Federal Reserve Bulletin, 1985-06

VOLUME 71 • NUMBER 6 • JUNE 1985 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 Linda C. Kyles. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Table of Contents 373 THE FEDERALLY SPONSORED CREDIT contribution to efforts to ameliorate the AGENCIES: AN OVERVIEW problems of the state-chartered, privately insured thrift institutions in Ohio, before This article examines the impact of the five the Subcommittee on Commerce, Consumprivately owned financial intermediaries er and Monetary Affairs of the House Comthat were established by the federal governmittee on Government Operations, April 3, ment to channel funds to particular sectors 1985. of the economy that are deemed worthy of special support. 415 Karen N. Horn, President, Federal Reserve Bank of Cleveland, examines the Federal 389 THE GROWTH OF CONSUMER DEBT Reserve's response to the recent problems experienced by thrift institutions insured by The surge in consumer installment credit the Ohio Deposit Guarantee Fund, before during the 1983-84 economic upswing has the Subcommittee on Commerce, Consumraised concerns that household indebteder and Monetary Affairs of the House Comness could inhibit future spending. mittee on Government Operations, April 3, 1985. 403 INDUSTRIAL PRODUCTION 418 Vice Chairman Martin discusses the recent Output rose an estimated 0.3 percent in surge in merger and takeover activity, be- March. fore the Subcommittee on Securities of the Senate Committee on Banking, Housing, 405 STATEMENTS TO CONGRESS and Urban Affairs, April 4, 1985. [Vice E. Gerald Corrigan, President, Federal Re- Chairman Martin presented similar testimoserve Bank of New York, discusses efforts ny before the Subcommittees on Oversight aimed at improving standards of capital and Select Revenue Measures of the House adequacy for dealers in U.S. government Committee on Ways and Means, April 16, securities, before the Subcommittee on Do- 1985.] mestic Monetary Policy of the House Com- 422 Theodore E. Allison, Staff Director for Fedmittee on Banking, Finance and Urban Aferal Reserve Bank Activities, Board of fairs, April 1, 1985. Governors, outlines the Federal Reserve's 409 J. Charles Partee, Member, Board of Gov- role in supplying cash to and accepting cash ernors, reviews some of the concerns of the from depository institutions and also ad- Federal Reserve Board with respect to dresses the Federal Reserve's record of evolving changes in the financial structure commitment in supporting government that serve to link depository institutions and agencies that are using currency data to other financial entities, before the Subcom- investigate criminal activity, before the mittee on Telecommunications, Consumer Subcommittee on Financial Institutions Su- Protection, and Finance of the House Com- pervision, Regulation and Insurance of the mittee on Energy and Commerce, April 2, House Committee on Banking, Finance and 1985. Urban Affairs, April 4, 1985. 412 Preston Martin, Vice Chairman, Board of 424 Chairman Volcker reviews some of the is- Governors, discusses the Federal Reserve's sues involved in proposed banking legisla- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

tion and focuses particularly on the long- Amendment to Regulation AA. and short-term effects of chartering so- Revised List of OTC Margin Stocks. called nonbank banks and on the provisions of the "Bank Definition Act," before the Revised Rules Regarding Equal Opportuni- Subcommittee on Financial Institutions Su- ty. pervision, Regulation and Insurance of the Proposal for a joint venture to deal in for- House Committee on Banking, Finance and eign currency options traded on a stock Urban Affairs, April 17, 1985. exchange. 428 Vice Chairman Martin underscores the im- Changes in Board staff. portance of assessing the implications of the recent surge in merger and takeover activi- Admission of seven state banks to memberty, before the Subcommittee on Telecom- ship in the Federal Reserve System. munications, Consumer Protection, and Finance of the House Committee on Energy 445 LEGAL DEVELOPMENTS and Commerce, April 23, 1985. Amendments to Regulations H and Y and 430 Chairman Volcker reviews the issues in- Rules of Procedure; amendments to Regulavolved in interstate and regional banking tion AA; amendments to Rules Regarding and says that the Federal Reserve Board Delegation of Authority; various bank holdbelieves the time has come for the Congress ing company, bank service corporation, and to authorize some interstate banking, be- bank merger orders; and pending cases. fore the Subcommittee on Financial Institutions Supervision, Regulation and Insurance of the House Committee on Banking, Al FINANCIAL AND BUSINESS STATISTICS Finance and Urban Affairs, April 24, 1985. A3 Domestic Financial Statistics 435 Governor Partee discusses the current diffi- A44 Domestic Nonfinancial Statistics culties being experienced by banks in agri- A53 International Statistics cultural communities and says that these problems have been intensifying lately as A69 GUIDE TO TABULAR PRESENTATION, more farmers have been finding it difficult STATISTICAL RELEASES, AND SPECIAL to meet fully their loan obligations, before TABLES the Subcommittee on Financial Institutions of the Senate Committee on Banking, A76 BOARD OF GOVERNORS AND STAFF Housing, and Urban Affairs, April 26, 1985. A78 FEDERAL OPEN MARKET COMMITTEE 440 ANNOUNCEMENTS AND STAFF; ADVISORY COUNCILS Revisions to guidelines for capital adequa- A80 FEDERAL RESERVE BOARD cy. PUBLICATIONS Publication of bank holding company performance report. A85 INDEX TO STATISTICAL TABLES Guidelines for purchase and sale of govern- A87 FEDERAL RESERVE BANKS, BRANCHES, ment-guaranteed loans. AND OFFICES Publication of report on priced services in 1984. A88 MAP OF FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Federally Sponsored Credit Agencies: An Overview This article was prepared by Michael J. Moran The sponsored agencies are expected to faciliof the Board's Division of Research and Statis- tate a more desirable outcome at times when tics. Michael Maryn provided research assist- market forces might allocate credit in ways that ance. are not socially optimal. For example, mortgage originators and smaller commercial banks might One of the hallmarks of a sophisticated financial be unable to attract sufficient deposits to meet system is a well-developed set of financial inter- the demands of potential homeowners and farmmediaries. In the United States, such institutions ers—at least at interest rates that are deemed to as commercial banks, savings and loan associa- be, in some sense, appropriate. Similarly, private tions, insurance companies, pension funds, and lenders may be reluctant to make loans for higher investment companies promote the efficient allo- education because of their long maturities or cation of capital by offering people financial their complex servicing requirements. In other instruments with features they could not obtain instances, lenders and borrowers in these marby investing directly with the ultimate users of kets may be mismatched geographically. In the the funds. The advantages of investing through a first examples, the federally sponsored credit financial intermediary include a more desirable agencies can channel funds from the money and combination of risk and return, greater liquidity, capital markets to the targeted sector; in the last lower transaction costs, smaller denominations example, the sponsored agencies serve to transfor initial savings balances, and greater flexibility fer funds to the place they are needed and in for subsequent additions to these balances. Bor- short supply. rowers and equity issuers, in turn, find a larger Rather than lending directly to the ultimate and more readily available pool of funds to borrowers, most of the federally sponsored credsupport their spending plans. In the U.S. econo- it agencies provide funds that private institutions my, an average of roughly 75 percent of net funds make available to individuals and businesses. supplied and raised each year are channeled The sponsored agencies obtain funds by selling through financial intermediaries. either debt or pass-through securities in the The federal government has established five money and capital markets; they channel these privately owned intermediaries to channel funds funds to private lending institutions either to particular sectors of the economy that are through loan agreements or by buying the assets deemed worthy of special support. These institu- of the private lenders and thus providing them tions are known collectively as the federally with funds to make new loans. With these methsponsored credit agencies: ods, the sponsored credit agencies represent a • Federal Home Loan Banks second layer of intermediation that is built upon • Federal Home Loan Mortgage Corporation the financial structure in the private sector. • Federal National Mortgage Association Many programs under the direction of the • Farm Credit Banks federal government serve an intermediary func- • Student Loan Marketing Association. tion, but two features of the federally sponsored The Congress established the first three interme- credit agencies set them apart. First, the spondiaries to broaden the flow of credit to the sored agencies are wholly owned by the private mortgage and housing markets, and the last two sector. Although they have certain unique ties to provide funds to support agriculture and high- with the federal government—such as board er education respectively. members appointed by the President and bor- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

374 Federal Reserve Bulletin • June 1985 rowing privileges from the Treasury Depart- the U.S. financial system. The combined assets ment—ultimately it is the stockholders or the of all five sponsored agencies are about one-third borrowers (all private) that stand to benefit or the size of those of the entire savings and loan lose from their activities. As private entities, industry and about one-half the size of those of these institutions are not subject to the appropri- private pension funds. The Federal Home Loan ations process of the federal budget, nor does the Banks (FHLBs), the Federal National Mortgage Congress directly influence their financing activi- Association (FNMA, or Fannie Mae), and the ty or rate of growth. Second, these intermediar- Farm Credit Banks (FCBs), taken alone, have ies borrow directly in the financial markets to assets much larger than those of the largest thrift raise funds, whereas other lenders under the institution and about the same size as those of direction of the federal government obtain their the third largest commercial bank. The Federal funds from the Federal Financing Bank, which, Home Loan Mortgage Corporation (FHLMC, or in turn, borrows from the Treasury Department. Freddie Mac) holds a much smaller volume of Because the sponsored agencies are privately total assets than does each of the three largest owned, their debt securities are not guaranteed sponsored agencies, but, as explained more fully by the federal government. later, the balance sheet understates the magni- One organization that frequently is associated tude of its activities in the financial markets. The with the federally sponsored credit agencies, but Student Loan Marketing Association (SLMA, or is quite different, is the Government National Sallie Mae) is the smallest of the federally spon- Mortgage Association—often referred to as sored credit agencies, but is still a substantial GNMA, or Ginnie Mae. This organization is part factor in the credit markets. of the Department of Housing and Urban Devel- The federally sponsored credit agencies hold opment and currently does not issue debt in the primarily two types of assets: loans granted to money and capital markets. The popular Ginnie private lending institutions and loans to individ- Mae securities that trade in the market place are uals or businesses that were purchased from actually mortgage pass-through certificates is- private lending institutions or originated directly. sued by mortgage originators, but Ginnie Mae The Federal Home Loan Banks issue loans guarantees the timely payment of interest and (called advances) to member savings and loan principal. This institution is not discussed further associations and mutual savings banks. These in this article. advances, which can have maturities of up to 20 The article next reviews the role of the federal- years, are used by the depository institutions to ly sponsored credit agencies in the U.S. econo- meet short-term liquidity needs and to expand my, including their growth over the long run and their asset portfolios. The Student Loan Markettheir effectiveness in channeling funds to their ing Association grants loans (called warehousing respective credit markets. It then discusses the advances) to many types of lenders, including financing activity of the sponsored agencies in commercial banks, thrift institutions, educationthe money and capital markets, and reviews their al institutions, and state lending agencies. Warenet income performance. The article concludes housing advances must be used to maintain or with a discussion of the future role of these expand the size of a lender's student loan portfointermediaries in light of some important changes lio. The Farm Credit Banks lend directly to unfolding in the financial system. individuals and businesses as well as to farm associations and cooperatives. The latter groups, in turn, either lend to agricultural and aquatic producers or provide services to the agricultural sector. THE GROWTH AND CONTRIBUTION OF THE FEDERALLY SPONSORED CREDIT AGENCIES The Federal National Mortgage Association and the Federal Home Loan Mortgage Corpora- The simplified balance sheet for each federally tion provide secondary markets for mortgage sponsored agency presented in table 1 reveals loans; that is, they purchase mortgage loans from the size and nature of their activities. In general, originating institutions. In addition to providing the sponsored agencies are large participants in funds for loan originations, these programs have Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Federally Sponsored Credit Agencies: An Overview 375 1. Balance sheets of federally sponsored credit agencies, year-end 1984 Millions of dollars 1. This amount includes loans made directly to individuals and businesses. served to standardize the terms on conventional of comparison, nominal gross national product mortgage loans. Fannie Mae holds a large por- and total debt of nonfinancial sectors expanded tion of the purchased mortgages in its portfolio, at compound annual rates of 93/t and 103A percent while Freddie Mac usually packages them into respectively over this period. As chart 1 shows, pass-through certificates and in eflFect sells them the growth of the sponsored agencies has not to other investors in the financial markets. Be- been smooth. The total assets of the Farm Credit cause the issuance of these pass-through securi- Banks, for example, trended upward during the ties represents the sale of the underlying mort- mid-1970s and accelerated beginning in 1979, but gages, the total assets of Freddie Mac are not they have shown essentially no growth in recent large, and its balance sheet thus understates its years. The combined assets of the three sponrole in transferring funds from the money and sored agencies in the mortgage market have capital markets to mortgage lenders. Fannie Mae alternated between rapid growth and no growth, also sells pass-through certificates to investors. in movements associated closely with cyclical The Student Loan Marketing Association also fluctuations in the housing sector. Sallie Mae purchases student loans from private lenders, experienced its strongest growth in 1981, a perimaking it the only sponsored agency to provide od of heavy demand for student loans and the both lending and secondary market facilities. Most of the loans it purchases are guaranteed 1. Total assets of the federally sponsored credit agencies either directly or indirectly by the federal government under the Guaranteed Student Loan Billions of dollars Program. This brief description of the federally sponsored credit agencies outlines their role only in general terms. The appendix provides a more complete discussion. The Growth of the Federally Sponsored Credit Agencies 1970 1975 1980 1984 Since 1970, the combined assets of the federally Data are for the year-end. sponsored credit agencies have grown at a com- The sponsored agencies in the mortgage market are the Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, pound annual rate of W/i percent. For purposes and the Federal National Mortgage Association. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

376 Federal Reserve Bulletin • June 1985 year in which it began a transition from financing 2. Growth of total deposits at thrift institutions, itself with government loans to borrowing in the and housing starts financial markets. Thousands of units Percent Farm Credit Banks. The growth of total assets at the Farm Credit Banks since 1970 has been closely correlated with conditions in the agricultural sector. In 1972 and 1973, prices of farm commodities increased sharply, paving the way for strong growth in farm income and large gains in the value of the farmland that frequently i i i i i i i i i i i i i i 10 serves as collateral for farm credit. In this envi- 1970 1975 [980 1984 ronment, farmers began to take on larger vol- Quarterly data at annual rates. umes of debt, reflected in the upward trend in the total assets of the Farm Credit Banks. Prices of sored agencies in the mortgage markets in 1984 farm commodities surged again in 1978 and 1979, closely resembles that in earlier episodes: assets and in consequence farm debt accelerated. began to expand rapidly near the peak in housing Beginning in 1980, farm prices began to stabi- activity, thus helping to cushion the fall. Last lize while overall prices continued to climb. The year, however, saw some important differences. weakening in farm income caused many farmers First, deposit growth at thrift institutions, aldifficulty in servicing their debts. The high levels though volatile, tended to be at much higher of interest rates in the early 1980s exacerbated levels than in previous years. Thus arguments the problems of farmers with short-term or vari- that the sponsored agencies were forestalling able-rate debt. As expectations for farm prices problems of credit availability may be difficult to and income were revised downward in the 1980s, make. Second, much of the expansion in the the value of farmland began to decline, with assets of the mortgage agencies last year represharp reductions realized each year from 1981 sented FHLB advances to ease the liquidity through 1984. Given the conditions confronting problems of some financially weak institutions. them in the early part of this decade, farmers Finally, a small portion of the expansion of were unwilling or unable to incur new debt, so Fannie Mae represented the acquisition of secthat the total assets of the Farm Credit Banks ond mortgages, an asset that often supports leveled off. (A more complete discussion of consumer spending rather than housing activity. conditions in the agricultural sector is provided by Emanuel Melichar, "A Financial Perspective Student Loan Marketing Association. The on Agriculture," FEDERAL RESERVE BULLETIN, Student Loan Marketing Association experi- January 1984.) enced its most rapid rate of growth in the early 1980s: total assets increased from $2.8 billion at Sponsored Agencies in the Mortgage Market. the end of 1980 to $9.1 billion at the end of 1983. Over the last 14 years, the sponsored agencies Rising tuition costs and high levels of interest serving the housing market have experienced rates increased the demand for the subsidized three periods of rapid growth. The first two student loans guaranteed by the federal governperiods, which began in 1973 and 1978, occurred ment. The average volume of new originations in near peaks in housing and mortgage activity and the Guaranteed Student Loan Program increased at times of diminishing growth in deposits at from about $2 billion in 1979 and 1980 to about $6 thrift institutions (see chart 2). This confluence billion over the next three years. (Most of the of events suggests that the sponsored agencies in loans purchased by Sallie Mae are issued under the mortgage market were attempting to cushion this program.) Sallie Mae's purchases were large the cyclical swings in housing activity, which is as many private lenders elected not to hold these heavily dependent upon thrift institutions. loans in their portfolios. On the surface, the rapid growth of the spon- This burst in the growth of Sallie Mae's assets Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Federally Sponsored Credit Agencies: An Overview 377 was associated with a shift in its method of 3. Contributions of federally sponsored credit agencies1 financing. In its early years, the Sallie Mae Percent financed its activities with loans from the Federal Financing Bank. In March 1981, however, Sallie Mae and the Treasury agreed that its level of debt at the Federal Financing Bank would not exceed $5 billion and that it could not take down new loans from this source after 1982. Sallie Mae quickly moved to its limit with the Federal Financing Bank and in 1981 issued debt in the money and capital markets for the first time to 10 finance its rapid expansion. Effectiveness as Financial Intermediaries The size and growth of the federally sponsored credit agencies suggest that they are important participants in the U.S. financial system. One measure of their contributions to their specific credit markets is presented in chart 3. This chart shows that the participation of these intermediaries has trended upward over the last 14 years; currently they account for sizable portions of the total volume of outstanding credit in their respec- 1. The curves, based on year-end data, are defined as follows: tive markets. The top panel shows the ratio of outstanding SLMA advances and loans purchased to outstanding guaranteed student loans; the middle Although these intermediaries maintain a sub- panel shows the ratio of outstanding FHLB advances plus total Fannie Mae and Freddie Mac mortgage assets to total residential mortgage stantial presence in the financial markets, their debt outstanding; the bottom panel shows the ratio of outstanding net long-run impact on the total volume of funds loans from the Farm Credit Banks to total farm debt outstanding. 2. This graph understates the contribution of the sponsored agenallocated to each sector is open to question. cies in the mortgage market because the pass-through securities issued Changes in the behavior of other lenders and by Freddie Mac and Fannie Mae are not included. borrowers in the private sector may mean that the credit flows generated by the sponsored quently had to constrain their lending activity as agencies supplant rather than supplement funds they experienced weak or negative deposit from other sources. Furthermore, even if the growth when market rates rose above their intersponsored agencies were successful in channel- est rate ceilings. The sponsored agencies chaning funds to a particular credit market, real neled funds from the money and capital markets economic activity in that sector might not be to these private lenders to limit the number of affected. For example, if the sponsored agencies displaced borrowers. Over time, however, this in the mortgage market were able to increase the assistance may well have been partially negated volume of mortgage credit, housing construction because the issuance of debt securities by the would not increase if households financed their federally sponsored credit agencies could itself homes with less equity and more debt than they have put further upward pressure on market otherwise would have or if they substituted the rates, contributing to slower deposit inflows. mortgage credit for other types of borrowing to This pattern was especially prevalent in the finance the purchase of consumer goods. mortgage market because thrift institutions usu- The credit flows generated by the federally ally suffered heavy deposit outflows when marsponsored credit agencies may have been offset ket rates increased. As charts 1 and 2 make clear, by disintermediation in the 1960s and 1970s. the rapid growth in the assets of the mortgage Commercial banks and thrift institutions fre- agencies in 1973 and 1978 was associated with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

378 Federal Reserve Bulletin • June 1985 weak deposit growth at thrift institutions. This lios in response to changes in relative interest weakness probably was exacerbated as the rates, and if borrowers in the targeted market are heavy volume of activity by the sponsored agen- insensitive to changes in interest rates, then the cies maintained upward pressure on market in- sponsored agencies, on balance, will have little terest rates and thus drew funds out of thrift impact. If the reverse holds—that is, if private institutions. lenders are not sensitive to interest rate changes Because interest rate ceilings on nearly all and borrowers are—then the sponsored agencies types of deposit accounts now have been re- could direct large amounts of credit to a particumoved, disintermediation, per se, will not com- lar sector. Whether or not a broadened flow of promise the efficacy of the sponsored agencies. credit will influence the level of real economic However, responses of borrowers and of other activity in that sector depends upon the amount lenders to the changes in relative interest rates of debt that borrowers are willing to bear and the associated with the financing activities of the degree of fungibility between credit of different sponsored agencies still will influence the ulti- types. mate amount of funds allocated to each sector. In the mortgage market, borrowers seem high- At the simplest level, the issuance of debt in the ly sensitive to interest rates, so that the sponcapital markets and the use of the proceeds in a sored agencies may have an important influence particular sector will lower interest rates in the on credit flows. However, other lenders in this targeted area relative to those in the financial market—such as commercial banks and life inmarkets. In such circumstances, lenders in the surance companies—probably would alter their private sector will tend to reduce investments in portfolios quickly as relative rates changed. the targeted area and purchase the relatively Thrift institutions also may now shift larger more attractive instruments in the money and amounts of their assets out of mortgages as capital markets. This shift will offset the credit interest rates change because their investment flows provided by the federally sponsored agen- powers have been expanded in recent years. The cies. Farm Credit Banks probably will have a greater The sensitivity of borrowers in the targeted long-run effect on credit flows in their sector than sectors to changes in interest rates also affects will the sponsored agencies in the mortgage the ultimate impact of the sponsored agencies on sector because some agricultural lenders, such as credit flows. If individuals and businesses in- commercial banks in rural areas, are less likely to crease their borrowing only a little as the spon- shift away from their accustomed loans to other sored agencies exert downward pressure on in- instruments. terest rates in a particular market, the change in Sallie Mae may be expected to have an apprethe volume of credit in the sector will be slight. ciable impact on the volume of student loans. In this case, even though the sponsored agencies The increases in the supply of funds for student may shift large amounts of funds to a particular lending generated by this sponsored agency will market, the interest rate in the market would not depress interest rates because a subsidy by have to fall sharply to establish a new equilibri- the federal government ties the return to lenders um and more private lenders will switch to other of guaranteed student loans to the rate on Treamarkets. Alternatively, if borrowers are very sury bills. Thus, as Sallie Mae expands its activisensitive to changes in rates, they will readily ty, private lenders will not have that kind of absorb most of the new funds advanced by the incentive to switch to other assets. Also, the sponsored agencies and the offsets will be slight. liquidity that this sponsored agency provides will The ultimate change in credit flows generated make lenders more willing to write student loans. by the activity of the sponsored credit agencies is Of course, Sallie Mae's activities might not expand college enrollments: students may simply thus uncertain. The final outcome depends upon substitute the government-guaranteed loans for the responses of borrowers and lenders to interothers, or they may finance their education with est rates on the targeted type of credit and on more debt than they would otherwise, or they other instruments in the economy. In general, if may attend a more expensive college. private lenders are prompt to alter their portfo- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Federally Sponsored Credit Agencies: An Overview 379 THE MARKET FOR THE SECURITIES OF THE dealers, in turn, distribute the securities to the FEDERALLY SPONSORED CREDIT AGENCIES public. The sponsored agencies meet the bulk of their financing needs through the issuance of Federally sponsored credit agencies finance their discount notes and bonds, but they also have loan programs and secondary market purchases used some of the more innovative techniques primarily by issuing debt in the money and that have emerged in the U.S. financial system in capital markets. These securities are not guaran- recent years. teed by the federal government, but because of the ties of the sponsored agencies to the government, they are afforded certain privileges not Discount Notes and Bonds available to most other issues: • exemption from the requirement to register Discount notes are short-term debt instruments the issue with the Securities and Exchange Com- resembling commercial paper. They have maturimission ties ranging from overnight to 360 days, depend- • exemption of interest income from state and ing upon their uses. The sponsored agencies use local taxes (except for issues of the Federal discount notes for several purposes, such as National Mortgage Association and the Federal financing short-term loans, bridging gaps that Home Loan Mortgage Corporation) can arise between cash outflows and inflows, and • eligibility as collateral when commercial delaying the issuance of longer-term debt until banks and thrift institutions borrow from the market conditions seem more favorable. Dis- Federal Reserve's discount window and when count notes are offered to investors on a daily thrift institutions borrow from a Federal Home basis at interest rates that typically are 15 to 25 Loan Bank basis points higher than those on Treasury bills • eligibility for purchase by the Federal Re- of similar maturity. At the end of 1984, the serve in open market operations sponsored agencies had about $33 billion of • eligibility as collateral for public deposits, discount notes outstanding, accounting for 14 including Treasury tax and loan accounts percent of their credit market debt. • favorable status in the portfolios of deposi- The sponsored agencies fill their longer-term tory institutions; for example, the shorter-term financing needs with bonds. The Federal Home securities may be used to meet the liquidity Loan Banks, the Farm Credit Banks, and the requirements of thrift institutions belonging to Federal National Mortgage Association offer the Federal Home Loan Bank System, and na- bonds to the public each month according to a tional banks may invest and deal in these securi- fixed schedule, and they occasionally bring to ties without limit. market unscheduled offerings as well. The Stu- Because of these advantages, as well as the dent Loan Marketing Association recently startperception that the sponsored agencies are high- ed to offer floating-rate notes on a monthly basis; ly creditworthy, the securities are well received the issuance by the Federal Home Loan Mortby a broad range of investors, including deposi- gage Corporation is irregular. Some of these tory institutions, pension funds, insurance com- securities have very short maturities. The Farm panies, and mutual funds. Individual investors Credit Banks, for example, issue six- and ninealso hold these securities, but their direct partici- month bonds each month, and the other sponpation in the market is not great. sored agencies also occasionally issue bonds The sponsored agencies issue short-term secu- with maturities under one year. Most of the rities known as discount notes in the money longer-term securities issued by the sponsored market, and they tap the longer-term markets agencies, however, are in the range of two to ten through bonds. Those securities are sold in the years; maturities in excess of that are infrequent. marketplace with the assistance of a fiscal agent, Most of the sponsored agencies issue debt with which recommends to the sponsored agencies maturities that approximately match those of the offering rates on the securities and allocates their assets so that they are not exposed to the notes and bonds to securities dealers. Those substantial interest rate risk. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

380 Federal Reserve Bulletin • June 1985 The interest rates on intermediate-term bonds period affected the other sponsored agencies, issued by the sponsored agencies usually are 15 and their interest rate spreads widened some to 30 basis points higher than the rate on Trea- even though their financial position was sound. sury securities of similar maturity (chart 4). The concerns of investors were allayed in subse- These spreads typically are narrower than those quent years as lower levels of interest rates and between Treasury securities and the highest- new strategies adopted by Fannie Mae improved rated corporate bonds with intermediate maturi- its prospects for profitability. Fannie Mae securities. The lower rates on the securities of the ties still sell at slightly higher interest rates than sponsored agencies result partly from their do those of the other sponsored agencies, reflectunique features and partly from the strong finan- ing some residual investor concern and the fact cial condition of their issuers. In addition, the that the interest income on FNMA's securities is sponsored agencies, either directly or indirectly, taxable at the state and local level. have lines of credit with the Treasury Department (at the discretion of its secretary) should they experience difficulty meeting their obligations. (The appendix lists the amounts of these Innovative Financing credit lines.) Beyond these factors, some investors believe that, although there is no explicit While the federally sponsored credit agencies guarantee, the federal government would not meet the bulk of their financing needs through allow a sponsored agency to default on a debt the traditional offerings of discount notes and issue. bonds, they also have been involved in innova- Nevertheless, the confidence of investors in tive transactions in an effort to broaden their the quality of sponsored-agency securities was investor base and to lower their overall interest shaken in 1981 and early 1982, so that the interest expense. rate spreads over Treasury securities widened Large current interest savings for some of the (chart 4). The trigger was the weakening in the sponsored agencies have come from the issuance net income of the Federal National Mortgage of long-term, zero-coupon securities. These se- Association (discussed below) and reports from curities do not provide periodic interest payinvestment analysts that the securities of Fannie ments to investors; rather, they are sold at a Mae carried greater credit risk than previously substantial discount from the face value that is perceived. Interest rate spreads over Treasury paid at maturity. In 1984, Fannie Mae, Freddie securities on Fannie Mae's debt averaged about Mac, and Sallie Mae were able to offer these 90 basis points in 1981, and some issues came to securities to investors at interest rates as much market with spreads as high as 150 basis points. as 2Vi percentage points below the rates on long- The risk consciousness of investors during this term Treasury bonds because foreign investors, especially the Japanese, were keenly interested in them. Japanese investors could avoid paying 4. Average spread between yields on federally taxes on the income from foreign zero-coupon sponsored agency securities and on Treasury securities if they sold them before maturity. The securities of corresponding maturity Ministry of Finance in Japan, however, does not Basis points permit its investors to hold securities that have been altered in any way, so they cannot purchase the popular zero-coupon securities that are formed by stripping apart Treasury debt (although it appears that they will be permitted 20 to purchase zero-coupon securities under the Treasury's new STRIPS program). The issues of the sponsored agencies last year thus represent- 1980 ' ' 1982 ' ' 1984 ed the highest quality zero-coupon security avail- Data are yearly averages for intermediate-term securities, which able. Late last year the Ministry of Finance have maturities of more than one year up to five years. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Federally Sponsored Credit Agencies: An Overview 381 indicated that it was reviewing the tax treatment currency used in that market, without exposure of such securities, and in March of this year the to exchange rate fluctuations. Japanese legislature voted to subject the gains on The currency swap is similar to the interest the sale of those securities to ordinary income rate swap used extensively by Sallie Mae and to tax rates. The sponsored agencies ceased issuing a lesser extent by Fannie Mae. An interest rate zero-coupon securities last year after the tax swap is a transaction in which two parties, one treatment was questioned by the Japanese gov- with fixed-rate debt and the other with variableernment. rate debt, agree to exchange interest-payment The sponsored agencies have made other ef- obligations, thereby converting their type of payforts to broaden their investor base by issuing ment from fixed-rate to variable-rate or vice securities in foreign countries. In 1984, Fannie versa. With this type of transaction, the two Mae and the Federal Home Loan Banks together parties usually find that their overall funding issued $500 million of debt in the Eurobond costs are lower than they would have been had market. Like many U.S. corporations, these they issued their preferred fixed- or variable-rate sponsored agencies were able to issue debt de- instrument directly. Sallie Mae, a pioneer in the nominated in dollars in foreign countries at inter- technique in the United States, wished to issue est rates below those in the U.S. market. Fannie variable-rate debt because most of its assets Mae's Eurobond issue was sold with an interest carry variable interest rates. However, it had rate that was 7 basis points higher than that on a issued so much debt of that type that investors Treasury security of comparable maturity; in the were willing to increase their holdings only at domestic market, a similar issue probably would higher rates. Sallie Mae found that it could keep have yielded at least 25 basis points more than a its funding costs low and still be protected from Treasury security. In subsequent trading in the interest rate risk by issuing fixed-rate debt and secondary markets, however, the yields on these engaging in an interest rate swap. Many types of securities moved to higher levels, and since then borrowers, such as savings and loan associations the sponsored agencies have not attempted to and nonfinancial corporations, would be interestissue dollar-denominated debt in foreign coun- ed in being a counterparty to obtain fixed-rate tries. financing. Yet the federally sponsored credit agencies Perhaps the most important innovation in the have not avoided the foreign markets entirely. sponsored-agency market is the collateralized Earlier this year, Fannie Mae and Sallie Mae mortgage obligation (CMO) introduced by the issued abroad securities that were denominated Federal Home Loan Mortgage Corporation. As in Japanese yen. Like the dollar-denominated its name implies, this security is simply a debt debt sold in foreign countries, these securities issue backed with mortgages or mortgage-backed resulted in substantial interest savings. To pro- securities. The unique feature introduced by tect themselves from the risks of exchange rate Freddie Mac was the division of an issue into fluctuations from such an issue, Sallie Mae and various classes, differing from one another in the Fannie Mae utilized another innovative financing way principal value is repaid. Table 2 presents an technique, a currency swap. example. The investors in the class A-l securi- Currency swaps involve two parties that issue ties receive interest payments as well as all of the debt in each other's currencies, then exchange scheduled repayments and prepayments on the their payment obligations so that each services underlying mortgages; the investors in the other debt in its home currency. In the case of the classes receive only interest payments until all recent Sallie Mae and Fannie Mae yen issues, the class A-l securities are retired. Because those sponsored agencies could exchange their initially the class A-l securities receive the reinterest payment obligations with a Japanese payments on the underlying mortgages, their firm that issued a comparable amount of debt expected life is relatively short. After the class denominated in dollars. This technique allows a A-l bonds are retired, the class A-2 bonds reborrower to raise funds in the market in which its ceive both interest payments and mortgage reinterest expenses are lowest, regardless of the payments while the class A-3 bonds continue to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

382 Federal Reserve Bulletin • June 1985 2. Characteristics of collateralized mortgage Construction firms also have issued collateralobligations of the Federal Home Loan Mortgage ized mortgage obligations. Many homebuilders Corporation, Series A, June 1983 have established finance subsidiaries in order to offer mortgage loans to potential buyers. After originating these mortgages, they frequently use them as collateral for both straight bond issues and CMOs. (These issues are referred to as Amount sold (millions of dollars) 215 350 435« Maximum average life (years) 3.2 8.6 20.4 builder bonds in the marketplace.) Savings and Quoted yield (percent) 10.70 11.37 11.98 Spread over yield on comparable loan associations have also started to use this Treasury securities (basis instrument as a source of funds. 39 52 84 1. Spread over closest Treasury constant-maturity yield on June 7, 1983. FINANCIAL PERFORMANCE receive only interest payments. After class A-2 is retired, class A-3 receives both interest pay- For the most part, the financial performance of ments and mortgage repayments. the federally sponsored credit agencies, as mea- This innovation reduces (though it does not sured by their net income, has been quite good. eliminate) the major disadvantage of uncertainty They are able to issue debt in the financial about maturity that is associated with mortgage markets at attractive rates, and because most of pass-through securities. Because all interest and them do not expose themselves to substantial principal repayments on an underlying pool of interest rate risk, they have realized strong, mortgages flow through to the holders of pass- stable earnings. The Federal Home Loan Banks, through securities, these securities will be retired the Federal Home Loan Mortgage Corporation, earlier than expected if prepayments accelerate. the Farm Credit Banks, and the Student Loan Moreover, mortgage prepayments and the pay- Marketing Association carefully match the matudown of pass-through securities frequently in- rities of their debt liabilities and of their assets, crease when interest rates drop, precisely the so that their positive interest rate spreads are not time when investors wish to hold longer-term, wiped out by interest rate fluctuations. As table 3 fixed-rate assets. When a mortgage-related se- shows, these sponsored agencies have consiscurity is divided into various maturity classes, tently earned high income, as measured by the investors have a clearer expectation of when ratio of net income to average assets. For purtheir security will be repaid. poses of comparison, this same aftertax income This financing technique has been widely imi- measure has ranged from 0.50 to 0.60 for the tated by other issuers in the financial markets. commercial banking industry in the early 1980s. Securities firms, for example, have issued large The net income of the Farm Credit Banks has volumes of bonds collateralized by Ginnie Mae receded some in the last two years. Because pass-through securities. They found that they these banks are owned by farm cooperatives, the could buy the Ginnie Mae pass-throughs in the only purpose of profits is to add to capital as total secondary markets, package them into CMOs, assets increase so as to maintain the same relaand issue them at lower rates because of the tive cushion for potential loan losses. With asset enhanced certainty of maturity. These firms re- growth flat, the Farm Credit Banks could reduce tained as profit the difference between the yield earnings. Their borrowers, many of them underon the Ginnie Mae pass-through securities and going financial strain, consequently received the yield on the CMO. As they began buying some interest rate relief. Increases in loan losses Ginnie Mae securities in volume, yields fell and in nonperforming loans, however, also resharply: Ginnie Maes were trading 13A to 2 duced profitability and limited the extent of percentage points over Treasury securities be- interest rate relief. fore CMOs were introduced, but subsequently The Federal Home Loan Mortgage Corporathe spread narrowed to less than 1 percentage tion has reported remarkably strong income in point. the last two years. The favorable performance of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Federally Sponsored Credit Agencies: An Overview 383 3. Ratio of net income to average assets of federally easing Fannie Mae's losses, but its management sponsored credit agencies also has launched an aggressive campaign to Percent improve its long-run earnings potential. For example, fee income has increased sharply since Federal Federal Student Federal National Home Farm Loan 1981, primarily because of the issuance of a large Home Loan Year Loan Mortgage Mortgage Credit Market- volume of pass-through securities. Also, Fannie Banks Associa- Corpora- Banks ing Assotion tion ciation Mae has shifted its new asset purchases toward interest-sensitive instruments such as adjustable- 1978... 1.30 .54 .69 .82 .78 1979... 1.29 .34 .86 .86 .50 rate mortgages and second mortgages. Last year, 1980... .83 .03 .67 1.12 .43 these types of mortgages accounted for nearly 40 1981 ... .82 -.32 .53 1.13 .45 1982 ... 1.24 -.16 .97 1.19 .60 percent of Fannie Mae's new purchases, com- 1983 ... .96 .10 2.13 .64 .80 1984... 1.04 -.07 2.42 .52 .96 pared with 5 percent in 1981. Finally, as explained above, Fannie Mae has adopted some innovative financing techniques, such as zero- Freddie Mac in 1983 and 1984 is partly the result coupon bonds, interest rate swaps, and debt of higher fee income. In 1981, the Federal Home issuance in foreign countries, to help reduce its Loan Mortgage Corporation introduced its cost of funds. "guarantor program," which led to a sharp increase in the issuance of its pass-through certificates as well as in its fees for guaranteeing these THE FUTURE ROLE OF THE FEDERALLY securities. (The guarantor program is explained SPONSORED CREDIT AGENCIES in the appendix.) A more important factor behind this income growth has been the corporation's Some analysts have speculated that the role of issuance of collateralized mortgage obligations. the federally sponsored credit agencies in the Freddie Mac earns as income the spread between economy will shrink as important structural the yields on the underlying pool of mortgages changes in the financial system lessen the need and on collateralized mortgage obligations. for intervention to support the credit flows to Fannie Mae has experienced earnings prob- particular sectors. As regulatory constraints are lems because the maturities of its assets and removed and as new instruments are developed, liabilities are mismatched. In general terms, the market participants in the private sector can balance sheet of this sponsored agency resem- assume a more active role in efficiently allocating bles that of a typical thrift institution: its assets credit. are concentrated in long-term, fixed-rate mort- Beginning in 1978, federal regulators allowed gages and they are financed primarily with depository institutions to offer accounts with shorter-term debt. As a result, Fannie Mae has interest rate ceilings tied to the rates on certain experienced the same earnings difficulties as Treasury securities, and in 1980, they began to thrift institutions: in the late 1970s and early dismantle the interest rate ceilings on deposits at 1980s, interest expenses increased sharply as commercial banks and thrift institutions. Curmarket rates moved to high levels while interest rently, nearly all categories of deposits can be income grew much more slowly because of the offered without interest rate limits. Thus deposilong maturities of its assets. Fannie Mae's in- tory institutions have greater control over their come weakened in 1979 and 1980, and it turned deposit flows. Faced with large demands for sharply negative in 1981 and 1982. The earnings credit, they can offer higher rates to depositors, performance improved in 1983 and 1984 as inter- thereby attracting the necessary funds; if they est rates moved to lower levels, but this spon- have exhausted their profitable lending opportusored agency continues to be burdened with a nities, they can lower their deposit rates, thus large volume of long-term mortgages carrying discouraging their own inflows and allowing relatively low yields. funds to flow to institutions or regions with greater credit demands. In this deregulated envi- The lower level of interest rates in effect over ronment, depository institutions themselves can the last two years has been an important factor in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

384 Federal Reserve Bulletin • June 1985 perform one of the important functions of the credit agencies, one of their unique attributes sponsored agencies—namely, transferring funds remains—namely, the implicit subsidy that their from capital-surplus areas to capital-deficient sponsored status confers in the form of lower areas. costs. This implicit subsidy has the effect of The need for the sponsored credit agencies to raising borrowing costs, to some degree, both to redistribute funds geographically also will be private sectors that are not the beneficiaries of lessened with the erosion of the barriers to sponsored-agency activities and to the Treasury. interstate banking. Recently, regulators have ap- With strong demands for credit by the federal proved several interstate mergers involving fi- government and heightened emphasis on renancially weak institutions. In addition, some source allocation through private markets, it is states have approved laws that allow out-of-state not surprising that this subsidy has come under bank holding companies to acquire banks within question. their borders, and others are considering that Most of the attention in this debate has fostep. Finally, the initiative of the private sector cused on the sponsored agencies serving the in moving toward interstate banking has been mortgage market. In public testimony and in evident in the development of so-called nonbank budget proposals, the Reagan administration has banks, institutions that do not provide the full advocated the complete privatization of Fannie array of banking services and therefore have won Mae and Freddie Mac. Thus far it has not approval in some cases to operate in different vigorously sought to cut the ties of Fannie Mae states. In light of these developments, the Feder- and Freddie Mac to the government; rather, it al Reserve Board recently advocated that the has concentrated on developing policies that Congress establish a program to move gradually improve the competitive position of private firms toward interstate banking. servicing the secondary mortgage market. The Other recent developments are making mort- major effort to date was the passage last year of gage originators less dependent on the sponsored the Secondary Mortgage Market Enhancement agencies for funds. Depository institutions ser- Act. Several provisions of this law make it easier vicing the mortgage market now have greater for private firms to market mortgage-backed direct access to the capital markets through new securities, and it limits to some extent the particifinancial instruments. For example, savings and pation of Fannie Mae and Freddie Mac in this loan associations are holding larger amounts of market. mortgage-backed securities as assets, which can A more recent proposal by the administration readily serve as collateral for new borrowing. that would further alter the competitive position The sponsored agencies are still important here, of all the sponsored agencies is a provision in the however, because many of these mortgage- 1986 budget to impose one-time origination fees backed securities were obtained by exchanging on their issuance of new debt and of passmortgage loans for pass-through certificates with through securities. In the latest form of the Freddie Mac and Fannie Mae. Also, the collater- proposal, the fees would be phased in beginning alized mortgage obligation has been widely ac- with 0.01 percent (1 basis point) of the amount of cepted by investors, and thrift institutions are debt issued in 1986 and eventually increasing to beginning to issue their own mortgage-backed 0.05 percent in 1990. The administration views bonds as a source of funds. Even institutions that the fee as a payment for special privileges that are not large enough to issue collateralized the sponsored agencies or their securities receive mortgage obligations by themselves can form because of their affiliation with the federal govconsortiums to sell these securities in the finan- ernment. Thus far, the Congress has not authocial markets. To the extent that depository insti- rized these fees, but they remain an issue in tutions can tap the money and capital markets discussions of deficit reduction measures. directly, the need is lessened for the federally sponsored credit agencies to channel funds to CONCLUSION certain areas. While these developments in financial markets The federally sponsored credit agencies were narrow the distinctive role of the sponsored created to alter the flow of funds ki cases in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Federally Sponsored Credit Agencies: An Overview 385 which, it was believed, the private markets were source allocation is still viewed as suboptimal not allocating resources to their optimal use. For from a social point of view, some form of direct a long time, however, analysts have questioned subsidy may be necessary to achieve the desired the ability of the sponsored agencies to alter outcome. appreciably the ultimate allocation of financial For the time being, the sponsored agencies capital and real resources. In a system that must be regarded as important participants in the permits credit to flow with few impediments, money and capital markets. Their financial reprivate lenders and borrowers can negate the sources are substantial, they have developed effects of the government-sponsored intermedia- expertise in their areas, and they are well estabtion. As the U.S. financial system becomes less lished among the borrowers and lenders in the regulated, the ability of the sponsored agencies credit markets that they serve. Their activities to influence the allocation of resources by serv- enhance the liquidity in these markets and foster ing as intermediaries may become even more the integration of the various components of the dubious. If the resulting market solution to re- financial system. • APPENDIX: DESCRIPTION OF THE loans (called advances). The Federal Home Loan FEDERALLY SPONSORED CREDIT AGENCIES Banks finance their advances primarily by selling debt securities in the money and capital markets The appendix table summarizes the organization- and by accepting deposits from member institual characteristics of the federally sponsored cred- tions. The debt securities are sold on a consoliit agencies whose activities are discussed in the dated basis—that is, they are the joint obligations text. The following paragraphs examine each of all 12 banks. The Federal Home Loan Banks agency in greater detail. are the only sponsored agency that issues deposit liabilities. Overnight accounts are the largest category of deposit liability at the banks, as they are used by member institutions to invest funds The Federal Home Loan Banks temporarily that otherwise might lie idle. The banks also issue demand and time deposits to The Congress established the Federal Home their members. Loan Bank System in 1932 to supervise federally chartered savings and loan associations and to provide a credit facility for thrift institutions. The system originally comprised only the Federal Federal Home Loan Mortgage Corporation Home Loan Bank Board, which serves primarily as a regulatory agency, and 12 regional Federal The Federal Home Loan Mortgage Corporation Home Loan Banks, which carry out the policies also belongs to the Federal Home Loan Bank of the Board and provide the credit facilities and System but performs a different function than the other services for member institutions. The Fed- 12 Home Loan Banks do. Freddie Mac provides eral Savings and Loan Insurance Corporation a secondary market for mainly conventional and the Federal Home Loan Mortgage Corpora- mortgage loans—that is, mortgages that are not tion were added to the system later, in 1934 and insured by the Federal Housing Administration 1970 respectively. or guaranteed by the Veterans Administration. The Federal Home Loan Banks are wholly When the corporation was established in 1970, owned by the financial institutions that join the secondary market facilities for government-insystem. The 12 banks operate individually, but sured and -guaranteed mortgages already were in they must observe guidelines established by the place, but support for conventional home loans board. The most important activity of the banks was lacking. Freddie Mac was created to fill this is to provide credit to members in the form of gap in the secondary market. It typically pur- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

386 Federal Reserve Bulletin • June 1985 chases mortgages from institutions originating direct payment of Freddie Mac dividends to the loans, thereby replenishing lenders' cash those institutions in future years. positions so they can write new loans. To a small extent, the Federal Home Loan Mortgage Corporation purchases mortgage loans The Federal National Mortgage to hold in its portfolio. More commonly, Freddie Association Mac purchases mortgage loans, places them in pools, and issues pass-through certificates The Congress established the Federal National backed by these loans. When it issues pass- Mortgage Association in 1938 to provide a secthrough certificates, the ownership of the under- ondary market for federally underwritten mortlying mortgage pool is transferred to a trustee, gages. Fannie Mae was once part of the federal who distributes the cash flow from the pool to government, but it was separated in 1968 and the certificate holders. Because Freddie Mac is now is fully owned by private investors (its not the owner of the pool of mortgages, these shares are traded on the New York Stock Exloans do not appear on its balance sheet. Thus change). For many years Fannie Mae could deal the $10 billion of mortgage holdings shown in only in mortgages underwritten by the Federal table 1 in the text greatly understates Freddie Housing Administration or guaranteed by the Mac's participation in the secondary market. Veterans Administration; but in 1970, it received The volume of pass-through securities issued authority to buy and sell conventional mortgage by Freddie Mac has increased sharply in the last loans, and it made its first purchase in 1972. three years because of the introduction of its At the end of 1984, Fannie Mae held $84 billion guarantor program in 1981. Under this program, in mortgages, making it the largest single invesmortgage investors can exchange whole mort- tor in home loans in the country. This sponsored gage loans for FHLMC participation certificates. agency also has issued a large amount of pass- The interest rates on these pass-through securi- through securities, which are not reflected on its ties are one-half percentage point below the rate balance sheet. Most of its issuance of passon the underlying mortgage loans; the difference throughs is associated with a swap program represents a fee to Freddie Mac for guaranteeing similar to that of the Federal Home Loan Mortthe pass-through security. These transactions are gage Corporation. commonly referred to as mortgage swaps. From 1982 to 1984, about 85 percent of the new participation certificates issued by Freddie Mac were Farm Credit Banks associated with swaps. Mortgage investors engage in these transactions because the participa- The Farm Credit System has the most complex tion certificate has greater liquidity. Also, the organizational structure of the five federally participation certificate can serve as collateral in sponsored credit agencies. The System is divided a repurchase agreement; thus mortgage investors geographically into 12 districts. Each district has expand their borrowing capabilities by holding a Federal Land Bank, a Federal Intermediate the Freddie Mac pass-through securities rather Credit Bank, and a Bank for Cooperatives. In than mortgage loans. addition, a Central Bank for Cooperatives partic- The common stock of Freddie Mac is owned ipates in large loans or loans that span more than by the 12 Federal Home Loan Banks. Recogniz- one district. These 37 banks, along with a large ing that ultimately the thrift institutions that are number of cooperative associations that own the members of the Federal Home Loan Bank Sys- banks, form the heart of the Farm Credit System. tem have a claim on its income, Freddie Mac The Farm Credit Administration, an independent issued $600 million of participating preferred agency of the federal government, provides sustock to these institutions in January 1985. The pervision at the national level. distribution of this stock will be retroactive so it The Farm Credit System is the oldest of the can boost the earnings and net worth position of federally sponsored credit agencies, dating back thrift institutions for 1984; it also will allow a to 1917, when the Federal Land Banks were Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Federally Sponsored Credit Agencies: An Overview 387 established. The other types of Farm Credit through a total of about 435 land bank associa- Banks followed later: the Federal Intermediate tions, issue primarily longer-term loans for the Credit Banks in 1923, and the Banks for Cooper- purchase of farms, farm equipment, or rural real atives in 1933. The underlying purpose of all estate. Most of these loans have variable interest these banks is the same: to provide an adequate rates. The Federal Land Banks account for about flow of credit to the agricultural sector. 65 percent of the total assets of the Farm Credit The three types of Farm Credit Banks and System. The Federal Intermediate Credit Banks their lending associations differ in the types of advance funds to about 370 production credit loans they make. The Federal Land Banks, associations and to other financing institutions, Characteristics of federally sponsored credit agencies Influence of Federal tax on State and local Agency Stockholders the Line of credit income of tax on interest with Treasury sponsored income of administration agency1 investors Federal Home Loan Banks Owned by President $4.0 billion No No member thrift selects all 3 institutions but members of operated by the FHLBB the Federal Home Loan Bank Board Federal National Mortgage Association Owned President $2.25 billion Yes Yes entirely by selects 5 of 18 private board stockholders members; subject to general supervision by HUD Federal Home Loan Mortgage Corporation Nonvoting Same as Indirect line of Yes2 Yes common stock FHLBs credit through owned by 12 the FHLBs FHLBs; participating preferred stock issued to member thrift institutions Farm Credit Banks Owned by President $112 million No No farm selects 12 for Federal cooperatives Board Intermediate and credit members; Credit Banks; associations Secretary of $149 million Agriculture, 1 for Banks for Cooperatives; secretary may deposit $6 million in Federal Land Banks Student Loan Marketing Association Lenders under President $1.0 billion3 Yes No the selects 7 of 21 Guaranteed Board Student Loan members Program may including the hold voting chairman common stock; individual investors may hold nonvoting common and preferred stock 1. Interest on all debt of the sponsored agencies is subject to federal 3. Sallie Mae also has the authority to sell to the Federal Financing taxation. Bank securities backed by student loans. 2. Effective January 1, 1985. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

388 Federal Reserve Bulletin • June 1985 such as commercial banks, that make primarily Mae are granted under the Guaranteed Student short-term loans for production or operating pur- Loan Program. These loans are originated by poses. They also write a small volume of loans private lending institutions (such as commercial for farm and rural homes and for farm-related banks, thrift institutions, and educational institubusinesses. The Federal Intermediate Credit tions), and they are guaranteed either directly or Banks account for about 23 percent of the total indirectly by the federal government. The return assets of the Farm-Credit System. on the loans to the holders is adjusted quarterly The Banks for Cooperatives make loans of all and set at 3Vi percentage points above the intertypes directly to cooperative organizations pro- est rate on three-month Treasury bills (bondviding agricultural services. The services include equivalent basis). The federal government makes marketing farm products, purchasing farm sup- the entire interest payment while the students are plies, or operating public utilities. As with the in school; after graduation the students begin other Farm Credit Banks, the Banks for Cooper- repaying the loans based on a fixed interest rate atives are owned by the cooperative organiza- stated at the outset and the federal government tions that borrow from them. makes a "special allowance" payment to bring At one time, the Federal Land Banks, the the return to 3'/2 percentage points above the Federal Intermediate Credit Banks, and the Treasury bill rate. Sallie Mae also purchases Banks for Cooperatives each issued their own loans granted under other federal programs for debt in the financial markets. In 1977, they higher education, such as the HEAL program issued their first consolidated debt (that is, a (Health Education Assistance Loans) and the security that was the joint obligation of all 37 PLUS program (loans to parents of dependent Farm Credit Banks), and since 1979 all debt undergraduate students and to independent stuissuance has been on a consolidated basis. The dents). Farm Credit Banks tap the short-term markets Sallie Mae is considerably smaller than other for a large proportion of their funds because most federally sponsored credit agencies, but its rate of their loans have either short terms or variable of growth over the last five years has been rapid. interest rates. In addition to acquiring a large volume of new assets, Sallie Mae has broadened its array of services by offering forward purchase commit- Student Loan Marketing Association ments, developing special credit plans for law and medical students, and issuing letters of credit The Student Loan Marketing Association was to back student loan revenue bonds issued by created by the Congress in 1972 to provide a state or local government agencies. In the sumsecondary market for student loans guaranteed mer of 1984, Sallie Mae acquired a savings and by the federal government. Sallie Mae also en- loan association in North Carolina to assist in courages the flow of credit to higher education providing its education-related financial serby providing loans to institutions, known as vices. The Congress at one time considered warehousing advances, so that they can write legislation that would prohibit this type of activiadditional student loans. ty by Sallie Mae, but no legislation is currently Most of the student loans purchased by Sallie pending. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

389 The Growth of Consumer Debt This article was prepared by Charles A. Luckett the volume of scheduled repayments and thereby and James D. August of the Board's Division of makes for faster growth in the stock of debt than Research and Statistics, with assistance from would occur under the shorter maturity. Janice S. Westfall. Factors that may be contributing to credit growth that has more significance for the burden The surge in consumer installment credit during of debt are the increased lending efforts of savthe 1983-84 economic upswing has raised con- ings and loan associations, the relaxation of cerns that household indebtedness could inhibit usury ceilings, and the introduction of adjustfuture spending—either directly, by diverting able-rate financing. income into debt service, or indirectly, by pro- The growth of outstanding installment debt is voking greater caution on the part of lenders. In apt to slow during 1985, notwithstanding its this article, we review recent consumer borrow- exceptional strength during the first two months ing and the burden of household debt from the of the year. Repayment of debt associated with broad perspective of experience since World earlier heavy borrowing is likely to increase War II. We examine factors underlying past and more rapidly than new gross borrowing (estimatcurrent developments and identify influences ed from administration projections of consumpthat may be most likely to affect the future tion expenditures), thus curbing net additions to course of consumer credit. the stock of consumer debt. In brief, several factors suggest that indebted- At the same time that growth of debt slackens, ness has not yet become a serious problem. however, the ratio of consumer installment debt Through the end of last year, the expansion of to disposable income—sometimes used as a meaconsumer installment debt was apparently quite sure of "debt burden" on household budgets— consistent with past relationships between con- could rise further, perhaps to a new high. Given sumption and new borrowing and between re- the earlier fast pace of debt expansion, even a payments and the stock of debt. Moreover, reduced rate of growth in debt could exceed the household survey information strongly suggests rate of income growth. Nevertheless, a further that upper-income households, which should be rise in the debt-to-income ratio would not necesbest equipped to handle debt, have accounted for sarily violate the easing in that ratio's long-run a large part of the growth in consumer debt. rate of increase, an easing that has persisted Several other influences together may be push- since the mid-1950s. ing up the measured rate of credit growth a notch In any case, additional considerations limit the or two without implying a proportional increase analytical significance of the debt-to-income rain the true burden of debt. One factor is the tio as a precise measure of the financial situation growing use of credit for "convenience" pur- of the household sector. These aspects include poses. Many consumers use credit cards primari- the paucity of information about the underlying ly as a convenient alternative to cash or checks distribution of aggregate consumer debt, the inrather than as a means of borrowing, but both adequacy of outstanding debt (which is usually borrowing and convenience use are counted in repayable over several years) as a measure of the aggregate consumer credit series. Another near-term constraint on budgets, and the impact factor that may be giving a false picture of of structural changes in consumer credit markets consumer debt is some lengthening in maturities such as the lengthening of maturities and the of new consumer loans, which initially reduces development of new uses of credit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

390 Federal Reserve Bulletin • June 1985 2. Ratio of installment credit outstanding to POSTWAR GROWTH OF CONSUMER disposable personal income INSTALLMENT CREDIT Percent Starting from a base of less than $3 billion at the end of 1945, consumer installment credit expanded rapidly through the mid-1950s, frequently recording annual increases greater than 20 percent (chart 1). Following this initial upsurge came a 20-year period during which growth of consumer credit fluctuated cyclically but gener- IliatllilttiaMlliMIMMMlitlBlli) ally remained within a range of 5 to 15 percent 1950 1960 1970 1980 1984 per year. Since 1976, consumer credit growth has Quarterly data. pushed above this range by 3 to 5 percentage points during two periods of major economic ate postwar decade. Because of wartime controls upswing—1977-78 and 1983-84. In 1984, conon production and credit, stocks of consumer sumer debt rose 20 percent, the highest rate for a durable goods were at artificially low levels at full year since 1955. the war's end. The backlog of demands for such The pattern of growth for consumer debt since goods and for the credit to help finance them World War II—a rapid increase followed by a played a major role in the ensuing rapid expanlong period of more subdued growth—has been sion of debt. A sharply higher rate of family repeated in the movement of installment debt formation during that period further stimulated relative to disposable personal income. This ratio outlays for consumer durables, which increased rose from less than 2 percent in 1945 to nearly 11 almost 11 percent per year in nominal terms from percent in 1955 (chart 2), a trend that many 1946 to 1955. observers at the time feared was incompatible The strong uptrends in consumer spending and with continued prosperity. But after its initial borrowing also reflected changing attitudes on sharp climb, the debt-to-income ratio advanced the part of both borrowers and creditors. Goods at a decelerating pace to reach 15 percent by the that consumers once treated as luxuries were mid-1960s, leveled off for several years, then increasingly viewed as necessities, and consummarked a new high of 17.8 percent in 1979. In ers began to use installment debt for a wider early 1985 the ratio was approaching 18 percent variety of purposes. At the same time, creditors again. were reassessing the risks of consumer lending in light of favorable industry experience with such Rapid Growth, 1946-55 credit. Before World War II most consumer credit was supplied by finance companies; after Several factors contributed to the powerful upthe war commercial banks competed more agsurge in consumer borrowing during the immedigressively. Banks were especially attracted to the market for automobile loans, in which both 1. Growth in consumer installment credit outstanding the projected volume of business and the sound- Percent ness of the collateral created attractive profit potential. A substantial lengthening of maturities on new loans contributed to the growth of outstanding debt in the early postwar years. Other things equal, a lengthening of maturity reduces the amount of repayments to be made during a given period of time; with debt thereby staying on the books longer, the stock of debt becomes larger Annual data. than it otherwise would have been. Moreover, "This break in series reflects the removal of mortgage debt held by because smaller monthly payments lighten the finance companies beginning in July 1980. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Growth of Consumer Debt 391 current debt burden on household budgets, de- Inflation accelerated after 1975, eventually mand for loans tends to rise when maturities reaching double digits. In the 1960s, consumers lengthen rapidly. Most observers regarded the responded to the onset of inflation by reducing rapid adoption of the 36-month car loan (the spending and attempting to build liquid assets. previous standard was 24 months) to have been a By 1977-78 the rapidity of inflation and the principal spur to the boom in new-car sales in perceived likelihood of its continuation overrode 1955. consumers' caution, driving them to shun financial assets and buy goods in advance of further Moderate Growth, 1956-75 price increases. During the last half of the 1970s, the climb in housing prices, which considerably The deceleration in the rate of expansion in exceeded the increase in the general level of consumer debt from the mid-1950s through the prices, provided further stimulus to consumer mid-1970s in large part reflected a moderation in borrowing.3 the fundamental forces that initially stimulated In the mid-1970s, maturities on new consumer the earlier postwar surge. By the mid-1950s, loans again began to lengthen considerably, a households had accumulated substantial stocks trend best documented for new-car loans. At of durables, the formation of new families had commercial banks, for instance, the proportion begun to slow perceptibly, and average loan of new-car loans with maturities exceeding 36 maturities were lengthening at a progressively months rose from about 5 percent in 1973, to 25 slower pace. percent in 1976, to 61 percent in 1979. Other factors also played a role. During the The growing use of credit cards as a conve- Vietnam War, inflation began to raise the fears of nience in transactions that could have been made consumers about the economic future. These with cash or checks probably added to the stock fears apparently led households to increase their of consumer debt measured in Federal Reserve desired levels of liquid asset holdings and reduce statistics.4 Several features of credit cards make their borrowing.1 On the supply side, higher them an attractive medium of transaction: they costs of lending in the face of statutory ceilings permit their users to carry less cash and to on consumer loan rates may have tightened the economize on checking account balances, they supply of credit in the early 1970s, though not serve as a record of purchase and as leverage in nearly so much as would the profit squeeze to disputes over purchases, and they provide users come a few years later. with free credit for short periods of time (up to nearly 60 days, depending on the timing of a Resurgence, 1977-78 purchase). The growth of consumer borrowing during 1977- 78 exceeded the 5 to 15 percent range that had by 3 percentage points. However, the oldest age group, prevailed for 20 years. Population trends and which uses credit sparingly, also increased its share of population, primarily at the expense of the 35-54 age group, social developments probably played a positive which is a relatively heavy user of consumer credit. but very limited role in this upsurge. The mar- 3. Much of the borrowing against inflated housing equity riages of the original "baby boomers" created was accomplished through mortgage instruments instead of consumer loans. It is possible that the substitution of mortsomething of a demographic echo effect during gage credit for traditional forms of consumer credit held the period, but as with any echo, the secondary down growth of the latter more than the increased wealth of effect was muted compared with the original homeowners (in illiquid form) stimulated it. There is little impact.2 question, however, that total household borrowing was boosted by the enormous swelling of equity in homes. 4. Convenience use of credit cards reflects innovations in 1. For example, in the 1962 Survey of Consumer Finances, payments technology and practices more than it does a conducted by the Survey Research Center of the University fundamental shift in consumers' acquisition of debt. Noneof Michigan, 50 percent of the respondents felt that their theless, all credit card charges that are on an institution's holdings of liquid assets were inadequate; in the 1969 survey, books at month-end are treated in the statistics as consumer 60 percent expressed that attitude. installment debt, regardless of the amount of those obliga- 2. Between 1970 and 1977, the 25-34 age group, which tions that will be paid in a lump sum before interest charges carries a high level of debt, increased its share of population begin to accrue. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

392 Federal Reserve Bulletin • June 1985 Slow Growth, 1980-82 adopt other restrictive measures with minimum resistance from customers. After the sharp credit expansion of 1977-78 came an extended period of sluggish growth associated with a slack economy. Installment credit ad- A CLOSER LOOK AT THE vanced by a still-robust 14 percent in 1979 but the DEBT-TO-INCOME RATIO rate tapered off rapidly toward the end of the year. In each of the three years 1980 through High levels of consumer debt relative to income 1982, growth of consumer debt was less than 6 imply that many borrowers might have trouble percent, the longest period of growth at such low meeting payment obligations, which in turn rates since World War II. Reduced demands for could mean larger losses on loans and lower net consumer durables during the back-to-back re- returns to creditors. Historically, creditor solcessions of the period contributed importantly to vency has generally not been a problem; instead, slowing the growth of credit, but the market for the concern has been that, with high debt burconsumer credit in 1980-82 was also noteworthy dens and rising loan losses, lenders simply will for supply constraints that were probably the curtail the availability of credit, thereby causing most stringent of the postwar period. consumer expenditures to weaken. However, The increasing costs of funds in the late 1970s the chief economic problem attributed to a high and early 1980s severely squeezed profits from aggregate debt burden appears to be its direct consumer lending as state usury laws kept rates impact on spending, not its indirect effect via the on consumer loans from rising as much as free- supply of credit. Elevated debt levels, in this market rates. For example, the rate for prime view, operate as a constraint on spending by business loans at banks, usually several percent- deflecting an increasing part of household inage points below the rate for new-car loans, come flows into the servicing of debt rather than reached 21 percent near the end of 1980, while into current consumption. Any sharp increase in ceilings held the most common rate for auto debt burden, particularly to a level higher than loans at banks to an average of only about 15 previously reached, provokes concern about its percent. effects on spending. The various state ceilings began to restrict lending broadly in 1979, causing virtually every state to revamp its rate-control laws within the Quantitative Estimates next three years; some states acted more than once. Constraints on the supply of consumer It is interesting to note that the historical trend of credit were probably greatest in 1980 and 1981, the debt-to-income ratio is consistent with that when market rates were at their highest and predicted by a simple model devised by Alain ceilings on rates for consumer loans were still Enthoven in 1957.6 Enthoven's article was writbeing adjusted.5 In addition, the consumer portion of the administration's 1980 program of 6. Alain Enthoven, "The Growth of Installment Credit and credit control provided lenders an opportunity to the Future of Prosperity," American Economic Review, vol. 47 (December 1957), pp. 913-29. Enthoven argued that the impose annual user fees on credit cards and to postwar rise was a normal, essentially benign adjustment from a level of debt artificially depressed by wartime controls and was stimulated by rapidly rising incomes and the large 5. Commercial banks, the largest and most diversified segment of the population that was in the heavy-borrowing presence in the consumer credit market, reduced their lend- phase of its life cycle. Enthoven's model was more an ing more sharply than any other source. With just under 50 illustrative exercise than a behavioral model, but one of its percent of total installment debt at the end of 1979, commer- important implications was that linear extrapolation of the cial banks cut their holdings by $3'/ billion during the 1980- postwar trend of the debt-to-income ratio was erroneous— 2 82 period, a drop in market share of 7 percentage points. By that even with no shift in borrowing habits, the debt burden contrast, finance companies increased their holdings by $30 ratio should tend toward some approximate ceiling deterbillion and their market share by 6 percentage points during mined by the long-term growth in income and propensities to the same period, in large part as a result of automobile borrow. The actual trend of measured debt burden from the finance companies acting as lenders of last resort for buyers late 1950s to the present has been quite consistent with of their parent companies' products. Enthoven's expectations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Growth of Consumer Debt 393 ten at a time when the ratio had increased rapidly The size of the monthly payment is generally from its postwar low, and many observers were more important to decisions on spending than is voicing concern over the potentially damaging the size of the total debt, which may be payable economic consequences of a continued sharp over several years. However, only amounts outrise. But Enthoven anticipated a leveling off of standing are now available; the repayments sethe ratio as it approached some upper limit ries were discontinued at the end of 1982 for all governed by the model's parameters. Replication lenders except finance companies. of the Enthoven model using historical data Although the repayments estimates were suggests that the normal upper bound for the dropped, in part to reduce the reporting required ratio of installment debt to income is between 20 of lenders, they also gave a misleading measure and 22 percent. Taking this rough estimate at of the burden of debt payments. In particular, face value, it appears that the ratio still has some they represented actual repayments rather than margin for further increase. scheduled or minimum required payments,7 and they were subject to distortions associated with fluctuations in refinancing.8 Analytical Limitations Incomplete Coverage of Household Indebted- There is little to justify heavy reliance on such an ness. Shifts among installment credit, noninstallupper bound figure to estimate a precise ceiling ment credit, and mortgage credit can reduce the for debt burden that would be invariant over relevance of a measure that includes only installtime. It would be particularly questionable to ment debt. On the other hand, a consumer debt read the calculated boundary as a critical value series incorporating all these types may not be above which households would be overburdened any more useful. The stock of mortgage debt is a with debt. Changes in several parameters, such particularly ambiguous proxy for budget conas the structure of debt maturity, can alter the straint, partly because of the much longer matuimplied ceiling for the debt-to-income ratio, and rity of mortgage debt compared with installment practical problems of statistical measurement debt. The home mortgage debt of all households also qualify the interpretation of the ratio. Some equals more than 50 percent of aggregate disposof the major limitations on the usefulness of the able income, but only a small fraction of the debt-to-income ratio are reviewed below. stock of such debt is due within a year. Moreover, the mix in the stock between fixed-rate Distribution of Debt. The aggregate ratio of mortgages and those whose scheduled payments debt to income provides no information on the may fluctuate with interest rate movements furdistribution of debt among households. Problems ther hinders interpretation. of repayment arising when a relatively limited As for noninstallment debt, a lack of good number of borrowers take on more debt might sources of data makes it a difficult component to well differ from those arising when a broader measure, and a large portion of it could be range of households are borrowing. Similarly, considered convenience credit, which is of little the aggregate ratio does not categorize income and asset holdings of debtors, yet it seemingly would make considerable difference whether it is 7. Thus early payoffs of debt, which might stem from a low-income, low-asset households or relatively strong household balance sheet, would have the effect of raising the measured repayments-to-income ratio; increased affluent consumers who are building up debts. delinquencies, reflecting repayment problems, would lower the measured ratio. Relative Significance of Outstanding Debt and 8. When an existing loan was refinanced, often in the process of borrowing additional funds, the repayment series Repayments. If consumer debt is of analytical usually treated the amount of the old loan as being repaid and concern mainly as a near-term constraint on the entire amount of the new loan as new borrowing. With the household budgets, a measure of scheduled pay- refinanced portion of the loan thus included in both extensions and repayments, the net flow of debt and the total stock ment obligations per month or per year would be were unaffected, but estimates of repayments would fluctuate preferable to a figure for total debt outstanding. with the (unknown) volume of refinancing activity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

394 Federal Reserve Bulletin • June 1985 analytical import.9 Historically, because nonin- Consistency with Consumption Spending stallment debt has closely followed the path of installment debt, its omission from the debt-to- The rate of advance in consumer installment income ratio appears to be unimportant for cycli- credit during 1983-84 was well above the growth cal analysis. However, there has been some paths in any other upswing since 1955. Moresecular shifting from noninstallment to install- over, the rapid gains during the latest recovery ment debt, especially through the long-term occurred despite a much slower pace of inflation trend in retail stores to shift from 30-day "charge than attended the 1977-78 credit boom. Installaccount" credit to optional-payment "revolv- ment credit growth soared to an annual rate of 24 ing" credit. percent in 1984:2, more than 3 percentage points higher than the rate in any other quarter in the Other Factors. All of the factors discussed past 30 years. From mid-1984 to year's end, earlier that may affect the use of debt or its credit growth ebbed, but it remained as strong as measurement would naturally affect the ratio of it was at the peaks of many earlier credit expandebt to income. Thus the spreading practice of sions. using credit cards for their convenience in place Credit growth has been exceptionally strong of cash or checks gives an upward nudge to the even though spending increases have not been as debt-to-income ratio. The lengthening of maturi- rapid as in some earlier periods of advance. It is ties, which lowers the ratio of repayments to likely that repayments have provided an uncomincome in the short run, raises the ratio of monly low offset to new borrowing, which would outstanding debt to income in both the short and explain much of this seeming anomaly between the long run. credit and spending growth. On balance, the ratio of installment debt to The net growth of consumer credit is the income is a rather crude measure of the extent to difference between gross new borrowing (extenwhich debt obligations constrain current spend- sions) and repayments of old debt. Since debt ing. Sharp and sustained increases in the ratio or repayments can be regarded as a function of the a surge to a level considerably higher than the credit extensions that took place in preceding peak in the preceding credit cycle should not be months (with the precise relationship determined dismissed lightly but cannot be taken as defini- by the original loan maturities and the propensitive evidence of a dangerously overburdened ties of borrowers to prepay their debts), repayconsumer sector. ments will be relatively large or small depending on the strength of new borrowings during a relevant period of time—about three to four A DETAILED LOOK AT 1983-84 years in the case of consumer credit.10 As discussed earlier, the 1980-82 period We have discussed the major factors underlying marked the longest sustained weakness of new the growth of consumer credit from the end of borrowing by consumers since World War II. World War II through 1982. Here we examine Thus, for much of 1983-84, the rate of growth in the 1983-84 growth phase for its consistency outstanding debt was probably boosted by the with movements in consumer spending, offer comparatively small volume of repayments flowevidence from surveys on the distribution of debt ing from the weak earlier extensions. More reby income of households, and identify several cently, the robust recovery in extensions during special factors that may help explain the data. 1983-84 has no doubt begun to enlarge the stream of repayments, a process that should retard credit growth as 1985 progresses. 9. Noninstallment credit includes amounts owed to utility In the absence of data on extensions and companies and providers of services, such as doctors and repayments after 1982, we projected historical dentists. The largest component—single-payment loans at banks—covers such uses as "bridge loans," which temporarily finance the purchase of one home while another is being sold, and loans that may be used for financial investments instead of consumption. 10. Most consumer loans mature in three to four years. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Growth of Consumer Debt 395 1. Ratio of extensions to consumption and of (column 8), and of simulated outstanding debt repayments to outstanding debt, 1979-821 (column 7) with actual outstanding debt (column 9), suggest that recent credit growth was consis- Extensions as Repayments as Year and quarter percent of percent of tent with the growth of consumption expendiconsumption outstanding debt tures, based on historical patterns of consump- 1979:1 22.1 101.3 tion and credit. After eight quarters of cal- 2 21.9 101.3 culations, the constructed debt total differed by 3 21.7 100.9 4 20.6 98.1 only $2 billion from the published total. 1980:1 20.1 98.7 The paths of historical and simulated exten- 22 16.7 94.7 sions and repayments relative to disposable in- 3 18.6 100.7 4 18.4 101.3 come are shown in chart 3. If the constructed 1981:1 19.0 102.7 series are reasonably accurate estimates of un- 2 18.9 101.5 3 18.2 98.7 derlying extensions and repayments, the two 4 17.1 97.1 ratios were approaching previous highs toward 1982:1 17.0 98.1 the end of 1984. 2 18.2 100.7 3 17.2 98.6 The analysis can be carried a step further to 4 18.1 100.7 examine reasonable expectations for consumer credit growth during 1985, based on implicit 1. Extensions, consumption, and repayments are quarterly totals at seasonally adjusted annual rates. Outstanding debt is the stock of administration estimates for consumption expeninstallment debt at the end of the previous quarter. Collection of data ditures (table 3). For instance, if the ratios of on extensions and repayments of consumer installment credit was discontinued beginning in 1983. extensions to consumption and of repayments to 2. The credit controls program was in force during this period. outstanding debt were increased gradually to their previous cyclical highs, the net change in patterns of extensions relative to consumption consumer credit would slide to about $50 billion and of repayments relative to outstanding debt by 1985:4, equivalent to a 10 percent annualized into the period 1983:1-1984:4; we used these growth rate. projections together with observed consumption Several alternative projections (not shown outlays to generate a simulated path of growth in here) were based on somewhat different but the stock of debt. Values for the ratios of exten- historically realistic assumptions about ratios of sions to consumption and of repayments to out- extensions to consumption and of repayments to standing debt for 1979-82 are shown in table 1, outstanding debt; none of the alternative growth and the simulated patterns of extensions, repay- paths varied by more than 2 percentage points ments, and net growth in credit outstanding are from that of table 3. Of course, substantial devipresented in table 2.11 Comparisons of simulated credit expansion (table 2, column 6) with actual credit growth 3. Ratios of extensions and repayments of consumer installment credit to disposable personal income 11. To simulate extensions for the period from 1983:1 to Percent 1984:4, we assumed that the extensions-to-consumption ratio Staff estimates would pick up gradually in early 1983 and accelerate toward the top of its historical range as the economic recovery Extensions gathered force. By applying this pattern to the actual figures for consumption, simulated estimates of extensions were /N^t^^^Repayments calculated. To generate reasonable values for repayments, the ratio of repayments to outstanding debt was begun at approximately the 1982:4 level and increased gradually toward the upper end of its recent range. As extensions and repayments for each quarter were derived, a resulting calcu- I I i • M I ! I I H I I ! I • ! I! I I II I if I II lation for outstanding debt was made that provided a base 1950 1960 1970 1980 1984 upon which to estimate the next period's outstanding debt. In Data are quarterly through 1982; data plotted in the shaded area are this manner, estimates of extensions, repayments, net staff estimates. change, and outstanding debt could be made for each quarter Two breaks in the series occur: the first reflects the inclusion of and would be consistent with historical relationships among gasoline companies after 1970; the second reflects the removal of these series themselves and with consumption. mortgage debt held by finance companies beginning in July 1980. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

396 Federal Reserve Bulletin • June 1985 2. Consumer credit aggregates, simulated and actual1 Billions of dollars, seasonally adjusted annual rate, except as noted Simulation Actual Ratio of Year and exten- Repayquarter Consumer sions to Ex- ment Repay- Net Out- Net Outspending consump- tensions ratio ments change standing change ssttaannddiinngg tion (percent) (percent) (1) (2) (3) (4) (5) (6) (7) (8) (9) 1983:1 2,070.4 17.5 362.3 101.5 333.2 29.1 335.6 28.0 335.3 2 2,141.6 17.8 381.2 101.5 340.6 40.6 345.8 38.8 345.0 3 2,181.4 18.3 399.2 101.7 351.7 47.5 357.7 50.8 357.7 • 4 2,230.2 19.0 423.7 101.7 363.8 59.9 372.7 73.6 376.1 1984:1 2,276.5 20.0 455.3 102.0 380.2 75.1 391.5 69.2 393.4 2 2,332.7 21.0 489.9 102.2 400.1 89.8 414.0 92.0 416.4 3 2,361.4 21.2 500.6 102.4 423.9 76.7 433.2 69.6 433.8 4 2,397.4 21.4 513.0 102.6 444.5 68.5 450.3 74.4 452.4 SOURCES. Col. 1: actual consumption expenditures, Bureau of Col. 5: col. 4 times col. 7, previous period. Economic Analysis. Col. 6: col. 3 minus col. 5. Col. 2: authors' estimates based on historical relation- Col. 7: col. 6 at quarterly rate plus col. 7, previous period. ships between extensions and consumption. Cols. 8 and 9: Federal Reserve Board, G.19 statistical release. Col. 3: col. 1 times col. 2. Col. 4: authors' estimates based on historical relationships between repayments and outstandings. ations from these calculated paths of credit ex- One important survey result is that a large part pansion could develop if, for instance, actual of the growth in installment debt between the consumption diverged significantly from its as- two years apparently was accounted for by sumed path, or if marked shifts from historical households in the highest income quintile (see norms occurred in the underlying debt ratios. table 4). The lowest income group also increased its share of debt somewhat, but that share nevertheless remained quite small. The top 20 percent 3. Illustrative projections of consumer installment of households by income level owed about 45 credit, 1985 percent of the debt in 1983, compared with 36 Billions of dollars Out- Exten- Repay- Net Growth Period standsions ments change rate ing 4. Proportion of households in debt and share of 1985:1... 526.6 464.5 62.1 467.9 13.7 total debt, by income quintile, 1970, 1977, and 2... 540.0 481.5 58.5 482.5 12.5 19831 3... 551.0 497.0 54.0 496.0 11.2 4... 561.6 510.9 50.7 508.7 10.2 Percent Income quintile YYeeaarr Lowest Second Third Fourth Highest Distribution of Consumer Debt Proportion of households in debt One problem in interpreting the aggregate debt- 1970.... 22.9 46.6 60.9 67.4 47.2 to-income ratio is that it contains no information 1977.... 30.0 50.5 62.7 64.9 57.5 1983.... 31.9 51.3 67.2 73.7 72.0 about the distribution of the debt among households of differing economic characteristics. Two Share of total debt in survey major surveys of consumers, sponsored by the 1970.... 3.8 15.2 31.4 27.9 21.7 Federal Reserve Board and conducted by the 1977.... 4.3 11.7 19.7 27.7 36.5 1983.... 4.8 14.1 16.3 19.4 45.5 Survey Research Center of the University of Michigan in 1977 and 1983, help to address this 1. Includes credit card debt. SOURCES. Consumer Credit Survey, 1970 and 1977, and 1983 Survey issue. of Consumer Finances. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Growth of Consumer Debt 397 percent in 1977.12 Those in the lowest income 20 percent for the large "other" credit category. bracket held 5 percent of the debt covered in the However, little hard evidence is available on 1983 survey, compared with AVi percent in 1977. what proportion of credit card debt outstanding The proportion of households in debt rose in all represents convenience use. income groups, with particularly sizable gains in An approximation of convenience use—reprethe two highest groups. sented by the proportion of card users who pay To some extent, then, these six-year trends in full within the billing period—is provided by tend to allay concerns that the rapid rise in debt two household surveys. In each of the large during 1983-84 has overburdened the household Board-sponsored surveys of 1977 and 1983, apsector with debt. An overburdening seems less proximately 50 percent of the card-using responlikely if, as the surveys suggest, the financially dents said that they "almost always" pay credit better-off households are doing most of the bor- card bills in full. Industry estimates of this prorowing and outstanding debt is more widely portion have generally been lower—more on the distributed among households than before. order of 35 to 40 percent.14 But even at the lower estimates, it seems that a substantial number of people behave as convenience users. Factors Influencing Current and Future The survey finding that the proportion of card Growth of Consumer Credit users that pay bills in full has not changed much between 1977 and 1983 might suggest that conve- That credit expansion during 1983-84 has been nience use may have been a constant share of consistent with consumer expenditure patterns total debt for several years. However, such perhaps makes a search for a special explanation proportions do not translate easily into the share of the expansion less imperative. However, vari- of debt attributable to convenience users beous possible influences on the rate of growth in cause the size of their average balances relative credit may provide clues to the prospects for to those of other card users is not known and future variations from the postwar paths of debt may change over time. It is entirely possible that and debt burden. convenience users have been increasing their activity relative to borrowers without increasing Convenience Use of Credit Cards. The ex- in relative numbers. panding use of credit cards for their convenience Nevertheless, a rough estimate was made of in transactions rather than for borrowing over a the impact of convenience use on the aggregate period of months has biased upward the mea- debt-to-income ratio in recent years. Starting sures of debt and debt burden in recent years. from 1977:1 (the point at which data on retail Convenience credit continues to be an important revolving credit became available as a compoissue for the future, as well, because it is plausi- nent separate from the "other" category), we ble that convenience credit could either expand assumed that the growth in convenience credit or contract substantially.13 was a constant 40 percent of the growth in total Revolving credit has been the fastest growing revolving credit throughout the period—roughly component of installment debt during the 1983— equivalent to the proportion of convenience us- 84 period. Over the 12 months through February ers in the card-holding population. We estimated 1985, revolving credit increased 26 percent, com- "convenience-adjusted" trends of revolving and pared with 20 percent for automobile credit and total debt by subtracting out all growth in convenience credit after 1977:1, thus holding the abso- 12. This result continued a trend that carried back at least to 1970, when the highest income quintile owed 25 percent of the debt. 13. For instance, if financial institutions were to impose 14. Industry estimates are more frequently based on actual interest charges from date of purchase to date of payment on account activity during a given period. Since, for any particubills paid in full, the long-term trend toward greater conve- lar month, some proportion of those who "almost always" nience use of credit cards might be sharply reversed; the pay in full will not in fact do so, the measured proportion of development of debit cards could also lower the convenience accounts paid in full will be smaller than the share of card use of credit cards. holders that usually pays in full. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

398 Federal Reserve Bulletin • June 1985 lute volume of convenience use to its 1977:1 5. Growth of consumer installment debt, actual and level. adjusted for convenience credit1 Although such calculations are merely hypo- Percent thetical, they suggest some reasonable magni- Annual rate of Ratio of outstanding tudes for the impact of convenience credit on the growth in debt to disposable outstanding debt personal income installment debt series. Actual figures and esti- YYeeaarr aanndd qquuaarrtteerr Conve- Convemates for total installment debt and the debt-to- Actual nience- Actual nienceincome ratio are shown in table 5. The conve- adjusted adjusted nience-adjusted growth rate in installment credit 1977:1 18.1 18.5 15.9 15.9 is about Vi to VA percentage points lower than 2 17.6 16.3 16.2 16.1 3 15.6 15.6 16.3 16.2 the reported rate in recent quarters, and the 4 17.5 15.9 16.5 16.4 adjusted debt-to-income ratio by 1984:4 is about 1978:1 16.7 16.0 16.8 16.6 2 20.8 19.8 17.2 16.9 1 percentage point below its actual level. In other 3 16.0 14.8 17.3 17.0 words, because the reported series reflect conve- 4 15.8 15.1 17.5 17.1 nience use of credit, debt growth has been some- 1979:1 17.5 16.0 17.7 17.3 2 13.7 12.2 17.9 17.4 what faster recently and the debt burden is now 1 3 13.2 12.0 17.9 17.4 4 10.4 9.5 17.9 17.4 percentage point higher than it otherwise would have been. 1980:1 7.4 8.3 17.7 17.2 2 -8.3 -9.7 17.1 16.6 3 (2) (2) 16.02 15.52 4 2.2 1.8 15.5 15.0 Lengthening of Maturities. For some types of closed-end loans, maturities have begun to 1981:1 6.9 6.3 15.3 14.8 2 6.9 5.9 15.3 14.8 lengthen recently. In the case of new-car loans at 3 7.8 7.6 15.0 14.5 4 .4 .1 14.9 14.3 major auto finance companies, the increasing use of five-year car loans has extended the average 1982:1 5.0 4.5 14.9 14.3 2 6.5 5.8 14.8 14.3 maturity to 50.2 months as of December 1984, 3 2.8 2.5 14.7 14.2 4 5.0 4.9 14.7 14.1 compared with 46.3 months at the end of 1983; 1983:1 8.6 8.0 14.8 14.2 the average maturity continued to lengthen in 2 11.6 10.6 15.0 14.3 early 1985. Between the end of 1979 and 1983, in 3 14.7 14.4 15.1 14.4 4 20.4 19.2 15.5 14.7 contrast, the average maturity at these companies had lengthened by just two months. Qualita- 1984:1 2 2 1 3 8. . 5 4 2 1 2 7. . 4 0 1 1 5 6 . . 7 3 1 1 4 5 . . 9 4 tive information indicates that an increasing pro- 3 16.8 16.3 16.6 15.7 4 17.1 16.3 17.1 16.2 portion of commercial banks and credit unions also are making some five-year car loans. 1. "Convenience-adjusted" debt is actual debt minus an estimate of the cumulative growth in convenience credit. Thus the difference The four-month increase in average maturity between the actual observations (which include convenience use) and for all newly originated auto loans during 1984 the convenience-adjusted estimates (which hold convenience use to its level in 1977:1) indicates the overall impact of convenience use on probably had a rather small impact on total the growth rate and the debt-burden measure. installment credit. Such a maturity shift could 2. The discontinuity in these series reflects the removal of mortgage debt held by finance companies beginning in July 1980. have accounted for about XA percentage point of the overall rise in the stock of debt in 1984.15 The impact of lengthening maturities will be- but a precise estimate for 1985 and beyond is come more pronounced if the trend continues, problematic. Since a shift from 48 months to 60 months would represent a smaller percentage change in maturity than, say, the earlier shift from 24 to 36 months, the resulting enlargement 15. For auto loans of typical size and interest rate, a maturity of 50 months would leave an outstanding balance at of the debt stock would be proportionately smallthe end of the first year 2Va percent higher than the corre- er. Likewise, the direct effect on the demand for sponding balance on a 46-month loan. However, newly made cars might be more moderate than before in view loans constitute only one-third to one-fourth of the auto loan stock, which in turn constitutes about one-third of total of the smaller percentage reduction of monthly installment debt. Thus, the first-year impact of a four-month payment size. On balance, however, it appears increase in the average maturity on new auto loans would be that the debt stock should continue to receive at diluted considerably in the aggregate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Growth of Consumer Debt 399 least a moderate boost over the next few years tion with 1983 average levels of debt within age from a stretching out of maturities, particularly categories, as shown in table 6. We weighted the in the auto loan area, where some lengthening is average amounts of debt for each age group in clearly in process. 1983 (including those with no debt) by the proportion of the households headed by a person Demographic Factors. Population trends have within that age group for each of the two years probably had a slightly positive effect on the and computed two weighted-average means. The growth of consumer credit in the last two years. 1983-weighted estimate of debt was $2,693, 0.5 The movement of the baby boom generation into percent larger than the 1977-weighted average of the age groups characterized by high rates of $2,679. This result suggests that the aggregate family formation, spending, and borrowing was level of debt in 1983 was 0.5 percent higher than approaching a crest as the 1983-84 period got it would have been had there been no change at under way. Whereas in 1977-78 the proportion of all in the structure of the population between people in the 35-44 age group had been declining 1977 and 1983. for several years, it was on the rise at the Marriage rates and birth rates rose 5-10 perbeginning of 1983. The 25-34 age group was still cent from 1977 to 1982, reinforcing the concluexpanding as well. Together these two groups sion that demographic trends have been stimulatrepresented 29 percent of the population in 1982, ing debt expansion during 1983-84. These rates compared with 26 percent in 1977 (and 23 Vz are still well below peaks in the late 1950s— percent in 1970). Further growth in the oldest age births, for instance, occurred at the rate of 25 per category, which uses debt sparingly, offset this 1,000 people in 1955 and only 16 per 1,000 in trend to some extent. 1982. But current trends appear to be unmistak- In 1983 (the latest year for which data are ably upward and should continue to foster conavailable) 42 percent of the nation's households sumer credit demands to a small degree. were headed by persons between 25 and 44. According to survey responses, households Credit Market Innovations. Innovations in headed by these persons ranked highest in the lending to households can affect the growth of proportion of households in debt (table 6). In the consumer installment credit series, positively addition, borrowers in the 35-44 age bracket also in some cases and negatively in others. An had the highest mean level of debt of any age innovation may consist of a new credit instrucategory. ment, revival of an "old" instrument, a new We estimated the overall impact of changes in source of credit, or some change in the characthe age distribution by calculating what the aver- teristics of loan contracts. The impacts of several age amount of debt for all households would be such factors are mentioned below, but we do not using 1977 and 1983 age distributions in conjunc- make a detailed evaluation. 6. Effect of age on amount of debt outstanding Distribution of households by MMeeaann aammoouunntt Contribution of age groups to AAggee ooff hheeaadd ooff hhoouusseehhoolldd age of head (percent) PPeerrcceenntt iinn ooff ddeebbtt,, 11998833'' overall average debt (dollars) ((yyeeaarrss)) ddeebbtt,, 11998833 ((ddoollllaarrss)) 1977 1983 1977 1983 (1) (2) (3) (4) (5) = (1) x (4) (6) = (2) x (4) Under 25 8.1 6.8 54.1 1,564 127 106 25-34 21.8 22.8 73.6 3,586 782 818 35-44 16.8 19.1 75.9 4,097 688 783 45-54 17.4 14.7 68.6 3,459 602 509 55-64 15.9 15.6 52.5 2,530 402 395 65 and over 20.0 21.1 21.8 388 78 82 All age groups 100.0 100.0 2,6792 2,6932 1. Mean is for all households in group, including those with no debt. SOURCES. Bureau of the Census, Current Population Reports, 2. Population-weighted average amount of debt outstanding, calcu- series P-20, selected issues; Federal Reserve Board, Consumer Credit lated by summing the figures shown for individual age groups. Survey, 1977 and 1983, data tapes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

400 Federal Reserve Bulletin • June 1985 • Securities brokerage firms in recent years A newer type of lending, secured by real estate have begun offering "cash management ac- and used primarily for consumption, provides an counts," which often include a line of credit open-ended line of credit backed by housing accessible by a credit card. Because brokerage equity. Several institutions began offering such firms are not included in the official installment plans in 1982, when certain changes in federal credit statistics, this development tends to retard regulations removed barriers that had made the the measured growth of the series to the extent plans impractical.19 The volume of receivables that consumers substitute brokerage credit for under such plans is believed to be comparatively credit from banks and other sources covered by small; it is not known to what extent some the statistics.16 institutions may be misreporting such lending as • Savings and loan associations are becoming revolving consumer credit rather than as mortincreasingly important suppliers of consumer gage credit. credit, by virtue of provisions in the Depository On the whole, individuals probably raised Institutions Deregulation and Monetary Control more funds by tapping their housing equity dur- Act of 1980 that widened the asset powers of ing the 1977-78 period, when housing equity had these institutions. In percentage terms, consum- grown enormously, than they did during 1983er credit at savings and loan associations grew 84, which followed a period of more slowly rising faster than any other component during 1983-84. home prices. Much of the housing equity mobi- Savings and loans held $31.7 billion of consumer lized in 1977-78 was raised in the process of debt in February 1985, nearly double the amount selling one home and purchasing another, rather at the end of 1982.17 How much of this gain than by second mortgages. Undoubtedly, borrepresents a net addition to household borrowing rowing against home equity partly supplemented and how much a replacement of one source by traditional types of consumer loans and partly another is uncertain; it seems likely that the substituted for them. On net, the 1977-78 surge additional competition introduced into the mar- in housing-related borrowing for consumption ket by savings and loans has operated to expand could partly explain why the reported rate of the overall supply of credit, resulting in at least growth in consumer credit during that period of somewhat greater borrowing on somewhat more inflation, when people might have been expected favorable terms than would otherwise have pre- to borrow more, was not as rapid as it was during vailed. 1983-84, when prices were more stable. • Housing equity grew rapidly in the last half • Adjustable-rate financing of consumer loans of the 1970s, and financial institutions greatly is probably encouraging the growth of consumer expanded their holdings of junior mortgages in credit to some extent. Adjustable-rate contracts, those years. Most junior mortgages properly which shift interest rate risk to consumers, have would be classified as mortgage credit instead of probably increased the willingness of creditors to consumer credit.18 Any expansion in junior mort- make consumer loans and to make them with gage debt that supplants consumer loans would longer maturities. In general, though, any inreduce the lending reported in the consumer debt crease in demand for consumer loans because of series. adjustable rates is likely to be small compared 16. Many of the credit card plans offered by brokerage firms are operated for the firms by other institutions, which purpose of borrowing, because the ultimate purpose—the actually carry the receivables. Credit extended under such marginal endeavor financed by a loan—is rarely knowable to plans in many cases would be included in the statistical series a creditor. as receivables held by the ultimate credit source. 19. The proper handling of sales under open-ended plans 17. Savings and loans may soon surpass retail stores— secured by real estate was blocked by the right of borrowers, which hold $38 billion of consumer receivables—as the fourth under the Truth in Lending law, to rescind within three days largest supplier of consumer credit. Commercial banks re- any transaction that mortgages their home and by the duty of main by far the largest supplier, with $218 billion of consumer sellers to give notice of such right at the time of purchase. credit outstanding in February. Finance companies hold $99 The Congress amended the law in 1982 to require that notice billion, and credit unions hold $71 billion. of the rescission right need be given only by creditors and 18. As a general principle, loans are classified in the only at the time that the account is opened or a change made consumer credit statistics by type of collateral rather than by in its terms or in the credit limit. 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The Growth of Consumer Debt 401 with the boost such financing has given to mort- 1984, reflecting the burgeoning costs of educagage lending. Because maturities are so much tion and the expansion of federal guarantee proshorter and loan amounts so much smaller in grams.22 Because growth in this sector has been consumer markets, the monthly payment is af- steady rather than cyclical, it probably has confected less by initially lower rates on a consumer tributed not so much to the 1983-84 upsurge in loan than it is on a mortgage.20 Thus demand credit as to a longer-run stimulus. effects are likely minimal. • "Private label" credit card plans have been Given the fairly slow spread of adjustable rates expanding rapidly, but this type of credit no in the consumer market so far—perhaps 10 per- doubt represents mainly a substitution of one cent of consumer loans carry an adjustable rate source of credit for another. Private label credit at present—and the questionable power of ad- cards carry the logo of a retail store or supplier of justable rates to generate demand for consumer goods (two major computer firms are recent loans, it appears that their effect on growth in entrants), and promotional materials for the firm 1983-84 was minor. Still, adjustable rates should are included with monthly bills, but the operation exert a net positive influence on the supply of of the plan and the carrying of the receivables are credit over the longer term. handled by another institution. Private label • The further development of secondary mar- credit should be reported as consumer credit kets for consumer loans could stimulate growth holdings by the ultimate carrier of the receivof consumer credit. To date, the purchase of ables, and for the most part this practice appears consumer loans has been limited primarily to the to be followed. small segments for home improvement, mobile • Loans on life insurance policies, now totaling home, and student loans, but the purchase of about $55 billion, are a source of credit to auto loans may be on the verge of rapid develop- consumers not included in the consumer credit ment. A major investment banking firm has been statistics. Borrowing against the cash value of privately selling "Certificates for Automobile insurance policies was much heavier in 1979-81, Receivables," representing packages of auto when low rates of interest were guaranteed in loans, and expects a public market to emerge many policies and market interest rates were soon.21 extraordinarily high, than it apparently was in In general, secondary markets can bring to a 1983-84. If it substitutes for consumer credit, an loan sector funds from investors who would not increased volume of policy loans would depress otherwise provide financing for that purpose. the measure of consumer credit, and a reduced The data on consumer credit growth may under- volume would tend to raise it, but the degree of state such expansion, however, if it means the substitution between the two is far from clear. transfer of receivables to the books of holders Much of the proceeds of earlier low-rate borrownot covered in the consumer credit statistics ing was redirected into high-yielding financial from originators that are included in the statis- assets rather than into consumption. On balance, tics. policy loans do not appear to have had a major • Student loans outstanding have increased impact on the growth rate of consumer credit. strongly over the past decade, to $32 billion in • The deductibility of interest payments in figuring federal income taxes supports consumer credit demands, especially when interest rates 20. On a typical 48-month car loan, an increase of 1 percentage point in the interest rate raises the monthly are high, as they were in the late 1970s. If payments for interest and principal by $3 to $4. On a typical enacted, the Treasury Department's proposal to 30-year home mortgage, a 1 percentage point difference in interest rate could mean a $50 difference in monthly payments. 21. In responding to a 1983 survey by the American 22. The loans are made by banks and other institutions Bankers Association, nearly 28 percent of commercial banks under the Department of Education's Guaranteed Student with assets of $500 million or more reported selling consumer Loan Program. The statistics on consumer credit treat stuloans in the secondary market; smaller banks were less dent loans as noninstallment credit until regular monthly active. The dollar volume of such transactions was not payments are begun after the student's graduation; at that reported. ABA, 1984 Retail Bank Credit Report (Washington: point the loans become one of many elements of the "other" ABA, 1984), table 18. component in the installment credit category. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

402 Federal Reserve Bulletin • June 1985 limit the deductibility of personal interest ex- affect the measured growth of the consumer pense should have but slight effect on consumer credit series. No information on this practice has credit demands. Under current law, all such been collected since the early 1950s. At one time, interest is deductible; under the proposal, de- the installment credit series were adjusted to ductibility would be limited to mortgage interest remove an estimate of nonconsumer use based on the taxpayer's principal residence and an on 1952 relationships. Adjustments for installamount equal to net investment income plus ment credit were small (although noninstallment $5,000. In the overview to the reform proposal, debt contained a fairly high proportion of nonthe Treasury points out that "in 1981, only 3.3 consumer use), and were confined mainly to percent of individual tax returns claimed item- home improvement credit. Such adjustments ized deductions for nonmortgage interest in ex- were eventually discontinued for lack of informacess of $5,000." The $5,000 allowance should be tion. There is no strong reason to believe that sufficient to allow the continued deductibility of nonconsumer use of consumer credit has intensiinterest on loans to buy autos and major appli- fied greatly during 1983-84, but in the absence of ances and on a sizable amount of other personal relevant data nothing definitive can be said on indebtedness. this point. • The development of tax-sheltered savings plans such as individual retirement accounts could lead to a higher volume of borrowing. Such CONCLUSION plans are generally quite illiquid and in most cases substitute for other types of saving. House- The pace of consumer credit expansion in 1983— holds are more likely to borrow to finance con- 84 exceeded that of any period since the years sumption when their savings are in illiquid form. immediately following World War II. This rapid Moreover, some households may find it advanta- growth, however, appears to be consistent with geous for tax reasons simultaneously to build up typical relationships between consumption and tax-sheltered savings and borrow for consump- borrowing and between repayments and the tion, rather than simply funneling income flows stock of debt. Several factors in combination directly into spending. may have imparted a moderate upward push to On the other hand, to the extent that tax- the measured rate of growth of installment debt sheltered savings plans promote saving at the and the ratio of debt to income, notably some expense of consumption, they could provide lengthening of loan maturities and a growing some deterrent to borrowing. Also, with the volume of convenience use of credit cards. The recent sharp increase in money market deposit continuation of normal linkages between conaccounts and other highly liquid assets, it is not sumption and debt expansion points to a slowing clear that household savings grew much less of the rate of growth in consumer credit during liquid, on balance, during the 1983-84 upswing. the near term. A miscellany of special factors • Finally, the use of consumer credit for busi- may, on balance, add from 1 to 3 percentage ness needs or other nonconsumer purposes can points to the anticipated trend. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

403 Industrial Production Released for publication April 16 higher, at an annual rate, than the fourth quarter of 1984. Industrial production increased an estimated 0.3 In market groupings, output of consumer percent in March following a decline of 0.2 goods was little changed in March following a 0.9 percent (revised) in February. At 165.4 percent percent decline in February. Automotive prodof the 1967 average, the index was 2.9 percent ucts rose 0.4 percent as autos were assembled at above a year ago, but remained slightly below its an annual rate of 8.3 million units following a rate level in the summer of 1984. The preliminary of 8.2 million units in February, but output of average for the first quarter is about 1 percent home goods and nondurable consumer goods 1979 1981 1983 1985 1979 1981 1983 1985 All series are seasonally adjusted and are plotted on a ratio scale. Auto sales and stocks include imports. Latest figures: March. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

404 Federal Reserve Bulletin • June 1985 1967 = 100 Percentage change from preceding month PPPeeerrrccceeennntttaaagggeee ccchhhaaannngggeee,,, Grouping 1985 1984 1985 MMMaaarrr... 111999888444 tttooo MMMaaarrr... Feb. Mar. Nov. Dec. Jan. Feb. Mar. 111999888555 Major market groupings Total industrial production 164.9 165.4 .2 .0 .2 -.2 .3 2.9 Products, total 167.7 168.0 .5 .2 .1 -.3 .2 4.3 Final products 166.1 166.2 .6 .3 .1 -.5 .1 4.8 Consumer goods 161.1 161.3 .6 -.2 .2 -.9 .1 .7 Durable 161.2 161.5 1.8 -.3 -.2 .3 .2 -1.0 Nondurable 161.1 161.2 .2 -.2 .3 -1.3 .1 1.3 Business equipment.. 188.9 188.5 .6 .6 -.3 -.1 -.2 9.5 Defense and space... 145.9 146.9 .8 1.8 .8 .1 .7 12.9 Intermediate products.. 173.7 174.5 -.2 .1 -.1 .4 .5 2.5 Construction supplies 158.5 159.2 -1.1 .4 -.1 .7 .4 .1 Materials 160.6 161.3 .0 -.4 .4 .1 .4 .6 Major industry groupings Manufacturing 166.5 167.1 .2 .0 -.2 3.1 Durable 157.7 158.5 .3 .0 -.1 4.7 Nondurable 179.1 179.5 .1 .0 -.3 1.1 Mining 123.1 123.5 1.0 -.3 -1.6 -.2 Utilities 184.6 184.7 2.3 -.5 .6 2.6 NOTE. Indexes are seasonally adjusted. changed little. In the equipment group, produc- rials, including paper and chemicals, also are tion of business equipment edged down again in estimated to have increased in March after small March largely as a result of further reductions in gains in January and February and a series of oil and gas well drilling, while defense and space reductions in the second half of 1984. equipment rose 0.7 percent. Output of construc- In industry groupings, manufacturing output tion products increased 0.4 percent following a rose 0.4 percent in March as durable manufac- 0.7 percent gain in February. Materials produc- turing increased 0.5 percent and nondurable tion rose 0.4 percent overall; among durable manufacturing, 0.2 percent. Mining output rose materials, output rose 0.6 percent, primarily re- 0.3 percent after declining 1.6 percent in Februflecting gains in basic metals. Nondurable mate- ary, and the output of utilities was little changed. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

405 Statements to Congress Statement by E. Gerald Corrigan, President, are preserved or, better still, improved. The Federal Reserve Bank of New York, before the historic "breadth, depth and resiliency" of the Subcommittee on Domestic Monetary Policy of government securities market reflect, in the first the Committee on Banking, Finance and Urban instance, the fact that the full faith and credit of Affairs, U.S. House of Representatives, April I, the United States stand behind each Treasury 1985. bill, note, or bond, thus creating a financial instrument that is "risk free." While the unique character of the U.S. govern- I welcome the opportunity to appear before this ment security rests fundamentally with the issuer subcommittee to discuss efforts aimed at improv- of the security, it is also true that certain instituing standards of capital adequacy for dealers in tional factors, which have worked in the direc- U.S. government securities. This and related tion of enhancing the marketability of U.S. govefforts predate my appointment as President of ernment securities, have developed over time. the Federal Reserve Bank of New York, but I am For example, the primary dealers in government generally familiar with the background leading to securities—the true market-makers for governtoday's hearing. I am also mindful that the events ment debt—clearly help to improve the liquidity of the past few weeks—growing out of the col- and the efficiency of the market by maintaining lapse of a Florida-based government securities two-way markets, by directly participating in firm—have raised broader questions about the auctions of new government debt, and by serving operation and the integrity of parts of the govern- as the essential bridge between the Treasury and ment securities market. In that context, I thought the vast network of institutions and individuals it would be useful to review briefly some back- who are the ultimate holders of government debt. ground relating to the market, including the role Similarly, the Federal Reserve-Treasury bookof the Federal Reserve Bank of New York in entry system for government securities provides providing a degree of oversight of that market. a highly efficient method for market participants Having done that, I will turn to the proposed to hold and to trade in government securities. capital standards and conclude with some gener- The resulting speed, efficiency, and relatively al observations about the future role of public low transaction costs associated with secondary policy as it pertains to the oversight or regulation market transactions in government securities of the government securities market. contribute importantly to the liquidity of the market and to the attractiveness of Treasury securities to investors. Because Treasury securities are issued by the BACKGROUND U.S. government and because of the way the secondary market for such securities has devel- At the outset, Mr. Chairman, I think it is impor- oped over time, the volume of trading in such tant to stress again that the market for U.S. securities is enormous. For example, it is not government securities is the largest, the most uncommon for more than $200 billion in governefficient, and the most liquid securities market in ment securities to change hands in a single day the world. More importantly, given the sheer via the book-entry system. And even that numsize of the debt of the federal government and the ber does not include the substantial trades that speed with which government debt is being accu- take place outside the Federal Reserve-Treasury mulated, we all have a very large stake in seeing book-entry system nor does it include the large to it that those traits of liquidity and efficiency volume of trading in derivative instruments Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

406 Federal Reserve Bulletin • June 1985 such as options and futures in government has made it possible for dozens, if not hundreds, securities. of new firms to enter the government securities As this subcommittee knows, the direct inter- business and to operate nationwide from virtualest of the Federal Reserve Bank of New York in ly any location in the country. the operation of the government securities mar- To summarize, the Fed's initial interest in the ket grows out of the fact that day-to-day pur- safe functioning of the government securities chases and sales of government securities— market was one that grew out of the timemost, I might add, in the form of repurchase honored tradition of knowing those with whom agreements—are the primary vehicle used by the you do business. Over time, that interest gradu- Federal Reserve in seeking to influence the growth ally took on some of the trappings of a more of money and credit. During 1984, for example, generalized, but essentially voluntary, system of the aggregate value of such transactions conduct- oversight aimed at the primary dealers. That ed by the Fed with the primary dealers was $209 system of general surveillance over the primary billion. The Fed also acts as agent for more than dealers has, in my judgment, served the Trea- 100 foreign central banks and other foreign offi- sury, the Fed, and the public well for a long cial institutions in the market. Transactions con- period of time. ducted by the Fed on behalf of these institutions More recently, and reflecting in part changes in 1984 amounted to $211 billion. All Fed trans- in market structure, the Fed stepped up its actions—whether for its own account or for the efforts to learn more about the activities of accounts of foreign official institutions—are con- nonprimary dealers in government securities. ducted with the primary dealers. This effort—also entirely voluntary in nature— The origin of the role of the Federal Reserve entailed a very limited form of monthly reporting Bank of New York in providing a form of surveil- and efforts aimed at establishing voluntary capilance over the primary dealers was, in part, a tal adequacy standards. The current arrangestraightforward business proposition. Indeed, ments, especially as extended to the nonprimary given the enormous volume of public funds asso- dealers with which we do not have a business ciated with the Fed's transactions in the market- relationship, are not without problems. place, it was quite natural that, in conducting Perhaps the more serious problem is that by such transactions, the New York Fed would be having an informal monitoring role, we may guided by one of the oldest precepts in trading— create an appearance of providing much greater "know your counterparty." protection from abuse than it is realistic to as- Of course, the essence of our interest in the sume. Given our present role, we have to be workings of the market goes beyond our strict careful in dealing with suspected problems— business relationships with the primary dealers. indeed there may be circumstances in which Indeed, the essence of that concern stems from efforts to move in on a suspected problem could the fact that the government securities market is create a difficulty when none existed, or could the market that we use for monetary policy make a large problem out of a small one. Some implementation and that the Treasury uses for danger of this type probably exists with any financing the federal government. Over time and regulatory function, but it may be especially in recognition of the larger public interest consid- acute in the case of the government securities erations associated with the operation of the market, given the intricate interdependence of government market, the New York Fed's role in that market with so many other parts of the the market evolved into an informal watch dog financial structure. Since there can never be a function that loosely incorporated some ele- fail-safe system of surveillance or even of regulaments of traditional regulatory functions. tion, I believe that recognition of these problems This evolution of the Fed's interest in the must be central to our thinking as we seek ways government securities market took place, how- to guard against the abuses while at the same ever, in a framework in which the Fed had, and time seeking to preserve the strength and the has, no statutory authority and in a framework in dynamism of the market for our government's which the sheer growth of the debt, as well as debt and the market we rely on for the conduct of advances in communications and technology, monetary policy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 407 THE FED S VOLUNTARY CAPITAL trating—and, we think, more realistic—analysis GUIDELINES of risks associated with particular instruments and classes of instruments in which dealers trade The Fed's initial proposal for a system of volun- and take positions. Also, there is greater attentary capital guidelines for government securities tion to risk in offsetting positions within maturity dealers was the subject of a hearing by this categories, and increased recognition of risk resubcommittee in May 1984. Reflecting the pro- duction embodied in arbitrage and hedging techceedings at that hearing, as well as the public niques employed by dealers. We have also excomments received on the initial proposal, a panded the number of maturity categories to revised approach was developed and issued for refine the measurement of risk and have included public comment on February 7, 1985. The public risk factors that reflect recent price volatility. comment period ended on March 31. To date, we Analysis of the risk of new instruments has also have received about 20 comments, and they are been added, including treatment of zero coupon summarized in the attached appendix.1 securities, futures, and options. At the risk of a gross oversimplification, and in While we believe the guidelines are technically an effort to avoid a morass of technical detail, I sound and especially well suited to a government believe I can say that there are two major differ- dealer operation, the question of how effective ences in the current proposal relative to the one the guideline program will be in reducing the that was discussed with the subcommittee last probability of new market abuses remains. Apyear. Those major differences are the following: plied in the present setting, the program depends 1. The current guidelines are targeted at those on an unsupervised dealer taking action volunfirms that are not otherwise regulated by federal tarily to implement the guidelines and to stick banking supervisors, are not covered by Securi- with them over time. The dealer must agree to ties and Exchange Commission (SEC) restric- participate and then to monitor the level of risk tions and capital rules, or are not subject to the according to the guideline analysis; the level of reporting, the monitoring, and the capital fitness risk must be reduced when the dealer's liquid standards of primary dealers. In other words, the capital falls below calculated requirements. We capital guidelines are aimed at unregulated believe dealers, as a group, will honor the volunand/or unsupervised dealers in government secu- tary system and that the presence of the guiderities. The universe of dealer firms that might be lines, reinforced by the certification procedures, subject to the guidelines is not known, in part, will help all market participants, especially pribecause as dealers in exempt securities they are mary dealers and clearing banks, and will instill a not subject to a federal registration requirement. higher level of discipline and prudence in the Using a narrow definition of what constitutes a marketplace. In the final analysis, however, the dealer, we believe that there may be 100 or so voluntary guidelines will provide that added firms in this universe, 30 of which are now measure of discipline only to the extent that providing the limited monthly reports referred to market participants insist that affected dealers earlier. comply with the guidelines and are willing to 2. The second and more substantive change in certify to that effect. the proposed guidelines relates to the methodolo- Having said that, let me hasten to add that the gy used to determine risk profiles and corre- capital guidelines should not be viewed as anysponding levels of adequate liquid capital. The thing approaching a panacea. They will help, but approach is broadly similar to the financial re- by themselves they will not provide ironclad sponsibility rules used by the SEC, but has been protections against all forms of market and credit tailored to the characteristics associated with risk. And, to be very sure, they will not restrain a positions and trading in government securities dealer willing to practice deception and to certify and related instruments. The current proposal, falsely that it is in compliance. Clearly, there is while more complex, centers on the more pene- no regulatory regime that can prevent all fraud or deception. 1. The attachments to this statement are available on These qualifications notwithstanding, I do not request from Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. see why the guidelines cannot be in force within Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

408 Federal Reserve Bulletin • June 1985 a matter of weeks. The speed with which dealers sharper focus the question of whether the current will adopt the guidelines is another matter and system of some self-regulation of parts of the will depend on how quickly market participants government securities market is adequate for the can be made aware of their existence, on wheth- future. In seeking to answer that question, there er participants are prompt in demanding compli- are several aspects of recent experience—experiance by their counterparties, and on how ence not limited to ESM—that seem to me highly promptly internal and outside auditors turn to the relevant. Among these are the following: task of assessing individual firms' conformity to 1. Despite the very troubling problem cases of the standards. This hearing, as well as other the recent past, the market as a whole continues educational efforts we contemplate, should help to function effectively in fair weather or foul. to speed the process by focusing public attention 2. Government securities dealers—like all ecoon the guidelines. However, the fact that we nomic agents—must follow the dictates of pruhave had very little direct commentary from dence and caution in their affairs. If they fail to those who would be affected by these proposals do so, they, as others, must be subject to the gives me some concern as to the speed with disciplines of the marketplace, including the ultiwhich the guidelines will, in fact, be put in place. mate discipline of failure. In considering the utility and the effectiveness 3. Because of the nature of their business, of the capital guidelines, an obvious question, of problems or failures of government securities course, is whether the guidelines could have or dealers raise very difficult issues relating to inwould have prevented the demise of E.S.M. vestor protection and the threat that a particular Government Securities, Inc. (ESM). Given the failure can cascade into a more generalized or truly extraordinary circumstances surrounding systemic problem. ESM's operations—including allegations of fraud Against this background and the background and wholly inaccurate financial statements—I of the problems of the recent past, there can be believe the answer must be that the guidelines little doubt that there are public policy issues of would not—in and of themselves—have prevent- broad importance associated with the safe operaed the problem. On the other hand, as I said tion of the government securities market. In earlier, I also believe that a case can be made these circumstances, it is not surprising to hear that the presence of such guidelines can, and increasing calls for some type of more formal should, bring further awareness and discipline to regulation of the market backed up by statutory the marketplace and, absent the gross irregular- authority vested with one or more government ities associated with an ESM-type operation, agencies. provide customers and trading partners of these The Federal Reserve, in cooperation with the unregulated firms with a vehicle to help them SEC and the Treasury, is taking a fresh look at assess the financial position of such firms. And, that question and the results of that review are given the experience at ESM, I would think that expected to be made available to the Congress as any accounting firm would take a long hard look soon as possible. While I do not want to prejudge at such financial statements before it was willing the results of that effort, I would stress three to certify the accuracy of such statements. In points. (1) In these deliberations, particular atshort, the ESM episode does not lessen the case tention will have to be focused on the universe of for the guidelines. Rather, it works in the oppo- nonregulated, nonprimary dealers. Indeed, even site direction, keeping in mind, of course, that when such firms report monthly, as ESM did, the such guidelines cannot eliminate all risks to the mere presence of such a reporting relationship marketplace and cannot contain those bent on may work to create a false and unwarranted fraud and deception. sense of confidence about such firms. (2) Any effort aimed at reform must take account of the imperative of preserving a smoothly functioning market for government securities. (3) With or LOOKING TO THE FUTURE without formal regulation, it seems to me that recent experience points to the need for further Whatever else may be said of the ESM episode, I efforts to reduce the risks of more problems think we can all agree that it does bring into even Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 409 down the road. In that connection, let me men- that would facilitate steps to improve the safety tion several areas that seem to me worthy of of repo-type transactions. The transfer of securifurther effort. ties, for example, could possibly be earmarked in 1. We in the Fed plan to step up, in a signifi- a way that would identify the securities being cant way, our education efforts, especially as held under a repurchase agreement and the parthey pertain to political jurisdictions and subdivi- ties to such agreements. As an extension of that sions. Toward this end, we are developing some procedure, consideration might be given to esnew educational material, and—working with tablishing a segregated account for repurchase trade groups at the national and local level as transactions at each depository institution. While well as with the other Federal Reserve Banks— there may be some pay dirt in these areas, I we plan to conduct a series of seminars nation- would want to stress at the outset that this is a wide over the coming months. While this effort highly problematic and complex area, with nucan reach only a small fraction of the market merous possible technical and legal impediments participants who might be susceptible to the that may stand in the way of getting useful abuses we have seen, we believe it can play a results. constructive role in further heightening investor These potential avenues for improvements awareness of the potential pitfalls associated should and will be explored; the voluntary capiwith repo (repurchase agreement)-type transac- tal guidelines should and will be put in place; tions. and the question of a more formal system of 2. I also believe that we may be able to do regulation of the government securities market more through the bank supervisory process to should and will be addressed. In the final analyeducate further both depository institutions and sis, however, none of these things can substitute examiners about risks in repo-type transactions for the good old-time religion of knowing your and securities lending. As a first step, we will counterparty; performing rigorous credit checks; recommend to the Federal Financial Institutions limiting trading and position-taking to sound, Examination Council that a coordinated exami- prudent levels; and resisting the complusion to nation program for clearing banks, banks in seek out those few extra basis points at the general, savings and loan associations, and credit expense of sound practice. Those disciplines unions be developed. With that in progress, we were never easy to instill and to maintain, but in will also bring this area of concern to the Confer- today's markets they are even more elusive. Yet, ence of State Bank Supervisors. as we have seen all too dramatically, the tempta- 3. The Federal Reserve also is investigating tions in today's markets with their sheer size and whether the operation of the book-entry system speed demand an even stricter adherence to that for Treasury securities can be adapted in ways old-time religion. • Statement by J. Charles Partee, Governor, with those services that have been traditionally Board of Governors of the Federal Reserve Sys- provided by depository institutions, it seems to tem, before the Subcommittee on Telecommuni- me eminently reasonable to ask whether safecations, Consumer Protection, and Finance of guards can be put in place to constrain or to the Committee on Energy and Commerce, U.S. eliminate the potential for abuse, without at the House of Representatives, April 2, 1985. same time unduly limiting the benefits of the merged activities. In my remarks, I will focus on I appreciate the opportunity to appear before this both the potential benefits and the costs of these subcommittee today to review some of the con- relationships and illustrate some of the problems cerns of the Federal Reserve Board with respect that may be involved by indicating how we at the to evolving changes in the financial structure that Federal Reserve have addressed similar issues serve to link depository institutions and other and conflicts in the recent past. financial entities. To the extent that previously The basic framework within which the Board separate financial services come to be merged approaches the issues arising from expanded Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

410 Federal Reserve Bulletin • June 1985 relationships between depository institutions and cern has centered on avoiding such anticompetiother financial entities can be summarized as tive practices as the following: (1) tying arrangefollows: (1) we want to encourage fair competi- ments involving banking services and nonbank tion in the provision of banking services to activities, (2) preferential treatment of nonbank preserve impartial access to credit; (2) we want affiliates, and (3) unequal access to credit for to promote efficiency and reduced costs so that independent firms competing with the bank's customers may benefit in terms of lower prices affiliates. for existing services and gain from possible new The Board has consistently supported the conand innovative services; (3) we want to protect cept of maintaining the separation of banking and against undue concentrations of economic re- commerce. In this regard, the recent proliferasources that would result in unfair discrimination tion of "nonbank banks" is a particularly disamong customers, conflicts of interest, and other turbing development. Such institutions are alpotential abuses; and (4) we want a strong and lowed to exist along with conventionally defined stable banking system, with continued close at- banks but, by virtue of a narrow definition of tention to safety and soundness of banks and what constitutes a "bank" in the Bank Holding other depository institutions, both as an objec- Company Act, may not be subject to that act and tive in and of itself and because of the crucial to the rules governing holding company relationimportance of banking stability to the smooth ships. This is the case whenever the nonbank operation of the economy. bank is owned by a commercial, an industrial, or These goals will, in some circumstances, be in a nonbank financial parent. Since by definition conflict so that each of the various avenues these owners do not thereby become bank holdtoward financial consolidation will require an ing companies, the anti-tie-in provisions of the examination of the particular issues raised and a act do not apply, nor are they subject to the careful balancing of the likely costs and the inspection and the enforcement powers of the benefits involved. In approaching that balance, Federal Reserve. Yet nonbank banks can take the normal perception for most industries—that different forms of deposits, including transaction one may simply look to the marketplace to accounts, and make consumer loans, as well as a promote competition and efficiency—must be wide variety of other types of credit extensions. tempered by a recognition of the need to main- By offering insured deposits, nonbank banks tain confidence in banking institutions and conti- could serve to increase the risks faced by the nuity in the provision of money and payments deposit insurance funds since their parents may services. In addition, any market perception that not be subject to the safeguards embodied in the diversification into new and riskier activities Bank Holding Company Act. significantly increases overall banking risk may Concern over conflicts of interest is not limited lead to higher funding costs and hence the cost to to issues of separating banking and commerce. It the public of bank credit. also relates to potential conflicts of interest that Longstanding policy in the United States has may arise from combinations of financial firms been to prevent banking organizations from en- and from the diversity of activities allowed withgaging directly in commercial enterprise. Con- in the bank itself. The usual means of addressing cern over the commingling of banking and com- these issues in banking are through a system of merce was an important motivation for the Bank prohibitions, limitations, and insulation. Holding Company Act of 1956 and the 1970 An example of this approach is the "Chinese amendments to that act. Potential abuses that Wall" separation of bank trust departments from were of concern to the Congress may be divided the rest of the bank. Besides securities laws into four categories: (1) potential conflicts of against insider trading and laws specifying the interest, (2) decreased or unfair competition, (3) fiduciary responsibilities of trustees, the Board undue concentration of resources, and (4) in- issued a policy statement in 1978 that augmented creased risk to banks that might result from further these prohibitions and limitations for affiliation with risky nonbank enterprises. With banks. The Board advised that trust personnel respect to potential conflicts of interest and should be denied access to commercial credit decreased or unfair competition, particular con- files; government, agency, and municipal securi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 411 ties underwriting files; and other pertinent rec- equity investments in real estate will permit ords. Greater insulation was also recommended these institutions to diversify their portfolios, to through the physical separation of trust and improve service to their real estate customers, commercial bank lending and investing person- and to enable them to share in the profits of real nel. Such prohibitions and limitations on activi- estate development more directly than through ties between trust and other departments appear the provision of real estate loans. On the other to have been successful in preventing abuses of hand, real estate development has historically the potential conflicts of interest inherent in a been a risky and a highly cyclical activity. And, combination of trust and commercial bank activi- as often is the case regarding these new activities. ties, diversification benefits could be swamped In accordance with this general approach, the by increased risks of loss if they are permitted to Board has supported some expansion of bank exceed relatively low levels of concentration. To holding company powers into other financial better insulate the bank, we believe that such activities under appropriate regulatory safe- activities should be placed in separate affiliates guards. Such activities include the ability to of a bank holding company rather than be undersponsor, control, and distribute the securities of taken within the bank itself. mutual funds; to underwrite and deal in munici- Lastly, considering the various ways in which pal revenue bonds, one- to four-family residen- depository institutions in the past have sometial mortgage-backed securities, and commercial times been weakened by activities of their holdpaper; and to engage in a limited way in a variety ing company affiliates, a number of common of real estate brokerage, some types of insurance elements emerge. These elements serve to illusunderwriting, and travel products. Certain other trate possible limitations that could be considactivities appear to raise serious risk and con- ered to improve the insulation concept. It may be flict-of-interest concerns, and thus the Board has desirable, for example, to require each subsidbeen much less willing to support bank involve- iary to maintain capital that is fully adequate to ment. For example, we recently denied the appli- meet its own commitments. Similarly, stricter cation of a bank holding company to acquire a rules designed to prevent extensive or regular national bond rating service because of the per- support in the form of loan guarantees on behalf vasive conflicts of interest that would be present of, preferential financing to, or cross collateraliin the combination. The Board has similar con- zation clauses in financing for affiliates may be cerns with respect to proposals to permit banks desirable. Adherence to all of the formalities of to underwrite corporate securities. separate incorporation may also be desirable so A related issue is whether a new activity that the public is not led to believe that holding should take place "inside" the bank, as with company affiliates together constitute a single trust activities, or should be lodged in a separate entity, and therefore that losses at one affiliate affiliate of the bank holding company to address could spread throughout the organization. better the insulation and the conflict-of-interest In sum, there are obvious problems in insuring concerns. The Board believes that in many cases that activities of nonbanking affiliates (and parthe latter strategy is the most appropriate. Con- ents) do not unduly affect banks and other deposduct of a nonbanking activity in a separate sub- itory institutions. When risk is substantial and sidiary would permit equivalent ground rules could threaten the banking entity, we would seek across institutional lines and would also provide to insulate the bank to protect depositors and the a structural basis for at least partial insulation of payments system. Quantitative limitations on one activity from another. such investments, perhaps based on the capital An area in which the insulation issue has of the holding company, might also be usefully emerged recently is that of direct equity involve- employed. Insulation and other efforts to avoid ment in real estate activities by banks. Such conflicts of interest cannot always be fully sucinvestments have been suggested as one area in cessful, and thus some risk will remain. Neverwhich depository institutions might play a great- theless, the marketplace is clearly evolving toer role in the future. Proponents argue that ward ever-broadening combinations of financial permitting depository institutions to make direct services, and there may well be economies, as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

412 Federal Reserve Bulletin • June 1985 well as the convenience and the other benefits of benefits be compared with the probable costs, increased competition, to be gained. In each taking into account whether, and what, workable instance of broader corporate powers, whether safeguards against injurious potential conflicts in banking, insurance, securities, or real estate need to be imposed. • development, we would urge that these potential Statement by Preston Martin, Vice Chairman, funds. At present, all but one of the ODGF thrift Board of Governors of the Federal Reserve Sys- institutions have reopened on either a full- or a tem, before the Subcommittee on Commerce, limited-service basis, although a permanent solu- Consumer, and Monetary Affairs of the Commit- tion involving the remaining closed thrift institutee on Government Operations, U.S. House of tion, Home State, and those thrift institutions Representatives, April 3, 1985. that cannot qualify for federal insurance remains to be worked out. The limited service reopenings I am pleased to appear before this subcommittee permit withdrawals of $750 per account per to discuss the Federal Reserve's contribution to month. The Federal Reserve is lending to the efforts to ameliorate the problems of the state- reopened thrift institutions when necessary. chartered, privately insured thrift institutions in In reviewing this situation, it is helpful at the Ohio. The situation in Ohio was touched off by outset to clarify the Federal Reserve's specific reported losses suffered by Home State Savings regulatory responsibilities for various types of Bank (Home State) as a result of transactions banking institutions as well as its broader responwith E.S.M. Government Securities, Inc. sibilities as the nation's central bank. The Feder- (ESM), a broker-dealer in government securi- al Reserve has primary supervisory responsibilties, but also was related to more systemic ity at the federal level for state-chartered banks weaknesses in the supervision and insurance of that are members of the Federal Reserve System some Ohio savings and loan associations. A and for all bank holding companies. Commercial detailed chronology of the Federal Reserve Sys- banks that are members of the Federal Reserve tem's response to events in Ohio is attached to System are insured by the Federal Deposit Insurthe statement of President Karen Horn of the ance Corporation (FDIC), and commercial banks Federal Reserve Bank of Cleveland. [That state- that are subsidiaries of bank holding companies, ment follows this one.] regardless of membership status, must by law be As this subcommittee is aware, reports of federally insured. Of course, the Federal Relosses at ESM precipitated a run on Home State serve does not have supervisory responsibility that led to its closing. This development subse- for thrift institutions, and the federal regulatory quently contributed to more generalized deposit agencies, including the Federal Reserve, generaloutflows at other Ohio Deposit Guarantee Fund ly do not have direct supervisory or regulatory (ODGF) savings and loan associations and sav- responsibility for state-chartered, nonfederally ings banks in Ohio, and a number of these insured depository institutions, such as the afinstitutions experienced heavy depositor with- fected ODGF thrift institutions in Ohio. Normaldrawals. Faced with this situation, Governor ly, such institutions are supervised and regulated Celeste of Ohio closed, on a temporary basis, all by state authorities. The Federal Reserve is not 70 of the remaining ODGF thrift institutions. an insuring agency and does not have the author- Subsequently, the state of Ohio adopted a plan ity to make direct equity investments in deposithat allows certain institutions that were found to tory institutions. However, the Federal Reserve qualify for federal insurance to reopen on a full- does have the authority to lend through the service basis. Ohio authorities are pursuing other discount window and, in its role as the nation's remedial steps, including the potential merger of central bank, has a fundamental responsibility to weak thrift institutions with stronger federally foster the stability and the orderly functioning of insured institutions, designed to resolve the situ- the nation's banking and financial system. ation and to promote the safety of depositor Nonmember depository institutions, including Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 413 the state-chartered thrift institutions in Ohio, 8 percent, and, as required by the Federal Rebecame generally eligible for discount window serve Act, have been secured by adequate collatborrowing in 1980 as a result of the enactment in eral. As is usually the case, this collateral has that year of the Monetary Control Act. Under consisted of government and agency securities, this legislation, the discount window facilities of commercial loans, one- to four-family residential the Federal Reserve System were made available mortgage loans, and other loans, and the collatto all insured or uninsured depository institutions eral has been evaluated within normal guidelines. throughout the nation that offer transaction ac- The Federal Reserve has, however, acted in an counts or hold nonpersonal time accounts. expeditious manner to facilitate the access of In its capacity as the central bank, the Federal these institutions to the discount window under Reserve may assist in efforts to deal with finan- normal terms and conditions. cial disturbances to prevent them from becoming Besides these responsibilities as lender of last generalized financial crises or causing systemic resort, the Federal Reserve has also played an dislocations. An important policy tool to achieve important role in monitoring events in Ohio and these ends is the discount window through which in facilitating cooperative efforts among the varithe Federal Reserve serves as the ultimate ous parties involved to resolve the situation, to source of liquidity. reestablish public confidence, and to promote Throughout this difficult period in Ohio, the the safety of depositors' funds. In this capacity, Federal Reserve Bank of Cleveland has been Federal Reserve officials have held or participatprepared to lend and has loaned through the ed in numerous meetings with government and discount window to the affected thrift institutions supervisory officials from the state of Ohio as under the terms and conditions established by well as with officials from the Federal Home law for such borrowing. Indeed, on March 6, one Loan Bank Board (FHLBB), the Federal Home day after the public disclosure of possible Home Loan Bank of Cincinnati, and other federal regu- State losses, Federal Reserve examiners were latory agencies. To enhance our understanding dispatched to Cincinnati to meet with Home of the financial condition of the affected thrift State officials, to explain borrowing procedures, institutions and to assist the state of Ohio and the and to begin to review potential collateral. In FHLBB, the Federal Reserve, within a few days addition, the eligibility of state-chartered deposi- of the temporary closings, provided examiners to tory institutions, including thrift institutions, for participate in on-site examinations and asset discount window assistance was stressed in a evaluations of the ODGF institutions. These public statement by the Federal Reserve Bank of examinations have helped to determine the avail- Cleveland on March 10. Before the temporary ability of collateral for facilitating access to the closings of the ODGF institutions, the Federal discount window and, equally important, they Reserve Bank of Cleveland provided discount have played a critical role in the process of window credit to certain affected institutions, reopening those institutions found to qualify for and as the institutions have reopened, they have federal insurance. The information developed in been eligible for liquidity assistance. The avail- our on-site visits and otherwise has been made ability of this discount window assistance to available promptly to other federal and state reopened institutions was stated publicly by authorities. We hope that these actions have President Horn on March 15 and reiterated by supported and complemented the steps taken by Chairman Volcker on March 20, 1985. Governor Celeste, the Ohio legislature, and the federal insurance agencies to reopen the affected In carrying out its responsibilities as lender of thrift institutions. last resort, the supervisory and examination personnel of the Federal Reserve System have As the primary supervisor of bank holding worked closely with the affected institutions to companies and in response to a request by the inform them of collateral and documentation state, the Federal Reserve has also been in requirements and to assist them in understanding contact with banking organizations, both within fully and in meeting these requirements. Dis- and outside Ohio, to determine their intercount window loans to affected institutions have est, if any, in acquiring or merging with ODGF been made at the regular discount rate, currently institutions, including those that may be unable Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

414 Federal Reserve Bulletin • June 1985 to qualify for federal insurance or to reopen While a longer-range solution with respect to without additional external support. The day all of the affected thrift institutions remains to be after the temporary closings, Reserve Bank offi- worked out, the events in Ohio underscore the cials telephoned the senior managements of bank importance of full cooperation among appropriholding companies throughout the country to ate federal and state supervisory authorities in inform them of imminent state plans to hold dealing with any strains or pressures involving meetings to discuss the possible sale or acquisi- depository institutions that could have adverse tions of certain thrift institutions. systemic implications for the banking or financial As the subcommittee is aware, the state of system. Such adverse developments must be met Ohio has adopted a plan requiring federal insur- with timely and effective action to restore confiance for essentially all savings and loan institu- dence and to maintain the stability of the finantions, building and loan associations, and all cial system. In the case of the thrift institutions in savings banks in the state. The state has also Ohio, I believe that, in general, the remedial implemented arrangements to provide depositors procedures that have been taken should signifiat ODGF thrift institutions with limited access to cantly reduce any lasting impacts on financial their funds. Further, the Ohio legislature acted markets. promptly to advance $50 million in state funds to One of the questions raised by the recent shore up the remaining ODGF institutions other events in Ohio relates to the role of private than Home State. To facilitate the federal insur- deposit insurance funds. Clearly, deposit insurance requirement, expedited arrangements have ance is an important factor in maintaining public been made for review of applications by the confidence in depository institutions. Indeed, as FHLBB, the FDIC, and the Federal Reserve. In I have noted, commercial banks that are memthis process, the Federal Reserve will continue bers of the Federal Reserve System are insured to make field examination personnel available to by the FDIC, and all commercial banks that are the FHLBB and to authorities in Ohio to assist in subsidiaries of bank holding companies are reexaminations and to expedite the process of quired by law to be federally insured. I believe qualifying for federal deposit insurance. We have that it is too early to make a definitive judgment been informed that as of March 29, 1985, the about the role of sole-insurer, private insurance state of Ohio had authorized 26 institutions to funds and even state-sponsored funds in our reopen on a full-service basis. Included in this financial system. group is a former thrift institution that has con- There may be industry structures that could be verted to commercial bank status and has re- adequately supported by private arrangements as opened with FDIC insurance after the Federal sole insurers—structures involving large num- Reserve Board acted on a bank holding company bers of small institutions, having a substantial application. Also included in this number is a reserve fund not dependent upon deposits by the thrift institution acquired by a bank holding insured institutions, and featuring adequately company in a transaction approved on an expe- strong examinations and auditing procedures. dited basis by the Federal Reserve Board. Such a structure might consist of a large number It may take some time for the thrift situation to of smaller credit unions. Any such arrangements return to normal in Ohio. A number of ODGF suffer from a certain degree of confusion as to institutions have obtained federal deposit insur- whether and to what extent the resources of state ance. Others will, apparently, need an injection government are behind the private sole insurers' of capital from present owners or new investors, reserves. However, industry structures consistand still others may need to be acquired by ing in part or in whole of sizable depository stronger depository institutions. I assure you institutions, reserve funds dependent upon the that the Federal Reserve will continue to provide deposits of the members, and with an examinaassistance through the discount window, the tion and regulatory procedure in part justified to provision of examination personnel to assist the its membership as less rigorous than federal FHLBB and state authorities, and the expedi- procedures raise substantial questions as to tious review and action on applications for merg- whether the public interest is served thereby. ers or acquisitions that require our approval. The Board supports the movement of several Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 415 state legislatures away from private insurance loss can spread to other institutions. In view of funds. Whatever approaches may ultimately these concerns, the Federal Reserve System will prove feasible, the events in Ohio do serve to continue to cooperate fully with the state and the remind us of the potential consequences of the federal authorities in seeking a long-run solution loss of public confidence in individual depository to liquidity problems of thrift institutions in institutions and of the celerity with which that Ohio. • Statement by Karen N. Horn, President, Federal The Federal Reserve Bank of Cleveland first Reserve Bank of Cleveland, before the Subcom- became aware of possible financial difficulties at mittee on Commerce, Consumer, and Monetary Home State Savings Bank of Cincinnati, Ohio, Affairs of the Committee on Government Opera- on March 4, 1985, when an official of Home State tions, U.S. House of Representatives, April 3, telephoned the Federal Reserve Bank of Cleve- 1985. land to inquire about the procedures that Home State should follow if it needed to borrow at the I am pleased to appear before this subcommittee discount window. The Federal Reserve Bank of to discuss the Federal Reserve's response to the Cleveland did not have any financial information recent problems experienced by thrift institu- on Home State. It is a state-chartered savings tions insured by the Ohio Deposit Guarantee and loan association, regulated and examined by Fund (ODGF). This morning I will be reviewing the Ohio Division of Savings and Loan Associafor you the response of the Federal Reserve tions, and before this time it had never borrowed Bank of Cleveland. Attached to my statement is at the discount window. We did know that Home a chronology that sets forth the Federal Reserve State's deposits were insured by the ODGF, but System's response to recent events in Ohio.1 we did not have access to any financial reports I would like to begin by stating that the role of on Home State. On March 5, the press reported the Federal Reserve Bank of Cleveland through- that Home State might suffer a large loss in out this period has been to assist the state of connection with the failure of E.S.M. Govern- Ohio and other federal regulators in fashioning a ment Securities, Inc. (ESM), a Florida-based solution. Our initial involvement was to ensure broker-dealer in government securities. The that we could act quickly to provide liquidity Federal Reserve began an effort to gather inforassistance at the discount window and to make mation on Home State's situation. Discussions currency shipments—first to Home State and with the FHLB of Cincinnati confirmed that subsequently to other institutions insured by the Home State was not a member of the FHLB and Ohio Deposit Guarantee Fund. We have acted at that the FHLB also had little financial informathe request of the state of Ohio, and throughout tion on Home State. this period the Federal Reserve Bank of Cleve- Reports from Cincinnati on Wednesday, land and the Federal Home Loan Bank (FHLB) March 6, indicated a large volume of depositor of Cincinnati have shared information and staff in withdrawals at Home State. On that same day, a cooperative effort to deal with the problems Federal Reserve examiners entered Home State and to fashion solutions. I would also like to to examine available collateral in the event that it recognize the substantial and supportive role of became necessary for Home State to borrow at the correspondent banks in Cincinnati. I believe the discount window. Depositor withdrawals on that the Federal Reserve has been helpful, and Wednesday and Thursday were funded with we will continue to assist the state of Ohio and Home State's own liquidity and lending by the other federal regulators until the problem is ODGF. The withdrawals on March 6 totaled $55 solved. million. On March 7, a meeting was held at the Cincinnati Branch of the Federal Reserve Bank of Cleveland with representatives from the state 1. The attachments to this statement are available on of Ohio, ODGF, and Home State to discuss request from Publications Services, Board of Governors of liquidity assistance for Home State from the the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

416 Federal Reserve Bulletin • June 1985 Federal Reserve Bank of Cleveland. Based on be prepared to deal with the problem by Moncollateral judged to be acceptable by the Federal day, March 11, when the ODGF institutions Reserve Bank, credit was extended on Friday, opened. We were fortunate to be able to draw March 8, and arrangements were put in place to upon staff from other Federal Reserve Banks to extend further credit. assist in the contingency planning and logistics. Depositor withdrawals had continued on The weekend planning effort concluded with March 7 and 8, reaching approximately $100 meetings at 10:00 p.m. on Sunday, March 10, in million for those two days. On Saturday, March both Cleveland and Cincinnati to brief Federal 9, Home State did not open for business. Gover- Reserve examiners on their role in the contingennor Celeste appointed a conservator for Home cy plans. These plans called for examiners to be State and announced on Sunday night, March 10, strategically placed near ODGF institutions that Home State would not reopen for business throughout the state prepared to deliver borrowon Monday. ing documents upon request. Although the problems at Home State were Also, late Sunday evening, March 10, after the triggered by unique events growing out of its Governor's announcement that Home State transactions with ESM, the severity of the public would not reopen on Monday, the Cleveland reaction made us concerned about possible de- Federal Reserve Bank publicly restated its disposit withdrawals at other ODGF-insured institu- count window policy: "State-chartered savings tions. As I mentioned earlier, deposits at Home and loans and savings banks, like all depository State were insured by the ODGF, a private fund institutions, are eligible for liquidity assistance that also insured 70 other state-chartered thrift through the discount window . . . under normal institutions in Ohio. According to state officials, terms and conditions." Our weekend efforts had the insurance fund had assets of about $130 made it possible to implement the policy, to million before the run on Home State. Uncertain- monitor deposit flows, to lend at the discount ty regarding other ODGF-insured institutions window, and to ship cash throughout the weeks was increased by reports on the use of ODGF that followed to a large number of institutions, funds to deal with Home State's heavy deposit most of which had not dealt with our discount withdrawals. Financial information on all window and normally received their currency ODGF-insured institutions was made available from other sources. to the Federal Reserve Bank of Cleveland late Public confidence in ODGF institutions con- Friday, March 8. Federal Reserve examiners and tinued to decline. As financial institutions discount window staff reviewed and analyzed opened on Monday, March 11, the evidence of this information on Saturday and Sunday, March the loss in depositors' confidence was almost 9 and 10, with the assistance of senior examina- immediate. At first the loss of confidence was tion personnel from the FHLB of Cincinnati. largely confined to Cincinnati, where Home Growing concern that other ODGF institutions State is located. As the week progressed, the might confront problems on Monday led us on number of ODGF institutions suffering heavy Saturday, March 9, to develop a plan to monitor cash drains increased, and the volume of withand to deal with deposit withdrawals at other drawals rose sharply. On Thursday, March 14, ODGF institutions, should they occur. The plan for example, the seven most affected institutions had several dimensions: (1) having a timely and in the Cincinnati area lost more than $60 million effective mechanism for sensing unusually heavy in deposits—almost triple the amount withdrawn deposit withdrawals; (2) informing ODGF insti- on Wednesday. Several institutions had lost onetutions of collateral and other requirements for fifth of their deposits between Monday morning borrowing at the discount window; and (3) plan- and Thursday night, and there was clear evining and putting into place the logistics neces- dence that the crisis was spreading to ODGFsary to deliver currency, evaluate collateral, and insured institutions in other cities. The more obtain documents for borrowing at the discount public confidence fell, the more serious the probwindow. The large number of ODGF institutions lem became. Federal Reserve examiners were and the need for prompt and effective action, if sent upon request to many institutions to begin action were required, made it imperative that we reviewing collateral as deposit withdrawals and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 417 the potential for borrowing at the discount win- Ohio to discuss the situation with them and to dow increased. The Federal Reserve and other propose a solution to the problem. A meeting commercial banks shipped currency to institu- with representatives of 13 depository institutions tions that were experiencing heavy withdrawals, in Ohio—banks and savings and loan institutions but cash alone was not enough to restore confi- (S&Ls)—was convened that morning at the Feddence; without confidence even the strongest eral Reserve Bank of Cleveland. At that meeting financial institution can be severely impacted. Governor Celeste explained his decision to close Our active and visible role was to provide the ODGF institutions and discussed a legislative liquidity assistance to ODGF institutions at the proposal that would require the ODGF institudiscount window. In performing this function, tions to obtain federal insurance before reopenthe Federal Reserve Bank of Cleveland has not ing. He also presented a proposal for dealing modified the normal eligibility requirements for with the ODGF institutions that would not qualidiscount window assistance in any way. The fy for federal insurance. The state subsequently Monetary Control Act of 1980 made the discount decided that it would be useful to discuss the window of the Federal Reserve Bank available to situation with out-of-state banks, and two meetany depository institution that holds transaction ings were held with out-of-state institutions at accounts or nonpersonal time deposits. Regula- the Federal Reserve Bank of Cleveland—one on tion A of the Board of Governors, which pre- Saturday, March 16, at 9:00 p.m. and another on scribes standards for the operation of the dis- Sunday, March 17, at 11:00 a.m. count window, provides for lending to eligible In the past two weeks, some elements of a depository institutions under two basic pro- solution have fallen into place. Each ODGF grams. One is the adjustment credit program; the institution was examined on a case-by-case basis other supplies credit for seasonal and other limit- to determine its financial condition and the likelied purposes for more extended periods. Adjust- hood of its qualifying for federal insurance. The ment credit is available on a short-term basis to state Superintendent of Savings and Loan Assoassist borrowers in meeting temporary require- ciations requested assistance from the Federal ments for funds while an orderly adjustment is Reserve, the Federal Deposit Insurance Corpobeing made in their assets and deposit liabilities. ration (FDIC), and the Ohio Division of Banks in All Federal Reserve advances must be secured conducting these examinations. This process beto the satisfaction of the Reserve Bank providing gan on Saturday, March 16, with examiners the credit. Satisfactory collateral includes securi- provided by the Federal Reserve Bank of Cleveties of the U.S. government and of federal agen- land and, eventually, by every other Federal cies, and, if of acceptable quality, residential Reserve Bank. Examiners were assigned to each mortgage notes and other assets. Although col- of the ODGF institutions. Virtually all examinalateral is generally held in safekeeping at the tions were completed on Sunday, March 17, Federal Reserve Banks or acceptable third-party enabling us to conduct a preliminary review of custodians, in this instance field warehouses the condition of each institution to supplement were set up in most ODGF institutions in which and update the information obtained the previous collateral was identified, evaluated, and ear- Friday from the state. The results of the prelimimarked for possible use in securing discount nary examinations made it clear that a large window borrowings. number of these institutions were well managed, The Federal Reserve played another very im- in sound financial condition, and, consequently, portant role during the ODGF savings and loan viable candidates for federal deposit insurance. problem—we served as a facilitator. During the Others, for a variety of reasons, would have early morning hours of Friday, March 15, when difficulty qualifying for federal deposit insurthe full dimensions of the problem became clear, ance. The FHLB Board agreed to review on an Governor Celeste decided to close all ODGF expedited basis the Federal Savings and Loan member institutions for a three-day period. Fol- Insurance Corporation (FSLIC) insurance applilowing that decision, the Governor requested cations of ODGF member institutions. Under that the Federal Reserve assist him in calling a this arrangement, FSLIC qualification examinameeting of large banking and thrift institutions in tions were expedited, using the resources of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

418 Federal Reserve Bulletin • June 1985 FHLB System and the Federal Reserve. The understanding that a final outline of such a plan is Federal Reserve offered its assistance to help not yet complete. A solution may have to involve complete the FSLIC examinations as rapidly as the sale of some ODGF institutions to other Ohio possible. We believed that we could facilitate financial institutions and, perhaps, also to out-ofthis process because our examiners were already state institutions. The Federal Reserve Bank of in place at the ODGF institutions and had gained Cleveland has not participated in the discussions familiarity with these institutions through the involving plans for any single institution except just-completed examinations conducted on those for which Federal Reserve regulatory ap- March 16 and 17. proval was required, such as the sale of Metro- As of Friday, March 29, according to the state politan Savings Bank of Youngstown to FNB of Ohio, 26 of the former ODGF institutions had Corporation, a Pennsylvania bank holding combeen reopened for the full range of banking pany, and the conversion of Scioto Savings Asfunctions, most with federal insurance. Confi- sociation into a state-chartered commercial bank dence in these institutions seems to have been insured by the FDIC under the continuing ownfully restored. There has been no evidence of ership of its parent company, Society Corporaunusual withdrawals or need for assistance tion, an Ohio bank holding company. through either the credit facilities of the FHLB of While this process is under way, the state has Cincinnati or the Federal Reserve discount win- authorized the ODGF institutions not yet qualidow. The federal deposit insurance applications fied to reopen for full business to open for the of some ODGF institutions are still being consid- limited purposes of giving each depositor access ered. Other ODGF institutions have been in- to a maximum of $750 per month and pledging formed of the changes and the improvements assets to and borrowing from correspondent that will be necessary to enable them to obtain banks or from the Federal Reserve discount federal insurance. window to fund the limited deposit withdrawals. The state of Ohio is making intense efforts to Complete confidence in the ODGF institutions develop an orderly plan for those institutions that has not been restored, but the atmosphere is might not qualify for federal insurance. It is my much calmer than it was two weeks ago. • Statement by Preston Martin, Vice Chairman, merger activity (attachment l).1 But the dollar Board of Governors of the Federal Reserve Sys- size of recent transactions exceeds by a wide tem, before the Subcommittee on Securities of margin any past experience. The largest acquisithe Committee on Banking, Housing, and Urban tion in 1984 totaled $13.3 billion, nearly twice as Affairs, U.S. Senate, April 4, 1985. large as any single merger of previous years. Indeed, last year there were 14 mergers that I am pleased to appear before this committee to exceeded $1 billion each. These 14 combinations discuss the recent surge in merger and takeover alone accounted for more than $50 billion in activity and the potential effect of this activity on activity. credit market conditions. Many other smaller transactions bolstered the The magnitude of recent merger trends under- total dollar volume of acquisition activity to scores the importance of assessing the implica- record levels last year; during 1984, nonfinancial tions of this activity, as you are reviewing in corporations retired an estimated $85 billion of these hearings. The number of completed merger equity through mergers, takeovers, and share transactions in 1984 totaled more than 2,800, and repurchases. Included in this total is about $15 it seems that almost every day we read in the billion of equity retired through so-called leverpress of a new combination of firms or a threatened takeover. These figures may not be unprec- 1. The attachments to this statement are available on edented; in the late years of the 1960s, for request from Publications Services, Board of Governors of example, more firms reportedly were involved in the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 419 aged buyouts, which rely heavily on debt financ- Ml tends to be insignificant over periods of time ing. In a typical leveraged buyout, an individual relevant for monetary policy deliberations. The or a small group of investors or management broader aggregates, M2 and M3, may be boosted purchases a company or a subsidiary of a compa- somewhat more than Ml, as some proceeds from ny with the proceeds of loans collateralized by stock sales find their way into time deposits, the assets of the company, and then takes the money market mutual funds, or other assets that company private. are included in these aggregates. But relative to In my view, there is a legitimate place in our the large size of M2 and M3 this effect also would economy for mergers and takeovers. They can be relatively minor. be important mechanisms for redeploying corpo- The Board is aware of the influence of merger rate assets to the most profitable—and socially activity and takes it into consideration when beneficial—uses, and for bringing about better evaluating the behavior of the money and debt management. We must be careful in attempting aggregates. Given our ability to monitor the size to impose the judgment of government authori- and the timing of very large transactions, we can ties about which among thousands of private anticipate possible distortions to the aggregates transactions will be economically productive and in a particular period and thus avoid inadvertentwhich will not; in most instances the parties ly reacting to these factors in policy deliberawhose fortunes are at stake are likely to be better tions. Moreover, distortions in the credit aggrejudges. Government authorities are obliged to do gate, in which the potential problems are largest, what they can to ensure that individual risk- are less likely to mislead policy deliberations. In taking does not jeopardize the stability of our setting monitoring ranges for this aggregate, the financial system. As I will discuss later, the Federal Open Market Committee recognizes that Federal Reserve recognizes its responsibilities in numerous factors, including merger activity, this area. may alter the behavior of credit growth relative Assessing the implications of merger activity is to gross national product. Thus, I do not believe complex. From the perspective of the Federal that mergers present for us a real operational Reserve, concerns have focused on the effect problem that would result in appreciable uninthat this activity is likely to have on aggregate tended variations in reserve market pressures. credit flows and on the risk exposure of financial More fundamental determinants of credit deinstitutions and markets. We all are aware that a mand, including the behavior of the household large portion of these merger transactions has sector, capital expenditures of businesses, and, been financed, at least initially, with debt, in- of course, the fiscal position of the federal govcluding short-term bank credit. Leveraged ernment, exert much more powerful and persisbuyouts typically entail as much as 80 to 90 tent pressures on credit markets than does takepercent of debt financing; and among the largest over activity. mergers last year, credit sources initially fi- Some members of the public and the Congress nanced about 75 to 80 percent of the equity have expressed concerns that merger activity purchases. absorbs credit that could be used to support Estimates by Board staff indicate that growth other, perhaps more productive, purposes. But in the domestic nonfinancial debt aggregate— this would be true only in unusual circumstances which is one of the aggregates that the Federal and for temporary periods. Basically, merger and Reserve monitors in the course of its monetary acquisition transactions involve transfers of policy deliberations—was boosted about 1 to 1 Vi ownership of existing assets and do not absorb percentage points in 1984 as a result of merger- net real savings in the economy. Proceeds from related borrowings. Mergers and buyouts appear the transactions either are returned to bank aclikely to have had a much more limited impact on counts or are reinvested in other financial instruthe narrow money aggregate, Ml. The checking ments, thereby recycling the funds into the maraccounts of merger participants may be in- kets. Thus, these transactions should not creased temporarily as a result of the mergers, generate significant lasting reductions in the but proceeds from merger sales are generally amounts of financial resources available to other reinvested in other assets, so that the effect on borrowers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

420 Federal Reserve Bulletin • June 1985 However, mergers may alter the cost or the cern because these purchases are typically exeamount of credit available to some borrowers if cuted using larger proportions of debt and smallbanks that extend large amounts of takeover er amounts of equity than mergers. In 1984, credit are subject to capital or liquidity con- leveraged buyout deals involving U.S. compastraints and reduce their lending to other poten- nies are estimated to have amounted to more tial borrowers for a time. In this case, those than $15 billion, with buyers rarely putting up borrowers with limited access to financial mar- more than 10 percent of the purchase price. The kets would be vulnerable to the potential effects ability of the firm to service this debt burden of these transactions. However, in the case of depends on the value of the assets and on the many mergers, corporations have begun to repay company's future earnings and on cash flow loans, frequently within a month or so after the prospects. These factors may be particularly takeover, with funds raised through sales of difficult to evaluate for buyouts if past operations assets or new equity or by borrowing in the are not expected to be a guide to future profitcommercial paper or bond markets. More than ability—which is, after all, the economic ratiotwo-thirds of the $32 billion of bank loans ex- nale of many buyouts. Because buyout loans tended to finance the largest mergers last year usually involve floating-rate debt, the companies has been repaid; the bulk of these repayments would be particularly vulnerable in the event that occurred within six months of the loan exten- interest rates rise substantially and cash flows sions. A number of foreign banks also have are not adequate to service heavy debt burdens. participated in the financing arrangements of But prudent lending practices established by many of the larger mergers, thus expanding the lenders take these possible outcomes into consupply of funds in domestic markets. Among the sideration, and thus help to ensure that any largest transactions completed last year, approx- failures associated with heavy leveraging would imately $7 billion, about one-fifth, of the initial be only isolated events. bank financing reportly came from foreign The Federal Reserve has actively urged banks banks. Foreign banks have also purchased merg- to evaluate carefully loans used to finance er loans originally made at large U.S. banks, buyouts and other types of takeover transactions though we have no statistics on the total volume and to apply prudent standards in their credit of this activity. decisions. Bank examiners have been instructed A more pertinent consideration regarding to review banks' involvement with leveraged merger financing from the Federal Reserve's buyout financing, and we have issued specific perspective is the potential for greater risk expo- guidelines for the examiners to follow in evaluatsure of the financial system. The Board of Gov- ing loans used for this purpose and for assessing ernors, as bank and bank holding company su- the total exposure of a bank to such lending. A pervisor and lender of last resort, has policy directive issued in 1984 to examiners at responsibility, along with the other regulatory each of the 12 District Federal Reserve Banks by agencies, for maintaining the safety and the the Director of the Board's Division of Banking soundness of financial institutions and markets. Supervision and Regulation pointed out that the In this regard, we are especially concerned about high volume of debt relative to equity that is potential financial risks involved with leveraging characteristic of leveraged buyouts reduces the and with acquisition activity financed with large cushion available to the purchased company to amounts of debt. Because many mergers and withstand unanticipated financial pressures or leveraged buyouts have involved heavy reliance economic adversity. on debt and retirement of existing equity, the The Board policy directive noted the following surviving firms have had balance sheets that two financial risks associated with leveraged leave them more vulnerable to downturns in buyout financing: (1) the possibility that interest earnings or sharp increases in interest rates. rates may rise higher than anticipated and there- When this development occurs, it of course by significantly increase the purchased compameans that the institutions providing the credit ny's debt service burden; and (2) the possibility may in turn be more exposed to possible loss. that the company's earnings and cash flow will Leveraged buyouts may be of particular con- decline or fail to meet projections, either because Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 421 of a general economic recession or because of a I should note that, while federally chartered downturn in a particular industry or sector of the depository institutions may make loans to loweconomy. rated borrowers, they are prohibited from ac- The Board directive stated that, given the quiring junk bonds in their investment portfolios amount of debt involved in leveraged buyouts, because they are not considered to be investthe value of collateral should be emphasized to ment-grade securities. But some state-chartered protect the creditworthiness of these loans. The institutions may not be subject to such restricquality of a purchased company's management is tions, and some state-chartered thrift institutions also important and represents another element in have purchased these securities. Given the evithe bank's evaluation of leveraged buyouts. dent sensitivity of financial markets to the for- Management is important because it must over- tunes of individual banks and thrift institutions, I see both the special financial risks associated think it is incumbent upon supervisors at both with the leveraged-buyout form of acquisition the federal and state levels to keep a close eye on financing as well as the normal day-to-day affairs developments in this area. and operations of the purchased company's busi- Lending on a prudent basis to finance mergers ness. and acquisitions need not weaken the financial The Board of Governors has expressed its fabric. Although the companies that have been concerns about the potential hazards of mergers created out of this recent surge in merger activity and leveraged buyouts with leaders of the bank- are still relatively untested, to date we have not ing community through public statements and seen significant problems for financial markets informal discussions. Members of the banking arising out of this activity. In part, this may community have indicated that they are review- reflect the favorable economic and financial ing lending practices to ensure that prudent stan- environment of the current expansion. Most secdards are applied to potential credit extensions tors have experienced substantial increases in for takeovers. Reportedly a number of attempted corporate profits and cash flows over the past buyouts have been terminated as a result of year, and interest rates are appreciably below the difficulties encountered in obtaining needed fi- levels of the early 1980s. While some individual nancing. At least $3 billion of proposed leveraged firms have taken on greater leverage, other busibuyouts were abandoned last year because fi- nesses have taken advantage of improved condinancing was not available, and we have read in tions to strengthen their balance sheets. For the the press recently of two or three sizable buyouts economy as a whole, retirements of equity that were terminated for this reason. These re- through mergers and merger-related activity ports suggest some selectivity on the part of have been partially offset by improvements in the lenders. market values of assets and by boosts to equity We hope that prudent lending standards will be from retained earnings growing out of the current applied by all lenders, including purchasers of expansion. so-called "junk bonds." Junk bonds are low- We do not believe that arbitrary controls on rated or unrated bond issues, which seem to have uses of credit can be effective or desirable. Nor gained popularity as a tool for financing mergers can a government agency determine among thouand takeover attempts. The large investors who sands of mergers which are good and which are purchase most of these bonds are relatively bad. A given transaction may be desirable from a sophisticated and should be aware of the risks social and economic standpoint if it results in involved. But it would be fair to say that one economies of scale, better management, or a cannot really be entirely comfortable about such more efficient allocation of resources. A blanket assumptions, especially when the market has not prohibition of all merger financing would be been tested by some significant negative sur- undesirable. Moreover, attempts to regulate prises—which inevitably will come at some flows of credit for particular purposes run the point. The higher rates paid on the junk bonds risk of creating unintended distortions in credit suggest that they are perceived by the market to flows and impeding the efficient allocation of involve greater risks; the question is whether the capital. When credit controls are in existence for risk premiums will in fact prove to be adequate. any length of time, they become increasingly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

422 Federal Reserve Bulletin • June 1985 inequitable as borrowers and lenders seek to tion standards in this regard are undergoing circumvent them. Credit controls are usually further review. And the Congress and other extremely difficult to enforce: since credit is government agencies need to give close scrutiny fungible, most financing can be achieved through to the numerous offensive and defensive pracalternative channels, such as borrowing through tices that have arisen in association with mergnonregulated intermediaries, foreign lenders, or ers, leveraged buyouts, and hostile takeovers to the like. ensure that institutions and investors are provid- I do not wish to imply, however, that we ed adequate protection. Also, a careful review should be complacent about the implications of should be given to features of the tax system that lending for mergers and takeovers. The Federal appear to encourage merger activity, and in Reserve will continue to monitor this activity and particular those features that favor the use of its effects on financial markets, and our examina- debt financing. • Vice Chairman Martin presented similar testimony before the Subcommittees on Oversight and Select Revenue Measures of the House Committee on Ways and Means on April 16, 1985. Statement by Theodore E. Allison, Staff Director order, the Bureau establishes a production for Federal Reserve Bank Activities, Board of schedule for the year. Governors of the Federal Reserve System, be- During the 1970s, the Bureau was producing fore the Subcommittee on Financial Institutions currency at its maximum capacity level. There- Supervision, Regulation and Insurance of the fore, there was a continuing concern whether a Committee on Banking, Finance and Urban Af- sufficient amount of new notes were available to fairs, U.S. House of Representatives, April 4, meet the demand. To determine the scope of the 1985. demand, Board staff would question the Federal Reserve Banks frequently on their needs for I would like to discuss briefly the Federal Re- increases in their printing orders. For example, serve's role in supplying cash to and accepting when the Federal Reserve Bank of Boston was cash from depository institutions. Then, I will asked during this period about an increase in address our record of commitment in supporting demand for $100 notes, the explanation received government agencies that are using currency was that the First National Bank of Boston data to investigate criminal activity. needed the notes to meet a request for large bills The Federal Reserve is responsible for meet- by foreign banks that historically had received ing the public's demand for currency. Likewise, their currency from New York banks. Board there is also a responsibility for the Federal staff determined that the number of notes needed Reserve to take back currency when the public to meet the additional demand would not excesdemand decreases sufficiently so that depository sively strain the inventory levels for new notes institutions have excess inventories. During the and could be met by shipping notes printed for calendar year 1984, $170 billion was received by other Federal Reserve Banks to the Federal Federal Reserve Banks from depository institu- Reserve Bank of Boston. tions and $181 billion in currency was paid to It should be noted that there has long been a depository institutions. demand for U.S. currency by residents of foreign Yearly, each Federal Reserve District submits countries for a variety of reasons, including an order to the Board for the estimated amount economic or political difficulties that their counof notes required to meet the expected demand tries may be experiencing. Indeed, once the during the following year. The orders are careful- residents of a country begin to hold U.S. currenly analyzed by Board staff to determine potential cy as a hedge against these uncertainties, the changes in demand over the previous year. Sub- demand for currency can multiply as it becomes sequently, a printing order is submitted to the more readily transferable to others locally in Bureau of Engraving and Printing. Based on this exchange for goods and services. These factors Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 423 have led at times to significant currency outflows • Currency flow reports were periodically supfrom the United States. plied to the Joint Economic Committee in 1979 This foreign demand for currency has tradi- for its work on estimating the size of the undertionally been met through private commercial ground economy. banking channels. Foreign banks have typically • Reports on currency receipts from and payplaced currency orders with U.S. commercial ments to depository institutions are supplied banks that in turn ship and receive currency as monthly to the following: (1) the Adviser of the part of their normal correspondent banking ser- Financial Crimes and Frauds Group of the U.S. vices. Treasury Department, Washington, D.C.; (2) the Modest levels of currency inflows into the Director of the Treasury Financial Law Enforce- United States are also commonplace. These ment Center of the U.S. Customs Service in flows are often associated with countries that Washington, D.C.; (3) the Drug Enforcement cater to the American tourist trade. Other in- Agency Office in Miami; (4) the Drug Enforceflows appear to be related to successful exchange ment Agency Office in Washington, D.C.; rate strategies that lead foreign residents who (5) the U.S. Transportation Department Office in had used U.S. currency to hedge against devalu- Cambridge, Massachusetts. ation risks to return to the use of local curren- • When requested, arrangements have been cies. There are also modest inflows associated made for federal investigators to visit Reserve with the normal servicing of the money stock in Bank offices to obtain more detailed information countries in which the U.S. dollar is a principal about trends indicated in the reports that were circulating currency of exchange. provided them by the Federal Reserve. For The Federal Reserve's interest in cash does example, the Adviser of the Financial Crimes not end with the provision of currency. The and Frauds Group of the U.S. Treasury has Reserve Banks' Examination Divisions monitor received detailed information from several Restate member banks and Edge Act corporations serve Banks and subsequently developed signififor compliance with government regulations cant findings of interest to ongoing investigasuch as the Bank Secrecy Act. The Federal tions. Roughly ten visits of this type have been Reserve's research staff develops macroeconom- arranged in the past two years. ic analyses and projections that help us under- • Special reports on cash flows into and out of stand and project cash demand. And finally the depository institutions in the Miami and New Board's Division of Federal Reserve Bank Oper- Orleans Reserve zones are supplied monthly to ations supplies federal investigatory agencies the Miami and the New Orleans Customs Offices. with data that are used in their monitoring and • The Federal Reserve and the Treasury are investigatory programs. looking at the feasibility of establishing a Sys- It is important to point out that while the temwide Federal Reserve automation program Federal Reserve System is not an investigatory for providing data on cash flows to appropriate agency and therefore cannot provide detailed government agencies on a monthly schedule. explanations for how cash sent into circulation is This program would be an expansion of the pilot used by individuals, it has cooperated with feder- efforts now under way in Miami and New al investigatory agencies to the fullest possible Orleans. extent. Data have been provided on currency • In addition, special anticrime assistance has flows into and out of Reserve Banks. In addition, been provided to others, such as the President's general explanations that help account for shifts Commission on Organized Crime, the Internal in these flows have also been provided. These Revenue Service, the Drug Enforcement Agendata and the general explanations then can be cy, the Central Intelligence Agency, and the analyzed in detail by those federal entities Federal Bureau of Investigation. charged with investigating criminal activities. In closing, let me reaffirm the Federal Re- Here are a few examples of the extent of the serve's commitment to assisting federal agencies ongoing cooperation and support that the Feder- that are charged with the very important task of al Reserve has provided for federal investiga- investigating currency transactions relating to tions: criminal activity. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

424 Federal Reserve Bulletin • June 1985 Statement by Paul A. Volcker, Chairman, Board Integral to that approach, the Bank Holding of Governors of the Federal Reserve System, Company Act allows ownership of a bank by before the Subcommittee on Financial Institu- another company only if that company engages tions Supervision, Regulation and Insurance of in activities that "are closely related to banking the Committee on Banking, Finance and Urban and a proper incident thereto." That provision is Affairs, U.S. House of Representatives, April 17, designed to enforce a basic separation of banking 1985. and commerce, and thus to limit conflicts of interest and avoid undue concentration of resources. The law also provides for some supervi- I appreciate the opportunity to appear before this sion and inspection of the holding company as a subcommittee to review with you some of the whole, recognizing that, in practice, the fortunes issues involved in proposed banking legislation. of one enterprise within a holding company can- You have requested me to focus my remarks not be wholly separated from those of its affiliparticularly on the long- and short-term effects of ates. The provisions of the Bank Holding Comchartering so-called nonbank banks and on the pany Act also place restrictions on interstate provisions of H.R. 20, the "Bank Definition banking by a holding company, paralleling the Act," which addresses the proliferation of non- restrictions on interstate branching in the Macbank banks. Fadden Act. I have long supported legislation to close ave- In our judgment, the basic concerns about the nues for evasion of some of the basic tenets of separation of commerce and banking remain public policy, incorporated in the Bank Holding valid and should be your point of departure today Company Act, that have guided the evolution of in considering the nonbank bank issue. our banking system for decades. At the same The definition of a bank is critical to a policy time, I want also to emphasize at the outset that, that sets out to separate banking and commerce while action to close the "nonbank bank loop- and to enforce restrictions on interstate banking. hole" is urgently needed, I hope the committee The Bank Holding Company Act defines a bank and the Congress will also deal in this session as an institution that both accepts demand deposwith other issues, ranging from powers of bank its and makes commercial loans. That definition holding companies to interstate banking, that was designed to exclude savings and industrial should be promptly resolved in the interest of a banks (which at the time had little or no demand competitive, safe, and healthy banking system. deposits or other transaction accounts or com- Some of those points are addressed by H.R. 15, mercial lending authority) and limited-purpose the bill sponsored by Mr. Wylie, which also deals trust companies. with nonbank banks. While thrift institutions today increasingly do Public policy has long recognized that com- commercial lending and can accept transaction mercial banks perform a unique and critical role accounts of individuals, institutions insured by in the economy and in the financial system. They the Federal Savings and Loan Insurance Corpoare operators of the payments system; they are ration (FSLIC) remain exempt under the terms custodians of the bulk of liquid savings; they are of the Garn-St Germain Act passed in 1982. the principal suppliers of short-term credit; and Moreover, as other forms of transaction acthey are the critical link between monetary poli- counts have developed with the basic charactercy and the economy. Moreover, the fortunes of istic of demand deposits, institutions with a bank individual institutions are so intertwined that charter can also take all kinds of deposits from instability of one may infect another. In recogni- the public (including under current court rulings tion of these circumstances, a federal safety NOW accounts) other than demand deposits and net—specifically the Federal Reserve discount make commercial loans without coming under window and federal deposit insurance—has long the restrictions of the Bank Holding Company been provided to help protect the system. Indi- Act. These are the so-called nonbank banks, for vidual banks are subject to a system of regulation which there have been hundreds of applications. and supervision to help assure their safety and Specifically, one form of nonbank bank may soundness. be owned by any company—a steel company, a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 425 retailer, a securities firm, an insurance company, toward banking. Basically satisfactory legislative or a real estate developer. The parent company is provisions to achieve that were contained in not subject to any of the limitations of the Bank separate bills last year. One was reported by this Holding Company Act that is designed to limit committee and another adopted by the full Senrisk or conflicts of interest and to avoid unfair ate. While detailed differences in approach were competition or excessive concentration of eco- not fully resolved, it appeared that other provinomic power. Thus, in its present guise, the sions of proposed banking legislation rather than nonbank bank undermines the basic separation basic disagreements on the nonbank bank quesof banking and commerce—a concept with deep tion stymied enactment. roots in both the English and the American H.R. 20 basically follows the approach of this traditions. consensus. It broadly applies the provisions of That seems to me the fundamental issue at the Bank Holding Company Act to all commerstake in closing the nonbank bank loophole. By cial banks insured by the Federal Deposit Insurpermitting commercial companies to provide ance Corporation (FDIC) whatever their particuthrough subsidiaries almost all the same func- lar mix of business. In addition, those uninsured tions as full-service banks and to obtain access to institutions that offer transaction accounts and the payments system, the discount window, and make commercial loans would continue to be deposit insurance, both the principle and the covered. This approach is broadly satisfactory so practical reality of the present restrictions of the far as it goes, as would be the similar provisions Bank Holding Company Act will be seriously of H.R. 15. undermined over time. The competitive position Before turning to areas of omission, I would of those banks still subject to the act will inevita- note particularly that these bills would bring sobly be damaged, potentially weakening the sys- called consumer banks clearly within the scope tem as a whole. of the provisions of the Bank Holding Company The nonbank bank is also, and today more Act. The suggestion has been made by others commonly, a device by which a bank holding that banks primarily aimed at serving the concompany or a commercial firm can escape the sumer might be exempted from the general prinrestrictions on interstate banking encompassed ciple of the separation of banking and commerce in the Douglas Amendment to the Bank Holding and from any restrictions on interstate banking Company Act. In fact, interstate banking is a applicable to ordinary banks. reality in many areas through Edge Act subsid- However beguilingly presented as a "family iaries, loan production offices, finance company bank" proposal, such an initiative seems to me and mortgage banking affiliates, credit card oper- misguided. I would emphasize that the great bulk ations, automated teller machine networks, and of existing banks and other depository instituotherwise. The nonbank bank offers the added tions are already "family" or "small business" avenue of on-site offices for a full range of oriented. We have in this country almost 20,000 consumer business or commercial lending com- banks and thrift institutions, nearly all actively bined with deposit-taking. I will be testifying competing for consumer business. Many of them with respect to interstate banking next week, and do little commercial lending; for instance, almost I believe some liberalization of current restric- 20 percent of commercial banks have 5 percent tions is justified. However, in my judgment, that or less of their assets in loans to businesses, and question should be approached on its own merits nearly half have less than 20 percent of assets in rather than by permitting interstate banking such loans. through an unintended "back door" device, with I see no justification for permitting commerthe inefficiencies and inequities that device in- cial, industrial, or securities firms to compete volves. with these institutions for insured deposits and I sense there is a broad consensus that it is other banking services under different ground important to preserve the basic policies of the rules as to ownership. The effect could only be to Bank Holding Company Act and that, according- undermine the public policy objectives incorpoly, it is essential to close the nonbank bank rated in the Bank Holding Company Act generalloophole as part of any legislative approach ly, and there would be the appearance and reality Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

426 Federal Reserve Bulletin • June 1985 of unfair competition with banks subject to the ing that development, there has also been inact. creasingly clear recognition of the need to adopt Do we really want, for example, a retail busi- rules to assure reasonably comparable regulatory ness to be able to gather deposits under the treatment. protection of federal insurance and to use those Considerations of competitive equity alone deposits to fund a credit card they sponsor more dictate that the privileges of, and restrictions on, cheaply than retailing competitiors? Do we want banks and thrift institutions be brought into a to bless interstate consumer banking simply be- more coherent relationship. But it is not just a cause there is a nonbank owner? Do we want to matter of competitive equity. Restrictions on encourage joint marketing efforts and "tie-ins," powers of bank holding companies and on nonimplicit or explicit? bank banks will inevitably be undercut, and If we are not sensitive to these concerns, then rapidly, to the extent that thrift institutions with what is the justification for the present restric- banking powers can simply substitute as a vehitions in the Bank Holding Company Act? cle for undertaking a wide range of banking Some of the family bank concepts propose a services, violating the basic separation of bankkind of sugarcoating in the form of higher capital- ing and commerce. ization, "lifeline" banking requirements, and I recognize that there are difficult questions rules requiring prompt deposit availability. If posed by firms that already have operations on these are indeed valid objectives of legislation— both sides of the line between commerce and and I make no judgment on that point now—then "thrift" banking. A number of industrial or comit seems to me the legislation should apply to all mercial firms own thrift institutions, and operate depository institutions and not to just a special those institutions as separate and distinct entities few. without significant problems arising. Those com- In other respects, I believe the coverage of binations might logically be permitted to contin- H.R. 20 must be broadened. As drafted, H.R. 20 ue on their present basis. However, in the envihas no provision with respect to the treatment of ronment we now face, these questions need to be thrift institutions—savings banks and savings approached with an eye toward the future, and a and loans. firm policy established with respect to which For some federally insured thrift institutions— new combinations are acceptable and which are namely, those owned by multiple savings and not. loan holding companies—no legislative action To deal with this problem, we have suggested appears required because their holding compa- that only those thrift institutions that have a high nies would remain subject to the Savings and percentage of their assets in home mortgages Loan Holding Company Act, which has restric- should be exempt from the same rules as to tions similar to those of the Bank Holding Com- ownership applicable to banks and multiple savpany Act. However, others—including FDIC- ings and loan holding companies. We have suginsured savings banks and privately insured thrift gested that present law be strengthened to reinstitutions—would be subject to neither act, and quire that such a "qualified" thrift institution unitary savings and loans may engage in substan- have at least 65 percent of its assets in residential tial nonresidential lending activities without any mortgages or housing-related investments. limitations on the commercial or industrial activi- I do not believe there is a sound rationale for ties of their corporate owners. Left unattended, including residential mortgage originations and the effect would plainly be to deflect the energies sales in such a calculation. Commercial banks, now reflected in nonbank banking into banking in mortgage banks, and others are all active mortthe guise of thrift institutions—"nonthrift gage originators. The distinguishing characteristhrifts." tic of a savings and loan and many savings banks In recent years, powers available to thrift historically—and the characteristic that historiinstitutions have become much more like those cally has justified special federal support—was available to banks, and indeed the range of thrift that they devoted relatively large portions of powers today, particularly of state-chartered in- their own resources to support housing. I believe stitutions, often exceeds that of banks. Parallel- that a substantial commitment to investment in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 427 housing should continue to be the test for exemp- We have reviewed both the institutions that tion from certain policies embodied in the Bank would be subject to grandfathering and the activ- Holding Company Act and the Savings and Loan ities that are conducted by them. As far as we Holding Company Act for multiple savings and can determine, H.R. 20 would grandfather about loan holding companies. Futhermore, any hold- 24 FDIC-insured nonbank banks; most of these ings of liquidity included in a thrift test should be are small in asset size, with at least 10 engaged confined to amounts legally required. essentially in trust activities and 6 or 7 in credit A further step is necessary to limit conflicts of card operations. Given this situation, we believe interest and tie-ins when a qualified thrift institu- that grandfathering as of the July 1, 1983, date, tion has a commercial owner. Specifically, joint subject to appropriate conditions to assure that marketing of services and products should be their grandfather status is not abused by expanprohibited. sion geographically or otherwise, would not be I am not suggesting that nonthrift thrifts need inconsistent with the objectives of the act. to be brought under the Bank Holding Company Should the grandfather date be moved toward Act administered by the Federal Reserve. I am the current date, an increasing number of insursuggesting that institutions that have essentially ance, securities, and retail firms that were fully the same charcteristics as commercial banks on notice about the likelihood of federal legislashould have broadly parallel restrictions on com- tion would be permitted to retain bank operabinations with commercial firms and that those tions. It is our understanding that few of these restrictions be administered by the appropriate institutions have yet made substantial investregulator—for savings and loans and federal sav- ments, and the larger number of charter rights ings banks, the Federal Home Loan Bank Board. that would be involved would increasingly impair Moreover, we calculate that about three-quarters the objectives sought by H.R. 20. of all savings and loans would meet the thrift test In concluding my testimony, I would note that I have proposed today and thus would not be one federal district court in Florida has enjoined restricted as to commercial ownership. the Comptroller from issuing final nonbank bank H.R. 20 does not prohibit an affiliation of thrift charters because it found, as a matter of law, that institutions and nonmember banks with securi- the National Banking Act does not permit the ties firms. That existing loophole in the Glass- Comptroller to issue a charter that does not Steagall Act should be closed in the interest of provide for the exercise of full national banking competitive equity and the purposes of the powers. As a result of that decision, final nation- Glass-Steagall Act. Such a provision has been al bank charters for new nonbank banks are not recommended by the Federal Home Loan Bank currently possible, and the Federal Reserve Board with respect to thrift institutions. Board has suspended processing such applica- In all these areas, appropriate transition peri- tions by bank holding companies. However, ods should be provided, and other detailed ques- state-chartered nonbank banks that are nonmemtions would need to be resolved. We would be bers can still be created. While final disposition glad to work with the committee in developing of the legal issues involved for the national banks such provisions. may take some time, any reversal of the district Finally, Mr. Chairman, I would like to com- court opinion will quickly touch off a flood of ment on the provision of the bill that grandfa- new national nonbank banks. thers certain nonbank banks acquired on or Consequently, the need for clear and effective before July 1, 1983. You and the Chairman of the action to deal with the nonbank bank question Senate Banking Committee have strongly sup- continues to rest with the Congress. I urge you to ported July 1, 1983, as the appropriate date for act expeditiously in this area and then to turn grandfathering nonbank banks. I would point out your attention promptly to other areas of banking that, even before that date, institutions were well that desperately need legislative resolution and aware that the nonbank bank loophole was a clarification. • matter of policy and congressional concern. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

428 Federal Reserve Bulletin • June 1985 Statement by Preston Martin, Vice Chairman, Even so, retained earnings of all nonfinancial Board of Governors of the Federal Reserve Sys- firms offset the net retirement of equity, and net tem, before the Subcommittee on Telecommuni- additions to equity in the aggregate remained cations, Consumer Protection, and Finance of positive, though quite low by historical stanthe Committee on Energy and Commerce, U.S. dards, especially during a business expansion. House of Representatives, April 23, 1985. Another source of equity growth has come from the appreciation of existing corporate as- I am pleased to appear before you to discuss the sets. Reflecting the improvement in corporate recent surge in merger and takeover activity and profits in this expansion and a more favorable its potential effects on credit market conditions. environment for future earnings, the market's Previous testimony underscores the impor- evaluation of corporate assets has risen. Moretance of assessing the implications of this activi- over, even though a large portion of recent stock ty. The dollar size of recent transactions exceeds retirements has been financed with debt, aggreby a wide margin any past experience. Nonfinan- gate debt-to-equity ratios for nonfinancial busicial corporations as a whole retired more than ness as a whole—based on market values of $85 billion of equity through mergers, takeovers, equity—have remained well below the peaks and share repurchases last year; included in this reached in the 1970s. Nonetheless, while these total is about $15 billion of equity retired through aggregate measures have not changed dramatileveraged buyouts. Equity retirements were bol- cally, it is clear that some firms are retiring huge stered also by firms that elected to repurchase amounts of their equity and are taking on appretheir own shares rather than to undertake new ciable amounts of debt to finance merger-related investment or to acquire other firms. Some share activity. The Federal Reserve is concerned that repurchases were prompted clearly as defensive individual risktaking associated with leveraging actions against possible hostile takeovers; ex- on such a large scale not impair the stability of cluding so-called "greenmail" purchases, avail- our financial system. able data suggest that more than $10 billion of In my view, there is a legitimate place in our stocks were bought back by firms last year. economy for mergers and takeovers. They can When a company believes that the value of its be important mechanisms for redeploying corpoassets is higher than the market value of its rate assets to more profitable uses. Many combistock, such buybacks may appear to be more nations promote economies of scale or scope, attractive than alternative investments. reinforce market incentives, and may bring about The unprecedented level of stock retirements better management. However, acquisitions do associated with mergers, takeovers, and share not always lead to big businesses. We have seen repurchases has given rise to concerns about the an increasing number of divestitures in which potential erosion of the equity base of American larger companies sell operating units to smaller business. There have been offsets, however, to firms or to management. Such spin-offs, which this erosion. Aided by the new depreciation not infrequently follow a merger between big rules, after-tax earnings of nonfinancial corpora- concerns, create enterprises that may function tions have rebounded strongly in the current more efficiently in a more specialized environexpansion. With dividend growth remaining re- ment and with more direct management control. strained, retained earnings have been a relatively The positive gains from mergers need not be substantial source of new corporate equity in limited only to friendly takeovers, but can occur recent quarters. in hostile situations as well. Thus, we must be A typically less important source of equity is careful about imposing the judgment of governnew stock issues. In 1983, the stock market ment authorities concerning which private transadvances attracted an unusually high volume of actions will be economically productive and new issuance. Last year, the volume of new which will not. issues dropped two-thirds; and the wave of re- The Federal Reserve's concerns have focused tirements associated with large debt-financed primarily on the effect that merger and takeover mergers, leveraged buyouts, and stock repur- activity may have on aggregate credit flows and chase programs greatly exceeded new issues. on the risk exposure of financial institutions and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 429 markets. With respect to credit flows, our esti- to possible loss. Leveraged buyouts may be of mates indicate that growth in the domestic nonfi- particular concern because they typically involve nancial debt aggregate—which is one of the larger proportions of debt and smaller amounts aggregates that we monitor in the course of our of equity than other types of mergers. monetary policy deliberations—was boosted The Federal Reserve has actively urged bank about 1 to IV2 percentage points in 1984 as a management to evaluate carefully loans used to result of merger-related borrowings. But mergers finance buyouts and other types of takeover and buyouts appear likely to have had a much transactions and to apply prudent standards in more limited impact on the three monetary ag- credit decisions. Reserve Bank examiners have gregates for which we establish target ranges. been instructed particularly to review bank in- Moreover, the Board is aware of the activity and volvement with leveraged buyout financing, and takes it into consideration when evaluating the we have issued specific guidelines for examiners behavior of the money and debt aggregates. to follow in evaluating loans used for this pur- Given our ability to monitor the size and timing pose and in assessing the exposure of a bank of very large transactions, we can anticipate portfolio to such lending. A policy directive possible distortions to the aggregates in a partic- issued in 1984 to examiners at each of the 12 ular period and thus avoid inadvertently reacting District Federal Reserve Banks pointed out that to these factors in policy deliberations. I do not the high proportion of debt to equity that is believe mergers present a real operational prob- characteristic of leveraged buyouts reduces the lem for us that would result in appreciable unin- cushion available to withstand unanticipated fitended variations in reserve market pressures. nancial pressures or economic adversity. More fundamental determinants of credit de- Moreover, the Board of Governors has exmand, including the behavior of the household pressed its concerns about the potential hazards sector, capital expenditures of businesses, and, of mergers and leveraged buyout lending with of course, the fiscal position of the federal gov- leaders of the banking community through public ernment, exert much more powerful and persis- statements and informal discussions. Members tent pressures on credit markets than does take- of the banking community have indicated that over activity. they are reviewing lending practices to ensure Some members of the public and the Congress that prudent standards are applied to potential have expressed concerns that merger activity credit extensions for takeovers. Reportedly a absorbs credit that could be used to support number of attempted buyouts have been termiother, perhaps more productive, purposes. But nated as a result of difficulties encountered in this would be true only in unusual circumstances obtaining needed financing, which suggests some and for temporary periods. Basically, merger and selectivity on the part of lenders. acquisition transactions involve transfers of We expect and demand that prudent lending ownership of existing assets and do not absorb standards be applied by all lenders, including net real savings in the economy. Proceeds from those who take back so-called junk bonds in the the transactions are either returned to bank ac- course of lending. The large investors who purcounts or reinvested in other financial instru- chase most of these bonds are relatively sophistiments, thereby recycling the funds into the mar- cated and should be aware of the risks involved. kets. The rating services also play a major role in A more pertinent consideration regarding evaluating the nature of these investments. But it merger financing from the Federal Reserve's would be fair to say that one cannot really be perspective is the potential for greater risk expo- entirely comfortable assuming that the risks are sure of the financial system. Because many clearly understood, especially when the market mergers and leveraged buyouts have involved has not been tested by some significant negative heavy reliance on debt and retirement of existing surprises—which inevitably come. The much equity, the surviving firms are more vulnerable higher rates paid on the junk bonds suggest that to downturns in earnings or sharp increases in they are perceived to involve greater risks; the interest rates. When this occurs, the institutions question is whether the risk premiums will in fact providing the credit may in turn be more exposed prove to be adequate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

430 Federal Reserve Bulletin • June 1985 Lending to finance mergers and acquisitions of resources. Attempts to regulate flows of credit need not weaken the financial fabric, however. for particular purposes run the risk of creating Although the companies that have been created unintended distortions in credit flows and impedout of this recent surge in merger activity are still ing the efficient allocation of capital. relatively untested, we have not seen to date any I do not wish to imply, however, that we significant problems for financial markets arising should be complacent about the implications of out of this activity. In part, this reflects the lending for mergers and takeovers. The Federal favorable economic and financial environment of Reserve will continue to monitor this activity and the current expansion. While some individual its effects on financial markets, and our examinafirms have taken on greater leverage, other busi- tion standards in this regard are undergoing nesses have taken advantage of improved condi- further review. In addition, the Congress and tions to strengthen their balance sheets. government agencies need to give close scrutiny We do not believe that arbitrary controls on to the numerous offensive and defensive pracuses of credit can be effective or desirable. As I tices that have arisen in association with mergnoted previously, any given merger, acquisition, ers, leveraged buyouts, and hostile takeovers to or divestiture may result in social and economic ensure that institutions and the stockholder popbenefits through economies of scale, better man- ulation are provided adequate protection. • agement, or generally a more efficient allocation Statement by Paul A. Volcker, Chairman, Board any substantive manner since 1933. The law of Governors of the Federal Reserve System, effectively prohibits national banks from branchbefore the Subcommittee on Financial Institu- ing interstate by limiting each national bank to tions Supervision, Regulation and Insurance of branching only within its home state, subject the Committee on Banking, Finance and Urban within that state to any branching restrictions Affairs, U.S. House of Representatives, April 24, imposed by that state on state-chartered banks. 1985. The Douglas amendment to the Bank Holding Company Act of 1956 prohibits interstate expan- I appreciate the opportunity to appear before this sion by means of a bank holding company acquirsubcommittee to review with you the issues ing banks in another state unless such acquisiinvolved in interstate and regional banking. tions are explicitly authorized by that state. These issues are inextricably related to the "non- In spite of the statutory McFadden and Dougbank bank" question that we discussed last las prohibitions, de facto there has been a large week, and to the still broader question of the and increasing amount of interstate banking in appropriate direction and structure of our bank- recent years. Some of that banking has taken ing system. place through avenues specifically permitted by In sum, the Federal Reserve Board believes law. the time has come for the Congress, as part of According to a study by the Federal Reserve more comprehensive banking legislation, to au- Bank of Atlanta, U.S. bank holding companies in thorize some interstate banking. The approach 1982 had 202 loan production offices and 143 should take account of the desirability of transi- internationally oriented Edge act corporations tional arrangements over a period of years before operating outside the parent's home state; formoving to more general interstate banking; the eign banking organizations had another 254 need to avoid undue concentration of banking banking offices outside their home state. There resources and to maintain a climate in which are probably more today. More important is the small institutions can flourish; and the desirabil- variety of finance companies, mortgage compaity of retaining a role for states in the evolution of nies, industrial banks, and other offices with at the banking structure within a state. least partial banking capabilities operated inter- The basic federal branch banking law, the state by bank holding companies. The Atlanta McFadden Act of 1927, has not been amended in study counted some 5,500 such offices operating Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 431 outside the holding company's home state, and and to expand their consumer lending. At the many more exist now. other end of the spectrum, there are small banks Technological advances are also providing concerned about their ability to compete effeclarge opportunities for banks to expand geo- tively without the power to combine with others graphically without brick and mortar offices. By in a natural market area that may extend over joining automated teller machine (ATM) net- state boundaries. works, banks in some cases have been able to Resistance to interstate banking for a variety reach out to existing or new customers over state of reasons—including a desire of many banks to lines. Looking ahead, banking through home continue as independent institutions—clearly recomputers would be difficult to confine within a mains strong. But the pressures for change are state's boundary. But even without exotic tech- apparent in initiatives by a number of states nology, the relative speed and simplicity of com- toward more interstate banking. The growing munications and transportation today makes it number of regional interstate banking arrangemuch easier, particularly on the deposit side, to ments is the most important reflection of that conduct banking at a distance. Large businesses change in attitude. Today fourteen states have routinely "sweep" deposits into "concentration enacted laws permitting reciprocal entry by bank accounts" at selected banks. The combinations affiliates of bank holding companies headquarof print and broadcast advertising, 800-number tered in states within a designated region; twelve telephone lines, deposit brokerage, and efficient more states are actively considering such arclearing mechanisms mean that the day of rather rangements. Four states allow entry from any insulated local deposit markets is gone. On the other state, three without and one with reciprociloan side, nationwide credit cards are available ty. These liberalized approaches toward interto customers throughout the country. state banking over recent years suggest a signifi- The substantial number of "nonbank bank" cant change in thinking since the MacFadden Act applications by bank holding companies, stretch- and the Douglas amendment were enacted. ing the fabric of existing law, is one indication of the strength and depth of some banks' desires to operate over a wider geographic area. The pressures toward interstate operations arise from a SUBSTANTIVE ISSUES number of sources. Competition from nondepo- IN INTERSTATE BANKING sitory businesses that can and do provide financial services—including money market accounts Against this background, the Federal Reserve and other banklike services—through interstate Board believes the time has come to review and networks is strong and pervasive. Thrift institu- clarify national policy toward interstate banking, tions, which have no statutory bar to interstate recognizing the economic and competitive presbranching, offer interstate facilities in a signifi- sures driving toward liberalization of present cant number of cases. Moreover, banks in slow- restrictions, while also protecting the safety and er-growing areas naturally want to participate in the efficiency of the banking system, preventing more rapidly expanding regions. Florida alone, undue concentration of economic resources, and for instance, has attracted about 20 percent of all assuring benefits to the users of banking sernonbank bank applications by bank holding com- vices. panies. One continuing objective of public policy is to A number of relatively large banks that never- assure competition in banking, as in other industheless rank well below the largest money center tries. Ordinarily, we would not expect that cominstitutions in size apparently feel, with some petition would be promoted by confining an urgency, that a stronger competitive position in industry to a single geographic market or a single national and international markets requires a state. Indeed, we rely on the ability of additional larger size than can reasonably be attained within firms to enter markets as a competitive force the boundaries of a single state. Some of the leading to the best possible products at least largest banks, conversely, urgently wish to attain cost. Moreover, existing antitrust law appears to a wider and more stable base of "retail" deposits provide considerable protection against local Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

432 Federal Reserve Bulletin • June 1985 markets becoming noncompetitive as the result Should banks be permitted to expand interstate of entry of larger organizations. more freely, we anticipate that similar patterns Available empirical studies do not suggest that would prevail. large states with large banks and statewide We are aware that a rush to expand geographibranching are experiencing increasing concentra- cally could pose certain risks—temptations to tion of local markets. The presumption that pay exceptionally high prices and to leverage restrictions on entry into particular markets im- capital, to spread management thin, and to enter ply some loss of competitive vigor, unless over- into new types of lending or operations in which ridden by other considerations of public policy, experience may be limited. We believe that these suggests that some liberalization of interstate risks can be dealt with through normal supervisobanking is appropriate. That presumption has ry processes, particularly in evaluating financial added force in an environment in which other and managerial factors with respect to applicalarge financial service firms are able to operate tions. In particular, we believe that a banking nationwide, exploiting the economies of scale in organization planning sizable expansion protechnology or marketing that may be available. grams should be able to demonstrate its ability to In effect, those firms may now be in a position to maintain fully adequate capital and liquidity posiskim off profitable areas of business from banks tions, to avoid excessive use of good will on its committed to providing a full range of banking balance sheet, and to provide capable manageservices. ment for acquired institutions. I would also em- Historically, a counterargument to interstate phasize, in this connection, that the risks—actual banking has been a strong antipathy to the con- and potential—from expansion into new banking centration of economic power, particularly in the markets are typically more identifiable, and often banking system, and a desire to maintain banking less, than those risks posed by entry into new resources in significant measure under control of nonbanking activities for which bank managelocal banks, knowledgeable about the needs and ment may have little or no experience. circumstances of smaller businesses and individuals. Experience in states with large banks and CONCENTRATION statewide branching suggests that these are not questions of "either-or." Attachments I and II Viewed from a national perspective, restrictions provide a brief analysis of experience in two of on interstate banking have been effective in our largest states, one that has had statewide forestalling large concentrations of domestic branching for decades and the other that has banking resources, at least by the standards of permitted statewide operations only since 1976.1 other countries. The 10 largest banking organiza- In both cases, large numbers of relatively small tions control only about 20 percent of all domesindependent banks remain. In California, a rapid- tic banking assets, and the 100 largest only a little ly growing state, new banks are being formed in more than half. relatively large numbers; in New York, a state Presumably, concentration ratios would tend that is growing more slowly, relatively few new to rise with interstate banking, quite significantly banks have been formed, but the number of small if such activity is unrestricted. At the same time, independent banks (that is, less than $100 mil- the experiences in California and New York that lion) has dropped only modestly since statewide I referred to earlier suggest the process would branching was permitted. In both states, the stop very far short of the concentration of institucompetitive environment appears healthy, with tions common in other countries. We would the consumer and businessman able to choose anticipate thousands of independent organizabetween some of the largest banking institutions tions remaining. in the world and small, locally oriented banks. Nevertheless, we believe that a variety of safeguards should be included in legislation liberalizing interstate banking to encourage continu- 1. The attachments to this statement are available upon ing diversification of banking resources. Taken request from Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. alone, antitrust laws—focused on the market Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 433 shares of competitors in particular markets—do We would strongly suggest that exceptions to not appear fully responsive to that need. Essen- these limitations be permitted for failing institutially, those laws as applied to banking make tions. Indeed, in light of the remaining strains little distinction between the overall size of orga- evident in some sectors of the thrift and banking nizations competing in particular markets, but industries, we would propose that the emergency rather focus on the size of their presence in a arrangements for failing institutions in the Garnsingle market. Consequently, those laws might St Germain Act be extended. They should be be consistent with considerably greater concen- liberalized in two ways: by not requiring that an tration, measured on a national or regional basis, institution actually be "closed" to qualify for than would be desirable. emergency treatment, and by reducing or elim- Two kinds of limitations, in our judgment, inating the $500 million size cut-off in the act. might be taken to forestall any substantial risk of excessive concentration. The approaches are not mutually exclusive and would be complemen- THE DUAL BANKING SYSTEM tary. Both approaches would, at the margin, involve essentially arbitrary judgments, for they Interstate banking, by its nature, has implicawould envisage a simple quantitative measure of tions for the dual banking system. Indeed, it is relative size. But, by responding directly and difficult to conceive of a system of interstate logically to the concerns about concentration, I branching that would enable state law and superbelieve that they would provide a more coherent vision to govern the operations of banks in sister approach than the present "system" of implicitly states. Consequently, interstate branching could relying on an almost total prohibition on inter- well lead to a massive expansion of the national state acquisition as an indirect means of control- banking system. ling concentration levels. If instead interstate banking operations are The first approach would envisage limitations generally confined to separately incorporated on the largest banking institutions acquiring oth- and chartered components of a holding compaer banks. For instance, the very largest holding ny, particular states could maintain authority companies in terms of domestic banking assets over the in-state operations of the holding com- (or depository institution assets)—say, the top pany. Moreover, there would be opportunity for 25—might be prohibited from merging with each a greater degree of local control. For those other. In addition, banks could be prohibited reasons, a requirement that interstate acquisifrom obtaining through acquisition more than tions generally take the form of a holding compasome fixed share of the nationwide total of such ny affiliate appears to fit more naturally our assets, although de novo or relatively small ac- banking traditions, at least over a long transitionquisitions in other states could be permitted. al period to a fully developed interstate banking The second approach would permit, or even environment. encourage, states to set limitations on the proportion of banking assets (or depository institution assets) within their own borders that could A POSSIBLE POLICY APPROACH be acquired through acquisitions or mergers of institutions of significant size. Specifically, such Various approaches toward interstate banking acquisitions could be denied if the resultant have been proposed over the years, ranging from institution would hold more than, for example, modest changes in existing arrangements to na- 15 or 20 percent of a state's banking assets. Any tionwide branching. For instance, possible transuch rule should be nondiscriminatory between sitional approaches well short of nationwide in-state and out-of-state banking organizations. banking include the following: (1) branching Of course, rules implementing these approach- throughout metropolitan areas that extend across es would have to be carefully drawn to avoid state lines, of which there are 35 at present; (2) anomalous results. The important point is that expansion into contiguous states; (3) expansion the national and statewide concentration limits de novo or by acquisition into any metropolitan be observed fully. area above a minimum size; (4) encouragement Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

434 Federal Reserve Bulletin • June 1985 of reciprocal arrangements among states; (5) In this approach, any state, if it so chose, interstate banking limited to de novo operations could continue entirely to "opt out" of full or small acquisitions (conversely, some have interstate banking. But, if it chose to enter into a proposed limiting or prohibiting small acquisi- regional arrangement, it would also have to be tions in the interest of maintaining local banks); prepared to consider those arrangements as a and (6) regional arrangements. transitional approach toward a broader arrange- Each of those approaches (and any others that ment encompassing all states willing to provide could be developed) has particular strengths and reciprocal privileges. weaknesses; each could be debated. However, As suggested above, all interstate acquisitions much of the recent thinking in states, and within would be subject to federal limitations designed the banking community, has focused largely on to protect against undue concentration, and the last of those options—regional arrangements. states would be able to limit the proportion of As a consequence, we believe that it is useful to their banking assets acquired by a single banking focus on that approach as a point of departure. organization. We would also suggest that it An advantage of regional arrangements seen would be appropriate, in the first stages at least, by many is the opportunity for regional organiza- for these interstate operations to be undertaken tions to reach a size necessary for an effective by means of separately incorporated units of a national or international presence, and then to holding company rather than by direct branches. become more effective competitors of the largest The number of states that ultimately might banking institutions in all phases of banking. wish to enter into regional (or nationwide) ar- However, the approach suffers from some rangements within this broad framework must, clear weaknesses. The regions may be defined in for the time being, remain unknown. Thus the a discriminatory way, aimed at encouraging par- possibility exists that little progress would be ticular combinations of banks and excluding oth- made toward interstate banking, even for limited ers, without clear and objective rationale. Specif- operations within metropolitan areas. Yet, the ically, some proposals appear to be driven by a status quo is hardly satisfactory, and the legitidesire to exclude New York and California mate pressures toward interstate operations that banks, or simply large money center banks. By have impelled nonbank banks would continue to their nature, sizable regional arrangements seek "unnatural" channels. Consequently, we would permit combinations of banks that are would suggest that, with due notice, the Conlong distances (and several states) apart, without gress authorize interstate branching within metpermitting even limited operations in some con- ropolitan areas and for neighboring areas of tiguous states. Metropolitan areas might be left, contiguous states. in a banking sense, bifurcated. Viewed as a permanent arrangement, regional compacts would tend to balkanize banking, with a tenden- CONCLUSION cy toward regional concentrations. Because of these potential weaknesses, we I have, on a number of occasions in the past, believe that a federal framework is required for stressed the urgency of congressional action to regional arrangements. For example, such weak- guide the orderly evolution of the banking sysnesses can be substantially ameliorated if states tem and to reaffirm certain basic principles that entering into such regional arrangements were have guided the banking and financial systems, also required after relatively few years—say, adapting them to present circumstances. Marthree—to permit reciprocal entry by banks in any kets will continue to respond and change will state that has enacted a regional arrangement or take place. The only question is whether that that otherwise provides for entry of banks from any other states.2 the Supreme Court sustains regional arrangements or even if the Court were to find them unconstitutional on grounds of violation of commerce or compact clause requirements. 2. Regional arrangements are the subject of a constitution- However, if the Court were to find that such arrangements al challenge that is now before the Supreme Court. A federal violate the equal protection clause, they could not be permitframework, such as suggested above, could be put in place if ted even if sanctioned by federal law. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 435 change will take place in a constructive frame- my judgment—and taking account of both marwork of rules established by the Congress after a ket forces and recent state inititatives—a comcareful weighing and balancing of the vital public prehensive approach now requires a resolution interests that are now before you for review. In of the issues involved in interstate expansion. • Statement by J. Charles Partee, Member, Board and abroad, so that by the start of this decade, of Governors of the Federal Reserve System, the potential for farm production had increased before the Subcommittee on Financial Institu- considerably. At the same time, growth in detions of the Committee on Banking, Housing, mand for American agricultural products weakand Urban Affairs, U.S. Senate, April 26, 1985. ened. Farm exports in particular have been reduced by sluggish economic conditions abroad I appreciate the opportunity to appear before this and the high exchange value of the U.S. dollar, committee to discuss the current difficulties be- as well as by the expanded ability of other ing experienced by banks in our agricultural nations to meet consumption needs from their communities. As members of this committee are own internal production. These market developwell aware, these problems have been intensify- ments have kept farm prices persistently deing lately, as more farmers have been finding it pressed. As a result, farm income has been low difficult, if not impossible, to meet fully the for five years in a row, and land values have been contractual terms of their loan obligations. declining since 1981. The origin of these problems can be traced to Farm debt, though no longer increasing, still is the 1970s. Our farm sector experienced a major high; and interest rates on farm loans, while economic boom during that decade, and many down from earlier levels, remain well above farmers expected the good times to continue in those rates prevailing in the last decade when the 1980s. There was, in particular, a general much of the debt was incurred. Thus, many perception of limits on potential world produc- farmers are faced with the problem of servicing a tion of agricultural products that would continue large volume of debt, at relatively high interest to encourage a rapid growth in farm exports, thus rates, with a substantially reduced level of farm fostering increasing returns to land and other earnings. High interest rates and reduced income farm inputs. Many also believed that the more flows also have added to the downward pressure rapid inflation of the decade would persist, so on land values, thus further limiting the ability of that long-term indebtedness could be paid off farmers to pay down debt by selling these assets. with less valuable future dollars. Acting on these The earnings of all farmers have been adverseexpectations, farmers and other investors ac- ly affected by lower product prices, but not all quired additional farm land, bidding up its price are experiencing the same degree of financial in the process. Farmers also invested heavily in stress. Farmers that are relatively debt-free have new machinery and equipment. Moreover, in suffered declines in asset values but are not in view of the apparently favorable outlook for danger of falling into insolvency. In contrast, agriculture and, for most of the decade, of inter- producers who entered the 1980s with only a est rates that were low relative to the expected relatively small equity cushion have been experirise in income and asset prices, many thought it encing increasing financial difficulties. Estimates advantageous to finance a relatively large share indicate that perhaps a third of the full-time of these investments with borrowed money. producers on commercial-sized family farms Consequently, farm indebtedness surged, rising, have debt burdens large enough to cause moderafter allowance for inflation, about 60 percent ate to severe financial stress, and this group from 1971 to 1979. owes about two-thirds of all farm debt. The As it turned out, however, the agricultural greater proportion of this debt is owed to the boom of the 1970s gave way to a bust in the Farm Credit System, the Farmers Home Admin- 1980s. The high farm prices of the 1970s attracted istration, and individuals. Nonetheless, about additional resources into agriculture both here one-quarter of total farm credit is provided by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

436 Federal Reserve Bulletin • June 1985 commercial banks, and a sizable proportion of through 1982. There was great variation in earnthe farm loan portfolios of many banks has ings recorded among agricultural banks, howevbecome troubled to a greater or lesser degree. er, mainly reflecting a sharp difference in loan- Commercial banks experienced only minimal loss experience. Thus, 12 percent of these banks problems in their farm loan portfolios during the reported negative earnings last year, and another 1970s. Such problems began to pick up in 1981 9 percent recorded only minimal positive earnand have been increasing steadily since then. ings. At the same time, over half earned more One indication of the deterioration in the quality than 10 percent on equity, and nearly a fifth, of agricultural loans at banks that has occured more than 15 percent. since then is provided by data on delinquencies In the aggregate, earnings of agricultural banks and charge-offs. While not all banks are required were high enough to permit a further buildup in to report such data for their farm loans, from the average capital ratio of these banks, and the available information our staff estimates that at capital ratios of most agricultural banks remain the end of 1984 nonaccrual farm production loans high relative to those at nonfarm banks. But at all banks in the nation totaled about $1.5 more farm banks seem certain to come under billion, and other nonperforming loans—those financial strain if farm loan losses continue and past due 90 days or more but still accruing intensify. Moreover, as I have noted, a small but interest, plus renegotiated troubled loans—to- troubling number of farm banks experiencing taled about $0.5 billion. In addition, about $1.0 relatively high loan losses have already suffered billion of farm production loans were past due 30 an erosion of their capital base, thus increasing to 89 days. Altogether, these poor-performing their vulnerability to failure should such losses and nonperforming loans constituted about IVi continue. percent of all farm production loans. Such extremely adverse results have been In addition, net charge-offs of farm loans at all occurring in small but increasing numbers. Last commercial banks are estimated to have been year, 32 agricultural banks failed—mostly in the about $900 million in 1984, or a bit more than 2 second half of the year—compared with only 7 in percent of outstandings. Of this total, $240 mil- 1983. Many of these banks came from a group lion was reported by banks in California, repre- that had reported delinquent loans at the beginsenting about 6 percent of their outstanding farm ning of the year in excess of the capital of the loans. While California banks led the nation in bank. Unfortunately, the number of agricultural charge-offs, these losses presented less of a banks in this condition, while still a relatively problem for these banks than for banks in many small proportion of the 5,000 agricultural banks, other states. This was because most of the losses rose further during 1984. At 102 agricultural were booked by major banks with large branch- banks, nonperforming loans at the beginning of ing systems in which agricultural loans constitut- this year exceeded total capital, up from 44 a ed a relatively small proportion of their total year earlier. Moreover, at 240 agricultural banks, asset portfolios. In contrast, many banks operat- the combined sum of past-due and nonperforming in agricultural areas of states that limit ing loans exceeded total capital, up from 133 a branching—states found mainly in the Mid- year earlier. Thus agricultural bank failures seem west—have had more trouble accommodating to likely to rise further in 1985—indeed 17 farm their loan losses because of the high concentra- bank failures already have occurred. tion of these loans in their asset portfolios. To sum up the current situation, while the Last year's high charge-offs and an increase in incomes of the great bulk of our farmers have provision of loan-loss reserves had a markedly been reduced since the beginning of this decade, depressing effect on the profitability of many those that got heavily into debt in the 1970s are agricultural banks (banks at which the ratio of primarily the ones experiencing serious financial farm loans to total loans exceeds the average of strains, with the severity of these strains increassuch ratios at all banks, currently about 17 ing with the degree of their leveraging. While percent). On average, returns on equity fell to 9 such farmers constitute only about one-third of percent, down from returns averaging between all farmers, they account for about two-thirds of 14 and 16 percent in every year from 1973 all agricultural debt. As many of these borrowers Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 437 have found it increasingly difficult to service their farmer customers will experience severe their loans, banks and other agricultural lenders financial dislocations over the next several have been encountering increasing problems. To years. I should hasten to add that at present it date, information suggests that the great majority still appears that most farmers and farm banks of farm banks remain in good condition despite have sufficient financial strength to weather these problems, but a significant and growing these conditions, although admittedly not withnumber is experiencing an increasing degree of out growing strains and problems. strain. The debt adjustment program, first announced That so many of our farm banks remain in by the administration last September and then relatively strong condition after five years of modified in March, will offer farm banks and depressed conditions in the agricultural sector their farmer customers some assistance in movstands, I believe, as a tribute to their manage- ing through the difficult transition period that ment. This rather clearly suggests that these appears to lie ahead. As committee members banks generally followed prudent standards in know, under this program the government will extending credit to their farm customers during guarantee most of the remainder of a troubled the boom times of the 1970s, standards that farm loan after the lender reduces the principal tended to hold down the degree of leveraging amount (or an equivalent in interest charges) 10 permitted individual customers—and in the pro- percent or more as needed to reduce the borrowcess helped to dampen tendencies for these cus- er's debt service burden to a level that he aptomers to become overextended. In addition, pears able to handle. As of April 15, the Farmers many farm banks followed policies that permit- Home Administration had received only 401 apted them to maintain reasonably diversified asset plications for such guarantees and had guaranportfolios. teed 129 loans totaling $19.5 million. The flow of Banks that failed to adhere to high standards of applications has been increasing gradually since quality and asset diversity have been considera- the program was revised on March 13, however, bly more vulnerable to the effects of deteriorat- and it seems quite reasonable to expect banks ing circumstances of agricultural borrowers. One and their farm customers to make greater use of can point to situations in which a bank that is these guarantees if problems in the agricultural failing or in extremely troubled condition is lo- sector persist. I understand also that the Farmers cated in close proximity to one or more other Home Administration, under its regular loan banks that remain in good condition. In addition, guarantee program, this year has guaranteed a I understand that the Federal Deposit Insurance substantially larger volume of farm operating Corporation (FDIC), in a study it conducted of loans than in preceding years. the banks that failed in 1984, found evidence of The Federal Reserve also revised and extendvarious kinds of abusive practices, including ed its seasonal lending program in March of this improper insider transactions, instances of possi- year with the objective of making sure that ble fraud, and other forms of irregular manage- agricultural banks will have sufficient liquidity to ment activities. provide needed production loans to their farmer The management policies and practices of customers. The regular seasonal program, in banks, of course, tend to vary along a continu- place since 1973, provides discount window um. Thus, the longer conditions in the agricultur- credit to depository institutions with limited acal sector remain depressed, the greater will be cess to national money markets that experience the number of banks experiencing problems of recurring seasonal swings in net needs for funds greater severity. As I have noted, that process is because of the way their deposit flows fluctuate already quite observable in the trends of recent relative to their loan demands. This existing years. Since no dramatic change appears likely in program was liberalized to increase the portion the current balance between supply and demand of the seasonal funding needs that the Federal in agricultural markets, such trends seem almost Reserve stands ready to supply to small and certain to continue for some time to come. Put midsized institutions. In addition, a temporary, more directly and graphically, it seems quite simplified seasonal program has been established possible that many more agricultural banks and as an alternative source of seasonal credit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

438 Federal Reserve Bulletin • June 1985 Aimed particularly at smaller banks substantially fallen significantly below regulatory standards involved in agricultural lending, this program and who have suffered negative earnings in two offers institutions with total loan growth above a preceding quarters. The swap is supposed to be base amount of 2 percent the opportunity to fund reversed when the institution regains its health. half of any further loan expansion through dis- While no new funds or permanent capital are count window loans, up to a maximum amount of provided by this program, it would permit an 5 percent of the institution's total deposits. institution to continue operating with a level of In announcing the broadening of its seasonal stockholder equity below that which regulatory credit program, the Federal Reserve noted that agencies ordinarily require. In addition, since the there were few if any signs to indicate that FDIC's promise would be a general asset of the agricultural banks generally would experience bank and thus available to meet the demands of any unusual shortfall of liquidity. The action was depositors and other creditors in the event the taken, nevertheless, to have in place a means to bank were liquidated, it would provide some offset any unforeseen liquidity strains that might reassurance to the holders of uninsured liabilities arise in local areas or for individual banks, thus of troubled banks. threatening the necessary flow of credit to farm- At present, the coverage of this proposed ers. Thus far, total borrowing in our seasonal program would be quite limited, since the vast program has been running somewhat below last majority of farm banks remain well capitalized year's levels. But seasonal credit needs normally and have positive earnings. Moreover, while the continue to expand through the spring and sum- number of banks that would be eligible for the mer and may yet begin to outpace the available program seems likely to grow, there are other liquidity of some farm banks. important drawbacks to be considered. As pres- The Federal Reserve, as well as the other ently formulated, the program would provide aid federal banking agencies, has also recently reit- to a bank regardless of whether its problems are erated its policy of instructing bank examiners to temporary or permanent in nature. If the latter, a refrain from taking supervisory actions that clearly better approach would be to achieve an would discourage banks from exercising appro- immediate shift of its resources to a healthy, priate forbearance when working with farmers or better-run institution. In addition, in cases in other small businesses with delinquent loans. It which significant loan losses must be taken and is not the intent of this policy to encourage or capital is thus eroded, it would be better for an permit loan decisions that are inconsistent with a institution's capital base to be augmented with bank's long-term safety and soundness. The poli- new permanent funding sources rather than with cy recognizes, however, that if there is good temporary accounting capital that would have to reason to believe a borrower's difficulties are be replaced over time by the retention of future temporary in nature, it is prudent banking policy earnings. to extend due dates on his loans, and in some Taking these points into consideration, I can cases to grant additional credit to carry him over see relatively little long-term advantage in the net a period of distress. Reserve Banks have desig- worth assistance (NWA) proposal, barring a furnated senior review examiners with expertise in ther substantial deterioration in the condition of supervising farm banks to oversee the adminis- farm banks that reaches systemic proportions. tration of this policy. At present, in cases in which loan losses prove I was asked to comment today on another enough to undermine seriously a bank's capital proposal for assisting troubled agricultural lend- position, I would think it better to encourage and ers. Legislation has been introduced that would facilitate mergers with stronger banking instituextend the Net Worth Assistance Program— tions, particularly those that are not now so currently targeted to provide assistance to real heavily involved in agricultural lending. That estate lenders with low capital and weak earn- would offer several important advantages. First, ings—to farm banks. Under this proposed pro- it would transfer control of the institution's lendgram, the FDIC would stand ready to swap its ing resources to a bank with a better managepromissory notes for the net worth certificates of ment record. Second, it would provide an infuthose farm lenders whose capital positions have sion of real, permanent capital into the bank and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 439 thus into agricultural lending in general rather in structure of high indebtedness. Many banks than temporary "accounting" capital as would that have concentrated their lending in the farm occur with NWA certificates. Finally, mergers area thus are encountering difficulty because of with banks outside the community of agricultural the inability of farmers to service their debts, and banks would promote greater diversification of it may be that more banks will be driven to the portfolio risk. In this way, the banking system point of bankruptcy. But, as I see it, the best way would come to be better protected against un- to deal with an erosion of capital is to obtain foreseen developments that, from time to time, replacement funds from present or prospective adversely affect the financial health of different bank owners. And when the bank's problems sectors of the economy. appear too severe and fundamental to handle in There is no doubt that the agricultural sector this manner, the best solution is to seek mergers has been going through some very hard times with other institutions that promise a larger, because of unanticipated weakness in farm prod- more stable, lending and deposit base. • uct markets that will no longer support the built- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

440 Announcements REVISIONS TO GUIDELINES their primary capital ratios are considered ade- FOR CAPITAL ADEQUACY quate. The Federal Reserve Board has announced revi- Zone 2. Institutions operating with total capital sions to its guidelines regarding capital adequacy equal to 6 to 7 percent of their total assets may be for state member banks and bank holding compa- considered capitalized at a minimally acceptable nies. level, subject to consideration of other financial The revised guidelines raise the minimum capi- factors. tal levels for multinational and regional banking organizations. By doing so, the revised guide- Zone 3. Banking organizations with total capilines eliminate the disparity in the minimum tal equal to less than 6 percent of their total capital requirements between these larger insti- assets are generally considered undercapitalized, tutions and smaller community state member in the absence of clear extenuating circumbanks and bank holding companies by setting a stances. uniform minimum ratio of primary capital to total assets of 5.5 percent and a minimum ratio of total The Board has also included in the revised capital to total assets of 6.0 percent. In general, guidelines a more detailed definitional section banking organizations are expected to operate dealing with mandatory convertible securities. above the minimum primary and total capital Finally, the Board has adopted a regulation eslevels. tablishing procedures by which the Board may This action parallels the recent actions of the require a banking organization to maintain the Office of the Comptroller of the Currency (OCC) minimum capital levels, as defined in the revised and the Federal Deposit Insurance Corporation guidelines, or higher levels for institutions on a (FDIC), resulting in uniform minimum capital case-by-case basis. levels being established for all federally super- The Board has made three changes in its vised banking organizations. existing capital guidelines for state member Based on its experience, the Board has contin- banks in order to define capital more consistently ued to include the substantive capital require- with the capital regulations of the OCC and the ments for state member banks and bank holding FDIC. Specifically, the Board has amended the companies in guidelines rather than in the form capital guidelines for state member banks, but of a regulation. In addition, the Board has re- not for bank holding companies: (1) to require tained the use of total capital zones or target the automatic deduction of goodwill from priranges that help to define various levels of capi- mary and total capital; (2) to eliminate equity talization. The use of such zones or target ranges commitment notes from primary capital; and (3) provides the management of banking organiza- to define the capital ratios in terms of average tions with broad standards for future capital assets rather than period-end figures. planning and encourages banking organizations The guidelines state that the Federal Reserve to maintain total capital levels in excess of the will review liquidity and the relationship of all minimum. The zones are generally defined as the on- and off-balance-sheet risks to capital, and following: will require those institutions with high or inordinate levels of risk to hold additional primary Zone 1. Institutions with total capital equal to capital. The guidelines suggest that banking orgaat least 7 percent of total assets are generally nizations avoid the practice of attempting to considered adequately capitalized, provided meet capital requirements by decreasing the lev- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

441 el of liquid assets in relation to total assets. The that participate in the purchase and sale of loans guidelines also indicate that the Federal Reserve guaranteed by the U.S. government. The policy will continue to review the need for more explicit updates guidelines first approved in 1979, which procedures for factoring on- and off-balance- established prudential standards for handling sheet risks into the assessment of capital ade- such loans. quacy. The revised policy reminds financial institutions that premiums received in lieu of servicing PUBLICATION OF BANK HOLDING fees, with respect to the selling and servicing COMPANY PERFORMANCE REPORT bank, are to be amortized over the life of the loan, and that, with respect to the purchasing The Federal Reserve Board has announced that bank, the premiums paid over the face value of the Bank Holding Company Performance Report the note are not guaranteed and are not paid by (BHCPR) will be available for sale to the public the guaranteeing federal agency when the loans for the first time on Monday, April 29, 1985. The are prepaid or in default. For this reason, the report will also be sent to all bank holding statement cautions banks against paying inapprocompanies that file the Bank Holding Company priate or excessive premiums. Financial Supplement (FR Y-9). The BHCPR is a 16-page report containing balance sheet and income items and financial PUBLICATION OF REPORT ON ratios that allows detailed financial analysis of PRICED SERVICES IN 1984 bank holding companies. It will be in the same format as the Uniform Bank Performance Report The Federal Reserve Board has issued a report that is issued by the Federal Financial Institu- summarizing developments in the priced services tions Examination Council. areas for 1984 and providing detailed financial The BHCPR will be available approximately results of providing those services. 120 days after the December and June reporting The Board issues a report on priced services periods. For the December reporting period, the annually and a priced service balance sheet and full report containing consolidated and parent income statement quarterly. The financial statedata for approximately 1,020 bank holding com- ments are designed to reflect standard accountpanies will be available as well as a four-page ing practices, taking into account the nature of report on parent-only companies for approxi- the Federal Reserve's activities and its unique mately 800 bank holding companies that have position in this field. consolidated assets between $50 million and $100 million. The June BHCPR will be produced for bank holding companies that are required to AMENDMENT TO REGULATION AA submit the FR Y-9 semiannually. Copies of individual bank holding company The Federal Reserve Board has announced a BHCPRs may be obtained by the public for final rule amending its Regulation AA (Unfair or $25.00 for the full report and $10.00 for the Deceptive Acts or Practices) that will carry out parent-only report. BHCPR User's Guides may the Credit Practices Rule recently adopted by the be obtained for $6.00 per copy. Order forms may Federal Trade Commission. be obtained from Publications Services, Board of All banks except those savings banks that are Governors of the Federal Reserve System, members of the Federal Home Loan Bank Sys- Washington, D.C. 20551. tem will be affected by the new rule. The Board's action, effective January 1, 1986, prohibits banks from entering into any consumer GUIDELINES FOR PURCHASE AND SALE OF credit obligation that contains a confession of GOVERNMENT-GUARANTEED LOANS judgment clause, a waiver of exemption, an assignment of future wages to the creditor in the The Federal Reserve Board has adopted a re- event of default, or a security interest in the vised policy for supervising financial institutions consumer's household goods other than those Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

442 Federal Reserve Bulletin • June 1985 purchased with the credit.1 In addition, the rule stocks have been included for the first time, 149 prohibits the enforcement of these provisions in under NMS designation; 20 stocks previously on a consumer credit obligation purchased by a the list have been removed for substantially bank. failing to meet the requirements for continued The rule also forbids the pyramiding of late listing; and 33 stocks have been removed for charges. Through this practice, a creditor im- reasons such as listing on a national securities poses multiple late charges based on a single late exchange or involvement in an acquisition. payment that is subsequently paid in full on or In addition to NMS-designated securities, the before the next timely payment. As the subse- Board will continue to monitor the market activiquent timely payments are made, and the late ty of other OTC stocks to determine which charge extracted, the late charges begin to pyra- stocks meet the requirements for inclusion and mid. In addition, the rule requires a creditor to continued inclusion on the list. give a notice to cosigners informing them of the nature of their obligation and potential liability. Under the new rule, banks are given the option of either providing the notice in a separate docu- REVISED RULES REGARDING EQUAL ment or including the notice in the contract OPPORTUNITY document. The Federal Reserve Board has approved for publication as a final rule its revised Rules Re- REVISED LIST OF OTC MARGIN STOCKS garding Equal Opportunity, effective June 1, 1985. The Federal Reserve Board has published a The Board revised and expanded its Rules revised list of over-the-counter (OTC) stocks Regarding Equal Opportunity to include the folthat are subject to its margin regulations, effec- lowing procedures: tive May 14, 1985. • Clarify responsibility within the Federal Re- The list includes all over-the-counter securities serve Board for implementation of the Board's designated by the Board pursuant to its estab- EEO Program. lished criteria as well as all securities qualified • Provide for review of Board decisions on for trading in the national market system (NMS). complaints of discrimination by the Equal Em- This list includes all securities qualified for trad- ployment Opportunity Commission. ing in tier 1 of the NMS through May 14 and • Provide Board employees and other persons those in tier 2 through April 16, 1985. Additional with the same rights that are provided to employ- OTC securities may be designated as NMS secu- ees of other federal agencies and others by the rities in the interim between the Board's quarter- Age Discrimination in Employment Act, the ly publications and will be immediately margina- Equal Pay Act, and the Rehabilitation Act. ble. The next publication of the Board's list is Copies of the Board's revised regulation and scheduled for August 1985. the accompanying Federal Register notice may This List of Marginable OTC Stocks super- be obtained upon request from the Federal Resedes the revised List of Marginable OTC Stocks serve Banks and the Board's Publications Serthat was effective on February 12, 1985. Changes vices office. that have been made in the list, which now includes 2,406 OTC stocks, are as follows: 175 PROPOSED ACTION The Federal Reserve Board has requested com- 1. A confession of judgment clause is a statement by which ment by May 28, 1985, on an application by the consumer agrees in advance to permit the creditor to obtain a judgment in the event of default without giving the Compagnie Financiere de Suez and its subsiddebtor prior notice or an opportunity to be heard in court. iary, Banque Indosuez, both of Paris, France, to Under a waiver of exemption, the consumer waives or limits deal in foreign currency options traded on a state law exemptions sheltering the consumer's home or other necessities from attachment. stock exchange through a joint venture. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 443 CHANGES IN BOARD STAFF Ms. Tigert holds a B.A. from Vanderbilt University, an M.A. from the University of North The Board of Governors has announced the Carolina, and a J.D. from the University of appointment of Florence M. Young as Adviser in Chicago. She had been a senior attorney with the the Division of Federal Reserve Bank Opera- Treasury Department. tions, effective April 8, 1985. Ms. Young has an M.B.A. from Georgia State University and has been a member of the SYSTEM MEMBERSHIP: Board's staff since July 1972. ADMISSION OF STATE BANKS The Board has also announced the following The following banks were admitted to memberchanges in the Legal Division, effective April 15, ship in the Federal Reserve System during the 1985: period April 1 through April 30, 1985: J. Virgil Mattingly, Jr., has been promoted to Deputy General Counsel. Arizona Richard M. Ashton has been promoted to Phoenix .... First Business Bank of Arizona Associate General Counsel for Litigation. Florida Oliver Ireland has been appointed Associate Orlando Commercial State Bank General Counsel for Monetary Affairs. of Orlando Ricki Tigert has been appointed Assistant Minnesota General Counsel for International Banking. Mora Kanabec State Bank Stephen Siciliano has been appointed Special Montana Assistant to the General Counsel for Administra- Seeley Lake First Valley Bank tive Law. Texas Mr. Ireland holds a B.A. from Yale University Denton Provident Bank-Denton and a J.D. from the University of Texas. He had Duncanville First State Bank of Texas been the Associate General Counsel for the Virginia Federal Reserve Bank of Chicago. Abingdon Highland Union Bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

445 Legal Developments AMENDMENTS TO REGULATIONS H, Y, AND Section 208.13—Capital Adequacy RULES OF PROCEDURE The standards and guidelines by which the capital The Board of Governors of the Federal Reserve Sys- adequacy of state member banks will be evaluated by tem has adopted revised capital adequacy guidelines the Board are set forth in Appendix A to the Board's and a procedural regulation to permit the Board to Regulation Y, 12 C.F.R. Part 225. enforce compliance with the revised guidelines. The amended guidelines and the procedural enforcement Part 225—Bank Holding Companies and regulation implement section 908 of the International Change in Bank Control Lending Supervision Act of 1983 (Public Law 98-181, Title IX, 97 Stat. 1153, codified at 12 U.S.C. § 3907), 2. 12 C.F.R. Part 225 is amended, under authority which directs the federal bank supervisory agencies, cited in this part including 12 U.S.C. 1844(b), i.e., the Board, the Federal Deposit Insurance Corpo- 18170(13), 1818(b), and Pub. L 98-181, Title IX ration ("the FDIC") and the Comptroller of the Cur- (12 U.S.C. 3907 and 3909), by revising Appendix A to rency ("the Comptroller"), to establish minimum and read as follows: appropriate levels of capital for federally supervised banking institutions. Pursuant to its supervisory au- Appendix A—Capital Adequacy Guidelines for thority, the Board is promulgating revised capital Bank Holding Companies and State Member guidelines for bank holding companies and state-char- Banks tered banks that are members of the Federal Reserve System. The Board of Governors of the Federal Reserve Sys- Capital adequacy is one of the critical factors the tem has adopted minimum capital ratios and guidelines Board is required to analyze in taking action on to provide a framework for assessing the adequacy of various types of applications, such as mergers and the capital of bank holding companies and state memacquisitions by banks and bank holding companies, ber banks (collectively "banking organizations"). The and in the conduct of the Board's various supervisory guidelines generally apply to all state member banks activities related to the safety and soundness of indi- and bank holding companies regardless of size and are vidual banks and bank holding companies and to the to be used in the examination and supervisory process stability of the banking system. as well as in the analysis of applications acted upon by In amending its capital guidelines, the Board has the Federal Reserve. The Board of Governors will adopted, with some changes, the proposal published review the guidelines from time to time for possible for comment on July 30, 1984 (49 Federal Register adjustments commensurate with changes in the econo- 30,317). my, financial markets, and banking practices. Effective May 15, 1985, the Board hereby amends Two principal measurements of capital are used— 12 C.F.R. parts 208, 225 and 263 as set forth below: the primary capital ratio and the total capital ratio. The definitions of primary and total capital for banks and bank holding companies and formulas for calculating Part 208—Membership of State Banking the capital ratios are set forth below in the definitional Institutions in the Federal Reserve System sections of these guidelines. 1. 12 C.F.R. Part 208 is amended by revising the Capital Guidelines authority for the Part, and by adding a new section 208.13 to read as follows: The Board has established a minimum level of primary capital to total assets of 5.5 per cent and a minimum level of total capital to total assets of 6.0 per cent. Authority: 12 U.S.C. 248, 321-338, 486, 1814, 3907, Generally, banking organizations are expected to op- 3909, unless otherwise noted. erate above the minimum primary and total capital Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

446 Federal Reserve Bulletin • June 1985 levels. Those organizations whose operations involve Board believes that, as a matter of both safety and or are exposed to high or inordinate degrees of risk will soundness and competitive equity, the degree of leverbe expected to hold additional capital to compensate age common in banking should not automatically for these risks. extend to nonbanking activities. Consequently, in In addition, the Board has established the following evaluating the consolidated capital positions of bankthree zones for total capital for banking organizations ing organizations, the Board is placing greater weight of all sizes: on the building-block approach for assessing capital requirements. This approach generally provides that nonbank subsidiaries of a banking organization should Capital Zones Total Capital Ratio maintain levels of capital consistent with the levels that have been established by industry norms or Zone 1 Above 7.0% standards, by Federal or State regulatory agencies for Zone 2 6.0% to 7.0% Zone 3 Below 6.0% similar firms that are not affiliated with banking organizations, or that may be established by the Board after taking into account risk factors of a particular indus- The capital guidelines assume adequate liquidity and try. The assessment of an organization's consolidated a moderate amount of risk in the loan and investment capital adequacy must take into account the amount portfolios and in off-balance sheet activities. The and nature of all nonbank activities, and an institu- Board is concerned that some banking organizations tion's consolidated capital position should at least may attempt to comply with the guidelines in ways equal the sum of the capital requirements of the that reduce their liquidity or increase risk. Banking organization's bank and nonbank subsidiaries as well organizations should avoid the practice of attempting as those of the parent company. to meet the guidelines by decreasing the level of liquid assets in relation to total assets. In assessing compli- Supervisory Action ance with the guidelines, the Federal Reserve will take into account liquidity and the overall degree of risk The nature and intensity of supervisory action will be associated with an organization's operations, includ- determined by an organization's compliance with the ing the volume of assets exposed to risk. required minimum primary capital ratio as well as by The Federal Reserve will also take into account the the zone in which the company's total capital ratio sale of loans or other assets with recourse and the falls. Banks and bank holding companies with primary volume and nature of all off-balance sheet risk. Partic- capital ratios below the 5.5 per cent minimum will be ularly close attention will be directed to risks associat- considered undercapitalized unless they can demoned with standby letters of credit and participation in strate clear extenuating circumstances. Such banking joint venture activities. The Federal Reserve will organizations will be required to submit an acceptable review the relationship of all on- and off-balance sheet plan for achieving compliance with the capital guiderisks to capital and will require those institutions with lines and will be subject to denial of applications and high or inordinate levels of risk to hold additional appropriate supervisory enforcement actions. primary capital. In addition, the Federal Reserve will The zone in which an organization's total capital continue to review the need for more explicit proce- ratio falls will normally trigger the following supervisodures for factoring on- and off-balance sheet risks into ry responses, subject to qualitative analysis: the assessment of capital adequacy. For institutions operating in Zone 1, the Federal The capital guidelines apply to both banks and bank Reserve will: holding companies on a consolidated basis.1 Some -consider that capital is generally adequate if the banking organizations are engaged in significant non- primary capital ratio is acceptable to the Federal banking activities that typically require capital ratios Reserve and is above the 5.5 per cent minimum. higher than those of commercial banks alone. The For institutions operating in Zone 2, the Federal Reserve will: -pay particular attention to financial factors, such as 1. The guidelines will apply to bank holding companies with less than $150 million in consolidated assets on a bank-only basis unless (1) asset quality, liquidity, off-balance sheet risk, and the holding company or any nonbank subsidiary is engaged directly or interest rate risk, as they relate to the adequacy of indirectly in any nonbank activity involving significant leverage or (2) the holding company or any nonbank subsidiary has outstanding capital. If these areas are deficient and the Federal significant debt held by the general public. Debt held by the general Reserve concludes capital is not fully adequate, the public is defined to mean debt held by parties other than financial Federal Reserve will intensify its monitoring and institutions, officers, directors, and principal shareholders of the banking organization or their related interests. take appropriate supervisory action. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 447 For institutions operating in Zone 3, the Federal Bank Holding Companies. While the Federal Reserve Reserve will: will consider the amount and nature of all intangible -consider that the institution is undercapitalized, assets, those holding companies with aggregate intanabsent clear extenuating circumstances; gible assets in excess of 25 per cent of tangible primary -require the institution to submit a comprehensive capital (i.e., stated primary capital less all intangible capital plan, acceptable to the Federal Reserve, assets) or those institutions with lesser, although still that includes a program for achieving compliance significant, amounts of goodwill will be subject to with the required minimum ratios within a reason- close scrutiny. For the purpose of assessing capital able time period; and adequacy, the Federal Reserve may, on a case-by-case -institute appropriate supervisory and/or adminis- basis, make adjustments to an organization's capital trative enforcement action, which may include the ratios based upon the amount of intangible assets in issuance of a capital directive or denial of applica- excess of the 25 per cent threshold level or upon the tions, unless a capital plan acceptable to the Feder- specific character of the organization's intangible asal Reserve has been adopted by the institution. sets in relation to its overall financial condition. Such adjustments may require some organizations to raise additional capital. The Board expects banking organizations (including Treatment of Intangible Assets for the Purpose of state member banks) contemplating expansion propos- Assessing the Capital Adequacy of Bank Holding als to ensure that pro forma capital ratios exceed the Companies and State Member Banks minimum capital levels without significant reliance on intangibles, particularly goodwill. Consequently, in In considering the treatment of intangible assets for reviewing acquisition proposals, the Board will take the purpose of assessing capital adequacy, the Federal into consideration both the stated primary capital ratio Reserve recognizes that the determination of the fu- (that is, the ratio without any adjustment for intangible ture benefits and useful lives of certain intangible assets) and the primary capital ratio after deducting assets may involve a degree of uncertainty that is not intangibles. In acting on applications, the Board will normally associated with other banking assets. Super- take into account the nature and amount of intangible visory concern over intangible assets derives from this assets and will, as appropriate, adjust capital ratios to uncertainty and from the possibility that, in the event include certain intangible assets on a case-by-case an organization experiences financial difficulties, such basis. assets may not provide the degree of support generally associated with other assets. For this reason, the State Member Banks. State member banks with intan- Federal Reserve will carefully review the level and gible assets in excess of 25 per cent of tangible primary specific character of intangible assets in evaluating the capital will be subject to close scrutiny. In addition, capital adequacy of state member banks and bank for the purpose of calculating capital ratios of state holding companies. member banks, the Federal Reserve will deduct good- The Federal Reserve recognizes that intangible as- will from primary capital and total capital. The Federal sets may differ with respect to predictability of any Reserve may, on a case-by-case basis, make further income stream directly associated with a particular adjustments to a bank's capital ratios based on the asset, the existence of a market for the asset, the amount of intangible assets (aside from goodwill) in ability to sell the asset, or the reliability of any excess of the 25 per cent threshold level or on the estimate of the asset's useful life. Certain intangible specific character of the bank's intangible assets in assets have predictable income streams and objective- relation to its overall financial condition. Such adjustly verifiable values and may contribute to an organiza- ments may require some banks to raise additional tion's profitability and overall financial strength. The capital. value of other intangibles, such as goodwill, may In addition, state member banks and bank holding involve a number of assumptions and may be more companies are expected to review periodically the subject to changes in general economic circumstances value at which intangible assets are carried on their or to changes in an individual institution's future balance sheets to determine whether there has been prospects. Consequently, the value of such intangible any impairment of value or whether changing circumassets may be difficult to ascertain. Consistent with stances warrant a shortening of amortization periods. prudent banking practices and the principle of the Institutions should make appropriate reductions in diversification of risks, banking organizations should carrying values and amortization periods in light of avoid excessive balance sheet concentration in any this review, and examiners will evaluate the treatment category or related categories of intangible assets. of intangible assets during on-site examinations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

448 Federal Reserve Bulletin • June 1985 Definition of Capital to be Used in Determining -For banks only, the aggregate amount of limited-life Capital Adequacy of Bank Holding Companies preferred stock and subordinate debt qualifying as and State Member Banks capital may not exceed 50 per cent of the amount of the bank's primary capital. Primary Capital Components As secondary capital components approach maturi- The components of primary capital are: ty, the banking organization must plan to redeem or -common stock, replace the instruments while maintaining an adequate -perpetual preferred stock (preferred stock that does overall capital position. Thus, the remaining maturity not have a stated maturity date and that may not be of secondary capital components will be an imporredeemed at the option of the holder), tant consideration in assessing the adequacy of total -surplus (excluding surplus relating to limited-life pre- capital. ferred stock), -undivided profits, Capital Ratios -contingency and other capital reserves, -mandatory convertible instruments,2 The primary and total capital ratios for bank holding -allowance for possible loan and lease losses (exclu- companies are computed as follows: sive of allocated transfer risk reserves), -minority interest in equity accounts of consolidated Primary capital ratio: Primary capital components subsidiaries. Total assets + Allowance for loan and lease losses (exclusive of Secondary Capital Components allocated transfer risk reserves) The components of secondary capital are: Total capital ratio: Primary capital components + -limited-life preferred stock (including related surplus) Secondary capital components and Total assets + Allowance for loan -bank subordinated notes and debentures and unse- and lease losses (exclusive of cured long-term debt of the parent company and its allocated transfer risk reserves) nonbank subsidiaries. The primary and total capital ratios for state mem- Restrictions Relating to Capital Components ber banks are computed as follows: To qualify as primary or secondary capital, a capital Primary capital ratio: Primary capital instrument should not contain or be covered by any components - Goodwill covenants, terms, or restrictions that are inconsistent Average total assets + Allowance with safe and sound banking practices. Examples of for loan and lease losses such terms are those regarded as unduly interfering (exclusive of allocated transfer with the ability of the bank or holding company to risk reserves) - Goodwill conduct normal banking operations or those resulting Total capital ratio: Primary capital components + in significantly higher dividends or interest payments Secondary capital in the event of a deterioration in the financial condition components - Goodwill of the issuer. The secondary components must meet the following Average total assets + Allowance for loan and lease losses conditions to qualify as capital: (exclusive of allocated transfer -The instrument must have an original weighted-averrisk reserves) - Goodwill age maturity of at least seven years. -The instrument must be unsecured. -The instrument must clearly state on its face that it is Generally, period-end amounts will be used to calnot a deposit and is not insured by a federal agency. culate bank holding company ratios. However, the -Bank debt instruments must be subordinated to Federal Reserve will discourage temporary balance claims of depositors. sheet adjustments or any other "window dressing" practices designed to achieve transitory compliance with the guidelines. Banking organizations are expected to maintain adequate capital positions at all times. Thus, the Federal Reserve will, on a case-by-case 2. See the definitional section below that lists the criteria for mandatory convertible instruments to qualify as primary capital. basis, use average total assets in the calculation of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 449 bank holding company capital ratios whenever this perpetual preferred stock of the bank or bank holding approach provides a more meaningful indication of an company. Any exception to this rule must be approved individual holding company's capital position. by the Federal Reserve. The securities may not be For the calculation of bank capital ratios, "average redeemed with the proceeds of another issue of mantotal assets" will generally be defined as the quarterly datory convertible securities. Nor may the issuer average total assets figure reported on the bank's repurchase or acquire its own mandatory convertible Report of Condition. If warranted, however, the Fed- securities for resale or reissuance. eral Reserve may calculate bank capital ratios based upon total assets as of period-end. All other compo- d. Holders of the securities may not accelerate the nents of the bank's capital ratios will be based upon payment of principal except in the event of bankruptperiod-end balances. cy, insolvency, or reorganization. Criteria for Determining the Primary Capital e. The securities must be subordinate in right of Status of Mandatory Convertible Securities of payment to all senior indebtedness of the issuer. In the Bank Holding Companies and State Member event that the proceeds of the securities are reloaned Banks to an affiliate, the loan must be subordinated to the same degree as the original issue. Mandatory convertible securities are subordinated debt instruments that are eventually transformed into f. An issuer that intends to dedicate the proceeds of an common or perpetual preferred stock within a speci- issue of common or perpetual preferred stock to fied period of time, not to exceed 12 years. To be satisfy the funding requirements of an issue of mandacounted as primary capital, mandatory convertible tory convertible securities (i.e., the requirement to securities must meet the criteria set forth below. These retire or redeem the notes with the proceeds from the criteria cover the two basic types of mandatory con- issuance of common or perpetual preferred stock) vertible securities: "equity contract notes"—securi- generally must make such a dedication during the ties that obligate the holder to take common or perpet- quarter in which the new common or preferred stock is ual preferred stock of the issuer in lieu of cash for issued.5 As a general rule, if the dedication is not made repayment of principal, and "equity commitment within the prescribed period, then the securities issued notes"—securities that are redeemable only with the may not at a later date be dedicated to the retirement proceeds from the sale of common or perpetual pre- or redemption of the mandatory convertible securiferred stock. Both equity commitment notes and equi- ties.6 ty contract notes qualify as primary capital for bank holding companies, but only equity contract notes Additional Criteria Applicable to Equity Contract qualify as primary capital for banks.3 Notes Criteria Applicable to Both Types of Mandatory a. The note must contain a contractual provision (or Convertible Securities must be issued with a mandatory stock purchase contract) that requires the holder of the instrument to a. The securities must mature in 12 years or less. take the common or perpetual stock of the issuer in lieu of cash in satisfaction of the claim for principal b. The maximum amount of mandatory convertible securities that may be counted as primary capital is 5. Common or perpetual preferred stock issued under dividend limited to 20 per cent of primary capital, exclusive of reinvestment plans or issued to finance acquisitions, including acquisitions of business entities, may be dedicated to the retirement or mandatory convertible securities.4 (Amounts out- redemption of the mandatory convertible securities. Documentation standing in excess of the 20 per cent limitation may be certified by an authorized agent of the issuer showing the amount of common stock or perpetual preferred stock issued, the dates of issue, counted as secondary capital provided they meet the and amounts of such issues dedicated to the retirement or redemption requirements of secondary capital instruments.) of mandatory convertible securities will satisfy the dedication requirement. 6. The dedication procedure is necessary to ensure that the primary c. The issuer may redeem securities prior to maturity capital of the issuer is not overstated. For each dollar of common or only with the proceeds from the sale of common or perpetual preferred proceeds dedicated to the retirement or redemption of the notes, there is a corresponding reduction in the amount of outstanding mandatory securities that may qualify as primary capital. 3. Equity commitment notes that were issued by state member De minimis amounts (in relation to primary capital) of common or banks prior to May 15, 1985 will continue to be included in primary perpetual preferred stock issued under arrangements in which the capital. amount of stock issued is not predictable, such as dividend reinvest- 4. The maximum amount of equity commitment notes that may be ment plans and employee stock option plans (but excluding public counted as primary capital is limited to 10 per cent of primary capital stock offerings and stock issued in connection with acquisitions), exclusive of mandatory convertible securities. should be dedicated by no later than the company's fiscal year end. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

450 Federal Reserve Bulletin • June 1985 repayment. The obligation of the holder to take the b. If the issuer fails to meet any of these periodic common or perpetual preferred stock of the issuer may funding requirements, the Federal Reserve immediatebe waived if, and to the extent that, prior to the ly will cease to treat the unfunded securities as primaturity date of the obligation, the issuer sells new mary capital and will take appropriate supervisory common or perpetual preferred stock and dedicates action. In addition, failure to meet the funding requirethe proceeds to the retirement or redemption of the ments will be viewed as a breach of a regulatory notes. The dedication generally must be made during commitment and will be taken into consideration by the quarter in which the new common or preferred the Board in acting on statutory applications. stock is issued. c. If a security is issued by a subsidiary of a bank or b. A stock purchase contract may be separated from a bank holding company, any guarantee of the principal security only if (1) the holder of the contract provides by that subsidiary's parent bank or bank holding sufficient collateral7 to the issuer, or to an independent company must be subordinate to the same degree as trustee for the benefit of the issuer, to assure perform- the security issued by the subsidiary and limited to ance under the contract and (2) the stock purchase repayment of the principal amount of the security at its contract requires the purchase of common or perpetu- final maturity. al preferred stock. d. The maximum amount of equity commitment notes Additional Criteria Applicable to Equity that may be counted as primary capital for a bank Commitment Notes holding company is limited to 10 per cent of primary capital exclusive of mandatory convertible securities. a. The indenture or note agreement must contain the Amounts outstanding in excess of the 10 per cent following two provisions: limitation may be counted as secondary capital provid- 1. The proceeds of the sale of common or perpetual ed they meet the requirements of secondary capital preferred stock will be the sole source of repayment instruments. for the notes, and the issuer must dedicate the proceeds for the purpose of repaying the notes. (Documentation certified by an authorized agent of Part 263—Rules of Practice for Hearings the issuer showing the amount of common or perpetual preferred stock issued, the dates of issue, and 3. 12. C.F.R. Part 263 is amended by adding a new amounts of such issues dedicated to the retirement Subpart D, including a section of the authority under or redemption of mandatory convertible securities which the Subpart is issued, to read as follows: will satisfy the dedication requirement.) 2. By the time that one-third of the life of the Part 263—Rules of Practice for Hearings securities has run, the issuer must have raised and dedicated an amount equal to one-third of the original principal of the securities. By the time that twothirds of the life of the securities has run, the issuer Subpart D—Procedures for Issuance and must have raised and dedicated an amount equal to Enforcement of Directives to Maintain Adequate two-thirds of the original principal of the securities. Capital At least 60 days prior to the maturity of the securities, the issuer must have raised and dedicated an Section 263.35 Authority, Purpose, and Scope amount equal to the entire original principal of the (a) Authority securities. Proceeds dedicated to redemption or (b) Purpose and scope retirement of the notes must come only from the sale Section 263.36 Definitions of common or perpetual preferred stock.8 Section 263.37 Establishment of Minimum Capital Levels Section 263.38 Procedures for Requiring Maintenance of Adequate Capital 7. Collateral is defined as: (1) cash or certificates of deposit; (2) (a) Submission of capital improve- U.S. government securities that will mature prior to or simultaneous with the maturity of the equity contract and that have a par or maturity ment plan value at least equal to the amount of the holder's obligation under the (b) Issuance of directive stock purchase contract; (3) standby letters of credit issued by an (1) Notice of intent to issue direcinsured U.S. bank that is not an affiliate of the issuer; or (4) other collateral as may be designated from time to time by the Federal tive Reserve. (2) Contents of notice 8. The funded portions of the securities will be deducted from primary capital to avoid double counting. (3) Response to notice Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 451 (4) Failure to file response (12 C.F.R. 225.2(b)) or any direct or indirect subsid- (5) Board consideration of re- iary thereof other than a bank subsidiary as defined in sponse section 2(c) of the BHC Act, 12 U.S.C. 1841(c), and in (6) Contents of directive the Board's Regulation Y (12 C.F.R. 225.2(a)). (7) Request for reconsideration of directive (b) "Capital Adequacy Guidelines" means those Section 263.39 Enforcement of Directive guidelines for bank holding companies and state mem- (a) Judicial and administrative reme- ber banks contained in Appendix A to the Board's dies Regulation Y (12 C.F.R. Part 225). (b) Other enforcement actions (c) Consideration in application pro- (c) "Directive" means a final order issued by the ceedings Board pursuant to ILSA (12 U.S.C. 3907(b)(2)) requir- Section 263.40 Establishment of Increased Capital ing a state member bank or bank holding company to Level for Individual Bank or Bank increase capital to or maintain capital at the minimum Holding Company level set forth in the Board's Capital Adequacy Guide- (a) Establishment of capital levels lines or as otherwise established under procedures for individual institution described in section 263.40 of this subpart. (b) Procedure to establish higher capital requirement (d) "State member bank" means any state-chartered (1) Notice bank that is a member of the Federal Reserve System. (2) Response (3) Board decision Section 263.37—Establishment of Minimum (4) Enforcement of higher capital Capital Levels level The Board has established minimum capital levels for state member banks and bank holding companies in its Subpart D—Procedures for Issuance and Capital Adequacy Guidelines. The Board may set Enforcement of Directives to Maintain higher capital levels as necessary and appropriate for a Adequate Capital particular state member bank or bank holding company based upon its financial condition, managerial Section 263.35—Authority, Purpose, and Scope resources, prospects, or similar factors, pursuant to the procedures set forth in section 263.40 of this (a) Authority. This subpart is issued under authority of subpart. the International Lending Supervision Act of 1983 ("ILSA"), 12 U.S.C. 3907, 3909; section 5(b) of the Section 263.38—Procedures for Requiring Bank Holding Company Act ("BHC Act"), 12 U.S.C. Maintenance of Adequate Capital 1844(b); the Financial Institutions Supervisory Act of 1966 ("FIS Act"), 12 U.S.C. 1818(b)-(n); and sections (a) Submission of capital improvement plan. Any state 9 and ll(i) of the Federal Reserve Act, 12 U.S.C. 248, member bank or bank holding company that may not 324, 329. be in compliance with the Board's Capital Adequacy Guidelines on the date that this regulation becomes (b) Purpose and scope. This subpart establishes proce- effective shall, within 90 days, submit to its appropridures under which the Board may issue a directive or ate Federal Reserve Bank for review a plan describing take other action to require a state member bank or a the means and the time schedule by which the bank or bank holding company to achieve and maintain ade- bank holding company shall achieve the required quate capital. The information collection requirement minimum level of capital. contained in this regulation has been approved by the Office of Managment and Budget under the provisions (b) Issuance of directive. of 44 U.S.C. Chapter 35 and has been assigned OMB (1) Notice of intent to issue directive. If a state No. 7100-0209. member bank or bank holding company is operating with less than the minimum level of capital estab- Section 263.36—Definitions lished in the Board's Capital Adequacy Guidelines, or as otherwise established under the procedures (a) "Bank holding company" means any company that described in section 263.40 of this subpart, the controls a bank as defined in section 2 of the BHC Act, Board may issue and serve upon such state member 12 U.S.C. 1841, and in the Board's Regulation Y bank or bank holding company written notice of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

452 Federal Reserve Bulletin • June 1985 Board's intent to issue a directive to require the (i) achieve or maintain the minimum capital rebank or bank holding company to achieve and quirement established pursuant to the Board's maintain adequate capital within a specified time Capital Adequacy Guidelines or the procedures in period. section 263.40 of this subpart by a certain date; (2) Contents of notice. The notice of intent to issue a (ii) adhere to a previously submitted plan or directive shall include: submit for approval and adhere to a plan for (i) the required minimum level of capital to be achieving the minimum capital requirement by a achieved or maintained by the institution; certain date; (ii) its current level of capital; (iii) take other specific action as the Board directs (iii) the proposed increase in capital needed to to achieve the minimum capital levels, including meet the minimum requirements; requiring a reduction of assets or asset growth or (iv) the proposed date or schedule for meeting restriction on the payment of dividends; or these minimum requirements; (iv) a combination of the above actions. (v) when deemed appropriate, specific details of a (7) Request for reconsideration of directive. Any proposed plan for meeting the minimum capital state member bank or bank holding company, upon requirements; and a change in circumstances, may request the Board (vi) the date for a written response by the bank or to reconsider the terms of a directive and may bank holding company to the proposed directive, propose changes in the plan under which it is which shall be at least 14 days from the date of operating to meet the required minimum capital issuance of the notice unless the Board deter- level. The directive and plan continue in effect while mines a shorter period is necessary because of the such request is pending before the Board. financial condition of the bank or bank holding company. (3) Response to notice. The bank or bank holding Section 263.39—Enforcement of Directive company may file a written response to the notice within the time period set by the Board. The re- (a) Judicial and administrative remedies. sponse may include: (1) Whenever a bank or bank holding company fails (i) an explanation why a directive should not be to follow a directive issued under this subpart, or to issued; submit or adhere to a capital adequacy plan as (ii) any proposed modification of the terms of the required by such directive, the Board may seek directive; enforcement of the directive, including the capital (iii) any relevant information, mitigating circum- adequacy plan, in the appropriate United States stances, documentation or other evidence in sup- district court, pursuant to section 908(b)(2)(B)(ii) of port of the institution's position regarding the ILSA (12 U.S.C. 3907(b)(2)(B)(ii) and to section 8(i) proposed directive; and of the Federal Deposit Insurance Act (12 U.S.C. (iv) the institution's plan for attaining the required 1818(i)), in the same manner and to the same extent level of capital. as if the directive were a final cease and desist order. (4) Failure to file response. Failure by the bank or (2) The Board, pursuant to section 910(d) of ILSA bank holding company to file a written response to (12 U.S.C. 3909(d)), may also assess civil money the notice of intent to issue a directive within the penalties for violation of the directive against any specified time period shall constitute a waiver of the bank or bank holding company and any officer, opportunity to respond and shall constitute consent director, employee, agent, or other person particito the issuance of such directive. pating in the conduct of the affairs of the bank or (5) Board consideration of response. After consider- bank holding company, in the same manner and to ing the response of the bank or bank holding compa- the same extent as if the directive were a final cease ny, the Board may: and desist order. (i) issue the directive as originally proposed or in modified form; (b) Other enforcement actions. A directive may be (ii) determine not to issue a directive and so notify issued separately, in conjunction with, or in addition the bank or bank holding company; or to any other enforcement actions available to the (iii) seek additional information or clarification of Board, including issuance of cease and desist orders, the response by the bank or bank holding compa- the approval or denial of applications or notices, or ny. any other actions authorized by law. (6) Contents of directive. Any directive issued by the Board may order the bank or bank holding (c) Consideration in application proceedings. In acting company to: upon any application or notice submitted to the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 453 pursuant to any statute administered by the Board, the constitute a waiver of the opportunity to respond Board may consider the progress of a state member and shall constitute consent to issuance of a direcbank or bank holding company or any subsidiary tive containing the required minimum capital level. thereof in adhering to any directive or capital adequa- (3) Board decision. After considering the response cy plan required by the Board pursuant to this subpart, of the institution, the Board may issue a written or by any other appropriate banking supervisory agen- directive to the bank or bank holding company cy pursuant to ILSA. The Board shall consider wheth- setting an appropriate capital level and the date on er approval or a notice of intent not to disapprove which this capital level will become effective. The would divert earnings, diminish capital, or otherwise Board may require the bank or bank holding compaimpede the bank or bank holding company in achiev- ny to submit and adhere to a plan for achieving such ing its required minimum capital level or complying higher capital level as the Board may set. with its capital adequacy plan. (4) Enforcement of higher capital level. The Board may enforce the capital level established pursuant to Section 263.40—Establishment of Increased the procedures described in this section and any Capital Level for Individual Bank or Bank plan submitted to achieve that capital level through Holding Company the procedures set forth in section 263.39 of this subpart. (a) Establishment of capital levels for individual institutions. The Board may establish a capital level higher than that specified in the Board's Capital Adequacy AMENDMENTS TO REGULATION AA Guidelines for an individual bank or bank holding company pursuant to: The Board is publishing a final rule amending Regula- (1) a written agreement or memorandum of under- tion AA (Unfair or Deceptive Acts or Practices) to standing between the Board or the appropriate Fed- implement, as to banks, the Credit Practices Rule eral Reserve Bank and the bank or bank holding adopted by the Federal Trade Commission. The Fedcompany; eral Trade Commission Act requires the Board to (2) a temporary or final cease and desist order issued adopt a rule, subject to certain exceptions, that is pursuant to section 8(b) or (c) of the FIS Act substantially similar to the Commission's rule. This (12 U.S.C. § 1818(b) or (c)); rule prohibits banks from entering into any consumer (3) a condition for approval of an application or credit obligation that contains certain prohibited proviissuance of a notice of intent not to disapprove a sions, from pyramiding late charges, or from obligating proposal; a cosigner without a required notice. The rule also (4) or other similar means; or prohibits the enforcement of any prohibited provisions (5) the procedures set forth in subsection (b) of this contained in a consumer credit obligation purchased section. by a bank. Effective January 1, 1986, the Board is amending (b) Procedure to establish higher capital requirement. Regulation AA, 12 C.F.R. Part 227, by redesignating (1) Notice. When the Board determines that capital the current provisions as Subpart A and adding a new levels above those in the Board's Capital Adequacy Subpart B, as follows: Guidelines may be necessary and appropriate for a particular bank or bank holding company under the Part 227—Unfair or Deceptive Acts or circumstances, the Board shall give the bank or Practices bank holding company notice of the proposed higher capital requirement and shall permit the bank or Subpart A—Consumer Complaints bank holding company an opportunity to comment upon the proposed capital level, whether it should be required and, if so, under what time schedule. The notice shall contain the Board's reasons for Subpart B—Credit Practices Rule proposing a higher level of capital. (2) Response. The bank or bank holding company Section 227.11 Authority, purpose, and scope shall be allowed at least 14 days to respond, unless Section 227.12 Definitions the Board determines that a shorter period is neces- Section 227.13 Unfair credit contract provisions sary because of the financial condition of the bank Section 227.14 Unfair or deceptive practices involvor bank holding company. Failure by the bank or ing cosigners bank holding company to file a written response to Section 227.15 Unfair late charges the notice within the time set by the Board shall Section 227.16 State exemptions Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

454 Federal Reserve Bulletin • June 1985 Authority: 15 U.S.C. 57a. (2) "Cosigner" includes any person whose signature is requested as a condition to granting credit to a Subpart A—Consumer Complaints consumer, or as a condition for forbearance on collection of a consumer's obligation that is in default. The term does not include a spouse whose signature is required on a credit obligation to perfect Subpart B—Credit Practices Rule a security interest pursuant to state law. (3) A person who meets the definition in this para- Section 227.11—Authority, Purpose, and Scope graph is a "cosigner," whether or not the person is designated as such on the credit obligation. (a) Authority. This subpart is issued by the Board under section 18(f) of the Federal Trade Commission (c) "Earnings" means compensation paid or payable Act, 15 U.S.C. 57a(f) (§ 202(a) of the Magnuson-Moss to an individual or for the individual's account for Warranty—Federal Trade Commission Improvement personal services rendered or to be rendered by the Act, Pub. L. 93-637). individual, whether denominated as wages, salary, commission, bonus, or otherwise, including periodic (b) Purpose. Unfair or deceptive acts or practices in or payments pursuant to a pension, retirement, or disabilaffecting commerce are unlawful under section 5(a)(1) ity program. of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1). This subpart defines unfair or deceptive acts (d) "Household goods" means clothing, furniture, or practices of banks in connection with extensions of appliances, linens, china, crockery, kitchenware, and credit to consumers. personal effects of the consumer and the consumer's dependents. The term "household goods" does not (c) Scope. This subpart applies to all banks and their include: subsidiaries, except savings banks that are members of (1) works of art; the Federal Home Loan Bank System. Compliance is (2) electronic entertainment equipment (other than to be enforced by: one television and one radio); (1) the Comptroller of the Currency, in the case of (3) items acquired as antiques; that is, items over national banks and banks operating under the code one hundred years of age, including such items that of laws for the District of Columbia; have been repaired or renovated without changing (2) the Board of Governors of the Federal Reserve their original form or character; and System, in the case of banks that are members of the (4) jewelry (other than wedding rings). Federal Reserve System (other than banks referred to in paragraph (c)(1) of this section); and (e) "Obligation" means an agreement between a con- (3) the Federal Deposit Insurance Corporation, in sumer and a creditor. the case of banks insured by the Federal Deposit Insurance Corporation (other than banks referred to (f) "Person" means an individual, corporation, or in paragraphs (c)(1) and (c)(2) of this section). other business organization. Section 227.12—Definitions Section 227.13—Unfair Credit Contract Provisions For the purposes of this subpart, the following definitions apply: It is an unfair act or practice for a bank to enter into a (a) "Consumer" means a natural person who seeks or consumer credit obligation that contains, or to enforce acquires goods, services, or money for personal, fam- in a consumer credit obligation purchased by the bank, ily, or household use other than for the purchase of any of the following provisions: real property. (a) Confession of judgment. A cognovit or confession of judgment (for purposes other than executory proc- (b)(1) "Cosigner" means a natural person who assumes ess in the State of Louisiana), warrant of attorney, or liability for the obligation of a consumer without other waiver of the right to notice and the opportunity receiving goods, services, or money in return for the to be heard in the event of suit or process thereon. obligation, or, in the case of an open-end credit obligation, without receiving the contractual right to (b) Waiver of exemption. An executory waiver or a obtain extensions of credit under the account. limitation of exemption from attachment, execution, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 455 or other process on real or personal property held, against the borrower, such as suing you, garnishing your owned by, or due to the consumer, unless the waiver wages, etc. If this debt is ever in default, that fact may become a part of your credit record. applies solely to property subject to a security interest This notice is not the contract that makes you liable for executed in connection with the obligation. the debt. (c) Assignment of wages. An assignment of wages or (2) In the case of open-end credit, the disclosure other earnings unless: statement shall be given to the cosigner prior to the (1) the assignment by its terms is revocable at the time that the cosigner becomes obligated for fees or will of the debtor; transactions on the account. (2) the assignment is a payroll deduction plan or (3) A bank that is in compliance with this paragraph preauthorized payment plan, commencing at the may not be held in violation of paragraph (a)(2) of time of the transaction, in which the consumer this section. authorizes a series of wage deductions as a method of making each payment; or (3) the assignment applies only to wages or other Section 227.15—Unfair Late Charges earnings already earned at the time of the assignment. (a) In connection with collecting a debt arising out of an extension of credit to a consumer, it is an unfair act (d) Security interest in household goods. A nonpossesor practice for a bank to levy or collect any deliquency sory security interest in household goods other than a charge on a payment, when the only delinquency is purchase money security interest. attributable to late fees or delinquency charges assessed on earlier installments, and the payment is otherwise a full payment for the applicable period and Section 227.14—Unfair or Deceptive Practices is paid on its due date or within an applicable grace Involving Cosigners period. (a) Prohibited practices. In connection with the exten- (b) For the purposes of this section, "collecting a sion of credit to consumers, it is: debt" means any activity, other than the use of judicial (1) a deceptive act or practice for a bank to misrepprocess, that is intended to bring about or does bring resent the nature or extent of cosigner liability to about repayment of all or part of money due (or alleged any person; and to be due) from a consumer. (2) an unfair act or practice for a bank to obligate a cosigner unless the cosigner is informed prior to Section 227.16—State Exemptions becoming obligated of the nature of the cosigner's liability. (a) General rule. (1) An appropriate state agency may apply to the (b) Disclosure requirement. Board for a determination that: (1) A clear and conspicuous disclosure statement (i) there is a state requirement or prohibition in shall be given in writing to the cosigner prior to effect that applies to any transaction to which a becoming obligated. The disclosure statement shall provision of this subpart applies; and be substantially similar to the following statement and shall either be a separate document or included (ii) the state requirement or prohibition affords a in the documents evidencing the consumer credit level of protection to consumers that is substanobligation. tially equivalent to, or greater than, the protection afforded by this subpart. Notice to Cosigner (2) If the Board makes such a determination, the provision of this subpart will not be in effect in that You are being asked to guarantee this debt. Think state to the extent specified by the Board in its carefully before you do. If the borrower doesn't pay the determination, for as long as the state administers debt, you will have to. Be sure you can afford to pay if and enforces the state requirement or prohibition you have to, and that you want to accept this responsibility. effectively. You may have to play up to the full amount of the debt if the borrower does not pay. You may also have to pay (b) Applications. The procedures under which a state late fees or collection costs, which increase this amount. agency may apply for an exemption under this section The bank can collect this debt from you without first trying to collect from the borrower. The bank can use the are the same as those set forth in Appendix B to same collection methods against you that can be used Regulation Z (12 C.F.R. Part 226). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

456 Federal Reserve Bulletin • June 1985 AMENDMENTS TO RULES REGARDING has applied for the Board's approval under section DELEGATION OF AUTHORITY 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to acquire the voting shares of Oxford Bank and Trust, Oxford, The Board of Governors is amending 12 C.F.R. Part Maine ("Bank"). 265, its Rules Regarding Delegation of Authority, to Notice of the application, affording an opportunity delegate to the Director of the Division of Banking for interested persons to submit comments, has been Supervision and Regulation, with the concurrence of given in accordance with section 3(b) of the Act. The the General Counsel, the authority under the Board's time for filing comments has expired, and the Board Procedures for Issuance and Enforcement of Direc- has considered the application and all comments retives to Maintain Adequate Capital, §§ 263.38 and ceived in light of the factors set forth in section 3(c) of 263.40 of Subpart D of the Board's Rules of Practice the Act (12 U.S.C. § 1842(c)). for Hearings, to issue notices that state member banks Applicant, with one banking subsidiary, is the secor bank holding companies have insufficent levels of ond largest banking organization in Vermont, with capital and that direct such banking organizations to consolidated assets of $510 million and total domestic file capital improvement plans. deposits of $431.8 million.1 Upon acquisition of Bank, Effective May 15, 1985, the Board hereby amends which has total assets of $31.4 million and total 12 C.F.R. 265.2 by adding paragraph (c)(33) to read as domestic deposits of $25.2 million,2 Applicant would follows: control the 15th largest banking organization in Maine and 0.7 percent of the total deposits in commercial Part 265—Rules Regarding Delegation of banks in the state.3 Authority Section 3(d) of the Act (12 U.S.C. § 1842(d)) prohibits the Board from approving any application by a bank Section 265.2—Specific Functions Delegated to holding company to acquire any bank located outside Board Employees and to Federal Reserve of the state in which operations of the bank holding Banks company's subsidiaries are principally conducted, unless such acquisition is "specifically authorized by the statute laws of the state in which such bank is located, by language to that effect and not merely by implica- (33) Under the Provisions of sections 263.38 and tion." 263.40 of the Board's Procedures for Issuance and Maine law expressly permits an out-of-state bank Enforcement of Directives to Maintain Adequate holding company to acquire a bank in Maine without Capital, Subpart D of the Board's Rules of Practice any restrictions as to the geographic location of the for Hearings (12 C.F.R. 263), and with the concur- out-of-state bank holding company or reciprocity rerence of the General Counsel, to issue a notice that a quirements.4 Accordingly, the Board has determined state member bank or bank holding company has that the proposed acquisition conforms with Maine insufficient capital and that directs said banking law and is expressly authorized by the statute laws of organization to file with its regional Reserve Bank a Maine. The Board has previously stated that statutes capital improvement plan. such as Maine's are fully consistent with the Douglas Amendment and provide a desirable means for creating a national market in banking services through state action and without unnecessary restrictions on com- ORDERS ISSUED UNDER BANK HOLDING merce in financial services across state lines.5 COMPANY ACT, BANK MERGER ACT, AND BANK Bank operates in two banking markets in Maine. It SERVICE CORPORATION ACT is the seventh largest of eight banking organizations in Orders Issued Under Section 3 of Bank Holding the Portland market, controlling 0.6 percent of total Company Act BankVermont Corporation Burlington, Vermont 1. Banking data are as of November 30, 1984. 2. Banking data are as of October 31, 1984. Order Approving the Acquisition of a Bank 3. Banking data are as of September 30, 1984. 4. Me. Rev. Stat. Ann. tit. 9-B, § 1013 (1984). Each proposal must comply, however, with the "net new funds" provision of the statute. BankVermont Corporation, Burlington, Vermont, a The Maine Superintendent of Banking has stated that consummation of this proposal will result in net new funds to the State. bank holding company within the meaning of the Bank 5. Bank of Boston Corporation, 70 FEDERAL RESERVE BULLETIN Holding Company Act of 1956, as amended ("Act"), 174 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 457 deposits in commercial banks in the market, and is the Based on the foregoing and other facts of record, the second largest of three banking organizations in the Board has determined that the application under sec- Paris-Norway market, controlling 37.5 percent of total tion 3(a)(3) should be and hereby is approved for the deposits in commercial banks in the market.6 Inas- reasons set forth above. The transaction shall not be much as the proposed acquisition represents Appli- consummated before the thirtieth calendar day followcant's initial entry into Maine, consummation of this ing the effective date of this Order or later than three transaction would not eliminate existing competition months after the effective date of this Order, unless in these markets. such period is extended by the Board or by the Federal Certain of Applicant's nonbanking subsidiaries pro- Reserve Bank of Boston, acting pursuant to delegated vide services, including investment advisory services, authority. to customers in the Portland banking market in which By order of the Board of Governors, effective Bank offers trust services. The trust services are April 1, 1985. limited in scope, however, and Bank's market share with respect to these services is small. Thus, the Voting for this action: Chairman Volcker and Governors Board concludes that the amount of existing competi- Wallich, Partee, Rice, Gramley, and Seger. Absent and not tion in these services that might be eliminated by this voting: Governor Martin. proposal is not significant. The Board has considered the effects of this propos- JAMES MCAFEE al on probable future competition in light of its pro- [SEAL] Associate Secretary of the Board posed guidelines for assessing the competitive effects of market extension mergers and acquisitions.7 After consideration of the specific facts of this case, includ- Intermountain Bankshares, Inc. ing the number of potential entrants into the relevant Charleston, West Virginia markets, the Board concludes that consummation of this proposal would not have any significant adverse Order Approving Acquisition of Bank effects on probable future competition in any relevant market. Intermountain Bankshares, Inc., Charleston, West The financial and managerial resources of Applicant Virginia, a bank holding company within the meaning and Bank are considered satisfactory and their pros- of the Bank Holding Company Act of 1956, as amendpects appear favorable. The Board has also deter- ed (the "Act") (12 U.S.C. § 1841 et seq.), has applied mined that considerations relating to the convenience for the Board's prior approval under section 3(a)(3) of and needs of the community to be served are consis- the Act (12 U.S.C. § 1842(a)(3)) to acquire 100 percent tent with approval of the application. Affiliation with of the voting shares of the successor by merger to the Applicant would enable Bank to expand the scope and Half Dollar Trust and Savings Bank, Wheeling, West array of its services. New investment and deposit Virginia ("Bank"). products are proposed for Bank's customers, as are Notice of the application, affording opportunity for expanded trust services. Bank would also be in a interested persons to submit comments, has been position to expand its commercial lending and second- given in accordance with section 3(b) of the Act. The ary mortgage lending services. Accordingly, it is the time for filing comments has expired and the Board Board's judgment that the proposed transaction would has considered the application and all comments rebe in the public interest and that the application should ceived in light of the factors set forth in section 3(c) of be approved. the Act (12 U.S.C. § 1842(c)). Applicant is the seventh largest banking organization in West Virginia, controlling one bank with total deposits of $196.6 million, representing approximately 1.8 percent of total deposits in commercial banks in 6. The Portland banking market is defined as the Portland Ranally Metro Area (RMA) and portions of the Counties of Cumberland and West Virginia.1 Bank is the fifty-second largest bank in York. The Paris-Norway banking market is approximated by the West Virginia, with total deposits of $53.5 million, towns of Albany, Buckfield, Greenwood, Norway, Paris, Oxford, representing approximately 0.6 percent of total depos- Stoneham, Sumner, Waterford, and Woodstock, all in Oxford County, Maine, as well as the town of Otisfield in Cumberland County, its in commercial banks in West Virginia. Upon con- Maine. 7. "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 (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. 1. Banking data are as of December 31, 1983. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

458 Federal Reserve Bulletin • June 1985 summation of this proposal, Applicant would control Midlantic Banks Inc. total deposits of $250.1 million and would be the fourth Edison, New Jersey largest commercial banking organization in West Virginia. Order Approving Merger of Bank Holding Applicant's bank subsidiary, Kanawha Banking and Companies Trust Company, N.A. ("KB&T"), is located in Charleston, West Virginia. Bank's two offices are Midlantic Banks Inc. ("Midlantic"), Edison, New located in the Wheeling, West Virginia market,2 ap- Jersey, a registered bank holding company within the proximately 160 miles north of KB&T. Bank is the meaning of the Bank Holding Company Act ("the ninth largest commercial banking organization in the BHC Act") (12 U.S.C. § 1841 et seq.), has applied for market, controlling approximately 5.6 percent of total the Board's approval under section 3(a)(5) of the Act deposits in commercial banks in the market. Consum- (12 U.S.C. § 1842(a)(5)), to acquire by merger Herimation of this proposal would not result in any signifi- tage Bancorporation ("Heritage"), Jamesburg, New cant adverse effects upon existing or potential compe- Jersey, a registered bank holding company by virtue of tition or increase in the concentration of banking its ownership of Heritage Bank, N.A., Jamesburg, resources in any relevant area. Accordingly, the Board New Jersey. concludes that competitive considerations are consis- Notice of the application, affording interested pertent with approval. sons an opportunity to submit comments, has been The financial and managerial resources of Applicant given in accordance with section 3 of the Act. The time and Bank are considered consistent with approval of for filing comments has expired, and the Board has this application. Consummation of this proposal will considered the application and all comments received strengthen management of Bank and will provide Bank in light of the factors set forth in section 3(c) of the with access to the greater financial and managerial Act. resources of Applicant. Applicant has proposed no Applicant controls seven banks and is the second new services for Bank upon acquisition. However, largest banking organization in New Jersey. Applicant there is no evidence in the record that the banking has total assets of $7.2 billion and controls total needs of the community to be served are not being domestic deposits of $5.2 billion, representing 13.9 met. Accordingly, considerations relating to the con- percent of the total deposits in commercial banks in venience and needs of the communities to be served the state.1 Heritage, which has approximately $2.0 are consistent with approval. billion in total assets, is the sixth largest commercial Based on the foregoing and other facts of record, the banking organization in New Jersey. Heritage oper- Board has determined that approval of the application ates one bank, Heritage Bank, N.A., which controls would be consistent with the public interest and that $1.5 billion in total deposits, representing 4.0 percent the application should be and hereby is approved. The of the total deposits in commercial banks in the state. transaction shall not be consummated before the thirtieth calendar day following the effective date of this Douglas Amendment Considerations Order, or later than three months after the effective date of this Order, unless such period is extended for Heritage Bank, N.A., is chartered in New Jersey and good cause by the Board or the Federal Reserve Bank its articles of incorporation specify that its principal of Richmond, acting pursuant to delegated authority. office shall be in New Jersey. Heritage Bank operates By order of the Board of Governors, effective 90 branches in New Jersey and one branch in Philadel- April 1, 1985. phia, Pennsylvania, and is one of only two national banks with branches in more than one state.2 The Voting for this action: Chairman Volcker and Governors Philadelphia branch of Heritage Bank accounts for less Wallich, Partee, Rice, Gramley, and Seger. Absent and not than two percent of the total deposits controlled by voting: Governor Martin. Heritage Bank. JAMES MCAFEE [SEAL] Associate Secretary of the Board 1. Asset and deposit data are as of December 31, 1984; bank market share data are as of December 31, 1983 ; market share data for thrift institutions are as of June 30, 1983. 2. Heritage Bank is expressly authorized by the McFadden Act to 2. The Wheeling markets consist of Ohio County, West Virginia, retain its branch in Philadelphia because it was established prior to the northern half of Marshall County, West Virginia and the eastern February 25, 1927. 12 U.S.C. § 36. C/., Seattle Trust & Savings Bank third of Belmont County, Ohio. The market is approximated by the v. Bank of California N.A., 492 F.2d 48 (9th Cir.), cert, denied, 419 Wheeling Ranally Metropolitan Area. U.S. 844 (1974). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 459 The Douglas Amendment to the BHC Act prohibits believe that consummation of the proposed transacthe Board from approving any application by a bank tion would have a significant adverse effect on the holding company to acquire "any additional bank concentration of banking resources in New Jersey. located outside of the State" in which the acquiring Subsidiary banks of Midlantic and Heritage compete bank holding company is located, unless the acquisi- in eleven markets in New Jersey: the Greater Newark, tion is specifically authorized by the state in which the Lakewood-Toms River, Paterson, Philadelphiabank to be acquired is located. For purposes of the Camden, Trenton, Yineland, Atlantic City, Cape May, Douglas Amendment, a bank holding company is Hackettstown, Morristown, and New Brunswick deemed to be located in the state in which the total banking markets. Based on all of the facts of record, deposits of its subsidiary banks were the largest on the including the number of remaining bank competitors later of July 1, 1966 or the date it became a bank and the number, size, and activities of thrift instituholding company. Applicant is located in New Jersey tions competing in the relevant markets,4 the Board for purposes of the Douglas Amendment. concludes that consummation of this proposal is not Based on all of the facts of record in this case, the likely to have significant adverse effects on competi- Board concludes that, for purposes of the Douglas tion in any relevant market. Amendment, Heritage Bank is located in New Jersey, where it is chartered and principally conducts its Atlantic City Banking Market banking operations. The Board believes that the acquisition of Heritage Bank by a New Jersey bank holding Midlantic is the third largest commercial banking company is consistent with the purposes of the Doug- organization in the Atlantic City banking market, las Amendment, provided the acquisition is not used controlling 15.6 percent of the total deposits in comto allow the acquiring bank holding company to ex- mercial banks in the market (hereafter "market depospand its operations outside of the state of its principal its").5 Heritage controls approximately 5.0 percent of operations in a manner inconsistent with the Douglas total market deposits and is the fourth largest commer- Amendment.3 In this regard, Applicant has advised cial banking organization in the market. The Atlantic the Board that it has no present plans to expand the City banking market is concentrated, with the four banking operations of Heritage Bank in the State of largest commercial banks in the market controlling Pennsylvania. Applicant has also committed that it 79.5 percent of total market deposits (hereafter, the will not expand in Pennsylvania by merger or acquisi- "four-firm concentration ratio"). The market's Hertion of banks without state authorization and has findahl-Hirschman Index ("HHI") is 2068. Upon conindicated it will request the Board to approve any summation of the proposal, Midlantic would remain branch office expansion in Pennsylvania should pre- the third largest banking organization in the market, sent circumstances change. controlling approximately 20.6 percent of total market Accordingly, under these circumstances and subject deposits. The market's four-firm concentration ratio to Applicant's commitments, the Board concludes that would increase to 83.2 percent, and the HHI would Heritage Bank is not "located outside" of New Jersey increase by 156 points to 2224.6 for purposes of the Douglas Amendment and that its Although consummation of the proposal would elimacquisition by Applicant—a New Jersey bank holding inate some existing competition in the Atlantic City company—is, therefore, permissible under the Doug- banking market, there are a number of factors that las Amendment. Competitive Considerations 4. The Board has previously determined that thrift institutions have become, or at least have the potential to become, major competitors of Upon consummation of the proposed transaction, commercial banks. NCNB Corporation, 70 FEDERAL RESERVE BUL- Midlantic would remain the second largest commercial LETIN 225 (1984); Sun Banks, Inc., 69 FEDERAL RESERVE BULLETIN banking organization in New Jersey, controlling ap- 934 (1983); First Tennessee National Corporation, 69 FEDERAL REproximately 17.9 percent of the total deposits in com- SERVE BULLETIN 298 (1983)). 5. The Atlantic City market is defined to include all of Atlantic mercial banking organizations in the state. The pro- County and adjacent portions of Burlington, Cape May, and Ocean posed acquisition would increase the share of deposits Counties in New Jersey. 6. Under the revised Department of Justice Merger Guidelines, a held by the four largest commercial banking organiza- market is considered "highly concentrated" if it has a post-acquisition tions in the state to 51.1 percent. The Board does not HHI greater than 1800. In such markets, the Department of Justice will decide on a case-by-case basis whether to challenge a merger that produces an increase in the HHI of between 50 and 100 points. If the increase in the HHI exceeds 100 and the HHI substantially exceeds 1800, only in extraordinary cases will the Department of Justice 3. See The Mitsubishi Bank, Ltd., 70 FEDERAL RESERVE BULLETIN determine that the facts indicate that the merger is not likely to 518 (1984). substantially lessen competition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

460 Federal Reserve Bulletin • June 1985 mitigate the anticompetitive effects of the proposal. controlling 17.3 percent of total market deposits.10 Ten commercial banks would continue to operate in Heritage ranks sixth in the market, and controls 4.9 the market after consummation of the proposal, in- percent of the total market deposits. The Hackettcluding two of the largest banking organizations in stown banking market is considered concentrated, New Jersey. In addition, twelve thrift institutions hold with a four-firm concentration ratio of 76.4 percent 45.1 percent of total deposits in commercial banking and an HHI of 1773. Upon consummation of the organizations and thrift institutions in the market. proposed acquisition, Midlantic would rank second in These thrift institutions offer a full range of consumer the market, controlling approximately 22.2 percent of banking services and make commercial real estate total market deposits, and the HHI would increase by loans. Five of the institutions engage in commercial 170 points to 1943. lending activities.7 The Board believes that the presence of thrift institutions in the market mitigates the anticompetitive Cape May Banking Market effects of the proposal.11 Nine thrift institutions control 41 percent of the total deposits in commercial Midlantic is the third largest of seven commercial banking organizations and thrift institutions in the banking organizations in the Cape May banking mar- market. All nine thrift institutions operating in the ket, controlling 23.9 percent of total market deposits.8 market offer a full range of consumer banking services Heritage is the smallest organization in the market, and make commercial real estate loans. Two thrift controlling 1.2 percent of total market deposits. The institutions in the market actively engage in commer- Cape May banking market is considered concentrated, cial lending activities. with a four-firm concentration ratio of 90.9 percent and an HHI of 2463. Upon consummation of the Morristown Banking Market proposed transaction, Midlantic would remain the third largest commercial banking organization in the Midlantic is the seventh largest of eleven commercial market, controlling approximately 25.1 percent of total banking organizations in the Morristown banking marmarket deposits, and the HHI would increase by 57 ket, controlling 7.2 percent of total market deposits.12 points to 2520. Heritage is the third largest commercial banking orga- The Board believes that the anticompetitive effects nization in the market with 14.2 percent of total market of this proposal are mitigated by the extent of competi- deposits. Upon consummation of the proposed acquition afforded by thrift institutions in the market. Seven sition, Midlantic would become the largest commercial thrift institutions control 39.4 percent of the total banking organization in the market, with 21.4 percent deposits in the Cape May market.9 The fourth and fifth of total market deposits. largest depository institutions in the market are thrift The Morristown banking market is not considered institutions and control 14 percent and 11.7 percent, highly concentrated, with a four-firm concentration respectively, of the total deposits in the Cape May ratio of 62.3 percent and an HHI of 1308. Upon market. Three thrift institutions in the market current- consummation of the proposal, the market would ly offer commercial checking accounts, and all thrifts remain only moderately concentrated with an HHI of in the Cape May market offer NOW accounts. The 1513. Moreover, nine commercial banking organiza- Board also notes that the commercial loan portfolios of tions would remain in the market. The Board notes commercial banks in the Cape May market resemble that 17 thrift institutions operate in the market and those of thrift institutions in that market. control 52.5 percent of the market's total deposits.13 All of the thrift institutions operating in this market Hackettstown Banking Market offer a full range of consumer services, including transaction accounts, and make commercial real estate Midlantic is the third largest of nine commercial banking organizations in the Hackettstown banking market, 10. The Hackettstown market is defined to include adjacent portions of Morris and Warren Counties in New Jersey. 11. If 50 percent of thrift deposits were included in the calculation of market concentration, upon consummation of the proposal, the 7. If 50 percent of thrift deposits were included in the calculation of market would be considered only moderately concentrated, with a market concentration, upon consummation of the proposal, the HHI four-firm concentration ratio of 60.3 percent. The HHI would increase would rise by 80 points, from 1223 to 1303, and the four-firm upon consummation of the proposal by 93 points from 1094 to 1187. concentration ratio would be 42.7 percent. 12. The Morristown market is defined to include adjacent portions 8. The Cape May market is defined to include Cape May County, of Morris and Somerset Counties in New Jersey. excluding Ocean City, in New Jersey. 13. If 50 percent of thrift deposits were included in the calculation 9. If 50 percent of the deposits held by thrift institutions were of market concentration, the market HHI would be 911 and would rise included in the calculation of market concentration, consummation of by 85 points to 996 upon consummation of the proposal. The four-firm the proposal would increase the HHI by 34 points to 1593, and the concentration ratio upon consummation of the proposal would be 54.8 four-firm concentration ratio would be 73.0 percent. percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 461 loans, and five thrift institutions engage in commercial Potential Competition lending activities. The Board has considered the effects of this proposal New Brunswick Banking Market on probable future competition in the six markets in which Midlantic or Heritage do not both compete.18 In Midlantic is the third largest commercial banking none of these markets would the proposed transaction organization in the New Brunswick banking market, require extensive analysis under the Board's proposed with 10.7 percent of total market deposits.14 Heritage guidelines.19 Five markets are not considered concenranks second in the market, with 13.2 percent of total trated under the guidelines, and in the sixth market market deposits. Upon acquisition of Heritage, Mid- there are numerous potential entrants. Accordingly, lantic would become the largest commercial banking the Board concludes that consummation of this proorganization in the market, with 23.9 percent of total posal is not likely to have any significant adverse market deposits. The New Brunswick banking market effects on probable future competition in any relevant is not highly concentrated, with a four-firm concentra- market. tion ratio of 52.2 percent and an HHI of 975. The Board notes that the New Brunswick banking Financial and Managerial Considerations market will remain relatively unconcentrated upon consummation of the proposal, with a four-firm con- In evaluating this application, the Board has considcentration level of 62.5 percent and an HHI of 1257. ered the financial and managerial resources of Appli- Moreover, 15 commercial banking organizations, in- cant and the effect on those resources of the proposed cluding eight of the ten largest banking organizations acquisition of Heritage. The Board has stated and in the state, will remain. The Board has also consid- continues to believe that capital adequacy is an espeered the presence in the market of 25 thrift institutions, cially important factor in the analysis of bank holding which include the three largest depository institutions company expansion proposals, particularly where sigin the market. Thrift institutions control 58.7 percent nificant acquisitions are proposed.20 of total deposits in commercial banks and thrift institu- In this case, the Board notes that Applicant's pritions in the market.15 mary capital ratio is above the minimum level for bank holding companies under the Board's capital adequacy Other Banking Markets guidelines. As a result of the proposed acquisition Applicant's primary capital ratio would decrease None of the remaining banking markets in which both somewhat, but would continue to be above the mini- Midlantic and Heritage compete are considered highly mum levels specified in both the Board's current21 and concentrated16 and the increase in concentration in proposed capital adequacy guidelines.22 In its assessthese markets as a result of the proposed transaction ment of Applicant's capital adequacy, the Board has would not be substantial.17 considered the fact that the proposed acquisition would increase the amount of goodwill as a percentage of Applicant's primary capital. However, Applicant's primary capital ratio, on a pro forma basis, would 14. The New Brunswick market is defined to include adjacent portions of Middlesex and Somerset Counties in New Jersey. remain above the minimum required under the Board's 15. If 50 percent of thrift deposits were included in the calculation current guidelines without any reliance on intangible of market concentration, the HHI would increase by 97 points from capital, and would meet the minimum capital required 530 to 627 upon consummation of the proposal, and the four-firm concentration ratio would become 40.3 percent. under the Board's proposed guidelines without any 16. These markets are: the Greater Newark, Lakewood-Toms reliance on goodwill and without undue reliance on River, Paterson, Philadelphia-Camden, Trenton, and Vineland banking markets. other types of intangible capital. 17. The combined market share of Midlantic and Heritage in each of these markets represents less than 20 percent of total market deposits and numerous other competitors would remain in each 18. These markets are: Asbury Park, Freehold, Newton, Flemingmarket. ton, and Plainfield, New Jersey, and Wilmington, Delaware. In considering the effect of the proposal on competition in the 19. "Policy Statement of the Board of Governors of the Federal Lakewood-Toms River banking market, the Board took into account a Reserve System for Assessing Competitive Factors Under the Bank noncontrolling investment made by Midlantic in Statewide Bancorp. Merger Act and the Bank Holding Company Act" (47 Federal 70 FEDERAL RESERVE BULLETIN 776 (1984). In light of all of the facts Register 19,017 (1982)). Although the proposed policy statement has and circumstances surrounding the investment by Midlantic in State- not been approved by the Board, the Board is using the policy wide Bancorp, including the commitments made by Midlantic to guidelines as part of its analysis of the effect of the proposal on insure that Midlantic would not exercise control over Statewide, the probable future competition. fact that Statewide is under the control of its management and others, 20. See, e.g., The Chase Manhattan Corporation, 70 FEDERAL and the absence of director interlocks between Midlantic and State- RESERVE BULLETIN 529 (1984); NCNB Corporation, 70 FEDERAL wide, the Board concludes that Midlantic does not control Statewide RESERVE BULLETIN 225 (1984). Bancorp and that consummation of this proposal would not otherwise 21. Capital Adequacy Guidelines, 12 C.F.R. Part 225, Appendix A. substantially lessen competition in the Lakewood-Toms River market. 22. Proposed Minimum Capital Guidelines for Bank Holding Com- See Sun Banks, Inc., 71 FEDERAL RESERVE BULLETIN 243 (1985). panies, 49 Federal Register 30,317 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

462 Federal Reserve Bulletin • June 1985 In addition, Applicant has indicated that, within 12 associations insured by the Ohio Deposit Guarantee months, under Applicant's current operating plans, its Fund ("ODGF"). Upon consummation of the proprimary capital ratio, taking into account the proposed posed acquisition, Applicant will engage through Menacquisition of Heritage and exclusive of intangibles, tor and Federated in the activity of operating savings will be above the minimum primary capital ratio under and loan associations in Ohio. Although the Board has the Board's proposed capital adequacy guidelines. not added the operation of a thrift institution to the list Based on these facts, and in view of Applicant's and of activities specified in section 225.25(b) of Regula- Heritage's satisfactory financial and managerial re- tion Y as generally permissible for bank holding comsources and future prospects, the Board believes that panies, the Board has determined in several individual banking factors are consistent with approval. Consid- cases that the operation of a thrift institution is closely erations relating to the convenience and needs of the related to banking.1 communities to be served are also consistent with As a result of amendments to the BHC Act conapproval of the application. Accordingly, the Board tained in the Garn-St Germain Depository Institutions finds that the proposed acquisition would be in the Act of 1982, section 4(c)(8) of the BHC Act provides public interest. that the Board may dispense with the notice and Based on all the facts of record and the commit- hearing requirements of section 4(c)(8) with regard to ments made by Applicant and subject to the conditions the acquisition of a thrift institution if the Board finds explained above, the Board has determined that the that an emergency exists that requires immediate application under section 3 of the Act should be, and action and the primary federal regulator of the instituhereby is, approved. The acquisition shall not be made tion concurs in this finding. (12 U.S.C. § 1843(c)(8); before the thirtieth calendar day following the date of 12 C.F.R. § 225.23(i)). Mentor and Federated are this Order, or later than three months after the date of thrift institutions as that term is defined in section 2(i) this Order, unless such period is extended for good of the BHC Act, and Mentor and Federated do not cause by the Board or by the Federal Reserve Bank of have federal regulators. New York, pursuant to delegated authority. By letters dated April 9, 1985, the Ohio Superinten- By order of the Board of Governors, effective dent of Savings and Loan Associations ("Superinten- April 1, 1985. dent") requested that the Board act expeditiously on these applications in light of the recent events in Ohio Voting for this action: Chairman Volcker and Governors and the financial condition of Federated and Mentor. Wallich, Partee, Rice, Gramley, and Seger. Absent and not In this regard, the Board notes that a number of Ohio voting: Governor Martin. savings and loan associations that are members of the ODGF, including Mentor and Federated, experienced JAMES MCAFEE substantial deposit withdrawals after the announce- [SEAL] Associate Secretary of the Board ment of the closing of Home State Savings Bank. On March 15, 1985, the Governor of Ohio declared an emergency bank holiday closing all Ohio savings and Orders Issued Under Section 4 of Bank Holding loan associations insured by the ODGF, immobilizing Company Act the funds of over 500,000 depositors in institutions with assets in excess of $5.4 billion. The Ohio legisla- The Chase Manhattan Corporation ture passed emergency legislation on March 19, 1985, New York, New York providing that the closed Ohio savings and loan associations could reopen only for the purpose of permitting limited withdrawals and other depositor transactions, Order Approving Acquisition of Stock Savings and unless they obtained FSLIC or FDIC deposit insur- Loan Associations ance, or the Superintendent has determined that they The Chase Manhattan Corporation, New York, New York, a bank holding company within the meaning of the Bank Holding Company Act (the "BHC Act"), has applied for the Board's approval under section 1. F.N.B. Corporation, 71 FEDERAL RESERVE BULLETIN 340 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)), and (1985); American Fletcher Corp., 60 FEDERAL RESERVE BULLETIN section 225.25(b)(1) of the Board's Regulation Y 868 (1974); D.H. Baldwin &Co., 63 FEDERAL RESERVE BULLETIN 280 (1977); Interstate Financial Corp., 68 FEDERAL RESERVE BULLETIN (12 C.F.R. § 225.25(b)(1)), to acquire all of the shares 316 (1982); Citicorp, 68 FEDERAL RESERVE BULLETIN 656 (1982); Old of Mentor Savings Bank, Mentor, Ohio ("Mentor"), Stone Corporation, 69 FEDERAL RESERVE BULLETIN 812 (1983). A and of Federated Savings Bank, Cincinnati, Ohio Board staff study of thrift institutions supports the view that operating a thrift institution is closely related to banking. Bank Holding Compa- ("Federated"), two state-chartered savings and loan ny Acquisitions of Thrift Institutions (September, 1981). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 463 could qualify for federal deposit insurance, or other- nounced its acceptance of the applications in press wise finds that the interests of depositors will not be statements released by the Board in Washington, jeopardized by the reopening.2 To date, 48 previously D.C., and by the Federal Reserve Banks of New York closed Ohio savings and loan associations have been and Cleveland. These publications and announcereopened on a full service basis, and 20 institutions ments provided interested persons until April 17, 1985, remain closed except for the purpose of accepting to comment on the applications. The Board has deterdeposits and permitting limited withdrawals. mined that no further action is necessary to authorize Federated has not been authorized by the Ohio the Board to dispense with opportunity for hearing. Superintendent to reopen except for the purpose of In response to its request for comment on these permitting limited withdrawals by its depositors. The applications, the Board received nine written com- Ohio Superintendent permitted Mentor to reopen on a ments, each of which argued that expeditious action full service basis only after determining that Mentor by the Board is not required in these cases and would should qualify for FSLIC insurance as a result of a frustrate the attempts of Ohio institutions to bid for $4.0 million deposit provided by Applicant to Mentor. Mentor, Federated and similar Ohio thrift institutions. Applicant's deposit, which was essential to Men- They also suggest as evidence of an absence of a need tor's reopening, may be withdrawn after 60 days if for early action by the Board, that Applicant has Applicant is not permitted to acquire Mentor. The offered to pay a price for Mentor stock well in excess Board has been informed by the Superintendent that of book value. Several Protestants have also argued Mentor would not be permitted to remain open if that the Board should deny these applications be- Applicant's deposit is withdrawn. Mentor has not yet cause, the Protestants allege, the acquisition of an qualified for FSLIC insurance and has experienced Ohio savings and loan association by an out-of-state deposit withdrawals since its reopening on April 5, bank holding company is not consistent with the 1985. purpose or procedures established by section 123 of In the event that Mentor and Federated are required the Garn-St Germain Depository Institutions Act of to write-off their investment in the ODGF, the net 1982 where a viable and bona fide offer to acquire the worth of both Mentor and Federated would be below institution has been made by an Ohio bank holding the levels required by all federal and state regulatory company. One Protestant has requested that the Board authorities and would not be sufficient to allow the hold a formal hearing regarding the condition of Meninstitutions to operate independently on a full service tor and the circumstances and procedures involved in basis. Consummation of Applicant's proposal involves the negotiations by Applicant to acquire Mentor. continuing financial support of Mentor and Federated The Board has carefully considered these comwhich should stabilize these institutions by eliminating ments, the applications, and all of the facts of record in uncertainty concerning their future ability to serve the the light of the factors set forth in section 4(c)(8) of the needs of their communities. Moreover, the Superin- Act. In the preceding pages of this Order, the Board tendent has indicated that Applicant's acquisition of has carefully examined the circumstances that have Federated and Mentor is part of an overall effort to given rise to the Superintendent's request for emerrestore full public confidence in the former ODGF gency action and the serious and uncertain conditions thrift institutions. that still exist for the former ODGF thrifts in Ohio. In view of these and the other facts of record, the The Board has also considered the financial situations Board believes that an emergency exists that requires of Mentor and Federated and the need to improve and expeditious action to assure restoration of Mentor and stabilize the condition of the former and place the Federated to permanent full-service operations as latter in a position where it may reopen for business. soon as possible and to contribute to the process of These factors were evaluated in the context of the achieving a resolution to the problems faced by former contribution that such stabilization and reopening ODGF institutions generally. Accordingly, the Board would make toward resolving the overall problems of has determined that it is appropriate in these cases to ODGF institutions generally and restoring public conshorten the period for interested persons to submit fidence. Based on these considerations, evaluated in comments regarding these applications. In this regard, the light of the comments of Protestants, the Board the Board promptly published notice of the application believes that emergency action is required and that a in the Federal Register and in newspapers of general hearing would be inappropriate and inconsistent with circulation in Cincinnati and in Cleveland, and an- the need to take immediate action. The Board, in particular, has considered the contentions made regarding the manner in which the bidding process for Mentor and Federated was conducted. In 2. Ohio Am. Sub. S.B. No. 119 § 8 (March 19, 1985). this regard, the Board was informed that the Governor Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

464 Federal Reserve Bulletin • June 1985 of Ohio and his representatives have met several times As noted above, this application has been filed with a number of Ohio banking organizations, includ- under section 4(c)(8) of the BHC Act as a nonbanking ing at general meetings on March 15 and 16, for the activity. The BHC Act defines a "bank" as an institupurpose of determining the role that Ohio banking tion that accepts deposits that the depositor has a legal organizations could play in resolving the problems right to withdraw on demand and that is engaged in the faced by privately insured Ohio savings and loan business of making commercial loans. (12 U.S.C. associations and inviting interested Ohio institutions § 1841(c)). to submit bids to acquire these savings and loan Both Mentor and Federated are, and will continue to associations. Indeed, several of the Protestants made be after the proposed acquisition, "thrift institutions" inquiries into, and conducted negotiations directed as that term is defined in section 2(i) of the BHC Act. toward, acquiring Mentor. (12 U.S.C. § 1841(i)). Applicant has committed that With respect to Protestants' suggestion that the prior to obtaining FSLIC insurance, neither Mentor Superintendent's approval of Applicant's proposal is nor Federated will make commercial loans, and subseinconsistent with the intention of the provisions of the quent to obtaining such insurance, Mentor and Feder- Garn-St Germain Act, the Board notes that the provi- ated will exercise only those powers permitted to sions of the Act establishing a priority for the accep- federally chartered savings and loan associations. tance of bids for failing savings and loan associations Thus, the acquisition of Mentor and Federated qualiapply only to institutions that are insured by the fies as a nonbanking acquisition, and after they have FSLIC. These provisions were intended to assure that obtained FSLIC insurance, Mentor and Federated the federal regulatory authorities conducted the bid- may be retained by Applicant as nonbanking instituding process for failing federally insured thrift institu- tions under the provisions of the Garn-St Germain tions in a manner that preserved, to the extent possi- Act, which provide that any institution that is insured ble, the interest of the states in securing an in-state by FSLIC is exempt from the definition of bank in the purchaser. The Garn-St Germain Act does not by its BHC Act. Thus, the Board concludes that this applicaterms, and was not intended to, require state authori- tion may properly be considered under section 4 of the ties to follow the order of bidding priorities established Act as a nonbanking application. for federal regulators by that Act when the States Applicant, with total assets of $86.9 billion, controls attempt to find a purchaser for a privately insured state three bank subsidiaries, including The Chase Manhatthrift institution, particularly where the state deter- tan Bank, N.A., New York, New York, and is the mines that the interest of the state is best served by a second largest commercial banking organization in different procedure. New York State. Applicant also operates in Ohio a In this regard, the Board notes that the State of Ohio commercial finance subsidiary, Chase Commercial has consulted with in-state bidders and that the deter- Corporation, and an economic forecasting and data mination whether the proposed affiliation of a closed processing subsidiary, Chase Econometrics/Inter Ac- Ohio savings and loan association with another institu- tive Data Corporation. Mentor, a stock savings and tion justifies reopening the thrift institution is a matter loan association, controls $107.4 million in assets and committed by Ohio law to the jurisdiction of the Ohio operates in the Cleveland, Ohio banking market. Fed- Superintendent of Savings and Loan Associations, and erated, which operates in the Cincinnati, Ohio banking he has exercised this jurisdiction in accordance with market, is also a stock savings and loan association, the terms of Ohio law with regard to Applicant's and controls $53.2 million in assets. (All financial data affiliation with Mentor and Federated. The BHC Act are as of December 31, 1984.) assigns to the Board the responsibility under section In view of the fact that Applicant's bank subsidiar- 4(c)(8) of the Act for evaluating the public benefits and ies, Mentor and Federated, operate in separate bankadverse effects of the application actually before the ing markets and there is no significant amount of direct Board. The Board's determination under section competition between them, consummation of the pro- 4(c)(8) of the Act does not prevent competing bank posed acquisition would not have a significant effect holding companies from continuing to bid to acquire on existing competition in any relevant market. Simithat institution or prejudice the Board's ability to larly, there is no significant competition between eiapprove similar applications by those competing bank ther Mentor or Federated and the nonbanking subsidholding companies.3 iaries of Applicant, and consummation of the proposal would not have a significant effect on competition in any nonbanking activities in any relevant market. In 3. See Comerica Incorporated, 69 FEDERAL RESERVE BULLETIN view of the relatively small size of both Mentor and 911 (1983); NBD Bancorp Inc., 69 FEDERAL RESERVE BULLETIN 917 Federated, and the number of potential entrants into (1983) (both orders approving applications to acquire Pontiac State their respective markets, the Board finds that this Bank, Pontiac, Michigan). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 465 acquisition would not have any significant adverse The Board has reexamined, in the context of these effect on potential competition. Indeed, the proposed applications, the adverse factors cited in the Board's acquisition would have a substantial beneficial effect 1977 D.H. Baldwin decision, including regulatory conon competition by ensuring the continued operation of flict, erosion of institutional rivalry, and the potential Mentor and Federated as effective competitors. for undermining interstate banking prohibitions. The Section 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)) Board has also considered the adverse factors that authorizes a bank holding company to acquire a non- might be associated with this particular application,5 bank company where the activities of the nonbank including the potential for unfair competition, conflicts company are determined by the Board to be "so of interests, financial risks, diversion of funds, and closely related to banking or managing or controlling participation in impermissible activities. banks as to be a proper incident thereto." The Act In view of the unique circumstances that led to the provides that the Board may make such determina- closing of Mentor, Federated and other privately intions by order or by regulation. As earlier stated, the sured institutions by the Governor of Ohio, the emer- Board has determined previously that the operation of gency legislation recently enacted by the Ohio legislaa thrift institution is closely related to banking, and ture to remedy the problems faced by these reaffirms that determination in this Order. institutions and their depositors,6 the need for a With respect to the "proper incident" requirement, prompt solution in this case, and the other considersection 4(c)(8) of the Act requires the Board to consid- ations detailed in this Order, the Board has determined er whether the performance of the activity by an that there are substantial benefits to the public associaffiliate of a holding company "can reasonably be ated with preserving Mentor and Federated as thrift expected to produce benefits to the public, such as competitors in their respective markets that are suffigreater convenience, increased competition, or gains cient to outweigh the generalized adverse effects found in efficiency that outweigh possible adverse effects, by the Board in the D.H. Baldwin case. such as undue concentration of resources, decreased The Board believes that Applicant's acquisition of or unfair competition, conflicts of interests, or un- Mentor and Federated will result in substantial and sound banking practices." compelling public benefits by providing Mentor and In 1977, the Board considered the question whether Federated with sufficient new capital funds to enable savings and loan association ("S&L") activities are a them to continue their operations and to remain effecproper incident to banking. At that time, the Board tive competitors, thus ensuring the continuation of determined that, as a general matter, S&L activities services by Mentor and Federated to their customers were not a proper incident to banking because the and protecting the interests of their depositors. The potential adverse effects of allowing affiliations of record establishes that Applicant has the financial and banks and S&Ls were then sufficiently strong to managerial resources and commitment to serving the outweigh any public benefits that might result in convenience and needs of the public to achieve this individual cases. (D.H. Baldwin & Co., 63 FEDERAL result. While the Board would normally consider as an RESERVE BULLETIN 280 (1977)). adverse factor any significant dilution of capital or Because of the considerations elaborated in D.H. increase in leverage by a bank holding company in Baldwin & Co., the Board has not been prepared to connection with a proposed acquisition, the Board permit bank holding companies to acquire thrift insti- notes that the proposed acquisitions have a de minimis tutions on a general basis. However, the Board has impact on the capital and leverage positions of Appliconsistently regarded the BHC Act as authorizing the cant. Board to permit such an acquisition, and the Board has The affiliation of Applicant and Mentor and Federatapproved several such proposals involving failing ed is not likely to result in unfair competition. To thrift institutions on the basis that any adverse effects guard against possible adverse effects of affiliation in of bank/thrift affiliations would be overcome by the this case between a banking organization and a savings public benefits of preserving the failing thrift institution.4 In addition, Congress has recognized the need to allow bank holding companies to acquire failing federally insured thrift institutions in the Garn-St Germain Act. 5. As stated above, the Board has examined the competitive effects associated with these particular applications and has concluded that there are no significant adverse effects associated with the proposed 4. See, e.g., Interstate Financial Corp., supra; Citicorp, supra; Old acquisition. Stone Corporation, supra. 6. Ohio Am. Sub. S.B. No. 119 § 8 (March 19, 1985). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

466 Federal Reserve Bulletin • June 1985 and loan association, including the potential for unfair Mentor and Federated as independent of Applicant competition and diversion of funds, the Board has and to prevent the improper diversion of funds, relied on the following commitments offered by Appli- there shall be no transactions between either Mentor cant: or Federated and Applicant or any of its subsidiaries 1. Applicant will operate Mentor and Federated as without the prior approval of the Federal Reserve savings and loan associations having as their pri- Bank of New York. This limitation encompasses the mary purpose the provision of residential housing transfer, purchase, sale or loan of any assets or credit. Mentor and Federated will limit their activi- liabilities, but does not include infusions of capital ties to those currently permitted to federal savings from Applicant, the payment of dividends by Menand loan associations under the Home Owners' tor or Federated to Applicant, or the sale of residen- Loan Act, but shall not engage in any activity tial real estate loans from Mentor or Federated to prohibited to bank holding companies and their any subsidiary of Applicant. subsidiaries under section 4(c)(8) of the Bank Hold- 8. Applicant will cooperate with Mentor and Federing Company Act. ated in applying for and obtaining FSLIC insurance. 2. Neither Mentor nor Federated will establish or operate a remote service unit at any location outside The Board concludes that consummation of the Ohio. proposal, subject to the commitments set out above, 3. Neither Mentor nor Federated will establish or may reasonably be expected not to result in conflicts operate branches at locations not permissible for of interests, unsound banking practices, undue connational or state banks located in Ohio.7 centration of resources, or other adverse effects. 4. Mentor and Federated will be operated as sepa- Based upon the foregoing and other facts and cirrate, independent, profit-oriented corporate entities cumstances reflected in the record, the Board has and shall not be operated in tandem with any other determined that the acquisition of Mentor and Federsubsidiary of Applicant, except that Applicant may ated by Applicant would result in substantial and merge Mentor and Federated together and operate compelling public benefits that are sufficient to outthe successor in accordance with this commitment. weigh any adverse effects that may reasonably be Applicant, Mentor, and Federated will limit their expected to result from this proposal, including any operations to effect this condition, and will observe potential adverse effects of the affiliation of a commerthe following conditions: cial banking organization with a thrift institution. a. No banking or other subsidiary of Applicant Accordingly, these applications are approved, subject will link its deposit-taking activities to accounts at to the commitments described in this Order and the Mentor or Federated in a sweeping arrangement record of this application. or similar arrangement. The Board's decision is further subject to the condib. Neither Applicant nor any of its subsidiaries tions set forth in Regulation Y, including sections will solicit deposits or loans for Mentor or Feder- 225.4(d) and 225.23(b), and to the Board's authority to ated, nor shall either Mentor or Federated solicit require such modification or termination of the activideposits or loans for any other subsidiary of ties of a holding company or any of its subsidiaries as Applicant. the Board finds necessary to assure compliance with, 5. Applicant will not change the name of Mentor or or to prevent evasion of, the provisions and purposes Federated in any manner that might confuse the of the Act and the Board's regulations and orders public regarding the status of these institutions or issued thereunder. The acquisitions shall be made not their successor by merger as a nonbank thrift institu- later than three months after the effective date of this tion. Order, unless that period is extended for good cause 6. Neither Mentor nor Federated will convert its by the Board or by the Federal Reserve Bank of New charter to that of a national or state commercial York pursuant to authority hereby delegated. bank without the Board's prior approval. By order of the Board of Governors, effective 7. To the extent necessary to insure the operation of April 19, 1985. Voting for this action: Chairman Volcker and Governors Martin, Wallich, Partee, Rice, and Gramley. Absent and not voting: Governor Seger. 7. The Federal Reserve Bank of New York is hereby delegated authority to act on applications by Applicant to open additional offices JAMES MCAFEE of Mentor or Federated under section 225.25(b)(1) of Regulation Y. (12 C.F.R. § 225.25(b)(1)). [SEAL] Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 467 First Interstate Bancorp The Board has previously determined that "buying Los Angeles, California and selling gold and silver bullion and silver coin . . . are activities closely related to banking or managing or Order Approving Application to Purchase and Sell controlling banks." Standard and Chartered Banking Precious Metals for the Account of Customers Group Ltd., 38 Federal Register 27,552 (1973). The proposed activities of FIDB are essentially First Interstate Bancorp, Los Angeles, California, a identical to those activities previously approved by the bank holding company within the meaning of the Bank Board. In addition, banks have traditionally engaged Holding Company Act, 12 U.S.C. § 1841 et seq. in the purchase and sale of gold and silver bullion.3 ("BHC Act"), has applied pursuant to section 4(c)(8) Thus, the Board concludes that Applicant's proposal of the BHC Act and section 225.21(a) of the Board's to engage in the purchase and sale of precious metals Regulation Y, 12 C.F.R. § 225.21(a), to engage for the account of customers is closely related to de novo through its wholly owned subsidiary, First banking. Interstate Discount Brokerage ("FIDB"), Los Ange- In order to approve this application, the Board is les, California, in the purchase and sale of precious also required to determine that the performance of the metals for the account of its customers. proposed activities by Applicant "can reasonably be Notice of the application, affording interested per- expected to produce benefits to the public . . . that sons an opportunity to submit comments on the rela- outweigh possible adverse effects . . . ." (12 U.S.C. tion of the proposed activity to banking and on the § 1843(c)(8)). Consummation of Applicant's proposal balance of the public interest factors regarding the will result in increased convenience resulting from the application, has been duly published, 50 Federal Reg- offering of additional services to customers. In addiister 3976 (1985). The time for filing comments and tion, the Board expects that the entry of Applicant into views has expired and the Board has considered the the market for these services will increase the level of application in light of the public interest factors set competition among providers of these services. Acforth in section 4(c)(8) of the BHC Act. cordingly, the Board concludes that the performance FIDB proposes to engage in the purchase and sale of of the proposed activities by Applicant can reasonably silver and gold bullion and coins for the account of be expected to produce benefits to the public. customers. FIDB will not engage in the purchase and The Board has also considered the potential for sale of platinum and palladium,' nor will it deal in gold adverse effects that may be associated with this proor silver for its own account. In addition, Applicant posal. There is no evidence in the record that consumdoes not propose to extend credit, and does not mation of the proposed transactions would result in propose to offer investment advice to customers in any adverse effects such as decreased competition, connection with the proposed services. undue concentration of resources, unfair competition, Applicant is a multi-bank holding company with 22 conflicts of interest, or unsound banking practices. subsidiary banks holding total domestic deposits of Based upon a consideration of all the relevant facts, approximately $29.8 billion.2 Applicant's lead bank, the Board concludes that the balance of the public First Interstate Bank of California, is the fourth largest interest factors that the Board is required to consider banking organization in California with total domestic under section 4(c)(8) is favorable. Accordingly, the deposits of approximately $12.7 billion, representing application is hereby approved. 7.2 percent of the total deposits in commercial banks This determination is subject to all of the conditions in the state. Applicant is also engaged, directly and set forth in the Board's Regulation Y, including those through certain of its subsidiaries, in a broad range of in section 225.4(d) and 225.23(b), and to the Board's permissible nonbanking activities throughout the Unit- authority to require such modification or termination ed States. FIDB is a discount broker that engages in of the activities of a bank holding company or any of securities brokerage activities permissible for bank its subsidiaries as the Board finds necessary to assure holding companies under section 225.25(b)(15) of the compliance with the provisions and purposes of the Board's Regulation Y, 12 C.F.R. § 225.25(b)(15). Act and the Board's regulations and orders issued thereunder, or to prevent evasion thereof. The transaction shall be consummated not later than three months after the effective date of this Order, unless such period is extended for good cause by the 1. In Standard and Chartered Banking Group Ltd., 38 Federal Register 27,552 (1973), the Board found that the activities of dealing in platinum and palladium were not authorized for national banks, and were not closely related to banking. 2. As of June 30, 1984. 3. E.g., 12 U.S.C. § 24(7). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

468 Federal Reserve Bulletin • June 1985 Board or by the Federal Reserve Bank of San Francis- Company, El Dorado, Arkansas ("Exchange Bank"), co pursuant to delegated authority. with deposits of $67.9 million. Both banks operate in By order of the Board of Governors, effective the Union County banking market, which is coexten- April 8, 1985. sive with Union County, Arkansas. Of the six banks in the market, Commerce Bank is the second largest and Voting for this action: Vice Chairman Martin and Gover- Exchange Bank is the third largest. Commerce Bank nors Wallich, Partee, Rice, and Seger. Absent and not voting: holds 22.3 percent of the total deposits in commercial Chairman Volcker and Governor Gramley. banks in the market; Exchange Bank holds 17.4 percent. JAMES MCAFEE Under Applicants' proposal, Consolidated would [SEAL] Associate Secretary of the Board lease data processing equipment from Applicants and, for a fee, would provide data processing services to Applicants and their subsidiaries. If Consolidated has NBC Bank Corp excess computer capacity, it may also provide such El Dorado, Arkansas services to other local businesses. NBC and Exchange would each name two of Consolidated's five directors. Exchange Bancshares, Inc. The fifth director would be a data processing profes- El Dorado, Arkansas sional who would not be affiliated with either Applicant. Order Approving Application to Engage in Data In considering this application, the Board must Processing Activities Through a Joint Venture determine whether the proposed joint venture can reasonably be expected to produce benefits to the NBC Bank Corp, El Dorado, Arkansas ("NBC"), and public that outweigh the possible adverse affects. Exchange Bancshares, Inc., El Dorado, Arkansas 12 U.S.C. § 1843(c)(8). The Board has repeatedly ex- ("Exchange") (together "Applicants"), bank holding pressed its concern that joint ventures not lead to a companies within the meaning of the Bank Holding matrix of relationships between the co-venturers that, Company Act ("Act") (12 U.S.C. §§ 1841-1849), as relevant here, could lessen competition between the have applied for the Board's approval under section co-venturers, create conflicts of interest, and impair or 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)) and section give the appearance of impairing the ability of a 225.21(a) of the Board's Regulation Y (12 C.F.R. banking organization to function effectively as an § 225.21(a)), for each to acquire 50 percent of the independent and impartial provider of credit.2 The voting shares of Consolidated Data Services, Inc., El Board believes that these concerns are of particular Dorado, Arkansas ("Consolidated"). Applicants in- significance in a case such as this, where the joint tend to form Consolidated, a de novo joint venture, to venturers directly compete in providing banking serprovide electronic data processing services such as vices and together control a substantial share of the deposit, loan, trust, and other bank accounting ser- deposits in commercial banks in the market. In such a vices for Applicant's bank subsidiaries and financial case, the Board will scrutinize all the facts and circumdata processing services for other businesses in Union stances to ensure that the business relationship be- County, Arkansas. The Board has previously deter- tween the joint venturers would not be likely to result mined that such activities are closely related to bank- in serious adverse effects. ing and permissible for bank holding companies. To address these concerns, Applicants have made 12 C.F.R. § 225.25(b)(7). several commitments to the Board, including the fol- Notice of the application, affording interested per- lowing: sons an opportunity to submit comments, has been (1) Neither Applicant will engage in any business duly published. 49 Federal Register 47,334 (1984). The cooperation with the other Applicant except in time for filing comments has expired, and the Board connection with Consolidated; has considered the application and all comments re- (2) Consolidated's operations will be kept at arm's ceived in light of the public interest factors set forth in length from those of Applicants and their subsidiarsection 4(c)(8) of the Act. ies; Applicants each control one bank. NBC controls the (3) Although an Applicant may name one or more of National Bank of Commerce, El Dorado, Arkansas its officers or directors to Consolidated's board of ("Commerce Bank"), with deposits of $86.6 million.1 directors, no officer or director of an Applicant or Exchange controls the Exchange Bank and Trust 2. See, e.g., Amsterdam-Rotterdam Bank, N.V., 70 FEDERAL RESERVE BULLETIN 835 (1984); Deutsche Bank AG, 67 FEDERAL 1. Banking data are as of June 30, 1984. RESERVE BULLETIN 449 (1981). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 469 any of its subsidiaries will serve as an officer or kets. The Board has previously noted that data procemployee of Consolidated; essing services can be provided by the "batch" (4) No officer, director, or employee of an Applicant method at a distance of 100-150 miles and by the or any of its subsidiaries will perform services for "remote" method at an even greater distance.5 Within Consolidated other than as a representative of that 120 miles of El Dorado, there are six major centers of Applicant on Consolidated's board of directors; and population and trade: the Little Rock, Pine Bluff, Hot (5) No officer, director, or employee of one Appli- Springs, and Texarkana metropolitan areas in Arkancant or any of its subsidiaries will deal with or have sas, and the Shreveport and Monroe metropolitan access to confidential information about the finan- areas in Louisiana. The Reserve Bank's survey indicial condition of the other Applicant or its subsidiar- cates that those metropolitan areas contain more than ies.3 100 data processing service organizations, as well as many other firms that offer or are capable of offering These commitments, by narrowly circumscribing such services to the public. the relationship involved in the joint venture, are The area surrounding El Dorado thus contains so designed to ensure that competition between Appli- many existing and potential providers of data processcants would not be diminished. In addition, the ing services that the joint venture would be unlikely to Board's concerns about this proposal are mitigated by result in any significant reduction in potential competithe fact that the joint venture is limited to data tion between Applicants. On this basis, the Board processing, an activity which does not involve basic concludes that the joint venture would not significantbanking functions, such as granting credit. In light of ly lessen potential competition in any relevant market. this fact, and in view of the commitments offered by There is no evidence that the joint venture would Applicants, the Board concludes that the proposal result in unfair competition, unsound banking pracwould be unlikely to have adverse effects in the tices, conflicts of interests, or an undue concentration banking market. A different conclusion might be in of resources. order, however, if the proposed activity were broader The joint venture would be likely to increase the in scope, or more directly related to Applicants' efficiency of Applicants' data processing operations by lending activities.4 allowing Applicants to eliminate duplicate facilities. The proposed joint venture would not eliminate any Moreover, if Consolidated offers data processing serexisting competition in providing data processing ser- vices to outside businesses, the public will also benefit vices to the public. Commerce Bank currently pro- through the increased competition in such services. vides data processing services for itself and one local The financial and managerial resources of Applimerchant. Exchange Bank performs no data process- cants and Consolidated are consistent with approval of ing for outside businesses and does only part of its own the application. data processing work. Based on the foregoing and other facts of record, the The joint venture also would not significantly reduce Board has determined that the balance of the public potential competition in providing data processing interest factors it is required to consider under section services. According to a survey conducted by the 4(c)(8) favors approval of the application. According- Federal Reserve Bank of St. Louis, Union County has ly, the application is hereby approved. This approval three firms primarily engaged in providing data proc- is subject to all of the conditions set forth in Regulation essing services to other businesses ("data processing Y, including those in sections 225.4(d) and 225.23(b), service organizations"), and one of those organiza- and to the Board's authority to require such modifications is a recent entrant. El Dorado also has at least six tion or termination of the activities of a bank holding computer dealers, and inexpensive desktop computers company or any of its subsidiaries as the Board finds enable businesses to do their own data processing and necessary to assure compliance with, and prevent thus avoid any dependence on data processing service evasions of, the provisions and purposes of the Act organizations. and the Board's regulations and orders issued there- Moreover, the geographic market for data process- under. ing services extends well beyond local banking mar- 5. BankAmerica Corporation, 66 FEDERAL RESERVE BULLETIN 3. No officer or director of one Applicant serves as an officer or 511, 512 (1980). "In batch processing, typically the information to be director of the other Applicant. Moreover, no such interlock could be processed is physically delivered to the servicer for processing at the created without violating the Depository Management Interlocks Act end of a business day and the processed information is delivered to the (12 U.S.C. § 3202). customer the following morning. In remote processing, the informa- 4. See, e.g., Deutsche Bank AG, 67 FEDERAL RESERVE BULLETIN tion to be processed is transmitted between the servicer and the 449 (1981); Maryland National Corp., 65 FEDERAL RESERVE BULLE- customer through telephone lines or other forms of electronic commu- TIN 271 (1979). nications." Id. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

470 Federal Reserve Bulletin • June 1985 The proposed acquisition shall not be consummated pursuant to section 4(c)(8) of the Bank Holding Comlater than three months after the effective date of this pany Act ("Act"), 12 U.S.C. § 1843(c)(8), and section Order, unless that period is extended for good cause 225.23(a) of the Board's Regulation Y, 12 C.F.R. by the Federal Reserve Bank of St. Louis, pursuant to § 225.23(a), to enter into a joint venture with Gooch & delegated authority, or by the Board. Wagstaff, a partnership whose principal place of busi- By order of the Board of Governors, effective ness is London, England. Applicants and Gooch & April 11, 1985. Wagstaff would each own 50 percent of Union, Gooch & Wagstaff ("Company"), a de novo joint venture. Voting for this action: Governors Partee, Rice, and Seger. Company would provide real estate investment advis- Voting against this action: Chairman Volcker. Abstaining ory services and advisory services related to the from this action: Governors Wallich and Gramley. Absent leasing of real and personal property. The Board has and not voting: Governor Martin. determined that these activities are closely related to banking. 12 C.F.R. §§ 225.25(b)(4) and (5). JAMES MCAFEE Notice of the application, affording interested per- [SEAL] Associate Secretary of the Board sons an opportunity to submit comments, has been duly published, 50 Federal Register 9129 (1985). The Statement of Chairman Volcker Concurring in Part time for filing comments has expired, and the Board has considered the application and all comments re- I do not share the majority opinion in one limited ceived in light of the public interest factors set forth in respect. The Board has expressed its concern regard- section 4(c)(8) of the Act. ing a joint venture offering services to the general Union, a bank holding company within the meaning public between directly competing banking organiza- of the Act, is the sixth largest banking organization in tions that together control a substantial share of the California, and has one subsidiary bank, Union Bank same banking market. The majority believed in this ("Bank"), Los Angeles, California.1 Bank has total particular case commitments offered by Applicants, deposits of $5.9 billion, which represents 3.0 percent and the fact the proposal is limited to data processing, of the deposits in commercial banks in California.2 would be sufficient to overcome potential adverse Union also is engaged in nonbanking activities through effects. I would have preferred to condition approval its nonbank subsidiaries, including a discount brokeron prohibition of such services to others than financial age subsidiary, an export trading company, a commerinstitutions on the basis that the relatively slight public cial finance company, a consumer finance company, benefits associated with this proposal are not sufficient and an investment company. to outweigh the possible adverse effects. I have no Gooch & Wagstaff is a partnership of chartered objection to other portions of the application providing surveyors.3 Other offices of Gooch & Wagstaff are for services to the applicants themselves or other located in Amsterdam, Holland; Frankfurt, West Gerdepository institutions which, as I understand it, pro- many; and Denver, Colorado. In 1983, Gooch & vides the main rationale for the proposal. Wagstaff entered into a joint venture with Raynd Ventures, Inc., Denver, Colorado, to provide real April 11, 1985 Standard Chartered Bank PLC London, England Standard Chartered Overseas Holdings, Ltd. 1. Overseas Holdings and The Chartered Bank ("Chartered"), London, England London, England, own 87.4 percent and 12.6 percent, respectively, of Union. Overseas Holdings and Chartered are wholly owned by Standard Bank. Standard Bank is a bank holding company within the Union Bancorp meaning of the Act by virtue of its indirect control of Bank, 12 C.F.R. Los Angeles, California §§ 225.2(b)(1) and (2). 2. As of December 31, 1984. 3. The partners and associates of Gooch & Wagstaff are members Order Approving Proposal to Engage in Investment of the Royal Institution of Chartered Surveyors ("Institution"). The Institution is a professional association that specializes in matters Advisory Services concerning real property that are not performed by lawyers and architects. Gooch & Wagstaff provides several types of services: (1) Standard Chartered Bank PLC ("Standard Bank"), acting as agent in the selling and leasing of commercial property; (2) furnishing advice to lessors and lessees and appearing as expert London, England; Standard Chartered Overseas witnesses injudicial proceedings regarding these matters; (3) acting as Holdings, Ltd. ("Overseas Holdings"), London, En- real estate investment advisors; (4) providing property valuations; (5) gland; and Union Bancorp ("Union"), Los Angeles, managing the physical facilities and portfolios of commercial buildings; and (6) furnishing advice in connection with the planning and California, have applied for the Board's approval zoning of land. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 471 estate advisory services in Colorado.4 Gooch & Wag- activities of the joint venture are permissible under staff is affiliated with G&W Architect, an architectural sections 225.25(b)(4) and (5) of Regulation Y, firm that operates in London, England. Gooch & 12 C.F.R. §§ 225.25(b)(4) and (5).8 Wagstaff also is affiliated with PSI Limited, a manage- The proposal involves a de novo acquisition and ment firm in Amsterdam, Holland. At present, Gooch normally consummation of such a proposal would not & Wagstaff does not have any plans to open additional have any adverse effects upon either existing or potenoffices elsewhere in the world. tial competition. The Board, however, has considered Gooch & Wagstaff s clientele consists primarily of the effect of the proposal on existing and potential foreign-based individuals and institutions, including competition because it involves a joint venture bepension funds, financial institutions, banks, insurance tween a banking and a nonbanking institution.9 companies, industrial corporations, accountants and With respect to existing competition between Union solicitors. In general, each office provides services and Gooch & Wagstaff in the relevant market for with respect to properties located within that office's investment advisory services, the record indicates that geographic area. The geographic area served by the Union and Gooch & Wagstaff currently engage in Denver office is generally limited to the state of similar activities. Union, through the trust department Colorado. of Bank, currently engages in advising individual for- Company will provide general investment advisory eign investors with respect to California real estate services to foreign and domestic investors with respect opportunities. Gooch & Wagstaff provides global into income-producing real property located primarily in vestment counseling, but does not provide any real the Western United States. The operations of Compa- estate investment advice with respect to properties ny will be limited to the following activities: located in California. Accordingly, consummation of (1) promoting and assisting direct investment by the proposal would not have a significant adverse effect on existing competition between Union and foreign and domestic individuals and institutions Gooch & Wagstaff in any relevant market. with respect to income-producing real properties located in California, Arizona, Oregon, Washington, With respect to potential competition, Company will Nevada and other states;5 act as a real estate investment advisor with particular (2) advising open and closed-end property funds, emphasis on foreign investors. The record indicates and evaluating and advising on open and closed-end that numerous other competitors currently provide property funds for foreign investors;6 and similar advisory services, including many banks, trust (3) publishing information periodically on real estate companies, insurance companies, real estate consulmarket conditions for dissemination in selected mar- tants and real estate brokers. Moreover, the market kets.7 for such services is unconcentrated. The record also Applicants also have indicated that Company will indicates that Gooch & Wagstaff is not likely to enter provide advisory services with respect to the leasing of the market de novo, since it lacks knowledge of real property. The Board has determined that the proposed estate opportunities available in the Western region of the United States, has limited local contacts, and lacks knowledge of local financing alternatives for real estate projects. Accordingly, consummation of this pro- 4. In addition, in 1983, the Board approved an application by Southeast Banking Corporation ("Southeast"), Miami, Florida, to posal would not appear to have a significant adverse provide real estate investment advisory services by means of a joint impact on potential competition in any relevant marventure with Gooch & Wagstaff and a subsidiary of Southeast. ket. Southeast Banking Corporation, 69 FEDERAL RESERVE BULLETIN 564 (1983). Southeast and Gooch & Wagstaff recently dissolved this joint The Board also finds that consummation of the venture. Prior to its dissolution, the joint venture provided real estate proposal can be expected to result in public benefits. investment advice related to income-producing real property located in the southeastern United States and Texas. Company expects to act as a conduit for attracting and 5. This activity involves the distribution of brochures to prospective foreign customers, informing such customers when potentially suitable real estate investments become available, assisting such customers in negotiating the terms of the purchase or sale of real property (if desired), and other related activities. In this regard, Applicants have committed that Company will not solicit properties to 8. Applicants have committed that any advisory services offered in be sold, list or advertise properties for sale, or hold itself out or connection with the leasing of property will be limited to leases that advertise as a real estate broker. conform with all of the requirements of section 225.25(b)(5) of the 6. These property funds are investment companies registered under Board's Regulation Y, 12 C.F.R. § 225.25(b)(5). the Investment Company Act of 1940, 15 U.S.C. § 80a-2(a)(20). 9. The Board in previous cases involving joint ventures has ex- Applicants have committed that any advisory services provided by pressed a concern that joint ventures not lead to a matrix of relation- Company to such property funds will be provided in accordance with ships that could undermine the legally mandated separation between all of the requirements of the Board's Published Interpretation regard- banking and commerce. E.g., Amsterdam-Rotterdam Bank, N.V., 70 ing investment advisory activities when advice is provided to an FEDERAL RESERVE BULLETIN 835 (1984); The Maybaco Company and investment company. 12 C.F.R. § 225.125 (1984). Equitable Bancorporation, 69 FEDERAL RESERVE BULLETIN 375 7. Applicants have committed that these services will be provided (1983); Deutsche Bank AG, 67 FEDERAL RESERVE BULLETIN 449 in accordance with footnote 2 of section 225.25(b)(4) of Regulation Y. (1981). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

472 Federal Reserve Bulletin • June 1985 directing capital flows iinto a high-growth region of the and thereby indirectly acquire First National Bank of United States. Moreover, the long-term nature of the Hamilton, Hamilton, Texas, and Andrews Bancreal estate investments is expected to have a stabiliz- shares, Inc., Odessa, Texas, and its subsidiary bank, ing impact on the economies of the region. Company Commercial State Bank, Andrews, Texas; De Leon also anticipates that large clients will invest in industri- Bancshares, Inc., Odessa, Texas, and thereby indial and commercial enterprises and thereby create rectly acquire Farmers and Merchants Bank, employment in the region. De Leon, Texas; Dublin Bancshares, Inc., Odessa, There is no evidence in the record that consumma- Texas, and thereby indirectly acquire The Dublin tion of the proposal would result in other adverse National Bank, Dublin, Texas; Glen Rose Bancshares, effects, such as conflicts of interest, concentration of Inc., Odessa, Texas, and thereby indirectly acquire resources, or unsound banking practices. First National Bank in Glen Rose, Glen Rose, Texas; Based upon the foregoing, the Board concludes that Ranger Bancshares, Inc., Odessa, Texas, and thereby the balance of public interest factors that it must indirectly acquire First State Bank, Ranger, Texas (colconsider under section 4(c)(8) of the Act is favorable. lectively "the bank holding companies and Banks"). Accordingly, the application should be and hereby is Applicant also has applied for the Board's approval approved. This determination is subject to all the under section 4(c)(8) of the Act (12 U.S.C. conditions set forth in the Board's Regulation Y, § 1843(c)(8)) to engage directly in leasing activities including those in sections 225.4(d) and 225.23(b), and presently being conducted by Andrews Financial and the Board's authority to require such modification or Andrews Bancshares. This activity has previously termination of the activities of a bank holding compa- been determined by the Board to be closely related to ny or any of its subsidiaries as the Board finds banking and permissible for bank holding companies necessary to assure compliance with the provisions (12 C.F.R. § 225.25(b)(5)). and purposes of the Act and the Board's regulations Notice of the applications, affording opportunity for and orders issued thereunder, or to prevent evasion interested persons to submit comments, has been thereof. given in accordance with sections 3 and 4 of the Act The proposed activity shall be commenced not later (50 Federal Register 12,870 (1985)). The time for filing than three months after the effective date of this comments has expired, and the Board has considered Order, unless such period is extended for good cause the applications and all comments received in light of by the Board or by the Federal Reserve Bank of San the factors set forth in section 3(c) of the Act Francisco, acting pursuant to delegated authority. (12 U.S.C. § 1842(c)) and the considerations specified By order of the Board of Governors, effective in section 4(c)(8) of the Act. April 2, 1985. Applicant is a nonoperating corporation formed for the purpose of becoming a bank holding company by Voting for this action: Chairman Volcker and Governors acquiring six bank holding companies, currently affili- Wallich, Partee, Rice, Gramley, and Seger. Absent and not ated through common ownership, and their subsidiary voting: Governor Martin. banks. Following consummation of the proposal, the acquired bank holding companies will be liquidated JAMES MCAFEE and Applicant will directly control Banks' shares. [SEAL] Associate Secretary of the Board Thus, this proposal represents a restructuring of existing ownership interests. All of the Banks to be acquired are small; each Orders Issued Under Sections 3 and 4 of Bank controls less than 0.1 percent of total deposits in Holding Company Act commercial banks in the state.1 Upon consummation B-Banc Corp. of this proposal, Applicant would become the 47th Odessa, Texas largest commercial banking organization in Texas, controlling six banks with total deposits of $189 million, representing approximately 0.1 percent of total Order Approving Formation of a Bank Holding deposits in commercial banks in the state. Consumma- Company and Application to Engage In Leasing tion of this proposal would have no significant adverse Activities effects on the concentration of banking resources in Texas. B-Banc Corp., Odessa, Texas, has applied for the Board's approval under section 3(a)(1) of the None of the Banks compete in the same banking Bank Holding Company Act ("Act") (12 U.S.C. market. Based upon the facts of record, consumma- § 1842(a)(1)) to become a bank holding company by acquiring all of the voting shares of Andrews Financial 1. Deposit data are as of June 30, 1984; banking structure data are Corporation, Odessa, Texas ("Andrews Financial"), as of December 31, 1984. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 473 tion of this proposal would have no significant adverse Citizens Financial Group, Inc. effects on competition in any relevant banking market. Providence, Rhode Island This proposal represents a reorganization of existing ownership interests. The financial and managerial re- Order Approving Formation of a Bank Holding sources and future prospects of Applicant and Banks Company and Acquisition of a Federal Savings Bank are considered to be generally satisfactory, especially and a Consumer Finance Company in light of certain commitments made by Applicant to the Board. Applicant has proposed no new activities Citizens Financial Group, Inc., Providence, Rhode for the Banks upon consummation of this proposal. Island, has applied for the Board's approval under However, there is no evidence in the record that the section 3(a)(1) of the Bank Holding Company Act needs of the communities to be served are not being (12 U.S.C. § 1842(a)(1)) ("Act") to become a bank met. Accordingly, considerations relating to the con- holding company through the acquisition of Citizens venience and needs of the communities to be served Corporation, Providence, Rhode Island, a bank holdare consistent with approval. ing company within the meaning of the Act, and its Applicant also has applied under section 4(c)(8) of subsidiary bank, Citizens Trust Company, Provithe Act to acquire the leasing portfolios of Andrews dence, Rhode Island ("Trust Company"). Applicant Financial and Andrews Bancshares and to engage has also applied for the Board's approval under secdirectly in leasing activities under the leasing provi- tion 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)) and sions of Regulation Y. 12 C.F.R. § 225.25(b)(5). There section 225.23 of the Board's Regulation Y (12 C.F.R. is no evidence in the record that approval of this § 225.23) to acquire Citizens Savings Bank, F.S.B., proposal would result in any undue concentration of Providence, Rhode Island ("Savings Bank"), currentresources, decreased or unfair competition, conflicts ly the parent of Citizens Corporation,1 and 80 percent of interests, unsound banking practices, or other ad- of the voting shares of The Money Store/Georgia, Inc., verse effects on the public interest. Accordingly, the Atlanta, Georgia ("Money Store"), a subsidiary of Board has determined that the balance of public inter- Citizens Corporation. est factors it must consider under section 4(c)(8) of the Savings Bank is a federally chartered mutual savings Act is consistent with approval of this proposal. bank, which will convert to a federal stock savings Based on the foregoing and the facts of record, the bank after the Board's approval of this application. Board has determined that the applications under Under section 2(c) of the Act, Savings Bank is not a sections 3(a)(1) and 4(c)(8) of the Act are consistent "bank" for purposes of the Act because its accounts with the public interest, and should be and hereby are would be insured by the Federal Savings and Loan approved. The transactions shall not be consummated Insurance Corporation and because it would be charbefore the thirtieth calendar day following the effective tered by the Federal Home Loan Bank Board. Accorddate of this Order, or later than three months after the ingly, the application to acquire Savings Bank is effective date of this Order, unless such period is properly filed under section 4(c)(8) of the Act. extended for good cause by the Board or by the The Board has not added the operation of a federal Federal Reserve Bank of Dallas, pursuant to delegated savings bank in Rhode Island to the list of activities authority. The determinations as to Applicant's non- specified in section 225.25(b) of Regulation Y as banking activities are subject to the conditions set generally permissible for bank holding companies. As forth in sections 225.4(d) and 225.23(b)(3) of Regula- discussed below, however, on a number of occasions tion Y (12 C.F.R. §§ 225.4(d) and 225.23(b)(3)) and the the Board has determined that the operation of a thrift Board's authority to require such modifications or institution is closely related to banking in Rhode termination of the activities of a holding company or Island. Moreover, with the exception of real estate any of its subsidiaries as the Board finds necessary to development activities, which Applicant has commitassure compliance with the provisions and purposes of the Act and the Board's regulations and orders issued thereunder, or to prevent evasion thereof. By order of the Board of Governors, effective 1. These applications are made necessary by the proposed corpo- April 15, 1985. rate reorganization of Savings Bank, which now indirectly controls Trust Company through its ownership of Citizens Corporation. Since Savings Bank is a mutual savings bank whose control of a bank Voting for this action: Chairman Volcker and Governors predates the 1970 Bank Holding Company Act Amendments, it is Martin, Gramley, and Seger. Absent and not voting: Gover- exempt from the Act under section 2(a)(5)(F) of the Act. Under the nors Wallich, Partee, and Rice. terms of its proposed reorganization, however, Savings Bank will convert to a federal stock savings bank, thereby losing its section 2(a)(5)(F) exemption. Upon Savings Bank's conversion to stock form, Applicant will acquire all of the capital stock issued by Savings Bank JAMES MCAFEE in its conversion and Savings Bank will transfer ownership of Citizens [SEAL] Associate Secretary of the Board Corporation to Applicant. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

474 Federal Reserve Bulletin • June 1985 ted to discontinue,2 all of the activities of Savings institution satisfies the first, or closely related to Bank have been determined by the Board to be closely banking, test of section 4(c)(8).7 related to banking and permissible for bank holding Under the second, or "proper incident," test, the companies.3 Board is required to consider whether the performance Money Store, which is operated pursuant to a joint of the activity by a bank holding company or a venture with The Money Store, Inc., Springfield, New subsidiary of a bank holding company "can reason- Jersey, engages in the origination, sale, and servicing ably be expected to produce benefits to the public, of mortgage loans and other consumer finance loans such as greater convenience, increased competition, and acts as agent for the sale of credit-related life and or gains in efficiency, that outweigh possible adverse accident and health insurance in the State of Georgia.4 effects, such as undue concentration of resources, These activities have been determined by the Board to decreased or unfair competition, conflicts of interests, be permissible for bank holding companies (12 C.F.R. or unsound banking practices." In 1977, the Board § 225.25(b)(1) and (8)). determined that, as a general matter, the activity of Notice of the applications, affording opportunity for operating a savings and loan is not a "proper incident" interested persons to submit comments, has been to banking because the potential adverse effects of given in accordance with sections 3 and 4 of the Act generally allowing affiliations of banks and thrift insti- (49 Federal Register 50,783 (1984)). The time for filing tutions were then sufficiently strong to outweigh the comments has expired, and the Board has considered benefits that might result in individual cases.8 the applications and all comments received in light of The Board has, however, recognized an exception the factors set forth in section 3(c) of the Act to this general rule in the case of affiliations between (12 U.S.C. § 1842(c)) and the considerations specified thrift institutions and commercial banks in Rhode in section 4(c)(8) of the Act. Island. In each case where the Board has considered a Applicant is a de novo bank holding company proposal by a Rhode Island bank holding company to formed for the purpose of holding Trust Company and engage in the activities of a thrift institution, the Board Savings Bank. Trust Company, a state-chartered com- has recognized the "history of close affiliation of mercial bank, controls $269 million in total deposits, mutual thrift institutions and commercial banks in and Savings Bank controls total deposits of $907 Rhode Island,"9 and has determined that engaging in million.5 With consolidated assets of $1.3 billion,6 the activities of a thrift institution is "so closely Savings Bank is the fourth largest banking organiza- related to Rhode Island banking as to be a proper tion in Rhode Island. Neither Applicant nor any of its incident thereto."10 There is no evidence in the record principals is affiliated with any other banking organiza- that the structure of the banking industry in Rhode tion in any relevant area. Since the proposed transac- Island has changed in such a way as to invalidate this tions are solely a corporate reorganization, they would have no effect on the statewide banking structure or on competition in any relevant area. 7. Citicorp (First Federal), 70 FEDERAL RESERVE BULLETIN 149 Because Savings Bank's exemption under section (1984); Old Stone Corporation, 69 FEDERAL RESERVE BULLETIN 812 2(a)(5)(F) would not be transferred to Applicant upon (1983); D.H. Baldwin & Co., 63 FEDERAL RESERVE BULLETIN 280 (1977); American Fletcher Corporation, 60 FEDERAL RESERVE BUL- Savings Bank's reorganization, the Board must con- LETIN 868 (1974). sider Applicant's acquisition of Savings Bank under 8. D.H. Baldwin & Co., 63 FEDERAL RESERVE BULLETIN 280 (1977). the standards of section 4(c)(8) of the Act. Section 9. Newport Savings and Loan Association, 58 FEDERAL RESERVE 4(c)(8) authorizes a bank holding company to acquire a BULLETIN 313, 315 (1972). In Old Colony Co-Operative Bank, 66 company engaged in nonbanking activities that are FEDERAL RESERVE BULLETIN 665, 666 n.6 (1980), the Board stated: determined by the Board to be "so closely related to The activities and powers of depository institutions in the state banking or managing or controlling banks as to be a are uniquely integrated, and have been for a long time. Each of proper incident thereto." The Board has determined Rhode Island's seven mutual savings banks . . . had acquired a commercial bank by 1967. Congress enacted section 2(a)(5)(F) of on numerous occasions that the operation of a thrift the Act in order to exempt these combined savings-commercial bank institutions from bank holding company status. In order partially to redress the competitive imbalance resulting from the superior competitive position of the seven savings-commercial 2. Applicant has committed that Savings Bank will limit its real bank institutions, the Rhode Island legislature, in May 1970, estate development activities to completion of its one current project authorized state-chartered building-loan associations to establish and will not invest in additional real estate development projects or acquire stock in a bank or trust company. unless such investments are authorized by the Board. 3. 12 C.F.R. § 225.25(a) and (b) and § 225.25(b)(1), (8), and (12); 10. Newport Savings and Loan Association, supra at 315; Old U.S. Trust Corporation, 70 FEDERAL RESERVE BULLETIN 371 (1984). Colony Co-Operative Bank, 58 FEDERAL RESERVE BULLETIN 417 4. Citizens Corporation received Board approval on February 2, (1972); Old Colony Co-Operative Bank, 69 FEDERAL RESERVE BULLE- 1984, to acquire 80 percent of the voting shares in Money Store. TIN 377 (1983); Newport Savings and Loan Association, 69 FEDERAL Citizens Corporation, 70 FEDERAL RESERVE BULLETIN 232 (1984). RESERVE BULLETIN 562 (1983). Both Old Colony and Newport are 5. Deposit data are as of September 30, 1984. Rhode Island mutual building-loan associations that became bank 6. As of December 31, 1984. holding companies in 1972. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 475 finding. In addition, the Board notes that Savings State of Rhode Island, resulting in conflict with the Bank and Trust Company have been affiliated since Board's general rule that operation of a thrift institu- 1947 and that the proposed transaction merely repre- tion is not a permissible activity for bank holding sents the reorganization of Savings Bank and Trust companies. In this regard, Applicant has committed Company into a bank holding company structure. For that Savings Bank will not expand outside of Rhode the above reasons, the Board concludes that Appli- Island through merger, branching, de novo acquisicant's operation of Savings Bank is so closely related tion, or any other means without the Board's prior to banking as to be a proper incident thereto. approval. Notwithstanding this general finding, the Board The Board concludes that its approval of this promust consider the particular facts of this case to posal, subject to the commitments set forth above, determine whether the proposed transaction can rea- may reasonably be expected not to result in unfair sonably be expected to produce benefits to the public competition, conflicts of interest, unsound banking that outweigh possible adverse effects. Savings Bank's practices, undue concentration of resources, or other conversion to stock form and inclusion in a holding potential adverse effects on the public interest. Based company organization will provide Applicant greater on the foregoing and all of the other facts of record, the resources for expansion and greater flexibility for Board has determined that the balance of the public diversification of business activities than Savings interest factors it must consider under section 4(c)(8) Bank, as a mutual institution, currently could provide. of the Act is favorable and consistent with approval of The proposed reorganization thus should allow Appli- these applications. cant to continue to compete effectively with other Accordingly, the applications under sections 3 and 4 large Rhode Island financial organizations and will of the Act are approved. The transactions shall not be enable Applicant to take advantage of interstate bank- consummated before the thirtieth day following the ing opportunities open to Rhode Island bank holding effective date of this Order, or later than three months companies.11 after the effective date of this Order, unless such The affiliation of Applicant and Savings Bank fol- period is extended for good cause by the Board or by lowing the proposed reorganization is not likely to the Federal Reserve Bank of Boston, pursuant to result in unfair competition. Savings Bank and Trust delegated authority. The determinations with respect Company have been affiliated since 1947 and Appli- to Applicant's acquisition of Savings Bank and Money cant has stated that it will continue to operate Savings Store are subject to all the conditions set forth in Bank as a savings bank in substantially the same Regulation Y, including sections 225.4(d) and manner as it has been operated historically. In addi- 225.23(b) (12 C.F.R. §§ 254.4(d) and 225.23(b)), and to tion, as noted previously, every Rhode Island thrift the Board's authority to require such modifications or institution of any size now owns a commercial bank. termination of activities of a holding company or any Furthermore, the Board has relied on the following of its subsidiaries as the Board finds necessary to commitments offered by Applicant: assure compliance with the provisions and purposes of (1) that Savings Bank's activities will be limited to the Act and the Board's regulations and orders issued those permitted to federal savings banks under the thereunder, or to prevent evasion thereof. Home Owners' Loan Act; and In addition, Savings Bank may not engage directly (2) that Savings Bank, subject to completion of its or indirectly in any activity other than those approved one current real estate development project,12 shall by the Board in this Order. Any expansion of Savings not engage in any activity prohibited to bank holding Bank's activities beyond those approved in this Order companies and their subsidiaries under section 4 of would require the Board's prior approval as provided the Act. in section 4 of the Act and the Board's Regulation Y.13 By order of the Board of Governors, effective In view of the potential for interstate expansion by April 22, 1985. Applicant following reorganization, Applicant's proposal raises a concern that the commercial bank- Voting for this action: Chairman Volcker and Governors savings bank affiliation might be extended beyond the Martin, Wallich, Partee, Rice, Gramley, and Seger. JAMES MCAFEE 11. Massachusetts, Connecticut, and Rhode Island have enacted regional reciprocal interstate banking statutes that permit the acquisi- [SEAL] Associate Secretary of the Board tion of banks in each state by bank holding companies located in other New England states that have enacted no less restrictive interstate bank acquisition statutes. Rhode Island's interstate banking statute will allow bank holding companies from any state with reciprocal 13. In this regard, the Board notes that because Savings Bank is not interstate banking legislation to acquire banks in Rhode Island effec- considered a bank under the Act, the provisions of section 225.22(d) of tive July 1, 1986. R.I. Gen. Laws § 19-30-1 (1984). Regulation Y would not be applicable to exempt the acquisitions or 12. See supra n.2. activities of Savings Bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

476 Federal Reserve Bulletin • June 1985 Commerce Group, Inc. Notice of these applications, affording an opportuni- Lincoln, Nebraska ty for interested persons to submit comments and views, has been given in accordance with sections 3 Order Approving Acquisition of Bank Holding and 4 of the Act (50 Federal Register 3975 (1985)). The Companies and to Engage in the Underwriting of time for filing comments and views has expired and the Credit Life and Credit Accident and Health Board has considered the applications and all com- Insurance ments received in light of the factors set forth in section 3(c) of the Act (12 U.S.C. § 1842(c)) and the Commerce Group, Inc., Lincoln, Nebraska, a bank considerations specified in section 4(c)(8) of the Act. holding company within the meaning of the Bank Applicant controls the National Bank of Commerce Holding Company Act ("Act") (12 U.S.C. § 1841 Trust and Savings Association ("NBCT"), Lincoln, et seq.), has applied for the Board's approval under Nebraska, which holds deposits of $299.8 million.1 section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to In addition, Applicant controls three industrial bank acquire at least 80 percent of the voting shares of the subsidiaries that make commercial loans, accept NOW following one-bank holding companies: Commerce accounts and are insured by the Federal Deposit Group Kearney, Inc., Kearney, Nebraska, and there- Insurance Corporation. Although Applicant previousby indirectly First National Bank and Trust Co. of ly obtained Board approval under section 4(c)(8) of the Kearney, Kearney, Nebraska; Commerce Group Has- Act to acquire these industrial banks, Applicant has tings, Inc., Hastings, Nebraska, and thereby indirectly applied under section 3(a)(3) of the Act to retain them City National Bank and Trust Co., Hastings, Nebras- as banks pursuant to Regulation Y. ka; Commerce Group West Point, Inc., West Point, Applicant's four deposit taking subsidiaries control Nebraska, and thereby indirectly First National Bank deposits of $349 million, making Applicant the fourth of West Point, West Point, Nebraska; Commerce largest banking organization in Nebraska with 2.8 Group Grand Island, Inc., Grand Island, Nebraska, percent of total state deposits. Upon consummation, and thereby indirectly Overland National Bank of Applicant would become the third largest banking Grand Island, Grand Island, Nebraska; Commerce organization in Nebraska, controlling deposits of Group North Platte, Inc., North Platte, Nebraska, and $665.9 million in nine banking subsidiaries. Applithereby indirectly North Platte National Bank, North cant's share of total deposits in commercial banks in Platte, Nebraska. Applicant also has applied for the the state would increase to 5.4 percent, and consum- Board's approval under section 3(a)(3) of the Act to mation of this proposal would not result in a significant retain currently owned shares of Commerce Savings increase in the concentration of banking resources in Lincoln, Inc., Lincoln, Nebraska, Commerce Savings Nebraska. Scottsblufif, Inc., Scottsbluflf, Nebraska, and Com- Each of the five bank holding companies to be merce Savings Columbus, Inc., Columbus, Nebraska acquired by Applicant operates in a separate banking (collectively the "industrial banks"). market in which neither Applicant nor its subsidiaries Applicant has also applied for the Board's approval is represented. Accordingly, consummation of these under section 4(c)(8) of the Act (12 U.S.C. proposals would not have any significant adverse § 1843(c)(8)) and section 225.23(a)(2) of the Board's effects on either existing or potential competition in Regulation Y (12 C.F.R. § 225.23(a)(2)), to indirectly any relevant market. acquire, through the acquisition of the previously The financial and managerial resources and future named bank holding companies, an additional 83.35 prospects of Applicant, its subsidiaries, and the holdpercent of the voting shares of Commerce Affiliated ing companies to be acquired are consistent with Life Insurance Company, Phoenix, Arizona ("Affiliat- approval. Considerations relating to the convenience ed"). Affiliated engages in underwriting as reinsurer and needs of the community to be served are also credit life and credit accident and health insurance consistent with approval. directly related to extensions of credit by Applicant Applicant has also applied, pursuant to section and the bank holding companies to be acquired. This 4(c)(8) of the Act, to acquire the 83.35 percent of the activity has been determined by the Board to be voting shares of Affiliated owned by the bank holding closely related to banking under section 225.25(b)(9) of companies to be acquired. Affiliated engages in the Regulation Y (12 C.F.R. § 225.25(b)(9)). The princi- activity of reinsuring credit-related insurance sold to pals of Applicant currently control all of the bank customers of affiliated banks. Due to the fact that holding companies to be acquired, and this proposal Applicant and the one-bank holding companies it represents the reorganization of six affiliated one bank holding companies into a single multibank holding company. 1. All banking data are as of December 31, 1983. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All proposes to acquire are currently engaged in jointly § 1842(a)(3)) to acquire all of the voting shares of the operating Affiliated, it does not appear that Appli- following one-bank holding companies: Pickrell, Inc., cant's acquisition of the remainder of Affiliated's Pickrell, Nebraska, and Wymore, Inc., Wymore, Neshares would result in any adverse competitive effects. braska. Applicant would thereby acquire control of There is no evidence in the record to indicate that Pickrell State Bank, Pickrell, Nebraska ("Pickrell"), approval of this proposal would result in undue con- and Wymore State Bank, Wymore, Nebraska ("Wycentration of resources, decreased or unfair competi- more"). tion, conflicts of interest, unsound banking practices Applicant has also applied for the Board's approval or other adverse effects. Accordingly, the Board has under section 4(c)(8) of the BHC Act (12 U.S.C. determined that the balance of public interest factors it § 1843(c)(8)) and section 225.23(a) of the Board's must consider under section 4(c)(8) of the Act is Regulation Y (12 C.F.R. 225.23(a)), to acquire indifavorable and consistent with approval of this applica- rectly, through Pickrell, Inc., 50 percent of the voting tion. shares of Pickrell Insurance Agency, also of Pickrell Based on the foregoing and other facts of record, the ("Agency"), and thereby to engage in the activities of Board has determined that the applications under a general insurance agency in a town with a population section 3(a)(3) and 4(c)(8) of the Act should be and not exceeding 5,000. hereby are approved. The transactions shall not be Notice of these applications, affording an opportuniconsummated before the thirtieth calendar day follow- ty for interested persons to submit comments and ing the effective date of this Order or later than three views, has been given in accordance with sections 3 months after the effective date of this Order, unless and 4 of the BHC Act (50 Federal Register 176 (1985)). such period is extended for good cause by the Board or The time for filing comments and views has expired by the Federal Reserve Bank of Kansas City, acting and the Board has considered the applications and all pursuant to delegated authority. The approval of Ap- comments received in light of the factors set forth in plicant's request to acquire additional shares of Affili- section 3(c) of the BHC Act (12 U.S.C. § 1842(c)) and ated is subject to the conditions set forth in section the considerations specified in section 4(c)(8) of the 225.23(b) of Regulation Y (12 C.F.R. § 225.23(b)) and BHC Act, including the comments of the Independent to the Board's authority to require modification or Insurance Agents of America, National Association of termination of the activities of a holding company or Casualty and Surety Agents, National Association of any of its subsidiaries as the Board finds necessary to Surety Bond Producers, National Association of Proassure compliance with the provisions and purposes of fessional Insurance Agents, and National Association the Act and the Board's regulations and orders issued of Life Underwriters. thereunder, or to prevent evasion thereof. Applicant is a one-bank holding company by virtue By order of the Board of Governors, effective of its control of Beatrice National Bank, Beatrice, April 17, 1985. Nebraska ("Beatrice National"). Applicant's principals control Wymore and Pickrell, and this proposal Voting for this action: Vice Chairman Martin and Gover- represents the reorganization of control of these three nors Rice, Gramley, and Seger. Absent and not voting: banking organizations into a single multibank holding Chairman Volcker and Governors Wallich and Partee. company. Applicant, with deposits of $63 million,1 is the 33rd largest commercial banking organization in JAMES MCAFEE the state, controlling 0.51 percent of the total deposits [SEAL] Associate Secretary of the Board in commercial banking organizations in the state. Upon consummation of this proposal, Applicant would become the 22nd largest commercial banking Cook Investment, Inc. organization in the state, controlling deposits of $78.5 Beatrice, Nebraska million, representing 0.64 percent of total deposits in commercial banking organizations in the state. Con- Order Approving Acquisition of Bank Holding summation of the transaction would not have any Companies and Engaging in General Insurance significant adverse effects upon the concentration of Agency Activities banking resources in the state. Applicant, through its control of Beatrice National, Cook Investment, Inc., Beatrice, Nebraska, a bank is the largest of twelve commercial banking organizaholding company within the meaning of the Bank Holding Company Act ("the BHC Act") (12 U.S.C. § 1841 et seq.), has applied for the Board's approval under section 3(a)(3) of the Act (12 U.S.C. 1. All banking data are as of December 31, 1983. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

478 Federal Reserve Bulletin • June 1985 tions operating in the Gage County banking market,2 served are also consistent with approval. controlling 34.2 percent of deposits in commercial Applicant has also applied, pursuant to section banks in the market. Both Wymore and Pickrell also 4(c)(8) of the Act, to acquire the 50 percent of the operate in the Gage County market. Wymore, with shares of Agency held by Pickrell and thus to engage in deposits of $10.5 million, is the 4th largest commercial general insurance agency activities in Pickrell, a combank operating in the Gage County banking market, munity with a population not exceeding 5,000. Upon controlling 5.7 percent of commercial banking deposits consummation of this proposal, the principal place of in the market. Pickrell, with $5 million in deposits, is banking business of Applicant will be Beatrice, a town the ninth largest commercial bank in the market, with a population of approximately 13,000. Several controlling 2.7 percent of commercial banking deposits insurance agents' groups have protested this applicain the market. Upon consummation of this proposal, tion. They assert that the Garn-St Germain Deposi- Applicant would remain the largest banking organiza- tory Institutions Act of 1982 ("the Garn Act"), which tion in the market, controlling 42.6 percent of total amended section 4(c)(8) of the BHC Act, 12 U.S.C. commercial banking deposits in the market. 1843(c)(8)(C), permits only those bank holding compa- In analyzing the competitive effects of an applica- nies that have their principal place of banking business tion to reorganize and restructure ownership of bank- in a town of less than 5,000 to engage in general ing organizations where an individual or family con- insurance agency activities in such small towns. trolling more than one banking organization in the Section 225.25(b)(8)(ii) of the Board's Regulation Y market seeks to transfer control of the banking organi- (12 C.F.R. § 225.25(b)(8)(ii)) permits bank holding zations to a single holding company, the Board takes companies to sell any insurance in a community that into consideration the competitive effects of the trans- has a population not exceeding 5,000, provided the action whereby common ownership was established.3 principal place of banking business of the bank holding In its approval of prior transactions whereby Beatrice company is also located in a community with a popula- National Corporation and Applicant acquired control tion not exceeding 5,000. The Board's regulation preof Beatrice National,4 the Board analyzed the transac- dates the Garn Act, and the Board has published a tions as a result of which Beatrice National and notice of proposed rulemaking regarding permissible Pickrell and Wymore were placed under common insurance activities to conform to the Garn Act. The control. Based on the small size of Pickrell (approxi- Board has specifically requested public comment on mately $600,000 in deposits) and Wymore (approxi- the question whether bank holding companies should mately $3 million in deposits) in 1965 and 1969, respec- be permitted to engage in general insurance agency tively, the poor record of Pickrell and Wymore as activities in communities that have populations not competitors in the market, and their long-run viability exceeding 5,000 without requiring the bank holding based on the very small and declining population base company's principal place of banking business to be of the townships of Wymore and Pickrell, the Board located in a community with a population not exceedconcluded that the initial affiliation of these three ing 5,000 (49 Federal Register 9215 (1984)). banking organizations did not result in any significant The Board notes that these applications involve a elimination of competition or other adverse competi- reorganization and restructuring of affiliated compative effects. For these same reasons, consummation of nies in which the insurance activities play a minor role. the instant proposal would not appear to have any Applicant has not sought the Board's approval to adverse effects upon competition or increase the con- expand Agency's insurance activities in any manner or centration on banking resources in any relevant area. to engage in general insurance agency activities at any The financial and managerial resources and future of its own offices. Agency will continue to engage in prospects of Applicant, its banking subsidiary, the general insurance activities only from a location in the bank holding companies to be acquired and their village of Pickrell, which had a population of 184 in affiliates are considered consistent with approval. Al- 1980. In view of the limited nature of this application, though Applicant proposes to incur debt in connection the hardship involved in requiring divestiture, and the with its proposal, it appears that Applicant will be able commitments of Applicant to conform its insurance to service its debt while maintaining required capital activities to the results of the rulemaking, including a within the Board's guidelines. Considerations relating complete divestiture of any of Agency's insurance to the convenience and needs of the communities to be activities that might be impermissible under the Board's final regulation, the Board believes it is appropriate to permit Agency to continue to engage in 2. The Gage County banking market consists of Gage County, general insurance activities pending the outcome of Nebraska. 3. See Mid Nebraska Bancshares, Inc. v. Board of Governors of the rulemaking. The Board notes that the Garn Act the Federal Reserve System, 627 F.2d 266 (D.C. Cir. 1980). does not, on its face, impose a "principal place of 4. Beatrice National Corporation, 61 FEDERAL RESERVE BULLEbanking business" requirement, and the Board has TIN 376 (1975). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 479 previously permitted retention of such insurance activ- those in sections 225.4(d) and 225.23(b), and to the ities in similar limited circumstances pending comple- Board's authority to require such modification or tion of the rulemaking proceeding. See Midwest Ban- termination of the activities of a bank holding compacorporation, Inc., 70 FEDERAL RESERVE BULLETIN ny or any of its subsidiaries as the Board finds 533 (1984). The Board believes it is advisable to necessary to assure compliance with the provisions address the issues raised by protestants in the context and purposes of the Act and the Board's regulations of the rulemaking proceeding and protestants' com- and orders issued thereunder, or to prevent evasion ments will be made a part of that proceeding. thereof. There is no evidence in the record to indicate that The transaction shall not be consummated before approval of this application would result in undue the thirtieth calendar day following the effective date concentration of resources, decreased or unfair com- of this Order, or later than three months after the petition, conflicts of interests, unsound banking prac- effective date of this Order, unless such period is tices, or other adverse effects on the public interest. extended for good cause by the Board, or by the Accordingly, in view of Applicant's commitment dis- Federal Reserve Bank of Kansas City, acting pursuant cussed above, the Board has determined that the to delegated authority. balance of public interest factors it must consider By order of the Board of Governors, effective under section 4(c)(8) of the Act is favorable and April 29, 1985. consistent with approval of the application. Based on the foregoing and other facts of record, the Voting for this action: Governors Wallich, Partee, Gram- Board has determined that the applications under ley, and Seger. Governor Wallich abstained from the insurance portion of the application. Absent and not voting: sections 3(a)(3) and 4(c)(8) of the Act should be, and Chairman Volcker and Governors Martin and Rice. hereby are, approved. The determination as to Applicant's nonbanking activities is subject to all the condi- JAMES MCAFEE tions set forth in the Board's Regulation Y, including [SEAL] Associate Secretary of the Board ORDERS APPROVED UNDER BANK HOLDING COMPANY ACT By the Board of Governors During April 1985 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) First Holding Company, First National Bank of Livingston, April 8, 1985 Livingston, Tennessee Livingston, Tennessee One Valley Bancorp of West Virginia, One Valley National Bank of April 15, 1985 Inc., Hurricane, Charleston, West Virginia Hurricane, West Virginia RB Bancorp, The Bank of Rancho Bernardo, April 9, 1985 San Diego, California San Diego, California Sun Banks, Inc., SunTrust Banks, Inc., March 28, 1985 Orlando, Florida Atlanta, Georgia Hernando Banking Corporation, Brooksville, Florida Hernando State Bank, Brooksville, Florida Sunset Financial Corporation, Universal Bank, April 29, 1985 Miami, Florida Boynton Beach, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

480 Federal Reserve Bulletin • June 1985 Section 4 Nonbank Effective AA pplicantt , company d aAt e FirsTier, Inc., Investors Mortgage Access Corp., April 19, 1985 Omaha, Nebraska Des Moines, Iowa 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 Allied Bankshares, Inc., Bank of Rutledge, Atlanta April 18, 1985 Thomson, Georgia Rutledge, Georgia American Bankshares, Ltd., American Bank of Commerce, Kansas City April 8, 1985 Denver, Colorado Denver, Colorado American National Bancshares American National Bank of Kansas City April 19, 1985 of Westlink, Inc., Westlink, Wichita, Kansas Wichita, Kansas Arcadia Bancshares, Inc., Home State Bank, Kansas City April 2, 1985 Overland Park, Kansas Arcadia, Kansas Bancenter One Group, Inc., Bankcenter One/St. Charles, St. Louis April 12, 1985 Ellisville, Missouri N.A., St. Charles, Missouri BBA, Inc., Bullitt County Bank, St. Louis April 12, 1985 Shepherds ville, Kentucky Shepherdsville, Kentucky Calumet Bancorporation, State Bank of Chilton, Chicago April 19, 1985 Chilton, Wisconsin Chilton, Wisconsin Central Jersey Bancorp, The Central Jersey Bank and New York April 19, 1985 Freehold, New Jersey Trust Company, Freehold, New Jersey Chemung Financial Corpora- Chemung Canal Trust Company, New York April 10, 1985 tion, Elmira, New York Elmira, New York Chicago Commerce Bancorpora- Chicago Bank of Commerce, Chicago March 29, 1985 tion, Chicago, Illinois Chicago, Illinois Citadel Bancorporation, Citadel Bank, Kansas City March 28, 1985 Colorado Springs, Colorado Colorado Springs, Colorado City Bancorp Inc., Gorham Bancorp, Inc., St. Louis April 12, 1985 Murphysboro, Illinois Murphysboro, Illinois The City Bank of Carbondale, Carbondale, Illinois Colonial Bancorporation, Inc., Colonial Trust & Savings Bank of Chicago February 15, 1985 Peru, Illinois Bureau County, Depue, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 481 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Commerce National Corpora- National Bank of Commerce, Atlanta April 5, 1985 tion, Winter Park, Florida Winter Park, Florida Community Independent Bank, Bernville, Bank, N.A., Philadelphia April 4, 1985 Inc., Bernville, Pennsylvania Bernville, Pennsylvania Fairfax Banc shares, Inc., Exchange Bank of Fairfax, Kansas City March 29, 1985 Fairfax, Missouri Fairfax, Missouri Farmers Bancshares, Inc., The Farmers Bank and Savings Cleveland March 28, 1985 Pomeroy, Ohio Company, Pomeroy, Ohio Financial Bankshares, Inc., First National Bank of Miami, Atlanta April 3, 1985 Miami, Florida Miami, Florida First American Bancorp, First American Bank, Atlanta March 25, 1985 Decatur, Alabama Decatur, Alabama First American Bank Corpora- Riverside National Bank, Chicago April 3, 1985 tion, Riverside, Illinois Elk Grove Village, Illinois First Bancorp of Taylorville, First National Bank in Chicago April 11, 1985 Inc., Taylorville, Taylorville, Illinois Taylorville, Illinois First Bancorporation of Cleve- First Bank of Conroe, Dallas April 8, 1985 land, Inc., Conroe, Texas Cleveland, Texas First Dubuque Corp., The First National Bank of Chicago April 19, 1985 Dubuque, Iowa Dubuque, Dubuque, Iowa First Guthrie Bancshares, Inc., Liberty State Bancshares, Inc., Kansas City April 9, 1985 Guthrie, Oklahoma Tahlequah, Oklahoma The Liberty State Bank of Tahlequah, Tahlequah, Oklahoma First National Bancor, Inc., First National Bank, Kansas City April 11, 1985 Lee's Summit, Missouri Lee's Summit, Missouri First National Corporation, North wood State Bank, Minneapolis March 27, 1985 Grand Forks, North Dakota North wood, North Dakota First National Lincoln Corpora- The First National Bank of Boston April 22, 1985 tion, Damariscotta, Damariscotta, Maine Damariscotta, Maine First NH Banks, Inc., The National Bank of Lebanon, Boston April 16, 1985 Manchester, New Hampshire Lebanon, New Hampshire First State Corp., First State Bank of Bibb County, Atlanta April 22, 1985 West Blocton, Alabama West Blocton, Alabama First Union Bancorp, First National Bank of Union Atlanta March 25, 1985 Blairsville, Georgia County, Blairsville, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

482 Federal Reserve Bulletin • June 1985 Section 3—Continued .. r. w x Reserve Effective Applicant Bank(s) Bank date First United Financial Services, Oak Park Bancorp, Inc., Chicago April 5, 1985 Inc., Oak Park, Illinois Arlington Heights, Illinois MSPBancorp, Inc., Mount Prospect, Illinois Oak Park Trust and Savings Bank, Oak Park, Illinois The Dunham Bank, St. Charles, Illinois Mount Prospect State Bank, Mount Prospect, Illinois United National Bank, Arlington Heights, Illinois Unibancorp, Inc., Chicago, Illinois First Western Holding Compa- First Western National Bank of Dallas April 5, 1985 ny, Carrollton, Carrollton, Texas Carrollton, Texas Firstway Financial, Inc., First National Bank and Trust Philadelphia March 27, 1985 Waynesboro, Pennsylvania Co., Waynesboro, Pennsylvania FNB Bankshares, The First National Bank of Bar Boston April 1, 1985 Bar Harbor, Maine Harbor, Bar Harbor, Maine Ganado Bancshares, Inc., The Citizens State Bank of Gan- Dallas April 4, 1985 Ganado, Texas ado, Ganado, Texas Gateway Bancorp, Inc., Gateway State Bank, New York March 29, 1985 Staten Island, New York Staten Island, New York Great Neck Bancorp, Bank of Great Neck, New York April 19, 1985 Great Neck, New York Great Neck, New York Heritage Bankshares, Inc., Turtle Creek National Bank, Dallas April 22, 1985 Dallas, Texas Dallas, Texas Heritage Racine Corporation, American State Bank, Chicago April 22, 1985 Racine, Wisconsin Kenosha, Wisconsin Hyden Citizens Bancorp, Inc., Farmers State Bancorp, Inc., Cleveland March 27, 1985 Hyden, Kentucky Bonneville, Kentucky Kingsley Banc Corp, Kingsley State Bank, Chicago April 8, 1985 Kingsley, Iowa Kingsley, Iowa Liberty Bancorp, Inc., Liberty Discount and Savings Philadelphia April 12, 1985 Carbondale, Pennsylvania Bank, Carbondale, Pennsylvania Liberty State Bancshares, Inc., The Liberty State Bank of Kansas City April 9, 1985 Tahlequah, Oklahoma Tahlequah, Tahlequah, Oklahoma Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 483 Section 3—Continued ,. , r. i / % Reserve Effective A Applicant Bank(s) ank date B Louisiana Bancshares, Inc., The Raceland Bank & Trust Atlanta April 19, 1985 Baton Rouge, Louisiana Company, Raceland, Louisiana Lowry Facilities, Inc., Oklahoma Bancorporation, Inc., Kansas City March 22, 1985 Clinton, Oklahoma Clinton, Oklahoma Oklahoma Bank and Trust, Clinton, Oklahoma Merchants Bancorp, Inc., The Wyoming National Bank of Philadelphia April 22, 1985 Allentown, Pennsylvania Wilkes-Barre, Pennsylvania, Wilkes-Barre, Pennsylvania MSB Bancshares, Inc., Mesquite National Bank, Dallas April 8, 1985 Mesquite, Texas Mesquite, Texas Minooka Bancorp, Inc., Tri-County Bank of Minooka, Chicago April 12, 1985 Minooka, Illinois Minooka, Illinois Northeastern Oklahoma Bancor- Bank of Inola, Kansas City April 17, 1985 poration, Inc., Inola, Oklahoma Inola, Oklahoma Pioneer American Holding Com- First National Bank, Philadelphia April 2, 1985 pany Corp., Carbondale, Pennsylvania Carbondale, Pennsylvania Polo Bancshares, Inc., Farmers Bank of Polo, Kansas City May 18, 1985 Richmond, Missouri Polo, Missouri Quinlan Bancshares, Inc., Quinlan State Bank, Dallas April 8, 1985 Quinlan, Texas Quinlan, Texas Red Bud Bancorp, Inc., First State Bank of Red Bud, St. Louis March 29, 1985 Red Bud, Illinois Red Bud, Illinois Sacramento Bancorp, Sacramento Deposit Bank, St. Louis April 23, 1985 Sacramento, Kentucky Sacramento, Kentucky St. Mary Holding Corporation, The St. Mary Bank and Trust Atlanta March 28, 1985 Franklin, Louisiana Company, Franklin, Louisiana Texas American Bancshares, Southwestern Bank, Dallas April 2, 1985 Inc., Stafford, Texas Fort Worth, Texas Texas Independent Bancshares, Gulf Shores Bank, Dallas April 19, 1985 Inc., Crystal Beach, Texas Texas City, Texas Westbanco, Inc., Minooka Bancorp, Inc., Chicago April 12, 1985 Westville, Illinois Minooka, Illinois Tri-County Bank of Minooka, Minooka, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

484 Federal Reserve Bulletin • June 1985 Section 4 Nonbanking Reserve Effective Applicant company Bank date CB&T Bancshares, Inc., Calumet Financial Associates, Atlanta April 18, 1985 Columbus, Georgia Inc., Knoxville, Tennessee Dunlap Iowa Holding Company, engage in making and servicing Chicago April 10, 1985 Dunlap, Iowa loans or other extensions of credit FAM Financial, Inc., Johnson Insurance Agency, Kansas City April 11, 1985 Macks ville, Kansas St. John, Kansas First Bank System, Inc., Austin-Osterud Agency, Inc., Minneapolis March 29, 1985 Minneapolis, Minnesota Austin, Minnesota First Cordell Banco, Inc., Flemming Insurance Agency, Kansas City March 25, 1985 Cordell, Oklahoma Cordell, Oklahoma First Metropolitan Financial First Metropolitan Mortgage Atlanta April 9, 1985 Corporation, Corp., Baton Rouge, Louisiana Baton Rouge, Louisiana Peoples Bankshares, Ltd., Bankers Plus, Inc., Chicago March 28, 1985 Waterloo, Iowa Minneapolis, Minnesota West Brook Bancshares, Inc., West Brook Insurance Agency, Chicago April 5, 1985 Westchester, Illinois Inc., Westchester, Illinois Sections 3 and 4 Bank(s)/Nonbanking Reserve ' Effective Applicant Company Bank date First Antlers Bancorporation, First Antlers Bancshares, Inc., Kansas City April 3, 1985 Inc., Antlers, Oklahoma Antlers, Oklahoma First National Bank of Antlers, Antlers, Oklahoma First Antlers Insurance Agency, Antlers, Oklahoma Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 485 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. Florida Bankers Association v. Board of Governors, Northeast Bancorp, Inc. v. Board of Governors, No. No. 84-3883 and No. 84-3884 (11th Cir., filed 84-363 (U.S., filed Mar. 27, 1984). Feb. 15, 1985). De Young v. Owens, et al., No. SC 9782-20-6 (D., N. Florida Department of Banking v. Board of Gover- Dist., Iowa, filed Mar. 8, 1984). nors, No. 84-3831 (11th Cir., filed Feb. 15, 1985). Huston v. Board of Governors, No. 84-1361 (8th Cir., Florida Department of Banking v. Board of Gover- filed Mar. 20, 1984); and No. 84-1084 (8th Cir. filed nors, No. 84-3832 (11th Cir., filed Feb. 15, 1985). Jan. 17, 1984). Dimension Financial Corporation v. Board of Gover- State of Ohio, v. Board of Governors, No. 84-1270 nors, No. 84-1274 (U.S., filed Feb. 6, 1985). (10th Cir., filed Jan. 30, 1984). Citicorp v. Board of Governors, No. 85-4009 (2d Cir., Ohio Deposit Guarantee Fund v. Board of Governors, filed Jan. 15, 1985). No. 84-1257 (10th Cir., filed Jan. 28, 1984). Citicorp v. Board of Governors, No. 84-4173 (2d Cir., Colorado Industrial Bankers Association v. Board of filed Dec. 31, 1984). Governors, No. 84-1122 (10th Cir., filed Jan. 27, Citicorp v. Board of Governors, No. 84-754 (U.S., 1984). filed Oct. 12, 1984). Financial Institutions Assurance Corp. v. Board of David Bolger Revocable Trust v. Board of Governors, Governors, No. 84-1101 (4th Cir., filed Jan. 27, No. 84-4141 (2d Cir., filed Aug. 31, 1984). 1984). Citicorp v. Board of Governors, No. 84-4121 (2d Cir., First Bancorporation v. Board of Governors, No. 84filed Aug. 27, 1984). 1011 (10th Cir., filed Jan. 5, 1984). Seattle Bancorporation, et al. v. Board of Governors, Oklahoma Bankers Association v. Federal Reserve No. 84-7535 (9th Cir., filed Aug. 15, 1984). Board, No. 83-2591 (10th Cir., filed Dec. 13, 1983). Bank of New York Co., Inc. v. Board of Governors, The Committee for Monetary Reform, et al. v. Board No. 84-4091 (2d Cir., filed June 14, 1984). of Governors, No. 84-5067 (D.C. Cir., filed June 16, Citicorp v. Board of Governors, No. 84-4081 (2d Cir., 1983). filed May 22, 1984). Securities Industry Association v. Board of Gover- Lamb v. Pioneer First Federal Savings and Loan nors, No. 80-2614 (D.C. Cir., filed Oct. 24. 1980); Association, No. C84-702 (D. Wash., filed May 8, and No. 80-2730 (D.C. Cir., filed Oct. 24, 1980). 1984). A. G. Becker, Inc. v. Board of Governors, No. 80- Melcher v. Federal Open Market Committee, No. 84- 2614 (D.C. Cir., filed Oct. 14, 1980); and No. 80- 1335 (D.D.C., filed, Apr. 30, 1984). 2730 (D.C. Cir., filed Oct. 14, 1980). Florida Bankers Association, et al. v. Board of Governors, No. 84-3269 and No. 84-3270 (11th Cir., filed Apr. 20, 1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1 Financial and Business Statistics CONTENTS WEEKLY REPORTING COMMERCIAL BANKS Assets and liabilities Domestic Financial Statistics A19 All reporting banks A20 Banks in New York City A21 Branches and agencies of foreign banks MONEY STOCK AND BANK CREDIT A22 Gross demand deposits—individuals, partnerships, and corporations A3 Reserves, money stock, liquid assets, and debt measures A4 Reserves of depository institutions, Reserve FINANCIAL MARKETS Bank credit A5 Reserves and borrowings—Depository A23 Commercial paper and bankers dollar institutions acceptances outstanding A5 Federal funds and repurchase agreements— A23 Prime rate charged by banks on short-term Large member banks business loans A24 Interest rates—money and capital markets A25 Stock market—Selected statistics POLICY INSTRUMENTS A26 Selected financial institutions—Selected assets and liabilities A6 Federal Reserve Bank interest rates A7 Reserve requirements of depository institutions A8 Maximum interest rates payable on time and FEDERAL FINANCE savings deposits at federally insured institutions A9 Federal Reserve open market transactions A28 Federal fiscal and financing operations A29 U.S. budget receipts and outlays A30 Federal debt subject to statutory limitation FEDERAL RESERVE BANKS A30 Gross public debt of U.S. Treasury—Types and ownership A10 Condition and Federal Reserve note statements A31 U.S. government securities dealers— All Maturity distribution of loan and security Transactions holdings A32 U.S. government securities dealers—Positions and financing A33 Federal and federally sponsored credit MONETARY AND CREDIT AGGREGATES agencies—Debt outstanding A12 Aggregate reserves of depository institutions and monetary base A13 Money stock, liquid assets, and debt measures A15 Bank debits and deposit turnover A16 Loans and securities—All commercial banks COMMERCIAL BANKING INSTITUTIONS All Major nondeposit funds A18 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 • June 1985 SECURITIES MARKETS AND A54 U.S. reserve assets CORPORATE FINANCE A54 Foreign official assets held at Federal Reserve Banks A34 New security issues—State and local A55 Foreign branches of U.S. banks—Balance sheet governments and corporations data A35 Open-end investment companies—Net sales and A57 Selected U.S. liabilities to foreign official asset position institutions A35 Corporate profits and their distribution A36 Nonfinancial corporations—Assets and liabilities REPORTED BY BANKS IN THE UNITED STATES A36 Total nonfarm business expenditures on new plant and equipment A57 Liabilities to and claims on foreigners A37 Domestic finance companies—Assets and A58 Liabilities to foreigners liabilities and business credit A60 Banks' own claims on foreigners A61 Banks' own and domestic customers' claims on foreigners REAL ESTATE A61 Banks' own claims on unaffiliated foreigners A62 Claims on foreign countries—Combined A38 Mortgage markets domestic offices and foreign branches A39 Mortgage debt outstanding REPORTED BY NONBANKING BUSINESS CONSUMER INSTALLMENT CREDIT ENTERPRISES IN THE UNITED STATES A40 Total outstanding and net change A63 Liabilities to unaffiliated foreigners A41 Terms A64 Claims on unaffiliated foreigners FLOW OF FUNDS SECURITIES HOLDINGS AND TRANSACTIONS A42 Funds raised in U.S. credit markets A65 Foreign transactions in securities A43 Direct and indirect sources of funds to credit A66 Marketable U.S. Treasury bonds and notes— markets Foreign holdings and transactions Domestic Nonfinancial Statistics INTEREST AND EXCHANGE RATES SELECTED MEASURES A67 Discount rates of foreign central banks A67 Foreign short-term interest rates A44 Nonfinancial business activity—Selected A68 Foreign exchange rates measures A45 Labor force, employment, and unemployment A46 Output, capacity, and capacity utilization A69 Guide to Tabular Presentation, A47 Industrial production—Indexes and gross value Statistical Releases, and Special A49 Housing and construction Tables A50 Consumer and producer prices A51 Gross national product and income A52 Personal income and saving SPECIAL TABLES A70 Terms of lending at commercial banks, International Statistics November 1984 SUMMARY STATISTICS A53 U.S. international transactions—Summary A54 U.S. foreign trade Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A3 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Monetary and credit aggregates (annual rates of change, seasonally adjusted in percent)' IItteemm 1984 1985 1984 1985 Q2 Q3 Q4 Q1 Nov. Dec. Jan. Feb.' Mar. Reserves of depository institutions2 1 Total 8.6 6.8 -.7 21.2 11.3 18.8 31.1 19.8 5.7 2 Required 10.3 6.6 -1.5 20.7 9.1 14.0 35.2 15.2 10.3 3 Nonborrowed -10.8 -44.6 30.7 61.9 66.3 72.6 94.4 23.8 -3.4 4 Monetary base3 7.0 7.2 3.9 8.7 7.6 8.0 8.0 12.2 5.9 Concepts of money, liquid assets, and debt4 5 Ml 6.5 4.5 3.2 10.5 12.0 10.2 9.0 14.1 5.5 6 M2 7.1 6.8 9.0 12.1 14.0 13.1 13.9' 11.1 4.0 7 M3 10.5 9.5 11.0 10.6 14.2 14.3' 10.2' 8.2 5.2 8 L 12.4' 12.2'" 9.4' 7.6 9.8' 12.(X n.a. n.a. n.a. 9 Debt 13.2' 12.5' 12.5 13.3 14.5' 14.3' 13.(K 12.3 n.a. Nontransaction components 10 In M25 7.2 7.6 10.8 12.6 14.6 14.1 15.4' 10.2 3.5 11 In M3 only6 24.9 20.3 18.9 5.0 15.2' 18.6>- -3.8' -2.7 9.9 Time and savings deposits Commercial banks 12 Savings7 -6.7 -5.6 -10.4 -8.7 -10.6 -11.6 -9.8 -2.0 -11.9 13 Small-denomination time8 13.1 13.4 6.9 -1.8 4.4 7.8 -7.1' -8.4 2.5 14 Large-denomination time9'10 21.8 19.3 12.2 2.4 1.8 3.6 -9.5 9.6 22.2 Thrift institutions 15 Savings7 -.7 -6.5' -6.6 2.4 -5.7 -6.5 7.2 8.6 2.9 16 Small-denomination time 13.4 17.0 14.8 1.9 10.8 11.2' -2.9^ -4.1 1.5 17 Large-denomination time9 48.1 38.1 31.3 19.8 42.9 39.0 20.5 3.1 -10.0 Debt components4 18 Federal 13.1 14.7 15.6 16.1 20.0 17.7 16.2' 14.4 n.a. 19 Nonfederal 13.2r 11.8' 11.5' 12.5 12.8' 13.3' 12.V 11.7 n.a. 20 Total loans and securities at commercial banks" 11.0 9.1 9.1 n.a. 12.8 9.5 n.a. n.a. 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 Federd 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 are 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 vaujts (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 11. Changes calculated from figures shown in table 1.23. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Financial Statistics • June 1985 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT Millions of dollars Monthly averages of Weekly averages of daily figures for week ending daily figures FFFaaaccctttooorrrsss 1985 1985 Jan. Feb. Mar. Feb. 13 Feb. 20 Feb. 27 Mar. 6 Mar. 13 Mar. 20 Mar. 27 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 11111 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 182,763 180,077 182,130 179,550 179,690 180,318 182,198 181,497 182,192 181,141 22222 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 159,619 157,221 159,896 156,656 157,641 157,589 160,037 159,115 159,983 159,736 33333 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 158,152 155,848 159,737 155,694 154,608 157,589 159,679 159,115 159,614 159,736 44444 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss 1,467 1,373 159 962 3,033 0 358 0 369 0 55555 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 8,526 8,565 8,386 8,692 8,628 8,372 8,426 8,372 8,415 8,372 66666 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 8,389 8,378 8,372 8,382 8,372 8,372 8,372 8,372 8,372 8,372 77777 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 137 187 14 310 256 0 54 0 43 0 88888 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 99999 LLLLLoooooaaaaannnnnsssss 1,567 1,278 1,646 1,095 994 1,354 1,691 2,038 1,681 897 1111100000 FFFFFllllloooooaaaaattttt 1,203 1,248 540 720 959 1,624 811 506 318 240 1111111111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 11,848 11,765 11,662 12,387 11,468 11,380 11,234 11,466 11,794 11,896 1111122222 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk 11,095 11,094 11,093 11,094 11,094 11,094 11,093 11,093 11,093 11,093 1111133333 SSSSSpppppeeeeeccccciiiiiaaaaalllll dddddrrrrraaaaawwwwwiiiiinnnnnggggg rrrrriiiiiggggghhhhhtttttsssss ccccceeeeerrrrrtttttiiiiifffffiiiiicccccaaaaattttteeeee aaaaaccccccccccooooouuuuunnnnnttttt 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 1111144444 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccuuuuurrrrrrrrrreeeeennnnncccccyyyyy ooooouuuuutttttssssstttttaaaaannnnndddddiiiiinnnnnggggg 16,453 16,501 16,565 16,492 16,506 16,520 16,533 16,550 16,568 16,586 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 1111155555 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 180,036 178,273 179,085 178,479 178,700 178,134 178,553 179,430 179,306 178,860 1111166666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss 526 550 549 549 556 555 538 549 552 554 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss,,,,, wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 1111177777 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 3,875 4,344 3,804 4,797 3,819 4,038 3,364 4,061 3,818 4,280 1111188888 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 219 223 229 210 236 229 253 207 254 205 1111199999 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss 1,961 1,191 1,242 1,590 1,886 1,693 1,715 1,993 1,577 1,538 2222200000 OOOOOttttthhhhheeeeerrrrr 479 533 628 521 508 466 520 440 1,205 473 2222211111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 6,200 6,061 6,099 6,008 6,026 6,182 5,849 5,907 6,101 6,262 2222222222 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss22222 21,634 21,115 22,772 19,599 20,176 21,253 23,652 21,171 21,658 21,266 End-of-month figures Wednesday figures 1985 1985 Jan. Feb. Mar. Feb. 13 Feb. 20 Feb. 27 Mar. 6 Mar. 13 Mar. 20 Mar. 27 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 2222233333 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 177,890 181,786 184,711 182,424 182,216 178,271 182,305 186,424 180,792 180,313 2222244444 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 154,555 159,632 160,983 157,651 158,072 155,501 160,235 160,156 158,869 159,169 2222255555 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 154,555 157,124 160,983 157,651 154,743 155,501 160,235 160,156 158,869 159,169 2222266666 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss 0 2,508 0 0 3,329 0 0 0 0 0 2222277777 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 8,389 8,752 8,372 8,372 8,676 8,372 8,372 8,372 8,372 8,372 2222288888 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 8,389 8,372 8,372 8,372 8,372 8,372 8,372 8,372 8,372 8,372 2222299999 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss 0 380 0 0 304 0 0 0 0 0 3333300000 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 3333311111 LLLLLoooooaaaaannnnnsssss 2,139 2,329 2,582 1,613 1,168 1,939 1,509 5,840 1,465 385 3333322222 FFFFFllllloooooaaaaattttt 502 -56 298 2,189 2,885 588 791 359 219 274 3333333333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 12,305 11,129 12,476 12,599 11,415 11,871 11,398 11,697 11,867 12,113 3333344444 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk 11,095 11,093 11,093 11,094 11,094 11,093 11,093 11,093 11,093 11,093 3333355555 SSSSSpppppeeeeeccccciiiiiaaaaalllll dddddrrrrraaaaawwwwwiiiiinnnnnggggg rrrrriiiiiggggghhhhhtttttsssss ccccceeeeerrrrrtttttiiiiifffffiiiiicccccaaaaattttteeeee aaaaaccccccccccooooouuuuunnnnnttttt ............... 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 3333366666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccuuuuurrrrrrrrrreeeeennnnncccccyyyyy ooooouuuuutttttssssstttttaaaaannnnndddddiiiiinnnnnggggg 16,476 16,531'" 16,602 16,504 16,518 16,532 16,548 16,565 16,583 16,602 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 3333377777 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 177,569 178,416 179,210 178,779 178,934 178,130 179,091 179,566 179,189 179,015 3333388888 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss 535 557 554 556 555 557 549 552 554 554 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 3333399999 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 5,349 3,308 3,063 3,974 3,916 3,099 4,002 3,698 3,623 4,204 4444400000 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 244 332 253 268 244 223 199 232 211 216 4444411111 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss .................... 1,164 1,226 1,359 1,164 1,213 1,213 1,226 1,226 1,224 1,224 4444422222 OOOOOttttthhhhheeeeerrrrr 560 461 347 479 473 452 433 411 721 439 4444433333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 5,964 5,863 6,600 5,860 5,926 5,963 5,741 5,934 5,894 6,101 4444444444 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss22222 18,694 23,866 25,638 23,559 23,185 20,877 23,322 27,082 21,671 20,873 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

Money Stock and Bank Credit A5 1.12 RESERVES AND BORROWINGS Depository Institutions Millions of dollars Monthly averages8 Reserve classification 1984 1984 1985 Dec. Sept. Oct. 1 Reserve balances with Reserve Banks1 24,939 21,138 21,738 20,143 20,099 20,843 21,738 21,577 20,417 22,063 2 Total vault cash2 20,392 20,755 22,316 21,232 21,875 21,827 22,316 23,044 23,927 21,863 3 Vault cash used to satisfy reserve requirements3 17,049 17,908 18,958 17,900 18,413 18,392 18,958 19,547 19,857 18,428 4 Surplus vault cash4 3,343 2,847 3,358 3,333 3,462 3,434 3,358 3,497 4,070 3,437 5 Total reserves5 41,853 38,894 40,696 38,043 38,512 39,235 40,696 41,125 40,273 40,489 6 Required reserves 41,353 38,333 39,843 37,415 37,892 38,542 39,843 40,380 39,370 39,729 7 Excess reserve balances at Reserve Banks6 500 561 853 628 620 693 853 745 903 761 8 Total borrowings at Reserve Banks 697 774 3,186 7,242 6,017 4,617 3,186 1,395 1,289 1,593 9 Seasonal borrowings at Reserve Banks 33 96 113 319 299 212 113 62 71 88 10 Extended credit at Reserve Banks7 187 2 2,604 6,459 5,057 3,837 2,604 1,050 803 1,059 Biweekly averages of daily figures for weeks ending Dec. 5 Feb. 13 Apr. 10 11 Reserve balances with Reserve Banks1 21,184 21,584 22,171 22,819 20,375 19,924 20,734 22,407 21,458 23,063 12 Total vault cash2 21,196 21,596 22,129 22.819 20,379 24,893 23,203 21,518 22,353 21,274 13 Vault cash used to satisfy reserve requirements 18,320 18,547 19,701 22,089 23,828 20,624 19,270 18,093 18,828 18,100 14 Surplus vault cash4 3,385 3,120 19,703 19,002 19,995 4,269 3,933 3,425 3,525 3,174 15 Total reserves5 39,516 40,143 41,832 41.820 40,374 40,548 40,003 40,500 40,286 41,163 16 Required reserves 38,602 39,617 40,625 41,187 39,590 39,537 39,198 39,719 39,477 40,645 17 Excess reserve balances at Reserve Banks6 914 526 1,207 634 785 1,012 806 782 810 519 18 Total borrowings at Reserve Banks 4,251 3,231 2,691 1,631 976 1,369 1,174 1,865 1,289 1,775 19 Seasonal borrowings at Reserve Banks 184 115 81 58 63 60 81 69 98 121 20 Extended credit at Reserve Banks7 3,488 2,774 2,038 1,371 593 988 603 1,224 839 1,295 1. Excludes required clearing balances and adjustments to compensate for computation period by institutions having required reserve balances at Federal float. Reserve Banks plus the amount of vault cash equal to required reserves during the 2. Dates refer to the maintenance periods in which the vault cash can be used to maintenance period at institutions having no required reserve balances. satisfy reserve requirements. Under contemporaneous reserve requirements, 6. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy maintenance periods end 30 days after the lagged computation periods in which reserve requirements less required reserves. the balances are held. 7. Extended credit consists of borrowing at the discount window under the 3. Equal to all vault cash held during the lagged computation period by terms and conditions established for the extended credit program to help institutions having required reserve balances at Federal Reserve Banks plus the depository institutions deal with sustained liquidity pressures. Because there is amount of vault cash equal to required reserves during the maintenance period at not the same need to repay such borrowing promptly as there is with traditional institutions having no required reserve balances. short-term adjustment credit, the money market impact of extended credit is 4. Total vault cash at institutions having no required reserve balances less the similar to that of nonborrowed reserves. amount of vault cash equal to their required reserves during the maintenance 8. Before February 1984, data are prorated monthly averages of weekly period. averages; beginning February 1984, data are prorated monthly averages of 5. Total reserves not adjusted for discontinuities consist of reserve balances biweekly averages. with Federal Reserve Banks, which exclude required clearing balances and NOTE. These data also appear in the Board's H.3 (502) release. For address, see adjustments to compensate for float, plus vault cash used to satisfy reserve inside front cover. requirements. Such vault cash consists of all vault cash held during the lagged 1.13 FEDERAL FUNDS AND REPURCHASE AGREEMENTS Large Member Banks' Averages of daily figures, in millions of dollars 1985 week ending Monday BByy mmaattuurriittyy aanndd ssoouurrccee Feb. 18 Feb. 25 Mar. 4 Mar. 11 Mar. 18 Mar. 25 Apr. 1 Apr. 8 Apr. 15 One day and continuing contract 1 Commercial banks in United States 61,529 58,363 60,758 62,875 59,617 55,739 56,025 65,950 63,319 2 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies . 29,116 27,655 25,753 27,269 26,391 25,724 24,661 24,529 2255,,111177 3 Nonbank securities dealers 8,404 9,055 8,973 8,992 9,082 8,195 8,652 6,940 7,835 4 All other 30,655 32,282 32,281 30,605 29,390 29,512 28,436 22,905 25,598 All other maturities 5 Commercial banks in United States 8,472 8,468 8,633 8,916 9,354 9,495 9,299 10,036 9,697 6 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies . 6,981 7,715 8,068 8,282 8,401 8,597 8,357 8,795 8,334 7 Nonbank securities dealers 7,507 7,772 7,600 7,540 8,366 8,010 8,641 8,371 8,072 8 All other 8,998 8,707 9,010 8,753 8,946 9,167 8,887 13,879 11,258 MEMO: Federal funds and resale agreement loans in maturities of one day or continuing contract 9 Commercial banks in United States 28,703 26,434 26,737 24,874' 26,775r 26,885 27,747 31,380 29,772 10 Nonbank securities dealers 6,137 6,117 6,883 6,410 6,505 6,521 6,902 6,281 6,595 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 Financial Statistics • June 1985 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per annum Current and previous levels Extended credit2 SShhoorrtt--tteerrmm aaddjjuussttmmeenntt ccrreeddiitt FFFeeedddeeerrraaalll RRReeessseeerrrvvveee aanndd sseeaassoonnaall ccrreeddiitt11 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 4/26/85 date rate 4/26/85 rate 4/26/85 rate 4/26/85 rate Boston 12/24/84 81/2 8W 9 9Vi 10 10W 12/24/84 New York 12/24/84 12/24/84 Philadelphia 12/24/84 12/24/84 Cleveland 12/24/84 12/24/84 Richmond 12/24/84 12/24/84 Atlanta 12/24/84 12/24/84 Chicago 12/24/84 12/24/84 St. Louis 12/24/84 12/24/84 Minneapolis 12/24/84 12/24/84 Kansas City .... 12/24/84 12/24/84 Dallas 12/24/84 12/24/84 San Francisco... 12/24/84 8W 8W 9 9 W 10 10 W 12/24/84 Range of rates in recent years3 Range (or F.R. Range (or F.R. Range (or F.R. Effective date A le ll v e F l) . — R. Ba of n k Effective date A le ll v e F l) . — R. Ba of n k Effective date A le ll v e F l) . — R. Ba of n k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1973 7'/2 7Vi July 3 7-7'/» 7V4 11998811——MMaayy 55 13-14 14 1974— Apr. 25 7W-8 8 10 71/4 7'/4 88 14 14 30 8 8 Aug. 21 73/4 7% Nov. 2 13-14 13 Dec. 9 7V+-8 73/4 Sept. 22 8 8 6 13 13 16 73/4 73/4 Oct. 16 8-8 Vi 8'/2 Dec. 4 12 12 20 8W 8 W 1975— Jan. 6 71/4—7V4 73/4 Nov. 1 8!/2-9'/2 9!-A 1982— July 20 HV2-H II'/! 10 7!/4-73/4 71/4 3 9W 9>/2 23 W/2 11W 24 71/4 71/4 Aug. 2 11—11 Vi 11 Feb. 5 63/4-7l/4 63/4 July 20 10 10 3 11 11 7 63/4 63/4 Aug. 17 10-10'/! 10W 16 10^ 10W Mar. 10 6l/4-63/4 61/4 20 10W 10W 27 10-101/2 10 14 61/4 61/4 Sept. 19 10W-11 11 30 10 10 May 16 6-61/4 6 21 11 11 Oct. 12 9W-10 91/2 23 6 6 Oct. 8 11-12 12 13 9W 91/2 10 12 12 Nov. 22 9-9 W 9 1976— Jan. 19 51/2-6 5!h 26 9 9 23 5Vi 5W Feb. 15 12-13 13 Dec. 14 8W-9 9 Nov. 22 51/4-51/2 51/4 19 13 13 15 81/2-9 8W 26 51/4 51/4 May 29 12-13 13 17 8!/2 S'/2 30 12 12 1977— Aug. 30 5'/4-53/4 51/4 June 13 11-12 11 1984— Apr. 9 8W-9 9 31 5'/4-53/4 53/4 16 11 11 13 9 9 Sept. 2 55/4 53/4 July 28 10-11 10 Nov. 21 8W-9 8W Oct. 26 6 6 29 10 10 26 8W 8W Sept. 26 11 11 Dec. 24 8 8 1978— Jan. 9 6-6 Vi 6Vi Nov. 17 12 12 20 61h 6V2 Dec. 5 12-13 13 May 11 6V2-7 1 13 13 12 1 7 In effect Apr. 26, 1985 8 8 1. A temporary simplified seasonal program was established on Mar. 8, 1985, Statistics, 1914-1941, and 1941-1970; Annual Statistical Digest, 1970-1979, 1980, and the interest rate was set at 8W percent at that time. 1981, and 1982. 2. 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. As an alternative, for loans outstanding for that had borrowed in successive weeks or in more than 4 weeks in a calendar more than 150 days, a Federal Reserve Bank may charge a flexible rate that takes quarter. A 3 percent surcharge was in effect from Mar. 17, 1980, through May 7, into account rates on market sources of funds, but in no case will the rate charged 1980. There was no surcharge until Nov. 17,1980, when a 2 percent surcharge was be less than the basic rate plus one percentage point. Where credit provided to a adopted; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and particular depository institution is anticipated to be outstanding for an unusually to 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective prolonged period and in relatively large amounts, the time period in which each Sept. 22, 1981, and to 2 percent effective Oct. 12. As of Oct. 1, the formula for rate under this structure is applied may be shortened. See section 201.3(b)(2) of applying the surcharge was changed from a calendar quarter to a moving 13-week Regulation A. period. The surcharge was eliminated on Nov. 17, 1981. 3. Rates for short-term adjustment credit. For description and earlier data see the following publications of the Board of Governors: Banking and Monetary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A7 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'* 7 12/30/76 $0-$29.8 million 3 1/1/85 9l/i 12/30/76 Over $29.8 million 1122 11//11//8855 $10 million-$100 million 113/4 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'/% years 3 10/6/83 Time and savings2 3 1 Vi years or more 0 10/6/83 Savings 3 3/16/67 Eurocurrency liabilities Time4 AAllll ttyyppeess 3 11/13/80 $0 million-$5 million, by maturity 30-179 days 3 3/16/67 180 days to 4 years 21/2 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 2Vi 1/8/76 4 years or more 1 10/30/75 1. For changes in reserve requirements beginning 1963, see Board's Annual week of May 14-21, 1980. In addition, beginning Mar. 19, 1980, the base was Statistical Digest, 1971-1975, and for prior changes, see Board's Annual Report reduced to the extent that foreign loans and balances declined. for 1976, table 13. Under provisions of the Monetary Control Act, depository 5. The Garn-St Germain Depository Institutions Act of 1982 (Public Law 97institutions include commercial banks, mutual savings banks, savings and loan 320) provides that $2 million of reservable liabilities (transaction accounts, associations, credit unions, agencies and branches of foreign banks, and Edge Act nonpersonal time deposits, and Eurocurrency liabilities) of each depository corporations. institution be subject to a zero percent reserve requirement. The Board is to adjust 2. Requirement schedules are graduated, and each deposit interval applies to the amount of reservable liabilities subject to this zero percent reserve requirethat part of the deposits of each bank. Demand deposits subject to reserve ment each year for the next succeeding calendar year by 80 percent of the requirements were gross demand deposits minus cash items in process of percentage increase in the total reservable liabilities of all depository institutions, collection and demand balances due from domestic banks. measured on an annual basis as of June 30. No corresponding adjustment is to be The Federal Reserve Act as amended through 1978 specified different ranges of made in the event of a decrease. Effective Dec. 9, 1982, the amount of the requirements for reserve city banks and for other banks. Reserve cities were exemption was established at $2.1 million. Effective with the reserve maintenance designated under a criterion adopted effective Nov. 9, 1972, by which a bank period beginning Jan. 1, 1985, the amount of the exemption is $2.4 million. In having net demand deposits of more than $400 million was considered to have the determining the reserve requirements of a depository institution, the exemption character of business of a reserve city bank. The presence of the head office of shall apply in the following order: (1) nonpersonal money market deposit accounts such a bank constituted designation of that place as a reserve city. Cities in which (MMDAs) authorized under 12 CFR section 1204.122; (2) net NOW accounts there were Federal Reserve Banks or branches were also reserve cities. Any (NOW accounts less allowable deductions); (3) net other transaction accounts; banks having net demand deposits of $400 million or less were considered to have and (4) nonpersonal time deposits or Eurocurrency liabilities starting with those the character of business of banks outside of reserve cities and were permitted to with the highest reserve ratio. With respect to NOW accounts and other maintain reserves at ratios set for banks not in reserve cities. transaction accounts, the exemption applies only to such accounts that would be Effective Aug. 24, 1978, the Regulation M reserve requirements on net balances subject to a 3 percent reserve requirement. due from domestic banks to their foreign branches and on deposits that foreign 6. For nonmember banks and thrift institutions that were not members of the branches lend to U.S. residents were reduced to zero from 4 percent and 1 percent Federal Reserve System on or after July 1, 1979, a phase-in period ends Sept. 3, respectively. The Regulation D reserve requirement of borrowings from unrelated 1987. For banks that were members on or after July 1, 1979, but withdrew on or banks abroad was also reduced to zero from 4 percent. before Mar. 31, 1980, the phase-in period established by Public Law 97-320 ends Effective with the reserve computation period beginning Nov. 16, 1978, on Oct. 24, 1985. For existing member banks the phase-in period of about three domestic deposits of Edge corporations were subject to the same reserve years was completed on Feb. 2, 1984. All new institutions will have a two-year requirements as deposits of member banks. phase-in beginning with the date that they open for business, except for those 3. Negotiable order of withdrawal (NOW) accounts and time deposits such as institutions that have total reservable liabilities of $50 million or more. Christmas and vacation club accounts were subject to the same requirements as 7. Transaction accounts include all deposits on which the account holder is savings deposits. permitted to make withdrawals by negotiable or transferable instruments, pay- The average reserve requirement on savings and other time deposits before ment orders of withdrawal, and telephone and preauthorized transfers (in excess implementation of the Monetary Control Act had to be at least 3 percent, the of three per month) for the purpose of making payments to third persons or others. minimum specified by law. However, MMDAs and similar accounts offered by institutions not subject to the 4. Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percent rules of the Depository Institutions Deregulation Committee (DIDC) that permit was imposed on large time deposits of $100,000 or more, obligations of affiliates, no more than six preauthorized, automatic, or other transfers per month of which and ineligible acceptances. This supplementary requirement was eliminated with no more than three can be checks—are not transaction accounts (such accounts the maintenance period beginning July 24, 1980. are savings deposits subject to time deposit reserve requirements.) Effective with the reserve maintenance period beginning Oct. 25, 1979, a 8. The Monetary Control Act of 1980 requires that the amount of transaction marginal reserve requirement of 8 percent was added to managed liabilities in accounts against which the 3 percent reserve requirement applies be modified excess of a base amount. This marginal requirement was increased to 10 percent annually by 80 percent of the percentage increase in transaction accounts held by beginning Apr. 3, 1980, was decreased to 5 percent beginning June 12, 1980, and all depository institutions determined as of June 30 each year. Effective Dec. 31, was eliminated beginning July 24, 1980. Managed liabilities are defined as large 1981, the amount was increased accordingly from $25 million to $26 million; time deposits, Eurodollar borrowings, repurchase agreements against U.S. effective Dec. 30, 1982, to $26.3 million; effective Dec. 29, 1983, to $28.9 million; government and federal agency securities, federal funds borrowings from non- and effective Jan. 1, 1985, to $29.8 million. member institutions, and certain other obligations. In general, the base for the 9. In general, nonpersonal time deposits are time deposits, including savings marginal reserve requirement was originally the greater of (a) $100 million or (b) deposits, that are not transaction accounts and in which a beneficial interest is the average amount of the managed liabilities held by a member bank, Edge held by a depositor that is not a natural person. Also included are certain corporation, or family of U.S. branches and agencies of a foreign bank for the two transferable time deposits held by natural persons, and certain obligations issued reserve computation periods ending Sept. 26, 1979. For the computation period to depository institution offices located outside the United States. For details, see beginning Mar. 20, 1980, the base was lowered by (a) 7 percent or (b) the decrease section 204.2 of Regulation D. in an institution's U.S. office gross loans to foreigners and gross balances due from foreign offices of other institutions between the base period (Sept. 13-26, NOTE. Required reserves must be held in the form of deposits with Federal 1979) and the week ending Mar. 12, 1980, whichever was greater. For the Reserve Banks or vault cash. Nonmembers may maintain reserve balances with a computation period beginning May 29, 1980, the base was increased by iVi Federal Reserve Bank indirectly on a pass-through basis with certain approved percent above the base used to calculate the marginal reserve in the statement institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Financial Statistics • June 1985 1.16 MAXIMUM INTEREST RATES PAYABLE on Time and Savings Deposits at Federally Insured Institutions1 Percent per annum Savings and loan associations and Commercial banks mutual savings banks (thrift institutions)1 In effect Apr. 30, 1985 In effect Apr. 30, 1985 Type of deposit Effective date Percent Effective date 1 Savings SVi 1/1/84 7/1/79 2 Negotiable order of withdrawal accounts SVt 12/31/80 5'/4 12/31/80 3 Negotiable order of withdrawal accounts of $ 1,000 or more2 0) 1/5/83 1/5/83 4 Money market deposit account2 12/14/82 (3) 12/14/82 Time accounts 5 7-31 days of less than $1,0004 SVi 1/1/84 SVi 9/1/82 6 7-31 days of $1,000 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 the minimum denomination and average maintenance balance requirements was by commercial banks and thrift institutions on various categories of deposits were lowered to $1,000. No minimum maturity period is required for this account, but removed. For information regarding previous interest rate ceilings on all catego- depository institutions must reserve the right to require seven days, notice before ries of accounts see earlier issues of the FEDERAL RESERVE BULLETIN, the withdrawals. When the average balance is less than $1,000, the account is subject Federal Home Loan Bank Board Journal, and the Annual Report of the Federal to the maximum ceiling rate of interest for NOW accounts; compliance with the Deposit Insurance Corporation. average balance requirement may be determined over a period of one month. 2. Effective Dec. 1, 1983, IRA/Keogh (HR10) Plan accounts are not subject to Depository institutions may not guarantee a rate of interest for this account for a minimum deposit requirements. Effective Jan. 1, 1985, the minimum denomina- period longer than one month or condition the payment of a rate on a requirement tion requirement was lowered from $2,500 to $1,000. that the funds remain on deposit for longer than one month. 3. Effective Dec. 14, 1982, depository institutions are authorized to offer a new 4. Effective Jan. 1, 1985, the minimum denomination requirement was lowered account with a required initial balance of $2,500 and an average maintenance from $2,500 to $1,000. Deposits of less than $1,000 issued to governmental units balance of $2,500 not subject to interest rate restrictions. Effective Jan. 1, 1985, continue to be subject to an interest rate ceiling of 8 percent. 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 1984 1985 TTyyppee ooff ttrraannssaaccttiioonn 11998822 11998833 11998844 Aug. Sept. Oct. Nov. Dec. Jan. Feb. U.S. GOVERNMENT SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 17,067 18,888 20,036 187 3,249 507 4,463 33,,441100 00 22,,997766 ? Gross sales 8,369 3,420 8,557 1,491 71 1,300 0 0 2,668 214 3 Exchange 0 0 0 0 0 0 0 0 0 0 4 Redemptions 3,000 2,400 7,700 800 0 2,200 0 0 1,600 400 Others within 1 year 5 Gross purchases 312 484 1,126 0 600 0 146 118822 00 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shift 17,295 18,887 16,354 3,811 872 8% 1,348 771 596 1,987 8 Exchange -14,164 -16,553 -20,840 -2,274 0 -1,497 -3,363 -966 -625 -2,739 9 Redemptions 0 87 0 0 0 0 0 0 0 0 1 to 5 years 10 Gross purchases 1,797 1,896 1,638 0 0 0 883300 00 00 00 11 Gross sales 0 0 0 0 0 0 0 0 0 0 1? Maturity shift -14,524 -15,533 -13,709 -3,811 -872 -896 594 -771 -596 -1,902 13 Exchange 11,804 11,641 16,039 1,443 0 1,497 1,763 966 625 1,645 5 to 10 years 14 Gross purchases 388 890 536 00 00 00 333355 00 00 00 15 Gross sales 0 0 300 0 0 0 0 0 100 0 16 Maturity shift -2,172 -2,450 -2,371 52 0 0 -1,893 0 0 -54 17 Exchange 2,128 2,950 2,750 500 0 0 850 0 0 600 Over 10 years 18 Gross purchases 307 383 441 0 0 0 116644 00 00 00 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shift -601 -904 -275 -52 0 0 -49 0 0 -30 21 Exchange 234 1,962 2,052 332 0 0 750 0 0 493 All maturities 22 Gross purchases 19,870 22,540 23,476 0 3,849 507 5,938 33,,559911 0 2,976 73 Gross sales 8,369 3,420 7,553 187 71 1,300 0 0 2,768 214 24 Redemptions 3,000 2,487 7,700 800 0 2,200 0 0 1,600 400 Matched transactions Gross sales 543,804 578,591 808,986 79,087 52,893 89,689 51,904 63,674 66,668 57,076 26 Gross purchases 543,173 576,908 810,432 78,842 55,776 85,884 55,516 61,537 66,367 57,283 Repurchase agreements 77 Gross purchases 130,774 105,971 139,441 4,992 26,040 0 1122,,006633 33,,888888 2200,,222255 1199,,558844 28 Gross sales 130,286 108,291 139,019 166 30,867 0 12,063 2,261 21,852 17,077 29 Net change in U.S. government securities 8,358 12,631 8,908 2,478 1,835 -6,798 9,549 3,080 -6,295 5,077 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 00 00 00 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 189 292 256 5 1 14 90 0 0 17 Repurchase agreements 33 Gross purchases 18,957 8,833 1,205 381 3,743 0 698 550066 1,463 2,428 34 Gross sales 18,638 9,213 817 12 4,112 0 698 119 1,851 2,048 35 Net change in federal agency obligations 130 -672 132 364 -370 -14 -90 388 388 363 BANKERS ACCEPTANCES 36 Repurchase agreements, net 1,285 -1,062 -418 0 0 0 0 0 0 0 37 Total net change in System Open Market Account 9,773 10,897 6,116 2,842 1,465 -6,811 9,459 33,,446688 --66,,668833 5,440 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 • June 1985 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements Millions of dollars Wednesday End of month Account 1985 1985 Feb. 27 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Jan. Feb. Consolidated condition statement ASSETS 1 Gold certificate account 11,093 11,093 11,093 11,093 11,093 11,095 11,093 11,093 2 Special drawing rights certificate account 4,618 4,618 4,618 4,618 4,618 4,618 4,618 4,618 3 Coin 555 560 565 561 548 497 551 566 Loans 4 To depository institutions 1,9390 1,5090 5,8400 1,4650 3850 2,1390 2,3290 2,5820 5 Other Acceptances—Bought outright 6 Held under repurchase agreements .... Federal agency obligations 7 Bought outright 8,3720 8,3720 8,3720 8,3720 8,3720 8,3890 8,372 8,3720 8 Held under repurchase agreements .... 380 U.S. government securities Bought outright 9 Bills 67,413 70,721 70,642 69,355 69,655 66,467 69,036 71,469 10 Notes 64,644 66,070 66,070 66,070 66,070 65,137 64,644 66,070 11 Bonds 23,444 23,444 23,444 23,444 23,444 22,951 23,444 23,444 12 Total bought outright1 155,5010 160,2350 160,1560 158,8690 159,1690 154,5550 157,124 160,9830 13 Held under repurchase agreements 2,508 14 Total U.S. government securities 155,501 160,235 160,156 158,869 159,169 154,555 159,632 160,983 15 Total loans and securities . 165,812 170,116 174,368 168,706 167,926 165,083 170,713 171,937 16 Cash items in process of collection... 6,814 7,871 6,433 6,609 6,429 6,161 6,241 6,127 17 Bank premises 571 572 572 572 576 570 571 572 Other assets 18 Denominated in foreign currencies2. 3,790 3,627 3,637 3,638 3,643 3,631 3,498 3,971 19 All other3 7,510 7,199 7,488 7,657 7,894 8,104 7,060 7,933 20 Total assets. 200,763 205,656 208,774 203,454 202,727 199,759 204,345 206,817 LIABILITIES 21 Federal Reserve notes 162,710 163,653 164,117 163,720 163,515 162,125 162,992 163,728 Deposits 22 To depository institutions 22,090 24,548 28,308 22,895 22,097 19,858 25,092 26,997 23 U.S. Treasury—General account. 3,099 4,002 3,698 3,623 4,204 5,349 3,308 3,063 24 Foreign—Official accounts 223 199 232 211 216 244 332 253 25 Other 452 433 411 721 439 560 461 347 26 Total deposits. 25,864 29,182 32,649 27,450 26,956 26,011 29,193 30,660 27 Deferred availability cash items 6,226 7,080 6,074 6,390 6,155 5,659 6,297 5,829 28 Other liabilities and accrued dividends4 . 2,321 2,318 2,261 2,218 2,412 2,355 2,463 2,445 29 Total liabilities . 197,121 202,233 205,101 199,778 199,038 196,150 200,945 202,662 CAPITAL ACCOUNTS 30 Capital paid in 1,669 1,670 1,677 1,687 1,685 1,639 1,669 1,687 31 Surplus 1,626 1,617 1,617 1,624 1,624 1,626 1,626 1,624 32 Other capital accounts 347 136 379 365 380 344 105 844 33 Total liabilities and capital accounts 200,763 205,656 208,774 203,454 202,727 199,759 204,345 206,817 34 MEMO: Marketable U.S. government securities held in custody for foreign and international account 115,296 114,354 115,506 116,649 116,519 114,890 Federal Reserve note statement 35 Federal Reserve notes outstanding 194,549 194,688 195,045 195,559 196,165 193,440 194,635 196,021 36 LESS: Held by bank 31,839 31,035 30,928 31,839 32,650 31,315 31,643 32,293 37 Federal Reserve notes, net 162,710 163,653 164,117 163,720 163,515 162,125 162,992 163,728 Collateral held against notes net: 38 Gold certificate account 11,093 11,093 11,093 1111,,009933 11,093 11,095 11,093 11,093 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 146,999 147,942 148,406 148,009 147,804 146,412 147,281 148,017 42 Total collateral 162,710 163,653 164,117 163,720 163,515 162,125 162,992 163,728 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. 2. Assets shown in this line are revalued monthly at market exchange rates. NOTE: Some of these data also appear in the Board's H.4.1 (503) release. For 3. Includes special investment account at Chicago of Treasury bills maturing address, see inside front cover. within 90 days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holdings Millions of dollars Wednesday End of month TTTyyypppeee aaannnddd mmmaaatttuuurrriiitttyyy gggrrrooouuupppiiinnngggsss 1985 1985 Feb. 27 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Jan. 31 Feb. 28 Mar. 29 1 Loans—Total 1,939 1,509 5,840 1,465 385 2,139 2,329 2,582 2 Within 15 days 1,936 1,455 5,827 1,451 365 2,125 2,320 2,558 3 16 days to 90 days 3 54 13 14 20 14 9 24 4 91 days to 1 year 0 0 0 0 0 0 0 0 5 Acceptances—Total 0 0 0 0 0 0 0 0 6 Within 15 days 0 0 0 0 0 0 0 0 7 16 days to 90 days 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 U.S. government securities—Total 155,501 160,235 160,156 158,869 159,169 154,555 159,632 160,983 10 Within 15 days1 4,207 9,504 9,365 8,512 5,393 3,249 5,276 4,565 11 16 days to 90 days 33,057 31,185 31,636 33,327 34,744 32,498 33,214 37,280 46,136 46,995 46,604 44,479 46,481 47,474 49,056 46,587 13 Over 1 year to 5 years 36,859 37,309 37,309 37,309 37,309 37,101 36,844 37,309 14 Over 5 years to 10 years 14,546 14,546 14,546 14,546 14,546 14,000 14,546 14,546 15 Over 10 years 20,696 20,696 20,696 20,696 20,696 20,233 20,696 20,696 16 Federal agency obligations—Total 8,372 8,372 8,372 8,372 8,372 8,389 8,752 8,372 17 Within 15 days' 234 135 74 196 142 97 615 142 18 16 days to 90 days 514 598 603 481 461 755 514 461 19 91 days to 1 year 1,739 1,769 1,881 1,880 1,942 1,644 1,738 1,942 20 Over 1 year to 5 years 4,222 4,207 4,151 4,152 4,164 4,248 4,222 4,164 2 2 1 2 O O v v e e r r 5 1 0 y y e e a a rs r s to 10 years 1,2 3 6 9 4 9 1,2 3 6 9 4 9 1,2 3 6 9 4 9 1,2 3 6 9 4 9 1,2 3 6 9 4 9 1,2 3 4 9 6 9 1,2 3 6 9 4 9 1, 3 26 9 4 9 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 Domestic Nonfinancial Statistics • June 1985 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE Billions of dollars, averages of daily figures 1984 1985 IItteemm DD 1199 ee 88 cc 11 .. DD 1199 ee 88 cc 22 .. DD 1199 ee 88 cc 33 .. DD 1199 ee 88 cc 44 .. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS'' 11 TToottaall rreesseerrvveess22 32.10 34.28 36.14 38.71 38.39 38.14 37.76 38.11 38.71 39.71 40.37 40.56 22 NNoonnbboorrrroowweedd rreesseerrvveess 31.46 33.65 35.36 35.52 30.37 30.90 31.74 33.50 35.52 38.32 39.08 38.97 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt33 31.61 33.83 35.37 38.13 37.41 37.36 36.80 37.33 38.13 39.37 39.88 40.03 44 RReeqquuiirreedd rreesseerrvveess 31.78 33.78 35.58 37.86 37.70 37.52 37.14 37.42 37.86 38.97 39.46' 39.80 55 MMoonneettaarryy bbaassee44 158.10 170.14 185.49 198.74 195.78 196.25 196.18 197.43 198.74 200.07 202.1C 203.10 Not seasonally adjusted 6 Total reserves2 32.82 35.01 36.86 40.13 37.70 37.88 37.95 38.69 40.13 40.70 39.88 40.06 7 Nonborrowed reserves 32.18 34.37 36.09 36.94 29.68 30.64 31.94 34.07 36.94 39.31 38.59 38.47 8 Nonborrowed reserves plus extended credit3 32.33 34.56 36.09 39.55 36.72 37.10 36.99 37.91 39.55 40.36 39.39 39.53 9 Required reserves 32.50 34.51 36.30 39.28 37.01 37.25 37.33 37.99 39.28 39.96 38.97r 39.30 10 Monetary base4 160.94 173.17 188.76 202.02 196.11 196.07 196.13 198.22 202.02 200.93 199.54' 200.95 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS5 11 Total reserves2 41.92 41.85 38.89 40.70 37.26 38.04 38.51 39.23 40.70 41.12 40.27 40.49 12 Nonborrowed reserves 41.29 41.22 38.12 37.51 29.25 30.80 32.50 34.62 37.51 39.73 38.98 38.89 13 Nonborrowed reserves plus extended credit3 41.44 41.41 38.12 40.09 36.29 37.29 37.37 38.54 40.09 40.88 39.83 40.03 14 Required reserves 41.61 41.35 38.33 39.84 36.57 37.41 37.89 38.54 39.84 40.38 39.37 39.73 15 Monetary base4 170.47 180.52 192.36 202.59 195.68 196.23 196.69 198.77 202.59 201.35 199.94' 201.37 1. Figures incorporate adjustments for discontinuities associated with the of vault cash holdings of thrift institutions that is included in the currency implementation of the Monetary Control Act and other regulatory changes to component of the money stock plus, for institutions not having required reserve reserve requirements. To adjust for discontinuities due to changes in reserve balances, the excess of current vault cash over the amount applied to satisfy requirements on reservable nondeposit liabilities, the sum of such required current reserve requirements. After the introduction of contemporaneous reserve reserves is subtracted from the actual series. Similarly, in adjusting for discontin- requirements (CRR), currency and vault cash figures are measured over the uities in the monetary base, required clearing balances and adjustments to weekly computation period ending Monday. compensate for float also are subtracted from the actual series. Before CRR, all components of the monetary base other than excess reserves 2. Total reserves not adjusted for discontinuities consist of reserve balances are seasonally adjusted as a whole, rather than by component, and excess with Federal Reserve Banks, which exclude required clearing balances and reserves are added on a not seasonally adjusted basis. After CRR, the seasonally adjustments to compensate for float, plus vault cash used to satisfy reserve adjusted series consists of seasonally adjusted total reserves, which include requirements. Such vault cash consists of all vault cash held during the lagged excess reserves on a not seasonally adjusted basis, plus the seasonally adjusted computation period by institutions having required reserve balances at Federal currency component of the money stock and the remaining items seasonally Reserve Banks plus the amount of vault cash equal to required reserves during the adjusted as a whole. maintenance period at institutions having no required reserve balances. 5. Reflects actual reserve requirements, including those on nondeposit liabil- 3. Extended credit consists of borrowing at the discount window under the ities, with no adjustments to eliminate the effects of discontinuities associated terms and conditions established for the extended credit program to help with implementation of the Monetary Control Act or other regulatory changes to depository institutions deal with sustained liquidity pressures. Because there is reserve requirements. not the same need to repay such borrowing promptly as there is with traditional NOTE. Latest monthly and biweekly figures are available from the Board's short-term adjustment credit, the money market impact of extended credit is H.3(502) statistical release. Historical data and estimates of the impact on similar to that of nonborrowed reserves. required reserves of changes in reserve requirements are available from the 4. The monetary base not adjusted for discontinuities consists of total reserves Banking Section, Division of Research and Statistics, Board of Governors of the plus required clearing balances and adjustments to compensate for float at Federal Federal Reserve System, Washington, D.C. 20551. Reserve Banks and the currency component of the money stock less the amount Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A13 1.21 MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Billions of dollars, averages of daily figures 1984 1985 1981 1982 1983 1984 Dec. Dec. Dec. Dec. Dec. Jan. Feb. Mar. Seasonally adjusted 1 Ml 441.9 480.5 525.4 558.5 558.5 562.7 569.3 572.0 7 M2 1,796.6 1,965.3 2,196.3 2,371.3' 2,371.3' 2,398.8' 2,420.9' 2,429.2 M3 2,236.7 2,460.3 2,710.4 2,995.1' 2,995.1' 3,020.6' 3,041.3' 3,054.8 4 L 2,598.4 2,868.7 3,178.7 3,543.9' 3,543.9' n.a. n.a. n.a. 5 Debt2 4,323.8 4,710.1 5,224.6 5,936.6' 5,936.6' 6,000.8 6,062.5' n.a. Ml components 6 Currency2 124.0 134.1 148.0 158.7 158.7 159.4 160.6 161.3 7 Travelers checks3 4.3 4.3 4.9 5.2 5.2 5.3 5.3 5.4 9 8 D O e th m e a r n c d h e d c e k p a o b s l i e t s4 d eposits5 23 7 6 7 . . 2 4 2 1 3 0 9 2 . . 7 4 2 1 4 2 3 8 . . 7 9 2n4e8..O6 ' 2 1 4 4 8 6 . . 6 C 2 1 4 4 9 8 . . 1 9 2 1 5 5 1 1 . . 7 7 2 1 5 5 1 3 . . 8 5 10N o I n n t r M an 26 s actions components 1,354.6 1,484.8 1,670.9 1,812.9 1,812.9 1,836.1' 1,851.6' 1,857.2 11 In M3 only7 440.2 495.0 514.1 623.8 623.8 621.8' 620.4' 625.6 Savings deposits9 17 Commercial Banks 159.7 164.9 134.6 122.6 122.6 112211..66 112211..44 112200..33 13 Thrift institutions 186.1 197.2 178.2 166.0' 166.0' 167.0' 168.2' 168.7 Small denomination time deposits9 14 Commerical Banks 349.6 382.2 353.1 387.0 387.0 384.7' 382.0' 382.8 15 Thrift institutions 477.7 474.7 440.0 498.0' 498.0' 496.8' 495.1' 495.7 Money market mutual funds 16 General purpose and broker/dealer 150.6 185.2 138.2 167.7 167.7 172.2 175.4 177.9 17 Institution-only 36.2 48.4 43.2 62.7 62.7 65.0 62.2 59.5 Large denomination time deposits10 18 Commercial Banks11 247.3 261.8 225.1 264.4 264.4 262.3 264.4' 269.4 19 Thrift institutions 54.3 66.1 100.4 152.4 152.4 155.0 155.4' 154.1 Debt components 70 Federal debt 830.1 991.4 1,173.1 1,367.1 1,367.1 1,385.5' 1,402.2 n.a. 21 Non-federal debt 3,493.7 3,718.7 4,051.6 4,569.6' 4,569.9' 4,615.3' 4,660.3 n.a. Not seasonally adjusted 77 Ml 452.3 491.9 537.9 570.4 570.4 568.2 558.5 564.7 73 M2 1,798.7 1,967.4 2,198.1 2,376.3 2,376.3 2,404.0' 2,414.4' 2,429.5 74 M3 2,242.7 2,466.6 2,716.5 3,002.3 3,002.3 3,024.3' 3,034.6' 3,056.5 75 L 2,605.6 2,876.5 3,189.4 3,545.2' 3,545.2' n.a. n.a. n.a. 26 Debt2 4,323.8 4,710.1 5,218.5 5,930.2' 5,930.2' 5,992.3 6,038.6' n.a. ' Ml components 77 Currency2 126.1 136.4 150.5 160.9 160.9 158.3 158.6 159.8 78 Travelers checks3 4.1 4.1 4.6 4.9 4.9 4.9 5.0 5.1 79 Demand deposits4 243.6 247.3 251.6 257.4 257.4 254.9 244.9 246.3 30 Other checkable deposits5 78.5 104.1 131.3 147.2 147.2 150.1 150.0 153.5' Nontransactions components 31 M26 1,346.3 1,475.5 1,660.2 1,805.9 1,805.9 1,835.8' 1,855.9' 1,864.7 32 M3 only7 444.1 499.2 518.4 626.0 626.0 620.3' 620.2' 627.0 Money market deposit accounts 33 Commercial banks n.a. 26.3 230.0 267.1 267.1 280.4 289.3 294.0 34 Thrift institutions n.a. 16.6 145.9 147.9' 147.9' 153.2' 158.9' 163.8 Savings deposits8 35 Commercial Banks 157.5 162.1 132.0 121.4 121.4 121.1 120.4 120.6 36 Thrift institutions 184.7 195.5 176.5 164.9' 164.9' 165.8' 166.7' 168.5 Small denomination time deposits9 37 Commercial Banks 347.7 380.1 351.0 387.6 387.6 386.3' 384.1' 383.7 38 Thrift institutions 475.6 472.4 437.6 498.8 498.8 501.6 499.C 496.1 Money market mutual funds 39 General purpose and broker/dealer 150.6 185.2 138.2 167.7 167.7 172.2 175.4 177.9 40 Institution-only 36.2 48.4 43.2 62.7 62.7 65.0 62.2 59.5 Large denomination time deposits10 41 Commercial Banks11 252.1 266.2 228.5 265.9 265.9 263.0' 263.9' 269.7 42 Thrift institutions 54.3 66.2 100.7 151.6 151.6 154.5 155.3 153.2 Debt components 43 Federal debt 830.1 999911..44 1,170.2 11,,336644..77 1,364.7 11,,338833..11 1,383.1' n.a. 44 Non-federal debt 3,943.7 3,718.7 4,048.3 4,565.5' 4,565.5' 4,609.2 4,641.1' n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • June 1985 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, con- NOTE: Latest monthly and weekly figures are available from the Board's H.6 sumer credit (including bank loans), other bank loans, commercial paper, bankers (508) release. Historical data are available from the Banking Section, Division of acceptances, and other debt instruments. The source of data on domestic Research and Statistics, Board of Governors of the Federal Reserve System, nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt Washington, D.C. 20551. data are on an end-of-month basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A15 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. 1984 1985 Sept. Oct. Nov. Dec. Jan. Feb. DEBITS TO Seasonally adjusted Demand deposits2 1 All insured banks 80,858.7 90,914.4 109,642.3 124,117.4 142,907.3 134,016.3 137,512.0 140,678.6 143,281.5 2 Major New York City banks 34,108.1 37,932.9 47,769.4 55,591.4 67,488.7 60,992.8 62,341.0 64,474.7 63,157.0 3 Other banks 46,966.5 52,981.5 61,873.1 68,526.0 75,418.5 73,023.5 75,171.0 76,203.9 80,124.5 4 ATS-NOW accounts3 761.0 1,036.2 1,405.5 1,640.6 1,698.6 1,678.5 1,677.5 1,552.0 1,618.6 5 Savings deposits4 679.6 720.3 741.4 566.8 597.2 579.1 486.0 501.3 499.8 DEPOSIT TURNOVER Demand deposits2 6 All insured banks 285.8 324.2 379.7 424.5 486.8 448.2 453.4 468.6 471.4 7 Major New York City banks 1,116.7 1,287.6 1,528.0 1,822.5 2,199.6 1,917.5 1,903.0 2,008.6 1,902.2 8 Other banks 185.9 211.1 240.9 261.7 286.9 273.3 277.8 284.2 295.9 9 ATS-NOW accounts3 14.4 14.5 15.6 16.2 16.9 16.5 16.3 14.6 15.0 10 Savings deposits4 4.1 4.5 5.4 4.6 4.9 4.7 4.0 4.2 4.2 DEBITS TO Not seasonally adjusted Demand deposits2 11 All insured banks 81,197.9 91,031.8 109,517.6 120,120.8 141,249.5 131,791.6 140,166.0 148,880.1 129,297.2 12 Major New York City banks 34,032.0 38,001.0 47,707.4 54,329.0 64,790.2 61,148.7 64,498.9 68,203.1 57,337.4 N Other banks 47,165.9 53,030.9 64,310.2 65,791.8 76,459.2 70,643.0 75,667.1 80,677.0 71,959.8 14 ATS-NOW accounts3 737.6 1,027.1 1,397.0 1,523.7 1,665.7 1,524.8 1,625.4 1,838.9 1,524.4 15 MMDA5 567.4 821.6 901.1 819.7 899.7 1,103.9 980.9 16 Savings deposits4 672.9 720.0 742.0 543.1 616.2 538.7 470.6 544.7 455.5 DEPOSIT TURNOVER Demand deposits2 17 All insured banks 286.4 325.0 379.9 408.9 479.9 438.8 447.1 486.0 437.2 18 Major New York City banks 1,114.2 1,295.7 1,510.0 1,786.4 2,120.7 1,944.6 1,910.8 2,025.9 1,780.6 19 Other banks 186.2 211.5 240.5 249.8 289.9 262.7 270.5 295.9 273.0 70 ATS-NOW accounts3 14.0 14.4 15.5 15.2 16.6 14.9 15.4 17.1 14.3 '1 MMDA5 2.8 3.4 3.7 3.2 3.4 4.0 3.4 22 Savings deposits4 4.1 4.5 5.4 4.5 5.1 4.4 3.9 4.6 3.9 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 These data also appear on the Board's G.6 (406) release. For address, see inside as Christmas and vacation clubs. front cover. 5. Money market deposit accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Nonfinancial Statistics • June 1985 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1984 1985 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted 1 Total loans and securities2 1,612.9 1,629.8 1,636.6 1,652.6 1,662.1 1,674.9 1,682.8 1,701.1 1,714.8 1,724.0 1,742.1' 1,759.0 2 U.S. government securities 257.6 257.3 253.7 256.4 257.1 258.0 257.0 259.4 260.2 260.1 265.7 267.1 3 Other securities 142.1 140.5 139.7 139.5 140.8 141.9 141.5 141.1 139.9 142.5 141.1' 139.0 4 Total loans and leases2 1,213.2 1,232.0 1,243.2 1,256.7 1,264.2 1,275.0 1,284.3 1,300.6 1,314.7 1,321.4 1,335.3' 1,353.0 5 Commercial and industrial 438.5 448.0 452.2 455.0 458.1 460.0 463.0 467.1 468.1 468.5 473.8 480.4 6 Bankers acceptances held3.. 5.2 5.8 5.8 6.5 6.1 5.7 5.9 6.2 5.4 5.1 6.3 6.5 7 Other commercial and industrial 433.2 442.2 446.3 448.5 451.9 454.3 457.1 460.8 462.7 463.4 467.6' 473.9 8 U.S. addressees4 420.8 430.2 434.7 436.8 440.3 443.2 446.5 450.5 453.1 453.7 457.4 463.6 9 Non-U.S. addressees4.... 12.4 12.0 11.7 11.6 11.6 11.1 10.6 10.3 9.6 9.7 10.2 10.3 10 Real estate 347.2 350.7 354.7 358.3 361.2 364.8 367.7 371.8 375.6 377.9 381.9 385.7 11 Individual 224.9 229.0 233.0 236.3 238.5 241.3 243.5 246.7 251.0 254.6 257.7 262.0 12 Security 29.6 30.1 28.6 28.0 26.1 28.8 30.3 30.2 31.5 31.9 3311..66 3322..88 13 Nonbank financial institutions 30.5 31.4 31.4 31.4 30.9r 31.3' 31.2' 31.2 31.4 31.3' 30.9 30.7 14 Agricultural 40.1 40.3 40.4 40.6 40.5 40.7 40.6 40.5 40.3 40.2 4400..22 40.3 15 State and political subdivisions 36.8' ll.ff IS.P 40.3' 41.1' 41.6' 41.2' 42.1' 44.0' 46.8' 46^ 46.8 16 Foreign banks 12.7 12.3 12.3 12.2 12.0 11.5 11.4 11.7 11.4 11.3 11.4 11.1 17 Foreign official institutions ... 8.9 8.9 8.8' 9.3 9.4 8.9' 8.5' 8.4 8.3 7.8' 7.9 7.7 18 Lease financing receivables... 14.0 14.1 14.3 14.5 14.8 15.0 15.1 15.3 15.5 15.6 15.8 16.1 19 All other loans 29^ 29.6' 28.8' 30^ 31.7' 31.2' 31.9' 35.7' 37.5' 35.2' 37.4' 39.4 Not seasonally adjusted 20 Total loans and securities2 1,613.7 1,626.6 1,637.6 1,646.7 1,656.1 1,673.3 1,684.0 1,701.9 1,725.8 1,732.0 1,740.2' 1,755.2 21 U.S. government securities 263.0 259.4 257.2 256.2 255.5 255.8 254.1 255.3 256.9 260.0 266.6 269.2 2 2 2 3 O To th ta e l r l s o e a c n u s ri a t n i d es leases2 1,2 1 0 4 9 1 . . 0 8 1,2 1 2 4 6 1 . . 1 1 1,2 1 4 3 1 9 . . 0 4 1,2 1 5 3 2 8 . . 4 2 1,2 1 6 4 0 0 . . 2 4 1,2 1 7 4 6 1 . . 3 3 1,2 1 8 4 9 0 . . 0 9 1,3 1 0 4 5 1 . . 5 2 1,3 1 2 4 7 1 . . 4 5 1,3 1 2 4 8 3 . . 6 4 1,3 1 3 4 2 1 . . 2 3 ' ' 1,3 1 4 3 6 9 . . 8 2 2 2 4 5 Co B m a m n e k r e c rs i al a c a c n e d p t i a n n d c u es s tr h i e a l l d . 3 . .. . . 438 5 . . 7 3 446 5 . . 8 7 450 6 . . 9 0 454 6 . . 3 4 456 5 . . 1 9 459 55 . .. 9 66 463 55 . .. 8 88 467 66 . .. 3 11 471 55 . .. 2 88 470 55 . .. 4 22 473 66 . .. 3 11 480 66.. . 44 0 26 Other commercial and industrial 433.4 441.0 444.8 447.9 450.1 454.3 458.0 461.2 465.3 465.2 467.2 473.6 2277 U.S. addressees4 421.7 429.5 433.5 436.2 438.5 443.0 447.0 450.2 454.8 455.4 457.6' 463.8 28 Non-U.S. addressees4 11.7 11.6 11.3 11.7 11.6 11.3 11.1 11.0 10.6 9.8 9.7 9.8 29 Real estate 346.0 349.8 354.1 357.7 361.4 365.9 368.9 372.8 376.2 378.5 381.5 384.6 30 Individual 222.9 227.2 231.3 234.7 238.3 242.4 245.3 248.4 254.0 257.1 257.4 259.8 31 Security 29.6 28.9 28.5 26.6 25.4 27.7 30.2 31.7 3355..22 3333..00 3300..88 3322..22 32 Nonbank financial institutions 30.7 31.2 31.4 31.4 31.(K 31.4' 31.1 31.1 31.5 31.4 30.7 30.7 3333 Agricultural 39.4 40.2 40.9 41.3 41.4 41.5 41.2 40.6 4400..00 3399..66 3399..44 3399..33 34 State and political subdivisions 36.8' 37.& 38.9' 40.3' 41.1' 41.6' 41.2' 42.1' 44.C 46.8' 46.6' 46.8 3355 Foreign banks 12.3 12.0 11.8 12.0 11.7 11.7 11.8 12.0 12.0 11.6 11.4 10.9 36 Foreign official institutions ... 8.9 8.9 8.8' 9.3 9.4 8.9' 8.5' 8.4 8.3 7.8' 7.9 7.7 37 Lease financing receivables... 14.0 14.1 14.3 14.4 14.7 14.9 15.0 15.1 15.5 15.8 16.0 16.2 38 All other loans 29.5' 29.6' 30.1' 30.3' 29.8' 30.5' 32.1' 35.8' 39.5' 36.4' 37.2' 38.6 1. Data are prorated averages of Wednesday estimates for domestically char- 2. Excludes loans to commercial banks in the United States. tered insured banks, based on weekly sample reports and quarterly universe 3. Includes nonfinancial commercial paper held. reports. For foreign-related institutions, data are averages of month-end estimates 4. United States includes the 50 states and the District of Columbia. based on weekly reports from large U.S. agencies and branches and quarterly NOTE. These data also appear in the Board's G.7 (407) release. For address, see reports from all U.S. agencies and branches, New York investment companies inside front cover. majority owned by foreign banks, and Edge Act corporations owned by domestically chartered and foreign banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A17 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS' Monthly averages, billions of dollars 1984 1985 SSoouurrccee Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Total nondeposit funds 1 Seasonally adjusted2 102.1 109.1 99.4 100.3 103.5 106.5 107.9 112.0 108.6 102.2 113.7' 111166..66 2 Not seasonally adjusted 105.0 113.8 101.8 99.9 105.7 107.0 109.6 117.5 111.1 104.6 117.1 119.0 Federal funds, RPs, and other borrowings from nonbanks3 3 Seasonally adjusted 135.7 137.4 133.2 134.5 139.3 141.6 141.4 145.0 140.5 138.7 146.7 147.2 4 Not seasonally adjusted 138.7 142.1 135.7 134.0 141.5 142.1 143.1 150.5 143.1 141.1 150.2 149.6 5 Net balances due to foreign-related institutions, not seasonally adjusted -33.5 -28.2 -33.9 -34.2 -35.8 -35.1 -33.5 -33.1 -32.0 -36.5 -33.1 --3300..66 MEMO 6 Domestically chartered banks' net positions with own foreign branches, not seasonally adjusted4 -33.1 -29.8 -32.9 -33.1 -35.0 -35.2 -34.2 -32.7 -31.4 -34.9 -31.8 --2299..88 7 Gross due from balances 73.6 73.5 73.8 71.2 72.8 71.5 69.8 68.3 69.0 71.4 70.6 71.5 8 Gross due to balances 40.4 43.6 40.9 38.1 37.7 36.3 35.6 35.6 37.6 36.5 38.8 41.7 9 Foreign-related institutions' net positions with directly related institutions, not seasonally adjusted5 -0.3 1.6 -0.9 -1.0 -0.7 0.1 0.7 -0.4 -0.6 -1.6 -1.3 --00..88 10 Gross due from balances 49.6 49.7 50.7 51.9 51.6 51.7 50.8 50.7 52.0 52.9 54.0 53.3 11 Gross due to balances 49.2 51.2 49.7 50.8 50.8 51.8 51.5 50.4 51.4 51.3 52.7 52.5 Security RP borrowings 12 Seasonally adjusted® 80.9 79.6 76.1 77.5 79.9 81.4 82.0 84.0 81.1 82.3 90.1 9922..00 13 Not seasonally adjusted 81.3 81.9 76.0 74.6 79.6 79.4 81.2 87.0 81.1 82.2 91.1 92.0 U.S. Treasury demand balances7 14 Seasonally adjusted 15.6 13.4 14.1 12.8 13.1 16.0 8.0 1177..33 1166..11 1144..77 1133..00 1111..88 15 Not seasonally adjusted 16.5 12.8 12.4 11.9 10.3 17.5 11.0 10.4 12.5 18.5 15.8 12.8 Time deposits, $100,000 or more8 16 Seasonally adjusted 292.2 302.2 309.9 314.8 314.2 315.4 321.4 323.0 325.8 324.8 325.3'" 332299..88 17 Not seasonally adjusted 290.1 300.2 309.0 313.7 315.6 316.8 322.2 322.9 327.3 325.6 324.9 330.1 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. York investment companies majority owned by foreign banks, and Edge Act 4. Averages of daily figures for member and nonmember banks. corporations owned by domestically chartered and foreign banks. 5. Averages of daily data. 2. Includes seasonally adjusted federal funds, RPs, and other borrowings from 6. Based on daily average data reported by 122 large banks. nonbanks and not seasonally adjusted net Eurodollars. Includes averages of 7. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at Wednesday data for domestically chartered banks and averages of current and commercial banks. Averages of daily data. previous month-end data for foreign-related institutions. 8. Averages of Wednesday figures. 3. Other borrowings are borrowings on any instrument, such as a promissory NOTE. These data also appear in the Board's G. 10 (411) release. For address see note or due bill, given for the purpose of borrowing money for the banking inside front cover. business. This includes borrowings from Federal Reserve Banks and from foreign Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • June 1985 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series Billions of dollars 1983 1984 1985 AAccccoouunntt Dec. June July Aug. Sept. Oct. Nov. Dec. Jan.' Feb.' Mar. ALL COMMERCIAL BANKING INSTITUTIONS1 1 Loans and securities 1.680.62 1,764.1 1,765.3 1,784.5 1,798.9 1,822.7 1,822.7 1,864.0 1,854.6 1,874.4 1.879.1 2 Investment securities 7.4 381.2 378.2 376.2 377.3 375.2 374.4 377.5 380.9 382.0 383.6 3 U.S. government securities 6.1 248.2 246.5 243.5 243.5 241.2 240.4 242.5 245.0 248.0 250.8 4 Other 1.3 133.0 131.7 132.7 133.8 134.0 133.9 134.9 136.0 134.0 132.8 5 Trading account assets .0 14.6 15.7 20.0 20.9 22.5 21.9 22.9 24.2 27.6 23.7 6 Total loans 1,249.32 1,368.3 1,371.4 1,388.4 1,400.6 1,424.9 1,426.4 1,463.7 1,449.5 1,464.8 1,471.7 7 Interbank loans 111.42 122.8 118.6 127.1 123.3 126.1 122.6 126.9 125.2 128.6 124.3 8 Loans excluding interbank 1,137.92 1,245.5 1,252.8 1,261.2 1,277.3 1,298.8 1,303.8 1,336.8 1,324.3 1,336.2 1,347.4 9 Commercial and industrial 419.4 452.9 454.4 455.2 459.9 467.7 468.7 476.8 470.0 476.8 482.7 10 Real estate 332.4' 354.6 356.8 361.8 366.7 369.8 374.4 377.7 380.7 382.6 385.9 11 Individual 217.6' 232.8 235.2 240.0 243.4 247.1 249.6 255.5 257.4 258.1 260.6 12 All other 168.52 205.2 206.5 204.2 207.3 214.2 211.1 226.8 216.1 218.7 218.3 13 Total cash assets 219.6 185.6 179.1 177.3 176.0 188.0 188.4 201.9 187.8 189.2 183.6 14 Reserves with Federal Reserve Banks 23.5 19.1 19.4 17.4 .8 18.1 20.4 20.5 20.9 19.6 20.0 15 Cash in vault 23.4 21.8 21.6 22.2 21.6 21.4 23.9 23.3 21.9 21.8 21.3 16 Cash items in process of collection ... 73.2 63.7 60.2 60.7 63.2 70.2 66.5 75.9 66.9 68.8 63.9 17 Demand balances at U.S. depository institutions 30.8 29.3 29.5 31.2 32.0 30.9 34.5 30.8 32.2 31.5 18 Other cash assets J 995 50.1 48.6 47.5 59.3 46.3 46.7 47.7 47.3 46.7 46.9 19 Other assets 193.6 191.8 191.3' 201.2' 201.6' 190.1' 196.8' 191.9, 195.2, 192.7 20 Total assets/total liabilities and capital ... 2,093.8 2,141.4' 2,135.6' 2,152.4' 2,176.1' 2,212.2' 2,201.2' 2,262.6' 2,234.2 2,258.8 2,255.3 21 Deposits 1,508.9 1,532.9 1,535.5 1,539.0 1,549.9 1,578.9 1,578.2 1,631.2 1,604.5 1,617.9 1,625.2 22 Transaction deposits 374.62 445.9 441.4 440.0 442.3 462.7 453.1 491.1 456.9 459.3 457.6 23 Savings deposits 457.22 369.5 368.5 365.1 364.9 371.1 378.1 386.3 400.0 406.8 409.8 24 Time deposits 677.1 717.4 725.6 734.0 742.7 745.0 747.0 753.8 747.5 751.8 757.8 25 Borrowings 273.22 292.8 292.0 301.5 307.1 314.3 298.8 304.1 306.7 309.0 300.2 26 Other liabilities 164.42 173.8' 167.9' 169.7' 172.9' 175.1' 179.4' 181.1' 174.2 182.6 180.5 27 Residual (assets less liabilities) 147.32 141.9 140.2 142.1 146.2 144.0 144.8 146.2 148.9 149.3 149.4 MEMO 28 U.S. government securities (including trading account) 225544..II22 256.5 255.6 255.1 255.5 256.3 255.2 256.9 262.0 269.5 268.4 29 Other securities (including trading account) 117777..2222 139.3 138.3 141.0 142.7 141.5 141.1 143.4 143.1 140.1 139.0 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 1.591.32 1,671.0 1,676.7 1,688.4 1,708.0 1,728.5 1,726.7 1,765.4 1,759.6 1,774.6 1,781.9 31 Investment securities n.a. 374.5 371.2 369.1 370.0 367.9 367.5 370.5 373.7 374.7 376.7 32 U.S. government securities n.a. 243.1 241.4 238.5 238.5 236.1 235.8 237.9 240.2 243.2 246.6 33 Other n.a. 131.4 129.8 130.7 131.5 131.8 131.6 132.6 133.5 131.5 130.1 34 Trading account assets n.a. 14.6 15.7 20.0 20.9 22.5 21.9 22.9 24.2 27.6 23.7 35 Total loans 1.167.42 1,281.8 1,289.8 1,299.4 1,317.0 1,338.0 1,337.3 1,372.1 1,361.7 1,372.3 1,381.4 36 Interbank loans 87.02 94.7 95.2 97.6 100.0 103.3 96.1 102.8 100.6 100.9 99.9 37 Loans excluding interbank 1,080.42 1,187.1 1,194.6 1,201.8 1,217.1 1,234.7 1,241.2 1,269.3 1,261.2 1,271.4 1,281.5 38 Commercial and industrial 381.32 412.9 414.0 414.5 418.8 423.0 424.7 430.2 425.7 431.5 435.5 39 Real estate 327.2 350.5 353.1 358.0 362.4 365.5 369.1 372.1 375.1 377.3 380.8 40 Individual 217.4 232.6 235.1 239.8 243.2 246.9 249.4 255.3 257.2 257.9 260.4 41 All other 154.62 191.1 192.4 189.6 192.6 199.3 198.0 211.7 203.1 204.8 204.9 42 Total cash assets 207.0 173.2 166.7 165.9 164.0 176.6 176.8 190.3 175.7 177.8 172.4 43 Reserves with Federal Reserve Banks 19.9 18.4 18.0 16.7 .1 17.1 19.7 19.2 20.2 18.7 19.2 44 Cash in vault 23.4 21.8 21.6 22.2 21.6 21.4 23.9 23.3 21.9 21.8 21.3 45 Cash items in process of collection ... 73.0 63.5 60.1 60.5 63.0 69.9 66.3 75.7 66.7 68.5 63.7 46 Demand balances at U.S. depository \ „ institutions 29.4 27.9 28.2 29.7 30.7 29.4 32.9 29.5 30.9 30.2 47 Other cash assets 40.1 39.2 38.3 49.6 37.5 37.5 39.3 37.5 37.9 38.0 48 Other assets 150.4 141.5 138.9 140.6 145.6 147.9 139.7 142.1 137.6 139.0 137.3 49 Total assets/total liabilities and capital... 1,948.7 1,985.7 1,982.3 1,995.0 2,017.6 2,053.1 2,043.2 2,097.8 2,072.9 2,091.4 2,091.7 50 Deposits 1,468.1 1,492.5 1,495.4 1,500.3 1,510.9 1,539.1 1,538.0 1,587.8 1,561.8 1,573.7 1,580.6 51 Transaction deposits 368.52 439.6 434.8 433.7 435.9 456.2 446.8 484.5 450.6 452.9 451.4 52 Savings deposits 456.62 368.6 367.5 364.2 363.9 370.1 377.1 385.2 398.9 405.6 408.6 53 Time deposits 643.0 684.3 693.1 702.4 711.1 712.8 714.1 718.1 712.3 715.2 720.6 54 Borrowings 214.12 229.6 228.0 236.0 243.5 251.3 240.9 243.1 246.5 247.0 239.9 55 Other liabilities 122.32 124.4 121.5 119.3 119.7 120.5 122.3 123.5 118.4 124.2 124.6 56 Residual (assets less liabilities) 144.12 139.1 137.4 139.3 143.4 142.1 142.0 143.4 146.1 146.5 146.6 1. Commercial banking institutions include insured domestically chartered NOTE. Figures are partly estimated. They include all bank-premises subsidiarcommercial banks, branches and agencies of foreign banks, Edge Act and ies and other significant majority-owned domestic subsidiaries. Loan and securi- Agreement corporations, and New York State foreign investment corporations. ties data for domestically chartered commercial banks are estimates for the last 2. Data are not comparable with those of later dates. See the Announcements Wednesday of the month based on a sample of weekly reporting banks and section of the March 1985 BULLETIN for a description of the differences. quarter-end condition report data. Data for other banking institutions are esti- 3. Insured domestically chartered commercial banks include all member banks mates made for the last Wednesday of the month based on a weekly reporting and insured nonmember banks. sample of foreign-related institutions and quarter-end condition reports. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A19 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 1985 Feb. 13' Feb. 2(V Feb. 27' Mar. (? Mar. 13' Mar. 20 Mar. 27 Apr. 3 Apr. 10 1 Cash and balances due from depository institutions 93.186 105,799 90,937 91,565 94,050 90,761 87,073 92,397 2 Total loans, leases and securities, net 823,236 827,490 828,532 830,350 829,742 827,400 829,298 836,345 3 U.S. Treasury and government agency 85,711 90,052 91,520 91,954 90,327 86,954 86,950 87,428 4 Trading account 17,610 20,289 21,500 22,234 20,417 17,652 17,512 17,316 5 Investment account, by maturity 68,102 69,762 70,020 69,720 69,910 69,302 69,438 70,112 6 One year or less 20.187 19,958 20,318 21,652 21,687 21,043 21,211 21,576 7 Over one through five years 34,476 37,044 36,711 34,968 35,002 35,224 35,213 35,254 8 Over five years 13,438 12,760 12,991 13,100 13,220 13,035 13,013 13,282 9 Other securities 47,934 47,799 47,251 47,185 46,710 46,742 47,143 45,845 10 Trading account 3,551 3,571 3,169 3,247 3,248 3,610 3,802 2,614 11 Investment account 44,382 44,228 44,082 43,938 43,463 43,132 43,341 43,231 12 States and political subdivisions, by maturity 39,828 39,678 39,529 39,363 38,886 38,577 38,737 38,471 13 One year or less 5,340 5,329 5,252 5,245 4,922 4,559 4,542 4,543 14 Over one year 34,488 34,349 34,278 34,118 33,964 34,018 34.195 33,928 15 Other bonds, corporate stocks, and securities 4,554 4,550 4,552 4,575 4,577 4,556 4,604 4,761 16 Other trading account assets 3,435 3,238 2,956 2,965 3,047 2,490 2,427 3,018 17 Federal funds sold1 51,377 49,599 49,087 47,357 51,504 48,994 51,804 54,904 18 To commercial banks 36,863 34,612 33,724 31,169 35,205 33,478 36,335 38,245 19 To nonbank brokers and dealers in securities 10,403 10,619 11,048 11,698 11,514 10,368 10,281 11,080 20 To others 4,111 4,368 4,315 4,490 4,785 5,148 5,187 5,579 21 Other loans and leases, gross2 651,311 653,379 654,350 657,627 654,985 659,004 657,592 661,828 22 Other loans, gross2 638,450 640,394 641,193 644,422 641,780 645,800 644,3% 648,580 23 Commercial and industrial2 251,284 252,335 253,256 255,601 254,935 256,079 255,670 256,355 24 Bankers acceptances and commercial paper 3,945 3,844 3,928 4,403 4,138 3,758 3,795 3,735 25 All other 247,338 248,492 249,329 251,198 250,797 252,322 251,875 252,620 26 , U.S. addressees 241,727 242,797 243,615 245,440 245,080 246,554 246,263 247,078 27 Non-U.S. addressees 5,612 5,694 5,714 5,758 5,717 5,768 5,612 5,542 4 2 2 3 3 3 3 3 3 4 3 3 3 3 0 8 9 2 3 5 6 7 9 1 0 1 4 8 L LE ea SS s T T T T T R F A e : o o o o o o e l U L l N B C r f a i f i d s n o l f n o a o n o o t p i e a e a t n n n a m d e r u p h n n a a b t k e s i r o c e m r n e v t i s a i r c s a g a n s c i n n e h d e i n n i t e g k t n a r e a d u d o c n g s a a r f l d i d r i o l g o l i o y a n e e e s n v r l a r g a p c p i c e e a n f c e s o b o o r i o n e a u s i s g l a r n m 2 d v n i i l n n t t t r m a d e p i o u k e b c c f e r e r s s i a c o l y n r a n e e l a u s a l i r s t n r o a n s n s v r p n n c u t e t y a i r d r a 2 b h a i n o i l l n e d e o d d g s e i t u i U v x h n o s c i p e n f s s e t r f t e i i c i i i o t o n c u t e f n n i u d i r d a n s i t i l a t i t S i o n u i e n t c n r s a i s s e a t t s l e i t s i u n t s i t o i n tu s tions . 1 1 4 2 2 1 6 1 1 1 1 1 6 4 2 6 5 9 3 4 2 3 1 4 2 1 , , , , , , , , , , , , , , 9 2 4 0 8 2 7 8 3 1 3 2 8 2 2 7 5 1 1 6 2 6 8 8 8 2 6 7 1 0 1 4 0 6 7 0 7 0 6 0 0 2 1 1 4 2 2 1 6 1 1 1 1 1 6 1 4 9 6 5 3 4 3 0 4 2 4 1 , , , , , , , , , , , , , , 0 1 0 2 5 9 8 0 7 9 0 9 7 3 2 7 9 6 9 7 1 1 2 8 5 1 9 1 5 7 2 3 3 5 4 3 0 5 6 9 9 4 1 1 4 2 2 1 1 6 1 1 1 1 5 3 0 9 6 5 3 5 3 3 1 3 1 4 , , , , , , , , , , , , , , 7 8 8 2 5 3 9 9 6 5 1 2 3 2 7 4 3 1 9 6 3 1 1 0 5 3 2 4 7 3 8 2 4 7 6 3 0 6 7 7 9 8 1 1 4 2 2 1 1 6 1 1 1 1 0 5 9 3 7 5 3 5 3 4 3 0 4 1 , , . , , , , , , , , , , . 7 2 4 6 2 0 6 5 8 8 2 7 0 4 9 5 9 8 4 4 2 1 9 0 9 8 9 9 7 7 3 0 3 9 6 0 8 5 0 0 8 4 1 1 2 3 2 1 1 1 6 1 1 3 9 5 5 9 9 6 3 5 3 3 4 3 1 , , , . , , , , , , , , , , 6 7 2 9 8 5 2 6 6 8 2 3 4 5 3 9 7 7 4 6 9 5 5 4 0 6 8 5 4 1 4 4 6 3 3 4 7 0 5 0 7 6 1 1 2 3 2 6 1 1 1 1 1 3 9 5 9 9 7 5 3 4 5 5 3 3 1 , , , , , , , , , , , , , , 7 8 8 4 0 7 2 6 3 9 6 2 8 5 2 8 9 8 5 2 6 0 5 4 8 0 5 2 2 8 2 3 5 5 4 6 6 6 4 4 6 0 1 1 3 2 2 1 1 6 1 1 1 9 5 3 8 7 9 3 5 6 4 4 3 3 1 , , , , , , , , , , , . , , 3 8 3 5 0 2 2 7 8 5 9 7 1 3 8 5 1 8 5 9 7 3 6 3 5 2 9 2 1 5 4 0 3 6 6 6 9 2 5 2 6 5 1 1 3 2 2 1 6 1 1 1 1 1 9 4 5 7 9 5 6 4 3 0 6 3 1 4 , , , , , , , , , , , , , , 6 0 5 6 5 4 0 0 2 4 8 4 2 5 3 4 1 5 3 6 6 1 2 9 7 5 4 4 5 9 8 2 1 9 8 3 6 8 6 7 9 9 4 4 2 3 O Al t l h o er t h l e o r a n a s s s a e n ts d leases, net2 6 1 3 3 4 2 , ,3 7 1 7 1 9 6 1 3 2 6 9 , , 8 7 0 6 2 6 6 1 3 3 7 1 , , 7 3 1 5 8 5 6 1 4 3 0 0 , , 8 9 8 8 9 2 6 1 3 2 8 8 , , 1 7 5 0 4 5 6 1 4 2 2 9 , , 2 4 2 5 0 6 6 1 4 2 0 9 , , 9 1 7 9 4 2 6 1 4 3 5 4 , , 1 01 4 7 9 44 Total assets 1,048,734 1,063,055 1,050,824 1,052,898 1,052,497 1,047,617 1,045,563 1,062,759 45 Demand deposits 188,257 197,177 185,247 184,905 181,664 185,023 182,381 194,793 46 Individuals, partnerships, and corporations 145,246 148,877 140,364 140,530 141,993 140,153 139,204 145,332 47 States and political subdivisions 4,684 5,515 4,883 5,154 4,408 5,169 4.719 4,693 48 U.S. government 1,617 1,897 2,713 2,286 1,156 4,040 2,581 4,512 49 Depository institutions in United States 20,951 25,266 22,190 22,104 20,259 21,427 21,511 23,456 50 Banks in foreign countries 6,131 6,366 5,740 5,392 4,989 5,429 5,302 6,050 51 Foreign governments and official institutions 922 821 744 736 690 776 810 850 52 Certified and officers' checks 8,705 8,435 8,612 8,703 8,169 8,029 8,254 9,900 53 Transaction balances other than demand deposits 35,851 35,960 35,478 37,317 36,597 36,409 36,111 38,852 54 Nontransaction balances 460,175 460,259 462,500 462,928 462,460 463,404 464,684 465,610 55 Individuals, partnerships and corporations 424,908 424,992 426,428 427,604 426,942 427,898 428,768 430,602 56 States and political subdivisions 22,841 22,935 23,360 22,967 23,170 23,452 23,682 22,953 57 U.S. government 449 447 423 455 355 349 347 342 58 Depository institutions in the United States 9,006 8,968 9,334 9,117 9,242 8,991 9,167 9,073 6 5 6 6 6 6 0 9 2 3 4 1 Lia T O F A B b o r l o t l i h e r r l a e i e o r t i r s t o i g u h e w n l s r e i i y r a n g f b o o l g t i i r a s v l a i x e b t b f - i r r i o e a l n o s r i n t m m r d i a o e e - s n w F l n o d e e t a f d s d o n s , e r u r m o n b b a f o o o l f o i r t n r c R e d r e i s a i y e o n l s w a e i e t n r d e v s d t e m i t n B u o o t a n t i n e o e k n y a s s 3 n d a nd d eb b e a n n t k u s r . e . s 1 1 9 9 8 2 3 8 7 7 1 , , , , , , 9 8 2 1 5 3 7 1 6 3 6 6 0 9 8 0 9 9 2 1 0 9 9 0 2 6 9 0 , , , , , 2 9 1 1 3 7 5 3 1 4 3 8 8 1 7 7 4 0 1 1 9 8 9 1 7 2 5 7 1 0 , , , , , , 9 4 2 1 5 3 5 3 3 4 4 6 5 6 8 2 4 0 1 1 9 9 9 2 6 3 7 2 1 , , , , , , 7 9 6 1 2 2 8 8 6 9 7 0 4 3 9 3 6 0 1 1 9 9 9 2 8 5 2 9 1 , , , , , , 7 4 5 1 6 9 2 5 5 3 6 5 1 0 8 9 4 4 1 1 9 9 8 2 6 8 3 3 1 , , , , , , 3 7 6 0 3 0 9 1 7 3 1 4 1 4 5 4 6 3 1 1 9 9 8 2 7 7 1 4 . , , , , 7 0 1 9 8 2 9 6 0 5 0 0 0 6 4 1 1 9 9 8 2 6 4 3 8 , , , , , 0 6 6 5 5 5 2 5 9 4 5 0 1 1 7 0 4 0 65 Total liabilities 975,270 989,788 977,804 979,303 978,817 974,260 972,226 988,927 66 Residual (total assets minus total liabilities)4 73,464 73,268 73,020 73,595 73,679 73,357 73,337 73,832 MEMO 67 Total loans and leases (gross) and investments adjusted5 791,518 798,500 800,212 805,138 801,594 800,824 799,726 804,711 68 Total loans and leases (gross) adjusted2-5 654,438 657,411 658,485 663,035 661,510 664,638 663,206 668,420 69 Time deposits in amounts of $100,000 or more 156,125 155,714 157,194 157,026 156,689 156,978 157,742 156,796 7 7 1 0 Lo C a o ns m m so e ld r c o ia u l t r a i n g d h t in to d u a s f t f r i i l a ia l tes—total6 2 1 , , 8 8 1 7 1 2 2 1 , , 8 9 4 1 1 0 2 1 , , 8 8 2 8 2 0 2 U ,8 28 2 1 . , 8 9 4 1 7 8 2 1 , , 8 9 9 7 7 4 2 1 , , 8 9 2 2 8 7 2 1 , , 8 9 5 6 5 2 72 Other 939 931 942 942 929 923 900 893 73 Nontransaction savings deposits (including MMDAs)... 174,802 175,664 176,302 176,755 176,492 176,916 177,132 178,585 1. Includes securities purchased under agreements to resell. 5. Exclusive of loans and federal funds transactions with domestic commercial 2. Levels of major loan items were affected by the Sept. 26, 1984 transaction banks. between Continental Illinois National Bank and the Federal Deposit Insurance 6. Loans sold are those sold outright to a bank's own foreign branches, Corporation. For details see the H.4.2 statistical release dated Oct. 5, 1984. nonconsolidated nonbank affiliates of the bank, the bank's holding company (if 3. Includes federal funds purchased and securities sold under agreements to not a bank), and nonconsolidated nonbank subsidiaries of the holding company. repurchase; for information on these liabilities at banks with assets of $1 billion or NOTE. These data also appear in the Board's H.4.2 (504) release. For address, more on Dec. 31, 1977, see table 1.13. see inside front cover. 4. This is not a measure of equity capital for use in capital adequacy analysis or for other analytic uses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • June 1985 1.28 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures 1985 AAccccoouunntt Feb. 13 Feb. 20 Feb. 27 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 1 Cash and balances due from depository institutions 26,683 27,586 22,661 21,904 24,355 22,556 20,303 21,876 22,600 2 Total loans, leases and securities, net1 171,345 173,601 174,709 174,882 176,578' 175,223 174,424 176,765 175,284 Securities 3 4 5 Investment account, by maturity 10,499 12,756 13,243 13,207 13,335 13,411 13,365 13,404 13,335 6 One year or less 1,658 1,764 2,200 2,256 2,257 2,276 2,255 2,293 2,321 7 Over one through five years 6,944 9,683 9,631 9,447 9,447 9,527 9,494 9,365 9,280 8 Over five years 1,897 11,,330099 11,,441122 11,,550044 11,,663311 11,,660099 11,,661155 11,,774477 11,,773344 9 10 11 Investment account 9,655 9,592 9,571 9,522 9,254 9,137 9,194 9,171 9,231 12 States and political subdivisions, by maturity 8,800 8,729 8,715 8,677 8,360 8,269 8,349 8,291 8,354 13 One year or less 1,253 1,239 1,229 1,219 995 909 933 908 910 14 Over one year 7,547 7,490 7,486 7,458 7,365 7,360 7,416 7,383 7,444 15 Other bonds, corporate stocks and securities 855 862 856 845 894 868 845 880 877 1166 Loans and leases 17 Federal funds sold3 20,214 20,598 20,884 19,281 22,388 19,894 20,082 20,452 21,640 18 To commercial banks 12,478 12,728 12,713 10,979 13,590 11,735 11,936 11,175 13,469 19 To nonbank brokers and dealers in securities 5,353 5,228 5,487 5,398 5,812 4,822 4,760 5,558 5,330 20 To others 2,383 2,642 2,684 2,904 2,986 3,338 3,386 3,719 2,841 21 Other loans and leases, gross 135,793 135,496 135,885 137,768 136,541' 137,709 136,667 138,536 135,944 22 Other loans, gross 133,729 133,352 133,599 135,490 134,274' 135,435 134,404 136,279 133,671 23 Commercial and industrial 61,334' 60,926' 61,345' 62,331' 61,824' 62,146 61,840 61,988 61,210 24 Bankers acceptances and commercial paper 1,121 1,008 969 1,071 902 773 825 800 798 25 All other 60,212' 59,918' 60,376' 61,26C 60,922' 61,373 61,016 61,188 60,412 26 U.S. addressees 59,566' 59,275' 59,722' 60,606' 60,265' 60,712 60,359 60,533 59,729 27 Non-U.S. addressees 646 643 654 653 656 660 657 654 683 28 Real estate loans 24,781 24,719 24,989 25,162 25,328 25,359 25,486 25,268 25,359 29 To individuals for personal expenditures 16,026 16,057 16,053 16,084 16,125 16,185 16,251 16,320 16,357 30 To depository and financial institutions 12,450 12,200 11,896 11,946 11,39c 11,467 10,932 11,711 11,129 31 Commercial banks in the United States 2,403 2,346 2,510 2,588 1,973' 1,976 1,975 2,425 1,920 32 Banks in foreign countries 2,297 2,137 1,894 1,896 1,989' 2,026 1,782 1,990 2,035 33 Nonbank depository and other financial institutions 7,750 7,717 7,492 7,462 7,427 7,464 7,174 7,296 7,174 34 For purchasing and carrying securities 6,446 6,473 6,388 7,537 7,054' 7,682 7,219 8,307 7,064 35 To finance agricultural production 414' 417' 411' 446r 438' 472 486 466 487 36 To states and political subdivisions 7,732 7,897 7,884 7,840 7,910 7,886 7,915 7,842 7,874 37 To foreign governments and official institutions 917 811 1,045 794 793' 799 788 840 900 38 All other 3,629 3,853 3,587 3,350 3,413' 3,439 3,487 3,536 3,289 39 Lease financing receivables 2,064 2,144 2,286 2,277 2,267 2,274 2,264 2,257 2,273 40 LESS: Unearned income 1,472 1,478 1,500 1,472 1,490 1,488 1,505 1,457 1,470 41 Loan and lease reserve 3,344 3,363 3,374 3,424 3,450 3,440 3,379 3,341 3,396 42 Other loans and leases, net 130,976 130,655 131,010 132,871 131,601' 132,781 131,783 133,738 131,078 43 All other assets4 68,871 70,046 70,073 70,962 67,786' 67,642 68,061 68,778 66,996 44 Total assets 266,899 271,232 267,443 267,748 268,720' 265,421 262,788 267,420 264,880 Deposits 45 Demand deposits 50,468 49,593 47,565 45,784 44,348' 47,193 44,275 47,910 46,144 46 Individuals, partnerships, and corporations 34,964 34,137 32,122 31,334 31,420' 32,189 30,741 31,732 31,702 47 States and political subdivisions 815 834 733 785 687 799 615 665 657 48 U.S. government 378 237 637 321 166 841 548 853 428 49 Depository institutions in the United States 4,813 5,033 5,077 4,647 4,028' 4,896 4,683 5,058 4,127 50 Banks in foreign countries 4,556 4,764 4,235 3,976 3,675' 4,146 3,984 4,665 4,226 51 Foreign governments and official institutions 726 631 576 551 5UY 526 610 674 811 52 Certified and officers' checks 4,216 3,957 4,184 4,169 3,862 3,795 33,,009933 44,,226622 44,,119922 53 Transaction balances other than demand deposits ATS, NOW, Super NOW, telephone transfers) 3,854 3,787 3,756 3,888 3,830 3,823 3,794 4,133 4,233 54 Nontransaction balances 84,011 84,471 85,226 85,200 84,581 84,715 84,555 84,935 84,642 55 Individuals, partnerships and corporations 75,959 76,312 76,761 77,145 76,478 76,760 76,552 77,235 77,038 56 States and political subdivisions 3,905 3,979 4,084 4,008 4,037 4,044 4,011 3,887 3,860 57 U.S. government 83 81 70 70 69 65 65 62 61 58 Depository institutions in the United States 2,445 2,504 2,678 2,488 2,537 2,386 2,466 2,354 2,360 59 Foreign governments, official institutions and banks 1,620 1,596 1,632 1,489 1,460 1,460 1,461 1,397 1,324 60 Liabilities for borrowed money 64,418 67,959 65,645 67,925 68,962' 64,374 6655,,224488 6655,,224411 64,412 61 500 425 2,776 950 62 Treasury tax-and-loan notes 2,298 2,497 2,894 875 524 2,446 1,765 1,072 9 63 All other liabilities for borrowed money5 61,620 65,462 62,326 67,050 65,662' 61,928 63,483 64,169 63,453 64 Other liabilities and subordinated note and debentures 40,669 41,997 41,943 41,321 43,442 41,946 41,621 41,669 41,864 65 Total liabilities 243,421 247,807 244,135 244,120 245,164' 242,052 239,494 243,888 241,296 66 Residual (total assets minus total liabilities)6 23,478 23,425 23,308 23,628 23,556 23,369 23,294 23,532 23,584 MEMO 67 Total loans and leases (gross) and investments adjusted1-7 161,280 163,369 164,360 166,211 165,955' 166,440 165,396 167,963 164,761 68 Total loans and leases (gross) adjusted7 141,126 141,021 141,546 143,481 143,366' 143,892 142,838 145,388 142,195 69 Time deposits in amounts of $100,000 or more 33,139 33,367 33,520 33,612 33,436' 33,395 33,173 33,083 32,582 1. Excludes trading account securities. 6. Not a measure of equity capital for use in capital adequacy analysis or for 2. Not available due to confidentiality. other analytic uses. 3. Includes securities purchased under agreements to resell. 7. Exclusive of loans and federal funds transactions with domestic commercial 4. Includes trading account securities. banks. 5. Includes federal funds purchased and securities sold under agreements to NOTE. These data also appear in the Board's H.4.2 (504) release. For address, repurchase. see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS WITH ASSETS OF $750 MILLION OR MORE ON JUNE 30, 1980 Assets and Liabilities • Millions of dollars, Wednesday figures 1985 AAccccoouunntt Feb. 13 Feb. 20 Feb. 27 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 1 Cash and due from depository institutions. 7,412' 6,362' 6,445 6,583 6,484 6,346 6,152 6,296 6,751 2 Total loans and securities 45,180' 45,243' 46,369' 45,461' 44,208 45,032 46,013 44,727 44,792 3 U.S. Treasury and govt, agency securities 4,022 4,040 4,050 3,610 3,445 3,581 3,630 3,466 3,461 4 Other securities 1,53c 1,48c 1,513' 1,628' 1,471 1,460 1,442 1,542 1,575 5 Federal funds sold1 5,070 4,397 5,390 4,788 4,564 4,035 4,582 3,172 4,002 6 To commercial banks in the United States 4,629 3,993 4,987 4,382 4,118 3,661 4,186 2,673 3,611 7 To others 442 404 403 406 446 374 396 500 390 8 Other loans, gross 34,558 35,326 35,415 35,435 34,727 35,956 36,359 36,546 35,754 9 Commercial and industrial 20,248 20,470 20,412 20,043' 20,004' 21,272 21,405 21,411 21,300 10 Bankers acceptances and commercial paper 1,733 1,900 1,759 1,794 1,843 1,871 1,798 1,960 1,899 11 All other 18,515 18,569 18,652 18,249' 18,161' 19,401 19,607 19,451 19,400 12 U.S. addressees 17,369 17,434 17,456 16,937' 16,925' 18,163 18,383 18,198 18,195 13 Non-U.S. addressees 1,146 1,135 1,196 1,311 1,236 1,238 1,224 1,253 1,205 14 To financial institutions 10,484 10,968 11,158 11,405 11,013 11,081 11,344 11,416 10,604 15 Commercial banks in the United States . 8,233 8,722 8,914 9,142 8,855 8,893 8,929 9,055 8,374 16 Banks in foreign countries 1,432 1,344 1,322 1,243 1,262 1,256 1,258 1,332 1,166 17 Nonbank financial institutions 819 902 923 1,021 8% 932 1,156 1,029 1,063 18 To foreign govts, and official institutions .. 666 650 702 654 653 654 651 660 685 19 For purchasing and carrying securities .. 1,001 1,015 978 1,166' 896' 870 939 1,047 1,084 20 All other 2,158 2,223 2,165 2,167 2,161 2,077 2,020 2,012 2,082 21 Other assets (claims on nonrelated parties).. 18,763' 18,686' 19,245' 19,158' 19,061' 18,864 18,282 17,940 17,989 22 Net due from related institutions 10,66c 11,112 11,130 11,004 9,871 10,904 9,786 11,689 10,664 23 Total assets 82,015' 81,403' 83,189 82,206 79,623' 81,146 80,233 80,652 80,197 24 Deposits or credit balances due to other than directly related institutions 24,035' 24,093' 24,968' 25,188' 25,019' 24,934 25,479 25,326 25,003 25 Credit balances 193 140 232 146 130 128 152 253 135 26 Demand deposits 1,613' 1,67C 1,621' 1,745' 1,64C 1,601 1,630 1,692 1,532 27 Individuals, partnerships, and corporations 821 916 844' 857' 822 809 844 871 836 28 Other 792' 754' 777 888' 817' 792 786 821 697 29 Time and savings deposits 22,229 22,283 23,115 23,297 23,249 23,205 23,697 23,380 23,335 30 Individuals, partnerships, and corporations 18,105 18,111 18,701 18,893 18,949 18,965 19,396 18,981 18,803 31 Other 4,124 4,172 4,414 4,404 4,300 4,240 4,301 4,399 4,532 32 Borrowings from other than directly related institutions 30,499 29,653 28,88C 28,427 27,122 28,257 28,450 30,304 29,532 33 Federal funds purchased2 12,675 12,017 10,742 10,542 9,851 11,421 11,212 13,262 12,547 34 From commercial banks in the United States 9,940 9,365 8,396 7,964 7,516 8,913 8,397 10,948 10,237 35 From others 2,735 2,652 2,346 2,578 2,335 2,508 2,815 2,314 2,310 36 Other liabilities for borrowed money.... 17,824 17,636 18,137' 17,885 17,270 16,836 17,238 17,042 16,985 37 To commercial banks in the United States 16,407 16,216 16,687 16,434 15,920 15,604 15,953 15,889 15,823 38 To others 1,417 1,420 1,45C 1,451 1,351 1,232 1,285 1,153 1,162 39 Other liabilities to nonrelated parties 20,329 20,332 20,875 20,931' 20,813' 20,508 20,606 19,833 19,689 40 Net due to related institutions 7,151' 7,325 8,466 7,661' 6,669 7,447 5,698 5,190 5,972 41 Total liabilities 82,015' 81,403' 83,189 82,206 79,623' 81,146 80,233 80,652 80,197 MEMO 42 Total loans (gross) and securities adjusted3 32,319' 32,528 32,468' 31,938' 31,234 32,478 32,897 32,999 32,807 43 Total loans (gross) adjusted3 26,767 27,008 26,904 26,700 26,318 27,437 27,826 27,991 27,770 A Levels of many asset and liability items were revised beginning Oct. 31, 3. Exclusive of loans to and federal funds sold to commercial banks in the 1984. For details, see the H.4.2 (504) statistical release dated Nov. 23, 1984. United States. 1. Includes securities purchased under agreements to resell. NOTE. These data also appear in the Board's H.4.2 (504) release. For address, 2. Includes securities sold under agreements to repurchase. see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • June 1985 1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations' Billions of dollars, estimated daily-average balances Commercial banks TTyyppee ooff hhoollddeerr 1983 1984 1199779922 11998800 11998811 11998822 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Sept. Dec. Mar. June Sept. Dec. 1 All holders—Individuals, partnerships, and corporations 302.3 315.5 288.9 291.8 280.3 293.5 279.3 285.8 284.7 304.5 2 Financial business 27.1 29.8 28.0 35.4 32.1 32.8 31.7 31.7 31.3 33.0 3 Nonfinancial business 157.7 162.8 154.8 150.5 150.2 161.1 150.3 154.9 154.8 166.3 4 Consumer 99.2 102.4 86.6 85.9 77.9 78.5 78.1 78.3 78.4 81.7 5 Foreign 3.1 3.3 2.9 3.0 2.9 3.3 3.3 3.4 3.3 3.6 6 Other 15.1 17.2 16.7 17.0 17.1 17.8 15.9 17.4 16.8 19.9 Weekly reporting banks 1983 1984 1199779933 11998800 11998811 11998822 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Sept. Dec.4 Mar. June Sept. Dec. 7 All holders—Individuals, partnerships, and corporations 139.3 147.4 137.5 144.2 136.3 146.2 139.2 145.3 145.3 157.1 8 Financial business 20.1 21.8 21.0 26.7 23.6 24.2 23.5 23.6 23.7 25.3 9 Nonfinancial business 74.1 78.3 75.2 74.3 72.9 79.8 76.4 79.7 79.2 87.1 10 Consumer 34.3 35.6 30.4 31.9 28.1 29.7 28.4 29.9 29.8 30.5 11 Foreign 3.0 3.1 2.8 2.9 2.8 3.1 3.2 3.2 3.2 3.4 12 Other 7.8 8.6 8.0 8.4 8.9 9.3 7.7 8.9 9.3 10.9 1. Figures include cash items in process of collection. Estimates of gross exceeding $750 million as of Dec. 31, 1977. Beginning in March 1979, demand deposits are based on reports supplied by a sample of commercial banks. Types of deposit ownership estimates for these large banks are constructed quarterly on the depositors in each category are described in the June 1971 BULLETIN, p. 466. basis of 97 sample banks and are not comparable with earlier data. The following 2. Beginning with the March 1979 survey, the demand deposit ownership estimates in billions of dollars for December 1978 have been constructed for the survey sample was reduced to 232 banks from 349 banks, and the estimation new large-bank panel; financial business, 18.2; nonfinancial business, 67.2; procedure was modified slightly. To aid in comparing estimates based on the old consumer, 32.8; foreign, 2.5; other, 6.8. and new reporting sample, the following estimates in billions of dollars for 4. In January 1984 the weekly reporting panel was revised; it now includes 168 December 1978 have been constructed using the new smaller sample; financial banks. Beginning with March 1984, estimates are constructed on the basis of 92 business, 27.0; nonfinancial business, 146.9; consumer, 98.3; foreign, 2.8; and sample banks and are not comparable with earlier data. Estimates in billions of other, 15.1. dollars for December 1983 based on the newly weekly reporting panel are: 3. After the end of 1978 the large weekly reporting bank panel was changed to financial business, 24.4; nonfinancial business, 80.9; consumer, 30.1; foreign, 3.1; 170 large commercial banks, each of which had total assets in domestic offices other, 9.5. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A23 1.32 COMMERCIAL PAPER AND BANKERS DOLLAR ACCEPTANCES OUTSTANDING Millions of dollars, end of period 19843 1985 1199779911 11998800 11998811 11998822 11998833 IInnssttrruummeenntt DDeecc.. DDeecc.. DDeecc.. DDeecc..22 DDeecc.. Sept. Oct. Nov. Dec. Jan/ Feb. Commercial paper (seasonally adjusted unless noted otherwise) 11 AAllll iissssuueerrss 112,803 124,374 165,829 166,436 188,312 225,127 228,194 235,363 239,117 245,322 247,095 FFiinnaanncciiaall ccoommppaanniieess44 DDeeaalleerr--ppllaacceedd ppaappeerr55 22 TToottaall 17,359 19,599 30,333 34,605 44,622 52,543 54,527 55,176 56,917 59,713 60,186 33 BBaannkk--rreellaatteedd ((nnoott sseeaassoonnaallllyy aaddjjuusstteedd)) 2,784 3,561 6,045 2,516 2,441 1,959 2,060 1,9% 2,035 2,137 2,265 DDiirreeccttllyy ppllaacceedd ppaappeerr66 44 TToottaall 64,757 67,854 81,660 84,393 96,918 107,537 105,379 109,419 110,474 113,101 114,824 55 BBaannkk--rreellaatteedd ((nnoott sseeaassoonnaallllyy aaddjjuusstteedd)) 17,598 22,382 26,914 32,034 35,566 41,066 38,112 40,185 42,105 43,046 42,759 66 NNoonnffiinnaanncciiaall ccoommppaanniieess77 30,687 36,921 53,836 47,437 46,772 65,047 68,288 70,768 71,726 72,508 72,085 Bankers dollar acceptances (not seasonally adjusted)8 7 Total 45,321 54,744 69,226 79,543 78,309 77,928 75,741' 75,179 75,470 72,273 76,109 Holder 8 Accepting banks 9,865 10,564 10,857 10,910 9,355 11,065 10,534 10,397 10,255' 10,060 10,569 9 Own bills 8,327 8,963 9,743 9,471 8,125 8,729 8,960 9,113 9,065 8,839 9,672 10 Bills bought 1,538 1,601 1,115 1,439 1,230 2,336 1,574 1,284 1,191 1,220 897 Federal Reserve Banks 11 Own account 704 776 195 1,480 418 0 0 0 0 0 0 12 Foreign correspondents 1,382 1,791 1,442 949 729 686 658 615 671 679 761 13 Others 33,370 41,614 56,731 66,204 68,225 66,177 64,549' 64,167' 64,543' 61,603 64,779 Basis 14 Imports into United States 10,270 11,776 14,765 17,683 15,649 17,196 16,256 16,433 16,975 16,733 17,115 15 Exports from United States 9,640 12,712 15,400 16,328 16,880 15,985 16,312 15,849 15,859 15,445 15,881 16 All other 25,411 30,257 39,060 45,531 45,781 44,746 43,172 42,897 42,635 40,095 43,113 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 5. 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, 6. 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 7. 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. Correction of a previous misclassification of paper by a reporter has created transportation, and services. a break in the series beginning December 1983. The correction adds some paper to 8. Beginning October 1984, the number of respondents in the bankers acceptnonfinancial and to dealer-placed financial paper. ance survey will be reduced from 340 to 160 institutions—those with $50 million or 4. Institutions engaged primarily in activities such as, but not limited to, more in total acceptances. The new reporting group accounts for over 95 percent commercial, savings, and mortgage banking; sales, personal, and mortgage of total acceptances activity. 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per annum Rate Effective Date Rate Month Average Month rate 11.00 1984-—Sept.27 12.75 1983—Jan 11.16 1984—Mar 1101..0500 Oct. 2 1 9 7 1 1 2 2 . . 5 0 0 0 F M e a b r 1 1 0 0 . . 9 5 8 0 A M p a r y Nov. 9 11.75 Apr 10.50 June 11.50 28 11.25 May 10.50 July 12.00 Dec. 20 10.75 June 10.50 Aug 12.50 July 10.50 Sept 13.00 1985-—Jan. 15 10.50 Aug 1101..0890 Oct Sept 11.00 Nov Oct 11.00 Dec Nov 11.00 Dec 1985—Jan 11.00 Feb 1984—Jan 11.00 Mar Feb Apr NOTE. These data also appear in the Board's H.15 (519) release. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • June 1985 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. 1984 1985 1985, week ending IInnssttrruummeenntt 11998822 11998833 11998844 Dec. Jan. Feb. Mar. Mar. 1 Mar. 8 Mar. 15 Mar. 22 Mar. 29 MONEY MARKET RATES 1 Federal funds1-2 12.26 9.09 10.23 8.38 8.35 8.50 8.58 8.40 8.63 8.52 8.75 8.38 2 Discount window borrowing1'2 3 11.02 8.50 8.80 8.37 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 Commercial paper4'5 3 1-month 11.83 8.87 10.05 8.39 7.99 8.46 8.74 8.55 8.80 8.77 8.72 8.67 4 3-month 11.89 8.88 10.10 8.44 8.03 8.54 8.90 8.75 9.06 8.93 8.86 8.75 5 6-month 11.89 8.89 10.16 8.55 8.15 8.69 9.23 9.05 9.42 9.26 9.21 9.02 Finance paper, directly placed4'5 6 1-month 11.64 8.80 9.97 8.25 7.95 8.42 8.70 8.54 88..7788 8.75 8.65 8.61 7 3-month 11.23 8.70 9.73 8.12 7.81 8.25 8.67 8.48 8.73 8.67 8.68 8.60 8 6-month 11.20 8.69 9.65 8.09 7.82 8.20 8.65 8.41 8.62 8.64 8.73 8.67 Bankers acceptances5'6 9 3-month 11.89 8.90 10.14 8.45 8.01 8.55 8.88 8.80 9.10 8.90 8.83 8.68 10 6-month 11.83 8.91 10.19 8.54 8.11 8.69 9.20 9.13 9.41 9.27 9.19 8.91 Certificates of deposit, secondary market7 11 1-month 12.04 8.96 10.17 8.47 8.05 8.50 8.73 8.62 8.80 8.74 8.74 8.64 12 3-month 12.27 9.07 10.37 8.60 8.14 8.69 9.02 8.91 9.22 9.04 9.01 8.82 13 6-month 12.57 9.27 10.68 8.85 8.45 9.04 9.60 9.47 9.86 9.62 9.58 9.31 14 Eurodollar deposits, 3-month8 13.12 9.56 10.73 8.90 8.37 9.05 9.32 9.35 9.61 9.30 9.20 9.14 U.S. Treasury bills5 Secondary market9 15 3-month 10.61 8.61 9.52 8.06 7.76 8.27 8.52 8.47 8.69 8.55 8.51 8.29 16 6-month 11.07 8.73 9.76 8.28 8.00 8.39 8.90 8.70 8.97 8.95 8.96 8.71 17 1-year 11.07 8.80 9.92 8.60 8.33 8.56 9.06 8.84 9.09 9.09 9.15 8.90 Auction average10 18 3-month 10.686 8.63 9.58 8.16 7.76 8.22 8.57 8.36 8.73 8.48 8.64 8.41 19 6-month 11.084 8.75 9.80 8.36 8.03 8.34 8.92 8.53 8.98 8.79 9.04 8.86 2200 1 year 1111..009999 88..8866 99..9911 88..3388 88..3399 88..4466 99..2244 99..2244 CAPITAL MARKET RATES U.S. Treasury notes and bonds" Constant maturities12 21 1-year 12.27 9.57 10.89 9.33 9.02 9.29 9.86 9.61 9.89 9.91 9.97 9.68 22 2-year 12.80 10.21 11.65 10.18 9.93 10.17 10.71 10.53 10.73 10.73 10.81 10.59 73 10.45 10.85 10.95 24 3-year 12.92 10.45 11.89 10.56 10.43 10.55 11.05 10.91 11.07 11.08 11.13 10.93 25 5-year 13.01 10.80 12.24 11.07 10.93 11.13 11.52 11.47 11.51 11.54 11.60 11.43 26 7-year 13.06 11.02 12.40 11.45 11.27 11.44 11.82 11.78 11.83 11.84 11.90 11.73 27 10-year 13.00 11.10 12.44 11.50 11.38 11.51 11.86 11.83 11.87 11.85 11.92 11.77 28 20-year 12.92 11.34 12.48 11.64 11.58 11.70 12.06 12.06 12.09 12.06 12.11 11.97 29 30-year 12.76 11.18 12.39 11.52 11.45 11.47 11.81 11.80 11.85 11.80 11.87 11.73 Composite14 30 Over 10 years (long-term) 12.23 10.84 11.99 11.21 11.15 11.35 11.78 11.77 1111..8811 11.77 11.83 11.70 State and local notes and bonds Moody's series15 31 Aaa 10.88 8.80 9.61 9.54 9.08 8.98 9.18 9.05 9.20 9.15 9.20 9.15 32 Baa 12.48 10.17 10.38 10.45 10.16 10.05 10.18 10.10 10.20 10.20 10.20 10.10 33 Bond Buyer series16 11.66 9.51 10.10 9.95 9.51 9.65 9.77 9.71 9.75 9.76 9.82 9.75 Corporate bonds Seasoned issues17 34 All industries 14.94 12.78 13.49 12.74 12.64 12.66 13.13 12.93 13.05 13.17 13.21 13.13 35 Aaa 13.79 12.04 12.71 12.13 12.08 12.13 12.56 12.47 12.55 12.58 12.62 12.50 36 Aa 14.41 12.42 13.31 12.50 12.43 12.49 12.91 12.69 12.80 12.97 12.98 12.93 37 A 15.43 13.10 13.74 12.92 12.80 12.80 13.36 13.06 13.19 13.42 13.47 13.41 38 Baa 16.11 13.55 14.19 13.40 13.26 13.23 13.69 13.51 13.63 13.70 13.75 13.68 39 A-rated, recently-offered utility bonds18 15.49 12.73 13.81 12.88 12.78 12.76 13.17 13.18 13.14 13.23 13.22 13.06 MEMO: Dividend/price ratio19 40 Preferred stocks 12.53 11.02 11.59 11.21 11.13 10.88 10.97 10.94 10.96 10.97 11.01 10.95 41 Common stocks 5.81 4.40 4.64 4.68 4.51 4.30 4.37 4.32 4.33 4.40 4.38 4.38 1. Weekly and monthly figures are averages of all calendar days, where the 11. Yields are based on closing bid prices quoted by at least five dealers. rate for a weekend or holiday is taken to be the rate prevailing on the preceding 12. Yields adjusted to constant maturities by the U.S. Treasury. That is, yields business day. The daily rate is the average of the rates on a given day weighted by are read from a yield curve at fixed maturities. Based on only recently issued, the volume of transactions at these rates. actively traded securities. 2. Weekly figures are averages for statement week ending Wednesday. 13. Each biweekly figure is the average of five business days ending on the 3. Rate for the Federal Reserve Bank of New York. Monday following the date indicated. Until Mar. 31, 1983, the biweekly rate 4. Unweighted average of offering rates quoted by at least five dealers (in the determined the maximum interest rate payable in the following two-week period case of commercial paper), or finance companies (in the case of finance paper). on 2-'/2-year small saver certificates. (See table 1.16.) Before November 1979, maturities for data shown are 30-59 days, 90—119 days, 14. Averages (to maturity or call) for all outstanding bonds neither due nor and 120-179 days for commercial paper; and 30-59 days, 90-119 days, and 150- callable in less than 10 years, including several very low yielding "flower" bonds. 179 days for finance paper. 15. General obligations based on Thursday figures; Moody's Investors Service. 5. Yields are quoted on a bank-discount basis, rather than an investment yield 16. General obligations only, with 20 years to maturity, issued by 20 state and basis (which would give a higher figure). local governmental units of mixed quality. Based on figures for Thursday. 6. Dealer closing offered rates for top-rated banks. Most representative rate 17. Daily figures from Moody's Investors Service. Based on yields to maturity (which may be, but need not be, the average of the rates quoted by the dealers). on selected long-term bonds. 7. Unweighted average of offered rates quoted by at least five dealers early in 18. Compilation of the Federal Reserve. This series is an estimate of the yield the day. on recently-offered, A-rated utility bonds with a 30-year maturity and 5 years of 8. Calendar week average. For indication purposes only. call protection. Weekly data are based on Friday quotations. 9. Unweighted average of closing bid rates quoted by at least five dealers. 19. Standard and Poor's corporate series. Preferred stock ratio based on a 10. Rates are recorded in the week in which bills are issued. Beginning with the sample often issues: four public utilities, four industrials, one financial, and one Treasury bill auction held on Apr. 18, 1983, bidders were required to state the transportation. Common stock ratios on the 500 stocks in the price index. percentage yield (on a bank discount basis) that they would accept to two decimal NOTE. These data also appear in the Board's H.15 (519) and G. 13 (415) releases. places. Thus, average issuing rates in bill auctions will be reported using two For address, see inside front cover. rather than three decimal places. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A25 1.36 STOCK MARKET Selected Statistics 1984 1985 IInnddiiccaattoorr 11998822 11998833 11998844 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) 68.93 92.63 92.46 87.08 94.49 95.68 95.09 95.85 94.85 99.11 104.73 103.92 2 Industrial 78.18 107.45 108.01 102.29 111.20 112.18 110.44 110.91 109.05 113.99 120.71 119.64 3 Transportation 60.41 89.36 85.63 76.72 86.86 86.88 86.82 87.37 88.00 94.88 101.76 98.30 4 Utility 39.75 47.00 46.44 44.17 46.69 47.47 49.02 49.93 50.58 51.95 53.44 53.91 5 Finance 71.99 95.34 89.28 79.03 87.92 91.59 92.94 95.28 95.29 101.34 109.58 107.59 6 Standard & Poor's Corporation (1941-43 = 10)' ... 119.71 160.41 160.50 151.08 164.42 166.11 164.82 166.27 164.48 171.61 180.88 179.42 7 American Stock Exchange2 (Aug. 31, 1973 = 100) 141.31 216.48 207.96 192.82 207.90 214.50 210.39 209.47 202.28 211.82 228.40 225.62 Volume of trading (thousands of shares) 8 New York Stock Exchange 64,617 85,418 91,084 79,156 109,892 93,108 91,676 83,692 89,032 121,545 115,489 102,591 9 American Stock Exchange 5,283 8,215 6,107 5,141 7,477 5,967 5,587 6,008 7,254 9,130 10,010 8,677 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 13,325 23,000 22t,47 0 22,980 22,t810 22,t800 22,t330 22,350 22,470 22,0t90 t t t 11 Margin stock 12,980 22,720 12 Convertible bonds 344 279 13 Subscription issues Free credit balances at brokers4 14 Margin-account 5,735 6,620 7,015 6,430 6,855 6,690 6,580 6,699 7,015 6,770 15 Cash-account 8,390 8,430 10,215 8,125 8,185 8,315 8,650 8,420 10,215 9,725 Margin-account debt at brokers (percentage distribution, end of period) 16 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 By equity class (in percent)5 17 Under 40 21.0 41.0 46.0 52.0 40.0 42.0 44.0 47.0 46.0 35.0 36.0 38.0 18 40-49 24.0 22.0 18.0 17.0 22.0 22.0 21.0 19.0 18.0 19.0 20.0 20.0 2 1 0 9 6 5 0 0 - - 6 5 9 9 2 1 4 4 . . 0 0 1 9 6 . . 0 0 1 9 6 . . 0 0 1 8 2 . . 0 0 1 9 6 . . 0 0 1 9 5 . . 0 0 1 9 4 . . 0 0 1 9 3 . . 0 0 1 9 6 . . 0 0 2101..00 1 1 8 1 . . 0 0 1 1 8 0 . . 0 0 21 70-79 9.0 6.0 5.0 5.0 6.0 6.0 6.0 6.0 5.0 7.0 8.0 7.0 22 80 or more 8.0 6.0 6.0 6.0 7.0 6.0 6.0 6.0 6.0 8.0 8.0 7.0 Special miscellaneous-account balances at brokers (end of period) 23 Total balances (millions of dollars)* 35,598 58,329 75,840 70,588 71,840 72,350 71,914 73,904 75,840 79,600 81,830 83,729 Distribution by equity status (percent) 24 Net credit status 62.0 63.0 59.0 57.0 58.0 58.0 59.0 59.0 59.0 59.0 59.0 60.0 Debt status, equity of 2 2 5 6 6 L 0 e s p s e r th ce a n n t 6 o 0 r p m er o c r e e nt 2 9 9 . . 0 0 28 9 . . 0 0 2 1 9 1 . . 0 0 3 1 0 3 . . 0 0 3 1 1 1 . . 0 0 3 1 1 1 . . 0 0 3 1 0 1 . . 0 0 2 1 9 2 . . 0 0 2 1 9 1 . . 0 0 3 1 0 0 . . 0 0 3 1 1 0 . . 0 0 3 1 0 0 . . 0 0 Margin requirements (percent of market value and effective date)7 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 27 Margin stocks 70 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 5. Each customer's equity in his collateral (market value of collateral less net companies. With this change the index includes 400 industrial stocks (formerly debit balance) is expressed as a percentage of current collateral values. 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40 6. Balances that may be used by customers as the margin deposit required for financial. additional purchases. Balances may arise as transfers based on loan values of 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. Beginning July 1983, under the revised Regulation T, margin credit at 7. Regulations G, T, and U of the Federal Reserve Board of Governors, broker-dealers includes credit extended against stocks, convertible bonds, stocks prescribed in accordance with the Securities Exchange Act of 1934, limit the acquired through exercise of subscription rights, corporate bonds, and govern- amount of credit to purchase and carry margin stocks that may be extended on ment securities. Separate reporting of data for margin stocks, convertible bonds, securities as collateral by prescribing a maximum loan value, which is a specified and subscription issues was discontinued in April 1984, and margin credit at percentage of the market value of the collateral at the time the credit is extended. broker-dealers became the total that is distributed by equity class and shown on Margin requirements are the difference between the market value (100 percent) lines 17-22. and the maximum loan value. The term "margin stocks" is defined in the 4. 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 • June 1985 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1984 1985 AAccccoouunntt 11998822 11998833 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Savings and loan associations 1 Assets 707,646 773,417 808,264 825,557 840,682 850,780 860,088 877,642 881,627 887,696 902,449 898,537' 898,086 2 Mortgages 483,614 494,789 510,670 519,628 528,172 535,814 540,644 550,129 552,516 556,229 555,277 558,276' 556,184 3 Cash and investment securities' .... 85,438 104,274 106,863 110,033 109,752 108,456 108,820 112,350 112,023 114,879 125,358 119,673' 119,724 4 Other 138,594 174,354 190,731 195,896 202,758 206,510 210,624 215,163 217,088 216,588 221,814 220,588' 222,178 5 Liabilities and net worth 707,646 773,417 808,264 825,557 840,682 850,780 860,088 877,642 881,627 887,696 902,449 898,537' 898,086 6 Savings capital 567,961 634,455 660,663 670,666 681,947 687,817 691,704 704,558 708,846 714,780 724,301 730,709' 726,308 7 Borrowed money 97,850 92,127 98,275 103,119 108,417 110,238 114,747 121,329 119,305 117,775 126,169 114,806' 116,879 8 FHLBB 63,861 52,626 51,951 53,485 56,558 57,115 60,178 63,627 63,412 63,383 64,207 63,152' 63,452 9 Other 33,989 39,501 46,324 49,634 51,859 53,123 54,569 57,702 55,893 54,392 61,962 51,654' 53,427 10 Loans in process2 9,934 21,117 23,938 24,761 25,726 26,122 26,773 27,141 26,754 26,683 26,959 26,546' 26,636 11 Other 15,602 15,968 17,524 19,832 17,586 19,970 20,599 18,050 19,894 21,302 17,215 18,358' 19,857 12 Net worth3 26,233 30,867 31,802 31,940 32,732 32,755 33,038 33,705 33,582 33,839 34,764 34,664' 35,042 13 MEMO: Mortgage loan commitments outstanding4 18,054 32,9% 41,732 45,274 44,878 43,878 41,182 40,089 38,530 37,856 34,841 33,305' 34,217 Mutual savings banks5 14 Assets 174,197 193,535 198,000 200,087 198,864 199,128 200,722 201,445 203,274 204,499' 203,898' 204,835 206,175 Loans 15 Mortgage 94,091 97,356 99,017 99,881 99,433 100,091 101,211 101,621 102,704 102,953 102,895' 103,394 103,654 16 Other 16,957 19,129 22,531 22,907 23,198 23,213 24,068 24,535 24,486 24,884' 24,954' 25,747 26,456 Securities 17 U.S. government6 9,743 15,360 15,913 16,404 15,448 15,457 15,019 14,965 15,295 15,034' 14,643' 14,616 14,917 18 State and local government 2,470 2,177 2,033 2,024 2,037 2,037 2,055 2,052 2,080 2,077 2,077 2,054 2,069 19 Corporate and other7 36,161 43,580 43,122 43,200 42,479 42,682 42,632 42,605 43,003 43,361' 42,%2' 43,349 43,063 20 Cash 6,919 6,263 5,008 5,031 5,452 4,896 4,981 4,795 4,605 4,795' 4,954' 4,141 4,423 21 Other assets 7,855 9,670 10,376 10,640 10,817 10,752 10,756 10,872 11,101 11,395' 11,413' 11,534 11,593 22 Liabilities 174,197 193,535 198,000 200,087 198,864 199,128 200,722 201,445 203,274 204,499' 203,898' 204,835 206,175 23 Deposits 155,196 172,665 175,875 176,253 174,972 174,823 176,085 177,345 178,624 180,073' 180,616' 181,013 181,849 24 Regular8 152,777 170,135 173,010 173,310 171,858 171,740 172,990 174,2% 175,727 177,13c 177,418' 177,904 178,791 25 Ordinary savings 46,862 38,554 37,329 37,147 36,322 35,511 34,787 34,564 34,221 34,009' 33,739' 33,48C 33,413 26 Time 96,369 95,129 96,920 97,236 97,168 98,410 101,270 102,934 104,151 104,849' 104,732' 104,067 103,536 27 Other 2,419 2,530 2,865 2,943 3,114 3,083 3,095 3,049 2,897 2,943' 3,198' 3,109 3,058 28 Other liabilities 8,336 10,154 11,211 12,861 12,999 13,269 13,604 12,979 13,853 13,453' 12,504' 12,962 13,387 29 General reserve accounts 9,235 10,368 10,466 10,554 10,404 10,495 10,498 10,488 10,459 10,535' lO^llX 10,613 10,670 30 MEMO: Mortgage loan commitments outstanding9 1,285 2,387 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Life insurance companies 31 Assets 588,163 654,948 671,259 673,518 679,449 684,573 694,082 699,9% 705,827 712,271 720,807 730,120 Securities 32 Government 36,499 50,752 52,828 53,422 53,970 54,688 56,263 57,552 59,825 62,678 64,683 65,367 33 United States10 16,529 28,636 31,358 31,706 32,066 32,654 33,886 35,586 37,594 40,288 41,970 42,183 34 State and local. 8,664 9,986 9,192 9,239 9,213 9,236 9,357 9,221 9,344 9,385 9,757 9,895 35 Foreign" 11,306 12,130 12,278 12,477 12,691 12,798 13,020 12,745 12,887 13,005 12,956 13,289 36 Business 287,126 322,854 334,634 334,151 338,508 341,802 348,614 350,512 352,059 354,815 354,902 364,617 n.a. 37 Bonds 231,406 257,986 271,296 273,212 276,902 281,113 283,673 285,543 287,607 291,021 290,731 297,666 38 Stocks 55,720 64,868 63,338 60,939 61,606 60,689 64,941 64,%9 64,452 63,794 64,171 66,951 39 Mortgages 141,989 150,999 152,373 152,968 153,845 154,299 155,438 155,802 156,064 156,691 157,283 157,583 40 Real estate 20,264 22,234 23,237 23,517 23,792 24,019 24,117 24,685 24,947 25,467 25,985 26,343 41 Policy loans 52,961 54,063 54,365 54,399 54,430 54,441 54,517 54,551 54,574 54,571 54,610 54,442 42 Other assets 48,571 54,046 53,822 55,061 54,904 55,324 55,133 56,894 58,358 58,049 63,344 61,768 Credit unions12 43 Total assets/liabilities and capital 69,585 81,961 86,594 88,350 90,276 90,145 90,503 91,651 91,619 92,521 93,036 94,646 %,183 44 Federal 45,493 54,482 58,127 59,636 61,316 61,163 61,500 62,107 61,935 62,690 63,205 64,505 65,989 45 State 24,092 27,479 28,467 28,714 28,960 28,982 29,003 29,544 29,684 29,831 29,831 30,141 30,194 46 Loans outstanding 43,232 50,083 53,247 54,437 55,915 57,286 58,802 59,874 60,483 62,170 62,561 62,662 62,393 47 Federal 27,948 32,930 35,286 36,274 37,547 38,490 39,578 40,310 40,727 41,762 42,337 42,220 42,283 48 State 15,284 17,153 17,961 18,163 18,368 18,7% 19,224 19,564 19,756 20,408 20,224 20,442 20,110 49 Savings 62,990 74,739 79,413 80,702 82,578 82,402 82,135 83,172 83,129 84,000 84,348 86,047 86,048 50 Federal (shares) 41,352 49,889 53,587 54,632 56,261 56,278 56,205 56,734 56,655 57,302 57,539 58,820 59,914 51 State (shares and deposits) 21,638 24,850 25,826 26,070 26,317 26,124 25,930 26,438 26,474 26,698 26,809 27,227 26,134 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All 1.37 Continued 1984 1985 AAccccoouunntt 11998822 11998833 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. FSLIC-insured federal savings banks 52 Assets 6,859 64,969 77,374 78,952 81,310 83,989 87,209 82,174 87,743 94,536 98,559 98,747 106,657 53 Mortgages 3,353 38,698 45,900 46,791 48,084 49,996 52,039 48,841 51,554 55,861 57,429 57,667 60,938 54 Cash and investment securities1 10,436 12,762 12,814 13,071 13,184 13,331 12,867 13,615 14,826 16,001 15,378 17,511 55 Other 15,835 18,712 19,347 20,155 20,809 21,839 20,466 22,574 23,849 25,129 25,702 28,208 56 Liabilities and net worth 6,859 64,969 77,374 78,952 81,310 83,989 87,209 82,174 87,743 94,536 98,559 98,747 106,657 57 Savings and capital 5,877 53,227 62,495 63,026 64,364 66,227 68,443 65,079 70,080 76,167 79,572 80,091 85,632 58 Borrowed money 7,477 9,707 10,475 11,489 12,060 12,863 11,828 11,935 11,937 12,798 12,372 14,079 59 FHLBB 4,640 5,491 5,900 6,538 6,897 7,654 6,600 6,867 7,041 7,515 7,361 8,023 60 Other 2,837 4,216 4,575 4,951 5,163 5,209 5,228 5,068 4,8% 5,283 5,011 6,056 61 Other 1,157 1,548 1,747 1,646 1,807 1,912 1,610 1,896 2,259 1,903 1,982 2,356 62 Net worth3 3,108 3,624 3,704 3,811 3,895 3,991 3,657 3,832 4,173 4,286 4,302 4,590 MEMO 63 Loans in process2 98 1,264 1,716 1,787 1,839 1,901 1,895 1,505 1,457 1,689 1,738 1,685 1,747 64 Mortgage loan commitments outstanding4 2,151 3,714 3,763 3,583 3,988 3,860 2,970 2,925 3,298 3,234 3,510 3,646 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 perons. 3. Includes net undistributed income accrued by most associations. NOTE. Savings and loan associations: Estimates by the FHLBB for all 4. Excludes figures for loans in process. associations in the United States. Data are based on monthly reports of federally 5. The National Council reports data on member mutual savings banks and on insured associations and annual reports of other associations. Even when revised, savings banks that have converted to stock institutions, and to federal savings data for current and preceding year are subject to further revision. banks. Mutual savings banks: Estimates of National Council of Savings Institutions for 6. Beginning April 1979, includes obligations of U.S. government agencies. all savings banks in the United States. Before that date, this item was included in "Corporate and other." Life insurance companies: Estimates of the American Council of Life Insurance 7. Includes securities of foreign governments and international organizations for all life insurance companies in the United States. Annual figures are annualand, before April 1979, nonguaranteed issues of U.S. government agencies. statement asset values, with bonds carried on an amortized basis and stocks at 8. Excludes checking, club, and school accounts. year-end market value. Adjustments for interest due and accrued and for 9. Commitments outstanding (including loans in process) of banks in New differences between market and book values are not made on each item separately York State as reported to the Savings Banks Association of the State of New but are included, in total, in "other assets." York. Credit unions: Estimates by the National Credit Union Administration for a 10. Direct and guaranteed obligations. Excludes federal agency issues not group of federal and federally insured state credit unions serving natural persons. guaranteed, which are shown in the table under "Business" securities. Figures are preliminary and revised annually to incorporate recent data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Nonfinancial Statistics • June 1985 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year Fiscal Fiscal Fiscal Type of account or operation year year year 1983 1984 1985 1982 1983 1984 HI H2 HI Jan. Feb. Mar. U.S. budget 1 Receipts1 617,766 600,562 666,457 306,331 306,584 341,808 70,454 54,021 49,606 2 Outlays1 728,375 795,917 841,800 3%,477 406,849 420,700 76,838 74,851 78,067 3 Surplus, or deficit (-) -110,609 -195,355 -175,343 -90,146 -100,265 -78,892 -6,384 -20,830 -28,461 4 Trust funds 5,456 23,056 30,565 22,680 7,745 18,080 -188 2,313 -1,682 5 Federal funds2-3 -116,065 -218,410 -205,908 -112,822 -108,005 -96,971 -6,198 -23,140 -26,780 Off-budget entities (surplus, or deficit (-)) 6 Federal Financing Bank outlays -14,142 -10,404 -7,277 -5,418 -3,199 -2,813 -840 0 0 7 Other3 4 -3,190 -1,953 -2,719 -528 -1,206 -838 -789 -421 -615 U.S. budget plus off-budget, including Federal Financing Bank 8 Surplus, or deficit (-) -127,940 -207,711 -185,339 -96,094 -104,670 -84,884 -8,013 -21,251 -29,076 Source of financing 9 Borrowing from the public 134,993 212,425 170,817 102,538 84,020 80,592 12,675 15,994 13,159 10 Cash and monetary assets (decrease, or increase (-))4 -11,911 -9,889 5,636 -9,664 -16,294 -3,127 -7,969 9,094 -3,212 11 Other5 4,858 5,176 8,885 3,222 4,358 7,418 3,307 4,033 -13,133 MEMO 12 Treasury operating balance (level, end of period) 29,164 37,057 22,345' 27,997 11,817 13,567 26,502 17,160 13,868 13 Federal Reserve Banks 10,975 16,557 3,791' 19,442 3,661 4,397 5,349 3,308 3,063 14 Tax and loan accounts 18,189 20,500 18,553' 8,764 8,157 9,170 21,153 13,852 10,805 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 U.S. Government, Fiscal 4. Includes U.S. Treasury operating cash accounts; SDRs; gold tranche 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

Federal Finance A29 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS Millions of dollars Calendar year Fiscal Fiscal Source or type year year 11998822 1983 11998844 11998855 1983 1984 H2 HI H2 HI Jan. Feb. Mar. RECEIPTS 1 All sources 600,563 666,457 286,337 306,331 305,122 341,808 70,454 54,021 49,606 2 Individual income taxes, net 288,938 295,955 145,676 144,551 147,663 144,691 37,852 23,769 15,254 3 Withheld 266,010 279,345 131,567 135,531 133,768 140,657 24,778 23,127 23,952 4 Presidential Election Campaign Fund ... 36 35 5 30 6 29 0 1 8 5 Nonwithheld 83,586 81,346 20,041 63,014 20,703 61,463 12,642 1,683 3,136 6 Refunds 60,692 64,771 5,938 54,024 6,815 57,458 -433 1,041 11,842 Corporation income taxes 7 Gross receipts 61,780 74,179 25,660 33,522 31,064 40,328 4,373 2,673 10,304 8 Refunds 24,758 17,286 11,467 13,809 8,921 10,045 1,594 919 1,888 9 Social insurance taxes and contributions, net 209,001 241,902 94,277 110,520 100,832 131,372 23,394 23,080 20,551 10 Payroll employment taxes and contributions1 179,010 203,476 85,064 90,912 88,388 106,436 21,661 19,433 19,045 11 Self-employment taxes and contributions2 6,756 8,709 177 6,427 398 7,667 602 664 610 12 Unemployment insurance 18,799 25,138 6,856 10,984 8,714 14,942 1,328 2,615 515 13 Other net receipts3 4,436 4,580 2,180 2,197 2,290 2,329 406 362 380 14 Excise taxes 35,300 37,361 16,555 16,904 19,586 18,304 3,267 2,585 2,739 15 Customs deposits 8,655 11,370 4,299 4,010 5,079 5,576 1,085 842 998 16 Estate and gift taxes 6,053 6,010 3,444 2,883 3,050 3,102 605 504 430 17 Miscellaneous receipts4 15,594 16,965 7,890 7,751 7,811 8,481 1,471 1,488 1,218 OUTLAYS 18 All types 795,917 841,800 390,847 396,477 406,849 420,700 76,838 74,851 78,067 19 National defense 210,461 227,405 100,419 105,072 108,967 114,639 19,367 19,785 21,782 20 International affairs 8,927 13,313 4,406 4,705 6,117 5,426 1,254 884 1,416 21 General science, space, and technology ... 7,777 8,271 3,903 3,486 4,216 3,981 654 715 740 22 Energy 4,035 2,464 2,058 2,073 1,533 1,080 369 215 207 23 Natural resources and environment 12,676 12,677 6,941 5,892 6,933 5,463 1,082 786 929 24 Agriculture 22,173 12,215 13,259 10,154 5,278 7,129 3,372 2,054 1,732 25 Commerce and housing credit 4,721 5,198 2,244 2,164 2,648 2,572 -737 -805 75 26 Transportation 21,231 24,705 10,686 9,918 13,323 10,616 2,053 1,505 1,583 27 Community and regional development 7,302 7,803 4,187 3,124 4,327 3,154 589 438 538 28 Education, training, employment, social services 25,726 26,616 12,186 12,801 13,246 13,445 2,547 2,628 2,233 29 Health 28,655] 30,435 39,072 41,206 42,150 15,748 2,822 2,778 2,685 30 Social security and medicare 223,311 ? 235,764 133,779 143,001 20,930 20,583 21,031 31 Income security 106,211J 96,714 135,579 65,212 11,600 10,220 11,530 32 Veterans benefits and services 24,845 25,640 13,240 11,334 13,621 12,849 928 2,218 2,296 33 Administration of justice 5,014 5,616 2,373 2,522 2,628 2,807 585 453 471 34 General government 4,991 4,836 2,323 2,434 2,479 2,462 244 699 343 35 General-purpose fiscal assistance 6,287 6,577 3,153 3,124 3,290 2,943 1,250 116 75 36 Net interest" 89,774 111,007 44,948 42,358 47,674 53,729 10,440 11,820 10,517 37 Undistributed offsetting receipts7 -21,424 -15,454 -8,332 -8,887 -7,262 -7,333 -2,513 -2,238 -2,118 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

A30 Domestic Nonfinancial Statistics • June 1985 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1982 1983 1984 IItteemm Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 1 Federal debt outstanding 1,201.9 1,249.3 1,324.3 1,381.9 1,415.3 1,468.3 1,517.2 1,576.7 1,667.4 2 Public debt securities 1,197.1 1,244.5 1,319.6 1,377.2 1,410.7 1,463.7 1,512.7 1,572.3 1,663.0 3 Held by public 987.7 1,043.3 1,090.3 1,138.2 1,174.4 1,223.9 1,255.1 1,309.2 1,373.4 4 Held by agencies 209.4 201.2 229.3 239.0 236.3 239.8 257.6 264.1 289.6 5 Agency securities 4.8 4.8 4.7 4.7 4.6 4.6 4.5 4.5 4.5 6 Held by public 3.7 3.7 3.6 3.6 3.5 3.5 3.4 3.4 3.4 7 Held by agencies 1.2 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 8 Debt subject to statutory limit 1,197.9 1,245.3 1,320.4 1,378.0 1,411.4 1,464.5 1,513.4 1,573.0 1,663.7 9 Public debt securities 1,196.5 1,243.9 1,319.0 1,376.6 1,410.1 1,463.1 1,512.1 1,571.7 1,662.4 10 Other debt1 1.4 1.4 1.4 1.3 1.3 1.3 1.3 1.3 1.3 11 MEMO: Statutory debt limit 1,290.2 1,290.2 1,389.0 1,389.0 1,490.0 1,490.0 1,520.0 1,573.0 1,823.8 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 1984 1985 TTyyppee aanndd hhoollddeerr 11998800 11998811 11998822 11998833 Q2 Q3 Q4 Q1 1 Total gross public debt 930.2 1,028.7 1,197.1 1,410.7 1,512.7 1,572.3 1,663.0 1,710.7 By type 2 Interest-bearing debt 928.9 1,027.3 1,195.5 1,400.9 1,501.1 1,559.6 1,660.6 1,695.2 3 Marketable 623.2 720.3 881.5 1,050.9 1,126.6 1,176.6 1,247.4 1,271.7 4 Bills 216.1 245.0 311.8 343.8 343.3 356.8 374.4 379.5 5 Notes 321.6 375.3 465.0 573.4 632.1 661.7 705.1 713.8 6 Bonds 85.4 99.9 104.6 133.7 151.2 158.1 167.9 178.4 7 Nonmarketable1 305.7 307.0 314.0 350.0 374.5 383.0 413.2 423.6 8 State and local government series 23.8 23.0 25.7 36.7 39.9 41.4 44.4 47.7 9 Foreign issues2 24.0 19.0 14.7 10.4 8.8 8.8 9.1 9.1 10 Government 17.6 14.9 13.0 10.4 8.8 8.8 9.1 9.1 11 Public 6.4 4.1 1.7 .0 .0 .0 .0 0 12 Savings bonds and notes 72.5 68.1 68.0 70.7 72.3 73.1 73.3 74.4 13 Government account series3 185.1 196.7 205.4 231.9 253.2 259.5 286.2 292.2 14 Non-interest-bearing debt 1.3 1.4 1.6 9.8 11.6 12.7 2.3 15.5 By holder* 15 U.S. government agencies and trust funds 192.5 203.3 209.4 236.3 257.6 263.1 289.6 16 Federal Reserve Banks 121.3 131.0 139.3 151.9 152.9 155.0 160.9 17 Private investors 616.4 694.5 848.4 1,022.6 1,102.2 1,154.1 1,212.5 18 Commercial banks 112.1 111.4 131.4 188.8 182.3 183.0 185.5? 19 Money market funds 3.5 21.5 42.6 22.8 14.9 13.6 26.0 20 Insurance companies 24.0 29.0 39.1 56.7 61.6" 58.6P 73.9P 21 Other companies 19.3 17.9 24.5 39.7 45.3 47.IP 50.2" 22 State and local governments 87.9 104.3 127.8 155.1 165.0" n.a. n.a. n .a. Individuals 23 Savings bonds 72.5 68.1 68.3 71.5 72.9 73.7 74.5 24 Other securities 44.6 42.7 48.2 61.9 69.3 73.8 70.8 25 Foreign and international5 129.7 136.6 149.5 166.3 171.5 175.5 193.IP 26 Other miscellaneous investors6 122.8 163.0 217.0 259.8 319.4 n.a. n.a. 1. Includes (not shown separately): Securities issued to the Rural Electrifica- 5. Consists of investments of foreign and international accounts. Excludes nontion Administration; depository bonds, retirement plan bonds, and individual interest-bearing notes issued to the International Monetary Fund. retirement bonds. 6. Includes savings and loan associations, nonprofit institutions, credit unions, 2. Nonmarketable dollar-denominated and foreign currency-denominated se- mutual savings banks, corporate pension trust funds, dealers and brokers, certain ries held by foreigners. U.S. government deposit accounts, and U.S. government-sponsored agencies. 3. Held almost entirely by U.S. government agencies and trust funds. SOURCES. Data by type of security, U.S. Treasury Department, Monthly 4. Data for Federal Reserve Banks and U.S. government agencies and trust Statement of the Public Debt of the United States; data by holder. Treasury funds are actual holdings; data for other groups are Treasury estimates. Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A31 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions Par value; averages of daily figures, in millions of dollars 1985 1985 week ending Wednesday IItteemm 11998822'' 11998833 11998844 Jan. Feb.' Mar. Feb. 20 Feb. 27' Mar. 6 Mar. 13 Mar. 20 Mar. 27 Immediate delivery1 1 U.S. government securities 64,531 42,135 52,786' 71,683' 71,544 72,848 69,48(K 77,302 67,414 66,064 66,218 77,482 By maturity 2 Bills 36,790 22,393 26,04C 32,185 33,354 37,978 35,788 33,718 33,773 36,427 38,976 37,620 3 Other within 1 year 1,620 708 1,305 1,758 1,650 1,720 1,765' 1,740 1,709 1,931 1,671 1,766 4 1-5 years 12,543 8,758 11,734 17,677' 17,452 15,975 16,464' 19,967 13,504 12,618 12,042 22,003 5 5-10 years 7,112 5,279 7,607 12,049 10,419 10,404 8,231' 14,264 11,724 9,304 7,625 10,033 6 Over 10 years 6,466 4,997 6,IOC 8,014 8,669 6,771 7,233' 7,613 6,705 5,784 5,903 6,060 By type of customer 7 U.S. government securities dealers 3,539 2,257 2,920 4,288 4,356 3,968 4,090 4,272 3,985 3,953 3,202 4,104 8 U.S. government securities brokers 31,453 21,045 25,584' 32,617 33,844 36,263 32,198 36,117 33,995 33,830 33,564 36,480 9 All others2 30,041 18,832 24,282' 34,778' 33,343 32,618 33,193' 36,913 29,434 28,281 29,452 36,898 10 Federal agency securities 8,282 5,576 7,845' 9,846 9,479 8,705 ll^C 8,923 7,483 8,161 10,129 8,185 11 Certificates of deposit 10,001 4,333 4,947 5,431' 4,591 3,713 3,929 4,651 3,810 3,771 3,458 3,649 12 Bankers acceptances 5,004 2,642 3,244 3,759' 3,218 2,915 2,860 3,358 3,391 3,043 2,399 2,790 13 Commercial paper 15,190 8,036 10,018 10,780 9,956 10,142 10,066 9,277 10,544 9,589 10,525 10,429 Futures transactions3 14 Treasury bills 10,086 6,655 6,947 5,512' 7,123 8,034 5,891 7,203 7,932 7,367 10,710 6,018 15 Treasury coupons 2,977 2,501 4,503 5,147 6,097 5,068 5,353 7,204 6,374 5,319 4,776 3,736 16 Federal agency securities 520 265 262 155 127 115 218 117 69 109 109 119 Forward transactions4 17 U.S. government securities 1,670 1,493 1,362 1,042 1,557 1,332 1,188 1,631 679 1,086 1,502 2,065 18 Federal agency securities 1,960 1,646 2,841' 3,538 3,292 2,137 4,373 3,293 2,174 2,116 2,609 1,768 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • June 1985 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing Averages of daily figures, in millions of dollars 1985 1985 week ending Wednesday Jan. Feb. Mar. Feb. 27 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Positions Net immediate1 1 U.S. government securities 13,663 10,701 5,538' 14,111 11,200 15,842' 14,574 11,666 8,573 10,816 2 Bills 7,297 8,020 5,50(K 11,629 12,441 13,979 13,495 14,181 14,672 13,809 14,342 3 Other within 1 year 972 394 63 -111 851 1,316 1,132 2,068 1,749 1,157 625 4 1-5 years 3,256 1,778 2,159 5,685 3,078' 449 2,254' 791 -783 -1,147 2,011 5 5-10 years -318 -78 -1,119 -4,024 -2,898 -2,548 -1,434 -1,677 -2,615 -2,828 -3,216 6 Over 10 years 2,026 528 -1,174 823 48 -2,240 294 -917 -1,574 -2,678 -3,256 7 Federal agency securities 4,145 7,232 15,294 19,429 19,603' 19,305 18,795' 20,157 20,346 19,377 18,456 8 Certificates of deposit 5,532 5,839 7,369 10,251 9,487 8,005 8,935 8,753 7,894 7,492 7,883 9 Bankers acceptances .... 2,832 3,332 3,874 4,839 4,728' 3,562 4,386' 4,191 3,758 3,041 3,249 10 Commercial paper 3,317 3,159 3,788 4,880 5,226 4,646 5,118 5,587 4,529 4,065 4,586 Futures positions 11 Treasury bills -2,507 -4,125 -4,525 -13,133 -2,549 1,215 2,306 4,387 3,522 1,635 -2,658 12 Treasury coupons -2,303 -1,032 1,794' 1,336 3,143 5,572 3,391 4,496 5,225 5,327 6,729 13 Federal agency securities -224 171 233 -55 -9 -101 -255 -66 -42 -149 -168 Forward positions 14 U.S. government securities -788 -1,936 -1,643 -845 -1,745' -1,320 -1,498' -1,410 -1,582 -535 -1,428 15 Federal agency securities -1,432 -3,561 -9,205' -6,990 -8,156 -8,250 -8,001 -8,751 -8,709 -8,136 -7,686 Financing2 Reverse repurchase agreements 16 Overnight and continuing.... 26,754 29,099 44,078 57,000 59,989 60,818 59,690 63,672 61,988 58,873 59,096 17 Term agreements 48,247 52,493 68,357 72,387 71,570 75,298 71,618 70,344 74,138 76,213 78,752 Repurchase agreements4 18 Overnight and continuing.... 49,695 57,946 75,717 93,727 96,535 96,019 100,117 102,523 99,639 91,341 91,832 19 Term agreements 43,410 44,410 57,047 63,188 62,327 62,890 60,975 61,142 61,379 63,137 65,514 1. Immediate positions are net amounts (in terms of par values) of securities 2. Figures cover financing involving U.S. government and federal agency owned by nonbank dealer firms and dealer departments of commercial banks on a securities, negotiable CDs, bankers acceptances, and commercial paper. commitment, that is, trade-date basis, including any such securities that have 3. Includes all reverse repurchase agreements, including those that have been been sold under agreements to repurchase (RPs). The maturities of some arranged to make delivery on short sales and those for which the securities repurchase agreements are sufficiently long, however, to suggest that the securi- obtained have been used as collateral on borrowings, that is, matched agreements. ties involved are not available for trading purposes. Prior to 1984, securities 4. Includes both repurchase agreements undertaken to finance positions and owned, and hence dealer positions, do not include all securities acquired under "matched book" repurchase agreements. reverse RPs. After January 1984, immediate positions include reverses to maturi- NOTE. Data for positions are averages of daily figures, in terms of par value, ty, which are securities that were sold after having been obtained under reverse based on the number of trading days in the period. Positions are shown net and are repurchase agreements that mature on the same day as the securities. Before on a commitment basis. Data for financing are based on Wednesday figures, in 1981, data for immediate positions include forward positions. terms of actual money borrowed or lent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A33 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1984 1985 AAggeennccyy 11998811 11998822 11998833 Sept. Oct. Nov. Dec. Jan. Feb. 1 Federal and federally sponsored agencies 221,946 237,085 239,716 267,399 268,964 270,314 271,564 270,965 271,479 2 Federal agencies 31,806 33,055 33,940 34,754 35,012 35,078 35,145 35,235 35,360 3 Defense Department1 484 354 243 153 149 146 142 133 122 4 Export-Import Bank2,3 13,339 14,218 14,853 15,733 15,721 15,721 15,882 15,882 15,881 5 Federal Housing Administration4 413 288 194 140 139 138 133 132 129 6 Government National Mortgage Association participation certificates5 2,715 2,165 2,165 2,165 2,165 2,165 2,165 2,165 2,165 7 Postal Service6 1,538 1,471 1,404 1,337 1,337 1,337 1,337 1,337 1,337 8 Tennessee Valley Authority 13,115 14,365 14,970 15,160 15,450 15,520 15,435 15,535 15,675 9 United States Railway Association6 202 194 111 51 51 51 51 51 51 10 Federally sponsored agencies7 190,140 204,030 205,776 232,645 233,952' 235,236 236,419 235,730 236,119" 11 Federal Home Loan Banks 54,131 55,967 48,930 65,616 66,126 66,230 65,085 64,705 64,706 12 Federal Home Loan Mortgage Corporation 5,480 4,524 6,793 8,950 9,634 10,299 10,270 10,195 11,237 13 Federal National Mortgage Association8 58,749 70,052 74,594 80,123 80,357 81,119 83,720 84,612 84,701 14 Farm Credit Banks 71,359 71,896 72,409 73,131 72,859 72,267 71,255 70,642 70,012 15 Student Loan Marketing Association 421 1,591 3,050 4,824 5,143 5,321 5,369 5,576 5,463 MEMO 16 Federal Financing Bank debt 110,698 126,424 135,791 144,836 144,978 145,174 145,217 146,034 146,611 Lending to federal and federally sponsored 17 Export-Import Bank3 12,741 14,177 14,789 15,690 15,690 15,690 15,852 15,852 15,852 18 Postal Service6 1,288 1,221 1,154 1,087 1,087 1,087 1,087 1,087 1,087 19 Student Loan Marketing Association 5,400 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 20 Tennessee Valley Authority 11,390 12,640 13,245 13,435 13,725 13,795 13,710 13,810 13,950 21 United States Railway Association6 202 194 111 51 51 51 51 51 51 Other Lending10 22 Farmers Home Administration 48,821 53,261 55,266 59,511 59,021 58,801 58,971 59,066 59,041 23 Rural Electrification Administration 13,516 17,157 19,766 20,587 20,694 20,889 20,693 20,653 20,804 24 Other 12,740 22,774 26,460 29,475 29,710 29,861 29,853 30,515 30,826 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • June 1985 1.45 NEW SECURITY ISSUES State and Local Governments Millions of dollars 1984 1985 Type of issue or issuer, or use 11998822 11998833 11998844'' June July Aug. Sept. Oct/ Nov/ Dec/ Jan. 1 All issues, new and refunding1 79,138 86,421 105,793 7,680 7,537 11,726 7,967 12,511 13,333 17,128 6,141 Type of issue 2 3 Ge U ne .S r . a l g o o b v l e i r g n a m tio e n n t loans2 21,0 2 9 2 4 5 21,56 % 6 26,48 1 6 6 2,857 0 1,919 1 1,781 1 1,433 4 3,764 1 2,680 3 2,125 2 1,767 3 4 Revenue 58,044 64,855 79,307 4,823 5,618 9,945 6,534 8,748 10,653 15,003 4,374 5 U.S. government loans2 461 253 17 0 I 1 1 3 1 0 3 Type of issuer 6 State 8,438 7,140 9,128 447 465 2,157 596 1,109 405 725 368 7 Special district and statutory authority 45,060 51,297 63,023 4,313 5,121 7,321 5,202 7,072 7,153 11,494 3,752 8 Municipalities, counties, townships, school districts 25,640 27,984 33,643 2,920 1,951 2,248 2,169 4,330 5,775 4,909 2,021 9 Issues for new capital, total 74,804 72,441 93,303 6,959 6,592 10,749 7,454 11,104 12,169 15,202 4,771 Use of proceeds 10 Education 6,482 8,099 7,514 877 466 627 333 743 992 651 650 11 Transportation 6,256 4,387 7,510 464 118 423 590 1,018 2,136 1,312 341 12 Utilities and conservation 14,259 13,588 17,744 1,195 385 1,015 2,013 2,782 512 4,078 1,308 13 Social welfare 26,635 26,910 29,700 2,239 3,728 4,823 3,018 3,500 3,627 3,444 1,133 14 Industrial aid 8,349 7,821 15,067 463 884 1,055 679 1,492 3,803 5,317 718 15 Other purposes 12,822 11,637 15,768 1,721 1,011 2,806 821 1,569 1,099 1,010 621 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 Corporations Millions of dollars 1984 1985 Type of is or s ue u s o e r issuer, 11998822 11998833 11998844 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. 1 All issues1'2 84,638 98,948 95,986 7,641 10,917 7,758 12,350 11,931 6,940 7,294 6,732 2 Bonds 54,076 47,369 73,357 6,309 8,863 6,225 10,403 9,524 5,918 5,739 4,016 Type of offering 3 Public 44,278 47,369 73,357 6,309 8,863 6,225 10,403 9,524 5,918 5,739 4,016 4 Private placement 9,798 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Industry group 5 Manufacturing 12,822 7,842 14,438 950 2,484 1,614 2,989 1,447 1,741 1,326 1,476 6 Commercial and miscellaneous 5,442 5,186 8,745 875 776 576 988 1,198 555 144 469 7 Transportation 1,491 1,039 1,272 40 183 200 161 19 110 297 30 8 Public utility 12,327 7,241 6,754 650 765 758 1,150 555 575 309 80 9 Communication 2,390 3,159 2,407 31 0 0 240 1,557 169 375 353 10 Real estate and financial 19,604 22,900 39,741 3,763 4,654 3,076 4,875 4,749 2,768 3,288 1,607 11 Stocks3 30,562 51,579 22,628 1,332 2,054 1,533 1,947 2,407 1,022 1,555 2,716 Type 12 Preferred 5,113 7,213 4,118 209 334 155 555 655 91 170 218 13 Common 25,449 44,366 18,510 1,123 1,720 1,378 1,392 1,752 931 1,385 2,498 Industry group 14 Manufacturing 5,649 14,135 4,054 204 258 212 712 227 137 172 229 15 Commercial and miscellaneous 7,770 13,112 6,277 382 558 378 489 1,025 112 234 760 16 Transportation 709 2,729 589 28 0 87 16 66 71 0 153 17 Public utility 7,517 5,001 1,624 136 44 92 146 150 66 225 283 18 Communication 2,227 1,822 419 0 123 9 69 3 26 271 101 19 Real estate and financial 6,690 14,780 9,665 582 1,071 755 515 936 610 653 1,190 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, SOURCE. Securities and Exchange Commission and the Board of Governors of employee stock plans, investment companies other than closed-end, intracorpo- the Federal Reserve System. rate transactions, and sales to foreigners. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Market and Corporate Finance A35 1.47 OPEN-END INVESTMENT COMPANIES Net Sales and Asset Position Millions of dollars 1984 1985 IItteemm 11998833 11998844 July Aug. Sept. Oct. Nov. Dec. Jan/ Feb. INVESTMENT COMPANIES1 1 Sales of own shares2 84,345 107,496 7,488 8,956 8,156 9,517 9,458 10,006 19,152 14,780 2 Redemptions of own shares3 57,100 76,38C 5,777 6,497 6,185 6,766 6,343 8,948 9,183 8,006 3 Net sales 27,245 31,1 ^ 1,711 2,459 1,971 2,751 3,115 1,058 9,969 6,774 4 Assets4 113,599 137,126 115,481 128,209 129,657 131,539 132,709 137,126 151,534 154,770 5 Cash position5 8,343 11,978 11,620 12,698 13,221 11,417 11,518 11,978 13,114 14,554 6 Other 105,256 125,148 103,861 115,511 116,436 120,122 121,191 125,148 138,420 140,216 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. 1983 1984 AAccccoouunntt 11998822 11998833 11998844'''' Ql Q2 Q3 Q4 Ql Q2 Q3 Q4' 1 Corporate profits with inventory valuation and capital consumption adjustment 159.1 225.2 285.7 179.1 216.7 245.0 260.0 277.4 291.1 282.8 291.6 2 Profits before tax 165.5 203.2 235.7 161.7 198.2 227.4 225.5 243.3 246.0 224.8 228.7 3 Profits tax liability 60.7 75.8 89.8 59.1 74.8 84.7 84.5 92.7 95.8 83.1 87.7 4 Profits after tax 104.8 127.4 145.9 102.6 123.4 142.6 141.1 150.6 150.2 141.7 141.0 5 Dividends 69.2 72.9 80.5 71.1 71.7 73.3 75.4 77.7 79.9 81.3 83.1 6 Undistributed profits 35.6 54.5 65.3 31.4 51.7 69.3 65.6 72.9 70.2 60.3 58.0 7 Inventory valuation -9.5 -11.2 -5.6 -4.3 -12.1 -19.3 -9.2 -13.5 -7.3 -.2 -1.6 8 Capital consumption adjustment 3.1 33.2 55.7 21.7 30.6 36.9 43.6 47.6 52.3 58.3 64.5 SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Nonfinancial Statistics • June 1985 1.49 NONFINANCIAL CORPORATIONS Assets and Liabilities Billions of dollars, except for ratio 1983 1984 AAccccoouunntt 11997788 11997799 11998800 11998811 11998822 Q4 Q1 Q2 Q3' Q4 1 Current assets 1,043.7 1,214.8 1,327.0 1,418.4 1,432.7 1,557.3 1,600.6 1,630.6 1,667.2 1,680.9 2 Cash 105.5 118.0 126.9 135.5 147.0 165.8 159.3 155.0 150.6 161.6 3 U.S. government securities 17.2 16.7 18.7 17.6 22.8 30.6 35.1 36.7 32.3 36.4 4 Notes and accounts receivable 388.0 459.0 506.8 532.0 519.2 577.8 596.9 612.4 628.1 617.7 5 Inventories 431.8 505.1 542.8 583.7 578.6 599.3 623.1 633.3 662.2 659.0 6 Other 101.1 116.0 131.8 149.5 165.2 183.7 186.3 193.2 194.0 206.3 7 Current liabilities 669.5 807.3 889.3 970.0 976.8 1,043.0 1,079.0 1,111.9 1,143.3 1,149.6 8 Notes and accounts payable 383.0 460.8 513.6 546.3 543.0 577.9 584.1 604.6 624.8 627.7 9 Other 286.5 346.5 375.7 423.7 433.8 465.2 495.0 507.3 518.5 521.9 10 Net working capital 374.3 407.5 437.8 448.4 455.9 514.3 521.6 518.6 523.9 531.4 11 MEMO: Current ratio1 1.559 1.505 1.492 1.462 1.467 1.493 1.483 1.466 1.458 1.462 1. Ratio of total current assets to total current liabilities. Statistics, Board of Governors of the Federal Reserve System, Washington, D.C. NOTE. For a description of this series, see "Working Capital of Nonfinancial 20551. Corporations" in the July 1978 BULLETIN, pp. 533-37. SOURCE. Federal Trade Commission and Bureau of the Census. 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 1.50 TOTAL NONFARM BUSINESS EXPENDITURES on New Plant and Equipment • Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1983 1984 1985 IInndduussttrryy11 11998833 11998844 1199885511 Q3 Q4 Ql Q2 Q3 Q4 Ql' Q2' 1 Total nonfarm business 304.78 353.74 384.40 309.25 325.45 337.48 348.34 361.12 367.21 380.05 388.86 Manufacturing 2 Durable goods industries 53.08 65.95 75.01 54.15 57.56 61.26 63.12 68.31 71.13 74.01 7766..8844 3 Nondurable goods industries 63.12 72.43 78.62 62.59 66.19 68.71 72.21 73.72 75.07 77.00 80.16 Nonmanufacturing 4 Mining 15.19 16.88 16.49 15.66 16.27 17.61 16.01 16.96 16.93 16.93 16.21 Transportation 5 Railroad 4.88 6.77 7.35 5.31 6.04 5.76 7.46 7.47 6.40 6.21 7.20 6 Air 4.36 3.55 3.86 4.20 3.75 3.23 3.52 3.73 3.73 3.64 3.90 7 Other 4.72 6.17 6.33 4.69 5.48 5.96 6.06 6.50 6.16 6.11 6.21 Public utilities 8 Electric 37.27 37.09 36.13 37.64 37.79 38.36 37.82 36.82 35.37 36.73 36.14 9 Gas and other 7.70 10.30 12.27 7.13 8.07 8.77 10.07 11.07 11.31 11.97 12.45 10 Commercial and other2 114.45 134.39 148.35 117.88 124.30 127.83 132.07 136.55 141.10 148.17 149.10 •Trade and services are no longer being reported separately. They are included 2. "Other" consists of construction; wholesale and retail trade; finance and in Commercial and other, line 10. insurance; personal and business services; and communication. 1. Anticipated by business. SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A37 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities Billions of dollars, end of period 1983 1984 AAccccoouunntt 11997788 11997799 11998800 11998811 11998822 Q3 Q4 QL Q2 Q3 ASSETS Accounts receivable, gross 1 Consumer 52.6 65.7 73.6 85.5 89.5 92.3 92.8 96.9 99.6 103.4 2 Business 63.3 70.3 72.3 80.6 81.0 86.8 95.2 101.1 104.2 103.2 3 Total 116.0 136.0 145.9 166.1 170.4 179.0 188.0 198.0 203.8 206.6 4 LESS: Reserves for unearned income and losses.... 15.6 20.0 23.3 28.9 30.5 30.1 30.6 31.9 33.4 34.7 5 Accounts receivable, net 100.4 116.0 122.6 137.2 139.8 148.9 157.4 166.1 170.4 171.9 6 Cash and bank deposits 3.5 1 7 Securities 1.3 \ 24.91 27.5 34.2 39.7 45.0 45.3 47.1 48.1 49.1 8 All other 17.3 J 9 Total assets 122.4 140.9 150.1 171.4 179.5 193.9 202.7 213.2 218.5 220.9 LIABILITIES 10 Bank loans 6.5 8.5 13.2 15.4 18.6 17.0 19.1 14.7 15.3 16.0 11 Commercial paper 34.5 43.3 43.4 51.2 45.8 49.7 53.6 58.4 62.0 60.1 Debt 12 Short-term, n.e.c 8.1 8.2 7.5 9.6 8.7 8.7 11.3 12.2 15.0 15.1 13 Long-term, n.e.c 43.6 46.7 52.4 54.8 63.5 66.2 65.4 68.7 67.6 71.2 14 Other 12.6 14.2 14.3 17.8 18.7 24.4 27.1 29.8 29.0 29.2 15 Capital, surplus, and undivided profits 17.2 19.9 19.4 22.8 24.2 27.9 26.2 29.4 29.6 29.2 16 Total liabilities and capital 122.4 140.9 150.1 171.4 179.5 193.9 202.7 213.2 218.5 220.9 1. Beginning Q1 1979, asset items on lines 6, 7, and 8 are combined. These data also appear in the Board's G.20 (422) release. For address, see NOTE. Components may not add to totals due to rounding. inside front cover. 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 1984 1985 1984 1985 1984 1985 FFFeeebbb... 222888,,, 111999888555''' Dec. Jan. Feb. Dec. Jan. Feb. Dec. Jan. Feb. 1 Total 137,947 2,969 4,368 869 27,088 28,010 26,444 24,119 23,642 25,575 Retail financing of installment sales 2 Automotive (commercial vehicles) 11,213 -20 -25 43 720 720 797 740 745 754 3 Business, industrial, and farm equipment 20,332 477 -218 -25 1,491 1,254 1,272 1,014 1,472 1,297 Wholesale financing 4 Automotive 20,186 1,295 1,096 709 9,898 10,165 9,394 8,603 9,069 8,685 5 Equipment 4,778 -82 157 -15 573 711 485 655 554 500 6 All other 6,597 212 147 106 1,690 1,824 1,690 1,478 1,677 1,584 Leasing 7 Automotive 13,436 377 623 305 917 1,121 966 540 498 661 8 Equipment 36,399 453 928 39 1,528 1,767 916 1,075 839 877 9 Loans on commercial accounts receivable and factored commercial accounts receivable 16,037 226 1,659 -687 9,285 9,475 9,650 9,059 7,816 1100,,333377 10 All other business credit 10,969 31 1 394 986 973 1,274 955 972 888800 1. Not seasonally adjusted. NOTE. These data also appear in the Board's G.20 (422) release. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • June 1985 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1984 1985 IItteemm 11998822 11998833 11998844 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars) 94.6 92.8 96.8 97.4 98.4 99.5 102.6 94.8 2 Amount of loan (thousands of dollars) 69.8 69.5 73.7 72.5 74.0 75.2 76.9 71.4 3 Loan/price ratio (percent) 76.6 77.1 78.7 77.3 78.2 77.9 77.9 77.9 4 Maturity (years) 27.6 26.7 27.8 27.6 27.6 27.5 28.0 27.7 5 Fees and charges (percent of loan amount)2 2.95 2.40 2.64 2.63 2.58 2.54 2.65 2.65 6 Contract rate (percent per annum) 14.47 12.20 11.87 12.03 12.27 12.27 12.05 11.77 Yield (percent per annum) 7 FHLBB series5 15.12 12.66 12.37 12.53 12.77 12.75 12.55 12.27 8 HUD series4 15.79 13.43 13.80 13.98 13.59 13.20 13.05 12.88 SECONDARY MARKETS Yield (percent per annum) 9 FHA mortgages (HUD series)5. 15.30 13.11 13.81 13.99 13.43 12.90 12.99 13.01 10 GNMA securities6 14.68 12.25 13.13 13.36 13.09 12.71 12.54 12.26 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 66,031 74,847 83,339 84,851 85,539 86,416 87,940 89,353 90,369 91,975 12 FHA/VA-insured 39,718 37,393 35,148 34,844 34,791 34,752 34,711 34,602 34,553 34,585 13 Conventional 26,312 37,454 48,191 50,006 50,749 51,664 53,229 54,751 55,816 57,391 Mortgage transactions (during period) 14 Purchases 15,116 17,554 16,721 1,145 1,087 1,297 1,962 1,943 1,559 2,256 15 Sales 2 3,528 978 0 0 0 0 0 0 100 Mortgage commitments7 16 Contracted (during period) 22,105 18,607 21,007 1,142 1,638 2,150 2,758 1,230 1,895 1,636 17 Outstanding (end of period) 7,606 5,461 6,384 6,235 6,656 5,916 6,384 5,678 5,665 5,019 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 18 Total 5,131 5,9% 9,283 9,447 9,726 9,900 10,399 10,362 19 FHA/VA 1,027 974 910 8% 891 886 881 876 20 Conventional 4,102 5,022 8,373 8,551 8,835 9,014 9,518 9,485 Mortgage transactions (during period) 21 Purchases 23,673 23,089 21,886 1,262 2,864 2,241 4,137 2,197 n.a. n.a. 22 Sales 24,170 19,686 18,506 1,137 2,573 1,961 3,635 2,162 Mortgage commitments9 23 Contracted (during period) 28,179 32,852 32,603 3,440 2,663 4,158 4,174 4,264 24 Outstanding (end of period) 7,549 16,964 26,990 22,013 25,676 27,550 26,990 29,654 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 averages of Friday figures from the borrower or the seller) to obtain a loan. Wall Street Journal. 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 A39 1.54 MORTGAGE DEBT OUTSTANDING Millions of dollars, end of period 1983 1984 TTyyppee ooff hhoollddeerr,, aanndd ttyyppee ooff pprrooppeerrttyy 11998822 11998833 11998844'' Q4 Q1 Q2 Q3 Q4' 1 All holders 1,658,450 1,827,563 2,031,459 1,827,563 1,874,489 1,934,437 1,987,130 2,031,459 ? 1- to 4-family 1,110,315 1,219,145 1,350,576 1,219,145 1,250,678 1,287,537 1,320,515 1,350,576 3 Multifamily 140,063 150,149 164,017 150,149 153,655 158,349 161,893 164,017 4 Commercial 301,362 348,958 406,059 348,958 360,540 377,974 393,600 406,059 5 106,710 109,311 110,807 109,311 109,616 110,577 111,122 110,807 6 Major financial institutions 1,024,680 1,110,165 1,247,047 1,110,165 1,138,931 1,183,480 1,221,779 1,247,047 7 Commercial banks1 301,272 328,323 374,186 328,323 340,797 353,946 365,386 374,186 8 1- to 4-family 173,804 181,300 197,944 181,300 185,530 190,706 194,933 197,944 9 Multifamily 16,480 18,288 21,142 18,288 20,005 20,670 21,412 21,142 10 Commercial 102,553 119,411 144,623 119,411 125,550 132,447 138,774 144,623 11 Farm 8,435 9,324 10,477 9,324 9,712 10,123 10,267 10,477 17 Mutual savings banks 97,805 136,054 160,301 136,054 143,180 147,517 150,462 160,301 13 1- to 4-family 66,777 96,569 114,061 96,569 101,868 105,063 106,944 114,061 14 Multifamily 15,305 17,785 20,119 17,785 18,441 18,752 19,138 20,119 15 Commercial 15,694 21,671 26,090 21,671 22,841 23,672 24,349 26,090 16 Farm 29 29 31 29 30 30 31 31 17 Savings and loan associations 483,614 494,789 555,277 494,789 503,509 528,172 550,129 555,277 18 1- to 4-family 393,323 390,883 431,450 390,883 397,017 414,087 429,101 431,450 19 Multifamily 38,979 42,552 48,309 42,552 43,553 45,951 47,861 48,309 20 Commercial 51,312 61,354 75,518 61,354 62,939 68,134 73,167 75,518 7n1 Life insurance companies 141,989 150,999 157,283 150,999 151,445 153,845 155,802 157,283 1- to 4-family 16,751 15,319 14,180 15,319 14,917 14,437 14,204 14,180 73 Multifamily 18,856 19,107 19,017 19,107 19,083 19,028 18,828 19,017 74 Commercial 93,547 103,831 111,642 103,831 104,890 107,796 110,149 111,642 25 Farm 12,835 12,742 12,444 12,742 12,555 12,584 12,621 12,444 76 Federal and related agencies 138,138 147,370 157,901 147,370 150,784 152,669 153,355' 157,901 27 Government National Mortgage Association 4,227 3,395 2,301 3,395 2,900 2,715 2,389 2,301 7,8 1- to 4-family 676 630 585 630 618 605 594 585 29 Multifamily 3,551 2,765 1,716 2,765 2,282 2,110 1,795 1,716 30 Farmers Home Administration 1,786 2,141 1,800 2,141 2,094 1,344 738 1,800 31 1- to 4-family 783 1,159 449 1,159 1,005 281 206 449 37 Multifamily 218 173 124 173 303 463 126 124 33 Commercial 377 409 652 409 319 81 113 652 34 Farm 408 400 575 400 467 519 293 575 35 Federal Housing and Veterans Administration 5,228 4,894 4,782 4,894 4,832 4,753 4,749' 4,782 36 1- to 4-family 1,980 1,893 2,007 1,893 1,956 1,894 1,982' 2,007 37 Multifamily 3,248 3,001 2,775 3,001 2,876 2,859 2,767' 2,775 38 Federal National Mortgage Association 71,814 78,256 87,940 78,256 80,975 83,243 84,850 87,940 39 1- to 4-family 66,500 73,045 82,175 73,045 75,770 77,633 79,175 82,175 40 Multifamily 5,314 5,211 5,765 5,211 5,205 5,610 5,675 5,765 41 Federal Land Banks 50,350 51,052 50,679 51,052 51,004 51,136 51,182 50,679 47 1- to 4-family 3,068 3,000 2,948 3,000 2,982 2,958 2,954 2,948 43 Farm 47,282 48,052 47,731 48,052 48,022 48,178 48,228 47,731 44 Federal Home Loan Mortgage Corporation 4,733 7,632 10,399 7,632 8,979 9,478 9,447 10,399 45 1- to 4-family 4,686 7,559 9,654 7,559 8,847 8,931 8,841 9,654 46 Multifamily 47 73 745 73 132 547 606 745 47 Mortgage pools or trusts2 216,654 285,073 331,532 285,073 296,481 305,051 317,548 331,532 48 Government National Mortgage Association 118,940 159,850 179,981 159,850 166,261 170,893 175,770 179,981 49 1- to 4-family 115,831 155,801 175,084 155,801 161,943 166,415 171,095 175,084 50 Multifamily 3,109 4,049 4,897 4,049 4,318 4,478 4,675 4,897 51 Federal Home Loan Mortgage Corporation 42,964 57,895 70,822 57,895 59,376 61,267 63,964 70,822 5? 1- to 4-family 42,560 57,273 70,253 57,273 58,776 60,636 63,352 70,253 53 Multifamily 404 622 569 622 600 631 612 569 54 Federal National Mortgage Association3 14,450 25,121 36,215 25,121 28,354 29,256 32,888 36,215 55 1- to 4-family 14,450 25,121 35,965 25,121 28,354 29,256 32,730 35,965 56 Multifamily n.a. n.a. 250 n.a. n.a. n.a. 158 250 57 Farmers Home Administration 40,300 42,207 44,514 42,207 42,490 43,635 44,926 44,514 58 1- to 4-family 20,005 20,404 21,578 20,404 20,573 21,331 21,595 21,578 59 Multifamily 4,344 5,090 5,835 5,090 5,081 5,081 5,618 5,835 60 Commercial 7,011 7,351 7,403 7,351 7,456 7,764 7,844 7,403 61 Farm 8,940 9,362 9,698 9,362 9,380 9,459 9,869 9,698 67 Individual and others4 278,978 284,955 294,979 284,955 288,293 293,237 294,448 294,979 63 1- to 4-family5 189,121 189,189 192,243 189,189 190,522 193,304 192,809 192,243 64 Multifamily 30,208 31,433 32,754 31,433 31,776 32,169 32,622 32,754 65 Commercial 30,868 34,931 40,131 34,931 36,545 38,080 39,204 40,131 66 Farm 28,781 29,402 29,851 29,402 29,450 29,684 29,813 29,851 1. Includes loans held by nondeposit trust companies but not bank trust 5. Includes estimate of residential mortgage credit provided by individuals. departments. NOTE. Based on data from various institutional and governmental sources, with 2. Outstanding principal balances of mortgages backing securities insured or some quarters estimated in part by the Federal Reserve in conjunction with the guaranteed by the agency indicated. Federal Home Loan Bank Board and the Department of Commerce. Separation of 3. Outstanding balances on FNMA's issues of securities backed by pools of nonfarm mortgage debt by type of property, if not reported directly, and conventional mortgages held in trust. Implemented by FNMA in 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

A40 Domestic Nonfinancial Statistics • June 1985 1.55 CONSUMER INSTALLMENT CREDIT' Total Outstanding, and Net ChangeA Millions of dollars 1984' 1985 HHoollddeerr,, aanndd ttyyppee ooff ccrreeddiitt 11998833 11998844 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Amounts outstanding (end of period) 1 Total 383,701 460,500 414,738 422,008 430,795 437,469 441,358 447,783 460,500 461,530 464,940 By major holder 2 Commercial banks 171,978 212,391 191,519 195,265 199,654 202,452 204,582 206,635 212,391 213,951 215,778 3 Finance companies 87,429 96,747 91,006 92,534 94,070 95,594 95,113 95,753 96,747 96,732 97,360 4 Credit unions 53,471 67,858 59,893 61,151 62,679 63,808 64,716 66,528 67,858 68,538 70,251 5 Retailers2 37,470 40,913 35,242 35,058 35,359 35,595 35,908 37,124 40,913 38,978 37,483 6 Savings and loans 23,108 29,945 25,428 26,057 26,922 27,880 28,781 29,358 29,945 30,520 31,405 7 Gasoline companies ... 4,131 4,315 4,289 4,472 4,452 4,328 4,290 4,217 4,315 4,329 4,012 8 Mutual savings banks .. 6,114 8,331 7,361 7,471 7,659 7,812 7,968 8,168 8,331 8,482 8,651 By major type of credit 9 Automobile 143,114 172,589 158,215 161,834 165,177 167,231 168,923 170,731 172,589 173,769 176,119 10 Commercial banks... 67,557 85,501 78,018 80,103 81,786 82,706 83,620 84,326 85,501 86,223 87,333 11 Credit unions 25,574 32,456 28,646 29,248 29,979 30,519 30,953 31,820 32,456 32,781 33,601 12 Finance companies .. 49,983 54,632 51,551 52,483 53,412 54,006 54,350 54,585 54,632 54,765 55,185 13 Revolving 81,977 101,555 85,027 86,003 88,202 90,231 91,505 93,944 101,555 100,565 99,316 14 Commercial banks... 44,184 60,549 49,374 50,358 52,313 54,258 55,276 56,641 60,549 61,445 61,978 15 Retailers 33,662 36,691 31,364 31,173 31,437 31,645 31,939 33,086 36,691 34,791 33,326 16 Gasoline companies . 4,131 4,315 4,289 4,472 4,452 4,328 4,290 4,217 4,315 4,329 4,012 17 Mobile home 23,862 24,556 24,300 24,639 24,947 25,198 24,573 24,439 24,556 24,281 24,393 18 Commercial banks... 9,842 9,610 9,621 9,681 9,711 9,761 9,627 9,613 9,610 9,498 9,456 19 Finance companies .. 9,547 9,243 9,729 9,883 9,992 10,065 9,470 9,235 9,243 9,053 9,044 20 Savings and loans ... 3,906 4,985 4,316 4,428 4,581 4,697 4,791 4,887 4,985 5,005 5,150 21 Credit unions 567 718 634 647 663 675 685 704 718 725 743 22 Other 134,748 161,800 147,196 149,532 152,469 154,809 156,357 158,669 161,800 162,915 165,112 23 Commercial banks... 50,395 56,731 54,506 55,123 55,844 55,727 56,059 56,055 56,731 56,785 57,011 24 Finance companies .. 27,899 32,872 29,726 30,168 30,666 31,523 31,293 31,933 32,872 32,914 33,131 25 Credit unions 27,330 34,684 30,613 31,256 32,037 32,614 33,078 34,004 34,684 35,032 35,907 26 Retailers 3,808 4,222 3,878 3,885 3,922 3,950 3,969 4,038 4,222 4,187 4,157 27 Savings and loans ... 19,202 24,960 21,112 21,629 22,341 23,183 23,990 24,471 24,960 25,515 26,255 28 Mutual savings banks 6,114 8,331 7,361 7,471 7,659 7,812 7,968 8,168 8,331 8,482 8,651 Net change (during period)3'' 29 Total 48,742 76,799 7,082 6,481 6,022 4,982 5,631 6,080 6,819 7,223 10,373 By major holder 30 Commercial banks 19,488 40,413 3,835 3,192 2,631 1,384 2,756 2,483 3,028 3,799 5,071 31 Finance companies 18,572 18,636 942 1,138 1,381 1,571 398 778 1,196 901 1,203 32 Credit unions 6,218 14,387 1,049 1,360 927 871 1,224 1,731 1,336 1,290 2,755 33 Retailers2 5,075 3,443 330 36 197 225 128 278 389 251 269 34 Savings and loans 7,285 6,837 813 586 804 770 864 546 576 922 997 35 Gasoline companies . . . 68 184 37 -23 -63 -38 98 86 117 -91 -102 36 Mutual savings banks .. 1,322 2,217 76 192 145 199 163 178 177 151 180 By major type of credit 31 Automobile 16,856 29,475 2,725 3,087 2,482 1,513 2,504 2,549 2,687 2,887 3,837 38 Commercial banks... 8,002 17,944 1,907 1,852 1,150 434 1,057 1,019 1,275 1,616 1,790 39 Credit unions 2,978 6,882 503 650 444 416 587 828 640 598 1,335 40 Finance companies .. 11,752 9,298 315 585 888 663 860 702 772 673 712 41 Revolving 12,353 19,578 1,356 772 1,263 1,484 1,488 1,614 1,445 1,957 2,527 42 Commercial banks... 7,518 16,365 1,047 764 1,159 1,323 1,279 1,289 1,001 1,809 2,429 43 Retailers 4,767 3,029 272 31 167 199 111 239 327 239 200 44 Gasoline companies . 68 184 37 -23 -63 -38 98 86 117 -91 -102 45 Mobile home 1,452 694 191 334 217 127 -392 -91 117 -159 296 46 Commercial banks... 237 -232 10 31 4 4 -91 -1 29 -89 41 47 Finance companies .. 776 -608 46 137 63 19 -381 -192 -13 -144 33 48 Savings and loans ... 763 1,079 123 152 140 95 67 84 88 60 192 49 Credit unions 64 151 12 14 10 9 13 18 13 14 30 50 Other 18,081 27,052 2,810 2,288 2,060 1,858 2,031 2,008 2,570 2,538 3,713 51 Commercial banks... 3,731 6,336 871 545 318 -377 511 176 723 463 811 52 Finance companies .. 6,044 9,946 581 416 430 889 -81 268 437 372 458 53 Credit unions 3,176 7,354 534 696 473 446 624 885 683 678 1,390 54 Retailers 308 414 58 5 30 26 17 39 62 12 69 55 Savings and loans ... 6,522 5,758 690 434 664 675 797 462 488 862 805 56 Mutual savings banks 1,322 2,217 76 192 145 199 163 178 177 151 180 • These data have not been revised this month due to revisions that were not 3. For 1982 and earlier, net change equals extensions, seasonally adjusted less available at time of publication. liquidations, seasonally adjusted. Beginning 1983, net change equals outstandings, 1. The Board's series cover most short- and intermediate-term credit extended seasonally adjusted less outstandings of the previous period, seasonally adjusted. to individuals through regular business channels, usually to finance the purchase NOTE. Total consumer noninstallment credit outstanding—credit scheduled to of consumer goods and services or to refinance debts incurred for such purposes, be repaid in a lump sum, including single-payment loans, charge accounts, and and scheduled to be repaid (or with the option of repayment) in two or more service credit—amounted to, not seasonally adjusted, $80.7 billion at the end of installments. 1981, $85.9 billion at the end of 1982, and $96.9 billion at the end of 1983. 2. Includes auto dealers and excludes 30-day charge credit held by travel and These data also appear in the Board's G.19 (421) release. For address, see entertainment companies. inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Consumer Installment Credit A41 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT Percent unless noted otherwise 1984 1985 IItteemm 11998822 11998833 11998844 Aug. Sept. Oct. Nov. Dec. Jan. Feb. INTEREST RATES Commercial banks1 1 48-month new car2 16.82 13.92 13.71 14.08 n.a. n.a. 13.91 n.a. n.a. 13.37 2 24-month personal 18.64 16.50 16.47 16.75 n.a. n.a. 16.63 n.a. n.a. 16.21 3 120-month mobile home2 18.05 16.08 15.58 15.72 n.a. n.a. 15.60 n.a. n.a. 15.42 4 Credit card 18.51 18.78 18.77 18.81 n.a. n.a. 18.82 n.a. n.a. 18.85 Auto finance companies New car 16.15 12.58 14.62 15.01 15.16 15.18 15.24 15.24 15.11 13.78 6 Used car 20.75 18.74 17.85 17.99 18.10 18.19 18.30 18.34 17.88 17.91 OTHER TERMS3 Maturity (months) 7 New car 45.9 45.9 48.3 49.2 49.5 49.7 50.0 50.2 50.7 51.4 8 Used car 37.0 37.9 39.7 39.8 39.9 39.9 39.9 39.8 41.3 41.1 Loan-to-value ratio 9 New car 85 86 88 88 89 88 89 89 90 90 10 Used car 90 92 92 93 93 93 93 93 93 93 Amount financed (dollars) 11 New car 8,178 8,787 9,333 9,409 9,402 9,449 9,577 9,707 9,654 9,196 12 Used car 4,746 5,033 5,691 5,753 5,792 5,826 5,900 5,975 5,951 5,968 1. Data for midmonth of quarter only. NOTE. These data also appear in the Board's G.19 (421) release. For address, 2. Before 1983 the maturity for new car loans was 36 months, and for mobile see inside front cover, home loans was 84 months. 3. At auto finance companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Financial Statistics • June 1985 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; half-yearly data are at seasonally adjusted annual rates. 1982 1983 1984 HI H2 HI H2 HI H2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors 386.0 344.6 380.4 404.1 526.4 715.3 358.1 450.1 448.9 563.8 697.9 732.6 By sector and instrument 2 U.S. government 37.4 79.2 87.4 161.3 186.6 198.8 104.1 218.4 222.0 151.1 177.4 220.2 3 Treasury securities 38.8 79.8 87.8 162.1 186.7 199.0 105.5 218.8 222.1 151.2 177.6 220.3 4 Agency issues and mortgages -1.4 -.6 -.5 -.9 -.1 -.2 -1.4 -.4 -.1 -.1 -.2 -.1 5 Private domestic nonfinancial sectors 348.6 265.4 293.1 242.8 339.8 516.5 254.0 231.7 266.9 412.7 520.5 512.4 6 Debt capital instruments 211.2 192.0 159.1 158.9 239.3 288.4 140.7 177.2 214.4 264.2 280.4 296.4 7 Tax-exempt obligations 30.3 30.3 22.7 53.8 56.3 54.6 43.9 63.7 62.8 49.7 37.9 71.3 8 Corporate bonds 17.3 26.7 21.8 18.7 15.7 32.2 12.0 25.3 23.0 8.4 24.1 40.3 9 Mortgages 163.6 135.1 114.6 86.5 167.3 201.5 84.8 88.2 128.6 206.0 218.3 184.8 10 Home mortgages 120.0 96.7 76.0 52.5 108.7 128.9 53.6 51.3 83.8 133.6 140.9 116.9 11 Multifamily residential 7.8 8.8 4.3 5.5 8.4 13.8 5.1 5.8 2.8 13.9 17.1 10.4 12 Commercial 23.9 20.2 24.6 23.6 47.3 57.3 19.7 27.5 40.3 54.3 58.5 56.1 13 Farm 11.8 9.3 9.7 5.0 2.9 1.6 6.5 3.5 1.6 4.1 1.8 1.3 14 Other debt instruments 137.5 73.4 134.0 83.9 100.5 228.1 113.2 54.6 52.5 148.5 240.2 216.1 15 Consumer credit 45.4 6.3 26.7 21.0 51.3 100.6 20.6 21.4 35.9 66.6 103.0 98.2 16 Bank loans n.e.c 51.2 36.7 54.7 55.5 27.3 71.5 69.0 42.0 13.3 41.2 83.2 59.7 17 Open market paper 11.1 5.7 19.2 -4.1 -1.2 23.8 10.0 -18.2 -10.6 8.3 31.5 16.0 18 Other 29.7 24.8 33.4 11.5 23.1 32.3 13.6 9.4 13.9 32.3 22.4 42.1 19 By borrowing sector 348.6 265.4 293.1 242.8 339.8 516.5 254.0 231.7 266.9 412.7 520.5 512.4 20 State and local governments 17.6 17.2 6.2 31.3 36.7 33.0 24.1 38.5 41.9 31.6 18.9 47.0 21 Households 179.3 122.1 127.5 94.5 175.4 241.6 94.7 94.3 134.8 216.0 236.6 246.6 22 Farm 21.4 14.4 16.3 7.6 4.3 2.2 9.6 5.6 .8 7.9 .6 3.8 23 Nonfarm noncorporate 34.4 33.7 40.2 39.5 63.9 76.3 36.6 42.3 50.1 77.6 86.1 66.5 24 Corporate 96.0 78.1 102.9 70.0 59.5 163.5 89.0 51.0 39.3 79.6 178.3 148.6 25 Foreign net borrowing in United States 20.2 27.2 27.2 15.7 18.9 1.7 10.2 21.2 15.3 22.5 19.2 -15.7 26 Bonds 3.9 .8 5.4 6.7 3.8 2.7 2.4 11.0 4.6 2.9 1.1 4.4 27 Bank loans n.e.c 2.3 11.5 3.7 -6.2 4.9 -6.2 -7.6 -4.7 11.3 -1.5 -6.0 -6.3 28 Open market paper 11.2 10.1 13.9 10.7 6.0 .4 12.5 9.0 -4.6 16.5 18.9 -18.1 29 U.S. government loans 2.9 4.7 4.2 4.5 4.3 4.8 3.0 6.0 3.9 4.6 5.3 4.4 30 Total domestic plus foreign 406.2 371.8 407.6 419.8 545.3 717.0 368.3 471.4 504.2 586.3 717.1 717.0 Financial sectors 31 Total net borrowing by financial sectors 82.4 62.9 84.1 69.0 90.7 126.5 84.2 53.8 74.0 107.3 121.0 131.9 By instrument 32 U.S. government related 47.9 44.8 47.4 64.9 67.8 74.2 60.0 69.7 66.2 69.4 69.1 79.2 33 Sponsored credit agency securities 24.3 24.4 30.5 14.9 1.4 30.0 22.4 7.5 -4.1 6.9 30.8 29.2 34 Mortgage pool securities 23.1 19.2 15.0 49.5 66.4 44.2 36.8 62.2 70.3 62.5 38.3 50.0 35 .6 1.2 1.9 .4 .8 36 Private financial sectors 34.5 18.1 36.7 4.1 22.9 52.3 24.2 -16.0 7.8 38.0 51.9 52.7 37 Corporate bonds 7.8 7.1 -.8 2.5 17.1 14.5 -2.5 7.6 15.2 18.9 14.9 14.1 38 Mortgages * -.1 -.5 .1 * * .1 .1 * * * * 39 Bank loans n.e.c -.5 -.9 .9 1.9 -.2 .9 3.2 .6 -2.5 2.2 .1 1.7 40 Open market paper 18.0 4.8 20.9 -1.2 13.0 21.2 12.3 -14.7 7.2 18.8 21.2 21.1 41 Loans from Federal Home Loan Banks 9.2 7.1 16.2 .8 -7.0 15.7 11.1 -9.5 -12.1 -2.0 15.7 15.7 By sector 42 Sponsored credit agencies 24.8 25.6 32.4 15.3 1.4 30.0 23.2 7.5 -4.1 6.9 30.8 29.2 43 Mortgage pools 23.1 19.2 15.0 49.5 66.4 44.2 36.8 62.2 70.3 62.5 38.3 50.0 44 Private financial sectors 34.5 18.1 36.7 4.1 22.9 52.3 24.2 -16.0 7.8 38.0 51.9 52.7 45 Commercial banks 1.6 .5 .4 1.2 .5 2.7 .7 1.7 .8 .2 4.8 .6 46 Bank affiliates 6.5 6.9 8.3 1.9 8.6 10.8 9.7 -5.8 6.1 11.1 20.0 1.5 47 Savings and loan associations 12.6 7.4 15.5 2.5 -2.7 20.1 14.3 -9.3 -10.0 4.5 18.2 21.9 48 Finance companies 16.5 5.8 12.8 -.9 17.0 19.5 * -1.9 11.4 22.7 9.6 29.4 49 REITs -1.3 -2.2 .2 .1 .2 .1 .1 .1 .2 .2 .1 .1 All sectors 50 Total net borrowing 488.7 434.7 491.8 488.8 635.9 843.5 452.5 525.1 578.2 693.6 838.1 848.9 51 U.S. government securities 84.8 122.9 133.0 225.9 254.4 273.1 163.5 288.3 288.4 220.5 246.7 299.5 52 State and local obligations 30.3 30.3 22.7 53.8 56.3 54.6 43.9 63.7 62.8 49.7 37.9 71.3 53 Corporate and foreign bonds 29.0 34.6 26.4 27.8 36.5 49.4 11.8 43.8 42.8 30.3 40.1 58.8 54 Mortgages 163.5 134.9 113.9 86.5 167.2 201.5 84.8 88.2 128.5 206.0 218.2 184.7 55 Consumer credit 45.4 6.3 26.7 21.0 51.3 100.6 20.6 21.4 35.9 66.6 103.0 98.2 56 Bank loans n.e.c 52.9 47.3 59.3 51.2 32.0 66.2 64.6 37.9 22.1 41.9 77.3 55.1 57 Open market paper 40.3 20.6 54.0 5.4 17.8 45.3 34.8 -23.9 -8.0 43.6 71.5 19.0 58 Other loans 42.4 37.8 55.8 17.2 20.3 52.8 28.5 5.9 5.7 35.0 43.4 62.2 External corporate equity funds raised in United States 59 Total new share issues -3.8 22.2 -4.1 35.3 67.8 -29.8 23.3 47.2 83.5 52.0 -43.3 -16.4 60 Mutual funds .1 5.2 6.3 18.4 32.8 38.1 12.5 24.3 36.8 28.9 39.0 37.2 61 All other -3.9 17.1 -10.4 16.9 34.9 -67.9 10.9 22.9 46.8 23.1 -82.3 -53.6 62 Nonfinancial corporations -7.8 12.9 -11.5 11.4 28.3 -72.1 7.0 15.8 38.2 18.4 -84.5 -59.6 63 Financial corporations 3.2 2.1 .8 4.0 2.7 3.0 3.9 4.1 2.8 2.5 2.9 3.2 64 Foreign shares purchased in United States .8 2.1 .3 1.5 4.0 1.1 -.1 3.0 5.7 2.2 -.7 2.9 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A43 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. 1982 1983 1984 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11997799 11998800 11998811 11998822 11998833 11998844 HI H2 HI H2 HI H2 1 Total funds advanced in credit markets to domestic nonfinanciat sectors 386.0 344.6 380.4 404.1 526.4 715.3 358.1 450.1 488.9 563.8 697.9 732.6 By public agencies and foreign ? Total net advances 75.2 97.0 97.7 109.1 111177..11 114422..66 110000..88 111177..33 111199..77 111144..66 112233..77 116611..55 3 U.S. government securities -6.3 15.7 17.2 18.0 27.6 35.8 9.7 26.2 40.5 14.6 33.4 38.2 4 Residential mortgages 35.8 31.7 23.5 61.0 76.1 56.5 47.6 74.4 80.1 72.0 52.0 61.1 5 FHLB advances to savings and loans 9.2 7.1 16.2 .8 -7.0 15.7 11.1 -9.5 -12.1 -2.0 15.7 15.7 6 Other loans and securities 36.5 42.4 40.9 29.3 20.5 34.6 32.4 26.2 11.1 29.9 22.6 46.6 Total advanced, by sector 7 U.S. government 19.0 23.7 24.1 16.0 9.7 16.7 14.8 17.1 9.1 10.3 6.1 27.2 8 Sponsored credit agencies 53.0 45.6 48.2 65.3 69.5 71.8 61.8 68.7 68.2 70.7 73.0 70.6 9 Monetary authorities 7.7 4.5 9.2 9.8 10.9 8.4 3.8 15.7 15.6 6.2 17.1 -.3 10 Foreign -4.6 23.2 16.3 18.1 27.1 45.7 20.4 15.8 26.8 27.4 27.5 64.0 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 47.9 44.8 47.4 64.9 6677..88 7744..22 6600..00 6699..77 6666..22 6699..44 6699..11 7799..22 12 Foreign 20.2 27.2 27.2 15.7 18.9 1.7 10.2 21.2 15.3 22.5 19.2 -15.7 Private domestic funds advanced 13 Total net advances 379.0 319.6 357.3 375.6 495.9 648.6 327.5 423.8 450.8 541.1 666622..55 663344..77 14 U.S. government securities 91.1 107.2 115.8 207.9 226.9 237.3 153.7 262.0 247.8 205.9 213.2 261.3 15 State and local obligations 30.3 30.3 22.7 53.8 56.3 54.6 43.9 63.7 62.8 49.7 37.9 71.3 16 Corporate and foreign bonds 18.5 19.3 18.8 14.8 14.6 17.4 -.1 29.6 22.9 6.3 18.0 16.9 17 Residential mortgages 91.9 73.7 56.7 -3.2 40.9 86.1 11.0 -17.4 6.4 75.5 105.9 66.2 18 Other mortgages and loans 156.3 96.2 159.5 103.2 150.2 268.9 130.2 76.3 98.7 201.7 303.2 234.7 19 LESS: Federal Home Loan Bank advances 9.2 7.1 16.2 .8 -7.0 15.7 11.1 -9.5 -12.1 -2.0 15.7 15.7 Private financial intermediation 20 Credit market funds advanced by private financial institutions 313.9 281.5 323.4 285.6 376.7 541.9 274.4 296.7 323.2 430.1 552222..22 561.6 71 Commercial banking 123.1 100.6 102.3 107.2 136.1 176.1 99.9 114.5 121.6 150.6 192.8 159.4 77 Savings institutions 56.5 54.5 27.8 31.3 136.8 147.7 25.2 37.4 128.9 144.6 157.0 138.4 73 Insurance and pension funds 85.9 94.3 97.4 108.8 98.8 113.2 111.4 106.3 89.5 108.1 95.6 130.8 24 Other finance 48.5 32.1 96.0 38.3 5.0 104.9 37.9 38.6 -16.8 26.8 76.7 133.1 75 Sources of funds 313.9 281.5 323.4 285.6 376.7 541.9 274.4 296.7 323.2 430.1 522.2 561.6 76 Private domestic deposits and RPs 137.4 169.6 211.9 174.7 203.5 283.9 147.6 201.9 192.7 214.2 277.0 290.7 27 Credit market borrowing 34.5 18.1 36.7 4.1 22.9 52.3 24.2 -16.0 7.8 38.0 51.9 52.7 78 Other sources 142.0 93.9 74.8 106.7 150.4 205.8 102.6 110.8 122.8 177.9 193.2 218.3 79 Foreign funds 27.6 -21.7 -8.7 -26.7 22.1 20.8 -28.3 -25.1 -14.2 58.5 15.7 25.9 30 Treasury balances .4 -2.6 -1.1 6.1 -5.3 3.8 -2.0 14.1 10.1 -20.8 .9 6.8 31 Insurance and pension reserves 72.8 83.9 90.4 104.6 99.2 108.2 111.4 97.8 90.0 108.4 107.6 108.9 32 Other, net 41.2 34.2 -5.9 22.8 34.4 72.9 21.5 24.1 36.8 31.9 69.0 76.8 Private domestic nonfinancial investors 33 Direct lending in credit markets 99.6 56.1 70.6 94.2 142.1 159.0 77.3 111.0 135.3 148.9 119922..33 112255..77 34 U.S. government securities 52.5 24.6 29.3 37.4 88.7 114.0 35.3 39.5 95.9 81.4 139.4 88.6 35 State and local obligations 9.9 7.0 10.5 34.4 42.5 31.8 30.1 38.7 52.7 32.3 21.5 42.1 36 Corporate and foreign bonds -1.4 -5.7 -8.1 -5.2 2.0 -6.2 -17.7 7.3 -1.7 5.7 7.8 -20.1 37 Open market paper 8.6 -3.1 2.7 -.1 3.9 1.0 3.5 -3.7 -8.1 15.9 3.0 -1.0 38 Other 30.0 33.3 36.3 27.8 5.0 18.4 26.2 29.3 -3.4 13.5 20.7 16.2 39 Deposits and currency 146.8 181.1 221.9 181.9 222.6 294.6 152.1 211.7 214.5 230.7 290.2 299.0 40 Currency 8.0 10.3 9.5 9.7 14.3 14.2 6.7 12.7 14.8 13.8 17.7 10.7 41 Checkable deposits 18.3 5.2 18.0 15.7 21.7 16.4 1.9 29.5 48.0 -4.7 36.6 -3.9 47 Small time and savings accounts 59.3 82.9 47.0 138.2 219.1 148.0 83.2 193.1 278.6 159.7 124.9 171.2 43 Money market fund shares 34.4 29.2 107.5 24.7 -44.1 47.2 39.4 10.0 -84.0 -4.2 30.2 64.2 44 Large time deposits 18.8 45.8 36.9 -7.7 -7.5 69.8 21.9 -37.3 -61.0 45.9 80.0 59.7 45 Security RPs 6.6 6.5 2.5 3.8 14.3 2.4 1.1 6.6 11.0 17.5 5.3 - s 46 Deposits in foreign countries 1.5 1.1 .5 -2.5 4.8 -3.4 -2.2 -2.9 7.0 2.7 -4.5 -2.3 47 Total of credit market instruments, deposits and currency 246.5 237.2 292.5 276.1 364.7 453.6 229.4 322.7 349.8 379.6 482.5 424.8 48 Public holdings as percent of total 18.5 26.1 24.0 26.0 21.5 19.9 27.4 24.9 23.7 19.5 17.2 22.5 49 Private financial intermediation (in percent) 82.8 88.1 90.5 76.0 76.0 83.5 83.8 70.0 71.7 79.5 78.8 88.5 50 Total foreign funds 23.0 1.5 7.6 -8.6 49.2 66.5 -7.9 -9.3 12.6 85.9 43.1 89.9 MEMO: Corporate equities not included above 51 Total net issues -3.8 22.2 -4.1 35.3 67.8 -29.8 2233..33 47.2 8833..55 5522..00 --4433..33 --1166..44 5? Mutual fund shares .1 5.2 6.3 18.4 32.8 38.1 12.5 24.3 36.8 28.9 39.0 37.2 53 Other equities -3.9 17.1 -10.4 16.9 34.9 -67.9 1101..90 22.9 46.8 23.1 -82.3 -53.6 54 Acquisitions by financial institutions 12.9 24.9 20.1 39.2 57.5 19.4 67.3 75.9 39.2 7.6 31.3 55 Other net purchases -16.7 -2.7 -24.2 -3.9 10.2 -49.2 12.3 -20.1 7.6 12.8 -50.8 -47.6 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/line 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. NOTE. Full statements for sectors and transaction types in flows and in amounts 29. Foreign deposits at commercial banks, bank borrowings from foreign outstanding may be obtained from Flow of Funds Section, Division of Research branches, and liabilities of foreign banking agencies to foreign affiliates. and Statistics, Board of Governors of the Federal Reserve System, Washington, 30. Demand deposits at commercial banks. D.C. 20551. 31. Excludes net investment of these reserves in corporate equities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • June 1985 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures 1967 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1984 1985 MMeeaassuurree 11998822 11998833 11998844 July Aug. Sept. Oct. Nov. Dec. Jan.' Feb.' Mar. 1 Industrial production 138.6 147.6 166.3 165.9 166.0 165.0 164.4 164.8 164.8' 165.2 164.9 165.4 Market groupings 2 Products, total 141.8 149.2 164.7 167.4 167.2 166.4 166.9 167.7 168.1' 168.2 167.7 168.0 3 Final, total 141.5 147.1 162.7 165.2 165.1 164.6 165.2 166.2 166.7' 166.9 166.1 166.2 4 Consumer goods 142.6 151.7 161.7 163.8 162.5 161.6 161.6 162.6 162.2' 162.5 161.1 161.3 5 Equipment 139.8 140.8 164.1 167.0 168.7 168.9 170.1 171.2 172.8' 172.9 172.9 173.0 6 Intermediate 143.3 156.6 172.3 175.8 175.1 173.0 173.4 173.1 173.2' 173.0 173.7 174.5 7 Materials 133.7 145.2 161.2 163.5 164.0 162.8 160.4 160.4 159.8' 160.5 160.6 161.3 Industry groupings 8 Manufacturing 137.6 148.2 164.8 167.3 167.6 166.6 166.2 166.6 166.6»- 166.8 166.5 167.1 Capacity utilization (percent)1 9 Manufacturing 71.1 75.2 81.6 82.9 82.8 82.2 81.7 81.6 81.4' 81.3 80.9 81.0 10 Industrial materials industries 70.1 75.2 82.0 83.1 83.3 82.4 81.0 80.9 80.4' 80.5 80.4 80.5 11 Construction contracts (1977 = 100)2 111.0 137.(K 149.C 150 .(K 148.(V 146.0' 145.0' 151.0 150.C 153.0 145.0 162.0 12 Nonagricultural employment, total3 136.1 137.0 143.1 143.4 143.6 144.1 144.6 145.1 145.4 146.0 146.1 146.7 13 Goods-producing, total 102.2 100.4 106.8 107.5 107.7 107.3 107.6 107.8 108.4 108.7 108.2 108.7 14 Manufacturing, total 96.6 95.1 100.7 101.3 101.4 100.9 101.2 101.4 101.8 101.9 101.5 101.4 15 Manufacturing, production-worker ... 89.1 87.9 94.0 94.6 94.8 94.0 94.3 94.4 94.8 94.8 94.3 94.1 16 Service-producing 154.7 157.1 163.0 163.1 163.4 164.2 164.9 165.6 165.7 166.4 166.9 167.6 17 Personal income, total 410.3 435.6 478.1 480.6 483.5 487.0 488.8 491.7 493.9 496.7 498.4 500.9 18 Wages and salary disbursements 367.4 388.6 422.5 424.4 425.5 428.4 428.8 432.6 436.7 438.5 440.4 443.8 19 Manufacturing 285.5 294.7 323.6 324.4 326.2 325.7 326.7 330.0 333.2 334.4 332.9 334.5 20 Disposable personal income4 398.0 427.1 470.3 472.5 475.5 479.1 480.6 482.9 484.5 487.5 483.6 481.3 21 Retail sales5 326.0 373.0 412.0 411.0 410.4 414.1 416.4 421.3 422.3 424.0 430.8 422.4 Prices6 22 Consumer 289.1 298.4 311.1 311.7 313.0 314.5 315.3 315.3 315.5 316.1 317.4 318.8 23 Producer finished goods 280.7 285.2 291.2 292.3 291.3 289.5 291.5 292.3 292.4 292.7 292.5 292.4 1. Ratios of indexes of production to indexes of capacity. Based on data from 5. Based on Bureau of Census data published in Survey of Current Business. Federal Reserve, McGraw-Hill Economics Department, Department of Com- 6. Data without seasonal adjustment, as published in Monthly Labor Review. merce, and other sources. Seasonally adjusted data for changes in the price indexes may be obtained from 2. Index of dollar value of total construction contracts, including residential, the Bureau of Labor Statistics, U.S. Department of Labor. nonresidential and heavy engineering, from McGraw-Hill Information Systems Company, F. W. Dodge Division. NOTE. Basic data (not index numbers) for series mentioned in notes 4, 5, and 6, 3. Based on data in Employment and Earnings (U.S. Department of Labor). and indexes for series mentioned in notes 3 and 7 may also be found in the Survey Series covers employees only, excluding personnel in the Armed Forces. of Current Business. 4. Based on data in Survey of Current Business (U.S. Department of Com- Figures for industrial production for the last two months are preliminary and merce). estimated, respectively. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data are seasonally adjusted. Exceptions noted. 1984 1985 CCaatteeggoorryy 11998822 11998833 11998844 Aug. Sept. Oct. Nov. Dec. Jan. Feb.' Mar. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 174,450 176,414 178,602 178,821 179,005 179,181 179,353 179,524 179,600 179,742 179,891 2 Labor force (including Armed Forces)1 112,383 113,749 115,763 115,867 116,006 116,241 116,292 116,682 117,091 117,310 117,738 3 Civilian labor force 111100,,220044 111111,,555500 111133,,554444 111133,,662299 111133,,776644 114,016 111144,,007744 111144,,446644 111144,,887755 111155,,008844 111155,,551144 Employment 4 Nonagricultural industries2 96,125 97,450 101,685 101,884 102,075 102,480 102,598 102,888 103,071 103,345 103,757 5 Agriculture 3,401 3,383 3,321 3,264 3,319 3,169 3,334 3,385 3,320 3,340 3,362 Unemployment 6 Number 10,678 10,717 8,539 8,481 8,370 8,367 8,142 8,191 8,484 8,399 8,396 7 Rate (percent of civilian labor force) ... 9.7 9.6 7.5 7.5 7.4 7.3 7.1 7.2 7.4 7.3 7.3 8 Not in labor force 62,067 62,665 62,839 62,954 62,999 62,940 63,061 62,842 62,509 62,432 62,153 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 89,566 90,138 94,166 94,523 94,807 95,157 95,497 95,681 96,045' 96,157 96,538 10 Manufacturing 18,781 18,497 19,589 19,725 19,616 19,686 19,718 19,801 19,808' 19,739 19,713 11 Mining 1,128 957 999 1,017 1,020 1,012 1,009 1,000 1,000' 999 997 12 Contract construction 3,905 3,940 4,315 4,356 4,374 4,382 4,396 4,457 4,530' 4,489 4,618 13 Transportation and public utilities 5,082 4,958 5,169 5,202 5,213 5,225 5,226 5,249 5,266' 5,279 5,266 14 Trade 20,457 20,804 21,790 21,839 21,930 22,080 22,267 22,267 22,372' 22,427 22,521 15 Finance 5,341 5,467 5,665 5,679 5,684 5,705 5,725 5,749 5,764' 5,800 5,828 16 Service 19,036 19,665 20,666 20,748 20,861 20,964 21,030 21,095 21,231 21,331 21,474 17 Government 15,837 15,851 15,973 15,957 16,109 16,103 16,126 16,063 16,074' 16,093 16,121 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

A46 Domestic Nonfinancial Statistics • June 1985 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION Seasonally adjusted 1984 1985 1984 1985 1984 1985 Q2 Q3 Q4' Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4' Q1 Output (1967 = 100) Capacity (percent of 1967 output) Utilization rate (percent) 1 Total industry 163.1 165.6 164.7 165.2 199.7 201.1 202.4 204.0 81.7 82.4 81.3 80.9 2 Mining 125.1 129.0 124.3 123.9 165.9 166.1 166.3 166.5 75.4 77.7 74.7 74.4 3 Utilities 183.1 181.1 183.0 184.3 215.3 216.8 218.3 219.8 85.0 83.5 83.8 83.8 4 Manufacturing 164.4 167.2 166.5 166.8 201.0 202.5 204.0 205.7 81.8 82.5 81.6 81.1 5 Primary processing ... 162.5 162.2 159.8 160.8 197.2 198.0 198.7 199.7 82.4 81.9 80.4 80.5 6 Advanced processing . 165.2 169.7 169.6 170.4 203.0 204.9 206.8 208.9 81.4 82.8 82.0 81.6 7 Materials 162.1 163.4 160.2 160.8 195.9 197.2 198.4 199.7 82.7 82.9 80.7 80.5 8 Durable goods 162.0 164.6 162.1 161.4 198.3 199.5 200.8 202.4 81.7 82.5 80.7 79.8 9 Metal materials .... 100.3 97.2 91.0 92.0 138.5 137.9 137.3 136.8 72.4 70.5 66.3 67.3 10 Nondurable goods.... 186.6 185.7 181.5 181.5 223.4 225.2 226.9 228.4 83.5 82.5 80.0 79.5 11 Textile, paper, and chemical.. 195.9 194.9 189.6 189.4 236.2 238.2 240.3 242.0 82.9 81.8 79.0 78.3 12 Paper 168.5 171.0 168.3 n.a. 169.5 170.5 171.5 n.a. 99.4 100.3 98.1 n.a. 13 Chemical 240.4 238.4 233.5 n.a. 305.2 308.0 310.9 n.a. 78.8 77.4 75.1 n.a. 14 Energy materials 132.4 133.1 129.4 133.7 156.4 157.0 157.6 158.4 84.6 84.8 82.1 84.4 Previous cycle1 Latest cycle2 1984 1984 1985 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 69.6 80.9 82.7 82.5 81.9 81.4 81.4 81.2 81.2 80.8 80.8 16 Mining 91.8 86.0 88.5 69.6 74.7 78.3 77.3 77.4 74.3 75.1 74.8 75.1 73.9 74.1 17 Utilities 94.9 82.0 86.7 79.0 84.0 84.1 83.3 83.2 82.9 84.6 83.9 83.7 84.0 83.8 18 Manufacturing 87.9 69.0 87.5 68.8 81.0 82.8 82.8 82.0 81.7 81.6 81.4 81.3 80.9 81.0 19 Primary processing ... 93.7 68.2 91.4 66.2 82.2 82.3 82.1 81.5 81.2 80.6 79.5 80.2 80.6 80.7 20 Advanced processing . 85.5 69.4 85.9 70.0 80.6 83.0 83.1 82.4 81.8 82.0 82.2 82.1 81.3 81.3 21 Materials 92.6 69.3 88.9 66.6 82.2 83.1 83.2 82.4 81.0 80.9 80.4 80.5 80.4 80.5 22 Durable goods 91.4 63.5 88.4 59.8 80.7 82.5 82.9 82.2 81.3 80.8 80.0 80.0 79.5 79.7 23 Metal materials 97.8 68.0 95.4 46.2 71.5 70.8 70.8 69.8 67.6 66.7 64.5 65.2 67.2 69.4 24 Nondurable goods 94.4 67.4 91.7 70.7 83.6 83.0 82.9 81.5 80.5 80.2 79.4 79.3 79.3 79.7 25 Textile, paper, and chemical 95.1 65.4 92.3 68.6 83.1 82.5 82.4 80.5 79.7 79.1 78.0 78.1 78.1 78.5 26 Paper 99.4 72.4 97.9 86.3 96.8 101.5 99.7 99.7 98.7 97.2 98.5 98.0 96.2 n.a. 27 Chemical 95.5 64.2 91.3 64.0 79.5 77.9 78.1 76.1 75.7 75.7 73.9 74.5 74.7 n.a. 28 Energy materials 94.5 84.4 88.9 78.5 84.1 85.3 84.7 84.3 81.0 82.1 83.2 83.9 84.7 84.6 1. Monthly high 1973; monthly low 1975. NOTE. These data also appear in the Board's G.3 (402) release. For address, see 2. Monthly highs 1978 through 1980; monthly lows 1982. inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value Monthly data are seasonally adjusted 1967 pro- 1984 Grouping por- avg. tion Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec/ Jan. Feb." Mar, Index (1967 = 100) MAJOR MARKET 1 Total index 100.00 163.3 160.8 162.1 162.8 164.4 165.9 166.0 165.0 164.4 164.8 164.8 165.2 2 Products 60.71 164.7 161.1 162.5 163.3 165.3 167.4 167.2 166.4 166.9 167.7 168.1 168.2 3 Final products 47.82 162.7 158.6 160.2 161.1 163.1 165.2 165.1 164.6 165.2 166.2 166.7 166.9 4 Consumer goods 27.68 161.6 160.2 161.4 161.7 163.0 163.8 162.5 161.6 161.6 162.6 162.2 162.5 5 Equipment 20.14 164.1 156.4 158.5 160.3 163.3 167.0 168.7 168.9 170.1 171.2 172.8 172.9 6 Intermediate products 12.89 172.3 170.2 171.0 171.6 173.5 175.8 175.1 173.0 173.4 173.1 173.2 173.0 7 Materials 39.29 161.2 160.4 161.5 162.0 162.9 163.5 164.0 162.8 160.4 160.4 159.8 160.5 Consumer goods 8 Durable consumer goods 7.89 162.0 163.1 162.2 161.4 163.6 163.7 162.6 159.6 158.7 161.5 161.0 160.7 9 Automotive products 2.83 181.3 184.1 180.9 179.8 184.3 185.0 181.8 173.0 171.9 184.1 186.0 192.0 10 Autos and utility vehicles 2.03 158.1 164.1 158.4 155.9 158.7 161.1 159.2 145.6 145.0 161.5 164.7 174.3 11 Autos 1.90 135.3 142.4 134.5 132.9 136.2 138.7 134.3 121.1 123.6 138.9 142.5 151.5 12 Auto parts and allied goods .80 240.2 234.7 238.0 240.6 249.3 245.8 239.1 242.7 240.2 241.2 239.9 236.8 13 Home goods 5.06 151.1 151.3 151.7 151.1 152.0 151.8 151.9 152.0 151.4 148.9 147.0 143.2 14 Appliances, A/C, and TV 1.40 134.3 134.4 136.1 134.0 134.9 133.4 132.3 136.4 133.5 130.5 133.0 121.9 15 Appliances and TV 1.33 137.5 138.0 138.8 136.7 138.0 136.9 135.9 140.2 136.8 133.2 136.0 124.2 16 Carpeting and furniture 1.07 179.2 180.2 181.0 179.6 179.4 179.5 180.8 179.3 178.1 177.5 173.2 169.9 17 Miscellaneous home goods 2.59 148.6' 148.5 148.0 148.6 150.0 150.3 150.6 149.2 150.0 147.0 143.8 143.6 18 Nondurable consumer goods 19.79 161.5' 159.1 161.1 161.8 162.7 163.9 162.4 162.4 162.7 163.0 162.7 163.2 2 1 0 9 C C o lo n t s h u in m g e r staples 1 4 5 . . 2 5 9 0 ni.y 168.0 170.2 171.6 173.2 174.5 172.7 173.1 173.8 173.9 173.2 173.6 21 Consumer foods and tobacco 8.33 160.6' 157.6 160.4 161.0 161.9 162.9 161.8 162.1 162.4 161.2 162.1 162.7 22 Nonfood staples 7.17 184.2 180.1 181.6 183.9 186.3 188.0 185.4 185.9 187.0 188.6 186.1 186.2 23 Consumer chemical products 2.63 240.7' 231.3 233.4 235.9 241.5 247.1 244.3 247.3 247.5 245.7 246.4 247.6 24 Consumer paper products 1.92 145.7' 141.8 144.0 145.6 147.9 151.5 148.7 146.7 146.9 148.5 146.7 147.7 25 Consumer energy products 2.62 155.6 156.8 157.1 159.8 159.0 155.3 153.3 153.0 155.6 160.7 154.4 152.7 26 Residential utilities 1.45 177.9 177.7 177.4 181.1 182.4 178.6 175.0 174.1 177.4 186.5 178.6 177.9 Equipment 27 Business 12.63 181.0 172.1 173.5 176.5 181.1 185.5 187.6 186.4 187.3 188.4 189.6 189.0 28 Industrial 6.77 140.6 134.8 135.9 138.5 140.4 143.1 143.3 143.5 145.3 145.6 147.0 144.6 29 Building and mining 1.44 187.6 175.2 173.6 182.9 185.8 190.0 191.6 190.7 194.6 197.2 199.8 195.0 30 Manufacturing 3.85 127.4 124.2 126.2 127.4 128.6 130.1 129.7 129.8 131.0 129.9 130.9 129.3 31 Power 1.47 128.8 122.7 124.1 124.1 126.7 131.0 131.2 133.0 134.5 135.8 137.3 135.2 32 Commercial transit, farm 5.86 227.6' 215.3 217.0 220.5 228.1 234.5 238.9 235.9 235.8 237.9 238.8 240.2 33 Commercial 3.26 325.1' 306.9 309.6 315.5 326.3 333.4 339.2 336.5 338.5 342.1 343.5 347.4 34 Transit 1.93 115.4 109.2 108.9 109.7 115.1 120.4 124.5 121.4 117.8 118.2 119.6 118.5 35 Farm .67 76.4 75.0 78.0 77.1 76.1 81.8 80.3 76.4 76.1 76.2 72.2 69.2 36 Defense and space 7.51 135.6' 130.1 133.2 133.1 133.5 135.9 136.8 139.5 141.1 142.2 144.7 145.8 Intermediate products 37 Construction supplies 6.42 158.9' 159.1 159.6 159.5 160.9 161.9 160.9 158.2 158.6 156.9 157.5 157.4 38 Business supplies 6.47 185.7 181.3 182.3 183.5 186.1 189.5 189.1 187.6 188.0 189.2 188.8 188.4 39 Commercial energy products 1.14 193.5 187.0 190.0 190.8 195.3 194.9 193.3 194.5 194.8 199.8 196.1 196.0 Materials 40 Durable goods materials 20.35 161.6 159.5 161.3 161.6 163.0 164.2 165.3 164.3 162.9 162.3 161.0 161.6 41 Durable consumer parts 4.58 134.4 133.0 133.2 132.6 134.7 135.1 136.6 136.2 136.3 134.8 136.9 138.3 42 Equipment parts 5.44 212.5 206.7 210.9 210.6 214.0 218.8 220.1 219.6 216.1 216.4 215.0 212.2 43 Durable materials n.e.c 10.34 146.9 146.3 147.7 148.6 148.7 148.3 149.2 147.7 146.7 146.0 143.3 145.2 44 Basic metal materials 5.57 100.9' 103.0 105.7 104.5 104.1 103.4 102.0 99.8 97.8 95.7 91.7 93.5 45 Nondurable goods materials 10.47 184.3 185.9 185.7 187.4 186.7 186.5 186.7 184.0 182.1 181.9 180.4 180.9 46 Textile, paper, and chemical materials 7.62 193.3 195.3 195.0 196.8 195.8 195.9 196.3 192.4 190.7 190.2 187.8 188.7 47 Textile materials 1.85 117.1 120.6 118.9 121.9 119.6 118.8 120.1 115.6 112.0 109.3 108.8 107.2 48 Paper materials 1.62 168.2' 163.5 166.7 169.2 169.5 172.8 170.0 170.3 168.9 166.7 169.2 168.7 49 Chemical materials 4.15 237.2' 241.1 240.0 241.1 240.2 239.3 240.6 235.3 234.5 235.5 230.5 232.9 50 Containers, nondurable 1.70 175.5 176.0 175.7 176.6 176.7 176.6 175.3 175.8 174.3 176.5 177.2 175.5 51 Nondurable materials n.e.c 1.14 137.3' 137.7 138.6 140.5 140.5 138.8 139.6 140.8 136.0 134.7 135.7 137.2 52 Energy materials 8.48 131.5' 131.3 132.1 131.9 133.2 133.7 133.0 132.7 127.6 129.4 131.3 132.7 53 Primary energy 4.65 119.5 119.6 119.5 119o8 120.1 122.7 121.8 121.6 113.1 115.3 117.9 119.5 54 Converted fuel materials 3.82 146.3 145.4 147.3 146.5 149.0 147.1 146.8 146.1 145.2 146.7 147.6 148.8 Supplementary groups 55 Home goods and clothing 9.35 139.4 140.1 141.0 139.8 139.6 139.7 139.6 138.9 138.3 137.2 136.7 135.2 56 Energy, total 12.23 142.5' 141.9 142.8 143.3 144.5 144.0 143.0 142.8 139.8 142.7 142.3 142.9 57 Products 3.76 167.1 166.0 167.1 169.2 170.0 167.3 165.4 165.5 167.5 172.6 167.0 165.9 58 Materials 8.48 131.5' 131.3 132.1 131.9 133.2 133.7 133.0 132.7 127.6 129.4 131.3 132.7 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • June 1985 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value—Continued 1967 1984 1985 SIC pro- 1984 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 12.05 152.0 150.4 151.3 152.1 154.1 154.4 153.0 153.3 150.5 153.1 152.4 152.6 152.2 152.4 2 Mining 6.36 125.7 123.8 123.3 125.0 127.0 129.9 128.3 128.7 123.6 124.8 124.4 125.1 123.1 123.5 3 Utilities 5.69 181.5' 180.0 182.7 182.3 184.3 181.8 180.6 180.9 180.6 184.7 183.7 183.5 184.6 184.7 4 Electric 3.88 205.4' 204.6 207.7 206.8 209.6 205.9 204.0 204.4 203.8 209.1 205.3 206.5 208.3 207.9 5 Manufacturing 87.95 164.8 162.1 163.4 164.2 165.7 167.3 167.6 166.6 166.2 166.6 166.5 166.6 166.5 167.1 6 Nondurable 35.97 179.4 177.6 179.1 179.9 181.3 181.8 181.7 180.3 179.4 179.6 179.5 179.6 179.1 179.5 7 Durable 51.98 154.6' 151.4 152.6 153.3 154.9 157.2 157.8 157.1 157.1 157.6 157.6 157.9 157.7 158.5 Mining 8 Metal 10 .51 91.7 100.0 98.5 98.0 96.8 96.4 83.4 84.5 91.2 87.5 76.3 82.8 78.7 9 Coal 11.12 .69 155.8 164.0 151.4 153.9 161.5 176.5 171.7 173.7 127.8 134.4 142.1 144.5 154.8 156.8 10 Oil and gas extraction 13 4.40 121.7 118.2 118.8 120.4 121.6 122.8 122.5 122.4 122.6 123.8 123.6 123.2 119.4 118.9 11 Stone and earth minerals 14 .75 145.0 135.8 140.4 144.0 147.9 151.9 153.5 154.6 147.8 147.5 146.0 146.7 146.0 Nondurable manufactures 12 Foods 20 8.75 163.2 161.2 163.1 164.2 165.1 164.9 164.7 164.3 164.0 162.9 164.1 164.9 13 Tobacco products 21 .67 115.2 111.8 113.3 112.8 118.3 115.1 113.8 113.1 119.5 117.4 120.5 116.7 14 Textile mill products 22 2.68 138.6' 143.5 140.0 140.5 140.7 139.8 140.3 135.4 133.3 132.0 132.0 131.5 130.3 15 Apparel products 23 3 31 16 Paper and products 26 3.21 174.4 173.8 172.4 174.1 174.6 176.7 176.7 177.5 173.5 173.0 173.7 174.1 176.0 175.9 17 Printing and publishing 27 4.72 169.7' 165.2 166.3 167.5 169.0 172.6 173.1 170.5 172.3 174.0 174.1 175.0 175.3 175.3 18 Chemicals and products 28 7.74 228.1' 225.0 228.3 227.9 231.0 232.0 231.6 230.8 228.0 230.2 228.1 227.8 227.2 19 Petroleum products 29 1.79 124.4 127.0 126.8 127.9 127.5 124.7 124.3 122.6 122.9 124.0 120.3 117.0 119.3 120.6 20 Rubber and plastic products 30 2.24 331.7' 323.8 328.0 334.1 341.0 341.4 341.5 338.4 338.6 332.2 331.3 334.7 333.8 21 Leather and products 31 .86 59.9 63.9 63.5 61.4 60.0 60.6 59.1 57.9 55.0 55.9 56.6 54.1 54.6 Durable manufactures 22 Ordnance, private and government 19.91 3.64 103.5 100.6 101.4 100.8 101.7 102.7 105.5 107.1 107.7 108.6 108.3 107.4 107.9 108.0 23 Lumber and products 24 1.64 148.7' 149.3 151.2 146.3 148.5 146.0 148.8 149.2 152.6 152.2 150.4 150.4 148.5 24 Furniture and fixtures 25 1.37 190.2 184.6 186.6 190.5 191.9 192.6 195.3 194.3 194.7 192.1 190.6 188.0 189.6 25 Clay, glass, stone products 32 2.74 159.7' 160.2 160.0 160.6 159.7 160.9 160.0 158.0 160.1 159.0 158.9 161.2 161.0 26 Primary metals 33 6.57 95.1' 97.5 99.3 98.2 97.9 94.5 94.4 94.1 92.7 91.5 87.8 89.7 92.8 93.8 27 Iron and steel 331.2 4.21 79.8 84.4 84.0 83.5 83.5 76.5 77.7 77.5 74.6 73.9 72.1 72.2 76.1 28 Fabricated metal products 34 5.93 137.5' 134.9 135.5 136.5 138.7 140.6 140.0 139.5 140.7 139.0 140.2 139.8 140.4 141.7 29 Nonelectrical machinery 35 9.15 181.5' 171.9 174.9 178.8 182.0 186.9 189.1 187.9 187.7 188.9 188.3 189.2 188.4 189.0 30 Electrical machinery 36 8.05 217.4' 212.0 214.6 214.5 216.0 221.5 221.5 222.8 222.3 222.5 224.5 220.9 219.8 220.6 31 Transportation equipment 37 9.27 137.6 135.8 134.5 135.0 137.2 140.6 141.0 137.6 137.2 141.3 143.3 145.8 144.2 144.7 32 Motor vehicles and parts 371 4.50 165.7 165.8 161.9 163.0 165.3 169.0 169.6 162.4 161.7 170.8 171.8 176.3 172.3 172.8 33 Aerospace and miscellaneous transportation equipment.. 372-9 4.77 111.2 107.5 108.8 108.6 110.8 113.8 113.9 114.2 114.1 113.6 116.4 117.2 117.8 118.2 34 Instruments 38 2.11 174.2 169.7 171.0 171.8 174.5 176.7 177.4 178.5 176.5 177.5 180.3 179.3 178.3 179.3 35 Miscellaneous manufactures 39 1.51 148.9 152.3 152.1 151.5 150.8 152.4 149.2 147.0 148.3 143.5 137.7 140.0 141.6 142.0 Gross value (billions of 1972 dollars, annual rates) MAJOR MARKET 36 Products, total 507.4 670.1 661.8 661.1 665.9 671.5 682.4 678.2 673.6 674.7 679.1 680.5 682.1 37 Final 390.9 516.9' 509.6 509.0 514.0 518.1 525.9 522.3 519.7 521.3 525.8 527.0 527.5 38 Consumer goods . 277.5 348.2' 347.7 347.8 349.5 350.9 353.2 347.4 345.4 346.7 350.1 349.4 350.1 39 Equipment 113.4 168.7 161.9 161.2 164.4 167.2 172.8 174.9 174.4 174.5 175.7 177.6 177.4 40 Intermediate 116.6 153.2 152.2 152.2 151.9 153.4 156.5 155.9 153.8 153.5 153.3 153.5 154.6 NOTE. These data also appear in the Board's G.12.3 (414) release. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A49 2.14 HOUSING AND CONSTRUCTION Monthly figures are at seasonally adjusted annual rates except as noted. 1984 1985 IItteemm 11998811 11998822 May June July Aug. Sept. Oct. Nov. Dec.' Jan.' Feb. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 986 1,000 1,605 1,774 1,819 1,590 1,508 1,481 1,436 1,613 1,627 1,676 1,636 2 1-family 564 546 902 943 941 849 835 865 817 838 852 924 957 3 2-or-more-family 421 454 703 831 878 741 673 616 619 775 775 752 679 4 Started 1,084 1,062 1,703 1,787 1,837 1,730 1,590 1,669 1,564 1,600 1,630 1,849 1,631 1-family 705 663 1,067 1,118 1,077 996 962 1,009 979 1,043 1,112 1,060 1,123 6 2-or-more-family 379 400 635 669 760 734 628 660 585 557 518 789 508 7 Under construction, end of period1 682 720 1,003 1,090 1,098 1,100 1,091 1,088 1,081 1,077 1,073 1,074 1,035 8 1-family 382 400 524 585 587 582 574 568 571 574 579 573 561 9 2-or-more-family 301 320 479 505 511 518 517 520 510 503 495 501 473 10 Completed 1,266 1,005 1,390 1,731 1,718 1,699 1,681 1,657 1,614 1,587 1,635 1,710 1,746 11 1-family 818 631 924 1,072 1,045 1,062 1,035 1,040 972 1,001 985 1,112 1,036 12 2-or-more-family 447 374 466 659 673 637 646 617 642 586 650 598 710 13 Mobile homes shipped 241 240 296 295 298 301 302 282 302 291 282 273 276 Merchant builder activity in 1-family units 14 Number sold 436 413 622 617 636 615 557 670 652 596 604 622 641 15 Number for sale, end of period1 278 255 304 332 338 340 343 343 346 349 356 356 362 Price (thousands of dollars)2 Median 16 Units sold 68.8 69.3 75.5 81.4 80.5 80.7 82.0 81.3 80.1 82.5 78.3 82.9 83.4 17 Units sold 83.1 83.8 89.9 101.9 98.8 97.1 96.9 101.3 95.7 101.4 96.3 98.8 98.5 EXISTING UNITS (1-family) 18 Number sold 2,418 1,991 2,719 2,970 2,920 2,790 2,770 2,730 2,740 2,830 2,870 3,000 2,880 Price of units sold (thousands of dollars)2 19 Median 66.1 67.7 69.8 72.7 73.4 74.2 73.5 71.9 71.9 71.9 72.1 73.8 73.5 20 Average 78.0 80.4 82.5 85.9 87.2 87.9 87.6 85.4 86.2 85.1 85.9 87.7 87.2 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 239,112 230,068 262,167 316,398 315,279 314,223 318,031 318,685 312,849' 308,111' 307,579 316,218 320,572 77, Private 185,761 179,090 211,369 261,182 257,789 258,245 261,165 260,871 256,121' 251,607' 251,283 258,967 264,125 73 Residential 86,564 74,808 111,727 138,401 136,418 137,818 138,926 137,106 131,143' 125,906' 122,727 128,515 132,465 24 Nonresidential, total 99,197 104,282 99,642 122,781 121,371 120,427 122,239 123,765 124,978' 125,701' 128,556 130,452 131,660 Buildings 75 Industrial 17,031 17,346 12,863 15,170 14,065 13,784 14,613 14,917 14,867' 15,287' 15,353 15,058 15,575 76 Commercial 34,243 37,281 35,787 49,718 48,947 48,436 49,496 50,861 53,509' 54,579' 56,661 58,458 59,234 7,7 Other 9,543 10,507 11,660 13,821 13,327 12,744 12,059 12,079 12,111' 11,975' 12,396 11,876 12,018 28 Public utilities and other 38,380 39,148 39,332 44,072 45,032 45,463 46,071 45,908 44,491' 43,860' 44,146 45,060 44,833 79 Public 53,346 50,977 50,798 55,216 57,490 55,979 56,866 57,814 56,729' 56,504' 56,296 57,252 56,448 30 Military 1,966 2,205 2,544 2,649 2,703 2,345 2,851 3,508 2,89C 3,082' 2,974 3,249 3,330 31 Highway 13,599 13,428 14,225 16,949 16,824 17,136 17,322 17,209 16,794' 17,458' 17,588 17,735 17,475 32 Conservation and development 5,300 5,029 4,822 4,356 4,492 4,520 4,520 4,890 4,591' 5,073' 4,555 4,585 4,622 33 Other 32,481 30,315 29,207 31,262 33,471 31,978 32,173 32,207 32,454' 30,891' 31,179 31,683 31,021 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

A50 Domestic Nonfinancial Statistics • June 1985 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data, except as noted Change from 12 Change from 3 months earlier months earlier (at annual rate) Change from 1 month earlier IIInnndddeeexxx llleeevvveeelll IIIttteeemmm MMMaaarrr... 1984 1985 1984 1985 111999888555 11998844 11998855 (((111999666777 MMaarr.. MMaarr.. === 111000000)))111 June Sept. Dec. Mar. Nov. Dec. Jan. Feb. Mar. CONSUMER PRICES2 1 AU items 4.7 3.7 3.2 4.5 3.0 4.1 .2 .3 .2 .3 .5 318.8 2 Food 4.0 2.5 -.5 3.9 3.7 2.6 .2 .4 .2 .5 .0 309.7 3 Energy items 4.6 -.4 .3 .1 -.7 -.8 .1 -.2 -.8 -1.4 1.9 416.6 4 All items less food and energy 5.0 4.8 4.8 5.3 3.5 5.5 .2 .3 .4 .6 .4 310.8 5 Commodities 4.5 3.8 3.9 3.8 .9 6.6 .0 .2 .5 .8 .3 259.3 6 Services 5.3 5.3 5.2 6.2 5.0 5.0 .4 .4 .4 .4 .4 369.4 PRODUCER PRICES 7 Finished goods 2.8 .3 -.4 .0 1.8 .3 .3 .2 .0 -.1 .2 292.4 8 Consumer foods 5.9 -.9 -7.5 4.5 4.5 -3.6 .5' .7' -.6 -.1 -.2 274.2 9 Consumer energy -2.1 -8.4 5.0 -19.7 5.7 -21.1 .6 -.6 -2.4 -2.5 -.9 694.0 10 Other consumer goods 2.7 2.4 .8 2.5 .0 6.5 ..2y' .2 .7 .2 .6 250.6 11 Capital equipment 2.3 2.5 2.2 2.3 .0 5.4 .0 .4 .5 .4 299.5 12 Intermediate materials3 3.0 .1 2.7 -1.1 1.1 -2.4 .2 -.1 .0 -.5 -.1 324.7 13 Excluding energy 3.6 .8 2.0 .9 1.3 -.9 .1' .0 .0 -.2 -.1 305.2 Crude materials 14 Foods 8.3 -9.7 -19.2 -1.7 12.0 -25.0 3.5' .5' -2.4 -2.0 -2.8 243.6 15 Energy -2.7 -4.2 4.0 .4 -6.5 -13.7 -1.1' --..46' r -2.2 -.4 -1.0 747.3 16 Other 12.3 -7.0 14.3 -15.3 -10.7 -13.4 -.2' -1.4 -4.3 2.3 255.2 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

Selected Measures A51 2.16 GROSS NATIONAL PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates. 1984 1985 AAccccoouunntt 11998822 11998833 11998844 Ql Q2 Q3 Q4 Ql GROSS NATIONAL PRODUCT 1 Total 3,069.3 3,304.8 3,662.8 3,553.3 3,644.7 3,694.6 3,758.7 3,819.9 By source 2 Personal consumption expenditures 1,984.9 2,155.9 2,341.8 2,276.5 2,332.7 2,361.4 2,396.5 2,442.8 3 Durable goods 245.1 279.8 318.8 310.9 320.7 317.2 326.3 333.1 4 Nondurable goods 757.5 801.7 856.9 841.3 858.3 861.4 866.5 877.9 5 Services 982.2 1,074.4 1,166.1 1,124.4 1,153.7 1,182.8 1,203.8 1,231.8 6 Gross private domestic investment 414.9 471.6 637.8 623.8 627.0 662.8 637.8 657.4 7 Fixed investment 441.0 485.1 579.6 550.0 576.4 591.0 601.1 610.8 8 Nonresidential 349.6 352.9 425.7 398.8 420.8 435.7 447.7 455.9 9 Structures 142.1 129.7 150.4 142.2 150.0 151.4 157.9 164.5 10 Producers' durable equipment 207.5 223.2 275.3 256.7 270.7 284.2 289.7 291.4 11 Residential structures 91.4 132.2 153.9 151.2 155.6 155.3 153.5 155.0 12 Nonfarm 86.6 127.6 148.8 146.4 150.5 150.1 148.3 149.7 13 Change in business inventories -26.1 -13.5 58.2 73.8 50.6 71.8 36.6 46.6 14 Nonfarm -24.0 -3.1 49.6 60.6 47.0 63.7 27.2 40.5 15 Net exports of goods and services 19.0 -8.3 -64.2 -51.5 -58.7 -90.6 -56.0 -73.0 16 Exports 348.4 336.2 364.3 358.9 362.4 368.6 367.2 361.4 17 Imports 329.4 344.4 428.5 410.4 421.1 459.3 423.2 434.4 18 Government purchases of goods and services 650.5 685.5 747.4 704.4 743.7 761.0 780.5 792.6 19 Federal 258.9 269.7 295.4 267.6 2%.4 302.0 315.7 320.2 20 State and local 391.5 415.8 452.0 436.8 447.4 458.9 464.8 472.5 By major type of product 7.1 Final sales, total 3,095.4 3,318.3 3,604.6 3,479.5 3,594.1 33,,662222..88 3,722.1 3,773.3 77 Goods 1,276.7 1,355.7 1,542.9 1,498.0 1,544.8 1,549.1 1,579.8 1,590.9 73 Durable 499.9 555.3 655.6 632.3 647.9 654.7 687.7 673.9 74 Nondurable 776.9 800.4 887.3 865.7 896.9 894.4 892.1 917.0 7.5 Services 1,510.8 1,639.3 1,763.3 1,713.7 1,742.6 1,783.3 1,813.7 1,856.4 26 Structures 281.7 309.8 356.5 341.6 357.2 362.1 365.2 372.5 27 Change in business inventories -26.1 -13.5 58.2 73.8 50.6 71.8 36.6 46.6 28 Durable goods -18.0 -2.1 30.4 34.9 18.2 41.7 26.7 26.1 29 Nondurable goods -8.1 -11.3 27.8 38.9 32.4 30.1 9.9 20.5 30 MEMO: Total GNP in 1972 dollars 1,480.0 1,534.7 1,639.3 1,610.9 1,638.8 1,645.2 1,662.4 1,668.0 NATIONAL INCOME 31 Total 2,446.8 2,646.7 2,959.9r 2,873.5 2,944.8 2,984.9 3,036.y n.a. 32 Compensation of employees 1,864.2 1,984.9 2,173.2 2,113.4 2,159.2 2,191.9 2,228.1 2,272.7 33 Wages and salaries 1,568.7 1,658.8 1,804.1 1,755.9 1,793.3 1,819.1 1,848.2 1,882.8 34 Government and government enterprises 306.6 328.2 349.8 342.9 347.5 352.0 357.2 365.5 35 Other 1,262.2 1,331.1 1,454.2 1,413.0 1,445.8 1,467.1 1,490.9 1,517.3 36 Supplement to wages and salaries 295.5 326.2 369.0 357.4 365.9 372.8 380.0 389.9 37 Employer contributions for social insurance 140.0 153.1 173.5 169.4 172.4 174.7 177.5 183.6 38 Other labor income 155.5 173.1 195.5 188.1 193.5 198.1 202.5 206.3 39 Proprietors' income1 111.1 121.7 154.4 154.9 149.8 153.7 159.1 156.7 40 Business and professional1 89.2 107.9 126.2 122.5 126.3 126.4 129.7 134.4 41 Farm1 21.8 13.8 28.2 32.5 23.4 27.3 29.4 22.4 42 Rental income of persons2 51.5 58.3 62.5 61.0 62.0 63.0 64.1 65.2 43 Corporate profits1 159.1 225.2 285.7r 277.4 291.1 282.8 291.6' n.a. 44 Profits before tax3 165.5 203.2 235.7r 243.3 246.0 224.8 228.7r n.a. 45 Inventory valuation adjustment -9.5 -11.2 -5.7 -13.5 -7.3 -.2 -1.6 -.6 46 Capital consumption adjustment 3.1 33.2 55.7 47.6 52.3 58.3 64.5 71.0 47 Net interest 260.9 256.6 284.1 266.8 282.8 293.5 293.4 288.8 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

A52 Domestic Nonfinancial Statistics • June 1985 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1984 1985 Account 1984 Q1 Q2 Q3 Q4 PERSONAL INCOME AND SAVING 1 Total personal income 2.584.6 2,744.2 3,012.1 2,920.5 2,984.6 3,047.3 3,096.2 2 Wage and salary disbursements 1.568.7 1,659.2 1.804.0 1,755.7 1,793.1 1,819.5 1,847.6 3 Commodity-producing industries 509.3 519.3 569.3 555.9 567.0 573.3 580.9 4 Manufacturing 382.9 395.2 433.9 424.6 432.2 436.4 442.4 5 Distributive industries 378.6 398.6 432.0 419.2 429.5 436.4 443.1 6 Service industries 374.3 413.1 452.9 437.9 449.3 457.3 466.9 7 Government and government enterprises 306.6 328.2 349.8 342.8 347.3 352.4 356.7 8 Other labor income 155.5 173.1 195.5 188.1 193.5 198.1 202.5 9 Proprietors' income1 111.1 121.7 154.4 154.9 149.8 153.7 159.1 10 Business and professional1 89.2 107.9 126.2 122.5 126.3 126.4 129.7 11 Farm1 21.8 13.8 28.2 32.5 23.4 27.3 29.4 12 Rental income of persons2 51.5 58.3 62.5 61.0 62.0 63.0 64.1 13 Dividends 66.5 70.3 77.7 75.0 77.2 78.5 80.2 14 Personal interest income 366.6 376.3 433.7 403.9 425.6 449.3 456.1 15 Transfer payments 376.1 405.0 416.7 411.3 415.2 418.6 421.8 16 Old-age survivors, disability, and health insurance benefits. 204.5 221.6 237.3 232.1 235.2 238.2 243.5 17 LESS: Personal contributions for social insurance 111.4 119.6 132.5 129.6 131.8 133.4 135.2 18 EQUALS: Personal income 2,584.6 2,744.2 3.012.1 2.920.5 2,984.6 3.047.3 3,0%.2 19 LESS: Personal tax and nontax payments 404.1 404.2 435.3 418.3 430.3 440.9 451.7 20 EQUALS: Disposable personal income 2,180.5 2,340.1 2,576.8 2,502.2 2,554.3 2.606.4 2,644.5 21 LESS: Personal outlays 2,044.5 2,222.0 2,420.7 2.349.6 2,409.5 2,442.3 2,481.5 22 EQUALS: Personal saving 136.0 118.1 156.1 152.5 144.8 164.1 163.0 MEMO Per capita (1972 dollars) 23 Gross national product 6,369.7 6,543.4 6,926.1 6.829.4 6.933.2 6,943.2 6,998.3 24 Personal consumption expenditures 4,145.9 4,302.8 4,488.7 4.426.5 4.502.3 4,498.4 4,527.1 25 Disposable personal income 4,555.0 4,670.0 4,939.0 4,865.0 4,930.0 4,965.0 4,9%.0 26 Saving rate (percent) 6.2 5.0 6.1 6.1 5.7 6.3 6.2 GROSS SAVING 27 Gross saving. 408.8 437.2 551.8' 543.9 551.0 556.4 sse.O' 28 Gross private saving 524.0 571.7 674.8 651.3 660.2 689.4 698.2' 29 Personal saving 136.0 118.1 156.1 152.5 144.8 164.1 163.0 30 Undistributed corporate profits' 29.2 76.5 115.4' 107.0 115.3 118.4 120.8' 31 Corporate inventory valuation adjustment -9.5 -11.2 -5.7 -13.5 -7.3 -.2 -1.6 Capital consumption allowances 32 Corporate 221.8 231.2 246.2 239.9 244.1 248.1 252.8 33 Noncorporate 137.1 145.9 157.0 151.8 156.0 158.8 161.5 34 Wage accruals less disbursements .0 .0 .0 .0 .0 .0 .0 35 Government surplus, or deficit (-), national income and product accounts -115.3 -134.5 -122.9' -107.4 -109.2 -133.0 -142.2' 3 3 6 7 F St e a d t e e ra a l n d local -14 3 8 2 . . 2 9 -17 4 8 4 . . 6 1 -17 5 5 2 .8 ^ -16 5 1 3 . . 3 9 -16 5 3 4 . . 7 5 -18 4 0 7 . . 6 6 -19 5 7 5 . ^ 8' 38 Capital grants received by the United States, net .0 .0 .0 .0 .0 .0 .0 39 Gross investment 408.3 437.7 544.4 546.1 542.0 543.4 546.1 40 Gross private domestic 414.9 471.6 637.8 623.8 627.0 662.8 637.8 41 Net foreign -6.6 -33.9 -93.4 -77.7 -85.0 -119.4 -91.6 42 Statistical discrepancy. -.5 -7.4' 2.2 -9.0 -13.0 -9.9' 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

Summary Statistics A53 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.1 1983 1984 IItteemm ccrreeddiittss oorr ddeebbiittss 11998822 11998833 11998844PP Q4 Ql Q2 Q3 Q4P 1 Balance on current account -9,199 -41,563 -101,647 -17,213 -19,669 -24,704 -33,599 -23,679 -> -15,964 -18,616 -24,380 -36,190 -22,461 3 Merchandise trade balance2 -36,469 -61,055 -107,435 -19,407 -25,813 -25,802 -32,941 -22,879 4 Merchandise exports 211,198 200,257 220,343 51,829 53,920 54,548 55,616 56,259 Merchandise imports -247,667 -261,312 -327,778 -71,236 -79,733 -80,350 -88,557 -79,138 6 Military transactions, net 195 515 -1,635 -273 -370 -404 -320 -542 7 Investment income, net3 27,802 23,508 18,115 5,119 7,744 3,455 2,876 4,039 8 Other service transactions, net 7,331 4,121 506 434 917 204 -352 -263 9 Remittances, pensions, and other transfers -2,635 -2,590 -2,946 -688' -717 -726 -693 -811 10 U.S. government grants (excluding military) -5,423 -6,060 -8,253 -2,398 -1,430 -1,431 -2,169 -3,223 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) -6,143 -5,013 -5,460 -1,429 -2,037 -1,235 -1,440 -748 12 Change in U.S. official reserve assets (increase, -) -4,965 -1,196 -3,130 -953 -657 -565 -799 -1,109 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -1,371 -66 -979 545 -226 -288 -271 -194 15 Reserve position in International Monetary Fund -2,552 -4,434 -995 -1,996 -200 -321 -331 -143 16 Foreign currencies -1,041 3,304 -1,156 498 -231 44 -197 -772 17 Change in U.S. private assets abroad (increase, -)3 -107,790 -43,281 -12,574 -12,461 742 -17,200 19,245 -15,362 18 Bank-reported claims -111,070 -25,391 -7,337 -8,239 1,955 -20,612 16,871 -5,551 19 Nonbank-reported claims 6,626 -5,333 5,566 -1,671 1,659 2,120 1,787 n.a. 20 U.S. purchase of foreign securities, net -8,102 -7,676 -4,761 -983 637 -820 -1,322 -3,257 21 U.S. direct investments abroad, net3 4,756 -4,881 -6,043 -1,568 -3,509 2,112 1,909 -6,554 22 Change in foreign official assets in the United States (increase, +) 3,318 5,339 2,998 6,555 -2,784 -345 -830 6,956 23 U.S. Treasury securities 5,728 6,989 4,644 2,603 -288 -310 -577 5,819 24 Other U.S. government obligations -694 -487 12 417 -8 147 85 -212 25 Other U.S. government liabilities4 382 199 333 161 242 448 -153 -205 26 Other U.S. liabilities reported by U.S. banks -1,747 433 676 3,498 -2,131 349 302 2,156 27 Other foreign official assets5 -351 -1,795 -2,667 -124 -599 -979 -487 -602 28 Change in foreign private assets in the United States (increase, +)3 91,863 76,383 89,800 27,249 18,444 40,750 33,,666622 2266,,994455 29 U.S. bank-reported liabilities 65,922 49,059 27,571 22,325 8,775 20,789 -5,410 3,417 30 U.S. nonbank-reported liabilities -2,383 -1,318 5,529 -228 4,404 4,055 -2,930 n.a. 31 Foreign private purchases of U.S. Treasury securities, net 7,062 8,731 22,487 1,673 1,358 6,477 5,121 9,531 32 Foreign purchases of other U.S. securities, net 6,396 8,612 13,036 1,134 1,516 587 1,609 9,325 33 Foreign direct investments in the United States, net3 14,865 11,299 21,177 2,345 2,391 8,842 5,272 4,672 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 32,916 9,331 30,015 -1,748 5,961 3,299 13,761 6,997 36 22,,665577 --119955 --114400 --22,,441100 22,,774488 37 Statistical discrepancy in recorded data before seasonal adjustment 32,916 9,331 30,015 -4,405 6,156 3,439 16,171 4,249 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -4,965 -1,196 -3,131 -953 -657 -566 -799 -1,110 39 Foreign official assets in the United States (increase, +) 2,936 5,140 2,665 6,394 -3,026 -793 -677 7,161 40 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 22 above) 7,291 -8,639 -4,198 -1,640 -2,447 -2,170 -494 913 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 593 205 187 84 41 44 45 58 1. Seasonal factors are no longer calculated for lines 6, 10, 12-16, 18-20, 22-34, 4. Primarily associated with military sales contracts and other transactions and 38-41. arranged with or through foreign official agencies. 2. Data are on an international accounts (IA) basis. Differs from the Census 5. Consists of investments in U.S. corporate stocks and in debt securities of basis data, shown in table 3.11, for reasons of coverage and timing; military private corporations and state and local governments. exports are excluded from merchandise data and are included in line 6. NOTE. Data are from Bureau of Economic Analysis, Survey of Current Business 3. Includes reinvested earnings. (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • June 1985 3.11 U.S. FOREIGN TRADE Millions of dollars; monthly data are seasonally adjusted. 1984 1985 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 18,123 18,210 18,411 18,395 19,142 19,401 17,853 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 261,305 243,952 258,048 26,866 28,409 26,783 27,331 25,933 28,297 27,985 3 Trade balance -27,628 -31,759 -57,562 -8,743 -10,199 -8,372 -8,936 -6,791 -8,896 -10,131 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. SOURCE. FT900 "Summary of U.S. Export and Import Merchandise Trade" The Census basis data differ from merchandise trade data shown in table 3.10, (Department of Commerce, Bureau of the Census). U.S. International Transactions Summary, for reasons of coverage and timing. On 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 1984 1985 TTyyppee 11998811 11998822 11998833 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Total 30,075 33,958 33,747 34,306 34,570 34,727 34,934 34,380 34,272' 35,493 2 Gold stock, including Exchange Stabilization Fund1 11,151 11,148 11,121 11,097 11,096 11,096 11,096 11,095 11,093 11,093 3 Special drawing rights2 3 4,095 5,250 5,025 5,554 5,539 5,693 5,641 5,693 5,781 5,973 4 Reserve position in International Monetary Fund2 5,055 7,348 11,312 11,619 11,618 11,675 11,541 11,322 11,097' 11,386 5 Foreign currencies4 9,774 10,212 6,289 6,036 6,317 6,263 6,656 6,270 6,301 7,041 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 1981, 5 currencies have been used. The U.S. SDR holdings and reserve position in 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 1984 1985 AAsssseettss 11998811 11998822 11998833 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Deposits 505 328 190 206 270 392 253 244 331 253 Assets held in custody 2 U.S. Treasury securities1 104,680 112,544 117,670 115,678 115,542 117,433 118,267 117,330 115,179 113,532 3 Earmarked gold2 14,804 14,716 14,414 14,256 14,260 14,265 14,265 14,261 14,260 14,264 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

Summary Statistics A55 3.14 FOREIGN BRANCHES OF U.S. BANKS Balance Sheet Data Millions of dollars, end of period 1984 1985 AAsssseett aaccccoouunntt 11998811 11998833 Aug. Sept. Oct.' Nov.' Dec.' Jan. Feb.'' All foreign countries 1 Total, all currencies 462,847 469,712 477,090 462,028' 453,711' 448,499 452,914 452,205 445,588 453,414 ?, Claims on United States 63,743 91,805 115,542 116,620' 113,789' 109,292 112,815 113,435 115,523 119,022 Parent bank 43,267 61,666 82,026 81,979' 79,664' 75,736 77,958 78,151 79,324 84,062 4 O N t o h n e b r a b n a k n s1 k s in United States1 1 33,Mb 2 1 1 3 , , 4 2 3 0 2 9 2 1 1 3 , , 0 12 0 5 0 2 1 0 2 , , 9 5 6 9 5 1 2 1 1 3 , , 3 5 0 5 3 4 2 1 1 3 , , 3 9 6 1 9 5 2 1 2 3 , , 2 93 6 1 8 2 1 0 3 , , 9 9 8 7 2 8 6 Claims on foreigners 378,954 358,493 342,689 324,474 319,375 319,075 319,431 318,710 309,712 314,790 7 Other branches of parent bank 87,821 91,168 96,004 93,507 92,646 90,821 91,313 94,738 87,476 89,360 8 150,763 133,752 117,668 103,346 101,567 102,258 103,050 100,307 100,004 104,483 9 Public borrowers 28,197 24,131 24,517 22,654 22,568 23,053 22,907 22,872 22,532 22,303 10 Nonbank foreigners 112,173 109,442 107,785 104,967 102,594 102,943 102,161 100,793 99,700 98,644 11 Other assets 20,150 19,414 18,859 20,934 20,547 20,132 20,668 20,060 20,353 19,602 12 Total payable in U.S. dollars 350,735 361,982 371,508 352,334' 346,54y 340,675 345,685 349,542 343,834 352,158 n Claims on United States 62,142 90,085 113,436 114,281' 111,291' 106,651 110,442 111,468 113,269 116,715 14 Parent bank 42,721 61,010 80,909 80,833' 78,476' 74,366 76,763 77,271 78,398 83,052 15 Other banks in United States1 1 12,890 12,769 12,338 13,356 13,745 13,732 13,699 16 Nonbanks1 20,558' 20,046' 19,947 20,323 20,452 21,139 19,964 17 Claims on foreigners 276,937 259,871 247,406 227,132 224,603 223,376 224,251 227,303 220,154 225,139 18 Other branches of parent bank 69,398 73,537 78,431 75,969 75,509 73,472 74,600 78,300 72,451 74,423 19 Banks 122,110 106,447 93,332 77,402 76,566 76,915 77,096 76,851 75,877 79,324 70 Public borrowers 22,877 18,413 17,890 16,783 16,946 17,337 17,374 17,160 17,084 16,847 21 Nonbank foreigners 62,552 61,474 60,977 56,978 55,582 55,652 55,181 54,992 54,742 54,545 22 Other assets 11,656 12,026 10,666 10,921 10,649 10,648 10,992 10,771 10,411 10,304 United Kingdom 23 Total, all currencies 157,229 161,067 158,732 154,250 147,696 147,562 149,377 144,385 146,130 149,534 74 Claims on United States 11,823 27,354 34,433 31,691 29,333 28,952 29,502 27,731 28,783 31,910 75 Parent bank 7,885 23,017 29,111 26,054 23,772 23,283 23,773 21,918 22,296 25,313 76 Other banks in United States1 1 1,087 1,327 1,214 1,484 1,429 1,540 1,561 77 Nonbanks1 4,550 4,234 4,455 4,245 4,384 4,947 5,036 78 Claims on foreigners 138,888 127,734 119,280 117,255 113,299 113,524 114,264 111,772 112,284 112,937 79 Other branches of parent bank 41,367 37,000 36,565 39,313 37,499 37,638 37,395 37,897 36,367 35,381 30 Banks 56,315 50,767 43,352 39,906 39,133 38,6% 39,262 37,443 39,063 40,%1 31 Public borrowers 7,490 6,240 5,898 5,510 5,330 5,441 5,424 5,334 5,345 5,296 32 Nonbank foreigners 33,716 33,727 33,465 32,526 31,337 31,749 32,183 31,098 31,509 31,299 33 Other assets 6,518 5,979 5,019 5,304 5,064 5,086 5,611 4,882 5,063 4,687 34 Total payable in U.S. dollars 115,188 123,740 126,012 118,337 114,358 113,437 114,895 112,809 112,919 116,212 35 Claims on United States 11,246 26,761 33,756 30,641 28,282 27,917 28,610 26,924 27,807 30,945 36 Parent bank 7,721 22,756 28,756 25,509 23,323 22,825 23,378 21,551 21,960 24,911 37 Other banks in United States1 950 1,195 1,113 1,437 1,363 1,496 1,498 3H Nonbanks1 4,182 3,764 3,979 3,795 4,010 4,351 4,536 39 Claims on foreigners 99,850 92,228 88,917 84,553 83,082 82,456 82,971 82,889 82,161 82,268 40 Other branches of parent bank 35,439 31,648 31,838 33,623 32,704 32,461 32,669 33,551 31,899 31,099 41 Banks 40,703 36,717 32,188 27,961 27,986 27,093 27,290 26,805 27,465 28,523 47 Public borrowers 5,595 4,329 4,194 3,983 3,879 4,063 4,094 4,030 4,021 3,964 43 Nonbank foreigners 18,113 19,534 20,697 18,986 18,513 18,839 18,918 18,503 18,776 18,682 44 Other assets 4,092 4,751 3,339 3,143 2,994 3,064 3,314 2,9% 2,951 2,999 Bahamas and Caymans 45 Total, all currencies 149,108 145,156 152,083 146,861' 144,207' 138,981 141,610 146,811 142,140 144,986 46 Claims on United States 46,546 59,403 75,309 78,424' 76,642' 71,911 75,655 77,296 76,872 76,457 47 Parent bank 31,643 34,653 48,720 50,926' 49,707' 45,641 48,202 49,449 48,892 50,044 48 Other banks in United States1 -i 11,540 11,072 10,716 11,284 11,795 11,571 11,546 49 15,958 15,863 15,554 16,169 16,052 16,409 14,867 50 Claims on foreigners 98,057 81,450 72,868 64,263 63,545 63,031 62,024 65,598 61,493 64,719 51 Other branches of parent bank 12,951 18,720 20,626 16,093 15,639 15,117 13,837 17,682 14,447 16,330 57 55,151 42,699 36,842 30,505 30,075 30,263 30,529 30,225 29,331 31,016 53 Public borrowers 10,010 6,413 6,093 5,883 6,119 6,057 6,075 6,089 6,253 6,175 54 Nonbank foreigners 19,945 13,618 12,592 11,782 11,712 11,594 11,583 11,602 11,462 11,198 55 Other assets 4,505 4,303 3,906 4,174 4,020 4,039 3,931 3,917 3,775 3,810 56 Total payable in U.S. dollars 143,743 139,605 145,641 140,666' 138,307' 133,002 136,211 141,562 137,392 139,860 1. Data for assets vis-a-vis other banks in the United States and vis-a-vis nonbanks are combined for dates prior to June 1984. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • June 1985 3.14 Continued 1984 1985 LLiiaabbiilliittyy aaccccoouunntt 11998811 11998822 11998833 Aug. Sept. Oct/ Nov/ Dec/ Jan. Feb.'' AH foreign countries 57 Total, all currencies 462,847 469,712 477,090 462,028' 453,711' 448,499 452,914 452,205 445,588 453,414 58 Negotiable CDs2 n.a. n.a. n.a. 41,656 39,866 38,520 37,915 37,725 38,804 41,798 59 To United States 137,767 179,015 188,070 152,177' 146,632' 139,567 138,498 146,955 143,980 141,218 60 Parent bank 56,344 75,621 81,261 76,702' 74,655' 74,757 70,346 78,111 75,459 72,606 61 Other banks in United States . 19,197 33,405 29,453 19,693 20,120 18,937 18,601 18,394 18,124 17,970 62 Nonbanks 62,226 69,989 77,356 55,782 51,857 45,873 49,551 50,450 50,397 50,642 63 To foreigners 305,630 270,853 269,685 246,565 245,746 248,164 253,925 246,894 241,591 249,297 64 Other branches of parent bank 86,396 90,191 90,615 90,747 90,426 89,492 90,681 93,206 87,844 90,016 65 Banks 124,906 9*,860 92,889 78,796 77,471 82,235 86,822 78.203 79,361 84,043 66 Official institutions 25,997 19,614 18,896 20,238 21,566 19,501 20,883 20,281 19,488 19,362 67 Nonbank foreigners 68,331 64,188 68,845 56,784 56,283 56,936 55,539 55.204 54,898 55,876 68 Other liabilities 19,450 19,844 19,335 21,630 21,467 22,248 22,576 20,631 21,213 21,101 69 Total payable in U.S. dollars 364,447 379,270 388,291 369,898' 363,876' 356,601 361,875 365,859 358,329 366,495 70 Negotiable CDs2 n.a. n.a. n.a. 39,610 37,629 36,102 35,608 35,227 36,295 39,544 71 To United States 134,700 175,528 184,305 147,644' 142,111' 135,2% 134,303 142,943 140,107 137,455 72 Parent bank 54,492 73,295 79,035 74,116' 71,883' 72,246 67,821 75,626 73,118 70,350 73 Other banks in United States . 18,883 33,040 28,936 19,019 19,457 18,283 18,052 17,920 17,585 17,440 74 Nonbanks 61,325 69,193 76,334 54,509 50,771 44,767 48,430 49,397 49,404 49,665 75 To foreigners 217,602 192,510 194,139 171,880 173,610 174,107 180,841 177,638 171,655 178,904 76 Other branches of parent bank 69,299 72,921 73,522 73,501 73,412 72,204 74,552 77,222 72,770 75,040 77 Banks 79,594 57,463 57,022 42,373 42,772 46,227 50,509 45,131 44,975 48,766 78 Official institutions 20,288 15,055 13,855 15,476 16,850 14,850 16,068 15,773 14,865 14,657 79 Nonbank foreigners 48,421 47,071 51,260 40,530 40,576 40,826 39,712 39,512 39,045 40,441 80 Other liabilities 12,145 " 11,232 9,847 10,764 10,526 11,096 11,123 10,051 10,272 10,592 United Kingdom 81 Total, all currencies 157,229 161,067 158,732 154,250 147,6% 147,562 149,377 144,385 146,130 149,534 82 Negotiable CDs2 n.a. n.a. n.a. 38,265 36,600 34,948 34,269 34,413 35,455 38,281 83 To United States 38,022 53,954 55,799 29,667 27,280 26,558 25,338 25,250 27,757 23,439 84 Parent bank 5,444 13,091 14,021 18,127 16,130 16,598 15,116 14,651 16,714 13,763 85 Other banks in United States . 7,502 12,205 11,328 3,548 3,451 3,388 3,002 3,110 3,556 3,086 86 Nonbanks 25,076 28,658 30,450 7,992 7,699 6,572 7,220 7,489 7,487 6,590 87 To foreigners 112,255 99,567 95,847 78,469 75,901 77,985 81,217 77,424 75,039 80,188 88 Other branches of parent bank 16,545 18,361 19,038 22,252 21,536 21,023 20,846 21,631 20,199 22,146 89 Banks 51,336 44,020 41,624 30,735 28,996 32,436 34,739 30,436 31,216 33,789 90 Official institutions 16,517 11,504 10,151 10,480 10,625 9,650 10,505 10,154 9,084 9,374 91 Nonbank foreigners 27,857 25,682 25,034 15,002 14,744 14,876 15,127 15,203 14,540 14,879 92 Other liabilities 6,952 7,546 7,086 7,849 7,915 8,071 8,553 7,298 7,879 7,626 93 Total payable in U.S. dollars .... 120,277 130,261 131,167 124,260 119,337 118,103 119,287 117,497 117,198 120,623 94 Negotiable CDs2 n.a. n.a. n.a. 37,219 35,398 33,703 33,168 33,070 34,084 37,033 95 To United States 37,332 53,029 54,691 28,027 25,763' 25,178 24,024 24,105 26,587 22,386 96 Parent bank 5,350 12,814 13,839 17,701 15,679 16,209 14,742 14,339 16,349 13,506 97 Other banks in United States . 7,249 12,026 11,044 3,244 3,131 3,144 2,792 2,965 3,407 2,942 98 Nonbanks 24,733 28,189 29,808 7,082 6,953 5,825 6,490 6,801 6,831 5,938 99 To foreigners 79,034 73,477 73,279 55,337 54,590 55,482 58,163 56,923 52,954 57,654 100 Other branches of parent bank 12,048 14,300 15,403 18,384 18,175 17,600 17,562 18,294 16,940 18,772 101 Banks 32,298 28,810 29,320 16,984 16,015 18,309 20,262 18,356 17,889 20,022 102 Official institutions 13,612 9,668 8,279 8,920 9,375 8,306 9,072 8,871 7,748 7,854 103 Nonbank foreigners 21,076 20,699 20,277 11,049 11,025 11,267 11,267 11,402 10,377 11,006 104 Other liabilities 3,911 3,755 3,197 3,677 3,586 3,740 3,932 3,399 3,563 3,550 Bahamas and Caymans 105 Total, all currencies 149,108 145,156 152,083 146,861' 144,207' 138,981 141,610 146,811 142,140 144,986 106 Negotiable CDs2 n.a. n.a. n.a. 905 788 878 898 615 734 953 107 To United States 85,759 104,425 111,299 103,457' 100,311' 95,249 95,975 102,955 98,753 99,503 108 Parent bank 39,451 47,081 50,980 41,915' 41,693' 42,851 40,517 47,161 43,999 43,625 109 Other banks in United States 10,474 18,466 16,057 14,742 15,459 14,167 14,187 13,938 13,332 13,591 110 Nonbanks 35,834 38,878 44,262 46,800 43,159 38,231 41,271 41,855 41,422 42,287 111 To foreigners 60,012 38,274 38,445 39,598 40,213 39,872 41,764 40,302 39,802 41,543 112 Other branches of parent bank 20,641 15,796 14,936 14,446 15,283 14,823 16,455 16,782 16,014 17,111 113 Banks 23,202 10,166 11,876 12,200 11,978 13,068 13,993 12,405 12,287 12,982 114 Official institutions 3,498 1,967 1,919 2,674 3,028 2,211 2,376 2,054 2,020 1,992 115 Nonbank foreigners 12,671 10,345 11,274 10,278 9,924 9,770 8,940 9,079 9,481 9,458 116 Other liabilities 3,337 2,457 2,339 2,901 2,895 2,982 2,973 2,921 2,851 2,987 117 Total payable in U.S. dollars 145,284 141,908 148,278 142,836' 140,531' 135,326 137,874 143,590 138,505 141,293 2. Before June 1984, liabilities on negotiable CDs were included in liabilities to the United States or liabilities to foreigners, according to the address of the initial purchaser. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A57 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1984 1985 IItteemm 11998822 11998833 Aug. Sept. Oct. Nov. Dec. Jan.? Feb.P 1 Total1 172,718 177,950 177,276 173,407 176,177 178,158 180,640 176,806 173,179 By type 2 Liabilities reported by banks in the United States2 24,989 25,534 26,381 24,038 26,893 25,789 26,197 23,288 23,266 3 U.S. Treasury bills and certificates3 46,658 54,341 54,022 54,627 55,780 59,570 59,976 56,662 52,474 U.S. Treasury bonds and notes 4 Marketable 67,733 68,514 70,441 68,471 67,647 67,003 68,995 71,522 72,845 5 Nonmarketable4 8,750 7,250 5,800 5,800 5,800 5,800 5,800 5,800 5,300 6 U.S. securities other than U.S. Treasury securities5 24,588 22,311 20,632 20,471 20,057 19,996 19,672 19,534 19,294 By area 7 Western Europe1 61,298 67,645 70,399 68,091 68,682 70,384 69,755 68,261 67,215 8 Canada 2,070 2,438 1,434 1,069 1,321 1,466 1,528 1,491 1,136 9 Latin America and Caribbean 6,057 6,248 8,170 7,053 8,109 8,894 8,646 7.451 7,279 10 Asia 96,034 92,572 90,464 90,403 91,491 90,047 93,951 93,031 91,024 11 Africa 1,350 958 838 897 967 1,316 1,291 1,120 1,397 12 Other countries6 5,909 8,089 5,971 5,894 5,607 6,051 5,469 5.452 5,128 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. NOTE. Based on Treasury Department data and on data reported to the 3. Includes nonmarketable certificates of indebtedness (including those pay- Treasury Department by banks (including Federal Reserve Banks) and securities able in foreign currencies through 1974) and Treasury bills issued to official dealers in the United States. institutions of foreign countries. 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 1984 IItteemm 11998811 11998822 11998833 Mar. June Sept. Dec. 1 Banks' own liabilities 3,523 4,844 5,219 5,817 6,402 5,901 7,501 2 Banks' own claims 4,980 7,707 7,231 9,034 9,623 9,006 10,801 3 Deposits 3,398 4,251 2,731 4,024 4,280 3,6% 3,964 4 Other claims 1,582 3,456 4,501 5,010 5,344 5,310 6,837 5 Claims of banks' domestic customers1 971 676 1,059 361 227 281 569 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

A58 International Statistics • June 1985 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States Payable in U.S. dollars Millions of dollars, end of period 1984 1985 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998811 •• 11998822 11998833 Aug. Sept. Oct. Nov. Dec. Jan. Feb.P 1 All foreigners 243,889 307,056 369,607 396,436 398,598 388,951 398,481 406,381' 400,295 404,783 2 Banks' own liabilities 163,817 227,089 279,087 296,595 299,732 290,282 296,833 306,758r 302,536 311,208 3 Demand deposits 19,631 15,889 17,470 16,229 17,198 16,490 17,448 19,542' 17,976 19,368 4 Time deposits1 29,039 68,797 90,632 107,604 111,901 109,612 112,678 110,235r 114,260 117,041 5 Other2 17,647 23,184 25,874 23,630 22,087 24,423 23,642 26,332 23,710 25,353 6 Own foreign offices3 97,500 119,219 145,111 149,132 148,546 139,758 143,065 150,650' 146,590 149,446 7 Banks' custody liabilities4 80,072 79,967 90,520 99,842 98,866 98,669 101,648 100,074 97,759 93,575 8 U.S. Treasury bills and certificates3 55,315 55,628 68,669 74,148 73,160 73,295 76,531 75,838 73,635 69,189 9 Other negotiable and readily transferable instruments6 18,788 20,636 17,467 20,567 20,833 20,281 19,703 18,775 18,128 17,995 10 Other 5,970 3,702 4,385 5,127 4,873 5,094 5,414 5,460 5,997 6,391 11 Nonmonetary international and regional organizations7 2,721 4,922 5,957 5,748 6,279 4,801 5,831 4,083 6,929 5,812 12 Banks' own liabilities 638 1,909 4,632 1,960 3,305 2,053 2,779 1,644 3,571 2,092 13 Demand deposits 262 106 297 325 209 144 354 263 417 341 14 Time deposits1 58 1,664 3,584 1,446 2,526 1,513 2,114 1,093r 2,682 936 15 Other2 318 139 750 189 570 396 311 288 472 815 16 Banks' custody liabilities4 2,083 3,013 1,325 3,788 2,975 2,748 3,052 2,440 3,358 3,719 17 U.S. Treasury bills and certificates 541 1,621 463 2,722 1,834 1,455 1,448 916 1,921 2,258 18 Other negotiable and readily transferable instruments6 1,542 1,392 862 1,067 1,140 1,292 1,604 1,524 1,429 1,461 19 Other 0 0 0 0 0 0 0 0 8 1 20 Official institutions8 79,126 71,647 79,876 80,403 78,665 82,673 85,359 86,17Y 79,950 75,740 21 Banks' own liabilities 17,109 16,640 19,427 18,222 16,274 19,247 18,748 19,065' 16,958 17,115 22 Demand deposits 2,564 1,899 1,837 2,003 1,969 1,725 2,133 1,823 1,780 1,881 23 Time deposits1 4,230 5,528 7,318 8,060 7,877 8,695 9,457 9,391' 8,356 8,654 24 Other2 10,315 9,212 10,272 8,158 6,429 8,828 7,159 7,852 6,821 6,580 25 Banks' custody liabilities4 62,018 55,008 60,448 62,181 62,391 63,426 66,611 67,108 62,992 58,625 26 U.S. Treasury bills and certificates5 52,389 46,658 54,341 54,022 54,627 55,780 59,570 59,976 56,662 52,474 27 Other negotiable and readily transferable instruments6 9,581 8,321 6,082 8,149 7,746 7,626 7,010 7,038 6,267 6,064 28 Other 47 28 25 10 18 20 31 94 63 87 29 Banks9 136,008 185,881 226,887 243,552 246,077 233,654 238,349 248,360' 242,858 249,848 30 Banks' own liabilities 124,312 169,449 205,347 218,081 221,185 209,529 214,783 225,512' 220,141 227,494 31 Unaffiliated foreign banks 26,812 50,230 60,236 68,949 72,640 69,771 71,718 74,862' 73,551 78,047 32 Demand deposits 11,614 8,675 8,759 7,884 8,453 8,389 8,528 10,526' 9,030 9,656 33 Time deposits1 8,720 28,386 37,439 46,901 49,763 46,755 47,703 47,059' 48,762 51,053 34 Other2 6,477 13,169 14,038 14,164 14,424 14,627 15,488 17,278 15,759 17,338 35 Own foreign offices3 97,500 119,219 145,111 149,132 148,546 139,758 143,065 150,650' 146,590 149,446 36 Banks' custody liabilities4 11,696 16,432 21,540 25,471 24,892 24,124 23,566 22,848 22,717 22,355 37 U.S. Treasury bills and certificates 1,685 5,809 10,178 12,766 12,234 11,828 11,409 10,927 10,933 10,488 38 Other negotiable and readily transferable instruments6 4,400 7,857 7,485 8,172 8,421 7,802 7,360 7,156 6,489 6,217 39 Other 5,611 2,766 3,877 4,534 4,236 4,494 4,797 4,766 5,295 5,650 40 Other foreigners 26,035 44,606 56,887 66,733 67,576 67,824 68,942 68,215' 70,557 73,383 41 Banks' own liabilities 21,759 39,092 49,680 58,332 58,968 59,453 60,523 60,537' 61,866 64,507 42 Demand deposits 5,191 5,209 6,577 6,017 6,567 6,232 6,433 6,930' 6,748 7,490 43 Time deposits 16,030 33,219 42,290 51,195 51,735 52,648 53,405 52,693' 54,460 56,399 44 Other2 537 664 813 1,120 665 573 685 914 658 619 45 Banks' custody liabilities4 4,276 5,514 7,207 8,401 8,609 8,372 8,419 7,678 8,692 8,876 46 U.S. Treasury bills and certificates 699 1,540 3,686 4,639 4,465 4,232 4,103 4,020 4,118 3,970 47 Other negotiable and readily transferable instruments6 3,265 3,065 3,038 3,180 3,525 3,560 3,730 3,058 3,943 4,253 48 Other 312 908 483 582 619 580 586 601 631 653 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 10,747 14,307 10,346 11,415 11,048 10,714 10,437 10,476 9,287 9,126 • Liabilities and claims of banks in the United States were increased, 4. Financial claims on residents of the United States, other than long-term beginning in December 1981, by the shift from foreign branches to international securities, held by or through reporting banks. banking facilities in the United States of liabilities to, and claims on, foreign 5. Includes nonmarketable certificates of indebtedness and Treasury bills residents. issued to official institutions of foreign countries. 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 foreign bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.17 Continued 1984 1985 AArreeaa aanndd ccoouunnttrryy 11998811AA 11998822 11998833 Aug. Sept. Oct. Nov. Dec. Jan. Feb.P 1 243,889 307,056 369,607 396,436 398,598 388,951 398,481 406,831r 400,295 404,783 2 Foreign countries 241,168 302,134 363,649 390,688 392,319 384,151 392,650 402,748' 393,365 398,971 3 Europe 91,275 117,756 138,072 150,785 147,244 146,413 149,577 152,395' 149,461 152,165 4 Austria 596 519 585 758 693 744 627 615 734 598 5 Belgium-Luxembourg 4,117 2,517 2,709 4,789 4,278 4,093 3,613 4,114 4,007 4,636 6 333 509 466 408 341 337 434 438 452 545 7 Finland 296 748 531 489 638 407 487 418 425 789 8 France 8,486 8,171 9,441 11,539 11,547 11,641 11,935 12,701 11,908 12,430 9 Germany 7,645 5,351 3,599 3,758 3,036 3,331 3,405 3,353' 3,581 3,258 10 Greece 463 537 520 566 567 609 602 699 615 583 11 Italy 7,267 5,626 8,462 8,356 8,266 8,976 11,056 10,757 9,657 9,148 1? Netherlands 2,823 3,362 4,290 5,116 5,239 4,421 5,077 4,799 4,663 4,622 n Norway 1,457 1,567 1,673 2,026 1,912 1,895 1,693 1,548 1,717 1,647 14 Portugal 354 388 373 539 434 540 552 597 570 613 IS Spain 916 1,405 1,603 1,971 1,984 1,905 1,873 2,082 2,016 1,887 16 Sweden 1,545 1,390 1,799 2,095 2,008 1,945 1,839 1,676' 2,133 1,551 17 Switzerland 18,716 29,066 32,246 32,919 32,995 32,461 31,494 31,054' 31,397 31,542 18 Turkey 518 296 467 354 320 557 457 584 495 501 19 United Kingdom 28,286 48,172 60,683 67,976 65,445 65,384 66,944 68,553' 68,043 70,216 ?0 Yugoslavia 375 499 562 435 514 579 565 602 545 602 21 Other Western Europe1 6,541 7,006 7,403 6,114 6,247 6,062 6,387 7,184' 5,855 6,500 ?? U.S.S.R 49 50 65 47 41 50 54 79 66 66 23 Other Eastern Europe2 493 576 596 532 738 476 481 542' 581 432 24 Canada 10,250 12,232 16,026 18,170 17,536 16,767 16,549 16,048' 16,233 18,163 ?s Latin America and Caribbean 85,223 114,163 140,088 150,972 152,069 145,771 149,574 153,985' 151,228 154,174 76 Argentina 2,445 3,578 4,038 4,411 4,384 4,484 4,607 4,424 4,523 4,361 77 Bahamas 34,856 44,744 55,818 60,077 58,321 52,912 55,102 56,955' 55,394 56,789 78 Bermuda 765 1,572 2,266 2,763 3,177 3,043 3,222 2,370 2,704 3,456 79 Brazil 1,568 2,014 3,168 4,697 4,427 4,714 4,978 5,332 4,928 6,136 30 British West Indies 17,794 26,381 34,545 33,789 35,926 34,419 34,336 36,949' 35,271 34,568 31 Chile 664 1,626 1,842 2,070 1,874 2,052 2,185 2,001 1,944 1,916 37 Colombia 2,993 2,594 1,689 1,791 1,957 2,022 2,057 2,514 2,356 2,453 33 Cuba 9 9 8 7 8 8 8 10 26 8 34 Ecuador 434 455 1,047 951 931 924 1,029 1,092 912 981 35 Guatemala 479 670 788 831 810 855 884 896 920 915 36 Jamaica 87 126 109 126 180 122 110 183' 157 182 37 Mexico 7,235 8,377 10,392 12,268 12,869 12,466 13,422 12,695' 13,297 13,061 38 Netherlands Antilles 3,182 3,597 3,879 4,261 4,179 4,187 4,180 4,153 4,346 4,662 39 Panama 4,857 4,805 5,924 6,506 6,811 6,578 6,847 6,928 6,872 7,156 40 Peru 694 1,147 1,166 1,273 1,343 1,304 1,258 1,247 1,152 1,063 41 Uruguay 367 759 1,244 1,319 1,418 1,361 1,309 1,394 1,485 1,413 47 Venezuela 4,245 8,417 8,632 10,046 9,615 10,367 10,013 10,545 10,667 10,742 43 Other Latin America and Caribbean 2,548 3,291 3,535 3,786 3,839 3,952 4,027 4,297' 4,275 4,311 44 49,822 48,716 58,570 61,559 66,397 66,028 67,182 71,139' 67,393 65,288 China 45 Mainland 158 203 249 671 876 861 844 1,153 1,078 1,068 46 Taiwan 2,082 2,761 4,051 4,799 4,970 5,041 5,355 4,975' 5,098 5,231 47 Hong Kong 3,950 4,465 6,657 6,110 6,977 6,236 6,535 7,240 7,417 6,642 48 India 385 433 464 800 644 616 606 507 554 721 49 Indonesia 640 857 997 1,137 939 1,339 884 1,033 1,136 914 50 Israel 592 606 1,722 726 750 2,017 1,023 1,268 1,003 995 51 Japan 20,750 16,078 18,079 19,792 21,310 19,644 20,750 20,929 21,662 22,726 57 Korea 2,013 1,692 1,648 1,641 1,572 1,552 1,609 1,691 1,561 1,623 51 Philippines 874 770 1,234 1,084 1,020 1,097 1,252 1,396 1,334 1,144 54 Thailand 534 629 747 782 741 980 1,458 1,257 1,161 1,062 55 Middle-East oil-exporting countries3 12,992 13,433 12,976 13,200 13,754 13,890 13,436 16,804' 15,970 15,219 56 Other Asia 4,853 6,789 9,748 10,815 12,844 12,755 13,432 12,886' 9,418 7,945 57 3,180 3,124 2,827 3,052 3,018 3,329 3,492 3,506' 3,431 3,572 58 Egypt 360 432 671 743 629 763 739 757 798 649 59 Morocco 32 81 84 119 136 115 117 118 115 121 60 South Africa 420 292 449 350 318 459 460 328 376 371 61 Zaire 26 23 87 101 148 141 163 153 76 79 62 Oil-exporting countries4 1,395 1,280 620 775 821 998 1,034 1,189 1,187 1,450 63 Other Africa 946 1,016 917 964 966 852 978 961' 878 903 64 Other countries 1,419 6,143 8,067 6,150 6,055 5,844 6,277 5,674' 5,619 5,608 65 Australia 1,223 5,904 7,857 5,749 5,687 5,464 5,598 5,290' 5,241 5,043 66 All other 196 239 210 401 368 379 679 384' 379 564 67 Nonmonetary international and regional organizations 2,721 4,922 5,957 5,748 6,279 4,801 5,831 4,083 6,929 5,812 68 International 1,661 4,049 5,273 4,973 5,411 4,086 5,055 3,376 6,165 4,453 69 Latin American regional 710 517 419 445 488 518 593 587 600 580 70 Other regional5 350 357 265 330 381 196 183 120 165 778 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. 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • June 1985 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 1984 1985 AArreeaa aanndd ccoouunnttrryy 11998811AA 11998822 11998833 Aug. Sept. Oct. Nov. Dec/ Jan. Feb.P 1 Total 251,589 355,705 391,312 396,232 393,959 383,444 384,517 398,722 387,197 392,684 2 Foreign countries 251,533 355,636 391,148 396,034 393,888 382,762 383,954 398,048 386,273 392,388 3 Europe 49,262 85,584 91,927 100,084 98,173 95,370 97,812 97,%2 %,038 97,981 4 Austria 121 229 401 581 572 521 532 433 339 367 3 Belgium-Luxembourg 2,849 5,138 5,639 6,156 6,286 5,363 4,988 4,794 4,683 5,097 6 Denmark 187 554 1,275 1,088 1,057 544 520 648 589 589 7 Finland 546 990 1,044 872 882 887 1,098 898 817 907 8 France 4,127 7,251 8,766 9,985 9,094 8,822 9,299 9,085 88,,661177 9,601 9 Germany 940 1,876 1,284 1,257 1,220 1,097 1,261 1,305 998888 939 10 Greece 333 452 476 974 1,086 929 819 817 896 840 11 Italy 5,240 7,560 9,018 7,832 7,803 7,820 8,854 9,079 8,040 8,483 12 Netherlands 682 1,425 1,267 1,440 1,470 1,190 1,229 1,351 1,480 1,490 13 Norway 384 572 690 649 649 676 602 675 651 808 14 Portugal 529 950 1,114 1,433 1,387 1,346 1,262 1,243 1,209 1,269 15 Spain 2,095 3,744 3,573 3,700 3,355 3,189 3,017 2,884 2,848 3,134 16 Sweden 1,205 3,038 3,358 2,404 2,596 2,362 2,313 2,220 2,497 2,580 17 Switzerland 2,213 1,639 1,863 1,580 1,741 2,067 2,275 2,201 2,308 2,112 18 Turkey 424 560 812 1,145 1,132 1,145 1,097 1,130 1,232 1,197 19 United Kingdom 23,849 45,781 47,364 54,752 53,676 53,269 54,520 55,184 54,849 54,565 20 Yugoslavia 1,225 1,430 1,718 1,857 1,888 1,868 1,866 1,886 1,862 1,783 21 Other Western Europe1 211 368 477 732 660 660 625 5% 668 683 22 U.S.S.R 377 263 192 175 176 159 169 142 118 219 23 Other Eastern Europe2 1,725 1,762 1,598 1,471 1,442 1,454 1,467 1,391 1,345 1,318 24 Canada 9,193 13,678 16,341 16,326 16,604 16,634 15,778 16,057 16,343 19,080 25 Latin America and Caribbean 138,347 187,969 205,491 203,465 203,001 198,372 199,058 207,577 199,663 200,256 26 Argentina 7,527 10,974 11,749 11,021 11,108 11,014 10,983 11,043 11,453 11,203 27 Bahamas 43,542 56,649 59,633 56,612 55,216 52,006 54,084 58,027 54,604 55,022 28 Bermuda 346 603 566 509 508 551 635 592 594 429 29 Brazil 16,926 23,271 24,667 25,991 26,140 26,146 26,275 26,307 25,886 26,146 30 British West Indies 21,981 29,101 35,527 35,390 36,002 34,866 33,722 38,105 35,372 36,824 31 Chile 3,690 5,513 6,072 6,619 6,836 6,795 6,703 6,839 6,746 6,713 32 Colombia 2,018 3,211 3,745 3,444 3,438 3,343 3,406 3,499 3,369 33,,440066 33 Cuba 3 3 0 0 0 0 0 0 0 11 34 Ecuador 1,531 2,062 2,307 2,380 2,365 2,452 2,431 2,420 2,477 2,489 35 Guatemala3 124 124 129 130 120 141 148 158 154 157 36 Jamaica3 62 181 215 216 225 234 222 252 244 253 37 Mexico 22,439 29,552 34,802 35,016 35,602 35,364 35,288 34,697 34,057 33,654 38 Netherlands Antilles 1,076 839 1,154 1,302 1,296 1,337 1,337 1,350 1,273 1,393 39 Panama 6,794 10,210 7,848 8,202 7,639 7,540 7,360 7,707 6,864 6,200 40 Peru 1,218 2,357 2,536 2,401 2,397 2,416 2,358 2,384 2,414 2,337 41 Uruguay 157 686 977 930 934 962 990 1,088 1,053 1,021 42 Venezuela 7,069 10,643 11,287 11,137 10,982 11,029 10,994 11,017 10,968 10,929 43 Other Latin America and Caribbean 1,844 1,991 2,277 2,165 2,191 2,175 2,123 2,091 2,135 2,079 44 49,851 60,952 67,837 65,979 6666,,000066 6622,,335566 6611,,339988 6666,,338800 6644,,339955 6655,,334488 China 45 Mainland 107 214 292 639 563 409 543 710 507 646 46 Taiwan 2,461 2,288 1,908 1,573 1,651 1,588 1,679 1,849 1,745 1,921 47 Hong Kong 4,132 6,787 8,489 6,809 7,139 7,155 6,945 7,368 6,801 7,346 48 India 123 222 330 295 354 302 381 425 299 354 49 Indonesia 352 348 805 906 886 821 797 734 710 780 50 Israel 1,567 2,029 1,832 1,869 1,802 1,890 1,938 2,088 1,993 2,041 51 Japan 26,797 28,379 30,354 29,005 30,601 26,862 26,421 29,059 28,495 29,110 52 Korea 7,340 9,387 9,943 9,547 9,586 9,253 8,8% 9,285 8,807 8,795 53 Philippines 1,819 2,625 2,107 2,756 2,578 2,510 2,487 2,550 2,499 2,560 54 Thailand 565 643 1,219 1,262 1,113 1,072 1,112 1,125 1,123 1,076 55 Middle East oil-exporting countries4 1,581 3,087 4,954 4,924 4,506 4,650 4,687 5,054 5,004 4,856 56 Other Asia 3,009 4,943 5,603 6,396 5,227 5,844 5,512 6,133 6,412 5,860 57 Africa 3,503 5,346 6,654 6,969 6,830 6,862 6,719 6,615 6,536 6,375 58 Egypt 238 322 747 613 650 674 693 728 668 584 59 Morocco 284 353 440 556 545 582 536 583 552 582 60 South Africa 1,011 2,012 2,634 3,281 3,152 3,140 2,960 2,795 2,791 2,666 61 Zaire 112 57 33 30 18 18 19 18 41 29 62 Oil-exporting countries5 657 801 1,073 996 944 938 911 842 812 791 63 Other 1,201 1,802 1,727 1,493 1,522 1,510 1,600 1,649 1,672 1,724 64 Other countries 1,376 2,107 2,898 3,210 3,274 3,169 3,189 3,456 3,297 3,348 65 Australia 1,203 1,713 2,256 2,582 2,673 2,508 2,487 2,778 2,593 2,635 66 All other 172 394 642 628 601 661 702 678 704 713 67 Nonmonetary international and regional organizations6 56 68 164 198 71 681 562 674 925 295 • Liabilities and claims of banks in the United States were increased, 3. Included in "Other Latin America and Caribbean" through March 1978. beginning in December 1981, by the shift from foreign branches to international 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and banking facilities in the United States of liabilities to, and claims on, foreign United Arab Emirates (Trucial States). residents. 5. Comprises Algeria, Gabon, Libya, and Nigeria. 1. Includes the Bank for International Settlements. Beginning April 1978, also 6. Excludes the Bank for International Settlements, which is included in includes Eastern European countries not listed in line 23. "Other Western Europe." 2. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German NOTE. Data for period before April 1978 include claims of banks' domestic Democratic Republic, Hungary, Poland, and Romania. customers on foreigners. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A61 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 1984 1985 TTyyppee ooff ccllaaiimm 11998811AA 11998822 11998833 Aug. Sept. Oct. Nov. Dec.' Jan. Feb." 1 Total 222222288888887777777,,,,,,,555555555555557777777 3333333%%%%%%%,,,,,,,000000011111115555555 444444422222226666666,,,,,,,222222211111115555555 444444422222227777777,,,,,,,999999988888885555555 444444433333331111111,,,,,,,666666633333339999999 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 222222255555551111111,,,,,,,555555588888889999999 333333355555555555555,,,,,,,777777700000005555555 333333399999991111111,,,,,,,333333311111112222222 396,232 333333399999993333333,,,,,,,999999955555559999999 383,444 384,517 333333399999998888888,,,,,,,777777722222222222222 387,197 392,684 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 33333331111111,,,,,,,222222266666660000000 44444445555555,,,,,,,444444422222222222222 55555557777777,,,,,,,555555566666669999999 58,477 55555559999999,,,,,,,666666611111117777777 61,361 61,443 66666661111111,,,,,,,333333377777771111111 61,321 61,673 44 OOwwnn ffoorreeiiggnn ooffffiicceess11 99999996666666,,,,,,,666666655555553333333 111111122222227777777,,,,,,,222222299999993333333 111111144444446666666,,,,,,,333333399999993333333 153,652 111111155555552222222,,,,,,,000000033333330000000 143,576 144,329 111111155555556666666,,,,,,,444444499999997777777 153,829 154,004 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 77777774444444,,,,,,,777777700000004444444 111111122222221111111,,,,,,,333333377777777777777 111111122222223333333,,,,,,,888888833333337777777 123,716 111111122222222222222,,,,,,,444444488888882222222 120,873 121,258 111111122222223333333,,,,,,,777777777777775555555 116,965 121,589 66 DDeeppoossiittss 22222223333333,,,,,,,333333388888881111111 44444444444444,,,,,,,222222222222223333333 44444447777777,,,,,,,111111122222226666666 46,990 44444447777777,,,,,,,333333377777779999999 46,778 45,788 44444448888888,,,,,,,111111111111112222222 45,070 47,763 77 OOtthheerr 55555551111111,,,,,,,333333322222222222222 77777777777777,,,,,,,111111155555553333333 77777776666666,,,,,,,777777711111111111111 76,725 77777775555555,,,,,,,111111100000003333333 74,094 75,469 77777775555555,,,,,,,666666666666663333333 71,894 73,826 88 AAllll ootthheerr ffoorreeiiggnneerrss 44444448888888,,,,,,,999999977777772222222 66666661111111,,,,,,,666666611111114444444 66666663333333,,,,,,,555555511111114444444 60,387 55555559999999,,,,,,,888888833333330000000 57,634 57,487 55555557777777,,,,,,,000000088888880000000 55,083 55,418 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss22 .... 33333335555555,,,,,,,999999966666668888888 44444440000000,,,,,,,333333311111110000000 33333334444444,,,,,,,999999900000003333333 33333334444444,,,,,,,000000022222226666666 33333332222222,,,,,,,999999911111116666666 1111111,,,,,,,333333377777778888888 2222222,,,,,,,444444499999991111111 2222222,,,,,,,999999966666669999999 4444444,,,,,,,555555577777775555555 3333333,,,,,,,333333388888880000000 11 Negotiable and readily transferable 22222226666666,,,,,,,333333355555552222222 33333330000000,,,,,,,777777766666663333333 22222226666666,,,,,,,000000066666664444444 22222223333333,,,,,,,3333333%%%%%%% 22222223333333,,,,,,,888888800000005555555 12 Outstanding collections and other 8888888,,,,,,,222222233333338888888 7777777,,,,,,,000000055555556666666 5555555,,,,,,,888888877777770000000 6666666,,,,,,,000000055555555555555 5555555,,,,,,,777777733333332222222 13 MEMO: Customer liability on 22222229999999,,,,,,,999999955555552222222 33333338888888,,,,,,,111111155555553333333 33333337777777,,,,,,,777777711111115555555 33333338888888,,,,,,,555555588888886666666 33333336666666,,,,,,,555555577777775555555 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States4 .... 40,369 42,499 45,856 44,615' 44,201' 42,774' 43,931' 39,924 41,667 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 • 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 1984 MMaattuurriittyy;; bbyy bboorrrroowweerr aanndd aarreeaa 11998811AA 11998822 11998833 Mar. June Sept. Dec.' 1 Total 154,590 228,150 243,715 238,819 249,646 240,674 243,049 By borrower 2 Maturity of 1 year or less1 116,394 173,917 176,158 163,567 172,144 162,914 165,200 3 Foreign public borrowers 15,142 21,256 24,039 20,453 21,018 21,059 22,076 4 All other foreigners 101,252 152,661 152,120 143,114 151,126 141,854 143,124 5 Maturity of over 1 year1 38,197 54,233 67,557 75,252 77,501 77,760 77,849 6 Foreign public borrowers 15,589 23,137 32,521 36,333 37,797 38,410 39,620 7 All other foreigners 22,608 31,095 35,036 38,919 39,704 39,350 38,229 By area Maturity of 1 year or less1 8 Europe 28,130 50,500 56,117 54,393 59,666 56,769 58,170 9 Canada 4,662 7,642 6,211 6,509 6,925 5,8% 5,978 10 Latin America and Caribbean 48,717 73,291 73,660 65,658 65,109 61,479 60,692 11 31,485 37,578 34,403 31,206 34,002 32,252 33,450 12 Africa 2,457 3,680 4,199 4,472 4,790 4,798 4,442 13 All other2 943 1,226 1,569 1,330 1,652 1,720 2,468 Maturity of over 1 year1 14 Europe 8,100 11,636 13,576 13,334 12,827 11,269 9,590 15 Canada 1,808 1,931 1,857 2,038 2,203 1,801 1,890 16 Latin America and Caribbean 25,209 35,247 43,888 51,233 54,271 56,577 57,834 17 1,907 3,185 4,850 5,150 5,098 5,106 5,386 18 Africa 900 1,494 2,286 2,291 1,865 1,857 2,033 19 All other2 272 740 1,101 1,206 1,237 1,150 1,116 • Liabilities and claims of banks in the United States were increased, 1. Remaining time to maturity, beginning in December 1981, by the shift from foreign branches to international 2. Includes nonmonetary international and regional organizations, 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

A62 International Statistics • June 1985 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks1 Billions of dollars, end of period 1982 1983 1984 AArreeaa oorr ccoouunnttrryy 11998800 11998811 Dec. Mar. June Sept. Dec. Mar. June7 Sept. Dec.P 1 Total 352.0 415.2 438.7 443.7 439.9 431.0 437.3 434.2 429.2 409.7 407.6 2 G-10 countries and Switzerland 162.1 175.5 179.7 182.5 177.1 168.8 168.0 166.1 157.8 148.1 147.5 3 Belgium-Luxembourg 13.0 13.3 13.1 13.8 13.3 12.6 12.4 11.0 10.8 9.8 8.8 4 France 14.1 15.3 17.1 17.1 17.1 16.2 16.3 15.9 14.3 14.3 14.0 5 Germany 12.1 12.9 12.7 13.4 12.6 11.6 11.3 11.7 11.0 10.0 9.0 6 Italy 8.2 9.6 10.3 10.2 10.5 9.9 11.4 11.2 11.5 9.7 10.1 1 Netherlands 4.4 4.0 3.6 4.3 4.0 3.6 3.5 3.4 3.0 3.4 3.9 8 Sweden 2.9 3.7 5.0 4.3 4.7 4.9 5.1 5.2 4.3 3.5 3.2 9 Switzerland 5.0 5.5 5.0 4.5 4.8 4.2 4.3 4.3 4.2 3.9 4.0 10 United Kingdom 67.4 70.1 72.1 73.4 70.8 67.8 65.4 65.1 60.2 57.4 59.7 11 Canada 8.4 10.9 10.4 12.5 10.8 8.9 8.3 8.6 8.9 8.1 7.8 12 Japan 26.5 30.2 30.2 29.0 28.5 29.0 29.9 29.8 29.5 27.9 27.1 13 Other developed countries 21.6 28.4 33.7 34.0 34.5 34.3 36.1 35.7 37.1 36.3 33.8 14 Austria 1.9 1.9 1.9 2.1 2.1 1.9 1.9 2.0 2.0 1.8 1.7 15 Denmark 2.3 2.3 2.4 3.3 3.4 3.3 3.4 3.4 3.1 2.9 2.2 16 Finland 1.4 1.7 2.2 2.1 2.1 1.8 2.4 2.1 2.3 1.9 1.9 17 Greece 2.8 2.8 3.0 2.9 2.9 2.9 2.8 3.0 3.3 3.2 2.9 18 Norway 2.6 3.1 3.3 3.3 3.4 3.2 3.3 3.2 3.2 3.2 3.0 19 Portugal .6 1.1 1.5 1.4 1.4 1.4 1.5 1.4 1.7 1.6 1.4 20 Spain 4.4 6.6 7.5 7.0 7.2 7.1 7.1 7.1 7.3 6.9 6.5 21 Turkey 1.5 1.4 1.4 1.5 1.4 1.5 1.7 1.9 2.0 2.0 1.9 22 Other Western Europe 1.7 2.1 2.3 2.3 2.0 2.1 1.8 1.8 1.9 1.7 1.7 23 South Africa 1.1 2.8 3.7 3.6 3.9 4.7 4.7 4.8 4.7 5.0 4.5 24 Australia 1.3 2.5 4.4 4.6 4.5 4.4 5.5 5.2 5.7 6.2 6.1 25 OPEC countries2 22.7 24.8 27.4 28.5 28.3 27.2 28.9 28.6 26.7 25.0 25.6 26 Ecuador 2.1 2.2 2.2 2.2 2.2 2.1 2.2 2.1 2.1 2.1 2.2 27 Venezuela 9.1 9.9 10.5 10.4 10.4 9.8 9.9 9.7 9.5 9.2 9.3 28 Indonesia 1.8 2.6 3.2 3.5 3.2 3.4 3.8 4.0 4.0 3.8 3.7 29 Middle East countries 6.9 7.5 8.7 9.3 9.5 9.1 10.0 9.8 8.4 7.4 8.2 30 African countries 2.8 2.5 2.8 3.0 3.0 2.8 3.0 3.0 2.7 2.5 2.3 31 Non-OPEC developing countries 77.4 96.3 107.1 108.1 108.8 109.8 111.6 112.1 112.7 111.9 112.3 Latin America 32 Argentina 7.9 9.4 8.9 9.0 9.4 9.5 9.5 9.5 9.2 9.1 8.7 33 Brazil 16.2 19.1 22.9 23.2 22.7 23.1 23.1 25.1 25.4 26.3 26.3 34 Chile 3.7 5.8 6.3 6.0 5.8 6.3 6.4 6.5 6.7 7.1 7.0 35 Colombia 2.6 2.6 3.1 2.9 3.2 3.2 3.2 3.1 3.0 2.9 2.9 36 Mexico 15.9 21.6 24.5 25.1 25.3 25.9 26.1 25.6 26.0 26.1 25.8 37 Peru 1.8 2.0 2.6 2.4 2.6 2.4 2.4 2.3 2.3 2.2 2.2 38 Other Latin America 3.9 4.1 4.0 4.2 4.3 4.2 4.2 4.4 4.0 3.9 3.9 Asia China 39 Mainland .2 .2 .2 .2 .2 .2 .3 .3 .6 .5 .7 40 Taiwan 4.2 5.1 5.3 5.1 5.1 5.2 5.3 4.9 5.3 5.2 5.1 41 India .3 .3 .6 .7 .7 .8 1.0 1.0 1.0 1.1 1.0 42 Israel 1.5 2.1 2.3 2.0 2.3 1.7 1.9 1.6 1.9 1.7 1.8 43 Korea (South) 7.1 9.4 10.9 10.9 10.9 10.9 11.3 11.1 11.2 10.3 10.7 44 Malaysia 1.1 1.7 2.1 2.5 2.6 2.8 2.9 2.8 2.7 3.0 2.8 45 Philippines 5.1 6.0 6.3 6.6 6.4 6.2 6.2 6.7 6.3 5.9 6.0 46 Thailand 1.6 1.5 1.6 1.6 1.8 1.8 2.2 2.1 1.9 1.8 1.8 47 Other Asia .6 1.0 1.1 1.4 1.2 1.0 1.0 .9 1.1 1.0 1.1 Africa 48 Egypt .8 1.1 1.2 1.1 1.3 1.4 1.5 1.4 1.4 1.2 1.2 49 Morocco .7 .7 .7 .8 .8 .8 .8 .8 .8 .8 .8 50 Zaire .2 .2 .1 .1 .1 .1 .1 .1 .1 .1 .1 51 Other Africa3 2.1 2.3 2.4 2.3 2.2 2.4 2.3 2.2 1.9 1.9 2.1 52 Eastern Europe 7.4 7.8 6.2 5.7 5.8 5.3 5.3 4.9 4.9 4.5 4.5 53 U.S.S.R .4 .6 .3 .3 .4 .2 .2 .2 .2 .2 .1 54 Yugoslavia 2.3 2.5 2.2 2.2 2.3 2.3 2.4 2.3 2.3 2.3 2.3 55 Other 4.6 4.7 3.7 3.2 3.0 2.8 2.8 2.5 2.4 2.1 2.1 56 Offshore banking centers 47.0 63.7 66.8 68.0 69.3 68.7 70.5 70.5 73.0 66.5 66.8 57 Bahamas 13.7 19.0 19.0 18.6 20.7 21.6 21.8 24.6 27.3 23.7 21.6 58 Bermuda .6 .7 .9 1.0 .8 .8 .9 .7 .7 1.0 .9 59 Cayman Islands and other British West Indies 10.6 12.4 12.9 12.6 12.7 10.5 12.2 11.2 11.3 10.7 11.7 60 Netherlands Antilles 2.1 3.2 3.3 3.1 2.6 4.1 4.2 3.3 3.3 3.1 3.4 61 Panama4 5.4 7.7 7.6 7.1 6.6 5.7 6.0 6.3 6.6 5.7 6.8 62 Lebanon .2 .2 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 8.1 11.8 13.9 15.1 14.5 15.2 15.0 14.4 13.5 12.7 12.5 64 Singapore 5.9 8.7 9.2 10.4 11.2 10.5 10.3 10.0 10.2 9.5 9.8 65 Others5 .3 .1 .0 .0 .0 .1 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated6 14.0 18.8 17.9 16.9 16.2 16.9 17.0 16.3 17.3 17.3 17.2 1. The banking offices covered by these data are the U.S. offices and foreign Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates) as well branches of U.S.-owned banks and of U.S. subsidiaries of foreign-owned banks. as Bahrain and Oman (not formally members of OPEC). Offices not covered include (1) U.S. agencies and branches of foreign banks, and 3. Excludes Liberia. (2) foreign subsidiaries of U.S. banks. To minimize duplication, the data are 4. Includes Canal Zone beginning December 1979. adjusted to exclude the claims on foreign branches held by a U.S. office or another 5. Foreign branch claims only. foreign branch of the same banking institution. The data in this table combine 6. Includes New Zealand, Liberia, and international and regional organizaforeign branch claims in table 3.14 (the sum of lines 7 through 10) with the claims tions. of U.S. offices in table 3.18 (excluding those held by agencies and branches of 7. Beginning with June 1984 data, reported claims held by foreign branches foreign banks and those constituting claims on own foreign branches). have been reduced by an increase in the reporting threshold for "shell" branches 2. Besides the Organization of Petroleum Exporting Countries shown individ- from $50 million to $150 million equivalent in total assets, the threshold now ually, this group includes other members of OPEC (Algeria, Gabon, Iran, Iraq, applicable to all reporting branches. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A63 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1983 1984 Type, and area or country 998800 11998811 11998822 Sept. Dec. Mar. June Sept. 1 Total 29,434 28,618 27,512 26,325 25,197' 29,481' 34,013 30,734 2 Payable in dollars 25,689 24,909 24,280 23,546 22,176' 26,243' 30,815 27,923 3 Payable in foreign currencies 3,745 3,709 3,232 2,780 3,020' 3,237' 3,198' 2,811 By type 4 Financial liabilities 11,330 12,157 11,066 10,900 10,423' 14,177' 18,339' 15,879 5 Payable in dollars 8,528 9,499 8,858 9,025 8,644' 12,159' 16,297 14,082 6 Payable in foreign currencies 2,802 2,658 2,208 1,875 1,779' 2,018' 2,043 1,797 7 Commercial liabilities 18,104 16,461 16,446 15,425 14,774' 15,304' 15,674 14,855 8 Trade payables 12,201 10,818 9,438 8,567 7,765' 7,893' 7,897 6,921 9 Advance receipts and other liabilities ... 5,903 5,643 7,008 6,858 7,009' 7,411' 7,776 7,934 10 Payable in dollars 17,161 15,409 15,423 14,521 13,533' 14,085' 14,518 13,841 11 Payable in foreign currencies 943 1,052 1,023 904 1,241' 1,219' 1,155 1,014 By area or country Financial liabilities 12 Europe 6,481 6,825 6,501 6,014 5,691' 7,087' 7,230 6,679 13 Belgium-Luxembourg 479 471 505 379 302 428 359 428 14 France 327 709 783 785 843' 956' 900 910 15 Germany 582 491 467 449 492' 514' 561 521 16 Netherlands 681 748 711 730 581 527 583 595 17 Switzerland 354 715 792 500 486 641 563 514 18 United Kingdom 3,923 3,565 3,102 3,014 2,839 3,790 4,013 3,463 19 Canada 964 963 746 788 764' 795' 735 825 20 Latin America and Caribbean 3,136 3,356 2,751 2,737 2,607' 4,912' 8,888 6,780 21 Bahamas 964 1,279 904 784 751 1,419 3,603 2,606 22 Bermuda 1 7 14 13 13 51 13 11 23 Brazil 23 22 28 32 32 37 25 33 24 British West Indies 1,452 1,241 1,027 1,095 1,018 2,635 4,457 3,250 25 Mexico 99 102 121 185 213' 243 237 260 26 Venezuela 81 98 114 117 124 121 124 130 27 Asia 723 976 1,039 1,327 1,332' 1,355 1,462' 1,566 28 Japan 644 792 715 896 898' 947 1,013' 1,085 29 Middle East oil-exporting countries2.. 38 75 169 201 170 170 180 144 30 Africa 11 14 17 19 19 19 16 16 31 Oil-exporting countries3 1 0 0 0 0 0 0 1 32 All other4 15 24 12 15 10 9 9 14 Commercial liabilities 4,402 3,770 3,831 3,633 3,245 3,567 3,409 3,967 33 Europe 90 71 52 47 62 40 45 34 34 Belgium-Luxembourg 582 573 598 523 437 488 525 430 35 France 679 545 468 472 427 417 501 552 36 Germany 219 220 346 243 268 259 265 238 37 Netherlands 499 424 367 460 241 477 246 417 38 Switzerland 1,209 880 1,027 967 732 847 794 1,133 39 United Kingdom 40 Canada 888 897 1,495 1,418 1,841 1,776 1,840 1,923 41 Latin America and Caribbean 11,,330000 1,044 1,570 1,508 1,473' 1,807' 1,705 1,758 42 Bahamas 88 2 16 1 1 14 17 1 43 Bermuda 75 67 117 77 67 158 124 110 44 Brazil 111 67 60 48 44 68 31 68 45 British West Indies 35 2 32 14 6 33 5 8 46 Mexico 367 340 436 512 585 682 568 641 47 Venezuela 319 276 642 539 432' 56C 630 628 48 Asia 10,242 9,384 8,144 7,638 6,741 6,620 6,989 5,554 49 Japan 802 1,094 1,226 1,305 1,247 1,291 1,235 1,388 50 Middle East oil-exporting countries2 5. 8,098 7,008 5,503 4,817 4,178 3,735 4,190 2,361 51 Africa 817 703 753 628 553 539 684 587 52 Oil-exporting countries3 517 344 277 231 167 243 217 251 53 All other4 456 664 651 600 921' 995' 1,046 1,067 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

A64 International Statistics • June 1985 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1983 1984 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998800 11998811 11998822 Sept. Dec. Mar. June Sept. 1 Total 34,482 36,185 28,725 32,934 34,932' 33,645' 31,740 30,078 2 Payable in dollars 31,528 32,582 26,085 30,029 31,842' 30,755' 28,77C 27,286 3 Payable in foreign currencies 2,955 3,603 2,640 2,905 3,09c 2,89C 2,97C 2,792 By type 4 Financial claims 19,763 21,142 17,684 22,038 23,801' 22,781' 21,292' 19,794 5 Deposits 14,166 15,081 13,058 16,907 18,356' 17,486' 16,124' 15,014 6 Payable in dollars 13,381 14,456 12,628 16,463 17,859' 17,057' 15,614' 14,574 7 Payable in foreign currencies 785 625 430 445 497 429' 510 439 8 Other financial claims 5,597 6,061 4,626 5,130 5,445' 5,296' 5,168' 4,781 9 Payable in dollars 3,914 3,599 2,979 3,279 3,489' 3,506<- 3,407' 3,088 10 Payable in foreign currencies 1,683 2,462 1,647 1,851 1,956' 1,79C 1,761' 1,693 11 Commercial claims 14,720 15,043 11,041 10,896 11,131 10,864' 10,448 10,283 12 Trade receivables 13,960 14,007 9,994 9,562 9,721 9,540 9,105 8,867 13 Advance payments and other claims 759 1,036 1,047 1,334 1,410 1,323' 1,343 1,416 14 Payable in dollars 14,233 14,527 10,478 10,287 10,494 10,193' 9,749 9,624 15 Payable in foreign currencies 487 516 563 609 637 671 699 659 By area or country Financial claims 16 Europe 6,069 4,596 4,873 6,232 6,434' 6,252' 6,364' 5,569 17 Belgium-Luxembourg 145 43 15 25 37 30 37 15 18 France 298 285 134 135 15C 171' 151 146 19 Germany 230 224 178 161 159 148 161 187 20 Netherlands 51 50 97 89 71 57 158 62 21 Switzerland 54 117 107 34 38 90 61 64 22 United Kingdom 4,987 3,546 4,064 5,577 5,767' 5,548' 5,543' 4,863 23 Canada 5,036 6,755 4,377 5,244 6,166' 5,665' 5,18C 4,419 24 Latin America and Caribbean 7,811 8,812 7,546 9,500 10,144' 9,823' 8,469' 8,633 25 Bahamas 3,477 3,650 3,279 3,829 4,745 3,927' 3,213' 3,255 26 Bermuda 135 18 32 62 96 3 5 5 27 Brazil 96 30 62 49 53 87 83 84 28 British West Indies 2,755 3,971 3,255 4,457 4,163' 4,903' 4,348' 4,423 29 Mexico 208 313 274 315 291 279 230 232 30 Venezuela 137 148 139 137 134 130 124 128 31 Asia 607 758 698 764 764 753 963 900 32 Japan 189 366 153 257 297 309 307 371 33 Middle East oil-exporting countries2 20 37 15 8 4 7 8 7 34 Africa 208 173 158 151 147 144 158 160 35 Oil-exporting countries3 26 46 48 45 55 42 35 37 36 All other* 32 48 31 148 145 145 158 113 Commercial claims 37 Europe 5,544 5,405 3,826 3,394 3,670 3,61C 3,555 3,563 38 Belgium-Luxembourg 233 234 151 116 135 173 142 128 39 France 1,129 776 474 486 459 413 408 410 40 Germany 599 561 357 382 348 363 443 367 41 Netherlands 318 299 350 282 334 31C 306 303 42 Switzerland 354 431 360 292 317 336 250 289 43 United Kingdom 929 985 811 738 809 787 812 888 44 Canada 914 967 633 792 829 1,061 933 1,024 45 Latin America and Caribbean 3,766 3,479 2,526 2,870 22,,669955 22,,441199 2,042 1,886 46 Bahamas 21 12 21 15 88 88 4 14 47 Bermuda 108 223 261 246 190 216 89 88 48 Brazil 861 668 258 611 493 357 310 219 49 British West Indies 34 12 12 12 7 7 8 10 50 Mexico 1,102 1,022 775 898 884 745 577 509 51 Venezuela 410 424 351 282 272 268 241 242 52 Asia 3,522 3,959 3,050 2,934 3,063 2,997 3,085 2,879 53 Japan 1,052 1,245 1,047 1,033 1,114 1,186 1,178 1,087 54 Middle East oil-exporting countries2 825 905 751 719 737 701 710 702 55 Africa 653 772 588 562 588 497 536 594 56 Oil-exporting countries3 153 152 140 131 139 132 128 135 57 All other4 321 461 417 344 286 280 297 338 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

Securities Holdings and Transactions A65 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1985 1984 1985 TTrraannssaaccttiioonnss,, aanndd aarreeaa oorr ccoouunnttrryy 11998833 11998844 Jan.- Aug. Sept. Oct. Nov. Dec. Jan. Feb." Feb. U.S. corporate securities STOCKS 1 Foreign purchases 69,770 60,462' 12,107 7,255 4,052 4,657 4,838 4,487' 5,005 7,102 2 Foreign sales 64,360 63,394 12,828 7,399 4,892 5,398 4,752 5,049 5,701 7,127 3 Net purchases, or sales (—) 5,410 —2,932'' -721 -144 -840 -741 86 -562' -696 -26 4 Foreign countries 5,312 -3,047' -734 -290 -909 -752 74 -461' -713 -21 5 Europe 3,979 -2,992 -770 -410 -690 -529 -96 -359 -558 -212 6 France -97 -405 -60 -28 -67 -37 -46 -54 -19 -41 7 Germany 1,045 -50 -243 -125 -63 -10 11 -105 -134 -109 8 Netherlands -109 -315 -151 -19 -66 -47 -15 -29 -44 -107 9 Switzerland 1,325 -1,490 -292 -358 -335 -130 -34 -249 -159 -133 10 United Kingdom 1,799 -664 -51 146 -131 -251 11 91 -178 127 11 Canada 1,151 1,673 215 129 149 150 47 134 46 169 12 Latin America and Caribbean 529 493 288 213 9 -89 30 67 103 185 13 Middle East1 -808 -1,998 -153 -214 -207 -270 -12 -196 -52 -101 14 Other Asia 395 -372' -363 -57 -160 -92 74 -91' -264 -99 15 Africa 42 -23 -10 -5 -6 -8 -8 -6 -7 -2 16 Other countries 24 171 59 54 -3 87 39 -11 19 40 17 Nonmonetary international and regional organizations 98 115 12 147 69 11 11 -101 17 -5 BONDS2 18 Foreign purchases 24,000 39,198' 14,158 2,885 3,356 6,994 4,899 6,403' 5,937 8,220 19 Foreign sales 23,097 26,029' 6,807 2,030 2,035 3,060 2,556 2,900' 3,106 3,701 20 Net purchases, or sales (-) 903 13,169' 7,351 855 1,321 3,934 2,342 3,503' 2,831 4,520 21 Foreign countries 888 12,872' 7,274 902 1,278 3,954 2,130 3,527' 2,835 4,439 22 Europe 909 11,693' 6,780 502 1,004 3,956 1,950 3,338' 2,635 4,144 23 France -89 207 38 17 8 143 -11 24 55 -17 24 Germany 344 1,731' -87 181 19 606 139 184' 67 -153 25 Netherlands 51 93 54 16 2 22 -1 15 9 44 26 Switzerland 583 644 327 49 9 253 159 276 12 315 27 United Kingdom 434 8,421' 6,459 311 922 2,860 1,599 2,776' 2,441 4,018 28 Canada 123 -71 49 54 3 -3 13 14 59 -11 29 Latin America and Caribbean 100 390 87 76 64 42 44 78 90 -2 30 Middle East1 -1,161 -1,011 -207 1 -19 -232 -45 -179 -123 -84 31 Other Asia 865 1,862 477 265 223 192 169 276 140 337 32 Africa 0 1 0 1 1 0 -2 1 0 0 33 Other countries 52 9 89 3 3 0 2 0 35 54 34 Nonmonetary international and regional organizations 15 297 77 -48 43 -20 213 -24 -4 81 Foreign securities 35 Stocks, net purchases, or sales (-) -3,765 -1,074 -1,429 -489 -340 -318 -177 -221 -764 -666 36 Foreign purchases 13,281 14,584 2,820 1,284 921 1,333 1,147 1,169 1,160 1,659 37 Foreign sales 17,046 15,658 4,249 1,773 1,261 1,651 1,324 1,390 1,924 2,325 38 Bonds, net purchases, or sales (-) -3,239 -3,586' 349 -287 -481 -1,187 -231 -1,159' 168 181 39 Foreign purchases 36,333 57,335' 10,675 5,770 4,122 4,527 6,601 5,134' 5,383 5,292 40 Foreign sales 39,572 60,921' 10,327 6,057 4,604 5,714 6,832 6,293' 5,216 5,111 41 Net purchases, or sales (—), of stocks and bonds .... -7,004 -4,660' -1,081 -777 -821 -1,505 -408 — 1,379'' -596 -485 42 Foreign countries -6,559 -4,271' -1,510 -613 -884 -1,470 -561 -671' -725 -785 43 Europe -5,492 -8,532' -839 -602 -962 -1,574 -707 -1,086' -730 -109 44 Canada -1,328 413 -346 -7 -198 -68 -23 254 75 -422 45 Latin America and Caribbean 1,120 2,474 149 127 28 217 207 104 210 -60 46 Asia -855 1,345' -650 -136 169 -30 88 -115' -395 -255 47 Africa 141 -107 -7 11 -14 -19 -16 3 -4 -3 48 Other countries -144 137 183 -5 92 6 -110 169 120 64 49 Nonmonetary international and regional organizations -445 -389 429 -163 64 -36 153 -709 129 300 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, ties sold abroad by U.S. corporations organized to finance direct investments Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). abroad. 2. Includes state and local government securities, and securities of U.S. government agencies and corporations. Also includes issues of new debt securi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 International Statistics • June 1985 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Holdings and Transactions Millions of dollars 1985 1984 1985 11998833 11998844 Country or area F Ja eb n . . - Aug. Sept. Oct. Nov. Dec. Jan. Feb. Transactions, net purchases or sales (-) during period 1 Estimated total2 3,693 21,387 4,633 6,5% -3,799 2,931 2,197 7,508 2,312 2,321 2 Foreign countries2 3,162 16,407 5,962 5,576 -1,736 1,092 2,293 5,066 3,797 2,165 3 Europe2 6,226 11,014 451 3,990 -718 795 776 1,300 532 -81 4 Belgium-Luxembourg -431 289 122 33 20 27 41 46 104 18 5 Germany2 2,450 2,958 -249 1,036 -747 -39 36 336 -120 -129 6 Netherlands 375 454 -60 13 -6 458 -7 16 -71 11 7 Sweden 170 46 140 -52 77 -1 1 -88 150 -10 8 Switzerland2 -421 635 323 67 99 -172 -288 26 -35 358 9 United Kingdom 1,966 5,175 77 2,857 -313 742 244 716 419 -342 10 Other Western Europe 2,118 1,458 98 35 153 -219 748 248 86 12 11 Eastern Europe 0 0 0 0 0 0 0 0 0 0 12 Canada 699 1,526 -324 231 288 237 193 249 -92 -231 13 Latin America and Caribbean -212 1,413 886 313 165 320 965 380 149 737 14 Venezuela -124 14 -6 1 3 1 7 -10 5 -11 15 Other Latin America and Caribbean 60 528 71 231 92 61 57 213 -2 73 16 Netherlands Antilles -149 871 820 80 69 258 902 177 146 674 17 Asia -3,535 2,376 4,819 1,000 -1,475 -302 369 3,218 3,093 1,726 18 Japan 2,315 6,062 1,137 529 -18 851 1,287 1,585 578 559 19 Africa 3 -67 3 -100 27 -1 -5 2 2 1 20 All other -17 145 127 142 -23 43 -5 -83 113 14 21 Nonmonetary international and regional organizations 535 4,982 -1,331 1,020 -2,063 1,839 -96 2,442 -1,485 154 22 International 218 4,612 -1,171 1,099 -2,149 1,651 -188 2,361 -1,675 504 23 Latin American regional 0 0 1 0 0 0 0 0 0 1 MEMO 24 Foreign countries2 3,162 16,407 5,962 5,576 -1,736 1,092 2,293 5,066 3,797 2,165 25 Official institutions 779 477 3,850 1,366 -1,968 -823 -602 1,919 2,527 1,322 26 Other foreign2 2,382 15,930 2,113 4,210 232 1,915 2,895 3,147 1,270 843 Oil-exporting countries 27 Middle East3 -5,419 -6,277 -345 -411 -144 -983 -1,284 -200 27 -372 28 Africa4 -1 -101 0 -100 0 0 0 0 0 0 1. Estimated official and private transactions in marketable U.S. Treasury 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and securities with an original maturity of more than 1 year. Data are based on United Arab Emirates (Trucial States). monthly transactions reports. Excludes nonmarketable U.S. Treasury bonds and 4. Comprises Algeria, Gabon, Libya, and Nigeria, notes held by official institutions of foreign countries. 2. Includes U.S. Treasury notes publicly issued to private foreign residents denominated in foreign currencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interest and Exchange Rates A67 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per annum Rate on Mar. 31, 1985 Rate on Mar. 31, 1985 Rate on Mar. 31, 1985 Country Country Country Per- Month Per- Month Per- Month cent effective cent effective cent effective Austria.. 4.5 June 1984 France1 10.50 Feb. 1985 Norway 8.0 June 1979 Belgium. 11.0 Feb. 1984 Germany, Fed. Rep. of 4.5 June 1984 Switzerland 4.0 Mar. 1983 Brazil... 49.0 Mar. 1981 Italy 15.5 Jan. 1985 United Kingdom2. Canada.. 10.65 Mar. 1985 Japan 5.0 Oct. 1983 Venezuela May 1983 Denmark 7.0 Oct. 1983 Netherlands 5.5 Feb. 1985 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 NOTE. Rates shown are mainly those at which the central bank either discounts central bank transacts the largest proportion of its credit operations. 3.27 FOREIGN SHORT-TERM INTEREST RATES Percent per annum, averages of daily figures 1984 1985 CCoouunnttrryy,, oorr ttyyppee 11998822 11998833 11998844 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Eurodollars 12.24 9.57 10.75 11.67 10.77 9.50 8.90 8.37 9.05 9.32 7 United Kingdom 12.21 10.06 9.91 10.79 10.60 9.87 9.74 11.63 13.69 13.52 3 Canada 14.38 9.48 11.29 12.20 11.99 11.09 10.41 9.70 10.63 11.42 4 Germany 8.81 5.73 5.96 5.81 6.06 5.92 5.81 5.84 6.13 6.36 5 Switzerland 5.04 4.11 4.35 5.04 5.23 5.03 4.96 5.13 5.66 5.77 6 Netherlands 8.26 5.58 6.08 6.23 6.16 5.87 5.77 5.87 6.90 7.14 7 14.61 12.44 11.66 11.00 10.75 10.54 10.66 10.43 10.60 10.71 8 19.99 18.95 17.08 17.28 17.13 17.13 16.86 15.82 15.79 15.82 9 14.10 10.51 11.41 11.16 11.00 10.81 10.75 10.75 10.75 10.75 10 Japan 6.84 6.49 6.32 6.33 6.31 6.32 6.33 6.27 6.29 6.30 NOTE. Rates are for 3-month interbank loans except for Canada, finance company paper; Belgium, 3-month Treasury bills; and Japan, Gensaki rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 International Statistics • June 1985 3.28 FOREIGN EXCHANGE RATES Currency units per dollar 1984 1985 CCoouunnttrryy//ccuurrrreennccyy 11998822 11998833 11998844 Oct. Nov. Dec. Jan. Feb. Mar. 1 Australia/dollar1 101.65 90.14 87.937 83.64 85.88 84.00 81.51 73.74 69.70 2 Austria/schilling 17.060 17.968 20.005 21.557 21.075 21.802 22.267 23.190 23.247 3 Belgium/franc 45.780 51.121 57.749 62.048 60.475 62.380 63.455 66.310 66.308 4 Brazil/cruzeiro 179.22 573.27 1841.50 2453.64 2734.16 3008.55 3346.67 3768.17 4158.19 5 Canada/dollar 1.2344 1.2325 1.2953 1.3189 1.3168 1.3201 1.3240 1.3547 1.3840 6 China, P.R./yuan 1.8978 1.9809 2.3308 2.6488 2.6785 2.7953 2.8160 2.8347 2.8533 7 Denmark/krone 8.3443 9.1483 10.354 11.090 10.824 11.126 11.330 11.807 11.797 8 Finland/markka 4.8086 5.5636 6.0007 6.3726 6.2653 6.4563 6.6368 6.8616 6.8464 9 France/franc 6.5793 7.6203 8.7355 9.4108 9.1981 9.5083 9.7036 10.093 10.078 10 Germany/deutsche mark 2.428 2.5539 2.8454 3.0678 2.9985 3.1044 3.1706 3.3025 3.2982 11 Greece/drachma 66.872 87.895 112.73 126.06 123.63 127.26 129.38 134.73 140.62 12 Hong Kong/dollar 6.0697 7.2569 7.8188 7.8242 7.8235 7.8287 7.8110 7.8017 7.8009 13 India/rupee 9.4846 10.1040 11.348 12.027 12.078 12.293 12.612 12.922 12.861 14 Ireland/pound1 142.05 124.81 108.64 100.85 103.41 100.37 98.23 94.23 94.58 15 Israel/shekel 24.407 55.865 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 16 Italy/lira 1354.00 1519.30 1756.10 1898.98 1863.05 1912.52 1948.76 2042.00 2078.50 17 Japan/yen 249.06 237.55 237.45 246.75 243.63 247.% 254.18 260.48 257.92 18 Malaysia/ringgit 2.3395 2.3204 2.3448 2.4076 2.4300 2.4164 2.4804 2.5513 2.5734 19 Mexico/peso 72.990 155.01 192.31 203.33 210.79 219.56 227.56 236.06 246.15 20 Netherlands/guilder 2.6719 2.8543 3.2083 3.4597 3.3817 3.5035 3.5819 3.7387 3.7290 21 New Zealand/dollar1 75.101 66.790 57.837 48.614 49.278 48.260 47.040 45.223 45.276 22 Norway/krone 6.4567 7.3012 8.1596 8.8721 8.7175 8.9805 9.1765 9.4695 9.4608 23 Philippines/peso 8.5324 11.0940 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 24 Portugal/escudo 80.101 111.610 147.70 163.36 163.10 167.31 172.56 183.24 183.98 25 Singapore/dollar 2.1406 2.1136 2.1325 2.1667 2.1554 2.1732 2.2011 2.2557 2.2582 26 South Africa/rand1 92.297 89.85 69.534 56.54 55.47 52.66 46.34 50.57 50.33 27 South Korea/won 731.93 776.04 807.91 820.03 818.89 825.73 832.16 839.16 850.71 28 Spain/peseta 110.09 143.500 160.78 172.15 168.10 171.98 175.13 182.35 183.13 29 Sri Lanka/rupee 20.756 23.510 25.428 25.906 26.075 26.213 26.392 26.605 26.836 30 Sweden/krona 6.2838 7.6717 8.2706 8.6887 8.5957 8.8614 9.0716 9.3364 9.4135 31 Switzerland/franc 2.0327 2.1006 2.3500 2.5245 2.4700 2.5602 2.6590 2.8045 2.8033 32 Taiwan/dollar n.a. n.a. 39.633 39.226 39.419 39.509 39.209 39.228 39.542 33 Thailand/baht 23.014 22.991 23.582 23.020 26.736 27.091 27.330 27.961 28.097 34 United Kingdom/pound1 174.80 151.59 133.66 121.% 123.92 118.61 112.71 109.31 112.53 35 Venezuela/bolivar 4.2981 10.6840 n.a. n.a. n.a. n.a. n.a. n.a. n.a. MEMO 36 United States/dollar2 116.57 125.34 138.19 147.56 144.92 149.24 152.83 158.43 158.14 1. Value in U.S. cents. NOTE. Averages of certified noon buying rates in New York for cable transfers. 2. Index of weighted-average exchange value of U.S. dollar against currencies Data in this table also appear in the Board's G.5 (405) release. For address, see of other G-10 countries plus Switzerland. March 1973 = 100. Weights are 1972-76 inside front cover. global trade of each of the 10 countries. Series revised as of August 1978. For description and back data, see "Index of the Weighted-Average Exchange Value of the U.S. Dollar: Revision" on p. 700 of the August 1978 BULLETIN. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 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 June 1985 A83 SPECIAL TABLES Published Irregularly, with Latest Bulletin Reference 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 commercial banks, December 31, 1983 June 1984 A66 Assets and liabilities of U.S. branches and agencies of foreign banks, December 31, 1983 June 1984 All Assets and liabilities of U.S. branches and agencies of foreign banks, March 31, 1984 November 1984 A4 Assets and liabilities of U.S. branches and agencies of foreign banks, June 30, 1984 April 1985 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, September 30, 1984 April 1985 A74 Terms of lending at commercial banks, November 1984 June 1985 A70 Special tables begin on next page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • June 1985 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, February 4-8, 1985' A. Commercial and Industrial Loans Weighted Loan rate (percent) Amount AAvveerraaggee average Loans PPaarrttiiccii-of loans size mmaattuurriittyy22 made under pation Characteristics ( o t f h o d u o s ll a a n r d s s ) ( o t f h o d u o s ll a a n r d s) s W av e e ig r h a t g e e d SSttaannddaarrdd q I u n a t r e t r i - le co ( m pe m r i c t e m nt e ) nt (p l e o r a c n e s n t) Days "effective3 range5 ALL LOANS 1 Overnight6 15,055,130 8,922 » 9.36 .69 8.98-9.59 74.1 4.1 2 One month and under 7,455,435 397 18 9.98 .56 9.32-10.20 69.3 10.7 3 Fixed rate 6,090,143 412 18 9.84 .65 9.25-10.06 66.6 10.8 4 Floating rate 1,365,292 341 19 10.57 .32 9.72-11.03 81.7 10.2 5 Over one month and under a year 7,470,662 64 138 11.35 .31 9.78-12.52 63.2 5.6 6 Fixed rate 4,005,981 50 109 11.13 .42 9.38-12.35 56.5 5.4 7 Floating rate 3,464,681 94 173 11.61 .31 10.87-12.55 70.8 5.8 8 Demand7 3,784,929 176 * 10.83 .12 9.52-11.85 78.5 7.9 9 Fixed rate 1,143,819 210 * 9.93 .67 9.05-10.20 81.1 11.1 10 Floating rate 2,641,110 165 * 11.22 .15 10.92-12.13 77.4 6.5 11 Total short term 33,766,156 213 40 10.10 .33 9.14-10.54 71.1 6.3 12 Fixed rate (thousands of dollars) . 26,113,902 257 23 9.77 .49 9.06-9.92 69.8 5.6 13 1-24 602,140 7 104 14.50 .23 13.38-15.58 15.4 .1 14 25-49 293,957 31 112 13.68 .35 13.24-14.65 13.2 .3 15 50-99 315,844 69 94 13.63 .41 11.84-15.98 40.0 .3 16 100-499 561,472 154 81 12.52 .63 10.92-14.93 42.2 4.1 17 500-999 251,408 654 40 10.51 .22 9.64-11.07 64.4 11.4 18 1000 and over 24,089,081 7,668 17 9.48 .12 9.03-9.78 72.9 5.9 19 Floating rate (thousands of dollars). 7,652,254 134 125 11.25 .24 10.08-12.13 75.6 8.6 20 1-24 276,318 9 154 13.14 .24 12.13-13.88 56.7 1.7 21 25-49 293,730 34 182 12.61 .16 11.85-13.31 52.0 1.6 22 50-99 512,086 62 152 12.48 .31 11.57-13.24 65.8 2.2 23 100-499 1,547,981 189 155 11.93 .11 11.02-12.55 66.9 5.3 24 500-999 723,034 645 146 11.59 .14 11.02-12.13 73.1 7.9 25 1000 and over 4,299,106 3,224 102 10.58 .25 9.54-11.23 83.2 11.6 Months 26 Total long term 4,675,130 152 50 11.10 .36 9.65-12.01 80.9 9.8 27 Fixed rate (thousands of dollars) 1,631,773 84 42 11.02 1.08 9.18-12.13 82.7 3.9 28 1-99 242,086 13 36 16.29 1.19 14.37-16.08 41.3 .1 29 100-499 98,036 123 27 12.88 .56 12.86-13.24 15.3 5.6 30 500-999 47,493 623 64 11.42 .88 9.75-13.00 62.1 23.6 31 1000 and over 1,244,157 8,704 43 9.84 .80 9.06-10.10 96.8 3.8 32 Floating rate (thousands of dollars) 3,043,357 272 54 11.14 .22 10.06-12.01 79.9 13.0 33 1-99 210,147 23 42 12.92 .18 12.13-13.24 32.6 2.3 34 100-499 291,740 205 46 12.12 .18 11.07-12.96 63.7 9.6 35 500-999 190,140 678 45 11.54 .33 10.92-12.13 80.7 13.6 36 1000 and over 2,351,330 5,598 57 10.82 .19 9.90-11.60 86.1 14.3 Loan rate (percent) DDaayyss PPrriimmee RRaattee99 Effective3 Nominal8 LOANS MADE BELOW PRIME10 37 Overnight6 14,842,322 9,981 9.33 8.92 10.50 74.2 4.1 38 One month and under 6,328,878 2,839 17 9.61 9.20 10.51 71.6 11.8 39 Over one month and under a year 3,347,345 461 125 9.67 9.33 10.57 75.7 7.8 40 Demand7 1,567,359 1,058 * 9.41 9.07 10.51 86.9 9.6 41 Total short term 26,085,904 2,095 22 9.45 9.05 10.51 74.5 6.8 42 Fixed rate 23,719,738 2,218 17 9.43 9.03 10.51 73.1 6.0 43 Floating rate 2,366,166 1,346 89 9.63 9.24 10.54 89.2 15.2 Months 44 Total long term 2,158,867 908 46 9.76 9.45 10.66 93.5 7.5 45 Fixed rate .... 1,088,075 739 35 9.60 9.41 10.68 95.5 4.6 46 Floating rate .. 1,070,792 1,181 56 9.91 9.48 10.63 91.4 10.4 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A71 4.23 Continued A. Continued Weighted Loan rate (percent) Amount Average average LLooaannss PPaarrttiiccii-of loans size mmaattuurriittyy22 made under pation Characteristics (thousands (thousands Weighted Inter- commitment loans of dollars) of dollars) average SSttaannddaarrdd quartile (percent) (percent) Days effective3 range5 48 LARGE BANKS 1 Overnight6 12,634,640 11,022 * 9.36 .02 8.98-9.62 76.0 4.8 2 One month and under 5,717,495 2,435 18 9.78 .02 9.28-10.08 74.7 10.8 3 Fixed rate 4,717,469 3,873 17 9.64 .05 9.25-9.89 71.7 10.7 4 Floating rate 1,000,025 885 18 10.40 .22 9.73-11.02 89.2 11.6 5 Over one month and under a year 3,674,726 393 127 10.37 .09 9.37-11.30 78.5 4.4 6 Fixed rate 2,258,664 1,478 107 9.88 .11 9.31-10.25 73.5 5.1 7 Floating rate 1,416,062 181 160 11.16 .05 10.30-12.13 86.4 3.5 8 Demand7 1,887,515 393 * 10.52 .02 9.29-11.30 86.3 9.5 9 Fixed rate 801,058 1,009 * 9.66 .08 9.05-9.65 94.8 15.7 10 Floating rate 1,086,457 271 * 11.16 .10 10.92-12.01 80.0 5.0 11 Total short term 23,914,376 1,356 27 9.71 .00 9.06-9.99 76.9 6.6 12 Fixed rate (thousands of dollars) . 20,247,890 4,342 18 9.50 .03 9.01-9.80 75.2 6.0 13 1-24 11,330 9 101 13.16 .04 11.91-14.37 48.8 .6 14 25-49 11,113 34 91 12.03 .06 11.63-13.31 64.6 3.1 15 50-99 16,434 66 76 11.81 .15 11.57-12.75 62.9 1.1 16 100-499 99,237 207 72 11.33 .02 10.41-12.13 77.4 5.6 17 500-999 114,039 649 31 10.38 .10 9.55-11.07 76.4 13.4 18 1000 and over 19,995,736 8,958 17 9.48 .03 9.01-9.80 75.2 5.9 19 Floating rate (thousands of dollars). 3,666,486 283 95 10.88 .11 9.91-11.85 85.9 9.9 20 1-24 55,257 11 184 12.63 .01 12.01-13.24 73.7 2.6 21 25-49 75,701 34 187 12.35 .06 11.85-12.96 73.2 3.1 22 50-99 137,389 66 191 12.19 .05 11.63-12.68 76.1 3.9 23 100-499 519,658 196 155 11.77 .04 11.02-12.13 74.8 5.7 24 500-999 309,662 650 139 11.54 .05 11.02-12.13 77.1 8.6 25 1000 and over 2,568,819 3,899 72 10.48 .11 9.63-11.02 90.4 11.6 Months 26 Total long term 3,223,270 1,293 49 10.46 .05 9.45-11.46 91.2 4.7 27 Fixed rate (thousands of dollars) 1,258,558 1,983 43 9.84 .20 9.06-10.10 95.8 4.6 28 1-99 8,464 22 51 13.51 .08 11.91-14.65 12.4 1.5 29 100-499 19,856 229 45 11.62 .49 11.02-12.86 56.3 25.6 30 500-999 32,383 637 51 10.83 .36 9.71-11.30 86.6 19.6 31 1000 and over 1,197,855 9,976 43 9.76 .22 9.06-9.94 97.3 3.9 32 Floating rate (thousands of dollars) 1,964,712 1,058 52 10.85 .03 9.90-11.85 88.2 4.8 33 1-99 27,409 30 38 12.64 .02 12.01-13.24 65.3 3.7 34 100-499 119,425 226 41 11.83 .02 11.02-12.55 78.0 9.8 35 500-999 108,245 664 44 11.49 .09 10.92-12.13 84.8 17.5 36 1000 and over 1,709,632 6,712 54 10.71 .05 9.81-11.46 89.5 3.6 Loan rate (percent) DDaayyss PPrriimmee RRaattee99 Effective3 Nominal8 LOANS MADE BELOW PRIME10 37 Overnight6 12,523,809 11,403 9.35 8.94 10.50 76.3 4.8 38 One month and under 5,187,426 5,364 17 9.61 9.19 10.50 74.3 11.5 39 Over one month and under a year 2,394,759 4,001 113 9.63 9.29 10.50 79.2 5.1 40 Demand7 509,236 3,020 * 9.36 9.02 10.50 94.7 13.2 41 Total short term 21,056,230 7,069 19 9.44 9.04 10.50 77.0 6.9 42 Fixed rate 19,563,402 7,898 16 9.43 9.03 10.50 75.6 6.0 43 Floating rate 1,492,828 2,977 52 9.68 9.29 10.50 94.5 18.0 Months 44 Total long term 1,863,649 7,639 43 9.52 9.25 10.50 99.0 4.4 45 Fixed rate .... 1,020,410 6,889 34 9.33 9.18 10.50 99.4 4.9 46 Floating rate .. 843,239 8,799 54 9.75 9.33 10.50 98.5 3.7 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • June 1985 4.23 Continued A. Continued Weighted Loan rate (percent) AAmmoouunntt Average average Loans Particiof loans size mmaattuurriittyy22 made under pation Characteristics ( o t f h o d u o s ll a a n r d s) s ( o t f h o d u o s ll a a n r d s) s W av ei e g r h a t g e e d SSttaannddaarrdd q I u n a t r e t r i - le co ( m pe m r i c t e m nt e ) n t (p l e o r a c n e s n t) Days effective3 range5 OTHER BANKS 1 Overnight6 2,420,489 4,474 * 9.33 .69 9.03-9.42 64.3 .3 2 One month and under 1,737,941 106 21 10.64 .56 9.37-11.30 51.5 10.3 3 Fixed rate 1,372,674 101 21 10.53 .64 9.37-11.02 49.0 11.3 4 Floating rate 365,267 127 22 11.06 .24 9.52-12.14 61.2 6.5 5 Over one month and under a year 3,795,936 35 149 12.30 .30 10.92-13.65 48.3 6.7 6 Fixed rate 1,747,317 22 111 12.74 .40 10.13-14.93 34.5 5.9 7 Floating rate 2,048,619 70 182 11.91 .31 10.98-13.03 60.1 7.4 8 Demand7 1,897,414 114 * 11.13 .12 9.60-12.13 70.8 6.2 9 Fixed rate 342,761 74 * 10.55 .67 9.01-10.92 49.1 .1 10 Floating rate 1,554,653 130 * 11.26 .12 10.92-12.13 75.6 7.6 11 Total short term 9,851,780 70 76 11.05 .33 9.28-12.14 57.1 5.7 12 Fixed rate (thousands of dollars) . 5,866,012 60 41 10.69 .49 9.19-11.30 51.0 4.4 13 1-24 590,811 7 104 14.53 .23 13.38-15.59 14.7 .0 14 25-49 282,845 30 112 13.74 .34 13.24-14.93 11.2 .1 15 50-99 299,410 70 94 13.73 .39 12.01-15.98 38.8 .3 16 100-499 462,235 146 83 12.78 .63 10.92-14.93 34.7 3.8 17 500-999 137,368 658 47 10.61 .20 9.66-11.07 54.5 9.9 18 1000 and over 4,093,345 4,502 19 9.48 .12 9.04-9.69 61.6 5.6 19 Floating rate (thousands of dollars). 3,985,767 91 157 11.58 .21 10.92-12.40 66.2 7.5 20 1-24 221,061 9 146 13.27 .24 12.13-14.37 52.4 1.4 21 25-49 218,029 34 181 12.70 .15 12.01-13.31 44.6 1.1 22 50-99 374,696 61 139 12.59 .30 11.57-13.31 62.1 1.5 23 100-499 1,028,323 186 155 12.01 .11 11.06-12.68 62.9 5.2 24 500-999 413,372 642 150 11.62 .13 11.02-12.13 70.2 7.3 25 1000 and over 1,730,286 2,565 163 10.73 .22 9.52-11.63 72.6 11.7 Months 26 Total long term 1,451,860 51 53 12.52 .36 11.01-13.24 58.0 21.1 27 Fixed rate (thousands of dollars) 373,214 20 35 15.01 1.07 13.24-15.50 38.3 1.5 28 1-99 233,622 13 36 16.39 1.19 14.45-16.08 42.4 .1 29 100-499 78,180 110 23 13.20 .26 13.24-13.24 4.9 .5 30 500-999 15,110 595 92 12.69 .80 9.98-14.37 9.6 32.2 31 1000 and over 46,302 2,024 36 11.87 .77 10.92-12.94 83.6 .0 32 Floating rate (thousands of dollars) 1,078,645 116 59 11.66 .22 10.92-12.41 64.8 27.9 33 1-99 182,738 22 42 12.96 .18 12.13-13.24 27.7 2.1 34 100-499 172,314 193 50 12.32 .18 11.46—13.24 53.8 9.5 35 500-999 81,895 696 46 11.59 .32 10.92-12.13 75.4 8.5 36 1000 and over 641,698 3,882 68 11.12 .18 10.75-11.85 77.0 42.6 Loan rate (percent) DDaayyss PPrriimmee RRaattee99 Effective3 Nominal8 „ LOANS MADE BELOW PRIME10 37 Overnight6 2,318,513 5,964 9.24 8.84 10.50 63.2 .3 38 One month and under 1,141,453 904 20 9.62 9.21 10.55 59.4 13.5 39 Over one month and under a year 952,586 143 155 9.78 9.44 10.76 66.7 14.7 40 Demand7 617,123 529 * 9.49 9.13 10.54 75.0 3.9 41 Total short term 5,029,674 531 39 9.46 9.07 10.56 64.4 6.5 42 Fixed rate 4,156,336 506 21 9.45 9.05 10.56 61.1 5.6 43 Floating rate 873,338 695 177 9.54 9.17 10.60 80.2 10.4 Months 44 Total long term 295,218 138 62 11.25 10.69 11.65 58.9 27.4 45 Fixed rate 67,664 51 57 13.68 12.87 13.43 37.1 .0 46 Floating rate .. 227,553 281 64 10.53 10.04 11.12 65.3 35.5 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A73 4.23 Continued B. Construction and Land Development Loans Loan rate (percent) AAmmoouunntt AAvveerraaggee WWeeiigghhtteedd LLooaannss PPaarrttiiccii-- CChhaarraacctteerriissttiiccss ooff llooaannss ssiizzee aavveerraaggee mmaaddee uunnddeerr ppaattiioonn (( oo tt ff hh oo dd uu oo ss llll aa aa nn rr dd ss)) ss (( oo tt ff hh oo dd uu oo ss llll aa aa nn rr dd ss)) ss (( mm mm aa oo tt nn uu tt rr hh iitt ss yy )) 22 W e a ff v e e i e g c r t h a i t g v e e e d 3 St e a r n r d o a r4 r d q r I u a n a n t r e g t r e i - l 5 e ccoo (( mm ppee mm rr ii cc tt ee mm nntt ee )) nn tt ((pp ll ee oo rr aa cc nn ee ss nn tt)) ALL BANKS 1 $1,535,632 92 8 12.05 .62 10.64-13.24 63.8 15.7 ? Fixed rate (thousands of dollars) 747,253 80 6 12.13 .68 10.42-14.90 67.2 22.5 3 1 24 41,095 8 9 15.54 .70 14.72-15.51 58.3 .0 4 25-49 57,592 37 12 14.28 .39 13.65-14.93 0.9 .0 5 50-99 100,331 65 4 14.61 * 13.60-15.77 42.7 .0 6 100-499 91,306 118 32 14.59 .72 14.90-14.90 5.8 .4 7 500 and over 456,928 9,886 1 10.52 1.01 10.27-10.64 93.9 36.7 8 Floating rate (thousands of dollars) 788,379 108 11 11.97 .24 11.02-12.68 60.5 9.2 9 1 24 25,345 6 7 13.07 .21 12.55-13.31 87.8 2.8 1100 25-49 52,841 41 11 13.02 .18 12.96-13.24 89.8 1.8 1111 50-99 26,467 67 12 12.57 .11 12.13-13.10 67.0 9.1 1? 100-499 278,228 209 12 11.67 .29 10.92-12.40 39.6 5.7 13 500 and over 406,299 1,854 10 11.94 .37 11.46-12.68 69.0 13.0 By type of construction 14 Single family 371,563 32 8 13.33 .38 1122..1199--1144..9933 5599..11 ..55 IS Multifamily 114,404 225 14 12.94 .59 12.13-13.80 44.5 13.5 16 Nonresidential 1,049,665 236 8 11.50 .60 10.47-12.13 67.5 21.3 48 LARGE BANKS 1 695,920 916 4 11.07 .46 10.46-12.00 89.5 24.4 7 Fixed rate (thousands of dollars) 401,266 3,826 1 10.46 .21 10.27-10.64 96.3 34.2 3 1 24 565 11 7 14.26 .37 13.87-15.60 61.3 .0 4 25 49 * * * * * * * * S 50-99 * * * * * * * 6 100-499 * * * * * * 7 500 and over 397,721 15,072 1 10.44 .09 10.27-10.64 96.4 34.4 8 Floating rate (thousands of dollars) 294,654 450 8 11.89 .04 11.46-12.13 80.2 11.0 9 1 24 2,411 10 7 12.75 .04 12.19-13.31 95.3 2.0 10 25-49 3,660 36 7 12.55 .01 12.13-12.68 97.0 .0 11 50-99 5,016 68 9 12.57 .06 12.13-12.96 81.5 .0 1? 100-499 42,134 260 11 12.45 .05 12.13-12.68 89.6 6.6 13 500 and over 241,433 3,468 7 11.75 .06 11.46-12.13 78.1 12.2 By type of construction 14 Single family 66,973 265 5 10.66 .21 99..4488--1122..1133 9944..11 ..00 IS Multifamily 34,903 264 15 12.60 .48 12.13-12.68 59.1 3.9 16 Nonresidential 594,044 1,585 3 11.02 .45 10.47-11.73 90.7 28.3 OTHER BANKS 1 839,712 53 13 12.86 .42 11.02-14.17 42.4 8.5 7 Fixed rate (thousands of dollars) 345,987 37 13 14.06 .65 13.60-14.93 33.4 88..88 3 1 24 40,530 7 9 15.56 .59 14.72-15.51 58.3 ..00 4 25 49 57,159 37 12 14.27 .32 13.65-14.93 .5 .0 S 50-99 100,027 65 4 14.61 .49 13.60-15.77 42.5 .0 6 100-499 89,063 117 33 14.64 .71 14.90-14.90 3.4 .0 7 500 and over * * * * * * * * 8 Floating rate (thousands of dollars) 493,725 74 13 12.02 .24 10.92-13.03 48.8 8.2 9 1 24 22,934 6 7 13.10 .21 12.55-13.31 87.0 2.9 10 25-49 48,381 42 11 13.06 .18 13.24-13.24 89.2 1.9 11 50-99 21,451 67 12 12.57 .09 12.13-13.18 63.6 11.2 17 100-499 236,094 202 13 11.53 .28 10.92-12.13 30.7 5.6 13 500 and over 164,865 1,103 15 12.20 .36 11.55-13.52 55.7 14.2 By type of construction 14 Single family 304,590 26 9 13.94 .32 1133..2244--1155..0033 5511..44 ..77 IS Multifamily 79,501 211 13 13.09 .35 12.13-13.80 38.1 17.7 16 Nonresidential 455,621 112 17 12.11 .39 10.92-13.37 37.2 12.1 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • June 1985 4.23 Continued C. Loans to Farmers" Size class of loans (thousands) Characteristics $250 All sizes $1-9 $10-24 $25-49 $50-99 $100-249 and over ALL BANKS 1 Amount of loans (thousands of dollars) $1,185,227 $132,846 $133,565 $138,408 $171,334 $276,439 $332,636 2 Number of loans 56,474 38,327 9,215 4,120 2,597 1,753 462 3 Weighted average maturity (months)2 6.8 6.2 7.6 8.1 11.4 5.8 4.8 4 Weighted average interest rate (percent)3 13.49 14.06 13.77 13.94 13.72 13.65 12.72 5 Standard error4 .49 .30 .51 .28 .27 .37 .77 6 Interquartile range5 12.63-14.49 13.43-14.91 13.08-14.48 13.00-14.79 13.37-14.34 13.00-14.49 11.02-15.04 By purpose of loan 7 Feeder livestock 13.79 13.92 1133..8855 1133..7700 1122..7700 1122..6600 1144..1155 8 Other livestock 13.65 13.79 13.25 13.20 14.45 * * 1 9 0 F O a t r h m er m cu a r c r h e i n n t e r o y p e a r n a d t i e ng q u e i x p p m e e n n s t es 1 1 3 3 . . 4 9 3 8 1 14 4 . . 2 0 8 2 1 1 3 4 . . 4 0 8 5 1 14 3 . . 3 8 5 3 1 1 3 3 . . 4 6 2 9 14.1 * 6 13.1 * 8 11 Other 12.42 13.26 13.42 12.99 13.57 13.48 11.08 Percentage of amount of loans 12 With floating rates 39.0 23.3 26.1 3366..33 3344..66 2266..77 6644..00 13 Made under commitment 34.5 20.6 26.9 25.6 36.2 23.1 55.4 By purpose of loan 14 Feeder livestock 17.3 9.4 66..44 1122..22 77..99 99..55 3388..44 15 Other livestock 7.0 11.7 8.7 5.2 19.7 * * 16 Other current operating expenses 42.5 55.2 51.7 52.4 50.4 49.6 19.6 17 Farm machinery and equipment 8.3 14.1 16.1 16.3 11.2 * 18 Other 24.9 9.6 17.1 13.9 10.7 34.8 37.9 48 LARGE BANKS" 1 Amount of loans (thousands of dollars) $282,920 $5,532 $9,011 $13,277 $19,976 $34,174 $200,950 2 Number of loans 3,073 1,369 604 401 298 224 177 3 Weighted average maturity (months)2 5.2 7.1 8.1 6.3 6.4 8.0 4.4 4 Weighted average interest rate (percent)3 11.69 12.92 12.74 12.51 12.45 12.04 11.42 5 Standard error4 .43 .19 .20 .15 .08 .16 .51 6 Interquartile range5 10.92-12.55 12.13-13.65 12.13-13.31 11.63-13.24 11.83-13.10 11.21-12.75 10.40-12.13 By purpose of loan 7 Feeder livestock 11.78 12.05 1122..3344 1122..3355 1122..1133 1111..8877 1111..5599 8 Other livestock 12.24 12.88 12.54 12.11 12.32 * 9 Other current operating expenses 12.46 12.98 12.79 12.79 12.52 12.24 12.35 10 Farm machinery and equipment 12.82 13.13 * * * * * 11 Other 11.22 13.35 12.98 12.14 12.72 11.93 11.08 Percentage of amount of loans 12 With floating rates 90.0 79.3 8877..44 9911..88 8888..88 9900..88 9900..33 13 Made under commitment 76.7 69.0 70.6 74.1 7799..22 83.5 76.0 By purpose of loan 14 Feeder livestock 20.7 1122..77 1144..99 1188..77 3300..66 4433..44 1166..44 15 Other livestock 7.1 8.0 13.9 9.8 10.3 * * 16 Other current operating expenses 20.7 57.2 46.7 48.5 31.1 30.5 14.0 17 Farm machinery and equipment 1.6 4.1 * * * * * 18 Other 49.9 17.8 21.6 19.2 19.6 17.2 62.7 OTHER BANKS" 1 Amount of loans (thousands of dollars) $902,307 127,314 $124,554 $125,131 $151,359 $242,265 * 2 Number of loans 53,401 36,958 8,611 3,720 2,299 1,529 * 3 Weighted average maturity (months)2 7.3 6.2 7.6 8.3 12.0 5.5 4 Weighted average interest rate (percent)3 14.05 14.10 13.84 14.09 13.89 13.88 * 5 Standard error4 .23 .23 .47 .23 .26 .33 * 6 Interquartile range5 13.45-15.04 13.43-14.92 13.16-14.49 13.25-15.02 13.45-14.34 13.42-14.49 By purpose of loan 7 Feeder livestock 1144..5599 1144..0033 1144..1144 1133..9933 * * * 8 Other livestock 14.09 13.82 * * * * 1 9 0 F O a t r h m er m cu a r c r h e i n n t e r o y p e a r n a d t i e n q g u e i x p p m e e n n s t es 1 1 3 4 . . 4 1 6 8 1 1 4 4 . . 0 3 3 4 1 14 3 . . 1 4 3 9 1 14 3 . . 5 8 1 6 13.7 * 8 14.3 * 2 * * 11 Other 13.51 13.25 13.46 13.12 13.81 Percentage of amount of loans 12 With floating rates 23.0 2200..99 2211..77 3300..44 2277..55 1177..77 * 13 Made under commitment 21.2 18.5 23.7 20.5 30.5 14.5 By purpose of loan 14 Feeder livestock 1166..33 99..22 5.8 1111..55 * * 15 Other livestock 7.0 11.9 * * * * * 16 Other current operating expenses 49.3 55.1 52.0 52.8 53.0 52.3 * 17 Farm machinery and equipment 10.3 14.6 17.1 17.6 * * * 18 Other 17.1 9.3 16.8 13.3 9.5 For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A75 NOTES TO TABLE 4.23 1. The survey of terms of bank lending to business collects data on gross loan 4. The chances are about two out of three that the average rate shown would extensions made during the first full business week in the midmonth of each differ by less than this amount from the average rate that would be found by a quarter by a sample of 340 commercial banks of all sizes. The sample data are complete survey of lending at all banks. blown up to estimate the lending terms at all insured commercial banks during that 5. The interquartile range shows the interest rate range that encompasses the week. The estimated terms of bank lending are not intended for use in collecting middle 50 percent of the total dollar amount of loans made. the terms of loans extended over the entire quarter or residing in the portfolios of 6. Overnight loans are loans that mature on the following business day. those banks. Construction and land development loans include both unsecured 7. Demand loans have no stated date of maturity. loans and loans secured by real estate. Thus, some of the construction and land 8. The approximate annual interest rate on each loan—without regard to development loans would be reported on the statement of condition as real estate compounding—is calculated from survey data on the stated rate and other terms loans and the remainder as business loans. The survey of terms of bank lending to of the loan; then in computing the average of these approximate nominal rates, farmers covers about 250 banks selected to represent all sizes of banks. Mortgage each loan is weighted by its dollar amount. loans, purchased loans, foreign loans, and loans of less than $1,000 are excluded 9. The prime rate reported by each bank is weighted by the volume of loans from the survey. extended and then averaged. As of Dec. 31, 1983, average domestic assets of 48 large banks were $14.3 10. This survey provides data on gross loan extensions made during one week billion and assets of the smallest of these banks were $2.9 billion. For all insured of each quarter. The proportion of these loan extensions that is made at rates banks total domestic assets averaged $140 million. below prime may vary substantially from the proportion of such loans outstanding 2. The weighted average maturity is calculated only for loans with a stated date in bank loan portfolios. of maturity (that is, loans payable on demand are excluded). In computing the 11. Among banks reporting loans to farmers, most "large banks" had over $500 average, each loan is weighted by its dollar amount. million in total assets, and most "other banks" had total assets below $500 3. The approximate compounded annual interest rate on each loan is calculated million. from survey data on the stated rate and other terms of the loan; then, in computing the average of these approximate effective rates, each loan is weighted by its dollar amount. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 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 ANTHONY F. COLE, Special Assistant to the Board STANLEY J. SIGEL, Assistant to the Board NAOMI P. SALUS, Special Assistant to the Board NORMAND R.V. BERNARD, Special Assistant to the Board LEGAL DIVISION DIVISION OF RESEARCH AND STATISTICS MICHAEL BRADFIELD, General Counsel JAMES L. KICHLINE, Director J. VIRGIL MATTINGLY, JR., Deputy General Counsel EDWARD C. ETTIN, Deputy Director RICHARD M. ASHTON, Associate General Counsel MICHAEL J. PRELL, Deputy Director OLIVER IRELAND, Associate General Counsel JOSEPH S. ZEISEL, Deputy Director RICKI TIGERT, Assistant General Counsel JARED J. ENZLER, Associate Director STEPHEN SICILIANO, Special Assistant to the General DAVID E. LINDSEY, Associate Director Counsel ELEANOR J. STOCKWELL, Associate Director MARYELLEN A. BROWN, Assistant to the General Counsel THOMAS D. SIMPSON, Deputy Associate Director LAWRENCE SLIFMAN, Deputy Associate Director HELMUT F. WENDEL, Deputy Associate Director OFFICE OF THE SECRETARY MARTHA BETHEA, Assistant Director ROBERT M. FISHER, Assistant Director WILLIAM W. WILES, Secretary DAVID B. HUMPHREY, Assistant Director BARBARA R. LOWREY, Associate Secretary SUSAN J. LEPPER, Assistant Director JAMES MCAFEE, Associate Secretary RICHARD D. PORTER, 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 LARRY J. PROMISEL, Senior Associate Director CHARLES J. SIEGMAN, Senior Associate Director DALE W. HENDERSON, Associate Director DIVISION OF BANKING ROBERT F. GEMMILL, Staff Adviser SUPERVISION AND REGULATION PETER HOOPER III, Assistant Director DAVID H. HOWARD, Assistant Director WILLIAM TAYLOR, Director RALPH W. SMITH, JR., Assistant Director THOMAS E. CIMENO, JR., Deputy Director1 FREDERICK R. DAHL, Associate Director DON E. KLINE, Associate Director FREDERICK M. STRUBLE, Associate Director HERBERT A. BIERN, Assistant Director ANTHONY CORNYN, Assistant Director ROBERT S. PLOTKIN, Assistant Director STEPHEN C. SCHEMERING, Assistant Director RICHARD SPILLENKOTHEN, Assistant Director SIDNEY M. SUSSAN, Assistant Director LAURA M. HOMER, Securities Credit Officer 1. On loan from the Federal Reserve Bank of Boston. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

and Official Staff EMMETT J. RICE MARTHA R. SEGER LYLE E. GRAMLEY 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., Adviser, Equal Employment CHARLES L. HAMPTON, Senior Technical Adviser Opportunity Programs, Federal Reserve System PORTIA W. THOMPSON, Equal Employment Opportunity Programs Officer DIVISION OF FEDERAL RESERVE BANK OPERATIONS DIVISION OF COMPUTING SERVICES CLYDE H. FARNSWORTH, JR., Director BRUCE M. BEARDSLEY, Director ELLIOTT C. MCENTEE, Associate Director THOMAS C. JUDD, Assistant Director DAVID L. ROBINSON, Associate Director ELIZABETH B. RIGGS, Assistant Director C. WILLIAM SCHLEICHER, JR., Associate Director ROBERT J. ZEMEL, Assistant Director WALTER ALTHAUSEN, Assistant Director CHARLES W. BENNETT, Assistant Director ANNE M. DEBEER, Assistant Director DIVISION OF INFORMATION SERVICES JACK DENNIS, JR., Assistant Director EARL G. HAMILTON, Assistant Director WILLIAM R. JONES, Director WILLIAM E. PASCOE III, Assistant Director 2 STEPHEN R. MALPHRUS, Assistant Director FLORENCE M. YOUNG, Adviser RICHARD J. MANASSERI, Assistant Director WILLIAM C. SCHNEIDER, JR., 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 GEORGE M. LOPEZ, Assistant Director 2. On loan from the Federal Reserve Bank of Richmond (Baltimore Branch). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Federal Reserve Bulletin • June 1985 Federal Open Market Committee FEDERAL OPEN MARKET COMMITTEE PAUL A. VOLCKER, Chairman E. GERALD CORRIGAN, Vice Chairman JOHN J. BALLES LYLE E. GRAMLEY J. CHARLES PARTEE ROBERT P. BLACK SILAS KEEHN EMMETT J. RICE ROBERT P. FORRESTAL PRESTON MARTIN MARTHA R. SEGER HENRY C. WALLICH STEPHEN H. AXILROD, Staff Director and Secretary J. ALFRED BROADDUS, Associate Economist NORMAND R.V. BERNARD, Assistant Secretary RICHARD G. DAVIS, Associate Economist NANCY M. STEELE, Deputy Assistant Secretary DONALD L. KOHN, 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 KARL A. SCHELD, Associate Economist EDWIN M. TRUMAN, Economist (International) CHARLES J. SIEGMAN, Associate Economist JOSEPH R. BISIGNANO, Associate Economist SHEILA L. TSCHINKEL, 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 LEWIS T. PRESTON, President PHILIP F. SEARLE, Vice President WILLIAM H. BOWEN, E. PETER GILLETTE, AND N. BERNE HART, Directors ROBERT L. NEWELL, First District HAL C. KUEHL, Seventh District LEWIS T. PRESTON, Second District WILLIAM H. BOWEN, Eighth District GEORGE A. BUTLER, Third District E. PETER GILLETTE, JR., Ninth District JULIEN L. MCCALL, Fourth District N. BERNE HART, Tenth District JOHN G. MEDLIN, JR., Fifth District NAT S. ROGERS, Eleventh District PHILIP F. SEARLE, Sixth District G. ROBERT TRUEX, JR., Twelfth District HERBERT V. PROCHNOW, Secretary WILLIAM J. KORSVIK, Associate Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 and Advisory Councils CONSUMER ADVISORY COUNCIL TIMOTHY D. MARRINAN, Minneapolis, Minnesota, Chairman THOMAS L. CLARK, JR., New York, New York, Vice Chairman RACHEL G. BRATT, Medford, Massachusetts LAWRENCE S. OKINAGA, Honolulu, Hawaii JONATHAN BROWN, Washington, D.C. JOSEPH L. PERKOWSKI, Centerville, Minnesota JEAN A. CROCKETT, Philadelphia, Pennsylvania ELVA QUIJANO, San Antonio, Texas THERESA FAITH CUMMINGS, Springfield, Illinois BRENDA L. SCHNEIDER, Detroit, Michigan STEVEN M. GEARY, Jefferson City, Missouri PAULA A. SLIMAK, Cleveland, Ohio RICHARD M. HALLIBURTON, Kansas City, Missouri GLENDA G. SLOANE, Washington, D.C. CHARLES C. HOLT, Austin, Texas HENRY J. SOMMER, Philadelphia, Pennsylvania EDWARD N. LANGE, Seattle, Washington TED L. SPURLOCK, New York, New York KENNETH V. LARKIN, Berkeley, California MEL STILLER, Boston, Massachusetts FRED S. MCCHESNEY, Atlanta, Georgia CHRISTOPHER J. SUMNER, Salt Lake City, Utah FREDERICK H. MILLER, Norman, Oklahoma WINNIE F. TAYLOR, San Francisco, California MARGARET M. MURPHY, Columbia, Maryland MICHAEL M. VAN BUSKIRK, Columbus, Ohio ROBERT F. MURPHY, Detroit, Michigan MERVIN WINSTON, Minneapolis, Minnesota HELEN NELSON, Mill Valley, California MICHAEL ZOROYA, St. Louis, Missouri THRIFT INSTITUTIONS ADVISORY COUNCIL THOMAS R. BOMAR, Miami, Florida, President RICHARD H. DEIHL, LOS Angeles, California, Vice President ELLIOTT G. CARR, Harwich Port, Massachusetts JOHN A. HARDIN, Rock Hill, South Carolina M. TODD COOKE, Philadelphia, Pennsylvania FRANCES LESNIESKI, East Lansing, Michigan J. MICHAEL CORNWALL, Dallas, Texas JOHN T. MORGAN, New York, New York HAROLD W. GREENWOOD, JR., Minneapolis, Minnesota SARAH R. WALLACE, Newark, Ohio MICHAEL R. WISE, Denver, Colorado Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 Federal Reserve Board Publications Copies are available from PUBLICATIONS SERVICES, SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SE- Mail Stop 138, Board of Governors of the Federal Reserve RIES OF CHARTS. Weekly. $15.00 per year or $.40 each in System, Washington, D.C. 20551. When a charge is indicat- the United States, its possessions, Canada, and Mexico; ed, remittance should accompany request and be made 10 or more of same issue to one address, $13.50 per year payable to the order of the Board of Governors of the Federal or $.35 each. Elsewhere, $20.00 per year or $.50 each. Reserve System. Remittance from foreign residents should THE FEDERAL RESERVE ACT, as amended through August 30, be drawn on a U.S. bank. Stamps and coupons are not 1984, with an appendix containing provisions of certain accepted. other statutes affecting the Federal Reserve System. 576 pp. $7.00. REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- ERAL RESERVE SYSTEM. REAPPRAISAL OF THE FEDERAL RESERVE DISCOUNT MECHA- THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNC- NISM. Vol. 1. 1971. 276 pp. Vol. 2. 1971. 173 pp. Each TIONS. 1984. 120 pp. volume, $3.00; 10 or more to one address, $2.50 each. ANNUAL REPORT. THE ECONOMETRICS OF PRICE DETERMINATION CONFER- FEDERAL RESERVE BULLETIN. Monthly. $20.00 per year or ENCE, October 30-31, 1970, Washington, D.C. 1972. 397 $2.00 each in the United States, its possessions, Canada, pp. Cloth ed. $5.00 each; 10 or more to one address, and Mexico; 10 or more of same issue to one address, $4.50 each. Paper ed. $4.00 each; 10 or more to one $18.00 per year or $1.75 each. Elsewhere, $24.00 per address, $3.60 each. year or $2.50 each. ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint Regulation Z) Vol. I (Regular Transactions). 1969. 100 of Part I only) 1976. 682 pp. $5.00. pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each BANKING AND MONETARY STATISTICS. 1941-1970. 1976. volume $2.25; 10 or more of same volume to one 1,168 pp. $15.00. address, $2.00 each. ANNUAL STATISTICAL DIGEST FEDERAL RESERVE MEASURES OF CAPACITY AND CAPACITY 1974-78. 1980. 305 pp. $10.00 per copy. UTILIZATION. 1978. 40 pp. $1.75 each; 10 or more to one 1980. 1981. 241 pp. $10.00 per copy. address, $1.50 each. 1981. 1982. 239 pp. $ 6.50 per copy. THE BANK HOLDING COMPANY MOVEMENT TO 1978: A 1982. 1983. 266 pp. $ 7.50 per copy. COMPENDIUM. 1978. 289 pp. $2.50 each; 10 or more to 1983. 1984. 264 pp. $11.50 per copy. one address, $2.25 each. FEDERAL RESERVE CHART BOOK. Issued four times a year in FLOW OF FUNDS ACCOUNTS. 1949-1978. 1979. 171 pp. $1.75 February, May, August, and November. Subscription each; 10 or more to one address, $1.50 each. includes one issue of Historical Chart Book. $7.00 per INTRODUCTION TO FLOW OF FUNDS. 1980. 68 pp. $1.50 each; year or $2.00 each in the United States, its possessions, 10 or more to one address, $1.25 each. Canada, and Mexico. Elsewhere, $10.00 per year or PUBLIC POLICY AND CAPITAL FORMATION. 1981. 326 pp. $3.00 each. $13.50 each. HISTORICAL CHART BOOK. Issued annually in Sept. Subscrip- NEW MONETARY CONTROL PROCEDURES: FEDERAL REtion to the Federal Reserve Chart Book includes one SERVE STAFF STUDY. 1981. issue. $1.25 each in the United States, its possessions, SEASONAL ADJUSTMENT OF THE MONETARY AGGREGATES: Canada, and Mexico; 10 or more to one address, $1.00 REPORT OF THE COMMITTEE OF EXPERTS ON SEASONAL each. Elsewhere, $1.50 each. ADJUSTMENT TECHNIQUES. 1981. 55 pp. $2.75 each. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; updat- STAFF STUDIES.- Summaries Only Printed in the ed at least monthly. (Requests must be prepaid.) Bulletin Consumer and Community Affairs Handbook. $60.00 per Studies and papers on economic and financial subjects that year. are of general interest. Requests to obtain single copies of Monetary Policy and Reserve Requirements Handbook. the full text or to be added to the mailing list for the series $60.00 per year. may be sent to Publications Services. Securities Credit Transactions Handbook. $60.00 per year. Federal Reserve Regulatory Service. 3 vols. (Contains all Staff Studies 115-125 are out of print. three Handbooks plus substantial additional material.) $175.00 per year. Rates for subscribers outside the United States are as 114. MULTIBANK HOLDING COMPANIES: RECENT EVIfollows and include additional air mail costs: DENCE ON COMPETITION AND PERFORMANCE IN Federal Reserve Regulatory Service, $225.00 per year. BANKING MARKETS, by Timothy J. Curry and John T. Each Handbook, $75.00 per year. Rose. Jan. 1982. 9 pp. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A 126. DEFINITION AND MEASUREMENT OF EXCHANGE MAR- MULTICOUNTRY MODEL, May 1984. 590 pp. $14.50 each. KET INTERVENTION, by Donald B. Adams and Dale WELCOME TO THE FEDERAL RESERVE. W. Henderson. August 1983. 5 pp. PROCESSING BANK HOLDING COMPANY AND MERGER APPLI- 127. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- CATIONS. VENTION: JANUARY-MARCH 1975, by Margaret L. THE MONETARY AUTHORITY OF THE FEDERAL RESERVE, Greene. August 1984. 16 pp. May 1984. (High School Level.) 128. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- WRITING IN STYLE AT THE FEDERAL RESERVE. August 1984. VENTION: SEPTEMBER 1977-DECEMBER 1979, by Mar- 93 pp. $2.50 each. garet L. Greene. October 1984. 40 pp. REMARKS BY CHAIRMAN PAUL A. VOLCKER, AT XIII AMERI- 129. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- CAN-GERMAN BIENNIAL CONFERENCE, March 1985 VENTION: OCTOBER I98O-OCTOBER 1981, by Margaret L. Greene. August 1984. 36 pp. 130. EFFECTS OF EXCHANGE RATE VARIABILITY ON IN- TERNATIONAL TRADE AND OTHER ECONOMIC VARIA- BLES: A REVIEW OF THE LITERATURE, by Victoria S. CONSUMER EDUCATION PAMPHLETS Farrell with Dean A. DeRosa and T. Ashby McCown. Short pamphlets suitable for classroom use. Multiple copies January 1984. 21 pp. available without charge. 131. CALCULATIONS OF PROFITABILITY FOR U.S. DOLLAR- DEUTSCHE MARK INTERVENTION, by Laurence R. Jacobson. October 1983. 8 pp. Alice in Debitland 132. TIME-SERIES STUDIES OF THE RELATIONSHIP BE- Consumer Handbook on Adjustable Rate Mortgages TWEEN EXCHANGE RATES AND INTERVENTION: A Consumer Handbook to Credit Protection Laws REVIEW OF THE TECHNIQUES AND LITERATURE, by The Equal Credit Opportunity Act and . . . Age Kenneth Rogoff. October 1983. 15 pp. The Equal Credit Opportunity Act and . . . Credit Rights in 133. RELATIONSHIPS AMONG EXCHANGE RATES, INTER- Housing VENTION, AND INTEREST RATES: AN EMPIRICAL IN- The Equal Credit Opportunity Act and . . . Doctors, Law- VESTIGATION, by Bonnie E. Loopesko. November yers, Small Retailers, and Others Who May Provide Inci- 1983. 20 pp. dental Credit 134. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET The Equal Credit Opportunity Act and . . . Women INTERVENTION: A REVIEW OF THE LITERATURE, by Fair Credit Billing Ralph W. Tryon. October 1983. 14 pp. Federal Reserve Glossary 135. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET Guide to Federal Reserve Regulations INTERVENTION: APPLICATIONS TO CANADA, GERMA- How to File A Consumer Credit Complaint NY, AND JAPAN, by Deborah J. Danker, Richard A. If You Borrow To Buy Stock Haas, Dale W. Henderson, Steven A. Symansky, and If You Use A Credit Card Ralph W. Tryon. April 1985. 27 pp. Instructional Materials of the Federal Reserve System 136. THE EFFECTS OF FISCAL POLICY ON THE U.S. ECONO- Series on the Structure of the Federal Reserve System MY, by Darrell Cohen and Peter B. Clark. January The Board of Governors of the Federal Reserve System 1984. 16 pp. The Federal Open Market Committee 137. THE IMPLICATIONS FOR BANK MERGER POLICY OF Federal Reserve Bank Board of Directors FINANCIAL DEREGULATION, INTERSTATE BANKING, Federal Reserve Banks AND FINANCIAL SUPERMARKETS, by Stephen A. Monetary Control Act of 1980 Rhoades. February 1984. 8 pp. Organization and Advisory Committees 138. ANTITRUST LAWS, JUSTICE DEPARTMENT GUIDE- Truth in Leasing LINES, AND THE LIMITS OF CONCENTRATION IN LO- U.S. Currency CAL BANKING MARKETS, by James Burke. June 1984. What Truth in Lending Means to You 14 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 139. SOME IMPLICATIONS OF FINANCIAL INNOVATIONS IN REPRINTS OF BULLETIN ARTICLES THE UNITED STATES, by Thomas D. Simpson and Most of the articles reprinted do not exceed 12 pages. Patrick M. Parkinson. August 1984. 20 pp. 140. GEOGRAPHIC MARKET DELINEATION: A REVIEW OF THE LITERATURE, by John D. Wolken. November The Commercial Paper Market since the Mid-Seventies. 6/82. 1984. 38 pp. Applying the Theory of Probable Future Competition. 9/82. 141. A COMPARISON OF DIRECT DEPOSIT AND CHECK PAY- International Banking Facilities. 10/82. MENT COSTS, by William Dudley. November 1984. 15 Foreign Experience with Targets for Money Growth. 10/83. pp. Intervention in Foreign Exchange Markets: A Summary of 142. MERGERS AND ACQUISITIONS BY COMMERCIAL Ten Staff Studies. 11/83. BANKS, 1960-83, by Stephen A. Rhoades. December A Financial Perspective on Agriculture. 1/84. 1984. 30 pp. U.S. International Transactions in 1983. 4/84. 143. COMPLIANCE COSTS AND CONSUMER BENEFITS OF Survey of Consumer Finances, 1983. 9/84. THE ELECTRONIC FUND TRANSFER ACT: RECENT Bank Lending to Developing Countries. 10/84. SURVEY EVIDENCE, by Frederick J. Schroeder. April Survey of Consumer Finances, 1983: A Second Report. 12/ 1985. 23 pp. 84. 144. SCALE ECONOMIES IN COMPLIANCE COSTS FOR CON- Union Settlements and Aggregate Wage Behavior in the SUMER CREDIT REGULATIONS: THE TRUTH IN LEND- 1980s. 12/84. ING AND EQUAL CREDIT OPPORTUNITY LAWS, by The Thrift Industry in Transition. 3/85. Gregory E. Elliehausen and Robert D. Kurtz. May 1985. 10 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A83 ANTICIPATED SCHEDULE OF RELEASE DATES FOR PERIODIC RELEASES—BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM1 iroximate Date or period Weekly Releases release days to which data refer Aggregate Reserves of Depository Institutions and Monetary Thursday Week ended previous Base. H.3 (502) [1.20] Wednesday Actions of the Board; Applications and Reports. H.2 (501) Friday Week ended previous Saturday Assets and Liabilities of Commercial Banking Institutions. H.8 Wednesday Wednesday, 2 weeks earlier (510) [1.25] Changes in State Member Banks. K.3 (615) Tuesday Week ended previous Saturday Factors Affecting Reserves of Depository Institutions and Thursday Week ended previous Condition Statement of Federal Reserve Banks. H.4.1 (503) Wednesday [1.11] Foreign Exchange Rates. H.10 (512) [3.28] Monday Week ended previous Friday Money Stock, Liquid Assets, and Debit Measures. H.6 (508) Thursday Week ended Wednesday of [1.21] previous week Selected Borrowings in Immediately Available Funds of Large Wednesday Week ended Thursday of Member Banks. H.5 (507) [1.13] previous week Selected Interest Rates. H. 15 (519) [ 1.35] Monday Week ended previous Saturday Weekly Consolidated Condition Report of Large Commercial Friday Wednesday, 1 week earlier Banks and Domestic Subsidiaries. H.4.2 (504) [1.26, 1.28, 1.29, 1.30] Monthly Releases Capacity Utilization: Manufacturing, Mining, Utilities and Midmonth Previous month Industrial Materials. G.3 (402) [2.12] Changes in Status of Banks and Branches. G.4.5 (404) 1st of month Previous month Commercial and Industrial Loan Commitments at Selected Large 2nd week of month 2nd month previous Commercial Banks. G.21 (423) Consumer Installment Credit. G. 19 (421) [1.55, 1.56] Midmonth 2nd month previous Debits and Deposit Turnover at Commercial Banks. G.6 (406) 12th of month Previous month [1.22] Finance Companies. G.20 (422) [1.51, 1.52] 5th working day of 2nd month previous month Foreign Exchange Rates. G.5 (405) [3.28] 1st of month Previous month Industrial Production. G.12.3 (414) [2.13] Midmonth Previous month Loans and Securities at all Commercial Banks. G.7 (407) [1.23] 3rd week of month Previous month Major Nondeposit Funds of Commercial Banks. G.10 (411) [1.24] 3rd week of month Previous month Maturity Distribution of Negotiable Time Certificates of Deposit 3rd week of month Last Wednesday of previous at Large Commercial Banks. G.9 (410) month Monthly Report of Assets and Liabilities of International Banking 2nd week of month Wednesday, 2 weeks earlier Facilities. G.14 (416) Research Library—Recent Acquisitions. G.15 (417) 1st of month Previous month 1. Release dates are those anticipated or usually met. However, please note that for some releases there is normally a certain variability because of reporting or processing procedures. Moreover, for all series unusual circumstances may, from time to time, result in a release date being later than anticipated. The BULLETIN table that reports these data is designated in brackets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A84 Approximate Date or period Monthly Releases—Continued release days to which data refer Selected Interest Rates. G.13 (415) [1.35] 3rd working day of Previous month month Quarterly Releases Agricultural Finance Databook. E.15 (125) End of March, January, April, July, and June, September, October and December Country Exposure Lending Survey. E.16 (126) January, April, Previous 3 months July, and October Domestic Offices, Commercial Bank Assets and Liabilities March, June, Previous 6 months Consolidated Report of Condition. E.3.4 (113) [1.26, 1.28] September, and December Flow of Funds: Seasonally adjusted and unadjusted. Z.l (780) 23rd of February, Previous quarter [1.58, 1.59] May, August, and November Flow of Funds Summary Statistics Z.l. (788) [1.57, 1.58] 15th of February, Previous quarter May, August, and November Geographical Distribution of Assets and Liabilities of Major 15th of March, Previous quarter Foreign Branches of U.S. Banks. E.ll (121) June, September, and December Survey of Terms of Bank Lending. E.2 (111) [1.34] Midmonth of February, May, August, and March, June, November September, and December List of OTC Margin Stocks. E.7 (117) January, April, February, May, August, and July, and November October Annual Releases Aggregate Summaries of Annual Surveys of Security Credit February End of previous June Extension. C.2 (101) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A85 Index to Statistical Tables References are to pages A3-75 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 19, 20, 74 Banks, by classes, 18-21 Assets and liabilities (See also Foreigners) Ownership by individuals, partnerships, and Banks, by classes, 18-20 corporations, 22 Domestic finance companies, 37 Turnover, 15 Federal Reserve Banks, 10 Depository institutions Financial institutions, 26 Reserve requirements, 7 Foreign banks, U.S. branches and agencies, 21 Reserves and related items, 3, 4, 5, 12 Nonfinancial corporations, 36 Deposits (See also specific types) Automobiles Banks, by classes, 3, 18-20, 21 Consumer installment credit, 40, 41 Federal Reserve Banks, 4, 10 Production, 47, 48 Turnover, 15 Discount rates at Reserve Banks and at foreign central BANKERS acceptances, 9, 23, 24 banks (See Interest rates) Bankers balances, 18-20 (See also Foreigners) Discounts and advances by Reserve Banks (See Loans) Bonds (See also U.S. government securities) Dividends, corporate, 35 New issues, 34 Rates, 24 EMPLOYMENT, 45 Branch banks, 21, 55 Eurodollars, 24 Business activity, nonfinancial, 44 Business expenditures on new plant and equipment, 36 FARM mortgage loans, 39 Business loans (See Commercial and industrial loans) Federal agency obligations, 4, 9, 10, 11, 31, 32 Federal credit agencies, 33 CAPACITY utilization, 46 Federal finance Capital accounts Debt subject to statutory limitation, and types and Banks, by classes, 18 ownership of gross debt, 30 Federal Reserve Banks, 10 Receipts and outlays, 28, 29 Central banks, discount rates, 67 Treasury financing of surplus, or deficit, 28 Certificates of deposit, 24 Treasury operating balance, 28 Commercial and industrial loans Federal Financing Bank, 28, 33 Commercial banks, 16, 19, 70-72 Federal funds, 5, 17, 19, 20, 21, 24, 28 Weekly reporting banks, 19-21 Federal Home Loan Banks, 33 Commercial banks Federal Home Loan Mortgage Corporation, 33, 38, 39 Assets and liabilities, 18-20 Federal Housing Administration, 33, 38, 39 Business loans, 70-73 Federal Land Banks, 38 Commercial and industrial loans, 16, 19, 21, 70-72 Federal National Mortgage Association, 33, 38, 39 Consumer loans held, by type, and terms, 40, 41 Federal Reserve Banks Loans sold outright, 19 Condition statement, 10 Nondeposit funds, 17 Discount rates (See Interest rates) Number, by classes, 18 U.S. government securities held, 4, 10, 11, 30 Real estate mortgages held, by holder and Federal Reserve credit, 4, 5, 10, 11 property, 39 Federal Reserve notes, 10 Time and savings deposits, 3 Federally sponsored credit agencies, 33 Commercial paper, 23, 24, 37 Finance companies Condition statements (See Assets and liabilities) Assets and liabilities, 37 Construction, 44, 49, 73 Business credit, 36 Consumer installment credit, 40, 41 Loans, 19, 40, 41 Consumer prices, 44, 50 Paper, 23, 24 Consumption expenditures, 51, 52 Financial institutions Corporations Loans to, 19, 20, 21 Profits and their distribution, 35 Selected assets and liabilities, 26 Security issues, 34, 65 Float, 4 Cost of living (See Consumer prices) Flow of funds, 42, 43 Credit unions, 26, 40 (See also Thrift institutions) Foreign banks, assets and liabilities of U.S. branches and Currency and coin, 18 agencies, 21 Currency in circulation, 4, 13 Foreign currency operations, 10 Customer credit, stock market, 25 Foreign deposits in U.S. banks, 4, 10, 19, 20 Foreign exchange rates, 68 DEBITS to deposit accounts, 15 Foreign trade, 54 Debt (See specific types of debt or securities) Foreigners Demand deposits Claims on, 55, 57, 60, 61, 62, 64 Adjusted, commercial banks, 15 Liabilities to, 20, 54, 55, 57, 58, 63, 65, 66 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A86 GOLD REAL estate loans Certificate account, 10 Banks, by classes, 16, 19, 20, 39 Stock, 4, 54 Financial institutions, 26 Government National Mortgage Association, 33, 38, 39 Terms, yields, and activity, 38 Gross national product, 51 Type of holder and property mortgaged, 39 Repurchase agreements, 5, 17, 19, 20, 21 HOUSING, new and existing units, 49 Reserve requirements, 7 Reserves Commercial banks, 18 INCOME, personal and national, 44, 51, 52 Depository institutions, 3, 4, 5, 12 Industrial production, 44, 47 Federal Reserve Banks, 10 Installment loans, 40, 41 U.S. reserve assets, 54 Insurance companies, 26, 30, 39 Residential mortgage loans, 38 Interest rates Retail credit and retail sales, 40, 41, 44 Bonds, 24 Commercial and industrial loans, 70-72 Federal Reserve Banks, 6 SAVING Foreign central banks and foreign countries, 67 Flow of funds, 42, 43 Money and capital markets, 24 National income accounts, 51 Mortgages, 38 Savings and loan associations, 8, 26, 39, 40, 42 (See also Prime rate, commercial banks, 23 Thrift institutions) Time and savings deposits, 8 Savings deposits (See Time and savings deposits) International capital transactions of United States, 53-67 Securities (See specific types) International organizations, 57, 58, 60, 63, 64 Federal and federally sponsored credit agencies, 33 Inventories, 51 Foreign transactions, 65 Investment companies, issues and assets, 35 New issues, 34 Investments (See also specific types) Prices, 25 Banks, by classes, 18, 19, 20, 21, 26 Special drawing rights, 4, 10, 53, 54 Commercial banks, 3, 16, 18-20, 39 State and local governments Federal Reserve Banks, 10, 11 Deposits, 19, 20 Financial institutions, 26, 39 Holdings of U.S. government securities, 30 New security issues, 34 Ownership of securities issued by, 19, 20, 26 LABOR force, 45 Rates on securities, 24 Life insurance companies (See Insurance companies) Stock market, 25 Loans (See also specific types) Stocks (See also Securities) Banks, by classes, 18-20 New issues, 34 Commercial banks, 3, 16, 18-20, 70 Prices, 25 Federal Reserve Banks, 4, 5, 6, 10, 11 Financial institutions, 26, 39 Student Loan Marketing Association, 33 Insured or guaranteed by United States, 38, 39 TAX receipts, federal, 29 MANUFACTURING Thrift institutions, 3 (See also Credit unions, Mutual Capacity utilization, 46 savings banks, and Savings and loan associations) Production, 46, 48 Time and savings deposits, 3, 8, 13, 17, 18, 19, 20, 21 (See Margin requirements, 25 also Transaction and Nontransaction balances) Member banks (See also Depository institutions) Trade, foreign, 54 Federal funds and repurchase agreements, 5 Transaction balances, 13, 19, 20 Reserve requirements, 7 Treasury currency, Treasury cash, 4 Mining production, 48 Treasury deposits, 4, 10, 28 Mobile homes shipped, 49 Treasury operating balance, 28 Monetary and credit aggregates, 3, 12 UNEMPLOYMENT, 45 Money and capital market rates (See Interest rates) U.S. government balances Money stock measures and components, 3,13 Commercial bank holdings, 18, 19, 20 Mortgages (See Real estate loans) Treasury deposits at Reserve Banks, 4, 10, 28 Mutual funds (See Investment companies) U.S. government securities Mutual savings banks, 8, 26, 39, 40 (See also Thrift Bank holdings, 17, 18-20, 21, 30 institutions) Dealer transactions, positions, and financing, 32 Federal Reserve Bank holdings, 4, 10, 11, 30 NATIONAL defense outlays, 29 Foreign and international holdings and transactions, 10, National income, 51 30, 66 Nontransaction balances, 3, 13, 19, 20 Open market transactions, 9 Outstanding, by type and holder, 26, 30 OPEN market transactions, 9 Rates, 24 U.S. international transactions, 53-67 Utilities, production, 48 PERSONAL income, 52 Prices Consumer and producer, 44, 50 VETERANS Administration, 38, 39 Stock market, 25 Prime rate, commercial banks, 23 WEEKLY reporting banks, 19-21 Producer prices, 44, 50 Wholesale (producer) prices, 44, 50 Production, 44, 47 Profits, corporate, 35 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A87 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 Joseph A. Baute Frank E. Morris Thomas I. Atkins Robert W. Eisenmenger NEW YORK* 10045 John Brademas E. Gerald Corrigan Clifton R. Wharton, Jr. 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 Robert E. Boni Charles A. Cerino Pittsburgh 15230 Milton G. Hulme, Jr. Harold J. Swart RICHMOND* 23219 Leroy T. Canoles, Jr. Robert P. Black Robert A. Georgine Jimmie R. Monhollon Baltimore 21203 Robert L. Tate Robert D. McTeer, Jr. Charlotte 28230 Wallace J. Jorgenson 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 Mclnnis Fred R. Hen- Jacksonville 32231 E. William Nash, Jr. James D. Hawkins Miami 33152 Eugene E. Cohen Patrick K. Barron Nashville 37203 Condon S. Bush Jeffrey J. Wells New Orleans 70161 Leslie B. Lampton Henry H. Bourgaux CHICAGO* 60690 Stanton R. Cook Silas Keehn Robert J. Day Daniel M. Doyle Detroit 48231 Russell G. Mawby Roby L. Sloan ST. LOUIS 63166 W.L. Hadley Griffin Thomas C. Melzer Mary P. Holt Joseph P. Garbarini Little Rock 72203 Sheffield Nelson John F. Breen Louisville 40232 Henry F. Frigon James E. Conrad Memphis 38101 Donald B. Weis Paul I. Black, Jr. MINNEAPOLIS 55480 John B. Davis, Jr. Gary H. Stern Michael W. Wright Thomas E. Gainor Helena 59601 Gene J. Etchart Robert F. McNellis KANSAS CITY 64198 Irvine O. Hockaday, Jr. Roger Guflfey Robert G. Lueder Henry R. Czerwinski Denver 80217 James E. Nielson Wayne W. Martin Oklahoma City 73125 Patience Latting William G. Evans Omaha 68102 Kenneth L. Morrison Robert D. Hamilton DALLAS 16222 Robert D. Rogers Robert H. Boykin Bobby R. Inman William H. Wallace El Paso 79999 John R. Sibley Joel L. Koonce, Jr. Houston 77252 Robert T. Sakowitz J.Z. Rowe San Antonio 78295 Robert F. McDermott Thomas H. Robertson SAN FRANCISCO 94120 Alan C. Furth John J. Balles Fred W. Andrew Richard T. Griffith Los Angeles 90051 Richard C. Seaver Richard C. Dunn Portland 97208 Paul E. Bragdon Angelo S. Carella Salt Lake City 84125 Don M. Wheeler E. Ronald Liggett 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

The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories Helena j Minneapolis^ ©i V Omaha' Chicagc • ; i D. (u :inci»i Kansas )klahoar Ciiy t iitl.e SR. o/ ck | Birm\ inr,g kan^^^ Dallas® i® " , Houston} San Antonio April 1984 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 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

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. LMMO LE4SING The LE4SMG Equal Credit LE4SMG Opportunity Act and TRUTH MLE4SING Credit Rights In Housing What Ttuthln Lending Means To You The The Equal Equal | Opp C o r r e t d u i n t i[ty 1| Credit AAAAcccctttt Opportunity 1 Act and... I If You Fair Use A Credit 1 1 Credit Billing Card WOMEN ........ ....aaaannnndddd AGE! E =3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis