Federal Reserve Bulletin, 1986-08
VOLUME 72 • NUMBER 8 • AUGUST 1986 FEDERAL RESERVE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • Michael Bradfield • S. David Frost • Griffith L. Garwood • James L. Kichline • Edwin M. Truman 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 511 MAJOR BORROWING AND LENDING 534 Paul A. Volcker, Chairman, Board of Gov- TRENDS IN THE U.S. ECONOMY, ernors, reviews the expenses and budget of 1981-85 the Federal Reserve System, concentrating on the record of the System's expense and This article provides an overview of borbudget performance over time and prosrowing trends in the domestic nonfinancial pects for 1986, before the Subcommittee on economy—federal, state, and local govern- Domestic Monetary Policy of the House ment, nonfinancial business, and house- Committee on Banking, Finance and Urban holds—in which net debt rose $3 trillion Affairs, June 5, 1986. during the five years under review; it also examines major domestic and foreign 541 Chairman Volcker places the issues arising sources of funds to credit markets and the from a review of the basic legislative apasset and liability positions of nonfinancial proach toward banking and bank holding corporations and households. company legislation in broad perspective and says that he has repeatedly expressed 525 TREASURY AND FEDERAL RESERVE the conviction that the Congress should FOREIGN EXCHANGE OPERATIONS move with a sense of urgency to reform the existing statutes governing banking organi- The dollar moved substantially lower zations, before the Subcommittee on Comagainst all major currencies during the three merce, Consumer, and Monetary Affairs of months ending in April, declining more than the House Committee on Government Op- 8 percent against most European currencies erations, June 11, 1986. and almost 12 percent against the Japanese yen. 554 Governor Johnson presents the views of the Board on the bill to amend the Export 529 INDUSTRIAL PRODUCTION Trading Company Act of 1982 and says Industrial production decreased an estimat- that, in the view of the Board, amending the ed 0.6 percent in May. Bank Export Services Act is not necessary at this time and that its effectiveness should be evaluated in the future, before the Sub- 531 STATEMENTS TO CONGRESS committee on International Finance and Manuel H. Johnson, Member, Board of Monetary Policy of the Senate Committee Governors, discusses the Depository Insti- on Banking, Housing, and Urban Affairs, tutions Examination Improvement Act and June 17, 1986. the Truth in Savings Act and says that the Board is in general agreement with the basic 560 Chairman Volcker reviews the debt situaobjectives of the proposed legislation and tion of developing countries and says that has already taken steps to achieve many of substantial progress has been made over the those objectives, before the Subcommittee past four years although some serious probon Financial Institutions Supervision, Reg- lems remain that have been aggravated by ulation and Insurance of the House Com- the sharp decline in oil prices, before the mittee on Banking, Finance and Urban Af- House Committee on Foreign Affairs, June fairs, June 4, 1986. 18, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
565 William Taylor, Director of the Board's Ai FINANCIAL AND BUSINESS STATISTICS Division of Banking Supervision and Regu- A3 Domestic Financial Statistics lation, discusses the impact of the Interna- A44 Domestic Nonfinancial Statistics tional Lending and Supervision Act of 1983 A53 International Statistics on international lending practices and says that progress in the debt situation over the A69 GUIDE TO TABULAR PRESENTATION, past four years has been made but that STATISTICAL RELEASES, AND SPECIAL regulatory agencies will need to continue to TABLES work with all interested parties to arrive at constructive solutions to the remaining A76 BOARD OF GOVERNORS AND STAFF problems, before the Subcommittee on International Finance of the Senate Commit- A78 FEDERAL OPEN MARKET COMMITTEE tee on Banking, Housing, and Urban Af- AND STAFF; ADVISORY COUNCILS fairs, June 25, 1986. A80 FEDERAL RESERVE BOARD 569 ANNOUNCEMENTS PUBLICATIONS Nominations requested for appointments to Consumer Advisory Council. A83 INDEX TO STATISTICAL TABLES Amendments to Regulation J. A85 FEDERAL RESERVE BANKS, BRANCHES, Proposed action. AND OFFICES Revisions to money stock data. A86 MAP OF FEDERAL RESERVE SYSTEM Changes in Board staff. Admission of four state banks to membership in the Federal Reserve System. 573 LEGAL DEVELOPMENTS Various bank holding company, bank service corporation, and bank merger orders; and pending cases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Major Borrowing and Lending Trends in t tie U.S. Economy, 1981-85 This article was prepared by John F. Wilson, positions that have emerged from the saving, Elizabeth M. Fogler, James L. Freund, and borrowing, and lending activities of these sec- Guido E. van der Ven of the Board's Division of tors. Research and Statistics. Donald W. Dicker son provided research assistance. USES OF FUNDS IN CREDIT MARKETS The past five years have witnessed considerable Throughout the 1960s and 1970s, the debt of change in the scale and pattern of borrowing and domestic nonfinancial sectors had a fairly stable lending in U.S. financial markets. Although de- relationship to gross national product. In fact, mands for funds by both financial and nonfinan- during the 1970s total debt of domestic nonfinancial sectors of the economy typically grow with cial sectors fluctuated mostly between 136 pereconomic activity, such demands have been un- cent and 138 percent of GNP throughout the usually strong in recent years, giving rise to a decade (chart 1). The approximate stability of marked expansion of debt. Total credit market total debt relative to GNP during much of the debt of all sectors expanded from $4.7 trillion to postwar period reflected substantial increases in $8.2 trillion between the end of 1980 and the end nonfederal debt and offsetting declines in the of 1985, and that of domestic nonfinancial sec- federal component (chart 2). During recessions tors rose from $3.9 trillion to $6.9 trillion during the ratio of federal debt to GNP often would the same period. depart from its downward trend, but this tended The rapid debt growth of the past five years to be in conjunction with a drop in the ratios for has given rise to concerns about widespread the nonfederal sectors. During expansions the payment problems in the event of an economic federal debt ratio would resume its downward downturn. Also, the convergence of heavy feder- course while private borrowing strengthened. al and nonfederal credit demands has raised fears Since 1981, however, the growth of total debt has about "crowding out," that is, the potential far outpaced the rate of expansion of domestic shouldering aside of private borrowers through output. high interest rates, with the consequent impair- The unusual acceleration of debt in the 1980s ment of capital formation. Rapid debt growth was triggered by the heavy needs of the federal also has drawn attention to the increasing role of foreign capital in satisfying credit demands in 1. Domestic nonfinancial debt relative to U.S. capital markets. nominal GNP This article provides, first, a broad overview Percent of borrowing trends in the domestic economy during the past five years, focusing primarily on the federal government, state and local govern- 150 ments, nonfinancial businesses, and households. It then reviews the major sources of funds to credit markets and discusses structural changes that have facilitated the flow of credit to final users. It concludes with a closer look at the I , -I *v„ f, I I i I J' t I I I i balance sheets of nonfinancial corporations and 1975 1980 1985 households, that is, at the asset and liability Annual data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
512 Federal Reserve Bulletin • August 1986 2. Composition, by sector, of domestic funds. The amount of this borrowing differs nonfinancial debt from, and is usually higher than, the federal deficit in the national income and product accounts because the geographic and financial coverage of the two systems differ. For instance, government loan programs affect borrowing requirements but are not part of the national income measure of deficits, which in each of the past five years has been $8 billion to $25 billion lower than net federal borrowing. Borrowing, however, tends to run parallel to the underlying 1960 1970 1980 1985 deficits, which remain its principal determinant. Annual data. Since 1981, several factors have contributed to government during a period of deep recession, unprecedented federal deficits. Large cuts in but for several years the pace of borrowing by personal income taxes were enacted early in the businesses, state and local governments, and period, and businesses were offered liberal dehouseholds remained moderate. Since 1983, preciation allowances to stimulate capital formahowever, debt of these nonfederal sectors also tion. At the same time, there was a substantial has accelerated. On balance, as illustrated in defense buildup, and cuts in nondefense prochart 1 and table 1, these developments have grams were not large enough to offset the associsharply raised the amount of debt in the economy ated spending rise. The combination of these relative to output. The ratio of total domestic policy shifts and the severe economic downturn nonfinancial debt to GNP has risen from 138 of the 1981-82 period resulted in a massive percent in 1980 to 169 percent at the end of 1985. federal deficit. Between 1981 and 1982, net feder- Indeed, with the slowing of economic growth in al borrowing from the public almost doubled, to the past two years, the debt ratio has climbed at $161 billion, and the growth rate of federal debt, an unprecedented rate. which had been a little less than 12 percent in each of the previous two years, suddenly accel- Federal Government erated to \9Vi percent. The dollar value of federal borrowing has continued to rise in each year Federal borrowing in the flow of funds accounts through the subsequent economic recovery—to is "net borrowing from the public," which $224 billion in calendar 1985—although the perexcludes changes in holdings of government trust centage growth rate of federal debt has tapered 1. Domestic nonfinancial debt and borrowing 1971-75, 1976-80, Category 1981 1982 1983 1984 1985 average average Annual percentage change, end-of-period basis Debt Federal 8.4 10.8 11.8 19.4 18.8 16.9 16.2 Nonfederal 10.1 11.7 9.0 6.8 9.7 14.0 14.6 Households 9.8 13.5 8.3 5.6 11.3 13.0 14.1 Nonfinancial business 11.0 11.8 11.1 7.6 7.7 15.4 11.3 State and local governments 8.2 6.1 2.3 8.5 11.4 12.2 34.2 Total 9.7 11.6 9.5 9.2 11.6 14.7 15.0 MEMO: Growth of nominal GNP 10.3 11.2 9.3 3.2 10.0 9.0 5.4 Average annual amounts, billions of dollars Net borrowing Federal 29 199 224 Nonfederal 139 567 674 Households 57 239 294 Nonfinancial business 68 283 240 State and local governments 14 45 141 Total 168 766 898 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Major Borrowing and Lending Trends in the U.S. Economy, 1981-85 513 by slowing the growth of interest payments on FLOW OF FUNDS ACCOUNTS the national debt. The flow of funds accounts, published by the Federal Households Reserve Board, are a broad statistical system to integrate financial market activities with the national in- The rate of growth of household debt slowed come and product accounts prepared by the Bureau of each year from 1979 to 1982, but it has outpaced Economic Analysis of the U.S. Department of Commerce. Flow of funds accounts measure the financial GNP growth each year since, surging to more flows that accompany the economy's nonfinancial than 14 percent in 1985 (table 1). In addition, activities. In the household sector, for instance, con- household debt growth exceeded that of dispossumer credit tends to expand in support of personal able personal income over the past five years. consumption expenditures. In the federal sector, bor- Since 1980 the increase in income has averaged rowing tends to move with the government's deficit. about 8 percent per year, while household debt The financial accounts present a statement of has grown at an average rate of IOV2 percent. sources and uses of funds that correspond to national Growth in overall household debt was particuincome concepts. Each sector of the economy relarly low in the 1981-82 economic downturn, ceives income flows that support its current spending with both the home mortgage and consumer and saving. A sector's saving and net borrowing credit components expanding by less than 5 enable it to make investments which, through time, reflect collective preferences for tangible and financial percent in 1982, the recession trough. Since assets in relation to liabilities. By complementing BE A 1982, however, consumer credit has expanded data on tangible assets with statistics on financial rapidly, with annual increases of 14 to 20 percent assets and liabilities, the financial accounts also permit in the 1983-85 interval. Although home mortgage the construction of sectoral balance sheets. debt has not grown as rapidly as in the late 1970s, In addition to sectoral financing statements, the it also has maintained a brisk pace, nearing 12 accounts provide summaries of flows and balances by percent in 1985. Net borrowing for home mortmajor types of credit market instruments and transacgages, which had averaged about $100 billion per tions. The Federal Reserve Board publishes estimates year during the late 1970s, dropped to half that of sources and uses of funds quarterly in the Flow of amount during the 1982 downturn; it subsequent- Funds Accounts. Data on the "outstandings" counterly picked up sharply, increasing to $155 billion in parts to the flow figures are published annually in Financial Assets and Liabilities. Sectoral balance 1985 with the decline in interest rates and the sheets are published semiannually in Balance Sheets revival of residential construction activity. for the U.S. Economy. Some tax-exempt borrowing, such as student loan bonds and issues for nonprofit hospitals, is attributed to households in the flow of funds off to about 16 percent. For the 1981-85 period as statistics. For reasons covered in detail below, a whole, net federal demands on credit markets this form of debt also moved up sharply in the totaled $858 billion, and outstanding U.S. gov- last five years, reaching an estimated $75 billion ernment debt held by the public rose 115 percent, at the end of 1985, more than four times the to a total of $1.6 trillion. amount outstanding in 1980. Legislative developments have created a near- The rise in household debt relative to disposterm outlook for considerable diminution in the able income—together with signs that delinquengrowth rate of federal debt, even if the amount of cy rates on mortgages and consumer credit are borrowing remains high for the next several increasing—has raised questions about the susyears. The Gramm-Rudman-Hollings Deficit tainability of these burdens. A later section of Reduction Act, if fully implemented, targets the this article will discuss household liabilities and complete elimination of the federal deficit by assets in more detail. 1991. Even if this goal is not attained, debt growth could slow substantially and the amount Nonfinancial Business of federal debt outstanding recede in relation to GNP. The recent drop in interest rates, if main- Debt of nonfinancial businesses has grown less tained, also will help promote deficit reduction rapidly in the 1980s—about IOV2 percent per year Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
514 Federal Reserve Bulletin • August 1986 on average—than in the previous decade, and it 2. Financing gap and funds raised in markets by has shown considerable year-to-year volatility. nonfinancial corporations Nonetheless, business borrowing, which totaled Billions of dollars $930 billion in the 1981-85 period, has exceeded Capital Inter- Credit Net apparent financing needs. Year expen- nal Financ- market equity ing gap bor- issu- Corporations were responsible for almost 65 ditures funds rowing ance percent of the growth in business debt during the 1981... 311 250 61 104 -11 1981-85 period, but noncorporate borrowing 1982... 267 237 30 72 11 1983... 281 277 4 56 28 likewise grew quickly, buoyed by increased ac- 1984... 382 322 59 192 -77 tivity in multifamily residential and commercial 1985... 369 353 17 166 -82 real estate. In contrast, net borrowing by the Total.. 1,610 1,439 171 590 -131 farm sector slowed during the first half of the 1980s after expanding rapidly between the mid- Much of the growth in corporate business 1970s and 1981. Farm debt actually contracted in debt—especially during the past two years—can both 1984 and 1985 as farm operators experi- be attributed to the massive volume of equity enced serious economic difficulties. Although retirements associated with the heavy wave of the business sector of the flow of funds accounts mergers, acquisitions, leveraged buyouts, and includes farms and unincorporated enterprises, share repurchases that occurred throughout the the dollar volume of transactions in the sector is economy. Typically these operations are accomdominated by nonfinancial corporations, and the plished by purchasing (and retiring) stock in following discussion focuses on these entities. existing companies. Between 1983 and 1985 ap- The underlying borrowing needs of corpora- proximately $200 billion in stock of nonfinancial tions are often measured by the so-called financ- corporations was taken off the market in this ing gap, that is, the difference between capital fashion. Although it is not always possible to link expenditures and internal funds generated from borrowing directly to equity retirements, in retained earnings and depreciation allowances many cases (notably some mergers involving (table 2). This indicator of external financing companies with more than $1 billion in assets) needs climbed to around $60 billion during the large bank financings, commercial paper issues, 1979-81 period, but during the past four years it and bonds are known to have been used for such has averaged $27 billion, about average for the purposes. Moreover, indications from some past two decades and rather low in comparison large mergers suggest that, initially, the preponwith the increased scale of business output. On derance of equity retirements were financed by average, over the severe economic downturn and borrowing. For the past two years at least, this sharp recovery of the early 1980s, nominal activity has dominated the financing gap as the spending on fixed investment by corporations mainspring of business borrowing. rose 8V2 percent per year during the 1981-85 Subsequent financial adjustments by compaperiod, only half the inflation-fueled annual rate nies involved in mergers and buyouts are much of the previous four years. With the exception of less visible than initial borrowing details. Some 1984, credit demands associated with inventory of the initial debt may have been paid down from accumulation likewise have not been particularly cash flows and sales of assets; the balance possilarge. On the other hand, internally generated bly has been rolled over or transformed into funds have been relatively ample. Pretax profits longer maturities as interest rates have fallen, but measured on an economic basis rose to record it nonetheless remains on corporate balance levels during the 1983-85 period, and deprecia- sheets. tion continued to grow, also contributing to cash The use of private-purpose, tax-exempt obligaflow in the business sector. Notwithstanding tions, often known as industrial development these favorable developments, nonfinancial cor- bonds (IDBs), has flourished in the last five porations borrowed a net $590 billion between years. Such tax-exempt debt is attributed in the 1981 and 1985, or about 3 ¥2 times the total flow of funds accounts to the business sector, financing gap during this period (table 2). rather than to the state and local government Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Major Borrowing and Lending Trends in the U.S. Economy, 1981-85 515 sector, because individual enterprises bear the borrowing surge was induced by pending legislarepayment obligation. Net tax-exempt borrowing tion, mentioned above, that would further reby businesses totaled about $81 billion in the strict private-purpose issues such as housing 1981-85 period; the growth rate of this form of bonds, limit arbitrage and advance refundings, debt, 23 percent per year on average, was more and tighten the definition of what constitutes a than double the rate of expansion of other forms public-purpose bond. of business debt. As this overview suggests, special influences The use of tax-exempt bonds for private enter- have caused federal borrowing and several imprises has come under fire, and several pieces of portant components of nonfederal borrowing to legislation have imposed tighter restrictions on rise strongly in the past five years, contributing the volume of these bonds. For example, the Tax to the rapid rise in debt of both federal and Equity and Fiscal Responsibility Act of 1982 nonfederal sectors. Some of these influences limited the use of IDBs for auto service and food appear to be waning, and there is little reason to and beverage establishments, and for sports and believe that major surges and timing distortions recreational facilities. The Tax Reform Act of in certain forms of debt will continue indefinite- 1983 set state-by-state caps on permissible vol- ly. Legislation already in place is expected to umes and imposed further limitations on IDBs. have a restraining effect on federal borrowing, Although volume limits so far have proved large- and prospects are good for somewhat tighter ly nonbinding, prospective further restrictions limits on tax-exempt debt for both public and have encouraged the issuance of sizable quanti- private purposes. In addition, the general rise in ties of private-purpose tax-exempt securities in equity prices may lead to a slowing of the stock each of the past two years. The 1985 net volume—$25 billion—was particularly heavy, with almost half of the total concentrated in the last FOMC-MONITORED DEBT quarter. Since 1983 the Federal Open Market Committee set a monitoring range for total debt of domestic State and Local Governments nonfinancial sectors. This "credit" aggregate was established as a tool to assist the Committee in follow- Net borrowing by state and local governments ing developments in the economy and in financial has for some years moved up strongly despite the markets. As monitored by the FOMC and published in rising surpluses shown by these governments in the Board's H.6 release, "Money Stock, Liquid Asthe national income and product accounts. Bor- sets, and Debt Measures," debt is measured on a rowing soared from about $7 billion in 1981 to period-average basis rather than the period-end basis $45 billion in 1984 and to $141 billion in 1985* yet presented in the flow of funds accounts. Although during the last five years, investable surpluses of definitionally the same as domestic nonfinancial debt in this article, the published levels and growth rates of such governments have averaged about $11 bilthe FOMC aggregate may differ from those shown in lion per year. The rapid pace of borrowing by the accounts because of the averaging and the removal these governments often has been influenced by of statistical discontinuities that may arise in the refunding opportunities on outstanding debt, series. The table below shows the growth of the plans for future capital expenditures, and, before FOMC debt aggregate since 1983. recent tightenings of rules on asset acquisition, even by chances for financial arbitrage. Percent changes, fourth As with tax-exempt business borrowing, actu- quarter to fourth quarter YYeeaarr al and threatened restrictions have had a pro- Monitoring nounced effect on the amount and timing of state range Actual and local financing for several years. The most 1983 8>/2toim 11.2 striking example of anticipatory effects came in 1984 8 to 11 14.3 1985 9 to 12 14.0 the fourth quarter of 1985, when state and local 19861 8 to 11 12.7 governments borrowed $75 billion net, and their debt expanded at a 63 percent annual rate. This 1. Through June 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
516 Federal Reserve Bulletin • August 1986 repurchases that have spurred the growth of 3. Sources of funds to credit markets business debt in the last two years. A moderation Share of total, percent of debt growth therefore seems likely, even though underlying trends suggest further increases in the ratio of debt to gross national product. SUPPLIES OF FUNDS TO CREDIT MARKETS All told, domestic nonfinancial sectors have borrowed almost $3 trillion in credit markets during the past five years (table 1), and financial sectors of the economy have raised almost $600 billion more (excluding deposits at banks and thrifts). 1970 1975 198a 1985 The supply of funds has expanded correspond- Annual data. ingly, and sources have displayed noticeable shifts in sectoral origin. The following discussion doubled, to 29 percent. The share of credit of supplies will encompass the provision of credit provided by the federal government continues to market funds to all sectors, rather than to domes- represent only a few percentage points of the tic nonfinancial sectors alone, because current total, and purchases of credit market instruments data sources do not permit the isolation of issues by foreigners—measured through the balance of of financial obligors from those of nonfinancial payments statistics—have oscillated in the 4 to 7 obligors in most debt-holders' portfolios. But percent range for most of this period, moving up since the largest portion of credit clearly flows to only a little on balance. nonfinancial sectors, the inclusion of funds sup- Financial intermediaries and nonfinancial secplied to financial sectors has little effect on the tors both provide funds to credit markets on a picture. substantial scale. For the most part, assets ac- The scope for net financial investment by each quired by intermediaries are classified as "credit sector of the economy is defined by the excess of market instruments," such as loans, securities, its saving over its capital outlays. Total net and mortgages; thus the expansion of their balsupplies of funds to credit markets thus originate ance sheets runs largely parallel to their supply primarily in nonfinancial sectors because they of funds to credit markets. In contrast, a large generate the bulk of national saving. Investment share of assets of nonfinancial sectors are in the choices made by nonfinancial sectors—such as form of deposit claims on intermediaries. For acquiring deposit claims on financial intermedi- instance, at the end of 1985 only 13 percent of aries, buying equities, or directly purchasing financial assets of households were held directly credit market assets—therefore have a major in credit market forms. role in determining proximate sources of funds to The most striking feature of net credit market markets. lending in the 1981-85 period is the almost five- A notable feature of the debt financing of fold rise of direct credit extensions by private recent years has been the gradual decline in the domestic nonfinancial sectors in a period when relative role of financial institutions in the direct overall borrowing roughly doubled (table 3). Forprovision of credit and the corresponding rise in eign lending also rose briskly, but direct lending direct credit market advances by private domes- by the federal government remained small. tic nonfinancial sectors (chart 3). The share of Lending by financial institutions moved higher intermediaries in all lending fell from an average during this period but proportionately less than of about 82 percent in the 1970s to about 62 that by nonfinancial lenders. Among financial percent of the total in 1985, while the share of institutions, commercial banks remain the preprivate domestic nonfinancial sectors more than eminent lenders, providing roughly 30 percent of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Major Borrowing and Lending Trends in the U.S. Economy, 1981-85 517 3. Net lending in U.S. credit markets Billions of dollars 1976-80, 1981 1982 1983 1984 1985 average Nonfinancial sectors 92 110 128 186 270 415 Private domestic 55 70 89 149 207 322 State and local governments 15 8 27 48 50 134 Households 36 48 46 74 126 185 Nonfinancial business 4 14 15 27 31 3 U.S. government 16 24 16 10 17 17 Foreign 21 16 23 27 46 76 Financial sectors 320 379 364 465 637 678 Commercial banking 100 102 107 136 182 197 Thrift institutions 66 28 30 140 146 86 Federally related mortgage pools 17 15 50 66 44 80 Mutual funds 2 5 13 15 26 90 Other 135 229 164 108 239 225 Total 412 489 491 651 907 1093 MEMO: Percent of total lending Domestic nonfinancial sectors 17.2 19.2 21.4 24.4 24.7 31.0 Foreign 5.1 3.3 4.5 4.1 5.1 7.0 Financial sectors 77.7 77.5 74.1 71.4 70.2 62.0 all credit (loans and purchases of securities) about 10 percent of net credit extended by finanextended by domestic financial entities, whereas cial sectors. Most mortgage pools have been the varying share of thrift institutions has mir- issued with the backing of agencies such as the rored gyrations in housing markets and financial Government National Mortgage Association, difficulties among the institutions themselves. and at the end of 1985 federally related pools held almost one-quarter of outstanding home mortgage debt. The steep rise of pool lending is Structural Shifts in Credit Supplies illustrated in the top panel of chart 4, and the increased role that pools now play in home Several developments in recent years have had mortgage markets is shown in the bottom panel. noticeable effects on the structure of credit mar- The substantial spike evident in 1981-82 reflects ket supplies. Among these are the increasing the major difficulties faced by savings institupackaging of mortgage loans into marketable securities and the resurgence of mutual funds as an indirect channel to credit markets. Large 4. Mortgage pools quantities of formerly illiquid mortgages, typical- Billions of dollars ly carried to maturity by depository institutions, are being converted through mortgage pools into securities, for which markets are potentially much wider. (Mortgage pools are, broadly, a form of activity, but they are treated as a financial institution in the flow of funds accounts because of their legal form as trust accounts Percent separate from other sectors and because of the 100 way purchasers report their holdings of these assets.) The rise in the popularity of mutual 75 funds has been spurred by heavy advertising, 50 specialization, and the advantages of liquidity and diversification offered to small investors. The share of lending by mortgage pools in 1975 1977 1979 1981 1983 1985 recent years has doubled since the late 1970s, to Annual data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
518 Federal Reserve Bulletin • August 1986 tions at that time. Both the sharp drop in net home 5. Household net credit market lending mortgage borrowing and sales of existing mortgages into pools drove the pool "share" of mortgage borrowing above 100 percent for a short time. Pooling of both new and existing mortgages into marketable securities lends support to underlying borrowing by opening new channels between potential purchasers of credit market instruments and primary mortgage markets, in which such purchasers formerly had virtually no 1975 1977 1979 1981 1983 1985 role. In addition to providing this liquidity to Annual data. markets, mortgage pools provide flexibility to the balance-sheet choices of thrift institutions and other originators of the mortgages underly- Money market mutual funds are another examing the securities. ple of indirect flows between households and Open-end investment funds (mutual funds) are credit markets. In the 1981-85 period, assets of another financial sector whose operations have these funds rose $133 billion, more than 75 expanded sharply toward credit market debt in percent of which went into short-term credit recent years after a period of relative quiescence. market instruments. The effect is much the same In 1970, when total fund assets were $46 billion, as with mutual funds, underscoring the link be- 85 percent of the total was invested in corporate tween financial surpluses of households and exequities. Net expansion of mutual funds was pansion of certain financial intermediaries. negligible in the last half of the 1970s (aside from capital gains), but between 1981 and 1985 net investment soared $196 billion, of which $148 The Role of Foreign Funds billion was directed into instruments such as taxable and tax-exempt bonds, with the remain- In recent years foreign capital has played an der going to equities. At the end of 1985, about 47 increasing role in the supply of funds to U.S. percent of mutual fund assets were in credit credit markets. Any domestic imbalance bemarket instruments, even after substantial in- tween domestic saving and investment has as its creases in the value of their equity holdings. counterpart a net capital flow with the rest of the The shares issued by mutual funds are treated world. In effect, the "foreign sector" provides as equities in the flow of funds accounts, so the saving (net capital flow) needed when there is purchases of these shares by households are not a domestic shortfall relative to investment, or included as funds supplied directly to credit absorbs such saving when there is an excess. The markets. Such purchases are, however, similar striking plunge of the U.S. current account (or, to direct supplies because they reflect conscious in terms of the national income accounts, net decisions to acquire fund shares backed by credit foreign investment) during the past few years market assets. These purchases, $5 billion in represents a greater dependence of the U.S. 1981, climbed to $26 billion in 1984 and then to economy on net capital inflows. U.S. net foreign $90 billion last year. If these indirect acquisitions investment, which averaged close to zero in the are taken into account, the share of nonfinancial 1976-80 period, has fallen precipitously since sectors in total credit market lending during 1982, and in 1985 it reached a negative $115 1981-85 rises even more than shown in chart 3. billion. By 1984, investment through mutual funds had Chart 6 gives some perspective on the role of become a substantial channel into credit mar- foreign capital flows in meeting domestic credit kets, and the sharp expansion of bond-fund market demands. Domestic nonfinancial sector shares in 1985 equalled almost 50 percent of borrowing is taken as a frame of reference bedirect household purchases of credit market incause nonfinancial sectors are the principal final struments (chart 5). demanders of credit, and it is their saving/invest- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Major Borrowing and Lending Trends in the U.S. Economy, 1981-85 519 ment imbalances that are the main determinants "Double Counting" in Credit Markets of the changing U.S. foreign investment position. As chart 6 shows, measured direct purchases of Changes in the liabilities of financial intermediar- U.S. credit market instruments by foreigners as a ies are closely linked to movements in their share of domestic nonfinancial borrowing have financial assets. Although borrowing by nonficlimbed only moderately, from an average of 6.5 nancial sectors usually is associated overwhelmpercent in 1978-80 to about 8.2 percent in 1985. ingly with expenditures, it is also sometimes Direct purchases of securities by foreigners draw done directly or indirectly to purchase credit much commentary, but they are only part of the market instruments. As examples, some part of story. corporate borrowing helps support the accumu- A broader measure of total foreign support to lation of liquid assets, and in recent years many U.S. credit markets is provided by the relation households have borrowed in order to fund taxbetween U.S. net foreign investment and domes- deferred financial investments such as individual tic nonfinancial borrowing. Net foreign invest- retirement accounts. In this sense a certain ment is an overall balance, capturing measured amount of "double counting" always resides in inward and outward flows of both U.S. and the totals for borrowing by the nonfinancial foreign-owned capital, as well as components sectors; however, seldom is it large enough to that have not been measured directly (the statis- inflate debt growth noticeably beyond the undertical discrepancy). The rise in the total net capital lying trend. inflow corresponding to the fall in the U.S. The upsurge in funds supplied to credit marinternational investment position is striking kets by state and local governments in the past (chart 6). It implies that direct and indirect three years provides an illustration of double foreign support to nonfinancial borrowing counting on an uncommonly large scale. These reached almost 13 percent of credit flows in 1985, entities, which can borrow in tax-exempt marup from negative values only a few years earlier. kets and invest at rates available in taxable In terms of total supplies of funds to domestic markets, have an incentive to engage in financial credit markets, an adjustment of the U.S. exter- arbitrage. The rules on permissible investments nal sector toward smaller deficits implies a de- by these governmental units are complicated and cline in dependence on foreign sources or, ex- have been tightened in the past few years, but pressed differently, a greater dependence on changing market conditions and legislative develdomestic saving in order to finance domestic opments still provide temporary opportunities investment. This fact has been cited by many for such activity. Most of the funds raised in the observers as one reason for reducing the federal huge rush to market tax-exempt debt late in 1985, deficit, lest the potential for crowding out of for instance, were rolled back into credit market private capital formation become a reality as the lending pending future debt retirements or capi- U.S. external position comes into better balance. tal expenditures. The result was an estimated $134 billion "supply" of funds to credit markets by state and local governments, more than twice 6. Foreign capital flows in relation to domestic any previous amount (table 3). About $110 billion nonfinancial borrowing of this appears to be in excess of normal histori- Percent cal relations, so that about 12 percent of total net Net purchases of U.S. borrowing in 1985 may represent almost pure ^"s^ credit market debt / 10 double counting in the figures. This example illustrates how both borrowing and lending patterns occasionally can be disturbed by special influences. Double counting on ./Net investment in United States 19HHHB the scale noted here usually is not a major feature i i WKKTTKM i of the nonfinancial accounts, but in 1985 it was 1975 1977 1979 1981 1983 1985 perceptible. Assuming, however, that the substantial investments of state and local govern- Annual data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
520 Federal Reserve Bulletin • August 1986 ments are liquidated in the future to support debt As interest rates declined sharply in 1985, retirements or expenditures, double counting however, corporations rapidly increased their will tend to dissipate with time. It should be activity in the bond markets. Net issuance of noted that the unusually high volume of state and taxable bonds for the year totaled $73 billion, local lending in 1985—mostly in purchases of more than during the previous two years com- U.S. government securities—had only a limited bined; this trend has continued in even more influence on federal borrowing itself. Except in vigorous form through mid-1986. Although much the short term, purchases of federal debt by of the recent surge in gross corporate bonds has municipal governments substitute for sales in the been associated with calls and retirements of market to other domestic and foreign purchasers. existing debt (especially by utilities), net bond issuance continued at unprecedented levels through the first half of this year, and only 40 FINANCIAL ACCOUNTS OF percent of funds borrowed have been in short- NONFINANCIAL CORPORATIONS term markets. The effect of the resurgence of long-term borrowing has been to lower the cost As discussed above, stock retirements have been of existing corporate debt and to push up the a major force behind the expansion of corporate long-term debt ratio a little by the end of 1985 borrowing well in excess of the financing gap and somewhat more this year. Although it is too during the past few years. One consequence of soon to judge how much further these balance this has been a marked increase in corporate sheet improvements will proceed, it is apparent debt-equity ratios. If tangible assets are valued at that businesses are now actively restructuring original cost, the ratio of nonfinancial corporate their accounts while conditions are perceived to debt to net worth climbed from 61 percent to 78 be favorable. percent between 1980 and 1985, following about As indicated by the national income accounts, a decade of little movement in this ratio. If corporate gross saving represents a substantial tangibles assets are valued at current prices, the share of total national saving. Corporate capital ratio rose from 35 percent in 1980 to more than 46 expenditures also are large, however, so their percent at the end of 1985, the highest figure acquistions of financial assets tend to be small, since the early 1970s. and their net financial investment usually is In addition to stock retirements, interest-rate negative. Companies accumulate liquid assets developments also may have contributed to the primarily to maintain desired amounts of workdominance, until recently, of short-term borrow- ing capital and for transactions purposes. ing in corporate use of credit markets during the Sources of information on changes in corporate past five years. The maturity structure of corpo- financial assets are scarce, but those available rate debt, in fact, has gradually drifted toward suggest that asset accumulation has been quite greater reliance on short-term liabilities for many small by historical standards. years. In 1960, for instance, about 71 percent of Holdings of liquid assets relative to nonfinantotal corporate debt was in long-term forms— cial business product increased from about IIV2 bonds and mortgages—but by 1980 the figure percent in 1981 to about 14 percent at the end of was 54 percent. Sharp increases in interest rates 1985. However, the share of liquid assets relative in the early 1980s, combined with a steep yield to short-term debt on corporate balance sheets curve, provided incentives for businesses to bor- has declined for more than two decades and was row more intensively in short-term markets, both only about 40 percent of such debt in 1985. to meet basic needs and to finance stock retire- Although corporate holdings of liquid assets may ments. More than half of the total net borrowing be low, the potential supply of funds through in the 1981-85 interval—about $330 billion—was channels such as bank lines of credit has expandin the form of loans from banks and finance ed greatly in recent years, and therefore the cutback in liquid assets may simply be an adaptacompanies and of short-term market paper. Near tion to changed circumstances rather than a the end of the period the long-term component of source of concern. The composition of liquid corporate debt had sunk to less than half of the assets also has changed markedly. Demand detotal, a historical low. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Major Borrowing and Lending Trends in the U.S. Economy, 1981-85 521 posits and currency, which represented more 7. Net financial investment than half of corporate liquid assets in the early Billions of dollars 1970s, fell to about one-fourth of the total by 1985. Time deposits and holdings of commercial paper approximately tripled their share in the same period, to about one-half of the total. HOUSEHOLDS 1975 1977 1979 1981 1983 1985 Annual data. The household sector in the flow of funds and the national income accounts consists primarily of ordinary households but also includes personal extent by net surpluses of financial sectors and, trusts and nonprofit organizations. Households to an increasing extent, by the foreign capital are the largest sector in the economy, with about flow associated with the U.S. external imbal- 41 percent of all financial assets at the end of ance. 1985 (table 4). Taking into account their holdings Given the importance of saving in the houseof tangible assets, households also have the hold sector for the rest of the economy, it is largest net worth of any economic sector. significant that, after rising to 7.5 percent in Households are the principal source of net 1981, the personal saving rate fell by 1985 to 4.6 saving in the economy; they typically invest percent, the lowest rate since 1949. This drop much more in financial assets than they borrow, came despite the enactment of legislation dethereby making funds available to other sectors, signed to encourage the growth of saving, such which tend to be net absorbers of funds. The as the 1981 liberalization of individual retirement weight of the household sector thus implies that accounts and of deferred income plans. Even in its activities have major effects on all other dollar terms, between 1981 and 1985 personal sectors of the economy. Most important for saving followed an erratic downward course to flows of finance are the amounts and rates of the $129 billion recorded last year, and in compersonal saving. Household financial surpluses parison with domestic nonfinancial borrowing directly and indirectly support the major part of household saving has fallen greatly. Personal net funds absorbed by other nonfinancial sectors saving represented almost 43 percent of domestic such as businesses and governments (chart 7). nonfinancial borrowing in 1981, but by 1985 the Remaining imbalances have been filled to a small ratio had shrunk to 14 percent. 4. Financial assets in the U.S. economy 1975 1980 1985 1975 1980 1985 SSeeccttoorr Billions of dollars, year-end Percent Households 2,541 4,498 7,723 42.1 41.4 41.4 Nonfinancial business 617 1,083 1,504 10.2 10.0 8.1 Private financial sectors 2,156 3,886 6,810 35.7 35.8 36.5 Commercial banking 835 1,390 2,234 13.8 12.8 12.0 Mutual funds and money market mutual funds 47 138 504 .8 1.3 2.7 Other1 1,274 2,359 4,072 21.1 21.7 21.8 Federally related mortgage pools 29 114 369 .5 1.0 2.0 Foreign 235 464 813 3.9 4.3 4.4 Other2 460 807 1,439 7.6 7.4 7.7 Total 6,038 10,852 18,658 100 100 100 1. Savings institutions, insurance companies, private pension 2. Federal and state and local governments, monetary authority, funds, state and local government retirement funds, finance compa- and sponsored credit agencies. nies, real estate investment trusts, and securities brokers and dealers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
522 Federal Reserve Bulletin • August 1986 One factor that may have contributed to the during the 1970s, decelerated markedly, growing decline in saving in recent years is the rise in the only 54 percent in the 1981-85 period to a total of value of tangible assets and of financial assets $1,456 billion. Consumer credit has expanded by such as equities; if households perceive their 77 percent in the last five years (to $666 billion at asset positions to be comfortable, they may save year-end 1985), and its share in the household less from current income. Another factor may total has advanced. Although the expansion of have been the increasing availability of credit consumer credit often follows cyclical patterns, sources, making saving in advance for large the past five years have witnessed the fastest consumer purchases appear to be less necessary growth in the past 40 years. than in earlier years. Factors such as these tend The great surge in household debt raises the to bolster household borrowing in credit markets possibility that borrowers are becoming overexand to reduce acquisitions of financial assets tended and would have difficulty in repaying because they contribute to higher spending rela- their obligations in the event of economic advertive to income flows. sity. Conversely, some observers claim that the Demographic factors may also have contribut- rise in household assets more than offsets the ed to the savings decline, as may have certain growing debt burden. In this regard it is helpful technical factors, such as the treatment of pri- to consider the relation of debts and financial vate pension plans in the national income ac- assets to disposable income as background to the counts. The increased share of interest payments discussion (chart 8); both these ratios have in personal outlays from current household in- climbed noticeably in the past few years. The come—a result of rising debt—has also played a ratio of household debt to disposable personal role. The effect of these and other influences on income, for instance, reached a postwar high of household behavior has been to narrow the almost 84 percent at the end of 1985, and the scope for net financial investment. Yet net acqui- asset ratio was about 271 percent., sitions of financial assets by households have not Assessing the potential burden of household diminished, but rather increased about 85 per- debt is difficult because of factors that cannot be cent in the past five years, reaching $477 billion easily illuminated with existing statistics. Conin 1985. sumer debt plainly has risen relative to income, but this fact alone may not be a convincing Household Debts and Assets, 1981-85 indicator of potential debt service problems (see "The Growth of Consumer Debt," FEDERAL Household purchases of financial assets have RESERVE BULLETIN, June 1985). For example, exceeded personal saving by margins of $150 to $250 billion per year in each of the last five years, 8. Household sector debt and financial assets in a fact which underscores the important role relation to disposable personal income played by borrowing in financing these acquisi- Percent tions. Indeed, as noted earlier, household debt reached a historical high of $2.4 trillion at the end of 1985, a 64 percent increase in five years. The following discussion will look in somewhat greater detail at the structure of household debts and at certain features of household financial assets, focusing on the question of potential repayment burdens. Debt of the household sector at the end of 1985 consisted mainly of home mortgages (61 percent) and consumer credit (28 percent), but also included miscellaneous loans from other sources and tax-exempt obligations issued to finance nonprofit hospitals and student loans. Home 1975 1977 1979 1981 1983 1985 mortgage indebtedness, after rising 225 percent Quarterly data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Major Borrowing and Lending Trends in the U.S. Economy, 1981-85 523 there is evidence that automobile loan maturities 5. Structure of household balance sheets are lengthening—which tends to reduce current Percent of total repayment obligations per dollar of debt outstanding—and that consumer debt is concentrati ed among upper-income households, which are most able to repay it. In addition, the bulk of household debt is in the form of home mortgages, Financial assets which are repayable over long periods of time. Equities (including The burden of current payments on this debt mutual ~ Credit market varies with the maturities of the obligations and instruments with the interest rates at which they were con- Pension fund reserves ... tracted, and it may change quickly in certain Other circumstances, as the current flood of home Total mortgage refinancing perhaps illustrates. In the Credit market debt past several years, many households also have Home mortgages I Consumer credit taken on adjustable-rate mortgages on which the Other payment burden fluctuates periodically. The Total ability of households to service their debts depends in part on a correct assessment of future valuation; personal saving represented less than income flows in relation to payment obligations one-eighth of this gain in wealth. and, also, on the amount of financial assets that Total financial assets of households consideracan be mobilized for such a purpose. bly exceed their liabilities (chart 8), and from that Total financial assets of households rose from perspective the sector's net financial position $4.5 trillion at the end of 1980 to $7.7 trillion at might be deemed comfortable. Aggregate meathe end of 1985, an increase of about 72 percent sures, however, may conceal relevant informaduring the interval. About 60 percent of these tion, and other considerations, such as liquidity, assets are concentrated in deposits (including also bear on assessments of household financial shares in money market funds) and holdings of conditions. equities (including mutual fund shares), a propor- Although household assets have grown, imbaltion that has declined moderately in the past 10 ances in the distribution of assets and liabilities years (table 5). Direct holdings of credit market within the sector are always a potential source of instruments are a small and rather stable share of stress in the event of an economic setback. the portfolio, but the share of assets in pension Information on these distributions cannot be fund reserves has risen by almost 40 percent. obtained from the flow of funds accounts; such Three factors contribute to changes in the value data can be derived only from microstudies of of household financial assets: saving, borrowing, consumer financial positions. The latest such and market valuation. Total personal saving in effort was the 1983 Survey of Consumer Fithe 1981-85 period represented less than 25 per- nances, carried out by the Survey Research cent of the rise in the value of household portfo- Center at the University of Michigan with suplios, and net credit market borrowing by house- port from the Federal Reserve and other agenholds was less than 30 percent of the increase. As cies. Results of the survey (whose findings on the these figures suggest, market valuation therefore aggregate distributions of household assets by plays a significant and sometimes dominant role type accord well with flow of funds data) tend to in changes in the value of household financial reinforce the view that household debts and positions; for instance, in the past five years assets both may be concentrated in upper-inhouseholds have made net sales of about $90 come strata (see FEDERAL RESERVE BULLETIN, billion of equities, but capital gains on their September 1984, December 1984, and March equity portfolios have totaled about $850 billion 1986). Although those findings are consistent in this period. More than half of the $1.1 trillion with the view that aggregate household positions increase in total household financial assets in are comfortable, they would not be inconsistent 1985 alone can be attributed to changes in market with the emergence of localized problems. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
524 Federal Reserve Bulletin • August 1986 Another factor affecting the interpretation of in borrowing and lending and the associated rise aggregate assets is the fact that the "household in debt and assets. A review of these developsector" of the flow of funds (and national in- ments shows that special factors may have concome) accounts contains private foundations and tributed to exceptionally heavy borrowing during a wide array of nonprofit organizations. Except the 1981-85 period, but these do not account for the tax-exempt borrowing of nonprofit hospi- fully for the rise in debt relative to historical tals and a small amount of mortgages, available norms. Although the underlying pace of borrowdata show that the credit market debt of these ing appears to be slowing, growth of debt still entities is minimal relative to their financial as- exceeds that of GNP by a considerable margin. sets (such as university and foundation endow- These heavy credit demands have been met ments). Research at the Federal Reserve indi- through shifts in the structure of the supply of cates these financial assets totaled more than funds, by the more active role played by financial $500 billion in 1984. Although that amount was transformations such as mortgage pools and muless than 10 percent of total assets in the house- tual funds, and, notably, by the net inflows of hold sector at the time, the presence of such foreign saving associated with disequilibrium in entities in the statistics should be borne in mind the U.S. current account. Adjustment of the because debts are largely those of true house- external accounts toward better balance and the holds, while a perceptible share of assets are not. corresponding fall in the supply of foreign saving Moreover, some evidence also suggests that non- may be a significant factor in domestic credit profit organizations have grown in relative im- markets in the period ahead. portance in recent years. The financial statements of businesses have Discussions that relate household debts and changed rapidly in the past few years. Large assets likewise should take account of the fact amounts of debt have replaced equity on busithat a rising proportion of financial assets of ness balance sheets, especially in connection households are in forms that may not be easily with the unusual surge of merger activity. Until accessible for debt service should such a need recently, short-term debt continued to advance arise. Assets embedded in pension funds and as a share of the total, but with the resurgence of personal trusts may not be readily accessible by bond markets in 1985 businesses are now activehouseholds that are the ultimate owners, even ly restructuring their debts toward long-term though they are a part of the sector's total forms. Corporations appear to be acquiring ficlaims. As table 5 demonstrates, these kinds of nancial assets at a slow pace, but this may be a assets constitute a rising share of total portfolios. natural adaptation to changing relations between From a share of only 3 percent in household nonfinancial and financial businesses. portfolios in 1945, pension fund reserves reached Finally, despite a sharp decline in the personal 19 percent in 1980 and more than 22 percent in saving rate, household financial positions appear 1985. Finally, despite the net selloff by house- to be reasonably comfortable at present, even holds of corporate equities in the past few years, though only rough judgments can be made from market revaluations have pushed up the value of the aggregate statistics. These aggregates show a the considerable amount that remains, contribut- wide and increasing margin of comfort between ing substantially to the total rise in the value of financial assets and debts. However, the margin household financial assets during the period un- for true households is exaggerated by the exisder review. The value of equities and other tence of nonprofit organizations, which hold a financial instruments in any portfolio remains portion of the sector's total assets. Moreover, subject to future market movements, which the distribution of debts and assets within the therefore represent a potential source of large sector, the accessibility of the assets, and, espegains or losses in household wealth. cially, future changes in the market value of assets could have significant effects on the finan- SUMMARY cial condition of households. • A striking feature of U.S. financial developments in the past few years has been the enormous rise Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
525 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report, covering the period Febru- EXCHANGE RATE DEVELOPMENTS ary through April 1986, provides information on DURING THE PERIOD Treasury and System foreign exchange operations. It was prepared by Sam Y. Cross, Manag- As the period opened, the foreign exchange er of Foreign Operations of the System Open markets were in a sensitive phase. The dollar had Market Account and Executive Vice President in already declined a substantial amount from its charge of the Foreign Group of the Federal highs of the year before. Yet there was little Reserve Bank of New York.1 evidence that the U.S. economy or its trade position had reaped enough benefit to allay con- The dollar moved substantially lower against all cerns among market participants that U.S. aumajor currencies during the three months ending thorities would wish to see further dollar depreciin April, declining more than 8 percent against ation. Indeed, statistics then being released most European currencies and almost 12 percent indicated the U.S. deficit on merchandise trade against the Japanese yen. The depreciation was a had widened substantially during December, and continuation of the trend that emerged in early the external sector continued to exert a signifi- 1985 and gained momentum after the September cant drag on domestic production. The mid- G-5 meeting. The U.S. authorities did not inter- February estimate of growth in gross national vene for their own account in the exchange product for the final quarter of 1985 revealed a markets during the February-April period, and disappointing, downward adjustment. Statistics the dollar's decline proceeded without any new for personal income and consumption in January concerted intervention in the exchange markets. were also worse than expected, leading many in The decline took place against a background of the market to conclude that the outlook for 1986 downward-moving interest rates and narrowing was even less optimistic than they had believed interest rate differentials favoring the dollar. The earlier. Subsequent data were interpreted as indimarket's attitude also seemed influenced by the cating points of weakness, rather than strength, implications of continuing large current account for the U.S. economic outlook. imbalances and by assessments of the varying At the same time, concern faded about poteninflation prospects in different countries as a tially adverse effects on prices of any continuing result of oil price changes. Market participants dollar depreciation. Inflationary expectations in were also influenced by perceptions of official the United States were being rapidly scaled back views about the dollar, particularly in light of the in response to further dramatic drops in prices January meeting of G-5 Finance Ministers and for oil and some other commodities. Thus, the Central Bank Governors at which they expressed risk of an accelerating decline in dollar exchange satisfaction with the trend of exchange rates rates was seen by many market observers to be since the September meeting. less than before. In addition, through early April, interest rates in the United States continued to ease at a faster pace than those abroad as many market participants expected that the Federal Reserve might ease monetary policy considera- 1. The charts for the report are available on request from bly. As a result, interest differentials favoring the Publications Services, Board of Governors of the Federal dollar continued to narrow. By April 16, interest Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
526 Federal Reserve Bulletin • August 1986 differentials on long-term government securities casts of German economic growth in 1986 were fell to within 200 basis points vis-a-vis German being revised upward toward 4 percent. Given and Japanese securities. the relatively lackluster growth performance in Beginning in February, a heavy schedule of the United States during the last quarter of 1985 statements and testimonies about U.S. economic and the weakness in several U.S. business indipolicies, together with the approach of a number cators early in 1986, Germany emerged as a of important international meetings, provided likely candidate for relatively high growth. Moreopportunities for officials here and abroad to be over, the German trade surplus had been increasquestioned about their attitude toward exchange ing during the previous few months. The continrate trends. Administration officials generally ued drop in oil prices made it appear possible expressed satisfaction with the decline in dollar that Germany's trade surplus for 1986 would be rates since the G-5 agreement in September. double the level of the previous year. Traders They noted that the dollar's decline had been also anticipated a possible realignment within the orderly and denied that there was any particular European Monetary System (EMS) in which the level or range of rates at which they expected or mark would be revalued. With these expectadesired the dollar to trade. The President, in his tions in the minds of market participants, the annual State of the Union address, noted the dollar declined against the mark until early problems that previous exchange rate fluctua- March as far as DM2.1960. tions had caused for many Americans and asked On March 6 and 7, the central banks of Germa- Secretary of the Treasury Baker to determine ny, Japan, the United States, France, and the whether it would be useful to hold an internation- Netherlands lowered their official interest rates. al conference to discuss with other countries the The central banks of the United Kingdom, Italy, role and relationships of currencies. Market par- and Sweden soon followed by cutting their ticipants and journalists tended to conclude from official lending rates. These actions had little these statements that U.S. authorities would immediate impact on exchange rates since the welcome a further depreciation of the dollar, reductions had been widely anticipated and internotwithstanding the repeated denials by U.S. national differentials in market rates were exofficials that they had a target range for the pected to be largely unchanged. But the concertdollar. In these circumstances, the market's atti- ed round of interest rate reductions underscored tude toward the dollar was predominantly bear- to the market the potential for further coordinatish. ed policy actions. For some time thereafter, most During February and early March, the dollar dollar exchange rates moved narrowly as mardeclined across the board without interruption. kets reassessed the near-term outlook for the The focus of market attention initially was the dollar and the prospects for other coordinated yen. It was supported by mounting monthly actions. trade surpluses and the view that declining oil Early in April, the dollar resumed its decline. prices would be particularly beneficial to the Indications that world oil exporters were failing Japanese economy. The dollar, which had closed to agree on a plan to support oil prices kept alive at ¥191.40 at the end of January, declined steadi- expectations that inflation in the major countries ly throughout early February to breach the psy- would continue to slow. Thus dealers anticipated chologically important ¥180 level and to reach that the major central banks would act soon to ¥177.40, a seven and one-half year low, by cut interest rates again. Some market partici- February 19. The yen's rise then stalled after pants even thought that the Federal Reserve Japan's Finance Ministry confirmed that it was might cut its discount rate more than other developing plans to ease regulations on capital central banks. In the United States, there was outflows, which could have the effect of raising concern about the impact of lower oil prices on the demand for dollars by Japanese institutional U.S. banks with exposure to the oil-exporting investors. developing countries and to the domestic energy sector. In Germany, the central bank had ex- At this point market participants shifted their pressed doubts that a further cut in the discount focus to the dollar-mark exchange rate. Fore- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Foreign Exchange Operations 527 rate would be appropriate given existing condi- this point the dollar was more then 37 percent tions in the domestic economy. below its highs vis-a-vis those currencies of Selling pressures against the dollar then about a year before. emerged, especially against the yen. That curren- Meanwhile, the financial markets around the cy has already appreciated significantly during world were astir with talk of a renewed drop in the past year, and Japanese exporters, particu- interest rates in many major countries. The larly small- and medium-sized firms, were facing plunge in oil prices was beginning to show a substantial drop in the demand for their prod- through in reduced inflation rates for a number of ucts. Under these circumstances, Japanese offi- countries. Partly in sympathy, interest rates on cials began to voice concern whenever the yen U.S. long-term securities had declined almost to advanced toward the level of ¥175 against the the level of the federal funds rate, indicating dollar. Dealers therefore remained wary that strong market expectations that a further cut in foreign exchange market intervention or some the Federal Reserve's discount rate was in the other official action might be taken to curb the offing. Japanese bond yields fell to postwar lows. exchange rate move. But the demand pressures And in Europe, a number of countries that had on the yen were becoming so strong as to bring not participated fully in the easing of interest into question the Japanese authorities' ability to rates before the EMS realignment were seen as resist its appreciation unilaterally, and the yen having increased scope to cut rates. strengthened relative to all major currencies. In fact, the moderation of global inflationary Against the major European currencies, the expectations did provide the impetus for a lowerdollar was influenced early in April by strains ing of official interest rates in a number of emanating from a realignment of exchange rates countries. The Federal Reserve and the Bank of within the joint intervention arrangement of the Japan both lowered their discount rates by Vz EMS. Market participants had long expected percentage point, effective April 21. Central that some adjustment in exchange rates might banks in the United Kingdom, France, and Italy occur soon after the March elections in France to lowered their official rates in one or two steps Vi adjust for inflation differentials that had existed percentage point or more at about the same time. between the participating countries since the The German central bank, feeling more congeneral realignment in 1983. As such an event strained by the weakness of the mark within the was thought to become more imminent, the EMS, did not join in this second round of reducdollar's decline against the mark slowed. Some tions of official lending rates. dealers were anticipating that the dollar might At the end of April, the dollar's decline benefit from speculative reflows out of the mark paused. Some foreign exchange and bond dealers after the realignment. But the realignment that had expressed concern that investors might be occurred over the first weekend in April unleashed a strong demand for French francs Net profits or losses (-) on U.S. Treasury and against all currencies. French residents unwound Federal Reserve current foreign exchange operations long-standing commercial leads and lags and Millions of dollars nonresidents sought quickly to build up investment positions in francs and to benefit from the U.S. Treasury relatively high interest rates in France. As a Period1 R F e e s d e e r r v a e l S E ta x b c il h i a za n t g i e o n result, the dollar again came on offer against the Fund European currencies after the realignment. February 2, 1986- April 30, 1986 0 0 By late April, the dollar had declined 10 per- Valuation profits and losses cent against the Continental currencies and 13 on outstanding assets and liabilities as of April 30, percent against the yen from levels at the end of 19862 962.9 1,031.4 January. It touched ¥166.10 against the yen, a 1. Data are on a value-date basis. record low for the postwar period, and 2. Valuation gains represent the increase in the dollar value of DM2.1520 against the mark, the lowest level outstanding currency assets valued at end-of-period exchange rates compared with the rates prevailing at the time the foreign currencies against the German currency since April 1981. At were acquired. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
528 Federal Reserve Bulletin • August 1986 reluctant to acquire the additional dollar-denomi- guilder. Other adjustments against the mark and nated assets needed to finance the continuing the guilder were much smaller, including 3 per- U.S. current account and fiscal deficits. Market cent effective devaluations in the central rates of participants were also well aware of pressures on the Italian lira and the Irish pound and 2 percent foreign governments to ease the pain for their for the Danish krone and the Belgian franc. own industries of too-rapid a fall of the dollar. Movements of the market exchange rates for Accordingly, they considered the possibility the EMS currencies after the realignment were that some agreement to support the dollar might relatively small. The French franc depreciated emerge from the discussions at the Economic V/i percent against the mark, substantially less Summit in Tokyo early in May. In addition, by than the 6 percent devaluation of its bilateral rate late April, there was evidence that foreign partic- with the German currency. In other respects the ipation in U.S. securities markets continued to configuration of exchange rates within the EMS be strong. The dollar therefore moved up some- also showed only modest changes—except for what from its lows by the close of the period the German mark, together with the Dutch guilunder review. der, which moved from the top to the bottom of the narrow band. Heavy reflows of funds following the realignment were reflected in substantial THE EMS REALIGNMENT changes in the foreign exchange reserves of several countries. German reserves declined by On April 6, the European Community announced almost $4 billion equivalent during the two weeks a realignment of the central rates within the following the realignment, although much of this EMS. This was the first overall realignment of decline was recouped later in the month. At the EMS central rates in more than three years. The same time, there were large increases in the realignment was initiated by the new French foreign-currency reserves of France and Italy Government as part of its program to restore during April. These two countries, as well as the competitiveness in the French economy and to other countries whose EMS central rates were dismantle exchange and other financial controls. effectively lowered against the guilder and the It involved in effect a devaluation of almost 6 mark, took advantage of the relief from exchange percent for the French franc's bilateral central market pressure late in April to add reserves, rates against the German mark and the Dutch ease exchange controls, and lower interest rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
529 Industrial Production Released for publication June 13 ness equipment, oil and gas well drilling, and durable goods materials. At 124.2 percent of the Industrial production decreased an estimated 0.6 1977 average, the total index in May was 2 percent in May, more than offsetting an upward percent below the recent high in January and revised increase of 0.4 percent in April. In addi- about the same as it was a year earlier. tion, revised data now indicate larger declines for In market groups, output of consumer goods both February and March. Reductions in output retreated somewhat in May and has been, on were widespread in May, with the most signifi- balance, stagnant since the beginning of the year. cant declines occurring in motor vehicles, busi- The recent monthly movements in output of Ratio scale, 1977 = 100 114400 TOTAL INDEX 112200 _ Products X 100 / Materials \ / 1 1 1 1 1 1 80 l 1 I 1 1 1 114400 MANUFACTURING MATERIALS Durable — Nondurable^-y' — 120 »Cs Nondurable . - 100 Durable \y Energy 1 1 1 1 1 1 80 i i i 1 1 1 160 _ CONSUMER GOODS 140 INTERMEDIATE PRODUCTS Business supplies 120 J 100 Construction supplies J | I 240 140 MOTOR VEHICLES AND PARTS FINAL PRODUCTS 200 120 Defense and space 100 160 Business equipment 140 / 120 100 60 1980 1982 1984 1980 1982 1984 1986 All series are seasonally adjusted. Latest figures: May. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
530 Federal Reserve Bulletin • August 1986 1977 = 100 Percentage change from preceding month PPPeeerrrccceeennntttaaagggeee ccchhhaaannngggeee,,, GGGrrrooouuuppp 1986 1986 MMMaaayyy 111999888555 tttooo MMMaaayyy Apr. May Jan. Feb. Mar. Apr. May 111999888666 Major market groups Total industrial production 125.0 124.2 .3 -.9 -.9 .4 -.6 .1 Products, total 132.6 131.8 .2 -1.0 -.9 .6 -.6 .3 Final products 132.2 131.2 .0 -1.2 -1.1 .7 -.7 -.4 Consumer goods 123.6 123.0 -.3 -.6 -.8 1.2 -.5 2.5 Durable 116.0 113.7 -.1 -.3 -2.8 2.6 -2.0 1.7 Nondurable 126.4 126.4 -.4 -.7 -.2 .7 .0 2.7 Business equipment 140.3 138.8 1.0 -1.3 -1.4 .9 -1.1 -2.2 Defense and space 179.0 179.3 -.8 -1.4 1.0 .3 .2 4.7 Intermediate products 134.0 133.8 1.1 -.2 -.3 .2 -.1 2.7 Construction supplies 123.5 123.3 2.7 -.4 -.1 .1 -.2 4.4 Materials 114.6 113.9 .3 -.7 -.9 .2 -.6 -.2 Major industry groups Manufacturing 128.6 127.9 .6 -.8 -.8 .6 -.5 1.0 Durable 128.4 127.2 .4 -1.0 -1.1 .6 -1.0 -.6 Nondurable 128.8 128.9 .8 -.5 -.4 .6 .1 3.3 Mining 101.8 99.6 .1 -2.0 -2.5 -.9 -2.1 -9.3 Utilities 114.1 114.5 -1.6 -1.9 1.1 .4 .3 .7 NOTE. Indexes are seasonally adjusted. consumer goods have been dominated by swings computers, also have weakened since the beginin motor vehicle production. Auto manufactur- ning of the year. In contrast, output of defense ers, faced with a high level of inventories relative and space equipment increased moderately again to sales, curtailed assemblies from a seasonally last month. Outside the final products sector, the adjusted annual rate of 8.1 million units in April production of construction supplies remained to a rate of 7.6 million units in May. Production near record levels, but materials production deof durable consumer goods other than autos also clined 0.6 percent in May, with metals and parts declined, while the output of nondurable con- for consumer durables and equipment especially sumer goods was unchanged in May after a rise weak. of 0.7 percent in April. In industry groups, manufacturing output de- Output of business equipment declined 1.1 clined 0.5 percent in May, as durables declined percent in May; since reaching a peak in Janu- 1.0 percent while production of nondurables ary, the index for business equipment has fallen edged up. Mining output declined 2.1 percent nearly 3 percent. Reductions in the output of and is now 9.3 percent below its level a year transit equipment, especially business autos and earlier, mainly reflecting the plunge in oil and gas trucks, have been a large contributor to the well drilling. May output at utilities rose 0.3 recent decline, as has the weakness in produc- percent after a similar rise in April, but was only tion of farm and mining equipment. Most other 0.7 percent higher than it was a year earlier. components of business equipment, including Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
531 Statements to Congress Statement by Manuel H. Johnson, Member, portion of the bill. At the same time, the Board Board of Governors of the Federal Reserve Sys- supports the legislation insofar as it applies to the tem, before the Subcommittee on Financial In- other supervisory agencies. The legislation will stitutions Supervision, Regulation and Insurance provide them with the flexibility necessary to of the Committee on Banking, Finance and Ur- establish their own employee compensation proban Affairs, U.S. House of Representatives, grams and budgets and thereby enable them to June 4, 1986. maintain a qualified examination and supervisory staff. I appreciate the opportunity to appear before the The proposed legislation would also require subcommittee today on behalf of the Federal that the Examination Council conduct regional Reserve Board to discuss H.R. 3567, the Deposi- studies of private sector pay scales and employee tory Institutions Examination Improvement Act, benefits for jobs comparable to those of federal and H.R. 2282, the Truth in Savings Act. I will examiners. The council would report the results begin by offering the Board's evaluation of H.R. of these studies to the federal regulatory agen- 3567 and then turn to H.R. 2282. The Board's cies, which would be required to take them into responses to the questions posed in Chairman St account in setting pay scales for their personnel. Germain's letter of May 27, 1986, are appended Under existing practice, the Federal Reserve to this testimony.1 Banks, which employ substantially all of the The purpose of the proposed legislation is to System's examiners, set their salary levels comimprove the quality of depository institutions mensurate with those being offered by banks and supervision by assuring that the federal supervi- other financial institutions in their local areas. In sory agencies provide adequate compensation determining what the local salary levels are, the and benefits to attract and retain competent Federal Reserve Banks conduct surveys that are personnel, by improving the efficiency of exam- essentially the same as those envisioned for the iner training programs, and by providing for the council. The Federal Reserve would be prepared certification of state supervisory agencies. We to share with the council the information that the are in agreement with the basic objectives of the Reserve Banks gather. Our survey experience, proposed legislation, and have taken steps to we would point out, is that, while the federal pay achieve many of them. We do have reservations scale is below going compensation levels in cerconcerning the arrangements that the bill would tain sections of the country, it is significantly establish to accomplish certain of the objectives, above local levels in other sections. however, and I will discuss them as I proceed. As important as the issue of examiner compen- With respect to the major provisions of the bill sation is, it cannot be considered without regard that would exempt the supervisory agencies from for the continuing need to control costs governfederal civil service laws and the federal budget- mentwide and to achieve budgetary savings conary process, we would point out that the Federal sistent with the Gramm-Rudman-Hollings legis- Reserve is already exempt from these constraints lation. Although the Federal Reserve System is under specific provisions of the Federal Reserve not covered by Gramm-Rudman, Chairman Act. Accordingly, the Board believes that the Volcker has stated the Federal Reserve System's Federal Reserve should be excluded from this intention to comply voluntarily with the spirit of that legislation. Accordingly, the Board's 1986 budget was revised to meet the 4.3 percent 1. The attachments to this statement are available on reduction mandated by Gramm-Rudman for othrequest from Publications Services, Board of Governors of er government agencies, and comparable reducthe Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
532 Federal Reserve Bulletin • August 1986 tions were made by the Reserve Banks. Despite The proposed legislation would also direct the this commitment to budgetary restraint, the Fed- council to establish standards for judging the eral Reserve is increasing the number of its adequacy of state supervisory agencies and to onsite examinations and hiring additional exam- conduct reviews of individual state supervisory iners to help conduct them. These measures are, departments to determine whether federal agenin our opinion, necessary to meet growing super- cies should rely on their examinations. It seems visory concerns regarding banks and bank hold- more appropriate to have the federal supervisory ing companies that are under the Federal Re- agencies ultimately charged with the responsibilserve's regulatory authority. Because of these ity for ensuring the safety and soundness of state concerns with supervision, we support the bill's institutions assigned the requisite legal authority objective to provide the other supervisory agen- for certifying the states. Thus, the Board cannot cies with adequate budgetary flexibility to meet support this portion of the proposed legislation increased requirements for bank supervision. because it does not establish the necessary inter- It is, of course, particularly difficult to relationship of authority and responsibility. strengthen our supervisory function at a time I would point out that the federal agencies that when our overall budget is being reduced. Of have statutory supervisory responsibility over necessity, we have expanded the supervisory state-chartered institutions already have in place function less than we had planned and, to meet programs to coordinate their supervisory efforts the added expenses of the expansion that has with state authorities. The Federal Reserve, for been accomplished, have had to make cuts in example, has voluntary arrangements with sevother areas of our budget. Thus, if the Congress eral qualified states to conduct alternate examiwere to provide the other agencies with flexible nations on an annual or more frequent basis. compensation and budgetary authority, we Furthermore, we have recently undertaken to would take guidance from this action in setting expand its use of examination reports prepared our own salary and budgetary policies. by state examiners. The proposed legislation would also provide I might add that the Federal Reserve System for the development of a proposal to consolidate has also taken steps to help supplement the all training programs for federal agency examin- training programs for state examiners. The ers under the Examination Council and would Board has authorized scholarship funds for the require that the council study the feasibility of Education Foundation of State Bank Supervisors establishing a graduate education program for and instructed the Reserve Banks to provide examiners. As I understand it, the council has financial assistance directly to state bank examthe concept of a graduate education program iners who attend Federal Reserve training under study and is not, under its current author- schools. ity, restricted from offering such a program. With In summary, we support the main thrust of the respect to consolidating all other examiner train- bill to provide, when needed, adequate compening in the council, we believe that besides the sation and budgetary flexibility—authority that present schools the council conducts for all the the Federal Reserve already has—to assure a agencies, serious consideration should be given continued high priority for adequate supervision to having the council assume responsibility for of the nation's depository institutions. We also conducting certain "core" courses for examin- see that certain benefits are to be gained from ers. We would stop short, however, of having the further coordinating the examiner training procouncil assume all educational responsibilities grams of the agencies. We do not, however, for the agencies. Each agency has unique activi- believe that it is appropriate to vest in the council ties and responsibilities that require specialized the responsibility for certifying the acceptability training for its examiners—for example, in the of a state's examination reports for use by the area of bank holding company inspections and federal supervisory agencies. Edge Act corporation examinations. Thus, it is I would now like to direct the balance of my essential that the agencies retain the flexibility to comments to the provisions of H.R. 2282. offer their own courses to meet their special H.R. 2282 would address deposit account adtraining needs. vertising and disclosures by establishing uniform Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 533 requirements applicable to all depository institu- sumers are receiving what they believe to be tions. The bill calls for advertisements regarding adequate disclosures on their accounts in written interest rates to state an annual percentage yield or oral form. and an annual rate of simple interest as well as While H.R. 2282 would have the advantage of other factors. With respect to disclosures, depos- extending uniform advertising and disclosure reitory institutions would be required to provide quirements to all depository institutions, includschedules of fees and charges for all existing ing member and nonmember banks, thrift instituaccounts and before any changes in the sched- tions, and credit unions, it may unduly limit ules. Rule-writing authority to implement these flexibility. In particular, by attempting to estabrequirements for all institutions is given to the lish uniform requirements applicable to all ac- Board of Governors of the Federal Reserve counts, H.R. 2282 does not allow sufficient lati- System. tude to tailor advertising and disclosure Since 1969, the Board has had comprehensive requirements to individual account characterisregulations on advertising in Regulation Q. In tics and individual customers' use of accounts. January 1986, the Board proposed a series of For example, H.R. 2282 requires advertisements amendments to update, clarify, and simplify its regarding the rate of interest payable on an current advertising requirements. This proposal account to state the annual percentage yield addresses many of the same advertising issues (APY) and the annual rate of simple interest. covered by H.R. 2282, such as requiring an Similarly in its January proposal, the Board annual percentage yield and a statement con- included three alternatives for advertising intercerning service charges in advertisements. At the est on deposits: simple interest, or an APY, or same time the Board directed its staff to explore both. While the Board's Consumer Advisory the need for action on disclosure of detailed Council supports requiring both the APY and the account information to bank customers. The simple interest rate, public commenters were Board also supports providing bank customers divided as to which alternative was most approwith clear and complete information when they priate. Given this difference of opinion, flexibiliopen their accounts and is planning a policy ty may be required in determining if the same statement encouraging disclosures by member requirements should apply to all. banks. Other provisions of H.R. 2282 may also ham- In considering this policy statement, the Board per regulatory flexibility in establishing clear and has taken into account the fact that the level of simple advertising requirements. It may be uninformation provided to bank customers has necessary to require advertisements containing been high. Over the past two years, only approx- annual percentage yields to refer to the method imately 4 percent of the total complaints received of compounding or to require advertisements to by the Board on member banks pertained to state the method of paying interest. Similarly, advertising and disclosure issues similar to these the statement concerning account charges recontained in the bill. Moreover, a January 1986 quired by H.R. 2282 refers to elements that are Survey of Consumer Attitudes conducted for the characteristic of transaction accounts, such as Board by the University of Michigan indicated transaction fees, and elements of time deposits, that 94 percent of current deposit account own- such as early withdrawal penalties, and might be ers felt that they had received the information simplified to avoid confusing bank customers as that they needed to know about the terms and to the charges applicable to their account. conditions of their accounts. Eighty-two percent With respect to disclosures, H.R. 2282 could of the families who opened a checking account be read to require depository institutions to and 73 percent of those who opened a savings provide customers with schedules of fees and account in the past two years reported that they charges applicable to all accounts and services had received a written explanation of the terms and a description of all changes in the previous and conditions of their new account. Although schedules when account terms are changed, even the survey did not provide information on the though such schedules may not be applicable to nature of the disclosures made in written form, it the customer's account. To avoid confusion, did indicate that a significant majority of con- disclosure requirements should be limited to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
534 Federal Reserve Bulletin • August 1986 changes in information relevant to a customer's tion of these concepts to all depository institudeposit relationship with the institution. tions. While we are not seeking legislation, if the Allow me, at this point, to reiterate our basic Congress believes that legislation is necessary to position. The Board supports clear advertising achieve uniformity among the agencies, the and full disclosure by depository institutions, has Board believes that the legislation should proproposed for comment amendments to update vide a more flexible statutory mandate. This and clarify its advertising rules, and is working flexibility would permit the Board to structure toward a policy statement that will address dis- rules that would enhance customer benefits as closures by member banks. Since both of these new types of deposits evolve while minimizing efforts would be limited to member banks, the customer confusion and the burden on deposi- Board is consulting with the other regulatory tory institutions. • agencies in an effort to obtain a uniform applica- Statement by Paul A. Volcker, Chairman, Board presented in the Budget Review, and I would be of Governors of the Federal Reserve System, happy to answer any questions that you may before the Subcommittee on Domestic Monetary have about the process. Policy of the Committee on Banking, Finance I believe the process is thorough and effective, and Urban Affairs, U.S. House of Representa- supported by strong management and staffs. tives, June 5, 1986. Within the Reserve Banks, experienced and widely respected directors, drawn from business I appreciate this opportunity to discuss and re- and various professions, are an integral part of view the Federal Reserve System's expenses and the process. Many of those directors are responbudget with this subcommittee. In view of my sible in their private capacities for managing testimony in late January on the broader issues large organizations and staffs. Their input to of Federal Reserve budgetary independence, I management of the Reserve Banks—I think will concentrate today on the record of our unique for a public body—is truly one of the expense and budget performance over time and strengths of the System. I am delighted to have prospects for 1986. I will also present the with me today Chairmen Rogers and Weitnauer Board's views on H.R. 2204. of the Federal Reserve Banks of Atlanta and The committee has been given copies of our Dallas respectively, and who, I am sure, would new publication entitled Annual Report: Budget be happy to respond to any questions you would Review. It brings together in one place detailed like to direct to them. information about our spending plans for 1986 As another matter of general background, Reand comparisons with expenditures in 1984 and serve Banks' budgets are in large part subject to 1985. We are now in the process of reviewing the the competitive discipline of the marketplace. format of that document for 1987 and would Specifically, about 40 percent of Reserve Bank welcome any comments and suggestions you expenses arises from services provided to deposmay have to make next year's edition even more itory institutions for which, by law, we charge useful. We have also supplied the committee fees adequate to cover costs and imputed taxes with answers to specific questions raised in and profits; in fact, fees collected for these Chairman Fauntroy's letter, other information services amount to some 50 percent of all our requested by your staff, and copies of our Plan- spending. These services, to a great extent, are ning and Control System (PACS) reports, which actually and potentially available elsewhere, so detail expenditures, employment, and productiv- there is a strong and direct incentive to maintain ity, service by service and unit by unit. efficiency. Indeed, in some respects the Federal Reserve is at a competitive disadvantage because In my January testimony I summarized the of our commitment to provide our basic services planning, budget, and control processes that we to all depository institutions that request them on have established for both the Reserve Banks and a nondiscriminatory basis. In other words, we the Board of Governors. Additional detail is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 535 neither price on the basis of what the market can The attached charts and tables depict changes bear nor limit our provisions of particular ser- in real unit costs and volumes for various priced vices to "profitable," high-volume areas. and nonpriced services since 1977 (the first year of entirely comparable data).1 For priced services—wire and securities transfers, check pro- A 10-YEAR OVERVIEW cessing, and automated clearinghouse (ACH) transactions—the data show that during the tran- The effectiveness of our budget process must be sition period to pricing of our services, there measured by its results. As I indicated in my were sharp losses in volume, particularly in January testimony, in the 10-year period from check collection, by far the most costly service. 1976 to 1986 Federal Reserve spending has in- Because of substantial elements of fixed costs, creased at an average annual rate of about 0.8 real expenses could not be cut at the same rate as percent in constant dollars or 6.8 percent in volume decreased; thus, real unit costs innominal terms. During that period, as you know, creased. However, since 1983 unit costs have System operations, and therefore expenses, again declined in almost every area, bringing real were heavily impacted by the Monetary Control unit costs substantially lower than in the 1970s. Act (MCA), which extended reserve require- Gains in productivity have also been made in ments to all nonmember banks and thrift institu- nonpriced service areas, which are comprised tions, requiring us to create and maintain new principally of fiscal agency operations for other data collection and account maintenance sys- governmental units and the provision of currency tems, and extended access to our services to all and coin. In these services also, volumes have depository institutions. In 1980, for instance, increased and real unit costs have declined or only 5,400 member banks were subject to reserve risen only slightly during the same time periods. requirements; today some 17,250 banks and thrift institutions have such requirements. If the 10-year period is divided into roughly GRAMM-R UDMAN-HOLLINGS three equal parts—pre-MCA, a transition period for implementation, and post-MCA—perfor- Before I review the 1986 budgets for the Reserve mance stands out even more clearly: Banks and the Board, let me comment on our actions in response to the Gramm-Rudman- 1. Pre-MCA, from 1976 to 1979, nominal ex- Hollings Act. As I indicated to the subcommittee penses increased at an annual rate of 4.7 percent, in January, even though the System is not covmore slowly than the consumer price index. ered by the act, the Board decided to reduce total 2. During the MCA implementation phase System budgeted expenses for 1986 in a manner from 1980 to 1982, expenses increased at an consistent with the spirit of the law. The Board annual rate of 11.7 percent, only 1.7 percent carefully reviewed possible approaches to comfaster than consumer prices despite the large parability with Gramm-Rudman-Hollings reoutlays involved in dealing with so many more quirements and determined that a reduction of institutions. $18 million in the System's (Reserve Banks and 3. Post-MCA, from 1983 to 1986, expenses Board of Governors) approved 1986 budget for increased 4.7 percent on average, about 1 per- nonpriced services (and for the total budget) was cent faster than the consumer price index. appropriate. The Board also decided that the reduction should be borne by the Reserve Banks Total employment in the Federal Reserve Sys- and the Board on the basis of both the relative tem is budgeted at 24,886 for 1986, a decline of size of the budgets of each of the 13 components 1,746 or 6.6 percent from the level at the end of of the System and the relative size of their 1976. During that period, weighted measures of the aggregate unit volume of services increased 41.2 percent. Clearly, productivity in the System 1. The attachments to this statement are available on has increased very significantly by almost 4 request from Publications Services, Board of Governors of percent per year. the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
536 Federal Reserve Bulletin • August 1986 expense increases over the past three years. The examination force is budgeted at 983 by year- Board provided guidance on the areas in which end. Increases in applications, offsite monitoring cuts were to be avoided if possible—including and analysis of banks and bank holding compabank supervision—and the Reserve Banks and nies, and monitoring of reserve accounts also the Board responded with specific plans for require additional supervisory personnel. As inachieving the required reductions. dicated, this area has been one of personnel The revised budget for the Reserve Banks now growth, but at a far slower rate than most activity totals $1,165 million, an increase of 4.3 percent measures. over 1985 expenses, and a staff level of 23,381, Expenses for Services to Financial Institutions an increase of 1.7 percent or 397 positions over and the Public constitute the largest portion of 1985 staff levels. More than half the staff increase Reserve Bank budgets at $764 million, nearly 66 is due to increases in supervision and regulation. percent of the total budget for the Reserve The Board's budget now totals $85 million, an Banks.3 Expenses are budgeted to increase $21 increase of 3.9 percent over 1985 expenses. million, to a level 2.8 percent higher than those in Board employment is budgeted at 1,505, a de- 1985. cline of 26 or 1.7 percent from 1985. Most of this expense category ($489 million) Our revised budget for the System now totals relates to services offered to depository institu- $1,251 million, an increase of $51 million or 4.3 tions for which fees are collected in accordance percent over actual expenses for 1985.2 with the provisions of the MCA. The volume of priced services from year to year is largely driven by demand, and expenses are fully recov- RESERVE BANK BUDGETS FOR 1986 ered by revenue received, which is anticipated to be $617 million in 1986. This revenue amount The 1986 budgets for the Federal Reserve Banks provides for full recovery of actual expenses plus are affected by several new initiatives, which we imputed costs that would have actually been believe to be of high priority. These initiatives incurred if a private business firm had provided include those shown in the accompanying table. the service—largely taxes and cost of capital. Excluding these initiatives and one-time costs, Volumes are expected to increase in all major adjusted Reserve Bank budgets would increase operations while real unit costs are expected to only 2.2 percent from the 1985 expense level. decline. Staff for these services is budgeted at On a service line basis, the largest budget 8,859, an increase of 105 or 1.2 percent. Those increase is planned in Supervision and Regula- staff increases are primarily devoted to improvetion in which the 1986 budget totals $166 million, ments to the payments mechanism, such as the an increase of 9.0 percent over 1985 expenses. wire notification program for the return of large Examination activities alone are budgeted to dollar checks. increase 18 percent to provide for increasing the Expenses for Services to the U.S. Treasury frequency and scope of bank and bank holding and Government Agencies total $140 million, an company examinations and for improving com- increase of $9 million or 6.8 percent over 1985.4 munications with those institutions' directors. Most of this increase is accounted for by the new Most Reserve Banks began to implement the "Treasury Direct" system for on-line book entry new program in 1985, and it is expected to be safekeeping of marketable Treasury securities fully in place by the end of 1987. Employment in supervision and regulation as a 3. These services include the following: (1) check and whole is budgeted to increase 219, or 11.4 pernoncash collection, wire transfers, automated clearinghouse cent; within this total we are planning to add 180 transactions, book-entry securities transfers, securities safepeople to the expanded supervisory program. keeping, and cash transportation, primarily on a priced basis; and (2) currency and coin processing, government check Our total bank and bank holding company field processing, loans to depository institutions, and public programs, on a nonpriced basis. 4. These services include savings bonds, sales and safe- 2. Budget data exclude expenditures for new currency keeping of government securities, government account and paid to the Bureau of Engraving and Printing, budgeted at coupon processing, funds and ACH transfers, and processing $186 million in 1986. of checks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 537 Initiative Budget expense Additional staff Supervision and regulation Efforts to increase frequency and scope of examinations of state member banks and inspections of bank holding companies $8.2 million 180 Treasury direct access book-entry On-line book-entry system for safekeeping of marketable Treasury securities for individuals and small investors $5.4 million 111 Notification of large dollar return items Implementation of a program on large dollar return item notification consistent with legislative proposals to improve funds availability to consumers $4.0 million 118 Small and disadvantaged businesses Implementation of procedures for acquiring goods and services from small and disadvantaged businesses $1.2 million 16 Building moves One-time expenses relating to current year costs incurred in moving into three new branch buildings and renovating one head-office building $5.1 million for individual investors. Reserve Banks expect Banks by service lines, we also look at individual to add about 111 additional people to run "Trea- objects of expense. Of the 1986 budget increase sury Direct." At the same time, the Treasury will of $48 million, personnel expenses are expected be able to reduce its staff by approximately 400 to increase $29 million or 4.2 percent, including as a result of the transfer of this function to the provisions for staff growth of about 397 persons System, resulting in considerable overall cost as previously noted. Because personnel exsavings to the government. penses account for about 60 percent of Reserve In the past a sizable proportion of the costs Bank expenses, human resources receive considfrom the services provided to the Treasury and erable attention in the System. We pride ourother government agencies has been reimbursed selves on our ability to attract and retain highby those agencies. We had anticipated receiving caliber employees. At the Reserve Banks our $107 million in reimbursements from the U.S. salary policies are based on those prevalent in Treasury and other government agencies at the the area in which each office is located. Market time the Reserve Bank budgets were approved. salary surveys are conducted annually to help We have been informed by the Treasury, howev- establish salary ranges. er, that its reimbursement to us this year could According to our internal studies, the practice be considerably less—perhaps only 30 percent of of using local salary surveys resulted in annual the amount budgeted. This matter is obviously 1984 savings to the Federal Reserve System of one of concern to us, and we believe that it is $28.5 million in salary costs relative to costs that inconsistent with appropriate budgetary policies would have been incurred if the Reserve Bank especially when we are acting, at their request, employees had been paid under the federal govas fiscal agent. Other agencies for which we ernment's pay schedules. In some areas, includprovide fiscal services reimburse our full costs. ing bank examination and data processing, it is, The Monetary and Economic Policy service of course, particularly important that we mainline budget totals $96 million, an increase of $5 tain reasonably competitive salary levels, and million or 5.4 percent over 1985, with no changes that requires special attention. in employment. The increase in expenses reflects Equipment costs account for 13 percent of the primarily growth in salaries and benefits as well total budget and are budgeted at $160 million, an as the design and development of new computer increase of 9.4 percent. Several automation efprograms for banking statistics to provide for forts significantly affect equipment expense uniform systems for the entire System and to growth. The System's long-range automation enhance our capacity to process and analyze strategy commits us to standardize automation financial data from depository institutions. and communication capabilities and software ap- Besides analyzing the budgets of the Reserve plications across all Reserve Banks and the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
538 Federal Reserve Bulletin • August 1986 Board. That standardization costs money now, penses are expected to increase 7.4 percent to but we expect both savings and better "back up" $99 million in 1986, reflecting increases in local capability in the future. tax rates and assessments, utility rates and us- The System's plans also include upgrading and age, renovations and refurbishments, and rental replacing obsolete check equipment to provide costs in some Districts. better service and continuing implementation of New buildings are expected to be completed enhanced office automation systems and thus to this year in Jacksonville, Omaha, and Los Angeachieve greater productivity. We plan to pur- les. One-time costs of moving into new buildings chase additional personal computers used in our are treated as current expenses, and are expectcommunications network with financial institu- ed to total $5.4 million in 1986. The building tions to expand the number of depository institu- being replaced in Omaha was occupied in 1925, tions that have electronic access to the Federal while the Los Angeles building was constructed Reserve's financial services. in 1928, and the Jacksonville building in 1952. Equipment expenses primarily reflect rental, Rapid growth in operational volumes has resultrepairs and maintenance, and depreciation. The ed in insufficient space in the present buildings, depreciation expenses ($75 million) reflect the and needs for modernization have also contributcurrent-year effect of both current and prior year ed to the need for new facilities. In each case a capital outlays in accordance with GAAP ac- thorough analysis was made to explore the justicounting. Total capital outlays of $124 million for fication for, and all alternatives to, a new buildequipment are anticipated in 1986, with about 75 ing project. This analysis included costs of the percent accounted for by data processing and proposed building project, projections of volume data communications equipment. These outlays growth, the impact on operating efficiency, and are accounted for directly in a capital budget. the alternative possibilities of renovation of old I might add that, as part of our planning buildings or lease. process, the Reserve Banks develop long-range automation and communication plans that cover virtually all acquisitions of data processing and BOARD BUDGET data communications equipment over a five-year planning period, with specific cost projections The budget and personnel of the Board of Goverover three years. Reserve Bank policies require nors in Washington is a relatively small part of that competitive bidding practices be followed total System expense, amounting to about 6.8 and that careful lease-versus-buy analyses be percent of the whole. performed. The Board's 1986 budget is affected by three Current building expenses are another large major factors as shown in the accompanying component of Reserve Bank budgets. These ex- table. Factor 1986 positions 1. Program improvement project (PIP) Self-initiated staff reduction project designed to enhance productivity and eliminate lower-priority work; reduction of 9 positions in 1984, 91 in 1985, and 51 in 1986 (151 positions) expected to yield $4.5 million in full-year savings in 1987 ($1.3 million) (51) savings savings 2. Supervision and regulation Increase in staff, consistent with a Systemwide effort, to enhance supervision of state member banks and bank holding companies $.9 million 29 3. Automation Provides for operating expense, including depreciation, for a new computer that is expected to meet a usage demand increase of 80 percent over three years and office automation equipment to improve staff productivity $1.1 million Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 539 In 1984 the Board of Governors undertook, at MISCELLANEOUS TOPICS its own initiative, a project to reduce or eliminate lower priority programs to increase the overall You have asked that I specifically address cerefficiency of our operations. The PIP program tain other topics. One of these topics is the cost reduces staffing by 151 or 9.2 percent over a two- of the several advisory councils to the Federal year period. A variety of personnel programs Reserve. The aggregate cost of the advisory were used in an effort to minimize the impact of councils to the Federal Reserve Banks, including the program—early retirement, internal training those established for small business and agriculand reassignment, and outplacement. Some per- ture, was about $92,000 in 1985. These councils sonnel savings will be offset by a decision to add are comprised of some 250 representatives of 29 positions to the supervision and regulation nonmember banks and thrift institutions, small function. businesses, and agriculture. Our expenditures Expenses in the Board's largest functional represent travel reimbursements and meals at area, Monetary and Economic Policy, are bud- council meetings. There are also three advisory geted to increase only 2.2 percent to $46 million councils to the Board of Governors: (1) the in 1986. The increase provides additional auto- Federal Advisory Council; (2) the Consumer mation resources necessary to improve handling Advisory Council, created by statute; and (3) the of the large volume of data required in analyzing Thrift Institutions Advisory Council, created by and implementing monetary and economic the Board when the MCA was enacted. In 1985, trends. the cost of these three councils was $164,000, The Supervision and Regulation function is representing travel, lodging, meals, and compenexpected to grow 5.2 percent to $20 million in sation. 1986. The increase in the supervision area, which We believe the cost to us of having the Advisosupports expanded and more frequent examina- ry Councils is minor compared with the benefits tions, is held down by the slower rate of growth we and the council members derive from the in the area of consumer affairs supervision and exchange of information and views between the regulation. private sector representatives and System offi- The Board's budget for personnel services cials. We believe that this interaction has been totals $60 million, an increase of $1 million or 2.1 very beneficial to the System in its ongoing percent from 1985. This increase is significantly operations and has provided additional insights smaller than those registered in recent years into conditions in the economies in which we because of the deferral of a general pay increase, operate. savings from the PIP project, and continued In the case of cafeteria subsidies, Reserve efforts to reduce costs of fringe benefits. Banks are authorized to absorb up to two-thirds In general, the Board of Governors has fol- of the costs of employees' food, equipment, and lowed federal pay scales in compensating its miscellaneous operating expenditures. As a matstaff. As a result, salary relationships are serious- ter of practice, no Reserve Bank provides a ly distorted, with salary distinctions among our subsidy of this magnitude. On average the subsitop-level people entirely insufficient to reflect dy is about 55 percent and has been declining in differences in levels of responsibilities. Adverse recent years. effects on the Board's ability to attract and retain The Federal Reserve Board spends around the high caliber young professionals we need are $1.2 million annually for printing of publications becoming clearer. Naturally, in the light of our for distribution to the public. Most of this cost is responsibilities this matter is a serious one. offset by receipts of about $1.1 million, primarily The Board's operating budget for nonperson- from subscriptions to the Federal Reserve Regunel services in 1986 totals $25 million, an in- latory Service. At the Federal Reserve Banks crease of $3 million or 14.8 percent. The largest about $4 million is spent for publications, with factor in this rise is equipment costs (including roughly $150,000 offset by receipts. The policy of depreciation because of the addition of office the Federal Reserve has been to provide to the automation equipment), a new computer, and a public at minimal or no charge publications that backup data processing system. improve public understanding of the monetary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
540 Federal Reserve Bulletin • August 1986 policy process and the central bank. We are, Class A directors are representative of the however, looking at our publications' policy member banks, and in practice have always been throughout the System to identify areas in which officers or directors of such banks or of their additional cost recovery may be appropriate. holding companies. Class B and C directors are The cost of acquiring currency has increased to be selected to represent the public, with due in recent years. Essentially, the Board must but not exclusive consideration to the interests of incur these expenses to provide the public with agriculture, commerce, industry, services, labor, sufficient currency to meet its demands. The and consumers. actual cost of printing the currency is controlled In appointing Class C directors, the Board by the Bureau of Engraving and Printing. Never- seeks individuals from diversified backgrounds theless, the Board, to the extent possible, en- so that a variety of viewpoints may be brought to deavors to control these expenditures through bear upon decisions relating to both the adminiscontinuing contact and consultation with the tration of the Reserve Banks and to decisions Bureau to encourage the use of the lowest-cost and advice with respect to monetary and other methods consistent with quality. The Board also policies. By increasing the number of Class C monitors the currency-processing operations at directors from three to five, H.R. 2204 would the Reserve Banks to ensure that the amounts of broaden further the opportunity for diversity currency destroyed are the minimum necessary among the directors appointed by the Board of to meet System guidelines on the quality of Governors. currency. In this way the Board minimizes the Passage of H.R. 2204 would also address an number of new notes ordered each year and the issue raised by the changed relationship of the cost of printing new currency. Federal Reserve to nonmember banks and thrift institutions as a result of the Monetary Control Act. As I mentioned before, the Monetary Control Act applied reserve requirements to all de- H.R. 2204 pository institutions over a certain size and made access to the Federal Reserve discount window I would also like to express today the Board's and payments services available to these institusupport for H.R. 2204, which would increase the tions as well. The System has taken a number of number of Class C directors of the Federal steps to ensure more effective mutual communi- Reserve Banks from three to five. cation with nonmember banks and thrift institu- The Federal Reserve System derives signifi- tions, including the appointment of thrift induscant benefits from the participation of directors try representatives to the boards of 19 of our 25 drawn from each District. The System receives Reserve Bank branches. Nevertheless, among from the directors of Federal Reserve Banks and the types of depository institutions subject to branches the benefit of their close contact with reserve requirements and with access to the discount window and payments services, at presemerging economic developments and opinion ent only member banks are assured of representhroughout the nation as well as leadership and tation on the Boards of Directors of the Reserve management skills in directing the operations of Banks. The Board therefore supports inclusion the Reserve Banks that would not otherwise be by H.R. 2204 of nonmember depository instituavailable at any price. tions specifically among the various groups that Under the Federal Reserve Act, the nine direcshould be considered in choosing Class C directors of each Reserve Bank are divided into three tors. classes of three directors each, designated as Classes A, B, and C. The Class A and B directors I might add that the Board would undertake are elected by the member banks of the District; normally to provide that one Class C director at the Class C directors are appointed by the Board each Federal Reserve Bank would be drawn of Governors. The act specifies that all directors from nonmember banks or the thrift industry, shall be chosen without discrimination on the with some diversity across the System of individbasis of race, creed, color, sex, or national uals with nonmember bank, savings and loan, origin. savings bank, and credit union backgrounds. We Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 541 would also continue to encourage the service of CONCLUSION those individuals on branch boards. In summary, the Board believes that providing The focus of my testimony today has been prian opportunity for nonmember banks and thrift marily on the 1986 budget. I hope that this institutions to participate in the deliberations of testimony and the additional materials submitted the Reserve Bank Boards of Directors as provid- in advance of the hearing have been helpful in ed by H.R. 2204, would be beneficial. At the enabling the subcommittee to review the Federal same time, the larger number of Class C direc- Reserve's expenditures and budgetary processtors, from a greater variety of backgrounds, es. In closing, I would like to reemphasize that would permit the Board added flexibility in the the Board believes the Federal Reserve's budget selection process to assure that our Reserve processes have worked well in controlling ex- Bank directors adequately reflect the diversity of penses. I would welcome any comments you the American economy and society. may have on our presentation of budget information and I am prepared to address any questions you may have on either our budget or H.R. 2204. • Statement by Paul A. Volcker, Chairman, Board safe and sound financial system, to assure equiof Governors of the Federal Reserve System, table and competitive access to financial services before the Subcommittee on Commerce, Con- and credit by consumers and businesses large as sumer, and Monetary Affairs of the Committee well as small, to maintain an efficient and safe on Government Operations, U.S. House of Rep- domestic and international payments system, resentatives, June 11, 1986. and to preserve an effective mechanism for transmitting the influence of monetary, credit, and I appreciate the effort of this subcommittee to other policies to the economy. undertake a full review of the basic approach The simple fact is that such assurance is lacktoward banking and bank holding company legis- ing today. The Congress has been debating the lation and regulation. This is a large subject, issues for several years, but every attempt to filled with controversy in its particulars and with address them has been stymied because, at least new questions arising about the philosophical in part, of the efforts to block legislative change underpinnings. Besides the Bank Holding Com- by those who perceive a strong particular interpany Act itself, the issues are relevant to the est in one part or another of the status quo or in Savings and Loan Holding Company Act and to exploiting an existing loophole. However, our the Glass-Steagall Act. This statement, supple- concern has to be about the coherence and mented with detailed appendixes, is an attempt wisdom of the whole. And changes in the finanto place the issues in a broad perspective, with cial system will not wait on legislation. The full treatment of the underlying public policy system is changing—haphazardly and without issues.1 I hope you find it useful. direction—in response to a variety of economic I have repeatedly expressed my conviction and other forces. What is clearly lacking is that the Congress should move with a sense of congressional guidance to assure that the imporurgency to reform the existing statutes governing tant public policy concerns are dealt with in a banking organizations. The public is entitled to constructive manner. the assurance that the powerful forces of change Before turning to a review of the fundamental at work today in the financial services market- financial industry policy issues, I want to stress place are channeled in a manner consistent with that there is, in my view, an opportunity for the broad public interest—the need to maintain a congressional action this year in important areas. Comprehensive banking legislation, including provisions to close unintended and unwise loop- 1. The attachments to this statement are available on holes in banking and thrift holding company request from Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. statutes and to provide certain new products and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
542 Federal Reserve Bulletin • August 1986 services for bank holding companies, has been abiding and valid concerns of the public interest. thoroughly debated, reviewed, and analyzed There is still time, but not much time. But I over a number of years and is long overdue. The cannot emphasize too strongly that left unattendrecently introduced emergency acquisition legis- ed the process of change now under way is not lation for institutions in danger of failing is ur- adequately addressing these concerns. gently needed and currently being debated. It Basic principles of public policy are being should be ready for action shortly, as is the case bypassed or ignored as market pressures and with legislation to strengthen the Federal Savings competitive instincts play against a legal and and Loan Insurance Corporation (FSLIC). regulatory structure that has been undermined I sense a theme in these hearings of frustration by officially sanctioned conduct designed to at the lack of congressional action, which I evade its basic tenets. The longer we postpone clearly share. There is danger that this frustra- difficult decisions about the direction in which tion would drive the legislative process to accept change should be encouraged or discouraged by a direction of change that would not be construc- public policy, the more difficult those decisions tive, but would instead further undermine some will ultimately become, and the greater the risk basic principles that have stood the test of time. that continuing policy concerns—including the For instance, one reaction to the legislative safety and soundness of the banking system— gridlock is to suggest that it is appropriate and will be eroded. even desirable that the evident anomalies of the In reviewing these matters with you today, I nonbank bank loophole should be resolved by would like to focus on underlying strengths as allowing any kind of business to own banks, well as weaknesses of the present system, the rationalized as a service to consumers and a problems for the future, and the fundamental source of funds to capital-starved institutions. policy considerations that should be our beacons We find that some commercial banks are willing as we navigate through uncharted, and possibly to tolerate and even encourage use of the non- stormy seas. I will stress the reasons why I feel it bank bank loophole for their own purposes, continues to make good sense to maintain a basic particularly to achieve interstate entry. At the separation between banking and commerce, same time, those banks, quite unrealistically and even though the line of separation is inevitably dangerously from my perspective, may feel that fuzzy at the edges. Finally, I would like to the Congress, overwhelmed by loophole exploi- broadly describe the changes that we would like tation, will, in the end, and for that reason alone, to see made to maintain a stable and efficient lower the legal barriers on entry of bank holding banking industry, able to compete effectively and companies into nonbanking activity. But instead, respond to the needs of a rapidly changing econthat course would be a process of legislation by omy. It is important, as we look at the future of loophole exploitation, with a strong possibility banking, that we approach the problems with that the issue of new products and services for care, both preserving what is essential, while existing bank holding companies will be by- making changes where change is necessary. passed indefinitely, with the result of weakening the banking system. That would be a most unfortunate result, aban- THE ROLE OF BANKS AND THE IMPORTANCE doning useful principles that have worked well to OF THE BANKING STRUCTURE strike out on a course that has clearly foreseeable pitfalls. We should not be beguiled by claims of At the outset, I referred to some general criteria what has been termed by some as a "Brave New that should guide the process of change. I would World" for banking without examining just what like to be more specific about certain basic points we would be getting into. That was precisely the against which proposals for changes in the dewarning delivered by Aldous Huxley's famous pository institution holding company acts should fable about the future. be tested: (1) the unique role of banks in the As regulators and legislators, our task is to economy; (2) the related needs for federal surrespond to real needs in the marketplace, while veillance and federal support, given the key role assuring that the system remains sensitive to of banks; and (3) the linking of the parts of a bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 543 holding company organization into an integral mechanism is suddenly called into question. whole. Then, serious implications for overall output, Commercial banks, and increasingly thrift in- employment, and prices—indeed, for the entire stitutions as they have gained banking powers, fabric of the economy—are apparent. are operators of the payments system, custodi- Because of their critical role in the economy, ans for the bulk of the liquid savings in the the deposit liabilities of banks and the stability of economy, still by far the most important suppli- depository institutions generally have long been ers of credit, and the link between monetary protected to a degree by official supervision and policy and the economy. All of these functions regulation and by a governmental "safety net." are imbued with a public interest, and, in combi- Of course, the first and most important line of nation, account for the explicit public concern defense for a safe and sound banking system over the years with the strength and stability of must be the interest of banking institutions themdepository institutions. selves in maintaining the confidence of their The nation's payments systems—the clearing customers. But long ago, in establishing national of checks, wire transfers, automated payment banks, the Federal Reserve System, the Federal arrangements, and securities clearances—collec- Deposit Insurance Corporation (FDIC), and the tively process more than a trillion dollars in FSLIC, the government determined that normal transactions each day. The orderly, quick, and market incentives and protections needed to be assured operation of that system is essential to supplemented by official supervision and, later, the efficient operation of markets and the econo- by a support apparatus. Because of the interdemy as a whole. pendence of the system, the necessity for confi- Because these systems have operated without dence, and the nature of banking liabilities, expereally significant disruption for almost as long as rience repeatedly showed that the market alone we can now remember, we have come to take could not be relied upon to assure banking stabiltheir effectiveness for granted. Certainly, a high ity and the stability of the economy as a whole. degree of automation has made the system more Indeed, if market discipline were to become fully efficient. But it is also true that there are inherent effective, the government would have to be prerisks in operating the system, and the speed and pared to see a banking crisis spread widely volume of payments increase those risks. That is through the system. It has been a long time since why as supervisor, regulator, and participant in that has been the case. the system, the federal government has to be The support apparatus provided the banking concerned about who operates this system, the system—importantly reflected in access to the terms of access to it, and the kinds of risks being discount window at the Federal Reserve and to undertaken. The consequences of breakdown deposit insurance—provides advantages in the and collective miscalculation are serious. competition for the public's funds. But there are These concerns derive in substantial part di- offsetting costs as well in, for instance, reserve rectly from the fact that the individual compo- requirements, insurance premiums, and complinents of the banking and payments system are ance with regulatory standards. Achieving a balclosely linked and, to a large extent, mutually ance between those costs and benefits is one of dependent. A sudden failure of one institution, the continuing challenges of public policy. particularly of substantial size, can interrupt a More broadly, the protection provided by delong chain of payments and dramatically and posit insurance and the discount window lessens unexpectedly affect other unrelated institutions, the discipline of the marketplace, potentially some of whom may not even have a business changing attitudes and behavior over time with relationship with the institution in difficulty and respect to risk-taking. Consequently, the logical have themselves been well managed and sound. extension of the public concern with the stability While secondary and tertiary effects are, of of the banking system is a continuing interest in course, present in some degree in the failure of limiting certain risks and in increasing the level any business firm, the effects are never so poten- of supervision. There are a number of restrictially contagious or so disruptive as when the tions on how banks (or thrift institutions) and stability of the banking system or the payments their holding companies can do business. The Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
544 Federal Reserve Bulletin • August 1986 operations and assets of banking institutions are were essentially concerned about potential also examined periodically as part of a continu- threats to the critical role that banks play in the ing supervisory process. Concern about the ac- economy and to safety and soundness. In the tivities of a bank holding company as a whole face of a new thrust toward linking banking with flows from the earlier points. commercial activities made possible by the bank In the nature of things, parts of an organization holding company, they foresaw the possibility under common management and in public per- that credit would be abused for the benefit of the ception related to each other, will, to a consider- owners and they were concerned about possible able degree, be affected by the fortunes of other discrimination in the allocation of credit to the important parts of the same organization. Conse- benefit of other parts of the holding company. quently, concern about the activities undertaken In transmitting one bank holding company within a bank holding company is a natural and legislation to the Congress in 1969, the adminislegitimate extension of interest in the safety and tration articulated a related trend of continuing soundness of the bank itself. The nonbanking concern as follows: activities need not be frozen in a fixed historical pattern. They may not require the same intensity Legislation in this area is important because there or degree of supervision as a bank, and they may has been a disturbing trend in the past year toward be regulated differently. But experience and logic erosion of the traditional separation of powers bealike strongly point to the need for surveillance tween the suppliers of money—the banks—and the and limitations on the range of activities of the users of money—commerce and industry. entire organization. Left unchecked, the trend toward the combining of banking and business could lead to the formation of a relatively small number of power centers dominating the American economy. This must not be permitted to IMPLICATIONS FOR DEPOSITORY happen; it would be bad for banking, bad for business, INSTITUTIONS HOLDING COMPANY ACTS and bad for borrowers and consumers. The strength of our economic system is rooted in diversity and free competition; the strength of our The concerns outlined above about the role of banking system depends largely on its independence. banks in the economy are widely acknowledged. Banking must not dominate commerce or be dominat- Some have, however, come to challenge the ed by it. proposition that the presence of a supervised, regulated, and protected bank within a larger In making the judgment that the health of the business structure requires a degree of surveil- banking system and the economy required the lance of the larger organization and concerns regulation of companies that own banks and the about the range and nature of its activities. The limiting of the range of their nonbanking activiargument is made that perhaps the relationship ties, the Congress also rejected the alternative of between the bank and its affiliates can be so allowing the diffuse ownership relationships to closely regulated that the safety and soundness exist, but regulating them to prevent abuses. The of the bank can be insulated and other abuses Congress has, in fact, provided rather explicit effectively forestalled. To properly evaluate this direction as to how relationships between a bank argument, I believe we need to review again the and its affiliates should be monitored and conobjectives that the Congress was trying to trolled. But it also limited bank holding compaachieve through the Bank Holding Company Act nies in 1970 to banking and managing and conand to see whether these same objectives, if still trolling banks and to activities that are "so valid, can, in fact, be accomplished by relying closely related to banking as to be a proper entirely on insulating a bank from its parent and incident thereto." These words, as interpreted affiliates. from the start, conveyed a limited grant of au- The United States has had a long tradition of thority but also a somewhat unusual requirement legislative separation of banking and commerce. that these activities meet a public benefits test— The Congresses that enacted holding company that any adverse effects be outweighed by public legislation, beginning in 1933, continuing in 1956, benefits. and again in 1970, built on this tradition. They In effect, the compromise that was struck was Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 545 to permit bank holding companies to engage in a sidiaries much more than independent finance range of financial activities, but, even within that companies, suggesting implicit or explicit reliframework, with strong limitations on underwrit- ance on the strengths of the related bank and ing and insurance activities. The Congress also holding company, even if there are no other provided the Federal Reserve authority to super- business relationships among them. vise the nonbanking activities to assure manage- Indeed, if such linkages did not exist, it is not rial adequacy and financial soundness. entirely clear what benefits bank holding compa- The Board has administered its mandate by ny managers would perceive from expansion into authorizing a variety of activities "closely relat- new activities (or from commercial firms entered to banking" and meeting the public benefits ing into banking) other than perhaps satisfying a requirements that the Congress laid down as a pure size of growth objective. In any event, prerequisite. effective coordination of the various operations Our practical experience in supervising bank of bank holding companies and their bank subholding companies confirms the congressional sidiaries will necessarily link the financial forconcerns. We have found that the practical reali- tunes of the banks to the rest of the organization. ties of the marketplace and the internal dynamics I know that when we, as regulator, question the of a business organization under central direction capital adequacy of a particular subsidiary of a drives bank holding companies to act in greater bank holding company, its managers inevitably or lesser degree as one business entity, with the point to the capital of the consolidated enterprise component parts drawing on each other for mar- as evidence of the necessary financial strength. keting and financial strength. Certainly the mar- Nevertheless, to gain the maximum benefits ket conceives of a bank holding company and its from distancing the bank as much as possible components in that way. And if market partici- from the nonbank activities of its holding compapants tend to consider the bank holding company ny, the Board has sought, in considering applicaas an integrated entity, problems in one part of tions for approval of new activities, to require the system will inevitably be transmitted to other that the holding company have the managerial parts. capacity to undertake the activity and the finan- The evidence of leading bankers themselves cial resources to capitalize it in accordance with on the point seems to me rather conclusive. standards prevailing in that industry generally, Walter Wriston, former chairman of Citicorp, with the aim of assuring, to the extent feasible, said ". . . it is inconceivable that any major bank that the new activity can support itself on a would walk away from any subsidiary of its stand-alone basis. holding company. If your name is on the door, all Experience clearly indicates, however, that of your capital funds are going to be behind it in when a subsidiary or even a related business the real world. Lawyers can say you have sepa- enterprise, such as a real estate investment trust, ration, but the marketplace is persuasive, and it of a bank holding company experiences financial would not see it that way." More recently, in a problems, strength will be drawn from other thoughtful lecture dealing with new directions in parts of the organization, including banking subbanking, Sir Jeremy Morse, the Chairman of sidiaries, to protect the reputation of the entire Lloyds Bank and distinguished ex-Deputy Gov- organization. Appendix C concludes, after examernor of the Bank of England, strongly stressed ining the evidence, that the financial problems of the obligation of banks entering into rapidly a parent or its nonbank affiliates will typically evolving and highly competitive new markets to affect the financial position of affiliated banks stand behind their affiliates. even though certain provisions of law provide a Business theory and empirical evidence indi- degree of insulation. cate that holding company managers, to attain Perhaps most pointedly, those of us who live real or perceived efficiencies in production, oper- in this area are familiar with the problems enations, marketing, and funding will want to coor- countered in the Maryland and Ohio thrift instidinate all of these activities. For instance, bank tutions. Those institutions were not federally holding companies acquiring commercial finance regulated, but their problems strongly emphasize companies have typically leveraged those sub- the temptations to exploit depository institutions Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
546 Federal Reserve Bulletin • August 1986 for the benefit of parent companies and their explicit disclaimers on affiliate obligations, no affiliates. Maryland and Ohio had few limitations tandem operations, and other such efforts to on the activities of the owners of financial institu- enforce true corporate separateness, would martions, a situation that itself made supervision of ket participants—including management itself— the depositories more difficult. In the event, a really begin to think of bank subsidiaries as number of those depositories were used as a separate and not put at risk by the activities of financing tool and to provide credibility and their affiliates. Such limitations, however, would support to poorly conceived, poorly executed, turn the nonbank affiliates of regulated bank and even fraudulent commercial and financial holding companies into portfolio investments. schemes of their owners and their affiliates. It is Without the perception or reality of synergy suggested that the blatant abuses found in Ohio between the bank and its affiliates, interest in and Maryland reflected an absence of sufficient such affiliates would surely decline sharply. Conlegal and regulatory insulation between the de- versely, the strong interest by some commercial pository institution and its affiliates. I would or financial firms in banks, or by bank holding agree. But regulators and supervisors cannot be companies in a more fully diversified financial everywhere, and the relevant question is how services structure, reflects the perception of many temptations and how much pressure "synergy" and interrelationships. events will put on management and the system as a whole. There is the sad story of the Amoco Cadiz, a large oil tanker that spilled its cargo on the EVALUATION OF THE ARGUMENTS FOR beaches of France after breaking up in a storm. LINKING BANKING AND COMMERCE Its owners had been careful to incorporate the ship's operation and separate its corporate struc- Much criticism of the present regulatory apture. In the ensuing litigation over liability, I was proach toward banking emphasizes the narrowintrigued to find that, as the drama unfolded, ness—and arbitrariness—of the definitions of crisis management took over, corporate forms activities that are "closely related to banking." were ignored, and the top leadership of the It is argued that the basic structure and the parent directed all of the activities of the ship- protections built into law can be maintained owning subsidiary. The court found the parent while expanding the permissible range of activifully liable for its subsidiary's environmental ties of the owners of banks to areas of related disaster. activity and expertise, thus allowing the owners Is it reasonable to expect different approaches of banks and other financial businesses to be when a financial disaster faces a bank holding more competitive with firms that offer a broad company? I think not. array of financial services to the public. Essen- The Congress can, of course, legislate barriers tially, this position recognizes, on the one hand, between a bank and its affiliates, and has, in fact, the need to maintain the protections of present done so by limiting interaffiliate loans under arrangements and, on the other hand, the feasisection 23A of the Federal Reserve Act. But, bility and desirability of expanding the scope of under pressures to maintain the viability of their bank holding company activities. As I stressed at organization, management can, and does, find the outset, and will explain at the conclusion of ways to support an affiliate that do not involve my testimony, we strongly support legislation to intercorporate lending. Simply strengthening adapt by that means the present system to a section 23A in the expectation that this would changing environment. enforce true corporate separateness is naive, There are others who would go much further— particularly when the parent and its affiliates are they seem to question the basic premises of any unregulated and unexamined so that enforce- limitations on the activities of owners of banks ment is much more difficult. and would permit any enterprise to own a bank Only if the Congress required such limitations or bank-like thrift institution. They essentially as completely different names for holding compa- question whether the safeguards built into the nies and affiliates, no management interlocks, present system to protect depositors' funds and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 547 banks from abuse need to be implemented To some extent, these developments may be through limitations on ownership. I would like to cyclical, but both the deregulation of interest analyze the following major arguments that have rates and the adjustments in the 1980s to disinflabeen advanced in that connection: (1) that bank- tion clearly played a role. Certainly banks have ing, as we know it now, is no longer competitive been adversely affected by a substantially as evidenced by the trends in bank profitability changed economic climate; an unusually large and market share and, accordingly, banking must number of borrowers, especially energy, agriculbe combined with other businesses to make it tural, real estate, and international borrowers, successful; (2) that technology has made it im- sustained dramatic reverses. To deal with this possible to segregate banking from other busi- problem, provisions for loan losses were raised nesses; (3) that the synergies created by combin- sharply. By last year these provisions were being ing banking with other products are competitive- added at more than five times the 1970 pace. In ly too strong to resist; (4) that the present system fact, the ratio of loan-loss provisions to average has been irretrievably undermined by market assets has reached a new peak for all sizes of developments such as nonbank banks, and the banks. present situation is irreversible; and (5) that it is The result has been pressure on earnings, even essential to bring down the barriers between the though interest margins and fee income have linking of banking and commerce to obtain an been relatively well maintained. What no statistiinfusion of commercial capital into the capital- cal analysis of that sort can demonstrate is the strained thrift and banking industries. extent to which banks, induced by years of relatively fair lending weather and inflationary expectations, engaged in unduly risky lending 1. Banking Industry Performance in Perspec- practices at home and abroad. To that extent, an tive. With increasing frequency, some serious ultimate penalty on profits is a natural market analysts of banking have expressed concern discipline. about the future viability of banks as effective It is also important to note that for a major competitors. They point to increased competi- portion of the banking system—all banks with tion from other financial and "nonfinancial" more than $100 million in assets—profitability institutions facilitated by improvements in com- over the past 10 years, as measured by the return puters and communications, to inroads into on assets, has varied in a relatively narrow banking through loopholes and exploitation of range. The lowest rate of return on assets for this other anomalies in the system, to statutory and group was 0.60 percent in 1984, a year that was regulatory restraints on banking, and to data on a distorted by the net loss of $1 billion by a single decline in profitability and market share for company—the largest loss in banking history. banks. This bad year for this group was immediately Clearly banking is facing problems. One obvi- followed, however, by a year which, even after ous symptom is the fact that bank failures have substantial interest rate deregulation and addibeen running at record rates in the past few years tional very large but isolated losses, provided the and overall, profitability has been declining, at highest rate of return on assets during this decleast until 1985. These are serious problems that ade. The only pronounced downward trend has require careful attention, but it is, of course, been in the return on equity for the largest money necessary to examine the data carefully to diag- center banks, declining each year for the past nose accurately the problems and to develop five years. Even here the trend is reversed when effective remedies. the data exclude certain banks experiencing ex- During the first half of the 1980s, commercial ceptional losses. bank profitability slid rather persistently from Considering the underlying economic difficulthe recovery peaks reached in 1979. During that ties and imbalances, the ability of the banking period, overall bank profitability remained well industry to build reserves and capital and to below its 1979 level, and there were particularly maintain profitability does not suggest an irreacute problems for some very small and very versible loss of competitive strength. There are large banking institutions. other indicators of underlying resiliency: for ex- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
548 Federal Reserve Bulletin • August 1986 ample, apart from one data series heavily weight- market and other large banks—have shifted to ed with some large troubled banks, most indexes the cheaper commercial paper and Euromarkets of bank stocks have performed as well as, or and to foreign banks in the United States. better than, broader stock market indicators thus The impact on the biggest "money center" far this decade. Net returns on assets of the banks is particularly notable; from 1975 to 1985, largest banks have remained within historical the commercial and industrial loans of the nine ranges despite record loan-loss provisions. It is largest banks dropped from 25 to 15 percent—a also significant that large regional banks, as a relative decline of 40 percent—of one broad group, recovered so well last year that measures measure of short-term credit extended to nonfiof their profitability now equal or exceed recent nancial businesses. It is this area that has been peaks. In sum, the data do not support an the source of much concern; apart from loss of assumption of irreversibly declining bank profits. profitable business, the erosion of one traditional However, one must be careful in judging the lending area may have the effect of driving level of profitability solely based upon the raw lending into other areas of substantially greater statistical measures of return on equity and re- risk than in the past. turn on assets as they may not fully gauge the The contrast between declining shares of relative change in the level of risk in bank short- and intermediate-term business credit and portfolios. Certainly, the extent of any increase maintained shares of total business credit apin portfolio risk must be taken into account in pears to reflect lower sales of long-term debt by evaluating the profitability data. corporations in recent years. Moreover, the ef- Those risks must also be taken into account in fects on the largest banks of "securitization" of reviewing the data on banks' share of the credit corporate lending have been accompanied by a markets. In general, those data suggest an ability strong effort to participate in "off-balanceof banks "to hold their own" in a number of sheet" financial guarantees to support shortmarkets despite increasingly tough competition. term market borrowings. In the last four years, the bank share of credit Many bankers have begun to question, howevextended to domestic nonfinancial businesses er, whether the returns on their off-balance-sheet has, on average, exceeded that of the preceding guarantees, and perhaps on commercial morttwo decades. In the credit market for house- gages as well, fully compensate for the risks holds, both consumer installment and residential involved. Moreover, direct credit extensions by mortgage credit shares have declined modestly banks may be concentrated more largely among since the late 1970s, but remain higher than borrowers with lower credit ratings than formerthroughout most of the 1960s. The loss in con- ly. sumer installment lending share has been mostly The domestic bank loss of short-term credit at the expense of thrift institutions given new market share is explained by an increase in the consumer lending powers by the Garn-St Ger- shares of both commercial paper and foreign main Act. banks. The commercial paper market has grown The bank share has declined sharply in the rapidly in recent years, and increased as a permarkets for credit extended to the Treasury and centage of short- and intermediate-term credit to state and local governments. These are not areas nonfinancial businesses from just under 6 perthat those who want to enter banking have cent in 1975 to nearly 15 percent last year. U.S. indicated that they find particularly attractive. agencies and branches of foreign banks also have Nonetheless, the apparent choice of banks not to made significant inroads into this market, douacquire such assets—or their ability to do so bling their market share to 8 percent in the period profitably—does have implications for their from 1972 to 1985. Viewed in a broader perspecoverall liquidity posture. tive, including the 25 percent or more owned Moreover, in one area, the record does dem- U.S. subsidiaries of foreign banks, as well as onstrate a strong adverse trend. The bank share their U.S. branches and agencies, the share of of short- and intermediate-term business credit total nonfinancial business credit of these banks markets has declined. Larger prime borrowers— substantially exceeded that of commercial paper. traditionally the strongest customers of money The appropriate public policy response to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 549 marked changes in the relative shares of domes- ence of treatment between domestic and foreign tic and foreign banks may be quite different with markets stand out. respect to the commercial paper market. For In closing this section of my testimony, I instance, foreign bank competition might point to would like to note the rapid movement of the the need for intensified international cooperation states toward expanded interstate banking. The on capital adequacy standards. Account should expansion of the regional arrangements has proalso be taken of the U.S. bank penetration in ceeded faster than anticipated. Twenty-six states foreign markets. have adopted some kind of regional authoriza- More fundamentally, it is essential to ask why tion. U.S. banks may be more expensive suppliers of I am also encouraged by the movement in credit than others to large corporations. Banks many states toward phasing out the regional bear certain costs—reserve requirements, depos- arrangements and opening their borders to nait insurance premiums, and a regulatory compli- tionwide banking—fourteen states (including ance burden—that are not applicable to other seven with initial regional pacts) have now relenders. On the other hand, banks are the benefi- moved most restrictions on interstate acquisiciaries of the federal safety net that is undoubted- tions or will soon do so. The task is now for the ly a factor in reducing their borrowing costs. states to complete the effort and avoid the possi- Whatever the reasons,.a significant cost differen- ble balkanization of the banking industry that tial appears to exist today. initially seemed to be the consequence of limited If banks are at a long-term basic competitive regional compacts. A transition to interstate disadvantage in supplying short-term funds to banking should help assure that banks are able to borrowers, there would of course be major impli- compete with other firms, operating nationwide, cations for the structure and size of banking, for that can bring the most advanced technology to the safety of the financial system as a whole, and bear in serving customer needs. for monetary policy. So far, the data do not unambiguously indicate that this is the case, but 2. The Role of Technology. Another concern developments do need to be carefully studied that needs careful analysis is that advances in and the implications appreciated. Such implica- technology somehow place the banking industry tions would not seem to include a need to change at a major competitive disadvantage. It is said the longstanding policy of separating commerce that burgeoning developments in building comand banking, a development that could well puters with extraordinary power, and high-speed aggravate the trend. communications systems permitting instanta- Certain approaches responding to the in- neous transmission of voice, data, and docucreased "securitization" of the short-term credit ments, make it much easier to manage and market—not just for business credit—do seem process a broad range of financial transactions, relevant to the legislative process. The Board has thereby permitting nonbanking companies to long supported an approach that, within the compete in areas previously within the exclusive scope of appropriate rules to limit potential con- domain of banks. flicts of interest and to assure safe and sound In considering the kinds of changes in public operation of securities affiliates, would permit policy that are necessary to respond to these subsidiaries of bank holding companies to engage developments, it seems to me that we should in underwriting and distributing commercial pa- bear in mind that banking institutions are already per. The Board has similarly supported authori- primary beneficiaries of computer and communization for underwriting mortgage-backed securi- cations technology. They have creatively applied ties, revenue bonds, and mutual funds. We have these technologies to global markets and have held this view for some time. The area of corpo- made possible almost instantaneous payments of rate underwriting, in which U.S. banks do partic- hundreds of billions of dollars every day. They ipate abroad, is much more difficult; I must point have permitted banks to respond to the marketout that the integration of international capital place with new services to meet the demands of markets and the growth of U.S. bank participa- corporate cash managers and for a broad array of tion in the Euromarkets make the present differ- new consumer products—including 24-hour Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
550 Federal Reserve Bulletin • August 1986 banking through automated teller machines bined financial enterprises have complained (ATMs), home banking, telephone bill payment, about the difficulties of coordinating the joined and credit and debit cards. Some banks may activities, and do not appear to have demonstrathave been a little slower to adapt to the very ed consistent higher levels of profitability. latest technology because, as premier financial data processors, they had invested so heavily in 4. Anomalies and Irreversibility. There is also the technology of an earlier time and because of the argument that things have already gone too branching and interstate restrictions. But they far to reverse, that too many nondepository are bringing their systems to the "state of the institutions are already in the banking business, art," and developments suggest that banks can and that these companies with their superior be as adept at harnessing new technology as any range of product offerings will simply outcomother business. pete the remaining banks. But despite all the Moreover, the long experience and direct pres- publicized acquisitions and product introducence of banks in local markets, for all its imbed- tions, the facts on market share, profitability, ded costs, carries advantages as well. I was and technological innovation do not seem to interested to see that one company that publicly support this thesis. reported that it intended "to develop and market Certainly there are large anomalies in the innovative financial services on a nationwide present system. The acquisition of nonbank basis" relying principally "on direct marketing, banks by insurance, securities, and commercial mail and telephone rather than on branches and firms, while bank holding companies cannot do salesmen" later decided to sell its nonbank bank the opposite, is surely competitively unfair. because it was unable to "get a piece of the Nonthrift thrift institutions and state grants of market." One mistake doesn't make a case, but powers to their own institutions for interstate certainly the relative competitive advantages and competitive reasons, even when those powers disadvantages remain an open question. are questionable from the point of view of safety and soundness and ruled out for bank holding 3. Synergy. Technology may also make possi- companies, are other examples. At this point, ble a melding of products and cross selling to these developments are still minor in their overestablish synergies unavailable to those who are all impact. They are an indication of the need for limited by law to banking or certain financial action, but they do not point to the inevitability services alone. That thought has apparently of accepting and enlarging what has happened. In spawned acquisitions of nonbank banks, non- fact, the announced intention of the banking thrift thrift institutions, or other financial service committees of the Senate and the House to have firms by retailers, insurance underwriters, secu- a retroactive grandfather date provides fair warnrities brokers and underwriters, and now indus- ing to those who have exploited the nonbank trial firms. bank loophole. We need to be cautious about whether these At some point, the process could be practically claims justify abandoning the broad separation of difficult to reverse or end. Again, that is an banking and commerce. I am bemused when argument for decision and action, not in itself an nonbanking firms, including retailers, seek in argument for reversing basic principles that have banking the growing markets and profitability guided the system. that they apparently question in their own industries, when at the same time, banks raise red 5. Fulfilling Capital Needs. The final arguflags about prospects in the banking industry. ment for allowing any company to own a bank or Synergism is hard to measure and demon- thrift institution seems to me a counsel of destrate. Some skepticism seems to be justified by spair; only commercial businesses can and will the mixed results that conglomeration appears to provide necessary capital to troubled thrift instihave achieved in nonfinancial areas, where, over tutions and banks. the past several years, we are seeing the spin-off In fact, any expectations that nondepository and sale of a great many companies that had been institutions are eager and prepared to invest large brought under a single management. Newly com- amounts in resuscitating large troubled institu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 551 tions is questionable. In many cases, the objec- goal. But it is difficult, indeed, to argue that the tive seems to me to obtain access to federally U.S. banking system, without commercial owninsured deposits, payments system services, and ership, cannot, or will not, meet that need. the ability to export a uniform credit card interest Federal and state policies have encouraged a rate throughout the country without taking on multiplicity of small depository institutions that large fixed costs. The emphasis often seems to be serve a public that is almost completely comon acquisition of a new or small institution with posed of small businesses and families. A counrelatively minimum initial capital requirements, try that has more than 35,000 depository instituparticularly as compared with the size of its tions—banks, thrift institutions, and credit parent commercial firm. Moreover, if companies unions—can hardly be said to ignore the needs of are generally permitted to own nonbank banks, consumers. In fact, the overwhelming number, or if access to bank ownership is to be more open more than 95 percent, of these institutions are to commercial firms more generally, existing none other than family banks serving the needs interest in taking on the heavy capital and man- of small business, families, and individuals. Alagement burden of acquiring large troubled thrift most one-quarter of commercial banks have 5 institutions would presumably drop away, sharp- percent or less of their assets in commercial and ly limiting any contribution to easing the burden industrial loans and more than three-quarters faced by the FSLIC. have less than 20 percent of assets in these loans. More basically, it would be anomalous to However beguilingly labeled, so-called conrecommend a solution for the difficulties of prob- sumer banks are essentially a device for breachlem institutions by potentially creating a situa- ing the wall that now separates banking and tion fraught with adverse consequences for the commerce. Those who would breach it in the system as a whole. To take just one example, presumed interest of competition and the conmany of the most serious problems among thrift sumer should, it seems to me, be asked to carry a institutions do not arise today because of their heavy burden of proof. Do we really want, for traditional business but because those businesses example, a retail business to be able to gather have been combined with risky real estate devel- deposits under the protection of federal insuropment. Increasing the ties between depository ance and to use those deposits to fund a credit and commercial firms more broadly could well card they sponsor more cheaply than retailing aggravate matters. competitors? Is it wise policy to encourage banking arrangements in which a retailer has an incentive to prefer its customers in the provision THE CONSUMER BANK QUESTION of loans? Is the converse—favoring retail customers of a particular bank—any better? Are The argument is made that so-called consumer there risks in reducing credit standards in an nonbank banks are needed to make available to effort to induce nonbanking business, with the consumers products and services that are not financial risks passed on, in part, to the federal otherwise available to them. As typically pro- safety net? Do we want to encourage joint marposed, these banks could engage in all the func- keting efforts and "tie-ins," implicit or explicit? tions of banks except making direct commercial Obviously, we can try to write complicated loans (they could make loans through the pur- laws to deal with these possibilities. But it strains chase of commercial paper and money market credulity about human behavior to suggest that instruments). They would be different from ordi- they would be entirely effective, any more than nary banks inasmuch as they could be owned by restrictions on intracorporate affiliates. That is commercial firms and engage in cross selling of particularly true if the parent holding company affiliates' products and services. and its nonbanking affiliates are unsupervised It is, of course, an essential objective of any and unexamined. banking system to provide efficient, competitive, I believe that, should the Congress authorize and innovative services and products to the the so-called consumer bank or make it clear that consuming public. Any banking structure must it did not intend to close the nonbank bank be designed to assure the achievement of this loophole, some rather dramatic changes in our Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
552 Federal Reserve Bulletin • August 1986 banking structure would occur in relatively short Fedwire transfers are made in very large dollar order. Some banks, in reassessing the circum- volumes. They involve more than 181,000 large stances, could be induced to take the radical step dollar payments every day with a total daily of formally dividing their existing banking institu- value of more than $400 billion. Similarly, there tion into two pieces, placing demand deposits are more than $200 billion in book-entry securiand consumer banking in one subsidiary and ties transfers every day. Most of these transfers commercial lending in another. Neither subsid- are processed through on-line linkages to the iary would be a "bank" according to the defini- Federal Reserve or by terminals or computers on tion of the Bank Holding Company Act, and the banks' premises, immediately and finally. holding company would then be free to engage in These systems can generate large overdrafts— any business activity. in the multibillions of dollars—in a very short New entrants into a market are ordinarily period of time. The main protection against the associated with more competition, at least for a rippling effects of a default is both the standing of time. But there is essentially free entry into the bank itself and its capacity and willingness, in banking today, and any firm can provide credit its own interest, to make an independent credit cards and consumer loans. The question is judgment about its customers. Such an indepenwhether there are significant added gains by dent judgment is hardly feasible when a bank is marrying banking and commerce. Certainly poli- ordered to make payment by a parent or an cy judgments cannot reasonably be made based affiliate. And, in the last analysis, if the bank or upon the activities of the few, and perhaps its parent is unable to cover the payment, the unrepresentative, commercial companies partici- public, through the Federal Reserve and the pating in banking today. FDIC, bears a large part of the risk. The risks inherent in parent-affiliate relationships would be exacerbated by the financial formula likely to be followed by a commercial IMPLICATIONS FOR THE PAYMENTS SYSTEM parent seeking access to the payments system through ownership of a nonbank bank: token I emphasized earlier the importance of dealing capitalization of the bank relative to both the size with risks to the nation's payments system. of the parent and affiliates and to the very high Advocates of broader access to that system dollar volume of transactions functioned through argue that risks arising from increased direct the bank. Such an arrangement seems to be access by nonbanking firms can be adequately implied by a number of actual or proposed noncontrolled through restrictions such as section bank banks. 23A of the Federal Reserve Act, which limits The combination of banking and commerce in extensions of credit to, and other transactions the provision of payment services would also by, insured banks with their regulated, super- raise important questions about the availability vised, and examined affiliates, or through over- of Federal Reserve credit, now essentially redraft limits under the Federal Reserve Board's served for supervised and regulated depository Policy Statement Regarding Risks on Large- institutions under carefully circumscribed condi- Dollar Wire Transfer Systems. tions. In a situation in which commercial firms These arguments fail to take into account a had direct access to the payments mechanism number of crucial aspects of the payments sys- through captive nonbank banks, the Federal Retem: the immediacy and finality of wire and serve would be put in the dilemma of either book-entry transfers, the importance of indepen- funding large overdrafts generated by a nonbank dent credit judgments in protecting the integrity bank parent or rejecting funding requests at the of the system, the difficulty of monitoring com- risk of impairing payments to innocent third pliance with rules to prevent abuse by affiliates parties and the functioning of the overall syswithout substantially and unacceptably delaying tem. Any competitive advantage of access to all payments and without examination authority, Federal Reserve credit would certainly push and the potential for opening access to the dis- more firms toward bank ownership; yet, I do not count window to commercial firms generally. believe that the Congress intended that the safety Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 553 net should inure to the advantage of nonbanking POLICY FOR THE FUTURE companies. It has been suggested that the exceptional The burden of my testimony is that the basic provision of payments system facilities to the banking system is sound, embodying important Chrysler Corporation during the period when the principles—important for safety and soundness, government guaranteed loans to that company for competitive open markets, and for innovademonstrates that this technique can be safely tion. This system has withstood enormous used. But that rescue to me is the exception that strains and demonstrated resilient strength in proves the rule. Payments facilities were provid- recent years. Certainly, the technological and ed to the Chrysler Corporation in 1981 when it market forces pressing upon the structure are was already in a real sense under government significant and important. But I believe that they protection. That access was provided in recogni- can be channeled in a manner consistent with tion of the fact that banks exercising independent longstanding purposes of public policy toward credit judgments would not accept Chrysler pay- banking and consistent with a more competitive, ment orders in the normal course. Direct access responsive, and stable financial system. to the payments system through a specially char- The Congress has the capacity to choose the tered bank was provided only because the Con- kind of system that we are to have. The time to gress had established a policy of supporting the exercise that choice is now. survival of the corporation, and because its debt You can refrain from action, but that will not had been guaranteed by the United States by stop change. Then we will see a proliferation of an act of the Congress. That does not seem nonbank banks and nonthrift thrift institutions; to me any precedent for firms without official increasing combinations of banking and comsupport. merce with only limited safeguards to prevent Appendix E discusses payments system risks excessive risk, conflicts of interest, and concenin some detail as well as why regulatory ap- tration of resources; and more anomalies and proaches to deal with these risks, particularly as uneven competitive conditions. In sum, a failure they are presented by nonbank banks, are not to lead, a failure to establish an orderly environsatisfactory. This is a technical, detailed matter. ment for the conduct of financial business, will But it is nonetheless a matter that lies at the heart have consequences that are both serious and of maintaining an efficient, safe financial system. real. Alternatively, the Congress could decide to legalize combinations of banking and commerce, regulating that relationship in such a way as to FOREIGN EXPERIENCE limit the scope for risk, conflicts of interest, and concentration of resources. Much of my testimo- As a matter of law and tradition, combinations of ny is that I do not believe that that arrangement banks and other businesses are present in some will work effectively. If the restraints on intracountries. Those very few countries that have corporate relationships are so strong as to deal banking systems in which such arrangements are with the risks, the competitive benefits from, and prevalent are generally characterized by the incentives to create, such relationships will be dominance of a relatively few large banks. Such exceedingly small. Alternatively, a closely regua situation presents a very different regulatory lated bank as part of an unregulated bank holding and supervisory framework, among other things company would dwindle in importance. It would making it possible for bank supervisors to main- be used only to provide such services as could tain a direct review of, and close contact with, only be provided in the form of a bank—insured those who are operating the banking system. deposits, and access to the payments system. But there also appear to be major costs in this Other services, financial or otherwise, would kind of a system in terms of tendencies toward gravitate outside the supervised framework. I cartelization, slower innovation, and narrower cannot see how that can be good for banking, for financial markets. These are not patterns that we business, or for stability. would wish to emulate. You have a third choice—to preserve the basic Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
554 Federal Reserve Bulletin • August 1986 elements of the present system while adapting it of those that were specifically prohibited. Into meet the requirements of changed circum- stead, the Gordian knot was cut by the Congress stances. There is nothing static about the bank giving the Federal Reserve Board the administraholding company concept; the Congress intend- tive discretion to determine specific activities ed to allow it to be adapted over time. We and under a general, but limited, standard that reothers came to the conclusion some years earlier quired the careful weighing and balancing of the that this could best be done by broadening some- public interest. what the scope of permissible nonbanking activi- Perhaps one way to break today's gridlock ties of bank holding companies to include a would be, 16 years later, to adopt the same greater variety of financial and brokerage ser- approach. Instead of the Congress trying to vices, all within a framework that assures that resolve specific industry issues, the Board might the public interest in safe and sound banking is be given a somewhat expanded, but still circummaintained. We have urged that bank holding scribed, mandate to allow broader ownership of companies, through their affiliates, be able to financial businesses by bank holding companies engage in a variety of activities such as under- and for these same kinds of financial businesses writing commercial paper and other instruments to own banks. To protect the reasonable interest I mentioned earlier, real estate and insurance of all parties, including both applicants and protbrokerage, and travel services. estants, any such new authority should be limit- We believe that the holding company and its ed by the same public interest standard as reaffiliates should be subject to official surveil- quired by present law, with the same procedural lance, with the right of inspection. Indeed, most protections provided by the right to an adminisof the proposed activities are, one way or anoth- trative hearing as well as judicial review of Board er, already subject to official supervision, and decisions. In addition, I believe a new safeguard that should be rationalized. would be desirable: the effective date of any new Such an arrangement would be perfectly neu- activity approved by the Board should be detral and reciprocal, favoring neither bank holding layed for six months so that the proposed action companies nor the financial industry competi- could be reviewed by the Congress before it went tors. If it is permissible under the law for bank into effect. holding companies to own an insurance, broker- However, that would be a second choice. We age, or securities firm, it would be equally per- look to the Congress to provide more specific missible for these firms to own banks. legislative direction, including review of the pre- It has thus far not been possible, for a variety sent restrictions of the Glass-Steagall Act. of reasons, for the Congress to adopt this ap- In any event, I hope the Congress will act, and proach. Within the congressional forum, it is act soon. The financial system is too important, difficult to resolve specific competitive issues. too interwoven into the fabric of the economy as That was true in 1970 when the Congress could a whole, to be allowed to evolve in a haphazard not decide to adopt either a positive list of manner. • specific bank holding company activities, or a list Statement by Manuel H. Johnson, Jr., Member, Act of 1982. We at the Board support efforts to Board of Governors of the Federal Reserve Sys- lower this country's trade deficit and wish to tem, before the Subcommittee on International work with the Congress in attempting to arrive at Finance and Monetary Policy of the Committee solutions to the problem. It is not the view of the on Banking, Housing, and Urban Affairs, U.S. Board, however, that amending the Bank Export Senate, June 17, 1986. Services Act (BESA) is necessary at this time. Given the unfavorable economic conditions that Thank you for the opportunity to present the have existed since enactment of the BESA, we views of the Federal Reserve Board on S. 1934, feel that the existing statute has not been given a the bill to amend the Export Trading Company fair test, and that its effectiveness should be Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 555 evaluated in the future. As to the specific provi- invest in an ETC only after allowing for review sions of S. 1934, the Board opposes three of the by the Federal Reserve. The Federal Reserve is revisions to the BESA proposed in the bill on required to review the notice to determine grounds of safety and soundness, but has fewer whether the proposal may result in unsafe or reservations concerning two other proposed re- unsound banking practices, undue concentration visions. of resources, decreased or unfair competition, or In my testimony, I will review briefly the conflicts of interest, or whether the investment Board's implementation to date of the BESA would have a materially adverse effect on the (Title II of the Export Trading Company Act of safety and soundness of a subsidiary bank of the 1982), discuss some of the experiences of bank- bank holding company. affiliated export trading companies (ETCs) and The Board issued final regulations implementother trading companies, and analyze and give in ing the BESA in June 1983. These regulations greater detail the Board's views on the provi- were later modified to simplify the notification sions of S. 1934. process and to provide for delegated authority to the individual Federal Reserve Banks to review certain ETC notifications. Virtually all of the THE BESA AND THE BOARD S notifications of intent to establish ETCs have been acted upon within the 60-day time period REGULATIONS set forth in the statute, and no notification by a The Export Trading Company Act of 1982 (ETC bank to invest in an ETC has been disapproved. Act) was designed to help promote exports by Fifteen of the 24 ETC notifications filed after the facilitating the formation and operation of ETCs. adoption of the delegation procedures were pro- The BESA provides a limited exception to the cessed by the Reserve Banks with no Board nonbanking prohibitions of the Bank Holding review. Company Act by permitting bank holding companies and certain other types of banking organizations to make equity investments in ETCs. The RESPONSE TO THE ACT purposes of the BESA were the following: (1) to provide for the establishment of U.S. ETCs that As you are well aware, the economic climate could be competitive with foreign-owned ETCs; since the ETC act was passed has not been (2) to provide U.S. commerce, industry, and favorable to exports. The act was signed during agriculture, especially small and medium-sized the fourth quarter of 1982, when the U.S. econofirms with a means of exporting their goods and my was in the depths of a recession and the services; (3) to foster the participation by region- volume of exports had fallen more than 20 peral and smaller banks in the development of cent from its peak in 1980. Since that time, U.S. ETCs; and (4) to facilitate the formation of joint output and employment have expanded rapidly. venture ETCs between bank holding companies By contrast, U.S. exports have rebounded only and nonbank firms. moderately and still remain below their 1980 Thus, the BESA represents a dramatic depar- peak. The U.S. trade deficit increased from $25 ture from traditional banking legislation because billion in 1980 to approximately $125 billion in it permits participation by banking organizations 1985. in commercial ventures. In recognition of this The weakness of U.S. exports can be attributexpanded latitude, however, the Congress in- ed to a number of macroeconomic developments cluded a number of prudential safeguards to limit that took place in the early to mid-1980s and that potential adverse financial effects on banks affili- have continued until fairly recently. The factors ated with ETCs. The statute provides that a bank include the rise of the dollar against foreign holding company may not invest more than 5 currencies; the relatively sluggish growth of forpercent of its consolidated capital and surplus in eign economies; and the drop in imports by an ETC nor lend more than 10 percent of its countries experiencing problems meeting their consolidated capital and surplus to an ETC. It external debt obligations. also provides that a bank holding company may Moreover, as was discussed during early hear- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
556 Federal Reserve Bulletin • August 1986 ings on the BESA, U.S. manufacturers have not tion with banking organizations. While there is traditionally made widespread use of trading no means of tracking all these trading companies, companies as a medium for exporting their the General Accounting Office has conducted a goods. By one estimate, in 1982, there were survey of 23 trading organizations that have about 2,000 American-owned trading companies obtained certificates of review from the Departactive in the United States. However, these ment of Commerce. Many of these firms reportcompanies were involved in only about 10 per- ed that business has been disappointing, citing cent of all U.S. exports. Larger U.S. multina- economic factors, particularly the high value of tional companies with substantial sales abroad the dollar as the reason. It is also interesting that had their own in-house marketing capability or a the membership of the National Association of few had trading company subsidiaries. Thus, at Export Companies, an organization composed the time the act was passed, the trading company primarily of nonbank export trading companies, generally was not a prominent vehicle for selling dropped by half in the last four years and is only U.S. exports, and it was unlikely that the pat- beginning to increase again. This drop in memterns of U.S. businesses with exporting capabili- bership is reportedly a result of the fact that ties could be changed in only a few years. many of the member companies have gone out of Notwithstanding this business environment, business. 40 bank holding companies have notified the Federal Reserve System of their intent to invest 1934 in ETCs. (Tables attached as an appendix to this testimony show the status of each ETC notifica- There is an understandable concern about the tion acted upon by the System.1) Several of these mediocre performance of ETCs since the pas- ETCs appear to be operating profitably and sage of the act resulting in attempts to deal with expanding their overseas operations. the situation by amending sections of the BESA. In contrast, the performance of many of these The amendments would modify certain of the bank-affiliated ETCs has been disappointing. In Board's regulations. Broad trends, however, fact, 11 ETCS are no longer operational. Besides such as unfavorable economic conditions—not poor economic conditions in their first years of the Board's regulations—have impeded the reexistence resulting in diminished profit potential, sults of the legislation. Moreover, three of the these ETCs have also encountered start-up diffi- bill's provisions present serious issues related to culties resulting from unfamiliarity with the trad- the safety and soundness of banking organizaing business. Other problems encountered are tions investing in ETCs. From a supervisory peculiar to the activities of trading companies, standpoint, we are less concerned about the regardless of how long they have been operating. other two provisions. However, I would note For example, one ETC experienced substantial that the provision dealing with the calculation of difficulties because a major customer broke the export revenues does raise policy questions terms of its trade agreement; another lost its about congressional intent in establishing ETCs capital because of its inability to deliver on a to foster U.S. exports. major contract; and a third was closed after suffering significant losses resulting from the lack 1. Transactions with Affiliates. The BESA of adequate controls over its trading activities. provides that extensions of credit from a bank to At least four bank holding companies have dis- its affiliated ETC are covered by section 23A of continued the operations of their ETCs either the Federal Reserve Act. Section 23A is a cortemporarily or permanently because the operat- nerstone of the regulatory structure for protecting losses were found to be unacceptable. ing banks from credit judgments made for non- There is no evidence, however, that ETCs commercial reasons. It generally limits the affiliated with banks have been any less success- amount of credit that banks may extend to a ful than trading companies that have no connec- nonbank affiliate and subjects such credit extensions to certain collateral requirements. 1. The attachment to this statement is available on request S. 1934 would exempt from section 23A of the from Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Federal Reserve Act a bank's transactions with Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 557 its affiliated ETC. The purpose of this exemp- financing for transactions in goods without creattion, according to the statement introducing the ing undue risk to the affiliated bank. In addition, bill, is to remove a competitive "disadvantage" the Board has stated that it would consider from ETCs, permitting them to borrow from granting ETCs additional waivers from these their affiliated bank without meeting the collater- collateral requirements based on specific real requirements of section 23A. quests. Experience over the years has demonstrated The bill also would relieve extensions of credit that limitations on self-dealing between a bank by a bank to its affiliated ETC from the quantitaand its affiliates are essential to help curb abuses, tive limits of section 23A. These limitations to maintain bank safety and soundness, and to provide that a bank may lend no more than 10 prevent excessive risk to the federal safety net. percent of its capital and surplus to an affiliate. The Congress also has recognized the impor- The BESA itself limits extensions of credit by a tance of the protections found in 23A—every bank holding company or its subsidiaries to an deregulatory proposal in the last four years has affiliated ETC to 10 percent of the holding comused section 23A as the central mechanism for pany's capital and surplus. Thus, the bill's propreserving the safety and soundness of banking posed exemption could have the effect of signifiorganizations with expanded powers to enter cantly increasing the exposure of a bank to its nonbanking areas. affiliates. The Board strongly recommends that The experience to date reinforces the desir- the quantitative limits on these extensions of ability of maintaining the protections afforded by credit be retained. section 23A. In one case, a bank lent to its affiliated ETC amounts in violation of section 2. Capital adequacy. In reviewing notices by 23A without required collateral. The ETC was banking organizations to invest in ETCs, the unable to repay the advances and thus the condi- Board considers the assets-to-equity ratio of tion of the bank was affected. Had section 23A each proposed ETC on a case-by-case basis, been complied with, the bank would not have taking into account, among other factors, the exposed itself to these losses. Therefore, an riskiness of the ETC's proposed activities. exemption from section 23A for transactions S. 1934 would prohibit the Board from disapwith an ETC does not appear to be in the best proving a bank's investment in an ETC solely on interests of preserving safety and soundness as it the basis of the proposed ratio of assets to equity creates the opportunity for a bank's resources to unless that ratio were greater than 25 to 1. be misused in support of the affiliate's trading The Board, by reason of its responsibilities as activities. In the area of extensions of credit, it is a bank regulator, has historically recognized the most important to strike the proper balance need for the maintenance of adequate capital in between encouraging the growth of ETCs and individual state member banks and bank holding preventing imprudent banking practices. Morecompanies and in the banking system in general. over, the application of section 23A does not Capital provides a buffer for banking organizaimpose a competitive disadvantage on ETCs tions in times of poor performance, helps to affiliated with banks. They, like other trading maintain public confidence in particular banking companies, are free to borrow from unaffiliated organizations and in the banking system, and lenders on terms determined by the market. supports the reasonable growth of banking orga- The Board, as a matter of policy, has generally nizations. An evaluation of capital adequacy is not granted exemptions from section 23A. With one of the major purposes of a bank or bank respect to ETCs, however, the Board has includ- holding company examination. ed in its regulations a waiver from the strict The Congress has recognized the necessity for collateralization standards of section 23A for banking organizations to maintain adequate capithose transactions in which the ETC takes title to tal. In the International Lending Supervision Act goods against a firm order and the lending bank of 1983, the Congress required the bank regulamaintains a security interest in those goods. The tory agencies to "cause banking institutions to Board has determined that in these circum- achieve and maintain adequate capital by estabstances a waiver would permit ETCs to obtain lishing minimum levels of capital for such bank- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
558 Federal Reserve Bulletin • August 1986 ing institutions." For this purpose, capital re- 3. Exporting Services. The BESA, read toquirements are assessed on a consolidated basis, gether with the Board's regulations, defines an although the capital adequacy of subsidiary orga- ETC in which a banking organization is permitnizations is also taken into account. The latter is ted to invest as a company that is exclusively necessary because the condition of affiliated or- engaged in international trade, and that principalganizations can have an important effect on their ly exports, or provides services to facilitate the related banks. export of, goods and services produced by oth- In the case of ETCs the Board strongly recom- ers. S. 1934 would modify the definition of an mends against the proposed legislative standard ETC to include companies that principally exfor the leveraging of ETCs. In carrying out its port goods or services produced by themselves duty to preserve the safe and sound operation of or any of their affiliates. This revision would bank holding companies, the Board must be able permit a bank to invest in any company that to examine carefully the capital structure and provides its own services to foreign customers proposed leveraging ratios of bank-affiliated regardless of whether the services relate to trade. ETCs. Capital adequacy is a critical determinant The common thread throughout consideration of the financial strength of the ETC and of its of the original legislation was that the experience ability to withstand unexpected adverse develop- and expertise of banks in financing foreign inments so as not to affect the financial resources vestment were thought to be needed by export of the parent holding company or the safety and trading companies—companies that serve as insoundness of affiliated banks. There is no justifi- termediaries for producers and suppliers of cation for a statutory rule allowing a minimum goods and services in the foreign marketing and capital level for bank-affiliated ETCs substantial- sale of their products by providing a range of ly less than that required for banks, when the export trade services. It was not intended that ETCs' activities are likely to be outside the banking organizations would serve as a source of normal range of banking operations and there- capital investment in various service industries fore present greater, not fewer, risks. Thus, we generally and assume the risks associated with do not adhere to the presumption of S. 1934 that those industries. The Board's regulations do not a leveraging ratio of 25:1 would be consistent limit the ability of bank-affiliated ETCs to offer a with the sound financial operation of an ETC. broad range of trade-related services both in the Many factors must be taken into account, such United States and abroad. For example, the as the nature of the ETCs business, the size of BESA and the regulations permit ETCs to proits inventory, and the size of the bank holding vide consulting, market research, marketing, incompany's investment in the ETC. Only a case- surance product research and design, legal asby-case analysis permits all these factors to be sistance, transportation including freight taken adequately into account. forwarding, warehousing, foreign exchange, fi- In this regard, the Board recently acted on a nancing, and taking title to goods, when provided request from a bank holding company to adopt a to facilitate the trade in goods and services leveraging ratio for its ETC that was higher than produced by others. According to the notificathe 10:1 ratio it had proposed in an earlier tions to the Federal Reserve, a number of ETCs notification to a Federal Reserve Bank. After are providing many of the trade services included determining that the nature and riskiness of the in this list. Moreover, the Board has recognized activities proposed for the ETC were similar to that this list of services is not exhaustive. For those of secured lending transactions, the Board example, upon demonstrating that the activities approved a leveraging ratio of 17:1. This action is were related to international trade, one ETC has illustrative of the flexible approach followed by acquired a company in England that engages in the Board with respect to the capitalization of customs bonding services and in certain types of ETCs. inventory control services related to cross-bor- In light of the critical importance of the capital der trade. In addition, the Board has responded adequacy of each subsidiary company in a bank favorably to several export trading company holding company organization, the Board needs notifications that specifically contemplated the to retain its discretion in this area. establishment of overseas offices and divisions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 559 The practical effect of S. 1934 would be to original premise for allowing bank holding comchange the congressionally intended emphasis in panies to engage in this activity: that the inthe BESA from promoting U.S. exports and creased risks undertaken by a bank holding comemployment to providing a vehicle by which pany through an ETC would be counterbalanced commercial banking organizations, through the by an increase in U.S. exports. Ultimately, howmedium of an ETC, could acquire organizations ever, it is up to the Congress to determine serving overseas customers without any benefit whether ETCs should continue to have as their to the U.S. trade or balance of payments posi- primary purpose the export of U.S. goods and tion. The proposal would thus have the effect of services. changing the incentive in the ETC Act to promote U.S. exports, while potentially undermin- 2. Inventory. The Board's regulations provide ing the public policy objectives embodied in the that a notice to invest in an ETC may be delegatseparation of banking and commerce. Such im- ed to the appropriate Federal Reserve Bank, portant public policy issues should be addressed rather than reviewed by the Board, if the prodirectly and not indirectly through technical posed export trading company will take title to changes in the BESA. goods only against firm orders, or if its inventory While the last two provisions of S. 1934, which is worth less than $2 million. Taking title to I will now discuss, appear to raise few superviso- goods involves sufficient risk that the Board felt ry concerns on our part, the calculation of the it should have the opportunity on a case-by-case export revenues provision, as I have mentioned, basis to review carefully proposals involving this does raise questions of policy. activity. The Board wanted to reserve the right to disapprove those proposals that could involve 1. Calculation of Export Revenues. The unsafe and unsound practices, as, for example, BESA defines an ETC as a company "organized when a bank-affiliated ETC has an inadequate and operated principally for purposes of export- system of management controls or when the ing or facilitating the export of goods and ser- ETC has insufficient safeguards to protect vices produced in the United States . . . ." This against a violation of the statutory prohibition definition reflects the goal of the Congress of against speculation in commodities. The Board improving U.S. export performance. In accor- has in fact reviewed and did not object to several dance with this purpose, the Board's current notices in which projected inventory is substanregulations require that more than half of an tially greater than $2 million. export trading company's revenues over a two- S. 1934 prohibits the Board from imposing a year period be derived from U.S. exports. dollar limit on an ETC's inventory unless the Under S. 1934 a company would qualify as an Board finds that the limit is necessary to prevent export trading company if its revenues from material adverse effects on a bank affiliate of the exports exceed its revenues from imports. Reve- ETC. This provision would merely codify the nues derived from third-party trade or associated Board's current practice and would provide the with countertrade would be excluded from the Board with sufficient authority to exercise its calculations. This would mean that an "export supervisory powers in this area when necessary. trading company" could be a company substantially engaged in third-party trade or countertrade involving two foreign countries, with minimal involvement in exporting goods or services CONCLUSION from the United States. In fact, the proposal could hurt U.S. exports, since the goods being In conclusion, I would like to emphasize again traded outside the United States can be substitut- the Board's support for a strengthened and exed for goods exported from the United States. panding export sector of the U.S. economy. In Such a result would amount to a substantial this context, we would urge the Congress to alteration of congressional intent as to the pur- allow for a fair testing of the existing law and to poses of ETCs to promote the export of U.S. refrain at this time from adopting the proposed goods and services and would be contrary to the amendments. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
560 Federal Reserve Bulletin • August 1986 Statement by Paul A. Volcker, Chairman, Board fortunes of the particular borrowing countries, of Governors of the Federal Reserve System, but also the performance of the world economy before the Committee on Foreign Affairs, U.S. and of the world financial system as a whole. House of Representatives, June 18, 1986. Leading banks, both in the United States and abroad, were heavily exposed at a time when I appreciate the opportunity to review with you many of them also faced the pressure of recesthe debt situation of developing countries. Over sion and financial strains at home. Exports to the the past four years, I think we can point to some borrowing countries dropped abruptly, and possubstantial progress. But despite that progress, sibilities of political strain were aggravated. serious problems remain. The sharp decline in oil A high degree of international cooperation prices has brought some of them to an acute involving borrowing countries, commercial stage once again. banks, and creditor countries has been necessary We have much of the essential framework in to deal with the situation, taking account, on a place to support growth with necessary econom- case-by-case basis, of differences among the ic adjustments among the borrowing countries. borrowers. During the initial crisis stage, it was But the hard fact is that much remains to be natural that the International Monetary Fund done, in the industrialized world and in the played a central, coordinating role; it could adheavily indebted countries of Latin American or vise the borrowing countries and, in effect, certielsewhere, to implement the measures necessary fy both their economic programs and the size of to that goal. That is the continuing challenge, and their external financing needs. It could also work I, for one, believe that it will be attainable in with both lending banks and creditor countries. practice with continued, and in some cases, That role was performed with skill, if not without intensified cooperation. controversy. The fundamental causes of the international With its traditional emphasis on long-term debt problem that burst forth on the front pages investment planning and on project lending, the of newspapers four years ago are complex. They World Bank was not in a position to react as included economic policies in the borrowing quickly as the Fund to the immediate adjustment countries that were premised in part upon the needs of the major borrowing countries. Nor assumption that funds would continue to be were borrowing countries—faced with priority available indefinitely from abroad at low or nega- short-term needs to cut back on internal budget tive real interest rates; in some countries, the deficits, to bring monetary expansion under conforeign borrowing increasingly financed capital trol, and to achieve and maintain more competioutflows. In essence, the domestic policies of the tive exchange rates—able to give the same attenborrowers did not command the confidence of tion to introducing necessary structural changes their own citizens, who placed much of their in their economies to enhance efficiency and domestic savings in other countries. The com- competition. Indeed, sharp cutbacks in overall mercial banks and other lenders that so freely investment as well as consumption expenditures provided the funds from abroad could not, or by the indebted countries became unavoidable. would not, assure the productive use of that As time passed, the Fund and the Bank have money. As the crisis broke, access to new loans found more and more opportunities for mutually was abruptly curtailed. At the same time, pro- supportive approaches, and both of them have found changes in the world economic and finan- flexibly adapted earlier approaches as justified cial situation provided a more difficult environ- by the needs and circumstances of particular ment for the borrowers as real interest rates rose, countries. By the end of 1985, for instance, inflation subsided, and commodity prices de- Colombia, Ecuador, Chile, and Uruguay had put clined. in place rather comprehensive programs looking There is no point at this stage in pointing toward more open and efficient economies as fingers at one culprit or another—although there well as more immediate fiscal and external adare many lessons for the future. More important, justments, working constructively, in different once the crisis was upon us, it was evident that ways, with both the Bank and the Fund. the problem threatened not only the economic Drawing on this kind of experience, Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 561 Baker, as you know, outlined the concept of a there have been comparable declines in relative Program for Sustained Growth in Seoul last exposure by foreign banks. October. He envisaged an increase in such coop- Indeed, one can question whether, in the past erative efforts, including an enhanced role for the year or so, net bank lending has not been below World Bank and the other multilateral develop- levels that will be necessary to complement ment lending institutions. His basic premise— effective economic programs of some borrowers, that a solution must be found in a context of particularly in the light of the sharp decline in oil growth—is of course widely shared. And I be- prices. In any event, the relative reduction in lieve there is increased agreement with the prop- overall exposure should continue even as the osition that success will be dependent on ongoing banks are called upon, consistent with the Baker structural changes as well as on adjustments in Initiative, to provide the moderate amounts of fiscal, monetary, and exchange rate policies. net new private lending over the next several A great deal remains to be done before the years needed to support borrowers' plans for international debt problem is resolved. But the structural adjustment and growth. And, as those very considerable accomplishments already relative exposures decline, one of the precondiachieved strongly suggest the problem should be tions for returning to more normal, fully volunmanageable in ways that serve the interests of tary, debtor-creditor relationships can be both borrowers and lenders. achieved. In relatively benign circumstances for Over the past three or four years, some sub- the world economy, steps in that direction by stantial—even dramatic—adjustments have been one or more countries well advanced in the made on the external side. That is most clearly adjustment process could possibly appear this evident in the fact that the 15 major borrowing year or next. countries that have been somewhat arbitrarily Economic growth has rebounded smartly in a identified with the Baker Initiative together few countries even as they have reduced or achieved a current account position of essential- eliminated their external deficits. The biggest ly zero during both 1984 and 1985. In contrast, economy and largest borrower among the midtheir collective deficits were about $50 billion in die-income developing countries—Brazil—is a 1981 and 1982. The shift was not simply a conse- leading case in point. The economies of Argentiquence of import compression: the volume of na, Chile, and Colombia are expanding as well. their exports rose about 15 percent during 1983— But the pattern has been uneven and disap- 84 before leveling off last year. pointing in some cases. Looked at as a group, the While progress is uneven, the burden of ser- value of exports by the major borrowers, upon vicing the external debt of the major borrowers which so much depends, declined during 1985. has also been reduced. Reschedulings of their That was, in large part, a reflection of lower debt to banks and official creditors have sharply commodity prices and the slower expansion of limited amortization requirements. Lower world the industrial countries that must provide their interest rates have been reflected in declines in principal markets. interest payment obligations. In some cases, Since last fall, the sharp decline in world oil interest payments as a percentage of exports of prices has added a new and disconcerting dimengoods and services this year will be as much as sion to the problems of Mexico, Nigeria, Veneone-third below their peaks. zuela, and Ecuador. Each of those countries has The pace of bank lending has slowed substan- lost both real income and budgetary revenues in tially as the borrowing countries have acted to amounts that are critically large in relation to bring their external debts into better alignment their resources. Adjustment to that loss of rewith their productive capacities. Meanwhile, sources is inevitable. What is at issue is the bank capital positions have been strengthened. speed and effectiveness of that adjustment. As a result, U.S. banks' exposure to non-OPEC One clear implication is that most of them will developing countries in relation to their capital need to cover larger external needs than anticidropped about one-third between mid-1982 and pated earlier, although not nearly as much as the the end of last year; those ratios have declined decline in oil prices taken alone might imply. even further over the first half of 1986. No doubt Lower world interest rates and their own efforts Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
562 Federal Reserve Bulletin • August 1986 will balance part of the losses, and potentially because it captures the essence of much of the more rapid growth in the industrial countries will thinking emerging in many parts of the world— increase export opportunities. developed and developing—over recent years. After four years, a sense of fatigue among The approach recognizes that success can only borrowing countries coping with continuing eco- lie in a mutual, cooperative effort to achieve nomic and debt problems is hardly surprising. growth. The borrowing countries must indeed For some, the reduction in oil prices has added a "adjust"—adjust not just in the sense of effecsharper edge of concern, if not despair. At the tive fiscal, monetary, and exchange rate policies, same time, commercial banks are naturally impa- but "adjust" in the sense of encouraging more tient, and seemingly more reluctant, to step competitive, investment-oriented, and open forward with new money pending concrete evi- economies. Their industry must be capable of dence countries are successfully undertaking ex- attracting domestic and foreign savings, penetraordinary stabilization efforts. Negotiation and trating export markets, and meeting the needs of implementation of new financing packages or growing populations at home. All of that depends restructurings linger on, sometimes entangled on productivity growth. in particular grievances over particular past The returns available in growing, productive loans. In the process, there is some danger of economies can, in turn, justify raising abroad losing sight of the larger issues that are surround- some margin of the credit and capital needed to ing the fundamentals of economic policies on support growth. Reasonable needs can be met which the soundness of the loans ultimately through a combination of official and private depends. resources, drawing on the World Bank and other But far too much is at stake—and far too much development institutions and the commercial has been accomplished—to make it sensible to banks around the world with so much at stake. give way to any sense of frustration. The mutual- Moreover, in reasonably favorable world ecoity of interest of borrowers and lenders in con- nomic circumstances, those additional credits structive approaches is as strong as ever. can be consistent with falling debt service ratios It is difficult—I think impossible—to deny the and declines in bank exposure relative to capital, simple proposition that the debt problem, as so just as in the past four years. many others, must be resolved in a framework of None of that provides a fixed formula or a growth. The corollary is that sustainable growth standard cookbook for dealing with the specific requires both financial discipline and structural problems of individual borrowing countries, each changes. And none of that is likely to proceed for with its unique history and economic situation. long unless developing countries are able to But it does provide a broad framework within defend and maintain their creditworthiness and which individual cases can be discussed, detailed access to the markets of world finance as well as approaches developed, financing negotiated, and goods. the plans implemented. The question is whether we can find the will The approach won't work unless it is convincand the means to act upon those propositions ing to the leaders of the borrowing countries with the necessary sense of conviction and ur- themselves, consistent with the way they come gency. That is why we stand at a kind of water- to assess their own priorities, and capable of shed. Business as usual clearly will not be good commanding the support of their people. Those enough. And the whole structure of economic countries must be willing to work toward more and financial relationships between the United efficient, competitive, and open economies. States and other industrialized countries and They can improve the climate for investment, Latin American will be affected, for better or whether by their own citizens or from abroad. worse. Pricing policies of state enterprises can be made Crisis serves a constructive purpose when it more economic, and those enterprises can be galvanizes constructive responses. I believe the sold, reduced in scope, or shut down when the so-called Baker Initiative can, and does, provide job can be better done in the private sector. a kind of rallying point for that effort, not be- Barriers to trade, including imports, can be recause it is a precise plan "made in the USA" but duced and rationalized, in part to support the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 563 competitiveness of exports. And inefficiencies in World Bank programs and loans should provide financial systems can be attacked. opportunities for parallel or cofinancing by oth- The needed measures sometimes go against ers, including commercial banks. the grain of much of postwar history in certain Amidst all the difficulties, there is some danger countries, and against the grain of established of losing sight of how much the approach of political systems. Suspicions abound—fear of individual countries, their stated policies, and invasion of domestic markets by international public attitudes, has changed. Mexico is only one companies, concern about foreign or private example of a country undertaking some impordomination of key national industries, a breaking tant reforms of trade policies—a process reflectdown of bureaucratic control. Long-cherished ed in its long-debated decision to join General concepts about the proper role of the state are Agreement on Tariffs and Trade (GATT). We challenged. have seen sales or closings of some state enter- But the basic ideas and motivations are, of prises. Rationalization of price and regulatory course, quite different—to promote the efficien- systems in the agricultural and financial sectors cy, the capital formation, and the use of technol- is proceeding. ogy upon which competitiveness and growth More immediately, most of the major borrowrest. What is encouraging is how widely these ers have encouraged the development of more ideas are recognized among leaders in Latin realistic exchange rates, providing a competitive America and elsewhere. Inevitably, the pace of base for future export-led growth. Notably, Archange is conditioned by their own experience gentina, Bolivia, and Brazil have embarked since and realities. Vested interests are tempted to mid-1985 upon bold domestic programs to disinrespond with nationalistic rhetoric. But one sim- flate and de-index their economies. ple truth has been increasingly widely recog- Commercial banks have made clear their nized: in today's world, no single country is broad support for the broad concepts of the likely to prosper and grow without being an Baker Initiative. But their willingness and ability effective part of the larger world community, to mobilize additional financing quickly once a with good credit standing, access to world capital borrower has developed a policy program and markets, the capacity and incentive to export, received general international endorsement has and financial stability. not been tested. Within the general framework of Success will remain dependent on a coopera- market criteria and covering costs, there may tive approach, with necessary external financing also be room for exploring innovative techniques available to support growth and adjustment. The in new borrowing arrangements to take more Bank and the Fund will remain focal points in account of the uncertainties of oil prices or that process. interest rates. For its part, the World Bank has moved quick- All of these considerations and propositions ly since last fall to play an expanded role. A are, and will be, tested in the case of Mexico. Its number of important negotiations are in various problems are unique and severe; the decline in stages with Mexico, Argentina, Ecuador, Colom- oil prices and production has reduced its national bia, the Ivory Coast, and others—more than I income significantly, reduced government revemight have thought likely six months earlier. The nues by as much as 4 percent of its GNP, and cut Bank's ability to respond effectively reflects both exports by about a third of last year's total. already established criteria for supporting the Obviously, strong and effective internal meastructural adjustment process and its consider- sures to deal with those losses are required, but able experience in such areas as trade, energy, in the best of circumstances the necessary adfinancial institutions, and rural development. justments will take time. The negotiations for structural reform in these Some delay in response was perhaps inevitaand other areas have also had the benefit of ble, given the abruptness and the nature of the consultation with the Fund, helping ensure that changed circumstances. But I remain hopeful Bank-supported sectoral programs are consistent that efforts both in Mexico and elsewhere to with the country's overall macroeconomic re- develop a coherent, effective response, with adequirements and priorities. Moreover, some of the quate external financing, will soon bear fruit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
564 Federal Reserve Bulletin • August 1986 A lot is at stake, not just because Mexico is a month stated the importance that they attach to a large country immediately on our border, with capital increase for the World Bank when approvery large debts. Success in providing a base for priate. To facilitate private capital movements new hope among the Mexican people, in laying toward the major borrowing countries, the new the groundwork for renewed growth next year, Multilateral Investment Guarantee Agency and in maintaining creditworthiness and access should, in time, facilitate increased flows of to world financial markets will encourage other direct investment. It is regrettable that congrescountries in their efforts. If, in contrast, we sional support for that concept has lagged. collectively falter in that effort, the progress of More particular actions can also help. For others will be undermined. example, export credit agencies of the Organiza- In Mexico, as elsewhere, success in making tion for Economic Cooperation and Developeffective use of its own savings and capital will ment (OECD) countries, especially the U.S. Exbe crucial. The massive capital flight from a port-Import Bank, have been an important number of Latin American countries during the source of support for the financing of trade flows late 1970s and the early 1980s greatly added to to the developing countries during this period of their needs for external borrowing. financial uncertainty. The interruption to debt While the data have to be interpreted with service by the borrowers has, in some cases, great caution, the evidence suggests that capital caused official agencies to go "off cover" and flight has receded somewhat in more recent cease new lending to the country in question. years. Indeed, in several countries, indirect evi- While in some cases such action may be justified, dence suggests rather dramatic improvement. it will also have perverse incentive effects in the Even in Mexico, where credit policies have been context of efforts to achieve constructive debt very restrictive, there are signs of some reversal restructuring. I hope that there is now more this year. general recognition of that fact. I do not refer to this evidence with any sense Another obligation that we in the United of complacency. Extremely tight money is not a States, as well as other countries, must accept is long-term answer, and we are a considerable way to restrain the forces of protectionism that hamfrom a point where we can say, with confidence, per exports from developing countries to our that a constructive, self-sustaining process of markets. With developing countries eager to growth and development is under way among import what their resources can support, rising most or all of the borrowers, that their access to exports to the industrialized countries also mean external credit is restored, or that fully effective more buying from us. Building the competitive use is being made of domestic savings. ability of borrowers to export, while reducing Behind all those particulars about where we unfair subsidies, is not a matter of stealing jobs stand with respect to the international debt prob- from our workers. It is a matter of participating lem, a still larger question remains: Will the in, and sharing in the fruits of, growing two-way global environment be conducive to favorable trade. conditions, to strong markets, and to sustained But none of those areas is so fundamentally growth for the developing world? important to developing countries over the next One critical variable has been going right: The several years as are the prospects for the suslevel of world interest rates has receded marked- tained growth of world markets. And that unly, taking at least part of the sting out of the avoidably raises a question of adjustment not just collapse in oil prices. The London interbank by the borrowers but by the industrialized world. offered rate (LIBOR) rate to which most loan The United States is in an expansion period agreements are keyed is more than 5 ¥2 percent that has already been sustained longer than most below its mid-1984 level, and VA percent below during the postwar era. The evidence is clear that the level as recently as December. Most loans during most of this period it is our economy that are denominated in dollars, so the decline in the has been the principal motor for world expandollar exchange rate is also helpful to most sion. But in that process, serious international borrowers. imbalances have developed. And, partly as a The major countries meeting in Tokyo last consequence, our own growth has slowed. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 565 In effect, over the past four years, the United The implication is not, of course, that we States, directly and indirectly, has provided a should stop growing, but that other strong coundisproportionate share of the incremental de- tries, with little or no inflation, with excess mand to the world economy. We have made capacity and historically high unemployment, room for most of the external adjustments of the and with very strong external positions, should debtor countries as well. In fact, Japan and assume more of the leadership in providing the Western Europe essentially have had no increase impetus for world growth. Such adjustments do in imports from Latin America since 1982, while not come easily—our long struggle with our the United States has shared disproportionately budget deficit is the most obvious case in point. in reduced exports of manufactured goods to that But that is the kind of mutually complementary area. action that is required. And difficult as they may The resultant strains are showing. I, for one, be, we might keep in mind the adjustments do not believe that relying upon exchange rate involved for us in the industrialized world do not changes alone promises a simple and easy solu- approach in relative magnitude those we expect tion to the imbalances, however important it is by the debtor countries. that we have now achieved a more competitive We can ill afford to be cynical or defeatist exchange rate structure. Among other things, we about all these efforts, difficult as they may be. had better not forget that we are today the Too much hinges on our success, and I know of world's largest debtor, dependent on a continu- no other approach that promises so much in ing large inflow of capital to finance our own terms not just of economic success but harmonibudget deficit, and that capital will not flow ous political relationships with Latin America freely without continuing confidence in our own and the developing world. • stability. Statement by William Taylor, Director, Division investment opportunities, encourages savings, of Banking Supervision and Regulation, Board and ultimately strengthens the countries' capaof Governors of the Federal Reserve System, bility to attract capital and maintain servicing of before the Subcommittee on International Fi- debt are particularly important to the achievenance and Monetary Policy of the Committee on ment of a longer-term solution to the internation- Banking, Housing, and Urban Affairs, U.S. Sen- al debt problem. ate, June 25, 1986. My testimony will focus on the three broad areas that the subcommittee has identified as of I appreciate the opportunity to testify before this most concern: (1) the effect of the act on internasubcommittee today to discuss the impact that tional lending practices and the international the International Lending and Supervision Act of debt situation, (2) any recommended changes to 1983 has had on international lending practices. the act, and (3) additional problems that need to The subcommittee has requested our views on be resolved. whether the act has been an effective mechanism in strengthening regulatory and banking practices regarding international lending. This topic EFFECT OF THE INTERNATIONAL LENDING is an important one in light of the obvious lessons AND SUPERVISION ACT of the past as well as of the continuing problems ON LENDING PRACTICES that some countries are having in servicing their external debt and the need to put in place con- The International Lending and Supervision Act structive and cooperative solutions to those set out to achieve the goal of assuring that the problems. The initiatives that are now being financial health and stability of the U.S. banking undertaken to assist developing countries to es- system would not be adversely affected or threattablish an economic framework that enhances ened by imprudent lending practices or inade- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
566 Federal Reserve Bulletin • August 1986 quate bank supervision. This goal was to be center banks to non-OPEC developing countries accomplished by strengthening bank capital, by represented 227 percent of combined capital. As improving the bank regulatory framework, and of December 1985 this exposure relative to capiby encouraging better coordination among inter- tal had declined to 148 percent. The progress national bank regulatory authorities. Although made by 15 other large banks is even more we continue our efforts in all three areas, it is my dramatic, with exposure of combined capital view that significant progress has been made. falling from 162 percent in June 1982 to 91 Primary bank capital, including loan-loss re- percent by December 1985. This decline in exposerves, has increased beyond the minimum sure relative to capital has occurred even though guidelines set by the bank regulatory agencies. modest amounts of new loans have been made to Discipline in international lending has been rein- some developing countries. forced not only by implementing the mandated The act also required the Board of Governors regulations concerning reserves, accounting for to work toward encouraging governments, cenfee income, and reviewing bank-originated loan tral banks, and foreign bank regulatory agencies evaluations but also by enhancing regulatory to maintain and, when appropriate, strengthen oversight over transfer risk, instituting more the capital base of all banking institutions infrequent examinations of large banks, and con- volved in international lending. This requirement ducting periodic meetings with boards of direc- is more difficult to achieve than raising capital tors to reinforce examination and supervisory standards in the United States, with the most assessments. complex problem being agreement upon a com- Perhaps the most dramatic progress made mon worldwide definition of capital. Neverthesince the passage of the act has been in the area less, advances have been made in focusing suof capital adequacy. The act required the federal pervisory attention worldwide on the issue of bank regulatory agencies to ensure that banks raising capital adequacy standards. The Basle achieve and maintain adequate capital. Since Committee on Banking Regulations and Superviyear-end 1983, the capital of the nation's 10 sory Practices of the Bank for International largest banking organizations has increased al- Settlements has recognized the need to continue most 20 percent. Since year-end 1981, primary to encourage incremental capital increases, to capital for this group increased more than 50 promote the use of a risk-based system when percent. In dollar terms the figures are equally measuring capital adequacy, and to ensure full impressive, with a total of more than $25 billion consolidation of all significant entities in assesshaving been issued by this group since 1981. ing capital adequacy. Although not as dramatic, substantial increases Large U.S. banks have increased capital, in in primary capital have been achieved by the part, in recognition of the increased risk in regional banks, and the average primary capital international lending. Banks in other countries ratio of the 50 largest banking organizations in have raised their loan reserves, which are oftenthis country is well above the minimum required times not disclosed, as the preferred method to by the regulators. Capital augmentation in the recognize the increased risk. We believe, howevbanking system continues, and almost all banks er, that most countries have reacted properly by with high loan exposures to developing countries encouraging banks to increase either published have raised primary capital significantly relative capital or to increase loan-loss reserves. to those exposures. The attached chart displays Besides the capital provisions, the act required graphically the progress made in reducing loan the federal bank regulatory agencies to strengthexposure to non-OPEC developing countries rel- en the supervision of international lending by ative to capital for the 9 money center banks and instituting a series of regulations designed to 15 other large banks.1 At the beginning of the require banks to establish and maintain special debt crisis in June 1982, exposure of the 9 money reserves on problem international assets, to force banks to account better for fee income, and to enhance the reporting and disclosure of inter- 1. The attachment to this statement is available on request national lending. from Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. The first main step taken by the bank regula- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Statements to Congress 567 tory authorities to implement these regulations In summary, the International Lending Superwas to initiate a procedure to recognize the vision Act has served as a catalyst in increasing reduction in the carrying value of loans to inter- banks' capital and has had the effect of tightening national borrowers in countries that are seriously supervisory standards over international lending delinquent and have not taken adequate mea- practices. sures to restore repayment prospects through economic adjustment. Banks whose borrowers are in countries that fall in this category have DOES THE ACT NEED TO BE AMENDED? their loans written down in value through a prescribed formula by use of an "Allocated The act itself contains sufficient latitude to issue Transfer Risk Reserve" (ATRR). This process and amend regulations at the federal banking permits an orderly adjustment in carrying value agencies' discretion. Therefore, the Board would for transfer risk on those countries in which not recommend amendments to the International economic adjustment has not been followed or Lending Supervision Act at this time. has not been successful. At the same time, the procedures for evaluation and classification of transfer risk within the ADDITIONAL PROBLEMS banking system were also reviewed and, in my THAT NEED BE RESOLVED view, strengthened. The three regulatory agencies issued a joint statement on examination There has been progress in the debt situation treatment of international loans shortly after the over the past four years. The banking system's International Lending Supervision Act was relative exposure to developing countries has passed. The enhancement announced by the moderated. Capital and loan-loss reserves have regulatory authorities at that time included new been bolstered, and the countries themselves definitions for transfer risk classifications and have instituted needed changes that are designed the identification of a category of international to encourage growth and strengthen capital acculoans called "Other Transfer Risk Problems." mulation. These loans represent exposures to countries The regulatory agencies will need to continue that have had difficulty meeting fully their exter- to work with all interested parties in an effort to nal debt service obligations but are taking posi- arrive at constructive solutions to remaining tive steps to restore debt service through eco- problems. The regulatory agencies need to connomic adjustment measures. While not tinue to encourage thoughtful approaches develconsidered in the same magnitude of risk as a oped by the banking system, governments, and classified credit, examiners, nevertheless, con- international agencies, and must work with these sider the total exposure to these countries cate- ideas to fit them in the context of prudential gorized as "Other Transfer Risk Problems" in standards of safety and soundness. assessing asset quality and the adequacy of re- Despite the achievements attained to date, serves and capital. however, problems obviously remain. The slide The final regulations concerning accounting in oil prices has taken its toll, not only on for fee income under restructured loans were Mexico, but also on other oil-exporting countries also issued. These regulations had the desired as well. On the other hand, lower oil prices will effect of reducing the opportunity for banks to provide relief for most other developing counenhance up-front fee income to the disadvantage tries. The extent and magnitude of capital flight of developed countries needing to restructure. continues to puzzle observers, with wide dispari- These guidelines for recognizing loan fee income ties between figures quoted. After four years, the were eventually adopted by the accounting pro- world's banking system has still not yet returned fession with only modest changes. In 1983, the to voluntary lending to developing countries. fees associated with a restructuring where new The conundrums posed would seem to argue money was involved averaged VA percent. The for continuing the patient approach of the past. same fees now range in the neighborhood of Vi The Baker Initiative provides the framework to percent. sustain the orderly flow of capital to developing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
568 Federal Reserve Bulletin • August 1986 countries undertaking progress in adjusting their countries. The U.S. and other banking systems economies. The regulatory authorities continue are reserving for countries that are not making to encourage capital augmentation in the U.S. adequate economic adjustments. Progress, while banking system and continue to raise the issue of perhaps slow in the minds of some, is being harmonizing capital standards among other made. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
569 Announcements NOMINATIONS SOUGHT FOR checks made available to them on those days, or APPOINTMENTS TO the paying banks may elect to pay the Reserve CONSUMER ADVISORY COUNCIL Bank for the value of the float that occurs. Other changes to the regulation would permit The Federal Reserve Board announced that it is Reserve Banks to collect checks drawn on banks seeking nominations of qualified individuals for located in foreign countries. This service will be seven new appointments to its Consumer Advis- provided on a limited basis. The technical ory Council to serve three-year terms beginning changes relate primarily to a Reserve Bank's in January 1987. liabilities regarding check collection and wire The Council, established by Congress in 1976, transfers of funds. advises the Board on the exercise of its responsi- To reduce and reallocate ACH float generated bilities under the Consumer Credit Protection from nonstandard holidays, the Board adopted Act and on other matters on which the Board modifications to Reserve Bank automated clearseeks its advice. The Council meets three times a inghouse procedures, effective April 1, 1987. In year. addition, the Board approved a standard holiday Nominations should be submitted in writing to schedule for the Reserve Banks to follow. Effec- Dolores S. Smith, Assistant Director, Division of tive January 1, 1987, all Reserve Banks will be Consumer and Community Affairs, Board of closed on the 10 national holidays. Governors of the Federal Reserve System, Washington, D.C. 20551. Nominations must be received no later than August 22, 1986. PROPOSED ACTION Nominations should include the name, address, and telephone number of the nominee. In The Federal Reserve Board has published for addition, information about past and present public comment a proposal to provide third-party positions held, special knowledge, interests or payment information over Fedwire in a standard experience related to consumer credit or other format. Comment is requested by August 11, consumer financial services should be included. 1986. REVISIONS TO MONEY STOCK DATA AMENDMENTS TO REGULATION J Measures of the money stock were revised in The Federal Reserve Board has adopted amend- March of this year to include annual benchmark ments to Regulation J (Check Collection and and seasonal factor changes. Data in tables 1.10 Transfers of Funds) concerning the reduction and 1.21 in the statistical appendix to the BULLEand reallocation of check float and the collection TIN reflected these changes beginning with the of foreign checks as well as some technical issue for April 1986. changes. In addition, the Board modified its Deposits were benchmarked to recent call automated clearinghouse (ACH) procedures and reports, and repurchase agreements (RPs) were adopted a standard holiday schedule for Reserve benchmarked to new quarterly and annual sur- Banks. veys. Revisions to seasonal factors were based One amendment to Regulation J, effective Jan- on the X-11-ARIMA procedure used in recent uary 1, 1987, requires paying banks that volun- years. As in the past the nontransaction (or nontarily close on nonstandard holidays to pay for Mi) part of M2 and the non-M2 part of M3 were Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
570 Federal Reserve Bulletin • August 1986 1. Seasonal factors used to construct Ml, M2 and M3, monthly, 1985-86 NNoonnbbaannkk Nontransaction components TTrraannssaaccttiioonn DDeemmaanndd YYeeaarr aanndd mmoonntthh CCuurrrreennccyy ttrraavveelleerrss ddeeppoossiittss11 ddeeppoossiittss11 cchheecckkss M2 M3 only 1985—January .9919 .9331 1.0181 1.0232 1.0010 .9984 February .9868 .9417 .9797 .9738 1.0022 .9986 March .9906 .9481 .9868 .9782 1.0047 .9981 April .9955 .9529 1.0173 1.0111 1.0014 .9958 May .9998 .9748 .9860 .9826 .9990 1.0032 June 1.0043 1.0482 1.0019 1.0016 1.0000 .9972 July 1.0089 1.1269 1.0027 1.0054 1.0008 .9880 August 1.0050 1.1220 .9900 .9899 .9991 1.0006 September .9989 1.0655 .9942 .9950 .9968 1.0032 October .9984 1.0050 .9958 .9985 .9986 1.0026 November 1.0056 .9531 1.0020 1.0046 .9983 1.0081 December 1.0146 .9311 1.0249 1.0358 .9973 1.0072 1986—January .9917 .9317 1.0181 1.0233 1.0013 .9984 February .9868 .9404 .9797 .9735 1.0026 .9980 March .9906 .9469 .9870 .9779 1.0051 .9974 April .9954 .9529 1.0168 1.0109 1.0015 .9953 May .9997 .9748 .9860 .9825 .9989 1.0034 June 1.0043 1.0476 1.0028 1.0025 .9999 .9977 July 1.0090 1.1287 1.0027 1.0059 1.0008 .9885 August 1.0051 1.1240 .9906 .9903 .9990 .9998 September .9990 1.0656 .9948 .9954 .9966 1.0030 October .9985 1.0042 .9950 .9977 .9984 1.0029 November 1.0056 .9527 1.0015 1.0039 .9982 1.0084 December 1.0145 .9308 1.0248 1.0360 .9974 1.0074 1987—January .9916 .9310 1.0182 1.0233 1.0014 .9984 February .9867 .9398 .9797 .9735 1.0028 .9978 March .9905 .9465 .9871 .9777 1.0053 .9973 1. Factors for transaction deposits are used to seasonally adjust the between seasonally adjusted transaction deposits and seasonally sum of demand deposits and other checkable deposits. Seasonally adjusted demand deposits. adjusted other checkable deposits are derived as the difference 2. Seasonal factors for selected components of the monetary aggregates, monthly, 1985-86 Experimental (model-based) Commercial bank deposits Thrift institution deposits factors for Ml Year and month Small- Large- Small- Largedenomi- denomi- denomi- denomi- Nonbank Trans- Savings nation nation Savings nation nation Currency travelers action time time time time checks deposits 1985—January ... .9942 1.0000 .9968 .9978 1.0058 1.0058 .9942 .9331 1.0192 February .. .9907 .9978 .9973 .9963 1.0031 1.0073 .9880 .9417 .9776 March .9964 .9960 1.0025 1.0032 .9980 .9994 .9907 .9481 .9817 April 1.0056 .9914 .9886 1.0058 .9951 .9941 .9961 .9529 1.0134 May 1.0050 .9936 .9970 1.0044 .9929 .9961 .9998 .9748 .9835 June 1.0094 .9970 .9935 1.0038 .9945 .9963 1.0029 1.0482 .9990 July 1.0118 .9995 .9961 1.0045 .9986 .9925 1.0085 1.1269 1.0000 August 1.0025 1.0051 1.0019 .9941 .9991 .9989 1.0051 1.1220 .9907 September. .9977 1.0064 1.0074 .9947 .9995 1.0000 .9980 1.0655 .9980 October ... 1.0011 1.0073 1.0088 1.0024 1.0057 1.0025 .9999 1.0050 1.0011 November. .9964 1.0052 1.0056 1.0000 1.0054 1.0051 1.0067 .9531 1.0077 December . .9927 1.0019 1.0064 .9954 1.0030 1.0028 1.0174 .9311 1.0286 1986—January ... .9933 .9999 .9961 .9973 1.0064 1.0052 .9940 .9317 1.0198 February .. .9892 .9973 .9962 .9953 1.0035 1.0058 .9879 .9404 .9769 March .9942 .9954 1.0019 1.0018 .9978 .9988 .9906 .9469 .9806 April 1.0047 .9910 .9879 1.0052 .9945 .9941 .9966 .9529 1.0154 May 1.0043 .9934 .9975 1.0043 .9923 .9970 .9994 .9748 .9829 June 1.0095 .9971 .9940 1.0035 .9942 .9971 1.0027 1.0476 .9977 July 1.0127 .9996 .9962 1.0048 .9981 .9936 1.0089 1.1287 1.0019 August 1.0035 1.0051 1.0012 .9944 .9987 .9994 1.0050 1.1240 .9900 September. .9984 1.0068 1.0075 .9951 .9996 .9997 .9984 1.0656 .9980 October ... 1.0020 1.0073 1.0097 1.0033 1.0058 1.0022 .9995 1.0042 1.0017 November. .9970 1.0053 1.0062 1.0006 1.0058 1.0046 1.0068 .9527 1.0071 December . .9928 1.0023 1.0064 .9954 1.0035 1.0025 1.0175 .9308 1.0286 1987—January ... .9928 .9999 .9957 .9969 1.0067 1.0049 .9937 .9310 1.0203 February .. .9883 .9970 .9957 .9948 1.0035 1.0054 .9879 .9398 .9765 March .9929 .9951 1.0019 1.0010 .9977 .9987 .9910 .9465 .9807 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Announcements 571 ict components of the monetary aggregates, weekly, December 1985-March 1987 Commercial bank deposits TTrraannssaaccttiioonn DDeemmaanndd : en CCuurrrreennccyy ddeeppoossiittss11 ddeeppoossiittss11 Small- Large- Savings denomination denomination time time 2 1.0072 1.0071 1.0148 .9941 1.0039 1.0069 9 1.0164 1.0252 1.0248 .9962 1.0036 1.0084 16 1.0126 1.0212 1.0291 .9934 1.0020 1.0080 23 1.0216 1.0189 1.0305 .9898 1.0006 1.0053 30 1.0130 1.0279 1.0488 .9897 1.0008 1.0048 6 1.0068 1.0708 1.0909 .9985 1.0009 1.0072 13 .9978 1.0403 1.0466 .9960 1.0006 .9978 20 .9903 1.0143 1.0161 .9927 1.0005 .9930 27 .9804 .9777 .9769 .9893 .9989 .9911 3 .9827 .9879 .9848 .9885 .9980 .9904 10 .9920 .9877 .9794 .9909 .9980 .9941 17 .9900 .9794 .9767 .9897 .9971 .9959 24 .9808 .9664 .9594 .9875 .9966 .9984 3 .9854 .9833 .9742 .9888 .9974 1.0006 10 .9955 .9953 .9849 .9917 .9967 1.0022 17 .9921 .9885 .9806 .9922 .9958 1.0003 24 .9874 .9737 .9619 .9941 .9946 1.0033 31 .9858 .9843 .9782 1.0011 .9936 1.0026 7 1.0033 1.0243 1.0171 1.0110 .9908 .9941 14 1.0018 1.0344 1.0268 1.0066 .9898 .9883 21 .9949 1.0292 1.0216 1.0019 .9918 .9829 28 .9868 .9904 .9872 .9994 .9912 .9863 5 .9975 1.0000 .9966 1.0036 .9920 .9884 12 1.0030 .9930 .9896 1.0050 .9925 .9934 19 .9990 .9882 .9879 1.0047 .9930 .9975 26 .9978 .9640 .9573 1.0025 .9942 1.0046 2 .9959 .9919 .9911 1.0063 .9951 1.0023 9 1.0105 1.0155 1.0102 1.0112 .9972 .9968 16 1.0055 1.0110 1.0099 1.0106 .9972 .9920 23 1.0011 .9884 .9854 1.0079 .9969 .9891 30 1.0003 .9921 .9992 1.0092 .9978 .9955 7 1.0210 1.0259 1.0299 1.0164 .9972 .9933 14 1.0145 1.0187 1.0233 1.0165 .9981 .9932 21 1.0082 .9972 1.0005 1.0125 .9998 .9966 28 1.0002 .9770 .9779 1.0075 1.0018 1.0005 4 1.0069 1.0052 1.0057 1.0078 1.0030 .9990 11 1.0117 1.0021 1.0011 1.0072 1.0042 .9990 18 1.0051 .9953 .9989 1.0040 1.0052 .9994 25 .9971 .9734 .9707 1.0015 1.0059 1.0024 1 .9986 .9793 .9779 .9983 1.0067 1.0057 8 1.0089 1.0112 1.0104 1.0010 1.0069 1.0054 15 1.0036 1.0112 1.0137 .9992 1.0066 1.0042 22 .9963 .9813 .9801 .9961 1.0071 1.0075 29 .9890 .9715 .9740 .9965 1.0066 1.0124 6 1.0022 1.0034 1.0036 1.0044 1.0071 1.0139 13 1.0055 1.0056 1.0071 1.0051 1.0084 1.0131 20 .9982 1.0009 1.0077 1.0026 1.0074 1.0101 27 .9908 .9744 .9760 .9980 1.0066 1.0065 3 .9969 1.0015 1.0057 .9991 1.0068 1.0025 10 1.0090 1.0038 1.0014 .9989 1.0069 1.0045 17 1.0055 1.0082 1.0131 .9977 1.0051 1.0048 24 1.0011 .9886 .9902 .9956 1.0044 1.0091 1 1.0069 1.0050 1.0121 .9945 1.0041 1.0084 8 1.0166 1.0234 1.0238 .9973 1.0041 1.0074 15 1.0138 1.0213 1.0287 .9941 1.0030 1.0079 22 1.0196 1.0205 1.0329 .9890 1.0022 1.0052 29 1.0144 1.0234 1.0438 .9893 1.0001 1.0042 ran: used to seasonally adjust the between seasonally adjusted transaction deposits and seasonally lep< xkable deposits. Seasonally adjusted demand deposits. hec : derived as the difference Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
572 Federal Reserve Bulletin • August 1986 3. Continued Commercial bank deposits TTrraannssaaccttiioonn DDeemmaanndd WWeeeekk eennddiinngg CCuurrrreennccyy ddeeppoossiittss'' ddeeppoossiittss'' Small- Large- Savings denomination denomination time time 1987—January 5 1.0049 1.0686 1.0897 .9973 1.0007 1.0082 12 .9996 1.0426 1.0505 .9969 1.0006 .9967 19 .9910 1.0174 1.0207 .9929 1.0007 .9932 26 .9818 .9824 .9815 .9893 .9993 .9912 February 2 .9808 .9863 .9859 .9872 .9979 .9920 9 .9915 .9881 .9819 .9897 .9977 .9940 16 .9903 .9807 .9768 .9889 .9967 .9950 23 .9822 .9680 .9592 .9875 .9962 .9967 March 2 .9838 .9806 .9723 .9873 .9970 .9992 9 .9956 .9959 .9849 .9909 .9964 1.0015 16 .9932 .9915 .9840 .9920 .9959 1.0004 23 .9890 .9774 .9654 .9930 .9947 1.0029 30 .9854 .9758 .9666 .9957 .9936 1.0045 April 6 1.0012 1.0140 1.0029 1.0036 .9909 .9966 For note, see preceding page. seasonally adjusted as aggregates, rather than SYSTEM MEMBERSHIP: being built up from seasonally adjusted compo- ADMISSION OF STATE BANKS nents. More detail on the revisions is available on the The following banks were admitted to member- H.6 release, "Money Stock, Liquid Assets and ship in the Federal Reserve System during the Debt Measures" for February 13, 1986. Histori- period June 1 through June 30, 1986: cal data are available from the Banking Section, Division of Research and Statistics, Board of Maryland Governors of the Federal Reserve System, Bel Air Commercial Bank Washington, D.C. 20551. Oklahoma Oklahoma City Bankers Bank Pennsylvania CHANGES IN BOARD STAFF Philadelphia Constitution Bank West Chester Freedom Valley Bank The Board of Governors announced the following changes in its official staff in the Office of Staff Director for Monetary and Financial Policy: Stephen H. Axilrod, Staff Director, retired, effective June 30, 1986. Stanley J. Sigel, Assistant to the Board, retired, effective June 30, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
573 Legal Developments AMENDMENTS TO REGULATION J Authority: 12 U.S.C. § 342; 12 U.S.C. § 248(i); 12 U.S.C. §§ 284(o) and 360; 12 U.S.C. § 464. The Board of Governors is amending its Regulation J, Collection of Checks and Other Items and Wire Trans- 2. Section 210.2 is amended by adding a new undesigfers of Funds, to: nated paragraph to the end of section 210.2 and by (1) permit the owner of a check or other item who is revising footnote 1, as follows: allegedly injured by a Reserve Bank's alleged failure to exercise ordinary care or act in good faith in collecting Section 210.2—Definitions an item to bring an action against the Reserve Bank, regardless of whether that person is a "sender" as defined in Regulation J; Unless the context otherwise requires, the terms not (2) establish, beginning on January 1, 1990, a two-year defined herein have the meanings set forth in the limitation period for actions against a Reserve Bank Uniform Commercial Code. for alleged mishandling of items under subpart A or wire transfer items or requests under subpart B, and, beginning August 1, 1986, a two-year limitation period for actions against paying banks for failure to comply 1. For purpose of this subpart, the Virgin Islands and Puerto Rico with the notification of nonpayment requirements of are deemed to be in the Second District, and Guam, American Samoa, subpart A; and the Northern Mariana Islands in the Twelfth District. (3) permit Reserve Banks to require any prior indorser 3. Section 210.3 is amended by adding a new parato defend a breach of indorsement warranty suit even graph (e) to read as follows: if the Reserve Bank has not been sued directly; (4) authorize Reserve Banks to collect instruments Section 210.3—General Provisions drawn on payors located in foreign countries; (5) clarify that Reserve Banks are not liable for consequential damages in handling wire transfers of funds; (e) Foreign items. A Reserve Bank also may receive (6) add the Commonwealth of the Northern Mariana and handle certain items payable outside a Federal Islands to the Twelfth District for collection purposes; Reserve District, as provided in its operating circulars. (7) adopt the definitions of the Uniform Commercial The handling of such items in a state is governed by Code for terms that are used but not defined in this subpart, and the handling of such items outside a Regulation J; state is governed by the local law. (8) effective January 1, 1987, require paying banks that close voluntarily on days that are banking days for 4. Section 210.5(a)(2), (b), and (c) are revised as their Reserve Banks to pay on such days for cash follows: items that Reserve Banks make available to them on such days; Section 210.5—Sender's Agreement; Recovery (9) make permanent in slightly modified form the by Reserve Bank temporary amendment adopted on October 3, 1985, creating a standard holiday schedule to be applied to ^ ^ Regulation J's notification of nonpayment provision. (2) warrants to each Reserve Bank handling the Effective June 6, 1986, the Board amends 12 C.F.R. item that: Part 210 as follows: (i) the sender has good title to the item or is authorized to obtain payment on behalf of one Part 210—Collection of Checks and Other who has good title (whether or not this warranty is Items and Wire Transfers of Funds evidenced by the sender's express guaranty of prior indorsements on the item); and 1. The authority citation of 12 C.F.R. Part 210 contin- (ii) to the extent prescribed by state law applicaues to read as follows: ble to a Reserve Bank or subsequent collecting Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
574 Federal Reserve Bulletin • August 1986 bank handling the item, the item has not been time the Reserve Bank receives payment for the materially altered; but this subparagraph (a)(2) item in actually and finally collected funds and does not limit any warranty by a sender or other makes the proceeds available for use by the sender. prior party arising under state law; and A Reserve Bank shall not have or assume any liability in respect of an item or its proceeds except for the Reserve Bank's own lack of good faith or (b) Recovery by Reserve Bank. If an action or pro- failure to exercise ordinary care and except as ceeding is brought against (or if defense is tendered to) provided in paragraph (b) of this section. a Reserve Bank that has handled an item, based on: (1) the alleged failure of the sender to have the authority to make the warranty and agreement in (c) Time for commencing action against Reserve subparagraph (a)(1) of this section; Bank. A claim against a Reserve Bank for lack of good (2) any action by the Reserve Bank within the scope faith or failure to exercise ordinary care shall be barred of its authority in handling the item; or unless the action on the claim is commenced within (3) any warranty made by the Reserve Bank under two years after the claim accrues. A claim accrues on section 210.6(b) of this subpart, the Reserve Bank the date when a Reserve Bank's alleged failure to may, upon entry of a final judgment or decree, exercise ordinary care or to act in good faith first recover from the sender the amount of attorneys' results in damages to the claimant. fees and other expenses of litigation incurred, as well as any amount the Reserve Bank is required to 6. Effective January 1, 1987, the last sentence of pay because of the judgment or decree or the tender section 210.9(a)(2) is revised to read as follows: of defense, together with interest thereon. Section 210.9—Payment (c) Methods of recovery. The Reserve Bank may recover the amount stated in paragraph (b) of this section by charging any account on its books that is maintained or used by the sender (or if the sender is (2) * * * A paying bank that closes voluntarily on a another Reserve Bank, by entering a charge against day that is a banking day for the Reserve Bank shall the other Reserve Bank through the Interdistrict Set- either pay on that day by the close of the Reserve tlement Fund), if: Bank's banking day for cash items that the Reserve (1) the Reserve Bank made seasonable written de- Bank makes available to the paying bank on that mand on the sender to assume defense of the action day, or compensate the Reserve Bank for the value or proceeding; and of the float associated with the items in accordance (2) the sender has not made any other arrangement with procedures provided in its Reserve Bank's for payment that is acceptable to the Reserve Bank. operating circular; in such circumstances, the paying bank is not considered to receive the item until The Reserve Bank is not responsible for defending its next banking day. the action or proceeding before using this method of recovery. A Reserve Bank that has been charged 7. Section 210.12(c)(10) is revised and new subparathrough the Interdistrict Settlement Fund may recover graph (c)(l 1) is added as set forth below: from its sender in the manner and under the circumstances set forth in this paragraph. A Reserve Bank's Section 210.12—Return of Cash Items failure to avail itself of the remedy provided in this paragraph does not prejudice its enforcement in any other manner of the indemnity agreement referred to (c) * * * in subparagraph (a)(3) of this section. (10) The following days shall not be considered banking days for purposes of the deadline for notice 5. Section 210.6(a)(1) is revised, and, effective January of nonpayment: Saturdays and Sundays, January 1, 1, 1990, new paragraph (c) is added as set forth below: the third Monday in January, the third Monday in February, the last Monday in May, July 4, the first Section 210.6—Status, Warranties, and Monday in September, the second Monday in Octo- Liability of Reserve Bank ber, November 11, the fourth Thursday in November, and December 25. If January 1, July 4, Novem- (a)(1) Status and liability. A Reserve Bank shall act ber 11, or December 25 fall on a Sunday, the next only as agent or subagent of the owner in respect of following Monday shall not be considered a banking an item. This agency terminates not later than the day for purposes of this subsection. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 575 (11) A claim for failure to comply with the require- of the Bank Holding Company Act ("BHC Act") ments of this paragraph (c) is barred unless the (12 U.S.C. § 1842(a)(1)), to become a bank holding action on the claim is commenced within two years company by acquiring State Savings Bank, Frankfort, after the date upon which the notice was required to Michigan ("SS Bank") and Central State Bank, Beube received by the depositary bank. lah, Michigan ("CS Bank"). Notice of the application, affording opportunity for 8. Section 210.38(b) is revised as follows: interested persons to submit comments, has been given in accordance with section 3(b) of the BHC Act Section 210.38—Reserve Bank Liability (51 Federal Register 10,671 (March 28, 1986)). The time for filing comments has expired, and the Board has considered the application and all comments re- (b) Damages. A Reserve Bank is liable to its immedi- ceived in light of the factors set forth in section 3(c) of ate transferor for a failure to credit the amount of a the BHC Act (12 U.S.C. § 1842(c)). transfer item or request to the transferee's account Applicant is a nonoperating corporation with no caused by a Reserve Bank's failure to exercise ordi- subsidiaries, formed for the purpose of acquiring the nary care or act in good faith. A Reserve Bank's banks. SS Bank, with total deposits of $19.6 million, liability for such a failure to credit is limited to and CS Bank, with total deposits of $16.7 million, damages that are attributable directly and immediately together represent less than 1 percent of the total to the failure to credit, but does not include damages deposits in commercial banks in the state.1 Accordingthat are attributable to the consequences of the failure ly, consummation of this proposal would not result in to credit, even if such consequences were foreseeable any significant increase in the concentration of bankat the time of such failure. ing resources in Michigan. CS Bank and SS Bank have been under common 9. Effective January 1, 1990, paragraph 210.38(b) is control since 1979, when Mr. Harry C. Calcutt, who redesignated subparagraph (b)(1), and new subpara- would own the majority of Applicant's shares, acgraph (b)(2) is added as follows: quired control over CS Bank. Thus, this proposal represents merely a restructuring of Mr. Calcutt's Section 210.38—Reserve Bank Liability ownership of the two banks and, as discussed below, would not have any significant adverse effect on competition in the relevant market. In analyzing the (b) * * * competitive effects of a proposal such as this one, (2) A claim against a Reserve Bank for failure to involving banking organizations located in the same exercise ordinary care or to act in good faith shall be market and under common control, the Board generalbarred unless the action on the claim is commenced ly considers the competitive effects of the transaction within two years after the claim accrues. A claim whereby common control of the formerly competing accrues on the date a Reserve Bank's alleged failure institutions was established.2 In this case, however, to exercise ordinary care or to act in good faith first the United States District Court for the Western results in damages to the claimant. District of Michigan, in a lawsuit brought against Mr. Calcutt by the Antitrust Division of the Department of Justice, examined the competitive aspects of ORDERS ISSUED UNDER BANK HOLDING Mr. Calcutt's acquisition of CS Bank in 1979, and COMPANY ACT, BANK MERGER, ACT BANK concluded that the acquisition did not have any signifi- SERVICE CORPORATION ACT, AND FEDERAL cant anticompetitive effects. RESERVE ACT The Department of Justice alleged that Mr. Calcutt's acquisition of CS Bank resulted in a restraint of trade Orders Issued Under Section 3 of the that violated section 1 of the Sherman Act, 15 U.S.C. Bank Holding Company Act § 1. The Department argued that the relevant product market for analyzing the effect of the affiliation should Central-State Bancorp consist of transaction accounts and small business Frankfort, Michigan loans and that the geographic market for these products was Benzie County, Michigan. Order Approving Formation of a Bank Holding Company 1. Banking data as of December 31, 1984. Central-State Bancorp, Inc., Frankfort, Michigan, has 2. See, Mid-Nebraska Bancshares, Inc. v. Board of Governors, 627 applied for the Board's approval under section 3(a)(1) F.2d 26 (D.C. Cir. 1980). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
576 Federal Reserve Bulletin • August 1986 The district court determined that the relevant geo- Citizens Fidelity Corporation graphic market was Benzie County and Grand Tra- Louisville, Kentucky verse County, Michigan, and that the product market included "the cluster of services and products that Order Approving Acquisition of a Bank Holding comprise the full range of services offered by commer- Company and the Merger of Banks cial banks."3 Using these definitions, the court concluded that Mr. Calcutt's acquisition of CS Bank did Citizens Fidelity Corporation, Louisville, Kentucky, a not result in a restraint of trade because the affiliation bank holding company within the meaning of the Bank of the two banks increased the Herfindahl-Hirschman Holding Company Act (12 U.S.C. § 1841 et seq. Index by only 21 points to 2161 and the combined ("Act")), has applied for the Board's approval under market share of the two banks was 6.4 percent.4 In section 3 of the Act (12 U.S.C. § 1842) to acquire addition, the court found no additional evidence to Indiana Southern Financial Corporation, Sellersburg, support a finding that the acquisition was in violation Indiana ("ISFC"), and thereby to acquire Indiana of the Sherman Act. The Justice Department has Southern Bank, Sellersburg, Indiana ("Sellersburg appealed this decision to the United States Court of Bank").1 Sellersburg Bank also has applied for the Appeals for the Sixth Circuit, on the grounds that the Board's approval under the Bank Merger Act, district court erred in its market definition. In the 12 U.S.C. § 1828(c), to merge with United Bank of event that the litigation results in a finding that the Indiana, N.A., Clarksville, Indiana ("Clarksville original acquisition was significantly anticompetitive, Bank"), under the charter and name of Sellersburg Applicant has committed to divest one of the two Bank. banks. Notice of the applications, affording interested per- The financial and managerial resources of Applicant sons an opportunity to submit comments, has been and Banks are satisfactory, especially in light of Appli- given in accordance with section 3(b) of the Act (51 cant's commitment to inject additional capital into CS Federal Register 12,566 (April 11, 1986)) and the Bank Bank. Considerations relating to the convenience and Merger Act. As required by the Bank Merger Act, needs of the community are also consistent with reports on the competitive effects of the merger were approval. Based on the foregoing and other facts of requested from the United States Attorney General, record, the Board has determined that the proposed the Comptroller of the Currency and the Federal acquisition is in the public interest and that the appli- Deposit Insurance Corporation. The time for filing cation should be approved. On the basis of the record, comments has expired, and the Board has considered the application is approved for the reasons summa- the applications and all comments received in light of rized above. the factors set forth in section 3(c) of the Act and the The transaction shall not be consummated before Bank Merger Act. the thirtieth calendar day following the effective date Section 3 of the Act, 12 U.S.C. § 1842(d), the Dougof this Order, or later than three months after the las Amendment, prohibits the Board from approving effective date of this Order, unless such period is an application by a bank holding company to acquire a extended for good cause by the Board or the Federal bank located outside the holding company's home Reserve Bank of Chicago, pursuant to delegated au- state,2 unless such acquisition is "specifically authothority. rized by the statute laws of the state in which [the bank By order of the Board of Governors, effective to be acquired] is located by language to that effect and June 24, 1986. not merely by implication." Applicant's home state is Kentucky. The statute laws of Indiana authorize a Voting for this action: Chairman Volcker and Governors Kentucky bank holding company to acquire an Indiana Wallich, Rice, Angell, and Johnson. Abstaining from this bank holding company if Kentucky law "permits action: Governor Seger. Indiana bank holding companies to acquire banks and bank holding companies in that state" and would also JAMES MCAFEE [SEAL] Associate Secretary of the Board 1. In connection with this application, CF Acquisition Corporation, Evansville, Indiana, a subsidiary of Applicant, will merge with ISFC and will liquidate upon consummation of the proposal. 3. United States v. Central State Bank, 621 F. Supp. 1276, 1291 2. A bank holding company's home state for purposes of the (W.D. Mich. 1985), appeal docketed, No. 85-1832 (6th Cir. October Douglas Amendment is that state in which the total deposits of its 11, 1985). banking subsidiaries were largest on July 1, 1966, or on the date it 4. Since 1979, the banks' market share has not increased signifi- became a bank holding company, whichever date is later. 12 U.S.C. cantly. § 1842(d). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 70 permit the acquiror Kentucky bank holding company Although consummation of the proposals would "to be acquired by the Indiana bank holding company eliminate existing competition between Applicant and . . . sought to be acquired." Ind. Code § 28-2-15- Clarksville Bank and Sellersburg Bank in the Louis- 18(e) (effective January 1, 1986). The Board has previ- ville market, numerous other commercial banking ously found that Kentucky has by statute expressly organizations would remain as competitors after conauthorized an Indiana bank holding company to ac- summation of the proposal. In addition, the Board has quire a Kentucky bank or bank holding company.3 In considered the presence and competition afforded by its determination, the Board concluded that the Indi- thrift institutions in its analysis of this proposal.7 Eight ana and Kentucky statutes are reciprocal and autho- thrift institutions compete with commercial banks in rize banking acquisitions between the two states. the Louisville banking market and account for 24.9 Accordingly, approval of Applicant's proposal to ac- percent of the total deposits in the market. Thrift quire the banks in Indiana is not barred by the Douglas institutions already exert a considerable competitive Amendment. influence in the market as providers of NOW accounts Applicant, the second largest commercial banking and consumer loans. In addition, most of these instituorganization in Kentucky, controls seven subsidiary tions provide commercial and industrial loans in addibanks with total deposits of $2.4 billion, representing tion to traditional thrift services. Based upon the 10.6 percent of the total deposits in commercial banks above considerations, the Board concludes that conin the state.4 Sellersburg Bank and Clarksville Bank summation of the proposal is not likely substantially to are among the smaller commercial banks in Indiana lessen competition in the Louisville banking market.8 and control deposits of $74.1 million and $43.5 million, The financial and managerial resources of Applirespectively, representing 0.2 and 0.1 percent of the cant, its subsidiaries and the Banks are consistent with total deposits in commercial banks in Indiana. Upon approval. Considerations relating to the convenience consummation of the proposed transactions, Appli- and needs of the community to be served are also cant would control the 63rd largest commercial bank in consistent with approval. Based on the foregoing and Indiana, with total deposits of $117.6 million, repre- other facts of record, the Board has determined that senting 0.3 percent of the total deposits in commercial the proposed acquisition and merger are in the public banks in the state. Consummation of the proposal interest and that the applications should be, and herewould have no significant effect on the concentration by are, approved. of banking resources in Indiana. On the basis of the record, the applications are Applicant, Sellersburg Bank and Clarksville Bank approved for the reasons summarized above. The compete directly in the Louisville, Kentucky, banking transactions shall not be consummated before the market.5 Applicant is the second largest commercial thirtieth calendar day following the effective date of banking organization in the market, with total deposits this Order, or later than three months after the effecof $2.1 billion, representing 28.7 percent of the total tive date of this Order, unless such period is extended deposits in commercial banks in the market. Sellersburg Bank and Clarksville Bank are the ninth and twelfth largest commercial banking organizations in the market, together holding 1.6 percent of the total deposits in commercial banks in the market. After consummation of the proposals, Applicant's share of the deposits in commercial banks in the market would trated. In such markets, the Department is likely to challenge a merger be 30.3 percent. The share of deposits held by the four 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 largest commercial banking organizations in the mar- acquisition generally will not be challenged (in the absence of other ket would increase from 83.7 percent to 85.3 percent factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by at least 200 and the Herfindahl-Hirschman Index ("HHI") would points. increase by 95 points to 2259.6 7. The Board has previously indicated that thrift institutions have become, or have the potential to become, major competitors of commercial banks. National City Corporation, 70 FEDERAL RESERVE BULLETIN 743 (1984); NCNB Corporation, 70 FEDERAL RESERVE 3. CNB Bancshares, Inc., 72 FEDERAL RESERVE BULLETIN 486 BULLETIN 225 (1984); General Bancshares Corporation, 69 FEDERAL (Order dated May 27, 1986). RESERVE BULLETIN 802 (1983); First Tennessee National Corpora- 4. Deposit data refer to total domestic deposits as of June 30, 1985, tion, 69 FEDERAL RESERVE BULLETIN 298 (1983). and reflect bank holding company acquisitions approved by March 31, 8. If 50 percent of deposits held by thrift institutions in the 1986. Louisville banking market are included in the calculation of market 5. The Louisville banking market is approximated by the Louis- concentration, the share of total deposits held by the four largest ville, Kentucky RMA plus Clark County, Indiana. organizations in the market would be 69.8 percent. Applicant's market 6. Under the revised Department of Justice Merger Guidelines (49 share would increase by 1.4 percentage points to 26.1 percent and the Federal Register 26,823 (June 29, 1984)) ("Guidelines"), a market in HHI would increase by 70 points to 1712 upon consummation of the which the post-merger HHI is over 1800 is considered highly concen- proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
578 Federal Reserve Bulletin • August 1986 for good cause by the Board or the Federal Reserve eration in mind.2 Because Bank is in organization, Bank of St. Louis pursuant to delegated authority. there is no record of management's performance at By order of the Board of Governors, effective Bank. Accordingly, it is necessary to look to the June 26, 1986. record of the proposed management of Applicant and Bank at other depository institutions in order to assess Voting for this action: Chairman Volcker and Governors managerial factors in connection with this application. Wallich, Rice, Seger, Angell, and Johnson. The proposed management of Applicant and Bank includes only two individuals with any prior banking JAMES MCAFEE experience. Based upon the management record3 of [SEAL] Associate Secretary of the Board the two experienced individuals in a similar situation at another depository institution, and the lack of prior banking experience of the remainder of the proposed Crown National Bancorp management of Applicant and Bank, the Board does San Jose, California not believe that the managerial resources of Applicant and Bank are consistent with approval of this applica- Order Denying Formation of a Bank Holding tion.4 Company The financial resources of Applicant and Bank and considerations relating to the convenience and needs Crown National Bancorp, San Jose, California, has of the community to be served are consistent with, but applied for the Board's approval under section 3(a)(1) lend no weight toward, approval of this proposal. of the Bank Holding Company Act ("Act") On the basis of all of the facts of record, the Board (12 U.S.C. § 1842(a)(1)) to become a bank holding concludes that the banking considerations involved in company by acquiring Crown National Bank, San this proposal present adverse factors bearing upon the Jose, California ("Bank"). managerial resources and future prospects of Appli- Notice of the application, affording opportunity for cant and Bank. Such adverse factors are not outinterested persons to submit comments, has been weighed by any relevant competitive or convenience given in accordance with section 3(b) of the Act. The and needs considerations. Accordingly, it is the time for filing comments has expired and the Board Board's judgment that approval of the application has considered the application and all comments re- would not be in the public interest and that the ceived in light of the factors set forth in section 3(c) of application should be, and hereby is, denied for the the Act (12 U.S.C. § 1842(c)). reasons summarized above. Applicant is a nonoperating corporation with no By order of the Board of Governors, effective subsidiaries formed for the purpose of acquiring Bank, June 10, 1986. a de novo bank. Principals of Applicant are also principals of Bank. Consummation of the transaction would Voting for this action: Chairman Volcker and Governors not result in an increase in the concentration of Rice, Seger, and Johnson. Absent and not voting: Governors Wallich and Angell. banking resources in California. Bank will operate in the San Francisco banking market.1 Principals of Applicant are not affiliated with JAMES MCAFEE [SEAL] Associate Secretary of the Board any other depository organization in this market. Consummation of this proposal would not result in any adverse effects upon competition or increase in the concentration of banking resources in any relevant 2. The Bank Holding Company Act requires that before an organiarea. Accordingly, the Board concludes that competization is permitted to become a bank holding company and thus obtain tive considerations under the Act are consistent with the benefits associated with the holding company structure, it must approval. secure the Board's approval. Section 3(c) of the Act provides that the Board must, in every case, consider, among other things, the financial The Board has indicated on previous occasions that and managerial resources of both the applicant company and the bank a bank holding company should serve as a source of to be acquired. The Board's action in this case is based on a financial and managerial strength to its subsidiary consideration of such factors. 3. This record includes reports of examination and information bank(s), and that the Board would closely examine the obtained from staff and senior officials of State and Federal supervisocondition of an applicant in each case with this consid- ry agencies. 4. The Board has previously stated that it is reasonable to expect an applicant to demonstrate a record of satisfactory managerial performance. See, e.g., Northwest Wisconsin Banco, Inc., 70 FEDERAL RESERVE BULLETIN 105 (1985); Central Minnesota Bancshares, Inc., 1. The San Francisco banking market is approximated by the San 70 FEDERAL RESERVE BULLETIN 877 (1984); and American National Francisco Ranally Metropolitan Area ("RMA"). Sidney Corp., 66 FEDERAL RESERVE BULLETIN 159 (1980). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 579 Heartland Bancorp, Inc. The Peoria banking market is unconcentrated and El Paso, Illinois would remain so after consummation. The present Herfindahl-Hirschman Index ("HHI") is 926 and Order Approving Acquisition of a Bank would only increase by 8 points to 934 as a result of this proposal.4 Thirty-six other commercial banking Heartland Bancorp, Inc., El Paso, Illinois ("Heart- organizations would remain in the market after conland"), a bank holding company within the meaning of summation of the proposal. Accordingly, consummathe Bank Holding Company Act ("Act"), 12 U.S.C. tion of the proposed acquisition is not likely to have a § 1841 et seq., has applied for Board approval under significant adverse effect on competition in the Peoria section 3(a)(3) of the Act, 12 U.S.C. § 1842 (a)(3), to banking market. acquire 70 percent or more of the voting shares of the The Board has also considered the effect of this First National Bank, Washington, Illinois ("Bank"). proposal upon probable future competition in the Notice of the application, affording interested per- Peoria market. Based upon the number of potential sons an opportunity to submit comments, has been entrants into this market, the Board concludes that given in accordance with section 3(b) of the Act. The consummation of the proposal would not have any time for filing comments has expired and the Board significant adverse effect upon probable future compehas considered the application and all comments re- tition in this market. ceived in light of the factors set forth in section 3(c) of The financial and managerial resources and future the Act, 12 U.S.C. § 1842(c). prospects of Applicant, its subsidiary banks and Bank Applicant is the 165th largest banking organization are generally satisfactory. Applicant will have a conin Illinois, with four subsidiary banks,1 controlling solidated primary capital to assets ratio of 7.0 percent $97.1 million in total deposits, which represents 0.1 on the date of consummation of the proposal, and has percent of the deposits of commercial banks in the further committed to operate at this capital level in the state.2 The Bank holds $39.3 million in total deposits, future. Although Applicant's consolidated primary representing less than one percent of the total deposits capital ratio will decline upon consummation of this in the state. Upon consummation of the proposal, proposal, that ratio will remain above the minimum Applicant would become the state's 113th largest level required by the Board's Capital Adequacy banking organization, controlling $136.4 million in Guidelines.5 Considerations relating to the convetotal deposits, representing 0.1 percent of the state's nience and needs of the community are consistent with commercial bank deposits. Accordingly, consumma- approval of the application.6 tion of this proposal would not have any significant effect on the concentration of banking resources in Illinois. One of Applicant's subsidiary banks, Eureka, and 4. Under the revised Department of Justice Merger Guidelines, 49 Bank compete in the Peoria, Illinois banking market.3 Federal Register 26,823 (June 29, 1984), any market in which the post- Eureka, with total deposits of $34.8 million, is the 14th merger HHI is below 1000 is considered unconcentrated. Except in extraordinary circumstances, the Justice Department is unlikely to largest of 38 commercial banking organizations in the challenge mergers in an unconcentrated market. Any market in which market, controlling 1.9 percent of the total deposits of the post-merger HHI is between 1000 and 1800 is considered moderately concentrated. In such a market, the Justice Department is commercial banks in that market. Bank is the 12th unlikely to challenge a merger that produces an increase in the HHI of largest commercial banking organization in the Peoria fewer than 100 points. Any market in which the post merger HHI is market, and controls 2.2 percent of the total deposits above 1800 is considered highly concentrated. The Department has informed the Board that a bank merger or acquisition generally will of commercial banks in the market. Upon consummanot be challenged (in the absence of other factors indicating anticomtion, Applicant would become the 5th largest banking petitive effects) unless the post-merger HHI is at least 1800 and the organization in the market, and would control 4.1 merger increases the HHI by at least 200 points. 5. Capital Adequacy Guidelines, 50 Federal Register 16,057 (April percent of the total deposits of commercial banks in 24, 1985); 71 FEDERAL RESERVE BULLETIN 445 (1985). the market. 6. Effective July 1, 1986, the statute laws of Illinois make it unlawful for any bank holding company with a total capital ratio of more than 7 percent to acquire an Illinois bank, "where the acquisition would result in a reduction of the holding company's capital 1. Applicant's four subsidiary banks are: (1) Woodford County adequacy ratio to less than 7 percent, where such ratios are measured Bank, El Paso, Illinois ("Woodford"); (2) Bank of Carlock, Carlock, pursuant to regulations published and made effective by the Board of Illinois ("Carlock"); (3) State Bank of Cornland, Cornland, Illi- Governors . . . ." 17 111. Stat. 2501, § 3.02(a)(6) (1986). The Board's nois ("Cornland"); and (4) First Bank of Eureka, Eureka, Illinois Capital Adequacy Guidelines establish minimum capital ratios to ("Eureka"). provide a framework for assessing the adequacy of the capital of bank 2. All banking data are as of June 30, 1985. holding companies, and provide that the two measures of capital to be 3. The Peoria, Illinois, banking market is approximated by Peoria used are the primary capital ratio and the total capital ratio. Since, and Tazewell counties, plus Partridge, Cazenovia, Metamora, Worth, upon consummation, Heartland's consolidated primary capital ratio Spring Bay, Cruger, Olio and Montgomery townships in Woodford will be at least 7 percent, the Board concludes that the proposed County, Illinois. acquisition will be in accordance with the terms of the Illinois statute. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
580 Federal Reserve Bulletin • August 1986 Based on the foregoing and other facts of record, the largest commercial banking organization in the state, Board has determined that consummation of the pro- with total deposits of $76 million, representing 0.1 posed acquisition would be in the public interest and percent of the total deposits in commercial banks in that the application should be approved. Accordingly, the state. Upon consummation of the proposed transthe application is approved for the reasons summa- action, Applicant would become the ninth largest rized above. The transaction shall not be consummat- banking organization in Illinois, with total deposits of ed before the thirtieth calendar day following the $997.9 million, representing 1 percent of the total effective date of this Order, or later than three months deposits in commercial banks in the state. Accordingafter the effective date of this Order, unless such ly, consummation of this proposal would have no period is extended for good cause by the Board or by significant effect on the concentration of banking rethe Federal Reserve Bank of Chicago, acting pursuant sources in Illinois. to delegated authority. Both Applicant and Bank compete directly in the By order of the Board of Governors, effective Decatur banking market.2 Applicant is the largest of 16 June 23, 1986. commercial banking organizations operating in the market, with total deposits of $203.3 million, repre- Voting for this action: Chairman Volcker and Governors senting 23.2 percent of the total deposits in commer- Wallich, Rice, Seger, Angell, and Johnson. cial banks in the market. Bank is the fourth largest commercial banking organization in the market, with JAMES MCAFEE total deposits of $76 million, representing 8.7 percent [SEAL] Associate Secretary of the Board of the total deposits in commercial banks in the market. Upon consummation of the proposal, Applicant's share of the deposits in commercial banks in the Magna Group, Inc. market would increase to 31.9 percent. The Decatur Belleville, Illinois banking market is considered to be moderately concentrated with the four largest commercial banks Order Approving Acquisition of a Bank Holding controlling 72 percent of the deposits in commercial banks in the market. The Herfindahl-Hirschman In- Company dex ("HHI") for the market is 1523 and would increase by 403 points to 1926 upon consummation of Magna Group, Inc., Belleville, Illinois, a bank holding the proposal.3 company within the meaning of the Bank Holding Company Act (12 U.S.C. § 1841 et seq. ("Act")), has Although consummation of the proposal would elimapplied for the Board's approval under section 3 of the inate some existing competition between Applicant Act (12 U.S.C. § 1842), to acquire the successor by and Bank in the Decatur banking market, numerous merger to Northtown Bancshares Corporation, Deca- other commercial banking organizations would remain tur, Illinois, and thereby indirectly acquire Northtown as competitors in the market upon consummation. In Bank and Trust, Decatur, Illinois ("Bank"). In con- addition, the presence of seven thrift institutions that nection with this application, Millikin Bancshares, control approximately 34.3 percent of the market's Inc., Millikin, Illinois, a subsidiary of Applicant, has total deposits mitigates the anticompetitive effects of applied to merge with Northtown Bancshares Corpo- the transaction.4 Thrift institutions already exert a ration. considerable competitive influence in the market as Notice of the applications, affording an opportunity providers of NOW accounts and consumer loans. In for interested persons to submit comments, has been given in accordance with section 3(b) of the Act (51 Federal Register 12,566 (1985)). The time for filing 2. The Decatur banking market is approximated by Macon County, Illinois, plus Moweaqua township in Shelby County, Illinois. comments has expired, and the Board has considered 3. Under the revised Department of Justice Merger Guidelines (49 the applications and all comments received in light of Federal Register 26,823 (June 29, 1984)), a market in which the postthe factors set forth in section 3(c) of the Act merger HHI is above 1800 is considered highly concentrated. In such markets, the Department is likely to challenge a merger that increases (12 U.S.C. § 1842(c)). the HHI by more than 50 points. The Department has informed the Applicant, the eleventh largest commercial banking Board that a bank merger or acquisition generally will not be chalorganization in Illinois, controls nine subsidiary banks lenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger with total deposits of $921.9 million, representing increases the HHI by at least 200 points. approximately 0.95 percent of the total deposits in 4. The Board has previously indicated that thrift institutions have commercial banks in the state.1 Bank is the 199th become, or have the potential to become, major competitors of commercial banks. National City Corporation, 70 FEDERAL RESERVE BULLETIN 743 (1984); NCNB Bancorporation, 70 FEDERAL RESERVE BULLETIN 225 (1984); General Bancshares Corporation, 69 FEDERAL 1. Deposit data are as of June 30, 1985, and reflect acquisitions RESERVE BULLETIN 802 (1983); First Tennessee National Corporaconsummated through March 31, 1986. tion, 69 FEDERAL RESERVE BULLETIN 298 (1983). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 581 addition, six of the thrift institutions are engaged in the in the purchase, ownership, installation, and operation business of making commercial loans and are provid- of electronic fund transfer ("EFT") terminals and ing an alternative for such services in the Decatur automatic teller machines ("ATMs") in retail institumarket. Based upon the above considerations, the tions in the state of Georgia through its newly formed, Board concludes that consummation of the proposal is wholly owned subsidiary, Bank South Services Corponot likely to substantially lessen competition in the ration ("BSSC"), Atlanta, Georgia. These activities Decatur banking market.5 have been determined by the Board to be closely The financial and managerial resources of Appli- related to banking and permissible for bank holding cant, its subsidiary banks, and Bank are consistent companies, 12 C.F.R. § 225.25(b)(7). with approval. Considerations relating to the conve- Applicant also proposes to provide certain data nience and needs of the communities to be served are processing and transmission services and to provide also consistent with approval. Based on the foregoing management consulting advice to depository instituand other facts of record, the Board has determined tions throughout the state of Georgia. The scope of that consummation of the proposed transaction would Applicant's proposed provision of data processing and be in the public interest and that the applications transmission services and management consulting adshould be approved. vice would be limited to those activities permitted On the basis of the record, the applications are under the Board's Regulation Y, 12 C.F.R. approved for the reasons summarized above. The § 225.25(b)(7), (11). transaction shall not be consummated before the thirti- Notice of the application, affording interested pereth calendar day following the effective date of this sons an opportunity to submit comments, has been Order, or later than three months after the effective duly published, 51 Federal Register 8017 (1986). The date of this Order, unless such period is extended for time for filing comments has expired, and the Board good cause by the Board or by the Federal Reserve has considered the application and all comments re- Bank of St. Louis pursuant to delegated authority. ceived in light of the public interest factors set forth in By order of the Board of Governors, effective section 4(c)(8) of the BHC Act. June 24, 1986. Applicant is the fourth largest commercial banking organization in Georgia, controlling consolidated as- Voting for this action: Chairman Volcker and Governors sets of approximately $2.3 billion. Applicant's lead Wallich, Rice, Seger, Angell, and Johnson. bank subsidiary, Bank South, N.A., controls total domestic deposits of $1.6 billion, representing 5.0 JAMES MCAFEE percent of the total deposits of commercial banks in [SEAL] Associate Secretary of the Board Georgia.1 Applicant's subsidiary bank, Bank South, N.A., currently owns and operates 15 ATMs in supermarkets Orders Issued Under Section 4 of the Bank in Georgia. Customers using such ATMs may make Holding Company Act cash withdrawals from their checking and savings accounts and make balance inquiries, but may not Bank South Corporation make deposits. The ATMs are connected to the Atlanta, Georgia AVAIL network, a joint-venture EFT interchange system that any federally insured depository institu- Order Approving Application to Engage in Data tion in Georgia may join. The AVAIL network cur- Processing and Management Consulting Activities rently has 139 member depository institutions, of which 79 are commercial banks. Bank South's ATMs Bank South Corporation, Atlanta, Georgia, a bank are operated pursuant to a contractual arrangement holding company within the meaning of the Bank between Bank South and the company that owns the Holding Company Act, 12 U.S.C. § 1841 et seq. supermarkets (the "company"). The contractual ar- ("BHC Act"), has applied pursuant to section 4(c)(8) rangement between Bank South and the company is of the BHC Act and section 225.23 of the Board's structured to take advantage of the complementary resources and experience of Bank South and the Regulation Y (12 C.F.R. § 225.23), to engage de novo company. Bank South's role in this arrangement is based on its experience in the installation, operation, management and repair of ATMs. Bank South also 5. If 50 percent of deposits held by thrift institutions in the Decatur banking market were included in the calculation of market concentra- trains retail store employees to answer customer intion, the share of total deposits held by the four largest organizations in the market would be 57.9 percent. Applicant would control 18.4 percent of the market's deposits and Bank would control 6.9 percent of the market's deposits. The HHI would increase by 253 points to 1315. 1. Banking data are as of September 30, 1985. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
582 Federal Reserve Bulletin • August 1986 quiries and to explain ATM operation procedures to its the area. Accordingly, the Board concludes that concustomers. The company provides the locations for summation of this proposal would not have a signifiinstallation of the ATMs, supplies the cash necessary cant adverse effect on probable future competition. for the operations of the ATMs, and provides some The Board has reviewed this proposal to ensure that initial maintenance of the ATMs. no unfair competitive practices or other substantially By this application, Applicant proposes to transfer adverse effects would result from consummation of the ownership of its existing ATMs to BSSC and to proposal. In this regard, the Board notes that the increase the number of locations at which it would structure of the contractual arrangement in place beoperate ATMs. The contractual arrangements be- tween Bank South and the company, and to be contintween Bank South and the company would remain in ued by BSSC and the company, allows depository force between BSSC and the company, and identical institutions in addition to Applicant non-discriminacontracts would be created between BSSC and addi- tory access to the ATMs to be established by Applitional supermarket companies where Applicant pro- cant, through membership in the AVAIL network. poses to locate ATMs. The capabilities of BSSC's After review of the application and other facts of ATMs would not be expanded beyond those of Bank record, the Board concludes that consummation of South's ATMs. The Georgia Department of Banking this proposal would not result in adverse effects, such and Finance has not objected to the current arrange- as unsound banking practices, unfair competition, ment between Bank South and the supermarkets or to conflicts of interest, or an undue concentration of the proposed transaction.2 resources. The Board has analyzed this proposal with respect Approval of this application can reasonably be exto its effects on existing competition between current pected to produce benefits to the public. Consummaand potential competitors in the market for the provi- tion of the proposal would give customers of financial sion of ATM services. Applicant is establishing ATM institutions in Georgia access to a greater number of locations through a de novo subsidiary. The Board ATM terminals, and would allow additional competinotes that all depository institutions that are members tion between ATMs provided by bank holding compaof the AVAIL network, and the customers of these nies and those provided by unaffiliated nonbanking depository institutions, would have access to the companies. ATMs installed by BSSC in supermarkets. Any feder- Based upon the foregoing and all the facts of record, ally insured depository institution in the state of Geor- the Board has determined that the balance of public gia may join the AVAIL network. Thus, BSSC's interest factors it is required to consider under section establishment of additional ATMs would expand the 4(c)(8) is favorable. Accordingly, the application is number of ATMs available as part of a shared neutral hereby approved. This determination is subject to all ATM network. In light of these and other facts of of the conditions set forth in the Board's Regulation Y, record, the Board concludes that consummation of including those in sections 225.4(d) and 225.23(b), and this proposal would not have a significant adverse to the Board's authority to require such modification effect on existing competition in the provision of ATM or termination of the activities of a bank holding services in any relevant market. company or any of its subsidiaries as the Board finds The Board also has considered the effects of con- necessary to assure compliance with, and prevent summation of this proposal on probable future compe- evasions of, the provisions and purposes of the BHC tition in the provision of ATMs. As noted above, Act and the Board's regulations and orders issued Applicant is establishing ATM locations through a thereunder. de novo subsidiary. In addition, numerous other po- This transaction shall not be consummated later tential entrants into the ATM market exist. In this than three months after the effective date of this connection, the Board notes that the market for the Order, unless such period is extended for good cause data processing, management consulting, and related by the Board, or by the Federal Reserve Bank of services provided in connection with the provision of Atlanta, pursuant to delegated authority. ATMs is unconcentrated, with many competitors and By order of the Board of Governors, effective few barriers to entry. Numerous national ATM net- June 5, 1986. works currently operate in the Atlanta metropolitan area, and additional networks could potentially enter Voting for this action: Chairman Volcker and Governors Rice, Seger, Angell, and Johnson. Abstaining from this action: Governor Wallich. 2. Applicant has stated that the operations of BSSC's ATMs will be conducted at all times in compliance with all federal and state JAMES MCAFEE branching laws, to the extent applicable. [SEAL] Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 583 Citicorp ipate or propose to participate (including Citibank, New York, New York N.A.) in networks utilizing the ATMs operated by Northeast Exchange may use the ATMs for cash Order Approving Application to Engage in Data withdrawals, balance inquiries and account transfers, Processing Activities but may not make deposits. The New York Banking Superintendent and the New Jersey Commissioner of Citicorp, New York, New York, a bank holding com- Banking, the state banking authorities for those locapany within the meaning of the Bank Holding Compa- tions where Northeast Exchange currently operates, ny Act, 12 U.S.C. § 1841 et seq. ("Act"), has applied have been notified of the proposal and they have pursuant to section 4(c)(8) of the Act and section expressed no objection to its terms.2 225.23 of the Board's Regulation Y (12 C.F.R. The Board has analyzed the proposal with respect to § 225.23), to acquire through its subsidiary, CitiEx- its effect on existing and potential competition in the change, Inc., certain assets and to assume certain market for ATM networks. Although Applicant, liabilities of Northeast Exchange Ltd. 1984-1 through its lead bank subsidiary and a savings and loan ("Northeast Exchange"), a Texas limited partnership. subsidiary, operates (and will continue to operate) two Since February 1984, Northeast Exchange has en- proprietary ATM networks, Applicant is not otherwise gaged in the business of installing automated teller engaged in the operation of a shared ATM network. machines ("ATMs") in retail stores and operating Because Applicant does not operate a shared ATM such ATMs as a neutral shared network in the North- network, the proposed acquisition of Northeast Exeastern United States. These activities have been change would not eliminate existing competition in the determined by the Board to be closely related to provision of ATM services in any relevant market. banking and permissible for bank holding companies The Board also has considered the effects of con- (12 C.F.R. § 225.25(b)(7)). summation of this proposal on probable future compe- Notice of the application, affording interested per- tition in the operation of a shared ATM network and sons an opportunity to submit comments, has been the provision of EFT switching services. Applicant is duly published. 50 Federal Register 51,604 (1985). The capable of entering the markets for ATM networks and time for filing comments has expired, and the Board the provision of EFT switching services de novo. has considered the application and all comments re- However, numerous other potential entrants into ceived in light of the public interest factors set forth in these markets exist. In this connection, the Board section 4(c)(8) of the Act. notes that the market for the data processing and Citicorp, with total consolidated assets of $181.9 related services is unconcentrated, with many competbillion, is the largest banking organization in the itors and few barriers to entry. Moreover, numerous nation.1 It presently operates eight banking subsidiar- national ATM networks operate in the areas currently ies. Its lead bank, Citibank, N.A., New York, New served by Northeast Exchange, and additional net- York, accounts for approximately 79 percent of its works could potentially enter these areas. Accordingconsolidated assets and is a full-service commercial ly, the Board concludes that consummation of this bank. Citicorp's other banking subsidiaries are located proposal would not have a significant adverse effect on in South Dakota, Maryland, Nevada, Delaware, existing and potential competition in the provision of Maine, Utah, and New York State. Citicorp also ATM and EFT switch services in any relevant market. engages, directly and through subsidiaries, in a variety The Board has reviewed this proposal to ensure that of nonbanking activities, including data processing and no unfair competitive practices or other substantially data transmission services. adverse effects would result from consummation of the Currently, Northeast Exchange engages in the in- proposal. In this regard, the Board notes that deposistallation of, and provision of support services to, tory institutions currently do have3 and would contin- ATMs in Pathmark supermarkets located in New York ue to have nondiscriminatory access to membership in and New Jersey, and anticipates installing and servic- the ATM network operated by Northeast Exchange. ing ATMs in Pathmark stores located in other states, After review of the application and other facts of as well as at other locations. Northeast Exchange's record, and particularly in light of certain commitactivities also include the ownership, construction, ments by Applicant regarding the relations between and management of an electronic funds transfer ("EFT") switch that transmits transactions performed on the ATMs to ATM networks and financial institu- 2. Applicant has stated that the operations of Northeast Exchange tions. Customers of depository institutions that partic- will be conducted at all times in compliance with all federal and state branching laws and regulatory provisions, to the extent applicable. 3. Thirty-two depository institutions currently participate in the ATM network established by Northeast Exchange and Applicant proposes to increase the number of depository institutions that will 1. Banking data are as of March 31, 1986. use the network. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
584 Federal Reserve Bulletin • August 1986 Northeast Exchange and its affiliated banks,4 the (collectively, "Applicant" or "NatWest"), both bank Board concludes that consummation of this proposal holding companies within the meaning of the Bank would not result in adverse effects such as unsound Holding Company Act ("BHC Act"), have applied for banking practices, unfair competition, conflicts of the Board's approval under section 4(c)(8) of the BHC interest or an undue concentration of resources. Act (12 U.S.C. § 1843(c)(8)), and section 225.23(a)(3) Approval of this application can reasonably be ex- of the Board's Regulation Y (12 C.F.R. pected to produce benefits to the public. Consumma- § 225.23(a)(3)), to form a de novo subsidiary, County tion of the proposal will continue to give customers of Securities Corporation, New York, New York financial institutions participating in the network in the ("CSC"), and thereby engage in the following activiareas served (and proposed to be served) by Northeast ties: Exchange access to a large number of ATM terminals (1) providing portfolio investment advice to "Instiin convenient locations. tutional Customers";1 Based upon the foregoing and all the facts of record, (2) providing securities execution (brokerage) serthe Board has determined that the balance of public vices, related securities credit activities pursuant to interest factors it is required to consider under section the Board's Regulation T, and incidental activities 4(c)(8) is favorable. Accordingly, the application is such as offering custodial services and cash managehereby approved. This determination is subject to all ment services, in each case for institutional customof the conditions set forth in the Board's Regulation Y, ers, and in each case under circumstances where the including those in sections 225.4(d) and 225.23(b), and securities brokerage services are restricted to buyto the Board's authority to require modification or ing and selling securities solely as agent for the termination of the activities of the holding company or account of such customers; any of its subsidiaries as the Board finds necessary to (3) furnishing general economic information and assure compliance with the provisions and purposes of advice, general economic statistical forecasting the BHC Act and the Board's regulations and orders services and industry studies to institutional cusissued thereunder, or to prevent evasion thereof. tomers; and This transaction shall not be consummated later (4) serving as an investment advisor (as defined in than three months after the effective date of this section 2(a)(20) of the Investment Company Act of Order, unless such period is extended for good cause 1940) to investment companies registered under that by the Board, or by the Federal Reserve Bank of New act.2 York, pursuant to delegated authority. By order of the Board of Governors, effective CSC will not act as principal or take a position (i.e., June 12, 1986. bear the financial risk) in any securities it brokers or recommends. CSC will execute a transaction only at Voting for this action: Chairman Volcker and Governors the direction of a customer and will not exercise Rice, Seger, Angell, and Johnson. Absent and not voting: discretion with respect to any customer account. CSC Governor Wallich. intends to offer investment advice, as well as to provide securities execution services, to institutional JAMES MCAFEE [SEAL] Associate Secretary of the Board 1. An Institutional Customer is defined by Applicant to be a person that is: National Westminster Bank PLC (1) a bank (acting in an individual or fiduciary capacity); an London, England insurance company; a registered investment company under the Investment Company Act of 1940; or a corporation, partnership, proprietorship, organization or institutional entity that regularly Nat West Holdings, Inc. invests in the types of securities as to which investment advice is New York, New York given, or that regularly engages in transactions in securities; (2) an employee benefit plan with assets exceeding $5,000,000, or whose investment decisions are made by a bank, insurance Order Approving Application to Engage in Combined company or investment advisor registered under the Investment Advisors Act of 1940; Investment Advisory and Securities Execution (3) a natural person whose individual net worth (or joint net Services worth with his or her spouse) at the time of receipt of the investment advice or brokerage services exceeds $5,000,000; (4) a broker-dealer or option trader registered under the Securi- National Westminster Bank PLC, London, England, ties Exchange Act of 1934, or other securities professional; or and NatWest Holdings, Inc., New York, New York (5) an entity all of the equity owners of which are institutional customers. 2. NatWest further expects that CSC will provide investment advice and securities execution services directly to NatWest affiliates. 4. Included among the commitments is the fact that the network Such services are permissible servicing activities under section will not use the Citi prefix or logo. 225.22(a) of Regulation Y, 12 C.F.R. § 225.22(a). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 585 customers on an integrated basis, i.e., CSC will not consideration of the entire record of the application charge an explicit fee for the investment advice and and for the reasons set forth below, the Board conwill receive fees only for transactions executed for cludes that the proposed activities are closely related customers. If its customers desire, CSC will provide to banking and a proper incident thereto under section investment advice or execution services separately 4(c)(8) of the BHC Act, and that consummation of the and for individual fees. CSC's activities will be con- proposal would not result in a violation of the Glassducted throughout the United States from offices of Steagall Act. Accordingly, the Board has determined CSC initially located in New York City. to approve the application. Notice of the application, affording interested persons an opportunity to submit comments on the pro- I. Whether the Proposed Activity is Closely posal, has been duly published (50 Federal Register Related to Banking 43,790 (1985)). In response to its request for comments on this application, the Board received three written In its evaluation of the application, the Board must comments opposing the proposal, and 23 in favor of initially determine whether the proposed activity is so the proposal. Among the comments opposing the closely related to banking as to be a proper incident application were those of the Securities Industry Asso- thereto within the meaning of section 4(c)(8) of the ciation (the "SIA"), a national trade association of the BHC Act. Section 4(c)(8) imposes a two-step test for securities industry.3 determining the permissibility of nonbanking activities National Westminster Bank PLC ("NatWest Bank for bank holding companies: PLC"), with approximately $104.7 billion in total (1) whether the activity is closely related to bankconsolidated assets as of December 31, 1985, is the ing; and fourteenth largest banking organization in the world (2) whether the activity is a "proper incident" to and provides a full range of retail and wholesale banking—that is, whether the proposed activity can banking services worldwide. In the United States, reasonably be expected to produce benefits to the NatWest Bank PLC operates four representative of- public that outweigh possible adverse effects.4 fices, three nonbanking subsidiaries (engaged in factoring, commercial finance and raising funds), Based on guidelines established in the National branches in New York and Chicago, and an agency in Courier case, a particular activity may be found to San Francisco. NatWest Bank PLC also controls meet the "closely related to banking" test if it is Applicant NatWest Holdings, Inc., and its subsidiary demonstrated that banks generally have in fact provid- National Westminster Bank USA, N.A. ("Bank"), ed the proposed activity; that banks generally provide New York, New York, which holds total deposits of services that are operationally or functionally so simiapproximately $7 billion as of year-end 1985. lar to the proposed activity so as to equip them This application raises two principal questions: first, particularly well to provide the proposed activity; or whether CSC's proposed activities are so closely that banks generally provide services that are so related to banking as to be a proper incident thereto integrally related to the proposed activity as to require within the meaning of section 4(c)(8) of the BHC Act; their provision in a specialized form.5 However, the and second, whether the conduct of such activities by National Courier guidelines are not the exclusive basis a member bank affiliate (such as CSC) would violate for finding a close relationship between a proposed section 20 or 32 of the Glass-Steagall Act ("Act"), activity and banking.6 which generally require a separation between member banks and companies principally or primarily engaged A. Current Provisions of Regulation Y in the underwriting or public sale of securities. Upon The Board has determined that the activities of providing portfolio investment advice, furnishing general 3. The Investment Company Institute stated that it objected to the economic information and advice, and serving as an proposal on the grounds set forth in the SIA's protest. The third protestant, Option Advisory Service, Inc. ("OAS"), alleges that NatWest intends by the application to help raise funds for "greenmailing" schemes to be conducted by certain individuals to takeover various corporations, in violation of the securities laws, and has 4. See Board of Governors v. Investment Company Institute, 450 requested a hearing on this assertion. The Board has carefully U.S. 46 (1984) ("/C/ //"); National Courier Ass'n v. Board of reviewed the submissions of OAS and has determined that these Governors, 516 F.2d 1229 (D.C. Cir. 1975) ("National Courier"). allegations do not raise a genuine issue of material fact that would 5. National Courier, 516 F.2d at 1237. warrant a hearing. CSC would not engage in making loans to finance 6. The Board has stated that in acting on a request to engage in a corporate takeover attempts or in arranging financing for such pur- new nonbanking activity, it will consider any other factor that an poses. In addition, the Board finds no basis for OAS's assertion that applicant may advance to demonstrate a reasonable or close connec- Bank's financing of previous takeover attempts constitutes aiding and tion or relationship of the activity to banking. 49 Federal Register 794, abetting alleged violations of the securities laws connected with such 806 (1984); Securities Industry Ass'n v. Board of Governors, 104 S. Ct. attempts. Accordingly, OAS's request for a hearing is denied. 3003, 3006 n.5 (1984) ("Schwab"). 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586 Federal Reserve Bulletin • August 1986 investment advisor to a registered investment compa- tions of providing securities brokerage and investment ny, are permissible for bank holding companies. advisory services together.8 The restriction on dis- 12 C.F.R. § 225.25(b)(4)(iii), (iv), and (ii). In rejecting count brokerage thus was not based on a view that the a challenge to the Board's determination, the Supreme combination of the two services was necessarily in- Court stated that the "services of an investment consistent with section 4(c)(8) or with the Glassadvisor are not significantly different from the tradi- Steagall Act—instead, the restriction reflects the limittional fiduciary functions of banks," and that "banks ed nature of the activity proposed by the particular have engaged in that sort of activity [to manage the applicant in the Schwab case. investment portfolios of its advisees] for decades." As the Board noted when it adopted the discount ICIII, 450 U.S. at 55. broker regulation, bank holding companies providing The Board has also determined that securities bro- investment advisory services pursuant to Regulation kerage services, related securities credit activities, and Y, in contrast to full-service brokers, typically charge related incidental services are permissible for bank an explicit fee for such services and thus usually deal holding companies if the securities brokerage services with sophisticated customers with substantial amounts are conducted solely as agent for the account of of funds to invest. Although CSC proposes to charge customers and do not include securities underwriting, for both investment advice and securities execution dealing, or investment advisory or research services. services on a transaction-related basis, CSC would 12 C.F.R. § 225.25(b)(15). In its decision affirming the offer its services only to financially sophisticated insti- Board's approval of the acquisition by BankAmerica tutional customers.9 Thus, this proposal represents the Corporation of the discount broker, Charles Schwab & combination of two activities, previously determined Co., the Supreme Court found that: to be closely related to banking, in such a way that the functional nature and scope of the combined activities Banks long have arranged the purchase and sale of conducted would not be altered. The fact that CSC securities as an accommodation to their customers . . . would not generally charge an explicit fee for each of [and] in substance the brokerage services that Schwab the component services is a pricing consideration that performs for its customers are not significantly different from those that banks have been performing for custom- does not in the Board's view sufficiently alter the ers for years. operational characteristics of the combined services so that they lose their close functional connection to Schwab, 104 S.Ct. at 3008-3009. banking activities. On this basis, the Board concludes The SIA argues that NatWest has failed to demon- that CSC's proposed activities are closely related to strate that the offering of combined securities broker- banking. age and investment advice is closely related to banking under any permissible standard. The Board has, how- B. Functional Similarity to Services Banks ever, determined, upon a review of general banking Already Provide practices and the record developed in the course of its consideration of the application, including the com- Even if the joint offering of securities and investment ments of the SIA, that the combination of investment advice is viewed as a distinct new activity, the Board advice and securities brokerage services as proposed concludes that the record supports a finding that the by CSC is closely related to banking. combined activity is closely related to banking. Under As the Board noted in approving the Schwab pro- the second National Courier test, a proposed activity posal, Schwab was a "discount" broker. Unlike full- is closely related to banking if banks generally provide service brokers, Schwab did not offer investment services that are so functionally similar to the proadvice and its commissions were significantly lower posed activity as to equip bank holding companies than those typically charged by full-service brokers, particularly well to provide the proposed activity. which usually do provide investment advice.7 In pro- Currently, banks provide a variety of services that viding that the discount brokerage services permissi- equip them with the expertise to offer a combined ble under Regulation Y do not include investment investment advisory/securities execution service. advice or research services, the Board stated that such a restriction was appropriate because the regulation was intended to incorporate into Regulation Y the 8. 48 Federal Register 37,003, 37,005 (1983). The Board noted that Board's decision on the Schwab proposal. The Board the investment advice provided by full-service brokers tends to reach a wider segment of the public than the advisory services of companies noted that, during consideration of that proposal, no that offer only investment advice, and that full-service brokers usually record was developed on which to assess the implica- look to commissions for executing transactions as compensation for the investment advice provided. These factors are considered in the Board's discussion of the public benefits test below. 9. As noted above, Applicant has committed that separate fees will 7. BankAmerica Corporation/Charles Schwab & Co., Inc., 69 be charged for customers desiring to utilize separately investment FEDERAL RESERVE BULLETIN 105, 106 (1983) ("Schwab Order"). advisory and securities execution services. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 587 Banks currently provide both investment advice and as part of their permissible government securities securities execution services in separate departments underwriting and money market operations, banks buy or subsidiaries and for separate fees.10 In addition, and sell as agent for customers, and offer specific banks currently do combine, at least to some extent, investment advice with respect to, obligations of the their separate investment advisory and securities exe- United States, certain obligations of various States cution services. Bank trust departments, which pro- and municipalities, and certain money market instruvide a variety of investment advisory services, may in ments.14 Banks also combine investment advice and certain circumstances use an affiliated discount broker execution services with respect to futures contracts on to purchase or sell securities on behalf of the bank's a transaction-related fee basis.15 trust customers. Under guidelines issued by the Office In sum, by linking separate advisory and execution of the Comptroller of the Currency ("OCC"),11 banks functions in these specific situations, banks now promay effect securities transactions for trust accounts vide services that are very close in function to those through an affiliated discount broker, if the transac- proposed by CSC: making recommendations concerntions are performed on a non-profit basis. Under these ing the purchase or sale of securities or other financial guidelines, and similar Board staff guidelines,12 a bank instruments and then executing the customer's directrust department may use an affiliated broker to re- tions based on these recommendations. Accordingly, ceive extra fees for brokerage services where specific the Board believes that these existing activities of authority is given to effect transactions through the banks would equip bank holding companies particularaffiliate within the appropriate governing instrument, ly well to provide the securities execution and advisoor by local law, or where all beneficiaries authorize. In ry services proposed by CSC as a combined service, many respects, this linkage between the bank's trust and support a determination that the proposed actividepartment and discount brokerage operations closely ties are closely related to banking.16 resembles the full-service brokerage services proposed here.13 II. The Proposed Activity as a Proper Incident Finally, the record reflects that banks offer broker- to Banking age-like services for specific types of financial instruments, and at the same time provide general or specific With regard to the "proper incident" requirement, advice with respect to such instruments. For example, section 4(c)(8) of the BHC Act requires the Board to consider whether the performance of the activity by an affiliate of a holding company "can reasonably be 10. National banks may lawfully provide securities brokerage services, Securities Industry Ass'n v. Comptroller of the Currency, 577 F. Supp. 252 (D.D.C. 1983), affd, 758 F.2d 739 (D.C. Cir. 1985), cert, denied, 106 S. Ct. 790 (1986) ("Security Pacific"). The FDIC has indicated that state nonmember banks may provide these services. 14. Member banks are specifically authorized to conduct the under- See 48 Federal Register 22,989 (1983). The Securities and Exchange writing and dealing activities pursuant to sections 16 and 5 of the Commission has recently stated its belief that over 1,000 banks are Glass-Steagall Act. 12 U.S.C. §§ 24 Seventh and 335. The 36 banks publicly soliciting securities brokerage business, often in separate that are primary dealers in government securities routinely provide departments or subsidiaries. See 50 Federal Register 28,385, 28,386 investment advice to their customers concerning those securities. The (1985). As noted above, banks have traditionally provided investment investment advice in these instances is offered on a non-fee basis. advisory services, generally through their trust departments. Manufacturers Hanover Corporation, 70 FEDERAL RESERVE BULLE- 11. OCC, Trust Banking Circular No. 23 (Oct. 4, 1983). TIN 661, 662 (1984). 12. FRRS § 3-447.11 (Sept. 19, 1983). 15. National banks have been permitted to execute and clear 13. The OCC has also approved the more explicit linkage of futures contracts, for the account of customers, through their operaseparate investment advisory and securities brokerage operations tions subsidiaries that serve as futures commission merchants. J.P. subsidiaries of a national bank, allowing a national bank's investment Morgan & Co. Incorporated, 71 FEDERAL RESERVE BULLETIN 251 advisory subsidiary to refer its customers to the bank's brokerage (1985). The provision of futures advisory services by national banks is subsidiary. Decision of the Comptroller of the Currency Concerning also lawful. Manufacturers Hanover Corporation, 70 FEDERAL REan Application by American National Bank of Austin, Texas, to SERVE BULLETIN 369, 370 (1984). Commercial banks also engage in Establish an Operating Subsidiary to Provide Investment Advice providing foreign exchange advice and transaction services to their (Sept. 2, 1983), reprinted in [1983-1984 Transfer Binder] Fed. Banking customers. See Hong Kong and Shanghai Banking Corporation, L. Rep. (CCH) 1199,732 ("American National"). The advisory activi- et al., 69 FEDERAL RESERVE BULLETIN 221 (1983). ties approved in the American National decision included the provi- 16. The SIA argues that the combined activity is not closely related sion of individualized investment advice to various bank clients, the to banking because services provided by bank trust departments differ exercise of discretionary trading authority, and the distribution of significantly from those proposed here. The SIA asserts in particular investment recommendations and analyses of economic trends in a that bank trust departments may not utilize affiliated brokers to buy newsletter. The two subsidiaries would not share employees, office and sell securities for customers. However, as noted earlier, neither space or telephones, but would share a common name and address. In the OCC nor the Board completely precludes a bank trust department addition, the two would refer customers to each other, and the from the use of affiliated brokers. Moreover, even if banks may not advisor's newsletter would be marketed to brokerage customers. The engage in a particular activity, the activity may nevertheless be subsidiaries would not share fees or receive fees for referring custom- closely related to banking. Under the framework set forth in the BHC ers to the other. The legality of this ruling has been challenged in Act, nonbank affiliates of banks are allowed greater latitude in the Securities Industry Ass'n v. Conover, No. 83-3581 (D.D.C. filed conduct of nonbanking activities than are banks themselves. In ICIII, Nov. 30, 1983). This lawsuit has been stayed pending the outcome of a the Supreme Court expressly stated that under the BHC Act (as well lawsuit which is currently before the Supreme Court on the issue of as the Glass-Steagall Act) a bank affiliate may engage in activities that whether discount brokerage offices are bank branches. would be impermissible for the bank itself. 450 U.S. at 63-64. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
588 Federal Reserve Bulletin • August 1986 expected to produce benefits to the public, such as the fortunes of a nonbank subsidiary of its holding greater convenience, increased competition, or gains company, since the securities markets, the general in efficiency that outweigh possible adverse effects, public, and the holding company itself typically look such as undue concentration of resources, decreased upon the bank and its affiliate as part of a consolidated or unfair competition, conflicts of interests, or un- organization. The Board has also recognized, howevsound banking practices." As discussed below, the er, that conducting nonbanking activities in a separate Board finds that on balance consummation of this affiliate can to some extent prevent problems associatproposal can reasonably be expected to result in public ed with the nonbanking activity from affecting the benefits outweighing possible adverse effects. bank. The Board regards as a significant factor in its approval of this proposal Applicant's commitment that A. Public Benefits it will maintain a functional and corporate separation between CSC and other NatWest affiliates. In the Board's view, the proposal will result in some In particular, Applicant has stated that CSC will be public benefits. CSC will enter the brokerage market maintained, and will hold itself out to the public, as a as a de novo competitor. Although the full-service separate and distinct corporate entity with its own brokerage industry is competitive and there are no name, properties, assets, liabilities, books and recsignificant barriers to entry into the market, the entry ords. Except for the provision of investment advice of a new competitor into the field should provide some and execution services directly to other NatWest increased competition.17 In addition, the ability to affiliates (as a permissible servicing activity under obtain both investment advice and the execution of section 225.22(a) of Regulation Y), NatWest also has securities transactions at the same location will result stated that CSC will conduct its business separate in increased efficiencies for CSC through the sharing from the other NatWest affiliates, and its agreements of facilities, equipment and personnel. with customers will indicate that CSC is solely responsible for its contractual obligations and commitments. B. Adverse Effects All of CSC's notices, tickets, advice, confirmations, correspondence and similar documentation will be The SIA argues that this proposal would lead to such clearly imprinted so as to avoid confusion on the part significant adverse effects that denial of the application of institutional customers or others between CSC's is required. Applicant argues that the limitation of the business and that of any other entity. In addition, proposed services to institutional customers, its series CSC's offices will either be separate from those of of commitments regarding the conduct of the proposed other NatWest affiliates or, in the case of offices activities, as well as existing statutes and regulations established in a building in which another NatWest regulating these activities, all guard against adverse affiliate also has offices, in areas separate from areas effects such as possible conflicts of interest. The utilized by such affiliate. Board, having considered the facts of record and the Applicant also has committed that no officer of CSC allegations of all of the parties, finds that the proposal will serve as an officer either of its overseas parent is not likely to result in any significant adverse effects. NatWest Bank PLC, Bank, or of any subsidiary of Bank.18 Moreover, no director of CSC will also be a 1. Unsound Banking Practices director of NatWest Bank PLC, Bank, or any of Bank's subsidiaries.19 Damage to Bank Reputation. The SIA contends that In addition, CSC's corporate name would be differdepositors might lose confidence in Bank if invest- ent from that of Bank and its parent bank holding ments made on the recommendation of its affiliate companies. CSC's name does, however, reflect its CSC do poorly. Based on the record, the Board finds affiliation with an overseas merchant bank, County no substantial basis for this contention. Bank, U.K. Since CSC expects to deal largely with The Board has long held the view that, as a practical U.S. customers, this current similarity in name does matter, a bank cannot be completely insulated from not appear significant for purposes of an association in the public's mind between CSC and its U.S. bank affiliate. 17. See Independent Ins. Agents of America v. Board of Governors, 736 F.2d 468,474 (8th Cir. 1984) ("[T]he mere fact of new entrfy] into the field is indicative of some degree of increased competition"). See also United City Corporation, 71 FEDERAL RESERVE BULLETIN 18. In addition, no officer of CSC engaged in providing investment 662, 663 (1985); 12 C.F.R. § 225.24 ("Unless the record demonstrates advisory or brokerage services will also provide such services on otherwise, the commencement or expansion of a nonbanking activity behalf of any other NatWest affiliate. de novo is presumed to result in benefits to the public through 19. It is anticipated, however, that certain directors of CSC may increased competition"). also be directors of other subsidiaries of NatWest Bank PLC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 589 Although it is possible that a particular customer of would be conducted only as agent, the lack of any CSC may withdraw funds from Bank on the basis that evidence that depositor confidence would be impaired, the investment advice provided by CSC was not to the as well as the other factors of record, the Board customer's liking, this possibility does not, in the believes that the public association between Board's judgment, constitute a significant adverse NatWest's bank subsidiaries and its securities affiliate effect. First, existing bank investment advisory affili- will be "prevented] to a large extent" and will not ates (and banks themselves in investing trust assets or pose an undue risk to the NatWest holding company acting in another traditional advisory capacity) are system, its banking and nonbanking subsidiaries, or to already subject to this potential loss of depositor the soundness of the banking system generally. confidence. No evidence has been presented indicat- Lack of Impartial Credit. The SIA also alleges that ing that public confidence in banks has been seriously NatWest's banks might be tempted to make imprudent impaired because of the provision of investment ad- loans to corporations in which CSC's customers had vice either directly by the bank or through an affiliate. invested at its recommendation, presumably in order In addition, the institutional customers to be served by to boost the market value of the stock and thereby CSC would be financially sophisticated and thus increase CSC's brokerage commissions, attract new would be less likely to place undue reliance on the customers, or preserve corporate good name and advice received. Furthermore, neither CSC nor Bank reputation. However, it would not be rational for a would purchase specific investments with their own bank to risk making unsound loans solely to obtain a funds, so that should investments recommended by comparatively insignificant increment in revenues for CSC prove unsuccessful, the public and depositors a brokerage affiliate from new brokerage and investshould understand that the banking organization itself ment advisory customers. In addition, the likelihood would not suffer serious financial losses. of damage to corporate good name as a result of In addition, Applicant's commitment not to permit imprudent lending dwarfs any gain in income, or the the exchange of confidential information (including benefit of maintaining existing customers, arising from customer and depositor lists and information regarding such imprudent practices. extensions of credit by any NatWest affiliate) between In addition, NatWest has committed that CSC will CSC and its affiliates further limits the potential that not transmit its advisory research or recommendations depositors of NatWest's affiliated bank might be solic- to the commercial lending department of any NatWest ited by CSC for their business, and would further affiliate, so that those responsible for making credit mitigate the potential for loss of depositor confidence. decisions on commercial loans would not routinely be In any event, both the Board and the Supreme Court aware of which particular securities CSC has recomhave recognized that the public association between mended. The Board also notes that, as is the case with bank and nonbank subsidiaries of the same parent many of the potential abuses cited by the SIA, any bank holding company cannot be completely eliminat- banking organization that provides investment advice ed, but as well that this factor does not represent is subject to the same possible risk of impairment of grounds for denial of a proposal. Here, both Applicant impartial lending practices. However, no showing has and the Board have adopted certain restrictions on the been made that unsound lending practices have been conduct of the proposed activity in order to mitigate attributable to the provision of investment advisory such a public association. The Supreme Court, in its services.20 ICI II decision, specifically relied on the Board's Shore Up Failing Securities Affiliate. Another poimposition of similar restrictions on the relations be- tential unsound banking practice that is cited as arising tween a bank holding company investment advisor and from the affiliation of a banking organization with a its affiliates in approving a Board regulation permitting securities firm is the prospect of unwarranted extenbank holding companies to act as investment advisors sions of credit by a bank to shore up its securities to closed-end investment companies. The Court stated affiliate if the affiliate encountered financial difficulthat: ties.21 These restrictions would prevent to a large extent the association in the public mind between the bank and the investment company, as well as the resulting connection 20. Nor is it realistic to expect that Bank would make unsound loans to enable CSC's customers to purchase securities recommended between public confidence in the bank and the fortunes by CSC. CSC will not refer its customers who seek to purchase of the investment company. securities on credit to any affiliated bank. Nor will any bank affiliated with CSC have any established program for extending credit for the 450 U.S. at 67 n.39 (emphasis added). In view of the purchase of securities by customers of CSC. Instead, CSC itself would extend margin credit, as provided for in Regulation Y. provisions for corporate separateness proposed by 21. See Investment Company Institute v. Camp, 401 U.S. 617, 631 Applicant, the fact that brokerage transactions by CSC (1971) ("/C/ /"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
590 Federal Reserve Bulletin • August 1986 However, CSC will not be acting as a principal to compliance with these commitments, conditions, and any extent or engaging in speculative ventures. Since regulatory provisions.26 its own funds will not be at risk in any transaction, Moreover, the Board believes that the possibility of significant losses by CSC as a result of its securities biased investment advice represents a potential abuse transactions are not likely. In addition, loans from that conceivably could occur any time a bank holding NatWest's affiliated bank to CSC would be restricted company provides investment advice alone, regardless by the lending limitations of section 23A of the Federal of whether brokerage services would also be provided. Reserve Act.22 None of the commenters has identified any evidence that bank holding companies providing investment 2. Conflicts of Interest advice under the existing regulatory provisions have improperly made investment recommendations in or- Provision of Biased Investment Advice. The SIA al- der to benefit the commercial lending operations of leges that adding an advisory service to a brokerage affiliated banks. On balance, the Board finds that the operation could give CSC opportunities to recommend addition of brokerage to a holding company's investto its customers the purchase or sale of securities of ment advisory services does not appear to increase the issuers to which its bank affiliates had extended credit, likelihood of this kind of abuse. especially where the proceeds of the securities would Churning and Unsuitability. As noted above, fullbe used to repay loans to the bank affiliates. However, service brokers do not usually charge an explicit fee to a large extent, CSC's investment advice is likely to for investment advice. Thus, these brokers look to relate to securities traded in the secondary market, commissions from buying and selling securities for i.e., securities that have already been issued and are customers as compensation for advisory services.27 It now held by the public. Even if CSC were to recom- has been recognized that in the case of nonbank fullmend newly issued securities, the federal securities service brokers, the joint pricing of investment advisolaws would require public disclosure of the expected ry and securities execution services might provide an use of the proceeds of the issue.23 incentive for the broker to give biased advice designed In addition, Nat West has committed to create a to generate increased trades and thus increase its "Chinese Wall" between its bank and its securities commissions, i.e., "churning", or for the broker to affiliate—similar to those walls created by banks with make recommendations unsuitable for particular cusregard to the provision of trust services.24 Thus, CSC tomers.28 CSC, however, like a full-service broker not personnel will not be given customer lists and other affiliated with a bank, would be a registered brokerconfidential information obtained by CSC's affiliates dealer under the Securities Exchange Act, would also in connection with their commercial banking opera- be registered under the Investment Advisors Act, and tions. This limitation would minimize the possibility would be a member of the National Association of that CSC employees would be aware of potential Securities Dealers. CSC, therefore, would be subject benefit to affiliated banks as a result of CSC's recom- to the antifraud provisions of the Securities Exchange mendations. Moreover, since CSC's customers will be Act of 1934, as well as the general antifraud provisions financially sophisticated institutions or individuals, in applicable regulations, which have been interpreted they should be better able to detect investment advice as prohibiting the churning of customer accounts and that is motivated by self-interest. the recommending of securities that are not suitable The Board notes that in reviewing an application for particular customers.29 under section 4(c)(8) of the BHC Act, the Board is In addition, the Board believes that other factors entitled to rely on an applicant's commitments, the associated with this particular application further asimposition of conditions, or on statutory and regula- sure that this kind of tainted advice would not result tory provisions in concluding that adverse effects will not occur.25 The Board has ample authority to enforce affiliate is a counter-party {e.g., where CSC would purchase securities desired by a customer from its affiliate's inventory), NatWest has 22. 12 U.S.C. § 371c. committed that CSC will disclose this fact to its customer and obtain 23. See, e.g., 15 U.S.C. § 77aa(13). the customer's specific consent for the transaction. 24. See, e.g., FRRS § 3-1550 (March 17, 1978). 26. 12 U.S.C. § 1818(b)-(l), 1847(b). 25. Independent Ins. Agents of America v. Board of Governors, 646 27. See 47 Federal Register 37,005 (1983). F.2d 868, 869-870 (4th Cir. 1981); Alabama Ass'n of Ins. Agents v. 28. Brokerage fees are usually charged for each transaction execut- Board of Governors, 533 F.2d 224, 250 n.25 (5th Cir. 1976), modified ed—the higher the volume of transactions, the greater the amount of on other grounds, 558 F.2d 729 (5th Cir. 1977), cert, denied, 435 U.S. brokerage income. 904 (1978). The Board notes that Nat West engages in extensive 29. See 15 U.S.C. § 78k and 17 C.F.R. § 240.15cl-2(a), respectivemerchant banking activities outside of the United States, including ly. Section 206 of the Investment Advisors Act (15 U.S.C. § 80b-6), acting as a dealer in securities. However, Nat West has committed that its antifraud provision, also would prohibit such practices. Since CSC the securities operations of its overseas affiliates will be limited to at times would provide investment advice for a separate fee, CSC transactions that do not constitute dealing in securities in the United would not be eligible for the exemption from the Advisors Act for States. Moreover, in any transaction by CSC in which a NatWest registered broker-dealers. See id., § 80b-2(a)(ll). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 591 from this proposal, although the Board does not rely that outweigh possible adverse effects. The Board solely on such factors. Applicant's commitment to therefore finds that the proposal satisfies the proper limit its services only to institutional customers makes incident test under section 4(c)(8) of the BHC Act. it less likely that CSC would be able to churn accounts or make unsuitable recommendations, since these III. Glass-Steagall Act Considerations financially sophisticated customers are likely to be aware of many alternative sources of advisory and In its evaluation of the application, the Board has also brokerage services and to have the resources to com- considered whether CSC's acquisition by Applicant pare performance and prices. In addition, CSC will not would result in a violation of the Glass-Steagall Act, have investment discretion over any customer ac- the popular term for provisions of the Banking Act of counts. In every case, CSC's customers will decide 1933, which is designed to insulate commercial bankwhether a particular purchase or sale transaction will ing from certain aspects of the securities business. The be undertaken. Glass-Steagall Act provisions at issue in this proposal Moreover, CSC will not require its customers to use are: section 20 (12 U.S.C. § 377), which prohibits the both its investment advisory and securities brokerage affiliation of any bank that is a member of the Federal services, and will charge a separate fee for those Reserve System with any corporation or similar orgacustomers desiring only investment advice or agency nization that is "engaged principally in the issue, executions. In this regard, the Board has indicated in flotation, underwriting, public sale, or distribution" of an analogous context that, "charging a separate fee for securities; and section 32 (12 U.S.C. § 78), which advice reduces the possibility for churning because it prohibits an officer, director or employee interlock reduces the incentive to recommend additional trades between a member bank and a company "primarily to generate fees."30 engaged" in such activities. Finally, in designating portfolio investment advice As a result of this proposal, CSC would become as closely related to banking, section 225.25(b)(4) of affiliated for purposes of section 20 with Bank, a Regulation Y states that in furnishing such services, member bank,32 and would by any measure be enbank holding companies and their subsidiaries "shall gaged principally in the full-service brokerage busiobserve the standards of care and conduct applicable ness. Thus, if CSC's proposed brokerage activities to fiduciaries." Such fiduciary standards would also constitute "the issue, flotation, underwriting, public prohibit the churning of accounts and other self- sale, or distribution" of securities, the proposal would interested practices. CSC must abide by the fiduciary result in a violation of section 20. responsibilities imposed on investment advisors by The SIA argues that the combination of investment that section in conducting its proposed services.31 advice with buying and selling securities on behalf of customers constitutes the "public sale" of securities. 3. Undue Concentration of Resources/Unfair SIA also contends that the combination gives rise to Competition the "subtle hazards" the Glass-Steagall Act was meant to eliminate, such as damage to the bank's In the Board's view, the entry of NatWest into the full- reputation and its position as an impartial provider of service securities brokerage market to serve institu- credit.33 tional customers would not result in an undue concen- For the reasons noted herein, and on the basis of the tration of resources or unfair competition. Since CSC facts appearing in the record, the Board concludes that would be a de novo entrant into a highly competitive the combination of investment advice and execution field, this proposal is not likely to produce undue services as proposed here does not constitute a "pubconcentration of resources. In addition, the Board lic sale" of securities for purposes of section 20 or 32 finds no evidence in the record indicating that this of the Glass-Steagall Act and that the proposal is proposal would result in any unfair or decreased consistent with the intent of that Act. competition. In sum, based upon a consideration of all the relevant facts, the Board concludes that this proposal may reasonably be expected to result in public benefits 32. CSC and Bank would also have some common employees for purposes of section 32. The Board's analysis of whether brokerage activities are covered by section 20 of the Act is equally applicable to 30. Manufacturers Hanover Corporation, 70 FEDERAL RESERVE section 32 because, as the Supreme Court indicated in its Schwab BULLETIN 369 (1984) (futures commission merchant activities). decision, "sections 20 and 32 contain identical language, were enacted 31. To the extent that CSC's full-service brokerage functions are for similar purposes, and are part of the same statute." 104 S. Ct. at viewed as a new nonbanking activity that is not technically subject to 3010. the fiduciary obligations imposed by the terms of section 225.25(b)(4), 33. It is undisputed that NatWest's proposed activity does not the Board conditions its approval of the proposal on CSC's obser- constitute the "issue, flotation, underwriting ... or distribution" of vance of the standards of care and conduct applicable to fiduciaries. securities for purposes of sections 20 and 32. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
592 Federal Reserve Bulletin • August 1986 A. The Public Sale of Securities Under Indeed, the Supreme Court has concluded that the Sections 20 and 32 provision of investment advice to an investment company does not violate the Glass-Steagall Act, even if In its decision affirming the Board's approval of the performed by a bank, provided that the bank does not acquisition by BankAmerica Corporation of Charles underwrite any issue of securities or purchase any Schwab & Co., the Supreme Court characterized the securities of the investment company. ICIII, 450 U.S. term "public sale" in section 20 as not applying to a at 62-63. The combination of similar investment advisdiscount broker—a firm that buys and sells securities ory activities, as proposed here, with securities execusolely for the account of and at the direction of tion services clearly not proscribed by section 20 or customers, but that does not provide investment ad- 32, does not convert the components into the kind of vice. The Court stated that "public sale" should be principal or distribution activity covered under section interpreted by reference to the activities described by 20 or 32.38 the terms surrounding it in section 20 — the "issue, The Board's conclusion that CSC's proposed activiflotation, underwriting, and distribution" of securi- ties do not constitute the "public sale" of securities ties.34 The Court further stated that the terms used in for purposes of sections 20 and 32 is consistent with conjunction with public sale refer to activities in which the legislative history of the Act, which reveals that a bank affiliate acts for its own account or where new the focus of Congressional concern was the underwritissues of securities are distributed to the public on ing, dealing and stock speculation activities that were behalf of an issuer.35 On this basis, the Court conclud- then conducted by banks and their securities affilied that the retail brokerage business at issue in that ates.39 There is no indication in the legislative history case did not involve these activities.36 that Congress intended to prohibit the kind of broker- Since the broker in that case did not provide invest- age activities proposed for CSC, where no position is ment advice, the Schwab decision did not reach the taken in the securities traded or where there is no issue of whether a broker, like CSC, that would also distribution of securities to the public on behalf of an provide investment advice would be engaged in the issuer.40 "public sale" of securities. However, in the Board's The SIA contends that the proposed activities are view, the addition of investment advice to securities contrary to the purposes of the Glass-Steagall Act execution services as proposed by CSC would not which, it argues, was meant to take every remedial render the combined activity the "public sale" of step within Congress' constitutional power to divorce securities. In providing investment advice in connec- the banking industry from the securities business. tion with the execution of securities transactions, CSC However, it is clear from the terms of the Act itself would act solely as agent for its customers and would that Congress did not intend to erect a complete not act as a principal (i.e., with its own funds) in barrier between banking organizations and the conbuying and selling securities. CSC would not, like duct of all securities activities. Under section 20, for many securities firms, make a market in securities with its own funds. Nor would CSC offer securities to the public as agent for the issuer of securities.37 Thus, CSC's full-service brokerage services would not in- 38. The SIA argues that CSC would be involved in the "public volve any of the factors used by the Supreme Court in sale" of securities within the ordinary meaning of the term, because in describing the term public sale in section 20. brokering securities that it recommends CSC "touts" or "promotes" specific securities. Such a construction is fundamentally inconsistent with the Supreme Court's interpretation of the term "public sale" in the Schwab decision as explained above. Moreover, if the SIA's construction were the correct meaning of the term public sale, then any time a banking organization provided investment advice it would be engaged in the proscribed securities business, since in making investment recommendations an advisor can be viewed as "promot- 34. Schwab, 104 S. Ct. at 3010. ing" specific securities in a general sense. 35. Id., at 3010 & n. 17. The Court noted that the process by which large blocks of securities are offered to the public by an investment 39. As the Supreme Court stated in ICI II: banker acting solely as the agent of the issuer is not technically underwriting, but left open the question of whether this "best efforts" The legislative history reveals that securities firms affiliated with banks had engaged in perilous underwriting operations, stock speculation, and maintaining a underwriting is covered by the Act, since the brokerage business at market for the bank's own stock, often with bank resources. Congress sought to issue in Schwab did not involve this kind of distribution plan. Id. separate national banks, as completely as possible, from affiliates engaged in such 36. Id. While both the Supreme Court and the Board described the activities. activities involved in Schwab as executing transactions on the "unsolicited" order of customers, nothing in the analysis of the Court or the 450 U.S. at 61-62. Board suggests that lack of solicitation is a decisive factor in determin- 40. During congressional consideration of the Glass-Steagall legising whether a particular activity is covered by the language of section lation, the scope of permissible bank brokerage activity was not 20. discussed in detail. The relevant legislative history merely states that 37. NatWest has stated that CSC will have no association with a national banks would be permitted to buy and sell securities for their particular issuer and no financial interest in the placement of a customers to the same extent as heretofore. S. Rep. No. 77, 73rd particular offering. Cong. 1st Sess. 16 (1933). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 593 example, certain types of securities activities, such as firms,45 such as Bache and Co. and Harris, Upham & underwriting, are proscribed to bank affiliates only if Co., the latter as late as 1962.46 Indeed, in the Board's the affiliate is "engaged principally" in that activity; in administrative action under section 32 of the Glasssection 32, an interlock between a bank and a firm Steagall Act at issue in Board of Governors v. Agengaged in the same activities is proscribed only where new,47 the Board excluded brokerage activities in the affiliate is "primarily engaged" in these activities. determining whether the securities firm involved in Similarly, the underwriting of a wide range of govern- that case was primarily engaged in underwriting or the ment securities is expressly authorized to member public sale of securities. The Supreme Court's decibanks under section 16 of the Glass-Steagall Act.41 sion upholding the Board's conclusion that the firm was primarily engaged under section 32 left undis- B. Banking Practices and Securities Brokerage turbed the Board's exclusion of brokerage from the After Glass-Steagall securities activities described in section 32.48 The Board also notes that immediately after the The conclusion that CSC's activities do not involve enactment of Glass-Steagall prominent private banks, the "public sale" of securities is consistent with the which were a chief target of the Act,49 apparently Board's longstanding position that full-service broker- believed that full-service brokerage did not constitute age activities do not fall within the scope of "public "issuing, underwriting, selling, or distributing" under sale" as used in section 32 of the Glass-Steagall Act. section 21 of that Act (12 U.S.C. § 378), and on this In 1934, the Board interpreted the interlock prohibi- basis continued to provide full-service brokerage.50 tions of section 32 as not covering agency brokerage Given that section 21 is part of the same statute as activities,42 and in 1936 incorporated this position into section 20, was enacted for the same purpose, and that its regulation implementing the provisions of section the two sections have similar language, the apparent 32, Regulation R.43 In particular, Regulation R provid- industry understanding that full-service brokerage is ed that a "broker who is engaged solely in executing not the impermissible "selling" of securities for purorders for the purchase and sale of securities on behalf poses of section 21 further supports the conclusion of others in the open market is not engaged in the business referred to in section 32." This provision has never been altered. In Schwab, the Supreme Court expressly relied on this administrative interpretation, finding that the interpretation should apply as well to the terms of section 20, and that the interpretation is consistent with both the plain language and legislative 45. See Letter from Merritt Sherman, Secretary of the Board, to intent of the statute.44 Howard D. Crosse, Vice President, Federal Reserve Bank of New York (May 7, 1962) (Harris, Upham determination); Letter from S. R. Under this interpretation, a broker that combines Carpenter, Secretary of the Board, to R. B. Wiltsee, Vice President, Federal Reserve Bank of New York (June 13, 1954) (Bache and Co. investment advice with buying and selling securities determination). on behalf of customers similarly is not engaged in the 46. It is clear that these organizations conducted "full-service" public sale of securities. On the basis of this interpreta- brokerage activities, because discount brokerage did not emerge until after May 1, 1975, when fixed brokerage rates were eliminated, and tion, the Board has allowed numerous interlocks be- securities firms in response "unbundled" their services to provide tween member banks and full-service brokerage investment advice and securities execution services separately. In addition, a 1936 study by the Securities and Exchange Commission regarding broker-dealers indicated that many commission brokers at that time discussed market conditions and furnished specific investment advice to their customers. Securities and Exchange Commission, Report on the Feasibility and Advisability of the Complete Segregation of the Functions of Dealer and Broker at 3 (June 20, 1936). 41. The SIA's reliance on passing references in the legislative 47. 329 U.S. 441 (1947). history to "brokerage houses" and "commissions" for securities 48. On judicial review, the member bank directors affected argued activities is misplaced. These references do not show any intent to that the securities firm was primarily engaged in the brokerage prohibit brokerage activities per se, but clearly were meant to describe business, because that business generated its largest source of revesecurities firms generally. In the 1930s brokerage houses, in addition nue, and that the company, a fortiori, could not be primarily engaged to providing brokerage services, also typically acted as principals in in any activity described in section 32. If the Court or the Board had dealing in and underwriting securities. These operations are among believed that brokerage fell within the ambit of section 32, the the activities proscribed by section 20. See Board of Governors v. combined underwriting and brokerage income would have been so Agnew, 329 U.S. 441, 445-46 (1947). In addition, the references in the great (constituting well over 50 percent of the firm's business) that legislative history pointed out by the SIA, where concern is expressed there would have been no "primarily engaged" issue to decide. that the perceived integrity of a bank securities affiliate may have 49. See e.g., Stock Exchange Practices: Hearings Before the induced the public to purchase particular securities, described circum- Senate Committee on Banking and Currency on S. Res. 64 and S. Res. stances in which the affiliate was functioning as an underwriter, not as 56, 73rd Cong., 2d Sess. 3975-3981 (1933) (Testimony of Winthrop W. a broker. Aldrich, President, Chase National Bank). 42. 20 FEDERAL RESERVE BULLETIN 393 (1934). 50. 138 Commercial and Financial Chronicle 3869, at col. 1 (June 9, 43. 12 C.F.R.§ 218.1, n.l. 1934) (Brown Brothers Harriman and Co.); N.Y. Times, June 9, 1934, 44. Schwab, 104 S. Ct. at 3010-11. at 21, col. 3 (J.P. Morgan and Co.). 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594 Federal Reserve Bulletin • August 1986 that full-service brokerage does not constitute the Congress identified with the combination of commerpublic sale of securities for purposes of section 20.51 cial banking and the securities business, and that The Board recognizes that, to a great extent, these Congress sought to avoid through enacting the Glassinterlocks between banks and brokerage firms and the Steagall Act.55 offering of brokerage services by private banks have At the outset, the Board notes that in its decisions been discontinued. However, the Board believes the under the Glass-Steagall Act, the Supreme Court has fact that banks (and bank holding companies) are not not relied on the possibility of "subtle hazards" as currently providing full-service brokerage activities determinative of the legality of a particular activity, does not reflect any common understanding that such where the activity is permissible under the literal terms activities are prohibited by the Act. As explained of the statute. The Court has examined the potential above, some private banks did continue full-service for subtle hazards in order to confirm that the literal brokerage after the effective date of the Glass-Steagall interpretation of the statute is correct or to shed light Act. In any event, the abandonment of these services on possibly ambiguous statutory language.56 Here, as may have been caused by a variety of factors.52 demonstrated by a contemporaneous and unchanged Accordingly, the failure of banks and bank holding administrative interpretation that has been confirmed companies to engage in brokerage activities until re- by the Supreme Court in the Schwab opinion, fullcently is not determinative of the lawfulness of these service brokerage does not fall within the literal terms activities under the Act. For example, the courts have of "public sale" or the other securities functions recently upheld the offering of discount brokerage described in sections 20 and 32 of the Act. services by bank affiliates and by banks directly, even Moreover, after reviewing CSC's proposed activithough banking organizations had not provided such ties in light of the hazards the Glass-Steagall Act was services before.53 enacted to eliminate, the Board finds that the potential that such hazards will occur as a result of the proposal C. The Subtle Hazards Implicated by does not cast doubt on the correctness of the long- Glass-Steagall standing interpretation that full-service brokerage is not covered by the terms of sections 20 and 32. Like The SIA also argues that regardless of whether such the broker involved in Schwab, CSC will act solely as brokerage or investment advisory activities are per- agent and its assets would not be "subject to the missible separately, the combination of securities exe- vagaries of the securities markets."57 The Board also cution services and investment advice raises the po- notes that virtually all of the potential hazards cited by tential for the creation of those subtle hazards54 that the SIA as resulting from the proposal (such as possible damage to the reputation of the affiliated bank due 51. The SIA also contends that full-service brokerage is commonly to poor performance of recommended investments, understood to be unlawful for banks under the Glass-Steagall Act, possible touting of securities issued by borrowers to citing section 16 of the Act and an interpretation of section 21 by the FDIC's General Counsel. Section 16 (12 U.S.C. § 24 Seventh) provides that a national bank's business of dealing in securities shall be limited to purchasing and selling securities "without recourse, solely upon the order and for the account of customers" and not for the Because the bank and its affiliate would be closely associated in the public mind, bank's own account. It is not clear that section 16 prohibits for public confidence in the bank might be impaired if the affiliate performed poorly. member banks the types of activities at issue here, since under CSC's Further, depositors of the bank might lose money on investments purchased in proposal the customer must direct each trade executed by the broker, reliance on the relationship between the bank and its affiliate. The pressure on even when CSC recommends the transaction. banks to prevent this loss of public confidence could induce the bank to make Moreover, even if the SIA is correct that banks may not provide unsound loans to the affiliate or to companies in whose stock the affiliate has full-service brokerage directly, this conclusion does not mean that an invested. Moreover, the association between the commercial and investment bank could result in the commercial bank's reputation for prudence and restraint affiliate would be so prohibited under section 20. The Glass-Steagall being attributed, without justification, to an enterprise seliing stocks and securi- Act prescribes different limitations on member banks than it does on ties. Futhermore, promotional considerations might induce banks to make loans their affiliates, allowing, as the Supreme Court has stated, a broader to customers to be used for the purchase of stocks and might impair the ability of spectrum of activity for affiliates. ICIII, 450 U.S. at 63-64. the commercial banker to render disinterested advice. 52. The Comptroller of the Currency effectively limited the conduct of such activities by national banks when, for over 20 years, he gave 450 U.S. at 66 n. 38. section 16 of the Act (which applies to direct securities activities of 55. The SIA specifically cites: banks) a restrictive reading, confining such activities solely to an (1) the loss of confidence in banks if investments made on the (originally no-cost) "accommodation service" for customers. These recommendation of their affiliates went bad; limitations have now been rejected as inconsistent with the statute. (2) NatWest's " 'pecuniary incentive' in promoting the sale of a See Security Pacific, supra. Further, it was only in the late 1960s that particular security" for a transaction-related fee will provide the large banks formed bank holding companies to engage in nonbanking potential for biased investment advice; activities. In addition, commenters have noted that banks traditionally (3) the touting of securities issued by corporate borrowers in had not considered the brokerage market very profitable, and banks order to pay off pre-existing loans to its bank affiliates; and could have declined to enter the market on that basis. See Note, (4) unwarranted extensions of credit to corporations whose secu- National Banks and the Brokerage Business: The Comptroller's New rities have been recommended. Reading of Glass-Steagall Act, 69 Va. L. Rev. 1303 (1983). 56. See ICI I, 401 U.S. at 629-38; ICI II, 450 U.S. at 66-67; 53. Schwab, supra; Security Pacific, supra. Securities Industry Ass'n v. Board of Governors, 104 S. Ct. 2979, 54. ICI I, 401 U.S. at 638, ICI II, 450 U.S. at 63. The Supreme 2989-91 (1984) ("Bankers Trust"); Schwab, 104 S. Ct. at 3011. Court in ICI II summarized these subtle hazards as follows: 57. See 104 S. Ct. at 3011. 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Legal Developments 595 pay off loans from an affiliated bank, and possible In making its judgment about the lack of significant unsound loans to issuers whose securities have been hazards associated with this proposal, the Board has recommended), are equally as likely to occur when a relied on various commitments entered into by banking organization provides investment advice NatWest limiting the scope of the proposed operaalone. The fact that provision of investment advice is tions, and has imposed certain conditions on the not unlawful under the Act indicates that the hazards conduct of the proposed activity. The Board believes cited by the SIA were not considered to be of such that its reliance on the commitments and conditions significant concern as to require a legal prohibition. In does not constitute the kind of regulatory approach the addition, as noted above, no evidence has been cited Supreme Court has disfavored in constructions of the that those investment advisory services, conducted Glass-Steagall Act.58 The Supreme Court has explicitunder the framework established by the Board, have ly recognized that where a particular activity is perproduced any conflicts of interests or other hazards. missible under the terms of the Act, the Board may In any event, each of the potential hazards advanced impose restrictions designed to assure that the activity by the SIA has been thoroughly considered in connec- is insulated from the subtle hazards associated with tion with the Board's analysis of this proposal under investment banking.59 ICI II, 450 U.S. at 62, 66-67 section 4(c)(8) of the BHC Act. As explained in the n.39. The commitments of Applicant and the reasons Board's section 4(c)(8) analysis, CSC's affiliation with for them are discussed above in connection with the a member bank, as structured by Applicant, will not consideration of the section 4(c)(8) factors.60 produce such significant potential hazards so as to undermine the longstanding administrative interpreta- IV. Conclusion tion that investment advice and brokerage are not covered by sections 20 and 32 and are consistent with Based upon the foregoing and other considerations the congressional intent reflected in the Act. For reflected in the record, the Board has determined that example, there is no significant potential for loss of the public benefits associated with consummation of confidence in an affiliate bank as a result of this this proposal can reasonably be expected to outweigh proposal, given the strict operational separation pro- possible adverse effects, and that the balance of the posed between CSC and other NatWest affiliates, the public interest factors that the Board is required to fact that the public and bank depositors should under- consider under section 4(c)(8) of the BHC Act is stand that CSC would not commit its own funds to any favorable. Accordingly, the application is hereby apspecific investments, and that depositor lists would proved, subject to the commitments made by Applinot be transmitted from any affiliated bank to CSC. cant and the conditions set forth in this Order. This With respect to the potential for biased investment determination is further subject to all of the conditions advice resulting from the proposed transaction-related set forth in the Board's Regulation Y, including those fee arrangement, the Board has noted that the federal in sections 225.4(d) and 225.23(b), and to the Board's securities laws prohibit self-interested advisory prac- authority to require modification or termination of the tices such as churning and unsuitable recommenda- activities of the holding company or any of its subsidtions. CSC would serve only institutional customers iaries as the Board finds necessary to assure complithat would be sensitive to less than impartial invest- ance with the provisions and purposes of the BHC Act ment advice, and CSC would provide investment and the Board's regulations and orders issued thereunadvice and execution services for separate fees if der, or to prevent evasion thereof. customers wished. In addition, as explained above, the Board also finds that there is no significant potential that CSC would recommend securities the proceeds of which would be 58. Bankers Trust, 104 S. Ct. at 2988. used to pay existing loans made by an affiliated bank, 59. In Bankers Trust, the Supreme Court made clear that an agency because the securities laws require disclosure of the may not rely on regulatory guidelines to overcome the explicit language of the Glass-Steagall Act, if that language expressly applies intended use of the proceeds, and because information to the activity in question. Here, as explained above, the explicit relating to loans made by NatWest affiliate banks language of the Act does not apply to CSC's activities. The Board also would not be made available to CSC. Finally, with has the independent authority under section 4(c)(8) of the BHC Act to impose conditions to assure compliance with that provision. respect to the potential for unwarranted loans to 60. In any event, the fact that an applicant has imposed limitations companies whose securities CSC has recommended, on a proposed activity designed to assure that potential hazards do not the Board has noted that the expected benefit of such occur, does not necessarily support the conclusion that without each of the limitations, the activity would implicate the subtle hazards that conduct would likely be outweighed by the potential motivated the Glass-Steagall Act. Indeed, in the Board's experience, losses resulting from the bad loans, and that informa- an applicant may agree to limitations that are more stringent than what tion relating to the particular recommendations made is required by law, simply to eliminate the need to address specific legal issues. Thus the limitations proposed by NatWest should not by CSC would not be provided to NatWest affiliates. necessarily be viewed as being mandated by the statute in every case. 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596 Federal Reserve Bulletin • August 1986 This transaction shall nol be consummated later Voting for this action: Vice Chairman Martin and Govcithan three months after the effective date of this nors Rice, Seger, Angell, and Johnson. Chairman Volcker abstained from this action. Absent and noi. voting: Governor Order, unless such period is extended for good cause Wallich. by the Board, or by the Federal Reserve Bank of New York, pursuant to delegated authority. WILLIAM W. WILES By order of the Board of Governors, effective [SEAL] Secretory of the Bnnrr! June 13, 1986. ORDERS APPROVED UNDER BANK HOLDING COMPANY ACT By the Board of Governors Recent applications have been approved by the Board of Governors as listed below. Copies are available upon request to Publications Services, Division of Support Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Board action Applicant Bank(s) (effective date) Greater Texas Bancshares, Inc. Greater Texas Bank Leander, June 26, 1986 Georgetown, Texas Leander, Texas Greater Texas Bank North, N.A. Austin, Texas Lockhart State Bank, Lockhart, Texas Manhattan Banking Corporation, Kansas State Bank, June 23, 1986 Manhattan, Kansas Manhattan, Kansas 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 American Commerce Ban- Financial Group Humboldt, Inc. Kansas City June 10, 1986 shares, Inc., Humboldt, Nebraska, Omaha, Nebraska Financial Group Elk Creek, Inc. Humboldt, Nebraska Financial Group Dawson, Inc., Dawson, Nebraska American National Corporation, Omaha, Nebraska AmeriTrust Corporation, State Bank of Lima, Cleveland May 20, 1986 Cleveland, Ohio Howe, Indiana First Indiana Bancorp, Elkhart, Indiana Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 597 Section 3—Continued . .. . . . Reserve Effective Applicant Bank(s) ^ ^ Banc One Corporation, Marion Bancorp, Cleveland June 4, 1986 Columbus, Ohio Marion, Indiana Bank Corporation of Georgia, The Citizens Bank of Ashburn, Atlanta June 13, 1986 Fort Valley, Georgia Ashburn, Georgia Banterra Corp., Norris City State Bank, St. Louis June 20, 1986 Eldorado, Illinois Norris City, Illinois Bellwood Bancorporation, Inc., Peterson Bank, Chicago May 21, 1986 Bellwood, Illinois Chicago, Illinois Caldwell Capital Corporation, First State Bank in Caldwell, Dallas June 6, 1986 Caldwell, Texas Caldwell, Texas Citizens Fidelity Corporation, Madison National Bank of St. Louis May 29, 1986 Louisville, Kentucky Richmond, Richmond, Kentucky Coastal Commerce Bancshares, Kaplan State Bank, Atlanta May 21, 1986 Inc., Kaplan, Louisiana Kaplan, Louisiana Community Bancshares, Inc., Community Bank of Marshall Atlanta June 6, 1986 Blountsville, Alabama County, Arab, Alabama COMMUNITY FINANCIAL Community State Bank, Chicago May 27, 1986 CORP., Avilla, Indiana Avilla, Indiana The Conifer Group Inc., Hampshire National Bank of Boston June 10, 1986 Worcester, Massachusetts South Hadley, South Hadley, Massachusetts The Conifer Group Inc., Patriot Bancorporation, Boston June 10, 1986 Worcester, Massachusetts Boston, Massachusetts Cumberland Bancshares, Inc., Citizens Bank, Atlanta June 13, 1986 Hartsville, Tennessee Hartsville, Tennessee DG Bancorp, Inc., Downers Grove National Bank, Chicago May 22, 1986 Downers Grove, Illinois Downers Grove, Illinois ExTraCo Bankshares, Inc., Texana Bank, N.A., Dallas June 19, 1986 Temple, Texas Waco, Texas First Banc Securities, Inc., The Peoples National Bank of Richmond May 20, 1986 Morgantown, West Virginia Martinsburg, Martinsburg, West Virginia First Coastal Banks, Inc., Merchants National Bank, Boston May 20, 1986 Portsmouth, New Hampshire Dover, New Hampshire First FSB Bancshares, Inc., FSB Bancshares, Inc., Dallas June 6, 1986 Italy, Texas Waco, Texas First Illinois Corporation, First Burlington Corporation, Chicago May 30, 1986 Evanston, Illinois La Grange, Illinois First National Bancshares of The First National Bank of Atlanta June 18, 1986 Wetumpka, Inc., Wetumpka, Wetumpka, Alabama Wetumpka, Alabama First State Bancshares of First State Bank of Blakely, Atlanta June 11, 1986 Blakely, Inc., Blakely, Georgia Blakely, Georgia First Vernon Bancshares, Inc., The Bank of Vernon, Atlanta June 23, 1986 Vernon, Alabama Vernon, Alabama Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
598 Federal Reserve Bulletin • August 1986 Section 3—Continued _ . , . Reserve Effective Applicant Bank(s) ^ Date First West Virginia Bancorp, First West Virginia Bank, N.A.— Cleveland May 28, 1986 Inc., Buckhannon, Wheeling, West Virginia Buckhannon, West Virginia First Wilmington Corp., The First National Bank of Chicago June 4, 1986 Wilmington, Illinois Wilmington, Wilmington, Illinois Fredonia Bancshares, Inc., Fredonia State Bank, Dallas June 25, 1986 Nacogdoches, Texas Nacogdoches, Texas Garden Plain Bancshares, Inc., Garden Plain State Bank, Kansas City May 29, 1986 Garden Plain, Kansas Garden Plain, Kansas Genala Banc, Inc., The Citizens Bank, Atlanta June 17, 1986 Geneva, Alabama Geneva, Alabama General Bancshares, Inc., Citizens State Bank, Atlanta May 28, 1986 South Pittsburg, Tennessee South Pittsburg, Tennessee Graham Shares of Waverly, Citizens State Bank of Waverly, Minneapolis June 9, 1986 Inc., Waverly, Minnesota Waverly, Minnesota Guaranty Bancshares Nanticoke Financial Services, Philadelphia June 11, 1986 Corporation, Inc., Shamokin, Pennsylvania Nanticoke, Pennsylvania The First National Bank of Nicholson, Nicholson, Pennsylvania Hamel Bancorp, Inc., Hamel State Bank, St. Louis May 29, 1986 Hamel, Illinois Hamel, Illinois Harry A. Lowe Agency, Inc., The Montrose County Bank, Kansas City May 30, 1986 Ouray, Colorado Naturita, Colorado IBT Bancshares, Inc., Investors Bank and Trust Atlanta June 11, 1986 Gretna, Louisiana Company, Gretna, Louisiana Independent Community Banc The Citizens National Bank of Cleveland June 4, 1986 Corp., Norwalk, Norwalk, Ohio Norwalk, Ohio Lakes Capital Corp., Bank of Water Valley, St. Louis June 17, 1986 Water Valley, Mississippi Water Valley, Mississippi Marble Financial Corporation, Marble Bank, Boston June 16, 1986 Rutland, Vermont Rutland, Vermont Marquette County Financial The First National Bank of Minneapolis June 11, 1986 Corporation, Negaunee, Negaunee, Michigan Negaunee, Michigan Nichols Hills Bancorporation, Nichols Hills Bank and Trust Kansas City June 13, 1986 Inc., Company, Oklahoma City, Oklahoma Oklahoma City, Oklahoma National Bankshares, Inc., The National Bank of Blacks- Richmond June 13, 1986 Blacksburg, Virginia burg, Blacksburg, Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 599 Section 3—Continued Reserve Effective Applicant Bank(s) Bank Date New Braunfels Bancshares, Citizens National Bank, Dallas May 21, 1986 Inc., New Braunfels, Texas New Braunfels, Texas Ogle County Bancshares, Inc., Leland National Bancorp. Inc., Chicago June 24, 1986 Roche lie, Illinois Leland, Illinois Omni Bancorp, Inc., Crossroads Bank, St. Louis June 9, 1986 Effingham, Illinois Effingham, Illinois Penn Rock Financial Services Blue Ball National Bank, Philadelphia June 17, 1986 Corporation, Blue Ball, Pennsylvania Blue Ball, Pennsylvania Pinnacle Financial Services, The Peoples State Bank of Chicago May 21, 1986 Inc., St. Joseph, St. Joseph, Michigan St. Joseph, Michigan Polk County Bancorporation, The Polk City Savings Bank, Chicago May 28, 1986 Inc., Polk City, Iowa Polk City, Iowa Putnam Bancshares, Inc., Putnam County Bank, Richmond June 5, 1986 Hurricane, West Virginia Hurricane, West Virginia St. Joseph Bancorporation, Inc., First Union Bank and Trust Chicago June 19, 1986 South Bend, Indiana Company, Winamac, Indiana Salin Bancshares of North CAMDEN FINANCIAL COR- Chicago May 30, 1986 Central Indiana, Inc., PORATION, Fort Wayne, Indiana Camden, Indiana Sidney Bancorporation, Inc., Sidney Community Bank, Chicago May 28, 1986 Sidney, Illinois Sidney, Illinois Sierra Tahoe Bancorp, Truckee River Bank, San Francisco June 9, 1986 Truckee, California Truckee, California Southwest Bankers, Inc., Bank of San Antonio/Medical Dallas June 24, 1986 San Antonio, Texas Center, San Antonio, Texas Spring Valley Bancorp, Inc., Spring Valley City Bank, Chicago May 27, 1986 Spring Valley, Illinois Spring Valley, Illinois Spurgeon Financial Corpora- Pike Bancshares, Inc., St. Louis June 6, 1986 tion, Petersburg, Indiana Spurgeon, Indiana Summcorp, Kendallville Bank & Trust Co., Chicago June 13, 1986 Fort Waye, Indiana Kendallville, Indiana The Summit Bancorporation, The Trust Company of Princeton, New York June 6, 1986 Summit, New Jersey Princeton, New Jersey Susquehanna Bancshares Inc., Williamsport National Bank, Philadelphia May 30, 1986 Lititz, Pennsylvania Williamsport, Pennsylvania Tyronza Bancshares, Inc., Tyronza Bank, St. Louis June 3, 1986 Tyronza, Arkansas Tyronza, Arkansas Valley-Hi Investment Company, Valley-Hi National Bank of Dallas May 19, 1986 San Antonio, Texas San Antonio, San Antonio, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
600 Federal Reserve Bulletin • August 1986 Section 4 Bank(s)/Nonbanking Reserve Effective Applicant Company Bank date AmeriTrust Corporation, Associates Corporation of North Cleveland June 13, 1986 Cleveland, Ohio America, Cleveland, Ohio Bank of Virginia Company, Dacor Finance, Inc., Richmond June 18, 1986 Richmond, Virginia Jackson, Mississippi Escrow Corporation of Lyle Thomas Agency, Minneapolis May 28, 1986 America, Inc., Willmar, Minnesota Pennock, Minnesota Norwest Corporation, McKinney Wudel Insurance Minneapolis May 21, 1986 Minneapolis, Minnesota Service, Rapid City, South Dakota U.S. Trust Corporation, Advanced Information Manage- New York June 18, 1986 New York, New York ment, Inc., Boston, Massachusetts Zions Utah Bancorporation, Century Mortgage Company, San Francisco June 13, 1986 Salt Lake City, Utah Salt Lake City, Utah By the Board of Governors Sections 3 and 4 Applicant Bank(s)/Nonbanking Effective Company date MCorp, MBank, Arboretum, June 12, 1986 Dallas, Texas Austin, Texas National Computer Analysts, Inc., Princeton, New Jersey ECOM Systems, Inc., Memphis, Tennessee By Federal Reserve Banks Bank(s)/Nonbanking Reserve Effective Company Bank date NBD Western Corporation, Union Bancorp, Inc., Chicago May 22, 1986 Detroit, Michigan Grand Rapids, Michigan Bankers Leasing Service, Inc., Southfield, Michigan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Legal Developments 601 ORDERS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Reserve Effective Applicant Bank(s) Bank date The Central Trust Company, The Clear Creek Valley Banking Cleveland May 22, 1986 Newark, Ohio Company, Amanda, Ohio Putnam County Bank, PCB Bank Company, Inc., Richmond June 5, 1986 Hurricane, West Virginia Hurricane, West Virginia Security Bank and Trust Com- Security Bank Oakland County, Chicago June 19, 1986 pany, Novi, Michigan Southgate, Michigan State Bank of Carthage, The First National Bank of Mays, Chicago June 23, 1986 Carthage, Indiana Mays, Indiana BANK SERVICE CORPORATION ACT By Federal Reserve Banks Reserve Effective Applicant Bank(s) Bank date Trust Company Bank, SunTrust Service Corporation, Atlanta June 18, 1986 Atlanta, Georgia Orlando, Florida 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 First National Bank of Blue Island Employee Stock Cir., filed Jan. 2, 1986). Ownership Plan v. Board of Governors, No. 85- Howe v. United States, et al, No. 85-4504-C (D. 2615 (7th Cir., filed Sept. 23, 1985). Mass., filed Dec. 6, 1985). First National Bancshares II v. Board of Governors, Myers, et al. v. Federal Reserve Board, No. 85-1427 No. 85-3702 (6th Cir., filed Sept. 4, 1985). (D. Idaho, filed Nov. 18, 1985). McHuin v. Volcker, et al., No. 85-2170 WARB (W.D. Souser, et al. v. Volcker, et al., No. 85-C-2370, et al. Okl., filed Aug. 29, 1985). (D. Colo., filed Nov. 1, 1985). Independent Community Bankers Associaton of South Podolak v. Volcker, No. C85-0456, et al. (D. Wyo., Dakota v. Board of Governors, No. 84-1496 (D.C. filed Oct. 28, 1985). Cir., filed Aug. 7, 1985). Kolb v. Wilkinson, et al., No. C85-4184 (N.D. Iowa, Florida Bankers Association, et al. v. Board of Goverfiled Oct. 22, 1985). nors, No. 85-193 (U.S., filed Aug. 5, 1985). Farmer v. Wilkinson, et al., No. 4-85-CIVIL-1448 (D. Urwyler, et al. v. Internal Revenue Service, et al., No. Minn., filed Oct. 21, 1985). CV-F-85-402 REC (E.D. Cal., filed July 18, 1985). Kurkowski v. Wilkinson, et al., No. CV-85-0-916 (D. Johnson v. Federal Reserve System, et al., No. S85- Neb., filed Oct. 16, 1985). 0958(R) and S85-1269(N) (S.D. Miss., filed July 16, Jensen v. Wilkinson, et al., No. 85-4436-S, et al. (D. 1985). Kan., filed Oct. 10, 1985). Wight, et al. v. Internal Revenue Service, et al., No. Alfson v. Wilkinson, et al, No. Al-85-267 (D. N.D., CIV S-85-0012 MLS (E.D. Cal., filed July 12, 1985). filed Oct. 8, 1985). Cook v. Spillman, et al., No. CIV S-85-0953 EJG (E.D. Cal., filed July 10, 1985). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
602 Federal Reserve Bulletin • August 1986 Florida Bankers Association v. Board of Governors, Lewis v. Volcker, et ai, No. C-l-85-0099 (S.D. Ohio, No. 84-3883 and No. 84-3884 (11th Cir., filed Feb. filed Jan. 14, 1985). 15, 1985). Brown v. United States Congress, et al., No. 84-2887- Florida Department of Banking v. Board of Gover- 6(IG) (S.D. Cal., filed Dec. 7, 1984). nors, No. 84-3831 (11th Cir., filed Feb. 15, 1985), Melcher v. Federal Open Market Committee, No. 84and No. 84-3832 (11th Cir., filed Feb. 15, 1985). 1335 (D.D.C., filed Apr. 30, 1984). 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
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 POLIC Y INS TR UMENTS 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 A35 Corporate profits and their distribution A17 Major nondeposit funds A18 Assets and liabilities, last-Wednesday-of-month series Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
2 Federal Reserve Bulletin • August 1986 A36 Nonfinancial corporations—Assets and A54 Foreign official assets held at Federal Reserve liabilities Banks A36 Total nonfarm business expenditures on new A55 Foreign branches of U.S. banks—Balance sheet plant and equipment data A37 Domestic finance companies—Assets and A57 Selected U.S. liabilities to foreign official liabilities and business credit institutions REAL ESTATE REPORTED BY BANKS IN THE UNITED STATES A38 Mortgage markets A57 Liabilities to and claims on foreigners A39 Mortgage debt outstanding A58 Liabilities to foreigners A60 Banks' own claims on foreigners A61 Banks' own and domestic customers' claims on CONSUMER INSTALLMENT CREDIT foreigners A61 Banks' own claims on unaffiliated foreigners A40 Total outstanding and net change A62 Claims on foreign countries—Combined A41 Terms domestic offices and foreign branches FLOW OF FUNDS REPORTED BY NONBANKING BUSINESS ENTERPRISES IN THE UNITED STATES A42 Funds raised in U.S. credit markets A43 Direct and indirect sources of funds to credit A63 Liabilities to unaffiliated foreigners markets A64 Claims on unaffiliated foreigners Domestic Nonfinancial Statistics SECURITIES HOLDINGS AND TRANSACTIONS A65 Foreign transactions in securities SELECTED MEASURES A66 Marketable U.S. Treasury bonds and notes— Foreign transactions AAA Nonfinancial business activity—Selected measures A45 Labor force, employment, and unemployment INTEREST AND EXCHANGE RATES A46 Output, capacity, and capacity utilization A47 Industrial production—Indexes and gross value A67 Discount rates of foreign central banks A49 Housing and construction A67 Foreign short-term interest rates A50 Consumer and producer prices A68 Foreign exchange rates A51 Gross national product and income A52 Personal income and saving A69 Guide to Tabular Presentation, Statistical Releases, and Special International Statistics Tables S UMMAR Y ST A TIS TICS SPECIAL TABLE A53 U.S. international transactions—Summary A70 Terms of lending at commercial banks, A54 U.S. foreign trade May 1986 A54 U.S. reserve assets 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 1986 Q2 Q3 Q4 QL Jan.' Feb.' Mar. Apr. May Reserves of depository institutions2 1 Total 17.0 15.7 12.5 13.1 7.1 12.8 12.8 10.5 32.9 2 Required 17.3 16.4 11.5 12.3 5.8 13.4 18.4 13.2 32.6 3 Nonborrowed 19.1 17.5 10.4 19.1 22.1 10.0 16.3 7.3' 33.9 4 Monetary base3 8.2 9.6 8.2 8.6 9.3 7.6 8.0 5.9' 13.7 Concepts of money, liquid assets, and debt4 5 Ml 10.5 14.5 10.7 7.7 1.1 7.3 14.1' 14.5 23.2 6 M2 6.3 9.5 6.0 4.3 1.5 3.5 6.8 13.8' 11.9 7 M3 5.5 7.7 6.4 -7.3' 8.5 6.1 7.3' 10.8' 6.7 8 L 6.2 7.9 9.3 8.1 6.8 6.1 4.0' n.a. n.a. 9 Debt 12.CK 12.9 14.6r 16.1 18.4 8.8 8.3' 9.7 n.a. Nontransaction components 10 In M25 5.0 8.0 4.6 3.2 1.6 2.3 4.4 13.5 8.3 11 In M3 only6 2.6 .1' 8.0 19.5' 36.9 16.3 9.4' -1.1' -13.8 Time and savings deposits Commercial banks 12 Savings7 -1.0 7.6 3.2' 1.9' 2.9 2.9 6.7 8.6 22.7 13 Small-denomination time8 2.1 -3.3 -1.6 5.3 7.8 4.7 2.8 -3.4 -9.6 14 Large-denomination time9-10 6.9 -3.6 14.1 18.5 45.6 7.5 -18.5 -23.4 Thrift institutions 15 Savings7 3.8 12.9 7.5 3.1' 1.3 4.0 8.7 24.5 30.5 16 Small-denomination time 1.0 -2.8 -2.9 6.6 7.7 8.4 6.7 6.2' -5.0 17 Large-denomination time9 5.5 -1.0 5.2 10.0 6.9 11.4 27.8 11.7 -2.2 Debt components4 18 Federal 12.5' 14.6 15.2' 17.5' 16.4 9.8 5.3' 7.8 n.a. 19 Nonfederal U.9r 12.4 14.4' 15.7' 19.0 8.5 9.2' 10.3 n.a. 20 Total loans and securities at commercial banks11 9.4' 9.6 9.4' 12.7 18.7 3.4 5.6' 2.0' 5.9 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 added on a not seasonally adjusted basis. After CRR, the seasonally sumer credit (including bank loans), other bank loans, commercial paper, bankers adjusted series consists of seasonally adjusted total reserves, which include acceptances, and other debt instruments. The source of data on domestic excess reserves on a not seasonally adjusted basis, plus the seasonally adjusted nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt currency component of the money stock plus the remaining items seasonally data are 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
A46 Domestic Nonfinancial Statistics • August 1986 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT Millions of dollars Monthly averages of Weekly averages of daily figures for week ending daily figures FFFaaaccctttooorrrsss 1986 1986 Mar. Apr. May Apr. 16 Apr. 23 Apr. 30 May 7 May 14 May 21 May 28 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 11111 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 199,955 203,014 205,800 202,326 204,287 204,676 209,053 205,101 204,581 204,387 22222 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 174,710 177,563 180,195 177,365 178,753 178,351 182,146 178,663 179,929 179,449 33333 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 174,492 176,389 179,287 176,281 177,055 176,103 179,189 178,663 178,865 179,449 44444 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 218 1,174 908 1,084 1,698 2,248 2,957 0 1,064 0 55555 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 8,246 8,384 8,366 8,309 8,410 8,685 8,826 8,166 8,430 8,137 66666 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 8,187 8,187 8,155 8,187 8,187 8,187 8,187 8,166 8,137 8,137 77777 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 59 197 211 122 223 498 639 0 293 0 88888 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 99999 LLLLLoooooaaaaannnnnsssss 755 919 858 729 992 1,057 905 806 848 890 1111100000 FFFFFllllloooooaaaaattttt 773 432 638 123 316 520 642 813 421 924 1111111111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 15,471 15,716 15,743 15,799 15,816 16,063 16,535 16,654 14,954 14,988 1111122222 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk 11,090 11,090 11,086 11,090 11,090 11,090 11,088 11,085 11,085 11,085 1111133333 SSSSSpppppeeeeeccccciiiiiaaaaalllll dddddrrrrraaaaawwwwwiiiiinnnnnggggg rrrrriiiiiggggghhhhhtttttsssss ccccceeeeerrrrrtttttiiiiifffffiiiiicccccaaaaattttteeeee aaaaaccccccccccooooouuuuunnnnnttttt.................... 4,718 4,718 4,776 4,718 4,718 4,718 4,718 4,732 4,818 4,818 1111144444 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccuuuuurrrrrrrrrreeeeennnnncccccyyyyy ooooouuuuutttttssssstttttaaaaannnnndddddiiiiinnnnnggggg 17,183' 17,229 17,273 17,226 17,235 17,244 17,254 17,265 17,276 17,287 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 1111155555 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 192,441' 194,372 196,431 194,850 194,400 194,058 195,151 196,350 196,414 197,175 1111166666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss 609 607 637 629 577 582 637 639 638 636 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss,,,,, wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 1111177777 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 3,399 3,870 4,679 3,393 2,221 6,769 7,246 4,591 3,972 3,580 1111188888 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 260 247 212 211 284 246 195 206 221 218 1111199999 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss .................... 1,863 1,818 1,841 1,868 1,947 1,736 1,745 1,747 1,815 1,891 2222200000 OOOOOttttthhhhheeeeerrrrr 487 448 482 467 415 414 573 455 531 395 2222211111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 6,391 6,254 6,384 6,252 6,345 6,388 6,758 6,262 6,332 6,269 2222222222 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss22222 27,497 28,435 28,269 27,690 31,140 27,534 29,809 27,933 27,838 27,413 End-of-month figures Wednesday figures 1986 1986 Mar. Apr. May Apr. 16 Apr. 23 Apr. 30 May 7 May 14 May 21 May 28 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 2222233333 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 201,820 210,494 206,437 205,160 212,037 210,494 208,032 205,636 209,592 209,431 2222244444 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 176,620 181,834 181,992 179,593 183,601 181,834 181,360 178,869 183,054 181,499 2222255555 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 176,620 174,312 181,992 176,238 176,660 174,312 181,360 178,869 178,296 181,499 2222266666 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 0 7,522 0 3,355 6,941 7,522 0 0 4,758 0 2222277777 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 8,187 9,620 8,137 8,487 9,180 9,620 8,187 8,137 9,506 8,137 2222288888 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 8,187 8,187 8,137 8,187 8,187 8,187 8,187 8,137 8,137 8,137 2222299999 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 0 1,433 0 300 993 1,433 0 0 1,369 0 3333300000 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 3333311111 LLLLLoooooaaaaannnnnsssss 818 954 850 699 1.233 954 899 812 1,233 812 3333322222 FFFFFllllloooooaaaaattttt 560 851 132 489 1,354 851 1,012 1,046 276 3,744 3333333333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 15,635 17,235 15,326 15,892 16,669 17,235 16,574 16,772 15,523 15,239 3333344444 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk 11,090 11,089 11,085 11,090 11,090 11,089 11,085 11,085 11,085 11,085 3333355555 SSSSSpppppeeeeeccccciiiiiaaaaalllll dddddrrrrraaaaawwwwwiiiiinnnnnggggg rrrrriiiiiggggghhhhhtttttsssss ccccceeeeerrrrrtttttiiiiifffffiiiiicccccaaaaattttteeeee aaaaaccccccccccooooouuuuunnnnnttttt ............... 4,718 4,718 4,818 4,718 4,718 4,718 4,718 4,818 4,818 4,818 3333366666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccuuuuurrrrrrrrrreeeeennnnncccccyyyyy ooooouuuuutttttssssstttttaaaaannnnndddddiiiiinnnnnggggg 17,207' 17,252 17,296 17,234 17,243 17,252 17,263' 17,274 17,285 17,296 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 3333377777 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 193,209' 194,503 197,807 194,871 194,163 194,503 195,913' 196,557 196,680 198,020 3333388888 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss 617 638 636 578 573 638 639 638 636 636 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 3333399999 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 3,280 11,550 3,083 3,484 0 11,550 4,003 2,604 4,186 4,098 4444400000 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 274 326 254 235 317 326 194 237 205 279 4444411111 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss .................... 1,542 1,590 1,5% 1,542 1,541 1,590 1,592 1,609 1,609 1,580 4444422222 OOOOOttttthhhhheeeeerrrrr 511 441 417 472 369 441 453 561 401 497 4444433333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 6,162 6,680 6,110 6,043 6.234 6,680 6,134 6,057 6,235 6,134 4444444444 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss22222 29,240 27,826 29,733 30,977 41,891 27,826 32,170 30,550 32,828 31,386 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 RReesseerrvvee ccllaassssiiffiiccaattiioonn 1983 1984 1985 1985 1986 Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Reserve balances with Reserve Banks1 21,138 21,738 27,620 25,431 26,385 27,620 26,373 24,700 27,114 28,892 2 Total vault cash2 20,755 22,316 22,956 22,724 22,457 22,956 24,245 24,962 22,688 22,231 3 Vault cash used to satisfy reserve requirements3 . 17,908 18,958 20,522 20,038 19,997 20,522 21,687 21,952 20,160 19,990 4 Surplus vault cash4 2,847 3,358 2,434 2,686 2,460 2,434 2,559 3,010 2,528 2,241 5 Total reserves3 38,894 40,696 48,142 45,469' 46,382 48,142 48,060 46,652 47,274 48,882 6 Required reserves 38,333 39,843 47,085 44,716 45,454 47,085 46,949 45,555 46,378 48,081 7 Excess reserve balances at Reserve Banks6 561 853 1,058 753 928 1,058 1,111 1,097 896 801 8 Total borrowings at Reserve Banks 774 3,186 1,318 1,187 1,741 1,318 770 884 761 893 9 Seasonal borrowings at Reserve Banks 96 113 56 172 107 56 36 56 68 73 10 Extended credit at Reserve Banks7 2 2,604 499 629 530 499 497 492 518 634 Biweekly averages of daily figures for weeks ending 1986 Jan. 29 Feb. 12 Feb. 26 Mar. 12 Mar. 26 Apr. 9 Apr. 23' May 7' May 21 June 4 11 Reserve balances with Reserve Banks1 24,702' 23,924 25,021' 27,102 26,704 28,292 29,385 28,676 27,875 28,556 12 Total vault cash2 24,684 26,078 24,348 22,577 22,986 22,121 22,369 22,100 22,700 22,422 13 Vault cash used to satisfy reserve requirements3 . 21,961 22,891 21,424 20,016 20,409 19,809 20,190 19,824 20,366 20,035 14 Surplus vault cash4 2,723 3,187 2,924 2,561 2,577 2,312 2,179 2,276 2,334 2,387 15 Total reserves5 46,663r 46,815 46,445' 47,118 47,113 48,101 49,575 48,500 48,241 48,591 16 Required reserves 45,743' 45,629 45,408' 46,142 46,187 47,479 48,703 47,612 47,554 47,593 17 Excess reserve balances at Reserve Banks6 921' 1,187 1,038' 976 926 622 873 888 688 999 18 Total borrowings at Reserve Banks 903 662 1,100 704 769 874 861 981 827 871 19 Seasonal borrowings at Reserve Banks 42 44 66 65 69 76 64 89 92 101 20 Extended credit at Reserve Banks7 529 480 506 475 535 576 671 637 571 566 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 Apr. 21 Apr. 28 May 5 May 12 May 19 May 26 June 2 June 9 June 16 One day and continuing contract 1 Commercial banks in United States 73,882' 67,770' 68,557 69,020 69,536 67,481 68,030 75,063 72,882 2 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies . 37,981 36,133 36,603 38,851 36,494' 37,095 37,650 38,033 38,329 3 Nonbank securities dealers 10,633 10,161 9,921 9,684 9,938 11,296 13,301 8,136 8,424 4 All other 25,239 25,852 25,433 25,321 26,337 25,333 25,969 24,724 24,906 All other maturities 5 Commercial banks in United States 9,472 9,598 10,167 9,464 9,394 9,361 9,242 9,259 99,,669900 6 Other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies . 7,702 7,359 7,915 6,853 6,632 7,706 7,198 6,800 6,714 7 Nonbank securities dealers 10,199 11,550 10,670 10,127 10,180 10,079 9,572 9,207 9,493 8 All other 10,781 11,175 10,824 10,427 10,523 10,531 9,651 9,077 9,644 MEMO: Federal funds and resale agreement loans in maturities of one day or continuing contract 9 Commercial banks in United States 30,341' 29,112' 28,673 24,906 26,736 24,605 27,310 27,391 27,068 10 Nonbank securities dealers 10,3^ 9,934' 9,306' 8,683' 8,946' 10,149 9,322 9,015 8,766 1. Banks with assets of Si billion or more as of Dec. 31, 1977. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A46 Domestic Nonfinancial Statistics • August 1986 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per annum Current and previous levels Extended credit2 SShhoorrtt--tteerrmm aaddjjuussttmmeenntt ccrreeddiitt FFFeeedddeeerrraaalll RRReeessseeerrrvvveee aanndd sseeaassoonnaall ccrreeddiitt11 First 60 days Next 90 days BBBaaannnkkk of borrowing of borrowing After 150 days EEffffeeccttiivvee ddaattee ffoorr ccuurrrreenntt rraatteess Rate on Effective Previous Rate on Previous Rate on Previous Rate on Previous 6/25/86 date rate 6/25/86 rate 6/25/86 rate 6/25/86 rate Boston 6 Vi 4/21/86 7 fM. 7 7Vi 8Vi 9 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 4/21/86 San Francisco... 6 Vi 4/21/86 7 6Vi 7 7'/i 8Vi 9 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 7Vi 7Vi 1978- Aug. 21 73/4 73/4 1981— Dec. 4 12 12 1974— Apr. 25 7Vi-8 8 Sept. 22 3 0 Oct. 16 8-8 i/i 8Vi 11998822—— JJuullyy 20 llVi-12 UVi Dec. 9 73/t-8 73/4 20 8Vi 8Vi 23 11 Vi 11 Vi 16 VA 73/4 Nov. 1 8Vi-9'/i 91/! AAuugg.. 2 11-llVi 11 3 9Vi 91/! 3 11 11 1975— Jan. 6 7V4-7V4 73/4 16 lOVi lOVi 10 7V4-VA 71/4 July 20 10 10 27 lO-lOVi 10 24 7Vi 71/4 Aug. 17 lO-lO'/i lOVi 30 10 10 Feb. 5 7 63/ 6 4 3 - /4 7 l/4 6 63 3 / / 4 4 Sept. 2 1 0 9 10 l > O / ' i / - i l 1 1 lO 1 V i Oct. 1 1 3 2 9V9i-110/ 2 9 9 V V i i Mar. 10 6V4-63/4 6>/4 21 11 11 Nov. 22 9-9 Vi 9 14 6V» 61/4 Oct. 8 11-12 12 26 9 9 May 16 6-6V4 6 10 12 12 Dec. 14 8Vi-9 9 23 6 6 15 8Vi-9 8Vi Feb. 15 12-13 13 17 8Vi 8Vi 1976— Jan. 19 5Vi-6 5Vi 19 13 13 23 5Vi 5Vi May 29 12-13 13 11998844—— AApprr.. 9 8Vi-9 9 Nov. 22 5'/4-5Vi 5'/4 30 12 12 13 9 9 26 5V4 51/4 June 13 11-12 11 Nov. 21 8Vi-9 8Vi 16 11 11 26 8Vi 8Vi 1977— Aug. 30 5V4-53/4 5'/4 July 28 10-11 10 Dec. 24 8 8 3 1 5'/4-53/4 53/4 29 10 10 Sept. 2 53/4 53/4 Sept. 26 11 11 11998855—— MMaayy 20 7Vi-8 7Vi Oct. 26 6 6 Nov. 17 12 12 24 7Vi 7Vi Dec. 5 12-13 13 1978— Jan. 9 6-6 Vi (>Vi 8 13 13 1986— Mar. 7 7-7 Vi 7 20 6Vi 6Vi 10 7 7 May 11 6Vi-7 7 May 5 13-14 14 AApprr.. 21 6Vi-7 6Vi 12 7 7 14 14 23 6Vi 6Vi July 3 7-71/4 71/4 Nov. 2 13-14 13 July 10 71/4 71/4 6 13 13 In effect June 25, 1986 6Vi 6Vi 1. After May 19, 1986, the highest rate within the structure of discount rates rate under this structure is applied may be shortened. See section 201.3(b)(2) of may be charged on adjustment credit loans of unusual size that result from a major Regulation A. operating problem at the borrower's facility. 3. Rates for short-term adjustment credit. For description and earlier data see A temporary simplified seasonal program was established on Mar. 8, 1985, and the following publications of the Board of Governors: Banking and Monetary the interest rate was a fixed rate Vi percent above the rate on adjustment credit. Statistics, 1914-1941, and 1941-1970; Annual Statistical Digest, 1970-1979, 1980, The program was re-established on Feb. 18, 1986; the rate may be either the same 1981, and 1982. as that for adjustment credit or a fixed rate Vi percent higher. In 1980 and 1981, the Federal Reserve applied a surcharge to short-term 2. Applicable to advances when exceptional circumstances or practices involve adjustment credit borrowings by institutions with deposits of $500 million or more only a particular depository institution and to advances when an institution is that had borrowed in successive weeks or in more than 4 weeks in a calendar under sustained liquidity pressures. As an alternative, for loans outstanding for quarter. A 3 percent surcharge was in effect from Mar. 17, 1980, through May 7, more than 150 days, a Federal Reserve Bank may charge a flexible rate that takes 1980. There was no surcharge until Nov. 17,1980, when a 2 percent surcharge was into account rates on market sources of funds, but in no case will the rate charged adopted; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and be less than the basic rate plus one percentage point. Where credit provided to a to 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective particular depository institution is anticipated to be outstanding for an unusually Sept. 22, 1981, and to 2 percent effective Oct. 12. As of Oct. 1, the formula for prolonged period and in relatively large amounts, the time period in which each applying the surcharge was changed from a calendar quarter to a moving 13-week period. The surcharge was eliminated on Nov. 17, 1981. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Policy Instruments 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 tt ss ee ii rr tt vv ,, aa aa ll nndd Monetary Control Act TTyy dd pp ee ee pp oo ooff ss iitt dd ee ii pp nn oo ttee ss rr ii vv tt,, aa ll aa 55 nn dd Monetary Control Act6 Percent EfFective date Percent EfFective date Net demand1 Net transaction accounts1-* 7 12/30/76 $0—$31.7 million 3 12/31/85 9'/2 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 1 '/2 years or more 0 10/6/83 Savings 3 3/16/67 Eurocurrency liabilities TTiimmee44 AAllll ttyyppeess 3 11/13/80 $0 million-$5 million, by maturity 30-179 days 3 3/16/67 180 days to 4 years 2l/2 1/8/76 4 years or more 1 10/30/75 Over $5 million, by maturity 30-179 days 6 12/12/74 180 days to 4 years 2'/2 1/8/76 4 years or more 1 10/30/75 1. For changes in reserve requirements beginning 1963, see Board's Annual 5. The Garn-St Germain Depository Institutions Act of 1982 (Public Law 97- Statistical Digest, 1971-1975, and for prior changes, see Board's Annual Report 320) provides that $2 million of reservable liabilities (transaction accounts, for 1976, table 13. Under provisions of the Monetary Control Act, depository nonpersonal time deposits, and Eurocurrency liabilities) of each depository institutions include commercial banks, mutual savings banks, savings and loan institution be subject to a zero percent reserve requirement. The Board is to adjust associations, credit unions, agencies and branches 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 that permit no more than six preauthorized, automatic, or other transfers per 4. Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percent month of which no more than three can be checks—are not transaction accounts was imposed on large time deposits of $100,000 or more, obligations of affiliates, (such accounts are savings deposits subject to time deposit reserve requirements.) and ineligible acceptances. This supplementary requirement was eliminated with 8. The Monetary Control Act of 1980 requires that the amount of transaction the maintenance period beginning July 24, 1980. accounts against which the 3 percent reserve requirement applies be modified EfFective with the reserve maintenance period beginning Oct. 25, 1979, a annually by 80 percent of the percentage increase in transaction accounts held by marginal reserve requirement of 8 percent was added to managed liabilities in all depository institutions determined as of June 30 each year. Effective Dec. 31, excess of a base amount. This marginal requirement was increased to 10 percent 1981, the amount was increased accordingly from $25 million to $26 million; beginning Apr. 3, 1980, was decreased to 5 percent beginning June 12, 1980, and efFective Dec. 30, 1982, to $26.3 million; efFective Dec. 29, 1983, to $28.9 million; was eliminated beginning July 24, 1980. Managed liabilities are defined as large effective Jan. 1, 1985, to $29.8 million; and efFective Dec. 31, 1985, to $31.7 time deposits, Eurodollar borrowings, repurchase agreements against U.S. million. government and federal agency securities, federal funds borrowings from non- 9. In general, nonpersonal time deposits are time deposits, including savings member institutions, and certain other obligations. In general, the base for the deposits, that are not transaction accounts and in which a beneficial interest is marginal reserve requirement was originally the greater of (a) $100 million or (b) held by a depositor that is not a natural person. Also included are certain the average amount of the managed liabilities held by a member bank, Edge transferable time deposits held by natural persons, and certain obligations issued corporation, or family of U.S. branches and agencies of a foreign bank for the two to depository institution offices located outside the United States. For details, see reserve computation periods ending Sept. 26, 1979. For the computation period section 204.2 of Regulation D. beginning Mar. 20, 1980, the base was lowered by (a) 7 percent or (b) the decrease in an institution's U.S. office gross loans to foreigners and gross balances due NOTE. Required reserves must be held in the form of deposits with Federal from foreign offices of other institutions between the base period (Sept. 13-26, Reserve Banks or vault cash. Nonmembers may maintain reserve balances with a i979) and the week ending Mar. 12, 1980, whichever was greater. For the Federal Reserve Bank indirectly on a pass-through basis with certain approved computation period beginning May 29, 1980, the base was increased by 7'/2 institutions. percent above the base used to calculate the marginal reserve in the statement week of May 14-21, 1980. In addition, beginning Mar. 19, 1980, the base was reduced to the extent that foreign loans and balances declined. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A46 Domestic Nonfinancial Statistics • August 1986 1.16 MAXIMUM INTEREST RATES PAYABLE on Time and Savings Deposits at Federally Insured Institutions1 Percent per annum Savings and loan associations and Commercial banks mutual savings banks (thrift institutions)1 In effect June 30, 1986 In effect June 30, 1986 TTTyyypppeee ooofff dddeeepppooosssiiittt Percent Effective date Percent Effective date 2 3 1 N M Sa e o v g n i o n e t y g ia s b m le a rk o e rd t e d r e o p f o s w it i t a h c d c r o aw un a t l accounts ( ( ( 4 2 3 ) ) ) 12 4 / 1 1 / / 1 4 1 / / / 8 8 8 2 6 6 ( ( ( 4 2 3 ) ) ) 12 4 / 1 1 / / 1 4 1 / / / 8 8 8 2 6 6 4 7 T i 3 m 1 e da a y c s c ounts (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 ort 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. ceiling of 5'/2 percent. 5. Before Jan. 1, 1986, deposits of less than $1,000 were subject to an interest 3. Before Jan. 1, 1986, NOW accounts with minimum denomination require- rate ceiling of 5'/2 percent. Deposits of less than $1,000 issued to governmental ments of less than $1,000 were subject to an interest rate ceiling of 5'/t percent. units were subject to an interest rate ceiling of 8 percent. Effective Jan. 1, 1986, NOW accounts with minimum required denominations of $1,000 or more and the minimum denomination requirement was removed. IRA/Keough (HR10) Plan accounts were not subject to interest rate ceilings. 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 Type of transaction 11998833 11998844 11998855 Oct. Nov. Dec. Jan. Feb. Mar, Apr. U.S. GOVERNMENT SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 18,888 20,036 22,214 0 1,180 4.515 286 0 396 2.988 2 Gross sales 3,420 8,557 4,118 265 0 0 225 2,277 0 0 3 Exchange 0 0 0 0 -350 0 0 0 0 0 4 Redemptions 2,400 7,700 3,500 0 0 0 0 1,000 0 0 Others within 1 year 5 Gross purchases 484 1,126 1,349 0 0 143 0 0 0 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shift 18,887 16,354 19,763 529 2,363 943 725 4,776 1,152 447 8 Exchange -16,553 -20,840 -17,717 -942 -615 -1,529 -596 -2,148 -1,458 -1,129 9 Redemptions 87 0 0 0 0 0 0 0 0 0 I to 5 years 10 Gross purchases 1.896 1,638 2,185 0 0 868 0 0 0 0 11 Gross sales 0 0 0 0 0 0 0 0 0 0 12 Maturity shift -15,533 -13,709 -17,459 -520 -1.731 -943 -703 -4,776 -1,152 -447 13 Exchange 11,641 16,039 13,853 942 650 1,529 596 1,548 1,458 1,134 5 to 10 years 14 Gross purchases 890 536 458 0 0 345 0 0 0 0 15 Gross sales 0 300 100 0 0 0 0 0 0 0 16 Maturity shift -2,450 -2,371 -1.857 -10 -600 0 -22 0 0 -5 17 Exchange 2,950 2,750 2.184 0 184 0 0 350 0 0 Over 10 years 18 Gross purchases 383 441 293 0 0 197 0 0 0 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shift -904 -275 -447 0 -32 0 0 0 0 0 21 Exchange 1,962 2,052 1,679 0 131 0 0 250 0 0 All maturities 22 Gross purchases 22,540 23,776 26,499 0 1,180 6,068 286 0 396 2,988 23 Gross sales 3,420 8,857 4,218 265 0 0 225 2,277 0 0 24 Redemptions 2,487 7,700 3,500 0 0 0 0 1,000 0 0 Matched transactions 25 Gross sales 578,591 808,986 866,175 100,929 85,486 76,399 63,109 90,459 88,917 109,253 26 Gross purchases 576,908 810,432 865,968 100,197 84,769 78,962 61,156 94,368 88,604 103,957 Repurchase agreements 27 Gross purchases 105,971 127,933 134,253 0 3,684 23,338 24,257 0 6,748 21,156 28 Gross sales 108,291 127,690 132,351 0 3,684 19,809 24,699 3,087 6,748 13,634 29 Net change in U.S. government securities 12,631 8,908 20,477 -997 463 12,159 -2,335 -2.456 83 5,214 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 0 0 0 0 -40 0 0 Repurchase agreements 33 Gross purchases 8,833 11,509 22,183 0 1,454 7,640 5,384 0 1,821 3,369 34 Gross sales 9,213 11,328 20,877 0 1,454 5,947 6,454 623 1,821 1,955 35 Net change in federal agency obligations . -672 -76 1,144 0 0 1,693 -1,070 -663 0 1,432 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 -997 463 13,853 -3,405 -3,119 83 6,647 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
A46 Domestic Nonfinancial Statistics • August 1986 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1986 1986 Apr. 30 May 7 May 14 May 21 May 28 Mar. Apr. May Consolidated condition statement ASSETS 1 Gold certificate account 11,089 11,085 11,085 11,085 11,085 11,090 11,089 11,085 2 Special drawing rights certificate account 4,718 4,718 4,818 4,818 4,818 4,718 4,718 4,818 3 Coin 530 527 523 513 491 570 530 487 Loans 4 To depository institutions 954 899 812 1,233 812 818 954 850 5 Other 0 0 0 0 0 0 0 0 Acceptances—Bought outright 6 Held under repurchase agreements 00 00 00 00 00 00 00 00 Federal agency obligations 7 Bought outright 8,187 8,187 8,137 88,,113377 88,,113377 88,,118877 88,,118877 88,,113377 8 Held under repurchase agreements 1,433 0 0 1,369 0 0 1,433 0 U.S. government securities Bought outright 9 Bills 81,939 88,987 86,496 85,923 89,126 84,247 81,939 89,619 10 Notes 67,397 67,397 67,397 67,097 67,097 67,397 67,397 67,097 11 Bonds 24,976 24,976 24,976 25,276 25,276 24,976 24,976 25,276 12 Total bought outright1 174,312 181,360 178,869 178,296 181,499 176,620 174,312 181,992 13 Held under repurchase agreements 7,522 0 0 4,758 0 0 7,522 0 14 Total U.S. government securities 181,834 181,360 178,869 183,054 181,499 176,620 181,834 181,992 15 Total loans and securities 192,408 190,446 187,818 193,793 190,448 185,625 192,408 190,979 16 Items in process of collection 7,798 7,710 7,133 6,453 11,852 5,495 7,798 5,836 17 Bank premises 623 624 625 629 629 618 623 629 Other assets 18 Denominated in foreign currencies2 8,260 8,265 8,271 8,285 8,290 7,673 8,260 8,002 19 All other3 8,352 7,685 7,876 6,609 6,320 7,344 8,352 6,695 20 Total assets 233,778 231,060 228,149 232,185 233,933 223,133 233,778 228,531 LIABILITIES 21 Federal Reserve notes 178,418 179,816 180,444 180,544 181,851 177,189 178,418 181,634 Deposits 22 To depository institutions 29,416 33,762 32,159 34,437 32,966 30,782 29,416 31,329 23 U.S. Treasury General account 11,550 4,003 2,604 4,186 4,098 3,280 11,550 3,083 24 Foreign Official accounts 326 194 ?37 205 279 274 326 254 25 Other 441 453 561 401 497 511 441 417 26 Total deposits 41,733 38,412 35,561 39,229 37,840 34,847 41,733 35,083 27 Deferred credit items 6,947 6,698 6,087 6.177 8,108 4,935 6,947 5,704 28 Other liabilities and accrued dividends4 2,217 2,116 2,087 2,262 2,160 2,184 2,217 2,249 29 Total liabilities 229,315 227,042 224,179 228,212 229,959 219,155 229,315 224,670 CAPITAL ACCOUNTS 30 Capital paid in 1,828 1,829 1,831 1,833 1,834 1,821 1,828 1,839 31 Surplus 1,781 1,781 1,781 1,781 1,781 1,781 1,781 1,778 32 Other capital accounts 854 408 358 359 359 376 854 244 33 Total liabilities and capital accounts 233,778 231,060 228,149 232,185 233,933 223,133 233,778 228,531 34 MEMO: Marketable U.S. government securities held in custody for foreign and international account 146,001 145,787 145,598 148,311 147,068 136,262 146,001 147,103 Federal Reserve note statement 35 Federal Reserve notes outstanding 211,992 212,372 212,848 213,680 213,981 211,323 211,992 213,923 36 LESS: Held by bank 33,574 32,556 32,404 33,136 32,130 34,134 33,574 32,289 37 Federal Reserve notes, net 178,418 179,816 180,444 180,544 181,851 177,189 178,418 181,634 Collateral held against notes net: 38 Gold certificate account 11,089 11,085 11,085 11,085 11,085 11,090 11,089 11,085 39 Special drawing rights certificate account 4,718 4,718 4,818 4,818 4,818 4,718 4.718 4,818 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. government and agency securities 162,611 164,013 164,541 164,641 165,948 161,381 162,611 165,731 42 Total collateral 178,418 179,816 180,444 180,544 181,851 177,189 178,418 181,634 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 Type and maturity groupings 1986 1986 Apr. 30 May 7 May 14 May 21 May 28 Mar. 31 Apr. 30 1 Loans—Total 954 899 812 1,233 812 818 954 2 Within 15 days 936 874 790 1,232 805 806 936 4 3 9 1 1 6 d d a a y y s s t t o o 9 1 0 y e d a a r y s 1 0 8 2 0 5 2 0 2 0 1 0 7 1 0 2 1 0 8 5 6 7 8 Ac W 9 1 c 1 6 e i p t d d h t a a a in y y n s s c 1 e t t 5 o o s — d 9 1 a 0 T y y o d s e t a a a r y l s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 U.S. government securities—Total 181,834 181,360 178,869 183,054 181,499 176,620 181,834 10 Within 15 days1 13,456 13,261 11,094 12,296 12,275 4,190 13,456 11 16 days to 90 days 39,760 40,458 41,799 44,962 43,197 45,337 39,760 12 91 days to 1 year 58,193 57,216 55,551 54,808 55,039 57,350 58,193 13 Over 1 year to 5 years 33,308 33,308 33,308 33,385 33,385 32,621 33,308 14 Over 5 years to 10 years 15,108 15,108 15,108 15,294 15,294 15,113 15,108 15 Over 10 years 22,009 22,009 22,009 22,309 22,309 22,009 22,009 16 Federal agency obligations—Total. 9,620 8,187 8,137 9,506 8,137 8,187 9,620 17 Within 15 days1 1,591 50 66 1,616 221 246 1,591 18 16 days to 90 days 617 701 725 544 504 617 617 19 91 days to 1 year 1,795 1,819 1,729 1,729 1,800 1,844 1,795 20 Over 1 year to 5 years 3,902 3,902 3,902 3,902 3,871 3,793 3,902 21 Over 5 years to 10 years 1,291 1,291 1,291 1,291 1,317 1,263 1,291 22 Over 10 years 424 424 424 424 424 424 424 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
A46 DomesticN onfinancial Statistics • August 1986 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE Billions of dollars, averages of daily figures 1985 1986 item 1982 1983 1984 1985 Dec. Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Seasonally adjusted ADJUSTED FOR 1 Total reserves2 34.28 36.14 39.08 45.61 44.24 44.85 45.61 45.88 46.37 46.86 47.28' 48.57 2 Nonborrowed reserves 33.65 35.36 35.90 44.29 43.06 43.11 44.29 45.11 45.49 46.10 46.38 47.69 3 Nonborrowed reserves plus extended credit3 33.83 35.37 38.50 44.79 43.69 43.64 44.79 45.61 45.98 46.62 47.02' 48.28 4 Required reserves 33.78 35.58 38.23 44.55 43.49 43.92 44.55 44.77 45.27 45.97 46.47 47.74 5 Monetary base4 170.04 185.39 198.80 216.72 213.57 215.25 216.72 218.40 219.79 221.26 222.36 224.89 Not seasonally adjusted 6 Total reserves2 35.01 36.86 40.13 46.84 44.21 45.08 46.84 47.11 45.68 46.34 47.94' 47.70 7 Nonborrowed reserves 34.37 36.09 36.94 45.52 43.02 43.34 45.52 46.34 44.80 45.58 47.04 46.83 8 Nonborrowed reserves plus extended credit3 34.56 36.09 39.55 46.02 43.65 43.87 46.02 46.84 45.29 46.10 47.68'' 47.41 9 Required reserves 34.51 36.30 39.28 45.78 43.45 44.14 45.78 46.00 44.59 45.44 47.14' 46.87 10 Monetary base4 173.07 188.66 201.94 220.36 213.36 216.04 220.36 218.74 216.78 218.98 222.13' 223.60 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS5 11 Total reserves2 41.85 38.89 40.70 48.14 45.47 46.38 48.14 48.06 46.65 47.27 48.88 48.41 12 Nonborrowed reserves 41.22 38.12 37.51 46.82 44.28 44.64 46.82 47.29 45.77 46.51 47.99 47.54 13 Nonborrowed reserves plus extended credit3 41.41 38.12 40.09 47.41 44.90 45.07 47.41 47.79 46.22 47.17 48.22' 48.24 14 Required reserves 41.35 38.33 39.84 47.08 44.72 45.45 47.08 46.95 45.55 46.38 48.08 47.58 15 Monetary base4 180.42 192.26 202.51 223.53 216.19 218.96 223.53 221.59 219.57 221.70 224.88 226.11 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 1986 1982 1983 1984 1985 DDeecc.. DDeecc.. DDeecc.. DDeecc.. FFeebb..'' MMaarr.. AApprr..'' MMaayy Seasonally adjusted 1 Ml 479.9 527.1 558.5 626.6 631.0^ 638.4 646.1 658.6 7 M2 1,952.6 2,186.0 2,373.8 2,565.8' 2,576.6' 2,591.2' 2,620.9 2,647.0 M3 2,443.5 2,697.3 2,986.5 3,200.1' 3,239.3' 3,259.1' 3,288.3 3,306.6 4 L 2,850.1 3,163.5 3,532.3 3,836.8' 3,878.3' 3,891.1' n.a. n.a. 5 Debt 4,661.3' 5,192.(y 5,952.(K 6,809.8' 6,964.5' 7,012.6' 7,069.5 n.a. Ml components 6 Currency2 134.3 148.3 158.5 170.6 172.9 173.9 174.4 175.8 7 Travelers checks3 4.3 4.9 5.2 5.9 5.9 6.1 6.1 6.1 8 Demand deposits4 237.9 242.7 248.4 271.5 269.2 273.2 275.7 281.6 9 Other checkable deposits5 103.4 131.3 146.3 178.6 183.1 185.2 189.9 195.1 Nontransactions components 10 In M26 1,472.7 1,658.9 1,815.4 1,939.2' 1,945.6' 1,952.8' 1,974.8 1,988.4 11 In M3 only7 490.9 511.3 612.7 634.3' 662.7' 667.9' 667.3 659.6 Savings deposits9 12 Commercial Banks 163.7 133.4 122.3 124.5 125.0 125.7 126.6 129.0 13 Thrift institutions 194.2 173.2 167.3 179.1 179.9' 181.2' 184.9 189.6 Small denomination time deposits9 14 Commercial Banks 380.4 351.1 387.2 384.1 388.1 389.0 387.9 384.8 15 Thrift institutions 472.4 434.1 500.3 496.2 502.9 505.7 508.3 506.2 Money market mutual funds 16 General purpose and broker/dealer 185.2 138.2 167.5 176.5 181.0 186.2 191.4 193.4 17 Institution-only 51.1 43.2 62.7 64.6 67.7 70.2 74.1 76.1 Large denomination time deposits10 18 Commercial Banks11 262.1 228.7 263.7 279.1 291.5 287.0 287.0 281.4 19 Thrift institutions 65.8 101.1 150.2 157.3 159.7 163.4 165.0 164.7 Debt components 20 Federal debt 979.2 1,173.0 1,367.3 1,586.3' 1,621.1' 1,628.2' 1,638.8' n.a. 21 Non-federal debt 3,682.1' 4,019.0 4,584.7' 5,223.5' 5,343.5' 5,384.4' 5,430.6' n.a. Not seasonally adjusted 77. Ml 490.9 538.8 570.5 639.9 619.2 630.5 652.8 651.7 23 M2 1,958.6 2,192.8 2,380.8 2,573.9 2,569.9' 2,593.2' 2,630.6 2,638.0 2.4 M3 2,453.3 2,707.9 2,997.9 3,212.8' 3,231.3' 3,259.4' 3,294.8 3,299.8 25 L 2,856.4 3,170.1 3,537.5 3,843.1' 3,870.7' 3,895.3' n.a. n.a. 26 Debt 4,655.7 5,186.5 5,946.2' 6,803.9' 6,945.2' 6,985.6' 7,040.9 n.a. Ml components 27 Currency2 136.5 150.5 160.9 173.1 170.6 172.3 173.6 175.8 28 Travelers checks3 4.1 4.6 4.9 5.5 5.6 5.8 5.8 5.9 29 Demand deposits4 246.2 251.3 257.3 281.3 262.0 267.1 278.6 276.7 30 Other checkable deposits5 104.1 132.4 147.5 180.1 181.0 185.3 194.7 193.4 Nontransactions components 31 M26 1,467.7 1,654.0 1,810.3 l^.O' 1,951.7' 1,962.7' 1,977.5 1,986.2 32 M3 only7 494.7 515.1 617.0 638.9' 661.4' 666.2' 663.7 661.8 Money market deposit accounts 33 Commercial banks 26.3 230.5 267.2 332.4 337.0 340.3 344.7 348.5 34 Thrift institutions 16.9 148.7 149.7 179.6 179.4 180.2 180.4 182.1 Savings deposits8 35 Commercial Banks 162.1 132.2 121.4 123.5 123.6 124.9 127.2 129.5 36 Thrift institutions 193.1 172.3 166.5 178.3 179.1 181.6 185.8 190.4 Small denomination time deposits9 37 Commercial Banks 380.1 351.1 387.6 384.8 387.1' 387.2 384.4 382.3 38 Thrift institutions 471.7 434.2 501.2 497.6 504.6' 504.6 505.4 502.3 Money market mutual funds 39 General purpose and broker/dealer 185.2 138.2 167.5 176.5 181.0 186.2 191.4 193.4 40 Institution-only 51.1 43.2 62.7 64.6 67.7 70.2 74.1 76.1 Large denomination time deposits10 41 Commercial Banks11 265.2 230.8 265.5 280.9 290.4' 287.6 283.5 280.7 42 Thrift institutions 65.8 101.4 150.6 157.8 160.7 163.2 164.0 164.2 Debt components 43 Federal debt 976.4 1,170.2 1,364.7 1,583.7 1,621.0 1,633.3' 1,644.6 n.a. 44 Non-federal debt 3,679.3 4,016.3 4,581.6' 5,220.2' 5,324.2' 5,352.3' 5,396.2 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A46 Domestic Nonfinancial Statistics • August 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 Nov. Dec. Jan. Feb. Ma:. Apr. Seasonally adjusted DEBITS TO Demand deposits2 1 All insured banks 109,642.3 128,440.8 154,556.0 163,038.1 189,203.0 169.894.2 179,139.6 182,841.8 192.847.2 ? Major New York City banks 47,769.4 57,392.7 70,445.1 77,069.6 89.415.1 79,324.3 85,298.6 89,350.3 95,699.5 3 Other banks 61,873.1 71,048.1 84,110.9 85,968.5 99,787.9 90,569.9 93,841.0 93.491.5 97.147.7 4 ATS-NOW accounts3 1.405.5 1,588.7 1,920.8 2,227.8 2,452.5 2,027.5 2,193.5 2,:66.0 2.088.7 5 Savings deposits4 741.4 633.1 539.0 533.4 418.6 362.4 364.6 356.7 385.2 DEPOSIT TURNOVER Demand deposits2 6 All insured banks 379.7 434.4 496.5 508.1 581.9 531.8 560.8 566.0 593.6 7 Major New York City banks 1,528.0 1,843.0 2,168.9 2,368.5 2,567.0 2,306.3 2.473.8 2,517.7 2.635.1 8 Other banks 240.9 268.6 301.8 298.1 343.7 317.7 329.3 : 25. i 336.6 9 ATS-NOW accounts3 15.6 15.8 16.7 18.2 19.8 16.1 17.2 17.7 16.0 10 Savings deposits4 5.4 5.0 4.5 4.3 3.4 2.9 3.0 2.9 3.1 DEBITS TO Not seasonally adjusted Demand deposits2 11 All insured banks 109,517.6 128,059.1 154.108.4 157,070.9 192,060.0 180,495.6 161,655.6 179,715.2 195.373.5 12 Major New York City banks 47,707.4 57,282.4 70,400.9 73,982.4 92,551.5 84,880.9 77,376.9 87,757.0 95,408.5 13 Other banks 64,310.2 70.776.9 83,707.8 83,088.6 99,508.5 95,614.7 84,278.6 91,958.3 99,965.0 14 ATS-NOW accounts3 1,397.0 1,579.5 1,903.4 2,007.8 2,354.4 2,406.1 2,065.3 2,349.0 2,393.2 15 MMDA5 567.4 848.8 1,179.0 1,221.5 1,493.2 1,543.8 1,334.9 1.600.4 1.638.8 16 Savings deposits4 742.0 632.9 538.7 496.3 405.3 392.4 331.1 362.3 418.7 DEPOSIT TURNOVER Demand deposits2 17 All insured banks 379.9 433.5 497.4 489.3 574.9 554.2 520.0 569.5 600.1 18 Major New York City banks 1,510.0 1,838.6 2.191.1 2,332.4 2,594.1 2,393.7 2,314.0 2.494.1 2.661.7 19 Other banks 240.5 267.9 301.6 287.2 333.4 329.4 303.8 328.0 345.0 70 ATS-NOW accounts3 15.5 15.7 16.6 16.4 18.8 18.9 16.4 18.3 17.9 71 MMDA5 2.8 3.5 3.8 3.7 4.5 4.6 4.0 4.7 4.8 22 Savings deposits4 5.4 5.0 4.5 4.0 3.3 3.2 2.7 3.0 3.4 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
A46 DomesticN onfinancial Statistics • August 1986 ] LOANS AND SECURITIES All Commercial Banks' Billions of dollars; averages of Wednesday figures 1985' 1986' June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Seasonally adjusted 1 Total loans and securities2 1,808.6 1,822.2 1,833.9 1,847.2 1,855.5 1,876.0 1,900.4 1,930.0 1,935.5 1,944.6 1,947.9 1,955.9 ?; U.S. government securities 273.1 275.4 275.1 275.5 274.2 276.0 273.1 268.2 273.6 269.5 270.0 274.0 Other securities 147.2 148.5 150.7 153.6 157.3 163.3 177.6 192.5 188.1 183.3 182.1 181.9 To!':1 loans and leases2 1,388.2 1,398.2 1.408.0 1,418.0 1,424.0 1,436.8 1,449.7 1,469.3 1,473.7 1,491.8 1,495.8 1,500.0 Commercial and industrial 487.6 488.5 489.7 492.1 492.7 495.7 499.5 502.1 502.4 506.1 507.8 506.5 Bankers acceptances held3.. 5.1 5.2 5.1 4.9 4.9 4.9 4.9 4.9 4.8 4.9 5.2 5.6 /' Other commercial and industrial 482.5 483.4 484.6 487.1 487.8 490.7 494.7 497.2 497.6 501.2 502.6 500.8 s1 1 U.S. addressees4 473.3 474.4 475.6 478.3 479.4 482.4 486.0 488.0 488.4 491.3 492.7 490.4 Non-U.S. addressees4... . 9.2 9.0 9.0 8.8 8.4 8.3 8.7 9.3 9.2 9.9 9.8 10.5 10 estate 397.9 402.2 405.9 409.5 414.0 418.0 422.4 427.1 431.4 436.1 440.7 446.2 r '".dividual 276.6 280.0 282.9 285.4 287.5 289.7 291.5 294.6 297.4 299.5 301.1 302.7 12 Security 40.4 40.9 39.0 39.7 39.2 39.8 40.1 44.1 43.4 50.3 47.9 46.3 13 Nonbank financial institutions 30.6 30.8 31.4 31.5 31.3 32.0 32.6 32.6 31.9 32.3 32.4 33.3 1 ! Agricultural 39.0 38.9 38.6 38.3 37.9 37.1 36.3 36.1 35.8 35.5 35.2 34.7 15 State and political subdivisions 47.5 47.9 48.8 48.8 49.3 50.0 52.8 60.5 60.3 60.2 59.8 59.5 16 Foreign banks 10.0 9.9 9.7 9.6 9.3 9.0 9.1 9.1 9.2 9.2 9.2 9.4 1 / Foreign official institutions .. . 6.6 6.5 6.2 6.5 6.6 6.7 6.9 7.0 7.0 6.8 5.3 5.1 18 Lease financing receivables.. . 17.5 17.8 18.0 18.1 18.3 18.4 18.8 19.4 19.6 19.8 19.9 19.8 19 A!! other loans 34.4 34.8 37.7 38.5 38.0 40.3 39.6 36.6 35.3 35.9 36.7 36.6 Not seasonally adjusted 20 Total loans and securities2 1,810.1 1,819.0 1,826.9 1,845.4 1,851.8 1,875.7 1,912.6 1,934.8 1,932.4 1,944.1 1,950.5 1,955.1 21 U.S. government securities 274.5 275.2 273.4 274.1 270.3 273.7 271.0 267.7 275.0 273.2 . 274.0 275.3 22 TOtohetrn slecurities 146.4 146.7 150.5 153.6 156.8 163.3 178.7 193.8 188.9 183.9 181.8 182.3 loans and leases- 1.389.2 1,397.0 1.402.9 1.417.7 1,424.7 1,438.7 1,462.9 1,473.3 1,468.5 1,487.1 1,494.7 1,497.5 >s Commercial and industrial.... 488.2 488.6 487.9 491.4 492.0 494.8 501.5 501.4 500.1 506.9 510.0 508.3 Hankers acceptances held'. . 5.1 5.2 5.0 4.8 4.8 5.0 5.2 4.9 44..77 55..00 55..22 55..55 Other commercial and 2/ U. i S n . d u ad st d ri r a e l s sees4 4 4 8 7 3 4 . . 2 0 4 47 8 4 3 . . 1 3 4 4 8 7 2 3 . . 8 6 4 47 8 7 6 . . 5 6 4 47 8 8 7 . . 4 2 4 4 8 8 9 1 . . 7 0 4 4 9 8 6 7 . . 4 3 4 4 9 8 6 7 . . 5 3 4 4 9 8 5 6 . . 4 3 4 5 9 0 2 1 . . 7 9 4 5 9 0 5 4 . . 4 9 5 4 0 9 2 3 . . 8 0 J . V Non-U.S. addressees4. . . . 9.1 9.2 9.3 9.1 8.8 8.8 9.0 9.2 9.1 9.2 9.5 9.7 Real estate 397.6 402.1 406.1 410.5 415.2 419.2 423.3 427.3 430.6 434.9 439.5 445.1 30 Individual 275.3 279.2 283.2 286.7 289.0 291.0 294.8 297.0 296.3 296.8 298.6 300.8 31 Security 40.6 39.2 36.6 37.5 38.6 41.0 45.4 46.8 4422..66 4499..44 48.4 4455..66 3 ' Nonbank financial i:, institutions 30.6 30.9 31.6 31.7 31.1 32.1 33.4 32.9 31.3 31.7 32.2 33.1 Agricultural 39.5 39.7 39.5 39.2 38.5 37.2 36.0 35.4 34.9 3344..66 3344..55 3344..66 34 State and political subdivisions 47.5 47.9 48.8 48.8 49.3 50.0 52.8 60.5 60.3 60.2 59.8 59.5 .•>.•• foreign banks 9.7 9.9 9.4 9.7 9.5 9.3 9.5 9.3 9.3 9.1 9.0 9.1 JO Foreign official institutions ... 6.6 6.5 6.2 6.5 6.6 6.7 6.9 7.0 7.0 6.8 5.3 5.1 3/ Lease financing receivables... 17.6 17.8 17.9 18.1 18.2 18.3 18.8 19.6 19.8 19.8 19.9 19.8 38 All other loans 36.0 35.2 35.7 37.8 36.7 39.1 40.4 36.1 36.1 36.8 37.5 36.6 1. Data are prorated averages of Wednesday estimates for domestically char- 2. Excludes loans to commercial banks in the United States. tered insured banks, based on weekly sample reports and quarterly universe 3. Includes nonfinancial commercial paper held. reports. For foreign-related institutions, data are averages of month-end estimates 4. United States includes the 50 states and the District of Columbia. based on weekly reports from large U.S. agencies and branches and quarterly NOTE. These data also appear in the Board's G.7 (407) release. Data have been reports from all U.S. agencies and branches, New York investment companies revised because of new seasonal factors and benchmark adjustments. Back data majority owned by foreign banks, and Edge Act corporations owned by domesti- are available from the Banking Section, Division of Research and Statistics, Mail cally chartered and foreign banks. Stop 66, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Commercial Banking Institutions A! 7 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS' Monthly averages, billions of dollars 1985 1986 Source June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr' Total nondeposit Kinds 1 Seasonally adjusted2 110.9 106.3 109.8 111.6 115.2 118.4 123.8 127.1 127.5 134.7' I28.J< • ••• > 2 Not seasonally adjusted 112.2 105.4 111.4 112.4 116.2 121.9 125.9 129.6T 132.5 141.6r HC.. Federal funds, RPs, and other borrowings from nonbanks3 4 3 N Se o a t s o se n a a s l o ly n a a l d ly ju a s d te j d u sted 1 1 4 4 3 4 . . 5 8 1 1 4 4 3 2 . . 4 4 1 14 3 1 9 . . 5 8 1 14 4 1 0 . . 4 5 1 1 4 4 1 2 . . 0 0 1 14 4 9 5 . . 4 9 1 1 5 5 0 2 . . 4 4 1 15 4 0 7 . . 1 7 ' 1 1 4 5 8 3 . . 6 6 T ^ 1 1 6 5 1 6 . . 2 3 ' ' 1 1 5 5 5 8 . . 3 6 • • «r j 5 Net balances due to foreign-related institutions, not seasonally adjusted -32.6 -37.1 -30.0 -29.0 -25.8 -27.6 -26.6 -20.5 -21.0 -19.5 -26.4 MEMO 6 Domestically chartered banks' net positions with own foreign brandies, not seasonally adjusted4 -32.5 -38.3 -32.8 -30.7 -28.7 -30.3 -31.6 -28.0 -25.8 -26.5 -30.2 -29 1 7 8 G G r r o o s s s s d d u u e e f to ro b m a l b an al c a e n s c es 7 4 6 4 . . 4 0 7 4 9 0 . . 2 8 7 43 5 . . 0 8 7 4 4 4 . . 7 0 7 4 4 5 . . 2 4 7 4 4 3 . . 1 8 7 4 6 4 . . 1 5 7 4 4 6 . . 4 5 4 6 3 9 . . 7 5 7 45 1 . . 2 7 7 45 5 . . 1 3 42.2 9 Foreign-related institutions' net positions with directly related institutions, not seasonally adjusted5 -.2 1.3 2.8 1.7 2.9 2.7 5.1 7.4 4.7r 7.0 3.7 T.l 10 Gross due from balances 53.0 54.6 55.1 56.0 55.4 56.1 56.8 57.7 60.0 60.7 62.6 60.0 11 Gross due to balances 52.8 55.9 57.9 57.8 58.3 58.8 61.9 65.1 64.8 67.7 66.3 67.: 12 Sec S u e r a i s t o y n R al P ly b a o d rr j o u w st i e n d g 5 s 83.5 83.7 83.3 85.3 84.7 84.8 88.0 86.1 87.y V.V 87.2 fefeO 13 Not seasonally adjusted 82.3 80.4 82.6 83.7 83.4 85.9 87.7 86.1 90.4'' 90.2' 88.1 14 U. S S e . a T s r o e n a a s l u ly ry a d d j e u m st a e n d d balances' 16.9 20.5 16.1 14.9 4.7 13.5 17.5 19.0 21.1 15.7 17.4 11 15 Not seasonally adjusted 14.9 23.1 13.4 16.8 5.4 7.9 14.6 24.0 24.2 15.7 17.8 .. 8 Time deposits, >100,000 or more* 1 1 6 7 S N e o a t s o se n a a s ll o y n a a l d ly ju a st d e j d u sted 3 32 2 7 8 . . 2 9 3 3 2 2 4 3 . . 2 2 3 3 2 2 7 7 . . 2 7 3 3 3 3 0 2 . . 8 7 3 3 3 3 3 6 . . 9 3 3 3 3 3 5 7 . . 9 5 3 3 3 3 7 9 . . 6 4 3 3 4 4 9 8 . . 4 3 3 3 5 5 1 0 . . 8 7 3 3 4 4 7 8 . . 7 3 ' 3 34 4 3 6 . . 4 9 m.t. 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 oaniut-g 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 RP», avJ 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 nonntember 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-loa- »< tr r . *t 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
A46 Domestic Nonfinancial Statistics • August 1986 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS1 Last-Wednesday-of-Month Series Billions of dollars 1985' 1986' AAccccoouunntt July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May ALL COMMERCIAL BANKING INSTITUTIONS2 1 Loans and sec jrities 1.954.3 1,958.2 1,976.4 1,985.8 2,035.6 2,068.7 2.065.2 2,078.8 2,091.4 2,113.4 2,101.3 2 Investment securities 399.1 400.3 403.8 402.4 410.5 420.4 432.5 432.8 427.2 429.5 430.9 3 U.S. government securities 260.2 257.8 258.1 252.9 254.9 253.9 251.9 255.1 253.7 255.8 257.7 4 Other 138.9 142.5 145.7 149.6 155.6 166.5 180.6 177.7 173.5 173.6 173.2 s Trading account assets 22.3 24.2 26.4 25.0 32.0 31.1 30.1 34.0 30.1 27.8 27.0 6 I otal loans 1,532.9 1,533.6 1,546.2 1,558.4 1,593.1 1,617.2 1,602.6 1,612.0 1,634.2 1,656.1 1,643.4 i interbank loans 133.0 129.4 128.6 132.4 149.0 150.6 140.4 143.5 146.0 155.7 146.3 8 Loans excluding interbank 1,399.9 1,404.3 1,417.6 1,425.9 1,444.2 1,466.7 1,462.2 1,468.5 1,488.1 1,500.4 1,497.2 9 Commercial and industrial 489.1 487.8 492.3 491.7 495.8 500.2 496.7 501.8 508.5 510.5 506.1 10 Real estate 403.7 407.4 411.5 416.7 420.2 423.7 428.7 431.5 435.9 441.7 446.4 11 Individual 281.0 284.9 287.4 290.3 292.0 296.0 297.4 296.4 296.9 300.4 301.2 12 All other 226.2 224.2 226.3 227.2 236.2 246.7 239.4 238.7 246.9 247.8 243.4 13 Total cash assets 199.8 190.2 189.6 191.5 209.0 213.3 187.3 193.7 198.1 209.9 221.0 14 Reserves with Federal Reserve Banks 21.0 24.6 24 8 19.5 20.4 27.6 21.9 26.2 29.1 25.5 30.2 15 Cash in vault 22.0 22.7 22.1 22.6 21.4 22.2 23.0 22.7 21.8 22.3 23.9 16 Cash items in process of collection . . . 70.7 62.6 61 6 68.1 82.1 79.5 64.2 66.9 68.8 80.7 84.6 17 Demand balances at U.S. depository institutions 33.6 30.7 30.6 31.5 35.8 36.0 31.3 31.8 31.1 34.7 36.8 18 Other cash assets 52.5 49.6 50.6 49.8 49.4 48.0 47.0 46.1 47.4 46.7 45.5 19 Other assets 204.5 190.7 196.2 189.2 197.1 201.9 187.0 186.5 195.3 207.0 196.0 20 Total assets/total liabilities and capital . . . 2,358.7 2,339.1 2,362.2 2,366.5 2,441.8 2,483.8 2,439.6 2,458.9 2,484.8 2,530.3 2,518.2 21 Deposits 1.692.6 1,684.3 1,690.5 1,713.6 1,751.7 1,772.5 1,739.5 1,746.4 1,762.8 1,798.4 1,808.0 22 Transaction deposits 493.2 476.3 475.2 491.7 522.2 536.9 488.8 492.1 502.5 540.7 542.7 23 Savings deposits 436.1 438.3 440.1 445.8 450.4 452.0 454.2 457.2 462.0 467.8 476.9 24 Time deposits 763.3 769.7 775.3 776.2 779.1 783.6 796.5 797.1 798.3 789.9 788.4 2i Borrowings 326.3 313.7 328.3 313.6 356.1 367.8 364.4 374.7 373.1 390.7 367.4 26 Other liabilities 176.1 177.3 179.0 173.7 167.9 175.8 167.6 169.1 179.3 170.4 173.1 27 Residual (assets less liabilities) 163.6 163.8 164.4 165.5 166.0 167.7 168.2 168.8 169.7 170.8 169.7 MEMO 28 U.S. government securities (including trading account) 274.0 271.9 275.2 268.6 274.8 269.7 269.8 278.4 273.7 274.0 275.1 29 Other securities (including trading account) 147.3 152.6 155.1 158.8 167.7 181.8 192.8 188.4 183.6 183.3 182.8 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 1.854.0 1,856.8 1,869.9 1,879.5 1,926.0 1,954.3 1,954.3 1,964.0 1,972.4 1,993.3 1,985.3 31 Investment securities 389.1 390.2 392.9 391.1 399.5 409.9 421.1 420.8 416.0 416.1 417.1 32 U.S. government securities 255.5 253.1 253.1 247.4 250.1 249.0 247.0 249.6 248.5 248.8 250.2 33 Other 133.7 137.1 139.7 143.8 149.4 160.9 174.1 171.2 167.5 167.2 166.9 34 Trading account assets 22.3 24.2 26.4 25.0 32.0 31.1 30.1 34.0 30.1 27.8 27.0 35 Total loans 1,442.6 1,442.4 1,450.6 1,463.4 1,494.5 1,513.4 1,503.1 1,509.2 1,526.3 1,549.4 1,541.2 36 Interbank loans 111.0 106.0 104.2 108.7 124.1 123.8 115.8 115.8 120.2 129.3 123.3 37 Loans excluding interbank 1,331.6 1,336.4 1,346.4 1,354.6 1,370.4 1,389.5 1,387.3 1,393.5 1,406.1 1,420.1 1,417.9 38 Commercial and industrial 439.8 438.0 440.2 439.3 441.8 445.3 442.5 446.2 448.2 452.3 449.7 39 Real estate 398.3 402.1 406.1 411.5 415.0 418.4 423.6 426.4 430.7 436.3 440.7 40 Individual 280.7 284.6 287.1 290.0 291.7 295.7 297.1 296.2 296.6 300.1 300.9 41 All other 212.8 211.7 213.1 213.8 222.0 230.1 224.1 224.7 230.7 231.4 226.6 42 Total cash assets 183.0 174.1 173.5 175.7 193.4 197.2 171.1 179.1 182.7 194.3 205.8 43 Reserves with Federal Reserve Banks 20.3 23.6 24.2 18.3 19.2 25.8 21.0 25.5 28.4 24.4 28.7 44 Cash in vault 22.0 22.7 22.0 22.6 21.4 22.2 23.0 22.6 21.7 22.2 23.8 45 Cash items in process of collection . .. 70.5 62.3 61.3 67.9 81.8 79.3 63.8 66.5 68.4 80.3 84.2 46 Demand balances at U.S. depository institutions 32.3 29.0 29.1 30.1 33.9 34.3 29.4 30.1 29.4 33.0 35.1 47 Other cash assets 38.0 36.4 36.8 36.8 37.1 35.7 34.0 34.3 34.7 34.3 34.0 48 Other assets 153.9 141.9 142.8 141.1 146.2 150.0 137.8 134.6 144.0 150.3 142.8 49 Total assets/total liabilities and capital ... 2,190.8 2,172.8 2,186.1 2,196.3 2,265.6 2,301.6 2,263.1 2,277.8 2,299.1 2,337.9 2,333.9 50 Deposits 1,648.7 1,638.4 1,643.1 1,666.4 1,704.6 1,724.4 1,689.6 1,698.2 1,713.1 1,749.1 1,759.3 51 Transaction deposits 486.6 469.5 468.3 485.0 515.3 529.5 481.6 484.8 495.0 533.1 535.4 52 Savings deposits 434.5 436.7 438.5 444.1 448.6 450.3 452.4 455.3 460.1 465.8 474.9 53 Time deposits 727.6 732.2 736.3 737.3 740.7 744.7 755.7 758.1 758.1 750.1 749.0 54 Borrowings 262.8 254.2 263.8 252.2 285.0 295.7 298.0 304.9 304.8 309.1 294.2 55 Other liabilities 118.8 119.5 117.9 115.4 113.0 116.9 110.5 109.0 114.6 112.0 113.9 56 Residual (assets less liabilities) 160.5 160.7 161.3 162.4 162.9 164.6 165.0 165.6 166.5 167.7 166.6 1. Data have been revised back to January 1984. Revised end-of-month data NOTE. Figures are partly estimated. They include all bank-premises subsidiarfrom January 1984 through June 1985 are available on request from the Banking ies and other significant majority-owned domestic subsidiaries. Loan and securi- Section. Division of Research and Statistics, Mail Stop 66, Board of Governors of ties data for domestically chartered commercial banks are estimates for the last the Federal Reserve System, Washington, D.C. 20551. Wednesday of the month based on a sample of weekly reporting banks and 2. Commercial banking institutions include insured domestically chartered quarter-end condition report data. Data for other banking institutions are esticommercial bank-, branches and agencies of foreign banks. Edge Act and mates made for the last Wednesday of the month based on a weekly reporting Agreement corporations, and New York State foreign investment corporations. sample of foreign-related institutions and quarter-end condition reports. 3. Insured domestically chartered commercial banks include all member banks and insured nonmember banks. 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 Apr. 2' Apr. 9r Apr. 16^ Apr. 23r Apr. 3(K May 7 May 14 May 21 May 28 1 Cash and balances due from depository institutions 102,206 90,946 104,826 109,112 101,565 94,697 97,036 96,704 111,756 2 Total loans, leases and securities, net 928,066 931,016 935,790 938,180 943,321 933,271 926,110 934,016 930,236 3 U.S. Treasury and government agency 91,288 95,401 94,796 91,625 92,541 93,773 93,671 93,603 92,761 4 Trading account 21,576 23,792 22,559 19,661 21,505 21,909 22,805 22,004 20,730 5 Investment account, by maturity 69,712 71,608 72,237 71,964 71,036 71,864 70,866 71,599 72,031 6 One year or less 19,718 20,057 19,712 19,269 19,227 19,252 19,107 18,755 19,070 7 Over one through five years 33,321 33,816 34,262 33,852 33,186 35,232 33,972 34,777 35,032 8 Over five years 16,673 17,735 18,264 18,843 18,622 17,380 17,787 18,067 17,929 9 Other securities 67,685 67,278 68,568 68,644 69,254 68,300 67,586 67,470 68,002 10 Trading account 4,534 4,252 5,414 5,238 5,192 4,738 4,001 3,934 4,534 11 Investment account 63,151 63,026 63,155 63,405 64,062 63,562 63,585 63,536 63,468 12 States and political subdivisions, by maturity 56,519 56,295 56,203 56,404 56,912 56,466 56,548 56,508 56,396 13 One year or less 9,835 9,743 9,677 9,634 9,648 9,376 9,345 9,199 9,040 14 Over one year 46,684 46,552 46,526 46,770 47,264 47,090 47,202 47,310 47,357 15 Other bonds, corporate stocks, and securities 6,632 6,731 6,952 7,001 7,149 7,096 7,037 7,028 7,071 16 Other trading account assets 5,260 4,886 4,903 4,509 4,830 5,051 4,870 4,851 5,417 17 Federal funds sold1 62,248 66,626 63,832 71,481 70,081 62,694 56,024 61,542 60,020 18 To commercial banks 37,999 43,303 39,137 43,705 43,878 37,729 32,271 35,034 35,801 19 To nonbank brokers and dealers in securities 17,340 15,284 16,655 18,824 17,391 16,636 15,819 17,718 15,993 20 To others 6,908 8,039 8,040 8,952 8,812 8,329 7,934 8,790 8,225 21 Other loans and leases, gross2 720,872 716,240 723,378 721,647 726,525 723,405 723,937 726,544 724,046 22 Other loans, gross2 704,976 700,356 707,483 705,745 710,631 707,496 708,036 710,637 708,139 23 Commercial and industrial2 261,187 258,571 261,491 258,778 260,976 261,411 260,914 258,845 258,072 24 Bankers acceptances and commercial paper 2,296 2,235 2,259 2,166 2,156 2,295 2,514 2,427 2,395 25 All other 258,890 256,336 259,232 256,612 258,821 259,116 258,400 256,417 255,677 26 U.S. addressees 254,411 251,945 254,526 252,106 254,277 254,575 253,897 251,951 251,276 27 Not\-U.S. addressees 4,479 4,390 4,706 4,506 4,543 4,541 4,502 4,466 4,401 28 Real estate loans2 185,745 185,948 186,781 187,041 187,521 188,035 189,181 190,106 189,826 29 To individuals for personal expenditures 132,655 132,745 133,478 133,866 134,298 134,219 134,516 134,556 134,843 30 To depository and financial institutions 42,406 42,225 43,054 44,100 43,639 44,062 43,692 45,324 44,814 31 Commercial banks in the United States 12,748 12,762 12,950 14,795 13,892 14,556 13,901 14,705 14,384 32 Banks in foreign countries 5,106 4,838 4,915 5,541 5,420 5,218 4,860 5,550 5,618 33 Nonbank depository and other financial institutions 24,552 24,625 25,189 23,764 24,326 24,288 24,932 25,069 24,812 34 For purchasing and carrying securities 20,036 20,253 21,152 20,435 21,958 18,170 18,257 20,540 18,625 35 To finance agricultural production 6,202 6,186 6,207 6,217 6,226 6,251 6,290 6,308 6,276 36 To states and political subdivisions 36,426 36,374 36,480 36,580 36,418 36,318 36,260 36,309 36,216 37 To foreign governments and official institutions 3,246 3,138 3,095 3,295 3,307 3,405 3,354 3,322 3,439 38 All other 17,073 14,914 15,744 15,433 16,288 15,624 15,572 15,327 16,028 39 Lease financing receivables 15,896 15,884 15,895 15,902 15,894 15,908 15,900 15,907 15,906 40 LESS: Unearned income 4,918 4,898 4,926 4,924 4,960 4,934 4,939 4,935 4,940 41 Loan and lease reserve2 14,368 14,517 14,760 14,802 14,949 15,018 15,039 15,060 15,069 42 Other loans and leases, net2 701,586 696,825 703,692 701,922 706,616 703,452 703,959 706,550 704,036 43 All other assets 130,332 132,817 133,081 130,442 131,872 131,118 129,324 127,990 124,611 44 Total assets 1,160,605 1,154,780 1,173,697 1,177,734 1,176,759 1,159,086 1,152,470 1,158,710 1,166,603 45 Demand deposits 217,876 206,384 222,204 213,151 222,092 207,070 208,595 203,878 223,183 46 Individuals, partnerships, and corporations 168,226 158,836 168,009 158,419 166,947 158,384 161,770 155,869 166,909 47 States and political subdivisions 5,099 4,618 5,988 5,051 6,036 5,151 4,640 5,056 5,051 48 U.S. government 1,666 1,674 4,029 3,742 4,767 2,925 2,437 1,132 1,861 49 Depository institutions in United States 24,856 22,705 25,329 22,885 24,632 23,777 23,168 23,842 27,045 50 Banks in foreign countries 6,158 5,557 6,225 6,832 6,451 5,990 6,319 6,209 6,613 51 Foreign governments and official institutions 939 891 930 985 878 809 800 796 952 52 Certified and officers' checks 10,932 12,104 11,694 15,238 12,381 10,033 9,460 10,974 14,753 53 Transaction balances other than demand deposits 45,918 46,476 48,153 45,792 44,322 45,125 44,471 44,526 44,433 54 Nontransaction balances 493,902 493,916 490,881 490,598 490,134 490,864 491,108 492,425 492,205 55 Individuals, partnerships and corporations 455,629 455,648 453,053 452,300 451,872 452,343 452,557 453,659 453,483 56 States and political subdivisions 25,429 25,614 25,308 25,825 25,753 25,795 26,052 26,315 26,326 57 U.S. government 692 700 691 689 683 671 674 762 761 58 Depository institutions in the United States 10,483 10,323 10,221 10,182 10,258 10,488 10,305 10,190 10,223 59 Foreign governments, official institutions and banks 1,669 1,630 1,607 1,601 1,567 1,566 1,520 1,498 1,412 60 Liabilities for borrowed money 236,206 242,290 246,846 258,563 252,508 250,943 242,378 246,116 238,496 61 Borrowings from Federal Reserve Banks 110 2,019 245 547 305 397 339 677 269 62 Treasury tax-and-loan notes 2,308 6,366 11,134 15,731 17,532 17,739 15,580 11,164 7,912 63 All other liabilities for borrowed money3 233,788 233,905 235,466 242,285 234,671 232,807 226,458 234,275 230,315 64 Other liabilities and subordinated note and debentures 85,547 84,339 84,724 88,625 85,833 83,128 83,826 89,811 86,339 65 Total liabilities 1,079,449 1,073,405 1,092,807 1,0%,730 1,094,890 1,077,130 1,070,378 1,076,756 1,084,656 66 Residual (total assets minus total liabilities)4 81,155 81,375 80,890 81,005 81,868 81,956 82,092 81,954 81,947 MEMO 67 Total loans and leases (gross) and investments adjusted5 896,605 894,366 903,391 899,406 905,460 900,938 899,916 904,272 900,060 68 Total loans and leases (gross) adjusted2 5 732,372 726,801 735,124 734,628 738,836 733,813 733,789 738,348 733,880 69 Time deposits in amounts of $100,000 or more 159,428 159,116 156,948 156,843 155,904 155,980 155,918 155,757 155,432 70 Loans sold outright to affiliates—total6 1,647 1,743 1,803 1,626 1,702 1,686 1,686 1,534 1,506 71 Commercial and industrial 942 1,044 1,102 962 1,038 1,049 1,057 958 950 72 Other 705 699 700 664 664 637 629 576 556 73 Nontransaction savings deposits (including MMDAs) 200,782 201,518 200,257 200,142 200,597 201,523 202,219 204,059 204,081 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
A46 Domestic Nonfinancial Statistics • August 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 Apr. 2 Apr. 9 Apr. 16 Apr. 23 Apr. 30 May 7 May 14 May 21 May 28 1 Cash and balances due from depository institutions 25,650 22,834 25,555 31,870 26,606 23,896 23,601 25,982 31,236 2 Total loans, leases and securities, net1 197,961 198,032 200,446 203,880 204,206 197,328 194,687 200,641 198,991 Securities 3 4 5 Investment account, by maturity 10,288 10,587 11,j 92 11,145 10,673 10,674 10,096 9,983 9,60i 6 One year or less 1,597 1,574 1,442 1,522 1,375 1,394 1,382 1,306 1,114 7 Over one through five years 5,608 5,732 6,322 6,017 6,087 6,470 5,383 5,215 5,214 8 Over five years 3,083 3,280 3,428 3,606 3,210 2,810 3,332 33,,446622 33,,227722 9 10 11 Investment account 15,228 15,183 15,276 15,319 15,462 15,439 15,447 15,324 15,310 12 States and political subdivisions, by maturity 13,141 13,110 13,106 13,144 13,262 13,254 13,299 13,234 13,232 13 One year or less 1,684 1,666 1,656 1,655 1,706 1,715 1,712 1,694 1,685 14 Over one year 11,456 11,443 11,449 11,489 11,557 11,539 11,587 11,540 11,546 15 Other bonds, corporate stocks and securities 2,087 2,074 2,170 2,174 2,200 2,184 2,148 2,091 2,078 1166 Loans and leases 17 Federal funds sold3 27,532 29,172 28,173 32,777 31,808 27,241 25,643 29,556 28,608 18 To commercial banks 13,319 15,660 14,180 17,499 16,289 12,260 11,630 13,954 13,989 19 To nonbank brokers and dealers in securities 9,343 7,479 8,433 9,539 8,800 8,447 8,063 8,939 8,207 20 To others 4,869 6,033 5,560 5,740 6,719 6,534 5,949 6,662 6,412 21 Other loans and leases, gross 150,434 148,666 151,388 150,235 151,907 149,651 149,232 151,522 151,218 22 Other loans, gross 147,345 145,633 148,348 147,189 148,870 146,606 146,236 148,517 148,206 23 Commercial and industrial 58,975 58,019 59,041 57,514 57,988 57,977 58,087 56,638 56,696 24 Bankers acceptances and commercial paper 462 516 483 492 488 512 618 666 542 25 All other 58,513 57,503 58,558 57,022 57,500 57,465 57,469 55,972 56,154 26 U.S. addressees 57,986 56,982 57,780 56,261 56,738 56,702 56,707 55,246 55,478 27 Non-U.S. addressees 527 522 779 762 762 763 762 725 675 28 Real estate loans 31,003 30,964 31,288 31,433 31,286 31,355 31,683 31,925 32,005 29 To individuals for personal expenditures 17,737 17,731 17,800 17,855 17,926 17,956 18,094 18,116 18,167 30 To depository and financial institutions 13,489 13,390 14,038 14,575 14,849 14,934 14,119 15,402 15,587 31 Commercial banks in the United States 4,524 4,639 4,981 5,487 5,880 6,194 5,667 6,548 6,459 32 Banks in foreign countries 2,318 2,080 1,955 2,576 2,293 2,200 1,827 2,130 2,397 33 Nonbank depository and other financial institutions 6,647 6,670 7,102 6,512 6,676 6,540 6,626 6,724 6,731 34 For purchasing and carrying securities 10,580 11,180 11,214 10,575 11,664 9,294 9,264 11,578 10,091 35 To finance agricultural production 317 316 312 323 319 311 295 300 301 36 To states and political subdivisions 9,196 9,187 9,279 9,391 9,259 9,248 9,258 9,307 9,211 37 To foreign governments and official institutions 818 764 716 922 856 959 879 857 963 38 All other 5,229 4,082 4,661 4,600 4,722 4,574 4,556 4,396 5,185 39 Lease financing receivables 3,089 3,033 3,040 3,046 3,037 3,045 2,996 3,005 3,012 40 LESS: Unearned income 1,407 1,377 1,384 1,389 1,433 1,435 1,434 1,438 1,440 41 Loan and lease reserve 4,113 4,198 4,200 4,208 4,211 4,242 4,297 4,306 4,306 42 Other loans and leases, net 144,913 143,091 145,804 144,638 146,263 143,974 143,501 145,778 145,472 43 All other assets4 72,181 76,800 75,831 72,658 73,456 74,334 73,336 72,672 71,611 44 Total assets 295,792 297,667 301,832 308,408 304,268 295,559 291,624 299,295 301,838 Deposits 45 Demand deposits 56,788 54,879 58,766' 59,757' 58,576' 53,624 52,385 53,883 61,506 46 Individuals, partnerships, and corporations 40,174 36,718 39,983' 37,705' 39,112' 35,967 35,826 35,823 39,514 47 States and political subdivisions 667 564 1,081 581 688 589 594 584 614 48 U.S. government 183 221 656 684 715 556 486 143 332 49 Depository institutions in the United States 5,286 5,229 5,878 5,517 6,167 6,033 5,410 5,832 5,863 50 Banks in foreign countries 4,772 4,347 4,886 5,587 5,127 4,818 5,070 4,989 5,225 51 Foreign governments and official institutions 790 724 766 831 684 646 642 640 784 52 Certified and officers' checks 4,915 7,077 5,516 8,852 6,082 5,014 4,358 5,872 99,,117755 53 Transaction balances other than demand deposits ATS, NOW, Super NOW, telephone transfers) 4,939' 5,071' 5,330 4,992 4,785 4,903 4,837 4,884 4,909 54 Nontransaction balances 91,876' 91,413' 91,105' 90,452' 91,402' 91,424 91,469 92,083 91,576 55 Individuals, partnerships and corporations 82,936' 82,527' 82,231' 81,439' 82,136' 82,104 82,334 82,664 82,490 56 States and political subdivisions 5,598 5,853 5,782 5,870 5,876 5,939 5,976 6,162 6,095 57 U.S. government 48 49 46 49 48 47 47 125 120 58 Depository institutions in the United States 2,385 2,114 2,187 2,222 2,496 2,488 2,249 2,273 2,097 59 Foreign governments, official institutions and banks 907 870 859 873 846 846 863 859 774 60 Liabilities for borrowed money 81,677 85,539 85,411 90,032 87,809 84,546 82,235 84,163 81,933 61 1,475 62 Treasury tax-and-loan notes 287 1,536 3,074 4,414 4,894 4,895 4,167 2,850 2,073 63 All other liabilities for borrowed money5 81,390 82,528 82,337 85,618 82,914 79,651 78,068 81,312 79,860 64 Other liabilities and subordinated note and debentures 34,521 34,700 35,286 37,146 35,378 34,597 34,256 37,871 35,556 65 Total liabilities 269,801 271,602 275,898 282,379 277,950 269,094 265,183 272,885 275,481 66 Residual (total assets minus total liabilities)6 25,991 26,065 25,934 26,028 26,318 26,465 26,441 26,411 26,357 MEMO 67 Total loans and leases (gross) and investments adjusted1-7 185,638 183,309 186,869 186,491 187,681 184,551 183,121 185,883 184,289 68 Total loans and leases (gross) adjusted7 160,122 157,539 160,401 160,027 161,546 158,437 157,578 160,576 159,378 69 Time deposits in amounts of $100,000 or more 35,043 34,657 34,834 34,402 34,880 34,684 34,476 34,794 34,288 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 BANKS1 Assets and Liabilities Millions of dollars, Wednesday figures 1986 AAccccoouunntt Apr. 2 Apr. 9 Apr. 16 Apr. 23 Apr. 30 May 7 May 14 May 21 May 28 1 Cash and due from depository institutions. 9,417 8,730 9,589 9,389 9,452 8,932 9,194 8,705 9,202 2 Total loans and securities 67,583 66,693 67,529 68,517 69,478 68,368 67,123 67,839 67,036 3 U.S. Treasury and govt, agency securities 3,888 4,245 4,492 4,345 4,946 4,952 4,938 5,089 5,256 4 Other securities 3,999 3,983 4,152 4,322 4,310 4,241 4,278 4,201 4,384 5 Federal funds sold2 3,786 3,726 3,116 4,380 4,318 4,752 3,563 5,105 3,628 6 To commercial banks in the United States 3,105 2,985 2,189 3,359 3,314 3,740 2,492 3,928 2,386 7 To others 681 741 927 1,021 1,004 1,011 1,071 1,177 1,242 8 Other loans, gross 55,908 54,740 55,769 55,469 55,904 54,424 54,344 53,444 53,768 9 Commercial and industrial 32,629 32,342 32,617 32,224 32,188 32,074 31,573 31,028 31,089 10 Bankers acceptances and commercial paper 2,348 2,216 2,243 2,219 2,371 2,605 2,626 2,659 2,616 11 All other 30,281 30,126 30,374 30,005 29,816 29,469 28,947 28,368 28,473 12 U.S. addressees 28,146 27,942 28,159 27,764 27,551 27,174 26,645 26,065 26,042 13 Non-U.S. addressees 2,135 2,184 2,215 2,241 2,265 2,295 2,302 2,304 2,431 14 To financial institutions 15,540 15,184 15,845 16,067 15,863 15,862 15,347 15,044 15,025 15 Commercial banks in the United States . 12,707 12,525 12,793 13,235 12,929 12,628 12,065 11,548 11,604 16 Banks in foreign countries 973 968 1,055 984 953 988 1,004 980 931 17 Nonbank financial institutions 1,860 1,692 1,996 1,848 1,981 2,247 2,278 2,517 2,490 18 To foreign govts, and official institutions .. 608 608 622 611 641 555 550 557 559 19 For purchasing and carrying securities .. 3,611 2,951 3,092 2,889 3,428 2,152 3,040 2,831 3,053 20 All other 3,520 3,654 3,593 3,678 3,784 3,780 3,834 3,983 4,042 21 Other assets (claims on nonrelated parties).. 21,812 22,273 21,905 22,107 22,024 22,000 22,088 22,336 21,937 22 Net due from related institutions 11,982 14,735 12,407 13,694 14,744 14,324 12,871 12,342 12,346 23 Total assets 110,794 112,431 111,430 113,708 115,698 113,624 111,276 111,222 110,522 24 Deposits or credit balances due to other than directly related institutions.... 31,901 32,113 32,338 31,799 32,821 32,386 32,060 32,059 32,047 25 Transaction accounts and credit balances3 2,723 2,549 2,730 2,653 2,961 3,245 2,903 3,057 3,085 26 Individuals, partnerships, and corporations 1,555 1,397 1,552 1,550 1,667 1,789 1,901 1,670 1,614 27 Other 1,168 1,152 1,178 1,102 1,294 1,456 1,002 1,387 1,472 28 Nontransaction accounts4 29,178 29,564 29,608 29,146 29,860 29,140 29,157 29,002 28,961 29 Individuals, partnerships, and corporations 23,718 24,110 24,109 23,831 24,626 23,855 23,865 2233,,772266 23,886 30 Other 5,460 5,454 5,499 5,315 5,234 5,286 5,292 5,277 5,076 31 Borrowings from other than directly related institutions 43,829 46,596 43,747 45,717 46,888 45,810 42,003 4422,,669900 4422,,113322 32 Federal funds purchased5 20,959 24,021 22,243 23,410 25,378 23,930 20,267 20,491 20,416 33 From commercial banks in the United States 16,055 18,892 15,886 16,856 18,439 16,874 13,964 13,977 13,587 34 From others 4,904 5,129 6,356 6,554 6,939 7,056 6,302 6,514 6,829 35 Other liabilities for borrowed money.... 22,871 22,575 21,505 22,306 21,510 21,880 21,736 22,199 21,715 36 To commercial banks in the United States 21,009 20,991 19,628 20,585 19,648 20,005 19,726 19,684 19,147 37 To others 1,862 1,584 1,876 1,722 1,863 1,875 2,010 2,515 2,568 38 Other liabilities to nonrelated parties 23,481 24,252 23,510 23,464 23,694 23,634 23,824 23,396 23,313 39 Net due to related institutions 11,582 9,468 11,835 12,728 12,294 11,793 13,389 13,076 13,030 40 Total liabilities 110,794 112,431 111,430 113,708 115,698 113,624 111,276 111,222 110,522 MEMO 41 Total loans (gross) and securities adjusted6 51,771 51,183 52,547 51,923 53,235 52,000 52,566 52,363 53,047 42 Total loans (gross) adjusted6 43,883 42,956 43,903 43,255 43,979 42,807 43,350 43,072 43,406 1. Effective Jan. 1, 1986, the reporting panel includes 65 U.S. branches and 4. Includes savings deposits, money market deposit accounts, and time agencies of foreign banks that include those branches and agencies with assets of deposits. $750 million or more on June 30, 1980, plus those branches and agencies that had 5. Includes securities sold under agreements to repurchase. reached the $750 million asset level on Dec. 31, 1984. 6. Exclusive of loans to and federal funds sold to commercial banks in the 2. Includes securities purchased under agreements to resell. United States. 3. Includes credit balances, demand deposits, and other checkable deposits. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A46 Domestic Nonfinancial Statistics • August 1986 1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations' 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 DD 1199 ee 88 cc 11 .. DD 1199 ee 88 cc 22 .. DD 11 ee 99 cc 88 .. 33 11 DD 1199 ee 88 cc 44 .. DD 1199 ee 88 cc 55 .. Nov. Dec. Jan. Feb. Mar. Apr. Commercial paper (seasonally adjusted unless noted otherwise) 11 AAll!! iissssuueerrss 165,829 166,436 187,658 237,586 300,899 287,981 300,899 302,160 297,862 301,110 297,108 FFiinnaanncciiaall ccoommppaanniieess33 DDeeaalleerr--ppllaacceedd ppaappeerr44 22 TToottaall 30,333 34,605 44,455 56.485 78,443 72,145 78,443 79,048 78,136 84,071 83,871 33 BBaannkk--rreellaatteedd ((nnoott sseeaassoonnaallllyy aaddjjuusstteedd)) 6,045 2,516 2,441 2,035 1,602 1,969 1,602 1,410 1,475 1,348 1,520 DDiirreeccttllyy ppllaacceedd ppaappeerr'' 44 TToottaall 81,660 84,393 97,042 110,543 135,504 131,667 135,504 134,584 134,443 135,510 135,801 55 BBaannkk--rreellaatteedd ((nnoott sseeaassoonnaallllyy aaddjjuusstteedd)) 26,914 32,034 35,566 42,105 44,778 41,490 44,778 37,418 36,948 37,013 37,835 66 NNoonnffiinnaanncciiaall ccoommppaanniieess66 53,836 47,437 46,161 70,558 86,952 84,169 86,952 88,528 85,283 81,529 77,436 Bankers dollar acceptances (not seasonally adjusted)7 7 Total 69,226 79,543 78,309 77,121 68,115' 67,890 68,115' 68,314' 67,188 66,882' 66,235 Holder 8 Accepting banks 10,857 10,910 9,355 9,812r 11,174' 11,027 11,174' 11,145' 12,331' 13,061' 12,287 9 Own bills 9,743 9,471 8,125 8,621' 9,448' 8,903 9,448' 9,407' 10,105' 10,722' 10,261 10 Bills bought 1,115 1,439 1,230 1,191 1,726 2,123 1,726 1,738 2,225 2,339' 2,026 Federal Reserve Banks 11 Own account 195 1,480 418 0 0 0 0 0 0 0 0 12 Foreign correspondents 1,442 949 729 671 937 874 937 898 874 877 746 13 Others 56,731 66,204 67,807 66,639' 56,004 55,990' 56,004 56,271 53,984' 52,944 53,202 Basis 14 Imports into United States 14,765 17,683 15,649 17,56(K 15,147' 15,845 15,147' 14,820 14,806 13,595' 14,464 15 Exports from United States 15,400 16,328 16,880 15,859 13,204' 13,030 13,204' 12,951 13,115 13,410' 13,473 16 All other 39,060 45,531 45,781 43,702' 39,763' 39,015 39,763' 40,543 39,268 39,878' 38,299 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 Rate Effective Date Rate Month Average Month rate 11.50 1985--Jan. 15.. 10.50 1984-—Jan 11.00 1985—Apr 12.00 May 20. 10.00 Feb 11.00 12.50 June 18. 9.50 Mar 11.21 June 13.00 11.93 July 12.75 1986--Mar. 7. 9.00 May 12.39 Aug 12.50 Apr. 21 . 8.50 June 12.60 Sept 12.00 July 13.00 Oct 11.75 Aug 13.00 11.25 Sept 12.97 Dec 10.75 Oct 12.58 11.77 1986—Jan Dec 11.06 Feb Mar 1985-—Jan 10.61 Apr Feb 10.50 May Mar 10.50 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
A46 Domestic Nonfinancial Statistics • August 1986 JINTERES? RATES Money and Capital Markets Averages, percent per annum; weekly and monthly figures are averages of business day data unless otherwise noted. 1986 1986, week ending IInnssttrruummeenntt 11998833 11998844 11998855 Feb. Mar. Apr. May May 2 May 9 May 16 May 23 May 30 MONEY MARKET RATES 1 Federal funds1'2 9.09 10.22 8.10 7.86 7.48 6.99 6.85 6.88 6.87 6.82 6.87 6.85 2 Discount window borrowing1-2 3 8.50 8.80 7.69 7.50 7.10 6.83 6.50 6.50 6.50 6.50 6.50 6.50 Commercial paper4-5 3 1-month 8.87 10.05 7.94 7.70 7.30 6.75 6.72 6.67 6.66 6.73 6.76 6.75 4 3-month 8.88 10.10 7.95 7.63 7.20 6.60 6.62 6.55 6.53 6.61 6.70 6.69 5 6-month 8.89 10.16 8.01 7.54 7.08 6.47 6.53 6.44 6.42 6.52 6.63 6.61 Finance paper, directly placed4-5 6 1-month 8.80 9.97 7.91 7.68 7.24 6.69 6.73 6.67 6.70 6.77 6.69 6.77 7 3-month 8.70 9.73 7.77 7.47 7.15 6.49 6.46 6.29 6.39 6.43 6.50 6.57 8 6-month 8.69 9.65 7.75 7.40 7.10 6.44 6.33 6.22 6.28 6.27 6.38 6.45 Bankers acceptances5-6 9 3-month 8.90 10.14 7.92 7.54 7.09 6.48 6.54 6.46 6.39 6.57 6.63 6.61 10 6-month 8.91 10.19 7.96 7.41 6.94 6.36 6.45 6.36 6.29 6.48 6.56 6.54 Certificates of deposit, secondary market7 11 1-month 8.96 10.17 7.97 7.69 7.33 6.74 6.68 6.63 6.60 6.70 6.76 6.72 12 3-month 9.07 10.37 8.05 7.69 7.24 6.60 6.65 6.56 6.53 6.64 6.75 6.71 N 6-month 9.27 10.68 8.25 7.70 7.23 6.57 6.64 6.54 6.50 6.65 6.75 6.71 14 Eurodollar deposits, 3-month8 9.56 10.73 8.28 7.89 7.42 6.80 6.86 6.78 6.74 6.79 6.98 6.91 U.S. Treasury bills5 Secondary market9 15 3-month 8.61 9.52 7.48 7.06 6.56 6.06 6.15 6.11 6.05 6.14 6.20 6.24 16 6-month 8.73 9.76 7.65 7.11 6.57 6.08 6.19 6.15 6.08 6.15 6.25 6.32 17 1-year 8.80 9.92 7.81 7.11 6.59 6.06 6.25 6.17 6.10 6.24 6.33 6.37 Auction average10 18 3-month 8.52 9.57 7.47 7.03 6.59 6.06 6.12 6.08 6.07 6.07 6.22 6.15 19 6-month 8.76 9.80 7.64 7.08 6.60 6.07 6.16 6.14 6.09 6.10 6.28 6.21 20 1-vear 8.86 9.91 7.83 7.19 6.61 5.94 6.17 n.a. n.a. 6.17 n.a. n.a. CAPITAL MARKET RATES U.S. Treasury notes and bonds11 Constant maturities12 21 1-year 9.57 10.89 8.43 7.61 7.03 6.44 6.65 6.56 6.49 6.65 6.74 6.79 22 2-year 10.21 11.65 9.27 7.97 7.21 6.70 7.07 6.85 6.82 7.09 7.22 7.26 23 3-year 10.45 11.89 9.64 8.10 7.30 6.86 7.27 7.07 6.98 7.28 7.45 7.47 24 5-year 10.80 12.24 10.13 8.34 7.46 7.05 7.52 7.21 7.19 7.58 7.78 7.70 25 7-year 11.02 12.40 10.51 8.58 7.67 7.16 7.65 7.31 7.34 7.71 7.87 7.86 26 10-year 11.10 12.44 10.62 8.70 7.78 7.30 7.71 7.44 7.44 7.75 7.90 7.88 27 20-vear 11.34 12.48 10.97 9.08 8.09 7.50 7.81 7.62 7.66 7.92 7.95 7.75 28 30-year 11.18 12.39 10.79 8.93 7.96 7.39 7.52 7.52 7.45 7.48 7.56 7.57 Composite13 29 Over 10 years (long-term) 10.84 11.99 10.75 9.07 8.13 7.59 8.02 7.77 7.77 8.05 8.21 8.19 State and local notes and bonds Moody's series14 30 Aaa 8.80 9.61 8.60 7.26 6.73 6.81 7.22 7.00 7.10 7.20 7.50 7.30 31 Baa 10.17 10.38 9.58 8.30 7.58 7.45 7.84 7.60 7.70 7.90 8.10 7.90 32 Bond Buyer series15 9.51 10.10 9.11 7.44 7.08 7.20 7.54 7.33 7.36 7.53 7.78 7.70 Corporate bonds Seasoned issues16 33 All industries 12.78 13.49 12.05 10.40 9.79 9.51 9.69 9.58 9.57 9.71 9.77 9.75 34 Aaa 12.04 12.71 11.37 9.67 9.00 8.79 9.09 8.97 8.98 9.12 9.17 9.14 35 Aa 12.42 13.31 11.82 10.13 9.49 9.21 9.43 9.31 9.32 9.43 9.51 9.50 36 A 13.10 13.74 12.28 10.67 10.15 9.83 9.94 9.82 9.82 9.97 10.02 9.99 37 Baa 13.55 14.19 12.72 11.11 10.50 10.19 10.29 10.20 10.16 10.29 10.37 10.37 38 A-rated, recently-offered utility bonds17 12.73 13.81 12.06 10.20 9.41 9.26 9.50 9.41 9.42 9.53 9.57 9.60 MEMO; Dividend/price ratio19 39 Preferred stocks 11.02 11.59 10.49 9.62 9.13 8.97 9.00 9.00 8.98 9.00 9.09 8.93 40 Common stocks 4.40 4.64 4.25 3.72 3.50 3.43 3.42 3.47 3.46 3.44 3.47 3.32 1. Weekly and monthly figures are averages of all calendar days, where the places. Thus, average issuing rates in bill auctions will be reported using two rate for a weekend or holiday is taken to be the rate prevailing on the preceding rather than three decimal places. business day. The daily rate is the average of the rates on a given day weighted by 11. Yields are based on closing bid prices quoted by at least five dealers. the volume of transactions at these rates. 12. Yields adjusted to constant maturities by the U.S. Treasury. That is, yields 2. Weekly figures are averages for statement week ending Wednesday. are read from a yield curve at fixed maturities. Based on only recently issued, 3. Rate for the Federal Reserve Bank of New York. actively traded securities. 4. Unweighted average of offering rates quoted by at least five dealers (in the 13. Averages (to maturity or call) for all outstanding bonds neither due nor case of commercial paper), or finance companies (in the case of finance paper). callable in less than 10 years, including one very low yielding "flower" bond. Before November 1979, maturities for data shown are 30-59 days, 90-119 days, 14. General obligations based on Thursday figures; Moody's Investors Service. and 120-179 days for commercial paper; and 30-59 days, 90-119 days, and 150- 15. General obligations only, with 20 years to maturity, issued by 20 state and 179 days for finance paper. local governmental units of mixed quality. Based on figures for Thursday. 5. Yields are quoted on a bank-discount basis, rather than an investment yield 16. Daily figures from Moody's Investors Service. Based on yields to maturity basis (which would give a higher figure). on selected long-term bonds. 6. Dealer closing offered rates for top-rated banks. Most representative rate 17. Compilation of the Federal Reserve. This series is an estimate of the yield (which may be, but need not be, the average of the rates quoted by the dealers). on recently-offered, A-rated utility bonds with a 30-year maturity and 5 years of 7. Unweighted average of offered rates quoted by at least five dealers early in call protection. Weekly data are based on Friday quotations. the day. 18. Standard and Poor's corporate series. Preferred stock ratio based on a 8. Calendar week average. For indication purposes only. sample of ten issues: four public utilities, four industrials, one financial, and one 9. Unweighted average of closing bid rates quoted by at least five dealers. transportation. Common stock ratios on the 500 stocks in the price index. 10. Rates are recorded in the week in which bills are issued. Beginning with the NOTE. These data also appear in the Board's H. 15 (519) and G. 13 (415) releases. Treasury bill auction held on Apr. 18, 1983, bidders were required to state the For address, see inside front cover. percentage yield (on a bank discount basis) that they would accept to two decimal 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 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) 92.63 92.46 108.09 106.62 107.57 113.93 119.33 120.16 126.43 133.97 137.25 137.37 2 Industrial 107.45 108.01 123.79 122.35 123.65 130.53 136.77 137.13 144.03 152.75 157.35 158.59 3 Transportation 89.36 85.63 104.11 104.96 103.72 108.61 113.52 115.72 124.18 128.66 125.92 122.21 4 Utility 47.00 46.44 56.75 55.93 55.84 59.07 61.69 62.46 65.18 68.06 69.35 68.65 5 Finance 95.34 89.28 114.21 110.21 112.36 122.83 128.86 132.36 142.13 153.94 154.83 151.28 6 Standard & Poor's Corporation (1941-43 = 10)' ... 160.41 160.50 186.84 184.06 186.18 197.45 207.26 208.19 219.37 232.33 237.97 238.46 7 American Stock Exchange2 (Aug. 31, 1973 = 50) 216.48 207.96 229.10 226.27 225.00 236.53 243.28 245.27 246.09 264.91 270.59 274.22 Volume of trading (thousands of shares) X New York Stock Exchange 85,418 91,084 109,191 97,910 110,569 122,263 133,446 130,872 152,590 160,755 146,330 127,624 9 American Stock Exchange 8,215 6,107 8,355 7,057 7,648 9,183 11,890 11,105 14,057 15,902 13,503 11,870 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 23,000 22,470 28,390 25,330 26,350 26,400 28,390 26,810 27,450 29,090 30,760 32,370 Free credit balances at brokers4 11 Margin-account5 1,755 2,715 1,745 1,715 2,080 2,715 2,645 2,545 2,715 3,065 2,405 12 Cash-account 8,430 10,215 12,840 10,080 9,630 10,340 12,840 11,695 12,355 13,920 14,340 12,970 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 14 Under 40 22.0 18.0 34.0 40.0 37.0 35.0 34.0 32.0 28.0 29.0 29.0 30.0 15 40-49 22.0 18.0 20.0 22.0 22.0 20.0 20.0 21.0 19.0 19.0 20.0 19.0 16 50-59 16.0 16.0 19.0 16.0 17.0 19.0 19.0 19.0 21.0 22.0 20.0 22.0 17 60-69 9.0 9.0 11.0 9.0 10.0 11.0 11.0 11.0 13.0 13.0 13.0 12.0 18 70-79 6.0 5.0 8.0 6.0 7.0 7.0 8.0 8.0 9.0 8.0 9.0 8.0 19 80 or more 6.0 6.0 8.0 7.0 7.0 8.0 8.0 9.0 10.0 9.0 9.0 9.0 Special miscellaneous-account balances at brokers (end of period) 20 Total balances (millions of dollars)7 58,329 75,840 99,310 91,400 92,250 95,240 99,310 99,290 104,228 103,450 105,790 109,620 Distribution by equity status (percent) 21 Net credit status 63.0 59.0 58.0 59.0 58.0 57.0 58.0 59.0 60.0 61.0 59.0 58.0 Debt status, equity of 22 60 percent or more 28.0 29.0 31.0 31.0 31.0 32.0 31.0 33.0 32.0 31.0 33.0 33.0 23 Less than 60 percent 9.0 11.0 11.0 10.0 11.0 11.0 11.0 8.0 8.0 8.0 8.0 9.0 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
A46 DomesticN onfinancial Statistics • August 1986 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1985 1986 AAccccoouunntt 11998833 11998844 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. FSL1C insured institutions 1 Assets 819,168 978,514 1,012,312 1,022,410 1,034,979 1,042,065 1,049,727' 1,061,529' 1,069,723' 1,069,766' 1,079,020' 1,089,805' 1,098,965 2 Mortgages 521,308 599,021 623,275 627,311 633,107 638,112 644,392' 647,384' 649,989' 651,650- 652,508' 653,534' 656,560 3 Mortgage-backed securities.... 90,902 108,219 102,892 105,869 108,417 113,333 112,190' 110,831' 111,071' 112,28(Y 113,993' 115,954' 119,826 4 Cash and investment securities' . 109,923 135,640 132,109 133,001 135,050 131,582 130,795' 139,628' 143,720' 139,909' 144,830' 150,250' 149,747 5 Other 74,086 91,516 100,595 101,281 101,688 101,467 102,537' 102,956' 102,548' 103,412' 104,181' 105,881' 107,072 6 Liabilities and net worth 819,168 978,514 1,012,312 1,022,410 1,034,979 1,042,065 1,049,727' 1,061,529' 1,069,723' 1,069,766' 1,079,020' 1,089,805' 1,098,965 7 Savings capital 671,059 784,724 817,551 822,105 826,841 831,274 833,193 837,463 843,953' 847,559' 852,339' 862,134' 862,336 8 Borrowed money 98,511 137,123 130,269 134,019 139.507 144,982 147,839' 152,966' 157,166' 151,032' 152,251' 155,322' 161,290 9 FHLBB 57,253 71,719 75,897 77,756 80,129 81,486 82,569 82,718 84,398 82,633 82,477' 82,434' 85,758 10 Other 41,258 65,404 54,372 56,263 59.378 63,4% 65,270' 70,248' 72,768' 68,399' 69,774' 72,888' 75,532 11 Other 16,619 18,746 22,055 23,252 25,199 21,865 24,282' 26,040' 21,981' 24,091' 26,613' 23,630' 25,876 12 Net worth- 32,980 37,921 42,436 43,034 43,432 43,945 44,413' 45,061' 46,824' 47,083' 47,818' 48,718' 49,462 13 MEMO: Mortgage loan commitments outstanding3 . 56,785 65,836 69,585 68,805 66,120 65,743 65,049 65,455 62,091 60,788 63,136 64,214 67,243 Savings banks4 14 Assets 193,535 203,898 212,163 213,824 215,298 215,560 215,893 216,793 216,776'' 216,673 218,119 221,256 Loans 15 Mortgage 97,356 102,895 105,891 106,441 107,322 108,842 109,171 109,494 110,371 108,973 109,702 110,271 16 Other 19,129 24,954 29,211 30,339 30,195 29,672 29,967 31,217 30,876' 31,752 32,501 34,873 Securities 17 U.S. government 15,360 14,643 14,074 13,960 13.868 13,686 13,734 13,434 13,111' 12,568 12,474 12,313 18 Mortgage-backed securities... 18,205 19,215 19,160 19,779 20,101 20,368 20,012 19,828 19,481' 21,372 21,525 21,593 19 State and local government... 2,177 2,077 2,093 2,086 2,105 2,107 2,163 2,148 2,323 2,298 2,297 2,306 70 Corporate and other7 25,375 23,747 24,047 23,738 23,735 23,534 23,039 22,816 21,199' 20,828 20,707 20,403 n.a. 71 Cash 6,263 4,954 4,935 4,544 4,821 4,916 4,893 4,771 6,225' 5,645 5,646 5,845 22 Other assets 9,670 11,413 12,770 12,937 13,151 12,345 12,914 13,085 13,113' 13,237 13,267 13,652 23 Liabilities 193,535 203,898 212,163 213,824 215,298 215,560 215,893 216,793 216,776' 216,673 218,119 221,256 74 Deposits 172,665 180,616 186,091 186,824 187,207 187,722 187,239 187,552 185,972' 186,321 186,777 188,960 ?5 Regular8 170,135 177,418 182,218 182,881 183,222 183,560 183,2% 183,716 181,921 182,399 182,890 184,704 76 Ordinary savings 38,554 33,739 33,526 33,495 33,398 33,252 33,303 33,638 33,018' 32,365 32,693 33,021 71 Time 95,129 104,732 104,756 104,737 104,448 104,668 104,024 104,116 103,311' 104,436 104,588 105,562 78 Other 2,530 3,198 3,873 3,943 3,985 4,162 3,943 3,836 4,051' 3,922 3,887 4,256 79 Other liabilities 10,154 12,504 14,348 15,137 15,971 15,546 15,9% 16,309 17,414' 17,086 17,793 18,412 30 General reserve accounts 10,368 10,510 11,238 11,453 11,704 11,882 12,299 12,567 12,823' 12,925 13,211 13,548 Life insurance companies8 31 Assets 654,948 722,979 765,891 772,452 778,293 783,828 791,483 802,024 816,203 824,850 834,492 Securities 37 Government 50,752 63,899 68,636 68,983 69,975 71,095 72,334 73,451 77,230 77,966 78,733 33 United States6 28,636 42,204 46,260 46,514 47,343 48,181 49,300 50,321 53,559 53,979 55,019 34 State and local 9,986 8,713 9,044 8,980 9,201 9,293 9,475 9,615 10,086 10,373 10,027 35 Foreign7 12,130 12,982 13,332 13,489 13,431 13,621 13,559 13,515 13,585 13,614 13,687 36 Business 322,854 359,333 388,448 393,386 397,202 399,474 403,832 410,141 414,424 420,835 429,090 n.a. n.a. 37 Bonds 257,986 295,998 317,029 321,752 325,647 329,133 331,675 335,129 337,205 343,003 347,122 38 Stocks 64,868 63,335 71,419 71,634 71,555 70,341 72,157 75,012 77,219 77,832 81,968 39 Mortgages 150,999 156,699 161,485 162,690 163,027 163,929 165,687 167,306 170,460 171,275 171,705 40 Real estate 22,234 25,767 27,831 28,240 28,450 28,476 28,637 28,844 28,662 28,709 29,069 41 Policy loans 54,063 54,505 54,320 54,300 54,238 54,225 54,142 54,121 54,200 54,187 54,164 42 Other assets 54,046 63,776 65,171 64,853 65,401 66,629 57,313 68,161 71,227 56,886' 56,237 Credit unions9 43 Total assets/liabilities and capital . 81,961 93,036 106,783 107,991 111,150 113,016 114,783 117,029 118,010 118,933 122,623 126,653 44 Federal 54,482 63,205 72,021 72,932 74,869 75,567 76,415 77,829 77,861 78,619 80,024 82,275 45 State 27,479 29,831 34,762 35,059 36,281 37,449 38,368 39,200 40,149 40,314 42,599 44,378 46 Loans outstanding 50,083 62,561 66,817 67,662 69,171 70,765 71,811 72,404 73,513 73,513 74,207 75,300 47 Federal 32,930 42,337 44,707 44,%3 46,036 46,702 47,065 47,538 47,933 48,055 48,059 48,633 n.a. 48 State 17,153 20,224 22,110 22,699 23,135 24,063 24,746 24,866 25,580 25,458 26,148 26,667 1 49 Savings 74,739 84,348 %,702 98,026 99,834 101,318 103,677 105,384 105,963 107,238 110,541 114,579 50 Federal (shares) 49,889 57,539 66,243 67,070 68,087 68,592 70,063 71,117 70,926 72,166 73,227 75,698 1 51 State (shares and deposits) . 24,850 26,809 30,459 30,956 31,747 32,726 33,614 34,267 35,037 35,072 37,314 38,881 t 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
A46 Domestic Nonfinancial Statistics • August 1986 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year FFFiiissscccaaalll FFFiiissscccaaalll FFFiiissscccaaalll TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn yyyeeeaaarrr yyyeeeaaarrr yyyeeeaaarrr 1985 1986 111999888333 111999888444 111999888555 Dec. Jan. Feb. Mar. Apr. May. U.S. budget1 1 Receipts, total 600,562 666,457 733,9% 68,193 76,710 53,370 49,557 91,438 46,246 2 On-budget n.a. n.a. n.a. 52,884 57,465 38,417 32,203 69,130 30,004 3 Off-budget n.a. n.a. n.a. 15,309 19,245 14,953 17,355 22,308 16,242 4 Outlays, total 808,273 851,796 945,927 82,849 83,201 77,950 79,700 81,510 85,642 5 On-budget n.a. n.a. n.a. 71,579 68,146 61,963 63,660 67,276 69,611 6 Off-budget n.a. n.a. n.a. 11,270 15,055 15,987 16,040 14,234 16,031 7 Surplus, or deficit (-), total -207,711 -185,339 -211,931 -14,656 -6,492 -24,580 -30,142 9,928 -39,396 8 On-budget n.a. n.a. n.a. -18,695 -10,682 -23,546 -31,457 1,854 -39,607 9 Off-budget n.a. n.a. n.a. 4,039 4,190 -1,034 1,315 8,074 211 Source of financing (total) 10 Borrowing from the public 212,424 170,817 197,269 33,261 12,660 16,010 8,441 1144,,221133 1177,,996600 11 Cash and monetary assets (decrease, or increase (-))2 -9,889 5,636 10,673 -21,020 -9,503 12,969 14,093 -22,542 22,774 12 Other3 5,176 8,885 3,989 2,415 3,334 -4,400 7,608 -1,599 -1,338 MEMO 13 Treasury operating balance (level, end of period) 37,057 22,345 17,060 30,935 40,215 26,326 12,246 34,417 12,808 14 Federal Reserve Banks 16,557 3,791 4,174 9,351 16,228 5,026 3,280 11,550 3,083 15 Tax and loan accounts 20,500 18,553 12,886 21,584 23,987 21,300 8,966 22,867 9,725 1. In accordance with the Balanced Budget and Emergency Deficit Control Act 3. Includes accrued interest payable to the public; allocations of special of 1985, all former off-budget entries are now presented on-budget. The Federal drawing rights; deposit funds; miscellaneous liability (including checks outstand- Financing Bank (FFB) activities are now shown as separate accounts under the ing) and asset accounts; seigniorage; increment on gold; net gain/loss for U.S. agencies that use the FFB to finance their programs. The act has also moved two currency valuation adjustment; net gain/loss for IMF valuation adjustment; and social security trust funds (Federal old-age survivors insurance and Federal profit on the sale of gold. disability insurance trust funds) off-budget. 2. Includes U.S. Treasury operating cash accounts; SDRs; reserve position on SOURCE. "Monthly Treasury Statement of Receipts and Outlays of the U.S. the U.S. quota in the IMF; loans to International Monetary Fund; and other cash Government," and the "Daily Treasury Statement." 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 Mar. Apr. May RECEIPTS 1 AU sources 666,457 733,996 341,808 341,392 380,618 364,790 49,557 91,438 46,246 ? Individual income taxes, net 295,960 330,918 144,691 157,229 166,783 169,987 12,572 45,120 9,820 3 Withheld 279,350 298,941 140,657 145,210 149,288 155,725 25,141 21,905 28,564 4 Presidential Election Campaign Fund ... 35 35 29 5 29 6 88 10 7 5 Nonwithheld 81,346 97,685 61,463 19,403 76,155 22,295 33,,448822 42,555 3,796 6 Refunds 64,770 65,743 57,458 7,387 58,684 8,038 16,060 19,350 22,546 Corporation income taxes 7 Gross receipts 74,179 77,413 40,328 35,190 42,193 3366,,552288 1100,,771144 1111,,119922 22,,881133 8 Refunds 17,286 16,082 10,045 6,847 8,370 7,751 2,601 2,476 1,365 9 Social insurance taxes and contributions, net 241,902 268,805 131,372 118,690 144,598 128,017 22,785 3311,,775566 2288,,774455 10 Employment taxes and contributions1 212,180 238,288 114,102 105,624 126,038 116,276 2222,,222299 2288,,339911 2200,,884444 11 Self-employment taxes and contributions2 8,709 10,468 7,667 1,086 9,482 985 664433 66,,551100 664433 1? Unemployment insurance 25,138 25,758 14,942 10,706 16,213 9,281 190 2,999 7,461 13 Other net receipts3 4,580 4,759 2,329 2,360 2,350 2,458 366 366 440 14 Excise taxes 37,361 35,865 18,304 18,961 17,259 18,470 2,531 2,512 2,669 IS Customs deposits 11,370 12,079 5,576 6,329 5,807 6,354 1,036 1,087 1,040 16 Estate and gift taxes 6,010 6,422 3,102 3,029 3,204 3,323 533 680 686 17 Miscellaneous receipts4 16,965 18,576 8,481 8,812 9,144 9,861 1,989 1,568 1,838 OUTLAYS 18 All types 851,781 946,323 420,700 446,944' 463,842 488,740^ 79,700 81,510 85,642 19 National defense 227,413 252,748 114,639 118,286 124,186 134,675 24,002 22,842 23,765 70 International affairs 15,876 16,176 5,426 8,550 6,675 8,367 1,676 732 1,654 71 General science, space, and technology ... 8,317 8,627 3,981 4,473 4,230 4,727 549 761 737 77 7,086 5,685 1,080 1,423 680 3,305 967 358 357 73 Natural resources and environment 12,593 13,357 5,463 7,370 5,892 7,553 838 1,130 1,007 24 Agriculture 13,613 25,565 7,129 8,524 11,705 15,412 1,207 3,489 3,008 75 Commerce and housing credit 6,917 4,229 2,572 2,663 -260 644 -319 604 43 76 Transportation 23,669 25,838 10,616 13,673 11,440 15,360 1,963 2,271 2,201 27 Community and regional development .... 7,673 7,680 3,154 4,836 3,408 3,901 615 638 599 78 Education, training, employment, social services 27,579 29,342 13,445 13,737 14,149 1144,,448811 22,,337777 22,,444400 22,,228877 79 Health 30,417 33,542 15,551 15,692 16,945 17,237 2,385 3,205 3,021 30 Social security and medicare 235,764 254,446 119,420 119,613 128,351 129,037 22,009 22,234 22,253 31 Income security 112,668 128,200 58,684 61,558 65,246 59,457 10,409 11,113 10,960 37 Veterans benefits and services 25,614 26,352 12,849 13,317 11,956 14,527 1,080 2,340 3,455 33 Administration of justice 5,660 6,277 2,807 2,992 3,016 3,212 511 546 533 34 General government 5,053 5,228 2,462 2,552 2,857 3,634 1,165 -48 576 35 General-purpose fiscal assistance 6,768 6,353 2,943 3,458 2,659 3,391 61 885 -142 36 111,058 129,436 54,748 61,293 65,143 67,448 10,668 10,359 11,766 37 Undistributed offsetting receipts6 -31,957 -32,759 -16,270 -17,061 -14,436 -17,953 -2,464 -4,387 -2,437 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 Financial Statistics • August 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 Q1 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 17 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 ?4 Other securities 42.7 48.2 61.9 69.3 69.7 72.0 73.2 74.9 75 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 Transactions' Par value; averages of daily figures, in millions of dollars 1986 1986 week ending Wednesday IItteemm 11998833 11998844 11998855 Mar/ Apr. May Apr. 23' Apr. 30 May 7 May 14 May 21 May 28 Immediate delivery2 1 U.S. government securities 42,135 52,778 75,331 103,921 99,952 91,765 95,363 92,007' 83,042 110022,,778822 97,134 7755,,992277 By maturity ? Bills 22,393 26,035 32,900 36,266 36,393 33,505 33,786 29,789' 32,366 3377,,553377 37,591 2233,,330099 3 Other within 1 year 708 1,305 1,811 1,994 1,786 2,046 1,690 2,528 2,455 1,980 1,840 2,063 4 8,758 11,733 18,361 24,222 22,637 23,303 21,567 24,805' 20,707 21,350 26,875 24,557 5 5-10 years 5,279 7,606 12,703 23,596 21,626 17,078 20,972 21,023 14,632 17,185 15,248 15,502 6 Over 10 years 4,997 6,099 9,556 17,844 17,511 15,833 17,348 13,862 12,881 24,730 15,579 10,497 By type of customer V U.S. government securities dealers 2,257 2,919 3,336 3,013 4,042 3,654 3,335 5,422 3,437 33,,993388 33,,550000 22,,663300 8 U.S. government securities 21,045 25,580 36,222 52,446 52,375 47,937 50,149 47,543 43,694 54,646 51,840 3377,,886600 9 All others3 18,833 24,278 35,773 48,463 43,535 40,174 41,880 39,042' 35,911 44,199 41,794 35,437 10 Federal agency securities 5,576 7,846 11,640 17,422 14,973 14,324 14,289 11,515' 12,115 15,200 16,467 12,571 11 Certificates of deposit 4,333 4,947 4,016 4,483 4,870 4,069 4,288 4,320 3,476 4,125 4,706 3,902 1? Bankers acceptances 2,642 3,243 3,242 3,753 3,841 2,989 2,972 2,911 2,833 2,842 3,437 2,813 13 Commercial paper 8,036 10,018 12,717 16,712 16,054 15,258 15,910 16,586 14,739 14,893 16,293 15,114 Futures transactions4 14 6,655 6,947 5,561 3,624 4,397 4,308 4,057 5,078 4,174 4,132 6,226 22,,117744 15 Treasury coupons 2,501 4,503 6,069 9,056 8,376 7,732 8,413 8,257 6,009 7,865 9,833 6,335 16 Federal agency securities 265 262 240 7 6 51 0 9 36 41 19 49 Forward transactions5 17 U.S. government securities 1,493 1,364 1,283 1,743 1,287 1,526 1,449 1,260 2,117 987 11,,778888 11,,337777 18 Federal agency securities 1,646 2,843 3,857 7,172 8,148 6,180 8,090 6,910 5,666 6,630 7,767 5,030 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
A46 Domestic Nonfinancial Statistics • August 1986 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Averages of daily figures, in millions of dollars 1986 1986 week ending Wednesday Mar. Apr. May Apr. 30 May 7 May 14 May 21 May 28 Positions Net immediate2 1 U.S. government securities 14,082 5,429 7,391 10,799 18,320 9,618 14,247 10,448 10,456 7,437 10,720 2 Bills 10,800 5,500 10,075 12,123 17,010 9,490 13,301 12,743 9,136 7,905 9,125 3 Other within 1 year 921 63 1,050 2,961 5,834 6,280 5,814 5,909 6,525 6,121 6,577 4 1-5 years 1,912 2,159 5,154 9,590 9,352 6,242 10,448 8,226 8,668 3,163 5,178 5 5-10 years -78 -1,119 -6,202 -10,339 -10,195 -9,344 -10,654 -11,874 -10,925 -7,107 -7,825 6 Over 10 years 528 -1,174 -2,686 -3,536 -3,681 -3,049 -4,663 -4,557 -2,949 -2,645 -2,335 7 Federal agency securities 7,313 15,294 22,860 37,208 36,179' 38,124 35,042 37,264 40,462 39,746 36,201 8 Certificates of deposit 5,838 7,369 9,192 10,608' 10,717 10,973 10,472 10,568 11,331 10,994 10,979 9 Bankers acceptances 3,332 3,874 4,586 5,776' 5,537 5,460 4,867 5,757 6,070 5,089 4,915 10 Commercial paper 3,159 3,788 5,570 8,678 8,148 7,379 9,146 8,742 7,854 6,665 6,453 Futures positions 11 Treasury bills -4,125 -4,525 -7,322 -27,539' -26,431 -19,214 -23,431 -21,458 -20,069 -17,744 -18,243 12 Treasury coupons -1,033 1,794 4,465 5,293' 2,77C 2,656 2,592' 3,438 2,953 2,213 2,122 13 Federal agency securities 171 233 -722 -247 -82 -70 -104 -44 -49 -64 -113 Forward positions 14 U.S. government securities -1,936 -1,643 -911 -2,988' -1,888 -1,985 -1,923 -1,338 -1,478 -3,128 -1,609 15 Federal agency securities -3,561 -9,205 -9,420 -12,151' -11,547' -11,482 -9,720' -11,059 -12,793 -11,967 -10,809 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 29,099 44,078 68,035 91,649 90,823 94,145 94,272 91,092 94,027 96,791 93,733 17 Term agreements 52,493 68,357 80,509 104,905 109,742 112,611 115,669 114,415 110,543 115,403 111,452 Repurchase agreements5 18 Overnight and continuing 57,946 75,717 101,410 138,072 141,918 140,171 141,617 138,654 141,377 139,947 138,711 19 Term agreements 44,410 57,047 77,748 94,667 103,705 107,095 111,130 108,099 106,614 111,443 105,526 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 secunties 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 Nov. Dec. Jan. Feb. Mar. Apr. 1 Federal and federally sponsored agencies 237,787 240,068 271,220 293,930 293,905 290,596' 292,043' 291,525' n.a. 2 Federal agencies 33,055 33,940 35,145 36,121 36,390 36,400 36,376 35,927 35,530 3 Defense Department1 354 243 142 75 71 66 63 59 55 4 Export-Import Bank2'3 14,218 14,853 15,882 15,417 15,678 15,677 15,677 15,257 15,257 5 Federal Housing Administration4 288 194 133 115 115 113 109 108 114 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 16,335 16,347 16,365 16,348 16,324 15,925 9 United States Railway Association6 194 111 51 74 74 74 74 74 74 10 Federally sponsored agencies7 204,732 206,128 236,075 257,809 257,515 254,196' 255,667' 255,598 n.a. 11 Federal Home Loan Banks 55,967 48,930 65,085 73,840 74,447 73,201 73,201' 74,778 76,527 12 Federal Home Loan Mortgage Corporation 4,524 6,793 10,270 11,016 11,926 13,044 13,695 12,963 n.a. i3 Federal National Mortgage Association 70,052 74,594 83,720 94,576 93,896 92,658 93,179 92,414 92,401 14 Farm Credit Banks 73,004 72,816 71,193 69,933 68,851 66,600 66,188' 65,930' 65,188 15 Student Loan Marketing Association8 2,293 3,402 5,745 8,444 8,395 8,693' 9,404' 9,513 10,198 MEMO 16 Federal Financing Bank debt 126,424 135,791 145,217 154,226 153,373 153,709 153,418 153,455 153,508 Lending to federal and federally sponsored 17 Export-Import Bank3 14,177 14,789 15,852 15,409 15,670 15,670 15,670 15,250 15,250 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 14,610 14,622 14,690 14,673 14,649 14,250 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 64,189 64,234 64,354 63,774 63,464 63,829 23 Rural Electrification Administration 17,157 19,766 20,693 21,826 20,654 20,678 20,739 20,959 21,061 24 Other 22,774 26,460 29,853 31,428 31,429 31,553 31,798 32,369 32,354 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 Financial Statistics • August 1986 1.45 NEW SECURITY ISSUES State and Local Governments Millions of dollars 1985 1986 Type of i o s r s u u e s e o r issuer, 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 All issues, new and refunding1 86,421 106,641 214,189 13,345 20,780 32,144 57,430 1,572' 3,255 7,636 11,914 Type of issue 2 3 Ge U ne .S ra . l g o o b v l e ig rn a m tio e n n t loans2 21,56 % 6 26,48 1 5 6 52,62 1 2 4 3,953 0 5,852 0 6,695 0 8,754 0 751 0 1,02 0 1 2 n , . 8 a 9 . 5 4 n , . 8 a 1 . 4 4 Revenue 64,855 80,156 161,567 9,392 14,928 25,449 48,676 821 2,234 4,741 7,099 5 U.S. government loans2 253 17 27 0 6 7 0 0 0 n.a. n.a. Type of issuer 6 State 7,140 9,129 13,004 1,501 1,337 1,648 2,146 296 255 n.a. n.a. 7 Special district and statutory authority 51,297 63,550 134,363 7,580 12,374 21,563 39,147 579 1,715 n.a. n.a. 8 Municipalities, counties, townships, school districts 27,984 33,962 66,822 4,264 6,371 21,563 16,137 697 1,285 n.a. n.a. 9 Issues for new capital, total 72,441 94,050 156,050 9,878 13,984 21,362 46,788 1,350 1,887 2,763 6,405 Use of proceeds t t 10 Education 8,099 7,553 16,658 1,317 1,518 1,954 3,901 370 422 11 Transportation 4,387 7,552 12,070 471 1,264 3,734 3,480 246 347 12 Utilities and conservation 13,588 17,844 26,852 1,358 2,924 3,266 7,070 315 212 nI.a. 13 Social welfare 26,910 29,928 63,181 3,989 4,305 8,672 22,589 6 110 14 Industrial aid 7,821 15,415 12,892 735 1,507 2,029 3,583 0 190 n1.a. 15 Other purposes 11,637 15,758 24,398 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 i o s r s u u e s e o r issuer, 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. p 1 All issues1 120,299 132,531 201,501' 11,304 11,595 13,568 19,429 16,981' 23,901' 30,378 32,563 2 Bonds2 68,718 109,903 165,986' 8,833 9,271 10,913 14,440 13,581' 19,439' 24,857 27,169 Type of offering 3 Public 47,594 73,579 119,789' 8,833 9,271 10,913 14,440 13,581' 19,439' 24,857 27,169 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 17,001 24,607 52,278 2,079 1,953 4,072 2,704 4,596' 3,950 8,895 7,919 6 Commercial and miscellaneous 7,540 13,726 15,215 186 898 933 735 624 1,216 790 2,640 7 Transportation 3,833 4,694 5,743 177 348 125 187 633 373 340 614 8 Public utility 9,125 10,679 12,957 1,042 863 1,114 1,090 820 2,540 2,133 3,330 9 Communication 3,642 2,997 10,456 367 690 100 2,318 0 1,200 1,907 3,115 10 Real estate and financial 27,577 53,199 69,337' 4,982 4,519 4,569 7,407 6,908' 10,16<y 10,793 9,552 11 Stocks3 51,579 22,628 35,515 2,471 2,324 2,655 4,989 3,400 4,462 5,521 5,394 Type 12 Preferred 7,213 4,118 6,505 653 406 782 908 570 975 1,160 551 13 Common 44,366 18,510 29,010 1,818 1,918 1,873 4,081 2,830 3,487 4,361 4,843 Industry group 14 Manufacturing 14,135 4,054 5,700 820 279 746 1,045 827 1,269 851 1,384 15 Commercial and miscellaneous 13,112 6,277 9,149 507 403 596 1,220 683 434 607 898 16 Transportation 2,729 589 1,544 107 113 21 200 78 302 355 158 17 Public utility 5,001 1,624 1,966 47 408 12 201 176 153 357 165 18 Communication 1,822 419 978 7 41 5 146 231 282 0 27 19 Real estate and financial 14,780 9,665 16,178 983 1,080 1,275 2,177 1,405 2,022 3,351 2,762 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 Sept. Oct. Nov. Dec. Jan. Feb. Mar/ Apr. INVESTMENT COMPANIES1 1 Sales of own shares2 107,480 222,671 16,936 22,099 20,585 23,560 32,466 27,489 33,764 37,656 2 Redemptions of own shares3 77,032 132,440 9,963 10,653 11,138 18,337 15,836 11,860 15,085 21,699 3 Net sales 30,448 90,321 6,973 11,446 9,447 5,223 16,630 15,629 18,679 15,957 4 Assets4 137,126 251,695 203,210 218,720 237,410 251,536 265,487 292,002 315,245 329,700 5 Cash position5 12,181 20,607 18,700 21,987 21,894 20,590 22,425 23,716 27,639 29,903 6 Other 124,945 231,088 184,510 196,733 215,516 230,946 243,062 268,286 287,606 299,797 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 1986 AAccccoouunntt 11998833 11998844 11998855 Q2 Q3 Q4 QL Q2 Q3 Q4 QK 1 Corporate profits with inventory valuation and capital consumption adjustment 213.8 273.3 295.5 277.8 271.2 276.2 281.7 288.1 309.1 303.1 313.7 2 Profits before tax 205.0 237.6 225.3 247.4 227.7 228.0 220.0 218.7 228.6 233.8 216.6 3 Profits tax liability 75.2 93.6 85.0 100.6 87.4 87.4 83.4 82.3 87.4 87.1 79.7 4 Profits after tax 129.8 144.0 140.2 146.7 140.3 140.6 136.6 136.4 141.1 146.7 137.0 5 Dividends 70.8 78.1 83.5 77.5 78.9 80.7 82.0 83.1 83.9 85.0 87.6 6 Undistributed profits 59.0 65.9 56.7 69.2 61.3 60.0 54.6 53.3 57.3 61.7 49.4 7 Inventory valuation -9.9 -5.4 -.6 -5.6 -1.3 -1.6 .7 2.2 4.7 -10.1 18.0 8 Capital consumption adjustment 18.8 41.0 70.9 36.0 44.8 49.8 61.1 67.2 75.9 79.4 79.0 SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A46 Domestic Nonfinancial Statistics • August 1986 1.49 NONFINANCIAL CORPORATIONS Assets and Liabilities Billions of dollars, except for ratio 1984 1985r AAccccoouunntt 11997799 11998800 11998811 11998822 11998833 Q4 Ql Q2 Q3 Q4 1 Current assets 1,214.8 1,328.3 1,419.6 1,437.1 1,575.9 1,703.0 1,718.4 1,729.8 1,756.7 1,778.5 ? Cash 118.0 127.0 135.6 147.8 171.8 173.6 166.7 168.0 174.6 188.0 3 U.S. government securities 16.7 18.7 17.7 23.0 31.0 36.2 35.0 34.8 31.9 32.3 4 Notes and accounts receivable 459.0 507.5 532.5 517.4 583.0 633.1 649.5 652.4 658.6 671.2 5 Inventories 505.1 543.0 584.0 579.0 603.4 656.9 666.1 666.6 674.7 663.9 6 Other 116.0 132.1 149.7 169.8 186.7 203.2 201.0 208.0 217.0 223.2 7 Current liabilities 807.3 890.6 971.3 986.0 1,059.6 1,163.6 1,173.2 1,179.4 1,209.1 1,232.7 8 Notes and accounts payable 460.8 514.4 547.1 550.7 595.7 647.8 636.4 649.8 668.1 683.1 9 Other 346.5 376.2 424.1 435.3 463.9 515.8 536.8 529.7 541.0 549.7 10 Net working capital 407.5 437.8 448.3 451.1 516.3 539.5 545.2 550.3 547.6 545.7 11 MEMO; Current ratio1 1.505 1.492 1.462 1.458 1.487 1.464 1.465 1.467 1.453 1.443 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''..'' Q4 Ql Q2 Q3 Q4 Ql Q21 Q31 1 Total nonfarm business 354.44 386.41 387.25 368.29 371.16 387.83 388.90 397.74 376.08 387.42 388.87 Manufacturing 2 Durable goods industries 66.24 73.14 72.09 71.43 69.87 73.96 72.85 75.87 67.74 72.20 71.42 3 Nondurable goods industries 72.58 80.01 77.09 75.53 75.78 80.36 81.19 82.70 75.32 75.80 77.04 Nonmanufacturing 4 Mining 16.86 15.88 12.35 17.00 15.66 16.51 15.94 15.40 12.85 12.61 12.49 Transportation 5 Railroad 6.79 7.06 6.44 6.44 6.02 7.48 8.13 6.61 5.82 6.95 7.31 6 Air 3.56 4.78 5.74 3.65 4.20 3.66 5.20 6.06 6.54 5.11 5.78 7 Other 6.17 6.13 5.98 6.18 6.01 6.37 5.77 6.39 5.40 5.94 6.12 Public utilities 8 Electric 37.03 36.12 33.65 35.40 36.65 36.04 35.34 36.45 34.33 34.49 32.59 9 Gas and other 10.44 12.62 12.75 11.52 11.81 12.43 12.80 13.44 12.82 13.10 12.39 10 Commercial and other2 134.75 150.67 161.16 141.13 145.16 151.02 151.69 154.81 155.27 161.22 163.73 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 1986 AAccccoouunntt 11998811 11998822 11998833 Q3 Q4 Q1 Q2 Q3 Q4 QL ASSETS Accounts receivable, gross 1 Consumer 72.4 78.1 87.4 95.6 96.7 99.1 106.0 116.4 120.8 125.5 2 Business 100.3 101.4 113.4 124.5 135.2 142.1 144.6 141.4 152.8 159.7 3 Real estate 17.9 20.2 22.5 25.2 26.3 27.2 28.4 29.0 30.4 31.5 4 Total 190.5 199.7 223.4 245.3 258.3 268.5 279.0 286.5 304.0 316.7 Less: 5 Reserves for unearned income 30.0 31.9 33.0 36.0 36.5 36.6 38.6 41.0 40.9 41.3 6 Reserves for losses 3.2 3.5 4.0 4.3 4.4 4.9 4.8 4.9 5.0 5.1 7 Accounts receivable, net 157.3 164.3 186.4 205.0 217.3 227.0 235.6 240.6 258.1 270.3 8 All other 27.1 30.7 34.0 36.4 35.4 35.9 39.5 46.3 46.8 50.6 9 Total assets 184.4 195.0 220.4 241.3 252.7 262.9 275.2 286.9 304.9 321.0 LIABILITIES 10 Bank loans 16.1 18.3 18.7 19.7 21.3 19.8 18.5 18.2 21.0 20.4 11 Commercial paper 57.2 51.1 59.7 66.8 72.5 79.1 82.6 93.6 96.9 102.0 Debt 12 Other short-term 11.3 12.7 13.9 16.1 16.2 16.8 16.6 16.6 17.2 18.5 13 Long-term 56.0 64.4 68.1 73.8 77.2 78.3 85.7 86.4 93.0 100.0 14 All other liabilities 18.5 21.2 30.1 32.6 33.1 35.4 36.9 36.6 39.6 41.4 15 Capital, surplus, and undivided profits 25.3 27.4 29.8 32.3 32.3 33.5 34.8 35.7 37.1 38.8 16 Total liabilities and capital 184.4 195.0 220.4 241.3 252.7 262.9 275.2 286.9 304.9 321.0 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 1986 1986 1986 AAAppprrr... 333000,,, 111999888666''' Feb. Mar. Apr. Feb. Mar. Apr. Feb. Mar. Apr. 1 Total 159,827 1,303 2,668 464 28,644 27,526 26,378 27,341 24,858 25,915 Retail financing of installment sales 2 Automotive (commercial vehicles) 15,199 360 126 197 1,256 1,044 1,115 896 918 918 3 Business, industrial, and farm equipment 20,083 -237 27 -135 692 805 858 929 778 993 Wholesale financing 4 Automotive 26,581 1,029 2,097 169 10,732 10,900 9,897 9,703 8,803 9,728 5 Equipment 4,709 -15 63 70 540 526 545 555 463 475 6 All other 7,732 38 168 -73 1,563 1,631 1,657 1,525 1,463 1,730 Leasing 7 Automotive 16,119 178 46 284 787 814 770 609 768 486 8 Equipment 40,088 46 -194 59 1,573 1,309 1,275 1,527 1,503 1,216 9 Loans on commercial accounts receivable and factored commercial accounts receivable 16,843 -28 322 -385 10,094 9,209 8,784 10,122 8,887 9,168 10 All other business credit 12,473 -68 13 277 1,407 1,288 1,477 1,475 1,275 1,200 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
A46 Domestic Nonfinancial Statistics • August 1986 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1985 1986 Nov. Dec. Jan. Feb. Mar. Apr. May. Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars) 92.8 96.8 104.1 107.5 111.5 108.4 115.1 108.2 114.2' 115.0 2 Amount of loan (thousands of dollars) 69.5 73.7 77.4 78.5 80.3 77.6 84.3 79.6 83.9' 83.1 3 Loan/price ratio (percent) 77.1 78.7 77.1 75.5 75.0 74.4 75.6 75.4 75.9' 74.5 4 Maturity (years) 26.7 27.8 26.9 26.4 26.7 25.4 26.8 26.9 25.9' 25.6 5 Fees and charges (percent of loan amount)2 2.40 2.64 2.53 2.57 2.59 2.55 2.64 2.60 2.34' 2.19 6 Contract rate (percent per annum) 12.20 11.87 11.12 10.55 10.47 10.40 10.21 10.04 9.87 9.81 Yield (percent per annum) 7 FHLBB series5 12.66 12.37 11.58 11.01 10.94 10.89 10.68 10.50 10.27' 10.19 8 HUD series4 13.43 13.80 12.28 11.56 11.03 10.82 10.49 10.06' 9.99 10.33 SECONDARY MARKETS Yield (percent per annum) 9 FHA mortgages (HUD series)5 13.11 13.81 12.24 11.28 10.70 10.78 10.59 9.77 9.80 10.07 10 GNMA securities6 12.25 13.13 11.61 10.81 10.39 10.25 9.79 9.44 9.17 9.23 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 74,847 83,339 94,574 97,807 98,282 98,671 98,820 98,795 98,746 98,0% 12 FHA/VA-insured 37,393 35,148 34,244 33,828 33,684 33,583 33,466 33,368 33,246 32,558 13 Conventional 37,454 48,191 60,331 63,979 64,598 65,088 65,354 65,427 65,500 65,538 Mortgage transactions (during period) 14 Purchases 17,554 16,721 21,510 1,624 1,663 1,188 1,159 1,410 1,631 1,978 15 Sales 3,528 978 1,301 100 319 0 n.a. n.a. n.a. n.a. Mortgage commitments1 16 Contracted (during period) 18,607 21,007 20,155 1,199 1,858 1,315 2,578 1,917 3,774 3,538 17 Outstanding (end of period) 5,461 6,384 3,402 3,330 3,402 3,211 4,480 4,851 6,942 8,444 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period f 18 Total 5,996 9,283 12,399 13,194 14,022 14,412 14,584 13,623 n.a. n.a. 19 FHA/VA 974 910 841 816 825 800 792 787 n.a. n.a. 20 Conventional 5,022 8,373 11,558 12,378 13,197 13,612 14,584 12,836 n.a. n.a. Mortgage transactions (during period) 21 Purchases 23,089 21,886 44,012 3,680 6,096 3,709 4,605 5,318 n.a. n.a. 22 Sales 19,686 18,506 38,905 3,449 5,202 3,107 4,286 5,897 n.a. n.a. Mortgage commitments9 23 Contracted (during period) 32,852 32,603 48,989 4,854 5,651 5,305 6,044 7,128 n.a. n.a. 24 Outstanding (end of period) 16,964 13,318 16,613 n.a. 16,613 n.a. n.a. 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. Based on transactions on first day of subsequent month. Large securities swap programs, while the corresponding data for FNMA exclude swap monthly movements in average yields may reflect market adjustments to changes activity. in maximum permissable contract rates. 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 1985 1986 Type of holder, and type of property 11998833 11998844 11998855 Ql Q2 Q3 Q4 Ql 1 All holders ... 1,811,540 2,024,483 2,256,778 2,071,279 2,128,471 2,190,661 2,256,778 2,303,698' 2 1- to 4-family . 1,189,811 1,319,667 1,471,012 1,347,511 1,384,248 1,427,675 1,471,012 1,497,458' 3 Multifamily... 158,718 179,074 204,311 184,886 190,004 195,488 204,311 208,784' 4 Commercial .. 350,389 414,040 474,755 427,242 443,400 458,735 474,755 491,823 5 Farm 112,622 111,702 106,700 111,640 110,819 108,763 106,700 105,633 6 Selected financial institutions . 1,130,781 1,269,500 1,390,328 1,291,540 1,323,474 1,356,114 1,390,328 1,407,881 Commercial banks1. 330,521 376,792 426,103 385,867 398,561 413,059 426,103 436,707 1- to 4-family . 182,514 197,225 214,817 199,617 204,439 210,203 214,817 218,354 Multifamily.., 18,410 20,387 23,442 20,808 21,748 22,426 23,442 24,018 Commercial .. 120,210 148,936 176,359 155,061 161,678 169,302 176,359 182,500 Farm 9,387 10,244 11,485 10,381 10,696 11,128 11,485 11,835 Savings banks .. 131,940 154,441 177,278 161,032 165,705 174,427 177,278 188,177 1- to 4-family . 93,649 107,302 121,889 111,592 114,375 119,952 121,889 131,043 Multifamily... 17,247 19,817 23,331 20,668 21,357 22,604 23,331 24,144 Commercial .. 21,016 27,291 31,976 28,741 29,942 31,757 31,976 32,906 Farm 28 31 82 31 31 114 82 84 Savings and loan associations. 494,789 555,277 586,085 559,263 569,291 575,684 586,085 576,998 1- to 4-family 387,924 421,489 434,359 421,024 425,021 427,081 434,359 420,096 Multifamily 44,333 55,750 66,775 57,660 60,231 62,608 66,775 67,368 Commercial 62,403 77,605 84,342 80,070 83,447 85,358 84,342 89,004 Farm 129 433 609 509 592 637 609 530 Life insurance companies 150,999 156,699 170,460 158,162 161,485 163,929 170,460 174,460 1- to 4-family 15,319 14,120 12,279 13,840 13,562 13,382 12,279 12,129 Multifamily 19,107 18,938 19,731 18,964 18,983 18,972 19,731 19,931 Commercial 103,831 111,175 126,621 113,187 116,812 119,543 126,621 130,671 Farm 12,742 12,466 11,829 12,171 12,128 12,032 11,829 11,729 27 Finance companies2 22,532 26,291 30,402 27,216 28,432 29,015 30,402 31,539 28 Federal and related agencies 148,328 158,993 166,978 163,531 165,912 166,248 166,978 166,097' 29 Government National Mortgage Association. 3,395 2,301 1,473 1,964 1,825 1,640 1,473 1,533' 30 1- to 4-family 630 585 539 576 564 552 539 527 31 Multifamily 2,765 1,716 934 1,388 1,261 1,088 934 1,006' Farmers Home Administration. 2,141 1,276 733 1,062 790 577 733 704 1- to 4-family 1,159 213 183 156 223 185 183 217 Multifamily 173 119 113 82 136 139 113 33 Commercial 409 497 159 421 163 72 159 217 Farm 400 447 278 403 268 181 278 237 37 Federal Housing and Veterans Administration 4,894 4,816 4,920 4,878 4,888 4,918 4,920 4,957 38 1- to 4-family 1,893 2,048 2,254 2,181 2,199 2,251 2,254 2,301 39 Multifamily 3,001 2,768 2,666 2,697 2,689 2,667 2,666 2,656 40 Federal National Mortgage Association . 78,256 87,940 98,282 91,975 94,777 96,769 98,282 98,795 41 1- to 4-family 73,045 82,175 91,966 86,129 88,788 90,590 91,966 92,315 42 Multifamily 5,211 5,765 6,316 5,846 5,989 6,179 6,316 6,480 43 Federal Land Banks. 52,010 52,261 47,548 52,104 51,056 49,255 47,548 46,485 44 1- to 4-family 3,081 3,074 2,798 3,064 3,006 2,895 2,798 2,735 45 Farm 48,929 49,187 44,750 49,040 48,050 46,360 44,750 43,750 Federal Home Loan Mortgage Corporation. 7,632 10,399 14,022 11,548 12,576 13,089 14,022 13,623' 1- to 4-family 7,559 9,654 11,881 10,642 11,288 11,457 11,881 12,231' Multifamily 73 745 2,141 906 1,288 1,632 2,141 1,392' 49 Mortgage pools or trusts3 285,073 332,057 415,042 347,793 365,748 388,948 415,042 440,701' 50 Government National Mortgage Association. 159,850 179,981 212,145 185,954 192,925 201,026 212,145 220,348 51 1- to 4-family 155,950 175,589 207,198 181,419 188,228 196,198 207,198 215,148' 52 Multifamily 3,900 4,392 4,947 4,535 4,697 4,828 4,947 5,200' Federal Home Loan Mortgage Corporation. 57,895 70,822 100,387 76,759 83,327 91,915 100,387 110,337' 1- to 4-family 57,273 70,253 99,515 75,781 82,369 90,997 99,515 108,020' Multifamily 622 569 872 978 958 918 872 2,317' Federal National Mortgage Association . 25,121 36,215 54,987 39,370 42,755 48,769 54,987 62,310 1- to 4-family 25,121 35,965 54,036 38,772 41,985 47,857 54,036 61,117 Multifamily n.a. 250 951 598 770 912 951 1,193 Farmers Home Administration. 42,207 45,039 47,523 45,710 46,741 47,238 47,523 47,706 1- to 4-family 20,404 21,813 22,186 21,928 21,962 22,090 22,186 22,082 Multifamily 5,090 5,841 6,675 6,041 6,377 6,415 6,675 6,943 Commercial 7,351 7,559 8,190 7,681 8,014 8,192 8,190 8,150 Farm 9,362 9,826 10,472 10,060 10,388 10,541 10,472 10,531 64 Individuals and others4 247,358 263,933 284,430 268,415 273,337 279,351 284,430 289,019 65 1- to 4-family 141,758 151,871 164,710 153,574 157,807 162,970 164,710 167,604 66 Multifamily 38,786 42,017 45,417 43,715 43,520 44,100 45,417 46,103 67 Commercial 35,169 40,977 47,108 42,081 43,344 44,511 47,108 48,375 68 Farm 31,645 29,068 27,195 29,045 28,666 27,770 27,195 26,937 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
A46 Domestic Nonfinancial Statistics • August 1986 1.55 CONSUMER INSTALLMENT CREDIT14 Total Outstanding, and Net Change, seasonally adjusted Millions of dollars 1985 1986 IVOJ Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Amounts outstanding (end of period) 1 Total 453,580 535,098 506,090 516,420 522,978 528,621 535,098 542,753 547,852 550,939 555,094 By major holder 2 Commercial banks 209,158 240,796 230,644 233,545 235,364 238,620 240,796 243,256 244,761 245,172 247,735 3 Finance companies2 96,126 120,095 109,457 114,927 117,565 118,356 120,095 123,717 126,001 127,422 128,154 4 Credit unions 66,544 75,127 71,938 72,433 73,474 74,117 75,127 75,810 76,431 76,953 77,578 5 Retailers3 37,061 39,187 38,751 38,723 38,890 39,039 39,187 39,416 39,497 39,844 39,826 6 Savings institutions 40,330 55,555 51,115 52,656 53,509 54,307 55,555 56,290 57,048 57,573 58,024 7 Gasoline companies 4,361 4,337 4,185 4,136 4,176 4,182 4,337 4,264 4,114 3,975 3,777 By major type of credit 8 Automobile 173,122 206,482 192,923 198,656 201,994 203,766 206,482 210,661 213,342 214,361 215,028 9 Commercial banks 83,900 92,764 90,234 90,784 91,402 92,127 92,764 93,489 93,828 93,377 92,956 10 Credit unions 28,614 30,577 29,775 29,556 29,904 30,166 30,577 30,855 31,107 31,320 31,574 11 Finance companies 54,663 73,391 64,071 69,201 71,415 71,996 73,391 76,410 78,310 79,416 80,111 12 Savings institutions 5,945 9,750 8,843 9,115 9,273 9,477 9,750 9,907 10,097 10,248 10,386 13 Revolving 98,514 118,296 112,373 113,850 115,218 117,050 118,296 119,682 120,724 122,131 123,445 14 Commercial banks 58,145 73,893 69,079 70,453 71,507 73,076 73,893 74,991 75,953 77,021 78,424 15 Retailers 33,064 34,560 34,330 34,264 34,382 34,486 34,560 34,770 34,843 35,188 35,170 16 Gasoline companies 4,361 4,337 4,185 4,136 4,176 4,182 4,337 4,264 4,114 3,975 3,777 17 Savings institutions 2,944 5,506 4,779 4,997 5,153 5,306 5,506 5,657 5,813 5,947 6,075 18 Mobile home 24,184 25,461 25,173 25,341 25,320 25,315 25,461 25,371 25,573 25,584 25,521 19 Commercial banks 9,623 9,578 9,608 9,662 9,596 9,584 9,578 9,457 9,566 9,348 9,272 20 Finance companies 9,161 9,116 9,114 9,092 9,089 9,057 9,116 9,125 9,161 9,327 9,286 21 Savings institutions 5,400 6,767 6,451 6,587 6,635 6,674 6,767 6,789 6,846 6,909 6,963 22 Other 157,760 184,859 175,621 178,573 180,446 182,490 184,859 187,039 188,212 188,863 191,100 23 Commercial banks 57,490 64,561 61,723 62,646 62,859 63,833 64,561 65,319 65,414 65,427 67,083 24 Finance companies 32,302 37,588 36,272 36,634 37,061 37,303 37,588 38,182 38,530 38,678 38,757 25 Credit unions 37,930 44,550 42,163 42,877 43,570 43,951 44,550 44,955 45,323 45,633 46,004 26 Retailers 3,997 4,627 4,421 4,459 4,508 4,553 4,627 4,646 4,653 4,656 4,656 27 Savings institutions 26,041 33,533 31,042 31,957 32,448 32,850 33,533 33,937 34,291 34,469 34,600 Net change (during period) 28 Total 77,341 81,518 6,051 10,330 6,558 5,643 6,477 7,655 5,099 3,087 4,155 By major holder 29 Commercial banks 39,819 31,638 1,556 2,901 1,819 3,256 2,176 2,460 1,505 411 2,563 30 Finance companies2 9,961 23,969 1,959 5,470 2,638 791 1,739 3,622 2,284 1,421 732 31 Credit unions 13,456 8,583 492 495 1,041 643 1,010 683 621 522 625 32 Retailers3 2,900 2,126 328 -28 167 149 148 229 81 347 -18 33 Savings institutions 11,038 15,225 1,641 1,541 853 798 1,248 735 758 525 451 34 Gasoline companies 167 -24 75 -49 40 6 155 -73 -150 -139 -198 By major type of credit 35 Automobile 27,214 33,360 1,722 5,733 3,338 1,772 2,716 4,179 2,681 1,019 667 36 Commercial banks 16,352 8,864 -116 550 618 725 637 725 339 -451 -421 37 Credit unions 3,223 1,963 59 -219 348 262 411 278 252 213 254 38 Finance companies 4,576 18,728 1,485 5,130 2,214 581 1,395 3,019 1,900 1,106 695 39 Savings institutions 3,063 3,805 294 272 158 204 273 157 190 151 138 40 Revolving 20,145 19,782 1,469 1,477 1,368 1,832 1,246 1,386 1,042 1,407 1,314 41 Commercial banks 15,949 15,748 907 1,374 1,054 1,569 817 1,098 962 1,068 1,403 42 Retailers 2,512 1,496 265 -66 118 104 74 210 73 345 -18 43 Gasoline companies 167 -24 75 -49 40 6 155 -73 -150 -139 -198 44 Savings institutions 1,517 2,562 222 218 156 153 200 151 156 134 128 45 Mobile home 1,990 1,277 158 168 -21 -5 146 -90 202 11 -63 46 Commercial banks -199 -45 32 54 -66 -12 -6 -121 109 -218 -76 47 Finance companies 544 -45 -27 -22 -3 -32 59 9 36 166 -41 48 Savings institutions 1,645 1,367 153 136 48 39 93 22 57 63 54 49 Other 27,992 27,099 2,702 2,952 1,873 2,044 2,369 2,180 1,173 651 2,237 50 Commercial banks 7,717 7,071 733 923 213 974 728 758 95 13 1,656 51 Finance companies 4,841 5,286 501 362 427 242 285 594 348 148 79 52 Credit unions 10,233 6,620 433 714 693 381 599 405 368 310 371 53 Retailers 388 630 63 38 49 45 74 19 7 3 0 54 Savings institutions 4,813 7,492 972 915 491 402 683 404 354 178 131 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. INTEREST RATES Commercial banks1 1 48-month new car2 13.92 13.71 n.a. n.a. 12.39 n.a. n.a. 12.29 n.a. n.a. 2 24-month personal 16.50 16.47 n.a. n.a. 15.61 n.a. n.a. 15.52 n.a. n.a. 3 120-month mobile home2 16.08 15.58 n.a. n.a. 14.66 n.a. n.a. 14.57 n.a. n.a. 4 Credit card 18.78 18.77 n.a. n.a. 18.57 n.a. n.a. 18.48 n.a. n.a. Auto finance companies 5 New car 12.58 14.62 n.a. 9.97 11.71 12.52 9.99 9.70 10.51 10.55 6 Used car 18.74 17.85 n.a. 17.21 17.28 17.22 16.60 16.74 16.63 16.67 OTHER TERMS3 Maturity (months) 7 New car 45.9 48.3 n.a. 51.5 52.0 52.1 51.2 51.3 51.0 50.6 8 Used car 37.9 39.7 n.a. 41.4 41.5 41.4 42.8 42.5 42.4 42.5 Loan-to-value ratio 9 New car 86 88 n.a. 93 92 92 92 92 90 89 10 Used car 92 92 n.a. 95 95 95 95 95 95 % Amount financed (dollars) 11 New car 8,787 9,333 n.a. 10,498 10,205 9,925 10,064 10,074 10,306 10,402 12 Used car 5,033 5,691 n.a. 6,091 6,167 6,255 6,165 6,194 6,207 6,281 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
A46 DomesticN onfinancial Statistics • August 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' 11998800 11998811 11998822 11998833 11998844 11998855'' HI H2 HI H2 HI H2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors .... 341.8 372.7 395.3 542.9 765.9 898.2 506.0 579.7 713.4 818.4 729.2 11,,006666..66 By sector and instrument 2 U.S. government 79.2 87.4 161.3 186.6 198.8 223.6 221.9 151.2 172.2 225.4 183.2 263.6 3 Treasury securities 79.8 87.8 162.1 186.7 199.0 223.7 222.0 151.4 172.4 225.5 183.3 263.7 4 Agency issues and mortgages -.6 -.5 -.9 -.1 -.2 -.1 -.1 -.1 -.2 -.1 -.1 -.1 5 Private domestic nonfinancial sectors 262.6 285.3 234.1 356.3 567.1 674.5 284.1 428.5 541.2 593.1 546.0 803.0 6 Debt capital instruments 188.1 154.5 152.6 253.7 325.3 492.9 227.3 280.1 287.7 362.8 370.0 615.2 7 Tax-exempt obligations 30.3 23.4 48.6 57.3 65.8 182.8 57.3 57.4 38.9 92.6 88.3 277.2 8 Corporate bonds 26.7 21.8 18.7 16.0 47.1 72.9 21.4 10.6 31.9 62.3 71.9 73.2 9 Mortgages 131.2 109.3 85.4 180.3 212.4 237.3 148.6 212.1 216.9 207.9 209.8 264.9 10 Home mortgages 94.2 72.2 50.5 116.9 130.7 155.3 98.7 135.2 135.6 125.7 130.8 180.0 11 Multifamily residential 7.6 4.8 5.4 11.9 20.7 26.1 6.1 17.6 23.6 17.7 22.3 30.0 12 Commercial 19.2 22.2 25.2 48.9 62.0 60.8 42.2 55.7 58.5 65.6 59.0 62.7 13 Farm 10.2 10.0 4.2 2.6 -1.0 -5.0 1.6 3.6 -.8 -1.2 -2.2 -7.8 14 Other debt instruments 74.5 130.8 81.4 102.6 241.9 181.6 56.8 148.4 253.5 230.2 175.9 187.7 15 Consumer credit 4.7 22.6 17.7 56.7 94.8 96.6 38.0 75.4 98.0 91.6 98.3 95.0 16 Bank loans n.e.c 37.0 54.7 54.2 26.8 79.5 39.4 13.7 39.8 89.9 69.0 28.3 51.0 17 Open market paper 5.7 19.2 -4.7 -1.6 24.2 12.4 -10.0 6.9 33.5 15.0 16.9 7.9 18 Other 27.1 34.4 14.2 20.7 43.3 33.2 15.1 26.3 32.1 54.6 32.5 33.9 19 By borrowing sector 262.6 285.3 234.1 356.3 567.1 674.5 284.1 428.5 541.2 593.1 546.0 803.0 20 State and local governments 17.2 6.8 25.9 37.6 45.0 140.9 36.0 39.2 21.4 68.6 74.1 207.6 21 Households 118.9 119.7 87.9 187.4 239.2 294.0 152.3 222.6 236.0 242.3 244.3 343.9 22 Farm 15.2 16.6 6.8 4.1 -.1 -11.9 .8 7.4 -.7 .5 -7.6 -16.2 23 Nonfarm noncorporate 31.2 38.6 41.3 70.8 90.8 85.4 56.1 85.5 96.9 84.7 84.4 86.4 24 Corporate 80.1 103.6 72.1 56.4 192.3 166.1 39.0 73.8 187.7 196.9 150.7 181.2 25 Foreign net borrowing in United States 27.2 27.2 15.7 18.9 2.8 1.5 15.4 22.4 23.0 -17.4 -3.2 6.2 26 Bonds .8 5.4 6.7 3.8 4.1 3.9 4.6 2.9 1.1 7.0 5.1 2.7 27 Bank loans n.e.c 11.5 3.7 -6.2 4.9 -7.8 -3.1 11.4 -1.6 -4.5 -11.1 -5.4 -.8 28 Open market paper 10.1 13.9 10.7 6.0 2.5 -.6 -4.6 16.5 20.9 -16.0 -5.4 4.2 29 U.S. government loans 4.7 4.2 4.5 4.3 4.0 1.3 3.9 4.6 5.5 2.6 2.4 .1 30 Total domestic plus foreign 369.0 399.9 411.0 561.7 768.7 899.7 521.3 602.1 736.4 801.0 725.9 1,072.8 Financial sectors 31 Total net borrowing by financial sectors 57.6 89.0 80.2 89.2 138.2 193.7 69.1 109.3 126.5 149.9 116677..22 222200..11 By instrument 32 U.S. government related 44.8 47.4 64.9 67.8 74.9 101.6 66.2 69.4 69.6 80.1 92.7 110.4 33 Sponsored credit agency securities 24.4 30.5 14.9 1.4 30.4 20.6 -4.1 6.9 29.9 30.9 26.0 15.1 34 Mortgage pool securities 19.2 15.0 49.5 66.4 44.4 79.9 70.3 62.5 39.7 49.2 6666..77 93.1 3S Loans from U.S. government 1.2 1.9 .4 1.1 2 2 36 Private financial sectors 12.8 41.6 15.3 21.4 63.3 92.1 2.9 40.0 56.9 69.7 74.5 109.7 37 Corporate bonds 1.8 3.5 13.7 12.6 25.9 31.2 10.3 14.9 20.7 31.1 32.2 2299..88 38 Mortgages * * .1 * .4 .1 * * .4 .4 ..11 39 Bank loans n.e.c -.9 .9 1.9 -.2 1.0 5.3 -3.3 3.0 -.5 2.4 1.7 9.2 40 Open market paper 4.8 20.9 -1.1 16.0 20.4 41.3 7.9 24.1 20.4 20.4 28.8 53.9 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 1111..77 1166..77 By sector 42 Sponsored credit agencies 25.6 32.4 15.3 1.4 30.4 21.7 -4.1 6.9 29.9 30.9 26.0 17.3 43 Mortgage pools 19.2 15.0 49.5 66.4 44.4 79.9 70.3 62.5 39.7 49.2 66.7 93.1 44 Private financial sectors 12.8 41.6 15.3 21.4 63.3 92.1 2.9 40.0 56.9 69.7 74.5 109.7 45 Commercial banks .5 .4 1.2 .5 4.4 5.4 .8 .2 4.8 3.9 5.2 5.7 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 22.1 -9.3 5.2 19.7 25.6 11.1 33.0 48 Finance companies -1.1 18.2 6.3 11.3 19.3 55.9 2.1 20.5 6.3 32.4 49.6 62.2 49 REITs -.5 -.2 * -.2 .8 .5 -.1 -.3 .8 .8 .5 .5 All sectors 50 Total net borrowing 426.6 488.9 491.2 651.0 906.9 1093.4 590.4 711.5 863.0 950.9 893.2 1,292.9 51 U.S. government securities 122.9 133.0 225.9 254.4 273.8 324.2 288.2 220.7 241.9 305.6 276.0 371.9 52 State and local obligations 30.3 23.4 48.6 57.3 65.8 182.8 57.3 57.4 38.9 92.6 88.3 277.2 53 Corporate and foreign bonds 29.3 30.7 39.0 32.4 77.1 108.0 36.3 28.4 53.8 100.5 109.3 105.7 54 Mortgages 131.1 109.2 85.4 180.3 212.7 237.3 148.6 212.0 217.2 208.2 209.8 264.9 55 Consumer credit 4.7 22.6 17.7 56.7 94.8 96.6 38.0 75.4 98.0 91.6 98.3 95.0 56 Bank loans n.e.c 47.7 59.2 49.9 31.5 72.7 41.7 21.8 41.2 84.9 60.4 24.6 59.4 57 Open market paper 20.6 54.0 4.9 20.4 47.1 53.1 -6.7 47.5 74.8 19.3 40.4 66.0 58 Other loans 40.1 56.7 19.9 17.9 63.0 49.7 6.9 29.0 53.4 72.7 46.6 52.9 External corporate equity funds raised in United States 59 Total new share issues 21.2 -3.3 33.6 66.3 -33.6 32.9 81.9 50.7 -41.2 -25.9 25.7 40.1 60 Mutual funds 4.5 6.0 16.8 31.5 37.1 105.3 35.3 27.7 39.0 35.3 92.0 118.6 61 All other 16.8 -9.3 16.8 34.8 -70.7 -72.4 46.6 23.0 -80.2 -61.2 -66.3 -78.4 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 5.3 2.6 2.4 5.0 5.3 5.1 5.4 64 Foreign shares purchased in United States 2.1 .3 1.5 4.0 1.1 4.0 5.7 2.2 -.7 2.9 4.3 3.6 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 341.8 372.7 395.3 542.9 765.9 898.2 506.0 579.7 713.4 818.4 729.2 1,066.6 By public agencies and foreign ? Total net advances 97.1 97.7 114.1 111177..44 144.6 221166..44 112200..55 111144..44 112244..22 116655..11 119977..66 223366..99 3 U.S. government securities 15.8 17.1 22.7 27.6 36.0 45.7 41.0 14.1 30.5 41.4 48.0 45.1 4 Residential mortgages 31.7 23.5 61.0 76.1 56.5 94.7 80.2 72.1 52.8 60.1 86.0 103.4 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 61.8 11.4 30.2 25.0 48.1 52.0 71.6 Total advanced, by sector 7 U.S. government 23.7 24.0 15.9 9.7 17.1 17.4 9.1 10.3 7.8 26.4 18.1 16.8 8 Sponsored credit agencies 45.6 48.2 65.5 69.8 73.3 101.6 68.6 71.0 73.6 73.0 97.7 105.5 9 Monetary authorities 4.5 9.2 9.8 10.9 8.4 21.6 15.7 6.1 12.1 4.7 27.1 16.4 10 Foreign 23.3 16.2 22.8 27.1 45.9 75.7 27.2 27.0 30.7 61.0 54.7 98.2 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 44.8 47.4 6644..99 6677..88 7744..99 110011..66 6666..22 6699..44 6699..66 8800..11 9922..77 111100..44 12 Foreign 27.2 27.2 15.7 18.9 2.8 1.5 15.4 22.4 23.0 --1177..44 -3.2 6.2 Private domestic funds advanced 13 316.7 349.6 361.8 512.1 699.0 784.9 446677..11 555577..11 668811..88 771166..11 662211..00 994466..33 14 U.S. government securities 107.1 115.9 203.1 226.9 237.8 278.5 247.2 206.6 211.4 264.2 228.0 326.8 15 State and local obligations 30.3 23.4 48.6 57.3 65.8 182.8 57.3 57.4 38.9 92.6 88.3 277.2 16 Corporate and foreign bonds 19.3 18.8 14.8 14.9 34.8 33.6 21.4 8.5 25.3 44.3 43.5 23.0 17 Residential mortgages 70.0 53.5 -5.3 52.6 94.8 86.7 24.6 80.6 106.3 83.3 67.0 106.5 18 Other mortgages and loans 97.1 154.2 101.4 153.0 281.5 217.6 104.6 202.0 315.8 247.1 205.9 229.6 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 7(1 Credit market funds advanced by private financial 283.8 321.7 288.4 384.6 555.6 555.2 332.0 437.2 552.5 558.7 448.9 665599..99 71 Commercial banking 100.6 102.3 107.2 136.1 181.7 196.6 121.0 151.3 195.2 168.1 142.6 251.9 7? Savings institutions 54.5 27.8 30.1 139.8 146.3 86.0 131.3 148.3 167.9 124.7 57.4 114.8 73 Insurance and pension funds 94.5 97.6 107.4 94.2 119.0 125.2 83.0 105.3 112.0 126.0 101.6 148.7 24 Other finance 34.2 94.0 43.7 14.5 108.6 147.4 -3.3 32.3 77.4 139.9 147.3 144.5 75 Sources of funds 283.8 321.7 288.4 384.6 555.2 555.2 332.0 437.2 552.5 558.7 448.9 659.9 76 Private domestic deposits and RPs 169.6 211.9 196.2 209.3 298.8 194.5 203.8 214.8 292.2 305.5 177.9 208.5 27 Credit market borrowing 12.8 41.6 15.3 21.4 63.3 92.1 2.9 40.0 56.9 69.7 74.5 109.7 78 Other sources 101.3 68.2 77.0 153.9 193.5 268.6 125.3 182.4 203.4 183.5 196.5 341.7 79 Foreign funds -21.7 -8.7 -26.7 22.1 19.0 14.0 -14.2 58.5 27.2 10.9 10.7 15.4 30 Treasury balances -2.6 -1.1 6.1 -5.3 4.0 10.3 9.9 -20.6 1.2 6.8 19.3 .7 31 Insurance and pension reserves 83.7 90.7 103.2 95.1 110.3 116.7 83.5 106.8 119.5 101.2 100.6 132.9 32 Other, net 41.8 -12.7 -5.6 41.9 60.1 127.6 46.1 37.7 55.5 64.6 66.0 192.7 Private domestic nonfinancial investors 33 Direct lending in credit markets 45.8 69.5 88.7 148.9 206.7 321.8 137.9 159.9 186.3 227.1 246.6 396.1 34 U.S. government securities 24.6 29.3 32.1 88.3 125.8 164.1 96.9 79.7 126.3 125.3 119.1 206.5 35 State and local obligations 7.0 11.1 29.2 43.5 43.2 90.4 47.2 39.9 25.3 61.2 47.0 133.6 36 Corporate and foreign bonds -11.0 -3.9 8.1 -5.5 15.3 3.1 -10.8 -.3 7.5 23.0 40.3 -32.4 37 Open market paper -3.1 2.7 -.6 6.5 -1.4 37.2 -6.6 19.7 3.2 -6.1 11.7 62.8 38 Other 28.4 30.3 19.9 16.1 23.8 27.1 11.3 20.8 24.0 23.7 28.5 25.7 39 Deposits and currency 181.1 221.9 203.3 228.4 303.4 206.9 225.6 231.3 303.6 303.2 191.8 219.3 40 10.3 9.5 9.7 14.3 8.6 12.4 14.8 13.8 15.9 1.3 18.5 6.3 41 5.4 18.1 17.6 26.7 24.1 43.5 53.0 -.4 30.4 17.7 15.9 69.3 42 Small time and savings accounts 82.9 47.0 138.1 218.3 149.8 128.8 278.9 157.7 130.7 169.0 156.6 100.6 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 14.3 -55.1 43.4 97.6 69.6 -.5 28.6 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 * 7.0 2.7 -4.5 -3.6 -4.5 4.5 47 Total of credit market instruments, deposits and currency 226.9 291.4 292.0 377.3 510.1 528.7 363.5 391.2 489.9 530.3 438.4. 615.4 48 Public holdings as percent of total 26.3 24.4 27.8 20.9 18.8 24.0 23.1 19.0 16.9 20.6 27.2 22.1 49 Private financial intermediation (in percent) 89.6 92.0 79.7 75.1 79.5 70.7 71.1 78.5 81.0 78.0 72.3 69.7 50 Total foreign funds 1.6 7.6 -3.9 49.2 64.9 89.7 13.0 85.5 57.9 71.9 65.4 113.6 MEMO: Corporate equities not included above 51 Total net issues 21.2 -3.3 33.6 66.3 -33.6 32.9 8811..99 50.7 --4411..22 --2255..99 2255..77 4400..11 5? Mutual fund shares 4.5 6.0 16.8 31.5 37.1 105.3 35.3 27.7 39.0 35.3 92.0 118.6 53 Other equities 16.8 -9.3 16.8 34.8 -70.7 -72.4 46.6 23.0 -80.2 -61.2 -66.3 -78.4 54 Acquisitions by financial institutions 24.9 20.9 36.9 56.7 10.3 43.8 76.4 36.9 2.1 18.5 60.7 23.9 55 Other net purchases -3.6 -24.3 -3.3 9.6 -43.9 -10.9 5.5 13.7 -43.4 -44.5 -35.0 16.2 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
A46 Domestic Nonfinancial Statistics • August 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 Sept. Oct. Nov. Dec. Jan.' Feb.' Mar.' Apr.' May 1 Industrial production 109.2 121.8 124.5 125.1 124.4 125.4 126.4 126.7 125.6 124.4 125.0 124.2 Market groupings 2 Products, total 113.9 127.1 131.7 133.1 131.8 133.5 134.1 134.4 133.1 131.8 132.6 131.8 3 Final, total 114.7 127.8 132.0 133.3 131.9 133.7 134.4 134.4 132.8 131.3 132.2 131.2 4 Consumer goods 109.3 118.2 120.7 121.8 120.8 122.7 124.2 123.9 123.2 122.1 123.6 123.0 5 Equipment 121.7 140.5 147.1 148.6 146.6 148.3 147.9 148.4 145.5 143.4 143.6 142.1 6 Intermediate 111.2 124.9 130.6 132.3 131.5 132.7 132.9 134.4 134.1 133.7 134.0 133.8 7 Materials 102.8 114.6 114.7 114.2 114.2 114.3 115.9 116.2 115.4 114.3 114.6 113.9 Industry groupings 8 Manufacturing 110.2 123.9 127.1 127.7 127.2 128.4 129.1 129.8 128.8 127.8 128.6 127.9 Capacity utilization (percent)2 9 Manufacturing 74.0 80.8 80.3 80.1 79.6 80.2 80.4 80.7 79.8 78.9 79.4 78.8 10 Industrial materials industries 75.3 82.3 80.2 79.5 79.3 79.2 80.1 80.2 79.6 78.8 78.9 78.3 11 Construction contracts (1977 = 100)3 138.0 150.0 161.0 167.0 168.0 162.0 162.0 146.0 162.0 149.0 176.0 160.0 12 Nonagricultural employment, total4 109.4' 114.5' 118.5' 119.(K 119.4' 119.6' 119.9' 120.4 120.6 120.6 121.0 121.2 13 Goods-producing, total 95.9r 101.6' 102.9' 102.1' 102.3' 102.4' 102.6' 103.1 102.9 102.5 102.9 102.7 14 Manufacturing, total 93.6' 98^ 98.7' 97.5' 97.7' 97.8' 98 .(X 98.0 98.0 97.8 97.8 97.6 15 Manufacturing, production-worker ... 88.6' 94.1' 93.5' 92.1' 92.4' 92.5' 92.7' 92.7 92.6 92.4 92.4 92.2 16 Service-producing 115.(K 120.CC 125.C 126.1' 126.5' 126.9' 127.2' 127.6 128.0 128.2 128.6 129.0 17 Personal income, total 176.4' 193.6' 204.9' 205.9' 207.2' 208.3' 210.5' 210.6 211.5 211.9 214.5 214.3 18 Wages and salary disbursements 168.6' 184.6' 197.3' 199.3' 200.4' 201.6' 203.5' 203.9 204.7 205.7 206.0 206.4 19 Manufacturing 149.(K 164.6' 171.6' 171.8' 173.7' 173.6' 175.4' 175.1 174.3 175.1 174.4 174.4 20 Disposable personal income5 175.8 193.6 203.1 203.5 204.9 205.9 208.2 208.9 209.9 210.5 213.4 213.0 21 Retail sales (1977 = 100)6 162.0 179.0 190.6 198.4 190.6 191.6 194.0 194.8 194.5 193.7 194.4 194.3 Prices7 22 Consumer 298.4 311.1 322.2 324.5 325.5 326.6 327.4 328.4 327.5 326.0 325.3 326.3 23 Producer finished goods 285.2 291.1 293.7 290.0 294.7 296.4 297.2 296.0 292.3 288.1 286.9 289.0 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 7. 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 Oct/ Nov/ Dec/ Jan. Feb. Mar. Apr. May HOUSEHOLD SURVEY DATA 1 Nonijistitutional population1 176,414 178,602 180,440 181,011 181,186 181,349 181,898 182,055 182,223 182,387 182,545 2 Labor force (including Armed Forces)1 113,749 115,763 117,695 118,355 118,376 118,466 119,014 119,322 119,445 119,473 119,898 3 Civilian labor force 111,550 113,544 115,461 116,114 116,130 116,229 116,786 117,088 117,207 117,234 117,664 4 Nonagricultural industries2 97,450 101,685 103,971 104,755 104,899 105,055 105,655 105,465 105,503 105,670 105,950 5 Agriculture 3,383 3,321 3,179 3,058 3,070 3,151 3,299 3,096 3,285 3,222 3,160 Unemployment 6 Number 10,717 8,539 8,312 8,301 8,161 8,023 7,831 8,527 8,419 8,342 8,554 7 Rate (percent of civilian labor force) ... 9.6 7.5 7.2 7.1 7.0 6.9 6.7 7.3 7.2 7.1 7.3 8 Not in labor force 62,665 62,839 62,745 62,656 62,810 62,883 62,884 62,733 62,778 62,914 62,647 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 90,196 94,461 97,698 98,428 98,666 98,910 99,296 99,429 99,484 99,797 99,946 10 Manufacturing 18,434 19,412 19,426 19,236 19,259 19,289 19,303 19,294 19,255 19,247 19,208 11 Mining 952 974 969 913 907 901 897 880 852 821 789 12 Contract construction 3,948 4,345 4,661 4,754 4,765 4,787 4,901 4,864 4,838 4,970 4,991 13 Transportation and public utilities 4,954 5,171 5,300 5,260 5,272 5,277 5,286 5,277 5,280 5,244 5,240 14 Trade 20,881 22,134 23,195 23,339 23,385 23,431 23,564 23,638 23,669 23,710 23,765 15 Finance 5,468 5,682 5.924 6,038 6,070 6,095 6,123 6,157 6,184 6,231 6,259 16 Service 19,694 20,761 21,929 22,313 22,415 22,501 22,585 22,638 22,707 22,854 22,953 17 Government 15,869 15,984 16,295 16,575 16.593 16,629 16,637 16,681 16,699 16,720 16,741 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 • August 1986 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION Seasonally adjusted 1985 1986 1985 1986 1985 1986 Q2 Q3 Q4 Qlr Q2 Q3 Q4 Q1 Q2 Q3 Q4 Qlr Output (1977 = 100) Capacity (percent of 1977 output) Utilization rate (percent) 1 Total industry 124.2 124.8 125.4 125.6 154.0 155.1 156.2 157.2 80.7 80.5 80.3 79.9 2 Mining 110.0 108.5 107.6 105.1 133.6 133.9 134.1 134.3 82.3 81.0 80.2 78.3 3 Utilities 113.6 111.4 113.7 113.6 134.5 135.4 136.3 136.9 84.4 82.3 83.4 82.9 4 Manufacturing 126.6 127.6 128.2 128.8 157.7 158.9 160.2 161.3 80.3 80.3 80.0 79.8 5 Primary processing ... 108.1 109.5 110.4 111.7 132.0 132.4 132.8 133.2 81.9 82.7 83.1 83.8 6 Advanced processing 137.9 138.6 139.0 139.1 173.2 174.9 176.7 178.3 79.6 79.2 78.7 78.0 7 Materials 114.5 114.2 114.8 115.3 142.5 143.4 144.3 145.0 80.4 79.6 79.5 79.5 8 Durable goods 121.4 120.7 121.4 121.6 157.4 158.9 160.5 161.6 77.1 76.0 75.6 75.3 9 Metal materials .... 80.2 79.4 82.4 80.1 117.3 117.3 117.3 116.7 68.4 67.7 70.3 68.7 10 Nondurable goods.... 111.2 113.7 113.8 115.9 137.8 138.2 138.7 139.1 80.7 82.2 82.0 83.3 11 Textile, paper, and chemical.. 111.0 114.1 114.0 116.3 137.0 137.4 137.8 138.1 81.0 83.0 82.7 84.2 12 Paper 121.8 123.8 124.5 128.1 136.2 136.3 136.5 136.8 89.4 90.8 91.2 93.6 13 Chemical 112.6 114.6 114.2 116.0 142.0 142.6 143.1 143.5 79.3 80.4 79.8 80.8 14 Energy materials 105.2 103.2 104.2 103.9 120.3 120.6 120.9 121.2 87.5 85.5 86.1 85.7 Previous cycle1 Latest cycle2 1985 1985 1986 High Low High Low May Sept. Oct. Nov. Dec. Jan. Feb.' Mar/ Apr/ May Capacity utilization rate (percent) 15 Total industry 88.6 72.1 86.9 69.5 80.6 80.5 79.8 80.3 80.7 80.8 79.9 79.0 79.2 78.6 16 Mining 92.8 87.8 95.2 76.9 82.2 81.0 80.9 79.7 80.0 80.0 78.4 76.5 75.8 74.2 17 Utilities 95.6 82.9 88.5 78.0 84.5 83.4 82.7 82.3 85.3 83.8 82.1 82.9 83.2 83.4 18 Manufacturing 87.7 69.9 86.5 68.0 80.3 80.1 79.6 80.2 80.4 80.7 79.8 78.9 79.4 78.8 19 Primary processing ... 91.9 68.3 89.1 65.1 81.5 82.8 83.1 83.0 83.3 84.8 83.9 82.9 83.3 83.0 20 Advanced processing . 86.0 71.1 85.1 69.5 79.8 79.0 78.0 79.0 79.0 78.8 78.1 77.3 77.8 77.0 21 Materials 92.0 70.5 89.1 68.4 80.1 79.5 79.3 79.2 80.1 80.2 79.6 78.8 78.9 78.3 22 Durable goods 91.8 64.4 89.8 60.9 76.6 75.4 75.2 75.8 75.8 76.4 75.2 74.2 74.0 73.3 23 Metal materials 99.2 67.1 93.6 45.7 66.2 67.3 69.4 70.8 70.7 71.3 68.4 66.3 66.7 66.4 24 Nondurable goods .... 91.1 66.7 88.1 70.6 80.8 82.9 81.9 81.5 82.7 83.5 83.7 82.8 83.2 83.3 25 Textile, paper, and chemical 92.8 64.8 89.4 68.6 80.9 83.7 82.4 82.1 83.5 84.3 84.6 83.8 83.8 84.1 26 Paper 98.4 70.6 97.3 79.9 88.8 90.7 88.8 90.1 94.7 94.8 93.7 92.3 92.2 n.a. 27 Chemical 92.5 64.4 87.9 63.3 79.5 81.2 80.5 78.8 80.1 81.1 80.9 80.5 80.4 n.a. 28 Energy materials 94.6 86.9 94.0 82.2 87.5 85.6 86.2 84.7 87.4 85.9 85.7 85.4 85.8 84.9 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 A Monthly data are seasonally adjusted 1977 1985 1986 pro- 11998855 GGrroouuppiinngg por- avg. tion May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar. Apr.P Maye Index (1977 = 100) MAJOR MARKET 1 Total index 100.00 124.5 124.1 124.3 124.1 125.2 125.1 124.4 125.4 126.4 126.7 125.6 124.4 125.0 124.2 7 57.72 131.7 131.4 131.6 131.6 133.0 133.1 131.8 133.5 134.1 134.4 133.1 131.8 132.6 131.8 Final products 44.77 132.0 131.7 131.6 131.8 133.3 133.3 131.9 133.7 134.4 134.4 132.8 131.3 132.2 131.2 4 Consumer goods 25.52 120.7 120.0 120.4 120.1 121.5 121.8 120.8 122.7 124.2 123.9 123.2 122.1 123.6 123.0 5 Equipment 19.25 147.1 147.1 146.6 147.3 149.0 148.6 146.6 148.3 147.9 148.4 145.5 143.4 143.6 142.1 6 Intermediate products 12.94 130.6 130.3 131.4 130.7 132.0 132.3 131.5 132.7 132.9 134.4 134.1 133.7 134.0 133.8 7 Materials 42.28 114.7 114.2 114.3 113.8 114.5 114.2 114.2 114.3 115.9 116.2 115.4 114.3 114.6 113.9 Consumer goods 8 Durable consumer goods 6.89 112.9 111.8 112.0 111.3 114.0 112.9 111.4 115.5 111166..88 116.6 111166..33 111133..00 111166..00 111133..77 9 Automotive products 2.98 115.1 113.6 113.4 115.0 120.0 117.8 112.9 116.8 116.6 117.0 118.3 112.3 118.2 114.1 10 1.79 112.0 109.6 109.4 113.7 120.2 116.6 108.7 113.7 112.0 116.2 118.8 107.6 116.0 109.6 11 Autos, consumer 1.16 98.9 98.1 97.0 101.1 101.3 98.8 92.3 94.9 99.9 103.6 107.0 95.1 101.0 94.0 1? Trucks, consumer .63 136.3 130.9 132.3 137.2 155.4 149.7 139.1 148.6 134.5 139.5 140.6 130.6 143.9 n Auto parts and allied goods 1.19 119.7 119.6 119.4 116.8 119.6 119.5 119.3 121.4 123.4 118.2 117.7 119.5 121.6 120.9 14 3.91 111.3 110.4 110.9 108.4 109.5 109.3 110.2 114.5 116.9 116.4 114.8 113.6 114.3 113.3 IS Appliances, A/C and TV 1.24 129.5 129.3 131.5 121.6 124.5 123.7 126.3 139.4 145.4 138.8 136.5 135.4 140.4 137.4 16 Appliances and TV 1.19 130.3 128.7 131.7 123.2 125.5 125.6 128.6 141.9 148.4 141.5 139.1 137.9 142.1 17 Carpeting and furniture .96 119.4 116.9 119.6 122.2 119.5 120.2 120.1 122.9 118.9 122.3 121.9 118.4 117.8 18 Miscellaneous home goods 1.71 93.6 93.1 91.2 91.2 93.0 92.7 92.9 91.9 95.2 96.9 95.1 95.1 93.5 19 Nondurable consumer goods 18.63 123.6 123.1 123.5 123.4 124.2 125.1 124.3 125.4 127.0 126.5 125.7 125.5 126.4 126.4 70 Consumer staples 15.29 129.4 129.0 129.6 129.3 130.3 131.0 130.1 131.0 133.0 132.2 131.7 131.5 132.5 132.6 ?1 7.80 129.7 128.9 130.5 130.1 130.8 131.5 129.5 130.7 132.4 131.3 131.9 130.8 131.4 7? 7.49 129.1 129.1 128.7 128.5 129.7 130.5 130.6 131.2 133.6 133.1 131.5 132.3 133.6 133.6 n Consumer chemical products 2.75 147.5 147.3 145.4 145.4 149.1 151.4 149.4 152.4 152.9 153.8 155.6 155.2 157.2 74 Consumer paper products 1.88 143.7 143.7 144.6 144.9 143.9 144.7 145.5 145.7 148.0 144.4 141.7 142.6 144.1 ?S Consumer energy 2.86 101.9 102.1 102.2 101.5 101.8 101.0 102.9 101.4 105.6 105.8 102.1 103.5 104.0 76 Consumer fuel 1.44 88.5 90.2 88.8 89.2 91.1 85.8 90.2 90.1 92.3 93.9 91.4 91.0 93.0 ">7 1.42 114.4 115.9 114.0 112.7 116.5 115.8 112.9 119.2 117.8 113.0 116.2 Equipment 78 Business and defense equipment 18.01 147.8 147.9 147.4 147.9 149.7 149.4 147.5 149.7 149.4 150.3 148.3 147.1 148.2 147.1 79 Business equipment 14.34 141.3 141.9 140.7 141.3 143.0 142.2 139.6 141.7 141.4 142.9 141.1 139.1 140.3 138.8 30 Construction, mining, and farm 2.08 67.7 67.4 67.7 68.6 67.2 67.0 65.9 68.2 68.3 67.7 65.3 62.3 62.4 31 3.27 112.8 113.1 111.9 113.5 115.1 114.8 111.7 112.8 112.8 113.1 114.1 114.0 113.5 111122..55 37 1.27 83.6 82.8 84.1 85.6 84.5 85.1 85.5 84.7 87.1 84.5 83.4 82.0 82.9 82.4 33 5.22 219.3 222.8 219.6 219.5 222.8 219.4 213.9 217.7 217.9 219.2 216.4 215.6 215.7 214.6 34 2.49 106.1 102.9 103.4 103.3 106.0 108.3 109.7 111.2 107.7 114.6 111.4 105.0 112.1 108.1 35 Defense and space equipment 3.67 173.6 171.2 173.4 173.9 175.5 177.5 178.7 180.7 180.7 179.3 176.7 178.5 179.0 179.3 Intermediate products 36 Construction supplies 5.95 119.0 118.1 119.2 119.4 121.5 121.3 120.0 120.9 120.7 124.0 112233..55 112233..44 112233..55 112233..33 37 6.99 140.5 140.7 141.7 140.3 140.9 141.7 141.2 142.7 143.3 143.2 143.1 142.6 142.9 38 General business supplies 5.67 144.4 144.4 146.1 144.4 145.1 145.4 144.8 146.7 146.8 147.2 146.7 146.3 147.2 39 Commercial energy products 1.31 123.7 124.6 122.7 122.7 122.5 125.7 125.7 125.3 128.1 125.9 127.5 126.4 124.2 4 40 1 2 4 0 . . 9 5 2 0 1 1 0 2 0 1 . . 7 8 1 1 0 2 0 0 . . 1 7 1 9 2 8 0 . . 7 8 1 9 2 8 0 . . 3 2 1 1 0 2 0 1 . . 0 8 1 9 2 9 0 . . 0 2 1 1 0 2 0 0 . . 2 4 1 1 0 2 1 1 . . 6 7 1 12 0 2 1 . . 1 5 1 1 0 2 3 3 . . 9 2 1 11 0 22 3 11 . .. 2 55 1 11 0 22 0 00 . .. 7 00 11 9 11 9 99 . .. 6 99 11 9 11 8 88 . .. 7 99 47 5.94 159.0 157.8 157.3 157.0 158.7 156.5 154.0 155.0 155.1 154.8 154.0 153.4 154.1 151.9 43 Durable materials n.e.c 9.64 109.7 108.2 109.6 108.6 110.2 108.7 109.9 111.4 112.3 113.7 110.9 109.3 109.2 108.9 44 Basic metal materials 4.64 84.8 82.0 85.0 82.5 85.1 82.8 85.8 87.6 88.5 87.5 83.4 81.1 81.7 45 Nondurable goods materials 10.09 112.2 111.3 111.8 112.8 113.5 114.7 113.4 113.0 114.9 116.1 116.4 115.2 115.9 116.1 46 Textile, paper, and chemical 7.53 112.4 110.9 111.7 113.5 113.8 115.1 113.5 113.2 115.2 116.4 116.8 111155..88 111155..99 111166..33 4477 1.52 97.7 95.0 97.3 100.2 104.4 104.1 101.2 104.4 102.1 103.2 107.3 105.9 106.4 4488 Pulp and paper materials 1.55 123.7 120.9 123.3 125.0 122.8 123.7 121.1 123.0 129.3 129.5 128.2 126.5 126.5 49 Chemical materials 4.46 113.6 112.9 112.6 114.0 113.8 115.9 115.0 112.8 114.8 116.3 116.1 115.5 115.5 50 Miscellaneous nondurable materials .. 2.57 111.3 112.5 112.0 110.8 112.7 113.5 113.3 112.5 113.9 115.3 115.2 113.4 115.9 51 11.69 104.3 105.3 105.1 103.5 102.7 103.4 104.2 102.5 105.8 104.1 103.9 103.7 104.2 103.2 57 Primary energy 7.57 107.8 107.8 109.0 107.4 106.4 106.8 108.2 106.7 109.0 106.8 107.6 107.1 107.4 53 Converted fuel materials 4.12 97.9 100.6 98.1 96.2 95.9 97.0 96.8 94.7 100.1 99.1 97.0 97.4 98.2 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A46 Domestic Nonfinancial Statistics • August 1986 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value—Continued 1977 1986 Grouping c S o I d C e p p r o o r- - a 1 v 98 g 5 . tion May June July Aug. Sept. Oct. Nov. Dec Jan. Feb/ Mar. Apr .p May Index (1977 = 100) MAJOR INDUSTRY 1 Mining and utilities 15.79 110.6 111.3 111.6 109.4 109.1 110.3 109.9 108.9 110.8 110.2 108.0 106.8 106.4 105.2 2 Mining 9.83 109.0 109.8 110.6 108.7 108.3 108.4 108.4 106.9 107.4 107.4 105.3 102.7 101.8 99.6 3 Utilities 5.96 113.2 113.7 113.4 110.7 110.3 113.2 112.4 112.2 116.5 114.6 112.4 113.6 114.1 114.5 4 Manufacturing 84.21 127.1 126.6 126.7 126.9 128.2 127.7 127.2 128.4 129.1 129.8 128.8 127.8 128.6 127.9 5 Nondurable 35.11 125.6 124.7 125.5 125.6 126.6 126.9 126.4 127.3 128.0 129.1 128.5 128.0 128.8 128.9 6 Durable 49.10 128.2 127.9 127.6 127.9 129.4 128.3 127.7 129.2 129.9 130.4 129.0 127.6 128.4 127.2 Mining 7 Metal 10 .50 75.1 78.3 77.5 60.9 73.1 71.4 74.2 78.3 74.3 75.5 77.2 78.1 76.8 8 Coal 11.12 1.60 127.5 128.7 134.0 128.0 127.7 126.3 130.1 125.5 128.0 130.6 124.9 123.5 124.5 9 Oil and gas extraction 13 7.07 106.3 106.9 106.9 106.9 105.5 106.0 104.8 103.5 104.4 103.6 101.4 98.5 97.1 95.0 10 Stone and earth minerals 14 .66 118.8 118.7 117.9 116.6 117.7 119.3 120.4 119.0 114.0 117.1 120.2 115.4 116.1 Nondurable manufactures 11 Foods 20 7.96 131.0 131.4 131.8 132.2 132.6 132.5 130.7 131.4 132.6 133.2 133.8 133.0 134.2 12 Tobacco products 21 .62 95.7 98.9 96.0 97.7 97.8 105.3 104.5 103.5 99.3 97.9 93.0 13 Textile mill products 22 2.29 102.5 100.0 103.3 104.1 106.3 106.7 104.9 108.0 106.3 107.4 110.4 109.1 109.7 14 Apparel products 23 2.79 101.8 100.3 99.2 100.6 100.4 101.8 102.6 103.9 105.0 105.8 103.6 104.0 104.6 15 Paper and products 26 3.15 127.4 124.1 127.1 129.0 127.5 128.6 127.3 128.2 132.3 133.1 132.1 131.4 132.0 16 Printing and publishing 27 4.54 155.3 155.4 156.7 154.3 156.3 156.2 157.0 159.0 158.4 158.9 155.4 156.7 157.7 158.3 17 Chemicals and products 28 8.05 127.1 126.7 126.4 126.4 128.2 129.0 127.9 128.0 128.5 130.5 130.9 130.7 131.2 18 Petroleum products 29 2.40 86.7 87.4 87.1 88.3 88.2 85.9 87.7 87.3 88.7 92.6 88.4 87.8 90.1 90.9 19 Rubber and plastic products 30 2.80 147.0 144.3 145.5 145.6 148.0 148.6 148.7 150.5 150.0 150.5 150.7 149.0 148.4 20 Leather and products 31 .53 70.9 71.0 71.5 72.2 72.7 72.3 71.4 72.1 69.9 67.5 67.0 65.4 64.5 Durable manufactures 21 Lumber and products 24 2.30 112.2 113.5 113.0 114.8 115.9 116.5 115.6 116.5 119.9 118.2 118.5 22 Furniture and fixtures 25 1.27 142.0 142.0 141.9 145.3 144.3 143.2 141.9 144.1 142.1 143.9 145.4 144.5 145.4 23 Clay, glass, stone products 32 2.72 114.8 116.3 116.1 115.1 116.2 116.2 115.6 115.2 118.2 120.2 118.8 119.5 120.4 24 Primary metals 33 5.33 80.6 76.4 78.3 79.0 82.0 80.3 83.1 83.6 81.7 84.9 80.7 77.3 77.9 77.3 25 Iron and steel 331.2 3.49 70.7 65.4 67.6 68.7 71.6 69.7 74.4 75.3 72.0 75.5 69.9 65.0 65.7 26 Fabricated metal products 34 6.46 107.8 108.3 107.4 107.3 107.8 107.5 108.4 107.9 108.8 109.3 109.4 108.0 108.6 107.1 27 Nonelectrical machinery 35 9.54 146.6 149.1 145.6 147.5 149.2 146.5 143.0 145.6 146.0 146.2 144.6 143.4 142.6 141.5 28 Electrical machinery 36 7.15 169.3 169.3 169.5 165.7 166.1 165.1 165.1 168.9 171.9 167.9 165.5 165.6 167.1 165.5 29 Transportation equipment 37 9.13 123.2 120.9 121.8 123.7 126.8 126.2 124.5 126.5 126.8 128.9 128.1 124.2 127.0 125.1 30 Motor vehicles and parts 371 5.25 112.8 110.5 110.5 112.8 116.8 115.3 111.7 114.5 115.4 117.8 117.8 110.4 114.7 110.4 31 Aerospace and miscellaneous transportation equipment. 372-6.9 3.87 137.5 134.9 137.1 138.5 140.4 141.1 141.9 142.9 142.3 144.0 142.1 142.8 143.8 145.0 32 Instruments 38 2.66 139.9 139.9 140.7 141.1 141.8 139.4 139.8 140.7 140.6 141.1 141.8 142.5 142.7 141.0 33 Miscellaneous manufactures.... 39 1.46 96.4 98.3 96.8 95.9 97.2 96.4 95.9 94.5 96.3 99.0 98.1 97.2 97.8 Utilities 34 Electric 44..1177 111199..55 111199..55 111199..44 111177..55 111166..77 112200..66 111199..33 111188..77 112244..44 111199..99 111188..55 111199..88 112200..77 Gross value (billions of 1972 dollars, annual rates) MAJOR MARKET 35 Products, total 517.5 773.4 774.4 773.5 769.0 778.7 777.9 772.2 782.8 783.3 792.9 786.3 776.2 785.4 778.8 36 Final 405.7 614.8 616.2 614.0 610.1 618.6 617.8 613.0 622.4 622.1 629.2 623.7 614.0 623.3 617.0 37 Consumer goods 272.7 364.8 365.1 364.0 361.7 366.2 365.6 363.8 370.5 373.6 375.0 373.9 369.9 377.2 373.7 38 Equipment 133.0 250.1 250.8 251.0 250.3 252.4 252.2 249.3 251.9 248.5 254.1 249.8 244.0 246.2 243.2 39 Intermediate 111.9 158.6 158.3 159.7 160.4 160.1 160.1 159.2 160.4 161.2 163.7 162.6 162.3 162.0 161.8 • 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 11998833 11998844 11998855 July Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar/ Apr. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,605 1,682 1,733 1,709 1,782 1,846 1,703 1,668 1,839 1,861 1,808 1,834 1,885 2 1-family 902 922 957 961 990 956 984 932 963 1,060 1,033 1,043 1,139 3 2-or-more-family 703 759 777 748 792 890 719 736 876 801 775 791 746 4 Started 1,703 1,749 1,742 1,673 1,737 1,653 1,784 1,654 1,882 2,034 2,001 1,960 2,039 5 1-family 1,067 1,084 1,072 1,068 1,071 1,006 1,118 1,006 1,098 1,335 1,202 1,221 1,262 6 2-or-more-family 635 665 669 605 666 647 666 648 784 699 799 739 777 7 Under construction, end of period1 1,003 1,051 1,063 1,071 1,079 1,065 1,089 1,087 1,088 1,094 1,110 1,100 1,134 8 1-family 524 556 539 577 582 568 578 570 561 571 581 574 588 479 494 524 494 499 496 512 517 528 522 529 527 546 10 Completed 1,390 1,652 1,703 1,722 1,720 1,778 1,541 1,721 1,762 1,778 1,725 1,813 1,688 11 1-family 924 1,025 1,072 1,042 1,032 1,100 1,072 1,095 1,141 1,075 1,038 1,157 1,129 12 2-or-more-family 466 627 631 680 688 678 469 626 621 703 687 656 559 13 Mobile homes shipped 296 296 284 285 286 283 291 287 285 280 266 240 249 Merchant builder activity in 1-family units 14 Number sold 622 639 688 745 708 681 637 722 729 735 740' 893 862 15 Number for sale, end of period1 304 358 350 351 348 350 353 353 349 352 354' 340 336 PPrriiccee ((tthhoouussaannddss ooff ddoollllaarrss))22 MMeeddiiaann 1166 UUnniittss ssoolldd 75.5 80.0 84.3 82.1 83.3 84.6 85.4 87.2 87.9 86.6 89.3 ' 88.7 92.9 AAvveerraaggee 1177 UUnniittss ssoolldd 89.9 97.5 101.0 99.4 99.2 102.6 102.7 104.1 106.1 104.1 105.9 r 109.4 113.0 EXISTING UNITS (1-family) 18 Number sold 2,719 2,868 3,217 3,170 3,430 3,480 3,530 3,450 3,520 3,300 3,270 3,200 3,570 Price of units sold (thousands of dollars)2 19 Median 69.8 72.3 75.4 76.7 77.2 75.9 75.2 74.9 75.5 77.1 77.4 79.8 80.2 20 Average 82.5 85.9 90.6 92.7 93.2 91.4 91.2 90.3 91.8 93.0 93.1 96.8 98.1 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 268,730 312,989 342,363 344,206 343,246 346,084 344,502 343,847 351,669 355,063 358,844 353,873 356,733 77 Private 218,016 257,802 280,023 279,521 279,371 282,505 282,115 281,284 286,914 286,701 290,230 284,841 287,322 73 Residential 121,309 145,058 148,250 148,699 146,858 148,915 150,873 149,670 150,690 151,716 155,220 155,500 159,584 24 Nonresidential, total 96,707 112,744 131,773 130,822 132,513 133,590 131,242 131,614 136,224 134,985 135,010 129,341 127,738 Buildings 25 Industrial 12,863 13,746 15,767 15,384 15,118 15,567 15,630 16,271 17,357 15,748 16,307 13,760 14,229 76 Commercial 35,787 48,102 60,050 57,956 59,910 61,227 60,740 61,101 64,496 64,340 63,205 60,949 59,392 77 Other 11,660 12,298 12,406 12,578 12,957 12,769 12,250 12,495 12,048 12,448 12,773 12,825 12,714 28 Public utilities and other 36,397 38,598 43,550 44,904 44,528 44,027 42,622 41,747 42,323 42,449 42,725 41,807 41,403 79 Public 50,715 55,186 62,342 64,686 63,875 63,580 62,387 62,563 64,755 68,361 68,614 69,032 69,411 30 Military 2,544 2,839 3,152 3,364 2,966 3,008 3,086 3,040 3,452 3,765 4,105 3,294 3,619 31 Highway 14,143 16,295 19,951 19,589 20,224 19,585 19,193 19,826 20,827 22,020 21,960 22,884 22,203 32 Conservation and development 4,822 4,656 4,959 5,075 4,824 5,254 4,892 5,176 4,978 5,620 4,404 4,616 4,818 33 Other 29,206 31,396 34,280 36,658 35,861 35,733 35,216 34,521 35,498 36,956 38,145 38,238 38,771 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 16,000 jurisdictions beginning with 1978. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A46 Domestic Nonfinancial Statistics • August 1986 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data, except as noted Change from 12 Change from 3 months earlier months earlier (at annual rate) Change from 1 month earlier IIInnndddeeexxx llleeevvveeelll IIIttteeemmm MMMaaayyy 1985 1986 1986 111999888666 11998855 11998866 (((111999666777 MMaayy MMaayy === 111000000)))111 June Sept. Dec. Mar. Jan. Feb. Mar. Apr. May CONSUMER PRICES2 1 All items 3.7 1.6 3.3 2.4 S.3 -1.9 .3 -.4 -.4 -.3 .2 326.3 2 Food 2.5 2.6 .6 2.1 5.9 -1.4 .2 -.7 .1 .3 .4 317.0 3 Energy items 1.3 -14.8 6.9 -3.2 3.3 -34.2 .1 -3.8 -6.5 -5.8 .3 367.6 4 All items less food and energy 4.5 4.0 3.5 3.4 5.4 4.1 .4 .2 .4 .4 .1 325.3 5 Commodities 2.8 1.0 -.9 1.1 3.6 .3 .3 -.1 -.1 -.1 -.1 262.2 6 Services 5.5 5.8 6.2 4.8 6.5 6.5 .5 .4 .6 .7 .2 394.5 PRODUCER PRICES 7 Finished goods 1.0 -1.7 2.2 -2.4 9.2 -12.4 -.7 -1.5' -1.1 -.6 .6 289.0 8 Consumer foods -.8 2.0 -5.7 -2.9 16.0 -7.4 -.6 -1.6 .3 .1 1.1 274.9 9 Consumer energy -2.2 -28.6 24.7 -11.3 20.7 -67.6 -4.4' -S.y -13.4 -8.4 2.7 532.7 10 Other consumer goods 2.4 2.5 1.9 .0 4.4 2.9 .0 -.1 .8 .2 .2 257.7 11 Capital equipment 2.2 1.8 1.5 -.9 5.6 .7 -.2 .1 .3 .3 .1 305.8 12 Intermediate materials3 .3 -4.3 .6 -1.3 2.9 -11.9 -.5 -1.4 -1.3 -1.0 -.3 312.5 13 Excluding energy .7 -.6 .8 -.7 .0 -1.2 -.1 -.3' .0 -.3 .0 304.0 Crude materials 14 Foods -11.3 -3.1 -16.7 -20.6 47.0 -25.2 -2.5' -3.7' -1.0 -3.1 4.1 228.9 15 Energy -3.3 -24.9 4.4 -5.9 -4.0 -50.1 -.4' -7.3' -8.9 -7.7 .2 571.6 16 Other -9.2 -1.2 -7.8 -4.4 1.5 -3.7 .4' -3.8' 2.6 1.2 .2 249.3 1. Not seasonally adjusted. 3. Excludes intermediate materials for food manufacturing and manufactured 2. Figures for consumer prices are those for all urban consumers 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 Q1 Q2 Q3 Q4 Qlr GROSS NATIONAL PRODUCT 1 3,401.6 3,774.7 3,988.5 3,917.5 3,960.6 4,016.9 4,059.3 4,115.7 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 2,668.2 3 Durable goods 289.6 331.1 361.5 351.5 356.5 376.0 362.0 363.1 4 Nondurable goods 817.0 872.4 912.2 895.7 910.2 914.5 928.3 935.6 5 Services 1,122.7 1,219.6 1,308.6 1,277.8 1,296.6 1,315.6 1,344.6 1,369.5 6 Gross private domestic investment 501.9 674.0 669.3 657.6 672.8 666.1 680.7 717.2 7 Fixed investment 508.3 607.0 661.8 639.1 657.3 665.9 685.0 677.3 8 Nonresidential 356.3 427.9 476.2 459.6 474.2 478.5 492.5 479.1 9 Structures 126.1 147.6 170.2 166.1 169.7 170.4 174.5 169.1 10 Producers' durable equipment 230.2 280.2 306.0 293.5 304.5 308.1 318.0 309.9 11 Residential structures 152.0 179.1 185.6 179.4 183.1 187.4 192.5 198.2 12 Change in business inventories -6.4 67.1 7.5 18.5 15.5 .2 -4.3 39.9 13 Nonfarm .8 58.0 11.8 14.2 10.8 3.1 19.0 40.7 14 Net exports of goods and services -5.3 -59.2 -78.5 -42.3 -70.3 -87.8 -113.4 -105.8 15 Exports 354.1 384.6 369.9 379.6 369.2 363.2 367.8 374.4 16 Imports 359.4 443.8 448.4 421.9 439.5 451.0 481.2 480.2 17 Government purchases of goods and services 675.7 736.8 815.4 777.2 794.8 832.5 857.2 836.2 18 284.8 312.9 355.4 334.4 337.8 364.8 384.7 357.1 19 State and local 390.9 423.9 460.0 442.8 457.1 467.7 472.5 479.0 By major type of product 70 Final sales, total 3,408.0 3,707.6 3,981.1 3,899.0 33,,994455..00 44,,001166..77 44,,006633..66 44,,007755..77 71 Goods 1,394.7 1,585.9 1,639.3 1,628.3 1,636.1 1,650.7 1,642.2 1,668.6 7? Durable 572.3 679.5 709.2 706.2 705.9 714.8 710.0 709.8 73 Nondurable 822.4 906.3 930.1 922.1 930.2 935.9 932.2 958.8 74 Services 1,678.0 1,806.6 1,930.5 1,887.6 1,908.2 1,939.9 1,986.4 2,014.5 25 Structures 328.9 382.2 418.6 401.5 416.3 426.2 430.6 432.5 26 Change in business inventories -6.4 67.1 7.5 18.5 15.5 .2 -4.3 39.9 27 Durable goods -.8 37.0 6.4 16.9 1.8 -6.4 13.4 28.7 28 Nondurable goods -5.5 30.1 1.0 1.6 13.7 6.6 -17.7 11.2 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 3,616.9 NATIONAL INCOME 30 2,718.3 3,039.3 3,211.3 3,155.3 3,192.2 3,228.0 3,269.9 3,314.9 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 2,463.1 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 2,035.4 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 1,650.5 35 Supplement to wages and salaries 350.5 386.2 412.2 402.7 409.4 415.1 421.7 427.7 36 Employer contributions for social insurance 171.0 192.8 205.8 201.8 204.6 206.7 210.2 213.4 37 Other labor income 179.5 193.4 206.4 200.9 204.8 208.4 211.5 214.3 38 Proprietors' income1 192.3 233.7 242.2 239.4 240.9 237.5 250.9 250.6 39 Business and professional1 178.0 201.6 221.0 212.9 218.1 225.3 227.6 235.1 40 Farm1 14.3 32.1 21.2 26.5 22.8 12.2 23.3 15.5 41 Rental income of persons2 12.8 10.8 13.8 11.0 13.8 14.5 15.9 19.7 47 Corporate profits1 213.8 273.3 295.5 281.7 288.1 309.1 303.1 313.7 43 Profits before tax3 205.0 237.6 225.3 220.0 218.7 228.6 233.8 216.6 44 Inventory valuation adjustment -10.0 -5.4 -.6 .7 2.2 4.7 -10.1 18.0 45 Capital consumption adjustment 18.8 41.0 70.9 61.1 67.2 75.9 79.4 79.0 46 Net interest 273.6 300.2 287.4 302.9 292.4 281.8 272.6 267.8 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A46 Domestic Nonfinancial Statistics • August 1986 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1985 Account 1985 Q1 Q2 Q3 Q4 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 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 3 Commodity-producing industries 523.0 577.9 607.3 600.1 604.7 607.6 616.9 4 Manufacturing 397.4 438.9 457.6 453.5 454.9 457.2 464.7 5 Distributive industries 404.2 441.6 468.8 459.8 467.4 471.2 476.8 6 Service industries 424.4 469.4 513.6 495.2 508.1 518.7 532.4 7 Government and government enterprises 324.2 346.1 370.8 362.5 368.4 372.6 379.7 8 Other labor income 179.5 193.4 206.4 200.9 204.8 208.4 211.5 9 Proprietors' income1 192.3 233.7 242.2 239.4 240.9 237.5 250.9 10 Business and professional1 178.0 201.6 221.0 212.9 218.1 225.3 227.6 11 Farm1 14.3 32.1 21.2 26.5 22.8 12.2 23.3 12 Rental income of persons2 12.8 10.8 13.8 11.0 13.8 14.5 15.9 13 Dividends 68.0 74.6 78.9 77.9 78.7 79.1 79.8 14 Personal interest income 385.7 442.2 456.3 462.8 460.5 450.6 451.4 15 Transfer payments 442.2 454.7 484.5 477.6 481.0 488.1 491.2 16 Old-age survivors, disability, and health insurance benefits 221.7 235.7 249.2 250.7 256.5 257.1 253.4 17 LESS; Personal contributions for social insurance 119.8 132.4 146.3 148.3 149.7 152.0 149.1 18 EQUALS: Personal income 2,836.4 3,111.9 3,240.9 3,280.1 3.298.5 3,354.3 3,293.5 19 LESS: Personal tax and nontax payments 411.1 441.8 501.7 462.4 498.2 508.5 492.7 20 EQUALS: Disposable personal income 2,425.4 2,670.2 2,739.2 2.817.7 2.800.2 2.845.9 2,800.8 21 LESS: Personal outlays 2,292.2 2,497.7 2,608.4 2,650.6 2.697.6 2,730.6 2,671.8 22 EQUALS: Personal saving 133.2 172.5 130.9 167.2 102.6 115.2 129.0 MEMO Per capita (1982 dollars) 23 Gross national product 13,957.8' 14,730.(K 14,917.4' 14,877.4' 14,885.4' 14,958.3' 14,949.2' 24 Personal consumption expenditures 9,138.1r 9,448.4' 9,665 .C 9,597.0' 9,638.7' 9,722.6' 9,701.9' 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 26 Saving rate (percent) 5.5 6.5 4.6 4.8 5.9 3.7 4.0 GROSS SAVING 27 Gross saving 469.8 584.5 553.4 578.3 571.7 537.3 526.1 28 Gross private saving 600.6 693.0 694.3 677.7 723.6 681.8 694.2 29 Personal saving 133.2 172.5 129.0 130.9 167.2 102.6 115.2 3 3 1 0 C U o n r d p i o st r r a i t b e u t i e n d v e c n o t r o p ry o r v at a e l u p a r t o io f n it s a 1 djustment -1 6 0 7 . . 0 9 1 - 0 5 1 . . 4 6 12 - 6 .6 . 9 116. . 3 7 12 2 2 . . 2 6 13 4 7 . . 7 8 - 1 1 3 0 1 . . 1 0 Capital consumption allowances 32 Corporate 245.0 256.6 269.2 264.3 266.8 270.9 274.8 33 Noncorporate 154.6 162.3 169.2 166.3 167.0 170.5 173.2 34 Wage accruals less disbursements .0 .0 .0 .0 .0 .0 .0 35 Government surplus, or deficit (-), national income and product accounts -130.8 -108.5 -141.0 -99.4 -151.9 -144.5 -168.0 36 Federal -179.4 -172.9 -200.0 -162.6 -209.1 -201.3 -226.9 37 State and local 48.6 64.4 59.0 63.2 57.3 56.9 58.8 38 Capital grants received by the United States, net .0 .0 .0 .0 .0 .0 .0 39 Gross investment 469.2 583.0 554.0 580.8 567.0 539.9 528.2 40 Gross private domestic 501.9 674.0 669.3 657.6 672.8 666.1 680.7 41 Net foreign -32.7 -91.0 -115.3 -76.8 -105.8 -126.2 -152.5 42 Statistical discrepancy -.6 2.5 -4.7 2.5 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 1985' 1986 IItteemm ccrreeddiittss oorr ddeebbiittss 11998833'' 11998844'' 11998855'' Ql Q2 Q3 Q4 Q1p 1 Balance on current account -46,605 -106,466 -117,676 -26,112 -29,417 -28,455 -33,695 -33,668 -> -23,529 -30,363 -32,275 -31,510 -30,695 Merchandise trade balance2 -67,080 -112,522 -124,439 -25,045 -30,367 -31,675 -37,352 -36,585 4 Merchandise exports 201,820 219,900 214,424 55,324 53,875 52,498 52,727 53,548 5 Merchandise imports -268,900 -332,422 -338,863 -80,369 -84,242 -84,173 -90,079 -90,133 6 Military transactions, net -370 -1,827 -2,917 -246 -729 -619 -1,322 -945 7 Investment income, net3 24,841 18,751 25,187 2,219 5,449 8,262 9,255 6,820 8 Other service transactions, net 5,484 1,288 -524 -240 312 -422 -32 -73 9 Remittances, pensions, and other transfers -3,194 -3,621 -3,787 -1,056 -881 -914 -937 -968 10 U.S. government grants (excluding military) -6,286 -8,536 -11,196 -2,224 -2,577 -3,087 -3,307 -2,063 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) -5,005 -5,523 -2,824 -807 -1,055 -422 -540 -146 12 Change in U.S. official reserve assets (increase. -) -1,196 -3,130 -3,858 -233 -356 -121 -3,147 -115 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -66 -979 -897 -264 -180 -264 -189 -274 15 Reserve position in International Monetary Fund -4,434 -995 908 281 72 388 168 344 16 Foreign currencies 3,304 -1,156 -3,869 -250 -248 -245 -3,126 -185 17 Change in U.S. private assets abroad (increase, -)3 -43,821 -14,987 -25,755 530 -1,382 -5,324 -19,579 -8,416 18 Bank-reported claims -29,928 -11,127 -691 335 3,450 4,009 -8,485 7,842 19 Nonbank-reported claims -6,513 5,081 1,665 1,058 1,706 -1,517 418 n.a. 20 U.S. purchase of foreign securities, net -7,007 -5,082 -7,977 -2,577 -2,325 -1,664 -1,411 -6,138 21 U.S. direct investments abroad, net3 -373 -3,859 -18,752 1,714 -4,213 -6,152 -10,101 -10,120 22 Change in foreign official assets in the United States (increase, +) 5,968 3,037 -1,324 11,066 8,486 2,577 -1,322 2,510 23 U.S. Treasury securities 6,972 4,690 -546 7,174 8,685 -81 -1,976 -3,256 24 Other U.S. government obligations -476 13 -295 -306 136 46 -171 -177 25 Other U.S. government liabilities4 725 436 483 -445 606 58 263 192 26 Other U.S. liabilities reported by U.S. banks 545 555 522 -3,025 -107 2,932 722 -1,124 27 Other foreign official assets5 -1,798 -2,657 -1,488 -116 -834 -378 -160 363 28 Change in foreign private assets in the United States (increase, +)3 79,528 99,730 128,431 25,313 16,872 33,088 53,158 36,974 29 U.S. bank-reported liabilities 50,342 33,849 40,387 12,078 606 7,276 20,427 8,582 30 U.S. nonbank-reported liabilities -118 4,704 -1,172 -2,156 -1,837 589 2,232 n.a. 31 Foreign private purchases of U.S. Treasury securities, net 8,721 23,059 20,500 2,217 5,123 7,484 5,676 8,311 32 Foreign purchases of other U.S. securities, net 8,636 12,759 50,859 9,567 7,223 11,628 22,441 18,793 33 Foreign direct investments in the United States, net3 11,947 25,359 17,857 3,607 5,757 6,111 2,382 1,288 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 11,130 27,338 23,006 12,375 6,852 -1,343 5,125 2,861 36 11,,009944 --11,,117744 --33,,668877 33,,777711 11,,553355 37 Statistical discrepancy in recorded data before seasonal adjustment 11,130 27,338 23,006 11,282 8,026 2,344 1,354 1,326 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -1,196 -3,130 -3,858 -233 -356 -121 -3,147 -115 39 Foreign official assets in the United States (increase, +) 5,243 2,601 -1,807 -10,621 7,880 2,519 1,585 2,318 40 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 22 above) -8,283 -4,304 -6,599 -1,923 -1,843 -1,831 -1,002 1,395 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 194 190 64 10 12 15 28 20 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 • August 1986 3.11 U.S. FOREIGN TRADE Millions of dollars; monthly data are not seasonally adjusted. 1985 1986 IItteemm 11998833 11998844 11998855 Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments 200,486 217,865 213,146 17,618 17,721 16,994 17,006 17,735 18,913 17,965 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 258,048 325,726 345,276 28,429 30,010 30,728 32,005 28,895 31,972 28,762 3 Trade balance -57,562 107,861 -132,129 -10,811 -12,290 -13,734 -14,999 -11,160 -13,059 -10,797 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 basis 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 Nov. Dec. Jan. Feb. Mar. Apr. May 1 Total 33,958 33,747 34,934 42,852 43,191 43,673 45,505 44,919 46,491 45,260 2 Gold stock, including Exchange Stabilization Fund1 11,148 11,121 11,096 11,090 11,090 11,090 11,090 11,090 11,089 11,085 3 Special drawing rights2 3 5,250 5,025 5,641 7,253 7,293 7,441 7,960 7,839 8,098 8,066 4 Reserve position in International Monetary Fund2 7,348 11,312 11,541 11,955 11,952 11,824 12,172 12,025 12,242 11,789 5 Foreign currencies4 10,212 6,289 6,656 12,554 12,856 13,318 14,283 13,965 15,062 14,320 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 Nov. Dec. Jan. Feb. Mar. Apr. May 1 Deposits 328 190 267 340 480 256 276 273 325 253 Assets held in custody 2 U.S. Treasury securities' 112,544 117,670 118,000 117,814 121,004 121,995 124,905 127,611 132,017 136,762 3 Earmarked gold2 14,716 14,414 14,242 14,240 14,245 14,193 14,172 14,167 14,160 14,145 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr.P All foreign countries 1 Total, all currencies 469,712 477,090 453,656 454,492 455,935 458,076 447,529 448,258' 458,566 473,945 2 Claims on United States 91,805 115,542 113,393 121,745' 115,507' 119,703' 116,786 113,708' 118,461 122,435 Parent bank 61,666 82,026 78,109 87,255 82,327 87,201 84,410 80,944' 85,164 88,% 1 4 Other banks in United States2 1 13,664 12,808 12,0% 13,076 11,757 11,727 12,909 12,766 5 Nonbanks2 21,620 21,682' 21,084' 19,426' 20,619 21,037 20,388 20,708 6 Claims on foreigners 358,493 342,689 320,162 310,541' 317,578' 315,776' 308,673 310,677' 315,762 325,301 7 Other branches of parent bank 91,168 96,004 95,184 86,912 89,580 91,399 88,393 88,482' 91,586 95,675 8 Banks 133,752 117,668 100,397 98,578 102,907 103,014 100,449 99,399' 101,185 106,588 9 Public borrowers 24,131 24,517 23,343 23,478 23,613 23,395 23,350 23,603' 23,675 23,551 10 Nonbank foreigners 109,442 107,785 101,238 101,573' 101,478' 97,%8' 96,481 99,193' 99,316 99,487 11 Other assets 19,414 18,859 20,101 22,206 22,850 22,597 22,070 23,873' 24,343 26,209 12 Total payable in U.S. dollars 361,982 371,508 350,636 331,610 329,622 336,288 321,703 315,295' 322,871 330,294 n Claims on United States 90,085 113,436 111,426 118,571' 112,341' 116,635' 113,726 110,351' 114,908 118,583 14 Parent bank 61,010 80,909 77,229 86,101 81,162 85,971 83,264 79,609' 83,841 87,583 15 Other banks in United States2 13,500 12,258 11,463 12,473 11,102 11,070 12,216 11,871 16 Nonbanks2 20,697 20,212' 19,716' 18,191' 19,360 19,672 18,851 19,129 17 Claims on foreigners 259,871 247,406 228,600 203,068' 207,336' 209,937' 198,817 195,108' 198,582 201,816 18 Other branches of parent bank 73,537 78,431 78,746 68,576 70,548 72,689 68,748 67,630' 70,910 73,546 19 Banks 106,447 93,332 76,940 67,344 69,646 71,738 65,779 63,310' 63,320 65,478 20 Public borrowers 18,413 17,890 17,626 17,432 17,277 17,169 16,958 17,127 17,128 16,808 21 Nonbank foreigners 61,474 60,977 55,288 49,716' 49,865' 48,341' 47,332 47,041' 47,224 45,984 22 Other assets 12,026 10,666 10,610 9,971 9,945 9,716 9,160 9,836' 9,381 9,895 United Kingdom 23 Total, all currencies 161,067 158,732 144,385 149,607 152,456 148,599 150,835 148,788 150,975 155,867 74 Claims on United States 27,354 34,433 27,731 33,755' 33,694' 33,137' 36,308 33,458 33,990 34,234 75 Parent bank 23,017 29,111 21,918 26,956 26,718 26,970 29,837' 27,281 27,881 28,058 76 Other banks in United States2 1 1,429 1,269 1,289 1,106 1,173 1,133 1,129 1,386 77 Nonbanks2 4,384 5,53C 5,687' 5,061' 5,298 5,044 4,980 4,790 7.8 Claims on foreigners 127,734 119,280 111,828 110,386' 112,945' 110,237' 109,301 109,826 111,468 115,485 79 Other branches of parent bank 37,000 36,565 37,953 32,110 30,600 31,576 30,394 30,218 31,250 32,516 30 Banks 50,767 43,352 37,443 37,858 40,482 39,250 39,257 39,393 38,929 41,593 31 Public borrowers 6,240 5,898 5,334 5,482 5,735 5,644 5,949 6,065 5,833 5,642 32 Nonbank foreigners 33,727 33,465 31,098 34,936' 36,128' 33,767' 33,161 34,150 35,456 35,734 33 Other assets 5,979 5,019 4,882 5,466 5,817 5,225 5,226 5,504 5,517 6,148 34 Total payable in U.S. dollars 123,740 126,012 112,809 108,024 108,699 108,626 108,566 105,272 105,111 107,359 35 Claims on United States 26,761 33,756 26,868 32,510' 32,475' 32,072' 35,292 32,360 32,746 32,959 36 Parent bank 22,756 28,756 21,495 26,495 26,210 26,568 29,470 26,874 27,393 27,629 3 3 7 8 O N t o h n e b r a b n a k n s2 k s in United States2 1 A nt\c 4 1 , , 0 3 1 6 0 3 4 1 , , 8 19 2 4 1 ' 5 1 , , 0 20 6 5 0 ' 4 1 , , 4 00 9 5 9 ' 4 1 , , 7 0 3 8 3 9 4 1 , , 4 0 3 4 9 7 4 1 , , 3 0 2 2 6 7 4 1 , , 1 2 0 2 5 5 39 Claims on foreigners 92,228 88,917 82,945 72,323 72.92C 73,495' 70,356 69,621 69,433 71,058 40 Other branches of parent bank 31,648 31,838 33,607 26,719 24,989 26,011 25,083 24,474 25,250 26,224 41 Banks 36,717 32,188 26,805 23,888 25,667 26,139 24,013 23,598 22,106 23,310 47 Public borrowers 4,329 4,194 4,030 3,966 3,982 3,999 4,252 4,367 4,223 4,012 43 Nonbank foreigners 19,534 20,697 18,503 17,809' 18,282' 17,346' 17,008 17,182 17,854 17,512 44 Other assets 4,751 3,339 2,996 3,132 3,304 3,059 2,918 3,291 2,932 3,342 Bahamas and Caymans 45 Total, all currencies 145,156 152,083 146,811 135,262 133,645 142,055 130,413 128,851 135,210 135,998 46 Claims on United States 59.403 75,309 77,296 73,572 69,923 74,874 68,576 68,304 71,672 72,703 47 Parent bank 34,653 48,720 49,449 47,918 45,811 50,553 44,586 43,866 46,813 47,599 48 Other banks in United States2 -i 11,544 10,812 10,082 11,223 9,867 9,815 10,776 10,419 49 Nonbanks2 16,303 14,842 14,030 13,098 14,123 14,623 14,083 14,685 50 Claims on foreigners 81,450 72,868 65,598 58,467 60,503 63,894 58,510 56,958 59,833 59,589 51 Other branches of parent bank 18,720 20,626 17,661 15,856 17,050 19,042 16,468 15,872 19,131 18,723 57 Banks 42,699 36,842 30,246 25,861 26,768 28,182 25,476 25,268 24,571 25,256 53 Public borrowers 6,413 6,093 6,089 6,417 6,440 6,458 6,320 6,186 6,197 6,232 54 Nonbank foreigners 13,618 12,592 11,602 10,333 10,245 10,212 10,246 9,632 9,934 9,378 55 Other assets 4,303 3,906 3,917 3,223 3,219 3,287 3,327 3,589 3,705 3,706 56 Total payable in U.S. dollars 139,605 145,641 141,562 129,787 127,997 136,794 124,981 122,980 129,187 129,322 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 • August 1986 3.14 Continued 1985 1986 15,84 Oct. Nov. Dec. Jan. Feb. Mar. Apr.? All foreign countries 57 Total, all currencies 469,712 477,090 453,656 454,492 455,935 458,076 447,529 448,258' 458,566 473,945 58 Negotiable CDs3 n.a. n.a. 37,725 38,044 36,607 34,607 34,597 33,458 36,066 33,229 59 To United States 179,015 188,070 147,583 140,142 143,203r 155,273 142,182' 138,160' 140,019 150,452 60 Parent bank 75,621 81,261 78,739 75,479 81,171 83,649 76,805 73,449' 74,653 81,317 61 Other banks in United States 33,405 29,453 18,409 15,602 15,490 16,894 14,724 13,989' 15,714 14,260 62 Nonbanks 69,989 77,356 50,435 49,061 46,542 54,730 50,653r 50,722' 49,652 54,875 63 To foreigners 270,853 269,685 247,907 252,253 252,171 246,006 249,623r 254,313' 260,567 268,278 64 Other branches of parent bank 90,191 90,615 93,909 88,539 88,438 89,529 86,351 86,349' 90,914 93,882 65 Banks 96,860 92,889 78,203 82,470 81,871 76,878 84,158 83,834' 84,806 89,599 66 Official institutions 19,614 18,896 20,281 21,322 21,658 19,523 19,935 21,885' 20,672 20,735 67 Nonbank foreigners 64,188 68,845 55,514 59,922 60,204 60,076 59,179' 62,245' 64,175 64,062 68 Other liabilities 19,844 19,335 20,441 24,053 23,954 22,190 21,127 22,327' 21,914 21,986 69 Total payable in U.S. dollars 379,270 388,291 367,145 346,883 345,810 353,470 337,194' 330,729 340,129 346,350 70 Negotiable CDs3 n.a. n.a. 35,227 33,995 32,838 31,063 31,182 30,202 32,418 29,912 71 To United States 175,528 184,305 143,571 134,266 137,070 149,896 136,784' 132,067' 133,823 143,665 72 Parent bank 73,295 79,035 76,254 71,996 77,892 80,623 73,897 70,111' 71,317 77,784 73 Other banks in United States 33,040 28,936 17,935 15,128 14,926 16,264 14,011 13,293' 14,923 13,467 74 Nonbanks 69,193 76,334 49,382 47,142 44,252 53,009 48,876' 48,663' 47,583 52,414 75 To foreigners 192,510 194,139 178,260 168,378 165,359 163,361 160,137' 159,603' 165,030 164,668 76 Other branches of parent bank 72,921 73,522 77,770 70,007 69,261 70,943 67,174 65,938' 70,458 71,955 77 Banks 57,463 57,022 45,123 41,559 39,682 37,323 38,469 36,690' 37,476 37,231 78 Official institutions 15,055 13,855 15,773 16,010 15,905 14,354 14,796 15,849' 14,703 14,737 79 Nonbank foreigners 47,071 51,260 39,594 40,802 40,511 40,741 39,698' 41,126' 42,393 40,745 80 Other liabilities 11,232 9,847 10,087 10,244 10,543 9,150 9,091 8,857 8,858 8,105 United Kingdom 81 Total, all currencies 161,067 158,732 144,385 149,607 152,456 148,599 150,835 148,788 150,975 155,867 82 Negotiable CDs3 n.a. n.a. 34,413 33,913 32,708 31,260 30,788 29,419 32,217 29,898 83 To United States 53,954 55,799 25.250 24,958 27,933 29,422 29,901 26,705 22,945 28,449 84 Parent bank 13,091 14,021 14,651 13,893 18,167 19,330 19,845 16,783 13,724 17,231 85 Other banks in United States 12,205 11,328 3,125 2,602 2,453 2,974 2,264 1,965 2,793 1,966 86 Nonbanks 28,658 30,450 7,474 8,463 7,313 7,118 7,792 7,957 6,428 9,252 87 To foreigners 99,567 95,847 77,424 80,646 81,446 78,525 80,724 82,666 86,053 87,774 88 Other branches of parent bank 18,361 19,038 21,631 20,175 21,932 23,389 21,858 21,954 24,733 25,379 89 Banks 44,020 41,624 30,436 33,102 32,200 28,581 32,326 32,088 33,301 34,294 90 Official institutions 11,504 10,151 10,154 10,812 10,519 9,676 10,093 10,956 9,750 9,757 91 Nonbank foreigners 25,682 25,034 15,203 16,557 16,795 16,879 16,447 17,668 18,269 18,344 92 Other liabilities 7,546 7,086 7,298 10,090 10,369 9,392 9,422 9,998 9,760 9,746 93 Total payable in U.S. dollars 130,261 131,167 117,497 111,263 112,681 112,697 112,073 108,402 108,303 110,376 94 Negotiable CDs3 n.a. n.a. 33,070 31,574 30,570 29,337 28,845 27,655 30,042 27,978 95 To United States 53,029 54,691 24,105 22,854 25,581 27,756 28,150 24,967 21,070 26,410 96 Parent bank 12,814 13,839 14,339 13,350 17,651 18,956 19,461 16,513 13,405 16,867 97 Other banks in United States 12,026 11,044 2,980 2,479 2,295 2,826 2,090 1,835 2,596 1,774 98 Nonbanks 28,189 29,808 6,786 7,025 5,635 5,974 6,599 6,619 5,069 7,769 99 To foreigners 73,477 73,279 56,923 52,469 52,091 51,980 50,762 51,686 53,102 52,263 100 Other branches of parent bank 14,300 15,403 18,294 15,480 16,687 18,493 16,614 16,829 19,068 19,297 101 Banks 28,810 29,320 18,356 17,053 15,840 14,344 14,872 14,457 14,731 14,125 102 Official institutions 9,668 8,279 8,871 8,877 8,357 7,661 8,242 8,747 7,839 7,449 103 Nonbank foreigners 20,699 20,277 11,402 11,059 11,207 11,482 11,034 11,653 11,464 11,392 104 Other liabilities 3,755 3,197 3,399 4,366 4,439 3,624 4,316 4,094 4,089 3,725 Bahamas and Caymans 105 Total, all currencies 145,156 152,083 146,811 135,262 133,645 142,055 130,413 128,851 135,210 135,998 106 Negotiable CDs3 n.a. n.a. 615 745 747 610 1,076 1,237 1,132 629 107 To United States 104,425 111,299 102,955 92,978 92,508 103,548 91,918' 91,705 97,304 98,710 108 Parent bank 47,081 50,980 47,162 43,083 43,509 44,546 38,850 39,380 43,535 43,387 109 Other banks in United States 18,466 16,057 13.938 11,946 11,874 12,778 11,185 10,854 11,604 11,014 110 Nonbanks 38,878 44,262 41,855 37,949 37,125 46,224 41,883' 41,471 42,165 44,309 111 To foreigners 38,274 38,445 40,320 38,787 37,307 35,053 35,296' 33,773 34,450 34,275 112 Other branches of parent bank 15,796 14,936 16,782 17,201 15,593 14,075 14,755 13,072 13,191 14,191 113 Banks 10,166 11,876 12,405 11,120 10,954 10,669 11,108 10,842 10,346 10,779 114 Official institutions 1,967 1,919 2,054 1,872 2,278 1,776 1,505 1,737 1,743 2,167 115 Nonbank foreigners 10,345 11,274 9,079 8,594 8,482 8,533 7,928' 8,122 9,170 7,138 116 Other liabilities 2,457 2,339 2,921 2,752 3,083 2,844 2,123 2,136 2,324 2,384 117 Total payable in U.S. dollars 141,908 148,278 143,582 130,992 129,575 138,322 126,536 124,572 131,004 131,708 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr.'' 1 Total1 177,950 180,552 178,331 179,971 178,743 180,773 180,335' 181,067' 188,951 By type 2 Liabilities reported by banks in the United States2 25,534 26,089 27,014 29,276 26,611 28,233 26,456' 25,492' 26,642 3 U.S. Treasury bills and certificates3 54,341 59,976 54,398 54,331 53,252 53,294 54,420 55,933 59,547 U.S. Treasury bonds and notes 4 Marketable 68,514 69,019 74,972 74,735 77,447 77,809 78,428 78,822 82,538 5 Nonmarketable4 7,250 5,800 3,550 3,550 3,550 3,550 3,150 2,750 2,300 6 U.S. securities other than U.S. Treasury securities5 22,311 19,668 18,397 18,079 17,883 17,887 17,881 18,070' 17,924 By area 7 Western Europe1 67,645 69,776 74,257 76,832 74,290 74,355 72,826' 72,434' 76,254 8 Canada 2,438 1,528 1,586 1,507 1,314 1,118 1,762 1,445 1,711 9 Latin America and Caribbean 6,248 8,561 10,100 10,871 11,121 11,506 10,228 10,414 10,775 10 Asia 92,572 93,954 87,288 85,876 86,995 89,088 90,268 91,423' 94,800 11 Africa 958 1,264 1,410 1,629 1,824 1,897 1,786 1,846 1,833 12 Other countries6 8,089 5,469 3,690 3,256 3,199 2,809 3,465 3,505 3,578 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 12,901 15,168 2 Banks' own claims 7,707 7,231 11,984 12,618 14,179 15,233 16,088 3 Deposits 4,251 2,731 4,998 5,941 7,308 8,540 8,329 4 Other claims 3,456 4,501 6,986 6,677 6,871 6,693 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 • August 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr.? 1 All foreigners 307,056 369,607 407,306 417,541 421,341 434,671 430,836 436,434' 440,110 442,878 2 Banks' own liabilities 227,089 279,087 306,898 321,857 324,049 340,373 335,036 340,071' 344,079 346,338 3 Demand deposits 15,889 17,470 19,571 18,450 20,940 21,107 19,648 19,659 20,195 19,753 4 Time deposits' 68,797 90,632 110,413 114,438 114,314 116,716 114,241 116,543' 116,390 114,672 5 Other2 23,184 25,874 26,268 28,932 29,856 29,468 30,805 31,560' 32,238 32,755 6 Own foreign offices3 119,219 145,111 150,646 160,037 158,939 173,082 170,342 172,309' 175,256 179,158 7 Banks' custody liabilities4 79,967 90,520 100,408 95,684 97,292 94,298 95,800 96,362 96,031 96,540 8 U.S. Treasury bills and certificates5 55,628 68,669 76,368 72,163 73,189 6688,,778855 6699,,880011 7722,,663311 7722,,771144 74,284 9 Other negotiable and readily transferable instruments6 20,636 17,467 18,747 16,755 16,979 17,964 17,946 15,547 15,329 13,775 10 Other 3,702 4,385 5,293 6,766 7,124 7,549 8,054 8,184 7,989 8,480 11 Nonmonetary international and regional organizations7 4,922 5,957 4,454 6,766 7,803 5,566 7,487 9,867' 5,228 3,420 12 Banks' own liabilities 1,909 4,632 2,014 1,842 1,535 2,366 2,714 4,326' 1,409 1,674 13 Demand deposits 106 297 254 143 252 85 96 184 102 138 14 Time deposits' 1,664 3,584 1,267 1,299 1,051 2,067 2,369 3,892' 397 681 15 Other2 139 750 493 399 233 214 250 250 910 856 16 Banks' custody liabilities4 3,013 1,325 2,440 4,924 6,268 3,200 4,773 5,540 3,820 1,746 17 U.S. Treasury bills and certificates 1,621 463 916 3,636 5,069 1,736 3,216 44,,221199 22,,331111 768 18 Other negotiable and readily transferable instruments6 1,392 862 1,524 1,287 1,195 1,464 11,,555566 1,322 1,508 970 19 Other 0 0 0 1 5 0 11 0 0 7 20 Official institutions8 71,647 79,876 86,065 81,412 83,608 79,862 81,527 80,876' 81,425 86,189 21 Banks' own liabilities 16,640 19,427 19,039 21,178 23,323 20,825 22,590 22,056' 21,739 23,541 22 Demand deposits 1,899 1,837 1,823 1,707 2,018 2,077 1,638 1,602 1,917 1,834 23 Time deposits1 5,528 7,318 9,374 10,277 10,523 10,935 10,680 10,319' 10,402 9,423 24 Other2 9,212 10,272 7,842 9,195 10,783 7,813 10,272 10,136 9,419 12,284 25 Banks' custody liabilities4 55,008 60,448 67,026 60,234 60,284 59,037 58,937 58,820 59,686 62,648 26 U.S. Treasury bills and certificates5 46,658 54,341 59,976 54,398 54,331 5533,,225522 5533,,229944 5544,,442200 5555,,993333 5599,,554477 27 Other negotiable and readily transferable instruments6 8,321 6,082 6,966 5,767 5,848 5,711 5,526 4,052 3,585 2,916 28 Other 28 25 84 69 105 75 117 348 168 185 29 Banks9 185,881 226,887 248,893 256,379 255,021 274,991 266,460 269,788' 278,549 277,729 30 Banks' own liabilities 169,449 205,347 225,368 234,428 233,188 252,290 243,740 247,127' 255,567 254,947 31 Unaffiliated foreign banks 50,230 60,236 74,722 74,391 74,249 79,208 73,397 74,818 80,311 75,789 32 Demand deposits 8,675 8,759 10,556 9,045 10,043 10,271 9,792 9,659 9,692 8,689 33 Time deposits1 28,386 37,439 47,095 47,833 46,809 48,962 44,662 45,536' 50,071 48,891 3 3 5 4 Ow O n t h f e o r r 2 e ign offices3 11 1 9 3 , , 2 1 1 6 9 9 14 1 5 4 , , 1 0 1 3 1 8 15 1 0 7 , ,0 6 7 4 1 6 16 1 0 7 , , 0 5 3 1 7 4 15 1 8 7, , 3 9 9 3 7 9 17 1 3 9 , , 0 9 8 7 2 5 17 1 0 8 , , 3 9 4 4 2 3 17 1 2 9 , ,6 3 2 0 3 9 ' ' 1 2 7 0 5 , , 5 2 4 5 7 6 17 1 9 8 , , 1 2 5 0 8 9 36 Banks' custody liabilities4 16,432 21,540 23,525 21,951 21,832 22,701 22,720 22,661 22,982 22,782 37 U.S. Treasury bills and certificates 5,809 10,178 11,448 9,897 9,429 99,,555544 99,,222233 99,,550011 99,,886699 99,,554466 38 Other negotiable and readily transferable instruments6 7,857 7,485 7,236 5,906 5,853 6,153 6,006 5,876 5,752 5,423 39 Other 2,766 3,877 4,841 6,148 6,551 6,994 7,491 7,283 7,361 7,813 40 Other foreigners 44,606 56,887 67,894 72,984 74,909 74,251 75,362 75,902 74,908 75,540 41 Banks' own liabilities 39,092 49,680 60,477 64,409 66,002 64,892 65,992 66,561 65,365 66,176 42 Demand deposits 5,209 6,577 6,938 7,555 8,627 8,673 8,122 8,214 8,484 9,093 43 Time deposits 33,219 42,290 52,678 55,029 55,932 54,752 56,530 56,796 55,519 55,677 44 Other2 664 813 861 1,825 1,444 1,467 1,340 1,550 1,361 1,406 45 Banks' custody liabilities4 5,514 7,207 7,417 8,575 8,907 9,359 9,370 9,341 9,544 9,364 46 U.S. Treasury bills and certificates 1,540 3,686 4,029 4,232 4,360 44,,224433 44,,006688 44,,449911 44,,660011 44,,442233 47 Other negotiable and readily transferable instruments6 3,065 3,038 3,021 3,795 4,084 4,636 4,858 4,297 4,483 4,465 48 Other 908 483 367 548 463 480 444 553 459 476 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 14,307 10,346 10,476 9,088 9,152 9,845 9,628 7,386 6,603 6,286 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr.? 1 Total 307,056 369,607 407,306 417,541 421,341 434,671 430,836 436,434' 440,110 442,878 2 Foreign countries 302,134 363,649 402,852 410,775 413,538 429,105 423,349 426,567' 434,882 439,458 3 Europe 117,756 138,072 153,145 158,857 163,433 163,438 161,234 157,176' 157,252 164,909 4 Austria 519 585 615 613 655 693 692 769 1,665 932 5 Belgium-Luxembourg 2,517 2,709 4,114 5,262 5,556 5,214 5,189 4,732 4,268 5,736 6 Denmark 509 466 438 558 624 513 536 533 536 752 7 Finland 748 531 418 594 497 491 373 506 354 697 8 France 8,171 9,441 12,701 15,984 15,863 15,540 15,595 15,148 15,905 19,227 9 Germany 5,351 3,599 3,358 4,366 7,265 4,835 5,622 5,309 5,691 6,718 10 Greece 537 520 699 536 574 664 612 551 535 559 11 Italy 5,626 8,462 10,762 9,717 9,069 9,642 7,739 7,235 7,215 6,536 17 Netherlands 3,362 4,290 4,731 4,295 4,359 4,212 4,069 4,027 4,334 4,320 13 Norway 1,567 1,673 1,548 1,132 1,008 848 781 552 469 731 14 Portugal 388 373 597 647 619 652 706 685 705 674 15 Spain 1,405 1,603 2,082 2,094 2,122 2,113 1,899 1,794 1,772 1,918 16 Sweden 1,390 1,799 1,676 1,760 1,482 1,344 1,622 1,693 1,547 1,313 17 Switzerland 29,066 32,246 31,740 28,495 28,992 28,742 26,119 25,606 26,754 26,962 18 Turkey 296 467 584 417 288 429 504 404 383 377 19 United Kingdom 48,172 60,683 68,671 73,877 74,595 76,571 80,563 80,100' 78,569 81,665 70 Yugoslavia 499 562 602 626 675 673 595 600 535 547 71 Other Western Europe1 7,006 7,403 7,192 7,403 8,619 9,635 7,643 6,441' 5,366 4,308 77 U.S.S.R 50 65 79 51 36 105 43 64 63 287 23 Other Eastern Europe2 576 596 537 429 533 523 332 427 587 649 24 Canada 12,232 16,026 16,059 16,288 16,428 17,426 18,037 21,466 22,496 20,449 75 Latin America and Caribbean 114,163 140,088 153,381 156,319 155,202 167,745 161,389 161,061' 164,241 164,614 76 Argentina 3,578 4,038 4,394 5,872 5,899 6,029 5,786 5,551 5,155 5,625 77 Bahamas 44,744 55,818 56,897 54,518 53,394 57,621 53,809 54,647' 55,280 57,861 78 Bermuda 1,572 2,266 2,370 2,238 2,415 2,765 2,596 2,147 2,324 2,276 79 Brazil 2,014 3,168 5,275 5,861 5,614 5,369 6,049 5,759 6,071 5,814 30 British West Indies 26,381 34,545 36,773 37,163 35,858 42,645 40,469 41,127 43,945 41,180 31 Chile 1,626 1,842 2,001 1,940 2,867 2,042 2,019 1,997 2,084 2,137 37 Colombia 2,594 1,689 2,514 2,562 2,920 3,102 3,336 3,140 3,076 3,100 33 Cuba 9 8 10 64 7 11 16 6 6 8 34 Ecuador 455 1,047 1,092 1,029 1,253 1,238 1,211 1,172 1,209 1,199 35 Guatemala 670 788 896 957 1,087 1,071 1,146 1,132 1,126 1,128 36 Jamaica 126 109 183 122 150 122 244 126 144 173 37 Mexico 8,377 10,392 12,303 13,610 13,948 14,045 13,702 13,433 12,990 13,109 38 Netherlands Antilles 3,597 3,879 4,220 4,666 4,612 4,875 4,696 4,560 4,561 4,860 39 Panama 4,805 5,924 6,951 7,343 6,502 7,492 7,416 7,161 7,226 6,948 40 Peru 1,147 1,166 1,266 1,093 1,124 1,166 1,124 1,100 1,166 1,115 41 Uruguay 759 1,244 1.394 1,498 1,534 1,549 1,730 1,727 1,567 1,644 47 Venezuela 8,417 8,632 10,545 11,404 11,345 11,919 11,467 11,741 11,670 11,705 43 Other Latin America and Caribbean 3,291 3,535 4,297 4,381 4,673 4,683 4,571 4,534 4,641 4,729 44 Asia 48,716 58,570 71,187 71,643 71,047 72,266 74,841 78,767 82,647 81,646 China 45 Mainland 203 249 1,153 1,809 1,380 1,594 1,003 1,624 1,410 1,555 46 Taiwan 2,761 4,051 4,990 6,455 7,427 7,799 9,092 9,661 10,840 11,102 47 Hong Kong 4,465 6,657 6,581 7,964 8,170 8,062 8,215 8,194 8,643 8,682 48 India 433 464 507 473 562 711 606 630 926 575 49 Indonesia 857 997 1,033 1,570 1,381 1,466 1,524 1,738 2,107 1,787 50 Israel 606 1,722 1,268 2,118 1,595 1,595 1,459 1,358 1,451 1,483 51 Japan 16,078 18,079 21,640 22,059 21,689 23,077 25,047 26,397 28,273 28,332 57 Korea 1,692 1,648 1,730 1,751 1,685 1,665 1,503 1,602 1,551 1,246 S3 Philippines 770 1,234 1,383 1,325 1,189 1,140 942 1,086 978 1,051 54 Thailand 629 747 1,257 1,014 1,066 1,358 1,199 1,141 1,103 994 55 Middle-East oil-exporting countries3 13,433 12,976 16,804 15,252 14,941 14,523 15,174 16,308 15,384 14,419 56 Other Asia 6,789 9,748 12,841 9,852 9,961 9,276 9,076 9,028 9,980 10,419 57 Africa 3,124 2,827 3,396 3,723 3,989 4,883 4,643 4,359 4,260 4,174 58 Egypt 432 671 647 885 780 1,363 1,080 987 870 960 59 Morocco 81 84 118 140 145 163 98 92 91 85 60 South Africa 292 449 328 404 462 388 567 421 465 387 61 Zaire 23 87 153 136 140 163 73 92 95 90 67 Oil-exporting countries4 1,280 620 1,189 1,076 1,407 1,494 1,644 1,614 1,601 1,443 63 Other Africa 1,016 917 961 1,082 1,056 1,312 1,182 1,152 1,137 1,210 64 Other countries 6,143 8,067 5,684 3,945 3,440 3,347 3,205 3,739 3,986 3,666 65 Australia 5,904 7,857 5,300 3,451 2,906 2,779 2,707 3,024 3,236 3,062 66 All other 239 210 384 494 534 568 498 714 750 604 67 Nonmonetary international and regional organizations 4,922 5,957 4,454 6,766 7,803 5,566 7,487 9,867' 5,228 3,420 68 International 4,049 5,273 3,747 5,779 6,952 4,551 6,109 8,671' 4,139 2,421 69 Latin American regional 517 419 587 646 580 894 909 863 916 823 70 Other regional5 357 265 120 341 271 121 470 333 173 176 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 • August 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr.P 1 Total 355,705 391,312 400,162 381,103 384,515 403,209 386,367 389,338' 394,660 400,936 2 Foreign countries 355,636 391,148 399,363 380,334 383,903 402,178 385,075 388,529' 394,177 400,434 3 Europe 85,584 91,927 99,014 102,194 106,915 108,360 104,277 100,139' 100,398 101,186 4 Austria 229 401 433 673 614 598 485 542 494 431 5 Belgium-Luxembourg 5,138 5,639 4,794 5,882 6,801 5,741 5,831 5,276 5,428 5,499 6 Denmark 554 1,275 648 636 558 706 864 940 845 794 7 Finland 990 1,044 898 789 909 823 843 741 1,194 795 8 France 7,251 8,766 9,157 10,190 9,785 9,134 9,058 7,943' 8,598 8,902 9 Germany 1,876 1,284 1,306 1,036 1,355 1,257 1,211 1,309' 1,374 1,332 10 Greece 452 476 817 966 854 991 933 884 798 764 11 Italy 7,560 9,018 9,119 7,597 7,765 8,833 7,482 6,913' 7,297 6,709 12 Netherlands 1,425 1,267 1,356 1,110 1,389 1,258 1,248 1,249 1,394 1,380 13 Norway 572 690 675 788 755 697 692 652 613 786 14 Portugal 950 1,114 1,243 1,141 1,123 1,058 1,040 936 897 874 15 Spain 3,744 3,573 2,884 2,310 2,199 1,908 1,801 1,885' 1,866 1,701 16 Sweden 3,038 3,358 2,230 2,643 2,546 2,203 2,174 2,278 2,422 1,923 17 Switzerland 1,639 1,863 2,123 2,604 3,162 3,161 2,836 2,361 2,940 2,966 18 Turkey 560 812 1,130 1,355 1,269 1,200 1,512 1,519 1,587 1,584 19 United Kingdom 45,781 47,364 56,185 58,106 61,655 64,594 62,356 60,587' 57,936 60,555 20 Yugoslavia 1,430 1,718 1,886 1,867 1,879 1,964 1,901 1,953 1,960 1,952 21 Other Western Europe1 368 477 596 1,206 1,082 998 716 734 1,166 648 22 U.S.S.R 263 192 142 165 128 130 169 287 424 480 23 Other Eastern Europe2 1,762 1,598 1,389 1,131 1,086 1,107 1,126 1,151' 1,165 1,111 24 Canada 13,678 16,341 16,109 15,941 16,209 16,466 17,279 18,280' 17,945 18,774 25 Latin America and Caribbean 187,969 205,491 207,862 190,779 191,663 202,401 188,975 190,479' 196,676 198,939 26 Argentina 10,974 11,749 11,050 11,236 11,486 11,462 11,463 11,574' 11,456 11,812 27 Bahamas 56,649 59,633 58,009 51,256 49,015 58,223 49,712 49,646' 55,646 55,130 28 Bermuda 603 566 592 1,017 498 499 542 380 460 275 29 Brazil 23,271 24,667 26,315 25,397 25,376 25,283 25,209 25,129' 25,379 25,391 30 British West Indies 29,101 35,527 38,205 34,258 37,063 38,640 34,345 36,475' 36,825 38,892 31 Chile 5,513 6,072 6,839 6,145 6,198 6,603 6,525 6,478' 6,557 6,585 32 Colombia 3,211 3,745 3,499 3,210 3,222 3,259 3,185 3,044 22,,990033 2,861 33 Cuba 3 0 0 4 0 0 0 0 11 0 34 Ecuador 2,062 2,307 2,420 2,411 2,419 2,390 2,439 2,369 2,399 2,388 35 Guatemala3 124 129 158 168 197 194 174 167 167 124 36 Jamaica3 181 215 252 222 222 224 228 213 213 341 37 Mexico 29,552 34,802 34,885 31,720 32,424 31,788 31,826 32,050' 31,620 32,235 38 Netherlands Antilles 839 1,154 1,350 1,387 1,071 1,340 1,022 1,043 927 839 39 Panama 10,210 7,848 7,707 6,526 6,519 6,650 6,532 5,859' 6,198 6,135 40 Peru 2,357 2,536 2,384 2,016 1,990 1,947 1,874 1,852' 1,806 1,767 41 Uruguay 686 977 1,088 947 954 960 966 956 %1 953 42 Venezuela 10,643 11,287 11,017 10,838 10,876 10,871 10,947 11,269^ 11,185 11,294 43 Other Latin America and Caribbean 1,991 2,277 2,091 2,022 2,135 2,067 1,984 1,976' 1,973 1,918 44 Asia 60,952 67,837 66,316 62,847 60,578 6666,,116666 6655,,889988 7711,,007733'' 7700,,772266 7733,,445511 China 45 Mainland 214 292 710 997 748 639 750 820 902 603 46 Taiwan 2,288 1,908 1,849 1,329 1,258 1,535 1,300 1,243' 1,400 1,132 47 Hong Kong 6,787 8,489 7,293 6,917 6,472 6,7% 6,923 7,602' 8,208 8,142 48 India 222 330 425 388 439 450 332 284 481 398 49 Indonesia 348 805 724 653 608 698 692 793 710 716 50 Israel 2,029 1,832 2,088 1,901 1,958 1,991 1,834 1,697 1,616 1,613 51 Japan 28,379 30,354 29,066 28,558 26,768 31,209 32,232 36,471' 36,711 37,898 52 Korea 9,387 9,943 9,285 9,096 8,908 9,241 8,839 9,087' 9,242 9,286 53 Philippines 2,625 2,107 2,555 2,239 2,285 2,224 2,206 2,224' 2,336 2,325 54 Thailand 643 1,219 1,125 756 788 840 793 765' 810 765 55 Middle East oil-exporting countries4 3,087 4,954 5,044 4,576 4,239 4,298 3,975 3,869 3,577 4,765 56 Other Asia 4,943 5,603 6,152 5,436 6,106 6,245 6,021 6,218 4,732 5,807 57 Africa 5,346 6,654 6,615 5,463 5,394 5,407 5,416 5,36c 5,128 5,003 58 Egypt 322 747 728 668 685 721 677 690 653 637 59 Morocco 353 440 583 610 584 575 591 612 646 660 60 South Africa 2,012 2,634 2,795 1,968 1,848 1,942 1,965 1,856' 1,799 1,716 61 Zaire 57 33 18 21 21 20 18 18' 17 17 62 Oil-exporting countries5 801 1,073 842 674 677 630 582 562' 488 464 63 Other 1,802 1,727 1,649 1,521 1,579 1,520 1,584 1,621 1,525 1,508 64 Other countries 2,107 2,898 3,447 3,111 3,144 3,379 3,230 3,199 3,305 3,082 65 Australia 1,713 2,256 2,769 2,293 2,341 2,401 2,409 2,367 2,480 2,237 66 All other 394 642 678 818 803 978 821 832 825 845 67 Nonmonetary international and regional organizations6 68 164 800 768 612 1,030 1,292 809 483 502 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 Oct. Nov. Dec. Jan. Feb.' Mar. Apr .p 1 Total 333333399999996666666,,,,,,,000000011111115555555 444444422222226666666,,,,,,,222222211111115555555 444444433333333333333,,,,,,,000000077777778888888 444444433333332222222,,,,,,,000000099999990000000 444444411111117777777,,,,,,,888888855555550000000 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 333333355555555555555,,,,,,,777777700000005555555 333333399999991111111,,,,,,,333333311111112222222 444444400000000000000,,,,,,,111111166666662222222 381,103 384,515 444444400000003333333,,,,,,,222222200000009999999 386,367 389,338 333333399999994444444,,,,,,,666666666666660000000 400,936 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 44444445555555,,,,,,,444444422222222222222 55555557777777,,,,,,,555555566666669999999 66666662222222,,,,,,,222222233333337777777 60,132 59,920 66666660000000.......333333333333331111111 60,469 60,539 66666660000000,,,,,,,444444422222224444444 60,001 44 OOwwnn ffoorreeiiggnn ooffffiicceess11 111111122222227777777,,,,,,,222222299999993333333 111111144444446666666,,,,,,,333333399999993333333 111111155555556666666,,,,,,,222222211111116666666 156,011 158,752 111111177777776666666,,,,,,,555555533333335555555 163,983 169,036 111111177777773333333,,,,,,,999999944444448888888 178,527 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111122222221111111,,,,,,,333333377777777777777 111111122222223333333,,,,,,,888888833333337777777 111111122222224444444,,,,,,,999999933333332222222 113,664 115,189 111111111111116666666,,,,,,,222222244444444444444 111,957 110,175 111111111111110000000,,,,,,,555555566666667777777 111,901 66 DDeeppoossiittss 44444444444444,,,,,,,222222222222223333333 44444447777777,,,,,,,111111122222226666666 44444449999999,,,,,,,222222222222226666666 47,345 47,610 44444447777777,,,,,,,444444411111116666666 45,694 44,160 44444444444444,,,,,,,999999977777773333333 46,097 77 OOtthheerr 77777777777777,,,,,,,111111155555553333333 77777776666666,,,,,,,777777711111111111111 77777775555555,,,,,,,777777700000006666666 66,319 67,578 66666668888888,,,,,,,888888822222229999999 66,263 66,015 66666665555555,,,,,,,555555599999993333333 65,804 88 AAllll ootthheerr ffoorreeiiggnneerrss 66666661111111,,,,,,,666666611111114444444 66666663333333,,,,,,,555555511111114444444 55555556666666,,,,,,,777777777777777777777 51,296 50,654 55555550000000,,,,,,,000000099999998888888 49,958 49,587 44444449999999,,,,,,,777777722222221111111 50,506 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss22 .... 44444440000000,,,,,,,333333311111110000000 33333334444444,,,,,,,999999900000003333333 33333332222222,,,,,,,999999911111116666666 22222228888888,,,,,,,888888888888881111111 22222223333333,,,,,,,111111199999990000000 2222222,,,,,,,444444499999991111111 2222222,,,,,,,999999966666669999999 3333333,,,,,,,333333388888880000000 3333333,,,,,,,333333333333335555555 2222222,,,,,,,444444499999996666666 11 Negotiable and readily transferable 33333330000000,,,,,,,777777766666663333333 22222226666666,,,,,,,000000066666664444444 22222223333333,,,,,,,888888800000005555555 11111119999999.......333333333333332222222 11111115555555,,,,,,,999999944444443333333 12 Outstanding collections and other 7777777,,,,,,,000000055555556666666 5555555,,,,,,,888888877777770000000 5555555,,,,,,,777777733333332222222 6666666,,,,,,,222222211111114444444 4444444,,,,,,,777777755555551111111 13 MEMO: Customer liability on 33333338888888,,,,,,,111111155555553333333 33333337777777,,,,,,,777777711111115555555 33333337777777,,,,,,,111111100000003333333 22222228888888,,,,,,,111111188888880000000 22222228888888,,,,,,,888888811111119999999 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States4 .... 42,499 46,337 40,714 37,757' 37,856 37,378' 39,465' 42,112 41,317 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 1986 MMaattuurriittyy;; bbyy bboorrrroowweerr aanndd aarreeaa 11998822 11998833 11998844 June Sept. Dec. Mar.P 1 Total 228,150 243,715 243,952 232,485 232,360 227,238 219,209 By borrower 7 Maturity of 1 year or less1 173,917 176,158 167,858 159,383 162,262 160,162 151,300 3 Foreign public borrowers 21,256 24,039 23,912 23,764 26,466 26,312 24,027 4 All other foreigners 152,661 152,120 143,947 135,619 135,797 133,850 127,273 5 Maturity of over 1 year1 54,233 67,557 76,094 73,102 70,098 67,076 67,910 6 Foreign public borrowers 23,137 32,521 38,695 37,554 36,257 34,510 36,762 7 All other foreigners 31,095 35,036 37,399 35,549 33,841 32,566 31,148 By area Maturity of 1 year or less1 8 Europe 50,500 56,117 58,498 56,369 58,403 56,425 53,159 9 Canada 7,642 6,211 6,028 6,160 6,100 6,386 5,658 10 Latin America and Caribbean 73,291 73,660 62,791 63,517 62,973 63,040 59,319 11 37,578 34,403 33,504 27,569 29,049 27,779 27,424 17 Africa 3,680 4,199 4,442 4,003 3,954 3,753 3,321 13 All other2 1,226 1,569 2,593 1,764 1,782 2,779 2,419 Maturity of over 1 year1 14 Europe 11,636 13,576 9,605 8,739 8,078 7,643 7,538 15 Canada 1,931 1,857 1,882 2,116 1,932 1,804 1,836 16 Latin America and Caribbean 35,247 43,888 56,144 53,507 52,049 50,662 51,989 17 3,185 4,850 5,323 5,123 5,217 4,502 4,191 18 Africa 1,494 2,286 2,033 1,9% 1,665 1,538 1,634 19 All other2 740 1,101 1,107 1,622 1,157 926 722 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 • August 1986 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks1 Billions of dollars, end of period 1984 1985 1986 AArreeaa oorr ccoouunnttrryy22 11998811 11998822 11998833 June3 Sept. Dec. Mar. June Sept. Dec. Mar.? 1 Total 415.2 438.0' 436.4' 430.2' 409.1' 408.0' 407.9' 399.0' 397.5' 396.9* 395.9 2 G-10 countries and Switzerland 175.5 179.7 167.8' 157.6' 147.6' 148.1' 153.2' 146.6' 151.5' 150.5' 156.9 3 Belgium-Luxembourg 13.3 13.1 12.4 10.9 9.8 8.7' 9.3' 8.9' 9.5' 9.3' 8.3 4 France 15.3 17.1 16.2' 14.2 14.3 14.1 14.6 13.5' 14.8' 12.3' 13.8 5 Germany 12.9 12.7 11.3 10.9 10.0 9.0 8.9 9.6 9.8' 10.5' 11.2 6 Italy 9.6 10.3 11.4 11.5 9.7 10.1 10.0 8.6' 8.3' 9.8' 8.5 7 Netherlands 4.0 3.6 3.5 3.0 3.4 3.9 3.8 3.7 3.4 3.8' 3.5 8 Sweden 3.7 5.0 5.1 4.3 3.5 3.2 3.1 2.9' 3.1 2.7 2.9 9 Switzerland 5.5 5.0 4.3 4.2 3.9 3.9 4.2 4.0 4.1 4.4 5.4 10 United Kingdom 70.1 72.1 65.3' 60.3' 57.1' 60.3' 65.4' 65.7' 66.9' 66.fr 69.2 11 Canada 10.9 10.4 8.3 8.9 8.1 7.9 9.1' 8.1' 7.5 1.0* 6.1 12 Japan 30.2 30.2 29.9 29.3 27.7' 27.1' 24.7' 21.7' 24.0' 24.1' 28.1 13 Other developed countries 28.4 33.7 36.1 37.1' 36.3' 33.8' 33.0 32.5 32.2' 30.5 31.6 14 Austria 1.9 1.9 1.9 1.9 1.8 1.6 1.6 1.6 1.7 1.6' 1.6 15 Denmark 2.3 2.4 3.4 3.1 2.9 2.2 2.1 1.9 2.1 2.4 2.5 16 Finland 1.7 2.2 2.4 2.3 1.9 1.9 1.8 1.8 1.8 1.6 1.9 17 Greece 2.8 3.0 2.8 3.3 3.2 2.9 2.9 2.9 2.8 2.6 2.5 18 Norway 3.1 3.3 3.3 3.2 3.2 3.0 2.9 2.9 3.4 2.9 2.7 19 Portugal 1.1 1.5 1.5 1.7 1.6 1.4 1.4 1.3 1.4 1.3 1.1 20 Spain 6.6 7.5 7.1 7.3 6.9 6.5 6.4 5.9 6.1' 5.8 6.4 21 Turkey 1.4 1.4 1.7 2.0 2.0 1.9 1.9 2.0 2.1 1.9 2.3 22 Other Western Europe 2.1 2.3 1.8 1.9 1.7 1.7 1.7 1.8 1.7 2.0 2.4 23 South Africa 2.8 3.7 4.7 4.7 5.0 4.5 4.2 3.9 3.3 3.2 3.2 24 Australia 2.5 4.4 5.5 5.7' 6.2' 6.1' 6.2 6.4 5.8 5.2 5.0 25 OPEC countries4 24.8 27.2' 28.8' 26.4' 24.7' 25.3' 24.8' 23^ 23.1' 21.8' 20.7 26 Ecuador 2.2 2.2 2.2 2.1 2.1 2.2 2.2 2.2' 2.2' 2.1' 2.2 27 Venezuela 9.9 10.5 9.9 9.5 9.2 9.3 9.3 9.3 9.0' 8.9 8.7 28 Indonesia 2.6 3.2 3.8 3.9' 3.6' 3.7' 3.fr 3.4' 3.4' 3.3' 3.3 29 Middle East countries 7.5 8.5' 9.9' 8.2' 7.3' 7.9' 7.4' 6.1' 6.2' 5.5' 4.7 30 African countries 2.5 2.8 3.0 2.7 2.5 2.3 2.3 2.2 2.3 2.0* 1.8 31 Non-OPEC developing countries 96.3 106.8' 111.3' 112.7' 112.1' 112.2' 111.3' 110.4' 108.2' 105.5' 103.6 Latin America 32 Argentina 9.4 8.9 9.5 9.2 9.1 8.7 8.6 8.6 8.9' 8.9 8.9 33 Brazil 19.1 22.9 23.1 25.4 26.3 26.3 26.4 26.6 25.5' 25.6 25.7 34 Chile 5.8 6.3 6.4 6.7 7.1 7.0 7.0 6.9 6.6' 7.0' 6.9 35 Colombia 2.6 3.1 3.2 3.0 2.9 2.9 2.8 2.7 2.6 2.7 2.3 36 Mexico 21.6 24.2' 25.8' 25^ 26 .(y 25.7' 25.5' 25.3' 24.4' 24.1' 23.9 37 Peru 2.0 2.6 2.4 2.3 2.2 2.2 2.2 2.1 1.9' 1.8 1.7 38 Other Latin America 4.1 4.0 4.2 4.1 3.9 3.9 3.7 3.6 3.5 3.4 3.6 Asia China 39 Mainland .2 .2 .3 .6 .5 .7 .7 .3 1.1 .5 .6 40 Taiwan 5.1 5.3 5.3 5.3' 5.2' 5.1' 5.3' 5.5 5.1' 4.5 4.3 41 India .3 .6 1.0 1.0 1.0r 1.0 1.0 1.0 1.1' 1.3' 1.2 42 Israel 2.1 2.3 1.9 1.9 1.7 1.8 1.7 2.3 1.5 1.6 1.3 43 Korea (South) 9.4 10.9 11.3 11.2' 10.4' 10.8' 10.5' 10.2' 10.5' 9.6' 9.5 44 Malaysia 1.7 2.1 2.9 2.7' 3.0' 2.8' 2.8' 2.8' 2.8' 2.4' 2.2 45 Philippines 6.0 6.3 6.2 6.3 5.9 6.0 6.1 6.0 6.0' 5.7' 5.6 46 Thailand 1.5 1.6 2.2 1.9 1.8 1.8 1.7 1.6 1.6 1.4 1.3 47 Other Asia 1.0 1.1 1.0 1.1 1.0 1.2 1.1 1.0 1.1 1.1 .9 Africa 48 Egypt 1.1 1.2 1.5 1.4 1.2 1.2 1.1 1.0 1.0 1.0 .9 49 Morocco .7 .7 .8 .8 .8 .8 .8 .8 .9 .9 .9 50 Zaire .2 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 51 Other Africa5 2.3 2.4 2.3 1.9 1.9 2.1 2.2 2.0 2.0 1.9 1.9 52 Eastern Europe 7.8 6.2 5.3 4.9 4.5 4.4 4.3 4.3 4.6 4.2' 4.0 53 U.S.S.R .6 .3 .2 .2 .2 .1 .2 .3 .2 .1 .3 54 Yugoslavia 2.5 2.2 2.4 2.3 2.3 2.3 2.2 2.2 2.4' 2.2 2.0 55 Other 4.7 3.7 2.8 2.4 2.1 2.0 1.9 1.8 1.9 1.8 1.7 56 Offshore banking centers 63.7 66.6' 70.2' 73.9' 66.4' 66.7' 64.2' 65.C 60.3' 67.2' 62.6 57 Bahamas 19.0 19.0 21.8 27.4' 23.3' 21.5 20.C 21.1' 16.fr 22.1' 21.0 58 Bermuda .7 .9 .9 .7 1.0 .9 .7 .9 .8 .7 .7 59 Cayman Islands and other British West Indies 12.4 12.8' 12.2 12.2' 11.1' 11.8' 12.3' 12.1' 12.3' 13.2' 11.3 60 Netherlands Antilles 3.2 3.3 4.1' 3.3 3.1 3.4 3.3 3.2 2.3 2.3 2.3 61 Panama6 7.7 7.5' 5.8' 6.5' 5.6' 6.7' 5.5' 5.4' 6.1' 6.<K 5.9 62 Lebanon .2 .1 .1 .1 .1 .1 .1 .1 .0 .1 .1 63 Hong Kong 11.8 13.9 15.0 13.5' 12.7' 12.5' 12.4' 12.fr 12.7' 12.9* 12.9 64 Singapore 8.7 9.2 10.3 10.3 9.5 9.8 10.0 9.7 9.4 9.9' 8.4 65 Others7 .1 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated8 18.8 17.9 17.0 17.fr 17.4 17.5' 17.2' 17.3 17.6 17.2' 16.5 1. The banking offices covered by these data are the U.S. offices and foreign 2. Revisions shown in this issue have been made in part to correct some branches of U.S.-owned banks and of U.S. subsidiaries of foreign-owned banks. double-counting of claims held by foreign branches located in Puerto Rico, the Offices not covered include (1) U.S. agencies and branches of foreign banks, and U.S. Virgin Islands, and Guam. (2) foreign subsidiaries of U.S. banks. To minimize duplication, the data are 3. Beginning with June 1984 data, reported claims held by foreign branches adjusted to exclude the claims on foreign branches held by a U.S. office or another have been reduced by an increase in the reporting threshold for "shell" branches foreign branch of the same banking institution. The data in this table combine from $50 million to $150 million equivalent in total assets, the threshold now foreign branch claims in table 3.14 (the sum of lines 7 through 10) with the claims applicable to all reporting branches. of U.S. offices in table 3.18 (excluding those held by agencies and branches of foreign banks and those constituting claims on own foreign 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 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998811 11998822 11998833 Dec. Mar. June Sept. Dec. 1 Total 28,618 27,512 25,346 29,357 26,243 24,591 25,184 27,018 2 Payable in dollars 24,909 24,280 22,233 26,389 23,466 21,945 22,364 23,811 3 Payable in foreign currencies 3,709 3,232 3,113 2,968 2,777 2,646 2,820 3,208 By type 4 Financial liabilities 12,157 11,066 10,572 14,509 11,722 11,489 11,743 12,856 5 Payable in dollars 9,499 8,858 8,700 12,553 9,873 9,533 9,780 10,835 6 Payable in foreign currencies 2,658 2,208 1,872 1,955 1,849 1,956 1,963 2,021 7 Commercial liabilities 16,461 16,446 14,774 14,849 14,521 13,103 13,441 14,162 8 Trade payables 10,818 9,438 7,765 7,005 7,052 5,854 5,694 6,685 9 Advance receipts and other liabilities 5,643 7,008 7,009 7,843 7,469 7,249 7,747 7,477 10 Payable in dollars 15,409 15,423 13,533 13,836 13,593 12,413 12,584 12,976 11 Payable in foreign currencies 1,052 1,023 1,241 1,013 928 690 857 1,186 By area or country Financial liabilities 12 Europe 6,825 6,501 5,742 6,728 6,138 5,934 6,534 7,146 13 Belgium-Luxembourg 471 505 302 471 298 351 367 329 14 France 709 783 843 995 896 865 849 857 15 Germany 491 467 502 489 506 474 493 419 16 Netherlands 748 711 621 590 619 604 624 745 17 Switzerland 715 792 486 569 541 566 593 676 18 United Kingdom 3,565 3,102 2,839 3,297 3,039 2,825 3,318 3,822 19 Canada 963 746 764 863 840 850 826 760 20 Latin America and Caribbean 3,356 2,751 2,596 5,086 3,147 3,106 2,619 3,152 21 Bahamas 1,279 904 751 1,926 1,341 1,107 1,145 1,120 22 Bermuda 7 14 13 13 25 10 4 4 23 Brazil 22 28 32 35 29 27 23 29 24 British West Indies 1,241 1,027 1,041 2,103 1,521 1,734 1,234 1,814 25 Mexico 102 121 213 367 25 32 28 15 26 Venezuela 98 114 124 137 3 3 3 3 27 Asia 976 1,039 1,424 1,777 1,555 1,555 1,728 1,765 28 Japan 792 715 991 1,209 1,033 965 1,098 1,148 29 Middle East oil-exporting countries2 75 169 170 155 124 147 82 82 30 Africa 14 17 19 14 12 14 14 12 31 Oil-exporting countries3 0 0 0 0 0 0 0 0 32 All other4 24 12 27 41 31 30 22 21 Commercial liabilities 33 Europe 3,770 3,831 3,245 4,001 3,519 3,485 3,897 4,011 34 Belgium-Luxembourg 71 52 62 48 37 53 56 62 3S France 573 598 437 438 401 425 431 453 36 Germany 545 468 427 622 590 431 601 607 37 Netherlands 220 346 268 245 272 284 386 364 38 Switzerland 424 367 241 257 233 353 289 379 39 United Kingdom 880 1,027 732 1,095 752 740 858 976 40 Canada 897 1,495 1,841 1,975 1,727 1,494 1,383 1,449 41 Latin America and Caribbean 1,044 1,570 1,473 1,871 1,717 1,244 1,262 1,088 42 Bahamas 2 16 1 7 11 12 2 12 43 Bermuda 67 117 67 114 112 77 105 77 44 Brazil 67 60 44 124 101 90 120 58 45 British West Indies 2 32 6 32 21 1 15 44 46 Mexico 340 436 585 586 654 492 415 430 47 Venezuela 276 642 432 636 395 309 311 212 48 9,384 8,144 6,741 5,285 5,721 5,259 5,353 6,046 49 Japan 1,094 1,226 1,247 1,256 1,241 1,232 1,567 1,799 50 Middle East oil-exporting countries2-5 7,008 5,503 4,178 2,372 2,786 2,396 2,109 2,829 51 Africa 703 753 553 588 765 633 572 587 52 Oil-exporting countries3 344 277 167 233 294 265 235 238 53 All other4 664 651 921 1,128 1,070 988 975 982 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. NOTES TO TABLE 3.21—CONTINUED 4. Besides the Organization of Petroleum Exporting Countries shown individ- 6. Includes Canal Zone beginning December 1979. ually, this group includes other members of OPEC (Algeria, Gabon, Iran, Iraq, 7. Foreign branch claims only. Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates) as well 8. Includes New Zealand, Liberia, and international and regional organizaas Bahrain and Oman (not formally members of OPEC). tions. 5. Excludes Liberia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A64 International Statistics • August 1986 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States' Millions of dollars, end of period 1984 1985 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998811 11998822 11998833 Dec. Mar. June Sept. Dec. 1 Total 36,185 28,725 34,911 29,839 28,672 26,968 28,487 28,071 2 Payable in dollars 32,582 26,085 31,815 27,242 26,100 24,339 25,621 25,769 3 Payable in foreign currencies 3,603 2,640 3,096 2,597 2,571 2,629 2,866 2,302 By type 4 Financial claims 21,142 17,684 23,780 19,192 18,375 16,512 19,024 18,031 5 Deposits 15,081 13,058 18,496 14,559 14,368 12,657 15,135 14,805 6 Payable in dollars 14,456 12,628 17,993 14,140 13,871 12,101 14,432 14,190 7 Payable in foreign currencies 625 430 503 420 497 556 704 615 8 Other financial claims 6,061 4,626 5,284 4,633 4,007 3,856 3,889 3,227 9 Payable in dollars 3,599 2,979 3,328 3,190 2,442 2,375 2,351 2,192 10 Payable in foreign currencies 2,462 1,647 1,956 1,442 1,565 1,480 1,538 1,035 11 Commercial claims 15,043 11,041 11,131 10,646 10,297 10,456 9,463 10,040 12 Trade receivables 14,007 9,994 9,721 9,177 8,784 9,089 7,988 8,750 13 Advance payments and other claims 1,036 1,047 1,410 1,470 1,513 1,367 1,475 1,290 14 Payable in dollars 14,527 10,478 10,494 9,912 9,787 9,863 8,839 9,387 15 Payable in foreign currencies 516 563 637 735 510 592 624 652 By area or country Financial claims 16 Europe 4,596 4,873 6,488 5,754 5,774 5,445 6,452 6,306 17 Belgium-Luxembourg 43 15 37 15 29 15 12 10 18 France 285 134 150 126 92 51 132 184 19 Germany 224 178 163 224 196 175 158 223 20 Netherlands 50 97 71 66 81 46 127 61 21 Switzerland 117 107 38 66 46 16 53 74 22 United Kingdom 3,546 4,064 5,817 4,856 5,042 4,867 5,725 5,492 23 Canada 6,755 4,377 5,989 3,979 3,934 3,747 4,022 3,256 24 Latin America and Caribbean 8,812 7,546 10,234 8,170 7,612 6,475 7,450 7,650 25 Bahamas 3,650 3,279 4,771 3,282 3,018 2,153 2,290 2,638 26 Bermuda 18 32 102 6 4 6 5 6 27 Brazil 30 62 53 100 98 96 92 78 28 British West Indies 3,971 3,255 4,206 4,021 3,924 3,657 4,504 4,440 29 Mexico 313 274 293 215 201 206 201 180 30 Venezuela 148 139 134 125 101 100 73 48 31 Asia 758 698 764 961 856 639 969 696 32 Japan 366 153 297 353 509 281 725 475 33 Middle East oil-exporting countries2 37 15 4 13 6 6 6 4 34 Africa 173 158 147 210 101 111 104 103 35 Oil-exporting countries3 46 48 55 85 32 25 31 29 36 All other4 48 31 159 117 97 95 26 21 Commercial claims 37 Europe 5,405 3,826 3,670 3,801 3,360 3,689 3,235 3,533 38 Belgium-Luxembourg 234 151 135 165 149 212 158 175 39 France 776 474 459 440 375 408 360 426 40 Germany 561 357 349 374 358 375 336 346 41 Netherlands 299 350 334 335 340 301 286 284 42 Switzerland 431 360 317 271 253 376 208 284 43 United Kingdom 985 811 809 1,063 885 950 779 898 44 Canada 967 633 829 1,021 1,248 1,065 1,100 1,023 45 Latin America and Caribbean 3,479 2,526 2,695 2,052 1,973 2,124 1,717 1,808 46 Bahamas 12 21 8 8 9 11 18 13 47 Bermuda 223 261 190 115 164 65 62 93 48 Brazil 668 258 493 214 210 193 211 206 49 British West Indies 12 12 7 7 6 29 7 6 50 Mexico 1,022 775 884 583 493 616 416 510 51 Venezuela 424 351 272 206 192 224 149 157 52 Asia 3,959 3,050 3,063 3,073 2,985 2,721 22,,771122 2,982 53 Japan 1,245 1,047 1,114 1,191 1,154 968 888844 1,016 54 Middle East oil-exporting countries2 905 751 737 668 666 593 541 638 55 Africa 772 588 588 470 510 522 434 437 56 Oil-exporting countries3 152 140 139 134 141 139 131 130 57 AH other4 461 417 286 229 221 336 264 257 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.- Oct. Nov. Dec. Jan. Feb. Mar. Apr? Apr. U.S. corporate securities STOCKS 1 Foreign purchases 59,834 81,819 48,123 7,244 8,409 11,172 8,729 10,585 13,503 15,306 2 Foreign sales 62,814 76,851 37,875 6,560 7,137 9,010 6,987 8,828 10,640 11,420 3 Net purchases, or sales (-) -2,980 4,968 10,248 684 1,273 2,161 1,743 1,756 2,863 3,886 4 Foreign countries -3,109 4,884 10,130 656 1,362 1,996 1,755 1,737 2,816 3,822 5 Europe -3,077 2,068 6,820 554 948 1,339 1,173 1,393 2,205 2,049 6 France -405 -438 -120 -82 -85 -105 -63 -68 -26 36 7 Germany -50 730 645 235 270 283 134 234 229 47 8 Netherlands -357 -122 518 33 47 125 109 121 166 123 9 Switzerland -1,542 -75 1,972 125 107 280 288 420 698 566 10 United Kingdom -677 1,674 2,989 210 579 700 615 634 1,021 719 11 Canada 1,691 355 189 -31 -70 93 121 -59 77 50 1? Latin America and Caribbean 495 1,718 1,206 89 243 305 -68 213 198 862 13 Middle East1 -1,992 238 654 8 -174 227 208 -19 127 338 14 Other Asia -378 313 920 -16 384 -25 268 154 122 376 15 Africa -22 24 163 -4 -1 12 25 30 59 48 16 Other countries 175 168 176 55 32 44 26 24 28 98 17 Nonmonetary international and regional organizations 129 84 118 2288 -89 165 -12 20 4477 6633 BONDS2 18 Foreign purchases 39,296 87,176 41,455 7,401 12,466 9,755 6,065 9,285r 12,564 13,541 19 Foreign sales 26,199 43,068 24,255 2,786 4,284 4,558 2,939 4,936 7,420 8,960 20 Net purchases, or sales (-) 13,096 44,109 17,200 4,614 8,182 5,197 3,126 4,350' 5,144 4,581 21 Foreign countries 12,799 44,203 16,664 4,768 7,824 5,555 3,229 4,201' 4,843 4,391 77 Europe 11,697 40,042 13,189 3,662 6,835 5,176 2,840 3,123' 3,690 3,536 73 207 210 -47 8 -15 0 27 -33 -17 -23 74 Germany 1,724 2,001 -254 308 897 408 -2 45 -224 -73 75 Netherlands 100 222 115 0 158 13 85 3 25 2 76 Switzerland 643 3,987 2,436 249 804 1,013 235 511 459 1,231 77 United Kingdom 8,429 32,757 10,936 3,036 4,903 3,696 2,471 2,617' 3,374 2,474 78 -62 189 -152 42 110 19 2 -31 -198 75 79 Latin America and Caribbean 376 498 509 81 124 68 18 27 200 263 30 Middle East1 -1,030 -2,643 -548 11 -215 -435 -174 0 15 -389 31 Other Asia 1,817 6,068 3,632 966 975 703 541 1,064 1,144 883 37 Africa 1 11 5 1 0 4 1 1 0 3 33 Other countries 0 38 28 6 -5 19 2 17 -10 19 34 Nonmonetary international and regional organizations 297 -95 537 -154 358 -358 -103 149 330011 119900 Foreign securities 35 Stocks, net purchases, or sales (-) -1,101 -3,895 -3,757 -49 -303 -413 123 -772 -1,440 -1,668 36 14,816 21,006 13,449 2,168 2,159 2,740 2,509 2,933 3,618 4,388 37 Foreign sales 15,917 24,902 17,206 2,217 2,462 3,153 2,386 3,705 5,058 6,057 38 Bonds, net purchases, or sales (—) -3,930 -4,018 -5,112 -756 272 -138 -67 -966 -3,003 -1,076 39 56,017 81,153 47,634 8,538 9,000 8,370 9,796 10,418 12,438 14,982 40 Foreign sales 59,948 85,171 52,746 9,294 8,728 8,507 9,862 11,385 15,441 16,058 41 Net purchases, or sales (—), of stocks and bonds .... -5,031 -7,913 -8,869 -805 -31 -551 57 -1,738 -4,443 -2,744 42 Foreign countries -4,642 -8,977 -8,643 -793 -254 -886 -31 -1,879 -4,119 -2,614 43 -8,655 -9,926 -8,575 -635 -1,046 -424 -379 -1,918 -3,840 -2,438 44 Canada 542 -1,686 -1,315 -27 112 -394 -219 -319 -491 -286 45 Latin America and Caribbean 2,460 1,850 800 48 32 85 220 297 121 162 46 1,356 667 943 -179 814 -352 395 563 127 -143 47 -108 75 27 -5 37 42 7 10 4 6 48 Other countries -238 43 -522 6 -204 156 -56 -512 -40 85 49 Nonmonetary international and regional organizations -389 1,063 -226 -13 223 335 88 140 --332244 -130 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 • August 1986 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1986 1985 1986 Country or area 11998844 11998855 A Ja p n r. . - Oct. Nov. Dec. Jan. Feb. Mar. Apr.f Transactions, net purchases or sales (-) during period1 1 Estimated total2 21,501 29,786 16,955 -647 2,500 6,460 -1,359 352' 9,572 8,390 2 Foreign countries2 16,496 29,303 13,346 -116 2,276 3,066 -884 3,883' 2,361 7,986 3 Europe2 11,014 3,918 5,275 -699 -995 180 114 1,818 1,813 1,531 4 Belgium-Luxembourg 287 476 -135 10 29 -44 33 -2 -196 29 5 Germany2 2,929 1,917 1,030 17 -101 302 132 459 322 117 6 Netherlands 449 269 -93 -126 155 -82 26 -261 61 81 7 Sweden 40 976 71 -41 -42 -41 -200 193 -14 93 8 Switzerland2 656 760 368 116 -151 -116 68 115 22 163 9 United Kingdom 5,188 -2,186 2,594 -733 -584 50 -60 1,388 1,474 -207 10 Other Western Europe 1,466 1,706 1,441 58 -301 111 116 -75 144 1,255 11 Eastern Europe 0 0 0 0 0 0 0 0 0 0 12 Canada 1,586 -190 225 138 -394 -71 -461 -131 762 55 13 Latin America and Caribbean 1,418 4,312 2,140 125 735 90 107 584 227 1,222 14 Venezuela 14 238 206 91 72 -41 -53 -63 127 196 15 Other Latin America and Caribbean 536 2,343 865 110 367 265 86 448 171 161 16 Netherlands Antilles 869 1,731 1,069 -76 296 -133 74 200 -70 865 17 Asia 2,431 20,839 5,066 248 2,979 2,833 -584 1,311' -446 4,786 18 Japan 6,289 18,859 2,853 1,630 3,039 902 -861 1,601 140 1,973 19 -67 112 -39 9 1 9 -8 -12 -18 -1 20 All other 114 311 678 63 -51 25 -52 314 22 394 21 Nonmonetary international and regional organizations 5,009 483 3,608 -530 224 3,393 -474 -3,532 7,211 403 22 International 4,612 -394 3,339 -430 -15 3,001 -194 -3,766 6,957 342 23 Latin American regional 0 18 118 0 8 7 14 51 23 30 MEMO 24 Foreign countries2 16,496 29,303 13,346 -116 2,276 3,066 -884 3,883' 2,361 7,986 25 Official institutions 505 8,427 5,092 -1,209 -236 2,712 362 619 394 3,716 26 Other foreign2 15,992 20,876 8,255 1,093 2,512 355 -1,246 3,264' 1,967 4,270 Oil-exporting countries 27 Middle East3 -6,270 -1,576 650 -814 -413 740 222 -301 -607 1,336 28 Africa4 -101 7 0 4 0 2 1 0 -2 1 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 May 31, 1986 Rate on May 31, 1986 Rate on May 31, 1986 Country Country Country Per- Month Per- Month Per- Month cent effective cent effective cent effective Austria.. 4.0 Aug. 1985 France1 7.25 May 1986 Norway 8.0 June 1983 Belgium. 8.0 May 1986 Germany, Fed. Rep. of ... 3.5 Mar. 1986 Switzerland 4.0 Mar. 1983 Brazil... 49.0 Mar. 1981 Italy 12.0 May 1986 United Kingdom2. Canada.. 8.43 May 1986 Japan 3.5 Apr. 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 Nov. Dec. Jan. Feb. Mar. Apr. May 1 Eurodollars 9.57 10.75 8.27 8.02 7.99 8.02 7.89 7.42 6.80 6.86 2 United Kingdom 10.06 9.91 12.16 11.50 11.66 12.78 12.60 11.70 10.43 10.16 3 Canada 9.48 11.29 9.64 8.85 9.25 10.23 11.81 10.94 9.57 8.60 4 Germany 5.73 5.96 5.40 4.82 4.80 4.65 4.47 4.49 4.48 4.58 5 Switzerland 4.11 4.35 4.92 4.07 4.13 4.08 3.85 3.84 4.04 4.32 6 Netherlands 5.58 6.08 6.29 5.90 5.79 5.71 5.74 5.44 5.23 5.76 7 France 12.44 11.66 9.91 8.95 8.92 8.95 8.81 8.28 7.66 7.21 8 Italy 18.95 17.08 14.86 14.29 14.71 14.88 15.91 16.05 13.62 12.35 9 Belgium 10.51 11.41 9.60 8.66 9.14 9.75 9.75 9.75 8.51 7.90 10 Japan 6.49 6.32 6.47 7.29 7.36 6.54 6.04 5.47 4.85 4.58 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 • August 1986 3.28 FOREIGN EXCHANGE RATES Currency units per dollar 1985 1986 CCoouunnttrryy//ccuurrrreennccyy 11998833 11998844 11998855 Dec. Jan. Feb. Mar. Apr. May 1 Australia/dollar1 90.14 87.937 70.026 68.11 70.00 69.93 70.79 72.28 72.72 2 Austria/schilling 17.968 20.005 20.676 17.658 17.151 16.389 15.976 15.965 15.667 3 Belgium/franc 51.121 57.749 59.336 51.251 49.843 47.748 46.603 46.394 45.497 4 Brazil/cruzeiro 573.27 1841.50 6205.10 9915.71 11345.26 13020.00 13.84' 13.84 13.84 5 Canada/dollar 1.2325 1.2953 1.3658 1.3954 1.4070 1.4043 1.4009 1.3879 1.3757 6 China, P.R./yuan 1.9809 2.3308 2.9434 3.2095 3.2095 3.2152 3.2202 3.2143 3.2014 7 Denmark/krone 9.1483 10.354 10.598 9.1221 8.9468 8.6048 8.4096 8.3928 8.2479 8 Finland/markka 5.5636 6.0007 6.1971 5.4824 5.4131 5.2465 5.1517 5.1235 5.0967 9 France/franc 7.6203 8.7355 8.9799 7.6849 7.4821 7.1575 6.9964 7.2060 7.0967 10 Germany/deutsche mark 2.5539 2.8454 2.9419 2.5122 2.4384 2.3317 2.2752 2.2732 2.2277 11 Greece/drachma 87.895 112.73 138.40 150.186 148.69 143.48 141.43 142.50 139.64 12 Hong Kong/dollar 7.2569 7.8188 7.7911 7.8064 7.8081 7.8042 7.8125 7.7957 7.8080 13 India/rupee 10.1040 11.348 12.332 12.1524 12.243 12.370 12.289 12.393 12.466 14 Ireland/pound1 124.81 108.64 106.62 122.48 124.75 129.79 132.87 133.71 136.62 15 Italy/lira 1519.30 1756.10 1908.90 1713.50 1663.14 1588.21 1548.43 1559.45 1528.50 16 Japan/yen 237.55 237.45 238.47 202.79 199.89 184.85 178.69 175.09 167.03 17 Malaysia/ringgit 2.3204 2.3448 2.4806 2.4291 2.4489 2.4704 2.5367 2.5981 2.5978 18 Netherlands/guilder 2.8543 3.2083 3.3184 2.8293 2.7489 2.6343 2.5678 2.5629 2.5082 19 New Zealand/dollar1 66.790 57.837 49.752 52.633 51.657 53.177 52.820 56.127 56.666 20 Norway/krone 7.3012 8.1596 8.5933 7.6524 7.5541 7.2789 7.1711 7.1603 7.4106 21 Portugal/escudo 111.610 147.70 172.07 160.798 157.99 152.63 149.40 150.79 149.12 22 Singapore/dollar 2.1136 2.1325 2.2008 2.1213 2.1289 2.1401 2.1600 2.1880 2.2157 23 South Africa/rand1 89.85 69.534 45.57 37.05 42.40 47.94 49.04 48.77 45.67 24 South Korea/won 776.04 807.91 861.89 893.13 892.75 888.57 886.66 887.95 889.09 25 Spain/peseta 143.500 160.78 169.98 156.052 152.91 147.31 143.06 144.11 141.62 26 Sri Lanka/rupee 23.510 25.428 27.187 27.420 26.342 27.596 27.623 27.791 27.932 27 Sweden/krona 7.6717 8.2706 8.6031 7.6817 7.5938 7.3997 7.2610 7.2433 7.1458 28 Switzerland/franc 2.1006 2.3500 2.4551 2.1042 2.0660 1.9547 1.9150 1.9016 1.8538 29 Taiwan/dollar n.a. 39.633 39.889 39.906 39.405 39.239 39.027 38.689 38.460 30 Thailand/baht 22.991 23.582 27.193 26.715 26.676 26.492 26.418 26.429 26.327 31 United Kingdom/pound1 151.59 133.66 129.74 144.47 142.44 142.97 146.74 149.85 152.11 MEMO 32 United States/dollar2 125.34 138.19 143.01 125.80 123.65 118.77 116.05 115.67 113.27 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, 1985 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 1986 A74 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 Terms of lending at commercial banks, May 1986 July 1986 A70 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A70 Special Tables • August 1986 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, May 5-9, 19861 A. Commercial and Industrial Loans Weighted Loan rate (percent) Amount Average average Loans PPaarrttiiccii-of loans size mmaattuurriittyy22 made under pation Characteristics ( o t f h o d u o s l a la n r d s s ) ( o t f h o d u o s l a la n r d s s ) W av e e ig ra h g te e d SSttaannddaarrdd q I u n a t r e t r i - le co ( m pe m rc it e m nt e ) n t (p l e o r a c n e s n t) Days effective3 range5 ALL BANKS • 1 Overnight6 16,796,379 6,319 7.45 .09 7.28-7.65 79.3 1.4 2 One month and under 7,400,682 630 18 7.97 .09 7.41-8.20 68.3 8.5 3 Fixed rate 5,582,297 869 17 7.82 .08 7.38-8.04 63.4 6.0 4 Floating rate 1,818,385 342 21 8.45 .21 7.51-9.14 83.2 16.1 5 Over one month and under a year 8,758,794 94 145 9.02 .26 7.65-9.92 70.0 16.5 6 Fixed rate 3,872,503 75 117 8.89 .32 7.64-9.74 61.4 13.6 7 Floating rate 4,886,291 116 167 9.12 .23 7.72-9.92 76.9 18.8 8 Demand7 6,444,800 181 * 8.84 .12 7.76-9.65 74.7 7.1 9 Fixed rate 1,067,107 278 * 8.00 .12 7.32-8.30 75.7 1.0 10 Floating rate 5,377,693 169 * 9.01 .11 8.17-9.92 74.5 8.3 11 Total short term 39,400,655 275 43 8.13 .18 7.36-8.78 74.4 7.0 12 Fixed rate (thousands of dollars) . 25,923,503 406 23 7.75 .19 7.30-7.88 72.5 3.8 13 1-24 340,596 7 115 11.90 .23 10.75-12.96 19.3 .1 14 25-49 246,526 33 117 11.36 .25 9.70-12.75 26.3 3.3 15 50-99 234,280 64 103 10.75 .30 9.84-11.84 26.9 .1 16 100-499 502,385 190 99 9.91 .25 8.87-10.49 52.8 5.1 17 500-999 313,732 649 68 8.78 .18 7.76-9.42 62.2 9.6 18 1000 and over 24,285,983 7,587 18 7.57 .07 7.30-7.79 74.7 3.8 19 Floating rate (thousands of dollars). 13,477,153 169 105 8.85 .16 7.66-9.69 78.1 13.3 20 1-24 405,983 10 160 10.82 .14 9.92-11.49 67.2 1.7 21 25-49 414,745 34 155 10.41 .07 9.65-11.02 63.8 2.2 22 50-99 624,411 66 153 10.04 .05 9.38-10.52 66.1 4.9 23 100-499 2,325,315 194 154 9.80 .08 8.87-10.38 69.8 4.8 24 500-999 1,075,887 634 143 9.45 .06 8.84-9.92 72.1 5.6 25 1000 and over 8,630,812 4,141 83 8.26 .15 7.42-8.84 83.2 18.2 Months 26 Total long term 5,130,929 221 50 9.07 .21 7.76-9.92 75.4 14.9 27 Fixed rate (thousands of dollars) 1,562,951 162 49 9.06 .34 7.44-10.47 64.6 5.9 28 1-99 138,468 16 46 12.28 .45 11.02-12.75 12.9 .6 29 100-499 121,037 171 87 11.45 .33 10.47-12.19 19.5 3.3 30 500-999 22,967 665 67 9.39 .36 8.93-10.33 65.5 7.2 31 1000 and over 1,280,480 5,648 46 8.48 .31 7.39-9.03 74.5 6.8 32 Floating rate (thousands of dollars) 3,567,977 263 51 9.07 .16 8.19-9.92 80.1 18.9 33 1-99 249,406 24 48 10.54 .15 9.84-11.02 40.0 2.0 34 100-499 442,587 204 52 9.85 .08 9.38-10.38 72.6 7.7 35 500-999 216,735 639 49 9.47 .11 8.84-9.96 82.9 16.7 36 1000 and over 2,659,250 4,450 51 8.77 .19 7.78-9.58 84.9 22.5 Loan rate (percent) DDaayyss PPrriimmee rraattee99 Effective3 Nominal8 LOANS MADE BELOW PRIME10 „ 37 Overnight6 16,214,379 9,774 7.39 7.21 8.50 79.4 1.5 38 One month and under 6,358,788 3,968 18 7.68 7.41 8.52 73.6 12.7 39 Over one month and under a year 4,294,210 614 124 7.84 7.61 8.65 80.5 22.4 40 Demand7 2,618,224 2,186 * 7.69 7.45 8.54 70.3 2.7 41 Total short term 29,485,601 2,574 25 7.54 7.33 8.53 77.5 7.1 42 Fixed rate 23,535,840 3,091 17 7.50 7.30 8.51 76.5 4.9 43 Floating rate 5,949,760 1,550 68 7.73 7.47 8.61 81.4 15.4 Months 44 Total long term 2,171,279 1,065 46 7.83 7.61 8.63 84.4 11.4 45 Fixed rate .... 914,661 1,088 44 7.75 7.58 8.58 77.3 5.6 46 Floating rate .. 1,256,619 1,049 47 7.89 7.62 8.67 89.7 15.6 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Financial Markets A71 4.23 Continued A. Continued Weighted Loan rate (percent) Amount Average average LLooaannss PPaarrttiiccii-of loans size mmaattuurriittyy22 made under pation Characteristics (thousands (thousands Weighted Inter- commitment loans of dollars) of dollars) average SSttaannddaarrdd quartile (percent) (percent) Days effective3 range5 LARGE BANKS 1 Overnight6 13,866,576 9,379 * 7.46 .09 7.28-7.65 82.0 1.6 2 One month and under 5,134,695 2,275 18 7.86 .08 7.38-8.10 64.0 7.8 3 Fixed rate 3,992,087 3,601 17 7.77 .10 7.38-7.96 57.7 2.8 4 Floating rate 1,142,608 995 21 8.17 .19 7.50-8.84 85.8 25.0 5 Over one month and under a year 4,443,531 474 138 8.25 .07 7.51-8.84 84.3 15.4 6 Fixed rate 2,064,793 1,002 121 8.09 .14 7.63-8.33 78.5 8.4 7 Floating rate 2,378,738 325 152 8.39 .12 7.50-8.87 89.3 21.4 8 Demand7 3,066,425 354 * 8.79 .16 7.88-9.42 76.1 1.6 9 Fixed rate 469,712 542 * 8.01 .19 7.24-8.84 70.2 .3 10 Floating rate 2,596,713 333 * 8.93 .14 8.30-9.65 77.2 1.8 11 Total short term 26,511,227 1,218 31 7.83 .09 7.32-8.06 78.2 5.1 12 Fixed rate (thousands of dollars) . 19,229,477 3,632 18 7.59 .09 7.30-7.79 75.9 2.0 13 1-24 15,037 10 105 11.10 .32 9.85-12.13 49.1 .0 14 25-49 13,299 33 98 10.35 .18 9.38-11.03 51.4 .0 15 50-99 25,666 67 71 10.19 .42 9.38-10.92 60.1 .4 16 100-499 132,273 215 58 9.28 .15 8.84-9.92 58.0 2.4 17 500-999 159,661 649 59 8.64 .12 7.92-9.18 67.9 2.8 18 1000 and over 18,883,542 9,012 17 7.56 .08 7.30-7.79 76.1 2.0 19 Floating rate (thousands of dollars). 7,281,749 442 83 8.45 .13 7.50-9.11 84.2 13.4 20 1-24 68,312 11 164 10.34 .12 9.65-11.02 77.6 .3 21 25-49 84,255 34 167 10.20 .08 9.65-11.02 77.7 .4 22 50-99 161,833 67 154 9.96 .07 9.38-10.47 77.8 .4 23 100-499 723,399 197 138 9.68 .06 8.84-10.20 77.2 2.0 24 500-999 439,855 657 129 9.47 .11 8.84-9.93 80.6 6.7 25 1000 and over 5,804,096 5,406 72 8.14 .14 7.41-8.84 85.7 16.0 Months 26 Total long term 3,322,932 1,114 51 8.72 .21 7.63-9.54 82.8 8.0 27 Fixed rate (thousands of dollars) 1,066,433 1,494 45 8.54 .47 7.44-9.21 72.9 3.0 28 1-99 9,278 21 50 11.70 .80 9.96-12.68 31.7 .0 29 100-499 16,592 217 55 9.87 .30 8.84-10.52 61.7 3.1 30 500-999 18,839 695 57 9.40 .51 8.84-10.33 66.7 .0 31 1000 and over 1,021,725 5,735 44 8.47 .48 7.39-8.84 73.6 3.1 32 Floating rate (thousands of dollars) 2,256,498 995 53 8.81 .09 7.83-9.65 87.6 10.3 33 1-99 35,899 35 41 10.14 .13 9.65-10.75 66.8 4.5 34 100-499 135,264 206 47 9.58 .10 9.04-9.96 77.6 14.8 35 500-999 137,829 661 52 9.36 .05 8.84-9.96 82.5 11.9 36 1000 and over 1,947,507 4,985 54 8.69 .10 7.75-9.38 89.0 10.0 Loan rate (percent) DDaayyss PPrriimmee rraattee99 Effective3 Nominal8 LOANS MADE BELOW PRIME10 37 Overnight6 13,298,928 11,289 * 7.39 7.23 8.50 82.2 1.7 38 One month and under 4,640,134 6,261 17 7.69 7.42 8.50 70.2 13.1 39 Over one month and under a year 3,163,950 4,723 122 7.72 7.49 8.50 88.6 19.9 40 Demand7 1,346,766 3,803 * 7.83 7.57 8.50 65.8 .1 41 Total short term 22,449,778 7,628 23 7.52 7.33 8.50 79.6 6.5 42 Fixed rate 18,228,722 8,215 16 7.49 7.30 8.50 78.5 3.6 43 Floating rate 4,221,056 5,828 61 7.68 7.42 8.50 84.8 19.2 Months 44 Total long term 1,717,401 5,476 47 7.76 7.55 8.50 84.0 6.0 45 Fixed rate .... 727,698 6,135 43 7.66 7.50 8.50 75.5 4.4 46 Floating rate .. 989,703 5,075 49 7.84 7.58 8.50 90.3 7.2 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A72 Special Tables • August 1986 4.23 TERMS OF LENDING AT COMMERCIAL BANKS SURVEY of Loans Made, May 5-9, 1986' -Continued A. Commercial and Industrial Loans—Continued Weighted Loan rate (percent) AAmmoouunntt AAvveerraaggee average Loans Particiof loans size mmaattuurriittyy22 made under pation Characteristics ( o t f h o d u o s l a la n r d s s ) ( o t f h o d u o s l a la n r d s s ) W av e e ig ra h g te e d SSttaannddaarrdd q I u n a t r e t r i - le co ( m pe m rc it e m nt e ) n t (p l e o r a c n e s n t) Days effective3 range5 OTHER BANKS , 1 Overnight6 2,929,803 2,483 7.39 .16 7.32-7.65 66.6 .6 2 One month and under 2,265,987 239 20 8.23 .14 7.41-8.54 78.0 10.2 3 Fixed rate 1,590,210 299 19 7.94 .12 7.38-8.20 77.7 14.0 4 Floating rate 675,777 162 21 8.91 .35 7.55-9.93 78.7 1.1 5 Over one month and under a year 4,315,263 51 152 9.81 .19 8.78-10.65 55.3 17.7 6 Fixed rate 1,807,710 37 114 9.79 .40 7.64-11.48 41.8 19.5 7 Floating rate 2,507,553 72 180 9.82 .13 8.87-10.47 65.1 16.3 8 Demand7 3,378,375 125 * 8.89 .18 7.73-9.92 73.4 12.2 9 Fixed rate 597,395 201 * 7.99 .17 7.32-8.30 80.1 1.6 10 Floating rate 2,780,980 116 * 9.08 .16 8.12-9.92 72.0 14.4 11 Total short term 12,889,429 106 74 8.74 .22 7.45-9.84 66.6 11.0 12 Fixed rate (thousands of dollars) . 6,694,025 114 39 8.21 .29 7.34-8.31 62.6 9.0 13 1-24 325,560 7 115 11.94 .23 10.92-12.96 17.9 .1 14 25-49 233,227 33 118 11.41 .31 9.84-12.75 24.8 3.5 15 50-99 208,614 64 106 10.82 .40 9.84-12.06 22.8 .1 16 100-499 370,112 182 111 10.13 .36 9.11-11.02 50.9 6.1 17 500-999 154,071 648 78 8.92 .31 7.71-9.92 56.3 16.6 18 1000 and over 5,402,440 4,887 23 7.60 .12 7.32-7.79 69.5 10.1 19 Floating rate (thousands of dollars). 6,195,403 98 136 9.31 .15 8.77-9.96 70.9 13.2 20 1-24 337,672 9 159 10.92 .19 9.92-11.57 65.1 2.0 21 25-49 330,490 34 153 10.46 .07 9.73-11.02 60.3 2.7 22 50-99 462,578 66 152 10.06 .07 9.35-10.65 62.0 6.5 23 100-499 1,601,917 192 160 9.85 .14 8.87-10.47 66.4 6.1 24 500-999 636,032 620 151 9.43 .07 8.84-9.92 66.2 4.9 25 1000 and over 2,826,715 2,797 111 8.52 .26 7.50-9.42 78.0 22.8 Months 26 Total long term 1,807,997 89 50 9.70 .25 8.77-10.47 61.7 27.7 27 Fixed rate (thousands of dollars) 496,518 55 58 10.17 .36 8.17-11.57 46.9 12.2 28 1-99 129,189 16 45 12.32 .36 11.02-12.75 11.5 .6 29 100-499 104,445 165 92 11.71 .33 11.02-12.19 12.8 3.3 30 500-999 4,128 554 113 9.37 .36 8.93-9.65 60.1 39.9 31 1000 and over 258,755 5,327 50 8.48 .43 7.36-9.03 78.1 21.1 32 Floating rate (thousands of dollars) 1,311,479 116 47 9.52 .21 8.77-10.38 67.3 33.6 33 1-99 213,507 23 49 10.61 .20 9.84-11.02 35.5 1.5 34 100-499 307,323 203 54 9.96 .07 9.42-10.47 70.4 4.6 35 500-999 78,906 604 43 9.66 .20 9.17-10.38 83.7 25.2 36 1000 and over 711,743 3,439 44 8.99 .34 8.57-9.92 73.7 56.7 Loan rate (percent) DDaayyss PPrriimmee rraattee99 Effective3 Nominal8 LOANS MADE BELOW PRIME10 37 Overnight6 2,915,452 6,063 t 7.37 7.11 8.50 66.5 .6 38 One month and under 1,718,654 1,995 19 7.65 7.39 8.56 82.8 11.5 39 Over one month and under a year 1,130,259 179 129 8.18 7.94 9.08 58.1 29.3 40 Demand7 1,271,458 1,507 * 7.54 7.33 8.57 75.1 5.5 41 Total short term 7,035,823 827 32 7.60 7.35 8.62 70.7 8.8 42 Fixed rate 5,307,119 984 20 7.52 7.27 8.54 69.9 9.5 43 Floating rate 1,728,704 555 94 7.84 7.60 8.87 73.1 6.4 Months 44 Total long term 453,878 263 43 8.10 7.83 9.13 86.2 31.7 45 Fixed rate .... 186,963 259 48 8.12 7.89 8.88 84.4 10.2 46 Floating rate .. 266,915 266 40 8.08 7.79 9.30 87.4 46.8 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Financial Markets A73 4.23 Continued B. Construction and Land Development Loans Loan rate (percent) AAmmoouunntt AAvveerraaggee WWeeiigghhtteedd LLooaannss PPaarrttiiccii-- CChhaarraacctteerriissttiiccss ooff llooaannss ssiizzee aavveerraaggee mmaaddee uunnddeerr ppaattiioonn (( oo tt ff hh oo dd uu oo ss llll aa aa nn rr dd ss)) ss (( oo tt ff hh oo dd uu oo ss llll aa aa nn rr dd ss)) ss (( mm mm aa oo tt nn uu tt rr hh ii ss ttyy ))22 W e a f v f e e e i c g r t a h i g t v e e e d 3 St e a r n r d o a r4 r d q r I u a n a n t r g e t r e i - l 5 e ccoo (( mm ppee mm rrcc iitt ee mm nntt ee )) nn tt ((pp ll ee oo rr aa cc nn ee ss nn tt)) ALL BANKS 1 Total 1,629,242 101 14 10.07 .27 8.84-11.02 71.5 13.1 2 Fixed rate (thousands of dollars) .... 526,640 77 14 10.78 .46 9.04-12.63 63.3 8.9 1-24 41,742 11 10 11.97 .29 11.57-12.75 45.8 6.5 4 25-49 37,884 38 17 12.27 .55 12.01-13.44 21.9 .3 50-99 69,873 73 30 12.78 .51 12.68-12.96 71.3 .6 6 100-499 143,757 137 16 11.80 .34 11.57-12.63 42.7 .8 7 500 and over 233,385 2,532 7 9.11 .51 8.44-9.92 83.4 18.1 8 Floating rate (thousands of dollars) .. 1,102,602 119 14 9.73 .21 8.82-10.47 75.4 15.1 9 1-24 41,688 11 7 10.66 .10 10.21-11.02 82.9 .4 10 25-49 56,557 34 10 10.82 .11 10.20-11.02 76.4 1.5 11 50-99 99,677 65 13 10.64 .13 9.92-11.30 63.0 4.6 17 100-499 337,730 188 17 9.83 .10 8.87-10.47 70.2 1.4 13 500 and over 566,949 1,579 13 9.34 .28 8.77-9.92 80.1 27.6 By type of construction 14 Single family 329,503 46 19 10.67 .23 9.82-12.61 67.3 .7 15 Multifamily 157,296 139 15 10.61 .17 9.38-12.63 59.1 .9 16 Nonresidential 1,142,444 146 12 9.82 .27 8.82-10.88 74.4 18.3 LARGE BANKS11 1 Total 454,086 461 11 9.18 .39 8.46-9.96 78.0 13.2 7. Fixed rate (thousands of dollars) .... 93,056 465 3 9.21 .57 9.04-9.18 90.8 1.7 3 1-24 1,230 8 7 11.58 .36 11.07-12.13 84.6 21.0 4 25-49 * * * * * * # * 5 50-99 * * * * * * * 6 100-499 * * * * * * * * 7 500 and over * * * * * * * * 8 Floating rate (thousands of dollars) .. 361,030 460 13 9.17 .39 7.66-10.20 74.7 16.2 9 1-24 2,592 10 9 10.41 .14 9.92-11.02 86.0 2.9 10 25-49 3,884 35 12 10.29 .07 9.92-10.48 86.7 5.9 11 50-99 8,103 71 11 10.10 .12 9.65-10.47 85.5 2.0 17 100-499 49,368 249 12 10.08 .04 9.92-10.47 91.3 2.9 13 500 and over 297,082 3,034 13 8.97 .49 7.66-9.92 71.3 19.1 By type of construction 14 Single family 28,504 75 10 10.29 .05 9.92-10.47 63.8 55..88 15 Multifamily 54,650 235 10 10.15 .17 9.65-10.47 76.5 1.2 16 Nonresidential 370,932 996 11 8.95 .45 7.66-9.92 79.3 15.6 OTHER BANKS11 1 Total 1,175,156 78 15 10.41 .26 9.31-11.57 69.0 13.0 2 Fixed rate (thousands of dollars) .... 433,584 65 16 11.12 .59 9.92-12.63 57.4 10.4 3 1-24 40,512 11 10 11.98 .44 11.57-12.75 44.6 6.0 4 25-49 37,363 38 17 12.29 .54 12.01-13.44 21.3 .0 5 50-99 69,220 73 30 12.81 .50 12.68-12.96 71.1 .0 6 100-499 141,320 136 16 11.83 .33 11.57-12.63 41.8 .3 7 500 and over 145,170 1,820 10 9.09 .70 7.12-10.06 79.0 29.2 8 Floating rate (thousands of dollars) .. 741,572 88 14 10.00 .19 9.30-10.47 75.8 14.6 9 1-24 39,096 11 7 10.68 .12 10.29-11.02 82.7 .2 10 25-49 52,672 34 10 10.86 .14 10.31-11.02 75.6 1.1 11 50-99 91,574 65 14 10.68 .22 9.92-11.30 61.0 4.8 17 100-499 288,363 180 17 9.78 .21 8.87-10.47 66.5 1.2 13 500 and over 269,867 1,033 12 9.74 .30 8.84-9.92 89.8 36.9 By type of construction 14 Single family 300,999 45 20 10.70 .39 9.65-12.68 67.6 .3 15 Multifamily 102,645 114 17 10.86 .29 9.30-12.63 49.8 .8 16 Nonresidential 771,512 104 12 10.24 .25 9.05-11.30 72.1 19.7 For notes see end of table. *Fewer than 10 sample loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
A74 Special Tables • August 1986 4.23 TERMS OF LENDING AT COMMERCIAL BANKS SURVEY of Loans Made, May 5-9, 1986'—Continued C. Loans to Farmers" Size class of loans (thousands) Characteristics $250 All sizes $1-9 $10-24 $25-49 $50-99 $100-249 and over ALL BANKS 1 Amount of loans (thousands of dollars) 1,148,530 129,811 168,975 148,588 140,714 217,576 342,866 2 Number of loans 55,898 36,077 11,162 4,598 2,165 1,553 343 3 Weighted average maturity (months)2 9.3 7.7 9.4 10.8 10.5 11.7 6.8 4 Weighted average interest rate (percent)3 11.52 12.41 12.13 11.93 11.79 11.22 10.78 5 Standard error4 .53 .28 .26 .38 .29 .56 .81 6 Interquartile range5 10.64-12.63 11.51-13.23 11.18-13.00 11.00-12.89 10.92-12.82 10.47-11.91 9.32-11.91 By purpose of loan 7 Feeder livestock 11.31 12.65 12.11 1122..3399 1122..3311 1100..5555 99..5522 8 Other livestock 11.69 12.02 13.58 12.25 * * 9.85 9 Other current operating expenses 11.56 12.40 11.87 11.62 11.46 11.50 10.86 10 Farm machinery and equipment 12.47 12.76 12.82 12.62 * * * 11 Other 11.30 12.27 11.64 11.95 10.92 11.02 11.19 Percentage of amount of loans 12 With floating rates 60.0 43.7 4422..44 4488..66 4499..88 6611..88 8822..88 13 Made under commitment 49.1 41.0 40.5 38.1 48.2 46.6 63.3 By purpose of loan 14 Feeder livestock 14.7 6.5 1100..22 1144..00 3355..33 1144..66 1111..88 15 Other livestock 8.2 5.5 11.3 7.7 * 55..55 16 Other current operating expenses 50.1 71.2 61.0 51.3 38.9 47.2 42.7 17 Farm machinery and equipment 4.6 7.4 6.9 9.2 * * 18 Other 22.4 9.3 10.6 17.8 11.6 21.9 3399..99 LARGE BANKS11 1 Amount of loans (thousands of dollars) 253,542 7,806 14,938 14,641 22,511 43,715 149,931 2 Number of loans 4,365 2,111 992 439 344 295 184 3 Weighted average maturity (months)2 6.4 7.6 7.1 6.8 10.8 4.9 6.2 4 Weighted average interest rate (percent)3 9.67 10.88 10.50 10.36 10.16 10.08 9.27 5 Standard error4 .52 .26 .18 .37 .18 .49 .32 6 Interquartile range5 8.84-10.38 10.11-11.53 9.84-11.07 9.62-11.02 9.69-10.65 9.31-10.78 8.57-9.84 By purpose of loan 1 Feeder livestock 9.69 10.74 1100..3377 1100..3322 99..9999 99..7788 99..5522 8 Other livestock 9.85 10.24 10.80 * * * 9.85 9 Other current operating expenses 9.79 10.91 10.65 10.38 10.39 10.27 9.23 10 Farm machinery and equipment 11.20 12.88 * * * * * 11 Other 9.34 10.88 10.22 10.23 10.03 10.25 Percentage of amount of loans 12 With floating rates 7711..99 7788..44 8866..66 8866..88 9900..88 89.7 6600..77 13 Made under commitment 83.3 78.8 79.0 7777..99 86.9 86.1 83.1 By purpose of loan 14 Feeder livestock 25.7 13.8 1122..66 1155..55 2244..11 3322..00 2277..11 15 Other livestock 9.8 6.3 5.6 * * * 12.6 16 Other current operating expenses 39.7 60.5 55.1 50.6 45.4 36.8 36.1 17 Farm machinery and equipment .8 2.1 * * * * 18 Other 23.9 17.3 26.3 24.2 25.6 22.1 OTHER BANKS11 1 Amount of loans (thousands of dollars) 894,987 122,005 154,037 133,947 118,203 173,861 * 51,534 33,966 10,170 4,159 1,821 1,258 * 3 Weighted average maturity (months)2 10.1 7.8 9.5 11.1 10.5 13.0 4 Weighted average interest rate (percent)3 12.04 12.51 12.29 12.10 12.11 11.51 * 5 Standard error4 .10 .09 .17 .05 .22 .26 * 6 Interquartile range5 11.46-12.82 11.65-13.28 11.41-13.15 11.07-12.90 11.63-12.82 10.80-12.29 By purpose of loan 7 Feeder livestock 12.34 1122..9933 1122..3322 1122..6644 1122..5599 * * 8 Other livestock 12.35 12.15 13.70 * * * * 9 Other current operating expenses 11.93 12.48 11.98 11.75 11.71 11.72 * 10 Farm machinery and equipment 12.52 12.76 12.83 * * * * 11 Other 11.90 12.44 12.04 12.22 Percentage of amount of loans 12 With floating rates 5566..66 4411..44 3388..11 4444..44 4422..00 5544..77 * 13 Made under commitment 39.5 38.6 36.7 33.8 40.9 36.7 By purpose of loan 14 Feeder livestock 1111..55 66..11 1100..00 1133..88 3377..44 * * 15 Other livestock 7.7 5.4 11.9 * * * * 16 Other current operating expenses 53.0 71.9 61.5 51.4 37.6 49.8 * 17 Farm machinery and equipment 5.7 7.8 7.6 * * * 18 Other 22.0 8.8 9.0 17.1 For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Financial Markets A75 NOTES TO TABLE 4.23 1. The survey of terms of bank lending to business collects data on gross loan 5. The interquartile range shows the interest rate range that encompasses the extensions made during the first full business week in the mid-month of each middle 50 percent of the total dollar amount of loans made. quarter by a sample of 340 commercial banks of all sizes. The sample data are 6. Overnight loans are loans that mature on the following business day. blown up to estimate the lending terms at all insured commercial banks during that 7. Demand loans have no stated date of maturity. week. The estimated terms of bank lending are not intended for use in collecting 8. The approximate annual interest rate on each loan—without regard to the terms of loans extended over the entire quarter or residing in the portfolios of compounding—is calculated from survey data on the stated rate and other terms those banks. Construction and land development loans include both unsecured of the loan; then in computing the average of these approximate nominal rates, loans and loans secured by real estate. Thus, some of the construction and land each loan is weighted by its dollar amount. development loans would be reported on the statement of condition as real estate 9. The prime rate reported by each bank is weighted by the volume of loans loans and the remainder as business loans. The survey of terms of bank lending to extended and then averaged. farmers covers about 250 banks selected to represent all sizes of banks. Mortgage 10. This survey provides data on gross loan extensions made during one week loans, purchased loans, foreign loans, and loans of less than $1,000 are excluded of each quarter. The proportion of these loan extensions that is made at rates from the survey. below prime may vary substantially from the proportion of such loans outstanding As of Dec. 31, 1985, assets of most of the large banks were at least $5.5 billion. in bank loan portfolios. For all insured banks total assets averaged $165 million. 11. Among banks reporting loans to farmers, most "large banks" had over $1 2. The weighted average maturity is calculated only for loans with a stated date billion in total assets, and most "other banks" had total assets below $1 billion. of maturity (that is, loans payable on demand are excluded). In computing the average, each loan is weighted by its dollar amount. NOTE: Through February 1986, the large bank category was comprised of 48 3. The approximate compounded annual interest rate on each loan is calculated banks having the largest volume of C&I loans outstanding at the inception of the from survey data on the stated rate and other terms of the loan; then, in computing survey in 1977. Beginning with the May 1986 survey, estimates for this category of the average of these approximate effective rates, each loan is weighted by its banks are based on a sample of 48 banks chosen to represent all of the nation's dollar amount. largest banks in terms of business lending. Additional information concerning this 4. The chances are about two out of three that the average rate shown would series break is available upon request from the Banking Section, Division of differ by less than this amount from the average rate that would be found by a Research and Statistics. complete survey of lending at all banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
76 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 DONALD L. KOHN, Deputy Staff Director STEVEN M. ROBERTS, Assistant to the Chairman NORMAND R.V. BERNARD, Special Assistant to the Board BOB S. MOORE, Special Assistant to the Board DIVISION OF RESEARCH AND STATISTICS LEGAL DIVISION JAMES L. KICHLINE, Director MICHAEL BRADFIELD, General Counsel EDWARD C. ETTIN, Deputy Director J. VIRGIL MATTINGLY, JR., Deputy General Counsel MICHAEL J. PRELL, Deputy Director RICHARD M. ASHTON, Associate General Counsel JARED J. ENZLER, Associate Director OLIVER IRELAND, Associate General Counsel DAVID E. LINDSEY, Associate Director RICKI R. TIGERT, Assistant General Counsel ELEANOR J. STOCKWELL, Associate Director MARYELLEN A. BROWN, Assistant to the General Counsel THOMAS D. SIMPSON, Deputy Associate Director LAWRENCE SLIFMAN, Deputy Associate Director MARTHA BETHEA, Assistant Director OFFICE OF THE SECRETARY SUSAN J. LEPPER, Assistant Director RICHARD D. PORTER, Assistant Director WILLIAM W. WILES, Secretary PETER A. TINSLEY, Assistant Director BARBARA R. LOWREY, Associate Secretary LEVON H. GARABEDIAN, Assistant Director JAMES MCAFEE, Associate Secretary (Administration) DIVISION OF CONSUMER DIVISION OF INTERNATIONAL FINANCE AND COMMUNITY AFFAIRS EDWIN M. TRUMAN, Director GRIFFITH L. GARWOOD, Director LARRY J. PROMISEL, Senior Associate Director JERAULD C. KLUCKMAN, Associate Director CHARLES J. SIEGMAN, Senior Associate Director GLENN E. LONEY, Assistant Director DAVID H. HOWARD, Deputy Associate Director DOLORES S. SMITH, Assistant Director ROBERT F. GEMMILL, Staff Adviser PETER HOOPER III, Assistant Director KAREN H. JOHNSON, Assistant Director DIVISION OF BANKING RALPH W. SMITH, JR., Assistant Director SUPERVISION AND REGULATION WILLIAM TAYLOR, Director WELFORD S. FARMER, Deputy Director1 FREDERICK R. DAHL, Associate 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 Digitized for FRAS1E. RO n loan from the Federal Reserve Bank of Richmond. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
All 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
78 Federal Reserve Bulletin • August 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 NORMAND R.V. BERNARD, Assistant Secretary RICHARD G. DAVIS, Associate Economist MICHAEL BRADFIELD, General Counsel THOMAS E. DAVIS, Associate Economist JAMES H. OLTMAN, Deputy General Counsel DONALD L. KOHN, Associate Economist JAMES L. KICHLINE, Economist DAVID E. LINDSEY, Associate Economist EDWIN M. TRUMAN, Economist (International) ALICIA H. MUNNELL, Associate Economist ANATOL B. BALBACH, Associate Economist MICHAEL J. PRELL, Associate Economist JOHN M. DAVIS, 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
79 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. FOGARTY, 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
80 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 CONSUMER EDUCATION PAMPHLETS or $.35 each. Elsewhere, $20.00 per year or $.50 each. Short pamphlets suitable for classroom use. Multiple copies THE FEDERAL RESERVE ACT, as amended through August 31, available without charge. 1985. with an appendix containing provisions of certain 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
81 Series on the Structure of the Federal Reserve System BLES: A REVIEW OF THE LITERATURE, by Victoria S. The Board of Governors of the Federal Reserve System Farrell with Dean A. DeRosa and T. Ashby McCown. The Federal Open Market Committee January 1984. Out of print. Federal Reserve Bank Board of Directors 131. CALCULATIONS OF PROFITABILITY FOR U.S. DOLLAR- Federal Reserve Banks DEUTSCHE MARK INTERVENTION, by Laurence R. Organization and Advisory Committees Jacobson. October 1983. 8 pp. U.S. Currency 132. TIME-SERIES STUDIES OF THE RELATIONSHIP BE- What Truth in Lending Means to You 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 STAFF STUDIES: Summaries Only Printed in the 1984. 38 pp. Bulletin 141. A COMPARISON OF DIRECT DEPOSIT AND CHECK PAY- Studies and papers on economic and financial subjects that MENT COSTS, by William Dudley. November 1984. 15 pp. are of general interest. Requests to obtain single copies of the full text or to be added to the mailing list for the series 142. MERGERS AND ACQUISITIONS BY COMMERCIAL may be sent to Publications Services. BANKS, 1960-83, by Stephen A. Rhoades. December 1984. 30 pp. 143. COMPLIANCE COSTS AND CONSUMER BENEFITS OF Staff Studies 115-125 are out of print. THE ELECTRONIC FUND TRANSFER ACT: RECENT SURVEY EVIDENCE, by Frederick J. Schroeder. April 1985. 23 pp. 114. MULTIBANK HOLDING COMPANIES: RECENT EVI- 144. SCALE ECONOMIES IN COMPLIANCE COSTS FOR CON- DENCE ON COMPETITION AND PERFORMANCE IN SUMER CREDIT REGULATIONS: THE TRUTH IN LEND- BANKING MARKETS, by Timothy J. Curry and John T. ING AND EQUAL CREDIT OPPORTUNITY LAWS, by Rose. Jan. 1982. 9 pp. Gregory E. Elliehausen and Robert D. Kurtz. May 1985. 10 pp. 126. DEFINITION AND MEASUREMENT OF EXCHANGE MAR- KET INTERVENTION, by Donald B. Adams and Dale 145. SERVICE CHARGES AS A SOURCE OF BANK INCOME W. Henderson. August 1983. 5 pp. AND THEIR IMPACT ON CONSUMERS, by Glenn B. Canner and Robert D. Kurtz. August 1985. 31 pp. 127. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- VENTION: JANUARY-MARCH 1975, by Margaret L. 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF Greene. August 1984. 16 pp. BUSINESS LOANS BY COMMERCIAL BANKS, 1977-84, by Thomas F. Brady. November 1985. 25 pp. 128. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- VENTION: SEPTEMBER 1977-DECEMBER 1979, by Mar- 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) garet L. Greene. October 1984. 40 pp. INDEXES OF THE MONETARY AGGREGATES, by Helen 129. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- T. Farr and Deborah Johnson. December 1985. 42 pp. VENTION: OCTOBER I98O-OCTOBER 1981, by Margaret 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF L. Greene. August 1984. 36 pp. THE ECONOMIC RECOVERY TAX ACT: SOME SIMULA- 130. EFFECTS OF EXCHANGE RATE VARIABILITY ON IN- TION RESULTS, by Flint Brayton and Peter B. Clark. TERNATIONAL TRADE AND OTHER ECONOMIC VARIA- December 1985. 17 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
82 149. 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 Staff Studies. 11/83. U.S. International Transactions in 1985. 5/86. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
83 Index to Statistical Tables References are to pages A3-A75 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 19, 20, 74 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, 10 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 CAPACITY utilization, 46 ownership of gross debt, 30 Capital accounts Receipts and outlays, 28, 29 Banks, by classes, 18 Treasury financing of surplus, or deficit, 28 Federal Reserve Banks, 10 Treasury operating balance, 28 Central banks, discount rates, 67 Federal Financing Bank, 28, 33 Certificates of deposit, 24 Federal funds, 5, 17, 19, 20, 21, 24, 28 Commercial and industrial loans Federal Home Loan Banks, 33 Commercial banks, 16, 19, 70-72 Federal Home Loan Mortgage Corporation, 33, 38, 39 Weekly reporting banks, 19-21 Federal Housing Administration, 33, 38, 39 Commercial banks Federal Land Banks, 39 Assets and liabilities, 18-20 Federal National Mortgage Association, 33, 38, 39 Commercial and industrial loans, 16, 18, 19, 20, 21, Federal Reserve Banks 70-72 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 Terms of lending, 70-75 Federal Savings and Loan Insurance Corporation insured Time and savings deposits, 3 institutions, 26 Commercial paper, 23, 24, 37 Federally sponsored credit agencies, 33 Condition statements (See Assets and liabilities) Finance companies Construction, 44, 49, 73 Assets and liabilities, 37 Consumer installment credit, 40, 41 Business credit, 37 Consumer prices, 44, 50 Loans, 40, 41 Consumption expenditures, 51, 52 Paper, 23, 24 Corporations Financial institutions Nonfinancial, assets and liabilities, 36 Loans to, 19, 20, 21 Profits and their distribution, 35 Selected assets and liabilities, 26 Security issues, 34, 65 Float, 4 Cost of living (See Consumer prices) Flow of funds, 42, 43 Credit unions, 26, 40 (See also Thrift institutions) Foreign banks, assets and liabilities of U.S. branches and Currency and coin, 18 agencies, 21 Currency in circulation, 4, 13 Foreign currency operations, 10 Customer credit, stock market, 25 Foreign deposits in U.S. banks, 4, 10, 19, 20 Foreign exchange rates, 68 DEBITS to deposit accounts, 15 Foreign trade, 54 Debt (See specific types of debt or securities) Foreigners Demand deposits Claims on, 55, 57, 60, 61, 62, 64 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
84 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 Commercial Banks, 70-75 Consumer installment credit, 41 SAVING Federal Reserve Banks, 6 Flow of funds, 42, 43 Foreign central banks and foreign countries, 67 National income accounts, 51 Money and capital markets, 24 Savings and loan associations, 8, 26, 39, 40, 42 (See also Mortgages, 38 Thrift institutions) Prime rate, 23 Savings banks, 26, 39, 40 Time and savings deposits, 8 Savings deposits (See Time and savings deposits) International capital transactions of United States, 53-67 Securities (See specific types) International organizations, 57, 58, 60, 63, 64 Federal and federally sponsored credit agencies, 33 Inventories, 51 Foreign transactions, 65 Investment companies, issues and assets, 35 New issues, 34 Investments (See also specific types) Prices, 25 Banks, by classes, 18, 19, 20, 21, 26 Special drawing rights, 4, 10, 53, 54 Commercial banks, 3, 16, 18-20, 39 State and local governments Federal Reserve Banks, 10, 11 Deposits, 19, 20 Financial institutions, 26, 39 Holdings of U.S. government securities, 30 New security issues, 34 LABOR force, 45 Ownership of securities issued by, 19, 20, 26 Life insurance companies (See Insurance companies) Rates on securities, 24 Loans (See also specific types) Stock market, selected statistics, 25 Banks, by classes, 18-20 Stocks (See also Securities) Commercial banks, 3, 16, 18-20, 70-75 New issues, 34 Federal Reserve Banks, 4, 5, 6, 10, 11 Prices, 25 Financial institutions, 26, 39 Insured or guaranteed by United States, 38, 39 Student Loan Marketing Association, 33 TAX receipts, federal, 29 MANUFACTURING Capacity utilization, 46 Thrift institutions, 3 (See also Credit unions, Mutual Production, 46, 48 savings banks, and Savings and loan associations) Margin requirements, 25 Time and savings deposits, 3, 8, 13, 17, 18, 19, 20, 21 Member banks (See also Depository institutions) Trade, foreign, 54 Federal funds and repurchase agreements, 5 Treasury cash, Treasury currency, 4 Reserve requirements, 7 Treasury deposits, 4, 10, 28 Mining production, 48 Treasury operating balance, 28 Mobile homes shipped, 49 UNEMPLOYMENT, 45 Monetary and credit aggregates, 3, 12 U.S. government balances Money and capital market rates, 24 Commercial bank holdings, 18, 19, 20 Money stock measures and components, 3, 13 Treasury deposits at Reserve Banks, 4, 10, 28 Mortgages (See Real estate loans) U.S. government securities Mutual funds, 35 Bank holdings, 18-20, 21, 30 Mutual savings banks, 8 (See also Thrift 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 Utilities, production, 48 PERSONAL income, 52 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
85 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 Ruben M. Garcia Thomas H. Robertson SAN FRANCISCO 94120 Alan C. Furth Robert T. Parry Fred W. Andrew Vacant 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 06096; Cranford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
86 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories LEGEND —"" Boundaries of Federal Reserve Districts ® Federal Reserve Bank Cities Boundaries of Federal Reserve Branch * Federal Reserve Branch Cities Territories Federal Reserve Bank Facility Q Board of Governors of the Federal Reserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Publications of Interest FEDERAL RESERVE REGULATORY SERVICE The Securities Credit Transactions Handbook contains Regulations G, T, U, and X, dealing with exten- To promote public understanding of its regulatory sions of credit for the purchase of securities, together functions, the Board publishes the Federal Reserve with all related statutes, Board interpretations, rul- Regulatory Service, a three-volume looseleaf service ings, and staff opinions. Also included is the Board's containing all Board regulations and related statutes, list of OTC margin stocks. interpretations, policy statements, rulings, and staff The Consumer and Community Affairs Handbook opinions. For those with a more specialized interest in contains Regulations B, C, E, M, Z, AA, and BB and the Board's regulations, parts of this service are associated materials. published separately as handbooks pertaining to mon- For domestic subscribers, the annual rate is $175 for etary policy, securities credit, and consumer affairs. the Federal Reserve Regulatory Service and $60 for These publications are designed to help those who each handbook. For subscribers outside the United must frequently refer to the Board's regulatory materi- States, the price including additional air mail costs is als. They are updated at least monthly, and each $225 for the Service and $75 for each Handbook. All contains conversion tables, citation indexes, and a subscription requests must be accompanied by a check subject index. or money order payable to Board of Governors of the The Monetary Policy and Reserve Requirements Federal Reserve System. Orders should be addressed Handbook contains Regulations A, D, and Q plus to Publications Services, Mail Stop 138, Federal Rerelated materials. For convenient reference, it also serve Board, 20th Street and Constitution Avenue, contains the rules of the Depository Institutions N.W., Washington, D.C. 20551. Deregulation Committee. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Publications of Interest FEDERAL RESERVE CONSUMER CREDIT sumer credit protections. This 44-page booklet ex- PUBLICATIONS plains how to use the credit laws to shop for credit, apply for it, keep up credit ratings, and complain about an unfair deal. The Federal Reserve Board publishes a series of Protections offered by the Electronic Fund Transfer pamphlets covering individual credit laws and topics, Act are explained in Alice in Debitland. This booklet as pictured below. The series includes such subjects as offers tips for those using the new "paperless" syshow the Equal Credit Opportunity Act protects wom- tems for transferring money. en against discrimination in their credit dealings, how Copies of consumer publications are available free to use a credit card, and how to use Truth in Lending of charge from Publications Services, Mail Stop 138, information to compare credit costs. Board of Governors of the Federal Reserve System, The Board also publishes the Consumer Handbook Washington, D.C. 20551. Multiple copies for classto Credit Protection Laws, a complete guide to con- room use are also available free of charge. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Cite this document
Federal Reserve (1986, July 31). Federal Reserve Bulletin, 1986-08. Bulletin, Federal Reserve. https://whenthefedspeaks.com/doc/bulletin_198608
@misc{wtfs_bulletin_198608,
author = {Federal Reserve},
title = {Federal Reserve Bulletin, 1986-08},
year = {1986},
month = {Jul},
howpublished = {Bulletin, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/bulletin_198608},
note = {Retrieved via When the Fed Speaks corpus}
}