Federal Reserve Bulletin, 1987-02

VOLUME 73 • NUMBER 2 • FEBRUARY 1987 FEDERAL RESERVE I BULLETIN 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 79 INTERSTATE BANKING DEVELOPMENTS 117 RECORD OF POLICY ACTIONS OF THE FEDERAL OPEN MARKET COMMITTEE This article offers data on interstate banking and discusses the continuing deregulation At its meeting on November 5, 1986, all of of geographic expansion by banking organi- the members of the Committee indicated zations. that they favored a directive that called for no change in the current degree of pressure 93 STRUCTURE AND USES OF THE MPS on reserve positions. The members expect- QUARTERLY ECONOMETRIC MODEL ed this approach to policy implementation OF THE UNITED STATES to be consistent with growth of M2 and M3 at annual rates of 7 to 9 percent over the This article describes the components of a fourth quarter from a September base. Over quarterly model of the U.S. economy and the same period, growth in Ml was expectpresents simulations to demonstrate the ed to moderate from its exceptional pace model's properties, particularly in the short during most of the period since early spring. run. It also discusses the model as a fore- Because the behavior of Ml remained subcasting and an analytic tool. ject to unusual uncertainty, the Committee decided to continue its recent practice of 110 INDUSTRIAL PRODUCTION not specifying a rate of expected growth for Industrial production increased an estimat- purposes of short-run policy implementaed 0.6 percent in November. tion but to evaluate this aggregate in the light of the performance of the broader 112 ANNOUNCEMENTS monetary aggregates and other factors. The members indicated that slightly greater or Resignation of Governor Henry C. Wallich slightly lesser reserve pressures might be as a member of the Board of Governors. acceptable over the intermeeting period de- New members appointed to Consumer Ad- pending on the behavior of the monetary visory Council. aggregates, taking into account the strength of the business expansion, the performance Change in Regulation Z. of the dollar in foreign exchange markets, Proposals to reduce and control the pay- progress against inflation, and conditions in ments system risk involved in large-dollar domestic and international credit markets. wire transfer networks, book-entry transfer The members agreed that the intermeeting systems, and automated clearinghouses; is- range for the federal funds rate, which suance of a series of questions and answers provides a mechanism for initiating consulrelating to an earlier proposal involving tation of the Committee when its boundautomated clearinghouse transactions; pro- aries are persistently exceeded, should be posed rulemaking to permit bank holding left unchanged at 4 to 8 percent. companies to engage in certain real estate investment activities. 123 LEGAL DEVELOPMENTS Changes in Board staff. Various bank holding company, bank ser- Admission of one state bank to membership vice corporation, and bank merger orders; in the Federal Reserve System. and pending cases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

177 MEMBERSHIP OF THE BOARD OF A76 BOARD OF GOVERNORS AND STAFF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, 1913-87 A78 FEDERAL OPEN MARKET COMMITTEE AND STAFF, ADVISORY COUNCILS List of appointive and ex officio members. A80 FEDERAL RESERVE BOARD Ai FINANCIAL AND BUSINESS STATISTICS PUBLICATIONS A3 Domestic Financial Statistics A44 Domestic Nonfinancial Statistics A83 INDEX TO STATISTICAL TABLES A53 International Statistics A85 FEDERAL RESERVE BANKS, BRANCHES, A69 GUIDE TO TABULAR PRESENTATION, AND OFFICES STATISTICAL RELEASES, AND SPECIAL TABLES A86 MAP OF FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interstate Banking Developments Donald T. Savage of the Board's Division of banking states converted from national to state Research and Statistics prepared this article. charters; the pressure of these conversions con- Elaine J. Peterson provided research assistance. tributed to the passage of federal branching legislation in 1927 (McFadden Act) and 1933 (Glass- After years of confinement to a single state, and Steagall Act). These relaxations of federal law in many cases to a single location within that gave the national banks in each state the same state, banking organizations are now being per- branching powers enjoyed by the state-chartered mitted to expand their deposit-taking operations banks in that state. over wider geographic areas. Federal laws have Early in the twentieth century, the bank holdnot been changed, but the states are lowering the ing company became a second vehicle for bankbarriers to interstate bank expansion by exercis- ing organizations to expand the geographic scope ing an option provided by the Bank Holding of their operations. A bank holding company Company Act of 1956. This article offers data on could own and operate subsidiary banks in any interstate banking and discusses the continuing number of states. The formation of a few large, deregulation of geographic expansion by banking multistate, multibank holding companies, espeorganizations. cially in the upper midwest, led to numerous attempts to regulate the corporate ownership of A BRIEF HISTORY more than one bank. The Glass-Steagall Act of 1933, better known for the separation of com- The first and second Bank of the United States, mercial and investment banking, also called for which combined commercial banking with some limited regulation of bank holding companies by central banking functions, operated branch of- the Federal Reserve System but did not prohibit fices throughout the country. After the 1836 their interstate expansion. decision not to recharter the second Bank, how- Although there were many subsequent proposever, commercial banking came under the regu- als for more comprehensive regulation of multilatory control of the individual states. Each state bank holding companies, further legislation was chartered its own banks, and no state provided a not forthcoming until the passage of the Bank general method for the entry of banks chartered Holding Company Act of 1956. The act increased in other states. Banking became an industry Federal Reserve Board regulation of multibank characterized by relatively small, locally orient- holding companies and established standards for ed firms. regulatory approval of future bank and nonbank The national banking system, following the acquisitions by bank holding companies. An pattern of state banking laws, made no provision amendment to the draft act, which came to be for a bank to expand beyond the borders of its known as the Douglas Amendment, prohibited home state. Indeed, the general interpretation of bank holding companies from acquiring banks in the National Banking Act of 1863 was that a more than one state unless acquisitions were national bank could not operate branches even in specifically permitted by the statutes of the state its home state. This interpretation created a in which the bank to be acquired was located. competitive disadvantage for those national The 1956 legislation permitted the continued banks operating in states that allowed state- operation of the small number of multistate bank chartered banks to operate branch offices. holding companies that existed when the law was Therefore, many national banks in the branch passed. Most of the smaller multistate companies Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

80 Federal Reserve Bulletin • February 1987 restructured or divested themselves of one or quire a failing bank or entry by limited-purpose more of their banks in order to avoid regulation banks, such as those only issuing credit cards. as multibank holding companies. Seven major domestic interstate bank holding companies re- THE CAUSES OF CHANGE mained in operation; the largest of these organizations now operates in 12 states. After the protracted legislative battles that usual- With the Bank Holding Company Act of 1956 ly have accompanied even relatively minor regulating multibank holding companies, subse- changes in state branch banking and bank holdquent federal legislative proposals focused on the ing company laws, the speed with which the extension of bank holding company regulation to states have adopted interstate banking laws is one-bank holding companies and the nonbank surprising. There may be no one explanation for activities of all bank holding companies. The the speed of change, but several factors have 1970 Amendments to the Bank Holding Compa- played a role in various states. Maine's motivany Act of 1956 extended regulation to one-bank tion in enacting the first interstate banking law holding companies and established standards for was to attract new capital into the state. It was the approval of proposed nonbank activities of thought that the ownership of Maine financial holding companies. State legislation focused on institutions by out-of-state firms might expand branch banking laws and regulation of intrastate the supply of economic development funds. multibank holding companies. Most discussions Some also believed that the purchase of Maine of interstate banking were on an academic level, institutions by out-of-state firms would free and the limited efforts to change the federal law Maine funds for other uses, and that new banks were unsuccessful. organized by out-of-state firms would augment Except for some minor state provisions allow- the supply of capital. ing additional bank acquisitions by the grandpar- A second factor, also related to economic ented interstate bank holding companies, no development, has contributed to the spread of state took advantage of its right to allow acquisi- regional interstate banking laws. Especially in tions by out-of-state bank holding companies the southeast, those advocating regional interuntil 1975. In that year, Maine passed the first state banking laws argue that the development of state law providing for general entry by out-of- large regional banks promotes the area's ecostate bank holding companies under the provi- nomic growth. The theory is that such banks, by sions of the Douglas Amendment to the Bank understanding and supporting regional indus- Holding Company Act of 1956. No more state tries, will do more for economic growth than the laws were enacted until 1982, when Massachu- money center banks would if they were permitsetts adopted a New England regional reciprocal ted to acquire the major regional banks under a law and New York enacted a nationwide recipro- national interstate banking law. cal law. Third, the reduction of barriers to entry affords The New England regional laws were chal- bank holding companies expansion opportunities lenged in the courts because they did not provide more nearly equal to those of other financial equal entry rights for banks headquartered in all service firms. Nondepository financial institustates. The United States Supreme Court ruled in tions are not subject to expansion restrictions, favor of the regional laws in June 1985 in North- and some thrift institutions have been able to east Bancorp, Inc. v. Board of Governors of the expand interstate by acquiring troubled thrifts in Federal Reserve System. Knowing that they other states. Banking organizations, however, could allow entry by bank holding companies were able to supply only limited financial serfrom selected states without having to open their vices on an interstate basis. Loan production borders to the states containing the money center offices, nonbank subsidiaries of the bank holding banks, more states revised their laws. By the end company, and Edge act offices provided a way to of 1986, 36 states and the District of Columbia offer some services across state lines, but fullhad enacted some provisions allowing entry by service deposit-taking offices could not be operout-of-state bank holding companies. Other ated outside the home state. states had adopted laws permitting entry to ac- In addition, regional interstate deposit-taking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interstate Banking Developments 81 constitutes a recognition of the fact that some are presented in table 1. This and subsequent banks have always offered nearly all their other tables exclude state laws that provide for entry services throughout a particular region. For ex- only by limited-service banks. Of the 37 state ample, the large Boston and Hartford banks had laws listed in table 1, 7 have not yet become supplied certain services, usually to business effective, and not many acquisitions have firms, throughout the region long before they taken place under the laws that are already in were permitted to take retail deposits in other effect. New England states. Eighteen of the interstate banking laws pro- Fourth, in some states, the desire to maximize vide for eventual entry from all other states, the number of potential acquirors of troubled although in some states the move to nationwide institutions was a motivating factor in the pas- entry is preceded by a period of entry from a sage of interstate banking laws. Some states have limited number of states. Only one major banklimited interstate acquisitions to the purchase of ing state, Texas, and a few smaller states— failed or failing banks; others, though motivated Arizona, Alaska, Maine, Oklahoma, Nevada, by the same fear of failures, have made all banks and Utah—do not require reciprocal entry rights eligible for interstate acquisition. for their banks as a condition for out-of-state Finally, an imitation effect has been at work in entry. Those states are not the home of large the spread of interstate banking laws. This effect numbers of major banks that would be expected is reminiscent of the rapid spread of the bank to make numerous interstate acquisitions. holding company form of organization in the In geographic terms, regional interstate bank- 1970s. Seeing their colleagues in other states ing has proven to be most popular in the southreceiving new powers, bankers have desired east. All of the states along the coast from equal expansion rights and have pressed for Maryland through Louisiana have adopted the legislation. Moreover, many of the larger banks regional approach, although not all have defined have feared being left out of a new alignment of their region in the same way. An upper mid westthe banking industry. The imitation effect has ern region has also been formed, but it involves been strengthened by the perceived effect of the fewer states and its definition is even less uniinterstate banking laws on the price of the stock form. The New England region, which began of those banks regarded as possible acquisition developing the earliest, does not yet embrace all targets. The likely positive effect of interstate six states because New Hampshire and Vermont banking on bank stock prices is strengthened by have yet to enact interstate banking laws. the prohibition in many states of de novo entry Approximately 77 percent of all federally inby out-of-state bank holding companies. Thus sured U.S. commercial banks are located in entry can be gained only by acquiring the stock states that have enacted interstate banking laws; of banks already operating in the state. they hold more than 91 percent of all U.S. Given these factors, most of which have been domestic banking assets. Although most banks present to some degree throughout the country, now have some opportunity for interstate expanmany state laws have been liberalized to lower sion, few organizations have been able to the barriers to out-of-state entry. But despite the achieve a full banking operation in a large numrapid change in the laws, actual change in the ber of states because of the limited time that geographic structure of the banking industry has most laws have been in effect. only begun. Part of the framework of an inter- Table 2 presents another view of the state state banking system has been erected, but its laws, taking into account interactions between utilization to build interstate banking organiza- the state laws, the effects of reciprocity requiretions will take time. ments, and delays in the effectiveness of some of the laws. This table, which includes laws in effect or enacted as of January 1, 1987, indicates the INTERSTATE BANKING NOW opportunities for expansion available to bank holding companies in each state. It tells when a The details of the laws of those states that have banking organization in a given state can enter passed statutes providing for interstate banking each other state (the columns), and by the same Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

82 Federal Reserve Bulletin • February 1987 1. Interstate banking legislation, by state, January 1, 1987 Area covered by Area covered by State Effective date interstate legislation1 State Effective date interstate legislation1 Alabama July 1, 1987 Reciprocal, 12 states Nevada Currently Reciprocal, 11 states (AR, FL, GA, KY, (AK, AZ, CO, HI, LA, MD, MS, NC, ID, MT, NM, OR, SC, TN, VA, WV) UT, WA, WY) and DC January 1, 1989 National, no reciprocity Alaska... Currently National, no reciprocity New Jersey. Currently Reciprocal, 13 states Arizona.. Currently National, no (DE, IL, IN, KY, reciprocity MD, MI, MO, OH, California July 1, 1987 Reciprocal, 11 states PA, VA, TN, WI, (AK, AZ, CO, HI, WV) and DC ID, NV, NM, OR, Trigger of 13 National, reciprocal TX, UT, WA) states with January 1, 1991 National, reciprocal reciprocity for NJ. 4 of 13 must be Connecticut Currently Reciprocal, 5 states among 10 states (MA, ME, NH, RI, with largest bank VT) deposits. District of Columbia Reciprocal, 11 states Currently (AL, FL, GA, LA, New York Currently National, reciprocal MD, MS, NC, SC, North Carolina. Currently Reciprocal, 12 states TN, VA, WV) (AL, AR, FL, GA, Florida. Reciprocal, 11 states KY, LA, MD, MS, Currently (AL, AR, GA, LA, SC, TN, VA. WV) MD, MS, NC, SC. and DC TN, VA, WV) and Ohio. Currently Reciprocal, 13 states DC (DE, IL, IN, KY, Georgia .. Currently Reciprocal, 9 states MD, MI, MO, NJ, (AL, FL, KY, LA, PA, TN, VA, WV, MS, NC, SC, TN, WI) and DC VA) October 17, 1988 National, reciprocal Idaho Currently Reciprocal, 6 states (MT, NV, OR, UT, Oklahoma. July 1, 1987 National. After initial WA, WY) entry, BHC must be Illinois ... Currently Reciprocal, 6 states from state offering (IA, IN, KY, MI, reciprocity or wait 4 MO, WI) years to expand. Indiana .. Currently Reciprocal, 4 states Oregon Currently 8 states, no (IL, KY. MI, OH) reciprocity (AK, AZ, Kentucky Currently National, reciprocal CA, HI, ID, NV, Louisiana July 1, 1987 Reciprocal, 14 states UT, WA) (AL, AR, FL, GA, Pennsylvania Currently Reciprocal, 7 states KY, MD, MS, NC, (DE, KY, MD, NJ, OK, SC, TN, TX, OH, VA, WV) and VA, WV) and DC DC January 1, 1989 National, reciprocal March 4, 1990 National, reciprocal Maine Currently National, no Rhode Island Currently Reciprocal, 5 states reciprocity (CT, MA, ME, NH, Maryland. Currently Reciprocal, 3 states VT) (DE, VA, WV, and July 1, 1988 National, reciprocal DC) July 1, 1987 Reciprocal, 14 states South Carolina. Currently Reciprocal. 12 states (AL, AR, DE, FL, (AL, AR, FL, GA, GA, KY, LA, MS. KY, LA, MD, MS, NC, PA, SC, TN, NC, TN, VA, WV) VA, WV) and DC and DC Tennessee. Currently Reciprocal, 13 states Massachusetts Currently Reciprocal, 5 states (AL, AR, FL, GA, (CT, ME, NH, RI, IN, KY, LA, MO, VT) MS, NC, SC, VA, Michigan Currently Reciprocal, 5 states WV) (IL, IN, MN, OH, Texas. Currently National, no reciprocity WI) Utah.. Currently Reciprocal, 11 states October 10, 1988 National, reciprocal (AK, AZ, CO, HI, ID, MT, NM, NV, Minnesota. Currently Reciprocal, 4 states OR, WA, WY) (IA, ND, SD, WI) December 31, 1987 National, no reciprocity Mississippi July 1, 1988 Reciprocal, 4 states (AL, AR, LA. TN) Virginia. Currently Reciprocal, 12 states July 1, 1990 Reciprocal, 13 states (AL, AR, FL, GA, (AL, AR, FL, GA, KY, LA, MD, MS, KY, LA, MO, NC, NC, SC, TN, WV) SC, TN, TX, VA, and DC WV) Washington.. July 1, 1987 National, reciprocal West Virginia January 1, 1988 National, reciprocal Missouri Currently Reciprocal, 8 states Wisconsin... Currently Reciprocal, 8 states (AR, IA, IL, KS, (IA, IL, IN, KY, MI, KY, NE, OK, TN) MN, MO, OH) 1. Several states prohibit acquisition of banks in operation for less than a specified number of years. Some allow out-of-state firms to acquire problem institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interstate Banking Developments 83 token, when banks in other states can enter that A variety of state and federal statutes are state (the rows). responsible for the remaining 8.7 percent of Because of unmet reciprocity requirements interstate assets. The provisions for emergency and the distant effective dates of some statutes, interstate acquisitions of large failed banks rebanks have fewer opportunities for expansion sulted in entry into Florida and Oklahoma. A than expected given the number of laws. In only state emergency acquisition law allowed one 334 (13 percent) of the 2,550 possible combina- large interstate bank acquisition. In a few intions (indicated by "now") is entry currently stances, bank holding companies were permitted permitted. Even if all of the laws that have been by the states and by the Federal Reserve System enacted were fully in effect at the moment, that to acquire failed state-insured thrift institutions percentage would rise to only 28 percent. and convert them to commercial banks. These Fifty-one banking organizations have subsid- commercial banks are included in table 2A, iary banks in one or more states besides their which excludes several thrift institutions achome state. On average, these bank holding quired by bank holding companies and maincompanies have bank subsidiaries in only two tained as such. other states; only 11 own banks in three or more additional states, and 4 of these are grandparented organizations that predate the current move to EARLY TRENDS interstate banking. Banking assets held by bank holding compa- Interstate banking is still in its initial stages. But, nies outside their home states total $148.4 billion, in light of its significance for the structure of the or approximately 6 percent of total U.S. domes- banking system, the early trends are important. tic commercial banking assets (see table 2A). At this point, any perceived problems can still be The table does not include other means by which addressed by state or federal legislation. banking organizations have been able to attain an The first clear trend is the attempt by banking interstate presence, such as nonbank subsidiar- organizations to enter states whose volume or ies of bank holding companies, limited-purpose growth of deposits makes them especially attracbanks, nondeposit trust companies, Edge act tive. Thus substantial interstate activity has insubsidiaries, or thrift institutions owned by bank volved the acquisition of Florida banks, particuholding companies. larly by Georgia and North Carolina orga- Again reflecting the early stage of interstate nizations under the regional interstate banking banking and the relative importance of their laws. Florida banking organizations, on the other grandparented bank holding companies, Califor- hand, have not yet completed any out-of-state nia and Minnesota bank holding companies hold acquisitions, contrary to the expectation that a relatively large percentage of the interstate Florida would become the region's banking cenbanking assets, as table 2A suggests. The collec- ter. Florida banks, already in an attractive martive interstate banking assets of grandparented ket, had less incentive to enter other markets interstate organizations account for 35.5 percent than other banks had to enter Florida. of the interstate banking assets, a percentage that In a second trend, nearly all interstate expanreveals the early stage of the current interstate sion has been via acquisition rather than de novo banking movement. entry. Thus, although interstate banking has not While the assets of the grandparented banks reduced the number of firms competing in local remain important, acquisitions under the new banking markets, it has not yet increased that state interstate banking laws account for 55.8 number. Therefore, interstate banking has neipercent of the interstate banking assets reported ther increased nor decreased local banking marin table 2A. In only a few years, such assets have ket concentration. come to exceed those held under the grandparent Banking organizations generally prefer to enprovisions of the federal law. Given the short ter new markets by acquisition; moreover, de time that these laws have been in effect, the novo entry in the context of interstate banking is volume of assets that has been acquired is im- prohibited by many interstate banking laws. The pressive. usual means of preventing de novo entry is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

84 Federal Reserve Bulletin • February 1987 2. Interstate banking laws, January 1, 19871—Continued Date of permitted entry State whose banks are permitted entry State permitting entry Ala- Arizo- Arkan- Cali- Colo- Con- Dela- District Geor- Alaska necti- of Co- Florida Hawaii Idaho bama na sas fornia rado cut ware lumbia gia Alabama2 (3) JL 87 JL 87 JL 87 Alaska now now now now now now now now now now now now Arizona now now now now now now now now now now now now Arkansas California (3) JL 87 JL 87 (3) <31 (3) (31 (3) (3) (3) (3) O) Colorado Connecticut2 Delaware District of Columbia2 JL 874 now (5) Florida2 JL 87" (5) now now Georgia2 JL 874 now Hawaii Idaho2 Illinois2 Indiana2 Iowa Kansas JL 874 now now (5) JL914 (5) (3) (5) <5> (5) now (5) (5) JL 87 JA 89 JA 89 <3) JL 916 (3) (3) (3) JL 87 JL 87 JL 87 <3) (3) now now now now now now now now now now now now now Maryland2 JL 87 (3) (51 now JL 87 (3) Massachusetts2 now 01 OOCC 8888 OOCC 8888 (3) JL 916 (3) (3) (3> (3) (3) (3) (3) (3) Minnesota2 Mississippi2 JL 88 (3) JL 90 JL % Missouri2 (51 Montana Nebraska JJAA 8899 nnooww now JA 89 JA 89 JA 895 JA 89 JA 89 JA 89 JA 89 JA 89 JA 895 now New Hampshire ... New Jersey2 (8) m (8) (8) (8) (8) (81 (5) «} (8) (8) (8) (8) New Mexico New York2 (5) nnooww nnooww <5) JL914 (5) (51 (5) (5) (5) (5) (5) (5) North Carolina2 JL 874 15) now now now North Dakota Iffir' Ohio2 0) OC 88 OC 88 (3) JL 916 (3) (3) (5) (5) (3) (3) (3) (3) JJLL 887799 JL 87» JL879 JL 87* JL87" JL 879 JL 8P JL 879 JL879 JL879 JL 879 JL879 JL 879 now now now now now h) MR 90 MR 90 (3) JL 916 (3) <3) (5) (5) (3) (3) (3) (3) m JJLL 8888 JJLL 8888 (31 JL 916 (31 now 13) (3) (3) (3) (3) 0) South Carolina2.... JL 874 (5) now now now JL 874 (5) now now * now now now now now now now now now now now now now Utah10 DDEE 8877 nnooww now DE 87 DE 87 DE 875 DE 87 DE 87 DE 87 DE 87 DE 87 DE 875 now JL 874 (5) now now now (3) JL 87 JL 87 (3) JL 916 (3) (3) (3) (3) (3) (3) (3) JL 87 West Virginia2 . ... JA 88 JA 88 JA 88 (31 JL 916 (3) (3) (3) JA 88 JA 88 (3) (3) (3) Wyoming Notes appear on page 87. to require that banks that are the object of out-of- Third, a trend has developed toward control state acquisition must have been in existence for by out-of-state organizations of banking in states some minimum number of years before their with relatively low deposits and relatively small acquisition. Many states adopted prohibitions banking organizations. Maine illustrates this deagainst de novo entry to answer concerns that velopment. Banks that have entered that state allowing large banks to enter de novo would own its five largest commercial banking organidestroy the franchise value of existing bank zations and control 83 percent of its commercial charters. banking assets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interstate Banking Developments 85 2. Continued State whose banks are permitted entry SSttaattee ppeerrmmiittttiinngg eennttrryy Indi- Ken- Louisi- Mary- Massa- Michi- Minne- Missis- Mis- Illinois ana Iowa Kansas tucky ana Maine land chu- gan sota sippi souri setts Alabama2 JL 87 JL 87 JL 87 JL 886 Alaska now now now now now now now now now now now now now Arizona now now now now now now now now now now now now now Arkansas Illllpll California (3) (3) (31 (3) JA 91 JA 91 JA 91 (31 (31 JA 91 (3) (31 (31 Colorado * Connecticut2 now now Delaware District of Columbia2 JL87* now (51 Florida2 JL 874 JL 874 JL 904 Georgia2 now JL 874 JL 904 Hawaii Idaho2 Illinois2 now (5} now now now Indiana2 now now now Iowa Kansas Kentucky2 now now (5) (51 JL 874 now JL874 (5) OC 88" (51 JL 904 now Louisiana2 (3> (3) (3) J L 87 JA 89 JL 87 (3) JA 89 (3) JL 886 (3) Maine now now now now now now now now now now now now Maryland2 JL 87 JL 87 (3) Massachusetts2 now Michigan2 now now (3) (3) OC 88 JA S96 OC 88 (31 (3) 151 <3> (31 Minnesota2 (5) Mississippi2 JL 90 JL 88 (3) Missouri2 now (51 (5) now Montana Nebraska Nevada7 JA 89 JA 89 JA 89 JA 89 JA 89 JA 89 JA 89 JA 89 JA 89 JA 89 JA 89 JA 89 JA 89 New Hampshire ... flBMB New Jersey2 (51 (5) (8) (8) now (8) (81 (51 (81 OC 884 (81 (81 (51 New Mexico mml^ New York2 (51 (51 <s> (5) now JA 894 now (5) (5) OC884 (51 (51 (51 North Carolina2.... now JL 874 JL 874 JL904 North Dakota Ohio2 <51 now (31 (31 now JA 89* OC 88 (5> <3> now (31 (3> (51 Oklahoma JL87* JL 879 JL 879 JL 879 JL 87* JL 879 JL 879 JL 879 JL879 JL 879 JL 879 JL 879 JL 879 Pennsylvania2 <3( (3) <3> (3) now MR 90 MR 90 JL 874 (3) MR 90 (31 (31 (31 Rhode Island- <31 (3) (3) (31 JL 88 JA 89* now (3) now OC 886 (31 (31 <31 South Carolina2.... now JL 874 JL 874 JL 904 South Dakota Tennessee2 (5j now JL874 JL 88" now Texas now now now now now now now now now now now now now Utah10 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 Vermont Virginia2 now JL 87" now JL 904 Washington2 ij) (31 (3) (3) JL 87 JA 89* JL 87 (31 (31 OC 88" (31 (3) (31 West Virginia (31 (31 <3> (3) JA 88 JA 88 JA 88 JA 88 (3> OC 886 (3) JL 90" (31 Wisconsin2 now (5) (5) now now now (5) Wyoming Fourth, the Maine experience also indicates companies acquired major Maine organizations. the greater possibilities offered by nationwide These entrants would have been excluded had rather than regional interstate entry. Entry into Maine chosen a New England regional banking Maine came from Boston, Hartford, and Provi- policy. dence, as expected, but bank holding companies A fifth trend is the development of "superrefrom outside New England also have been im- gional" banking organizations formed by the portant participants. One money center bank merger of major banking organizations from two from outside New England established a de novo or more of a region's states. The regional bankbank, and two upstate New York bank holding ing laws have prevented the acquisition of a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

86 Federal Reserve Bulletin • February 1987 2. Interstate banking laws, January 1, 1987'—Continued Date of permitted entry State whose banks are permitted entry SSttaattee ppeerrmmiittttiinngg New New North Penneennttrryy Mon- Ne- Neva- Hamp- New Mexi- New Caro- North Ohio Okla- Oregon syltana braska da shire Jersey co York lina Dakota homa vania Alabama2 JL 87 Alaska now now now now now now now now now now now now now Arizona now now now now now now now now now now now now now Arkansas California2 (3) (3) JA 89* (31 (81 (3) JA 91 (3) (3) JA 91 JA 91 JL 87 JA 91 Colorado Connecticut2 (5) Delaware District of Columbia2 now Florida2 now Georgia2 now Hawaii Idaho2 (J> now now Illinois2 Indiana2 now Iowa Kansas Kentucky2 (5) (51 JA 89* (51 now (5) now now (5) now JL 874 (5) now Louisiana2 (3) (31 JA 89 (31 (8) (31 JA 89 JL 87 (3) JA 89 JL 87 (3) MR 906 Maine now now now now now now now now now now now now now Maryland2 JL 87 JL 87 Massachusetts2 (5) Michigan2 (3) ni • .. JA 89" (31 OC 88 (31 OC 88 (3) «) now OC 88 (31 MR 90* Minnesota2 (5) Mississippi2 JL 90 Missouri2 (51 JL 87" Montana Nebraska Nevada7 JA 895 JA 89 JA 89 JK 89 JA 89< JA 89 JA 89 JA 89 JA 89 JA 89 now JA 89 New Hampshire ... New Jersey2 (8) (81 (8l (81 (8) (Hi (8) (8) now (81 (8) now New Mexico New York2 (Si (51 JA 894 (5) (5) (5) ($) (5) OC 88" JL 874 MR 904 North Carolina2.... North Dakota Ohio2 (3) (3) JA 89* (31 now (31 OC 88 (3) (31 OC 88 (31 now Oklahoma JL 879 JL 879 JL 879 JL 879 JL 879 JL 87" JL 879 JL879 JL 879 JL 87s JL 879 JL 879 Oregon now Pennsylvania2 (31 (3! MR 90 <31 now (31 MR 90 (!) (3) now MR 90 (3) Rhode Island2 (31 01 JA 89" (51 (8l 13) JL 88 (3) (3) OC 88* JL 88 (3) MR 90* South Carolina2.... now South Dakota Tennessee2 now Texas now now now now now now now now now now now now now Utah10 DE 875 DE 87 now DE 87 DE 87 DE 875 DE 87 DE 87 DE 87 DE 87 DE 87 now DE 87 Vermont Virginia2 now Washington2 (3) •S, (3) JL 87 (31 (81 (3) JL 87 (3) BS OC 88* JL 87 JL 87 MR 90* West Virginia2 (3) (3) JA 89* (31 JA 88 (31 JA 88 JA 88 (3) JA 88 JA 88 (3) JA 88 Wisconsin2 now Wyoming region's major banks by money center banks. graphic expansion is attributable to large banks Thus banks with a strong regional orientation and is conducted through mergers and acquisihave grown through mergers to a size that now tions. In the case of interstate banking, many of limits the number of potential acquirors. the organizations resulted from mergers between Finally, interstate banking appears likely to relatively large banks. Of the 51 interstate orgaincrease the concentration of banking assets in nizations noted in table 2A, all but 6 rank among the nation over the long run because most geo- the country's top 200 banking firms. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interstate Banking Developments 87 2. Continued State whose banks are permitted entry State permitting South West entry Rhode Caroli- South Ten- Texas Utah Ver- Virgin- Wash- Vir- Wis- Wyo- Island Dakota nessee mont ia ington consin ming na ginia Alabama2 JL 87 JL 87 JL 87 JA 886 Alaska now now now now now now now now now now now now Arizona now now now now now now now now now now now now Arkansas California JA 91 (3> (3) (3) JL 87 DE 87s (3) (3) JL 87 JA 91 (3) (31 Colorado Connecticut2 now (5) Delaware District of Columbia2 now 0) now JA 884 Florida2 now now now JA 884 Georgia2 now now now Hawaii Idaho2 now JL 874 (5) Illinois2 now Indiana2 Iowa Kansas Kentucky2 JL 884 now (3) now now DE 874 (5) now JL874 JA 88" now (5) Louisiana2 JA 89 JL 87 (31 JL 87 JL 87 JA 89 (3) JL 87 JA 89 JA 886 (3) (3) Maine now now now now now now now now now now now now Maryland2 JL 87 (3) now JA884 Massachusetts2 now (5) Michigan2 OC 88 o> (3) (3) OC 88 OC 88 (3) (3) OC 88 OC 88 now (3) Minnesota2 (5) now Mississippi2 JL 90 JL 88 JL 90 JL 90 JL 90 Missouri2 now Montana Nebraska Nevada7 JA 89 JA 89 JA 89 JA 89 JA 89 now JA 89 JA 89 JL 874 JA 89 JA 89 JA 895 New Hampshire New Jersey2 (8) (8) (8) (J) (8) <8) (8) (5) (8) JA884 (5) (8) New Mexico New York2 JL 884 (5) (5) (5) now DE 874 (5) (5) JL874 JA 884 (5) (5) North Carolina2 now now now JA 884 North Dakota Ohio2 OC 88 (3) (3) (5) OC 88 OC 88 (3) (5) OC 88 JA 884 now (3) Oklahoma JL 879 JL 87s JL 879 JL879 JL879 JL 879 JL879 JL 879 JL879 JL 87* JL 87s JL879 Oregon now now Pennsylvania2 MR 90 (3) (3) (3) MR 90 MR 90 (3) <5) MR 90 JA 884 (3) (3) Rhode Island2 (3) (3) (3) JL 88 JL 88 (5) (3) JL 88 JL 88 <3) (3) South Carolina2 now now JA 884 South Dakota Tennessee2 now now JA884 Texas now now now now now now now now now now now Utah1® DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 DE 87 JL 874 DE 87 DE 87 DE875 Vermont Virginia2 now now JA 884 Washington2 JL 886 (3) (3) (3) JL 87 JL 87 (3) (3) JA 886 (3) (3) West Virginia2 JL 886 JA 88 (3) JA 88 JA 88 JA 88 (3) JA 88 JA 88 (3) (3) Wisconsin2 Wyoming 1. Laws already in effect or with established effective dates. entry from the state in the row. 2. Reciprocity required. 6. Entry would be allowed at an earlier date, but the law of the state 3. Entry would be allowed at a future date, but the state in the in the column granting reciprocity will not be effective until this later column has not enacted a law granting reciprocity to the state in the date. row. 7. Reciprocity is required until January 1989. 4. Entry would be allowed now, but the reciprocity requirement is 8. Future reciprocity is provided for, but the trigger date is indeternot met. The state in the column has enacted a law providing for entry minate because it depends on the action of other states. from the state in the row, but the law does not become effective until 9. Entry is permitted but subsequent expansion depends on recithe date given. procity. 5. Entry would be allowed now. but the reciprocity requirement is 10. Reciprocity is required until December 1987. not met. The state in the column has not enacted a law permitting Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

88 Federal Reserve Bulletin • February 1987 Since the days of the first and second Bank of arising from the failure of a large bank and the the United States, concentration has been a limited number of firms able to acquire a large concern in the regulation of American banking. failed bank, should economic policy foster even Unlike other countries, where a relatively small larger banks? On the sociopolitical side, how number of banks hold the vast bulk of banking dispersed should power over the allocation of assets, the United States has designed a policy credit be in a free enterprise society? Credit is a that avoids concentration of control over the key input in the production and distribution of all allocation of credit. Whether the nation would be other goods, and the access to credit on fair and better served by a small number of large banks or competitive terms has always been important to a large number of small banks is a central ques- policymakers. Therefore, heavy emphasis has tion in all discussions of branch banking and been placed on ensuring that no firm or group of bank holding company expansion policy. firms gains monopoly control over the allocation The issue of aggregate concentration embodies of credit. both economic and sociopolitical questions. On While traditional policy is oriented toward the economic side, higher concentration means preventing an increase in the aggregate concenfewer, but larger, banks. In face of the difficulties tration of banking, other views suggest that ag- 2A. Interstate banking assets1 Millions of dollars State whose banks are permitted entry State permitting entry Cali- n C e o c n ti - - D of is t C ri o c - t Geor- Idaho Illinois Indiana Ken- M c a h s u s - a- Michi- Minne- Misfornia cut lumbia gia tucky setts gan sota souri Alaska Arizona 10,281 Colorado 2.568 Connecticut 9,542 District of Columbia Florida 15,347 347 Georgia Idaho 789 Illinois 910 Indiana 333399 660033 Iowa 2,130 Kentucky 117 Maine 1,928 Maryland 845 Massachusetts 2,594 Michigan 88 Montana 301 2,873 Nebraska 1,424 Nevada 2,844 New Jersev New Mexico 931 New York 956 BIS North Dakota 2,467 Ohio Oklahoma 1,754 (•§(§• Oregon 5,418 272 Rhode Island 3 3,555 South Carolina 3,167 446 South Dakota 2,915 Tennessee 397 Utah 943 352 Virginia 2,601 Washington 12,184 Wisconsin 1,303 :: : Wyoming 476 Total 38,489 2,597 4,799 18,513 624 347 204 339 15,025 603 13,111 1,355 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interstate Banking Developments 89 gregate concentration poses less threat than it substantial barriers both to the formation of new did in the past. Such views stress the larger banking organizations and to the expanded lendnumber of credit-granting organizations in the ing activity of entities other than domestic comeconomy. These include U.S. agencies and mercial banks. branches of foreign banks and thrift institutions For a long time, the barriers to interstate that have only recently gained the power to make banking have maintained a relatively deconcencommercial and industrial loans and all types of trated banking industry because the inability to consumer loans. In addition, the wide variety of acquire banks in other states has limited the nondepository institutions would offer competi- share of national banking assets that any one firm tion if large banks were not allocating credit to its could acquire. The shares of total domestic bankmost efficient uses. The ease of entry into the ing assets held by the 5, 10, 25, 50, and 100 banking industry would permit the formation of largest insured banking organizations are indicatnew banks to seek profits by meeting those credit ed in table 3. In recent years, the shares of needs. According to this view, aggregate concen- banking assets held by the 50 and 100 largest tration would be a problem only if there were banking organizations have increased. With in- 2A. Continued State whose banks are permitted entry State permitting entry br N a e sk a Y N o e r w k C N a o n r r a o t l h i- Ohio P v s e a y n n l n i a - R Is h la o n d d e n T es e s n e e Utah m V o e n rt Virgin- W ing a t s o h n c W on i s s i n Total2 Alaska 558 130 Arizona 19 1,127 26 243 11,695 Colorado 2,568 Connecticut 1,501 11,042 District of Columbia 1,854 1,854 Florida 580 13,979 30,253 Georgia 9,988 9.988 Idaho 1,753 2,543 Illinois 910 Indiana 3,839 Iowa 33 2,163 Kentucky 703 168 987 Maine 1,975 779 39 4,721 Maryland 484 235 6,357 7,923 Massachusetts 5 2,599 Michigan 359 446 Montana 3,174 Nebraska 1,424 Nevada 211 3,055 New Jersey 2,070 2,070 New Mexico 931 New York 956 North Dakota 2,467 Ohio 394 394 Oklahoma 1,754 Oregon 128 5,818 Rhode Island 3,558 South Carolina 3,721 6,887 South Dakota 2,915 Tennessee 842 Utah 41 1,335 Virginia 2,601 Washington 12,184 Wisconsin 1,303 Wyoming 68 543 Total 53 5,287 27,688 3,959 2,305 2,285 168 2,058 39 8,212 130 243 148,432 1. All the data on assets are as of June 30, 1986, except for 1986. The table reflects acquisitions and mergers reported in the California banks in Oklahoma, for which data are as of March 31, FEDERAL RESERVE BULLETIN through the issue for November 1986. 2. Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

90 Federal Reserve Bulletin • February 1987 3. Shares of domestic commercial banking assets FEDERAL RESERVE POLICY TOWARD held by largest banking organizations1 INTERSTATE BANKING Percent The Federal Reserve Board has supported the Year Top 5 Top 10 Top 25 Top 50 Top 100 concept of interstate banking. In 1956, the Board 1970.. 14.0 21.4 32.8 41.1 50.4 supported the original draft of proposed bank 1971.. 13.4 20.5 31.7 40.1 49.5 1972.. 13.5 20.7 31.8 40.3 50.3 holding company legislation that did not yet 1973.. 13.3 20.9 32.4 41.1 51.2 1974.. 14.2 22.2 33.9 42.3 52.3 contain the Douglas Amendment barrier to inter- 1975.. 13.7 21.3 32.6 41.1 50.8 state banking. Then-Chairman William McC. 1976.. 13.4 20.8 31.7 40.2 49.9 Martin, Jr., added the Board's support to a 1977.. 13.5 21.0 32.0 40.5 50.2 1978.. 13.4 21.1 32.4 41.1 50.8 proposal advanced in 1969 that would have per- 1979.. 13.4 21.3 32.6 41.5 51.2 mitted interstate banking within the Washington, 1980.. 13.5 21.6 33.1 41.6 51.4 D.C., area. Hearings were held by the Senate 1981.. 13.2 21.1 33.1 41.6 51.7 1982.. 13.4 21.8 34.2 43.0 53.6 Committee on Banking and Currency, but the bill 1983.. 13.1 21.0 33.8 43.2 54.3 1984.. 13.0 20.3 33.1 43.5 55.0 did not advance. 1985.. 12.8 20.3 33.1 45.7 57.7 One interstate banking measure the Board 1. Banks are ranked by domestic banking assets. Only insured suggested was the provision for emergency intercommercial banks are included; nondeposit trust companies are state acquisitions, which was ultimately included excluded. in the Garn-St Germain Act of 1982. This techterstate banking expected to result in higher nique for dealing with the failure of a large concentration, the choice is either to develop banking organization was proposed annually by new methods to maintain deconcentration or to the Board after the difficulties in arranging an accept the greater banking concentration on the acquisition of Franklin National Bank in 1974. hypothesis that it does not necessarily mean The most recent Board statement on interstate greater control over the allocation of credit. banking is the testimony by Chairman Paul A. Various proposals have been advanced for the Volcker before a subcommittee of the House prevention of a substantially higher level of na- Committee on Banking, Finance and Urban Aftionwide banking concentration under a system fairs on April 24, 1985. In his testimony, the of interstate banking. One relatively simple alter- chairman focused on the survival of small banks, native would be to bar mergers among the 10, 25, aggregate concentration, states' rights, and the or 50 largest banking organizations. These large potential "Balkanization" of the banking indusorganizations, which are the most likely to be- try. He stressed that small banks continue to come regional or nationwide organizations, operate profitably in all varieties of banking would be forced to expand either on a de novo markets. Probably because substantial econobasis or by acquiring organizations outside the mies of scale are not available in banking, no top tier. Any bank ranked below the top 50 evidence suggests that small banks cannot comnationwide holds less than V2 percent of nation- pete with much larger organizations. Indeed, wide banking assets. Therefore, expansion of the even in large metropolitan markets, small banks major banks by acquisitions outside the top 50 can compete with larger ones and frequently earn would have no real effect on the level of banking higher rates of return on assets. concentration in the short term, although it might Chairman Volcker described a variety of apin the long run. proaches to limiting aggregate concentration in An alternative way of controlling aggregate banking. The plan he suggested would prohibit concentration would be to establish a limit on the mergers among banks ranked in the top 25 napercentage of total nationwide banking assets tionwide. In addition, no organization could acthat any one banking organization could hold. quire, through large acquisitions, more than 2.5 Once a firm reached this limit, it could not percent of total domestic deposits in depository expand by merger, although it would still be free institutions. to increase its national share by internal growth While recognizing the value of the dual bankor de novo entry into new markets. ing system and the right of the states to enact Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interstate Banking Developments 91 their own legislation, Chairman Volcker ex- large banking organizations. The development of pressed the Board's concern over the regional- the superregional banks is likely to continue; ization of the banking industry resulting from the their growth and expansion into new states and new state laws. To reconcile the desire for a markets will result from the acquisition of relauniform national policy with the desire to main- tively large banking organizations. tain a dual system of bank regulation, Chairman Thus far interstate banking has not increased Volcker recommended a federally legislated limit concentration in local banking markets because on the number of years that states could maintain the interstate banks are acquiring banks in mara system of regional interstate banking. After a kets in which they were not previously allowed suggested interval of three years, the state would to operate a full-service bank. Their entry into a have to allow entry from any state that was open new market via the acquisition of a firm already to its banking organizations. A draft interstate in that market has merely replaced one competibanking bill incorporating most of the Board's tor with another without changing market conrecommendations was adopted by the House centration. Banking Committee, but was not acted upon by As noted, the expansion of interstate banking the full House of Representatives. does not appear to threaten the small banks. In the long run, as interstate organizations expand beyond major banking markets into smaller cities and towns, fewer small banks will be isolated LIKELY FUTURE DEVELOPMENTS from large bank competitors. Yet, just as the small banks have survived decades of competi- If the experience of the last few years persists, tion from major branch banks in the relatively most of the states that have not already done so concentrated statewide banking states, they will will pass some form of interstate banking legisla- survive competition from the nationwide banking tion. Because the major banking states already organizations. have enacted laws, however, the initial legisla- Nevertheless, the issue of the aggregate contive phase of interstate banking is already over. centration of the banking industry will continue The next phase will focus on attempts to expand to be important as the expansion of interstate the limited regions that have been selected by banking intensifies nationwide concentration of many states. If the process depends on a gradual assets beyond the degree attainable before interstate-by-state expansion of interstate banking state banking. Taking a long view and assuming rights, however, full nationwide banking is likely no restrictions on mergers among large banks, to be achieved only in the distant future, and the one can argue that the banking system will expansion opportunities of the money center comprise thousands of small banks, and a few banks will remain limited. very large banking organizations operating in The current high level of interstate mergers, as most major banking markets and collectively well as intrastate mergers, gives every sign of holding a large share of the nation's banking persisting. A few bank holding companies will assets. These large banks will be competing acquire more banks as they attempt to develop against both the small banks and many other nationwide banking organizations, and a larger depository and nondepository financial institunumber will form regional organizations. These tions. organizations will be seeking added diversifica- Finally, at some point in the development of tion of their deposit bases and loan portfolios. interstate banking, efforts will be made to change They may also expect their growth to yield lower the state laws to allow interstate branch banking costs, although the empirical evidence does not as well as interstate bank holding companies. support this view. Generally, after the liberalization of state Over the longer run, the merger activity may branching laws, banking organizations have involve more relatively small banks. For the sought to reduce costs by consolidating many short term, however, the development of inter- subsidiary banks into one bank with many state banking will continue to involve mainly branch offices. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

92 Federal Reserve Bulletin • February 1987 SUMMARY After being prohibited for most of the nation's the structure of the American banking system. history, interstate banking is now being permit- While the aggregate concentration of banking is ted by state statutes. Although the laws have the issue that has raised the most concern, it been changed only recently in most states, many could be addressed by appropriate policies. In interstate acquisitions have already taken place the long run, geographic deregulation could be as as firms have attempted to build regional or important to the banking system as the deregulanational bank holding companies. tion of interest rates and the provision of new Interstate banking will continue to develop in bank products and services. the next several years and will significantly affect Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

93 Structure and Uses of the MPS Quarterly Econometric Model of the United States Flint Brayton and Eileen Mauskopf of the Since 1970, when the first working version was Board's Division of Research and Statistics pre- completed, the Board's Division of Research and pared this article. Statistics has used the model for forecasting, for analyzing the consequences of exogenous eco- In the late 1960s, staff members of the Board of nomic shocks and alternative monetary or fiscal Governors of the Federal Reserve System, along policies, and for various research projects. Alwith several university economists, undertook to though many key elements of the original model build a quarterly model of the U.S. economy. remain intact, considerable effort has been de- Their goal was to develop a model that focused voted over the years to maintaining and improvmore intensively than did existing models on the ing the model. These efforts stem from new channels through which monetary policy affected insights provided by theoretical and applied ecothe real sectors of the economy. The model has nomic research, from revisions in data, and from generally become known by the abbreviation institutional and technological developments that MPS, which reflects the academic affiliations of have caused the performance of some equations two of its key developers, Franco Modigliani to deteriorate. This article provides a general (Massachusetts Institute of Technology) and Al- description of the current structure and uses of bert Ando (University of Pennsylvania), and the the model.2 organization (Social Science Research Council) through which Federal Reserve support for the project was channeled.1 SUMMARY OF MODEL STRUCTURE As of late 1986, the MPS model consists of 334 1. Papers describing early versions of the model and citing equations, of which 128 are stochastic and 206 contributors to the development of the model include Frank are identities. In addition, it has 188 exogenous de Leeuw and Edward Gramlich, "The Federal Reservevariables. The theoretical core of the model is MIT Econometric Model," FEDERAL RESERVE BULLETIN, vol. 54 (January 1968), pp. 11-40; Frank de Leeuw and based on the behavior of cost-minimizing pro- Edward Gramlich, "The Channels of Monetary Policy: A ducers and utility-maximizing consumers. Further Report on the Federal Reserve-MIT Econometric In the long run, when markets clear and expec- Model," FEDERAL RESERVE BULLETIN, vol. 55 (June 1969), pp. 472-91; Robert H. Rasche and Harold T. Shapiro, "The tations are fulfilled, the model behaves like a F.R.B.-M.I.T. Econometric Model: Its Special Features," neoclassical growth model. The long-run growth American Economic Review, vol. 58 (May 1968, Papers and rate of the economy is determined by the rate of Proceedings, 1967), pp. 123-49; and Albert Ando and Franco Modigliani, "Econometric Evaluation of Stabilization Poli- population growth and the rate of technological cies," American Economic Review, vol. 59 (May 1969, progress, both of which are exogenous to this Papers and Proceedings, 1968), pp. 296-314. model. The level of per capita output depends on Jared Enzler. Associate Director of the Division of Research and Statistics, was involved in the model development the capital-output ratio and the characteristics of work, managed the model through much of its first decade of operation, and continues to maintain an active interest in and oversight of model developments. Other current and former Board staff who have worked with the model in its operation- 2. A more detailed description of the model, containing a al phase include Robert Anderson, Douglas Battenberg, complete list of the equations (as of 1985), is presented in Richard Berner, Flint Brayton, Tim Grunwald, William Lee, Flint Brayton and Eileen Mauskopf, "The Federal Reserve Eileen Mauskopf, Stephan Thurman, David Wilcox, Anne Board MPS Quarterly Econometric Model of the U.S. Econ- Williams, and David Wyss. omy, "Economic Modelling, vol. 2 (July 1985), pp. 170-292. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

94 Federal Reserve Bulletin • February 1987 the production function.3 Although an optimal affects real output directly through the contribucapital-output ratio exists at which the sustain- tion of government spending to aggregate deable level of per capita consumption is highest, mand and less directly through the impact of tax there is no guarantee that the actual path to policy on disposable income and investment inwhich the model converges is this "golden rule" centives; changes in the supply of money affect path. The capital-output ratio that prevails in the both nominal and real interest rates, and the long run will be affected by fiscal policy, among latter influence investment and consumption. other things. The long-run unemployment rate The transition from the short-run responses of will be consistent with nonaccelerating infla- the model to the long-run state after either a tion—which, in the model, depends both on the change in policy or some other disturbance is pace of productivity growth and the ratio of often lengthy. As shown in simulation results unemployment benefits to take-home pay. In the described below, however, after about one year long run, the rate of inflation will equal the wages and prices are sufficiently flexible that the excess of the rate of growth of money over that short-run effects of fiscal and monetary policy on needed to support the growth rate of real activi- demand begin to be offset by supply responses ty; inflation also will depend on any exogenous reflected in movements in wages, prices, and trend in the ratio of income to money. Money is interest rates. neutral in the long run in the sense that a A crucial issue in building economic models is permanent change in the amount of money in the the appropriate way to model expectations. The economy will cause a proportionate change in use in the MPS model of autoregressive (AR) the price level, leaving all real magnitudes un- expectations contrasts to the approach using changed. A permanent change in the rate of rational expectations (RE) that has prevailed in growth of money, however, will not be neutral in theoretical macroeconomic analysis during the the long run. The consequent changes in the rate past decade. The rational expectations hypotheof inflation and the nominal rate of interest will sis is based on the assumption that economic have real effects because the demand for money agents use all available information in forming depends on the nominal rate of interest and expectations. In its strong form (SRE), this hybecause some provisions of the tax code are pothesis requires that expectations appearing in defined with respect to nominal, rather than real, a model be consistent with the forecasts of that magnitudes. model.4 For several reasons, the MPS model has In the short run, the properties of the model not adopted this constraint on modeling expectaare quite different. Because wages and prices are tions. One is practical: the computational diffiestimated to adjust slowly, neither labor nor culties in estimating and simulating a large-scale goods markets are continuously in equilibrium. model incorporating SRE are formidable; conse- This disequilibrium reflects the presence of ad- quently, most of the empirical models that have justment costs and the assumption that expecta- incorporated this approach have been small. tions are formed autoregressively (for example, Another reason is our belief that the SRE apexpected inflation depends on past inflation). proach is extreme. The economy is sufficiently Thus, in the short run, the model has properties complex that economic agents are likely to unthat may be characterized as Keynesian: aggregate demand largely determines the level of 4. A weaker definition of rational expectations postulates output, and the unemployment rate of labor (and that expectations are optimal forecasts based on available the utilization rate of capital) may be either information. Costs of acquiring and evaluating information could cause economic agents to make use solely of past below or above the natural rate; fiscal policy observations of a variable in forming their expectations of its future values. In this restricted case, the AR model would be rational, but its parameters need not be constant over time: they could vary with changes in policy rules. The distinction 3. The level of per capita output also depends upon the between strong and weak rational expectations is made by level of technology embodied in the existing capital stock and P. A. V. B. Swamy, J. R. Barth, and P. A. Tinsley, "The on the relative price of energy. The latter determines the Rational Expectations Approach to Economic Modelling," energy intensity of production. Energy prices are exogenous Journal of Economic Dynamics and Control, vol. 4 (May in the model. 1982), pp. 125-47. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Structure and Uses of the MPS Quarterly Econometric Model of the United States 95 derstand it only imperfectly. Moreover, once To describe the structure of the model in more sluggish adjustments owing to sources other than detail, we split it into aggregate demand, aggreexpectational lags (such as long-term contracts) gate supply, and financial components, although are introduced into economic behavior, SRE a precise division between the demand and supmodels show characteristics similar to those of ply components of the model does not exist. models with AR expectations: both types of models generate business cycles and permit (expected) policy actions to affect real outcomes.5 Aggregate Demand Nevertheless, the AR expectations approach does have some limitations, and it may not be The categories of aggregate demand specified in well suited for the analysis of issues such as the the model follow the National Income and Prodconsequences of large, well-understood shifts in uct Account (NIPA) disaggregation of gross napolicy, policy changes that are widely anticipat- tional product into consumption, investment, ed before they occur, or policies that would government purchases, and exports and imports. continuously surprise economic agents who were Within each category, further disaggregation has assumed to be using AR expectations. In these been made to ensure that the components modcases, we accept Lucas's critique that macroeco- eled are reasonably homogeneous. nomic models not based on rational expectations may fail to predict correctly the response to a Consumption. The key variable in the conpolicy action.6 In general, however, the practical sumption sector (CON) consists of spending on importance of the Lucas critique may not be that nondurable goods and services plus the imputed substantial. Sims argues that policymaking value of services from the stock of consumer should be viewed as a gradually evolving random durables. CON measures consumption of duraprocess (and that it is viewed as such by the bles and thus differs from the NIPA measure of public), not as discrete shifts in policy regimes.7 personal consumption because the latter includes Blanchard and Blinder present evidence that, the purchase of durables rather than their use. even after the major policy changes of the past The modeling of the behavior of CON is based decade, key macroeconomic equations with AR on the life-cycle theory, which maintains that expectations do not show the signs of instability consumers maximize utility over their lifetimes, that should have emerged if the Lucas critique subject to the initial value of their wealth and were important.8 their expectations regarding nonproperty income and the rate of interest. The rate of interest measures the return to postponing consumption 5. One area of research on sources of adjustment lags to a later period. In the equation, nonproperty unrelated to the formation of expectations is that on nominal contracts. See, for example, Stanley Fisher, "Long-Term income is disaggregated into labor and transfer Contracts, Rational Expectations, and the Optimal Money components because of the different life-cycle Supply Rule," Journal of Political Economy, vol. 85 (Februcharacteristics of the two—labor income ceases ary 1977), pp. 191-205, and John B. Taylor, "Aggregate Dynamics and Staggered Contracts," Journal of Political with retirement whereas transfer income may Economy, vol. 88 (February 1980), pp. 1-23. continue for the remainder of an individual's 6. Robert E. Lucas, Jr., "Econometric Policy Evaluation: lifetime. The estimated long-run marginal pro- A Critique," in Karl Brunner and Allan H. Meltzer, eds., The Phillips Curve and Labor Markets, Carnegie-Rochester Con- pensities to consume (MPC) out of labor and ference Series on Public Policy, vol. 1 (Amsterdam: North transfer income are 0.52 and 0.93 respectively. Holland, 1976), pp. 19-46. Wealth also is disaggregated into two compo- 7. Christopher A. Sims, "Policy Analysis with Econometnents—corporate equities and all other types of ric Models," Brookings Papers on Economic Activity, 1:1982, pp. 107-52. wealth—with estimated MPCs of 0.05 and 0.09 8. Olivier J. Blanchard, "The Lucas Critique and the respectively. In theory, the nonproperty income Volcker Deflation," American Economic Review, vol. 74 and wealth MPCs are not simply constants but (May 1984, Papers and Proceedings, 1983), pp. 211-15; Alan S. Blinder, "Reaganomics and Growth: The Message in the are functions of the rate of interest. Only in the Models," in Charles R. Hulten and Isabel V. Sawhill, eds., case of the wealth MPCs, however, is this depen- The Legacy of Reaganomics (Urban Institute, 1984), dence recognized in the estimated equation, and pp. 199-228. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

96 Federal Reserve Bulletin • February 1987 it is recognized indirectly through the inclusion sity to consume out of nonproperty income, the of property income—the product of the rate of ratio of consumption to total income (property interest and wealth—as an additional explana- and nonproperty income) falls, and the ratio of tory variable.9 The estimated long-run MPC out saving to income rises. The effect on the saving of property income is 0.40. ratio is very small given the estimated MPCs: in Because both property income and the market the long run each percentage point change in the value of wealth depend on the rate of interest, real after-tax rate of interest moves the private the model has two channels through which saving ratio in the same direction 0.1 to 0.2 interest rates alfect consumption. The latter percentage point.11 channel—variations in the market value of The consumption sector of the model also wealth—is estimated to be by far the stronger includes equations for the purchase of consumer one, except over very long periods. An increase durables; these purchases are treated as investin the rate of interest, for example, quickly ment decisions. Consumer durables are disaggrereduces the market value of wealth, lowering gated into two components—new automobiles consumption and raising saving. But the higher and other consumer durables—and the equations level of saving then causes wealth to grow more for both are specified in stock-adjustment form rapidly, and thus the effect of wealth gradually with the desired stocks depending on income, the diminishes over time.10 The effects of interest real rate of interest, relative prices, and the rate rates on consumption through the former chan- of depreciation. The desired stock of cars is also nel—variations in property income—occur more a function of the price of gasoline and the fuel gradually because property income reflects the efficiency of cars. average returns on existing assets and thus responds slowly to changes in interest rates. The Investment. Fixed investment is divided into estimated MPC out of property income is posi- four categories: residential structures, productive but less than one, and therefore an increase ers' durable equipment, producers' structures in the rate of interest raises both consumption excluding public utility structures and those used and saving through this channel. However, be- in petroleum drilling and mining, and other noncause the proportion of the increase in property residential structures. The last category is exogeincome that is consumed is less than the propen- nous. Equations for the other three are based on 11. The exact relation between the saving ratio and the rate of interest is derived in Brayton and Mauskopf, "Federal 9. This formulation is based on the simplifying assumption Reserve Board MPS Quarterly Econometric Model," p. 184. that the wealth MPCs are linear functions of the rate of The private saving measure determined by the equation for interest. Property income is measured as the sum of rental, CON differs from NIPA private saving in the definitions of interest, dividend, and proprietors' income, corporate re- both the consumption and the income measures upon which tained earnings, and imputed income on consumer durables, the measure is based. The definition of consumption for the less an adjustment for losses due to inflation on fixed interest model includes the service flow of the durable stock, meaassets. sured by the sum of the real interest rate and the depreciation 10. In the life-cycle model, the gradual lessening of the rate times the durable stock. By contrast, the NIPA conwealth effect reflects the fact that only those cohorts of sumption measure includes the purchase of durables. On consumers subject to unexpected gains or losses on their average, this difference is likely to be small and would, in assets change their consumption plans. As time passes, these fact, be zero if the real rate of interest equaled the real growth cohorts form a smaller and smaller fraction, weighted by rate of the stock of consumer durables. The income measure wealth, of the aggregate population of consumers. From this in the CON equation differs from aggregate business and perspective, the rate at which the wealth effect diminishes household income in the NIPA accounts by including the should be gradual, and the parameter estimates in the CON imputed income on the stock of consumer durables and by equation support this conclusion. Assuming that saving flows excluding the inflation premium in the return on private into (or out of) the same wealth category that is subject to the holdings of government- and foreign-issued debt. The differshock to its market value, the rate at which the initial wealth ence in the income measure is more important than the effect dies out over time equals the corresponding wealth difference in the consumption measure in accounting for the MPC. Thus the induced changes in saving reduce the effect of divergence of the two saving measures. Note that NIPA wealth on consumption about 5 percent per year in the case of private saving equals the sum of personal and business a change in the market value of corporate equities and about 9 saving, and that the saving concept in the model includes percent per year for changes in the value of other forms of business saving because retained earnings are part of the wealth. household income measure. 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Structure and Uses of the MPS Quarterly Econometric Model of the United States 97 the neoclassical approach, in which producers placement capacity. On the other hand, investadd to the capital stock until its marginal product ment in capital whose existing units can be freely equals its implicit rental price. The implicit rental modified {putty-putty capital) responds more in price, which is often called the cost of capital, is the short run than in the long run to a change in calculated from the purchase price of capital, the the cost of capital. The short-run response is after-tax costs of debt and equity finance, eco- greater because it includes the one-time alternomic depreciation, tax depreciation allowances, ation of existing capital as well as the replaceand other tax parameters. ment of depreciating capital. The estimated paths For producers' durable equipment and the of adjustment indicate that producers' durable endogenous component of producers' structures, equipment is more likely to be putty-clay and it is assumed that the production technologies in producers' structures to be putty-putty.12 which each is used are of the constant-elasticity- The principal housing equation explains real of-substitution class. This assumption implies per capita expenditures on nonsubsidized housthat the long-run response of each capital-output ing exclusive of brokers' commissions. The deratio has a constant elasticity with respect to sired stock depends on consumption (serving as changes in the cost of capital. For producers' a proxy for permanent income) and on the ratio structures, the estimated elasticity is about 0.5 of the rental price to the consumption deflator. (in absolute value); therefore, the percentage The rental price is a function of the real after-tax change in the long-run ratio of structures to mortgage rate, of tax parameters, and of the output is one-half the percentage change in the price of new residential construction. The deinverse of its cost of capital. In the case of sired housing stock also depends on the nominal equipment, the estimated elasticity is not signifi- mortgage rate, which is a proxy for qualification cantly different from one (in absolute value); standards imposed by mortgage lenders based on and, to simplify elements of the supply side of the level of monthly mortgage payments. The the model, an elasticity of one is imposed. The elasticity of the housing stock with respect to the long-run ratio of equipment to output thus moves rental price is not constant, and the adjustment proportionately to the inverse of its cost of pattern of expenditures is consistent with a putcapital. ty-putty response. Brokers' commissions, which The equations for these two categories of are a significant fraction of NIPA housing expenbusiness fixed investment also indicate differ- ditures, are a function of the value of expendiences in the paths of adjustment of the types of tures on new single-family housing and of capital capital to their new, desired levels following a gains on existing homes. The latter is a proxy for change in the cost of capital. Investment in sales of existing houses. producers' durable equipment adjusts only grad- Real inventory investment is divided into four ually to the cost of capital, with the maximum categories: nondurable, retail durable, nonretail response achieved in the long run. By contrast, durable, and farm. The first three are modeled the short-run response of investment in produc- using a stock-adjustment specification in which ers' structures to its cost of capital exceeds the the desired inventory-sales ratios are functions long-run effect. These dynamic response pat- of the real rate of interest and tax parameters. In terns suggest that the two types of capital differ addition, short-run movements in inventories are in the degree to which existing units of capital influenced by the degree to which sales are higher can be modified for use with new quantities of or lower than the level anticipated by firms. The other inputs (labor and energy). On the one hand, unexpected component of sales is likely to cause when the factor proportions embodied in the unintended changes in inventory stocks because of initial design cannot be changed subsequently time lags in the process of producing and distribut- (putty-clay capital), investment occurs only to replace existing production capacity as it wears out, assuming output is constant. A change in the 12. The pattern of estimated response to the cost of capital cost of capital thus modifies only the amount of is not a precise indication of whether or not capital is ex post malleable because the response may also reflect adjustment, investment associated with this stream of reexpectational, and decisionmaking lags. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

98 Federal Reserve Bulletin • February 1987 ing most goods. This buffer-stock element of in- proxies: the exchange rate forward premium, ventory behavior is captured by including the past changes in the exchange rate, and the devichange in sales in the inventory equations. Farm ation of the real exchange rate from a level that inventories are exogenous. was consistent historically with balance of the current account. Equation estimates indicate Government Purchases. Federal, state, and that expectations of the level of the exchange local government purchases are each divided rate are regressive: a movement of the exchange into three components: employee compensation, rate in one direction generates the expectation construction spending, and other purchases. The that the exchange rate will move in the opposite federal components are exogenous. Behavioral direction. equations explain the three categories of state and local purchases. The principal explanatory variables are the level and growth rate of dispos- Aggregate Supply able income, the fraction of the population that is of school age, the unemployment rate, and the The supply side of the model includes the proamount of federal grants-in-aid. duction technology, the specification of firms' production and pricing behavior, and the demand Exports and Imports. Exports and imports are for inputs into the production process—labor, each divided into three general groups: merchan- capital, and energy. Besides treating these facets dise trade, service receipts and payments, and of the model, this section describes wage dynamfactor income flows. The principal behavioral ics and briefly discusses how the model's strucequations in the merchandise trade group are for ture relates to several supply-side issues. These nonagricultural exports and nonpetroleum im- issues include the interest elasticity of private ports. In each case the key explanatory variables saving, the response of consumption to debtare the level of GNP—domestic GNP for imports financed tax cuts, and the response of labor and foreign GNP for exports—and the relative supply to changes in marginal tax rates. prices of goods produced domestically and abroad. Agricultural exports are exogenous, and The Behavior of Producers: Factor Demands petroleum imports depend on the difference be- and Prices. The cornerstone of the supply side of tween domestic petroleum demand and supply. the model is the production function. Output of Service exports and imports depend on the ap- the principal sector of the economy—nonfarm propriate GNP measure, the relative prices for business exclusive of services of the housing foreign and domestic goods, and the magnitude stock—is assumed to be produced using labor, of trade flows. Factor-income flows are modeled capital, and energy inputs with a Cobb-Douglas as the product of interest rates and stocks of production function. Thus, for a given level of assets. production, the minimizing of costs by firms In the model, the U.S. exchange rate (defined causes the demand for each input to be inversely as a weighted average of 10 bilateral exchange proportional to its own price relative to the price rates) is determined endogenously by the re- of output. This relation between factor demands quirement that the net capital inflow (outflow) and factor prices is based on the estimated equal the current account deficit (surplus). The parameters in the equation for producers' duraspecification of the capital account includes ble equipment, which is the only type of capital equations for domestic investors' holdings of included in the production function for this secforeign assets and foreign investors' holdings of tor.13 As described below, however, the demand domestic assets. The demand for these assets for energy does not appear to be based on the depends mainly on the differential between the short-term interest rate on domestic assets and 13. The role of the stock of producers' structures in the that on foreign assets, adjusted for the expected production process is much less clear than the role of rate of change of the exchange rate. This expect- equipment. Clearly, structures are required for most forms of production to occur, but the degree to which structures ed rate of change is represented by several contribute to output and can be substituted for other input Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Structure and Uses of the MPS Quarterly Econometric Model of the United States 99 simple Cobb-Douglas technology, and research It may be expressed as the product of output and is planned to resolve this inconsistency in the a weighted average of the energy-output ratios structure of the model. on the various vintages in use, where the weights The specification of the supply side is compli- represent the share of output produced by each cated by the empirical observation that produc- vintage. The energy-output ratios for each viners' durable equipment is putty-clay. In design- tage depend on the real price of energy at the ing this type of capital, producers choose time the capital was installed. In the estimated particular amounts of labor and energy to be equation, no attempt is made to use specific used with the capital from the possibilities of- vintage weights. Rather, the aggregate energyfered by the ex ante Cobb-Douglas production output ratio is made a function of a long distributfunction. Once designed and installed, however, ed lag on the relative price of energy, and the that unit of capital is operable only with those slow estimated response of the aggregate ratio to amounts of labor and energy. Because of this the relative price is consistent with the puttycharacteristic, it is important to distinguish be- clay characteristic. However, the estimated tween the determination of the optimal factor long-run real price elasticity of -0.33 is lower intensities on a particular vintage of capital and than expected and casts doubt on the approprithe specification of the aggregate demands for ateness of the Cobb-Douglas production funccapital, labor, and energy. In general, only the tion. demands for these inputs associated with new Analogous to the aggregate demand for enervintages of capital will be responsive to changes gy, the aggregate demand for labor (measured in in factor prices; consequently, the aggregate hours) is the sum of labor required across the input demands will be relatively insensitive to different vintages of capital in use. Because the factor prices in the short run.14 Only in the longer optimal labor intensity of each vintage is modrun, when the capital stock has been totally eled as a function of the optimal intensities of replaced, will the full (inverse) proportionality capital and energy and the parameters of the ex between factor prices and aggregate factor de- ante production function, aggregate labor demands hold. These characteristics were de- mand depends on actual output and the average scribed above for investment in producers' dura- capital-output and energy-output ratios in use. ble equipment. In addition, the ex ante production function The aggregate demand for energy is the sum of assumes a constant rate of labor-augmenting energy required on each vintage of capital in use. technological change; and, therefore, the intensity of the labor input in production falls over time, ceteris paribus. Hours per unit of output also factors (particularly labor and equipment) is difficult to depend on the level of capacity utilization: an define. For this reason, they are not included in the production function. increase in utilization rates increases labor pro- This specification of production technology and firm be- ductivity as overhead labor is used more effihavior is for the nonfarm business sector exclusive of the ciently, but it reduces productivity as machines services of the housing stock (the implicit rental value). The with higher operating costs (due primarily to other sectors of the economy have much simpler production relationships: output is proportional to labor input (govern- higher labor requirements) must be brought into ment, household, and institution sectors) and to capital input production. The latter relation between capacity (housing output) and is exogenous (farm) or equal to net utilization and productivity attempts to capture factor income (the rest of the economy). The discussion in the remainder of this section applies only to the nonfarm business indirectly variations over time in the vintages sector exclusive of housing output. actually used. 14. On the one hand, the factor intensities on the current vintage of capital depend, in principle, not only on current Prices are set as a markup over unit labor real factor prices but also on their expected values over the costs.15 The existence of the markup stems from lifetime of the vintage because of the putty-clay characteristic. On the other hand, lags in decisionmaking and delivery cause the factor proportions on the current vintage to depend 15. An alternative but equivalent way of specifying prices on lagged real factor prices. The use of lagged factor prices in is as a markup over unit factor costs. In this case, prices the model equations should thus be interpreted as reflecting move proportionately with all factor costs (with the sum of both autoregressive expectations and these other sources of the elasticities of factor costs equal to unity) and inversely lagged adjustment. with the rate of technological progress. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

100 Federal Reserve Bulletin • February 1987 the assumption that firms generally operate as and a natural rate of unemployment exists.17 This oligopolists, setting prices above the level that rate is consistent with the maintenance of a would obtain under perfect competition, but not constant rate of inflation but is independent of so high as to induce additional firms to enter the the actual inflation rate. The economy cannot market. As specified in the equation, the actual deviate permanently from the natural rate withmarkup varies positively with the degree of utili- out causing an unbounded acceleration or decelzation of capital and labor and inversely with the eration of prices. In the model, the natural rate degree of price competition from foreign goods. moves positively with the ratio of unemployment In principle, the putty-clay nature of capital also benefits to wages and negatively with the rate of complicates the specification of price behavior. growth of productivity. With trend productivity Prices should be set such that the revenue stream growth of 1.0 percent and unemployment benefits of the newest vintage of capital equals the mark- at their current level, the natural rate of unemup times the cost stream, both discounted over ployment is 6.4 percent. the lifetime of the capital. A consequence of this rule for setting prices is that labor productivity of Labor Supply. The specification of labor suponly the most recent vintage of capital rather ply depends largely on demographic factors, with than labor productivity averaged across all vin- some cyclical influence by the employment rate. tages of capital should affect the price. The Although the responsiveness of the labor supply model's price equation, by contrast, uses aver- to the real after-tax wage rate is a critical element age labor productivity, a use that may be justified in the revival of classical economics, the equain part on the basis of short-run adjustment costs tion for aggregate labor supply does not contain for investment in new capital. such a term. The failure to find empirical support for this hypothesis may stem from (1) offsetting Wage Determination and the Natural Unem- income and substitution effects generated by a ployment Rate. The rate of change in compensa- change in the real wage of primary workers, and tion per hour is explained by an expectations- (2) the behavior of nonprimary workers, who augmented Phillips curve. Each percentage point respond positively to their own real wage but decrease in the unemployment rate is estimated negatively to the real wage of primary workers. to raise the rate of change in hourly compensation in the same quarter by 0.85 percentage point Private Saving. Another tenet of supply-side at an annual rate. The behavior of compensation theory that our empirical work fails to substantiper hour also depends on the rate of inflation in ate is a large positive response of the saving rate the prices of consumer goods, the change in the to the real after-tax rate of interest. As described minimum wage, the ratio of unemployment bene- above, the consumption equation indicates that, fits to wages, the change in female representation although the response of the saving rate to the in the labor force, and changes in employer real after-tax rate of interest is positive, the effect contributions to social security and unemploy- in the long run is weak. In addition, net foreign ment insurance.16 saving is estimated to be relatively insensitive to As is well known, when the wage equation is the differential between interest rates on U.S. of the Phillips-curve variety, the coefficient on assets and those on foreign assets. One conseprice change determines the existence of a long- quence of the relative insensitivity to the real run tradeoff between inflation and unemploy- interest rate of both private and net foreign ment. If the coefficient is less than unity, there is saving is that persistent government budget defisuch a long-run tradeoff. If the coefficient is cits—which are a form of dissaving—reduce the unity, as it is estimated to be in the model's equation, the long-run Phillips curve is vertical, 17. The equation imposes a unitary price response, but the coefficient value when freely estimated is not significantly different from this value. The existence of a natural unem- 16. Compensation is inclusive of employee and employer ployment rate also requires that the elasticities of the output social security insurance contributions and of other fringe price with respect to factor prices sum to one. The model's benefits. price equation implicitly has this characteristic. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Structure and Uses of the MPS Quarterly Econometric Model of the United States 101 amount of wealth in individuals' portfolios allo- Financial Sectors cated to the private capital stock. Thus, in the long run, per capita output is smaller than it The financial sector includes equations for the would otherwise be.18 components of the money stock measures Ml The relation between government debt policy and M2 and for the behavior of bank reserves. A and private saving also hinges on the extent to term-structure equation links the long-term rate which individuals' consumption decisions are of interest to the current and past values of a sensitive to expected future tax liabilities. Under short-term interest rate and the rate of inflation. what has become known as the Ricardian equiva- Another equation equates the expected rate of lence proposition, a shift between tax and deficit return on equity (net of a risk premium) to the (bond) finance of government expenditures has expected rate of return on bonds. no effect on consumption.19 This conclusion is based on the intertemporal budget constraint Ml andM2 Components. Ml is modeled as the faced by the government, which ensures that sum of four components: currency plus travelers short-run changes in the financing mix change checks, demand deposits, Super NOWs, and only the time profile of tax liabilities, not their other checking deposits excluding Super NOWs. present value. This view also requires that con- The specification of each equation is based on sumers are forward-looking and see that changes the inventory-theoretic transactions model. The in the short-run financing mix do not affect their principal explanatory variables are the opportuown intertemporal budget constraints. nity cost (market rate of interest less any explicit For both empirical and theoretical reasons, the return on the deposit), the price level (with specification of the model's consumption equa- homogeneity of degree one imposed), and real tion is not based on the Ricardian equivalence output or consumption. Except in the case of approach. The specification used has explained currency, the elasticity of deposits with respect past consumption well, even over recent years, to the opportunity cost increases as the opportuwhen there has been a marked shift toward nity cost rises, and it approaches zero as the deficit finance. In the Ricardian view, the result- opportunity cost approaches zero. The demand ing increase in aftertax income should have been for currency has a constant elasticity with resaved. Instead, consumption has increased and spect to the opportunity cost. private saving has remained low, as predicted by At the M2 level, all deposit categories in M2 the model's consumption equation. From a theo- but not in Ml,except overnight RPs and Eurodolretical perspective, the Ricardian equivalence lars, are aggregated for modeling purposes. The proposition is not valid if such factors as liquidity share of household wealth allocated to this aggreconstraints, finite planning horizons, or uncertain- gate depends on measures of the opportunity ty significantly influence consumer behavior.20 cost as well as on the change in wealth due to personal saving (to reflect a temporary rise in the share of wealth allocated to these more liquid deposits when saving increases). The Yields on Bonds and Equity. The term- 18. In the long run, government deficits always crowd out structure equation relates the yield on corporate gross output; and, unless the capital-output ratio exceeds bonds to current and lagged values of the comthat consistent with maximum sustainable net output, deficits crowd out net output also. mercial paper rate and the rate of inflation. 19. Robert J. Barro, "Are Government Bonds Net Because the effective duration or maturity of a Wealth?" Journal of Political Economy, vol. 82 (November/ coupon bond shortens as interest rates rise, the December 1974), pp. 1095-117. 20. See Robert B. Barsky, N. Gregory Mankiw, and Ste- length of the distributed lags on both the comphen R. Zeldes, "Ricardian Consumers with Keynesian Pro- mercial paper and inflation rates is allowed to pensities," American Economic Review, vol. 76 (September vary with the recent level of the commercial 1986), pp. 676-91, and the references cited therein. To the extent that these potential factors affect the sensitivity of paper rate.21 The lag length is estimated to be consumption to contemporaneous aftertax income, they are consistent with the general specification of the model's con- 21. The duration shortens as the interest rate rises because a sumption equation, which freely estimates this parameter. larger fraction of the present value of all payments on a bond— Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

102 Federal Reserve Bulletin • February 1987 shorter the higher are recent values of the short- Ml by purchasing through open market operaterm rate. The real return on equity is calculated tions the fraction of the increase in government as a weighted average of dividends and cash debt that the nongovernment sectors do not wish flow, divided by the market value of equity; most to hold at the base value of the short-term of the weight is on dividends. This real rate is interest rate. As shown in entry 1 in table 1, these equated to the real return on bonds—the corpo- assumptions result in a response of the level of rate bond rate less a long distributed lag on the real GNP that peaks at 3.8 percent after four rate of inflation—plus a constant to reflect a risk years and subsides a bit thereafter. This is a premium. typical multiplier-accelerator pattern: the adjustment dynamics of most of the investment equations cause the short-run response to exceed the long-run response. The size of the long-run re- MODEL PROPERTIES sponse depends inversely on the degree to which The previous sections have described key com- increases in income escape from the domestic ponents of the structure of the model. This part spending chain in the form of increases in saving, presents simulations to demonstrate more con- a rise in taxes, and purchases of foreign goods. cretely the properties of the model, particularly The second entry shows the consequence of in the short run. Each case has a base simulation altering the monetary policy assumption to one in which the model is adjusted to replicate the in which Ml is held at its base path. The higher historical path of the economy. Then a second level of activity generated by the change in fiscal simulation, in which the time path of an exoge- policy requires an increase in interest rates to nous variable is altered, is performed. The re- hold money demand equal to the fixed supply. sults presented below are differences between (In the loanable funds market, the rise in interest the second simulation and the base simulation.22 rates is necessary to induce the nongovernment sectors to hold all of the increase in government debt.) Under this monetary policy assumption, Response to a Fiscal Shock the boost to real GNP is considerably damped as the higher level of the interest rate crowds out In this simulation, real federal purchases are some interest-sensitive private spending. The permanently increased by 1 percent of real GNP. peak response is 1.4 percent after two to four All tax rates are held constant. The simulation is quarters. performed four different ways to show the rela- In entry 3, prices are endogenized, but wages tive importance of demand and supply responses are still exogenous.23 Monetary policy is again and the dependence of the outcome on the stance characterized by fixed Ml. In this case, producof monetary policy. In the first case, the supply ers are permitted to choose the price at which to side of the model is suppressed by holding supply output although labor is still available at wages, prices, and relative factor proportions at the fixed wage rate. Given these assumptions, their base values to highlight the demand effects the real GNP response is further damped after of the fiscal change; thus the supply of output is the first two years, but only by a little. After the first assumed to move one for one with changes in two quarters, prices rise slightly, reflecting some demand at an unchanged price. Monetary policy upward slope to the supply curve for output. The is characterized by holding the federal funds rate higher price level retards aggregate demand at its base value. From the perspective of the through a shift in the distribution of income loanable funds market, fixing the federal funds toward profits and away from real disposable rate requires the monetary authority to increase income (such a shift reduces demand in the short run but not in the long run when households recognize their gains as shareholders). It retards both the coupon and the repayment of principal—is then due to the nearer-term payments. 22. Because the model is nonlinear, the size of the multiplier depends on the characteristics of the base simulation. Experi- 23. The mix of inputs in the production process also is ments have shown that this dependence on initial conditions allowed to change, but this change is of only small quantitative can be significant. importance over the period being simulated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Structure and Uses of the MPS Quarterly Econometric Model of the United States 103 1. Simulated responses to an increase in purchases by the federal government1 Percent, except where noted Quarter following shock TTyyppee ooff ssiimmuullaattiioonn 1 2 4 8 12 16 20 1. Exogenous supply side: federal funds rate fixed Real GNP 1.3 1.7 2.3 3.1 33..77 33..88 33..11 2. Exogenous supply side: Ml fixed Real GNP 1.2 1.4 1.4 11..22 1.1 .8 .4 Federal funds rate (percentage points) 1.02 1.24 1.12 .80 .89 .68 .32 3. Exogenous wages: MI fixed Real GNP 1.3 1.5 1.4 1.2 11..00 ..55 .1 GNP deflator 0 0 .1 .3 .4 .5 .5 Federal funds rate (percentage points) .98 1.36 1.30 1.05 1.18 .98 .48 4. Full model: Ml fixed Real GNP 1.3 1.4 1.3 1.0 .2 -.9 -2.0 GNP deflator 0 .1 .3 .9 1.8 2.7 3.0 Federal funds rate (percentage points) 1.00 1.42 1.49 1.67 2.20 2.15 1.31 1. Real federal purchases are increased by 1 percent of the base over the period 1981-85, with the base simulation constructed to value of real gross national product. The responses were calculated replicate historical values. aggregate demand also by further raising interest supply-side response that will cause the long-run rates, given the fixed Ml policy. real output multiplier to be negative: the crowd- In each of these three cases, the more expan- ing out of private investment lowers the private sionary fiscal policy leads to a permanent in- capital stock. This is a very gradual process, crease in output because of the suppression of however, and is not apparent over the five-year one or more elements of the supply side of the period shown in the table. model. In a fourth case, when wages are endo- Comparing entries 2 and 4 indicates the relagenized and the full model is simulated (with tive importance of the supply side of the model fixed Ml), the picture changes dramatically. The over short periods. Both of these multipliers are stimulative fiscal policy now has only a transi- based on the same monetary policy assumption, tory positive effect on real activity. No longer but entry 2 suppresses the supply side of the can firms boost employment at a fixed wage rate; model whereas entry 4 includes it. The results rather, the increase in employment required to for real GNP are virtually the same for the first produce the initially higher level of output leads quarter and are fairly close after one year, but to higher wages. Higher wages boost prices, then diverge significantly. For the period simuwhich in turn put further upward pressure on lated, supply-side influences work primarily wages. The wage-price acceleration (relative to through the wage-price sectors; however, in the the values of wages and prices in the base long run, the effect on potential output of simulation) stops as higher prices push up inter- changes in the private capital stock becomes the est rates and crowd out private spending. Private dominant factor. spending is fully displaced by the higher level of The response of the model to other exogenous 1 government purchases after about 3/2 years. The shifts in aggregate demand, such as a shift in the response of output then turns negative because investment function, is similar over a five-year the higher price level is inconsistent with the period to that from a change in government unchanged supply of money. In general, the purchases. Over longer periods, however, the dynamic path to the long-run equilibrium will be responses will not be the same to the extent that characterized by gradually damped oscillations.24 The expansive fiscal policy also sets off a fixed supply of money, an increase in real activity requires that interest rates rise to hold money demand equal to the un- 24. The model tends to oscillate after a shock, especially if changed supply. The higher interest rates eventually lower monetary policy takes the form of holding a monetary aggregate activity. The scenario is then repeated in reverse. The other, unchanged. There are two basic reasons for the cycling. One is and more important, source of cycling is the specification of the the longer lag between interest rates and real activity compared wage equation in growth-rate form. As a result, the real wage with the lag between interest rates and money demand. With a oscillates in response to a shock. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

104 Federal Reserve Bulletin • February 1987 they have different implications for the private the direct effect of monetary policy on financial capital stock and potential output. markets. The effects on selected financial variables are presented in the top third of the table. An increase in Ml initially depresses the short- Response to a Shock in the Level of Money term interest rate by a disproportionately large amount. The "overshooting" of interest rates Because a principal reason for building the model stems from the small contemporaneous elasticity was to focus on monetary and financial forces, of Ml (relative to its long-run elasticity) with much attention has been paid over the years to respect to the short-term interest rate. Because exploring the channels through which monetary the corporate bond rate is modeled by a distributfactors affect the real economy. This issue has ed lag on the commercial paper rate—and the long been a subject of controversy at both the dividend-price ratio by a distributed lag on the theoretical and the empirical levels. The role of bond rate—these rates can also overshoot initialmoney in the model lies well between the ex- ly. By the end of the fifth year, the effect on the tremes of the monetarist school, on the one commercial paper rate is close to 1 percentage hand, and the view that money is a relatively point; the effect on the bond rate is slightly unimportant factor in business cycles, on the smaller; and the change in the dividend-price other. There is, however, a fundamental differ- ratio is about half the change in the bond rate, ence between the short- and the long-run effects reflecting the historical average of the dividendof money in the model. Over the short run, an earnings payout ratio. The percentage increase in autonomous change in the money supply signifi- stock market wealth equals the percentage decantly affects aggregate demand because of the cline in the dividend-price ratio, and the change estimated importance of the real interest rate and in land prices moves inversely but slowly with of wealth in influencing demand. Nevertheless, the decline in the bond rate. By quarter 20, the the effect on demand occurs solely through percentage increase in land prices is about 70 changes in the interest rate—neither the level nor percent of the long-run change consistent with the rate of growth of money enters the behavioral the decline in the bond rate.26 equations (except, of course, the money demand In panel 2, the changes in interest rates and equations). In the long run, an autonomous wealth after 20 quarters, as reported in the last change in the level of money has no effect on the column of panel 1, are fed through to the equareal economy and, instead, will determine only tions for the components of demand. By using the level of prices. the long-run changes in interest rates and wealth To isolate some of the factors influencing the (that is, those that appear after 20 quarters) full model response to a permanent change in the rather than the complete path as reported in level of money, the simulations were decom- panel 1, the simulation compresses the period posed into several steps. The results are present- over which these demand responses would aped in table 2. pear. Each component of demand is treated In the first stage, the level of Ml is permanent- separately from all other components, and aggrely increased by 1 percent relative to the baseline gate output and income are held fixed to abstract value of Ml. Only interest rates and the interest- from multiplier-accelerator effects on spending. sensitive components of wealth are endogen- Thus the direct effects of changes in interest ized.25 Because prices and output are held fixed, rates and wealth on individual components of changes in the rest of the economy do not feed demand are isolated.27 back to the financial sectors, so we can measure 26. The estimated long-run elasticities of land values with respect to the bond rate are (in absolute value) 0.81 for farmland, 0.73 for household ownership of land, and 1.02 for other noncorporate land. 25. Although market values of housing, consumer durables, 27. The percentage change in land prices that is used for the and bonds (with a maturity in excess of one period) would also simulations reported in panel 2 is the change in land prices in change with interest rates, the model captures changes only in evidence when land prices have fully adjusted to the changes in the capitalized values of the stock market and of land. the bond rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Structure and Uses of the MPS Quarterly Econometric Model of the United States 105 In the model, the principal channel through level of output. The modeling of consumer durawhich money and interest rates affect spending is bles, business fixed investment, housing, and the cost of capital, which is the gross return on inventory investment explicitly recognizes this capital given the rate of return on investor equi- link between the cost of capital and investment ty, the rate at which capital depreciates, the tax spending. rate, the cost of debt, and the rate of inflation. A Panel 2 reveals considerable variation in the reduction in the rate of return on equity or debt— way various kinds of investment respond to a holding fixed the rate of inflation—lowers the decline in the interest rate. Several factors accost of capital and raises the optimal capital- count for this variation. A change in the interest output ratio and the rate of spending at a given rate has a bigger impact on the cost of capital the 2. Simulated responses to an increase in money1 Quarter following shock 1 4 8 12 16 20 1. Ml increased: only interest rates endogenous Commercial paper rate (basis points) -252 -111 -83 -89 -99 -97 Corporate bond rate (basis points) -81 -76 -51 -59 -88 -94 Dividend-price ratio (basis points) -47 -51 -30 -25 -42 -44 Corporate equity Billions of dollars 149 141 103 130 203 293 Percent 12.2 Noncorporate land Billions of dollars 9 28 47 68 86 104 Percent 4.1 2. Interest rate and wealth changed by long-run effect (as reported in quarter 20 of panel one); aggregate output, income, and prices exogenous Producers' durable equipment Billions of 1982 dollars .7 2.4 4.2 8.4 10.7 13.2 Percent .3 1.0 2.0 3.2 3.6 4.1 Producers' structures Billions of 1982 dollars 0 3.7 5.3 7.4 7.5 6.9 Percent 0 2.4 3.9 5.6 5.1 4.5 Housing investment Billions of 1982 dollars 2.6 10.0 8.6 9.6 7.8 6.3 Percent 1.9 9.1 7.4 6.0 4.6 3.5 Inventory investment Billions of 1982 dollars .5 1.7 1.7 1.1 .8 .7 Consumer purchases of new autos Billions of 1982 dollars 0 .8 1.0 1.0 .9 .8 Percent 0 1.9 1.7 1.4 1.2 1.1 Consumer durables other than autos Billions of 1982 dollars .2 1.7 2.9 3.2 3.1 3.1 Percent .1 .8 1.4 1.4 1.2 1.2 Consumption2 Without consumption price change Billions of 1982 dollars 2.2 8.7 13.1 21.0 25.2 27.9 Percent .1 .4 .6 1.0 1.1 1.2 With consumption price change Billions of 1982 dollars 4.7 14.6 20.0 29.0 33.2 35.8 Percent .2 .7 .9 1.3 1.5 1.5 3. Full-model responses for Ml increase RReeaall GGNNPP Billions of 1982 dollars 11 38 36 17 -24 -61 Percent .3 1.2 1.1 .5 -.7 -1.7 GNP deflator (percent) 0 .1 .6 1.4 2.1 2.4 Commercial paper rate (basis points) -229 -15 53 89 56 1 Corporate bond rate (basis points) -82 -20 34 34 49 41 Unemployment rate (percentage points) -.1 -.4 -.5 -.4 0 .6 Exchange rate (percent) -2.9 -2.4 -2.8 -.3 .1 2.8 1. The level of Ml is permanently increased by 1 percent. The 2. Includes the service flow from the stock of consumer durables responses were calculated over the period 1981-85 with the base but not expenditure on new durables, simulation constructed to replicate historical values. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

106 Federal Reserve Bulletin • February 1987 longer the life of the capital.28 Therefore, housing The second consumption row in panel 2 allows and nonresidential structures are more sensitive for an additional influence of interest rate to interest rate changes than are consumer and changes on consumption spending. The model producers' durables, ceteris paribus. Differences definition of consumption includes the imputed in the estimated elasticity of each type of capital flow of services from the stock of consumer to the cost of capital also matter. The larger durables. Because an element of the price of response of producers' durable equipment to the these services is the (real) interest expense on a cost of capital, compared with that of structures, unit of consumer durables, a decline in the offsets some of the greater sensitivity of the cost interest rate directly lowers the price of conof capital to interest rates that longer-lived struc- sumption, thus stimulating consumption for a tures have. In addition, because the figures in given level of nominal income.29 As shown in the panel 2 represent the dynamic paths of spending last row, including this effect boosts the conrather than the steady-state effects, the re- sumption response about 50 percent. sponses reflect differences among the markets Another channel that at one time was imporfor the various capital goods in the time between tant in linking the financial and real sectors of the placing an order and receiving the capital and in model was nonprice credit rationing in the mortthe speed with which actual changes in interest gage market. However, the causes of credit rates lead to expected changes. Equally impor- rationing—deposit rate ceilings, usury contant for the dynamic paths is the ex post possibil- straints on mortgage rates, and the lack of inteity for factor substitution. Because of its putty- gration of the mortgage and general capital marclay nature, producers' durable equipment ad- kets—have diminished considerably over the justs relatively slowly to the change in interest past decade with the deregulation of both the rates, and the short-run response of investment deposit and the mortgage markets. The structure in this type of capital never exceeds the long-run of the model's housing sector thus assumes that response. By contrast, all other categories of the influence of credit rationing has been negligicapital show a tendency to overshoot in the short ble since the mid-1970s. run. The full-model response to a permanent in- Another way financial variables affect the real crease in the level of Ml, reported in panel 3, economy is by inducing short-run variations in allows for the feedback from output to prices and household net worth. In the model, the market interest rates and for multiplier-accelerator efvalue of corporate equity is determined by capi- fects on output. Initially, interest rates are lowtalizing the dividend stream by the dividend- ered and output is stimulated by the factors price ratio, and the market value of land is described in the first two panels of the table. The determined by capitalizing the expected real out- higher level of output then leads to increases in put of land by the real rate of interest on bonds. prices, and the higher output and higher prices A dollar increase in the value of the stock market together subsequently raise interest rates—deand the value of land is estimated to increase spite the increase in Ml. Higher interest rates consumption by five cents and nine cents respec- then depress spending relative to the base path, tively. The first consumption row in panel 2 and prices and interest rates will eventually shows the dynamic response of consumption to reverse direction. By quarter 20, the model soluchanges in wealth (consistent with a decline in tion remains far from its steady-state response: the bond rate of a little less than 1 percentage the increase in the price level (2.4 percent) is well point), assuming no change in property income. above the 1 percent that in the long run is By quarter 20, the effects of wealth on consumption approximately equal the sum of the effects of the cost of capital on the other categories of demand. 29. One component of the model's measure of nominal property income is not held constant in this case. A decline in consumption prices—given past prices—initially reduces the capital gains households earn on their holdings of government 28. This effect occurs because for longer-lived assets the rate and foreign debt. Because this change in the price level is of interest is a larger fraction and the depreciation rate a smaller permanent, the rate of inflation is ultimately unchanged, so this fraction of the cost of capital. effect does die out. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Structure and Uses of the MPS Quarterly Econometric Model of the United States 107 consistent with the change in money, and the bles are derived as residuals from autoregressive level of output is 1.7 percent below its long-run equations 32 response of no change. Policy Alternatives USES OF THE MODEL The model offers a convenient framework for analyzing the effects of alternative monetary and Forecasting fiscal policies or of changes in other exogenous variables. Despite the complexity of the model, The staff of the Federal Reserve Board regularly such simulations often require judgmental adjustprepares forecasts of the economy, and one ments or adaptations of model equations to capelement in the forecasts is a projection derived ture fully the important aspects of the issue being from the quarterly model. The model forecast is analyzed. For instance, in simulating the effect of not a purely mechanical projection; rather, it lower energy prices, a judgmental adjustment typically depends on constant adjustments (add has to be made both to the projection of domestic factors) applied to many of the behavioral equa- production of petroleum and to investment in tions. Add factors are introduced for three rea- petroleum drilling rigs because those variables sons: (1) to adjust equations whose post-sample are exogenous to the current structure of the errors have deviated from the estimated error model. characteristics and for which there has been either insufficient time to reestimate the equation Special Uses of the Model or lack of success at respecifying the equation; (2) to reflect shocks to behavior that can be In addition to its use for forecasting and shortidentified with events not captured by the struc- run multiplier analysis, the model has served ture of an equation and whose magnitude and other purposes over the years. Often it has been persistence can be roughly predicted; and (3) to simulated to determine the long-run implications incorporate an estimate of an equation's near- of policy changes. A study by Anderson, Ando, term error based on high-frequency data obser- and Enzler, for example, examined the effect of vations. In the last case, a pooled forecast from various fiscal policies on the steady-state values the quarterly model and a monthly short-term of output and the real rate of interest.33 In one set forecasting model are used as aids in generating of simulations reported, the long-term ratio of add factors.30 The monthly model combines di- net federal debt to nominal GNP was increased rect observations on high-frequency data with a from 0 to 100 percent with the consequence that mix of behavioral and autoregressive equa- the new steady state had a real rate of interest tions.31 that was higher by 5 percentage points and a As part of the forecasting process, a stochastic level of real GNP that was 5 percent lower. In simulation technique is used to generate confi- another study of fiscal policy, Brayton and Clark dence ranges or probability distributions for the used the model to investigate the longer-run model projection. The approach involves repeat- consequences of the 1981 Economic Recovery edly simulating the model, subjecting each be- Tax Act (ERTA).34 In this case, rather than havioral equation and most exogenous variables to random shocks based on their historical error 32. The stochastic simulation methodology was developed characteristics. The errors for exogenous varia- and implemented by Peter Tinsley, James Berry, Gerhard Fries, Doug Handler, and Arthur Kennickell. It has also been extensively used for the analysis of policy strategies as de- 30. Carol Corrado and Mark Greene, "Reducing Uncertain- scribed in the text. ty in Short-Term Projections: The Linkage of Monthly and 33. Robert Anderson, Albert Ando, and Jared Enzler, "In- Quarterly Models" (Board of Governors of the Federal Reserve teraction between Fiscal and Monetary Policy and the Real System, Division of Research and Statistics, Special Studies Rate of Interest," American Economic Review, vol. 74 (May Section, December 1983). 1984, Papers and Proceedings, 1983), pp. 55-60. 31. Carol Corrado and David Reifschneider, "A Monthly 34. Flint Brayton and Peter B. Clark, The Macroeconomic Forecasting Model of the U.S. Economy" (Board of Governors and Sectoral Effects of the Economic Recovery Tax Act: of the Federal Reserve System, Division of Research and Some Simulation Results, Staff Studies 148 (Board of Gover- Statistics, Special Studies Section, September 1986). nors of the Federal Reserve System, 1985). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

108 Federal Reserve Bulletin • February 1987 simulating the model until it reached an equilibri- Most recently, Anderson and Enzler extended um growth path, they adjusted monetary policy this approach to develop a hierarchical policy to offset the impact of ERTA on real output. reaction function and used stochastic simulation Several results emerged from the study: real to contrast it to the case of Ml targeting.37 This interest rates were significantly higher as a result study also investigated these types of policies in of ERTA; investment was depressed as the in- a forward-looking framework that permits the crease in real interest rates more than offset the policy setting in each period to depend on the stimulus to investment from the acceleration of consequences of the policy as given by determindepreciation allowances; and the shift from tax istic simulations of the model. to bond finance of federal expenditures, implicit in ERTA, would have led eventually to an unstable budgetary position in which government debt CHANGES TO THE STRUCTURE grew explosively. OF THE MODEL Some other special uses of the model have centered on the analysis of alternative strategies All macroeconomic models are at best approxifor conducting monetary policy. Two papers by mations to the true structure of the economy. Kalchbrenner and Tinsley in the mid-1970s ap- Exact models cannot be created because of the plied optimal control techniques to this topic.35 complexity of the economy. Moreover, empirical Subsequent studies have used the stochastic methods are limited to estimating behavioral simulation methodology, described above, to an- relations based on available data, however imalyze a wider range of policy design issues than perfect. Although one hopes to model the imporcan be studied using deterministic simulations tant features of the economy accurately, the (for example, policies that react to shocks) and to passage of time inevitably reveals the failure of evaluate policies on the basis of the degree of parts of a model's structure to explain adequatecontrol achieved over ultimate targets such as ly economic events. Thus a need to reexamine inflation and unemployment. A series of papers the structure of a model persists. by Tinsley and von zur Muehlen used stochastic The process of reexamination has led over model simulations for three purposes: (1) to rank time to many modifications of the quarterly strategies that focused directly on the ultimate model structure. Among the most important targets with those based on intermediate targets changes was the replacement of the original wage (Ml, M2, nominal GNP, the federal funds rate, equation—which implied a long-run tradeoff beand the monetary base); (2) to determine whether tween inflation and unemployment—with one in the choice of an intermediate target more closely which no such tradeoff existed.38 The long-run related to the ultimate targets was superior to characteristics of the model's supply side also targeting on variables causally further removed; were altered with the inclusion of the average and (3) to evaluate conditional intermediate tar- capital-output ratio (and, at a later time, the geting in which policy settings were revised in energy-output ratio) in the productivity equalight of events affecting the ultimate targets.36 Studies Section, November 1983); and P. A. Tinsley and P. von zur Muehlen, "Conditional Intermediate Targetting" 35. J. H. Kalchbrenner and P. A. Tinsley, "On the Use of (Board of Governors of the Federal Reserve System, Divi- Optimal Control in the Design of Monetary Policy," Special sion of Research and Statistics, Special Studies Section, Studies Papers 76 (Board of Governors of the Federal Reserve October 1983). System, Division of Research and Statistics, Special Studies 37. Robert Anderson and Jared Enzler, "Policy Design: Section, July 1975), and J. H. Kalchbrenner and P. A. Tinsley, Policy Rules That Use Forecasts," in R. Dornbush and "On the Use of Feedback Control in the Design of Aggregate S. Fisher, eds., Macroeconomics and Finance: Essays in Monetary Policy,"American Economic Review, vol. 66 (May Honor of Franco Modigliani (Cambridge, Mass., and Lon- 1976, Papers and Proceedings, 1975), pp. 349-55. don: M.I.T. Press, forthcoming). 36. P. Tinsley, and P. von zur Muehlen, "A Maximum 38. The original wage equation embodying the long-run Probability Approach to Short-Run Policy, "Journal of tradeoff is described in George de Menil and Jared Enzler, Econometrics, vol. 15 (January 1981), pp. 31—48; P. Tinsley "Prices and Wages in the FR-MIT-Penn Econometric Modand P. von zur Muehlen, "The Reliability of Alternative el," in O. Eckstein, ed., The Econometrics of Price Determi- Intermediate Targets (Board of Governors of the Federal nation (Board of Governors of the Federal Reserve System, Reserve System, Division of Research and Statistics, Special 1972), pp. 277-308. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Structure and Uses of the MPS Quarterly Econometric Model of the United States 109 tion. The foreign sector of the model was elabo- portfolio equations that determine international rated considerably in the mid-1970s in response capital flows have been another source of probto the shift from fixed to floating exchange rates lems. These equations do not adequately capture and to the expansion of international trade. As the portfolio shifts and exchange rate movements mentioned above, the structure of the model's that have taken place since the early 1980s. housing sector has changed from one in which Finally, the role of energy in the production credit rationing and the supply of mortgage funds technology will be reexamined, given the inconplayed an important role to one in which interest sistency between the estimated price elasticity of rates capture all supply factors. the demand for energy and the use of a Cobb- Work is now planned in several areas to im- Douglas production function. Work in this area is prove the current structure of the model. Recent- likely to affect the labor demand equation, and it ly, considerable effort has been devoted to ex- may have implications for the specification of the plaining the surprisingly strong growth of Ml investment equations. • since 1985. New equations are anticipated for components of Ml and M2 as well as for the own Paulus, "Some Problems of Money Demand," Brookings rates of return on several components.39 The Papers on Economic Activity, 1:1976, pp. 261-80; Richard D. Porter, Thomas D. Simpson, and Eileen Mauskopf, "Financial Innovation and the Monetary Aggregates,"Brookings Papers on Economic Activity, 1:1979, pp. 213-29; P. A. Tinsley and B. Garrett, with M. E. Friar, "The Measurement 39. This research, which is being undertaken by Richard of Money Demand," Special Studies Papers 133 (Board of Porter, George Moore, David Small, Jong Park, and Dan Governors of the Federal Reserve System, Division of Re- Bagatell, is summarized in Richard D. Porter, Paul A. Spindt, search and Statistics, Special Studies Section, October 1978); and David E. Lindsey, "Econometric Modeling of the De- Thomas D. Simpson and Richard D. Porter, "Some Issues mands for the U.S. Monetary Aggregates: Conventional and Involving the Definition and Interpretation of the Monetary Experimental Approaches" (paper presented at the Pacific Aggregates," in Federal Reserve Bank of Boston, Control- Basin Central Bank Conference on Economic Modeling, ling the Monetary Aggregates III, Conference Series 23 Sydney, Australia, December 1986). Over the years, money (FRBB, October 1980), pp. 161-234; and Flint Brayton, Terry demand has proved to be a difficult area to model, and it has Farr, and Richard Porter, "Alternative Money Demand been the subject of considerable research by members of the Specifications and Recent Growth in Ml" (Board of Gover- Division of Research and Statistics as well as by other nors of the Federal Reserve System, Division of Research researchers. Previous studies of money demand by division and Statistics, Econometric and Computer Applications Sececonomists include Jared Enzler, Lewis Johnson, and John tion, May 1983). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

110 Industrial Production Released for publication December 15 125.9 percent of the 1977 average, industrial output in November was less than 1 percent Industrial production increased an estimated 0.6 higher than it was a year earlier. percent in November following three months of In market groups, output of total consumer virtually no change. Gains prevailed in all major goods rose 0.7 percent in November—the first market groups except energy materials, which gain since July. Autos were assembled at an edged down further. Nondurable materials, annual rate of 7.3 million units—the same as home goods, defense equipment, and construc- October; schedules for output were not met in tion supplies continued to show strength. At part because of a strike at a parts manufacturing Ratio scale, 1977 = 100 TOTAL INDEX 140 - - _ Products 170 „ —— ——. SM. •-•.— . — 100 v. / Materials ^ / 80 I i i i i i MATERIALS Durable Nondurable 160 I CONSUMER GOODS 140 _ INTERMEDIATE PRODUCTS Business supplies 120 J 100 Construction supplies j i i 240 140 MOTOR VEHICLES AND PARTS FINAL PRODUCTS 200 120 Defense and space 100 160 Business equipment 140 120 100 60 Consumer goods 1980 1982 1984 1986 1980 1982 1984 1986 All series are seasonally adjusted. Latest figures: November. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Ill 1977 = 100 Percentage change from preceding month PPPeeerrrccceeennntttaaagggeee ccchhhaaannngggeee,,, Group 1986 1986 NNNooovvv... 111999888555 tttooo NNNooovvv... Oct. Nov. Dec. Aug. Sept. Oct. Nov. 111999888666 Major market groups Total industrial production 125.2 125.9 .5 .1 .0 .1 .6 .8 Products, total 133.8 134.6 .6 .4 -.2 .2 .6 1.3 Final products 132.7 133.5 .7 .4 -.1 .1 .6 .3 Consumer goods 124.7 125.6 .6 .0 -.3 .0 .7 2.4 Durable 115.9 116.8 1.7 -.5 1.5 -1.3 .7 1.2 Nondurable 127.9 128.8 .3 .1 -.9 .4 .7 2.8 Business equipment.. 139.4 140.1 1.0 1.0 .1 .0 .5 -.5 Defense and space 183.6 184.4 .7 .8 .6 .9 .4 4.1 Intermediate products.. 137.8 138.4 .2 .4 -.5 .4 .5 5.0 Construction supplies 125.0 125.7 -.1 -.6 .3 .5 4.3 Materials 113.3 113.9 .4 -J .2 -.1 .5 .0 Major industry groups Manufacturing. 129.6 130.5 .7 .2 .0 .1 .7 2.1 Durable 127.9 128.6 1.0 .1 .4 -.1 .6 .3 Nondurable . 132.0 133.1 .4 .4 -.5 .3 .8 4.6 Mining 94.9 94.2 -1.8 -.7 -1.0 -.7 -.7 -11.9 Utilities 110.9 111.3 1.0 -1.2 1.3 1.0 .4 -.5 NOTE. Indexes are seasonally adjusted. plant. Besides another strong increase in produc- ing a lackluster performance throughout most of tion of home goods, output increased in nondura- 1986. Sizable increases occurred in both durable ble consumer goods—in particular clothing, and nondurable components, with gains especialfood, and other staples. Production of equipment ly strong for nondurable groups such as textile, strengthened 0.5 percent in November, with paper, and chemicals. gains in most types of equipment. Nevertheless, In industry groups, manufacturing output adproduction of equipment is below year-earlier vanced 0.7 percent in November after little levels as a result of weakness earlier this year in change in recent months. Most durable goods output of business equipment and in oil and gas industries, including metals, appliances, lumber, well drilling. In particular, although activity in oil and furniture, increased during November, but and gas well drilling has improved somewhat in total durable manufacturing remained about the recent months, it is still almost 50 percent lower same as a year earlier. In contrast, nondurable than it was in November 1985. manufacturing, which also increased in Novem- Production of construction and business sup- ber, is almost 5 percent higher than it was in the plies expanded further in November, about in same month last year. Utility output rose 0.4 line with the pace of the past year. Output of percent in November, but mining activity was materials also posted a gain in November follow- reduced further. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

112 Announcements HENRY C. WALLICH: came after an already distinguished career as an RESIGNATION AS A MEMBER economist engaged in central banking, teaching, OF THE BOARD OF GOVERNORS and writing. Educated in Germany, at Oxford University in Henry C. Wallich resigned as a member of the England, and at Harvard University, Governor Board of Governors, effective December 15. The Wallich was Professor of Economics at Yale text of Governor Wallich's letter of resignation University for 23 years immediately before jointo President Reagan and a Board announcement ing the Board in 1974. He began his career with follow: the Federal Reserve 45 years ago at the Federal Reserve Bank of New York and served as chief December 15, 1986 of that bank's Foreign Research Division from 1946 to 1951. He took leave from Yale on two The President occasions, first when he served as Assistant to The White House Washington, D.C. the Secretary of the Treasury in 1958-59 and later from 1959-61 when he was appointed by My dear Mr. President: President Eisenhower as a member of the President's Council of Economic Advisers. Governor It is with great sadness that, because of poor health, Wallich also served as chief economic consultant I submit my resignation as a Member of the Board of to the Treasury Department for a number of Governors of the Federal Reserve System. The resigyears before his appointment to the Federal nation is to be effective as of the date of this letter. My association with the Federal Reserve System Reserve Board. began over forty years ago when, in 1941,1 joined the Paul A. Volcker, Chairman of the Federal staff of the Federal Reserve Bank of New York. After Reserve Board, paid special tribute to Governor many years at Yale University, I resumed this associa- Wallich's long service to the Board, to the protion when I was appointed a Member of the Board of Governors of the Reserve System. It is an office to fession of economics, and to his country. His which I was proud to be called and in which I have statement follows: been honored to have served for the past twelve years. Throughout these four decades, the Federal Reserve Henry brought unique talents to the Board. He has System has been the cornerstone of our monetary been widely known throughout his career as a prolific system. I have every confidence that its strength and writer, bringing to a large public audience incisive soundness will continue and I wish it well in the future. analysis of a variety of economic issues, large and small, in highly readable form. He has a lot to say, and Very sincerely yours, said it exceptionally well in books, in speeches, in magazine columns, and informal commentary. Henry C. Wallich Many fewer were privileged to work with him at the Board table and within the Federal Open Market Committee. Henry is, first of all, an inflation fighter, deeply On December 15, Henry C. Wallich resigned, committed to the need for currency and financial after long service as a member of the Board of stability. That belief motivated his service on the Governors, due to poor health. Board, and he brought to that effort a combination of theoretical insight and practical experience rare in any Governor Wallich has been the senior member individual. And all his colleagues came to know him as of the Board in terms of service, having joined a man to combine incisiveness and persistence with the Board on March 8, 1974. He was appointed wit, goodwill, and unfailing courtesy. by President Richard Nixon. That appointment Throughout his time at the Board, Henry also car- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

113 ried particular responsibilities for maintaining and member of the Ad Hoc Advisory Committee on the enlarging the international work of the Federal Re- Women's Initiative, an advisory group to the National serve. It was an area for which he was exceptionally Board of Directors of AARP. She is a licensed investwell fitted by training and personal interest. To many ment adviser, and since 1980 has headed her own abroad, he came to be the personification of the financial planning firm. Ms. Brown recently co-auth- Federal Reserve, and his financial diplomacy stands as ored A Second Start: A Widow's Guide to Financial a lasting contribution to international monetary coop- Survival at a Time of Emotional Crisis, published by eration. Simon and Schuster. She currently is on the Board of To all of us at the Board, he has been not only a the Minnesota Women's Network, is a member of the colleague but a friend. We wish him well in official National Business and Professional Women's Council, retirement, while looking forward to further contribu- and serves on the Governor's Appointments Commistions from his vast experience. sion. She also is a member of the Board of Governors at Mt. Sinai Hospital. Ms. Brown previously served on the Board of the National Women's Alliance for Professional and Executive Women. NEW MEMBERS APPOINTED TO CONSUMER ADVISORY COUNCIL Richard B. Doby, Denver, Colorado, is the Bank Commissioner for the state of Colorado and chairs the State Banking Board. He previously spent 12 years as The Federal Reserve Board on December 18, a commercial banker with the United Bank of Denver. 1986, named seven new members to its Consum- Mr. Doby is a member of the Board of Directors of the er Advisory Council to replace those members Conference of State Bank Supervisors. He also serves whose terms are expiring and designated a new on the Advisory Board of the Salvation Army. He is a past president of the Colorado Consumer Credit Coun- Chairman and Vice Chairman of the Council for seling Service, past chairman of the Colorado Urban 1987. League's membership committee, past member of the The Consumer Advisory Council was estab- Board of Directors of the Mile High United Way, and lished by the Board in 1976, at the direction of past chairman (appointed by the Governor) of the the Congress, to represent the interests of the Colorado Health Facilities Authority. Mr. Doby has been a guest lecturer on banking and economic finanfinancial industry and consumers. The Council cial issues at the University of Denver and Colorado advises and consults with the Board in the exer- University. He has an undergraduate degree in bankcise of the Board's functions under the Consum- ing and finance and holds a degree from the Graduate er Credit Protection Act and with regard to other School of Banking at the University of Wisconsin. In consumer-related matters of interest to the 1983, Mr. Doby led a delegation of Colorado bankers to Russia and China to study their monetary systems. Board. The Council consists of 30 members whose three-year terms are staggered. Richard H. Fink, Washington, D.C., is founder and Mr. Edward N. Lange was designated as President of Citizens for a Sound Economy, a 250,000member citizens organization. He also founded and is Chairman to succeed Ms. Margaret M. Murphy. Chairman of the Center for the Study of Market Mr. Lange is a partner with the law firm of Processes at George Mason University and is on the Davis, Wright, Todd, Riese, and Jones in Seat- Board of Trustees of the Center for the Study of Public tle, Washington. His term on the Council runs Choice, also at George Mason University. Mr. Fink is through December 1987. editor of Supply-Side Economics: A Critical Appraisal and A Nation in Debt: Economists Debate the Federal Mr. Steven W. Hamm was named to a one- Budget Deficit. His articles have appeared in numeryear term as Vice Chairman to succeed Mr. ous newspapers, magazines, and journals, including Lawrence S. Okinaga. Mr. Hamm is the Admin- the American Economic Review. He holds a Master's istrator for the South Carolina Department of degree in economics from the University of California, Consumer Affairs. He will serve on the Council Los Angeles, and is a magna cum laude graduate of Rutgers University. through December 1988. The seven new members, named for three- Stephen Gardner, Dallas, Texas, is an Assistant year terms beginning January 1, 1987, are the Attorney General of the state of Texas for the Dallas following: regional office. He is a member of the Council of the Consumer Law Section of the State Bar of Texas and Judith N. Brown, Edina, Minnesota, serves as the of a Texas State Bar Committee. Mr. Gardner has National Treasurer of the American Association of been active in conducting training conferences for Retired Persons (AARP), an organization representing lawyers and non-lawyers in consumer law and trial the interests of 24 million older Americans. She is a tactics, and has authored numerous publications on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

114 Federal Reserve Bulletin • February 1987 consumer law. He was formerly with the New York frequently quoted in consumer finance articles appear- State Bureau of Consumer Frauds and Protection and ing in national publications. He has written several the Legal Aid Society of Central Texas. He also textbooks and is the author of more than 100 professerved as the Students' Attorney at the University of sional articles and publications including Check Your Texas at Austin and was a Consumer Law Fellow at Interest and Cents-ible Interest. the National Consumer Law Center in Boston during 1980. The other members of the Council are the following (the date each term expires appears in parentheses): Elena G. Hanggi, Little Rock, Arkansas, is National President of the Association of Community Organiza- Edwin B. Brooks tions for Reform Now (ACORN), a community-based President organization in 26 states with a membership that Security Federal exceeds 60,000 low- and moderate-income families. Savings & Loan Association She has been an active participant in local and national Richmond, Virginia (December 31, 1988) discussions pertaining to the credit needs of low- and moderate-income communities. Ms. Hanggi has Jonathan A. Brown worked with ACORN chapters around the country Director, BankWatch regarding efforts to bring about basic banking offerings Washington, D.C. (December 31, 1987) by financial institutions. She has also consulted with these groups in negotiations with financial institutions Michael S. Cassidy concerning compliance with the federal Community Senior Vice President, Chase Manhattan Bank Reinvestment Act. Ms. Hanggi is a member of the New York, New York (December 31, 1988) Coalition of Women's Economic Needs in Arkansas and is on the Board of the Arkansas Peace Center. She Theresa Faith Cummings also serves on the Board of Directors of a community Social Services Consultant radio station, KABF, in Little Rock. She holds a B.A. Springfield, Illinois (December 31, 1987) from the University of Arkansas, Little Rock, with a major in English and Sociology and a minor in Urban Neil J. Fogarty Affairs, and will graduate in January 1987 from the Senior Attorney, Hudson County Legal Services University of Arkansas Law School. Jersey City, New Jersey (December 31, 1988) Ramon E. Johnson, Salt Lake City, Utah, is Profes- Kenneth A. Hall sor of Finance in the Graduate School of Business at President, Great Southern National Bank the University of Utah. He also conducts research on Jackson, Mississippi (December 31, 1988) a variety of matters concerning finance and business management, including the structure of interest rates. Robert J. Hobbs Dr. Johnson has been an administrator at the universi- Senior Attorney, National Consumer Law Center ty, serving six years as Chairman of the Department of Boston, Massachusetts (December 31, 1988) Finance and four years as Associate Dean of the Graduate School of Business. He has also served as Robert W. Johnson President of the University of Utah Credit Union. As a Professor of Management and Director Chartered Financial Analyst, Dr. Johnson has consult- Credit Research Center, Purdue University ed with the U.S. Federal Home Loan Bank Board, as West Lafayette, Indiana (December 31, 1988) well as numerous savings and loan associations, commercial banks, and other corporate organizations in John M. Kolesar Salt Lake City. In 1981 and 1982, he served on the President, Ameritrust Development Bank Mayor's blue ribbon panel to evaluate the financial Cleveland, Ohio (December 31, 1988) status of Salt Lake City. Alan B. Lerner Richard L.D. Morse, Manhattan, Kansas, is a Pro- Senior Executive Vice President fessor of Family Economics at Kansas State Universi- Associates Corporation of North America ty, actively involved in research on consumer credit Dallas, Texas (December 31, 1988) and consumer savings. He has testified before committees of the U.S. Senate and House of Representatives, Fred S. McChesney and drafted the U.S. Department of Defense's Direc- Visiting Fellow of Law and Economics tive on Consumer Credit. As a member of President University of Chicago Law School Kennedy's Consumer Advisory Council, he developed Chicago, Illinois (December 31, 1987) the concepts of APR (annual percentage rate) and PPR (periodic percentage rate). Dr. Morse has been a Helen E. Nelson consultant to the New York State Banking Depart- President, Consumer Research Foundation ment for drafting Truth in Savings regulations, and is Mill Valley, California (December 31, 1987) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Announcements 115 Sandra R. Parker At the same time, the Board withdrew its Chairman, Banking Committee proposal, issued on August 6, to exempt refi- Richmond United Neighborhoods nancings secured by the consumer's principal Richmond, Virginia (December 31, 1988) dwelling by other than the original creditor. The Joseph L. Perkowski proposal would have excluded refinancings when Chief Executive Officer (1) no new advances of money are made to the Minneapolis Federal Employees Credit Union consumer, (2) the annual percentage rate on the Centerville, Minnesota (December 31, 1987) new obligation is not subject to increase after consummation and is the same as or lower than Brenda L. Schneider Director of Community Relations the annual percentage rate on the obligation Manufacturers National Bank being replaced, and (3) the new transaction does Detroit, Michigan (December 31, 1987) not have a balloon payment feature. Jane Shull Director, Institute for the Study of Civic Values Philadelphia, Pennsylvania (December 31, 1988) PROPOSED ACTIONS Ted L. Spurlock Vice President and Director The Federal Reserve Board on December 10, of Credit and Consumer Banking Services J.C. Penney Company, Inc. 1986, issued for comment a series of proposals to Dallas, Texas (December 31, 1987) reduce and control the payments system risk faced by the Federal Reserve and individual Mel R. Stiller depository institutions participating in large-dol- Executive Director Consumer Credit Counseling Service lar wire transfer networks, book-entry transfer of Eastern Massachusetts systems, and automated clearinghouses (ACHs). Boston, Massachusetts (December 31, 1987) These proposals supplement the payment system risk policy announced by the Board on May 17, Christopher J. Sumner 1985. President and CEO Western Savings & Loan Company The Board also issued for public comment a Salt Lake City, Utah (December 31, 1987) revised interpretation to its official staff commentary on Regulation Z. The proposed revision to Edward J. Williams the commentary describes what constitutes a Senior Vice President, Consumer Banking Group new advance of money in a refinancing that is Harris Trust and Savings Bank Chicago, Illinois (December 31, 1988) exempt from the rescission provision. Comment is requested by January 30. Michael Zoroya The Federal Reserve Board on December 8, Retail Services Consultant 1986, issued a series of questions and answers The May Department Stores St. Louis, Missouri (December 31, 1987) relating to its ACH proposal that was issued on September 17. The proposal relates to the cost of float generated by ACH transactions processed CHANGE IN REGULATION Z during the night cycle and a corresponding reduction in the current per-item surcharge as- The Federal Reserve Board issued on December sessed on night-cycle ACH transactions. These 18, 1986, a final rule that modifies a provision of questions and answers have been developed to Regulation Z (Truth in Lending), exempting re- aid the public with its comments on the proposal. financings by original creditors from the right of Comment is requested by December 22. rescission. The rule states that if the original The Federal Reserve Board also requested creditor finances nonfinance charges such as comment by February 23, 1987, on proposed attorney's fees, title examination fees, and insur- rulemaking to permit bank holding companies to ance premiums, the right of rescission will not engage in real estate investment activity within apply. This final rule is effective immediately. certain limits. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

116 Federal Reserve Bulletin • February 1987 CHANGES IN BOARD STAFF Mr. Dreyer is currently Vice President for Supervision and Regulation at the Federal Re- The Board of Governors has announced the serve Bank of Chicago and will be on loan to the temporary appointment of Franklin D. Dreyer as Board for one year. Mr. Dreyer began his assign- Deputy Director in the Division of Banking Su- ment with the Board on January 5, 1987. pervision and Regulation. The Board announced the retirement of Frederick R. Dahl, Associate Director, Division of SYSTEM MEMBERSHIP: Banking Supervision and Regulation, effective ADMISSION OF STATE BANKS December 31, 1986. The Board also announced the retirement of The following bank was admitted to membership Walter W. Kreimann, Associate Director, Divi- in the Federal Reserve System during the period sion of Support Services, effective January 2, December 1 through December 31, 1986: 1987. Illinois Bartonville Bartonville Bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

117 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON NOVEMBER 5, 1986 pace of industrial production was reflected in a decline in manufacturing jobs that more than 1. Domestic Policy Directive offset the increase reported for August. Employment in trade, finance, and services advanced The information reviewed at this meeting sug- further in September, but at a less rapid rate than gested that economic activity grew at a moderate in earlier months of the year. The civilian unemrate in the third quarter, after rising only slightly ployment rate moved back up to 7 percent in in the previous quarter. Payroll employment September, close to its average level earlier in expanded somewhat further in September, al- the year. though manufacturing jobs declined following Total retail sales increased 4.6 percent in Seplittle change in August. Consumer spending, tember because of a substantial jump in auto which had been quite robust in the first half of sales following the expansion of sales incentive the year, strengthened further in the third quar- programs by domestic automakers in late Auter. Business capital spending, however, re- gust. During September, domestic cars sold at a mained sluggish, reflecting declines in outlays for record 113A million unit annual rate, compared nonresidential construction; new orders rose in with an average 8million unit pace in the September and equipment spending picked up. preceding five months. Light trucks and foreign Residential construction expenditures advanced cars also sold at record monthly rates in Septemfurther in the third quarter, but housing starts fell ber. Outside of the auto group, sales were virtuin September. Wage increases have continued to ally unchanged from August levels. moderate, while prices have increased a bit be- In the business sector, spending has remained cause of developments in food and energy mar- sluggish. Business purchases of motor vehicles kets. were up sharply in the third quarter, but spend- Industrial production rose another 0.1 percent ing for other equipment declined, and outlays for in September. The gain partly reflected a surge in nonresidential structures dropped substantially the production of cars and light trucks. Other further. However, new orders for nondefense production was unchanged on balance; produc- capital goods rose sharply in September; altion of defense equipment rose, but output of though aircraft orders accounted for half of the nondefense goods edged down and materials increase, bookings for many other types of production remained sluggish. Domestic auto- equipment also posted sizable gains. For strucmakers apparently cut back assemblies during tures, data on new commitments have continued October, but still were planning relatively large to point to further declines in office building, but production for the fourth quarter as a whole. the drop in oil- and gas-well drilling appears to Capacity utilization in manufacturing, mining, have ended. and utilities was unchanged in September at 79.2 Housing starts have declined since earlier in percent. The utilization rate in mining continued the year, but residential construction expendito decline, while the rate in manufacturing edged tures rose through the summer. Total private up, reflecting the pickup in motor vehicle pro- housing starts dropped in September to an annuduction. al rate of 1.68 million units from a rate of about Total nonfarm payroll employment grew 1.8 million units during July and August. Single somewhat further in September. The sluggish family starts fell somewhat in September, regis- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

118 Federal Reserve Bulletin • February 1987 tering the lowest monthly reading since Decem- to 9 percent. Growth in Ml over the same period ber, but sales of new and existing homes in- was expected to moderate from the exceptionally creased during the month. Multifamily housing large increase during the previous several starts declined further, apparently reflecting in months. The Committee agreed that the growth part record high vacancy rates and prospectively in Ml would continue to be evaluated in view of diminished rates of return on rental properties as the behavior of the broader aggregates and other a result of tax reform. factors. The members also decided that slightly Labor cost increases have moderated further greater reserve restraint would, or slightly lesser over the past year, but price increases have been reserve restraint might, be acceptable depending a bit higher in recent months than earlier in the on the behavior of the monetary aggregates, year due mainly to developments in food and taking into account the strength of the business energy markets. Consumer food prices rose expansion, developments in foreign exchange sharply during the summer, reflecting in part markets, progress against inflation, and condiweather-related disruptions in some supplies. By tions in domestic and international credit mar- September conditions had improved, and in- kets. The intermeeting range for the federal creases in retail food prices slowed noticeably. funds rate was maintained at 4 to 8 percent. In the energy sector, petroleum prices moved up M2 and M3 increased at annual rates of 83/4 and at the wellhead and refinery levels in the Septem- V/2 percent respectively, on average over Sepber PPI, reflecting the OPEC agreement in early tember and October, well below their rates of August to curtail production. This increase in growth since early spring. Through October, crude oil costs apparently has already reached both aggregates were very close to the upper the retail level as gasoline and heating oil prices ends of their 6 to 9 percent annual growth ranges turned up in the September CPI, after steep established by the Committee for 1986. Growth declines throughout much of the year. Excluding in Ml still was quite strong over September and food and energy, consumer prices have risen October, but down substantially from its average recently at about the same pace as earlier in the over the previous several months. year. Adjustment plus seasonal borrowing at the The trade-weighted value of the dollar against discount window averaged about $325 million in major foreign currencies continued to decline for the two complete maintenance periods after the several weeks after the September 23 FOMC September meeting. Federal funds generally conmeeting, but it subsequently recovered and has tinued to trade close to 57/s percent over the risen somewhat on balance. Short-term and long- intermeeting period. Most other interest rates term interest rate differentials increased a bit eased somewhat on balance, with short-term during the intermeeting period; foreign rates rates about unchanged to down 15 basis points moved up, particularly at the short end, while and long-term rates off as much as 35 basis rates in the United States eased slightly. Real net points. Bond prices increased in the days just exports of goods and services dropped further in before the meeting in part reflecting perceptions the third quarter, mainly reflecting a surge in the of stronger foreign demand for dollar assets, volume of oil imports. After the recovery in real prompted to some extent by the cut in the economic activity in most major foreign industri- Japanese discount rate on October 31. In addial countries in the second quarter, available data tion, market participants reportedly interpreted for the third quarter indicate further moderate the cut in the Japanese rate as giving the Federal expansion in Germany, France, the United King- Reserve more leeway to ease domestic monetary dom, and to a lesser extent in Japan. policy. At its meeting in September, the Committee The staff projections presented at this meeting adopted a directive that called for maintaining suggested that real GNP would continue to grow the existing degree of pressure on reserve posi- at a moderate rate through the end of 1987. tions. The members expected such an approach Anticipations of sustained growth in real exto policy to be consistent with growth in M2 and ports, reflecting the improvement in the price M3 from August to December at annual rates of 7 competitiveness of U.S. goods, continued to be a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 119 key element supporting the expected expansion In the Committee's review of the outlook for in domestic production. Growth in domestic spending by domestic sectors of the economy, spending was projected to be relatively sluggish the members generally expected demand to conover the forecast horizon. The staffs projection tinue to increase, but at a slower pace than in for inflation continued to show some step-up recent quarters. Individual members again highearly next year associated with the effects of lighted the uneven conditions in different indusrapidly rising import prices on the prices of U.S. tries and parts of the country. One member goods and with the turnaround in energy prices. commented that the complex tax reform legisla- In the Committee's discussion of the economic tion constituted a major source of uncertainty. situation and outlook, the members agreed that The members agreed that total consumer spendincoming data on business activity and reports ing would tend to be held down in the current on specific conditions in many industries were quarter by reduced purchases of automobiles broadly consistent with the staff forecast of con- following the bulge associated with attractive tinuing expansion at a moderate pace. There incentive programs. One member observed, were uncertainties nonetheless about the pro- however, that some offsetting expenditures on spective performance of individual sectors of the high-priced items might be induced before yeareconomy and thus of the economy generally. In end because the deductibility of sales taxes in the view of most members the risks of a devi- computing personal income taxes would be teration from the staff projection appeared to be minated starting in 1987. On the negative side, evenly balanced, but a few felt the risks were one member suggested that the adjustment in greater in the direction of less growth. automobile sales might take longer than many As they had at several previous meetings, the observers currently expected and also stressed members focused on the performance of net that consumer debt burdens were an important exports as a key factor in the outlook for eco- inhibiting factor on spending. In the area of nomic activity. The most recent data could be business investment, members noted that coninterpreted as suggesting that the trade balance struction activity would probably be held down was no longer worsening. However, clear evi- by relatively high vacancy rates in office builddence of an actual turnaround in the trade bal- ings, multifamily housing, and other commercial ance had not yet emerged and it was far from facilities such as hotels, especially in the context certain that there would be significant improve- of the reportedly adverse impact of the tax ment during the months ahead. Some members reform legislation on such investments. Memreported that a growing number of firms were bers also referred to a number of plant closings in experiencing increases in orders from abroad, a the manufacturing sector. On the other hand, development that lent support to expectations of some current economic indicators pointed to a a significant pickup in export sales over the next strengthening in the demand for business equipfew quarters. To an important degree, the out- ment. One member also commented that the look for U.S. exports remained contingent on prospects for improvement in the nation's balgrowing demands from major industrial nations. ance of trade, if realized, would require more In that regard it was noted that the evidence was investment in domestic productive facilities over mixed. Domestic expansion—and also the de- time. In regard to agriculture current conditions mand for foreign goods—appeared to be were mixed, but one member indicated that the strengthening in some major countries, but the overall situation in that industry and also in outlook was less promising in others. On the energy no longer appeared to be worsening and import side, members observed that foreign com- accordingly those key sectors of the economy petition remained intense, notably from coun- had probably ceased to exert a negative influence tries whose exchange rates had not appreciated on general economic activity. Likewise, the outagainst the dollar. Nonetheless, there were re- look for reduced government deficits, including ports that rising import prices were improving surpluses for state and local governments, and the competitive position of at least some domes- the apparently favorable prospects for foreign tic producers. trade implied a reduction in major structural Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

120 Federal Reserve Bulletin • February 1987 imbalances and an improved basis for sustained 3 to 8 percent, which implied a considerable economic expansion. reduction from the likely rate of growth in 1986, With regard to the outlook for inflation, the appeared appropriate for 1987 in the light of most members agreed that the lagged impacts of the historical experience. The Committee also redollar's depreciation along with developments in tained the range of 8 to 11 percent for growth of energy markets were likely to contribute to total domestic nonfinancial debt in 1987. It was somewhat faster price increases during the year understood that all the ranges were provisional ahead. Many domestic businesses reportedly and that, notably in the case of Ml, they would continued to look for competitive opportunities be reviewed in early 1987 against the background to raise prices and widen profit margins. One of intervening developments. member observed that a potential inflation risk, The Committee's discussion of policy impleand one for business activity generally, would be mentation for the weeks immediately ahead rethe emergence of new protectionist measures in flected the sense that the economy was continuresponse to unsatisfactory progress in reducing ing to expand at a moderate rate and that, while the nation's trade deficit. On the favorable side, price pressures could be strengthening somewhat wages generally appeared to be continuing to rise in response to higher import prices, those price more slowly than earlier and businesses were increases should be well contained. Externally, continuing to devote considerable attention to some signs of greater stability seemed to be paring costs and improving their productivity. emerging in exchange markets. In those circum- Some food prices might also tend to decline stances, all of the members indicated that they following increases in recent months. More gen- were in favor of continuing to direct open market erally, the prospect that capacity utilization rates operations toward maintaining unchanged condiwere likely to remain relatively low in most tions of reserve availability. That conclusion was industries over the year ahead implied that infla- also warranted by indications that monetary tionary pressures would be muted during that growth had moderated somewhat over Septemperiod. ber and October, and an expectation that the At its meeting in July the Committee reviewed broad aggregates might stay close to the Committhe basic policy objectives that it had established tee's earlier expectations for growth near the in February for growth of the monetary and upper ends of their long-term ranges in the credit aggregates in 1986 and it set tentative closing months of the year, assuming no signifiobjectives for expansion in 1987. For the period cant changes in reserve conditions and in shortfrom the fourth quarter of 1985 to the fourth term interest rates. quarter of 1986, the Committee reaffirmed the In the Committee's discussion of possible inranges established in February for growth of 6 to termeeting adjustments in the degree of reserve 9 percent for both M2 and M3. The associated pressure, the members suggested that developrange for expansion in total domestic nonfinan- ments calling for more than a slight change in cial debt also was reaffirmed at 8 to 11 percent reserve conditions would be unlikely during the for the current year. With respect to Ml, the weeks ahead. Although a few members felt that Committee decided that growth in excess of the 3 policy implementation should remain especially to 8 percent range set in February would be alert to the potential need for some easing of acceptable and that such growth would be evalu- reserve conditions, notably the need to respond ated in relation to the velocity of Ml, the expan- to emerging indications, if any, of relatively sion of the broader aggregates, developments in weak business activity, most felt that there the economy and financial markets, and price should be no presumptions about the likely direcpressures. For 1987 the Committee agreed on tion of any small intermeeting adjustments, tentative monetary growth objectives that in- should they be desirable. With respect to the cluded reductions of Vi percentage point to monetary aggregates, some members commentranges of 5Yi to 8V2 percent for both M2 and M3. ed that a shortfall from current expectations In the case of Ml the Committee expressed the would be a welcome development, given the preliminary view that retaining the 1986 range of rapid growth earlier in the year, and within limits Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 121 a shortfall should be tolerated provided it oc- up to 7.0 percent in September, close to its average curred in the context of satisfactory economic level earlier in the year. Industrial production rose slightly further in September and posted a moderate performance and did not appear to be associated gain over the third quarter. Consumer spending has with upward pressures on market interest rates. remained strong in recent months, with gains in retail One member commented, however, that a sharp sales in August and especially in September paced by a and abrupt slowdown in Ml growth might well sharp rise in auto sales. Housing starts fell in Septemsignal a weaker economy and, depending on the ber, but residential investment increased further in the third quarter as a whole. Business capital spending circumstances, might require more than a slight appears to have remained sluggish; equipment spendadjustment in policy implementation. ing picked up in the third quarter and new orders were At the conclusion of the Committee's discus- strong in September, but outlays for nonresidential sion, all of the members indicated that they construction continued to decline. Real net exports of favored a directive that called for no change in goods and services dropped further in the third quarter, reflecting in large part a surge in the volume of oil the current degree of pressure on reserve posiimports. Increases in labor compensation have slowed tions. The members expected this approach to over the course of the year, while broad measures of policy implementation to be consistent with prices have firmed somewhat recently due to developgrowth of M2 and M3 at annual rates of 7 to 9 ments in food and energy markets. percent over the fourth quarter from a Septem- Growth of M2 moderated further in September, but appears to have picked up in October, while growth of ber base. Over the same period, growth in Ml M3 has tended to slow. Expansion of these two was expected to moderate from its exceptional aggregates for the year through September has been at pace during most of the period since early spring. the upper end of their respective ranges established by Because the behavior of Ml remained subject to the Committee for 1986. Growth of Ml slowed in the unusual uncertainty, the Committee decided to September-October period from the very rapid pace experienced since early spring. Expansion in total continue its recent practice of not specifying a domestic nonfinancial debt remains appreciably above rate of expected growth for purposes of short-run the Committee's monitoring range for 1986. Most policy implementation but to evaluate this aggre- interest rates have declined somewhat since the Sepgate in the light of the performance of the broad- tember 23 meeting of the Committee. Although the er monetary aggregates and other factors. The trade-weighted value of the dollar against major foreign currencies continued to decline for several weeks members indicated that slightly greater or slightafter the September meeting, it subsequently recovly lesser reserve pressures might be acceptable ered and has risen somewhat on balance. over the intermeeting period depending on the The Federal Open Market Committee seeks monebehavior of the monetary aggregates, taking into tary and financial conditions that will foster reasonable account the strength of the business expansion, price stability over time, promote growth in output on the performance of the dollar in foreign exchange a sustainable basis, and contribute to an improved pattern of international transactions. In furtherance of markets, progress against inflation, and condithese objectives the Committee agreed at the July tions in domestic and international credit marmeeting to reaffirm the ranges established in February kets. The members agreed that the intermeeting for growth of 6 to 9 percent for both M2 and M3, range for the federal funds rate, which provides a measured from the fourth quarter of 1985 to the fourth mechanism for initiating consultation of the quarter of 1986. With respect to Ml, the Committee recognized that, based on the experience of recent Committee when its boundaries are persistently years, the behavior of that aggregate is subject to exceeded, should be left unchanged at 4 to 8 substantial uncertainties in relation to economic activipercent. ty and prices, depending among other things on the At the conclusion of the meeting, the following responsiveness of Ml growth to changes in interest rates. In light of these uncertainties and of the substandomestic policy directive was issued to the Fedtial decline in velocity in the first half of the year, the eral Reserve Bank of New York: Committee decided that growth of Ml in excess of the previously established 3 to 8 percent range for 1986 The information reviewed at this meeting indicates would be acceptable. Acceptable growth of Ml over that economic activity grew at a moderate pace in the the remainder of the year will depend on the behavior third quarter. In September total nonfarm payroll of velocity, growth in the other monetary aggregates, employment grew somewhat further, although em- developments in the economy and financial markets, ployment in manufacturing fell after changing little in and price pressures. Given its rapid growth in the early August. The civilian unemployment rate moved back part of the year, the Committee recognized that the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

122 Federal Reserve Bulletin • February 1987 increase in total domestic nonfinancial debt in 1986 Votes for this action: Messrs. Volcker, Corrigan, may exceed its monitoring range of 8 to 11 percent, but Angell, Guffey, Heller, Mrs. Horn, Messrs. felt an increase in that range would provide an inap- Johnson, Melzer, Morris, Rice, and Ms. Seger. propriate benchmark for evaluating longer-term trends Votes against this action: None. Absent and not in that aggregate. voting: Mr. Wallich. For 1987 the Committee agreed on tentative ranges of monetary growth, measured from the fourth quarter of 1986 to the fourth quarter of 1987, of 5>/ to 8!/ 2 2 percent for M2 and M3. While a range of 3 to 8 percent 2. Authorization for Domestic Open Market for Ml in 1987 would appear appropriate in the light of Operations most historical experience, the Committee recognized that the exceptional uncertainties surrounding the be- Effective December 3, 1986, the Committee aphavior of Ml velocity over the more recent period proved a temporary increase of $1 billion, to $7 would require careful appraisal of the target range at the beginning of 1987. The associated range for growth billion, in the limit between Committee meetings in total domestic nonfinancial debt was provisionally on changes in System Account holdings of U.S. set at 8 to 11 percent for 1987. government and federal agency securities speci- In the implementation of policy for the immediate fied in paragraph 1(a) of the authorization for future, the Committee seeks to maintain the existing domestic open market operations. The increase degree of pressure on reserve positions. This action is was effective for the intermeeting period ending expected to be consistent with growth in M2 and M3 over the period from September to December at with the close of business on December 16, 1986. annual rates of 7 to 9 percent. While growth in Ml over the same period is expected to moderate from its Votes for this action: Messrs. Volcker, Corrigan, exceptional pace during the previous several months, Angell, Guffey, Heller, Mrs. Horn, Messrs. growth in this aggregate will continue to be judged in Johnson, Melzer, Morris, Rice, and Ms. Seger. the light of the behavior of M2 and M3 and other Votes against this action: None. Absent and not factors. Slightly greater reserve restraint or slightly voting: Mr. Wallich. lesser reserve restraint might be acceptable depending on the behavior of the aggregates, taking into account This action was taken on the recommendation the strength of the business expansion, developments of the Manager for Domestic Operations. The in foreign exchange markets, progress against inflation, and conditions in domestic and international Manager had advised that outright purchases of credit markets. The Chairman may call for Committee securities in the intermeeting interval through consultation if it appears to the Manager for Domestic December 1, 1986, had reduced the leeway under Operations that reserve conditions during the period the usual $6 billion limit to about $3.5 billion. before the next meeting are likely to be associated with Additional purchases of securities in excess of a federal funds rate persistently outside a range of 4 to that leeway likely would be necessary over the 8 percent. remainder of the intermeeting period, chiefly reflecting seasonal increases in currency in circulation and required reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

123 Legal Developments AMENDMENT TO REGULATION Z Supervision and Regulation with the concurrence of the Board's General Counsel, and to the Reserve The Board of Governors is amending 12 C.F.R. Part Banks with the concurrence of the Director of the 226, its Regulation Z, by issuing a final rule modifying Division of Banking Supervision and Regulation and the existing provision that exempts original creditors the Board's General Counsel, authority to waive the from providing the right of rescission in certain refin- publication and solicitation of public comment requireancings secured by the consumer's principal dwelling. ments of the Change in Bank Control Act, 12 U.S.C. The regulation provides that the right of rescission will § 1817(j), as amended by the Anti-Drug Abuse Act of not apply if the original creditor finances nonfinance 1986, No. 99-750 (October 27, 1986), where it is charges such as attorney's fees, title examination fees, determined in writing that such disclosure or solicitaand insurance premiums. tion would seriously threaten the safety or soundness Effective December 16, 1986, but reliance optional of a bank. The Board has delegated similar authority to until October 1, 1987, the Board amends 12 C.F.R. waive, dispense with or modify the procedural require- Part 226 as follows: ments, including publication requirements, of the Bank Holding Company Act, 12 U.S.C. § 1841 etseq., Part 226—Truth In Lending where expeditious action is required. 12 C.F.R. §§ 262.3(k)(l) and 265.2(c)(30). 1. The authority citation for 12 C.F.R. Part 226 contin- Effective December 15, 1986, the Board amends ues to read as follows: 12 C.F.R. Part 265 as follows: Authority: 15 U.S.C. § 1601 et seq. Part 265—Rules Regarding Delegation of Authority 2. Part 226 is amended by revising section 226.23(f)(2) to read as follows: 1. The authority citation for 12 C.F.R. Part 265 continues to read as follows: Section 226.23—Right of Rescission Authority: Sec. 11, 38 Stat. 261 and 80 Stat. 1314; 12 U.S.C. 248. (f) Exempt transactions. 2. Part 265 is amended by adding new paragraphs 265.2(c)(35) and 265.2(f)(48) to read as follows: (2) A refinancing or consolidation by the same creditor of an extension of credit already secured by Section 265.2—Specific Functions Delegated to the consumer's principal dwelling. The right of Board Employees and to Federal Reserve rescission shall apply, however, to the extent the Banks new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the (c)(35) Under section 1817(j)(2) of the Change in Bank costs of the refinancing or consolidation. Control Act (12 U.S.C. 18170)), and with the concurrence of the Board's General Counsel, to waive, dispense with, modify, or excuse the failure to AMENDMENT TO RULES REGARDING comply with the requirement for publication and DELEGATION OF AUTHORITY solicitation of public comment regarding a notice filed under the Change in Bank Control Act provid- The Board of Governors is amending 12 C.F.R. Part ed that a written finding is made that such disclosure 265, its Rules Regarding Delegation of Authority, to or solicitation would seriously threaten the safety or delegate to the Director of the Division of Banking soundness of a bank holding company or bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

124 Federal Reserve Bulletin • February 1987 j|c sjc % * the Federal Reserve Bank of Cleveland, acting pursuant to delegated authority. (f)(48) Under section 18170X2) of the Change in Bank By order of the Board of Governors, effective Control Act (12 U.S.C. 1817(j)) and with the concur- December 23, 1986. rence of the Board's Director of Banking Supervision and Regulation and the Board's General Coun- Voting for this action: Chairman Volcker and Governors sel or their designees, to waive, dispense with, Johnson, Seger, Angell, and Heller. Absent and not voting: modify, or excuse the failure to comply with the Governor Rice. requirement for publication and solicitation of public comment regarding a notice filed under the JAMES MCAFEE Change in Bank Control Act provided that a written [SEAL] Associate Secretary of the Board finding is made that such disclosure or solicitation would seriously threaten the safety or soundness of a bank holding company or bank. STATEMENT BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM REGARDING THE APPLICATION OF BANC ONE CORPORATION TO ACQUIRE AMERICAN FLETCHER CORPORATION ORDERS ISSUED UNDER BANK HOLDING COMPANY ACT, BANK MERGER ACT, BANK By Order dated December 23, 1986, the Board ap- SERVICE CORPORATION ACT, AND FEDERAL proved the application of Banc One Corporation, RESERVE ACT Columbus, Ohio, to acquire American Fletcher Corporation, Indianapolis, Indiana ("AFC"), pursuant to Orders Issued Under Section 3 of the Bank section 3(a)(3) of the Bank Holding Company Act Holding Company Act ("BHC Act" or "Act"). 12 U.S.C. § 1842(a)(3). In this Statement, the Board sets forth its reasons for Banc One Corporation approving the application. Columbus, Ohio Applicant, with assets of $11.2 billion, is the largest commercial banking organization in Ohio. Its 22 Ohio American Fletcher Corporation subsidiary banks control deposits of approximately Indianapolis, Indiana $8.8 billion, representing 13.4 percent of the total deposits in commercial banks in Ohio.1 AFC (assets of Order Approving Acquisition of a Bank Holding $4.4 billion) is the second largest commercial banking Company organization in Indiana. Its five subsidiary banks control deposits of approximately $3.0 billion, represent- Banc One Corporation, Columbus, Ohio, a bank hold- ing 7.4 percent of the total deposits in commercial ing company within the meaning of the Bank Holding banks in Indiana. AFC controls nonbank subsidiaries Company Act (12 U.S.C. § 1841 et seq.) ("Act" or engaged in mortgage banking, consumer finance and "BHC Act"), has applied for the Board's approval reinsurance activities and also engages in certain inunder sections 3 and 4 of the Act (12 U.S.C. §§ 1842 surance agency activities.2 and 1843) to acquire American Fletcher Corporation, Section 3(d) of the Act (12 U.S.C. § 1843(d)) prohib- Indianapolis, Indiana ("AFC"), also a bank holding its the Board from approving an application by a bank company. As a result of this acquisition, Applicant holding company to acquire control of any bank locatwould acquire indirectly AFC's five banking and four ed outside of the holding company's home state,3 nonbanking subsidiaries.1 unless such acquisition is "specifically authorized by On the basis of the record, the application under the statute laws of the state in which such bank is section 3 of the Act is approved for the reasons set located, by language to that effect and not merely by forth in the Board's Statement, which will be released implication." at a later date. The transaction shall not be consummated before the thirtieth calendar day following the effective date of this Order or later than three months 1. Banking data are as of June 30, 1986. Applicant also controls after the effective date of this Order, unless such banking subsidiaries in Indiana, Michigan and Kentucky. 2. Applicant's proposed acquisition of AFC's nonbanking subsidperiod is extended for good cause by the Board or by iaries under section 4 of the Act will be considered separately by the Board. 3. A bank holding company's home state is that state in which the operations of the bank holding company's banking subsidiaries were 1. Applicant's proposed acquisition of AFC's nonbanking subsid- principally conducted on July 1, 1966, or on the date on which the iaries under section 4 of the Act will be considered separately by the company became a bank holding company, whichever is later. Appli- Board. cant's home state is Ohio. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 125 The Board previously has concluded that Indiana Ohio ("Columbus Bank") and Bank One, Merriville, has by statute expressly authorized an Ohio bank N.A., Merriville, Indiana ("Merriville Bank") and of holding company, such as Applicant, to acquire an AFC's lead bank subsidiary, American Fletcher Na- Indiana bank or bank holding company, such as AFC, tional Bank & Trust Company, Indianapolis, Indiana subject to approval from the Indiana state banking ("Indianapolis Bank"). The Protestants have alleged commissioner. Banc One Corporation, 72 FEDERAL that Columbus Bank, Merriville Bank, and Indianapo- RESERVE BULLETIN 422 (1986). By letter dated De- lis Bank failed to adequately meet the credit needs of cember 4, 1986, the Director of the Indiana Depart- their respective communities, particularly with respect ment of Financial Institutions stated, pursuant to to individuals residing in low-income and minority section 28-2-15-17 of the Indiana Code, that the neighborhoods.7 statute laws of Indiana and Ohio are reciprocal and In an attempt to resolve differences among the specifically authorize this interstate acquisition. Ac- individual parties, Applicant met privately with indicordingly, the Board concludes that approval of Appli- vidual protestants on various occasions and also parcant's proposal to acquire indirectly AFC's banks in ticipated in joint meetings with representatives of the Indiana is not barred by the Douglas Amendment. Federal Reserve Bank of Cleveland, the Financial AFC's bank subsidiaries operate in four Indiana Institutions Department, State of Indiana, and the banking markets.4 Applicant operates five subsidiary individual community groups. Applicant reached banks in Indiana and is the seventh largest commercial agreement with two of the five organizations and has banking organization in the state, controlling approxi- narrowed, but not entirely resolved, its differences mately 2.2 percent of statewide commercial bank with the remaining community groups. deposits. None of Applicant's Indiana banks operates The Board has carefully reviewed the records of in those banking markets in which AFC competes. Applicant and AFC in meeting the convenience and Accordingly, consummation of the proposed acquisi- needs of all segments of their communities. Initially, tion would have no adverse effects on existing compe- the Board notes that Applicant's and AFC's subsidiary tition in any relevant market. banks have achieved a satisfactory overall CRA rating The Board also has considered the effects of the based upon the most recent compliance examinations proposed acquisition on probable future competition conducted by the Office of the Comptroller of the in Ohio, Indiana, Michigan and Kentucky. In view of Currency.8 the existence of numerous other potential entrants In addition, the Board has considered that Applicant from states within the interstate banking regions into has adopted the following corporate policies on behalf each of the markets served by AFC or Applicant, the of its existing and future bank subsidiaries in order to Board has concluded that consummation of the pro- enhance the provision of services to their local composed transaction would not have any significant ad- munities. Applicant has committed to: verse effects on probable future competition in any (1) Adopt expanded guidelines for CRA programs at relevant market. subsidiary banks, including ascertainment of com- The financial and managerial resources of Appli- munity credit needs and the use of such information cant, AFC, and their subsidiary banks are considered by Applicant product development personnel; satisfactory and consistent with approval. In consider- (2) Develop marketing plans designed to increase ing the convenience and needs of the communities to loan penetration in low- and moderate-income be served, the Board also has taken into account the neighborhoods; records of Applicant and AFC under the Communi- (3) Develop a regularly scheduled program designed ty Reinvestment Act (12 U.S.C. § 2901 et seq.) to assure the adequate provision of information to ("CRA").5 The Board has received comments from subsidiary bank personnel regarding CRA requirefive organizations (collectively, "Protestants")6 regarding the performance of two of Applicant's subsidiary banks, Bank One, Columbus, N.A., Columbus, 7. The Protestants generally allege that Applicant and AFC bank subsidiaries have had inadequate real estate lending records in minority/low-income neighborhoods, particularly in the Columbus commu- 4. These markets are the Indianapolis, Elkhart-Niles-South Bend, nity; that Applicant's efforts to ascertain community credit needs have and the Bluffton and Jay Counties, Indiana, banking markets. been inadequate; that Applicant's credit practices have been discrimi- 5. The CRA requires the Board, in its evaluation of a bank holding natory with respect to individuals residing in and/or companies company application, to assess the record of an applicant in meeting located in low-income neighborhoods; and that Applicant's marketing the credit needs of the entire community, including low- and moder- effort to make members of the community aware of the credit services ate-income neighborhoods, consistent with safe and sound operation. offered and provided by Applicant has been ineffective. 6. The commenting organizations are: The Main Street Business 8. While Columbus Bank's record of mortgage lending to its Association ("MSBA"); The Committee for Economic Justice community declined during 1985, Applicant attributes this trend to a ("CFEJ"); and The CRA Task Force ("CRA Task Force"), all of decrease in mortgage lending generally, and not only with respect to Columbus, Ohio; The Indianapolis Reinvestment Alliance, Indianapo- minority and low-income areas. Applicant also states that it is now lis, Indiana ("IRA"); and The Northwest Indiana Open Housing committed to undertake an active mortgage lending program generally Center, Gary, Indiana ("NWIOHC"). within these sectors of the Columbus community. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

126 Federal Reserve Bulletin • February 1987 ments and the 12 assessment factors of the Board's commitments outlined above as well as its enhanced Regulation BB; relationship with neighborhood groups will enable (4) Develop programs to train personnel to utilize Applicant to meet its improved lending objectives more effectively programs for community and eco- without the provision of below-market rates of internomic development; and est. The Board previously has determined that neither (5) Establish and maintain an officer-level CRA the CRA nor the BHC Act requires it to establish the committee reporting directly to Applicant's Board terms and conditions upon which lending activities of Directors, in order to monitor and evaluate sub- must be conducted to meet community needs.10 Acsidiary bank CRA compliance. cordingly, the Board declines to require Applicant to provide extensions of credit at below-market rates of In order to increase its service to low- and moder- interest, as urged by the CRA Task Force. ate-income sectors of the Columbus community, Ap- With respect to Merriville Bank's service to the plicant has established goals, consistent with prudent Gary community, Applicant has committed to adopt banking practices, for residential, small business and programs substantially similar to those proposed in home improvement lending totaling $50 million over Columbus, including specific monetary goals over the five years. Applicant further has pledged to increase next five years for residential, home improvement and market penetration in low- and moderate-income small business lending in low-income and minority neighborhoods through targeted advertising in neigh- census tracts. In reliance on this commitment, the borhood newspapers, creation of a neighborhood ser- NWIOHC also has withdrawn its protest. vices guide, and development of a marketing plan Upon acquisition of the Indianapolis Bank, Applidirected to such neighborhoods. Applicant also has cant has committed to implement in Indianapolis the agreed to provide written reports to the community general CRA programs outlined above for the Columgroups regarding Columbus Bank's home mortgage bus and Gary communities, including targeted adverand small business lending activity in minority and tising, increased financing flexibility, and active cooplow-income areas.9 eration with local CDCs. Applicant also will conduct Applicant has agreed to assist in the capitalization an immediate inquiry to ascertain the credit needs of and funding of a community development corporation the low-income and minority neighborhoods served by ("CDC") in Columbus to purchase, rehabilitate and the Indianapolis Bank. Where appropriate, Applicant sell homes and businesses in designated low- and has agreed to establish in Indianapolis programs submoderate-income areas, at lower effective interest stantially identical to those proposed in Columbus, rates, and to participate in other local community including targeted monetary goals for residential, economic revitalization programs. Applicant further home improvement and small business lending. Applihas agreed to establish a loan review board, comprised cant further has committed to implement its own of local small business representatives, representa- branch closing procedures by providing advance notives of community groups, and Columbus Bank loan tice to customers of a proposed closing, by consulting officers, in order to investigate and review denied loan with the community regarding the restoration of a applications. branch to efficient operation, and by offering assis- As a result of these commitments and programs, tance to customers in finding alternative sources of Applicant has reached an agreement with the MSBA in credit.11 Columbus, which has withdrawn its protest to the Finally, Applicant will provide the Federal Reserve acquisition. Another protest group in Columbus, the Bank of Cleveland with regular written reports detail- CRA Task Force, indicates its general acceptance of ing the progress of Applicant's subsidiary banks in Applicant's CRA pledges and commitments, but implementing the proposed programs to assess and claims that Applicant can only achieve such goals by serve the credit needs of their respective communities providing interest rate incentives to credit recipients. and in fulfilling the commitments made in connection Applicant states that its revised CRA programs and with this application. Accordingly, based upon all of the evidence, including the programs and measures that Applicant has 9. Applicant also has pledged to adopt more flexible lending criteria, including the financing of loan points and closing costs (consistent with prudent lending practices), the consideration of all 10. Hibernia Corporation, 72 FEDERAL RESERVE BULLETIN 656, sources of family income, and allowing lower down payments and long 658 (1986); Commerce Bancshares, Inc., 64 FEDERAL RESERVE BULterm financing. Applicant also has agreed to participate in public/ LETIN 576, 579 (1978). private consortia designed to stimulate rehabilitation of homes and 11. In addition, after Applicant gains control of AFC's mortgage businesses and to lower effective interest rates in residential and banking subsidiary, it will gather and report loan origination data by commercial areas. census tract as if the mortgage company were a bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 127 proposed in order to enhance its service to the conve- section 3 of the Bank Holding Company Act of 1956, nience and needs of its communities, including low- as amended ("Act") (12 U.S.C. §§ 1841 et seq.), to and moderate-income segments of the communities, acquire voting shares of First National Bank of Valley and the additional monitoring of Applicant's programs City, Valley City, North Dakota ("Bank"), and thereby the Federal Reserve Bank of Cleveland, the Board by become a bank holding company. concludes that convenience and needs considerations Notice of the application, affording an opportunity are consistent with approval of this application.12 for interested persons to submit comments, has been Based on the foregoing and other facts of record, the given in accordance with section 3(b) of the Act. The Board has determined that consummation of the pro- time for filing comments has expired, and the Board posed acquisition would be in the public interest and has considered the application and all comments rethat the application should be approved.13 According- ceived in light of the factors set forth in section 3(c) of ly, the application is approved for the reasons summa- the Act (12 U.S.C. § 1842(c)). rized above. Applicant is a non-operating corporation formed for the purpose of acquiring Bank. Bank is the 20th largest December 31, 1986. banking organization in the state,1 with total domestic deposits of $45.8 million, representing 0.8 percent of total deposits in commercial banking organizations in JAMES MCAFEE [SEAL] Associate Secretary of the Board the state. Consummation of this proposal would not result in the concentration of banking resources or in any significant adverse competitive effects in the state. First Bancshares of Valley City, Inc. Bank operates in the Jamestown market,2 where it is Valley City, North Dakota the fourth largest commercial banking organization, controlling 8.2 percent of total deposits in commercial Order Approving the Acquisition of a Bank banking organizations in the state. None of the principals of Applicant or Bank is associated with any other First Bancshares of Valley City, Inc., Valley City, financial institutions located within the relevant bank- North Dakota, has applied for Board approval under ing market. Accordingly, consummation of this transaction would not result in the concentration of banking resources or in any significant adverse competitive 12. Certain Protestants also have requested that the Board order a effects in the relevant geographic area. Thus, competipublic meeting or hearing to receive public testimony on the issues tive factors are consistent with approval. presented by these applications. Although section 3(b) of the Act does not require a formal hearing in this instance, the Board may, in any The Board has indicated on previous occasions that case, order a formal or informal hearing. In the Board's view, the a bank holding company should serve as a source of parties have had ample opportunity to present their arguments in financial and managerial strength to its subsidiary writing and to respond to one another's submissions. In light of these facts, the proposals by Applicant to expand its services, and other banks, and that the Board would closely examine the facts of record, the Board has determined that a hearing would serve condition of an applicant in each case with this considno useful purpose. Accordingly, the Protestants' request for a public eration in mind.3 This application represents the first hearing is hereby denied. The Protestants' request for a public meeting is denied for the same reason. of a number of proposals involving the divestiture by 13. The American Council of Life Insurance, the American Insur- First Bank System, Inc., a large regional bank holding ance Association, the National Association of Independent Insurers, and the Alliance of American Insurers submitted comments protesting company, of small, rural banks to individuals or small Board approval of this application on the grounds that the general bank holding companies. Under these circumstances, insurance agency activities conducted by a department of AFC's the Board is particularly concerned with the financial subsidiary bank, Union Bank and Trust Company, Franklin, Indiana ("Franklin Bank"), are prohibited under the amendments to section 4 of the BHC Act contained in the 1982 Garn-St Germain Depository Institutions Act. The Independent Insurance Agents of America Inc., the National Association of Casualty and Surety Agents, and the National Association of Surety Bond Producers filed additional comments raising substantially the same arguments. In response to these protests, Applicant has agreed that Franklin Bank will divest or 1. Deposit data are as of June 30, 1985. terminate its general insurance agency activities within two years of 2. The Jamestown market is comprised of the counties of Eddy, consummation of the acquisition, unless during such period Applicant Foster, Stutsman, Lamoure, and Barnes, and parts of Steel and Griggs receives approval pursuant to an application under section 4(c)(8) of counties, North Dakota. the BHC Act to retain such activities. During this two-year period or 3. The Bank Holding Company Act requires that before an organiunless authorization is granted pursuant to the BHC Act for broader zation is permitted to become a bank holding company and thus obtain activities, Applicant will limit the insurance agency activities of the benefits associated with the holding company structure, it must Franklin Bank to the renewal of existing policies and those credit- secure the Board's approval. Section 3(c) of the Act provides that the related insurance agency activities permitted under section 4(c)(8)(A) Board must, in every case, consider, among other things, the financial of the BHC Act. The Board believes that Applicant's divestiture and managerial resources of both the applicant company and the bank commitments adequately address the issues raised by these protes- to be acquired. The Board's action in this case is based on a tants. consideration of such factors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

128 Federal Reserve Bulletin • February 1987 strength and future prospects of the banks to be First Chicago Corporation divested, in part because of the uncertainty associated Chicago, Illinois with a change in ownership from a large regional banking organization to individuals or bank holding American National Corporation companies with substantially fewer resources to sup- Chicago, Illinois port the banks. These concerns are mitigated in this case by several Order Approving Acquisition of a Bank factors. First, the proposal has been strengthened by the contribution of additional equity capital to Appli- First Chicago Corporation, Chicago, Illinois, and its cant by Applicant's principals. Second, First Bank wholly owned subsidiary, American National Corpo- System, Inc. has improved Bank's overall asset quali- ration, Chicago, Illinois (together "Applicants"), both ty by purchasing a large portion of Bank's non- bank holding companies within the meaning of the performing and classified loans. Third, First Bank Bank Holding Company Act of 1956, as amended (the System, Inc. has agreed to retain an investment, in the "BHC Act") (12 U.S.C. § 1841 et seq.), have each form of a capital note, in Applicant until Applicant's applied for the Board's prior approval under section initial leverage is reduced. This investment will not 3(a)(3) of the BHC Act (12 U.S.C. § 1842(a)(3)) to entail any debt service burden on Applicant or Bank acquire all of the outstanding voting shares of Bank of and will be available to support Applicant's capital Lansing, Lansing, Illinois ("Lansing Bank"). structure. Fourth, although Applicant will incur a Notice of the applications, affording interested percertain amount of debt in connection with the pro- sons an opportunity to submit comments, has been posed transaction, it appears that Applicant will have given in accordance with section 3(b) of the BHC Act. sufficient flexibility to retire the debt without adverse- The time for filing comments has expired and the ly affecting the capital position of Bank, particularly in Board has considered the applications and all comlight of the foregoing considerations. All of these ments received in light of the factors set forth in factors are designed to strengthen the acquiring orga- section 3(c) of the BHC Act (12 U.S.C. § 1842(c)). nization and to facilitate the transfer of Bank to new Applicants comprise the largest commercial banking ownership, thus ensuring that Bank will be financially organization in Illinois, with five banks holding total protected following divestiture. deposits of $14.4 billion, representing 14 percent of the In light of these and other facts of record, the Board total deposits in commercial banks in the state.1 Lanconcludes that the financial and managerial resources sing Bank is the 150th largest commercial banking and future prospects of Applicant and Bank are con- organization in Illinois, with total deposits of $102 sistent with approval of the application. million, representing 0.1 percent of the total deposits Although Applicant does not anticipate any immedi- in commercial banks in the state. Upon consummation ate changes in the services offered by Bank, consider- of the proposal, Applicants would remain the largest ations relating to the convenience and needs of the commercial banking organization in Illinois, with total community to be served are also consistent with deposits of $14.5 billion, representing 14.1 percent of approval of the application. the total deposits in commercial banks in the state. Based on the foregoing and other facts of record, the Consummation of the proposal would not result in a Board has determined that the application should be, significant increase in the concentration of banking and hereby is, approved. The acquisition shall not be resources in Illinois. consummated before the thirtieth calendar day follow- Applicants are the largest of 234 commercial banking the effective date of this Order, or later than three ing organizations in the Chicago banking market,2 months after the effective date of this Order, unless controlling 21.6 percent of the total deposits in comsuch period is extended for good cause by the Board or mercial banks therein. Lansing Bank also competes in the Federal Reserve Bank of Minneapolis, acting the Chicago banking market, where it is the 97th pursuant to delegated authority. largest commercial banking organization, controlling By order of the Board of Governors, effective 0.2 percent of the total deposits in commercial banks. December 8, 1986. Upon consummation of the proposal, Applicants would remain the largest commercial banking organi- Voting for this action: Chairman Volcker and Governors Seger, Angell, and Heller. Absent and not voting: Governors Johnson, Wallich, and Rice. 1. All banking data are as of December 31, 1985. JAMES MCAFEE 2. The Chicago banking market is approximated by Cook, DuPage [SEAL] Associate Secretary of the Board and Lake Counties, all in Illinois. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 129 zation in the market, controlling 21.8 percent of the 6. Expanded internal audits of their CFTRA prototal deposits in commercial banks. grams to insure compliance with the CFTRA. The Chicago banking market is not highly concentrated, with the four largest commercial banking orga- The sufficiency of the remedial programs has been nizations holding 51.7 percent of the total deposits in reviewed by the Office of the Comptroller of the commercial banks and a Herfindahl-Hirschman Index Currency. The Board has also consulted with appro- ("HHI") of 818 points. Upon consummation of the priate enforcement agencies and has considered Appliproposal, the four-firm concentration ratio would in- cants' past record of compliance with the law. For the crease by 0.2 percent to 51.9 percent and the HHI foregoing reasons and based on all of the facts of would increase by 9 points to 827 points. Based upon record, the Board has determined that the managerial these facts, the Board has determined that consumma- resources of Applicants are consistent with approval tion of the proposal would not have any significant of the proposal. adverse competitive effects in any relevant banking The financial resources and future prospects of market. Applicants and Lansing Bank are consistent with In its evaluation of Applicants' managerial re- approval of the proposal. Considerations relating to sources, the Board has considered certain violations the convenience and needs of the communities to be by Applicants' subsidiary banks, First National Bank served are also consistent with approval of the proof Chicago, Chicago, Illinois ("First Bank"), and posal. American National Bank and Trust Company of Chi- Based on the foregoing and all of the facts of record, cago, Chicago, Illinois ("American Bank"), of the the Board has determined that approval of the transac- Currency and Foreign Transactions Reporting Act tion is consistent with the public interest, and that the ("CFTRA") and the regulations thereunder.3 The applications should be, and hereby are, approved. The Board notes that First Bank and American Bank have transaction shall not be consummated before the thirticonsulted with and cooperated with the appropriate eth calendar day following the effective date of this supervisory authorities and law enforcement agencies Order, or later than three months after the effective following discovery of the violations. date of this Order, unless the latter period is extended In addition, First Bank and American Bank have for good cause by the Board, or by the Federal filed corrective currency transaction reports and im- Reserve Bank of Chicago, acting pursuant to delegated plemented comprehensive remedial programs to pre- authority. vent further violations of the CFTRA, including: By order of the Board of Governors, effective 1. Appointment of senior officials as compliance December 1, 1986. officers responsible for compliance by the banks with the CFTRA; Voting for this action: Chairman Volcker and Governors 2. Institution of intensive training and periodic re- Johnson, Seger, and Heller. Absent and not voting: Govertraining for bank personnel in the requirements of nors Wallich, Rice, and Angell. the CFTRA; 3. Preparation of extensive and comprehensive man- JAMES MCAFEE uals and policy statements so that bank personnel [SEAL] Associate Secretary of the Board are aware of the requirements of the CFTRA and the procedures implemented by the banks to insure that all covered transactions are reported and that all James Madison Limited currency transaction forms are properly completed; Washington, D.C. 4. Institution of review procedures, including review by senior bank officials, to insure that exemptions Order Approving Acquisition of a Bank are properly granted, that exemption limits on currency transactions are appropriate, and that the James Madison Limited, Washington, D. C., a bank exempt status of customers and exemption limits are holding company within the meaning of the Bank periodically reviewed regarding whether such status Holding Company Act (12 U.S.C § 1841 et seq.) and limits continue to be appropriate; ("Act"), has applied for the Board's approval under 5. Institution of review procedures, including review section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to by computer programs, to insure that all covered acquire the successor by merger to First Continental transactions are captured and reported; and Bank of Maryland, Silver Spring, Maryland ("Bank"). Notice of the application, affording an opportunity for interested persons to submit comments, has been 3. 31 U.S.C. § 5311 et seq.; 31 U.S.C. § 103. given in accordance with section 3 of the Act. The time Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

130 Federal Reserve Bulletin • February 1987 for filing comments has expired, and the Board has the Douglas Amendment, subject to Applicant's reconsidered the application and all comments received ceipt of the approval of the Maryland Commissioner of in light of the factors set forth in section 3(c) of the Banking pursuant to Maryland Fin. Inst. Code § Act. 5-1003. The Board's Order is specifically conditioned Applicant, a one-bank holding company, is the upon satisfaction of the state regulatory approval seventh largest commercial banking organization in requirement. the District of Columbia ("District"). Applicant con- Applicant's subsidiary bank competes with Bank in trols total domestic deposits of $475.2 million, repre- the Washington, D.C., banking market.5 Applicant is senting 3.5 percent of the total deposits in commercial the 14th largest of 70 commercial banking organizabanks in the District. Bank is the 52nd largest commer- tions in the Washington, D.C., market, and controls cial banking organization in Maryland, controlling deposits of $417.6 million, representing 1.9 percent of total domestic deposits of $28.5 million, representing the total deposits in commercial banks therein.6 Bank 0.1 percent of the total deposits in commercial banks is the 54th largest commercial banking organization in in Maryland.1 the market, controlling domestic deposits of $19.5 Section 3(d) of the Act (12 U.S.C. § 1842(d)), the million, representing less than 0.1 percent of the total Douglas Amendment, prohibits the Board from ap- deposits in commercial banks in the market. Upon proving an application by a bank holding company to acquisition of Bank, Applicant would become the 11th acquire control of any bank located outside of the largest commercial banking organization in the Washholding company's home state,2 unless such acquisi- ington, D.C., market and would control 2.0 percent of tion is "specifically authorized by the statute laws of the total deposits in commercial banks in the market. the state in which such bank is located, by language to The Washington, D.C., banking market is unconthat effect and not merely by implication." centrated, and would remain unconcentrated after The statute laws of Maryland authorize the acquisi- consummation of the proposed acquisition. The share tion of a bank or bank holding company in Maryland of deposits held by the four largest commercial bankby a bank holding company located in another state in ing organizations in the market is 50.4 percent and the a defined southeastern region, including the District, if Herfindahl-Hirschman Index ("HHI") for the market the laws of that state permit Maryland bank holding is 817.7 Moreover, a large number of commercial companies to acquire banks and bank holding compa- banking organizations would remain in the Washingnies in that state.3 The District has enacted a similar ton, D.C., market after the proposed acquisition. On regional interstate banking statute, which permits the the basis of these and all other facts of record, the acquisition of a District bank holding company or bank Board concludes that consummation of the acquisition by a bank holding company located in Maryland.4 would not have a significant adverse effect on existing The District statute appears to satisfy the require- competition in the Washington, D.C., market. In view ments of Maryland Fin. Inst. Code § 5-1003. Based on of the existence of numerous other potential entrants the foregoing, the Board has determined that the into the relevant banking market, the Board has conproposed acquisition is specifically authorized by the cluded that consummation of the proposed transaction statute laws of Maryland and is thus permissible under would not have any significant adverse effects on probable future competition in any relevant market. The financial and managerial resources and future prospects of Applicant, Bank, and their respective subsidiaries are consistent with approval of the appli- 1. Deposit data are as of December 31, 1985, and include Application. Considerations relating to the convenience and cant's recent acquisition of UNB Bancshares, Washington, D.C., and Applicant's proposed acquisition of the successor by merger to The needs of the communities to be served are also consis- McLean Bank, McLean, Virginia, approved by the Board on Novem- tent with approval. ber 3, 1986. 2. A bank holding company's home state is that state in which the operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the company became a bank holding company, whichever is later. Applicant's home state is the District of Columbia. 3. Md. Fin. Inst. Code Ann. § 5-1001 et seq. (Supp. 1985). The states in the region defined by Maryland law include, through June 30, 5. The Washington, D. C., banking market is defined as the 1987, Maryland, Delaware, Virginia, West Virginia, and the District of Washington, D. C., Ranally Metropolitan Area, which comprises the Columbia; and, on or after July 1, 1987, Alabama, Arkansas, Dela- District of Columbia and the surrounding suburban areas of Maryland ware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, and Virginia. North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, 6. Market data are as of June 30, 1985. West Virginia, and the District of Columbia. 7. Consummation of the proposed transaction would increase the 4. D.C. Code Ann. § 26-801 et seq. (Supp. 1986), as amended by market's HHI by 0.4 points. Thus, the transaction is not likely to be the District of Columbia Regional Interstate Banking Act of 1985 challenged by the Department of Justice under its merger guidelines, Amendments Act of 1985, D. C. Law 6-276. 49 Federal Register 26,823 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 131 Based on the foregoing and other facts of record, the result in a significant increase in the concentration of Board has determined that this application should be, banking resources in Illinois. and hereby is, approved, subject to the express condi- Bank operates in the Chicago metropolitan banking tion that Applicant obtain the approval of the Mary- market,2 where it is the 265th largest commercial land Commissioner of Banking pursuant to section banking organization, controlling 0.1 percent of the 5-1003 of the Maryland Financial Institutions Code. total deposits in commercial banks therein. Appli- The acquisition of Bank shall not be consummated cant's principal is also a principal of three banks and/ before the thirtieth calendar day following the effective or their respective bank holding companies in the date of the Order, or later than three months after the Chicago metropolitan banking market. Together these effective date of the Order, unless such period is institutions would rank as the 59th largest commercial extended for good cause by the Board or by the banking organization in the Chicago metropolitan Federal Reserve Bank of Richmond, acting pursuant banking market and would control 0.3 percent of the to delegated authority. deposits in commercial banking organizations in the Chicago metropolitan banking market. Consummation By order of the Board of Governors, effective of this proposal is not likely to have a significant December 1, 1986. adverse effect upon competition in the Chicago banking market. Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Gover- The Board has indicated on previous occasions that nors Wallich, Rice, and Angell. a bank holding company should serve as a source of financial and managerial strength to its subsidiary JAMES MCAFEE bank, and that the Board would closely examine the [SEAL] Associate Secretary of the Board condition of an applicant in each case with this consideration in mind. In this regard, the Board has cautioned against the assumption of substantial amounts of debt by a bank holding company because the Board Mid AmeriBancorp, Inc. was concerned that the bank holding company would Chicago, Illinois no longer have the financial flexibility to meet unexpected problems of its subsidiary bank or would be Order Denying Formation of a Bank Holding forced to place substantial demands on its subsidiary Company bank to meet its debt servicing requirements. In connection with this proposal, Applicant would incur a Mid AmeriBancorp, Inc., Chicago, Illinois, has ap- sizeable amount of debt and would be dependent upon plied for the Board's approval pursuant to section the earnings of Bank to service the debt. Bank has 3(a)(1) of the Bank Holding Company Act (12 U.S.C. experienced declining earnings in recent years and, § 1842(a)(1)) ("Act") to become a bank holding com- using projections based on Bank's past performance, it pany by acquiring 42.6 percent of the voting shares of does not appear that Applicant would have sufficient Mid-America National Bank of Chicago, Chicago, financial flexibility to service its debt while maintain- Illinois ("Bank"). ing adequate capital levels at Bank. In addition, Appli- Notice of the application, affording interested per- cant would be an owner of less than a majority interest sons an opportunity to submit comments, has been in Bank and would not be in a position to control the given in accordance with section 3(b) of the Act. The operations of bank and therefore improve its earnings time for filing comments has expired, and the Board prospects.3 Accordingly, based on these and other has considered the application and all comments re- facts of record, the Board concludes that considerceived in light of the factors set forth in section 3(c) of ations relating to Applicant's financial resources and the Act. future prospects are adverse and weigh against ap- Applicant is a nonoperating corporation formed for proval of this application. the purpose of becoming a bank holding company by Applicant has proposed no new services for Bank acquiring Bank. Bank is the 541st largest commercial upon consummation of this proposal. Thus, considerbanking organization in Illinois, controlling deposits of ations relating to the convenience and needs of the $39.2 million representing less than 0.1 percent of the total deposits in commercial banking organizations in the state.1 Consummation of this acquisition would not 2. The Chicago banking market is approximated by Cook, Lake and DuPage Counties, Illinois. 3. See Lloyds Bank Pic, 72 FEDERAL RESERVE BULLETIN 841 1. All banking data are as of December 31, 1985. (1986) and NBC Co., 60 FEDERAL RESERVE BULLETIN 782 (1974). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

132 Federal Reserve Bulletin • February 1987 community to be served are consistent with, but lend tion in Minnesota, with total deposits of $28.8 million, no weight toward, approval of this application. representing .08 percent of total deposits in commer- On the basis of all the facts of record, the Board cial banks in the state.1 Norwest Bank Luverne is the concludes that the banking considerations involved in 140th largest commercial banking organization in Minthis proposal are adverse and are not outweighed by nesota, with total deposits of $31.4 million, representany relevant competitive or convenience and needs ing .09 percent of total deposits in commercial banks in considerations. Accordingly, it is the Board's judg- the state. Norwest Bank Montevideo is the 95th largment that approval of the application would not be in est commercial banking organization in Minnesota, the public interest and that the application should be, with total deposits of $38.4 million, representing .11 and hereby is, denied for the reasons summarized percent of total deposits in commercial banks in the above. state. Norwest Bank Ortonville is the 190th largest By order of the Board of Governors, effective commercial banking organization in Minnesota, with December 1, 1986. total deposits of $25.5 million, representing .07 percent of total deposits in commercial banks in the state. Voting for this action: Chairman Volcker and Governors Upon consummation, Applicant would become the Johnson, Seger, and Heller. Absent and not voting: Gover- 16th largest bank holding company in Minnesota, and nors Wallich, Rice, and Angell. would control approximately .35 percent of deposits in commercial banks in the state. Consummation of this JAMES MCAFEE proposal would not result in the concentration of [SEAL] Associate Secretary of the Board banking resources or in any significant adverse competitive effects in Minnesota. Further, since Applicant does not have a presence in Minnwest, Inc. any of the relevant banking markets, consummation of Minnetonka, Minnesota this transaction would not result in the concentration of banking resources or in any significant adverse competi- Order Approving Formation of Bank Holding tive effects in any relevant geographic area. Thus, Company competitive factors are consistent with approval. The Board has indicated on previous occasions that Minnwest, Inc., Minnetonka, Minnesota, has applied a bank holding company should serve as a source of for the Board's approval under section 3(a)(1) of the financial and managerial strength to its subsidiary Bank Holding Company Act of 1956, as amended banks, and that the Board would closely examine the ("BHC Act") (12 U.S.C. § 1842(a)(1)), to become a condition of an applicant in each case with this considbank holding company by acquiring 100 percent of the eration in mind.2 This application represents the divesvoting shares of each of the following de novo Minne- titure by Norwest Corporation, a large regional bank sota banks: Minnwest Bank Dawson, Dawson; Minn- holding company, of small, rural banks to individuals west Bank Luverne, Luverne; Minnwest Bank Monte- or small bank holding companies. Under these circumvideo, Montevideo; and Minnwest Bank Ortonville, stances, the Board is particularly concerned with the Ortonville (collectively, "Banks"). Each of these financial strength and future prospects of the banks to banks is being formed to purchase certain assets and be divested, in part because of the uncertainty associassume certain liabilities of each of the following ated with a change in ownership from a large regional existing Minnesota banks, respectively: Norwest banking organization to individuals or bank holding Bank Dawson, Dawson; Norwest Bank Luverne, Lu- companies with substantially fewer resources to supverne; Norwest Bank Montevideo, Montevideo; and port the banks. Norwest Bank Ortonville, Ortonville. These concerns are mitigated in this case by several Notice of the application, affording opportunity for factors. First, a significant portion of the purchase interested persons to submit comments, has been given in accordance with section 3(b) of the BHC Act (51 Federal Register 31,370 (1986)). The time for filing comments has expired, and the Board has considered 1. Banking data are as of June 30, 1985. the application and all comments received in light of 2. The Bank Holding Company Act requires that before an organithe factors set forth in section 3(c) of the BHC Act zation is permitted to become a bank holding company and thus obtain the benefits associated with the holding company structure, it must (12 U.S.C. § 1842(c)). secure the Board's approval. Section 3(c) of the Act provides that the Applicant is a non-operating corporation formed for Board must, in every case, consider, among other things, the financial the purpose of acquiring Banks. Norwest Bank Daw- and managerial resources of both the applicant company and the bank to be acquired. The Board's action in this case is based on a son is the 162nd largest commercial banking organiza- consideration of such factors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 133 price will be funded by capital provided by the princi- Holding Company Act (12 U.S.C. § 1841 et seq. pals of Applicant, and consequently, Applicant will ("BHC Act")), has applied for the Board's approval not be highly leveraged. Second, Norwest has agreed under section 3 of the BHC Act (12 U.S.C. § 1842) to to retain an investment, in the form of a capital note, in acquire First Lake Forest Corporation, Lake Forest, Applicant and Banks until Applicant's initial leverage Illinois ("FLFC"), and thereby indirectly acquire The is reduced. This investment will not entail any debt First National Bank of Lake Bluff, Lake Bluff, Illinois; service burden on Applicant or Banks, will be avail- The First National Bank of Lake Forest, Lake Forest, able to support Applicant's capital structure, and will Illinois; and Lake Forest National Bank, Lake Forest, convert into common stock under certain circum- Illinois (collectively, "Illinois Banks"). Applicant has stances. Third, although Applicant will incur a certain also filed an application under section 3 of the BHC amount of debt in connection with the proposed trans- Act to acquire Northern Trust Bank of Arizona, N.A., action, it appears that Applicant will have sufficient Phoenix, Arizona ("Arizona Bank"),1 the successor flexibility to retire the debt without adversely affecting by merger of The Northern Trust Company of Arizona the capital position of Banks, particularly in light of the and Phoenix National Bank, both of Phoenix, Arizona. foregoing considerations. In addition, in contempla- Notice of the applications, affording interested pertion of this transaction, Norwest has significantly sons an opportunity to submit comments, has been strengthened the loan-loss reserves at each of the Banks. given in accordance with section 3(b) of the BHC Act. All of these factors are designed to strengthen the The time for filing comments has expired, and the acquiring organization and to facilitate the transfer of Board has considered the applications and all com- Banks to new ownership, thus ensuring that Banks will ments received in light of the factors set forth in be financially protected following divestiture. section 3(c) of the BHC Act (12 U.S.C. § 1842(c)). In light of these and other facts of record, the financial Applicant, the fourth largest commercial banking and managerial resources and future prospects of Appli- organization in Illinois, controls five subsidiary banks cant and Banks are consistent with approval of the in Illinois with total deposits of $3.6 billion, representproposal. Considerations relating to the ing 3.5 percent of total deposits in commercial banks in convenience and needs of the community to be served the state.2 FLFC is the fortieth largest commercial are also consistent with approval of the proposal. banking organization in the state, controlling three Based on the foregoing and all the facts of record, the subsidiary banks with total deposits of $336.7 million, Board has determined that the application should be and representing 0.3 percent of total deposits in commerhereby is approved. The transaction shall not be con- cial banking organizations in the state. Upon consumsummated before the thirtieth calendar day following the mation of the proposed transaction, Applicant would effective date of this Order or later than three months remain the fourth largest commercial banking organiafter the effective date of this Order, unless such period zation in the state, with total deposits of $3.9 billion, is extended by the Board or by the Federal Reserve representing 3.8 percent of total deposits in commer- Bank of Minneapolis acting pursuant to delegated au- cial banking organizations in the state. Consummation thority. of this proposal would not have a significant effect By order of the Board of Governors, effective upon the concentration of banking resources in Illi- December 18, 1986. nois. Applicant and FLFC both compete in the Chicago Voting for this action: Chairman Volcker and Governors banking market.3 Applicant is the fourth largest of 387 Johnson, Seger, Angell, and Heller. Absent and not voting: commercial banking organizations in the market, with Governor Rice. five bank subsidiaries controlling 5.4 percent of total deposits in commercial banking organizations in the JAMES MCAFEE market. FLFC is the 29th largest commercial banking [SEAL] Associate Secretary of the Board Northern Trust Corporation 1. In a related application, Nortrust of Arizona Holding Corpora- Chicago, Illinois tion ("NAHC"), Applicant's wholly owned subsidiary, has applied under section 3(a)(1) of the BHC Act (12 U.S.C. § 1842(a)(1), for Order Approving Acquisition of a Bank Holding approval to become a bank holding company through its acquisition of Arizona Bank. NAHC has no significance except as a means to Company and a Bank facilitate Applicant's acquisition of Arizona Bank. 2. All banking data are as of December 31, 1985. In addition, Northern Trust Corporation, Chicago, Illinois, a bank Applicant controls four subsidiary banks in Florida. 3. The Chicago banking market is approximated by Cook, Lake and holding company within the meaning of the Bank DuPage Counties, all in Illinois. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

134 Federal Reserve Bulletin • February 1987 organization in the market with three bank subsidiaries 6-322 of Arizona Revised Statutes. The Board's Order controlling 0.5 percent of total deposits in commercial is specifically conditioned upon satisfaction of the banking organizations in the market. Upon consum- state regulatory approval requirement. mation of this proposal, Applicant would remain the Applicant does not provide banking services in the fourth largest commercial banking organization in the Phoenix banking market, where Phoenix National market, controlling 5.9 percent of total deposits in Bank now competes, or elsewhere in Arizona.6 Applicommercial banking organizations in the market. The cant's indirect Arizona subsidiary, Northern Trust Chicago banking market is considered unconcentrat- Company of Arizona, Phoenix, Arizona, has operated ed, with the four largest commercial banking organiza- only as a trust company.7 The Arizona interstate tions controlling 46.7 percent of the deposits in com- banking statute permits banking organizations from mercial banking organizations in the market. The any state to enter Arizona, and, accordingly, there are Herfindahl-Hirschman Index ("HHI") for the market numerous potential entrants into the state and into the is 711 and would increase by only 5 points to 716 upon Phoenix market in which Phoenix National Bank now consummation of the proposal.4 competes. Based on the foregoing, the Board con- Although consummation of the proposal would elim- cludes that the proposal would not have any adverse inate some existing competition between Applicant effects on the concentration of banking resources in and FLFC in the Chicago banking market, numerous any relevant area, and that the proposal would not other commercial banking organizations would remain result in the elimination of substantial existing or as competitors in the market upon consummation. probable future competition in any relevant market. Based upon the above considerations, the Board con- Thus, the competitive effects of the proposal are cludes that consummation of the proposal is not likely consistent with approval. to substantially lessen competition in the Chicago In its evaluation of Applicant's managerial rebanking market. sources, the Board has considered certain violations Regarding Applicant's proposed acquisition of Ari- by two of Applicant's subsidiary banks, one of zona Bank, section 3(d) of the BHC Act (12 U.S.C. FLFC's subsidiary banks, and Phoenix National Bank § 1842(d)), the Douglas Amendment, prohibits the of the Currency and Foreign Transactions Reporting Board from approving an application by a bank hold- Act ("CFTRA") and the regulations thereunder.8 ing company to acquire a bank located outside the With regard to the CFTRA violations, the Board notes holding company's home state, unless such acquisition that Applicant brought violations of its lead bank to is "specifically authorized by the statute laws of the the attention of the appropriate supervisory authorities state in which such bank is located, by language to that after the violations were discovered through its intereffect and not merely by implication." The statute nal audit and has cooperated with law enforcement laws of Arizona authorize an out-of-state bank holding agencies. company, with the approval of the Arizona Superin- Applicant has undertaken a comprehensive corpotendent of Banks, to acquire an Arizona bank that had rate-wide remedial program to correct the violations at applied to operate in Arizona before May 31, 1984.5 both banks and to prevent violations from occurring in The Arizona Superintendent of Banks has informed the future in any of its subsidiary banks. Applicant has the Board that the proposal does not present any of the advised the Board that it has filed corrective currency grounds for denial of the application under Arizona transaction reports and established a central control Revised Statutes § 6-326 and that the Superintendent unit which has day-to-day responsibility for monitoranticipates approving the proposal. Based on the fore- ing all reportable transactions and ensuring that regoing, the Board has determined that the proposed ports are properly filed. Applicant has increased the acquisition is specifically authorized by the statute scope and frequency of its audits of the compliance of laws of Arizona and is thus permissible under the its subsidiary banks with the CFTRA. Applicant has Douglas Amendment, subject to Applicant's obtaining also instituted an intensive internal training program the approval of the Superintendent pursuant to section for bank personnel regarding compliance with the CFTRA. The sufficiency of the compliance procedures adopted to address Applicant's subsidiary banks' CFTRA 4. Consummation of the proposed transaction would increase the market's HHI by only a slight amount. The market is considered unconcentrated under the Department of Justice Merger Guidelines, 49 Federal Register 26,823 (1984), and the increase in the HHI resulting from the transaction is not within the parameters the 6. The Phoenix banking market is approximated by the Phoenix, Department of Justice has stated are likely to result in its challenging Arizona RMA. the transaction. 7. As of June 30, 1986, Northern Trust Company of Arizona, 5. Arizona Revised Statutes §§ 6-322 and 6-323 (effective Octo- Phoenix, Arizona, administered $1.1 billion in trust assets. ber 1, 1986). 8. 31 U.S.C. § 5311, et seq.\31 C.F.R. § 103. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 135 violations has been reviewed by examiners from the Bank is a state-chartered mutual savings and loan Office of the Comptroller of the Currency and the association, the accounts of which are insured by the Federal Reserve System. The Board also has consult- Federal Savings and Loan Insurance Corporation ed with appropriate enforcement agencies, and has ("FSLIC"). Bank has adopted a conversion plan by considered Applicant's past record of compliance with which it will convert to a state-chartered mutual the law. In addition, Applicant has committed to savings bank insured by the Federal Deposit Insurance implement its compliance program at the subsidiary Corporation ("FDIC"), and will then convert to a banks of FLFC and NAHC within 30 days of consum- state-chartered stock savings bank.1 mation and to undertake a compliance review at those The Board has previously determined that a statebanks within 120 days of consummation. chartered savings bank is a "bank" under section 2(c) Based upon a review of all of the facts of record, the of the Act if it accepts demand deposits, engages in the Board concludes that the financial and managerial business of making commercial loans, and is not resources and future prospects of Applicant, FLFC, covered by the exemption created by the Garn-St NAHC, and their respective subsidiary banks and Germain Depository Institutions Act of 1982 ("Garn- Arizona Bank are consistent with approval of these St Germain Act") for thrift institutions insured by the transactions. Considerations relating to the conve- FSLIC.2 Bank accepts demand deposits and engages nience and needs of the communities to be served also in the business of making commercial loans, and its are consistent with approval of these transactions. deposits will not be insured by the FSLIC. According- Based on the foregoing and other facts of record, the ly, Bank is a "bank" for purposes of the Act, and Board has determined that the applications should be, Applicant has applied to acquire Bank under section 3 and hereby are, approved, subject to the express of the Act, which governs the acquisition of banks by condition that with regard to the Arizona acquisition, bank holding companies. Applicant obtain the approval of the Arizona Superin- Section 3(d) of the Act (12 U.S.C. § 1842(d)), the tendent of Banks pursuant to section 6-322 of the Douglas Amendment, prohibits the Board from ap- Arizona Revised Statutes. The transactions shall not proving the application by a bank holding company to be consummated before the thirtieth calendar day acquire control of any bank located outside of the following the effective date of this Order or later than holding company's home state,3 unless such acquisithree months after the effective date of this Order, tion is "specifically authorized by the statute laws of unless such period is extended for good cause by the the state in which such bank is located, by language to Board or by the Federal Reserve Bank of Chicago, that effect and not merely by implication." acting pursuant to delegated authority. The statute laws of Connecticut authorize the acqui- By order of the Board of Governors, effective sition of a Connecticut bank by a bank holding compa- December 1, 1986. ny located in a state in the New England region,4 if that state has enacted legislation that permits the acquisition of a bank located in that state by a Con- Voting for this action: Chairman Volcker and Governors Johnson, Seger, and Heller. Absent and not voting: Gover- necticut bank holding company.5 Maine has enacted a nors Wallich, Rice, and Angell. statute that permits the acquisition of a Maine bank by JAMES MCAFEE [SEAL] Associate Secretary of the Board 1. In connection with the proposed acquisition, a newly chartered Connecticut stock savings bank, all of the shares of which are owned STATEMENT BY BOARD OF GOVERNORS OF THE by Applicant and which has been formed solely to facilitate the FEDERAL RESERVE SYSTEM REGARDING THE acquisition, will be merged with and into Bank subsequent to Bank's APPLICATION OF THE ONE BANCORP TO ACQUIRE conversion to a state-chartered stock savings bank and all of the shares of the interim bank will be automatically converted into the BANK OF HARTFORD shares of Bank. 2. The One Bancorp, 70 FEDERAL RESERVE BULLETIN 359 (1984); By Order dated November 7, 1986, the Board ap- First NH Banks, Inc., 69 FEDERAL RESERVE BULLETIN 874 (1983). 3. A bank holding company's home state is that state in which the proved the application of The One Bancorp, Portland, operations of the bank holding company's banking subsidiaries were Maine, under section 3(a)(3) of the Bank Holding principally conducted on July 1, 1966, or the date on which the Company Act ("Act"), to acquire the successor by company became a bank holding company, whichever is later. Applicant's home state is Maine. merger to Bank of Hartford, Inc., Hartford, Connecti- 4. Connecticut's regional interstate banking statute defines states in cut ("Bank"). the New England region to include Maine, Massachusetts, New Hampshire, Rhode Island and Vermont, in addition to Connecticut. In this Statement, the Board sets forth its reasons Conn. G ,n. Stat. Ann. § 36-552 (West 1986). for approving this application. 5. Conn. Gen. Stat. Ann. § 36-553 (West 1986). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

136 Federal Reserve Bulletin • February 1987 a bank holding company located in any state.6 In this banks like Bank as "thrift institutions" subject to the regard, the Connecticut Banking Commissioner has detailed provisions of that Act relating to acquisitions informed the Board that the proposed transaction of thrift institutions, but rather treats them as "banks" appears to satisfy the requirements of Connecticut law under the Act, provided that they accept demand regarding regional interstate banking acquisitions in deposits and engage in commercial lending, as Bank Connecticut. does. Under this proposal, Applicant will acquire and Based on the foregoing, the Board has determined operate Bank as a "bank" subject to all the banking that the proposed acquisition is specifically authorized standards of the Bank Holding Company Act, includby the statute laws of Connecticut and is thus permis- ing the Douglas Amendment. As noted above, the sible under the Douglas Amendment, subject to Appli- proposal is consistent with those banking standards. cant's obtaining the approval of the Connecticut Bank- The Board notes that the Federal Home Loan Bank ing Commissioner pursuant to Conn. Gen. Stat. Ann. Board ("FHLBB") has promulgated a regulation that § 36-553. The Board's Order is specifically condi- requires prior FHLBB approval for transfers of assets tioned upon satisfaction of the state regulatory approv- by insured institutions, whether by statutory converal requirement. sion, merger, or consolidation.9 In addition, the Applicant is the second largest depository institu- FHLBB has issued a letter to Bank stating that institution among commercial banks and thrift institutions in tions, like Bank, that voluntarily terminate FSLIC Maine, with deposits of approximately $935 million, insurance of accounts must pay a final insurance representing 10.7 percent of the total deposits in premium in an amount twice that of its last annual commercial banks and thrift institutions in the state. premium pursuant to the National Housing Act, Bank is the 42d largest depository institution among 12 U.S.C. § 1730.10 commercial banks and thrift institutions in Connecti- The Board expects that Applicant will comply with cut, with deposits of approximately $209 million, rep- all state and federal requirements necessary for conresenting 0.4 percent of the total deposits in commer- summation of the acquisition, and the Board's approvcial banks and thrift institutions in the state.7 al of this application under the Act is not intended to Since Applicant's subsidiary bank does not operate preempt any such requirements.11 The Board has in Connecticut, and Bank does not operate in Maine, previously stated that its approval of transactions consummation of the proposed acquisition would have under section 3 of the Act does not relieve an applicant no effect on existing competition in any Connecticut or or the bank involved of the responsibility to obtain Maine market. In view of the existence of numerous approval under other federal or state laws and regulaother potential entrants into each of the markets tions and does not shield an applicant from the conseserved by Batnk or Applicant, the Board has concluded quences of violations of other laws.12 that consummation of the proposed transaction would Based on the foregoing and other facts of record, the not have any significant adverse effects on probable Board has determined that the application should be future competition in any relevant market. approved. Accordingly, the application is approved The financial and managerial resources and future for the reasons summarized above. prospects of Applicant and its subsidiaries and Bank are consistent with approval of the application. Con- December 31, 1986 siderations relating to the convenience and needs of the communities to be served are also consistent with JAMES MCAFEE approval. [SEAL] Associate Secretary of the Board The Board notes that this application involves the acquisition of a bank that results from a conversion of 9. 12 C.F.R. § 563.22(b). The Board notes that the promulgation of a nonfailing FSLIC-insured savings and loan associa- this FHLBB regulation has been challenged in litigation brought by tion. The acquisition proposed here, however, does Barnett Banks of Florida against the FHLBB. United First Federal Savings and Loan Association, et al., v. Federal Home Loan Bank not fall within the scope of the Board's policy and Board, No. 86-661-Civ-J-16 (Order denying Defendant's motion to rulings regarding acquisitions of thrift institutions un- dismiss Plaintiff's complaint and granting Plaintiff's motion for prelimder section 4 of the Act8 or the provisions of the Garn- inary injunction, M.D. Florida, Jacksonville Div., December 19, 1986). The FHLBB has appealed from the district court decision and St Germain Act regarding acquisitions of thrift institu- moved to expedite the appeal. tions. The Garn-St Germain Act does not treat savings 10. See Letter of September 22, 1986, from Julie L. Williams, Deputy General Counsel, Federal Home Loan Bank Board, to H. Langedon Bell, Jr., Chairman and President, The Bank of Hartford, Inc. 11. The Board may not approve an application that would result in 6. Me. Rev. Stat. Ann. tit. 9-B, § 1013 sub. 2 (as amended, a violation of federal or state law. Whitney National Bank v. Bank of February 7, 1984). New Orleans, 379 U.S. 411 (1964). 7. Banking data are as of December 31, 1985. 12. Crocker National Corporation, 66 FEDERAL RESERVE BULLE- 8. D.H. Baldwin Company, 63 FEDERAL RESERVE BULLETIN 280 TIN 66 (1979); Royal Trust Company, 37 Federal Register 18,414, (1977). 18,415 (1972). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 137 SafraCorp before the thirtieth calendar day following the effective Miami, Florida date of this Order or later than three months after the effective date of this Order, unless such period is Order Approving Acquisition of a Bank extended for good cause by the Board or the Federal Reserve Bank of Atlanta, acting pursuant to delegated SafraCorp, Miami, Florida, a bank holding company authority. within the meaning of the Bank Holding Company Act By order of the Board of Governors, effective (12 U.S.C. § 1841 et seq.) ("Act") has applied for the December 23, 1986. Board's approval under section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to acquire all of the voting Voting for this action: Chairman Volcker and Governors shares of Colonial Savings Bank, N.A., Ocala, Florida Johnson, Seger, Angell, and Heller. Absent and not voting: ("Bank"). Governor Rice. Notice of the application, affording opportunity for interested persons to submit comments, has been JAMES MCAFEE given in accordance with section 3(b) of the Act (51 [SEAL] Associate Secretary of the Board Federal Register 37,237 (1986)). The time for filing comments has expired and the Board has considered the application and all comments received in light of Orders Issued Under Section 4 of the Bank the factors set forth in section 3(c) of the Act Holding Company Act (12 U.S.C. § 1842(c)). Applicant is the 18th largest commercial banking BankEast Corporation organization in Florida, with total deposits of $169 Manchester, New Hampshire million, representing less than one percent of the total deposits in commercial banking organizations in the Order Approving the Acquisition of a Discount state.1 Bank is among the smaller commercial banking Broker organizations in Florida, with total deposits of $14 million, also representing less than one percent of the BankEast Corporation, Manchester, New Hampshire, total deposits in commercial banking organizations in a bank holding company within the meaning of the the state. Consummation of this proposal would not Bank Holding Company Act ("Act"), 12 U.S.C. result in a significant increase in the concentration of §§ 1841-48, has applied for the Board's approval unbanking resources in Florida. der section 4(c)(8) of the Act, 12 U.S.C. § 1843(c)(8), Bank operates in the Marion County banking mar- and section 225.23 of the Board's Regulation Y, ket,2 a market where Applicant does not operate. 12 C.F.R. § 225.23, to acquire all of the voting shares Based on all the facts of record, consummation of the of Royal/Grimm & Davis, Inc., New York, New York proposed transaction would not result in any signifi- ("Company"), a discount broker. The Board has cant adverse effects on existing or potential competi- previously determined that discount brokerage is tion or increase the concentration of banking re- closely related to banking and permissible for bank sources in any relevant area. holding companies. 12 C.F.R. § 225.25(b)(15). The financial and managerial resources and future Notice of the application, affording interested perprospects of Applicant and its subsidiary banks and of sons an opportunity to submit comments, has been Bank are considered satisfactory and consistent with duly published. 51 Federal Register 26,058 (1986). The approval. Considerations related to the convenience time for filing comments has expired, and the Board and needs of the communities to be served also are has considered the application and all comments reconsistent with approval. ceived in light of the public interest factors set forth in Based on the foregoing and other facts of record, the section 4(c)(8) of the Act. Board has determined that the application should be, Applicant, with consolidated assets of $953 million,1 and hereby is, approved. This approval is subject to is the fourth largest commercial banking organization Applicant's compliance with all state and federal re- in New Hampshire. Applicant's subsidiary banks have quirements necessary for consummation of the acqui- deposits of $737 million, representing 9.1 percent of all sition. The transaction shall not be consummated deposits in commercial banks in the state. In addition, Applicant engages in mortgage lending, trust, and other activities through nonbank subsidiaries. 1. Banking data are as of December 31, 1985. 2. The Marion County banking market is approximated by Marion County, Florida. 1. All data are as of June 30, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

138 Federal Reserve Bulletin • February 1987 Company, with assets of $399,070, provides dis- Based on the foregoing and other facts of record, the count brokerage services from a single office in New Board concludes that the balance of the public interest York City. Under Applicant's proposal, Company's factors it is required to consider under section 4(c)(8) brokerage activities would be limited to buying and favors approval of the application. Accordingly, the selling securities solely upon the order and for the application is hereby approved. This approval is subaccount of its customers, and would not include under- ject to all of the conditions set forth in Regulation Y, writing, dealing, investment advice, or research ser- including those in sections 225.4(d) and 225.23(b), vices. 12 C.F.R. §§ 225.4(d), 225.23(b), and to the Board's The market for discount brokerage services is na- authority to require such modification or termination tionwide and unconcentrated. Because Applicant does of the activities of a bank holding company or any of not currently provide such services, the proposed its subsidiaries as the Board finds necessary to assure acquisition would not eliminate any existing competi- compliance with, and to prevent evasions of, the tion. The acquisition could make Company a stronger provisions and purposes of the Act and the Board's competitor by enabling it to raise capital at a lower regulations and orders issued thereunder. cost and by giving it access to Applicant's marketing, The proposed acquisition shall not be consummated managerial, financial, and technical resources. In view later than three months after the effective date of this of the large number of prospective providers of dis- Order unless that period is extended for good cause by count brokerage services, the acquisition would have the Federal Reserve Bank of Boston, pursuant to no significant adverse effect on probable future com- delegated authority, or by the Board. petition. The Board accordingly concludes that com- By order of the Board of Governors, effective petitive factors lend weight toward approval of the December 23, 1986. application. Company's president and chief executive officer, Voting for this action: Chairman Volcker and Governors Mr. Jay V. Grimm ("Protestant"), has protested the Johnson, Seger and Heller. Abstaining from this action: proposed acquisition, asserting that it would violate Governor Angell. Absent and not voting: Governor Rice. his contractual rights to manage Company and thus expose Applicant to litigation and possible liability; JAMES MCAFEE would cause Company to lose money and could result [SEAL] Associate Secretary of the Board in the loss of valuable employees and customers; and would yield no offsetting public benefits. He also asserts that Applicant has exercised control over Com- Bankers Trust New York Corporation pany without the prior approval required under section New York, New York 4(c)(8) of the Act. Having reviewed Protestant's arguments, the Board Order Approving Application to Engage in concludes that they do not warrant denial of the Commercial Paper Placement to a Limited Extent application. In light of the entire record, the Board concludes that Applicant has the financial and mana- Bankers Trust New York Corporation, New York, gerial resources to handle any foreseeable problems New York, a bank holding company within the meanassociated with the proposed acquisition or with Pro- ing of the Bank Holding Company Act, 12 U.S.C. testant's contractual claims. The Board also finds that § 1841 et seq. ("BHC Act"), has applied pursuant to Applicant has not exercised control over Company. section 4(c)(8) of the BHC Act (12 U.S.C. Accordingly, the Board concludes that financial and § 1843(c)(8)) and section 225.21(a) of the Board's managerial considerations are consistent with approv- Regulation Y (12 C.F.R. 225.21(a)) to act as agent and al of the application.2 adviser to issuers of commercial paper in connection There is no evidence of record indicating that the with the placement of such commercial paper with proposed acquisition would result in conflicts of inter- institutional purchasers. The activity will be conductest, undue concentration of resources, unsound bank- ed through BT Commercial Corporation, Chicago, ing practices, or other adverse effects. Illinois ("Company"), a wholly owned commercial finance subsidiary of Applicant's direct subsidiary, B.T. Leasing Services, Inc., New York, New York. Pursuant to prior Board approval under section 2. Protestant's request for a formal hearing was untimely, having been submitted more than two months after the close of the comment 4(c)(8) of the BHC Act, Company engages in making period. See 12 C.F.R. § 262.3(e). Moreover, the parties have had and servicing loans and leasing, activities that are ample opportunity to present evidence and arguments in writing, and permissible for bank holding companies under sections to respond to one another's submissions. The Board has accordingly denied Protestant's request for a formal hearing. 225.25(b)(1) and 225.25(b)(5) of Regulation Y Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 139 (12 C.F.R. 225.25(b)(1) and (5)). Company would pro- distribution" of securities within the meaning of secvide the proposed commercial paper placement activi- tion 20 of the Banking Act of 1933 (the "Glass-Steagall ty in addition to the previously approved commercial Act").4 If so, the Board may not approve the proposfinance activities, with Company serving customers al.5 In addition, the Board must determine whether the through offices in New York, Chicago and Los Ange- proposed activity is so closely related to banking as to les. be a proper incident thereto within the meaning of Applicant, with consolidated assets of $50.7 billion,1 section 4(c)(8) of the BHC Act and is, on this basis, a is the sixth largest banking organization in New York. permissible activity for bank holding companies. It operates two subsidiary banks and engages in a broad range of permissible nonbanking activities in the Part I. Glass-Steagall Act Analysis United States and abroad. Notice of the application, affording interested per- A. Commercial Paper Placement Is Not sons an opportunity to submit comments on the pro- Covered By Section 20 posal, has been duly published, 50 Federal Register 25,465 (1985). The majority of the written comments Applicant contends that Company would not be enwere in favor of the proposals. The Board received gaged in underwriting, distributing or any other activithree written comments opposing the application from ty covered by section 20 of the Glass-Steagall Act on the Securities Industry Association ("SIA"), a trade the basis of the Board's conclusions in its 1985 ruling association of the investment banking industry, the with respect to the commercial paper placement activi- Investment Company Institute ("ICI"), a trade associ- ties of Bankers Trust. Statement Concerning Applicaation of the mutual fund industry, and Merrill Lynch bility of the Glass-Steagall Act to the Commercial Money Markets, Inc., a dealer in commercial paper, Paper Placement Activities of Bankers Trust Company who contended that the activity would violate the (June 4, 1985) ("Statement"). In the Statement, the Glass-Steagall Act. Board ruled that the commercial paper placement Under this proposal, Company would assume the activity as conducted by the bank as an agent for commercial paper placement activity currently con- customers is a permissible securities activity and does ducted by Applicant's subsidiary, Bankers Trust Com- not constitute the "underwriting," "distribution" or pany ("Bankers Trust"), a state member bank. Thus, impermissible "selling" of such securities for pur- Company would enter into agreements with corporate poses of section 16 or 21 of the Glass-Steagall Act issuers of commercial paper to act as the issuer's agent (12 U.S.C. §§ 24 Seventh and 378(a)(1)), the proviin facilitating the placement of the issuer's commercial sions of the Act applying directly to banks.6 paper in minimum denominations of $250,000 with a In the Board's view, Company would not be enlimited number of institutions, such as banks, insur- gaged in underwriting, distributing or the public sale of ance companies, mutual funds, and nonfinancial businesses.2 Company may also advise the issuers of commercial paper with respect to the rates and maturi- 4. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) provides ties of the proposed issue that are likely to be accepted that in the market. ... no member bank shall be affiliated . . . with any . . . organization engaged principally in the issue, flotation, underwriting, public sale, or Because Company would be affiliated through com- distribution at wholesale or retail or through syndicate participation of mon ownership with a member bank,3 the Board must stocks, bonds, debentures, notes, or other securities. . . . In Securities Industry Ass'n. v. Board of Governors of the Federal determine whether, upon consummation of the pro- Reserve System, 468 U.S. 137 (1984) (hereinafter "Bankers Trust"), posal, Company would be "engaged principally" in the Court held that commercial paper is a security for purposes of sections 16 and 21 of the Glass-Steagall Act (12 U.S.C. §§ 24 Seventh the "issue, flotation, underwriting, public sale, or and 378), which taken together prohibit banks, such as Bankers Trust, from underwriting any issue of securities or stock, subject to certain exceptions for U.S. government and agency securities, state and municipal general obligations, and other specified securities. On the basis of this decision, the Board concludes that commercial paper is a security for purposes of section 20. 1. Asset data are as of September 30, 1986. 5. See Securities Industry Ass'n v. Board of Governors of the 2. Commercial paper refers to prime quality, short-term promissory Federal Reserve System, 468 U.S. 207, 216 (1984) (hereinafter notes (maturities not exceeding nine months) issued or backed by "Schwab"). large financial, industrial, and commercial companies to finance 6. In its Statement, the Board concluded that so long as the bank seasonal or other current needs. Commercial paper is placed with a acted only as agent for the issuer and did not assume the risk of a limited number of large institutions and is not offered to the general principal by making commercial paper-related loans, letters of credit public. Issuers placing commercial paper in the recognized market do or other credit facilities, it would be engaged in selling activity as not register the paper pursuant to the Securities Act of 1933, relying agent, which does not violate sections 16 and 21 of the Glass-Steagall on the exemption in section 3(a)(3) of that Act. 15 U.S.C. 377c(a)(3). Act and is authorized for member banks. In addition, the Board 3. Under the Glass-Steagall Act, companies are affiliated if, as concluded that the bank would not be "underwriting" or "distributrelevant here, more than 50 percent of their voting shares is held by ing" securities because there would be no public ofiFering of commerthe same shareholder. 12 U.S.C. § 221a(b). cial paper. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

140 Federal Reserve Bulletin • February 1987 securities for purposes of section 20 for the same The Board has ordered a hearing on these applicareasons the Board concluded in its Statement that tions and the legal and factual issues that prompted Bankers Trust would not be engaged in these types of this decision are explained in a statement issued by the activities under sections 16 and 21, so long as Compa- Board today. Press Release, dated December 24, 1986. ny's activity conforms to that approved for Bankers This Order, therefore, examines the question of Trust under the Board's Statement. As the Supreme whether Applicant's commercial paper placement pro- Court's opinions interpreting the Glass-Steagall Act posal is consistent with the "engaged principally" indicate, where a particular activity is found not to be provisions of section 20 and the Bank Holding Compathe type of activity prohibited to banks by sections 16 ny Act. and 21, it should not be viewed as the kind of activity described in section 20.7 B. The Term "Engaged Principally" in Section The protestants have disputed the Board's conclu- 20 Denotes Substantial Activity sions concerning the permissibility of this activity for a member bank under the Glass-Steagall Act, and the Applicant's Contentions SI A has also challenged the Board's Statement in court. On December 23, 1986, the United States Court Applicant contends that, even if Company's commerof Appeals for the District of Columbia Circuit upheld cial paper placement activities were deemed to constithe Board's determination that Bankers Trust's com- tute underwriting under section 20, Company would mercial paper placement activity does not constitute not be "engaged principally" in underwriting securi- "underwriting" or the impermissible "selling" of ties under section 20 because its placement activity commercial paper under sections 16 and 21 of the would represent only a minor aspect of Company's Glass-Steagall Act. Securities Industry Ass'n v. Board overall business activity. To assure that the activity of Governors of the Federal Reserve System, Nos. 86- will be relatively insubstantial, Applicant has commit- 5089 et al. ("Bankers Trust I f ). ted that Company will limit its commercial paper Applicant argues, however, that even if the pro- placement activity so that its gross revenue (fee and posed commercial paper placement activity is viewed similar income) from the activity will not in any year as "underwriting" or similar activity covered by sec- exceed 5 percent of Company's gross revenues. tion 20 of the Glass-Steagall Act, the proposal would The Applicant and other commenters supporting nevertheless comply with section 20 because Compa- approval of the application contend that under the ny would not be "engaged principally" in such activi- "engaged principally" test in section 20, Company ty. The Board believes it should respond to this may underwrite commercial paper so long as this alternative basis for approval of the proposal advanced activity does not constitute more than 50 percent of its by Applicant. total business activity or represent its single largest The Board also believes it is appropriate to act on business activity.8 On this basis and subject to the this application at this time because it does not involve proposed limitation on its commercial paper activity, the same complex factual and legal issues that arise Applicant contends Company would be "engaged from the separate applications of Applicant, Citicorp, principally" in commercial lending activities and, and J.P. Morgan & Co. Incorporated to underwrite therefore, Company could not by definition be encommercial paper, mortgage-backed securities, mu- gaged principally in underwriting securities in violanicipal revenue bonds and consumer-related receiv- tion of section 20 of the Glass-Steagall Act. Applicant ables in an affiliate that also underwrites U.S. govern- further claims that, even under the narrowest reading ment securities. These applications are substantially of "principally" as denoting any substantial activity, different from the Applicant's commercial lending Company would not be engaged principally in underaffiliate proposal because the proposed underwriting writing securities under the 5 percent gross revenue would be conducted in an affiliate predominantly en- limitation proposed in its application. gaged in underwriting U.S. government securities and because of issues concerning the effectiveness of the sales volume limitations proposed in these applications. 8. Applicant and some of the commenters rely on a dictionary definition of the term "principally" to mean the single largest activity and statements in the U.S. Supreme Court decision in Board of Governors of the Federal Reserve System v. Agnew, 329 U.S. 441, 446, 448 (1947), concerning section 32 of the Glass-Steagall Act, 7. Board of Governors of the Federal Reserve System v. Invest- which prohibits member banks and companies "primarily engaged" in ment Company Institute, 450 U.S. 46, 60-61 n.26 (1981) ("7C7II"). the underwriting or public sale of securities from having a common See also Schwab, 468 U.S. at 219. officer, director or employee. 12 U.S.C. § 78. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 141 Protestants' Comments abolished underwriting affiliates of member banks, but has allowed such affiliates where their conduct of The protestants claim that Applicant's view of the underwriting activity would not represent a principal term "principally" would vitiate the central purpose line of business for the affiliate. S. Rep. No. 77, 73d of the Glass-Steagall Act by allowing member banks Cong., 1st Sess. 10 (1933). to reestablish "security affiliates" that could rival the As the Supreme Court has recognized, it is evident largest investment banking firms. For this reason, the in the terms and structure of the Glass-Steagall Act protestants contend that the term "principally" must that Congress intended to "treat banks separately be interpreted consistent with Congressional intent to from their affiliates"12 and to apply a "significantly denote any substantial, significant, regular or non- less stringent" standard to affiliates than to banks incidental activity, whether or not it is the largest under the Act.13 Indeed, the Court has stated that activity of the affiliate. under the Glass-Steagall Act "a bank affiliate may Protestants also contend that the proposed activity engage in activities that would be impermissible for the is not closely related to banking under the BHC Act bank itself."14 and would result in substantial risk and conflicts of Thus, the Board's decision in this case does not turn interest not outweighed by public benefits. upon whether a member bank affiliate may engage in section 20 activity. The statute by its terms plainly Literal Terms and Structure of the Glass-Steagall authorizes such activity by member bank affiliates Act where the affiliate is not "engaged principally" in the activity. Rather, the Board must determine at what In interpreting a statute, the Board must be guided by level and by what measurement a member bank affilithe ordinary meaning of the words Congress chose to ate would be "engaged principally" in this activity. express its intention and the underlying purpose of the Given the fact that section 20 plainly permits some statute as evident in its structure and legislative his- amount of otherwise impermissible securities undertory.9 In interpreting the term "engaged principally" writing activity, but that a fundamental purpose of the in section 20, the Board believes it important to note at Act as a whole is to separate securities affiliates as far the outset that, while the overall objective of the as possible from member banks, the Board believes, Glass-Steagall Act is to separate commercial and for the reasons set out below, that the term "engaged investment banking,10 section 20 by its terms does not principally" in section 20 denotes an activity of the require that this separation be complete. In contrast to affiliate that is substantial, even if the activity does not the flat prohibitions of sections 16 and 21 on securities represent more than 50 percent of the affiliate's total underwriting and dealing by banks (other than as business activity or its single largest or most important specifically authorized),11 section 20 prohibits under- activity. writing and dealing activity by a member bank affiliate While the term "engaged principally" may, as Aponly where the affiliate would be "engaged principal- plicant and others contend, mean that activity acly" in such activity. In other words, Congress has not counting for more than 50 percent of the firm's business or its single largest activity, the term may also mean engaged "primarily" or "in a principal manner" and refer to a number of different activities that are 9. See, e.g., Steadman v. S.E.C., 450 U.S. 91, 97 (1981); Southeastern Community College v. Davis, 442 U.S. 397, 405 (1979). See also e.g., Bankers Trust 468 U.S. at 149; Schwab, 468 U.S. at 217; Agnew, 329 U.S. at 447. 12 U.S.C. § 24 Seventh. 10. See Bankers Trust, 468 U.S. at 147; ICIII, 450 U.S. at 61-62, Section 21 makes it unlawful— 70, citing S. Rep. No. 77, 73d Cong., 1st Sess. 10 (1933); Investment For any person . . . engaged in the business of issuing, underwriting, Company Institute v. Camp, 401 U.S. 617, 629 (1971) ('7C/ /"). selling, or distributing . . . stocks, bonds, debentures, notes, or other securities, to engage at the same time to any extent whatever in the business 11. Section 16 provides: of receiving deposits . . . Provided, That the provisions of this paragraph The business of dealing in securities and stock by [a member bank] shall shall not prohibit . . . banks ... or other financial institutions . . . from be limited to purchasing and selling such securities and stock without dealing in, underwriting, purchasing and selling investment securities, or recourse, solely upon the order, and for the account of, customers, and in no issuing securities, to the extent permitted to [member banks under section case for its own account, and [a member bank] shall not underwrite any issue 16]. of securities or stock . . . 12 U.S.C. § 378(a)(1). 12. ICI II, 450 U.S. at 58 n.24. 13. Id. at 71 n.46 and 60 n.26. The limitations and restrictions herein contained as to dealing in, underwriting and purchasing for its own account, investments securities shall not 14. Id. at 64. In the Agnew case, the Court also recognized that the apply to obligations of the United States, or general obligations of any State Glass-Steagall Act does not mandate a complete separation between or any political subdivision thereof, or [other specified obligations]. member banks and underwriting firms. 329 U.S. at 447, 449. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

142 Federal Reserve Bulletin • February 1987 "main," "leading," "important" or "outstanding."15 should be construed together and that the term "prin- For example, Webster's 1933 dictionary—the version cipally" in section 20 must, like the term "primarily" available at the time the Glass-Steagall Act was en- in section 32, denote any substantial activity.17 In the acted—states that the term "principal" may refer to a Schwab case, the Supreme Court also observed that, number of the most considerable or important objects, because of the parallels between sections 20 and 32, a as in "the principal officers; the principal men; the long accepted interpretation of section 32 should apply principal productions; the principal arguments." The equally to section 20. 468 U.S. at 219. Board also notes that courts often use the term "principal" to denote a number of important or leading Legislative History of Section 20 objects, as in the "principal cities" of a nation.16 Moreover, the Supreme Court has held in the con- The Board believes that a construction of the term text of section 32 of the Glass-Steagall Act that the "engaged principally" to denote any substantial line of term "primarily," which as noted can be a synonym business activity is the only reasonable construction for "principally," denotes any substantial activity that would carry out the legislative intent of the Glasseven if not the most important activity. Agnew, 329 Steagall Act to separate commercial and investment U.S. at 446. banking in the country as far as possible18 and of In light of the two alternative meanings for the term section 20 in particular "to provide for the divorce of "principally," the decision as to the proper meaning of security affiliates from member banks."19 that term in section 20 must, in the Board's judgment, In this regard, the Board is concerned that Applibe made on the basis of legislative intent. This was the cant's interpretation would substantially negate the rationale adopted by the Supreme Court in the Agnew purpose of section 20 by allowing affiliations between case in upholding, as "more consonant with the legis- large member banks and the largest investment banks lative purpose" of the Glass-Steagall Act, the Board's in the country, the precise situation at which the decision that the term "primarily engaged" in section Glass-Steagall Act was directed.20 As the Supreme 32 of the Glass-Steagall Act must be given its alterna- Court noted in the Agnew case, because investment tive meaning as denoting a substantial, even if not the banking concerns engage in numerous activities other largest, activity. 329 U.S. at 446-447. Given the than underwriting, an interpretation of "primarily ensimilarity in language of sections 20 and 32 and the fact that they were enacted at the same time for the same purpose and that "principally" and "primarily" can be synonyms, the Board believes that these sections 17. In prior rulings under the Glass-Steagall Act, the Board has applied the terms "principally" and "primarily" to the same levels of activity and treated the sections in a parallel fashion. See, e.g., 20 FEDERAL RESERVE BULLETIN 485-86 (1934); letter from the Board to the Federal Reserve Bank of Kansas City (August 8, 1935) (concern- 15. Webster's New International Dictionary of the English Lan- ing First Trust Company of Lincoln, Lincoln, Nebraska); 12 C.F.R. guage 1706 (1933); Webster's New International Dictionary of the 218.104. English Language 1966 (2d ed. 1934), 1802; Webster's Third New 18. ICIII, 450 U.S. at 61-62; ICII 401 U.S. at 629-633; S. Rep. International Dictionary of the English Language 1802-03 (1981). No. 77, 73rd Cong., 1st Sess. 10 (1933). Accord: 75 Cong. Rec. 9888- The Board finds no support in the accepted definition of the term 9889 (1932) (statement of Sen. Glass); 15 Cong. Rec. 9905 (1932) "principally" or, as discussed below, in prior Board rulings for (statement of Sen. Walcott); 77 Cong. Rec. 3835 (1933) (statement of protestants' assertion that the term also denotes activity that is regular Rep. Steagall); and 77 Cong. Rec. 3907 (1933) (statement of Rep. or non-incidental, even if not substantial or important. See note 28, Koppleman). below. 19. Operation of the National and Federal Reserve Banking Sys- 16. E.g., Marquette National Bank of Minneapolis v. First of tems, 1932: Hearings on S. 4115 before the Senate Comm. on Banking Omaha Service Corp., 439 U.S. 299, 315 n.29 (1978) ("the principal and Currency, 72d Cong., 1st Sess. 388 (1932) (statement of Governor cities along the Atlantic coast"); B. & O. R. Co. v. United States, 386 Eugene Meyer delivering Federal Reserve Board's Comments and U.S. 372, 380 (1967) ("the principal cities [served by a railroad Recommendations on the Glass Bill (S. 4115)) (hereinafter "1932 system]"); Chicago & N.W. Ry. Co. v. Atchison, T. <& S. F. Ry. Co., Hearings"). 387 U.S. 326, 340 (1967) ("eight principal Midwestern roads"); 20. On this basis, the Board in connection with the withdrawal of an National Labor Relations Board v. Fruehauf Trailer Co., 301 U.S. 49, earlier proposal by Citicorp to underwrite corporate debt, municipal 53 (1937) ("principal cities of the country"). revenue bonds, and mortgage-backed securities through a subsidiary The fact that "principally" is used in other statutory or regulatory engaged predominantly in underwriting U.S. government and other contexts to denote the single largest activity {e.g., 12 U.S.C. securities authorized under section 16 of the Glass-Steagall Act, § 1861(b)(7) and 12 C.F.R. 211.23(b) and 211.32 implementing 12 stated its preliminary view that the proposal was inconsistent with the U.S.C. §§ 1841(h) and 1843(c)(14)(F)) is not dispositive under section Glass-Steagall Act, where the proposal would have allowed the 20. For example, the term is used in other regulatory contexts to applicant to underwrite a volume of securities equal to or greater than denote a number of main or important objects: e.g., 12 C.F.R. that of the largest securities underwriters. Board Press Release, dated 347.4(d) ("principal locations"); 12 C.F.R. 335.312, Item 1(b)(3) February 27, 1985. ("principal services" and "principal markets"). In any event, these This conclusion is also supported by the court of appeals emphasis interpretations pertain to statutes that were enacted for different in Bankers Trust II on the fact that Congress intended, through the purposes than section 20 and the use of the alternative definition of Glass-Steagall Act, to prevent member banks from establishing "principally" was determined to be appropriate in the context of affiliates "having a far-flung retail network to distribute securities to those statutes to carry out their different legislative purposes. the public." Slip op. at 27. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 143 gaged" as denoting the largest activity would mean nents of the Act in believing that the legislation would that section 32 of the Glass-Steagall Act "would apply require a separation between member banks and their to no one."2' This same reasoning applies to the security affiliates.23 As explained above, this objective "engaged principally" standard of section 20. would not be accomplished if the term "engaged The Board's interpretation of principally as denoting principally" meant only the single largest activity of an any substantial line of business activity also seems affiliate. The implications of interpreting the word appropriate in light of the fact that the alternative "principally" to mean the single largest activity would interpretation advanced by Applicant and other com- be that—insofar as the Glass-Steagall Act is conmenters would produce the anomalous result that a cerned—major banks could affiliate with major investmember bank could be affiliated through common ment banks and large investment banks could acquire stock ownership with an investment banking concern commercial banks.24 that is "substantially" but not "predominantly" en- Moreover, Senator Bulkley's amendment was to the gaged in underwriting activities, but could not, under proposed section 21, which as originally drafted, covsection 32 of the Glass-Steagall Act, have an officer, ered a company "engaged principally in the business" director or employee in common with the affiliate. In of underwriting or similar activity. Accordingly, his other words, in such a situation, the Act would prohib- remark concerning the use of "principally" in section it management interlocks because of the potential for 21 is not necessarily applicable to section 20, which conflicts, unsound practices and other hazards that does not contain the words "engaged principally in the Congress found could arise when commercial banking business . . . ."25 and investment banking functions were combined, but would permit the member bank and the securities The Agnew Decision company to be commonly owned, share a common name and pursue common policies dictated by the As noted above, the Board believes the reasoning of corporate owner, a situation that raises a far greater the Agnew case supports the Board's conclusion that potential for the types of adverse effects that lead the term "principally" in section 20 means substantial- Congress to enact section 20 of Glass-Steagall Act. ly because this interpretation is "more consonant with The Board has considered the reliance by some the legislative purpose" of the Glass-Steagall Act and commenters on the statement by Senator Bulkley in section 20 in particular. 329 U.S. at 447. urging deletion of the term "principally" from the In this regard, the Board has considered Applicant's "engaged principally in the business" language in the reliance on statements in the Agnew case suggesting proposed section 21 of the Glass-Steagall Act, that "at that through the use of different terminology in section least some of the great investment houses are engaged 32 ("primarily" engaged) and section 20 ("principalin so many forms of business that there is some doubt ly" engaged), Congress meant to describe different as to whether the investment business is the principal levels of underwriting activity in the two sections, and one."22 The Board does not, however, believe that the that "primarily" denoted any substantial activity, phraseology of this remark should be given controlling suggesting that "principally" meant the single most weight in interpreting the provisions of section 20. important activity. 329 U.S. at 448. The Board notes, Senator Bulkley was a major proponent of the Glass- however, that the meaning of the term "principally" in Steagall Act and was in accord with the other propo- section 20 was not before the Court in the Agnew case because there was no affiliation through common 21. 329 U.S. at 447. The Board also notes that, under Applicant's interpretation, section 20 would have failed to accomplish its basic purpose of requiring the separation of member banks from their 23. 75 Cong. Rec. 9909-13 (1932). security affiliates, because, at least in certain cases, the most impor- 24. In any event, the statements of a single legislator are not tant activity of some security affiliates in the early 1930s was not dispositive as to the meaning of a statute. Consumer Product Safety underwriting and dealing, but operating as an investment trust or Comm'n v. GTE Sylvania, 447 U.S. 102, 118 (1979). holding the stock of affiliated companies. See W. Peach, The Security 25. For the same reasons, the statement by Senator Glass (77 Cong. Affiliates of Banks 85 (1941); Operation of the National and Federal Rec. 3730) that section 21 would prohibit large "private banks, whose Reserve Banking Systems: Hearings Pursuant to S. Res. 71 Before a chief business is an investment business, from receiving deposits," Subcommittee of the Senate Comm. on Banking and Currency, 71st does not mean that the term principally in section 20 denotes the single Cong., 3d Sess. 1057-61 (1931). However, there is little doubt that largest activity. securities underwriting was a substantial activity of these security Certain commenters also note that Representative Bacon described affiliates. section 20 as applying to companies "chiefly engaged in the flotation, 22. 77 Cong. Rec. 4180 (1933). Section 21 prohibits a firm "engaged underwriting, or sale of investment securities." 77 Cong. Rec. 3954 in the business of issuing, underwriting, selling or distributing" (1933). However, "chiefly" like "principally" may refer to more than securities from accepting deposits. 12 U.S.C. § 378(a)(1). As originally one leading activity. There is no evidence that Representative Bacon drafted, section 21 would have applied to firms "engaged principally intended chiefly to be limited to the single largest activity, since he, in the business of' issuing or underwriting securities. S. 1631, 73d like Senator Bulkley, was a proponent of the separation of security Cong., 1st Sess. (1933). affiliates from member banks. Id. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

144 Federal Reserve Bulletin • February 1987 stock ownership between Eastman, Dillon & Co., the company consumer finance subsidiaries affiliated with underwriter in that case, and the member bank in- member banks to issue thrift note securities that did volved. Thus, the Agnew case does not as a legal not exceed 25 percent of the issuer's total consolidated matter compel a finding that "principally" in section assets on the basis that the activity would not be "a 20 means the single most important activity, particu- principal activity" of the company.29 larly in view of the broad inconsistency of such an interpretation with the purpose of section 20 of the Subtle Hazards Implicated by the Glass-Steagall Act Glass-Steagall Act. Moreover, there is nothing in the legislative history Finally, the Board believes that constraining the level of the Glass-Steagall Act suggesting that Congress of otherwise impermissible securities activity to the meant to describe different levels of underwriting point where it represents only an insubstantial line of activity in sections 20 and 32. If anything, the legisla- activity for the affiliate would minimize the potential tive history of section 20 indicates that section 20 was for conflicts of interest and the other so-called "subtle intended to be more rigorous than section 32, which hazards" that Congress concluded are raised when was described as "ineffective" in many cases to investment and commercial banking functions are achieve the Congressional goal of separating commer- combined.30 This is consistent in the Board's view cial and investment banking and "capable of easy with the Congressional intent underlying section 20 evasion."26 Further, as noted, common sense would that an insubstantial quantitative level of activity that suggest that a stricter standard for underwriting should is not conducted within a bank but by an affiliate of a be applied in the case of affiliations through common bank is acceptable from the point of view of the safety stock ownership than in the case of interlocking rela- and soundness of the bank and the interests of its tionships between otherwise unaffiliated companies. depositors. On the other hand, the interpretation advanced by Prior Board Interpretations the Applicant and certain commenters permitting a substantial amount of possibly speculative and hazard- The Board notes that the Applicant's interpretation of ous securities activity, so long as it is not the single section 20 is also inconsistent with the Board's prior largest activity, would not necessarily lead to a reducinterpretations, in which the Board has viewed the tion in the potential for subtle hazards. For example, engaged principally test as calling on it to weigh the the potential for conflicts and damage to a bank's substantiality of the securities activity even though the reputation would not appear to be reduced simply activity in question is not the single largest activity of because the affiliate's underwriting activity constitutes the firm. On this basis, the Board has long permitted 49 percent of its total activity rather than 51 percent. bank holding company subsidiaries affiliated with The fact that, under the Board's interpretation, the member banks to issue securities—an activity de- potential for "subtle hazards" may continue to exist, scribed in section 20—so long as the issuing activity albeit at a minimized level, even where underwriting did not become frequent and in substantial amounts27 activity is not substantial does not, however, alter the or "necessary to permit maintenance of the holding clear Congressional decision to allow some limited company's activities without substantial contraction" level of underwriting by member bank affiliates. As the or an "integral part of [the holding company's] opera- Supreme Court recognized in Agnew, even though the tions."28 The Board has also allowed bank holding potential for conflicts and other hazards may exist 26. 1932 Hearings at 387. 27. 12 C.F.R. 218.104(b). See also 12 C.F.R. 225.125(c). 29. Letters from the Board to Philadelphia National Corporation, 28. 12 C.F.R. 250.221(d). Protestants' reliance on these Board Centran Corporation and Virginia National Bankshares (September 9, rulings for the proposition that any frequent or recurring underwriting 1974). See also Financial Services Corporation of the Midwest, 63 activity is covered by section 20 regardless of whether the activity is FEDERAL RESERVE BULLETIN 948 (1977); and letter from the Board to important or substantial is misplaced. In these cases, the Board held— the SIA (December 27, 1977) (concerning a $25 million notes issue by consistent with its decision in this case—that the underwriting or Citicorp). issuing activity must not only be frequent but must also be substantial The Board's determination to permit a member bank affiliate to relative to the affiliate's total business activity. obtain 25 percent of its funding through issuance of securities does not In the case of the Board's closed-end mutual fund interpretation constitute a test that would allow a company to provide underwriting (12 C.F.R. 225.125(c)), the Board noted that a closed-end fund does services to third parties up to 25 percent of total activity. In the thrift not, after the initial distribution, obtain a substantial or material note cases, the companies issued their own notes as an activity portion of its capital structure from issuing securities, as opposed to incidental to their main consumer finance business and therefore a an open-end fund which must continually issue securities to maintain finding that they were not "engaged principally" in securities activity its capital and prevent shrinkage of its assets. ICIII, 450 U.S. at 51, was consistent with the terms and purposes of section 20. Moreover, 60-61 n.26. If the fund, however, issued securities frequently, it would as a share of total business, thrift note issuance would have been be obtaining a major portion of its capital and could be engaged considerably less than 25 percent. principally within the context of prior Board interpretations of section 30. See ICI I, 401 U.S. at 629-638; ICI II, 450 U.S. at 66-67; 20. Schwab, 468 U.S. at 220-221; Bankers Trust, 468 U.S. at 145-148. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 145 whatever proportion of the firm's business derives than 5 percent of the average outstanding volume for from underwriting, the Glass-Steagall Act does not by all dealer-placed commercial paper. its terms establish a complete barrier between banks The Board believes that the gross revenue a member and underwriting firms. 329 U.S. at 447. bank affiliate derives from commercial paper activity In any event, the potential for these subtle hazards relative to its total gross revenue would be an approand other conflicts of interest and unsound banking priate measure of "engaged principally," when coupractices that Congress identified when commercial pled with the affiliate's overall share of the market for banking and investment banking are combined would the particular type of security underwritten. This is not be present to any significant degree under the consistent with the Board's practice under the "prilimitations described in Part II of this Order for the marily engaged" standard of section 32 of the Glassconduct of the activity under the proper incident to Steagall Act, which gives controlling weight to the banking standard of section 4(c)(8) of the BHC Act. As revenues derived by the company from underwriting the Board has previously noted, the Supreme Court in activity relative to its total business revenues and the ICI II, 450 U.S. at 62, 67, explicitly recognized that significance of the organization's presence in the marwhere a particular activity is permissible under the ket for the particular activity.32 terms of the Act, the Board may rely upon restrictions The Board believes that revenue is an appropriate to insure that the activity is insulated from the subtle test to determine whether a subsidiary is "principally hazards associated with investment banking.31 The engaged" because it is an objective and meaningful court of appeals in Bankers Trust II, also recognized measure of the importance of the activity to the that the Board may examine the realities of a particular enterprise as a whole and often reflects the level of risk situation, including representations by an applicant as involved in the activity, a major consideration under to the manner in which an activity will be conducted, the Glass-Steagall Act.33 In addition, a gross revenue in determining whether the potential for conflicts of test avoids the potential for manipulation present in a interest and other subtle hazards are present in a test based solely or predominantly on sales volume. particular proposal. Slip op. at 30. The sales volume of an affiliate, particularly of a government securities subsidiary, could be increased C. Appropriate Measure of ' 'Engaged through churning of the affiliate's dealing activity in U.S. government and other authorized securities in Principally" order to create a larger base against which the section 20 securities activity would not appear to be substan- Having determined that the "engaged principally" tial. The Board has ordered a hearing to take evidence standard of section 20 denotes any substantial activity on these questions in connection with the underwriting by a member bank affiliate, the Board must determine applications by Applicant, Citicorp and J.P. Morgan & whether under the limitations proposed by Applicant, Co., which propose to use sales volume to measure Company's proposed commercial placement activity, "engaged principally" status under section 20.34 assuming that it constitutes underwriting, would be substantial. In addition, in the Board's judgment, the fact that an Applicant has suggested that Company would not be affiliate would be a relatively substantial force in a "engaged principally" in underwriting activity based particular securities market would be a factor suggeston a gross revenue test, i.e., the annual gross revenue ing that the affiliate is "engaged principally" in underfrom its commercial placement activity will not exceed writing securities. Thus, the Board has consistently 5 percent of its total gross revenues, which otherwise taken into account a firm's market share in decisions will be derived from commercial lending operations. under section 32 the Glass-Steagall Act. Applicant also notes that the amount of Company's assets devoted to the commercial paper activity will be "virtually nil" and has projected that commercial paper activity would not be large, accounting for less 32. Letter from the Board to the Federal Reserve Banks (August 11, 1958), reprinted in F.R.R.S. 11 3-895. 33. The Board notes that the protestant SI A is of the view that gross revenue (as well as assets devoted to the activity), not sales 31. National Westminster Bank PLC, 72 FEDERAL RESERVE BUL- volume, is the appropriate measure of an affiliate's section 20 activi- LETIN 584, 595 (1986). Moreover, reliance on these restrictions does ties on the basis that revenue is a better indicator of the risk involved not constitute the kind of regulatory approach the Supreme Court has in securities activities. Protestant Merrill Lynch claims that to avoid disfavored in construction of the Glass-Steagall Act. Bankers Trust, manipulation, net, not gross, revenues are the appropriate standard. 468 U.S. at 149-154. In that case, the Court indicated that an agency However, a test based on net revenues is itself subject to manipulamay not rely on regulatory limitations to overcome the explicit tion, since by allowing its costs to rise, an affiliate could reduce its net language of the Glass-Steagall Act. Here, as noted, the Glass-Steagall revenue but the volume and gross revenues from its securities Act explicitly permits some level of otherwise impermissible under- operations would not necessarily decrease and could even increase. writing activity for member bank affiliates. 34. Board Press Release, dated December 24, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

146 Federal Reserve Bulletin • February 1987 The Board also believes that a market share test creation of a large base of permissible non-section 20 could provide a useful and objective proxy for volume, activity, the size of the securities activity that may be which the Board believes is an important factor to be conducted by the affiliate on this basis is limited by the taken into account under the principally engaged test "engaged principally" provisions of the Glass-Steaof section 20. Unlike the sales volume test, the market gall Act as interpreted by the Board. As previously share test would not be subject to manipulation, but noted, these provisions involve the concept of a quanwould provide for consideration of the volume of titative limitation on underwriting activity which is business activity of the affiliate. embodied in the revenue and market share criteria for In the Board's view, where Company would not be establishing "substantiality" contained in this Order. engaged in a general securities or investment banking The Board wishes to stress that the latter criterion, in business and where its gross revenue from commercial particular, creates a limitation on underwriting activity paper activities in any one year would constitute less which is independent of the size of the affiliate that than 5 percent of its total gross revenue and the might be established by purposeful transfer of activivolume of commercial paper outstanding at any one ties from the bank to the holding company affiliate. time placed by Company represents less than 5 percent of the average amount of dealer-placed commer- Part II. Bank Holding Company Act Analysis cial paper outstanding during the previous four calendar quarters, Company would not be "engaged In every application under section 4(c)(8) of the BHC principally" in underwriting securities within the Act, the Board must find that the proposed activity is meaning of section 20. The conduct of the commercial "so closely related to banking ... as to be a proper paper placement activity at these less than 5 percent incident thereto." This statutory standard requires levels is consistent with the Board's past practice for that two separate tests be met for an activity to be many years under the "primarily engaged" standard permissible for a bank holding company. First, the of section 32,35 and would, in the Board's judgment, be Board must determine that the activity is, as a general within the Congressional intent underlying section 20 matter, "closely related to banking." Second, the to allow member bank affiliates to engage in underwrit- Board must find in a particular case that the performing activities at levels that are not substantial and thus ance of the activity by the applicant bank holding minimize problems of safety or soundness or risk for company may reasonably be expected to produce affiliated member banks. public benefits that outweigh possible adverse ef- The Board recognizes that its past decisions have fects.36 permitted somewhat higher levels of activity as con- Based on guidelines established in the National sistent with the "primarily engaged" test under sec- Courier decision, a particular activity may be found to tion 32. Accordingly, the Board does not determine meet the "closely related to banking" test if it is definitively in this case at what quantitative level of demonstrated that: activity a company would be "engaged principally" in (1) banks generally have in fact provided the prosection 20 activity or whether this level should be the posed activity; same in all cases. (2) banks generally provide services that are opera- In its evaluation of this case, the Board has carefully tionally or functionally so similar to the proposed considered the fact that, in connection with the trans- activity so as to equip them particularly well to fer of the commercial paper placement activity to provide the proposed activity; or Company, Applicant will also transfer to Company a (3) banks generally provide services that are so portion of the commercial finance activity of Bankers integrally related to the proposed activity as to Trust. As indicated, Company is currently engaged in require their provision in a specialized form. commercial finance pursuant to approval by the Board under the BHC Act. Accordingly, although hardly a The National Courier guidelines are not the exclusive welcome result from some perspectives, Applicant's basis for finding a proposed activity closely related to proposed transfer of a segment of its commercial banking (516 F.2d at 1237), and the Board may considfinance activities to Company is necessary in order to er any other basis that may demonstrate that the meet the engaged principally test of section 20 and is activity has a reasonable or close relationship to authorized under both the BHC Act and Board regula- banking. 49 Federal Register 806 (1984). The U.S. tions. While the transfer could result in the deliberate Supreme Court stated in Schwab that the use of these 36. See ICI II, 450 U.S. at 57 n.22; National Courier Ass' n v. Board 35. See letter, dated December 14, 1981, reprinted in F.R.R.S. 1 of Governors of the Federal Reserve System, 516 F.2d 1229, 1237 3-939. (D.C. Cir. 1975). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 147 factors by the Board in determining the closely-relat- late 1970's. Protestants argue that the lawfulness of edness of an activity is reasonable and within the this activity has been continuously under challenge Board's discretion. 468 U.S. at 210 n. 5. and that there is little if any evidence that banks traditionally acted on behalf of issuers in the commer- A. Closely Related to Banking Analysis cial paper market.39 However, even if it were assumed that banks historically have not and legally may not After carefully considering the facts of record, the engage in the proposed placement activity, the Board Board concludes that placing commercial paper with nevertheless has the discretion to determine that this institutional purchasers, as the agent of third party activity is closely related to banking.40 issuers, is closely related to banking, because banks Placing commercial paper as the agent of the issuer provide services that are operationally and functional- is an activity that is similar in function to the traditionly so similar to the proposed services that banking al commercial banking function of arranging loan organizations are particularly well equipped to provide participations or syndications with other banks and the proposed services. As noted below, the proposed institutional lenders. Although commercial paper techactivity is a natural extension of commercial lending nically is a security for purposes of the Glass-Steagall activities traditionally conducted by banks, involving Act, this kind of instrument has many of the characterlittle additional risk or new conflicts of interest, and istics of a traditional commercial loan.41 A commercial potentially yielding significant public benefits in the loan in its traditional form represents a short-term form of increased competition and convenience.37 On extension of credit to a business to finance working this basis, the Board has urged the Congress to autho- capital needs. (E.g., United States v. Connecticut rize bank holding companies to engage in a wider Nat'I Bank, 418 U.S. 656, 665 (1974)). Because of its range of activities than that proposed here—under- short term, commercial paper is customarily held to writing and distributing commercial paper as princi- maturity—like a commercial loan. There is virtually no pals, underwriting certain other types of securities that secondary market. Because of its large denominations, are very similar to obligations currently underwritten commercial paper is generally purchased only by by banks, i.e., municipal revenue bonds and mortgage large, financially sophisticated institutions, such as trust departments of banks, money market mutual related securities, and sponsoring mutual funds. This funds, insurance companies, and pension funds. As view is not held by the Board alone. The other federal the activity is proposed by Applicant, Company will banking agencies as well as the U.S. Departments of sell commercial paper only to these large institutions. Treasury and Justice support the conduct of these activities by bank holding companies.38 Thus, Company's role will be, in effect, that of arranging short-term commercial loans from the institutional As noted above, the Board's June 1985 Statement buyers of commercial paper to the issuers of the paper. concludes that the proposed activity is lawful for member banks and that determination has been upheld In arranging a loan participation or syndication, a by the court of appeals. Applicant's subsidiary bank, bank, serving as the lead bank, solicits other institu- Bankers Trust, and certain other banks have placed tional lenders that may be interested in lending funds commercial paper, in some cases using procedures to a borrowing firm. The lead bank furnishes financial slightly different than those proposed here, since the information concerning the borrower to the prospective lenders. In certain types of shared loan arrangements, i.e., syndications, the lead bank sells a note issued by the borrower to the participating lenders. The lead bank ordinarily receives a fee from the 37. See, e.g., Statement of Chairman Volcker Before the Sub- borrower for its services in arranging the participation Comm. on Commerce, Consumer & Monetary Affairs of the House or syndication, and this reimbursement is contingent Comm. on Government Operations (June 11, 1986), reprinted in 72 FEDERAL RESERVE BULLETIN 541, 549 (1986); Financial Restructuring: The Road Ahead: Hearings on H.R. 5342, 4506 and 3537 Before the Subcomm. on Telecommunications, Consumer Protection, and Finance of the House Comm. on Energy and Commerce, 98th Cong., 2d Sess. 91 (1984) (statement by Paul A. Volcker, Chairman, Board of Governors of the Federal Reserve System), reprinted in 70 FEDERAL RESERVE BULLETIN 312, 316 (1984); S. Rep. No. 560, 98th Cong., 2d 39. See Bankers Trust, 468 U.S. at 160. Sess. 15-16 (1984). 40. ICIII, 450 U.S. at 64 ("In both the Glass-Steagall Act itself and 38. Competitive Equity in the Financial Services Industry: Hear- in the [BHC] Act, Congress indicated that a bank affiliate may engage ings on S.2181 Before the Senate Comm. on Banking, Housing, and in activities that would be impermissible for the bank itself."). Urban Affairs, 98th Cong., 2d Sess. 1221, 1274, 1550, 1714 (1984) 41. In Bankers Trust, the Supreme Court found that commercial (Statements of C. Todd Conover, Comptroller of the Currency, paper fell within the literal terminology of the Act ("notes, or other William M. Isaac, Chairman, F.D.I.C., Douglas H. Ginsburg, Deputy securities"), but did not directly dispute the Board's determination Assistant Attorney General, U.S. Department of Justice, and Donald that commercial paper has the functional characteristics of a commer- T. Regan, Secretary of the Treasury, respectively). cial loan. 468 U.S. at 150-59. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

148 Federal Reserve Bulletin • February 1987 on the lead bank's successful completion of the ar- that market. Moreover, the establishment of this activrangement function.42 ity in a holding company subsidiary will allow appli- Accordingly, the Board concludes that the proposed cant to provide greater convenience to customers of commercial paper placement activity is so functionally the service and to offer the service more efficiently on and operationally similar to the role of a bank that a nationwide scale. The Board considers these two arranges a loan participation or syndication that bank- factors—increased competition and more convenient ing organizations are particularly well suited to per- service to investors and borrowers—to be substantial form the commercial paper placement function.43 and important public benefits. B. Proper Incident to Banking Analysis Adverse Effects In order to approve an application to engage in a After a review of the application and other facts of nonbanking activity under section 4(c)(8), the Board record the Board finds no evidence that Applicant's must also determine that a proposed activity is a conduct of the activity through Company, acting sole- "proper incident" to banking by determining whether ly as the agent for issuers, is likely to result in any the performance of the activity by the applicant bank significant adverse effects under the framework for holding company may reasonably be expected to pro- conducting this activity proposed by Bankers Trust duce public benefits, such as greater convenience, and approved in this Order. increased competition, or gains in efficiency, that The Board's Statement concluded that placing comoutweigh possible adverse effects, such as undue mercial paper as the agent of the issuer within the concentration of resources, decreased or unfair com- terms of that Statement would not give rise to any petition, conflicts of interest, or unsound banking significant conflicts of interest and other hazards the practices. 12 U.S.C. § 1843(c)(8). Based upon the Glass-Steagall Act was enacted to eliminate. In its facts of record and for the reasons and subject to the recent opinion the court of appeals affirmed this deterlimitations set out below, the Board finds that consum- mination, with one exception that, as explained below, mation of this proposal may reasonably be expected to is not material to this application.44 result in public benefits that outweigh possible adverse In addition, the Board believes that the considereffects. ation of potential hazards that has been employed in analyzing the legality of a particular activity conducted Public Benefits directly by a bank is less controlling where, as here, the same activity would be performed by an affiliate of The Board believes that consummation of this propos- the bank. As explained above, section 20 of the Glassal will produce significant benefits to the public in the Steagall Act by its terms allows member bank affiliates form of increased competition and greater conve- to engage, to a limited extent, in general securities nience and efficiency. Company will offer the pro- underwriting and distributing, activities that clearly posed commercial paper placement service on a na- involve the promotional incentive and subtle hazards tionwide basis. In light of the fact that currently the Congress associated with investment banking activity. commercial paper market is dominated by a small In any event, a proposal by a bank holding company number of dealers, the expansion of Applicant's com- to engage in securities activities that is consistent with mercial paper activities can only foster competition in section 20 must also comply with the public benefits test of section 4(c)(8); the expected benefits to the public from the proposal must outweigh likely adverse effects. Moreover, unlike the Glass-Steagall Act, the 42. E.g., Note, Loan Participation Agreements as Securities: Judi- BHC Act authorizes the Board to impose conditions cial Interpretations of the Securities Act of 1933 and the Securities Exchange Act of 1934, 24 Wm. & Mary L. Rev. 295, 296-297 (1983); on a proposal to assure the specific adverse effects do Pollock, Notes Issued in Syndicated Loans—A New Test to Define not result. Securities, 32 Bus. Law. 537, 538 (1977); Comment, International Insulation of Proposed Activities from Affiliated Loan Syndication, the Securities Acts, and the Duties of a Lead Bank, 64 Va. L. Rev. 897, 899-900 (1978). Banks. At the outset, the Board notes that a great 43. For many years, banks have also acted as agents on behalf of many of the adverse effects it is charged with considerissuers of long-term debt and equity securities in soliciting a limited ing under the proper incident to banking test of section number of institutions to purchase the securities in private placement transactions. See Federal Reserve Board Staff, Commercial Bank 4(c)(8), like unsound banking practices and conflicts of Private Placement Activities (1977); Comptroller of the Currency, interest, relate to potential damage to the holding Federal Deposit Insurance Corporation, Federal Reserve Board, Commercial Bank Private Placement Activities (1978). These private placement operations of banks regarding various other types of securities are clearly very close in function to the proposed commercial paper placement activities. 44. Bankers Trust II, slip op. at 29-34. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 149 company's subsidiary bank that might result from the iaries through Company's activity or through impruproposed nonbanking activity. The Board has previ- dent financial transactions with Company or made for ously indicated that although a bank cannot be com- its benefit. In addition, the Board has considered pletely insulated from the fortunes of an affiliated whether the public association and corporate linkages nonbanking subsidiary, the greater the extent to which between Company and Applicant's subsidiary banks the nonbanking activity of a nonbank subsidiary of a could lead to a loss of public confidence in the banks if holding company is insulated, both structurally and losses are sustained by Company or by persons dealoperationally, from the holding company's subsidiary ing with Company. The Board is of the view that the bank, the less likely it is that these kinds of adverse proposal as structured will not produce any unsound effects will result from the conduct of the nonbanking banking practices, as discussed below. activity.45 Protestants first allege that Company could lose its While the Board has found that the proposed place- own funds as a result of the commercial paper placement activity may be conducted directly by a bank ment activity. The Board finds, however, that the risk without danger of significant conflicts of interest, of loss to Applicant or to Company as a result of this unsound banking practices, or other abuses, the trans- proposal is not excessive or inconsistent with prudent fer of this activity to a separate subsidiary of Applicant banking standards. As the activity is proposed by will negate further any possibility of adverse effects. In Applicant, Company would not purchase or repurparticular, under the proposal made by Applicant, the chase any commercial paper for its own account or activity would be separated from the activities of inventory unsold portions of a commercial paper issue Applicant's subsidiary banks, both through separate in connection with its proposed placement activity. incorporation and through financial and operational Since Company would act solely as agent, it would not limitations specifically designed to ensure that the assume any credit or market risk with respect to the proposed placement activity is insulated from the paper it places.47 subsidiary banks. For example, as explained below, The Board also has determined that, contrary to under section 23A of the Federal Reserve Act protestants' assertions, the proposed activities are not (12 U.S.C. § 371c), transactions between the affiliated likely to damage public confidence in Applicant's banks and Company will be strictly limited, and under subsidiary banks. First, damage to the reputation of Applicant's proposal Company will not have officers, affiliated banks is most likely to occur if Company or directors, or employees in common with Applicant's depositors of these banks suffer losses. As noted, subsidiary banks. Similarly, as explained in greater Company will not purchase commercial paper for its detail below, Company's lending affiliates will be own account. Moreover, Company would not adverrestricted in extending credit to issuers of commercial tise or offer commercial paper to the public generally, paper placed by Company and, significantly, these but would place the paper in private transactions with affiliates will not purchase, as principal or fiduciary, or a limited number of institutions, only some of whom recommend to customers the purchase of, commercial may be depositors of Applicant's subsidiary banks. paper placed by Company. The Board also requires In addition, under Applicant's proposal, its subsidthat Company's access to customer records of the iary banks will not purchase, for accounts managed or affiliated banks be limited. advised by their trust departments, commercial paper Finally, although to some extent the potential for placed by Company or even recommend that a cusconflicts of interest and other adverse effects exists in tomer purchase such paper, and no affiliate of Compaconnection with permissible loan participation and ny will purchase such commercial paper for an acprivate placement activities of member banks, there is count for which the affiliate has investment discretion no evidence in recent experience or in the past that or acts as investment adviser.48 Moreover, under this these operations have produced conflicts of interest or proposal, commercial paper will be placed by Compaother abuses.46 ny, not by Applicant's subsidiary banks, so that com- Unsound Banking Practices. The Board has consid- mercial paper will be purchased not from the bank but ered the extent to which the proposal would result in from Company, which is not a bank, and has no unsound banking practices or excessive financial risk depositors, and whose operations will be separated to Applicant, Company, or Applicant's other subsid- 47. Moreover, as explained below, neither Company nor its affili- 45. National Westminster Bank, PLC, 72 FEDERAL RESERVE BUL- ates will make any loans that are the functional equivalent of purchas- LETIN at 588. ing the paper being placed. 46. See Federal Reserve Board Staff Study, Commercial Bank 48. Bankers Trust will execute orders for commercial paper placed Private Placement Activities 65 (1977). by Company only when specifically directed by the purchaser. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

150 Federal Reserve Bulletin • February 1987 from the functions of Applicant's subsidiary banks.49 for its own account, since any credit it extends to the Thus, there is no reasonable likelihood that the reputa- issuer of paper being placed is under different terms, at tion of Applicant's subsidiary banks will be damaged different times and for different purposes than the by Company's activities or that the banks will be terms and timing of the paper being placed. associated or identified by the public with the success Moreover, to insure that in practice funds borrowed or failure of specific obligations or issuers. from Bankers Trust are not used to support commer- Conflicts of Interest. In determining whether the cial paper placed by the bank, the bank assures itself proposed placement activities are a proper incident to that any advances by the bank to an issuer of commerbanking, the Board also has considered whether the cial paper under any line of credit are not used to repay activities would result in conflicts of interest. Given paper placed by the bank or to cover any unsold that the proposed activities would not be a significant portion of a commercial paper issue placed by the activity of Company, the fact that banks have engaged bank.51 in substantially similar activities for a number of years Since under Applicant's proposal Company would without giving rise to significant conflicts, and the conduct its placement activity in a manner identical to limitations on the activity as proposed by Applicant, the procedures currently followed by Bankers Trust, the Board believes that any potential conflicts arising Company's operations and the lending operations of from the proposal would not be significant. Applicant's subsidiary banks and other lending subsid- In particular, the protestants allege that Company's iaries will also be conducted within these limitations. "salesman's interest" in the success of its commercial The Board also finds that there is no significant paper placement activity may affect its affiliate banks' potential for Applicant's subsidiary banks to make ability to function as an impartial source of credit and unsound loans to issuers of commercial paper placed as a disinterested financial advisor to its corporate, by Company in an attempt to improve the issuer's trust, correspondent, and other customers.50 First, the financial condition. The potential loss to the bank if protestants allege that Applicant's subsidiary banks such loans are not repaid would greatly exceed the may be encouraged to make imprudent loans to fi- very small commissions Company would receive for nance the purchase of commercial paper placed by the its placement services, typically one-eighth of one affiliate. However, because the yields on commercial percent of the amount of paper placed, so that it is paper are generally lower than the rates charged for unreasonable to expect the bank to make such loans. loans by banks, purchase of commercial paper with In sum, Applicant and its affiliates will not use their borrowed funds is unprofitable. Thus, the potential for credit to support commercial paper placed by Compathis kind of abuse as a result of this proposal is ny, and the danger of imprudent loans to commercial negligible. paper issuers as a result of the application is not Protestants also assert that a related conflict might significant. also arise because Applicant's subsidiary banks may Protestants also assert that Applicant's subsidiary not be objective in extending credit to issuers of the banks may be tempted to make imprudent extensions commercial paper placed by Company. In conducting of credit or other investments to support Company if it this activity at present, Bankers Trust does not pro- encounters financial difficulties. This conflict is inhervide any letter of credit or other guarantee arrange- ent in transactions between banks and their affiliates ment to support an issue of commercial paper placed generally and is addressed by section 23A of the by the bank. Nor does Bankers Trust make loans to Federal Reserve Act. (12 U.S.C. § 371c). That proviissuers of commercial paper it places where the loans sion limits extensions of credit by a bank to its are the functional equivalent of purchasing the paper nonbank affiliates, as well as asset purchases from an affiliate, to 10 percent of the bank's capital and requires that any extensions of credit be well collateralized (e.g., 110 percent of the extension of credit if the 49. The court of appeals decision in Bankers Trust II stated that the collateral is composed of revenue bonds). Section 23A Supreme Court had rejected the argument that commercial paper also prohibits a bank from purchasing low quality placement would not damage the reputation of the bank because purchasers are financially sophisticated institutions. Slip op. at 32-33. assets from an affiliate or accepting them as collateral However, the Supreme Court's finding was made where bank deposi- for loans to an affiliate. In addition, the likelihood that tors could purchase commercial paper "through their bank." Id. at 32. In contrast, here the bank's affiliate, not the bank, is placing the paper. Moreover, as was the case in the court of appeals Glass- Steagall analysis in Bankers Trust II, the existence of a potential unsound practice is not fatal to a proposal under section 4(c)(8), since 51. It is clear that lines of credit are not for these purposes if there is the likelihood of that adverse effect can be outweighed by the benefits documentary evidence, for example, of substantial participation in the to the public expected from the proposal. credit by other lenders or that the loan is for a documented special 50. See generally 1CI 1 at 630-632; Bankers Trust, 468 U.S. at purpose, such as equipment financing, plant expansion, or inventory 145-47. or receivables. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 151 Company will encounter losses that might motivate ing the loans. The Board notes that because of the Bankers Trust or other subsidiaries of Applicant to existence of commercial paper rating services, it is make unsound loans or investments to shore up Com- extremely difficult for corporations experiencing fipany is not significant, given that Company will not nancial difficulties to obtain the high rating necessary hold or maintain an inventory of any paper with its to raise funds in the commercial paper market. In own funds, and that the placement operation will not addition, the disclosure requirements of the federal constitute a significant activity of Company or involve securities laws require disclosure of material facts any significant amount of its assets. concerning the issuer's financial condition and the An additional potential conflict cited by protestants intended use of the proceeds of the offering. In the is the possibility that commercial paper placed by Board's view, these requirements mean at a minimum Company might be "palmed off' on Applicant's sub- that if Company or any of its affiliates has a lending sidiary banks. Currently, none of Bankers Trust's relationship with a particular issuer of commercial affiliates purchases for its own account commercial paper being placed, Company would disclose the paper placed by Bankers Trust. After the function is existence of that relationship to each purchaser of that transferred to Company, none of Company's affiliates issuer's paper. (including Bankers Trust) will purchase paper being Accordingly, subject to the foregoing limitations as placed by Company either for its own account or a proposed by Bankers Trust, the Board believes that customer's account, and accordingly, there is no sig- the proposal does not pose the potential for any nificant possibility that this conflict of interest will significant conflicts of interest.54 occur. Unfair Competition. The Board has also considered Protestants also raise concerns relating to whether protestants' contention that Company would have the proposals will impair Applicant's obligation to unfair competitive advantages over nonbank-affiliated provide unbiased investment advice to trust depart- commercial paper dealers. In particular, the SI A alment customers and customers relying on Applicant's leges that Company would enjoy unfair advantages in, advice in seeking to raise funds.52 This conflict will not for example, the rates it would pay for funding and arise as a result of this proposal because Company's having access to the credit files of affiliate banks to affiliates will not purchase commercial paper placed by obtain information useful in marketing its services to Company for accounts they manage or advise or issuers. The Board finds that this limited proposal provide investment advice to customers concerning would not result in unfair competition for the following the purchase of commercial paper placed by Compa- reasons. ny. The Board understands this limitation to mean that With respect to the unfair funding claim, the Board affiliates of Company will not advertise or distribute notes at the outset that since Company will act only as sales literature relating to commercial paper placed by agent in placing commercial paper, it will not be Company.53 required to finance holdings or inventory of commer- The final category of potential conflicts of interest cial paper purchased with its own funds. In addition, cited by protestants involves possible harm to the funding for Company would be provided by its parent interests of those who purchase commercial paper holding company, which is not a bank. Rates paid by placed by Company. For example, protestants con- Applicant and other bank holding companies on their tend that Company might encourage issuers to issue commercial paper have generally been the same as commercial paper the proceeds of which will be used those paid by corporations of similar size and credit to repay loans made by Applicant's subsidiary banks, ratings. especially where the issuer is having difficulty repay- Moreover, since Company would be a corporation legally separate and apart from Applicant's subsidiary banks, Company could not obtain funding directly through federally insured deposits or the Federal Re- 52. See Bankers Trust, 468 U.S. at 146-147; ICI I, 401 U.S. at 633. serve's discount window, which is ordinarily available 53. Protestants have also raised the possibility that Applicant might only to depository institutions. Furthermore, the not provide impartial advice to customers about the best method of obtaining funds. However, the potential financial benefit to Company Board does not believe that funds from such sources from the placement service is so small in relation to other services could effectively be provided to Company in view of offered by Applicant that it would not be reasonable for Company to provide this kind of biased advice. Moreover, commercial paper is issued only by a small number of the nation's largest and financially strongest corporations, which clearly have the resources and expertise to evaluate independently the best methods of obtaining shortterm financing. Indeed, Applicant states that this activity was devel- 54. In light of the fact that the placement activity would, as a result oped in response to the decision of Bankers Trust's most creditworthy of the proposal, be conducted by an affiliate of Bankers Trust rather borrowers to seek short-term funds in the commercial paper market than by the bank itself, any disclosure should also describe the rather than through bank loans. difference between Company and its affiliated banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

152 Federal Reserve Bulletin • February 1987 the statutory lending limitations and collateral require- undue concentration of resources, in view of the size ments of section 23 A of the Federal Reserve Act, and of Applicant and the concern expressed in the BHC the fact that any such loans or investments would be Act regarding the concentration of control over credit subject to review in the supervision and examination resources.56 The Board finds that this proposal is not process. likely to lead to undue concentration of resources or In any event, as the Board noted in its BankAmeri- decreased competition under the facts and circumca/Schwab decision, the legislative history of section stances of record. 4(c)(8) of the Act indicates that the term "unfair Applicant seeks to transfer an existing operation competition" was intended to refer to unfair or unethi- currently being conducted by Bankers Trust to Applical business conduct under the law, and not to dispari- cant's commercial finance subsidiary. Thus, the proties established by existing federal regulation of pro- posal does not involve any combination of existing viders of financial services.55 Accordingly, for the competitors or elimination of any existing provider of reasons set out in BankAmericalSchwab, even if Com- these services, but would instead enable the existing pany might obtain some funding advantage by reason service to be offered on a nationwide basis. Moreover, of its affiliation with Applicant, the Board finds that as explained above, Company's share of the commerany such advantage is not unfair competition within cial paper market as a result of this proposal would be the meaning of section 4(c)(8) of the Act. relatively insubstantial. The Board has also considered the allegation that In sum, the Board finds that this proposal, as limited unfair competition would result from sharing of confi- by Applicant, is consistent with section 20 of the dential information between Company and its affili- Glass-Steagall Act, and may reasonably be expected ates, such as granting Company access to the credit to result in public benefits that outweigh possible files of its affiliates so that Company could identify adverse effects. Accordingly, the Board finds that potential issuers of commercial paper and thus have an Applicant may conduct the proposed activities to the advantage in offering its services to those prospective extent and in the manner described in this Order issuers. There is no evidence that in conducting the consistent with section 20 of the Glass-Steagall Act commercial paper placement activity Bankers Trust and section 4(c)(8) of the BHC Act.57 The Board's has obtained any unfair advantage as a result of its approval of this application extends only to the activipurported access to confidential financial information ty conducted within the following limitations proposed concerning prospective customers. by Applicant for Company and Applicant's subsidiary In any event, to remove even the possibility that banks and other subsidiaries, and the placement of some unwarranted competitive advantage might oc- commercial paper in any manner other than as decur, as a condition of the Board's approval of this scribed below and in this Order is not within the scope application, no lending affiliate of Company may dis- of the Board's approval here and is not authorized for close to Company any non-public customer informa- Company: tion concerning an evaluation of the financial condi- 1. Company will place only commercial paper that is tion of an issuer whose paper is placed by Company or prime quality, short-term (with maturities not exof any other customer of Company, except as express- ceeding nine months), in minimum denominations of ly required by securities law or regulation. at least $250,000, and that is exempt from the The Board does not believe that unfair competition registration and prospectus requirements of the Seor conflicts could arise from the potential for disclo- curities Act of 1933 pursuant to section 3(a)(3) of sure of confidential information held by Company to that Act. its affiliates. The Board notes that trading on inside 2. Company will place only commercial paper with a information about issuers would violate the federal limited number of financially sophisticated institusecurities laws. Moreover, Applicant would have little tions, which normally purchase large amounts of incentive to gain access to confidential information possessed by Company since, as discussed above, Applicant and Company's other affiliates may not purchase as principal or in a fiduciary capacity any 56. See Conf. Rep. No. 1747, 91st Cong., 2d Sess. 17 (1970) (Statement of the Managers on the Part of the House). commercial paper placed by Company. 57. Merrill Lynch requested the Board to hold a hearing on the Undue Concentration of Resources or Decreased application. Since the proposal involves only the transfer to Company of the commercial paper placement activity currently being conducted Competition. The Board has carefully considered the by Bankers Trust, this application presents no disputed issue of possibility that these proposals would result in an material fact and raises only questions that are legal in nature. The Board notes that it has ordered a hearing with regard to certain similar applications by Applicant and other bank holding companies, where the proposals are structured differently than this application and do raise factual issues. Merrill Lynch may participate in this hearing. 55. 69 FEDERAL RESERVE BULLETIN 105, 111 (1983), affirmed by Accordingly, the Board denies the hearing request with respect to this the Supreme Court in Schwab. application. See 12 C.F.R. 262.3(e) and 225.23(g). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 153 other short-term money market obligations, and will at a minimum disclose the existence of that relationnot place paper with individuals. Company will ship to each purchaser of that issuer's paper. Any make no general solicitation or general advertising disclosure made by Company will also describe the for commercial paper it places and such paper will difference between Company and Applicant's subnot be purchased by the general public. sidiary banks. 3. Company will not purchase or repurchase for its 12. Company will not have officers, directors, or own account the commercial paper being placed or employees in common with Applicant's subsidiary inventory unsold portions of the paper. banks.58 4. The gross revenues derived from Company's commercial paper placement service will not in any In addition, with respect to the following limited year exceed 5 percent of Company's gross reve- area, the Board has also required that no lending nues. affiliate of Company will disclose to Company any 5. The amount of commercial paper outstanding at non-public customer information concerning an evaluany one time placed by Company will be less than 5 ation of the financial condition of an issuer whose percent of the average amount of all dealer-placed paper is placed by Company or of any other customer commercial paper outstanding during the last four of Company, except as expressly required by securicalendar quarters. ties law or regulation. 6. Neither Company nor any of its affiliates will The Board's determination is subject to all of the provide any letter of credit or other guarantee to conditions set forth in the Board's Regulation Y, support commercial paper placed by Company. including those in sections 225.4(d) and 225.23(b), and 7. Neither Company nor any of its affiliates will to the Board's authority to require modification or make loans to issuers of commercial paper placed by termination of the activities of the holding company or Company that are the functional equivalent of pur- any of its subsidiaries as the Board finds necessary to chasing the paper for the account of its affiliate. ensure that the commercial paper placement activity Thus, any credit extended by any of these compa- of Company is consistent with safety and soundness nies to the issuer will be under different terms, at and conflict of interest considerations and to assure different times, and for different purposes than the compliance with the provisions of the BHC Act and paper being placed. It would be clear that any such the Board's regulations and orders issued thereunder, credit is for different purposes if there is documenta- or to prevent evasion thereof.59 ry evidence of, for example, substantial participa- This transaction shall not be consummated later tion in the credit by other lenders or that the loan is than three months after the effective date of this for a documented special purpose, such as equip- Order, unless such period is extended for good cause ment financing, plant expansion, or inventory or by the Board, or by the Federal Reserve Bank of New receivables. York, pursuant to delegated authority. 8. Company and its affiliates will assure themselves By order of the Board of Governors, effective that any advances to an issuer of commercial paper December 24, 1986. placed by Company are not used to repay the paper or to cover any unsold portion of a commercial Voting for this action: Chairman Volcker and Governors paper issue placed by Company. Johnson, Seger, Angell, and Heller. Absent and not voting: Governor Rice. 9. Neither Applicant nor any of Company's affiliates will purchase for its own account commercial paper placed by Company. WILLIAM W. WILES 10. Applicant's subsidiary banks will not purchase [SEAL] Secretary of the Board commercial paper placed by Company for accounts managed or advised by their trust departments and neither the banks nor any of their affiliates will 58. The fact that conditions and limitations are relied on by the Board here to assure that this proposal complies with the public purchase commercial paper placed by Company for benefits test of section 4(c)(8) does not indicate that the activity any other accounts they advise or for which they approved violates the Glass-Steagall Act. The public benefits stanhave investment discretion. dard in section 4(c)(8) establishes a test that is independent of the Glass-Steagall Act. It is clear, for example, that certain securities 11. No affiliate of Company will provide investment activities that are lawful under the Glass-Steagall Act, such as advice to the purchasers of commercial paper placed providing investment advice and portfolio management, may raise the by Company and will not advertise or distribute potential for adverse effects under section 4(c)(8) which may be addressed through the types of limitations established in this Order. sales literature concerning such commercial paper. See 12 C.F.R. 225.25(b)(4) n.l; ICI II, 450 U.S. at 62, 67. Moreover, where Company or any of its affiliates 59. As provided in section 225.23(b)(1), no reorganization of Comhas a lending relationship with an issuer of commer- pany, such as the establishment of a subsidiary of Company to conduct the approved activity, may be consummated without prior cial paper being placed by Company, Company will Board approval. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

154 Federal Reserve Bulletin • February 1987 Concurring Statement by Chairman Volcker to permit significant amounts of underwriting without being "principally engaged" in that activity. A sensi- I join with the majority of the Board in giving approval ble financial framework would not encourage artificialfor the Bankers Trust application to engage in com- ly such a transfer of ordinary banking assets out of an mercial paper placement in a commercial lending insured bank that is a beneficiary of the federal safety affiliate. I also concur in the Board's decision to net and subject to banking regulations. Moreover, request additional information before proceeding to a certain quantitative and other limitations on the scale final decision on the applications by Bankers Trust, of the proposed underwriting activity to fit it into the Citicorp, and J.P. Morgan to engage in underwriting framework of Glass-Steagall may be unnecessary or commercial paper, mortgage-backed securities, mu- undesirable to protect the public interest. nicipal revenue bonds and consumer related receiv- The limited decision taken by the Board today only ables in a government securities underwriting affiliate. emphasizes the fact that authority for underwriting of As an administrative agency, we are bound to carry securities by banking organizations urgently needs to out the function assigned by Congress of applying be legislatively reviewed and updated. Our common existing law to applications submitted to us. Today's objective is a framework reconciling the requirements decision, applying the Glass-Steagall Act, makes as for a safe and sound banking and financial system with much good sense as is possible to draw from applying effective competition and the need for efficiency. My a statute, adopted a half century ago, to a banking sense is that this sensible and reasonable result cannot marketplace that technology and other competitive be achieved within the four corners of existing law. forces have altered in a manner and to an extent never The Supreme Court has recently admonished us in envisioned by the enacting Congress. the Dimension case that the law must be applied as The Glass-Steagall Act authorizes the affiliates of written, even though it produces curious results. The banks to engage in underwriting securities so long as Board has, in my judgment, conscientiously followed they are not "engaged principally" in this activity. In that precept. the light of the intent of the Act, which has long been The Court also noted in that case that the cure for considered, in short hand, to require the divorce of anomalies brought about by change and time is in the investment and commercial banking, the Board's con- hands of Congress. It is to that body that we must turn clusion that the term "engaged principally" includes for wise action. any substantial activity, even though that function is I believe legislation should be adopted promptly to less than 50 percent of the total, seems to me to be give straightforward authority for bank holding comcorrect. It gives effect to what I believe was Congres- panies to engage in certain underwriting activities— sional intent to assure that even limited underwriting underwriting commercial paper, mortgage-backed seactivities not passing the threshold of "engaged princi- curities, revenue bonds and mutual funds—with such pally" would be separated from the bank itself in a protections against conflicts of interest and self-dealdistinct corporate entity and that any possible adverse ing as may be appropriate. In addition, while apparentimpact on an affiliated bank would be minimized. ly not ripe for action immediately, I would suggest the I also agree that the tests of 5 percent of income and time has come for Congress to undertake a study of the 5 percent of market share constitute a reasonable need for change in the current prohibitions on corpothreshold, consistent with the legislative intent, for rate underwriting, recognizing that today, unlike 1933, determining what is a relatively insubstantial activity. bank holding companies conduct such activities Among other things, it seems to me a company that abroad in substantial volume, and technological and has a relatively large share of an investment market other changes increasingly encourage "securitization" would, in most circumstances, be substantially en- of some bank loans. gaged in that line of activity even if it is a relatively I fully realize that these are hotly contested issues, small fraction of the activity of a large affiliate. with large private economic interests at stake. Al- Nevertheless, it seems to me evident that applica- though the legislative process has hitherto been paration of the plain language and legislative intent in the lyzed by this conflict, a new Congress provides new far different circumstances now prevailing produces opportunity for prompt action in the public interest. I some odd results that point to the need for review and join the entire Board in pressing for prompt construcchange of the basic legislation. For instance, it seems tive legislation. to me that no useful public policy goal is served by the incentive created by the Glass-Steagall Act, as we must interpret it, to shift assets (such as commercial loans) out of a bank and into nonbank affiliates of a holding company so that the affiliates are large enough December 24, 1986 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 155 Bayerische Vereinsbank AG 12 U.S.C. § 3106(c). That authority is subject to re- Munich, Federal Republic of Germany view by the Board, which may, after opportunity for a hearing, require termination of any grandfathered ac- Order Approving Application to Provide Investment tivity if necessary to prevent unfair competition, con- Advisory Services flicts of interests, or other adverse effects. AECM currently serves as investment adviser to Bayerische Vereinsbank AG, Munich, Federal Repub- eight investment companies, of which one is closedlic of Germany, a foreign bank subject to certain end and seven are technically open-end, and it wishes provisions of the Bank Holding Company Act ("BHC to serve as investment adviser to additional invest- Act"), 12 U.S.C. §§ 1841-48, has applied for the ment companies of the same kind. The seven open-end Board's approval under section 4(c)(8) of the BHC investment companies (collectively the "Investment Act, 12 U.S.C. § 1843(c)(8), and section 225.23 of the Companies") differ from the usual mutual fund, which Board's Regulation Y, 12 C.F.R. § 225.23, to continue continuously offers new shares to the public. See to provide investment advisory services through AE generally 12 C.F.R. § 225.125(c). None of the Invest- Capital Management, Inc., New York, New York ment Companies has made an offering of securities, ("AECM"), serving as investment adviser to regis- continuous or otherwise, in the United States or tered investment companies and providing portfolio abroad. Each Investment Company's shares have investment advice to existing customers and to institu- been privately placed in the Federal Republic of tional and large private accounts.1 The Board has Germany, and are owned by four or fewer West previously determined that those activities are closely German corporations. To maintain favorable tax treatrelated to banking and permissible for bank holding ment under the tax treaty between the United States companies. 12 C.F.R. § 225.25(b)(4)(ii)-(iii). and the Federal Republic of Germany,4 each shareholder has a strong interest in continuing to own at Notice of the application, affording interested perleast 25 percent of the Investment Company's shares, sons an opportunity to submit comments, has been and thus also has an interest in restricting the issuance duly published. 51 Federal Register 31,982 (1986). The of new shares.5 time for filing comments has expired, and the Board has considered the application and all comments re- Since their initial capitalization, the Investment ceived in light of the public interest factors set forth in Companies have issued shares only infrequently. One section 4(c)(8) of the Act. company went from two shareholders to three shortly Applicant, with total assets of approximately $53 after its organization; another from one to two. Severbillion, is the forty-second largest bank in the world al of the companies issue new shares annually so that and the fourth largest in the Federal Republic of shareholders may reinvest their dividends. With those Germany.2 Applicant engages in a wide range of retail, exceptions, none of the Investment Companies has wholesale, and investment banking activities in Ger- issued shares since its initial capitalization. There have many and abroad. In the United States, Applicant has been no redemptions to date. As each Investment branches in New York and Chicago; has agencies in Company has a stable shareholder base of institutional Atlanta, Los Angeles, and Miami; owns all of the investors, it is not under pressure to issue shares voting shares of AECM, a registered investment advis- frequently so as to offset redemptions. er; and owns 95 percent of the voting shares of The Board has long maintained that an investment Associated European Capital Corporation, New York, company that is open-end for purposes of the Invest- New York ("AEC"), a registered broker/dealer.3 ment Company Act, see 15 U.S.C. § 80a-5(a), may be AEC operates pursuant to section 8(c) of the Interna- closed-end for purposes of section 225.25(b)(4)(ii) of tional Banking Act ("IBA"), which permits a foreign bank such as Applicant to engage in any nonbanking activity in which it was engaged on July 26, 1978. 4. Convention for the Avoidance of Double Taxation with Respect to Taxes on Income, July 22, 1954, 5 U.S.T. 2768, T.I.A.S. No. 3133, as amended by Protocol Modifying the Convention of July 22, 1954, Sept. 17, 1965, 16 U.S.T. 1875, T.I.A.S. No. 5920. 5. Under the tax treaty, dividends paid to a West German corpora- 1. Applicant commenced the activities in question through AECM tion by a U.S. corporation are not immediately subject to West in 1984 without obtaining the prior approval required under section German taxation if the U.S. corporation is subject to U.S. taxation 4(c)(8). Having reviewed the relevant facts, the Board concludes that and the West German corporation holds at least 25 percent of the U.S. the failure to obtain prior approval was inadvertent and does not corporation's outstanding voting shares. Art. XV(l)(b)l.(aa), 16 reflect adversely on the management of Applicant or AECM. U.S.T. at 1886. Although a regulated investment company (as defined 2. As of December 31, 1985. in the Internal Revenue Code) is a U.S. corporation subject to U.S. 3. Although AECM is currently owned by AEC, it will become a taxation for purposes of the tax treaty, such a company pays no U.S. direct subsidiary either of Applicant or of a holding company to be taxes at the corporate level so long as it distributes its earnings to its formed and owned by Applicant. shareholders. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

156 Federal Reserve Bulletin • February 1987 Regulation Y if it issues shares only infrequently.6 Republic of Germany. The Board also notes that the Based on the particular facts of record, the Board application involves nonbanking activities that generconcludes that the Investment Companies should be ate fee income and that require only a minimal comtreated as closed-end companies for purposes of sec- mitment of capital. In light of all the facts of record, tion 225.25(b)(4)(ii). Accordingly, the activities in the Board has determined that financial factors are question are permissible under that section regardless consistent with approval of the application. of whether Applicant organized, sponsored, or con- To approve the application, the Board must find that trols the Investment Companies. Applicant's performance of the activities in question In cases under section 4(c)(8) of the BHC Act, the "can reasonably be expected to produce benefits to Board evaluates the financial resources of the appli- the public, such as greater convenience, increased cant, including its subsidiaries, and the effect of the competition, or gains in efficiency, that outweigh proposed transaction on those resources. 12 C.F.R. possible adverse effects, such as undue concentration § 225.24. In accordance with the principles of national of resources, decreased or unfair competition, contreatment and competitive equity, the Board expects a flicts of interests, or unsound banking practices." foreign bank to meet the same general standards of 12 U.S.C. § 1843(c)(8). In evaluating those factors, the financial strength as domestic bank holding compa- Board considered that Applicant, through AEC, ennies. On the other hand, the Board is aware that gages in securities activities in the United States that outside the United States foreign banks operate under are not permissible for U.S. bank holding companies. different regulatory and supervisory requirements, ac- As a result, Applicant could conceivably gain an unfair counting principles, asset quality standards, and bank- competitive advantage over domestic bank holding ing practices and traditions, and that these differences companies by combining grandfathered securities acmake it difficult to compare foreign banks' capital tivities with activities permissible under section positions with those of domestic bank holding compa- 4(c)(8). That could occur if the grandfathered activities nies. were used to support or enhance the section 4(c)(8) The appropriate balancing of these concerns raises activities, thus allowing Applicant to offer a wide array complex issues that require careful consideration and of services not permissible for domestic bank holding that the Board currently has under review. The Board companies. Moreover, the combination of AEC's unis reexamining the capital standards applicable to derwriting activities and AECM's investment advisory domestic bank holding companies and considering activities could give rise to conflicts of interests. revisions that might make those standards more readi- Applicant has, however, made a series of commitly comparable to those of foreign banks. The Board is ments aimed at separating the operations of AEC and also pursuing consultations with foreign banking au- AECM and avoiding conflicts of interests: Apart from thorities about appropriate capital standards for banks clerical and support staff, AEC and AECM will have operating internationally. Pending the outcome of separate officers, directors, and employees. AEC and those deliberations and consultations, the Board is AECM will not solicit customers for each other in the considering case-by-case the issues raised by foreign United States. No customer lists or confidential inforbanks' applications to engage in activities in the Unit- mation about customers will be passed between AEC ed States. and AECM. AEC will not sell or purchase securities, In this instance, Applicant's primary capital ratio, as either as a principal or as a broker, to, from, or for any publicly reported, is below the Board's Capital Ade- investment company advised by AECM, or otherwise quacy Guidelines. However, after certain adjustments perform for such an investment company any service to take account of German banking and accounting that AEC might have authority to provide under the practices (particularly the practice of carrying securi- IB A. No employee of AEC will serve as a portfolio ties at or below historical cost, which in this case is manager of any investment company advised by substantially below their market value) as well as AECM. AECM will not provide investment advice consideration of all available information relating to about the securities of Applicant or its subsidiaries or Applicant's overall financial condition, Applicant's affiliates. AECM will not give investment advice about capital ratio more nearly approximates U.S. stan- securities that are being underwritten by one of its dards. The Board notes that well over half of Appli- affiliates, or in which an affiliate is making a market, cant's assets are mortgage loans funded by mortgage- unless AECM has independently analyzed those secubacked bonds, and that some 64 percent of those loans rities in the same manner and to the same extent as if are to state and local governments in the Federal they were not underwritten by an affiliate; discloses the affiliate's involvement with the securities and relationship to AECM; and obtains the customer's consent before any such securities are purchased for 6. See Letter dated March 8, 1974, to Mr. G. Duane Vieth. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 157 the customer's account. AECM will not engage in any Citicorp promotional activities relating to any distribution of New York, New York securities that are being underwritten by one of its affiliates. Order Approving Application to Execute and Clear In light of these and other commitments, as well as Futures Contracts on Stock Indexes applicable legal restrictions,7 the Board believes that Applicant would not have an unfair competitive ad- Citicorp, New York, New York, a bank holding comvantage in conducting the activities in question under pany within the meaning of the Bank Holding Compasection 4(c)(8), and that those activities would not give ny Act, 12 U.S.C. § 1841 et seq. ("BHC Act"), has rise to conflicts of interests. The Board notes, more- applied pursuant to section 4(c)(8) of the BHC Act over, that Applicant will limit its investment advisory (12 U.S.C. § 1843(c)(8)) and section 225.23(a)(3) of the services to existing customers and to investment com- Board's Regulation Y (12 C.F.R. § 225.23(a)(3)) to panies and institutional and large private accounts, engage de novo through its wholly owned subsidiary, and will not provide such services to the general Citicorp Futures Corporation ("CFC"), in the execupublic. tion and clearance, on major commodity exchanges, of There is no evidence of record indicating that the futures contracts on stock indexes and options on such activities in question would result in undue concentra- futures contracts. tion of resources, unsound banking practices, or other CFC proposes to execute and clear the Standard and adverse effects. By commencing the activities de Poor's 100 Stock Price Index futures contract, the novo, Applicant increased the number of firms provid- Standard & Poor's 500 Stock Price Index futures ing investment advisory services; thus competitive contract ("S&P 500") and options on the S&P 500, all factors lend weight toward approval of the application. of which are currently traded on the Index and Option Managerial factors are consistent with approval. Division of the Chicago Mercantile Exchange. Based on the foregoing and other facts of record, the Applicant proposes to offer these services to major Board concludes that the balance of the public interest corporations, financial institutions, and other sophistifactors it is required to consider under section 4(c)(8) cated customers in the United States and abroad. favors approval of the application. Accordingly, the Notice of the application, affording interested perapplication is hereby approved. This approval is sub- sons an opportunity to submit comments on the relaject to all of the conditions set forth in Regulation Y, tion of the proposed activities to banking and on the including those in sections 225.4(d) and 225.23(b), balance of public interest factors, has been duly pub- 12 C.F.R. §§ 225.4(d), 225.23(b), and to the Board's lished (50 Federal Register 27,684 (1985)). The time for authority to require such modification or termination filing comments has expired, and the Board has conof the activities of a bank holding company or any of sidered the application and all comments received in its subsidiaries as the Board finds necessary to assure light of the public interest factors set forth in section compliance with, and to prevent evasions of, the 4(c)(8) of the BHC Act. provisions and purposes of the BHC Act and the Citicorp, with total consolidated assets of $186.0 Board's regulations and orders issued thereunder. billion,1 is the largest banking organization in the By order of the Board of Governors, effective United States. It presently operates eight banking December 1, 1986. subsidiaries and engages, directly and through subsidiaries, in a variety of nonbanking activities. CFC is a Voting for this action: Chairman Volcker and Governors futures commission merchant ("FCM") registered Johnson, Seger, and Heller. Absent and not voting: Gover- with the Commodity Futures Trading Commission nors Wallich, Rice, and Angell. ("CFTC") that engages in the execution and clearance JAMES MCAFEE of options contracts on bullion, foreign exchange, [SEALI Associate Secretary of the Board government securities and money market instruments, and options on futures contracts based on these commodities and instruments on major commodities ex- 7. The Securities Exchange Act, the Investment Company Act, and changes for nonaffiliated persons. the Investment Advisers Act also tend to separate the operations of The Board has previously determined that the exe- AEC and AECM and to reduce the risk of conflicts of interests. For cution and clearance of futures contracts, and options example, the Investment Company Act generally prohibits an investment company advised by AECM from purchasing any securities of on futures contracts, based on stock indexes is closely which AEC is a principal underwriter or from engaging in any principal transaction with AEC. 15 U.S.C. §§ 80a-10(f), -17(a). In keeping with the Investment Advisers Act, AECM will disclose its relationship with its affiliates to each of its customers, and will have no arrangement with any distributor of securities regarding the advice AECM gives concerning such securities. 1. As of September 30, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

158 Federal Reserve Bulletin • February 1987 related to banking. J.P. Morgan & Co. Incorporated, such period is extended for good cause by the Board or 71 FEDERAL RESERVE BULLETIN 251 (1985). The pro- by the Federal Reserve Bank of New York pursuant to posed activities of CFC are essentially identical to delegated authority. those activities previously approved by the Board. By order of the Board of Governors, effective Thus, the Board concludes that Applicant's proposal December 12, 1986. to execute and clear futures contracts on stock indexes is closely related to banking. Voting for this action: Chairman Volcker and Governors In order to approve this application, the Board is Johnson, Seger, and Heller. Absent and not voting: Goveralso required to determine that the performance of the nors Wallich, Rice, and Angell. proposed activities by Applicant "can reasonably be expected to produce benefits to the public . . . that BARBARA R. LOWREY outweigh possible adverse effects, such as undue [SEAL] Associate Secretary of the Board concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices." (12 U.S.C. § 1843(c)(8)). Commonwealth Bancshares Corporation Consummation of Applicant's proposal would pro- Williamsport, Pennsylvania vide added convenience to those clients of Applicant and its subsidiaries that trade in the cash, forward and Order Approving Provision of Employee Benefits futures markets for these instruments. The Board Consulting Services expects that the de novo entry of Applicant into the market for these services would increase the level of Commonwealth Bancshares Corporation, Williamscompetition among providers of these services already port, Pennsylvania, a bank holding company within in operation. Accordingly, the Board concludes that the meaning of the Bank Holding Company Act the performance of the proposed activities by Appli- ("Act"), 12 U.S.C. § 1841 et seq., has applied for the cant can reasonably be expected to provide benefits to Board's approval under section 4(c)(8) of the Act, the public. 12 U.S.C. § 1843(c)(8), and section 225.23 of the The Board also has considered the potential for Board's Regulation Y, 12 C.F.R. § 225.23, to acquire adverse effects that may be associated with this pro- all of the voting shares of Commonwealth Employer posal. There is no evidence in the record that consum- Services, Inc., Williamsport, Pennsylvania. mation of the proposed FCM activities would result in Notice of the application, affording interested perany adverse effects such as undue concentration of sons an opportunity to submit comments on the proresources, decreased or unfair competition, conflicts posal, has been duly published (51 Federal Register of interests, or unsound banking practices. In addition, 41,836 (1986)). The time for filing comments has the Board has taken into account and has relied on the expired, and the Board has considered the application regulatory framework established pursuant to law by and all comments received in light of the public the CFTC for the trading of futures, as well as the interest factors set forth in section 4(c)(8) of the Act. conditions set forth in section 225.25(b)(18) of Regula- Applicant, a bank holding company by virtue of its tion Y with respect to executing and clearing futures ownership of Commonwealth Bank and Trust Compacontracts. ny, N.A., Williamsport, Pennsylvania, has total con- Based upon a consideration of all the relevant facts, solidated assets of $864 million.1 Applicant also enthe Board concludes that the balance of the public gages in certain nonbanking activities, including interest factors that the Board is required to consider community development and underwriting credit life, under section 4(c)(8) is favorable. accident and health insurance for the subsidiaries of This determination is also subject to all of the the bank holding company. conditions set forth in Regulation Y, including sections Applicant proposes to acquire Company, which will 225.4(d) and 225.23(b)(3) (12 C.F.R. §§ 225.4(d) and be an employee benefits consulting firm that will 225.23(b)(3)), and to the Board's authority to require provide services with regard to self-directed employee such modification or termination of the activities of a group health benefit programs. Company's activities bank holding company or any of its subsidiaries as the can be divided into four basic categories: Board finds necessary to assure compliance with the 1. Plan Design—designing employee health beneprovisions and purposes of the BHC Act and the fit plans, including determining funding levels and Board's regulations and orders issued thereunder, or cost estimates; to prevent evasion thereof. The transaction shall be made not later than three months after the effective date of this Order, unless 1. Data are as of September 30, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 159 2. Plan Implementation—providing assistance in creased efficiencies, without resulting in any adverse implementing the health plans, including assistance consequences. in the preparation of plan documents and the imple- Clients will have the option of obtaining a complete mentation of employee benefit administration sys- package of employee benefits consulting services from tems, and arranging for services from outside agen- a single company, including those services that can be cies; provided by other subsidiaries of Applicant, resulting 3. Administrative Services—providing administra- in increased convenience to the customers for this tive services, including recordkeeping services and service. In addition, the increase in the number of preparing periodic and other reports and govern- companies that can conduct a broad array of services ment filings; with regard to employee benefits consulting is likely to 4. Employee Communications—developing em- enhance competition in the provision of this service. ployee communication programs, including partici- There is no evidence in the record to indicate that pation in seminars, public programs and other fo- Applicant's performance of the proposed activity rums relating to such developments. would lead to any undue concentration of resources, decreased or unfair competition, unsound banking The Board has previously approved applications by practices, or other adverse effects. Clients will have bank holding companies to provide employee benefits the option to use any component of Applicant's emconsulting services with regard to defined benefit, ployee benefits consulting services individually, or the defined contribution plans, and other employee benefit entire package of services, and Applicant has commitplans, including health care plans.2 In its orders, the ted to avoid tying any employee benefits consulting Board has determined that the provision of services service to the purchase of the entire employee benefits for these types of plans encompassed the type of package or to any other service offered by Applicant services banks have traditionally performed and that or its subsidiaries. the provision of employee benefits consulting services In its evaluation of Applicant's managerial refor these plans was operationally or functionally relat- sources, the Board has considered certain violations ed to the trust services that banks traditionally provide by Applicant of the Currency and Foreign Transacto customers. The Board also stated that the activity tions Reporting Act ("CFTRA") and the regulations essentially involved the provision of financial informa- thereunder.4 The Board notes that Applicant has cooption and thus, was similar to a number of financial erated with law enforcement agencies and has estabservices, such as the provision of investment and lished comprehensive policies and procedures to engeneral economic information, and financial data proc- sure compliance with the CFTRA. Examiners of the essing and transmission, all of which are activities that Office of the Comptroller of the Currency have reare permissible for bank holding companies.3 Thus, viewed the sufficiency of the compliance procedures the Board concluded that the provision of employee adopted and their efficacy in correcting the deficienbenefits consulting services for employee benefit cies. The Board also has consulted with appropriate plans, including health care plans, is closely related to enforcement agencies, and has considered Applicant's banking. past record of compliance with law. The Board, there- In order to approve this application, the Board must fore, concludes that the managerial resources of Applialso find that the performance of the proposed activity cant and Bank are consistent with approval. "can reasonably be expected to produce benefits to Based upon the foregoing and all the facts of record, the public, such as greater convenience, increased including certain commitments made by Applicant, the competition, or gains in efficiency, that outweigh Board has determined that the balance of public interpossible adverse effects, such as undue concentration est factors it is required to consider under section of resources, decreased or unfair competition, con- 4(c)(8) is favorable. Accordingly, the application is flicts of interests, or unsound banking practices." hereby approved. This determination is subject to the With respect to the proposed employee benefits con- conditions set forth in sections 225.4(d) and sulting activities of Applicant, it appears from the 225.23(b)(3) of the Board's Regulation Y, 12 C.F.R. record that authorizing the activity would enhance §§ 225.4(d) and 225.23(b)(3). The approval is also competition and provide greater convenience and in- subject to the Board's authority to require modification or termination of the activities of the holding company or any of its subsidiaries as the Board finds necessary to assure compliance with the provisions 2. Norstar Bancorp, Inc., 72 FEDERAL RESERVE BULLETIN 729 (1986); BankVermont Corporation, 72 FEDERAL RESERVE BULLETIN 337 (1986); Norstar Bancorp, Inc., 71 FEDERAL RESERVE BULLETIN 656 (1985). 3. 12 C.F.R. § 225.25(b)(4), (7), (20), & (21) (1986). 4. 31 U.S.C. § 5311 et seq.\ 31 C.F.R. § 103. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

160 Federal Reserve Bulletin • February 1987 and purposes of the Act and the Board's regulations United States, Applicant maintains branches in New and orders issued thereunder, or to prevent evasion York and Los Angeles and an agency in Miami. As a thereof. result, Applicant is subject to the nonbanking restric- This transaction shall not be commenced later than tions of section 4 of the Act as if it were a bank holding three months after the effective date of this Order, company. unless such period is extended for good cause by the Applicant also engages in activities in the United Board, or by the Federal Reserve Bank of Philadel- States through subsidiaries, described below, that are phia, pursuant to delegated authority. grandfathered under section 8(c) of the International By order of the Board of Governors, effective Banking Act of 1978 ("IBA") (12 U.S.C. § 3106(c)). December 16, 1986. Section 8(c) of the IBA permits a foreign bank such as Applicant to continue to engage in any nonbanking Voting for this action: Chairman Volcker and Governors activities in which it was engaged on July 26, 1978. Johnson, Seger, Angell, and Heller. Absent and not voting: This authority is subject to review by the Board, which Governors Wallich and Rice. may, after opportunity for a hearing, require termina- JAMES MCAFEE tion of any grandfathered activity if necessary to [SEAL] Associate Secretary of the Board prevent adverse effects. Applicant controls two subsidiaries, Swiss American Asset Management International, Inc. ("SAAMI"), and Swiss American Securities, Inc. Credit Suisse ("SASI"), that engage in certain securities activities, Zurich, Switzerland including investment advisory activities, in the United States pursuant to section 8(c) of the IBA. In addition, Order Approving Acquisition of Investment Advisor through FCSFB, Applicant holds approximately 35 percent of the shares of First Boston, Inc., New York, Credit Suisse, Zurich, Switzerland, a foreign bank New York, a publicly held company that is a regissubject to certain provisions of the Bank Holding tered broker-dealer in the United States and also Company Act ("Act"), 12 U.S.C. §§ 1841-1848, has engages in investment banking activities outside the applied for the Board's approval under section 4(c)(8) United States. Applicant's interest in First Boston, of the Act (12 U.S.C. § 1843(c)(8)) and section 225.23 which is considered a domestically-controlled affiliate of the Board's Regulation Y (12 C.F.R. § 225.23), to of Applicant under section 8(c) of the IBA, is also acquire through its indirect subsidiary, Financiere grandfathered under the IBA. Credit Suisse-First Boston ("FCSFB"), Zug, Switzer- Company is a registered investment advisor under land, substantially all of the assets of John M. Blewer, the Investment Advisers Act of 1940 and provides Inc. ("Company"), New York, New York, a regis- investment advice and portfolio management services tered investment advisor. FCSFB will acquire the to individuals and institutions. The acquisition of assets of Company through a new subsidiary formed Company will be made by FCSFB in order to establish for that purpose and will thereby engage in providing an investment advisory presence in the United States portfolio advice and portfolio management services to independent of Applicant and its other affiliates. Secinstitutions and individuals. Such activities have been tion 8(c) generally does not authorize the expansion of determined by the Board to be closely related to a grandfathered nonbanking activity through the acbanking and permissible for bank holding companies. quisition of a going concern. Therefore, Applicant has 12 C.F.R. § 225.25(b)(4)(iii). applied for the Board's approval of the acquisition Notice of the application, affording interested per- under section 4(c)(8) and Regulation Y. sons the opportunity to submit comments, has been In applications under section 4(c)(8) of the Act, the duly published. 51 Federal Register 34,689 (1986). The Board evaluates the financial resources of the applitime for filing comments has expired and the Board cant, including its subsidiaries, and the effects of the has considered the application and all comments re- proposed transaction on those resources. The Board ceived in light of the public interest factors set forth in has considered the financial resources of Applicant section 4(c)(8) of the Act. and notes that the publicly reported primary capital Applicant, with total assets of approximately U. S. ratio of Applicant is in conformance with the capital $50.5 billion, is the 61st largest banking organization in guidelines established by the Board for bank holding the world and the third largest in Switzerland.1 In the companies. The Board also notes that the application involves activities that generate fee income and do not require a substantial commitment of capital. In light of these and other facts of record, the Board has deter- 1. Data are as of June 30, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 161 mined that the financial resources of Applicant are will not provide investment advice to a client with satisfactory and consistent with approval of the appli- respect to securities that are part of a distribution by cation. an affiliate or in which an affiliate makes a market, As noted above, the activities of Company have unless Company has conducted an independent analybeen determined by the Board to be closely related to sis of such securities in the same manner and to the banking. In order to approve this application, the same extent as if the securities were not underwritten Board must also find that the performance of the or dealt in by an affiliate, discloses the fact of the proposed activity by Applicant "can reasonably be affiliation to its client, and obtains the client's prior expected to produce benefits to the public, such as consent to the purchase of any such securities. Comgreater convenience, increased competition, or gains pany will not engage in promotional activities with in efficiency, that outweigh possible adverse effects, respect to any distribution of securities being undersuch as undue concentration of resources, decreased written by an affiliate. The Board notes that these or unfair competition, conflicts or interests, or un- commitments reduce the potential for conflicts of sound banking practices." 12 U.S.C. § 1843(c)(8). interest and enhance the separation of the companies, In its evaluation of these factors, the Board consid- thereby reducing the potential for any competitive ered the fact that Applicant indirectly engages in a advantage to accrue to Applicant. wide range of securities activities in the United States The Board has also considered whether other adthat are not permissible either for United States bank verse effects on competition may result from the holding companies or for other foreign banking organi- proposal and notes that, although Company engages in zations that do not have grandfathered securities affili- activities that are also provided by Applicant's affiliates. The Board has considered the potential for unfair ates, Company is relatively small and its acquisition by competition through the combination of grandfathered FCSFB will not eliminate substantial competition in securities activities with permissible activities under any relevant area. Moreover, acquisition of Company section 4(c)(8). This could arise if grandfathered secu- can be expected to result in some increase in competirities affiliates were used to support and enhance the tion due to the financial support provided by FCSFB, activities of a company operating under section enabling Company to become a stronger competitor. 4(c)(8), thereby enabling the company to offer to In light of the facts of record and the commitments customers a wide array of services not permitted for offered by Applicant to enhance the separation of bank holding companies. In addition, the combination Company from its grandfathered securities affiliates, of permissible investment advisory activities and im- the Board finds that the proposal would not result in permissible securities underwriting activities in the conflicts of interest or decreased or unfair competi- United States creates the potential for conflicts of tion. There is also no evidence in the record that interest. indicates that Applicant's proposal would result in any In this case, the facts of record indicate that Compa- undue concentration of resources, unsound banking ny is intended to establish for FCSFB an investment practices or other adverse effects. advisory presence in the United States and will oper- Based on the foregoing and other facts of record, the ate independently of First Boston, SAAMI and SASI. Board has determined that the balance of public inter- There will be no director, officer or employee inter- est factors it is required to consider under section locks between Company and any of these affiliates. In (4)(8) of the BHC Act is favorable. Accordingly, the addition, there will be no joint marketing efforts under- application is hereby approved. The Board's determitaken by Company and any of its grandfathered affili- nation in this case is subject to all of the conditions set ates. Company will not share fees, profits or customer forth in Regulation Y, including those in sections information, will not make customer referrals, and will 225.4(d) and 225.23(b) (12 C.F.R. §§ 225.4(d) and not engage in cross-marketing involving these affili- 225.23(b)), and to the Board's authority to require ates. such modification or termination of the activities of a In order to further the separation of the companies, bank holding company or any of its subsidiaries as the thereby reducing the potential for competitive advan- Board finds necessary to assure compliance with, and tage, and in order to prevent conflicts of interest that prevent evasions of, the provisions and purposes of may arise from the fact that Applicant will operate the BHC Act and the Board's regulations and orders both grandfathered underwriting affiliates and an in- issued thereunder. vestment advisory company, Applicant has also made The transaction shall not be consummated later than certain commitments. Company will not provide ad- three months after the date of this Order, unless such vice on any securities of Applicant, First Boston or period is extended for good cause by the Board or by any other affiliate, and Company will disclose to its the Federal Reserve Bank of New York, pursuant to clients its relationships with its affiliates. Company delegated authority. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

162 Federal Reserve Bulletin • February 1987 By order of the Board of Governors, effective the applications, the Board has considered the com- December 2, 1986. ments of the insurance groups that the Board deny these applications because Applicant has its principal Voting for this action: Chairman Volcker and Governors place of banking business in North Platte, Nebraska, a Johnson, Seger, and Heller. Absent and not voting: Gover- town with a population of more than 5000 inhabitants. nors Wallich, Rice, and Angell. In addition, the insurance groups argue the Board JAMES MCAFEE should consider the cumulative financial and economic [SEAL] Associate Secretary of the Board impact of permitting a single banking organization to operate insurance agencies in several small towns. The insurance groups apparently would have the Board First United Bancshares, Inc. find that several small-town insurance agencies could Ord, Nebraska jointly serve an area or "place" with a population in excess of 5000 inhabitants. Order Approving Acquisition of Insurance Agencies The Board has previously decided that exemption C of section 4(c)(8) of the BHC Act does not require a First United Bancshares, Inc., Ord, Nebraska, a bank bank holding company to have its principal place of holding company within the meaning of the Bank banking business in a town with a population of fewer Holding Company Act ("BHC Act") (12 U.S.C. than 5000 residents. The Board discussed its findings § 1841 et seq.), has applied pursuant to section 4(c)(8) and provided detailed reasons in support of this conof the Act (12 U.S.C. § 1843(c)(8)) to engage in general clusion in its recently adopted amendment to Regulainsurance activities: tion Y governing permissible insurance activities for (1) by acquiring all of the assets of Ord Insurance bank holding companies. See 51 Federal Register Agency, Ord, Nebraska, and Wolbach Insurance 36,201 (October 9, 1986). For reasons stated in the Agency, Wolbach, Nebraska; and commentary accompanying the insurance regulation, (2) by acquiring indirect control of Grant Insurance the Board finds no merit to the argument of the Agency, Grant, Nebraska, through the acquisition insurance groups that a bank holding company enof its parent company Grant Bancshares, Inc., gaged in general insurance agency activities in a town Grant, Nebraska.1 of fewer than 5000 inhabitants must have its principal place of banking business in such a small town. Notice of the applications, affording interested per- The Board also finds there is no merit to the sons an opportunity to submit comments on the pro- insurance parties second argument, that the Board posal, has been duly published (51 Federal Register must consider the cumulative impact of permitting a 37,650 (1986). The time for filing comments has ex- single bank holding company to operate general insurpired, and the Board has considered the applications ance agency subsidiaries in more than one town. The and all comments received, including those of various insurance parties cannot point to statutory language in insurance associations,2 in light of the public interest exemption C, the legislative history, or Board precefactors set forth in section 4(c)(8) of the BHC Act. dent, either under the new Board insurance regulation Applicant proposes to engage in general insurance (12 C.F.R. § 225.25(b)(8)(iii)) or under its prior regulaactivities, pursuant to exemption C of section 4(c)(8) tion (12 C.F.R. § 225.25(b)(8)(ii)( 1986)), that supports of BHC Act, in Ord, Wolbach, and Grant, Nebraska, their position. For over 10 years, the Board has each a town with a population of fewer than 5000 examined each insurance agency subsidiary proposed residents, according to the 1980 census. In reviewing to be located in a small town to determine that that subsidiary properly served the limited geographic area of the small town and surrounding environs and to determine that the proposed agency would not solicit business from places having more than 5000 residents. 1. These applications are part of a restructuring of a chain of three bank holding companies and five subsidiary banks under common At no time has the Board aggregated either the populaownership into a single multibank holding company. The Board tions to be served or the service areas of bank holding approved this restructuring, including Applicant's acquisition of con- companies with two or more small-town insurance trol of Grant Bancshares, Inc., by Order dated November 25, 1986, but it delayed consideration of the proposed restructuring of the three agency subsidiaries in order to limit the total activities existing insurance agency subsidiaries to allow additional time for of all such small town agency subsidiaries. The Board public comment. finds nothing in exemption C and no policy consider- 2. The Board has considered the comments of the Association of Life Underwriters, National Association of Professional Insurance ations to compel a change in its longstanding practice Agents, Independent Insurance Agents of America, Inc., National and the imposition of a substantial additional restric- Association of Casualty and Surety Agents, and National Association tion now proposed by the insurance parties. of Surety Bond Producers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 163 Applicant has provided a sufficient record that Ord, Orders Approved Under Sections 3 and 4 of the Wolbach and Grant are towns of fewer than 5000 Bank Holding Company Act residents. Applicant has described the proposed service area of each subsidiary and demonstrated that Fidelcor, Inc. each will include fewer than 5000 inhabitants. There is Philadelphia, Pennsylvania some additional basis to rely on Applicant's figures, since the proposed subsidiaries have operated for Order Approving Acquisition of a Bank Holding some time as subsidiaries of Applicant's predecessor Company and Underwriting Credit-Related bank holding companies and were subject to Board Insurance supervision and regulation. Each proposed subsidiary is a separate company with a history of independent Fidelcor, Inc., Philadelphia, Pennsylvania, a bank operation. Finally, since Applicant's three proposed holding company within the meaning of the Bank subsidiaries are located 40 miles to more than 190 Holding Company Act of 1956, as amended ("BHC miles apart, it is implausible to believe that these Act" or "Act") (12 U.S.C. § 1841 et seq.), has apentities might jointly serve a single large market area. plied for the Board's approval under section 3(a)(3) of Thus the Board not only rejects the criterion suggested the Act (12 U.S.C. § 1842(a)(3)), to acquire Merchants by the insurance parties but also finds it is inapplicable Bancorp., Inc., Allentown, Pennsylvania ("Merin this case. chants"), and thereby indirectly to acquire Merchants Consummation of the proposal would not result in Bank, N.A., Allentown, Pennsylvania ("Merchants the elimination of any competition. Furthermore, Bank"), and Merchants Bank North, Wilkes-Barre, there is no evidence in the record to indicate that Pennsylvania ("Merchants North"). Applicant has approval of this proposal would result in undue con- also filed a section 4(c)(8) application (12 U.S.C. centration of resources, decreased or unfair competi- § 1843(c)(8)) to acquire Merchants' nonbanking subtion, conflicts of interest, unsound banking practices, sidiary, Merchants Life Insurance Company, Phoenix, or other adverse effects on the public interest. Accord- Arizona, and thereby to underwrite credit-related life ingly, the Board has determined that the balance of the and accident and health insurance. public interest factors it must consider under section Notice of these applications, affording an opportuni- 4(c)(8) of the Act is consistent with approval of the ty for interested persons to submit comments, has application. been given in accordance with section 3(b) of the BHC Based on the foregoing and other facts of record, the Act (51 Federal Register 33,804 (1986)). The time for Board has determined that the applications should be filing comments has expired, and the Board has conand hereby are approved. This determination is sub- sidered these applications and all comments received ject to all of the conditions set forth in Regulation Y, in light of the factors set forth in section 3(c) of the including sections 225.4(d) and 225.23(b)(3) (12 C.F.R. BHC Act (12 U.S.C. § 1842(c)) and the considerations §§ 225.4(d) and 225.23(b)(3)), and to the Board's au- in section 4(c)(8) of the BHC Act (12 U.S.C. thority to require such modification or termination of § 1843(c)(8)). the activities of a bank holding company or any of its Applicant is the fourth largest commercial banking subsidiaries as the Board finds necessary to assure organization in Pennsylvania, holding deposits of $5.7 compliance with the provisions and purposes of the billion, representing 5.9 percent of total deposits in Act and the Board's regulations and orders issued commercial banks in the state.1 Merchants is the 12th thereunder, or to prevent evasion thereof. These largest commercial banking organization in Pennsylvatransactions shall not be consummated later than three nia, controlling deposits of $1.8 billion, representing months after the effective date of this Order, unless 1.8 percent of total deposits in commercial banks in such period is extended for good cause by the Board or the state. Upon consummation of this proposal, Appliby the Federal Reserve Bank of Kansas City, pursuant cant would become the third largest banking organizato delegated authority. tion in the state and would control approximately 7.7 By order of the Board of Governors, effective percent of deposits in commercial banks in the state. December 16, 1986. Consummation of the proposal would not have a significant adverse effect on the concentration of banking resources in the state. Voting for this action: Chairman Volcker and Governors Johnson, Seger, Angell, and Heller. Absent and not voting: Governors Wallich and Rice. JAMES MCAFEE 1. AH banking data are as of June 30, 1986, unless otherwise [SEAL] Associate Secretary of the Board specified. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

164 Federal Reserve Bulletin • February 1987 Applicant and Merchants compete in the Allentown/ al is not likely to substantially lessen competition in Bethlehem market.2 Applicant is the sixth largest of 38 the Allentown/Bethlehem banking market.6 commercial banking organizations in the market, with The Board has also considered the effects of this total deposits of $154.2 million, representing 3.1 per- proposal on probable future competition in the marcent of total deposits in commercial banks.3 Mer- kets in which either Applicant or Merchants, but not chants is the largest commercial banking organization both, competes. In light of the number of probable in the market, with total deposits of $1.13 billion, future entrants into each of these markets and other representing 22.6 percent of total deposits in commer- facts of record, the Board concludes that consummacial banks in the market. After consummation of the tion of this proposal would not have any significant proposal, Applicant's share of the deposits in commer- adverse effect on probable future competition in any cial banks in the market would be 25.7 percent. The market. Allentown/Bethlehem market is considered moderate- In its evaluation of Applicant's managerial rely concentrated, with the four largest banks controlling sources, the Board has considered certain violations 62.1 percent of the deposits in commercial banks. The by Applicant and its subsidiary bank and Merchants Herfindahl-Hirschman Index ("HHI") will increase and its subsidiary banks of the Currency and Foreign by 152 points to 1,377 and the four-firm concentration Transactions Reporting Act ("CFTRA") and the reguratio will increase to 65.2 percent.4 lations thereunder.7 In this regard, the Board notes Although consummation of the proposal would elim- that Applicant brought these matters to the attention inate some existing competition between Applicant of the appropriate supervisory authorities after the and Merchants in the Allentown/Bethlehem banking violations were discovered through an internal audit. market, numerous other commercial banking organi- Applicant and its subsidiary bank and Merchants and zations would remain as competitors in the market its subsidiaries have also undertaken comprehensive after consummation. In addition, the presence of 22 remedial programs to correct these violations and to thrift institutions that control approximately 27 per- prevent violations from occurring in the future. Applicent of the market's total deposits mitigates the anti- cant has advised the Board that it has: completely competitive effects of the transaction.5 Thrift institu- restructured its compliance function and instituted a tions already exert a considerable competitive new compliance committee; designated a compliance influence in the market as providers of NOW accounts officer with responsibility for compliance manageand consumer loans. In addition, several of the thrift ment; created a new unit to manage all aspects of institutions make commercial loans and provide an CFTRA and provided this unit with the authority and alternative for such services in the Allentown/Bethle- capacity to examine every reportable transaction, inhem market. Based upon the above considerations, cluding multiple deposits or withdrawals involving a the Board concludes that consummation of the propos- single account on a given day, and to review all CTR reports for accuracy and completeness before filing; reviewed, revised, automated and centralized the exemption lists which are regularly distributed to all branches; prepared a handbook exclusively on the subject of CFTRA compliance and distributed the handbook throughout the branches and appropriate 2. The Allentown/Bethlehem market is defined by the Allentown/ Bethlehem Metropolitan Statistical Area and includes Carbon, Le- operations areas; developed a separate policies and high, Northampton and Warren Counties in Pennsylvania. procedures manual for CFTRA compliance; provided 3. Market structure data are as of June 30, 1985, and account for all training for personnel in the branch system, the money acquisitions that have been consummated as of September 29, 1986. 4. Under the revised Department of Justice Merger Guidelines (49 center, bookkeeping, and other areas affected by the Federal Register 26,823 (June 29, 1984)), any market in which the CFTRA regulations; and incorporated CFTRA trainpost-merger HHI is between 1000 and 1800 is considered moderately concentrated, and the Department is likely to challenge a merger that ing into all new branch staff training sessions. increases the HHI by more than 100 points, unless other facts of The sufficiency of the compliance procedures adoptrecord indicate that the merger is not likely substantially to lessen ed by Applicant and their efficacy in correcting the competition. The Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the postmerger HHI is at least 1800 and the merger increases the HHI by at least 200 points. 5. The Board has previously indicated that thrift institutions have 6. If 50 percent of deposits held by thrift institutions in the become, or have the potential to become, major competitors of Allentown/Bethlehem banking market were included in the calculation commercial banks. National City Corporation, 70 FEDERAL RESERVE of market concentration, the share of total deposits held by the four BULLETIN 743 (1984); NCNB Bancorporation, 70 FEDERAL RESERVE largest organizations would be 52.2 percent. Applicant would control BULLETIN 2215 (1984); GeneralBancshares Corporation, 69 FEDERAL 21.8 percent of the market's deposits upon consummation. The HHI RESERVE BULLETIN 802 (1983); First Tennessee National Corpora- would increase by 100 points to 995. tion, 69 FEDERAL RESERVE BULLETIN 298 (1983). 7. 31 U.S.C. § 5311 et seq.\ 31 C.F.R. § 103. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 165 deficiencies have been reviewed by examiners of the banking activities is subject to all of the conditions set Office of the Comptroller of the Currency. The Board forth in Regulation Y, including sections 225.4(d) and notes that Applicant has cooperated fully with law 225.23(b) (12 C.F.R. §§ 225.4(d) and 225.23(b)), and to enforcement agencies. The Board has also consulted the Board's authority to require such modification or with appropriate enforcement agencies with respect to termination of activities of the holding company or any this matter, and has considered Applicant's past re- of its subsidiaries as the Board finds necessary to cord of compliance with the law. assure compliance with, or to prevent evasion of, the The Board has also considered certain violations of provisions and purposes of the Act and the Board's CFTRA by Merchants' subsidiary banks. Merchants regulations and orders issued thereunder. has taken remedial action as a result of the discovery By order of the Board of Governors, effective of these violations, including the formation of a com- December 1, 1986. pliance unit and additional staff training. Applicant has stated that following the acquisition, it will extend its Voting for this action: Chairman Volcker and Governors compliance system to Merchants' subsidiaries. Johnson, Seger, and Heller. Absent and not voting: Gover- For the foregoing reasons and based upon a review nors Wallich, Rice, and Angell. of all of the facts of record, the Board concludes that the managerial resources of Applicant and Merchants JAMES MCAFEE are consistent with approval. The Board also finds that [SEAL] Associate Secretary of the Board the financial resources and future prospects of Applicant and Merchants are consistent with approval of the applications. Considerations relating to convenience NBD Bancorp, Inc. and needs of the communities to be served also are Detroit, Michigan consistent with approval. Applicant has also applied, pursuant to section Order Approving Acquisition of a Bank Holding 4(c)(8) of the Act, to acquire Merchants Life Insurance Company and a Nonbanking Company Company, Phoenix, Arizona ("Merchants Life"), the nonbanking subsidiary of Merchants, and thereby to NBD Bancorp, Inc., Detroit, Michigan, a bank holding engage in reinsuring credit-related life and accident company within the meaning of the Bank Holding and health insurance in conjunction with consumer Company Act (12 U.S.C. § 1841 et seq.) ("Act"), has lending. These activities are permissible for bank applied for the Board's approval under section 3 of the holding companies under section 225.25 (b)(8) of the Act (12 U.S.C. § 1842) to acquire Omnibank Corp., Board's Regulation Y (12 C.F.R. § 225.25(b)(8)). Con- Wyandotte, Michigan ("Omni"), and thereby indirectsummation of the proposal would not result in the ly to acquire Wyandotte Savings Bank, Wyandotte, elimination of any competition. Furthermore, there is Michigan ("Bank").1 no evidence in the record to indicate that approval of Applicant has also applied for the Board's approval this proposal would result in undue concentration of under section 4(c)(8) of the Act (12 U.S.C. resources, decreased or unfair competition, conflicts § 1843(c)(8)) to acquire Computer Communications of of interest, unsound banking practices, or other ad- America, Inc., Detroit, Michigan ("CCA"), which verse effects on the public interest. Accordingly, the engages in providing loan servicing and data process- Board has determined that the balance of the public ing services to financial institutions. CCA is presently interest factors it must consider under section 4(c)(8) a subsidiary of Applicant's lead bank, National Bank of the Act is consistent with approval of the applica- of Detroit, Detroit, Michigan. tion. Notice of the applications, affording interested per- Based on the foregoing and other facts of record, the sons an opportunity to submit comments, has been Board has determined that the applications under given in accordance with section 3(b) of the Act. The sections 3 and 4 of the Act should be and hereby are time for filing comments has expired, and the Board approved. The banking acquisition shall not be con- has considered the applications and all comments summated before the thirtieth calendar day following the effective date of this Order, and neither the banking acquisition nor the nonbanking acquisition shall occur later than three months after the effective date of this Order, unless such period is extended for good 1. Applicant has also applied under section 3(a)(1) of the Act cause by the Board or by the Federal Reserve Bank of (12 U.S.C. § 1842(a)(1)) for approval for its wholly owned subsidiary, Philadelphia, acting pursuant to delegated authority. NBD Southern Corporation ("NBDSC"), to become a bank holding company through acquisition of Omni. NBDSC has no significance The determination with respect to Applicant's non- except as a means to facilitate the acquisition of Omni. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

166 Federal Reserve Bulletin • February 1987 received in light of the factors set forth in section 3(c) to substantially lessen competition in the Detroit bankand the considerations specified in section 4(c)(8) of ing market. the Act. In its evaluation of Applicant's managerial re- Applicant, the largest commercial banking organiza- sources, the Board has considered certain violations tion in Michigan, controls 25 subsidiary banks with by two of Applicant's subsidiary banks of the Currentotal deposits of $12.1 billion, representing 21 percent cy and Foreign Transactions Reporting Act of total deposits in commercial banks in the state.2 ("CFTRA") and the regulations thereunder. With Omni is the fifteenth largest commercial banking orga- regard to the CFTRA violations, the Board notes that nization in the state, controlling one bank subsidiary Applicant has cooperated with law enforcement agenwith total deposits of $315 million, representing 0.5 cies, has subsequently reported previously unreported percent of total deposits in commercial banking orga- transactions to the Internal Revenue Service and has nizations in the state. Upon consummation of this adopted measures designed to prevent recurrence of acquisition, Applicant would remain the largest com- such violations. Applicant had incorrectly defined mercial banking organization in the state, controlling exempt customers, and it has clarified its procedures total deposits of $12.4 billion, representing 21.5 per- for identifying exempt customers. Applicant has also cent of total deposits in commercial banking organiza- redesigned its exempt customer cards to insure that tions in the state. Consummation of this proposal adequate information is provided, has redefined its would not significantly increase the concentration of procedures for the periodic review of currency transbanking resources in Michigan. action report forms, and has developed new training Applicant and Omni compete in the Detroit banking programs to familiarize all customer contact personnel market.3 Applicant is the largest commercial banking with CFTRA requirements. An automated system has organization in the Detroit banking market, controlling been implemented which produces a listing of the 28.6 percent of the total deposits in commercial bank- previous day's large cash transactions for each branch ing organizations in the market. Omni is the eighth location, and Applicant will acquire software which largest commercial banking organization in the Detroit permits aggregating transactions throughout its branch banking market, controlling 1.1 percent of the total system. deposits in commercial banking organizations in the The sufficiency of the compliance procedures adoptmarket. Upon consummation of this proposal, Appli- ed to address Applicant's subsidiary banks' CFTRA cant would remain the largest commercial banking violations has been reviewed by examiners from the organization in the market, controlling 29.7 percent of Office of the Comptroller of the Currency. The Board the total deposits in commercial banking organizations also has consulted with appropriate enforcement agenin the market. After consummation of this proposal, cies, and has considered Applicant's past record of the Detroit banking market would become highly cooperation with supervisory and enforcement agenconcentrated, with the four largest commercial bank- cies to comply with the law. ing organizations controlling 77 percent of the deposits For the foregoing reasons, and based upon a review in commercial banking organizations in the market and of all of the facts of record, the Board concludes that the Herfindahl-Hirschman Index ("HHI") would in- the managerial resources of NBD, Omni and their crease by 64 points to 1806.4 respective subsidiary banks are consistent with ap- Although consummation of the proposal would elim- proval. The Board also finds that the financial reinate some existing competition between Applicant sources and future prospects of Applicant, Omni, and and Omni in the Detroit banking market, numerous their subsidiary banks are satisfactory. Based upon a other commercial banking organizations would remain review of all of the facts of record, the Board conas competitors in the market upon consummation. cludes that the financial and managerial resources of Based upon the above considerations, the Board con- Applicant, Omni and their respective subsidiary banks cludes that consummation of the proposal is not likely are consistent with approval of this transaction. Considerations related to the convenience and needs of the communities to be served also are consistent with 2. All banking data are as of December 31, 1985. 3. The Detroit banking market is approximated by the Detroit approval of the transaction. RMA. Applicant has also applied, pursuant to section 4. Under the revised Department of Justice Merger Guidelines (49 4(c)(8) of the Act, to acquire CCA and thereby engage Federal Register 26,823 (June 29, 1984)) ("Guidelines"), a market in which the post-merger HHI is over 1800 is considered highly concen- in the provision of loan servicing and data processing trated. In such markets, the Department is likely to challenge a merger services to financial institutions. The Board has deterthat produces an increase in the HHI of more than 50 points. The mined that the activity of loan servicing and data Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other processing services are permissible for bank holding factors indicating anticompetitive effects) unless the post-merger HHI companies (12 C.F.R. §§ 225.25(b)(1) and (7)). CCA is at least 1800 and the merger increases the HHI by at least 200 points. previously conducted these activities as a subsidiary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 167 of Applicant's lead bank, and there is no evidence in company subsidiaries, Standard Chartered Holdings, the record to indicate that approval of this proposal Inc., and Union Bancorp, both of Los Angeles, Caliwould result in undue concentration of resources, fornia, have applied for the prior approval of the Board decreased or unfair competition, conflicts of interest, under section 3 of the Bank Holding Company Act unsound banking practices, or other adverse effects on (12 U.S.C. § 1842) ("BHC Act") to acquire United the public interest. Accordingly, the Board has deter- Bancorp of Arizona, Phoenix, Arizona, and thereby to mined that the balance of the public interest factors it acquire indirectly United Bank of Arizona, Phoenix, must consider under section 4(c)(8) of the Act is Arizona ("Bank"). Applicant has also applied for the consistent with approval of the application. prior approval of the Board under section 4(c)(8) of the Based on the foregoing and other facts of record, the BHC Act (12 U.S.C. § 1843(c)(8)) to acquire H.S. Board has determined that the applications under Pickrell Company, Phoenix, Arizona, and thereby sections 3 and 4 of the Act should be, and hereby are, engage in mortgage banking. This activity is authoapproved. The acquisition of Omni shall not be con- rized for bank holding companies pursuant to the summated before the thirtieth calendar day following Board's Regulation Y, 12 C.F.R. § 225.25(b)(1). Furthe effective date of this Order, and neither the acqui- ther, Applicant has provided notice to the Board under sition of Omni nor the acquisition of CCA shall be section 4(c)(14) to acquire United Bancorp Export made later than three months after the effective date of Trading Company, Phoenix, Arizona, and thereby this Order, unless such period is extended for good engage in export trading. cause by the Board or the Federal Reserve Bank of Notice of the applications, affording opportunity for Chicago, pursuant to delegated authority. The deter- interested persons to submit comments, has been mination with respect to Applicant's nonbanking ac- published (51 Federal Register 36,757 (1986)). The tivities is subject to all of the conditions set forth in time for filing comments has expired, and the Board Regulation Y, including sections 225.4(d) and has considered the applications and all comments 225.23(b) (12 C.F.R. §§ 225.4(d) and 225.23(b)), and to received in light of the factors set forth in sections 3(c) the Board's authority to require such modifications or and 4 of the BHC Act.1 termination of activities of the holding company or any Union Bancorp is the fifth largest commercial bankof its subsidiaries as the Board finds necessary to ing organization in California with domestic deposits assure compliance with, or to prevent evasion of, the of approximately $6.2 billion, representing 3.2 percent provisions and purposes of the Act and the Board's of the total deposits in commercial banks in Califorregulations and orders issued thereunder. nia.2 Bank is the fourth largest commercial banking By order of the Board of Governors, effective organization in Arizona with domestic deposits of December 1, 1986. approximately $1.9 billion, representing 8.6 percent of the total deposits in commercial banks in Arizona. Voting for this action: Chairman Volcker and Governors Section 3(d) of the BHC Act (12 U.S.C. § 1842(d)), Johnson, Seger, and Heller. Absent and not voting: Gover- the Douglas Amendment, prohibits the Board from nors Wallich, Rice, and Angell. JAMES MCAFEE [SEAL] Associate Secretary of the Board 1. In connection with these applications, the American Council of Life Insurance, the American Insurance Association, the National Association of Independent Insurers, and the Alliance of American Insurers submitted comments protesting Board approval of these applications on the grounds that the general insurance agency activi- Standard Chartered PLC, Standard Chartered ties conducted by a subsidiary of Bank are prohibited under the Bank, and Standard Chartered Overseas amendments to section 4 of the BHC Act contained in the Garn-St Holdings Ltd. Germain Depository Institutions Act. The Board also received comments from the National Association of Life Underwriters, the London, England National Association of Professional Insurance Agents, the Independent Insurance Agents of America Incorporated, the National Association of Casualty and Surety Agents, and the National Association of Standard Chartered Holdings, Inc., and Union Surety Bond Producers, raising substantially the same arguments. In Bancorp response to the protest, Applicant has agreed that, within two years of Los Angeles, California consummation of its acquisition of Bank, Bank will divest or terminate its general insurance agency activities, unless during such period Applicant receives approval pursuant to an application under section Order Approving Acquisition of a Bank Holding 4(c)(8) of the BHC Act to retain such activities. During this two-year period or unless authorization is granted pursuant to the BHC Act for Company and Certain Nonbanking Subsidiaries broader activities, Applicant will limit the insurance agency activities of Bank and its subsidiaries to the renewal of existing policies and those credit-related insurance agency activities permitted under sec- Standard Chartered PLC, Standard Chartered Bank, tion 4(c)(8)(A) of the BHC Act. In the Board's view, these divestiture and Standard Chartered Overseas Holdings Ltd., all of commitments address the issues raised by Protestants. London, England, and their domestic bank holding 2. Banking data are as of June 30, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

168 Federal Reserve Bulletin • February 1987 approving any application by a bank holding company tations with appropriate foreign bank supervisors and to acquire control of any bank located outside of the notes that work is currently in progress among foreign holding company's home state,3 unless such acquisi- and domestic bank supervisory officials to develop tion is "specifically authorized by the statute laws of more fully the concept of functional equivalency of the State in which [the] bank is located, by language to capital ratios for banks of different countries. Pending that effect and not merely by implication." The Board the outcome of these consultations and deliberations, has previously determined that the statute laws of the Board has determined to consider the issues raised Arizona authorize an out-of-state financial institution by applications by foreign banks to acquire domestic to acquire any Arizona financial institution that has banks on a case-by-case basis. applied to operate in Arizona before May 31, 1984, In this case, the Board notes that the capital ratio of subject to approval by the State Banking Superinten- Applicant, as publicly reported, is above the minimum dent.4 The Arizona State Banking Superintendent has level established by the Board for domestic bank informed the Board that the proposal does not present holding companies. As in similar cases, the Board has any of the grounds for denial of the application under considered appropriate adjustments to Applicant's Ariz. Rev. Stat. § 6-326 and, accordingly, the Superin- capital ratio to reflect differences in accounting and tendent anticipates approving the application. Based regulatory requirements in the United States and on the foregoing, the Board has determined that the abroad, including discounting for the practice of revalproposed acquisition is specifically authorized by the uation of certain assets and giving positive weight to statute laws of Arizona and is thus permissible under the issuance by Applicant of a significant amount of the Douglas Amendment, subject to Applicant's ob- undated loan capital, which is recognized by the Bank taining the approval of the Superintendent pursuant to of England and the Board as primary capital. Based section 6-322 of the Arizona Revised Statutes. The upon these considerations, the Board notes that the Board's order is specifically conditioned upon satis- primary capital ratio of Applicant is currently, and will faction of the state regulatory approval requirement. remain upon consummation, above the minimum capi- Applicant does not operate a bank in any market in tal guidelines established by the Board for U.S. bank which Bank operates. Applicant does, however, oper- holding companies. Further, Applicant is in compliate a consumer lending subsidiary that competes with ance with the capital and other financial requirements Bank and its subsidiaries in Arizona. Applicant's of the appropriate supervisory authorities in England market share is small and consummation of the pro- and Applicant's resources and prospects are viewed as posal would not result in any significant decrease in satisfactory by those authorities. Finally, the Board competition or increase in concentration in any rele- notes that Applicant's current U.S. operations are vant market. Accordingly, consummation of the pro- satisfactory. posal is not likely to result in the elimination of any The Board expects that Applicant will use its capacisignificant existing competition. In view of the numer- ty to raise capital to increase the tangible primary ous entrants into the relevant markets, the Board capital level of Union Bancorp and United Bancorp concludes that the proposal would not have any signif- and to maintain Union Bancorp, Union Bank, United icant adverse effect on probable future competition. Bancorp and Bank as among the more strongly capital- Section 3(c) of the BHC Act requires in every case ized banking organizations of comparable size in the that the Board consider the financial resources of the United States. The Board notes as a positive factor applicant organization and the bank or bank holding that Applicants have raised additional capital equal to company to be acquired. As the Board has previously a significant portion of the purchase price in anticipastated, review of the financial resources of foreign tion of the proposed acquisition. Based on these and banking organizations raises a number of complex all of the other facts of record, the Board concludes issues that the Board believes requires careful consid- that the financial and managerial factors are consistent eration and that the Board continues to have under with approval of this application. Factors related to review.5 In this regard, the Board has initiated consul- the convenience and needs of the communities to be served are also consistent with approval. 3. A bank holding company's home state is that state in which the There is no evidence in the record to indicate that operations of the bank holding company's banking subsidiaries were approval of this proposal would result in undue conprincipally conducted on July 1, 1966, or the date on which the centration of resources, decreased or unfair competicompany became a bank holding company, whichever is later. 4. Ariz. Rev. Stat. § 6-321 et seq. (effective October 1, 1986). See tion, conflicts of interests, unsound banking practices, Marshall & Ilsley, 72 FEDERAL RESERVE BULLETIN 720 (1986). or other adverse effects on the public interest. Accord- 5. Bank of Montreal, 70 FEDERAL RESERVE BULLETIN 664 (1984); ingly, the Board has determined that the balance of Mitsubishi Bank, Ltd., 70 FEDERAL RESERVE BULLETIN 518 (1984). See also Policy Statement on Supervision and Regulation of Foreign- public interest factors it must consider under section Based Bank Holding Companies, 1 Federal Reserve Regulatory 4(c)(8) of the BHC Act is favorable and consistent with Service 11 4-835 (1979). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 169 approval of the application to acquire Bank's non- San Francisco, pursuant to delegated authority. The banking subsidiaries and activities. determinations as to the nonbanking activities are The Board has also considered the notice of Appli- subject to all of the conditions contained in Regulation cant's proposed investment in United Bancorp Export Y, including those in sections 225.4(d) and 225.23(b)(3) Trading Company under section 4(c)(14) of the BHC (12 C.F.R. §§ 225.4(d) and 225.23(b)(3)), and to the Act. Based on the facts of record, the Board has Board's authority to require such modification or determined that disapproval of the proposed invest- termination of the activities of a holding company or ment is not warranted. any of its subsidiaries as the Board finds necessary to Based on the foregoing and other facts of record, assure compliance with, or to prevent evasion of, the and conditioned upon certain commitments made by provisions and purposes of the BHC Act and the Applicant, the Board has determined that the applica- Board's regulations and orders issued thereunder. tions under sections 3 and 4 of the BHC Act should be By order of the Board of Governors, effective and hereby are approved, subject to the express December 9, 1986. condition that Applicant obtain the approval of the Arizona Superintendent of Banks pursuant to section Voting for this action: Chairman Volcker and Governors 6-322 of the Arizona Revised Statutes. The acquisition Seger, Angell, and Heller. Absent and not voting: Governors Johnson, Wallich, and Rice. of Bank shall not be consummated before the thirtieth calendar day following the effective date of this Order or later than three months after the effective date of JAMES MCAFEE this Order, unless such period is extended for good [SEAL] Associate Secretary of the Board cause by the Board or by the Federal Reserve Bank of ORDERS APPROVED UNDER BANK HOLDING COMPANY ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Section 3 Reserve Effective Applicant Bank(s) Bank date Allied Bankshares, Inc., Bank of Columbia County, Atlanta November 26, 1986 Thomson, Georgia Harlem, Georgia AmTex Bancshares, Inc., Pavillion National Bank, Dallas December 12, 1986 Bridge City, Texas Dallas, Texas Ballard Kevil Bancorp, Inc., The Kevil Bank, St. Louis December 1, 1986 Kevil, Kentucky Kevil, Kentucky Bank Corporation of Georgia, Southern Bank and Trust Atlanta November 19, 1986 Fort Valley, Georgia Company, Savannah, Georgia Bank South Corporation, Southern Bancorp, Inc., Atlanta November 28, 1986 Atlanta, Georgia Way cross, Georgia Bankers' Bancorporation of Missouri Independent Bank, St. Louis December 1, 1986 Missouri, Inc., Jefferson City, Missouri Jefferson City, Missouri Boynton Holding Company, First National Bank, Kansas City December 1, 1986 Boynton, Oklahoma Boynton, Oklahoma Brannen Banks of Florida, Inc. The Bank of Brooksville, Atlanta December 3, 1986 Inverness, Florida Brooksville, Florida Broadway Bancshares, Inc., Heights National Bank, Dallas November 21, 1986 San Antonio, Texas San Antonio, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

170 Federal Reserve Bulletin • February 1987 Section 3—Continued , • . r> w \ Reserve Effective AApplicant Bank(s) ^ ^ CB&T Financial Corp., The Union Bank of Harrisville, Richmond November 28, 1986 Fairmont, West Virginia Harrisville, West Virginia Central Bancshares, Inc., The Central Bank of North St. Louis November 20, 1986 Louisville, Kentucky Pleasure ville, Pleasure ville, Kentucky Central Illinois Community Northwest Community Bank of Chicago November 28, 1986 Bancorp, Inc., Peoria, Peoria, Illinois Peoria, Illinois FIRST TAZEWELL BANCORP, INC., East Peoria, Illinois Charter 17 Bancorp, Inc., First National Bancorp, Chicago November 26, 1986 Richmond, Indiana New Castle, Indiana Cherry Valley Bancshares, Inc., Bank of Cherry Valley, St. Louis December 1, 1986 Cherry Valley, Arkansas Cherry Valley, Arkansas CNB Bancshares, Inc., City National Bank, Dallas December 10, 1986 Whitehouse, Texas Whitehouse, Texas Citizens Bancorp Investment, Dale Hollow Holding Company, Atlanta December 3, 1986 Inc., Celina, Tennessee Lafayette, Tennessee Citizens Bancshares of Eldon, Citizens Bank of Eldon, St. Louis December 9, 1986 Inc., Eldon, Missouri Eldon, Missouri Citizens Southern Bancshares, Citizens State Bank, Atlanta December 10, 1986 Inc., Vernon, Alabama Vernon, Alabama Commercial Bancorporation of Rocky Mountain Bank & Trust Kansas City November 26, 1986 Colorado, Company, Denver, Colorado Fort Collins, Colorado Commercial Bank Investment Company, Denver, Colorado County Bancorporation, Inc., Delta Counties Bank, St. Louis December 15, 1986 Jackson, Missouri Sikeston, Missouri Crockett County National Crockett County National Bank, Dallas December 2, 1986 Bancshares, Inc., Ozona, Texas Ozona, Texas DuPage Financial Corporation, ALLIED BANCSHARES OF Chicago November 24, 1986 Naperville, Illinois ILLINOIS, INC., Joliet, Illinois F & M Financial Services Bank of Fond du Lac, Chicago November 28, 1986 Corporation, Fond du Lac, Wisconsin Menomonee Falls, Wisconsin Faith Bank Holding Company, Farmers State Bank, Minneapolis November 21, 1986 Pierre, South Dakota Faith, South Dakota FCB Corporation, The Meltons Bank, Atlanta November 20, 1986 Manchester, Tennessee Gassaway, Tennessee Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 171 Section 3—Continued Reserve Effective AApppplliiccaanntt BBaannkk((ss)) Bank date Financial Bancshares, Inc., Financial Diversified Investment Kansas City December 4, 1986 Topeka, Kansas Corporation, Topeka, Kansas First Bancorp of Russell Citizens Bank and Trust St. Louis November 25, 1986 County, Inc., Company, Russell Springs, Kentucky Campbellsville, Kentucky First Columbus Financial First Columbus National Bank, St. Louis November 17, 1986 Corporation, Columbus, Mississippi Columbus, Mississippi First Community Shares, Inc., Centennial Bank, San Francisco November 19, 1986 Carmel, California Hay ward, California First Interstate Corporation of Mid-Continental Bancorporation, Chicago December 1, 1986 Wisconsin, Inc., Sheboygan, Wisconsin Milwaukee, Wisconsin First Michigan Bank State Savings Bank, Chicago November 25, 1986 Corporation, Lowell, Michigan Zeeland, Michigan First Mid-Illinois Bancshares, Tuscola Bancorp, Inc., Chicago November 28, 1986 Inc., Springfield, Illinois Mattoon, Illinois FIRST NORTHBROOK First Cary-Grove Corp., Chicago November 24, 1986 BANCORP, INC., Cary, Illinois Northbrook, Illinois First Ohio Bancshares, Inc., The Home Banking Company, Cleveland December 8, 1986 Toledo, Ohio Gibsonburg, Ohio 1st State Corporation, Parkway Bank and Trust Chicago December 1, 1986 Harwood Heights, Illinois Company, Harwood Heights, Illinois Franklin Capital Corporation, First State Bank & Trust Chicago November 28, 1986 Morton Grove, Illinois Company of Franklin Park, Franklin Park, Illinois Burlington Capital Corporation, Wilmette, Illinois GreatBanc, Inc., FNB Bancorp., Inc., Chicago November 28, 1986 Itasca, Illinois Chicago Heights, Illinois Hemet Bancorp, The Bank of Hemet, San Francisco November 28, 1986 Hemet, California Hemet, California Hopedale Investment Company, Community Bank of Hopedale, Chicago December 1, 1986 Quincy, Illinois Hopedale, Illinois Hub Financial Corporation, City Bank, N.A., Dallas December 5, 1986 Lubbock, Texas Lubbock, Texas Illinois Marine Bancorp, Inc., Colonial Bancorporation, Inc., Chicago November 21, 1986 Elmhurst, Illinois Peru, Illinois Jack Banshares, Inc., The First State Bank of Kansas City November 19, 1986 Commerce, Oklahoma Commerce, Commerce, Oklahoma Key Centurion Bancshares, Nicholas County Bank, Richmond November 26, 1986 Inc., Summersville, West Virginia Charleston, West Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

172 Federal Reserve Bulletin • February 1987 Section 3—Continued Reserve Effective AApppplliiccaanntt BBaannkk((ss)) Bank date Lake Bank Shares, Inc., Security State Bank of Albert Minneapolis December 8, 1986 Albert Lea, Minnesota Lea, Albert Lea, Minnesota Emmons Agency, Inc., Emmons, Minnesota Lane Financial, Inc., Bank of Westmont, Chicago November 21, 1986 Northbrook, Illinois Westmont, Illinois Longview Capital Corporation, The First National Bank of Chicago November 28, 1986 Longview, Illinois Ogden, Ogden, Illinois Lunenburg Community The Lunenburg County Bank, Richmond December 1, 1986 Bankshares, Inc., Kenbridge, Virginia Kenbridge, Virginia Mercantile Bancorporation Inc., First Bancshares Corporation of St. Louis December 8, 1986 St. Louis, Missouri Illinois, Alton, Illinois Merchants National The Citizens National Bank of Chicago November 21, 1986 Corporation, Tipton, Indianapolis, Indiana Tipton, Indiana NBG Financial Corporation, Greenwood, Indiana Mid-Southern Indiana Bancorp, Seymour, Indiana Mid States Bancshares, Inc., First National Bank of Moline, Chicago November 28, 1986 Moline, Illinois Moline, Illinois Mid-Continental Holdings, Inc., Continental Bank & Trust Co., Chicago December 1, 1986 Sheboygan, Wisconsin Milwaukee, Wisconsin Middleburg Bancorp, Inc., Farmers Deposit Bank, St. Louis November 24, 1986 Middleburg, Kentucky Middleburg, Kentucky Midstate Bancorp, First State Bank, Kansas City December 4, 1986 Hinton, Oklahoma Hinton, Oklahoma Norstar Bancorp, Inc., Peconic Bancshares, Inc., New York December 1, 1986 Albany, New York Riverhead, New York Northern of Tennessee Corp., Central Bancorp, Inc., Atlanta November 24, 1986 Clarksville, Tennessee Murfreesboro, Tennessee Bedford County Bank, Shelbyville, Tennessee Northwest Arkansas Bank of Pea Ridge, St. Louis November 25, 1986 Bancshares, Inc., Pea Ridge, Arkansas Bentonville, Arkansas Mcllroy Bank and Trust, Fayetteville, Arkansas Siloam Springs Bancshares, Inc., Bentonville, Arkansas PNB Financial Corporation, The Peoples National Bank of Richmond November 25, 1986 Warrenton, Virginia Warrenton, Warrenton, Virginia Premier Bankshares Peoples Bank, Inc., Richmond November 28, 1986 Corporation, Honaker, Virginia Tazewell, Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 173 Section 3—Continued ,. i / \ Reserve Effective AApplicant Bank(s) „ . , Bank date R. Darryl Fisher, M.D., Inc. Pontotoc County Bank, Kansas City December 9, 1986 Pension Trust, Roff, Oklahoma Ada, Oklahoma Republic Bancorp Inc., Peoples State Bank, Chicago November 24, 1986 Flint, Michigan Williamston, Michigan Ridgeland Bancorp, Inc., Farmers State Bank, Minneapolis November 28, 1986 Phillips, Wisconsin Ridgeland, Wisconsin Bank of Dallas, Dallas, Wisconsin Rio Grande City Bancshares, Floresville Bancshares, Inc., Dallas November 25, 1986 Inc., Floresville, Texas Rio Grande City, Texas Security Bancorp, Inc., Trenton Bank and Trust Chicago November 25, 1986 Southgate, Michigan Company, Trenton, Michigan Security Bancorporation, Inc., The State Bank of Hudson, Minneapolis November 26, 1986 Newport, Minnesota Hudson, Wisconsin Southeast Banking Corporation, Florida State Bank, Atlanta November 28, 1986 Miami, Florida Destin, Florida STAR Financial Group, Inc., First National Bank of Madison Chicago November 26, 1986 Marion, Indiana County, Anderson, Indiana Citizens National Bank of Whitley County, Columbia City, Indiana Security Bank, Elwood, Indiana The Hamilton Bank, Hamilton, Indiana Citizens National Bank of Grant County, Marion, Indiana Central Bank and Trust, Muncie, Indiana Bank of Henry County, New Castle, Indiana Stark County Bancorp, Inc., State Bank of Toulon, Chicago November 28, 1986 Toulon, Illinois Toulon, Illinois State National Bancorp, Inc.. Peoples Bank of Morehead, Cleveland November 24, 1986 Maysville, Kentucky Morehead, Kentucky Stigler Bancorporation, Inc., First Oklahoma National Kansas City November 24, 1986 Stigler, Oklahoma Corporation, Stigler, Oklahoma Sturm Investment, Inc., First Holdings, Inc., Chicago November 28, 1986 Omaha, Nebraska Omaha, Nebraska Summcorp, American State Bancorp, Chicago November 26, 1986 Fort Wayne, Indiana Sheridan, Indiana Western State Bank, South Bend, Indiana Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

174 Federal Reserve Bulletin • February 1987 Section 3—Continued Reserve Effective AApppplliiccaanntt BBaannkk((ss)) Bank date Tennessee State Bancshares, Tennessee State Bank, Atlanta November 24, 1986 Inc., Gatlinburg, Tennessee Gatlinburg, Tennessee Texas Commerce Bancshares, Texas Commerce Bank-San Dallas November 28, 1986 Inc., Antonio, Houston, Texas Loop 410, San Antonio, Texas Texas Commerce Bank- Richardson, N.A., Richardson, Texas Traders Bankshares, Inc., The Traders Bank, Richmond November 26, 1986 Spencer, West Virginia Spencer, West Virginia Tri-County Bancorp, Inc., Tri-County National Bank, Cleveland November 24, 1986 Corbin, Kentucky Corbin, Kentucky Unibancorp, Inc., DuPage County Bank of Glendale Chicago November 19, 1986 Chicago, Illinois Heights, Glendale Heights, Illinois United Bancorp, Inc., The Citizens State Bank of Cleveland November 25, 1986 Martins Ferry, Ohio Strasburg, Strasburg, Ohio Valley Bancorporation, Suburban State Bank, Chicago November 28, 1986 Appleton, Wisconsin Hartland, Wisconsin Valley Holding Company, Valley Bank of Ronan, Minneapolis November 24, 1986 Ronan, Montana Ronan, Montana Warranty Bancorporation, South Ottumwa Savings Bank, Chicago December 1, 1986 Ottumwa, Iowa Ottumwa, Iowa Wesbanco, Inc., South Hills Bank, Cleveland December 1, 1986 Wheeling, West Virginia Charleston, West Virginia Wesbanco, Inc., Wirt County Bank, Cleveland December 1, 1986 Wheeling, West Virginia Elizabeth, West Virginia Western Bancshares of Clovis, Western Bank of Clovis, Dallas November 25, 1986 Inc., Clovis, New Mexico Clovis, New Mexico Section 4 Nonbanking Reserve Effective Applicant Company/Activity Bank date Chemical New York Penmark Investments Inc., New York November 20, 1986 Corporation, Chicago, Illinois New York, New York Norwest Corporation, acquire general insurance agency Minneapolis November 26, 1986 Minneapolis, Minnesota assets from Bayly, Martin, and Fay International, Inc., Fort Worth, Texas The Standard Life Assurance IF A, Incorporated, New York November 21, 1986 Company, Palatine, Illinois Edinburgh, Scotland Bank of Scotland, Edinburgh, Scotland Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 175 Sections 3 and 4 Bank(s)/Nonbanking Reserve Effective Applicant Company Bank date Barnett Banks of Florida, Inc. First City Bancorp, Inc., Atlanta November 28, 1986 Jacksonville, Florida Marietta, Georgia nonbanking activities BMR Bancorp, Inc., The Citizens Bank of Atlanta November 28, 1986 Decatur, Georgia Swainsboro, Swainsboro, Georgia nonbanking activities First of America Bank Premier Bancorporation, Inc., Chicago November 20, 1986 Corporation, Libertyville, Illinois Kalamazoo, Michigan Premier Life Insurance Company, Liberty ville, Illinois First of America Premier Bancorporation, Inc., Chicago November 20, 1986 Bancorporation—Illinois, Liberty ville, Illinois Inc., Premier Life Insurance Company, Kalamazoo, Michigan Liberty ville, Illinois Trustcorp, Inc., St. Joseph Bancorporation, Cleveland December 1, 1986 Toledo, Ohio South Bend, Indiana St. Joseph Mortgage Company, Inc., South Bend, Indiana Indiana Inc., Goshen, Indiana ORDERS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Reserve Effective Applicant Bank(s) Bank date Community Bank of Lunenburg, The Lunenburg County Bank, Richmond December 1, 1986 Kenbridge, Virginia Kenbridge, Virginia First Virginia Bank-Citizens, Peoples Bank of Pound, Richmond November 28, 1986 Clint wood, Virginia Pound, Virginia First Virginia Bank- First Virginia Bank-Surry, Richmond December 1, 1986 Commonwealth, Surry, Virginia Grafton, Virginia New Lowell State Bank, State Savings Bank, Chicago November 25, 1986 Lowell, Michigan Lowell, Michigan Security Bank of Richmond, Security Bank Imlay City, Chicago November 25, 1986 Richmond, Michigan Imlay City, Michigan Shelby County State Bank, Windsor State Bank, Chicago November 24, 1986 Shelbyville, Illinois Windsor, Illinois The Traders Bank, The Traders Interim Bank, Inc., Richmond November 26, 1986 Spencer, West Virginia Spencer, West Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

176 Federal Reserve Bulletin • February 1987 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. Independent Insurance Agents of America, et al. v. First National Bank of Blue Island Employee Stock Board of Governors, Nos. 86-1572, 1573, 1576 Ownership Plan v. Board of Governors, No. 85- (D.C. Cir., filed Oct. 24, 1986). 2615 (7th Cir., filed Sept. 23, 1985). Securities Industry Association v. Board of Gover- First National Bancshares II v. Board of Governors, nors, No. 86-2768 (D.D.C., filed Oct. 7, 1986). No. 85-3702 (6th Cir., filed Sept. 4, 1985). Independent Community Bankers Association v. McHuin v. Volcker, et al., No. 85-2170 WARB (W.D. Board of Governors, No. 86-5373 (8th Cir., filed Okl., filed Aug. 29, 1985). Oct. 3, 1986). Independent Community Bankers Associaton of South Jenkins v. Board of Governors, No. 86-1419 (D.C. Dakota v. Board of Governors, No. 84-1496 (D.C. Cir., filed July 18, 1986). Cir., filed Aug. 7, 1985). Securities Industry Association v. Board of Gover- Urwyler, et al. v. Internal Revenue Service, et al., No. nors, No. 86-1412 (D.C. Cir., filed July 14, 1986). 85-2877 (9th Cir., filed July 18, 1985). Adkins v. Board of Governors, No. 86-3853 (4th Cir., Johnson v. Federal Reserve System, et al., No. 86filed May 14, 1986). 4536 (5th Cir., filed July 16, 1985). Optical Coating Laboratory, Inc. v. United States, Wight, et al. v. Internal Revenue Service, et al., No. No. 288-86C (U.S. Claims Ct., filed May 6, 1986). 85-2826 (9th Cir., filed July 12, 1985). CBC, Inc. v. Board of Governors, No. 86-1001 (10th Cook v. Spillman, et al., No. 86-1642 (9th Cir., filed Cir., filed Jan. 2, 1986). July 10, 1985). Howe v. United States, et al., No. 86-1430 (1st Cir., Florida Bankers Association v. Board of Governors, filed Dec. 6, 1985). No. 84-3883 and No. 84-3884 (11th Cir., filed Feb. Myers, et al. v. Federal Reserve Board, No. 85-1427 15, 1985). (D. Idaho, filed Nov. 18, 1985). Florida Department of Banking v. Board of Gover- Souser, et al. v. Volcker, et al., No. 85-C-2370, et al. nors, No. 84-3831 (11th Cir., filed Feb. 15, 1985), (D. Colo., filed Nov. 1, 1985). and No. 84-3832 (11th Cir., filed Feb. 15, 1985). Podolak v. Volcker, No. C85-0456, et al. (D. Wyo., Lewis v. Volcker, et al., No. 86-3210 (6th Cir., filed filed Oct. 28, 1985). Jan. 14, 1985). Kolb v. Wilkinson, et al., No. C85-4184 (N.D. Iowa, Brown v. United States Congress, et al., No. 84-2887filed Oct. 22, 1985). 6(IG) (S.D. Cal., filed Dec. 7, 1984). Farmer v. Wilkinson, et al., No. 4-85-CIVIL-1448 (D. Melcher v. Federal Open Market Committee, No. 84- Minn., filed Oct. 21, 1985). 1335 (D.D.C., filed Apr. 30, 1984). Kurkowski v. Wilkinson, et al., No. CV-85-0-916 (D. Florida Bankers Association, et al. v. Board of Gover- Neb., filed Oct. 16, 1985). nors, Nos. 84-3269, 84-3270 (11th Cir., filed April Jensen v. Wilkinson, et al., No. 85-4436-S, et al. (D. 20, 1984). Kan., filed Oct. 10, 1985). Securities Industry Association v. Board of Gover- Alfson v. Wilkinson, et al., No. Al-85-267 (D. N.D., nors, No. 80-2614 (D.C. Cir., filed Oct. 24., 1980), filed Oct. 8, 1985). and No. 80-2730 (D.C. Cir., filed Oct. 24, 1980). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

177 Membership of the Board of Governors of the Federal Reserve System, 1913-87 Federal Reserve Date of initial Other dates and information relating Name District oath of office to membership2 Charles S. Hamlin Boston Aug. 10, 1914 Reappointed in 1916 and 1926. Served until Feb. 3, 1936.3 Paul M. Warburg New York .do Term expired Aug. 9, 1918. Frederic A. Delano Chicago .do Resigned July 21, 1918. W.P.G. Harding Atlanta .do Term expired Aug. 9, 1922. Adolph C. Miller San Francisco .do, Reappointed in 1924. Reappointed in 1934 from the Richmond District. Served until Feb. 3, 1936.3 Albert Strauss New York Oct. 26, 1918 Resigned Mar. 15, 1920. Henry A. Moehlenpah Chicago Nov. 10, 1919 Term expired Aug. 9, 1920. Edmund Piatt New York June 8, 1920 Reappointed in 1928. Resigned Sept. 14, 1930. David C. Wills Cleveland Sept. 29, 1920 Term expired Mar. 4, 1921. John R. Mitchell Minneapolis May 12, 1921 Resigned May 12, 1923. Milo D. Campbell Chicago Mar. 14, 1923 Died Mar. 22, 1923. Daniel R. Crissinger Cleveland May 1, 1923 Resigned Sept. 15, 1927. George R. James St. Louis May 14, 1923 Reappointed in 1931. Served until Feb. 3, 1936.4 Edward H. Cunningham...Chicago do Died Nov. 28, 1930. Roy A. Young Minneapolis Oct. 4, 1927 Resigned Aug. 31, 1930. Eugene Meyer New York Sept. 16, 1930 Resigned May 10, 1933. Wayland W. Magee Kansas City May 18, 1931 Term expired Jan. 24, 1933. Eugene R. Black Atlanta May 19, 1933 Resigned Aug. 15, 1934. M.S. Szymczak Chicago June 14, 1933 Reappointed in 1936 and 1948. Resigned May 31, 1961. J.J. Thomas Kansas City do Served until Feb. 10, 1936.3 Marriner S. Eccles San Francisco Nov. 15, 1934 Reappointed in 1936, 1940, and 1944. Resigned July 14, 1951. Joseph A. Broderick New York Feb. 3, 1936 Resigned Sept. 30, 1937. John K. McKee Cleveland do Served until Apr. 4, 1946.3 Ronald Ransom Atlanta do Reappointed in 1942. Died Dec. 2, 1947. Ralph W. Morrison Dallas Feb. 10, 1936 Resigned July 9, 1936. Chester C. Davis Richmond June 25, 1936 Reappointed in 1940. Resigned Apr. 15, 1941. Ernest G. Draper New York Mar. 30, 1938 Served until Sept. 1, 1950.3 Rudolph M. Evans Richmond Mar. 14, 1942 Served until Aug. 13, 1954.3 James K. Vardaman, Jr. ..St. Louis Apr. 4, 1946 Resigned Nov. 30, 1958. Lawrence Clayton Boston Feb. 14, 1947 Died Dec. 4, 1949. Thomas B. McCabe Philadelphia Apr. 15, 1948 Resigned Mar. 31, 1951. Edward L. Norton Atlanta Sept. 1, 1950 Resigned Jan. 31, 1952. Oliver S. Powell Minneapolis do Resigned June 30, 1952. Wm. McC. Martin, Jr New York April 2, 1951 Reappointed in 1956. Term expired Jan. 31, 1970. A.L. Mills, Jr San Francisco Feb. 18, 1952 Reappointed in 1958. Resigned Feb. 28, 1965. J.L. Robertson Kansas City do Reappointed in 1964. Resigned Apr. 30, 1973. C. Canby Balderston Philadelphia Aug. 12, 1954 Served through Feb. 28, 1966. Paul E. Miller Minneapolis Aug. 13, 1954 Died Oct. 21, 1954. Chas. N. Shepardson Dallas Mar. 17, 1955 Retired Apr. 30, 1967. G.H. King, Jr Atlanta Mar. 25, 1959 Reappointed in 1960. Resigned Sept. 18, 1963. George W. Mitchell Chicago Aug. 31, 1961 Reappointed in 1962. Served until Feb. 13, 1976.3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

178 APPOINTIVE MEMBERS1 Federal Reserve Date of initial Other dates and information relating Name District oath of office to membership2 J. Dewey Daane Richmond Nov. 29, 1963 Served until Mar. 8, 1974.3 Sherman J. Maisel ... San Francisco Apr. 30, 1965 Served through May 31, 1972. Andrew F. Brimmer. Philadelphia Mar. 9, 1966 Resigned Aug. 31, 1974. William W. Sherrill.. Dallas May 1, 1967 Reappointed in 1968. Resigned Nov. 15, 1971. Arthur F. Burns New York Jan. 31, 1970 Term began Feb. 1, 1970. Resigned Mar. 31, 1978. John E. Sheehan St. Louis Jan. 4, 1972 Resigned June 1, 1975. Jeffrey M. Bucher.... San Francisco June 5, 1972 Resigned Jan. 2, 1976. Robert C. Holland ... Kansas City June 11, 1973 Resigned May 15, 1976. Henry C. Wallich Boston Mar. 8, 1974 Resigned Dec. 15, 1986. Philip E. Cold well.... Dallas Oct. 29, 1974 Served through Feb. 29, 1980. Philip C. Jackson, Jr. Atlanta July 14, 1975 Resigned Nov. 17, 1978. J. Charles Partee Richmond Jan. 5, 1976 Served until Feb. 7, 1986.3 Stephen S. Gardner.. Philadelphia Feb. 13, 1976 Died Nov. 19, 1978. David M. Lilly Minneapolis June 1, 1976 Resigned Feb. 24, 1978. G. William Miller San Francisco Mar. 8, 1978 Resigned Aug. 6, 1979. Nancy H. Teeters.... Chicago Sept. 18, 1978 Served through June 27, 1984. Emmett J. Rice New York June 20, 1979 Resigned Dec. 31, 1986. Frederick H. Schultz Atlanta July 27, 1979 Served through Feb. 11, 1982. Paul A. Volcker Philadelphia Aug. 6, 1979 Lyle E. Gramley Kansas City May 28, 1980 Resigned Sept. 1, 1985. Preston Martin San Francisco Mar. 31, 1982 Resigned April 30, 1986. Martha R. Seger Chicago July 2, 1984 Wayne D. Angell Kansas City Feb. 7, 1986 Manuel H. Johnson.. Richmond Feb. 7, 1986 H. Robert Heller San Francisco Aug. 19, 1986 Chairmen4 Vice Chairmen* Charles S. Hamlin Aug. 10, 1914-Aug. 9, 1916 Frederic A. Delano Aug. 10, 1914-Aug. 9, 1916 W.P.G. Harding Aug. 10, 1916-Aug. 9, 1922 Paul M. Warburg Aug. 10, 1916-Aug. 9, 1918 Daniel R. Crissinger May 1, 1923-Sept. 15, 1927 Albert Strauss Oct. 26, 1918-Mar. 15, 1920 Roy A. Young Oct. 4, 1927-Aug. 31, 1930 Edmund Piatt July 23, 1920-Sept. 14, 1930 Eugene Meyer Sept. 16, 1930-May 10, 1933 J.J. Thomas Aug. 21, 1934-Feb. 10, 1936 Eugene R. Black May 19, 1933-Aug. 15, 1934 Ronald Ransom Aug. 6, 1936-Dec. 2, 1947 MarrinerS. Eccles Nov. 15, 1934-Jan. 31, 1948 C. Canby Balderston Mar. 11, 1955-Feb. 28, 1966 Thomas B. McCabe Apr. 15, 1948-Mar. 31, 1951 J.L. Robertson Mar. 1, 1966-Apr. 30, 1973 Wm. McC. Martin, Jr. ...Apr. 2, 1951-Jan. 31, 1970 George W. Mitchell May 1, 1973-Feb. 13, 1976 Arthur F. Burns Feb. 1, 1970-Jan. 31, 1978 Stephen S. Gardner Feb. 13, 1976-Nov. 19, 1978 G. William Miller Mar. 8, 1978-Aug. 6, 1979 Frederick H. Schultz July 27, 1979-Feb. 11, 1982 Paul A. Volcker Aug. 6, 1979- Preston Martin Mar. 31, 1982-Mar. 31, 1986 Manuel H. Johnson Aug. 22, 1986- EX-OFFICIO MEMBERS1 Secretaries of the Treasury Comptrollers of the Currency W.G. McAdoo Dec. 23, 1913-Dec. 15, 1918 John Skelton Williams ...Feb. 2, 1914-Mar. 2, 1921 Carter Glass Dec. 16, 1918-Feb. 1, 1920 Daniel R. Crissinger Mar. 17, 1921-Apr. 30, 1923 David F. Houston Feb. 2, 1920-Mar. 3, 1921 Henry M. Dawes May 1, 1923-Dec. 17, 1924 Andrew W. Mellon Mar. 4, 1921-Feb. 12, 1932 Joseph W. Mcintosh Dec. 20, 1924-Nov. 20, 1928 Ogden L. Mills Feb. 12, 1932-Mar. 4, 1933 J.W. Pole Nov. 21, 1928-Sept. 20, 1932 William H. Woodin Mar. 4, 1933-Dec. 31, 1933 J.F.T. O'Connor May 11, 1933-Feb. 1, 1936 Henry Morgenthau, Jr. ..Jan. 1, 1934-Feb. 1, 1936 1. Under the provisions of the original Federal Reserve Act, the composed of seven appointive members; that the Secretary of the Federal Reserve Board was composed of seven members, including Treasury and the Comptroller of the Currency should continue to five appointive members, the Secretary of the Treasury, who was ex- serve as members until Feb. 1, 1936, or until their successors were officio chairman of the Board, and the Comptroller of the Currency. appointed and had qualified; and that thereafter the terms of members The original term of office was ten years, and the five original should be fourteen years and that the designation of Chairman and appointive members had terms of two, four, six, eight, and ten years Vice Chairman of the Board should be for a term of four years. respectively. In 1922 the number of appointive members was in- 2. Date after words "Resigned" and "Retired" denotes final day of creased to six, and in 1933 the term of office was increased to twelve service. years. The Banking Act of 1935, approved Aug. 23, 1935, changed the 3. Successor took office on this date. name of the Federal Reserve Board to the Board of Governors of the 4. Chairman and Vice Chairman were designated Governor and Federal Reserve System and provided that the Board should be Vice Governor before Aug. 23, 1935. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1 Financial and Business Statistics CONTENTS WEEKLY REPORTING COMMERCIAL BANKS Assets and liabilities Domestic Financial Statistics A19 All reporting banks A20 Banks in New York City A21 Branches and agencies of foreign banks MONEY STOCK AND BANK CREDIT A22 Gross demand deposits—individuals, partnerships, and corporations A3 Reserves, money stock, liquid assets, and debt measures A4 Reserves of depository institutions, Reserve FINANCIAL MARKETS Bank credit A5 Reserves and borrowings—Depository A23 Commercial paper and bankers dollar institutions acceptances outstanding A5 Selected borrowings in immediately available A23 Prime rate charged by banks on short-term funds—Large member banks business loans A24 Interest rates—money and capital markets A25 Stock market—Selected statistics POLICY INSTRUMENTS A26 Selected financial institutions—Selected assets and liabilities A6 Federal Reserve Bank interest rates A7 Reserve requirements of depository institutions A8 Maximum interest rates payable on time and FEDERAL FINANCE savings deposits at federally insured institutions A9 Federal Reserve open market transactions A28 Federal fiscal and financing operations A29 U.S. budget receipts and outlays A30 Federal debt subject to statutory limitation FEDERAL RESERVE BANKS A30 Gross public debt of U.S. Treasury—Types and ownership A10 Condition and Federal Reserve note statements A31 U.S. government securities dealers— All Maturity distribution of loan and security Transactions holdings A32 U.S. government securities dealers—Positions and financing A33 Federal and federally sponsored credit MONETARY AND CREDIT AGGREGATES agencies—Debt outstanding A12 Aggregate reserves of depository institutions and monetary base SECURITIES MARKETS AND A13 Money stock, liquid assets, and debt measures CORPORATE FINANCE A15 Bank debits and deposit turnover A16 Loans and securities—All commercial banks A34 New security issues—State and local governments and corporations A35 Open-end investment companies—Net sales and COMMERCIAL BANKING INSTITUTIONS asset position 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 • February 1987 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 A44 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 SUMMARY STATISTICS SPECIAL TABLES A53 U.S. international transactions—Summary A70 Terms of lending at commercial banks, A54 U.S. foreign trade November 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 Q4 Q1 Q2 Q3 July Aug. Sept.' Oct. Nov. Reserves of depository institutions2 1 Total 12.5 13.1 17.8 22.9 25.3 19.7 11.5 13.7' 32.8 2 Required 11.5 12.3 19.8 23.9 26.3 24.2 12.0 13.4 27.7 3 Nonborrowed 10.4 19.1 17.6 23.2 27.3 16.8 8.4 17.9 35.4 4 Monetary base3 8.2 8.6 8.8 9.9 8.8 12.0 5.4 9.4' 12.8 Concepts of money, liquid assets, and debt4 5 Ml 10.7 7.7 15.8 17.3 16.6 20.6 9.6 14.0 20.9 6 M2 6.1 4.3 10.5' 11.1 12.8 11.2' 7.3 10.&- 6.7 7 M3 6.6 7.6 9.0 10.2' 13.0 9.1' 8.8 6.5' 5.6 8 L 9.5 8.4 7.0 8.5' 9.1 8.3' 8.6 6.5 n.a. 9 Debt 13.6' 15.4' 10.2' 12.(K 11.2' \2.9r 11.8 8.7 n.a. Nontransaction components 10 In M25 4.6 3.3 8.7 9.1 11.5' S.W 6.4 9.6' 1.9 11 In M3 only6 8.5 20.6 3.4 6.3 13.8' 14.7 -10.0' 1.2 Time and savings deposits Commercial banks 12 Savings7 3.2 1.9 11.8 25.5 22.9 30.6 36.0 41.7 37.9 13 Small-denomination time8 -1.6 5.3 -3.1 -9.0 -5.3 -12.6 -10.9 -15.8 -12.1 14 Large-denomination time910 14.1 18.5 -8.8 -2.5 -1.3' 7.7 -2.6 -10.2' 9.5 Thrift institutions 15 Savings7 7.5 3.1 20.9 23.6 22.9 18.2 16.1 26.5 28.3 16 Small-denomination time -2.9 6.6 2.6 -3.8 -.5 -6.0 -6.0 -11.3' -8.7 17 Large-denomination time9 5.2 10.0 11.0 2.7 8.7 2.2 -2.2 -13.0 -16.1 Debt components4 18 Federal 13.7 17.C 11.^ 14.5 14.7' 8.8 11.4 9.9 n.a. 19 Nonfederal 13.5r 15.(K 9.8' 11.3' 10.1' 14.1' 11.9 8.3 n.a. 20 Total loans and securities at commercial banks" 9.3 12.7 4.1 10.5' 13.0 13.8 13.0 2.2 8.9 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

A4 Domestic Financial Statistics • February 1987 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT Millions of dollars Monthly averages of daily figures Weekly averages of daily figures for week ending FFFaaaccctttooorrrsss 1986 1986 Sept. Oct. Nov. Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 11111 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 215,130 214,197 219,190 213,770 216,092 213,851 216,206 218,842 220,660 218,971 22222 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 188,598 188,195 193,043 187,677 189,717 188,083 189,770 192,168 193,626 194,251 33333 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 187,237 187,944 192,284 187,677 188,605 188,083 189,770 192,168 192,005 193,459 44444 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 1,361 251 759 0 1,112 0 0 0 1,621 792 55555 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 8,252 8,030 7,968 7,988 8,217 7,954 7,954 7,900 7,961 7,928 66666 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 8,047 7,975 7,867 7,988 7,973 7,954 7,954 7,900 7,829 7,829 77777 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 205 55 101 0 244 0 0 0 132 99 88888 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 99999 LLLLLoooooaaaaannnnnsssss 1,046 779 802 653 888 715 1,082 518 1,103 639 1111100000 FFFFFllllloooooaaaaattttt 734 560 974 761 628 342 572 1,164 1,416 587 1111111111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 16,500 16,633 16,403 16,690 16,642 16,757 16,827 17,092 16,555 15,566 1111122222 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk 11,084 11,084 11,084 11,084 11,084 11,084 11,084 11,084 11,084 11,084 1111133333 SSSSSpppppeeeeeccccciiiiiaaaaalllll dddddrrrrraaaaawwwwwiiiiinnnnnggggg rrrrriiiiiggggghhhhhtttttsssss ccccceeeeerrrrrtttttiiiiifffffiiiiicccccaaaaattttteeeee aaaaaccccccccccooooouuuuunnnnnttttt.................... 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5.018 5,018 5,018 1111144444 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccuuuuurrrrrrrrrreeeeennnnncccccyyyyy ooooouuuuutttttssssstttttaaaaannnnndddddiiiiinnnnnggggg 17.42CK 17,465 17,516 17.459 17,469 17,478 17,489 17,503 17,517 17,531 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 1111155555 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 201,433 202,301 205,069 203,045 202,751 201,937 202,793 204,686 205,566 205,493 1111166666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss 495 492 474 493 493 492 484 483 475 468 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss,,,,, wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 1111177777 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 5,677 3,305 3,117 2,701 3,552 3,332 2,919 3,730 3,696 2,474 1111188888 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 285 215 233 217 210 231 255 239 204 224 1111199999 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss 1,886 1,971 2,064 1,939 1,926 1,907 2,042 1,970 1,980 2,044 2222200000 OOOOOttttthhhhheeeeerrrrr 497 516 522 576 475 453 643 545 510 428 2222211111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 6,405 6,302 6,345 6,302 6,289 6,266 6,363 6,401 6,322 6,275 2222222222 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss22222 31,974 32,663 34,984 32,059 33,967 32,815 34,298 34,392 35,527 35,198 End-of-month figures Wednesday figures 1986 1986 Sept. Oct. Nov. Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 2222233333 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 219,358 215,993 221,673 216,106 221,974 214,647 218,943 220,267 226,011 219,141 2222244444 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 190,751 189,995 196,293 188,988 193,130 188,302 190,424 192,841 196,369 193,261 2222255555 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 184,437 189.995 194,876 188,988 188,055 188,302 190,424 192,841 191,850 191,627 2222266666 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 6,314 0 1,417 0 5,075 0 0 0 4,519 1,634 2222277777 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 9,856 7,954 8,177 7,988 8,877 7,954 7,954 7,829 8,087 8,215 2222288888 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 8,047 7,954 7,829 7,988 7,954 7,954 7,954 7,829 7,829 7,829 2222299999 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 1,809 0 348 0 923 0 0 0 258 386 3333300000 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 3333311111 LLLLLoooooaaaaannnnnsssss 879 806 557 638 2,261 807 3,502 572 3,980 481 3333322222 FFFFFllllloooooaaaaattttt 849 441 748 1.917 739 517 404 1,842 1,841 1,391 3333333333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 17,023 16,797 15,898 16.575 16,967 17,067 16,659 17,183 15,734 15,793 3333344444 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk 11,084 11,084 11,084 11.084 11,084 11,084 11,084 11,084 11,084 11,084 3333355555 SSSSSpppppeeeeeccccciiiiiaaaaalllll dddddrrrrraaaaawwwwwiiiiinnnnnggggg rrrrriiiiiggggghhhhhtttttsssss ccccceeeeerrrrrtttttiiiiifffffiiiiicccccaaaaattttteeeee aaaaaccccccccccooooouuuuunnnnnttttt ............... 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 3333366666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccuuuuurrrrrrrrrreeeeennnnncccccyyyyy ooooouuuuutttttssssstttttaaaaannnnndddddiiiiinnnnnggggg 17,438r 17,488 17,543 17,467 17,477 17,487 17,501 17,515 17,529 17,543 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 3333377777 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 200,630 202,517 206,904 203,417 202,404 202,242 203,296 205,528 205,415 206,786 3333388888 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss 492 485 459 493 492 491 483 476 469 459 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 3333399999 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 7,514 2,491 2,529 3,105 3,349 3,594 3,746 3,327 2,850 2,591 4444400000 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 342 303 225 240 206 238 272 234 174 337 4444411111 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss 1,681 1,744 1,744 1,717 1,717 1,743 1,744 1,726 1,727 1,802 4444422222 OOOOOttttthhhhheeeeerrrrr 663 479 425 625 439 455 526 524 486 430 4444433333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 6,463 6,342 6,480 6,138 6,212 6,081 6,233 6,262 6,223 6,094 4444444444 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss22222 35,113 35,222 36,552 33,941 40,735 33,392 36,247 35,808 42,298 34,287 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 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 1986 Dec. Dec. Dec. Apr. May June July Aug. Sept. Oct. 1 Reserve balances with Reserve Banks1 21,138 21,738 27,620 28,892 28,279 29,499 30,313 30,165 31,922 32,947 2 Total vault cash2 20,755 22,316 22,956 22,231 22,474 22,805 23,098 23,451 23,384 23,753 3 Vault cash used to satisfy reserve requirements3 . 17,908 18,958 20,522 19,990 20,140 20,439 20,716 21,112 21,267 21,676 4 Surplus vault cash4 2,847 3,358 2,434 2,241 2,334 2,366 2,381 2,339 2,117 2,078 5 Total reserves5 38,894 40,696 48,142 48,882 48,419 49,938 51,029 51,277 53,189 54,623 6 Required reserves 38,333 39,843 47,085 48,081 47,581 49,007 50,118 50,538 52,463 53,877 7 Excess reserve balances at Reserve Banks6 561 853 1,058 801 838 931 910 740 726 746 8 Total borrowings at Reserve Banks 774 3,186 1,318 893 876 803 741 872 1,008 841 9 Seasonal borrowings at Reserve Banks 96 113 56 73 94 108 116 144 137 99 10 Extended credit at Reserve Banks7 2 2,604 499 634 584 531 378 465 570 497 Biweekly averages of daily figures for weeks ending 1986 Aug. 13 Aug. 27 Sept. 10 Sept. 24 Oct. 8 Oct. 22 Nov. 5 Nov. 19' Dec. 3 Dec. 17 11 Reserve balances with Reserve Banks1 30,185 29,758r 31,527 32,103 32,156 33,007 33,557' 34,945 35,215 36,511 12 Total vault cash2 23,323 23,792 22,671 23,623 24,015 23,955 23,208 23,405 23,871 23,458 13 Vault cash used to satisfy reserve requirements3 . 20,992 21,388 20,534 21,567 21,790 21,914 21,204 21,570 21,809 21,725 14 Surplus vault cash4 2,331 2,404 2,137 2,056 2,225 2,041 2,004 1,835 2,062 1,733 15 Total reserves5 51,177 51,146 52,061 53,670 53,946 54,921 54,761' 56,515 57,024 58,235 16 Required reserves 50,592 50,279 51,268 52,964 53,287 54,170 53,947' 55,599 55,867 57,510 17 Excess reserve balances at Reserve Banks6 585 867 793 706 660 751 814' 916 1,157 725 18 Total borrowings at Reserve Banks 759 910 1,111 981 902 771 899 811 610 514 19 Seasonal borrowings at Reserve Banks 134 152 149 135 125 88 93 68 63 34 20 Extended credit at Reserve Banks7 373 515 592 569 538 488 476 437 368 310 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 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Member Banks1 Averages of daily figures, in millions of dollars 1986 week ending Monday BByy mmaattuurriittyy aanndd ssoouurrccee Oct. 20 Oct. 27 Nov. 3 Nov. 10 Nov. 17 Nov. 24 Dec. 1 Dec. 8 Dec. 15 Federal funds purchased, repurchase agreements, and other selected borrowing in immediately available funds From commercial banks in the United States 1 For one day or under continuing contract 72,919' 68,940 72,150 78,023 75,888 75,244 80,123 84,359 81,851 2 For all other maturities 9,966 9,403 9,465 9,448 9,135 8,448 9,088 77,,772288 77,,441188 From other depository institutions, foreign banks and foreign official institutions, and United States government agencies 3 For one day or under continuing contract 40,503 38,472 36,804 40,272' 39,350 38,907 35,348 39,599 38,279 4 For all other maturities 6,142 5,824 5,698 5,330 5,085 4,941 5,702 5,236 5,199 Repurchase agreements on United States government and federal agency securities in immediately available funds Brokers and nonbank dealers in securities 5 For one day or under continuing contract 13,711 13,586 11,847 11,596 11,311 11,181 9,276 11,220 10,114 6 For all other maturities 8,769 9,455 9,829 9,652 10,537 10,396 11,236 9,039 9,630 All other customers 7 For one day or under continuing contract 27,179 28,346 29,725 28,079' 28,156 29,541 28,018 29,046 29,165 8 For all other maturities 10,432 10,810 10,915 11,048 10,824 10,711 14,211 10,426 10,374 MEMO; Federal funds loans and resale agreements in immediately available funds in maturities of one day or under continuing contract 9 To commercial banks in the United States 29,987 26,244 29,120 28,968 28,506 27,235 30,473 26,230 26,266 10 To all other specified customers2 10,917 10,568 10,261 10,482 10,245 10,070 10,631 9,916 10,064 Digitized for FR1. ABSanEksR w ith assets of $1 billion or more as of Dec. 31, 1977. 2. Brokers and nonbank dealers in securities; other depository institutions; http://fraser.stlouisfed.org/ foreign banks and official institutions; and United States government agencies. Federal Reserve Bank of St. Louis

A6 Domestic Financial Statistics • February 1987 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 12/26/86 date rate 12/26/86 rate 12/26/86 rate 12/26/86 rate Boston SVi 8/21/86 6 5Vi 6 6 Vi 7 7Vi 8/21/86 New York 8/21/86 8/21/86 Philadelphia 8/22/86 8/22/86 Cleveland 8/21/86 8/21/86 Richmond 8/21/86 8/21/86 Atlanta 8/21/86 8/21/86 Chicago 8/21/86 8/21/86 St. Louis 8/22/86 8/22/86 Minneapolis 8/21/86 8/21/86 Kansas City .... 8/21/86 8/21/86 Dallas 8/21/86 8/21/86 San Francisco... 5Vi 8/21/86 6 5 Vi 6 7 7V4 8/21/86 Range of rates in recent years3 Range (or F.R. Range (or F.R. Range(or F.R. Effective date A le ll v e F l . s R - . B o a f n k Effective A le l v l e F l) . — R. Ba of n k Effective date A le l v l e F l) . — R. Ba of n k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1973 7Vi IVi 1978-— Aug. 21 73/4 m 1982— July 20 llVi-12 11 Vi 1974— Apr. 25 m-% 8 Sept. 22 8 8 23 llVi llVi 30 8 8 Oct. 16 8-8 Vi 8VS Aug. 2 11—11 Vi 11 Dec. 9 7V+-8 m 20 8Vi 81/! 3 11 11 16 73/4 73/4 Nov. 1 8>/2-9>/2 91/2 16 lOVi lOVi 9Vi 9 Vi 27 10-10'/! 10 1975— Jan. 6 7V4-73/4 73/4 30 10 10 10 7!/4-73/4 71/4 1979--July 20 10 10 Oct. 12 9Vi-10 9Vi 24 71/4 7V4 AAuugg.. 17 IO-IOV2 10>/2 13 9Vi 9Vi Feb. 5 6V4-7V4 63/4 20 lOVi 10V^ Nov. 22 9-9 Vi 9 7 63/4 63/4 SSeepptt.. 19 10>/>-ll 11 26 9 9 Mar. 10 6'/4-63/4 6V4 21 11 11 Dec. 14 8/2-9 9 14 6V4 6V4 Oct. 8 11-12 12 15 8'/2-9 8Vi May 16 6-61/4 6 10 12 12 17 8'/> 8Vi 23 6 6 1980-- Feb. 15 12-13 13 1984— Apr. 9 8Vi-9 9 1976— Jan. 19 51/2-6 5'/> 19 13 13 13 9 9 23 SVi SVi May 29 12-13 13 Nov. 21 8Vi-9 8Vi Nov. 22 51/4-5 Vi 5V4 30 12 12 26 8Vi 8V2 26 51/4 51/4 June 13 11-12 11 Dec. 24 8 8 16 11 11 1977— Aug. 30 5V4-53/4 5>/4 JJuullyy 28 10-11 10 1985— May 20 7Vi-8 7Vi 31 5'/4-53/4 53/4 29 10 10 24 7Vi 71/2 Sept. 2 53/4 53/4 Sept. 26 11 11 Oct. 26 6 6 Nov. 1/ 12 12 1986— Mar. 7 7-7 Vi 7 Dec. 5 12-13 13 10 7 7 1978— Jan. 9 6-6/2 6 Vi 8 13 13 Apr. 21 m-i 6Vi 20 6/2 6</2 23 6'/i 6Vi May 11 6Vi-7 7 1981-— May 5 13-14 14 July 11 6 6 12 7 7 8 14 14 Aug. 21 5/2-6 5</> July 3 1-1 Vi 7'/4 Nov. 2 13-14 13 22 5'/! 5Vi JJuullyy 1100 71/4 7</4 6 13 13 Dec. 4 12 12 In effect Dec. 26, 1986 5Vi 5Vi 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 INSTITUTIONS' 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 oo ff 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 demand2 Net transaction accounts1 7 12/30/76 $0-$36.7 million 3 12/31/85 $2 million $10 million 9 Vi 12/30/76 1122 1122//3311//8855 $10 million-$100 million 113/4 12/30/76 $100 million-$400 million 123/4 12/30/76 Nonpersonal time deposits9 Over $400 million 161/4 12/30/76 By original maturity Less than IV2 years 3 10/6/83 Time and savings2^ 1V2 years or more 0 10/6/83 SSaavviinnggss 3 3/16/67 Eurocurrency liabilities Time4 AAllll ttyyppeess 3 11/13/80 $0 million-$5 million, by maturity 30-179 days 3 3/16/67 180 days to 4 years 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 2l/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 was established at $2.4 requirements for reserve city banks and for other banks. Reserve cities were million. Effective with the reserve computation period beginning Dec. 31, 1985, designated under a criterion adopted effective Nov. 9, 1972, by which a bank the amount of the exemption was established at $2.6 million. Effective Dec. 30, having net demand deposits of more than $400 million was considered to have the 1986, the amount of the exemption is $2.5 million. In determining the reserve character of business of a reserve city bank. The presence of the head office of requirements of a depository institution, the exemption shall apply in the such a bank constituted designation of that place as a reserve city. Cities in which following order: (1) nonpersonal money market deposit accounts (MMDAs) there were Federal Reserve Banks or branches were also reserve cities. Any described in 12 CFR section 204.2 (d)(2); (2) net NOW accounts (NOW accounts banks having net demand deposits of $400 million or less were considered to have less allowable deductions); (3) net other transaction accounts; and (4) nonpersonal the character of business of banks outside of reserve cities and were permitted to time deposits or Eurocurrency liabilities starting with those with the highest maintain reserves at ratios set for banks not in reserve cities. reserve ratio. With respect to NOW accounts and other transaction accounts, the Effective Aug. 24, 1978, the Regulation M reserve requirements on net balances exemption applies only to such accounts that would be subject to a 3 percent due from domestic banks to their foreign branches and on deposits that foreign reserve requirement. branches lend to U.S. residents were reduced to zero from 4 percent and 1 percent 6. For nonmember banks and thrift institutions that were not members of the respectively. The Regulation D reserve requirement of borrowings from unrelated Federal Reserve System on or after July 1, 1979, a phase-in period ends Sept. 3, banks abroad was also reduced to zero from 4 percent. 1987. For banks that were members on or after July 1, 1979, but withdrew on or Effective with the reserve computation period beginning Nov. 16, 1978, before Mar. 31, 1980, the phase-in period established by Public Law 97-320 ends domestic deposits of Edge corporations were subject to the same reserve on Oct. 24, 1985. For existing member banks the phase-in period of about three requirements as deposits of member banks. years was completed on Feb. 2, 1984. All new institutions will have a two-year 3. Negotiable order of withdrawal (NOW) accounts and time deposits such as phase-in beginning with the date that they open for business, except for those Christmas and vacation club accounts were subject to the same requirements as institutions that have total reservable liabilities of $50 million or more. savings deposits. 7. Transaction accounts include all deposits on which the account holder is The average reserve requirement on savings and other time deposits before permitted to make withdrawals by negotiable or transferable instruments, payimplementation of the Monetary Control Act had to be at least 3 percent, the ment orders of withdrawal, and telephone and preauthorized transfers (in excess minimum specified by law. of three per month) for the purpose of making payments to third persons or others. 4. Effective Nov. 2, 1978, a supplementary reserve requirement of 2 percent However, MMDAs and similar accounts offered by institutions not subject to the was imposed on large time deposits of $100,000 or more, obligations of affiliates, rules that permit no more than six preauthorized, automatic, or other transfers per and ineligible acceptances. This supplementary requirement was eliminated with month of which no more than three can be checks—are not transaction accounts the maintenance period beginning July 24, 1980. (such accounts are savings deposits subject to time deposit reserve requirements.) Effective with the reserve maintenance period beginning Oct. 25, 1979, a 8. The Monetary Control Act of 1980 requires that the amount of transaction marginal reserve requirement of 8 percent was added to managed liabilities in accounts against which the 3 percent reserve requirement applies be modified excess of a base amount. This marginal requirement was increased to 10 percent annually by 80 percent of the percentage increase in transaction accounts held by beginning Apr. 3, 1980, was decreased to 5 percent beginning June 12, 1980, and all depository institutions determined as of June 30 each year. Effective Dec. 31, was eliminated beginning July 24, 1980. Managed liabilities are defined as large 1981, the amount was increased accordingly from $25 million to $26 million; time deposits, Eurodollar borrowings, repurchase agreements against U.S. effective Dec. 30, 1982, to $26.3 million; effective Dec. 29, 1983, to $28.9 million; government and federal agency securities, federal funds borrowings from non- effective Jan. 1, 1985, to $29.8 million; and effective Dec. 31, 1985, to $31.7 member institutions, and certain other obligations. In general, the base for the million. Effective Dec. 30, 1986, the amount was increased to $36.7 million. marginal reserve requirement was originally the greater of (a) $100 million or (b) 9. In general, nonpersonal time deposits are time deposits, including savings the average amount of the managed liabilities held by a member bank, Edge deposits, that are not transaction accounts and in which a beneficial interest is corporation, or family of U.S. branches and agencies of a foreign bank for the two held by a depositor that is not a natural person. Also included are certain reserve computation periods ending Sept. 26, 1979. For the computation period transferable time deposits held by natural persons, and certain obligations issued beginning Mar. 20, 1980, the base was lowered by (a) 7 percent or (b) the decrease to depository institution offices located outside the United States. For details, see in an institution's U.S. office gross loans to foreigners and gross balances due section 204.2 of Regulation D. from foreign offices of other institutions between the base period (Sept. 13-26, 1979) and the week ending Mar. 12, 1980, whichever was greater. For the NOTE. Required reserves must be held in the form of deposits with Federal computation period beginning May 29, 1980, the base was increased by V/i Reserve Banks or vault cash. Nonmembers may maintain reserve balances with a percent above the base used to calculate the marginal reserve in the statement Federal Reserve Bank indirectly on a pass-through basis with certain approved week of May 14-21, 1980. In addition, beginning Mar. 19, 1980, the base was institutions. reduced to the extent that foreign loans and balances declined. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Financial Statistics • February 1987 1.16 MAXIMUM INTEREST RATES PAYABLE on Time and Savings Deposits at Federally Insured Institutions' Percent per annum Commercial banks mut S u a al v i s n a g v s i n a g n s d b l a o n a k n s a ( s t s h o r c if i t a t i i n o s n t s it u a t n io d n s)1 In effect Dec. 31, 1986 In effect Dec. 31, 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 m b 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 ( ( ( 2 4 3 ) ) ) 12 4 / 1 1 / / 1 4 1 / / / 8 8 8 6 2 6 ( ( ( 4 2 3 ) ) ) 12 4 / 1 1 / / 1 4 1 / / / 8 8 8 6 2 6 4 7 T im 31 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 on various categories of deposits were account with a required initial balance of $2,500 and an average maintenance removed. For information regarding previous interest rate ceilings on all catego- balance of $2,500 not subject to interest rate restrictions. Effective Jan. 1, 1985, ries of accounts see earlier issues of the FEDERAL RESERVE BULLETIN, the the minimum denomination and average balance maintenance requirements was Federal Home Loan Bank Board Journal, and the Annual Report of the Federal lowered to $1,000. Effective Jan. 1,1986, the minimum denomination and average Deposit Insurance Corporation. balance maintenance requirements were removed. No minimum maturity period 2. Effective Apr. 1, 1986, the interest rate ceiling on savings deposits was is required for this account, but depository institutions must reserve the right to removed. Before Apr. 1, 1986, savings deposits were subject to an interest rate require seven days, notice before withdrawals. ceiling of 5V2 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 Vi 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'/4 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 1986 TTyyppee ooff ttrraannssaaccttiioonn 11998833 11998844 11998855 Apr. May June July Aug. Sept. Oct. U.S. GOVERNMENT SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 18,888 20,036 22,214 2,988 3,196 1,402 886677 2,940 861 992288 2 Gross sales 3,420 8,557 4,118 0 0 0 0 0 0 0 3 Exchange 0 0 0 0 0 0 0 0 0 0 4 Redemptions 2,400 7,700 3,500 0 0 0 0 0 0 0 Others within 1 year 5 Gross purchases 484 1,126 1,349 0 0 0 0 0 0 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shift 18,887 16,354 19,763 447 1,847 1,152 579 1,715 1,053 974 8 Exchange -16,553 -20,840 -17,717 -1,129 -1,819 -1,957 -1,253 -4,087 -1,892 -529 9 Redemptions 87 0 0 0 0 0 0 0 0 0 1 to 5 years 10 Gross purchases 1,896 1,638 2,185 0 0 0 00 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 -447 -1,532 -1,152 -386 -1,194 -1,053 -969 13 Exchange 11,641 16,039 13,853 1,134 1,019 1,957 1,253 2,587 1,892 529 5 to 10 years 14 Gross purchases 890 536 458 0 0 0 00 0 0 00 15 Gross sales 0 300 100 0 0 0 0 0 0 0 16 Maturity shift -2,450 -2,371 -1,857 -5 -315 0 -193 -520 0 -5 17 Exchange 2,950 2,750 2,184 0 500 0 0 1,000 0 0 Over 10 years 18 Gross purchases 383 441 293 0 0 0 0 0 0 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shift -904 -275 -447 0 0 0 0 0 0 0 21 Exchange 1,962 2,052 1,679 0 300 0 0 500 0 0 All maturities 22 Gross purchases 22,540 23,776 26,499 2,988 3,1% 1,402 867 2,940 861 928 23 Gross sales 3,420 8,857 4,218 0 0 0 0 0 0 0 24 Redemptions 2,487 7,700 3,500 0 0 0 0 0 0 0 Matched transactions 25 Gross sales 578,591 808,986 866,175 109,253 62,663 80,219 70,928 60,460 73,179 77,262 26 Gross purchases 576,908 810,432 865.968 103,957 67,147 80,674 69,659 60,011 70,817 81,892 Repurchase agreements 27 Gross purchases 105,971 127,933 134,253 21,156 12,395 5,640 1188,,665577 0 14,717 55,,667700 28 Gross sales 108,291 127,690 132,351 13,634 19,917 5,640 18,657 0 8,403 11,984 29 Net change in U.S. government securities 12,631 8,908 20,477 5,214 158 1,857 -403 2,491 4,814 -756 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 00 00 00 00 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 292 256 162 0 50 0 * 90 * 93 Repurchase agreements 33 Gross purchases 8,833 11,509 2222,,118833 33,,336699 33,,113355 11,,669911 44,,998844 00 22,,667788 995522 34 Gross sales 9,213 11,328 20,877 1,955 4,567 1,691 4,984 0 869 2,761 35 Net change in federal agency obligations -672 -76 1,144 1,432 -1,482 0 # -90 1,809 -1,902 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 6,647 -1,324 1,857 --440033 2,401 6,623 --22,,665588 NOTE. Sales, redemptions, and negative figures reduce holdings of the System Open Market Account; all other figures increase such holdings. Details may not add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Financial Statistics • February 1987 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1986 1986 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 Sept. Oct. Nov. Consolidated condition statement ASSETS 1 Gold certificate account 11,084 11,084 11,084 11,084 11,084 11,084 11,084 11,084 2 Special drawing rights certificate account 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 3 Coin 507 525 506 510 508 507 508 507 Loans 4 To depository institutions 807 3,502 572 3,980 481 879 806 557 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 7,954 7,954 7,829 7,829 7,829 8,047 77,,995544 7,829 8 Held under repurchase agreements 0 0 0 258 386 1,809 0 348 U.S. government securities Bought outright 9 Bills 95,929 98,051 100,468 98,000 97,777 92,064 9977,,662222 101,026 10 Notes 66,597 66,597 66,597 68,126 68,126 66,597 66,597 68,126 11 Bonds 25,776 25,776 25,776 25,724 25,724 25,776 25,776 25,724 12 Total bought outright1 188,302 190,424 192,841 191,850 191,627 184,437 189,995 194,876 13 Held under repurchase agreements 0 0 0 4,519 1,634 6,314 0 1,417 14 Total U.S. government securities 188,302 190,424 192,841 196,369 193,261 190,751 189,995 196,293 15 Total loans and securities 197,063 201,880 201,242 208,436 201,957 201,486 198,755 205,027 16 Items in process of collection 6,091 6,812 7,127 9,381 7,818 9,125 6,104 4,721 17 Bank premises 649 649 648 651 654 647 649 654 Other assets 18 Denominated in foreign currencies2 9,156 9,134 9,140 9,145 9,095 9,126 9,133 9,179 19 All other3 7,262 6,876 7,395 5,938 6,044 7,250 7,015 6,065 20 Total assets 236,830 241,978 242,160 250,163 242,178 244,243 238,266 242,255 LIABILITIES 21 Federal Reserve notes 185,753 186,802 188,994 188,865 190,210 184,191 186,022 190,327 Deposits 22 To depository institutions 35,135 37,991 37,534 44,025 36,089 36,794 36,966 38,296 23 U.S. Treasury—General account 3,594 3,746 3,327 2,850 2,591 7,514 2,491 2,529 24 Foreign—Official accounts 238 272 234 174 337 342 303 225 25 Other 455 526 524 486 430 663 479 425 26 Total deposits 39,422 42,535 41,619 47,535 39,447 45,313 40,239 41,475 27 Deferred credit items 5,574 6,408 5,285 7,540 6,427 8,276 5,663 3,973 28 Other liabilities and accrued dividends4 2,067 2,258 2,245 2,110 2,074 2,193 2,275 2,242 29 Total liabilities 232,816 238,003 238,143 246,050 238,158 239,973 234,199 238,017 CAPITAL ACCOUNTS 30 Capital paid in 1,853 1,858 1,860 1,859 1,860 1,849 1,854 1,860 31 Surplus 1,781 1,781 1,781 1,781 1,781 1,780 1,781 1,781 32 Other capital accounts 380 336 376 473 379 641 432 597 33 Total liabilities and capital accounts 236,830 241,978 242,160 250,163 242,178 244,243 238,266 242,255 34 MEMO: Marketable U.S. government securities held in custody for foreign and international account 166,086 164,174 164,654 164,518 164,567 163,236 164,020 164,411 Federal Reserve note statement 35 Federal Reserve notes outstanding 227,605 227,859 228,750 229,916 231,208 223,928 227,605 231,281 36 LESS: Held by bank 41,852 41,057 39,756 41,051 40,998 39,737 41,583 40,954 37 Federal Reserve notes, net 185,753 186,802 188,994 188,865 190,210 184,191 186,022 190,327 Collateral held against notes net: 38 Gold certificate account 11,084 11,084 11,084 11,084 11,084 11,084 11,084 11,084 39 Special drawing rights certificate account 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. government and agency securities 169,651 170,700 172,892 172,763 174,108 168,089 169,920 174,225 42 Total collateral 185,753 186,802 188,994 188,865 190,210 184,191 186,022 190,327 1. Includes securities loaned—fully guaranteed by U.S. government securities 4. Includes exchange-translation account reflecting the monthly revaluation at pledged with Federal Reserve Banks—and excludes (if any) securities sold and market exchange rates of foreign-exchange commitments. scheduled to be bought back under matched sale-purchase transactions. NOTE: Some of these data also appear in the Board's H.4.1 (503) release. For 2. Assets shown in this line are revalued monthly at market exchange rates. address, see inside front cover. 3. Includes special investment account at Chicago of Treasury bills maturing within 90 days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holdings Millions of dollars Wednesday End of month TTTyyypppeee aaannnddd mmmaaatttuuurrriiitttyyy gggrrrooouuupppiiinnngggsss 1986 1986 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 Sept. 30 Oct. 31 Nov. 28 1 Loans—Total 807 3,502 572 3,980 481 879 806 557 2 Within 15 days 802 3,470 539 3,976 471 855 783 545 3 16 days to 90 days 5 32 33 4 10 24 23 12 4 91 days to 1 year 0 0 0 0 0 0 0 0 5 Acceptances—Total 0 0 0 0 0 0 0 0 6 Within 15 days 0 0 0 0 0 0 0 0 7 16 days to 90 days 0 0 0 0 0 0 0 0 8 91 days to 1 year 0 0 0 0 0 0 0 0 9 U.S. government securities—Toted 188,302 190,424 192,841 196,369 193,261 190,751 189,995 196,293 10 Within 15 days' 9,673 11,371 7,567 14,6% 11,263 11,681 6,964 7,625 11 16 days to 90 days 46,627 45,279 50,035 47,200 49,947 46,290 48,533 54,077 12 91 days to 1 year 56,915 59,131 60,596 58,950 56,528 57,693 59,855 59,068 13 Over 1 year to 5 years 36,703 36,259 36,259 37,006 37,006 36,698 36,259 37,006 14 Over 5 years to 10 years 15,575 15,575 15,575 15,451 15,451 15,580 15,575 15,451 15 Over 10 years 22,809 22,809 22,809 23,066 23,066 22,809 22,809 23,066 16 Federal agency obligations—Total 7,954 7,954 7,829 8,087 8,215 9,856 7,954 8,177 17 Within 15 days' 279 125 30 506 691 2,118 279 653 18 16 days to 90 days 940 1,064 1,094 876 789 755 940 851 19 91 days to 1 year 1,360 1,390 1,330 1,330 1,438 1,502 1,360 1,376 20 Over 1 year to 5 years 3,808 3,808 3,808 3,808 3,730 3,905 3,808 3,730 21 Over 5 years to 10 years 1,193 1,193 1,193 1,193 1,193 1,152 1,193 1,193 22 Over 10 years 374 374 374 374 374 424 374 374 1. Holdings under repurchase agreements are classified as maturing within 15 days in accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Financial Statistics • February 1987 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE Billions of dollars, averages of daily figures 1986 11998822 11998833 11998844 11998855 IItteemm DDeecc.. DDeecc.. DDeecc.. DDeecc.. Apr. May June July Aug. Sept. Oct. Nov. Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CCHHAANNGGEESS IINN RREESSEERRVVEE RREEQQUUIIRREEMMEENNTTSS11 11 TToottaall rreesseerrvveess22 34.28 36.14 39.51 45.61 47.28 48.58 49.45 50.49 51.32 51.81 52.40 53.84 22 NNoonnbboorrrroowweedd rreesseerrvveess 33.65 35.36 36.32 44.29 46.38 47.70 48.64 49.75 50.45 50.80 51.56 53.09 33 NNoonnbboorrrroowweedd rreesseerrvveess pplluuss eexxtteennddeedd ccrreeddiitt33 33.83 35.37 38.93 44.79 47.02 48.29 49.17 50.13 50.91 51.37 52.06' 53.50 44 RReeqquuiirreedd rreesseerrvveess 33.78 35.58 38.66 44.55 46.47 47.74 48.51 49.58 50.58 51.08 51.66' 52.84 55 MMoonneettaarryy bbaassee44 170.04 185.39 199.17 216.72 222.36 224.90 226.63 228.30 230.59 231.63 233.44 235.93 Not seasonally adjusted 6 Total reserves2 35.01 36.86 40.57 46.84 47.94 47.71 49.20 50.32 50.62 51.55 52.34 54.12 7 Nonborrowed reserves 34.37 36.09 37.38 45.52 47.04 46.84 48.40 49.58 49.75 50.54 51.50 53.37 8 Nonborrowed reserves plus extended credit3 34.56 36.09 39.98 46.02 47.68 47.42 48.93 49.96 50.22 51.11 52.00 53.79 9 Required reserves 34.51 36.30 39.71 45.78 47.14 46.87 48.27 49.41 49.88 50.82 51.60' 53.12 10 Monetary base4 173.07 188.66 202.34 220.36 222.13 223.61 227.04 230.02 230.76 231.51 233.04 236.92 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS5 11 Total reserves2 41.85 38.89 40.70 48.14 48.88 48.42 49.94 51.03 51.28 53.19 54.62 56.41 12 Nonborrowed reserves 41.22 38.12 37.51 46.82 47.99 47.54 49.14 50.29 50.41 52.18 53.78 55.66 13 Nonborrowed reserves plus extended credit3 41.41 38.12 40.09 47.41 48.22 48.24 49.81 50.68 50.90 52.76 54.15 56.16 14 Required reserves 41.35 38.33 39.84 47.09 48.08 47.58 49.01 50.12 50.54 52.46 53.88' 55.41 15 Monetary base4 180.42 192.26 204.18 223.53 224.88 226.12 229.68 232.55 233.32 235.07 237.26 241.28 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.. AAuugg.. SSeepptt.. OOcctt.. NNoovv.. Seasonally adjusted 1 Ml 479.9 527.1 558.5 626.6 687.6 693.1 701.2 713.4 ? M2 1,952.6 2,186.0 2,373.8 2,566.5 2,724.3' 2,740.8' 2,764.9' 2,780.1 M3 2,443.5 2,697.3 2,986.5 3,201.2 3,400.7' 3,425.5' 3,444.5' 3,460.6 4 L 2,850.1 3,162.7 3,532.4 3,839.5 4,030.7' 4,059.6' 4,082.2 n.a. 5 Debt 4,661.7' 5,210.1' 5,950.0r 6,771.8' 7,306.2' 7,375.8' 7,427.9 n.a. Ml components 6 Currency2 134.3 148.3 158.5 170.6 179.0 179.7 181.2 182.2 7 Travelers checks3 4.3 4.9 5.2 5.9 6.5 6.5 6.4 6.4 8 Demand deposits4 237.9 242.7 248.4 271.5 291.8 292.2 293.2 298.4 9 Other checkable deposits5 103.4 131.3 146.3 178.6 210.4 214.8 220.4 226.4 Nontransactions components 10 In M26 1,472.7 1,658.9 1,815.4 1,939.9 2,036.7' 2,047.6' 2.063.7' 2,066.7 11 In M3 only7 490.9 511.3 612.7 634.6 676.4' 684.7' 679.5' 680.5 Savings deposits9 \? Commercial Banks 163.7 133.4 122.3 112244..55 136.8 114400..99 114455..88 115500..44 13 Thrift institutions 194.2 173.2 167.3 179.1 200.8 203.5 208.0 212.8 Small denomination time deposits9 14 Commercial Banks 380.4 351.1 387.2 384.1 376.0 372.6 367.7 363.9 15 Thrift institutions 472.4 434.1 500.3 496.2 501.2 498.7 494.0' 490.4 Money market mutual funds 16 General purpose and broker/dealer 185.2 138.2 167.5 176.5 200.5 202.2 206.7 206.6 17 Institution-only 51.1 43.2 62.7 64.6 80.8 84.4 84.5 84.4 Large denomination time deposits10 18 Commercial Banks11 262.1 228.7 263.7 279.2 282.C 281.4' 279.2' 281.6 19 Thrift institutions 65.8 101.1 150.2 157.3 166.1 165.8 164.0 161.8 Debt components 70 Federal debt 979.7 1,172.8 1,367.6^ 1,587.0 1,725.1' 1,741.6' 11,,775555..99 n.a. 21 Non-federal debt 3,682.1 4,037.3' 4,582.4' 5,184.8' 5,581.8' 5,634.2' 5,672.1 n.a. Not seasonally adjusted ?? Ml 490.9 538.8 570.5 639.9 684.6 690.7 698.4 714.9 ?3 M2 1,958.6 2,192.8 2,380.8 2,574.7 2,719.2' 2,731.5' 2,758.9' 2,778.0 74 M3 2,453.3 2,707.9 2,997.8 3,213.9 3,395.4' 3,418.2' 3,440.4' 3,464.2 L 2,856.4 3,169.3 3,537.6 3,845.7 4,027.0' 4,054.5' 4,078.1 n.a. 26 Debt 4,655.8 5,204.5' 5,944.2' 6,765.2' 7,276.0' 7,354.0' 7,410.4 n.a. Ml components 27 Currency2 136.5 150.5 160.9 173.1 179.9 179.6 180.9 183.2 28 Travelers checks3 4.1 4.6 4.9 5.5 7.3 6.9 6.5 6.1 79 Demand deposits4 246.2 251.3 257.3 281.3 289.0 290.8 292.5 299.6 30 Other checkable deposits5 104.1 132.4 147.5 180.1 208.5 213.5 218.5 226.0 Nontransactions components 31 M26 1,467.7 1,654.0 1,810.3 1.934.7 2,034.6' 2,040.7' 2,060.5' 2,063.0 32 M3 only7 494.7 515.1 617.0 639.2 676.3 686.7' 681.5' 686.2 Money market deposit accounts 33 Commercial banks 26.3 230.5 267.2 332.4 363.5' 368.1 371.7' 375.1 34 Thrift institutions 16.9 148.7 149.7 179.6 189.5 190.2 192.1 193.0 Savings deposits8 35 Commercial Banks 162.1 132.2 121.4 112233..55 113377..33 114400..77 114466..11 149.9 36 Thrift institutions 193.1 172.3 166.5 178.3 199.7 202.5 208.7 212.9 Small denomination time deposits9 37 Commercial Banks 380.1 351.1 387.6 384.8 377.9 375.2' 370.4 365.9 38 Thrift institutions 471.7 434.2 501.2 497.6 500.5 498.4 496.9' 493.2 Money market mutual funds 39 General purpose and broker/dealer 185.2 138.2 167.5 176.5 200.5 202.2 206.7 206.6 40 Institution-only 51.1 43.2 62.7 64.6 80.8 84.4 84.5 84.4 Large denomination time deposits10 41 Commercial Banks11 265.2 230.8 265.4 228800..99 228822..33 228833..55'' 281.9' 283.3 42 Thrift institutions 65.8 101.4 150.6 157.8 166.0 165.7 164.4' 162.5 Debt components 43 Federal debt 976.4 1,170.2 1,364.7 11,,558833..77 11,,771133..33 11,,773344..55'' 1,748.6 n.a. 44 Non-federal debt 3,679.3 4,034.3' 4,579.5' 5,181.5' 5,562.7' 5,619.5' 5,661.8 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Financial Statistics • February 1987 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. 1986 IVOJ iy©4 May June July Aug. Sept. Oct. Seasonally adjusted DEBITS TO Demand deposits2 1 All insured banks 109,642.3 128,440.8 154,556.0 189,819.7 187,035.1 188,874.2 194,457.3 197,997.9 197,222.5 2 Major New York City banks 47,769.4 57,392.7 70,445.1 87,846.7 89,201.2 91,040.8 92,961.7 95,252.0 95,919.7 3 Other banks 61,873.1 71,048.1 84,110.9 101,973.0 97,833.9 97,833.4 101,495.6 102,745.9 101,302.9 4 ATS-NOW accounts3 1,405.5 1,588.7 1,920.8 2,255.6 2,188.0 2,320.1 2,414.8 2,704.8 2,292.5 5 Savings deposits4 741.4 633.1 539.0 389.7 382.6 417.4 421.0 428.4 456.5 DEPOSIT TURNOVER Demand deposits2 6 All insured banks 379.7 434.4 496.5 569.7 553.3 556.4 567.6 573.9 569.6 7 Major New York City banks 1,528.0 1,843.0 2,168.9 2,457.8 2,504.5 2,417.2 2,437.0 2,519.8 2,493.4 8 Other banks 240.9 268.6 301.8 342.8 323.5 324.2 333.4 334.5 329.2 9 ATS-NOW accounts3 15.6 15.8 16.7 17.0 16.2 16.8 16.9 18.4 15.2 10 Savings deposits4 5.4 5.0 4.5 3.1 3.0 3.2 3.2 3.1 3.2 DEBITS TO Not seasonally adjusted Demand deposits2 11 All insured banks 109,517.6 128,059.1 154,108.4 184,827.4 188,924.1 198,657.9 186,892.9 198,433.5 204,618.4 12 Major New York City banks 47,707.4 57,282.4 70,400.9 85,189.6 91,315.2 96,686.1 88,807.6 96,489.1 98,837.9 13 Other banks 64,310.2 70,776.9 83,707.8 99,637.8 97,608.9 101,971.8 98,085.3 101,944.4 105,780.4 14 ATS-NOW accounts3 1,397.0 1,579.5 1,903.4 2,256.6 2,356.3 2,240.4 2,140.8 2,524.1 2,231.9 15 MMDA5 567.4 848.8 1,179.0 1,557.9 1,697.2 1,575.9 1,530.6 1,612.9 1,607.4 16 Savings deposits4 742.0 632.9 538.7 377.8 385.9 419.9 413.7 414.2 449.2 DEPOSIT TURNOVER Demand deposits2 17 All insured banks 379.9 433.5 497.4 569.4 564.1 587.8 554.7 577.6 593.5 18 Major New York City banks 1,510.0 1,838.6 2,191.1 2,487.0 2,570.0 2,620.6 2,421.9 2,603.6 2,656.9 19 Other banks 240.5 267.9 301.6 343.2 326.0 338.7 326.6 332.6 343.9 20 ATS-NOW accounts3 15.5 15.7 16.6 17.1 17.4 16.3 15.1 17.3 14.9 21 MMDA5 2.8 3.5 3.8 4.5 4.8 4.4 4.2 4.4 4.3 22 Savings deposits4 5.4 5.0 4.5 3.0 3.0 3.2 3.1 3.0 3.2 1. Annual averages of monthly figures. NOTE. Historical data for demand deposits are available back to 1970 estimated 2. Represents accounts of individuals, partnerships, and corporations and of in part from the debits series for 233 SMSAs that were available through June states and political subdivisions. 1977. Historical data for ATS-NOW and savings deposits are available back to 3. Accounts authorized for negotiable orders of withdrawal (NOW) and ac- July 1977. Back data are available on request from the Banking Section, Division counts authorized for automatic transfer to demand deposits (ATS). ATS data of Research and Statistics, Board of Governors of the Federal Reserve System, availability starts with December 1978. Washington, D.C. 20551. 4. Excludes ATS and NOW accounts, MMDA and special club accounts, such These data also appear on the Board's G.6 (406) release. For address, see inside as Christmas and vacation clubs. front cover. 5. Money market deposit accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • February 1987 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1985 1986 Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept/ Oct/ Nov. Seasonally adjusted 1 Total loans and securities2 1,900.4 1,930.0 1,935.5 1,944.6 1,947.9 1,957.5 1,963.7 1,985.0 2,007.7 2,029.6 2,034.0 2,049.0 2 U.S. government securities 273.1 268.2 273.6 269.5 270.0 274.1 274.8 285.4 290.9 294.3 299.6 304.8 3 Other securities 177.6 192.5 188.1 183.3 182.1 181.9 183.6 186.1 192.3 200.7 196.7 194.8 4 Total loans and leases2 1,449.7 1,469.3 1,473.7 1,491.8 1,495.8 1,501.5 1,505.3 1,513.4 1,524.5 1,534.7 1,537.7 1,549.5 5 Commercial and industrial 499.5 502.1 502.4 506.1 507.8 506.7 508.7 508.7 510.4 512.1 514.1 520.3 6 Bankers acceptances held3.. 4.9 4.9 4.8 4.9 5.2 5.6 6.1 5.8 5.9 6.3 6.4 6.1 7 Other commercial and industrial 494.7 497.2 497.6 501.2 502.6 501.0 502.6 502.8 504.4 505.8 507.8 514.1 8 U.S. addressees4 486.0 488.0 488.4 491.3 492.7 490.6 493.1 493.8 495.4 496.9 449999..00 505.4 9 Non-U.S. addressees4 8.7 9.3 9.2 9.9 9.8 10.5 9.5 9.0 9.1 8.9 88..88 8.7 10 Real estate 422.4 427.1 431.4 436.1 440.7 446.4 450.7 455.9 461.4 465.9 470.8 476.5 11 Individual 291.5 294.6 297.4 299.5 301.1 303.0 304.5 305.6 306.9 308.8 309.8 311.1 12 Security 40.1 44.1 43.4 50.4 48.0 46.4 42.5 44.8 44.2 44.4 3399..55 4400..11 13 Nonbank financial institutions 32.6 32.6 31.8 32.2 32.3 33.3 34.7 34.2 34.4 35.1 35.6 35.3 14 Agricultural 36.3 35.9 35.4 34.9 34.6 34.1 33.7 33.3 33.3 33.2 3333..33 3333..66 15 State and political subdivisions 52.8 60.5 60.3 60.2 59.8 59.5 59.4 59.0 59.4 59.4 58.5 57.8 16 Foreign banks 9.1 9.1 9.2 9.2 9.2 9.3 9.5 9.5 9.3 9.4 9.2 9.0 1/ Foreign official institutions ... 6.9 7.0 7.0 6.8 5.3 5.1 6.4 6.5 6.5 6.4 6.4 6.2 18 Lease financing receivables... 18.8 19.4 19.6 19.8 19.9 19.8 20.0 20.0 20.2 20.4 20.4 21.0 19 All other loans 39.6 36.9 35.8 36.6 37.3 37.9 35.4 35.9 38.5 39.7 40.1 38.5 Not seasonally adjusted 20 Total loans and securities2 1,912.6 1,934.8 1,932.4 1,944.1 1,950.5 1,956.7 1,965.4 1,981.4 1,999.8 2,027.3 2,029.2 2,048.6 21 U.S. government securities 271.0 267.7 275.0 273.2 274.0 275.4 276.2 285.3 289.1 292.6 295.2 302.5 1 li 1 O To th ta e l r l s o e a c n u s r i a t n ie d s leases2 1,4 1 6 7 2 8 . . 9 7 1,4 1 7 9 3 3 . . 3 8 1,4 1 6 8 8 8 . . 5 9 1,4 1 8 8 7 3 . . 1 9 1,4 1 9 8 4 1 . . 7 8 1,4 1 9 8 9 2 . . 0 2 1,5 1 0 8 6 2 . . 7 5 1,5 1 1 8 2 3 . . 1 9 1,5 1 1 9 8 2 . . 7 1 1, 2 5 0 3 0 4 . . 7 0 1,5 1 3 9 7 6 . . 7 3 1,5 1 5 9 1 4 . . 3 8 1 2 4 5 Co B m a m nk e e rc rs ia l a c a c n e d p t i a n n d c u e s s t ri h a e l ld3.. 50 5 1 . . 2 5 50 4 1 . . 9 4 50 4 0 . . 7 1 50 5 6 . . 0 9 51 5 0 . . 2 0 50 5 8 . . 5 5 50 66 9. .. 4 00 50 66 8 .. . 00 6 50 55 8 .. . 99 3 51 66 1 .. . 11 2 51 66 3 .. . 22 1 51 66 9 .. . 22 3 26 Other commercial and 22 2 77 8 N U o . i S n n . d - U u ad s . t S d r . r i a e l a s s d e d e r s e 4 ssees4.... 4 4 8 9 9 7 6 . . . 0 3 4 4 4 8 9 9 7 6 . . . 2 3 5 4 4 8 9 9 6 5 . . . 1 3 4 4 5 9 0 9 2 1 . . . 2 7 9 4 5 9 0 5 9 4 . . . 4 5 9 4 5 9 0 9 3 3 . . . 7 3 0 4 5 9 0 4 9 3 . . . 0 4 4 4 5 9 0 9 3 2 . . . 3 3 6 4 5 9 0 3 9 2 . . . 1 4 4 4 5 9 0 9 5 5 . . . 3 9 2 4 5 9 0 9 7 6 . . . 2 7 9 5 5 0 1 9 3 3 . . . 2 8 0 29 Real estate 423.3 427.3 430.6 434.9 439.5 445.2 450.2 455.8 461.7 466.9 472.2 478.0 30 Individual 294.8 297.0 296.3 296.8 298.6 301.1 303.1 304.9 307.2 310.2 311.4 312.4 31 Security 45.4 46.8 42.6 49.5 48.5 45.6 42.5 4433..00 4411..33 4411..88 3388..77 4411..33 32 Nonbank financial institutions 33.4 32.8 31.2 31.6 32.2 33.1 34.6 34.3 34.6 35.3 35.4 35.4 3333 Agricultural 36.0 35.2 34.5 34.0 33.9 34.1 34.2 3344..11 3344..11 3344..00 3333..88 3333..77 34 State and political subdivisions 52.8 60.5 60.3 60.2 59.8 59.5 59.4 59.0 59.4 59.4 58.5 57.8 3355 Foreign banks 9.5 9.3 9.3 9.1 9.0 9.1 9.2 9.4 9.1 9.4 9.3 9.3 36 Foreign official institutions ... 6.9 7.0 7.0 6.8 5.3 5.1 6.4 6.5 6.5 6.4 6.4 6 2 3/ Lease financing receivables... 18.8 19.6 19.8 19.8 19.9 19.9 20.0 20.0 20.1 20.3 20.3 20.9 38 All other loans 40.5 36.4 36.6 37.5 38.1 37.9 37.7 36.5 36.3 39.0 38.6 37.0 1. Data are prorated averages of Wednesday estimates for domestically char- 2. Excludes loans to commercial banks in the United States. tered insured banks, based on weekly sample reports and quarterly universe 3. Includes nonfinancial commercial paper held. reports. For foreign-related institutions, data are averages of month-end estimates 4. United States includes the 50 states and the District of Columbia. based on weekly reports from large U.S. agencies and branches and quarterly NOTE. These data also appear in the Board's G.7 (407) release. For address, see reports from all U.S. agencies and branches, New York investment companies inside front cover. majority owned by foreign banks, and Edge Act corporations owned by domestically chartered and foreign banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions All 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS1 Monthly averages, billions of dollars 1985 1986 SSoouurrccee Dec. Jan. Feb. Mar. Apr. May June July' Aug.' Sept. Oct. Nov. Total nondeposit funds 1 Seasonally adjusted2 128.2 131.7 131.7 141.2 134.1 135.7 132.6 136.1 138.1 143.cc 114400..55'' 114433..22 2 Not seasonally adjusted 127.9 131.8 134.4 143.7 135.0 137.9' 131.3 132.2 137.1 141.3' 138.7' 144.4 Federal funds, RPs, and other borrowings from nonbanks3 3 Seasonally adjusted 154.1 151.6 152.7 160.6 160.4 157.9 157.1 166.4 168.4 116688..44'' 165.7 4 Not seasonally adjusted 153.7 151.6 155.3 163.1 161.3 160.0 155.8 162.5 167.3 166.3' 166.7' 166.8 5 Net balances due to foreign-related institutions, not seasonally adjusted -25.9 -19.9 -21.0 -19.4 -26.3 -22.2 -24.5 -30.3 -30.3 --2255..00 --2288^^ --2222..55 MEMO 6 Domestically chartered banks' net positions with own foreign branches, not seasonally adjusted4 -31.6 -28.0 -25.8 -26.5 -30.2 -29.3 -30.5 -33.8 -31.2 --2299..22 --3311..99 --2288..77 7 Gross due from balances 76.3 74.3 69.4 71.7 75.2 72.9 72.2 73.9 75.2 74.0 73.5 70.8 8 Gross due to balances 44.7 46.4 43.6 45.2 45.1 43.6 41.7 40.1 44.0 44.8 41.6 42.1 9 Foreign-related institutions' net positions with directly related institutions, not seasonally adjusted5 5.7 8.1 4.8 7.1 3.9 7.1 6.0 3.5 .9 44..22 44..00 66..22 10 Gross due from balances 56.7 57.6 60.0 60.7 62.5 60.0 62.8 64.1 66.2 67.9 68.3 68.8 11 Gross due to balances 62.5 65.7 64.8 67.8 66.4 67.1 68.7' 67.7 67.1 72.0' 72.2' 75.0 Security RP borrowings 12 Seasonally adjusted6 89.4 87.6 89.5 89.7 89.7 89.0 89.3' 95.9 96.8 9966..77'' 9977..44'' 9966..33 13 Not seasonally adjusted 89.0 87.7 92.2 92.2 90.6 91.2 88.0 92.0 95.7 95^ 95.6' 97.4 U.S. Treasury demand balances7 14 Seasonally adjusted 17.5 19.0 21.1 15.7 17.4 2211..33 1188..55 1144..77 13.1 1166..00 1133..22 2266..55 15 Not seasonally adjusted 14.6 24.0 24.2 15.7 17.8 21.8 16.1 16.8 11.0 18.2 15.3 15.2 Time deposits, $100,000 or more8 16 Seasonally adjusted 337.6 349.4 351.9 347.7 346.9 340.4 339.8 338.5 342.9 334422..55 340.1 341.1 17 Not seasonally adjusted 339.4 348.3 350.7 348.3 343.5 339.7 338.1 337.5 343.2 344.6 342.8 342.9 1. Commercial banks are those in the 50 states and the District of Columbia 3. Other borrowings are borrowings on any instrument, such as a promissory with national or state charters plus agencies and branches of foreign banks, New note or due bill, given for the purpose of borrowing money for the banking York investment companies majority owned by foreign banks, and Edge Act business. This includes borrowings from Federal Reserve Banks and from foreign corporations owned by domestically chartered and foreign banks. banks, term federal funds, overdrawn due from bank balances, loan RPs, and Data for lines 1-4 and 12-17 have been revised in light of benchmarking and participations in pooled loans. revised seasonal adjustment. 4. Averages of daily figures for member and nonmember banks. 2. Includes seasonally adjusted federal funds, RPs, and other borrowings from 5. Averages of daily data. nonbanks and not seasonally adjusted net Eurodollars. Includes averages of 6. Based on daily average data reported by 122 large banks. Wednesday data for domestically chartered banks and averages of current and 7. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at previous month-end data for foreign-related institutions. commercial banks. Averages of daily data. 8. Averages of Wednesday figures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Financial Statistics • February 1987 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series Billions of dollars 1986 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. ALL COMMERCIAL BANKING INSTITUTIONS1 1 Loans and securities 2,065.2 2,078.8 2,091.4 2,113.4 2,101.3 2,105.5 2,134.0 2,154.4 2,171.1 2,173.2 2,218.1 2 Investment securities 432.5 432.8 427.2 429.5 430.9 432.6 445.7 455.1 464.6 467.4 470.4 3 U.S. government securities 251.9 255.1 253.7 255.8 257.7 259.6 269.6 272.2 275.9 281.8 286.2 4 Other 180.6 177.7 173.5 173.6 173.2 173.0 176.1 183.0 188.7 185.6 184.3 5 Trading account assets 30.1 34.0 30.1 27.8 27.0 27.4 28.7 29.3 27.9 26.0 28.1 6 Total loans 1,602.6 1,612.0 1,634.2 1,656.1 1,643.5 1,645.5 1,659.6 1,670.0 1,678.5 1,679.9' 1,719.5 7 Interbank loans 140.4 143.5 146.0 155.7 146.2 139.2 148.6 149.4 145.3 146.8' 161.0 8 Loans excluding interbank 1,462.2 1,468.5 1,488.1 1,500.4 1,497.2 1,506.3 1,511.0 1,520.6 1,533.2 1,533.1 1,558.6 9 Commercial and industrial 496.7 501.8 508.5 510.5 506.2 512.3 507.3 510.1 512.1 512.6 520.2 10 Real estate 428.7 431.5 435.9 441.7 446.4 451.4 457.6 463.2 467.7 473.5 479.3 11 Individual 297.4 296.4 296.9 300.4 301.1 304.0 305.6 308.4 310.5 311.8 312.8 12 All other 239.4 238.7 246.9 247.8 243.6 238.7 240.5 238.8 242.9 235.2 246.3 13 Total cash assets 187.3 193.7 198.1 209.9 221.0 196.0 206.2 205.8 196.6 200.4 223.9 14 Reserves with Federal Reserve Banks 21.9 26.2 29.1 25.5 30.2 27.9 28.2 27.9 27.8 31.2 31.7 15 Cash in vault 23.0 22.7 21.8 22.3 23.9 23.0 23.3 23.7 22.9 23.5 22.2 16 Cash items in process of collection ... 64.2 66.9 68.8 80.7 84.6 67.3 72.1 73.5 66.3 66.2' 86.5 17 Demand balances at U.S. depository institutions 31.3 31.8 31.1 34.7 36.8 32.0 33.8 33.6 32.3 32.6 37.7 18 Other cash assets 47.0 46.1 47.4 46.7 45.5 45.8 48.7 47.1 47.4 46^ 45.8 19 Other assets 187.0 186.5 195.3 207.0 195.9 196.6 196.6 196.2 200.8 198.2' 201.9 20 Total assets/total liabilities and capital ... 2,439.6 2,458.9 2,484.8 2,530.3 2,518.3 2,498.1 2,536.7 2,556.4 2,568.4 2,571.8' 2,643.9 21 Deposits 1,739.5 1,746.4 1,762.8 1,798.4 1,807.4 1,791.9 1,819.5 1,833.6 1,830.8 1,843.7' 1,896.8 22 Transaction deposits 488.8 492.1 502.5 540.7 542.7 523.3 540.0 544.2 537.4 547.5 594.8 23 Savings deposits 454.2 457.2 462.0 467.8 477.3 482.4 490.8 497.7 504.4 514.8 521.7 24 Time deposits 796.5 797.1 798.3 789.9 787.5 786.3 788.7 791.7 789.0 781.4' 780.3 25 Borrowings 364.4 374.7 373.1 390.7 367.4 366.8 379.2 377.3 388.1 380.0 394.1 26 Other liabilities 167.6 169.1 179.3 170.4 173.1 168.5 168.6 174.7 177.5 175.1 180.2 27 Residual (assets less liabilities) 168.2 168.8 169.7 170.8 170.3 170.9 169.4 170.8 172.1 173.1' 172.8 MEMO 28 U.S. government securities (including trading account) 269.8 278.4 273.7 274.0 275.1 276.5 288.8 289.8 292.5 298.5' 303.6 29 Other securities (including trading account) 192.8 188.4 183.6 183.3 182.8 183.5 185.6 194.6 200.0 194.8 195.0 DOMESTICALLY CHARTERED COMMERCIAL BANKS2 30 Loans and securities 1,954.3 1,964.0 1,972.4 1,993.3 1,985.3 1,990.0 2,014.0 2,029.4 2,039.8 2,046.2 2,090.2 31 Investment securities 421.1 420.8 416.0 416.1 417.1 419.6 432.5 440.2 448.0 450.6' 454.4 32 U.S. government securities 247.0 249.6 248.5 248.8 250.2 253.1 263.2 264.5 267.5 272.9 278.1 33 Other 174.1 171.2 167.5 167.2 166.9 166.5 169.4 175.7 180.5 177.8 176.4 34 Trading account assets 30.1 34.0 30.1 27.8 27.0 27.4 28.7 29.3 27.9 26.0 28.1 35 Total loans 1,503.1 1,509.2 1,526.3 1,549.4 1,541.3 1,543.0 1,552.8 1,559.8 1,564.0 1,569.6' 1,607.6 36 Interbank loans 115.8 115.8 120.2 129.3 123.3 117.3 122.7 123.1 118.9 122.5' 137.8 37 Loans excluding interbank 1,387.3 1,393.5 1,406.1 1,420.1 1,418.0 1,425.8 1,430.1 1,436.7 1,445.1 1,447.1' 1,469.9 38 Commercial and industrial 442.5 446.2 448.2 452.3 449.8 452.5 448.4 448.4 447.2 447.2 453.9 39 Real estate 423.6 426.4 430.7 436.3 440.7 445.8 451.9 457.3 461.7 467.6' 472.7 40 Individual 297.1 296.2 296.6 300.1 300.8 303.6 305.3 308.1 310.1 311.5 312.4 41 All other 224.1 224.7 230.7 231.4 226.7 223.9 224.6 222.9 226.1 220.8 230.8 42 Total cash assets 171.1 179.1 182.7 194.3 205.8 180.1 187.8 189.3 180.4 183.1 207.6 43 Reserves with Federal Reserve Banks 21.0 25.5 28.4 24.4 28.7 26.3 27.2 26.6 26.9 29.7 29.8 44 Cash in vault 23.0 22.6 21.7 22.2 23.8 22.9 23.2 23.7 22.8 23.4 22.2 45 Cash items in process of collection ... 63.8 66.5 68.4 80.3 84.2 66.7 71.7 73.1 65.9 65.5 86.1 46 Demand balances at U.S. depository institutions 29.4 30.1 29.4 33.0 35.1 30.2 32.0 31.9 30.5 30.9' 35.8 47 Other cash assets 34.0 34.3 34.7 34.3 34.0 34.0 33.6 34.1 34.4 33.6' 33.7 48 Other assets 137.8 134.6 144.0 150.3 142.8 144.1 143.2 141.7 145.5 142.7' 143.0 49 Total assets/total liabilities and capital ... 2,263.1 2,277.8 2,299.1 2,337.9 2,334.0 2,314.1 2,345.0 2,360.3 2,365.7 2,372.1 2,440.8 50 Deposits 1,689.6 1,698.2 1,713.1 1,749.1 1,758.7 1,741.4 1,768.0 1,779.9 1,775.2 1,788.6 1,840.5 51 Transaction deposits 481.6 484.8 495.0 533.1 535.3 515.5 532.1 536.1 529.3 539.7 586.8 52 Savings deposits 452.4 455.3 460.1 465.8 475.2 480.3 488.7 495.5 502.1 512.5 519.2 53 Time deposits 755.7 758.1 758.1 750.1 748.1 745.6 747.2 748.2 743.8 736.5 734.5 54 Borrowings 298.0 304.9 304.8 309.1 294.2 293.5 300.5 295.5 305.2 299.3 312.6 55 Other liabilities 110.5 109.0 114.6 112.0 113.9 111.5 110.3 117.3 116.4 114.2' 118.0 56 Residual (assets less liabilities) 165.0 165.6 166.5 167.7 167.2 167.8 166.2 167.7 168.9 169.9' 169.6 1. Commercial banking institutions include insured domestically chartered NOTE. Figures are partly estimated. They include all bank-premises subsidiarcommercial banks, branches and agencies of foreign banks, Edge Act and ies and other significant majority-owned domestic subsidiaries. Loan and securi- Agreement corporations, and New York State foreign investment corporations. ties data for domestically chartered commercial banks are estimates for the last 2. Insured domestically chartered commercial banks include all member banks Wednesday of the month based on a sample of weekly reporting banks and and insured nonmember banks. quarter-end condition report data. Data for other banking institutions are estimates made for the last Wednesday of the month based on a weekly reporting sample of foreign-related institutions and quarter-end condition reports. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A19 1.26 ALL LARGE WEEKLY REPORTING COMMERCIAL BANKS with Domestic Assets of $1.4 Billion or More on December 31, 1982, Assets and Liabilities Millions of dollars, Wednesday figures Oct. 1 Oct. 8 Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 1 Cash and balances due from depository institutions 107,770 92,984 117,960' 100,525' 92,889' 100,823 117,402 106,498 106,729 2 Total loans, leases and securities, net 973,244 965,268 967,647' 961,594' 957,305' 974,218 975,304 983,395 988,788 3 U.S. Treasury and government agency 104,097 105,279 104,505' 104,229' 107,780 110,485 110,478 111,961 113,889 4 Trading account 20,348 20,742 19,31C 18,823 20,023 22,113 20,750 21,321 21,462 5 Investment account, by maturity 83,749 84,536 85,196' 85,406' 87,757 88,372 89,727 90,640 92,427 6 One year or less 17,274 17,310 17,257 17,141 17,087 16,749 16,549 16,924 17,209 7 Over one through five years 38,932 39,826 40,307' 40,103 39,946 40,168 40,336 41,762 41,992 8 Over five years 27,544 27,400 27,631 28,162' 30,724 31,455 32,842 31,953 33,226 9 Other securities 75,762 74,484 73,875 73,575 72,350 72,412 72,926 71,947 72,061 10 Trading account 5,821 4,901 4,866 5,074 4,535 4,767 5,183 4,792 5,488 11 Investment account 69,941 69,584 69,009 68,501 67,816 67,645 67,743 67,155 66,574 12 States and political subdivisions, by maturity 60,448 60,126 59,466 59,024 58,287 57,548 57,769 57,510 56,836 13 One year or less 11,007 11,107 10,916 10,805' 10,245' 9,669 9,616 9,672 9,319 14 Over one year 49,441 49,020 48,550 48,2^ 48,041' 47,879 48,153 47,838 47,517 15 Other bonds, corporate stocks, and securities 9,492 9,457 9,543 9,477 9,529 10,097 9,974 9,645 9,737 16 Other trading account assets 5,346 5,375 5,399 4,580 5,0% 5,364 4,780 4,910 5,728 17 Federal funds sold1 64,656 62,627 63,450 60,516 55,978 64,195 61,757 65,465 61,012 18 To commercial banks 39,054 39,012 38,846 35,750 33,418 40,841 37,930 40,749 36,426 19 To nonbank brokers and dealers in securities 17,219 13,939 15,636 14,772 14,327 15,862 15,893 16,198 16,643 20 To others 8,383 9,677 8,967 9,994 8,233 7,492 7,934 8,518 7,943 21 Other loans and leases, gross2 744,423 738,664 741,602' 739,912' 737,312' 743,303 746,914 750,758 757,894 22 Other loans, gross2 727,987 722,193 725,315' 723,62C 721,010' 726,773 730,368 734,140 740,397 23 Commercial and industrial2 259,659 258,542 259,145 258,701 257,394' 261,735 262,730 263,512 263,460 24 Bankers acceptances and commercial paper 2,257 2,286 2,484 2,390 2,387 2,492 2,442 2,638 2,496 25 All other 257,402 256,255 256,660 256,311 255,008' 259,244 260,288 260,874 260,964 26 U.S. addressees 253,510 252,398 252,757 252,469 251,161' 255,078 256,126 256,796 257,074 27 Non-U.S. addressees 3,892 3,857 3,903 3,842 3,846 4,166 4,162 4,077 3,890 28 Real estate loans2 198,294 198,712 199,568' 200,696 200,268 200,575 201,464 202,709 202,835 29 To individuals for personal expenditures 140,101 140,135 140,460 140,712 141,026 141,110 141,369 141,800 142,208 30 To depository and financial institutions 49,250 48,738 48,757' 48,150' 47,249' 48,025 48,419 49,270 50,831 31 Commercial banks in the United States 16,644 15,581 15,631' 15,675' 15,689' 16,435 16,456 16,848 17,974 32 Banks in foreign countries 5,260 6,035 5,858 4,810 4,575 4,706 4,770 5,222 6,366 33 Nonbank depository and other financial institutions . 27,347 27,122 27,268' 27,664 26,984 26,883 27,193 27,200 26,491 34 For purchasing and carrying securities 16,791 14,473 14,855 13,816 12,962 13,572 14,270 15,032 18,602 35 To finance agricultural production 5,997 6,008 5,922 5,909 5,776 5,791 5,723 5,707 5,684 36 To states and political subdivisions 36,080 35,908 35,724 35,531 35,472 35,300 35,247 35,304 35,230 37 To foreign governments and official institutions 3,194 3,153 3,224 3,248 3,246 3,213 3,124 3,247 3,342 38 All other 18,620 16,524 17,660 16,856 17,614 17,450 18,023 17,557 18,205 39 Lease financing receivables 16,436 16,472 16,287 16,292 16,302 16,529 16,546 16,619 17,497 40 LESS: Unearned income 4,877 4,910 4,933 4,944 4,950 4,925 4,946 4,998 5,033 41 Loan and lease reserve2 16,163 16,252 16,251 16,273 16,261 16,617 16,606 16,647 16,763 42 Other loans and leases, net2 723,382 717,503 720,418' 718,695' 716,100' 721,761 725,363 729,113 736,098 43 All other assets 133,767 129,743' 127,797' 124,464' 124,772' 133,054 128,208 122,057 123,916 44 Total assets 1,214,781 1,187,996' 1,213,405' 1,186,584' 1,174,966' 1,208,095 1,220,914 1,211,950 1,219,433 45 Demand deposits 241,097 215,89c 246,526' 212,827' 212,303' 229,330 244,445 224,562 238,550 46 Individuals, partnerships, and corporations 185,025 167,357 186,941' 163,278' 163,712' 174,349 189,342 169,926 181,634 47 States and political subdivisions 6,103 4,828 6,030 5,458 4,912' 5,576 5,224 5,209 5,694 48 U.S. government 1,490 2,785 3,238 2,495 2,582' 4,464 1,921 4,004 2,749 49 Depository institutions in United States 29,18(X 23,733' 31,249 24,214 24,294' 25,514 27,726 25,911 27,887 50 Banks in foreign countries 7,063' 6,846' 7,598' 6,476' 6,103' 6,134 6,485 6,828 6,866 51 Foreign governments and official institutions 927 794 874 911 828 954 1,252 838 1,004 5 5 2 3 Tr C an er s t a i c fi t e io d n a n b d a l o a f n f c ic e e s rs o ' th ch er e c t k h s a n demand deposits 5 1 0 1 , , 5 31 1 0 0 5 9 1 , , 5 3 4 9 7 1 5 1 1 0 , ,5 3 9 6 5 1 ' 5 9 0 , , 9 9 9 2 5 7 5 9 0 , , 8 5 7 0 2 2 5 1 3 2 , , 1 3 2 3 5 9 5 1 3 2 , , 1 4 2 9 8 3 5 1 2 1 , , 6 84 9 7 8 5 1 3 2 , , 3 7 1 1 3 8 54 Nontransaction balances 501,642 500,976' 501,354' 499,49c 498,868' 499,928 500,135 500,418 500,632 55 Individuals, partnerships and corporations 463,27C 462,28C 463,037' 461,168' 460,388' 461,367 461,972 462,351 462,729 56 States and political subdivisions 25,653 25,926 25,875' 25,926 25,868 26,084 25,955 26,132 26,053 57 U.S. government 860 870 878 893 910 916 807 804 781 58 Depository institutions in the United States 10,605' 10,617' 10,345' 10,286' 10,489 10,389 10,240 9,980 9,935 59 Foreign governments, official institutions and banks ... 1,254 1,283 1,218 1,218 1,213 1,172 1,160 1,152 1,133 60 Liabilities for borrowed money 255,179 256,123' 249,974' 254,958 244,891 255,334 257,890 263,653 255,894 61 Borrowings from Federal Reserve Banks 230 1,680 100 1,688 195 2,831 110 3,319 25 62 Treasury tax-and-loan notes 18,470 6,362 2,267 6,514 6,846 2,598 5,756 8,891 10,450 63 All other liabilities for borrowed money3 236,479 248,081' 247,607' 246,755 237,850 249,905 252,024 251,442 245,419 64 Other liabilities and subordinated note and debentures. 82,911 79,754' 80,427' 84,496' 84,438 85,832 80,522 85,943 86,706 65 Total liabilities 1,131,340 1,104,135' 1,129,642' 1,102,698' 1,091,002' 1,123,549 1,136,121 1,127,275 1,135,095 66 Residual (total assets minus total liabilities)4 83,441 83,861 83,762 83,885 83,964 84,546 84,794 84,675 84,338 MEMO 67 Total loans and leases (gross) and investments adjusted5. 938,586 931,837 934,354' 931,386' 929,409' 938,483 942,470 947,444 956,184 68 Total loans and leases (gross) adjusted2-5 753,381 746,699 750,575 749,002 744,182' 750,221 754,286 758,626 764,506 69 Time deposits in amounts of $100,000 or more 153,604 153,593' 152,532 152,852 152,051' 152,477 152,551 152,556 151,812 70 Loans sold outright to affiliates—total6 1,744 1,729 1,705 1,736 1,703 1,750 1,746 1,688 1,651 71 Commercial and industrial 1,047 1,027 1,007 1,039 1,006 1,055 1,029 975 971 72 Other 698 702 698 697 697 695 717 712 680 73 Nontransaction savings deposits (including MMDAs) 218,645' 218,107 220,231' 218,505' 218,458' 220,198 220,478 221,016 221,745 1. Includes securities purchased under agreements to resell. 4. This is not a measure of equity capital for use in capital adequacy analysis or 2. Levels of major loan items were affected by the Sept. 26, 1984, transaction for other analytic uses. between Continental Illinois National Bank and the Federal Deposit Insurance 5. Exclusive of loans and federal funds transactions with domestic commercial Corporation. For details see the H.4.2 statistical release dated Oct. 5, 1984. banks. 3. Includes federal funds purchased and securities sold under agreements to 6. Loans sold are those sold outright to a bank's own foreign branches, repurchase; for information on these liabilities at banks with assets of $1 billion or nonconsolidated nonbank affiliates of the bank, the bank's holding company (if more on Dec. 31, 1977, see table 1.13. not a bank), and nonconsolidated nonbank subsidiaries of the holding company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Financial Statistics • February 1987 1.28 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures except as noted 1986 AAccccoouunntt Oct. 1 Oct. 8 Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 1 Cash and balances due from depository institutions 30,803 21,423 28,967 28,537 22,071' 26,292 30,864 28,990 28,236 2 Total loans, leases and securities, net1 207,604 205,670 207,479 205,107 203,001' 207,485 211,404 216,149 216,398 Securities 3 U.S. Treasury and government agency2 0 0 0 0 0 0 0 0 0 4 Trading account2 0 0 0 0 0 0 0 0 0 5 Investment account, by maturity 11,159 11,404 11,346 11,437 13,582 13,524 13,826 13,701 14,108 6 One year or less 1,311 1,322 1,342 1,348 1,398 1,221 1,234 1,234 1,233 7 Over one through five years 5,290 5,490 5,594 5,690 5,659 5,360 5,566 5,521 5,874 8 Over five years 4,557 4,592 4,410 4,400 6,525 6,943 7,027 6,945 7,001 9 Other securities2 0 0 0 0 0 0 0 0 0 10 Trading account2 0 0 0 0 0 0 0 0 0 11 Investment account 16,933 16,722 16,510 16,343 16,188 16,178 16,407 16,318 16,261 12 States and political subdivisions, by maturity 14,859 14,702 14,492 14,325 14,112 13,969 14,381 14,301 14,237 13 One year or less 2,423 2,374 2,333 2,354 2,099 1,924 1,885 1,902 1,833 14 Over one year 12,436 12,328 12,160 11,970 12,012 12,045 12,497 12,400 12,404 15 Other bonds, corporate stocks and securities 2,073 2,020 2,017 2,018 2,076 2,209 2,025 2,017 2,024 16 Other trading account assets2 0 0 0 0 0 0 0 0 0 Loans and leases 17 Federal funds sold3 28,340 28,823 30,596 28,731 24,443 27,294 28,474 31,204 24,826 18 To commercial banks 12,364 13,994 15,647 12,971 10,704 13,213 14,290 16,303 10,167 19 To nonbank brokers and dealers in securities 9,119 6,703 7,585 7,711 6,958 7,974 7,871 8,419 8,374 20 To others 6,858 8,126 7,363 8,049 6,780 6,107 6,312 6,482 6,285 21 Other loans and leases, gross 157,044 154,724 155,029 154.608 154,837' 156,658 158,903 161,179 167,565 22 Other loans, gross 153,786 151,445 151,745 151,305 151,519' 153,264 155,517 157,738 163,284 23 Commercial and industrial 58,221 58,338 58,801 58,647 58,148 60,479 60,893 61,192 61,422 24 Bankers acceptances and commercial paper 457 454 558 622 629 637 739 806 740 25 All other 57.764 57,884 58,243 58,025 57,519 59,841 60,154 60,386 60,682 26 U.S. addressees 57,337 57,490 57,843 57,628 57,154 59,450 59,751 59,954 60,275 27 Non-U.S. addressees 427 394 400 397 366 392 404 432 407 28 Real estate loans 33,553 33,616 33,563 33,943 34,190 34,266 34,498 34,914 35,165 29 To individuals for personal expenditures 19,575 19,596 19,701 19,740 19,702 19,717 19,799 19,841 19,918 30 To depository and financial institutions 18,076 18,069 17,607 17,358 16,996' 16,803 17,116 18,028 19,908 31 Commercial banks in the United States 8,432 7,857 7,599 7,707 7,679' 7,762 7,661 8,274 9,417 32 Banks in foreign countries 2,526 3,064 2,926 2,437 2,015 2,120 2,176 2,534 3,455 33 Nonbank depository and other financial institutions 7,118 7,149 7,082 7,215 7,302 6,921 7,278 7,221 7,035 34 For purchasing and carrying securities 8,654 7,355 7.018 7,159 6,784 6,950 7,511 8,241 10,772 35 To finance agricultural production 362 353 300 309 282 282 260 284 310 36 To states and political subdivisions 8,830 8,787 8,710 8,669 8,676 8,632 8,652 8,706 8,674 37 To foreign governments and official institutions 868 845 916 918 899 948 884 892 1,005 38 All other 5,646 4,486 5,129 4,561 5,842 5,188 5,902 5,638 6,110 39 Lease financing receivables 3,259 3,279 3,284 3,304 3,317 3,393 3,386 3,441 4,281 40 LESS: Unearned income 1,477 1,510 1,512 1,516 1,518 1,495 1,494 1,535 1,575 41 Loan and lease reserve 4,396 4,492 4,489 4,497 4,530 4,675 4,712 4,718 4,787 42 Other loans and leases, net 151,172 148,722 149,028 148,595 148,789' 150,488 152,697 154,926 161,203 43 All other assets4 72,822 70,463 69,516 66,785' 68,856 73,288 69,237 65,100 67,094 44 Total assets 311,228 297,556 305,963 300,429' 293,928' 307,064 311,505 310,239 311,728 Deposits 45 Demand deposits 66,457 55,279 65,283 54,491' 54,354' 59,369 62,932 59,115 62,274 46 Individuals, partnerships, and corporations 45,477 38,034 43,773 36,234' 37,350' 40,140 42,515 38,844 42,064 47 States and political subdivisions 1,115 654 1,200 792 544 698 572 640 590 48 U.S. government 213 592 565 514 495 834 257 747 524 49 Depository institutions in the United States 8,276 5,594 7,707 6,035 6,089 5,775 6,411 6,387 6,524 50 Banks in foreign countries 5,772 5,490 6,410 5,276 4,948 4,895 5,176 5,638 5,527 51 Foreign governments and official institutions 776 659 731 758 672 780 1,093 665 843 52 Certified and officers' checks 4,830 4,255 4,896 4,882 4,255 6,246 6,908 6,194 66,,220011 53 Transaction balances other than demand deposits ATS, NOW, Super NOW, telephone transfers) 6,064 6,190 6,171 6,126 6,113 6,379 6,579 6,509 6,595 54 Nontransaction balances 94,969 93,852 95,261 94,472 93,896 94,828 94,633 94,943 95,344 55 Individuals, partnerships and corporations 85,871 84,554 86,182 85,255 84,846 85,535 85,416 85,759 86,022 56 States and political subdivisions 5,779 5,941 5,821 5,953 5,947 6,229 6,175 6,164 6,244 57 U.S. government 68 73 78 80 79 82 80 74 63 58 Depository institutions in the United States 2,603 2,632 2,554 2,549 2,399 2,387 2,355 2,337 2,413 59 Foreign governments, official institutions and banks 648 651 626 634 626 595 606 607 602 60 Liabilities for borrowed money 80,615 81,933 77,863 81,937 76,552 81,982 86,430 84,697 82,484 61 Borrowings from Federal Reserve Banks 0 1,450 0 1,380 0 1,245 0 750 0 62 Treasury tax-and-loan notes 3,748 1,207 501 2,005 1,751 632 1,742 2,154 2,390 63 All other liabilities for borrowed money5 76,867 79,275 77,361 78,552 74,801 80,105 84,688 81,793 80,093 64 Other liabilities and subordinated note and debentures 35,804 32,878 33,929 35,974 35,799 36,973 33,350 37,414 37,784 65 Total liabilities 283,910 270,131 278,507 273,000' 266,714' 279,530 283,924 282,678 284,481 66 Residual (total assets minus total liabilities)6 27,318 27,424 27,456 27,428 27,214 27,534 27,580 27,561 27,247 MEMO 67 Total loans and leases (gross) and investments adjusted1'7 192,680 189,822 190,234 190,442 190,666 192,680 195,658 197,826 203,176 68 Total loans and leases (gross) adjusted7 164,588 161,696 162,378 162,661 160,896 162,977 165,425 167,806 172,806 69 Time deposits in amounts of $100,000 or more 33,560 33,429 33,607 33,669 33,418 33,851 34,022 34,215 34,127 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 Oct. 1 Oct. 8 Oct. 15 Oct. 22 Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 1 Cash and due from depository institutions. 9,352 10,380 10,020 10,245 10,592 10,092 10,131 10,467 9,879 2 Total loans and securities 76,737 75,876 75,644 73,183 74,011 73,508 75,640 75,329 74,922 3 U.S. Treasury and govt, agency securities 5,931 6,011 5,768 5,750 6,230 5,239 5,376 5,592 5,757 4 Other securities 5,712 5,712 5,788 5,374 5,371 5,511 5,424 5,408 5,477 5 Federal funds sold2 4,093 5,377 5,773 5,480 4,682 4,045 5,639 6,285 3,823 6 To commercial banks in the United States 3,089 4,352 4,594 4,174 3,902 3,096 4,823 5,437 3,110 7 To others 1,004 1,026 1,178 1,306 780 948 816 848 713 8 Other loans, gross 61,000 58,776 58,316 56,580 57,728 58,713 59,200 58,044 59,865 9 Commercial and industrial 36,724 35,588 35,503 35,678 36,307 36,840 37,052 36,515 36,937 10 Bankers acceptances and commercial paper 3,305 3,064 2,977 3,058 3,036 2,969 2,980 2,919 2,990 11 All other 33,419 32,524 32,526 32,620 33,271 33,870 34,071 33,596 33,947 12 U.S. addressees 31,156 30,294 30,183 30,240 30,955 31,546 31,810 31,397 31,742 13 Non-U.S. addressees 2,263 2,229 2,343 2,381 2,316 2,325 2,261 2,199 2,206 14 To financial institutions 15,877 15,350 14,776 13,922 14,174 14,187 14,196 14,211 14,453 15 Commercial banks in the United States . 12,535 12,196 11,458 10,786 11,022 11,037 10,791 10,721 11,113 16 Banks in foreign countries 1,291 1,064 1,109 986 1,038 1,066 1,116 1,149 1,077 17 Nonbank financial institutions 2,051 2,089 2,209 2,150 2,114 2,083 2,290 2,341 2,263 18 To foreign govts, and official institutions .. 561 567 702 541 532 527 536 521 545 19 For purchasing and carrying securities .. 3,257 2,802 2,841 2,022 2,249 2,588 2,514 1,975 2,925 20 All other 4,581 4,468 4,492 4,417 4,465 4,572 4,902 4,821 5,005 21 Other assets (claims on nonrelated parties).. 23,087 23,221 22,958 23,303 23,280 23,292 23,022 23,360 23,226 22 Net due from related institutions 15,675 15,791 15,050 13,708 12,934 14,043 13,582 14,287 14,627 23 Total assets 124,850 125,268 123,673 120,438 120,817 120,936 122,376 123,444 122,654 24 Deposits or credit balances due to other than directly related institutions.... 36,775 36,344 36,446 35,342 36,608 36,034 36,986 36,744 37,279 25 Transaction accounts and credit balances3 3,097 3,312 3,574 3,050 3,284 3,124 3,333 3,229 3,260 26 Individuals, partnerships, and corporations 1,721 1,994 1,882 1,825 1,811 1,924 1,821 1,973 1,827 27 Other 1,376 1,318 1,692 1,224 1,473 1,200 1,513 1,255 1,432 28 Nontransaction accounts4 33,677 33,032 32,872 32,292 33,324 32,909 33,653 33,515 34,019 29 Individuals, partnerships, and corporations 27,646 26,748 26,642 26,014 27,129 26,738 27,252 27,082 27,160 30 Other 6,031 6,284 6,230 6,278 6,195 6,171 6,400 6,434 6,859 31 Borrowings from other than directly related institutions 50,875 52,898 50,873 46,956 46,772 50,393 47,412 48,359 46,948 32 Federal funds purchased5 27,680 31,046 28,947 25,278 24,966 29,328 25,862 25,375 21,466 33 From commercial banks in the United States 19,103 21,302 19,317 15,266 16,527 19,534 17,523 16,519 13,807 34 From others 8,577 9,744 9,630 10,012 8,439 9,793 8,340 8,856 7,658 35 Other liabilities for borrowed money.... 23,195 21,852 21,926 21,678 21,805 21,065 21,550 22,984 25,482 36 To commercial banks in the United States 20,811' 19,651 19,841 19,303 19,741 18,932 19,146 20,397 22,738 37 To others 2,384' 2,201 2,085 2,374 2,065 2,134 2,404 2,587 2,745 38 Other liabilities to nonrelated parties 24,750 24,931 24,570 24,805 24,833 24,885 24,708 25,095 25,113 39 Net due to related institutions 12,450 11,095 11,784 13,335 12,605 9,624 13,270 13,246 13,313 40 Total liabilities 124,850 125,268 123,673 120,438 120,817 120,936 122,376 123,444 122,654 MEMO 41 Total loans (gross) and securities adjusted6 61,113 59,328 59,591 58,224 59,086 59,374 60,026 59,171 60,699 42 Total loans (gross) adjusted6 49,469 47,605 48,035 47,100 47,486 48,624 49,226 48,171 49,465 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

A22 Domestic Nonfinancial Statistics • February 1987 1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations' Billions of dollars, estimated daily-average balances, not seasonally adjusted Commercial banks TTyyppee ooff hhoollddeerr 1985 1986 11998811 11998822 11998833 11998844 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Mar.34 June Sept. Dec. Mar. June 1 All holders—Individuals, partnerships, and corporations 288.9 291.8 293.5 302.7 286.3 298.4 299.3 321.0 307.4 322.4 2 Financial business 28.0 35.4 32.8 31.7 27.3 27.9 28.1 32.3 31.8 32.3 3 Nonfinancial business 154.8 150.5 161.1 166.3 157.9 164.5 167.2 178.5 166.6 180.0 4 Consumer 86.6 85.9 78.5 81.5 78.9 82.8 82.0 85.5 84.0 86.4 5 Foreign 2.9 3.0 3.3 3.6 3.6 3.7 3.5 3.5 3.4 3.0 6 Other 16.7 17.0 17.8 19.7 18.7 19.5 18.5 21.2 21.6 20.6 Weekly reporting banks 1985 1986 11998811 11998822 11998833 11998844 DDeecc.. DDeecc.. DDeecc.. DDeecc..22 Mar.3'4 June Sept. Dec. Mar. June 7 All holders—Individuals, partnerships, and corporations 137.5 144.2 146.2 157.1 147.7 151.2 153.6 168.6 159.7 168.5 8 Financial business 21.0 26.7 24.2 25.3 21.9 22.1 22.7 25.9 25.5 25.7 9 Nonfinancial business 75.2 74.3 79.8 87.1 82.3 83.7 85.5 94.5 86.8 93.1 10 Consumer 30.4 31.9 29.7 30.5 30.2 31.0 31.6 33.2 32.6 34.9 11 Foreign 2.8 2.9 3.1 3.4 3.4 3.5 3.3 3.1 3.3 2.9 12 Other 8.0 8.4 9.3 10.9 9.8 10.9 10.5 12.0 11.5 11.9 1. Figures include cash items in process of collection. Estimates of gross thrift institutions. Historical data have not been revised. The estimated volume of deposits are based on reports supplied by a sample of commercial banks. Types of such deposits for December 1984 is $5.0 billion at all insured commercial banks depositors in each category are described in the June 1971 BULLETIN, p. 466. and $3.0 billion at weekly reporting banks. Figures may not add to totals because of rounding. 4. Historical data back to March 1985 have been revised to account for 2. Beginning in March 1984, these data reflect a change in the panel of weekly corrections of bank reporting errors. Historical data before March 1985 have not reporting banks, and are not comparable to earlier data. Estimates in billions of been revised, and may contain reporting errors. Data for all commercial banks for dollars for December 1983 based on the new weekly reporting panel are: financial March 1985 were revised as follows (in billions of dollars): all holders, -.3; business, 24.4; nonfinancial business, 80.9; consumer, 30.1; foreign, 3.1; other, financial business, -.8; nonfinancial business, —.4; consumer, .9; foreign, .1; 9.5. other, -.1. Data for weekly reporting banks for March 1985 were revised as 3. Beginning March 1985, financial business deposits and, by implication, total follows (in billions of dollars): all holders, -.1; financial business, -.7; nonfinangross demand deposits have been redefined to exclude demand deposits due to cial business, -.5; consumer, 1.1; foreign, .1; other, -.2. 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 1986 Instrument Dec. Dec. Dec. Dec. Dec. May June July Aug. Sept. Oct. Commercial paper (seasonally adjusted unless noted otherwise) 1 AH issuers 165,829 166,436 187,658 237,586 300,899 309,843 310,711 311,435 326,601 326,567 329,516 Financial companies3 Dealer-placed paper4 2 Total 3300,,333333 3344,,660055 44,455 56,485 78,443 87,423 89,757 90,038 94,084 97,994 99,688 3 Bank-related (not seasonally adjusted) 6,045 2,516 2,441 2,035 1,602 1,575 1,568 1,772 1,799 1,980 2,172 Directly placed paper5 4 Total 81,660 84,393 97,042 110,543 135,504 142,252 142,933 142,121 149,200 147,497 147,163 5 Bank-related (not seasonally adjusted) 26,914 32,034 35,566 42,105 44,778 39.009 40,147 39,067 40,415 37,455 38,957 6 Nonfinancial companies6 53,836 47,437 46,161 70,558 86,952 80,168 78,021 79,276 83,317 81,076 82,665 Bankers dollar acceptances (not seasonally adjusted)7 7 Total 69,226 79,543 78,309 77,121 68,115 66,759 67,080 66,437 64,480 67,009 65,920 Holder 8 Accepting banks 10,857 10,910 9,355 9,811 11,174 12,216 12,789 11,577 12,127 13,101 12,569 9 Own bills 9,743 9,471 8,125 8,621 9,448 10,254 10,641 9,257 9,794 11,001 10,178 10 Bills bought 1,115 1,439 1,230 1,191 1,726 1,962 2,147 2,320 2,333 2,101 2,391 Federal Reserve Banks 11 Own account 195 1,480 418 0 0 0 0 0 0 0 0 12 Foreign correspondents 1,442 949 729 671 937 664 896 931 897 924 1,131 13 Others 56,731 66,204 67,807 66,639 56,004 53,880 53,396 53,929 51,456 52,984 52,220 Basis 14 Imports into United States 14,765 17,683 15,649 17,560 15,147 15,094 15,106 15,601 15,796 16,612 15,980 15 Exports from United States 15,400 16,328 16,880 15,859 13,204 13,574 13,721 13,781 12,948 12,693 12,612 16 All other 39,060 45,531 45,781 43,702 39,765 38,091 38,254 37,056 35,736 37,704 37,328 1. Effective Dec. 1, 1982, there was a break in the commercial paper series. The 4. Includes all financial company paper sold by dealers in the open market. key changes in the content of the data involved additions to the reporting panel, 5. As reported by financial companies that place their paper directly with the exclusion of broker or dealer placed borrowings under any master note investors. agreements from the reported data, and the reclassification of a large portion of 6. Includes public utilities and firms engaged primarily in such activities as bank-related paper from dealer-placed to directly placed. communications, construction, manufacturing, mining, wholesale and retail trade, 2. Correction of a previous misclassification of paper by a reporter has created transportation, and services. a break in the series beginning December 1983. The correction adds some paper to 7. Beginning October 1984, the number of respondents in the bankers acceptnonfinancial and to dealer-placed financial paper. ance survey were reduced from 340 to 160 institutions—those with $50 million or 3. Institutions engaged primarily in activities such as, but not limited to, more in total acceptances. The new reporting group accounts for over 95 percent commercial, savings, and mortgage banking; sales, personal, and mortgage of total acceptances activity. financing; factoring, finance leasing, and other business lending; insurance underwriting; and other investment activities. 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per annum Effective Date Average Month rate 11.50 1985--Jan. 15 10.50 1984—Jan 11.00 1985—July 12.00 May 20 10.00 Feb 11.00 Aug 12.50 June 18 9.50 Mar 11.21 Sept 13.00 Apr 11.93 Oct 12.75 1986--Mar. 7 9.00 May 12.39 Nov 12.50 Apr. 21 8.50 June 12.60 Dec 12.00 July 11 8.00 July 13.00 11.75 Aug. 26 7.50 Aug 13.00 1986—Jan 11.25 Sept 12.97 Feb 10.75 Oct 12.58 Mar Nov 11.77 Apr Dec 11.06 May June 1985—Jan 10.61 July Feb 10.50 Aug Mar 10.50 Sept Apr 10.50 Oct May 10.31 Nov June 9.78 NOTE. These data also appear in the Board's H.15 (519) release. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • February 1987 1.35 INTEREST RATES Money and Capital Markets Averages, percent per annum; weekly and monthly figures are averages of business day data unless otherwise noted. 1986 1986, week ending IInnssttrruummeenntt 11998833 11998844 11998855 Aug. Sept. Oct. Nov. Oct. 31 Nov. 7 Nov. 14 Nov. 21 Nov. 28 MONEY MARKET RATES 1 Federal funds1-2 9.09 10.22 8.10 6.17 5.89 5.85 6.04 5.86 6.02 5.98 6.13 6.00 2 Discount window borrowing1-2'3 8.50 8.80 7.69 5.82 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 Commercial paper4-5 3 1-month 8.87 10.05 7.94 6.02 5.74 5.74 5.84 5.74 5.77 5.83 5.87 5.88 4 3-month 8.88 10.10 7.95 5.92 5.68 5.68 5.76 5.69 5.69 5.77 5.78 5.81 5 6-month 8.89 10.16 8.01 5.83 5.61 5.61 5.69 5.61 5.62 5.71 5.72 5.72 Finance paper, directly placed4 5 6 1-month 8.80 9.97 7.91 5.98 5.76 5.74 5.79 5.69 5.75 5.77 5.81 5.84 7 3-month 8.70 9.73 7.77 5.94 5.61 5.56 5.67 5.55 5.57 5.68 5.70 5.73 8 6-month 8.69 9.65 7.75 5.90 5.54 5.50 5.58 5.46 5.49 5.62 5.63 55..6600 Bankers acceptances5-6 9 3-month 8.90 10.14 7.92 5.80 5.60 5.58 5.67 5.59 5.60 5.71 5.69 5.71 10 6-month 8.91 10.19 7.96 5.71 5.56 5.52 5.59 5.53 5.54 5.66 5.61 5.58 Certificates of deposit, secondary market7 11 1-month 8.96 10.17 7.97 5.97 5.73 5.71 5.80 5.69 5.70 5.82 5.83 5.84 12 3-month 9.07 10.37 8.05 5.92 5.71 5.69 5.76 5.68 5.69 5.81 5.80 5.76 13 6-month 9.27 10.68 8.25 5.92 5.71 5.70 5.76 5.69 5.69 5.81 5.79 5.76 14 Eurodollar deposits, 3-month8 9.56 10.73 8.28 6.06 5.88 5.88 5.96 5.94 5.84 5.96 5.98 5.99 U.S. Treasury bills5 Secondary market9 15 3-month 8.61 9.52 7.48 5.53 5.21 5.18 5.35 5.19 5.26 5.41 5.36 5.39 16 6-month 8.73 9.76 7.65 5.58 5.35 5.26 5.41 5.27 5.35 5.49 5.41 5.42 17 1-year 8.80 9.92 7.81 5.60 5.45 5.41 5.48 5.43 5.45 5.56 5.47 5.45 Auction average10 18 3-month 8.52 9.57 7.47 5.57 5.19 5.18 5.35 5.18 5.23 5.41 5.39 5.35 19 6-month 8.76 9.80 7.64 5.58 5.31 5.26 5.42 5.21 5.30 5.54 5.44 5.39 20 1-year 8.86 9.91 7.76 5.82 5.33 5.44 5.45 5.44 n.a. n.a. n.a. 5.45 CAPITAL MARKET RATES U.S. Treasury notes and bonds11 Constant maturities12 21 1-year 9.57 10.89 8.43 5.93 5.77 5.72 5.80 5.74 5.76 5.89 5.79 5.77 22 2-year 10.21 11.65 9.27 6.33 6.35 6.28 6.28 6.30 6.27 6.37 6.26 6.21 23 3-year 10.45 11.89 9.64 6.49 6.62 6.56 6.46 6.57 6.48 6.55 6.44 6.39 24 5-year 10.80 12.24 10.13 6.80 6.92 6.83 6.76 6.80 6.76 6.85 6.75 6.66 25 7-year 11.02 12.40 10.51 7.01 7.28 7.24 7.08 7.17 7.12 7.18 7.04 6.99 26 10-year 11.10 12.44 10.62 7.17 7.45 7.43 7.25 7.39 7.31 7.34 7.21 7.14 27 20-year 11.34 12.48 10.97 7.28 7.56 7.61 7.42 7.59 7.49 7.49 7.38 7.31 28 30-year 11.18 12.39 10.79 7.33 7.62 7.70 7.52 7.68 7.58 7.59 7.47 7.42 Composite13 29 Over 10 years (long-term) 10.84 11.99 10.75 7.72 8.08 8.04 7.81 7.96 7.87 7.95 7.74 7.71 State and local notes and bonds Moody's series14 30 Aaa 8.80 9.61 8.60 7.11 6.91 6.44 6.19 6.10 6.10 6.30 6.20 6.15 31 Baa 10.17 10.38 9.58 7.81 7.59 7.23 7.13 6.95 6.95 7.20 7.15 7.20 32 Bond Buyer series15 9.51 10.10 9.11 7.21 7.11 7.08 6.85 6.94 6.94 6.92 6.78 6.74 Corporate bonds Seasoned issues16 33 All industries 12.78 13.49 12.05 9.44 9.55 9.54 9.37 9.49 9.41 9.42 9.34 9.28 34 Aaa 12.04 12.71 11.37 8.72 8.89 8.86 8.68 8.80 8.73 8.77 8.65 8.55 35 Aa 12.42 13.31 11.82 9.22 9.36 9.33 9.20 9.30 9.26 9.25 9.16 9.11 36 A 13.10 13.74 12.28 9.64 9.73 9.72 9.51 9.65 9.56 9.54 9.48 9.43 37 Baa 13.55 14.19 12.72 10.18 10.20 10.24 10.07 10.19 10.09 10.12 10.04 99..9999 38 A-rated, recently-offered utility bonds17 12.73 13.81 12.06 9.51 9.56 9.48 9.31 9.32 9.42 9.37 9.22 9.16 MEMO: Dividend/price ratio18 39 Preferred stocks 11.02 11.59 10.49 8.42 8.10 8.17 8.07 8.09 8.10 8.01 8.03 8.13 40 Common stocks 4.40 4.64 4.25 3.36 3.43 3.49 3.40 3.44 3.36 3.37 3.50 3.35 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 ar? 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 often 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 1986 IInnddiiccaattoorr 11998833 11998844 11998855 Mar. Apr. May June July Aug. Sept. Oct. Nov. Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) 92.63 92.46 108.09 133.97 137.25 137.37 140.82 138.32 140.91 137.06 136.74 140.84 2 Industrial 107.45 108.01 123.79 152.75 157.35 158.59 163.15 158.06 160.10 156.52 156.56 162.10 3 Transportation 89.36 85.63 104.11 128.66 125.92 122.21 120.65 112.03 111.24 114.06 120.04 122.27 4 Utility 47.00 46.44 56.75 68.06 69.35 68.65 70.69 74.20 77.84 74.56 73.38 75.77 5 Finance 95.34 89.28 114.21 153.94 154.83 151.28 151.73 150.23 152.90 145.56 143.89 142.97 6 Standard & Poor's Corporation (1941-43 = 10)1 ... 160.41 160.50 186.84 232.33 237.97 238.46 245.30 240.18 245.00 238.27 237.36 245.09 7 American Stock Exchange2 (Aug. 31, 1973 = 50) 216.48 207.96 229.10 264.91 270.59 274.22 281.18 269.93 268.55 264.30 257.82 265.14 Volume of trading (thousands of shares) X New York Stock Exchange 85,418 91,084 109,191 160,755 146,330 127,624 126,151 137,709 128,661 150,831 131,155 154,770 9 American Stock Exchange 8,215 6,107 8,355 15,902 13,503 11,870 12,795 10,320 9,885 10,853 8,930 10,513 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 23,000 22,470 28,390 29,090 30,760 32,370 32,480 33,170 34,550 34,580 36,310 Free credit balances at brokers4 11 Margin-account5 1,755 2,715 2,715 3,065 2,405 2,585 2,570 3,035 3,395 3,805 12 Cash-account 8,430 10,215 12,840 13,920 14,340 12,970 13,570 14,600 14,210 14,060 14,445 Margin-account debt at brokers (percentage distribution, end of period)6 13 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 By equity class (in percentf 14 Under 40 22.0 18.0 34.0 29.0 29.0 30.0 31.0 15 40-49 22.0 18.0 20.0 19.0 20.0 19.0 20.0 n.a. n.a. n a. n a. n a. 16 50-59 16.0 16.0 19.0 22.0 20.0 22.0 20.0 17 60-69 9.0 9.0 11.0 13.0 13.0 12.0 13.0 18 70-79 6.0 5.0 8.0 8.0 9.0 8.0 8.0 19 80 or more 6.0 6.0 8.0 9.0 9.0 9.0 8.0 Special miscellaneous-account balances at brokers (end of period)6 20 Total balances (millions of dollars)8 ... 58,329 75,840 99,310 103,450 105,790 109,620 112,401 Distribution by equity status (percent) 21 Net credit status Debt status, equity of 22 60 percent or more 28.0 29.0 31.0 31.0 33.0 33.0 32.0 23 Less than 60 percent 9.0 11.0 11.0 8.0 8.0 9.0 9.0 Margin requirements (percent of market value and effective date)9 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 and dealers. Data items that are no longer reported include distributions of margin companies. With this change the index includes 400 industrial stocks (formerly debt by equity status of the account and special miscellaneous-account 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40 balances. financial. 7. Each customer's equity in his collateral (market value of collateral less net 2. Beginning July 5, 1983, the American Stock Exchange rebased its index debit balance) is expressed as a percentage of current collateral values. effectively cutting previous readings in half. 8. Balances that may be used by customers as the margin deposit required for 3. Beginning July 1983, under the revised Regulation T, margin credit at additional purchases. Balances may arise as transfers based on loan values of broker-dealers includes credit extended against stocks, convertible bonds, stocks other collateral in the customer's margin account or deposits of cash (usually sales acquired through exercise of subscription rights, corporate bonds, and govern- proceeds) occur. ment securities. Separate reporting of data for margin stocks, convertible bonds, 9. Regulations G, T, and U of the Federal Reserve Board of Governors, and subscription issues was discontinued in April 1984, and margin credit at prescribed in accordance with the Securities Exchange Act of 1934, limit the broker-dealers became the total that is distributed by equity class and shown on amount of credit to purchase and carry margin stocks that may be extended on lines 17-22. securities as collateral by prescribing a maximum loan value, which is a specified 4. Free credit balances are in accounts with no unfulfilled commitments to the percentage of the market value of the collateral at the time the credit is extended. brokers and are subject to withdrawal by customers on demand. Margin requirements are the difference between the market value (100 percent) 5. New series beginning June 1984. and the maximum loan value. The term "margin stocks" is defined in the 6. In July 1986, the New York Stock Exchange stopped reporting certain data corresponding regulation. items that were previously obtained in a monthly survey of a sample of brokers Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • February 1987 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1986 AAccccoouunntt 11998833 11998844 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Savings and loan associations 1 Assets. 773,417 903,488 938,467 943,029 947,302 954,089' 962,484' 953,527' 958,049' 965,071' 957,503' 961,305 2 Mortgages 494,789 555,277 557788,,447722 557766,,660088 557744,,773322 557755,,228888 557755,,009977 556655,,114488 556655,,337766 556666,,550066 555577,,442299 555577,,552211 3 Mortgage-backed securities... 9966,,889911 9988,,448822 9999,,333322 110022,,339988'' 110077,,330088'' 111122,,115544'' 111133,,009955'' 111133..6622CC 111177,,6644CC 112200,,330044 4 Cash and investment securities' 104,274 124,801 112233,,441155 112277,,002288 113311,,446644 113322,,334477 113344,,886688'' 113300,,996600'' 113322,,880011'' 113388,,885588'' 113388,,335577'' 113377,,998888 5 Other 174,354 223,396 223366,,885500 223399,,339944 224411,,110044 224466,,445544'' 225522,,557788'' 225577,,441177'' 225599,,887700'' 225599,,770066'' 226611,,771155'' 226655,,779944 6 Liabilities and net worth. 773,417 903,488 938,467 943,029 947,302 954,089' 962,484' 953,527' 958,049' 965,071' 957,503' 961,305 7 Savings capital... 634,455 725,045 745,218 747,016 752,056 750,299 751,138 744,021' 747,020' 749,023' 743,496' 742,192 n a. 8 Borrowed money 92,127 125,666 131,521 131,671 133,407 139,574 144,179 147,205' 146,589' 148,525' 155,484' 152,098 9 FHLBB 52,626 64,207 71,488 71,214 70,464 73,815 73,520 73,555 75,058' 75,594 80,36C 75,279 10 Other 39,501 61,459 60,033 60,457 62,943 65,759 70,659 73,650' 71,531' 72,931' 75,124' 76,819 11 Other 15,968 17,944 21,024 23,125 20,078 22,046' 24,783' 20,907' 22,856' 24,709' 15,423' 23,277 12 Net worth2. 30,867 34,833 40,704 41,217r 41,760 42,17c 42,384' 41,393' 41,583' 42,815' 43,099' 43,738 MEMO 13 Mortgage loan commitments outstanding3 54,113 61,305 51,130 52,542 54,366 55,818 57,997 57,183 55,687 53,164 51,531 49,927 FSLIC-insured federal savings banks 14 Assets 64,969 98,559 142,136 146,508 152,823 155,684 164,129 180,129' 183,309' 186,763' 196,279' 201,759 15 Mortgages 38,698 57,429 78,984 81,641 85,028 865,598' 89,108 99,636' 101,797' 103,040' 108,207' 110,251 16 Mortgage-backed securities.... 7,172 9,949 16,620 16,367 17,851 18,661 19,829 21,61C 23,249' 24,098' 26,445' 27,507 17 Other 6,595 10,971 13,274 13,759 13,923 14,590 15,083 16,784' 17,01C 17,036' 18.37C 18,641 18 Liabilities and net worth 64,969 98,559 142,136 146,508 152,823 155,684 164,129 180,129' 183,309' 186,763' 196,279' 201,759 19 Savings capital 53,227 79,572 111,879 114,743 119,434 121,133 126,123 138,168 140,610 142,808' 149,071' 152,481 n a. 20 Borrowed money 7,477 12,798 20,419 21,254 22,747 23,196 25,686 28,502 28,722' 29,39C 32,32C 33,432 21 FHLBB 4,640 7,515 11,151 11,283 12,064 12,476 12,830 15,301 15,866 16,157 16,845 17, 388 22 Other 2,837 5,283 9,268 9,971 10,683 10,720 12,856 13,201 12,856' 13,233' 15,475' 16,044 23 Other 1,157 1,903 2,983 3,397 3,291 3,758' 4,338 4,279 4,555' 4,918' 4,6%' 5,325 24 Net worth 3,108 4,286 6,855 7,114 7,349 7,599 7,982 9,179' 9,424' 9,647' 10,191' 10,520 MEMO 25 Mortgage loan commitments outstanding3 2,151 3,234 6,707 7,718 8,330 8,287 8,762 9,410' 10,134 9,770' 10.22C 9,371 Savings banks 26 Assets 193,535 203,898 216,673 218,119 221,256 222,542 226,495 223,367 224,569 227,011 228,854 Loans 27 Mortgage 97,356 102,895 108,973 109,702 110,271 111,813' 112,417 110,958 111,971 113,265 114,188 28 Other 19,129 24,954 31,752 32,501 34,873 34,591 35,500 36,692 36,421 37,350 37,298 Securities 29 U.S. government 15,360 14,643 12,568 12,474 12,313 12,013 13,210 12,115 12,297 12,043 12,357 30 Mortgage-backed securities ... 18,205 19,215 21,372 21,525 21,593 21,885 22,546 22,413 22,954 21,161 23,216 31 State and local government... 2,177 2,077 2,298 2,297 2,306 2,372 2,343 2,281 2,309 2,400 2,407 32 Corporate and other 25,375 23,747 20,828 20,707 20,403 20,439 20,260 2,036 20,862 20,602 20,902 33 Cash 6,263 4,954 5,645 5,646 5,845 5,570 6,225 5,301 4,651 5,018 4,811 n a. n a. 34 Other assets 9,670 11,413 13,237 13,267 13,652 13,859 13,994 13,244 13,104 13,172 13,675 35 Liabilities 193,535 203,898 216,673 218,119 221,256 222,542 226,495 223,367 224,569 227,011 228,854 36 Deposits 172,665 180,616 186,321 186,777 188,960 189,025 190,310 189,109 188,615 189,937 190,210 37 Regular4 170,135 177,418 182,399 182,890 184,704 184,580 185,716 183,970 183,433 184,764 185,002 38 Ordinary savings 38,554 33,739 32,365 32,693 33,021 33,057 33,577 34,008 34,166 34,530 35,227 39 Time 95,129 104,732 104,436 104,588 105,562 105,550 105,146 103,083 102,374 102,668 102,191 40 Other 2,530 3,198 3,922 3,887 4,256 4,445 4,594 5,139 5,182 5,173 5,208 41 Other liabilities 10,154 12,504 17,086 17,793 18,412 19,074 21,384 19,226 20,641 21,360 21,947 42 General reserve accounts 10,368 10,510 12,925 13,211 13,548 14,114 14,519 14,731 15,084 15,427 16,319 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All 1.37—Continued 1986 AAccccoouunntt 11998833 11998844 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Credit unions5 43 Total assets/liabilities and capital . 81,961 93,036 118,933 122,623 126,653 128,229 132,415 134,703 137,901 139,233 140,496 44 Federal 54,482 63,205 78,619 80,024 82,275 83,543 86,289 87,579 89,539 90,367 91,981 45 State 27,479 29,831 40,314 42,599 44,378 44,686 46,126 47,124 48,362 48,866 48,515 46 Loans outstanding 50,083 62,561 73,513 74,207 75,300 76,385 76,774 77,847 79,647 80,656 81,820 n a. n a. 47 Federal 32,930 42,337 48,055 48,059 48,633 49,756 49,950 50,613 51,331 52,007 53,042 48 State 17,153 20,224 25,458 26,148 26,667 26,629 26,824 27,234 28,316 28,649 28,778 49 Savings 74,739 84,348 107,238 110,541 114,579 116,703 120,331 122,952 125,331 126,268 128,125 50 Federal 49,889 57,539 72,166 73,227 75,698 77,112 79,479 80,975 82,596 83,132 84,607 51 State 24,850 26,809 35,072 37,314 38,881 39,591 40,852 41,977 42,735 43,136 43,518 Life insurance companies 52 Assets 654,948 722,979 831,716 839,856 848,535 855,605 863,610 872,359 877,919 887,255 892,304 Securities 53 Government 50,752 63,899 75,937 76,761 77,965 78,494 79,051 78,284 78,722 79,188 81,636 54 United States6 28,636 42,204 52,243 53,264 54,289 54,705 55,120 54,197 54,321 54,487 56,698 55 State and local 9,986 8,713 9,869 9,588 9,674 9,869 9,930 10,114 10,350 10,472 10,606 56 Foreign7 12,130 12,982 13,825 13,909 14,002 13,920 14,001 13,973 14,051 14,229 14,332 57 Business 322,854 359,333 428,979 435,758 440,963 445,573 450,279 455,119 455,013 463,135 462,540 n.a. n a. 58 Bonds 257,986 295,998 351,402 354,911 357,196 361,306 364,122 367,966 369,704 374,670 378,267 59 Stocks 64,868 63,335 77,577 80,847 83,767 84,267 86,157 87,153 85,309 88,465 84,273 60 Mortgages 150,999 156,699 172,324 172,997 174,823 175,951 177,554 180,041 182,542 183,943 185,268 61 Real estate 22,234 25,767 29,035 29,356 29,804 30,059 30,025 30,350 31,151 31,844 31,725 62 Policy loans 54,063 54,505 54,264 54,267 54,273 54,272 54,351 57,342 54,249 54,247 54,273 63 Other assets 54,046 63,776 57,090 57,351 57,753 57,492 57,802 58,290 58,792 57,905 58,086 1. Holdings of stock of the Federal Home Loan Banks are in "other assets." FSLIC-insured federal savings banks: Estimates by the FHLBB for federal 2. Includes net undistributed income accrued by most associations. savings banks insured by the FSLIC and based on monthly reports of federally 3. As of July 1985, data include loans in process. insured institutions. 4. Excludes checking, club, and school accounts. Savings banks: Estimates by the National Council of Savings Institutions for all 5. Data include all federally insured credit unions, both federal and state savings banks in the United States and for FDIC-insured savings banks that have chartered, serving natural persons. converted to federal savings banks. 6. Direct and guaranteed obligations. Excludes federal agency issues not Credit unions: Estimates by the National Credit Union Administration for guaranteed, which are shown in the table under "Business" securities. federally chartered and federally insured state-chartered credit unions serving 7. Issues of foreign governments and their subdivisions and bonds of the natural persons. International Bank for Reconstruction and Development. Life insurance companies: Estimates of the American Council of Life Insurance NOTE. Savings and loan associations: Estimates by the FHLBB for all for all life insurance companies in the United States. Annual figures are annualassociations in the United States based on annual benchmarks for non-FSLIC- statement asset values, with bonds carried on an amortized basis and stocks at insured associations and the experience of FSLIC-insured associations. year-end market value. Adjustments for interest due and accrued and for differences between market and book values are not made on each item separately but are included, in total, in "other assets." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Nonfinancial Statistics • February 1987 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year FFFiiissscccaaalll FFFiiissscccaaalll FFFiiissscccaaalll TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn yyyeeeaaarrr yyyeeeaaarrr yyyeeeaaarrr 1986 111999888444 111999888555 111999888666 June July Aug. Sept. Oct. Nov. U.S. budget1 1 Receipts, total 666,457 734,057 769,091 77,024 62,974 56,523 78,013 59,012 52,%7 2 On-budget n.a. 547,886 568,862 58,400 47,571 41,404 59,978 43,865 38,158 3 Off-budget n.a. 186,170 200,228 18,624 15,402 15,119 18,035 15,147 14,809 4 Outlays, total 851,7% 945,987 989,789 78,034 85,203 84,434 81,750 84,267 79,973 5 On-budget n.a. 769,180 806,291 60,982 69,604 68,112 65,614 68,780 63,639 6 Off-budget n.a. 176,807 183,498 17,052 15,599 16,322 16,136 15,486 16,334 7 Surplus, or deficit (-), total -185,339 -211,931 -220,698 -1,011 -22,229 -27,911 -3,737 -25,255 -27,006 8 On-budget n.a. -221,294 -237,428 -2,583 -22,033 -26,708 -5,636 -24,915 -25,481 9 Off-budget n.a. 9,363 16,371 1,572 -1% -1,203 1,898 -340 -1,524 Source of financing (total) 10 Borrowing from the public 170,817 197,269 235,745 18,500 14,980 20,278 22,188 55,,993366 4400,,335522 11 Cash and monetary assets (decrease, or increase (-))2 5,636 10,673 -18,044 -13,065 3,972 10,298 -21,313 18,131 -2,721 12 Other3 8,885 3,989 2,997 -4,424 3,277 -2,665 2,862 1,188 -10,625 MEMO 13 Treasury operating balance (level, end of period) 22,345 17,060 31,384 24,641 20,810 10,428 31,384 13,616 17,007 14 Federal Reserve Banks 3,791 4,174 7,514 3,143 3,983 1,106 7,514 2,491 2,529 15 Tax and loan accounts 18,553 12,886 23,870 21,498 16,827 9,322 23,870 11,126 14,478 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 Fiscal Fiscal Source or type year year 1985 1986 1986 1985 1986 HI Sept. Nov. RECEIPTS 1 AU sources 734,057 769,091 341,392 380,618 364,790 394,345 78,013 59,012 52, %7 2 Individual income taxes, net 334,560 348,959 157,229 166,783 169,987 169,444 37,125 31,123 24,122 4 3 P W re it s h i h d e e l n d t ial Election Campaign Fund . 298,94 3 1 5 314,80 3 3 6 145,210 5 149,28 2 8 9 155,725 6 153,91 3 9 1 24,707 1 29,556 0 24,242 0 5 Nonwithheld 101,328 105,994 19,403 76,155 22,295 78,981 14,199 3,122 1,143 6 Refunds 65,743 71,873 7,387 58,684 8,038 63,488 1,782 1,554 1,263 Corporation income taxes 7 Gross receipts 77,413 80,442 35,190 42,193 36,528 41,946 13,162 3,219 2,716 8 Refunds 16,082 17,298 6,847 8,370 7,751 9,557 1,713 2,679 %8 9 Social insurance taxes and contributions net 265,163 283,901 128,017 156,714 23,507 21,179 21,751 10 Employment taxes and contributions1 234,646 255,062 105,624 126,038 116,276 139,706 22,819 19,583 19,015 11 Self- c e o m n p tr l i o b y u m ti e o n n t s 2 t axes and 10,468 11,840 1,086 9,482 985 10,581 1,379 0 223 12 Unemployment insurance 25,758 24,098 10,706 16,213 9,281 14,674 314 1,135 2,377 13 Other net receipts3 4,759 4,741 2,360 2,350 2,458 2,333 374 459 360 14 Excise taxes 35,992 32,919 18,961 17,259 18,470 15,944 2,653 2,708 15 Customs deposits 12,079 13,323 6,329 5,807 6,354 6,369 1,236 1,281 ,090 16 Estate and gift taxes 6,422 6,958 3,029 3,204 3,323 3,487 599 647 488 17 Miscellaneous receipts4 18,510 19,887 8,812 9,144 9,861 10,002 1,445 1,534 ,279 OUTLAYS 18 All types 946,223 989,789 446,944 463,842 487,188 486,037 81,750 84,267 79,973 19 National defense 252,748 273,369 118,286 124,186 134,675 135,367 23,964 23,177 20,907 2 2 2 2 2 4 0 1 2 3 G I N E A n n e a g t e n e t r u r i r e c g n r r a u y a a l l l t t i r u o s e r c n e s i a o e l u n a r c c f e f e , a s i s r p a s n a d c e, e n a v n i d r o t n e m ch e n n o t logy . 2 1 1 5 8 5 3 6 , , , , , 5 6 6 3 1 6 8 2 5 7 5 5 7 7 6 3 1 1 1 9 4 4 3 , , , , , 7 0 1 4 5 9 1 6 7 0 2 7 9 1 8 4 7 8 8 1 , , , , , 5 4 3 5 4 2 7 7 5 2 4 3 0 0 3 1 6 4 5 1 , , , , 6 8 2 6 7 7 9 3 0 8 5 2 0 5 0 1 8 4 7 3 5 , , , , , 7 3 5 3 4 2 6 1 5 0 7 7 2 3 5 1 1 6 5 2 4 2 , , , , , 2 3 4 4 5 4 8 8 8 1 5 4 4 2 9 2 2 1 , , , 6 8 8 2 2 0 0 2 7 2 3 7 6 1 8 3 1 1 , , , 5 7 4 2 2 7 0 9 5 0 3 5 4 9 0 3 1 , , 1 9 7 5 9 6 8 5 7 0 2 6 3 3 8 25 Commerce and housing credit 4,229 4,258 2,663 -260 644 860 1,884 593 182 26 Transportation 25,838 28,058 13,673 11,440 15,360 12,658 2,969 2,107 2,399 27 Community and regional development .. 7,680 7,510 4,836 3,408 3,901 3,169 516 735 478 28 Education, training, employment, social services 29,342 13,737 14,149 14,481 14,712 2,507 2,332 29 Health 33,542 35,936 15,692 16,945 17,237 17,872 2,997 4,266 3,153 30 Social security and medicare 254,446 190,850 119,613 128,351 129,037 135,214 22,756 23,700 22,182 31 Income security 128,200 120,686 61,558 65,246 59,457 60,786 8,574 9,367 9,130 32 Veterans benefits and services 26,352 26,614 13,317 11,956 14,527 12,193 829 3,491 797 3 3 3 4 G A e d n m e i r n a i l s t g r o a v ti e o r n n m of e j n u t stice 6 5 , , 2 2 7 2 7 8 6 6 , , 5 7 5 9 5 6 2 2 , , 9 5 9 5 2 2 3 2 , , 0 8 1 5 6 7 3 3 , , 6 2 3 1 4 2 3 3 , , 3 5 5 6 2 6 5 52 1 5 3 5 2 3 0 9 9 5 37 0 1 5 3 3 3 5 6 7 N G U e e n t n d e i i s n r t a t r l e i - r b p e u u s t r t e ' p d o s o e f f f s i e s t c t a i l n g a s r s e i c s e t i a p n t c s e 6 - 1 3 2 2 6 9 , , , 7 3 4 5 5 3 9 3 6 - 1 3 3 3 6 5 , , , 2 4 2 4 3 8 4 0 4 -1 6 7 1 3 , , , 0 2 4 6 9 5 1 3 8 -1 6 4 5 2 , , , 4 1 6 3 4 5 6 3 9 -1 6 7 7 3 , , , 9 3 4 5 9 4 3 1 8 -1 6 7 8 2 , , , 1 0 1 9 5 7 3 4 9 -3 8 1 , , , 6 7 1 % 4 3 0 9 -3 9 , , 7 9 2 1 5 8 9 1 4 - 1 2 2 , , 4 4 - 5 2 4 5 1 1. Old-age, disability, and hospital insurance, and railroad retirement accounts. 5. Net interest function includes interest received by trust funds. 2. Old-age, disability, and hospital insurance. 6. Consists of rents and royalties on the outer continental shelf and U.S. 3. Federal employee retirement contributions and civil service retirement and government contributions for employee retirement. disability fund. 4. Deposits of earnings by Federal Reserve Banks and other miscellaneous SOURCE. "Monthly Treasury Statement of Receipts and Outlays of the U.S. receipts. Government," and the Budget of the U.S. Government, Fiscal Year 1987. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • February 1987 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1984 1985 1986 IItteemm Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 1 Federal debt outstanding 1,576.7 1,667.4 1,715.1 1,779.0 1,827.5 1,950.3 1,991.1 2,063.6 2,129.5 2 Public debt securities 1,572.3 1,663.0 1,710.7 1,774.6 1,823.1 1,945.9 1,986.8 2,059.3 2,125.3 3 Held by public 1,309.2 1,373.4 1,415.2 1,460.5 1,506.6 1,597.1 1,634.3 1,684.9 1,742.4 4 Held by agencies 263.1 289.6 295.5 314.2 316.5 348.9 352.6 374.4 382.9 5 Agency securities 4.5 4.5 4.4 4.4 4.4 4.4 4.3 4.3 4.2 6 Held by public 3.4 3.4 3.3 3.3 3.3 3.3 3.2 3.2 3.2 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 1,573.0 1,663.7 1,711.4 1,775.3 1,823.8 1,932.4 1,973.3 2,060.0 2,111.0 9 Public debt securities 1,571.7 1,662.4 1,710.1 1,774.0 1,822.5 1,931.1 1,972.0 2,058.7 2,109.7 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 1,573.0 1,823.8 1,823.8 1,823.8 1,823.8 2,078.7 2,078.7 2,078.7 2,111.0 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 1986 TTyyppee aanndd hhoollddeerr 11998811 11998822 11998833 Q4 Ql Q2 Q3 1 Total gross public debt 1,028.7 1,197.1 1,410.7 1,663.0 1,945.9 1,986.8 2,059.3 2,125.3 By type 2 Interest-bearing debt 1,027.3 1,195.5 1,400.9 1,660.6 1,943.4 1,984.2 2,056.7 2,122.7 3 Marketable 720.3 881.5 1,050.9 1,247.4 1,437.7 1,472.8 1,498.2 1,564.3 4 Bills 245.0 311.8 343.8 374.4 399.9 393.2 396.9 410.7 5 Notes 375.3 465.0 573.4 705.1 812.5 842.5 869.3 896.9 6 Bonds 99.9 104.6 133.7 167.9 211.1 223.0 232.3 241.7 7 Nonmarketable1 307.0 314.0 350.0 413.2 505.7 511.4 558.5 558.4 8 State and local government series 23.0 25.7 36.7 44.4 87.5 88.5 98.2 102.4 9 Foreign issues2 19.0 14.7 10.4 9.1 7.5 6.7 5.3 4.1 10 Government 14.9 13.0 10.4 9.1 7.5 6.7 5.3 4.1 11 Public 4.1 1.7 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 68.1 68.0 70.7 73.1 78.1 79.8 82.3 85.6 13 Government account series3 196.7 205.4 231.9 286.2 332.2 336.0 372.3 365.9 14 Non-interest-bearing debt 1.4 1.6 9.8 2.3 2.5 2.6 2.6 .4 By holder* 15 U.S. government agencies and trust funds 203.3 209.4 236.3 289.6 348.9 352.6 374.4 382.9 16 Federal Reserve Banks 131.0 139.3 151.9 160.9 181.3 184.8 183.8 190.8 17 Private investors 694.5 848.4 1,022.6 1,212.5 1,417.2 1,473.1 1,502.7 1,553.3 18 Commercial banks 111.4 131.4 188.8 183.4 192.2 195.1 197.2 212.5 19 Money market funds 21.5 42.6 22.8 25.9 25.1 29.9 22.8 24.9 20 Insurance companies 29.0 39.1 56.7 76.4 93.2 95.8 n.a. n.a. 21 Other companies 17.9 24.5 39.7 50.1 59.0 59.6 59.8 67.0 22 State and local governments 104.3 127.8 155.1 179.4 n.a. n.a. n.a. n.a. Individuals 23 Savings bonds 68.1 68.3 71.5 74.5 79.8 81.4 83.8 87.1 74 Other securities 42.7 48.2 61.9 69.3 75.0 76.2r 73.9' 69.0 25 Foreign and international5 136.6 149.5 166.3 192.9 214.6 225.4 239.8' 256.3 26 Other miscellaneous investors6 163.0 217.0 259.8 360.6 n.a. n.a. 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 Sept. Oct. Nov. Oct. 22' Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 Immediate delivery2 1 U.S. government securities 42,135 52,778 75,331 102,015 93,308' 96,844 85,855 100,241 99,483 100,720 104,395 100,142 By maturity 2 Bills 22,393 26,035 32,900 35,526 32,634' 32,218 30,595 33,796 32,487 33,707 36,723 30,424 3 Other within 1 year 708 1,305 1,811 2,263 2,221 2,122 1,536 2,411 2,452 2,496 2,430 2,112 4 1-5 years 8,758 11,733 18,361 29,743 25,480' 25,954 24,953 25,672' 26,187 25,197 28,717 27,730 5 5-10 years 5,279 7,606 12,703 21,718 21,186' 20,976 17,533 25,502' 23,593 20,784 19,678 24,941 6 Over 10 years 4,997 6,099 9,556 12,766 11,787' 15,574 11,238 12,861 14,765 18,536 16,847 14,935 By type of customer 7 U.S. government securities dealers 2,257 2,919 3,336 4,232 3,905 3,902 2,747 3,637 4,972 4,396 3,552 3,346 8 U.S. government securities brokers 21,045 25,580 36,222 54,585 49,366 50,707 45,456 53,876 51,373 54,249 56,416 51,757 9 All others3 18,833 24,278 35,773 43,199 40,037' 42,235 37,651 42,728' 43,138 42,076 44,429 45,040 10 Federal agency securities 5,576 7,846 11,640 17,693 18,302 20,111 23,729 20,221' 17,050 15,095 26,247 23,840 11 Certificates of deposit 4,333 4,947 4,016 4,724 4,372' 3,861 3,993 4,221' 3,759 3,558 3,641 4,990 17 Bankers acceptances 2,642 3,243 3,242 3,452 3,348 2,859 3,549 2,534 3,160 3,335 2,849 2,873 13 Commercial paper 8,036 10,018 12,717 16,058 17,078 16,705 17,401 17,014 17,558 17,108 17,074 17,997 Futures transactions4 14 Treasury bills 6,655 6,947 5,561 3,056 1,754 2,801 2,728 1,361 2,084 3,172 3,361 2,682 15 Treasury coupons 2,501 4,503 6,069 7,784 5,416 6,387 5,307 5,430 6,247 6,568 7,016 6,570 16 Federal agency securities 265 262 240 4 0 11 * 2 1 1 23 36 Forward transactions5 17 U.S. government securities 1,493 1,364 1,283 1,838 1,731' 2,403 3,082 1,968 2,254 3,063 3,243 1,367 18 Federal agency securities 1,646 2,843 3,857 8,685' 8,450 10,258 10,913 7,581 7,055 8,151 14,356 11,579 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 NOTE. Data for the period May 1 to Sept. 30, 1986, are partially estimated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • February 1987 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Averages of daily figures, in millions of dollars 1986 1986 week ending Wednesday Sept. Oct. Nov. Oct. 29 Nov. 5 Nov. 12 Nov. 19 Nov. 26 Positions Net immediate2 1 U.S. government securities 14,082 5,429 7,391 11,302 8,297' 14,368' 10,039' 12,512 14,083 11,611 17,618 2 Bills 10,800 5,500 10,075 8,676 11,060' 14,967 11,633 15,008 12,667 13,083 18,338 3 Other within 1 year 921 63 1,050 2,847 2,704 2,030 2,150 1,611 1,790 2,053 2,299 4 1-5 years 1,912 2,159 5,154 11,917 9,676' 8,419 10,946 11,493 11,612 5,870 6,663 5 5-10 years -78 -1,119 -6,202 -9,181 -11,127 -8,131 -11,098 -11,680 -9,584 -6,954 -6,554 6 Over 10 years 528 -1,174 -2,686 -2,957 -4,017 -2,916 -3,593 -3,921 -2,403 -2,440 -3,128 7 Federal agency securities 7,313 15,294 22,860 30,165 29,066' 30,257 28,155 28,593 29,313 31,296 30,922 8 Certificates of deposit 5,838 7,369 9,192 11,289 9,511 9,956 8,944 9,933 9,841 9,307 10,353 9 Bankers acceptances 3,332 3,874 4,586 5,665 5,897 5,244 5,074 5,445 5,718 5,290 4,654 10 Commercial paper 3,159 3,788 5,570 8,991 8,302 9,630 7,250 9,710 10,862 9,554 8,380 Futures positions 11 Treasury bills -4,125 -4,525 -7,322 -15,996 -15,845 -15,972 -13,900 -14,595 -14,857 -15,981 -17,360 12 Treasury coupons -1,033 1,794 4,465 4,234 3,424 4,022 3,132 2,917 3,801 4,216 4,360 13 Federal agency securities 171 233 -722 -64 -70 -82 -75 -80 -80 -82 -83 Forward positions 14 U.S. government securities -1,936 -1,643 -911 -3,769 -122' -781 410 190 -1,294 -1,262 -629 15 Federal agency securities -3,561 -9,205 -9,420 -10,224 -11,322' -14,622 -11,378 -11,323 -13,815 -15,408 -15,661 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 29,099 44,078 68,035 112,717' 115,847 n.a. 112,095' 106,699 112,752 114,482 n.a. 17 Term agreements 52,493 68,357 80,509 106,049' 110,294 n.a. 111,118' 117,147 113,195 114,179 n.a. Repurchase agreements5 18 Overnight and continuing 57,946 75,717 101,410 148,687' 150,662 n.a. 141,865' 147,499 155,517 154,786 n.a. 19 Term agreements 44,410 57,047 77,748 104,168' 108,375 n.a. 110,059' 114,015 105,989 109,099 n.a. 1. Data for dealer positions and sources of financing are obtained from reports reverses to maturity, which are securities that were sold after having been submitted to the Federal Reserve Bank of New York by the U.S. government obtained under reverse repurchase agreements that mature on the same day as the securities dealers on its published list of primary dealers. securities. Data for immediate positions do not include forward positions. Data for positions are averages of daily figures, in terms of par value, based on 3. Figures cover financing involving U.S. government and federal agency the number of trading days in the period. Positions are net amounts and are shown securities, negotiable CDs, bankers acceptances, and commercial paper. on a commitment basis. Data for financing are in terms of actual amounts 4. Includes all reverse repurchase agreements, including those that have been borrowed or lent and are based on Wednesday figures. arranged to make delivery on short sales and those for which the securities 2. Immediate positions are net amounts (in terms of par values) of securities obtained have been used as collateral on borrowings, that is, matched agreements. owned by nonbank dealer firms and dealer departments of commercial banks on a 5. Includes both repurchase agreements undertaken to finance positions and commitment, that is, trade-date basis, including any such securities that have "matched book" repurchase agreements. been sold under agreements to repurchase (RPs). The maturities of some NOTE. Data on positions for the period May 1 to Sept. 30, 1986, are partially repurchase agreements are sufficiently long, however, to suggest that the securi- estimated. ties involved are not available for trading purposes. Immediate positions include 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 1986 AAggeennccyy 11998833 11998844 11998855 May June July Aug. Sept. Oct. 1 Federal and federally sponsored agencies 240,068 271,220 293,905 294,961 296,226 298,361 n.a. n.a. n.a. 2 Federal agencies 33,940 35,145 36,390 36,110 35,826 35,768 36,132 36,473 36,716 3 Defense Department1 243 142 71 52 48 45 40 37 36 4 Export-Import Bank2'3 14,853 15,882 15,678 15,256 14,953 14,953 14,953 14,274 14,274 5 Federal Housing Administration4 194 133 115 118 115 115 115 117 123 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 1,404 1,337 1,940 1,940 1,854 1,854 1,854 3,104 3,104 8 Tennessee Valley Authority 14,970 15,435 16,347 16,505 16,617 16,562 16,931 16,702 16,940 9 United States Railway Association6 111 51 74 74 74 74 74 74 74 10 Federally sponsored agencies1 206,128 236,075 257,515 258,851 260,400 262,593 n.a. n.a. n.a. 11 Federal Home Loan Banks 48,930 65,085 74,447 78,718 81,558 83,081 85,997 87,133 87,146 12 Federal Home Loan Mortgage Corporation 6,793 10,270 11,926 12,475 12,276 12,818 n.a. n.a. n.a. 13 Federal National Mortgage Association 74,594 83,720 93,896 92,629 92,562 93,417 92,286 91,629 93,272 14 Farm Credit Banks 72,816 71,193 68,851 64,629 63,585 62,857 61,575 63,073 63,079 15 Student Loan Marketing Association8 3,402 5,745 8,395 10,400 10,419 10,420 10,420 10,555 10,791 MEMO 16 Federal Financing Bank debt 135,791 145,217 153,373 155,076 155,222 155,526 156,132 156,873' 157,371 Lending to federal and federally sponsored 17 Export-Import Bank3 14,789 15,852 15,670 15,250 14,947 14,947 14,947 14,268 14,268 18 Postal Service6 1,154 1,087 1,690 1,690 1,604 1,604 1,604 2,854 2,854 19 Student Loan Marketing Association 5,000 5,000 5,000 5,000 5,000 5,000 5,000 4,970' 4,970 20 Tennessee Valley Authority 13,245 13,710 14,622 14,830 14,942 14,937 15,306 15,077 15,515 21 United States Railway Association6 111 51 74 74 74 74 74 74 74 Other Lending10 22 Farmers Home Administration 55,266 58,971 64,234 64,544 64,924 65,174 6655,,227744 6655,,337744 6655,,337744 23 Rural Electrification Administration 19,766 20,693 20,654 21,154 21,255 21,321 21,398 21,460 21,506 24 Other 26,460 29,853 31,429 32,534 32,476 32,469 32,529 32,796' 32,810 1. Consists of mortgages assumed by the Defense Department between 1957 7. Includes outstanding noncontingent liabilities: Notes, bonds, and debenand 1963 under family housing and homeowners assistance programs. tures. Some data are estimated. 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. 8. Before late 1981, the Association obtained financing through the Federal 3. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget thereafter. Financing Bank. 4. Consists of debentures issued in payment of Federal Housing Administration 9. The FFB, which began operations in 1974, is authorized to purchase or sell insurance claims. Once issued, these securities may be sold privately on the obligations issued, sold, or guaranteed by other federal agencies. Since FFB securities market. incurs debt solely for the purpose of lending to other agencies, its debt is not 5. Certificates of participation issued before fiscal 1969 by the Government included in the main portion of the table in order to avoid double counting. National Mortgage Association acting as trustee for the Farmers Home Adminis- 10. Includes FFB purchases of agency assets and guaranteed loans; the latter tration; Department of Health, Education, and Welfare; Department of Housing contain loans guaranteed by numerous agencies with the guarantees of any and Urban Development; Small Business Administration; and the Veterans particular agency being generally small. The Farmers Home Administration item Administration. consists exclusively of agency assets, while the Rural Electrification Administra- 6. Off-budget. tion entry contains both agency assets and guaranteed loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • February 1987 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1986 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11998833 11998844 11998855 Mar. Apr. May June July Aug. Sept. Oct. 1 All issues, new and refunding1 86,421 106,641 214,189 8,008 12,578 13,215 12,611 19,833 25,965 4,532 8,825 Type of issue 2 General obligation 21,566 26,485 52,622 2,720 5,459 7,115 6,326 6,531 5,931 1,267 2,104 3 Revenue 64,855 80,156 161,567 5,288 7,120 6,100 6,285 13,302 20,034 3,265 6,721 Type of issuer 4 7,140 9,129 13,004 1,088 1,956 2,825 1,705 2,879 2,121 9 697 5 Special district and statutory authority2 51,297 63,550 134,363 4,383 7,350 6,427 6,351 10,589 15,714 3,275 5,757 6 Municipalities, counties, townships 27,984 33,962 66,822 2,537 3,273 3,962 4,554 6,365 8,125 1,248 2,371 7 Issues for new capital, total 72,441 94,050 156,050 3,314 6,938 7,155 8,178 13,165 17,810 2,558 3,789 Use of proceeds 8 Education 8,099 7,553 16,658 624 1,706 1,827 1,694 2,800 2,926 558 928 9 Transportation 4,387 7,552 12,070 795 815 273 947 3,164 1,460 827 1,195 10 Utilities and conservation 13,588 17,844 26,852 4,082 4,554 3,450 1,583 4,425 6,292 1,365 2,396 11 Social welfare 26,910 29,928 63,181 337 579 1,424 1,518 1,186 2,554 812 2,098 12 Industrial aid 7,821 15,415 12,892 37 313 264 255 975 489 138 499 13 Other purposes 11,637 15,758 24,398 2,132 4,610 5,978 6,614 7,281 12,245 832 1,708 1. Par amounts of long-term issues based on date of sale. SOURCES. Securities Data Company beginning April 1986. Public Securities 2. Includes school districts beginning April 1986. Association for earlier data. This new data source began with the November BULLETIN. 1.46 NEW SECURITY ISSUES Corporations Millions of dollars 1986 Type of issue or issuer, or use 11998833 11998844 11998855 Mar. Apr. May June July Aug. Sept/ Oct. 1 All issues1 119,949 132,531 201,269 30,444 33,489 19,564 25,776 21,093 24,245 16,093 28,230 2 Bonds2 68,370 109,903 165,754 24,923 27,883 13,050 20,756 16,766 18,481 12,830 23,295 Type of offering 3 Public 47,244 73,579 119,559 24,923 27,883 13,050 20,756 16,766 18,481 12,830 23,295 4 Private placement 21,126 36,324 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 52,228 8,895 7,975 3,939 5,368 2,535 4,536 2,345 2,055 6 Commercial and miscellaneous 7,540 13,726 15,215 790 2,640 1,776 2,206 3,410 1,045 1,405 1,092 7 Transportation 3,833 4,694 5,743 303 614 427 250 497 550 375 170 8 Public utility 9,125 10,679 12,957 2,133 3,330 1,709 1,948 1,470 2,098 1,915 2,537 9 Communication 3,642 2,997 10,456 1,907 3,115 712 810 465 1,615 417 1,255 10 Real estate and financial 27,227 53,199 69,157 10,895 10,210 4,487 10,174 8,389 8,638 6,373 16,185 11 Stocks3 51,579 22,628 35,515 5,521 5,606 6,514 5,020 4,327 5,764 3,263 4,935 Type 12 Preferred 7,213 4,118 6,505 1,160 751 856 1,284 726 1,290 402 727 13 Common 44,366 18,510 29,010 4,361 4,855 5,658 3,736 3,601 4,474 2,861 4,208 Industry group 14 Manufacturing 14,135 4,054 5,700 851 1,434 1,827 1,132 746 982 250 701 15 Commercial and miscellaneous 13,112 6,277 9,149 607 910 953 421 917 803 1,009 1,217 16 Transportation 2,729 589 1,544 355 158 372 154 179 57 28 511 17 Public utility 5,001 1,624 1,966 357 165 346 406 305 208 174 410 18 Communication 1,822 419 978 0 27 74 140 107 379 0 59 19 Real estate and financial 14,780 9,665 16,178 3,351 2,912 2,942 2,767 2,073 3,335 1,802 2,037 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, SOURCES. IDD Information Services, Inc., Securities and Exchange Commisemployee stock plans, investment companies other than closed-end, intracorpo- sion and the Board of Governors of 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 1986 IItteemm 11998844 11998855 Mar. Apr. May June July Aug. Sept/ Oct. INVESTMENT COMPANIES1 1 Sales of own shares2 107,480 222,670 33,764 37,656 31,251 30,619 35,684 32,636 34,690 37,095 2 Redemptions of own shares3 77,032 132,440 15,085 21,699 16,706 18,921 21,508 20,102 21,338 20,808 3 Net sales 30,448 90,230 18,679 15,957 14,545 11,698 14,176 12,534 13,352 16,287 4 Assets4 137,126 251,695 315,245 329,684 343,926 356,040 360,050 387,547 381,872 402,516 5 Cash position5 12,181 20,607 27,639 29,599 28,184 28,083 28,080 28,682 29,540 30,954 6 Other 124,945 231,088 287,606 300,085 315,742 327,957 331,970 358,865 352,332 371,562 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 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 1 Corporate profits with inventory valuation and capital consumption adjustment 213.7 264.7 280.6 265.0 266.4 274.3 296.3 285.6 296.4 293.1 302.0 2 Profits before tax 207.6 235.7 223.1 221.9 213.8 213.8 229.2 235.8 222.5 227.7 240.4 3 Profits tax liability 77.2 95.4 91.8 87.8 87.8 87.1 95.8 96.4 95.7 99.0 104.4 4 Profits after tax 130.4 140.3 131.4 134.1 126.0 126.7 133.4 139.4 126.9 128.8 135.9 5 Dividends 71.5 78.3 81.6 80.1 80.9 81.4 81.6 82.5 85.2 87.5 88.8 6 Undistributed profits 58.8 62.0 49.8 54.0 45.1 45.3 51.8 57.0 41.7 41.2 47.2 7 Inventory valuation -10.9 -5.5 -.6 -1.6 -.5 1.6 6.1 -9.4 16.5 10.6 6.1 8 Capital consumption adjustment 17.0 34.5 58.1 44.7 53.2 58.9 61.0 59.2 57.3 54.8 55.5 SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Nonfinancial Statistics • February 1987 1.49 NONFINANCIAL CORPORATIONS Assets and Liabilities Billions of dollars, except for ratio 1985 1986 AAccccoouunntt 11998800 11998811 11998822 11998833 11998844 Q1 Q2 Q3 Q4 Ql 1 Current assets 1,328.3 1,419.6 1,437.1 1,575.9 1,703.0 1,722.7 1,734.6 1,763.0 1,784.6 1,795.7 2 Cash 127.0 135.6 147.8 171.8 173.6 167.5 167.1 176.3 189.2 195.3 3 U.S. government securities 18.7 17.7 23.0 31.0 36.2 35.7 35.4 32.6 33.0 31.0 4 Notes and accounts receivable 507.5 532.5 517.4 583.0 633.1 650.3 654.1 661.0 671.5 663.4 5 Inventories 543.0 584.0 579.0 603.4 656.9 665.7 666.7 675.0 666.0 679.6 6 Other 132.1 149.7 169.8 186.7 203.2 203.5 211.2 218.0 224.9 226.3 7 Current liabilities 890.6 971.3 986.0 1,059.6 1,163.6 1,174.1 1,182.9 1,211.9 1,233.6 1,222.3 8 Notes and accounts payable 514.4 547.1 550.7 595.7 647.8 636.9 651.7 670.4 682.7 668.4 9 Other 376.2 424.1 435.3 463.9 515.8 537.1 531.2 541.5 550.9 553.9 10 Net working capital 437.8 448.3 451.1 516.3 539.5 548.6 551.7 551.1 551.0 573.4 11 MEMO; Current ratio1 1.492 1.462 1.458 1.487 1.464 1.467 1.466 1.455 1.447 1.469 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 A Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1985 1986 1987 IInndduussttrryy 11998844 11998855 11998866llrr Q2 Q3 Q4 Ql Q2 Q31 Q4 Ql' 1 Total nonfarm business 354.44 387.13 380.69 387.86 389.23 397.88 377.94 375.92 374.55 394.34 386.82 Manufacturing 2 Durable goods industries 66.24 73.27 69.96 74.34 72.99 75.47 68.01 68.33 69.31 74.17 67.86 3 Nondurable goods industries 72.58 80.21 74.81 79.91 81.48 82.79 76.02 73.35 69.89 80.00 73.36 Nonmanufacturing 4 Mining 16.86 15.88 11.24 16.56 15.89 15.25 12.99 11.22 10.15 10.62 10.36 Transportation 5 Railroad 6.79 7.08 6.72 7.38 7.79 6.74 6.22 6.77 7.31 6.60 6.37 6 Air 3.56 4.79 6.04 3.71 5.17 6.07 6.58 5.77 5.69 6.12 7.22 7 Other 6.17 6.15 5.87 6.35 5.85 6.34 5.42 5.74 6.03 6.30 6.26 Public utilities 8 Electric 37.03 36.11 33.96 36.00 35.58 36.38 34.21 33.81 33.91 33.91 33.34 9 Gas and other 10.44 12.71 12.57 12.61 12.86 13.41 12.82 12.74 11.99 12.72 12.97 10 Commercial and other2 134.75 150.93 159.50 150.99 151.62 155.42 155.67 158.18 160.25 163.91 169.08 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 1985 1986 AAccccoouunntt 11998822 11998833 11998844 Ql Q2 Q3 Q4 Ql Q2 Q3 ASSETS Accounts receivable, gross 1 Consumer 78.1 87.4 96.7 99.1 106.0 116.4 120.8 125.5 134.7 146.7 2 Business 101.4 113.4 135.2 142.1 144.6 141.4 152.8 159.7 160.3 152.7 3 Real estate 20.2 22.5 26.3 27.2 28.4 29.0 30.4 31.5 32.4 33.8 4 Total 199.7 223.4 258.3 268.5 279.0 286.5 304.0 316.7 327.5 333.2 Less: 5 Reserves for unearned income 31.9 33.0 36.5 36.6 38.6 41.0 40.9 41.3 41.8 43.6 6 Reserves for losses 3.5 4.0 4.4 4.9 4.8 4.9 5.0 5.1 5.2 5.5 7 Accounts receivable, net 164.3 186.4 217.3 227.0 235.6 240.6 258.1 270.3 280.4 284.1 8 All other 30.7 34.0 35.4 35.9 39.5 46.3 46.8 50.6 52.1 63.1 9 Total assets 195.0 220.4 252.7 262.9 275.2 286.9 304.9 321.0 332.5 347.2 LIABILITIES 10 Bank loans 18.3 18.7 21.3 19.8 18.5 18.2 21.0 20.4 22.9 25.3 11 Commercial paper 51.1 59.7 72.5 79.1 82.6 93.6 96.9 102.0 106.4 110.6 Debt 12 Other short-term 12.7 13.9 16.2 16.8 16.6 16.6 17.2 18.5 20.9 21.6 13 Long-term 64.4 68.1 77.2 78.3 85.7 86.4 93.0 100.0 101.8 105.3 14 All other liabilities 21.2 30.1 33.1 35.4 36.9 36.6 39.6 41.4 40.4 43.2 15 Capital, surplus, and undivided profits 27.4 29.8 32.3 33.5 34.8 35.7 37.1 38.8 40.2 41.3 16 Total liabilities and capital 195.0 220.4 252.7 262.9 275.2 286.9 304.9 321.0 332.5 347.2 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 OOOcccttt... 333111,,, 111999888666''' Aug. Sept. Oct. Aug. Sept. Oct. Aug. Sept. Oct. 1 Total 158,739 190 -6,552 5,751 28,014 26,662 32,469 27,824 33,214 26,718 Retail financing of installment sales 2 Automotive (commercial vehicles) 18,350 291 1,290 281 1,302 2,299 1,359 1,011 1,009 1,078 3 Business, industrial, and farm equipment 20,113 -91 -212 11 786 986 965 876 1,197 954 Wholesale financing 4 Automotive 20,727 127 -9,172 4,592 10,220 7,536 13,818 10,093 16,708 9,226 5 Equipment 4,781 -44 36 134 845 829 715 889 793 581 6 All other 7,709 33 113 149 1,703 1,881 2,043 1,669 1,768 1,893 Leasing 7 Automotive 16,610 185 549 248 892 1,075 1,018 707 526 770 8 Equipment 40,606 22 286 -10 1,540 1,574 1,770 1,518 1,289 1,780 9 Loans on commercial accounts receivable and factored commercial accounts receivable 16,850 -307 539 -267 9,429 9,298 9,201 9,735 8,760 9,468 10 All other business credit 12,993 -27 19 613 1,298 1,183 1,580 1,325 1,164 966 1. Not seasonally adjusted. NOTE. These data also appear in the Board's G.20 (422) release. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Financial Statistics • February 1987 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1986 item May June July Aug. Sept. Oct. Nov. Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars) 92.8 96.8 104.1 114.7 122.1 115.7 117.9 124.0 127.5'' 122.6 2 Amount of loan (thousands of dollars) 69.5 73.7 77.4 83.0 88.0 83.4 84.8 90.4 93.9' 91.9 3 Loan/price ratio (percent) 77.1 78.7 77.1 74.7 74.9 73.9 74.5 75.2 75.6 76.5 4 Maturity (years) 26.7 27.8 26.9 25.8 26.6 26.2 26.5 27.1 27.Y 27.4 5 Fees and charges (percent of loan amount)2 2.40 2.64 2.53 2.19 2.40 2.35 2.40 2.49 2.66' 2.69 6 Contract rate (percent per annum) 12.20 11.87 11.12 9.84 9.74 9.89 9.84 9.74 9.57' 9.46 Yield (percent per annum) 7 FHLBB series5 12.66 12.37 11.58 10.22 10.15 10.30 10.26 10.17 10.02' 9.93 8 HUD series4 13.43 13.80 12.28 10.32 10.38 10.28 9.88 9.96 9.89 n.a. SECONDARY MARKETS Yield (percent per annum) 9 FHA mortgages (HUD series)5 13.11 13.81 12.24 10.07 9.98 10.01 9.80 9.90 9.80 n.a. 10 GNMA securities6 12.25 13.13 11.61 9.23 9.57 9.31 9.11 9.17 9.06 8.83 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 74,847 83,339 94,574 98,096 97,295 97,255 %,675 97,717 98,402 98,210 12 FHA/VA-insured 37,393 35,148 34,244 32,558 31,241 30,766 28,451 26,658 25,435 24,300 13 Conventional 37,454 48,191 60,331 65,538 66,054 66,489 68,224 71,059 72,%7 73,910 Mortgage transactions (during period) 14 Purchases 17,554 16,721 21,510 1,978 3,000 3,343 3,800 4,649 3,784 2,549 15 3,528 978 1,301 n.a. n.a. n.a. n.a. n.a. n a. n.a. Mortgage commitments1 16 Contracted (during period) 18,607 21,007 20,155 3,538 3,049 3,270 3,840 4,248 2,375 1,811 17 Outstanding (end of period) 5,461 6,384 3,402 8,444 7,862 7,706 7,671 7,252 5,740 4,625 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 18 Total 5,9% 9,283 12,399 14,302 14,194 13,795 14,010 19 FHA/VA 974 910 841 769 742 692 688 20 Conventional 5,022 8,373 11,558 13,533 13,452 13,103 13,322 Mortgage transactions (during period) 21 Purchases 23,089 21,886 44,012 8,947 10,505 8,518 10,458 n.a. n.a. n.a. 22 19,686 18,506 38,905 7,354 9,588 8,113 10,132 Mortgage commitments9 23 Contracted (during period) 32,852 32,603 48,989 10,612 10,338 7,863 13,707 24 Outstanding (end of period) 16,964 13,318 16,613 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 Q3 Q4 Q1 Q2 Q3 1 All holders 1,813,856 2,034,602 2,266,267 2,200,561 2,266,267 2,315,038 2,381,232 2,456,496' 2 1- to 4-family 1,189,822 1,318,888 1,466,117 1,425,357 1,466,117 1,493,772 1,541,478 1,595,308' 3 Multifamily 160,805 185,414 213,817 203,626 213,817 221,508 228,255 236,094' 4 Commercial 350,389 418,300 480,718 463,272 480,718 495,865 509,873 524,947' 5 Farm 112,840 112,000 105,615 108,306 105,615 103,893 101,626 100,147' 6 Selected financial institutions 1,130,781 1,272,206 1,392,084 1,357,483 1,392,084 1,410,541 1,437,054 1,463,625' 7 Commercial banks' 330,521 379,498 429,386 415,599 429,386 441,293 456,146 472,048 8 1- to 4-family 182,514 196,163 213,624 209,119 213,624 216,580 222,144 228,471 9 Multifamily 18,410 20,264 23,374 22,254 23,374 25,310 26,306 27,709 10 Commercial 120,210 152,894 181,031 173,190 181,031 187,606 195,459 203,217 11 Farm 9,387 10,177 11,357 11,036 11,357 11,797 12,237 12,651 12 Savings banks 131,940 154,441 177,263 174,427 177,263 188,154 203,238 214,156' 13 1- to 4-family 93,649 107,302 121,879 119,952 121,879 131,381 142,215 148,010' 14 Multifamily 17,247 19,817 23,329 22,604 23,329 23,980 26,549 28,467' 15 Commercial 21,016 27,291 31,973 31,757 31,973 32,707 34,370 37,59c 16 Farm 28 31 82 114 82 86 104 89' 17 Savings and loan associations 494,789 555,277 583,236 573,682 583,236 574,732 565,205 558,409 18 1- to 4-family 387,924 421,489 432,422 425,596 432,422 420,073 413,952 408,584 19 Multifamily 44,333 55,750 66,410 62,390 66,410 67,140 65,966 65,902 20 Commercial 62,403 77,605 83,798 85,061 83,798 86,860 84,755 83,409 21 Farm 129 433 606 635 606 659 532 514 22 Life insurance companies 150,999 156,699 171,797 164,760 171,797 174,823 180,041 185,241 23 1- to 4-family 15,319 14,120 12,381 13,454 12,381 12,605 12,608 12,958 24 Multifamily 19,107 18,938 19,894 19,074 19,894 20,009 20,181 20,981 25 Commercial 103,831 111,175 127,670 120,183 127,670 130,569 135,924 140,124 26 Farm 12,742 12,466 11,852 12,049 11,852 11,640 11,328 11,178 27 Finance companies2 22,532 26,291 30,402 29,015 30,402 31,539 32,424 33,771 28 Federal and related agencies 148,328 158,993 166,928 166,248 166,928 165,041 161,398 159,879' 29 Government National Mortgage Association 3,395 2,301 1,473 1,640 1,473 1,533 876 826 30 1- to 4-family 630 585 539 552 539 527 49 44 31 Multifamily 2,765 1,716 934 1,088 934 1,006 827 782 32 Farmers Home Administration 2,141 1,276 733 577 733 704 570 457 33 1- to 4-family 1,159 213 183 185 183 217 146 132 34 Multifamily 173 119 113 139 113 33 66 57 35 Commercial 409 497 159 72 159 217 111 115 36 Farm 400 447 278 181 278 237 247 153 37 Federal Housing and Veterans Administration 4,894 4,816 4,920 4,918 4,920 4,964 5,094 4,966 38 1- to 4-family 1,893 2,048 2,254 2,251 2,254 2,309 2,449 2,331 39 Multifamily 3,001 2,768 2,666 2,667 2,666 2,655 2,645 2,635 40 Federal National Mortgage Association 78,256 87,940 98,282 96,769 98,282 98,795 97,295 97,717 41 1- to 4-family 73,045 82,175 91,966 90,590 91,966 92,315 90,460 90,508 42 Multifamily 5,211 5,765 6,316 6,179 6,316 6,480 6,835 7,209 43 Federal Land Banks 52,010 52,261 47,498 49,255 47,498 45,422 43,369 42,119' 44 1- to 4-family 3,081 3,074 2,798 2,895 2,798 2,673 2,552 2,478' 45 Farm 48,929 49,187 44,700 46,360 44,700 42,749 40,817 39,641' 46 Federal Home Loan Mortgage Corporation. 7,632 10,399 14,022 13,089 14,022 13,623 14,194 13,794 47 1- to 4-family 7,559 9,654 11,881 11,457 11,881 12,231 11,890 10,890 48 Multifamily 73 745 2,141 1,632 2,141 1,392 2,304 2,904 49 Mortgage pools or trusts3 285,073 332,057 415,042 388,948 415,042 440,701 475,615 520,675 50 Government National Mortgage Association 159,850 179,981 212,145 201,026 212,145 220,348 229,204 241,230 51 1- to 4-family 155,950 175,589 207,198 196,198 207,198 215,148 223,838 235,582 52 Multifamily 3,900 4,392 4,947 4,828 4,947 5,200 5,366 5,648 53 Federal Home Loan Mortgage Corporation. 57,895 70,822 100,387 91,915 100,387 110,337 125,903 144,825 54 1- to 4-family 57,273 70,253 99,515 90,997 99,515 108,020 123,676 142,638 55 Multifamily 622 569 872 918 872 2,317 2,227 2,187 56 Federal National Mortgage Association 25,121 36,215 54,987 48,769 54,987 62,310 72,377 86,359 57 1- to 4-family 25,121 35,965 54,036 47,857 54,036 61,117 71,153 85,171 58 Multifamily n.a. 250 951 912 951 1,193 1,224 1,188 59 Farmers Home Administration 42,207 45,039 47,523 47,238 47,523 47,706 48,131 48,261 60 1- to 4-family 20,404 21,813 22,186 22,090 22,186 22,082 21,987 21,782 61 Multifamily 5,090 5,841 6,675 6,415 6,675 6,943 7,170 7,353 62 Commercial 7,351 7,559 8,190 8,192 8,190 8,150 8,347 8,409 63 Farm 9,362 9,826 10,472 10,541 10,472 10,531 10,627 10,717 64 Individuals and others4 249,674 271,346 292,213 287,882 292,213 298,755 307,165 312,317' 65 1- to 4-family 141,769 152,154 162,853 163,149 162,853 164,955 169,935 171,958 66 Multifamily 40,873 48,480 55,195 52,526 55,195 57,850 60,589 63,072 67 Commercial 35,169 41,279 47,897 44,817 47,897 49,756 50,907 52,083 68 Farm 31,863 29,433 26,268 27,390 26,268 26,194 25,734 25,204' 1. Includes loans held by nondeposit trust companies but not bank trust 4. Other holders include mortgage companies, real estate investment trusts, departments. state and local credit agencies, state and local retirement funds, noninsured 2. Assumed to be entirely 1- to 4-family loans. pension funds, credit unions, and other U.S. agencies. 3. Outstanding principal balances of mortgage pools backing securities insured NOTE. Based on data from various institutional and governmental sources, with or guaranteed by the agency indicated. some quarters estimated in part by the Federal Reserve. Multifamily debt refers to loans on structures of five or more units. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • February 1987 1.55 CONSUMER INSTALLMENT CREDIT14 Total Outstanding, and Net Change, seasonally adjusted Millions of dollars 1986 noiuer, anu lype oi creuii 11998844 11998855 Feb. Mar. Apr. May June July Aug. Sept/ Oct. Amounts outstanding (end of period) 1 Total 453,580 535,098 547,852 550,939 555,810 562,267 567,653 573,216 576,609 584,334 591,117 By major holder 2 Commercial banks 209,158 240,796 244,761 245,172 247,498 248,681 249,753 251,197 251,908 253,329 255,766 3 Finance companies2 96,126 120,095 126,001 127,422 128,728 131,172 134,933 137,197 138,938 144,559 146,862 4 Credit unions 66,544 75,127 76,431 76,953 77,957 78,474 79,095 80,130 80,622 81,374 82,448 5 Retailers3 37,061 39,187 39,497 39,844 39,826 40,139 40,076 40,251 40,351 40,445 40,641 6 Savings institutions 40,330 55,555 57,048 57,573 58,024 60,247 60,352 61,051 61,421 61,331 62,079 V Gasoline companies 4,361 4,337 4,114 3,975 3,777 3,554 3,445 3,389 3,368 3,295 3,320 By major type of credit 8 Automobile 173,122 206,482 213,342 214,361 215,814 218,965 222,606 226,234 228,814 236,280 240,327 y Commercial banks 83,900 92,764 93,828 93,377 93,013 93,157 93,261 94,014 94,686 95,842 97,218 10 Credit unions 28,614 30,577 31,107 31,320 31,728 31,939 32,191 32,613 32,813 33,119 33,556 n Finance companies 54,663 73,391 78,310 79,416 80,685 83,221 86,520 88,862 90,578 96,598 98,695 12 Savings institutions 5,945 9,750 10,097 10,248 10,386 10,648 10,634 10,745 10,736 10,721 10,858 13 Revolving 98,514 118,296 120,724 122,131 123,442 124,545 124,720 125,577 125,915 126,012 126,609 14 Commercial banks 58,145 73,893 75,953 77,021 78,421 79,151 79,397 79,998 80,133 80,160 80,406 15 Retailers 33,064 34,560 34,843 35,188 35,170 35,449 35,390 35,542 35,639 35,688 35,861 16 Gasoline companies 4,361 4,337 4,114 3,975 3,777 3,554 3,445 3,389 3,368 3,295 3,320 17 Savings institutions 2,944 5,506 5,813 5,947 6,075 6,392 6,488 6,649 6,775 6,869 7,021 18 Mobile home 24,184 25,461 25,573 25,584 25,513 25,560 25,479 25,398 25,215 24,958 24,954 19 Commercial banks 9,623 9,578 9,566 9,348 9,264 9,215 9,196 9,156 9,086 9,071 9,074 20 Finance companies 9,161 9,116 9,161 9,327 9,286 9,115 9,077 8,989 8,882 8,681 8,611 21 Savings institutions 5,400 6,767 6,846 6,909 6,963 7,230 7,206 7,253 7,248 7,206 7,269 22 Other 157,760 184,859 188,212 188,863 191,041 193,197 194,847 196,007 196,665 197,084 199,226 23 Commercial banks 57,490 64,561 65,414 65,427 66,800 67,158 67,898 68,030 68,003 68,256 69,068 24 Finance companies 32,302 37,588 38,530 38,678 38,757 38,836 39,336 39,345 39,479 39,281 39,556 25 Credit unions 37,930 44,550 45,323 45,633 46,228 46,535 46,903 47,517 47,809 48,255 48,892 26 Retailers 3,997 4,627 4,653 4,656 4,656 4,690 4,686 4,710 4,712 4,758 4,780 27 Savings institutions 26,041 33,533 34,291 34,469 34,600 35,977 36,024 36,405 36,662 36,535 36,931 Net change (during period) 28 Total 77,341 81,518 5,099 3,087 4,871 6,457 5,386 5,563 3,393 7,725 6,783 By major holder 29 Commercial banks 39,819 31,638 1,505 411 2,326 1,183 1,072 1,444 711 1,421 2,437 30 Finance companies2 9,961 23,969 2,284 1,421 1,306 2,444 3,761 2,264 1,741 5,621 2,303 31 Credit unions 13,456 8,583 621 522 1,004 517 621 1,035 492 752 1,074 32 Retailers3 2,900 2,126 81 347 -18 313 -63 175 100 94 196 33 Savings institutions 11,038 15,225 758 525 451 2,223 105 699 370 -90 748 34 Gasoline companies 167 -24 -150 -139 -198 -223 -109 -56 -21 -73 25 By major type of credit 3355 Automobile 27,214 33,360 2,681 1,019 1,453 3,151 3,641 3,628 2,580 7,466 4,047 36 Commercial banks 16,352 8,864 339 -451 -364 144 104 753 672 1,156 1,376 37 Credit unions 3,223 1,963 252 213 408 211 252 422 200 306 437 38 Finance companies 4,576 18,728 1,900 1,106 1,269 2,536 3,299 2,342 1,716 6,020 2,097 39 Savings institutions 3,063 3,805 190 151 138 262 -14 111 -9 -15 137 40 Revolving 20,145 19,782 1,042 1,407 1,311 1,103 175 857 338 97 597 41 Commercial banks 15,949 15,748 962 1,068 1,400 730 246 601 135 27 246 42 Retailers 2,512 1,496 73 345 -18 279 -59 152 97 49 173 43 Gasoline companies 167 -24 -150 -139 -198 -223 -109 -56 -21 -73 25 44 Savings institutions 1,517 2,562 156 134 128 317 96 161 126 94 152 45 Mobile home 1,990 1,277 202 11 -71 47 -81 -81 -183 -257 -4 46 Commercial banks -199 -45 109 -218 -84 -49 -19 -40 -70 -15 3 47 Finance companies 544 -45 36 166 -41 -171 -38 -88 -107 -201 -70 48 Savings institutions 1,645 1,367 57 63 54 267 -24 47 -5 -42 63 49 Other 27,992 27,099 1,173 651 2,178 2,156 1,650 1,160 658 419 2,142 50 Commercial banks 7,717 7,071 95 13 1,373 358 740 132 -27 253 812 51 Finance companies 4,841 5,286 348 148 79 79 500 9 134 -198 275 52 Credit unions 10,233 6,620 368 310 595 307 368 614 292 446 637 53 Retailers 388 630 7 3 0 34 -4 24 2 46 22 54 Savings institutions 4,813 7,492 354 178 131 1,377 47 381 257 -127 396 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 1986 IItteemm 11998833 11998844 11998855 Apr. May June July Aug. Sept. Oct. INTEREST RATES Commercial banks' 1 48-month new car2 13.92 13.71 12.91 n.a. 11.45 n.a. n.a. 11.00 n.a. n.a. 2 24-month personal 16.68 16.47 15.94 n.a. 14.89 n.a. n.a. 14.70 n.a. n.a. 3 120-month mobile home2 16.08 15.58 14.96 n.a. 13.97 n.a. n.a. 13.95 n.a. n.a. 4 Credit card 18.78 18.77 18.69 n.a. 18.32 n.a. n.a. 18.15 n.a. n.a. Auto finance companies 5 New car 12.58 14.62 11.98 10.55 9.49 9.35 9.31 9.29 5.40 6.12 6 Used car 18.74 17.85 17.59 16.67 16.56 16.06 15.83 15.56 15.23 15.17 OTHER TERMS3 Maturity (months) / New car 45.9 48.3 51.5 50.6 49.4 49.5 49.9 50.4 44.5 45.3 8 Used car 37.9 39.7 41.4 42.5 42.5 42.7 42.8 42.9 42.5 42.2 Loan-to-value ratio 9 New car 86 88 91 89 89 89 89 90 92 92 10 Used car 92 92 94 96 97 97 97 97 98 97 Amount financed (dollars) 11 New car 8,787 9,333 9,915 10,402 10,521 10,608 10,748 10,756 11,162 11,340 12 Used car 5,033 5,691 6,089 6,281 6,393 6,611 6,614 6,569 6,763 6,746 1. Data for midmonth of quarter only. 3. At auto finance companies. 2. Before 1983 the maturity for new car loans was 36 months, and for mobile NOTE. These data also appear in the Board's G.19 (421) release. For address, home loans was 84 months. see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 DomesticN onfinancial Statistics • February 1987 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; half-yearly data are at seasonally adjusted annual rates. 1983r 1984r 1985r 1986 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998800 11998811 11998822 11998833 11998844 H2 HI H2 HI H2 HI' Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors .... 344.9 375.8 387.4 548.8 756.3 869.3 592.2 727.8 784.8 732.6 1,006.1 705.4 By sector and instrument ? U.S. government 79.2 87.4 161.3 186.6 198.8 223.6 156.1 181.3 216.3 201.8 245.5 221111..33 3 Treasury securities 79.8 87.8 162.1 186.7 199.0 223.7 156.3 181.5 216.4 201.9 245.5 211.4 4 Agency issues and mortgages -.6 -.5 -.9 -.1 -.2 -.1 -.1 -.2 -.1 -.1 -.1 -.1 5 Private domestic nonfinancial sectors 265.7 288.5 226.2 362.2 557.5 645.7 436.0 546.5 568.5 530.8 760.6 494.1 6 Debt capital instruments 189.1 155.5 148.3 252.8 314.0 461.7 278.0 298.4 329.6 355.4 568.0 384.5 7 Tax-exempt obligations 30.3 23.4 44.2 53.7 50.4 152.4 51.8 42.8 58.0 67.5 237.3 19.9 8 27.7 22.8 18.7 16.0 46.1 73.9 11.5 31.2 61.1 72.7 75.1 129.1 9 131.2 109.3 85.4 183.0 217.5 235.4 214.7 224.5 210.5 215.2 255.7 235.4 in Home mortgages 94.2 72.2 50.5 117.1 129.9 150.3 135.1 135.2 124.7 133.1 167.5 153.1 n Multifamily residential 7.6 4.8 5.4 14.1 25.1 29.2 20.4 27.5 22.7 24.6 33.7 29.0 i? Commercial 19.2 22.2 25.2 49.0 63.3 62.4 55.3 62.9 63.7 60.3 64.4 60.6 13 Farm 10.2 10.0 4.2 2.8 -.8 -6.4 3.9 -1.1 -.5 -2.8 -10.0 -7.3 14 Other debt instruments 76.6 133.0 77.9 109.5 243.5 184.0 158.0 248.1 238.9 175.4 192.6 109.7 n Consumer credit 4.5 22.6 17.7 56.8 95.0 96.6 75.1 98.7 91.3 97.3 95.9 75.3 16 Bank loans n.e.c 37.8 57.0 52.9 25.8 80.1 41.3 42.1 91.9 68.4 24.9 57.7 22.1 17 Open market paper 4.0 14.7 -6.1 -.8 21.7 14.6 4.3 24.8 18.7 12.3 16.9 -15.7 18 Other 30.3 38.7 13.4 27.7 46.6 31.4 36.5 32.7 60.5 40.9 22.0 28.1 19 By borrowing sector 265.7 288.5 226.2 362.2 557.5 645.7 436.0 546.5 568.5 530.8 760.6 494.1 ?0 State and local governments 17.2 6.8 21.5 34.0 27.4 107.8 33.7 25.2 29.6 56.8 158.7 40.7 ?1 120.0 121.4 88.4 188.0 239.5 295.0 223.4 232.8 246.2 253.6 336.4 228.5 ?? 15.2 16.6 6.8 4.3 .1 -13.6 6.7 -.4 .5 -5.9 -21.3 -15.' r\ Nonfarm noncorporate 31.8 38.5 40.2 76.6 97.1 92.8 91.7 101.4 92.7 85.6 99.9 95.2 24 Corporate 81.5 105.2 69.2 59.3 193.4 163.7 80.6 187.4 199.5 140.7 186.8 144.8 25 Foreign net borrowing in United States 23.8 23.5 16.0 17.4 6.1 1.7 15.5 35.5 -23.3 -4.1 7.5 24.3 76 .8 5.4 6.7 3.1 1.3 4.0 2.3 1.1 1.5 5.5 2.6 7.1 ?7 Bank loans n.e.c 11.8 3.0 -5.5 3.6 -6.6 -2.8 -3.4 -2.2 -11.1 -6.1 .4 1.4 28 Open market paper 2.4 3.9 1.9 6.5 6.2 6.2 6.0 18.0 -5.6 4.2 8.2 20.6 29 U.S. government loans 8.8 11.1 13.0 4.1 5.3 -5.7 10.7 18.7 -8.1 -7.8 -3.6 -4.8 30 Total domestic plus foreign 368.7 399.3 403.4 566.2 762.4 871.0 607.7 763.3 761.5 728.4 1,013.5 729.7 Financial sectors 31 Total net borrowing by financial sectors 65.4 101.9 90.1 94.0 139.0 186.9 123.2 134.2 143.8 154.8 218.9 189.0 By instrument 37 U.S. government related 44.8 47.4 64.9 67.8 74.9 101.5 68.8 69.8 80.0 92.9 110.2 112299..55 31 Sponsored credit agency securities 24.4 30.5 14.9 1.4 30.4 20.6 8.1 29.1 31.8 25.3 15.9 4.4 34 Mortgage pool securities 19.2 15.0 49.5 66.4 44.4 79.9 60.7 40.7 48.2 67.6 92.1 124.3 1.2 1.9 .4 1.1 2.2 .8 36 Private financial sectors 20.6 54.5 25.2 26.2 64.1 85.3 54.3 64.4 63.8 61.9 108.8 59.6 37 Corporate bonds 1.6 4.4 12.5 12.1 23.3 36.5 13.1 17.3 29.3 35.3 37.7 28.7 38 Mortgages * * .1 * .4 ..11 * .4 .4 * ..11 .6 19 Bank loans n.e.c -1.0 1.2 1.9 -.1 .7 22..66 2.2 -.1 1.4 .9 44..22 2.4 40 Open market paper 12.9 32.7 9.9 21.3 24.1 32.0 40.9 31.1 17.0 13.9 50.1 14.4 41 Loans from Federal Home Loan Banks 7.1 16.2 .8 -7.0 15.7 14.2 -1.8 15.7 15.7 11.7 16.7 13.5 By sector 4? Sponsored credit agencies 25.6 32.4 15.3 1.4 30.4 21.7 8.1 29.1 31.8 2255..33 18.1 55..22 43 19.2 15.0 49.5 66.4 44.4 79.9 60.7 40.7 48.2 67.6 92.1 124.3 44 Private financial sectors 20.6 54.5 25.2 26.2 64.1 85.3 54.3 64.4 63.8 61.9 108.8 59.6 45 Commercial banks 8.3 11.6 11.7 5.0 7.3 -4.9 17.1 15.4 -.9 -9.2 -.6 -6.7 46 Bank affiliates 6.7 9.2 6.8 12.1 15.6 14.5 14.9 23.7 7.5 13.7 15.3 1.7 47 Savings and loan associations 7.4 15.5 2.5 -2.1 22.7 22.3 4.6 20.2 25.1 12.1 32.6 21.3 48 Finance companies -1.3 18.5 4.3 11.4 17.8 52.8 18.0 4.3 31.3 44.8 60.9 42.4 49 REITs -.5 -.2 * -.2 .8 .5 -.3 .8 .8 .5 .5 .9 All se :tors 50 Total net borrowing 434.1 501.3 493.5 660.2 901.4 1057.8 730.8 897.5 905.3 833.3 1,232.4 918.7 51 U.S. government securities 122.9 133.0 225.9 254.4 273.8 324.2 225.0 251.2 296.4 294.8 353.5 340.0 52 State and local obligations 30.3 23.4 44.2 53.7 50.4 152.4 51.8 42.8 58.0 67.5 237.3 19.9 53 Corporate and foreign bonds 30.1 32.6 37.8 31.2 70.7 114.4 26.8 49.6 91.9 113.5 115.3 164.9 54 131.1 109.2 85.4 183.0 217.8 235.4 214.6 224.8 210.8 215.2 255.7 236.0 55 Consumer credit 4.5 22.6 17.7 56.8 95.0 96.6 75.1 98.7 91.3 97.3 95.9 75.3 56 48.5 61.2 49.3 29.3 74.2 41.0 40.8 89.6 58.8 19.8 62.3 25.9 57 Open market paper 19.3 51.3 5.7 26.9 52.0 52.8 51.2 73.8 30.1 30.4 75.2 19.3 58 Other loans 47.5 68.0 27.6 24.8 67.6 41.0 45.4 67.1 68.1 44.8 37.3 37.5 External corporate equity funds raised in United States 59 Total new share issues 21.2 -3.3 33.6 67.0 -31.1 37.5 52.1 -40.1 -22.2 33.3 41.6 153.4 60 Mutual funds 4.5 6.0 16.8 32.1 38.0 103.4 28.7 39.3 36.6 93.6 113.1 203.9 61 All other 16.8 -9.3 16.8 34.9 -69.1 -65.9 23.4 -79.4 -58.8 -60.4 -71.5 -50.4 62 Nonfinancial corporations 12.9 -11.5 11.4 28.3 -77.0 -81.6 18.4 -84.5 -69.4 -75.7 -87.5 -67.5 63 Financial corporations 1.8 1.9 4.0 2.7 6.7 11.7 2.9 5.9 7.6 11.0 12.4 8.6 64 Foreign shares purchased in United States 2.1 .3 1.5 3.9 1.2 4.0 2.1 -.7 3.0 4.3 3.6 8.5 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' 1986 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11998800 11998811 11998822 11998833 11998844 11998855rr H2 HI H2 HI H2 HI' I Total funds advanced in credit markets to domestic nonfinancial sectors 344.9 375.8 387.4 548.8 756.3 869.3 592.2 727.8 784.8 732.6 1,006.1 705.4 By public agencies and foreign 2 Total net advances 94.9 104.4 115.4 115.3 154.6 203.3 107.9 132.5 176.6 220011..88 220044..99 226699..99 3 U.S. government securities 15.8 17.1 22.7 27.6 36.0 47.2 20.0 26.8 45.2 53.1 41.3 81.5 4 Residential mortgages 31.7 23.5 61.0 76.1 56.5 94.6 71.5 52.7 60.2 85.6 103.7 121.0 5 FHLB advances to savings and loans 7.1 16.2 .8 -7.0 15.7 14.2 -1.8 15.7 15.7 11.7 16.7 13.5 6 Other loans and securities 40.2 47.7 30.8 18.6 46.5 47.3 18.2 37.5 55.5 51.4 43.2 53.9 Total advanced, by sector 7 U.S. government 23.7 24.0 15.9 9.7 17.4 17.8 9.7 9.0 25.7 28.8 6.7 14.6 8 Sponsored credit agencies 45.6 48.2 65.5 69.8 73.3 101.5 70.5 74.0 72.5 98.2 104.9 127.3 9 Monetary authorities 4.5 9.2 9.8 10.9 8.4 21.6 12.4 8.8 8.0 23.7 19.5 9.8 10 Foreign 21.1 23.0 24.1 24.9 55.5 62.4 15.3 40.7 70.4 51.0 73.8 118.2 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 44.8 47.4 64.9 67.8 74.9 101.5 6688..88 69.8 80.0 9922..99 111100..22 112299..55 12 Foreign 23.8 23.5 16.0 17.4 6.1 1.7 15.5 35.5 -23.3 -4.1 7.5 24.3 Private domestic funds advanced 13 Total net advances 318.7 342.3 352.9 518.7 682.7 769.2 568.6 700.5 664.9 619.6 918.8 589.3 14 U.S. government securities 107.1 115.9 203.1 226.9 237.8 277.0 205.0 224.4 251.2 241.7 312.2 258.5 15 State and local obligations 30.3 23.4 44.2 53.7 50.4 152.4 51.8 42.8 58.0 67.5 237.3 19.9 16 Corporate and foreign bonds 20.3 19.8 14.8 14.6 32.6 41.2 9.1 25.6 39.6 49.7 32.7 93.5 17 Residential mortgages 70.0 53.5 -5.3 55.0 98.5 84.8 84.0 109.9 87.0 72.0 97.5 61.1 18 Other mortgages and loans 98.1 145.9 96.9 161.5 279.1 228.1 217.0 313.6 244.7 200.4 255.9 169.8 19 LESS: Federal Home Loan Bank advances 7.1 16.2 .8 -7.0 15.7 14.2 -1.8 15.7 15.7 11.7 16.7 13.5 Private financial intermediation 20 Credit market funds advanced by private financial institutions 286.2 320.2 261.9 391.9 550.5 554.4 449.3 581.8 519.1 471.3 637.4 573.0 71 Commercial banking 107.6 106.5 110.2 144.3 168.9 186.3 168.8 184.2 153.5 133.8 238.8 106.9 ??. Savings institutions 51.3 26.2 21.8 135.6 149.2 83.4 143.9 173.5 124.9 63.0 103.9 102.0 23 Insurance and pension funds 93.2 93.5 86.2 97.8 124.0 141.0 105.7 144.5 103.5 121.8 160.1 130.9 24 Other finance 34.0 94.0 43.7 14.1 108.3 143.6 30.9 79.5 137.2 152.7 134.5 233.2 75 Sources of funds 286.2 320.2 261.9 391.9 550.5 554.4 449.3 581.8 519.1 471.3 637.4 573.0 2.6 Private domestic deposits and RPs 170.8 214.5 195.2 212.2 317.6 204.8 235.5 300.2 334.9 203.0 206.6 222.9 27 Credit market borrowing 20.6 54.5 25.2 26.2 64.1 85.3 54.3 64.4 63.8 61.9 108.8 59.6 2.8 Other sources 94.8 51.2 41.5 153.4 168.8 264.2 159.5 217.2 120.4 206.5 322.0 290.6 29 Foreign funds -25.1 -23.7 -31.4 16.3 5.4 17.7 46.2 3.0 7.8 11.2 24.3 .2 30 Treasury balances -2.6 -1.1 6.1 -5.3 4.0 10.3 -22.4 -.1 8.2 14.4 6.1 -5.5 31 Insurance and pension reserves 88.9 89.6 92.5 110.6 112.5 107.0 122.4 146.5 78.5 97.4 116.6 109.2 32 Other, net 33.6 -13.6 -25.7 31.8 46.8 129.2 13.3 67.8 25.9 83.5 175.0 186.7 Private domestic nonfinancial investors 33 Direct lending in credit markets 53.1 76.6 116.3 153.0 196.4 300.2 173.6 183.1 209.6 210.2 390.2 75.9 34 U.S. government securities 34.2 37.1 69.9 95.5 132.9 150.9 87.3 142.2 123.6 130.8 171.0 50.5 35 State and local obligations 7.0 11.1 25.0 39.0 29.6 59.2 37.7 25.0 34.3 20.5 98.0 -19.4 36 Corporate and foreign bonds -11.7 -4.0 2.0 -12.7 -3.4 13.2 -4.5 -26.8 19.9 25.4 1.0 34.9 37 Open market paper -4.6 1.4 -1.3 15.1 8.9 51.8 31.9 15.7 2.2 7.3 96.3 -14.7 38 Other 28.2 31.0 20.6 16.2 28.3 25.1 21.2 26.9 29.7 26.3 24.0 24.6 39 Deposits and currency 183.9 222.4 204.5 229.7 321.1 215.1 248.7 311.3 330.9 215.9 214.3 240.0 40 Currency 10.3 9.5 9.7 14.3 8.6 12.4 17.5 13.1 4.1 15.8 9.0 10.9 41 Checkable deposits 6.5 18.5 18.6 28.8 27.8 42.0 16.9 29.4 26.3 18.2 65.8 84.9 42 Small time and savings accounts 82.3 47.3 135.7 215.3 150.7 137.5 147.8 136.4 164.9 167.1 108.0 117.5 43 Money market fund shares 29.2 107.5 24.7 -44.1 47.2 -2.2 -4.2 30.2 64.2 4.2 -8.6 29.0 44 Large time deposits 45.9 36.0 5.2 -6.3 84.9 14.0 53.2 93.4 76.5 -.8 28.9 3.5 45 Security RPs 6.8 5.2 11.1 18.5 7.0 13.4 21.8 10.8 3.1 14.3 12.5 -11.9 46 Deposits in foreign countries 2.8 -1.7 -.4 3.1 -5.1 -2.1 -4.3 -2.0 -8.2 -2.9 -1.3 6.2 47 Total of credit market instruments, deposits and currency 237.0 299.0 320.7 382.7 517.4 515.3 422.3 494.4 540.5 426.0 604.5 315.9 48 Public holdings as percent of total 25.7 26.2 28.6 20.4 20.3 23.3 17.8 17.4 23.2 27.7 20.2 37.0 49 Private financial intermediation (in percent) 89.8 93.6 74.2 75.5 80.6 72.1 79.0 83.1 78.1 76.1 69.4 97.2 50 Total foreign funds -4.0 -.7 -7.3 41.3 60.9 80.1 61.4 43.7 78.2 62.2 98.1 118.4 MEMO: Corporate equities not included above 51 Total net issues 21.2 -3.3 33.6 67.0 -31.1 37.5 52.1 -40.1 -22.2 33.3 41.6 153.4 57 Mutual fund shares 4.5 6.0 16.8 32.1 38.0 103.4 28.7 39.3 36.6 93.6 113.1 203.9 53 Other equities 16.8 -9.3 16.8 34.9 -69.1 -65.9 23.4 -79.4 -58.8 -60.4 -71.5 -50.4 54 Acquisitions by financial institutions 22.2 19.9 27.6 46.8 8.2 33.3 35.6 -4.1 20.6 54.0 12.6 34.8 55 Other net purchases -1.0 -23.2 6.0 20.2 -39.4 4.1 16.5 -36.0 -42.7 -20.7 29.0 118.7 NOTES BY LINE NUMBER. 31. Excludes net investment of these reserves in corporate equities. 1. Line 1 of table 1.57. 32. Mainly retained earnings and net miscellaneous liabilities. 2. Sum of lines 3-6 or 7-10. 33. Line 13 less line 20 plus line 27. 6. Includes farm and commercial mortgages. 34-38. Lines 14-18 less amounts acquired by private finance plus amounts 11. Credit market funds raised by federally sponsored credit agencies, and net borrowed by private finance. Line 38 includes mortgages. issues of federally related mortgage pool securities. 40. Mainly an offset to line 9. 13. Line 1 less line 2 plus line 11 and 12. Also line 20 less line 27 plus line 33. Also 47. Lines 33 plus 39, or line 13 less line 28 plus 40 and 46. sum of lines 28 and 47 less lines 40 and 46. 48. Line 2/line 1. 18. Includes farm and commercial mortgages. 49. Line 20/line 13. 26. Line 39 less lines 40 and 46. 50. Sum of lines 10 and 29. 27. Excludes equity issues and investment company shares. Includes line 19. 51. 53. Includes issues by financial institutions. 29. Foreign deposits at commercial banks, bank borrowings from foreign NOTE. Full statements for sectors and transaction types in flows and in amounts branches, and liabilities of foreign banking agencies to foreign affiliates, less outstanding may be obtained from Flow of Funds Section, Division of Research claims on foreign affiliates and deposits by banking in foreign banks. and Statistics, Board of Governors of the Federal Reserve System, Washington, 30. Demand deposits and note balances at commercial banks. D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • February 1987 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures' 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1986 MMeeaassuurree 11998833 11998844 11998855 Mar. Apr. May June July Aug. Sept/ Oct/ Nov. 1 Industrial production 109.2 121.8 124.5 123.6 124.7 124.2 124.2 124.9 125.1 125.1 125.2 125.9 Market groupings 2 Products, total 113.9 127.1 131.7 131.2 132.7 132.4 132.4 133.2 133.8' 133.6 133.8 134.6 3 Final, total 114.7 127.8 132.0 130.6 132.1 131.6 131.1 132.0 132.6r 132.5 132.7 133.5 4 Consumer goods 109.3 118.2 120.7 121.8 124.5 124.3 124.4 125.2 125.1 125.7 124.7 125.6 5 Equipment 121.7 140.5 147.1 142.3 142.3 141.2 140.0 141.0 142.5r 142.8 143.3 144.1 6 Intermediate 111.2 124.9 130.6 133.3 134.5 135.1 137.0 137.3 137.8 137.2 137.8 138.4 7 Materials 102.8 114.6 114.7 113.3 113.8 113.0 113.1 113.6 113.2 113.5 113.3 113.9 Industry groupings 8 Manufacturing 110.2 123.9 127.1 127.2 128.7 128.2 128.3 129.2 129.5 129.5 129.6 130.5 Capacity utilization (percent)2 9 Manufacturing 74.0 80.8 80.3 79.1 79.9 79.4 79.3 79.7 79.7r 79.6 79.5 79.9 10 Industrial materials industries 75.3 82.3 80.2 78.5 78.7 78.1 78.0 78.3 77.9r 78.0 77.8 78.2 11 Construction contracts (1977 = 100)3 138.0 150.0 161.0 149.0 176.0 160.0 161.0 163.0 168.0 158.0 170.0 171.0 12 Nonagricultural employment, total4 109.4 114.5 118.5 120.6 121.0 121.2 121.1 121.4 121.6 121.9 122.3 122.6 13 Goods-producing, total 95.9 101.6 102.9 102.5 102.9 102.6 102.1 102.2 102.2 102.1 102.2 102.3 14 Manufacturing, total 93.6 98.6 98.7 97.8 97.8 97.5 97.2 97.1 97.1 97.0 97.2 97.3 15 Manufacturing, production-worker ... 88.6 94.1 93.5 92.4 92.4 92.1 91.8 91.7 91.7 91.7 91.8 92.2 16 Service-producing 115.0 120.0 125.0 128.2 128.6 129.0 129.0 129.4 129.7 130.2 130.7 131.0 17 Personal income, total 176.6 193.5 206.2 214.3 216.9 216.6 216.6 217.2' 217.6'' 218.2 219.0 219.7 18 Wages and salary disbursements 168.7 184.8 197.8 206.4 206.8 207.1 207.6 208.5 209.6 210.1 211.5 212.6 19 Manufacturing 149.0 164.6 172.5 176.4 175.8 176.1 175.4 175.5 176.6 176.5 179.0 178.0 20 Disposable personal income5 176.0 193.6 205.0 213.7 216.5 215.9 215.5 215.8r 215.9' 216.4 216.9 217.2 21 Retail sales (1977 = 100)6 162.0 179.0 190.6 193.7 195.4 197.0 197.5 198.9 201.7 213.0 201.9 202.9 Prices7 22 Consumer 298.4 311.1 322.2 326.0 325.3 326.3 327.9 328.0 328.6 330.2 330.5 330.8 23 Producer finished goods 285.2 291.1 293.7 288.0 287.2 288.9 289.3 287.6r 288.3 287.5 290.5 290.7 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. 1986 CCaatteeggoorryy 11998833 11998844 11998855 Apr. May June July Aug. Sept. Oct.' Nov. HOUSEHOLD SURVEY DATA 1 Noninstitutiona! population1 176,414 178,602 180,440 182,387 182,545 182,732 182,906 183,074 183,261 183,450 183,628 2 Labor force (including Armed Forces)1 113,749 115,763 117,695 119,473 119,898 120,345 120,296 120,428 120,484 120,746 120,919 3 Civilian labor force 111,550 113,544 115,461 117,234 117,664 118,116 118,072 118,182 118,220 118,482 118,654 Employment 4 Nonagricultural industries2 97,450 101,685 103,971 105,670 105,950 106,508 106,769 107,107 106,770 107,091 107,146 5 Agriculture 3,383 3,321 3,179 3,222 3,160 3,165 3,112 3,048 3,121 3,149 3,225 Unemployment 6 Number 10,717 8,539 8,312 8,342 8,554 8,443 8,190 8,027 8,329 8,242 8,283 7 Rate (percent of civilian labor force) ... 9.6 7.5 7.2 7.1 7.3 7.1 6.9 6.8 7.0 7.0 7.0 8 Not in labor force 62,665 62,839 62,745 62,914 62,647 62,387 62,610 62,646 62,777 62,704 62,709 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 90,196 94,461 97,698 99,783 99,918 99,843 100,105 100,283 100,560" 100,820 101,069 10 Manufacturing 18,434 19,412 19,426 19,245 19,201 19,135 19,121 19,123 19,105' 19,128 19,163 11 Mining 952 974 969 821 790 772 768 753 743' 747 741 12 Contract construction 3,948 4,345 4,661 4,972 4,974 4,947 4,980 5,012 5,010' 4,997 5,008 13 Transportation and public utilities 4,954 5,171 5,300 5,266 5,265 5,167 5,288 5,255 5,316' 5,318 5,346 14 Trade 20,881 22,134 23,195 23,715 23,783 23,773 23,841 23,893 23,924' 24,003 24,022 15 Finance 5,468 5,682 5,924 6,228 6,261 6,295 6,334 6,364 6,388' 6,407 6,436 16 Service 19,694 20,761 21,929 22,825 22,924 23,072 23,176 23,255 23,300' 23,361 23,481 17 Government 15,869 15,984 16,295 16,711 16,720 16,682 16,597 16,628 16,774' 16,859 16,872 1. Persons 16 years of age and over. Monthly figures, which are based on 3. Data include all full- and part-time employees who worked during, or sample data, relate to the calendar week that contains the 12th day; annual data received pay for, the pay period that includes the 12th day of the month, and are averages of monthly figures. By definition, seasonality does not exist in exclude proprietors, self-employed persons, domestic servants, unpaid family population figures. Based on data from Employment and Earnings (U.S. Depart- workers, and members of the Armed Forces. Data are adjusted to the March 1984 ment of Labor). benchmark and only seasonally adjusted data are available at this time. Based on 2. Includes self-employed, unpaid family, and domestic service workers. data from Employment and Earnings (U.S. Department of Labor). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • February 1987 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION Seasonally adjusted 1985 1985 1986 Series Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3' Output (1977 = 100) Capacity (percent of 1977 output) Utilization rate (percent) 1 Total industry 124.7 125.0 124.3 155.4 156.3 157.1 157.9 80.2 80.0 79.2 79.2 2 Mining 107.1 105.4 100.1 96.6 132.5 132.1 132.1 137.5 80.9 79.6 75.6 73.0 112.8 110.5 109.5 110.6 135.7 136.3 136.9 149.0 83.2 81.1 79.5 79.4 3 Utilities 127.4 128.4 128.3 159.5 160.5 161.4 162.3 79.9 80.0 79.5 79.7 4 Manufacturing 110.3 111.5 111.1 111.9 133.1 133.6 134.0 134.5 82.8 83.5 82.9 83.2 5 Primary processing 137.8 138.5 138.8 140.1 175.3 176.7 177.9 179.2 78.6 78.4 78.0 78.0 6 Advanced processing 114.3 114.5 113.4 113.4 143.6 144.2 144.7 145.3 79.6 79.4 78.3 78.1 7 Materials 121.1 120.9 118.8 118.7 159.0 159.9 160.7 161.5 76.2 75.6 73.9 73.6 82.6 79.0 75.2 72.6 115.5 115.0 114.5 114.0 71.5 68.7 65.6r 64.1 8 Durable goods 113.9 115.7 116.8 118.9 138.6 139.0 139.5 139.9 82.2 83.2 83.8 85.6 9 Metal materials 114.0 116.2 117.0 119.6 138.0 138.4 138.8 139.2 82.7 83.9 84.3 86.5 10 Nondurable goods 124.8 128.8 130.2 136.5 137.3 138.1 91.4 93.8 94.2r 97.3 11 Textile, paper, and chemical 113.4 115.3 115.4 143.6 144.0 144.3 79.0 80.1 80.CK 81.3 12 Paper 1134 EnerCgyh emmaictearli als 102.6 102.2 100.8 99.4 120.9 121.1 121.3 121.4 84.9 84.4 82.9 81.2 Previous cycle1 Latest cycle2 1985 High Low High Low Aug. Apr. May June July Aug/ Sept. Oct.' Capacity utilization rate (percent) 15 Total industry 88.6 72.1 86.9 69.5 80.6 79.0 79.5 79.1 79.0 77.2 79.2 79.0 79.0 79.3 16 Mining 92.8 87.8 95.2 76.9 81.6 77.9 76.4 75.5 74.9 73.5 73.1 72.4 72.0 71.5 95.6 82.9 88.5 78.0 81.5 80.1 80.0 79.3 79.2 79.9 78.8 79.7 80.4 80.6 17 Utilities 87.7 69.9 86.5 68.0 80.3 79.1 79.9 79.4 79.3 79.7 79.8 79.6 79.5 79.9 18 Manufacturing 91.9 68.3 89.1 65.1 82.5 82.4 83.2 82.9 82.7 82.9 83.2 83.6 83.5 83.9 19 Primary processing ... 86.0 71.1 85.1 69.5 79.3 77.4 78.5 78.0 77.7 78.4 78.0 77.7 77.7 78.1 20 Advanced processing . 92.0 70.5 89.1 68.4 79.8 78.5 78.7 78.1 78.0 78.3 77.9 78.0 77.8 78.2 21 Materials 91.8 64.4 89.8 60.9 76.8 74.5 74.9 73.7 73.2 73.7 73.5 73.5 73.5 74.0 99.2 67.1 93.6 45.7 70.2 66.0 68.3 65.2 63.2 63.8 63.8 64.7 65.1 65.9 2223 DuMraebtlael gmoaotdersi als 24 Nondurable goods .... 91.1 66.7 88.1 70.6 81.6 82.5 83.6 83.5 84.3 85.0 85.5 86.1 85.9 86.3 25 Textile, paper, and chemical 92.8 64.8 89.4 68.6 81.7 83.4 83.6 84.2 85.1 85.6 86.5 87.4 86.9 87.4 26 Paper 98.4 70.6 97.3 79.9 89.7 93.0 93.6 93.1 95.9 97.8 97.9 96.1 95.9 27 Chemical 92.5 64.4 87.9 63.3 78.7 79.4 79.4 80.2 80.4 80.2 81.2 82.6 82.0 28 Energy materials 94.6 86.9 94.0 82.2 84.8 83.7 82.8 82.9 83.1 82.3 80.6 80.6 79.8 79.8 1. Monthly high 1973; monthly low 1975. NOTE. These data also appear in the Board's G.3 (402) release. For address, see 2. Monthly highs 1978 through 1980; monthly lows 1982. inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value • Monthly data are seasonally adjusted 1977 1985 1986 Grouping p p o ro r- - a 11 v 9988 g 55 . tion Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug/ Sept. Oct.'' Nov/ Index (1977 = 100) MAJOR MARKET 1 Total index 100.00 123.8 124.8 125.6 126.2 125.3 123.6 124.7 124.2 124.2 124.9 125.1 125.1 125.2 125.9 2 Products 57.72 130.8 132.8 133.0 134.0 132.9 131.2 132.7 132.4 132.4 133.2 133.8 133.6 133.8 134.6 3 Final products 44.77 131.1 133.1 133.2 133.9 132.8 130.6 132.1 131.6 131.1 132.0 132.6 132.5 132.7 133.5 4 Consumer goods 25.52 120.2 122.7 123.3 123.8 123.3 121.8 124.5 124.3 124.4 125.2 125.1 124.7 124.7 125.6 5 Equipment 19.25 145.4 147.0 146.4 147.5 145.4 142.3 142.3 141.2 140.0 141.0 142.5 142.8 143.3 144.1 6 Intermediate products 12.94 130.0 131.8 132.0 134.2 133.4 133.3 134.5 135.1 137.0 137.3 137.8 137.2 137.8 138.4 7 Materials 42.28 114.2 113.9 115.4 115.5 114.8 113.3 113.8 113.0 113.1 113.6 113.2 113.5 113.3 113.9 Consumer goods 8 Durable consumer goods 6.89 112.9 115.4 115.3 116.0 116.6 112.4 115.9 113.8 114.3 116.3 115.7 117.4 115.9 116.8 9 Automotive products 2.98 114.0 115.6 113.9 116.2 117.6 110.4 116.4 113.2 113.7 116.4 114.5 117.0 112.1 112.4 10 Autos and trucks 1.79 112.0 114.1 110.4 118.2 119.4 106.3 115.1 110.3 112.2 114.5 110.4 116.8 107.7 107.5 11 Autos, consumer 1.16 98.9 95.6 94.6 105.5 107.1 93.7 100.8 94.8 99.3 95.3 87.8 96.2 91.9 92.3 12 Trucks, consumer .63 136.3 148.6 139.8 141.7 142.1 129.6 141.5 139.1 136.1 150.3 152.4 155.1 137.1 13 Auto parts and allied goods 1.19 116.9 117.7 119.0 113.3 114.9 116.6 118.4 117.4 116.1 119.1 120.7 117.4 118.6 119.8 14 Home goods 3.91 112.2 115.3 116.4 115.8 115.8 113.9 115.5 114.3 114.8 116.3 116.7 117.7 118.9 120.2 15 Appliances, A/C and TV 1.24 131.0 138.8 140.4 133.2 135.1 133.7 138.8 133.9 137.5 138.9 139.4 141.2 141.9 143.8 16 Appliances and TV 1.19 131.8 141.3 143.2 135.7 137.6 136.0 140.6 135.8 139.1 141.6 142.5 143.5 143.5 17 Carpeting and furniture .96 119.8 124.6 123.3 125.1 124.4 121.2 121.8 123.3 122.5 126.6 125.8 126.2 128.1 18 Miscellaneous home goods 1.71 94.3 93.1 95.1 98.0 97.0 95.5 95.0 95.0 94.1 94.1 95.1 96.0 97.1 19 Nondurable consumer goods 18.63 122.9 125.3 126.3 126.6 125.8 125.3 127.7 128.1 128.1 128.4 128.6 127.4 127.9 128.8 20 Consumer staples 15.29 129.0 131.3 132.5 132.8 132.3 131.6 134.3 135.0 135.1 135.3 135.5 134.3 134.7 135.6 21 Consumer foods and tobacco 7.80 128.8 130.5 131.6 130.1 131.1 130.3 131.9 132.4 133.3 132.2 133.2 132.2 131.9 22 Nonfood staples 7.49 129.2 132.1 133.4 135.6 133.5 133.0 136.7 137.7 137.0 138.5 137.9 136.4 137.7 138.3 23 Consumer chemical products .. 2.75 149.1 154.8 153.6 156.3 158.3 156.4 163.1 162.4 163.6 166.4 163.4 161.1 161.7 24 Consumer paper products 1.88 141.9 143.2 146.5 148.9 143.4 143.1 145.1 148.6 147.1 146.4 147.7 145.7 149.3 25 Consumer energy 2.86 101.8 103.1 105.4 107.0 103.2 104.0 106.0 106.8 104.8 106.6 107.1 106.7 106.9 26 Consumer fuel 1.44 88.6 89.8 91.7 94.1 92.0 92.2 93.7 96.4 91.8 91.2 94.9 92.5 92.2 27 Residential utilities 1.42 115.3 116.6 119.4 120.1 114.5 116.1 118.4 117.5 118.1 122.3 119.6 121.2 Equipment 28 Business and defense equipment 18.01 146.0 148.2 147.8 149.1 147.8 145.5 146.6 146.0 145.1 146.4 147.8 148.1 148.4 149.1 29 Business equipment 14.34 139.6 140.8 140.0 141.5 140.5 137.7 138.6 137.9 136.6 137.9 139.3 139.4 139.4 140.1 30 Construction, mining, and farm .. 2.08 64.3 65.1 66.3 65.3 63.0 59.5 58.6 60.9 61.9 60.6 58.3 58.1 57.8 31 Manufacturing 3.27 110.7 110.5 111.6 113.0 112.9 112.4 111.9 111.9 111.7 112.6 113.3 113.0 113.2 113.5 32 Power 1.27 83.5 84.1 85.4 82.9 82.3 82.0 83.0 82.9 83.5 81.7 81.7 80.3 80.4 81.0 33 Commercial 5.22 217.9 218.6 217.0 217.8 216.8 214.3 213.4 212.9 208.2 214.5 217.5 215.1 215.7 216.8 34 Transit 2.49 105.4 109.7 105.5 112.7 111.7 104.3 112.1 107.3 108.8 103.9 106.9 113.8 112.4 113.1 35 Defense and space equipment 3.67 170.6 177.2 178.5 178.7 176.3 176.2 178.0 178.0 178.4 179.5 181.0 182.0 183.6 184.4 Intermediate products 36 Construction supplies 5.95 118.3 120.5 119.8 124.0 122.6 122.6 123.6 123.5 124.1 124.0 125.4 124.6 125.0 125.7 37 Business supplies 6.99 140.0 141.5 142.4 142.9 142.6 142.5 143.8 145.0 147.9 148.6 148.4 147.8 148.6 38 General business supplies 5.67 143.9 145.3 146.2 147.2 146.7 146.4 148.0 148.3 151.6 153.3 152.5 152.2 152.7 39 Commercial energy products 1.31 122.9 125.4 126.2 124.4 124.9 125.6 125.8 130.7 131.9 128.3 130.6 129.0 131.1 Materials 40 Durable goods materials 20.50 121.4 121.2 121.9 122.2 121.3 119.3 120.2 118.4 117.8 118.8 118.8 118.8 119.1 120.0 41 Durable consumer parts 4.92 100.3 100.7 101.1 103.5 103.2 99.9 99.3 96.4 96.3 96.7 95.2 95.2 96.0 97.3 42 Equipment parts 5.94 158.0 154.0 154.1 153.8 153.0 153.7 154.8 152.3 151.8 154.3 155.6 154.8 154.3 155.1 43 Durable materials n.e.c 9.64 109.7 111.4 112.8 112.2 111.0 108.0 109.4 108.8 107.9 108.2 108.1 108.7 109.3 110.0 44 Basic metal materials 4.64 84.8 87.8 87.9 85.2 83.0 79.6 82.9 78.9 76.7 77.4 76.9 78.2 78.7 45 Nondurable goods materials 10.09 112.2 113.3 114.9 116.2 116.1 114.8 116.5 116.5 117.7 118.9 119.7 120.6 120.4 121.2 46 Textile, paper, and chemical materials 7.53 112.2 113.4 115.0 116.5 116.5 115.5 115.9 116.9 118.2 119.0 120.5 121.8 121.3 122.1 47 Textile materials 1.52 98.7 106.1 103.8 104.1 107.5 105.7 106.7 108.4 109.5 111.2 113.4 116.4 116.0 48 Pulp and paper materials 1.55 124.1 123.6 129.0 129.7 128.8 128.0 129.0 128.6 132.7 135.6 136.0 133.7 133.7 49 Chemical materials 4.46 112.7 112.4 114.0 116.2 115.4 114.5 114.5 115.7 116.1 115.9 117.5 119.6 118.8 50 Miscellaneous nondurable materials 2.57 112.1 112.8 114.4 115.4 115.0 112.8 118.2 115.3 116.4 118.3 117.2 117.1 117.7 51 Energy materials 11.69 103.4 101.8 104.5 103.0 102.1 101.4 100.4 100.5 100.8 99.9 97.9 97.9 97.0 97.0 52 Primary energy 7.57 107.2 106.5 108.1 106.9 106.7 107.4 106.2 106.7 106.5 104.8 103.7 103.1 101.6 53 Converted fuel materials 4.12 96.4 93.3 97.9 95.8 93.6 90.5 89.7 89.2 90.4 90.9 87.3 88.3 88.6 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • February 1987 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 Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug/ Sept. Oct.? Nov. Index (1977 = 100) MAJOR INDUSTRY 1 Mining and utilities 15.79 110.0 108.8 110.2 109.8 106.8 105.4 104.2 103.1 102.6 101.8 100.9 100.9 100.9 100.7 2 Mining 9.83 108.8 106.9 107.4 108.1 105.1 103.0 101.0 99.8 98.9 97.1 96.4 95.5 94.9 94.2 3 Utilities 5.96 111.9 111.9 114.8 112.5 109.7 109.3 109.4 108.5 108.6 109.7 108.3 109.7 110.9 111.3 4 Manufacturing 84.21 126.4 127.8 128.2 129.4 128.7 127.2 128.7 128.2 128.3 129.2 129.5 129.5 129.6 130.5 5 Nondurable 35.11 125.1 127.2 127.5 129.3 128.7 127.7 129.6 129.9 131.2 131.7 132.2 131.6 132.0 133.1 6 Durable 49.10 127.3 128.2 128.7 129.5 128.7 126.8 128.1 127.0 126.2 127.4 127.5 128.0 127.9 128.6 Mining 7 Metal 10 .50 75.0 78.3 77.3 73.5 77.2 75.9 76.0 72.0 65.9 69.2 70.9 8 Coal 11.12 1.60 126.8 125.8 128.4 130.8 126.5 124.7 124.4 124.0 127.3 120.2 122.2 120.8 116.1 9 Oil and gas extraction 13 7.07 106.2 103.6 104.2 104.9 101.1 99.2 96.2 95.1 93.3 92.4 90.7 90.2 90.0 88.2 10 Stone and earth minerals 14 .66 118.3 118.0 114.6 113.5 116.8 111.6 115.0 112.4 114.5 111.8 114.8 110.7 112.8 Nondurable manufactures 11 Foods 20 7.96 130.2 131.5 132.1 132.0 132.9 132.2 133.1 133.7 134.6 134.3 135.1 134.4 133.3 12 Tobacco products 21 .62 100.2 102.8 100.3 93.8 97.0 93.6 100.3 101.6 97.6 97.9 97.1 97.2 13 Textile mill products 22 2.29 103.2 110.0 107.7 107.9 109.9 108.0 111.4 111.3 112.6 113.4 114.7 116.0 116.9 14 Apparel products 23 2.79 100.9 103.8 104.5 105.5 102.8 102.8 103.1 102.6 101.7 102.5 102.5 102.7 103.5 15 Paper and products 26 3.15 127.6 128.9 131.3 133.6 132.6 132.4 134.1 133.2 137.2 138.1 138.6 137.2 137.5 16 Printing and publishing 27 4.54 153.9 156.8 157.6 160.9 156.7 157.8 161.6 161.9 164.0 165.4 164.6 162.9 167.0 167.8 17 Chemicals and products 28 8.05 127.1 128.2 128.1 131.7 132.0 130.2 132.8 131.5 134.2 134.1 134.4 133.9 133.5 18 Petroleum products 29 2.40 86.8 87.6 88.9 94.7 90.1 88.6 91.3 95.7 91.8 90.6 94.0 93.3 92.0 91.3 19 Rubber and plastic products 30 2.80 146.9 150.1 149.4 150.2 151.1 147.8 146.8 150.1 152.2 155.5 155.5 155.1 156.4 20 Leather and products 31 .53 68.5 68.7 66.4 65.4 64.8 62.7 61.5 59.5 57.9 61.9 62.0 60.9 59.8 Durable manufactures 21 Lumber and products 24 2.30 113.4 115.0 116.1 120.5 120.3 120.7 121.3 121.6 120.9 120.8 122.5 121.8 22 Furniture and fixtures 25 1.27 139.7 142.2 140.5 141.2 143.2 142.9 145.9 146.2 147.1 149.5 148.3 147.9 148.0 23 Clay, glass, stone products.... 32 2.72 115.5 116.7 118.2 120.0 119.3 120.0 121.6 120.2 120.8 119.6 119.7 121.6 119.0 24 Primary metals 33 5.33 80.5 82.9 81.7 82.4 80.3 76.3 78.1 74.8 71.4 73.6 73.4 74.0 73.8 75.0 25 Iron and steel 331.2 3.49 70.4 73.9 71.6 72.2 69.5 64.3 65.6 60.2 58.3 61.7 60.8 61.0 61.3 26 Fabricated metal products .... 34 6.46 107.3 107.6 108.2 109.2 108.5 107.6 108.2 106.5 106.6 105.7 105.9 107.2 107.9 108.0 27 Nonelectrical machinery 35 9.54 145.3 144.8 146.2 144.9 143.9 141.7 140.8 141.3 140.4 142.6 142.6 140.9 142.0 142.8 28 Electrical machinery 36 7.15 168.4 166.9 168.7 166.1 164.8 165.2 166.8 166.0 163.2 166.8 167.2 167.2 167.6 168.9 29 Transportation equipment 37 9.13 121.4 124.8 124.0 128.2 127.5 122.6 126.2 124.1 125.1 125.6 125.1 127.7 125.1 125.6 30 Motor vehicles and parts.... 371 5.25 111.5 112.6 111.4 116.5 116.4 108.1 112.6 108.7 110.6 111.2 108.2 112.2 107.0 107.8 31 Aerospace and miscellaneous transportation equipment 372-6.9 3.87 134.9 141.3 141.0 143.9 142.6 142.4 144.8 145.0 144.7 145.2 148.0 148.8 149.6 149.9 32 Instruments 38 2.66 139.1 139.9 140.4 141.5 141.9 142.0 142.4 140.3 139.9 141.7 142.0 141.7 140.8 140.8 33 Miscellaneous manufactures... 39 1.46 96.1 94.8 96.6 100.9 100.9 99.0 99.2 101.0 98.3 97.5 98.3 98.1 99.9 Utilities 34 Electric 44..1177 111199..77 112200..11 112222..44 111199..77 111199..55 111199..88 112211..66 112211..77 112233..11 112255..44 112222..44 112233..88 112255..33 Gross value (billions of 1978 dollars, annual rates) MAJOR MARKET 35 Products, total 517.5 1,650.9 1,680.6 1,676.6 1,702.1 1,686.5 1,660.8 1,686.3 1,687.6 1,676.7 1,669.9 1,681.3 1,682.2 1,685.9 1,694.5 36 Final 405.7 1,282.3 1,304.9 1,302.5 1,321.2 1,310.3 1,282.5 1,307.0 1,301.1 1,289.5 1,282.7 1,292.6 1,296.5 1,295.2 1,303.2 37 Consumer goods . 272.7 820.7 838.1 841.7 850.7 845.3 832.0 852.3 852.4 843.8 842.3 846.9 843.6 841.6 848.6 38 Equipment 133.0 461.7 466.8 460.8 470.5 465.1 450.4 454.7 448.7 445.7 440.4 445.7 452.9 453.7 454.6 39 Intermediate 111.9 368.6 375.7 374.1 380.8 376.2 378.3 379.3 386.4 387.2 387.1 388.7 385.7 390.7 391.2 • 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. 1986 IItteemm Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,605 1,682 1,733 1,861 1,808 1,834 1,885 1,788 1,792 1,759 1,673 1,603 1,565 2 1-family 902 922 957 1,060 1,033 1,043 1,139 1,092 1,121 1,093 1,039 1,047 1,006 3 2-or-more-family 703 759 777 801 775 791 746 696 671 666 634 556 559 4 Started 1,703 1,749 1,742 2,034 2,001 1,960 2,019 1,853 1,852 1,782 1,795 1,664 1,628 5 1-family 1,067 1,084 1,072 1,335 1,202 1,221 1,242 1,241 1,230 1,137 1,186 1,102 1,090 6 2-or-more-family 635 665 669 699 799 739 777 612 622 645 609 562 538 7 Under construction, end of period1 1,003 1,051 1,063 1,094 1,110 1,099 1,135 1,132 1,151 1,157 1,164 1,154 1,145 8 1-family 524 556 539 571 581 574 586 597 612 623 630 626 626 9 2-or-more-family 479 494 524 522 529 526 549 534 539 533 533 528 519 10 Completed 1,390 1,652 1,703 1,778 1,725 1,806 1,693 1,829 1,620 1,761 1,763 1,733 1,736 11 1-family 924 1,025 1,072 1,075 1,038 1,153 1,127 1,140 1,060 1,067 1,128 1,109 1,170 12 2-or-more-family 466 627 631 703 687 653 566 689 560 694 635 624 566 13 Mobile homes shipped 296 296 284 280 266 240 249 239 226 236 232 244 244 Merchant builder activity in 1-family units 14 Number sold 622 639 688 735 741 924 880 787 722 698' 618 732 662 15 Number for sale, end of period1 304 358 350 352 352 338 336 336 340 349 353 356 359 Price (thousands of dollars)2 Median 16 Units sold 75.5 80.0 84.3 86.6 89.7 88.7 92.5 92.1 91.2 94.1' 91.1 91.7 93.6 17 Units sold 89.9 97.5 101.0 104.1 106.6 108.0 110.3 114.6 110.9 116.8' 114.6 112.4 111.6 EXISTING UNITS (1-family) 18 Number sold 2,719 2,868 3,217 3,300 3,270 3,200 3,570 3,450 3,390 3,470 3,610 3,770 3,810 Price of units sold (thousands of dollars)2 19 Median 69.8 72.3 75.4 77.1 77.4 79.8 80.2 83.2 82.6 79.9 82.0 79.4 79.4 20 Average 82.5 85.9 90.6 93.0 93.1 96.8 98.1 101.7 102.1 99.2 100.3 96.8 97.3 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 279,240 327,209 355,570 373,378 373,947 368,027 373,904 374,483 375,397 380,722' 382,603' 382,581' 379,676' 22 Private 228,527 271,973 292,792 305,366 305,682 298,868 303,320 302,573 304,567 309,003' 310,155' 308,617' 307,736' 23 Residential 126,553 155,148 158,818 163,413 164,713 165,645 170,520 172,491 174,478 178,821' 178,761' 178,480' 178,642' 24 Nonresidential, total 101,974 116,825 133,974 141,953 140,969 133,223 132,800 130,082 130,089 130,182' 131,394' 130,137' 129,094' Buildings 25 Industrial 12,863 13,746 15,769 15,783 16,381 13,354 14,557 13,658 13,027 12,866' 12,543' 13,18c 12,913' 26 Commercial 35,789 48,100 59,626 65,222 63,494 60,716 59,763 57,368 57,443 58,132' 60,054' 58,001' 56,430' 27 Other 11,838 12,547 12,619 12,781 13,065 13,131 13,006 13,131 13,263 13,277' 13,315' 14,001' 14,435' 28 Public utilities and other 41,484 42,432 45,960 48,167 48,029 46,022 45,474 45,925 46,356 45,907' 45,482' 44,955' 45,316' 29 Public 50,715 55,232 62,777 68,013 68,264 69,150 70,583 71,910 70,830 71,719' 72,448' 73,964' 71,940' 30 Military 2,544 2,839 3,283 3,407 3,974 3,673 3,725 3,637 3,761 3,553' 4,132' 5,050' 3,695' 31 Highway 14,143 16,343 19,998 22,129 22,273 22,673 23,240 22,001 21,771 21,603' 21,607' 20,552' 20,274' 32 Conservation and development 4,820 4,654 4,952 5,614 4,372 4,598 4,947 4,729 4,657 4,415' 4,294' 4,841' 4,843' 33 Other 29,208 31,396 34,544 36,863 37,645 38,215 38,756 40,304 40,411 42,148' 42,415' 43,521' 43,128' 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

A50 Domestic Nonfinancial Statistics • February 1987 2.15 CONSUMER AND PRODUCER PRICES Percentage changes based on seasonally adjusted data, except as noted Change from 12 Change from 3 months earlier Change from 1 month earlier months earlier (at annual rate) IIInnndddeeexxx llleeevvveeelll IIIttteeemmm NNNooovvv... 1985 1986 1986 111999888666 11998855 11998866 (((111999666777 NNoovv.. NNoovv.. === 111000000)))''' Dec. Mar. June Sept. July Aug.' Sept. Oct. Nov. CONSUMER PRICES2 1 All items 3.6 1.3 5.3 -1.9 1.5 2.2 .0 .2 .3 .2 .3 330.8 2 Food 2.3 4.4 5.9 -1.4 3.4 9.4 .9 .9 .4 .3 .5 324.6 3 Energy items .8 -19.6 3.3 -34.2 -12.5 -19.5 -4.1 -1.9 .7 -2.2 -.7 341.7 4 All items less food and energy 4.4 3.8 5.4 4.1 3.1 3.7 .4 .3 .3 .4 .3 332.5 5 Commodities 2.2 1.3 3.6 .3 -.5 3.1 .2 .3 .2 .2 .2 266.1 6 Services 5.7 5.2 6.5 6.5 5.2 4.1 .4 .3 .3 .5 .4 405.0 PRODUCER PRICES 7 Finished goods 1.4 -1.9 9.2 -12.5 .4 .7 -.6' .4 .4 .3 .2 290.7 8 Consumer foods -.1 4.1 16.0 -8.1 5.9 13.0 1.8' 1.4 -.2 .9 -.1 283.0 9 Consumer energy -2.4 -37.9 20.7 -66.9 -22.3 -36.9 -13.9' -.2 3.7 -4.3 .0 452.9 10 Other consumer goods 2.8 3.0 4.4 2.5 2.0 2.2 .2 .1 .2 .8 .3 262.7 11 Capital equipment 2.5 2.2 5.6 .7 2.3 2.2 .1 .1 .4 .5 .3 310.5 12 Intermediate materials3 -.5 -4.3 2.9 -11.8 -5.3 -.8 -.6 -.1 .5 -.3 .2 310.4 13 Excluding energy -.2 .3 .0 -1.0 -1.3 2.0 .2 .1 .3 .1 .2 305.1 Crude materials 14 Foods -6.4 -.3 47.0 -24.7 1.6 20.1 3.3' 2.1 -.8 2.6 -.2 235.9 15 Energy -5.3 -27.4 -4.0 -51.3 -29.1 -13.3 -6.2' -.8 3.7 -.9 -.7 535.3 16 Other -4.3 .0 1.5 -.2 7.0 -18.1 .3' -5.6 .5 1.7 1.6 244.5 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 Q3 Q4 Ql Q2 Q3' GROSS NATIONAL PRODUCT 1 Total 3,405.7 3,765.0 3,998.1 4,030.5 4,087.7 4,149.2 4,175.6 4,240.7 By source 2 Personal consumption expenditures 2,234.5 2,428.2 2,600.5 2,627.1 2,667.9 2,697.9 2,732.0 2,799.8 3 Durable goods 289.1 331.2 359.3 373.3 362.0 360.8 373.9 414.5 4 Nondurable goods 816.7 870.1 905.1 907.4 922.6 929.7 928.4 932.8 5 Services 1,128.7 1,227.0 1,336.1 1,346.4 1,383.2 1,407.4 1,429.8 1,452.4 6 Gross private domestic investment 502.3 662.1 661.1 657.4 669.5 708.3 687.3 675.8 7 Fixed investment 509.4 598.0 650.0 654.3 672.6 664.4 672.8 680.3 8 Nonresidential 356.9 416.5 458.2 459.8 474.0 459.2 457.5 459.0 9 Structures 124.0 139.3 154.8 155.0 157.2 154.6 141.5 139.5 10 Producers' durable equipment 232.8 277.3 303.4 304.7 316.8 304.6 316.0 319.5 11 Residential structures 152.5 181.4 191.8 194.5 198.6 205.3 215.3 221.3 12 Change in business inventories -7.1 64.1 11.1 3.1 -3.1 43.8 14.5 -4.5 13 Nonfarm .4 56.6 12.2 3.2 16.7 41.2 10.5 -10.3 14 Net exports of goods and services -6.1 -58.7 -78.9 -83.7 -105.3 -93.7 -104.5 -108.9 15 Exports 352.5 382.7 369.8 362.3 368.2 374.8 363.0 370.8 16 Imports 358.7 441.4 448.6 446.0 473.6 468.5 467.5 479.7 17 Government purchases of goods and services 675.0 733.4 815.4 829.7 855.6 836.7 860.8 874.0 18 Federal 283.5 311.3 354.1 360.9 380.9 355.7 367.6 369.3 19 State and local 391.5 422.2 461.3 468.8 474.7 480.9 493.3 504.7 By major type of product 20 Final sales, total 3,412.8 3,700.9 3,987.0 4,027.4 4,090.8 4,105.4 4,161.2 4,245.2 21 Goods 1,396.1 1,576.7 1,630.2 1,642.8 1,644.1 1,669.0 1,661.6 1,680.2 22 Durable 573.3 675.0 700.2 710.3 709.1 710.6 703.1 730.1 23 Nondurable 822.7 901.7 930.0 932.5 935.0 958.4 958.5 950.1 24 Services 1,682.5 1,813.1 1,959.8 1,971.9 2,025.5 2,057.7 2,087.4 2,125.2 25 Structures 327.1 375.1 408.1 415.9 418.1 422.6 426.7 435.3 26 Change in business inventories -7.1 64.1 11.1 3.1 -3.1 43.8 14.5 -4.5 27 Durable goods -1.0 39.2 6.6 -2.7 9.5 28.6 -.1 -15.6 28 Nondurable goods -6.1 24.9 4.5 5.8 -12.7 15.3 14.6 11.1 29 MEMO: Total GNP in 1982 dollars 3,279.1 3,489.9 3,585.2 3,603.8 3,622.3 3,655.9 3,661.4 3,686.4 NATIONAL INCOME 30 Total 2,719.5 3,032.0 3,222.3 3,243.4 3,287.3 3,340.7 3,376.4 3,396.1 31 Compensation of employees 2,020.7 2,214.7 2,368.2 2,380.9 2,423.6 2,461.5 2,480.2 2,507.4 32 Wages and salaries 1,676.2 1,837.0 1,965.8 1,976.0 2,012.8 2,044.1 2,058.8 2,081.1 33 Government and government enterprises 324.3 346.2 372.2 374.2 381.6 387.2 392.5 398.4 34 Other 1,352.3 1,490.6 1,593.9 1,601.8 1,631.1 1,656.8 1,666.3 1,682.7 35 Supplement to wages and salaries 344.5 377.7 402.4 404.9 410.9 417.4 421.3 426.3 36 Employer contributions for social insurance 170.9 193.1 205.5 206.1 209.1 212.9 214.1 215.9 37 Other labor income 173.6 184.5 196.9 198.8 201.7 204.5 207.3 210.4 38 Proprietors' income1 190.9 236.9 254.4 249.3 262.1 265.3 289.1 277.5 39 Business and professional1 178.4 205.3 225.2 227.7 232.7 240.9 249.6 258.0 40 Farm1 12.4 31.5 29.2 21.6 29.4 24.4 39.5 19.6 41 Rental income of persons2 13.2 8.3 7.6 7.3 8.3 12.8 16.3 16.2 42 Corporate profits1 213.7 264.7 280.7 296.3 285.6 296.4 293.1 302.0 43 Profits before tax3 207.6 235.7 223.2 229.2 235.8 222.5r 221.1' 240.4 44 Inventory valuation adjustment -10.9 -5.5 -.6 6.1 -9.4 16.5 10.6 6.1 45 Capital consumption adjustment 17.0 34.5 58.1 61.0 59.2 57. y 54.8' 55.5 46 Net interest 281.0 307.4 311.4 309.7 307.6 304.9 297.7 292.9 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A52 Domestic Nonfinancial Statistics • February 1987 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. Account 1984 1985 Q3 Q4 Ql Q2 PERSONAL INCOME AND SAVING 1 Total personal income 2,838.6 3,110.2 3,314.5 3,323.2 3,382.9 3,432.6 3,483.3 2 Wage and salary disbursements 1,676.6 1.836.8 1,966.1 1,976.0 2,012.8 2,044.1 2,058.8 3 Commodity-producing industries 523.1 577.8 607.7 608.3 617.7 622.0 620.8 4 Manufacturing 397.4 439.1 460.1 460.7 467.5 470.5 468.8 5 Distributive industries 404.2 442.2 469.8 472.4 478.9 485.2 484.3 6 Service industries 425.1 470.6 516.4 521.1 534.6 549.6 561.3 7 Government and government enterprises. 324.3 346.2 372.2 374.2 381.6 387.2 392.5 8 Other labor income 173.6 184.5 196.9 198.8 201.7 204.5 207.3 9 Proprietors' income1 190.9 236.9 254.4 249.3 262.1 265.3 289.1 10 Business and professional1 178.4 205.3 225.2 227.7 232.7 240.9 249.6 11 Farm1 12.4 31.5 29.2 21.6 29.4 24.4 39.5 12 Rental income of persons2 13.2 8.3 7.6 7.3 8.3 12.8 16.3 13 Dividends 68.7 74.7 76.4 76.3 76.7 79.1 81.1 14 Personal interest income 393.1 446.9 476.2 475.2 480.6 480.8 480.1 15 Transfer payments 442.6 455.6 487.1 491.1 493.6 504.7 510.1 16 Old-age survivors, disability, and health insurance benefits. 221.7 235.7 253.4 256.5 256.8 263.2 264.1 17 LESS: Personal contributions for social insurance 120.1 133.5 150.2 150.7 152.9 158.6 159.5 18 EQUALS: Personal income 2,838.6 3,110.2 3,314.5 3,323.2 3,382.9 3,432.6 3,483.3 19 LESS: Personal tax and nontax payments 410.5 439.6 486.5 491.2 500.7 497.5 504.8 20 EQUALS: Disposable personal income 2,428.1 2,670.6 2,828.0 2,832.0 2,882.2 2,935.1 2,978.5 21 LESS: Personal outlays 2,297.4 2.501.9 2,684.7 2,712.4 2,756.4 2,789.4 2,825.5 22 EQUALS: Personal saving 130.6 168.7 143.3 119.6 125.8 145.6 153.1 MEMO Per capita (1982 dollars) 23 Gross national product 13,963.7 14,721.1 14,980.9 15,040.5 15,080.3' 15,188.6' 15,179.9 24 Personal consumption expenditures 9,138.5 9,475.4 9,713.0 9,774.4 9,790.6' 9,857.5' 9,985.0 25 Disposable personal income 9,930.0 10,421.0 10,563.0 10,537.0 10,577.0 10,723.0 10,886.0 26 Saving rate (percent) 5.4 6.3 5.1 4.2 4.4 5.0 5.1 GROSS SAVING 27 Gross saving. 463.6 573.3 551.5 541.7 524.1 583.2 539.7 28 Gross private saving 592.2 674.8 687.8 679.6 679.2 708.3' 713.0' 29 Personal saving 130.6 168.7 143.3 119.6 125.8 145.6 153.1 30 Undistributed corporate profits1 65.0 91.0 107.3 118.8 106.8 115.5' 106.6' 31 Corporate inventory valuation adjustment. -10.9 -5.5 -.6 6.1 -9.4 16.5 10.6 Capital consumption allowances 32 Corporate 242.7 253.9 268.2 270.1 273.3 275.3 278.9 33 Noncorporate 153.9 161.2 169.0 171.2 173.4 171.8 174.4 34 Wage accruals less disbursements .0 .0 .0 .0 .0 .0 .0 35 Government surplus, or deficit (-), national income and product accounts -128.6 -101.5 -136.3 -138.0 -155.1 -125.1' -173.3' 36 Federal -176.0 -170.0 -198.0 -197.5 -217.6 -195.C -232.2' 37 State and local 47.5 68.5 61.7 59.5 62.5 69.9' 58.9' 38 Capital grants received by the United States, net .0 .0 .0 .0 .0 .0 .0 39 Gross investment 468.8 571.4 545.9 536.2 525.7 579.6 544.3 40 Gross private domestic 502.3 662.1 661.1 657.4 669.5 708.3 687.3 41 Net foreign -33.5 -90.7 -115.2 -121.2 -143.8 -128.6 -143.0 42 Statistical discrepancy. 5.2 -5.5 -3.6 4.6 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 Q3 Q4 Ql Q2 Q3" 1 Balance on current account -46,605 -106,466 -117,677 -28,455' -33,695' -34,038 -34,413 -36,280 -32,275 -31,510 -31,020 -35,458 -40,206 3 Merchandise trade balance2 -67,080 -112,522 -124,439 -31,675 -37,352 -36,459 -35,669 -37,669 4 Merchandise exports 201,820 219,900 214,424 52,498 52,727 53,661 55,149 55,318 Merchandise imports -268,900 -332,422 -338,863 -84,173 -90,079 -90,120 -90,818 -92,987 6 Military transactions, net -370 -1,827 -2,917 -619 -1,322 -1,066 -695 -624 7 Investment income, net3 24,841 18,751 25,188 8,262 9,255 6,517 5,325 5,509 8 Other service transactions, net 5,484 1,288 -525 -422' -32' -7 705 681 9 Remittances, pensions, and other transfers -3,194 -3,621 -3,787 -914 -937 -954 -834 -789 10 U.S. government grants (excluding military) -6,286 -8,536 -11,196 -3,087 -3,307 -2,069 -3,245 -3,388 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) -5,005 -5,523 -2,824 -422 -540 -250 -209 -1,346 12 Change in U.S. official reserve assets (increase, -) -1,196 -3,130 -3,858 -121 -3,148 -115 16 280 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -66 -979 -897 -264 -189 -274 -104 163 15 Reserve position in International Monetary Fund -4,434 -995 908 388 168 344 366 508 16 Foreign currencies 3,304 -1,156 -3,869 -245 -3,126 -185 -246 -391 17 Change in U.S. private assets abroad (increase, -)3 -43,821 -14,987 -25,754 -5,324 -19,579 -12,533 -25,357 -28,016 18 Bank-reported claims -29,928 -11,127 -691 4,009 -8,485 6,333 -14,387 -20,507 19 Nonbank-reported claims -6,513 5,081 1,665 -1,517 418 -2,842 -1,220 n.a. 20 U.S. purchase of foreign securities, net -7,007 -5,082 -7,977 -1,664 -1,411 -6,133 -1,664 163 21 U.S. direct investments abroad, net3 -373 -3,859 -18,752 -6,152 -10,101 -9,891 -8,806 -7,672 22 Change in foreign official assets in the United States (increase, +) 5,968 3,037 -1,324 2,577 -1,322 2,469 14,704 15,839 23 U.S. Treasury securities 6,972 4,690 -546 -81 -1,976 3,256 14,538 12,262 24 Other U.S. government obligations -476 13 -295 46 -171 -177 -644 -276 25 Other U.S. government liabilities4 725 436 483 58 263 288 679 954 26 Other U.S. liabilities reported by U.S. banks 545 555 522 2,932 722 -1,261 662 3,201 27 Other foreign official assets5 -1,798 -2,657 -1,488 -378 -160 363 -531 -302 28 Change in foreign private assets in the United States (increase, +)3 79,528 99,730 128,430 33,088 53,158 34,151 32,822 53,294 29 U.S. bank-reported liabilities 50,342 33,849 40,387 7,276 20,427 8,434 3,553 32,187 30 U.S. nonbank-reported liabilities -118 4,704 -1,172 589 2,232 -2,057 -1,644 n.a. 31 Foreign private purchases of U.S. Treasury securities, net 8,721 23,059 20,500 7,484 5,676 7,666 3,807 597 3? Foreign purchases of other U.S. securities, net 8,636 12,759 50,859 11,628 22,441 18,686 23,018 17,078 33 Foreign direct investments in the United States, net3 11,947 25,359 17,856 6,111 2,382 1,422 4,088 3,432 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 11,130 27,338 23,006 -1,343' 5,125' 10,316 12,437 -3,771 36 --33,,668877'' 33,,777711'' 11,,221166 --11,,550055 --33,,999933 37 Statistical discrepancy in recorded data before seasonal adjustment 11,130 27,338 23,006 2,344 1,354 9,100 13,942 222 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -1,196 -3,130 -3,858 -121 -3,148 -115 16 280 39 Foreign official assets in the United States (increase, +) 5,243 2,601 -1,807 2,519 -1,585 2,181 14,025 14,885 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 -1,831 -1,002 1,421 -1,938 -2,828 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 194 190 64 15 28 22 12 15 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 officii 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 • February 1987 3.11 U.S. FOREIGN TRADE Millions of dollars; monthly data are not seasonally adjusted. 1986 IItteemm 11998833 11998844 11998855 Apr. May June July Aug. Sept. Oct. 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments 200,486 217,865 213,146 17,965 17,431 19,070 17,707 17,604 17,518 193,300 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 258,048 325,726 345,276 28,762 30,272 31,764 34,121 29,476 28,695 30,018 3 Trade balance -57,562 107,861 -132,129 -10,797 -12,842 -12,694 -16,414 -11,871 -11,177 -10,688 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 1986 TTyyppee 11998833 11998844 11998855 May June July Aug. Sept. Oct. Nov.? 1 Total 33,747 34,934 43,191 45,260 46,635 47,430 48,161 48,086 47,166 48,054 2 Gold stock, including Exchange Stabilization Fund1 11,121 11,096 11,090 11,085 11,084 11,084 11,084 11,084 11,143 11,300 3 Special drawing rights2-3 5,025 5,641 7,293 8,066 8,213 8,085 8,250 8,295 8,090 8,310 4 Reserve position in International Monetary Fund2 11,312 11,541 11,952 11,789 12,109 12,114 12,017 11,922 11,575 11,659 5 Foreign currencies4 6,289 6,656 12,856 14,320 15,229 16,147 16,810 16,785 16,358 16,785 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 1986 AAsssseettss 11998833 11998844 11998855 May June July Aug. Sept. Oct. Nov. 1 Deposits 190 267 480 253 354 233 227 342 303 224 Assets held in custody 2 U.S. Treasury securities' 117,670 118,000 121,004 136,762 137,820 144,527 148,263 152,275 156,076 156,919 3 Earmarked gold2 14,414 14,242 14,245 14,145 14,128 14,131 14,120 14,115 14,110 14,057 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 1986 AAsssseett aaccccoouunntt 11998833 Apr. May June July Aug. Sept. Oct.'' All foreign countries 1 Total, all currencies 477,090 453,656 458,012 475,158 459,587 467,565 454,886 461,404 474,567 446,581 ? Claims on United States 115,542 113,393 119,713 122,593' 117,724' 117,812' 113,474' 117,661 116,382 112,068 Parent bank 82,026 78,109 87,201 88,975 83,404 82,565' 79,387 83,779 82,302 79,999 4 Other banks in United States2 13,664 13,057 12,823' 13,206' 14,039" 13,527' 13,072' 13,624 11,659 5 Nonbanks2 21,620 19,455 20,795' 21,114' 21,208' 20,56c 20,810" 20,456 20,410 6 Claims on foreigners 342,689 320,162 315,680^ 326,185' 316,337' 324,216' 314,354' 315,583 328,563 305,647 7 Other branches of parent bank 96,004 95,184 91,399 95,238 90,447 98,406" 92,641 93,435 103,278 90,412 8 Banks 117.668 100,397 102,960 107,212' 103,958' 105,648' 103,095' 102,849 107,503 100,707 9 Public borrowers 24,517 23,343 23,478 23,676' 23,846' 23,279" 23,578' 23,720 23,505 24,091 10 Nonbank foreigners 107,785 101,238 97,843r 100,059' 98,086' 96,883' 95,040' 95,579 94,277 90,437 11 Other assets 18,859 20,101 22,619' 26,380' 25,526" 25,537" 27,058' 28,160 29,622 28,866 12 Total payable in U.S. dollars 371,508 350,636 336,288 331,511 322,837 327,639 313,703 318,357 330,597 309,087 n Claims on United States 113,436 111,426 116,645 118,735' 113,864' 113,519" 109,263' 113,636 112,133 107,612 14 Parent bank 80,909 77,229 85,971 87,597 82,110 81,073" 78,025 82,261 80,753 78,335 15 Other banks in United States2 13,500 12,454 11,922' 12,293' 12,907' 12,373' 12,180" 12,802 10,544 16 Nonbanks2 20,697 18,220 19,216' 19,461' 19,539' 18,865" 19,195' 18,578 18,733 17 Claims on foreigners 247,406 228,600 209,905' 202,670' 198,358' 203,934' 194,102" 194,643 207,701 190,086 18 Other branches of parent bank 78,431 78,746 72,689 73,109 69,684 75,883' 69,135 68,604 78,400 67,835 19 Banks 93,332 76,940 71,748 66,077' 65,160" 66,751' 65,033" 64,940 68,596 62,836 70 Public borrowers 17,890 17,626 17,252 16,783' 17,203' 16,498' 16,684' 16,788 16,521 17,355 21 Nonbank foreigners 60,977 55,288 48,216" 46,701' 46,311' 44,802' 43,250' 44,311 44,184 42,060 22 Other assets 10,666 10,610 9,738' 10,106' 10,615' 10,186' 10,338' 10,078 10,763 11,389 United Kingdom 23 Total, all currencies 158,732 144,385 148,599 155,867 152,075 151,593 145,448 145,619 151,596 142,398 74 Claims on United States 34,433 27,675 33,157 34,234 34,231 31,364 30,223 29,839 30,879 30,747 ?5 Parent bank 29,111 21,862 26,970 28,058 28,001 25,106 24,252 23,466 24,291 24,800 ?fi Other banks in United States2 "1 1,429 1,106 1,386 1,312 1,365 1,369 1,448 2,092 1,314 77 Nonbanks2 4,384 5,081 4,790 4,918 4,893 4,602 4,925 4,4% 4,633 78 Claims on foreigners 119,280 111,828 110,217 115,485 111,823 113,739 108,156 109,024 113,368 105,609 ?9 Other branches of parent bank 36,565 37,953 31,576 32,516 31,984 34,670 31,613 31,828 34,678 31,268 30 Banks 43,352 37,443 39,250 41,593 39,222 39,430 38,393 38,048 40,204 37,836 31 Public borrowers 5,898 5,334 5,644 5,642 5,427 5,236 5,229 5,336 5,086 5,033 32 Nonbank foreigners 33,465 31,098 33,747 35,734 35,190 34,403 32,921 33,812 33,400 31,472 33 Other assets 5,019 4,882 5,225 6,148 6,021 6,490 7,069 6,756 7,349 6,042 34 Total payable in U.S. dollars 126,012 112,809 108,626 107,364 106,716 104,013 97,641 97,771 103,228 97,295 35 Claims on United States 33,756 26,868 32,092 32,959 32,872 29,944 28,848 28,446 29,512 29,312 36 Parent bank 28,756 21,495 26,568 27,629 27,584 24,693 23,888 22,972 23,826 24,323 37 Other banks in United States2 1 ~ 1,363 1,005 1,225 1,152 1,102 1,131 1,194 1,848 1,110 38 Nonbanks2 4,010 4,519 4,105 4,136 4,149 3,829 4,280 3,838 3,879 39 Claims on foreigners 88,917 82,945 73,475 71,058 70,406 70,697 65,472 66,465 70,325 64,929 40 Other branches of parent bank 31,838 33,607 26,011 26,224 26,265 27,559 24,258 24,657 27,151 24,632 41 Banks 32,188 26,805 26,139 23,310 23,134 22,825 21,938 21,636 22,917 21,011 4? Public borrowers 4,194 4,030 3,999 4,012 3,937 3,777 3,793 3,838 3,778 3,759 43 Nonbank foreigners 20,697 18,503 17,326 17,512 17,070 16,536 15,483 16,334 16,479 15,527 44 Other assets 3,339 2,9% 3,059 3,347 3,438 3,372 3,321 2,860 3,391 3,054 Bahamas and Caymans 45 Total, all currencies 152,083 146,811 142,055 137,272 132,122 138,944 134,238 137,526 143,082 134,060 46 Claims on United States 75,309 77,296 74,864 72,861' 68,807' 70,883' 69,812' 73,047 71,918 68,614 47 48,720 49,449 50,553 47,613 42,868 44,183' 43,867 47,694 46,635 44,476 48 Other banks in United States2 11,544 11,204 10,476' 10,916' 11,730' 11,201' 10,813' 10,641 9,557 49 Nonbanks2 16,303 13,107 14,772' 15,023' 14,970" 14,744' 14,540" 14,642 14,581 50 Claims on foreigners 72,868 65,598 63,882' 60,473' 59,292' 64,043' 60,363' 60,167 66,620 59,622 51 Other branches of parent bank 20,626 17,661 19,042 18,286 15,703 20,585' 16,682 16,539 22,763 16,985 5? Banks 36,842 30,246 28,192 25,880' 26,397' 27,078' 27,160' 27,065 27,779 26,205 53 Public borrowers 6,093 6,089 6,458 6,357' 6,717' 6,405' 6,551' 6,675 6,434 7,263 54 Nonbank foreigners 12,592 11,602 10,19c 9,950" 10,475' 9,975' 9,970" 9,888 9,644 9,169 55 Other assets 3,906 3,917 3,309' 3,938' 4,023' 4,018' 4,063' 4,312 4,544 5,824 56 Total payable in U.S. dollars 145,641 141,562 136,794 130,530 125,681 132,353 127,910 130,723 136,615 127,361 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 • February 1987 3.14 Continued 1986 Apr. May June July Aug. Sept. Oct.? All foreign countries 57 Total, all currencies 477,090 453,656 458,012 475,158 459,587 467,565 454,886 461,404 474,567 446,581 58 Negotiable CDs3 n.a. 37,725 34,607 33,229 35,006 34,683 32,656 31,475 33,642 32,267 59 To United States 188,070 147,583 155,538 150,395' 144,241 149,848 141,599 145,488 151,281 141,303 60 Parent bank 81,261 78,739 83,914 81,594 77,484 85,126 81,299 79,564' 87,927 75,773 61 Other banks in United States 29,453 18,409 16,894 14,270 14,347 16,118 14,191 15,151' 14,153 14,791 62 Nonbanks 77,356 50,435 54,730 54,531' 52,410 48,604 46,109 50,773 49,201 50,739 63 To foreigners 269,685 247,907 245,942 269,809' 258,700 262,329 259,133 262,978 269,322 253,316 64 Other branches of parent bank 90,615 93,909 89,529 93,768 90,228 97,717 91,144 91,307 102,245 87,883 65 Banks 92,889 78,203 76,814 89,608 83,251 81,008 82,854 85,239 81,953 80,709 66 Official institutions 18,896 20.281 19,523 20,744 20,792 20,480 20,608 20,637 20,109 19,436 67 Nonbank foreigners 68,845 55,514 60,076 65,689' 64,429 63,124 64,527 65,795 65,015 65,288 68 Other liabilities 19,335 20,441 21,925 21,725 21,640 20,705 21,498 21,463 20,322 19,695 69 Total payable in U.S. dollars 388,291 367,145 353,470 347,587 340,176 346,428 330,183 333,581 349,259 323,699 70 Negotiable CDs3 n.a. 35,227 31,063 29,912 31,513 31,076 28,970 28,091 30,560 29,029 71 To United States 184,305 143,571 150,161 143,606' 137,694 142,730 133,908 137,805 143,627 133,478 72 Parent bank 79,035 76,254 80,888 78,061 73,950 81,066 77,048 75,391' 83,790 71,854 73 Other banks in United States 28.936 17,935 16,264 13,477 13,575 15,323 13,507 14,364' 13,173 13,768 74 Nonbanks 76,334 49,382 53,009 52,068' 50,169 46,341 43,353 48,050 46,664 47.856 75 To foreigners 194,139 178,260 163,361 166,224' 162,528 163,943 158,314 158,931 167,356 153,598 76 Other branches of parent bank 73,522 77,770 70,943 71,841 69,978 75,805 68,065 66,878 77,464 65,077 77 Banks 57,022 45,123 37,323 37,240 36,335 33,745 34,827 36,460 35,358 33,802 78 Official institutions 13,855 15,773 14,354 14,746 14,049 13,772 14,091 14,125 13,697 13,320 79 Nonbank foreigners 51,260 39,594 40,741 42,397' 42,166 40,621 41,331 41,468 40,837 41,399 80 Other liabilities 9,847 10,087 8,885 7,845 8,441 8,679 8,991 8,754 7,716 7,594 United Kingdom 81 Total, all currencies 158,732 144,385 148,599 155,867 152,075 151,593 145,448 145,619 151,596 142,398 82 Negotiable CDs3 n.a. 34,413 31,260 29,898 31,734 31,396 29,295 28,279 30,352 28,847 83 To United States 55,799 25,250 29,422 28,450 27,505 26,270 22,671 22,831 26,540 24,610 84 Parent bank 14,021 14,651 19,330 17,231 16,624 15,892 13,300 14,188 17,399 14,014 85 Other banks in United States 11,328 3,125 2,974 1,966 2,175 1,997 1,999 2,148 2,062 2,382 86 Nonbanks 30,450 7,474 7,118 9,253 8,706 8,381 7,372 6,495 7,079 8,214 87 To foreigners 95,847 77,424 78,525 87,773 83,067 84,362 83,707 84,880 85,680 80,366 88 Other branches of parent bank 19,038 21,631 23,389 25,379 23,838 27,029 25,106 24,962 28,272 24,194 89 Banks 41,624 30,436 28,581 34,294 31,584 30,505 31,678 32,250 31,190 31,001 90 Official institutions 10,151 10,154 9,676 9,757 9,548 9,543 9,074 9,330 8,652 8,068 91 Nonbank foreigners 25,034 15,203 16,879 18,343 18,097 17,285 17,849 18,338 17,440 17,103 92 Other liabilities 7,086 7,298 9,392 9,746 9,769 9,565 9,775 9,629 9,150 8,575 93 Total payable in U.S. dollars 131,167 117,497 112,697 110,378 109,337 108,375 101,095 101,397 108,249 99,820 94 Negotiable CDs3 n.a. 33,070 29,337 27,978 29,542 29,135 27,015 26,114 28,490 26,927 95 To United States 54,691 24,105 27,756 26,411 25,490 24,214 20,065 20,403 24,039 21,960 96 Parent bank 13,839 14,339 18,956 16,867 16,233 15,331 12,648 13,707 16,984 13,591 97 Other banks in United States 11,044 2,980 2,826 1,774 1,944 1,817 1,738 1,879 1,735 2,108 98 Nonbanks 29,808 6,786 5,974 7,770 7,313 7,066 5,679 4,817 5,320 6,261 99 To foreigners 73,279 56,923 51,980 52,262 50,441 51,056 49,932 50,855 52,645 47,553 100 Other branches of parent bank 15,403 18,294 18,493 19,297 18,043 20,455 17,868 17,790 21,305 17,289 101 Banks 29,320 18,356 14,344 14,125 14,114 13,073 14,251 15,056 14,491 14,123 102 Official institutions 8,279 8,871 7,661 7,449 6,953 6,914 6,658 6,724 6,015 5,685 103 Nonbank foreigners 20,277 11,402 11,482 11,391 11,331 10,614 11,155 11,285 10,834 10,456 104 Other liabilities 3,197 3,399 3,624 3,727 3,864 3,970 4,083 4,025 3,075 3,380 Bahamas and Caymans 105 Total, all currencies 152,083 146,811 142,055 137,272 132,122 138,944 134,238 137,526 143,082 134,060 106 Negotiable CDs3 n.a. 615 610 629 634 567 565 470 527 506 107 To United States 111,299 102,955 103,813 98,621 94,128 98,897 96,636 99,585 102,012 96,017 108 Parent bank 50,980 47,162 44,811 43,662 40,757 47,014 47,862 44,417' 49,981 43,466 109 Other banks in United States 16,057 13,938 12,778 11,014 10,738 12,868 11,131 11,952' 10,986 11,144 110 Nonbanks 44,262 41,855 46,224 43,945 42,633 39,015 37,643 43,216 41,045 41,407 111 To foreigners 38,445 40,320 35,053 35,901 35,139 37,340 34,827 35,216 38,447 35,427 112 Other branches of parent bank 14,936 16,782 14,075 14,077 13,731 15,882 13,561 13,368 15,918 13,574 113 Banks 11,876 12,405 10,669 10,788 10,318 9,991 9,636 10,216 10,158 8,964 114 Official institutions 1,919 2,054 1,776 2,176 2,144 2,427 2,468 2,386 2,834 2,665 115 Nonbank foreigners 11,274 9,079 8,533 8,860 8,946 9,040 9,162 9,246 9,537 10,224 116 Other liabilities 2,339 2,921 2,579 2,121 2,221 2,140 2,210 2,255 2,096 2,110 117 Total payable in U.S. dollars 148,278 143,582 138,322 132,966 127,918 134,606 130,075 133,256 138,733 130,084 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 1986 IItteemm 11998844 11998855 Apr. May June July Aug. Sept. Oct.? 1 Total1 180,552 178,356 188,914 190,159 194,562 198,784 203,364 209,823 210,306 By type 2 Liabilities reported by banks in the United States2 26,089 26,734 27,028 24,911 26,142 25,143 25,482 29,342 26,248 3 U.S. Treasury bills and certificates3 59,976 53,252 59,547 63,614 65,790 70,721 74,766 75,095 75,457 U.S. Treasury bonds and notes 4 Marketable 69,019 77,108 82,345 82,501 84,113 85,561 85,622 87,945 91,220 5 Nonmarketable4 5,800 3,550 2,300 1,800 1,800 1,300 1,300 1,300 1,300 6 U.S. securities other than U.S. Treasury securities5 19,668 17,712 17,694 17,333 16,717 16,059 16,194 16,140 16,081 By area 7 Western Europe1 69,776 74,418 76,354 76,405 79,641 81,524 83,874 87,060 87,504 8 Canada 1,528 1,314 1,711 1,502 1,529 1,627 1,535 1,626 1,699 9 Latin America and Caribbean 8,561 11,141 10,785 10,595 11,046 11,242 10,801 10,346 9,901 10 Asia 93,954 86,459 94,653 96,487 97,359 100,070 102,362 106,017 105,818 11 Africa 1,264 1,824 1,833 1,718 1,717 1,525 1,958 1,864 1,715 12 Other countries6 5,469 3,200 3,578 3,452 3,270 2,796 2,834 2,910 3,669 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 1986 IItteemm 11998822 11998833 11998844 Dec. Mar. June' Sept. 1 Banks' own liabilities 4,844 5,219 8,586 15,368 21,364 24,077 29,227 2 Banks' own claims 7,707 7,231 11,984 16,161 19,736 20,985 24,516 3 Deposits 4,251 2,731 4,998 8,304 11,318 11,313 13,818 4 Other claims 3,456 4,501 6,986 7,857 8,418 9,672 10,698 5 Claims of banks' domestic customers' 676 1,059 569 580 1,426 1,385 1,660 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 • February 1987 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States Payable in U.S. dollars Millions of dollars, end of period 1986 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998833 11998844 11998855 Apr. May June July Aug. Sept. Oct.'' 1 AH foreigners 369,607 407,306 435,726 443,456 444,528 457,350 469,720 486,514' 505,328 459,673 2 Banks' own liabilities 279,087 306,898 341,070 346,469 342,074 345,663 342,267 355,003' 372,233 360,964 3 Demand deposits 17,470 19,571 21,107 19,751 19,651 21,332 19,607 20,277' 21,380 21,726 4 Time deposits1 90,632 110,413 117,278 114,209 114,055 115,246 117,010 122,322' 125,917 123,361 5 Other2 25,874 26,268 29,305 33,220 31,686 31,712 30,650 33,026 36,621 35,222 6 Own foreign offices3 145,111 150,646 173,381 179,289 176,683 177,373 174,999 179,378 188,316 180,654 7 Banks' custody liabilities4 90,520 100,408 94,656 96,987 102,454 111,687 127,453 131,511 133,095 134,710 8 U.S. Treasury bills and certificates5 68,669 76,368 69,133 74,631 80,192 82,701 86,789 8899,,558866 9900,,446677 9911,,330055 9 Other negotiable and readily transferable instruments6 17,467 18,747 17,964 13,776 13,917 14,729 14,702' 14,507' 14,430 14,991 10 Other 4,385 5,293 7,558 8,580 8,346 14,257 25,%2' 27,417' 28,198 28,413 11 Nonmonetary international and regional organizations7 5,957 4,454 5,821 3,495 4,519 3,441 3,974 5,253 3,038 3,882 12 Banks' own liabilities 4,632 2,014 2,621 1,749 2,388 891 1,857 4,090 1,721 2,406 13 Demand deposits 297 254 85 138 99 79 156 165 180 175 14 Time deposits1 3,584 1,267 2,067 681 1,109 551 1,209 3,233 1,243 1,919 15 Other2 750 493 469 931 1,179 262 492 691 299 312 16 Banks' custody liabilities4 1,325 2,440 3,200 1,746 2,131 2,550 2,118 1,163 1,317 1,476 17 U.S. Treasury bills and certificates 463 916 1,736 768 1,282 1,619 991 129 218 308 18 Other negotiable and readily transferable instruments6 862 1,524 1,464 970 849 918 1,126 11,,003333 1,099 1,162 19 Other 0 0 0 7 0 13 0 11 0 6 20 Official institutions8 79,876 86,065 79,985 86,576 88,526 91,932 95,863 100,247 104,439 101,705 21 Banks' own liabilities 19,427 19,039 20,835 23,927 22,018 22,928 22,044 22,710 26,619 23,187 22 Demand deposits 1,837 1,823 2,077 1,832 1,810 2,131 1,609 1,582 1,893 1,840 23 Time deposits1 7,318 9,374 10,949 9,368 9,850 10,347 10,116 9,892 10,924 10,336 24 Other2 10,272 7,842 7,809 12,728 10,358 10,450 10,319 11,236 13,802 11,011 25 Banks' custody liabilities4 60,448 67,026 59,150 62,648 66,508 69,004 73,820 77,538 77,819 78,518 26 U.S. Treasury bills and certificates5 54,341 59,976 53,252 5599,,554477 63,614 6655,,779900 7700,,772211 7744,,776666 7755,,009955 7755,,445577 27 Other negotiable and readily transferable instruments6 6,082 6,966 5,824 2,916 2,754 2,9% 2,892 2,624 2,524 2,857 28 Other 25 84 75 185 139 218 207 148 199 204 29 Banks9 226,887 248,893 275,589 277,856 275,047 284,637 291,827' 301,549' 317,985 310,283 30 Banks' own liabilities 205,347 225,368 252,723 254,617 251,126 255,673 251,779 260,950' 276,542 268,343 31 Unaffiliated foreign banks 60,236 74,722 79,341 75,328 74,444 78,300 76,780 81,573' 88,226 87,690 32 Demand deposits 8,759 10,556 10,271 8,689 9,036 10,277 9,180 9,304' 9,302 9,714 33 Time deposits1 37,439 47,095 49,510 48,484 46,780 48,480 49,418 52,811 58,043 55,916 34 Other2 14,038 17,071 19,561 18,155 18,627 19,544 18,181 19,458 20,881 20,059 35 Own foreign offices3 145,111 150,646 173,381 179,289 176,682 177,373 174,999 179,378 188,316 180,654 36 Banks' custody liabilities4 21,540 23,525 22,866 23,239 23,922 28,964 40,048' 40,598' 41,443 41,940 37 U.S. Treasury bills and certificates 10,178 11,448 9,832 9,914 10,841 1100,,668888 1100,,993344 10,543 1100,,663355 1100,,660011 38 Other negotiable and readily transferable instruments6 7,485 7,236 6,040 5,423 5,451 5,448 5,585 5,526 5,538 5,501 39 Other 3,877 4,841 6,994 7,901 7,629 12,828 23,529' 24,530' 25,270 25,838 40 Other foreigners 56,887 67,894 74,331 75,530 76,436 77,339 78,055' 79,465' 79,867 79,803 41 Banks' own liabilities 49,680 60,477 64,892 66,176 66,543 66,170 66,587 67,253' 67,351 67,028 42 Demand deposits 6,577 6,938 8,673 9,093 8,705 8,845 8,663 9,227 10,005 9,997 43 Time deposits 42,290 52,678 54,752 55,677 56,316 55,869 56,267 56,386' 55,707 55,191 44 Other2 813 861 1,467 1,406 1,521 1,456 1,657 1,641 1,639 1,840 45 Banks' custody liabilities4 7,207 7,417 9,439 9,354 9,893 11,169 11,468' 12,212' 12,516 12,776 46 U.S. Treasury bills and certificates 3,686 4,029 4,314 4,401 4,454 44,,660044 44,,114433 44,,114499 44,,551199 44,,993399 47 Other negotiable and readily transferable instruments6 3,038 3,021 4,636 4,465 4,862 5,367 5,099' 5,325' 5,268 5,472 48 Other 483 367 489 487 577 1,198 2,226 2,738 2,729 2,365 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 10,346 10,476 9,845 6,286 6,269 6,419 6,492 6,569 6,554 5,605 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 1986 AArreeaa aanndd ccoouunnttrryy 11998833 11998844 11998855 Apr. May June July Aug. Sept. Oct.? 1 Total 369,607 407,306 435,726 443,456 444,528 457,350 469,720 486,514' 505,328 495,673 2 Foreign countries 363,649 402,852 429,905 439,961 440,009 453,909 465,745 481,261' 502,290 491,791 3 Europe 138,072 153,145 164,114 165,193 165,795 166,382 163,016 166,145' 173,730 172,324 4 Austria 585 615 693 931 897 1,013 988 1,035 1,106 1,020 5 Belgium-Luxembourg 2,709 4,114 5,243 5,737 5,425 5,224 5,343 5,114 6,132 5,837 6 Denmark 466 438 513 752 523 519 560 643 483 478 7 Finland 531 418 496 619 514 484 449 365 407 606 8 France 9,441 12,701 15,541 19,322 19,423 19,862 20,129 21,469' 21,338 21,243 9 Germany 3,599 3,358 4,835 6,718 4,964 4,639 5,646 5,290' 5,360 5,800 10 Greece 520 699 666 559 552 657 604 570 623 645 11 Italy 8,462 10,762 9,667 6,553 7,875 8,918 8,828 9,269 8,819 8,757 1? Netherlands 4,290 4,731 4,212 4,320 4,183 4,224 4,682 4,495 4,952 4,817 13 Norway 1,673 1,548 948 731 850 710 497 542 575 664 14 Portugal 373 597 652 674 796 795 711 791 758 737 15 Spain 1,603 2,082 2,114 1,919 1,879 2,069 1,894 1,979 2,083 2,293 16 Sweden 1,799 1,676 1,422 1,313 1,299 1,118 1,267 944 1,295 1,032 17 Switzerland 32,246 31,740 29,020 27,247 26,848 27,812 28,455 29,064' 29,207 29,832 18 Turkey 467 584 429 363 434 586 310 285 448 459 19 United Kingdom 60,683 68,671 76,728 81,983 83,885 82,314 78,193 79,947 86,209 83,908 70 Yugoslavia 562 602 673 547 556 661 542 482 562 515 21 Other Western Europe1 7,403 7,192 9,635 4,233 4,165 3,997 3,366 3,277 2,729 2,938 77 U.S.S.R 65 79 105 38 34 89 48 32 84 25 23 Other Eastern Europe2 596 537 523 634 693 690 506 553 562 719 24 Canada 16,026 16,059 17,427 20,450 21,257 22,926 22,359 23,933 24,150 24,339 75 Latin America and Caribbean 140,088 153,381 167,856 164,801 161,405 169,650 181,737 187,780' 196,765 187,819 76 Argentina 4,038 4,394 6,032 5,627 6,075 6,229 6,336 6,096 6,069 5,819 77 Bahamas 55,818 56,897 57,657 57,865 53,680 60,081 60,764 67,096 69,119 64,022 78 Bermuda 2,266 2,370 2,765 2,270 2,016 2,513 2,201 2,195 2,199 1,930 29 Brazil 3,168 5,275 5,373 5,788 5,542 5,185 5,134 5,179 5,359 5,358 30 British West Indies 34,545 36,773 42,674 41,354 42,116 43,278 55,552 55,614 61,557 58,576 31 Chile 1,842 2,001 2,049 2,147 2,223 2,270 2.227 2,139 2,426 2,400 37 Colombia 1,689 2,514 3,104 3,101 3,053 3,419 3,334 3,315 3,373 3,773 33 Cuba 8 10 11 7 7 8 7 8 75 6 34 Ecuador 1,047 1,092 1,239 1,199 1,166 1,262 1,196 1,232 1,260 1,216 35 Guatemala 788 896 1,071 1,128 1,097 1,108 1,123 1,140 1,129 1,126 36 Jamaica 109 183 122 173 201 185 184 177 187 151 37 Mexico 10,392 12,303 14,060 13,126 13,153 13,633 12,985 13,609' 13,137 13,201 38 Netherlands Antilles 3,879 4,220 4,875 4,859 4,798 4,358 4,382 4,383 4,765 4,646 39 Panama 5,924 6,951 7,514 6,960 7,042 6,686 6,639 6,390' 6,415 6,521 40 Peru 1,166 1,266 1,167 1,116 1,132 1,254 1,158 1,149 1,253 1,167 41 Uruguay 1,244 1,394 1,552 1,646 1,703 1,664 1,687 1,636 1,589 1,608 47, Venezuela 8,632 10,545 11,922 11,727 11,712 11,734 12,058 11,668 11,708 11,446 43 Other Latin America and Caribbean 3,535 4,297 4,668 4,708 4,689 4,783 4,770 4,753' 5,144 4,852 44 58,570 71,187 72,280 81,682 83,817 86,977 91,669 96,021' 100,051 99,310 China 45 Mainland 249 1,153 1,607 1,550 973 1,469 1,795 1,185 1,947 1,585 46 Taiwan 4,051 4,990 7,786 11,027 12,687 13,683 14,331 15,608 16,130 16,534 47 Hong Kong 6,657 6,581 8,067 8,757 8,745 8,656 8,934 9,026 9,339 8,650 48 India 464 507 712 574 577 695 562 685 651 755 49 Indonesia 997 1,033 1,466 1,787 1,758 1,416 1,572 1,474 1,611 1,529 50 Israel 1,722 1,268 1,601 1,490 1,671 1,725 1,731 1,686 2,109 1,984 51 Japan 18,079 21,640 23,077 28,279 29,689 31,325 36,286 38,221 39,954 41,336 5? Korea 1,648 1,730 1,665 1,337 1,336 1,414 1,392 1,251 1,282 1,442 53 Philippines 1,234 1,383 1,140 1,051 1,331 1,306 1,363 1,458 1,400 1,696 54 Thailand 747 1,257 1,358 993 1,155 1,068 1,104 1,080 1,100 1,106 55 Middle-East oil-exporting countries3 12,976 16,804 14,523 14,418 14,537 14,581 12,739 13,227 13,047 12,045 56 Other Asia 9,748 12,841 9,276 10,419 9,355 9,638 9,861 11,121 11,481 10,648 57 Africa 2,827 3,396 4,883 4,173 4,227 4,291 4,041 4,227 4,168 3,973 58 Egypt 671 647 1,363 960 910 1,079 820 1,088 843 640 59 Morocco 84 118 163 85 92 87 93 82 91 86 60 South Africa 449 328 388 386 414 414 609 438 328 347 61 Zaire 87 153 163 90 105 92 65 60 80 79 67 Oil-exporting countries4 620 1,189 1,494 1,442 1,490 1,463 1,368 1,371 1,584 1,623 63 Other Africa 917 961 1,312 1,210 1,216 1,156 1,086 1,189 1,244 1,199 64 Other countries 8,067 5,684 3,347 3,662 3,507 3,682 2,924 3,155 3,425 4,026 65 Australia 7,857 5,300 2,779 3,058 2,744 2,943 2,173 2,459 2,785 2,943 66 All other 210 384 568 604 763 739 751 696 640 1,083 67 Nonmonetary international and regional organizations 5,957 4,454 5,821 3,495 4,519 3,441 3,974 5,253 3,038 3,882 68 International 5,273 3,747 4,806 2,512 3,669 2,471 2,714 4,147 1,759 2,728 69 Latin American regional 419 587 894 823 748 845 922 916 972 957 70 Other regional5 265 120 121 160 102 126 338 190 307 197 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 • February 1987 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 1986 AArreeaa aanndd ccoouunnttrryy 11998833 11998844 11998855 Apr. May June July Aug. Sept. Oct.P 1 Total 391,312 400,162 401,608 401,109 394,667 403,843 403,494 403,729 416,645 406,569 2 Foreign countries 391,148 399,363 400,577 400,607 394,259 403,387 403,002 403,309 416,444 406,197 3 Europe 91,927 99,014 106,413 101,250 100,903 104,441 100,321 100,323 106,734 103,459 4 Austria 401 433 598 429 501 609 619 694 654 619 5 Belgium-Luxembourg 5,639 4,794 5,772 5,502 5,6% 7,243 6,113 6,990 6,593 7,689 6 Denmark 1,275 648 706 794 882 750 856 783 807 796 7 Finland 1,044 898 823 795 866 983 1,041 %1 1,085 1,111 8 France 8,766 9,157 9,124 8,902 8,861 9,455 9,583 9,483 10,189 9,512 9 Germany 1,284 1,306 1,267 1,341 1,176 1,095 1,426 1,181 1,601 1,174 10 Greece 476 817 991 764 723 629 622 660 706 626 11 Italy 9,018 9,119 8,848 6,709 6,806 7,474 7,266 5,981 6,797 7,679 12 Netherlands 1,267 1,356 1,258 1,380 1,384 1,407 1,427 1,254 2,038 2,114 13 Norway 690 675 706 786 746 905 614 698 732 711 14 Portugal 1,114 1,243 1,058 874 850 776 789 757 734 699 15 Spain 3,573 2,884 1,908 1,701 1,986 2,001 1,863 1,749 1,995 1,907 16 Sweden 3,358 2,230 2,219 1,924 2,239 2,478 2,906 2,404 2,487 2,383 17 Switzerland 1,863 2,123 3,171 2,978 3,134 3,553 2,617 3,306 2,665 2,666 18 Turkey 812 1,130 1,200 1,584 1,649 1,856 1,709 1,649 1,585 1,614 19 United Kingdom 47,364 56,185 62,566 60,602 59,332 58,224 56,249 57,846 61,935 58,082 20 Yugoslavia 1,718 1,886 1,964 1,950 1,928 2,005 1,902 1,852 1,876 1,882 21 Other Western Europe1 477 596 998 649 491 1,253 1,102 521 791 803 22 U.S.S.R 192 142 130 477 489 568 504 528 462 296 23 Other Eastern Europe2 1,598 1,389 1,107 1,111 1,164 1,176 1,112 1,026 1,002 1,097 24 Canada 16,341 16,109 16,482 18,814 17,910 18,270 18,303 19,401 18,112 19,502 25 Latin America and Caribbean 205,491 207,862 202,674 199,032 193,625 200,733 202,204 197,866 205,575 196,914 26 Argentina 11,749 11,050 11,462 11,803 11,921 12,079 12,282 12,009 12,119 12,243 27 Bahamas 59,633 58,009 58,258 55,260 52,537 57,075 56,250 55,453 61,702 53,565 28 Bermuda 566 592 499 275 238 274 432 373 320 452 29 Brazil 24,667 26,315 25,283 25,363 25,271 24,855 24,915 24,762 24,856 24,728 30 British West Indies 35,527 38,205 38,881 38,932 37,072 40,043 41,923 39,836" 40,357 40,040 31 Chile 6,072 6,839 6,603 6,540 6,537 6,507 6,514 6,449 6,488 6,514 32 Colombia 3,745 3,499 3,249 2,861 2,820 2,789 2,776 2,642 2,634 2,674 33 Cuba 0 0 0 0 0 0 0 0 0 2 34 Ecuador 2,307 2,420 2,390 2,388 2,382 2,397 2,366 2,375 2,387 2,418 35 Guatemala3 129 158 194 124 112 136 113 127 135 122 36 Jamaica3 215 252 224 216 218 244 209 209 224 247 37 Mexico 34,802 34,885 31,799 32,367 31,493 31,399 31,168 30,839 31,037 31,024 38 Netherlands Antilles 1,154 1,350 1,340 839 1,075 1,086 996 1,060 1,133 972 39 Panama 7,848 7,707 6,645 6,133 5,919 5,860 6,280 5,862 6,377 6,094 40 Peru 2,536 2,384 1,947 1,767 1,757 1,738 1,703 1,677 1,600 1,625 41 Uruguay 977 1,088 960 953 951 931 927 936 1,051 930 42 Venezuela 11,287 11,017 10,871 11,295 11,326 11,304 11,364 11,289 11,175 11,180 43 Other Latin America and Caribbean 2,277 2,091 2,067 1,917 1,997 2,015 1,985 1,969" 1,979 2,086 44 67,837 66,316 66,212 73,421 73,965 72,033 74,253 7777,,779922 78,082 7788,,665522 China 45 Mainland 292 710 639 593 703 567 779 526 758 758 46 Taiwan 1,908 1,849 1,535 1,151 1,446 1,238 1,089 1,637 1,903 1,532 47 Hong Kong 8,489 7,293 6,7% 8,134 8,315 7,526 8,445 8,632 8,883 8,142 48 India 330 425 450 398 420 440 372 375 355 508 49 Indonesia 805 724 698 717 736 675 720 729 689 694 50 Israel 1,832 2,088 1,991 1,611 1,766 1,772 1,567 1,541 1,621 1,630 51 Japan 30,354 29,066 31,249 38,781 38,629 38,524 40,902 43,327 42,751 45,167 52 Korea 9,943 9,285 9,226 9,286 9,176 8,977 8,900 8,476 7,855 7,000 53 Philippines 2,107 2,555 2,224 2,325 2,263 2,393 2,168 2,128 2,148 2,071 54 Thailand 1,219 1,125 845 775 716 706 711 736 636 611 55 Middle East oil-exporting countries4 4,954 5,044 4,298 3,838 3,948 3,680 2,919 2,764 3,724 3,513 56 Other Asia 5,603 6,152 6,260 5,812 5,845 5,535 5,680 6,921 6,759 7,027 57 Africa 6,654 6,615 5,407 5,007 4,890 4,971 4,817 4,693 4,660 4,411 58 Egypt 747 728 721 639 619 740 701 633 593 577 59 Morocco 440 583 575 662 640 642 615 617 636 617 60 South Africa 2,634 2,795 1,942 1,716 1,743 1,705 1,661 1,683 1,607 1,428 61 Zaire 33 18 20 17 17 17 17 21 42 35 62 Oil-exporting countries5 1,073 842 630 465 417 415 413 445 511 545 63 Other 1,727 1,649 1,520 1,508 1,455 1,452 1,410 1,294 1,271 1,207 64 Other countries 2,898 3,447 3,390 3,082 2,966 2,939 3,103 3,232 3,281 3,259 65 Australia 2,256 2,769 2,413 2,237 2,050 2,023 2,159 2,293 2,277 2,143 66 All other 642 678 978 845 916 916 945 940 1,004 1,115 67 Nonmonetary international and regional organizations6 164 800 1,030 502 408 456 493 420 200 372 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 1986 TTyyppee ooff ccllaaiimm 11998833 11998844 11998855 Apr. May June July Aug. Sept. Oct .p 1 Total 444444222222666666,,,,,,222222111111555555 444444333333333333,,,,,,000000777777888888 444444333333000000,,,,,,444444888888999999 444444333333222222,,,,,,333333222222666666 444444444444888888,,,,,,444444999999444444 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 333333999999111111,,,,,,333333111111222222 444444000000000000,,,,,,111111666666222222 444444000000111111,,,,,,666666000000888888 401,109 394,667 444444000000333333,,,,,,888888444444333333 403,494 403,729 444444111111666666,,,,,,666666444444555555 406,569 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 555555777777,,,,,,555555666666999999 666666222222,,,,,,222222333333777777 666666000000,,,,,,555555000000777777 60,157 59,972 666666000000,,,,,,666666222222222222 60,667 59,947r 666666000000,,,,,,555555999999888888 60,889 44 OOwwnn ffoorreeiiggnn ooffffiicceess11 111111444444666666......333333999999333333 111111555555666666,,,,,,222222111111666666 111111777777444444,,,,,,222222666666111111 179,662 173,094 111111888888111111,,,,,,888888666666777777 181,590 182,151 111111999999333333,,,,,,333333555555333333 182,915 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111222222333333,,,,,,888888333333777777 111111222222444444,,,,,,999999333333222222 111111111111666666,,,,,,666666555555444444 111,832 112,522 111111111111222222,,,,,,999999999999666666 114,101 115,922' 111111111111666666,,,,,,888888888888222222 117,158 66 DDeeppoossiittss 444444777777,,,,,,111111222222666666 444444999999,,,,,,222222222222666666 444444888888,,,,,,333333777777222222 46,393 47,493 444444777777,,,,,,000000444444111111 49,326 52,410 555555222222,,,,,,222222333333000000 53,052 77 OOtthheerr 777777666666,,,,,,777777111111111111 777777555555,,,,,,777777000000666666 666666888888,,,,,,222222888888222222 65,439 65,029 666666555555,,,,,,999999555555555555 64,775 63,512' 666666444444,,,,,,666666555555333333 64,106 88 AAllll ootthheerr ffoorreeiiggnneerrss 666666333333......555555111111444444 555555666666,,,,,,777777777777777777 555555000000,,,,,,111111888888555555 49,458 49,079 444444888888,,,,,,333333555555888888 47,137 45,708' 444444555555,,,,,,888888111111222222 45,606 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss22 .... 333333444444,,,,,,999999000000333333 333333222222,,,,,,999999111111666666 222222888888,,,,,,888888888888111111 222222888888,,,,,,444444888888333333 333333111111,,,,,,888888444444999999 222222,,,,,,999999666666999999 333333,,,,,,333333888888000000 333333,,,,,,333333333333555555 333333,,,,,,444444777777555555 333333,,,,,,777777444444333333 11 Negotiable and readily transferable 222222666666,,,,,,000000666666444444 222222333333,,,,,,888888000000555555 111111999999,,,,,,333333333333222222 222222000000,,,,,,222222999999444444 222222222222,,,,,,333333333333777777 12 Outstanding collections and other 555555,,,,,,888888777777000000 555555,,,,,,777777333333222222 666666,,,,,,222222111111444444 444444,,,,,,777777111111555555 555555,,,,,,777777666666999999 13 MEMO: Customer liability on acceptances 333333777777,,,,,,777777111111555555 333333777777,,,,,,111111000000333333 222222888888,,,,,,444444888888777777 222222888888,,,,,,333333222222888888 222222777777,,,,,,111111777777222222 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States4 .... 46,337 40,714 37,399 42,771 47,351 46,200 47,464 48,575' 44,515 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 Dec. Mar. June Sept.P 1 Total 228,150 243,715 243,952 227,903 221,177 222,255' 224,317 By borrower 2 Maturity of 1 year or less1 173,917 176,158 167,858 160,824 152,696 152,247' 154,731 3 Foreign public borrowers 21,256 24,039 23,912 26,302 23,845 23,183 22,392 4 All other foreigners 152,661 152,120 143,947 134,522 128,851 129,065' 132,339 5 Maturity of over 1 year1 54,233 67,557 76,094 67,078 68,481 70,008 69,586 6 Foreign public borrowers 23,137 32,521 38,695 34,512 36,681 37,177 38,115 7 All other foreigners 31,095 35,036 37,399 32,567 31,800 32,830 31,471 By area Maturity of 1 year or less1 8 Europe 50,500 56,117 58,498 56,585 53,462 57,929 59,331 9 Canada 7,642 6,211 6,028 6,401 5,899 6,043 5,968 10 Latin America and Caribbean 73,291 73,660 62,791 63,328 59,538 57,134 57,814 11 37,578 34,403 33,504 27,966 28,034 25,772 26,713 12 Africa 3,680 4,199 4,442 3,753 3,331 3,297 3,038 13 All other2 1,226 1,569 2,593 2,791 2,433 2,073 1,866 Maturity of over 1 year1 14 Europe 11,636 13,576 9,605 7,634 7,783 7,934 7,285 15 Canada 1,931 1,857 1,882 1,805 1,925 2,256 1,861 16 Latin America and Caribbean 35,247 43,888 56,144 50,674 52,165 53,572 54,147 17 3,185 4,850 5,323 4,502 4,251 4,034 3,990 18 Africa 1,494 2,286 2,033 1,538 1,634 1,497 1,479 19 All other2 740 1,101 1,107 926 722 714 824 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 • February 1987 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks12 Billions of dollars, end of period 1984 1985 1986 AArreeaa oorr ccoouunnttrryy 11998822 11998833 Sept. Dec. Mar. June Sept. Dec. Mar. June Sept.P 1 Total 436.1 433.9 406.4 405.7 405.5 396.8 394.9 391.9 394.3' 390.9' 391.4 2 G-10 countries and Switzerland 179.6 167.8 147.5 148.1 153.0 146.7 152.0 148.5 156.4' 159.8' 158.6 3 Belgium-Luxembourg 13.1 12.4 9.8 8.7 9.3 8.9 9.5 9.3 8.3 9.0 8.5 4 France 17.1 16.2 14.3 14.1 14.5 13.5 14.8 12.3 13.8 15.1' 14.6 5 Germany 12.7 11.3 10.0 9.0 8.9 9.6 9.8 10.5 11.2 11.5 12.5 6 Italy 10.3 11.4 9.7 10.1 10.0 8.6 8.4 9.8 8.5 9.3 8.1 7 Netherlands 3.6 3.5 3.4 3.9 3.8 3.7 3.4 3.7 3.5 3.4 3.9 8 Sweden 5.0 5.1 3.5 3.2 3.1 2.9 3.1 2.8 2.9 2.9 2.7 9 Switzerland 5.0 4.3 3.9 3.9 4.2 4.0 4.1 4.4 5.4 5.6 4.8 10 United Kingdom 72.1 65.3 57.1 60.3 65.4 65.7 67.1 64.6 68.5' 68.9 70.1 11 Canada 10.4 8.3 8.1 7.9 9.1 8.1 7.6 7.0 6.2' 6.8' 6.1 12 Japan 30.2 29.9 27.7 27.1 24.7 21.7 24.3 24.2 28.1 27.4 27.4 13 Other developed countries 33.5 36.0 36.2 33.6 32.8 32.3 32.0 30.4 31.6' 30.6 29.4 14 Austria 1.9 1.9 1.8 1.6 1.6 1.6 1.7 1.6 1.6 1.7 1.7 15 Denmark 2.4 3.4 2.9 2.2 2.1 1.9 2.1 2.4 2.5 2.4 2.3 16 Finland 2.2 2.4 1.9 1.9 1.8 1.8 1.8 1.6 1.9 1.6 1.7 17 Greece 3.0 2.8 3.2 2.9 2.9 2.9 2.8 2.6 2.5 2.6 2.3 18 Norway 3.3 3.3 3.2 3.0 2.9 2.9 3.4 2.9 2.7 3.0 2.7 19 Portugal 1.5 1.5 1.6 1.4 1.4 1.3 1.4 1.3 1.1 1.0 1.0 20 Spain 7.5 7.1 6.9 6.5 6.4 5.9 6.1 5.8 6.4 6.4 6.7 21 Turkey 1.4 1.7 2.0 1.9 1.9 2.0 2.1 1.9 2.3 2.5 2.1 22 Other Western Europe 2.3 1.8 1.7 1.7 1.7 1.8 1.7 2.0 2.4 2.1 1.6 23 South Africa 3.7 4.7 5.0 4.5 4.2 3.9 3.3 3.2 3.2 3.1 3.1 24 Australia 4.3 5.4 6.1 6.0 6.1 6.2 5.6 5.0 4.9 4.2 4.2 25 OPEC countries3 26.9 28.4 24.4 24.9 24.5 22.8 22.7 21.6 20.7' 20.6 20.0 26 Ecuador 2.2 2.2 2.1 2.2 2.2 2.2 2.2 2.1 2.2 2.1 2.1 27 Venezuela 10.5 9.9 9.2 9.3 9.3 9.3 9.0 8.9 8.7 8.8 8.7 28 Indonesia 2.9 3.4 3.2 3.3 3.3 3.1 3.1 3.0 3.3 3.0 2.8 29 Middle East countries 8.5 9.8 7.3 7.9 7.4 6.1 6.2 5.5 4.8 5.0 4.7 30 African countries 2.8 3.0 2.5 2.3 2.3 2.2 2.3 2.0 1.8 1.7 1.7 31 Non-OPEC developing countries 106.5 110.8 111.6 111.8 110.8 110.0 107.8 105. 1' 103.5' 101.4' 99.6 Latin America 32 Argentina 8.9 9.5 9.1 8.7 8.6 8.6 8.9 8.9 8.9 9.2 9.3 33 Brazil 22.9 23.1 26.3 26.3 26.4 26.6 25.5 25.6 25.7 25.3 25.2 34 Chile 6.3 6.4 7.1 7.0 7.0 6.9 6.6 7.0 7.0 7.1 7.1 35 Colombia 3.1 3.2 2.9 2.9 2.8 2.7 2.6 2.7 2.3 2.2 2.0 36 Mexico 24.2 25.8 26.0 25.7 25.5 25.3 24.4 24.2' 24.(K 23.8' 23.8 37 Peru 2.6 2.4 2.2 2.2 2.2 2.1 1.9 1.8 1.7 1.6 1.5 38 Other Latin America 4.0 4.2 3.9 3.9 3.8 3.7 3.5 3,4 3.3 3.3 3.4 Asia China 39 Mainland .2 .3 .5 .7 .7 .3 1.1 .5 .6 .6 .6 40 Taiwan 5.3 5.2 5.1 5.1 5.3 5.5 5.1 4.5 4.3 3.7' 4.3 41 .5 .9 1.0 .9 .9 .9 1.1 1.2 1.2 1.3 1.3 42 Israel 2.3 1.9 1.7 1.8 1.7 2.3 1.5 1.6 1.3 1.6 1.4 43 Korea (South) 10.7 11.2 10.3 10.6 10.4 10.0 10.4 9.4 9.5 8.6' 7.3 44 Malaysia 2.1 2.8 2.9 2.7 2.7 2.8 2.7 2.4 2.2 2.0 2.1 45 Philippines 6.3 6.1 5.9 6.0 6.1 6.0 6.0 5.7 5.6 5.7 5.4 46 Thailand 1.6 2.2 1.8 1.8 1.7 1.6 1.6 1.4 1.3 1.1 1.0 47 Other Asia 1.1 1.0 .9 1.1 1.1 .9 .9 1.0 .9 .8 .7 Africa 48 Egypt 1.2 1.5 1.2 1.2 1.1 1.0 1.0 1.0 .9 .9 .7 49 Morocco .7 .8 .8 8 .8 .8 .9 .9 .9 .9 .9 50 Zaire .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 51 Other Africa4 2.4 2.3 1.9 2.1 2.2 2.0 2.0 1.9 1.9 1.7 1.6 52 Eastern Europe 6.2 5.3 4.5 4.4 4.3 4.3 4.6 4.2 4.0 4.0 3.3 53 U.S.S.R .3 .2 .2 .1 .2 .3 .2 .1 .3 .3 .1 54 Yugoslavia 2.2 2.4 2.3 2.3 2.2 2.2 2.4 2.2 2.0 2.0 1.9 55 Other 3.7 2.8 2.1 2.0 1.9 1.8 1.9 1.8 1.7 1.7 1.4 56 Offshore banking centers 66.0 68.9 65.1 65.6 63.2 63.9 58.8 65.4 61.5 57.2 62.6 57 Bahamas 19.0 21.7 23.3 21.5 20.1 21.1 16.6 21.4 21.5 17.3 20.0 58 Bermuda .9 .9 1.0 .9 .7 .9 .8 .7 .7 .4 .5 59 Cayman Islands and other British West Indies 12.8 12.2 11.1 11.8 12.3 12.1 12.3 13.4 11.3 12.8 13.2 60 Netherlands Antilles 3.3 4.2 3.1 3.4 3.3 3.2 2.3 2.3 2.3 2.3 1.9 61 Panama5 7.5 5.8 5.6 6.7 5.5 5.4 6.1 6.0 5.9 5.5 6.8 62 Lebanon .1 .1 .1 .1 .1 .1 .0 .1 .1 .1 .1 63 Hong Kong 13.3 13.8 11.6 11.4 11.4 11.4 11.4 11.5 11.4 9.4 10.4 64 Singapore 9.1 10.3 9.4 9.8 9.9 9.7 9.4 9.9 8.4 9.3 9.7 65 Others6 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated7 17.5 16.8 17.1 17.3 16.9 16.9 17.3 16.9 16.7' 17.2 17.8 1. The banking offices covered by these data are the U.S. offices and foreign from $50 million to $150 million equivalent in total assets, the threshold now branches of U.S.-owned banks and of U.S. subsidiaries of foreign-owned banks. applicable to all reporting branches. Offices not covered include (1) U.S. agencies and branches of foreign banks, and 3. Besides the Organization of Petroleum Exporting Countries shown individ- (2) foreign subsidiaries of U.S. banks. To minimize duplication, the data are ually, this group includes other members of OPEC (Algeria, Gabon, Iran, Iraq, adjusted to exclude the claims on foreign branches held by a U.S. office or another Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates) as well foreign branch of the same banking institution. The data in this table combine as Bahrain and Oman (not formally members of OPEC). foreign branch claims in table 3.14 (the sum of lines 7 through 10) with the claims 4. Excludes Liberia. of U.S. offices in table 3.18 (excluding those held by agencies and branches of 5. Includes Canal Zone beginning December 1979. foreign banks and those constituting claims on own foreign branches). 6. Foreign branch claims only. 2. Beginning with June 1984 data, reported claims held by foreign branches 7. Includes New Zealand, Liberia, and international and regional organizahave been reduced by an increase in the reporting threshold for "shell" branches tions. 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 1985 1986 Type, and area or country 998822 11998833 11998844 June Sept. Dec. Mar. JuneP 1 Total 27,512 25,346 29,357 24,574 25,256 27,230 25,635 24,222 2 Payable in dollars 24,280 22,233 26,389 21,899 22,408 23,994 22,022 20,692 3 Payable in foreign currencies 3,232 3,113 2,968 2,675 2,848 3,236 3,613 3,530 By type 4 Financial liabilities 11,066 10,572 14,509 11,528 11,815 13,005 12,328 11,117 5 Payable in dollars 8,858 8,700 12,553 9,543 9,824 10,955 10,205 9,177 6 Payable in foreign currencies 2,208 1,872 1,955 1,985 1,991 2,050 2,123 1,940 7 Commercial liabilities 16,446 14,774 14,849 13,046 13,441 14,225 13,307 13,105 8 Trade payables 9,438 7,765 7,005 5,797 5,694 6,685 5,598 5,503 9 Advance receipts and other liabilities... 7,008 7,009 7,843 7,249 7,747 7,540 7,710 7,602 10 Payable in dollars 15,423 13,533 13,836 12,356 12,584 13,039 11,817 11,516 11 Payable in foreign currencies 1,023 1,241 1,013 690 857 1,186 1,490 1,590 By area or country Financial liabilities 12 Europe 6,501 5,742 6,728 5,944 6,568 7,270 6,971 6,705 13 Belgium-Luxembourg 505 302 471 351 367 329 338 288 14 France 783 843 995 865 849 857 851 701 15 Germany 467 502 489 474 493 419 371 262 16 Netherlands 711 621 590 604 624 745 630 651 17 Switzerland 792 486 569 566 593 676 702 561 18 United Kingdom 3,102 2,839 3,297 2,835 3,351 3,924 3,736 3,960 19 Canada 746 764 863 850 826 760 753 287 20 Latin America and Caribbean 2,751 2,596 5,086 3,106 2,619 3,152 2,788 2,404 21 Bahamas 904 751 1,926 1,107 1,145 1,120 954 859 22 Bermuda 14 13 13 10 4 4 13 14 23 Brazil 28 32 35 27 23 29 26 27 24 British West Indies 1,027 1,041 2,103 1,734 1,234 1,814 1,610 1,362 25 Mexico 121 213 367 32 28 15 20 30 26 Venezuela 114 124 137 3 3 3 4 3 27 Asia 1,039 1,424 1,777 1,584 1,767 1,790 1,799 1,660 28 Japan 715 991 1,209 994 1,136 1,173 1,192 1,189 29 Middle East oil-exporting countries2.. 169 170 155 147 82 82 78 43 30 Africa 17 19 14 14 14 12 12 12 0 0 0 0 0 0 0 0 31 Oil-exporting countries3 12 27 41 30 22 21 4 49 32 All other4 Commercial liabilities 3,831 3,245 4,001 3,461 3,897 4,074 3,915 3,761 33 Europe 52 62 48 53 56 62 66 58 34 Belgium-Luxembourg 598 437 438 423 431 453 382 357 35 France 468 427 622 428 601 607 546 512 36 Germany 346 268 245 284 386 364 545 587 37 Netherlands 367 241 257 349 289 379 251 283 38 Switzerland 1,027 732 1,095 730 858 976 957 861 39 United Kingdom 40 Canada 1,495 1,841 1,975 1,494 1,383 1,449 1,442 1,351 41 Latin America and Caribbean 1,570 1,473 1,871 1,225 1,262 1,088 1,097 1,304 42 Bahamas 16 1 7 12 2 12 26 10 43 Bermuda 117 67 114 77 105 77 210 294 44 Brazil 60 44 124 90 120 58 64 107 45 British West Indies 32 6 32 1 15 44 7 35 46 Mexico 436 585 586 492 415 430 256 235 47 Venezuela 642 432 636 309 311 212 364 488 48 Asia 8,144 6,741 5,285 5,246 5,353 6,046 5,384 5,068 49 Japan 1,226 1,247 1,256 1,219 1,567 1,799 2,039 2,095 50 Middle East oil-exporting countries2'5, 5,503 4,178 2,372 2,396 2,109 2,829 2,171 1,731 51 Africa 753 553 588 631 572 587 486 569 52 Oil-exporting countries3 277 167 233 265 235 238 148 215 53 All other4 651 921 1,128 988 975 982 983 1,053 1. For a description of the changes in the International Statistics tables, see 3. Comprises Algeria, Gabon, Libya, and Nigeria. July 1979 BULLETIN, p. 550. 4. Includes nonmonetary international and regional organizations. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and 5. Revisions include a reclassification of transactions, which also affects the United Arab Emirates (Trucial States). totals for Asia and the grand totals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • February 1987 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States' Millions of dollars, end of period 1985 1986 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998822 11998833 11998844 June Sept. Dec. Mar. JuneP 1 Total 28,725 34,911 29,901 26,750 28,610 28,085 30,927 32,519 2 Payable in dollars 26,085 31,815 27,304 24,121 25,743 25,783 28,740 30,337 3 Payable in foreign currencies 2,640 3,0% 2,597 2,629 2,866 2,302 2,187 2,182 By type 4 Financial claims 17,684 23,780 19,254 16,695 19,203 18,099 21,540 23,324 5 Deposits 13,058 18,4% 14,621 12,839 15,315 14,852 18,146 20,034 6 Payable in dollars 12,628 17,993 14,202 12,283 14,611 14,237 17,689 19,479 7 Payable in foreign currencies 430 503 420 556 704 615 457 555 8 Other financial claims 4,626 5,284 4,633 3,856 3,889 3,248 3,394 3,290 9 Payable in dollars 2,979 3,328 3,190 2,375 2,351 2,213 2,301 2,269 10 Payable in foreign currencies 1,647 1,956 1,442 1,480 1,538 1,035 1,093 1,021 11 Commercial claims 11,041 11,131 10,646 10,055 9,406 9,986 99,,338877 9,195 12 Trade receivables 9,994 9,721 9,177 8,688 7,932 8,6% 88,,008866 7,858 13 Advance payments and other claims 1,047 1,410 1,470 1,367 1,475 1,290 1,301 1,337 14 Payable in dollars 10,478 10,494 9,912 9,463 8,782 9,333 8,750 8,589 15 Payable in foreign currencies 563 637 735 592 624 652 637 606 By area or country Financial claims 16 Europe 4,873 6,488 5,762 5,477 6,463 6,327 6,859 8,877 17 Belgium-Luxembourg 15 37 15 15 12 10 10 11 18 France 134 150 126 51 132 184 217 257 19 Germany 178 163 224 175 158 223 172 148 20 Netherlands 97 71 66 46 127 61 61 17 21 Switzerland 107 38 66 16 53 74 166 177 22 United Kingdom 4,064 5,817 4,864 4,900 5,736 5,522 5,986 8,051 23 Canada 4,377 5,989 3,988 3,756 4,037 3,256 4,024 4,464 24 Latin America and Caribbean 7,546 10,234 8,216 6,616 7,603 7,697 9,934 9,151 25 Bahamas 3,279 4,771 3,306 2,204 2,315 2,685 3,500 3,251 26 Bermuda 32 102 6 6 5 6 2 17 27 Brazil 62 53 100 % 92 78 77 75 28 British West Indies 3,255 4,206 4,043 3,747 4,632 4,440 5,904 5,359 29 Mexico 274 293 215 206 201 180 178 176 30 Venezuela 139 134 125 100 73 48 43 42 31 698 764 %1 640 969 696 621 723 32 Japan 153 297 353 281 725 475 350 499 33 Middle East oil-exporting countries2 15 4 13 6 6 4 2 2 34 Africa 158 147 210 111 104 103 87 89 35 Oil-exporting countries3 48 55 85 25 31 29 27 25 36 All other4 31 159 117 95 26 21 14 20 Commercial claims 37 Europe 3,826 3,670 3,801 3,680 3,235 3,533 3,387 3,304 38 Belgium-Luxembourg 151 135 165 212 158 175 148 131 39 France 474 459 440 408 360 426 384 390 40 Germany 357 349 374 375 336 346 396 414 41 Netherlands 350 334 335 301 286 284 221 237 42 Switzerland 360 317 271 376 208 284 248 221 43 United Kingdom 811 809 1,063 950 779 898 793 668 44 Canada 633 829 1,021 1,065 1,100 1,023 1,060 970 45 Latin America and Caribbean 2,526 2,695 22,,005522 1,803 1,660 1,753 1,599 1,590 46 Bahamas 21 8 88 11 18 13 27 24 47 Bermuda 261 190 115 65 62 93 82 148 48 Brazil 258 493 214 193 211 206 231 194 49 British West Indies 12 7 7 29 7 6 7 24 50 Mexico 775 884 583 468 416 510 388 320 51 Venezuela 351 272 206 181 149 157 172 180 52 3,050 3,063 3,073 2,707 22,,771122 2,982 2,606 2,649 53 Japan 1,047 1,114 1,191 954 888844 1,016 801 846 54 Middle East oil-exporting countries2 751 737 668 593 541 638 630 691 55 Africa 588 588 470 464 434 437 491 447 56 Oil-exporting countries3 140 139 134 137 131 130 167 171 57 All other4 417 286 229 336 264 257 244 235 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 1986 TTrraannssaaccttiioonnss,, aanndd aarreeaa oorr ccoouunnttrryy 11998844 11998855 Jan.- Apr. May June July Aug. Sept. Oct.? Oct. U.S. corporate securities STOCKS 1 Foreign purchases 59,834 81,995 121,897 15,414 13,244 11,176 13,268 12,045' 12,260 10,948 2 Foreign sales 62,814 77,054 104,943 11,468 10,388 10,832 11,258 10,615' 10,948 12,281 3 Net purchases, or sales (—) -2,980 4,941 16,954 3,947 2,856 344 2,010 1,430' 1,258 -1,333 4 Foreign countries -3,109 4,857 17,208 3,883 2,814 464 2,075 1,470' 1,303 -1,189 5 Europe -3,077 2,057 9,493 2,066 1,571 192 576 824' 587 -1,126 6 France -405 -438 418 36 99 219 182 105 30 -92 7 Germany -50 730 320 47 99 -174 -130 -42 9 -104 8 Netherlands -357 -123 972 123 236 97 52 50 36 -19 9 Switzerland -1,542 -75 1,748 569 376 -134 -198 44 70 -405 10 United Kingdom -677 1,665 4,579 733 563 38 481 521' 462 -484 11 Canada 1,691 356 643 52 44 131 214 97 93 -125 12 Latin America and Caribbean 495 1,718 2,437 880 489 60 269 108 145 154 13 Middle East1 -1,992 238 801 339 117 -236 181 78 58 -51 14 Other Asia -378 296 3,334 399 472 288 830 376 346 16 15 Africa -22 24 258 48 43 -3 30 -1 -13 39 16 Other countries 175 168 241 100 78 32 -23 -13 86 -97 17 Nonmonetary international and regional organizations 129 84 -254 63 42 -121 -65 -40 -45 -143 BONDS2 18 Foreign purchases 39,296 86,587 101,456 13,483 12,044 8,964 8,937 9,420 10,160 9,718 19 Foreign sales 26,399 42,439 57,913 8,855 5,252 5,686 5,679 5,348 5,585 5,494 20 Net purchases, or sales (—) 12,897 44,149 43,543 4,628 6,792 3,278 3,259 4,072 4,575 4,223 21 Foreign countries 12,600 44,244 42,926 4,438 6,696 2,798 3,197 4,077 4,871 4,481 22 Europe 11,697 40,047 34,126 3,641 6,221 2,763 2,395 2,484 3,386 3,501 23 France 207 210 28 -22 83 -6 6 20 -29 0 24 Germany 1,724 2,001 -125 -73 205 -3 -91 -81 26 81 25 Netherlands 100 222 222 2 89 -37 -39 98 51 -55 26 Switzerland 643 3,987 4,442 1,231 456 490 180 564 30 265 27 United Kingdom 8,429 32,762 29,705 2,578 5,631 2,214 2,213 1,917 3,414 3,203 28 Canada -62 190 240 74 54 55 85 110 2 86 29 Latin America and Caribbean 376 498 1,301 263 142 63 250 160 64 101 30 Middle East1 -1,230 -2,631 -2,338 -396 -186 -632 -718 -40 -169 -33 31 Other Asia 1,817 6,091 9,458 840 464 480 1,177 1,329 1,586 816 32 Africa 1 11 12 3 -2 3 -3 5 6 -1 33 Other countries 0 38 127 13 3 66 11 29 -4 11 34 Nonmonetary international and regional organizations 297 -95 617 190 96 480 61 -4 -296 -258 Foreign securities 35 Stocks, net purchases, or sales (-) -1,101 -3,894 -1,960 -1,668 -221 -238 404 -83 676 1,207 36 Foreign purchases 14,816 20,851 41,033 4,390 3,454 3,775 4,310 4,610 5,091 6,233 37 Foreign sales 15,917 24,746 42,993 6,057 3,675 4,013 3,907 4,694 4,415 5,026 38 Bonds, net purchases, or sales (-) -3,930 -3,996 -2,029 -1,251 188 1,540 359 1,232 -2,231 2,150 39 Foreign purchases 56,017 81,214 136,854 15,296 13,491 15,632 13,559 14,086 15,182 16,239 40 Foreign sales 59,948 85,210 138,883 16,546 13,303 14,091 13,200 12,854 17,412 14,089 41 Net purchases, or sales (—), of stocks and bonds .... -5,031 -7,891 -3,988 -2,918 -33 1,302 762 1,149 -1,555 3,357 42 Foreign countries -4,642 -8,954 -4,520 -2,788 -106 1,122 438 1,090 -1,492 3,173 43 Europe -8,655 -9,887 -15,153 -2,649 208 -1,332 -683 -714 -3,379 -504 44 Canada 542 -1,682 -508 -286 82 16 245 263 111 88 45 Latin America and Caribbean 2,460 1,845 3,194 176 363 742 278 127 351 449 46 1,356 658 8,901 -124 -746 1,639 659 1,337 1,852 3,201 47 Africa -108 75 44 6 3 3 9 1 3 -2 48 Other countries -238 38 -997 89 -16 55 -70 75 -430 -59 49 Nonmonetary international and regional organizations -389 1,063 532 -130 73 180 324 59 -63 184 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 • February 1987 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1986 1986 11998844 11998855 Country or area O Ja c n t. . - Apr. May June July Aug. Sept. Oct.? Transactions, net purchases or sales (-) during period1 1 Estimated total2 21,501 29,047 25,686 8,658 -2,132 3,112 -254 752 5,480 2,917 2 Foreign countries2 16,496 28,591 26,409 8,398 -252 2,230 2,705 2,215 4,485 2,678 3 Europe2 11,014 4,145 16,501 1,625 1,436 2,562 2,544 2,442 -685 2,943 4 Belgium-Luxembourg 287 476 321 29 39 82 -46 180 239 4 5 Germany2 2,929 1,917 7,295 139 468 357 818 1,050 1,133 2,419 6 Netherlands 449 269 1,303 81 -31 -64 1,756 -64 -313 112 7 Sweden 40 976 447 113 236 16 42 -25 85 4 8 Switzerland2 656 760 1,161 163 365 349 -278 52 -53 373 9 United Kingdom 5,188 -1,954 3,955 -206 698 698 610 1,207 -1,970 170 10 Other Western Europe 1,466 1,701 2,019 1,307 -339 1,125 -358 43 195 -139 11 Eastern Europe 0 0 0 0 0 0 0 0 0 0 12 Canada 1,586 -188 559 55 908 -302 67 105 -198 -230 13 Latin America and Caribbean 1,418 4,312 725 1,234 -954 -460 28 -37 220 -224 14 Venezuela 14 238 -84 196 36 -170 -72 -294 266 -55 15 Other Latin America and Caribbean 536 2,343 1,148 173 372 -290 96 255 32 -195 16 Netherlands Antilles 869 1,731 -339 865 -1,363 0 5 2 -78 26 17 Asia 2,431 19,899 8,093 5,092 -1,617 515 -137 -133 5,336 41 18 Japan 6,289 17,920 5,816 2,267 -1,148 223 273 683 4,395 -453 19 Africa -67 112 -45 -1 -2 -5 6 -1 11 -15 20 All other 114 311 576 394 -22 -80 198 -160 -200 163 21 Nonmonetary international and regional organizations 5,009 457 -721 260 -1,880 882 -2,959 -1,462 995 239 22 International 4,612 -420 -929 198 -1,889 899 -2,804 -1,511 890 290 23 Latin American regional 0 18 157 30 0 5 0 0 39 -5 MEMO 24 Foreign countries2 16,496 28,591 26,409 8,398 -252 2,230 2,705 2,215 4,485 2,678 25 Official institutions 505 8,088 14,112 3,862 157 1,612 1,448 61 2,324 3,274 26 Other foreign2 15,992 20,503 12,298 4,537 -409 619 1,257 2,154 2,161 -596 Oil-exporting countries 27 Middle East3 -6,270 -1,581 -465 1,334 -14 -290 14 -239 -205 -377 28 Africa4 -101 7 4 1 1 0 2 -1 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 Nov. 30, 1986 Rate on Nov. 30, 1986 Rate on Nov. 30, 1986 Country Country Country Per- Month Per- Month Per- Month cent effective cent effective cent effective Austria.. 4.0 Aug. 1985 France1 7.0 June 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.. 8.47 Nov. 1986 Japan 3.0 Oct. 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 1986 CCoouunnttrryy,, oorr ttyyppee 11998833 11998844 11998855 May June July Aug. Sept. Oct. Nov. 1 Eurodollars 9.57 10.75 8.27 6.86 6.95 6.54 6.06 5.88 5.88 5.96 2 United Kingdom 10.06 9.91 12.16 10.16 9.70 9.91 9.79 10.05 11.08 11.12 3 Canada 9.48 11.29 9.64 8.60 8.72 8.45 8.50 8.38 8.45 8.39 4 Germany 5.73 5.96 5.40 4.58 4.59 4.61 4.56 4.48 4.56 4.67 5 Switzerland 4.11 4.35 4.92 4.32 4.96 4.80 4.30 4.13 3.96 3.88 6 Netherlands 5.58 6.08 6.29 5.76 5.90 5.69 5.28 5.17 5.32 5.48 7 France 12.44 11.66 9.91 7.21 7.23 7.13 7.09 7.07 7.38 7.51 8 Italy 18.95 17.08 14.86 12.35 11.78 11.70 11.18 10.84 10.85 11.05 9 Belgium 10.51 11.41 9.60 7.90 7.27 7.25 7.25 7.25 7.29 7.38 10 Japan 6.49 6.32 6.47 4.58 4.64 4.62 4.68 4.71 4.75 4.39 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 • February 1987 3.28 FOREIGN EXCHANGE RATES Currency units per dollar 1986 CCoouunnttrryy//ccuurrrreennccyy 11998833 11998844 11998855 June July Aug. Sept. Oct. Nov. 1 Australia/dollar1 90.14 87.937 70.026 68.89 62.91 61.23 62.21 63.83 64.45 2 Austria/schilling 17.968 20.005 20.676 15.699 15.117 14.502 14.349 14.111 14.251 3 Belgium/franc 51.121 57.749 59.336 45.633 44.304 42.701 42.315 41.635 42.069 4 Brazil/cruzeiro 573.27 1841.50 6205.10 13.84 13.84 13.84 13.84 13.98 14.10 5 Canada/dollar 1.2325 1.2953 1.3658 1.3899 1.3808 1.3885 1.3872 1.3885 1.3863 6 China, P.R./yuan 1.9809 2.3308 2.9434 3.2115 3.6435 3.7129 3.7150 3.7257 3.7314 7 Denmark/krone 9.1483 10.354 10.598 8.2822 8.0635 7.7657 7.7278 7.5607 7.6444 8 Finland/markka 5.5636 6.0007 6.1971 5.1954 5.0744 4.9377 4.9190 4.8684 4.9576 9 France/franc 7.6203 8.7355 8.9799 7.1208 6.9323 6.7215 6.6835 6.5628 6.6206 10 Germany/deutsche mark 2.5539 2.8454 2.9419 2.2337 2.1517 2.0621 2.0415 2.0054 2.0243 11 Greece/drachma 87.895 112.73 138.40 140.98 138.40 134.68 135.07 135.44 139.12 12 Hong Kong/dollar 7.2569 7.8188 7.7911 7.8107 7.8123 7.8003 7.8026 7.7999 7.7974 13 India/rupee 10.1040 11.348 12.332 12.599 12.508 12.567 12.676 12.848 13.076 14 Ireland/pound1 124.81 108.64 106.62 135.68 139.00 134.67 134.53 135.89 134.64 15 Italy/lira 1519.30 1756.10 1908.90 1533.10 1478.31 1420.33 1410.23 1387.67 1401.08 16 Japan/yen 237.55 237.45 238.47 167.54 158.61 154.18 154.73 156.47 162.85 17 Malaysia/ringgit 2.3204 2.3448 2.4806 2.6231 2.6455 2.6121 2.6174 2.6245 2.6131 18 Netherlands/guilder 2.8543 3.2083 3.3184 2.5154 2.4236 2.3242 2.3050 2.2663 2.2870 19 New Zealand/dollar1 66.790 57.837 49.752 54.585 53.176 50.068 47.950 50.392 51.382 20 Norway/krone 7.3012 8.1596 8.5933 7.6117 7.4800 7.3534 7.3429 7.3611 7.5401 21 Portugal/escudo 111.610 147.70 172.07 151.09 148.67 146.17 146.83 147.24 149.54 22 Singapore/dollar 2.1136 2.1325 2.2008 2.2232 2.1861 2.1601 2.1680 2.1777 2.1922 23 South Africa/rand1 89.85 69.534 45.57 39.49 39.04 38.39 43.36 44.42 44.37 24 South Korea/won 776.04 807.91 861.89 890.74 888.59 886.45 883.06 879.22 873.54 25 Spain/peseta 143.500 160.78 169.98 142.91 137.58 134.11 134.10 133.43 136.10 26 Sri Lanka/rupee 23.510 25.428 27.187 27.955 28.065 28.187 28.297 28.407 28.471 27 Sweden/krona 7.6717 8.2706 8.6031 7.2124 7.0715 6.9365 6.9191 6.8901 6.9683 28 Switzerland/franc 2.1006 2.3500 2.4551 1.8406 1.7445 1.6616 1.6537 1.6433 1.6858 29 Taiwan/dollar n.a. 39.633 39.889 38.163 38.119 37.422 36.885 36.647 36.438 30 Thailand/baht 22.991 23.582 27.193 26.400 26.204 26.093 26.120 26.129 26.278 31 United Kingdom/pound1 151.59 133.66 129.74 150.85 150.71 148.61 146.98 142.64 142.38 MEMO 32 United States/dollar2 125.34 138.19 143.01 113.77 110.38 107.50 107.15 106.58 107.90 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

A69 Guide to Tabular Presentation, Statistical Releases, and Special Tables GUIDE TO TABULAR PRESENTATION Symbols and Abbreviations c Corrected 0 Calculated to be zero e Estimated n.a. Not available p Preliminary n.e.c. Not elsewhere classified r Revised (Notation appears on column heading when IPCs Individuals, partnerships, and corporations about half of the figures in that column are changed.) REITs Real estate investment trusts * Amounts insignificant in terms of the last decimal place RPs Repurchase agreements shown in the table (for example, less than 500,000 SMSAs Standard metropolitan statistical areas when the smallest unit given is millions) Cell not applicable General Information Minus signs are used to indicate (1) a decrease, (2) a negative obligations of the Treasury. "State and local government" figure, or (3) an outflow. also includes municipalities, special districts, and other politi- "U.S. government securities" may include guaranteed cal subdivisions. issues of U.S. government agencies (the flow of funds figures In some of the tables details do not add to totals because of also include not fully guaranteed issues) as well as direct rounding. STATISTICAL RELEASES List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases December 1986 A87 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, 1985 January 1987 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, September 30, 1985 May 1986 A74 Assets and liabilities of U.S. branches and agencies of foreign banks, December 31, 1985 September 1986 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, March 31, 1986 November 1986 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, June 30, 1986 December 1986 A76 Terms of lending at commercial banks, February 1986 May 1986 A70 Terms of lending at commercial banks, May 1986 July 1986 A70 Terms of lending at commercial banks, August 1986 December 1986 A70 Terms of lending at commercial banks, November 1986 February 1987 A70 Special tables begin on next page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • February 1987 4.23 TERMS OF LENDING AT COMMERCIAL BANKS Survey of Loans Made, November 3-7, 19861 A. Commercial and Industrial Loans2 Loans Characteristics ( o t f A o h f o m d u o l o o s l u l a a a n n n r s t d s ) s ( o t A f h o v d s u e o iz r s l a e l a a g n r e d s s ) W m av a e D t e i u a g r r y a h i s g t t e e y d 3 W e a f v f e e e i c g r t a h i g t v e e e d L 4 oan r S a t e t a e r n r d o (p a r5 e r d rc ent) q r I u a n a n t r e g t r i e - l 6 e ( c p o u m e m m n r a e c d m d n e e e t n i r t t - ) (p P p l e a a o r r t a c t i i n e o c s n n i - t) ALL BANKS 1 Overnight8 18,042,062 7,415 78.3 2 One month and under 9,138,063 657 18 7.11 6.51-7.43 77.1 7.7 3 Fixed rate 7,227.320 844 18 6.98 6.47-7.19 76.6 4.7 4 Floating rate 1,910,743 358 20 7.61 6.66-8.33 79.0 19.0 5 Over one month and under a year 10,836,499 126 135 7.97 6.79-8.65 72.8 7.8 6 Fixed rate 5,317,993 130 96 7.78 6.70-8.23 74.0 9.5 7 Floating rate 5,518,506 123 171 8.16 6.98-8.87 71.6 6.1 8 Demand9 6,306,616 174 8.01 6.91-8.84 80.7 5.7 9 Fixed rate 1,560,525 618 6.93 6.38-7.11 76.6 4.2 10 Floating rate 4,746,092 141 8.37 7.76-8.87 82.0 6.2 11 Total short term 44,323,240 7.28 6.54-7.76 77.0 4.8 12 Fixed rate (thousands of dollars) . 31,768,686 584 22 6.96 6.49-7.11 77.3 3.5 13 1-24 295,394 8 106 11.24 9.93-12.55 18.8 .1 14 25-49 163,721 32 107 10.22 8.83-11.73 32.9 .1 15 50-99 197,270 64 112 10.18 8.87-11.36 18.3 .9 16 100-499 597,956 213 130 9.14 8.03-10.47 51.1 1.1 17 500-999 280,882 677 60 7.51 6.79-7.79 80.9 4.5 18 1000 and over 30,233,463 7,874 18 6.83 6.48-6.98 79.0 3.7 19 Floating rate (thousands of dollars). 12,554,554 149 126 8.10 6.98-8.84 76.4 8.0 20 1-24 407,448 9 158 9.70 8.84-10.25 71.0 3.9 21 25-49 455,089 34 161 9.54 8.82-9.93 72.8 4.1 22 50-99 765,387 66 158 9.29 8.57-9.92 70.8 1.7 23 100-499 2,464,770 196 143 8.75 7.85-9.38 76.1 4.1 24 500-999 1,178,220 640 168 8.45 7.76-9.11 80.8 6.2 25 1000 and over 7,283,639 3,978 110 7.53 6.58-8.30 77.0 10.7 Months 26 Total long term 6,635,816 265 8.24 7.49-9.04 76.5 7.9 27 Fixed rate (thousands of dollars) 1,799,667 179 6.99-8.84 67.6 1.9 28 1-99 144,382 16 11.35 9.49-12.40 19.6 .0 29 100-499 132,431 195 9.49 8.30-10.75 24.9 17.7 30 500-999 57,597 696 9.92 9.76-11.02 21.5 .0 31 1000 and over 1,465,256 8,109 7.56 6.79-8.06 78.1 32 Floating rate (thousands of dollars) 4,836,150 322 8.30 7.71-9.04 79.8 10.1 33 1-99 273,875 25 9.41 8.57-9.96 56.8 1.1 34 100-499 563,406 194 8.79 8.03-9.38 65.8 6.3 35 500-999 450,929 652 8.49 7.76-8.84 76.2 11.1 36 1000 and over 3,547,940 5,521 8.11 7.64-8.84 84.3 11.3 Loan rate (percent) Days Prime rate11 Effective4 Nominal10 LOANS MADE BELOW PRIME12 37 Overnight8 17,572,718 9,467 6.66 6.45 7.50 78.2 1.3 38 One month and under 7,413,630 4,110 17 6.74 6.53 7.51 78.2 7.6 39 Over one month and under a year . 4,828,488 907 126 6.81 6.62 7.60 76.7 12.8 40 Demand9 2,060,771 2,561 6.64 6.48 7.51 76.8 3.4 41 Total short term 31,875,608 3,256 6.70 6.50 7.52 77.9 4.7 42 Fixed rate 27,957,590 4,042 16 6.70 6.50 7.51 77.8 3.9 43 Floating rate 3,918,017 1,365 101 6.71 6.51 7.56 78.3 10.2 Months 44 Total long term 1,927,756 1,184 47 7.75 89.5 14.6 45 Fixed rate .... 935,092 1,093 6.73 6.60 7.70 86.2 2.3 46 Floating rate .. 992,664 1,285 6.87 6.67 7.80 92.7 26.2 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. Commercial and Industrial Loans Continued Loans Characteristics ( o t f A o h f o m d u l o o o s l u a a la n n n r s t d s s ) ( o t A f h o v d s u e o iz s r l e a a la g n r e d s s ) W m a a v e D t e i u g a r r y a h i s g t t e e y d 3 W e a f v f e e e ig c r t a h i g t v e e e d L 4 oan r S a t t a e n d (p a e rd rc ent) q r I u a n a n t r e g t r i e - l 6 e ( c p o u m m e m n r a e c d m d n e e e t n i r t t - ) (p P p l e a a o r r t a c t i i n o e c s n n i - t) LARGE BANKS 1 Overnight8 12,542,083 9,774 6.45-6.88 2 One month and under 6,537,372 2,953 18 6.95 6.53-7.21 79.7 4.3 3 Fixed rate 5,695,923 4,798 17 6.88 6.47-7.19 78.6 3.5 4 Floating rate 841,449 820 21 7.40 6.76-7.78 87.3 9.1 5 Over one month and under a year 6,518,756 831 123 7.49 6.70-8.23 81.6 5.6 6 Fixed rate 3,643,926 2,269 82 7.40 6.70-8.23 88.5 5.4 7 Floating rate 2,874,830 461 175 7.61 6.65-8.33 73.0 5.8 8 Demand9 3,110,547 354 7.78 6.70-8.77 75.9 5.1 9 Fixed rate 811,651 3,095 6.80 6.37-6.75 59.0 1.5 10 Floating rate 2,298,896 269 8.12 7.71-8.84 81.9 6.3 11 Total short term 28,708,758 1,425 7.07 6.51-7.49 79.9 12 Fixed rate (thousands of dollars) . 22,451,611 5,233 19 6.89 6.49-7.10 80.6 2.5 13 1-24 8,266 10 92 10.03 8.96-10.48 37.4 .9 14 25-49 7,285 33 75 9.30 8.78-9.92 36.6 .0 15 50-99 13,041 64 71 9.14 8.33-9.92 45.4 3.1 16 100-499 99,787 224 63 8.18 7.59-8.81 71.6 3.9 17 500-999 159,883 677 48 7.54 6.79-7.79 79.5 4.7 18 1000 and over 22,163,348 9,394 19 6.87 6.48-7.09 80.7 2.5 19 Floating rate (thousands of dollars). 6,257,146 395 132 7.73 6.72-8.51 77.5 6.2 20 1-24 61,632 11 129 9.36 8.77-9.% 77.1 .4 21 25-49 78,033 34 136 9.21 8.57-9.92 73.8 .7 22 50-99 161,312 67 139 9.02 8.30-9.65 74.5 .7 23 100-499 774,947 206 140 8.63 7.79-9.11 81.2 1.4 24 500-999 418,935 653 141 8.33 7.76-8.87 82.6 5.5 25 1000 and over 4,762,288 4,668 130 7.44 6.57-8.24 76.6 7.4 Months 26 Total long term 4,471,849 1,011 8.09 7.06-8.77 83.3 4.4 27 Fixed rate (thousands of dollars) 1,229,545 2,779 7.90 6.99-8.06 78.3 1.0 28 1-99 6,918 29 10.93 9.17-11.57 23.3 .0 29 100-499 15,600 217 9.46 8.47-10.47 42.4 5.0 30 500-999 12,550 702 9.12 7.25-12.13 67.3 .0 31 1000 and over 1,194,478 10,122 7.85 6.99-8.06 79.2 .9 32 Floating rate (thousands of dollars) 3,242,304 815 8.17 7.64-9.04 85.2 5.7 33 1-99 81,289 35 8.70 8.03-8.87 86.0 .7 34 100-499 197,256 211 8.52 7.98-9.04 89.7 7.2 35 500-999 161,682 662 8.20 7.71-8.77 94.3 11.6 36 1000 and over 2,802,077 6,302 8.13 7.64-9.04 84.3 5.4 Loan rate (percent) Days Prime rate" Effective4 Nominal10 LOANS MADE BELOW PRIME12 37 Overnight8 12,118,445 10,976 6.69 6.47 7.50 80.1 1.3 38 One month and under 5,718,113 6,128 17 6.76 6.55 7.50 79.0 4.3 39 Over one month and under a year 3,718,708 5,801 134 6.77 6.58 7.50 80.9 7.1 40 Demand9 1,215,213 4,096 6.57 6.43 7.50 62.3 1.0 41 Total short term 22,770,479 7,654 28 6.71 6.51 7.50 79.0 42 Fixed rate 20,027,982 8,326 17 6.72 6.51 7.50 79.3 2.6 43 Floating rate 2,742,497 4,815 129 6.69 6.49 7.50 76.4 5.7 Months 44 Total long term 1,373,605 5,719 4.5 .0 45 Fixed rate 674,229 8,960 7.01 6.91 7.50 94.2 8.9 46 Floating rate .. 699,376 4,240 6.80 6.61 7.50 %.5 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • February 1987 4.23 TERMS OF LENDING AT COMMERCIAL BANKS SURVEY of Loans Made, November 3-7, 1986'—Continued A. Commercial and Industrial Loans — Continued2 Weighted Loan rate (percent) Loans Amount Average average made Particiof loans size maturity3 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 ) Days W e a f v f e e e i c g r t a h i g t v e e e d 4 Standard q r I u a n a n t r e g t r i e - l 6 e ( c p o m e m r e c m n e t n i t t - ) (p l e o r a c n e s n t) OTHER BANKS 1 Overnight8 5,499,979 4,783 6.62 6.45-6.71 2 One month and under 2,600,692 222 20 7.52 6.49-8.05 70.5 16.3 3 Fixed rate 1,531,398 208 20 7.34 6.49-7.63 69.1 9.0 4 Floating rate 1,069,294 248 19 7.77 6.38-8.84 72.4 26.8 5 Over one month and under a year 4,317,742 55 152 8.69 7.71-9.42 59.5 11.1 6 Fixed rate 1,674,066 43 128 8.59 6.94-10.35 42.6 18.4 7 Floating rate 2,643,676 167 8.75 7.76-9.38 70.2 6.5 8 Demand9 3,196,069 116 8.24 7.70-8.84 85.3 6.4 9 Fixed rate 748,874 331 7.06 6.41-7.11 95.7 7.2 10 Floating rate 2,447,195 97 8.59 7.76-9.11 82.1 6.1 11 Total short term 15,614,483 132 7.67 6.56-8.57 71.8 12 Fixed rate (thousands of dollars) . 9,317,075 186 29 7.13 6.50-7.11 69.4 6.0 13 1-24 287,127 8 107 11.28 9.93-12.56 18.3 .0 14 25-49 156,436 32 109 10.26 8.84-11.73 32.8 15 50-99 184,229 64 115 10.25 8.87-11.58 16.4 16 100-499 498,169 211 144 9.33 8.27-10.47 47.0 .6 17 500-999 120,999 676 76 7.49 6.82-7.76 82.8 4.3 18 1000 and over 8,070,115 5,452 16 6.71 6.45-6.85 74.3 6.8 19 Floating rate (thousands of dollars). 6,297,408 92 120 8.48 7.76-9.32 75.4 9.7 20 1-24 345,816 9 161 9.77 8.84-10.47 69.9 4.6 21 25-49 377,056 34 164 9.61 8.84-9.95 72.6 4.8 22 50-99 604,075 65 161 9.35 8.57-9.92 69.9 1.9 23 100-499 1,689,824 192 144 8.80 8.03-9.38 73.8 5.3 24 500-999 759,286 632 181 8.51 7.76-9.11 79.9 6.6 25 1000 and over 2,521,351 3,110 72 7.70 6.58-8.33 77.7 16.8 Months 26 Total long term 2,163,968 105 8.54 7.71-9.38 62.5 15.0 27 Fixed rate (thousands of dollars) 570,122 59 8.48 6.72-10.52 44.6 4.0 28 1-99 137,465 15 11.37 9.50-12.47 19.4 .0 29 100-499 116,832 192 9.49 8.30-10.75 22.6 19.3 30 500-999 45,046 694 10.14 9.79-11.02 8.7 .0 31 1000 and over 270,779 4,319 6.29 4.75-8.43 72.8 .0 32 Floating rate (thousands of dollars) 1,593,846 144 8.56 7.76-9.31 68.9 19.0 33 1-99 192,586 23 9.71 8.84-10.47 44.5 1.3 34 100-499 366,150 185 8.94 8.30-9.42 52.9 5.8 35 500-999 289,247 647 8.66 7.79-9.38 66.2 10.8 36 1000 and over 745,862 3,766 8.04 7.45-8.77 84.1 33.3 Loan rate (percent) Days Effective4 Nominal10 LOANS MADE BELOW PRIME12 37 Overnight8 5,454,273 7,251 6.61 6.40 7.50 74.1 1.4 38 One month and under 1,695,517 1,947 17 6.69 6.48 7.56 75.4 18.7 39 Over one month and under a year 1,109,780 237 101 6.97 6.77 7.93 62.8 32.1 40 Demand9 845,559 1,665 6.74 6.56 7.53 97.7 6.9 41 Total short term 9,105,129 1,336 6.68 6.47 7.56 75.2 8.9 42 Fixed rate 7,929,609 1,757 6.67 6.46 7.54 74.1 7.1 43 Floating rate 1,175,520 511 6.75 6.54 7.71 82.6 20.6 Months 44 Total long term 554,151 399 6.34 39.6 45 Fixed rate .... 260,864 334 5.99 5.80 8.23 65.5 8.3 46 Floating rate .. 293,287 483 7.03 6.81 8.50 83.5 67.5 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A73 4.23 Continued B. Construction and Land Development Loans Loan rate (percent)13 AAmmoouunntt AAvveerraaggee WWeeiigghhtteedd LLooaannss PPaarrttiiccii-- CChhaarraacctteerriissttiiccss ooff llooaannss ssiizzee aavveerraaggee mmaaddee uunnddeerr ppaattiioonn (( oo tt ff hh oo dd uu oo ss llll aa aa nn rr dd ss)) ss (( oo tt ff hh oo dd uu oo ss llll aa aa nn rr dd ss)) ss (( mm mm aa oo tt nn uu tt rr hh iitt ss yy ))33 W e a f v f e e e i c g r t a h i g t v e e e d 4 St e a r n ro d r a 5 r d q r I u a n a n t r g e t r i e - l 6 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 1,824,092 112 9 8.84 .26 7.90-9.38 78.6 17.2 2 Fixed rate (thousands of dollars) .... 866,332 115 5 8.79 .44 7.90-9.11 83.3 24.9 1-24 58,913 11 7 12.29 .48 11.57-12.40 71.1 .5 4 25-49 37,502 37 13 11.91 .58 11.03-12.40 71.5 .0 50-99 53,150 71 19 11.61 .37 10.43-13.49 16.1 .0 6 100-499 33,614 184 11 10.44 .50 9.65-11.58 83.5 4.8 7 500 and over 683,153 6,270 4 8.02 .22 7.86-8.17 90.2 31.3 8 Floating rate (thousands of dollars) .. 957,760 109 14 8.87 .16 8.30-9.38 74.3 10.3 9 1-24 49,853 9 10 9.78 .16 8.87-10.20 83.8 2.1 10 25-49 32,736 32 8 9.53 .28 8.84-9.78 74.9 2.2 11 50-99 49,785 70 9 9.22 .18 8.84-9.92 74.4 2.7 1? 100-499 242,978 183 12 8.85 .17 8.57-9.65 80.9 7.5 13 500 and over 582,408 1,959 15 8.74 .14 8.03-9.38 70.7 13.2 By type of construction 14 Single family 408,526 37 13 9.93 .32 8.84-11.03 76.2 2.2 IS Multifamily 231,210 356 8 8.26 .22 7.72-8.57 64.6 2.2 16 Nonresidential 1,184,355 262 9 8.57 .19 7.90-9.06 82.1 25.3 LARGE BANKS14 1 Total 1,052,717 838 7 8.25 .17 7.85-8.57 86.1 22.8 2 Fixed rate (thousands of dollars) .... 646,615 2,297 3 7.99 .47 7.86-8.05 91.1 33.3 3 1-24 1,470 10 7 10.49 .55 9.92-11.02 72.4 14.2 4 25-49 * * * * * * * * S 50-99 * * * * * * * * 6 100-499 * * # * * * * * 7 500 and over 638,358 7,167 3 7.98 .02 7.86-8.05 91.4 33.5 8 Floating rate (thousands of dollars) .. 406,102 417 12 8.67 .17 7.76-9.11 78.1 6.0 9 1-24 3,612 10 13 9.08 .21 8.57-9.38 93.4 5.5 10 25-49 4,086 34 16 9.06 .12 8.30-9.84 81.8 .0 11 50-99 6,562 71 17 8.93 .35 8.30-9.38 94.6 4.4 1? 100-499 57,411 209 13 8.91 .14 8.57-9.38 88.6 11.3 13 500 and over 334,430 2,350 12 8.61 .20 7.76-9.06 75.8 5.2 By type of construction 14 Single family 52,643 123 13 9.08 .19 8.84-9.38 78.9 8.5 IS Multifamily 206,224 940 7 8.15 .20 7.72-8.24 63.6 1.0 16 Nonresidential 793,850 1,305 6 8.23 .13 7.90-8.43 92.4 29.4 OTHER BANKS14 1 Total 771,375 51 14 9.63 .38 8.84-9.96 68.4 9.6 2 Fixed rate (thousands of dollars) .... 219,717 30 11 11.15 .53 9.84-12.13 60.5 .0 3 1-24 57,443 11 7 12.34 .48 11.58-12.57 71.1 .1 4 25-49 36,753 37 13 11.95 .78 11.03-12.40 71.4 .0 50-99 52,495 71 19 11.62 .52 10.47-13.49 15.8 .0 6 100-499 28,231 174 10 10.83 .79 10.47-11.58 87.0 .0 7 500 and over * * * * * * * * 8 Floating rate (thousands of dollars) .. 551,658 70 15 9.03 .25 8.84-9.42 71.5 13.4 9 1-24 46,240 9 10 9.84 .13 9.11-10.25 83.1 1.9 10 25-49 28,649 32 7 9.59 .44 8.84-9.77 73.9 2.5 11 50-99 43,224 70 8 9.27 .09 8.84-9.92 71.3 2.5 1? 100-499 185,567 176 12 8.83 .32 8.69-9.92 78.6 6.3 13 500 and over 247,978 1,599 21 8.92 .21 8.84-9.38 63.9 24.0 By type of construction 14 Single family 355,883 33 13 10.06 .58 8.84-11.58 75.8 1.2 IS Multifamily 24,986 58 9 9.14 .29 8.30-9.84 73.1 11.6 16 Nonresidential 390,505 100 16 9.27 .26 8.84-9.42 61.3 17.1 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • February 1987 4.23 TERMS OF LENDING AT COMMERCIAL BANKS SURVEY of Loans Made, November 3-7, 1986'—Continued C. Loans to Farmers14 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 tlQllars) 989,660 97,735 135,549 118,401 181,806 187,495 268,674 2 Number of loans 44,034 27,209 8,952 3,460 2,732 1,285 397 3 Weighted average maturity (mohths)? 8.3 5.5 7.4 7.9 12.1 5.5 9.4 4 Weighted average interest rate (percent)4 10.87 11.87 11.35 11.34 10.98 10.90 9.98 5 Standard error5 .49 .29 .41 .58 .66 .26 .39 6 Interquartile range6 9.65-12.01 11.07-12.68 10.52-12.10 10.59-12.35 10.20-12.10 9.31-12.28 8.30-11.35 By purpose of loan 7 Feeder livestock 10.77 1111..7788 1111..1144 1111..7700 1100..9977 1111..0088 99..4488 8 Other livestock 10.65 11.81 11.64 11.40 10.20 9.76 * 9 Other current operating expenses 11.10 11.77 11.40 11.11 11.28 10.92 10.71 10 Farm machinery and equipment 11.93 12.80 11.83 * * * * 11 Farm real estate 9.86 10.72 10.98 * * * * 12 Other 10.20 12.11 10.75 10.97 10.87 10.77 Percentage of amount of loans 13 With floating rates 54.5 43.4 3399..44 4433..44 4411..22 5577..11 7788..33 14 Made under commitment 51.6 32.7 29.3 32.0 38.4 55.3 84.7 By purpose of loan 15 Feeder livestock 31.4 1155..22 1166..99 3377..33 4411..44 3399..99 2299..44 16 Other livestock 6.8 8.2 9.0 9.8 9.7 4.8 * 17 Other current operating expenses 46.5 59.5 47.0 42.9 36.7 41.7 53.0 18 Farm machinery and equipment 2.7 7.0 13.1 * * * * 19 Farm real estate 1.1 .7 3.1 * * * * 20 Other 11.4 9.4 11.0 8.6 11.3 13.0 * LARGE BANKS14 1 Amount of loans (thousands of dollars) 248,210 7,495 13,919 16,951 25,512 57,607 126,726 2 Number of loans 4,206 1,848 907 500 392 394 164 3 Weighted average maturity (months)3 6.6 6.7 6.7 5.8 5.8 6.5 7.0 4 Weighted average interest rate (percent)4 8.88 9.90 9.67 9.34 9.19 8.96 8.58 .45 .25 .37 .56 .39 .14 .34 6 Interquartile range6 8.12-9.58 9.00-10.38 8.84-10.20 8.78-9.93 8.77-9.65 8.30-9.58 7.90-9.31 By purpose of loan 1 Feeder livestock 8.82 9.30 99..4466 99..4455 99..1144 99..1188 88..5577 8 Other livestock 9.11 9.57 10.09 8.96 8.99 9.12 * 9 Other current operating expenses 8.94 10.03 9.64 9.43 9.50 8.77 8.53 10 Farm machinery and equipment 10.09 10.87 10.14 * * * * 11 Farm real estate 9.15 10.60 * * * * * 12 Other 8.69 9.68 9.66 9.07 9.13 8.90 * Percentage of amount of loans 13 With floating rates 83.1 84.2 8833..22 9922..77 9988..66 9966..88 7722..33 14 Made under commitment 80.9 71.4 69.6 80.4 90.2 92.0 75.9 By purpose of loan 15 Feeder livestock 31.0 1188..77 1111..55 1199..22 2222..77 3300..44 3377..44 16 Other livestock 9.0 3.6 5.0 9.7 16.7 11.5 * 17 Other current operating expenses 32.7 53.5 56.2 47.8 22.7 40.5 25.4 18 Farm machinery and equipment 1.2 4.5 4.8 * * * 19 Farm real estate 2.9 5.6 * * * * * 20 Other 23.1 14.0 20.6 17.2 31.6 15.5 * OTHER BANKS14 1 Amount of loans (thousands of dollars) 741,451 90,240 121,630 101,450 156,294 129,889 2 Number of loans 39,828 25,361 8,045 2,960 2,340 891 * 3 Weighted average maturity (months)3 8.6 5.4 7.4 8.2 12.8 5.1 * 4 Weighted average interest rate (percent)4 11.54 12.04 11.54 11.67 11.27 11.75 5 Standard error5 .18 .13 .15 .11 .53 .21 * 6 Interquartile range6 11.04-12.22 11.31-12.73 11.04-12.23 11.05-12.44 10.52-12.13 11.78-12.36 * By purpose of loan 7 Feeder livestock 11.41 1122..0033 1111..2266 1111..8888 1111..1122 * 8 Other livestock 11.42 11.88 11.73 * * * * 9 Other current operating expenses 11.56 11.90 11.65 11.43 11.45 * * 10 Farm machinery and equipment 12.16 12.90 11.90 * * * * 11 Farm real estate * * * * * * * 12 Other 11.77 12.42 11.00 11.74 * For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A75 4.23 Continued C. Loans to Farmers14—Continued Size class of loans (thousands) Characteristics All sizes $1-9 $10-24 $25-49 $50-99 $100-249 $250 and over Percentage of amount of loans 13 With floating rates 45.0 40.0 34.4 35.2 31.8 39.4 * 14 Made under commitment 41.8 29.5 24.7 24.0 29.9 39.0 * By purpose of loan 15 Feeder livestock 31.6 14.9 17.5 40.3 44.5 * * 16 Other livestock 6.1 8.5 9.4 * * * * 17 Other current operating expenses 51.1 60.0 46.0 42.1 39.0 * * 18 Farm machinery and equipment 3.3 7.2 14.0 * * * * 19 Farm real estate * * * * * * 20 Other 7.5 9.0 9.9 7.1 * * * *Fewer than 10 sample loans. 6. The interquartile range shows the interest rate range that encompasses the 1. The survey of terms of bank lending to business collects data on gross loan middle 50 percent of the total dollar amount of loans made. extensions made during the first full business week in the mid-month of each 7. The most common base rate is that rate used to price the largest dollar quarter by a sample of 340 commercial banks of all sizes. A subsample of 250 volume of loans. Base pricing rates include the prime rate (sometimes referred to banks also report loans to farmers. The sample data are blown up to estimate the as a bank's "basic" or "reference" rate); the federal funds rate; domestic money lending terms at all insured commercial banks during that week. The estimated market rates other than the federal funds rate; foreign money market rates; and terms of bank lending are not intended for use in collecting the terms of loans other base rates not included in the foregoing classifications. extended over the entire quarter or residing in the portfolios of those banks. 8. Overnight loans are loans that mature on the following business day. Construction and land development loans include both unsecured loans and loans 9. Demand loans have no stated date of maturity. secured by real estate. Thus, some of the construction and land development 10. Nominal (not compounded) annual interest rates are calculated from survey loans would be reported on the statement of condition as real estate loans and the data on the stated rate and other terms of the loan and weighted by loan size. remainder as business loans. Mortgage loans, purchased loans, foreign loans, and 11. The prime rate reported by each bank is weighted by the volume of loans loans of less than $1,000 are excluded from the survey. extended and then averaged. As of Dec. 31, 1985, assets of most of the large banks were at least $5.5 billion. 12. The proportion of loans made at rates below prime may vary substantially For all insured banks total assets averaged $165 million. from the proportion of such loans outstanding in banks' portfolios. 2. Beginning with the August 1986 survey respondent banks provide informa- 13. 73.4 percent of construction and land development loans were priced tion on the type of base rate used to price each commercial and industrial loan relative to the prime rate. made during the survey week. This reporting change is reflected in the new 14. Among banks reporting loans to farmers (Table 5), most "large banks" column on the most common base pricing rate in table A and footnote 13 from (survey strata 1 to 3) had over $600 million in total assets, and most "other banks" table B. (survey strata 4 to 6) had total assets below $600 million. 3. Average maturities are weighted by loan size and exclude demand loans. The survey of terms of bank lending to farmers now includes loans secured by 4. Effective (compounded) annual interest rates are calculated from the stated farm real estate. In addition, the categories describing the purpose of farm loans rate and other terms of the loan and weighted by loan size. have now been expanded to include "purchase or improve farm real estate." In 5. The chances are about two out of three that the average rate shown would previous surveys, the purpose of such loans was reported as "other". differ by less than this amount from the average rate that would be found by a complete survey of lending at all banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Federal Reserve Board of Governors PAUL A. VOLCKER, Chairman MARTHA R. SEGER MANUEL H. JOHNSON, Vice Chairman WAYNE D. ANGELL 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 MARTHA BETHEA, Deputy Associate Director THOMAS D. SIMPSON, Deputy Associate Director LAWRENCE SLIFMAN, Deputy Associate Director OFFICE OF THE SECRETARY PETER A. TINSLEY, Deputy Associate Director SUSAN J. LEPPER, Assistant Director WILLIAM W. WILES, Secretary RICHARD D. PORTER, Assistant Director BARBARA R. LOWREY, Associate Secretary MARTHA S. SCANLON, Assistant Director JAMES MCAFEE, Associate Secretary JOYCE K. ZICKLER, Assistant Director LEVON H. GARABEDIAN, Assistant Director (Administration) DIVISION OF CONSUMER AND COMMUNITY AFFAIRS DIVISION OF INTERNATIONAL FINANCE GRIFFITH L. GARWOOD, Director GLENN E. LONEY, Assistant Director EDWIN M. TRUMAN, Director ELLEN MALAND, Assistant Director LARRY J. PROMISEL, Senior Associate Director DOLORES S. SMITH, Assistant Director CHARLES J. SIEGMAN, Senior Associate Director DAVID H. HOWARD, Deputy Associate Director ROBERT F. GEMMILL, Staff Adviser DIVISION OF BANKING DONALD B. ADAMS, Assistant Director SUPERVISION AND REGULATION PETER HOOPER III, Assistant Director KAREN H. JOHNSON, Assistant Director WILLIAM TAYLOR, Director RALPH W. SMITH, JR., Assistant Director FRANKLIN D. DREYER, Deputy Director' DON E. KLINE, Associate Director FREDERICK M. STRUBLE, Associate Director WILLIAM A. RYBACK, Deputy Associate Director STEPHEN C. SCHEMERING, Deputy Associate Director RICHARD SPILLENKOTHEN, Deputy Associate Director HERBERT A. BIERN, Assistant Director JOE M. CLEAVER, Assistant Director ANTHONY CORNYN, Assistant Director JAMES I. GARNER, Assistant Director JAMES D. GOETZINGER, Assistant Director MICHAEL G. MARTINSON, Assistant Director ROBERT S. PLOTKIN, Assistant Director SIDNEY M. SUSSAN, Assistant Director LAURA M. HOMER, Securities Credit Officer 1. On loan from the Federal Reserve Bank of Chicago. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All and Official Staff H. ROBERT HELLER 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 JOHN H. PARRISH, Assistant Director FLORENCE M. YOUNG, Adviser GEORGE E. LIVINGSTON, Controller BRENT L. BOWEN, Assistant Controller DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, 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 RICHARD C. STEVENS, Assistant Director PATRICIA A. WELCH, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Federal Reserve Bulletin • February 1987 Federal Open Market Committee FEDERAL OPEN MARKET COMMITTEE PAUL A. VOLCKER, Chairman E. GERALD CORRIGAN, Vice Chairman WAYNE D. ANGELL KAREN N. HORN FRANK E. MORRIS ROGER GUFFEY MANUEL H. JOHNSON MARTHA R. SEGER H. ROBERT HELLER THOMAS C. MELZER 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 JOHN P. LA WARE, First District CHARLES T. FISHER, III, Seventh District JOHN F. MCGILLICUDDY, Second District DONALD N. BRANDIN, Eighth District SAMUEL A. MCCULLOUGH, Third District DEWALT H. ANKENY, JR., Ninth District JULIEN L. MCCALL, Fourth District F. PHILLIPS GILTNER, Tenth District JOHN G. MEDLIN, JR., Fifth District GERALD W. FRONTERHOUSE, Eleventh District BENNETT A. BROWN, Sixth District JOHN D. MANGELS, Twelfth District HERBERT V. PROCHNOW, SECRETARY WILLIAM J. KORSVIK, ASSOCIATE SECRETARY Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 and Advisory Councils CONSUMER ADVISORY COUNCIL EDWARD N. LANGE, Seattle, Washington, Chairman STEVEN W. HAMM, COLUMBIA, South Carolina, Vice Chairman EDWIN B. BROOKS, JR., Richmond, Virginia JOHN M. KOLESAR, Cleveland, Ohio JONATHAN A. BROWN, Washington, D.C. ALAN B. LERNER, Dallas, Texas JUDITH N. BROWN, Edina, Minnesota FRED S. MCCHESNEY, Chicago, Illinois MICHAEL S. CASSIDY, New York, New York RICHARD L. D. MORSE, Manhattan, Kansas THERESA FAITH CUMMINGS, Springfield, Illinois HELEN E. NELSON, Mill Valley, California RICHARD B. DOBY, Denver, Colorado SANDRA R. PARKER, Richmond, Virginia RICHARD H. FINK, Washington, D.C. JOSEPH L. PERKOWSKI, Centerville, Minnesota NEIL J. FOG ARTY, Jersey City, New Jersey BRENDA L. SCHNEIDER, Detroit, Michigan STEPHEN GARDNER, Dallas, Texas JANE SHULL, Philadelphia, Pennsylvania KENNETH A. HALL, Jackson, Mississippi TED L. SPURLOCK, Dallas, Texas ELENA G. HANGGI, Little Rock, Arkansas MEL R. STILLER, Boston, Massachusetts ROBERT J. HOBBS, Boston, Massachusetts CHRISTOPHER J. SUMNER, Salt Lake City, Utah RAMON E. JOHNSON, Salt Lake City, Utah EDWARD J. WILLIAMS, Chicago, Illinois ROBERT W. JOHNSON, West Lafayette, Indiana MICHAEL ZOROYA, St. Louis, Missouri THRIFT INSTITUTIONS ADVISORY COUNCIL MICHAEL R. WISE, Denver, Colorado, President JOHN C. DICUS, Topeka, Kansas DONALD F. MCCORMICK, Livingston, New Jersey JAMIE J. JACKSON, Houston, Texas HERSCHEL ROSENTHAL, Miami, Florida GARY L. SIRMON, Walla, Walla, Washington Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 Federal Reserve Board Publications Copies are available from PUBLICATIONS SERVICES, INTRODUCTION TO FLOW OF FUNDS. 1980. 68 pp. $1.50 each; Mail Stop 138, Board of Governors of the Federal Reserve 10 or more to one address, $1.25 each. System, Washington, D.C. 20551. When a charge is indicat- PUBLIC POLICY AND CAPITAL FORMATION. 1981. 326 pp. ed, remittance should accompany request and be made $13.50 each. payable to the order of the Board of Governors of the Federal FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; updat- Reserve System. Remittance from foreign residents should ed at least monthly. (Requests must be prepaid.) be drawn on a U.S. bank. Stamps and coupons are not Consumer and Community Affairs Handbook. $75.00 per accepted. year. Monetary Policy and Reserve Requirements Handbook. $75.00 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNC- Securities Credit Transactions Handbook. $75.00 per year. TIONS. 1984. 120 pp. Federal Reserve Regulatory Service. 3 vols. (Contains all ANNUAL REPORT. three Handbooks plus substantial additional material.) ANNUAL REPORT: BUDGET REVIEW, 1985-86. $200.00 per year. FEDERAL RESERVE BULLETIN. Monthly. $20.00 per year or Rates for subscribers outside the United States are as $2.00 each in the United States, its possessions, Canada, follows and include additional air mail costs: and Mexico; 10 or more of same issue to one address, Federal Reserve Regulatory Service, $250.00 per year. $18.00 per year or $1.75 each. Elsewhere, $24.00 per Each Handbook, $90.00 per year. year or $2.50 each. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint MULTICOUNTRY MODEL, May 1984. 590 pp. $14.50 each. of Part I only) 1976. 682 pp. $5.00. WELCOME TO THE FEDERAL RESERVE. BANKING AND MONETARY STATISTICS. 1941-1970. 1976. PROCESSING AN APPLICATION THROUGH THE FEDERAL RE- 1,168 pp. $15.00. SERVE SYSTEM. August 1985. 30 pp. ANNUAL STATISTICAL DIGEST WRITING IN STYLE AT THE FEDERAL RESERVE. August 1984. 1974-78. 1980. 305 pp. $10.00 per copy. 93 pp. $2.50 each. 1981. 1982. 239 pp. $ 6.50 per copy. INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. 1982. 1983. 266 pp. $ 7.50 per copy. 440 pp. $9.00 each. 1983. 1984. 264 pp. $11.50 per copy. FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1984. 1985. 254 pp. $12.50 per copy. December 1986. 264 pp. $10.00 each. 1985. 1986. 231 pp. $15.00 per copy. HISTORICAL CHART BOOK. Issued annually in Sept. $1.25 each in the United States, its possessions, Canada, and Mexico; 10 or more to one address, $1.00 each. Elsewhere, $1.50 each. CONSUMER EDUCATION PAMPHLETS SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SE- Short pamphlets suitable for classroom use. Multiple copies RIES OF CHARTS. Weekly. $21.00 per year or $.50 each in are available without charge. the United States, its possessions, Canada, and Mexico; 10 or more of same issue to one address, $19.50 per year or $.45 each. Elsewhere, $26.00 per year or $.60 each. Alice in Debitland THE FEDERAL RESERVE ACT, and other statutory provisions Consumer Handbook on Adjustable Rate Mortgages affecting the Federal Reserve System, as amended Consumer Handbook to Credit Protection Laws through April 20, 1983, with Supplements covering Fair Credit Billing amendments through August 1986. 576 pp. $7.00. Federal Reserve Glossary REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- A Guide to Business Credit and the Equal Credit Opportunity ERAL RESERVE SYSTEM. Act ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— Guide to Federal Reserve Regulations Regulation Z) Vol. I (Regular Transactions). 1969. 100 How to File A Consumer Credit Complaint pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each If You Borrow To Buy Stock volume $2.25; 10 or more of same volume to one If You Use A Credit Card address, $2.00 each. Series on the Structure of the Federal Reserve System FEDERAL RESERVE MEASURES OF CAPACITY AND CAPACITY The Board of Governors of the Federal Reserve System UTILIZATION. 1978. 40 pp. $1.75 each; 10 or more to one The Federal Open Market Committee address, $1.50 each. Federal Reserve Bank Board of Directors THE BANK HOLDING COMPANY MOVEMENT TO 1978: A Federal Reserve Banks COMPENDIUM. 1978. 289 pp. $2.50 each; 10 or more to Organization and Advisory Committees one address, $2.25 each. What Truth in Lending Means to You Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 PAMPHLETS FOR FINANCIAL INSTITUTIONS REVIEW OF THE TECHNIQUES AND LITERATURE, by Short pamphlets on regulatory compliance, primarily suit- Kenneth Rogoff. October 1983. 15 pp. able for banks, bank holding companies and creditors. 133. RELATIONSHIPS AMONG EXCHANGE RATES, INTER- VENTION, AND INTEREST RATES: AN EMPIRICAL IN- VESTIGATION, by Bonnie E. Loopesko. November Limit of 50 copies 1983. Out of print. 134. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET INTERVENTION: A REVIEW OF THE LITERATURE, by The Board of Directors' Opportunities in Community Rein- Ralph W. Tryon. October 1983. 14 pp. Out of print. vestment 135. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET The Board of Directors' Role in Consumer Law Compliance INTERVENTION: APPLICATIONS TO CANADA, GERMA- Combined Construction/Permanent Loan Disclosure and NY, AND JAPAN, by Deborah J. Danker, Richard A. Regulation Z Haas, Dale W. Henderson, Steven A. Symansky, and Community Development Corporations and the Federal Re- Ralph W. Tryon. April 1985. 27 pp. Out of print. serve 136. THE EFFECTS OF FISCAL POLICY ON THE U.S. ECONO- Construction Loan Disclosures and Regulation Z MY, by Darrell Cohen and Peter B. Clark. January Finance Charges Under Regulation Z 1984. 16 pp. Out of print. How to Determine the Credit Needs of Your Community 137. THE IMPLICATIONS FOR BANK MERGER POLICY OF Regulation Z: The Right of Rescission FINANCIAL DEREGULATION, INTERSTATE BANKING, The Right to Financial Privacy Act AND FINANCIAL SUPERMARKETS, by Stephen A. Signature Rules in Community Property States: Regulation B Rhoades. February 1984. Out of print. Signature Rules: Regulation B 138. ANTITRUST LAWS, JUSTICE DEPARTMENT GUIDE- Timing Requirements for Adverse Action Notices: Regula- LINES, AND THE LIMITS OF CONCENTRATION IN LOtion B CAL BANKING MARKETS ,by James Burke. June 1984. What An Adverse Action Notice Must Contain: Regulation B 14 pp. Out of print. Understanding Prepaid Finance Charges: Regulation Z 139. SOME IMPLICATIONS OF FINANCIAL INNOVATIONS IN THE UNITED STATES, by Thomas D. Simpson and Patrick M. Parkinson. August 1984. 20 pp. 140. GEOGRAPHIC MARKET DELINEATION: A REVIEW OF STAFF STUDIES: Summaries Only Printed in the THE LITERATURE, by John D. Wolken. November Bulletin 1984. 38 pp. Out of print. Studies and papers on economic and financial subjects that 141. A COMPARISON OF DIRECT DEPOSIT AND CHECK PAYare of general interest. Requests to obtain single copies of MENT COSTS, by William Dudley. November 1984. the full text or to be added to the mailing list for the series 15 pp. Out of print. may be sent to Publications Services. 142. MERGERS AND ACQUISITIONS BY COMMERCIAL BANKS, 1960-83, by Stephen A. Rhoades. December 1984. 30 pp. Out of print. Staff Studies 115-125 are out of print. 143. COMPLIANCE COSTS AND CONSUMER BENEFITS OF THE ELECTRONIC FUND TRANSFER ACT: RECENT SURVEY EVIDENCE, by Frederick J. Schroeder. April 114. MULTIBANK HOLDING COMPANIES: RECENT EVI- 1985. 23 pp. Out of print. DENCE ON COMPETITION AND PERFORMANCE IN 144. SCALE ECONOMIES IN COMPLIANCE COSTS FOR CON- BANKING MARKETS, by Timothy J. Curry and John T. SUMER CREDIT REGULATIONS: THE TRUTH IN LEND- Rose. Jan. 1982. 9 pp. ING AND EQUAL CREDIT OPPORTUNITY LAWS, by 126. DEFINITION AND MEASUREMENT OF EXCHANGE MAR- Gregory E. Elliehausen and Robert D. Kurtz. May KET INTERVENTION, by Donald B. Adams and Dale 1985. 10 pp. W. Henderson. August 1983. 5 pp. Out of print. 145. SERVICE CHARGES AS A SOURCE OF BANK INCOME 127. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- AND THEIR IMPACT ON CONSUMERS, by Glenn B. VENTION: JANUARY-MARCH 1975, by Margaret L. Canner and Robert D. Kurtz. August 1985. 31 pp. Out Greene. August 1984. 16 pp. Out of print. of print. 128. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF VENTION: SEPTEMBER 1977-DECEMBER 1979, by Mar- BUSINESS LOANS BY COMMERCIAL BANKS, 1977-84, garet L. Greene. October 1984. 40 pp. Out of print. by Thomas F. Brady. November 1985. 25 pp. 129. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) VENTION: OCTOBER I98O-OCTOBER 1981, by Margaret INDEXES OF THE MONETARY AGGREGATES, by Helen L. Greene. August 1984. 36 pp. T. Farr and Deborah Johnson. December 1985. 42 pp. 130. EFFECTS OF EXCHANGE RATE VARIABILITY ON IN- 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF TERNATIONAL TRADE AND OTHER ECONOMIC VARIA- THE ECONOMIC RECOVERY TAX ACT: SOME SIMULA- BLES: A REVIEW OF THE LITERATURE, by Victoria S. TION RESULTS, by Flint Brayton and Peter B. Clark. Farrell with Dean A. DeRosa and T. Ashby McCown. December 1985. 17 pp. January 1984. Out of print. 149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS 131. CALCULATIONS OF PROFITABILITY FOR U.S. DOLLAR- IN BANKING BEFORE AND AFTER ACQUISITION, by DEUTSCHE MARK INTERVENTION, by Laurence R. Stephen A. Rhoades. April 1986. 32 pp. Jacobson. October 1983. 8 pp. 150. STATISTICAL COST ACCOUNTING MODELS IN BANK- 132. TIME-SERIES STUDIES OF THE RELATIONSHIP BE- ING: A REEXAMINATION AND AN APPLICATION, by TWEEN EXCHANGE RATES AND INTERVENTION: A John T. Rose and John D. Wolken. May 1986. 13 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 151. RESPONSES TO DEREGULATION: RETAIL DEPOSIT Bank Lending to Developing Countries. 10/84. PRICING FROM 1983 THROUGH 1985, by Patrick I. Survey of Consumer Finances, 1983: A Second Report. 12/84. Mahoney, Alice P. White, Paul F. O'Brien, and Mary Union Settlements and Aggregate Wage Behavior in the M. McLaughlin. January 1987. 30 pp. 1980s. 12/84. The Thrift Industry in Transition. 3/85. A Revision of the Index of Industrial Production. 7/85. Financial Innovation and Deregulation in Foreign Industrial REPRINTS OF BULLETIN ARTICLES Countries. 10/85. Most of the articles reprinted do not exceed 12 pages. Recent Developments in the Bankers Acceptance Market. 1/86. The Use of Cash and Transaction Accounts by American Limit of 10 copies Families. 2/86. Financial Characteristics of High-Income Families. 3/86. U. S. International Transactions in 1985. 5/86. Foreign Experience with Targets for Money Growth. 10/83. Prices, Profit Margins, and Exchange Rates. 6/86. Intervention in Foreign Exchange Markets: A Summary of Agricultural Banks under Stress. 7/86. Ten Staff Studies. 11/83. Foreign Lending by Banks: A Guide to International and A Financial Perspective on Agriculture. 1/84. U.S. Statistics. 10/86. Survey of Consumer Finances, 1983. 9/84. Recent Developments in Corporate Finance. 11/86. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A83 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) Discounts and advances by Reserve Banks (See Loans) BANKERS acceptances, 9, 23, 24 Dividends, corporate, 35 Bankers balances, 18-20, 70, 72, 74 (See also Foreigners) Bonds (See also U.S. government securities) EMPLOYMENT, 45 New issues, 34 Eurodollars, 24 Rates, 24 Branch banks, 21, 55 FARM mortgage loans, 39 Business activity, nonfinancial, 44 Federal agency obligations, 4, 9, 10, 11, 31, 32 Business expenditures on new plant and equipment, 36 Federal credit agencies, 33 Business loans (See Commercial and industrial loans) 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, 70-72 Federal Reserve Banks Consumer loans held, by type, and terms, 40, 41 Condition statement, 10 Loans sold outright, 19 Discount rates (See Interest rates) Nondeposit funds, 17 U.S. government securities held, 4, 10, 11, 30 Real estate mortgages held, by holder and property, 39 Federal Reserve credit, 4, 5, 10, 11 Terms of Lending, 70-75 Federal Reserve notes, 10 Time and savings deposits, 3 Federal Savings and Loan Insurance Corporation insured Commercial paper, 23, 24, 37 institutions, 26 Condition statements (See Assets and liabilities) Federally sponsored credit agencies, 33 Construction, 44, 49, 73 Finance companies Consumer installment credit, 40, 41 Assets and liabilities, 37 Consumer prices, 44, 50 Business credit, 37 Consumption expenditures, 51, 52 Loans, 40, 41 Corporations Paper, 23, 24 Nonfinancial, assets and liabilities, 36 Financial institutions Profits and their distribution, 35 Loans to, 19, 20, 21 Security issues, 34, 65 Selected assets and liabilities, 26 Cost of living (See Consumer prices) Float, 4 Credit unions, 26, 40 (See also Thrift institutions) Flow of funds, 42, 43 Currency and coin, 18, 70, 72, 74 Foreign banks, assets and liabilities of U.S. branches and Currency in circulation, 4, 13 agencies, 21 Customer credit, stock market, 25 Foreign currency operations, 10 Foreign deposits in U.S. banks, 4, 10, 19, 20 Foreign exchange rates, 68 DEBITS to deposit accounts, 15 Foreign trade, 54 Debt (See specific types of debt or securities) Foreigners Demand deposits Claims on, 55, 57, 60, 61, 62, 64 Banks, by classes, 18-21 Liabilities to, 20, 54, 55, 57, 58, 63, 65, 66 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A84 GOLD REAL estate loans Certificate account, 10 Banks, by classes, 16, 19, 20, 39 Stock, 4, 54 Financial institutions, 26 Government National Mortgage Association, 33, 38, 39 Terms, yields, and activity, 38 Gross national product, 51 Type of holder and property mortgaged, 39 Repurchase agreements, 5, 17, 19, 20, 21 HOUSING, new and existing units, 49 Reserve requirements, 7 Reserves Commercial banks, 18 INCOME, personal and national, 44, 51, 52 Depository institutions, 3, 4, 5, 12 Industrial production, 44, 47 Federal Reserve Banks, 10 Installment loans, 40, 41 U.S. reserve assets, 54 Insurance companies, 26, 30, 39 Residential mortgage loans, 38 Interest rates Retail credit and retail sales, 40, 41, 44 Bonds, 24 Commercial 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 Ownership of securities issued by, 19, 20, 26 LABOR force, 45 Rates on securities, 24 Life insurance companies (See Insurance companies) Stock market, selected statistics, 25 Loans (See also specific types) Stocks (See also Securities) Banks, by classes, 18—20 New issues, 34 Commercial banks, 3, 16, 18-20, 70-75 Prices, 25 Federal Reserve Banks, 4, 5, 6, 10, 11 Financial institutions, 26, 39 Student Loan Marketing Association, 33 Insured or guaranteed by United States, 38, 39 TAX receipts, federal, 29 MANUFACTURING 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, 30, 66 NATIONAL defense outlays, 29 National income, 51 Open market transactions, 9 Outstanding, by type and holder, 26, 30 Rates, 24 OPEN market transactions, 9 U.S. international transactions, 53-67 Utilities, production, 48 PERSONAL income, 52 Prices VETERANS Administration, 38, 39 Consumer and producer, 44, 50 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

A85 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 R. Opel E. Gerald Corrigan Virginia A. Dwyer Thomas M. Timlen Buffalo 14240 Mary Ann Lambertsen John T. Keane PHILADELPHIA 19105 Nevius M. Curtis Edward G. Boehne George E. Bartol III Richard L. Smoot CLEVELAND* 44101 (to be announced) Karen N. Horn E. Mandell de Windt William H. Hendricks Cincinnati 45201 Owen B. Butler 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 Gloria L. Johnson Robert D. McTeer, Jr. Charlotte 28230 Wallace J. Jorgenson Albert D. Tinkelenberg Culpeper Communications John G. Stoides and Records Center 22701 ATLANTA 30303 Bradley Currey, Jr. Robert P. Forrestal Larry L. Prince Jack Guynn Delmar Harrison Birmingham 35283 Margaret E. M. Tolbert Fred R. Herr Jacksonville 32231 Andrew A. Robinson James D. Hawkins Miami 33152 Robert D. Apelgren Patrick K. Barron Nashville 37203 C. Warren Neel Jeffrey J. Wells New Orleans 70161 Caroline K. Theus 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 Robert L. Virgil, Jr. Joseph P. Garbarini Little Rock 72203 (to be announced) John F. Breen Louisville 40232 (to be announced) James E. Conrad Memphis 38101 (to be announced) Paul I. Black, Jr. MINNEAPOLIS 55480 John B. Davis, Jr. Gary H. Stern Michael W. Wright Thomas E. Gainor Helena 59601 Warren H. Ross 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 Bobby R. Inman Robert H. Boykin Hugh G. Robinson William H. Wallace James L. Stull El Paso 79999 (to be announced) Joel L. Koonce, Jr. Houston 77252 (to be announced) J. Z. Rowe San Antonio 78295 (to be announced) Thomas H. Robertson SAN FRANCISCO 94120 Fred W. Andrew Robert T. Parry Robert F. Erburu Carl E. Powell Los Angeles 90051 Richard C. Seaver Thomas C. Warren (Acting) Portland 97208 Paul E. Bragdon Angelo S. Carella Salt Lake City 84125 Don M. Wheeler E. Ronald Liggett Seattle 98124 John W. Ellis Gerald R. Kelly *Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 060%; Cranford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A86 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories Por"**<, Helena . ??c'sco Denv iige!es April 1984 i i ALASKA i i i i i © i y / /p 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