Federal Reserve Bulletin, 1986-06

VOLUME 72 • NUMBER 6 • JUNE 1986 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 Section 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 355 RECENT DEVELOPMENTS IN experienced by banks in agricultural com- AUTOMOBILE FINANCE munities and discusses various proposals to ease the strains resulting from these prob- This article describes the patterns of growth lems, including the Farm Credit Partnership in auto credit during the 1980s, identifies Act and the Emergency Farm Income and the major forces underlying those patterns, Credit Act of 1986, before the Subcommitand discusses some recent developments in tee on Conservation, Credit, and Rural Dethe auto credit market. velopment of the House Committee on Agriculture, April 9, 1986. 366 PRICES, PROFIT MARGINS, AND 393 Frederick R. Dahl, Associate Director of EXCHANGE RATES the Board's Division of Banking Supervi- This article reviews both aggregate macro- sion and Regulation, discusses the role of economic evidence on how changes in the the Federal Reserve in implementing the value of the dollar affect overall U.S. export Bank Export Services Act, before the Suband import prices, and disaggregated eco- comittee on International Economic Policy nomic evidence, including the behavior of and Trade of the House Committee on prices and profit margins for a number of Foreign Affairs, April 22, 1986. individual industries. 398 Paul A. Volcker, Chairman, Board of Governors, discusses the rapid growth of debt 380 INDUSTRIAL PRODUCTION in the United States and its possible implications for our financial markets and econo- Industrial production declined an estimated my, before the Subcommittee on Telecom- 0.5 percent in March. munications, Consumer Protection, and Finance of the House Committee on Energy and Commerce, April 23, 1986. 382 STATEMENTS TO CONGRESS Preston Martin, Vice Chairman, Board of 404 ANNOUNCEMENTS Governors of the Federal Reserve System, Change in the discount rate. discusses the difficulties that some banks are facing as a result of farm, energy, and Publication of final changes to official staff developing country loans, and offers a few commentaries on Regulations E and Z. remarks on the commercial real estate situ- Report on priced service operations for ation, before the Subcommittee on Finan- 1985. cial Institutions Supervision, Regulation and Insurance of the House Committee on Publication of revised list of OTC stocks Banking, Finance and Urban Affairs, April subject to margin regulations. 9, 1986. Proposed action. Changes in Board staff. 389 William Taylor, Director of the Board's Division of Banking Supervision and Regu- Admission of eight state banks to memberlation, reviews the problems that are being ship in the Federal Reserve System. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

406 RECORD OF POLICY ACTIONS OF THE aries are persistently exceeded, should be FEDERAL OPEN MARKET COMMITTEE left unchanged at 6 to 10 percent. At its meeting on February 11-12, 1986, the 415 LEGAL DEVELOPMENTS FOMC established monetary growth ranges for 1986 of 3 to 8 percent for Ml and 6 to 9 Various bank holding company, bank serpercent for both M2 and M3. A monitoring vice corporation, and bank merger orders; range of 8 to 11 percent was also accepted and pending cases. for total domestic nonfinancial debt. In keeping with the Committee's usual proce- 434 MEMBERSHIP OF THE dures under the Humphrey-Hawkins Act, BOARD OF GOVERNORS OF THE the ranges would be reviewed at midyear, FEDERAL RESERVE SYSTEM, 1913-86 or sooner if deemed necessary, in the light List of appointive and ex officio members. of their behavior in relation to economic and financial developments. Ai FINANCIAL AND BUSINESS STATISTICS With regard to the implementation of policy for the immediate future, the Com- A3 Domestic Financial Statistics mittee adopted a directive that called for A44 Domestic Nonfinancial Statistics maintaining unchanged conditions of re- A53 International Statistics serve availability. The members expected such an approach to policy implementation A69 GUIDE TO TABULAR PRESENTATION, to be consistent with growth in M2 and M3 STATISTICAL RELEASES, AND SPECIAL at annual rates of about 6 percent and 7 TABLES percent, although the behavior of Ml was seen as still subject to unusual uncertainty. A70 BOARD OF GOVERNORS AND STAFF The Committee indicated that it might find somewhat greater or somewhat lesser re- A72 FEDERAL OPEN MARKET COMMITTEE serve restraint acceptable over the inter- AND STAFF, ADVISORY COUNCILS meeting period depending on the growth of the monetary aggregates, the strength of the A74 FEDERAL RESERVE BOARD business expansion, the performance of the PUBLICATIONS dollar on foreign exchange markets, progress against inflation, and conditions in A79 INDEX TO STATISTICAL TABLES domestic and international credit markets. The members agreed that the intermeeting A81 FEDERAL RESERVE BANKS, BRANCHES, range for the federal funds rate, which AND OFFICES provides a mechanism for initiating consultation of the Committee when its bound- A82 MAP OF FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Automobile Finance Charles A. Luckett of the Board's Division of Forces Affecting Research and Statistics prepared this article. Auto-Related Markets Janice Schuler Westfall provided research assistance. A brief overview of some fundamental determinants of automobile sales helps clarify the link- Automobile purchases constitute the largest sin- ages between economic conditions and activity gle category of expenditure financed by consum- in the auto credit market. The demand for autoer installment credit. Auto loans currently ac- mobile credit can be viewed as primarily a "decount for about two-fifths of the household rived" demand stemming from the decision to sector's $560 billion in nonmortgage installment purchase a car, although the volume of borrowdebt, and thus they loom large in any analysis of ing relative to total expenditures on autos can the financial condition of American households. vary with conditions in the credit markets. At the In addition, recent experience has demonstrated same time, the terms and availability of credit that changes in the terms or availability of auto can in turn affect the type of car bought or credit can exert a strong influence on short-run whether a purchase is completed at all. The movements in auto sales and aggregate consumer causal linkages between auto sales and credit run spending. in both directions. Not surprisingly, the net This article describes the patterns of growth in volume of auto credit has closely tracked the auto credit during the 1980s, identifies the major path of car sales in recent years (chart 1). forces underlying those patterns, and discusses Underlying the decision to purchase a car is some recent developments in the auto credit the more fundamental demand for the flow of market. services provided by automobiles. Current and expected income, the costs of purchasing, fi- PATTERNS OF GROWTH IN AUTO SALES nancing, and operating a car, and the price and AND CREDIT availability of alternative means of transportation all help determine the amount of automobile Growth in automobile credit has gone through a services demanded. Obviously, the greater the pronounced cycle of weakening and resurgence demand for such services, the stronger the poin recent years. After four years of robust growth tential demand to purchase cars. However, the through 1979, auto financing contracted along desired services of autos can be supplied in part with car sales in the recession of 1980 and by cars already owned, so the existing stock of expanded only sluggishly over the next two cars also affects the ultimate demand to buy cars. years. As new-car sales improved in 1983, auto When the stock of cars owned is already adecredit snapped back to a growth rate of 16 quate to satisfy the bulk of the transportation percent, about the pace of 1979. With sales of needs of households, the overall demand to both new and used cars continuing to advance, purchase cars tends to be relatively low. the rate of expansion of auto debt climbed to The relationships outlined above are not easily nearly 20 percent in both 1984 and 1985; in all, quantified, in part because the ideal concepts of consumers added $59 billion to their stock of "transportation services" and "stock of cars" auto debt during those two years, raising aggre- cannot be translated readily into accurate meagate auto debt to $206 billion at year-end 1985. sures. The aggregate number of miles driven Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

356 Federal Reserve Bulletin • June 1986 during a period might approximate the amount of Weakness: 1980-82 services consumed, but the quality and convenience of miles traveled ought to figure into the For four years before 1980, sales of new domesmeasurement of services as well. For instance, tic and imported cars had totaled between 10 miles traveled in a comfortable, well-equipped million and 11 million units each year, and auto car would be considered of "better quality" than credit had expanded at annual rates approaching those logged under less agreeable conditions, and occasionally exceeding 20 percent. After and ought to carry more weight in measuring the remaining fairly strong in the first quarter of services provided by cars. Similarly, the stock of 1980, car sales and credit volume plummeted in cars can be crudely estimated by the number of the following quarter and recovered only moderunits on the road, but the stock, too, would be ately in the second half of the year. New-car more meaningfully measured if it could be "qual- sales eroded progressively in 1981 and 1982, with ity adjusted" for its age, condition, and composi- domestic cars absorbing virtually the entire detion by type of car. cline. Sales of used cars, the supply of which Despite these problems of measurement, a depends in part on trade-ins from new-car transsuitable framework for understanding the auto- actions, slumped as well. Correspondingly, mobile sales and credit markets is provided by growth in auto credit slowed to well below the the general notion of auto credit demand as 1976-79 pace. derived mainly from the demand for cars. The The years 1980 through 1982 encompassed demand for cars arises from the transportation back-to-back recessions, one in the first half of needs of potential buyers, the prices and financ- 1980 and the other from mid-1981 through Noing costs for cars on the market, and the gap vember 1982. The curtailed income and uncerbetween the "desired stock" of cars—that which tain employment outlook that characterizes rewill yield the requisite amount of services—and cessions no doubt depressed demand for the the actual stock owned by the public. services provided by automobiles. Moreover, the strength of auto sales during the preceding four years had probably gone a long way toward closing any gap between the actual and desired stocks of cars. 1. Auto sales and credit Other factors contributed to the steepness of Millions of units the sales decline. The plunge in car sales in the spring of 1980 coincided with the adoption of the Carter administration's program of selective credit controls. Ironically, automobile credit was specifically exempted from the control measures (in the consumer credit area, attention focused on credit card debt), but the initial shock of the program seemed to dissuade consumers from taking on additional debt in any form. In any case, the program's impact was short-lived: credit controls were phased out within three months. Even if they had not been, their effect on auto credit probably would have abated as consumers came to realize the limited scope of the program. The effect of the credit controls program on auto markets was certainly less enduring than the impact of a decline in profitability that stemmed 1976 1978 1980 1982 1984 1986 from a shift in interest rate relationships. Financial institutions faced unusually high funding 1. Seasonally adjusted annual rate of growth. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Automobile Finance 357 Statutory state ceilings on interest rates $8V2 billion, or YlVi percent. Their share of on new-car loans1 outstanding auto credit dropped from 58 percent to 45 percent. Number of states3 RRaattee cceeiilliinngg The constriction of auto credit supplied by ((aannnnuuaall ppeerrcceennttaaggee rraattee22)) 1979 1983 banks and (to a lesser extent) credit unions was partially offset by the reactions of the auto manu- 10 to 13 16 0 13.1 to 15 17 2 facturers. As the banks retreated from the mar- 15.1 to 18 13 19 18.1 and above 5 15 ket, the auto makers pursued their principal Variable formula 0 2 objective of selling cars by stepping in to support No statutory limit 0 13 the credit market through their "captive" fi- 1. In many states, limits on rates on used-car loans are scaled up nance company subsidiaries (chart 3). They did from the new-car ceilings. so at first simply by standing ready to serve those 2. In many states, rate ceilings are expressed as "add on" or "discount" rates; these are converted here to true annual percentage suddenly unable to obtain credit elsewhere. Then rates, as defined in Regulation Z (Truth in Lending). in 1981, they began to offer loans at below- 3. Includes the District of Columbia. market rates on certain slow-selling models. By costs at the same time that movements in the the end of 1982, finance companies (mainly the rates they charged on auto loans were restrained captives) had expanded their auto credit holdings by state-mandated ceilings in much of the coun- by $22 billion, an increase of more than 80 try. Therefore, they curtailed substantially the percent in three years. amount of auto credit they were willing to extend. Even though many states raised or elimi- 3. Net change in auto credit outstanding nated their ceilings during the early 1980s (table Billions of dollars 1), the average spread between auto loan rates 20 and the cost of funds did not widen appreciably Finance until very late in 1981 (chart 2). companies Commercial banks, in particular, cut back on lending to consumers in the 1980-82 period. Banks account for the largest share of automobile credit (as they do for most other forms of consumer credit), but they also have more alter- 1985 native outlets for funds than many of the other participants in consumer credit markets. Thus, Annual data. as interest rates on business loans, mortgages, and other investments soared in contrast to the Despite the surge in lending by finance compasluggish consumer rates, banks shifted away nies, total auto credit outstanding at all types of from consumer lending. Between 1980 and 1982, lenders increased only 12 percent over the threebanks reduced their portfolio of auto loans by year period ending in 1982, compared with a 68 percent expansion over the preceding three years. 2. Selected interest rates Percent Resurgence: 1983-85 New-car rate at banks The economy began to expand again in 1983, initiating three years of increasingly vigorous auto sales and credit activity. Sales of new cars including imports rebounded to 9{A million units in 1983 from the 20-year low of 8 million units the V I I 1980 year before, and auto credit outstanding increased 16 percent. Sales reached IOV2 million Quarterly data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

358 Federal Reserve Bulletin • June 1986 units in 1984 and 11 million units in 1985— Automobile credit and other forms of consumer roughly the levels achieved in the late 1970s— lending were once more attractive outlets for and growth in auto credit again approached 20 investable funds. percent. When it became clear by the fall of 1983 that Slack new-car sales and a reduced rate of banks had returned wholeheartedly to the auto scrappage during the three preceding years of credit market, the auto finance companies took recession had raised the average age of the the opportunity to reduce their participation toexisting car stock and no doubt diminished its ward more comfortable levels. Their support of capability of providing transportation services. the market in 1980-82 had necessitated sizable As the recovering economy in 1983 stimulated a increases in liabilities, which subjected the balpickup in demand for the services of automo- ance sheets of the companies to some strain. biles, a gap between desired and actual stocks They still supported the market with reducedrapidly opened. Moreover, three years of re- rate financing programs in the first half of 1983, trenchment in consumer borrowing had helped to but these were substantially phased back by the strengthen household balance sheets, putting summer and finally eliminated late in the year. consumers in a better position to purchase and The margin between auto loan rates and costs finance cars. Installment debt owed by house- of funds narrowed briefly in the first half of 1984 holds relative to their income had dropped more but remained basically attractive throughout the than 3 percentage points by the end of 1982 to a 1983-85 period. As a result, banks continued to seven-year low of 14 percent, and delinquency be eager suppliers of credit to car buyers during rates on consumer loans were dropping toward 1984 and 1985. Finance companies, with their unusually low levels. balance sheets in better adjustment, became Other factors combined to create a more favor- more aggressive again, particularly in 1985, when able car-buying atmosphere in 1983. Gasoline they reestablished their reduced-rate financing prices had stabilized, albeit at high levels; sub- plans. stantial declines in market interest rates were pulling auto loan rates down from their 1980 highs; and, in part because of the strengthening The Entry of Savings and Loans of the dollar on foreign exchange markets, heavy into the Market competition from imported cars was generating some downward pressure on automobile prices, In the early 1980s, a new credit supplier—savdespite the introduction of voluntary export re- ings and loan associations—entered the auto loan straints on Japanese cars. The influence of each market, aided by the relaxing of restrictions on of these factors intensified over the 1984-85 their investment outlets under the Depository period. In addition, developments on the supply Institutions Deregulation and Monetary Control side of the credit market, discussed below, pro- Act in 1980, and the Garn-St Germain Act in vided firmer support to the demand for cars. 1982. Historically, by tradition and by regulation, the financial assets of savings and loans have consisted primarily of long-term fixed-rate home The Return of Banks as Major Suppliers mortgages. In contrast to the typically long maturities of such assets, the deposit liabilities that The year 1983 marked the return of commercial finance those mortgages have had much shorter banks as aggressive competitors in the auto maturities. As short-term interest rates climbed credit market. Especially with the advent of the in the late 1970s and early 1980s (and ceilings on money market deposit account, banks were ex- deposit rates were being dismantled), the cost to periencing heavy deposit inflows. Consumer savings and loans of obtaining loanable funds loan rates had dropped more gradually from their increased sharply. At the same time, because of earlier peaks than had most other market interest the slow turnover of mortgage portfolios, gross rates, so that relative yields obtainable by banks yields on their assets rose sluggishly so that on consumer loans had increased considerably. profits were severely squeezed. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Automobile Finance 359 Part of the motivation for enhancing the lend- 4. Average maturity of auto loans ing powers of savings and loans via the 1980 at finance companies deregulation act and subsequent legislation was Months to enable them to match maturities on assets and liabilities more closely, thereby reducing exposure to interest rate risk and stabilizing profits. Federally chartered associations currently are authorized to place up to 30 percent of total assets in nonmortgage loans. Savings and loans responded with some vigor, i i i « i i i 1 more than doubling their aggregate holdings of 1980 1982 1984 1986 consumer installment loans between the end of Quarterly data. 1982 and the end of 1985. Last fall they moved ahead of retail stores as the fourth largest source also.have edged higher. At the auto finance of consumer credit (behind commercial banks, companies, the average maturity of new-car finance companies, and credit unions). loans rose from 46 months to 52 months during Part of the expansion in consumer receivables the 1984-85 period (chart 4), and banks are also at savings and loan associations has gone into offering longer terms. Although the most comauto loans. Holdings of auto paper by these mon loan maturity is 48 months, five-year loans institutions have grown from $1 billion in 1981 to are now much more frequent, and some auto $8V2 billion at the end of 1985. This amount still loans are made at even longer maturities, particrepresents only a small share—about 4 percent— ularly those for higher-priced models. of the overall auto credit market, and no doubt A longer maturity, of course, reduces the part of it constitutes a shift among sources of current monthly payment on a loan of given size, financing rather than a net addition to supply. making the automobile more affordable. Histori- Nevertheless, the additional competition intro- cally, major shifts toward longer maturities apduced into the market by savings and loans pear to have boosted new-car sales. The 1955 probably has resulted in somewhat greater bor- sales boom coincided with a shift toward 36rowing on somewhat more favorable terms than month financing in place of the previously typical would otherwise have prevailed. 24-month contract, and the movement toward Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

360 Federal Reserve Bulletin • June 1986 2. Monthly payment on $10,000 auto loan, cars were made eligible for reduced-rate financselected maturities and interest rates ing (although at somewhat smaller discounts). Dollars The lowest rates of the year (just under 9 percent per year) were offered during June but were Maturity (months) IInntteerreesstt rraattee restricted to small cars. Coverage was broadened ((ppeerrcceenntt)) 36 48 60 again in the summer and fall, but this time rates 16 352 283 243 were only marginally below those available from 12 332 263 222 other lenders. 8 313 244 203 Separating precisely the effect of the various maintaining ownership of the car, the supplier positive influences on auto sales and credit durcan make use of several tax benefits. As a result, ing 1983 is difficult. Certainly the highly publithe implicit rate of interest incorporated in a cized low-rate loan programs prodded some indilease is often a bit lower than the interest rate on viduals into making a purchase and influenced a loan. others to take out a larger loan than they would To the customer, one of the principal attrac- have at higher rates. But the major effect of the tions of a lease is the ability to obtain use of a car special financing programs may have been on the with a relatively small initial outlay of cash. In distribution of credit by source. For the full year, addition, monthly payments may be smaller with growth at finance companies (13 percent) about a lease since they need offset only the estimated matched that at banks (16 percent), but patterns depreciation on the car, not the entire purchase during the year differed markedly. Auto receivprice. Of course, the lessee, unlike a buyer, ables at finance companies grew at an annual rate ordinarily builds up no equity in the car. of 23 percent in the first quarter, but the growth tailed off to 5 percent in the final quarter, after the incentive-financing programs were phased Reduced-Rate Financing Programs out. In contrast, auto credit at banks actually contracted during the first quarter of 1983 and then advanced at a 30 percent rate in the fourth Interest rates on auto loans generally have fallen quarter. about 5 percentage points from their 1982 peaks, and the periodic offering of cut-rate financing by In the strong auto sales year of 1984, banks the auto finance companies has given an addi- expanded their holdings of auto loans by 24 tional lift to auto sales and credit. Such programs percent. The auto finance companies seemed were heavily used in 1983, were largely aban- content to continue strengthening their balance doned the following year, and then became prev- sheets during the first half by adding slowly to alent again last year. auto loan receivables and reducing reliance on The large domestic automakers first offered a short-term liabilities; for the year as a whole, broad program of low-rate financing during the auto loan receivables for all finance companies summer of 1982. The manufacturers had relied increased at the moderate rate of 9 percent. mainly on price rebates in 1980-81, although Overall, auto credit grew that year by about 19 they had experimented with rate-reduction pro- percent, despite the absence of any special figrams of limited scope in the summer of 1981 and nancing programs. However, rates offered by again in the spring of 1982. Generally, these banks remained near the lower levels reached earlier programs entailed relatively moderate during the spring and summer of 1983, and rate discounts or were applicable to a rather finance company rates, though no longer heavily narrow selection of slow-selling models. discounted from market levels, stayed well be- Below-market financing was reintroduced in low their 1982 peaks. November 1982 (table 3); deeper discounts were Some of the auto makers reintroduced lowoffered (about 5 percentage points) and coverage rate loans in February 1985 (table 4). The move was broadened to encompass about half the was somewhat surprising in that new-car sales normal sales mix. Coverage was expanded fur- were continuing at a robust pace—sales in Januther in the first quarter of 1983, when virtually all ary, after seasonal adjustment, had exceeded Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Automobile Finance 361 3. Summary of interest rate reduction programs of auto manufacturers, November 1982-October 1983 Interest rate Coverage Average interest rate2 PPeerriioodd11 G M e o n t e o r r a s l Ford Chrysler G M e o n t e o r r a s l Ford Chrysler Month Banks co F m in p a a n n c i e e s 1982 Nov. 1-Dec. 31 10.9 10.75 10.9 Selective: Selective: Selective: Nov. 15.97 12.82 1982 models certain large 1982 and 1983 Dec. 12.57 only cars FWD cars, excluding vans 1983 11.9 11.9 11.9 Broad Broad Broad Jan. 12.25 Feb. 14.81 12.05 Jan. 1-Mar. 1 . Mar. 12.07 9.9 9.9 9.8 Selective: Fairly broad: Selective: Apr. 11.90 11.9 mainly small small cars (9.9) mainly small May 13.90 11.94 Apr. 1-May 31 cars large cars (11.9) cars 8.7 Selective: Selective: Selective: 13.9 mainly small small cars (8.8) mainly small June 11.57 June 1-30 cars large cars (13.9) cars 9.9 9.9 9.83 Selective: Selective: Selective: 13.9 mainly small small cars (9.9) mainly small July 11.84 July 1-31 cars large cars (13.9) cars 10.9 10.9 12.9 Selective: Selective: Broad 12.9 13.9 13.1 small cars pick-ups Aug. 13.50 12.77 Aug. 1-Sept. 30 (10.9) only (10.9) Sept. 13.62 13.5 J-, F-cars cars (13.9), (12.9) but only for 36-month loans Oct. 1-31 12.9 12.9 12.9 Broad Broad Broad Oct. 13.54 1. Dates are approximate. Beginning and ending dates usually average of the rates charged by the financing subsidiaries of the auto varied somewhat among firms. manufacturers on ail new-car loans made during a month. 2. The interest rate for banks is a simple average of the most 3. Customer given option of subsidized rate or a cash rebate on common rate charged on 48-month loans at each of about 200 banks purchase price. sampled. The rate shown for finance companies is a volume-weighted those for any month in 1984—and inventory reinstituted financing incentives. New-car sales levels were not unusually high. But other rates responded immediately and sharply. Unit sales were falling across the board in early 1985, of domestic models jumped to a rate of I2V2 reducing the cost of funds to finance companies. million in the final ten days of August and Further stimulating sales by vigorous promotion recorded a rate of 11 million units for all of of even lower auto loan rates may have seemed September. especially opportune at a time when rates were To some degree this enormous response rebeginning to head down anyway. flected the expansion of the programs to cover As in earlier periods, the net impact of the virtually all 1985 models as well as the depth of early 1985 financing incentives are difficult to the discounts (about 4 to 5 percentage points assess. With the programs in effect, the annual below market rates). But perhaps the principal rate of sales of domestic cars fluctuated narrowly factor was that, with production of 1985 models around the 8V2 million unit mark during the first completed, the stock of cars eligible for reducedfive months of the year. In the next three rate financing clearly was going to shrink continmonths, when the below-market rates were tem- uously. Even though manufacturer inventories porarily abandoned, sales—disrupted as well by were unusually large entering the close-out perian auto haulers' strike—dropped to an annual od, potential buyers realized that the most desirrate of IVi million. Inventories of 1985 models able cars would be taken first, and thus they had escalated during that time, and shortly after the an incentive to act quickly. strike was settled in mid-August, the companies The financing programs expired in early Octo- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

362 Federal Reserve Bulletin • June 1986 4. Summary of interest rate reduction programs of auto manufacturers, February 1985-April 1986 Interest rate Coverage Average interest rate2 Period1 G M e o n t e o r r a s l Ford Chrysler G M e o n t e o r r a s l Ford Chrysler Month Banks co F m in p a a n n c i e e s 1985 Feb. 22-Apr. 22 . 8.8 8.8 8.8 Limited: Selective: Selective: Feb. 13.38 13.78 certain light selected compacts, Mar. 12.65 trucks compacts, trucks Apr. 11.92 light trucks Mar. 21-Apr. 30 . 8.8 8.8 8.83 Selective: (Program (Program certain continued) continued) subcompacts May 5-June 10 ... 8.8 8.8 8.8 Selective Selective: some Selective May 13.16 11.87 subcompacts, luxury cars June 12.06 Aug. 15-Oct. 2 ... 7.7 7.74 7.55 3 road Broad Broad Aug. 12.72 10.87 Sept. 8.84 Oct. 8-Nov. 20 . 8.8 8.8 8.8 Selective: Selective: Selective: Oct. 9.97 mixture mainly small cars mainly Nov. 12.39 11.71 small, small larger cars cars 1985-86 Dec. 27-Feb. 22 . 7.9 7.9 8.65 Selective: Selective: Selective: Dec. 12.52 cars, trucks; cars, trucks; 25 variety of Jan. 9.99 40 percent percent of cars Feb. 12.29 9.70 of product product line line 1986 Feb. 23-Apr. 12 . 9.9 9.9 7.56 Broad: Broad Selective: Mar. 10.51 7.7 most vehicles certain (9.9) selected small compacts (7.7) cars Apr. 14 9.97 8.97 6.8«7 Broad to to to small cars, certain 5.9 6.9 5.8 some trucks small cars 1. Dates are approximate. Beginning and ending dates usually 3. Chrysler program includes some price rebates. varied somewhat among firms. 4. Ford program includes optional price rebates of up to $1,000. 2. The interest rate for banks is a simple average of the most 5. Chrysler program includes optional rebates of up to $1,500. common rate charged on 48-month loans at each of about 200 banks 6. Cash rebates available on broader range of cars. sampled. The rate shown for finance companies is a volume-weighted 7. Rates vary according to vehicle purchased and length of loan average of the rates charged by the financing subsidiaries of the auto contracts; structure and coverage were modified during program. manufacturers on all new-car loans made during a month. ber, were immediately revived in limited fashion somewhat slower annual pace {VA million units) for a few weeks, then allowed to lapse. Once than they had averaged in either 1984 or 1985. In again, new-car sales plunged with the termina- contrast with the previous fall, consumers probation of the programs, a development that prompt- bly felt less urgency to respond to financing ed a new round of financing incentives in late incentives because the model year was still in its December. Most programs were extended in early stages; moreover, a number of models were some fashion upon expiration near the end of not included in the programs. Potential buyers of February and remained in force, with periodic these excluded models may have been willing to modifications, well into the second quarter of wait on the sidelines for a possible broadening of this year. coverage later. The subdued effect of the pro- With the incentive programs in place, auto grams in 1986 also may reflect the likelihood that sales recovered in the first quarter of 1986, but many of the people most responsive to financing only moderately. Domestic new cars sold at a incentives had already purchased cars during Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Automobile Finance 363 earlier programs. On balance, the low-rate loan representing ownership in a pool of automobile programs appear to affect the timing of sales loans; the security typically has been priced to more than they affect the total volume over a yield from 60 to 80 basis points more than twoperiod of time. year Treasury notes. Cash flow from repayment Although the statistics on auto credit include and prepayment of loan principal passes to the financing of used cars and imported new cars, holder of the certificate; GMAC retains servicing credit trends in 1985 and early this year roughly of the loans, for which it earns a fee, and mirrored fluctuations in sales of domestic new provides a guarantee covering payment of the cars, which in turn reflected the alternate offer- underlying loans. GMAC agrees to repurchase ing and retraction of the financing incentives. defaulted loans amounting to as much as 5 per- Total auto credit grew at a 19 percent rate during cent of the total dollar amount of the issue, a the first five months of the year, dropped off to proportion far exceeding the historical default about 12 percent in the summer, and then surged rate on auto loans at GMAC. to 28 percent for September and October. Since The development of auto-backed certificates is then, the growth has dropped sharply. desirable from the originator's perspective because they eliminate the problem of mismatching maturities on assets and liabilities, and because Securities Backed by Auto Loans they enable the institution to improve capital ratios by taking the loans off its books (where Secondary markets can attract funds to a loan regulations permit) while deriving income from sector from investors who would not otherwise fees for servicing the underlying auto loans. provide financing to that sector. The broadening Investors are attracted by the yield advantage of the market for mortgage debt through mort- of these securities over Treasurys, which they gage-backed securities provides a notable recent can obtain with limited default risk, and they also example. Until last year, secondary marketing of like the comparatively short and predictable manonmortgage consumer debt through the issu- turity (about two years). With mortgage-backed ance of securities was virtually nonexistent. securities, a decline in market rates typically To date, the General Motors Acceptance Cor- stimulates early repayment of the underlying poration has been the principal originator of loans, reducing the realized maturity of the secusecurities backed by auto loans. In December rities. Refinancing in response to interest rate 1985, GMAC made its first public offering of declines is much less likely for auto loans; their such securities—$525 million through First Bos- shorter maturities and smaller principal amounts ton Corporation—and it has followed up with make the size of monthly payments much less two additional issues this year, the last of which responsive to differentials between the contract was for $1 billion in mid-April. Earlier in 1985, interest rate and going market rates. A 1 percentthe investment banking firm of Salomon Broth- age point difference for a typical car loan makes a ers purchased a $23 million block of automobile $3 to $4 difference in the monthly payment; a 1 loans from the Marine Midland Bank, which it point decline in mortgage rates, on the other repackaged into "Certificates for Automobile hand, can mean a $50 difference in the monthly Receivables (CARS)" and sold to other institu- payment. tions. Subsequently, a few other small private The risk on auto-backed securities appears placements of auto loan-backed securities were moderate in part because delinquency and demade; but so far banks have been reluctant to fault rates on auto loans have been fairly stable originate such securities because, if investors historically (chart 5). At commercial banks, dehave recourse, the banks are not permitted to linquency rates on auto loans acquired through remove the underlying auto loans from their dealers have ranged between Wi and 2Vi percent books for purposes of computing capital require- during the past 20 years, and actual chargeoffs ments. have been considerably lower. The guarantees The basic structure of the GMAC-issued cer- typically attached to the loan-backed securities tificates is that of a "pass-through" security further reduce the risk to borrowers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

364 Federal Reserve Bulletin • June 1986 er. The current low rates available from many 5. Delinquency rates on auto loans at banks sources are probably minimizing the size of the Percent perceived benefit of the special programs and diluting the urgency of a quick response. Also, as the financing incentives become a more familiar part of the landscape, potential borrowers may be regarding them as just one alternative in a rotating arsenal of promotional techniques rather than a unique and additional pricing concession. i i i i i i i i i i i i i i i i i i i i i The offering, under some plans, of a choice 1965 1970 1975 1980 1985 between a price rebate and a reduced finance Quarterly data. rate strengthens the impression that attractive rates might be offset by less generous pricing in Banks and thrift institutions reportedly have other aspects of the transaction. And, of course, been the largest purchasers of the auto-backed previous programs may already have served to certificates so far, but pension funds and insur- narrow any divergence between desired and acance companies, two types of institutions that tual stocks. formerly had not participated in auto finance, On balance, of course, the generally lower also have invested in them. The GMAC certifi- interest rates for auto loans apart from the specates were available in units as small as $1,000, cial incentives should give at least a marginal which could attract some funds from individual push to car sales, and several other factors seem investors, such as for IRA accounts. likely contributors to a solid underpinning of The influence of this new secondary market automobile demand. For instance, the recent instrument on the supply of auto credit to this sharp declines in gasoline prices (chart 6) should point has been small. The aggregate amount of boost the demand for miles of travel and, as a securities issued is estimated to be no more than result, increase the desired auto stock. More- $3 billion, and only some fraction of that would over, statistics indicate that the median age of represent funds that otherwise would have been the car stock reached 6.9 years in 1985, the unavailable. Still, given the appeal of certain highest reading in the postwar period, despite an features of the securities to institutions outside increase in the scrappage rate to V/A million units the traditional auto credit market, the continued during the 1985 model year (the record was 9^4 development of such securities should bolster million in 1979). Although the amount of services the overall supply of credit in the months ahead. embodied by scrapped units is difficult to compare with that in new units, the prospect of a large volume of scrappage for an aging stock should normally yield a sizable replacement de- CURRENT PROSPECTS FOR AUTO SALES mand for cars. AND CREDIT In the past, a three-year period of vigorous Domestic car makers regarded sales through the first four months of 1986 with some disappointment. To be sure, sales were hardly weak by 6. Gasoline price index historical standards: at an average of VA million 1967 = 100 units per year, seasonally adjusted, volume was only 400,000 units below the 1985 pace, which was the highest in six years. But viewed in the context of larger-than-normal inventories and the apparently waning public responsiveness to financing incentives, dissatisfaction with the pace of sales was understandable. The reasons for the diminishing allure of below-market financing have been discussed earli- Seasonally adjusted monthly data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Automobile Finance 365 sales—such as that from 1983 through 1985— flecting funding costs widened considerably last frequently has given way to a stretch of weaker year and appear to be widening further this year, sales as desired and actual stocks have come into probably more than compensating for any incloser alignment, but such periods of depressed creases in debt-collection costs or write-offs. In sales have generally been linked to a broader the latter half of the 1980s, with restrictions on economic downturn that adversely affects the both auto finance rates and deposit accounts underlying demand for auto services. Currently, removed or greatly relaxed, the costs and availhowever, the outlook for the economy as a ability of credit in the auto loan market should whole, with falling interest rates and minimal move more closely with those in other financial inflationary pressures, seems reasonably bright markets. to most observers. Continued economic strength On balance, despite the rather lackluster dowould help to support or even increase the mestic new-car sales so far in 1986, several desired auto stock, making a plunge in car sales factors point toward the maintenance of strong unlikely. basic demand for cars, including an expanding In the market for automobile credit, demand economy, a high auto scrappage rate, and downwill largely mirror the level of demand for cars. ward pressure on automobile operating costs Credit supplies should be ample to meet any from lower gasoline prices. Together these facdemand likely to arise under foreseeable eco- tors could work to offset the normal tendency of nomic circumstances. Although rising delinquen- three consecutive years of high sales volume to cy rates on auto loans could induce a more shrink the gap between the actual and the desired cautious approach to lending, these measures are stock of cars. Supply conditions in the auto only about midway between their past cyclical credit market appear supportive of a high level of high and low points and have not yet caused sales, and the potential of an emerging secondary lenders real concern. At the same time, the market to attract new sources of funding lends margins between auto loan rates and rates re- some further tilt toward expansion of supply. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

366 Prices, Profit Margins, and Exchange Rates Catherine L. Mann of the Board's Division of This article reviews both aggregate macroeco- International Finance prepared this article. nomic evidence on how changes in the value of the dollar affect overall U.S. export and import The decline in the exchange value of the dollar prices, and disaggregated microeconomic eviover the past year or so has had important dence, including the behavior of prices and profit implications for the outlook for the U.S. current margins, for a number of individual industries. account balance and domestic inflation. The rela- Examining industry-specific behavior may help tionship between changes in exchange rates and illuminate some of the empirical regularities of changes in import and export prices, known as the aggregate pass-through relationship. the "pass-through" relationship, has been rela- Throughout the analysis, the period of depreciatively stable historically. But recent changes in tion in the dollar from 1977 through 1980 is the pattern of U.S. trade, the unprecedented contrasted with the period of appreciation from appreciation of the dollar during the first half of the 1980s, and the volatility of bilateral exchange rates may affect at least the speed of the pass- 1. Index of the exchange rate and actual through of exchange rate changes to import and and estimated import prices export prices, and possibly the long-run relation- March 1973 = 100 ship as well. The top panel of chart 1 shows the significant movements over the last nine years of the foreign exchange value of the dollar measured in terms of a multilateral trade-weighted index of the currencies of the other Group of 10 countries.1 The bottom panel shows the actual unit value of non-oil imports and an estimate of that unit value based on a long-run historical relationship between exchange rates and import prices. The historical relationship suggests that non-oil import prices should have risen faster during 1985 than they did. This raises several questions: Are the profit margins of foreign suppliers being squeezed in the short-run? Is the long-run pass-through relationship changing? 1. This index, which includes the currencies of Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, and the United Kingdom, is a convenient summary statistic for the dollar's average performance. However, movements in bilateral exchange rates may be more significant in determining trade in particular products because often only a few countries account for the bulk of the source of imports or the destination for exports. Moreover, 1. Weighted average against foreign G-10 countries using total certain key importers, such as the Asian newly industrialized 1972-76 average trade shares. countries and Brazil, more or less peg the value of their 2. Estimate based on the multilateral trade-weighted consumer price currencies to the dollar. The movements in these bilateral index and a contemporaneous 60 percent pass-through of exchange rates often are quite different from that of the G-10 rate. rate changes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

367 1981 through early 1985. Comparing these two import and export prices is the law of one price: periods may reveal some consequences of the under conditions of perfect competition in docurrent depreciation of the dollar. mestic and international goods markets (zero Statistical analysis of macroeconomic data profits or no profits in excess of "normal ecosuggests that the long-run relationship between nomic" profits) the exchange rate equates the the exchange rate and import and export prices domestic currency prices of similar traded goods was relatively stable over the two subperiods. produced at home and abroad. This relationship, However, the profit margins of foreign suppliers given in equation 1, says that the U.S. price (in (in the aggregate) do appear to have expanded dollars) of a product equals the foreign price (in somewhat more during the period of appreciation foreign currency) times the exchange rate: after 1980 than earlier experience would have predicted; and profit margins of U.S. exporters (1) PD = P X E, F appear to have risen somewhat less. Two factors may have contributed to these deviations from where the historical relationship: the unusual magnitude of the dollar's rise during the early 1980s P = price of the product in the United D and the month-to-month volatility of the dollar States, in dollar terms over this period. Pf = price at which the foreign supplier sells Analysis of microeconomic data from individ- the product, in foreign currency terms ual industries suggests that, in addition to the E = the exchange value of the dollar in appreciation of the dollar, the rebound in real terms of dollars per unit of foreign curgrowth in the United States, inflation in the rency. source country, market structure, and trade barriers influenced profit margins and the amount Under these conditions, if the exchange rate and speed of pass-through during the first half of changes and foreign prices remain unchanged, the 1980s. Dollar prices on products imported the domestic price changes one for one: passfrom the newly industrialized countries with high through of the exchange rate change to domestic inflation rates generally remained high and profit prices is 100 percent. margins rose, while dollar prices of products Profit margins are a key link between the from the countries with more moderate rates of exchange rate and prices of traded goods that inflation fell and profit margins were more stable. extends the analysis based on the law of one At the same time, U.S. exporters in many indi- price. Relaxing the assumptions of perfect comvidual industries appear to have been relatively petition allows for short-run variability in profit insensitive to exchange rate changes. Indeed, margins that may help explain the short-run some exporters appear to have widened their variations in the pass-through relationship obprofit margins even as the dollar appreciated. served in the macroeconomic data. Equations 2 The presentation is organized as follows: The and 3 together show two important identities that next section reviews some analytical foundations relate the dollar price of imports, the exchange for the relationship among exchange rates, rate, and profit margins: prices, and profit margins. Next comes an exami- ( nation of evidence on pass-through and profit (2) P = C + M F F F margins based on the macroeconomic data, then a review of the industry-specific evidence on the (3) P = (C + M ) x E, D F F behavior of prices and profit margins. A final section presents some concluding observations. where CF is the cost, in foreign currency terms, of producing the product in the foreign country and ANALYTICAL FOUNDATIONS Mf is the margin over costs, in foreign currency terms, chosen by the foreign producers. Equa- A fundamental starting point for an analysis of tion 2 says that the foreign currency price of the pass-through of exchange rate changes to products imported into the United States equals Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

368 Federal Reserve Bulletin • June 1986 the foreign cost of producing the product plus 2. A model of foreign suppliers' profit margins some profit margin. Equation 3 combines equa- and pass-through tions 1 and 2 and shows that the U.S. dollar price equals the sum of the foreign costs of production and profit margins, all times the exchange rate. The concept of pass-through is presented in equation 4: (4) A/>d = A C f + A M f + AE\ that is, the change in the dollar price equals the change in foreign costs plus the change in margin plus the change in the exchange rate. If foreign costs are constant, dollar import prices will change little (and pass-through will be less than 100 percent) if foreign profit margins adjust to offset some of the exchange rate changes. If foreign costs change as well, profit margins can change and buffer the ultimate effect on the dollar price. Introducing profit margins into the aggregate equation allows more flexibility in the speed and In addition to these microeconomic factors, amount of pass-through of exchange rate macroeconomic forces such as the volatility of changes to import prices. But what factors can exchange rates and booms and recessions in lead to variable profit margins? Profit margins demand may affect a firm's pricing strategy. The vary in part because of the characteristics of data suggest that the key factor in determining market structure in the individual industries and industry pricing and profit margins over the last in part because of overall changes in the macro- eight years was not market structure alone, but economic environment. the way market structure interacted with macro- A number of models of international trade economic uncertainty. analyze how prices are affected by market structures that deviate from perfect competition. Factors leading to imperfect competition include nomic Review, vol. 70 (December 1980), pp. 950-59, and Elhanan Helpman, "International Trade in the Presence of imperfect substitutability of products so that Product Differentiation, Economies of Scale and Monopoliseach supplier has some market power; produc- tic Competition: A Chamberlinian-Heckscher-Ohlin Aption technology that exhibits nonconstant returns proach," Journal of International Economics, vol. 11 (August 1981), pp. 305-40, provide a theoretical foundation for to scale so that the supply curve is sloped; a the effect of product substitutability on pricing decisions. relatively small number of firms in the industry; Paul Krugman, "Increasing Returns, Monopolistic Competiand wage and sales contracts that may limit the tion, and International Trade," Journal of International speed of adjustment of prices to changes in costs Economics, vol. 9 (November 1979), pp. 469-79, and Rudiger Dornbusch, "Exchange Rates and Prices," October 1985, or demand.2 focus on production technology; Dornbusch also reflects on how the number of firms affects prices. The following papers examine how contracts affect the timing of the pass-through 2. Peter Isard, "How Far Can We Push the 'Law of One of exchange rate changes to prices: John E. Wilson and Price'?" American Economic Review, vol. 67 (December Wendy E. Takacs, "Expectations and the Adjustment of 1977), pp. 942-48, examines the law of one price for disaggre- Trade Flows Under Floating Exchange Rates: Leads, Lags, gated industry groups. Eugene R. Flood, "Global Competi- and J-Curve," International Finance Discussion Papers 160 tion and Exchange Rate Exposure," Research Paper 837, (Board of Governors of the Federal Reserve System, April Stanford Business School, September 1985, discusses in very 1980); Stephen P. Magee, "Currency Contracts, Passgeneral terms the way the slopes of the demand and supply through, and Devaluation," Brookings Papers on Economic curves affect the pricing decision and profitability of an Activity, 1:1973, pp.303-23; and William H. Branson, "The international firm. Paul Krugman, "Scale Economies, Prod- Trade Effects of the 1971 Currency Realignments," Brookuct Differentiation, and Patterns of Trade," American Eco- ings Papers on Economic Activity, 1:1972, pp. 15-58. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Prices, Profit Margins, and Exchange Rates 369 Chart 2 depicts one way of thinking about output demanded) is supplied by the U.S. proimport price determination.3 A set of foreign ducers. At price P* and output Q*, the cost of firms, which are assumed to act as one, export to production per unit to the foreign firm is C*. the United States. These firms face a market Hence the profit margin enjoyed by the foreign demand curve (D) that represents the potential producers on each additional item sold in the market in the United States. This curve moves United States is the amount P* - C* shown in out over time as U.S. gross national product the diagram. grows, but because of booms and recessions, it Since the residual-demand curve is a function does not move out at a constant rate. The slope of both domestic supply and U.S. demand, it of the demand curve is determined by such incorporates both exchange rate uncertainty and aspects of market structure as the number of aggregate demand uncertainty. The foreign firms firms producing the good, strategic interfirm cannot perfectly forecast either the exchange behavior, and the degree of product substitut- rate or GNP, so their profit margins are exposed ability. to both exchange rate and demand shocks. For Part of the total U.S. demand is supplied by example, if the dollar depreciates, the U.S. supdomestic U.S. producers (S). How large a share ply curve will shift down, causing the residualthey capture depends in part on the value of the demand curve to shift down as well (see chart 2). dollar, which moves over time and which is also The foreign firms reduce their price, and their volatile. The U.S. market price is expressed in profit margins fall. Because the foreign currency terms of foreign currency in the diagram so that a price falls somewhat, the decline in the value of depreciation of the dollar will shift down the the dollar is not fully passed through to the U.S. U.S. supply curve. The slope and location of that dollar price of the product. If, at the same time, curve are also determined by such characteris- there are other macroeconomic shocks, such as a tics of the market as trade barriers, product demand boom in the United States, the foreign substitutability, and the production technology suppliers' price and profit margins may not of the U.S. producers. change as much as they would in the face of a The marginal cost curve of the foreign firms depreciation in the dollar taken by itself: pass- (MC) depends on their production technology. through would appear to be even lower.4 There- Its slope and location depend on wages, the cost fore, while microeconomic market structure genof fixed capital, costs of imported intermediate erates profit margins, macroeconomic uncertainproducts, and other costs of production. ty alters profit margins and affects pass-through. The foreign firms face much uncertainty as they make their pricing decision. They must guess the location of the total market demand, AGGREGATE MACROECONOMIC EVIDENCE the supply from the U.S. producers, and the cost ON PROFIT MARGINS AND PASS-THROUGH of their own output. To maximize profits, the firms choose a price on the residual-demand Aggregate regression equations for the price of curve (D - S) at the point at which expected U.S. non-oil imports often take the form of a marginal revenue equals expected marginal cost. logarithmic transformation of equation 1. Vari- Thus the foreign firms price their product at P*. ous reseachers using similar regression equations They export Q* to the United States, and the remainder of the output (to QT, which is the total 4. Consider a depreciation in the dollar and a simultaneous demand boom. The depreciation shifts down the U.S. supply curve causing the residual-demand curve to shift down. A 3. The model presented here is adapted from the limit- boom shifts out the total market demand curve causing the pricing models in industrial organization theory. Daniel Gros, residual-demand curve to shift up. The decline in prices and "The Determinants of Competitiveness and Profitability," profit margins of foreign suppliers will not be as large as if the International Monetary Fund, Research Department dollar depreciated by itself. (In fact, prices and profit margins DM/86/21, March 20, 1986, presents a somewhat different could increase if the demand boom is large enough.) Since model, which examines competitiveness and profitability pass-through is defined for changes in import prices resulting when aggregate demand changes in a small open economy from changes in exchange rates, pass-through would appear that is not perfectly competitive. to be smaller in the multiple-shock scenario. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

370 Federal Reserve Bulletin • June 1986 have estimated pass-through of a change in the ences in the variables used than from changing exchange rate to import prices ranging from 50 characteristics of the macroeconomic environpercent to 80 percent, depending on the time ment.6 period of estimation, the particular measure of Some modelers have employed a distributed the exchange rate used, the import price consid- lag on the exchange rate, making the regression ered, and the other variables in the regression specification functionally equivalent to equation equation.5 Despite these different estimates of 3. Although a profit margin is not explicitly pass-through, statistical tests have shown the specified in this form of the regression equation, relationship to be fairly stable over different time the lag on the exchange rate means that changes periods of estimation, implying that the varia- in the exchange rate do not have their full effect tions in the estimates derive more from differ- on import prices immediately. During the adjustment period (until the exchange rate change completes its effect on import prices), foreign profit margins on products imported into the 5. These studies include a comprehensive analysis by Peter B. Clark, "The Effects of Recent Exchange Rate United States must be changing. The long-run Changes on the U.S. Trade Balance," in P.B. Clark, D.E. pass-through effect from these equations, mea- Logue, and R.J. Sweeney, eds., The Effects of Exchange sured by the sum of the coefficients, is quite Rate Adjustments (U.S. Treasury, OASIA Research Department, 1974). Peter Isard, "The Price Effects of Exchange similar to pass-through estimated without the Rate Changes," in Clark and others, eds., Effects of Ex- lag. But additional information about how profit change Rate Adjustments, focuses on how different degrees margins may be changing over the adjustment of industry aggregation in the import data affect pass-through. Eugene R. Flood, "An Empirical Analysis of the Effect of period is revealed by examining the lag structure. Exchange Rate Changes on Commodity Prices," revised, Finally, even though stability tests fail to un- September 1984, compares pass-through for different commodity and manufacturing groups. Robert M. Dunn, Jr., cover any statistically significant structural "Flexible Exchange Rates and Oligopoly Pricing: A Study of breaks in the parameters of the relationship Canadian Markets," Journal of Political Economy, vol. 78 between external prices and the dollar, an exami- (January-February, 1970), pp. 140-51, examines data for Canada. Lawrence Schwartz and Lorenzo Perez, "Survey nation of the residuals over different time periods Evidence on the Pass-Through of Smithsonian Revalua- of estimation may reveal some information about tions," in Clark and others, eds. Effects of Exchange Rate whether the behavior of profit margins and pass- Adjustments, focuses on different industries and countries, as through differs between periods of appreciation do Irving B. Kravis and Robert E. Lipsey, "Price Behavior in the Light of Balance of Payments Theories," Journal of and depreciation of the dollar. International Economics, vol. 8 (May 1978), pp. 193-246, and John E. Wilson and Wendy E. Takacs, "Differential Responses to Price and Exchange Rate Influences in the Foreign Trade of Selected Industrial Countries," Review of Econom- Imports ics and Statistics, vol. 61 (May 1979), pp. 267-79. Charles Schotta and Joseph Trojanowski, "The Impact of the Smith- The top panel of chart 3 is a rough empirical sonian Exchange Rate Realignments on U.S. Retail and Import Prices of Japanese Photographic Equipment," in representation of equation 1 without using a Clark and others, eds., Effects of Exchange Rate Adjust- regression equation. It shows the unit value of ments, examines both retailers' and wholesalers' profit marnon-oil imports in dollars and an estimate of gins and pass-through for Japanese cameras and lenses. Eliot R.J. Kalter, "The Effect of Exchange Rate Changes Upon aggregate foreign costs in dollar terms (using International Price Discrimination," International Finance foreign consumer prices). If dollar import prices Discussion Papers 122 (Board of Governors of the Federal Reserve System, August 1978), examines pass-through for a highly disaggregated group of industrial exports, assuming a model of imperfect competition. Jacques R. Artus, "The Behavior of Export Prices for Manufactures," in Clark and 6. In "The Strong Dollar and U.S. Inflation," Federal others, eds., Effects of Exchange Rate Adjustments, exam- Reserve Bank of New York, Quarterly Review (Spring 1984), ines exporters' price behavior for several countries. Two pp. 23-29, Charles Pigott and Vincent Reinhart report their other papers examine exporters' behavior in a macroeconom- findings of a statistical break in 1982. However, it appears ic framework: Helen B. Junz and Rudolf R. Rhomberg, that they may not, in fact, have tested for statistical stability "Price Competitiveness in Export Trade Among Industrial of the parameters. A Chow test of whether the two subperi- Countries," American Economic Review, vol. 63 (May 1972, ods examined here were statistically different from the period Papers and Proceedings), pp. 412-18, and Irving B. Kravis 1965:1 through 1984:2 confirmed parameter stability. Howevand Robert E. Lipsey, "Export Prices and Transmission of er, because the variables are highly collinear, the power of Inflation," American Economic Review, vol. 67 (February the test was likely quite low. In fact, there is some reason to 1977), pp. 155-63. question the parameter estimates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Prices, Profit Margins, and Exchange Rates 371 3. Aggregate and model estimate of profit margins multilateral trade-weighted basis leads gradually on U.S. imports (over a period of about two years) to a 6 percent 1982 = 100 change in the dollar price of non-oil imports.8 AGGREGATE PROFIT MARGINS The presence of a two-year lag suggests that ON U.S. IMPORTS foreign profit margins tend to fall below their normal levels for a time as the dollar depreciates and tend to rise above their normal levels as it appreciates. When the model's prediction deviates from the actual non-oil import unit value, ACTUAL AND MODEL ESTIMATE 7 3 log(PM,) = a + £ b, x log(JO?,_,) + I c, x log(/>C,_,) i=0 i=0 1977 1979 1981 1983 1985 + d x log (CPI*,) + e, t Cumulative percentage of Value of coefficient total exchange-rate effect on exchange rate where PM = index of non-oil import unit value XR = multilateral trade-weighted exchange rate, estimated with an eight-quarter, second-degree, polynomial distributed lag (with a tail constraint) PC = commodity price index, estimated with a threequarter, second-degree, polynomial distributed lag I^IINMIiSiMffiiBil^MIBiiwMflfiiwHBi*^ (with a tail constraint), from International Finan- 0 1 2 3 4 5 6 7 cial Statistics Quarter CPI* - foreign consumer price index weighted by the 1. Multilateral trade-weighted foreign CPI of G-10 countries, dollar multilateral trade weights terms. e = random error. depended on the exchange rate and foreign The period of estimation is 1965:1-1982:4. prices alone, the dollar price of U.S. imports Consumer prices are a poor proxy for the costs of producprobably would have fallen more in line with the tion in the import price equation because they include nontraded goods. However, two other proxies, unit labor costs gray line during the 1980s. Therefore, the panel and producer price indexes, are not available with either the suggests that profit margins of foreign suppliers frequency or the reliability of the consumer price index. in the aggregate rose substantially in recent 8. The result that import prices, even in the long run, change by significantly less than 100 percent of the exchange years. rate change can be explained by several factors. One is that A more systematic analysis of the relationship the particular measure of the dollar's exchange rate used in between exchange rates and import unit values is this estimate is an average against 10 currencies weighted by each country's share in world trade. U.S. import prices are a given in the middle panel. The gray line shows function of a much wider set of bilateral exchange rates. the prediction for non-oil import prices using a More broadly based import-weighted indexes tend to move regression equation based on equation 3 that less than the Federal Reserve Board's 10-currency index relates the import price to foreign consumer because many of the excluded currencies are tied fairly closely to the dollar. Hence the 10-currency index tends to prices, commodity prices, and the exchange overstate the implications for U.S. import prices of any given rate.7 The equation suggests that on average a 10 episode of exchange rate changes. Schemes with alternative percent change in the value of the dollar on a weighting, such as GNP weights or bilateral trade weights, give somewhat different results. Experiments using a more broadly based exchange rate measure and bilateral trade weights including some of the trading partners that are among 7. The equation specification used here is part of a larger the larger newly industrialized countries yielded a long-run model of the U.S. balance of payments. For additional pass-through estimate close to 90 percent. Moreover, just as information on the model specification, see William L. Hel- U.S. prices rise with a fall in the dollar, foreign costs and kie, "A Forecasting Model for the U.S. Merchandise Trade prices tend to fall, for analogous reasons. The decline in Balance," paper presented at the Fifth International Sympo- foreign prices, if passed through to prices of traded goods, sium on Forecasting, Montreal, Canada, June 9-12, 1985. will offset part of the effect of the exchange rate change on The specification for the non-oil import price equation is U.S. import prices. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

372 Federal Reserve Bulletin • June 1986 profit margins are changing more than the aver- 1980s, foreign suppliers absorbed the dollar apage as predicted by the equation. The panel preciation into wider profit margins instead of therefore implies that foreign profit margins in passing it through to lower dollar import prices. the aggregate decreased slightly more during If the foreign suppliers widened their short-run 1977 through 1981 and increased somewhat more profit margins as much as these results suggest, during 1982 through early 1985 than would have one implication is that they probably had ample been predicted on the basis of experience. room to squeeze their margins as the dollar fell The bottom panel of chart 3 shows the quarter- after early 1985. by-quarter structure of the relationship between non-oil import prices and the exchange rate. The gray curve shows, for each quarter, the cumula- Exports tive percentage of the total long-run pass-through that had taken place through that quarter. About Chart 5 illustrates analogous pass-through and 50 percent of the effect on import prices of a profit-margin relationships for U.S. exports and change in the exchange rate is felt within two the price competitiveness of U.S. exports in quarters, and almost 70 percent in a year. international markets. The top panel presents an The lag structure reveals some variability over estimated foreign currency price of nonagricultime in the dynamic relationship between ex- tural exports and an estimated foreign currency change rates and prices. The panels in chart 4 value of U.S. costs of production, as measured show estimates of the lag structure and cumula- by producer prices. This aggregate evidence sugtive percentage of pass-through as obtained for gests that profit margins for U.S. exporters do the two subperiods during 1977 through early not change much with a change in the exchange 1985. Although the short period of estimation rate: pass-through for exports is close to 100 prevents them from being statistically signifi- percent. As the dollar appreciated, the foreign cant, these results suggest that exchange rate currency price of exports rose almost one for one changes were passed through to non-oil import with the exchange rate, causing a significant prices more fully, but more slowly (as calculated in terms of the cumulative percentage effect), when the dollar depreciated than when it appre- 5. Aggregate and model estimate of profit margins ciated. This result is at least consistent with both on U.S. exports the evidence presented in equations 1 through 4 ~~ 1982=100 and anecdotal accounts of how, during the early AGGREGATE PROFIT MARGINS 4. Pass-through lag structure Value of coefficient QUARTER-BY-QUARTER LAG COEFFICIENTS Percentage CUMULATIVE PERCENTAGE OF TOTAL ACTUAL AND MODEL ESTIMATE OF NONAGRICULTURAL EXPORT PRICES Estimate Quarter 1. Estimation period: 1981:1-1985:2. 1977 1979 ' 1981 1983 1985 2. Estimation period: 1977:1-1980:4. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Prices, Profit Margins, and Exchange Rates 373 decline in the price competitiveness of U.S. SIC number Imports exports in international markets. 2311 Men's and boys' suits and coats The bottom panel shows the unit value of 2621 Paper mill products 2221 Weaving mill, synthetics, and silks nonagricultural exports and a prediction of the 2033 Canned fruits and vegetables 314 Men's and women's leather footwear (3143 + 3144) price of nonagricultural exports derived from an 33 Rolling mill and electrometalurgical steels estimated equation that relates that unit value to (3312 + 3313) 3531 Construction machinery U.S. producer prices, foreign consumer price Exports indexes, and the multilateral trade-weighted ex- 2611 Pulp mill products change value of the dollar.9 The equation pre- 2011 Meat packing and preparation 3494 Valves and pipe fittings dicts that on average a 10 percent change in the 3519 Internal combustion engines 3523 Farm machinery and equipment value of the dollar should lead directly to a 0.75 3533 Oilfield and gasfield equipment 3546 Power-driven hand tools percent change in export prices. Of course, a 3555 Printing trades machinery change in the exchange rate will affect domestic 3674 Semiconductor devices and export prices indirectly through its effect on import prices and on the prices of internationally traded commodities. The gap between the lines suggests that, in the aggregate, U.S. producers ing exported products; all are disaggregated to limited price increases on their exports some- the four-digit SIC level. what more as the dollar appreciated than the The four-digit Standard Industrial Classificahistorical evidence suggested that they would. tion (SIC) disaggregation was used because the Therefore, the sustained appreciation of the dol- Bureau of Labor Statistics recently began to lar may have induced U.S. exporters to price publish export and import price indexes on this somewhat more competitively on international basis; heretofore, only unit value indexes were markets than they had done in the past. available.10 When working with disaggregated industry data, a careful match of the industry categories for prices and costs is important; many other data for the United States are available disaggregated on an SIC basis. INDUSTRY EVIDENCE ON PROFIT MARGINS AND PASS-THROUGH Only nine export price indexes and seven import price indexes had an historical record Disaggregated industry data provide further evi- long enough for this project. The export categodence on changes in profit margins and the ries accounted for 6 percent of total trade in 1980 stability of the long-run pass-through relation- and the import catagories for about 7 percent. ship. Industries examined in this study produce For such a small set of industries, there is the following imported products and the follow- variety, and as a group these industries represent the kinds of products that dominate U.S. nonagricultural exports and U.S. non-oil imports. An index of profit margins on U.S. exports of 9. See Helkie, "A Forecasting Model" for further details. each category was calculated in dollar terms as The equation is the ratio of each product's export price index to 2 log(PZ,) = a + E bi x log{WPia + c x log(CPI*fXR) + e, t t 1=0 10. Only rarely is an external price series available. These where data are based on a survey (done once each quarter, in the last month of the quarter) of actual transactions prices of PX = unit value of nonagricultural exports exporters and importers (as opposed to customs valuation). WPI = an index of U.S. export-weighted producer prices Unit value indexes have often been the only available proxies (estimated with a three-quarter, second-degree, for external prices. Unit value indexes are prone to problems polynomial lag with nose and tail constraint) of shifting composition of goods within the aggregate and XR = multilateral trade-weighted exchange rate often are poor at capturing quality changes. See Irving B. CPI* = foreign consumer price index Kravis and Robert E. Lipsey, Price Competitiveness in e = random error. World Trade (National Bureau of Economic Research, 1971), for a full discussion of the problems associated with using The period of estimation is 1969:1-1982:4. unit value indexes as proxies for prices. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

374 Federal Reserve Bulletin • June 1986 its producer price index.11 The U.S. producer er price index from national sources.13 The ratio price index is a proxy for U.S. costs of produc- of the indexes of foreign currency import prices tion. Nothing can be inferred from the level of and of foreign currency costs of production this index because the choice of base year is forms an index of foreign currency profit margins arbitrary. for each import. For imports, the study examines foreign currency profit margins on the assumption that a foreign firm maximizes profits measured in its Imports own currency. Therefore, each product's import price index must be converted to foreign curren- The relation of dollar import prices to domestic cy units. An index of nominal exchange rates U.S. prices in part determines the competitiveweighted by import shares was created for each ness of domestic import-competing products product.12 Multiplying this index by the index of and, moreover, influences domestic inflation. dollar import prices yields an index of foreign The panels in chart 6 show dollar import prices currency import prices. Multiplying the import- and the calculated estimates of foreign currency share weights by each country's proxy for the values of foreign profit margins of selected U.S. product's production costs creates an index of imports. Dollar prices increased fairly sharply foreign currency costs of production for each for all of these imports during the depreciation of imported good. Since there is no comparable SIC 1977-80. During the appreciation of 1981-85, breakdown for foreign costs of production, the however, behavior was mixed: dollar prices for analysis relied on the nearest equivalent produc- some products, such as footwear, textiles, and apparel, remained rather stable; for other products, such as certain steels and construction 11. Producer price indexes include a profit margin at the machinery, dollar prices fell. wholesale level because they are constructed from prices Foreign currency profit margins behaved rathobserved in the first commercial transaction involving the item. However, the index of export profit margins calculated er similarly over the eight years, showing a direct here captures at least the extent to which profit margins can association with movements in the dollar. Profit differ between exporting versus selling the same product in margins generally declined slightly during the the United States. period 1977-80, when the dollar depreciated, and 12. In concept, the import share weights are the share each foreign country has in the total imports into the United States increased during the more recent period, when of a particular four-digit SIC category of product. However, the dollar appreciated. For some products, such trade data are available on a Schedule A disaggregated basis as footwear, textiles, paper products, and only by individual country. Therefore, the import share weights are based on Schedule A, and a concordance between Schedule A and the SIC was used to determine which Schedule A categories to aggregate to get the four-digit SIC category. The share weights were calculated for the top three 13. The following sources were used: Canada: industry to five supplying countries for 1980 and 1984, interpolating selling price indexes based on 1970 Standard Industrial for the intervening years. This technique accounted for an Classification, Statistics Canada, Canadian Statistical Reaverage of 80 percent of the imports of each four-digit SIC view, Japan: wholesale price indexes (by products and category, ranging from a low of 66 percent for steel to a high sectors), Bank of Japan, Statistical Bulletin-, Brazil: Precos of 89 percent for footwear. The average values of the por atacado (nova classificacao) offerta global, Conjuntura exchange rate index and the cost of production indexes were Economica, National Economic Indexes; United Kingdom: used for the fraction not allocated to any particular country. index numbers of wholesale (producer) prices, price indexes While this method has many pitfalls, a very different import of output of broad sectors of industry, Central Statistical weighting calculation revealed virtually the same pattern of Office, Government Statistical Service, Monthly Digest of behavior of profit margins and exchange rates. In this alterna- Statistics; Germany: Preise und Preisindizes fur gewerbliche tive technique, the import share weights were calculated for Produkte (Erzeugerpreise), W. Kohlhammer GMBH, Statiseach year using selected aggregate Schedule A groupings tisches Bundesamt Wiesbaden; Italy: Numeri indici prezzi all containing products similar to those in the four-digit SIC ingrosso, indici por settori e branche, indici alcuri gruppi, categories. These data are available for the regions of the Insitutio Centrale de Statistica, Bollettino Mensile Da Statisworld and a few countries. For each region, a representative tical South Korea: wholesale price indexes (by commodity by country's costs of production and nominal exchange rate subgroup), Bank of Korea, Monthly Statistical Bulletin-, were chosen. For example, Brazil "represented" Latin Taiwan: indexes of wholesale prices in Taiwan area, Execu- American imports to the United States. tive Yuan Republic of China, Directorate-Generale of Budget These two different construction methods introduce very Accounting and Statistics, Monthly Statistics of the Republic different biases. That the results are similar is reassuring. of China. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Prices, Profit Margins, and Exchange Rates 375 6. Prices and profit margins for U.S. imports, selected industries 1980:4 = 1 1980:4 =100 1980:4=1 CANNED FRUITS AND VEGETABLES LEATHER FOOTWEAR Dollar import price 1.5 100 1.5 1.0 v x* 75 1.0 > y V 4 "V" Foreign currency profit margin Foreign currency profit margin m M H HM CERTAIN STEELS CERTAIN TEXTILES Dollar import price Dollar import price 1.5 100 1.5 100 / V ' -V 1.0 \ 75 1.0 » T\ Jk / 75 r ~ V -^ Foreign currency profit margin Foreign currency profit margin CONSTRUCTION MACHINERY CERTAIN APPAREL Dollar import price Dollar import price 1.5 100 1.5 100 JS 1.0 75 1.0 75 Y / ^v Foreign currency profit margin Foreign currency profit margin t i i i i i i t 1977 1979 1981 1983 1985 1977 1979 1981 1983 1985 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

376 Federal Reserve Bulletin • June 1986 canned fruits and vegetables, the change in trend later period, as the dollar appreciated sharply, is quite distinct. For others, such as steels, it is the rapid expansion of domestic demand in the less so. United States probably was the key to keeping The top panel of table 1 shows how much these dollar import prices up and foreign currency estimates of foreign currency profit margins profit margins wide, especially as foreign cost changed during the two periods of dollar move- inflation abated. It appears that dollar import ment. This calculation emphasizes the general prices fell while margins remained stable on trends of narrowing profit margins during a de- products imported primarily from the other inpreciation and widening profit margins during an dustrial countries, where domestic disinflation appreciation. It also shows the diversity of re- was most significant. Dollar prices were mainsponses of individual imported products. tained, as were margins, on products imported Both industry-specific and general macroeco- from the newly industrialized countries, where nomic factors contribute to the observed pricing cost inflation remained high. The Multi-Fiber and profit margins. In the earlier period, high Arrangement probably was also important in rates of cost inflation abroad, which importers maintaining the margins on textiles and apparel. did not completely pass on to their sales prices, raised the dollar price of imports and narrowed foreign currency profit margins from the cost Exports side. In addition, relatively slack aggregate demand conditions in the United States meant that The behavior of prices and profit margins on producers could not exploit market power and products exported from the United States is raise prices; thus margins were capped. In the shown in chart 7. Most U.S. exporters appear to have made relatively small adjustments to profit margins. As a consequence, as the dollar rose, U.S. exporters suffered a significant decline in 1. Percent change in profit margins, selected industries price competitiveness, as implied by the rise in their prices in terms of foreign currency. Produc- Industry 1977 to 1980' 1980 to 1985:22 ers of semiconductors, power-driven hand tools, Exchange value of the dollar3.... -15.5 74.9 and pulp mill products cut margins in an effort to remain competitive on international markets, Imports (foreign currency) and their prices in foreign currency did not rise Leather footwear -4.2 87.3 Certain textiles4 -9.1 28.0 so much. Anecdotes support these statistical Construction machinery -9.2 11.6 Paper products -2.3 17.6 results. Certain apparel5 -4.9 4.1 Canned fruits and vegetables .... -14.1 6.8 All the machinery products have similar be- Certain steels6 14.6 4.1 havioral characteristics. Perhaps these products Exports (dollars) are so differentiated that foreign demand is quite Semiconductors7 -5.9 -9.6 inelastic. The share of exports in total output Power-driven hand tools8 -5.0 -6.9 Pulp mill products 4.6 -17.1 may be so small that they are a residual element Internal combustion engines9 .... -4.5 4.2 in domestic marketing and pricing strategy. Im- Valves and pipe fittings10 -2.7 8.7 Oilfield and gasfield equipment8 . -2.0 1.0 port-competing products may be in such small Printing trades machinery10 -3.9 5.3 Farm machinery9 -2.9 4.5 supply that they do not affect domestic prices. Meat packing and preparation8... -3.6 17.7 The bottom panel of table 1 shows the change in profit margins for U.S. exporters over the two 1. Percent change between the 1977 four-quarter average and the 1980 four-quarter average. periods of change in the exchange rate. Confirm- 2. Percent change between the 1980 four-quarter average and the ing the graphical evidence, those industries that 1985 two-quarter average. 3. Based on the G-10 multilateral trade-weighted exchange rate. responded to the appreciation in the dollar (semi- 4. Silk and other man-made fibers. conductors, power-driven hand tools, and pulp 5. Men's and boys' suits and coats. 6. Rolled and electrometalurgical steels; 1978 four-quarter aver- mill products) did cut profit margins. However, age. even these industries responded proportionately 7. 1979 three-quarter average. 8. 1977 three-quarter average. less to the change than did foreign importers 9. 1978 three-quarter average. when the dollar depreciated (table 2). Not only 10. 1978 two-quarter average. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Prices, Profit Margins, and Exchange Rates 377 7. Prices and profit margins for U.S. exports, selected industries 1980:4= 1 1980:4=100 1980:4=1 1980:4 = 100 INTERNAL COMBUSTION ENGINES SEMICONDUCTOR DEVICES 1.8 225 U 225 1.6 190 1.6 190 Foreign currency export price 1.4 155 1.4 155 Foreign currency export price 1.2 120 1.2 120 1.0 85 1.0 85 Dollar profit margin i i i f i VALVES AND PIPE FITTINGS POWER-DRIVEN HAND TOOLS 225 U 225 1.6 190 1.6 190 Foreign currency export price 1.4 155 \.i 155 Foreign currency export price 1.2 120 1.2 120 Dollar profit margin 1.0 85 1.0 85 I-ARM MACHINERY AND EQUIPMENT 1.8 225 U 225 1.6 190 1.6 190 Foreign currency export price 1.4 155 1.4 155 Foreign currency export price 1.2 120 1.2 120 Dollar profit margin 1.0 85 1.0 85 1977 1979 1981 1983 1985 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

378 Federal Reserve Bulletin • June 1986 2. Comparison of changes in profit margins, that over the past decade exchange rate changes selected periods' have been absorbed into the profit margins of foreign suppliers to a considerable extent and for Industry 1977 to 1980 1980 to 1985:2 relatively long periods—as much as two years or Imports more. This behavior is consistent with the pre- Leather footwear .27 1.17 diction of theoretical models in which imported Certain textiles .59 .37 goods are produced and sold under conditions of Construction machinery. .59 .15 Paper products .15 .23 imperfect competition and macroeconomic un- Certain apparel .32 .05 Fruits and vegetables ... .91 .09 certainty. Apparently, this behavior is being re- Certain steels -.94 .05 peated as dollar import prices are rising more Exports slowly in response to the dollar depreciation than Semiconductors .38 -.13 would have been expected in light of the histori- Power-driven hand tools .32 -.09 Pulp mill products -.30 -.22 cal record. Internal combustion engines .29 .06 Valves and pipe fittings .17 .12 The empirical evidence also suggests, at least Oilfield and gasfield equipment... .13 .01 weakly, that the long-run relationship between Printing trades machinery .25 .07 Farm machinery .19 .06 the exchange rate and import prices may be Meat packing .23 .23 changing. A trend toward buying worldwide by 1. These figures are the ratio of the percent change in the profit U.S. and foreign multinationals, newly estabmargins to the percent change in the exchange rate for the two lished distributor networks in the United States, subperiods using the data in table 1. A positive number indicates that the profit margin fell during the depreciation and rose during the and a greater ability to hedge foreign currency appreciation. exposure in international credit markets could imply a smaller long-run pass-through of exare U.S. exporters in the aggregate relatively change rate changes to import and export prices. insensitive to the exchange rate, but also the In addition, stiffened competition for the U.S. disaggregated evidence indicates that some U.S. market between established suppliers and newly exporters in fact increased profit margins even as industrialized countries may lead to permanently the dollar appreciated. This evidence, combined lower profit margins on some imports and a with the narrowing in margins in the earlier prolonged delay in the pass-through of the experiod, suggests that aggregate demand in the change rate depreciation to some import prices. United States may dominate the exporter's pric- U.S. producers are slowly becoming more aware ing strategy. of the advantages of trade. Competition for mar- Several inferences can be drawn from these kets overseas may induce them to use exchange disaggregated industry data. Historically, foreign rate changes to price more strategically in the producers seem to have responded to a dollar foreign market. depreciation by squeezing profit margins; pre- In any event, the wide profit margins that had serving market share in the United States may be been attained by the end of the dollar appreciathe key to their behavior. But other factors tion in early 1985 gave foreign suppliers ample besides exchange rate changes affect the pricing room to squeeze profits. Improvements in the decisions and profit margins for individual im- domestic price competitiveness of import-comported products: inflation in the source country, peting goods and increases in domestic inflation relative growth in demand, and factors specific may be slower in coming than experience sugto individual industries such as market structure gests. Moreover, other macroeconomic phenomand trade barriers. The profit margins and pricing ena, such as aggregate demand shocks and dobehavior of U.S. exporters seem even less affect- mestic cost inflation, clearly affect pricing ed by exchange rate changes. strategy and therefore profit margins and passthrough. CONCLUSIONS With respect to exports, in contrast, U.S. producers appear to be relatively insensitive to A review of both aggregate data on U.S. import exchange rate changes. Both U.S. export prices prices and industry-specific evidence suggests in dollar terms and the profit margins of U.S. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Prices, Profit Margins, and Exchange Rates 379 exporting industries fluctuated much less over facing foreign competition. Therefore, if U.S. the past eight years than did the profit margins of producers follow their historical behavior and do foreign suppliers, suggesting that exchange rate not broaden their profit margins on their exports changes were largely passed through to changes too much, improvements in export performance in the foreign currency prices of U.S. exports should be forthcoming. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

380 Industrial Production Released for publication April 15 annual rate than it was for the fourth quarter of 1985. At 125.1 percent of the 1977 average, the Industrial production declined an estimated 0.5 total index in March was 0.9 percent higher than percent in March following a 0.7 percent drop in it was a year earlier. February. The decline in March was concentrat- In market groups, output of consumer goods ed in oil and gas well drilling activity, auto and remained weak in March. Auto assemblies were truck assemblies, and steel production. The pre- cut to an annual rate of 7.7 million units from the liminary average for industrial production for the rate of 8.7 million units in February in response first quarter of 1986 was 1.4 percent higher at an to weak sales and excessive inventories. In addi- Ratio scale, 1977 = 100 140 TOTALINDEX 120 100 MATERIALS Durable -~»-Cs Nondurable EEnneerrggyy INTERMEDIATE PRODUCTS Business supplies Construction supplies 240 140 MOTOR VEHICLES AND PARTS FINAL PRODUCTS 200 120 Defense and space 100 160 Business equipment J 140 120 100 60 Consumer goods 1980 1982 1984 1986 1980 1982 1984 1986 All series are seasonally adjusted. Latest figures: March. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

381 1977 = 100 Percentage change from preceding month PPPeeerrrccceeennntttaaagggeee ccchhhaaannngggeee,,, Group 1986 1985 1986 MMMaaarrr... 111999888555 tttooo MMMaaarrr... Feb. Mar. Nov. Dec. Jan. Feb. Mar. 111999888666 Major market groups Total industrial production 125.7 125.1 .8 .8 .2 -.7 -.5 .9 Products, total 133.2 132.5 1.3 .4 .3 -.9 -.6 1.7 Final products 133.1 131.9 1.4 .5 .1 -1.1 -.9 .9 Consumer goods 123.5 122.7 1.6 1.2 -.3 -.2 -.7 2.5 Durable 116.4 113.0 3.7 1.1 -.1 -.2 -2.9 -.4 Nondurable 126.2 126.3 .9 1.2 -.4 -.2 .1 3.4 Business equipment.. 141.5 140.2 1.5 -.2 1.3 -1.3 -.9 .0 Defense and space... 176.3 177.4 1.2 .0 -.7 -1.7 .6 4.9 Intermediate products.. 133.7 134.4 .9 .2 1.1 -.5 .5 4.5 Construction supplies 122.8 123.5 .7 -.2 2.7 -.9 .6 5.6 Materials 115.4 115.0 .1 1.4 .0 -.4 -.3 -.4 Major industry groups Manufacturing 128.9 128.3 1.0 .5 .6 -.8 -.5 1.6 Durable 129.0 127.8 1.1 .5 .6 -1.2 -1.0 -.2 Nondurable 128.7 128.9 .7 .5 .8 -.2 .2 4.1 Mining 104.2 103.0 -1.5 .5 .0 -3.0 -1.1 -6.8 Utilities 115.3 115.1 -.2 3.8 -2.7 1.7 -.1 1.1 NOTE. Indexes are seasonally adjusted. tion, home goods production, which surged in gains of about Vi percent in March following the fourth quarter of 1985, fell for the third declines in February. For the first quarter, outsuccessive month in March. Output of nondura- put of construction supplies advanced at an ble consumer goods was again little changed. annual rate of almost 10 percent. Total materials Total equipment output dropped significantly edged down 0.3 percent in March, reflecting further in March, as drilling activity plunged 17 declines for durable goods materials and energy percent to a level about one-third below that of materials. Nondurable goods materials, howev- December 1985. Moreover, business equipment er, increased for the fourth successive month production fell 0.9 percent in March following a bringing the gain over the past year to almost 6 decline of 1.3 percent in February. The recent percent. curtailments were most pronounced in transit In industry groups, manufacturing output deequipment, which includes business autos and clined 0.5 percent in March following a drop of trucks, and in construction, mining, and farm 0.8 percent in February. Mining activity, which equipment. The other major components of busi- includes oil and gas well drilling, fell sharply ness equipment have, on balance, shown little again in March. Production by utilities edged change over the past few months. Production of down following a gain of 1.7 percent in February. both construction and business supplies posted Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

382 Statements to Congress Statement by Preston Martin, Vice Chairman, tion, the system could not have weathered these Board of Governors of the Federal Reserve Sys- events if it were not fundamentally sound. tem, before the Subcommittee on Financial In- The strength of the industry is also demonstitutions Supervision, Regulation and Insurance strated in various performance indicators. Last of the Committee on Banking, Finance and Ur- year, net earnings in the industry increased about ban Affairs, U.S. House of Representatives, 17 percent. This increase was accompanied by a April 9, 1986.1 boost in the ratio of primary capital to assets, marking the fifth consecutive yearly rise in that I appreciate the opportunity to discuss the diffi- important ratio. I might add that last year's culties that some banks are facing as a result of improved earnings were aided by a combination farm, energy, and developing country loans. As of higher net interest income and noninterest requested, my remarks will center on the nature income, which indicates strength in the core and magnitude of risk exposure in each of these lending business as well as in other activities sectors and on appropriate measures to deal with such as trading, merchant banking, and other them. I also plan to offer a few remarks on the fee-generating services. commercial real estate situation. The Federal In short, the banking industry shows some Reserve, in conjunction with the Federal Deposit robust signs. These positive factors should be Insurance Corporation (FDIC) and the Office of kept in mind as one looks at the more troubling the Comptroller of the Currency (OCC), is sup- areas such as farm, energy, and developing counplying the related information and statistics re- try loans. quested. The banking system today continues to deal with a series of adjustments to changing eco- THE FARM SECTOR nomic conditions and to contractions in specific industries and geographic regions. Very substan- The current problems affecting the agricultural tial volumes of loans have had to be written off, sector are more serious than any encountered loan-loss reserves have been augmented, and since the Great Depression. These problems capital resources have been built up, using a have been brought on by the worldwide increase variety of debt and equity instruments. In this in agricultural production, which has driven process, the banking system has exhibited an down crop prices and, with them, farm incomes ability to adapt to changes in loan-asset quality at and asset values. While all farmers have been the same time that the liability side of the balance adversely affected by these conditions, those sheet has changed under the twin forces of farmers who entered the decade with substantial market developments and deregulation. In recent debt have naturally encountered the most diffiyears, the banking system has survived numer- culty. Their problems have, of course, been ous periods of stress and uncertainty, including compounded by the relatively high interest rates the collapse of Drysdale Securities, the silver that have prevailed over the current decade. crisis, the failure of Penn Square Bank, and the Our estimates suggest that perhaps a third of near-failure of Continental Illinois Bank. During the full-time family farmers are experiencing a period of deregulation and intensified competi- financial stress that is moderate to severe. This group owes about one-half of the farm debt owed by such farmers. 1. The attachments to this statement are available on Several recent developments should aid the request from Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. farm economy, including the dramatic fall in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

383 energy costs and the substantial declines in inter- local level. The effect on banks at the local level, est rates and in the exchange value of the dollar. however, has been damaging. For example, of The recent farm bill also offers an additional the 62 farm banks that failed in 1985, 43 of these source of support for farm incomes. were the only bank in the community. In most However, supply conditions for farm products cases, a merger with another banking company suggest that a substantial rebound in crop prices, was arranged. However, arranging takeovers of and thus in farm incomes, is not likely to take failed institutions has become increasingly diffiplace over the foreseeable future. Consequently, cult. In 1985, no merger could be arranged for 11 farmers with relatively heavy debt loads will failed farm banks: the depositors were paid off continue to face serious difficulties. and the institutions were liquidated. The majority of farm debt is not in fact owed to Having reviewed the negative side of the farm commercial banks, but to the Farm Credit Sys- bank situation, I would like to touch on the tem, the Farmers Home Administration, and to positive side to provide a balanced perspective. individuals. About one-fourth of total farm debt More than 95 percent of the total loans at agriculis held by commercial agricultural banks, which tural banks are performing loans, and one-half of for purposes of this testimony are defined as these banks reported earnings equal to 10 perthose banks having 25 percent or more of total cent or more of equity. Also, agricultural banks loans related to agriculture.2 generally have a substantial capital cushion to The recent problems in the farm economy absorb loan losses. In fact, the ratio of capital to have inevitably been transmitted to many of the assets for all agricultural banks averaged 9.8 farm banks. Such problems are manifested in percent in September last year, well above the data on nonperforming loans, problem banks, 7.5 percent ratio for the entire banking system. and failed banks, among other measures. At year-end 1985, nonperforming loans numbered about 5 percent of gross loans at agricul- THE ENERGY SECTOR tural banks versus about 3 percent at nonagricultural banks. Besides problems in the farm sector, conditions Likewise, agricultural banks dominate the in the energy industry resulting in part from ranks of problem banks—that is to say, banks declining oil and gas prices have created serious that are rated low—4 or 5 by examiners using a strains on banking organizations, particularly scale of 1 to 5. As of February 1986, farm banks those organizations located in the Southwest. represented more than 40 percent of all problem While this situation has intensified with the rebanks. cent sharp drop in oil prices, problems associat- Agricultural banks are also overrepresented in ed with energy lending have their roots in the oil terms of failures. In 1985, 62 of 120 failed banks shocks and energy shortages experienced in the were classified as farm banks. In 1986, a similar decade of the 1970s. The intense concern over pace has continued: 9 of 21 failed banks as of the continued availability of energy supplies and March 25 were farm banks. With no imminent the inflation psychology of this earlier period led recovery in the farm economy in sight, it is many observers, including bankers, to conclude expected that farm banks will continue to ac- that the price of oil and other forms of energy count for a disproportionate number of failures. would continue to move upward over time. Ener- Most of the failed farm banks have been very gy-based loans were seen as particularly safe and small, and thus their failure has had less effect on profitable. the overall banking system than on banks at the The rapid increase in energy lending during this period is reflected in the statistics on shared national credits (SNC), which capture energy 2. In previous testimony the Federal Reserve Board has loans and commitments. A shared national credit defined "agricultural banks" as banks with a ratio of farm loans to total loans that exceeds the average of such ratios at is any loan or group of loans, including unused all banks, currently about 16 percent. The 25 percent cutoff is commitments, to one borrower that exceeds $20 used in this testimony so that our definition is consistent with million and is shared by two or more banks. The that used by the Comptroller of the Currency and the Federal aggregate of such energy-loan exposure included Deposit Insurance Corporation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

384 Federal Reserve Bulletin • June 1986 in SNC credits increased from $6.7 billion in 1977 quality) increased from $1.2 billion, representing to $56.9 billion in 1984. This growth, in turn, paid 2.6 percent of the capital of the SNC energy handsome dividends for a time for energy lend- lenders, to $8.4 billion, or 9.8 percent of the ers. From 1979 to 1982 the asset growth and capital of these energy lenders. While shared profitability of large bank holding companies national credits do not include all energy loans in (that is, those companies with assets in excess of the banking system and the effects of the most $1 billion) in the Southwest generally exceeded recent drop in oil prices have yet to be reflected the growth and profitability of comparable com- in these figures, the increases nonetheless reveal panies in other regions. the pressures being experienced by some energy But by 1982, the energy boom in the South- lenders. west began to end. Successful conservation ef- The difficulties experienced by energy lenders forts and the back-to-back recessions of the early since 1982 reflect the ongoing adjustment pro- 1980s tempered demand for energy while new cess in the energy sector. As energy supplies non-OPEC supply sources grew. The combined have continued to grow relative to demand and result was a reversal in the upward pressures on as prices have fallen, the value of oil and gas energy prices. Serious strains within the banking equipment and reserves has declined, and the system surfaced in 1982 with the failure of the cash flows of many borrowers have been severe- Penn Square Bank and the severe repercussions ly reduced. This situation has eroded the finanof this failure on other large banking organiza- cial strength of a considerable number of energy tions. As everyone here no doubt recalls, loans borrowers, forcing some borrowers into bankand participations purchased from Penn Square ruptcy and preventing others from servicing their inflicted substantial losses on a number of banks loans in accordance with the original terms and and contributed to the huge loan losses and the conditions. The result, as has already been severe liquidity crisis at Continental Illinois Na- noted, has been that many energy banks and tional Bank in the period from 1982 to 1984. institutions in the Southwest have been forced to Energy problems also led to the closing of the cope with serious asset and earnings problems First National Bank of Midland, Texas, in 1983, over the past four years. In 1984, 11 banks failed one of the largest actual failures of a commercial in Texas and Oklahoma, states with a considerbank in the United States. able number of energy lenders. This number Besides signifying the emergence of serious amounted to about 14 percent of all bank failures problems within the energy sector, some of these in that year. Last year, the number of bank events, to be sure, also reflected the conse- failures in these states doubled to 22, or approxiquences of questionable lending decisions and mately 19 percent of all bank closings. practices and inadequate management controls. Pressures on these lenders have increased By 1983, the return on assets of many large since year-end because of the further sharp debanking organizations in the Southwest fell well clines in oil and gas prices. These developments below the levels of similar banking organizations have exacerbated the problems of many energynationwide, and the loan-loss experience of related firms and energy lenders, including some heavy energy lenders significantly exceeded the sizable institutions. Many banks in energy-proexperience of similar sized nonenergy banking ducing areas or with heavy energy exposure are organizations. While earnings of bank holding also experiencing strains from loans to troubled companies in the Southwest improved in 1984, real estate and agricultural borrowers, and in last year the return on assets of these companies some cases have exposure to foreign countries once again fell well below their national peers. dependent on the production and export of oil. Furthermore, the relative level of nonperforming A recent survey by the FDIC identified 563 loans in energy-oriented organizations in that federally insured banks with assets of more than region greatly exceeded national peer group av- $100 million and oil and gas loans in excess of 25 erages. percent of total capital. The survey found that Between 1982 and 1985, the aggregate volume these institutions held more than $61 billion in of oil and gas credits classified under the SNC energy loans, with $57 billion (92 percent of the program (that is, those larger credits of poor total) held by 59 large regional and multinational Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 385 banks with assets of more than $1 billion. Of the 2. Reaffirm the agencies' long-standing polismaller banks identified in the survey, more than cies of not discouraging banks from forbearing 80 percent were located in Texas, Oklahoma, on farm loans through appropriate debt restrucand Louisiana. turings in cases in which there are reasonable Recognizing the problems in the energy sector, prospects that restructurings will work to the banks in the Southwest began to make significant advantage of the bank as well as to the borrower. additions to their loan-loss reserves in 1982 and 3. Refrain from requiring automatic chargehave continued to do so. offs of debt restructurings when their terms meet To improve our understanding of the financial the criteria of generally accepted accounting condition of large energy lenders, the Federal principles. Reserve, with the cooperation of the FDIC and 4. Revise supervisory reporting procedures for the OCC, is conducting a special energy inspec- restructured loans that are performing under the tion of bank holding companies with assets in new terms to more accurately reflect the status excess of $500 million and significant energy of such loans and to avoid the suggestion that exposure generally in excess of 25 percent of such loans are a component of nonperforming capital. Through these special inspections we assets. will obtain more current information on the ag- While these policies were initially developed in gregate oil and gas exposure of these organiza- connection with our review and consideration of tions, the volume of nonperforming energy problems in the farm sector, the dislocations and loans, and the condition of their large oil and gas uncertainties resulting from the recent sharp credits. decline in energy prices have created serious The Federal Reserve, together with the other pressures for some energy lenders as well. federal banking agencies, recognizes that condi- Therefore, the Federal Reserve and other federal tions have shifted sharply and unexpectedly in banking agencies recognizing these pressures both the agricultural and energy sectors of our have agreed to follow these policies in superviseconomy. In view of the continued deterioration ing energy banks as well. For its part, the Federin agriculture, the Federal Reserve in February al Reserve Board has already instructed the this year renewed in a slightly modified form the Reserve Banks to conform their practices and simplified seasonal credit program for agricultur- procedures to the policies outlined in the joint al banks. This program is designed to make funds statement. available at the discount window to agricultural I hasten to point out that none of these steps, banks experiencing especially strong loan de- of course, is intended to shield banks engaged in mands. This change is designed to assure that unsafe and unsound or objectionable practices agricultural banks will not face liquidity con- from appropriate supervisory enforcement acstraints in accommodating the needs of farm tion. Rather, the intent is to adopt supervisory borrowers over the planning and production cy- policies that will assist banks that are fundamencle. tally sound and well managed, and that have In addition, the banking agencies in March taken reasonable steps to strengthen their posiissued a joint statement on policies to assist tions and conserve their capital. basically sound, well-managed farm banks to Despite the assistance provided by these poliweather this period of economic adversity. cies, some banking organizations may continue These policies, among other things, accomplish to experience severe and prolonged financial the following. stress. To augment flexibility in dealing with the 1. Permit banks experiencing heavy losses more serious cases, the Board would encourage because of external factors to operate with re- modification of the provisions of the Garn-St duced capital levels even if they are below the Germain Act of 1982, which prohibit acquisitions minimum standards set down in our supervisory of failed banks across state lines before an actual guidelines, provided the banks are following pru- failure occurs and which also prohibit acquisident lending and financial practices and have the tions of failed banks with assets of less than $500 clear potential for replenishing their capital posi- million. The Board believes that these two contions over a reasonable period of time. straints should be eased by allowing the across- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

386 Federal Reserve Bulletin • June 1986 state acquisitions of failing banks and by reduc- remain vacant, or nearly vacant, and this situaing the size of such banks that can be so tion has greatly increased the exposure of banks acquired. In addition, the Board believes that the that are heavily involved in commercial real acquirer of a failing bank should also be permit- estate lending. To some extent the decline in ted to purchase the holding company that owns interest rates should help alleviate the cash-flow the bank and other affiliates of the bank. These problems of those that have borrowed heavily to modifications would help minimize losses to the finance commercial real estate. deposit insurance fund and also help maintain banking services in small communities. One further means of promoting the mainte- INTERNATIONAL LENDING nance of banking services in small communities is through the relaxation of state branching re- I would now like to turn to the international strictions. Such an easing would enable out-of- activities of the banks. Loans to foreign borrowterritory banking institutions to acquire small ers have attracted considerable attention since banks when a separately organized and capital- 1982 when several countries were unable to ized bank might not be viable. continue servicing their external debts as initially contracted. Before 1982, U.S. and other banks had rapidly expanded their lending to many COMMERCIAL REAL ESTATE countries. For example, claims on Latin American borrowers by U.S. banks rose from $38 Besides the agricultural and energy sectors, an- billion to $84 billion from 1977 to 1982. However, other area that bears close watching is commer- by 1982 economic and financial conditions for cial real estate and, in particular, the market for many of these countries were deteriorating. office buildings. In many areas of the country the Countries' debt levels and market interest rates supply of newly constructed office buildings has were high; the United States and major Eurogreatly exceeded the demand and this situation pean countries had not yet emerged from serious has translated into extremely high vacancy rates. recessions; and commodity prices were weak. In fact, the vacancy rate for office buildings in The international debt crisis began to seriously metropolitan areas reached 20 percent at the end threaten bank earnings and capital and became a of last year, the highest rate in the postwar major concern to us all. period. To put this in perspective, the previous While problems in international lending repostwar high, which occurred in the mid-1970s, main, the environment has clearly changed, and was 11.5 percent. most U.S. banks appear better prepared now to A large part of the general overbuilding in the handle these problems than they have been in office market has been a regional phenomenon, many years. Since 1982 the banking industry has most prevalent in the sunbelt states. What is substantially increased total capital funds, while especially troublesome, however, is that difficul- total claims of U.S. banks on Latin American ties brought on by the decline in energy prices borrowers have tended to stabilize. Though still have greatly reduced the demand for office space large, exposure relative to capital has declined in cities such as Houston and Dallas, where significantly. vacancy rates are now among the highest in the Among U.S. banks, the exposure to the heavicountry. Thus banks that were heavily involved ly indebted countries is concentrated in the nine in financing both the Texas energy boom and the largest international lenders, which account for real estate boom have been dealt a particularly almost two-thirds of all loans by U.S. banks to severe blow. In other cities in the sunbelt, such Latin America. The exposure of most other U.S. as Fort Lauderdale and Tampa, the vacancy banks is relatively small. It is especially encourrates exceed 25 percent and are expected to aging, therefore, to note that by raising additionremain at high levels during 1986. Weakness in al capital these large banks have reduced their the market for office buildings has prompted relative exposure to Latin American countries owners to offer concessionary rental rates to from almost 180 percent of total capital in 1982 to attract tenants. Nevertheless, many buildings about 130 percent today. It is also important to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 387 recognize that these lending relationships are programs has given promise of what can ultilong term in nature and that U.S. and other mately be achieved. But permanent success for foreign banks must continue to play important Argentina, Brazil, and other debtor countries roles in financing the economic growth of these embarking on such programs will depend on the countries. willingness of the industrial countries to maintain A second encouraging factor is that both the open markets for the exports of these countries banks and the debtor nations have generally as well as on the countries' ability to regain the addressed payment problems in a reasonable and confidence of their citizens. By merely adopting nonconfrontational way. Since 1982, foreign policies that stem the flight of capital and encourcountries throughout the world have negotiated age the return of previous outflows, many counmore than 50 separate restructuring agreements, tries could significantly reduce their external often by postponing principal payments while debt problems. remaining current on interest. Argentina, which The recent decision by the Executive Board of has received much attention in recent years the International Monetary Fund to work jointly because of its external debt problems, has made with the World Bank in providing at least $3 significant progress, and by the early part of this billion or more of new financing to the leastyear had eliminated all interest arrearages on its developed countries should also help the econopublic sector debt. Most other major debtor mies of the poorest nations. The nominal interest countries are similarly current on their public rates of xh of 1 percent annually should be an sector interest payments. attractive incentive for many of these countries Comprehensive data on nonaccrual loans to to enter the program and work with these organideveloping countries are not available, but the zations to implement needed reforms. Although amount is relatively small. One indication is the U.S. banks have relatively little exposure to fact that one of this country's largest lenders these countries, this lending facility and the recently reported that only about 7 percent of its coordination by the IMF and the World Bank loans to foreign countries that had refinanced that it represents are helpful and encouraging their debt were on a nonaccruing status. This developments. rate is significantly higher than its overall rate of Finally, declining oil prices have improved the nonaccruing loans, but remains a relatively small economic outlook for Brazil and other heavily percent of its loans to countries with payment indebted countries and declining interest rates difficulties. Moreover, most of the foreign nonac- are generally having a beneficial effect on the cruing loans are made to private sector borrow- debtor countries. With the recent decline in ers and are due largely to commercial credit interest rates it is estimated that the Latin Ameriproblems, rather than transfer risk problems. can countries alone will save $10 billion annually The United States and other major countries in interest costs on their short-term and floatinghave recognized the serious and long-term nature rate debt. of the problems that many of the major debtor Despite the progress that has been made, countries face and have endorsed policies that, significant difficulties remain in this sector of when implemented, should help these countries bank lending. The continuing fall in oil prices has regain economic health. The Baker Initiative, severely disadvantaged Mexico and other oilwhich combines additional private and World exporting nations, and the full effects of this Bank lending with structural reforms within the trend have not yet been felt. In addition, many debtor countries, represents a sound approach to uncertainties surround the adjustment programs resolving many countries' payment problems. of developing countries and could threaten con- Many countries have already adopted elements tinued progress. of the approach outlined by Secretary Baker. Nevertheless, recent economic reforms adopt- Argentina and, most recently, Brazil have under- ed by some countries, the lower interest rate taken major economic reforms designed to re- environment, and the significant additions to duce their inflation, encourage local investment, bank capital provide hopeful indications that and promote a more rational pattern of economic progress is being made. Recent actions by some growth. Argentina's brief experience under its Latin American countries to allow more foreign Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

388 Federal Reserve Bulletin • June 1986 direct investment are also movements in the right under the board and the CEO. More often, direction and consistent with the principles em- committees made up of outside directors have bodied in the Baker plan. A number of state- been set up to monitor the working out of probowned firms have been designated for partial or lem loans and assets and the processes by which complete sale. There is some additional empha- the institution exercises control over their asset sis upon measures that would stimulate the pri- portfolio. vate sectors in the developing countries, thus 3. In the area of capital adequacy, minimum providing for the expected need for increased capital requirements were adopted in 1981 to employment in those areas. With continued reverse the decline in bank and bank holding cooperation and free trade, the debtor countries company capital ratios. Since 1981 capital ratios and their creditor banks should be able to avoid have shown a strong increase. The minimum major problems. capital requirements were raised in April last year for regional and multinational institutions, and the disparity in minimum capital require- STRENGTHENED SUPERVISION ments between large and small institutions was eliminated. In January this year we announced a I think we can agree that the difficulties in proposal to supplement the existing capital rebanking underscore the need for a strong super- quirements with an adjusted capital measure visory framework. Such a framework is even that, among other things, would take into acmore important if we are to proceed with deregu- count the risk associated with off-balance-sheet lation in the banking industry. At the Federal banking activities. In addition, we issued guide- Reserve, we have taken a number of initiatives to lines on dividend policies of banks and bank improve our supervision of banks and bank hold- holding companies to ensure that such policies ing companies. I would like to review with you a do not weaken an organization's financial posifew of those initiatives. tion. 1. We recently announced intensified sched- 4. We have taken steps to expand and improve ules for the examination and inspection of banks the flow of information on banking institutions to and bank holding companies. Under the new strengthen our capacity to monitor the financial schedule, banking organizations that are experi- condition of banks and bank holding companies encing problems, as well as the largest organiza- and to detect problems at an early stage. tions, will be examined or inspected semiannu- At this point, I would like to address a quesally. We have also been increasing the size of tion that has been raised frequently in connection our examination staff to meet these new schedul- with the ongoing debate on the tax bill as to ing requirements. whether the reserve method of computing the 2. We recently formalized and strengthened allowable tax deduction for bad debts should be the process of communicating examination and repealed. The proposed repeal would of course inspection findings to the directors of banking make it more costly for banks to maintain loanorganizations. Senior Federal Reserve officials, loss reserves. Moreover, I argue that it would including Federal Reserve Bank Presidents, will inhibit the growth of loan-loss reserves by discommunicate these findings directly to directors couraging banks from maintaining reserves at of those banks and bank holding companies levels at which they might otherwise, thereby subject to the intensified exam schedule. In creating some risk in terms of bank safety and addition, a written summary of examination find- soundness. From my perspective as a bank reguings—separate from the complete examination or lator, I believe measures should be taken to inspection report—will also be distributed to encourage banks to increase their loan-loss rethese directors. It is encouraging that many bank serves. Therefore, from that perspective, I boards of directors and chief executive officers would favor the retention of the existing tax are concerning themselves with the quality of treatment for loan-loss reserves, or its liberalizaassets and with the review processes by which tion. But I recognize, of course, that a decision that quality is maintained. In many cases, a more on this matter must be made against the need to senior officer has been given the responsibility achieve reductions in the budget deficit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 389 Another matter that has received considerable ing severe strains resulting from heavy exposure attention recently is the whole issue of account- to the agricultural, energy, and in some cases, ing flexibility. For example, there have been a the real estate sectors. However, it is important number of proposals that would allow banks to to keep these problems in proper perspective and defer over a number of years the charge-off of to recognize that the great majority of banks uncollectible loans. While I strongly endorse the remain in healthy condition and that the system ongoing efforts to improve accounting principles is fundamentally sound. and practices, I would caution against any Much progress has been made over the last changes—such as the deferral of loan charge- several years in encouraging banking organizaoffs—that would impair the meaningfulness or tions to increase their capital bases, and this credibility of bank financial statements. encouragement has contributed significantly to In summary, the banking industry as a whole the ability of banks to withstand periods of has demonstrated a remarkable ability to with- uncertainty and adversity. The prospects of lowstand the financial pressures and volatility of the er inflation and interest rates and improved ecopast several years. To be sure, a considerable nomic performance generally augur well for the number of banking organizations are experienc- future health and stability of our banking system. Statement by William Taylor, Director, Division cial health that is generally commensurate with of Banking Supervision and Regulation, Board their degree of leverage. of Governors of the Federal Reserve System, Our staff estimates suggest that about a third of before the Subcommittee on Conservation, the full-time producers on commercial-sized fam- Credit, and Rural Development of the Commit- ily farms are experiencing financial stress. This tee on Agriculture, U.S. House of Representa- group owes about one-half of the farm debt of all tives, April 9, 1986. such operators. The problems of these farmers have been compounded by the relatively high interest rates that have prevailed over the cur- I am pleased to appear before this committee rent decade. In addition, their efforts to restructoday to review the problems that are being ture debt, or to reduce it by selling some of their experienced by banks in our agricultural commu- assets, have been hampered greatly by the denities and to discuss various proposals to ease cline in farm asset values. the strains resulting from these problems, includ- The great proportion of farm debt is owed to ing H.R. 3868, the Farm Credit Partnership Act, the Farm Credit System, the Farmers Home and H.R. 4267, the Emergency Farm Income and Administration, and individuals. But about one- Credit Act of 1986. quarter of the total is provided by commercial The agricultural sector of our economy is banks, and the banks that have concentrations of experiencing greater problems today than at any such loans have been experiencing increasing time since the Great Depression of the 1930s. stress in recent years. For example, past due and Farm incomes and farm asset values have de- nonaccrual loans at agricultural banks accounted clined sharply over the current decade as crop for 7!A percent of total loans at the end of last prices—responding to a major increase in the year, up from 6lA percent a year earlier, and from global supply of farm products relative to de- about 5 percent at the end of 1982 (the first date mand—have dropped substantially. All our farm- for which such data are available).1 This increase ers have been adversely affected by these devel- has taken place even as these banks have made opments but not all to the same degree. Farmers substantial charge-offs of their loans. Charge-offs who are relatively debt free generally have maintained strong financial positions, although significantly less so than a few years ago. In contrast, 1. For purposes of this testimony, agricultural banks have been defined as those banks with a ratio of farm loans to total farmers who entered the 1980s substantially in loans that exceeds the average of such ratios for all banks, debt have experienced an erosion in their finan- which is now about 16 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

390 Federal Reserve Bulletin • June 1986 have increased in each year of the decade, rising to assist the farm economy, including the recent from just less than one-third of 1 percent of total dramatic fall in energy prices and the substantial loans in 1980 to more than 2 percent of total loans declines in interest rates and in the exchange last year. value of the dollar. The recently enacted farm bill Given the high volume of loan losses and the offers an additional source of support for farm need to add to loan-loss reserves to cover poten- incomes. At the same time, however, prospectial losses inherent in the increasing volume of tive supply conditions for farm products, both at poorly performing and nonperforming loans, the home and internationally, suggest that a substanearnings of farm banks have declined steadily tial rebound in crop prices, and thus in farm and substantially over the decade. The propor- incomes, is not likely to take place in the near tion of farm banks posting negative earnings rose term. Certainly it would appear unwise to base to 18 percent last year, up from 1 percent at the public policy on the assumption that such a turn of the decade. And another 30 percent of all rebound will take place. Accordingly, while farm banks reported earnings on equity of less farmers that are now financially healthy should than 10 percent last year; by contrast, only about be able to avoid serious problems and many 10 percent of the farm banks had earnings this borderline farm operators may be able to work low during the late 1970s and the early 1980s. out of their current difficulties, many other farm- Altogether, agricultural banks recorded a net ers with relatively heavy debt loads face a conreturn of 6 percent on equity in 1985, down from tinuation of serious difficulties. That situation 16 percent in 1980. means, of course, that a sizable number of farm One manifestation of these various negative banks will also continue to experience severe trends has been a rising number of agricultural strains. bank failures. Nearly 70 agricultural banks failed It is altogether understandable that the Conlast year, more than double the number recorded gress is seeking to identify approaches by which in 1984 and up from a minimal number in the late appropriate assistance can be provided to trou- 1970s and the early 1980s. Moreover, the number bled farm banks to aid them and their farmer of farm banks with serious problems has contin- customers to get through this period. In your ued to increase. One indication of this increase is letter requesting a Federal Reserve reprethat at the end of last year there were 330 sentative to appear here today you asked for agricultural banks that had poor-quality loans comment on two such proposals, those proposals that exceeded their total capital; just a few years set forth in H.R. 4267 and in H.R. 3868. In my ago the number was less than 100. The further remaining time, I will summarize the Board's increase in this number reflects not only a rise in assessment of these proposals and then review poor-quality loans but also an erosion of capital with you the actions that the Federal Reserve, that has occurred at many of these banks due to the Office of the Comptroller of the Currency loan write-offs. (OCC), and the Federal Deposit Insurance Cor- Having reviewed the negative side of the farm poration (FDIC) have recently taken to help bank situation, I believe it important that I alleviate the problems being faced by farm banks briefly relate the positive side to provide a bal- and their farmer customers. anced perspective. Nearly 93 percent of the total loans at all agricultural banks are generally of good quality. One-half of all farm banks reported REVIEW OF H.R. 4267 AND H.R. 3868 earnings last year equal to at least 10 percent of their equity. Also, agricultural banks generally The provisions of Titles II and III of H.R. 4267 have a substantial capital cushion to absorb loan would basically augment, with certain modificalosses. The ratio of capital to assets at all agricul- tions, existing Farmers Home Administration tural banks averaged 93/4 percent in September (FmHA) loan programs. Lenders would be oflast year, higher than it was at the start of the fered the opportunity to receive an FmHA guardecade and well above the ratio of IVi percent for antee on principal and accrued interest on rethe entire banking system. structured farm loans, provided that the A number of recent developments should work following conditions are met: (1) principal and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 391 accrued interest on the original loan are reduced large part of interest subsidy and of losses on at least 10 percent; (2) the restructured loan is loans guaranteed would be borne by the taxpayextended at an interest rate at or below the er. Besides these budgetary considerations, such lender's cost of funds; and (3) the borrower is an assistance program raises the question of able to demonstrate a positive pro forma cash whether similar aid should be provided, now or flow for at least five years after the restructuring. in the future, for other broad classes of borrow- In addition, lenders would receive an FmHA ers at U.S. banks and other lenders that are interest subsidy of 1 percent for each 10 percent encountering difficulties. of loan value written off. Besides the budgetary issues, we have serious H.R. 3868, the Farm Credit Partnership Act, reservations regarding the provisions of the bills would offer a similar package of assistance. It, that authorize banks to defer loan losses over a too, would provide an interest rate subsidy that 10-year period. Such a deferral does not address is tied to the size of a principal write-down and a bank's fundamental financial problems. Conseextend a government guarantee to the remaining quently, in the case of a bank whose capital has loan balance. The interest rate subsidy in this been severely depleted or eliminated by loan proposal would appear to be a bit more generous, losses and whose earnings prospects are poor, however, ranging up to 5 percentage points. It deferral of loss recognition, rather than providing would be provided as follows: 2 percent by the a solution to a problem, simply puts off the day federal government; 2 percent by a state govern- when such problems must be faced. And that ment (if a state chooses to participate in the raises the clear danger that when the problems program); and 1 percent by the lender. are addressed they will be more difficult to sort It appears that the proposed bills are intended out and resolve and will prove more costly to the to encourage a greater volume of farm loan deposit insurance fund. Thus, in such circumrestructurings by going beyond existing FmHA stances the Board believes that it would be far programs. Besides the encouragement that better to seek a permanent solution to the bank's would be provided by the more generous interest problem by having it obtain new capital or, if its subsidies offered by H.R. 3868, both proposals problems are too severe, by merging it with a would authorize lenders to write off loan losses stronger institution. over a 10-year period rather than in the year in There are, of course, less extreme situations in which the losses occur, which is the present which a bank has suffered substantial loan losses practice. but, even after recognition of these losses, re- The debt restructuring programs proposed un- tains a sizable amount of capital—although perder the two bills would undoubtedly benefit haps not up to minimum supervisory standards— farmers. Farmers that participate in these pro- and has reasonably good prospects for recovery grams would be forgiven part of their debt obliga- over time. In these cases rather than allowing tions and have their interest costs reduced while banks to amortize losses over a number of years retaining full title and use of their assets. Lenders and then report regulatory capital at an artificial would also receive clear benefits even though level, it would be more straightforward for superthey would experience a loan write-down and visors to permit them to operate with capital at might stand to receive less interest than was reduced levels, even if below supervisory stanpromised in the terms of the original loans. But dards. The Federal Reserve and other bank these are conditions that they would face in any supervisors have decided to employ this apevent in the case of these loans so that they are proach as part of their general program for made no worse off by these features of the assisting farm and energy banks. proposals. At the same time, they obtain a full Another undesirable feature of stretching out government guarantee on restructured debt and, loan losses over a number of years is that this at least in certain cases, receive an interest practice is not consistent with Generally Acceptsubsidy that will provide them greater interest ed Accounting Principles (GAAP). As a conserevenues than they would otherwise receive. quence, regulatory accounting statements would Unfortunately, these benefits to farmers and show levels of capital higher than that level banks would not come free, as the costs of a reported on financial statements prepared under Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

392 Federal Reserve Bulletin • June 1986 GAAP. This disparity would tend to cause public the policies of the program in some detail, I will confusion and impair the usefulness and credibil- limit my remarks here to the following summary ity of regulatory financial statements. of its key elements.2 In this regard the Board would note that generally accepted accounting principles already pro- Capital Flexibility .The Federal Reserve will vide a reasonably flexible approach for restruc- exercise forbearance in applying its capital turing troubled but viable loans. In particular, guidelines to situations in which banks have Financial Accounting Standard No. 15 permits a suffered an erosion of their capital base because lender to restructure troubled loans provided of losses on farm and energy loans but have the that under the modified terms the total of antici- clear potential for restoring their capital position pated future cash receipts can reasonably be over a reasonable period of time. This approach expected to at least equal the original principal of is basically consistent with the objective that was the loan. This restructuring, too, is an element of sought in establishing these guidelines—namely the assistance program that the banking agencies to ensure that banks maintain adequate capital have agreed to implement to assist farmers. during reasonably good economic times so that they are able to withstand and ultimately overcome unanticipated loan losses or other adversi- BANKING AGENCY POLICIES TO ASSIST ties that can occur when times turn bad. FARM AND ENERGY BANKS AND THEIR CUSTOMERS Bank Forbearance on Farm and Energy Loans. The Federal Reserve has reaffirmed its Having offered the Board's general views on policy of not discouraging banks from forbearing H.R. 3868 and H.R. 4267, I should now like to on farm loans in cases in which there is a review that assistance program with you. The reasonable prospect that a loan restructuring will key elements of the program were first described work to the benefit of the bank as well as the on March 11, when the Federal Reserve, the borrower. Recognizing the dislocations that may FDIC, and the OCC issued a joint policy state- result from the decline in energy prices, the ment in conjunction with their appearance before Federal Reserve believes that it is also approprithe Senate Committee on Banking, Housing, and ate to follow this policy in the case of energy Urban Affairs. How these policies might be related loans. specifically implemented were discussed during the hearings, and further discussions were held Utilization of FASB No. 15. Consistent with with members of the Senate as well as other the loan forbearance policy, the Federal Reserve members of the Congress subsequent to the will not require an automatic charge-off of rehearings. One important outcome of these dis- structured loans when they meet the criteria set cussions was that the program, which focused on down in Generally Accepted Accounting Princifarm banks and their customers when the joint ples—in particular, Financial Accounting Stanstatement was issued, was extended to energy dard No. 15 (Accounting by Debtors and Credibanks and their customers. At the end of March, tors for Troubled Debt Restructurings). the three agencies decided to formally implement the assistance program. Change in Reporting of Restructured Loans. For its part, the Board had already instructed To avoid possible public association of restructhe Reserve Banks—in a telephone conference tured loans that are performing in accordance call held just after the Senate Banking Commit- with modified terms with past due and nonactee hearings—to generally conform their prac- crual loans, such restructured loans will hencetices and procedures to the policies outlined in forth be reported in the regular loan schedule of the joint statement. Written instructions for im- the Call Report. plementing the program were sent to the officers in charge of supervision and regulation at Federal Reserve Banks on March 28. Since I am 2. The attachments to this statement are available on request from Publications Services, Board of Governors of attaching a copy of this letter, which discusses the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 393 Before concluding, I would point out that the serve would encourage the Congress to modify assistance program will not, by itself, address all provisions of the Garn-St Germain Act of 1982 problem situations that appear likely to arise in that prohibit acquisitions of failed banks across the farm and energy sectors. It seems unavoid- state lines before an actual failure occurs and able that we will continue to have banks with that also prohibit acquisitions of failed banks problems so severe that they cannot continue to with assets of less than $500 million. The Board operate without an infusion of additional capital believes that these two constraints should be and fresh management. It is very important for eased by allowing across-state acquisitions of banking supervisors to be able to deal with these failing banks and by reducing the size of failed situations as quickly and effectively as possible and failing banks that can be so acquired. In to minimize their impact on local communities addition the Board also believes that the acquirer and on the banking system generally. of such banks should be permitted to purchase To help achieve the disposition of serious the bank's holding company and its affiliates. • problem situations in that way, the Federal Re- Statement by Frederick R. Dahl, Associate Di- U.S. goods and services in a manner consistent rector, Division of Banking Supervision and Reg- with maintaining bank safety and soundness and ulation, Board of Governors of the Federal Re- with avoiding the risks, conflicts, and other serve System, before the Subcommittee on adverse effects that the Congress has sought to International Economic Policy and Trade of the prevent through limitations on the combination Committee on Foreign Affairs, U.S. House of of banking and commerce. To this end, the Representatives, April 22, 1986. Board is required to review each proposal for unsafe or unsound banking practices, undue con- I appreciate the opportunity to appear before this centration of resources, decreased or unfair comsubcommittee on behalf of the Board of Gover- petition, conflicts of interest, and for any materinors to discuss the role of the Federal Reserve in al adverse effects on the safety and soundness of implementing the Bank Export Services Act. affiliated banks. The Board has asked me to emphasize that it Having established these safeguards, the Confully supports both the efforts to assure that the gress permitted these ETCs to engage in a broad United States has a strong and expanding export range of activities and services that assist in sector encompassing a broad range of industries conducting international trade. These activities and firms, as well as the specific role that bank- include international market research, consulting organizations, through export trading compa- ing, insurance, transportation, product research nies, can play in this effort. A strong export and design, product modification, taking title to sector is a critical element of a healthy economy. goods, and many others. Recognizing this, the Board has sought to admin- In October 1984, the Board submitted a report ister the Bank Export Services Act as the Con- to the Congress that described the Board's imgress intended—to optimize the usefulness of plementation of the BESA to that date. My export trading companies in promoting the ex- intention today is to provide the subcommittee port of goods and services from the United with an update of that report, including a descrip- States. tion of the extent and nature of current opera- As you are aware, the Bank Export Services tions of ETCs in which banking organizations Act (or BESA), which is Title II of the Export have invested, and an assessment of their per- Trading Company Act of 1982, authorizes bank formance. holding companies to acquire equity interests in Ever since the passage of the BESA, the export trading companies (ETCs), subject to Board's approach has been to establish regulareview by the Federal Reserve Board. This legis- tions that further the chief purpose of the legislalation was designed to permit banking organiza- tion—promotion of exports from the United tions to participate in promoting the export of States—while maintaining the safety and sound- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

394 Federal Reserve Bulletin • June 1986 ness of the investing banking organizations. I expectations. In a number of instances ETCs believe that the Board's regulations have met have scaled back their operations significantly these objectives while keeping its procedures for since they opened. All but a few of the active banking organizations to invest in ETCs to a companies have had operating losses. minimum. Many of the difficulties that ETCs have experienced have been those normally associated with the startup of new lines of business. These startup difficulties have, of course, not been INVESTMENTS BY BANKING limited to the ETCs owned by banking organiza- ORGANIZATIONS tions. Besides those difficulties, some of the problems that we have seen are peculiar to the At the time of the Board's Report to the Con- activities of trading companies, regardless of gress submitted in October 1984, two years after how long they have been operating. For exampassage of the Export Trading Company Act, the ple, one ETC encountered substantial difficulties System had acted upon 29 notifications to estab- because a major customer broke the terms of its lish export trading companies. As of April 15, trade agreement; another had its capital wiped 1986, the Federal Reserve System had acted out because of its inability to deliver on a major upon 40 notifications to make initial investments contract; and a third was closed after encounterin export trading companies. Most of this activity ing significant losses because of the holding occurred between mid-1983 and early 1985. In company's inability to control the trading activithe past year, there has been a noticeable decline ties of its ETC. Besides these cases, at least four in such investments. There is currently one noti- bank holding companies have discontinued the fication pending in the Federal Reserve System. operations of their ETCs either temporarily or permanently because the operating losses were In addition, the System has acted upon eight found to be unacceptable. notices to make additional investments in ETCs or to expand the scope of their activities. The More fundamentally, the fact that ETC per- Board has not objected to any notification to formance has not met expectations is attributable establish ETCs or to expand the scope of their to the generally bad export climate that has activities. existed for several years as illustrated by the These numbers, however, do not accurately U.S. trade deficit, which increased from $25 reflect current bank holding company involve- billion in 1980 to approximately $125 billion in ment in ETC activity. Eleven of those ETCs on 1985. As is generally well known, the weakness which the Board acted are not currently opera- of U.S. exports reflects a number of macroecotional. Accordingly, as of April 15, 1986, there nomic developments that took place in the early were 29 operating ETCs owned by bank holding to mid-1980s and that have continued until fairly companies. (Tables attached as an appendix to recently: the very substantial rise of the dollar this testimony show the status of each ETC against foreign currencies; the relatively sluggish notification acted upon by the Federal Reserve growth of real activity in foreign industrial coun- System.1) tries; and the drop in imports of countries experi- The performance of operating ETCs has been encing debt-burden difficulties, especially Mexitracked in a number of ways including the annual co and other Latin American countries. reports by, and regular inspections of, bank The appreciation of the dollar until early 1985 holding companies, and frequent, informal con- has had a particularly severe effect on the intertacts that the Reserve Banks have with bank national price competitiveness of U.S. products. holding companies in their Districts. Drawing on Although a large part of the dollar's appreciation these sources of information, it is clear that the has been reversed over the past several months, operations of these ETCs have not lived up to we cannot expect any immediate improvement in U.S. export performance. Nevertheless, the improved prospects for U.S. export performance 1. The attachments to this statement are available on make it reasonable to expect the outlook for request from Publications Services, Board of Governors of bank-affiliated ETCs to get better. the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 395 The factors just mentioned have been the goods and services produced in the United major force delaying development of ETCs affili- States. ..." This definition reflects the goal of ated with banking organizations. The Board's the Congress of using the facilities and expertise administration of the BESA has not been a of U.S. banking organizations to improve the barrier to accomplishing the goals of the act. All export performance of U.S. manufacturing and of the notifications have been acted upon within servicing firms. In accordance with this purpose, the 60-day time period set forth in the statute, the Board's regulations establish that an ETC in and no notification by a bank to invest in an ETC which a banking organization may invest shall has been disapproved. Moreover, to expedite derive more than one-half of its revenues over a review of notifications the Board has decentral- two-year period from U.S. exports or from faciliized the process and given the Reserve Banks tating U.S. exports. authority to act on most ETC notifications. Fif- This revenues test was designed to ensure that teen of the 24 notifications to establish ETCs the chief efforts of an ETC are directed to filed after adoption of the delegation procedures exporting U.S. goods and services, as the Conwere processed by the Reserve Banks with no gress intended, rather than to trading outside the Board review. In addition, when the Board has United States. This position is fully supported by reviewed notifications, it has not placed specific the legislative history of the BESA. The Conferlimitations or restrictions as a condition of per- ence Report states: mitting an investment, although it has taken note of, and commented upon, the scope of some of [W]hile it is understood that ETCs will periodically the proposals. have to engage in importing, barter, third party trade, and related activities, the managers intend that such activity be conducted only to further the purposes of the Act. THE BOARD'S REGULATIONS Some bank-affiliated ETCs have advocated IMPLEMENTING THE BESA excluding from the revenues test those revenues generated from trade outside the United States. I will now discuss four aspects of the Board's They claim that counting those revenues as nonimplementation of the BESA. These issues, export revenues restricts the ability of ETCs to which were treated at length in the Board's 1984 compete with foreign-owned trading companies. report to the Congress on implementation of the The reason that the Board has not taken this BESA and were also the focus of discussion in approach is that it would permit an ETC to the recent GAO report on Implementation of the engage almost exclusively in trade outside the Export Trading Company Act of 1982, are the United States with little or no benefit to U.S. following: (1) the revenues test for ETCs; (2) export performance and yet would subject the leveraging of ETCs; (3) exemption of transac- affiliated U.S. banking organization to all the tions by banks with affiliated ETCs from the risks of the trading activity. Such a result is not requirements of section 23A; and (4) the export consistent with the intent of the Congress in of services by ETCs and their affiliated compa- enacting the BESA—which, as I have stated, nies. permits banking organizations to invest only in ETCs "organized and operated principally for 1. Calculation of Export Revenues. At the the purpose of exporting . . . goods and services outset I must emphasize that the chief purpose of produced in the United States" (emphasis addthe BESA was the promotion of U.S. exports. ed). The BESA was not designed to promote international trade outside the United States or imports 2. Leveraging. In reviewing notices by bankinto this country. The BESA defines an ETC as a ing organizations to invest in ETCs, the Board company that is "exclusively engaged in activi- considers the assets-to-equity ratio of each proties related to international trade" and that is posed ETC on a case-by-case basis. In this "organized and operated principally for pur- review, the Board takes into account the riskiposes of exporting [or facilitating the export of] ness of the proposed activities of the ETC. This Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

396 Federal Reserve Bulletin • June 1986 is done to carry out the Board's duty to preserve proved a leveraging ratio of 17:1. This action is the safe and sound operation of bank holding illustrative of the flexible approach followed by companies and their affiliated banks. the Board with respect to the capitalization of In the International Lending Supervision Act ETCs. More generally, the Board has not condiof 1983, the Congress required the bank regula- tioned approval of any ETC notice on a specific tory agencies to "cause banking institutions to leveraging ratio. achieve and maintain adequate capital by establishing minimum levels of capital for such bank- 3. Exemption of Transactions by Banks with ing institutions." These levels have been estab- Affiliated ETCs from the Requirements of Seclished. For this purpose, capital requirements are tion 23A. The BESA provides that transactions assessed on a consolidated basis, although the between a bank and its affiliated ETC are covcapital adequacy of subsidiary organizations is ered by section 23A of the Federal Reserve Act. also taken into account. The latter is necessary Section 23 A generally limits the amount of credit because the condition of affiliated organizations that banks may extend to a nonbank affiliate and can have an important effect on their related subjects such credit extensions to certain collatbanks. eral requirements. The purpose of Section 23A is Capital adequacy is a critical element in the to protect the safety and soundness of the bank financial strength of an ETC and its ability to by identifying and restricting those classes of withstand unexpected adverse developments. A affiliate transactions that could result in losses to sufficient capital cushion is necessary to prevent a bank because the affiliate relationship may an ETC's difficulties from affecting the financial have colored the bank's objectivity in evaluating resources of the parent holding company or the the creditworthiness of the borrower. safety and soundness of affiliated banks. Experience over the years has demonstrated In general, the Board is still in the process of that limitations on self-dealing between a bank assessing the capital needs of ETCs and has not and its affiliates are essential to prevent abuses, established capital, or leveraging, requirements. to maintain bank safety and soundness, and to To the extent ETCs engage in nonbanking or prevent excessive risk to the federal safety net. nonfinancial activities that pose greater risk, it is Accordingly, the Board as a matter of policy has not unreasonable to expect ETCs to maintain generally not granted exemptions from section higher capital ratios than banks. As a general 23A. With respect to ETCs, however, the Board matter, capital levels should be commensurate has included in its regulations a waiver from the with the risk of the company's activities. strict collateralization standards of section 23A To streamline ETC notifications, the Board for those transactions in which the ETC takes has delegated the authority to review a banking title to goods against a firm order and the lending organization's notice of intent to invest in an bank maintains a security interest in those goods. ETC to the appropriate Federal Reserve Bank. The Board has determined that in these circum- If, however, the proposed leveraging ratio of the stances a waiver would permit ETCs to obtain ETC exceeds 10:1, then Board review is re- financing for transactions in goods without creatquired. The proposed leveraging ratio, together ing undue risk to the affiliated bank. In addition, with the other facts pertaining to the proposal, is the Board has stated that it would consider then evaluated on a case-by-case basis. granting ETCs additional waivers from these In this regard, the Board recently acted on a collateral requirements based on specific rerequest from a bank holding company that had quests. established its ETC under the delegated proce- The experience to date, though limited, reindures. The bank holding company sought to forces the desirability of maintaining the protecadopt a leveraging ratio for its ETC that was tions afforded by section 23A. In at least one higher than the 10:1 ratio it had proposed to the instance that we are aware of, a bank lent to its Reserve Bank earlier. After having determined affiliated ETC in violation of section 23A. The that the nature and riskiness of the activities loan went bad because of misjudgments on the proposed for the ETC were similar to those of trading side, and significantly affected the condisecured lending transactions, the Board ap- tion of the bank. Therefore, we question the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 397 wisdom of a total exemption from section 23A Board's regulations permit bank-affiliated ETCs for transactions with an ETC, as some bank- to offer a broad range of trade-related services affiliated ETCs have suggested. Especially in the both in the United States and abroad. For examarea of extensions of credit, it is important to ple, the BESA and the regulations permit ETCs strike the proper balance between encouraging to provide consulting, market research, marketthe growth of ETCs and preventing imprudent ing, insurance, product research and design, legal banking practices. assistance, transportation including freight forwarding, warehousing, foreign exchange, financ- 4. Exporting Services. The BESA requires that ing and taking title to goods, when provided to a bank-affiliated ETC engage "exclusively" in facilitate the trade in goods and services proactivities related to international trade and "prin- duced by others. According to the notifications cipally" in exporting or facilitating exports from to the Federal Reserve, a number of ETCs are the United States. The Congress permitted an providing many of the trade services listed in the exception to the traditional separation between statute. Moreover, the Board has recognized that banking and commerce for investments by bank- this list of services is not exhaustive. As an ing organizations in ETCs because it viewed example, upon demonstrating that the activities banks as "the best intermediary between the were related to international trade, one ETC has potential U.S. exporter and the foreign buyer acquired a company in England that engages in because they already have offices (branches) at customs bonding services and in certain types of both ends of the chain, and are already communi- inventory control services related to cross-borcating with business people on both ends." To der trade. further this purpose, the Board's regulations A bank-affiliated ETC may provide these and provide that an ETC in which a banking organi- other trade services to any of its affiliates (other zation may invest must derive more than one- than a subsidiary), including its parent bank half its revenues from exporting or facilitating holding company and its bank and nonbank the export of goods and services produced in the affiliates, and to its customers to facilitate the United States by persons other than the ETC or export from the United States of the services of its subsidiary. the affiliate or the customer. Revenues derived Under the BESA and the Board's regulations, from such services would be considered export a banking organization may invest in a company revenues under the Board's regulations. A bankthat offers any of a variety of services that in one affiliated ETC could also form a joint venture way or another facilitate trade. A banking organi- with a manufacturing or a service company to zation, however, may not invest in any company export the goods or services of the joint venture of its choice simply because that company has partner. Revenues derived from these activities foreign customers. Such an interpretation would are also considered export related and count have the effect of substantially increasing the toward meeting the revenues test in the Board's scope of activities in which a bank holding com- regulations. pany could engage both in the United States and abroad. It not only would deviate from the purpose of the BESA but would disrupt the framework that the Congress has established in SUMMARY the Bank Holding Company Act for investments by bank holding companies in other nonbanking In sum, the Board believes that its regulations companies. It would permit banking organiza- appropriately implement the BESA by furthering tions to invest in an ETC engaged in an otherwise the purposes of the statute to promote the export prohibited nonbanking activity simply on the of U.S. goods and services while maintaining the grounds that the company had foreign custom- safety and soundness of the banking organizaers. tions that invest in ETCs. The Board has sought The Board's regulations do not limit the ability to maintain flexibility in its approach to such of bank-affiliated ETCs to provide trade ser- investments because of the difficult export envivices. On the contrary, the BESA and the ronment and because there is still little experi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

398 Federal Reserve Bulletin • June 1986 ence with the industry generally. The Board of increased experience regulating investments expects to continue to review its policies in light in ETCs and in response to individual requests. Statement by Paul A. Volcker, Chairman, Board pressions, wars, or major inflations—not just in of Governors of the Federal Reserve System, the United States but also, so far as comparable before the Subcommittee on Telecommunica- statistics are readily available, in other major tions, Consumer Protection, and Finance of the countries. That fact itself raises questions as to Committee on Energy and Commerce, U.S. what is different now. House of Representatives, April 23, 1986. In that connection, I should emphasize that there is nothing particularly significant or alarm- I appreciate this opportunity to discuss the rapid ing, in itself, about one or another ratio of debt to growth of debt in the United States and its income. Even if the statistics were fully compapossible implications for our financial markets rable and accurate through time, there are a and economy. As you know, this is a subject number of reasons why the ratios might change about which I have expressed some concern over time or between countries. One major influfrom time to time over the past few years, and I ence, for instance, is the amount of financial welcome an exploration of the many difficult and intermediation characteristic of an economy. complex issues it raises. Given those difficulties The data I just cited nets out debt of defined and complexities, no single hearing can do more financial intermediaries—banks, thrift instituthan identify tendencies, raise questions, and tions, finance companies, and other "financial" point to areas for further study. In that sense, firms. But "nonfinancial" firms and governthis testimony is more descriptive than prescrip- ments both lend and borrow, more today than tive, but I think it does suggest the importance of before, and, from one point of view, the related the subject. debt is double counted in the data. Stated anoth- The increase in indebtedness since the early er way, offsetting borrowings and loans on bal- 1980s certainly has been extraordinary.1 The ance sheets of firms may not suggest the same debt of domestic nonfinancial sectors—the mea- risks and "leveraging" as borrowings not sure of credit monitored by the Federal Open matched by comparable financial assets. Market Committee—has increased at rates rang- However, even after allowing for identified ing from about 11 to 14 percent in each of the areas of double counting or greater intermediathree years of the current economic expansion. tion—for instance, the spate of advance refund- This growth has been much faster than the ings late last year by state and local governnominal increase in GNP and income, breaking a ments—the overall data do strongly suggest pattern that had persisted through most of the greater "leveraging" among borrowers; that is, a postwar period. larger burden of interest and principal payments Until the early 1980s, debt and income expand- relative to net worth and income streams. In the ed at roughly comparable rates over time, and corporate sector, the same conclusion is implicit the ratio of debt to income fluctuated at or just in the massive net retirement of equity recently, below 140 percent. Since then, however, as debt amounting to some $150 billion over the last two expansion far outpaced the growth of income, years, even though retained earnings have been this ratio has risen sharply to almost 170 percent rising. at the end of 1985. Historically, changes of that The willingness to take on large volumes of magnitude, up or down, are unusual except in additional debt certainly has not impeded the highly disturbed economic circumstances—de- economic expansion. To some degree, the high levels of borrowing have helped support the spending needed to keep the economy growing. However, at some point a rising debt load is not 1. The attachments to this statement are available on sustainable. Debt cannot rise without limit relarequest from Publications Services, Board of Governors of tive to the income needed to service it, and the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 399 increased leveraging implies smaller safety mar- "crowding out" of private borrowing. In subgins to deal with economic adversity. Conse- stantial part, the simultaneous rapid expansion of quently, continuing rapid growth of debt has both federal and private debt has been a reflecdisturbing implications for the fragility of the tion of the relative ease with which this country financial system over time, and the question is has attracted savings and capital from other especially apropos at a time when certain impor- countries in recent years. tant groups of borrowers are already under se- In effect, there has been a massive imbalance vere financial stress. The vulnerability of the between the generation of loanable funds at economy to unanticipated increases in interest home and the amount of borrowings. The resultrates or a shortfall in income appears to be ing pressures on interest rates have been moderincreasing, rather than the reverse. Surely we ated by the capital inflow from abroad. But that must be concerned about achieving a better inflow exacts a price. The net transfer of finanbalance in the sources of our economic expan- cial resources has been accompanied by a similar sion if we wish it to be sustained. transfer of real resources to the United States— or to put it in more comprehensible language, record trade deficits. And we have, in the space of a few years, reversed our position as the SOURCES OF CREDIT GROWTH largest world creditor (net) and are in the process The very structure of the growth of debt in the of becoming the largest world debtor. last few years reflects underlying imbalances in We do not want those developments to continour national economy. To a considerable extent, ue indefinitely—ultimately they are both politithe unusually rapid growth of debt in recent cally and economically unsustainable. The willyears directly reflects the borrowing by the fed- ingness of foreigners to advance credit to the eral government to finance an unprecedented United States is not inexhaustible, and the capistring of budget deficits. Usually, budget deficits tal inflow and related trade deficit has been and federal borrowing decline as the economy maintained at the expense of our own manufacrecovers from recession, boosting tax receipts. turing industry. In the past three years, by contrast, the budget Moreover, for a country as well as an individdeficit has remained extraordinarily high during ual or business, rising debt levels imply greater the expansion, and federal debt held by the obligations to make interest payments out of public has grown more than 15 percent each future income. This situation would be of less year. concern if the foreign savings could be seen as The federal government is our strongest bor- being used to build up our domestic productive rower, and an increase in the federal debt ordi- capacity, improving our prospects for growth narily would not connote greater weakness in our and giving us a stronger base from which to make credit structure. Even then, however, the need interest or dividend payments abroad. But with to service that debt requires higher taxation than domestic investment spending relatively modest would otherwise be necessary—with conse- in recent quarters, it seems evident that in large quences for economic efficiency—and pressures measure the foreign lending is going, directly or of government debt service have historically indirectly, to fill the deficiency in domestic savsometimes led to excess money creation and ing created by federal deficits. In a real sense, inflation. the rapid growth of federal debt and imbalance in Viewed from an economy-wide perspective, foreign transactions has placed a mortgage on large borrowings by the federal government have our future. typically been accompanied by small increases in Perhaps the most striking evidence of greater private debt. In the current setting, however, willingness to incur debt can be found in the borrowing by nonfederal sectors also has been substitution of debt for equity associated with unusually strong, with indebtedness by house- the wave of mergers, leveraged buyouts, and holds, businesses, and state and local govern- stock repurchase programs over the past few ments all rising relative to GNP. years. These activities resulted in the gross re- In that sense, it's hard to see direct evidence of tirement of about $100 billion in outstanding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

400 Federal Reserve Bulletin • June 1986 equity of nonfinancial corporations in 1984 and for interest expenses. However, these provisions again in 1985, funded in the initial stages primari- and their incentives have not substantially ly by new debt issues, amounts not nearly offset changed in the 1980s, and lower marginal tax by new sales of equity. rates tend to reduce the incentives. The unusual volume of equity retirements may The inflation experience of the 1970s probably have accounted for roughly 1 percentage point of had a profound effect on attitudes toward debt. debt growth in each of the past two years. While During much of that period, inflation rates outsome of this debt may subsequently be paid stripped interest rates, making leveraged buying down through sales of assets, or with equity a seemingly attractive economic strategy. Some obtained by sales of stock or internally generated borrowers may have expected inflation to pick cash flow, it seems clear that at least for some up again as the economy expanded after 1982, time a significant number of businesses will be inducing them to buy in advance of price incarrying more debt, and therefore greater finan- creases and in anticipation of repaying debts in cial exposure, than if these corporate restructur- dollars of lower real value. Perhaps they looked ings had not occurred. to some degree to the borrowing patterns of the These concerns are mitigated by the substan- federal government as justification of a view that tial profits and cash flow of many businesses, so debt creation is benign. that equity and cash cushions have been better This tactic might have seemed quite risky and maintained than debt data alone might suggest. unattractive if borrowing had to be done at the Moreover, the recent surge in stock prices has high, long-term rates prevailing over this period. greatly bolstered the market value of corporate But the greater availability of short- and floatingequity—ratios of market valuations of corporate rate instruments reduced the risk considerably debt to equity have actually declined in the past because if inflation did not rebound short-term year. Declining interest rates also moderate the rates would be expected to move lower. debt burden. Nonetheless, the trend in debt The shift to floating-rate instruments is but one creation, if extended, would imply some increase example of innovations in financial markets that in financial risk for the economic system. have played a role in supporting, if not encourag- In the household sector, saving rates have ing, the growth of debt. The proliferation of been unusually low, and both consumer and techniques such as interest rate swaps, securitimortgage indebtedness have risen much more zation of loan portfolios, and third-party guaranrapidly than disposable income. Some part of the tees may have given borrowers access to sources rise in the ratio of debt to income for house- of funds that might otherwise have been closed to holds—which stands at a postwar high—un- them, and reduced perceptions of risk. Many doubtedly reflects lengthening debt maturities, smaller or growing companies have long used shifting demographics, and greater convenience low or unrated bonds as an important financing use of credit, rather than an underlying increase technique, and those securities clearly have a in debt burdens. Even so, it appears that house- legitimate role in finance. But recent innovaholds, like businesses, have become more willing tions, relying on the use of such bonds to finance to take on debt, at the expense of more vulnera- large takeovers of well-established companies, ble financial positions. seem to have opened new channels from lenders to borrowers, increasing the flow of credit for particular uses. SHIFTING ATTITUDES TOWARD DEBT For intermediaries, the rapid development of secondary markets at home and abroad for loans The reasons for the apparent shift in attitudes are of various types has enabled them to originate a not easily identified and quantifiable. It is evi- far larger volume of credit than would be consisdent that the tax system favors debt over equity tent with their own command over resources. In sources of funds for businesses through its differ- addition, concerns over exposure to interest rate ential treatment of interest and dividend pay- fluctuations probably do not constrain asset ments. The tax system also encourages house- growth at banks or thrift institutions to the hold borrowing by allowing unlimited deductions degree that they once did, given the greater Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 401 opportunities to structure both assets and liabil- risk of unexpected movements in interest rates ities to manage the degree of interest rate risk. has been shifted onto borrowers. Most recently, At the same time, elimination of most deposit borrowers have benefited from this shift, as rate ceilings allows depository institutions to declining interest rates have reduced their intercompete for funds for lending under a variety of est costs and enabled them to extend debt matucircumstances, even if interest rates were to rise rities at considerably lower rates than if they had sharply. And the lifting of many usury ceilings been using long-term credit all along. But the has meant that lenders would continue to be strategy can, and does, carry considerable risk willing to make credit available under such con- that an unanticipated rise in interest rates could ditions. Thus, deregulation has substantially di- sap the financial strength and creditworthiness of minished the threat of constraints on credit avail- a substantial number of borrowers. ability as credit markets tighten, though it may My general concern relates primarily to the also imply a wider swing in interest rates over the degree to which the continuing buildup of debt cycle. may, as a by-product of eroding financial posi- From one perspective, these developments tions, leave a substantial number of borrowers so have increased the efficiency of our credit mar- extended that they would have great difficulty kets and improve the distribution of saving dealing with unanticipated financial setbacks. Of among competing uses. The greater variety of course, borrowers ordinarily do not take on debt instruments available enables borrowers to tailor that they expect, with any high degree of probathe maturity and other characteristics of debt to bility, will cause them problems ahead (although their specific needs or expectations. And with even that assumption may not be valid with deregulation, borrowers probably feel a greater respect to a relatively few depository institutions sense of assurance that funds will be available to in hard-pressed financial circumstances that roll over existing debt, even if interest rates have been willing, in effect, to make high-stake should rise. On the supply side of the credit gambles with insured depositors' money). Nonemarket, the ability of intermediaries to reduce theless, the larger the share of income devoted to interest rate risk, to compete for funds without debt servicing in relatively prosperous times or regulatory constraint, and to replenish lendable the smaller the equity cushion—and that has funds through sales of assets probably has en- been the trend over rather a long period of time— couraged a more aggressive pursuit of lending the more likely it is that an unexpected shortfall opportunities and an eager embrace of innova- in income or rise in interest rates will lead to tive techniques to appeal to borrowers. problems in meeting obligations. For individual borrowers, income could weaken owing to factors beyond their control, reflect- CONSEQUENCES AND CONCERNS ing conditions in a particular region or industry as well as a general downturn in the economy. A On balance, the net effect of shifting attitudes substantial rise in interest rates could prove and financial innovation appears to have been to especially troublesome, given the still heavy increase the expansion of private debt. Many of reliance on short-term or floating-rate debt. the particular techniques developed are designed Many borrowers may minimize such possibilito reduce risks for one or more of the parties ties—and economic policy typically works to directly involved. The larger question remains as limit the risk. But all of history suggests that it to whether risks have, in fact, been reduced on would be shortsighted to behave as if such possibalance for the financial system and the economy bilities did not exist. as a whole. The increase in total debt burdens, The agricultural sector of our economy prothe longer and larger chain of transactions be- vides ample evidence of the effect of unexpected tween ultimate borrowers and lenders with a developments on highly leveraged borrowers. diffusion and possible widening of credit judg- Those farmers who went deeply into debt in the ment, and the greater internationalization of the late 1970s in anticipation of maintenance of highsystem all raise questions. er land and crop prices are experiencing the most One thing seems reasonably clear. More of the agonizing difficulties as these expectations are Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

402 Federal Reserve Bulletin • June 1986 not fulfilled. Their problems in turn have severe- not constitute a solid, sustainable base for satisly weakened a number of agricultural lenders. factory economic growth and stability indefinite- Potential vulnerabilities are suggested not only ly into the future. Ultimately, debt can only be by elevated debt-to-income ratios throughout the serviced from income. If that relationship is economy, but also by the deterioration or disap- strained, financial pressures will jeopardize furpointing performance of certain more direct indi- ther growth in income itself, aggravating the cators of financial distress at a time of rising difficulties. The time to act is before the strains economic activity generally. Corporate bond become oppressive, not after. downgradings, for example, have trended sharp- The most direct step that can be taken by the ly higher over the past two years, reflecting in government itself to address concerns about the part concerns about the effects of additional growth of debt is to decrease, and eventually leveraging on the financial strength of certain eliminate, the federal budget deficit. Such a corporations. In addition, problems in the house- course will reduce pressures on domestic credit hold sector are indicated by some upward ten- markets, freeing domestic savings to be chandency in delinquency rates on consumer and nelled into domestic investment and encouraging mortgage loans or other measures of financial further restructuring of balance sheets through distress during the expansion period. greater reliance on long-term debt and equity. By In another vein, I addressed earlier some of promoting better balance between spending and the implications of our growing dependence on income domestically, this course will also work capital and credit from abroad. That is hardly a to reduce dependence on foreign capital. dependable source of financing for years to Some of these effects already were discernible come, and indeed will shrink as our trade balance as the Gramm-Rudman-Hollings legislation improves, as we hope. moved toward passage late last year; the im- I do not suggest that these developments point proved outlook for budget balance appeared to to some inexorable accumulation of debilitating contribute materially to the decline in rates on financial difficulty. Indeed, there are a number of bonds and fixed-rate mortgages, in an environdevelopments currently working in the opposite ment in which the dollar was also depreciating direction. Recent substantial declines in interest toward levels more consistent with restoring the rates and increases in stock prices have helped to international competitive position of U.S. prodalleviate pressures on financial positions. The ucts. Concrete actions to implement the law will fall in rates by itself will reduce debt-servicing provide a constructive background for financial burdens, and both firms and households have markets over coming years, partly by its direct taken advantage of the considerable downward effects and partly by reducing the changes of a movement in long-term rates to lengthen the resurgence in inflationary pressures. maturities of their liabilities, locking in lower Beyond that step, I believe that the time has rates and reducing exposure to an unanticipated come for the Congress to also address those rise in short-term rates. The higher stock prices elements of our tax code that so strongly favor are currently strengthening the financial posi- debt finance. While that "bias" has long existed, tions of many individuals and companies. New other changes in the economic and financial stock issues have picked up. And recent regula- environment seem to have had the effect of tory and supervisory initiatives can help. making it more important in decision-making. At the same time, enough has gone on, and The original Treasury tax reform proposal had continues to go on, to raise clear warning signals, some limited elements that moved in the right to justify further analytic effort, and to support direction; they have subsequently been dropped action in areas in which such action is plainly or sharply diluted. One lesson, I suppose, is that warranted. no strong constituency has emerged for a reform with such diffuse and seemingly indirect benefits. But I also believe that other efforts to reduce ADDRESSING THE CONCERNS excessive reliance on debt in the private sector We know enough to understand that dispropor- pale into relative insignificance so long as that basic bias imbedded in the tax system exists. tionate increases in debt extended over years do Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 403 I noted that deregulation and innovation may raising new questions about our ability to mainencourage growth of debt. Those changes re- tain the stability of the whole. The situation cries spond to basic technological and competitive out for review and for new laws, adapted to the forces that cannot be denied. We can, however, problems of today and tomorrow. respond in constructive ways, strengthening Nor can we evade a review of the basic when necessary oversight of key markets and safeguards and trading practices in other key intermediaries so that they do not become the sectors of financial markets, given the complex unwitting vehicles for the spread of problems interdependencies that exist. One specific examthrough the economy. ple came to your attention last year, and the To this end, the Federal Reserve, working in Committee responded by providing a legislative concert with other regulators of depository insti- framework for limited surveillance and regulatutions, has stepped up its examination of banks tion of the government securities market. As you and bank holding companies, tightened capital know, action has not yet been completed on that standards, and proposed keying those standards matter. to the risk profile of the banks. We and the other bank regulators are also acting to deal with present points of strain, particularly in the agri- CONCLUSION cultural and energy areas, through a variety of techniques. We have also joined with the other In one sense, the extraordinary volume of credit regulators in requesting that the Congress extend flows in recent years is a tribute to the efficiency and liberalize legislative authorization for inter- and innovative instincts of financial intermediarstate acquisition of troubled institutions. ies, borrowers, and lenders alike. There has been These are essentially defensive measures, de- rapid and effective response to new technological signed to keep immediate problems from infect- possibilities. ing the financial system more generally by easing Those same developments also highlight the adjustments by individual institutions and local complex interactions involved and the new interareas. They are not, and cannot be, a substitute dependencies created. And, in the end, credit for forward-looking structural change. creation is constructive only to the extent the In that connection, it seems to me imperative obligations are manageable in relation to income. to clarify and modernize the laws governing the It is in those areas that questions arise. structure of our depository and financial sys- I must emphasize that the government can tems. Too often in recent years, old legislation take a number of basic steps to address concerns has clashed with new market facts. Accommoda- about the rapid growth of debt. These include, tion is achieved more by the exploitation of most importantly, a balanced approach to ecoperceived loopholes in existing law then by a nomic policy, including cutting excessive budget well-considered design of how we want the finan- deficits and a fresh look at some important cial system to evolve. Distinctions among bank- provisions of the tax code. Government must ing, other financial institutions, and commercial also provide a supervisory and regulatory strucfirms are fast eroding with little considered de- ture to promote a sound financial system. bate—and less action—to guide the process. Ultimately, and quite properly in our free For a long time, as the result of the lessons of market economy, the strength of our financial past financial crises, the unique role of banking system must also ultimately rest on the prudent and the payments system in our economy has, in decisions of private parties. Borrowers and lendconcept, been recognized through provision of a ers must recognize risks and act to manage them. federal "safety net," backed up by special over- In such a context, the growth of debt would hold sight and supervision. Today, the distinctions no concerns for us, but rather would be seen as underlying that approach are rapidly eroding, an integral part of a healthy and active economy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

404 Announcements CHANGE IN THE DISCOUNT RATE disclosure, rules for identifying transactions, and advertising for open-end credit. The Federal Reserve Board announced a reduction in the discount rate from 7 percent to 6V2 percent, effective on Monday, April 21, 1986. REPORT ON PRICED SERVICE OPERATIONS The action taken is a technical change de- FOR 1985 signed to place the discount rate in more appropriate alignment with the prevailing level of The Federal Reserve Board issued on April 18, market rates. The change in the discount rate 1986, a report summarizing developments in the also appears consistent with international inter- priced service areas for 1985 and supplying deest rate considerations. tailed financial results of providing those serv- In making the change, the Board voted on ices. requests submitted by the board of directors of The Board issues a report on priced services the Federal Reserve Banks of Boston, New annually and a priced service balance sheet and York, Cleveland, Richmond, Chicago, Minne- income statement quarterly. The financial stateapolis, Kansas City, Dallas, and San Francisco. ments are designed to reflect standard account- (Subsequently, the Board approved similar ac- ing practices, taking into account the nature of tions by the directors of the Federal Reserve the Federal Reserve's activities and its unique Banks of Atlanta and St. Louis, effective April position in this field. 22, and Philadelphia, effective April 23.) The discount rate is the interest rate that is charged depository institutions when they bor- PUBLICATION OF REVISED LIST OF row from their District Federal Reserve Banks. OTC STOCKS SUBJECT TO MARGIN REGULATIONS PUBLICATION OF FINAL CHANGES TO The Federal Reserve Board published a revised OFFICIAL STAFF COMMENTARIES ON list of over-the-counter (OTC) stocks that are REGULATIONS E AND Z subject to its margin regulations, effective May 13, 1986. The Federal Reserve Board has adopted final The list includes all over-the-counter securities changes to the official staff commentaries to designated by the Board pursuant to its estab- Regulations E (Electronic Fund Transfers) and Z lished criteria as well as all securities qualified (Truth in Lending). Proposed changes to each for trading in the national market system (NMS). commentary were published by the Board in This list includes all securities qualified for trad- December 1985. ing in tier 1 of the NMS through May 13 and The revisions to the official staff commentary those in tier 2 through April 15, 1986. Additional on Regulation E relate to preauthorized electron- OTC securities may be designated as NMS secuic fund transfers for biweekly loan payments and rities in the interim between the Board's quarterto written authorization for preauthorized debits. ly publications and will be immediately margina- The revisions to the official staff commentary ble. The next publication of the Board's list is on Regulation Z address such matters as credit scheduled for August 1986. transactions that have some lease characteris- This List of Marginable OTC Stocks supertics, prepayment penalty and security interest sedes the revised list that was effective on Febru- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

405 ary 11, 1986. Changes that have been made in the sistant Director of the newly created Applied list, which now includes 2,646 OTC stocks, are Technology Branch, reporting to the Office of as follows: 135 stocks have been included for the the Executive Director. first time, 105 under NMS designation; 41 stocks • Restructuring the previous Division of Compreviously on the list have been removed for puting Services into the Hardware and Software substantially failing to meet the requirements for Systems Division with Bruce M. Beardsley as continued listing; 44 stocks have been removed Director. for reasons such as listing on a national securities • Restructuring the previous Division of Inforexchange or involvement in an acquisition. mation Services into the Division of Applications In addition to NMS-designated securities, the Development and Statistical Services with Wil- Board will continue to monitor the market activi- liam R. Jones as Director. ty of other OTC stocks to determine which • Appointment of Day W. Radebaugh as Asstocks meet the requirements for inclusion and sistant Director for Administrative and Financial continued inclusion on the list. Systems in the Division of Applications Development and Statistical Services. PROPOSED ACTION Mr. Radebaugh first joined the Board's staff in May 1975. He returned to the Board in Decem- The Federal Reserve Board extended from April ber 1983 after having been with the Student Loan 25 to May 23 the period for comment on its Marketing Association. Mr. Radebaugh has a supplemental adjusted capital proposal that was Ph.D. from Johns Hopkins University. designed to include a risk factor in the Board's policies on capital for bank holding companies and state member banks. SYSTEM MEMBERSHIP.• ADMISSION OF STATE BANKS CHANGES IN BOARD STAFF The following banks were admitted to member- Joseph S. Zeisel, Deputy Director, Division of ship in the Federal Reserve System during the Research and Statistics, retired, effective May period April 1 through April 30, 1986: 16, 1986. Florida The Board of Governors has also announced Largo Indian Rocks State Bank the reorganization of the Office of the Executive Georgia Director for Computing and Information Ser- Hiawassee Mountain Bank of Georgia vices, the Division of Computing Services, and New York the Division of Information Services. The reor- Great Neck Bank of Great Neck ganization includes the following changes: Texas • Change in organization title from Office of the Dallas Park Central Bank of Dallas Executive Director for Computing and Informa- Hutto Hutto State Bank tion Services to Office of the Executive Director Irving Bank of the West for Information Resource Management. Virginia • Reassignment of Stephen R. Malphrus from Richmond Commerce Bank of Henrico Assistant Director, User Services and Applica- West Virginia tions, Division of Information Services, to As- New Martinsville New Martinsville Bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

406 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON FEBRUARY 11-12, 1986 percent recorded in the summer of 1984. Total retail sales rose 1.9 percent in Decem- Domestic Policy Directive ber, after having declined on balance over the previous two months. Sales increased for all The information reviewed at this meeting sug- major categories, but most of the rise was attribgested that economic activity was expanding at a utable to sizable gains in outlays for durable moderate pace. A number of major indicators of goods. Boosted by an expanded round of financproduction and spending had shown improve- ing incentive programs, sales of domestic automent in late 1985 and early 1986. Underlying mobiles registered a strong rebound toward the inflationary pressures appeared to be generally end of December and were at an annual rate of well contained. Prices in the latter part of the 7.9 million units for the month as a whole—about year were boosted by developments in markets V/2 million units above the rate in each of the for food and energy, but oil prices declined preceding two months. Sales advanced further in substantially in early 1986. January to a rate of 8.6 million units. The labor market, one of the few areas for Total private housing starts rose sharply in which data for early 1986 were available at the December, more than offsetting the appreciable time of this meeting, showed exceptional decline in the previous month, and newly issued strength in January. Total nonfarm payroll em- permits for residential building also increased ployment rose 566,000—about twice the average substantially. The strength in housing activity monthly increase in the fourth quarter of 1985— during the month was apparent in both the singleand the unemployment rate declined to 6.7 per- family and the multifamily sectors. For the cent, its lowest rate in six years. Hiring remained fourth quarter as a whole, both housing starts brisk at trade establishments and in finance and and permits were at annual rates of nearly VA service industries, with those sectors accounting million units—close to the pace recorded in for about two-thirds of the rise. Employment earlier quarters and for the year 1985. Sales of gains in the construction industry were also new homes improved a bit around year-end, and strong, apparently due in part to unusually good sales of existing homes in the final quarter of weather throughout most of the country during 1985 registered their fifth consecutive quarterly the month. In the manufacturing sector, employ- increase. ment increased for the fourth consecutive Business capital spending strengthened somemonth, and the average number of hours in the what in the fourth quarter. Growth in expendifactory workweek remained at a high level. tures for producers' durable equipment was es- The index of industrial production rose an pecially rapid, possibly reflecting firms' attempts estimated 0.7 percent further in December, after to realize tax benefits that might be eliminated no change on balance over the preceding two for equipment installed after 1985. New orders months. Available information for January sug- for nondefense capital goods grew appreciably in gested some additional rise in that month. The December but were essentially flat over the index of capacity utilization for total industry fourth quarter as a whole. Shipments of such rose in December for the second consecutive goods, however, rose about V/2 percent in the month, increasing 0.4 percentage point to 80.5 quarter. Outlays for nonresidential construction percent. Nevertheless, the year-end rate re- rose about 5 percent in December after having mained below the most recent peak of 82.0 changed little on balance since August. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

407 In the final months of 1985, the rates of in- 9 percent over the four-month period. It was crease in consumer and producer prices were agreed that somewhat greater restraint might, somewhat higher than in the spring and summer, and somewhat lesser restraint would, be acceptreflecting mainly what appeared to be a tempo- able over the intermeeting period, depending on rary spurt in prices for food and energy-related the growth of the monetary aggregates, the items. In the agricultural component, prices of strength of the business expansion, the performdomestically produced crude foods had leveled ance of the dollar on foreign exchange markets, off" in December and apparently fell in January. progress against inflation, and conditions in do- In the energy sector, prices of crude oil and other mestic and international credit markets. The petroleum products tumbled dramatically in ear- intermeeting range for the federal funds rate was ly 1986, and the effects of these declines were retained at 6 to 10 percent. likely to show through at the consumer level in With respect to the Committee's longer-run coming months. Excluding the food and energy ranges for monetary growth during 1985, Ml sectors, consumer prices rose in November and expanded at a rate well above the range of 3 to 8 December at a pace close to that for the year as a percent, at an annual rate, set for the second half whole, and producer prices changed little on of the year; M2 grew at a rate somewhat below balance over the two-month period. For the year the upper end of its range of 6 to 9 percent for the 1985 consumer prices rose about 33A percent, year; and M3 expanded at a rate near the midcompared with 4 percent in 1984; producer prices point of its range of 6 to 9Vi percent for 1985. rose about PA percent in both years. The index Expansion in total domestic nonfinancial debt of average hourly earnings of nonfarm produc- was above the upper end of its monitoring range tion workers increased 3 percent last year, about of 9 to 12 percent for the year. In early 1986, the same as in 1984. there was evidence of a marked overall slowing The trade-weighted value of the dollar against in the monetary aggregates. Ml, which had inmajor foreign currencies had declined about 4 creased at an annual rate of about 12V2 percent in percent further since the Committee's meeting in December, grew only a little in January; on mid-December. Throughout the period, and par- average over the two months, expansion in Ml ticularly around the time of the January meeting was running near the lower end of the short-run of the G-5 countries, exchange market move- range anticipated by the Committee at its previments reflected varying assessments of official ous meeting. M2, which had expanded moderateattitudes toward the dollar and differing views ly in December, decelerated markedly in Januabout the likely effects of sharply declining oil ary, reflecting both the slowdown in Ml and prices on various industrial and developing coun- quite low growth in its nontransaction compotries. Preliminary data on merchandise trade for nent. Expansion in M3 picked up somewhat in the fourth quarter suggested that the deficit wid- January as banks issued a substantial volume of ened further from the already high third-quarter large time deposits to support a further robust level. Both oil and non-oil imports rose, and increase in bank credit; its growth over the twoexports were little changed. For the year 1985 month period was in line with the Committee's the deficit was estimated at about $120 billion, up expectations. from $107 billion in 1984. Open market operations during the intermeet- At its meeting on December 16-17, 1985, the ing period were directed toward achieving a Committee had adopted a directive that called slight decrease in pressures on reserve positions. for some limited decrease in the degree of pres- Seasonal plus adjustment borrowing from the sure on reserve positions. The members expect- discount window, while rising sharply around ed such an approach to policy implementation to year-end when excess reserves were particularly be consistent with growth of M2 and M3 at large, averaged only about $260 million during annual rates of about 6 to 8 percent over the the two full maintenance periods ending in Januperiod from November to March. Although the ary. Open market operations were undertaken in behavior of Ml continued to be subject to unusu- an environment of large seasonal fluctuations in al uncertainty, the members expected expansion reserve needs, unusually high Treasury balof that aggregate to slow to an annual rate of 7 to ances, a weakening tendency for the dollar in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

408 Federal Reserve Bulletin • June 1986 foreign exchange markets, incoming economic assessing changes in the foreign exchange value data that were somewhat stronger than had gen- of the dollar. erally been anticipated and, as the period pro- While they recognized the limitations of any gressed, sharp further declines in oil prices. forecasts under present circumstances, the mem- Under these conditions the federal funds rate bers of the Committee and the Federal Reserve generally hovered around the 8 percent level Bank presidents not currently serving as memduring much of the intermeeting interval and was bers presented at this meeting specific projecconsiderably above that level for a few days tions of economic activity, average prices, and around year-end. More recently, the rate moved the rate of unemployment. For the period from down to a range of VA to T/% percent. Other the fourth quarter of 1985 to the fourth quarter of short-term rates rose a little over the period, 1986, forecasts for growth of real GNP centered and intermediate- and long-term rates were un- on a range of 3 to V/i percent, with a full range of changed to somewhat lower. 23/ to 4VA percent. Forecasts of growth in nomi- 4 The staff projections presented at this meeting nal GNP had a central tendency of 6V2 to IVA suggested that economic activity and employ- percent and an overall range of 5 to 8V2 percent. ment would be somewhat stronger over the near With regard to the rate of inflation, as indexed by term than had been anticipated at the time of the the GNP deflator, the projections centered on previous meeting. For the year 1985, the third rates of 3 to 4 percent and the range was IVz to successive year of economic expansion, real 41/2 percent. Estimates of the rate of unemploy- GNP was estimated to have increased about 2VI ment in the fourth quarter of 1986 varied from percent, and broad measures of inflation general- about 6V4 to 63/ 4 percent, with several in the area ly had risen at rates of around 316 to VA per- of 6V2 percent. These forecasts were based on the cent—close to, or somewhat below, those re- Committee's objectives for growth in money and corded in the preceding two years. Real GNP credit that were established at this meeting. It was expected to grow a little more this year than was also assumed that federal budget deficits in 1985 and the average unemployment rate was would be on a declining trend and that the foreign projected to decline somewhat from the rate exchange value of the dollar would not change recorded last year. The rate of increase in prices enough after its substantial fall during 1985 to over the coming year was expected to be little exert a significant further impact on economic changed from that experienced in 1985. It was activity and prices during 1986. noted, however, that the sharp further declines In the course of the Committee's discussion, in oil prices in the days before this meeting had members referred to the recent improvement in not been incorporated in the projections. several key indicators of business activity. In In the Committee's discussion of the economic themselves these indicators augured well for situation and outlook the members differed continuing economic growth over the year somewhat in their assessments of the prospects ahead. On the other hand some members comfor business activity, but they generally agreed mented that the current and prospective perthat further expansion at a somewhat faster pace formance of several important sectors of the than in 1985 was a reasonable expectation for economy—such as agriculture and business fixed 1986. At the same time, several members com- investment—did not suggest a strengthening exmented that the outlook remained subject to pansion. However, the actual performance of substantial uncertainties. Changes in the interna- those sectors among others would be influenced tional prices of crude oil were so large and so to an important extent by a number of broad, recent that they were particularly difficult to overriding factors. evaluate. Members also referred to uncertainties Among the positive factors cited by the memsurrounding prospects for fiscal policy stemming bers were the recent decline in oil prices, lower from the legal challenge to the Gramm-Rudman- interest rates, and higher stock prices. These Hollings legislation, the problems for business developments generally had favorable implicainvestors associated with pending tax reform tions for consumer spending, housing, and many legislation, and the difficulties of predicting and types of business investment. Some members Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 409 also referred to the rapid growth in Ml and to the my's growth potential might be more limited than ample availability of liquidity as factors that they had thought earlier and that relatively rapid would tend to support the expansion over the business expansion might at some point, though year ahead. The decline in the foreign exchange not over the quarters immediately ahead, be value of the dollar, while exerting upward pres- associated with increasing inflationary pressures on prices, was seen as another positive sures. Other members, while also troubled by development in terms of its impact on economic productivity trends, nonetheless felt that the rate activity, although views differed considerably of unemployment was still sufficiently high and with regard to the timing and extent of that capacity utilization rates sufficiently low to rule impact. out such a concern for the conduct of policy for On the negative side, members mentioned the the time being. Views also differed in emphasis downside risks inherent in the debt problems with regard to the inflationary impact of the faced by many consumers and a number of decline in the foreign exchange value of the industries, including agriculture, and the associ- dollar. The depreciation of the dollar, especially ated financial strains on some of their institution- if it were to continue substantially further, could al lenders. The recent decline in oil prices, while involve significant upward pressures on import a favorable development in terms of its overall prices at some point. Some members emphasized impact on the economy, nonetheless had nega- their view that the inflationary impact of the tive consequences for energy producers and dollar decline would be greatly dampened by therefore for important parts of the country. efforts of foreign business firms to retain market Several members also stressed the adverse re- shares. Others, while recognizing that the effects percussions of lower oil prices on a number of of the dollar's decline could be delayed and in the developing countries that were heavily depen- short run offset by reduced oil prices, felt that the dent on oil exports to service their large debts to inflationary potential would be significant over international lending institutions, including ma- time, depending in part on other economic policy jor U.S. banks. developments. The members generally agreed The fiscal policy outlook, despite current legal that, in addition to oil price and federal budgetcomplications, was seen as pointing to declining ary developments, the strong price competition budgetary deficits. Members commented that the in many markets and restrained labor settlements better prospects for action on the federal budget were factors currently tending to curb inflationhad already helped to reduce inflationary expec- ary pressures. tations and had exerted a quite favorable impact At this meeting the Committee reviewed the on domestic financial markets. The actual imple- 1986 growth ranges for the monetary and credit mentation of deficit-reducing measures—in aggregates that it had tentatively set in July 1985 terms of their direct effects on government within the framework of the Full Employment spending—would tend to restrain the growth of and Balanced Growth Act of 1978 (the Humincome and economic activity. However, those phrey-Hawkins Act). Those tentative ranges ineffects might well be offset, at least in part, by cluded growth, measured from the fourth quarter increased private spending that would tend to be of 1985 to the fourth quarter of 1986, of 4 to 7 stimulated by downward adjustments in interest percent for Ml and 6 to 9 percent for both M2 rates as markets anticipated or responded to and M3. The associated range for total domestic reduced federal credit demands. nonfinancial debt had been provisionally set at 8 In their discussion of the outlook for inflation, to 11 percent for 1986. the members expressed somewhat differing Discussion of the tentative range for Ml foviews. These ranged from expectations of little cused on its appropriate width and level in light change, or perhaps some improvement, from the of the economic and financial circumstances that recent trend to the anticipation of some deterio- appeared to be in prospect for the year ahead and ration. In the context of the sizable decline in on its unusual behavior in recent years. While unemployment and poor productivity perform- the members expressed some differing preferance, some members commented that the econo- ences regarding an appropriate range for Ml, the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

410 Federal Reserve Bulletin • June 1986 differences were not very large. All of the mem- gates, the members indicated that the tentative bers contemplated a marked slowing in Ml ranges established in July for 1986 were still growth from that experienced in 1985 as a likely appropriate. Growth last year was generally in development despite their expectations of some line with expectations, and on balance over the pickup in the expansion of nominal GNP. None- past few years, the behavior of M2 and M3 theless, the members gave considerable empha- seemed to have been less affected than Ml by sis to the uncertainties that continued to sur- institutional and interest rate changes. In part round the outlook for the velocity of Ml—the that development reflected the fact that the relationship between Ml and GNP. The sharp broader aggregates include an array of deposit decline in Ml velocity during 1985 was unexpect- and money market instruments that often exhibit ed although after the fact it could be explained to offsetting movements. a considerable extent, though not entirely, by In the course of the Committee's discussion, historical relationships of money to income and consideration was given to the appropriate deinterest rates. Still, the changing composition of gree of emphasis to be given to Ml in policy Ml, involving a growing share of interest-bearing implementation, at least until there was more components, had increased the proportion of Ml evidence that the behavior of Ml velocity could that served both a transaction and a savings be anticipated with a greater degree of confifunction and appeared to have made the behavior dence. Most of the members felt that the Comof this aggregate less predictable in comparison mittee's current procedures remained approto earlier experience. Moreover, demand depos- priate, taking account of the considerations its had grown much more in 1985 than might have underlying the range adopted and its interpretabeen anticipated and it was not clear whether tion. Some emphasized that Ml was likely to that growth reflected more cautious cash man- prove again to be a more useful guide for policy agement practices on the part of businesses or implementation in a variety of potential economother perhaps transitory factors. ic settings. One member commented that over In the view of most, but not all, of the mem- time Ml would probably serve as a better indicabers it was desirable to widen the tentative Ml tor of future GNP than the broader measures of range in order to take account of the uncertainty money. Alternatively, it was suggested that in the relationship between Ml and economic while Ml might have become a less reliable activity and prices, but in general the suggested guide, at least under recently prevailing circumranges involved approximately the same mid- stances, it continued to have significant value as points. The upper limits that were proposed a policy indicator when considered in the context generally assumed there would not be as large a of the behavior of the broader aggregates. Coldrop in velocity this year as had occurred in lectively, the aggregates used by the Committee 1985. But it was noted that in the absence of appeared to have more significance than any one some reversal in the sharp 1985 drop in Ml of them viewed separately. velocity, growth toward the upper end of the With respect to the monitoring range for total range might well prove to be consistent with domestic nonfinancial debt, a majority of the satisfactory economic performance. It might members favored adopting the range of 8 to 11 even be appropriate for Ml to run above the percent for 1986 that had been tentatively estabupper bound of its range should recent velocity lished in July. A number of other members trends persist. On the other hand, more moder- preferred somewhat higher ranges in the expecate growth in Ml could be indicated to the extent tation that debt expansion, while decreasing that its velocity proved to be stronger than from its actual pace in 1985, might still be expected. In general, there was agreement that around—or perhaps a bit above—the upper limit the behavior of Ml should be evaluated in light of of the tentative range. In the course of the its consistency with M2 and M3 and also in the discussion, it was suggested that the Committee context of broader economic and financial devel- drop its monitoring range for debt, perhaps subopments and the potential for inflationary pres- stituting another measure such as total liquid sures. assets. It was pointed out, among other things, that the debt aggregate was subject to serious With regard to the broader monetary aggre- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 411 measurement problems, including a large amount sures. It adopted a range of 6 to 9 percent for M2 and 6 of double counting—related for example to finan- to 9 percent for M3. The associated range for growth in cial activities such as advance refundings and total domestic nonfinancial debt was set at 8 to 11 percent for the year 1986. mortgage financing by state and local governments—and distortions arising from an extraor- Votes for this action: Messrs. Volcker, Corrigan, dinary pace of share retirements financed by Angell, Black, Forrestal, Johnson, Keehn, Martin, borrowing. It was also noted that the debt mea- Parry, Rice, Ms. Seger, and Mr. Wallich. Votes sure had been deviating substantially in recent against this action: None. years from past historical relationships to GNP. A majority of the members, while acknowledging In the Committee's discussion of policy implethe difficulties with this aggregate and agreeing mentation for the weeks immediately ahead, a that further study was needed, continued to feel number of members referred to the difficulty of that it served as a useful benchmark for evaluat- clearly appraising the significance of the most ing the growth of debt in the economy and that its recent economic and financial developments. behavior should continue to be monitored, par- While monetary expansion had slowed in recent ticularly in light of the Committee's concern weeks, the period of reduced growth was brief about the increasing debt burden in the econo- and it followed a period of substantial expansion. my. Strong employment growth did not appear to be At the conclusion of the Committee's consid- fully matched by other current economic indicaeration of the long-run ranges, all of the members tors. The needed correction of the value of the indicated that they favored or found acceptable dollar entailed risks of a more fundamental monetary growth ranges for 1986 of 3 to 8 change in market attitudes and a cumulating percent for Ml and 6 to 9 percent for both M2 decline in the exchange rate that might discourand M3. A monitoring range of 8 to 11 percent age willingness to hold dollars at declining interwas also accepted for total domestic nonfinancial est rates. In these circumstances, nearly all pardebt. In keeping with the Committee's usual ticipants agreed that little or no change in reserve procedures under the Humphrey-Hawkins Act, availability was warranted. In that connection, the ranges would be reviewed at midyear, or members also noted that the recent slowing of sooner if deemed necessary, in the light of their the monetary aggregates was reasonably in line behavior in relation to economic and financial with the Committee's expectations at the time of developments. the December meeting for the November-to- The following paragraph relating to the long- March period. run ranges was approved for the domestic policy In the course of the Committee's discussion it directive: was noted that while monetary policy had been relatively accommodative for some time, short- The Federal Open Market Committee seeks to fos- term rates had shown little tendency to decline ter monetary and financial conditions that will help to and the federal funds rate remained significantly reduce inflation further, promote growth in output on a above the discount rate even though borrowing sustainable basis, and contribute to an improved patat the discount window had dropped to rather tern of international transactions. In furtherance of these objectives the Committee agreed to establish the low levels last month. Moreover, long-term rates following ranges for monetary growth, measured from had declined substantially since early fall. In that the fourth quarter of 1985 to the fourth quarter of 1986. context, and against the already accommodative With respect to Ml, the Committee recognized that, mode of open market operations, the point was based on the experience of recent years, the behavior made that the discount rate might need to be of that aggregate was subject to substantial uncertainties in relationship to economic activity and prices, reduced to permit or accommodate a market depending among other things on its responsiveness to tendency toward lower rates and that such a changes in interest rates. It agreed that an appropriate move would be a desirable complement to open target range under existing circumstances would be 3 market operations in the light of the risks of a to 8 percent, but it intends to evaluate movements in slower rate of business expansion. More general- Ml in the light of its consistency with the other monetary aggregates, developments in the economy ly, in prevailing circumstances, the members and financial markets, and potential inflationary pres- wished to conduct open market operations in a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

412 Federal Reserve Bulletin • June 1986 manner that would not in itself signal or encour- The Committee indicated that it might find someage higher interest rates or impede the tendency what greater or somewhat lesser reserve refor some market rates to decline. At the same straint acceptable over the intermeeting period time, there was concern that policy implementa- depending on the growth of the monetary aggretion be sensitive to a situation in which a decline gates, the strength of the business expansion, the in the dollar might tend to feed upon itself, performance of the dollar on foreign exchange leading to an exaggerated fall with disturbing markets, progress against inflation, and condiimplications for inflation, financial markets, and tions in domestic and international credit marthe economy over time. In that connection it was kets. The members agreed that the intermeeting noted that the desirability of a discount rate range for the federal funds rate, which provides a action would depend on evolving economic and mechanism for initiating consultation of the financial circumstances; among other factors, in Committee when its boundaries are persistently the light of the risks for the dollar in foreign exceeded, should be left unchanged at 6 to 10 exchange markets, such action would need to percent. take account of the willingness of major central At the conclusion of the meeting, the following banks abroad to take broadly similar actions. domestic policy directive, embodying the Com- In the Committee's discussion of possible in- mittee's long-run ranges and its short-run operattermeeting adjustments in policy implementa- ing instructions, was issued to the Federal Retion, the members agreed that the appropriate serve Bank of New York: degree of pressure on reserve positions should continue to be determined in light of the growth of the monetary aggregates judged in the context The information reviewed at this meeting suggests that economic activity is currently expanding at a of incoming information about the economy, the moderate pace. Total nonfarm payroll employment outlook for prices, and conditions in domestic increased substantially further in January, and the and international financial markets, including the civilian unemployment rate declined to 6.7 percent. In value of the dollar in the foreign exchange mar- December industrial production rose further, and kets. A majority of the members agreed with the available information suggests some additional rise in January. Retail sales increased considerably in Desuggestion that there should be no presumptions cember after declining on balance over the previous about the likely direction of any intermeeting two months, and housing starts rebounded from their adjustments, given the many uncertainties about October-November pace. Business capital spending prospective economic and financial develop- strengthened somewhat in the fourth quarter. Merments and the behavior of the monetary aggre- chandise trade data for the fourth quarter suggest that the deficit widened further from the very high thirdgates. However, some members believed that quarter level. In late 1985 consumer and producer policy implementation should remain especially prices rose somewhat more than earlier, but for the alert to developments that might call for some year as a whole broad measures of prices and wages easing of reserve conditions in light of the con- increased at rates close to those recorded in 1984. siderable risks that they saw of some weakening With respect to the Committee's ranges for longerterm monetary growth, Ml expanded at a rate well in the economic expansion. above the range set for the second half of 1985; M2 At the conclusion of the Committee's discus- grew at a rate somewhat below the upper end of its sion a majority of the members indicated their range for the year; and M3 expanded at a rate near the acceptance of a directive that called for maintain- midpoint of its range for 1985. Expansion in total domestic nonfinancial debt was above the upper end of ing unchanged conditions of reserve availability. its monitoring range for the year. In January growth in The members expected such an approach to Ml and M2 slowed markedly, while growth in M3 policy implementation to be consistent with picked up as banks issued a substantial volume of large growth in M2 and M3 at annual rates of about 6 time deposits to support further robust growth in bank percent and 7 percent respectively for the period credit. Interest rates have fluctuated considerably since the December meeting of the Committee; on from November to March. Over the same period balance, short-term interest rates have risen a little they expected Ml to expand at an annual rate of while longer-term rates are unchanged to somewhat around 7 percent, although the behavior of Ml lower. The trade-weighted value of the dollar against was seen as still subject to unusual uncertainty. major foreign currencies has declined further. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 413 The Federal Open Market Committee seeks to fos- greater reserve restraint or somewhat lesser reserve ter monetary and financial conditions that will help to restraint might be acceptable depending on behavior of reduce inflation further, promote growth in output on a the aggregates, the strength of the business expansion, sustainable basis, and contribute to an improved pat- developments in foreign exchange markets, progress tern of international transactions. In furtherance of against inflation, and conditions in domestic and interthese objectives the Committee agreed to establish the national credit markets. The Chairman may call for following ranges for monetary growth, measured from Committee consultation if it appears to the Manager the fourth quarter of 1985 to the fourth quarter of 1986. for Domestic Operations that reserve conditions dur- With respect to Ml, the Committee recognized that, ing the period before the next meeting are likely to be based on the experience of recent years, the behavior associated with a federal funds rate persistently outof that aggregate was subject to substantial uncertain- side a range of 6 to 10 percent. ties in relationship to economic activity and prices, depending among other things on its responsiveness to Votes for the short-run operational paragraph: changes in interest rates. It agreed that an appropriate Messrs. Volcker, Corrigan, Angell, Black, target range under existing circumstances would be 3 Forrestal, Johnson, Keehn, Parry, Rice, and to 8 percent, but it intends to evaluate movements in Wallich. Votes against this action: Mr. Martin and Ml in the light of its consistency with the other Ms. Seger. monetary aggregates, developments in the economy and financial markets, and potential inflationary pressures. It adopted a range of 6 to 9 percent for M2 and 6 Mr. Martin and Ms. Seger dissented because to 9 percent for M3. The associated range for growth in they preferred some easing of reserve conditions total domestic nonfinancial debt was set at 8 to 11 given the risks they saw of unacceptably sluggish percent for the year 1986. economic expansion. Such risks would be re- In the implementation of policy for the immediate future, the Committee seeks to maintain the existing duced in their view by lower short-term interest degree of pressure on reserve positions. This action is rates, which had not declined in line with recent expected to be consistent with growth in M2 and M3 reductions in long-term interest rates and in over the period from November to March at annual inflation expectations. They also believed some rates of about 6 percent and 7 percent, respectively; modest easing could lead to market conditions while the behavior of Ml continues to be subject to unusual uncertainty, growth at an annual rate of about that would facilitate a reduction in the discount 7 percent over the period is anticipated. Somewhat rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

415 Legal Developments ORDERS ISSUED UNDER BANK HOLDING Applicant's home state is North Carolina. The Board COMPANY ACT, BANK SERVICE CORPORATION has previously found that Florida has by statute ex- ACT, AND FEDERAL RESERVE ACT pressly authorized a North Carolina bank holding company, such as Applicant, to acquire a Florida bank Orders Issued Under Section 3 of the Bank or bank holding company, such as First Bankers.4 Holding Company Act Accordingly, approval of Applicant's proposal to acquire banks in Florida is not barred by the Douglas First Union Corporation Amendment. Charlotte, North Carolina Applicant is the third largest commercial banking organization in North Carolina. It controls total depos- Order Approving Acquisition of a Bank Holding its in North Carolina of $6.2 billion,5 which represents Company 20 percent of the total deposits in commercial banking organizations in the state. Applicant also controls First Union Corporation, Charlotte, North Carolina, a banks in South Carolina, Georgia and Florida. Conbank holding company within the meaning of the Bank summation of the proposal would not increase the Holding Company Act ("Act"), 12 U.S.C. § 1841 et concentration of banking resources in North Carolina, seq., has applied for the Board's approval under South Carolina or Georgia because First Bankers does section 3(a)(3) of the Act, 12 U.S.C. § 1842(a)(3), to not operate in those states. acquire First Bankers Corporation of Florida ("First Applicant is the sixth largest commercial banking Bankers"), Pompano Beach, Florida, a bank holding organization in Florida. It controls total deposits in company, and thereby indirectly to acquire its bank Florida of $3.4 billion, which represents 4.9 percent of subsidiaries.1 the total deposits in commercial banks in Florida. First Notice of the application, affording an opportunity Bankers is the 11th largest commercial banking organifor interested persons to submit comments, has been zation in Florida. It controls total deposits of $1.1 given in accordance with section 3(b) of the Act. The billion, which represents 1.5 percent of the total detime for filing comments has expired, and the Board posits in commercial banks in Florida. Upon consumhas considered the application and all comments re- mation of the transaction, Applicant would become ceived in light of the factors set forth in section 3(c) of the fifth largest commercial banking organization in the Act, 12 U.S.C. § 1842(c). Florida. It would control total deposits of $4.5 billion, The Douglas Amendment prohibits Board approval which represents 6.4 percent of the deposits in Floriof an application by a bank holding company to da. Florida is unconcentrated, and would remain so acquire a bank located outside the holding company's after consummation of the proposal. Accordingly, the home state,2 unless the state where the target bank is Board concludes that consummation of the proposal located has specifically authorized the acquisition.3 would not have a significant adverse effect on the concentration of banking resources in Florida. The subsidiary banks of Applicant and First Bankers compete in the Central Brevard County, East Palm Beach, East Polk County, Miami-Ft. Lauderdale, Orlando, Pinellas County and South Brevard County 1. First Bankers controls two nonbanking companies, First Bankers Data Corp., and The First Bankers Management Group, Inc., both of Pompano Beach, Florida. Applicant has not applied under section 4(c)(8) of the Act to acquire these companies because they will be liquidated prior to the acquisition of First Bankers. 2. A bank holding company's home state for purposes of the Douglas Amendment is that state in which the total deposits of its 4. E.g., First Union Corporation, 71 FEDERAL RESERVE BULLETIN banking subsidiaries were largest on July 1, 1966, or on the date it 971 (1985); see also Fla. Stat. Ann. § 658.295; N.C. Gen. Stat. §§ 53became a bank holding company, whichever date is later. 12 U.S.C. 209 et seq. § 1842(d). 5. Unless otherwise indicated, all state data are as of September 30, 3. 12 U.S.C. § 1842(d). 1985, and all market data are as of June 30, 1984. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

416 Federal Reserve Bulletin • June 1986 banking markets.6 The Board has considered the effect market is highly concentrated. The HHI is 1921, and of the proposal on existing competition in each of would increase by 219 points to 2140 upon consummathese markets. In light of the changes in the Herfin- tion of the proposal. The percentage of deposits held dahl-Hirschman Index ("HHI")7 and the four-firm by the four largest banking organizations in the market concentration ratios, the combined market shares of is 83.8 and would increase to 90.5. Applicant and First Bankers upon consummation of While consummation of the proposal would elimithe proposal, and other facts of record, the Board nate existing competition in the East Polk County concludes that consummation of the proposal would banking market, the Board believes that the anticomnot have a significant adverse effect on existing com- petitive effects of this proposal are mitigated by the petition in any of the relevant banking markets except extent of competition afforded by thrift institutions.10 East Polk County. In each of these other markets, the Five thrift institutions control 37.2 percent of the increase in the HHI upon consummation of the pro- deposits in depository institutions in the market. posal would be less than 100,8 and in all markets These thrifts are exercising their relatively new powexcept the Orlando banking market, the HHI would ers to offer consumer, and commercial and industrial remain below 1800.9 loans. In view of this fact, the Board has considered Applicant is the fifth largest of nine commercial the presence of thrift institutions as a significant factor banking organizations in the East Polk County banking in assessing the competitive effects of this transaction market. It controls deposits of $50.2 million, which in the East Polk County banking market.11 Accordingrepresents 6.7 percent of the deposits in commercial ly, the Board concludes that consummation of the banks in the market. First Bankers is the fourth largest proposal would not have a significant adverse effect commercial banking organization in the market. It upon existing competition in the East Polk County controls deposits of $122.1 million, which represents banking market. 16.3 percent of the deposits in commercial banks in the The Board also has considered the effect of this market. Upon consummation of the proposal, Appli- proposal upon probable future competition. There are cant would become the second largest commercial 13 markets in which Applicant competes but First banking organization in the market, and control 23 Bankers does not, and three markets in which First percent of the deposits in commercial banks in the Bankers competes but Applicant does not. Based upon market. The East Polk County commercial banking the number of potential entrants into these markets, the Board concludes that consummation of the proposal would not have any significant adverse effects upon 6. The Central Brevard County banking market includes the towns probable future competition in any relevant market. of Cape Canaveral, Cocoa, Merritt Island, Rockledge, and Cocoa Cocoa Beach, all in Florida. The East Palm Beach banking market The financial and managerial resources and future includes Palm Beach County, east of Loxahatchee, Florida. The East prospects of Applicant, First Bankers, and their sub- Polk County banking market includes the towns of Auburndale, Davenport, Haines City, Lake Alfred, Lake Wales and Winter Haven, sidiaries are generally satisfactory. Applicant has all in Florida. The Miami-Ft. Lauderdale banking market includes raised a significant amount of capital in recent years to Broward County, plus Dade County, both in Florida. The Orlando finance its interstate acquisitions. Although Applibanking market includes Orange County, plus Seminole County, minus the town of Sanford in Seminole County, plus Osceola County, cant's tangible primary capital ratio will decline upon all in Florida. The Pinellas County banking market is defined as consummation of this proposal, that ratio will remain Pinellas County, Florida. The South Brevard County banking market above the minimum level required by the Board's includes the towns of Indialantic, Melbourne, Palm Bay, Satellite Beach, and West Melbourne, all in Florida. Capital Adequacy Guidelines.12 Moreover, Applicant 7. Under the revised Department of Justice Merger Guidelines, 49 has indicated that it intends to maintain adequate Federal Register 26,823 (June 29,1984), any market in which the postmerger HHI is below 1000 is unconcentrated. Except in extraordinary capital, and its performance indicates that it has the circumstances, the Justice Department is unlikely to challenge merg- ability to do so. Considerations relating to the conveers in an unconcentrated market. Any market in which the postmerger HHI is between 1000 and 1800 is considered moderately concentrated. The Justice Department is unlikely to challenge a merger that produces an increase in the HHI of less than 100 points. 10. The Board has previously determined that thrift institutions Any market in which the post-merger HHI is above 1800 is highly have become, or at least have the potential to become, major concentrated. The Department has informed the Board that a bank competitors of banks. Citizens and Southern Georgia Corporation, 72 merger or acquisition generally will not be challenged (in the absence FEDERAL RESERVE BULLETIN 260 (1986); Louisiana Bancshares, of other factors indicating anticompetitive effects) unless the post- Inc., 72 FEDERAL RESERVE BULLETIN 154 (1986); NCNB Corporamerger HHI is at least 1800 and the merger increases the HHI by at tion, 72 FEDERAL RESERVE BULLETIN 59 (1986). least 200 points. 11. If 50 percent of the deposits held by thrift institutions were 8. The HHI in the Central Brevard County, East Palm Beach, included in the calculation of market concentration, consummation of Miami-Ft. Lauderdale, Orlando, Pinellas County, and South Brevard the proposal would increase the HHI by 131 points to 1526, and the County banking markets would increase by 70, 25, 5, 20, 7, and 97 percentage of deposits controlled by the four largest firms in the points, respectively. market would increase from 66.4 to 70.9. Applicant would control 17.8 9. In the Orlando banking market, the HHI would be 2362 upon percent of the deposits in depository institutions in the market. consummation of the merger; however, the HHI would only increase 12. Capital Adequacy Guidelines, 50 Federal Register 16,057 (April 20 points in this market. 24, 1985); 71 FEDERAL RESERVE BULLETIN 445 (1985). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 417 nience and needs of the communities to be served are state.1 Auburn, Dekalb and Churubusco each have consistent with approval of the application. one subsidiary bank. Their subsidiary banks are the Based upon the foregoing and all the facts of record, 135th, 360th and 162nd largest, respectively, in the the Board has determined that this application should state, with the total deposits controlled by these be, and hereby is, approved. The acquisition shall not institutions representing in each case less than 1 be consummated before the thirtieth calendar day percent of the total deposits in commercial banks in following the effective date of this Order, or later than the state.2 Upon consummation of the proposal, Applithree months after the effective date of this Order, cant would remain the state's ninth largest banking unless such period is extended for good cause by the organization, controlling $761.3 million in total depos- Board or by the Federal Reserve Bank of Richmond, its, representing 2.16 percent of the state's commercial pursuant to delegated authority. bank deposits. Accordingly, consummation of this By order of the Board of Governors, effective proposal would not have any significant effect on the April 17, 1986. concentration of banking resources in Indiana. Applicant, Auburn, Dekalb and Churubusco all op- Voting for this action: Chairman Volcker and Governors erate in the Fort Wayne, Indiana banking market.3 Wallich, Rice, Seger, Angell, and Johnson. Absent and not Applicant is the third largest of 18 commercial banking voting: Governor Martin. organizations in the market, controlling deposits representing 22.6 percent of the total deposits of commer- JAMES MCAFEE cial banks in that market. The subsidiary banks of [SEAL] Associate Secretary of the Board Auburn, Dekalb and Churubusco are the 6th, 17th, and 8th largest commercial banking organizations, respectively, in the Fort Wayne market, controlling deposits Fort Wayne National Corporation of $64.3 million, $9.4 million and $52.1 million, repre- Fort Wayne, Indiana senting respectively 2.3 percent, 0.3 percent and 1.9 percent of the total deposits of commercial banks in Order Approving Merger of Bank Holding the market. Upon consummation of this proposal, Companies Applicant would become the largest banking organization in the market, and would control 27.1 percent of Fort Wayne National Corporation, Fort Wayne, Indi- the total deposits of commercial banks in the market. ana, a bank holding company within the meaning of The Fort Wayne banking market is highly concenthe Bank Holding Company Act ("Act") (12 U.S.C. trated, with the four largest commercial banking firms § 1841 et seq.), has applied for the Board's approval controlling 81.8 percent of the total deposits of comunder section 3(a)(5) of the Act (12 U.S.C. mercial banks in the market. Upon consummation of § 1842(a)(5)) to acquire through merger 100 percent of the proposal, the four largest banking organizations the voting shares of: Auburn Financial Corporation, would control 86.3 percent of the market. The Herfin- Auburn, Indiana ("Auburn"), and thereby indirectly dahl-Hirschman Index ("HHI") is 1946 and would acquire Auburn's subsidiary bank, The Auburn State increase by 214 points to 2160 upon consummation of Bank, Auburn, Indiana; Dekalb Financial Corpora- this proposal.4 tion, Waterloo, Indiana ("Dekalb"), and thereby indirectly acquire its subsidiary bank, Citizens State 1. All banking data are as of December 31, 1984. Bank, Waterloo, Indiana; and Churubusco Bancorp, 2. The percentage of statewide bank deposits held by the subsidiary Churubusco, Indiana ("Churubusco"), and thereby banks of Auburn, Dekalb and Churubusco are 0.18 percent, 0.03 indirectly acquire its subsidiary bank, Churubusco percent and 0.15 percent, respectively. 3. The Fort Wayne banking market is approximated by Allen, State Bank, Churubusco, Indiana. DeKalb and Whitley counties in Indiana; Jefferson township in Wells Notice of the applications, affording interested per- County, Indiana; Hicksville township in Defiance County, Ohio; and Carryall township in Paulding County, Ohio. sons an opportunity to submit comments, has been 4. Under the revised Department of Justice Merger Guidelines (49 given in accordance with section 3(b) of the Act. The Federal Register 26,823 (June 29, 1984)), any market in which the time for filing comments has expired and the Board post-merger HHI is above 1800 is considered highly concentrated. In such markets, the Department is likely to challenge any merger that has considered the applications and all comments produces an increase in the HHI of more than 100 points unless other received in light of the factors set forth in section 3(c) factors indicate that the merger will not substantially lessen competiof the Act (12 U.S.C. § 1842(c)). tion. The Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other Applicant is the ninth largest banking organization factors indicating anticompetitive effect) unless the post-merger HHI in Indiana, with one subsidiary bank, controlling is at least 1800 and the merger increases the HHI by at least 200 points. $635.5 million in total deposits, which represents 1.8 The Department has not objected to Board approval of this transacpercent of the deposits in commercial banks in the tion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

418 Federal Reserve Bulletin • June 1986 Although consummation of the proposal would elim- following the effective date of this Order, or later than ina;N existing competition between Applicant and Au- three months after the effective date of this Order, burn, Dekalb and Churubusco in the Fort Wayne unless this period is extended for good cause by the banking market, numerous other commercial banking Board or by the Federal Reserve Bank of Chicago, organizations would remain as competitors after con- pursuant to delegated authority. summation of the proposal. In addition, the Board has By order of the Board of Governors, effective concluded that the effect of this proposal on existing April 23, 1986. competition is mitigated by the extent of competition offered by thrift institutions in the market.5 Voting for this action: Vice Chairman Martin and Gover- Four thrift institutions in the Fort Wayne banking nors Wallich, Rice, Seger, and Johnson. Absent and not voting: Chairman Volcker and Governor Angell. market hold 17.1 percent of the total deposits of depository institutions in the market. These institutions compete with the commercial banks in the mar- JAMES MCAFEE ket for transaction accounts, consumer loans and [SEALI Associate Secretary of the Board commercial loans. In view of these facts, the Board considers the presence of thrift institutions a significant factor in assessing the competitive effects of this Gainer Corporation proposal.6 Accordingly, in view of the competition Merrillville, Indiana provided by thrift institutions, the number of competitors remaining in the market and other facts of record, the Board concludes that consummation of the pro- Order Approving Acquisition of a Bank Holding posed acquisition is not likely to have a significant Company and Bank adverse effect on competition in the Fort Wayne banking market. Gainer Corporation, Merrillville, Indiana, a bank hold- The financial and managerial resources of Appli- ing company within the meaning of the Bank Holding cant, Auburn, Dekalb and Churubusco, and their Company Act of 1956, as amended ("Act") respective subsidiary banks are generally satisfactory (12 U.S.C. § 1841 et seq.), has applied for the Board's and consistent with approval. As a result of this approval under section 3(a)(3) of the Act (12 U.S.C. acquisition, Applicant proposes to offer several new or § 1842(a)(3)) to acquire the successor by merger to expanded services to the customers of the subsidiary Northern Indiana Bancshares, Inc., Valparaiso, Indibanks of Auburn, Dekalb and Churubusco, including ana, and thereby to acquire indirectly Northern Indi- Master Card/VISA banking, securities brokerage ac- ana Bank & Trust Company, Valparaiso, Indiana tivities, expanded trust and corporate banking serv- ("Bank"). ices, and additional ATM services. Accordingly, con- Notice of the application, affording an opportunity siderations relating to the convenience and needs of for interested persons to submit comments, has been the community are also consistent with approval. given in accordance with section 3(b) of the Act. The Based on the foregoing and other facts of record, the time for filing comments has expired, and the Board Board has determined that the proposed acquisition is has considered the application and all comments rein the public interest and that the applications should ceived in light of the factors set forth in section 3(c) of be, and hereby are, approved. The transaction shall the Act (12 U.S.C. § 1842(c)). not be consummated before the thirtieth calendar day Applicant, which controls three banks, is the fourth largest commercial banking organization in Indiana, with total deposits of $792.7 million, representing 2.2 percent of the total deposits in commercial banks in 5. The Board has previously determined that thrift institutions have the state.1 Bank is the 25th largest commercial bank in become, or at least have the potential to become, major competitors of Indiana, with total deposits of $234.6 million, reprebanks. NCNB Corporation, 70 FEDERAL RESERVE BULLETIN 225 senting 0.7 percent of the total deposits in commercial (1984); Sun Banks, Inc., 69 FEDERAL RESERVE BULLETIN 934 (1983); Merchants Bancorp, Inc., 69 FEDERAL RESERVE BULLETIN 865 banks in the state. Upon consummation of this propos- (1983); First Tennessee National Corporation, 69 FEDERAL RESERVE al, Applicant would remain the fourth largest commer- BULLETIN 298 (1983). cial banking organization in Indiana, with total depos- 6. If 50 percent of the deposits held by thrift institutions were included in the calculation of market concentration, Applicant would its of approximately $1.0 billion, representing control 20.5 percent of total deposits in the market, and Auburn, Dekalb and Churubusco would control 2.1, 0.3 and 1.7 percent, respectively. Consummation of the proposed acquisition would increase Applicant's share of deposits in the market to 24.6 percent, the 1. All banking data are as of December 31, 1984, adjusted to HHI by 181 points to 1816, and the four-firm concentration ratio from account for mergers and acquisitions consummated as of April 3, 74.2 percent to 78.3 percent. 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 419 approximately 2.9 percent of the total deposits in counts, consumer loans and commercial loans. Accommercial banks in the state. Consummation of this cordingly, in view of the competition provided by proposal would not result in a significant increase in thrift institutions and the number of competitors rethe concentration of banking resources in Indiana. maining in the market, the Board concludes that Applicant is the largest of 13 commercial banking consummation of the proposed acquisition is not likely organizations in the Gary-Hammond banking market,2 to have a significant adverse effect on competition in controlling 28.8 percent of the total deposits in com- the Gary-Hammond banking market. mercial banks in the market. Bank is the sixth largest The financial and managerial resources and future commercial banking organization in the market, con- prospects of Applicant and Bank are considered genertrolling 8.5 percent of the total deposits in commercial ally satisfactory. Applicant has indicated that it probanks therein. Upon consummation of this proposal, poses to provide several new services to Bank's Applicant would control 37.3 percent of the total customers including access to an ATM network, disdeposits in commercial banks in the market. count brokerage services, expanded lending services, The Gary-Hammond banking market is considered FHA and VA mortgage loans, an expanded student moderately concentrated, with a four-firm concentra- loan program, and new trust services. Considerations tion ratio of 58.2 percent and a Herfindahl-Hirschman relating to the convenience and needs of the communi- Index ("HHI") of 1373. Upon consummation of this ty to be served are consistent with approval. proposal, the four-firm concentration ratio in the mar- Based upon the foregoing and other facts of record, ket would increase by 8.5 percent to 66.7 percent and the Board has determined that consummation of the the HHI would increase by 490 points to 1863.3 transaction would be in the public interest and that the Although consummation of this proposal would application should be, and hereby is, approved. The eliminate existing competition between Applicant and transaction shall not be consummated before the thirti- Bank in the Gary-Hammond banking market, 11 other eth calendar day following the effective date of this commercial banking organizations would remain as Order, or later than three months after the effective competitors. In addition, the Board has concluded that date of this Order, unless such period is extended for the effect of this proposal on existing competition is good cause by the Board or the Federal Reserve Bank mitigated by the extent of competition offered by thrift of Chicago, pursuant to delegated authority. institutions in the market.4 Sixteen savings and loan By order of the Board of Governors, effective associations in the market hold total deposits of $1.7 April 30, 1986. billion, representing 38.1 percent of the total deposits in the market.5 These institutions compete with the Voting for this action: Chairman Volcker and Governors commercial banks in the market for transaction ac- Martin, Rice, Seger, Angell, and Johnson. Absent and not voting: Governor Wallich. 2. The Gary-Hammond banking market is approximated by Lake JAMES MCAFEE and Porter Counties, Indiana. [SEAL] Associate Secretary of the Board 3. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)), any market in which the post-merger HHI is over 1800 is considered highly concentrated, and Marshall & Ilsley Corporation the Department is likely to challenge a merger that increases the HHI by more than 50 points unless other factors indicate that the merger is Milwaukee, Wisconsin not likely substantially to lessen competition. The Department of Justice has informed the Board that a bank merger or acquisition M&I Marytown Corporation generally will not be challenged (in the absence of other factors indicating an anticompetitive effect) unless the post-merger HHI is at Mary town, Wisconsin least 1800 and the merger increases the HHI by at least 200 points. The Department of Justice has not advised the Board of any objection to this transaction. Order Approving Formation of a Bank Holding 4. The Board has previously determined that thrift institutions have Company and Acquisition of Bank become, or at least have the potential to become, major competitors of banks. NCNB Corporation, 70 FEDERAL RESERVE BULLETIN 225 (1984); Sun Banks, Inc., 69 FEDERAL RESERVE BULLETIN 934 (1983); Marshall & Ilsley Corporation, Milwaukee, Wiscon- Merchants Bancorp, Inc., 69 FEDERAL RESERVE BULLETIN 865 sin, a bank holding company within the meaning of the (1983); First Tennessee National Corporation, 69 FEDERAL RESERVE BULLETIN 298 (1983). Bank Holding Company Act ("Act") (12 U.S.C. 5. If 50 percent of the deposits held by thrift institutions is included §§ 1841 et seq.), has applied for the Board's approval in the calculation of market concentration, Applicant would control under section 3(a)(3) of the Act (12 U.S.C. 22.0 percent and Bank would control 6.5 percent of the total deposits in the market; the four-firm concentration ratio would be 44.5 percent; § 1842(a)(3)) to acquire Marytown Bancshares, Inc., and the HHI would be 886. Following consummation of the proposal, New Holstein, Wisconsin ("Company"), a one-bank Applicant would control 28.5 percent of the total deposits in the holding company, and thereby indirectly acquire Commarket, the four-firm concentration ratio would be 51.0 percent, and the HHI would be 1172. pany's banking subsidiary, Farmers & Merchants Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

420 Federal Reserve Bulletin • June 1986 Bank, Marytown, Wisconsin ("Bank"). This transac- challenge under the Department of Justice Merger tion would be effected by merging Company with and Guidelines.4 into M&I Marytown Corporation, Marytown, Wiscon- Although the proposed acquisition would eliminate sin.1 some existing competition in the market, the Board Notice of the applications, affording interested per- has concluded that the effect of this proposal on sons an opportunity to submit comments, has been existing competition is mitigated by the extent of given in accordance with section 3(b) of the Act. The competition offered by thrift institutions in the martime for filing comments has expired, and the Board ket.5 Three thrift institutions located in the market has considered the applications and all comments hold deposits of $51.9 million, representing 25.6 perreceived in light of the factors set forth in section 3(c) cent of the total deposits in the market. These instituof the Act. tions compete with commercial banks in the provision Applicant is the second largest commercial banking of consumer loans, transaction accounts and commerorganization in Wisconsin and controls deposits of cial real estate loans, and are authorized to provide $3.5 billion, representing 11.9 percent of the total commercial lending services. In view of these facts, deposits in commercial banks in the state.2 Company the Board considers the presence of thrift institutions a is one of the smaller commercial banking organizations significant factor in assessing the competitive effects in the state and controls deposits of $10.3 million, of this proposal.6 The Board also notes that several representing less than one percent of the total deposits competitors — six commercial banks and three thrift in commercial banks in the state. Upon acquiring institutions — would remain in the market following Company, Applicant would remain the second largest consummation of this proposal. On the basis of these banking organization and control 12.0 percent of the and other facts of record, the Board concludes that the total deposits in commercial banks in the state. Con- effects of consummation of the proposal on existing summation of this proposal would have no significant competition in the New Holstein banking market effect on the concentration of banking resources in would not be significantly adverse. Wisconsin. The financial and managerial resources and future An existing banking subsidiary of Applicant, M&I prospects of Applicant and Company are considered New Holstein Bank, New Holstein, Wisconsin, com- satisfactory and consistent with approval of the applipetes directly with Bank in the New Holstein banking cation. Considerations related to the convenience and market.3 Applicant is the third largest commercial needs of the communities to be served are also consisbanking organization in the market, controlling depos- tent with approval. its of $27.2 million, representing 18 percent of the total Based on the foregoing and other facts of record, the deposits in commercial banks in the market. Company Board has determined that the proposed acquisition is is the sixth largest commercial banking organization in in the public interest and that the applications should the market, controlling deposits of $10.3 million, representing 6.9 percent of the total deposits in commercial banks therein. Upon acquiring Company, Applicant would control 4. Under the revised Department of Justice Merger Guidelines (49 24.9 percent of the total deposits in commercial banks Federal Register 26,823 (1984)), any market in which the post-merger HHI is above 1800 is considered highly concentrated. In such marin the market. The share of deposits held by the four kets, the Department is likely to challenge a merger that increases the largest banking organizations in the market, currently HHI by more than 50 points unless other facts of record indicate that the merger will not substantially lessen competition. The Department 73 percent, would increase to 79.9 percent upon conhas informed the Board that a bank merger or acquisition generally summation of this proposal. The market's Herfindahl- will not be challenged (in the absence of other factors indicating an Hirschman Index ("HHI") would increase by 248 anticompetitive efiFect) unless the post-merger HHI is at least 1800 and the merger increases the HHI by at least 200 points. points to 1856 upon consummation of the proposal, The Department has not advised the Board of any objection to this making this transaction one that would be subject to transaction. 5. The Board has previously determined that thrift institutions have become, or at least have the potential to become, major competitors of banks. E.g., NCNB Corporation, 70 FEDERAL RESERVE BULLETIN 1. M&I Marytown Corporation has applied for the Board's approv- 225 (1984); Sun Banks, Inc., 69 FEDERAL RESERVE BULLETIN 934 al pursuant to section 3(a)(1) of the Act (12 U.S.C. § 1842(a)(1)) to (1983); Merchants Bancorp, Inc., 69 FEDERAL RESERVE BULLETIN become a bank holding company by merging with Company. 865 (1983); First Tennessee National Corporation, 69 FEDERAL RE- 2. Banking data are as of December 31, 1984, and reflect Appli- SERVE BULLETIN 298 (1983). cant's acquisition of Lancaster State Bank, Lancaster, Wisconsin, on 6. If 50 percent of the deposits held by thrift institutions were December 31, 1985. included in the calculation of market concentration, the pre-acquisi- 3. The New Holstein banking market is approximated by southern tion four-firm concentration ratio would decrease to 62.3 percent and Calumet County (Stockbridge, Chilton, Charlestown, Brothertown, the HHI would decrease to 1254. Upon consummation of this proposand New Holstein townships); Eaton and Schleswig townships in al, the four-firm concentration ratio would increase to 68.1 percent Manitowoc County; Russell and Rhine townships in Sheboygan and the HHI would increase by 179 points to 1433. The resulting County; and Calumet township in Fond du Lac County. market share of Applicant would decrease to 21.2 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 421 be approved. Accordingly, the applications are ap- Notice of the applications, affording opportunity for proved for the reasons stated above. The transactions interested persons to submit comments, has been shall not be consummated before the thirtieth calendar given in accordance with sections 3 and 4 of the Act day following the effective date of this Order, or later (51 Federal Register 5101 (February 11, 1986)). The than three months after the effective date of this time for filing comments has expired, and the Board Order, unless that period is extended for good cause has considered the applications and all comments by the Board or the Federal Reserve Bank of Chicago, received in light of the factors set forth in section 3(c) pursuant to delegated authority. of the Act, 12 U.S.C. § 1842(c), and the consider- By order of the Board of Governors, effective ations specified in section 4(c)(8) of the Act. April 8, 1986. Archer is the 172nd largest commercial banking organization in Nebraska, holding total deposits of Voting for this action: Chairman Volcker and Governors $18.5 million, representing less than one percent of Martin, Wallich, Rice, Seger, Angell, and Johnson. total deposits in the state.1 Bank is the 251st largest commercial bank in Nebraska, holding total deposits JAMES MCAFEE of $12.6 million, representing less than one percent of [SEAL] Associate Secretary of the Board total deposits in the state. Consummation of this proposed transaction would not have significant adverse effects upon the concentration of banking resources in the state. Orders Issued Under Sections 3 and 4 of the Bank operates in the Omaha, Nebraska-Council Bank Holding Company Act Bluffs, Iowa banking market,2 where it is the 28th largest of 38 commercial banks, controlling 0.34 per- Archer, Inc. cent of total deposits in commercial banks in the Palmer, Nebraska market. Archer and Osceola do not compete in the Omaha-Council Bluffs market. Order Approving the Merger of Bank Holding Principals of Archer, however, control an additional Companies bank in the market, Bank of Papillion, Papillion, Nebraska, which holds deposits of $35.7 million, rep- Archer, Inc., Palmer, Nebraska ("Archer"), and its resenting 0.97 percent of total deposits in commercial subsidiary Osceola Insurance, Inc., Osceola, Nebras- banks in the market and making it the 24th largest bank ka ("Osceola"), bank holding companies within the in the market. Principals of Archer also control Gretmeaning of the Bank Holding Company Act of 1956, as na, and this proposal represents the reorganization of amended ("Act") (12 U.S.C. § 1841 et seq.), have these organizations into a single multibank holding applied for the Board's approval under section 3 of the company. Since Bank, like Bank of Papillion, is pres- Act (12 U.S.C. § 1842) to acquire The Gretna Compa- ently controlled by principals of Archer, the proposed ny ("Gretna"), and thereby to acquire indirectly its transaction will not result in any lessening of competisubsidiary bank, Gretna State Bank ("Bank"), both of tion between Bank of Papillion and Bank. In addition, Gretna, Nebraska. Archer proposes to merge Gretna Bank and Bank of Papillion are two of the smaller and Osceola, with the latter being the surviving institu- banks in the market, together controlling deposits of tion. $48.3 million, representing 1.31 percent of total depos- Gretna also engages directly in the sale of credit life its in commercial banks in the Omaha-Council Bluffs and credit accident and health insurance related to market. The Board concludes that consummation of extensions of credit by Bank, and Archer and Osceola this transaction will not have any significant adverse have applied under section 4(c)(8) of the Act effects upon competition in any relevant market. (12 U.S.C. § 1843(c)(8)) and section 225.23(a)(2) of Where the principals of an applicant are engaged in the Board's Regulation Y (12 C.F.R. § 225.23(a)(2)), operating a chain of banking organizations, the Board, to engage in these credit-related insurance agency in addition to analyzing the bank holding company activities. The sale of insurance that is limited to assuring repayment of the outstanding balance on a specific extension of credit by a bank holding company's subsidiary bank in the event of the death, disability or involuntary unemployment of the debtor has been determined by the Board to be closely related to banking and permissible for bank holding companies 1. Deposit data are as of December 31, 1984. 2. The Omaha, Nebraska-Council Bluffs, Iowa banking market is pursuant to 12 U.S.C. § 1843(c)(8)(A). approximated by the Omaha, Nebraska-Council Bluffs, Iowa RMA. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

422 Federal Reserve Bulletin • June 1986 proposal before it, also considers the entire chain and By order of the Board of Governors, effective analyzes the financial and managerial resources and April 14, 1986. future prospects of the chain within the context of the Board's multibank holding company standards. After Voting for this action: Chairman Volcker and Governors considering the facts of record, including recent oper- Wallich, Rice, Seger, Angell, and Johnson. Governor Wallich abstained from the insurance portion of this action. Absent ating changes within the chain banking organization, and not voting: Governor Martin. the Board has concluded that the financial and managerial resources and future prospects of Archer, Osce- JAMES MCAFEE ola and Bank are consistent with approval of this [SEAL] Associate Secretary of the Board application. Considerations relating to the convenience and needs of the communities to be served also are consistent with approval. Banc One Corporation Archer and Osceola have also applied, pursuant to Columbus, Ohio section 4(c)(8) of the Act, to engage in the sale of credit life and credit accident and health insurance through Money Management Corporation acquisition of the insurance agency operated directly Merrillville, Indiana by Gretna. No adverse competitive effect would result from this acquisition because the insurance agency Order Approving Acquisition of a Bank Holding activities of Gretna are limited to the sale of credit life Company and credit accident and health insurance directly related to extensions of credit made by Bank. Banc One Corporation, Columbus, Ohio, a bank hold- There is no evidence in the record to indicate that ing company within the meaning of the Bank Holding approval of this proposal would result in undue con- Company Act (12 U.S.C. § 1841 et seq.) ("Act"), has centration of resources, unfair competition, conflicts applied for the Board's approval under section 3(a)(5) of interests, unsound banking practices, or other ad- of the Act (12 U.S.C. § 1842(a)(5)) to acquire Money verse effects on the public interest. The proposed Management Corporation, Merrillville, Indiana acquisition will allow Archer and Osceola to provide a ("Management"). As a result of this acquisition, Apconvenient source for credit life insurance for Bank's plicant would acquire indirectly Management's subsidborrowers. Accordingly, the Board has determined iary bank, Bank of Indiana, N.A. ("Bank"), Gary, that the balance of the public interest factors it must Indiana. consider under section 4(c)(8) of the Act is favorable Banc One Corporation has also applied for the and consistent with approval of the application to Board's approval under section 4(c)(13) of the Act acquire Gretna's insurance agency. (12 U.S.C. § 1843(c)(13)) to acquire all of the shares Based on the foregoing and other facts of record, the of British Swiss Trust Company, Charlottetown, Board has determined that the applications under Prince Edward Island, Canada, a currently inactive sections 3 and 4 of the Act should be, and hereby are, company. approved. The merger with Gretna shall not be con- Notice of the applications, affording an opportunity summated before the thirtieth calendar day following for interested persons to submit comments and views, the effective date of this Order, and neither the bank- has been given in accordance with section 3(b) of the ing acquisition nor the nonbanking acquisition shall Act. The time for filing comments and views has occur later than three months after the effective date of expired, and the Board has considered the application this Order, unless such period is extended for good and all comments received in light of the factors set cause by the Board or by the Federal Reserve Bank of forth in section 3(c) of the Act. Kansas City, pursuant to delegated authority. The Applicant is the second largest commercial banking determination with respect to Archer's acquisition of organization in Ohio. Its 22 subsidiary banks control Gretna's insurance agency activities is subject to all of deposits of approximately $8.4 billion, representing the conditions set forth in Regulation Y, including 13.5 percent of the total deposits in commercial banks sections 225.4(d) and 225.23(b) (12 C.F.R. §§ 225.4(d) in Ohio.1 Management is the seventeenth largest comand 225.23(b)), and to the Board's authority to require mercial banking organization in Indiana. Its sole bank such modifications or termination of the activities of a subsidiary controls deposits of approximately $278.8 bank holding company or any of its subsidiaries as the million, representing less than 1 percent of the total Board finds necessary to assure compliance with, and deposits in commercial banks in Indiana. Management prevent evasions of, the provisions and purposes of the Act and the Board's regulations and orders issued thereunder. 1. Statewide deposit data are as of September 30, 1985. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 423 also controls British Swiss Trust Company, an inac- All of Bank's 14 offices are located in the Garytive company chartered in Canada to engage in pen- Hammond banking market5 where Bank is the third sion fund administration activities. largest banking organization, controlling 9.8 percent of Section 3(d) of the Act (12 U.S.C. § 1843(d)) prohib- the deposits in commercial banks in the market. Appliits the Board from approving an application by a bank cant's subsidiary banks do not operate in the Garyholding company to acquire control of any bank locat- Hammond market, and consummation of the proposed ed outside of the holding company's home state,2 acquisition would have no adverse effect on competiunless such acquisition is "specifically authorized by tion in any relevant market. the statute laws of the State in which such bank is The Board also examined the effect of the proposal located, by language to that effect and not merely by on probable future competition in the relevant geoimplication." graphic markets. In light of the numerous other poten- Effective January 1, 1986, the statute laws of the tial out-of-state entrants into the Ohio markets served State of Indiana authorized any bank holding company by Applicant, the Board has concluded that consumhaving its principal place of business in Ohio, Ken- mation of this proposal would not have any significant tucky, Illinois and Michigan to acquire control of an adverse effects on probable future competition in any Indiana bank or bank holding company, if the state relevant market. where that bank holding company is located autho- The financial and managerial resources and future rized the acquisition of that acquiror bank holding prospects of Applicant, Management, and their subcompany "by the Indiana bank holding company or sidiaries are considered satisfactory. Considerations Indiana bank, sought to be acquired."3 relating to the convenience and needs of the communi- Effective October 17, 1985, the statute laws of Ohio ties to be served are also consistent with approval. authorized a bank or bank holding company with its The Board has also considered the application to principal place of business in another state to charter acquire British Swiss Trust Company and has deteror otherwise acquire an Ohio bank or bank holding mined that the factors that the Board must consider company, only if the Ohio Superintendent of Banks under section 4(c)(13) are consistent with approval. determines that the laws of such other state permit an Based on the foregoing and other facts of record, the Ohio bank or bank holding company to acquire a bank Board has determined that consummation of the proor bank holding company in that state "on terms that posed acquisition would be in the public interest and are, on the whole, substantially no more restrictive" that the application should be approved. Accordingly, that those established under Ohio law.4 Until October the application is approved for the reasons summa- 1988, interstate acquisitions are authorized only from a rized above. The transaction shall not be consummatlimited number of states, including Indiana. The Ohio ed before the thirtieth calendar day following the Superintendent of Banks has issued a "Determination effective date of this Order or later than three months of Reciprocity," in which she concludes that the after the effective date of this Order, unless such interstate banking statute of Indiana is reciprocal with period is extended for good cause by the Board or by that of Ohio and authorizes banking acquisitions be- the Federal Reserve Bank of Cleveland, acting pursutween the two states. The Director of the Indiana ant to delegated authority.6 Department of Financial Institutions has also deter- By order of the Board of Governors, effective mined that the two state statutes are reciprocal and April 28, 1986. authorize such interstate acquisitions. The Board concludes that the two statutes are Voting for this action: Chairman Volcker and Governors reciprocal and that Indiana has by statute expressly Martin, Rice, Seger, Angell, and Johnson. Absent and not voting: Governor Wallich. authorized an Ohio bank holding company, such as Applicant, to acquire an Indiana bank or bank holding company, such as Management. Accordingly, the JAMES MCAFEE Board concludes that approval of Applicant's proposal [SEAL] Associate Secretary of the Board to acquire indirectly a bank in Indiana is not barred by the Douglas Amendment. 2. A bank holding company's home state is that state in which the 5. The Gary-Hammond banking market is approximated by Lake operations of the bank holding company's banking subsidiaries were and Porter Counties, Indiana. principally conducted on July 1, 1966, or on the date on which the 6. The Board notes that Applicant may not consummate this company became a bank holding company, whichever is later. transaction unless and until it receives final approval by the Indiana 3. Ind. Code § 28-2-15-18 (Supp. 1985). Department of Financial Institutions pursuant to section 28-2-15-17 of 4. Ohio Rev. Code Ann. §§ 1101.05 (Page Supp. 1985). the Indiana Code. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

424 Federal Reserve Bulletin • June 1986 Wells Fargo & Company time for filing comments has expired, and the Board San Francisco, California has considered the applications and all comments received in light of the factors and considerations set Order Approving the Acquisition of a Bank Holding forth in section 3(c) and 4 of the Act (12 U.S.C. Company § 1842(c) and 1843), and the purposes of the Edge Act. Wells Fargo is the third largest commercial banking Wells Fargo & Company, San Francisco, California, a organization in California, with one subsidiary bank bank holding company within the meaning of the Bank that controls total domestic deposits of $18.3 billion, Holding Company Act (12 U.S.C. § 1841 et seq.) representing 10.0 percent of the total deposits in ("Act"), has applied for the Board's approval under commercial banks in the state.1 Crocker is the fifth section 3 of the Act (12 U.S.C. § 1842), to acquire largest commercial banking organization in the state, Crocker National Corporation, San Francisco, Cali- with one banking subsidiary that controls aggregate fornia ("Crocker"), and thereby indirectly acquire domestic deposits of $12.6 billion, representing 6.8 Crocker National Bank, San Francisco, California. percent of the total deposits in commercial banks in Wells Fargo also has applied for the Board's approv- the state. Upon consummation of the proposed acquial under section 4(c)(8) of the Act (12 U.S.C. sition, Wells Fargo's share of total deposits in com- § 1843(c)(8)) and section 225.23(a)(2) of the Board's mercial banks in the state would increase to approxi- Regulation Y (12 C.F.R. § 225.23(a)(2)), to acquire mately 16.8 percent, and Wells Fargo would become the following subsidiaries of Crocker: Crocker Mort- the second largest commercial banking organization in gage Company, Inc., San Diego, California, and there- the state. by engage in originating, purchasing, and servicing Although the Board is concerned about the effect of mortgages, loans and other extensions of credit; this combination of the third and fifth largest commer- Crocker Trust Company of California, Hawthorne, cial banking organizations in California on the concen- California, and thereby perform trust company ser- tration of banking resources within the state, certain vices; Crocker Financial Corporation, Limited, Hono- conditions that would exist after the proposed merger lulu, Hawaii, and thereby operate an industrial loan mitigate that concern. A number of other large bank company and engage in the sale of credit life, accident, holding companies that are active competitors and health insurance; Crocker Life Insurance Compa- throughout the state would remain upon consummany, San Francisco, California, and thereby underwrite tion of this proposal. In addition, California would credit life and disability insurance for Crocker and its remain moderately concentrated in terms of banking subsidiaries; Crocker Investment Management Corp., resources, with the share of the commercial bank San Francisco, California, and thereby provide portfo- deposits held by the four largest commercial banking lio investment advice and general economic and finan- organizations in California increasing from 61.5 percial information and advice; and CNC Insurance cent to 68.3 percent. Furthermore, the Board notes Agency, San Francisco, California, and thereby act as that 48.9 percent of the combined deposits of banks agent for the sale of credit life and disability insurance and thrift institutions in the state is controlled by thrift directly related to extensions of credit by subsidiaries institutions, which compete actively with commercial of Crocker. The Board has determined that these banks throughout the state. Thirty-three of the 49 activities are closely related to banking and are per- depository institutions with deposits of $1.0 billion or missible for bank holding companies (12 C.F.R. more are thrifts, while only 16 are commercial banks. §§ 225.25(b)(1), (2), (3), (4), (8), (9)). In view of the structure of banking in California, the Wells Fargo also has applied for the Board's approv- Board concludes that consummation of this acquisial under section 25(a) of the Federal Reserve Act tion would not have any significantly adverse effects ("Edge Act") to acquire Crocker Bank International, on the concentration of commercial banking resources New York, New York, and Crocker International in California. Investment Corporation, San Francisco, California. Wells Fargo and Crocker are also among the larger Wells Fargo has also provided notice under section commercial banking organizations in the United 4(c)(14) of the Act (12 U.S.C. § 1843(c)(14)) of its States. Based on consolidated assets, Wells Fargo is intention to acquire Crocker Pacific Trade Corpora- the thirteenth largest commercial banking organization tion, San Francisco, California, an export trading in the country, with total assets of $29.4 billion.2 company. Crocker is the twenty-fifth largest commercial banking Notice of the applications, affording opportunity for interested persons to submit comments, has been 1. Data are as of June 30, 1985, unless otherwise noted, and do not given in accordance with sections 3 and 4 of the Act reflect the proposed divestitures. (51 Federal Register 10,446 (March 26, 1986)). The 2. Data are as of December 31, 1985. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 425 organization in the country, with total assets of $19.2 formance. Thus, considerations relating to banking billion. Upon consummation of the proposal and a factors lend weight toward approval of this applicaplanned reduction in assets, Wells Fargo would be- tion. come the tenth largest commercial banking organiza- Wells Fargo's subsidiary bank competes with tion in the country, with $42.5 billion of consolidated Crocker's subsidiary bank in 36 banking markets in assets. California. Wells Fargo proposes to make certain As the Board has previously noted, it views with divestitures in seven of these markets in order to concern any proposal involving a major expenditure of alleviate the anticompetitive effects that would otherfunds for expansion that could limit a bank holding wise result from consummation of the proposal. The company's ability to serve as a source of strength to its Board has reviewed the effect of the transaction in subsidiary banks, particularly its ability to raise new these seven markets in light of the proposed divestiequity capital to deal with unforeseen difficulties.3 The tures and in the other 29 relevant markets, and finds Board is also concerned about large acquisitions that that the effect on existing competition that would reduce the amount of equity capital in the banking result from this transaction in each of these markets is system. Thus in its evaluation of the financial aspects not so adverse as to warrant denial of the application. of this case, the Board has given special and careful In this regard, The Department of Justice has informed attention to Wells Fargo's capital position and the fact the Board of its view that consummation of the transthat it has raised substantial additional equity capital action would not be significantly adverse if the divestito fund the acquisition. tures proposed by Wells Fargo in the seven relevant After a review of the effect of the proposal on Wells banking markets are completed under the conditions Fargo's financial resources, the Board concludes that described below. consummation of the proposal will not have a material Both Wells Fargo and Crocker are headquartered in adverse effect on Wells Fargo's capital and that Wells the San Francisco market.4 In the San Francisco Fargo's financial resources will remain satisfactory. In banking market, Wells Fargo is the second largest reaching this conclusion, the Board has noted as a commercial banking organization with total deposits of matter of particular importance the fact that more than $10.5 billion, representing 19.5 percent of the total 70 percent of the purchase price of this transaction will deposits in commercial banks in the market. Crocker be financed with equity, including the issuance of is the third largest commercial banking organization more than $400 million in common stock, which al- with total deposits of $5.7 billion, representing 10.7 ready has been issued. In addition, after consumma- percent of total deposits in commercial banks in the tion of the proposal Wells Fargo intends to reduce its market. After consummation of the proposal, Appliassets by $5.9 billion by September. After this reduc- cant would control approximately 30.2 percent of the tion in assets, the tangible primary and total capital of total deposits in commercial banks in the market. both Wells Fargo and its subsidiary bank will be well The San Francisco banking market is considered to in excess of the Board's minimum requirements for be concentrated, with the four largest commercial multinational organizations. Accordingly, the Board banks controlling 72.4 percent of the deposits in comconcludes that the financial resources of Wells Fargo mercial banks in the market. The Herfindahl-Hirschand its subsidiary are consistent with approval. man Index ("HHI") for the market is 1998 and would The Board has also reviewed the effect of this increase by 418 points to 2416 upon consummation of proposal in light of Crocker's financial performance. the proposal.5 In recent years, Crocker has suffered significant finan- Although consummation of this proposal would cial losses. As a result of these losses, Crocker's eliminate existing competition between Wells Fargo parent, Midland Bank pic, London, England, has and Crocker in the San Francisco market, more than restructured Crocker's management to improve its financial condition. Announcement of the merger has continued the uncertainty surrounding Crocker's management, and has resulted in the prospect of an 4. The San Francisco banking market is approximated by the San adverse effect on Crocker's financial and managerial Francisco-Oakland-San Jose RMA plus the city of St. Helena. resources. The Board believes that Wells Fargo will 5. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)) ("Guidelines"), a market provide the stability to Crocker's management that is in which the post-merger HHI is over 1800 is considered highly needed to strengthen Crocker and improve its per- concentrated. In such markets, the Department is likely to challenge a merger that produces an increase in the HHI of more than 50 points. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI 3. Manufacturers Hanover Corporation, 70 FEDERAL RESERVE is at least 1800 and the merger increases the HHI by at least 200 BULLETIN 452 (1984). points. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

426 Federal Reserve Bulletin • June 1986 100 commercial banking organizations would remain the increase in concentration resulting from the proin the market as competitors after consummation of posal, as measured by the increase in the HHI in these the proposal. These institutions include some of the markets, is not so significant as to warrant denial of country's larger commercial banks as well as a number the proposal. In addition, the presence of thrift instituof large foreign financial institutions. In addition, the tions in these markets further mitigates any anticomcompetition provided by more than 60 thrift institu- petitive effects in the markets. tions in the market also mitigates the competitive In the seven remaining markets where no divestieffects of the transaction.6 Thrift institutions hold tures are planned,10 consummation of the proposal combined deposits of approximately $33.3 billion, or would result in a substantial increase in the market approximately 38 percent of the total deposits in the share of the resulting organization and the market market. Thrift institutions already exert a considerable would be highly concentrated in terms of commercial competitive influence in the market as providers of bank deposits only. After a review of the record, NOW accounts and consumer loans. In addition, some however, the Board believes that there are mitigating of the thrift institutions are engaged in the business of circumstances that indicate that consummation of the making commercial loans and are providing an alterna- proposal would not have substantially adverse effects tive for such services in the San Francisco market. on competition. First, in each of these markets, nu- Accordingly, based upon the foregoing and other facts merous competitors, including the state's largest comof record, the Board concludes that the effects of the mercial banking organization, would remain after conproposal on competition in the San Francisco market summation of the proposal. Moreover, the would not be substantially adverse.7 anticompetitive effects of this transaction are further There are 28 other markets in which both Wells mitigated by the presence and competition afforded by Fargo and Crocker compete and where no divestiture numerous thrift institutions which control at least oneis proposed. An analysis of these markets indicates third of the combined deposits of banks and thrift that in 21 markets, taking into account the competition institutions in each market. among commercial banks only, consummation of the The record indicates that most of the thrift instituproposal would not have a significant adverse effect on tions in these markets currently offer a full range of competition. Six of these markets would be only consumer services, NOW accounts and other transacmoderately concentrated after consummation of the tion accounts, and some of them are currently inproposal and in five of these six markets, the increase volved in commercial lending activities. If 50 percent in Wells Fargo's market share is small.8 In the sixth of the deposits of thrift institutions are included in the market, the increase in Wells Fargo's market share is calculation of market concentration, six of these marmitigated by existence of numerous other competitors kets would be considered only moderately concentratand the fact that the market would remain only moder- ed and in the seventh market the increase in concenately concentrated. The other 15 of the 21 markets are tration occasioned by this proposal, as measured by already considered concentrated under the guidelines the increase in the HHI in the market, would not be and would remain so upon consummation.9 However, significant. In the seven markets where Wells Fargo proposes divestitures, it will divest seven branches with a total of approximately $225 million in deposits to a commer- 6. The Board has previously indicated that thrift institutions have cial banking organization not currently represented in become, or have the potential to become, major competitors of the markets.11 In four of these markets, Wells Fargo's commercial banks. National City Corporation, 70 FEDERAL RESERVE BULLETIN 743 (1984); NCNB Bancorporation, 70 FEDERAL RESERVE market share will remain unchanged because it will BULLETIN 225 (1984); General Bancshares Corporation, 69 FEDERAL divest all of Crocker's position in the market. In a fifth RESERVE BULLETIN 802 (1983); First Tennessee National Corporamarket, Wells Fargo will divest its pre-acquisition tion, 69 FEDERAL RESERVE BULLETIN 298 (1983). 7. If 50 percent of deposits held by thrift institutions in the San position in the market. On the basis of these divesti- Francisco banking market were included in the calculation of market tures and all of the facts of record, the Board conconcentration, the share of total deposits held by the four largest cludes that consummation of the transaction would not organizations in the market (one of which is a thrift institution) would be 55.8 percent. Wells Fargo would control 14.9 percent of the tend substantially to lessen competition in these marmarket's deposits and Crocker would control 8.2 percent of the kets. market's deposits. The HHI would increase by 244 points to 1445 upon consummation of the proposal. 8. These markets are the Los Angeles, Modesto, San Joaquin County, San Diego, Santa Barbara and Ventura-Oxford banking markets, all in California. 9. These markets are as follows: Bakersfield, Central Riverside 10. These markets are the Antioch-Pittsburg, Chico, Merced, Mon- County, Fairfield, Fresno, Hemet, Imperial County, San Bernardino, terey, Sacramento, Sonora and Woodland-Davis banking markets. San Luis Obispo County, Santa Cruz, Santa Maria, Santa Rosa, 11. These markets are Colusa County, Placerville, Eureka, Redd- Southern Butte County, Ukiah, Visalia, and Watsonville. ing, Salinas, Tehama County and Marysville banking markets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 427 In the remaining two markets, the Board concludes In its evaluation of Wells Fargo's managerial rethat consummation of the proposal would not substan- sources, the Board has considered certain violations tially lessen competition after taking into account the by Wells Fargo of the Currency and Foreign Transaccompetition afforded by thrift institutions in the mar- tions Reporting Act ("CFTRA") and the regulations kets and the proposed divestitures.12 Moreover, the thereunder.15 In this regard, the Board notes that state's largest commercial banking organization is the Wells Fargo has cooperated fully with law enforcelargest bank in each market and controls a significant ment agencies. Wells Fargo and its subsidiaries have share of the market's deposits. also undertaken a comprehensive remedial program to Where, as in this case, divestitures are proposed to correct these violations and to prevent violations from avoid the otherwise substantial anticompetitive effects occurring in the future. Wells Fargo has advised the resulting from a proposed acquisition, the Board's Board that it has filed corrective currency transaction policy requires that such divestitures take place on or reports ("CTRs") appointed a senior officer responsibefore the date of consummation of the acquisition.13 ble for ensuring compliance with CFTRA reporting In accordance with the Board's policy, Wells Fargo is requirements, and established a central control unit required to make every effort to complete the divesti- which has day-to-day responsibility for monitoring all tures prior to consummation of its acquisition of reportable transactions, ensuring that reports are Crocker. In this regard, the Board notes that Wells properly filed and administering the exemption list. Fargo has entered into an agreement in principle with Wells Fargo has also designated a currency transacanother commercial banking organization not repre- tion specialist to monitor all aspects of CFTRA reportsented in the markets in question for the sale of the ing and instituted intensive internal training for bank seven branches to be divested, and the purchaser will personnel regarding compliance with the CFTRA. The file for the necessary regulatory approvals before Board has also consulted with the Office of the Compconsummation of Wells Fargo's acquisition of Crock- troller of the Currency and other appropriate enforceer. Wells Fargo's action to reach an agreement for the ment agencies with respect to this matter, and has sale of these branches is fully consistent with the considered Wells Fargo's past record of compliance Board's competitive divestiture policy. with the law. Although the Board anticipates that every effort will Based on the facts discussed above and other facts be made to complete the divestitures before consum- of record, the Board concludes that Wells Fargo's mation of the Crocker acquisition, in some circum- managerial resources are consistent with approval of stances divestiture may not be possible before the the application. The convenience and needs of the expected consummation date because of the inability communities to be served are also consistent with of the purchaser for the branches to obtain regulatory approval of this application.16 approval due to time constraints.14 Applicant also has applied, pursuant to section The Board also has considered the effects of this 4(c)(8) of the Act, to acquire Crocker Life Insurance proposal on probable future competition in the mar- Company and Crocker Insurance Agency, Inc., both kets in which Wells Fargo and Crocker do not compete of San Francisco, California, and thereby engage in with each other. In light of the number of probable the underwriting and sale of credit-related insurance future entrants into each of these markets and other associated with loans by Crocker's subsidiary banks. facts of record, the Board concludes that consumma- Although Wells Fargo currently engages in the reinsurtion of this proposal would not have any significant ance of credit-related insurance, no adverse competiadverse effect on probable future competition in any tive effect would result from this acquisition because relevant market. the activities of the firms would be limited to insurance directly related to extensions of credit made by the subsidiaries of Crocker. Wells Fargo also has applied 12. If 50 percent of the deposits held by thrift institutions in the market were included in the calculation of market concentration, the to acquire Crocker Mortgage Corporation, San Diego, markets would be considered only moderately concentrated and the California ("CMC"), a company that engages in mortincrease in market concentration resulting from the proposal would gage banking activities primarily in California and not be substantial. 13. Barnett Banks of Florida, Inc., 68 FEDERAL RESERVE BULLE- Hawaii. Wells Fargo presently engages in mortgage TIN 190 (1982); Interfirst Corporation, 68 FEDERAL RESERVE BULLE- TIN 243 (1982). 14. If the purchaser is unable to acquire the branches prior to Wells Fargo's acquisition of Crocker because of delay in securing regulatory approval, an independent trustee must be appointed for the branches prior to consummation with instructions to divest the branches 15. 31 U.S.C. § 5311, et. seq.; 31 C.F.R. § 103. promptly. This is consistent with the need to consummate the Crocker 16. The Board has received comments from a number of communiacquisition expeditiously in order to assure the expected improve- ty groups concerning the acquisition. After a number of meetings with ments in Crocker's performance and avoid managerial or other Wells Fargo, Wells Fargo issued a policy statement setting forth its problems that could result from delay. commitment to help meet the needs of the community. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

428 Federal Reserve Bulletin • June 1986 banking activities through its subsidiary bank in mar- Corporation under section 4(c)(14) of the Act and the kets where CMC operates. There are numerous other acquisition of Crocker Bank International and Crocker competitors in these markets, however, and Wells International Investment Corporation under the Edge Fargo's acquisition of CMC would not eliminate any Act. Based on the facts of record, the Board has significant competition in any relevant market. determined that disapproval of the proposed invest- Wells Fargo also proposes to acquire Crocker Trust ments is not warranted. Company of California, Hawthorne, California, a com- Based on the foregoing and other facts of record, the pany that provides data processing and custodial activ- Board has determined that the applications under ities, and Crocker Financial Corporation, Ltd., Hono- sections 3 and 4 of the Act should be and hereby are lulu, Hawaii, an industrial loan company that engages approved. The acquisition of Crocker shall not be in consumer lending in Hawaii. Wells Fargo does not consummated before the thirtieth calendar day followengage in these activities and thus the acquisition of ing the effective date of this Order or later than three Crocker's subsidiary will not eliminate any existing months after the effective date of this Order, unless competition. Wells Fargo has also applied to acquire such period is extended for good cause by the Board or Crocker Investment Management Corporation, San by the Federal Reserve Bank of San Francisco, pursu- Francisco, California ("CIMC"), a company that pro- ant to delegated authority. The determinations as to vides portfolio and general economic information ad- Wells Fargo's nonbanking activities are subject to all vice. Wells Fargo also engages in this activity. Be- of the conditions contained in Regulation Y, including cause of the large number of firms that engage in this those in sections 225.4(d) and 225.23(b)(3) (12 C.F.R. activity, however, acquisition of CIMC will not have §§ 225.4(d) and 225.23(b)(3)), and to the Board's auan adverse effect on competition. thority to require such modification or termination of Accordingly, it appears that Wells Fargo's acquisi- the activities of a holding company or any of its tion of these nonbanking subsidiaries would not have a subsidiaries as the Board finds necessary to assure significantly adverse effect upon competition in any compliance with the provisions and purposes of the relevant market. Furthermore, there is no evidence in Act and the Board's regulations and orders issued the record to indicate that approval of this proposal thereunder, or to prevent evasion thereof. would result in undue concentration of resources, By order of the Board of Governors, effective decreased or unfair competition, conflicts of interests, April 29, 1986. unsound banking practices, or other adverse effects on the public interest. Accordingly, the Board has deter- Voting for this action: Chairman Volcker and Governors mined that the balance of the public interest factors it Rice, Seger, Angell, and Johnson. Abstaining from this must consider under section 4(c)(8) of the Act is action: Governor Martin. Absent and not voting: Governor Wallich. favorable and consistent with approval of the application to acquire Crocker's nonbanking subsidiaries. The Board has also considered the notice of Wells JAMES MCAFEE Fargo's proposed investment in Crocker Pacific Trade [SEAL] Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 429 ORDERS APPROVED UNDER BANK HOLDING COMPANY ACT 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 AmBank Financial Services, American Bank of Rock Island, Chicago April 2, 1986 Inc., Rock Island, Illinois Rock Island, Illinois Apollo Bancorp, Inc., Apollo Trust Company, Cleveland April 11, 1986 Apollo, Pennsylvania Apollo, Pennsylvania Bankvest, Inc., First Peoples National Bank, Philadelphia April 28, 1986 Wilkes-Barre, Pennsylvania Ed wards ville, Pennsylvania Bryant-Irvin Bancshares, Inc., Citizens National Bank, Dallas April 7, 1986 Benbrook, Texas Benbrook, Texas Central State Bancorp, Inc., Central State Bank, St. Louis March 19, 1986 Lexington, Tennessee Lexington, Tennessee Central Wisconsin Bankshares, Valley View Bank, Chicago March 31, 1986 Inc., La Crosse, Wisconsin Wausau, Wisconsin Champlain Bank Corporation, Essex County-Champlain New York April 2, 1986 Willsboro, New York National Bank, Willsboro, New York Charter 17 Bancorp, Inc., PTC Financial Corporation, Chicago April 14, 1986 Richmond, Indiana Peru, Indiana Citizens Community Iron Exchange Bank, Chicago April 18, 1986 Bankshares, Inc., Hurley, Wisconsin Wittenberg, Wisconsin CNB Corp, Inc., Citizens National Bank in Cleveland April 8, 1986 Windber, Pennsylvania Windber, Windber, Pennsylvania Comm. Bancorp, Inc., The First National Bank of Philadelphia March 27, 1986 Forest City, Pennsylvania Nicholson, Nicholson, Pennsylvania Commerce Financial Commercial Bank at Alma, St. Louis April 14, 1986 Corporation, Alma, Arkansas Alma, Arkansas Community Bankers' Marion Center National Bank, Cleveland March 31, 1986 Corporation, Marion Center, Pennsylvania Marion Center, Pennsylvania Community Banks, Inc., Community Banks, Inc., Chicago April 17, 1986 Employee Stock Ownership Middleton, Wisconsin Trust, Middleton, Wisconsin Community Banks, Inc., Peoples Bank of Shamokin, Philadelphia April 14, 1986 Millersburg, Pennsylvania Shamokin, Pennsylvania Crown Bancshares, Inc., First United Bank of Bellevue, Kansas City March 31, 1986 Omaha, Nebraska Bellevue, Nebraska Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

430 Federal Reserve Bulletin • June 1986 Section 3—Continued . „ ., . Reserve Effective Applicant Bank(s) Bank date DBT Financial Corporation, DeWitt Bank & Trust Company, St. Louis April 18, 1986 DeWitt, Arkansas DeWitt, Arkansas Depositors Bancorp, Depositors Trust Company, Boston March 25, 1986 Lexington, Massachusetts Lexington, Massachusetts Dominion Bankshares State National Bank of Maryland, Richmond April 3, 1986 Corporation Rockville, Maryland Roanoke, Virginia First Alpine, Inc., First National Bank in Alpine, Dallas April 17, 1986 Alpine, Texas Alpine, Texas First Bancshares of Muskogee, First City Bank, N.A., Kansas City April 4, 1986 Inc., Tulsa, Oklahoma Muskogee, Oklahoma First Hanover Bancorp, Inc., Hanover State Bank, Chicago April 18, 1986 Hanover, Illinois Hanover, Illinois First National Corporation of First National Bank of Sparta, Atlanta April 17, 1986 Sparta, Sparta, Tennessee Sparta, Tennessee First Rainsville Bancshares, First National Bank of Rainsville, Atlanta March 31, 1986 Inc., Rainsville, Alabama Rainsville, Alabama First Virginia Banks, Inc., The Commercial Bank, Richmond April 21, 1986 Falls Church, Virginia Bel Air, Maryland Gateway Bancorp, Inc., Gateway National Bank, San Francisco April 4, 1986 Phoenix, Arizona Phoenix, Arizona Grenada Sunburst System Grenada Bank, St. Louis April 11, 1986 Corporation, Grenada, Mississippi Grenada, Mississippi Independent Community Newton State Bank, Chicago April 17, 1986 Bancshares, Inc., Newton, Wisconsin Kiel, Wisconsin Interchange Financial Services Interchange State Bank, New York April 9, 1986 Corporation, Saddle Brook, New Jersey Saddle Brook, New Jersey Interchange Financial Services Interchange State Bank, New York April 9, 1986 Corporation, Saddle Brook, New Jersey Saddle Brook, New Jersey Kanbanc, Inc., The Hepler State Bank, Kansas City April 18, 1986 Overland Park, Kansas Hepler, Kansas Citizens State Bank of Pomona, Pomona, Kansas Lafayette Bancshares, Inc., Citizens State Bank of Lafayette, Minneapolis March 25, 1986 Lafayette, Minnesota Lafayette, Minnesota Lake Elmo Bancorp., Inc., State Bank of Lake Elmo, Minneapolis April 15, 1986 Lake Elmo, Minnesota Lake Elmo, Minnesota Liberty Bancshares Inc., The Montgomery National Bank, Richmond April 18, 1986 Montgomery, West Virginia Montgomery, West Virginia Medina Bancshares, Inc., Medina Banking Company, St. Louis April 15, 1986 Medina, Tennessee Medina, Tennessee Mercantile Bancshares, Inc., Mercantile Bank, St. Louis March 25, 1986 Jonesboro, Arkansas Jonesboro, Arkansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 431 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date National Bancshares Corpus Christi Bancshares, Inc., Dallas March 27, 1986 Corporation of Texas, Corpus Christi, Texas San Antonio, Texas National Industrial Bancorp, National Industrial Bank of Boston April 8, 1986 Inc., Connecticut, East Hartford, Connecticut Meriden, Connecticut National Penn Bancshares, Inc., Constitution Bank, Philadelphia March 25, 1986 Boyertown, Pennsylvania Philadelphia, Pennsylvania NBC Company, Corpus Christi Bancshares, Inc., Dallas March 27, 1986 San Antonio, Texas Corpus Christi, Texas Norstar Bank of Upstate NY, purchase certain assets and New York March 18, 1986 Albany, New York assume certain liabilities of six branches of The Bank of New York, New York, New York North Central Texas Memphis State Bank, Dallas March 27, 1986 Bancshares, Inc., Memphis, Texas Iowa Park, Texas Oaklawn Financial Corporation, First Bank and Trust, Dallas April 15, 1986 Texarkana, Texas New Boston, New Boston, Texas Pandora Bancshares The First National Bank of Cleveland April 18, 1986 Incorporated, Pandora, Pandora, Ohio Pandora, Ohio Peninsula Financial The Peninsula Bank of Minneapolis April 15, 1986 Corporation, Ishpeming, Ishpeming, Michigan Ishpeming, Michigan Piedmont BankGroup The First National Bank of Richmond April 11, 1986 Incorporated, Stuart, Martinsville, Virginia Stuart, Virginia Premier Bancorporation, Inc., Zion State Bank and Trust Chicago April 17, 1986 Libertyville, Illinois Company, Zion, Illinois Roscoe Financial Services, Inc., First State Bank of Roscoe, Minneapolis April 4, 1986 Roscoe, South Dakota Roscoe, South Dakota Saver's Bancorp, Inc., Dartmouth Savings Bank, Boston April 1, 1986 Littleton, New Hampshire Hanover, New Hampshire SouthTrust Corporation, The Bank of Ozark, Atlanta April 15, 1986 Birmingham, Alabama Ozark, Alabama State Bancorp, Inc., State Bank of Long Island, New York March 26, 1986 New Hyde Park, New York New Hyde Park, New York T N Bancshares, Inc., Coronado Bancshares, Inc., Dallas April 11, 1986 El Paso, Texas El Paso, Texas Coronado Bank, El Paso, Texas Union Bancshares of Campbell Union Bank, Atlanta March 31, 1986 County, Inc., Jellico, Tennessee Jellico, Tennessee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

432 Federal Reserve Bulletin • June 1986 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Union National Corporation, Valley National Bank, Cleveland April 10, 1986 Mount Lebanon, Freeport, Pennsylvania Pennsylvania United Bankshares, Inc., Intermountain Bankshares Inc., Richmond April 3, 1986 Parkersburg, West Virginia Charleston, West Virginia United Southeastern Athens-Limestone Bank, Atlanta April 14, 1986 Bancshares, Inc., Athens, Alabama Athens, Alabama Williamsburg Bancshares, Inc., Farmers National Bank of Cleveland April 9, 1986 Williamsburg, Kentucky Williamsburg, Williamsburg, Kentucky Wrightsville Bancshares, Inc., Bank of Wrightsville, Atlanta April 2, 1986 Wrightsville, Georgia Wrightsville, Georgia Section 4 Bank(s)/Nonbanking Reserve Effective Applicant Company Bank date Banc One Corporation, HCL Leasing Corporation, Cleveland March 31, 1986 Columbus, Ohio Parsipanny, New Jersey The Chase Manhattan Genola II, Inc., New York April 16, 1986 Corporation, Moberly, Missouri New York, New York The Chase Manhattan The New York Switch New York March 18, 1986 Corporation, Corporation, New York, New York Fort Lee, New Jersey Creditanstalt-Bankverein, Pacific Overseas Finance New York March 27, 1986 Vienna, Austria Corporation, San Francisco, California Liberty BanCorporation, F-P-H Agency, Inc., Chicago April 16, 1986 Durant, Iowa Durant, Iowa McLaughlin Holding Company, MBC FINANCIAL CORP., Chicago April 10, 1986 Moline, Illinois Moline, Illinois Mid Town Bancorp, Inc., making real estate development Chicago April 14, 1986 Chicago, Illinois loans and real estate rehabilitation loans Southern National Corporation, Southern International Richmond April 21, 1986 Lumberton, North Carolina Corporation, Charlotte, North Carolina Sovran Financial Corporation, Internet, Inc., Richmond March 28, 1986 Norfolk, Virginia Reston, Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 433 ORDERS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Reserve Effective Applicant Bank(s) Bank date The Bel Air Bank, The Commercial Bank, Richmond April 21, 1986 Bel Air, Maryland Bel Air, Maryland City Bank and Trust Company, Farmers and Merchants Bank of St. Louis March 31, 1986 Moberly, Missouri Huntsville, Huntsville, Missouri The New Waterford Interim The New Waterford Bank, Cleveland March 27, 1986 Bank, New Waterford, Ohio New Waterford, Ohio The Merrill Trust Company, Merrill Bank, N.A., Boston March 31, 1986 Bangor, Maine Farmington, Maine The Toledo Trust Company, First Buckeye Bank, N.A., Cleveland March 25, 1986 Toledo, Ohio Mansfield, Ohio 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. CBC, Inc. v. Board of Governors, No. 86-1001 (10th Independent Community Bankers Associaton of South Cir., filed Jan. 2, 1986). Dakota v. Board of Governors, No. 84-1496 (D.C. Howe v. United States, et al., No. 85-4504-C (D. Cir., filed Aug. 7, 1985). Mass., filed Dec. 6, 1985). Florida Bankers Association, et al. v. Board of Gover- Myers, et al. v. Federal Reserve Board, No. 85-1427 nors, No. 85-193 (U.S., filed Aug. 5, 1985). (D. Idaho, filed Nov. 18, 1985). Urwyler, et al. v. Internal Revenue Service, et al., No. Souser, et al. v. Volcker, et al., No. 85-C-2370, et al. CV-F-85-402 REC (E.D. Cal., filed July 18, 1985). (D. Colo., filed Nov. 1, 1985). Johnson v. Federal Reserve System, et al., No. S85- Podolak v. Volcker, No. C85-0456, et. al. (D. Wyo., 0958(R) and S85-1269(N) (S.D. Miss., filed July 16, filed Oct. 28, 1985). 1985). Kolb v. Wilkinson, et al., No. C85-4184 (N.D. Iowa, Wight, et al. v. Internal Revenue Service, et al., No. filed Oct. 22, 1985). CIV S-85-0012 MLS (E.D. Cal., filed July 12,1985). Farmer v. Wilkinson, et al., No. 4-85-CIVIL-1448 (D. Cook v. Spillman, et al., No. CIV S-85-0953 EJG Minn., filed Oct. 21, 1985). (E.D. Cal., filed July 10, 1985). Kurkowski v. Wilkinson, et al., No. CV-85-0-916 (D. Florida Bankers Association v. Board of Governors, Neb., filed Oct. 16, 1985). No. 84-3883 and No. 84-3884 (11th Cir., filed Feb. Jensen v. Wilkinson, et al., No. 85-4436-S, et al. (D. 15, 1985). Kan., filed Oct. 10, 1985). Florida Department of Banking v. Board of Gover- Alfson v. Wilkinson, et al., No. Al-85-267 (D. N.D., nors, No. 84-3831 (11th Cir., filed Feb. 15, 1985), filed Oct. 8, 1985). and No. 84-3832 (11th Cir., filed Feb. 15, 1985). First National Bank of Blue Island Employee Stock Lewis v. Volcker, et al., No. C-l-85-0099 (S.D. Ohio, Ownership Plan v. Board of Governors, No. 85- filed Jan. 14, 1985). 2615 (7th Cir., filed Sept. 23, 1985). Brown v. United States Congress, et al., No. 84-2887- First National Bancshares II v. Board of Governors, 6(IG) (S.D. Cal., filed Dec. 7, 1984). No. 85-3702 (6th Cir., filed Sept. 4, 1985). Melcher v. Federal Open Market Committee, No. 84- McHuin v. Volcker, et al., No. 85-2170 WARB (W.D. 1335 (D.D.C., filed Apr. 30, 1984). Okl., filed Aug. 29, 1985). Securities Industry Association v. Board of Governors, No. 80-2614 (D.C. Cir., filed Oct. 24., 1980), and No. 80-2730 (D.C. Cir., filed Oct. 24, 1980). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

434 Membership of the Board of Governors of the Federal Reserve System, 1913-86 APPOINTIVE MEMBERS1 Federal Reserve Date of initial Other dates and information relating Name District oath of office to membership2 Charles S. Hamlin Boston Aug. 10, 1914 Reappointed in 1916 and 1926. Served until Feb. 3, 1936.3 Paul M. Warburg... .New York .do. Term expired Aug. 9, 1918. Frederic A. Delano .Chicago .do. Resigned July 21, 1918. W.P.G. Harding .... .Atlanta .do. Term expired Aug. 9, 1922. Adolph C. Miller ... .San Francisco .do. Reappointed in 1924. Reappointed in 1934 from the Richmond District. Served until Feb. 3, 1936.3 Albert Strauss New York .Oct. 26, 1918 Resigned Mar. 15, 1920. Henry A. Moehlenpah Chicago.... .Nov. 10, 1919 Term expired Aug. 9, 1920. Edmund Piatt New York .June 8, 1920 Reappointed in 1928. Resigned Sept. 14, 1930. David C. Wills Cleveland... .Sept. 29, 1920 Term expired Mar. 4, 1921. John R. Mitchell Minneapolis .May 12, 1921 Resigned May 12, 1923. Milo D. Campbell Chicago .Mar. 14, 1923 Died Mar. 22, 1923. Daniel R. Crissinger Cleveland... .May 1, 1923 Resigned Sept. 15, 1927. George R. James St. Louis.... .May 14, 1923 Reappointed in 1931. Served until Feb. 3, 1936.4 Edward H. Cunningham...Chicago do Died Nov. 28, 1930. Roy A. Young Minneapolis . .Oct. 4, 1927 Resigned Aug. 31, 1930. Eugene Meyer New York ... .Sept. 16, 1930 Resigned May 10, 1933. Wayland W. Magee Kansas City. .May 18, 1931 Term expired Jan. 24, 1933. Eugene R. Black Atlanta .May 19, 1933 Resigned Aug. 15, 1934. M.S. Szymczak Chicago June 14, 1933 Reappointed in 1936 and 1948. Resigned May 31, 1961. J.J. Thomas Kansas City... do Served until Feb. 10, 1936.3 Marriner S. Eccles San Francisco .Nov. 15, 1934 Reappointed in 1936, 1940, and 1944. Resigned July 14, 1951. Joseph A. Broderick New York ... .Feb. 3, 1936 Resigned Sept. 30, 1937. John K. McKee Cleveland.... do Served until Apr. 4, 1946.3 Ronald Ransom Atlanta do Reappointed in 1942. Died Dec. 2, 1947. Ralph W. Morrison Dallas .Feb. 10, 1936 Resigned July 9, 1936. Chester C. Davis Richmond... .June 25, 1936 Reappointed in 1940. Resigned Apr. 15, 1941. Ernest G. Draper New York .. .Mar. 30, 1938 Served until Sept. 1, 1950.3 Rudolph M. Evans Richmond... .Mar. 14, 1942 Served until Aug. 13, 1954.3 James K. Vardaman, Jr. ..St. Louis .Apr. 4, 1946 Resigned Nov. 30, 1958. Lawrence Clayton Boston .Feb. 14, 1947 Died Dec. 4, 1949. Thomas B. McCabe Philadelphia .Apr. 15, 1948 Resigned Mar. 31, 1951. Edward L. Norton Atlanta .Sept. 1, 1950 Resigned Jan. 31, 1952. Oliver S. Powell Minneapolis do Resigned June 30, 1952. Wm. McC. Martin, Jr New York .. .April 2, 1951 Reappointed in 1956. Term expired Jan. 31, 1970. A.L. Mills, Jr San Francisco .Feb. 18, 1952 Reappointed in 1958. Resigned Feb. 28, 1965. J.L. Robertson Kansas City... do Reappointed in 1964. Resigned Apr. 30, 1973. C. Canby Balderston Philadelphia... .Aug. 12, 1954 Served through Feb. 28, 1966. Paul E. Miller Minneapolis... .Aug. 13, 1954 Died Oct. 21, 1954. Chas. N. Shepardson Dallas .Mar. 17, 1955 Retired Apr. 30, 1967. G.H. King, Jr Atlanta .Mar. 25, 1959 Reappointed in 1960. Resigned Sept. 18, 1963. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Date of initial Other dates and information relating Name District oath of office to membership2 George W. Mitchell. Chicago Aug. 31, 1961 Reappointed in 1962. Served until Feb. 13, 1976.3 J. Dewey Daane Richmond Nov. 29, 1963 Served until Mar. 8, 1974.3 Sherman J. Maisel .. San Francisco Apr. 30, 1965 Served through May 31, 1972. Andrew F. Brimmer Philadelphia Mar. 9, 1966 Resigned Aug. 31, 1974. William W. Sherrill. Dallas May 1, 1967 Reappointed in 1968. Resigned Nov. 15, 1971. Arthur F. Burns New York Jan. 31, 1970 Term began Feb. 1, 1970. Resigned Mar. 31, 1978. John E. Sheehan St. Louis Jan. 4, 1972 Resigned June 1, 1975. Jeffrey M. Bucher.... San Francisco June 5, 1972 Resigned Jan. 2, 1976. Robert C. Holland ... Kansas City June 11, 1973 Resigned May 15, 1976. Henry C. Wallich Boston Mar. 8, 1974 Philip E. Coldwell.... Dallas Oct. 29, 1974 Served through Feb. 29, 1980. Philip C. Jackson, Jr. Atlanta July 14, 1975 Resigned Nov. 17, 1978. J. Charles Partee Richmond Jan. 5, 1976 Served until Feb. 7, 1986.3 Stephen S. Gardner.. Philadelphia Feb. 13, 1976 Died Nov. 19, 1978. David M. Lilly Minneapolis June 1, 1976 Resigned Feb. 24, 1978. G. William Miller San Francisco Mar. 8, 1978 Resigned Aug. 6, 1979. Nancy H. Teeters.... Chicago Sept. 18, 1978 Served through June 27, 1984. Emmett J. Rice New York June 20, 1979 Frederick H. Schultz Atlanta July 27, 1979 Served through Feb. 11, 1982. Paul A. Volcker Philadelphia Aug. 6, 1979 Lyle E. Gramley Kansas City May 28, 1980 Resigned Sept. 1, 1985. Preston Martin San Francisco Mar. 31, 1982 Resigned April 30, 1986. Martha R. Seger Chicago July 2, 1984 Wayne D. Angell Kansas City Feb. 7, 1986 Manuel H. Johnson.. Richmond Feb. 7, 1986 Chairmen4 Vice Chairmen4 Charles S. Hamlin Aug. 10, 1914-Aug. 9, 1916 Frederic A. Delano Aug. 10, 1914-Aug. 9, 1916 W.P.G. Harding Aug. 10, 1916-Aug. 9, 1922 Paul M. Warburg Aug. 10, 1916-Aug. 9, 1918 Daniel R. Crissinger May 1, 1923-Sept. 15, 1927 Albert Strauss Oct. 26, 1918-Mar. 15, 1920 Roy A. Young Oct. 4, 1927-Aug. 31, 1930 Edmund Piatt July 23, 1920-Sept. 14, 1930 Eugene Meyer Sept. 16, 1930-May 10, 1933 J.J. Thomas Aug. 21, 1934-Feb. 10, 1936 Eugene R. Black May 19, 1933-Aug. 15, 1934 Ronald Ransom Aug. 6, 1936-Dec. 2, 1947 Marriner S. Eccles Nov. 15, 1934-Jan. 31, 1948 C. Canby Balderston Mar. 11, 1955-Feb. 28, 1966 Thomas B. McCabe Apr. 15, 1948-Mar. 31, 1951 J.L. Robertson Mar. 1, 1966-Apr. 30, 1973 Wm. McC. Martin, Jr. ...Apr. 2, 1951-Jan. 31, 1970 George W. Mitchell May 1, 1973-Feb. 13, 1976 Arthur F. Burns Feb. 1, 1970-Jan. 31, 1978 Stephen S. Gardner Feb. 13, 1976-Nov. 19, 1978 G. William Miller Mar. 8, 1978-Aug. 6, 1979 Frederick H. Schultz July 27, 1979-Feb. 11, 1982 Paul A. Volcker Aug. 6, 1979- Preston Martin Mar. 31, 1982-Mar. 31, 1986 EX-OFFICIO MEMBERS1 Secretaries of the Treasury Comptrollers of the Currency W.G. McAdoo Dec. 23, 1913-Dec. 15, 1918 John Skelton Williams ...Feb. 2, 1914-Mar. 2, 1921 Carter Glass Dec. 16, 1918-Feb. 1, 1920 Daniel R. Crissinger Mar. 17, 1921-Apr. 30, 1923 David F. Houston Feb. 2, 1920-Mar. 3, 1921 Henry M. Dawes May 1, 1923-Dec. 17, 1924 Andrew W. Mellon Mar. 4, 1921-Feb. 12, 1932 Joseph W. Mcintosh Dec. 20, 1924-Nov. 20, 1928 Ogden L. Mills Feb. 12, 1932-Mar. 4, 1933 J.W. Pole Nov. 21, 1928-Sept. 20, 1932 William H. Woodin Mar. 4, 1933-Dec. 31, 1933 J.F.T. O'Connor May 11, 1933-Feb. 1, 1936 Henry Morgenthau, Jr. ..Jan. 1, 1934-Feb. 1, 1936 1. Under the provisions of the original Federal Reserve Act, the composed of seven appointive members; that the Secretary of the Federal Reserve Board was composed of seven members, including Treasury and the Comptroller of the Currency should continue to five appointive members, the Secretary of the Treasury, who was ex- serve as members until Feb. 1, 1936, or until their successors were officio chairman of the Board, and the Comptroller of the Currency. appointed and had qualified; and that thereafter the terms of members The original term of office was ten years, and the five original should be fourteen years and that the designation of Chairman and appointive members had terms of two, four, six, eight, and ten years Vice Chairman of the Board should be for a term of four years. respectively. In 1922 the number of appointive members was in- 2. Date after words "Resigned" and "Retired" denotes final day of creased to six, and in 1933 the term of office was increased to twelve service. years. The Banking Act of 1935, approved Aug. 23, 1935, changed the 3. Successor took office on this date. name of the Federal Reserve Board to the Board of Governors of the 4. Chairman and Vice Chairman were designated Governor and Federal Reserve System and provided that the Board should be vice Governor before Aug. 23, 1935. 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 SECURITIES MARKETS AND A13 Money stock, liquid assets, and debt measures CORPORATE FINANCE A15 Bank debits and deposit turnover A16 Loans and securities—All commercial banks A34 New security issues—State and local governments and corporations A35 Open-end investment companies—Net sales and COMMERCIAL BANKING INSTITUTIONS asset position A3 5 Corporate profits and their distribution 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

85 Federal Reserve Bulletin • June 1986 A36 Nonfinancial corporations—Assets and A54 U.S. reserve assets liabilities A54 Foreign official assets held at Federal Reserve A36 Total nonfarm business expenditures on new Banks plant and equipment A55 Foreign branches of U.S. banks—Balance sheet A37 Domestic finance companies—Assets and data liabilities and business credit A57 Selected U.S. liabilities to foreign official institutions REAL ESTATE REPORTED BY BANKS IN THE UNITED STATES A3 8 Mortgage markets A39 Mortgage debt outstanding A57 Liabilities to and claims on foreigners A58 Liabilities to foreigners A60 Banks' own claims on foreigners CONSUMER INSTALLMENT CREDIT A61 Banks' own and domestic customers' claims on foreigners A40 Total outstanding and net change A61 Banks' own claims on unaffiliated foreigners A41 Terms A62 Claims on foreign countries—Combined domestic offices and foreign branches FLOW OF FUNDS REPORTED BY NONBANKING BUSINESS A42 Funds raised in U.S. credit markets ENTERPRISES IN THE UNITED STATES A43 Direct and indirect sources of funds to credit markets A63 Liabilities to unaffiliated foreigners A64 Claims on unaffiliated foreigners Domestic Nonfinancial Statistics SECURITIES HOLDINGS AND TRANSACTIONS SELECTED MEASURES A65 Foreign transactions in securities A66 Marketable U.S. Treasury bonds and notes— A44 Nonfinancial business activity—Selected Foreign transactions measures A45 Labor force, employment, and unemployment A46 Output, capacity, and capacity utilization INTEREST AND EXCHANGE RATES A47 Industrial production—Indexes and gross value A49 Housing and construction A67 Discount rates of foreign central banks A50 Consumer and producer prices A67 Foreign short-term interest rates A51 Gross national product and income A68 Foreign exchange rates A52 Personal income and saving A69 Guide to Tabular Presentation, International Statistics Statistical Releases, and Special Tables 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)1 IItteemm 1985 1986 1985 1986 Q2 Q3 Q4 Ql Nov. Dec. Jan. Feb. Mar. Reserves of depository institutions2 1 Total 12.2 16.4 12.1 12.9 20.0 21.9 4.8 12.(K 13.4 2 Required 12.3 17.1 11.1 12.0 15.4 18.8 3.4 12.6 19.0 3 Nonborrowed 14.1 18.2 9.9 19.0 4.9 34.6 19.9 9.1' 16.9 4 Monetary base3 7.5 9.7 8.1 8.6 10.2 8.4 8.9 7.6' 8.3 Concepts of money, liquid assets, and debt* 5 Ml 10.5 14.5 10.7r 7.7 11.5 12.6 1.1 7.3 14.1 6 M2 6.3 9.5 6.0 4.2 5.9' 7.1' 1.5' 3.5' 6.4 7 M3 5.5 7.7' 6.5' 7.4 5.7' 7.4' 8.9' 6.0' 6.6 8 L 6.0 7.9' 9.5' n.a. 11.8' 12.1' 7.2 5.8 n.a. 9 Debt 12.1 12.9 14.4 16.2 15.8' 21.8 18.3' 10.3 n.a. Nontransaction components 10 In M25 5.0 8.0 4.6' 3.1 4.1' 5.3 1.7' 2.3' 3.9 11 In M3 only6 2.6 .2' 8.2' 20.0 5.4' 8.6' 38.9' 15.7' 7.2 Time and savings deposits Commercial banks 12 Savings7 -1.0 7.6 3.2 1.9 3.9 -3.8 2.9 2.9 5.8 13 Small-denomination time8 2.1 -3.3 -1.6 5.2 .6 6.0 7.5 4.7 2.8 14 Large-denomination time9'10 6.9 14.1' 18.5 12.3' 10.4 45.6 7.0' -17.7 Thrift institutions 15 Savings7 3.8 12.9 7.5 3.4 7.4 .7 1.3 4.7' 8.0 16 Small-denomination time 1.0 -2.8 -2.9 6.7 .0 6.1 7.7 8.4' 7.9 17 Large-denomination time9 5.5 -1.0 5.2 10.0 2.3 8.5 6.9 11.4 27.1 Debt components4 18 Federal 12.6 14.6 15.1 17.8 24.1 29.1 17.0 10.4 n.a. 19 Nonfederal 12.0 12.3 14.1' 15.7 13.3' 19.6 18.7' 10.2 n.a. 20 Total loans and securities at commercial banks11 9.7 9.6 8.8 9.7 16.4 16.6 15.3 4.1 9.5 1. Unless otherwise noted, rates of change are calculated from average commercial banks, money market funds (general purpose and broker/dealer), amounts outstanding in preceding month or quarter. foreign governments and commercial banks, and the U.S. government. Also 2. Figures incorporate adjustments for discontinuities associated with the subtracted is a consolidation adjustment that represents the estimated amount of implementation of the Monetary Control Act and other regulatory changes to demand deposits and vault cash held by thrift institutions to service their time and reserve requirements. To adjust for discontinuities due to changes in reserve savings deposits. requirements on reservable nondeposit liabilities, the sum of such required M3: M2 plus large-denomination time deposits and term RP liabilities (in reserves is subtracted from the actual series. Similarly, in adjusting for discontin- amounts of $100,000 or more) issued by commercial banks and thrift institutions, uities in the monetary base, required clearing balances and adjustments to term Eurodollars held by U.S. residents at foreign branches of U.S. banks compensate for float also are subtracted from the actual series. worldwide and at all banking offices in the United Kingdom and Canada, and 3. The monetary base not adjusted for discontinuities consists of total balances in both taxable and tax-exempt, institution-only money market mutual reserves plus required clearing balances and adjustments to compensate for float funds. Excludes amounts held by depository institutions, the U.S. government, at Federal Reserve Banks plus the currency component of the money stock less money market funds, and foreign banks and official institutions. Also subtracted is the amount of vault cash holdings of thrift institutions that is included in the a consolidation adjustment that represents the estimated amount of overnight RPs currency component of the money stock plus, for institutions not having required and Eurodollars held by institution-only money market mutual funds. reserve balances, the excess of current vault cash over the amount applied to L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term satisfy current reserve requirements. After the introduction of contemporaneous Treasury securities, commercial paper and bankers acceptances, net of money reserve requirements (CRR), currency and vault cash figures are measured over market mutual fund holdings of these assets. the weekly computation period ending Monday. Debt: Debt of domestic nonfinancial sectors consists of outstanding credit Before CRR, all components of the monetary base other than excess reserves market debt of the U.S. government, state and local governments, and private are seasonally adjusted as a whole, rather than by component, and excess nonfinancial sectors. Private debt consists of corporate bonds, mortgages, conreserves are aidded 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 based on monthly averages. Growth rates for debt reflect adjustments for adjusted as a whole. discontinuities over time in the levels of debt presented in other tables. 4. Composition of the money stock measures and debt is as follows: 5. Sum of overnight RPs and Eurodollars, money market fund balances Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults (general purpose and broker/dealer), MMDAs, and savings and small time of commercial banks; (2) travelers checks of nonbank issuers; (3) demand deposits deposits less the estimated amount of demand deposits and vault cash held by at all commercial banks other than those due to domestic banks, the U.S. thrift institutions to service their time and savings deposit liabilities. government, and foreign banks and official institutions less cash items in the 6. Sum of large time deposits, term RPs, and Eurodollars of U.S. residents, process of collection and Federal Reserve float; and (4) other checkable deposits money market fund balances (institution-only), less a consolidation adjustment (OCD) consisting of negotiable order of withdrawal (NOW) and automatic transfer that represents the estimated amount of overnight RPs and Eurodollars held by service (ATS) accounts at depository institutions, credit union share draft institution-only money market mutual funds. accounts, and demand deposits at thrift institutions. The currency and demand 7. Excludes MMDAs. deposit components exclude the estimated amount of vault cash and demand 8. Small-denomination time deposits—including retail RPs—are those issued deposits respectively held by thrift institutions to service their OCD liabilities. in amounts of less than $100,000. All IRA and Keogh accounts at commercial M2: Ml plus overnight (and continuing contract) repurchase agreements (RPs) banks and thrifts are subtracted from small time deposits. issued by all commercial banks and overnight Eurodollars issued to U.S. residents 9. Large-denomination time deposits are those issued in amounts of $100,000 by foreign branches of U.S. banks worldwide, Money Market Deposit Accounts or more, excluding those booked at international banking facilities. (MMDAs), savings and small-denomination time deposits (time deposits—includ- 10. Large-denomination time deposits at commercial banks less those held by ing retail RPs—in amounts of less than $100,000), and balances in both taxable and money market mutual funds, depository institutions, and foreign banks and tax-exempt general purpose and broker/dealer money market mutual funds. official institutions. Excludes individual retirement accounts (IRA) and Keogh balances at depository 11. Changes calculated from figures shown in table 1.23. institutions and money market funds. Also excludes all balances held by U.S. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Nonfinancial Statistics • June 1986 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT Millions of dollars Monthly averages of daily figures Weekly averages of daily figures for week ending Factors 1986 1986 Feb. Mar. Feb. 12 Feb. 19 Feb. 26 Mar. 5 Mar. 12 Mar. 19 Mar. 26 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit 206,784 199,811 199,955 198,077 200,179 198,841 199,657 200,138 199,346 2 U.S. government securities1 181,208 174,309 174,710 172,271 174,534 173,935 175,429 175,010 173,891 3 Bought outright 179,076 174,088 174,492 172,271 174,534 173,935 175,429 174,421 173,891 4 Held under repurchase agreements 2,132 221 218 0 0 0 0 589 0 5 Federal agency obligations 8,754 8,248 8,246 8,213 8,195 8,193 8,187 8,299 8,187 6 Bought outright 8,227 8,204 8,187 8,213 8,195 8,193 8,187 8,187 8,187 7 Held under repurchase agreements 527 44 59 0 0 0 0 112 0 8 Acceptances 0 0 0 0 0 0 0 0 0 9 Loans 834 872 755 596 1,161 1,038 654 754 758 10 Float 758 1,056 773 1,131 1,046 1,159 357 761 619 11 Other Federal Reserve assets 15,230 15,326 15,471 15,866 15,243 14,516 15,030 15,314 15,890 12 Gold stock 11,090 11,090 11,090 11,090 11,090 11,090 11,090 11,090 11,090 13 Special drawing rights certificate account 4,718 4,718 4,718 4,718 4,718 4,718 4,718 4,718 4,718 14 Treasury currency outstanding 17,079 17,131 17,190 17,120 17,134 17,148 17,162 17,176 17,190 ABSORBING RESERVE FUNDS 15 Currency in circulation 193,330 191,241 192,447 191,275 191,712 191,195 191,302 192,412 192,807 16 Treasury cash holdings 555 575 609 578 576 580 602 603 605 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 10,569 7,282 3,399 6,854 6,167 6,922 4,477 3,496 3,044 18 Foreign 260 221 260 199 207 232 286 246 264 19 Service-related balances and adjustments 1,985 1,951 1,863 1,860 1,886 2,158 1,904 2,104 1,718 20 Other 486 445 487 411 474 425 451 410 690 21 Other Federal Reserve liabilities and capital 6,287 6,326 6,391 6,391 6,117 6,243 6,645 6,600 6,184 22 Reserve balances with Federal Reserve Banks2 26,199 24,709 27,497 23,437 25,982 24,042 26,959 27,251 27,033 End-of-month figures Wednesday figures 1986 Feb. 19 Feb. 26 Mar. 5 Mar. 12 SUPPLYING RESERVE FUNDS 23 Reserve Bank credit 205,146 200,473 201,820 201,509 202,179 200,013 199,183 206,265 198,690 24 U.S. government securities1 178,992 176,536 176,620 175,087 175,011 175,870 174,562 178,585 173,965 25 Bought outright 175,905 176,536 176,620 175,087 175,011 175,870 174,562 174,461 173,965 26 Held under repurchase agreements... 3087 0 0 0 0 0 0 4,124 0 27 Federal agency obligations 8,850 8,187 8,187 8,195 8,195 8,187 8,187 8,973 8,187 28 Bought outright 8,227 8,187 8,187 8,195 8,195 8,187 8,187 8,187 8,187 29 Held under repurchase agreements... 623 0 0 0 0 0 0 786 0 30 Acceptances 0 0 0 0 0 0 0 0 0 31 Loans 827 661 818 639 606 682 552 1,704 702 32 Float 663 -212 560 1,617 3,721 618 639 1,254 402 33 Other Federal Reserve assets 15,814 15,301 15,635 15,971 14,646 14,656 15,243 15,749 15,434 34 Gold stock 11,090 11,090 11,090 11,090 11,090 11,090 11,090 11,090 11,090 35 Special drawing rights certificate account .. 4,718 4,718 4,718 4,718 4,718 4,718 4,718 4,718 4,718 36 Treasury currency outstanding 17,104 17,160 17,216 17,132 17,146 17,160 17,174 17,188 17,202 ABSORBING RESERVE FUNDS 37 Currency in circulation 190,430 191,038 193,217 191,595 191,964 191,099 191,878 192,822 192,742 38 Treasury cash holdings 565 604 617 575 580 583 606 604 613 Deposits, other than reserve balances with Federal Reserve Banks 39 Treasury 16,228 5,026 3,280 5,596 7,278 4,679 4,430 2,871 1,440 40 Foreign 256 277 274 204 223 254 320 238 248 41 Service-related balances and adjustments ... 1,505 1,525 1,542 1,505 1,512 1,512 1,525 1,523 1,536 42 Other 477 436 511 431 541 425 390 408 528 43 Other Federal Reserve liabilities and capital 6,622 6,735 6,162 5,997 5,931 6,142 6,509 6,084 5,976 44 Reserve balances with Federal Reserve Banks2 21,975 27,799 29,240 28,546 27,104 28,287 26,507 34,711 28,617 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 RRReeessseeerrrvvveee ccclllaaassssssiiifffiiicccaaatttiiiooonnn 1983 1984 1985 1985 1986 Dec. Dec. Dec. Aug. Sept. Oct. Nov. Dec. Jan. Feb. 11111 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss''''' 21,138 21,738 27,620 23,415 24,972 25,431 26,385 27,620 26,373 24,700 22222 TTTTToooootttttaaaaalllll vvvvvaaaaauuuuulllllttttt cccccaaaaassssshhhhh22222 20,755 22,316 22,956 22,839 22,465 22,724 22,457 22,956 24,245 24,962 33333 VVVVVaaaaauuuuulllllttttt cccccaaaaassssshhhhh uuuuussssseeeeeddddd tttttooooo sssssaaaaatttttiiiiisssssfffffyyyyy rrrrreeeeessssseeeeerrrrrvvvvveeeee rrrrreeeeeqqqqquuuuuiiiiirrrrreeeeemmmmmeeeeennnnntttttsssss33333 ..... 17,908 18,958 20,522 19,548 19,475 20,038 19,997 20,522 21,687 21,952 44444 SSSSSuuuuurrrrrpppppllllluuuuusssss vvvvvaaaaauuuuulllllttttt cccccaaaaassssshhhhh44444 2,847 3,358 2,434 3,291 2,990 2,686 2,460 2,434 2,559 3,010 55555 TTTTToooootttttaaaaalllll rrrrreeeeessssseeeeerrrrrvvvvveeeeesssss55555 38,894 40,696 48,142 42,963 44,447 44,469 46,382 48,142 48,060 46,652 66666 RRRRReeeeeqqqqquuuuuiiiiirrrrreeeeeddddd rrrrreeeeessssseeeeerrrrrvvvvveeeeesssss 38,333 39,843 47,085 42,135 43,782 44,716 45,454 47,085 46,949 45,555 77777 EEEEExxxxxccccceeeeessssssssss rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaattttt RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss66666 561 853 1,058 827 666 753 928 1,058 1,111 1,097 88888 TTTTToooootttttaaaaalllll bbbbbooooorrrrrrrrrrooooowwwwwiiiiinnnnngggggsssss aaaaattttt RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 774 3,186 1,318 1,073 1,289 1,187 1,741 1,318 770 884 99999 SSSSSeeeeeaaaaasssssooooonnnnnaaaaalllll bbbbbooooorrrrrrrrrrooooowwwwwiiiiinnnnngggggsssss aaaaattttt RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 96 113 56 221 203 172 107 56 36 56 1111100000 EEEEExxxxxttttteeeeennnnndddddeeeeeddddd cccccrrrrreeeeedddddiiiiittttt aaaaattttt RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss77777 2 2,604 499 570 656 629 530 499 497 492 Biweekly averages of daily figures for weeks ending 1985 and 1986 Dec. 4 Dec. 18 Jan. 1 Jan. 15 Jan. 29 Feb. 12 Feb. 26 Mar. 12' Mar. 26 Apr. 9 1111111111 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh..... RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss''''' 27,029 27,503 27,928 28,282 24,710 23,924 24,989 27,102 26,704 28,291 1111122222 TTTTToooootttttaaaaalllll vvvvvaaaaauuuuulllllttttt cccccaaaaassssshhhhh22222 22,543 22,464 23,612 23,591 24,684 26,078 24,348 22,577 22,986 22,121 1111133333 VVVVVaaaaauuuuulllllttttt cccccaaaaassssshhhhh uuuuussssseeeeeddddd tttttooooo sssssaaaaatttttiiiiisssssfffffyyyyy rrrrreeeeessssseeeeerrrrrvvvvveeeee rrrrreeeeeqqqqquuuuuiiiiirrrrreeeeemmmmmeeeeennnnntttttsssss33333 ..... 20,028 20,199 21,022 21,288 21,961 22,891 21,424 20,016 20,409 19,809 1111144444 SSSSSuuuuurrrrrpppppllllluuuuusssss vvvvvaaaaauuuuulllllttttt cccccaaaaassssshhhhh44444 2,515 2,265 2,590 2,304 2,723 3,187 2,924 2,561 2,577 2,312 1111155555 TTTTToooootttttaaaaalllll rrrrreeeeessssseeeeerrrrrvvvvveeeeesssss55555 47,057 47,702 48,950 49,570 46,671 46,815 46,413 47,118 47,113 48,100 1111166666 RRRRReeeeeqqqqquuuuuiiiiirrrrreeeeeddddd rrrrreeeeessssseeeeerrrrrvvvvveeeeesssss 46,005 46,875 47,644 48,294 45,753 45,629 45,406 46,142 46,187 47,470 1111177777 EEEEExxxxxccccceeeeessssssssss rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaattttt RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss66666 1,052 828 1,307 1,276 918 1,187 1,008 976 926 630 1111188888 TTTTToooootttttaaaaalllll bbbbbooooorrrrrrrrrrooooowwwwwiiiiinnnnngggggsssss aaaaattttt RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 2,928 841 1,338 614 903 662 1,100 704 769 874 1111199999 SSSSSeeeeeaaaaasssssooooonnnnnaaaaalllll bbbbbooooorrrrrrrrrrooooowwwwwiiiiinnnnngggggsssss aaaaattttt RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 84 53 51 28 42 44 66 65 69 76 2222200000 EEEEExxxxxttttteeeeennnnndddddeeeeeddddd cccccrrrrreeeeedddddiiiiittttt aaaaattttt RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss77777 503 524 472 471 529 480 506 475 535 576 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 1986 week ending Monday BByy mmaattuurriittyy aanndd ssoouurrccee Feb. 17 Feb. 24 Mar. 3 Mar. 10 Mar. 17 Mar. 24 Mar. 31 Apr. 7 Apr. 14 One day and continuing contract 1 Commercial banks in United States 64,533 65,474 67,344 74,710 70,119 67,991 66,593 7777,,445522 7755,,448888 2 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies . 32,073 33,709 35,606 40,20 1' 41,839 39,070 38,368 39,712 40,106 3 Nonbank securities dealers 9,956 11,690 10,825 9,486 9,918 9,022 9,113 10,027 10,498 4 All other 27,319 28,583 29,808 28,26c 28,364 27,653 23,446 26,583 25,542 All other maturities 5 Commercial banks in United States 11,537 11,228 11,141 11,206 10,666 10,509 12,443 99,,666644 99,,330011 6 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies . 6,296 6,336 7,420 7,534' 7,635 7,747 8,080 7,287 7,590 7 Nonbank securities dealers 10,748 10,052 10,308 11,054 11,581 10,604 10,828 9,912 10,505 8 All other 11,185 10,874 10,844 10,676 10,093 10,625 14,646 9,434 10,013 MEMO: Federal funds and resale agreement loans in maturities of one day or continuing contract 9 Commercial banks in United States 28,433 29,360 29,047 32,275 30,347' 26,605 25,894 33,684 31,752 10 Nonbank securities dealers 8,954 10,155 11,502 12,983 11,964' 10,689 9,592 11,245 9,056 1. Banks with assets of $1 billion or more as of Dec. 31, 1977. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Nonfinancial Statistics • June 1986 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per annum Current and previous levels Extended credit2 Short-term adjustment credit Federal Reserve and seasonal credit1 First 60 days Next 90 days Bank of borrowing of borrowing After 150 days Effective date for current rates Rate on Effective Previous Rate on Previous Rate on Previous Rate on Previous 4/25/86 date rate 4/25/86 rate 4/25/86 rate 4/25/86 rate Boston 6'/i 4/21/86 6'/2 m 8Vi 4/21/86 New York ... 4/21/86 4/21/86 Philadelphia.. 4/23/86 4/23/86 Cleveland.... 4/21/86 4/21/86 Richmond ... 4/21/86 4/21/86 Atlanta 4/22/86 4/22/86 Chicago 4/21/86 4/21/86 St. Louis .... 4/22/86 4/22/86 Minneapolis.. 4/21/86 4/21/86 Kansas City . 4/21/86 4/21/86 Dallas 4/21/86 IV2 4/21/86 San Francisco 4/21/86 6 Vi 8'/2 4/21/86 Range of rates in recent years3 Range (or F.R. Range(or F.R. Range (or F.R. Effective date A le l v l e F l) . — R. Ba o n f k Effective date A le l v l e F l) . — R. Ba o n f k Effective date A le l v l e F l) . — R. Ba o n f k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1973 71/2 7'/2 1978—July 10 71/4 7'/4 1981— Dec. 4 12 12 1974— Apr. 25 7V2-8 Aug. 21 73/4 73/4 30 8 Sept. 22 8 8 1982— July 20 11V2-12 111/2 Dec. 9 73/4-8 73/4 Oct. 16 8-8 Vi 8Vi 23 111/2 llVi 16 73/4 73/4 20 8Vi 8Vi Aug. 2 11-11V2 11 Nov. 1 8'/2-9Vi 9Vi 3 11 11 1975— Jan. 6 7'/4-73/4 73/4 3 9Vi 9 Vi 16 10Vi 10 V: 10 7'/4-73/4 7'/4 27 lO-lO'/i 10 24 71/4 71/4 1979—July 20 10 10 30 10 10 Feb. 5 63A-7!/4 63/4 Aug. 17 IO-IOV2 lOVi Oct. 12 9V2-10 91/2 7 63/4 63/4 20 IOV2 lO'/i 13 91/2 91/2 Mar. 10 6'/4-63/4 61/4 Sept. 19 lO'/i-ll 11 Nov. 22 9-9 Vi 9 14 6'/4 61/4 21 11 11 26 9 9 May 16 6-61/4 6 Oct. 8 11-12 12 Dec. 14 8V2-9 9 23 6 6 10 12 12 15 8Vi-9 81/2 17 8V2 8V2 1976— Jan. 19 5l/>-6 5'/2 1980—Feb. 15 12-13 13 23 5'/! 19 13 13 1984— Apr. 9 8Vi-9 9 Nov. 22 51/4-5 Vi 51/4 May 29 12-13 13 13 9 9 26 5'/4 51/4 30 12 12 Nov. 21 8V2-9 81/2 June 13 11-12 11 26 8V2 8Vi 1977— Aug. 30 5i/4-53/4 51/4 16 11 11 Dec. 24 8 8 31 5'/4—53/4 53/4 July 28 10-11 10 Sept. 2 53/4 53/4 29 10 10 1985— May 20 71/2-8 71/2 Oct. 26 6 6 Sept. 26 11 11 24 71/2 71/2 Nov. 17 12 12 1978— Jan. 9 6-6 Vi 61/2 Dec. 5 12-13 13 1986— Mar. 7 7-71/2 7 20 6V2 61/2 8 13 13 10 7 7 May 11 61/2-7 7 5 13-14 14 Apr. 21 6'/2-7 6V2 12 7 7 23 61/2 61/2 July 3 7-71/4 71/4 1981— May 8 14 14 Nov. 2 13-14 13 IInn eeffffeecctt AApprr.. 2255,, 11998866 6>/2 61/2 6 13 13 1. A temporary simplified seasonal program was established on Mar. 8, 1985, 3. Rates for short-term adjustment credit. For description and earlier data see and the interest rate was a fixed rate I/2 percent above the rate on adjustment the following publications of the Board of Governors: Banking and Monetary credit. The program was re-established on Feb. 18, 1986; the rate may be either Statistics, 1914-1941, and 1941-1970; Annual Statistical Digest, 1970-1979, 1980, the same as that for adjustment credit or a fixed rate Vi percent higher. 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A7 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Percent of deposits Member bank requirements Depository institution requirements before implementation of the after implementation of the TTyypp dd ee ee pp oo oo ff ss ii dd tt ee ii pp nn oo ttee ssii rr tt vv ,, aa aa ll nndd Monetary Control Act TTyy dd pp ee ee pp oo oo ff ss iitt dd ee ii pp nn oo ttee ss rr iitt vv ,, aa aa ll55 nn dd Monetary Control Act6 Percent Effective date Percent Effective date Net demand2 Net transaction accounts1 $ 7 12/30/76 $0-$31.7 million 3 12/31/85 $2 million-$10 million 9 lfi 12/30/76 1122 1122//3311//8855 $10 million-$100 million ll3/4 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 IVi years 3 10/6/83 TTiimmee aanndd ssaavviinnggss22>>33 11 xxhh yyeeaarrss oorr mmoorree 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 IVi 1/8/76 4 years or more 1 10/30/75 Over $5 million, by maturity 3 1 0 8 - 0 1 d 79 a y d s a t y o s 4 years 6m 12/ 1 1 / 2 8 / / 7 7 4 6 4 years or more i 10/30/75 1. For changes in reserve requirements beginning 1963, see Board's Annual 5. The Garn-St Germain Depository Institutions Act of 1982 (Public Law 97- Statistical Digest, 1971-1975, and for prior changes, see Board's Annual Report 320) provides that $2 million of reservable liabilities (transaction accounts, for 1976, table 13. Under provisions of the Monetary Control Act, depository nonpersonal time deposits, and Eurocurrency liabilities) of each depository institutions include commercial banks, mutual savings banks, savings and loan institution be subject to a zero percent reserve requirement. The Board is to adjust associations, credit unions, agencies and branches offoreign banks, and Edge Act the amount of reservable liabilities subject to this zero percent reserve requirecorporations. ment each year for the next succeeding calendar year by 80 percent of the 2. Requirement schedules are graduated, and each deposit interval applies to percentage increase in the total reservable liabilities of all depository institutions, that part of the deposits of each bank. Demand deposits subject to reserve measured on an annual basis as of June 30. No corresponding adjustment is to be requirements were gross demand deposits minus cash items in process of made in the event of a decrease. Effective Dec. 9, 1982, the amount of the collection and demand balances due from domestic banks. exemption was established at $2.1 million. Effective with the reserve maintenance The Federal Reserve Act as amended through 1978 specified different ranges of period beginning Jan. 1, 1985, the amount of the exemption is $2.4 million. requirements for reserve city banks and for other banks. Reserve cities were Effective with the reserve computation period beginning Dec. 31, 1985, the designated under a criterion adopted effective Nov. 9, 1972, by which a bank amount of the exemption is $2.6 million. In determining the reserve requirements having net demand deposits of more than $400 million was considered to have the of a depository institution, the exemption shall apply in the following order: (1) character of business of a reserve city bank. The presence of the head office of nonpersonal money market deposit accounts (MMDAs) authorized under 12 CFR such a bank constituted designation of that place as a reserve city. Cities in which section 1204.122; (2) net NOW accounts (NOW accounts less allowable deducthere were Federal Reserve Banks or branches were also reserve cities. Any tions); (3) net other transaction accounts; and (4) nonpersonal time deposits or banks having net demand deposits of $400 million or less were considered to have Eurocurrency liabilities starting with those with the highest reserve ratio. With the character of business of banks outside of reserve cities and were permitted to respect to NOW accounts and other transaction accounts, the exemption applies maintain reserves at ratios set for banks not in reserve cities. only to such accounts that would be subject to a 3 percent reserve requirement. Effective Aug. 24, 1978, the Regulation M reserve requirements on net balances 6. For nonmember banks and thrift institutions that were not members of the due from domestic banks to their foreign branches and on deposits that foreign Federal Reserve System on or after July 1, 1979, a phase-in period ends Sept. 3, branches lend to U.S. residents were reduced to zero from 4 percent and 1 percent 1987. For banks that were members on or after July 1, 1979, but withdrew on or respectively. The Regulation D reserve requirement of borrowings from unrelated before Mar. 31, 1980, the phase-in period established by Public Law 97-320 ends banks abroad was also reduced to zero from 4 percent. on Oct. 24, 1985. For existing member banks the phase-in period of about three Effective with the reserve computation period beginning Nov. 16, 1978, years was completed on Feb. 2, 1984. All new institutions will have a two-year domestic deposits of Edge corporations were subject to the same reserve phase-in beginning with the date that they open for business, except for those requirements as deposits of member banks. institutions that have total reservable liabilities of $50 million or more. 3. Negotiable order of withdrawal (NOW) accounts and time deposits such as 7. Transaction accounts include all deposits on which the account holder is Christmas and vacation club accounts were subject to the same requirements as permitted to make withdrawals by negotiable or transferable instruments, paysavings deposits. ment orders of withdrawal, and telephone and preauthorized transfers (in excess The average reserve requirement on savings and other time deposits before of three per month) for the purpose of making payments to third persons or others. implementation of the Monetary Control Act had to be at least 3 percent, the However, MMDAs and similar accounts offered by institutions not subject to the minimum specified by law. rules of the Depository Institutions Deregulation Committee (DIDC) that permit 4. Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percent no more than six preauthorized, automatic, or other transfers per month of which was imposed on large time deposits of $100,000 or more, obligations of affiliates, no more than three can be checks—are not transaction accounts (such accounts and ineligible acceptances. This supplementary requirement was eliminated with are savings deposits subject to time deposit reserve requirements.) the maintenance period beginning July 24, 1980. 8. The Monetary Control Act of 1980 requires that the amount of transaction Effective with the reserve maintenance period beginning Oct. 25, 1979, a accounts against which the 3 percent reserve requirement applies be modified marginal reserve requirement of 8 percent was added to managed liabilities in annually by 80 percent of the percentage increase in transaction accounts held by excess of a base amount. This marginal requirement was increased to 10 percent all depository institutions determined as of June 30 each year. Effective Dec. 31, beginning Apr. 3, 1980, was decreased to 5 percent beginning June 12, 1980, and 1981, the amount was increased accordingly from $25 million to $26 million; was eliminated beginning July 24, 1980. Managed liabilities are defined as large effective Dec. 30, 1982, to $26.3 million; effective Dec. 29, 1983, to $28.9 million; time deposits, Eurodollar borrowings, repurchase agreements against U.S. effective Jan. 1, 1985, to $29.8 million; and effective Dec. 31, 1985, to $31.7 government and federal agency securities, federal funds borrowings from non- 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. week of May 14-21, 1980. In addition, beginning Mar. 19, 1980, the base was reduced to the extent that foreign loans and balances declined. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • June 1986 1.16 MAXIMUM INTEREST RATES PAYABLE on Time and Savings Deposits at Federally Insured Institutions1 Percent per annum Commercial banks mut S u a a v l i s n a g v s i n a g n s d b l a o n an k s a ( s t s h o r c if i t a t i i n o s n t s it u a t n i d on s)1 In effect Apr. 30, 1986 In effect Apr. 30, 1986 TTTyyypppeee ooofff dddeeepppooosssiiittt Percent Effective date Percent Effective date 3 2 1 M N Sa e o v g n i o n e t y g ia s b m le a r o k r e d t e d r e o p f o s w it i t a h c d c r o a u w n a t l accounts ( ( ( 3 2 4 ) ) ) 12 4 / 1 1 / / 1 4 1 / / / 8 8 8 6 2 6 ( ( ( 3 2 4 ) ) ) 12 4 / 1 1 / / 1 4 1 / / / 8 8 8 6 2 6 4 7 T i 3 m 1 e d a a c y c s o unts (5) 1/1/86 (5) 9/1/86 1100//11//8833 1100//11//8833 1. Effective Oct. 1, 1983, restrictions on the maximum rates of interest payable 4. Effective Dec. 14, 1982, depository institutions are authorized to offer a new by commercial banks and thrift institutions on various categories of deposits were account with a required initial balance of $2,500 and an average maintenance removed. For information regarding previous interest rate ceilings on all catego- balance of $2,500 not subject to interest rate restrictions. Effective Jan. 1, 1985, ries of accounts see earlier issues of the FEDERAL RESERVE BULLETIN, the the minimum denomination and average balance maintenance requirements was Federal Home Loan Bank Board Journal, and the Annual Report of the Federal lowered to $1,000. Effective Jan. 1, 1986, the minimum denomination and average Deposit Insurance Corporation. balance maintenance requirements were removed. No minimum maturity period 2. Effective Apr. 1, 1986, the interest rate ceiling on savings deposits was is required for this account, but depository institutions must reserve the right to removed. Before Apr. 1, 1986, savings deposits were subject to an interest rate require seven days, notice before withdrawals. Depository institutions may not ceiling of 5xh percent. guarantee a rate of interest for this account for a period longer than one month or 3. Before Jan. 1, 1986, NOW accounts with minimum denomination require- condition the payment of a rate on a requirement that the funds remain on deposit ments of less than $1,000 were subject to an interest rate ceiling of 5^4 percent. for longer than one month. NOW accounts with minimum required denominations of $1,000 or more and 5. Before Jan. 1, 1986, deposits of less than $1,000 were subject to an interest IRA/Keough (HR10) Plan accounts were not subject to interest rate ceilings. rate ceiling of 5'/2 percent. Deposits of less than $1,000 issued to governmental Effective Jan. 1, 1986, the minimum denomination requirement was removed. units were subject to an interest rate ceiling of 8 percent. Effective Jan. 1, 1986, the minimum denomination requirement was removed. 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 1985 1986 TTyyppee ooff ttrraannssaaccttiioonn 11998833 11998844 11998855 Aug. Sept. Oct. Nov. Dec. Jan. Feb. U.S. GOVERNMENT SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 18,888 20,036 22,214 3,056 1,171 0 1,180 4,515 228866 0 2 Gross sales 3,420 8,557 4,118 0 0 265 0 0 225 2,277 3 Exchange 0 0 0 0 350 0 -350 0 0 0 4 Redemptions 2,400 7,700 3,500 0 0 0 0 0 0 1,000 Others within 1 year 5 Gross purchases 484 1,126 1,349 0 0 0 0 143 00 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shift 18,887 16,354 19,763 4,895 1,028 529 2,363 943 725 4,776 8 Exchange -16,553 -20,840 -17,717 -3,275 -1,807 -942 -615 -1,529 -596 -2,148 9 Redemptions 87 0 0 0 0 0 0 0 0 0 I to 5 years 10 Gross purchases 1,896 1,638 22,,118855 6 0 00 00 868 00 00 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shift -15,533 -13,709 -17,459 -3,760 -1,028 -520 -1,731 -943 -703 -4,776 13 Exchange 11,641 16,039 13,853 1,825 1,457 942 650 1,529 596 1,548 5 to 10 years 14 Gross purchases 890 536 458 6 0 00 0 334455 00 00 15 Gross sales 0 300 100 0 0 0 0 0 0 0 16 Maturity shift -2,450 -2,371 -1,857 -1,136 0 -10 -600 0 -22 0 17 Exchange 2,950 2,750 2,184 800 0 0 184 0 0 350 Over 10 years 18 Gross purchases 383 441 293 0 0 0 0 197 0 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shift -904 -275 -447 0 0 0 -32 0 0 0 21 Exchange 1,962 2,052 1,679 650 0 0 131 0 0 250 All maturities 22 Gross purchases 22,540 23,776 26,499 3,068 1,171 0 1,180 6,068 286 0 23 Gross sales 3,420 8,857 4,218 0 0 265 0 0 225 2,277 24 Redemptions 2,487 7,700 3,500 0 0 0 0 0 0 1,000 Matched transactions 25 Gross sales 578,591 808,986 866,175 64,263 73,925 100,929 85,486 76,399 63,109 90,459 26 Gross purchases 576,908 810,432 865,968 64,209 72,347 100,197 84,769 78,962 61,156 94,368 Repurchase agreements 27 Gross purchases 105,971 127,933 134,253 1,928 14,029 0 3,684 2233,,333388 2244,,225577 0 28 Gross sales 108,291 127,690 132,351 1,928 14,029 0 3,684 19,809 24,699 3,087 29 Net change in U.S. government securities 12,631 8,908 20,477 3,014 -408 -997 463 12,159 -2,335 -2,456 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 0 0 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 292 256 162 30 0 0 0 0 0 -40 Repurchase agreements 33 Gross purchases 8,833 11,509 22,183 354 3,522 0 1,454 7,640 5,384 0 34 Gross sales 9,213 11,328 20,877 354 3,522 0 1,454 5,947 6,454 623 35 Net change in federal agency obligations -672 -76 1,144 -30 0 0 0 1,693 -1,070 -663 BANKERS ACCEPTANCES 36 Repurchase agreements, net -1,062 -418 0 0 0 0 0 0 0 0 37 Total net change in System Open Market Account 10,897 8,414 21,621 2,984 -408 -997 463 13,853 -3,405 -3,119 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 1986 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements Millions of dollars Wednesday End of month AAccccoouunntt 1986 1986 Feb. 26 Mar. 5 Mar. 12 Mar. 19 Mar. 26 Jan. Feb. Mar. Consolidated condition statement ASSETS 1 Gold certificate account 11,090 11,090 11,090 11,090 11,090 11,090 11,090 11,090 2 Special drawing rights certificate account 4,718 4,718 4,718 4,718 4,718 4,718 4,718 4,718 3 Coin 586 587 582 582 562 562 589 570 Loans 4 To depository institutions 682 552 1,704 702 895 827 661 818 5 Other 0 0 0 0 0 0 0 0 Acceptances—Bought outright 6 Held under repurchase agreements 0 00 00 00 00 00 00 00 Federal agency obligations 7 Bought outright 8,187 8,187 8,187 8,187 88,,118877 88,,222277 88,,118877 88,,118877 8 Held under repurchase agreements 0 0 786 0 1,035 623 0 0 U.S. government securities Bought outright 9 Bills 83,497 82,189 82,088 81,592 81,715 8833,,553322 8844,,116633 8844,,224477 10 Notes 67,397 67,397 67,397 67,397 67,397 67,647 67,397 67,397 11 Bonds 24,976 24,976 24,976 24,976 24,976 24,726 24,976 24,976 12 Total bought outright1 175,870 174,562 174,461 173,965 174,088 175,905 176,536 176,620 13 Held under repurchase agreements 0 0 4,124 0 2,624 3,087 0 0 14 Total U.S. government securities 175,870 174,562 178,585 173,965 176,712 178,992 176,536 176,620 15 Total loans and securities 184,739 183,301 189,262 182,854 186,829 188,669 185,384 185,625 16 Items in process of collection 6,588 7,802 7,285 6,924 5,678 6,519 6,295 5,495 17 Bank premises 611 615 617 618 617 612 616 618 Other assets 18 Denominated in foreign currencies2 7,349 7,830 7,843 7,845 7,855 7,336 7,829 7,673 19 All other3 6,696 6,798 7,289 6,971 7,634 7,866 6,856 7,344 20 Total assets 222,377 222,741 228,686 221,602 224,983 227,372 223,377 223,133 LIABILITIES 21 Federal Reserve notes 175,108 175,897 176,820 176,735 176,690 174,453 175,072 177,189 Deposits 22 To depository institutions 29,799 28,032 36,234 30,153 33,367 2233,,448800 29,324 3300,,778822 23 U.S. Treasury—General account 4,679 4,430 2,871 1,440 2,394 16,228 5,026 3,280 24 Foreign—Official accounts 254 320 238 248 187 256 277 274 25 Other 425 390 408 528 377 477 436 511 26 Total deposits 35,157 33,172 39,751 32,369 36,325 40,441 35,063 34,847 27 Deferred credit items 5,970 7,163 6,031 6,522 5,824 5,856 6,507 4,935 28 Other liabilities and accrued dividends4 2,234 2,125 2,144 2,053 2,195 2,372 2,273 2,184 29 Total liabilities 218,469 218,357 224,746 217,679 221,034 223,122 218,915 219,155 CAPITAL ACCOUNTS 30 Capital paid in 1,799 1,800 1,801 1,816 1,820 1,789 1,800 1,821 31 Surplus 1,781 1,781 1,781 1,781 1,781 1,781 1,781 1,781 32 Other capital accounts 328 803 358 326 348 680 881 376 33 Total liabilities and capital accounts 222,377 222,741 228,686 221,602 224,983 227,372 223,377 223,133 34 MEMO: Marketable U.S. government securities held in custody for foreign and international account 130,103 132,701 133,307 136,601 135,222 129,152 131,599 136,262 Federal Reserve note statement 35 Federal Reserve notes outstanding 210,200 210,649 211,061 211,161 211,248 208,135 210,237 211,323 36 LESS: Held by bank 35,092 34,752 34,241 34,426 34,558 33,682 35,165 34,134 37 Federal Reserve notes, net 175,108 175,897 176,820 176,735 176,690 174,453 175,072 177,189 Collateral held against notes net: 38 Gold certificate account 11,090 11,090 11,090 11,090 11,090 1111,,009900 1111,,009900 1111,,009900 39 Special drawing rights certificate account 4,718 4,718 4,718 4,718 4,718 4,718 4,718 4,718 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. government and agency securities 159,300 160,089 161,012 160,927 160,882 158,645 159,264 161,381 42 Total collateral 175,108 175,897 176,820 176,735 176,690 174,453 175,072 177,189 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. NOTE: Some of these data also appear in the Board's H.4.1 (503) release. For 2. Assets shown in this line are revalued monthly at market exchange rates. address, see inside front cover. 3. Includes special investment account at Chicago of Treasury bills maturing within 90 days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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 1986 1986 Feb. 26 Mar. 5 Mar. 12 Mar. 19 Mar. 26 Jan. 31 Feb. 28 Mar. 31 1 Loans—Total 682 552 1,704 702 895 827 661 818 2 Within 15 days 668 546 1,695 678 889 820 647 806 16 days to 90 days 14 6 9 24 6 7 14 12 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 8 91 days to 1 year 0 0 0 0 0 0 0 0 9 U.S. government securities—Total 175,870 174,562 178,585 173,965 176,712 178,992 176,536 176,620 10 Within 15 days' 8,272 8,670 12,218 8,730 8,800 5,197 4,893 4,190 11 16 days to 90 days 42,348 40,556 41,081 41,799 42,426 46,616 45,663 45,337 1? 91 days to 1 year 55,830 55,899 55,849 53,999 56,049 55,114 56,543 57,350 n Over 1 year to 5 years 32,298 32,315 32,315 32,315 32,315 35,543 32,315 32,621 14 Over 5 years to 10 years 15,113 15,113 15,113 15,113 15,113 14,763 15,113 15,113 15 Over 10 years 22,009 22,009 22,009 22,009 22,009 21,759 22,009 22,009 16 Federal agency obligations—Total 8,187 8,187 8,973 8,187 9,222 8,850 8,187 8,187 17 Within 15 days' 331 190 848 269 1,281 740 331 246 18 16 days to 90 days 704 885 863 656 617 976 704 617 19 91 days to 1 year 1,744 1,694 1,732 1,732 1,844 1,654 1,744 1,844 20 Over 1 year to 5 years 3,821 3,831 3,853 3,853 3,793 4,250 3,821 3,793 21 Over 5 years to 10 years 1,178 1,178 1,253 1,253 1,263 821 1,178 1,263 22 Over 10 years 409 409 424 424 424 409 409 424 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 1986 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE Billions of dollars, averages of daily figures 1985 1986 11998822 11998833 11998844 11998855 IItteemm DDeecc.. DDeecc.. DDeecc.. DDeecc.. Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar. Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS11 11 TToottaall rreesseerrvveess22 34.28 36.14 39.08 45.19 43.19 43.51 43.65 44.38 45.19 45.36 45.82 46.33 22 NNoonnbboorrrroowweedd rreesseerrvveess 33.65 35.36 35.90 43.87 42.12 42.22 42.46 42.64 43.87 44.59 44.93 45.57 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt33 33.83 35.37 38.50 44.37 42.69 42.87 43.09 43.17 44.37 45.09 45.43 46.08 44 RReeqquuiirreedd rreesseerrvveess 33.78 35.58 38.23 44.13 42.37 42.84 42.90 43.45 44.13 44.25 44.72 45.42 55 MMoonneettaarryy bbaassee44 170.04 185.39 198.80 216.44 210.85 212.08 213.12 214.93 216.44 218.04 219.41 220.90 Not seasonally adjusted 6 Total reserves2 35.01 36.86 40.13 46.40 42.60 43.22 43.75 44.62 46.40 46.63 45.18 45.83 7 Nonborrowed reserves 34.37 36.09 36.94 45.09 41.52 41.93 42.56 42.88 45.09 45.86 44.29 45.07 8 Nonborrowed reserves plus extended credit3 34.56 36.09 39.55 45.59 42.09 42.59 43.19 43.41 45.59 46.36 44.78 45.59 9 Required reserves 34.51 36.30 39.28 45.35 41.77 42.56 42.99 43.70 45.35 45.52 44.08 44.92 10 Monetary base4 173.07 188.66 201.94 219.75 211.16 211.65 212.75 215.42 219.75 218.16 216.20 218.36 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS5 11 Total reserves2 41.85 38.89 40.70 48.14 42.96 44.45 45.47 46.38 48.14 48.06 46.65 47.27 12 Nonborrowed reserves 41.22 38.12 37.51 46.82 41.89 43.16 44.28 44.64 46.82 47.29 45.77 46.51 13 Nonborrowed reserves plus extended credit3 41.41 38.12 40.09 47.41 42.50 43.83 44.90 45.07 47.41 47.79 46.22 47.17 14 Required reserves 41.35 38.33 39.84 47.08 42.14 43.78 44.72 45.45 47.08 46.95 45.55 46.36 15 Monetary base4 180.42 192.26 202.51 221.49 211.53 212.88 214.47 217.18 221.49 219.59 217.67 219.81 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 1985 1986 1982 1983 1984 1985 Dec. Dec. Dec. Dec. Dec/ Jan.' Feb/ Mar. Seasonally adjusted 1 Ml 479.9 527.1 558.5 626.6' 626.6 627.2 631.0 638.4 7 M2 1,952.6 2,186.0 2,373.8 2,565.5 2,565.5 2,568.5 2,576.3 2,590.4 3 M3 2,443.5 2,697.3 2,986.5 3,200.5' 3,200.5 3,224.2 3,240.6 3,258.9 4 L 2,850.1 3,163.5 3,532.3 3,837.3' 3,837.3 3,860.1 3,879.1 n.a. 5 Debt 4,661.1 5,191.9 5,951.8 6,802.1' 6,802.1 6,905.9 6,965.0 n.a. Ml components 6 Currency2 134.3 148.3 158.5 170.6 170.6 171.9 172.9 173.9 7 Travelers checks3 4.3 4.9 5.2 5.9 5.9 5.9 6.0 6.1 8 Demand deposits4 237.9 242.7 248.4 271.5 271.5 268.9 269.1 273.1 9 Other checkable deposits5 103.4 131.3 146.3 178.6' 178.6 180.5 183.1 185.3 Nontransactions components 10 In M26 1,472.7 1,658.9 1,815.4 1,938.9* 1,938.9 1,941.3 1,945.3 1,952.1 11 In M3 only7 490.9 511.3 612.7 635. 1' 635.1 655.7 664.2 668.4 Savings deposits9 12 Commercial Banks 163.7 133.4 122.3 124.4 124.4 124.7 125.0 125.6 13 Thrift institutions 194.2 173.2 167.3 179.1 179.1 179.3 179.9 181.0 Small denomination time deposits9 14 Commercial Banks 380.4 351.1 387.2 384.1 384.1 386.5 388.0 388.8 15 Thrift institutions 472.4 434.1 500.3 496.2 496.2 499.6 503.2 506.7 Money market mutual funds 16 General purpose and broker/dealer 185.2 138.2 167.5 176.5 176.5 177.7 180.9 185.8 17 Institution-only 51.1 43.2 62.7 64.6 64.6 67.3 67.7 70.3 Large denomination time deposits10 18 Commercial Banks11 262.1 228.7 263.7 279.1 279.1 289.7 291.4 287.2 19 Thrift institutions 65.8 101.1 150.2 157.3 157.3 158.2 159.7 163.3 Debt components 20 Federal debt 979.2 1,173.0 1,367.3 1,586.0 1,586.0 1,608.5 1,622.5 n.a. 21 Non-federal debt 3,681.8 4,019.0 4,584.6 5,216.0' 5,216.0 5,297.3 5,342.5 n.a. Not seasonally adjusted 22 Ml 490.9 538.8 570.5 640.C 640.0 633.5 619.2 630.5 7.3 M2 1,958.6 2,192.8 2,380.8 2,573.6 2,573.6 2,577.3 2,569.6 2,592.5 24 M3 2,453.3 2,707.9 2,997.9 3,213.3' 3,213.3 3,231.8 3,232.5 3,259.2 7.5 L 2,856.4 3,170.1 3,537.5 3,843.5' 3,843.5 3,865.3 3,871.5 n.a. 26 Debt 4,655.7 5,186.5 5,946.2 6,795.0' 6,795.0 6,898.3 6,943.3 n.a. Ml components 27 Currency2 136.5 150.5 160.9 173.1 173.1 170.5 170.6 172.3 28 Travelers checks3 4.1 4.6 4.9 5.5 5.5 5.5 5.6 5.8 29 Demand deposits4 246.2 251.3 257.3 281.3 281.3 275.1 262.0 267.1 30 Other checkable deposits5 104.1 132.4 147.5 180.1' 180.1 182.4 181.0 185.3 Nontransactions components M26 1,467.7 1,654.0 1,810.3 1,933.7' 1,933.7 1,943.7 1,950.4 1,962.0 32 M3 only7 494.7 515.1 617.0 639.7' 639.7 654.6 662.9 666.7 Money market deposit accounts 33 Commercial banks 26.3 230.5 267.2 332.4' 332.4 336.7 336.9 340.2 34 Thrift institutions 16.9 148.7 149.7 179.6 179.6 179.0 179.4 180.2 Savings deposits8 35 Commercial Banks 162.1 132.2 121.4 123.5 123.5 123.9 123.6 124.9 36 Thrift institutions 193.1 172.3 166.5 178.3 178.3 178.8 179.0 181.4 Small denomination time deposits9 37 Commercial Banks 380.1 351.1 387.6 384.8 384.8 386.5 387.0 387.0 38 Thrift institutions 471.7 434.2 501.2 497.7 497.7 502.8 504.9 505.5 Money market mutual funds 39 General purpose and broker/dealer 185.2 138.2 167.5 176.5 176.5 177.7 180.9 185.8 40 Institution-only 51.1 43.2 62.7 64.6 64.6 67.3 67.7 70.3 Large denomination time deposits10 41 Commercial Banks" 265.2 230.8 265.5 280.9 280.9 288.5 290.3 287.7 42 Thrift institutions 65.8 101.4 150.6 157.8 157.8 159.0 160.6 163.1 Debt components 43 Federal debt 976.4 1,170.2 1,364.7 1,583.7 1,583.7 1,606.7 1,621.0 n.a. 44 Non-federal debt 3,679.3 4,016.3 4,581.5 5,211.3' 5,211.3 5,291.6 5,322.3 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 1986 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 based on monthly averages. 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. 1985 1986 lyoj Sept. Oct. Nov. Dec. Jan. Feb. DEBITS TO Seasonally adjusted Demand deposits2 1 All insured banks 109,642.3 128,440.8 154,556.0 159,593.3 162,205.4 163,038.1 189,203.0 169,894.2 179,139.6 2 Major New York City banks 47,769.4 57,392.7 70,445.1 72,765.4 76,706.3 77,069.6 89,415.1 79,324.3 85,298.6 3 Other banks 61,873.1 71,048.1 84,110.9 86,827.9 85,499.2 85,968.5 99,787.9 90,569.9 93,841.0 4 ATS-NOW accounts3 1,405.5 1,588.7 1,920.8 2,465.3 2,212.7 2,227.8 2,452.5 2,027.5 2,193.5 5 Savings deposits4 741.4 633.1 539.0 509.1 562.0 533.4 418.6 362.4 364.6 DEPOSIT TURNOVER Demand deposits2 6 All insured banks 379.7 434.4 496.5 510.9 513.2 508.1 581.9 531.8 560.8 7 Major New York City banks 1,528.0 1,843.0 2,168.9 2,326.3 2,422.2 2,368.5 2,567.0 2,306.3 2,473.8 8 Other banks 240.9 268.6 301.8 308.9 300.6 298.1 343.7 317.7 329.3 9 ATS-NOW accounts3 15.6 15.8 16.7 20.6 18.4 18.2 19.8 16.1 17.2 10 Savings deposits4 5.4 5.0 4.5 4.2 4.6 4.3 3.4 2.9 3.0 DEBITS TO Not seasonally adjusted Demand deposits2 11 All insured banks 109,517.6 128,059.1 154,108.4 148,788.8 167,639.3 157,070.9 192,060.0 180,495.6 161,655.6 12 Major New York City banks 47,707.4 57,282.4 70,400.9 68,967.9 78,010.5 73,982.4 92,551.5 84,880.9 77,376.9 N Other banks 64,310.2 70,776.9 83,707.8 79,820.9 89,628.8 83,088.6 99,508.5 95,614.7 84,278.6 14 ATS-NOW accounts3 1,397.0 1,579.5 1,903.4 2,289.9 2,157.7 2,007.8 2,354.4 2,406.1 2,065.3 15 MMDA5 567.4 848.8 1,179.0 1,192.2 1,293.0 1,221.5 1,493.2 1,543.8 1,334.9 16 Savings deposits4 742.0 632.9 538.7 490.1 579.9 496.3 405.3 392.4 331.1 DEPOSIT TURNOVER Demand deposits2 17 All insured banks 379.9 433.5 497.4 475.0 532.1 489.3 574.9 554.2 520.0 18 Major New York City banks 1,510.0 1,838.6 2,191.1 2,216.6 2,507.4 2,332.4 2,594.1 2,393.7 2,314.0 19 Other banks 240.5 267.9 301.6 282.9 315.7 287.2 333.4 329.4 303.8 20 ATS-NOW accounts3 15.5 15.7 16.6 19.4 18.1 16.4 18.8 18.9 16.4 21 MMDA5 2.8 3.5 3.8 3.7 4.0 3.7 4.5 4.6 4.0 22 Savings deposits4 5.4 5.0 4.5 4.1 4.8 4.0 3.3 3.2 2.7 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 1986 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1985 1986 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted 1 Total loans and securities2 1,768.8 1,788.5 1,802.7 1,819.0 1,828.8 1,841.3 1,844.4 1,869.6 1,895.5 1,919.6 1,926.2' 1,941.5 2 U.S. government securities 261.4 266.3 267.1 271.6 271.4 273.1 270.0 275.0 270.7 264.6 270.8 268.0 3 Other securities 140.2 142.2 144.5 145.4 148.2 151.3 154.8 160.7 174.5 189.6 184.9 180.5 4 Total loans and leases2 1,367.1 1,380.0 1,391.0 1,402.1 1,409.2 1,416.9 1,419.7 1,433.9 1,450.3 1,465.4 1,470.5' 1,493.0 5 Commercial and industrial 481.9 484.3 484.3 484.1 485.7 487.2 487.0 490.6 493.9 494.2 495.3 502.1 6 Bankers acceptances held3.. 5.4 4.9 4.7 5.1 5.0 4.7 4.7 4.9 5.2 5.3 4.8 5.0 7 Other commercial and industrial 476.5 479.3 479.6 479.0 480.7 482.5 482.3 485.7 488.6 489.0 490.5 497.1 8 U.S. addressees4 465.8 469.2 470.1 469.6 471.1 473.3 473.7 477.3 479.8 479.1 480.8 487.3 9 Non-U.S. addressees4.... 10.7 10.1 9.5 9.4 9.6 9.2 8.6 8.4 8.8 9.9 9.7 9.8 10 Real estate 390.8 394.8 398.7 403.7 407.1 409.9 414.5 419.2 423.2 426.1 430.5' 435.6 11 Individual 266.5 269.9 272.7 276.3 278.5 280.3 281.3 283.8 286.5 289.4 292.3' 294.8 12 Security 35.1 37.5 40.0 40.3 36.7 38.2 37.9 37.8 38.7 43.1 41.8 48.3 13 Nonbank financial institutions 31.0 31.4 31.1 31.4 32.1 32.3 32.0 32.8 34.1 33.7 32.2 32.2 14 Agricultural 39.4 39.4 39.4 39.6 39.6 40.1 40.3 40.5 40.8 40.9 41.0 41.0 15 State and political subdivisions 47.2 47.5 47.5 47.9 48.8 48.8 49.3 50.0 52.5' 58.3 58.1 58.0 16 Foreign banks 10.9 10.7 10.4 10.5 10.2 10.0 9.7 9.6 9.6 9.6 9.8 9.8 17 Foreign official institutions ... 6.9 6.9 6.7 6.6 6.4 6.6 6.8 6.9 7.0 7.0 7.0 6.8 18 Lease financing receivables... 16.4 16.7 17.0 17.3 17.5 17.6 17.7 17.9 18.2 18.7 18.9 19.0 19 All other loans 40.9 40.9 43.3 44.4 46.5 46.0 43.2 44.9 46.1' 44.4' 43.5' 45.5 Not seasonally adjusted 20 Total loans and securities2 1,769.0 1,784.6 1,803.6 1,812.5 1,822.1 1,839.8 1,846.1 1,870.8 1,908.5 1,929.0 1,924.2' 1,937.2 21 U.S. government securities 266.9 268.4 270.8 271.4 269.8 270.7 266.9 270.6 267.2 264.5 271.8 270.1 22 Other securities 139.9 142.8 144.2 144.0 147.7 150.7 154.2 160.8 176.5 190.8 185.2 180.7 23 Total loans and leases2 1,362.3 1,373.4 1,388.6 1,397.2 1,404.6 1,418.4 1,424.9 1,439.4 1,464.8 1,473.7 1,467.2' 1,486.4 24 Commercial and industrial.... 482.1 482.8 482.8 483.2 483.5 487.2 488.0 491.0 497.3 496.4 494.9 501.8 25 Bankers acceptances held3.. 5.5 4.9 4.8 5.0 4.9 4.6 4.6 4.8 5.5 55..44 44..77 55..00 26 Other commercial and industrial 476.6 477.9 477.9 478.2 478.6 482.6 483.4 486.2 491.8 491.0 490.1 496.8 2277 U.S. addressees4 466.7 468.3 468.6 468.7 469.0 473.1 474.3 477.1 481.8 481.0 481.1' 487.7 28 Non-U.S. addressees4.... 9.9 9.6 9.3 9.5 9.6 9.4 9.1 9.1 10.0 10.0 9.1 9.1 29 Real estate 389.5 393.8 398.1 403.1 407.3 411.2 415.9 420.3 423.8 426.8 430.0' 434.3 30 Individual 264.3 267.7 270.7 274.5 278.3 281.5 283.4 285.8 290.0 292.2 292.0' 292.3 31 Security 35.0 36.0 39.9 38.3 35.8 36.7 37.7 3399..77 4433..44'' 4444..55 4400..66 4477..44 32 Nonbank financial institutions 31.1 31.2 31.1 31.5 32.3 32.4 32.0 32.7 34.2 33.7 31.9 32.1 3333 Agricultural 38.8 39.3 39.9 40.4 40.5 40.9 40.9 40.6 40.4 4400..33 4400..11 4400..11 34 State and political subdivisions 47.2 47.5 47.5 47.9 48.8 48.8 49.3 50.0 52.5' 58.3 58.1 58.0 35 Foreign banks 10.6 10.4 10.1 10.3 10.0 10.1 10.0 9.9 10.1 9.8 9.8 9.7 36 Foreign official institutions ... 6.9 6.9 6.7 6.6 6.4 6.6 6.8 6.9 7.0 7.0 7.0 6.8 37 Lease financing receivables... 16.4 16.7 16.9 17.2 17.4 17.5 17.6 17.7 18.1 18.9 19.1' 19.2 38 All other loans 40.4 41.1 44.9 44.2 44.4 45.5 43.4 44.7 48.0 45.8 43.6' 44.7 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 BANKS1 Monthly averages, billions of dollars 1985' 1986 SSoouurrccee Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar. Total nondeposit funds 11 1 1 0 0 2 5 . . 1 4 1 1 1 0 3 9 . . 7 2 1 1 1 1 2 0 . . 2 9 1 1 0 0 6 5 . . 3 4 1 1 1 0 1 9. . 8 4 1 1 1 1 1 2 . . 6 4 1 1 1 1 5 6 . . 2 2 1 12 1 1 8 . . 9 4 1 1 2 2 3 5 . . 8 9 1 12 2 9 7 . . 5 0 1 1 2 3 7 2 . . 5 5 1 1 3 4 6 1 . . 6 5 Federal funds, RPs, and other borrowings from nonbanks3 134.0 137.7 143.5 143.4 139.8 140.5 141.0 145.9 150.4 147.6 148.5 156.1 4 137.3 142.1 144.8 142.4 141.5 141.4 142.0 149.4 152.4 150.1 153.5 161.0 5 Net balances due to foreign-related institutions, not seasonally -31.9 -28.4 -32.6 -37.1 -30.0 -29.0 -25.8 -27.6 -26.6 -20.6 -21.0 -19.5 MEMO 6 Domestically chartered banks' net positions with own foreign branches, not seasonally -32.4 -29.5 -32.5 -38.3 -32.8 -30.7 -28.7 -30.3 -31.6 -28.0 -25.8 -26.5 7 74.8 74.5 76.4 79.2 75.8 74.7 74.2 74.1 76.1 74.4 69.5 71.6 8 42.4 44.9 44.0 40.8 43.0 44.0 45.4 43.8 44.5 46.4 43.7 45.2 9 Foreign-related institutions' net positions with directly related institutions, not seasonally .5 1.1 -.2 1.3 2.8 1.7 2.9 2.7 5.1 7.4 4.7 6.9 1111100000 51.2 51.7 53.0 54.6 55.1 56.0 55.4 56.1 56.8 57.7 60.0 60.7 1111111111 51.7 52.9 52.8 55.9 57.9 57.8 58.3 58.8 61.9 65.1 64.7 67.7 Security RP borrowings 1111122222 80.8 81.4 83.5 83.7 83.3 85.3 84.7 84.8 88.0 86.1 87.7 87.6 1111133333 81.7 83.4 82.3 80.4 82.6 83.7 83.4 85.9 87.7 86.1 90.3 90.1 U.S. Treasury demand balances7 1111144444 15.0 20.3 16.9 20.5 16.1 14.9 4.7 13.5 17.5 19.0 21.1 15.7 11115555 15.4 20.9 14.9 23.1 13.4 16.8 5.4 7.9 14.6 24.0 24.2 15.7 Time deposits, $100,000 or more8 11116666 333.6 330.4 328.9 324.2 327.2 330.8 333.9 335.9 337.6 349.4 351.8 347.7 11117777 333300..55 329.6 327.2 323.2 327.7 332.7 336.3 337.5 339.4 348.3 350.6 348.2 1. Commercial banks are those in the 50 states and the District of Columbia 3. Other borrowings are borrowings on any instrument, such as a promissory with national or state charters plus agencies and branches of foreign banks, New note or due bill, given for the purpose of borrowing money for the banking York investment companies majority owned by foreign banks, and Edge Act business. This includes borrowings from Federal Reserve Banks and from foreign corporations owned by domestically chartered and foreign banks. banks, term federal funds, overdrawn due from bank balances, loan RPs, and Data for lines 1-4 and 12-17 have been revised in light of benchmarking and participations in pooled loans. revised seasonal adjustment. 4. Averages of daily figures for member and nonmember banks. 2. Includes seasonally adjusted federal funds, RPs, and other borrowings from 5. Averages of daily data. nonbanks and not seasonally adjusted net Eurodollars. Includes averages of 6. Based on daily average data reported by 122 large banks. Wednesday data for domestically chartered banks and averages of current and 7. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at previous month-end data for foreign-related institutions. commercial banks. Averages of daily data. 8. Averages of Wednesday figures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • June 1986 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series Billions of dollars 1985 1986 AAccccoouunntt May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. ALL COMMERCIAL BANKING INSTITUTIONS1 1 Loans and securities 1,908.6 1,927.3 1,948.5 1,952.1 1,969.9 1,979.1 2,027.7 2,059.3 2,057.9 2,071.6 2,084.6 2 Investment securities 390.3 392.1 392.3 393.7 397.0 3%. 3 404.6 413.6 427.2 427.3 422.1 3 U.S. government securities 254.4 255.3 256.1 254.2 254.4 249.3 251.8 249.9 249.0 252.1 250.9 4 Other 135.9 136.8 136.2 139.6 142.6 147.0 152.8 163.6 178.3 175.1 171.2 5 Trading account assets 23.5 23.1 22.3 24.2 26.4 25.0 32.0 31.1 30.1 33.9 30.1 6 Total loans 1,494.9 1,512.1 1,534.0 1,534.1 1,546.5 1,557.8 1,591.2 1,614.6 1,600.6 1,610.4 1,632.3 7 Interbank loans 124.0 123.1 133.0 128.6 129.1 131.7 147.0 149.6 136.5 139.2 141.1 8 Loans excluding interbank 1,370.8 1,388.9 1,401.0 1,405.5 1,417.5 1,426.1 1,444.1 1,465.0 1,464.1 1,471.2 1,491.3 9 Commercial and industrial 483.4 484.3 485.9 484.6 489.2 488.8 493.1 495.9 496.9 502.1 509.2 10 Real estate 395.8 400.0 405.6 409.3 412.8 418.3 421.8 425.0 428.6 431.6 436.1 II Individual 268.5 272.1 276.1 280.0 282.1 285.1 286.8 291.1 292.7 292.3 292.6 12 All other 223.0 232.6 233.4 231.5 233.4 233.9 242.5 253.0 245.8 245.1 253.4 13 Total cash assets 202.3 190.4 198.0 188.4 188.2 190.1 207.7 211.6 188.1 194.6 199.4 14 Reserves with Federal Reserve Banks 20.7 21.6 21.0 24.5 24.9 19.6 20.5 27.6 22.0 26.3 29.2 15 Cash in vault 23.3 22.2 22.0 22.7 22.1 22.6 21.4 22.2 23.0 22.6 21.8 16 Cash items in process of collection ... 76.5 68.4 70.5 62.5 61.4 67.9 81.9 79.3 63.9 66.7 68.6 17 Demand balances at U.S. depository institutions 35.2 31.3 33.5 30.6 30.8 31.6 35.8 36.1 31.4 31.9 31.4 18 Other cash assets 46.6 46.8 51.0 48.2 49.1 48.4 48.1 46.5 47.8 47.1 48.4 19 Other assets 183.4 189.4 194.5 180.8 185.8 178.1 185.0 189.4 178.0 177.1 185.4 20 Total assets/total liabilities and capital ... 2,294.2 2,307.1 2,341.1 2,321.3 2,344.0 2,347.3 2,420.5 2,460.3 2,424.0 2,443.3 2,469.3 21 Deposits 1,661.5 1,659.8 1,685.0 1,676.9 1,683.0 1,705.6 1,743.9 1,763.6 1,729.5 1,736.9 1,754.2 22 Transaction deposits 480.3 474.0 492.3 475.4 474.9 491.4 521.9 536.4 488.2 491.3'' 502.1 23 Savings deposits 418.7 425.6 434.3 436.4 438.3 443.8 448.4 450.0 451.9 455.1 459.8 24 Time deposits 762.5 760.1 758.4 765.0 769.8 770.4 773.6 777.1 789.4 790.4' 792.2 25 Borrowings 305.4 315.8 321.6 308.9 323.2 309.0 350.8 361.5 359.7 370.2 369.2 26 Other liabilities 176.0 179.7 181.1 182.0 183.6 177.9 170.6 178.5 177.9 178.7 187.5 27 Residual (assets less liabilities) 151.3 151.8 153.4 153.4 154.1 154.8 155.1 156.7 156.9 157.6 158.5 MEMO 28 U.S. government securities (including trading account) 269.3 271.0 270.0 268.3 271.5 265.1 271.7 265.7 266.9 275.4 270.9 29 Other securities (including trading account) 144.4 144.3 144.6 149.7 151.9 156.2 164.9 178.9 190.4 185.8 181.3 DOMESTICALLY CHARTERED COMMERCIAL BANKS2 30 Loans and securities 1,812.7 1,829.2 1.847.9 1,850.8 1,863.6 1,872.3 1,917.7 1,944.2 1,943.6 1,953.8 1,961.9 31 Investment securities 383.8 385.1 385.1 386.5 389.1 388.1 396.6 405.9 417.3 416.9 412.4 32 U.S. government securities 250.7 251.4 252.4 250.4 250.5 245.0 248.0 246.0 244.9 247.6 246.5 33 Other 133.1 133.8 132.7 136.0 138.6 143.1 148.7 159.9 172.4 169.3 165.8 3 3 4 5 T T r o a ta d l i n l g o a a n c s c ount assets 1,4 2 0 3 5 . . 5 5 1,4 2 2 3 0 . . 1 9 1,4 2 4 2 0. . 5 3 1,44 2 0 4 . . 1 2 1,4 2 48 6 . . 1 4 1,4 2 5 5 9 . . 0 2 1,48 3 9 2 . . 1 0 1,5 3 0 1 7 . . 1 2 1,4 3 9 0 6 . . 1 3 1,5330.9 2.9- 1,51 30 9 . . 1 5 36 Interbank loans 100.6 100.6 110.0 104.7 103.8 106.8 121.1 121.2 113.0 112.6 116.5 37 Loans excluding interbank 1,304.9 1,320.3 1,330.5 1,335.5 1,344.2 1,352.4 1,368.0 1,386.0 1,383.3 1,390.3 1,402.9 38 Commercial and industrial 436.6 436.0 437.6 435.7 437.9 437.4 440.0 442.0 439.7 443.4 445.5 39 Real estate 390.4 394.4 399.9 403.7 407.0 412.7 416.3 419.4 423.1 426.1 430.5 40 Individual 268.3 271.8 275.9 279.8 281.8 284.8 286.5 290.9 292.5 292.0 292.3 41 All other 209.6 218.1 217.2 216.3 217.5 217.5 225.2 233.7 228.0 228.8 234.5 42 Total cash assets 191.2 179.2 185.3 176.4 176.1 178.0 195.8 199.3 173.2 181.2 185.3 43 Reserves with Federal Reserve Banks 19.6 20.9 20.4 23.8 24.4 18.6 19.5 26.1 21.2 25.8 28.7 44 Cash in vault 23.2 22.2 22.0 22.6 22.0 22.6 21.4 22.2 23.0 22.6 21.7 45 Cash items in process of collection ... 76.2 68.2 70.3 62.2 61.1 67.7 81.6 79.0 63.5 66.3 68.1 46 Demand balances at U.S. depository institutions 33.8 29.8 32.2 29.0 29.4 30.2 34.0 34.4 29.6 30.3 29.8 47 Other cash assets 38.3 38.1 40.4 38.8 39.2 38.9 39.2 37.7 35.9 36.2 36.9 48 Other assets 131.5 137.7 144.9 132.6 133.3 132.0 137.1 141.2 130.0 126.4' 135.5 49 Total assets/total liabilities and capital... 2,135.4 2,146.2 2,178.1 2,159.8 2,173.0 2,182.3 2,250.6 2,284.8 2,246.8 2,261.3 2,282.7 50 Deposits 1,618.4 1,617.2 1,642.3 1,631.9 1,636.6 1,659.5 1,697.5 1,716.7 1,681.2 1,689.9' 1,705.8 51 Transaction deposits 473.8 467.7 486.0 468.9 468.3 484.9 515.2 529.3 481.3 484.3' 494.8 52 Savings deposits 417.5 424.3 432.9 435.1 436.9 442.4 446.9 448.5 450.4 453.5 458.2 53 Time deposits 727.1 725.2 723.3 727.9 731.4 732.2 735.4 738.9 749.5 752.1 752.7 54 Borrowings 246.1 253.8 258.4 249.6 259.0 248.0 280.5 290.0 292.2 299.2 299.7 55 Other liabilities 122.4 126.1 126.8 127.4 125.9 122.7 120.2 124.0 119.1 117.2 121.4 56 Residual (assets less liabilities) 148.6 149.1 150.7 150.8 151.5 152.2 152.5 154.0 154.3 154.9 155.8 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. Insured domestically chartered commercial banks include all member banks Wednesday of the month based on a sample of weekly reporting banks and and insured nonmember banks. quarter-end condition report data. Data for other banking institutions are estimates made for the last Wednesday of the month based on a weekly reporting 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 1986 AAccccoouunntt Jan. 29' Feb. 5' Feb. 12' Feb. Feb. 26' Mar. 5 Mar. 12 Mar. 19 Mar. 26 1 Cash and balances due from depository institutions 87,188 96,175 92,807 107,382 93,408 100,133 99,573 96,650 97,287 2 Total loans, leases and securities, net 913,201 918,757 916,097 926,536 920,866 935,777 932,784 926,093 922,615 3 U.S. Treasury and government agency 87,104 89,223 90,329 93,110 94,769 92,193 91,492 89,804 90,179 4 Trading account 17,954 20,779 21,054 22,033 23,245 21,782 20,819 20,324 19,986 Investment account, by maturity 69,150 68,443 69,275 71,077 71,524 70,411 70,673 69,480 70,193 6 One year or less 18,378 18,347 18,325 18,424 18,309 18,533 18,871 19,321 18,930 7 Over one through five years 32,946 32,707 33,448 35,093 35,229 34,613 34,593 33,522 34,566 8 Over five years 17,825 17,389 17,502 17,560 17,986 17,264 17,208 16,636 16,697 9 75,136 73,946 73,020 72,430 71,708 70,485 69,527 68,864 68,830 10 Trading account 7,860 7,339 6,616 6,460 5,767 5,547 5,017 4,825 4,870 11 Investment account 67,276 66,607 66,404 65,970 65,940 64,939 64,510 64,038 63,960 1? States and political subdivisions, by maturity 61,528 61,078 60,812 60,401 59,963 58,695 58,208 57,762 57,485 n One year or less 11,430 11,623 11,654 11,585 11,502 10,840 10,493 10,353 10,388 14 Over one year 50,098 49,455 49,158 48,816 48,461 47,854 47,716 47,408 47,097 15 Other bonds, corporate stocks, and securities 5,748 5,528 5,592 5,569 5,978 6,244 6,302 6,277 6,475 16 Other trading account assets 4,283 4,150 3,657 4,303 4,942 4,696 5,124 5,529 5,246 17 Federal funds sold1 60,963 62,788 62,085 63,570 58,839 70,522 69,935 59,773 60,729 18 36,636 37,727 38,195 38,110 33,337 40,082 40,917 32,410 34,492 19 To nonbank brokers and dealers in securities 16,150 16,168 14,778 16,137 15,881 19,923 19,574 19,138 18,617 ?0 8,177 8,893 9,112 9,322 9,621 10,517 9,443 8,224 7,620 71 Other loans and leases, gross2 704,459 707,655 706,014 712,182 709,742 717,192 716,055 721,499 716,877 V Other loans, gross2 688,778 692,052 690,252 696,406 693,646 701,357 700,163 705,616 700,982 73 Commercial and industrial2 254,652 255,836 256,420 256,554 257,737 259,785 258,756 260,706 258,884 74 Bankers acceptances and commercial paper 1,999 2,106 2,026 2,224 2,220 2,162 2,223 2,328 2,231 ?5 All other 252,653 253,730 254,394 254,329 255,517 257,623 256,533 258,378 256,653 ?6 U.S. addressees 247,973 248,985 249,698 249,642 250,852 253,023 251,941 253,831 252,081 27 Non-U.S. addressees 4,680 4,746 4,696 4,687 4,665 4,600 4,592 4,547 4,572 78 182,014 182,070 182,741 183,102 183,297 183,536 184,188 185,203 185,260 79 To individuals for personal expenditures 133,232 133,051 132,812 132,867 133,048 132,846 132,824 132,817 132,772 30 To depository and financial institutions 41,041 41,986 41,606 42,734 41,915 43,429 42,471 42,610 42,324 31 Commercial banks in the United States 11,735 12,593 12,403 12,680 13,293 13,539 13,029 13,202 13,122 3? Banks in foreign countries 5,287 5,475 4,942 5,959 5,028 5,845 5,152 5,105 5,141 33 Nonbank depository and other financial institutions 24,019 23,918 24,261 24,095 23,594 24,045 24,289 24,303 24,061 34 For purchasing and carrying securities 16,545 17,497 15,980 19,021 16,544 19,695 21,252 22,210 20,704 35 To finance agricultural production 6,463 6,463 6,355 6,309 6,276 6,308 6,255 6,264 6,236 36 To states and political subdivisions 37,015 36,790 36,748 36,819 36,742 36,807 36,751 36,754 36,640 37 To foreign governments and official institutions 2,999 3,047 3,376 3,476 3,286 3,214 3,116 3,104 3,246 38 All other 14,816 15,312 14,213 15,525 14,800 15,737 14,551 15,949 14,915 39 Lease financing receivables 15,681 15,603 15,763 15,776 16,096 15,835 15,892 15,883 15,895 40 LESS: Unearned income 5,077 5,027 5,018 5,035 5,034 4,948 4,985 4,983 4,976 41 Loan and lease reserve2 13,667 13,978 13,990 14,024 14,100 14,364 14,365 14,391 14,270 4? Other loans and leases, net2 685,715 688,650 687,005 693,123 690,608 697,880 696,706 702,124 697,631 43 All other assets 123,006 123,927 122,004 123,098 120,374 126,894 122,385 127,153 127,040 44 1,123,396 1,138,859 1,130,908 1,157,015 1,134,648 1,162,804 1,154,742 1,149,897 1,146,942 45 193,226 205,805 194,253 215,876 195,162 211,916 202,585 205,087 200,672 46 Individuals, partnerships, and corporations 147,168 153,627 149,660 162,266 149,182 157,118 157,320 156,133 152,937 47 States and political subdivisions 4,807 5,730 4,564 5,472 5,193 4,486 4,137 4,829 5,012 48 U.S. government 2,684 4,981 2,711 2,037 2,706 4,856 2,834 4,162 2,520 49 Depository institutions in United States 22,129 23,530 21,757 27,721 23,036 24,902 21,924 23,035 23,024 50 Banks in foreign countries 5,322 5,398 5,302 7,014 5,483 6,606 5,951 5,497 5,827 51 Foreign governments and official institutions 1,200 888 763 843 993 779 861 770 891 5? Certified and officers' checks 9,914 11,652 9,495 10,522 8,568 12,808 9,558 10,661 10,461 51 Transaction balances other than demand deposits 41,086 43,327 42,346 42,579 42,008 44,804 43,746 43,559 43,330 54 Nontransaction balances 491,985 494,094 493,868 494,304 493,330 493,290 493,920 493,315 493,942 55 Individuals, partnerships and corporations 453,920 454,908 454,384 455,266 453,877 453,950 454,700 454,367 454,758 56 States and political subdivisions 25,982 26,064 26,462 26,293 26,427 26,142 26,190 25,879 25,845 57 U.S. government 529 538 548 549 544 766 550 5% 637 58 Depository institutions in the United States 9,619 10,683 10,613 10,414 10,732 10,718 10,874 10,854 11,086 59 Foreign governments, official institutions and banks 1,934 1,900 1,860 1,782 1,750 1,714 1,606 1,619 1,616 60 Liabilities for borrowed money 232,325 232,716 237,795 240,865 241,427 248,425 249,414 241,991 240,885 61 Borrowings from Federal Reserve Banks 200 150 145 140 140 120 1,182 145 173 6? Treasury tax-and-loan notes 17,000 12,331 14,529 14,577 16,504 8,553 6,122 11,844 9,405 63 All other liabilities for borrowed money3 215,126 220,235 223,121 226,149 224,782 239,752 242,110 230,002 231,307 64 Other liabilities and subordinated note and debentures 85,050 82,804 82,367 83,347 82,756 83,873 84,200 85,230 87,458 65 Total liabilities 1,043,672 1,058,746 1,050,629 1,076,972 1,054,683 1,082,308 1,073,864 1,069,222 1,066,288 66 Residual (total assets minus total liabilities)4 79,723 80,113 80,279 80,043 79,965 80,496 80,878 80,675 80,655 MEMO 67 Total loans and leases (gross) and investments adjusted5 883,574 887,442 884,508 894,805 893,370 901,468 898,187 899,856 894,247 68 Total loans and leases (gross) adjusted2'5 717,051 720,123 717,501 724,962 721,950 734,093 732,043 735,660 729,992 69 Time deposits in amounts of $100,000 or more 164,746 165,631 165,805 164,685 164,511 163,171 162,770 162,134 161,924 70 Loans sold outright to affiliates—total6 1,848 1,660 1,762 1,783 1,776 1,762 1,823 1,918 1,918 71 Commercial and industrial 1,073 911 1,019 1,038 1,053 1,041 1,100 1,193 1,214 7? Other 774 749 742 745 724 721 724 724 704 73 Nontransaction savings deposits (including MMDAs) 194,111 195,175 194,897 196,175 195,822 196,695 197,794 197,783 198,102 1. Includes securities purchased under agreements to resell. 4. This is not a measure of equity capital for use in capital adequacy analysis or 2. Levels of major loan items were affected by the Sept. 26, 1984, transaction for other analytic uses. between Continental Illinois National Bank and the Federal Deposit Insurance 5. Exclusive of loans and federal funds transactions with domestic commercial Corporation. For details see the H.4.2 statistical release dated Oct. 5, 1984. banks. 3. Includes federal funds purchased and securities sold under agreements to 6. Loans sold are those sold outright to a bank's own foreign branches, repurchase; for information on these liabilities at banks with assets of $1 billion or nonconsolidated nonbank affiliates of the bank, the bank's holding company (if more on Dec. 31, 1977, see table 1.13. not a bank), and nonconsolidated nonbank subsidiaries of the holding company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • June 1986 1.28 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures except as noted 1986 AAccccoouunntt Jan. 29 Feb. 5 Feb.12 Feb. 19 Feb. 26 Mar. 5 Mar. 12 Mar. 19 Mar. 26 1 Cash and balances due from depository institutions 21,534 26,060 24,645 28,565 22,952 26,055 27,675 25,493 27,075 2 Total loans, leases and securities, net1 195,026 192,313 192,299 198,235 195,127 201,517 203,712 199,994 198,136 Securities 5 Investment account, by maturity 10,897 10,200 10,574 11,074 11,311 10,988 10,682 9,747 10,171 6 One year or less 1,524 1,470 1,360 1,338 1,365 1,299 1,215 1,492 1,596 7 Over one through five years 5,375 4,751 5,152 5,814 5,908 5,712 5,635 4,643 5,570 8 Over five years 3,998 3,979 4,062 3,922 4,039 33,,997766 3,832 3,612 33,,000044 11 Investment account 15,756 15,496 15,413 15,341 15,618 15,624 15,626 15,515 15,567 12 States and political subdivisions, by maturity 13,967 13,927 13,840 13,779 13,693 13,495 13,490 13,399 13,382 13 One year or less 1,826 1,825 1,874 1,876 1,875 1,842 1,847 1,818 1,915 14 Over one year 12,141 12,102 11,966 11,904 11,818 11,653 11,643 11,581 11,467 15 Other bonds, corporate stocks and securities 1,789 1,568 1,573 1,561 1,926 2,129 2,136 2,116 2,186 Loans and leases 17 Federal funds sold3 30,335 27,639 28,936 29,341 27,791 30,107 33,921 28,733 29,414 18 To commercial banks 15,339 12,427 13,711 13,716 12,344 11,670 16,347 11,886 13,755 19 To nonbank brokers and dealers in securities 8,807 8,448 8,078 9,146 8,060 11,172 10,889 10,807 9,642 20 To others 6,189 6,763 7,146 6,480 7,386 7,265 6,684 6,040 6,018 21 Other loans and leases, gross 143,456 144,447 142,904 148,023 146,005 150,430 149,182 151,728 148,642 22 Other loans, gross 140,466 141,446 139,852 144,967 142,643 147,351 146,099 148,644 145,551 23 Commercial and industrial 57,739 57,624 57,815 57,982 58,365 58,951 58,298 58,396 57,635 24 Bankers acceptances and commercial paper 479 550 486 584 536 546 541 547 495 25 All other 57,260 57,074 57,329 57,398 57,829 58,406 57,757 57,849 57,140 26 U.S. addressees 56,649 56,463 56,720 56,812 57,262 57,833 57,180 57,271 56,551 27 Non-U.S. addressees 611 611 609 586 567 573 578 578 588 28 Real estate loans 30,166 30,119 30,256 30,393 30,268 30,421 30,630 31,014 30,924 29 To individuals for personal expenditures 17,740 17,709 17,708 17,842 17,861 17,831 17,804 17,849 17,872 30 To depository and financial institutions 12,341 12,977 12,356 13,867 13,216 14,047 13,099 13,322 13,380 31 Commercial banks in the United States 3,433 4,028 3,965 4,400 4,529 4,745 4,439 4,586 4,487 32 Banks in foreign countries 2,249 2,441 1,868 2,865 2,076 2,888 2,174 2,308 2,232 33 Nonbank depository and other financial institutions 6,658 6,508 6,523 6,601 6,611 6,414 6,487 6,428 6,661 34 For purchasing and carrying securities 8,069 8,637 7,307 9,912 8,214 11,122 11,898 12,794 11,163 35 To finance agricultural production 305 315 309 307 320 344 322 324 321 36 To states and political subdivisions 9,562 9,360 9,357 9,431 9,402 9,411 9,369 9,347 9,244 37 To foreign governments and official institutions 619 667 1,017 1,086 912 870 761 749 866 38 All other 3,924 4,039 3,727 4,146 4,085 4,353 3,915 4,849 4,144 39 Lease financing receivables 2,991 3,000 3,052 3,056 3,362 3,079 3,083 3,084 3,091 40 LESS: Unearned income 1,460 1,440 1,438 1,440 1,449 1,424 1,432 1,434 1,433 41 Loan and lease reserve 3,959 4,028 4,090 4,103 4,149 4,208 4,267 4,296 4,224 42 Other loans and leases, net 138,038 138,979 137,376 142,479 140,407 144,798 143,483 145,998 142,984 43 All other assets4 65,885 70,244 69,008 72,282 70,656 75,147 69,053 72,561 69,544 44 Total assets 282,446 288,617 285,951 299,081 288,736 302,719 300,441 298,048 294,754 Deposits 45 Demand deposits 50,504 54,244 48,166 57,683 50,247 57,392 53,916 55,640 54,077 46 Individuals, partnerships, and corporations 33,684 35,442 32,977 38,950 34,661 36,220 37,511 37,881 36,317 47 States and political subdivisions 673 1,112 538 680 639 606 483 691 698 48 U.S. government 630 1,073 503 250 622 961 545 839 513 49 Depository institutions in the United States 5,578 5,368 4,769 6,265 5,539 6,542 5,282 5,797 5,762 50 Banks in foreign countries 4,032 4,165 3,999 5,642 4,255 5,313 4,661 4,263 4,467 51 Foreign governments and official institutions 1,026 715 594 673 822 628 723 627 783 52 Certified and officers' checks 4,881 6,370 4,784 5,223 3,708 7,120 4,711 5,540 5,536 53 Transaction balances other than demand deposits ATS, NOW, Super NOW, telephone transfers) 4,443 4,666 4,565 4,524 4,483 4,987 4,594 4,612 4,622 54 Nontransaction balances 91,455 92,006 91,684 92,987 92,519 92,349 91,788 92,166 91,649 55 Individuals, partnerships and corporations 82,571 83,053 82,582 83,949 83,126 82,983 82,496 83,130 82,662 56 States and political subdivisions 5,741 5,739 5,886 5,925 6,053 5,954 5,937 5,794 5,645 57 U.S. government 51 35 38 52 46 45 41 40 43 58 Depository institutions in the United States 2,148 2,226 2,222 2,156 2,390 2,459 2,478 2,364 2,445 59 Foreign governments, official institutions and banks 944 952 956 904 904 907 836 839 855 60 Liabilities for borrowed money 76,352 79,253 83,186 85,972 83,548 89,794 92,141 85,371 83,257 800 62 Treasury tax-and-loan notes 4,964 3,281 4,337 4,237 4,729 2,274 1,413 3,208 2,535 63 All other liabilities for borrowed money5 71,388 75,972 78,849 81,735 78,819 87,521 89,927 82,164 80,722 64 Other liabilities and subordinated note and debentures 34,194 32,729 32,623 32,354 32,450 32,466 32,137 34,581 35,489 65 Total liabilities 256,948 262,898 260,224 273,520 263,247 276,989 274,578 272,370 269,095 66 Residual (total assets minus total liabilities)6 25,498 25,719 25,727 25,562 25,488 25,730 25,863 25,678 25,659 MEMO 67 Total loans and leases (gross) and investments adjusted1-7 181,672 181,326 180,150 185,663 183,852 190,734 188,625 189,252 185,551 68 Total loans and leases (gross) adjusted7 155,019 155,631 154,164 159,248 156,922 164,122 162,317 163,989 159,813 69 Time deposits in amounts of $100,000 or more 36,664 36,886 37,038 37,105 36,975 36,778 35,645 35,948 35,567 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 A Millions of dollars, Wednesday figures 1986 AAccccoouunntt11 Jan. 29 Feb. 5 Feb. 12 Feb. 19 Feb. 26 Mar. 5 Mar. 12 Mar. 19 Mar. 26 1 Cash and due from depository institutions. 9,794 8,704 9,309 8,920 8,732 8,939 8,894 8,435 9,204 2 Total loans and securities 63,634 63,437 63,586 65,051 65,727 63,728 64,800 66,163 68,377 3 U.S. Treasury and govt, agency securities 3,506 3,960 3,730 3,931 3,932 3,789 3,906 3,883 3,784 4 Other securities 4,450 4,436 4,281 4,287 4,387 4,391 4,078 4,080 4,014 5 Federal funds sold2 4,778 3,630 4,314 5,282 6,509 2,989 3,485 3,823 4,312 6 To commercial banks in the United States 3,862 2,685 3,221 4,120 5,603 2,225 2,788 2,919 3,394 7 To others 917 945 1,093 1,162 906 764 696 904 918 8 Other loans, gross 50,900 51,411 51,261 51,552 50,899 52,559 53,331 54,377 56,266 9 Commercial and industrial 30,002 30,497 30,735 31,002 30,712 31,478 31,649 32,188 33,411 10 Bankers acceptances and commercial paper 2,088 2,196 2,109 2,150 2,075 2,186 2,042 2,230 2,372 11 All other 27,914 28,300 28,625 28,852 28,637 29,292 29,606 29,957 31,038 12 U.S. addressees 26,054 26,461 26,775 26,889 26,698 26,947 27,313 27,867 28,888 13 Non-U.S. addressees 1,860 1,840 1,850 1,963 1,940 2,345 2,293 2,090 2,150 14 To financial institutions 14,078 13,864 13,645 13,810 14,027 14,282 14,726 14,902 15,262 15 Commercial banks in the United States . 11,070 10,762 10,759 10,972 11,157 11,316 11,650 11,773 12,288 16 Banks in foreign countries 1,056 1,124 1,020 1,031 1,133 1,124 1,091 1,069 1,012 17 Nonbank financial institutions 1,952 1,979 1,866 1,807 1,736 1,842 1,985 2,060 1,962 18 To foreign govts, and official institutions .. 702 650 641 657 613 598 607 606 654 19 For purchasing and carrying securities .. 2,619 2,790 2,676 2,422 1,926 2,562 2,708 3,084 3,397 20 All other 3,500 3,609 3,563 3,660 3,620 3,638 3,641 3,597 3,542 21 Other assets (claims on nonrelated parties).. 21,920 22,258 22,516 22,961 23,024 22,594 22,901 22,758 22,783 22 Net due from related institutions 10,723 12,996 11,714 11,875 11,192 14,048 13,625 12,317 11,206 23 Total assets 106,070 107,395 107,125 108,808 108,676 109,309 110,220 109,674 111,570 24 Deposits or credit balances due to other than directly related institutions.... 32,872 32,516 32,137 31,904 31,396 31,144 30,835 31,792 3322,,446622 25 Transaction accounts and credit balances3 2,586 2,585 2,631 2,826 2,427 2,975 2,419 2,777 2,841 26 Individuals, partnerships, and corporations 1,367 1,467 1,4% 1,544 1,420 1,478 1,495 1,558 11,,552200 27 Other 1,219 1,118 1,135 1,282 1,007 1,496 923 1,219 1,321 28 Nontransaction accounts4 30,286 29,931 29,506 29,078 28,969 28,169 28,417 29,014 29,620 29 Individuals, partnerships, and corporations 23,840 23,732 22,908 23,088 22,912 22,458 22,878 23,661 2244,,001199 30 Other 6,446 6,198 6,598 5,990 6,058 5,711 5,539 5,353 5,601 31 Borrowings from other than directly related institutions 38,594 41,357 39,660 42,024 40,155 44,366 44,065 4400,,990066 3399,,332200 32 Federal funds purchased5 17,187 20,612 18,588 20,959 18,043 22,187 21,920 18,439 16,772 33 From commercial banks in the United States 12,495 14,768 13,850 15,914 12,605 17,332 17,060 13,191 12,314 34 From others 4,692 5,844 4,738 5,045 5,439 4,855 4,860 5,248 4,457 35 Other liabilities for borrowed money.... 21,407 20,745 21,071 21,065 22,112 22,179 22,145 22,467 22,548 36 To commercial banks in the United States 19,356 18,737 18,877 18,917 19,848 20,170 20,510 20,679 20,744 37 To others 2,051 2,008 2,194 2,148 2,264 2,009 1,636 1,788 1,803 38 Other liabilities to nonrelated parties 23,576 24,292 24,367 24,611 25,053 24,252 24,755 24,900 24,476 39 Net due to related institutions 11,028 9,231 10,961 10,269 12,071 9,548 10,564 12,076 15,312 40 Total liabilities 106,070 107,395 107,125 108,808 108,676 109,309 110,220 109,674 111,570 MEMO 41 Total loans (gross) and securities adjusted6 48,702 49,990 49,607 49,959 48,966 50,187 50,362 51,471 5522,,669966 42 Total loans (gross) adjusted6 40,747 41,594 41,595 41,742 40,648 42,006 42,378 43,508 44,897 • Levels of many asset and liability items were revised beginning Oct. 31, in transaction accounts. Before Jan. 1, 1986, they were included in savings 1984. For details, see the H.4.2 (504) statistical release dated Nov. 23, 1984. (nontransaction) accounts. 1. Effective Jan. 1, 1986, The reporting panel includes 65 U.S. branches and 2. Includes securities purchased under agreements to resell. agencies of foreign banks instead of the 50 banks previously reporting. Data 3. Includes credit balances, demand deposits, and other checkable deposits. shown for weeks before Jan. 1, 1986 are estimated to represent the new 65-bank 4. Includes savings deposits, money market deposit accounts, and time panel. Minor definitional changes were made in a few items effective with Jan. 1 deposits. data due to a change in treatment of credit balances and other checkable deposits. 5. Includes securities sold under agreements to repurchase. Credit balances formerly were reported as a separate item and are now included in 6. Exclusive of loans to and federal funds sold to commercial banks in the the transaction account breakdowns. Other checkable deposits are now included United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • June 1986 1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations1 Billions of dollars, estimated daily-average balances, not seasonally adjusted Commercial banks TTyyppee ooff hhoollddeerr 1984 1985 11998800 11998811 11998822 11998833 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Sept. Dec. Mar.3 June Sept. Dec. 1 All holders—Individuals, partnerships, and corporations 315.5 288.9 291.8 293.5 288.8 302.7 286.6 298.6 299.6 321.6 2 Financial business 29.8 28.0 35.4 32.8 30.4 31.7 28.1 28.9 28.9 32.9 3 Nonfinancial business 162.8 154.8 150.5 161.1 158.9 166.3 158.3 164.7 168.1 178.4 4 Consumer 102.4 86.6 85.9 78.5 79.9 81.5 77.9 81.8 80.7 84.8 5 Foreign 3.3 2.9 3.0 3.3 3.3 3.6 3.5 3.7 3.5 3.5 6 Other 17.2 16.7 17.0 17.8 16.3 19.7 18.8 19.5 18.5 22.1 Weekly reporting banks 1984 1985 11998800 11998811 11998822 11998833 DDeecc.. DDeecc.. DDeecc.. DDeecc..22 Sept. Dec. Mar.3 June Sept. Dec. 7 All holders—Individuals, partnerships, and corporations 147.4 137.5 144.2 146.2 145.3 157.1 147.8 151.4 153.7 168.8 8 Financial business 21.8 21.0 26.7 24.2 23.7 25.3 22.6 22.9 23.3 26.6 9 Nonfinancial business 78.3 75.2 74.3 79.8 79.2 87.1 82.8 84.0 85.9 94.4 10 Consumer 35.6 30.4 31.9 29.7 29.8 30.5 29.1 29.9 30.6 32.4 11 Foreign 3.1 2.8 2.9 3.1 3.2 3.4 3.3 3.5 3.3 3.1 12 Other 8.6 8.0 8.4 9.3 9.3 10.9 10.0 11.0 10.6 12.3 1. Figures include cash items in process of collection. Estimates of gross 3. Beginning March 1985, financial business deposits and, by implication, total deposits are based on reports supplied by a sample of commercial banks. Types of gross demand deposits have been redefined to exclude demand deposits due to depositors in each category are described in the June 1971 BULLETIN, p. 466. thrift institutions. Historical data have not been revised. The estimated volume of 2. In January 1984 the weekly reporting panel was revised; it now includes 168 such deposits for December 1984 is $5.0 billion at all insured commercial banks banks. Beginning with March 1984, estimates are constructed on the basis of 92 and $3.0 billion at weekly reporting banks. sample banks and are not comparable with earlier data. Estimates in billions of dollars for December 1983 based on the newly weekly reporting panel are: financial business, 24.4; nonfinancial business, 80.9; consumer, 30.1; foreign, 3.1; 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 1985 1986 IInnssttrruummeenntt D 19 e 8 c 1 . D 19 e 8 c 2 . D 1 e 9 c 8 . 3 1 D 19 e 8 c 4 . D 19 e 8 c 5 . Sept. Oct. Nov. Dec. Jan. Feb. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 165,829 166,436 187,658 237,586 300,899 277,482 282,155 287,981 300,899 302,160 297,862 Financial companies3 Dealer-placed paper4 2 Total 30,333 34,605 44,455 56,485 7788,,444433 7711,,008800 7700,,339955 7722,,114455 7788,,444433 7799,,005522 7788,,113366 3 Bank-related (not seasonally adjusted) 6,045 2,516 2,441 2,035 1,602 2,333 2,077 1,969 1,602 11,,441144 11,,447755 Directly placed paper5 4 Total 81,660 84,393 97,042 110,543 135,504 132,068 131,504 131,667 113355,,550044 113344,,558844 113344,,444433 5 Bank-related (not seasonally adjusted) 26,914 32,034 35,566 42,105 44,778 43,224 42,570 41,490 44,778 35,660 36,948 6 Nonfinancial companies6 53,836 47,437 46,161 70,558 86,952 74,334 80,256 84,169 86,952 88,528 85,283 Bankers dollar acceptances (not seasonally adjusted)7 7 Total 69,226 79,543 78,309 77,121r 68,180 70,845 69,272 67,890 68,180 68,205 67,188 Holder 8 Accepting banks 10,857 10,910 9,355 10,255 11,233 10,014 9,719 11,027 11,233 11,084 12,352 9 Own bills 9,743 9,471 8,125 9,065 9,507 8,501 8,041 8,903 9,507 9,346 10,127 10 Bills bought 1,115 1,439 1,230 1,191 1,726 1,513 1,679 2,123 1,726 1,738 22,,222255 Federal Reserve Banks 11 Own account 195 1,480 418 0 0 0 0 0 0 0 0 12 Foreign correspondents 1,442 949 729 671 937 793 850 874 937 898 874 13 Others 56,731 66,204 68,225 67,309' 56,946 60,830 59,552 56,863 56,946 57,120 54,835 Basis 14 Imports into United States 14,765 17,683 15,649 16,975 15,225 17,146 16,503 15,845 15,225 14,820 14,806 15 Exports from United States 15,400 16,328 16,880 15,859 13,189 13,242 13,116 13,030 13,189 12,951 13,115 16 All other 39,060 45,531 45,781 43,702' 36,688 38,776 38,362 37,516 36,688 37,277 36,648 1. Effective Dec. 1,1982, there was a break in the commercial paper series. The 4. Includes all financial company paper sold by dealers in the open market. key changes in the content of the data involved additions to the reporting panel, 5. As reported by financial companies that place their paper directly with the exclusion of broker or dealer placed borrowings under any master note investors. agreements from the reported data, and the reclassification of a large portion of 6. Includes public utilities and firms engaged primarily in such activities as bank-related paper from dealer-placed to directly placed. communications, construction, manufacturing, mining, wholesale and retail trade, 2. 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 7. Beginning October 1984, the number of respondents in the bankers acceptnonfinancial and to dealer-placed financial paper. ance survey were reduced from 340 to 160 institutions—those with $50 million or 3. 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. financing; factoring, finance leasing, and other business lending; insurance underwriting; and other investment activities. 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per annum Effective Date Average Month Average rate rate 11.50 1984--Nov. 9 11.75 1984—Jan 11.00 1985—Mar 10.50 12.00 28 11.25 Feb 11.00 Apr 10.50 12.50 Dec. 20 10.75 Mar 11.21 May 10.31 13.00 Apr 11.93 June 9.78 12.75 1985--Jan. 15 10.50 May 12.39 July 9.50 12.50 May 20 10.00 June 12.60 Aug 9.50 12.00 June 18 9.50 July 13.00 Sept 9.50 Aug 13.00 Oct 9.50 Sept 12.97 9.50 Oct 12.58 Dec 9.50 Nov 11.77 Dec 11.06 1986—Jan 9.50 Feb 9.50 1985—Jan 10.61 Mar 9.00 Feb 10.50 Apr 8.50 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 1986 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. 1985 1986 1986, week ending IInnssttrruummeenntt 11998833 11998844 11998855 Dec. Jan. Feb. Mar. Feb. 28 Mar. 7 Mar. 14 Mar. 21 Mar. 28 MONEY MARKET RATES 1 Federal funds12 9.09 10.22 8.10 8.27 8.14 7.86 7.48 7.82 7.89 7.52 7.47 7.25 2 Discount window borrowing1-2,3 8.50 8.80 7.69 7.50 7.50 7.50 7.10 7.50 7.50 7.07 7.00 7.00 Commercial paper4-5 3 1-month 8.87 10.05 7.94 7.87 7.78 7.70 7.30 7.66 7.52 7.20 7.22 7.25 4 3-month 8.88 10.10 7.95 7.75 7.71 7.63 7.20 7.59 7.40 7.13 7.13 7.13 5 6-month 8.89 10.16 8.01 7.62 7.62 7.54 7.08 7.48 7.27 7.04 7.01 7.00 Finance paper, directly placed4-5 6 1-month 8.80 9.97 7.91 7.81 7.75 7.68 7.24 7.61 7.43 7.18 7.19 7.19 7 3-month 8.70 9.73 7.77 7.57 7.52 7.47 7.15 7.44 7.34 7.14 7.11 7.03 8 6-month 8.69 9.65 7.75 7.51 7.47 7.40 7.10 7.37 7.30 7.11 7.05 6.96 Bankers acceptances5-6 9 3-month 8.90 10.14 7.92 7.65 7.62 7.54 7.09 7.50 7.27 7.05 7.04 7.01 10 6-month 8.91 10.19 7.96 7.52 7.55 7.41 6.94 7.31 7.11 6.95 6.88 6.83 Certificates of deposit, secondary market7 11 1-month 8.96 10.17 7.97 7.87 7.83 7.69 7.33 7.63 7.51 7.24 7.27 7.30 12 3-month 9.07 10.37 8.05 7.80 7.82 7.69 7.24 7.62 7.46 7.19 7.17 7.16 13 6-month 9.27 10.68 8.25 7.80 7.83 7.70 7.23 7.62 7.46 7.18 7.16 7.15 14 Eurodollar deposits 3-month8 9.56 10.73 8.28 7.99 8.02 7.89 7.42 7.86 7.70 7.41 7.39 7.43 U.S. Treasury bills' Secondary market9 15 3-month 8.61 9.52 7.48 7.10 7.07 7.06 6.56 7.04 6.79 6.59 6.49 6.39 16 6-month 8.73 9.76 7.66 7.14 7.16 7.11 6.57 7.04 6.77 6.58 6.55 6.42 17 1-year 8.80 9.92 7.80 7.16 7.21 7.11 6.59 7.02 6.76 6.59 6.57 6.46 Auction average10 18 3-month 8.63 9.58 7.48 7.07 7.04 7.03 6.59 6.96 6.92 6.55 6.52 6.36 19 6-month 8.75 9.80 7.66 7.09 7.13 7.08 6.60 7.00 6.87 6.54 6.55 6.43 20 1-year 8.86 9.91 7.80 7.06 7.31 7.19 6.61 n.a. n.a. 6.61 n.a. n.a. CAPITAL MARKET RATES U.S. Treasury notes and bonds11 Constant maturities12 21 1-year 9.57 10.89 8.43 7.67 7.73 7.61 7.03 7.52 7.22 7.03 7.01 6.89 22 2-vear 10.21 11.65 9.27 8.15 8.14 7.97 7.21 7.81 7.43 7.17 7.20 7.10 ">3 2-w-year13 11.82 9.54 8.30 8.33 8.10 8 05 7 40 7 20 24 3-year 10.45 11.89 9.64 8.40 8.41 8.10 7.30 7.91 7.51 7.26 7.29 7.19 25 5-year 10.80 12.24 10.13 8.73 8.68 8.34 7.46 8.06 7.66 7.40 7.46 7.36 26 7-year 11.02 12.40 10.51 9.11 9.03 8.58 7.67 8.20 7.90 7.61 7.71 7.52 27 10-year 11.10 12.44 10.62 9.26 9.19 8.70 7.78 8.29 8.01 7.72 7.80 7.63 28 20-year 11.34 12.48 10.97 9.75 9.59 9.08 8.09 8.56 8.31 8.09 8.14 7.93 29 30-year 11.18 12.39 10.79 9.54 9.40 8.93 7.96 8.47 8.17 7.95 7.98 7.81 Composite14 30 Over 10 years (long-term) 10.84 11.99 10.75 9.60 9.51 9.07 8.13 8.57 8.31 8.14 8.17 7.98 State and local notes and bonds Moody's series15 31 Aaa 8.80 9.61 8.60 7.98 7.74 7.26 6.73 6.90 6.65 6.65 6.80 6.80 32 Baa 10.17 10.38 9.58 9.05 8.79 8.30 7.58 7.80 7.50 7.50 7.70 7.60 33 Bond Buyer series16 9.51 10.10 9.11 8.43 8.08 7.44 7.08 6.98 6.88 6.89 7.34 7.21 Corporate bonds Seasoned issues17 34 All industries 12.78 13.49 12.05 10.89 10.75 10.40 9.79 10.08 9.89 9.78 9.80 9.71 35 Aaa 12.04 12.71 11.37 10.16 10.05 9.67 9.00 9.29 9.08 8.98 9.03 8.94 36 Aa 12.42 13.31 11.82 10.63 10.46 10.13 9.49 9.81 9.59 9.48 9.52 9.43 37 A 13.10 13.74 12.28 11.19 11.04 10.67 10.15 10.40 10.29 10.15 10.14 10.04 38 Baa 13.55 14.19 12.72 11.58 11.44 11.11 10.50 10.82 10.59 10.52 10.50 10.42 39 A-rated, recently-offered utility bonds18 12.73 13.81 12.06 10.91 10.74 10.20 9.41 9.48 9.56 9.37 9.38 9.29 MEMO: Dividend/price ratio19 40 Preferred stocks 11.02 11.59 10.49 10.05 9.85 9.62 9.13 9.66 9.14 9.06 9.10 9.21 41 Common stocks 4.40 4.64 4.25 3.88 3.90 3.72 3.50 3.62 3.63 3.50 3.45 3.43 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-'/;-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 one very low yielding "flower" bond. 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 1985 1986 IInnddiiccaattoorr 11998833 11998844 11998855 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) 92.63 92.46 108.09 111.64 109.09 106.62 107.57 113.93 119.33 120.16 126.43 133.97 2 Industrial 107.45 108.01 123.79 126.94 124.92 122.35 123.65 130.53 136.77 137.13 144.03 152.75 3 Transportation 89.36 85.63 104.11 111.67 109.92 104.96 103.72 108.61 113.52 115.72 124.18 128.66 4 Utility 47.00 46.44 56.75 59.68 56.99 55.93 55.84 59.07 61.69 62.46 65.18 68.06 5 Finance 95.34 89.28 114.21 119.85 114.68 110.21 112.36 122.83 128.86 132.36 142.13 153.94 6 Standard & Poor's Corporation (1941-43 = 10)' ... 160.41 160.50 186.84 192.54 188.31 184.06 186.18 197.45 207.26 208.19 219.37 232.33 7 American Stock Exchange2 (Aug. 31, 1973 = 50) 216.48 207.96 229.10 235.21 232.65 226.27 225.00 236.53 243.28 245.27 246.09 264.91 Volume of trading (thousands of shares) 8 New York Stock Exchange 85,418 91,084 109,191 111,952 87,468 97,910 110,569 122,263 133,446 130,872 152,590 160,755 9 American Stock Exchange 8,215 6,107 8,355 7,284 7,275 7,057 7,648 9,183 11,890 11,105 14,057 15,902 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 23,000 22,470 28,390 25,220 25,780 25,330 26,350 26,400 28,390 26,810 27,450 29,090 Free credit balances at brokers4 11 Margin-account5 n.a. 1,755 2,715 1,950 1,810 1,745 1,715 2,080 2,715 2,645 2,550 2,710 12 Cash-account 8,430 10,215 12,840 9,700 9,440 10,080 9,630 10,340 12,840 11,695 12,355 13,920 Margin-account debt at brokers (percentage distribution, end of period) 13 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)6 14 Under 40 22.0 18.0 34.0 34.0 35.0 40.0 37.0 35.0 34.0 32.0 28.0 29.0 15 40-49 22.0 18.0 20.0 20.0 21.0 22.0 22.0 20.0 20.0 20.0 19.0 19.0 16 50-59 16.0 16.0 19.0 19.0 18.0 16.0 17.0 19.0 19.0 20.0 21.0 21.0 17 60-69 9.0 9.0 11.0 11.0 11.0 9.0 10.0 11.0 11.0 11.0 13.0 13.0 18 70-79 6.0 5.0 8.0 8.0 8.0 6.0 7.0 7.0 8.0 8.0 9.0 9.0 19 80 or more 6.0 6.0 8.0 8.0 7.0 7.0 7.0 8.0 8.0 9.0 10.0 9.0 Special miscellaneous-account balances at brokers (end of period) 20 Total balances (millions of dollars)7 58,329 75,840 99,310 89,240 90,930 91,400 92,250 95,240 99,310 99,290 104,228 103,450 Distribution by equity status (percent) 21 Net credit status 63.0 59.0 58.0 59.0 59.0 59.0 58.0 57.0 58.0 59.0 60.0 61.0 Debt status, equity of 22 60 percent or more 28.0 29.0 31.0 32.0 30.0 31.0 31.0 32.0 31.0 33.0 32.0 31.0 23 Less than 60 percent 9.0 11.0 11.0 9.0 11.0 10.0 11.0 11.0 11.0 8.0 8.0 8.0 Margin requirements (percent of market value and effective date)8 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 24 Margin stocks 70 80 65 55 65 50 25 Convertible bonds 50 60 50 50 50 50 26 Short sales 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance 5. New series beginning June 1984. companies. With this change the index includes 400 industrial stocks (formerly 6. Each customer's equity in his collateral (market value of collateral less net 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40 debit balance) is expressed as a percentage of current collateral values. financial. 7. Balances that may be used by customers as the margin deposit required for 2. Beginning July 5, 1983, the American Stock Exchange rebased its index additional purchases. Balances may arise as transfers based on loan values of effectively cutting previous readings in half. other collateral in the customer's margin account or deposits of cash (usually sales 3. Beginning July 1983, under the revised Regulation T, margin credit at proceeds) occur. broker-dealers includes credit extended against stocks, convertible bonds, stocks 8. Regulations G, T, and U of the Federal Reserve Board of Governors, acquired through exercise of subscription rights, corporate bonds, and govern- prescribed in accordance with the Securities Exchange Act of 1934, limit the ment securities. Separate reporting of data for margin stocks, convertible bonds, amount of credit to purchase and carry margin stocks that may be extended on and subscription issues was discontinued in April 1984, and margin credit at securities as collateral by prescribing a maximum loan value, which is a specified broker-dealers became the total that is distributed by equity class and shown on percentage of the market value of the collateral at the time the credit is extended. lines 17-22. Margin requirements are the difference between the market value (100 percent) 4. Free credit balances are in accounts with no unfulfilled commitments to the and the maximum loan value. The term "margin stocks" is defined in the brokers and are subject to withdrawal by customers on demand. corresponding regulation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • June 1986 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1985 1986 AAccccoouunntt 11998833 11998844 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. FSLIC insured institutions 1 Assets 819,168 978,514 995,430 1,003,225 1,012,312 1,022,410 1,034,979 1,040,968 1,049,251 1,061,362 1,069,399 1,069,866 1,079,060 2 Mortgages 521,308 599,021 613,334 617,574 623,275 627,310 632,839 638,158 644,598 647,885 649,848 651,959 652,527 3 Mortgage-backed securities.... 90,902 108,219 108,174 106,433 102,892 105,869 108,685 113,086 111,422 110,400 110,710 111,831 113,593 4 Cash and investment securities1 . 110099,,992233 135,640 127,225 129,918 132,109 133,001 135,136 130,791 130,859 139,609 143,110 139,660 144,618 5 Other 91,516 96,903 98,034 100,595 101,281 101,564 101,896 102,679 103,034 103,312 103,977 104,483 6 Liabilities and net worth 819,168 978,514 995,430 1,003,225 1,012,312 1,022,410 1,034,979 1,040,968 1,049,251 1,061,362 1,069,399 1,069,866 1,079,060 7 Savings capital 671,059 784,724 801,293 809,083 817,551 822,105 826,841 831,274 833,193 837,496 843,933 847,598 852,212 8 Borrowed money 98,511 137,123 132,230 129,082 130,269 134,019 139,507 144,880 147,355 152,768 156,249 150,826 151,863 9 FHLBB 57,253 71,719 72,785 74,159 75,897 77,756 80,129 81,485 82,569 82,718 84,000 82,602 82,327 10 Other 41,258 65,404 59,445 54,923 54,372 56,263 59,378 63,395 64,786 70,050 72,249 68,224 69,536 11 Other 16,619 18,746 22,468 24,215 22,055 23,252 25,199 21,864 24,284 26,035 21,996 24,186 26,793 12 Net worth2 32,980 37,921 39,476 40,845 42,436 43,034 43,432 43,950 44,419 45,063 46,820 47,256 48,192 13 MEMO: Mortgage loan commitments outstanding3 . 56,785 65,836 68,671 69,683 69,585 68,805 66,120 65,743 65,056 65,447 61,985 61,284 64,115 Savings banks4 14 Assets 193,535 203,898 210,469 212,509 212,163 213,824 215,298 215,560 215,893 216,793 216,693 216,673 Loans 15 Mortgage 97,356 102,895 105,102 105,869 105,891 106,441 107,322 108,842 109,171 109,494 110,371 108,973 16 Other 19,129 24,954 28,000 28,530 29,211 30,339 30,195 29,672 29,967 31,217 30,875 31,752 Securities 17 U.S. government 15,360 14,643 14,504 14,895 14,074 13,960 13,868 13,686 13,734 13,434 13,113 12,568 18 Mortgage-backed securities... 18,205 19,215 19,750 19,527 19,160 19,779 20,101 20,368 20,012 19,828 19,482 21,372 19 State and local government... 2,177 2,077 2,097 2,094 2,093 2,086 2,105 2,107 2,163 2,148 2,323 2,298 20 Corporate and other7 25,375 23,747 24,139 24,344 24,047 23,738 23,735 23,534 23,039 22,816 21,212 20,828 n.a. 21 Cash 6,263 4,954 4,679 5,004 4,935 4,544 4,821 4,916 4,893 4,771 6,219 5,645 22 Other assets 9,670 11,413 12,288 12,246 12,770 12,937 13,151 12,345 12,914 13,085 13,098 13,287 23 Liabilities 193,535 203,898 210,469 212,509 212,163 213,824 215,298 215,560 215,893 216,793 216,693 216,673 24 Deposits 172,665 180,616 184,478 185,802 186,091 186,824 187,207 187,722 187,239 187,552 185,930 186,321 25 Regular8 170,135 177,418 180,804 182,113 182,218 182,881 183,222 183,560 183,296 183,716 181,881 182,399 26 Ordinary savings 38,554 33,739 33,211 33,457 33,526 33,495 33,398 33,252 33,303 33,638 33,021 32,365 27 Time 95,129 104,732 104,527 104,843 104,756 104,737 104,448 104,668 104,024 104,116 103,269 104,436 28 Other 2,530 3,198 3,689 3,674 3,873 3,943 3,985 4,162 3,943 3,836 4,049 3,922 29 Other liabilities 10,154 12,504 14,959 15,546 14,348 15,137 15,971 15,546 15,996 16,309 17,375 17,086 30 General reserve accounts 10,368 10,510 10,803 10,913 11,238 11,453 11,704 11,882 12,299 12,567 12,821 12,925 Life insurance companies8 31 Assets 654,948 722,979 748,865 757,523 765,891 772,452 778,293 783,828 791,483 802,024 816,203 Securities 32 Government 50,752 63,899 66,402 67,880 68,636 68,983 69,975 71,095 72,334 73,451 77,230 33 United States6 28,636 42,204 44,200 45,593 46,260 46,514 47,343 48,181 49,300 50,321 53,559 34 State and local 9,986 8,713 8,923 8,998 9,044 8,980 9,201 9,293 9,475 9,615 10,086 35 Foreign7 12,130 12,982 13,279 13,289 13,332 13,489 13,431 13,621 13,559 13,515 13,585 36 Business 322,854 359,333 379,247 384,342 388,448 393,386 397,202 399,474 403,832 410,141 414,424 n.a. n.a. 37 Bonds 257,986 295,998 311,123 314,021 317,029 321,752 325,647 329,133 331,675 335,129 337,205 38 Stocks 64,868 63,335 68,124 70,321 71,419 71,634 71,555 70,341 72,157 75,012 77,219 39 Mortgages 150,999 156,699 159,393 160,470 161,485 162,690 163,027 163,929 165,687 167,306 170,460 40 Real estate 22,234 25,767 26,828 27,215 27,831 28,240 28,450 28,476 28,637 28,844 28,662 41 Policy loans 54,063 54,505 54,439 54,384 54,320 54,300 54,238 54,225 54,142 54,121 54,200 42 Other assets 54,046 63,776 62,556 63,232 65,171 64,853 65,401 66,629 57,313 68,161 71,227 Credit unions9 43 Total assets/liabilities and capital . 81,961 93,036 101,268 104,992 106,783 107,991 111,150 113,016 114,783 117,029 118,010 118,933 122,623 44 Federal 54,482 63,205 68,903 71,342 72,021 72,932 74,869 75,567 76,415 77,829 77,861 78,619 80,024 45 State 27,479 29,831 32,365 33,650 34,762 35,059 36,281 37,449 38,368 39,200 40,149 40,314 42,599 46 Loans outstanding 50,083 62,561 64,341 65,298 66,817 67,662 69,171 70,765 71,811 72,404 73,513 73,513 74,207 47 Federal 32,930 42,337 43,414 44,042 44,707 44,963 46,036 46,702 47,065 47,538 47,933 48,055 48,059 48 State 17,153 20,224 20,927 21,256 22,110 22,699 23,135 24,063 24,746 24,866 25,580 25,458 26,148 49 Savings 74,739 84,348 91,275 95,278 96,702 98,026 99,834 101,318 103,677 105,384 105,963 107,238 110,541 50 Federal (shares) 49,889 57,539 62,867 66,680 66,243 67,07C 68,087 68,592 70,063 71,117 70,926 72,166 73,227 51 State (shares and deposits) . 24,850 26,809 28,408 28,598 30,459 30,956 31,747 32,726 33,614 34,267 35,037 35,072 37,314 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All NOTES TO TABLE 1.37 1. Holdings of stock of the Federal Home Loan Banks are in "other assets." NOTE. FSLIC-insured institutions: Estimates by the FHLBB for all associa- 2. Includes net undistributed income accrued by most associations. tions in the United States. Data are based on monthly reports of federally insured 3. As of July 1985, data include loans in process. associations. Even when revised, data for current and preceding year are subject 4. The National Council reports data on member mutual savings banks and on to further revision. savings banks that have converted to stock institutions, and to federal savings Savings banks: Estimates of National Council of Savings Institutions for all banks. savings banks in the United States. 5. Excludes checking, club, and school accounts. Life insurance companies: Estimates of the American Council of Life Insurance 6. Direct and guaranteed obligations. Excludes federal agency issues not for all life insurance companies in the United States. Annual figures are annualguaranteed, which are shown in the table under "Business" securities. statement asset values, with bonds carried on an amortized basis and stocks at 7. Issues of foreign governments and their subdivisions and bonds of the year-end market value. Adjustments for interest due and accrued and for International Bank for Reconstruction and Development. differences between market and book values are not made on each item separately 8. Data for December 1984 through April 1985 have been revised. but are included, in total, in "other assets." 9. As of June 1982, data include federally chartered or federally insured, state- Credit unions: Estimates by the National Credit Union Administration for a chartered credit unions serving natural persons. Before that date, data were group of federal and federally insured state credit unions serving natural persons. estimates of all credit unions. 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 1986 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year FFiissccaall FFiissccaall FFiissccaall Type of account or operation yyeeaarr yyeeaarr yyeeaarr 1984 1985 1985 1986 11998833 11998844 11998855 H2 HI H2 Dec. Jan. Feb. U.S. budget 1 Receipts 600,562 666,457 733,996 341,393 380,619 364,791 68,193 76,710 53,370 2 Outlays 795,917 841,800 936,809 446,949 463,735 488,740 84,079 82,849 78,290 3 Surplus, or deficit (-) -195,355 -175,343 -202,813 -105,557 -83,115 -123,950 -15,886 -6,140 -24,920 4 Trust funds 23,056 30,565 53,540 31,473 22,592 30,278 15,268 1,710 433 5 Federal funds1 -218,410 -205,908 -256,353 -137,032 -105,707 -154,229 -31,155 -7,849 -25,354 Off-budget entities (surplus, or deficit (~))2 6 Federal Financing Bank outlays -10,404 -7,277 -7,339 -1,913 -6,274 -529 1,020 -188 282 7 Other3 -1,953 -2,719 -1,779 -77 -1,567 -545 210 -163 58 U.S. budget plus off-budget, including Federal Financing Bank 8 Surplus, or deficit (-) -207,711 -185,339 -211,931 -109,474 -90,553 -125,022 -14,656 -6,492 -24,580 Source of financing 9 Borrowing from the public 212,425 170,817 197,269 118,209 87,054 136,567 33,261 12,660 16,010 10 Cash and monetary assets (decrease, or increase (-))4 -9,889 5,636 10,673 -16,683 -6,479 -10,428 -21,020 -9,503 12,969 11 Other5 5,176 8,885 3,989 7,948 9,978 1,117 2,415 3,334 -4,400 MEMO 12 Treasury operating balance (level, end of period) 37,057 22,345 17,060 17,649 24,013 30,935 30,935 40,215 26,326 13 Federal Reserve Banks 16,557 3,791 4,174 5,316 3,288 9,351 9,351 16,228 5,026 14 Tax and loan accounts 20,500 18,553 12,886 12,333 20,725 21,584 21,584 23,987 21,300 1. Half-year figures are calculated as a residual (total surplus/deficit less trust 5. Includes accrued interest payable to the public; allocations of special fund surplus/deficit). drawing rights; deposit funds; miscellaneous liability (including checks outstand- 2. The recently enacted Gramm-Rudman legislation folds the unified and ing) and asset accounts; seigniorage; increment on gold; net gain/loss for U.S. previously off-budget outlays into a total outlays and total deficit framework. currency valuation adjustment; net gain/loss for IMF valuation adjustment; and However, the latest "Monthly Treasury Statement" continues to distinguish profit on the sale of gold. between the old unified and off-budget spending categories. 3. Other off-budget includes Postal Service Fund; Rural electrification and SOURCE. "Monthly Treasury Statement of Receipts and Outlays of the U.S. telephone revolving fund; Rural Telephone Bank; Synthetic fuels corporation Government," "Daily Treasury Statement," and the Budget of the U.S. Governfund; U.S. Railway Association; and petroleum acquisition and transportation ment, Fiscal Year 1987. and strategic petroleum reserve effective November 1981. 4. Includes U.S. Treasury operating cash accounts; SDRs; reserve position on the U.S. quota in the IMF; 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 FFFiiissscccaaalll FFFiiissscccaaalll SSSooouuurrrccceee ooorrr tttyyypppeee yyyeeeaaarrr yyyeeeaaarrr 1984 1985 1986 111999888444 111999888555 HI H2 HI H2 Jan. Feb. Mar. RECEIPTS 1 All sources 666,457 733,9% 341,808 341,392 380,618 364,790 76,710 53,370 49,557 ? 295,960 330,918 144,691 157,229 166,783 169,987 40,150 25,370 12,572 3 Withheld 279,350 298,941 140,657 145,210 149,288 155,725 26,146 27,295 25,141 4 Presidential Election Campaign Fund ... 35 35 29 5 29 6 0 2 88 81,346 97,685 61,463 19,403 76,155 22,295 14,484 1,253 33,,448822 6 Refunds 64,770 65,743 57,458 7,387 58,684 8,038 480 3,181 16,060 Corporation income taxes 7 74,179 77,413 40,328 35,190 42,193 3366,,552288 3,588 11,,994411 1100,,771144 8 Refunds 17,286 16,082 10,045 6,847 8,370 7,751 763 1,321 2,601 9 Social insurance taxes and contributions, net 241,902 268,805 131,372 118,690 144,598 128,017 26,983 22,046 2222,,778855 10 Employment taxes and contributions1 212,180 238,288 114,102 105,624 126,038 116,276 2255,,336633 1199,,220077 2222,,222299 11 Self-employment taxes and contributions2 8,709 10,468 7,667 1,086 9,482 998855 773377 664411 664433 17 Unemployment insurance 25,138 25,758 14,942 10,706 16,213 9,281 1,211 2,467 190 13 Other net receipts3 4,580 4,759 2,329 2,360 2,350 2,458 408 372 366 14 37,361 35,865 18,304 18,961 17,259 18,470 3,167 2,265 2,531 15 11,370 12,079 5,576 6,329 5,807 6,354 1,097 948 1,036 16 Estate and gift taxes 6,010 6,422 3,102 3,029 3,204 3,323 587 487 533 17 Miscellaneous receipts4 16,965 18,576 8,481 8,812 9,144 9,861 1,901 1,635 1,989 OUTLAYS 18 All types 851,781 946,323 420,700 446,943 463,842 488,739 82,849 78,290 79,700 19 227,413 252,748 114,639 118,286 124,186 134,675 20,945 21,268 24,002 70 15,876 16,176 5,426 8,550 6,675 8,367 550 -208 1,676 71 General science, space, and technology ... 8,317 8,627 3,981 4,473 4,230 4,727 689 840 549 77 7,086 5,685 1,080 1,423 680 3,305 248 179 967 73 Natural resources and environment 12,593 13,357 5,463 7,370 5,892 7,553 1,216 838 883388 24 Agriculture 13,613 25,565 7,129 8,524 11,705 15,412 3,270 2,103 11,,220077 75 Commerce and housing credit 6,917 4,229 2,572 2,663 -260 644 280 -725 -319 76 Transportation 23,669 25,838 10,616 13,673 11,440 15,360 2,025 1,723 1,963 27 Community and regional development .... 7,673 7,680 3,154 4,836 3,408 3,901 603 519 615 78 Education, training, employment, social services 27,579 29,342 13,445 13,737 1144,,114499 1144,,448811 22,,666666 22,,772277 22,,337777 ">9 Health 30,417 33,542 15,551 15,692 16,945 17,237 3,174 2,885 2,385 30 Social security and medicare 235,764 254,446 119,420 119,613 128,351 129,037 22,399 21,641 22,009 31 Income security 112,668 128,200 58,684 61,558 65,246 59,457 10,778 10,683 10,409 3? Veterans benefits and services 25,614 26,352 12,849 13,317 11,956 14,527 2,077 2,327 1,080 33 Administration of justice 5,660 6,277 2,807 2,992 3,016 3,212 646 567 511 34 General government 5,053 5,228 2,462 2,552 2,857 3,634 313 375 1,165 35 General-purpose fiscal assistance 6,768 6,353 2,943 3,458 2,659 3,391 1,163 172 61 36 111,058 129,436 54,748 61,293 65,143 67,448 12,364 12,958 10,668 37 Undistributed offsetting receipts6 -31,957 -32,759 -16,270 -17,061 -14,436 -17,953 -2,557 —2,583 -2,464 1. Old-age, disability, and hospital insurance, and railroad retirement accounts. 5. Net interest function includes interest received by trust funds. 2. Old-age, disability, and hospital insurance. 6. Consists of rents and royalties on the outer continental shelf and U.S. 3. Federal employee retirement contributions and civil service retirement and government contributions for employee retirement. disability fund. 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous SOURCE. "Monthly Treasury Statement of Receipts and Outlays of the U.S. receipts. Government," and the Budget of the U.S. Government, Fiscal Year 1987. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • June 1986 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1983 1984 1985 IItteemm Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 1 Federal debt outstanding 1,415.3 1,468.3 1,517.2 1,576.7 1,667.4 1,715.1 1,779.0 1,827.5 1,950.3 2 Public debt securities 1,410.7 1,463.7 1,512.7 1,572.3 1,663.0 1,710.7 1,774.6 1,823.1 1,945.9 3 Held by public 1,174.4 1,223.9 1,255.1 1,309.2 1,373.4 1,415.2 1,460.5 1,506.6 1,597.1 4 Held by agencies 236.3 239.8 257.6 263.1 289.6 295.5 314.2 316.5 348.9 5 Agency securities 4.6 4.6 4.5 4.5 4.5 4.4 4.4 4.4 4.4 6 Held by public 3.5 3.5 3.4 3.4 3.4 3.3 3.3 3.3 3.3 7 Held by agencies 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 8 Debt subject to statutory limit 1,411.4 1,464.5 1,513.4 1,573.0 1,663.7 1,711.4 1,775.3 1,823.8 1,932.4 9 Public debt securities 1,410.1 1,463.1 1,512.1 1,571.7 1,662.4 1,710.1 1,774.0 1,822.5 1,931.1 10 Other debt1 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 11 MEMO: Statutory debt limit 1,490.0 1,490.0 1,520.0 1,573.0 1,823.8 1,823.8 1,823.8 1,823.8 2,078.7 1. Includes guaranteed debt of government agencies, specified participation NOTE. Data from Treasury Bulletin and Daily Treasury Statement (U.S. certificates, notes to international lending organizations, and District of Columbia Treasury Department), stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1985 TTyyppee aanndd hhoollddeerr 11998811 11998822 11998833 11998844 Qi Q2 Q3 Q4 1 Total gross public debt 1,028.7 1,197.1 1,410.7 1,663.0 1,710.7 1,774.6 1,823.1 1,945.9 By type 2 Interest-bearing debt 1,027.3 1,195.5 1,400.9 1,660.6 1,695.2 1,759.8 1,821.0 1,943.4 3 Marketable 720.3 881.5 1,050.9 1,247.4 1,271.7 1,310.7 1,360.2 1,437.7 4 Bills 245.0 311.8 343.8 374.4 379.5 381.9 384.2 399.9 5 Notes 375.3 465.0 573.4 705.1 713.8 740.9 776.4 812.5 6 Bonds 99.9 104.6 133.7 167.9 178.4 187.9 199.5 211.1 7 Nonmarketable1 307.0 314.0 350.0 413.2 423.6 449.1 460.8 505.7 8 State and local government series 23.0 25.7 36.7 44.4 47.7 53.9 62.8 87.5 9 Foreign issues2 19.0 14.7 10.4 9.1 9.1 8.3 6.6 7.5 10 Government 14.9 13.0 10.4 9.1 9.1 8.3 6.6 7.5 11 Public 4.1 1.7 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 68.1 68.0 70.7 73.1 74.1 75.4 77.0 78.1 13 Government account series3 196.7 205.4 231.9 286.2 292.2 311.0 313.9 332.2 14 Non-interest-bearing debt 1.4 1.6 9.8 2.3 15.5 14.8 2.1 2.5 By holder4 15 U.S. government agencies and trust funds 203.3 209.4 236.3 289.6 295.5 314.2 316.5 348.9 16 Federal Reserve Banks 131.0 139.3 151.9 160.9 161.0 169.1 169.7 181.3 17 Private investors 694.5 848.4 1,022.6 1,212.5 1,254.1 1,292.0 1,338.2 1,431.3 18 Commercial banks 111.4 131.4 188.8 183.4 195.0 196.3 196.9 192.2 19 Money market funds 21.5 42.6 22.8 25.9 26.7 24.8 22.7 25.1 20 Insurance companies 29.0 39.1 56.7 76.4 80.4 85.0 88.6 93.2 21 Other companies 17.9 24.5 39.7 50.1 50.8 50.7 54.9 62.0 22 State and local governments 104.3 127.8 155.1 179.4 189.7 198.9 n.a. n.a. Individuals 23 Savings bonds 68.1 68.3 71.5 74.5 75.4 76.7 78.2 79.8 24 Other securities 42.7 48.2 61.9 69.3 69.7 72.0 73.2 74.9 25 Foreign and international5 136.6 149.5 166.3 192.9 186.4 200.7 209.8 214.6 26 Other miscellaneous investors6 163.0 217.0 259.8 360.6 380.0 386.9 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 Transactions1 Par value; averages of daily figures, in millions of dollars 1986 1986 week ending Wednesday IItteemm 11998833 11998844 11998855 Jan. Feb. Mar. Feb. 19 Feb. 26 Mar. 5 Mar. 12 Mar. 19 Mar. 26 Immediate delivery2 1 U.S. government securities 42,135 52,778 75,331 89,176 102,447 103,928 102,792 103,477 134,948 103,687 91,292 92,909 By maturity ? Bills 22,393 26,035 32,900 36,042 34,744 36,264 35,569 34,278 42,941 35,539 35,539 3322,,661133 3 Other within 1 year 708 1,305 1,811 2,083 1,850 1,995 1,843 1,647 2,499 1,673 2,225 1,884 4 1-5 years 8,758 11,733 18,361 20,580 25,662 24,230 25,706 27,138 30,153 22,688 19,030 25,615 5-10 years 5,279 7,606 12,703 17,327 20,883 23,604 19,796 20,945 33,976 23,958 19,563 19,060 6 Over 10 years 4,997 6,099 9,556 13,143 19,307 17,836 19,879 19,469 25,379 19,830 14,936 13,738 By type of customer 7 U.S. government securities dealers 2,257 2,919 3,336 3,128 2,903 3,013 2,746 2,602 2,543 3,102 2,565 2,166 8 U.S. government securities brokers 21,045 25,580 36,222 46,057 51,385 52,450 48,991 51,348 69,953 52,991 45,344 4466,,771155 9 All others3 18,833 24,278 35,773 39,991 48,159 48,465 51,056 49,528 62,452 47,595 43,382 44,028 10 Federal agency securities 5,576 7,846 11,640 13,655 15,243 17,366 20,739 15,835 17,201 16,193 19,534 17,228 11 Certificates of deposit 4,333 4,947 4,016 4,493 3,739 4,478 3,733 4,251 4,799 6,005 3,665 3,516 17 Bankers acceptances 2,642 3,243 3,242 3,195 3,281 3,749 3,672 3,184 3,887 3,879 3,741 3,462 13 Commercial paper 8,036 10,018 12,717 17,792 16,366 16,705 18,350 16,006 17,173 17,231 17,314 15,029 Futures transactions4 14 Treasury bills 6,655 6,947 5,561 4,497 5,423 3,607 3,815 6,540 5,703 4,972 2,881 2,249 15 Treasury coupons 2,501 4,503 6,069 8,136 9,140 9,056 8,266 9,586 12,324 11,109 8,486 6,092 16 Federal agency securities 265 262 240 41 2 7 2 1 3 11 1 3 Forward transactions5 17 U.S. government securities 1,493 1,364 1,283 1,318 2,592 1,743 1,639 1,374 1,405 1,684 2,068 1,739 18 Federal agency securities 1,646 2,843 3,857 6,122 6,655 7,172 8,045 6,178 7,350 8,355 8,043 5,494 1. Transactions are market purchases and sales of securities as reported to the securities, nondealer departments of commercial banks, foreign banking agencies, Federal Reserve Bank of New York by the U.S. government securities dealers on and the Federal Reserve System. its published list of primary dealers. 4. Futures contracts are standardized agreements arranged on an organized Averages for transactions are based on the number of trading days in the period. exchange in which parties commit to purchase or sell securities for delivery at a The figures exclude allotments of, and exchanges for, new U.S. government future date. securities, redemptions of called or matured securities, purchases or sales of 5. Forward transactions are agreements arranged in the over-the-counter securities under repurchase agreement, reverse repurchase (resale), or similar market in which securities are purchased (sold) for delivery after 5 business days contracts. from the date of the transaction for government securities (Treasury bills, notes, 2. Data for immediate transactions do not include forward transactions. and bonds) or after 30 days for mortgage-backed agency issues. 3. Includes, among others, all other dealers and brokers in commodities and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • June 1986 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Averages of daily figures, in millions of dollars 1986 1986 week ending Wednesday IItteemm 11998833 11998844 11998855 Jan. Feb. Mar. Feb. 26 Mar. 5 Mar. 12 Mar. 19 Mar. 26 Positions Net immediate2 1 U.S. government securities 14,082 5,429 7,391 8,657 11,716 10,804 12,677 14,637 11,301 7,468 10,897 2 Bills 10,800 5,500 10,075 14,023 16,085 12,127 15,303 15,192 11,907 11,440 12,473 3 Other within 1 year 921 63 1,050 1,640 2,801 2,955 3,250 3,070 2,811 2,989 2,907 4 1-5 years 1,912 2,159 5,154 9,779 8,793 9,598 8,247 8,252 9,426 7,639 10,776 5 5-10 years -78 -1,119 -6,202 -12,337 -11,172 -10,339 -9,246 -7,620 -9,342 -11,239 -11,965 6 Over 10 years 528 -1,174 -2,686 -4,448 -4,793 -3,536 -4,878 -4,257 -3,501 -3,361 -3,295 7 Federal agency securities 7,313 15,294 22,860 34,498 33,044 37,210 33,284 35,785 36,442 38,375 37,821 8 Certificates of deposit 5,838 7,369 9,192 10,868 9,436 10,605 9,827 10,409 10,266 10,737 10,689 9 Bankers acceptances 3,332 3,874 4,586 4,673 5,608 5,773 5,935 5,517 5,178 5,707 6,306 10 Commercial paper 3,159 3,788 5,570 5,919 6,832 8,678 7,277 8,456 7,932 8,679 9,055 Futures positions 11 Treasury bills -4,125 -4,525 -7,322 -14,663 -18,504 -27,524 -20,266 -25,948 -28,321 -27,179 -27,664 12 Treasury coupons -1,033 1,794 4,465 3,966 5,003 5,279 5,406 5,553 5,200 5,198 5,300 13 Federal agency securities 171 233 -722 -612 -313 -233 -313 -320 -334 -301 -87 Forward positions 14 U.S. government securities -1,936 -1,643 -911 -1,978 -928 -2,981 -261 -1,351 -3,106 -4,144 -2,762 15 Federal agency securities -3,561 -9,205 -9,420 -12,167 -10,039 -12,151 -9,499 -10,109 -11,862 -13,693 -12,211 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 29,099 44,078 68,035 87,103 86,481 91,649 85,138 96,267 94,404 96,504 85,265 17 Term agreements 52,493 68,357 80,509 100,238 101,330 104,905 102,277 103,968 105,433 106,946 105,460 Repurchase agreements5 18 Overnight and continuing 57,946 75,717 101,410 131,069 131,711 138,072 131,372 137,799 137,992 137,548 139,413 19 Term agreements 44,410 57,047 77,748 84,681 86,748 94,667 88,378 91,034 95,636 96,389 95,024 1. Data for dealer positions and sources of financing are obtained from reports ties involved are not available for trading purposes. Immediate positions include submitted to the Federal Reserve Bank of New York by the U.S. government reverses to maturity, which are securities that were sold after having been securities dealers on its published list of primary dealers. obtained under reverse repurchase agreements that mature on the same day as the Data for positions are averages of daily figures, in terms of par value, based on securities. Data for immediate positions do not include forward positions. the number of trading days in the period. Positions are net amounts and are shown 3. Figures cover financing involving U.S. government and federal agency on a commitment basis. Data for financing are in terms of actual amounts securities, negotiable CDs, bankers acceptances, and commercial paper. borrowed or lent and are based on Wednesday figures. 4. Includes all reverse repurchase agreements, including those that have been 2. Immediate positions are net amounts (in terms of par values) of securities arranged to make delivery on short sales and those for which the securities owned by nonbank dealer firms and dealer departments of commercial banks on a obtained have been used as collateral on borrowings, that is, matched agreements. commitment, that is, trade-date basis, including any such securities that have 5. Includes both repurchase agreements undertaken to finance positions and been sold under agreements to repurchase (RPs). The maturities of some "matched book" repurchase agreements. repurchase agreements are sufficiently long, however, to suggest that the securi- 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 1985 1986 AAggeennccyy 11998822 11998833 11998844 Sept. Oct. Nov. Dec. Jan. Feb. 1 Federal and federally sponsored agencies 237,787 240,068 271,220 288,657 292,584 293,930 293,905 290,546 290,810 2 Federal agencies 33,055 33,940 35,145 35,903 35,990 36,121 36,390 36,400 36,376 3 Defenset1 354 243 142 82 79 75 71 66 63 4 Export-Import Bank2'3 14,218 14,853 15,882 15,419 15,417 15,417 15,678 15,677 15,677 5 Federal Housing Administration4 288 194 133 117 116 115 115 113 109 6 Government National Mortgage Association participation certificates5 2,165 2,165 2,165 2,165 2,165 2,165 2,165 2,165 2,165 7 Postal Service6 1,471 1,404 1,337 1,940 1,940 1,940 1,940 1,940 1,940 8 Tennessee Valley Authority 14,365 14,970 15,435 16,106 16,199 16,335 16,347 16,365 16,348 9 United States Railway Association6 194 111 51 74 74 74 74 74 74 10 Federally sponsored agencies7 204,732 206,128 236,075 252,754 256,594 257,809 257,515 254,146 254,434 11 Federal Home Loan Banks 55,967 48,930 65,085 72,384 73,260 73,840 74,447 73,201 73,201 12 Federal Home Loan Mortgage Corporation 4,524 6,793 10,270 12,720 13,239 11,016 11,926 13,044 13,695 13 Federal National Mortgage Association8 70,052 74,594 83,720 91,693 92,578 94,576 93,896 92,658 93,179 14 Farm Credit Banks 73,004 72,816 71,193 68,287 69,274 69,933 68,851 66,600 64,955 15 Student Loan Marketing Association 2,293 3,402 5,745 7,670 8,243 8,444 8,395 8,643 9,404 MEMO 16 Federal Financing Bank debt 126,424 135,791 145,217 153,513 153,565 154,226 153,373 153,709 153,418 Lending to federal and federally sponsored 17 Export-Import Bank3 14,177 14,789 15,852 15,409 15,409 15,409 15,670 15,670 15,670 18 Postal Service6 1,221 1,154 1,087 1,690 1,690 1,690 1,690 1,690 1,690 19 Student Loan Marketing Association 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 20 Tennessee Valley Authority 12,640 13,245 13,710 14,381 14,474 14,610 14,622 14,690 14,673 21 United States Railway Association6 194 111 51 74 74 74 74 74 74 Other Lending10 22 Farmers Home Administration 53,261 55,266 58,971 64,169 63,969 64,189 64,234 6644,,335544 63,774 23 Rural Electrification Administration 17,157 19,766 20,693 21,676 21,792 21,826 20,654 20,678 20,739 24 Other 22,774 26,460 29,853 31,114 31,157 31,428 31,429 31,553 31,798 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. Some data are estimated. 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 1986 1.45 NEW SECURITY ISSUES State and Local Governments Millions of dollars 1985 1986 Type of issue or issuer, 11998833 11998844 11998855 oorr uussee July Aug. Sept. Oct. Nov. Dec. Jan. Feb. 1 All issues, new and refunding1 86,421 106,641 214,189 12,268 15,239 13,345 20,780 32,144 57,430 1,572 3,255 Type of issue 2 General obligation 21,566 26,485 52,622 5,257 3,160 3,953 5,852 6,695 8,754 751 1,021 3 U.S. government loans2 96 16 14 0 0 0 0 0 0 0 0 4 Revenue 64,855 80,156 161,567 7,011 12,079 9,392 14,928 25,449 48,676 821 2,234 5 U.S. government loans2 253 17 27 6 2 0 6 7 0 0 0 Type of issuer 6 State 7,140 9,129 13,004 786 800 1,501 1,337 1,648 2,146 296 255 7 Special district and statutory authority 51,297 63,550 134,363 6,893 9,484 7,580 12,374 21,563 39,147 762 1,715 8 Municipalities, counties, townships, school districts 27,984 33,962 66,822 4,589 4,955 4,264 6,371 21,563 16,137 697 1,285 9 Issues for new capital, total 72,441 94,050 156,050 7,660 10,709 9,878 13,984 21,362 46,788 1,350 1,887 Use of proceeds 10 Education 8,099 7,553 16,658 797 1,194 1,317 1,518 1,954 3,901 370 422 11 Transportation 4,387 7,552 12,070 651 252 471 1,264 3,734 3,480 246 347 12 Utilities and conservation 13,588 17,844 26,852 720 1,987 1,358 2,924 3,266 7,070 315 212 13 Social welfare 26,910 29,928 63,181 3,155 4,283 3,989 4,305 8,672 22,589 6 110 14 Industrial aid 7,821 15,415 12,892 553 1,524 735 1,507 2,029 3,583 0 190 15 Other purposes 11,637 15,758 24,398 1,784 1,469 2,009 2,466 1,707 6,165 413 606 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 1985 1986 Type of issue or issuer, or use 11998833 11998844 11998855 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. p 1 All issues1 120,149 132,531 201,751 12,042 14,861 11,304 11,595 13,568 19,429 17,479 23,869 2 Bonds2 68,570 109,903 166,236 8,835 11,465 8,833 9,271 10,913 14,440 14,079 19,509 Type of offering 3 Public 47,444 73,579 120,039 8,835 11,465 8,833 9,271 10,913 14,440 14,079 19,509 4 Private placement 21,126 36,326 46,195 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Industry group 5 Manufacturing 16,851 24,607 52,278 2,688 2,352 2,079 1,953 4,072 2,704 4,694 3,950 6 Commercial and miscellaneous 7,540 13,726 15,215 1,642 921 186 898 933 735 624 1,216 7 Transportation 3,833 4,694 5,743 76 459 177 348 125 187 633 373 8 Public utility 9,125 10,679 12,957 434 857 1,042 863 1,114 1,090 820 2,540 9 Communication 3,642 2,997 10,456 110 1,295 367 690 100 2,318 0 1,200 10 Real estate and financial 27,577 53,199 69,587 3,885 5,581 4,982 4,519 4,569 7,407 7,308 10,230 11 Stocks3 51,579 22,628 35,515 3,207 3,396 2,471 2,324 2,655 4,989 3,400 4,360 Type 12 Preferred 7,213 4,118 6,505 631 754 653 406 782 908 570 975 13 Common 44,366 18,510 29,010 2,576 2,642 1,818 1,918 1,873 4,081 2,830 3,385 Industry group 14 Manufacturing 14,135 4,054 5,700 605 235 820 279 746 1,045 827 1,264 15 Commercial and miscellaneous 13,112 6,277 9,149 568 1,293 507 403 596 1,220 683 434 16 Transportation 2,729 589 1,544 0 127 107 113 21 200 78 302 17 Public utility 5,001 1,624 1,966 87 73 47 408 12 201 176 153 18 Communication 1,822 419 978 99 18 7 41 5 146 231 282 19 Real estate and financial 14,780 9,665 16,178 1,848 1,650 983 1,080 1,275 2,177 1,405 1,925 1. Figures, which represent gross proceeds of issues maturing in more than one 2. Monthly data 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 1985 1986 IItteemm 11998844 11998855 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. INVESTMENT COMPANIES1 1 Sales of own shares2 107,480 222,673 20,284 18,049 16,936 22,099 20,585 23,560 32,466 27,433 2 Redemptions of own shares3 77,032 132,440 11,502 10,837 9,963 10,653 11,138 18,337 15,836 11,849 3 Net sales 30,448 90,233 8,782 7,212 6,973 11,446 9,447 5,223 16,630 15,584 4 Assets4 137,126 251,695 195,707 201,608 203,210 218,720 237,410 251,536 265,487 289,552 5 Cash position5 12,181 20,607 16,943 17,959 18,700 21,987 21,894 20,590 22,425 23,732 6 Other 124,945 231,088 178,764 183,649 184,510 196,733 215,516 230,946 243,062 265,820 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. 1984 1985 AAccccoouunntt 11998833 11998844 11998855 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 Corporate profits with inventory valuation and capital consumption adjustment 213.8 273.3 295.5 268.0 277.8 271.2 276.2 281.7 288.1 309.1 303.1 2 Profits before tax 205.0 237.6 225.3 247.4 247.4 227.7 228.0 220.0 218.7 228.6 233.8 3 Profits tax liability 75.2 93.6 85.0 99.1 100.6 87.4 87.4 83.4 82.3 87.4 87.1 4 Profits after tax 129.8 144.0 140.2 148.3 146.7 140.3 140.6 136.6 136.4 141.1 146.7 5 Dividends 70.8 78.1 83.5 75.3 77.5 78.9 80.7 82.0 83.1 83.9 85.0 6 Undistributed profits 59.0 65.9 56.7 73.1 69.2 61.3 60.0 54.6 53.3 57.3 61.7 7 Inventory valuation -9.9 -5.4 -.6 -13.0 -5.6 -1.3 -1.6 .7 2.2 4.7 -10.1 8 Capital consumption adjustment 18.8 41.0 70.9 33.5 36.0 44.8 49.8 61.1 67.2 75.9 79.4 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 1986 1.49 NONFINANCIAL CORPORATIONS Assets and Liabilities Billions of dollars, except for ratio 1984 1985 AAccccoouunntt 11997799 11998800 11998811 11998822 11998833 Q3 Q4 Ql Q2 Q3 1 Current assets 1,214.8 1,328.3 1,419.6 1,437.1 1,575.9 1,685.9 1,703.0 1,715.9 1,725.2 1,750.5 2 Cash 118.0 127.0 135.6 147.8 171.8 161.3 173.6 167.9 170.6 178.6 3 U.S. government securities 16.7 18.7 17.7 23.0 31.0 33.0 36.2 34.7 34.1 31.1 4 Notes and accounts receivable 459.0 507.5 532.5 517.4 583.0 639.1 633.1 647.4 648.5 653.2 5 Inventories 505.1 543.0 584.0 579.0 603.4 659.3 656.9 664.7 663.7 670.1 6 Other 116.0 132.1 149.7 169.8 186.7 193.2 203.2 201.1 208.3 217.4 7 Current liabilities 807.3 890.6 971.3 986.0 1,059.6 1,155.0 1,163.6 1,171.5 1,176.0 1,203.8 8 Notes and accounts payable 460.8 514.4 547.1 550.7 595.7 642.2 647.8 635.3 647.3 664.2 9 Other 346.5 376.2 424.1 435.3 463.9 512.9 515.8 536.2 528.7 539.5 10 Net working capital 407.5 437.8 448.3 451.1 516.3 530.8 539.5 544.4 549.3 546.7 11 MEMO; Current ratio1 1.505 1.492 1.462 1.458 1.487 1.460 1.464 1.465 1.467 1.454 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. 1984 1985 1986 IInndduussttrryy 11998844 11998855 11998866'' Q3 Q4 QL Q2 Q3 Q4 Ql> Q21 1 Total nonfarm business 354.44 386.41 395.13 361.48 368.29 371.16 387.83 388.90 397.74 390.66 400.68 Manufacturing 2 Durable goods industries 66.24 73.14 70.99 68.26 71.43 69.87 73.96 72.85 75.87 71.11 72.71 3 Nondurable goods industries 72.58 80.01 80.86 74.18 75.53 75.78 80.36 81.19 82.70 79.17 81.04 Nonmanufacturing 4 Mining 16.86 15.88 13.89 16.82 17.00 15.66 16.51 15.94 15.40 14.11 14.30 Transportation 5 Railroad 6.79 7.06 6.90 7.31 6.44 6.02 7.48 8.13 6.61 6.35 7.41 6 Air 3.56 4.78 6.14 3.72 3.65 4.20 3.66 5.20 6.06 6.70 5.67 7 Other 6.17 6.13 5.98 6.47 6.18 6.01 6.37 5.77 6.39 5.84 5.86 Public utilities 8 Electric 37.03 36.12 35.45 36.63 35.40 36.65 36.04 35.34 36.45 35.53 34.81 9 Gas and other 10.44 12.62 13.05 11.28 11.52 11.81 12.43 12.80 13.44 13.10 13.99 10 Commercial and other2 134.75 150.67 161.88 136.80 141.13 145.16 151.02 151.69 154.81 158.74 164.88 ATrade 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 1984 1985 AAccccoouunntt 11998811 11998822 11998833 Q2 Q3 Q4 Ql Q2 Q3 Q4 ASSETS Accounts receivable, gross 1 Consumer 72.4 78.1 87.4 90.5 95.6 96.7 99.1 106.0 116.4 120.8 2 Business 100.3 101.4 113.4 124.4 124.5 135.2 142.1 144.6 141.4 152.8 3 Real estate 17.9 20.2 22.5 23.0 25.2 26.3 27.2 28.4 29.0 30.4 4 Total 190.5 199.7 223.4 238.0 245.3 258.3 268.5 279.0 286.5 304.0 Less: 5 Reserves for unearned income 30.0 31.9 33.0 33.9 36.0 36.5 36.6 38.6 41.0 40.9 6 Reserves for losses 3.2 3.5 4.0 4.4 4.3 4.4 4.9 4.8 4.9 5.0 7 Accounts receivable, net 157.3 164.3 186.4 199.6 205.0 217.3 227.0 235.6 240.6 258.1 8 All other 27.1 30.7 34.0 35.8 36.4 35.4 35.9 39.5 46.3 46.8 9 Total assets 184.4 195.0 220.4 235.4 241.3 252.7 262.9 275.2 286.9 304.9 LIABILITIES 10 Bank loans 16.1 18.3 18.7 18.3 19.7 21.3 19.8 18.5 18.2 21.0 11 Commercial paper 57.2 51.1 59.7 68.5 66.8 72.5 79.1 82.6 93.6 96.9 Debt 12 Other short-term 11.3 12.7 13.9 15.5 16.1 16.2 16.8 16.6 16.6 17.2 13 Long-term 56.0 64.4 68.1 69.7 73.8 77.2 78.3 85.7 86.4 93.0 14 All other liabilities 18.5 21.2 30.1 32.1 32.6 33.1 35.4 36.9 36.6 39.6 15 Capital, surplus, and undivided profits 25.3 27.4 29.8 31.4 32.3 32.3 33.5 34.8 35.7 37.1 16 Total liabilities and capital 184.4 195.0 220.4 235.4 241.3 252.7 262.9 275.2 286.9 304.9 NOTE. Components may not add to totals due to rounding. These data also appear in the Board's G.20 (422) release. For address, see 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 1985 1986 1985 1986 1985 1986 FFFeeebbb... 222888,,, 111999888666''' Dec. Jan. Feb. Dec. Jan. Feb. Dec. Jan. Feb. 1 Total 156,337 2,129 2,704 1,303 29,677 28,862 28,644 27,548 26,158 27,341 Retail financing of installment sales 2 Automotive (commercial vehicles) 14,721 -76 242 360 821 1,128 1,256 896 886 896 3 Business, industrial, and farm equipment 20,257 527 -5 -237 1,365 686 692 838 691 929 Wholesale financing 4 Automotive 24,586 2,277 285 1,029 11,813 10,681 10,732 9,536 10,396 9,703 5 Equipment 4,431 -265 153 -15 536 689 540 801 536 555 6 All other 7,421 156 305 38 1,799 1,779 1,563 1,643 1,474 11,,552255 Leasing 7 Automotive 15,821 -109 272 178 719 949 787 828 677 609 8 Equipment 40,267 -15 700 46 1,6% 1,932 1,573 1,711 1,232 11,,552277 9 Loans on commercial accounts receivable and factored commercial accounts receivable 16,665 -348 668 -28 9,502 9,560 10,094 9,850 8,892 10,122 10 All other business credit 12,168 -18 84 -68 1,427 1,458 1,407 1,445 1,374 1,475 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 1986 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1985 1986 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) 92.8 96.8 104.1 104.6 104.1 107.5 111.5 108.4 115. V 109.2 2 Amount of loan (thousands of dollars) 69.5 73.7 77.4 76.7 77.1 78.5 80.3 77.6 84.3' 81.0 3 Loan/price ratio (percent) 77.1 78.7 77.1 76.0 76.0 75.5 75.0 74.4 75.6' 76.1 4 Maturity (years) 26.7 27.8 26.9 26.7 26.7 26.4 26.7 25.4 26.8' 26.8 5 Fees and charges (percent of loan amount)2 2.40 2.64 2.53 2.62 2.49 2.57 2.59 2.55 2.64' 2.74 6 Contract rate (percent per annum) 12.20 11.87 11.12 10.69 10.64 10.55 10.47 10.40 10.21 10.01 Yield (percent per annum) 1 FHLBB series5 12.66 12.37 11.58 11.17 11.09 11.01 10.94 10.89 10.68' 10.48 8 HUD series4 13.43 13.80 12.28 12.02 11.86 11.56 11.03 10.82 10.49 10.60 SECONDARY MARKETS Yield (percent per annum) 9 FHA mortgages (HUD series)5 13.11 13.81 12.24 12.04 11.87 11.28 10.70 10.78 10.59 n.a. 10 GNMA securities6 12.25 13.13 11.61 11.29 11.16 10.81 10.39 10.25 9.79 9.44 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 74,847 83,339 94,574 96,769 97,228 97,807 98,282 98,671 98,820 98,795 12 FHA/VA-insured 37,393 35,148 34,244 34,084 33,885 33,828 33,684 33,583 33,466 33,368 13 Conventional 37,454 48,191 60,331 62,685 63,343 63,979 64,598 65,088 65,354 65,427 Mortgage transactions (during period) 14 Purchases 17,554 16,721 21,510 1,739 1,767 1,624 1,663 1,188 1,159 1,410 15 Sales 3,528 978 1,301 101 200 100 319 0 n.a. n.a. Mortgage commitments1 16 Contracted (during period) 18,607 21,007 20,155 1,638 1,733 1,199 1,858 1,315 2,578 1,917 17 Outstanding (end of period) 5,461 6,384 3,402 3,974 3,840 3,330 3,402 3,211 4,48(K 4,851 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 18 Total 5,9% 9,283 12,399 13,088 13,025 13,194 14,022 14,412 n.a. n.a. 19 FHA/VA 974 910 841 829 823 816 825 800 n.a. n.a. 20 Conventional 5,022 8,373 11,558 12,259 12,202 12,378 13,197 13,612 n.a. n.a. Mortgage transactions (during period) 21 Purchases 23,089 21,886 44,012 4,219 3,215 3,680 6,096 3,709 n.a. n.a. 22 Sales 19,686 18,506 38,905 4,501 3,076 3,449 5,202 3,106 n.a. n.a. Mortgage commitments9 23 Contracted (during period) 32,852 32,603 48,989 2,919 3,995 4,854 5,651 5,305 n.a. n.a. 24 Outstanding (end of period) 16,964 13,318 16,613 n.a. n.a. n.a. 16,613 n.a. n.a. n.a. 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 1984 1985 TTyyppee ooff hhoollddeerr,, aanndd ttyyppee ooff pprrooppeerrttyy 11998833 11998844 11998855 Q4 Ql Q2 Q3 Q4 1 1,811,540 2,022,769 2,250,370 2,022,769 2,069,664 2,127,381 2,187,756 2,250,370 7 1,189,811 1,319,413 1,469,075 1,319,413 1,347,567 1,385,620 1,426,569 1,469,075 3 Multifamily 158,718 178,795 203,556 178,795 184,591 189,818 195,368 203,556 4 350,389 412,924 471,037 412,924 425,941 441,212 457,064 471,037 5 112,622 111,637 106,702 111,637 111,565 110,731 108,755 106,702 6 Selected financial institutions 1,130,781 1,267,488 1,386,865 1,267,488 1,289,271 1,321,054 1,353,888 1,386,865 7 Commercial banks1 330,521 374,780 423,003 374,780 383,598 396,141 410,653 423,003 8 1- to 4-family 182,514 196,540 214,340 196,540 198,849 203,654 209,724 214,340 9 18,410 20,216 22,906 20,216 20,609 21,544 22,239 22,906 10 Commercial 120,210 147,845 174,336 147,845 153,827 160,315 167,603 174,336 11 Farm 9,387 10,179 11,421 10,179 10,313 10,628 11,087 11,421 1? Savings banks 131,940 154,441 177,774 154,441 161,032 165,705 174,427 177,774 n 1- to 4-family 93,649 107,302 122,323 107,302 111,592 114,375 119,952 122,323 14 Multifamily 17,247 19,817 23,360 19,817 20,668 21,357 22,604 23,360 is Commercial 21,016 27,291 32,009 27,291 28,741 29,942 31,757 32,009 16 Farm 28 31 82 31 31 31 114 82 17 Savings and loan associations 494,789 555,277 587,799 555,277 559,263 569,291 575,864 587,799 18 1- to 4-family 387,924 421,489 432,564 421,489 421,024 425,021 426,432 432,564 19 Multifamily 44,333 55,750 67,006 55,750 57,660 60,231 62,499 67,006 70 62,403 77,605 87,617 77,605 80,070 83,447 86,255 87,617 21 Farm 129 433 612 433 509 592 678 612 77 Life insurance companies 150,999 156,699 167,887 156,699 158,162 161,485 163,929 167,887 73 15,319 14,120 13,499 14,120 13,840 13,562 13,382 13,499 74 Multifamily 19,107 18,938 19,453 18,938 18,964 18,983 18,972 19,453 75 Commercial 103,831 111,175 122,925 111,175 113,187 116,812 119,543 122,925 26 Farm 12,742 12,466 12,010 12,466 12,171 12,128 12,032 12,010 27 Finance companies2 22,532 26,291 30,402 26,291 27,216 28,432 29,015 30,402 78 Federal and related agencies 148,328 158,993 166,183 158,993 163,531 165,912 166,248 166,183 79 Government National Mortgage Association 3,395 2,301 1,473 2,301 1,964 1,825 1,640 1,473 30 1- to 4-family 630 585 539 585 576 564 552 539 31 Multifamily 2,765 1,716 934 1,716 1,388 1,261 1,088 934 37 Farmers Home Administration 2,141 1,276 733 1,276 1,062 790 577 733 33 1- to 4-family 1,159 213 183 213 156 223 185 183 34 Multifamily 173 119 113 119 82 136 139 113 35 Commercial 409 497 159 497 421 163 72 159 36 Farm 400 447 278 447 403 268 181 278 37 Federal Housing and Veterans 4,894 4,816 4,903 4,816 4,878 4,888 4,918 4,903 Administration 1,893 2,048 2,246 2,048 2,181 2,199 2,251 2,246 38 1- to 4-family 3,001 2,768 2,657 2,768 2,697 2,689 2,667 2,657 39 MMuullttiiffaammiillyy 78,256 87,940 98,282 87,940 91,975 94,777 96,769 9988,,228822 40 Federal National Mortgage Association 73,045 82,175 91,966 82,175 86,129 88,788 90,590 91,966 41 1- to 4-family 5,211 5,765 6,316 5,765 5,846 5,989 6,179 6,316 42 MMuullttiiffaammiillyy 52,010 52,261 47,548 52,261 52,104 51,056 49,255 47,548 43 Federal Land Banks 3,081 3,074 2,798 3,074 3,064 3,006 2,895 2,798 44 1- to 4-family 48,929 49,187 44,750 49,187 49,040 48,050 46,360 44,750 45 Farm 7,632 10,399 13,244 10,399 11,548 12,576 13,089 13,244 46 Federal Home Loan Mortgage Corporation 7,559 9,654 11,208 9,654 10,642 11,288 11,457 11,208 47 1- to 4-family 73 745 2,036 745 906 1,288 1,632 2,036 48 MMuullttiiffaammiillyy 285,073 332,057 413,913 332,057 347,793 365,748 388,948 413,913 49 Mortgage pools or trusts3 159,850 179,981 212,145 179,981 185,954 192,925 201,026 212,145 50 Government National Mortgage Association 155,950 175,589 207,198 175,589 181,419 188,228 196,198 207,198 51 1- to 4-family 3,900 4,392 4,947 4,392 4,535 4,697 4,828 4,947 52 MMuullttiiffaammiillyy 57,895 70,822 99,088 70,822 76,759 83,327 91,915 99,088 53 Federal Home Loan Mortgage Corporation 57,273 70,253 98,182 70,253 75,781 82,369 90,997 98,182 54 1- to 4-family 622 569 906 569 978 958 918 906 55 MMuullttiiffaammiillyy 25,121 36,215 54,987 36,215 39,370 42,755 48,769 54,987 56 Federal National Mortgage Association 25,121 35,965 54,036 35,965 38,772 41,985 47,857 54,036 57 1- to 4-family n.a. 250 951 250 598 770 912 951 58 MMuullttiiffaammiillyy 42,207 45,039 47,693 45,039 45,710 46,741 47,238 47,693 59 Farmers Home Administration 20,404 21,813 22,186 21,813 21,928 21,962 22,090 22,186 60 1- to 4-family 5,090 5,841 6,675 5,841 6,041 6,377 6,415 6,675 61 Multifamily 7,351 7,559 8,189 7,559 7,681 8,014 8,192 8,189 62 Commercial 9,362 9,826 10,643 9,826 10,060 10,388 10,541 10,643 63 Farm 247,358 264,231 283,409 264,231 269,069 274,667 278,672 283,409 64 Individual and others4 141,758 152,302 165,405 152,302 154,398 159,964 162,992 165,405 65 1- to 4-family 38,786 41,909 45,296 41,909 43,619 43,538 44,276 45,296 66 Multifamily 35,169 40,952 45,802 40,952 42,014 42,519 43,642 45,802 67 Commercial 31,645 29,068 26,906 29,068 29,038 28,646 27,762 26,906 68 Farm 1. Includes loans held by nondeposit trust companies but not bank trust 4. Other holders include mortgage companies, real estate investment trusts, departments. state and local credit agencies, state and local retirement funds, noninsured 2. Assumed to be entirely 1- to 4-family loans. pension funds, credit unions, and other U.S. agencies. 3. Outstanding principal balances of mortgage pools backing securities insured NOTE. Based on data from various institutional and governmental sources, with or guaranteed by the agency indicated. some quarters estimated in part by the Federal Reserve. Multifamily debt refers to loans on structures of five or more units. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • June 1986 1.55 CONSUMER INSTALLMENT CREDIT14 Total Outstanding, and Net Change, seasonally adjusted Millions of dollars 1985 1986 noiuer, anu type oi creau 11998844 11998855 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Amounts outstanding (end of period)r 1 Total 453,580 535,098 493,253 500,039 506,090 516,420 522,978 528,621 535,098 542,753 547,727 By major holder 2 Commercial banks 209,158 240,796 226,825 229,088 230,644 233,545 235,364 238,620 240,796 243,256 244,820 3 Finance companies2 96,126 120,095 106,106 107,498 109,457 114,927 117,565 118,356 120,095 123,717 126,001 4 Credit unions 66,544 75,127 70,689 71,446 71,938 72,433 73,474 74,117 75,127 75,810 76,361 5 Retailers3 37,061 39,187 38,327 38,423 38,751 38,723 38,890 39,039 39,187 39,416 39,497 b Savings institutions 40,330 55,555 47,235 49,474 51,115 52,656 53,509 54,307 55,555 56,290 56,934 7 Gasoline companies 4,361 4,337 4,072 4,110 4,185 4,136 4,176 4,182 4,337 4,264 4,114 By major type of credit 8 Automobile 173,122 206,482 189,459 191,201 192,923 198,656 201,994 203,766 206,482 210,661 213,196 9 Commercial banks 83,900 92,764 89,799 90,350 90,234 90,784 91,402 92,127 92,764 93,489 93,730 10 Credit unions 28,614 30,577 29,543 29,716 29,775 29,556 29,904 30,166 30,577 30,855 31,079 11 Finance companies 54,663 73,391 61,960 62,586 64,071 69,201 71,415 71,996 73,391 76,410 78,310 12 Savings institutions 5,945 9,750 8,157 8,549 8,843 9,115 9,273 9,477 9,750 9,907 10,077 13 Revolving 98,514 118,296 109,260 110,904 112,373 113,850 115,218 117,050 118,296 119,682 120,722 14 Commercial banks 58,145 73,893 66,891 68,172 69,079 70,453 71,507 73,076 73,893 74,991 75,963 15 Retailers 33,064 34,560 34,013 34,065 34,330 34,264 34,382 34,486 34,560 34,770 34,843 16 Gasoline companies 4,361 4,337 4,072 4,110 4,185 4,136 4,176 4,182 4,337 4,264 4,114 17 Savings institutions 2,944 5,506 4,284 4,557 4,779 4,997 5,153 5,306 5,506 5,657 5,802 18 Mobile home 24,184 25,461 24,768 25,015 25,173 25,341 25,320 25,315 25,461 25,371 25,564 19 Commercial banks 9,623 9,578 9,596 9,576 9,608 9,662 9,596 9,584 9,578 9,457 9,571 20 Finance companies 9,161 9,116 9,107 9,141 9,114 9,092 9,089 9,057 9,116 9,125 9,161 21 Savings institutions 5,400 6,767 6,065 6,298 6,451 6,587 6,635 6,674 6,767 6,789 6,832 22 Other 157,760 184,859 169,766 172,919 175,621 178,573 180,446 182,490 184,859 187,039 188,245 23 Commercial banks 57,490 64,561 60,539 60,990 61,723 62,646 62,859 63,833 64,561 65,319 65,557 24 Finance companies 32,302 37,588 35,039 35,771 36,272 36,634 37,061 37,303 37,588 38,182 38,530 25 Credit unions 37,930 44,550 41,146 41,730 42,163 42,877 43,570 43,951 44,550 44,955 45,282 26 Retailers 3,997 4,627 4,314 4,358 4,421 4,459 4,508 4,553 4,627 4,646 4,653 27 Savings institutions 26,041 33,533 28,728 30,070 31,042 31,957 32,448 32,850 33,533 33,937 34,223 Net change (during period)r 28 Total 77,341 81,518 4,391 6,786 6,051 10,330 6,558 5,643 6,477 7,655 4,974 By major holder 29 Commercial banks 39,819 31,638 1,432 2,263 1,556 2,901 1,819 3,256 2,176 2,460 1,564 30 Finance companies2 9,961 23,969 1,323 1,392 1,959 5,470 2,638 791 1,739 3,622 2,284 31 Credit unions 13,456 8,583 415 757 492 495 1,041 643 1,010 683 551 32 Retailers3 2,900 2,126 14 96 328 -28 167 149 148 229 81 33 Savings institutions 11,038 15,225 1,225 2,239 1,641 1,541 853 798 1,248 735 644 34 Gasoline companies 167 -24 -18 38 75 -49 40 6 155 -73 -150 By major type of credit 35 Automobile 27,214 33,360 1,926 1,742 1,722 5,733 3,338 1,772 2,716 4,179 2,535 36 Commercial banks 16,352 8,864 601 551 -116 550 618 725 637 725 241 37 Credit unions 3,223 1,963 32 173 59 -219 348 262 411 278 224 38 Finance companies 4,576 18,728 893 626 1,485 5,130 2,214 581 1,395 3,019 1,900 39 Savings institutions 3,063 3,805 400 392 294 272 158 204 273 157 170 40 Revolving 20,145 19,782 888 1,644 1,469 1,477 1,368 1,832 1,246 1,386 1,040 41 Commercial banks 15,949 15,748 673 1,281 907 1,374 1,054 1,569 817 1,098 972 42 Retailers 2,512 1,496 -21 52 265 -66 118 104 74 210 73 43 Gasoline companies 167 -24 -18 38 75 -49 40 6 155 -73 -150 44 Savings institutions 1,517 2,562 254 273 222 218 156 153 200 151 145 45 Mobile home 1,990 1,277 98 247 158 168 -21 -5 146 -90 193 46 Commercial banks -199 -45 -1 -20 32 54 -66 -12 -6 -121 114 47 Finance companies 544 -45 15 34 -27 -22 -3 -32 59 9 36 48 Savings institutions 1,645 1,367 84 233 153 136 48 39 93 22 43 49 Other 27,992 27,099 1,479 3,153 2,702 2,952 1,873 2,044 2,369 2,180 1,206 50 Commercial banks 7,717 7,071 159 451 733 923 213 974 728 758 238 51 Finance companies 4,841 5,286 415 732 501 362 427 242 285 594 348 52 Credit unions 10,233 6,620 383 584 433 714 693 381 599 405 327 53 Retailers 388 630 35 44 63 38 49 45 74 19 7 54 Savings institutions 4,813 7,492 487 1,342 972 915 491 402 683 404 286 1. The Board's series cover most short- and intermediate-term credit extended 2. More detail for finance companies is available in the G.20 statistical release, to individuals that is scheduled to be repaid (or has the option of repayment) in 3. Excludes 30-day charge credit held by travel and entertainment companies, two or more installments. 4. All data have been revised. 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 1985 1986 IItteemm 11998833 11998844 11998855 Aug. Sept. Oct. Nov. Dec. Jan. Feb. INTEREST RATES Commercial banks1 1 48-month new car2 13.92 13.71 n.a. 12.72 n.a. n.a. 12.39 n.a. n.a. 12.29 2 24-month personal 16.50 16.47 n.a. 15.84 n.a. n.a. 15.61 n.a. n.a. 15.52 3 120-month mobile home2 16.08 15.58 n.a. 14.72 n.a. n.a. 14.66 n.a. n.a. 14.57 4 Credit card 18.78 18.77 n.a. 18.62 n.a. n.a. 18.57 n.a. n.a. 18.48 Auto finance companies 5 New car 12.58 14.62 n.a. 10.87 8.84 9.97 11.71 12.52 9.99 9.70 6 Used car 18.74 17.85 n.a. 17.57 17.31 17.21 17.28 17.22 16.60 16.74 OTHER TERMS3 Maturity (months) 7 New car 45.9 48.3 n.a. 51.1 51.2 51.5 52.0 52.1 51.2 51.3 8 Used car 37.9 39.7 n.a. 41.6 41.4 41.4 41.5 41.4 42.8 42.5 Loan-to-value ratio 9 New car 86 88 n.a. 91 92 93 92 92 92 92 10 Used car 92 92 n.a. 95 95 95 95 95 95 95 Amount financed (dollars) 11 New car 8,787 9,333 n.a. 10,422 10,449 10,498 10,205 9,925 10,064 10,074 12 Used car 5,033 5,691 n.a. 6,139 6,097 6,091 6,167 6,255 6,165 6,194 1. Data for midmonth of quarter only. 3. At auto finance companies. 2. Before 1983 the maturity for new car loans was 36 months, and for mobile NOTE. These data also appear in the Board's G.19 (421) release. For address, home loans was 84 months. see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • June 1986 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; half-yearly data are at seasonally adjusted annual rates. 1983 1984 1985 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998800 11998811 11998822 11998833 HI H2 HI H2 HI H2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors .... 341.8 372.7 395.3 542.9 765.9 883.8 506.0 579.7 713.4 818.4 735.8 1,032.0 By sector and instrument ? 79.2 87.4 161.3 186.6 198.8 223.6 221.9 151.2 172.2 225.4 118844..00 226633..22 3 Treasury securities 79.8 87.8 162.1 186.7 199.0 223.7 222.0 151.4 172.4 225.5 184.1 263.3 4 Agency issues and mortgages -.6 -.5 -.9 -.1 -.2 -.1 -.1 -.1 -.2 -.1 -.1 -.1 5 Private domestic nonfinancial sectors 262.6 285.3 234.1 356.3 567.1 660.2 284.1 428.5 541.2 593.1 551.8 768.7 6 Debt capital instruments 188.1 154.5 152.6 253.7 325.3 474.3 227.3 280.1 287.7 362.8 367.4 581.2 7 Tax-exempt obligations 30.3 23.4 48.6 57.3 65.8 173.4 57.3 57.4 38.9 92.6 88.4 258.4 8 26.7 21.8 18.7 16.0 47.1 67.9 21.4 10.6 31.9 62.3 68.0 67.8 9 131.2 109.3 85.4 180.3 212.4 233.0 148.6 212.1 216.9 207.9 211.1 255.0 10 Home mortgages 94.2 72.2 50.5 116.9 130.7 152.8 98.7 135.2 135.6 125.7 133.8 171.7 11 Multifamily residential 7.6 4.8 5.4 11.9 20.7 25.7 6.1 17.6 23.6 17.7 22.5 28.9 1? Commercial 19.2 22.2 25.2 48.9 62.0 59.0 42.2 55.7 58.5 65.6 57.0 61.1 13 Farm 10.2 10.0 4.2 2.6 -1.0 -4.5 1.6 3.6 -.8 -1.2 -2.3 -6.7 14 Other debt instruments 74.5 130.8 81.4 102.6 241.9 185.9 56.8 148.4 253.5 230.2 184.3 187.5 IS 4.7 22.6 17.7 56.7 94.8 103.6 38.0 75.4 98.0 91.6 113.0 94.2 16 Bank loans n.e.c 37.0 54.7 54.2 26.8 79.5 30.7 13.7 39.8 89.9 69.0 24.0 37.4 17 Open market paper 5.7 19.2 -4.7 -1.6 24.2 12.9 -10.0 6.9 33.5 15.0 13.3 12.4 18 Other 27.1 34.4 14.2 20.7 43.3 38.8 15.1 26.3 32.1 54.6 34.0 43.5 19 By borrowing sector 262.6 285.3 234.1 356.3 567.1 660.2 284.1 428.5 541.2 593.1 551.8 768.7 70 State and local governments 17.2 6.8 25.9 37.6 45.0 128.5 36.0 39.2 21.4 68.6 71.5 185.6 ?1 118.9 119.7 87.9 187.4 239.2 297.7 152.3 222.6 236.0 242.3 261.8 333.5 ?? Farm 15.2 16.6 6.8 4.1 -.1 -6.8 .8 7.4 -.7 .5 -7.6 -6.1 ?3 Nonfarm noncorporate 31.2 38.6 41.3 70.8 90.8 84.0 56.1 85.5 96.9 84.7 80.8 87.1 24 Corporate 80.1 103.6 72.1 56.4 192.3 156.9 39.0 73.8 187.7 196.9 145.2 168.6 ?5 Foreign net borrowing in United States 27.2 27.2 15.7 18.9 2.8 -.4 15.4 22.4 23.0 -17.4 -2.4 1.5 ?6 Bonds .8 5.4 6.7 3.8 4.1 4.9 4.6 2.9 1.1 7.0 5.2 4.7 ?7 Bank loans n.e.c 11.5 3.7 -6.2 4.9 -7.8 -6.9 11.4 -1.6 -4.5 -11.1 -5.6 -8.1 ?8 Open market paper 10.1 13.9 10.7 6.0 2.5 -1.0 -4.6 16.5 20.9 -16.0 -4.6 2.5 29 U.S. government loans 4.7 4.2 4.5 4.3 4.0 2.5 3.9 4.6 5.5 2.6 2.6 2.4 30 Total domestic plus foreign 369.0 399.9 411.0 561.7 768.7 883.4 521.3 602.1 736.4 801.0 733.4 1,033.5 Financial sectors 31 Total net borrowing by financial sectors 57.6 89.0 80.2 89.2 138.2 187.5 69.1 109.3 126.5 149.9 167.0 208.1 By instrument 3? U.S. government related 44.8 47.4 64.9 67.8 74.9 99.4 66.2 69.4 69.6 8800..11 9922..77 110066..11 33 Sponsored credit agency securities 24.4 30.5 14.9 1.4 30.4 20.6 -4.1 6.9 29.9 3300..99 26.0 15.1 34 Mortgage pool securities 19.2 15.0 49.5 66.4 44.4 78.8 70.3 62.5 39.7 49.2 66.7 91.0 1 2 1 9 .4 36 Private financial sectors 12.8 41.6 15.3 21.4 63.3 88.1 2.9 40.0 56.9 69.7 74.3 101.9 37 Corporate bonds 1.8 3.5 13.7 12.6 25.9 28.6 10.3 14.9 20.7 31.1 33.2 24.0 38 Mortgages * .1 * .4 -.2 * * .4 .4 -.1 -.2 39 Bank loans n.e.c -.9 .9 1.9 -.2 1.0 4.2 -3.3 3.0 -.5 2.4 11..11 7.2 40 Open market paper 4.8 20.9 -1.1 16.0 20.4 41.3 7.9 24.1 20.4 20.4 2288..44 54.3 41 Loans from Federal Home Loan Banks 7.1 16.2 .8 -7.0 15.7 14.2 -12.1 -2.0 15.9 15.5 11.7 16.7 By sector 47 Sponsored credit agencies 25.6 32.4 15.3 1.4 30.4 20.6 -4.1 6.9 2299..99 30.9 2266..00 1155..11 43 Mortgage pools 19.2 15.0 49.5 66.4 44.4 78.8 70.3 62.5 39.7 49.2 66.7 91.0 44 Private financial sectors 12.8 41.6 15.3 21.4 63.3 88.1 2.9 40.0 56.9 69.7 74.3 101.9 45 Commercial banks .5 .4 1.2 .5 4.4 3.8 .8 .2 4.8 3.9 5.2 2.4 46 Bank affiliates 6.9 8.3 5.9 12.6 16.9 9.2 10.1 15.1 26.0 7.8 9.2 9.2 47 Savings and loan associations 7.4 15.5 2.5 -2.1 22.7 21.7 -9.3 5.2 19.7 25.6 1111..11 32.3 48 Finance companies -1.1 18.2 6.3 11.3 19.3 54.4 2.1 20.5 6.3 32.4 4499..88 59.1 49 REITs -.5 -.2 * -.2 .8 -.1 -.1 -.3 .8 .8 -.2 All sectors 50 Total net borrowing 426.6 488.9 491.2 651.0 906.9 1070.9 590.4 711.5 863.0 950.9 900.3 51 U.S. government securities.. 122.9 133.0 225.9 254.4 273.8 323.1 288.2 220.7 241.9 305.6 276.8 52 State and local obligations... 30.3 23.4 48.6 57.3 65.8 173.4 57.3 57.4 38.9 92.6 88.4 53 Corporate and foreign bonds 29.3 30.7 39.0 32.4 77.1 101.4 36.3 28.4 53.8 100.5 106.3 54 Mortgages 131.1 109.2 85.4 180.3 212.7 232.8 148.6 212.0 217.2 208.2 210.8 55 Consumer credit 4.7 22.6 17.7 56.7 94.8 103.6 38.0 75.4 98.0 91.6 113.0 56 Bank loans n.e.c 47.7 59.2 49.9 31.5 72.7 28.0 21.8 41.2 84.9 60.4 19.5 57 Open market paper 20.6 54.0 4.9 20.4 47.1 53.2 -6.7 47.5 74.8 19.3 37.2 58 Other loans 40.1 56.7 19.9 17.9 63.0 55.5 6.9 29.0 53.4 72.7 48.4 External corporate equity funds raised in United States 59 Total new share issues 21.2 -3.3 33.6 66.3 -33.6 28.2 81.9 50.7 -41.2 -25.9 25.1 31.2 60 Mutual funds 4.5 6.0 16.8 31.5 37.1 99.6 35.3 27.7 39.0 35.3 92.0 107.1 61 All other 16.8 -9.3 16.8 34.8 -70.7 -71.4 46.6 23.0 -80.2 -61.2 -66.9 -75.9 62 Nonfinancial corporations 12.9 -11.5 11.4 28.3 -77.0 -81.6 38.2 18.4 -84.5 -69.4 -75.7 -87.5 63 Financial corporations 1.8 1.9 4.0 2.5 5.2 4.6 2.6 2.4 5.0 5.3 4.6 4.7 64 Foreign shares purchased in United States 2.1 .3 1.5 4.0 1.1 5.6 5.7 2.2 -.7 2.9 4.2 6.9 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. 1983 1984 1985 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11998800 11998811 11998822 11998833 11998844 11998855 HI H2 HI H2 HI H2 1 Total funds advanced in credit markets to domestic nonfinancial sectors 341.8 372.7 395.3 542.9 765.9 883.8 506.0 579.7 713.4 818.4 735.8 1,032.0 By public agencies and foreign 7 Total net advances 97.1 97.7 114.1 117.4 144.6 220.9 120.5 114.4 124.2 116655..11 119955..99 224455..88 3 U.S. government securities 15.8 17.1 22.7 27.6 36.0 46.8 41.0 14.1 30.5 41.4 47.0 46.5 4 Residential mortgages 31.7 23.5 61.0 76.1 56.5 92.6 80.2 72.1 52.8 60.1 86.0 99.3 5 FHLB advances to savings and loans 7.1 16.2 .8 -7.0 15.7 14.2 -12.1 -2.0 15.9 15.5 11.7 16.7 6 Other loans and securities 42.5 40.9 29.5 20.8 36.6 67.3 11.4 30.2 25.0 48.1 51.2 83.3 Total advanced, by sector 7 U.S. government 23.7 24.0 15.9 9.7 17.1 22.5 9.1 10.3 7.8 26.4 19.7 25.3 8 Sponsored credit agencies 45.6 48.2 65.5 69.8 73.3 103.9 68.6 71.0 73.6 73.0 97.7 110.1 9 Monetary authorities 4.5 9.2 9.8 10.9 8.4 21.6 15.7 6.1 12.1 4.7 26.6 16.6 10 Foreign 23.3 16.2 22.8 27.1 45.9 72.8 27.2 27.0 30.7 61.0 51.9 93.8 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 44.8 47.4 64.9 67.8 74.9 99.4 6666..22 6699..44 69.6 8800..11 9922..77 110066..11 12 Foreign 27.2 27.2 15.7 18.9 2.8 -.4 15.4 22.4 23.0 -17.4 -2.4 1.5 Private domestic funds advanced 13 Total net advances 316.7 349.6 361.8 512.1 699.0 762.0 467.1 557.1 681.8 716.1 630.2 893.8 14 U.S. government securities 107.1 115.9 203.1 226.9 237.8 276.4 247.2 206.6 211.4 264.2 229.8 322.9 15 State and local obligations 30.3 23.4 48.6 57.3 65.8 173.4 57.3 57.4 38.9 92.6 88.4 258.4 16 Corporate and foreign bonds 19.3 18.8 14.8 14.9 34.8 31.4 21.4 8.5 25.3 44.3 41.9 21.0 17 Residential mortgages 70.0 53.5 -5.3 52.6 94.8 85.8 24.6 80.6 106.3 83.3 70.3 101.3 18 Other mortgages and loans 97.1 154.2 101.4 153.0 281.5 209.2 104.6 202.0 315.8 247.1 211.5 206.9 19 LESS: Federal Home Loan Bank advances 7.1 16.2 .8 -7.0 15.7 14.2 -12.1 -2.0 15.9 15.5 11.7 16.7 Private financial intermediation 20 Credit market funds advanced by private financial institutions 283.8 321.7 288.4 384.6 555.6 531.5 332.0 437.2 552.5 558.7 456.8 606.4 21 Commercial banking 100.6 102.3 107.2 136.1 181.7 170.8 121.0 151.3 195.2 168.1 147.2 194.4 7? Savings institutions 54.5 27.8 30.1 139.8 146.3 104.5 131.3 148.3 167.9 124.7 61.7 147.4 73 Insurance and pension funds 94.5 97.6 107.4 94.2 119.0 118.1 83.0 105.3 112.0 126.0 101.6 134.5 24 Other finance 34.2 94.0 43.7 14.5 108.6 138.1 -3.3 32.3 77.4 139.9 146.3 130.0 75 Sources of funds 283.8 321.7 288.4 384.6 555.2 531.5 332.0 437.2 552.5 558.7 456.8 606.4 76 Private domestic deposits and RPs 169.6 211.9 196.2 209.3 298.8 201.5 203.8 214.8 292.2 305.5 185.2 217.5 27 Credit market borrowing 12.8 41.6 15.3 21.4 63.3 88.1 2.9 40.0 56.9 69.7 74.3 101.9 78 Other sources 101.3 68.2 77.0 153.9 193.5 241.9 125.3 182.4 203.4 183.5 197.3 287.0 29 Foreign funds -21.7 -8.7 -26.7 22.1 19.0 17.3 -14.2 58.5 27.2 10.9 10.7 24.0 30 Treasury balances -2.6 -1.1 6.1 -5.3 4.0 9.8 9.9 -20.6 1.2 6.8 20.3 -.7 31 Insurance and pension reserves 83.7 90.7 103.2 95.1 110.3 110.2 83.5 106.8 119.5 101.2 100.6 119.7 32 Other, net 41.8 -12.7 -5.6 41.9 60.1 104.5 46.1 37.7 55.5 64.6 65.6 144.0 Private domestic nonfinancial investors 33 Direct lending in credit markets 45.8 69.5 88.7 148.9 206.7 318.6 137.9 159.9 186.3 227.1 247.7 389.4 34 U.S. government securities 24.6 29.3 32.1 88.3 125.8 155.3 96.9 79.7 126.3 125.3 121.6 188.9 35 State and local obligations 7.0 11.1 29.2 43.5 43.2 99.4 47.2 39.9 25.3 61.2 47.2 151.6 36 Corporate and foreign bonds -11.0 -3.9 8.1 -5.5 15.3 6.9 -10.8 -.3 7.5 23.0 39.7 -25.8 37 Open market paper -3.1 2.7 -.6 6.5 -1.4 30.9 -6.6 19.7 3.2 -6.1 8.3 53.5 38 Other 28.4 30.3 19.9 16.1 23.8 26.0 11.3 20.8 24.0 23.7 30.9 21.1 39 Deposits and currency 181.1 221.9 203.3 228.4 303.4 211.8 225.6 231.3 303.6 303.2 199.5 223.7 40 Currency 10.3 9.5 9.7 14.3 8.6 12.4 14.8 13.8 15.9 1.3 18.4 6.5 41 Checkable deposits 5.4 18.1 17.6 26.7 24.1 45.2 53.0 -.4 30.4 17.7 17.9 72.2 47 Small time and savings accounts 82.9 47.0 138.1 218.3 149.8 134.3 278.9 157.7 130.7 169.0 161.4 107.2 43 Money market fund shares 29.2 107.5 24.7 -44.1 47.2 -2.2 -84.0 -4.2 30.2 64.2 4.2 -8.6 44 Large time deposits 45.6 36.8 11.9 -5.9 83.6 14.1 -55.1 43.4 97.6 69.6 * 28.1 45 Security RPs 6.5 2.5 3.8 14.3 -5.8 10.1 11.0 17.5 3.3 -15.0 1.7 18.5 46 Deposits in foreign countries 1.1 .5 -2.5 4.8 -4.0 -2.2 7.0 2.7 -4.5 -3.6 -4.1 -.3 47 Total of credit market instruments, deposits and currency 226.9 291.4 292.0 377.3 510.1 530.3 363.5 391.2 489.9 530.3 447.2 613.0 48 Public holdings as percent of total 26.3 24.4 27.8 20.9 18.8 25.0 23.1 19.0 16.9 20.6 26.7 23.8 49 Private financial intermediation (in percent) 89.6 92.0 79.7 75.1 79.5 69.8 71.1 78.5 81.0 78.0 72.5 67.8 50 Total foreign funds 1.6 7.6 -3.9 49.2 64.9 90.2 13.0 85.5 57.9 71.9 62.6 117.7 MEMO: Corporate equities not included above 51 Total net issues 21.2 -3.3 33.6 66.3 -33.6 28.2 81.9 50.7 -41.2 -25.9 25.1 31.2 5? Mutual fund shares 4.5 6.0 16.8 31.5 37.1 99.6 35.3 27.7 39.0 35.3 92.0 107.1 53 Other equities 16.8 -9.3 16.8 34.8 -70.7 -71.4 46.6 23.0 -80.2 -61.2 -66.9 -75.9 54 Acquisitions by financial institutions 24.9 20.9 36.9 56.7 10.3 47.4 76.4 36.9 2.1 18.5 60.7 34.1 55 Other net purchases -3.6 -24.3 -3.3 9.6 -43.9 -19.2 5.5 13.7 -43.4 -44.5 -35.6 -2.9 NOTES BY LINE NUMBER. 31. Excludes net investment of these reserves in corporate equities. 1. Line 1 of table 1.57. 32. Mainly retained earnings and net miscellaneous liabilities. 2. Sum of lines 3-6 or 7-10. 33. Line 13 less line 20 plus line 27. 6. Includes farm and commercial mortgages. 34-38. Lines 14-18 less amounts acquired by private finance plus amounts 11. Credit market funds raised by federally sponsored credit agencies, and net borrowed by private finance. Line 38 includes mortgages. issues of federally related mortgage pool securities. 40. Mainly an offset to line 9. 13. Line 1 less line 2 plus line 11 and 12. Also line 20 less line 27 plus line 33. Also 47. Lines 33 plus 39, or line 13 less line 28 plus 40 and 46. sum of lines 28 and 47 less lines 40 and 46. 48. Line 2/line 1. 18. Includes farm and commercial mortgages. 49. Line 20/line 13. 26. Line 39 less lines 40 and 46. 50. Sum of lines 10 and 29. 27. Excludes equity issues and investment company shares. Includes line 19. 51. 53. Includes issues by financial institutions. 29. Foreign deposits at commercial banks, bank borrowings from foreign NOTE. Full statements for sectors and transaction types in flows and in amounts branches, and liabilities of foreign banking agencies to foreign affiliates, less outstanding may be obtained from Flow of Funds Section, Division of Research claims on foreign affiliates and deposits by banking in foreign banks. and Statistics, Board of Governors of the Federal Reserve System, Washington, 30. Demand deposits and note balances at commercial banks. D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • June 1986 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures' 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1985 1986 MMeeaassuurree 11998833 11998844 11998855 July Aug. Sept. Oct. Nov. Dec/ Jan/ Feb/ Mar. 1 Industrial production 109.2 121.8 124.5 124.1 125.2 125.1 124.4 125.4 126.4 126.6 125.7 125.1 Market groupings 2 Products, total 113.9 127.1 131.7 131.6 133.0 133.1 131.8 133.5 134.1 134.5 133.2 132.5 3 Final, total 114.7 127.8 132.0 131.8 133.3 133.3 131.9 133.7 134.4 134.5 133.1 131.9 4 Consumer goods 109.3 118.2 120.7 120.1 121.5 121.8 120.8 122.7 124.2 123.8 123.5 122.7 5 Equipment 121.7 140.5 147.1 147.3 149.0 148.6 146.6 148.3 147.9 148.7 145.7 144.2 6 Intermediate 111.2 124.9 130.6 130.7 132.0 132.3 131.5 132.7 132.9 134.4 133.7 134.4 7 Materials 102.8 114.6 114.7 113.8 114.5 114.2 114.2 114.3 115.9 115.9 115.4 115.0 Industry groupings 8 Manufacturing 110.2 123.9 127.1 126.9 128.2 127.7 127.2 128.4 129.1 129.9 128.9 128.3 Capacity utilization (percent)2 9 Manufacturing 74.0 80.8 80.3 80.1 80.7 80.1 79.6 80.2 80.4 80.7 79.9 79.3 10 Industrial materials industries 75.3 82.3 80.2 79.5 79.9 79.5 79.3 79.2 80.1 80.0 79.6 79.2 11 Construction contracts (1977 = 100)3 138.0 150.0 161.0 164.0 164.0 167.0 168.0 162.0 162.0 146.0 162.0 149.0 12 Nonagricultural employment, total4 137.1 143.6 148.5 148.5 148.9 149.3 149.8 150.1 150.6 151.2 151.4 151.7 13 Goods-producing, total 100.1 106.1 107.5 107.2 107.3 107.1 107.5 107.6 107.9 108.5 108.3 107.9 14 Manufacturing, total 94.8 99.8 99.9 99.5 99.6 99.1 99.4 99.7 99.9 100.0 99.9 99.7 15 Manufacturing, production-worker ... 87.6 93.0 92.4 91.8 91.9 91.5 91.8 92.0 92.4 92.4 92.4 92.2 16 Service-producing 157.3 164.1 170.9 171.1 171.7 172.4 173.0 173.5 174.0 174.6 175.1 175.7 17 Personal income, total 440.1 482.8 511.0 510.5 511.3 513.6 516.7 519.3 525.1 525.4 527.6 528.5 18 Wages and salary disbursements 390.7 427.8 457.1 456.9 459.2 461.9 464.3 467.1 471.5 472.6 474.2 476.5 19 Manufacturing 295.9 326.8 340.7 339.2 340.7 341.3 344.9 344.8 348.4 347.7 346.0 347.4 20 Disposable personal income5 175.8 193.6 203.1 202.7 202.8 203.5 204.9 205.9 208.2 209.0 210.0 210.5 21 Retail sales (1977 = 100)6 162.0 179.0 190.6 189.9 194.2 198.4 190.6 191.6 194.0 194.8 195.0 193.5 Prices7 22 Consumer 298.4 311.1 322.2 322.8 323.5 324.5 325.5 326.6 327.4 328.4 327.5 326.0 23 Producer finished goods 285.2 291.1 293.7 294.8 293.5 290.0 294.7 296.7 297.2 296.2 292.3 288.1 1. A major revision of the industrial production index and the capacity 5. Based on data in Survey of Current Business (U.S. Department of Comutilization rates was released in July 1985. See "A Revision of the Index of merce). Industrial Production" and accompanying tables that contain revised indexes 6. Based on Bureau of Census data published in Survey of Current Business. (1977=100) through December 1984 in the FEDERAL RESERVE BULLETIN, vol. 71 1. Data without seasonal adjustment, as published in Monthly Labor Review. (July 1985), pp. 487-501. The revised indexes for January through June 1985 were Seasonally adjusted data for changes in the price indexes may be obtained from shown in the September BULLETIN. the Bureau of Labor Statistics, U.S. Department of Labor. 2. Ratios of indexes of production to indexes of capacity. Based on data from Federal Reserve, McGraw-Hill Economics Department, Department of Com- NOTE. Basic data (not index numbers) for series mentioned in notes 4, 5, and 6, merce, and other sources. and indexes for series mentioned in notes 3 and 7 may also be found in the Survey 3. Index of dollar value of total construction contracts, including residential, of Current Business. nonresidential and heavy engineering, from McGraw-Hill Information Systems Figures for industrial production for the last two months are preliminary and Company, F. W. Dodge Division. estimated, respectively. 4. Based on data in Employment and Earnings (U.S. Department of Labor). Series covers employees only, excluding personnel in the Armed Forces. 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. 1985 1986 CCaatteeggoorryy 11998833 11998844 11998855 Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 176,414 178,602 180,440 180,657 180,831 181,011 181,186 181,349 181,898 182,055 182,223 2 Labor force (including Armed Forces)1 113,749 115,763 117,695 117,595 118,049 118,355 118,376 118,466 119,014 119,322 119,445 3 Civilian labor force 111,550 113,544 115,461 115,343 115,790 116,114 111166,,113300 116,229 111166,,778866 111177,,008888 111177,,220077 Employment 4 Nonagricultural industries2 97,450 101,685 103,971 104,115 104,502 104,755 104,899 105,055 105,655 105,465 105,503 5 Agriculture 3,383 3,321 3,179 3,095 3,017 3,058 3,070 3,151 3,299 3,096 3,285 Unemployment 6 Number 10,717 8,539 8,312 8,133 8,271 8,301 8,161 8,023 7,831 8,527 8,419 7 Rate (percent of civilian labor force) ... 9.6 7.5 7.2 7.1 7.1 7.1 7.0 6.9 6.7 7.3 7.2 8 Not in labor force 62,665 62,839 62,745 63,062 62,782 62,656 62,810 62,883 62,884 62,733 62,778 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 90,196 94,461 97,698 97,977 98,217 98,559 98,801 99,086 99,496 99,649 99,841 10 Manufacturing 18,434 19,412 19,426 19,362 19,279 19,338 19,381 19,433 19,447 19,434 19,392 11 Mining 952 974 969 965 962 960 954 952 947 928 899 12 Contract construction 3,948 4,345 4,661 4,688 4,721 4,753 4,754 4,770 4,906 4,875 4,867 13 Transportation and public utilities 4,954 5,171 5,300 5,282 5,317 5,327 5,342 5,350 5,357 5,342 5,352 14 Trade 20,881 22,134 23,195 23,305 23,344 23,440 23,473 23,550 23,697 23,792 23,882 15 Finance 5,468 5,682 5,924 5,959 5,987 6,011 6,048 6,068 6,098 6,130 6,151 16 Service 19,694 20,761 21,929 22,073 22,155 22,244 22,365 22,450 22,540 22,600 22,749 17 Government 15,869 15,984 16,295 16,343 16,452 16,486 16,484 16,513 16,504 16,548 16,549 1. Persons 16 years of age and over. Monthly figures, which are based on exclude proprietors, self-employed persons, domestic servants, unpaid family sample data, relate to the calendar week that contains the 12th day; annual data workers, and members of the Armed Forces. Data are adjusted to the March 1984 are averages of monthly figures. By definition, seasonality does not exist in benchmark and only seasonally adjusted data are available at this time. Based on population figures. Based on data from Employment and Earnings (U.S. Depart- data from Employment and Earnings (U.S. Department of Labor). ment of Labor). 4. In addition to the revisions noted here, data for January through June 1985 2. Includes self-employed, unpaid family, and domestic service workers. have been revised as follows: Jan., 21,382; Feb., 21,480; Mar., 21,644; Apr., 3. Data include all full- and part-time employees who worked during, or 21,723; May, 21,813; and June, 21,856. These data were reported incorrectly in received pay for, the pay period that includes the 12th day of the month, and the BULLETIN for November 1985 through March 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • June 1986 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION Seasonally adjusted 1985 1986 1985 1986 1985 1986 SSeerriieess Q2 Q3 Q4' Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Output (1977 = 100) Capacity (percent of 1977 output) Utilization rate (percent) 1 Total industry 124.2 124.8 125.4 125.8 154.0 155.1 156.2 157.2 80.7 80.5 80.3 80.0 2 Mining 110.0 108.5 107.6 104.8 133.6 133.9 134.1 134.3 82.3 81.0 80.2 78.1 3 Utilities 113.6 111.4 113.7 114.6 134.5 135.4 136.3 136.9 84.4 82.3 83. 4' 83.7 4 Manufacturing 126.6 127.6 128.2 129.0 157.7 158.9 160.2 161.3 80.3 80.3 80.0r 80.0 5 Primary processing ... 108.1 109.5 110.4 112.0 132.0 132.4 132.8 133.2 81.9 82.7 83.1 84.1 6 Advanced processing 137.9 138.6 139.0 139.2 173.2 174.9 176.7 178.3 79.6 79.2 78.7 78.1 7 Materials 114.5 114.2 114.8 115.4 142.5 143.4 144.3 145.0 80.4 79.6 79.5 79.6 8 Durable goods 121.4 120.7 121.4 121.9 157.4 158.9 160.5 161.6 77.1 76.0 75.6 75.4 9 Metal materials .... 80.2 79.4 82.4 81.8 117.3 117.3 117.3 116.7 68.4 67.7 70. y 70.1 10 Nondurable goods.... 111.2 113.7 113.8 116.3 137.8 138.2 138.7 139.1 80.7 82.2 82.0 83.6 11 Textile, paper, and chemical.. 111.0 114.1 114.0 116.6 137.0 137.4 137.8 138.1 81.0 83.0 82. T 84.4 12 Paper 121.8 123.8 124.5 n.a. 136.2 136.3 136.5 n.a. 89.4 90.8 91.2'" n.a. 13 Chemical 112.6 114.6 114.2 n.a. 142.0 142.6 143.1 n.a. 79.3 80.4 79.8' n.a. 14 Energy materials 105.2 103.2 104.2 103.5 120.3 120.6 120.9 121.2 87.5 85.5 86.1 85.4 Previous cycle1 Latest cycle2 1985 1985 1986 High Low High Low Feb. July Aug. Sept. Oct. Nov. Dec/ Jan/ Feb/ Mar. Capacity utilization rate (percent) 15 Total industry 88.6 72.1 86.9 69.5 80.9 80.2 80.7 80.5 79.8 80.3 80.7 80.7 80.0 79.4 16 Mining 92.8 87.8 95.2 76.9 82.1 81.2 80.9 81.0 80.9 79.7 80.0 80.0 77.6 76.7 17 Utilities 95.6 82.9 88.5 78.0 86.7 81.9 81.5 83.4 82.7 82.3 85.3 82.8 84.2 84.0 18 Manufacturing 87.7 69.9 86.5 68.0 80.4 80.1 80.7 80.1 79.6 80.2 80.4 80.7 79.9 79.3 19 Primary processing ... 91.9 68.3 89.1 65.1 81.5 82.3 82.9 82.8 83.1 83.0 83.3 84.8 84.0 83.4 20 Advanced processing . 86.0 71.1 85.1 69.5 79.8 79.1 79.6 79.0 78.0 79.0 79.0 78.9 78.0 77.4 21 Materials 92.0 70.5 89.1 68.4 81.5 79.5 79.9 79.5 79.3 79.2 80.1 80.0 79.6 79.2 22 Durable goods 91.8 64.4 89.8 60.9 79.1 75.8 76.6 75.4 75.2 75.8 75.8 76.3 75.3 74.7 23 Metal materials 99.2 67.1 93.6 45.7 68.2 66.4 69.4 67.3 69.4 70.8 70.7 71.3 70.2 68.8 24 Nondurable goods .... 91.1 66.7 88.1 70.6 81.1 81.7 82.1 82.9 81.9 81.5 82.7 83.4 83.5 83.9 25 Textile, paper, and chemical 92.8 64.8 89.4 68.6 82.0 82.7 82.8 83.7 82.4 82.1 83.5 84.1 84.3 84.8 26 Paper 98.4 70.6 97.3 79.9 92.6 91.7 90.1 90.7 88.8 90.1 94.7 94.8 94.3 n.a. 27 Chemical 92.5 64.4 87.9 63.3 80.2 80.1 79.8 81.2 80.5 78.8 80.1 81.0 81.5 n.a. 28 Energy materials 94.6 86.9 94.0 82.2 87.4 85.8 85.1 85.6 86.2 84.7 87.4 85.2 85.7 85.2 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 1977 1985 1986 11998855 Grouping por- avg. tion Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec/ Jan. Feb.P Mar.f Index (1977 = 100) MAJOR MARKET 1 Total index 100.00 124.5 124.0 124.1 124.1 124.3 124.1 125.2 125.1 124.4 125.4 126.4 126.6 125.7 125.1 2 Products 57.72 131.7 130.3 130.8 131.4 131.6 131.6 133.0 133.1 131.8 133.5 134.1 134.5 133.2 132.5 3 Final products 44.77 132.0 130.8 131.3 131.7 131.6 131.8 133.3 133.3 131.9 133.7 134.4 134.5 133.1 131.9 4 Consumer goods 25.52 120.7 119.8 119.5 120.0 120.4 120.1 121.5 121.8 120.8 122.7 124.2 123.8 123.5 122.7 5 Equipment 19.25 147.1 145.4 146.9 147.1 146.6 147.3 149.0 148.6 146.6 148.3 147.9 148.7 145.7 144.2 6 Intermediate products 12.94 130.6 128.6 129.3 130.3 131.4 130.7 132.0 132.3 131.5 132.7 132.9 134.4 133.7 134.4 7 Materials 42.28 114.7 115.5 115.0 114.2 114.3 113.8 114.5 114.2 114.2 114.3 115.9 115.9 115.4 115.0 Consumer goods 8 Durable consumer goods 6.89 112.9 113.5 111.5 111.8 112.0 111.3 114.0 112.9 111.4 115.5 116.8 116.6 116.4 113.0 9 Automotive products 2.98 115.1 115.1 113.1 113.6 113.4 115.0 120.0 117.8 112.9 116.8 116.6 117.0 118.9 111.5 10 Autos and trucks 1.79 112.0 110.5 109.0 109.6 109.4 113.7 120.2 116.6 108.7 113.7 112.0 116.2 118.8 106.1 11 Autos, consumer 1.16 98.9 101.3 100.5 98.1 97.0 101.1 101.3 98.8 92.3 94.9 99.9 103.6 107.0 95.1 12 Trucks, consumer .63 136.3 127.5 124.7 130.9 132.3 137.2 155.4 149.7 139.1 148.6 134.5 139.5 140.6 13 Auto parts and allied goods 1.19 119.7 122.0 119.4 119.6 119.4 116.8 119.6 119.5 119.3 121.4 123.4 118.2 119.1 119.6 14 Home goods 3.91 111.3 112.2 110.2 110.4 110.9 108.4 109.5 109.3 110.2 114.5 116.9 116.4 114.6 114.2 15 Appliances, A/C and TV 1.24 129.5 131.8 126.9 129.3 131.5 121.6 124.5 123.7 126.3 139.4 145.4 138.8 136.6 136.1 16 Appliances and TV 1.19 130.3 131.8 127.1 128.7 131.7 123.2 125.5 125.6 128.6 141.9 148.4 141.5 139.3 17 Carpeting and furniture .96 119.4 117.7 118.1 116.9 119.6 122.2 119.5 120.2 120.1 122.9 118.9 122.3 121.1 18 Miscellaneous home goods 1.71 93.6 95.0 93.7 93.1 91.2 91.2 93.0 92.7 92.9 91.9 95.2 96.9 95.0 19 Nondurable consumer goods 18.63 123.6 122.1 122.5 123.1 123.5 123.4 124.2 125.1 124.3 125.4 127.0 126.4 126.2 126.3 20 Consumer staples 15.29 129.4 127.9 128.5 129.0 129.6 129.3 130.3 131.0 130.1 131.0 133.0 132.1 132.2 132.4 21 Consumer foods and tobacco 7.80 129.7 128.0 129.4 128.9 130.5 130.1 130.8 131.5 129.5 130.7 132.4 131.0 131.5 22 Nonfood staples 7.49 129.1 127.7 127.6 129.1 128.7 128.5 129.7 130.5 130.6 131.2 133.6 133.2 133.0 133.2 23 Consumer chemical products .. 2.75 147.5 145.1 145.1 147.3 145.4 145.4 149.1 151.4 149.4 152.4 152.9 153.8 154.4 24 Consumer paper products 1.88 143.7 141.7 142.0 143.7 144.6 144.9 143.9 144.7 145.5 145.7 148.0 143.7 142.8 25 Consumer energy 2.86 101.9 101.9 101.5 102.1 102.2 101.5 101.8 101.0 102.9 101.4 105.6 106.6 106.1 26 Consumer fuel 1.44 88.5 87.0 90.0 90.2 88.8 89.2 91.1 85.8 90.2 90.1 92.3 94.9 92.9 27 Residential utilities 1.42 117.1 113.2 114.4 115.9 114.0 112.7 116.5 115.8 112.9 119.2 118.5 Equipment 28 Business and defense equipment 18.01 147.8 146.1 147.7 147.9 147.4 147.9 149.7 149.4 147.5 149.7 149.4 150.6 148.6 147.8 29 Business equipment 14.34 141.3 140.2 142.0 141.9 140.7 141.3 143.0 142.2 139.6 141.7 141.4 143.3 141.5 140.2 30 Construction, mining, and farm .. 2.08 67.7 67.1 68.4 67.4 67.7 68.6 67.2 67.0 65.9 68.2 68.3 67.7 65.6 31 Manufacturing 3.27 112.8 112.0 112.4 113.1 111.9 113.5 115.1 114.8 111.7 112.8 112.8 113.1 112.4 112.0 32 Power 1.27 83.6 79.6 81.8 82.8 84.1 85.6 84.5 85.1 85.5 84.7 87.1 86.7 85.7 85.6 33 Commercial 5.22 219.3 218.9 221.8 222.8 219.6 219.5 222.8 219.4 213.9 217.7 217.9 219.7 217.9 218.3 34 Transit 2.49 106.1 104.5 106.0 102.9 103.4 103.3 106.0 108.3 109.7 111.2 107.7 114.9 111.5 105.0 35 Defense and space equipment 3.67 173.6 169.0 170.1 171.2 173.4 173.9 175.5 177.5 178.7 180.7 180.7 179.3 176.3 177.4 Intermediate products 36 Construction supplies 5.95 119.0 116.9 117.4 118.1 119.2 119.4 121.5 121.3 120.0 120.9 120.7 123.9 122.8 123.5 37 Business supplies 6.99 140.5 138.6 139.4 140.7 141.7 140.3 140.9 141.7 141.2 142.7 143.3 143.3 143.0 38 General business supplies 5.67 144.4 141.9 143.4 144.4 146.1 144.4 145.1 145.4 144.8 146.7 146.8 147.3 146.4 39 Commercial energy products 1.31 123.7 124.5 122.4 124.6 122.7 122.7 122.5 125.7 125.7 125.3 128.1 125.9 128.5 Materials 40 Durable goods materials 20.50 121.8 123.3 122.8 120.7 120.8 120.2 121.8 120.2 120.4 121.7 122.1 123.1 121.7 120.8 41 Durable consumer parts 4.92 100.7 102.1 101.8 100.1 98.7 98.3 100.0 99.0 100.2 101.6 101.5 103.9 102.2 99.9 42 Equipment parts 5.94 159.0 163.3 161.1 157.8 157.3 157.0 158.7 156.5 154.0 155.0 155.1 154.8 154.0 153.7 43 Durable materials n.e.c 9.64 109.7 109.6 110.0 108.2 109.6 108.6 110.2 108.7 109.9 111.4 112.3 113.4 111.7 111.2 44 Basic metal materials 4.64 84.8 85.1 86.6 82.0 85.0 82.5 85.1 82.8 85.8 87.6 88.5 87.5 85.5 45 Nondurable goods materials 10.09 112.2 110.3 110.4 111.3 111.8 112.8 113.5 114.7 113.4 113.0 114.9 115.9 116.1 116.8 46 Textile, paper, and chemical materials 7.53 112.4 111.3 110.5 110.9 111.7 113.5 113.8 115.1 113.5 113.2 115.2 116.1 116.5 117.1 47 Textile materials 1.52 97.7 93.0 94.1 95.0 97.3 100.2 104.4 104.1 101.2 104.4 102.1 102.3 102.5 48 Pulp and paper materials 1.55 123.7 125.4 121.3 120.9 123.3 125.0 122.8 123.7 121.1 123.0 129.3 129.5 129.0 49 Chemical materials 4.46 113.6 U2.7 112.3 112.9 112.6 114.0 113.8 115.9 115.0 112.8 114.8 116.1 116.9 50 Miscellaneous nondurable materials 2.57 111.3 107.2 110.1 112.5 112.0 110.8 112.7 113.5 113.3 112.5 113.9 115.3 115.0 51 Energy materials 11.69 104.3 106.2 105.3 105.3 105.1 103.5 102.7 103.4 104.2 102.5 105.8 103.2 103.8 103.4 52 Primary energy 7.57 107.8 110.2 107.9 107.8 109.0 107.4 106.4 106.8 108.2 106.7 109.0 106.8 106.4 53 Converted fuel materials 4.12 97.9 99.0 100.6 100.6 98.1 96.2 95.9 97.0 96.8 94.7 100.1 96.7 99.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • June 1986 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value—Continued 1977 1985 1986 SIC pro- 1985 Grouping code por- avg. tion Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec Jan. Feb.? Mar Index (1977 = 100) MAJOR INDUSTRY 1 Mining and utilities. 15.79 110.6 111.8 111.1 111.3 111.6 109.4 109.1 110.3 109.9 108.9 110.8 109.6 108.3 107.6 2 Mining 9.83 109.0 110.5 109.6 109.8 110.6 108.7 108.3 108.4 108.4 106.9 107.4 107.4 104.2 103.0 3 Utilities 5.96 113.2 113.9 113.6 113.7 113.4 110.7 110.3 113.2 112.4 112.2 116.5 113.3 115.3 115.1 4 Manufacturing 84.21 127.1 126.3 126.6 126.6 126.7 126.9 128.2 127.7 127.2 128.4 129.1 129.9 128.9 128.3 5 Nondurable 35.11 125.6 123.9 124.3 124.7 125.5 125.6 126.6 126.9 126.4 127.3 128.0 129.0 128.7 128.9 6 Durable 49.10 128.2 128.0 128.2 127.9 127.6 127.9 129.4 128.3 127.7 129.2 129.9 130.6 129.0 127.8 Mining 7 Metal 10 .50 75.1 83.6 81.2 78.3 77.5 60.9 73.1 71.4 74.2 78.3 74.3 76.0 73.5 8 Coal 11.12 1.60 127.5 131.9 128.5 128.7 134.0 128.0 127.7 126.3 130.1 125.5 128.0 130.6 124.9 122.5 9 Oil and gas extraction ... 13 7.07 106.3 106.8 106.5 106.9 106.9 106.9 105.5 106.0 104.8 103.5 104.4 103.5 100.1 98.9 10 Stone and earth minerals. 14 .66 118.8 118.7 118.5 118.7 117.9 116.6 117.7 119.3 120.4 119.0 114.0 117.1 120.7 Nondurable manufactures 11 Foods 20 7.96 131.0 128.5 130.8 131.4 131.8 132.2 132.6 132.5 130.7 131.4 132.6 133.2 133.0 12 Tobacco products 21 .62 103.4 98.4 95.7 98.9 96.0 97.7 97.8 105.3 104.5 103.5 88.5 13 Textile mill products 22 2.29 102.5 99.4 99.0 100.0 103.3 104.1 106.3 106.7 104.9 108.0 106.3 107.5 107.3 14 Apparel products 23 2.79 101.8 101.3 100.2 100.3 99.2 100.6 100.4 101.8 102.6 103.9 105.0 105.8 104.0 15 Paper and products 26 3.15 127.4 126.9 125.1 124.1 127.1 129.0 127.5 128.6 127.3 128.2 132.3 133.3 131.9 16 Printing and publishing 27 4.54 155.3 152.6 154.2 155.4 156.7 154.3 156.3 156.2 157.0 159.0 158.4 158.7 158.2 158.7 17 Chemicals and products 28 8.05 127.1 126.5 125.8 126.7 126.4 126.4 128.2 129.0 127.9 128.0 128.5 130.6 131.7 18 Petroleum products 29 2.40 86.7 84.7 87.3 87.4 87.1 88.3 88.2 85.9 87.7 87.3 88.7 93.5 91.4 89.4 19 Rubber and plastic products. 30 2.80 147.0 144.1 144.9 144.3 145.5 145.6 148.0 148.6 148.7 150.5 150.0 150.5 150.0 20 Leather and products 31 .53 70.9 69.4 69.9 71.0 71.5 72.2 72.7 72.3 71.4 72.1 69.9 68.3 66.9 Durable manufactures 21 Lumber and products 24 2.30 109.5 110.9 112.2 113.5 113.0 114.8 115.9 116.5 115.6 116.5 119.7 22 Furniture and fixtures 25 1.27 142.0 139.2 141.0 142.0 141.9 145.3 144.3 143.2 141.9 144.1 142.1 143.9 144.1 23 Clay, glass, stone products. 32 2.72 114.8 111.4 114.5 116.3 116.1 115.1 116.2 116.2 115.6 115.2 118.2 120.1 119.3 24 Primary metals 33 5.33 80.6 81.8 81.4 76.4 78.3 79.0 82.0 80.3 83.1 83.6 81.7 84.7 82.8 79.9 25 Iron and steel 331.2 3.49 70.7 73.2 71.9 65.4 67.6 68.7 71.6 69.7 74.4 75.3 72.0 75.5 72.6 26 Fabricated metal products 34 6.46 107.8 108.6 109.1 108.3 107.4 107.3 107.8 107.5 108.4 107.9 108.8 109.3 108.3 107.7 27 Nonelectrical machinery .. 35 9.54 146.6 146.5 148.9 149.1 145.6 147.5 149.2 146.5 143.0 145.6 146.0 146.2 145.0 145.0 28 Electrical machinery 36 7.15 169.3 173.1 168.9 169.3 169.5 165.7 166.1 165.1 165.1 168.9 171.9 168.3 165.0 165.0 29 Transportation equipment 37 9.13 123.2 120.8 120.7 120.9 121.8 123.7 126.8 126.2 124.5 126.5 126.8 128.9 127.8 122.9 30 Motor vehicles and parts 371 5.25 112.8 111.3 110.9 110.5 110.5 112.8 116.8 115.3 111.7 114.5 115.4 117.9 117.9 109.3 31 Aerospace and miscellaneous transportation equipment. 372-6.9 3.87 137.5 133.7 134.1 134.9 137.1 138.5 140.4 141.1 141.9 142.9 142.3 144.0 141.3 141.3 32 Instruments 38 2.66 139.9 139.0 138.5 139.9 140.7 141.1 141.8 139.4 139.8 140.7 140.6 142.0 141.8 142.7 33 Miscellaneous manufactures.... 39 1.46 96.4 96.0 98.3 98.3 96.8 95.9 97.2 96.4 95.9 94.5 96.3 100.8 97.0 Utilities 34 Electric. 44..1177 111199..55 119.5 119.1 111199..55 119.4 117.5 116.7 112200..66 111199..33 111188..77 112244..44 112200..22 112222..44 Gross value (billions of 1972 dollars, annual rates) MAJOR MARKET 35 Products, total 517.5 773.4 769.5 773.3 774.4 773.5 769.0 778.7 777.9 772.2 782.8 783.3 793.3 787.2 781.1 36 Final 405.7 614.8 613.3 616.2 616.2 614.0 610.1 618.6 617.8 613.0 622.4 622.1 629.7 625.1 618.1 37 Consumer goods 272.7 364.8 364.6 364.7 365.1 364.0 361.7 366.2 365.6 363.8 370.5 373.6 375.1 374.7 371.4 38 Equipment 133.0 250.1 244.8 248.0 250.8 251.0 250.3 252.4 252.2 249.3 251.9 248.5 254.6 250.4 246.7 39 Intermediate 111.9 158.6 153.9 155.6 158.3 159.7 160.4 160.1 160.1 159.2 160.4 161.2 163.7 162.1 163.0 A A major revision of the industrial production index and the capacity (July 1985), pp. 487-501. The revised indexes for January through June 1985 were utilization rates was released in July 1985. See "A Revision of the Index of shown in the September BULLETIN. Industrial Production" and accompanying tables that contain revised indexes NOTE. These data also appear in the Board's G.12.3 (414) release. For address, (1977=100) through December 1984 in the FEDERAL RESERVE BULLETIN, vol. 71 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. 1985 1986 IItteemm 11998844 11998855 May June July Aug. Sept. Oct. Nov.' Dec.' Jan.' Feb. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,605 1,682 1,726 1,778 1,712 1,694 1,784 1,808 1,688 1,661 1,873 1,907 1,803 7 1-family 902 922 953 933 961 967 990 949 965 918 978 1,094 1,022 3 2-or-more-family 703 759 773 845 751 727 794 859 723 743 895 813 781 4 Started 1,703 1,749 1,742 1,684 1,693 1,673 1,737 1,653 1,784 1,654 1,882 2,034 1,997 5 1-family 1,067 1,084 1,072 1,041 1,036 1,068 1,071 1,006 1,118 1,006 1,098 1,335 1,204 6 2-or-more-family 635 665 669 643 657 605 666 647 666 648 784 699 793 7 Under construction, end of period1 1,003 1,051 1,063 1,082 1,073 1,071 1,079 1,065 1,089 1,087 1,088 1,097 1,116 8 1-family 524 556 539 579 574 577 582 568 578 570 561 572 585 9 2-or-more-family 479 494 524 504 499 494 499 496 512 517 528 524 530 10 Completed 1,390 1,652 1,703 1,635 1,758 1,722 1,720 1,778 1,541 1,721 1,762 1,774 1,725 11 1-family 924 1,025 1,072 1,028 1,078 1,042 1,032 1,100 1,072 1,095 1,141 1,071 1,029 12 2-or-more-family 466 627 631 607 680 680 688 678 469 626 621 703 696 13 Mobile homes shipped 296 296 284 287 272 285 286 283 291 287 285 280 266 Merchant builder activity in 1 -family units 14 Number sold 622 639 688 684 710 745 708 681 637 722 712 712 685 15 Number for sale, end of period1 304 358 352 355 354 351 348 350 353 353 351 355 356 Price (thousands of dollars)2 Median 16 Units sold 75.5 80.0 84.3 80.1 86.3 82.1 83.3 84.6 85.4 87.2 88.6 86.0 87.3 17 Units sold 89.9 97.5 101.1 98.1 99.6 99.4 99.2 102.6 102.7 104.1 107.1 102.4 106.3 EXISTING UNITS (1-family) 18 Number sold 2,719 2,868 3,217 3,040 3,070 3,170 3,430 3,480 3,530 3,450 3,520 3,300 3,270 Price of units sold (thousands of dollars)2 19 Median 69.8 72.3 75.4 75.2 76.5 76.7 77.2 75.9 75.2 74.9 75.5 77.1 77.4 20 Average 82.5 85.9 90.6 90.3 91.9 92.7 93.2 91.4 91.2 90.3 91.8 93.0 93.1 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 268,730 312,989 342,363 339,943 343,837 344,206 343,246 346,084 344,502r 343,847 351,669 356,099 360,504 7? Private 218,016 257,802 280,023 276,420 278,939 279,521 279,371 282,505 282,115R 281,284 286,914 287,992 293,569 ?3 Residential 121,309 145,058 148,250 142,254 147,158 148,699 146,858 148,915 150,873' 149,670 150,690 152,556 155,758 24 Nonresidential, total 96,707 112,744 131,773 134,166 131,781 130,822 132,513 133,590 131,242' 131,614 136,224 135,436 137,811 Buildings 75 Industrial 12,863 13,746 15,767 16,443 15,170 15,384 15,118 15,567 15,63c 16,271 17,357 16,035 17,696 76 Commercial 35,787 48,102 60,050 60,064 58,290 57,956 59,910 61,227 60,740r 61,101 64,496 64,482 64,754 77 Other 11,660 12,298 12,406 12,929 12,786 12,578 12,957 12,769 12,250' 12,495 12,048 12,469 12,908 28 Public utilities and other 36,397 38,598 43,550 44,730 45,535 44,904 44,528 44,027 42,622' 41,747 42,323 42,450 42,453 79 Public 50,715 55,186 62,342 63,523 64,897 64,686 63,875 63,580 62,387' 62,563 64,755 68,106 66,935 30 Military 2,544 2,839 3,152 3,349 3,426 3,364 2,966 3,008 3,086' 3,040 3,452 3,659 3,971 31 Highway 14,143 16,295 19,951 22,314 21,093 19,589 20,224 19,585 19,193' 19,826 20,827 22,110 22,259 37 Conservation and development 4,822 4,656 4,959 5,051 5,410 5,075 4,824 5,254 4,892' 5,176 4,978 5,616 4,448 33 Other 29,206 31,396 34,280 32,809 34,968 36,658 35,861 35,733 35,216' 34,521 35,498 36,721 36,257 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 1986 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data, except as noted C m h o a n n t g h e s f e r a o r m li e 1 r 2 Change ( a f t r o a m nn u 3 a m l o r n at t e h ) s earlier Change from 1 month earlier IIInnndddeeexxx llleeevvveeelll IIIttteeemmm MMMaaarrr... 1985 1986 1985 1986 111999888666 11998855 11998866 (((111999666777 MMaarr.. MMaarr.. === 111000000)))''' June Sept. Dec. Mar. Nov. Dec. Jan. Feb. Mar. CONSUMER PRICES2 1 All items 3.7 2.3 3.3 2.4 5.3 -1.9 .6 .4 .3 -.4 -.4 326.0 2 Food 2.5 1.8 .6 2.1 5.9 -1.4 .7 .6 .2 -.7 .1 315.4 3 Energy items -.4 -8.5 6.9 -3.2 3.3 -34.2 .6 .4 .1 -3.8 -6.5 381.3 4 All items less food and energy 4.8 4.1 3.5 3.4 5.4 4.1 .5 .3 .4 .2 .4 323.6 5 Commodities 3.8 1.0 -.9 1.1 3.6 .3 .2 .2 .3 -.1 -.1 262.0 6 Services 5.3 6.0 6.2 4.8 6.5 6.5 .7 .4 .5 .4 .6 391.5 PRODUCER PRICES 7 Finished goods .2 -1.4 2.2 -2.4 9.2 -12.4 .7' •6r -.7 -1.6 -1.1 288.1 8 Consumer foods -1.0 -.5 -5.7 -2.9 15.0 -6.6 1.1 .8' -.4 -1.6 .3 272.2 9 Consumer energy -8.5 -20.5 24.7 -11.3 22.2 -68.0 2.y 2.6' -4.2 -9.4 -13.4 551.1 10 Other consumer goods 2.4 2.2 1.9 .0 4.5 2.7 .2" .2 .0 -.1 .8 256.1 11 Capital equipment 2.4 1.7 1.5 -.9 5.3 .9 .2 .1 -.1 .1 .3 304.3 12 Intermediate materials3 .1 -2.8 .6 -1.3 2.7 -11.8 .3 .3 -.5 -1.4 -1.3 315.5 13 Excluding energy .8 -.3 .8 -.7 -.3 -.9 .0 .0 .0 -.2 .0 304.4 Crude materials 14 Foods -10.0 -7.8 -16.7 -20.6 47.0 -25.2 4.2' -.5 -2.6 -3.6 -1.0 224.0 15 Energy -4.3 -17.1 4.4 -5.9 -2.0 -51.1 -.8' .3' .1 -8.2 -8.9 618.4 16 Other -6.9 -3.8 -7.8 -4.4 1.0 -3.2 .1' -.2' -.3 -3.0 2.6 245.6 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. 1985 1986 AAccccoouunntt 11998833 11998844 11998855 Ql Q2 Q3 Q4 Ql GROSS NATIONAL PRODUCT 1 Total 3,401.6 3,774.7 3,988.5 3,917.5 3,960.6 4,016.9 4,059.3 4,116.7 By source 2 Personal consumption expenditures 2,229.3 2,423.0 2,582.3 2,525.0 2,563.3 2,606.1 2,634.8 2,670.6 3 Durable goods 289.6 331.1 361.5 351.5 356.5 376.0 362.0 362.4 4 Nondurable goods 817.0 872.4 912.2 895.7 910.2 914.5 928.3 939.2 5 Services 1,122.7 1,219.6 1,308.6 1,277.8 1,296.6 1,315.6 1,344.6 1,369.1 6 Gross private domestic investment 501.9 674.0 669.3 657.6 672.8 666.1 680.7 708.0 7 Fixed investment 508.3 607.0 661.8 639.1 657.3 665.9 685.0 678.3 8 Nonresidential 356.3 427.9 476.2 459.6 474.2 478.5 492.5 479.6 9 Structures 126.1 147.6 170.2 166.1 169.7 170.4 174.5 174.2 10 Producers' durable equipment 230.2 280.2 306.0 293.5 304.5 308.1 318.0 305.4 11 Residential structures 152.0 179.1 185.6 179.4 183.1 187.4 192.5 198.7 12 Change in business inventories -6.4 67.1 7.5 18.5 15.5 .2 -4.3 29.7 13 Nonfarm .8 58.0 11.8 14.2 10.8 3.1 19.0 30.4 14 Net exports of goods and services -5.3 -59.2 -78.5 -42.3 -70.3 -87.8 -113.4 -95.1 IS Exports 354.1 384.6 369.9 379.6 369.2 363.2 367.8 378.4 16 Imports 359.4 443.8 448.4 421.9 439.5 451.0 481.2 473.6 17 Government purchases of goods and services 675.7 736.8 815.4 777.2 794.8 832.5 857.2 833.1 18 Federal 284.8 312.9 355.4 334.4 337.8 364.8 384.7 354.3 19 State and local 390.9 423.9 460.0 442.8 457.1 467.7 472.5 478.8 By major type of product 70 Final sales, total 3,408.0 3,707.6 3,981.1 3,899.0 3,945.0 4,016.7 4,063.6 44,,008866..99 71 Goods 1,394.7 1,585.9 1,639.3 1,628.3 1,636.1 1,650.7 1,642.2 1,667.8 77 Durable 572.3 679.5 709.2 706.2 705.9 714.8 710.0 712.8 73 Nondurable 822.4 906.3 930.1 922.1 930.2 935.9 932.2 955.0 74 Services 1,678.0 1,806.6 1,930.5 1,887.6 1,908.2 1,939.9 1,986.4 2,011.3 25 Structures 328.9 382.2 418.6 401.5 416.3 426.2 430.6 437.5 26 Change in business inventories -6.4 67.1 7.5 18.5 15.5 .2 -4.3 29.7 27 Durable goods -.8 37.0 6.4 16.9 1.8 -6.4 13.4 20.9 28 Nondurable goods -5.5 30.1 1.0 1.6 13.7 6.6 -17.7 8.8 29 MEMO: Total GNP in 1982 dollars 3,277.7 3,492.0 3,570.0 3,547.8 3,557.4 3,584.1 3,590.8 3,619.2 NATIONAL INCOME 30 2,718.3 3,039.3 3,211.3 3,155.3 3,192.2 3,228.0 3,269.9 n.a. 31 Compensation of employees 2,025.9 2,221.3 2,372.5 2,320.4 2,356.9 2,385.2 2,427.5 2,462.4 37 Wages and salaries 1,675.4 1,835.2 1,960.3 1,917.7 1,947.6 1,970.1 2,005.8 2,034.8 33 Government and government enterprises 324.2 346.1 370.8 362.6 367.4 372.6 379.7 384.9 34 Other 1,351.6 1,488.9 1,589.7 1,555.1 1,580.2 1,597.5 1,626.1 1,649.9 35 Supplement to wages and salaries 350.5 386.2 412.2 402.7 409.4 415.1 421.7 427.6 36 Employer contributions for social insurance 171.0 192.8 205.8 201.8 204.6 206.7 210.2 213.3 37 Other labor income 179.5 193.4 206.4 200.9 204.8 208.4 211.5 214.3 38 Proprietors' income1 192.3 233.7 242.2 239.4 240.9 237.5 250.9 252.4 39 Business and professional1 178.0 201.6 221.0 212.9 218.1 225.3 227.6 236.4 40 Farm1 14.3 32.1 21.2 26.5 22.8 12.2 23.3 16.0 41 Rental income of persons2 12.8 10.8 13.8 11.0 13.8 14.5 15.9 17.8 4? Corporate profits1 213.8 273.3 295.5 281.7 288.1 309.1 303.1 n.a. 43 Profits before tax3 205.0 237.6 225.3 220.0 218.7 228.6 233.8 n.a. 44 Inventory valuation adjustment -10.0 -5.4 -.6 .7 2.2 4.7 -10.1 14.2 45 Capital consumption adjustment 18.8 41.0 70.9 61.1 67.2 75.9 79.4 81.7 46 Net interest 273.6 300.2 287.4 302.9 292.4 281.8 272.6 268.9 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 1986 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1985 1986 AAccccoouunntt 11998833 11998844 11998855 Ql Q2 Q3 Q4 Ql PERSONAL INCOME AND SAVING 1 Total personal income 2,836.4 3,111.9 3,293.5 3,240.9 3,280.1 3,298.5 3,354.3 3,397.9 2 Wage and salary disbursements 1,675.8 1,834.9 1,960.5 1,917.6 1,948.6 1,970.1 2,005.8 2,034.8 3 Commodity-producing industries 523.0 577.9 607.3 600.1 604.7 607.6 616.9 620.6 4 Manufacturing 397.4 438.9 457.6 453.5 454.9 457.2 464.7 466.0 5 Distributive industries 404.2 441.6 468.8 459.8 467.4 471.2 476.8 482.8 6 Service industries 424.4 469.4 513.6 495.2 508.1 518.7 532.4 546.6 7 Government and government enterprises 324.2 346.1 370.8 362.5 368.4 372.6 379.7 384.9 8 Other labor income 179.5 193.4 206.4 200.9 204.8 208.4 211.5 214.3 9 Proprietors' income1 192.3 233.7 242.2 239.4 240.9 237.5 250.9 252.4 10 Business and professional1 178.0 201.6 221.0 212.9 218.1 225.3 227.6 236.4 11 Farm1 14.3 32.1 21.2 26.5 22.8 12.2 23.3 16.0 12 Rental income of persons2 12.8 10.8 13.8 11.0 13.8 14.5 15.9 17.8 13 Dividends 68.0 74.6 78.9 77.9 78.7 79.1 79.8 82.1 14 Personal interest income 385.7 442.2 456.3 462.8 460.5 450.6 451.4 451.6 15 Transfer payments 442.2 454.7 484.5 477.6 481.0 448888..11 491.2 502.2 16 Old-age survivors, disability, and health insurance benefits... 221.7 235.7 253.4 249.2 250.7 225566..55 257.1 264.4 17 LESS: Personal contributions for social insurance 119.8 132.4 149.1 146.3 148.3 149.7 152.0 157.4 18 EQUALS: Personal income 2,836.4 3,111.9 3,293.5 3,240.9 3,280.1 3,298.5 3,354.3 3,397.9 19 LESS: Personal tax and nontax payments 411.1 441.8 492.7 501.7 462.4 498.2 508.5 503.8 20 EQUALS: Disposable personal income 2,425.4 2,670.2 2,800.8 2,739.2 2,817.7 2,800.2 2,845.9 2,894.1 21 LESS: Personal outlays 2,292.2 2,497.7 2,671.8 2,608.4 2,650.6 2,697.6 2,730.6 2,769.6 22 EQUALS: Personal saving 133.2 172.5 129.0 130.9 167.2 102.6 115.2 124.4 MEMO Per capita (1982 dollars) 23 Gross national product 13,959.5 14,727.9 14,918.5 14,875.4 14,884.5 1144,,995588..66 1144,,994499..22 1155,,003366..11 24 Personal consumption expenditures 9,139.2 9,447.0 9,665.7 9,595.8 9,638.0 9,722.8 9,701.9 9,783.1 25 Disposable personal income 9,942.0 10,412.0 10,483.0 10,411.0 10,595.0 10,447.0 10,479.0 10,601.0 26 Saving rate (percent) 5.5 6.5 4.6 4.8 5.9 3.7 4.0 4.3 GROSS SAVING 27 Gross saving 469.8 584.5 553.4 578.3 571.7 537.3 526.1 n.a. 28 Gross private saving 600.6 693.0 694.3 677.7 723.6 681.8 694.2 n.a. 29 Personal saving 133.2 172.5 129.0 130.9 167.2 102.6 115.2 124.4 30 Undistributed corporate profits1 67.9 101.6 126.9 116.3 122.6 137.8 131.0 n.a. 31 Corporate inventory valuation adjustment -10.0 -5.4 -.6 .7 2.2 4.7 -10.1 14.2 Capital consumption allowances 32 Corporate 245.0 256.6 226699..22 264.3 226666..88 227700..99 227744..88 227777..00 33 Noncorporate 154.6 162.3 169.2 166.3 167.0 170.5 173.2 173.6 34 Wage accruals less disbursements .0 .0 .0 .0 .0 .0 .0 .0 35 Government surplus, or deficit (-), national income and -130.8 -108.5 -141.0 -99.4 -151.9 -144.5 --116688..00 n.a. -179.4 -172.9 -200.0 -162.6 -209.1 -201.3 -226.9 n.a. 37 State and local 48.6 64.4 59.0 63.2 57.3 56.9 58.8 n.a. 38 Capital grants received by the United States, net .0 .0 .0 .0 .0 .0 .0 .0 39 Gross investment 469.2 583.0 554.0 580.8 567.0 539.9 528.2 578.5 40 Gross private domestic 501.9 674.0 669.3 657.6 672.8 666.1 680.7 708.0 41 Net foreign -32.7 -91.0 -115.3 -76.8 -105.8 -126.2 -152.5 -129.5 42 Statistical discrepancy -.6 -1.5 .6 2.5 -4.7 2.5 2.1 2.1 1. With inventory valuation and capital consumption adjustments. SOURCE. Survey of Current Business (Department of Commerce). 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A53 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.1 1984 1985 IItteemm ccrreeddiittss oorr ddeebbiittss 11998833 11998844 11998855PP Q4 Q1 Q2 Q3 Q4P i1 Balance on current account -45,994 -107,358 -117,664 -31,805 -24,183 -27,626 -29,300 -36,559 -28,982 -23,491 -27,980 -33,101 -33,093 3 Merchandise trade balance2 -67,216 -114,107 -124,289 -30,885 -23,365 -28,487 -32,955 -39,482 4 Merchandise exports 201,712 219,916 213,990 56,242 55,198 53,530 52,276 52,986 5 Merchandise imports -268,928 -334,023 -338,279 -87,127 -78,563 -82,017 -85,231 -92,468 6 Military transactions, net -163 -1,765 -2,046 -575 -212 -586 -429 -818 7 Investment income, net3 25,401 19,109 24,683 4,003 2,530 5,378 8,651 8,124 8 Other service transactions, net 4,837 819 -1,229 -253 36 -503 -571 -194 9 Remittances, pensions, and other transfers -2,566 -2,891 -3,538 -782 -934 -843 -866 -8% 10 U.S. government grants (excluding military) -6,287 -8,522 -11,246 -3,313 -2,238 -2,585 -3,130 -3,293 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) -5,006 -5,516 -2,628 -734 -850 -853 -392 -532 12 Change in U.S. official reserve assets (increase, -) -1,196 -3,130 -3,858 -1,109 -233 -356 -121 -3,147 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -66 -979 -897 -194 -264 -180 -264 -189 15 Reserve position in International Monetary Fund -4,434 -995 908 -143 281 72 388 168 16 Foreign currencies 3,304 -1,156 -3,869 -772 -250 -248 -245 -3,126 17 Change in U.S. private assets abroad (increase, -)3 -48,842 -11,800 -31,698 -13,003 621 -1,342 -12,235 -18,742 18 Bank-reported claims -29,928 -8,504 -5,926 -4,933 135 4,095 -1,521 -8,635 19 Nonbank-reported claims -6,513 6,266 n.a. 970 1,201 1,863 -1,873 n.a. 20 U.S. purchase of foreign securities, net -7,007 -5,059 -7,871 -3,663 -2,494 -2,214 -1,708 -1,456 21 U.S. direct investments abroad, net3 -5,394 -4,503 -19,092 -5,377 1,779 -5,086 -7,133 -8,651 22 Change in foreign official assets in the United States (increase, +) 5,795 3,424 -1,908 7,119 -11,204 8,465 2,435 -1,604 23 U.S. Treasury securities 6,972 4,690 -610 5,814 -7,219 8,722 -90 -2,023 24 Other U.S. government obligations -476 167 -329 -67 -307 136 24 -182 25 Other U.S. government liabilities4 552 453 148 -197 -462 575 -95 130 26 Other U.S. liabilities reported by U.S. banks 545 663 372 2,052 -3,099 -134 2,974 631 27 Other foreign official assets5 -1,798 -2,549 -1,489 -483 -117 -834 -378 -160 28 Change in foreign private assets in the United States (increase, +)3 78,527 93,895 125,017 26,191 24,915 17,849 32,113 50,140 29 U.S. bank-reported liabilities 49,341 31,674 40,610 4,481 13,345 195 6,527 20,543 30 U.S. nonbank-reported liabilities -118 4,284 n.a. -1,863 -2,655 -1,324 509 n.a. 31 Foreign private purchases of U.S. Treasury securities, net 8,721 22,440 20,910 9,501 2,633 5,106 7,452 5,719 3? Foreign purchases of other U.S. securities, net 8,636 12,983 50,712 9,380 9,510 7,135 11,674 22,393 33 Foreign direct investments in the United States, net3 11,947 22,514 16,255 4,692 2,082 6,737 5,951 1,485 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 16,717 30,486 32,739 13,341 10,934 3,863 7,500 10,444 36 44,,330055 -425 --559977 --33,,665500 44,,667744 37 Statistical discrepancy in recorded data before seasonal adjustment 16,717 30,486 32,739 9,036 11,359 4,460 11,150 5,770 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -1,196 -3,130 -3,858 -1,109 -233 -356 -121 -3,147 39 Foreign official assets in the United States (increase, +) 5,243 2,971 -2,056 7,316 -10,742 7,890 2,530 -1,734 40 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 22 above) -8,283 -4,143 -6,750 812 -2,021 -1,808 -1,961 -960 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 194 190 5588 61 1100 12 15 22 1. Seasonal factors are not calculated for lines 6, 10, 12-16, 18-20, 22-34, and 4. Primarily associated with military sales contracts and other transactions 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 1986 3.11 U.S. FOREIGN TRADE Millions of dollars; monthly data are not seasonally adjusted. 1985 1986 IItteemm 11998833 11998844 11998855 Aug. Sept. Oct. Nov. Dec. Jan. Feb. 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments 200,486 217,865 213,146 16,584 17,034 17,618 17,721 16,994 17,006 17,735 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 258,048 325,726 345,276 26,247 31,349 28,429 30,010 30,728 32,005 28,895 3 Trade balance -57,562 107,861 -132,129 -9,663 -14,315 -10,811 -12,290 -13,734 -14,999 -11,160 NOTE. The data through 1981 in this table are reported by the Bureau of Census the export side, the largest adjustments are: (1) the addition of exports to Canada data of a free-alongside-ship (f.a.s.) value basis—that is, value at the port of not covered in Census statistics, and (2) the exclusion of military sales (which are export. Beginning in 1981, foreign trade of the U.S. Virgin Islands is included in combined with other military transactions and reported separately in the "service the Census basts trade data; this adjustment has been made for all data shown in account" in table 3.10, line 6). On the import side, additions are made for gold, the table. Beginning with 1982 data, the value of imports are on a customs ship purchases, imports of electricity from Canada, and other transactions; valuation basis. military payments are excluded and shown separately as indicated above. The Census basis data differ from merchandise trade data shown in table 3.10, SOURCE. FT900 "Summary of U.S. Export and Import Merchandise Trade" U.S. International Transactions Summary, for reasons of coverage and timing. On (Department of Commerce, Bureau of the Census). 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1985 1986 TTyyppee 11998822 11998833 11998844 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Total 33,958 33,747 34,934 38,295 41,657 42,852 43,191 43,673 45,505 44,919 2 Gold stock, including Exchange Stabilization Fund1 11,148 11,121 11,096 11,090 11,090 11,090 11,090 11,090 11,090 11,090 3 Special drawing rights2-3 5,250 5,025 5,641 6,847 6,926 7,253 7,293 7,441 7,960 7,839 4 Reserve position in International Monetary Fund2 7,348 11,312 11,541 11,686 11,843 11,955 11,952 11,824 12,172 12,025 5 Foreign currencies4 10,212 6,289 6,656 8,672 11,798 12,554 12,856 13,318 14,283 13,965 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 1985 1986 AAsssseettss 11998822 11998833 11998844 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Deposits 328 190 253 535 267 340 480 256 276 273 Assets held in custody 2 U.S. Treasury securities1 112,544 117,670 118,267 120,978 118,000 117,814 121,004 121,995 124,905 127,611 3 Earmarked gold2 14,716 14,414 14,265 14,245 14,242 14,240 14,245 14,193 14,172 14,167 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 Data1 Millions of dollars, end of period 1985 1986 AAsssseett aaccccoouunntt 11998822 11998844 Aug. Sept. Oct. Nov. Dec. Jan. Feb.? All foreign countries 1 Total, all currencies 469,712 477,090 453,656 457,777' 456,676' 454,492 455,935 458,076' 446,714 447,827 7 Claims on United States 91,805 115,542 113,393 122,97C 119,526 121,806 115,587 119,716' 116,775 113,841 Parent bank 61,666 82,026 78,109 83,735 85,463 87,255 82,327 87,201 84,410 80,939 4 Other banks in United States2 13,664 14.16C 13,258 12,808 12,096 13,076' 11,746 11,751 5 Nonbanks2 21,620 22,075 20,805 21,743 21,164 19,439' 20,619 21,151 6 Claims on foreigners 358,493 342,689 320,162 313,444' 314,997 310,480 317,498 315,763 308,207 310,385 7 Other branches of parent bank 91,168 96,004 95,184 89,678 87,673 86,912 89,580 91,399 88,393 88,282 8 Banks 133,752 117,668 100,397 99,296' 102,334 98,578 102,907 103,014 100,460 99,798 9 Public borrowers 24,131 24,517 23,343 22,971' 23,389 23,478 23,613 23,395 23,366 23,682 10 Nonbank foreigners 109,442 107,785 101,238 101,499' 101,601 101,512 101,398 97,955 95,988 98,623 11 Other assets 19,414 18,859 20,101 21,363' 22,153' 22,206 22,850 22,597' 21,732 23,601 12 Total payable in U.S. dollars 361,982 371,508 350,636 342,124' 335,302' 331,610 329,622 336,288' 321,625 314,789 n Claims on United States 90,085 113,436 111,426 120,222' 116,630 118,630 112,419 116,648' 113,715 110,485 14 Parent bank 61,010 80,909 77,229 85,806 84,252 86,101 81,162 85,971 83,264 79,605 15 Other banks in United States2 13,500 13,553' 12,697 12,258 11,463 12,473' 11,091 11,076 16 Nonbanks2 20,697 20,863 19,681 20,271 19,794 18,204' 19,360 19,804 17 Claims on foreigners 259,871 247,406 228,600 212,207' 208,868 203,009 207,258 209,924' 198,828 194,778 18 Other branches of parent bank 73,537 78,431 78,746 72,475 69,241 68,576 70,548 72,689 68,748 67,458 19 Banks 106,447 93,332 76,940 71,05C 71,013 67,344 69,646 71,738 65,790 63,714 70 Public borrowers 18,413 17,890 17,626 17,145' 17,386 17,432 17,277 17,169' 16,958 17,127 21 Nonbank foreigners 61,474 60,977 55,288 51,537' 51,228 49,657 49,787 48,328 47,332 46,479 22 Other assets 12,026 10,666 10,610 9,695' 9,804' 9,971 9,945 9,716' 9,082 9,526 United Kingdom 23 Total, all currencies 161,067 158,732 144,385 151,118 150,276 149,607 152,456 148,599 150,835 148,538 74 Claims on United States 27,354 34,433 27,731 35,256 32,620 33,816 33,774 33,150 36.308 33,458 75 Parent bank 23,017 29,111 21,918 28,156 25,829 26,956 26,718 26,970 26,837 27,281 76 Other banks in United States2 1,429 1,474 1,334 1,269 1,289 1,106 1,173 1,133 77 Nonbanks2 4,384 5,626 5,457 5,591 5,767 5,074 5,298 5,044 78 Claims on foreigners 127,734 119,280 111,828 110,513 112,529 110,325 112,865 110,224 109,301 109,826 79 Other branches of parent bank 37,000 36,565 37,953 32,654 32,418 32,110 30,600 31,576 30,394 30,218 30 Banks 50,767 43,352 37,443 37,796 40,504 37,858 40,482 39,250 39,257 39,393 31 Public borrowers 6,240 5,898 5,334 5,054 5,112 5,482 5,735 5,644 5,949 6,065 32 Nonbank foreigners 33,727 33,465 31,098 35,009 34,495 34,875 36,048 33,754 33,161 34,150 33 Other assets 5,979 5,019 4,882 5,349 5,127 5,466 5,817 5,225 5,226 5,254 34 Total payable in U.S. dollars 123,740 126,012 112,809 110,973 108,731 108,024 108,699 108,626 108,566 105,022 35 Claims on United States 26,761 33,756 26,868 34,207 31,505 32,569 32,553 32,085 35,292 32,360 36 Parent bank 22,756 28,756 21,495 27,853 25,358 26,495 26,210 26,568 29,470 26,874 37 Other banks in United States2 1 1,363 1,355 1,247 1,194 1,205 1,005 1,089 1,047 38 Nonbanks2 4,010 4,999 4,900 4,880 5,138 4,512 4,733 4,439 39 Claims on foreigners 92,228 88,917 82,945 73,807 74,301 72,323 72,842 73,482 70,356 69,621 40 Other branches of parent bank 31,648 31,838 33,607 27,031 26,596 26,719 24,989 26,011 25,083 24,474 41 Banks 36,717 32,188 26,805 24,382 25,458 23,888 25,667 26,139 24,013 23,598 47 Public borrowers 4,329 4,194 4,030 3,599 3,633 3,966 3,982 3,999 4,252 4,367 43 Nonbank foreigners 19,534 20,697 18,503 18,795 18,614 17,750 18,204 17,333 17,008 17,182 44 Other assets 4,751 3,339 2,9% 2,959 2,925 3,132 3,304 3,059 2,918 3,041 Bahamas and Caymans 45 Total, all currencies 145,156 152,083 146,811 138,78c 135,519 135,262 133,645 142,055 130,413 128,851 46 Claims on United States 59,403 75,309 77,296 74,53C 72,744 73,572 69,923 74,874 68,576 68,304 47 Parent bank 34,653 48,720 49,449 47,815 47,299 47,918 45,811 50,553 44,586 43,866 48 Other banks in United States2 1 11,544 11,827' 11,138 10,812 10,082 11,223' 9,867 9,815 49 Nonbanks2 16,303 14,888 14,307 14,842 14,030 13,098' 14,123 14,623 50 Claims on foreigners 81,450 72,868 65,598 61,11C 59,466 58,467 60,503 63,894 58,510 56,958 51 Other branches of parent bank 18,720 20,626 17,661 16,479 15,428 15,856 17,050 19,042 16,468 15,872 57 Banks 42,699 36,842 30,246 27,678' 27,087 25,861 26,768 28,182 25,476 25,268 53 Public borrowers 6,413 6,093 6,089 6,54C 6,598 6,417 6,440 6,458 6,320 6,186 54 Nonbank foreigners 13,618 12,592 11,602 10,413' 10,353 10,333 10,245 10,212 10,246 9,632 55 Other assets 4,303 3,906 3,917 3.14C 3,309 3,223 3,219 3,287' 3,327 3,589 56 Total payable in U.S. dollars 139,605 145,641 141,562 133,791' 130,135 129,787 127,997 136,794 124,981 122,980 1. Beginning with June 1984 data, reported claims held by foreign branches 2. Data for assets vis-a-vis other banks in the United States and vis-a-vis have been reduced by an increase in the reporting threshold for "shell" branches nonbanks are combined for dates before June 1984. from $50 million to $150 million equivalent in total assets, the threshold now applicable to all reporting branches. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • June 1986 3.14 Continued 1985 1986 Aug. Sept. Oct. Nov. Dec. Jan. Feb.? All foreign countries 57 Total, all currencies 469,712 477,090 453,656 457,777' 456,676' 454,492 455,935 458,076' 446,714 447,827 58 Negotiable CDs3 n.a. n.a. 37,725 37,880 39,676 38,044 36,607 34,607 34,597 33,458 59 To United States 179,015 188,070 147,583 144,659' 143,556 140,142 143,169 155,273' 142,201 137,173 60 Parent bank 75,621 81,261 78,739 77,682' 78,631 75,479 81,171 83,649 76,799 72,273 61 Other banks in United States 33,405 29,453 18,409 16,086' 17,017 15,602 15,460 16,894 14,724 13,992 62 Nonbanks 69,989 77,356 50,435 50,891' 47,908 49,061 46,538 54.73C 50,678 50,908 63 To foreigners 270,853 269,685 247,907 252,697' 250,345 252,253 252,205 246,006' 248,788 255,061 64 Other branches of parent bank 90,191 90,615 93,909 90,477 87,854 88,539 88,438 89,529 86,351 87,468 65 Banks 96,860 92,889 78,203 80,931 82,421 82,470 81,871 76,878 84,106 83,850 66 Official institutions 19,614 18,896 20,281 21,234 21,020 21,322 21,658 19,523 19,921 21,854 67 Nonbank foreigners 64,188 68,845 55,514 60,055' 59,050 59,922 60,238 60,076' 58,410 61,889 68 Other liabilities 19,844 19,335 20,441 22,541' 23,099' 24,053 23,954 22,190' 21,128 22,135 69 Total payable in U.S. dollars 379,270 388,291 367,145 357,453' 350,394 346,883 345,810 353,470' 337,029 329,110 70 Negotiable CDs3 n.a. n.a. 35,227 34.025 35,695 33,995 32,838 31,063 31,182 30,202 71 To United States 175.528 184,305 143,571 139,037' 136,917 134,266 137,036 149,8%' 136,809 131,083 72 Parent bank 73,295 79,035 76,254 74,374' 74,778 71,996 77,892 80,623 73,897 68,937 73 Other banks in United States 33,040 28,936 17,935 15,465' 16,092 15,128 14,896 16,264 14,011 13,294 74 Nonbanks 69,193 76,334 49,382 49,198' 46,047 47,142 44,248 53,009' 48,901 48,852 75 To foreigners 192,510 194,139 178,260 174,625' 167,785 168,378 165,393 163,361' 160,112 159,326 76 Other branches of parent bank 72,921 73,522 77,770 73,764 69,606 70,007 69,261 70,943 67,174 65,996 77 Banks 57,463 57,022 45,123 42,850 41,180 41,559 39,682 37,323 38,469 36,716 78 Official institutions 15,055 13,855 15,773 16,238 16,224 16,010 15,905 14,354 14,796 15,819 79 Nonbank foreigners 47,071 51,260 39,594 41,773' 40,775 40,802 40,545 40,741' 39,673 40,795 80 Other liabilities 11,232 9,847 10,087 9,766 9,997 10,244 10,543 9,15c 8,926 8,499 United Kingdom 81 Total, all currencies 161,067 158,732 144,385 151,118 150,276 149,607 152,456 148,599 150,835 148,538 82 Negotiable CDs3 n.a. n.a. 34,413 34,151 35,819 33,913 32,708 31,260 30,788 29,419 83 To United States 53,954 55,799 25,250 25,158 25,547 24,958 27,933 29,422' 29,901 26,705 84 Parent bank 13,091 14,021 14,651 14,336 14,592 13,893 18,167 19,330 19,845 16,783 85 Other banks in United States 12,205 11,328 3,125 2,839 3,526 2,602 2,453 2,974 2,264 1,965 86 Nonbanks 28,658 30,450 7,474 7,983 7,429 8,463 7,313 7,118' 7,792 7,957 87 To foreigners 99,567 95,847 77,424 82,317 79,671 80,646 81,446 78,525' 80,724 82,666 88 Other branches of parent bank 18,361 19,038 21,631 22,348 20,233 20,175 21,932 23,389 21,858 21,954 89 Banks 44,020 41,624 30,436 31,518 32,041 33,102 32,200 28,581 32,326 32,088 90 Official institutions 11,504 10,151 10,154 10,823 10,824 10,812 10,519 9,676 10,093 10,956 91 Nonbank foreigners 25,682 25,034 15,203 17,628 16,573 16,557 16,795 16,879' 16,447 17,668 92 Other liabilities 7,546 7,086 7,298 9,492 9,239 10,090 10,369 9,392 9,422 9,748 93 Total payable in U.S. dollars 130,261 131,167 117,497 115,065 112,816 111,263 112,681 112,697 112,073 108,152 94 Negotiable CDs3 n.a. n.a. 33,070 31,906 33,380 31,574 30,570 29,337 28,845 27,655 95 To United States 53,029 54,691 24,105 23,119 23,329 22,854 25,581 27,756' 28,150 24,%7 % Parent bank 12,814 13,839 14,339 13,773 13,995 13,350 17,651 18,956 19,461 16,513 97 Other banks in United States 12,026 11,044 2,980 2,628 3,309 2,479 2,295 2,826 2,090 1,835 98 Nonbanks 28,189 29,808 6,786 6,718 6,025 7,025 5,635 5,974' 6,599 6,619 99 To foreigners 73,477 73,279 56,923 56,208 52,245 52,469 52,091 51,98C 50,762 51,686 100 Other branches of parent bank 14,300 15,403 18,294 18,241 15,999 15,480 16,687 18,493 16,614 16,829 101 Banks 28,810 29,320 18,356 16,975 15,787 17,053 15,840 14,344 14,872 14,457 102 Official institutions 9,668 8,279 8,871 9,005 9,055 8,877 8,357 7,661 8,242 8,747 103 Nonbank foreigners 20,699 20,277 11,402 11,987 11,404 11,059 11,207 11,482' 11,034 11,653 104 Other liabilities 3,755 3,197 3.399 3,832 3,862 4,366 4,439 3,624 4,316 3,844 Bahamas and Caymans 105 Total, all currencies 145,156 152,083 146,811 138,78C 135,519 135,262 133,645 142,055 130,413 128,851 106 Negotiable CDs3 n.a. n.a. 615 356 686 745 747 610 1,076 1,237 107 To United States 104,425 111,299 102,955 96,044' 94,375 92,978 92,508 103,548 91,943 91,705 108 Parent bank 47,081 50,980 47,162 43,582' 44,647 43,083 43,509 44,546 38,850 39,380 109 Other banks in United States 18,466 16,057 13,938 12,152 12,092 11,946 11,874 12,778 11,185 10,854 110 Nonbanks 38,878 44,262 41,855 40,310' 37,636 37,949 37,125 46,224 41,908 41,471 111 To foreigners 38,274 38,445 40,320 39,659' 37,668 38,787 37,307 35,053 35,271 33,773 112 Other branches of parent bank 15,796 14,936 16,782 17,632 16,023 17,201 15,593 14,075 14,755 13,072 113 Banks 10,166 11,876 12,405 11,443 11,420 11,120 10,954 10,669 11,108 10,842 114 Official institutions 1,967 1,919 2,054 1,687 1,763 1,872 2,278 1,776 1,505 1,737 115 Nonbank foreigners 10,345 11,274 9,079 8,897' 8,462 8,594 8,482 8,533 7,903 8,122 116 Other liabilities 2,457 2,339 2,921 2,721 2,790 2,752 3,083 2,844 2,123 2,136 117 Total payable in U.S. dollars 141,908 148,278 143,582 134,893' 131,226 130,992 129,575 138,322 126,536 124,572 3. 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 1985 1986 IItteemm 11998833 11998844 Aug. Sept. Oct. Nov. Dec. Jan.? Feb.? 1 Total1 177,950 180,552 181,131 180,328 178,331 179,931 178,743 180,768 179,921 By type 2 Liabilities reported by banks in the United States2 25,534 26,089 23,340 25,889 27,014 29,276 26,611 28,228 26,469 3 U.S. Treasury bills and certificates3 54,341 59,976 60,921 56,493 54,398 54,331 53,252 53,294 54,420 U.S. Treasury bonds and notes 4 Marketable 68,514 69,019 75,117 76,181 74,972 74,695 77,447 77,809 78,400 5 Nonmarketable4 7,250 5,800 3,550 3,550 3,550 3,550 3,550 3,550 2,750 6 U.S. securities other than U.S. Treasury securities5 22,311 19,668 18,382 18,215 18,397 18,079 17,883 17,887 17,882 By area 7 Western Europe1 67,645 69,776 75,234 74,514 74,257 76,832 74,290 74,328 72,454 8 Canada 2,438 1,528 1,664 1,561 1,586 1,507 1,314 1,118 1,762 9 Latin America and Caribbean 6,248 8,561 9,531 10,539 10,100 10,871 11,121 11,506 10,218 10 Asia 92,572 93,954 89,606 88,326 87,288 85,836 86,995 89,083 90,243 11 Africa 958 1,264 1,110 1,397 1,410 1,629 1,824 1,897 1,779 12 Other countries6 8,089 5,469 4,166 3,991 3,690 3,256 3,199 2,836 3,465 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 1985 IItteemm 11998822 11998833 11998844 Mar. June Sept. Dec.? 1 Banks' own liabilities 4,844 5,219 8,586 7,992 10,238 12,168 15,168 2 Banks' own claims 7,707 7,231 11,984 12,565 14,179 15,125 16,088 3 Deposits 4,251 2,731 4,998 5,941 7,362 8,498 8,329 4 Other claims 3,456 4,501 6,986 6,625 6,817 6,627 7,759 5 Claims of banks' domestic customers1 676 1,059 569 440 243 328 832 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 1986 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States Payable in U.S. dollars Millions of dollars, end of period 1985 1986 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998822 11998833 11998844 Aug. Sept. Oct. Nov. Dec. Jan. Feb.P 1 All foreigners 307,056 369,607 407,306 420,118 420,801 418,485 421,398 434,671' 430,562 435,639 2 Banks' own liabilities 227,089 279,087 306,898 321,300 323,382 322,801 324,106 340,373' 334,778 339,276 i 4 T D i e m m e a n d d ep d o e s p it o s s 1 its 6 1 8 5 , , 7 8 9 8 7 9 9 1 0 7 , , 6 4 3 7 2 0 11 19 0 , , 5 4 7 1 1 3 11 1 9 7 , , 0 7 2 3 4 5 1 2 1 0 5, , 2 9 2 2 1 6 11 1 4 8 , , 4 4 3 5 8 0 1 2 1 0 4 , , 9 30 5 2 9 1 2 1 1 6 , , 1 7 0 1 7 6 ' ' 11 1 4 9 , , 3 6 3 4 4 7 11 1 6 9 , , 6 6 2 5 2 6 6 5 O O w th n e r f 2 o reign offices3 1 2 1 3 9 , , 1 2 8 1 4 9 1 2 4 5 5 , ,1 8 1 7 1 4 1 2 5 6 0 , , 2 6 6 4 8 6 1 2 5 5 8 , , 7 8 1 3 1 0 1 2 5 9 7 , , 7 48 5 1 4 1 2 6 8 0 , , 9 98 3 1 2 1 2 5 9 8 , , 8 9 5 8 6 9 1 2 7 9 3 , , 4 0 6 8 8 2 ' ' 1 3 7 0 0 , , 7 0 2 7 1 6 1 3 7 1 1 , , 3 61 8 8 0 8 7 Ba U nk .S s . ' T cu r s e t a o s d u y ry l i b a i b ll i s li t a ie n s d 4 certificates5 5 79 5 , , 9 6 6 2 7 8 6 9 8 0 , , 6 5 6 2 9 0 1 7 0 6 0 , , 3 40 6 8 8 7 98 5 , , 8 6 1 9 8 9 77 9 33 7 ,, , 33 4 99 1 88 9 77 9 22 5 ,, , 11 6 66 8 33 4 77 97 33 , ,, 2 11 9 88 2 99 66 9 88 4 ,, , 77 2 88 9 55 8 66 9 99 5 ,, , 88 7 00 8 11 4 77 9 22 6 ,, , 66 3 33 6 11 2 9 Other negotiable and readily transferable instruments6 20,636 17,467 18,747 16,707 17,160 16,755 16,979 17,964 17,930 15,547 10 Other 3,702 4,385 5,293 6,412 6,861 6,766 7,124 7,549 8,054 8,184 11 Nonmonetary international and regional organizations7 4,922 5,957 4,454 7,353 7,467 6,766 7,803 5,566 7,487 9,997 12 Banks' own liabilities 1,909 4,632 2,014 5,569 3,275 1,842 1,535 2,366 2,714 4,456 13 Demand deposits 106 297 254 252 243 143 252 85 96 184 14 Time deposits1 1,664 3,584 1,267 4,366 2,261 1,299 1,051 2,067 2,369 4,022 15 Other2 139 750 493 951 771 399 233 214 250 250 16 Banks' custody liabilities4 3,013 1,325 2,440 1,784 4,192 4,924 6,268 3,200 4,773 5,540 17 U.S. Treasury bills and certificates 1,621 463 916 742 22,,775599 33,,663366 55,,006699 11,,773366 33,,221166 44,,221199 18 Other negotiable and readily transferable instruments6 1,392 862 1,524 1,042 1,433 11,,228877 1,195 1,464 11,,555566 1,322 19 Other 0 0 0 1 0 11 5 0 11 0 20 Official institutions8 71,647 79,876 86,065 84,261 82,382 81,412 83,608 79,862' 81,522 80,889 21 Banks' own liabilities 16,640 19,427 19,039 17,836 20,262 21,178 23,323 20,825' 22,585 22,069 22 Demand deposits 1,899 1,837 1,823 1,538 2,151 1,707 2,018 2,077 1,638 1,601 23 Time deposits1 5,528 7,318 9,374 9,340 8,954 10,277 10,523 10,935' 10,675 10,332 24 Other2 9,212 10,272 7,842 6,959 9,157 9,195 10,783 7,813' 10,272 10,136 25 Banks' custody liabilities4 55,008 60,448 67,026 66,425 62,120 60,234 60,284 59,037 58,937 58,820 26 U.S. Treasury bills and certificates5 46,658 54,341 59,976 60,921 5566,,449933 5544,,339988 5544,,333311 5533,,225522 5533,,229944 5544,,442200 27 Other negotiable and readily transferable instruments6 8,321 6,082 6,966 5,291 5,492 5,767 5,848 5,711 5,526 4,052 28 Other 28 25 84 213 135 69 105 75 117 348 29 Banks9 185,881 226,887 248,893 256,475 257,733 257,323 255,059 274,991' 266,164 269,114 30 Banks' own liabilities 169,449 205,347 225,368 234,231 235,106 235,372 233,226 252,290' 243,460 246,454 31 Unaffiliated foreign banks 50,230 60,236 74,722 75,401 77,625 74,391 74,237 79,208' 73,384 74,836 32 Demand deposits 8,675 8,759 10,556 8,594 10,468 9,045 10,043 10,271 9,792 9,658 3 3 3 3 4 3 Ow O T n i t m h f e o e r r 2 d e i e g p n o s o i f t f s i ' c es3 1 2 1 1 8 9 3 , , , 3 2 1 8 1 6 6 9 9 1 3 4 1 7 5 4 , , , 4 1 0 1 3 3 1 9 8 1 4 5 1 7 0 7 , , , 0 0 6 9 7 4 5 1 6 1 4 5 1 9 8 6 , , , 8 9 8 7 3 3 3 5 0 1 4 5 1 8 7 8 , , , 7 4 3 8 7 7 1 9 7 1 4 6 1 7 0 7 , , , 8 9 5 8 3 1 1 3 4 1 4 5 1 6 8 7 , , , 7 3 9 9 9 8 7 7 9 1 4 7 1 8 3 9 , , , 9 0 9 6 7 8 2 5 2 ' ' ' 1 4 7 1 4 0 8 , , , 7 0 8 3 7 6 3 6 0 1 4 7 1 5 1 9 , , , 6 6 5 0 1 6 9 8 9 36 Banks' custody liabilities4 16,432 21,540 23,525 22,244 22,627 21,951 21,832R 22,701 22,704 22,661 37 U.S. Treasury bills and certificates 5,809 10,178 11,448 9,966 99,,995522 99,,889977 99,,442299'' 99,,555544 99,,222233 99,,550011 38 Other negotiable and readily transferable instruments6 7,857 7,485 7,236 6,569 6,462 5,906 5,853 6,153 5,990 5,876 39 Other 2,766 3,877 4,841 5,710 6,213 6,148 6,551 6,994 7,491 7,283 40 Other foreigners 44,606 56,887 67,894 72,029 73,219 72,984 74,928' 74,251' 75,390 75,638 41 Banks' own liabilities 39,092 49,680 60,477 63,664 64,740 64,409 66,021 64,892' 66,020 66,297 4'2 Demand deposits 5,209 6,577 6,938 7,351 8,064 7,555 8,646 8,673' 8,122 8,212 4 4 4 3 T O i t m he e r 2 d eposits 33,2 6 1 6 9 4 42,2 8 9 1 0 3 52,6 8 7 6 8 1 55,4 8 4 6 6 7 55 1 , , 2 4 2 4 7 9 55 1 , , 0 82 2 5 9 55 1 , , 9 4 3 4 2 4 54 1 , , 7 4 5 67 2 ' 56 1 , , 5 3 5 4 8 0 56 1 , , 6 4 5 2 9 5 45 Banks' custody liabilities4 5,514 7,207 7,417 8,365 8,479 8,575 8,907 9,359 9,370 9,341 46 U.S. Treasury bills and certificates 1,540 3,686 4,029 4,071 44,,119933 44,,223322 44,,336600 44,,224433 44,,006677 44,,449911 47 Other negotiable and readily transferable instruments6 3,065 3,038 3,021 3,805 3,774 3,795 4,084 4,636 4,858 4,297 48 Other 908 483 367 489 513 548 463 480 444 553 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 14,307 10,346 10,476 8,903 9,228 9,088 9,152 9,845 9,612 7,386 1. Excludes negotiable time certificates of deposit, which are included in 5. Includes nonmarketable certificates of indebtedness and Treasury bills "Other negotiable and readily transferable instruments." issued to official institutions of foreign countries. 2. Includes borrowing under repurchase agreements. 6. Principally bankers acceptances, commercial paper, and negotiable time 3. U.S. banks: includes amounts due to own foreign branches and foreign certificates of deposit. subsidiaries consolidated in "Consolidated Report of Condition" filed with bank 7. Principally the International Bank for Reconstruction and Development, and regulatory agencies. Agencies, branches, and majority-owned subsidiaries of the Inter-American and Asian Development Banks. foreign banks: principally amounts due to head office or parent foreign bank, and 8. Foreign central banks and foreign central governments, and the Bank for foreign branches, agencies or wholly owned subsidiaries of head office or parent International Settlements. foreign bank. 9. Excludes central banks, which are included in "Official institutions." 4. Financial claims on residents of the United States, other than long-term securities, held by or through reporting banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.17 Continued 1985 1986 AArreeaa aanndd ccoouunnttrryy 11998822 11998833 11998844 Aug. Sept. Oct. Nov. Dec. Jan. Feb.? 1 Total 307,056 369,607 407,306 420,118 420,801 418,485 421,398 434,671' 430,562 435,639 2 Foreign countries 302,134 363,649 402,852 412,765 413,334 411,719 413,595 429,105' 423,075 425,642 3 Europe 117,756 138,072 153,145 160,095 157,265 158,893 163,483 163,438' 161,204 156,783 4 Austria 519 585 615 711 767 613 655 693 692 769 5 Belgium-Luxembourg 2,517 2,709 4,114 5,416 5,725 5,262 5,556 5,214 5,137 4,732 6 Denmark 509 466 438 617 778 558 624 513 536 533 7 Finland 748 531 418 377 350 594 497 491 373 506 8 France 8,171 9,441 12,701 15,626 15,741 15,984 15,863 15,540 15,631 15,148 9 Germany 5,351 3,599 3,358 5,359 5,224 4,366 7,265 4,835 5,622 5,309 in Greece 537 520 699 531 593 536 574 664 612 551 ii Italy 5,626 8,462 10,762 9,537 9,088 9,717 9,069 9,642' 7,739 7,210 i? Netherlands 3,362 4,290 4,731 4,588 4,568 4,295 4,359 4,212' 4,069 4,024 n Norway 1,567 1,673 1,548 1,156 1,043 1,132 1,008 848 781 552 14 Portugal 388 373 597 672 641 647 619 652 669 685 15 Spain 1,405 1,603 2,082 2,034 2,140 2,094 2,122 2,113 1,899 1,792 16 Sweden 1,390 1,799 1,676 2,008 1,668 1,760 1,482 1,344 1,622 1,693 17 Switzerland 29,066 32,246 31,740 29,475 29,290 28,495 28,992 28,742 26,119 25,606 18 Turkey 296 467 584 404 516 417 288 429 504 404 19 United Kingdom 48,172 60,683 68,671 73,530 70,540 73,913 74,645 76,571' 80,549 79,706 70 Yugoslavia 499 562 602 622 647 626 675 673 595 600 71 Other Western Europe1 7,006 7,403 7,192 6,884 7,432 7,403 8,619 9,635' 7,643 6,472 77 U.S.S.R 50 65 79 45 37 51 36 105 43 64 23 Other Eastern Europe2 576 596 537 503 477 429 533 523 369 427 24 Canada 12,232 16,026 16,059 16,739 17,358 16,288 16,428r 17,426 18,037 21,464 75 Latin America and Caribbean 114,163 140,088 153,381 157,638 157,480 157,227 155,209 167,745' 161,112 160,488 76 Argentina 3,578 4,038 4,394 5,187 5,634 5,872 5,899 6,029 5,786 5,549 77 Bahamas 44,744 55,818 56,897 55,497 53,694 54,518 53,398 57,621 53,532 54,288 78 Bermuda 1,572 2,266 2,370 2,741 2,124 2,238 2,415 2,765 2,596 2,383 79 Brazil 2,014 3,168 5,275 5,918 5,894 5,861 5,614 5,369 6,049 5,885 30 British West Indies 26,381 34,545 36,773 38,359 38,931 37,163 35,863 42,645 40,469 40,762 31 Chile 1,626 1,842 2,001 1,966 1,907 1,940 2,867 2,042 2,019 1,997 37 Colombia 2,594 1,689 2,514 2,543 2,599 2,562 2,920 3,102 3,336 3,129 33 Cuba 9 8 10 9 13 64 7 11 16 6 34 Ecuador 455 1,047 1,092 1,043 1,251 1,029 1,255 1,238 1,211 1,172 35 Guatemala 670 788 896 995 1,005 957 1,087 1,071 1,146 1,132 36 Jamaica 126 109 183 152 144 122 150 122 244 126 37 Mexico 8,377 10,392 12,303 13,381 13,809 13,610 13,948 14,045 13,702 13,253 38 Netherlands Antilles 3,597 3,879 4,220 4,364 4,973 4,666 4,617 4,875 4,696 4,560 39 Panama 4,805 5,924 6,951 7,430 7,168 8,251 6,506 7,492' 7,416 7,147 40 Peru 1,147 1,166 1,266 1,143 1,159 1,093 1,124 1,166 1,124 1,100 41 Uruguay 759 1,244 1,394 1,557 1,576 1,498 1,534 1,549 1,730 1,726 47 Venezuela 8,417 8,632 10,545 10,940 11,121 11,404 11,345 11,919 11,467 11,739 43 Other Latin America and Caribbean 3,291 3,535 4,297 4,414 4,479 4,381 4,661 4,683' 4,571 4,533 44 48,716 58,570 71,187 70,473 73,292 71,643 71,047 72,266' 74,874 78,821 China 45 Mainland 203 249 1,153 1,117 1,937 1,809 1,380 1,594 1,003 1,624 46 Taiwan 2,761 4,051 4,990 6,065 6,280 6,455 7,427 7,799 9,094 9,661 47 Hong Kong 4,465 6,657 6,581 8,001 7,924 7,964 8,170 8,062' 8,215 8,193 48 India 433 464 507 484 644 473 562 711 606 629 49 Indonesia 857 997 1,033 1,337 1,363 1,570 1,381 1,466 1,524 1,738 50 Israel 606 1,722 1,268 885 1,189 2,118 1,595 1,595' 1,458 1,358 SI 16,078 18,079 21,640 22,537 23,597 22,059 21,689 23,077' 25,047 26,472 57 Korea 1,692 1,648 1,730 1,580 1,657 1,751 1,685 1,665' 1,503 1,602 53 Philippines 770 1,234 1,383 1,694 1,607 1,325 1,189 1,140' 928 1,086 54 Thailand 629 747 1,257 1,073 1,029 1,014 1,066 1,358 1,199 1,141 55 Middle-East oil-exporting countries3 13,433 12,976 16,804 14,817 15,352 15,252 14,941 14,523 15,175 16,292 56 Other Asia 6,789 9,748 12,841 10,885 10,713 9,852 9,961 9,276' 9,122 9,025 57 Africa 3,124 2,827 3,396 3,501 3,635 3,723 3,989 4,883' 4,643 4,347 58 Egypt 432 671 647 737 923 885 780 1,363 1,080 986 59 Morocco 81 84 118 162 157 140 145 163 98 92 60 South Africa 292 449 328 420 370 404 462 388 567 421 61 Zaire 23 87 153 103 115 136 140 163 73 92 67 Oil-exporting countries4 1,280 620 1,189 1,092 1,049 1,076 1,407 1,494 1,644 1,607 63 Other Africa 1,016 917 961 986 1,021 1,082 1,056 1,312' 1,182 1,150 64 Other countries 6,143 8,067 5,684 4,319 4,303 3,945 3,440 3,347 3,205 3,739 65 Australia 5,904 7,857 5,300 3,850 3,762 3,451 2,906 2,779 2,707 3,024 66 All other 239 210 384 469 541 494 534 568 498 714 67 Nonmonetary international and regional organizations 4,922 5,957 4,454 7,353 77,,446677 6,766 7,803 5,566 7,487 9,997 68 International 4,049 5,273 3,747 6,458 6,542 5,770 6,952 4,551 6,109 8,801 69 Latin American regional 517 419 587 739 796 646 580 894 909 863 70 Other regional5 357 265 120 156 129 350 271 121 470 333 1. Includes the Bank for International Settlements. Beginning April 1978, also 4. Comprises Algeria, Gabon, Libya, and Nigeria. includes Eastern European countries not listed in line 23. 5. Asian, African, Middle Eastern, and European regional organizations, 2. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German except the Bank for International Settlements, which is included in "Other Democratic Republic, Hungary, Poland, and Romania. Western Europe." 3. 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

A60 International Statistics • June 1986 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 1985 1986 AArreeaa aanndd ccoouunnttrryy 11998822 11998833 11998844 Aug. Sept. Oct. Nov. Dec. Jan. Feb.? 1 Total 355,705 391,312 399,422 387,607 392,778 380,556 384,041 403,209' 385,805 389,537 2 Foreign countries 355,636 391,148 398,623 387,168 392,395 379,787 383,429' 402,178' 384,513 388,922 3 Europe 85,584 91,927 98,274 100,711 105,734 101,668 106,440 108,360' 103,643 100,097 4 Austria 229 401 433 703 763 673 614 598 485 561 5 Belgium-Luxembourg 5,138 5,639 4,794 5,501 6,147 5,882 6,801 5,741' 5,831 5,257 6 Denmark 554 1,275 648 492 615 636 558 706 864 940 7 Finland 990 1,044 898 738 905 789 909 823 843 741 8 France 7,251 8,766 9,157 10,287 11,029 10,190 9,785 9,134' 9,107 7,980 9 Germany 1,876 1,284 1,306 948 999 1,036 1,355 1,257' 1,208 1,307 10 Greece 452 476 817 959 1,016 966 854 991 933 884 11 Italy 7,560 9,018 9,119 6,532 7,436 7,597 7,765 8,833 7,477 6,929 12 Netherlands 1,425 1,267 1,356 1,200 1,297 1,110 1,389 1,258' 1,248 1,249 13 Norway 572 690 675 683 858 788 755 697 692 652 14 Portugal 950 1,114 1,243 1,181 1,211 1,141 1,123 1,058 1,021 936 15 Spain 3,744 3,573 2,884 2,156 2,438 2,310 2,199 1,908 1,780 1,897 16 Sweden 3,038 3,358 2,230 2,496 2,474 2,643 2,546 2,203' 2,174 2,278 17 Switzerland 1,639 1,863 2,123 2,629 3,091 2,604 3,162 3,161 2,836 2,381 18 Turkey 560 812 1,130 1,234 1,303 1,355 1,269 1,200 1,512 1,517 19 United Kingdom 45,781 47,364 55,445 58,952 60,105 57,579 61,180 64,594' 61,717 60.455 20 Yugoslavia 1,430 1,718 1,886 1,954 1,899 1,867 1,879 1,964' 1,901 1,953 21 Other Western Europe1 368 477 596 629 699 1,206 1,082 998 717 734 22 U.S.S.R 263 192 142 239 199 165 128 130 169 287 23 Other Eastern Europe2 1,762 1,598 1,389 1,198 1,252 1,131 1,086 1,107 1,129 1,159 24 Canada 13,678 16,341 16,109' 17,005 16,940 15,941 16,209 16,466' 17,274 18,281 25 Latin America and Caribbean 187,969 205,491 207,862 196,966 196,388 190,759 191,663 202,401' 189,048 190,701 26 Argentina 10,974 11,749 11,050 11,293 11,855 11,236 11,486 11,462' 11,463 11,594 27 Bahamas 56,649 59,633 58,009 53,559 53,414 51,236 49,015 57,756' 49,864 49,784 28 Bermuda 603 566 592 502 480 1,017 498 499 r 542 380 29 Brazil 23,271 24,667 26,315 26,441 26,017 25,397 25,376 25,283' 25,209 25,159 30 British West Indies 29,101 35,527 38,205 35,861 35,096 34,258 37,063 38,640' 34,236 36,367 31 Chile 5,513 6,072 6,839 6,476 6,524 6,145 6,198 6,603' 6,525 6,487 32 Colombia 3,211 3,745 3,499 3,205 3,195 3,210 3,222 3,259 3,185 3,040 33 Cuba 3 0 0 0 0 4 0 0 0 0 34 Ecuador 2,062 2,307 2,420 2,430 2,486 2,411 2,419 2,390 2,439 2,369 35 Guatemala3 124 129 158 149 168 168 197 194 174 167 36 Jamaica3 181 215 252 228 228 222 222 224 228 213 37 Mexico 29,552 34,802 34,885 32,375 32,349 31,720 32,424 32,255' 31,826 32,072 38 Netherlands Antilles 839 1,154 1,350 1,135 1,170 1,387 1,071 1,340 1,022 1,043 39 Panama 10,210 7,848 7,707 6,923 7,108 6,526 6,519 6,650' 6,532 5,881 40 Peru 2,357 2,536 2,384 2,221 2,206 2,016 1,990 1,947 1,874 1,891 41 Uruguay 686 977 1,088 1,018 1,035 947 954 960' 966 956 42 Venezuela 10,643 11,287 11,017 11,028 11,052 10,838 10,876 10,871' 10,947 11,302 43 Other Latin America and Caribbean 1,991 2,277 2,091 2,122 2,005 2,022 2,135 2,067' 2,015 1,995 44 Asia 60,952 67,837 66,316 63,778 64,547 62,847 60,551 66,166' 65,903 7711,,118855 China 45 Mainland 214 292 710 560 1,148 997 748 639 750 820 46 Taiwan 2,288 1,908 1,849 1,527 1,525 1,329 1,258 1,535 1,297 1,286 47 Hong Kong 6,787 8,489 7,293 7,999 7,718 6,917 6,472 6,796 6,923 7,607 48 India 222 330 425 460 461 388 439 450 332 284 49 Indonesia 348 805 724 623 718 653 608 698 692 793 50 Israel 2,029 1,832 2,088 1,955 1,875 1,901 1,958 1,991' 1,834 1,697 51 Japan 28,379 30,354 29,066 27,785 27,002 28,558 26,741 31,209' 32,222 36,506 52 Korea 9,387 9,943 9,285 9,337 9,223 9,096 8,908 9,241' 8,857 9,099 53 Philippines 2,625 2,107 2,555 2,487 2,445 2,239 2,285 2,224 2,206 2,236 54 Thailand 643 1,219 1,125 745 781 756 788 840 793 766 55 Middle East oil-exporting countries4 3,087 4,954 5,044 4,116 4,845 4,576 4,239 4,298 3,975 3,869 56 Other Asia 4,943 5,603 6,152 6,185 6,805 5,436 6,106 6,245 6,021 6,220 57 Africa 5,346 6,654 6,615 5,718 5,700 5,463 5,421 5,407' 5,416 5,459 58 Egypt 322 747 728 585 634 668 685 721 677 690 59 Morocco 353 440 583 598 592 610 584 575 591 612 60 South Africa 2,012 2,634 2,795 2,214 2,062 1,968 1,848 1,942' 1,965 1,948 61 Zaire 57 33 18 25 22 21 21 20 18 19 62 Oil-exporting countries5 801 1,073 842 722 859 674 677 630 582 568 63 Other 1,802 1,727 1,649 1,574 1,531 1,521 1,606 1,520 1,584 1,621 64 Other countries 2,107 2,898 3,447 2,991 3,087 3,111 3,144 3,379' 3,230 3,199 65 Australia 1,713 2,256 2,769 2,227 2,304 2,293 2,341 2,401' 2,409 2,367 66 All other 394 642 678 764 783 818 803 978 821 832 67 Nonmonetary international and regional organizations6 68 164 800 438 382 768 612 1,030 1,292 616 1. Includes the Bank for International Settlements. Beginning April 1978, also 4. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and includes Eastern European countries not listed in line 23. United Arab Emirates (Trucial States). 2. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German 5. Comprises Algeria, Gabon, Libya, and Nigeria. Democratic Republic, Hungary, Poland, and Romania. 6. Excludes the Bank for International Settlements, which is included in 3. Included in "Other Latin America and Caribbean" through March 1978. "Other Western Europe." 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 1985 1986 TTyyppee ooff ccllaaiimm 11998822 11998833 11998844 Aug. Sept. Oct. Nov. Dec/ Jan. Feb.? 1 Total 333333399999996666666,,,,,,,000000011111115555555 444444422222226666666,,,,,,,222222211111115555555 444444433333332222222,,,,,,,333333333333338888888 444444422222226666666,,,,,,,222222244444446666666 444444433333332222222,,,,,,,000000099999990000000 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 333333355555555555555,,,,,,,777777700000005555555 333333399999991111111,,,,,,,333333311111112222222 333333399999999999999,,,,,,,444444422222222222222 387,607 333333399999992222222,,,,,,,777777777777778888888 380,556 384,041 444444400000003333333,,,,,,,222222200000009999999 385,805 389,537 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 44444445555555,,,,,,,444444422222222222222 55555557777777,,,,,,,555555566666669999999 66666662222222,,,,,,,222222233333337777777 60,961 66666662222222,,,,,,,111111199999996666666 60,132 59,920 66666660000000.......333333333333331111111 60,385 60,454 44 OOwwnn ffoorreeiiggnn ooffffiicceess11 111111122222227777777,,,,,,,222222299999993333333 111111144444446666666,,,,,,,333333399999993333333 111111155555556666666,,,,,,,222222211111116666666 155,375 111111155555559999999,,,,,,,555555522222220000000 156,011 158,752 111111177777776666666,,,,,,,555555533333335555555 163,369 168,998 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111122222221111111,,,,,,,333333377777777777777 111111122222223333333,,,,,,,888888833333337777777 111111122222224444444,,,,,,,111111199999992222222 118,005 111111111111118888888,,,,,,,000000044444448888888 113,117 114,714 111111111111116666666,,,,,,,222222244444444444444 112,012 110,437 66 DDeeppoossiittss 44444444444444,,,,,,,222222222222223333333 44444447777777,,,,,,,111111122222226666666 44444448888888,,,,,,,444444488888886666666 50,216 44444449999999,,,,,,,444444400000006666666 46,707 47,136 44444447777777,,,,,,,444444411111116666666 45,683 44,092 77 OOtthheerr 77777777777777,,,,,,,111111155555553333333 77777776666666,,,,,,,777777711111111111111 77777775555555,,,,,,,777777700000006666666 67,789 66666668888888,,,,,,,666666644444442222222 66,410 67,578 66666668888888,,,,,,,888888822222229999999 66,329 66,345 88 AAllll ootthheerr ffoorreeiiggnneerrss 66666661111111,,,,,,,666666611111114444444 66666663333333,,,,,,,555555511111114444444 55555556666666,,,,,,,777777777777777777777 53,266 55555553333333,,,,,,,000000011111113333333 51,296 50,654 55555550000000,,,,,,,000000099999998888888 50,039 49,648 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss22 .... 44444440000000,,,,,,,333333311111110000000 33333334444444,,,,,,,999999900000003333333 33333332222222,,,,,,,999999911111116666666 33333333333333,,,,,,,444444466666668888888 22222228888888,,,,,,,888888888888881111111 2222222,,,,,,,444444499999991111111 2222222,,,,,,,999999966666669999999 3333333,,,,,,,333333388888880000000 3333333,,,,,,,333333311111114444444 3333333,,,,,,,333333333333335555555 11 Negotiable and readily transferable 33333330000000,,,,,,,777777766666663333333 22222226666666,,,,,,,000000066666664444444 22222223333333,,,,,,,888888800000005555555 22222224444444,,,,,,,888888822222227777777 11111119999999.......333333333333332222222 12 Outstanding collections and other 7777777,,,,,,,000000055555556666666 5555555,,,,,,,888888877777770000000 5555555,,,,,,,777777733333332222222 5555555,,,,,,,333333322222227777777 6666666,,,,,,,222222211111114444444 13 MEMO: Customer liability on 33333338888888,,,,,,,111111155555553333333 33333337777777,,,,,,,777777711111115555555 33333337777777,,,,,,,111111100000003333333 33333330000000,,,,,,,555555511111117777777 22222228888888,,,,,,,111111188888880000000 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States4 .... 42,499 46,337 40,714 38,796R 38,205R 37,632R 37,856' 37,307 38,318 n.a. 1. U.S. banks: includes amounts due from own foreign branches and foreign 3. Principally negotiable time certificates of deposit and bankers acceptances. subsidiaries consolidated in "Consolidated Report of Condition" filed with bank 4. Includes demand and time deposits and negotiable and nonnegotiable regulatory agencies. Agencies, branches, and majority-owned subsidiaries of certificates of deposit denominated in U.S. dollars issued by banks abroad. For foreign banks: principally amounts due from head office or parent foreign bank, description of changes in data reported by nonbanks, see July 1979 BULLETIN, and foreign branches, agencies, or wholly owned subsidiaries of head office or p. 550. parent foreign bank. NOTE. Beginning April 1978, data for banks' own claims are given on a monthly 2. Assets owned by customers of the reporting bank located in the United basis, but the data for claims of banks' own domestic customers are available on a States that represent claims on foreigners held by reporting banks for the account quarterly basis only. of their domestic customers. 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 1985 MMaattuurriittyy;; bbyy bboorrrroowweerr aanndd aarreeaa 11998822 11998833 11998844 Mar. June Sept. Dec. 1 Total 228,150 243,715 243,952 240,325 231,724 231,768 227,238 By borrower 2 Maturity of 1 year or less1 173,917 176,158 167,858 165,951 158,622 161,675 160,162 3 Foreign public borrowers 21,256 24,039 23,912 23,688 23,784 26,466 26,312 4 All other foreigners 152,661 152,120 143,947 142,263 134,838 135,210 133,850 5 Maturity of over 1 year1 54,233 67,557 76,094 74,374 73,102 70,093 67,076 6 Foreign public borrowers 23,137 32,521 38,695 38.169 37,535 36,257 34,510 7 All other foreigners 31,095 35,036 37,399 36,206 35,567 33,836 32,566 By area Maturity of 1 year or less1 8 Europe 50,500 56,117 58,498 60,660 55,620 57,867 56,425 9 Canada 7,642 6,211 6,028 7,576 6,155 6,060 6,386 10 Latin America and Caribbean 73,291 73,660 62,791 60,342 63,510 62,963 63,040 11 Asia 37,578 34,403 33,504 30,903 27,569 29,049 27,779 17 Africa 3,680 4,199 4,442 4,109 4,003 3,954 3,753 13 All other2 1,226 1,569 2,593 2,360 1,764 1,782 2,779 Maturity of over 1 year1 14 Europe 11,636 13,576 9,605 8,545 8,739 8,078 7,643 15 Canada 1,931 1,857 1,882 2,181 2,116 1,932 1,804 16 Latin America and Caribbean 35,247 43,888 56,144 55,411 53,507. 52,049 50,662 17 3,185 4,850 5,323 5,221 5,123 5,212 4,502 18 Africa 1,494 2,286 2,033 1,963 1,996 1,665 1,538 19 All other2 740 1,101 1,107 1,053 1,622 1,157 926 1. Remaining time to maturity. 2. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • June 1986 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks' Billions of dollars, end of period 1984 1985 AArreeaa oorr ccoouunnttrryy 11998811 11998822 11998833 Mar. June7 Sept. Dec. Mar. June Sept. Dec.'' 1 Total 415.2 438.7 437.3 435.1 432.4 411.9 409.2 411.3 402.5 403.9 403.5 2 G-10 countries and Switzerland 175.5 179.7 168.0 166.0 157.9 148.2 148.0 152.8 146.9 153.1 155.7 3 Belgium-Luxembourg 13.3 13.1 12.4 11.0 10.9 9.8 8.8 9.4 9.0 9.6 9.2 4 France 15.3 17.1 16.3 15.9 14.2 14.3 14.1 14.6 13.6 14.9 12.6 5 Germany 12.9 12.7 11.3 11.7 10.9 10.0 9.0 8.9 9.6 9.9 11.0 6 Italy 9.6 10.3 11.4 11.2 11.5 9.7 10.1 10.0 8.5 8.4 9.7 7 Netherlands 4.0 3.6 3.5 3.4 3.0 3.4 3.9 3.8 3.7 3.4 3.9 8 Sweden 3.7 5.0 5.1 5.2 4.3 3.5 3.2 3.1 2.8 3.1 2.7 9 Switzerland 5.5 5.0 4.3 4.3 4.2 3.9 3.9 4.2 4.0 4.1 4.4 10 United Kingdom 70.1 72.1 65.4 65.1 60.6 57.5 60.0 65.1 65.7 68.0 66.9 11 Canada 10.9 10.4 8.3 8.6 8.9 8.1 7.9 9.0 8.0 7.5 8.0 12 Japan 30.2 30.2 29.9 29.7 29.3 27.9 27.2 24.8 22.0 24.3 27.3 13 Other developed countries 28.4 33.7 36.1 35.7 37.2 36.4 33.9 33.0 32.5 32.3 30.5 14 Austria 1.9 1.9 1.9 2.0 1.9 1.8 1.6 1.6 1.6 1.7 1.5 15 Denmark 2.3 2.4 3.4 3.4 3.1 2.9 2.2 2.1 1.9 2.1 2.4 16 Finland 1.7 2.2 2.4 2.1 2.3 1.9 1.9 1.8 1.8 1.8 1.6 17 Greece 2.8 3.0 2.8 3.0 3.3 3.2 2.9 2.9 2.9 2.8 2.6 18 Norway 3.1 3.3 3.3 3.2 3.2 3.2 3.0 2.9 2.9 3.4 2.9 19 Portugal 1.1 1.5 1.5 1.4 1.7 1.6 1.4 1.4 1.3 1.4 1.3 20 6.6 7.5 7.1 7.1 7.3 6.9 6.5 6.4 5.9 6.2 5.8 21 Turkey 1.4 1.4 1.7 1.9 2.0 2.0 1.9 1.9 2.0 2.1 1.9 22 Other Western Europe 2.1 2.3 1.8 1.8 1.9 1.7 1.7 1.7 1.8 1.7 2.0 23 South Africa 2.8 3.7 4.7 4.8 4.7 5.0 4.5 4.2 3.9 3.3 3.2 24 Australia 2.5 4.4 5.5 5.2 5.8 6.3 6.2 6.2 6.4 5.8 5.2 25 OPEC countries2 24.8 27.4 28.9 28.6 27.0 25.2 25.8 25.4 23.8 24.1 21.8 26 Ecuador 2.2 2.2 2.2 2.1 2.1 2.1 2.2 2.2 2.3 2.3 2.2 27 Venezuela 9.9 10.5 9.9 9.7 9.5 9.2 9.3 9.3 9.3 9.2 8.9 28 Indonesia 2.6 3.2 3.8 4.0 4.3 4.0 3.9 3.8 3.6 3.6 3.4 29 Middle East countries 7.5 8.7 10.0 9.8 8.4 7.4 8.2 7.8 6.6 6.7 5.7 30 African countries 2.5 2.8 3.0 3.0 2.7 2.5 2.3 2.3 2.2 2.3 1.6 31 Non-OPEC developing countries 96.3 107.1 111.6 112.2 113.5 112.7 112.9 111.8 111.0 111.2 106.8 Latin America 32 Argentina 9.4 8.9 9.5 9.5 9.2 9.1 8.7 8.6 8.6 9.3 8.9 33 Brazil 19.1 22.9 23.1 25.1 25.4 26.3 26.3 26.4 26.6 26.1 25.6 34 Chile 5.8 6.3 6.4 6.5 6.7 7.1 7.0 7.0 6.9 6.9 6.9 35 Colombia 2.6 3.1 3.2 3.1 3.0 2.9 2.9 2.8 2.7 2.6 2.7 36 Mexico 21.6 24.5 26.1 25.6 26.2 26.2 26.0 25.7 25.6 25.2 25.3 37 2.0 2.6 2.4 2.3 2.3 2.2 2.2 2.2 2.1 2.0 1.8 38 Other Latin America 4.1 4.0 4.2 4.4 4.1 3.9 3.9 3.7 3.6 3.5 3.4 Asia China 39 Mainiand .2 .2 .3 .3 .6 .5 .7 .7 .3 1.1 .5 40 Taiwan 5.1 5.3 5.3 4.9 5.4 5.3 5.3 5.4 5.5 5.2 4.5 41 .3 .6 1.0 1.0 1.0 1.1 1.0 1.0 1.0 1.2 1.4 42 2.1 2.3 1.9 1.6 1.9 1.7 1.8 1.7 2.3 1.5 1.6 43 Korea (South) 9.4 10.9 11.3 11.1 11.3 10.5 10.9 10.6 10.3 10.7 9.7 44 Malaysia 1.7 2.1 2.9 2.8 2.9 3.1 3.0 2.9 3.0 2.9 2.5 45 Philippines 6.0 6.3 6.2 6.7 6.3 5.9 6.0 6.1 6.0 6.1 5.8 46 Thailand 1.5 1.6 2.2 2.1 1.9 1.8 1.8 1.7 1.6 1.6 1.4 47 Other Asia 1.0 1.1 1.0 .9 1.1 1.0 1.2 1.1 1.0 1.1 1.1 Africa 48 Egypt 1.1 1.2 1.5 1.4 1.4 1.2 1.2 1.1 1.0 1.0 1.0 49 Morocco .7 .7 .8 .8 .8 .8 .8 .8 .8 .9 .9 50 Zaire .2 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 51 Other Africa3 2.3 2.4 2.3 2.2 1.9 1.9 2.1 2.2 2.0 2.0 1.9 52 Eastern Europe 7.8 6.2 5.3 4.9 4.9 4.5 4.4 4.3 4.3 4.6 4.1 53 U.S.S.R .6 .3 .2 .2 .2 .2 .1 .2 .3 .2 .1 54 Yugoslavia 2.5 2.2 2.4 2.3 2.3 2.3 2.3 2.2 2.2 2.5 2.2 55 Other 4.7 3.7 2.8 2.5 2.4 2.1 2.0 1.9 1.8 1.9 1.8 56 Offshore banking centers 63.7 66.8 70.5 71.4 74.6 67.4 67.0 66.9 66.8 61.4 67.4 57 Bahamas 19.0 19.0 21.8 24.6 27.5 23.8 21.5 21.9 22.0 16.9 21.6 58 Bermuda .7 .9 .9 .7 .7 1.0 .9 .7 .9 .8 .7 59 Cayman Islands and other British West Indies 12.4 12.9 12.2 12.0 12.2 11.1 11.7 12.4 12.4 12.5 13.4 60 Netherlands Antilles 3.2 3.3 4.2 3.3 3.3 3.1 3.4 3.3 3.2 2.3 2.3 61 Panama4 7.7 7.6 6.0 6.3 6.6 5.7 6.8 5.7 5.5 6.2 6.2 62 Lebanon .2 .1 .1 .1 .1 .1 .1 .1 .1 .0 .1 63 Hong Kong 11.8 13.9 15.0 14.4 13.9 13.1 12.8 12.9 13.1 13.2 13.3 64 Singapore 8.7 9.2 10.3 10.0 10.3 9.5 9.8 10.0 9.7 9.4 9.8 65 Others5 .1 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated6 18.8 17.9 17.0 16.3 17.4 17.4 17.3 17.1 17.3 17.6 17.1 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 1984 1985 Type, and area or country 998811 11998822 11998833 Sept. Dec. Mar. June Sept. 1 Total 28,618 27,512 25,346 31,438 29,357 26,243 24,591 25,012' 2 Payable in dollars 24,909 24,280 22,233 28,538 26,389 23,466 21,945 22,342' 3 Payable in foreign currencies 3,709 3,232 3,113 2,900 2,968 2,777 2,646 2,67C By type 4 Financial liabilities 12,157 11,066 10,572 16,488 14,509 11,722 11,489 11,743' 5 Payable in dollars 9,499 8,858 8,700 14,602 12,553 9,873 9,533 9,780' 6 Payable in foreign currencies 2,658 2,208 1,872 1,886 1,955 1,849 1,956 1,963' 7 Commercial liabilities 16,461 16,446 14,774 14,950 14,849 14,521 13,103 13,269 8 Trade payables 10,818 9,438 7,765 7,015 7,005 7,052 5,854 5,576 9 Advance receipts and other liabilities... 5,643 7,008 7,009 7,936 7,843 7,469 7,249 7,693 10 Payable in dollars 15,409 15,423 13,533 13,936 13,836 13,593 12,413 12,562 11 Payable in foreign currencies 1,052 1,023 1,241 1,014 1,013 928 690 707 By area or country Financial liabilities 12 Europe 6,825 6,501 5,742 6,697 6,728 6,138 5,934 6,534' 13 Belgium-Luxembourg 471 505 302 428 471 298 351 367 14 France 709 783 843 910 995 896 865 849 15 Germany 491 467 502 521 489 506 474 493 16 Netherlands 748 711 621 605 590 619 604 624' 17 Switzerland 715 792 486 514 569 541 566 593 18 United Kingdom 3,565 3,102 2,839 3,470 3,297 3,039 2,825 3,318' 19 Canada 963 746 764 825 863 840 850 826' 20 Latin America and Caribbean 3,356 2,751 2,5% 7,253 5,086 3,147 3,106 2,619' 21 Bahamas 1,279 904 751 3,052 1,926 1,341 1,107 1,145' 22 Bermuda 7 14 13 11 13 25 10 4 23 Brazil 22 28 32 33 35 29 27 23 24 British West Indies 1,241 1,027 1,041 3,271 2,103 1,521 1,734 1,234' 25 Mexico 102 121 213 260 367 25 32 28 26 Venezuela 98 114 124 130 137 3 3 3 27 Asia 976 1,039 1,424 1,662 1,777 1,555 1,555 1,728 28 Japan 792 715 991 1,174 1,209 1,033 965 1,098 29 Middle East oil-exporting countries2., 75 169 170 151 155 124 147 82 30 Africa 14 17 19 16 14 12 14 14 0 0 0 1 0 0 0 0 31 Oil-exporting countries3 24 12 27 35 41 31 30 22 32 All other4 Commercial liabilities 3,770 3,831 3,245 4,052 4,001 3,519 3,485 3,894 33 Europe 71 52 62 34 48 37 53 56 34 Belgium-Luxembourg 573 598 437 430 438 401 425 432 35 France 545 468 427 561 622 590 431 601 36 Germany 220 346 268 238 245 272 284 386 37 Netherlands 424 367 241 405 257 233 353 293 38 Switzerland 880 1,027 732 1,224 1,095 752 740 869 39 United Kingdom 40 Canada 897 1,495 1,841 1,906 1,975 1,727 1,494 1,384 41 Latin America and Caribbean 1,044 1,570 1,473 1,780 1,871 1,717 1,244 1,237 42 Bahamas 2 16 1 1 7 11 12 2 43 Bermuda 67 117 67 110 114 112 77 105 44 Brazil 67 60 44 68 124 101 90 120 45 British West Indies 2 32 6 8 32 21 1 15 46 Mexico 340 436 585 641 586 654 492 415 47 Venezuela 276 642 432 628 636 395 309 283 48 Asia 9,384 8,144 6,741 5,547 5,285 5,721 5,259 5,197 49 Japan 1,094 1,226 1,247 1,429 1,256 1,241 1,232 1,429 50 Middle East oil-exporting countries2'5. 7,008 5,503 4,178 2,364 2,372 2,786 2,396 2,099 51 Africa 703 753 553 597 588 765 633 570 52 Oil-exporting countries3 344 277 167 251 233 294 265 235 53 All other4 664 651 921 1,068 1,128 1,070 988 988 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 1986 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1984 1985 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998811 11998822 11998833 Sept. Dec. Mar. June Sept. 1 Total 36,185 28,725 34,911 30,939 29,839 28,672 26,968 28,967r 2 Payable in dollars 32,582 26,085 31,815 28,148 27,242 26,100 24,339 26,101r 3 Payable in foreign currencies 3,603 2,640 3,0% 2,792 2,597 2,571 2,629 2,866 By type 4 Financial claims 21,142 17,684 23,780 20,435 19,192 18,375 16,512 19,024' 5 Deposits 15,081 13,058 18,496 15,626 14,559 14,368 12,657 15,135' 6 Payable in dollars 14,456 12,628 17,993 15,187 14,140 13,871 12,101 14,432' 7 Payable in foreign currencies 625 430 503 439 420 497 556 704 8 Other financial claims 6,061 4,626 5,284 4,808 4,633 4,007 3,856 3,889' 9 Payable in dollars 3,599 2,979 3,328 3,116 3,190 2,442 2,375 2,351' 10 Payable in foreign currencies 2,462 1,647 1,956 1,693 1,442 1,565 1,480 1,538 11 Commercial claims 15,043 11,041 11,131 10,505 10,646 10,297 10,456 9,943 12 Trade receivables 14,007 9,994 9,721 9,012 9,177 8,784 9,089 8,406 13 Advance payments and other claims 1,036 1,047 1,410 1,493 1,470 1,513 1,367 1,537 14 Payable in dollars 14,527 10,478 10,494 9,845 9,912 9,787 9,863 9,319 15 Payable in foreign currencies 516 563 637 659 735 510 592 624 By area or country Financial claims 16 Europe 4,5% 4,873 6,488 5,783 5,754 5,774 5,445 6,452' 17 Belgium-Luxembourg 43 15 37 15 15 29 15 12 18 France 285 134 150 151 126 92 51 132' 19 Germany 224 178 163 192 224 196 175 158' 20 Netherlands 50 97 71 62 66 81 46 127' 21 Switzerland 117 107 38 64 66 46 16 53' 22 United Kingdom 3,546 4,064 5,817 5,068 4,856 5,042 4,867 5,725' 23 Canada 6,755 4,377 5,989 4,492 3,979 3,934 3,747 4,022' 24 Latin America and Caribbean 8,812 7,546 10,234 8,987 8,170 7,612 6,475 7,450' 25 Bahamas 3,650 3,279 4,771 3,435 3,282 3,018 2,153 2,290' 26 Bermuda 18 32 102 5 6 4 6 5' 27 Brazil 30 62 53 84 100 98 % 92 28 British West Indies 3,971 3,255 4,206 4,580 4,021 3,924 3,657 4,504' 29 Mexico 313 274 293 232 215 201 206 201 30 Venezuela 148 139 134 128 125 101 100 73' 31 Asia 758 698 764 900 %1 856 639 %9' 32 Japan 366 153 297 371 353 509 281 725 33 Middle East oil-exporting countries2 37 15 4 7 13 6 6 & 34 Africa 173 158 147 160 210 101 111 104' 35 Oil-exporting countries3 46 48 55 37 85 32 25 31 36 All other4 48 31 159 113 117 97 95 26 Commercial claims 37 Europe 5,405 3,826 3,670 3,618 3,801 3,360 3,689 3,294 38 Belgium-Luxembourg 234 151 135 128 165 149 212 158 39 France 776 474 459 411 440 375 408 385 40 Germany 561 357 349 368 374 358 375 340 41 Netherlands 299 350 334 298 335 340 301 286 42 Switzerland 431 360 317 289 271 253 376 208 43 United Kingdom 985 811 809 949 1,063 885 950 785 44 Canada %7 633 829 1,026 1,021 1,248 1,065 1,101 45 Latin America and Caribbean 3,479 2,526 2,695 2,027 2,052 1,973 2,124 2,063 46 Bahamas 12 21 8 14 8 9 11 18 47 Bermuda 223 261 190 88 115 164 65 63 48 Brazil 668 258 493 219 214 210 193 212 49 British West Indies 12 12 7 10 7 6 29 7 50 Mexico 1,022 775 884 595 583 493 616 566 51 Venezuela 424 351 272 245 206 192 224 246 52 3,959 3,050 3,063 2,901 3,073 2,985 2,721 2,726 53 Japan 1,245 1,047 1,114 1,089 1,191 1,154 %8 884 54 Middle East oil-exporting countries2 905 751 737 703 668 666 593 544 55 Africa 772 588 588 595 470 510 522 494 56 Oil-exporting countries3 152 140 139 135 134 141 139 131 57 All other4 461 417 286 338 229 221 336 265 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 1986 1985 1986 TTrraannssaaccttiioonnss,, aanndd aarreeaa oorr ccoouunnttrryy 11998844 11998855 Jan.- Aug. Sept. Oct. Nov. Dec. Jan. Feb.P Feb. U.S. corporate securities STOCKS 1 Foreign purchases 59,834 81,538 19,478 6,371 4,802 7,232 8,409 11,172' 8,723 10,755 2 Foreign sales 62,814 76,617 15,815 5,721 4,690 6,560 7,137 9,010' 6,987 8,828 3 Net purchases, or sales (-) -2,980 4,921 3,663 650 112 673 1,273 2,161' 1,736 1,927 4 Foreign countries -3,109 4,837 3,656 649 163 644 1,362 1,996' 1,748 1,908 5 -3,077 2,068 2,738 369 170 554 948 1,339 1,172 1,566 6 -405 -437 -130 -41 -120 -82 -85 -105 -63 -68 7 Germany -50 730 368 76 29 235 270 283 134 234 8 Netherlands -357 -122 230 18 25 33 47 125 109 121 9 Switzerland -1,542 -75 881 -23 -87 125 107 280 287 593 10 United Kingdom -677 1,674 1,248 295 293 210 579 700 614 634 11 Canada 1,691 355 60 68 34 -31 -70 93 121 -61 1? Latin America and Caribbean 495 1,671 144 109 -35 78 243 305' -69 213 13 Middle East1 -1,992 238 189 35 54 8 -174 227 208 -19 14 Other Asia -378 313 418 58 -26 -16 384 -25 264 154 15 -22 24 56 9 0 -4 -1 12 25 30 16 Other countries 175 168 51 1 -34 55 32 44 26 24 17 Nonmonetary international and regional organizations 129 84 7 1 -51 2288 -89 116655 --1122 2200 BONDS2 18 Foreign purchases 39,296 87,109 15,315 5,547 7,482 7,401 12,466 9,755' 6,029 9,286 19 Foreign sales 26,199 43,055 7,869 3,741 3,632 2,786 4,284 4,558' 2,939 4,930 20 Net purchases, or sales (-) 13,096 44,054 7,446 1,806 3,850 4,614 8,182 5,197' 3,090 4,356 21 Foreign countries 12,799 44,149 7,400 2,118 4,176 4,768 7,824 5,555' 3,193 4,208 7? Europe 11,697 40,002 5,933 1,834 3,949 3,662 6,835 5,176' 2,804 3,130 73 France 207 210 -6 169 42 8 -15 0 27 -33 24 Germany 1,724 2,001 44 103 159 308 897 408 -2 46 ?s Netherlands 100 222 88 25 -4 0 158 13 85 3 ?6 Switzerland 643 3,987 747 243 154 249 804 1,013 235 512 77 United Kingdom 8,429 32,717 5,055 1,368 3,519 3,036 4,903 3,696' 2,435 2,620 78 Canada -62 189 -29 -24 -31 42 110 19 2 -31 ?9 Latin America and Caribbean 376 484 45 -81 -64 81 124 68' 18 27 30 Middle East1 -1,030 -2,643 -174 -80 -187 11 -215 -435 -174 0 31 Other Asia 1,817 6,068 1,604 465 508 966 975 703 541 1,064 37, Africa 1 11 2 1 0 1 0 4 1 1 33 Other countries 0 38 18 3 1 6 -5 19 2 17 34 Nonmonetary international and regional organizations 297 -95 46 -312 -326 -154 358 -358 -103 114499 Foreign securities 35 Stocks, net purchases, or sales (-) -1,101 -3,909 -649 -213 -221 -72 -309 -413' 123 -772 36 Foreign purchases 14,816 21,009 5,440 1,689 1,564 2,172 2,171 2,740' 2,508 2,933 37 Foreign sales 15,917 24,919 6,089 1,902 1,785 2,244 2,480 3,153' 2,384 3,705 38 Bonds, net purchases, or sales (-) -3,930 -4,127 -958 305 -420 -689 162 -138' -67 -892 39 Foreign purchases 56,017 81,048 20,280 6,959 6,840 8,538 8,902 8,37C 9,7% 10,484 40 Foreign sales 59,948 85,175 21,238 6,654 7,260 9,227 8,740 8,507' 9,862 11,376 41 Net purchases, or sales (—), of stocks and bonds .... -5,031 -8,037 -1,607 92 -641 -761 -147 -551' 57 -1,664 42 Foreign countries -4,642 -9,100 -1,908 302 -876 -748 -370 -886' -31 -1,877 43 Europe -8,655 -9,941 -2,300 -258 -764 -577 -1,062 -424' -379 -1,921 44 Canada 542 -1,784 -538 36 2 -27 14 -394 -219 -319 45 Latin America and Caribbean 2,460 1,858 522 178 191 48 32 85' 220 302 46 1,356 650 958 387 -322 -193 812 -352' 395 563 47 Africa -108 75 18 9 -2 -5 37 42 7 10 48 Other countries -238 42 -567 -51 19 6 -204 156 -56 -512 49 Nonmonetary international and regional organizations -389 1,063 301 -210 235 -13 223 335 88 213 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 1986 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1986 1985 1986 11998844 11998855 Country or area Jan.- Aug. Sept. Oct. Nov. Dec. Jan. Feb.? Feb. Transactions, net purchases or sales (-) during period1 1 Estimated total2 21,501 29,767 -1,067 -3,345 6,533 -653 2,510 6,460' -1,359 292 2 Foreign countries2 16,496 29,284 2,939 1,027 3,988 -122 2,286 3,066' -884 3,823 3 Europe2 11,014 3,962 1,931 953 958 -701 -941 180 114 1,818 4 Belgium-Luxembourg 287 476 31 92 49 10 29 -44 33 -2 5 Germany2 2,929 1,917 592 937 294 17 -101 302 132 460 6 Netherlands 449 269 -235 386 127 -126 155 -82 26 -261 7 Sweden 40 976 -7 -89 -33 -41 -42 -41 -200 193 8 Switzerland2 656 760 183 72 25 116 -151 -116 68 115 9 United Kingdom 5,188 -2,143 1327 -82 283 -735 -530 50 -60 1,388 10 Other Western Europe 1,466 1,706 41 -363 214 58 -301 111 116 -75 11 Eastern Europe 0 0 -1 0 0 0 0 0 0 -1 12 Canada 1,586 -190 -591 -144 106 138 -394 -71 -461 -131 13 Latin America and Caribbean 1,418 4,312 691 524 562 125 735 90 107 584 14 Venezuela 14 238 -117 33 2 91 72 -41 -53 -63 15 Other Latin America and Caribbean 536 2,343 534 95 556 110 367 265 86 448 16 Netherlands Antilles 869 1,731 274 397 4 -76 296 -133 74 200 17 2,431 20,776 667 -416 2,225 244 2,935 2,833' -584 1,251 18 Japan 6,289 18,859 740 875 1,884 1,630 3,039 902 -861 1,601 19 -67 112 -20 -1 0 9 1 9 -8 -12 20 All other 114 311 262 111 137 63 -51 25 -52 314 21 Nonmonetary international and regional organizations 5,009 482 -4,006 -4,372 2,545 -530 223 3,393 -474 -3,532 22 International 4,612 -394 -3,960 -4,400 1,883 -430 -15 3,001 -194 -3,766 23 Latin American regional 0 18 65 0 -1 0 8 7 14 51 MEMO 24 Foreign countries2 16,496 29,284 2,939 1,027 3,988 -122 2,286 3,066' -884 3,823 25 Official institutions 505 8,389 954 104 1,064 -1,209 -276 2,712' 362 591 26 Other foreign2 15,992 20,896 1,986 923 2,924 1,087 2,562 355 -1,246 3,232 Oil-exporting countries 27 Middle East3 -6,270 -1,640 -79 -1,132 -838 -818 -457 740 222 -301 28 Africa4 -101 7 1 0 0 4 0 2 1 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, 1986 Rate on Mar. 31, 1986 Rate on Mar. 31, 1986 Country Country Country Per- Month Per- Month Per- Month cent effective cent effective cent effective Austria.. 4.0 Aug. 1985 France1 8.25 Mar. 1986 Norway 8.0 June 1983 Belgium . 9.75 Dec. 1985 Germany, Fed. Rep. of 3.5 Mar. 1986 Switzerland 4.0 Mar. 1983 Brazil... 49.0 Mar. 1981 Italy 14.0 Mar. 1986 United Kingdom2. Canada.. 10.44 Mar. 1986 Japan 4.0 Mar. 1986 Venezuela Oct. 1985 Denmark 7.0 Oct. 1983 Netherlands 4.5 Mar. 1986 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 1985 1986 CCoouunnttrryy,, oorr ttyyppee 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Eurodollars 9.57 10.75 8.27 8.14 8.08 8.02 7.99 8.02 7.89 7.42 2 United Kingdom 10.06 9.91 12.16 11.49 11.49 11.50 11.66 12.78 12.60 11.70 3 Canada 9.48 11.29 9.64 9.10 8.73 8.85 9.25 10.23 11.81 10.94 4 Germany 5.73 5.96 5.40 4.64 4.77 4.82 4.80 4.65 4.47 4.49 5 Switzerland 4.11 4.35 4.92 4.59 4.53 4.07 4.13 4.08 3.85 3.84 6 Netherlands 5.58 6.08 6.29 5.72 5.89 5.90 5.79 5.71 5.74 5.44 7 France 12.44 11.66 9.91 9.57 9.29 8.95 8.92 8.95 8.81 8.28 8 Italy 18.95 17.08 14.86 13.95 14.16 14.29 14.71 14.88 15.91 16.05 9 Belgium 10.51 11.41 9.60 9.33 8.97 8.66 9.14 9.75 9.75 9.75 10 Japan 6.49 6.32 6.47 6.31 6.47 7.29 7.36 6.54 6.04 5.47 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 1986 3.28 FOREIGN EXCHANGE RATES Currency units per dollar 1985 1986 CCoouunnttrryy//ccuurrrreennccyy 11998833 11998844 11998855 Oct. Nov. Dec. Jan. Feb. Mar. 1 Australia/dollar1 90.14 87.937 70.026 70.25 67.74 68.11 70.00 69.93 70.79 2 Austria/schilling 17.968 20.005 20.676 18.569 18.236 17.658 17.151 16.389 15.976 3 Belgium/franc 51.121 57.749 59.336 53.618 52.474 51.251 49.843 47.748 46.603 4 Brazil/cruzeiro 573.27 1841.50 6205.10 8203.57 8913.95 9915.71 11345.26 13020.00 13.843 5 Canada/dollar 1.2325 1.2953 1.3658 1.3667 1.3765 1.3954 1.4070 1.4043 1.4009 6 China, P.R./yuan 1.9809 2.3308 2.9434 3.0782 3.2086 3.2095 3.2095 3.2152 3.2202 7 Denmark/krone 9.1483 10.354 10.598 9.5880 9.3918 9.1221 8.9468 8.6048 8.4096 8 Finland/markka 5.5636 6.0007 6.1971 5.6836 5.5709 5.4824 5.4131 5.2465 5.1517 9 France/franc 7.6203 8.7355 8.9799 8.0641 7.9095 7.6849 7.4821 7.1575 6.9964 10 Germany/deutsche mark 2.5539 2.8454 2.9419 2.6446 2.5954 2.5122 2.4384 2.3317 2.2752 11 Greece/drachma 87.895 112.73 138.40 145.74 153.037 150.186 148.69 143.48 141.43 12 Hong Kong/dollar 7.2569 7.8188 7.7911 7.7908 7.8042 7.8064 7.8081 7.8042 7.8125 13 India/rupee 10.1040 11.348 12.332 12.033 12.1010 12.1524 12.243 12.370 12.289 14 Ireland/pound1 124.81 108.64 106.62 117.00 119.19 122.48 124.75 129.79 132.87 15 Italy/lira 1519.30 1756.10 1908.90 1785.43 1753.72 1713.50 1663.14 1588.21 1548.43 16 Japan/yen 237.55 237.45 238.47 214.68 204.07 202.79 199.89 184.85 178.69 17 Malaysia/ringgit 2.3204 2.3448 2.4806 2.4529 2.4341 2.4291 2.4489 2.4704 2.5367 18 Netherlands/guilder 2.8543 3.2083 3.3184 2.9819 2.9230 2.8293 2.7489 2.6343 2.5678 19 New Zealand/dollar1 66.790 57.837 49.752 56.931 57.230 52.633 51.657 53.177 52.820 20 Norway/krone 7.3012 8.1596 8.5933 7.9099 7.8076 7.6524 7.5541 7.2789 7.1711 21 Portugal/escudo 111.610 147.70 172.07 164.59 162.963 160.798 157.99 152.63 149.40 22 Singapore/dollar 2.1136 2.1325 2.2008 2.1387 2.1084 2.1213 2.1289 2.1401 2.1600 23 South Africa/rand1 89.85 69.534 45.57 38.38 37.57 37.05 42.40 47.94 49.04 24 South Korea/won 776.04 807.91 861.89 894.49 893.35 893.13 892.75 888.57 886.66 25 Spain/peseta 143.500 160.78 169.98 161.712 159.658 156.052 152.91 147.31 143.06 26 Sri Lanka/rupee 23.510 25.428 27.187 27.421 27.449 27.420 26.342 27.596 27.623 27 Sweden/krona 7.6717 8.2706 8.6031 7.9557 7.8127 7.6817 7.5938 7.3997 7.2610 28 Switzerland/franc 2.1006 2.3500 2.4551 2.1692 2.1306 2.1042 2.0660 1.9547 1.9150 29 Taiwan/dollar n.a. 39.633 39.889 40.195 39.981 39.906 39.405 39.239 39.027 30 Thailand/baht 22.991 23.582 27.193 26.569 26.315 26.715 26.676 26.492 26.418 31 United Kingdom/pound1 151.59 133.66 129.74 142.15 143.96 144.47 142.44 142.97 146.74 MEMO 32 United States/dollar2 125.34 138.19 143.01 130.71 128.08 125.80 123.65 118.77 116.05 1. Value in U.S. cents. 3. Currency reform. 2. Index of weighted-average exchange value of U.S. dollar against currencies NOTE. Averages of certified noon buying rates in New York for cable transfers. of other G-10 countries plus Switzerland. March 1973 = 100. Weights are 1972-76 Data in this table also appear in the Board's G.5 (405) release. For address, see global trade of each of the 10 countries. Series revised as of August 1978. For inside front cover. 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

69 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 1986 All SPECIAL TABLES Published Irregulary, 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, 1984 August 1985 A76 Assets and liabilities of U.S. branches and agencies of foreign banks, March 31, 1985 November 1985 A76 Assets and liabilities of U.S. branches and agencies of foreign banks, June 30, 1985 ... January 1986 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, September 30, 1985 May 1985 A74 Terms of lending at commercial banks, May 1985 August 1985 A70 Terms of lending at commercial banks, August 1985 November 1985 A70 Terms of lending at commercial banks, November 1985 March 1986 A70 Terms of lending at commercial banks, February 1986 May 1986 A70 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

70 Federal Reserve Board of Governors PAUL A. VOLCKER, Chairman HENRY C. WALLICH EMMETT J. RICE 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 BOB S. MOORE, 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 J. VIRGIL MATTINGLY, JR., Deputy General Counsel JAMES L. KICHLINE, Director RICHARD M. ASHTON, Associate General Counsel EDWARD C. ETTIN, Deputy Director OLIVER IRELAND, Associate General Counsel MICHAEL J. PRELL, Deputy Director RICKI R. TIGERT, Assistant General Counsel JARED J. ENZLER, Associate Director MARYELLEN A. BROWN, Assistant to the General Counsel DAVID E. LINDSEY, Associate Director ELEANOR J. STOCKWELL, Associate Director OFFICE OF THE SECRETARY THOMAS D. SIMPSON, Deputy Associate Director LAWRENCE SLIFMAN, Deputy Associate Director WILLIAM W. WILES, Secretary MARTHA BETHEA, 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 DIVISION OF CONSUMER LEVON H. GARABEDIAN, Assistant Director AND COMMUNITY AFFAIRS (Administration) GRIFFITH L. GARWOOD, Director JERAULD C. KLUCKMAN, Associate Director DIVISION OF INTERNATIONAL FINANCE GLENN E. LONEY, Assistant Director DOLORES S. SMITH, Assistant Director EDWIN M. TRUMAN, Director LARRY J. PROMISEL, Senior Associate Director DIVISION OF BANKING CHARLES J. SIEGMAN, Senior Associate Director SUPERVISION AND REGULATION DAVID H. HOWARD, Deputy Associate Director ROBERT F. GEMMILL, Staff Adviser WILLIAM TAYLOR, Director PETER HOOPER III, Assistant Director WELFORD S. FARMER, Deputy Director1 KAREN H. JOHNSON, Assistant Director FREDERICK R. DAHL, Associate Director RALPH W. SMITH, JR., Assistant Director DON E. KLINE, Associate Director FREDERICK M. STRUBLE, Associate Director WILLIAM A. RYBACK, Deputy Associate Director STEPHEN C. SCHEMERING, Deputy Associate Director RICHARD SPILLENKOTHEN, Deputy Associate Director HERBERT A. BIERN, Assistant Director JOE M. CLEAVER, Assistant Director ANTHONY CORNYN, Assistant Director JAMES I. GARNER, Assistant Director JAMES D. GOETZINGER, Assistant Director MICHAEL G. MARTINSON, Assistant Director ROBERT S. PLOTKIN, Assistant Director SIDNEY M. SUSSAN, Assistant Director LAURA M. HOMER, Securities Credit Officer 1. On loan from the Federal Reserve Bank of Richmond. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

71 and Official Staff MARTHA R. SEGER MANUEL H. JOHNSON WAYNE D. ANGELL 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 CHARLES L. HAMPTON, Senior Technical Adviser PORTIA W. THOMPSON, Equal Employment Opportunity DIVISION OF FEDERAL RESERVE Programs Officer BANK OPERATIONS CLYDE H. FARNSWORTH, JR., Director DIVISION OF PERSONNEL ELLIOTT C. MCENTEE, Associate Director DAVID L. ROBINSON, Associate Director DAVID L. SHANNON, Director C. WILLIAM SCHLEICHER, JR., Associate Director JOHN R. WEIS, Assistant Director CHARLES W. BENNETT, Assistant Director CHARLES W. WOOD, Assistant Director ANNE M. DEBEER, Assistant Director JACK DENNIS, JR., Assistant Director EARL G. HAMILTON, Assistant Director OFFICE OF THE CONTROLLER WILLIAM E. PASCOE III, Assistant Director JOHN H. PARRISH, Assistant Director GEORGE E. LIVINGSTON, Controller FLORENCE M. YOUNG, Adviser BRENT L. BOWEN, Assistant Controller DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director WALTER W. KREIMANN, Associate Director GEORGE M. LOPEZ, Assistant Director OFFICE OF THE EXECUTIVE DIRECTOR FOR INFORMATION RESOURCES MANAGEMENT ALLEN E. BEUTEL, Executive Director STEPHEN R. MALPHRUS, Assistant Director DIVISION OF HARDWARE AND SOFTWARE SYSTEMS BRUCE M. BEARDSLEY, Director THOMAS C. JUDD, Assistant Director ELIZABETH B. RIGGS, Assistant Director ROBERT J. ZEMEL, Assistant Director DIVISION OF APPLICATIONS DEVELOPMENT AND STATISTICAL SERVICES WILLIAM R. JONES, Director DAY W. RADEBAUGH, Assistant Director WILLIAM C. SCHNEIDER, JR., Assistant Director RICHARD C. STEVENS, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

155 Federal Reserve Bulletin • June 1986 Federal Open Market Committee FEDERAL OPEN MARKET COMMITTEE PAUL A. VOLCKER, Chairman E. GERALD CORRIGAN, Vice Chairman WAYNE D. ANGELL MANUEL H. JOHNSON EMMETT J. RICE ROGER GUFFEY THOMAS C. MELZER MARTHA R. SEGER KAREN N. HORN FRANK E. MORRIS HENRY C. WALLICH STEPHEN H. AXILROD, Staff Director and Secretary JOHN M. DAVIS, Associate Economist NORMAND R.V. BERNARD, Assistant Secretary RICHARD G. DAVIS, Associate Economist NANCY M. STEELE, Deputy Assistant Secretary THOMAS E. DAVIS, Associate Economist MICHAEL BRADFIELD, General Counsel DONALD L. KOHN, Associate Economist JAMES H. OLTMAN, Deputy General Counsel DAVID E. LINDSEY, Associate Economist JAMES L. KICHLINE, Economist ALICIA H. MUNNELL, Associate Economist EDWIN M. TRUMAN, Economist (International) MICHAEL J. PRELL, Associate Economist ANATOL B. BALBACH, Associate Economist CHARLES J. SIEGMAN, 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 ROBERT L. NEWELL, FIRST DISTRICT, President WILLIAM H. BOWEN, EIGHTH DISTRICT, Vice President ROBERT L. NEWELL, First District HAL C. KUEHL, Seventh District JOHN F. MCGILLICUDDY, Second District WILLIAM H. BOWEN, Eighth District GEORGE A. BUTLER, Third District DEWALT H. ANKENY, JR., Ninth District JULIEN L. MCCALL, Fourth District F. PHILLIPS GILTNER, Tenth District JOHN G. MEDLIN, JR., Fifth District NAT S. ROGERS, Eleventh District BENNETT A. BROWN, 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

A73 "i and Advisory Councils CONSUMER ADVISORY COUNCIL MARGARET M. MURPHY, Columbia, Maryland, Chairman LAWRENCE S. OKINAGA, Honolulu, Hawaii, Vice Chairman RACHEL G. BRATT, Medford, Massachusetts FREDERICK H. MILLER, Norman, Oklahoma JONATHAN BROWN, Washington, D.C. ROBERT F. MURPHY, Detroit, Michigan MICHAEL S. CASSIDY, New York, New York HELEN NELSON, Mill Valley, California THERESA FAITH CUMMINGS, Springfield, Illinois SANDRA PARKER, Richmond, Virginia NEIL J. FOG ARTY, Jersey City, New Jersey JOSEPH L. PERKOWSKI, Centerville, Minnesota STEVEN M. GEARY, Jefferson City, Missouri BRENDA SCHNEIDER, Detroit, Michigan KENNETH HALL, Jackson, Mississippi JANE SHULL, Phildelphia, Pennsylvania STEVEN W. HAMM, Columbia, South Carolina TED L. SPURLOCK, New York, New York ROBERT J. HOBBS, Boston, Massachusetts MEL STILLER, Boston, Massachusetts ROBERT W. JOHNSON, West Lafayette, Indiana CHRISTOPHER J. SUMNER, Salt Lake City, Utah JOHN M. KOLESAR, Cleveland, Ohio EDWARD J. WILLIAMS, Chicago, Illinois EDWARD N. LANGE, Seattle, Washington MERVIN WINSTON, Minneapolis, Minnesota FRED S. MCCHESNEY, Atlanta, Georgia MICHAEL ZOROYA, St. Louis, Missouri THRIFT INSTITUTIONS ADVISORY COUNCIL RICHARD H. DEIHL, Los Angeles, California, President MICHAEL R. WISE, Denver, Colorado, Vice President ELLIOTT G. CARR, Orleans, Massachusetts JAMIE J. JACKSON, Houston, Texas M. TODD COOKE, Philadelphia, Pennsylvania FRANCES LESNIESKI, East Lansing, Michigan JOHN C. DICUS, Topeka, Kansas DONALD F. MCCORMICK, Livingston, New Jersey HAROLD W. GREENWOOD, JR., Minneapolis, Minnesota HERSCHEL ROSENTHAL, Miami, Florida JOHN A. HARDIN, Rock Hill, South Carolina GARY L. SIRMON, Walla Walla, Washington Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 Federal Reserve Board Publications Copies are available from PUBLICATIONS SERVICES, THE BANK HOLDING COMPANY MOVEMENT TO 1978: A Mail Stop 138, Board of Governors of the Federal Reserve COMPENDIUM. 1978. 289 pp. $2.50 each; 10 or more to System, Washington, D.C. 20551. When a charge is indicat- one address, $2.25 each. ed, remittance should accompany request and be made INTRODUCTION TO FLOW OF FUNDS. 1980. 68 pp. $1.50 each; payable to the order of the Board of Governors of the Federal 10 or more to one address, $1.25 each. Reserve System. Remittance from foreign residents should PUBLIC POLICY AND CAPITAL FORMATION. 1981. 326 pp. be drawn on a U.S. bank. Stamps and coupons are not $13.50 each. accepted. SEASONAL ADJUSTMENT OF THE MONETARY AGGREGATES: REPORT OF THE COMMITTEE OF EXPERTS ON SEASONAL THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNC- ADJUSTMENT TECHNIQUES. 1981. 55 pp. $2.75 each. TIONS. 1984. 120 pp. FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; updat- ANNUAL REPORT. ed at least monthly. (Requests must be prepaid.) ANNUAL REPORT: BUDGET REVIEW, 1985-86. Consumer and Community Affairs Handbook. $60.00 per FEDERAL RESERVE BULLETIN. Monthly. $20.00 per year or year. $2.00 each in the United States, its possessions, Canada, Monetary Policy and Reserve Requirements Handbook. and Mexico; 10 or more of same issue to one address, $60.00 per year. $18.00 per year or $1.75 each. Elsewhere, $24.00 per Securities Credit Transactions Handbook. $60.00 per year. year or $2.50 each. Federal Reserve Regulatory Service. 3 vols. (Contains all BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint three Handbooks plus substantial additional material.) of Part I only) 1976. 682 pp. $5.00. $175.00 per year. BANKING AND MONETARY STATISTICS. 1941-1970. 1976. Rates for subscribers outside the United States are as 1,168 pp. $15.00. follows and include additional air mail costs: ANNUAL STATISTICAL DIGEST Federal Reserve Regulatory Service, $225.00 per year. 1974-78. 1980. 305 pp. $10.00 per copy. Each Handbook, $75.00 per year. 1981. 1982. 239 pp. $ 6.50 per copy. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A 1982. 1983. 266 pp. $ 7.50 per copy. MULTICOUNTRY MODEL, May 1984. 590 pp. $14.50 each. 1983. 1984. 264 pp. $11.50 per copy. WELCOME TO THE FEDERAL RESERVE. 1984. 1985. 254 pp. $12.50 per copy. PROCESSING AN APPLICATION THROUGH THE FEDERAL RE- FEDERAL RESERVE CHART BOOK. Issued four times a year in SERVE SYSTEM. August 1985. 30 pp. February, May, August, and November. Subscription THE MONETARY AUTHORITY OF THE FEDERAL RESERVE, includes one issue of Historical Chart Book. $7.00 per May 1984. (High School Level.) year or $2.00 each in the United States, its possessions, WRITING IN STYLE AT THE FEDERAL RESERVE. August 1984. Canada, and Mexico. Elsewhere, $10.00 per year or 93 pp. $2.50 each. $3.00 each. REMARKS BY CHAIRMAN PAUL A. VOLCKER, AT XIII AMERI- HISTORICAL CHART BOOK. Issued annually in Sept. Subscrip- CAN-GERMAN BIENNIAL CONFERENCE, March 1985. tion to the Federal Reserve Chart Book includes one REMARKS BY CHAIRMAN PAUL A. VOLCKER, TO THE EMPIRE issue. $1.25 each in the United States, its possessions, CLUB OF CANADA AND THE CANADIAN CLUB OF TO- Canada, and Mexico; 10 or more to one address, $1.00 RONTO, October 28, 1985. each. Elsewhere, $1.50 each. SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SE- RIES OF CHARTS. Weekly. $15.00 per year or $.40 each in the United States, its possessions, Canada, and Mexico; 10 or more of same issue to one address, $13.50 per year or $.35 each. Elsewhere, $20.00 per year or $.50 each. CONSUMER EDUCATION PAMPHLETS THE FEDERAL RESERVE ACT, as amended through August 31, Short pamphlets suitable for classroom use. Multiple copies 1985. with an appendix containing provisions of certain available without charge. other statutes affecting the Federal Reserve System. 576 pp. $7.00. Alice in Debitland REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- Consumer Handbook on Adjustable Rate Mortgages ERAL RESERVE SYSTEM. Consumer Handbook to Credit Protection Laws ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— The Equal Credit Opportunity Act and Business Credit Regulation Z) Vol. I (Regular Transactions). 1969. 100 Fair Credit Billing pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each Federal Reserve Glossary volume $2.25; 10 or more of same volume to one Guide to Federal Reserve Regulations address, $2.00 each. How to File A Consumer Credit Complaint FEDERAL RESERVE MEASURES OF CAPACITY AND CAPACITY If You Borrow To Buy Stock UTILIZATION. 1978. 40 pp. $1.75 each; 10 or more to one If You Use A Credit Card address, $1.50 each. Instructional Materials of the Federal Reserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

75 Series on the Structure of the Federal Reserve System 130. EFFECTS OF EXCHANGE RATE VARIABILITY ON IN- The Board of Governors of the Federal Reserve System TERNATIONAL TRADE AND OTHER ECONOMIC VARIA- The Federal Open Market Committee BLES: A REVIEW OF THE LITERATURE, by Victoria S. Federal Reserve Bank Board of Directors Farrell with Dean A. DeRosa and T. Ashby McCown. Federal Reserve Banks January 1984. Out of print. Organization and Advisory Committees 131. CALCULATIONS OF PROFITABILITY FOR U.S. DOLLAR- U.S. Currency DEUTSCHE MARK INTERVENTION, by Laurence R. What Truth in Lending Means to You Jacobson. October 1983. 8 pp. 132. TIME-SERIES STUDIES OF THE RELATIONSHIP BE- TWEEN EXCHANGE RATES AND INTERVENTION: A REVIEW OF THE TECHNIQUES AND LITERATURE, by Kenneth Rogoff. October 1983. 15 pp. 133. RELATIONSHIPS AMONG EXCHANGE RATES, INTER- VENTION, AND INTEREST RATES: AN EMPIRICAL IN- PAMPHLETS FOR FINANCIAL INSTITUTIONS VESTIGATION, by Bonnie E. Loopesko. November Short pamphlets on regulatory compliance, primarily suit- 1983. Out of print. able for banks, bank holding companies and creditors. 134. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET INTERVENTION: A REVIEW OF THE LITERATURE, by Ralph W. Tryon. October 1983. 14 pp. The Board of Directors' Opportunities in Community Rein- 135. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET vestment INTERVENTION: APPLICATIONS TO CANADA, GERMA- The Board of Directors' Role in Consumer Law Compliance NY, AND JAPAN, by Deborah J. Danker, Richard A. Combined Construction/Permanent Loan Disclosure and Haas, Dale W. Henderson, Steven A. Symansky, and Regulation Z Ralph W. Tryon. April 1985. 27 pp. Community Development Corporations and the Federal Re- 136. THE EFFECTS OF FISCAL POLICY ON THE U.S. ECONOserve MY, by Darrell Cohen and Peter B. Clark. January Construction Loan Disclosures and Regulation Z 1984. 16 pp. Out of print. Finance Charges Under Regulation Z 137. THE IMPLICATIONS FOR BANK MERGER POLICY OF How to Determine the Credit Needs of Your Community FINANCIAL DEREGULATION, INTERSTATE BANKING, Regulation Z: The Right of Rescission AND FINANCIAL SUPERMARKETS, by Stephen A. The Right to Financial Privacy Act Rhoades. February 1984. Out of print. Signature Rules in Community Property States: Regulation B 138. ANTITRUST LAWS, JUSTICE DEPARTMENT GUIDE- Signature Rules: Regulation B LINES, AND THE LIMITS OF CONCENTRATION IN LO- Timing Requirements for Adverse Action Notices: Regula- CAL BANKING MARKETS, by James Burke. June 1984. tion B 14 pp. What An Adverse Action Notice Must Contain: Regulation B 139. SOME IMPLICATIONS OF FINANCIAL INNOVATIONS IN Understanding Prepaid Finance Charges: Regulation Z THE UNITED STATES, by Thomas D. Simpson and Patrick M. Parkinson. August 1984. 20 pp. 140. GEOGRAPHIC MARKET DELINEATION: A REVIEW OF THE LITERATURE, by John D. Wolken. November 1984. 38 pp. 141. A COMPARISON OF DIRECT DEPOSIT AND CHECK PAY- MENT COSTS, by William Dudley. November 1984. STAFF STUDIES: Summaries Only Printed in the 15 pp. Bulletin 142. MERGERS AND ACQUISITIONS BY COMMERCIAL Studies and papers on economic and financial subjects that BANKS, 1960-83, by Stephen A. Rhoades. December are of general interest. Requests to obtain single copies of 1984. 30 pp. the full text or to be added to the mailing list for the series 143. COMPLIANCE COSTS AND CONSUMER BENEFITS OF may be sent to Publications Services. THE ELECTRONIC FUND TRANSFER ACT: RECENT SURVEY EVIDENCE, by Frederick J. Schroeder. April 1985. 23 pp. Staff Studies 115-125 are out of print. 144. SCALE ECONOMIES IN COMPLIANCE COSTS FOR CON- SUMER CREDIT REGULATIONS: THE TRUTH IN LEND- 114. MULTIBANK HOLDING COMPANIES: RECENT EVI- ING AND EQUAL CREDIT OPPORTUNITY LAWS, by DENCE ON COMPETITION AND PERFORMANCE IN Gregory E. Elliehausen and Robert D. Kurtz. May BANKING MARKETS, by Timothy J. Curry and John T. 1985. 10 pp. Rose. Jan. 1982. 9 pp. 145. SERVICE CHARGES AS A SOURCE OF BANK INCOME 126. DEFINITION AND MEASUREMENT OF EXCHANGE MAR- AND THEIR IMPACT ON CONSUMERS, by Glenn B. KET INTERVENTION, by Donald B. Adams and Dale Canner and Robert D. Kurtz. August 1985. 31 pp. W. Henderson. August 1983. 5 pp. 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF 127. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- BUSINESS LOANS BY COMMERCIAL BANKS, 1977-84, VENTION: JANUARY-MARCH 1975, by Margaret L. by Thomas F. Brady. November 1985. 25 pp. Greene. August 1984. 16 pp. 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) 128. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- INDEXES OF THE MONETARY AGGREGATES, by Helen VENTION: SEPTEMBER 1977-DECEMBER 1979, by Mar- T. Farr and Deborah Johnson. December 1985. 42 pp. garet L. Greene. October 1984. 40 pp. 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF 129. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- THE ECONOMIC RECOVERY TAX ACT: SOME SIMULA- VENTION: OCTOBER I98O-OCTOBER 1981, by Margaret TION RESULTS, by Flint Brayton and Peter B. Clark. L. Greene. August 1984. 36 pp. December 1985. 17 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

76 149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS A Financial Perspective on Agriculture. 1/84. IN BANKING BEFORE AND AFTER ACQUISITION, by Survey of Consumer Finances, 1983. 9/84. Stephen A. Rhodes. April 1986. 32 pp. Bank Lending to Developing Countries. 10/84. 150. STATISTICAL COST ACCOUNTING MODELS IN BANK- Survey of Consumer Finances, 1983: A Second Report. ING: A REEXAMINATION AND AN APPLICATION, by 12/84. John T. Rose and John D. Wolken. May 1986. 13 pp. Union Settlements and Aggregate Wage Behavior in the 1980s. 12/84. The Thrift Industry in Transition. 3/85. A Revision of the Index of Industrial Production. 7/85. REPRINTS OF BULLETIN ARTICLES Financial Innovation and Deregulation in Foreign Industrial Most of the articles reprinted do not exceed 12 pages. Countries. 10/85. Recent Developments in the Bankers Acceptance Market. 1/86. The Commercial Paper Market since the Mid-Seventies. 6/82. The Use of Cash and Transaction Accounts by American Foreign Experience with Targets for Money Growth. 10/83. Families. 2/86. Intervention in Foreign Exchange Markets: A Summary of Financial Characteristics of High-Income Families. 3/86 Ten Stat Studies. 11/83. U. S. International Transactions in 1985. 5/86. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All ANTICIPATED SCHEDULE OF RELEASE DATES FOR PERIODIC RELEASES—BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM1 Approximate Date or period Weekly Releases release days to which data refer Aggregate Reserves of Depository Institutions and the Monetary Thursday Week ended previous Base. H.3 (502) [1.20] Wednesday Actions of the Board: Applications and Reports Received. H.2 Friday (501) Week ended previous Saturday Assets and Liabilities of Insured Domestically Chartered and Monday Foreign Related Banking Institutions. H.8 (510) [1.25] Wednesday, 3 weeks earlier 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 Debt Measures. H.6 (508) [1.21] Thursday Week ended Wednesday of 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 Subidiaries. 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 Outstanding Negotiable Time Certificates 3rd week of month Last Wednesday of previous of Deposit 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

78 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. 1 (780) 23rd of February, Previous quarter [1.58, 1.59] May, August, and November Flow of Funds Summary Statistics Z.7. (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 Securities Credit February End of previous June Extension. C.2 (101) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

79 Index to Statistical Tables References are to pages A3-A68 although the prefix 'A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 19, 20 Ownership by individuals, partnerships, and Assets and liabilities (See also Foreigners) corporations, 22 Banks, by classes, 18-20 Turnover, 15 Domestic finance companies, 37 Depository institutions Federal Reserve Banks, 10 Reserve requirements, 7 Financial institutions, 26 Reserves and related items, 3, 4, 5, 12 Foreign banks, U.S. branches and agencies, 21 Deposits (See also specific types) Nonfinancial corporations, 36 Banks, by classes, 3, 18-20, 21 Automobiles Federal Reserve Banks, 4, io Consumer installment credit, 40, 41 Turnover, 15 Production, 47, 48 Discount rates at Reserve Banks and at foreign central banks and foreign countries (See Interest rates) BANKERS acceptances, 9, 23, 24 Discounts and advances by Reserve Banks (See Loans) Bankers balances, 18-20 (See also Foreigners) Dividends, corporate, 35 Bonds (See also U.S. government securities) New issues, 34 EMPLOYMENT, 45 Rates, 24 Eurodollars, 24 Branch banks, 21, 55 Business activity, nonfinancial, 44 FARM mortgage loans, 39 Business expenditures on new plant and equipment, 36 Federal agency obligations, 4, 9, 10, 11, 31, 32 Business loans (See Commercial and industrial loans) Federal credit agencies, 33 Federal finance Debt subject to statutory limitation, and types and ownership of gross debt, 30 CAPACITY utilization, 46 Receipts and outlays, 28, 29 Capital accounts Treasury financing of surplus, or deficit, 28 Banks, by classes, 18 Treasury operating balance, 28 Federal Reserve Banks, 10 Federal Financing Bank, 28, 33 Central banks, discount rates, 67 Federal funds, 5, 17, 19, 20, 21, 24, 28 Certificates of deposit, 24 Federal Home Loan Banks, 33 Commercial and industrial loans Federal Home Loan Mortgage Corporation, 33, 38, 39 Commercial banks, 16, 19 Federal Housing Administration, 33, 38, 39 Weekly reporting banks, 19-21 Federal Land Banks, 39 Commercial banks Federal National Mortgage Association, 33, 38, 39 Assets and liabilities, 18-20 Federal Reserve Banks Commercial and industrial loans, 16, 18, 19, 20, 21 Condition statement, 10 Consumer loans held, by type, and terms, 40, 41 Discount rates (See Interest rates) Loans sold outright, 19 U.S. government securities held, 4, 10, 11, 30 Nondeposit funds, 17 Federal Reserve credit, 4, 5, 10, 11 Real estate mortgages held, by holder and property, 39 Federal Reserve notes, 10 Time and savings deposits, 3 Federal Savings and Loan Insurance Corporation insured Commercial paper, 23, 24, 37 institutions, 26 Condition statements (See Assets and liabilities) Federally sponsored credit agencies, 33 Construction, 44, 49 Finance companies Consumer installment credit, 40, 41 Assets and liabilities, 37 Consumer prices, 44, 50 Business credit, 37 Consumption expenditures, 51, 52 Loans, 40, 41 Corporations Paper, 23, 24 Nonfinancial, assets and liabilities, 36 Financial institutions Profits and their distribution, 35 Loans to, 19, 20, 21 Security issues, 34, 65 Selected assets and liabilities, 26 Cost of living (See Consumer prices) Float, 4 Credit unions, 26, 40 (See also Thrift institutions) Flow of funds, 42, 43 Currency and coin, 18 Currency in circulation, 4, 13 Foreign banks, assets and liabilities of U.S. branches and Customer credit, stock market, 25 agencies, 21 Foreign currency operations, 10 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 Banks, by classes, 18-21 Liabilities to, 20, 54, 55, 57, 58, 63, 65, 66 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 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 INCOME, personal and national, 44, 51, 52 Commercial banks, 18 Industrial production, 44, 47 Depository institutions, 3, 4, 5, 12 Installment loans, 40, 41 Federal Reserve Banks, 10 Insurance companies, 26, 30, 39 U.S. reserve assets, 54 Interest rates Residential mortgage loans, 38 Bonds, 24 Retail credit and retail sales, 40, 41, 44 Consumer installment credit, 41 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, 23 Thrift institutions) Time and savings deposits, 8 Savings banks, 26 International capital transactions of United States, 53-67 Savings deposits (See Time and savings deposits) International organizations, 57, 58, 60, 63, 64 Securities (See specific types) Inventories, 51 Federal and federally sponsored credit agencies, 33 Investment companies, issues and assets, 35 Foreign transactions, 65 Investments (See also specific types) New issues, 34 Banks, by classes, 18, 19, 20, 21, 26 Prices, 25 Commercial banks, 3, 16, 18-20, 39 Special drawing rights, 4, 10, 53, 54 Federal Reserve Banks, 10, 11 State and local governments Financial institutions, 26, 39 Deposits, 19, 20 Holdings of U.S. government securities, 30 LABOR force, 45 New security issues, 34 Life insurance companies (See Insurance companies) Ownership of securities issued by, 19, 20, 26 Loans (See also specific types) Rates on securities, 24 Banks, by classes, 18-20 Stock market, selected statistics, 25 Commercial banks, 3, 16, 18-20 Stocks (See also Securities) Federal Reserve Banks, 4, 5, 6, 10, 11 New issues, 34 Financial institutions, 26, 39 Prices, 25 Insured or guaranteed by United States, 38, 39 Student Loan Marketing Association, 33 MANUFACTURING Capacity utilization, 46 TAX receipts, federal, 29 Production, 46, 48 Thrift institutions, 3 (See also Credit unions, Mutual Margin requirements, 25 savings banks, and Savings and loan associations) Member banks (See also Depository institutions) Time and savings deposits, 3, 8, 13, 17, 18, 19, 20, 21 Federal funds and repurchase agreements, 5 Trade, foreign, 54 Reserve requirements, 7 Treasury cash, Treasury currency, 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, 24 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, 35 U.S. government securities Mutual savings banks, 8, 26, 39, 40 (See also Thrift Bank holdings, 18-20, 21, 30 institutions) Dealer transactions, positions, and financing, 32 Federal Reserve Bank holdings, 4, 10, 11, 30 Foreign and international holdings and transactions, 10, NATIONAL defense outlays, 29 30, 66 National income, 51 Open market transactions, 9 Outstanding, by type and holder, 26, 30 OPEN market transactions, 9 Rates, 24 U.S. international transactions, 53-67 PERSONAL income, 52 Utilities, production, 48 Prices Consumer and producer, 44, 50 VETERANS Administration, 38, 39 Stock market, 25 Prime rate, 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

81 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 George N. Hatsopoulos Robert W. Eisenmenger NEW YORK* 10045 John Brademas E. Gerald Corrigan Clifton R. Wharton, Jr. Thomas M. Timlen Buffalo 14240 Mary Ann Lambertsen 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 James E. Haas 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 30303 John H. Weitnauer, Jr. Robert P. Forrestal Bradley Currey, Jr. Jack Guynn Delmar Harrison Birmingham 35283 A. G. Trammell Fred R. Hen- Jacksonville 32231 E. William Nash, Jr. James D. Hawkins Miami 33152 Sue McCourt Cobb Patrick K. Barron Nashville 37203 Patsy R. Williams Jeffrey J. Wells New Orleans 70161 Sharon A. Perlis Henry H. Bourgaux CHICAGO* 60690 Robert J. Day Silas Keehn Marcus Alexis Daniel M. Doyle Detroit 48231 Robert E. Brewer 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 William C. Ballard, Jr. James E. Conrad Memphis 38101 G. Rives Neblett Paul I. Black, Jr. MINNEAPOLIS 55480 John B. Davis, Jr. Gary H. Stern Michael W. Wright Thomas E. Gainor Helena 59601 Marcia S. Anderson Robert F. McNellis KANSAS CITY 64198 Irvine O. Hockaday, Jr. Roger Guffey Robert G. Lueder Henry R. Czerwinski Denver 80217 James E. Nielson Wayne W. Martin Oklahoma City 73125 Patience S. Latting William G. Evans Omaha 68102 Kenneth L. Morrison Robert D. Hamilton DALLAS 75222 Robert D. Rogers Robert H. Boykin Bobby R. Inman William H. Wallace James L. Stull El Paso 79999 Peyton Yates Joel L. Koonce, Jr. Houston 77252 Walter M. Mischer, Jr. J.Z. Rowe San Antonio 78295 Lawrence L. Crum Thomas H. Robertson SAN FRANCISCO 94120 Alan C. Furth Robert T. Parry Fred W. Andrew Richard T. Griffith Los Angeles 90051 Richard C. Seaver Robert M. McGill 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 060%; 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

82 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories April 1984 i i ALASKA i i i i © / y yp y •AX 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