Federal Reserve Bulletin, 1987-07

VOLUME 73 • NUMBER 7 • JULY 1987 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 523 TURNING THE CORNER on budget developments in 1987, and says ON TROUBLED FARM DEBT that the Board believes the Federal Reserve's budget processes have worked well Farmland values probably are near the end in controlling expenses, before the Subcomof their adjustment to this decade's less mittee on Domestic Monetary Policy of the exuberant expectations for farm income; if House Committee on Banking, Finance and so, financial stress in the farm sector has Urban Affairs, May 6, 1987. entered the final stages, and the remaining troubled debt incurred during the boom of 569 E. Gerald Corrigan, President, Federal Rethe 1970s will be worked out. serve Bank of New York, discusses recent and prospective developments regarding 537 THE PROFITABILITY OF the globalization of financial markets and U.S.-CHARTERED INSURED institutions, with particular emphasis on COMMERCIAL BANKS IN 1986 developments in New York, London, and Tokyo; and says that if we are to restore Asset-quality problems continued to dog balanced growth here at home and in the U.S.-chartered commercial banks in 1986, world more generally, we must avoid any and escalating loan losses cut into profits. renewed outburst of inflation, which would undermine prospects on all fronts, before 552 TREASURY AND FEDERAL RESERVE the Senate Committee on the Budget, FOREIGN EXCHANGE OPERATIONS May 6, 1987. The dollar traded rather steadily in Febru- 577 Manuel H. Johnson, Vice Chairman, Board ary and early March and then moved lower of Governors, presents the views of the through the end of April. Board on conditions in the banking system and what supervisory steps should be taken 558 INDUSTRIAL PRODUCTION to address these conditions, before the Sen- Industrial production declined an estimated ate Committee on Banking, Housing, and 0.4 percent in April. Urban Affairs, May 21, 1987. 560 STATEMENTS TO CONGRESS 588 ANNOUNCEMENTS Martha R. Seger, Member, Board of Gover- Retirement of Paul A. Volcker as Chairman nors, discusses the efforts being taken to of the Board of Governors and nomination enlist the cooperation of foreign authorities of Alan Greenspan to succeed him. in eliminating the use of the international Appointment of Edward W. Kelley, Jr. as a banking system by criminal elements, bemember of the Board of Governors. fore the Subcommittee on Financial Institutions Supervision, Regulation, and Insur- Adoption of forms for use by government ance of the House Committee on Banking, securities brokers and dealers. Finance and Urban Affairs, May 6, 1987. First-quarter financial results available for priced service operations. 563 Wayne D. Angell, Member, Board of Governors, reviews the expenses and budget of Publication of the Seventy-Third Annual the Federal Reserve System, with emphasis Report of the Board of Governors. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Comment period extended on proposal to members agreed that the intermeeting range amend Capital Guidelines. for the federal funds rate, which provides a mechanism for initiating consultation of the Errata in BULLETIN table. Committee when its boundaries are persis- Change in Board staff. tently exceeded, should be left unchanged at 4 to 8 percent. Admission of one state bank to membership in the Federal Reserve System. 597 LEGAL DEVELOPMENTS 590 RECORD OF POLICY ACTIONS OF THE Various bank holding company, bank ser- FEDERAL OPEN MARKET COMMITTEE vice corporation, and bank merger orders; and pending cases. At its meeting on March 31, 1987, all of the members of the Committee indicated that 631 MEMBERSHIP OF THE BOARD OF they favored or could accept a directive that GOVERNORS OF THE FEDERAL called for no change in the degree of pres- RESERVE SYSTEM, 1913-87 sure on reserve positions in the immediate future. There was a consensus in favor of List of appointive and ex officio members. allowing for possible limited adjustments during the intermeeting period toward some AI FINANCIAL AND BUSINESS STATISTICS firming of reserve conditions, with excessive weakness in the dollar recognized as A3 Domestic Financial Statistics the potential development most likely to A44 Domestic Nonfinancial Statistics make such an adjustment appropriate. In A53 International Statistics particular, the members agreed that somewhat greater reserve restraint might be ac- A69 GUIDE TO TABULAR PRESENTATION, ceptable depending on the performance of STATISTICAL RELEASES, AND SPECIAL the dollar in foreign exchange markets, but TABLES also taking into account the behavior of the monetary aggregates, the strength of the A82 BOARD OF GOVERNORS AND STAFF business expansion, progress against inflation, and conditions in credit markets. This A84 FEDERAL OPEN MARKET COMMITTEE approach to policy implementation was ex- AND STAFF, ADVISORY COUNCILS pected to be consistent with growth in M2 and M3 at annual rates of around 6 percent A86 FEDERAL RESERVE BOARD or less over the three-month period from PUBLICATIONS March to June. Over the same period, growth in Ml was expected to remain sub- A89 INDEX TO STATISTICAL TABLES stantially below its pace in 1986. Because the behavior of Ml remained subject to A9i FEDERAL RESERVE BANKS, BRANCHES, unusual uncertainty, the Committee decid- AND OFFICES ed to continue its practice of not specifying a numerical expectation for its growth. The A92 MAP OF FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Turning the Corner on Troubled Farm Debt Emanuel Melichar, of the Board's Division of land have completed their downward adjust- Research and Statistics, prepared this article. ment. Therefore, the first section of this article reviews past and current relationships among Farmland values probably are near the end of aggregate income, assets, and debt. The boom's their adjustment to this decade's less exuberant legacy of troubled debt and probable losses are expectations for farm income. If so, financial then assessed. The last section concentrates on stress in the farm sector has entered its final agricultural banks, more than 200 of which have stages, and the remaining troubled debt incurred failed since the onset of farm loan problems. The during the boom of the 1970s will be worked out. recent experience of these institutions reflects During that boom, farmers as a group enjoyed a the losses attending the resolution of farm loan massive increase in real wealth, and some farm- delinquencies as well as the consequent improveers borrowed heavily to increase their participa- ment in the financial condition of the farm sector. tion in those gains. In the bust of the 1980s, the entire increase in real wealth disappeared, and many heavily indebted farmers have been unable FARM INCOME AND LAND PRICES to service or to repay their debt. Their personal financial crises are being managed through the Changes in farm income and in expectations of restructuring of their obligations or are ending in farm income triggered both the boom and the the liquidation of their assets; that is, their ex- bust. In 1972-73, an extraordinary rise in farm cess debt is being forgiven or proceeds from sale income brought instant prosperity to the farm or foreclosure of their assets are being applied to sector but also set off a chain of events that the indebtedness. In either event, such borrow- eventually was to bring sorrow to many. In ers have lost their equity and their lenders have acting on expectations that farm income would lost part of the funds they lent. continue to rise, buyers and sellers of farmland But the movement of farm assets from overly priced it at a relatively high multiple of its indebted or bankrupt farmers into stronger hands earnings at the time. When, in the 1980s, it tends to improve the financial condition of the became evident that the likely income trend sector. While land prices were falling rapidly, would instead be flat—and then only with the problems associated with large amounts of newly help of government programs and payments— troubled debt overshadowed the effects of debt land prices fell to produce the lower pricerestructuring and liquidation. But now the re- earnings ratio appropriate for assets with less verse is true. The amount of delinquent farm exciting prospects; that is, land prices fell sharploans, which had been increasing through early ly even though income was maintained. 1986, is now declining. Charge-offs of farm loans appear to be past their peak among several major lender groups—individuals, banks, and life insur- Income from Assets ance companies—and may be peaking now at the large federally sponsored lender, the Farm Cred- Data on the earnings of farm capital, which are it System. fundamental to the study of these events and At this stage of the boom-bust cycle, how relationships, are difficult to obtain. Most farm much problem debt remains at various lender businesses are family enterprises, and the operagroups, and how large are the losses yet to tors do not separately calculate the returns to come? Much depends on whether prices of farm- capital and to labor and management. Conse- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

524 Federal Reserve Bulletin • July 1987 quently, the reports of farm income that are most assets has differed materially from income that widely known and used are not suitable for the includes the earnings of labor and management. analysis of returns on assets. Fortunately, the The boom of the 1970s was preceded by two U.S. Department of Agriculture has recently decades of slow but significant growth in income provided improved estimates of annual net in- from assets and thus in asset values as well. come attributable to assets alone, derived as During those years, farmers became accustomed shown in table 1 and plotted, in constant dollars, to recording much of their individual financial in chart 1. As the chart shows, income from progress through price appreciation of their real 1. Farm income, returns, assets, and debts of operators and landlords, 1970-86' Annual average Asset Boom, Recession, Boom, Recession, revalua- MEMO: 1972-75 1976-77 1978-79 1980-83 tion, 1986 1984-86 Billions of 1986 dollars2 Derivation of net income and total returns Gross income 149 191 176 200 174 160 149 LESS: Wages and perquisites paid to hired labor 11 12 14 13 11 10 10 LESS: Other operating expenses, excluding interest 73 87 90 104 93 78 71 LESS: Depreciation allowances and accidental damage 16 18 22 23 23 18 17 EQUALS: Net income from assets and operators' work 49 73 49 59 46 54 51 LESS: Income imputed to operators' work 27 30 30 30 27 24 21 EQUALS: Net income from assets 22 44 20 29 20 29 30 PLUS: Real capital gain on assets3 8 55 66 82 -57 -103 -66 EQUALS: Total return from assets 30 99 86 111 -38 -73 -35 LESS: Interest paid 9 11 13 17 23 18 15 PLUS: Real capital gain on debt3 6 10 9 16 13 6 4 EQUALS: Total return from equity 27 99 82 110 -47 -86 -47 Balance sheet (end of period) Assets 751 960 1,088 1,274 1,020 684 684 LESS: Debt 132 159 183 208 206 155 155 EQUALS: Equity 619 801 905 1,065 814 530 530 Percent Rates of return and interest rates Income return on assets 3.0 5.0 1.9 2.4 1.7 3.5 4.1 PLUS: Real capital gain on assets3 1.1 6.4 6.4 6.9 -4.9 -12.3 -9.0 EQUALS: Total return on assets 4.1 11.4 8.3 9.3 -3.2 -8.8 -4.9 Interest paid 6.7 7.2 7.8 8.7 10.8 9.9 9.1 LESS: Real capital gain on debt3 4.3 6.8 5.6 8.3 6.2 3.1 2.3 EQUALS: Real cost of debt 2.4 .4 2.3 .4 4.6 6.8 6.8 Income return on equity 2.2 4.6 .8 1.2 -.3 1.7 2.7 PLUS: Real capital gain on equity 2.2 9.0 8.7 9.8 -4.6 -15.0 -11.0 EQUALS: Total return on equity 4.4 13.6 9.5 11.0 -5.0 -13.3 -8.3 1. Data are for the farm sector excluding farm households (opera- 2. Data are adjusted for general price inflation by the implicit price tors' dwellings, household equipment and furnishings, and all financial deflator for personal consumption expenditures (1986 average = 1.00). assets except cash, checkable bank deposits, and stock in farmers' 3. Real capital gain (loss) on farm assets is the amount by which the cooperatives). Bank deposits are estimated by the author. Outstand- annual increase in total market value of assets is greater (less) than the ing loans from the Commodity Credit Corporation are excluded from sum of net investment and of the change in general purchasing power debt, and a corresponding amount is subtracted from the value of of the total funds tied up in these assets. Real capital gain (loss) on stored crops when computing total assets (proceeds of CCC loans are debt is the decrease (increase) in general purchasing power of the included in gross farm income). Data for 1986 reflect revised prelimi- funds owed. Changes in general purchasing power are measured by nary estimates in Agricultural Outlook, U.S. Department of Agricul- the implicit price deflator for personal consumption expenditures. ture, June 1987, while earlier data are mainly from Economic Indica- SOURCE. Agricultural Finance Databook, Statistical Release E.15, tors of the Farm Sector: National Financial Summary, 1985, U.S. Board of Governors of the Federal Reserve System, June 1987. Department of Agriculture, November 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Turning the Corner on Troubled Farm Debt 525 1. Farm income 2. Farm assets and income from assets Ratio scale, billions of 1986 dollars Ratio scale,_ Ratio scale, billions of 1986 dollars Net income from assets and from operators' work Net income from assets Percent margin income and assets are defined in table 1. ments was required to keep income from falling. In response, land prices began to decline toward a lower multiple of those earnings. Income series are defined in table 1. Profit margin is net income from assets as a percentage of gross income. Land Prices estate. Then income surged and the expectation Most of the rise and subsequent fall in the total spread that food scarcity would persist and push value of farm assets consisted of changes in the commodity prices and farm income ever higher. price of farmland. Chart 3 shows the enormous Farmers responded by further bidding up land changes in the value of farm real estate (excludprices and by increasing their investments in ing operators' dwellings). Measured in 1986 dolmachinery and in land development projects lars, real capital gains on farmland during the such as irrigation facilities and permanent plant- 1970s totaled about $500 billion. Real capital ings. losses during 1980-86 were about $450 billion. Asset values continued to rise during the rest For many years, the real capital gains and of the 1970s, even though, as chart 2 shows, losses experienced by owners of farmland have income from assets fell back toward the pre- overshadowed current income in determining the boom level. Optimistic expectations were total return on farm assets (chart 4). A positive refueled by the income rebound of 1978-79. total return will be restored when land prices Even as late as 1980 and 1981, prominent ana- stop falling, and they will do so when enough lysts and forecasting firms expected steep up- potential buyers, finding that current and proward trends in commodity prices and farm in- jected income returns are more attractive, think come. The realization of these expectations that prices are bottoming. Recent reports on land would have validated, at least temporarily, the prices suggest that this point may be at hand. For high multiple of earnings to which farmland example, surveys of rural banks conducted by five of the Federal Reserve Banks on April 1 prices had by then risen. Instead, on average, an indicated that prices of farmland were relatively expansion of government programs and pay- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

526 Federal Reserve Bulletin • July 1987 3. Real capital gains on farm real estate their individual financial progress—experience that helped to erase more cautious attitudes Billions of 1986 dollars formed in depression years. Initial earnings from land priced to reflect expectations of rising earnings often fell short of servicing the debt incurred to purchase it; however, farmers found that growth in earnings and capital appreciation later rewarded them handsomely for coping with their initial "cash flow problem." During the boom, farmers continued to make about the same relative use of debt; that is, debt rose at roughly the same pace as farm asset values. Farm debt (excluding household debt and commodity price support loans from the federal Commodity Cred- 5. Total real return on farm assets l l l H l f i H I I I H I II 1955 1960 1965 1970 1975 1980 1985 and real cost of farm debt Percent Real capital gain is defined in table 1. stable in major midwestera farming areas during the first quarter of 1987. In the Chicago Federal Reserve District, where bankers were asked about their near-term expectations, most thought that prices of farmland would remain stable in the second quarter. FARM DEBT • iiiatiiBHEBiiiaiiiBiiiBiiiRiiiaiitRnfiiMaiHiiiiainaHia Percentage points For several decades before the boom, farmers Spread had favorable experience with the use of debt to Total real return minus real cost of debt leverage their holdings and thereby accelerate 4. Rates of return on farm assets Percent • • • • • • • • • • • • • • • • • • • • • • • I H B MH 1915 1925 1935 1945 1955 1965 1975 1985 Returns, assets, and debt are defined in table 1. Total return on 1955 1960 1965 1970 1975 1980 1985 assets is the sum of the income return and real capital gain. Real cost of debt is the average interest rate on outstanding farm debt less the Returns and assets are defined in table 1. Total return on assets is general inflation rate as measured by the deflator for personal conthe sum of the income return and real capital gain. sumption expenditures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Turning the Corner on Troubled Farm Debt 527 it Corporation) rose from $53 billion at the begin- The major contribution to this large and swift ning of 1972 to $150 billion at the beginning of decline was the liquidation or restructuring of 1980 and then increased further to a cyclical peak troubled loans, which involved write-offs by approaching $200 billion in the summer of 1984. lenders and the transfer of assets from heavily During the boom, use of debt was highly indebted owners to buyers for cash or, temporarprofitable. As chart 5 indicates, the total real ily, to the lenders. Ironically, another contribureturn on farm assets during the 1970s far ex- tion to the large reduction in debt came from ceeded the real cost of farm debt (interest rate farmers who were not financially stressed but less the general inflation rate). Although the low who instead had liquid assets, such as bank real cost of borrowing during these years was an deposits, on which yields had recently fallen far incentive to increase borrowing, the impetus below the interest rate on their farm debt and came mostly from the increase in profitability of which they now saw fit to use to pay down or owning farm assets. Even a somewhat higher eliminate their debt. Finally, farmers in general real cost of debt probably would not have de- have been paring the amount of debt used to terred substantial additional borrowing, given finance operating expenses and purchases of the extraordinary total real returns on assets machinery and livestock. Such expenses continduring those years. ued to be reduced by factors such as lower fuel prices and cutbacks in crop acreage required by government programs. Cost-consciousness and Reduction of Farm Debt low debt are now prevalent and mutually reinforcing themes among farmers, who are reacting Only 27 months after its peak in September 1984, both to the relatively high real cost of borrowing farm debt had fallen more than 20 percent, to an and to the financial misery they have been witestimated $157 billion at the end of 1986 (table 2). nessing. 2. Change in farm debt outstanding, 1980-86 Percent change during year MEMO: Outstanding, Type of debt and lender1 1980 1981 1982 1983 1984 1985 1986 y 19 e 8 a 6 r - ( e b n i d llions of dollars) Total debt 10 9 4 2 -1 -8 -10 157.3 Banks 2 3 8 9 3 -6 -6 41.3 Farm Credit System 17 16 5 0 -2 -13 -18 45.5 Life insurance companies 6 1 -2 -1 -2 -5 -7 10.2 Farmers Home Administration 21 19 3 1 7 6 -1 23.9 Individuals and others 8 6 2 -1 -6 -11 -10 36.3 Real estate debt 12 11 4 3 -1 -5 -8 89.4 Banks 0 -2 1 11 10 12 12 11.7 Federal Land Banks 21 21 9 2 1 -9 -16 35.0 Life insurance companies 6 1 -2 -1 -2 -5 -7 10.2 Farmers Home Administration 9 13 4 4 6 4 -1 9.5 Individuals and others 8 5 1 1 -7 -9 -8 23.1 Non-real-estate debt 8 8 4 1 -1 -11 -12 67.8 Banks 2 4 10 8 1 -10 -12 29.6 Production credit associations2 9 8 -3 -6 -7 -23 -24 10.6 Farmers Home Administration 31 23 2 -1 7 7 -2 14.4 Individuals and others 7 6 4 -3 -5 -15 -12 13.2 1. Loans from the Commodity Credit Corporation are excluded. cultural credit corporations and similar "other financing institutions," See table 1, note 1. which totaled $275 million on December 31, 1986. 2. Includes loans from Federal Intermediate Credit Banks to agri- SOURCE. Agricultural Finance Databook, June 1987. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

528 Federal Reserve Bulletin • July 1987 Farm Financial Stress operators were indebted to this extent, and they owed nearly two-thirds of total farm debt. These At the end of the 1970s, a majority of farmers and farmers began to take actions to ease their debt farm landlords were not heavily indebted (chart burden; however, their ability to extricate them- 6). The farmers with little or no debt were not selves from their predicament was drastically affected directly by the large rise in interest rates reduced when prices of land and machinery that ensued. Although the drop in land prices began to fall sharply. The drop in asset values eliminated much of the increase in net worth exhausted the equity of many of the more heavily these farmers had enjoyed during the boom, their indebted farmers, and, as it continued, lenders net income on average did not drop, and they could not recover the full amount of the funds were not financially threatened. loaned to those farmers. Farmers who had relatively heavy debt at the start of the 1980s—a position that, in general, Experience of Farm Lenders resulted from relatively large recent investments in land or machinery—fared much differently. Information on the delinquent loans and loan First, their interest rates rose—rapidly, to very losses of farm lenders varies greatly. Little is high levels, on short-term debt and more slowly known, for example, about the experience of one on long-term debt with variable rates. Therefore, of the more important groups—individuals who debt service began to absorb much more of their themselves provided financing when they sold income than they had expected when they in- their farms. Anecdotes and press accounts indicurred the debts. As interest rates rose far above cate that many of the borrowers either have the average income return on assets, surveys defaulted and returned the collateral to the sellindicated, farmers with debt-asset ratios above ers or have forced renegotiation of the sale price 40 percent were likely to be financially stressed. or terms as an alternative to default. More au- On commercial-size farms, about one-third of the thoritative data are available for non-real-estate loans at commercial banks; reporting of delinquencies on such loans started in December 6. Farm assets and debt 1982, and reporting of charge-offs started in 1984. Recently, detailed information on the past and Ratio scale, billions of 1986 dollars expected experience of the Farm Credit System has also become available. Delinquent Loans. As financially stressed farmers started to miss loan payments, farm loan delinquencies began to rise from the very low level of the boom years. The Farmers Home Administration (FmHA) was the first of the major farm lenders to encounter a large increase in delinquent loans; that increase occurred primarily among the "emergency" loans it had made to farmers with drought or flood losses and among the "economic emergency" loans of 1978-82 (table 3). Delinquencies of FmHA loans also reached their highest level much earlier than at other lenders. As of September 1986, about $12 billion, or 43 percent, of FmHA farm loans were delinquent, a level essentially unchanged since 1983. At the other reporting lenders, delinquent farm Assets and debt are defined in table 1. loans continued to rise until 1986. As described Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Turning the Corner on Troubled Farm Debt 529 below, such delinquencies at commercial banks 7. Delinquency rates on non-real-estate farm loans at likely reached a cyclical peak in March 1986. insured commercial banks Similarly, the cyclical peak among life insurance Percent companies probably occurred in mid-1986: delinquent loans fell 18 percent in the second half of that year, after having risen almost steadily since 1979. Several companies have noted that the incidence of new delinquencies declined markedly during the second half of 1986. At the Farm Credit System, nonaccrual loans were at a high of $8 billion in September 1986 and subsequently declined to less than $7 billion in March 1987. The proportion of farm loans in nonaccrual status at small commercial banks had risen End-of-quarter data. Delinquent loans are defined in table 4. steadily each quarter from 0.3 percent in December 1982 to 5.7 percent in March 1986. During the rest of 1986, these nonaccrual loans declined in more meaningful indicator of the trend in the each quarter, down to 4.6 percent at the end of magnitude of the problem posed by these loans. the year. At all banks, delinquency rates have At commercial banks, past-due and nonaccrual dropped considerably since March 1986, and the loans at the end of 1986 totaled $2.9 billion, not rates at the end of 1986 were below those of a only down sharply from $3.6 billion a year earlier year earlier (chart 7). Because the volume of but also somewhat below the total delinquencies outstanding loans has been dropping sharply two years earlier (table 4). during the past two years, however, the dollar amount of delinquent loans has actually dropped Charge-ojfs of Farm Loans. As delinquencies more significantly than is revealed by the decline increased, loan losses at lenders began to rise in the delinquency rates. And, in these circum- also. Data on charge-offs of farm loans are availstances, the drops in the dollar amounts are the able only for banks, the Farm Credit System, and 3. Delinquent farm loans, December 31, 1980-86 Lender 1980 1981 1982 1983 1984 1985 1986 Billions of dollars BBBBaaaannnnkkkkssss''''2222 n.a. n.a. .9 1.5 2.1 2.6 2.2 FFFFaaaarrrrmmmm CCCCrrrreeeeddddiiiitttt SSSSyyyysssstttteeeemmmm3333 .3 .4 .7 1.3 2.1 5.3 7.1 LLLLiiiiffffeeee iiiinnnnssssuuuurrrraaaannnncccceeee ccccoooommmmppppaaaannnniiiieeeessss'''' **** .3 .5 .8 1.1 1.2 1.8 1.9 FFFFaaaarrrrmmmmeeeerrrrssss HHHHoooommmmeeee AAAAddddmmmmiiiinnnniiiissssttttrrrraaaattttiiiioooonnnn5555 3.6 5.8 9.5 11.0 12.1 11.9 12.1 Percentage of outstanding loans BBBBaaaannnnkkkkssss''''2222 n.a. n.a. 2.5 3.8 5.2 7.3 7.0 FFFFaaaarrrrmmmm CCCCrrrreeeeddddiiiitttt SSSSyyyysssstttteeeemmmm'''' .5 .5 1.1 1.8 3.3 8.7 14.4 LLLLiiiiffffeeee iiiinnnnssssuuuurrrraaaannnncccceeee ccccoooommmmppppaaaannnniiiieeeessss1111----4444 2.0 3.7 6.4 8.3 9.6 15.1 17.0 FFFFaaaarrrrmmmmeeeerrrrssss HHHHoooommmmeeee AAAAddddmmmmiiiinnnniiiissssttttrrrraaaattttiiiioooonnnn5555 18.2 24.1 37.9 43.9 45.9 41.5 42.9 1. Delinquencies were reported by institutions holding the most than the smaller amount of delinquent payments that is often reported farm loans in this lender group. Data shown are estimates obtained by as FmHA "delinquencies." assuming that the remaining institutions in the group experienced the n.a. Not available. same delinquency rate. SOURCE. Data for commercial banks are from their year-end reports 2. Farm non-real-estate loans past due 90 days or more or in of condition; for the Farm Credit System, from Farm Credit System nonaccrual status. Annual Information Statement—1986, Federal Farm Credit Banks 3. Nonaccrual loans. The Farm Credit System also reports "other Funding Corporation, March 6, 1987, and, for years before 1985, from high-risk loans," but not all such loans are delinquent. Farm Credit Administration Financial Forecast of the Farm Credit 4. Loans with interest in arrears more than 90 days. System, Appendix B, Farm Credit Administration, May 1987; for life 5. Past due 15 days or more. Data shown are for September 30; thus insurance companies, from Investment Bulletin, American Council of they avoid the year-end seasonal peak in very short term delinquen- Life Insurance, March 20, 1987; and for the Farmers Home Adminiscies and are more comparable with those shown for other lenders. The tration, from Report 616, selected issues. data shown reflect the total outstanding amount of these loans, rather Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

530 Federal Reserve Bulletin • July 1987 4. Delinquent non-real-estate farm loans at insured many of which have been delinquent for several commercial banks, December 31, 1982-86 years. As a government agency, the FmHA can Billions of dollars exercise such forbearance toward borrowers, but the public then bears the cost of the forgone Class of delinquent loan1 1982 1983 1984 1985 1986 interest and any increase in the eventual loss that results from extended delinquency. Past due 30 to 89 days and still accruing . .9 1.0 1.0 1.0 .8 A crude estimate of total charge-offs of all farm Nonperforming .9 1.5 2.1 2.6 2.2 Past due 90 days or loans in 1986 can be obtained by assuming that more and still accruing .4 .4 .4 .4 .3 all private farm lenders had the same relative Nonaccrual .5 1.1 1.6 2.2 1.9 charge-off experience as commercial banks and Total 1.9 2.5 3.1 3.6 2.9 the Farm Credit System, whose loans that year MEMO: Restructured represented about 56 percent of all private farm loans in loans. As shown in table 5, charge-offs at the compliance with modified terms2... * .1 .1 .2 .4 banks and Farm Credit System totaled $2.6 billion in 1986; therefore, on all farm debt other 1. For nonaccrual loans, banks can record interest as income only when it is actually received; for other loans, banks record interest as it than FmHA loans, charge-offs may have totaled is earned. Thus, a loan can be past due and still accruing interest. about $4.6 billion. With the FmHA included, Loans are in nonaccrual status if (1) they are maintained on a cash basis because of deterioration in the financial position of the borrow- charge-offs of farm loans in 1986 may have er, (2) payment in full of interest or principal is not expected, or (3) totaled about $5 billion. Thus, charge-offs alone principal or interest has been in default for a period of 90 days or more unless the obligation is both well secured and in the process of probably accounted for more than one-fourth of collection. the $18 billion reduction in total farm debt during 2. For 1982-85, data shown are renegotiated "troubled" debt. 1986. Moreover, the $5 billion in charge-offs may * Less than $50 million. have involved perhaps $15 billion in loans being liquidated or restructured, if one assumes a rethe Farmers Home Administration (table 5). In covery rate in the range often mentioned by farm 1984, when commercial banks were first asked to lenders. Another portion of such debt came off report such losses, they reported charging off the books as ownership of the collateral passed nearly $1 billion, more than double the chargeto the lenders or to less-indebted farmers. offs of the Farm Credit System that year. Annual bank charge-offs probably peaked in 1985, however, whereas charge-offs at the Farm Credit Currently Troubled Debt System were at a high in 1986 and may go slightly and Potential Losses higher in 1987. At the Farmers Home Administration, charge-offs have been very low in rela- In January 1984, the U.S. Department of Agrition to the huge amount of delinquent loans, culture began a program to collect extensive 5. Annual net charge-offs of farm loans, 1980-86 Lender 1980 1981 1982 1983 1984 1985 1986 Billions of dollars BBBBaaaannnnkkkkssss1111 n.a. n.a. n.a. n.a. .9 1.3 1.2 FFFFaaaarrrrmmmm CCCCrrrreeeeddddiiiitttt SSSSyyyysssstttteeeemmmm2222 .1 .2 .3 .4 1.1 1.4 FFFFaaaarrrrmmmmeeeerrrrssss HHHHoooommmmeeee AAAAddddmmmmiiiinnnniiiissssttttrrrraaaattttiiiioooonnnn * * * .1 .1 .3 .4 Percentage of loans outstanding at start of year BBBBaaaannnnkkkkssss1111 n.a. n.a. n.a. n.a. 2.3 3.3 3.4 FFFFaaaarrrrmmmm CCCCrrrreeeeddddiiiitttt SSSSyyyysssstttteeeemmmm2222 .1 .1 .3 .4 .6 1.6 2.5 FFFFaaaarrrrmmmmeeeerrrrssss HHHHoooommmmeeee AAAAddddmmmmiiiinnnniiiissssttttrrrraaaattttiiiioooonnnn .1 .1 .1 .3 .5 1.0 1.6 1. Non-real-estate loans only. SOURCE. Data for commercial banks are from their year-end reports 2. Includes a relatively small amount of charge-offs at the Banks for of condition; for the Farm Credit System, from Farm Credit System Cooperatives. Annual Information Statement—1986 and, for years before 1985, from n.a. Not available. Farm Credit Administration Financial Forecast; and for the Farmers * Less than $50 million. Home Administration, from the public information office. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Turning the Corner on Troubled Farm Debt 531 financial data from a large national sample of estimate of its total problem loans and a forecast farmers at the beginning of each year. The latest of its charge-offs. Subtracting estimated 1986 available survey, for January 1986, shows that charge-offs of $5 billion among all lenders and operators of 670,000 commercial-size farms cov- $1.4 billion at the Farm Credit System leaves ered by the survey reported total farm business estimated post-1986 losses of $11 billion among debt of $94 billion, excluding loans from the all lenders and $2.6 billion at the Farm Credit Commodity Credit Corporation (CCC). From System. other financial data also reported, analysts at the In another study of the survey data, analysts at Department of Agriculture estimated that prob- the Department of Agriculture used three differlem debt accounted for $30.5 billion of this ent approaches to estimate the proportion of amount and that eventual lender losses might be troubled debt at each farm lender group. Calcu- $8.1 billion. One can extend these results to the lating the average of these proportions for each total farm debt of $188 billion outstanding at the group and applying it to that group's farm loans beginning of 1986 (including household debt but puts problem debt at $52 billion as of January excluding CCC loans) by assuming that the rest 1986. If recoveries on such problem loans averof the debt owed to each lender group was age two-thirds, post-1985 losses would be $17 troubled to the same extent as the debt surveyed. billion. The Farm Credit System has $15 billion This rough procedure yields a total problem debt of the estimated problem debt and $5.1 billion of of $60 billion and puts lender losses after 1985 at the losses. Subtracting 1986 charge-offs, this $16 billion. Of these amounts, the Farm Credit approach puts losses after 1986 at $12 billion for System would have a post-1985 loss of $4 billion all lenders and $3.7 billion for the Farm Credit on problem debt of $17 billion. Results for the System. Farm Credit System are of special interest be- These two estimates do not differ greatly. The cause it is the only lender that has published an second estimate of post-1986 charge-offs at the 6. Loan-loss experience and forecasts of the Farm Credit System, 1980-94' Billions of dollars Allowance PLUS: EQUALS: MEMO: for losses, LESS: Annual Allowance Nonaccrual Year Net beginning provision for losses, loans, end charge-offs of year for losses end of year of year 1980 1.1 * .2 1.2 .3 1981 1.2 .1 .2 1.4 .4 1982 1.4 .2 .2 1.4 .7 1983 1.4 .3 .2 1.4 1.3 1984 1.4 .4 .3 1.3 2.1 1985 1.3 1.1 3.0 3.2 5.3 1986 3.2 1.4 1.8 3.6 7.1 Projection made by Farm Credit System 1987 3.6 1.6 .8 2.8 6.2 1988 2.8 1.2 .5 2.0 4.4 1989 2.0 .7 .3 1.7 2.6 Forecast made by Farm Credit Administration 1987 3.6 1.4 .9 3.0 5.6 1988 3.0 .8 .5 2.7 3.8 1989 2.7 .6 .3 2.4 2.3 1990 2.4 .4 .2 2.2 1.6 1991 2.2 .3 .2 2.1 1.1 1992 2.1 .2 .2 2.0 .8 2.0 .2 .2 2.0 .6 1994 2.0 .2 .2 2.0 .6 1. The allowance for loan losses is an asset item that has been SOURCE. Experience in 1985-86 is from Farm Credit System Annual accumulated through earlier annual provisions for loan losses (which Information Statement—1986, and experience in 1980-84 is from are annual expense items). During each year, the allowance is Farm Credit Administration Financial Forecast. The forecast shown depleted by charge-offs of uncollectible loans and is replenished by for the Farm Credit Administration is the "most likely scenario" in further provision for losses. Appendix C of that publication. The projection made by the Farm * Less than $50 million. Credit System is from Summary of Combined Financial Projections, 1987-1989, Farm Credit Corporation of America, May 1987. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

532 Federal Reserve Bulletin • July 1987 Farm Credit System is very close to the system's their portfolios was above the unweighted mean own forecast made this spring and to that of its of such ratios at all banks (15.7 percent). In the regulator, the Farm Credit Administration. The aggregate, farm loans averaged 2.9 percent of Farm Credit System projected charge-offs total- total loans at all banks and 35 percent at the 4,700 ing $3.5 billion during 1987-89, at the end of agricultural banks. This concentration in farm which period nonaccrual loans would have lending ties the fortune of the typical agricultural dropped to $2.6 billion (table 6). Its regulator, the bank closely to that of farmers. But in this Farm Credit Administration, forecast the charge- decade of great variation in the financial experioffs at $4.1 billion for 1987-94, after which time ence of individual farmers, the condition of their nonaccrual loans would be well under $1 billion banks also has exhibited striking variability. and the boom-bust episode would be over. Most Analyses must consider the range as well as the or all of the projected charge-offs have already average of bank experiences and conditions. been provided for in the loan-loss allowance of the Farm Credit System, which stood at $3.6 billion at the end of 1986. (In addition to these Loan Problems future charge-offs of loans, which it has anticipated and expensed through loan-loss provisions Loan delinquencies and losses have been at the made in 1985 and 1986, the Farm Credit System heart of problems encountered by agricultural is experiencing unique problems beyond the banks during the past few years. Differences in scope of this article, including operating losses as the magnitude of loan problems account for a result of the relatively high interest rates on its much of the variation in income among those own old borrowings and difficulties in implebanks; in general, banks that have avoided signifmenting loss-sharing arrangements among its icant loan problems have continued to thrive. many entities.) Thus, factors such as the deregulation of interest The projections for the Farm Credit System rates or of banking structure appear to have had indicate that, aside from the Farmers Home relatively little effect so far on the performance Administration, the current pace of debt restruc- of agricultural banks. turing and liquidation will work out most of the When, in early 1986, national average delinfarm sector's troubled debt within the next few quency rates on farm loans at banks peaked, so years. did average delinquency rates on all loans at agricultural banks (chart 8). The level of delinquencies of total loans has remained below that AGRICULTURAL BANKS of farm loans at those banks during recent years, indicating that even the limited diversification of The experience of agricultural banks—commer- their loans has been advantageous. Although the cial banks with relatively heavy involvement in proportion of loans past due or nonperforming farm lending—mirrored financial developments rose seasonally to a new peak above 8 percent in in the farm economy. Before 1986, most mea- March 1986, it dropped to 6.4 percent by the end sures of performance and condition at such of the year, well below its level of 6.9 percent a banks had been steadily deteriorating; during the year earlier. Where seasonality is minor, as in year, virtually all of these indicators either the proportion of nonaccrual loans, the reversal stopped falling or reversed course. The amount in trend is more evident. Between December of delinquent loans began to drop last spring, and 1982, when these data were first collected, and in turn charge-offs declined toward year-end. last summer, the percentage of loans in nonac- The downward spiral in profitability thus slowed, crual status rose in each quarter; since then, the halting the drift toward a more vulnerable finan- percentage has been falling. cial condition. The decline in the share of nonaccrual loans At the end of 1986, about one-third of all banks did not derive from an acceleration of charge-offs could be regarded as "agricultural banks" in that by banks. By the fourth quarter of 1986, the the ratio of farm loans to total loans in each of charge-off rate was below its level of a year Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Turning the Corner on Troubled Farm Debt 533 8. Delinquency rates on loans at agricultural banks stered by capital gains on investments (equal to 0.2 percent of assets), leaving net income before provision for loan losses roughly unchanged from that of recent years. The provision for loan losses declined slightly in 1986 after rising sharply since 1980. Thus, the pronounced decline in net income, which had resulted mainly from the need to cover greater loan losses, was nearly halted last year. End-of-quarter data. Delinquent loans are defined in table 4. In spite of declining net income, agricultural Agricultural banks are defined in table 7, note 1. banks as a group continued to pay dividends to earlier, the first such decline since 1982. For the their stockholders at the advanced level first year as a whole, net charge-offs of loans at reached in 1981—about double the relative level agricultural banks averaged 2.2 percent of total of dividend payouts in the mid-1970s—and did so loans outstanding at year-end, only slightly again last year. As a result, retained earnings above the rate of 2.1 percent in 1985. provided only small additions to capital in 1985 and 1986. Profitability Role of Interest Rates. The reduced interest margin at agricultural banks in 1986 may surprise With loan charge-offs leveling out and delinquen- observers who have noted—along with borrowcies falling, the long uptrend in the average ers—that farm loan interest rates at those banks annual provision for loan losses made by agricul- have declined more slowly than the prime rate tural banks ended in 1986. Consequently, the has since 1981. Since mid-1982, the average income statement for agricultural banks as a interest rate on farm loans at smaller banks has group last year resembled that of 1985 in most been noticeably higher than either the national respects (table 7). The net interest margin de- prime rate on business loans or the average rate clined somewhat in 1986 as interest income on farm loans at larger banks (chart 9). In recent dropped more than interest expense (all data are years, however, interest income at agricultural expressed and discussed as a percentage of total banks has dropped more rapidly than interest assets). However, noninterest income was bol- expense has (table 7). Factors underlying that 7. Income, expenses, and profits of agricultural banks, 1978-86' Percentage of total assets at year-end Item 1978 1979 1980 1981 1982 1983 1984 1985 1986 Interest income 7.0 7.8 9.3 11.0 11.4 10.3 10.6 10.0 9.0 LESS: Interest expense 3.6 4.1 5.3 7.1 7.5 6.5 6.9 6.2 5.4 EQUALS: Net interest margin . 3.5 3.7 4.0 4.0 3.9 3.8 3.7 3.8 3.6 PLUS: Noninterest income2 .4 .4 .4 .5 .5 .5 .5 .5 .7 LESS: Noninterest expense, excluding loan losses 2.3 2.3 2.4 2.5 2.6 2.6 2.6 2.7 2.7 EQUALS: Net income before loan losses 1.6 1.8 2.0 1.9 1.8 1.7 1.6 1.7 1.6 LESS: Provision for loan losses .2 .2 .2 .3 .4 .6 .8 1.2 1.1 EQUALS: Net income before taxes 1.4 . 1.5 1.7 1.6 1.4 1.1 .8 .6 .5 LESS: Income taxes .3 .3 .4 .4 .3 .2 .1 .0 .1 EQUALS: Net income 1.1 1.2 1.3 1.2 1.1 1.0 .7 .5 .4 LESS: Cash dividends .3 .3 .3 .4 .4 .4 .4 .4 .4 EQUALS: Retained earnings ,.. .8 .9 .9 .8 .7 .6 .3 .1 .1 1. For banks in operation at the end of the year. Agricultural banks on the date specified (15.7 percent at the end of 1986). are insured commercial banks at which the ratio of total farm loans to 2. Includes capital gain or loss on investments, total loans is above the unweighted average of such ratios at all banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

534 Federal Reserve Bulletin • July 1987 9. Average effective interest rates on non-real-estate return on equity of the group hovered between 14 farm loans made by commercial banks and 16 percent. After 1980, as loan losses began Percent their climb, the proportion of agricultural banks reporting negative earnings rose as well, reaching 20 percent in 1986 (table 8). The average return on equity fell from 16 percent in 1980 to 5 percent last year. The return on equity at agricultural banks in 1986 varied inversely with provisions for loan losses. Two-fifths of all agricultural banks earned 10 percent or more on equity last year, but nearly two-thirds of agricultural banks making low provision for losses (under 1 percent of loan volume) In recent quarters, most "large banks" had total assets of $600 were this profitable. The distribution of the latter million or more. Farm loan rate is an estimate of the effective rate on banks by return on equity in 1986 (table 9, first loans made in the first full week of the second month of each quarter. Prime rate shown is the average effective national prime rate at large column) resembles that of all agricultural banks banks during the week for which the farm loan rate is estimated, in earlier years of low loan losses (table 8). assuming a loan maturity of six months. SOURCE. Current data on farm loan rates are in "Survey of Terms of Bank Lending," Statistical Release E.2, and historical series are in Agricultural Finance Databook, Statistical Release E.15, both published by Board of Governors of the Federal Reserve System. Variability of Problem-Loan Levels experience include the increase in nonperform- Variability in the relative level of loan losses in ing loans, a fall in the loan-deposit ratio resulting turn reflects the uneven distribution of loan from a reduction in loan demand from creditwor- delinquencies among agricultural banks. A mathy borrowers, and a lag in the response of jority of agricultural banks have a relatively low interest expense to the fall in current interest level of problem loans, while a small proportion rates as longer-term certificates of deposit re- of those banks have very high levels that are main outstanding at the old rates. pulling up the average (table 10). At the end of 1986, more than three-fifths of the banks had a Variability of Profits. During the 1970s, when proportion of nonperforming loans below the loan losses at agricultural banks were very low, agricultural-bank average of 4 percent. At twoonly 1 percent of those banks reported negative fifths of the banks, nonperforming loans were earnings in any given year, and the average less than 2 percent of total loans. 8. Distribution of agricultural banks, by return on equity, 1978-86 Percent Net income as a percentage of average equity at bank1 1978 1979 1980 1981 1982 1983 1984 1985 1986 Negative income 1 1 1 2 4 7 13 18 20 0 to 4 3 2 2 3 5 7 9 11 14 5 to 9 14 8 9 12 15 18 23 22 27 10 to 14 46 36 33 33 33 36 36 33 28 15 to 19 28 38 35 32 28 24 15 13 9 20 to 24 6 12 14 13 11 7 3 3 2 25 or more 1 3 5 6 4 2 1 1 1 Total 100 100 100 100 100 100 100 100 100 MEMO Average return on equity 14 15 16 15 14 11 8 6 5 Net charge-offs as a percentage of total loans .2 .2 .3 .4 .7 .9 1.2 2.1 2.2 Average capital ratio, December 312 8.9 9.0 9.2 9.2 9.3 9.4 9.5 9.6 9.5 1. Net income after taxes as a percentage of the average of equity at 2. Total primary and secondary capital (items available in bank the beginning and end of the year. reports as of the date specified) as a percentage of total assets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Turning the Corner on Troubled Farm Debt 535 9. Distribution of agricultural banks, by return on equity and loan-loss provision class, 1986 Percent Provision for loan losses as a percentage of total loans MMEEMMOO:: NN oo ee ff tt aa ii vv nn ee cc rr oo aa mm ggee ee ee aa qq ss uu aa ii ttyy pp ee aa rr tt cc ee bb nn aa tt nn aa kk gg 11 ee Less than 1.0 to 2.5 to 5.0 to 7.5 or bbaa AA nn ll kk ll ss 1.0 2.4 4.9 7.4 more Negative income 2 6 30 72 92 20 0 to 4 6 15 27 17 5 14 5 to 9 26 36 27 9 2 27 10 to 14 43 32 13 2 * 28 15 to 19 17 8 1 » * 9 20 to 24 4 1 1 * 0 2 25 or more 1 1 0 0 0 1 Total 100 100 100 100 100 100 MEMO: Number of banks 1,656 1,511 876 322 331 4,6% 1. See table 8, note 1. * Less than 0.5 percent. Furthermore, as table 10 shows, during 1986 the ultimate outcome depends on what proporthe distribution of agricultural banks shifted to- tion of the nonperforming loans can be collected. ward the low end of the delinquency-rate scale. Before 1986, agricultural banks had been moving This shift suggests that the decline last year in into more vulnerable positions, according to this the proportion of nonperforming loans was wide- ratio (table 11). For the most part, further deterispread among agricultural banks, rather than oration was avoided in 1986. merely a result of, say, the failure of banks and The level of delinquent loans at most agriculthe assumption of such loans by the Federal tural banks does not pose a threat of failure. At Deposit Insurance Corporation. nearly three-fourths of agricultural banks, nonperforming loans were less than 25 percent of total capital at the end of 1986. Banks at which Vulnerable Banks nonperforming loans exceed total capital are here called vulnerable banks because many of In recent years, a large majority of the banks that the banks that failed in recent years were in this failed had earlier reported a relatively high level position. At the end of 1986, only 152, or 3.2 of delinquent loans. The ratio of nonperforming loans to total capital is a particularly appropriate 11. Distribution of agricultural banks, by indicator of vulnerability, although, of course, nonperforming ioans as a percentage of total capital, December 31, 1982-86 Percent 10. Distribution of agricultural banks, by nonperforming loans as a percentage of total Nonperforming loans, December 31, 1982-86 loans as a 1982 1983 1984 1985 1986 percentage of total Percent capital of bank1 Nonperforming Less than 25 85.6 82.2 75.3 70.2 72.3 loans as a 25 to 49 11.2 13.0 16.3 18.7 16.6 1982 1983 1984 1985 1986 percentage of total 50 to 74 2.2 3.0 4.6 5.6 5.4 loans at bank1 75 to 99 .7 1.0 1.9 2.6 2.3 100 to 124 .3 .3 .9 1.1 1.1 Less than 2.0 58.7 52.8 44.7 36.4 39.6 125 to 149 * .2 .3 .6 .5 2.0 to 4.9 29.5 31.9 33.4 33.1 32.2 150 to 174 » .1 .2 .3 .3 5.0 to 9.9 10.0 12.3 16.4 21.6 19.8 175 to 199 .1 * .1 .2 .3 10.0 to 14.9 1.4 2.3 3.9 5.6 5.5 200 or more2 .1 .2 .3 .6 1.1 15.0 to 19.9 .3 .6 1.1 2.1 1.9 Total 100 100 100 100 100 20 or more .1 .2 .5 1.2 1.0 Total 100 100 100 100 100 MEMO: Average percentage of MEMO: Average nonperforming percentage of loans 13.0 15.1 18.9 21.7 19.6 nonperforming loans 2.4 2.7 3.4 4.2 4.0 1. Nonperforming loans are defined in table 4. 2. Includes banks with negative capital. 1. Nonperforming loans are defined in table 4. * Less than 0.05 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

536 Federal Reserve Bulletin • July 1987 10. Vulnerable banks and bank failures continued decline in the number of such vulnerable agricultural banks foreshadows a downturn in Number of banks the number of failures. VULNERABLE BANKS With the number of vulnerable agricultural 400 • Nonagricuitural banks banks up only slightly during 1986 and with • Agricultural banks delinquencies among nonfarm loans rising, agricultural banks have become a less important component of all vulnerable banks. By the end of 200 the year, agricultural banks constituted only twofifths of all vulnerable banks, compared with a peak share of three-fifths in March 1985. The agricultural-bank share of the total loans at vul- BANK FAILURES nerable banks, which had peaked at 39 percent in March 1985, declined to 12 percent by December 1986. From a slightly different point of view, the farm-loan share of total loans at vulnerable banks I fell to 6 percent, compared with 15 percent a year earlier and a peak proportion of 19 percent in March 1985. I i l l. I m In short, severe financial difficulties at some agricultural banks have derived primarily from 1983 1984 1985 1986 the legacy of problem loans left by the farm Vulnerable banks are counted at the end of the quarter and are boom. With farm asset values completing their defined as having nonperforming loans greater than total capital. Bank failures are counted for the whole quarter. adjustment to post-boom conditions, restructurings and liquidations are exceeding additions to percent, of the agricultural banks were vulnera- the number of problem loans. The improvement ble, down from a peak of about 200 banks in the in loan portfolios in turn has stemmed the deterispring of that year and only slightly above the oration in the condition of the agricultural year-earlier level of 141 banks (chart 10). A banks. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

537 The Profitability of U.S.-Chartered Insured Commercial Banks in 1986 Deborah J. Danker and Mary M. McLaughlin of ing, have persisted as the economic expansion has the Board's Division of Research and Statistics continued. In many cases, these losses have reprepared this article. Rachel Valcour and Linda flected broad economic strains associated with Rosenberg provided research assistance. disinflation and with the deterioration in the nation's trade performance; but in some of the most Asset-quality problems continued to dog Un- severe cases, the losses have reflected the spechartered commercial banks in 1986. Escalating cial problems of such troubled sectors as energy loan losses cut into profits, as the banking indus- and agriculture. In 1986, the depressed level of try's return on assets dropped to 0.64 percent world oil prices caused pronounced dislocations and its return on equity fell to 10.23 percent. As and economic distress in energy-producing areas shown in chart 1, last year's decline in these of the country, and these conditions were reflectprofit measures, which reflect banks' foreign and ed in the poor performance of banks in those domestic operations on a fully consolidated ba- areas. Farm banks' profits also were under pressis, extended the downtrend—interrupted only in sure last year, although the deterioration was 1985—that has been evident since 1980. In 1985, slight compared with that in the previous few lower market interest rates had contributed to a years. For the first time in six years, the average wider net interest margin and had allowed banks profitability of farm banks eroded at a rate no to realize substantial capital gains by selling faster than that of the rest of the banking indusinvestment-account securities. The wider margin try. and the capital gains in turn offset the continuing In many areas of the country, by contrast, drag on earnings from growing loan losses. De- economic conditions in 1986 were favorable, and spite a further drop in rates last year, the indus- banks did relatively well. In the Northeast, comtry's interest margin returned to its 1984 level, mercial bank profitability climbed and was well and an additional hike in securities gains proved above its 1980 level. The lower level of interest insufficient to prevent a renewed erosion of rates, which allowed banks to realize substantial profitability (see table 1). gains by selling securities, also left banks with Problems in credit quality during the 1980s have unrealized capital gains in their investment acnot been unique to commercial banks. A variety of counts, which at the end of the year amounted to lenders have suffered losses that, rather than abat- nearly four times those realized gains. Bank balance sheets were further strengthened by additions to loss reserves and capital, which boost- 1. Net income after taxes ed the industry's primary capital to 7.57 percent of assets. As a result, banks were in a better position to meet the continuing challenges of the 1980s, including, importantly, the threat to overall asset quality from the debt of developing countries. TRENDS IN PROFITABILITY AND CAPITAL The decline in profitability last year was accompanied by an increase in the dispersion of bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

538 Federal Reserve Bulletin • July 1987 1. Income and expense as a percentage of average net assets, all insured commercial banks, 1981-8612 Item 1981 1982 1983 1984 1985 19863 Gross interest income 11.93 11.36 9.63 10.23 9.44 8.38 Gross interest expense 8.77 8.07 6.38 6.97 6.06 5.10 Net interest margin 3.17 3.28 3.25 3.26 3.38 3.28 Noninterest income .90 .96 1.03 1.19 1.32 1.40 Loss provision .26 .40 .47 .57 .67 .77 Other noninterest expense 2.77 2.93 2.96 3.05 3.19 3.22 Securities gains (losses) -.08 -.06 .00 -.01 .06 .14 Income before tax .96 .85 .85 .83 .90 .82 Taxes4 .20 .14 .18 .19 .21 .19 Extraordinary items .00 .00 .00 .01 .01 .01 Net income .76 .71 .67 .64 .70 .64 Cash dividends declared .30 .31 .33 .32 .33 .33 Net retained earnings .46 .40 .34 .33 .37 .31 MEMO Net interest margin, taxable equivalent5 3.53 3.66 3.60 3.73 3.77 3.68 1. Before 1984, data are based on averages for call dates in and expense figures presented in this article apparently are biased December of the preceding year and in June and December of the downward slightly. In the case of interest income and interest expense current year. In 1984, data are based on averages for call dates at the as a share of assets, we have estimated this bias to be roughly 10 basis beginning and end of the year only. After 1984, data are based on points. Over the income statement as a whole, the omitted data appear averages of the call date in December of the preceding year and all to be just offsetting and would not affect the net income figure. four call dates in the current year. 4. Includes all taxes estimated to be due on income, extraordinary 2. Assets are fully consolidated and net of loss reserves. gains, and securities gains. 3. Some of the income and expense items in this table appear to be 5. For each bank with profits before tax greater than zero, income understated a bit in 1986 because of the increased importance of from state and local obligations was increased by [//(l—/)] times the merger activity within the banking industry last year. In the most lesser of profits before tax or interest earned on state and local common type of merger, the income statement for the consolidated obligations (r is the marginal federal income tax rate). This adjustment bank at the end of the year would not include the income and expenses approximates the equivalent pretax return on state and local obligaof the acquired bank in the period before the merger. Thus the income tions. earnings. Chart 2 illustrates this growing disper- Most of the banks experiencing large losses sion in the widening gap between those banks last year were in the southwestern and plains with relatively high net incomes and those with states; two-thirds of the banks posting losses in relatively low net incomes. As may be seen by excess of 2.5 percent of assets were located in the 95th percentile line in that chart, many banks the Kansas City or Dallas Federal Reserve Discontinued to do well in 1986: 5 percent of all tricts. Similarly, two-thirds of the 136 U.S. banks earned returns on assets in excess of 1.8 commercial banks that failed in 1986 were headpercent. However, the banks that did poorly did quartered in these two Districts. The poor pervery poorly: the bottom 5 percent of commercial formance of commercial banks in these Districts banks posted losses equivalent to at least 2.5 is evident in chart 3. The worst case was the percent of assets. Calculating the standard devi- Dallas region, which recorded an overall net loss ation of bank returns on assets confirms the for the year. This net loss highlights the current increase in dispersion: the standard deviation difficulties of banks heavily involved in energymore than doubled between 1980 and 1986. related lending and, compared with the figure for 1980, illustrates the sharp reversals suffered in both energy and agricultural lending. 2. Dispersion of bank earnings When the industry is disaggregated by size of Return on assets, percent bank rather than by location or lending specialty, small and medium banks appear to have been the predominant sources of the decline in overall profitability last year. Moreover, these two groups of banks, which together account for onethird of bank assets, have been primarily responsible for the cumulative drop in the industry's profitability since 1980. The average return on assets at banks with under $100 million in assets has fallen by more than one-half, and medium Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of U.S.-Chartered Insured Commercial Banks in 1986 539 3. Return on assets, by Federal Reserve District Percent banks (those with assets of $100 million to $1 turn on equity edged lower. Additions to equity billion) have posted a drop of more than one- also were apparent in the decline last year in the quarter. As a result, the average return on assets average return on equity at other banks with at small banks, which had been well above the assets of at least $1 billion. Nevertheless, at industrywide figure, dropped to the average for 12.61 percent, the return on equity at these banks all banks in 1985 and fell significantly below the remained well in excess of the industrywide figaverage, to 0.53 percent, in 1986 (see table 2). At ure and almost matched the level for this group in medium banks the decline was not so severe, and 1980. The return on assets for these other large the average return on assets for these banks, at banks, while declining marginally last year, re- 0.71 percent, remained above the industry aver- mained significantly above the 1980 level. age—albeit by a reduced margin. Although in recent years mounting loan losses After eroding somewhat from its earlier highs, have affected the profitability of these large the aggregate return on assets at the nation's nine banks nearly as much as they have that of other largest banks held steady from 1985 to 1986, banks, the large banks have managed to overdespite the large loss reported by Bank of Ameri- come the losses through strong growth in net ca. As a result of additions to equity capital, interest margins and securities gains. These however, the money center banks' average re- banks increased their interest margins through 2. Profit rates, all insured commercial banks, 1981-861 Percent Type of return and size of bank2 1981 1982 1983 1984 1985 1986 Return on assets3 All banks .76 .71 .67 .64 .70 .64 Less than $100 million 1.14 1.07 .96 .81 .70 .53 $100 million to $1 billion .91 .84 .84 .88 .84 .71 $1 billion or more Money center banks .53 .53 .54 .52 .45 .46 Others .66 .60 .54 .53 .78 .75 Return on equity4 All banks 13.09 12.10 11.24 10.60 11.32 10.23 Less than $100 million 13.39 12.45 11.12 9.50 8.18 6.24 $100 million to $1 billion 12.78 11.74 11.86 12.41 11.69 9.87 $1 billion or more Money center banks 13.57 13.27 12.57 11.42 9.60 9.50 Others 12.80 11.42 10.15 9.66 13.69 12.61 1. See table 1, note 1. 3. Net income as a percentage of average fully consolidated assets 2. Size categories are based on year-end fully consolidated assets. net of loss reserves. 4. Net income as a percentage of average equity capital. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

540 Federal Reserve Bulletin • July 1987 their relative success in replacing more expen- to 52 percent as retained earnings shrank and sive wholesale liabilities with deregulated retail large banks issued additional common and predeposits, as well as by shifting the other side of ferred stock. Banks also bolstered their primary their balance sheets toward higher-yielding types capital positions last year by increasing their of assets. By comparison, small banks experi- reserves for losses and expanding their issuance enced a less favorable shift in balance-sheet of securities eligible for primary capital treatcomposition and a narrowing net interest margin, ment. In the aggregate, primary capital grew IOV2 which offset the swing toward sizable securities percent in 1986, while assets measured according gains and allowed the sharp rise in their loss to the appropriate regulatory definition rose VA provisions since 1980 to feed through directly to percent, lifting the resultant capital-asset ratio to the bottom line. (Additional data on balance- 7.57 percent. While the ratio of primary capital to sheet composition, earnings, and rates paid and assets at small banks remained—at 9.19 perearned are displayed in appendix table A.l, cent—the highest in the industry, only this group disaggregated by bank size.) of banks experienced a decline in its ratio. In As shown in appendix table A.2, while earn- general, the larger the bank, the lower its priings of the overall banking industry declined $184 mary capital ratio and the larger the increase in million last year, cash dividends rose more than that ratio last year. For example, the nation's $700 million, as the dividend payout rate was nine largest banks raised their primary capital by lifted to more than one-half. On average, institu- 9^4 percent on average, while keeping the intions have changed their dividend payments only crease in their assets under 5 percent for the fifth sluggishly in response to movements in profit- straight year. ability in recent years; moreover, in many cases these changes have been in opposite directions. For example, in 1980, when small banks were LOAN LOSSES earning a return on assets of 1.19 percent, they were paying out dividends of 0.32 percent of The downturn in the overall profitability of comassets. In 1986, with profitability at less than half mercial banks in the 1980s has been primarily an that earlier level, small banks declared cash asset-quality phenomenon. What is perhaps redividends of 0.38 percent of assets. In part, the markable is the extent to which the banking figures for small banks reflect the actions of system has been able to offset the adverse effect small energy banks, which on average paid divi- of loan losses on its net income. Since the dends out of equity last year, registering "re- beginning of the 1980s, loss provisions have tained earnings" of —0.87 percent of assets. more than tripled, to 0.77 percent of assets in As shown in table 3, the portion of new equity 1986. At the same time, nearly three-fourths of derived from retained earnings in 1986 dropped this deterioration has been counterbalanced by 3. Sources of increases in total equity capital, all insured commercial banks, 1981-86 Millions of dollars, except as noted Item 1981 1982 1983 1984 1985 1986 Retained earnings' All banks 8,848 8,284 7,653 7,824 9,455 8,539 Large banks2 4,104 4,051 3,621 4,090 6,368 6,476 Net increase in equity capital All banks 11,163 9,374 10,739 14,958 14,720 16,502 Large banks 5,465 4,578 5,625 9,415 9,402 11,846 Percentage of net increase in equity capital from retained earnings All banks 79 88 71 52 64 52 Large banks 75 88 64 43 68 55 1. Net income less cash dividends declared on preferred and 2. Banks with fully consolidated assets of $1 billion or more at yearcommon stock. end. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of U.S.-Chartered Insured Commercial Banks in 1986 541 an upturn in securities gains, a widening in groups continued to charge off between 2 percent interest margins, and—to a lesser degree—a re- and 3 percent of their loans.1 Despite the higher duction in tax burdens. Loss provisions, which overall level of charge-offs, nonaccrual loans generally move in close alignment with same- edged up over the year, to 2.27 percent of loans. period charge-offs of bad loans, represent cur- As noted above, the groups of banks have not rent revenues that are diverted from profits to been equally successful in reducing the effect of raise or to replenish loss reserves. Those loss higher loss provisions on their profitability in reserves, in turn, are balance-sheet items that recent years. Specifically, in 1986 the rise in loss must be maintained at a level adequate to absorb provisions as a share of assets at small banks was anticipated losses and may not dip below zero just 5 basis points—one-half the industrywide when charge-offs occur. average. Nevertheless, these banks posted the As shown in table 4, loss provisions in recent largest decline in profits of any size group. The years have increased with net charge-offs but nine money center banks also hiked their loss have exceeded them and thus have allowed ex- provisions 5 basis points, to 0.79 percent of pansion in reserves for losses. In 1986, these assets, but suffered no erosion of profitability in reserves ranged from an average of 1.02 percent 1986. Medium and large (non-money-center) of assets at the money center banks to 0.76 banks raised their loss provisions 14 basis points. percent of assets at small banks. These figures At medium banks this increase translated into an translate into 1.70 percent and 1.48 percent, equivalent hit to profits; but the large banks were respectively, of loans at those institutions. able to offset the bulk of the increase by holding The increases in loss reserves are particularly constant their net interest margin, boosting their striking since, for the industry as a whole, net securities gains, and reducing their noninterest charge-offs extinguished a full 1 percent of total expenses. loans, with small and medium banks experienc- The relatively minor increase in loss proviing higher than average losses. Detailed data sions at small banks resulted to an extent from available only for banks with at least $300 million the importance of agricultural banks in this in assets indicate that charge-off rates were high- group. Farm banks continued to add to loss er for every major category of loans last year— including real estate, business, and consumer 1. Farm banks are defined as those at which the ratio of loans. The rise in charge-off rates was particular- total agricultural loans to total loans is above the unweighted average of such ratios at all banks. Energy banks include ly pronounced at energy banks and relatively generally those with energy loans and leases in excess of 25 mild at farm banks; nevertheless, both of these percent of primary capital. 4. Loan losses and recoveries, all insured commercial banks, 1985-86 Millions of dollars, except as noted Net charge-offs YYeeaarr aanndd ssiizzee ooff bbaannkk11 LLoosssseess RReeccoovveerriieess LLoossss cchhaarrggeedd Percentage pprroovviissiioonn Amount of loans2 1985 All banks 15,519 2,694 12,825 .86 16,965 Less than $100 million 3,271 453 2,818 1.38 3,318 $100 million to $1 billion 2,841 461 2,380 .83 33,,009999 $1 billion or more Money center banks 3,864 557 3,307 .86 4,605 Others 5,543 1,223 4,320 .70 5,943 1986 All banks 19,091 3,028 16,063 1.00 21,194 Less than $100 million 3,609 526 3,083 1.56 3,500 $100 million to $1 billion 3,699 534 3,165 1.05 44,,005544 $1 billion or more Money center banks 4,395 700 3,695 .94 5,124 Others 7,388 1,267 6,121 .85 8,516 1. Size categories are based on fully consolidated assets at year-end. 2. See table 1, note 1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

542 Federal Reserve Bulletin • July 1987 reserves at a rate well in excess of the industry ment securities, what growth there was came average, but at 1.16 percent of assets their loss from higher-yielding federally related mortgageprovisions were 8 basis points below those taken backed securities; Treasury securities fell sharpin 1985. Average loss provisions at small banks, ly relative to assets. As shown in table 5, for the however, were inflated a bit by the 309 energy fourth year in a row, interest-bearing deposits as banks, which registered provisions of 1.78 per- a share of assets posted a decline, largely reflectcent of assets. Loss provisions of IV2 percent or ing the pullback by U.S. banks from the Euromore of assets were not uncommon in some interbank market. While concern over capitalareas of the nation last year. For example, aver- asset ratios has limited banks' interest in placing age provisions for all banks in the Dallas Federal funds in the interbank markets, the spreading use Reserve District rose from less than 1 percent of of off-balance-sheet hedging devices, such as assets in 1985 to 1.62 percent in 1986. interest rate futures, has provided banks with alternative means to manage their exposures and has lessened the need for access to interbank NET INTEREST MARGIN deposit markets. The portion of bank assets made up of loans The industry's net interest margin, while remain- declined in 1986, despite bouyant growth of ing at a relatively high level, narrowed somewhat consumer and real estate loans. The sizable in 1986 as the decline in market interest rates decline in average corporate bond rates promptbrought down interest income faster than interest ed nonfinancial corporations to issue a record expense. With market rates dropping and the amount in the long-term market and stunted yield curve flattening, interest income fell 1.06 business demand for C&I loans. In addition, percentage points to 8.38 percent of net assets, much of the new C&I lending by major U.S. and interest expense declined nearly 1 percent- banks was sold into the secondary market and age point to 5.10 percent—both to their lowest often ended up on the books of foreign banks. As levels since 1978. a result of these influences, C&I loans dropped In the aggregate, the effect of declining market to less than 21 percent of assets at U.S. commerrates on interest income was moderated by the cial banks. In contrast to their restraining effect persistence of older, fixed-rate assets and by on C&I lending, lower long-term rates greatly some shifts in the composition of assets. While boosted real estate loans, leading to sometimes the various groups of banks succeeded to differ- frantic mortgage origination activity. Real estate ing degrees in redirecting their portfolios away lending was given further impetus just before the from lower-yielding assets, the industry as a end of the year by the impending effective date of whole reduced the share of its assets held in the tax reform, which ended the favorable tax treatforms of U.S. government securities, interbank ment of capital gains realized in real estate (and deposits, and commercial and industrial (C&I) other) transactions. loans. Even within the category of U.S. govern- Securities—other than U.S. government is- 5. Selected portfolio items as a percentage of total assets, all insured commercial banks, 1981-86' Item 1981 1982 1983 1984 1985 1986 Interest-earning assets 84.59 85.87 85.96 85.74 86.00 86.02 Loans 55.91 56.82 56.46 57.67 58.38 57.86 Securities 17.00 16.56 17.47 17.58 17.64 18.29 U.S. government 8.63 8.59 9.79 9.89 9.53 9.25 State and local government 7.62 7.25 6.84 6.76 7.02 7.49 Other bonds and stocks .75 .73 .83 .93 1.09 1.55 Gross federal funds sold and reverse repurchase agreements 3.99 4.41 4.34 4.17 4.44 4.72 Interest-bearing deposits 7.69 8.06 7.69 6.33 5.54 5.15 MEMO Loss reserves .55 .59 .63 .70 .80 .92 Average assets (billions of dollars) 1,940 2,101 2,259 2,418 2,562 2,779 1. See table 1, note 1. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of U.S.-Chartered Insured Commercial Banks in 1986 543 sues—rose strongly as a share of assets. Private 6. Rates of return on fully consolidated portfolios, taxable securities remained a tiny share of com- all insured commercial banks, 1981-86' mercial bank assets but rose rapidly, to \Vi Percent percent in 1986 from just over 1 percent of assets Item 1981 1982 1983 1984 1985 1986 in 1985. Acquisitions of collateralized mortgage Securities, total 9.28 9.96 9.83 9.95 9.27 8.34 obligations likely contributed to this rise. Tax- State and local exempt securities also increased substantially government.... 6.74 7.20 7.04 7.51 7.43 7.20 Loans, gross 16.32 15.17 12.69 13.65 12.06 10.84 last year; 1985 and 1986 were the only times in Net of loss provision 15.59 14.17 11.59 12.54 10.90 9.48 the past 15 years that tax-exempt obligations Taxable equivalent2 increased faster than the overall portfolio. These Total securities 11.65 12.43 12.06 12.18 11.46 10.53 State and local comparisons refer to annual average levels. In government.... 11.96 12.81 12.58 13.45 13.08 12.53 Total securities and contrast, when measured from year-end 1985 to gross loans 15.07 14.39 12.41 13.31 11.92 10.77 year-end 1986, tax-exempt securities declined, both as a share of bank assets and in dollar 1. Calculated as described in the "Technical Note," Federal Reserve Bulletin, vol. 65 (September 1979), p. 704, for years through terms. Anticipation of tax reform, which has 1984. For more recent years, rates of return are derived from income made tax-exempt securities far less attractive to items and quarterly average balance sheet data. 2. See table 1, note 4. commercial banks by ending the 80 percent deductibility of carrying costs on most newly acquired obligations, led to a surge in purchases of banks uncharacteristically was about as large as tax-exempt securities at the end of 1985 and the industry average, as these banks shifted their again in the third quarter of 1986 and sharply portfolios toward relatively liquid, but lowerboosted the average level for last year. Table 6 yielding, assets. shows why state and local government issues Loans declined more than 1 Vi percentage were popular during most of 1986: on a taxable- points as a share of assets at small banks last equivalent basis, the rate of return on tax-exempt year, owing importantly to agricultural and enersecurities greatly exceeded that of taxable secu- gy banks, which registered declines of twice that rities or loans. This rate relationship was attrib- size because creditworthy borrowers became utable partly to the long average maturity of state scarcer and many farmers repaid their debts. and local government securities but also to the Among the types of loans, not only C&I and farm huge supplies of issues as tax-exempt borrowers loans but also consumer loans decreased at small rushed both to take advantage of lower interest banks. These influences were offset in part by rates and to beat anticipated tax-reform dead- real estate loans, which grew as a share of small lines. During one notable, extended period last banks' assets by about the same amount as for year, yields on municipal revenue bonds were the rest of the industry. Besides running off taxappreciably above comparable-maturity Trea- exempt securities, small banks decreased somesury rates, even before the adjustment for their what their holdings of U.S. government issues— tax status. Despite the high yields, small banks although farm and energy banks acquired U.S. as a group ran off tax-exempt securities last year, government securities on balance, presumably in probably because deteriorating profits left these lieu of lending their available funds. The strongbanks with less need for tax shelters. Large est increases in assets at small banks last year banks (excluding the money center banks) were in the relatively low-yielding categories of showed the largest increase in holdings of muni- federal funds and interbank deposits, which tocipals. gether rose by 2 percentage points at small The comparison of these and other changes in banks, to IOV2 percent of assets. the balance sheets of these two groups of banks By contrast, the large banks (other than the illustrates how important compositional shifts money center banks) reduced the portion of their are in influencing the course of interest income. portfolio devoted to federal funds and interest- Although the rates of return on each category of bearing deposits IV4 percentage points, to 9lA assets at small banks decreased less than did percent of assets. Instead, these banks increased those of the industry as a whole, the drop in their holdings of consumer and real estate loans interest income per dollar of assets at small and of all types of securities—including tax- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of U.S.-Chartered Insured Commercial Banks in 1986 545 8. Selected liabilities as a percentage of total assets, all insured commercial banks, 1981-861 Item 1981 1982 1983 1984 1985 1986 Deposit liabilities 78.61 77.61 77.68 77.93 77.47 76.72 In foreign offices 15.93 15.79 14.71 12.94 12.65 11.61 In domestic offices 62.68 61.82 62.97 64.99 64.83 65.11 Demand deposits 20.76 17.35 16.53 16.47 15.69 16.04 Other checkable deposits 2.43 3.43 4.03 4.34 4.58 5.21 Large time deposits2 14.12 14.61 12.15 12.22 11.42 10.75 Other deposits3 25.37 26.44 30.26 31.95 33.14 33.12 Gross federal funds purchased and repurchase agreements 7.54 7.99 7.81 7.51 7.62 8.26 Other borrowings 2.62 2.64 2.84 2.87 3.33 4.00 MEMO Money market liabilities4 40.21 41.03 37.51 35.55 35.01 34.61 Average assets (billions of dollars) 1,940 2,101 2,259 2,418 2,562 2,779 1. See table 1, note 1. 4. Large time deposits issued by domestic offices, deposits issued 2. Deposits of $100,000 and over. by foreign offices, repurchase agreements, gross federal funds pur- 3. Including savings, small time deposits, and MMDAs. chased, and other borrowings. come and expenses over the past few years. In in this area, the decline in overall profitability 1986, trading account profits and commissions, would have been about twice as large. Banks trust fees, and sales of assets were major contrib- took advantage of market rates at 9-year lows to utors to income. As off-balance-sheet activities realize nearly $4 billion in securities gains during have become more important, income from 1986. While banks of all sizes took these gains them, which is part of the undifferentiated "other last year, small banks registered the largest capinoninterest income" category, has soared. In tal gains (scaled by assets). This pattern is con- 1986, the bulk of the increase in noninterest sistent with small banks holding more securities income occurred in this category, as the notional relative to assets than do other banks and having value of interest rate swaps outstanding almost been under more earnings pressure than the rest doubled and loan sales rose by half, generating of the industry. additional fee income. Standby letters of credit, Despite the large realized capital gains, the however, shrank slightly, as foreign-chartered decline in interest rates left banks with a much banks supplied a larger share of the market and larger reservoir of unrealized securities gains at U.S. banks anticipated risk-based capital re- the end of 1986 than they had had a year earlier. quirements that would raise the implicit cost of The market value of investment-account securiissuing standby letters of credit. Salaries and ties held by the banking industry exceeded their benefits accounted for more than half of the rise book value by $141/2 billion at the end of Decemin noninterest expenses last year as the money ber. About $3 billion of that excess was at small center banks expanded into new products and banks, $4 billion at medium banks, $2 billion at new markets. money center banks, and $5V2 billion at other For the banking industry as a whole, the large banks. Chart 4 shows the rise in this pool of noninterest margin was supported last year by potential gains over the past three years and the restraint on expenses. Only the money center banks posted a significant increase in noninterest 4. Unrealized capital gains on securities expenses (scaled by assets), and they made up for that increase with a parallel hike in income. Percent Billions of dollars Other large banks managed to lower their noninterest expenses relative to assets by 6 basis points as a result of slower growth in wages and salaries. For the second year in a row, the commercial banking industry benefited significantly from capital gains on the sale of investment account securities, which accounted for one-sixth of pretax earnings last year. Without the improvement Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

546 Federal Reserve Bulletin • July 1987 decline in interest rates (illustrated by the 10- than $200 million for the first quarter alone. In year Treasury note rate). the second quarter, the banking industry is likely to show an overall net loss as a result of the decisions first by Citibank and then by others to EARLY 1987 make huge additions to loan loss reserves in Although call report data for the first quarter of recognition of problems with developing-country 1987 were not available when this article was debt. prepared, other sources of information on the In the first five months of 1987, insured banks performance of large banks indicate that the failed at their fastest rate ever; 83 commercial downward trend in profitability is continuing in banks were closed, and the FDIC estimated that 1987. Again the driving force is asset quality. In failures would run at about that rate throughout February, Brazil declared a moratorium on debt the year. But the incipient improvement in the service payments to commercial banks, and farm sector, the stabilization of oil prices, and many banks placed these loans on nonaccrual the movement by many banks to put problems status. At the nine money center banks this latter with their international loans behind them are all action raised the pool of nonperforming assets positive developments for the U.S. banking inalmost $14 billion and decreased earnings more dustry over the longer term. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of U.S.-Chartered Insured Commercial Banks in 1986 547 A.l. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1981-861 A. Banks with less than $100 million in assets Item 1981 1982 1983 1984 1985 1986 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 90.84 91.10 91.02 90.77 91.00 90.91 Loans 53.72 52.55 51.49 52.26 53.15 51.51 Commercial and industrial 12.26 12.91 12.88 12.90 13.53 12.67 Real estate 19.60 18.37 17.98 18.88 19.83 20.77 Consumer 13.97 12.91 12.28 12.36 12.50 11.73 Securities 29.35 29.61 31.00 30.39 29.32 28.90 U.S. government 17.38 18.25 20.52 20.85 20.17 19.65 State and local government 11.50 10.94 10.01 9.01 8.55 8.27 Other bonds and stocks .46 .41 .46 .54 .60 .98 Gross federal funds sold and reverse repurchase agreements 5.87 6.35 5.96 5.53 5.78 7.22 Interest-bearing deposits 1.90 2.60 2.57 2.59 2.75 3.28 Deposit liabilities 87.56 87.17 87.83 88.18 88.23 88.54 Demand deposits 22.52 19.04 17.01 16.10 14.62 14.10 Other checkable deposits 4.01 6.14 7.55 8.14 8.53 9.49 Large time deposits 10.03 10.67 9.80 10.23 10.98 10.96 Other deposits 51.00 51.32 53.46 53.71 54.10 53.95 Gross federal funds purchased and repurchase agreements 1.41 1.68 1.21 11..0011 ..8855 ..7733 Other borrowings .52 .48 .41 .35 .34 .29 MEMO Money market liabilities 11.96 12.83 11.42 11.59 12.18 1122..0022 Loss reserves .51 .51 .52 .58 .67 .76 Effective interest rate (percent) Rates earned Securities 9.69 10.82 10.58 10.66 9.83 8.86 State and local government 6.45 7.24 7.47 7.84 7.87 7.70 Loans, gross 14.91 15.34 13.70 14.16 12.71 11.73 Net of loss provision 14.27 14.39 12.55 12.80 11.06 9.92 Taxable equivalent Securities 11.70 12.95 12.53 12.23 11.42 1100..3388 Securities and gross loans 13.75 14.46 13.24 13.45 12.25 11.24 Rates paid Interest-bearing deposits 11.21 10.96 9.15 9.54 77..9999 66..9966 Large certificates of deposit 15.14 13.74 9.20 10.84 8.74 7.39 Other deposits 10.56 10.51 9.15 9.34 7.86 6.88 All interest-bearing liabilities 11.31 11.01 9.11 9.54 8.00 6.96 Income and expenses as a percentage of average net consolidated assets Gross interest income 11.55 11.75 10.60 10.89 10.33 9.32 Gross interest expense 7.15 7.35 6.32 6.73 6.06 5.28 Net interest margin 4.39 4.40 4.28 4.17 4.28 4.04 Taxable equivalent 4.93 4.96 4.82 4.66 4.75 4.48 Noninterest income .68 .67 .69 .74 .77 .77 Loss provision .29 .42 .51 .63 .87 .92 Other noninterest expense 3.24 3.31 3.29 3.28 3.38 3.39 Securities gains or losses (-) -.10 -.02 .01 -.01 .08 .16 Income before tax 1.45 1.31 1.18 .99 .88 .66 Taxes .31 .24 .23 .19 .19 .15 Extraordinary items .00 .00 .00 .01 .01 .02 Net income 1.14 1.07 .96 .81 .70 .53 Cash dividends declared .35 .39 .38 .39 .41 .38 Net retained earnings .79 .67 .58 .41 .29 .16 MEMO Average assets (billions of dollars) 352 365 373 383 385 384 Number of banks 12,353 12,081 11,811 11,554 11,332 11,011 1. See notes to tables in the text. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

548 Federal Reserve Bulletin • July 1987 A.l. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1981-861 —Continued B. Banks with $100 million to $1 billion in assets Item 1981 1982 1983 1984 1985 1986 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 88.37 89.34 89.65 89.58 90.02 89.88 Loans 54.40 53.71 52.98 54.41 56.26 55.94 Commercial and industrial 16.34 16.88 16.84 17.51 17.96 16.76 Real estate 20.02 19.38 18.89 19.61 21.07 22.34 Consumer 14.00 13.16 12.86 13.14 13.54 13.61 Securities 25.68 25.30 26.51 26.18 25.60 25.05 U.S. government 13.15 13.48 15.34 15.46 14.76 13.60 State and local government 11.88 11.16 10.29 9.77 9.86 10.09 Other bonds and stocks .65 .66 .87 .95 .98 1.36 Gross federal funds sold and reverse repurchase agreements 5.46 5.91 5.59 5.41 5.33 6.37 Interest-bearing deposits 2.84 4.42 4.58 3.58 2.84 2.51 Deposit liabilities 83.18 82.89 84.34 85.14 85.51 85.74 In foreign offices .24 .24 .22 .27 .28 .39 In domestic offices 82.94 82.66 84.12 84.87 85.23 85.35 Demand deposits 24.97 21.31 19.51 18.71 17.31 16.94 Other checkable deposits 3.62 5.21 6.10 6.44 6.80 7.73 Large time deposits 14.98 15.35 12.94 12.95 13.22 12.53 Other deposits 39.37 40.79 45.57 46.76 47.89 48.15 Gross federal funds purchased and repurchase agreements 6.08 6.47 5.21 44..5599 44..1133 33..7700 Other borrowings 1.28 1.15 1.21 1.04 1.01 1.28 MEMO Money market liabilities 22.58 23.20 19.57 18.86 18.65 1177..9900 Loss reserves .58 .59 .61 .65 .72 .81 Effective interest rate (percent) Rates earned Securities 9.15 9.96 9.89 9.97 9.22 88..3344 U.S. government 11.55 12.41 11.86 10.35 10.40 9.17 State and local government 6.52 7.03 7.03 7.43 7.44 7.32 Other bonds and stocks 10.15 10.52 11.31 10.39 9.39 7.95 15.23 14.70 12.78 13.61 12.16 11.20 Net of loss provision 14.56 13.71 11.81 12.65 11.04 9.82 Taxable equivalent Securities 11.37 12.27 12.08 12.15 11.33 1100..4433 Securities and gross loans 13.90 13.84 12.50 13.13 11.90 10.96 Rates paid Interest-bearing deposits 11.47 10.67 8.83 9.33 77..8800 66..8811 Large certificates of deposit 16.05 13.91 8.90 10.88 8.56 7.20 Deposits in foreign offices 15.84 14.48 9.23 15.80 8.45 7.76 Other deposits 9.99 9.71 8.82 8.95 7.63 6.72 All interest-bearing liabilities 11.98 10.98 8.80 9.39 7.79 6.80 Income and expenses as a percentage of average net consolidated assets Gross interest income 11.37 11.18 9.92 10.39 9.81 8.91 Gross interest expense 7.44 7.19 6.02 6.50 5.79 5.04 Net interest margin 3.94 4.00 3.90 3.89 4.02 3.87 Taxable equivalent 4.46 4.53 4.42 4.42 4.57 4.40 Noninterest income .83 .86 .90 .97 .98 1.02 .27 .42 .43 .46 .61 .76 Other noninterest expense 3.37 3.45 3.39 3.33 3.42 3.41 Securities gains or losses (-) -.10 -.07 -.01 -.01 .06 .14 Income before tax 1.03 .92 .98 1.06 1.03 .86 Taxes .13 .09 .14 .19 .20 .17 Extraordinary items .01 .00 .00 .01 .01 .01 .91 .84 .84 ..8888 .84 .71 Cash dividends declared .39 .40 .42 ..4433 .45 .43 Net retained earnings .52 .44 .42 .44 .39 .27 MEMO Average assets (billions of dollars) 382 413 454 488 550088 553399 Number of banks 1,651 1,813 2,012 2,135 2,259 2,398 1. See notes to tables in the text. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of U.S.-Chartered Insured Commercial Banks in 1986 549 A.l. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1981-86' —Continued C. Money center banks Item 1981 1982 1983 1984 1985 1986 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 80.63 82.19 81.56 81.14 80.56 80.09 Loans 59.14 62.27 62.93 63.66 61.91 60.07 Commercial and industrial 30.21 32.34 32.31 31.78 29.46 26.49 Real estate 8.62 9.16 9.22 9.82 10.49 11.45 Consumer 4.50 4.61 4.72 5.28 5.78 6.13 Securities 6.48 5.96 6.39 6.68 7.15 8.49 U.S. government 2.77 2.37 2.60 2.33 2.31 2.28 State and local government 2.39 2.37 2.49 2.90 3.02 3.48 Other bonds and stocks 1.32 1.23 1.30 1.45 1.82 2.73 Gross federal funds sold and reverse repurchase agreements 2.11 2.50 2.52 2.51 3.54 3.62 Interest-bearing deposits 12.90 11.43 9.72 8.29 7.95 7.91 Deposit liabilities 75.37 73.69 72.18 72.08 70.74 69.92 In foreign offices 39.86 39.99 37.93 35.21 35.86 34.64 In domestic offices 35.51 33.70 34.25 36.88 34.88 35.28 Demand deposits 15.06 11.28 11.43 11.83 11.51 12.46 Other checkable deposits .83 1.06 1.19 1.24 1.30 1.63 Large time deposits 12.95 13.75 10.55 10.62 8.18 7.30 Other deposits 6.68 7.61 11.08 13.20 13.89 13.88 Gross federal funds purchased and repurchase agreements 7.23 7.27 77..8866 77..4422 77..6666 88..1177 Other borrowings 4.54 4.75 5.12 5.34 6.51 7.95 MEMO Money market liabilities 64.58 65.76 61.46 58.58 58.21 5588..0077 Loss reserves .49 .54 .59 .69 .83 1.02 Effective interest rate (percent) Rates earned Securities 9.89 9.73 9.56 9.72 9.41 8.51 U.S. government 10.97 10.81 11.92 11.58 10.51 9.07 State and local government 7.55 7.46 6.33 7.61 7.24 7.09 Other bonds and stocks 11.99 11.93 11.46 11.10 11.45 9.79 Loans, gross 17.32 15.47 12.64 13.85 12.08 10.53 Net of loss provision 16.62 14.63 11.75 12.97 10.85 9.18 Taxable equivalent Securities 12.46 12.36 11.86 1122..5588 1111..7755 1100..8899 Securities and gross loans 16.56 14.94 12.32 13.73 12.05 10.58 Rates paid Interest-bearing deposits 15.94 13.95 1100..2233 1111..0066 88..9911 77..4411 Large certificates of deposit 16.64 14.47 8.96 10.70 9.07 7.45 Deposits in foreign offices 17.12 14.89 10.77 12.90 9.59 7.88 Other deposits 9.97 10.15 10.02 7.83 7.43 6.47 All interest-bearing liabilities 16.06 13.84 10.56 11.53 9.16 7.57 Income and expenses as a percentage of average net consolidated assets Gross interest income 12.55 11.63 9.40 10.22 9.10 7.85 Gross interest expense 10.45 9.29 7.00 7.84 6.74 5.57 Net interest margin 2.10 2.34 2.40 2.38 2.36 2.28 Taxable equivalent 2.25 2.49 2.53 2.83 2.53 2.49 Noninterest income .98 1.05 1.12 1.42 1.75 2.02 Loss provision .21 .30 .36 .50 .75 .79 Other noninterest expense 1.99 2.25 2.34 2.54 2.71 2.96 Securities gains or losses (-) -.05 -.06 .01 .02 .06 .13 Income before tax .83 .77 .84 .78 .71 .68 Taxes .30 .24 .30 .26 .26 .22 Extraordinary items .00 .01 .00 .00 .00 .00 Net income .53 .53 .54 .52 .45 .46 Cash dividends declared .22 .23 .27 .24 .25 .21 Net retained earnings .31 .30 .26 .29 .21 .25 MEMO Average assets (billions of dollars) 538 564 582 594 623 652 Number of banks 9 9 9 9 9 9 1. See notes to tables in the text. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

550 Federal Reserve Bulletin • July 1987 A.l. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1981-86' —Continued D. Large banks other than money center banks Item 1981 1982 1983 1984 1985 1986 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 82.33 84.19 84.77 84.62 85.45 85.95 Loans 55.33 56.52 56.07 57.78 59.23 59.56 Commercial and industrial 22.42 23.70 23.15 23.19 23.17 22.47 Real estate 13.02 13.25 13.25 13.74 14.74 15.73 Consumer 9.02 8.68 8.88 10.31 11.58 12.43 Securities 14.00 13.43 14.28 14.81 15.72 17.19 U.S. government 6.14 5.91 7.04 7.35 7.38 7.76 State and local government 7.35 6.97 6.58 6.71 7.46 8.25 Other bonds and stocks .51 .54 .66 .75 .89 1.18 Gross federal funds sold and reverse repurchase agreements 3.68 4.09 4.20 4.01 4.04 33..7788 Interest-bearing deposits 9.32 10.15 10.21 8.02 6.45 5.42 Deposit liabilities 73.89 73.07 73.43 73.77 73.63 72.59 In foreign offices 14.01 13.85 13.03 10.77 9.49 7.85 In domestic offices 59.89 59.22 60.40 62.99 64.14 64.74 Demand deposits 22.02 18.89 18.21 18.37 17.79 18.18 Other checkable deposits 2.21 2.92 3.33 3.68 4.00 4.64 Large time deposits 16.75 16.75 13.84 13.65 12.63 11.75 Other deposits 18.90 20.66 25.02 27.29 29.73 30.17 Gross federal funds purchased and repurchase agreements 11.84 12.39 1122..0055 11.68 1111..7799 1122..7744 Other borrowings 2.94 2.92 3.23 3.29 3.66 4.27 MEMO Money market liabilities 45.53 45.91 42.16 39.39 37.56 36.61 Loss reserves .60 .65 .70 .78 .86 .97 Effective interest rate (percent) Rates earned Securities 8.74 9.17 9.16 9.42 8.89 8.01 U.S. government 10.64 11.12 11.18 11.13 10.27 9.01 State and local government 6.96 7.24 6.95 7.36 7.28 6.99 Other bonds and stocks 12.11 12.66 10.84 11.46 10.49 8.79 Loans, gross 16.80 15.08 12.29 13.37 11.78 10.61 Net of loss provision 15.98 13.92 10.99 12.11 10.80 9.37 Taxable equivalent 11.60 12.09 11.66 12.06 11.51 1100..5588 Securities and gross loans 15.55 14.31 12.00 13.10 11.73 10.61 Rates paid Interest-bearing deposits 13.92 12.20 99..0099 9.73 88..1122 66..8844 Large certificates of deposit 16.88 14.17 8.83 10.52 8.71 7.30 Deposits in foreign offices 17.98 14.84 9.48 12.04 9.25 7.54 Other deposits 9.54 9.66 9.08 8.71 7.62 6.56 All interest-bearing liabilities 14.55 12.28 9.24 10.04 8.13 6.82 Income and expenses as a percentage of average net consolidated assets Gross interest income 11.95 11.06 9.19 9.89 9.13 8.13 Gross interest expense 9.02 8.00 6.17 6.76 5.79 4.82 Net interest margin 2.94 3.06 3.02 3.13 3.34 3.31 Taxable equivalent 3.31 3.42 3.35 3.56 3.75 3.76 1.00 1.09 1.19 1.34 1.43 1.44 Loss provision .29 .46 .56 .64 .57 .71 Other noninterest expense 2.79 2.97 3.01 3.14 3.29 3.23 Securities gains or losses (-) -.10 -.07 -.01 -.02 .05 .13 .76 .65 .63 .67 .96 .94 .10 .05 .10 .16 .20 .20 Extraordinary items .00 .00 .00 .01 .02 .01 .66 .60 .54 .53 .78 .75 Cash dividends declared .30 .29 .29 .27 .29 .34 Net retained earnings .37 .31 .25 .25 .49 .41 MEMO Average assets (billions of dollars) 668 759 850 953 1,047 1,204 Number of banks 195 220 243 263 290 321 1. See notes to tables in the text. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of U.S.-Chartered Insured Commercial Banks in 1986 551 A.2. Report of income, all insured commercial banks, 1981-86 Millions of dollars Item 1981 1982 1983 1984 1985 1986 Operating income, total 247,577 257,293 239,264 274,273 273,461 269,292 Interest, total 230,148 237,193 216,059 245,640 239,952 230,702 Loans 164,715 168,619 153,323 181,873 175,679 168,429 Balances with banks 23,905 23,867 16,739 16,557 13,590 11,132 Gross federal funds sold and reverse repurchase agreements 12,183 11,309 9,198 10,464 9,352 8,922 Securities (excluding trading accounts) .. 29,345 33,398 36,799 36,746 41,331 42,219 State and local government 9,704 10,648 10,620 11,817 12,820 14,956 Other 19,641 22,749 26,179 24,929 28,511 27,263 Service charges on deposits 3,892 4,584 5,399 6,512 7,280 7,902 Other operating income' 13,538 15,517 17,806 22,121 26,229 30,689 Operating expense, total 227,490 238,274 220,236 254,273 252,057 250,399 Interest, total 169,078 168,651 143,215 167,335 154,094 140,467 Deposits 138,830 141,185 119,843 139,331 128,837 115,889 Large certificates of deposit 38,896 37,366 22,523 25,761 22,472 19,257 Deposits in foreign offices 46,696 41,754 29,021 35,781 30,013 24,440 Other deposits 53,238 62,065 68,299 77,789 76,352 72,192 Gross federal funds purchased and repurchase agreements 23,752 20,628 16,438 19,323 16,236 15,766 Other borrowed money2 6,496 6,838 6,934 8,682 9,020 8,812 Salaries, wages, and employee benefits .... 27,901 31,244 33,637 36,463 39,338 42,258 Occupancy expense3 8,558 9,975 11,101 12,092 13,407 14,551 Loss provision 5,080 8,429 10,621 13,690 16,965 21,194 Other operating expense 16,873 19,975 21,662 24,694 28,254 31,929 Securities gains or losses (-) -1,595 -1,282 -30 -142 1,504 3,773 Income before tax 18,491 17,737 18,998 19,858 22,908 22,665 Taxes 3,859 2,976 4,076 4,665 5,369 5,261 Extraordinary items 57 64 70 217 318 271 Net income 14,689 14,826 14,992 15,409 17,858 17,674 Cash dividends declared 5,841 6,542 7,338 7,585 8,402 9,135 1. Includes income from assets held in trading accounts. 3. Occupancy expense for bank premises net of any rental income 2. Includes interest paid on U.S. Treasury tax and loan account plus furniture and equipment expenses, balances and on subordinated notes and debentures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

552 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report, covering the period Febru- stantial investments in dollar-denominated asary through April 1987, provides information on sets. Treasury and System foreign exchange opera- Meanwhile, economic statistics being released tions. It was prepared by Sam Y. Cross, Manag- suggested that the underlying economic fundaer of Foreign Operations of the System Open mentals were clearly moving in directions that Market Account and Executive Vice President in would lead to adjustment of external imbalances. charge of the Foreign Group of the Federal To be sure, there were still few signs that the Reserve Bank of New York.' dollar's two-year decline had reduced the nominal U.S. trade deficit. However, data on gross The dollar traded rather steadily in February and national product for the fourth quarter of 1986, early March, and then moved lower through the together with information becoming available on end of April. It closed the period down more than export and import volumes, showed that the 8 percent against both the Japanese yen and the nation's trade deficit was declining in volume British pound, down roughly 2 percent against terms and that the nation's external sector was the German mark and most other continental beginning to contribute to economic growth. currencies, and unchanged on balance against Japan's trade surplus, though still high in nomithe Canadian dollar. The U.S. authorities inter- nal terms, had been declining in volume terms vened in the market at various times during the since the beginning of 1986. As for Germany, three-month period under review. weak export volumes and strong import volume After declining almost continuously for nearly gains carried a similar indication that earlier two years, the dollar steadied as the period opened. Market participants were reassured by a coordinated U.S.-Japanese intervention opera- 1. Federal Reserve reciprocal currency arrangements tion undertaken in late January following a joint Millions of dollars statement by Secretary Baker and Finance Minister Miyazawa in which they reaffirmed their Amount of Institution facility, willingness to cooperate on exchange rate issues. April 30, 1987 Talk that the financial authorities of the major Austrian National Bank 250 industrial countries would soon meet encouraged National Bank of Belgium 1,000 Bank of Canada 2,000 expectations that multilateral efforts might be National Bank of Denmark 250 forthcoming to prevent the dollar from declining Bank of England 3,000 Bank of France 2,000 further. In addition, reports of extensive Japa- German Federal Bank 6,000 Bank of Italy 3,000 nese participation in the February refunding op- Bank of Japan 5,000 erations of the U.S. Treasury reassured the Bank of Mexico 700 exchange markets by seeming to suggest that Netherlands Bank 500 Bank of Norway 250 Japanese investors would continue to make sub- Bank of Sweden 300 Swiss National Bank 4,000 Bank for International Settlements Dollars against Swiss francs 600 Dollars against other authorized European currencies 1,250 1. The charts for the report are available on request from Publications Services, Board of Governors of the Federal Total 30,100 Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

553 exchange rate movements were working to re- result of central bank intervention, an impression duce external imbalances. In these circum- that added to the dollar's firmness. stances, the dollar rose from its lows of late The dollar continued to trade narrowly against January to trade within a narrow range through the yen at around ¥153 after the Paris meeting. mid-February against both the yen and the mark, Japanese exporters took advantage of any firmaround ¥153 and DM1.82 respectively. ing of the dollar against the yen to convert export Then on February 22, following meetings held proceeds into yen—an activity that accelerated at the Louvre in Paris, finance ministers and ahead of Japan's fiscal year-end in March. Japacentral bank governors of six major industrial nese investors took advantage of any easing of countries stated that, given the economic policy the dollar against the yen to increase their holdcommitments they were making, their currencies ings of U.S. and other foreign assets. They were now "within ranges broadly consistent with perceived relatively little near-term exchange underlying economic fundamentals." In the an- rate risk in investing abroad, expecting the aunouncement, the authorities of Germany and thorities to prevent any significant further appre- Japan stated that they would provide greater ciation of the yen against the dollar. stimulus to their economies, and the U.S. gov- Meanwhile, greater stability in dollar exchange ernment said that it would resist protectionism rates in February, together with the subsequent and substantially reduce the budget deficit for Paris commitment to foster exchange rate stabilthe fiscal year 1988. The statement noted that ity, was seen in the market as reducing exchange "further substantial exchange rate shifts among rate risk more generally and thereby enhancing their currencies could damage growth and adjust- the relative attractiveness of assets denominated ment prospects in their countries." The officials in currencies with relatively high interest rates. of the six major industrial countries also an- Sterling, which also benefited from several other nounced that they had agreed "in current cir- economic and political developments, rose cumstances to cooperate closely to foster stabil- strongly against all major currencies in February ity of exchange rates around current levels." and early March, amid reports of strong demand Although many market participants regarded by foreign investors. There were also signs of previous promises of domestic policy actions by increased investor interest in the Australian and the major industrial nations with skepticism, the Canadian dollars, the Swedish krone, the French prospect of increased cooperation and the more franc, and the Italian lira to take advantage of the explicit association of the U.S. Treasury with a high interest rates available in those currencies. call for greater exchange rate stability reassured In that environment, investors found that a the market about the near-term outlook for the number of currencies offered more attractive dollar. Remarks by some foreign officials attend- investment opportunities than did the German ing the Paris meeting suggested that there had mark. Traders viewed economic activity as also been an agreement for coordinated interven- somewhat stronger in the United States and tion in the exchange market. somewhat weaker in Germany than previously During the first several weeks following the thought. Also, expectations persisted that short- Paris agreement, the dollar strengthened, espe- term interest rate differentials would continue to cially against the German mark and other conti- favor the dollar relative to the mark. Moreover, nental currencies. Although many market profes- market participants were aware that there resionals expressed doubt, given the continuing mained outstanding large positions, long of pressures of large international trade imbalances, marks and short of dollars; any generalized move that further declines in the dollar could be avoid- to trim these positions was expected to result in ed over time, there was less sense of downside considerable bidding for dollars. In these circumrisk in holding dollars in the near term. As a stances, the dollar continued to rise gradually result, some corporations began to unwind costly against the mark in late February and early hedges against their dollar positions. This com- March. mercial demand gave the dollar buoyancy that Around mid-March, speculative buying started some market professionals suspected was the to push the dollar up more rapidly against the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

554 Federal Reserve Bulletin • July 1987 mark. A number of stop-loss orders to buy Japanese were diverting their exports from other dollars and sell marks were triggered, and the markets to Europe. With the weakness of the resulting bidding for dollars in otherwise thin German economy seemingly confirmed by figtrading propelled the dollar rate up as high as ures then becoming available, market partici- DM1.8745 on March 11 in New York. Under pants were sensitive to the possibility that trade these circumstances, the Trading Desk at the friction between Japan and Europe was also Federal Reserve Bank of New York entered the intensifying. Market concerns increased that exchange market, selling $30 million against there might be renewed calls for a lower dollar as marks. The intervention operation, which was a response to these trade problems. A clear undertaken to foster greater exchange rate stabil- bearish sentiment reemerged toward the dollar ity as envisaged in the Paris agreement was against the yen. quickly talked about in the markets. Dealers On March 23, the dollar moved below ¥150. imagined that the Desk had sold a much larger Japanese investment houses, insurance compaamount and interpreted the action as signaling nies, and corporations sold dollars aggressively, that major countries would seek to limit any stop-loss orders were activated, and the dollar significant rise in the dollar, as well as any began to move down sharply. To restrain the significant decline. As a result, market partici- dollar's decline, the Desk made daily purchases pants calculated that there was little need to of dollars against yen in a series of operations protect themselves against the possibility that between March 23 and April 6, purchasing a total the dollar might continue to advance. In view of of $3,007.7 million. The operations by the U.S. their long-standing expectation that the dollar authorities were coordinated with operations by would decline over time, bidding for dollars the Bank of Japan and several European central quickly subsided, and dollar rates started to drift banks. down. By the end of March, the dollar appeared to be As the dollar started to decline after mid- settling in a range around ¥147. But concern March, the focus of market attention shifted over the stability of the dollar had spread from from the mark to the yen. The expectation that the foreign exchange to other financial markets. short-term interest rate differentials would move The dollar's depreciation precipitated sharp dein favor of the dollar against the mark and fear of clines in prices of U.S. bonds and equities. It central bank intervention limited the dollar's contributed to sharp increases in the prices of decline against the mark. But against the yen, the gold and silver. And as investors sought alternadollar was trading only slightly above the ¥150 tives to dollar-denominated assets, the prices of level that many market participants, especially in bonds denominated in other currencies rose. As Japan, believed represented at least an important a result of the divergent forces in the world's psychological benchmark and perhaps constitut- bond markets, long-term interest rate differened the lower limit of the range for the yen-dollar tials moved strongly in favor of the dollar. exchange rate they thought had been agreed to in Meanwhile, market participants came to beconjunction with the Paris agreement. Although lieve that new incentives would be needed to Japanese economic growth was weaker than it maintain the credibility of official efforts to stabihad been in many years, market participants lize exchange rates and halt the dollar's decline. evidently judged that the Japanese government, As a result, they looked forward to a scheduled embroiled in a debate concerning tax reform, meeting of the Group of Seven (G-7) finance would not take early and significant policy acministers and central bank governors in Washtions to spur domestic demand and reduce its ington on April 8 for evidence that the authorities trade surplus as promised in the Paris agreement. were firmly committed to exchange rate stability. Moreover, the announcement that the United The G-7 ministers and governors welcomed States would impose trade sanctions on selected the proposals announced by the governing party Japanese products following a dispute over semiin Japan for substantial measures to stimulate conductor products fueled fears of protection- Japan's economy. But some market participants ism. In Europe, concern was growing that the were disappointed that additional new initiatives Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 555 were not announced. Also, U.S. trade statistics 2. Drawings and repayments by foreign central for February, released on April 14, left the banks under regular reciprocal currency arrangements' impression that the adjustment in the world's trade imbalances, at least in nominal terms, was Millions of dollars; drawings or repayments (-) still disappointingly small. Under these circum- Central bank Out- Outdrawing on standing, stances, sentiment toward the dollar remained Feb- standing, the Federal Feb- March April ruary April bearish. Market participants questioned whether Reserve ruary 30, 1987 System 1, 1987 interest rate differentials favoring the dollar were sufficient to maintain foreign investors' appetite Bank of Mexico ... 61.4 -61.4 0 0 0 for dollar-denominated assets. As a result, the dollar was again heavily offered in early April, I. Data are on a value-date basis. especially against the yen but also against other currencies that provided attractive capital market outlets for foreign investors. The U.S. au- hopes of more economic policy convergence thorities continued to intervene on occasion, faded. In Japan, official comments suggested that buying U.S. dollars at times to foster exchange there would be no further easing of credit policy, rate stability. They operated on three of the nine and there seemed to be little evidence of movebusiness days between April 7 and April 17, ment toward a more expansionary budget. buying $532 million against yen. As before, these Doubts developed that the Federal Reserve had operations in yen were closely coordinated with much scope to tighten monetary policy, given the those undertaken by the Bank of Japan and decline in U.S. final domestic demand as reportseveral European central banks. ed in the first-quarter data on gross national Statements by U.S. and Japanese officials in product. Moreover, reports emerged from U.S.mid-April were interpreted as indicating that the Japanese trade negotiations indicating little progofficials were genuinely concerned about the ress, and toward the end of the month the U.S. risks of further sharp downward movements in House of Representatives added to its trade bill a dollar rates and that other action might be forth- provision calling for mandatory restrictions on coming to enhance efforts to stabilize exchange U.S. imports from countries with large trade rates. Comments by Bank of Japan Governor surpluses. Sumita and other Japanese officials suggested Thus, the dollar was again subject to episodes that new arrangements were under consideration of intense selling pressure in the third week of to finance concerted intervention operations. In April. Against the yen it declined below ¥140, a speech before the Japan Society in New York, reaching a 40-year low of ¥137.25 on April 27. Treasury Secretary Baker, making specific refer- The dollar also declined against the European ence to the dollar-yen rate, said that U.S. and currencies, easing below DM1.80 to trade as low other authorities intended to cooperate closely to as DM1.7710 against the German mark. The foster exchange rate stability despite trade diffi- Desk intervened on three more occasions in late culties and that a further decline of the dollar April, both in yen and marks, purchasing $424.9 against other major currencies could be counter- million against yen and $99 million against productive. Also around mid-April, U.S. short- marks. term interest rates firmed, and this was taken by In the final days of April, comments by Chairsome market participants as an indication that man Volcker and by Prime Minister Nakasone U.S. monetary policy might be tightening some- during his visit to Washington indicated that the what to ease the pressures on the dollar. central banks of the two countries were making Even so, many in the market continued to more adjustments in their monetary policies. Mr. doubt that the authorities were sufficiently com- Nakasone announced that the Bank of Japan mitted to exchange rate stability to make major would act to ease short-term market rates, and adjustments to domestic economic policies. Mr. Volcker stated that the Federal Reserve had Thus, the dollar again came under strong selling "snugged up" monetary policy in light of the pressure during the last full week of April as exchange rate pressure. With the market per- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

556 Federal Reserve Bulletin • July 1987 3. Drawings and repayments by foreign central banks under special swap arrangement with the U.S. Treasury1 Millions of dollars; drawings or repayments ( —) Outstanding, Outstanding, Central bank drawing Amount of February 1, February March April April 30, on the U.S. Treasury facility 1987 1987 Bank of Mexico 273.0 61.6 -61.6 (-) (2) (2) Central Bank of Argentina 225.0 0 0 225.0 0 225.0 1. Data are on a value-date basis. 2. No facility. ceiving that monetary authorities were acting to the April G-7 statement to foster exchange rate widen interest rate differentials in favor of the stability. But in part, these transactions reflected dollar, the currency recovered from its lows the purchases of a number of European central against the yen and the mark to close the period banks that took advantage of the relative firmat ¥140.85 and DM1.7925 respectively. At these ness of their currencies against the mark, the levels, the dollar was down 83/s percent against dollar, or both, to replenish official reserves by the yen from both its opening in February and its purchasing dollars. level in mid-March. Against the mark, the dollar During the three-month period, the Treasury closed the period down 2'/s percent from its Department through the Exchange Stabilization opening in February and down 43/s percent from Fund (ESF) joined with other central banks to its highs in mid-March. On a trade-weighted provide a multilateral short-term credit facility basis, as measured by the Federal Reserve Board totaling $500 million for the Central Bank of the index, the dollar declined 37/s percent against all Argentine Republic in support of Argentina's G-10 currencies between the opening in Febru- economic program to achieve sustainable growth ary and the end of April. and a viable balance of payments position. The For the three-month period as a whole, inter- ESF's portion of the facility was $225 million. vention dollar purchases by the U.S. monetary The facility was established on March 5, and the authorities totaled $4,063.6 million, while dollar full amount was drawn by the Central Bank of sales totaled $30 million. All intervention was the Argentine Republic on March 9. financed out of foreign currency balances. The Meanwhile, Mexico fully repaid on February bulk of the authorities' dollar purchases, or 13 the $61.6 million drawing on the ESF and a $3,964.6 million, was against sales of yen, of $61.4 million drawing on the Federal Reserve which $1,962.3 million equivalent was drawn that were outstanding under a two-tranche multifrom the Treasury's balances and $2,002.3 mil- lateral near-term contingency support facility of lion equivalent was drawn from the Federal $1.1 billion provided jointly by the U.S. mone- Reserve. In addition, the Federal Reserve and tary authorities, the Bank for International Setthe Treasury each sold $49.5 million equivalent tlements (acting for certain central banks), and of German marks. On one occasion in the period, the central banks of Argentina, Brazil, Colomas indicated above, the Federal Reserve and the bia, and Uruguay. The facility has now lapsed. Treasury each sold $15 million equivalent of As noted in previous reports, the first tranche of German marks. $850 million had been made available to Mexico During the three-month period, foreign central on August 29, 1986, with the Federal Reserve banks also bought dollars in extraordinary providing $211.0 million. On December 8, after amounts in the exchange markets. In part, these Mexico had become eligible to draw the second purchases reflected operations of the Bank of tranche of $250.0 million, Mexico had drawn Japan, the Bundesbank, and several other Euro- $61.8 million from the Federal Reserve and $62.0 pean central banks, which purchased dollars million from the ESF. Drawings on the first against yen and other currencies in accordance tranche were fully repaid in the previous reportwith the understandings of the Paris Accord and ing period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 557 4. Net profits or losses (-) on U.S. Treasury and eign currency balances were $1,981.3 million for Federal Reserve current foreign exchange the Federal Reserve and $1,809.8 million for the operations1 Treasury's ESF. These valuation gains represent Millions of dollars the increase in the dollar value of outstanding U.S. Treasury currency assets valued at end-of-period ex- Federal Exchange Period change rates, compared with the rates prevailing Reserve Stabilization Fund at the time the foreign currencies were acquired. February 1, 1987- The Federal Reserve and the ESF invest for- April 30, 1987 688.1 571.9 eign currency balances acquired in the market as Valuation profits and losses on outstanding a result of their foreign operations in a variety of assets and liabilities as of April 30, 1987 1,981.3 1,809.8 instruments that yield market-related rates of return and that have a high degree of quality and 1. Data are on a value-date basis. liquidity. As of April 30, 1987, under the authority provided by the Monetary Control Act of In the period from February 1 through April 1980, the Federal Reserve held investments to- 30, the Federal Reserve and the ESF realized talling $1,091.1 million equivalent of its foreign profits of $688.1 million and $571.9 million re- currency holdings in securities issued by foreign spectively on sales of foreign currency balances. governments. In addition, as of the same date, As of April 30, cumulative bookkeeping or valua- the Treasury held the equivalent of $2,566.1 tion gains during the period on outstanding for- million in such securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

558 Industrial Production Released for publication May 15 index in April was 1.3 percent above that of a year earlier. Industrial production declined an estimated 0.4 In market groupings, output of consumer percent in April, after having fallen a revised 0.2 goods declined 0.9 percent in April after having percent in March. Output of motor vehicles decreased 0.4 percent in March. A large part of dropped sharply, and much of the April decline the April decline resulted from a sharp reduction in total production was related to the cuts in this in output of durable consumer goods, primarily industry; however, smaller declines were wide- motor vehicles. In April, autos were assembled spread. At 126.3 percent of the 1977 average, the at an annual rate of 7.2 million units as compared Ratio scale, 1977= 100 140 Products TOTAL INDEX 120 100 / Materials J I 80 140 MANUFACTURING Durable MATERIALS Durable 112200 — Nondurable -js Nondurable ^^ / — 100 Energy s—— _ 1 1 1 1 1 1 80 1 1 1 1 1 1 160 CONSUMER GOODS INTERMEDIATE PRODUCTS Nondurable 140 Business supplies 120 100 80 — Construction supplies I I L 140 MOTOR VEHICLES AND PARTS FINAL PRODUCTS Defense and space 120 100 80 Consumer goods 60 1981 1983 1985 1987 1981 1983 1985 1987 All series are seasonally adjusted. Latest figures: April. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

559 1977 = 100 Percentage change from preceding month PPPeeerrrccceeennntttaaagggeee ccchhhaaannngggeee,,, Group 1987 1986 1987 AAAppprrr... 111999888666 tttooo AAAppprrr... Mar. Apr. Dec. Jan. Feb. Mar. Apr. 111999888777 Major market groups Total industrial production 126.8 126.3 .5 -.1 .4 -.2 -.4 1.3 Products, total 135.6 134.9 .4 -.1 .8 -.3 -.5 1.7 Final products 134.4 133.5 .4 .0 1.0 -.5 -.6 1.0 Consumer goods 127.0 125.9 1.3 -.4 .6 -.4 -.9 1.1 Durable 121.3 118.3 2.7 -1.2 1.9 -.9 -2.5 2.1 Nondurable 129.1 128.7 .8 -.1 .2 -.3 -.3 .8 Business equipment.. 139.6 139.0 -1.1 .7 1.9 -.8 -.4 .3 Defense and space... 186.7 186.6 .5 -.3 .7 .1 - .1 4.8 Intermediate products.. 139.7 139.5 .4 -.4 .2 .3 -.1 3.7 Construction supplies 128.1 127.9 .8 .3 -.3 .2 -.2 3.5 Materials 114.8 114.7 .8 .0 -.2 -.1 -.1 .8 Major industry groups Manufacturing 131.7 131.1 .6 .1 .6 -.2 -.4 1.9 Durable 129.9 128.9 .5 -.1 1.0 -.3 -.7 .7 Nondurable 134.3 134.3 .8 .3 .1 .0 -.1 3.6 Mining 95.0 95.2 -.7 .5 -1.7 -.6 .2 -5.7 Utilities 110.2 110.5 -.6 -1.0 .3 .4 .3 1.0 NOTE. Indexes are seasonally adjusted. with rates of 7.9 million in March and 8.3 million business supplies, which was quite strong during in February. Moreover, the output of home the second half of last year, has been, on avergoods, which was very strong in the last quarter age, little changed since December. Output of of 1986, fell for the fourth consecutive month. materials was about unchanged in April, with The production of nondurable consumer goods declines in durable and nondurable goods materidropped in April and has been weak throughout als, but a small rise occurred in energy materials. this year. Production of business equipment de- In industry groupings, manufacturing produccreased 0.4 percent in April led by weakness in tion decreased 0.4 percent in April, with most of transit equipment, particularly in motor vehicles; the decline concentrated in durables. Iron and output in all other major business equipment steel output, however, continued to rise followareas declined with the exception of commercial ing gains in February and March. Output of equipment, which rose. Production of defense nondurables has been flat, on balance, since and space equipment was little changed again in January. Production at both mines and utilities April. The production of both construction and increased in April. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

560 Statements to Congress Statement by Martha R. Seger, Member, Board $10,000. During 1986 the Federal Reserve conof Governors of the Federal Reserve System, ducted 844 examinations of state member banks before the Subcommittee on Financial Institu- and Edge act corporation offices for compliance. tions Supervision, Regulation and Insurance of These compliance reviews found violations of the Committee on Banking, Finance and Urban the Bank Secrecy Act at 153 banks or offices. Affairs, U.S. House of Representatives, May 6, These violations included incomplete or inaccu- 1987. rate currency transaction reports, failure to file reports, and failure to maintain exemption lists I appreciate the opportunity to appear before the with the required information. subcommittee on behalf of the Federal Reserve. The vast majority of these violations were The subcommittee asked the Board to discuss found to be technical in nature. The violations the efforts being taken to enlist the cooperation resulted primarily from procedural problems or of foreign authorities in eliminating the use of the misinterpretations of the reporting requirements. international banking system by criminal ele- When it appears that an institution has willfulments. ly avoided the Bank Secrecy Act's reporting Before I begin to discuss this topic, however, requirements, however, then the matter is rethe chairman of the subcommittee requested that ferred immediately to the Department of the I familiarize the subcommittee members with the Treasury. The staff members of the Department duties and responsibilities of the Federal Reserve of the Treasury review each report to determine in enforcing the Bank Secrecy Act of 1970 and if a criminal investigation is warranted or wheththe Money Laundering Control Act of 1986. I er civil money penalties should be assessed. Of will also take this opportunity to inform the course, every violation discovered by bank regusubcommittee about the enhancements to the latory agencies is reported to the Department of Federal Reserve's procedures on examining for the Treasury on a quarterly basis. compliance with provisions of the acts and efforts taken to date to educate the banking system on our procedures and the acts in general. COMPLIANCE WITH ANTI-DRUG ABUSE ACT OF 1986 RESPONSIBILITIES OF THE FEDERAL Section 1359 of the Anti-Drug Abuse Act of 1986 RESERVE UNDER THE BANK SECRECY ACT required the federal banking agencies to develop regulations requiring insured banks to establish The Federal Reserve, in conjunction with the and maintain the necessary procedures that other banking supervisory agencies, has the re- would ensure compliance with the Bank Secrecy sponsibility for monitoring financial institutions Act. On January 21, 1987, the Board amended to determine their compliance with the record- Regulation H to require state member banks to keeping and reporting requirements of the Bank establish a program that would assure compli- Secrecy Act. This authority is delegated to the ance with the recordkeeping and reporting re- Federal Reserve by the Department of the Trea- quirements of the Bank Secrecy Act. The regulasury. tion requires that a written compliance program Among other requirements, the Bank Secrecy that is approved by the bank's board of directors Act orders financial institutions to report curren- be established. The compliance program must, at cy transactions of certain customers that exceed a minimum, include four elements: (1) a system Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

561 of internal controls; (2) independent testing for not have complex or sophisticated internal opercompliance; (3) designation of individual(s) to be ations. responsible for compliance; and (4) appropriate Also, Board staff members were active particitraining of employees. The regulations were pub- pants in the recent seminars conducted by the lished in the Federal Register on January 27, American Bankers Association and a teleconfer- 1987, and required banks to have a program ence by the Bank Administration Institute. implemented by April 27, 1987. These programs provided a forum for more than Besides formulating the required regulations, 7,000 bankers to discuss the fight against drug the Federal Reserve also has the responsibility trafficking and money laundering. They also profor ensuring compliance through the examination vided the opportunity to update the industry on of its regulated banks. During an on-site exami- the 1986 amendments to the Bank Secrecy Act. nation, a state member bank's written proce- The Anti-Drug Abuse Act of 1986 also amenddures are carefully scrutinized to ensure that all ed the Change in Bank Control Act. The Change of the Bank Secrecy Act's recordkeeping and in Bank Control Act requires persons seeking to reporting requirements are addressed. Cease- acquire control of a bank or a bank holding and-desist proceedings are required if a bank company to provide the appropriate federal does not have a written compliance program or banking agency with notice of the proposed has not corrected previously cited problems. acquisition at least 60 days before the transac- Written documentation is reviewed to ensure tion. During the 60-day period the Federal Rethat, among other considerations, the bank has serve has the responsibility to conduct investigaadopted the appropriate measures for establish- tions of competence, experience, and financial ing and maintaining the list of customers who ability of each notificant and to make an indepenhave been exempted from the reporting require- dent determination of the accuracy and comments of the Bank Secrecy Act. Also, the docu- pleteness of the information provided. The mentation must provide for review procedures to Board must also perform a competitive analysis make certain that each Currency Transaction of the proposal. The amendments to the Change Report is filled out completely and accurately in Bank Control Act require the federal banking before the time that it is forwarded to the Internal agencies to publish the name of each party Revenue Service. seeking to acquire control of a bank or a bank holding company and the name of the target Board staff is presently in the process of institutions and to solicit public comment on the strengthening the procedures followed by the proposed acquisition, in particular from persons Federal Reserve in enforcing the Bank Secrecy in the geographic area in which the bank to be Act. Procedures designed to help detect violation acquired is located. of the law, developed by the Bank Secrecy Act Interagency Working Group chaired by the Trea- In addition, the amendments permit the federal sury Department, are being incorporated into our banking agencies to extend the period of agency examination instructions. In addition, the staff is review of proposed acquisitions. The agencies revising the Currency and Foreign Transactions may extend the 60-day review period for 30 days Reporting Manual, which includes the examina- at the agency's discretion. Two additional 45-day tion procedures, to reflect the recent amend- extension periods are permitted if the agency ments to the Bank Secrecy Act and to include determines that additional time is necessary to exemption and reporting data recently developed investigate a notificant's compliance with the by the Internal Revenue Service. Bank Secrecy Act. The extension period is also Board staff has provided assistance to state available if the agency is unable to complete its member banks in meeting the new requirements review of the notice because the notificant has of Regulation H by issuing guidelines for estab- not provided all relevant information, has prolishing policies and procedures for maintaining vided information that is substantially inaccucompliance with the Bank Secrecy Act. We also rate, or has delayed in providing appropriate provide sample documentation that will serve as information. a reference for banks that rarely conduct large The Board recently proposed amending its cash transactions with their customers and do regulations regarding the Change in Bank Con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

562 Federal Reserve Bulletin • July 1987 trol Act to implement the amendments to the act Bank Regulation and Supervisory Practices.1 As made by the Anti-Drug Abuse Act of 1986. The a result of these discussions, the committee has comment period for the proposal expired March asked the Federal Reserve and the Office of the 6, 1987, and the Board is following the proce- Comptroller of the Currency to develop jointly a dures in the proposal pending final issuance of Code of Conduct. This code, and ensuing discusthe regulation. sions of it, may eventually evolve into a viable document to promote international agreement on the role that banks should play in helping to INTERNATIONAL COOPERATIVE EFFORT eliminate criminal elements from the international banking system. Several countries have indi- Besides concentrating on enhancing its domestic cated a desire to work with the U.S. authorities oversight of the Bank Secrecy Act, the Federal in preparing this paper. A first draft of the code Reserve has also been working to obtain the will be completed shortly. The Federal Reserve cooperation of the international regulatory com- will then begin a series of bilateral discussions munity in implementing policies aimed at elim- aimed at securing general agreement with the inating criminal elements in the international code and soliciting opinions on the degree to banking system. The Federal Reserve is also which individual countries can ensure complicollecting information on how U.S. banks police ance by their banks. their own activities to ensure that procedures are The Federal Reserve is also working with in place to ascertain if criminal elements are officials from the Department of the Treasury to using the international payments system. initiate an educational program on U.S. laws. Bank supervisory authorities agree that it is This program would focus on the commitment of important to cooperate in attempting to elimi- our government to eliminate the use of the banknate, to the extent possible, the use of the ing system by criminal elements. Our support for international banking system by criminal ele- this effort is wholehearted because we believe ments. However, they often point out that while that an important step in the process of securing their role as information providers can be en- international cooperation is educating the princihanced, a more effective force for deterrence pal parties, both in bank supervision and in the may be the law enforcement agencies. Neverthe- area of law enforcement, to the commitments less, bank supervisors recognize that it is in- made by the United States concerning money creasingly important to protect the banking sys- laundering. tem against criminal exploitation. The Federal Reserve has also initiated efforts It is also interesting to note that countries to determine the extent to which overseas besides the United States are becoming more branches of U.S. banks have in place proper active in this area. Switzerland, for example, procedures to implement safeguards against often described as a preferred haven for money money laundering. Examiners are being instructlaundering, has recently published proposals for ed to question management at each branch being making money laundering a crime. The proposal examined as to what internal control measures was introduced by the Federal Justice and Police the bank has taken to prevent money laundering Department, which is illustrative of the critical activities. Besides providing information for the role of law enforcement authorities in developing report required by Section 1363 of the 1986 act, this effort will serve as a basis for discussions approaches to hinder criminal use of the banking system. The Federal Reserve is continuing its efforts to 1. The Basle Committee was established at the end of 1974 heighten the sensitivity of foreign bank supervi- by the central bank governors of the Group of Ten industrialsory authorities to the problems of money laun- ized countries, with the objective of strengthening collaboration among national authorities in their prudential supervision dering and, more generally, to educate those of international banking. The committee, whose members are authorities about U.S. laws. The need for officials of the central banks and supervisory agencies, meets strengthened international cooperation in this four times a year at the Bank for International Settlements in Basle, Switzerland. It is sometimes referred to as the Basle area has been raised by the Federal Reserve in a Supervisors' Committee or Cooke Committee, after its curnumber of meetings with the Basle Committee on rent chairman, W.P. Cooke. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 563 with individual banks regarding compliance with Department of the Treasury in carrying out the the spirit of the Money Laundering Control Act. requirements of Subtitle H of the Anti-Drug The efforts just described are obviously initial Abuse Act of 1986 and the Bank Secrecy Act. steps being taken to set the groundwork for further work in this area. Progress is being made, and the Federal Reserve believes that efforts IRAN-CONTRA INVESTIGATION undertaken to date have been generally well received. The members of the Basle Committee The letter inviting the Board to testify requested appear to be more receptive to dealing with the information regarding any role the Federal Reissue of money laundering now than in the past. serve is undertaking in the Iran-Contra investiga- The efforts of the United States, and now Swit- tion. The Federal Reserve has not been asked to zerland, may serve as role models to other play any specific role in this investigation alcountries in focusing their attention on these though our staff did respond orally to a request issues. The Federal Reserve will continue to for technical information about the operation of focus its attention in this area and to assist the the international payment systems. • Statement by Wayne D. Angell, Board of Gover- rience in 1986 and therefore, small variations nors of the Federal Reserve System, before the exist from data in that document.1 Subcommittee on Domestic Monetary Policy of Before getting to the substance of our 1987 the Committee on Banking, Finance and Urban budget, I would remind the subcommittee of two Affairs, U.S. House of Representatives, May 6, aspects of Federal Reserve System operations 1987. that affect our budget in unusual ways. First, about 40 percent of the Reserve Bank expenses I appreciate this opportunity to discuss and re- arise from services provided to depository instiview the Federal Reserve System's expenses and tutions for which, by law, we charge fees adebudget with this subcommittee. In 1986 Chair- quate to cover costs, imputed taxes, and imputed man Volcker testified twice on Federal Reserve return on capital that would have been paid had budget matters. In January he focused on budget the services been furnished by a private business policy and the issue of Federal Reserve budget- firm. In fact, since fees cover actual costs plus ary independence, and in June he concentrated these imputed costs (what we call the private on our expense and budget performance over the sector adjustment factor) plus the imputed cost past 10 years and on the 1986 budget. This of float, our revenue from the priced services testimony continues that series with emphasis on amounts to about 50 percent of all our spending. budget developments in 1987. Priced services are subject to the competitive We have recently made available to the public discipline of the marketplace; yet we neither and to this subcommittee copies of our publica- price on the basis of what the market can bear tion entitled Annual Report: Budget Review, nor limit our provisions of particular services to 1986-87. This document presents detailed—but "profitable" customers or geographic areas; nor readable and convenient—information about do we rely on variable cost pricing to maintain spending plans for 1987 and comparisons with market share. Second, many fiscal agency operaexpenditures in 1985 and 1986. Also included is tions are reimbursable from the Treasury Departinformation about the budget and accounting ment. Altogether, about 57 percent of our total processes in the Federal Reserve System. The expenses are either recovered through pricing or Budget Review is in its second year of publica- are reimbursable. tion and is a companion document to the Board's 73rd Annual Report, 1986. Much of the material in this testimony has 1. The attachments to this statement are available on been taken from the budget document. The atrequest from Publications Services, Board of Governors of tached tables have been updated for actual expe- the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

564 Federal Reserve Bulletin • July 1987 A 10-YEAR OVERVIEW Bank operations, significant increases in volumes of electronic payments, and steady in- Let me put the 1987 budget in further perspective creases in volumes of paper-based payments. by sketching briefly the 10-year history of Sys- On the productivity front, real unit costs, tem expenses. In the 10-year period from 1977 to 1977-86, have decreased at an annual rate of 1987, Federal Reserve expenses increased at an about 3.5 percent per year. For priced services— average annual rate of 6.7 percent in nominal primarily check processing, which accounts for terms and 0.9 percent in constant dollars while about 75 percent of priced service expenses— System employment decreased by 1,129, or 4.4 there were sharp losses in volume during the percent. In the measured services (chiefly those MCA transition period. Because of substantial subject to pricing), volume increased about 40 elements of fixed costs, real expenses could not percent through 1986; unit costs, adjusted for be cut at the same rate as volume decreased; inflation, decreased more than 25 percent. Labor thus, real unit costs increased. However, since productivity showed an average gain of more 1983 unit costs have again declined in almost than 5 percent per year. every area, bringing real unit costs substantially Any discussion of operational trends during lower than they were in the 1970s. The decline this period should mention the impact of the has been particularly sharp in electronic payment Monetary Control Act (MCA) on System re- areas in which equipment is more readily substisources. The MCA, which created the pricing tuted for human resources and in which volume system described earlier, also extended reserve growth has been more rapid. requirements to all nonmember banks and thrift Gains in productivity have also been made in institutions, thus requiring us to create and main- nonpriced service areas, which are comprised tain new data collection and account mainte- principally of fiscal agency operations performed nance systems. With the transition to pricing, for governmental units and cash operations innew billing and pricing systems had to be estab- volving distribution of currency and coin. In lished and access to our services had to be these services, volumes have increased and real provided to all depository institutions. If the 10- unit costs have declined or risen only slightly year period is divided into three distinct peri- during the same time periods. ods—pre-MCA, transition to MCA, and post- This 10-year period of expenditure control and MCA—performance stands out more clearly: productivity gain was concluded by additional • Pre-MCA, from 1977 to 1979, nominal ex- expense reduction actions in 1986 and 1987 in the penses increased at an annual rate of 5.4 percent. spirit of Gramm-Rudman-Hollings. If a broad-based measure of inflation is used, an annual rate of decrease in real expenses of 2.4 percent is implied. GRAMM-R UDMAN-HOLLINGS • During the MCA implementation phase from 1980 to 1982, nominal expenses increased at an As Chairman Volcker indicated in testimony annual rate of 11.7 percent because of the large before this subcommittee last year, even though outlays required for the Monetary Control Act— the System is not covered by the Gramm-Rudan annual rate of increase of 3.1 percent is man-Hollings legislation, the Board decided to implied in real terms. reduce System budgeted expenses for 1986 in a • Post-MCA, from 1983 to 1987, nominal ex- manner consistent with the spirit of the legislapenses increased at 4.3 percent on average—an tion. The Board determined that a reduction of annual rate of increase of 1.0 percent is implied $18 million in the System's (Reserve Bank and in real terms. Board of Governors) approved budget was ap- The past 10 years have also seen rapid changes propriate. I am pleased to be able to report that in the banking industry that have required addi- the System achieved the reduction targeted by tional resources to strengthen examinations of the Board and further reduced expenses $53 member banks and inspections of bank holding million. companies. The period has also been marked by The Federal Reserve System is continuing in rapid developments in automation of Reserve 1987 to make special efforts to limit the growth of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 565 expenses. The Reserve Banks have reduced pre- As a result of the review process, the total viously planned growth in expenses $21.1 mil- budgeted expense of the Reserve Banks—both lion. As a result, 1987 Reserve Bank budgeted priced and nonpriced—was held to an increase of expenditures are only 1.3 percent more than 2.9 percent over estimated 1986. (Over actual those in the original 1986 budget. At the Board, 1986, the increase is expected to be 3.1 percent savings in personnel costs related to a self- since actual expenses were less than estimated.) imposed staff reduction project, which 1 will The Reserve Banks' 1987 budgets are affected by discuss later, and to Gramm-Rudman-Hollings five initiatives, which we believe to be of high combined to hold expenses well below the level priority. These are the initiatives: to which they would otherwise have risen. 1. The Board of Governors decided in 1985 to As you may know, the budgets for the Reserve intensify System supervisory oversight of state Banks and the budget for the Board of Governors member banks and of bank holding companies are approved through separate processes al- and to strengthen the procedures for reporting to though all must be approved by the Board of bank management. These efforts will cost $6.7 Governors. Reserve Bank budgets must first be million more in 1987 than they did in 1986. The reviewed by the Committee on Federal Reserve impact of this program is seen in the employment Bank Activities; the Board budget must be re- growth in supervision and regulation of 175 in viewed by the Administrative Governor. Also, 1986 over 1985 and of 94 in 1987 over 1986. The service and expense object categories are differ- program enhancement will be in place in 1987. ent in some respects between the Reserve Banks 2. A computer contingency center will provide and the Board. Therefore, it is appropriate that I emergency data processing for the New York discuss the Reserve Bank budgets and the Board Reserve Bank's electronic transfers of largebudget in separate sections. dollar funds and securities. The center is budgeted at $3.9 million in 1987 and is needed to reduce the possibility of financial crises should existing facilities fail. (These expenses are partially re- RESERVE BANK BUDGETS FOR 1987 covered through pricing and reimbursement.) 3. Several Districts are improving their elec- Planning for 1987 Reserve Bank budgets (93.2 tronic delivery and receipt of payment informapercent of System expenses) began early in 1986, tion and their check-clearing services at a cost of when the staff developed the budget objective $3.5 million. (These expenses are recovered based on forecasts of Reserve Bank workloads through pricing.) and productivity. This annual budget objective, 4. One-time expenses will be incurred in movwhich was approved by the Board in the spring, ing into a new branch building and renovating was used by the Reserve Banks in developing four head-office buildings at a cost of $4.9 miltheir plans and budgets. At each of the 12 Re- lion. serve Banks, the proposed 1987 budget was 5. Several initiatives for the U.S. Treasury will given rigorous review (with the budget objective increase expenses $4.8 million. Treasury Direct, as guidance) by a committee of the respective a book-entry system for the safekeeping of mar- Bank's senior officials, First Vice President, and ketable Treasury securities for individuals and President. The budget, as modified by these small investors, is expected to reduce staff at the reviews, was also reviewed and approved by the Treasury Department resulting in a net reduction Reserve Bank's Board of Directors, many of of federal resources. A full year of operations of whom are responsible in their private capacity the Treasury Direct System will increase reimfor managing large organizations. In the fall, bursable expenses $4.4 million in 1987 and in- Reserve Bank budgets were submitted to the crease staff at the central site in Philadelphia by Board of Governors where they were analyzed 24 employees (bringing total staff there to 69). and reviewed by the Committee on Federal Re- The Federal Reserve is also continuing the develserve Bank Activities, which held separate meet- opment of a Public Debt Accounting and Reportings with each Reserve Bank President on the ing System and two savings bond projects. proposed budget. The total increase in expenses for these major Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

566 Federal Reserve Bulletin • July 1987 initiatives is $24 million in 1987. If we were to expected next year (an increase of 4.7 percent). exclude costs for these projects, the 1987 budget Reserve Banks are taking steps to improve furfor Reserve Banks would be only 0.9 percent ther the technology of high-speed currency progreater than estimated expenses for 1986. Bud- cessing. It is anticipated that newly designed geting for these initiatives and at the same time second-generation equipment will improve effikeeping bottom line expense growth low (2.9 ciency of operations in future years. percent) was achieved by restrained growth or Expenses in the funds transfer service are decreases in other areas. Indeed, staff increases projected to increase $3.3 million, or 5.7 percent, for these initiatives were more than offset by largely because of the implementation of new decreases in other services, producing a 1987 software and the expansion of electronic netbudgeted decrease in total staff of 220. works in several Districts to improve services to For a look at 1987 budgeted expenses on a the public. The System expects to process 85 program basis, I will discuss our four service million funds transfers in 1987, a rise of 6.2 lines in the order of their size. percent over 1986. Expenses for services to financial institutions An increase of $5.3 million, or 9.5 percent, is and the public total $799 million and account for expected for the automated clearinghouse seralmost two-thirds of the Reserve Banks' 1987 vice because of the growth in workload (21 budgets. Expenses are budgeted to increase 3.8 percent) and higher costs associated with expercent over actual 1986. While increases in panding the electronic networks. A staff reducvolume are expected in all major operations, tion of 13 is planned for noncash collection as employment is budgeted to decline by 77 per- volume continues to decline. sons, or 0.8 percent, from 1986. Expenses for supervision and regulation, Almost half of the expenses in this operational which total $172 million, constitute 14 percent of area is related to commercial check processing. the Reserve Banks' 1987 budgets and are budget- The budget increase for this area, $14.2 million, ed to increase $7.8 million, or 4.7 percent over accounts for most of the increase for the service actual 1986. A major factor in the increase is the line as a whole and results from growth in continuation of a program instituted in 1985 to volume and in the cost of new services. In 1987 strengthen the supervision of financial instituthe System expects to process 14.8 billion com- tions and to improve communications with their mercial checks, 330 million more than in 1986. management and directors. The supervision ser- As a result of continuing improvements in effi- vice, which includes the examination activities, ciency, the commercial checks staff is budgeted is budgeted to increase $6.5 million, or 7.0 perto decline by 67. System initiatives focus on cent. The enhanced supervisory program will be offering new or improved services such as notifi- fully implemented by the end of 1987. Employcation of the return of large-dollar checks; trun- ment is expected to increase 94, or 4.5 percent cation (under which checks are not returned to (mostly bank examiners). the writer); and the accelerated availability of To accomplish the enhanced supervisory profunds through the development of new products, gram cost effectively, the Reserve Banks are the enhancement of existing ones, and the expan- shifting resources from other supervisory areas. sion of check-clearing zones. The budget projec- For example, the Reserve Banks will reduce the tions do not, however, reflect the potential im- frequency of examinations of smaller banking pact of legislation being considered in the Senate organizations with satisfactory ratings; they will and the House of Representatives that would reduce the frequency of trust examinations and mandate certain availability limits on funds de- examinations for compliance with consumer regposited by check. Passage could require an in- ulations; and they will be better integrated with crease of 20 to 35 percent in return items staff state examinations. Also, the Reserve Banks are and an increase in equipment. Overall expenses improving productivity through continued use of could approach $50 million over several years. automation, including the use of portable personal computers in the field, and in-house analysis in Expenses for currency processing are expectcertain cases. ed to increase $0.9 million, or 0.8 percent. Highspeed processing of more than 14 billion notes is Even without the enhanced supervisory pro- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 567 gram, the workload in supervision and regulation account for 62 percent of total expenses and are would be expanding as a consequence of the expected to increase only 1.3 percent over actual normal growth in the formation of new state levels in 1986. A major factor contributing to this member banks and bank holding companies. low rate of increase is the decline of $13.9 million Moreover, in the current environment, the grow- in retirement and other benefits in 1987—owing ing number of mergers in some Districts, the to a cessation of contributions to the overfunded continued expansion of investment banking ac- retirement plan in 1987, and a decline in the cost tivities by multinational banking organizations, of group life insurance. A negative expense adthe number of problem banks, and the Board's justment resulting from 1987 implementation of a payment system risk reduction program are all recently adopted GAAP (generally accepted acplacing additional demands on Reserve Bank counting principles) standard is not included. resources. These decreases are partially offset by increases Expenses for services to the U.S. Treasury and in expenses of other benefits. Another significant other government agencies—the next service line factor is a major decrease in the expected use of in order of size—are budgeted at $136 million for contract computer programmers in 1987 due to 1987 (11 percent of all Reserve Bank expenses). the completion of several important program Expenses are expected to decline $0.9 million, or applications. Increases in salaries of officers and 0.6 percent, from 1986 levels, primarily as a conse- employees result from merit pay increases, proquence of accounting changes and lower work- motions and reclassifications, and changes in the loads. Partially offsetting these factors is the in- number of employees. creased expense of $4.4 million in 1987 for Equipment expenses, which make up 14 per- Treasury Direct, a book-entry system for the safe- cent of total expenses, are budgeted to increase keeping of marketable Treasury securities for indi- 7.5 percent over 1986. Equipment costs have viduals and small investors. In addition, the Feder- risen more rapidly than personnel costs in recent al Reserve is developing a "public debt accounting years as capital has been substituted for labor to and reporting system" for the U.S. Treasury at a improve productivity. In summary, the increase cost of $483,000 in 1987, $285,000 more than in budgeted for equipment results from replace- 1986; and the Pittsburgh Branch will serve as the ments and upgrades to ensure compatibility with System's central site for processing payroll bonds the System's long-range automation plan and and book-entry savings bonds at a cost of $97,000 with automation and communication initiatives. in 1987. Building expenses, which constitute 9 percent Expenses for monetary and economic policy, of total expenses, are expected to increase 11.9 which total $91 million and account for about 8 percent in 1987. The increase results from anticipercent of the 1987 budget, are expected to pated increases in local tax rates and assessincrease only $232,000 or 0.3 percent in 1987. ments, increases in utility rates and consump- Employment is expected to be 780, a decline of tion, renovations and refurbishments, higher 11 from 1986 levels. Factors tending to decrease rentals in some Districts, and the full-year effect expenses include the completion of a major of new buildings at two branch locations. banking statistics project, which will enhance the Shipping costs, 7 percent of total expenses, System's capacity to process and analyze finan- are budgeted to increase 3.5 percent because of cial data from depository institutions, and a higher costs for the interdistrict transportation reduction in staff for economic policy determina- system and anticipated increases in courier rates. tion. Factors increasing expenses include ex- Other objects of expense, constituting the repanded office automation, initiatives in open maining 8 percent of total expenses, are expected market trading at New York (two additional staff to increase only 1.4 percent. members and software), and analysis of the The plans of the Reserve Banks for capital financial problems of developing countries. spending in 1987 are also shown. By their nature, A brief review of Reserve Bank expenses on capital outlays vary greatly from year to year. an object-of-expense basis might be useful to the Outlays for buildings and for data processing and subcommittee. Total personnel expenses, which communications equipment continue to domiinclude all salaries and related benefits expenses, nate Reserve Bank capital budgets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

568 Federal Reserve Bulletin • July 1987 BOARD BUDGET area, Monetary and Economic Policy, are budgeted to increase 4.8 percent to $46 million in The budget of the Board of Governors is a 1987. This increase is attributed to relatively low relatively small part of the total System budget, data processing costs in 1986 and to higher-thanamounting to about 6.8 percent of the whole. normal vacancy rates in 1986 due to budgetary Each division director met with the appropriate restraints. The installation of a microcomputer Oversight Committee, composed of Board Mem- network in 1987 will increase expenses but will bers, early in the process. These meetings pro- also foster more efficient collection and analysis vided a high-level forum for planning budget of data in conjunction with the present Board initiatives and reviewing programs to find offset- mainframe configuration. ting reductions. The result of the process was a The Supervision and Regulation area has been guideline limiting the 1987 budget to an increase subject to the same factors that have affected this of only 2.7 percent over 1986 estimated ex- area at the Reserve Banks, and consequently, penses. expenses have grown sharply in the past two As a result of the intensive management re- years. Although expenses are budgeted to inview, the Board's 1987 operating budget totals crease only 1.6 percent above 1986 expenses, $86.3 million, an increase of $2.3 million or 2.7 this increase follows an increase of 12.8 percent percent over actual 1986 expenses. The 1987 in 1986. This level of increase has been necessary budget is, however, 0.3 percent less than the because the state of the nation's banking indusoriginal 1986 budget. This relatively low rate of try has required intensified supervision, surveilgrowth can be attributed to three major factors: lance, and enforcement. Additional resources have been required in spite of impressive produc- 1. Program Improvement Project. This staff tivity gains of staff working in the supervisory reduction project was initiated in mid-1984 to areas. Examples of the increase in workload reduce expenses by scaling back lower-priority from 1982 through 1986 include the following: an functions and by improving productivity. The increase of 25 percent in the number of bank incremental 1987 savings as a result of the staff holding companies monitored; an increase of 132 reduction project are $2.2 million; the annual rate percent in the number of bank holding company of savings from this program since its inception examination reports analyzed; and an increase of totals $5.6 million. 278 percent in the number of formal enforcement 2. Gramm-Rudman-Hollings. The Board in its actions. voluntary compliance with the spirit of this legis- In the area of Services to Financial Institutions lation, adopted measures in 1986 that reduced its and the Public, the 1987 budget of $2 million is operating budget $1.4 million. The reductions 16.1 percent less than 1986 expenses. This dewere accomplished, and the revised 1986 budget crease is the result of the completion of portions was underexpended at year-end. Some of the of the development work associated with the reductions made in 1986 to comply with Gramm- daylight overdraft project. The project is in- Rudman-Hollings were carried forward into tended to minimize risk in the payments 1987. mechanism. 3. Income. The Board adopted a policy to The 1987 budget for System Policy Direction reduce the costs associated with Board publica- and Oversight is $16.2 million, which is 1.6 tions. This policy reduced expenses $0.1 million percent higher than 1986 expenses. This increase in 1986 and will save $0.5 million per year is partially due to the reinstatement of a program beginning in 1987. to perform operations reviews that had been held in abeyance during the Program Improvement The Board's operations are categorized into Project. The 1987 budget for the oversight porfour major functional areas: Monetary and Eco- tion of this category was increased to include nomic Policy, Supervision and Regulation, Ser- funds to improve the ability of the Board to vices to Financial Institutions and the Public, perform electronic data processing audits at the and System Policy Direction and Oversight. Federal Reserve Banks. This improvement helps the Board to comply with the Federal Reserve Expenses in the Board's largest functional Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 569 Act requirement to examine each Reserve Bank 1986 expenses. This increase can be attributed annually. primarily to depreciation, which reflects capital Again, a brief review of expenses on an object- investments of approximately $17.4 million by of-expense basis is useful. Seventy percent, or the Board in 1986, including the purchase of a $60.1 million of the Board's $86.3 million budget, new mainframe computer and disk access deis for salaries, retirement, and insurance ex- vices for $12 million. This equipment was necespenses. This amount represents a $0.7 million, or sary to handle increases in the volume of data a 1.2 percent increase over 1986 expenses. A processed at the Board, to support increased general pay increase, of 3.0 percent, routine analysis and modeling, and to support enhancesalary actions, and changes in insurance rates ments in supervision. account for an increase of $3.3 million, which is partially offset by the savings of $2.2 million associated with the Program Improvement Pro- CONCLUSION ject. Further savings of $0.4 million resulted from a reduction of 22 positions in centralized In closing, I would like to emphasize that the data processing and an increase in the vacancy Board believes the Federal Reserve's budget rate throughout the Board. processes have worked well in controlling ex- The remaining 30 percent of the Board's 1987 penses. I would welcome any comments you operating budget is for goods and services, and may have on our presentation of budget informadepreciation. These expenses total $26 million, tion, and I am prepared to address any questions an increase of $1.5 million or 6.2 percent over you may have on our budget. • Statement by E. Gerald Corrigan, President, deed, reflecting its very large domestic saving Federal Reserve Bank of New York, before the rate and its massive current account surplus, Committee on the Budget, U.S. Senate, May 6, Japan has assumed a unique financial position in 1987. the world's community of nations. But Japan's financial position relative to the United States or I am pleased to be able to appear today to discuss to the rest of the world did not develop in a with the committee recent and prospective de- vacuum. Thus, before turning to the specific velopments regarding the globalization of finan- questions raised by the committee, allow me to cial markets and institutions, with particular em- comment briefly on the general economic and phasis on developments in the three major financial environment within which we must financial centers of the world: New York, Lon- seek to address the points of stress and tension don, and Tokyo. Within that broad framework, I that are so apparent. will devote particular attention to a series of That broader perspective should include at issues pertaining to access of U.S. firms to least four major points of reference, as follows: money and securities markets in Japan. 1. The dramatic rise in Japan's external surplus over the decade of the 1980s and the corresponding increase in the external deficit of the BACKGROUND United States are primarily the result of macroeconomic considerations including the following: Legend has it that Willie Sutton once said that he (1) the persistent and very large domestic savings robbed banks because that's where the money gap in the United States—growing importantly was. The analogy is poor, but there can be no out of the huge budget deficits—coupled with doubt that much of the current interest in Japa- Japan's extraordinarily high internal savings nese financial markets stems from that same rate; and (2) considerably more rapid growth in consideration: That's where the money is! In- domestic demand in the U.S. economy, especial- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

570 Federal Reserve Bulletin • July 1987 ly during the earlier stages of the current expan- 4. Whether we like it or not, the globalization sion. There is also the related issue of apparent of financial markets and institutions is a reality. differences in the ability of U.S. firms, perhaps Since that reality has been brought about imporespecially manufacturing firms, to compete ef- tantly by technology and innovation, it cannot be fectively in the external marketplace or with reversed in any material way by regulation or external competitors. All three of the factors, legislation. Moreover, while this process of globtogether with associated swings in exchange alization and innovation is producing important rates—swings that in my view tend to be exag- benefits to suppliers and users of financial sergerated by the marketplace—lie at the heart of vices, it also produces anomalous results. To cite the severe imbalances in the world economy. an example or two, Japanese securities compa- The relative openness, or lack thereof, of Japa- nies—whether owned by Japanese or foreign nese financial markets is at most a marginal firms—cannot generally engage in foreign exfactor insofar as the underlying causes of trade change trading and position-taking in Tokyo, but current account imbalances are concerned. they do it in London and New York; U.S. 2. Reversing the imbalances that have devel- banking companies cannot underwrite corporate oped over the past five years will not be easy and debt and equity securities in the United States, will take time. Moreover, if that adjustment is to but they do it in London or elsewhere. take place in a context of growth rather than in a framework of contraction, we must deal with the More generally, national systems of supervifundamentals. More open external markets for sion and regulation—to say nothing of tax and U.S. products and services are an important part accounting policies—that were created many of the agenda for adjustment, but absent underly- years ago were not designed for a marketplace of ing changes in economic policies and perfor- worldwide dimensions in which firms with differmance here in the United States as well as else- ing charters and national origins compete head to where in the world, more open financial markets head with each other around the clock and simply will not materially help the adjustment around the world. This situation is one of the process along. reasons why I believe the Congress must get on 3. Under the best of circumstances, the United with the task of fundamental reform of the struc- States will be dependent on capital inflows from ture of our banking and financial system—a task abroad for several years to come. That is, and to that is already well under way in several other use a purely hypothetical example, even if our countries. budget and trade deficits move lower at roughly A more rational structure at home—including the same speed as they increased, the United a structure that works in the direction of States would still have relatively large—and cu- strengthening the banking and financial system— mulating—current account deficits for the next would help encourage a more rational structure few years. This situation, of course, implies that internationally. Both now and in the future, this our external indebtedness will continue to grow, is probably more important to the prospects for even if at a slower rate, such that net capital U.S. financial firms and the U.S. national interinflows will be needed. To the extent that these ests than are the relatively narrow issues of necessary capital flows are impeded—for what- immediate dispute in particular markets. ever reason—the implications for interest rates In short, there are important and legitimate and exchange rates, and therefore domestic eco- concerns that must be dealt with pertaining to nomic activity, are almost certain to be detrimen- access of U.S. firms to foreign financial markets. tal here and elsewhere. To put it more directly, However, in seeking constructive solutions to we must take care to conduct our affairs in such a those problems, we must be sensitive to the way that our foreign creditors will be willing to larger picture, and we must recognize that the acquire and hold the needed amounts of dollarsolutions to these larger problems are not to be denominated assets at interest rates and exfound in the relatively narrow context of specific change rates that are otherwise consistent with equity and access issues pertaining to the activinoninflationary growth in the U.S. and world ties of U.S. financial firms abroad, as important economy. as those issues are for other reasons. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 571 MAJOR INTERNATIONAL FINANCIAL suggest that there are systematic patterns of MARKETS, AN OVERVIEW discrimination against foreign participants in any of the centers that are rooted in law. However, At the risk of injuring the sensitivities of our the simple "yeses" and "nos" in Exhibit I do friends in Frankfurt, Zurich, or Hong Kong—to not even begin to tell the whole story. Thus, the say nothing of Chicago or San Francisco—it is balance of this section will look at the individual probably fair to say that there are three dominant markets in somewhat greater detail. financial centers in the world today: London, Tokyo, and New York. Accordingly, and to provide some further perspective, Exhibit I at- BANKING MARKETS tempts to categorize the scope of activities available to various classes of domestic and foreign For several decades, foreign banking institutions institutions in each of these markets.1 have had a major presence in the United States. As the exhibit indicates, there are important This presence reflected several key factors indifferences from one market to the other, but as a cluding the following: (1) the multinational popugeneral matter, these differences do not reflect lation base of the United States; (2) the size and strictly legal distinctions based on the national importance of U.S. markets; and (3) the role of origin of the firm in question. To put it different- the U.S. dollar as a reserve currency and an ly, all three markets have de jure conditions of international medium of exchange. broad national treatment insofar as the general Typically, foreign banks operating in the U.S. range of banking and financial activities are market concentrate their activities heavily on the concerned even though there are important dif- so-called wholesale market. While there are ferences between the centers and, as noted later, some important exceptions, foreign banks are important de facto distinctions in terms of com- generally not major factors in retail banking petitiveness of foreign versus domestic concerns. markets. In addition, most of the foreign banks For example: that have a sizable presence in the United States • As mentioned earlier, banks, domestic or are affiliated with well-known major banks foreign, cannot as a general matter underwrite abroad, many of which have Triple-A credit corporate securites in New York or Tokyo, but ratings. Needless to say, the prominent names of they may do so in London. some of these institutions, together with their • Securities companies, domestic or foreign, credit ratings, give them important recognition in may not as a general matter deal in foreign their activities here in the United States. exchange in Tokyo, but they may in London and As of year-end 1986, there were more than 250 New York. foreign banks that had some kind of presence in • In two instances, there is a small tilt in favor the United States. In the aggregate, the assets of of U.S. banks in that as of March of this year, such foreign banks exceeded $500 billion at year- U.S. banks in Tokyo may have a securities end 1986 and constituted almost 20 percent of affiliate whereas domestic Japanese banks may total U.S. banking assets. To an extent, this not, and U.S. banks were permitted in 1986 to figure is inflated by virtue of the fact that some own trust banks in Tokyo whereas Japanese city foreign banks—notably the Japanese—book banks may not. By the same token, there are a most of their Western Hemisphere loans in U.S. number of foreign banks (none of which is Japa- offices. While not shown in the exhibit, foreign nese) that have grandfathered securities subsid- banks also account for about 20 percent of all iaries in the United States. commercial and industrial loans outstanding to In short, looking at broad classes of financial U.S. addressees. In both instances, Japanese activities in the three major centers does not banks are by far the most dominant group of foreign banks, accounting for nearly half of the total assets and commercial loans outstanding at foreign banks in the United States. In certain 1. The attachments to this statement are available on markets, such as standby letters of credit and request from Publications Services, Board of Governors of standbys associated with U.S. municipal bond the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

572 Federal Reserve Bulletin • July 1987 offerings, Japanese banks now account for be- major markets are distorted somewhat because tween one-quarter and one-half of the total U.S. the United Kingdom does not require strict sepamarket. ration of commercial and investment banking, Measured in terms of numbers of institutions, whereas both Japan and the United States make the U.S. banking presence in Japan is similar to such a distinction. In addition, data on relative that of Japanese banks in the United States. size and importance of securities market activi- However, in terms of asset size, in either abso- ties are not as readily available as are data in lute or relative terms, U.S. banks are much banking. However, these limitations notwithsmaller in Japan, with total assets in Japan of standing, some approximations of size and imsomething short of $20 billion, than are Japanese portance are possible. banks here. As in the United States, most foreign In terms of numbers of firms and employment banking activities in Japan are concentrated in levels, the presence of U.S. securities firms in the wholesale markets and in activities such as Japan and Japanese securities firms' presence in foreign exchange trading. In the recent past, the United States are very roughly equivalent, however, at least one U.S. bank has demonstrat- and both have been growing quite rapidly in ed some interest in selective aspects of the recent years. The activities of U.S. securities Japanese retail banking markets. firms in Japan and Japanese firms in the United The reasons for the relatively small U.S. bank- States also tend to be quite similar in that both ing presence reflect a variety of factors. Histori- are concentrated in trading-type activities. Both cal and strategic considerations probably play a classes of institutions are engaged in underwritrole. It is also true that U.S. banks find it more ing activities in each others' markets but, to date, attractive to book Asian loans in Hong Kong or virtually all such underwriting by the foreign Singapore rather than in Tokyo. Finally, the participants in both markets takes place as syndihistorical rigidities of the local funding markets cate members, not as syndicate leaders or manin Japan make it difficult to build up a large agers. In the United States, four Japanese securibanking operation in Japan, especially in the face ties houses (the "big four") are members of the of lingering uncertainties as to the receptivity of New York Stock Exchange, while in Japan three Japan to a broad-based presence of major foreign U.S. securities houses—and one securities combanks. pany that is owned by a U.S. bank through its While the size of the U.S. banking presence in London merchant bank—are members of the Japan is small, the same cannot be said for Tokyo Stock Exchange. London. Indeed, the U.S. banking presence in In short, in many respects, the relative size London is more than six times the U.S. presence and importance of U.S. securities firms in Japan in Japan. And, U.S. banking assets in the United and Japanese securities companies in the United Kingdom are roughly three times greater than States are quite similar and, as noted earlier, U.K. banking assets in the United States. To a both are growing rapidly. However, despite considerable extent, the size of U.S. banking these broad similarities, there are particular operations in London reflects the long history of points of tension regarding the treatment of U.S. the importance of the London market, its open- financial firms in Japan that are not generally in ness to foreigners, and its association with the evidence with regard to the treatment of Japa- Eurocurrency markets that are so important to nese financial firms in the United States. U.S. companies—financial and nonfinancial alike. In short, the London market has, for many years, sought out and welcomed foreign banks in JAPANESE INITIATIVES: FINANCIAL part by maintaining a "friendly" regulatory envi- DEREGULATION AND ACCESS ronment. The postwar Japanese financial system was, in SECURITIES MARKETS many respects, modeled after the U.S. system. Not surprisingly, therefore, several features of The comparative nature and scope of securities the Japanese system that are the subject of markets activities by foreign firms in the three controversy today—including interest rate ceil- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 573 ings on deposits and legal barriers separating Equal Treatment Issues. While purely legal classes of financial institutions including com- barriers to national treatment of U.S. firms in mercial and investment banks—are precisely the Japanese markets have been eliminated, certain same issues that have provoked, and continue to distinctions between the treatment of U.S. and provoke, controversy in the United States. In Japanese firms are seen as having important Japan, as in the United States, pressures for competitive implications even though the basis sweeping change in the structure and regulation for the distinction is not to be found in law. of financial markets were largely muted until the Concerns about practices for issuing government late 1970s and early 1980s. Similarly, while U.S. debt and limitations on seats on the Tokyo Stock financial firms have, for some time, had a minor Exchange would fit in this category. presence in Japan, it was not until fairly recently that pressures for greater access built in a major Regulatory Policies. There are several areas of way. These mounting pressures for deregulation regulatory policy that are viewed by some U.S. and more open access reflected the interaction of firms as especially troublesome. These areas a powerful set of macroeconomic forces as well would include remaining regulatory and adminisas the wave of change and innovation that is trative rigidities in the money market, prohibirapidly transforming financial markets and insti- tions on certain activities such as foreign extutions around the world. change trading by securities companies, and In response to these forces, the Japanese au- other miscellaneous matters such as withholding thorities—under prodding from the United States taxes on interest income to foreigners and limitaand other governments—have, over the past tions on the ability to engage in short selling. several years, made major changes in the struc- While all of these policies apply equally to U.S. ture and regulation of financial markets, includ- and Japanese firms, certain U.S. firms allege ing important reductions in barriers to foreign that, in practice, they are more binding on U.S. presence in the Tokyo markets. Taken as a firms since they impinge on activities in which whole, the actions by the Japanese over the past U.S. firms have special expertise. several years are noteworthy, especially in the There is, however, another important area of relatively short time frame involved. Indeed, I regulatory policy that results in important differbelieve a case can be made that the Japanese ences in treatment and that relates to capital record of the past several years is better than adequacy standards for banks, a subject that is some observers suggest and is good enough to covered in greater detail later in this statement. warrant confidence that further progress will be made in the future. Limitations on Acquisitions. In most foreign Having said that, I would hasten to add that countries, acquisitions of banks or other finandespite this progress, the situation in Japan is cial concerns by U.S. firms are either limited by still one in which barriers—visible and invisi- law or regulation or are very difficult to achieve ble—to open and effective competition between as a matter of practice. In Japan, the most U.S. and Japanese financial firms remain impor- significant current barrier to acquisition may be tant factors limiting the activities and competi- price, but whatever the reason, it is easier for tive effectiveness of U.S. firms in Japan. It is foreign entities to acquire U.S. banking and also true that as the strategic importance of the financial institutions than is the reverse. Tokyo marketplace continues to grow and competitive pressures mount, concerns about those Invisible Barriers. There are a host of considbarriers have received increasing attention. erations ranging from language to custom to However, in a number of important instances, relationships with bureaucrats, which can be specific issues raised by U.S. firms have little or barriers to market participants in any foreign nothing to do with national treatment consider- center, and Japan is certainly no exception. ations. Indeed, some observers would contend that so- At the risk of a great oversimplification, the called invisible barriers in Japan are more of a points of immediate concern to U.S. firms can be problem than is the case in other international classified as follows: financial centers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

574 Federal Reserve Bulletin • July 1987 THE RECORD OF THE PAST SIX MONTHS merchant banks, and I know of four U.S. banking organizations that are seeking to obtain li- Over the past several months, Japanese authori- censes for securities affiliates under the arrangeties have implemented several important policy ments noted above. The requests are in the changes in furtherance of the goal of more open advanced stage of review such that formal appliand more competitive financial markets in Japan. cations will soon be filed with final approvals These steps included the following: expected in the near term. Of course, these arrangements would also be subject to approval Deposit Deregulation. Effective April 6, 1987, of U.S. bank regulatory authorities. the Ministry of Finance accomplished the following: (1) reduced the minimum size of time depos- Access to the Government Securities Market. its that are free of interest rate ceilings from 300 Before 1978, all Japanese government debt was million yen (about $2 million) to 100 million yen sold by the so-called syndicate method, whereby (about $700,000); and (2) reduced the minimum the terms of such debt issues were negotiated by size of money market certificates from 30 million the government and a syndicate of financial yen (about $200,000) to 20 million yen (about companies. Each member of the syndicate, in $150,000). Both the new and the old regulations turn, received a predetermined share of the secuapply equally to domestic and foreign institu- rities issue. The syndicate method of issuing tions. government debt is still the dominant method of In the area of deposit deregulation and greater debt issuance in a number of countries, including money market flexibility, national treatment con- a few major industrial countries. It is also the siderations are not the central issue since Japa- general procedure followed by federal governnese institutions operate under the same rules as ment agencies here in the United States as well foreign institutions. Rather, the money market as the prevailing method for issuing most corpoissues are more a matter of greater market effi- rate and municipal debt. ciencies in a setting in which firms with special Because most Japanese government debt was market expertise—Japanese or others—can take issued in this fashion and because U.S. firms full advantage of those skills. While the extent of were generally not part of the syndicate, U.S. money market deregulation achieved is impor- firms did not have meaningful direct access to tant, further steps are needed. This area will be new issues of Japanese government securities. one of those considered at the next round of so- De facto limits on access to new issues of govcalled yen-dollar discussions between the U.S. ernment securities placed U.S. firms at a com- Treasury and Japanese authorities planned for petitive disadvantage not just in the government the near future. market itself but in other markets as well because of the important linkages between government Securities Affiliates of U.S. Banks. In March securities and other securities. 1987, the Ministry of Finance formally advised In response to this situation, the Japanese that it had amended its regulations to permit U.S. authorities have taken several steps. First, for a banking organizations to have securities affiliates number of short- and intermediate-term issues, in Japan, subject to the same terms and condi- they have fully adopted the auction method such tions that apply to securities affiliates of Europe- that about 35 percent of new issues in 1986 were an universal banks. What is particularly signifi- auctioned. In addition, the Japanese authorities cant about this action is that it provides access to have eliminated the requirement of having an Japanese securities markets for U.S. banks even account at the Bank of Japan to be eligible to bid though such access is not available to Japanese in such auctions. However, the 10- and 20-year banks. It would also permit these U.S. bank maturities are still issued by the syndicate methaffiliates in Japan a wider range of securities od—a fact that is especially important in the case activities than is permissible here in the United of the 10-year bond that is the largest and most States. important of the issues, especially in terms of At present, there are three U.S. banks with secondary market trading. securities affiliates in Japan through their U.K. In these circumstances, effective April 1, 1987, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 575 the syndicate has agreed to increase the total maturities of intermediate and longer-term issues share of the new issues available to foreign that would work in the direction of increasing the securities firms from 1.19 percent to 5.725 per- percentage of issues sold through auction; (2) cent of the share available to securities houses, shifting the 20-year issue from a syndicate to an and it has raised the shares available to individ- auction; and (3) the use of something like the ual foreign companies from 0.70 percent to a U.S. noncompetitive tender system in the 10maximum of 1 percent. While still small, we year maturity that could provide larger shares to understand that these shares for the foreign U.S. market participants while still preserving group as a whole are commensurate with the the syndicate framework for that issue. Needless overall size of secondary market trading by for- to say, I would welcome initiatives along these eign securities firms in yen government bonds. lines, which could pave the way to the day in Finally, as discussed below, the Ministry of which the auction method of issuing debt was the Finance apparently is considering additional general practice. In turn, this method would be steps that would further open the market for an important step in the direction of establishing Japanese government debt to foreign market market practices in the Japanese government participants. securities markets that are more in line with Taken in the context of measures initiated by practices here and in London. the Japanese authorities over the past several 2. Increased representation in the Tokyo Stock years and taken in the context of further steps Exchange. As I understand it, plans are now that may be under consideration at present (see under way to expand the number of seats— below), these latest initiatives by the Japanese including seats held by foreigners—on the Tokyo strike me as helpful and as reflective of contin- Stock Exchange next spring when new facilities ued good-faith efforts to move ahead with finan- and computer capabilities will be in place. Procecial market liberalization. To be sure, further durally, this will entail the establishment of a effort on a variety of fronts is needed. membership committee within the exchange in the near term. I am led to believe that the committee's deliberations should be completed LOOKING TO THE FUTURE and its recommendations made to the full exchange membership late this year. Here too, I In looking to the future, there is a clear need to expect that the result of these deliberations reduce both the specific points of friction re- would be some added representation of U.S. ferred to in this statement and, more important- firms in the exchange. I would also hope that the ly, to deal with the underlying problems that are time schedule for this process could be accelerat the heart of current tensions in international ated, but I do understand the practical problems economic and the financial arena. involved. Insofar as particular problems relating to the 3. Money market liberalization. As noted earliactivities of U.S. banks and securities companies er, the next round of discussions between the in Japan are concerned, I would hope, and Japanese authorities and U.S. Treasury repreexpect, that the Japanese would continue to sentatives is scheduled to take place shortly. move forward with efforts to liberalize their Those discussions will, among other things, fodomestic financial markets, thereby providing cus on what further steps might be taken to greater competitive opportunities for U.S. firms reduce rigidities in the Japanese money market, in the Japanese marketplace. As I see it, there which, in turn, can make it easier for U.S. are four specific areas that warrant particular institutions to compete in the market and thereby attention: more easily fund Japanese-based lending and securities market activities in the local currency. 1. Greater access to the Japanese government 4. Bank Capital Standards. While the areas securities market. In this area, I believe that the mentioned above are important, the single item Japanese authorities may be considering one or on which I place greatest emphasis relates to more possible further steps including the follow- bank capital adequacy standards and specifically ing: (1) the offering through auction of new to the goal of moving Japanese bank capital Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

576 Federal Reserve Bulletin • July 1987 standards into closer alignment with emerging could have the effect of stalling rather than international standards. accelerating discussions and negotiations, while Efforts to establish international standards for possibly producing unintended adverse side efbank capital adequacy have been under way fects—both in terms of general attitudes toward within the Bank for International Settlements for market liberalization and attitudes regarding capabout three years. This effort was undertaken by ital inflows to the United States. It would be one the Group of Ten central bank governors in thing to consider a legislative approach in an recognition of the fact that both competitive and environment in which progress and good-faith prudential considerations pointed to the need for discussions were not taking place. However, this such standards as the globalization of banking is not the current situation. was proceeding very rapidly. While efforts are Taking a longer-term view of the situation, proceeding in the Bank for International Settle- Japan faces many of the same problems in the ments and through other multinational channels, financial area that we are so conscious of here in the United States and the United Kingdom reached the United States. Namely, much of its overall agreement earlier this year on a joint approach to banking and financial structure—as well as the capital standards in our respective countries. regulatory and supervisory apparatus associated Such proposals were made available for public with that structure—were not designed for the comment in January, and final rules are expected environment of the current international market. to be put in place sometime later this year. The Japanese will have to come to grips with Senior officials of both the Bank of Japan and these issues just as we and others will have to do the Ministry of Finance have indicated that they the same. In the case of the Japanese, coming to agree in principle that Japanese bank capital grips with these larger issues could also yield a standards should, in due course, be brought into situation in which constructive change on the broad alignment with international standards. Japanese side is forthcoming at their initiative, as And, preliminary discussions between senior a part of that larger process, rather than as a Federal Reserve, Bank of England, and Japanese result of time-consuming and, at times, difficult officials have been held on the subject. Further discussions of specific points of concern and discussions are scheduled in the near term. friction. In this regard, the point should also be Achieving the needed degree of convergence stressed that problems of the nature discussed in in this area will be much more difficult in the case this statement—specific or generic—are by no of Japan than was true with the United Kingdom means limited to Japan. because the starting points with Japan are much In concluding, let me return briefly to where I further removed from prevailing practices in the started—with the economic fundamentals. If we United States and the United Kingdom. More- are to be successful in winding down our external over, as we have seen with U.S. banks, even imbalances in an orderly way, we in the United relatively minor changes in this area can be States must live up to our responsibilities— controversial. Thus, while achieving conver- which means learning to live within our means. gence with the Japanese will be a long and To be sure, actions abroad are needed and needdifficult task, progress along those lines is impor- ed badly. But, as we call on others to open their tant. markets and to stimulate their economies, let us As I see it, the four areas I have mentioned not lose sight of our end of the bargain. Our above are clear priorities. Given the progress federal budgetary affairs—despite the efforts of that has been made in the past, I am confident this committee and others—are still in a state of that efforts to move ahead in these and other disarray and must be put in order; the need for areas will prove fruitful and mutually beneficial. broad-based reform in our own financial struc- Partly for this reason, I am opposed to legislative ture must be addressed; pressing questions as to efforts along the lines of the so-called primary the degree of underlying competitiveness of our dealer amendment that was incorporated into the industrial sector must be answered; and, patterns trade bill passed by the House of Representa- of savings and investment in our domestic econotives or as recently proposed by Senators Prox- my must be brought into line with the longer-run mire and Riegle. As I see it, such legislation needs of rising productivity and standards of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 577 living. If we are to come full circle in restoring growth in the world economy will also provide a balanced growth here at home and in the world much more constructive environment within more generally, we must also avoid any renewed which legitimate issues regarding financial maroutburst of inflation, which would undermine ket practices and evolution can be resolved here prospects on all fronts. Moreover, balanced and elsewhere. • Statement by Manuel H. Johnson, Vice Chair- back recessions in the early 1980s that left a man, Board of Governors of the Federal Reserve legacy of troubled loans, even as the economy System, before the Committee on Banking, began to recover in late 1982. A second type of Housing, and Urban Affairs, U.S. Senate, May economic transition—from a weak dollar to a 21, 1987. strong dollar—struck hard at another large segment of the banking industry's customer base: I am pleased to meet with this committee to manufacturers of internationally traded goods. present the views of the Board of Governors on Finally, the transition from a period of low or the condition of the banking system and to negative real interest rates and expanding export address the general areas covered in your letter markets to a period of high real interest rates and of invitation. The Federal Reserve staff has declining export revenues, coupled with other worked with the regulatory agencies of other factors, left many borrowers in less developed depository institutions and members of your staff countries in weakened positions. to provide financial information and data on the During this period, banks also have been concondition of U.S. banking organizations. It is not fronted with competitive challenges from several my intent here to review all of these data in directions. Thrift institutions, foreign banks, and detail; rather, I intend to discuss our views on even nondepository financial institutions have broad developments and conditions in the bank- emerged as formidable competitors in many ing system and what supervisory steps we have areas. The direct issuance of securities has taken to address these conditions. proved to be a less expensive and more efficient In looking at the financial condition of the form of financing than bank loans for many of the banking system, it is important to consider the banking industry's prime customers. And, the environment within which banking organizations deregulation of interest rates and the dismantling have been operating in recent years. Without of geographic barriers have placed pressure on question, the environment has been a difficult the margins of some institutions, although these one—characterized by considerable financial developments should lead to a more sound and stress and volatility. As a consequence, many efficient banking system over time. institutions, many segments of the industry, and, All of this procedure was compounded by the indeed, the industry as a whole have experienced inclination on the part of some depository institurising levels of loan charge-offs and classified tion managers to assume excessive risks with assets, and, of course, the number of problem federally insured deposits in the hope that the banks and failed banks has also increased signifi- expected high rewards would accrue to invescantly. tors. By far the majority of banking organizations These problems are rooted in several causes. are well managed; however, mismanagement, One cause, undoubtedly, is the transition to a improper lending practices, and other forms of less inflationary environment. As you know, excessive risk-taking have contributed to finaninflation rates have drifted from double-digit cial problems and the failure of a number of levels in the late 1970s and early 1980s to low institutions. single-digit levels in each of the past several Yet, despite these economic dislocations, years. Unfortunately, inflationary expectations problems, and competitive challenges, most support many farm, energy, and real estate loans banking organizations remain fundamentally that, in hindsight, we now know were not viable. sound, and it is important not to lose sight of the This situation was aggravated by steep back-to- important elements of strength that underlie our Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

578 Federal Reserve Bulletin • July 1987 banking system. To be sure, asset quality prob- Asset quality measures of banks in these areas lems remain and segments of the industry have are generally lower than those of banks in other been weakened by troubled farm, energy, real parts of the country. estate, and foreign loans. On the other hand, Nonetheless, there are some signs that condimany institutions continue to record favorable tions may be stabilizing. The price of oil has operating results, and the industry as a whole recovered somewhat from very low levels, and in (and particularly the group of larger institutions) some areas the decline in prices of farm assets continues to build its capital strength. Indeed, I has leveled off. While adverse effects on banks suspect that many institutions that have with- that lend heavily to these sectors will continue, stood the recent pressures on the industry may we have, I believe, begun to work through these emerge in a much stronger competitive position. problems, and absent any unanticipated shocks, the worst may be behind us in these sectors. We need to maintain our vigilance, though, ASSET QUALITY over these and other areas of the loan portfolio. In parts of our country that witnessed the energy Asset quality difficulties have contributed to the boom and bust, problems have spilled over into prevailing unease about the health of the banking the real estate industry. New construction, espesystem. Loan problems and loan losses have cially for downtown office buildings, has finally increased during the past few years, despite slowed and even come to a virtual stop in some more than four full years of economic expansion. energy-area markets, such as Houston. Nonethe- This experience is especially troublesome and less, these markets remain depressed, with a contrary to that of recent decades. In past peri- large relative supply of available office space. ods of recession and recovery, a consistent pat- Moreover, while construction has slowed in tern was observed: loan losses increased during these markets, it has not done so in the aggrethe recession and immediately afterwards but gate. In 1986, real estate construction loans held then improved as economic growth resumed. by banks grew nearly 20 percent, while total The relatively high level of troubled assets at loans grew less than 8 percent. Over the past some banks at this point in the recovery suggests three years, construction loan growth averaged that any major unforeseen economic or financial 21 percent, compared with an average growth of total loans of 10 percent. Thus, the banking shocks could test the resiliency and solvency of industry remains highly exposed to conditions in the most vulnerable institutions. the real estate market. Although 1986 witnessed The failure of asset quality to improve during some improvement in real estate vacancy rates, the current economic expansion is due to special they remain relatively high by historical stannational and international economic conditions dards. that have adversely affected particular borrowing sectors. The most obvious examples domestical- One additional area of the domestic loan portly are the agricultural and energy sectors. In the folio that bears continued attention in the future late 1970s and early 1980s, borrowers in these is that of credit card loans. In recent years, many sectors took on large amounts of debt that could banks have solicited new accounts in a very not be serviced when conditions subsequently aggressive fashion and have purchased existing accounts. These methods of securing new acdeteriorated. While the wringing out of inflation counts have resulted in historically high chargehad an important positive impact on the econooff rates. Although there is evidence that such my as a whole, the declines in the value of farm rates may be peaking, losses are expected to property and the price of oil led to an increase in remain high and many credit card portfolios the level of delinquencies and defaults on bank remain vulnerable to narrowing margins and posloans. sible increased delinquencies. Depressed conditions in these two sectors have created serious problems in certain geo- An important determinant of asset quality at graphic areas. Particularly hard hit have been the major money center banks and some regional banks in the farmbelt states of the Midwest and institutions continues to be the debt problems of the energy-dependent states in the Southwest. the less developed countries. The adjustment Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 579 process they have undergone has been painful, bank earnings and asset quality, U.S. banks to and the difficulties facing these borrowers remain date have proved able to cope with the effects of serious; nonetheless, some progress has been foreign debt problems and, in particular, with made in dealing with this situation. Despite some Brazil's moratorium on interest rate payments. significant exceptions, most countries have been It is important to note that events of recent able to service their indebtedness over the past days underscore the prudence of wisdom of four and a half years. During this period, banks efforts, over the last several years, to strengthen have been able to significantly improve their the capital bases of our larger institutions. The ability to absorb any losses from their loans to support of the Congress, as manifested in the countries with debt problems. Since 1982, the International Lending Supervision Act of 1983, capital of the 50 largest U.S. banking organiza- together with actions by both bankers and regutions has roughly doubled while exposure to lators in recent years, has resulted in significanttroubled developing-country borrowers has actu- ly higher capital levels at most of our larger ally declined slightly. Thus, their exposure to the banking organizations. This should enable banks heavily indebted countries relative to their capi- to withstand the pressures stemming from intertal bases has declined sharply. national lending difficulties of the type being At the same time, many borrowing countries experienced by Brazil. Indeed, it is a fundamenhave made progress in strengthening their econo- tal function of capital to absorb losses stemming mies and their ability to service their external from unanticipated shocks while maintaining obligations. Most of these economies now are confidence in the banking system. Although the experiencing real growth, reducing their com- difficulties facing many foreign borrowers are bined current account deficits considerably, and significant, the problems in Brazil should not instituting many needed economic reforms. In obscure the progress made with other debtors. the case of some countries, this development has During 1987, new lending agreements have been been achieved despite a significant decline in signed, or tentatively agreed to with Mexico, commodity prices and export revenues. In my Chile, Venezuela, Argentina, and the Philipview, the international debt problem has been pines. managed through an extraordinary cooperative Having generally reviewed those segments of effort by borrowing countries, the international the loan portfolio that have been cause for conbanking community, multilateral financial insti- cern in recent years, I would now like to address tutions, and creditor governments. Moreover, briefly recent trends in certain broad indicators while banks have shown a willingness to work of loan quality. with countries that undertake appropriate adjust- Overall, loan losses trended upward for most ment policies, this has been done without an of this decade. For all insured commercial banks, excessive buildup of additional debt. The exter- the ratio of net charge-offs to average total loans nal debts of heavily indebted developing coun- has increased steadily since 1981; by year-end tries have increased at an annual rate of only V/z 1986, it had reached nearly 1 percent, an unusupercent over the past four years, which, under ally high level for the industry as a whole. normal circumstances, would imply declining Looking at specific size classes of banks, we debt burdens. find that the overall trend describes accurately While I believe we are on a track that offers a each size group. No size class has fully escaped reasonable prospect of long-run success, this is the general deterioration in asset quality, alnot to say, of course, that individual countries though some have done better than others. In will not experience renewed problems from time general, banks with assets of less than $100 to time. For example, Brazil is now facing a million have the highest relative level of loan resumption of serious inflationary pressures that, losses. The problems experienced by smaller banks largely reflect the relatively high concentrawith other factors, has led to a curtailment of tion of agricultural credits in many of these institudebt service. It will take, no doubt, the concerted tions. The smaller regional banks, those with aseffort of Brazil and all of its creditors to manage sets of between $1 billion and $5 billion, have had this situation. Nonetheless, despite the impact the best performance, relatively speaking. that the international debt situation has had on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

580 Federal Reserve Bulletin • July 1987 Nonperforming assets give some general idea underwriting performed by those originating the of the level of problems in the loan portfolio. loans to be securitized. The quality of lending Nonperforming assets have increased or re- could improve if securitization results in greater mained at relatively high levels in the last several specialization and standardization in lending and years despite the extraordinarily high level of if it is performed by the industry's most capable loan charge-offs over this same period. Among lenders. On the other hand, there is always the the various size groups of banks, nonperforming danger that too many insitutions will attempt to asset ratios are generally highest at the largest participate in the securitization process and that and the smallest banks. At year-end 1986 for standards of credit underwriting will be comproexample, nonperforming assets averaged 2.34 mised in the battle for market share. From a percent of total assets for the 25 largest banks, up supervisory standpoint, we expect banking orgafrom 2.25 percent a year earlier.' For the smaller nizations that purchase securitized assets to conbanks, those with assets of less than $300 mil- duct proper credit analyses and to assure themlion, the nonperforming ratio stood at 2.09 per- selves of the quality of the assets they are taking cent, unchanged from the prior year-end level. into their portfolios. As I have already suggested, nonperforming as- We sometimes hear that if banks securitize and sets are higher than we would like at this point in sell their highest quality assets, the overall qualithe economic cycle. ty of bank assets will decline as relatively weaker In general, the difficult period of problems assets that cannot be sold are retained in the with asset quality through which we are passing balance sheet. While I see no necessary reason firmly underscores, for both bankers and super- that banks that engage in this activity should visors alike, the need for renewed attention to relax their credit standards in general, examiners sound and prudent lending standards and prac- will, of course, continue to evaluate the conditices, as well as the need for continued efforts to tion of assets retained in selling bank portfolios, strengthen capital adequacy. and supervisors have the latitude to require You have asked that we address the effect of additional capital if an institution's credit profile "securitization" on asset quality. Simply stated, changes as a result of such transactions. a securitized loan is one in which the originator is One supervisory concern regarding securitizanot the ultimate investor. In a typical loan securi- tion relates to whether the selling institution tization, the originator sells a bundle of loans, achieves a complete transfer of risk to the buyer rather than individual loans, and the loans are before removing the "sold" assets from its converted to securities backed by the loans. Of books. Obviously, if the seller retains an explicit course, depository institutions can act as both or implicit obligation to repurchase the securities buyers and sellers of securitized loans. Until with the aim of providing a credit guarantee or now, loan securitization has occurred mainly in liquidity support, then the transaction has not the residential mortgage market, where more reduced the risk to the selling institution. Morethan half of all loans that are originated are over, if such obligations were in fact, retained in subsequently securitized. Other assets that have connection with a large number of such "sales," been securitized on a much smaller scale include risk could be significantly increased. To deal automobile loans, credit card receivables, lease with this concern, we have generally recognized receivables, and commercial real estate. transactions as true sales only if the seller retains Securitization offers the potential benefits of no risk of loss to its capital base. In general, if the diversification of credit risk, improved control holder of the securities has recourse to the bank, over interest rate exposure, enhanced liquidity, that is, if the bank is at risk, the transaction must and increased efficiency. The question of how be kept on the bank's balance sheet and the risk securitization will affect asset quality, however, of loss must be backed by capital. is difficult to answer with precision. The answer will no doubt lie ultimately in the quality of EARNINGS AND PROFITABILITY 1. The figures for year-end 1986 do not include the effects The economic difficulties and imbalances that of placing Brazilian debt in nonperforming status, which occurred in the first quarter of 1987. have marked the 1980s inevitably have placed Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 581 downward pressure on the earnings and profit- The largest banks also have been adversely afability of the banking industry. Aggregate after- fected by the loss of many of their most credittax earnings growth slowed from an annual rate worthy customers to the securities markets and of about 11 percent in the 1970s to an annual rate to foreign banks. of about 5 percent in the first half of the 1980s, Those banks that have avoided the most seriand earnings actually declined about 1 percent ous asset quality problems generally have fared last year. Over this same period, asset and equity quite well. Indeed, the return on assets was at or growth also have slowed, but more moderately. near peak levels last year for many regional Consequently, key measures of aggregate indus- banks located in Federal Reserve Districts in the try profitability—return on assets and return on eastern half of the country. The resiliency of the equity—last year fell to the lowest levels since at banking industry is evident in data on net interest least 1970. margins, that is, net interest income as a percent- The deterioration in asset quality that I have age of assets. Although the margins dipped described has been the dominant factor underly- somewhat last year, they remained well above ing declining industry profitability. U.S. banks' the average for the 1970s. The deregulation of loan-loss expenses, measured as a percentage of deposit interest rates does appear to have conaverage assets, have tripled since 1981. Indeed, tributed to a narrowing of margins at smaller this development accounts for much of the de- banks from the very high levels recorded early in cline in profitability during this period. Declining this decade, but even at these banks margins interest rates have allowed banks to offset a generally compare favorably with historical levsubstantial portion of their credit losses with els. What is not clear, however, is the extent to gains from the sale of investment securities. which the attempt to earn high margins has Profits from the sale of investment securities induced banks to hold riskier loan portfolios. accounted for about one-sixth of total pretax income for the banking industry last year. Some of the very largest banking organizations have CAPITAL cushioned the impact of credit quality problems on profitability by achieving a very robust While trends in banking conditions over the past growth in other noninterest income, reflecting few years may give rise to some uneasiness, our their increased emphasis on fee-based services, nation's banks, fortunately, have made considersuch as investment banking, securities process- able progress in strengthening their capital posiing, and cash management. It is not clear, how- tions. This development is particularly noteworever, how much these activities have contributed thy because capital plays a central role in to the net income of these banks since data fortifying the banking system. It acts as the necessary to allocate certain expenses are not buffer that provides protection to depositors, available. It is known that expansion of fee-based other creditors, and the deposit insurance fund services has required substantial noninterest ex- when an institution reports negative earnings. penses in the form of investments in technology The protection capital offers also serves to mainand the hiring of highly paid staff. Indeed, at tain confidence in the banking system as a whole. some of the largest banks, the growth of nonin- It was only a few years ago that capital levels terest expense has outstripped that of noninter- in the banking industry caused considerable apest income. prehension about the ability of some banks to It is extremely important to realize, however, weather a difficult economic and financial envithat much of the U.S. banking industry remains ronment. This apprehension was accentuated by profitable. Earnings difficulties have been con- the buildup in problem loans and off-balancecentrated in the western half of the country, sheet exposures that in many instances accompawhere the problems in the energy and agricultur- nied the thinning of capital cushions. Against this al sectors have loomed large and at the major background, in December 1981, the three federal multinational banks, which have been hurt by bank regulatory agencies adopted formal miniforeign loans and, in some cases, by concentra- mum capital standards for banks and bank holdtions of energy, real estate, and shipping loans. ing companies to halt the secular decline in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

582 Federal Reserve Bulletin • July 1987 capital ratios that had occurred and to counter- tomer. Commitments form yet another broad balance the increase in risk-taking that became group of off-balance-sheet exposures. evident during the 1970s. It is therefore comfort- The total volume of the industry's off-balanceing to note that since the adoption of the guide- sheet business is considerable. At year-end 1986, lines, the industry's capital base has been bol- standby letters of credit issued by insured comstered steadily by the issuance of common and mercial banks amounted to $170 billion, foreign preferred stock and long-term debt, and by the exchange commitments came to $893 billion, buildup of loan-loss reserves. loan commitments were $571 billion, and interest Currently, all banks and bank holding compa- rate and cross-currency swaps totaled $376 bilnies must meet a minimum primary capital re- lion. The numbers appear staggering, as indeed quirement of 5.5 percent and a minimum total they are. However, it clearly would be inapprocapital requirement of 6.0 percent.2 As these priate and misleading to relate the total volume levels are minimums, banks normally are expect- of off-balance-sheet exposures to the capital reed to, and in fact do, operate above them. quirements of the banking industry. This is be- From our perspective, the capital guidelines cause in many cases the principal or face value of have worked reasonably well. The long secular the instruments is not an indicator of the amount decline in bank capital ratios has been reversed. that is at risk, and because many of the assorted The larger banking institutions have made espe- off-balance-sheet activities are used by banking cially noteworthy improvement in their capital institutions to reduce their exposure to risk. positions since the end of 1981. Over this period, Therefore, it is important to look at these activithe average primary capital ratio of the nation's ties on a risk-adjusted basis. 50 largest bank holding companies jumped from In an attempt to provide some insight into the 4.7 percent to 7.1 percent—which is well above effect of the growth of off-balance-sheet items on the minimum guideline level of 5.5 percent. Of capital trends, we have looked at a number of course, a complete assessment of capital adequa- capital ratios adjusted for off-balance-sheet risks. cy must take account of both the quality of a Based on our analysis, the capital ratios of the banking organization's assets and the amount of largest banking institutions appear to have imany off-balance-sheet exposure. proved over the last several years—even when With regard to the latter, financial innovation off-balance-sheet activity is taken into considerhas given birth to a wide variety of financing ation. For example, the ratio of primary capital instruments that carry varying degrees of risk to total assets including adjustments for offand serve different purposes but that do not find balance-sheet items for the 10 largest bank holdtheir way onto banks' balance sheets. Interest ing companies has climbed from 4.0 percent in rate swaps, financial futures and options, for- December 1981 to 6.2 percent by year-end 1986. ward rate agreements, and foreign exchange con- These results are not suprising given the huge tracts are among the off-balance-sheet instru- amounts of new capital banks have raised over ments that banks use either to capitalize on or to the past several years. These trends clearly demhedge against interest rate and foreign exchange onstrate why capital, which long has been a sore risks. Another group of off-balance-sheet items, point for the banking industry, is becoming an often referred to as "direct credit substitutes," important selling point for major U.S. banking includes financial guarantees and standby letters institutions, which now are among the most of credit that back financial claims of third par- strongly capitalized in the world. ties. A bank issuing such instruments bears es- As you may know, we have recently proposed, sentially the same credit risk that it would have if in conjunction with the other federal banking it made a direct extension of credit to the cus- agencies and the Bank of England, a risk-based capital framework. Besides factoring off-balance-sheet risks into our analysis, other impor- 2. The principal components of primary capital are common stockholders' equity, perpetual preferred stock, loan- tant objectives of this proposal are to recognize loss reserves, and certain debt instruments that must convert that certain liquid, low-risk assets require less to stock. Total capital consists of primary capital plus sec- capital backing than standard loans and to ondary capital instruments—such as limited-life preferred achieve greater convergence in the assessment of stock and certain qualifying long-term debt securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 583 capital adequacy among countries with major ments of competing institutions into closer alignfinancial centers. We currently do not collect all ment. For this reason, we strongly support the of the data necessary to calculate precisely the efforts of the Federal Home Loan Bank Board to ratio as proposed. However, estimates for the 10 encourage thrift institutions to strengthen their largest bank holding companies averaged ap- capital positions. proximately 6.3 percent as of June 30, 1986; by You specifically asked that we address the year-end this figure had increased 6.6 percent. issue of "double leveraging." Double leveraging Capital ratios are, of course, lower if adjust- refers to the practice of a parent company transment is made for problem assets. This is not forming debt that it issues into equity at the surprising since one of the major functions of subsidiary level. A bank holding company can capital is to absorb losses resulting from problem leverage itself by issuing long-term debt and can loans. Yet, even if capital is reduced by a per- then channel, or "downstream," the proceeds of centage of classified loans, we find that there has the offering to its bank or nonbank subsidiaries been an improvement over the 1982-86 interval. by purchasing their equity securities. Double For the 25 largest banks, for example, the aver- leveraging is often used to increase the capital of age ratio of primary capital, adjusted for problem a subsidiary bank to satisfy regulatory capital assets, to total assets increased from 4.0 percent requirements. By using the parent as a centralat year-end 1982 and to 5.6 percent by year-end ized conduit for the capital financing of subsid- 1986. Some improvement in this ratio, albeit on a iaries, an organization can reduce its cost of more modest scale, was also reported for other raising funds. banks with assets of $1 billion or more. On the An organization using double leveraging runs other hand, we noted some deterioration in this the risk that its subsidiaries will not be able to ratio for banks in the asset size category of less "upstream" the cash flow needed to service the than $300 million. The average for this group parent's debt. A bank subsidiary, for example, declined from 8.0 percent in 1982 to 7.7 percent may fail to earn sufficient income to pay diviby the end of 1986. This decline was in large part dends, the principal source of funds parent comdue to the disproportionate share of problem panies use to service their debt. The risks of farm loans held by small banks. double leveraging are borne by a parent organi- An important goal of the recent joint proposal zation's shareholders and uninsured creditors. of the U.S. federal banking agencies and the A commonly used measure of double leverage Bank of England for the establishment of a risk- is the ratio of the parent company's equity inbased capital framework was to reduce the com- vestments in its subsidiaries to total parent competitive inequities that can arise when superviso- pany equity. Last year there was a significant ry authorities in countries around the world decline in levels of double leveraging in the introduce different capital requirements. I cannot banking industry. The decline was particularly emphasize strongly enough our interest in the pronounced among the largest holding compacompetitiveness of U.S. banks. Only a strong, nies, where as a group, the ratio for the 25 largest competitive, and profitable banking system can dropped from 158 percent at year-end 1985 to 125 remain healthy in the long run and fulfill the percent by year-end 1986. The decline in double strategic role banks play in our economic and leveraging can be attributed, in part, to a heightfinancial system. Thus, the Federal Reserve is ened awareness on the part of holding company committed to working with supervisors from creditors that the flow of funds from bank subsidother countries to encourage the development iaries to the parent company cannot be assured, and adoption of more consistent and broadly and in part, to increased supervisory scrutiny of accepted international capital standards of the parent company cash flow and its potential imtype set forth in the U.S.-U.K. proposal. pact on the capital of subsidiary banks. In addition, since we apply our capital standards to Another dimension of the issue is the competiconsolidated holding companies as well as to tion from nonbank financial institutions, includtheir subsidiary banks, there is a limit on the ing thrift institutions. Again, as a matter of both potential incentive for excessive double leveragcompetitive equity and prudential concerns, it ing. would seem desirable to bring the capital require- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

584 Federal Reserve Bulletin • July 1987 LIQUIDITY At the end of March 1987, there were 85 problem state member banks and 510 problem Liquidity is a difficult concept to define with bank holding companies. These 85 state member precision, and judgments on liquidity require banks represented 7.7 percent of all state memconsideration of a number of factors pertaining to ber banks, while the 510 bank holding companies both the asset and liability side of the balance represented 7.9 percent of all bank holding comsheet, as well as to off-balance-sheet commit- panies and controlled approximately 8.5 percent ments. However, one helpful measure of liquid- of total banking assets. ity is the degree of reliance on volatile, pur- As of May 8, 1987, 74 commercial banks had chased liabilities to fund assets. Reliance on such failed, compared with 41 over the same period in liabilities has decreased in recent years, primari- 1986. Of the 74 banks that failed, 5 were state ly because of the deregulation of interest rates member banks with total assets of $243 million; that has enabled banks to compete more effec- in all of 1986, 11 state member banks with total tively for retail accounts. This trend has been assets of $147 million failed. Over the five-year offset to some degree by a decline in the holding period, 1982 through 1986, the assets of failed of certain liquid assets by banking institutions; state member banks represented 5 percent of nonetheless, on net, liquidity appears generally total failed bank assets. To put this figure into to have improved over the past several years. perspective, state member banks comprised 18 Although dependence on managed liabilities has percent of total bank assets at year-end 1986. changed little in recent years at smaller banks, deregulation has removed the threat of deposit disintermediation, which was perhaps the most serious threat to their liquidity. SUPERVISOR Y ACTIONS Brokered deposits generally have remained a very small share of total deposits of banks, and Over the past several years, the Federal Reserve thus, for the most part, have not had a significant has addressed the trends and conditions that I impact on liquidity. Although brokered funds have just described with a number of important have been abused in some specific cases, super- actions designed to strengthen our supervisory visors monitor the use of such funds closely, policies, practices, and procedures. Our objecparticularly in connection with our review of the tives have been threefold: (1) to implement suoverall use of purchased liabilities. pervisory policies that would improve the ability of banking organizations to withstand financial stress and adversity; (2) to enhance our ability to identify in a timely manner financial and operat- PROBLEM AND FAILED INSTITUTIONS ing deficiencies that could weaken an organization's financial condition; and (3) to strengthen It is a widely known fact that the number of our follow-up procedures, particularly by improblem and failed banking organizations has proving our techniques for communicating with risen at an uncomfortably rapid pace over the boards of directors and, when appropriate, past several years. It is our expectation that, broadening our use of formal enforcement acabsent unforeseen adverse economic or financial tions. developments, these numbers may begin to level In carrying out our supervisory responsibiloff. However, we do not expect these numbers to ities, we attempt to balance the need to maintain decline in a significant way in the near term. a fully adequate supervisory framework with our In data submitted to the committee staff, the desire to avoid impinging on the legitimate prebanking agencies have provided information on rogatives of management or undercutting the the total number of problem and failed commer- benefits from greater competition in our banking cial banks, and their aggregate deposits, in some and financial markets. While views may differ on detail. Therefore, I will touch briefly on the the best way to strike this balance, the crucial situation with respect to institutions under the public interest in the maintenance of a sound and jurisdiction of the Federal Reserve System. stable banking system, and the existence of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 585 federal "safety net," underscore the critical im- ening banking organizations' awareness of the portance of a strong and effective supervisory potential risks associated with daylight overand regulatory framework. drafts in large dollar payment systems and to I have already noted the efforts that the Feder- giving bankers and examiners alike improved al Reserve, together with the other federal bank- analytical and supervisory tools to monitor and ing agencies, has made over time to encourage control these risks. More recently, we have banking organizations to strengthen their capital reiterated as clearly as possible our long-standing positions. The imposition of minimum capital policy that bank holding companies should serve standards in 1981 and the strengthening of these as a source of financial and managerial strength standards in 1983 and 1985 have played an impor- to their subsidiary banks. This is particularly tant role in helping banking institutions to with- important since banks benefit from the ability to stand the strains of the past several years. issue federally insured deposits and to borrow In carrying out its day-to-day supervisory ac- from the Federal Reserve discount window. In tivities, the Federal Reserve has encouraged light of subsidiary bank access to these "safetybanks to operate above the minimum capital net" protections, we expect their holding comparatios established by regulatory rules. Banking nies to stand ready to use available resources to organizations undertaking significant expansion support their banks during periods of financial are expected to maintain particularly strong capi- stress or adversity, and we have underscored our tal positions that are well above minimum super- policy to use our enforcement authority, when visory standards. In addition, within the past two warranted and appropriate, to see that this is years, we have reiterated and strengthened our done. policy on the payment of cash dividends to In addition, we have taken actions to improve shareholders when a banking organization is our ability to monitor the emergence of superviexperiencing financial problems. Accordingly, sory problems in banking organizations. In 1986, we have intensified our review of dividend pay- we increased the frequency of examinations to ments by banking organizations and, when ap- provide for at least an annual examination of propriate, have encouraged them to conserve state member banks and most large bank holding their capital by adopting more prudent dividend companies and semiannual examinations or onlevels. site reviews for very large institutions and prob- As I have stated, we are in the process of lem companies. This program has been supportfurther improving our capital adequacy policies ed by a significant boost in budgetary resources through adoption of risk-based capital standards. devoted to supervision and regulation and by an A major objective of our risk-based capital pro- increase in the number of examiners from 835 in posal, as I have indicated, is to ensure that 1985 to 914 at the end of 1986. This more capital is adequate to support off-balance-sheet frequent on-site examination program has also been made possible, in part, through increased exposures. In addition, our adoption of a riskcooperation with state banking departments in based capital framework will help to match more the form of greater reliance on state examinaaccurately an organization's capital requiretions of certain institutions, and through inments with its level of risk-taking and will concreased operating efficiencies. We also have retribute to broader international efforts to envised our reporting requirements for bank hance capital standards for large multinational holding companies to place greater emphasis on banking institutions. Such efforts are aimed at such indicators as the level of nonperforming achieving stronger, more stable international loans and off-balance-sheet activities. banking institutions and markets, and at reducing the competitive inequities and distortions that Taken together, those actions have strengthcan result from vastly different prudential rules ened our ability to monitor risk-taking and imamong countries with important financial cen- proved our capacity to take enforcement actions. ters. Indeed, since 1982, we have greatly increased We have, as you may be aware, taken other the number of enforcement actions such as cease prudential actions. Over the past several years, and desist orders, written agreements, and removal actions aimed at officers and directors. In much time and effort has been devoted to height- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

586 Federal Reserve Bulletin • July 1987 the period 1980-82, the Federal Reserve System compete effectively with other nonbank financial averaged 42 enforcement actions per year; from institutions. 1984-86, the average number of enforcement In the long run, of course, these activities actions had increased to 177. Such actions are should result in real benefits to banking organizaemployed to require banks to improve their tions by promoting greater efficiencies, more lending policies and procedures, strengthen man- competitive equity, and more diversified sources agement, terminate unsafe and unsound prac- of income. These benefits will also, I believe, tices, and adopt more prudent funding, dividend, contribute to a stronger and more resilient bankand capital strategies. ing system. In addition, a prudent expansion of Enforcement actions are but one form of su- bank holding company powers should provide pervision. Equally, or perhaps more, important significant benefits to customers in the form of are preventive actions such as our efforts to greater convenience and competition and addiimprove communications with directors who, of tional alternatives for obtaining important financourse, have primary responsibility to see that cial services. their institutions are operated safely and in com- In approving these applications, the Board pliance with banking law and regulations. To- acted under existing authority, applying a statute ward this end, we have implemented a directors' adopted more than 50 years earlier in very differsummary report to spell out more clearly and ent circumstances, to a financial marketplace effectively our supervisory assessment of an that technology and competitive forces have organization's problems and have broadened the altered in ways that the enacting Congress could involvement of senior Reserve Bank officials in not have envisioned. Thus, we continue to urge meetings with directors of large institutions and the Congress to recognize the competitive, techthose with significant problems. nological, and international forces at work in Actions of the type that I have just reviewed, banking and financial markets by providing a of course, cannot deal with all of the problems clear legislative framework for expanding the facing our depository institutions. Thus, the authority of bank holding companies to provide Board continues to support legislation to recapi- financial services, consistent with the need to talize the Federal Savings and Loan Insurance maintain a safe and sound banking system and Corporation fund at an appropriate level. More- safeguards against conflicts of interest and selfover, while we are gratified by the actions taken dealing. We also believe that the Congress by some state legislatures to permit out-of-state should address the need for change in the current acquisitions of failed or failing banks, we do not prohibitions on corporate underwriting, recogbelieve that these have alleviated the problem of nizing that bank holding companies conduct such finding buyers for troubled institutions in certain activities abroad in substantial volume. As part states. Thus, the Board continues to urge the of more comprehensive legislation in the future, Congress to provide federal regulators with au- we feel that it would also be desirable to consider thority to arrange interstate acquisitions of failing ways of encouraging more consistency in acand failed institutions. counting, supervisory, and capital standards As you are aware, the Board has recently among various types of depository institutions. approved the applications of certain bank holding companies to engage in underwriting commercial paper, 1- to 4-family mortgage-backed CONCLUSION securities, and municipal revenue bonds. We have approved these applications subject to con- The recent trends in the performance and condiditions to assure that the activity will be consis- tion of our nations's banks, notably, the deteriotent with safe and sound banking practices and ration in asset quality, the slide in earnings and avoid conflicts of interest, concentration of re- profitability, and the growth in off-balance-sheet sources, and other possible adverse effects. It is exposures, explain much of the current unease our hope that this action will provide banking about banking. But the industry has been workorganizations with additional sources of income ing to reverse these trends and much progress is and enhance in a meaningful way their ability to evident. Many banks have put in place cost- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 587 cutting programs, strengthened their capital posi- strains within our economy or financial markets. tions, adopted more conservative lending prac- While there is some justification for the pretices, and generated new sources of income. The vailing sense of unease over banking, I believe supervisory agencies, for their part, have imple- that, on balance, much more is right in banking mented programs to help ensure that the banking today than is wrong. The problems, while signifisystem remains on a sound footing and that cant, are manageable, and I can assure this adequate safeguards are in place. All of these committee that the Board will do its utmost to efforts should have the effect of putting banking see that supervisory efforts will continue to be organizations in a better position to withstand directed toward maintaining the soundness of the any additional unanticipated pressures and banking system. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

588 Announcements RETIREMENT OF PAUL A. VOLCKERAS convenient and consistent with an orderly transition. CHAIRMAN OF THE BOARD OF GOVERNORS.- Consequently, I do not desire reappointment as Chairman, and I plan to resign as Governor when a new NOMINATION OF ALAN GREENSPAN Chairman is prepared to assume office. TO SUCCEED HIM I will be leaving with a sense of great appreciation for At a White House press briefing on June 2, your unfailing courtesy to me personally. More broad- President Reagan made the following announce- ly, your consistent support of the work of the Federal ment: Reserve during a particularly challenging period for it, for the financial system, and for the economy has been critical to whatever success we have had. I have a statement for you: Paul Volcker has advised me of his decision not to accept a third term as a Without doubt, strong challenges remain for all of member and Chairman of the Federal Reserve Board. those involved in economic policy. In that effort, I believe the nation will continue to be well served by a I accepted Mr. Volcker's decision with great reluc- strong Federal Reserve System—a system firmly deditance and regret. He has served with distinction on the cated to fostering economic and financial strength and Board of Governors and has been an historic chairman stability and able to bring to that effort a combination during this time of economic recovery and expansion. of sound and independent professional judgment and Therefore, it's my intention to nominate Dr. Alan continuity beyond any partisan considerations. Greenspan to a 4-year term as Chairman of the Federal Reserve. Mr. Volcker has indicated his strong support May I add, too, my personal best wishes for the for Dr. Greenspan. remainder of your own term in office during which you have done so much to restore a sense of confidence And let me add, my dedication to our fight to hold and self-reliance among the American people. down the forces of inflation remains as strong as ever. And I know that Dr. Greenspan shares that same Faithfully yours, commitment. Paul A. Volcker The letter from Chairman Volcker and his statement about Chairman-Elect Greenspan follow: June 2, 1987 Statement of Paul A. Volcker, Chairman, Board of June 1, 1987 Governors of the Federal Reserve System The President I have known Alan Greenspan for many years. I know The White House his talent and his experience—and not least his dedica- Washington, D.C. tion. The President has made a natural and outstanding choice. I am delighted that Alan has agreed to take on Dear Mr. President: the job. The Federal Reserve is a very special institution. Obviously, I leave with mixed feelings, but As the end of my term as Chairman of the Federal Alan's appointment makes me feel very comfortable Reserve Board approaches, you naturally have to about the continuing role of the Fed. consider an appropriate new appointment. In that connection, you will recall that, upon my reappointment as Chairman in 1983, I felt unable to EDWARD W. KELLEY, JR.: APPOINTMENT make a firm commitment to you or to the Congress to AS A MEMBER OF THE BOARD OF remain in office for a second full four-year term. GOVERNORS Despite my reservations at the time, that term is in fact now almost finished. However, I do think, after 8 years as Chairman, a natural time has now come for On January 21, 1987, President Reagan anme to return to private life as soon as reasonably nounced his intention to nominate Edward W. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

589 Kelley, Jr., as a member of the Board of Gover- QUARTERLY FINANCIAL RESULTS nors. Mr. Kelley was subsequently confirmed by AVAILABLE FOR the Senate on May 20 and took the oath of office, PRICED SERVICE OPERATIONS administered by Chairman Volcker, on May 26. The text of the White House announcement of The Federal Reserve Board reported on May 19, January 21 follows: 1987, financial results of Federal Reserve priced service operations for the quarter ending March The President today announced his intention to nomi- 31, 1987. nate Edward W. Kelley, Jr., of Texas, District 11, to The Board issues a report on priced services be a Member of the Board of Governors of the Federal Reserve System for the unexpired term of 14 years annually and a priced service balance sheet and from February 1, 1976. He would succeed Emmett income statement quarterly. The financial state- John Rice. ments are designed to reflect standard accounting practices, taking into account the nature of Since 1981, Mr. Kelley has been Chairman of the the Federal Reserve's activities and its unique Board, Investment Advisors Incorporated in Houston, Texas. In addition, he currently is Chairman of the position in this field. Beginning with the state- Board of The Shoreline Companies, Inc. and Director ments for the second quarter of 1987, this release of Texas Industries, Inc. Previously, he was President will be incorporated into the FEDERAL RESERVE and CEO of Kelley Industries, Inc., 1959-81. Mr. BULLETIN. Kelley has served as a Director of the following banks: Southern National Bank, 1961-72; Westwood Commerce Bank, 1974-82; and West Belt National Bank, 1982-84. ANNUAL REPORT: PUBLICATION Mr. Kelley graduated from Rice University (B.A., 1954) and Harvard Business School (M.B.A., 1959). The Seventy-Third Annual Report of the Board He is married, has three children and resides in of Governors of the Federal Reserve System, Houston, Texas. Mr. Kelley was born January 27, 1932, in Eugene, Oregon. covering operations for the calendar year 1986, is available for distribution. Copies may be obtained on request to Publications Services, ADOPTION OF FORMS FOR USE BY Board of Governors of the Federal Reserve GOVERNMENT SECURITIES BROKERS System, Washington, D.C. 20551. A separately AND DEALERS printed companion document entitled Annual Report: Budget Review, 1986-87, which de- The Federal Reserve Board announced adoption scribes the budgeted expenses of the Federal on May 26, 1987, of forms to be used by financial Reserve System for 1987 and compares them institutions acting as government securities bro- with expenses for 1985 and 1986, is also available kers or as government securities dealers to re- from Publications Services. port their status under the Government Securities Act of 1986. The act requires all financial institutions that act as government securities brokers or dealers to notify their federal regulators of their broker- PROPOSED ACTIONS dealer activities. Institutions that currently act as broker-dealers must file notice (form G-FIN) by The Federal Reserve Board has extended the July 25, 1987. The second notice (form G-FINW) period for comment on its proposals to amend its would be used by institutions that terminate their Capital Guidelines to include a risk-based capital status as a government securities broker or deal- measure and to incorporate into that risk-based er. capital measure credit risks on off-balance-sheet Under the act, the Board has the responsibility interest rate and exchange rate contracts. The to establish the form of these notices to be used comment periods were extended from May 13 by commercial banks, foreign banks, savings and May 22 respectively to June 1 because of the banks, and savings and loan associations. significance and nature of the Board's proposals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

590 Federal Reserve Bulletin • July 1987 ERRATA: BULLETIN TABLE CHANGE IN BOARD STAFF In table 4, "Net profits or losses (-) on U.S. Anne DeBeer, Assistant Director in the Division Treasury and Federal Reserve current foreign of Federal Reserve Bank Operations, has reexchange operations," which appeared on page signed, effective June 30, 1987. 333 of the May 1987 BULLETIN, the figures in the last line, "Valuation profits and losses on outstanding assets and liabilities as of January 30, SYSTEM MEMBERSHIP: 1987," were inadvertently shown as negative ADMISSION OF STATE BANKS amounts. The corrected table appears below. The following state bank was admitted to mem- 4. Net profits or losses (-) on U.S. Treasury and bership in the Federal Reserve System during the Federal Reserve current foreign exchange period May 1 through May 31, 1987: operations Millions of dollars Texas U.S. Treasury Piano First Bank of Piano Period1 Federal Exchange Reserve Stabilization Fund November 1, 1986- January 30, 1987 8.0 6.6 Valuation profits and losses on outstanding assets and liabilities as of January 30, 1987 2,322.8 1,975.0 1. Data are on a value-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

59 i Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON MARCH 31, 1987 On the demand side, both consumption and business fixed investment have been relatively 1. Domestic Policy Directive weak. Purchases of automobiles, after a sharp drop in January, have recovered somewhat over The information reviewed at this meeting sug- the past two months, but are still well below the gested that economic activity has risen at a faster fourth-quarter pace. Automakers have trimmed pace so far this year than in the fourth quarter of assembly schedules and have renewed sales in- 1986, while the rate of price increase has acceler- centive programs, but dealer inventories have ated slightly. The expansion in output apparently been building up. Consumer spending on goods has reflected a rebuilding of inventories and other than autos has advanced at a moderate some improvement in the external sector. Impor- rate. Business investment spending appears to tant components of domestic final demands seem have weakened in recent months. Shipments of to have eased off in the early months of 1987 after nondefense capital goods fell on balance over the a surge late in 1986. The pickup in inflation first two months of the year after the tax-related primarily has reflected a rebound in crude oil surge in equipment outlays late last year. New prices; wage pressures have remained subdued. orders also have moved lower and outlays for Data on employment and production suggest- nonresidential construction fell further in Janued a sizable advance in output in early 1987. ary, maintaining the downtrend that began early Total nonfarm payroll employment rose more last year. than 300,000 per month over the first two months The large fluctuations in final sales that ocof the year, appreciably faster than in 1986; large curred around the turn of the year have been gains were reported in construction, trade, and mirrored in changes in inventories. Stocks rose services. In addition, the average workweek has sharply in January, after being drawn down late lengthened, and total hours worked by produc- last year. Notable swings in inventories occurred tion and nonsupervisory personnel have risen for autos and machinery, where tax incentives sharply from the fourth quarter. The civilian may have had a greater effect on the timing of unemployment rate was 6.7 percent in February purchases than on production. In addition, some for the third consecutive month as increases in stockbuilding was evident in manufacturing inthe labor force matched the strong expansion in dustries in which production has been relatively employment. strong. The index of industrial production rose 0.5 Activity in the housing sector remained vigorpercent in February to a level about 1 percent ous in January and February, with starts averagabove its fourth-quarter 1986 average. Increased ing more than 1.8 million units at an annual rate production of motor vehicles accounted for most in both months. The strength in starts appeared of the gain, but output of defense and space to reflect unusually good weather in the Midequipment, construction supplies, and nondura- west. Single-family starts have been particularly ble materials also posted further appreciable robust. Multifamily starts, by contrast, have increases. Reflecting the recent strengthening in remained weak because of high vacancy rates the industrial sector, the capacity utilization rate and a less favorable tax environment for conincreased 0.2 percentage point in February to struction of rental units. 79.8 percent. Inflation picked up early this year, largely Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

592 Federal Reserve Bulletin • July 1987 reflecting the pass-through of higher crude oil able depending on the behavior of the aggreprices into prices of final energy products. The gates, taking into account developments in the CPI rose 0.4 percent in February, after a 0.7 economy and in foreign exchange and domestic percent increase a month earlier. Prices of gaso- credit markets. The intermeeting range for federline and fuel oil posted further sizable increases al funds was left unchanged at 4 to 8 percent. last month. Consumer food prices in February Growth of the monetary aggregates slowed continued to rise at the pace that has prevailed sharply in February and March, and over the two since last September. Excluding food and ener- months expansion in M2 and M3 was somewhat gy, increases in consumer prices slowed a bit in below the Committee's expectations. In March, February. Spot prices for industrial materials these aggregates appeared to be around the lower have essentially leveled off in recent weeks after bounds of the 5!/2 to SVz percent ranges estabrising late last year. Wage increases have re- lished by the Committee for the year. Some of mained moderate so far this year. the slower growth in the aggregates so far this Economic activity in major foreign industrial year appears to be related to a reversal of the countries remained generally weak in the fourth bulge in deposits and bank lending associated quarter of 1986 and early 1987, except in the with the surge in transactions before year-end, United Kingdom. Debt-servicing problems beset but a more general moderation in the expansion several important developing countries but prog- of money balances also might be associated with ress was made in the negotiations of a number of completion of portfolio adjustments to earlier such countries with commercial banks. declines in interest rates. Total and nonborrowed The trade-weighted value of the dollar against reserves fell slightly over the past two months, as other G-10 currencies changed little in the period required reserves leveled off after the year-end following the February 10-11 meeting of the bulge in transaction deposits, and excess re- Committee until mid-March. The stability appar- serves edged lower in line with their usual seaently was fostered to a considerable extent by sonal pattern. In the three complete reserve the announcement that the major industrial coun- maintenance periods after the February FOMC tries at a meeting in Paris on February 22 had meeting, adjustment plus seasonal borrowing avagreed to support the prevailing structure of eraged about $280 million. At the same time, the exchange rates. Since mid-March, however, the federal funds rate edged off from 6lA percent to dollar has come under strong downward pres- around 6 percent or a bit higher. sure, particularly against the Japanese yen, ap- Other interest rates changed little over most of parently triggered in part by intensified trade the intermeeting period before firming somewhat frictions between the United States and Japan. recently. Over the past few days concern about An improved fiscal picture for the United King- the dollar contributed to some pressure on rates, dom contributed to a sharp rise in sterling. As a particularly in long-term markets in which Trearesult, the Bank of England cut its lending rates sury bond yields have risen about 20 basis around mid-March; several other European points. On balance, private short-term rates rose countries also lowered official lending rates as about 15 basis points over the intermeeting peritheir currencies strengthened against the German od, while Treasury bill rates were about unmark. changed to 20 basis points lower; the differential At its meeting in February, the Committee probably reflected heightened concerns about adopted a directive that called for maintaining credit quality relating to debt-servicing problems the existing degree of pressure on reserve posi- of developing countries and a pay down of bills tions. M2 and M3 were expected to grow at by the Treasury. Equity prices rose markedly annual rates of about 6 to 7 percent from January over the period. through March, while growth in Ml was expect- As at other recent meetings the staff projeced to slow substantially from the high rates of tions suggested that real GNP would grow at a previous months. The members decided that moderate rate through the end of 1987. The rise somewhat greater reserve restraint would, or in net exports remained critical to sustaining slightly lesser reserve restraint might, be accept- growth. In response to the increased competi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 593 tiveness of U.S. goods, growth in exports was dollar's depreciation was fostering growing deexpected to continue to boost demands on do- mand for their products in export markets, almestic production and growth of imports was though that experience was not shared by busianticipated to slow. Gross domestic purchases nesses in all areas. On the import side, many were expected to be sluggish, reflecting in part domestic producers indicated an increased abilithe effects of a less expansive fiscal policy and ty to compete with foreign goods. Nonetheless, the influence of rising import prices on real the outlook for foreign trade remained subject to income growth and consumption. Business a great deal of uncertainty. Generally weak ecoequipment spending was projected to resume a nomic growth abroad was cited as a negative moderate uptrend; however, construction of sin- factor. Members acknowledged that the dollar's gle-family homes was expected to edge down depreciation might help U.S. producers, but subfrom the current pace, and activity in office stantial further weakness in the dollar carried building and multifamily housing could weaken considerable risks. A large additional decline substantially in response to overbuilding of such would tend to damp demands and economic structures in many areas and the effects of the growth abroad, especially in the absence of stimnew tax law. Inflation was likely to pick up, ulative policy actions in other major industrial reflecting the effects of the recent rebound of countries. It could lead to substantially greater crude oil prices as well as the projected accelera- inflationary pressures in the United States, with tion of import prices. However, remaining mar- adverse impacts on credit markets. While a few gins of slack in product and labor markets were members were of the view that the dollar sooner expected to limit overall inflationary pressures. or later might need to decline somewhat further In their discussion of the economic situation to correct the nation's trade imbalance—and and outlook, Committee members generally such a decline should be accepted if it ocagreed that recent developments on the whole curred—most expressed concern about the imwere consistent with continuing expansion at a plications of continuing dollar depreciation under moderate pace. Comments on business condi- prevailing circumstances. tions in several parts of the country tended to Members already were anticipating that the support a somewhat brighter picture than had earlier depreciation of the dollar along with the been reported at earlier meetings. Business con- rebound in energy prices would be reflected in a fidence appeared to have improved in many somewhat higher rate of inflation this year. areas, buoyed by greater success in meeting Tending to support that view were indications in foreign competition. Overall, economic activity some parts of the country that prices of a number seemed to have picked up in early 1987, though of products and services were rising somewhat the improvement was due importantly to a build- more rapidly than earlier. Nevertheless, the still up of inventories. Domestic final demands were ample availability of production resources in expected to grow at a relatively slow pace over most industries and continuing competition from the year, with business spending for equipment abroad were viewed as likely to limit price inand nonresidential construction likely to be re- creases, assuming the absence of a substantial tarding influences. Consumer spending on auto- further drop in the dollar. It also was noted that mobiles was mentioned as another potentially recent labor contract settlements were generally weak area of the economy, and problems persist- favorable in terms of their impact on business ed in agriculture and energy. The members con- costs. cluded as at previous meetings that the prospects At its meeting in February the Committee had for sustaining a moderate rate of expansion agreed on policy objectives that called for monewould depend to an important extent on the tary growth ranges for the period from the fourth achievement of significant gains in net exports. quarter of 1986 to the fourth quarter of 1987 of The members saw encouraging signs that the 5VI to 8'/2 percent for both M2 and M3. The trade deficit was narrowing in real terms if not associated range for growth in total domestic yet in current dollar terms. Business contacts in nonfinancial debt was set at 8 to 11 percent. The several parts of the country reported that the Committee anticipated that growth in Ml would Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

594 Federal Reserve Bulletin • July 1987 slow in 1987 from its very rapid pace in 1986, but There was some divergence of views regarding the members decided not to establish a numerical the circumstances under which any tendency for target for the year; instead, the appropriateness the dollar to fall appreciably further should be of Ml changes would be evaluated during the resisted through a reduced availability of reyear in the light of the behavior of Ml velocity, serves. Some members emphasized the desirabildevelopments in the economy and financial mar- ity of relatively prompt, if limited, action to kets, and the nature of emerging price pressures. enhance the prospects for more stable exchange In their discussion at this meeting, Committee rates and also to reduce the need for stronger members agreed that domestic business and fi- measures in the future. If successful, that apnancial conditions and growth of the monetary proach would minimize the rise in domestic aggregates did not call for any change in the inflation and interest rates over time and perhaps current degree of pressure on reserve positions, facilitate a reversal of interest rates. One memat least at the start of the intermeeting period. ber noted that the success of such an approach in With regard to the weeks ahead, a number of stabilizing the dollar might be realized more members noted that, while other developments promptly and certainly if the markets were alertin the economy and financial markets would ed to any firming action the Federal Reserve need to be taken into account, continuing weak- might undertake. Some other members preferred ness in the dollar would suggest the possibility to move with relative caution, if at all, in counthat some limited adjustment in policy implemen- tering any further weakening in the dollar. These tation in a firming direction would be appropri- members acknowledged that failure to arrest a ate. considerable further decline in the dollar might result in substantial upward pressures on longer- In the course of the Committee's discussion, a term domestic interest rates, especially given good deal of attention was devoted to the implicurrent market anxieties. At the same time, they cations for policy of the currently strong downstressed the uncertainties surrounding the relaward pressure on the dollar in foreign exchange tionship between U.S. interest rates and the markets. Members agreed that the conduct of behavior of the dollar and also the negative open market operations needed to be especially impact that a firmer policy could have on a sensitive to any tendency for the dollar to weakpossibly fragile economic expansion, not only in en significantly further. Some commented that, the United States but around the world. within the framework of basically unchanged conditions of reserve availability, open market With regard to the monetary aggregates, the operations should be conducted with special members generally viewed the recent slowdown caution to minimize unintended market impacts in monetary growth as a welcome development at times when the dollar was under particular in light of the previously rapid expansion over an downward pressure. Several also indicated that extended period. In their assessment of the outif pressures increased enough so that interven- look for the months immediately ahead, the tion in the foreign exchange markets was not members took account of an analysis, which effective in stabilizing the dollar, policy imple- suggested some acceleration in the growth of M2 mentation might need to be adjusted to reduce and M3 to rates approximating the expansion in reserve availability somewhat during the inter- nominal income if interest rates remained around meeting period. In appraising the need for some current levels. Most of the members felt that firming, the Committee would be mindful of the more restrained monetary growth would be acadverse effects that a further slide in the dollar ceptable, especially if it occurred against the could have on domestic interest rates, on infla- background of further downward pressures on tion expectations, and on the economy more the dollar. While continued slow money growth generally over the longer run. The members also that held the broad aggregates below the lower recognized that the problem was multilateral in ends of their long-run ranges could be a basis for nature and that the effectiveness of any policy concern, some shortfall in the growth of M2 and steps in the United States would be greatly M3 would not seem to call for a more generous enhanced by complementary actions abroad. provision of reserves in the period immediately Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 595 ahead, given the earlier monetary expansion, funds rate, which provides a mechanism for continuing moderate growth of the economy, and initiating consultation of the Committee when its weakness of the dollar in foreign exchange mar- boundaries are persistently exceeded, should be kets. On the other hand, the members would not left unchanged at 4 to 8 percent. welcome a resumption of relatively rapid growth At the conclusion of the meeting, the following under current conditions. Some members sug- domestic policy directive was issued to the Fedgested that the Committee specify rates of ac- eral Reserve Bank of New York: ceptable growth of around 6 percent for M2 and M3 from March to June. Other members, reflect- The information reviewed at this meeting suggests ing the Committee's discussion that some short- on balance that economic activity has been expanding fall in monetary growth would be of less concern at a faster pace than in the fourth quarter, with output than an overshoot under current circumstances, apparently strengthened by a rebuilding of business inventories and some improvement in foreign trade. suggested various ranges of growth for the Total nonfarm payroll employment rose strongly again broader aggregates, with the ranges extending in February. The civilian unemployment rate remained further below than above 6 percent. All the at 6.7 percent for the third consecutive month. Indusmembers were able to accept a specification of 6 trial production also increased appreciably further in percent or less on the understanding that the February. Total retail sales have continued to fluctuate substantially from month to month, largely reflect- Committee would need to reconsider its stance ing the uneven pattern of automobile sales, but on should monetary growth be extremely weak, balance overall consumer spending has been relatively especially in the context of a more sluggish flat over the past several months. Housing starts economy than was currently anticipated. strengthened further in February after rising in December and January to their highest level since late At the conclusion of the Committee's discusspring. Business capital spending appears to have sion, all of the members indicated that they weakened in early 1987. Consumer and producer favored or could accept a directive that called for prices rose more rapidly in early 1987, primarily no change in the degree of pressure on reserve reflecting sizable increases in energy prices. Labor positions in the immediate future. There was a cost increases have remained relatively moderate in recent months. consensus in favor of allowing for possible limit- Growth of M2 and M3 has slowed substantially from ed adjustments during the intermeeting period the pace in December and January, and for 1987 to toward some firming of reserve conditions, with date expansion of these two aggregates appears to excessive weakness in the dollar recognized as have been around the lower ends of their respective the potential development most likely to make ranges established by the Committee for the year. such an adjustment appropriate. In particular, Growth of Ml, after moderating in January from an exceptionally rapid pace in late 1986, also has slowed the members agreed that somewhat greater remarkedly further. Expansion in total domestic nonfiserve restraint might be acceptable depending on nancial debt appears to have moderated appreciably the performance of the dollar in foreign exchange since year-end. Interest rates generally have fluctuatmarkets, but also taking into account the behav- ed in a relatively narrow range since the February 10ior of the monetary aggregates, the strength of 11 meeting of the Committee, although they have firmed somewhat recently. At a meeting in the latter the business expansion, progress against inflapart of February, the Finance Ministers and Central tion, and conditions in credit markets. This ap- Bank Governors of major industrial countries agreed proach to policy implementation was expected to to cooperate closely to foster stability of exchange be consistent with growth in M2 and M3 at rates around then-current levels. However, after midannual rates of around 6 percent or less over the March, the trade-weighted value of the dollar against the other G-10 currencies declined further on balance, three-month period from March to June. Over including a sizable decline against the yen. the same period growth in Ml was expected to The Federal Open Market Committee seeks moneremain substantially below its pace in 1986. tary and financial conditions that will foster reasonable Because the behavior of Ml remained subject to price stability over time, promote growth in output on unusual uncertainty, the Committee decided to a sustainable basis, and contribute to an improved continue its practice of not specifying a numeri- pattern of international transactions. In furtherance of these objectives the Committee at its February meetcal expectation for its growth. The members ing established growth ranges of 5l/z to 8V2 percent for agreed that the intermeeting range for the federal both M2 and M3, measured from the fourth quarter of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

596 Federal Reserve Bulletin • July 1987 1986 to the fourth quarter of 1987. The associated federal funds rate persistently outside a range of 4 to 8 range for growth in total domestic nonfinancial debt percent. was set at 8 to 11 percent for 1987. Votes for this action: Messrs. Volcker, Corrigan, With respect to Ml, the Committee recognized that, Angell, Boehne, Boykin, Heller, Johnson, Keehn, based on experience, the behavior of that aggregate Ms. Seger, and Mr. Stern. Votes against this acmust be judged in the light of other evidence relating to tion: None. economic activity and prices; fluctuations in Ml have become much more sensitive in recent years to changes in interest rates, among other factors. During 2. Authorization for Domestic Open 1987, the Committee anticipates that growth in Ml Market Operations should slow. However, in the light of its sensitivity to a variety of influences, the Committee decided at the Effective April 22, 1987, the Committee ap- February meeting not to establish a precise target for its growth over the year as a whole. Instead, the proved a temporary increase of $3 billion, to $9 appropriateness of changes in Ml during the course of billion, in the limit between Committee meetings the year will be evaluated in the light of the behavior of on changes in System Account holdings of U.S. its velocity, developments in the economy and finangovernment and federal agency securities specicial markets, and the nature of emerging price presfied in paragraph 1(a) of the Authorization for sures. Domestic Open Market Operations. Subsequent- In that connection, the Committee believes that, particularly in the light of the extraordinary expansion ly, effective May 6, 1987, the Committee apof this aggregate in recent years, much slower mone- proved a further increase of $2 billion, to $11 tary growth would be appropriate in the context of billion, in the intermeeting limit. These increases continuing economic expansion accompanied by signs were effective for the remainder of the intermeetof intensifying price pressures, perhaps related to ing period ending with the close of business on significant weakness of the dollar in exchange markets, and relatively strong growth in the broad mone- May 19, 1987. tary aggregates. Conversely, continuing sizable increases in Ml could be accommodated in Votes for the April 22 action: Messrs. Volcker, circumstances characterized by sluggish business ac- Corrigan, Angell, Boehne, Boykin, Heller, tivity, maintenance of progress toward underlying Johnson, Keehn, Ms. Seger, and Mr. Stern. Votes price stability, and progress toward international equi- against this action: None. librium. As this implies, the Committee in reaching Votes for the May 6 action: Messrs. Volcker, operational decisions during the year, might target Corrigan, Angell, Boehne, Boykin, Heller, appropriate growth in Ml from time to time in the light Johnson, Keehn, and Ms. Seger. Votes against this of circumstances then prevailing, including the rate of action: None. Absent and not voting: Mr. Stern. growth of the broader aggregates. In the implementation of policy for the immediate The increases were approved on the recomfuture, the Committee seeks to maintain the existing degree of pressure on reserve positions. Somewhat mendation of the Manager for Domestic Operagreater reserve restraint might be acceptable depend- tions. The Manager had advised on April 22 that ing on developments in foreign exchange markets, outright purchases of securities in the intermeettaking into account the behavior of the aggregates, the ing interval through April 21 had reduced the strength of the business expansion, progress against leeway under the usual $6 billion limit to about inflation, and conditions in credit markets. This approach is expected to be consistent with growth in M2 $1^4 billion. On May 6, the Manager advised that and M3 over the period from March through June at the leeway had been reduced under the April 22 annual rates of around 6 percent or less. Growth in Ml ceiling to a little over $100 million. Additional is expected to remain substantially below its pace in purchases of securities in excess of these 1986. The Chairman may call for Committee consultaleeways were necessary chiefly because of untion if it appears to the Manager for Domestic Operations that reserve conditions during the period before usually steep increases in Treasury balances at the next meeting are likely to be associated with a the Federal Reserve Banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

597 Legal Developments ORDERS ISSUED UNDER BANK HOLDING Applicant and Bank compete in the Davenport/Rock COMPANY ACT, BANK MERGER ACT, BANK Island banking market.2 Applicant is the fourth largest SERVICE CORPORATION ACT, AND FEDERAL of 13 banking organizations in the market, controlling RESERVE ACT $73.2 million in deposits, representing 5.7 percent of the total deposits in commercial banking organizations Orders Issued Under Section 3 of the Bank in the market. Bank is the seventh largest commercial Holding Company Act banking organization in the market, controlling deposits of $45.4 million, representing 3.5 percent of the Banks of Iowa, Inc. total deposits in commercial banking organizations in Des Moines, Iowa the market. Upon consummation of the proposal, Applicant will become the third largest commercial Order Approving Acquisition of a Bank banking organization in the market, with deposits of $118.6 million, representing 9.2 percent of the total Banks of Iowa, Inc., Des Moines, Iowa, a bank deposits in commercial banking organizations in the holding company within the meaning of the Bank market. Holding Company Act (12 U.S.C. § 1841 et seq.) The Davenport/Rock Island banking market is con- ("Act"), has applied for the Board's approval under sidered to be highly concentrated, with a Herfindahlsection 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to Hirschman Index ("HHI") of 3355. Upon consummaacquire Central Trust and Savings Bank ("Bank"), tion of the proposal, however, the HHI would increase Eldridge, Iowa. by only 40 points to 3395, and this acquisition would Notice of the application, affording interested per- not be subject to challenge by the Department of sons an opportunity to submit comments, has been Justice under its merger guidelines.3 In view of the given in accordance with section 3(b) of the Act. The small increase in market concentration and other facts time for filing comments has expired, and the Board of record, the Board concludes that consummation of has considered the application and all comments re- this proposal is not likely to have any significant ceived in light of the factors set forth in section 3(c) of adverse effect on existing competition in the Daventhe Act. port/Rock Island banking market. Applicant, the second largest commercial banking The financial and managerial resources of Applicant organization in Iowa, controls 14 banks with deposits and its banking subsidiaries are consistent with apof $1.77 billion,1 representing 7.2 percent of total proval. Moreover, the Board has considered the fact deposits in commercial banking organizations in the that Bank has experienced some financial difficulties state. Bank, the 146th largest commercial banking and consummation of this proposal will improve the organization in the state, controls deposits of $45.4 prospects of Bank by providing Bank with the finanmillion, representing 0.18 percent of total deposits in cial and managerial resources to continue to serve the commercial banking organizations in the state. Upon consummation of this proposal, Applicant would remain the second largest commercial banking organization in Iowa, controlling deposits of $1.8 billion, 2. The Davenport/Rock Island banking market is approximated by representing 7.38 percent of the total deposits in Scott County and Farmington Township in Cedar County, Iowa; and Rock Island County (except Drury and Buffalo Prarie Townships), commercial banking organizations in the state. Conand Colona, Edford, Genesco, Hanna and Western Townships of summation of this proposal would not have any signifi- Henry County, Illinois. cant adverse effect upon the concentration of banking 3. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)), a market in which the resources in Iowa. post-merger HHI is above 1800 is considered highly concentrated. In such markets, the Department is likely to challenge a merger that increases the HHI by more than 50 points. 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 post-merger HHI is at least 1800 and the 1. All banking data are as of December 31, 1985. merger increases the HHI by at least 200 points. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

598 Federal Reserve Bulletin • July 1987 convenience and needs of the community. Consider- tors set forth in section 3(c) of the Act (12 U.S.C. ations related to the convenience and needs of the § 1842(c)). communities to be served also are consistent with Applicant is a non-operating corporation formed for approval of the transaction. the purpose of acquiring Bank. Bank is among the Based on the foregoing and other facts of record, the smaller banking organizations in the state,2 with total Board has determined that the application should be, domestic deposits of $40.6 million, representing less and hereby is, approved. The transaction shall not be than one percent of total deposits in commercial consummated before the thirtieth day following the banking organizations in the state. Consummation of effective date of this Order, or later than three months this proposal would not result in a concentration of after the effective date of this Order, unless such banking resources or in any significant adverse comperiod is extended for good cause by the Board or by petitive effects in the state. the Federal Reserve Bank of Chicago, pursuant to Bank operates in the Watseka, Illinois banking delegated authority. market,3 where it is the 2nd largest commercial bank- By order of the Board of Governors, effective ing organization, controlling 11.3 percent of total de- May 26, 1987. posits in commercial banking organizations in the state. None of the principals of Applicant or Bank is Voting for this action: Chairman Volcker and Governors associated with any other financial institution located Johnson, Seger, Angell, and Heller. within the relevant banking market. Accordingly, consummation of this transaction would not result in a JAMES MCAFEE concentration of banking resources or in significant [SEAL] Associate Secretary of the Board adverse competitive effects in the relevant geographic area.4 Competitive factors, therefore, are consistent with approval of the application. CNB Bancorp, Inc. The Board has previously indicated that a bank Danville, Illinois holding company should serve as a source of financial and managerial strength for its subsidiary bank. Al- Order Approving Formation of a Bank Holding though Applicant will incur debt in connection with Company this proposal, it appears that Applicant will be able to service its debt and serve as a source of financial and CNB Bancorp, Inc., Danville, Illinois, has applied for managerial strength to Bank, particularly in light of the Board's approval under section 3 of the Bank certain commitments by Applicant's principals. Ac- Holding Company Act of 1956, as amended ("Act") cordingly, the Board concludes that the financial and (12 U.S.C. § 1841 et seq.), to acquire the City Nation- managerial resources of Applicant and Bank are conal Bank of Hoopeston, Hoopeston, Illinois ("Bank"), sistent with approval. and thereby to become a bank holding company. Based on the foregoing and other facts of record, the Notice of the application, affording an opportunity Board has determined that the application should be, for interested persons to submit comments, has been and hereby is, approved. The transaction shall not be given in accordance with section 3(b) of the Act consummated before the thirtieth calendar day follow- (52 Federal Register 41,434 (1986)). The time for filing ing the effective date of this Order or later than three comments has expired and the Board has considered the application and all comments received, including a protest submitted by the Lake Shore National Bank, Protestant also has requested that a public meeting be held on this Danville, Illinois ("Protestant"),1 in light of the fac- application pursuant to section 262.25(d) of Regulation Y, 12 C.F.R. § 262.25(d). The Foard has carefully reviewed the issues raised by the Protestant in light of the record before it, and has concluded that no additional clarification of the issues presented therein is necessary for 1. Protestant, a competitor of Bank in the local banking market, the Board's disposition of this matter. The Board therefore concludes alleges in pertinent part that Applicant's proposal would have a that a public meeting would serve no useful purpose. Accordingly, the significantly adverse effect on competition in view of the numerous request for a public meeting is denied. existing providers of financial services; that Applicant has failed to 2. Banking data are as of December 31, 1985. demonstrate how the proposal would serve the needs of the Danville 3. The Watseka banking market includes all of Iroquois County, and Hoopeston, Illinois communities; that Applicant's principals Illinois, as well as Butler and Grant Townships in Vermilion County, failed to rent to Protestant space in a shopping mall owned by the Illinois. principals; and that Applicant has failed to demonstrate that it has the 4. Upon consummation of the proposed transaction, Applicant financial and managerial resources to serve as a source of strength to intends to apply to the Comptroller of the Currency for approval to Bank. The Board has carefully reviewed Protestant's comments, move Bank's main office a distance of 25 miles from its current Applicant's responses thereto, and all the facts of record, and has location in Hoopeston, Illinois, to Danville, Illinois, which also is concluded that financial, managerial and competitive factors, as well located within the Watseka banking market. Bank would be mainas convenience and needs considerations, are consistent with approv- tained as a separate facility and there would be no decrease in existing al of the application. banking services in the market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 599 months after the effective date of this Order, unless Michigan, controlling 13.6 percent of the total deposits such period is extended for good cause by the Board or of commercial banking organizations in the state. by the Federal Reserve Bank of Chicago, acting pursu- After conversion Bank will control deposits of $281.7 ant to delegated authority. million, representing 0.5 percent of the total deposits By order of the Board of Governors, effective in commercial banking organizations in the state. May 6, 1987. Upon consummation of this proposal, Applicant will continue to be the second largest commercial banking Voting for this action: Chairman Volcker and Governors organization in Michigan and control deposits of $8.1 Johnson, Seger, Angell, and Heller. billion, representing 14.1 percent of total deposits in commercial banking organizations in the state. Con- JAMES MCAFEE summation of this proposal would not have any signifi- [SEAL] Associate Secretary of the Board cant adverse effect upon the concentration of banking resources in the state. Applicant competes directly with Bank in the Grand Comerica Incorporated Rapids banking market.2 Applicant is the ninth largest Detroit, Michigan of 17 commercial banking organizations, with total deposits of $52.5 million, representing 1.4 percent of Order Approving Acquisition of a Bank total deposits in commercial banks in the market. Upon conversion Bank will be the fourth largest Comerica Incorporated, Detroit, Michigan, a bank commercial banking organization in the market, with holding company within the meaning of the Bank total deposits of $281.7 million, representing 7.6 per- Holding Company Act ("Act"), 12 U.S.C. § 1841 cent of total deposits in commercial banking organizaet seq., has applied pursuant to section 3(a)(3) of the tions in the market. After consummation of this pro- Act, 12 U.S.C. § 1843(a)(3) to acquire between 25.77 posal, Applicant would become the fourth largest percent and 100 percent of the shares of the successor commercial banking organization and control 9.0 perby merger to MetroBanc, Federal Savings Bank, cent of total deposits in commercial banking organiza- Grand Rapids, Michigan ("Bank"). tions in the market. The share of deposits held by the four largest commercial banking organizations in the Notice of the application, affording interested permarket would be 85.5 percent and the Herfindahlsons an opportunity to submit comments, has been Hirschman Index ("HHI") would increase by 21 given in accordance with section 3(b) of the Act, points to 2494.3 51 Federal Register 45,177 (1986). The time for filing comments has expired, and the Board has considered Although consummation of the proposal would elimthe application and all comments received in light of inate some existing competition between Applicant the factors set forth in section 3(c) of the Act. and Bank in the Grand Rapids banking market, numer- Bank is a federal savings bank, the accounts of ous other commercial banking organizations would which are insured by the Federal Savings and Loan remain as competitors in the market. Moreover, the Insurance Corporation ("FSLIC"). Bank has adopted conversion of MetroBanc to a national bank introa conversion plan by which it will convert to a state duces another full service competitor into the market. chartered, federally insured savings bank and then will Based upon the above considerations, the Board conconvert to a national bank. Applicant proposes to cludes that consummation of the proposal is not likely establish an interim national bank which will acquire by merger the national bank into which Bank will be converted. Since Bank, at the time of acquisition by Applicant, 2. The Grand Rapids banking market is approximated by Kent will be a national bank that will continue to accept County, except for Oakfield and Spencer townships; Thornapple demand deposits and make commercial loans, Bank is township in Barry County; Casnovia township in Muskegon County; Salem, Dorr and Leighton townships in Allegan County; and Jamesa "bank" for purposes of the Act, and Applicant town, Georgetown, Blendon, Allendale, Tallmadge, Polkton, Wright, properly has applied to acquire Bank under section 3 and Chester townships in Ottawa County, Michigan. of the Act, which governs the acquisition of banks by 3. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)), any market in which the bank holding companies. post-merger HHI is over 1800 is considered highly concentrated, and Applicant, with deposits of $7.8 billion,1 is the the Department is likely to challenge a merger that increases the HHI by more than 50 points unless other factors indicate that the merger second largest commercial banking organization in will not substantially lessen competition. The Department of Justice has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating an 1. Market data are as of December 31, 1985. State data are as of anticompetitive effect) unless the post-merger HHI is at least 1800 and June 30, 1985. the merger increases the HHI by at least 200 points. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

600 Federal Reserve Bulletin • July 1987 to substantially lessen competition in the Grand Rap- under other federal or state laws and regulations and ids banking market. does not shield an applicant from the consequences of Based upon a review of all of the facts of record, the violations of other laws.7 Board has determined that the financial and manageri- Based on the foregoing and other facts of record, the al resources of Applicant and MetroBanc are consis- Board has determined that the application should be, tent with approval. In its evaluation of Applicant's and hereby is, approved. This transaction shall not be managerial resources, the Board has considered cer- consummated before the thirtieth calendar day followtain violations by Applicant's lead bank, Comerica ing the effective date of this Order, or later than three Bank, Detroit, Michigan, of the Currency and Foreign months after the effective date of this Order, unless Transactions Reporting Act ("CFTRA") and the regu- such period is extended for good cause by the Board or lations thereunder.4 With regard to CFTRA violations, by the Federal Reserve Bank of Chicago, acting pursuthe Board notes that Applicant has cooperated with ant to delegated authority. law enforcement agencies and has taken remedial By order of the Board of Governors, effective action designed to correct violations and prevent their May 4, 1987. recurrence. The sufficiency of Applicant's compliance procedures has been reviewed by examiners from the Voting for this action: Chairman Volcker and Governors Office of the Comptroller of the Currency and the Johnson, Angell, and Heller. Abstaining from this action: Governor Seger. Federal Reserve Bank of Chicago, and the Bank has consulted with appropriate enforcement agencies. For the foregoing reasons, the Board concludes that JAMES MCAFEE the managerial resources of Applicant and its subsid- [SEAL] Associate Secretary of the Board iary banks are consistent with approval. Considerations relating to the convenience and needs of the communities to be served are also consistent with First Chicago Corporation approval of the proposal. Chicago, Illinois The Board notes that this application involves the acquisition of a bank that results from a conversion of Order Approving Acquisition of a Bank a non-failing FSLIC-insured federal savings bank. The acquisition proposed here, however, does not fall First Chicago Corporation, Chicago, Illinois, a bank within the scope of the Board's policy and rulings holding company within the meaning of the Bank regarding acquisitions of thrift institutions under sec- Holding Company Act (12 U.S.C. § 1841 et seq.) (the tion 4 of the Act5 or the provisions of the 1982 Garn-St "Act"), has applied for the Board's approval under Germain Depository Institutions Act regarding acqui- section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to sitions of thrift institutions. Bank, when acquired by acquire all the voting shares of Beneficial National Applicant, will be a national bank chartered by the Bank USA, Wilmington, Delaware ("Beneficial"), a Office of the Comptroller of the Currency. Bank will limited-purpose national bank that engages in credit function as a commercial bank, accepting demand card operations. deposits and engaging in commercial lending, and will Notice of the application, affording opportunity for be subject to all the banking standards of the Bank interested persons to submit comments, has been Holding Company Act. published (52 Federal Register 15,381 (1987)). The The Board expects that Applicant will comply with time for filing comments has expired, and the Board all state and federal requirements necessary for con- has considered the application and all comments resummation of the acquisition, and the Board's approv- ceived in light of the factors set forth in section 3 of the al of this application under the Act is not intended to Act. preempt any such requirements.6 The Board has previ- Applicant is the largest commercial banking organiously stated that its approval of transactions under zation in Illinois, operating 10 subsidiary banks with section 3 of the Act does not relieve an applicant or the total deposits of $27 billion.1 Beneficial is a national bank involved of the responsibility to obtain approval banking association chartered in 1983 by the Comp- 4. 31 U.S.C. § 5311 et seq.; 31 C.F.R. § 103. 7. Crocker National Corporation, 66 FEDERAL RESERVE BULLETIN 5. D.H. Baldwin Company, 63 FEDERAL RESERVE BULLETIN 280 66 (1980); Royal Trust Company, 37 Federal Register 18,414, 18,415 (1977). (1972). 6. The Board may not approve an application that would result in a violation of federal or state law. Whitney National Bank v. Bank of New Orleans, 379 U.S. 411 (1964). 1. Banking data are as of December 31, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 601 troller of the Currency. Beneficial is engaged primarily ed before the thirtieth day following the effective date in the extension of credit by means of the issuance of of this Order, or later than 90 days after the effective Visa and MasterCard credit cards. Beneficial also date of this Order, unless such period is extended for accepts time deposit accounts in the form of certifi- good cause by the Board or by the Federal Reserve cates of deposit, but it does not accept demand depos- Bank of Chicago, pursuant to delegated authority. its. Because of the limited scope of Beneficial's activi- By order of the Board of Governors, effective ties, the proposed transaction would have no May 26, 1987. significant effect on the concentration of banking resources in Delaware. Voting for this action: Chairman Volcker and Governors Section 3(d) of the Act (12 U.S.C. § 1842(d)), the Johnson, Seger, Angell, and Heller. Douglas Amendment, prohibits the Board from approving an application by a bank holding company to JAMES MCAFEE acquire control of any bank located outside of the bank [SEAL] Associate Secretary of the Board holding company's home state unless the acquisition is "specifically authorized by the statute laws of the state in which such bank is located, by language to that effect and not merely by implication."2 As of May 18, Norstar Bancorp, Inc. 1987, the statute laws of Delaware authorize the Albany, New York acquisition by an out-of-state bank holding company of an existing bank that satisfies the requirements of Order Approving Acquisition of a Bank section 803, Title 5, of the Delaware Code.3 The Delaware Commissioner of Banks has notified the Norstar Bancorp, Inc., Albany, New York, a bank Board that he has approved the acquisition. holding company within the meaning of the Bank Based on the foregoing, the Board has determined Holding Company Act (12 U.S.C. § 1841 et seq.) (the that the proposed acquisition is specifically authorized "Act"), has applied for the Board's approval under by the statute laws of Delaware and thus Board section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to approval is not prohibited by the Douglas Amend- acquire all of the voting shares of Syracuse Savings ment. Bank, Syracuse, New York, a stock savings bank Applicant operates subsidiaries that compete with ("Bank"). Bank presently operates as a mutual associ- Beneficial in the provision of credit card services. ation and will convert to stock form in order to effect Applicant controls approximately 3.9 percent of the the acquisition. market for bank revolving credit cards and Beneficial Notice of the application, affording an opportunity controls approximately 1.2 percent of the market.4 for interested persons to submit comments, has been The market for such services is nationwide, and there published (52 Federal Register 8,967 (1987)). The time are numerous existing and potential competitors in the for filing comments has expired, and the Board has market. Accordingly, consummation of this proposal considered the application and all comments received would not result in a substantial lessening of competi- in light of the factors set forth in section 3(c) of the Act tion in any relevant market. (12 U.S.C. § 1842(c)). The financial and managerial resources of Applicant The Board previously has determined that a state and Beneficial are consistent with approval of the savings bank is a "bank" under section 2(c) of the Act proposal. Considerations relating to the convenience if it accepts demand deposits, engages in the business and needs of the communities to be served also are of making commercial loans, and is not covered by the consistent with approval. exemption created by the Garn-St Germain Deposi- Based on the foregoing and other facts of record, the tory Institutions Act of 1982 for thrift institutions Board has determined that the application under sec- insured by the Federal Savings and Loan Insurance tion 3 of the Act should be and hereby is approved. Corporation ("FSLIC") or is not operating under a The acquisition of Beneficial shall not be consummat- charter by the Federal Home Loan Bank Board.1 Bank 2. A bank holding company's home state is the state in which the 1. Excel Bancorp, Inc., 72 FEDERAL RESERVE BULLETIN 731 operations of the bank holding company's subsidiary banks were (1986); First Fidelity Bancorporation, 72 FEDERAL RESERVE BULLEprincipally conducted on July 1, 1966, or the date on which the TIN 487 (1986); BankVermont Corporation, 70 FEDERAL RESERVE company became a bank holding company, whichever is later. BULLETIN 829 (1984); The Frankford Corporation, 70 FEDERAL 3. Del. Am. S.B. No. 109 § 160(3) (May 18, 1987); Del. Code Ann. RESERVE BULLETIN 654 (1984); The One Bancorp, 70 FEDERAL tit. 5 § 803 (1985). RESERVE BULLETIN 359 (1984); First NH Banks, Inc., 69 FEDERAL 4. Data are as of June 30, 1986, and are based on bank credit card RESERVE BULLETIN 874 (1983); Amoskeag Bank Shares, Inc., 69 and check credit receivables. FEDERAL RESERVE BULLETIN 860 (1983). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

602 Federal Reserve Bulletin • July 1987 will accept deposits and engage in the business of factor in its evaluation of the competitive effects of this making commercial loans, and its deposits will not be proposal Bank's deteriorating financial condition and insured by the FSLIC. Accordingly, Bank will be a that consummation of this proposal will provide it with "bank" for purposes of the Act. The application the financial and managerial resources to continue to therefore has been considered in light of the require- serve the convenience and needs of the community. ments of section 3 of the Act pertaining to the acquisi- In addition, the Board has considered the presence tion of banks. of thrift institutions in the Syracuse market. The Board Applicant is the tenth largest commercial banking previously has indicated that thrift institutions have organization in New York, with deposits of approxi- become, or have the potential to become, major commately $8.3 billion, controlling 3.3 percent of the total petitors of commercial banks.4 Thrift institutions aldeposits in commercial banking organizations in the ready exert a considerable competitive influence in the state.2 Bank is the twenty-fourth largest commercial market by providing a wide array of deposit and banking organization in New York, with approximate- lending services to consumer and commercial customly $1.1 billion in deposits, controlling 0.4 percent of the ers. In view of these facts, the Board has concluded total deposits in commercial banking organizations in that thrift institutions exert a significant competitive New York. Upon consummation of this proposal, influence that mitigates the anticompetitive effects of Applicant would remain the tenth largest commercial this proposal in the Syracuse market. In accordance banking organization in New York. Consummation of with the Board's practice, the Board has included in this proposal would not have a significant effect on the the calculation of market concentration 50 percent of concentration of banking resources in New York. the deposits controlled by thrift institutions. Both Applicant and Bank operate in the Syracuse Taking into account all of these factors, the Board and Elmira-Corning banking markets.3 notes that if 50 percent of deposits held by thrift Applicant is the sixth largest of 15 commercial institutions in the Syracuse market were included in banking organizations in the Syracuse banking market, the calculation of market concentration, Applicant with 3.4 percent of the total deposits in commercial would be the eighth largest of 28 depository institubanking organizations in the market. Bank is the tions in the market with 2.5 percent of the total largest commercial banking organization in the Syra- deposits in depository institutions in the market. Bank cuse banking market, with 30.2 percent of the total would be the largest depository institution in the deposits in commercial banking organizations in the market with 22.7 percent of the total deposits in market. Upon consummation of the transaction, Ap- depository institutions in the market. Upon consumplicant will become the largest commercial banking mation of the transaction, Applicant would become organization in the market, with 33.6 percent of the the largest depository institution in the market with total deposits in commercial banking organizations in 25.2 percent of the total deposits in depository instituthe market. The market is highly concentrated, with a tions in the market. The market would be moderately Herfindahl-Hirschman Index ("HHI") of 1836, and concentrated, with an HHI of 1185, and the proposed the proposed acquisition will increase the HHI by 202 acquisition would increase the HHI by 114 points to points. 1299. This market share and concentration ratio are Although consummation of this proposal would consistent with prior decisions by the Board involving eliminate some existing competition between Appli- acquisitions of direct competitors. cant and Bank in the Syracuse banking market, certain Applicant is the third largest of 14 commercial facts of record mitigate the adverse competitive effect banking organizations in the Elmira-Corning banking of the proposal in this market. Numerous other com- market, with 13.2 percent of the total deposits in mercial banking organizations would continue to oper- commercial banking organizations in the market. Bank ate in the market after consummation of the proposal. is the sixth largest commercial banking organization in Moreover, the Board has considered as an extenuating the Elmira-Corning banking market, with 5.8 percent 2. State deposit data are as of December 31, 1986. Market deposit data are as of June 30, 1985. 4. National City Corporation, 70 FEDERAL RESERVE BULLETIN 743 3. The Syracuse banking market is approximated by all of Cayuga, (1984); The Chase Manhattan Corporation, 70 FEDERAL RESERVE Onondaga, and Oswego Counties, and parts of Cortland and Madison BULLETIN 529 (1984); NCNB Bancorporation, 70 FEDERAL RESERVE Counties. The Elmira-Corning banking market is approximated by all BULLETIN 225 (1984); General Bancshares Corporation, 69 FEDERAL of Chemung County and parts of Allegany, Schuyler, and Steuben RESERVE BULLETIN 802 (1983); First Tennessee Corporation, 69 Counties. FEDERAL RESERVE BULLETIN 298 (1983). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 603 of the total deposits in commercial banking organiza- 4 of the Act, contained in the Garn-St Germain tions in the market. Upon consummation of the trans- Depository Institutions Act of 1982.7 action, Applicant will become the second largest com- In response to the protests and in order to expedite mercial banking organization in the market, with 19.1 consideration of the application, Applicant has agreed percent of the total deposits in commercial banking that, within two years of consummation of its acquisiorganizations in the market. The market is moderately tion of Bank, Bank will divest or terminate its SBLI concentrated, with an HHI of*1297, and the proposed activities, unless during such period Applicant reacquisition will increase the HHI by 154 points. Ac- ceives approval pursuant to an application under seccordingly, the Board concludes that the acquisition tion 4(c)(8) of the Act to retain such activities, or the would have no significant adverse effect on existing Board otherwise determines that these activities are competition in the Elmira-Corning banking market.5 permissible under the Act when conducted directly by In the past, Bank has engaged in certain real estate subsidiary banks of bank holding companies. investment activities authorized by state law. Bank Accordingly, and without resolving whether section has advised Applicant that it currently is not engaged 4 of the Act governs the SBLI activities conducted in these activities, and Applicant has committed that, directly by savings banks owned by bank holding upon consummation, Bank will not engage, directly or companies, the Board has determined to accept Appliindirectly, in any real estate investment activities. cant's commitment to divest or terminate such activi- Bank engages, through a separate department, in the ties within two years of consummation of the proposal sale and issuance of Savings Bank Life Insurance unless during that period Applicant obtains a Board ("SBLI"). As required by New York law, the assets, determination that Bank may continue to conduct its reserves and earnings of Bank's SBLI department are SBLI activities under the Act. The Board wishes to held solely for the benefit of policyholders. These emphasize that its action in this case does not constiholdings are segregated from all other assets, liabil- tute a decision by the Board on the merits of the issues ities, obligations, and expenses of Bank.6 Bank also raised by Protestants. engages in certain insurance activities through a sub- In this regard, the Board notes that, even if the sidiary. The subsidiary acts as an agent in selling Board were to conclude, as the Protestants claim, that various types of insurance such as life insurance. the insurance prohibitions of the Act apply to the In connection with Applicant's proposal, the Inde- direct activities of Bank, the Board would, under the pendent Insurance Agents of America, Inc., the Na- circumstances of this case, allow the Applicant two tional Association of Casualty and Surety Agents, the years to conform to the nonbanking provisions of the National Association of Surety Bond Producers, the Act.8 The Board believes the two-year period to be National Association of Life Underwriters, and the particularly appropriate in this case in light of the facts National Association of Professional Insurance Agents that this acquisition will result in the recapitalization of submitted comments protesting this application on the grounds that the insurance activities conducted by Bank are prohibited under the amendments to section 7. The National Association of Life Underwriters and the National Association of Professional Insurance Agents have also requested that the Board order a factual hearing to determine whether the application complies with section 4(c)(8) of the Act. Although section 3(b) of the Act does not require a formal hearing in this instance, the Board may, in any case, order an informal or formal hearing. In light of the commitments made by Applicant and other facts of record, the Board has determined that a hearing would serve no useful purpose. Accordingly, the request for a hearing is denied. 5. If deposits held by thrift institutions in the Elmira-Corning 8. Section 4(a)(2) of the Act (12 U.S.C. § 1843(a)(2)) expressly market were included in the calculation of market concentration, provides that a company has two years from the date it becomes a Applicant would be the third largest of 20 depository institutions in the bank holding company to terminate any impermissible activities. market with 10.5 percent of the total deposits in depository institu- Although Applicant is an established bank holding company, the tions in the market. Bank would be the ninth largest depository Board has also allowed, in certain circumstances, already established institution in the market with 4.6 percent of the total deposits in bank holding companies a similar two-year period to divest impermisdepository institutions in the market. Upon consummation of the sible nonbanking activities acquired in connection with the acquisition transaction, Applicant would become the second largest depository of a permissible activity. See, e.g. Saban S.A., 73 FEDERAL RESERVE institution in the market with 15.1 percent of the total deposits in BULLETIN 359 (1987); Maryland National Corporation, 73 FEDERAL depository institutions in the market. The market would be unconcen- RESERVE BULLETIN 311 (1987); Security Pacific Corporation, 72 trated, with an HHI of 931, and the proposed acquisition would FEDERAL RESERVE BULLETIN 800, 802 n.12 (1986); Citicorp!Quotron, increase the HHI by 97 points, to 1028, which is a moderately 72 FEDERAL RESERVE BULLETIN 497, 500 (1986); Chase Manhattan concentrated market. Corporation, 71 FEDERAL RESERVE BULLETIN 960 (1985); Baltimore Bancorp, 71 FEDERAL RESERVE BULLETIN 901 (1985); Citicorp/First 6. If the claims upon Bank's SBLI department exceed the depart- Federal Savings & Loan, 70 FEDERAL RESERVE BULLETIN 149, 155 ment's reserves, those claims are paid by the New York State SBLI (1984). Fund. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

604 Federal Reserve Bulletin • July 1987 Bank and that Bank has conducted this activity safely tent with approval, particularly in light of the fact that and soundly pursuant to explicit state authorization for the acquisition will result in the recapitalization of over 40 years. In addition, the Board notes that an Bank and enable it to continue to provide services to immediate requirement for cessation of Bank's SBLI the public. activity could cause adverse consequences for other Based on the foregoing and other facts of record, institutions offering SBLI as well as the state-SBLI including the commitments made by Applicant, the financial guaranty fund. On this basis, and in view of Board has determined that the application under secthe special and historical relationship between savings tion 3 of the Act should be and hereby is approved. banks and the SBLI program, the Board has deter- The acquisition of Bank shall not be consummated mined to grant the two-year divestiture period prof- before the fifth calendar day following the effective fered by Applicant. date of this Order, or later than 90 days after the With regard to the Bank's remaining insurance effective date of this Order, unless such period is activities, Applicant has agreed that, within two years extended for good cause by the Board or by the of consummation of the acquisition, Bank will divest Federal Reserve Bank of New York, pursuant to or terminate the insurance activities of its subsidiary, delegated authority. unless during such period Applicant receives approval By order of the Board of Governors, effective pursuant to an application under section 4(c)(8) of the May 6, 1987. Act to retain such activities. During this two-year period or unless authorization is granted pursuant to Voting for this action: Chairman Volcker and Governors the Act for broader activities, Bank will limit the Johnson, Seger, Angell, and Heller. insurance activities of its subsidiary to renewal of existing policies.9 JAMES MCAFEE In evaluating this application, the Board has consid- [SEAL! Associate Secretary of the Board ered the financial and managerial resources of Applicant and the effect on those resources of the proposed United Missouri Bancshares, Inc. acquisition. In this regard, the Board has previously Kansas City, Missouri stated that it expects organizations experiencing substantial growth internally and by acquisition, such as Order Approving Acquisition of a Bank Holding Applicant, to maintain a strong capital position sub- Company and Banks stantially above the minimum levels specified in the Capital Adequacy Guidelines, without significant reli- United Missouri Bancshares, Inc., Kansas City, Misance on intangibles, particularly goodwill.10 Although souri, a bank holding company within the meaning of the proposed transaction will result in the creation of a the Bank Holding Company Act ("Act"), 12 U.S.C. substantial amount of intangible assets, Applicant's § 1841 et seq., has applied for the Board's approval tangible primary capital ratio is and will remain well pursuant to section 3(a)(3) of the Act, to acquire 100 above the minimum level specified in the Guidelines. percent of the voting shares of FCB Corp. ("FCB"), In this connection, the Board notes that Applicant is Collinsville, Illinois, and thereby indirectly to acquire raising common equity to fund the proposed acquisi- The First National Bank of Collinsville, Collinsville, tion. With respect to Bank's financial resources, Ap- Illinois; First County Bank of Maryville, Maryville, plicant will inject a significant amount of capital into Illinois; and First State Bank of Morrisonville, Morri- Bank and maintain Bank's tangible primary capital sonville, Illinois. ratio above the Board's minimum Guidelines. Accord- Notice of the application, affording interested peringly, the Board concludes that the financial and sons an opportunity to submit comments, has been managerial resources and future prospects of Appli- given in accordance with section 3(b) of the Act cant are satisfactory and consistent with approval. (51 Federal Register 44,379 (1986)). The time for filing Considerations relating to the convenience and comments has expired, and the Board has considered needs of the communities to be served also are consis- the application and all comments received in light of the factors set forth in section 3(c) of the Act. The Board is prohibited by the Douglas Amendment to the Act from approving any application by a bank holding company to acquire directly or indirectly a 9. See Standard Chartered PLC, 73 FEDERAL RESERVE BULLETIN bank located outside the bank holding company's 167 (1987). 10. Citicorp, 72 FEDERAL RESERVE BULLETIN 724; Capital Ade- home state, unless the state where the bank to be quacy Guidelines, 50 Federal Register 16,057, 16,066-67 (April 24, acquired is located has specifically authorized the 1985), 71 FEDERAL RESERVE BULLETIN 445 (1985); National City Corporation, 70 FEDERAL RESERVE BULLETIN 743, 746 (1984). acquisition "by language to that effect and not merely Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 605 by implication." 12 U.S.C. § 1842(d). Applicant's consummation of this proposal.5 Based upon the numhome state is Missouri. FCB and its subsidiary banks ber of commercial banking organizations that would are located in Illinois. The Board reviewed the region- remain in the market after consummation and the al reciprocal interstate banking statutes of Illinois and small increase in Applicant's market share, the Board Missouri1 in Landmark Bancshares Corp., Clayton, concludes that consummation of this proposal is not Missouri, to acquire Mid America Bancsystem, Inc., likely to substantially lessen competition in the St. Fairview Heights, Illinois, and determined that the Louis banking market. laws of Illinois and Missouri met the requirements of FCB's subsidiary bank, First State Bank of Morrithe Douglas Amendment and that the acquisition of an sonville, operates in the Christian County banking Illinois bank holding company and banks by a Missou- market.6 FCB is the 9th largest of 11 commercial ri bank holding company was, therefore, permissible banking organizations in the market, with total deposunder the Act.2 Accordingly, the Board concludes that its of $8.6 million, representing 2.6 percent of total the Douglas Amendment does not prohibit Board deposits in commercial banks in the market. Applicant approval of Applicant's acquisition of FCB and its is not currently represented in the Christian County subsidiary banks. banking market. Applicant, with deposits of $2.8 billion,3 is the 5th This market is not located within a Metropolitan largest banking organization in Missouri, controlling Statistical Area, and FCB is among the smaller firms in 6.5 percent of the total deposits in commercial banking the market. In addition, there are a significant number organizations in Missouri. FCB, with deposits of of banking organizations in Illinois and those states $146.7 million, is the 102nd largest banking organiza- with which it has established reciprocal interstate tion in Illinois, controlling 0.1 percent of the total banking, including Missouri, which qualify as probable deposits in commercial banking organizations in Illi- future entrants into the Christian County banking nois. Consummation of this proposal will not have a market. Based upon these and other facts of record, significant adverse effect on existing levels of concen- the Board concludes that consummation of this protration of state-wide banking resources in either Mis- posal would not have a significant adverse effect on souri or Illinois. probable future competition in the Christian County Applicant's subsidiary banks compete directly with banking market. Accordingly, based on all the facts of FCB's subsidiary banks in the St. Louis banking record, the Board concludes that consummation of the market.4 Applicant is the 9th largest of 72 commercial proposal would not have a significant adverse effect on banking organizations in the market, with total market existing or probable future competition or significantly deposits of $340.1 million, representing 1.8 percent of increase the concentration of banking resources in any total deposits in commercial banks in the market. FCB relevant banking market. is the 17th largest commercial banking organization in The financial and managerial resources of Applicant the market, with total market deposits of $138.1 mil- and FCB are considered satisfactory and consistent lion, representing 0.7 percent of total deposits in with approval. commercial banks in the market. Upon consummation In considering the convenience and needs of the of this proposal, Applicant will become the 8th largest communities to be served, the Board has considered commercial banking organization in the market, con- the records of Applicant's bank subsidiaries under the trolling deposits of $478.2 million, representing 2.5 Community Reinvestment Act ("CRA"), as well as percent of total deposits in commercial banks in the the comments of the Committee Against Recurring market. Economic Discrimination ("Protestant").7 Protestant The St. Louis banking market is considered unconcentrated, with the four largest banks controlling 55.3 percent of deposits in commercial banks in the market. The Herfindahl-Hirschman Index ("HHI") for the market is 900, and would increase by 3 points upon 5. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)), any market in which the post-merger HHI is below 1000 is considered unconcentrated, and the Department will not challenge a merger with a post-merger HHI below 1000, except in extraordinary circumstances. 6. The Christian County banking market is approximated by 1. See, Mo. Rev. Stat. § 362.910, et seq. (1986); 111. Rev. Stat. Ch. Christian County, Illinois, and the Townships of Cold Spring, Oconee, 17 § 2501, et seq. (1986). Rural and Tower Hill in Shelby County, Illinois. 2. Landmark Bancshares Corp., Order approved November 24, 7. The CRA requires the Board to assess the record of banks in 1986. meeting the credit needs of their entire communities, including low-to- 3. All banking data are as of December 31, 1986. moderate income neighborhoods, consistent with their safe and sound 4. The St. Louis banking market is approximated by St. Louis, operation, and to take those records into account in the Board's Jefferson and St. Charles Counties, Missouri, and Lebanon and evaluation of bank holding company applications. 12 U.S.C. § 2901 Mascoutal Townships in St. Claire County, Illinois. et seq. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

606 Federal Reserve Bulletin • July 1987 alleges that Applicant's Kansas City Banks ("Banks") (2) Place advertisements in an area newspaper, have not adequately assessed or met the credit needs suggested by Protestant as one having significant of low-to-moderate income neighborhoods located interest and circulation in Protestant's census tracts, within the Banks' delineated service areas, in particu- describing the availability of home improvement, lar low-to-moderate income individuals residing in the home purchase and SBA loans; northeast section of Kansas City. In this regard, (3) Designate a "Loan Officer" at United Missouri pursuant to the Board's practice and procedures, the City Bank's Independence Avenue office; Federal Reserve Bank of Kansas City arranged several (4) Ensure that representatives of Applicant's mortprivate meetings between the Applicant and Protestant gage banking subsidiary and loan officers of United in January 1987 to clarify the issues under the CRA Missouri City Bank meet to review details of the and provide a forum for the resolution of differences.8 loan application process for home purchase loans The Board notes that Applicant's and FCB's subsid- that qualify for Freddie Mac and Fannie Mae particiiary banks have achieved satisfactory overall CRA pation; ratings based upon the most recent compliance exami- (5) Implement training sessions for loan officers and nations. The Board also notes that, in 1985, approxi- personal banking representatives of Banks to inmately 18.6 percent of the Banks' total home purchase crease familiarity with the CRA and the Board's loans were made in low-to-moderate income areas in Regulation BB; the Kansas City MSA. (6) Develop lobby posters and information leaflets The record also shows that since 1983, over 30 explaining the availability of loans and the applicapercent of the home improvement loans made by tion procedure; Banks in the Kansas City MSA were made in low-to- (7) Ensure the availability of a representative of moderate income areas.9 This represents a higher level United Missouri City Bank to become involved with of home improvement loans made in low-to-moderate Old Northeast, Inc., an area neighborhood associaincome census tracts in the Kansas City MSA than tion, or some similar group; and was made by all other banks operating in the market. (8) Ensure that Banks' representatives will be avail- In 1985, Banks also made 28.8 percent of their Small able to make presentations to area groups concern- Business Administration ("SBA") loans and 13.4 per- ing the services available at Banks. cent of their consumer installment loans in low-tomoderate income census tracts in the Kansas City The Board expects Applicant to provide the Reserve MSA. Bank of Kansas City with quarterly written reports Applicant has informed the Board that its internal detailing the progress of Applicant's Kansas City goals for 1987 contemplate a 20 percent increase in its Banks in implementing the proposed programs to home mortgage lending activities throughout the Kan- assess and serve the credit needs of their respective sas City MSA, including a 20 percent increase in its communities and to fulfill the commitments made in current home mortgage lending in low-to-moderate connection with this application. income areas. Similarly, Applicant expects to increase Accordingly, based on all of the evidence, including home improvement lending by approximately 10 per- the commitments and measures Applicant has procent in 1987. posed in order to enhance its service of the conve- In order to address concerns raised by Protestant, to nience and needs of its communities, the Board conenhance its service to low-to-moderate income areas, cludes that convenience and needs considerations are and to inform residents of low-to-moderate income consistent with approval of this application.10 neighborhoods of services available through Applicant's subsidiaries, Applicant has committed to: (1) Include statement stuffers with all checking and savings account statements to improve customers' understanding of the availability of home improvement, home purchase and SBA loans; 10. The Board has also considered the Protestant's request for a public meeting under section 262.25(d) of the Board's regulations and a formal hearing under the Act. Protestant has been given the opportunity to submit written facts and arguments to the Board regarding this application. In addition, the Reserve Bank has arranged several informal meetings between Protestant and Applicant in order to permit clarification and discussion of the record of Applicant's Banks in meeting the convenience and needs of the community. In light of this and the representations and commitments made by 8. 12 C.F.R. § 262.25. Applicant in response to Protestant's comments, the Board has 9. These ratios are 33.3 percent in 1983, 34.2 percent in 1984, and determined to deny Protestant's requests for a public meeting and a 32.6 percent in 1985. formal hearing at this time. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 607 Based on the foregoing and other facts of record, the underwrite and deal in U.S. government and agency Board has determined that the application should be, and state and municipal securities that state member and hereby is, approved. This transaction shall not be banks are authorized to underwrite and deal in under consummated before the thirtieth calendar day follow- section 16 of the Banking Act of 1933 (the "Glassing the effective date of this Order, or later than three Steagall Act") (12 U.S.C. § 24 Seventh) (hereinafter months after the effective date of this Order, unless "eligible securities"). Company would engage in the such period is extended for good cause by the Board or proposed underwriting and dealing activities through by the Federal Reserve Bank of Kansas City, acting offices in New York, California, Illinois, Massachupursuant to delegated authority. setts, Pennsylvania, and Texas.3 By order of the Board of Governors, effective May Applicant, with consolidated assets of $94.8 billion,4 28, 1987. is the third largest banking organization in the nation. It operates seven subsidiary banks in New York, Voting for this action: Chairman Volcker and Governors Maryland, Ohio, Delaware, Florida, and Arizona and Johnson, Seger, Heller, and Kelley. Abstaining from this engages in a broad range of permissible nonbanking action: Governor Angell. activities in the United States and abroad. Notice of the application, affording interested per- JAMES MCAFEE sons an opportunity to submit comments on the pro- [SEAL] Associate Secretary of the Board posal, has been published (52 Federal Register 1,380 (1987)). The Board received two comments on the proposal. The Securities Industry Association Orders Issued Under Section 4 of the Bank ("SIA"), a trade association of the investment bank- Holding Company Act ing industry, opposes the application for the reasons stated in its earlier protests to similar applications by The Chase Manhattan Corporation Citicorp, J.P. Morgan & Co. Incorporated and Bank- New York, New York ers Trust New York Corporation. The Dealer Bank Association commented in favor of the application. Order Conditionally Approving Application to The Board has previously determined that under- Underwrite and Deal in Certain Securities to a writing and dealing in eligible securities is closely Limited Extent related to banking under section 4(c)(8) of the BHC Act. 12 C.F.R. § 225.25(b)(16). In addition, the Board The Chase Manhattan Corporation, New York, New concludes that Company's performance of this activity York, a bank holding company within the meaning of may reasonably be expected to result in public benefits the Bank Holding Company Act ("BHC Act"), has which would outweigh adverse affects under the propapplied for the Board's approval under section 4(c)(8) er incident to banking standard of section 4(c)(8) of the of the BHC Act and section 225.21(a) of the Board's BHC Act. Accordingly, Applicant may engage Regulation Y, 12 C.F.R. § 225.21(a), to engage through Company in underwriting and dealing in eligithrough a wholly owned subsidiary, Chase Manhattan ble securities to the extent that state member banks Securities, Inc. ("Company")1, in underwriting and are authorized by section 16 of the Glass-Steagall Act. dealing in, on a limited basis, the following securities: On April 30, the Board approved applications by (1) municipal revenue bonds, including certain in- Citicorp, J.P. Morgan and Bankers Trust to underdustrial development bonds; write and deal in, through their eligible securities (2) residential mortgage-related securities; and underwriting subsidiaries, 1-4 family mortgage- (3) consumer-receivable-related securities ("CRRs").2 backed securities, municipal revenue bonds (and certain industrial development bonds) and (except for In addition, Applicant has applied for approval Citicorp) commercial paper.5 The Board concluded under section 4(c)(8) of the BHC Act for Company to that the underwriting subsidiaries would not be "en- 3. The Board has previously authorized Applicant to underwrite and deal in third party commercial paper through a commercial 1. Company is presently operating as Chase Manhattan Treasury finance subsidiary, Chase Commercial Corporation, Englewood, New Corporation. Jersey, subject to 5 percent gross revenues and market limitations. 2. Applicant proposes to limit Company's underwriting and dealing The Chase Manhattan Corporation, 73 FEDERAL RESERVE BULLETIN activity in these securities to 10 percent of the total business of the 367 (1987). underwriting subsidiary as measured by dollar volume and assets as 4. Banking data are as of December 31, 1986. well as to 3 percent of the market. 5. Citicorp!Morgan!Bankers Trust, supra. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

608 Federal Reserve Bulletin • July 1987 gaged principally" in underwriting or dealing in securi- section 225.25(b)(16) of the Board's Regulation Y and ties within the meaning of section 20 of the Glass- the Citicorp!Morgan!Bankers Trust Order, including Steagall Act6 provided they derived no more than 5 the Board's reservation of authority to establish addipercent of their total gross revenues from underwriting tional limitations to ensure that the subsidiary's activiand dealing in the approved securities over any two- ties are consistent with safety and soundness, conflict year period and their underwriting and dealing activi- of interest and other relevant considerations under the ties did not exceed 5 percent of the market for each BHC Act. Underwriting and dealing in the approved particular type of security involved. The Board further securities in any manner other than as approved in that found that, subject to the prudential framework of Order8 is not within the scope of the Board's approval limitations established in those cases to address the and is not authorized for Company. potential for conflicts of interest, unsound banking As the Board noted in the Citicorp!Morgan!Bankers practices or other adverse effects, the proposed under- Trust Order, Congress has under consideration legislawriting and dealing activities were so closely related to tion that would prohibit Board approval of an underbanking as to be a proper incident thereto within the writing application, such as this, between March 6, meaning of section 4(c)(8) of the BHC Act. In the case 1987 and March 1,1988. While this moratorium legislaof CRRs, the Board concluded that the record then tion has not yet been enacted into law, the Board calls before it did not provide a sufficient evidentiary basis to Applicant's attention that it may be required by for it to make the formal finding required by the BHC subsequent Congressional action to cease its under- Act, but stated that it would reconsider the matter writing and dealing activities approved in this Order. within 60 days of its Order on the basis of fuller The Board retains jurisdiction over the application to submissions. act to carry out the requirements of any legislation For the reasons set forth in the Board's Citicorp/ adopted by Congress that would affect Applicant's Morgan/Bankers Trust Order, the Board concludes conduct of underwriting and dealing activities under that Applicant's proposal to engage through Company this Order and the BHC Act. in underwriting and dealing in municipal revenue The Board's determination is subject to all of the bonds7 and 1-4 family mortgage-related securities conditions set forth in the Board's Regulation Y, would not result in a violation of section 20 of the including those in sections 225.4(d) and 225.23(b), and Glass-Steagall Act and is closely related and a proper to the Board's authority to require modification or incident to banking within the meaning of section termination of the activities of a bank holding compa- 4(c)(8) of the BHC Act provided Applicant limits ny or any of its subsidiaries as the Board finds Company's activities as provided in the Citicorp! necessary to assure compliance with, and to prevent Morgan/Bankers Trust Order. The Board will recon- evasion of, the provisions of the BHC Act and the sider the permissibility of Applicant's proposal with Board's regulations and orders issued thereunder. respect to CRRs within 60 days. Accordingly, the This transaction shall not be consummated later Board has determined to approve the underwriting than three months after the effective date of this application subject to all of the terms and conditions Order, unless such period is extended for good cause established in the Citicorp!Morgan!Bankers Trust by the Board, or by the Federal Reserve Bank of New Order. The Board hereby adopts and incorporates York, pursuant to delegated authority. herein by reference the reasoning and analysis con- By order of the Board of Governors, effective tained in the Citicorp!Morgan!Bankers Trust Order. May 18, 1987. The Board's approval of this application extends only to activities conducted within the limitations of Voting for this action: Governors Johnson, Seger, and Heller. Voting against this action: Chairman Volcker and Governor Angell. JAMES MCAFEE 6. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) prohibits [SEAL] Associate Secretary of the Board the affiliation of a member bank with "any corporation . . . engaged principally in the issue, flotation, underwriting, public sale, or distribution at wholesale or retail or through syndicate participation of stocks, bonds, debentures, notes, or other securities . . . ." 7. The industrial development bonds approved in those applications and for Applicant in this case are only those tax exempt bonds in which the governmental issuer, or the governmental unit on behalf of 8. Company may also provide services that are necessary incidents which the bonds are issued, is the owner for federal income tax to these approved activities. The incidental services should be taken purposes of the financed facility (such as airports, mass commuting into account in computing the gross revenue and market share limits facilities, and water pollution control facilities). Without further on the underwriting subsidiaries' ineligible underwriting and dealing approval from the Board, Company may underwrite or deal in only activities, to the extent such limits apply to particular incidental these types of industrial development bonds. activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 609 Dissenting Statement of Chairman Volcker and trust company. It engages in activities normally per- Governor Angell formed by a trust company, such as the provision of fiduciary, investment advisory, and custody and agen- For the reasons set forth in our dissenting statement in cy services. Its original charter did not authorize it to the Citicorp!Morgan!Bankers Trust Order, we regret engage in deposit-taking or lending activities. we are unable to join the majority in approving this Company now proposes to expand its trust company application. activities to offer various forms of FDIC-insured sav- May 18, 1987 ings, time, and demand deposits. Company also intends to offer loans to individuals for personal, family, household, or charitable purposes, and other non- Chemical New York Corporation commercial purposes. Company has received the per- New York, New York mission of the OCC to engage in the proposed expanded list of activities. Order Approving Expansion of Activities of Trust Applicant has stated that because Company will not Company to Include Deposit-Taking and Consumer engage in the business of making commercial loans, Lending Company will not be a "bank" as defined in section 2 of the BHC Act,2 and thus that Board approval of the Chemical New York Corporation, New York, New application is not barred by the interstate banking York, a bank holding company within the meaning of limitations of the Douglas Amendment to the BHC the Bank Holding Company Act (12 U.S.C. § 1841 Act.3 et seq.) (the "BHC Act" or "Act"), has applied for In approving an application by U.S. Trust Corporathe Board's approval under section 4(c)(8) of the Act tion to expand the powers of its Florida trust company (12 U.S.C. § 1843(c)(8)) and section 225.23(a)(1) of the subsidiary to include certain deposit-taking and con- Board's Regulation Y (12 C.F.R. § 225.23(a)(1)), to sumer lending activities, the Board concluded that a expand the activities of its subsidiary, Chemical Trust bank holding company could acquire, on an interstate Company of Florida, N.A., Palm Beach, Florida basis, a nationally chartered nonbank bank that would ("Company"), to include the acceptance of savings, accept demand deposits but not make commercial time, and demand deposits and the making of consum- loans.4 The Board's determination has been upheld in er loans. These activities have been previously deter- a decision by the U.S. Court of Appeals for the mined by the Board to be closely related to banking. Eleventh Circuit.5 12 C.F.R. § 225.25(b)(1); U.S. Trust Corporation, 70 FEDERAL RESERVE BULLETIN 371 (1984). Notice of the application, affording opportunity for interested persons to comment, has been published (51 Federal Register 43,244 (1986)). The time for filing 2. The BHC Act defines the term "bank" to include any institution chartered under the laws of the United States or any state that accepts comments and views has expired, and the Board has deposits that the depositor has a legal right to withdraw on demand considered the application and all comments received, and that engages in the business of making commercial loans. including those submitted by the Comptroller of the 12 U.S.C. § 1841(c). An institution that is chartered as a bank but that does not perform one of the two essential functions required for State of Florida, the Florida Bankers Association, and "bank" status under the BHC Act has been referred to as a "nonbank the Conference of State Bank Supervisors (collective- bank". 3. 12 U.S.C. § 1842(d). The Douglas Amendment prohibits Board ly, the "Protestants") in opposition to the proposal, in approval of an application by a bank holding company to acquire a light of the factors set forth in section 4(c)(8) of the Act bank outside the holding company's home state unless the state in (12 U.S.C § 1843(c)(8)). which the bank is located has by statute authorized the acquisition. The Douglas Amendment applies only to the acquisition of banks as Applicant, with total consolidated assets of $61.0 defined in the Act and has no applicability in the case of nonbanking billion,1 is the fifth largest commercial banking organi- companies. Lewis v. BTInvestment Managers, Inc., 447 U.S. 27, 47, 49 (1980). zation in New York. Company is a national banking 4. U.S. Trust Corporation, 70 FEDERAL RESERVE BULLETIN 371 association chartered by the Office of the Comptroller (1984) {"U.S. Trust"). Applicant states that Company's excess funds of the Currency ("OCC") in 1982 as a limited purpose will be invested in investment securities permitted for national banks under 12 U.S.C. section 24 (seventh). Applicant further has committed that Company will not channel funds into any commercial lending affiliate of Company. Accordingly, it appears that Company will not engage in the business of making commercial loans, either directly or indirectly. 5. Florida Dept. of Banking & Finance v. Board of Governors, 760 F.2d 1135 (11th Cir. 1985), vacated and remanded for further consid- 1. Asset data are as of March 31, 1987, and do not reflect Appli- eration in light of Dimension U.S 106 S. Ct. 875 (1986), on cant's acquisition of Texas Commerce Bancshares, Inc., Houston, remand, 800 F.2d 1534 (11th Cir. 1986), cert, denied, 55 U.S.L.W. Texas. 3706 (U.S. April 21, 1987) (No. 86-1024). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

610 Federal Reserve Bulletin • July 1987 State Law Considerations In light of these decisions, the Board has taken the position that, in acting on applications under the BHC Protestants contend that the proposed transaction is Act, it would review the applicability of the state prohibited under a 1984 Florida statute that prohibits statutes that bear on the proposed transaction, includthe acquisition of nonbank banks in Florida.6 The ing the constitutionality of such statutes, but that it statute generally prevents a bank holding company, would not "hold the state statute to be unconstitutionwhether headquartered in Florida or outside Florida, al without clear and unequivocal evidence of the from acquiring an institution located in Florida that inconsistency of the state law with the federal Constitakes deposits insured by the FDIC unless the institu- tution." NCNB Corp., 68 FEDERAL RESERVE BULLEtion qualifies as a "bank" under the BHC Act. In TIN 54, 56 (1982). Bank of New England Corporation, addition, the statute prohibits a nonbanking company 70 FEDERAL RESERVE BULLETIN 374, 376 (1984). from acquiring a bank in Florida unless the company is In this case, the state statute in question would a bank holding company. directly prohibit consummation of Applicant's propos- Applicant contends that the Florida statute discrimi- al and thus directly bears on the Board's decision on nates against interstate commerce and is thus uncon- the application under the BHC Act. Moreover, resolustitutional under the Commerce Clause of the United tion of the issues raised regarding the consistency of States Constitution. Applicant, therefore, urges the the Florida statute with the Commerce Clause of the Board to approve the application notwithstanding the U.S. Constitution are closely intertwined with the Florida statute. consideration of the provisions of the BHC Act. In Whitney National Bank in Jefferson Parish v. Indeed, the Florida statute was enacted to deal with a Bank of New Orleans & Trust Company, 379 U.S. 411, particular issue that arises under the BHC Act and the 419 (1965) ("Whitney"), the Supreme Court stated impact of the statute on affected banking organizations that, in acting on bank holding company proposals, the may only be understood in the context of the interstate Board must make a finding in the first instance regard- banking prohibitions of the Douglas Amendment to the ing the applicability and validity of state laws that bear Bank Holding Company Act. on the particular transaction before the Board, and The Board, therefore, believes that, as the agency that the Board may not approve a bank acquisition with primary federal responsibility for administration under the Bank Holding Company Act that would be of the BHC Act, it is particularly appropriate for the prohibited by a valid state statute.7 The United States Board to express its views in this case regarding the Court of Appeals for the District of Columbia con- constitutionality of the Florida nonbank bank statute. firmed that this requirement applies to constitutional The Board recognizes that this matter must in the final issues.8 analysis be resolved by the judiciary, but believes its views would be of benefit to the court in reviewing the matter, particularly in light of the critical importance to the constitutional issue of the interplay between the Florida statute and the BHC Act. See Whitney, 379 6. Fla. Stat. Ann. § 658.296 (West 1984 and Supp. 1987). 7. See also First State Bank of Clute v. Board of Governors, 553 U.S. at 421 (The Board's "role in the development of F.2d 950 (5th Cir. 1977), and Gravois Bank v. Board of Governors, 478 the national banking laws . . . makes its views of F.2d 546 (8th Cir. 1973), which do not deal with constitutional issues particular benefit to the courts where ultimately the but required a decision by the Board as to the applicability of state laws to bank holding company acquisitions. validity of the arrangement will be tested.").9 In acting on nonbanking proposals under section 4 of the Act, the Accordingly, the Board has examined carefully the Board has also considered whether consummation of the proposal arguments advanced by Applicant and Protestants as would violate or result in a violation of a state statute. E.g., Guaranty Bancshares Corp., 69 FEDERAL RESERVE BULLETIN 39, 40 (1983); well as additional information regarding the constitu- Commerce Bancshares, 69 FEDERAL RESERVE BULLETIN 447 (1983); tionality of the Florida statute obtained at an informal Crocker National Corp., 66 FEDERAL RESERVE BULLETIN 66 (1980). The U.S. Court of Appeals for the Fifth Circuit has held that the hearing on February 6, 1985. For the reasons set out in Board cannot ignore the applicability and effect of state law in acting detail in the attached Appendix, the Board concludes on nonbanking proposals under section 4(c)(8) of the Act. Florida that the Florida statute, as it applies to bank holding Ass'n of Insurance Agents v. Board of Governors, 591 F.2d 334, 342 (5th Cir. 1979). 8. Iowa Independent Bankers Association v. Board of Governors of the Federal Reserve System, 511 F.2d 1288, 1293 n.4 (1975). The court stated that it felt constrained "to register . . . substantial doubt that the Board can continue to presume conclusively the constitutional validity of state or federal law in light of the Supreme Court's opinion in [Whitney]. . . ." The Board notes that Justice Douglas in 9. See also Florida Ass'n of Insurance Agents, 591 F.2d at 342 his dissent in Whitney noted that the specific issue with respect to the ("the 'applicability and effect' of state law on public benefits criteria Louisiana statute at issue in that case would require the Board to under the Act is 'the very type of question that Congress envisioned as decide a "bare, bald question of . . . constitutionality." 379 U.S. at being resolved in the first instance by the Board.'" (citing Whitney, 431. 379 U.S. at 425)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 611 companies, is not consistent with the Commerce In the Board's view, these conditions preclude the Clause of the U.S. Constitution and is not authorized type of linked or integrated operations that could under the Douglas Amendment to the BHC Act. otherwise render Company a bank for purposes of the In sum, the Board believes that the Florida statute is Act. On the basis of Applicant's proposed adherence inconsistent with the Commerce Clause of the Consti- to these conditions and for the reasons set out more tution because the record clearly and unequivocally fully in the Board's decision in U.S. Trust, the Board shows that the statute in practice imposes a substantial concludes that Company will not be a bank as that burden on bank holding companies located outside of term is defined in the Act. Florida and its southern interstate banking region that Applicant has requested Board approval pursuant to is not imposed on Florida and southern region bank the third U.S. Trust condition to engage in certain holding companies; that the burden on out-of-state transactions with affiliates. Applicant through its lead bank holding companies resulting from the statute is bank, Chemical Bank, currently provides certain serclearly excessive in relation to the local benefits vices to Company on an arms length basis, and has resulting from the statute; and that the state statute in requested that it be permitted to continue to provide this case is not authorized by federal statute.10 Ac- these services upon consummation of the proposal. cordingly, the Board concludes that the Florida statute They involve: securities custodial arrangements; redoes not bar Board approval of this application under search and investment advisory services; as well as the BHC Act. data processing and similar internal support services. The Board notes that the issue of the constitutional- These services are conducted in such a manner that ity of state statutes regulating the ownership or opera- customers of Company would not have direct contact tion by holding companies of nonbank banks is raised with Applicant or any of its affiliates providing the in a number of other proposals. While the Board has services. expressed its views regarding this issue in the context For the following reasons, the Board has determined of this application, the Board believes that the ultimate that it is appropriate to permit Applicant to continue to resolution of this issue is a proper function of the conduct these activities in this case. First, the securicourts, which have particular expertise in the analysis ties custodial arrangements, as well as the research and balancing of interests required to resolve constitu- and investment advisory services, are specifically pertional questions. mitted for bank holding companies and their subsidiaries under Regulation Y. 12 C.F.R. § 225.25(b)(3) and Limitations on Nonbank Banks (4). Bank holding companies are also specifically authorized under the BHC Act to provide internal sup- Applicant intends to operate Company as a nonbank port services to their bank and nonbank subsidiaries, bank in accordance with the Board's U.S. Trust deci- 12 U.S.C. § 1843(c)(1)(C). sion. As in the U.S. Trust case, the Board believes it is Second, the continued provision of these services appropriate to take action to ensure that Company is by Applicant or Chemical Bank to Company would not not used as a vehicle for evasion of the Act's bank link demand deposit taking with commercial lending, definition. In U.S. Trust, the Board determined to result in any impermissible commingling of banking condition its approval on the following limitations: and commerce, or implicate any of the fundamental 1. Applicant will not operate the demand-deposit policy concerns underlying the Board's U.S. Trust taking activities of the nonbank bank in tandem with conditions. any other subsidiary or other financial institution; The Board finds no evidence that consummation of 2. Applicant will not link in any way the demand this proposal, subject to the limitations and conditions deposit and commercial lending services that define described above, would result in any conflicts of a bank under the Act; and interest, unfair competition, unsound banking prac- 3. The nonbank bank will not engage in any transac- tices or other adverse effects. Due to the de novo tions with affiliates, other than the payment of nature of this proposal, there will not be any decrease dividends to Applicant or the infusion of capital by in competition. Indeed, consummation of the proposal Applicant into the nonbank bank, without the may reasonably be expected to result in increased Board's approval. competition. Need for Congressional Action 10. The Board notes that the Florida statute as it applies to The Board has previously indicated its reluctance to nonbanking concerns would not be subject to these constitutional approve nonbank bank acquisitions in view of the concerns. See Sears, Roebuck & Co. v. Brown, 806 F.2d 399 (2d Cir. 1986). potential presented by such acquisitions to alter signif- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

612 Federal Reserve Bulletin • July 1987 icantly the nation's banking structure without Con- rectly in any activity other than those explicitly apgressional action on the underlying policy issues." For proved by the Board in this Order.14 the reasons stated in the Board's previous orders, the The Board's approval is also subject to the Board's Board continues to believe that Congressional action authority to require modification or termination of the to close the nonbank bank loophole is imperative. The activities of the holding company or any of its subsidfact that the Board is required by the technical aspects iaries as the Board finds necessary to assure compliof the bank definition in the Act to approve this ance with the provisions and purposes of the Act and application should not be construed as encouragement the Board's regulations and orders issued thereunder, to Applicant to consummate this proposal or to others or to prevent evasion thereof. In accordance with the to pursue similar acquisitions. provisions of section 225.23(b)(iii) of Regulation Y, the In this regard, the Board notes that the United Board's approval would be required for additional States Senate has recently passed legislation that acquisitions by Applicant of nonbank banks or for the would eliminate the nonbank bank loophole in the establishment of offices of Company located in a state BHC Act by redefining the term "bank" to include other than Florida. FDIC-insured banks.12 While this legislation has not By order of the Board of Governors, effective yet been enacted, the Board calls to Applicant's May 29, 1987. attention that it may be required by subsequent Congressional action to limit the activities of Company. Voting for this action: Chairman Volcker and Governors The Board retains jurisdiction over the application to Johnson, Seger, Angell, Heller, and Kelley. act to carry out the requirements of any legislation adopted by Congress that would affect Company's JAMES MCAFEE activities. [SEAL] Associate Secretary of the Board Based upon the foregoing and other facts of record, the Board has determined that the Florida statute, as it applies to bank holding companies seeking to acquire APPENDIX nonbank banks in Florida, is inconsistent with the Commerce Clause and is not a bar to approval of this Appendix to the Order Approving the Applicaapplication, and that the balance of public interest tion of Chemical New York Corporation, New factors the Board is required to consider under section York, New York, to Expand the Activities of its 4(c)(8) is favorable. Accordingly, the application is Subsidiary, Chemical Trust Company of Florida, hereby approved.13 Consummation of the proposal is NA., Palm Beach, Florida subject to the conditions set forth in this Order and the conditions set forth in the Board's Regulation Y, In 1984, Florida enacted a statute that prohibits any including those in sections 225.4(d) and 225.23(b). In bank holding company, whether located in Florida or addition, Company may not engage directly or indi- outside Florida, from acquiring an institution located in Florida that takes deposits insured by the FDIC unless the institution qualifies as a "bank" under the Bank Holding Company Act ("BHC Act").1 The BHC Act defines a bank as any institution chartered as a 11. See e.g., U. S. Trust, supra. 12. S.790 (The Competitive Equality Banking Act of 1987), 100th bank "which (1) accepts deposits that the depositor Cong., 1st Sess. (1987). 13. The Protestants have requested that the Board convene a formal hearing in order to develop a complete record regarding the validity of the Florida statute. The courts have determined that the Board is required to hold a formal hearing regarding an application submitted under section 4(c)(8) of the Act only where ' 'there is dispute 14. In this regard, the Board notes that because Company is not as to facts material to the Board's ultimate decision." Connecticut considered a bank under the BHC Act, the provisions of section Bankers Ass'n v. Board of Governors, 627 F.2d 245, 250 (D.C. Cir. 225.22(d)(1) of Regulation Y would not be applicable to exempt the 1980). See also 12 C.F.R. § 225.23(g). In this case, Protestants have acquisitions or activities of Company from Board approval under been given the opportunity to submit facts and arguments to the section 4 of the Act. Board, and in fact have submitted material to the Board. Protestants have not identified any material fact that is in dispute in this case, but have disputed only the legality of the proposal under the Florida statute—which is a question of law, and not of fact. Moreover, on 1. The Florida statute provides that "No bank holding company February 6, 1985, the Board held an informal hearing regarding the shall control a bank [i.e., a company (with several exceptions not constitutionality of the Florida statute at issue in this case as well as relevent here) that accepts deposits in Florida that are insured under other similar statutes. the provisions of the Federal Deposit Insurance Act] unless the bank In light of the extensive record compiled in this case and at the is a bank as defined in section 2(c) of the federal Bank Holding earlier informal meeting, and the fact that Protestants have not Company Act." Fla. Stat. Ann. 658.296(2) (West 1984 and Supp. identified any material facts that remain in dispute, Protestants' 1987). The statute also provides that "No company that is not a bank request for a formal hearing in this case is denied. holding company shall control a bank." Fla. Stat. Ann. 658.296(3). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 613 has a legal right to withdraw on demand, and (2) position of economic isolation. See, e.g., Philadelphia engages in the business of making commercial loans." v. New Jersey, 437 U.S. at 626-27; Baldwin v. G.A.F. 12 U.S.C. § 1841(c). Seelig, Inc., 294 U.S. 511 (1935). The states retain the Applicant asserts that this state statute is unconsti- authority, particularly pursuant to their powers to tutional under the Commerce Clause of the United safeguard the health and safety of their residents, to States Constitution because the practical effect of the regulate matters of legitimate local concern even Florida statute is to discriminate against bank holding though interstate commerce may be affected.3 However, companies located outside of Florida and the southern the states may not regulate in a manner that imposes region.2 Consequently, Applicant urges the Board to more than an incidental burden on interstate commerce declare the Florida statute void and approve the or that discriminates against articles of commerce from application. outside the state unless there is some reason apart from The Office of the Comptroller of Florida, the Florida their origin to treat them differently.4 Bankers Association, and the Conference of State In those instances where the states have acted to Bank Supervisors ("Protestants") have protested effect purposes of simple economic protectionism or in Board approval of this application. Protestants argue a manner that is patently discriminatory, the Supreme that the Florida statute represents a legitimate exercise Court has held such state statutes to be per se unconof the State's authority to regulate the structure of stitutional.5 In determining whether a state statute that banking within Florida and to provide for the well- is neutral on its face discriminates against interstate being of residents of Florida. Protestants also assert commerce, the Supreme Court has stated that "the that the Florida statute does not discriminate against principal focus of inquiry must be the practical operainterstate commerce and visits its prohibition against tion of the statute, since the validity of state laws must ownership of deposit-taking nonbank banks in Florida be judged chiefly in terms of their probable effects."6 evenhandedly on all companies, including Florida In this case, the Florida restriction on ownership of bank holding companies. Protestants argue that any deposit-taking nonbank banks is neutral on its face and practical advantage granted to Florida bank holding prohibits all bank holding companies, wherever locatcompanies is the result of the disparate treatment of ed, from owning deposit-taking nonbank banks located bank holding companies under the Douglas Amend- in Florida. However, in practice, the Florida statute ment to the BHC Act, and not the result of the Florida operates to discriminate against out-of-state bank ban on ownership of nonbank banks, which applies holding companies, while imposing no burden on equally to in-state and out-of-state companies. As a Florida bank holding companies. The Florida statute result, Protestants contend that the Florida statute is has no effect on in-state bank holding companies consistent with the requirements of the Commerce because bank holding companies located in Florida Clause of the U.S. Constitution and bars approval of take deposits through full service commercial banks the proposal in this case. and therefore have no reason or incentive to acquire a The Commerce Clause of the U.S. Constitution nonbank bank in Florida. A nonbank bank offers no invests Congress with the power to regulate interstate advantage to a Florida bank holding company over a commerce. Art. I, § 8, cl. 3. The courts have long full service commercial bank either in the services that interpreted the positive grant of authority to Congress the nonbank bank may provide, or in the geographic contained in the Commerce Clause as limiting the locations at which it may offer these services in power of states to erect barriers against interstate Florida. A Florida bank holding company may own a trade. See, e.g., Philadelphia v. New Jersey, 437 U.S. full service commercial bank at every location in 617, 623 (1978); Pike v. Bruce Church, Inc., 397 U.S. Florida that a nonbank bank may operate. The ab- 137, 142 (1970); Cooley v. Board of Wardens, 12 How. sence of any effect from the Florida statute on in-state 299 (1852). The Supreme Court has interpreted the Commerce Clause as prohibiting a state from discriminating against interstate commerce and placing itself in a 3. Pike v. Bruce Church, Inc., 397 U.S. at 142. 4. Philadelphia v. New Jersey, 437 U.S. at 624. 5. Id. The Court has declared that "where simple economic protectionism is affected by state legislation, a virtually per se rule of 2. Pursuant to the Douglas Amendment, Florida has authorized invalidity has been erected." 437 U.S. at 624. bank holding companies located in certain states in the southern 6. Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 37 (1980) region of the United States to acquire banks in Florida. Fla. Stat. Ann. (emphasis supplied); see also Hunt v. Washington Apple Advertising 658.295 (West 1984 and Supp. 1987). Thus, for purposes of this Commission, 432 U.S. 333 (1977) (facially neutral North Carolina Appendix, these institutions will be treated as Florida bank holding statute regulating transportation and display of apples in North companies, and not as out-of-state bank holding companies. Bank Carolina was found inconsistent with the Commerce Clause because it holding companies located outside of this region continue to be barred had the effect of imposing a substantial burden on the shipment of by the Douglas Amendment from acquiring a bank in Florida. Washington apples into North Carolina). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

614 Federal Reserve Bulletin • July 1987 bank holding companies is demonstrated by the fact no effect on Florida bank holding companies and, that no Florida bank holding company owns or has insofar as bank holding companies are concerned, applied to own a nonbank bank in Florida. In contrast, operates exclusively to deny to out-of-state bank holdout-of-state bank holding companies have applied for ing companies the ability to conduct deposit-taking in 48 nonbank bank charters in Florida. Florida through nonbank banks as permitted for bank On the other hand, the Florida restriction on owner- holding companies under the BHC Act.11 ship of deposit-taking nonbank banks imposes a direct It has been suggested that the burden experienced burden on out-of-state bank holding companies by by out-of-state bank holding companies is the result of foreclosing to them the only method available under the Douglas Amendment, which prohibits out-of-state the BHC Act to acquire a deposit-taking banking bank holding companies from acquiring full service institution in Florida. The Douglas Amendment to the banks in Florida, and not the result of the Florida BHC Act prohibits bank holding companies located statute. The Douglas Amendment does not, however, outside of Florida from acquiring full service banks in prohibit the acquisition of nonbank banks in Florida, Florida.7 Deposit-taking nonbank banks which are the which as noted may be acquired by out-of-state bank subject of the Florida statute are not "banks" for holding companies. It is the Florida statute that forepurposes of the BHC Act, but are deemed to be closes this opportunity for out-of-state bank holding nonbanking companies subject to section 4 of the BHC companies to compete in Florida, thereby burdening Act.8 As a result, the courts have held that the interstate commerce. In effect, the Florida statute acquisition of nonbank banks by bank holding compa- attempts to extend the coverage of the Douglas nies is not subject to the interstate banking limitations Amendment to institutions that Congress exempted contained in the Douglas Amendment.9 Thus, the from the Douglas Amendment. See Dimension, 106 S. Florida statute, by preventing the acquisition of non- Ct. at 687. As discussed below, the Douglas Amendbank banks in Florida, imposes a significant burden on ment does not authorize the states to act beyond the out-of-state bank holding companies effectively pre- limits of the Commerce Clause in regulating the acquiventing them from competing with Florida bank hold- sition of nonbanking companies, including nonbank ing companies by operating deposit-taking facilities in banks. See Lewis, 447 U.S. at 47, 44, see also North- Florida that are permissible for bank holding compa- east Bancorp v. Board of Governors, 472 U.S. 159, 174 nies under the BHC Act. (1985) (an individual state could not on its own author- Accordingly, because the operation and actual effect ity comprehensively regulate the acquisition of local of the Florida statute results in discrimination against banks by out-of-state bank holding companies). interstate commerce based solely on the geographic Moreover, a state may not enact a facially neutral location of the bank holding company involved, the statute that, in tandem with some other pre-existing statute, insofar as it applies to bank holding compa- legal requirement, operates in practice to discriminate nies,10 violates the Commerce Clause of the United against out-of-state business organizations seeking to States Constitution. As noted, the Florida statute has do business in the state. See Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 334 (1977). 7. 12 U.S.C. § 1842(d). Florida law permits bank holding companies with 80 percent of their total deposits located in certain southern states to acquire banks located in Florida. Fla. Stat. Ann. 658.295 (West 1984 and Supp. 1987). 11. The legislative history of the Florida statute illustrates that the 8. See Board of Governors of the Federal Reserve System v. Florida legislators intended the legislation to prohibit nonbank banks Dimension Financial Corp., 106 S. Ct. 681 (1986); Florida Dept. of in Florida as a means to prevent circumvention of Florida's interstate Banking and Finance v. Board of Governors, 760 F.2d 1135 (11th Cir. banking statute by out-of-state bank holding companies through 1985), vacated and remanded for further consideration in light of acquisition of deposit-taking nonbank banks in Florida. At that time, Dimension, U.S 106 S. Ct. 875 (1986), on remand, 800 F.2d the Comptroller of Florida advised the Governor and members of the 1534 (11th Cir. 1986), cert, denied, 55 U.S.L.W. 3706 (U.S. April 21, Florida legislature of the need to bar nonbank banks in Florida, noting 1987) (No. 86-1024). that there were a number of pending applications before the Comptrol- 9. Id. See also Lewis, 447 U.S. at 47, 48, in which the Supreme ler of the Currency and the Federal Reserve Board for nonbank banks Court held that the Douglas Amendment does not apply to nonbanking in Florida. See Letter dated November 13, 1984, from Gerald Lewis, companies. Florida Comptroller, to Honorable D. Robert Graham, Governor of 10. The Florida statute, both as the statute is written and as it Florida. Similar letters dated November 14, 1984, to James Harold operates in practice, appears to treat nonbanking companies control- Thompson, Speaker, Florida House of Representatives, and Harry A. ling nonbank banks equally, whether the companies are located inside Johnston, II, President, Florida Senate. or outside Florida. Accordingly, the statute would appear to be The record shows that all of these applications involved acquisitions consitutional as it applies to ownership of nonbank banks by such by out-of-state bank holding companies. Thus, the Florida legislature nonbanking companies. See Sears, Roebuck and Co. v. Brown, 806 was aware that, insofar as bank holding companies were concerned, F.2d 399 (2d Cir. 1986). This equal distribution of burden in one area the statute would affect only out-of-state bank holding companies that does not, however, save the statute from constitutional infirmity as it were prohibited by the Douglas Amendment and Florida law from applies to bank holding companies because the Commerce Clause acquiring full service banks in Florida. See also Staff Analysis of Bill requires that like entities be treated in a like manner without regard to 10A, Committee on Commerce, Florida House of Representatives, geographic criteria. Id. at 408. p.4 (December 5, 1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 615 The burden imposed by the Florida statute on out- Thus, it does not appear that the state's local interests of-state bank holding companies also is not out- have been significantly or evenhandedly advanced by weighed by the putative local benefits of the statute. the Florida statute in a manner consistent with the See Pike v. Bruce Church, Inc., supra. The Protes- Commerce Clause. See Lewis 447 U.S. at 42-3; Hunt tants argue that the statute serves the purpose of 432 U.S. at 353-54. preventing the diversion of deposits outside of Florida The Board's conclusion that the Florida statute in and of assuring the availability of commercial loans in this case falls outside the limits established by the Florida.12 Commerce Clause is consistent with previous deci- The Florida statute itself, however, regulates only sions of the U.S. Supreme Court. The discriminatory the ownership of nonbank banks and does not directly effect resulting in practice from the Florida statute is address the possible diversion of funds out of Florida substantially similar to the effect of a North Carolina or place any limits on the use of deposits by Florida law declared unconstitutional by the Supreme Court in institutions seeking to support their out-of-state com- Hunt, supra. Both the state statute in Hunt and the mercial lending operations. The statute does not, for Florida statute at issue here impose requirements that example, require that commercial loans made by non- significantly burden the ability of certain out-of-state bank banks be made in Florida. Moreover, there is companies to compete within the state while having nothing in the statute that would prohibit Florida no, or virtually no, impact on the operations of similar banks owned by Florida bank holding companies or in-state companies. See Hunt 432 U.S. at 350. Moresouthern region bank holding companies from using over, neither the statute in Hunt, which was ostensibly Florida deposits exclusively to fund commercial loans enacted to eliminate the problems of deception and or other operations outside of Florida. Similarly, the confusion in grading apples, nor the Florida statute statute does not apply to banks or nonbank banks here adequately serve legitimate local purposes, and unless they are owned by a company, or to deposit- appear in fact to have been enacted for the purpose of taking thrift institutions under any circumstances. In protecting local companies from competition from outaddition, a company may satisfy the statute's require- of-state companies. Id. at 353. ments by making any amount of commercial loans, no The Florida statute may also be distinguished from matter how small in volume. the statutes upheld by the Court in Exxon Corp. v. As currently written, the Florida statute has the Governor of Maryland, 437 U.S. 117 (1978), and practical effect of requiring out-of-state bank holding Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456 companies to bear the burden for achieving these local (1981). In both Exxon and Minnesota v. Clover Leaf, benefits. Both purposes of preventing diversion of entities of the same type, whether located inside or funds from Florida and of assuring the availability of outside of the state, were in practice treated similarly commercial loans in Florida would be better served by by the state statutes at issue. In Exxon, the statute legislation that also regulates the activities of full affected only out-of-state oil refiners because there service banks and thrift institutions in Florida, rather were in fact no Maryland oil refiners at that time. than by simply regulating the ownership of nonbank Similarly, in Minnesota v. Clover Leaf, most plastic banks. container manufacturers affected by the state statute In sum, there appear to be several methods of were located outside of Minnesota. In both cases, accomplishing the ostensible purposes of the Florida however, there was no bar to the establishment of a statute that would be more effective and would not in Maryland oil refiner or to the establishment of a plastic practice result in discrimination based upon geograph- container manufacturer in Minnesota, and, in both ic location as does the Florida ban on nonbank banks. cases, any in-state companies that existed or were subsequently established would in fact have been subject to the same state statutory requirements and 12. The record demonstrates that the concerns of the Protestants about nonbank banks have focused, insofar as bank holding compa- practical effects of those statutory requirements as nies are concerned, on the fact that the nonbank bank loophole similar institutions located out-of-state.13 undermines the right of the states under the Douglas Amendment to authorize and limit interstate acquisition of "banks" within their borders, rather than because there was evidence that nonbank banks were used to divert funds from Florida or because of a belief that 13. The Florida statute here may also be distinguished from the regulating nonbank banks would assure the availability of commercial Indiana statute reviewed by the Court in CTS Corp. v. Dynamics loans in Florida. See U.S. Trust Corporation, 70 FEDERAL RESERVE Corp., 55 U.S.L.W. 4478 (U.S. April 21, 1987). In that case, while the BULLETIN 371 (1984); Florida Dept. of Banking and Finance, supra. record suggested that, as a practical matter, most tender offers As discussed below, in light of the Supreme Court's decisions in affected by the Indiana statute are launched by offerors located Dimension and Lewis, however, it appears clear that the provisions of outside Indiana, the Indiana statute in practice imposed the same the BHC Act and the Douglas Amendment do not authorize the states burden on offerors, whether located inside or outside Indiana. Id. at to attempt to accomplish these purposes by restricting the acquisition 4483. As discussed above, the Florida statute at issue here, in of local nonbank banks by out-of-state bank holding companies in a practice, imposes a greater burden on out-of-state bank holding manner that is not consistent with the Commerce Clause. companies than on in-state bank holding companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

616 Federal Reserve Bulletin • July 1987 Such is not the case here. As discussed above, the applies only to state legislation that operates within the Florida statute in actual effect imposes a significant boundaries of the Commerce Clause. Lewis, 447 U.S. burden on out-of-state bank holding companies that is at 47, 49. Thus, the provisions of the BHC Act do not not similarly borne by Florida bank holding compa- authorize the states to restrict the acquisition of local nies.14 In addition, unlike the statute in Exxon and nonbank banks in a manner that is not consistent with Minnesota v. Clover Leaf, the Florida statute directly the Commerce Clause. eliminates interstate commerce by foreclosing to out-of- Accordingly, the Board believes that the Florida state bank holding companies the only vehicle available statute in this case does not meet the requirements for to them to operate a deposit-taking banking institution in valid state action under the Commerce Clause of the Florida in competition with Florida bank holding compa- U.S. Constitution and relevant Supreme Court decinies, which as noted, are not affected in any manner by sions as the statute applies to prohibit the ownership of the Florida statute in their ability to operate deposit- nonbank banks in Florida by bank holding companies. taking institutions in Florida. In short, Florida has enacted a statute that only bank holding companies JAMES MCAFEE located in Florida or the Southern region may comply [SEAL] Associate Secretary of the Board with, and, thereby, has effectively prevented out-ofregion bank holding companies from operating deposittaking banking institutions in Florida. Chemical New York Corporation In conclusion, in the Board's view, the Florida New York, New York statute is not consistent with the Commerce Clause because it "discriminates among affected business Order Conditionally Approving Applications to entities according to the extent of their contacts with Underwrite and Deal in Certain Securities to a the local economy . . . [and] in actual effect . . . Limited Extent and to Place Commercial Paper displays a local favoritism or protectionism that significantly alters its Commerce Clause status." Lewis, 447 Chemical New York Corporation, New York, New U.S. at 42. York, a bank holding company within the meaning of A state statute that imposes a discriminatory burden the Bank Holding Company Act ("BHC Act"), has on interstate commerce may nonetheless withstand applied for the Board's approval under section 4(c)(8) constitutional challenge if the statute is authorized by of the BHC Act and section 225.21(a) of the Board's Congress. Northeast, All U.S. at 174 (the Douglas Regulation Y, 12 C.F.R. § 225.21(a), to engage through Amendment authorizes states to discriminate against a wholly owned subsidiary, Chemical Securities, Inc. out-of-state bank holding companies in the acquisition ("Company"), in underwriting and dealing in, on a of banks located within the state). Florida's ban on limited basis, the following securities: nonbank banks is not authorized by federal statute, (1) municipal revenue bonds, including certain inhowever. As noted above, the Supreme Court has dustrial development bonds; determined that so-called deposit-taking nonbank (2) residential mortgage-related securities; banks are not "banks" for purposes of the BHC Act. (3) consumer-receivable-related securities ("CRRs"); Dimension, supra. As a result, the acquisition of a and deposit-taking nonbank bank is deemed to be the (4) commercial paper.1 acquisition of a nonbanking company subject to section 4 of the BHC Act, and not within the scope of the Applicant has also applied separately for Company Douglas Amendment, which is limited to the acquisi- to act as agent for issuers of commercial paper and tion under section 3 of the BHC Act of banks as other short-term promissory notes in connection with defined by the Act. Florida Department of Banking the placement of such notes with institutional customand Finance, supra. The Supreme Court determined ers. in Lewis, supra, that the Douglas Amendment to the Applicant has previously received approval under BHC Act does not grant the states authority to limit section 4(c)(8) of the BHC Act for Company to underthe acquisition of a nonbanking company by out-of- write and deal in U.S. government and agency and state bank holding companies, and that the authority state and municipal securities that state member banks reserved to the states in section 7 of the BHC Act 1. Applicant proposes to limit Company's underwriting and dealing activity in these securities in the same manner and to the same extent as proposed by Bankers Trust in its application to underwrite and deal 14. In Lewis, 447 U.S. at 42, the Supreme Court stated that "the in these securities. See Citicorp!]. P. Morgan & Co. Incorporated! absence of a similar discrimination between interstate and local Bankers Trust New York Corporation, Order dated April 30, 1987, pp. producer-refiners was a most critical factor in Exxon." 17-18 n.ll. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 617 are authorized to underwrite and deal in under section banking as to be a proper incident thereto within the 16 of the Banking Act of 1933 (the "Glass-Steagall meaning of section 4(c)(8) of the BHC Act. In the case Act") (12 U.S.C. § 24 Seventh) (hereinafter "eligible of CRRs, the Board concluded that the record then securities").2 The proposed new underwriting and before it did not provide a sufficient evidentiary basis dealing activities would be provided in addition to the for it to make the formal finding required by the BHC previously approved activities, with Company serving Act, but stated that it would reconsider the matter customers through offices in New York. within 60 days of its Order on the basis of fuller Applicant, with total consolidated assets of $60.6 submissions. billion, is the seventh largest commercial banking For the reasons set forth in the Board's Citicorp/ organization in the nation.3 It operates 69 subsidiary Morgan/Bankers Trust Order, the Board concludes banks in New York, Delaware, Colorado, Florida, and that Applicant's proposal for Company to underwrite Texas and engages directly and through subsidiaries in and deal in municipal revenue bonds,6 commercial a broad range of permissible nonbanking activities. paper and 1-4 family mortgage-related securities Notice of the applications, affording interested per- would not result in a violation of section 20 of the sons an opportunity to submit comments on the pro- Glass-Steagall Act and is closely related and a proper posals, has been published (51 Federal Register 42,003 incident to banking within the meaning of section and 42,300 (1986)). The Board received two comments 4(c)(8) of the BHC Act, provided Applicant limits on each proposal. The Securities Industry Association Company's activities as provided in the Citicorp/ ("SIA"), a trade association of the investment bank- Morgan/Bankers Trust Order. The Board will reconing industry, opposes the applications for the reasons sider the permissibility of Applicant's proposal with respect to CRRs within 60 days. Accordingly, the stated in its earlier protests to similar applications by Board has determined to approve the underwriting Citicorp, J.P. Morgan & Co. Incorporated and Bankapplication subject to all of the terms and conditions ers Trust New York Corporation. The Dealer Bank established in the CiticorplMorganlBankers Trust Or- Association commented in favor of the applications. der. The Board hereby adopts and incorporates herein On April 30, the Board approved applications by by reference the reasoning and analysis contained in Citicorp, J.P. Morgan and Bankers Trust to underthe CiticorplMorganlBankers Trust Order. write and deal in, through their eligible securities underwriting subsidiaries, 1-4 family mortgage- For the reasons set forth in the Board's Bankers backed securities, municipal revenue bonds (and cer- Trust commercial paper placement decision,7 the tain industrial development bonds) and (except for Board concludes that Applicant's proposal to place Citicorp) commercial paper.4 The Board concluded commercial paper is also consistent with section 20 of that the underwriting subsidiaries would not be "en- the Glass-Steagall Act and permissible for bank holdgaged principally" in underwriting or dealing in securi- ing companies under section 4(c)(8) of the BHC Act, ties within the meaning of section 20 of the Glass- subject to the prudential limitations of that Order and Steagall Act5 provided they derived no more than 5 the CiticorplMorganlBankers Trust Order. percent of their total gross revenues from underwriting The Board's approval of these applications extends and dealing in the approved securities over any two only to activities conducted within the limitations of year period and their underwriting and dealing activi- the CiticorplMorganlBankers Trust Order and the ties did not exceed 5 percent of the market for each Bankers Trust commercial paper placement Order, particular type of security involved. The Board further including the Board's reservation of authority to estabfound that, subject to the prudential framework of limitations established in those cases to address the potential for conflicts of interest, unsound banking practices or other adverse effects, the proposed under- 6. The industrial development bonds approved in those applicawriting and dealing activities were so closely related to tions and for Applicant in this case are only those tax exempt bonds in which the governmental issuer, or the governmental unit on behalf of which the bonds are issued, is the owner for federal income tax purposes of the financed facility (such as airports, mass commuting facilities, and water pollution control facilities). Without further 2. These activities are authorized for bank holding companies approval from the Board, Company may underwrite or deal in only under section 225.25(b)(16) of Regulation Y. 12 C.F.R. these types of industrial development bonds. § 225.25(b)(16). 7. Bankers Trust New York Corporation, 73 FEDERAL RESERVE 3. Banking data are as of December 31, 1986. BULLETIN 138 (1987). Company may underwrite, deal in and place 4. CiticorplMorganlBankers Trust, supra. only commercial paper that is exempt from the registration and 5. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) prohibits prospectus requirements of the Securities Act of 1933 and that is short the affiliation of a member bank with "any corporation . . . engaged term, of prime quality, and issued in denominations no smaller than principally in the issue, flotation, underwriting, public sale, or distri- $100,000. Applicant has stated the paper will be issued or backed by bution at wholesale or retail or through syndicate participation of large companies and sold to financially sophisticated corporate and stocks, bonds, debentures, notes, or other securities . . . ." other institutional investors. 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618 Federal Reserve Bulletin • July 1987 lish additional limitations to ensure that the subsid- Dissenting Statement of Chairman Volcker and iary's activities are consistent with safety and sound- Governor Angell ness, conflict of interest and other relevant considerations under the BHC Act. Underwriting and For the reasons set forth in our dissenting statement in dealing in the approved securities, or acting as agent the Citicorp!Morgan!Bankers Trust Order, we regret for the placement of commercial paper, in any manner we are unable to join the majority in approving this other than as approved in those Orders8 is not within application. the scope of the Board's approval and is not autho- May 18, 1987 rized for Company. As the Board noted in the Citicorp!Morgan!Bankers Citicorp Trust Order, Congress has under consideration legisla- New York, New York tion that would prohibit Board approval of an underwriting application, such as this, between March 6, Order Approving Application to Underwrite and 1987 and March 1, 1988. While this moratorium legisla- Deal in Commercial Paper to a Limited Extent tion has not yet been enacted into law, the Board calls to Applicant's attention that it may be required by Citicorp, New York, New York, a bank holding comsubsequent Congressional action to cease its under- pany within the meaning of the Bank Holding Compawriting and dealing activities approved in this Order. ny Act, 12 U.S.C. § 1841 et seq. ("BHC Act"), has The Board retains jurisdiction over the applications to applied pursuant to section 4(c)(8) of the BHC Act act to carry out the requirements of any legislation (12 U.S.C. § 1843(c)(8)) and section 225.21(a) of the adopted by Congress that would affect Applicant's Board's Regulation Y (12 C.F.R. § 225.21(a)) to conduct of underwriting and dealing activities under engage through Citicorp Securities, Inc. ("CSI"), a this Order and the BHC Act. wholly owned subsidiary, in underwriting and dealing The Board's determination is subject to all of the in commercial paper to a limited extent.1 conditions set forth in the Board's Regulation Y, Applicant has previously received Board approval including those in sections 225.4(d) and 225.23(b), and for CSI to underwrite and deal in U.S. government and to the Board's authority to require modification or agency and state and municipal securities that state termination of the activities of a bank holding compa- member banks are authorized to underwrite and deal ny or any of its subsidiaries as the Board finds in under section 16 of the Banking Act of 1933 (the necessary to assure compliance with, and to prevent "Glass-Steagall Act") (12 U.S.C. § 24 Seventh) evasion of, the provisions of the BHC Act and the (hereinafter "eligible securities").2 On April 30, 1987, Board's regulations and orders issued thereunder. the Board authorized Citicorp to engage through CSI This transaction shall not be consummated later in underwriting and dealing in 1-4 family mortgagethan three months after the effective date of this backed securities and municipal revenue bonds.3 Order, unless such period is extended for good cause Citicorp, with total consolidated assets of $196 by the Board, or by the Federal Reserve Bank of New billion, is the largest banking organization in the York, pursuant to delegated authority. nation.4 It operates eight banking subsidiaries and By order of the Board of Governors, effective engages directly and through subsidiaries in a broad May 18, 1987. range of permissible nonbanking activities. Notice of the application, affording interested per- Voting for this action: Governors Johnson, Seger, and sons an opportunity to submit comments on the pro- Heller. Voting against this action: Chairman Volcker and posal, has been published (52 Federal Register 13,317 Governor Angell. (1987)). The Securities Industry Association ("SIA"), JAMES MCAFEE [SEAL] Associate Secretary of the Board 1. Applicant proposes to limit CSI's underwriting and dealing activity in commercial paper as described in its application to underwrite and deal in municipal revenue bonds, mortgage-backed securities and consumer-receivable-related securities. See Citicorp, J. P. Morgan & Co. Incorporated and Bankers Trust New York Corporation ("Citicorp/Morgan/Bankers Trust"), Order dated April 30, 1987, 8. Company may also provide services that are necessary incidents pp. 17-18 n.ll. to these approved activities. The incidental services should be taken 2. These activities are authorized for bank holding companies into account in computing the gross revenue and market share limits under section 225.25(b)(16) of Regulation Y. 12 C.F.R. on the underwriting subsidiaries' ineligible underwriting and dealing § 225.25(b)(16). activities, to the extent such limits apply to particular incidental 3. Citicorp/Morgan/Bankers Trust, supra. activities. 4. All asset data are as of December 31, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 619 a trade association of the investment banking industry, tional limitations to ensure that the subsidiary's activiopposes the application for the reasons stated in its ties are consistent with safety and soundness, conflict earlier protests to similar applications by Citicorp, J.P. of interest and other relevant considerations under the Morgan and Bankers Trust. BHC Act. Underwriting and dealing in commercial In its Citicorp/Morgan/Bankers Trust decision, the paper in any manner other than as approved in that Board concluded that CSI and the eligible securities Order7 is not within the scope of the Board's approval underwriting subsidiaries of J.P. Morgan and Bankers and is not authorized for CSI. Trust would not be "engaged principally" in under- As the Board noted in the CiticorplMorganlBankers writing or dealing in municipal revenue bonds, 1-4 Trust Order, Congress has under consideration legislafamily mortgage-backed securities and (except for tion that would prohibit Board approval of an under- Citicorp) commercial paper within the meaning of writing application, such as this, between March 6, section 20 of the Glass-Steagall Act5 provided they 1987 and March 1, 1988. While this moratorium legisladerived no more than 5 percent of their total gross tion has not yet been enacted into law, the Board calls revenues from underwriting and dealing in the ap- to Applicant's attention that it may be required by proved securities over any two year period and their subsequent Congressional action to cease its underunderwriting and dealing activities did not exceed 5 writing and dealing activities approved in this Order. percent of the market for each particular type of The Board retains jurisdiction over the application to security involved. The Board further found that, sub- act to carry out the requirements of any legislation ject to the prudential framework of limitations estab- adopted by Congress that would affect Applicant's lished in those cases to address the potential for conduct of underwriting and dealing activities under conflicts of interest, unsound banking practices or this Order and the BHC Act. other adverse effects, the proposed underwriting and The Board's determination is subject to all of the dealing activities were so closely related to banking as conditions set forth in the Board's Regulation Y, to be a proper incident thereto within the meaning of including those in sections 225.4(d) and 225.23(b), and section 4(c)(8) of the BHC Act. to the Board's authority to require modification or For the reasons set forth in the Citicorp!Morgan! termination of the activities of a bank holding compa- Bankers Trust Order,6 the Board concludes that Appli- ny or any of its subsidiaries as the Board finds cant's proposal for CSI to underwrite and deal in necessary to assure compliance with, and to prevent commercial paper would not result in a violation of evasion of, the provisions of the BHC Act and the section 20 of the Glass-Steagall Act and is closely Board's regulations and orders issued thereunder. related and a proper incident to banking within the This transaction shall not be consummated later meaning of section 4(c)(8) of the BHC Act provided than three months after the effective date of this Applicant limits CSI's activities as provided in the Order, unless such period is extended for good cause CiticorplMorganlBankers Trust Order. Accordingly, by the Board, or by the Federal Reserve Bank of New the Board has determined to approve the application York, pursuant to delegated authority. subject to the terms and conditions established in the By order of the Board of Governors, effective CiticorplMorganlBankers Trust Order. The Board May 18, 1987. hereby adopts and incorporates herein by reference the reasoning and analysis contained in the Citicorp/ Voting for this action: Governors Johnson, Seger, and Morgan/Bankers Trust and Chase Orders. Heller. Voting against this action: Chairman Volcker and Governor Angell. The Board's approval of this application extends only to activities conducted within the limitations of the CiticorplMorganlBankers Trust Order, including JAMES MCAFEE the Board's reservation of authority to establish addi- [SEAL] Associate Secretary of the Board 5. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) prohibits the affiliation of a member bank with "any corporation . . . engaged principally in the issue, flotation, underwriting, public sale, or distribution at wholesale or retail or through syndicate participation of stocks, bonds, debentures, notes, or other securities . . . ." 6. In The Chase Manhattan Corporation, 73 FEDERAL RESERVE 7. CSI may also provide services that are necessary incidents to BULLETIN 367 (1987), the Board found that underwriting commercial these approved activities. The incidental services should be taken into paper was closely related to banking under section 4(c)(8) of the BHC account in computing the gross revenue and market share limits on the Act. The CiticorplMorganlBankers Trust decision incorporated these underwriting subsidiaries' ineligible underwriting and dealing activifindings. ties, to the extent such limits apply to particular incidental activities. 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620 Federal Reserve Bulletin • July 1987 Dissenting Statement of Chairman Volcker and Board authorization, engages in securities brokerage Governor Angell services pursuant to section 225.25(b)(15) of Regulation Y, 12 C.F.R. § 225.25(b)(15). These brokerage For the reasons set forth in our dissenting statement in services are conducted separately from the eligible the Citicorp!Morgan!Bankers Trust order, we regret securities underwriting and dealing activity. The prowe are unable to join the majority in approving this posed new underwriting and dealing activities would application. be provided in addition to the previously approved May 18, 1987 activities, with Company serving customers through offices in New York. Applicant, with total consolidated assets of $75.8 Manufacturers Hanover Corporation billion, is the fifth largest commercial banking organi- New York, New York zation in the nation.3 It operates two subsidiary banks in New York and Delaware and engages directly and Order Conditionally Approving Application to through subsidiaries in a broad range of permissible Underwrite and Deal in Certain Securities to a nonbanking activities. Limited Extent and to Place Commercial Paper Notice of the application, affording interested persons an opportunity to submit comments on the pro- Manufacturers Hanover Corporation, New York, posal, has been published (52 Federal Register 6,218 New York, a bank holding company within the mean- (1987)). The Board received two comments on the ing of the Bank Holding Company Act ("BHC Act"), proposal. The Securities Industry Association has applied for the Board's approval under section ("SIA"), a trade association of the investment bank- 4(c)(8) of the BHC Act and section 225.21(a) of the ing industry, opposes the application for the reasons Board's Regulation Y, 12 C.F.R. § 225.21(a), to stated in its earlier protests to similar applications by engage through a wholly owned subsidiary, Manufac- Citicorp, J.P. Morgan & Co. Incorporated and Bankturers Hanover Securities Corporation ("Company"), ers Trust New York Corporation. The Dealer Bank in underwriting and dealing in, on a limited basis, the Association commented in favor of the application. following securities: On April 30, the Board approved applications by (1) municipal revenue bonds, including certain in- Citicorp, J.P. Morgan and Bankers Trust to underdustrial development bonds; write and deal in, through their eligible securities (2) residential mortgage-related securities; underwriting subsidiaries, 1-4 family mortgage- (3) consumer-receivable-related securities ("CRRs"); backed securities, municipal revenue bonds (and cerand tain industrial development bonds) and (except for (4) commercial paper.1 Citicorp) commercial paper.4 The Board concluded that the underwriting subsidiaries would not be "en- Applicant has also applied for Company to act as gaged principally" in underwriting or dealing in securiagent for issuers of commercial paper in connection ties within the meaning of section 20 of the Glasswith the placement of such notes with institutional Steagall Act5 provided they derived no more than 5 customers. percent of their total gross revenues from underwriting Applicant has previously received approval under and dealing in the approved securities over any two section 4(c)(8) of the BHC Act for Company to under- year period and their underwriting and dealing activiwrite and deal in U.S. government and agency and ties did not exceed 5 percent of the market for each state and municipal securities that state member banks particular type of security involved. The Board further are authorized to underwrite and deal in under section found that, subject to the prudential framework of 16 of the Banking Act of 1933 (the "Glass-Steagall limitations established in those cases to address the Act") (12 U.S.C. § 24 Seventh) (hereinafter "eligible potential for conflicts of interest, unsound banking securities").2 In addition, Company, pursuant to practices or other adverse effects, the proposed under- 1. Applicant proposes to limit Company's underwriting and dealing activity in these securities in the same manner and to the same extent 3. Asset data are as of March 31, 1987. Banking data are as of as proposed by Bankers Trust in its application to underwrite and deal December 31, 1986. in these securities. See Citicorp, J.P. Morgan & Co. Incorporated and 4. Citicorp/MorganlBankers Trust, supra. Bankers Trust New York Corporation, Order dated April 30, 1987, pp. 5. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) prohibits 17-18 n.l 1. the affiliation of a member bank with "any corporation . . . engaged 2. These activities are authorized for bank holding companies principally in the issue, flotation, underwriting, public sale, or distriunder section 225.25(b)(16) of Regulation Y. 12 C.F.R. bution at wholesale or retail or through syndicate participation of § 225.25(b)(16). stocks, bonds, debentures, notes, or other securities . . . ." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 621 writing and dealing activities were so closely related to including the Board's reservation of authority to estabbanking as to be a proper incident thereto within the lish additional limitations to ensure that the subsidmeaning of section 4(c)(8) of the BHC Act. In the case iary's activities are consistent with safety and soundof CRRs, the Board concluded that the record then ness, conflict of interest and other relevant before it did not provide a sufficient evidentiary basis considerations under the BHC Act. Underwriting and for it to make the formal finding required by the BHC dealing in the approved securities in any manner other Act, but stated that it would reconsider the matter than as approved in those Orders8 is not within the within 60 days of its Order on the basis of fuller scope of the Board's approval and is not authorized for submissions. Company. For the reasons set forth in the Board's Citicorp! As the Board noted in the CiticorplMorganlBankers Morgan!Bankers Trust Order, the Board concludes Trust Order, Congress has under consideration legislathat Applicant's proposal to engage through Company tion that would prohibit Board approval of an underin underwriting and dealing in municipal revenue writing application, such as this, between March 6, bonds,6 commercial paper and 1-4 family mortgage- 1987 and March 1, 1988. While this moratorium legislarelated securities would not result in a violation of tion has not yet been enacted into law, the Board calls section 20 of the Glass-Steagall Act and is closely to Applicant's attention that it may be required by related and a proper incident to banking within the subsequent Congressional action to cease its undermeaning of section 4(c)(8) of the BHC Act provided writing and dealing activities approved in this Order. Applicant limits Company's activities as provided in The Board retains jurisdiction over the application to the CiticorplMorganlBankers Trust Order. The Board act to carry out the requirements of any legislation will reconsider the permissibility of Applicant's pro- adopted by Congress that would affect Applicant's posal with respect to CRRs within 60 days. According- conduct of underwriting and dealing activities under ly, the Board has determined to approve the under- this Order and the BHC Act. writing application subject to all of the terms and The Board's determination is subject to all of the conditions established in the CiticorplMorganlBankers conditions set forth in the Board's Regulation Y, Trust Order. The Board hereby adopts and incorpoincluding those in sections 225.4(d) and 225.23(b), and rates herein by reference the reasoning and analysis to the Board's authority to require modification or contained in the CiticorplMorganlBankers Trust Ortermination of the activities of a bank holding compader. ny or any of its subsidiaries as the Board finds For the reasons set forth in the Board's Order in necessary to assure compliance with, and to prevent Bankers Trust approving commercial paper placement evasion of, the provisions of the BHC Act and the activity, the Board concludes that Applicant's propos- Board's regulations and orders issued thereunder. al to place commercial paper is also consistent with This transaction shall not be consummated later section 20 of the Glass-Steagall Act and permissible than three months after the effective date of this for bank holding companies under section 4(c)(8) of Order, unless such period is extended for good cause the BHC Act, subject to the prudential limitations of by the Board, or by the Federal Reserve Bank of New that Order and the CiticorplMorganlBankers Trust York, pursuant to delegated authority. Order.7 By order of the Board of Governors, effective The Board's approval of this application extends May 18, 1987. only to activities conducted within the limitations of the CiticorplMorganlBankers Trust Order and the Voting for this action: Governors Johnson, Seger, and Bankers Trust commercial paper placement Order, Heller. Voting against this action: Chairman Volcker and Governor Angell. 6. The industrial development bonds approved in those applica- JAMES MCAFEE tions and for Applicant in this case are only those tax exempt bonds in which the governmental issuer, or the governmental unit on behalf of [SEAL] Associate Secretary of the Board which the bonds are issued, is the owner for federal income tax purposes of the financed facility (such as airports, mass commuting facilities, and water pollution control facilities). Without further approval from the Board, Company may underwrite or deal in only these types of industrial development bonds. 7. Bankers Trust New York Corporation, 73 FEDERAL RESERVE BULLETIN 138 (1987). Company may underwrite, deal in and place only commercial paper that is exempt from the registration and 8. Company may also provide services that are necessary incidents prospectus requirements of the Securities Act of 1933 and that is short to these approved activities. The incidental services should be taken term, of prime quality, and issued in denominations no smaller than into account in computing the gross revenue and market share limits $100,000. Applicant has stated the paper will be issued or backed by on the underwriting subsidiaries' ineligible underwriting and dealing large companies and sold to financially sophisticated corporate and activities, to the extent such limits apply to particular incidental other institutional investors. activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

622 Federal Reserve Bulletin • July 1987 Dissenting Statement of Chairman Volcker and Applicant, with total consolidated assets of $64.0 Governor Angell billion, is the sixth largest commercial banking organization in the nation.3 It operates five subsidiary banks For the reasons set forth in our dissenting statement in in California, Arizona, Washington and Oregon and the CiticorplMorgan/Bankers Trust Order, we regret engages directly and through subsidiaries in a broad we are unable to join the majority in approving this range of permissible nonbanking activities. application. Notice of the application, affording interested per- May 18, 1987 sons an opportunity to submit comments on the proposal, has been published (52 Federal Register 8,365 Security Pacific Corporation (1987)). The Board received two comments on the Los Angeles, California proposal. The Securities Industry Association ("SIA"), a trade association of the investment bank- Order Conditionally Approving Application to ing industry, opposes the application for the reasons Underwrite and Deal in Certain Securities to a stated in its earlier protests to similar applications by Limited Extent Citicorp, J.P. Morgan & Co. Incorporated and Bankers Trust New York Corporation. The Dealer Bank Security Pacific Corporation, Los Angeles, California, Association commented in favor of the application. a bank holding company within the meaning of the On April 30, the Board approved applications by Bank Holding Company Act ("BHC Act"), has ap- Citicorp, J.P. Morgan and Bankers Trust to underplied for the Board's approval under section 4(c)(8) of write and deal in, through their eligible securities the BHC Act and section 225.21(a) of the Board's underwriting subsidiaries, 1-4 family mortgage- Regulation Y, 12 C.F.R. § 225.21(a), to engage backed securities, municipal revenue bonds (including through a wholly owned subsidiary, Security Pacific certain industrial development bonds) and (except for Securities, Inc. ("Company"), in underwriting and Citicorp) commercial paper.4 The Board concluded dealing in, on a limited basis, the following securities: that the underwriting subsidiaries would not be "en- (1) municipal revenue bonds, including certain in- gaged principally" in underwriting or dealing in securidustrial development bonds; ties within the meaning of section 20 of the Glass- (2) residential mortgage-related securities; Steagall Act5 provided they derived no more than 5 (3) consumer-receivable-related securities ("CRRs"); percent of their total gross revenues from underwriting and and dealing in the approved securities over any two (4) commercial paper.1 year period and their underwriting and dealing activities did not exceed 5 percent of the market for each Applicant has previously received approval under particular type of security involved. The Board further section 4(c)(8) of the BHC Act for Company to under- found that, subject to the prudential framework of write and deal in U.S. government and agency and limitations established in those cases to address the state and municipal securities that state member banks potential for conflicts of interest, unsound banking are authorized to underwrite and deal in under section practices or other adverse effects, the proposed under- 16 of the Banking Act of 1933 (the "Glass-Steagall writing and dealing activities were so closely related to Act") (12 U.S.C. § 24 Seventh) (hereinafter "eligible banking as to be a proper incident thereto within the securities").2 The proposed new underwriting and meaning of section 4(c)(8) of the BHC Act. In the case dealing activities would be provided in addition to the of CRRs, the Board concluded that the record then previously approved eligible securities activities, with before it did not provide a sufficient evidentiary basis Company serving customers through offices in Los for it to make the formal findings required by the BHC Angeles. Act, but stated that it would reconsider the matter within 60 days of its Order on the basis of fuller submissions. 1. Applicant proposes to limit Company's underwriting and dealing activity in these securities in the same manner and to the same extent 3. Asset data are as of March 31, 1987. Banking data are as of as proposed by Bankers Trust in its application to underwrite and deal December 31, 1986. in these securities. See Citicorp, J.P. Morgan & Co. Incorporated and 4. CiticorplMorgan/Bankers Trust, supra. Bankers Trust New York Corporation, Order dated April 30, 1987, pp. 5. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) prohibits 17-18 n.ll. the affiliation of a member bank with "any corporation . . . engaged 2. These activities are authorized for bank holding companies principally in the issue, flotation, underwriting, public sale, or distriunder section 225.25(b)(16) of Regulation Y. 12 C.F.R. bution at wholesale or retail or through syndicate participation of § 225.25(b)(16). stocks, bonds, debentures, notes, or other securities . . . ." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 623 For the reasons set forth in the Board's Citicorp/ tion has not yet been enacted into law, the Board calls Morgan/Bankers Trust Order, the Board concludes to Applicant's attention that it may be required by that Applicant's proposal to engage through Company subsequent Congressional action to cease its underin underwriting and dealing in municipal revenue writing and dealing activities approved in this Order. bonds,6 commercial paper and 1-4 family mortgage- The Board retains jurisdiction over the application to related securities would not result in a violation of act to carry out the requirements of any legislation section 20 of the Glass-Steagall Act and is closely adopted by Congress that would affect Applicant's related and a proper incident to banking within the conduct of underwriting and dealing activities under meaning of section 4(c)(8) of the BHC Act provided this Order and the BHC Act. Applicant limits Company's activities as provided in The Board's determination is subject to all of the the Citicorp/Morgan/Bankers Trust Order. The Board conditions set forth in the Board's Regulation Y, will reconsider the permissibility of Applicant's pro- including those in sections 225.4(d) and 225.23(b), and posal with respect to CRRs within 60 days. According- to the Board's authority to require modification or ly, the Board has determined to approve the under- termination of the activities of a bank holding compawriting application subject to all of the terms and ny or any of its subsidiaries as the Board finds conditions established in the Citicorp!Morgan!Bankers necessary to assure compliance with, and to prevent Trust Order. The Board hereby adopts and incorpo- evasion of, the provisions of the BHC Act and the rates herein by reference the reasoning and analysis Board's regulations and orders issued thereunder. contained in the Citicorp!Morgan/Bankers Trust Or- This transaction shall not be consummated later der. than three months after the effective date of this The Board's approval of this application extends Order, unless such period is extended for good cause only to activities conducted within the limitations of by the Board, or by the Federal Reserve Bank of San the Citicorp!Morgan!Bankers Trust Order, including Francisco, pursuant to delegated authority. the Board's reservation of authority to establish addi- By order of the Board of Governors, effective tional limitations to ensure that the subsidiary's activi- May 18, 1987. ties are conducted consistent with safety and soundness, conflict of interest and other relevant Voting for this action: Governors Johnson, Seger, and considerations under the BHC Act. Underwriting and Heller. Voting against this action: Chairman Volcker and Governor Angell. dealing in the approved securities in any manner other than as approved in that Order7 is not within the scope of the Board's approval and is not authorized for JAMES MCAFEE Company. [SEAL] Associate Secretary of the Board As the Board noted in the Citicorp!Morgan!Bankers Trust Order, Congress has under consideration legisla- Dissenting Statement of Chairman Volcker and tion that would prohibit Board approval of an under- Governor Angell writing application, such as this, between March 6, 1987 and March 1, 1988. While this moratorium legisla- For the reasons set forth in our dissenting statement in the Citicorp!Morgan!Bankers Trust Order, we regret we are unable to join the majority in approving this 6. The industrial development bonds approved in those applica- application. tions and for Applicant in this case are only those tax exempt bonds in which the governmental issuer, or the governmental unit on behalf of May 18, 1987 which the bonds are issued, is the owner for federal income tax purposes of the financed facility (such as airports, mass commuting facilities, and water pollution control facilities). Without further approval from the Board, Company may underwrite or deal in only Orders Approved Under the Bank Merger Act these types of industrial development bonds. 7. Company may also provide services that are necessary incidents Carney Bank to these approved activities. The incidental services should be taken into account in computing the gross revenue and market share limits Boynton Beach, Florida on the underwriting subsidiaries' ineligible underwriting and dealing activities, to the extent such limits apply to particular incidental Carney Bank of Broward County activities. Applicant has proposed to place third party commercial paper as Sunrise, Florida agent as an incident to its commercial paper underwriting and dealing activity. In this case, the Board concludes that Company may, as an incident to its commercial paper underwriting and dealing activities, Order Approving Merger of Banks engage in commercial paper placement provided Company observes the prudential limitations set forth by the Board in the Citicorp/ Morgan/Bankers Trust Order and Bankers Trust New York Corpora- Carney Bank, Boynton Beach, Florida, and Carney tion, 73 FEDERAL RESERVE BULLETIN 138 (1987). Bank of Broward County, Sunrise, Florida ("Sunrise Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

624 Federal Reserve Bulletin • July 1987 Bank"), have applied for the Board's approval under Carney Bank and Sunrise Bank do not operate in the the Bank Merger Act (12 U.S.C. § 1828(c)) to merge same banking market. In view of this fact and the fact under the title and charter of Carney Bank. that this proposal represents a reorganization of exist- Notice of the application, affording interested per- ing ownership interests, consummation of the prosons an opportunity to submit comments and views, posed transaction would not result in any significant has been given in accordance with the Bank Merger adverse effects on competition or increase the concen- Act and the Board's Rules of Procedure (12 C.F.R. tration of banking resources in any relevant area. § 262.3(b)). As required by the Bank Merger Act, This proposed merger will result in a reduction in reports on the competitive effects of the transaction operating expenses and will be accompanied by an were requested from the United States Attorney Gen- injection of additional capital. In view of these facts eral, the Comptroller of the Currency, and the Federal and other facts of record, the financial and managerial Deposit Insurance Corporation. The time for filing resources of Carney Bank and Sunrise Bank are comments has expired, and the Board has considered considered consistent with approval. Considerations the application and all comments received in light of relating to the convenience and needs of the communithe factors set forth in section 18(c) of the Bank ty to be served are also consistent with approval. Merger Act. Based on the foregoing and other facts of record, the Carney Bank, a Florida corporation with one Board has determined that consummation of the transbranch, is one of the smallest commercial banking action would be in the public interest and that the organization in Florida,1 controlling total deposits of application is approved for the reasons summarized $8.9 million, representing less than 1 percent of total above. The transaction shall not be consummated deposits in commercial banks in the state. Sunrise before the thirtieth calendar day following the effective Bank, which is also a Florida corporation with one date of this Order, or later than three months after the branch, is one of the smallest commercial banking effective date of this Order, unless such period is organizations in Florida, controlling total deposits of extended for good cause by the Board or by the $7.8 million, representing less than one percent of total Federal Reserve Bank of Atlanta, acting pursuant to deposits in commercial banks in the state. The result- delegated authority. ant bank would control total deposits of $16.7 million, By order of the Board of Governors, effective representing less than 1 percent of total deposits in May 7, 1987. commercial banks in the state. Voting for this action: Chairman Volcker and Governors Johnson, Seger, Angell, and Heller. JAMES MCAFEE 1. All banking data are as of October 31, 1986. [SEAL] Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 625 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 ALLIANCE FINANCIAL Michigan Bank—Huron, Chicago April 24, 1987 CORPORATION, East Tawas, Michigan Dearborn, Michigan Belle Fourche Bancshares, Inc., Pioneer Bank and Trust Minneapolis April 30, 1987 Belle Fourche, South Dakota Company, Bell Fourche, South Dakota Cherry Bancorporation, Inc., State Bank of Cherry, Chicago April 22, 1987 Cherry, Illinois Cherry, Illinois Chesapeake Bank Corporation, American Bank, Richmond May 8, 1987 Chesapeake, Virginia Newport News, Virginia Citizens First Bancorp, Inc., Bank of Obion County, St. Louis April 23, 1987 Union City, Tennessee Union City, Tennessee Citizens State Bank Employee Citizens State Bank, St. Louis April 30, 1987 Stock Ownership Trust, Trenton, Tennessee Trenton, Tennessee City National Bancshares, Inc., City National Bank of Florida, Atlanta April 24, 1987 Miami, Florida Hallandale, Florida City National Bank Corporation, Miami, Florida CNB Financial Corporation, First Bank Central (N.A.)- Minneapolis May 4, 1987 Litchfield, Minnesota Litchfield, Litchfield, Minnesota Collegiate Peaks Collegiate Peaks Bank, Kansas City May 4, 1987 Bancorporation, Inc., Buena Vista, Colorado Buena Vista, Colorado Connecticut Bancorp, Inc., The Norwalk Bank, New York May 5, 1987 Norwalk, Connecticut Norwalk, Connecticut Dime Financial Corp., The Dime Savings Bank of Philadelphia April 14, 1987 West Chester, Pennsylvania Chester County, West Chester, Pennsylvania First Azle Bancshares, Inc., First National Bank of Azle, Dallas May 15, 1987 Azle, Texas Azle, Texas First Caprock Bancshares, Inc. The First National Bank of Dallas May 8, 1987 Claude, Texas Claude, Claude, Texas First Citizens Banc Corp., The Citizens Banking Company, Cleveland May 8, 1987 Sandusky, Ohio Sandusky, Ohio First City Corporation First City Corporation, St. Louis May 6, 1987 Employee Stock Ownership Fort Smith, Arkansas Trust, Fort Smith, Arkansas First Community Corporation, Community First Bank, Atlanta May 14, 1987 Woodstock, Georgia Woodstock, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

626 Federal Reserve Bulletin • July 1987 Section 3—Continued „ . , . Reserve Effective Applicant Bank(s) ^ B&nk First Gilmer Bankshares, Inc.. The First National Bank of Dallas May 1, 1987 Gilmer, Texas Gilmer, Gilmer, Texas First Interstate Corporation of State Bank of Green Valley, Chicago May 15, 1987 Wisconsin, Green Valley, Wisconsin Sheboygan, Wisconsin First Jersey National Newmarket National Bank, New York April 24, 1987 Corporation, Fort Washington, Pennsylvania Jersey City, New Jersey First Union Corporation, First Sarasota Bancorporation, Richmond April 22, 1987 Charlotte, North Carolina Tampa, Florida First Virginia Banks, Inc., First Virginia Bank—Clinch Richmond April 22, 1987 Falls Church, Virginia Valley, Richlands, Virginia First Wachovia Corporation, F.A. Bankshares, Inc., Richmond April 23, 1987 Winston-Salem, North Monroe, Georgia Carolina FMB Bankshares, Inc., First Madison Bank, Minneapolis April 27, 1987 Madison, South Dakota Madison, South Dakota F.N.B. Corporation, First County Bank, Cleveland April 30, 1987 Hermitage, Pennsylvania Chardon, Ohio Greenville Bancshares American National Bank of Dallas April 22, 1987 Corporation, Greenville, Greenville, Texas Greenville, Texas Gulf/Bay Financial Corporation, Gulf/Bay Bank, Atlanta April 23, 1987 Tampa, Florida Tampa, Florida Gulf & Southern Financial Community National Bank of Atlanta April 24, 1987 Corporation, Sarasota County, Fort Myers, Florida Venice, Florida Indiana United Bancorp, The Peoples Bank, Chicago April 20, 1987 Greensburg, Indiana Portland, Indiana Lee Capital Corp., Lee County Bancorp, Inc., Chicago April 23, 1987 Fort Madison, Iowa Fort Madison, Iowa Liberty Bancshares, Inc., The Liberty National Bank of Cleveland May 8, 1987 Ada, Ohio Ada, Ada, Ohio Manteno Bancshares, Inc., First Midwest Bank/Bradley, Chicago May 12, 1987 Manteno, Illinois Bradley, Illinois Market Bancorporation, Inc., First State Bank of New Market, Minneapolis May 5, 1987 New Market, Minnesota New Market, Minnesota McLachlen Bancshares McLachlen National Bank, Richmond May 12, 1987 Corporation, Washington, D.C. Washington, D.C. Mercantile Bancorporation Inc., Mercantile Bank of Delaware, St. Louis May 8, 1987 St. Louis, Missouri New Castle, Delaware Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 627 Section 3—Continued * * > r> i / \ Reserve Effective Applicant Bank(s) ^ ^ Mercantile Partners and F-K Landmark Bank-Mid Cities, Dallas April 24, 1987 Partnership, Euless, Texas Fort Worth, Texas Security Bank of Arlington, Landmark Financial Group of Arlington, Texas Delaware, Tarrant County Bancshares, Inc., Wilmington, Delaware Fort Worth, Texas Landmark Service Corporation, Fort Worth, Texas Landmark Financial Group, Inc., Fort Worth, Texas Merchants & Miners Merchants & Miners State Bank Minneapolis May 1, 1987 Bancshares, Inc., of Hibbing, Hibbing, Minnesota Hibbing, Minnesota Merchants National Indiana United Bancorp, Chicago April 20, 1987 Corporation, Greensburg, Indiana Indianapolis, Indiana Mountaineer Bankshares of Mercantile Bancorp, Inc., Richmond May 5, 1987 W. Va., Inc., Moundsville, West Virginia Martinsburg, West Virginia Mountaineer Bankshares of Morgan Bancorp, Inc., Richmond May 5, 1987 W. Va., Inc., Berkeley Springs, West Martinsburg, West Virginia Virginia NBD Bancorp, Inc., NBD Battle Creek, National Chicago May 5, 1987 Detroit, Michigan Association, Battle Creek, Michigan Northside Bancshares, Inc., The Northside Bank & Trust Atlanta May 6, 1987 Roswell, Georgia Company, Roswell, Georgia NW Bancshares, Inc., The Northwestern Bank, Minneapolis May 4, 1987 Chippewa Falls, Wisconsin Chippewa Falls, Wisconsin Peoples Bancshares, Inc., Peoples Bank and Loan St. Louis May 14, 1987 Lewisville, Arkansas Company, Lewisville, Arkansas Premier Bankshares The Richlands National Bank, Richmond April 22, 1987 Corporation, Richlands, Virginia Tazewell, Virginia Rainbow Investment Company, Bank of Tuckerman, St. Louis May 5, 1987 Inc., Tuckerman, Arkansas Tuckerman, Arkansas Randolph Bancshares, Inc., Alabanc, Inc., Atlanta May 14, 1987 Oxford, Alabama Wadley, Alabama Republic Bancorp Inc., Republic Bank of Ann Arbor, Chicago April 24, 1987 Flint, Michigan Ann Arbor, Michigan Trustcorp, Inc., Trustcorp Company, Dayton, Cleveland May 6, 1987 Toledo, Ohio Dayton, Ohio Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

628 Federal Reserve Bulletin • July 1987 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date U.S.B. Corporation, United Southwest Bank, St. Louis April 24, 1987 Washington, Indiana Washington, Indiana VALLEY BANC SERVICES State Bank of Osco, Chicago April 27, 1987 CORP., Osco, Illinois Antioch, Illinois West Tennessee Bancorp, Inc. Henderson County Bank, St. Louis April 28, 1987 Lexington, Tennessee Lexington, Tennessee Worthington Bancshares, Inc., First National Bank in Minneapolis May 11, 1987 Worthington, Minnesota Worthington, Worthington, Minnesota Wyatt Bancshares, Inc., The First National Bank of Izard St. Louis May 8, 1987 Calico Rock, Arkansas County, Calico Rock, Arkansas Section 4 Nonbanking Reserve Effective Applicant Company/Activity Bank date Bank of New England Clayton, Polleys & Co., Inc., Boston May 13, 1987 Corporation, Boston, Massachusetts Boston, Massachusetts Continental Illinois Corporation, Continental Capital Management Chicago May 6, 1987 Chicago, Illinois Corporation, Chicago, Illinois Delaware National Bankshares Kenneth White Insurance Agency Philadelphia April 24, 1987 Corp., Inc., Georgetown, Delaware Lewes, Delaware Section 3 and 4 Bank(s)/Nonbanking Reserve Effective Applicant Company Bank date Draper Holding Company, Inc. Draper State Bank, Minneapolis April 28, 1987 Draper, South Dakota Draper, South Dakota First Insurance-Presho, Presho, South Dakota Hayes Insurance Agency, Draper, South Dakota First of America Keystone Bancshares, Inc., Chicago April 24, 1987 Bancorporation-Illinois, Inc., Kankakee, Illinois Libertyville, Illinois Keystone Bancshares Life Insurance Co., Kankakee, Illinois Keystone Data Corporation, Kankakee, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 629 Section 3 and 4—Continued Bank(s)/Nonbanking Reserve Effective Applicant Company Bank date First of America Bank Keystone Bancshares, Inc., Chicago April 24, 1987 Corporation, Kankakee, Illinois Kalamazoo, Michigan Keystone Bancshares Life Insurance Co., Kankakee, Illinois Keystone Data Corporation, Kankakee, Illinois Lincoln Financial Corporation, SSB Bancorp, Chicago April 20, 1987 Fort Wayne, Indiana Shipshewana, Indiana Shipshewana State Bank, Shipshewana, Indiana Shipshewana Insurance Agency, Inc., LaGrange, Indiana Society for Savings Bancorp, Society for Savings, Boston April 21, 1987 Inc., Hartford, Connecticut Hartford, Connecticut Fidelity Acceptance Corporation, Minneapolis, Minnesota Society Mortgage Corporation, Wethersfield, Connecticut Financing for Science and Industry, Inc., Hartford, Connecticut ORDERS APPROVED UNDER THE BANK MERGER ACT By Federal Reserve Banks Reserve Effective Applicant Bank(s) Bank date Alpine Bank and Trust, Alpine Bank, Glen wood Springs Kansas City April 22, 1987 Glen wood Springs, Colorado Mall, Glenwood Springs, Colorado Bank of Lewanee, Hudson State Savings Bank, Chicago May 15, 1987 Adrian, Michigan Hudson, Michigan First Virginia Bank—Clinch Clinch Valley Bank & Trust Richmond April 22, 1987 Valley, Company, Richlands, Virginia Richlands, Virginia Newport News Interim Bank, American Bank, Richmond May 8, 1987 Newport News, Virginia Newport News, Virginia Security Bank Northeast, Security Bank of Almont, Chicago April 30, 1987 Richmond, Michigan Almont, Michigan Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

630 Federal Reserve Bulletin • July 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. Securities Industry Association v. Board of Gover- Podolak v. Volcker, No. C85-0456, et al. (D. Wyo., nors, et al., No. 87-1169 (D.C. Cir., filed April 17, filed Oct. 28, 1985). 1987). Kolb v. Wilkinson, et al., No. C85-4184 (N.D. Iowa, Jones v. Volcker, No. 87-0427 (D.D.C., filed Feb. 19, filed Oct. 22, 1985). 1987). Farmer v. Wilkinson, et al., No. 4-85-CIVIL-1448 (D. Bankers Trust New York Corp. v. Board of Governors, Minn., filed Oct. 21, 1985). No. 87-1035 (D.C. Cir., filed Jan. 23, 1987). Kurkowski v. Wilkinson, et al., No. CV-85-0-916 (D. Securities Industry Association v. Board of Gover- Neb., filed Oct. 16, 1985). nors, et al., No. 87-1030 (D.C. Cir., filed Jan. 20, Alfson v. Wilkinson, et al., No. Al-85-267 (D. N.D., 1987). filed Oct. 8, 1985). Grimm v. Board of Governors, No. 87-4006 (2nd Cir., Independent Community Bankers Associaton of South filed Jan. 16, 1987). Dakota v. Board of Governors, No. 84-1496 (D.C. Independent Insurance Agents of America, et al. v. Cir., filed Aug. 7, 1985). Board of Governors, Nos. 86-1572, 1573, 1576 Urwyler, et al. v. Internal Revenue Service, et al., No. (D.C. Cir., filed Oct. 24, 1986). 85-2877 (9th Cir., filed July 18, 1985). Securities Industry Association v. Board of Gover- Wight, et al. v. Internal Revenue Service, et al., No. nors, No. 86-2768 (D.D.C., filed Oct. 7, 1986). 85-2826 (9th Cir., filed July 12, 1985). Independent Community Bankers Association of Florida Bankers Association v. Board of Governors, South Dakota v. Board of Governors, No. 86-5373 No. 84-3883 and No. 84-3884 (11th Cir., filed Feb. (8th Cir., filed Oct. 3, 1986). 15, 1985). Jenkins v. Board of Governors, No. 86-1419 (D.C. Florida Department of Banking v. Board of Gover- Cir., filed July 18, 1986). nors, No. 84-3831 (11th Cir., filed Feb. 15, 1985), Securities Industry Association v. Board of Gover- and No. 84-3832 (11th Cir., filed Feb. 15, 1985). nors, No. 86-1412 (D.C. Cir., filed July 14, 1986). Lewis v. Volcker, et al., No. 86-3210 (6th Cir., filed Adkins v. Board of Governors, No. 86-3853 (4th Cir., Jan. 14, 1985). filed May 14, 1986). Brown v. United States Congress, et al., No. 84-2887- Optical Coating Laboratory, Inc. v. United States, 6(IG) (S.D. Cal., filed Dec. 7, 1984). No. 288-86C (U.S. Claims Ct., filed May 6, 1986). Melcher v. Federal Open Market Committee, No. 84- CBC, Inc. v. Board of Governors, No. 86-1001 (10th 1335 (D.D.C., filed Apr. 30, 1984). Cir., filed Jan. 2, 1986). Florida Bankers Association, et al. v. Board of Gover- Myers, et al. v. Federal Reserve Board, No. 85-1427 nors, Nos. 84-3269, 84-3270 (11th Cir., filed April (D. Idaho, filed Nov. 18, 1985). 20, 1984). Souser, et al. v. Volcker, et al., No. 85-C-2370, et al. Securities Industry Association v. Board of Gover- (D. Colo., filed Nov. 1, 1985). nors, No. 86-5089, et al. (D.C. Cir., filed Oct. 24., 1980) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

631 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 APPOINTIVE MEMBERS1 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

632 Federal Reserve Bulletin • July 1987 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 Edward W. Kelley, Jr. .Dallas May 26, 1987 Chairmen4 Vice Chairmen4 Charles S. Hamlin .Aug. 10, 1914-Aug. 9, 1916 Frederic A. Delano Aug. 10, 1914-Aug. 9, 1916 W.P.G. Harding .Aug. 10, 1916-Aug. 9, 1922 Paul M. Warburg Aug. 10, 1916-Aug. 9, 1918 Daniel R. Crissinger .., .May 1, 1923-Sept. 15, 1927 Albert Strauss Oct. 26, 1918-Mar. 15, 1920 Roy A. Young .Oct. 4, 1927-Aug. 31, 1930 Edmund Piatt July 23, 1920-Sept. 14, 1930 Eugene Meyer .Sept. 16, 1930-May 10, 1933 J.J. Thomas Aug. 21, 1934-Feb. 10, 1936 Eugene R. Black .May 19, 1933-Aug. 15, 1934 Ronald Ransom Aug. 6, 1936-Dec. 2, 1947 Marriner S. Eccles .Nov. 15, 1934-Jan. 31, 1948 C. Canby Balderston Mar. 11, 1955-Feb. 28, 1966 Thomas B. McCabe ... .Apr. 15, 1948-Mar. 31, 1951 J.L. Robertson Mar. 1, 1966-Apr. 30, 1973 Wm. McC. Martin, Jr. .Apr. 2, 1951-Jan. 31, 1970 George W. Mitchell May 1, 1973-Feb. 13, 1976 Arthur F. Burns .Feb. 1, 1970-Jan. 31, 1978 Stephen S. Gardner Feb. 13, 1976-Nov. 19, 1978 G. William Miller .Mar. 8, 1978-Aug. 6, 1979 Frederick H. Schultz July 27, 1979-Feb. 11, 1982 Paul A. Volcker .Aug. 6, 1979- Preston Martin Mar. 31, 1982-Mar. 31, 1986 Manuel H. Johnson Aug. 22, 1986- EX-OFFICIO MEMBERS' 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. I, 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 A6 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 A7 Federal Reserve Bank interest rates A8 Reserve requirements of depository institutions A9 Federal Reserve open market transactions FEDERAL FINANCE A28 Federal fiscal and financing operations FEDERAL RESERVE BANKS A29 U.S. budget receipts and outlays A30 Federal debt subject to statutory limitation A10 Condition and Federal Reserve note statements A30 Gross public debt of U.S. Treasury—Types and All Maturity distribution of loan and security ownership holdings A31 U.S. government securities dealers— Transactions A32 U.S. government securities dealers—Positions MONETAR Y AND CREDIT AGGREGA TES and financing A33 Federal and federally sponsored credit A12 Aggregate reserves of depository institutions agencies—Debt outstanding and monetary base A13 Money stock, liquid assets, and debt measures A15 Bank debits and deposit turnover SECURITIES MARKETS AND A16 Loans and securities—All commercial banks CORPORATE FINANCE A34 New security issues—State and local COMMERCIAL BANKING INSTITUTIONS governments and corporations A35 Open-end investment companies—Net sales and All Major nondeposit funds asset position A18 Assets and liabilities, last-Wednesday-of-month A35 Corporate profits and their distribution series Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • July 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 Assets and liabilities of commercial banks, A54 U.S. foreign trade September 30, 1986 A54 U.S. reserve assets A76 Assets and liabilities of commercial banks, December 31, 1986 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 1986 1987 1986 1987 Q2 Q3 Q4 Q1 Dec. Jan.' Feb.' Mar.' Apr. Reserves of depository institutions2 1 Total 18.7r 21.0' 24.3' 16.4' 36.9' 15.3 -.2 -.4 23.2 2 Required 20.7r 21.9' 22.8' 16.5' 28.8' 22.3 -3.3 5.9 25.5 3 Nonborrowed 18.6' 21.3' 25.3' 18.5' 35.8' 20.9 .3 .2 13.5 4 Monetary base3 9.1' 9.7' 11.0' 11.3' 13.4' 14.6 7.6 2.9 9.9 Concepts of money, liquid assets, and debt4 5 Ml 15.5 16.5 17.0 13.0 30.5 11.7 -.7 3.3 17.7 6 M2 9.4 10.6 9.2 6.4 10.5 9.5 -.1 1.7 5.7 7 M3 8.7 9.6 8.0 6.5' 10.2' 9.0 1.3 1.7 5.5 8 L 7.1 8.0 8.2 6.6 9.6' 9.7 2.7 -2.4 n.a. 9 Debt 10.2 12.3 12.1 11.8' 15.4 12.8 8.0 7.9 n.a. Nontransaction components 10 M25 7.5 8.6 6.6 4.1 3.7 8.6 .1 1.2 1.4 11 M3 only6 6.0 5.7 3.4 6.9' 8.9' 7.3 6.9 1.9 4.8 Time and savings deposits Commercial banks 12 Savings7 13.4 25.0 36.9 37.0 34.4 41.2 33.8 28.5 27.8 13 Small-denomination time8 -2.5 -7.5 -10.7 -4.9 -3.9 .0 -7.2 -8.3 -8.3 14 Large-denomination time910 -3.5 -1.5 .4 9.2' 7.9' 15.6 .8 11.8 27.7 Thrift institutions 15 Savings7 16.0 21.0 23.0 27.9 19.6 29.5 33.2 29.1 30.5 16 Small-denomination time .3 -3.4 -6.4 -4.8 -6.8 -5.2 -3.0 .2 -1.7 17 Large-denomination time9 11.2 2.8 -7.3 -10.0 -5.4 -10.1 -14.0 -8.7 -19.1 Debt components4 18 Federal 11.6 14.5 12.1 10.2 19.1 8.6 4.6 3.9 n.a. 19 Nonfederal 9.8 11.7 12.1 12.3' 14.2 14.2 9.1 9.1 n.a. 20 Total loans and securities at commercial banks" 4.1 10.6 9.1 10.1 17.4 16.1 .9 3.8 11.9 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 • July 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 1987 1987 Feb. Mar. Apr. Mar. 18 Mar. 25 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 11111 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 222,882 221,583 230,049 221,286 221,096 222,732 225,432 227,243 232,065 233,864 22222 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 195,023 195,925 203,630 195,737 195,389 196,549 199,491 201,744 204,393 207,658 33333 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 194,910 195,619 201,662 195,388 195,389 196,549 197,717 201,299 202,535 205,270 44444 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 113 306 1,968 349 0 0 1,774 445 1,858 2,388 55555 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 7,750 7,772 8,220 7,818 7,719 7,719 8,118 7,862 8,195 8,374 66666 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 7,719 7,719 7,703 7,719 7,719 7,719 7,717 7,714 7,701 7,683 77777 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 31 53 517 99 0 0 401 148 494 691 88888 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 99999 LLLLLoooooaaaaannnnnsssss 554 535 872 502 553 690 591 693 1,219 798 1111100000 FFFFFllllloooooaaaaattttt 2,085 466 604 384 373 1,107 669 224 1,512 -48 1111111111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 17,470 16,885 16,723 16,845 17,063 16,667 16,563 16,720 16,746 17,082 1111122222 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk22222 11,070 11,083 11,079 11,083 11,082 11,081 11,080 11,078 11,078 11,076 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 17,652 17,711 17,744 17,709 17,723 17,718 17,728 17,738 17,748 17,758 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 1111155555 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 206,450 207,265 209,684 207,704 207,318 207,376 208,876 210,111 210,281 209,620 1111166666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss22222 484 506 530 500 507 516 525 531 534 531 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss,,,,, wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 1111177777 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 4,834 3,161 7,163 3,255 2,865 3,025 3,923 3,815 4,758 13,312 1111188888 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 228 238 279 208 254 259 264 202 270 354 1111199999 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss 2,519 2,026 2,211 2,145 1,975 2,036 2,048 2,318 2,041 1,993 2222200000 OOOOOttttthhhhheeeeerrrrr 424 442 424 468 423 459 431 399 451 390 2222211111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 6,602 6,345 6,896 6,348 6,429 6,569 6,791 6,762 7,018 7,043 2222222222 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss55555 35,081 35,412 36,701 34,468 35,148 36,309 36,399 36,939 40,556 34,474 End-of-month figures Wednesday figures 1987 1987 Feb. Mar. Apr. Mar. 18 Mar. 25 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 2222233333 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 220,180 227,578 249,706 220,131 220,344 222,860 232,873 229,625 242,619 243,550 2222244444 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 194,178 196,409 218,883 194,413 194,544 197,013 204,720 203,917 209,978 213,824 2222255555 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 194,178 196,409 205,112 194,182 194,544 197,013 196,920 202,818 202,034 204,590 2222266666 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 0 0 13,771 231 0 0 7,800 1,099 7,944 9,234 2222277777 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 7,719 7,719 11,039 7,826 7,719 7,719 9,236 8,198 10,028 10,436 2222288888 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 7,719 7,719 7,683 7,719 7,719 7,719 7,714 7,714 7,683 7,683 2222299999 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss.................... 0 0 3,356 107 0 0 1,522 484 2,345 2,753 3333300000 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 3333311111 LLLLLoooooaaaaannnnnsssss 514 1,587 2,464 420 573 596 1,592 464 5,627 1,0% 3333322222 FFFFFllllloooooaaaaattttt 1,023 5,241 126 387 249 577 380 294 -102 691 3333333333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 16,746 16,622 17,914 17,085 17,259 16,955 16,945 16,752 17,088 17,503 3333344444 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk22222 11,085 11,081 11,076 11,082 11,082 11,081 11,079 11,078 11,077 11,076 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 17,679 17,735 17,767 17,721 17,735 17,727 17,737 17,747 17,757 17,767 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 3333377777 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 205,988 207,818 210,265 207,692 207,331 208,035 209,649 210,460 210,179 209,899 3333388888 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss22222 510 518 531 505 515 519 532 534 531 529 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 3333399999 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 3,482 3,576 29,688 2,437 2,953 4,563 3,531 4,056 9,431 25,802 4444400000 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 201 268 343 190 226 399 176 285 225 504 4444411111 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss 1,799 1,817 1,812 1,807 1,807 1,817 1,818 1,806 1,810 1,811 4444422222 OOOOOttttthhhhheeeeerrrrr 539 577 533 498 610 485 360 557 522 527 4444433333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 6,110 6,682 7,057 6,140 6,267 6,541 6,727 6,677 7,037 7,165 4444444444 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss33333 35,334 40,156 33,337 34,684 34,470 34,326 43,914 39,092 46,736 31,172 1. Includes securities loaned—fully guaranteed by U.S government securities stock. Revised data not included in this table are available from the Division of pledged with Federal Reserve Banks—and excludes any securities sold and Research and Statistics, Banking Section. scheduled to be bought back under matched sale-purchase transactions. 3. Excludes required clearing balances and adjustments to compensate for 2. Revised for periods between October 1986 and April 1987. At times during float. this interval, outstanding gold certificates were inadvertently in excess of the gold 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 1984 1985 1986 1986 1987 Dec. Dec. Dec. Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Reserve balances with Reserve Banks1 21,738 27,620 37,360 31,922 32,947 34,803 37,360 36,584 33,625 35,318 2 Total vault cash2 22,313 22,953 24,071 23,384 23,753 23,543 24,071 25,049 25,889r 23,759 3 Vault3 18,958 20,522 22,199 21,267 21,676 21,595 22,199 23,084 23,435 21,743 4 Surplus4 3,355 2,431 1,872 2,117 2,078 1,947 1,872 1,965 2,454 2,016 5 Total reserves5 40,696 48,142 59,560 53,189 56,623 56,399 59,560 59,668 57,060 57,061 6 Required reserves 39,843 47,085 58,191 52,463 53,877 55,421 58,191 58,600 55,849 56,146 7 Excess reserve balances at Reserve Banks6 853 1,058 1,369 726 746 978 1,369 1,068 1,211 916 8 Total borrowings at Reserve Banks 3,186 1,318 827 1,008 841 752 827 580 556 527 9 Seasonal borrowings at Reserve Banks 113 56 38 137 99 70 38 34 71 91 10 Extended credit at Reserve Banks7 2,604 499 303 570 497 418 303 225 283 264 Biweekly averages of daily figures for weeks ending 1987 Jan. 14 Jan. 28 Feb. 11 Feb. 25 Mar. 11 Mar. 25 Apr. 8 Apr. 22 May 6p May 20pf 11 Reserve balances with Reserve Banks' 38,710 35,228 32,991 33,742 35,400 34,809 36,358 38,746 37,613 36,343 12 Total vault cash2 24,583r 25,028 27,327 25,237 23,662 24,077 23,198 23,479 23,289 23,552 13 Vault3 22,815 23,012 24,677 22,857 21,582 22,038 21,350 21,761 21,517 21,786 14 Surplus4 1,768 2,017 2,650 2,380 2,080 2,039 1,848 1,719 1,772 1,766 15 Total reserves5 61,525 58,239 57,667 56,599 56,982 56,847 57,708 60,506 59,130 58,129 16 Required reserves 60,680 57,033 56,208 55,530 56,021 55,866 57,029 59,703 58,106 57,041 17 Excess reserve balances at Reserve Banks6 845 1,206 1,459 1,070 961 981 679 804 1,024 1,088 18 Total borrowings at Reserve Banks 505 689 425 680 466 528 641 956 1,410 830 19 Seasonal borrowings at Reserve Banks 28 36 56 81 83 96 98 110 159 190 20 Extended credit at Reserve Banks7 215 227 265 299 275 263 248 267 299 276 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Financial Statistics • July 1987 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Member Banks' Averages of daily figures, in millions of dollars 1987 week ending Monday MMaattuurriittyy aanndd ssoouurrccee Feb. 2 Feb. 9 Feb. 16 Feb. 23 Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 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 78,255 80,428 76,927 77,242 75,122 80,561 78,545 76,584 74,628 2 For all other maturities 8,052 8,229 8,764 8,315 9,130 8,677 88,,338855 88,,338877 8,312 From other depository institutions, foreign banks and foreign official institutions, and United States government agencies 3 For one day or under continuing contract 38,995 39,005 39,000 39,390 40,802 43,033 42,504 39,322 39,651 4 For all other maturities 6,175 5,920 6,603 6,021 6,631 6,504 7,083 6,917 7,412 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 13,194 12,909 13,906 14,289 14,033 12,682 12,226 11,325 12,120 6 For all other maturities 9,066r 9,802' 10,551' 9,258' 10,649' 9,714' 9,638 10,345 10,525 All other customers 7 For one day or under continuing contract 28,016 27,793 26,148 27,380 27,176 27,408 26,848 25,636 25,813 8 For all other maturities 10,667' 10,363' 10,541' 9,880' 10,098' 9,578' 9,209 9,399 9,874 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 34,026 31,180' 28,120' 28,588' 27,305 27,952 26,831 25,694 23,909 10 To all other specified customers2 12,671 10,976' 12,235 11,852 11,786 10,762 11,508 11,935 10,288 1. Banks with assets of $1 billion or more as of Dec. 31, 1977. 2. Brokers and nonbank dealers in securities; other depository institutions; foreign banks and official institutions; and U.S. government agencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A7 1.14 FEDERAL RESERVE BANK INTEREST RATES Percent per annum Current and previous levels Extended credit2 SShhoorrtt--tteerrmm aaddjjuussttmmeenntt ccrreeddiitt aanndd sseeaassoonnaall ccrreeddiitt11 FFFeeedddeeerrr BBB aaalll aaannn RRR kkk eee ssseeerrrvvveee Fir b st o r 6 r 0 o w da in y g s of Nex b t o r 5 r K o ) w d i a n y g s of After 150 days EEffffeeccttiivvee ddaattee ffoorr ccuurrrreenntt rraatteess Rate on Effective Previous Rate on Previous Rate on Previous Rate on Previous 5/28/87 date rate 5/28/87 rate 5/28/87 rate 5/28/87 rate Boston SVi 8/21/86 6 5% 6 6 Vi 7 m 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 D Sa a n l la F s r ancisco ... SVi 8 8 / / 2 2 1 1 / / 8 8 6 6 6 5 Vi 6 6Vi 7 m 8 8 / / 2 2 1 1 / / 8 8 6 6 Range of rates in recent years3 Range (or F.R. Range (or F.R. Range (or F.R. Effective date A le l v l e F l) . — R. B o a f n k Effective date A le l v l e F l) . — R. Ba o n f k Effective date A le l v l e F l) . — R. Ba o n f k Banks N.Y. Banks N.Y. Banks N.Y. I 1 n 9 7 e 4 ff — ec D A t e p D c r. . e c. 2 3 1 9 5 6 0 3 1, 1973 l 7 V 3 I 7 / 3 8 V 4 / i 4 - - 8 i % 7 I 8 7 8 3 3 V / / 4 4 i 1978-— O N S A e c o u p t v g . t . . . 2 2 2 1 1 2 0 6 1 S 8 V 9 - 7 S8 3 8 V i / VW - 4 i 9 i Vi 9 9 S 8 8 7 V 3 V V / tV 4 > 2 i i 1982—J A u u ly g . 2 2 2 1 0 2 7 3 6 3 1 1 1 0 1n 1 1 V - 1 1 v 0 S - 1 0 - 1 i V % 1 2 1 2 V 2 1 1 1 1 l 1 1 0 O 1 1 I V V V i i i 1975— F Ja e n b . . 2 1 5 6 4 0 7 6 7 V 3 V / 7 + 4 4 - - - 7 7 7 V V 3 3 / / 4 4 4 4 7 7 7 6 V V 3 3 / / 4 4 4 4 1979--J AA u uu ly gg .. 2 2 1 0 0 7 lo 1 - 0 i 1 o 0 Vv ti! l 1 l o O 0 w Vi O N c o t v . . 2 1 3 1 2 2 0 3 9 9 9 V - 1 9 Y 0 2 V i - 1 2 0 1 9 0 9 9 V Vi i Mar. 1 1 0 4 7 6V 6 6 4 V 3 -6 /4 4 3 /4 6 6 6 V V 3/4 4 4 O SSee c pp t. tt .. 2 1 8 1 9 1 1 0 1 V 1 - 1 1 i - 2 l l 1 1 1 1 1 2 Dec. 1 2 1 4 6 5 8 8 V V 9 i i -9 - 9 9 9m May 16 6-6V4 6 10 12 12 17 8% 8 Vi 23 6 6 1976— N Ja o n v . . 2 1 2 2 9 3 5 5 V 5 S V * V V i - - i i S 6 V i S 5 5SV V V Vi 4 4 i 1980--F MM e aa b yy . 2 3 1 1 9 0 5 9 1 1 2 2 1 1 - - 2 3 1 1 3 3 1 1 1 1 2 3 3 3 1984— N A o pr v . . 2 2 1 1 9 6 3 8 8 8 V V 9 2 iV - - 9 9 > m8 9 9 V i 26 June 13 11-12 11 Dec. 24 8 8 1977—Aug. 3 3 0 1 5 5 V (4 4 - - 5 5 3 3 / / 4 4 S 53/ V 4 4 JJuullyy 2 2 1 8 9 6 10 1 1 - 1 0 1 1 1 1 1 0 1 0 1985—May 2 2 0 4 7 7 V V i i - 8 I 7 V Vi i O Se c p t. t . 26 2 5 6 3/ 4 6 53 /4 S N e o p v t . . 1 2 7 6 1 1 1 2 1 1 1 2 1986—Mar. 7 1-lVi 7 1978— J M J u a a n ly y . 1 2 1 9 1 3 0 2 6 6 1 V 6 I - - V 7 V i 6 1 t - > 7 i V V i i 6 6 1 17 I V V V V i i i 4 1981---MM N D aa o e yy c v . . 2 5 5 8 8 1 1 1 3 3 2 1 1 - - - 3 4 1 1 1 4 4 3 1 1 1 1 1 3 3 3 4 4 A J A u p u ly g r. . 2 2 2 2 1 1 1 1 2 3 1 0 5 6 V V 5 6 7 6 V Vi i - - 7 6 i i 55 6 6 76 V V V V i l 2 i July 10 Dec. 6 4 1 1 3 2 1 1 3 2 In effect May 28, 1987 SVi SVi 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 and again on Jan. 28, 1987; the 1981, and 1982. rate may be either the same as that for adjustment credit or a fixed rate Vi percent In 1980 and 1981, the Federal Reserve applied a surcharge to short-term higher. adjustment credit borrowings by institutions with deposits of $500 million or more 2. Applicable to advances when exceptional circumstances or practices involve that had borrowed in successive weeks or in more than 4 weeks in a calendar only a particular depository institution and to advances when an institution is quarter. A 3 percent surcharge was in effect from Mar. 17, 1980, through May 7, under sustained liquidity pressures. As an alternative, for loans outstanding for 1980. There was no surcharge until Nov. 17,1980, when a 2 percent surcharge was more than 150 days, a Federal Reserve Bank may charge a flexible rate that takes adopted; the surcharge was subsequently raised to 3 percent on Dec. 5,1980, and into account rates on market sources of funds, but in no case will the rate charged to 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective be less than the basic rate plus one percentage point. Where credit provided to a Sept. 22, 1981, and to 2 percent effective Oct. 12. As of Oct. 1, the formula for particular depository institution is anticipated to be outstanding for an unusually applying the surcharge was changed from a calendar quarter to a moving 13-week prolonged period and in relatively large amounts, the time period in which each period. The surcharge was eliminated on Nov. 17, 1981. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Financial Statistics • July 1987 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Percent of deposits Depository institution requirements after implementation of the Type of deposit, and Monetary Control Act deposit interval2 Effective date Net transaction accounts*-* $0 million-$36.7 million ... 12/30/86 More than $36.7 million .. . 12/30/86 Nonpersonal time deposits 5 By original maturity Less than 1 Vi years 10/6/83 1 Vi years or more 10/6/83 Eurocurrency liabilities All types 11/13/80 1. Reserve requirements in effect on Dec. 31, 1986. Required reserves must be highest reserve ratio. With respect to NOW accounts and other transaction held in the form of deposits with Federal Reserve Banks or vault cash. Nonmem- accounts, the exemption applies only to such accounts that would be subject to a 3 bers may maintain reserve balances with a Federal Reserve Bank indirectly on a percent reserve requirement. pass-through basis with certain approved institutions. For previous reserve 3. Transaction accounts include all deposits on which the account holder is requirements, see earlier editions of the Annual Report and of the FEDERAL permitted to make withdrawals by negotiable or transferable instruments, pay- RESERVE BULLETIN. Under provisions of the Monetary Control Act, depository ment orders of withdrawal, and telephone and preauthorized transfers in excess of institutions include commercial banks, mutual savings banks, savings and loan three per month for the purpose of making payments to third persons or others. associations, credit unions, agencies and branches of foreign banks, and Edge However, MMDAs and similar accounts subject to the rules that permit no more corporations. than six preauthorized, automatic, or other transfers per month, of which no more 2. The Garn-St. Germain Depository Institutions Act of 1982 (Public Law 97- than three can be checks, are not transaction accounts (such accounts are savings 320) requires that $2 million of reservable liabilities (transaction accounts, deposits subject to time deposit reserve requirements). nonpersonal time deposits, and Eurocurrency liabilities) of each depository 4. The Monetary Control Act of 1980 requires that the amount of transaction institution be subject to a zero percent reserve requirement. The Board is to adjust accounts against which the 3 percent reserve requirement applies be modified the amount of reservable liabiliiies subject to this zero percent reserve require- annually by 80 percent of the percentage increase in transaction accounts held by ment each year for the succeeding calendar year by 80 percent of the percentage all depository institutions, determined as of June 30 each year. Effective Dec. 30, increase in the total reservable liabilities of all depository institutions, measured 1986, the amount was increased from $31.7 million to $36.7 million. on an annual basis as of June 30. No corresponding adjustment is to be made in the 5. In general, nonpersonal time deposits are time deposits, including savings event of a decrease. On Dec. 30, 1986, the exemption was raised from $2.6 million deposits, that are not transaction accounts and in which a beneficial interest is to $2.9 million. In determining the reserve requirements of depository institutions, held by a depositor that is not a natural person. Also included are certain the exemption shall apply in the following order: (I) net NOW accounts (NOW transferable time deposits held by natural persons and certain obligations issued accounts less allowable deductions); (2) net other transaction accounts; and (3) to depository institution offices located outside the United States. For details, see nonpersonal time deposits or Eurocurrency liabilities starting with those with the section 204.2 of Regulation D. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Policy Instruments A9 1.17 FEDERAL RESERVE OPEN MARKET TRANSACTIONS1 Millions of dollars 1986 1987 TTyyppee ooff ttrraannssaaccttiioonn 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 20,036 22,214 22,602 861 928 3,318 5,422 997 191 1,062 2 Gross sales 8,557 4,118 2,502 0 0 0 0 583 3,581 0 3 Exchange 0 0 0 0 0 0 0 0 0 0 4 Redemptions 7,700 3,500 1,000 0 0 0 0 0 800 0 Others within 1 year 5 Gross purchases 1,126 1,349 190 0 0 190 0 0 0 0 6 Gross sales 0 0 0 0 0 0 0 0 0 0 7 Maturity shift 16,354 19,763 18,673 1,053 974 2,974 1,280 611 1,855 1,762 8 Exchange -20,840 -17,717 -20,179 -1,892 -529 -1,810 -1,502 0 -4,954 -1,799 9 Redemptions 0 0 0 0 0 0 0 0 0 0 1 to 5 years 10 Gross purchases 1,638 2,185 893 0 0 893 0 0 0 0 11 Gross sales 0 0 0 0 0 0 0 0 252 0 12 Maturity shift -13,709 -17,459 -17,058 -1,053 -969 -2,414 -1,280 -591 -1,650 -1,762 13 Exchange 16,039 13,853 16,984 1,892 529 1,510 1,502 0 4,354 1,799 5 to 10 years 14 Gross purchases 536 458 236 0 0 236 0 0 0 0 15 Gross sales 300 100 0 0 0 0 0 0 0 0 16 Maturity shift -2,371 -1,857 -1,620 0 -5 -560 0 -20 -204 0 22,,775500 22,,118844 22,,005500 00 0 220000 0 0 400 0 Over 10 years 18 Gross purchases 441 293 158 0 0 158 0 0 0 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shift -275 -447 0 0 0 0 0 0 0 0 21 Exchange 2,052 1,679 1,150 0 0 100 0 0 200 0 All maturities 22 Gross purchases 23,776 26,499 24,078 861 928 4,795 5,422 997 191 1,062 23 Gross sales 8,857 4,218 2,502 0 0 0 0 583 3,833 0 24 Redemptions 7,700 3,500 1,000 0 0 0 0 0 800 0 Matched transactions 25 Gross sales 808,986 866,175 927,997 73,179 77,262 60,146 91,404 63,865 82,086 72,306 26 Gross purchases 810,432 865,968 927,247 70,817 81,892 60.232 88,730 65,145 81,387 73,476 Repurchase agreements2 27 Gross purchases 127,933 134,253 170,431 14,717 5,670 16,888 44,303 36,373 0 55,,665577 28 Gross sales 127,690 132,351 160,268 8,403 11,984 15,471 32,028 46,897 3,168 5,657 29 Net change in U.S. government securities 8,908 20,477 29,989 4,814 -756 6,298 15,023 -8,830 -8,307 2,231 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 00 0 0 00 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 256 162 398 0 93 125 0 110 0 0 Repurchase agreements2 33 Gross purchases 11,509 22,183 31,142 2,678 995522 1,622 5,488 4,714 0 889977 34 Gross sales 11,328 20,877 30,522 869 2,761 1,274 3,522 6,171 857 897 35 Net change in federal agency obligations -76 1,144 222 1.809 -1,902 223 1,965 -1,567 -857 0 BANKERS ACCEPTANCES 36 Repurchase agreements, net -418 0 0 0 0 0 0 0 0 0 37 Total net change in System Open Market Account 8,414 21,621 30,211 6,623 -2,658 6,522 16,988 -10,397 -9,165 2,231 1. Sales, redemptions, and negative figures reduce holdings of the System 2. In July 1984 the Open Market Trading Desk discontinued accepting bankers Open Market Account; all other figures increase such holdings. Details may not acceptances in repurchase agreements, add to totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Financial Statistics • July 1987 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1987 1987 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 Feb. Mar. Apr. Consolidated condition statement ASSETS 1 Gold certificate account 11,081 11,080 11,078 11,078 11,077 11,059 11,081 11,076 2 Special drawing rights certificate account 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 3 Coin 563 556 549 537 523 578 569 517 Loans 4 To depository institutions 596 1,592 464 5,627 1,096 514 1,587 2,464 5 Other 0 0 0 0 0 0 0 0 Acceptances—Bought outright 6 Held under repurchase agreements 00 0 00 00 00 00 00 00 Federal agency obligations 7 Bought outright 7,719 7,714 7,714 7,683 7,683 7,719 7,719 77,,668833 8 Held under repurchase agreements 0 1,522 484 2,345 2,753 0 0 3,356 U.S. government securities Bought outright 9 Bills 101,221 101,128 104,949 104,165 104,536 100,581 102,812 110055,,005588 10 Notes 69,637 69,637 71,420 71,420 73,378 67,673 67,673 73,378 11 Bonds 26,155 26,155 26,449 26,449 26,676 25,924 25,924 26,676 12 Total bought outright1 197,013 196,920 202,818 202,034 204,590 194.178 196,409 205,112 13 Held under repurchase agreements 0 7,800 1,099 7,944 9,234 0 0 13,771 14 Total U.S. government securities 197,013 204,720 203,917 209,978 213,824 194,178 196,409 218,883 15 Total loans and securities 205,328 215,548 212,579 225,633 225,356 202,411 205,715 232,386 16 Items in process of collection 7,244 6,444 7,632 6,808 7,039 6,338 13,284 6,203 17 Bank premises 671 670 675 675 675 669 671 675 Other assets 18 Denominated in foreign currencies2 9,251 8,964 8,879 8,809 8,642 9,960 9,467 8,283 19 All other3 7,033 7,311 7,198 7,604 8,186 6,117 6,484 8,236 20 Total assets 246,189 255,591 253,608 266,162 266,516 242,150 252,289 272,394 LIABILITIES 21 Federal Reserve notes 191,391 193,001 193,797 193,491 193,187 189,370 191,170 193,547 Deposits 22 To depository institutions 36,143 45,732 40,898 48,546 32,983 37,133 41,973 3355,,114499 23 U.S. Treasury—General account 4,563 3,531 4,056 9,431 25,802 3,482 3,576 29,688 24 Foreign—Official accounts 399 176 285 225 504 201 268 343 25 Other 485 360 557 522 527 539 577 533 26 Total deposits 41,590 49,799 45,796 58,724 59,816 41,355 46,394 65,713 27 Deferred credit items 6,667 6,064 7,338 6,910 6,348 5,315 8,043 6,077 28 Other liabilities and accrued dividends4 2,333 2,595 2,538 2,889 3,024 2,189 2,219 2,696 29 Total liabilities 241,981 251,459 249,469 262,014 262,375 238,229 247,826 268,033 CAPITAL ACCOUNTS 30 Capital paid in 1,917 1,918 1,917 1,920 1,921 1,910 1,916 1,921 31 Surplus 1,874 1,873 1,873 1,873 1,873 1,860 1,874 1,873 32 Other capital accounts 417 341 349 355 347 151 673 567 33 Total liabilities and capital accounts 246,189 255,591 253,608 266,162 266,516 242,150 252,289 272,394 34 MEMO: Marketable U.S. government securities held in custody for foreign and international account 176,098 178,243 178,466 175,355 176,544 166,449 175,569 174,715 Federal Reserve note statement 3") Federal Reserve notes outstanding 237,082 238,048 238,783 239,561 240,024 234,114 236,868 240,164 36 LESS: Held by bank 45,691 45,047 44,986 46,070 46,837 44,744 45,698 46,617 37 Federal Reserve notes, net 191,391 193,001 193,797 193,491 193,187 189,370 191,170 193,547 Collateral held against notes net: 38 Gold certificate account 11,081 11,080 11,078 11,078 11,077 11,059 11,081 11,076 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 175,292 176,903 177,701 177,395 177,092 173,293 175,071 177,453 42 Total collateral 191,391 193,001 193,797 193,491 193,187 189,370 191,170 193,547 1. Includes securities loaned—fully guaranteed by U.S. government securities 4. Includes exchange-translation account reflecting the monthly revaluation at pledged with Federal Reserve Banks—and excludes (if any) securities sold and market exchange rates of foreign-exchange commitments. scheduled to be bought back under matched sale-purchase transactions. NOTE: Some of these data also appear in the Board's H.4.1 (503) release. For 2. Assets shown in this line are revalued monthly at market exchange rates. address, see inside front cover. 3. Includes special investment account at Chicago of Treasury bills maturing within 90 days. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holdings Millions of dollars Wednesday End of month Type and maturity groupings Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 Feb. 27 1 Loans—Total 596 1,592 464 5,627 1,096 514 1,587 2 Within 15 days 567 1,558 449 5,619 1,082 502 1,573 3 16 days to 90 days 29 0 34 0 1 0 5 1 0 4 1 0 2 1 0 4 4 91 days to 1 year 5 Acceptances—Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 Within 15 days 0 0 0 0 0 0 0 7 16 days to 90 days 0 0 0 0 0 0 0 8 91 days to 1 year 9 U.S. government securities—Total 197,013 204,720 203,917 209,978 213,824 194,178 196,409 10 Within 15 days1 9,639 17,113 13,192 15,179 19,553 4,662 4,688 11 16 days to 90 days 47,756 48,029 51,305 52,594 50,056 52,118 53,011 12 91 days to 1 year 60,628 60,588 58,892 61,677 61,890 59,463 61,450 13 Over 1 year to 5 years 39,611 39,611 40,587 40,587 41,851 39,042 38,367 14 Over 5 years to 10 years 15,917 15,917 16,232 16,232 16,538 15,627 15,627 15 Over 10 years 23,462 23,462 23,709 23,709 23,936 23,266 23,266 16 Federal agency obligations—Total. 7,719 9,236 8,198 10,028 10,436 7,719 7,719 1 1 7 8 W 16 i t d h a in y s 1 t 5 o d 9 a 0 y d s1 a ys 53 4 2 0 1, 7 5 1 8 0 9 7 5 3 1 2 6 2,4 6 7 6 5 1 2,8 6 8 6 4 9 6 3 4 0 0 1 2 5 9 3 5 2 19 91 days to 1 year 1,607 1,417 1,485 1,526 1,547 1,307 1,352 20 Over 1 year to 5 years 3,918 3,898 3,848 3,749 3,750 3,819 3,918 21 Over 5 years to 10 years 1,342 1,342 1,337 1,337 1,306 1,372 1,342 22 Over 10 years 280 280 280 280 280 280 280 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 • July 1987 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE Billions of dollars, averages of daily figures 1986' 1987 1983 1984 1985 1986 Dec. Dec. Dec/ Dec/ Sept. Oct. Nov. Dec. Jan/ Feb/ Mar/ Apr. Seasonally adjusted ADJUSTED FOR 1 Total reserves2 36.16 39.51 46.06 56.17 52.30 53.23 54.49 56.17 56.88 56.87 56.85 57.95 2 Nonborrowed reserves 35.38 36.32 44.74 55.34 51.29 52.38 53.74 55.34 56.30 56.32 56.33 56.% 3 Nonborrowed reserves plus extended credit3 35.38 38.93 45.24 55.64 51.86 52.88 54.16 55.64 56.53 56.60 56.59 57.23 4 Required reserves 35.59 38.66 45.00 54.80 51.58 52.48 53.51 54.80 55.82 55.66 55.94 57.12 5 Monetary base4 185.38' 199.2 <y 217.32 239.51 232.28 234.43 236.88 239.51 242.43 243.97 244.56 246.57 Not seasonally adjusted 6 Total reserves2 36.87 40.57 47.24 57.64 52.02 52.83 54.59 57.64 58.73 56.09 56.07 58.37 7 Nonborrowed reserves 36.09 37.38 45.92 56.81 51.01 51.98 53.84 56.81 58.15 55.53 55.54 57.38 8 Nonborrowed reserves plus extended credit3 36.10 39.98 46.42 57.11 51.58 52.48 54.26 57.11 58.38 55.81 55.80 57.65 9 Required reserves 36.31 39.71 46.18 56.27 51.29 52.08 53.61 56.27 57.66 54.88 55.15 57.54 10 Monetary base4 188.65 202.34 220.82 243.63 232.07 233.61 237.50 243.63 243.42 240.82 241.93 246.05 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS5 11 Total reserves2 38.89 40.70 48.14 59.56 53.19 54.62 56.40 59.56 59.67 57.06 57.06 59.39 12 Nonborrowed reserves 38.12 37.51 46.82 58.73 52.18 53.78 55.65 58.73 59.09 56.50 56.53 58.40 13 Nonborrowed reserves plus extended credit3 38.12 40.09 47.41 59.04 52.76 54.15 56.15 59.04 59.32 56.74 56.82 58.19 14 Required reserves 38.33 39.84 47.08 58.19 52.46 53.88 55.42 58.19 58.60 55.85 56.15 58.56 15 Monetary base4 192.26 204.18 223.53 247.71 235.07 237.26 241.27 247.71 246.75 244.22 244.98 249.23 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 1987 IItteemm11 D 19 e 8 c 3 . D 19 e 8 c 4 . D 19 e 8 c 5 . D 19 e 8 c 6 . Jan. Feb.' Mar. Apr. Seasonally adjusted 1 526.9 557.5 627.0 730.5 737.6 737.2 739.2 750.1 ? M2 2,184.6 2,369.1 2,569.5 2,799.7r 2,821.8' 2,821.6 2,825.5' 2,839.0 M3 2,692.8 2,985.4r 3,205.5 3,488.8r 3,515.(K 3,518.8 3,523.8' 3,540.0 4 3,154.6 3,529.0r 3,838.9 4,140.8' 4,174.3' 4,183.8 4,175.6 n.a. 5 5,206.3 5,946.0 6,774.9 7,625.6' 7,707.2' 7,758.7 7,809.6 n.a. Ml components 6 Currency2 148.3 158.5 170.6 183.5 186.0 187.2 187.8 188.9 7 Travelers checks3 4.9 5.2 5.9 6.4 6.5 6.7 6.8 6.8 8 Demand deposits4 242.3 248.3 272.2 308.3 305.1 300.7 299.1 303.9 9 Other checkable deposits5 131.4 145.5 178.3 232.3 240^ 242.7 245.5 250.5 Nontransactions components 10 In M26 1,657.7 1,811.5 1,942.5 2,069.3 2,084.2' 2,084.3 2,086.3' 2,088.8 11 In M3 only7 508.2 616.3' 636.1' 689.0' 693.2' 697.2 698.3' 701.1 Savings deposits8 1? Commercial Banks 133.2 122.2 124.6 154.5 115599..88 164.3 116688..22 172.1 13 Thrift institutions 173.0 166.6 179.0 211.7 216.9 222.9 228.3 234.1 Small denomination time deposits9 14 Commercial Banks 350.9 386.6 383.9 364.7 364.7 362.5 360.0 335577..55 15 Thrift institutions 432.9 498.6 500.3 488.5 486.4' 485.2 485.3 484.6 Money market mutual funds 16 General purpose and broker/dealer 138.2 167.5 176.5 207.6 209.0 210.7 211.6 211.8 17 Institution-only 43.2 62.7 65.1 84.1 84.0 84.7 84.9 83.1 Large denomination time deposits10 18 Commercial Banks11 230.0 269.6 284.1 291.9' 229955..77'' 295.9 229988..88'' 330055..77 19 Thrift institutions 96.2 147.3 152.1 155.1 153.8 152.0 150.9' 148.5 Debt components 70 Federal debt 1,172.8 1,367.6 11,,558877..00 11,,880044..88 11,,881177..88 1,824.7 11,,883300..77 n.a. 21 Nonfederal debt 4,033.5 4,578.4 5,187.9 5,820.8' 5,889.5' 5,933.9 5,978.9 n.a. Not seasonally adjusted r> M l 538.3 570.3 641.0 746.5' 744.3 723.1 728.7 757.4 73 M2 2,191.6 2,378.3 2,580.5 2,813.2' 2,832.0' 2,809.6 2,819.3' 2,847.6 74 M3 2,702.4 2,997.2' 3,218.8r 3,504.C 3,525.8' 3,509.1 3,520.9' 3,548.1 L 3,163.1 3,539.7' 3,850.7 4,154.2' 4,185.7' 4,175.6 4,179.0 n.a. 26 Debt 5,200.7 5,940.2 6,768.3 7,618.4' 7,701.4' 7,742.3 7,786.4 n.a. Ml components 77 Currency2 150.6 160.8 117733..11 118866..22 118844..66 118844..88 118866..00 188.0 28 Travelers checks3 4.6 4.9 5.5 6.0 6.0 6.2 6.4 6.5 79 Demand deposits4 251.0 257.2 282.0 319.4' 311.0 291.9 291.4 305.7 30 Other checkable deposits5 132.2 147.4 180.4 235.0 242.8 240.1 244.8' 257.2 Nontransactions components 31 M26 1,653.3 1,808.0 1,939.5 2,066.7 2,087.7' 2,086.5 2,090.6' 2,090.3 32 M3 only7 510.8 618.9 638.3' 690.8 693.7' 699.5 701.6' 700.5 Money market deposit accounts 33 Commercial banks 230.4 267.4 332.5 379.0 338811..77 378.4 378.1 375.3 34 Thrift institutions 148.5 150.0 180.7 192.3 192.4 192.2 192.2 189.9 Savings deposits8 3S Commercial Banks 132.2 121.4 112233..99 153.8 115599..22 116622..77 116677..11 172.0 36 Thrift institutions 172.4 166.2 178.8 211.7 217.2 222.0 228.2 234.3 Small denomination time deposits9 37 Commercial Banks 351.1 386.7 383.8 364.4 364.4 362.1 359.6 355.6 38 Thrift institutions 433.5 499.6 501.5 489.6 489.5' 487.6 485.5' 483.0 Money market mutual funds 39 General purpose and broker/dealer 138.2 167.5 176.5 207.6 209.0 210.7 211.6 211.8 40 Institution-only 43.2 62.7 65.1 84.1 84.0 84.7 84.9 83.1 Large denomination time deposits10 41 Commercial Banks11 231.6 271.2 285.6 293.3' 296.9' 298.0 301.2' 303.1 42 Thrift institutions 96.3 147.3 151.9 154.7 154.2 152.8 150.9 147.8 Debt components 43 Federal debt 1,170.2 1,364.7 11,,558833..77 11,,880033..33'' 11,,881166..99 11,,882266..77 1,838.3 n.a. 44 Nonfederal debt 4,030.5 4,575.5 5,184.6 5,815.1' 5,884.5' 5,915.6 5,948.2 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • July 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 1987 Oct. Nov. Dec. Jan. Feb. Mar. DEBITS TO Seasonally adjusted Demand deposits2 1 All insured banks 128,440.8 154,556.0 189,534.1 197,222.5 187,594.4 206,689.6 210,574.2 211,169.4 217,019.7 2 Major New York City banks 57,392.7 70,445.1 91,212.9 95,919.7 96,829.5 95,831.3 99,357.1 98,712.3 104,224.5 3 Other banks 71,048.) 84,110.9 98,321.4 101,302.9 90,764.9 110,858.4 111,217.1 112,457.1 112,795.2 4 ATS-NOW accounts3 1,588.7 1,920.8 2,351.1 2,292.5 2,501.0 2,960.8 2,255.7 2,306.0 2,344.6 5 Savings deposits4 633.1 539.0 410.3 456.5 424.9 533.7 459.2 477.7 468.6 DEPOSIT TURNOVER Demand deposits2 6 All insured banks 434.4 496.5 561.8 569.6 538.2 560.7 580.3 594.7 613.8 7 Major New York City banks 1,843.0 2,168.9 2,460.6 2,493.4 2,513.2 2,251.6 2,426.4 2,461.0 2,707.8 8 Other banks 268.6 301.8 327.4 329.2 292.8 340.0 345.5 357.0 358.0 9 ATS-NOW accounts3 15.8 16.7 16.8 15.2 16.1 18.3 13.4 13.5 13.6 10 Savings deposits4 5.0 4.5 3.1 3.2 2.9 3.5 2.9 2.9 2.8 DEBITS TO Not seasonally adjusted Demand deposits2 11 All insured banks 128,059.1 154,108.4 189,443.3 204,618.4 167,465.5 226,263.1 216,638.7 191,572.9 222,532.0 12 Major New York City banks 57,282.4 70,400.9 91,294.4 98,837.9 85,849.7 106,935.2 102,274.2 89,866.7 106,161.2 N Other banks 70,776.9 83,707.8 98,149.0 105,780.4 81,615.8 119,327.9 114,364.5 101,706.2 116,370.8 14 ATS-NOW accounts3 1,579.5 1,903.4 2,338.4 2,231.9 2,255.1 2,841.5 2,679.2 2,173.2 2,422.7 15 MMDA5 848.8 1,179.0 1,599.3 1,607.4 1,434.0 2,058.2 1,913.3 1,600.7 1,754.4 16 Savings deposits4 632.9 538.7 404.3 449.2 382.7 503.6 499.0 434.6 476.2 DEPOSIT TURNOVER Demand deposits2 17 All insured banks 433.5 497.4 564.0 593.5 476.4 572.0 554.8 550.0 641.0 18 Major New York City banks 1,838.6 2,191.1 2,494.3 2,656.9 2,225.4 2,235.2 2,130.5 2,273.3 2,742.6 19 Other banks 267.9 301.6 327.9 343.9 260.8 357.4 346.6 329.4 377.3 20 ATS-NOW accounts3 15.7 16.6 16.8 14.9 14.6 17.4 15.7 12.9 14.1 21 MMDA5 3.5 3.8 4.5 4.3 3.8 5.4 5.0 4.2 4.7 22 Savings deposits4 5.0 4.5 3.1 3.2 2.6 3.3 3.1 2.7 2.9 1. Annual averages of monthly figures. NOTE. Historical data for demand deposits are available back to 1970 estimated 2. Represents accounts of individuals, partnerships, and corporations and of in part from the debits series for 233 SMSAs that were available through June states and political subdivisions. 1977. Historical data for ATS-NOW and savings deposits are available back to 3. Accounts authorized for negotiable orders of withdrawal (NOW) and ac- July 1977. Back data are available on request from the Banking Section, Division counts authorized for automatic transfer to demand deposits (ATS). ATS data are of Research and Statistics, Board of Governors of the Federal Reserve System, available beginning December 1978. Washington, D.C. 20551. 4. Excludes ATS and NOW accounts, MMDA and special club accounts, such These data also appear on the Board's G.6 (406) release. For address, see inside as Christmas and vacation clubs. front cover. 5. Money market deposit accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Nonfinancial Statistics • July 1987 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1986 1987 ego y May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Seasonally adjusted f Total loans and securities2 1,969.8 1,978.3 1,998.2 2,022.6 2,044.6 2,052.4 2,063.5 2,089.8 2,118.3 2,119.7 2,126.2' 2,147.3 2 U.S. government securities 275.7 275.7 284.7 291.5 294.9 299.6 304.1 309.9 316.3 315.2 314.3 315.8 3 Other securities 185.6 187.0 189.7 196.0 204.2 199.8 197.9 196.9 190.2 193.8 195.5 197.2 4 Total loans and leases2 1,508.5 1,515.6 1,523.7 1,535.1 1,545.4 1,553.0 1,561.5 1,583.0 1,611.8 1,610.7 1,616.4' 1,634.3 5 Commercial and industrial 509.9 513.0 512.6 515.2 517.3 520.0 525.7 541.4 554.1 553.8 551.7 553.9 6 Bankers acceptances held3.. 6.1 6.3 6.1 6.5 6.6 6.7 6.4 6.4 66..77 66..88 66..11 66..55 7 Other commercial and industrial 503.8 506.6 506.5 508.7 510.7 513.3 519.2 535.1' 547.3 547.0 545.5' 547.5 8 U.S. addressees4 493.9 497.3 497.7 499.8 501.7 504.6 510.7 525.7 537.8 537.9 536.8' 539.0 9 Non-U.S. addressees4 9.9 9.4 8.9 8.9 9.0 8.8 8.5 9.4 9.5 9.1 8.7 8.5 10 Real estate 449.3 453.6 458.3 464.8 468.9 474.2 479.6 489.0 499.2 504.0 511.0 517.9 11 Individual 303.7 305.1 306.3 308.1 309.9 311.2 312.6 314.2 314.9 315.2 315.7 316.6 12 Security 45.(K 41.3' 43.7' 43.1' 42.8' 39.1' 40.1' 38.6' 37.7' 3388..55'' 3388..33'' 4433..66 13 Nonbank financial institutions 33. 7' 34.6' 34.5 34.5' 34.9' 35.5' 34.9' 35.2' 35.7 34.7' 35.(y 35.4 14 Agricultural 34.2 33.7 33.3 33.0 32.7 32.4 32.1 31.7 3311..55 3311..66 3311..55'' 3311..11 15 State and political subdivisions 60.3 60.1 59.9 60.1 60.0 59.3 58.7 57.9 57.8 57.2 56.9 55.9 16 Foreign banks 10.0 10.3 10.3 10.1 10.1 10.0 10.0 10.4 10.6 10.3 9.7 9.9 17 Foreign official institutions ... 6.1 6.0 6.1 6.1 6.0 6.0 5.9 5.8 5.9 6.1 6.7 6.7 18 Lease financing receivables... 20.2 20.4 20.5 20.7 21.1 21.8 22.0 22.2 22.1 22.2 22.3 22.6 19 All other loans 36.2' 37.4' 38.2' 39.5' 41.7' 43.3 39^ 36.6' 42.3' 37.2' 37.5' 40.7 Not seasonally adjusted 20 Total loans and securities2 1,967.8 1,978.2 1,993.7 2,015.1 2,042.3 2,044.0 2,064.2 2,105.2 2,123.7 2,121.6 2,127.8' 2,148.4 21 U.S. government securities 275.5 276.2 285.6 290.5 293.8 296.1 303.2 308.3 314.6 318.9 317.2 317.7 22 Other securities 185.1 185.7 187.5 196.2 205.0 200.1 198.3 198.1 193.7 194.1 194.4 195.2 23 Total loans and leases2 1,507.2 1,516.3 1,520.6 1,528.4 1,543.5 1,547.8 1,562.6 1,598.7 1,615.4 1,608.6 1,616.2' 1,635.4 24 Commercial and industrial.... 511.8 514.2 512.1 512.8 516.1 517.8 525.2 544.3 552.4 551.7 554.5 556.5 25 Bankers acceptances held3.. 6.0 6.4 6.2 6.3 6.7 6.6 6.6 6.7 66..66 66..66 66..22 66..44 26 Other commercial and industrial 505.8 507.8 506.0 506.5 509.4 511.2 518.5 537.6 545.9 545.1 548.3' 550.1 27 U.S. addressees4 495.8 498.4 496.8 497.3 500.2 502.1 509.5 528.8 553377..11 553366..33 539.9 541.6 28 Non-U.S. addressees4 9.9 9.4 9.2 9.1 9.2 9.1 9.1 8.8 88..88 88..88 8.4 8.4 29 Real estate 448.5 453.3 458.4 464.9 469.9 475.1 480.7 489.9 499.3 503.1 509.8 516.7 30 Individual 301.8 303.8 305.2 307.9 310.8 312.3 313.7 317.8 317.9 314.7 313.3 314.4 31 Security 44.9' 41.9' 42.7' 40.7' 41.3' 37.8' 40.4' 40.9' 3399..44'' 3377..55'' 3388..66'' 4455..11 32 Nonbank financial institutions 33.2 34.7 34.5 34.8 35.6 35.6 35.4 36.4 35.7 33.8 33.8 34.8 33 Agricultural 34.0 34.1 34.0 33.9 33.7 33.2 32.2 31.4 3300..88 3300..66 3300..55'' 3300..33 34 State and political subdivisions 60.3 60.1 59.9 60.1 60.0 59.3 58.7 57.9 57.8 57.2 56.9 55.9 35 Foreign banks 9.7 10.1 10.3 9.9 10.3 10.0 10.1 10.9 10.7' 10.5 9.7 9.5 36 Foreign official institutions ... 6.1 6.0 6.1 6.1 6.0 6.0 5.9 5.8 5.9 6.1 6.7 6.7 37 Lease financing receivables... 20.3 20.5 20.5 20.6 21.0 21.5 21.8 22.2 22.4 22.4 22.5 22.7 38 All other loans 36.7' 37.7' 36.8' 36.7' 39.0' 39.1' 38.6' 41.3' 43.(K 40.8' 39.8' 42.7 1. These data also appear in the Board's G.7 (407) release. 3. Includes nonfinancial commercial paper held. 2. Excludes loans to commercial banks in the United States. 4. United States includes the 50 states and the District of Columbia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A17 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS1 Monthly averages, billions of dollars 1986 1987 SSoouurrccee May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb.' Mar.' Apr. Total nondeposit funds 1 Seasonally adjusted2 137.4 134.3 136.1 137.9 142.6 140.5 144.2 144.9 154.1' 158.1 163.1 159.7 2 Not seasonally adjusted 138.5 132.0' 132.9 137.8 141.9 139.5 145.7 145.0 153.6' 160.7 165.4 159.8 Federal funds, RPs, and other borrowings from nonbanks3 3 Seasonally adjusted 158.8 158.0 165.5 167.4 166.9 167.8 166.0 164.0 169.2 170.1 169.1 169.4 4 Not seasonally adjusted 159.8r 155.7 162.4 167.3 166.2 166.9 167.5 164.1 168.7 172.8 171.4 169.5 5 Net balances due to foreign-related institutions, not seasonally adjusted -21.3 -23.7 -29.5 -29.5 -24.3 -27.3 -21.8 -19.1 -15.1' -12.1 -6.0 -9.7 MEMO 6 Domestically chartered banks' net positions with own foreign branches, not seasonally adjusted4 -29.3 -30.5 -33.8 -31.2 -29.2 -31.9 -28.7 -30.7 -25.7' -24.0 -20.8 -22.4 7 Gross due from balances 72.9 72.2 73.9 75.2 74.0 73.5 70.8 73.4 70.8' 68.6 65.7 70.0 8 Gross due to balances 43.6 41.7 40.1 44.0 44.8 41.6 42.1 42.7 45.2 44.6 44.8 47.6 9 Foreign-related institutions' net positions with directly related institutions, not seasonally adjusted5 8.0 6.8 4.3 1.7 4.9 4.6 6.9 11.6 10.6' 11.9 14.9 12.7 10 Gross due from balances 60.0 62.8 64.2 66.3 67.9 68.3 68.7 70.8 74.6 72.8 71.1 72.6 11 Gross due to balances 67.9 69.6 68.6 67.9 72.7 72.9 75.6 82.5 85.1 84.8 86.0 85.3 Security RP borrowings 12 Seasonally adjusted" 89.9 90. K 95.2 95.9 95.9 97.0 96.9 9977..CCKK 99.4 96.3 93.9 97.1 13 Not seasonally adjusted 91.0 87.9 92.0 95.8 95.2 96.1 98.5 97.1 98.9 99.0 96.2 97.2 U.S. Treasury demand balances7 14 Seasonally adjusted 19.1 17.7 15.4 14.5 16.5 17.1 23.2 21.2 21.3 23.2 17.7 20.7 15 Not seasonally adjusted 21.8 16.1 16.8 11.1 18.2 15.3 15.3 19.2 27.5 28.6 17.1 21.6 Time deposits, $100,000 or more8 16 Seasonally adjusted 341.9 341.8 341.1 344.3 344.2 342.7 343.3 345.6' 350.1' 351.1 354.1 359.8 17 Not seasonally adjusted 340.5 339.2 338.3 344.0 345.5 343.8 344.1 347.1 351.3' 353.2 356.4 357.1 1. Commercial banks are those in the 50 states and the District of Columbia business. This includes borrowings from Federal Reserve Banks and from foreign with national or state charters plus agencies and branches of foreign banks. New banks, term federal funds, overdrawn due from bank balances, loan RPs, and York investment companies majority owned by foreign banks, and Edge Act participations in pooled loans. corporations owned by domestically chartered and foreign banks. 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. 3. Other borrowings are borrowings on any instrument, such as a promissory 8. Averages of Wednesday figures. note or due bill, given for the purpose of borrowing money for the banking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • July 1987 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series' Billions of dollars 1986 1987 AAccccoouunntt June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. ALL COMMERCIAL BANKING INSTITUTIONS2 1 Loans and securities 2,117.8 2,144.5 2,164.8 2,179.7 2,183.2 2,227.3 2,314.3 2,284.8 2,279.4 2,279.2 2,306.1 2 Investment securities 435.9 449.0 460.0 469.4 471.9 475.4 479.6 482.2 484.7 486.2 492.5 3 U.S. government securities 259.5 269.1 272.9 276.6 282.8 287.3 292.6 296.1 298.8 299.5 305.0 4 Other 176.4 179.9 187.1 192.8 189.1 188.0 187.0 186.1 185.9 186.7 187.4 5 Trading account assets 27.3 28.6 29.3 27.9 26.0 28.1 27.8 26.4 29.0 25.2 23.3 6 Total loans 1,654.7 1,666.9 1,675.6 1,682.4 1,685.3 1,723.8 1,807.0 1,776.3 1,765.6 1,767.8 1,790.3 7 Interbank loans 138.9 148.7 145.5 139.8 141.2 154.7 168.9 160.1 156.7 154.3 151.8 8 Loans excluding interbank 1,515.8 1,518.2 1,530.1 1,542.5 1,544.1 1,569.1 1,638.1 1,616.2 1,608.9 1,613.5 1,638.5 9 Commercial and industrial 516.2 510.6 513.8 515.9 517.2 524.9 568.2 551.1 551.5 555.3 555.5 10 Real estate 454.3 459.8 466.5 470.5 476.2 481.8 497.5 499.9 503.5 510.7 518.9 11 Individual 304.6 305.8 308.8 311.2 312.8 314.1 320.4 317.0 314.7 313.1 315.2 12 All other 240.8 242.1 241.0 244.9 237.8 248.2 252.0 248.3 239.2 234.4 248.9 13 Total cash assets 198.7 209.0 208.3 199.3 203.5 227.0 273.7 214.4 206.3 203.8 209.7 14 Reserves with Federal Reserve Banks 28.3 28.6 28.3 28.2 31.6 32.2 41.2 33.4 28.4 31.1 29.8 15 Cash in vault 23.0 23.3 23.7 22.9 23.5 22.2 25.7 23.7 23.5 22.9 24.0 16 Cash items in process of collection ... 67.3 72.2 73.5 66.2 66.2 86.5 111.3 74.5 71.4 68.1 74.5 17 Demand balances at U.S. depository institutions 32.5 34.3 34.0 32.8 33.1 38.3 43.3 34.0 33.0 32.7 33.9 18 Other cash assets 47.5 50.7 48.7 49.2 49.0 47.9 52.3 48.8 50.1 49.0 47.5 19 Other assets 195.2 195.3 194.8 201.4 198.6 202.2 224.8 201.3 201.1 202.1 204.1 20 Total assets/total liabilities and capital ... 2,511.7 2,548.9 2,567.8 2,580.4 2,585.3 2,656.5 2,812.8 2,700.5 2,686.8 2,685.2 2,719.8 21 Deposits 1,796.1 1,822.4 1,837.6 1,834.5 1,847.1 1,900.2 2,018.0 1,898.3 1,895.5 1,899.6 1,919.4 22 Transaction deposits 524.8 541.6 545.7 538.9 548.8 596.3 691.1 577.8 569.2 568.8 590.7 23 Savings deposits 484.0 492.5 499.2 505.5 516.0 522.9 535.0 532.3 535.9 539.7 535.1 24 Time deposits 787.3 788.3 792.6 790.1 782.2 781.1 791.9 788.2 790.3 791.2 793.6 25 Borrowings 370.0 381.7 379.8 391.6 383.3 397.4 414.5 432.7 425.6 414.9 422.6 26 Other liabilities 168.8 168.7 173.8 176.3 175.7 180.0 199.6 188.0 184.6 188.7 194.9 27 Residual (assets less liabilities) 176.7 176.0 176.7 178.1 179.2 178.9 180.6 181.5 181.2 181.9 182.9 MEMO 28 U.S. government securities (including trading account) 276.4 288.4 290.6 293.2 299.5 304.8 308.4 314.5 320.1 316.7 318.9 29 Other securities (including trading account) 186.8 189.2 198.7 204.1 198.4 198.8 198.9 194.1 193.7 194.7 196.9 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 1,996.7 2,020.1 2,034.6 2,044.8 2,052.1 2,094.7 2,154.4 2,136.7 2,130.3 2,121.7 2,146.8 31 Investment securities 420.9 433.8 443.0 450.5 452.9 457.1 459.3 461.5 463.3 463.6 469.9 32 U.S. government securities 252.7 262.5 265.0 267.9 273.6 279.0 283.0 286.8 289.2 289.4 295.2 33 Other 168.2 171.3 178.0 182.5 179.3 178.2 176.3 174.8 174.1 174.2 174.7 34 Trading account assets 27.3 28.6 29.3 27.9 26.0 28.1 27.8 26.4 29.0 25.2 23.3 35 Total loans 1,548.5 1,557.7 1,562.3 1,566.4 1,573.2 1,609.5 1,667.3 1,648.8 1,638.0 1,632.9 1,653.5 36 Interbank loans 116.6 124.0 119.7 115.6 1)8.8 133.0 137.9 134.3 130.5 124.1 124.2 37 Loans excluding interbank 1,431.9 1,433.7 1,442.7 1,450.8 1,454.3 1,476.4 1,529.5 1,514.5 1,507.5 1,508.8 1,529.3 38 Commercial and industrial 453.8 448.9 449.4 448.1 449.0 455.7 488.2 475.5 474.1 474.6 473.5 39 Real estate 448.4 453.8 460.4 464.3 470.0 475.1 490.3 493.2 497.0 504.1 511.9 40 Individual 304.3 305.4 308.5 310.9 312.5 313.8 320.1 316.7 314.4 312.7 314.9 41 All other 225.4 225.6 224.4 227.5 222.7 231.8 230.9 229.2 221.9 217.4 229.0 42 Total cash assets 182.3 190.1 191.2 182.5 185.6 210.0 253.5 196.6 188.9 186.5 192.5 43 Reserves with Federal Reserve Banks 26.4 27.2 26.6 26.9 29.7 29.8 39.7 31.2 27.1 29.7 27.2 44 Cash in vault 23.0 23.3 23.7 22.9 23.5 22.2 25.7 23.6 23.5 22.8 24.0 45 Cash items in process of collection ... 66.7 71.7 73.1 65.8 65.6 86.1 110.9 74.0 71.0 67.7 74.0 46 Demand balances at U.S. depository institutions 30.7 32.5 32.3 30.9 31.3 36.3 40.8 32.2 31.1 31.1 31.9 47 Other cash assets 35.6 35.4 35.5 36.0 35.5 35.6 36.4 35.6 36.4 35.2 35.4 48 Other assets 142.6 140.4 139.3 143.5 141.0 141.6 165.0 141.5 144.0 143.4 144.4 49 Total assets/total liabilities and capital ... 2,321.5 2,350.6 2,365.0 2,370.8 2,378.7 2,446.3 2,572.8 2,474.8 2,463.2 2,451.5 2,483.7 50 Deposits 1,746.3 1,771.6 1,784.2 1,779.3 1,792.8 1,844.8 1,957.0 1,840.8 1,838.2 1,840.7 1,857.1 51 Transaction deposits 516.9 533.5 537.6 530.6 540.9 588.2 682.2 569.4 561.3 560.5 582.2 52 Savings deposits 482.3 490.8 497.4 503.7 514.1 520.8 533.0 530.3 533.9 537.7 533.0 53 Time deposits 747.1 747.3 749.3 745.0 737.7 735.8 741.8 741.1 743.0 742.5 741.9 54 Borrowings 296.2 302.2 296.8 306.9 301.3 314.1 322.9 341.7 336.1 319.1 328.1 55 Other liabilities 105.5 103.9 110.5 109.6 108.6 111.7 115.5 114.0 110.8 113.0 118.8 56 Residual (assets less liabilities) 173.6 172.9 173.5 174.9 176.0 175.8 177.5 178.3 178.1 178.8 179.7 1. Data have been revised because of benchmarking to new Call Reports and condition report data. Data for other banking institutions are estimates made for new seasonal factors beginning July 1985. Back data are available from the the last Wednesday of the month based on a weekly reporting sample of foreign- Banking Section, Board of Governors of the Federal Reserve System, Washing- related institutions and quarter-end condition reports. ton, D.C., 20551. 2. Commercial banking institutions include insured domestically chartered Figures are partly estimated. They include all bank-premises subsidiaries and commercial banks, branches and agencies of foreign banks, Edge Act and other significant majority-owned domestic subsidiaries. Loan and securities data Agreement corporations, and New York State foreign investment corporations. for domestically chartered commercial banks are estimates for the last Wednes- 3. Insured domestically chartered commercial banks include all member banks day of the month based on a sample of weekly reporting banks and quarter-end and insured nonmember banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A19 1.26 ALL LARGE WEEKLY REPORTING COMMERCIAL BANKS with Domestic Assets of $1.4 Billion or More on December 31, 1982, Assets and Liabilities Millions of dollars, Wednesday figures Mar. 4 Mar. 11 Mar. 18 Mar. 25 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 1 Cash and balances due from depository institutions .... 103,334 105,003 102,523' 95,872 114,633 103,130 119,102 109,998 99,258 2 Total loans, leases and securities, net 1,008,989' 1,004,946' 1,001,501' 996,414' 1,011,601 1,006,690 1,020,503 1,021,813 1,016,620 3 U.S. Treasury and government agency 117,832 115,499 113,048 112,921 112,345 112,098 111,902 110,467 110,606 4 Trading account 21,586 19,414 18,314 17,256 16,596 16,377 16,578 14,346 13,847 5 Investment account, by maturity 96,245 96,086 94,734 95,664 95,749 95,721 95,324 96,121 96,759 6 One year or less 17,302' 17,418 16,629' 16,304' 15,997 16,014 16,017 15,426 15,321 7 Over one through five years 41,494 40,998 40,614 40,456' 40,612 40,048 40,630 41,501 42,028 8 Over five years 37,449' 37,670 37,491' 38,904' 39,139 39,659 38,677 39,193 39,410 9 Other securities 67,371 67,497 67,290 67,324 67,487 67,247 68,076 68,551 69,450 10 Trading account 3,523 3,405 3,335 3,515 3,773 3,511 4,182 4,576 4,946 11 Investment account 63,848 64,092 63,955 63,810 63,714 63,736 63,894 63,975 64,504 12 States and political subdivisions, by maturity 52,343 52,150 51,829 51,626 51,368 51,310 51,380 51,421 51,528 13 One year or less 6,870 6,766 6,702 6,590 6,528 6,575 6,544 6,580 6,629 14 Over one year 45,473 45,384 45,127 45,036 44,840 44,735 44,835 44,841 44,899 15 Other bonds, corporate stocks, and securities 11,505 11,942 12,126 12,184 12,346 12,426 12,514 12,554 12,976 16 Other trading account assets 4,394 4,562 5,046 4,440 4,244 4,879 4,757 4,482 4,500 17 Federal funds sold1 57,163' 59,758' 54,452' 53,877' 62,950 58,332 63,856 65,983 60,379 18 To commercial banks 34,70C 35,868' 30,904' 31,546' 38,441 35,870 41,298 39,636 35,833 19 To nonbank brokers and dealers in securities 14,932 16,565 15,880 15,205 18,402 15,202 16,118 18,885 16,539 20 To others 7,532 7,326 7,668 7,126 6,107 7,261 6,439 7,462 8,007 21 Other loans and leases, gross2 785,076r 780,507' 784,553' 780,473' 786,903 786,531 794,330 794,636 793,834 22 Other loans, gross2 766,856' 762,241' 766,270' 762,143' 768,557 768,122 775,892 776,205 775,230 23 Commercial and industrial2 281,226' 280,274' 281,002' 280,097' 279,601 278,648 280,336 279,934 277,688 24 Bankers acceptances and commercial paper 2,484 2,652 2,428 2,280 2,298 2,317 2,178 2,429 2,177 25 All other 278,742' 277,622' 278,574' 277,817' 277,304 276,331 278,157 277,505 275,511 26 U.S. addressees 275,065' 274,032' 275,180' 274,405' 273,991 273,012 274,717 274,147 272,195 27 Non-U.S. addressees 3,677' 3,590' 3,394' 3,412' 3,313 3,319 3,440 3,358 3,315 28 Real estate loans2 216,439 217,513 218,752 218,440' 219,457 219,748 220,633 220,520 221,069 29 To individuals for personal expenditures 141,388' 140,982' 140,731' 140,530' 140,563 140,320 141,040 141,481 141,923 30 To depository and financial institutions 51,373' 50,533' 51,373' 49,332' 51,988 53,587 53,060 52,560 53,480 31 Commercial banks in the United States 20,625' 20,193' 20,833' 20,326' 21,171 22,599 21,782 22,504 23,376 32 Banks in foreign countries 5,566' 4,970' 5,058' 4,934' 5,200 4,998 4,632 4,896 4,561 33 Nonbank depository and other financial institutions 25,181 25,370' 25,482 24,072' 25,616 25,990 26,645 25,160 25,543 34 For purchasing and carrying securities 15,213 12,915 13,606 13,904 14,900 15,763 18,463 20,353 20,435 35 To finance agricultural production 5,326 5,339 5,368 5,344 5,322 5,325 5,323 5,326 5,318 36 To states and political subdivisions 34,563' 34,280' 34,268' 34,299' 34,052 33,772 33,716 33,653 33,508 37 To foreign governments and official institutions .... 3,271' 3,231 3,262' 3,189 3,166 3,027 3,068 3,000 3,045 38 All other 18,058' 17,175' 17,907' 17,009' 19,506 17,930 20,253 19,378 18,764 39 Lease financing receivables 18,22c 18,266' 18,283' 18,33(K 18,346 18,410 18,437 18,430 18,604 40 LESS: Unearned income 4,833 4,829 4,830 4,614 4,568 4,591 4,596 4,590 4,483 41 Loan and lease reserve2 18,014 18,050 18,058 18,008 17,760 17,807 17,822 17,716 17,667 42 Other loans and leases, net2 762,228' 757,628' 761,664' 757,851' 764,574 764,134 771,912 772,329 771,684 43 All other assets 130,599 126,381 126,967 125,294' 131,191 129,817 128,413 126,696 126,320 44 Total assets 1,242,922' 1,236,330' 1,230,991' 1,217,579' 1,257,426 1,239,638 1,268,019 1,258,508 1,242,198 45 Demand deposits 230,727' 223,641' 225,538' 215,343' 250,126 224,041 262,570 233,431 228,895 46 Individuals, partnerships, and corporations 176,401' 173,282' 172,555' 167,748' 194,415 174,330 195,740 179,974 176,883 47 States and political subdivisions 5,259 4,610 5,191 5,066 5,776 4,594 6,138 5,755 5,585 48 U.S. government 4,894 2,751' 4,160 2,013 1,516 2,877 11,521 3,963 4,378 49 Depository institutions in United States 25,982 23,328 24,521 23,949 30,131 23,630 28,222 25,181 23,857 50 Banks in foreign countries 6,365 6,217 6,663 5,919 6,643 6,640 6,546 6,421 6,338 51 Foreign governments and official institutions 700 849 590 758 1,030 928 855 829 1,076 52 Certified and officers' checks 11,125 12,605 11,858 9,890' 10,615 11,042 13,549 11,309 10,777 53 Transaction balances other than demand deposits 60,710' 59,653' 59,44(K 59,135 61,602 63,224 66,729 64,623 60,280 54 Nontransaction balances 519,119 518,950 519,643 518,495 521,088 520,839 518,641 516,313 516,208 55 Individuals, partnerships and corporations 480,591' 480,392' 480,973' 479,952' 482,867 483,016 481,172 478,418 478,130 56 States and political subdivisions 26,587' 26,712' 26,810' 26,899' 26,488 26,352 26,170 26,439 26,698 57 U.S. government 733 746 731 709 753 738 699 833 791 58 Depository institutions in the United States 10,196 10,092 10,098 9,984 10,029 9,801 9,672 9,705 9,698 59 Foreign governments, official institutions and banks .. 1,011 1,007 1,031 952 951 932 928 918 890 60 Liabilities for borrowed money 259,176 258,049' 251,450 248,716 251,484 261,362 251,653 266,995 253,902 61 Borrowings from Federal Reserve Banks 100 0 0 70 0 1,180 0 4,838 156 62 Treasury tax-and-loan notes 10,506 6,111 14,004 9,923 4,977 8,904 7,906 18,929 20,764 63 All other liabilities for borrowed money3 248,570 251,938' 237,446 238,722 246,508 251,278 243,747 243,228 232,982 64 Other liabilities and subordinated note and debentures. 86,011' 88,725' 87,769' 87,895' 84,422 81,405 79,934 88,667 94,420 65 Total liabilities 1,155,743' 1,149,018' 1,143,840' 1,129,583' 1,168,723 1,150,871 1,179,528 1,170,029 1,153,706 66 Residual (total assets minus total liabilities)4 87,179 87,312 87,151 87,996 88,703 88,767 88,491 88,478 88,492 MEMO 67 Total loans and leases (gross) and investments adjusted5. 976,512' 971,763' 972,652' 967,164' 974,318 970,619 979,840 981,980 979,561 68 Total loans and leases (gross) adjusted2-5 786,914' 784,204' 787,268' 782,478' 790,241 786,395 795,105 798,479 795,005 69 Time deposits in amounts of $100,000 or more 158,352' 158,215' 158,470 158,230 157,667 158,661 157,278 158,003 159,588 70 Loans sold outright to affiliates—total6 2,037 1,942 1,954 1,967 1,940 1,903 1,862 1,754 1,685 71 Commercial and industrial 1,551 1,470 1,482 1,486 1,460 1,457 1,402 1,283 1,215 72 Other 485 472 472 481 480 446 460 470 470 73 Nontransaction savings deposits (including MMDAs) 232,676 232,966 233,555 232,792 236,368 235,664 234,545 231,712 230,211 1. Includes securities purchased under agreements to resell. 4. This is not a measure of equity capital for use in capital adequacy analysis or 2. Levels of major loan items were affected by the Sept. 26, 1984, transaction for other analytic uses. between Continental Illinois National Bank and the Federal Deposit Insurance 5. Exclusive of loans and federal funds transactions with domestic commercial Corporation. For details see the H.4.2 statistical release dated Oct. 5, 1984. banks. 3. Includes federal funds purchased and securities sold under agreements to 6. Loans sold are those sold outright to a bank's own foreign branches, repurchase; for information on these liabilities at banks with assets of $1 billion or nonconsolidated nonbank affiliates of the bank, the bank's holding company (if more on Dec. 31, 1977, see table 1.13. not a bank), and nonconsolidated nonbank subsidiaries of the holding company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • July 1987 1.28 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures except as noted 1987 AAccccoouunntt Mar. 4 Mar. 11 Mar. 18 Mar. 25 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 1 Cash and balances due from depository institutions 24,497 30,317 26,221 25,419 34,104 28,339 32,137 27,134 24,078 2 Total loans, leases and securities, net1 218,318 219,405 217,071 216,671 220,495 220,858 223,880 229,297 226,815 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 14,214 13,844 13,663 13,604 13,793 14,002 13,929 14,041 14,218 6 One year or less 1,670' 1,732 1,608' 1,474' 1,594 1,613 1,650 1,536 1,535 7 Over one through five years 4,623 4,116 4,124 4,136 4,173 4,221 4,407 4,981 5,135 8 Over five years 7,921' 7,995 7,931' 7,994' 8,025 8,168 7,872 7,524 7,547 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 16,418 16,440 16,513 16,549 16,472 16,498 16,555 16,482 16,527 12 States and political subdivisions, by maturity 13,996 13,923 13,981 13,974 13,868 13,869 13,933 13,915 13,955 13 One year or less 1,436 1,393 1,407 1,392 1,350 1,386 1,368 1,380 1,395 14 Over one year 12,560 12,530 12,573 12,582 12,517 12,483 12,564 12,536 12,560 15 Other bonds, corporate stocks and securities 2,423 2,517 2,532 2,575 2,605 2,629 2,622 2,567 2,572 16 Other trading account assets2 0 0 0 0 0 0 0 0 0 Loans and leases 17 Federal funds sold3 20,539 25,273 21,124 21,742 22,934 23,054 23,906 28,502 26,681 18 To commercial banks 8,617 11,732 8,247 10,123 9,572 10,488 11,366 13,432 11,837 19 To nonbank brokers and dealers in securities 5,803 7,832 7,377 6,662 9,451 7,408 8,311 9,749 8,456 20 To others 6,119 5,709 5,500 4,956 3,911 5,158 4,228 5,322 6,388 21 Other loans and leases, gross 173,987 170,769 172,667 171,639 174,035 174,057 176,262 176,943 175,959 22 Other loans, gross 169,610 166,366 168,254 167,199 169,559 169,560 171,748 172,422 171,302 23 Commercial and industrial 65,631 65,127 64,737 64,615 62,882 62,575 62,558 62,283 61,118 24 Bankers acceptances and commercial paper 762 859 691 610 578 601 562 743 590 25 All other 64,869 64,268 64,046 64,005 62,304 61,974 61,996 61,540 60,527 26 U.S. addressees 64,300 63,772 63,671 63,593 61,880 61,568 61,539 61,086 60,096 27 Non-U.S. addressees 569 4% 375 412 423 406 457 453 431 28 Real estate loans 39,568 39,868 40,407 40,463 40,831 40,813 40,591 40,817 40,895 29 To individuals for personal expenditures 20,576 20,385 20,402 20,411 20,508 20,500 20,641 20,788 20,908 30 To depository and financial institutions 20,844 20,052 21,012 20,095 21,679 22,583 21,444 21,521 21,792 31 Commercial banks in the United States 11,550 11,223 11,532 11,109 11,865 12,815 11,751 12,026 12,311 32 Banks in foreign countries 2,993 2,445 2,625 2,652 2,786 2,642 2,319 2,563 2,365 33 Nonbank depository and other financial institutions 6,301 6,384 6,855 6,334 7,028 7,126 7,374 6,932 7,117 34 For purchasing and carrying securities 7,396 5,799 6,631 6,781 7,390 7,868 9,936 11,006 11,265 35 To finance agricultural production 244 249 261 252 252 258 252 253 248 36 To states and political subdivisions 8,537 8,331 8,304 8,348 8,237 8,172 8,223 8,207 8,088 37 To foreign governments and official institutions 1,036 993 1,038 977 974 833 887 845 882 38 All other 5,776 5,560 5,461 5,258 6,807 5,957 7,215 6,701 6,108 39 Lease financing receivables 4,377 4,403 4,413 4,440 4,476 4,497 4,514 4,521 4,657 40 LESS: Unearned income 1,591 1,594 1,5% 1,598 1,579 1,588 1,589 1,585 1,485 41 Loan and lease reserve 5,250 5,326 5,300 5,264 5,160 5,165 5,183 5,086 5,085 42 Other loans and leases, net 167,146 163,849 165,771 164,776 167,295 167,304 169,489 170,271 169,389 43 All other assets4 66,908 61,421 62,150 59,148 65,752 62,611 62,520 62,166 62,900 44 Total assets 309,723 311,143 305,442 301,238 320,351 311,808 318,536 318,5% 313,793 Deposits 45 Demand deposits 59,784 59,288 61,214 57,256 71,589 57,581 72,378 61,261 59,405 46 Individuals, partnerships, and corporations 40,732 39,546 41,292 39,860 50,265 39,243 48,460 42,007 41,385 47 States and political subdivisions 547 574 636 729 709 571 757 528 556 48 U.S. government 992 518 782 355 149 504 2,660 707 713 49 Depository institutions in the United States 6,502 5,477 6,058 5,952 9,944 5,441 7,306 7,047 5,771 50 Banks in foreign countries 5,199 5,080 5,452 4,822 5,409 5,383 5,329 5,073 5,176 51 Foreign governments and official institutions 556 679 438 605 882 770 709 688 917 52 Certified and officers' checks 5,254 7,413 6,557 44,,993322 44,,223311 55,,667700 77,,115577 55,,221100 44,,888866 53 Transaction balances other than demand deposits ATS, NOW, Super NOW, telephone transfers) 7,753 7,675 7,764 7,774 8,115 8,456 9,190 8,769 8,135 54 Nontransaction balances 99,740 99,024 99,657 98,670 100,184 99,553 98,996 98,544 98,093 55 Individuals, partnerships and corporations 90,650 90,035 90,800 90,045 91,620 91,041 90,694 90,205 89,705 56 States and political subdivisions 6,259 6,262 6,203 6,168 6,152 6,149 6,111 6,105 6,123 57 U.S. government 35 37 36 26 32 33 31 31 31 58 Depository institutions in the United States 2,189 2,085 2,004 1,897 1,848 1,820 1,647 1,694 1,752 59 Foreign governments, official institutions and banks 608 605 613 534 532 510 513 508 482 60 Liabilities for borrowed money 80,216 79,832 71,597 72,171 76,943 83,640 76,413 79,879 73,209 61 Borrowings from Federal Reserve Banks 0 0 0 0 0 1,180 0 3,250 0 62 Treasury tax-and-loan notes 2,362 1,403 3,690 2,536 1,367 2,111 1,932 5,236 5,244 63 All other liabilities for borrowed money5 77,855 78,429 67,907 69,636 75,576 80,348 74,481 71,393 67,%5 64 Other liabilities and subordinated note and debentures 33,888 36,904 36,765 36,044 33,841 32,899 32,053 40,697 45,586 65 Total liabilities 281,382 282,724 276,997 271,916 290,671 282,130 289,030 289,151 284,429 66 Residual (total assets minus total liabilities)6 28,341 28,419 28,445 29,322 29,680 29,678 29,506 29,446 29,365 MEMO 67 Total loans and leases (gross) and investments adjusted1-7 204,992 203,370 204,188 202,302 205,799 204,307 207,534 210,511 209,237 68 Total loans and leases (gross) adjusted7 174,359 173,086 174,012 172,149 175,533 173,808 177,050 179,988 178,492 69 Time deposits in amounts of $100,000 or more 36,428 36,263 36,172 35,633 35,881 36,174 35,816 35,733 35,955 1. Excludes trading account securities. 6. Not a measure of equity capital for use in capital adequacy analysis or for 2. Not available due to confidentiality. other analytic uses. 3. Includes securities purchased under agreements to resell. 7. Exclusive of loans and federal funds transactions with domestic commercial 4. Includes trading account securities. banks. 5. Includes federal funds purchased and securities sold under agreements to NOTE. These data also appear in the Board's H.4.2 (504) release. For address, repurchase. see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS' Assets and Liabilities Millions of dollars, Wednesday figures 1987 AAccccoouunntt Mar. 4 Mar. 11 Mar. 18 Mar. 25 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 1 Cash and due from depository institutions. 88,,888866 9,343 9,423 9,834 10,354 10,092 9,722 10,152 10,179 2 Total loans and securities 8844,,992299 85,732 87,041 90,502 90,250 87,814 89,778 94,608 92,308 3 U.S. Treasury and govt, agency securities 6,414 6,964 6,986 6,856 6,966 6,748 6,551 6,370 6,728 4 Other securities 7,161 7,183 7,103 7,189 7,087 7,225 7,264 7,278 7,493 5 Federal funds sold2 4,270 5,102 4,920 6,499 5,862 4,173 5,098 9,212 7,223 6 To commercial banks in the United States 3,227 4,189 3,667 5,755 4,523 2,837 3,456 7,235 5,759 7 To others 1,044 913 1,253 744 1,339 1,336 1,643 1,976 1,464 8 Other loans, gross 67,084 66,483 68,033 69,957 70,335 69,668 70,864 71,748 70,864 9 Commercial and industrial 42,067 41,921 42,748 43,484 44,481 43,446 43,957 44,615 44,208 10 Bankers acceptances and commercial paper 2,798 2,808 2,707 2,616 2,660 2,838 22,,997711 33,,112266 33,,111122 11 All other 39,269 39,113 40,041 40,868 41,821 40,608 40,986 41,489 41,096 12 U.S. addressees 36,960 36,887 37,776 38,621 39,542 38,312 38,699 39,092 38,835 13 Non-U.S. addressees 2,310 2,226 2,265 2,246 2,278 2,2% 2,287 2,397 2,261 14 To financial institutions 15,935 15,970 16,226 17,089 16,433 16,396 16,403 16,278 15,922 15 Commercial banks in the United States . 12,318 12,445 12,777 13,592 12,840 12,750 12,475 12,568 12,173 16 Banks in foreign countries 1,134 942 884 884 912 900 1,085 1,018 953 17 Nonbank financial institutions 2,483 2,582 2,565 2,613 2,680 2,747 2,843 2,693 2,795 18 To foreign govts, and official institutions .. 844 895 978 1,035 1,028 1,153 1,152 990088 839 19 For purchasing and carrying securities .. 2,799 2,402 2,654 2,899 2,906 3,264 3,930 44,,552244 4,402 20 All other 5,438 5,294 5,427 5,450 5,488 5,409 5,422 5,421 5,493 21 Other assets (claims on nonrelated parties).. 22,433 22,978 23,390 23,308 22,701 23,186 22,749 23,026 23,690 22 Net due from related institutions 15,527 14,794 15,696 14,387 15,447 15,467 15,984 15,086 13,753 23 Total assets 131,776 132,848 135,550 138,030 138,752 136,559 138,233 142,872 139,930 24 Deposits or credit balances due to other than directly related institutions.... 39,778 40,129 40,407 40,667 40,678 40,160 4400,,995555 4411,,995555 4433,,555566 25 Transaction accounts and credit balances3 3,133 3,181 3,243 3,136 3,417 2,982 3,232 3,392 3,786 26 Individuals, partnerships, and corporations 1,979 1,852 1,767 1,706 1,804 1,782 11,,990077 22,,004422 22,,003366 27 Other 1,154 1,328 1,476 1,430 1,613 1,201 1,325 1,350 1,750 28 Nontransaction accounts4 36,645 36,948 37,164 37,531 37,261 37,177 37,723 38,563 39,771 29 Individuals, partnerships, and corporations 29,281 29,467 29,627 30,408 30,116 30,058 3300,,550022 3311,,337744 3322,,229999 30 Other 7,364 7,480 7,538 7,124 7,145 7,120 7,221 7,189 7,471 31 Borrowings from other than directly related institutions 53,698 52,504 55,278 54,013 58,111 5566,,662266 5577,,444422 5588,,445511 5544,,009966 32 Federal funds purchased5 25,808 23,789 25,212 22,928 27,813 25,702 25,848 26,489 23,451 3333 From commercial banks in the United States 15,352 13,525 15,014 13,419 16,972 15,455 15,480 1155,,117788 1122,,777711 34 From others 10,457 10,264 10,197 9,510 10,841 10,248 10,368 11,312 10,680 35 Other liabilities for borrowed money.... 27,890 28,715 30,066 31,084 30,297 30,923 31,594 31,961 30,645 3366 To commercial banks in the United States 24,316 24,986 26,265 26,606 26,051 26,800 27,577 27,791 26,439 37 To others 3,574 3,729 3,801 4,478 4,246 4,123 4,017 4,170 4,206 38 Other liabilities to nonrelated parties 24,576 24,767 25,272 25,538 24,484 25,599 25,902 26,276 27,024 39 Net due to related institutions 13,724 15,447 14,593 17,813 15,480 14,174 13,934 16,190 15,254 40 Total liabilities 131,776 132,848 135,550 138,030 138,752 136,559 138,233 142,872 139,930 MEMO 41 Total loans (gross) and securities adjusted6 69,384 69,098 70,597 71,155 72,887 72,227 73,848 74,805 74,376 42 Total loans (gross) adjusted6 55,810 54,950 56,509 57,109 58,835 58,254 60,032 61,157 60,155 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 • July 1987 1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations1 Billions of dollars, estimated daily-average balances, not seasonally adjusted Commercial banks TTyyppee ooff hhoollddeerr 1985 1986 1987 11998811 11998822 11998833 11998844 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Dec.3-4 Mar. June Sept. Dec. Mar. 1 All holders—Individuals, partnerships, and corporations 288.9 291.8 293.5 302.7 321.0 307.4 322.4 333.6 363.6 n.a. 2 Financial business 28.0 35.4 32.8 31.7 32.3 31.8 32.3 35.9 41.4 n.a. 3 Nonfinancial business 154.8 150.5 161.1 166.3 178.5 166.6 180.0 185.9 202.0 n.a. 4 Consumer 86.6 85.9 78.5 81.5 85.5 84.0 86.4 86.3 91.1 n.a. 5 Foreign 2.9 3.0 3.3 3.6 3.5 3.4 3.0 3.3 3.3 n.a. 6 Other 16.7 17.0 17.8 19.7 21.2 21.6 20.7 22.2 25.8 n.a. Weekly reporting banks 1985 1986 1987 11998811 11998822 11998833 11998844 DDeecc.. DDeecc.. DDeecc.. DDeecc..22 Dec.3-4 Mar. June Sept. Dec. Mar.P 7 All holders—Individuals, partnerships, and corporations 137.5 144.2 146.2 157.1 168.6 159.7 168.5 174.7 195.1 178.2 8 Financial business 21.0 26.7 24.2 25.3 25.9 25.5 25.7 28.9 32.5 28.7 9 Nonfinancial business 75.2 74.3 79.8 87.1 94.5 86.8 93.1 94.8 106.4 94.4 10 Consumer 30.4 31.9 29.7 30.5 33.2 32.6 34.9 35.0 37.5 36.8 11 Foreign 2.8 2.9 3.1 3.4 3.1 3.3 2.9 3.2 3.3 2.8 12 Other 8.0 8.4 9.3 10.9 12.0 11.5 11.9 12.8 15.4 15.5 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 1987 Instrument Dec. Dec. Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 166,436 187,658 237,586 300,899 330,828 328,275 322,292 330,828 336,996 336,550 338,797 Financial companies1 Dealer-placed paper* 2 Total 34,605 44,455 56,485 78,443 99,980 99,186 95.015 99,980 101,731 102,784 102,889 3 Bank-related (not seasonally adjusted) 2,516 2,441 2,035 1,602 2,265 2,172 2,031 2,265 2,284 2,174 2,116 Directly placed paper5 4 Total 84,393 97,042 110,543 135,504 152,385 147,056 146,856 152,385 157,252 158,954 159,333 5 Bank-related (not seasonally adjusted) 32,034 35,566 42,105 44,778 40,860 38,957 39.205 40,860 45,085 45,722 46,634 6 Nonfinancial companies6 47,437 46,161 70,558 86,952 78,463 82,033 80,421 78,463 78,013 74,812 76,575 Bankers dollar acceptances (not seasonally adjusted)7 7 Total 79,543 78,309 78,364 68,413 64,974 65,920 64,952 64,974 65,049 65,144 66,125 Holder 8 Accepting banks 10,910 9,355 9,811 11,197 13,423 12,569 12,787 13,423 13,224 11,828 12,294 9 Own bills 9,471 8,125 8,621 9,471 11,707 10,178 10,951 11,707 10,662 10,006 10,516 10 Bills bought 1,439 1,230 1,191 1,726 1,716 2,391 1,835 1,716 2,561 1,821 1,778 Federal Reserve Banks 11 Own account 1,480 418 0 0 0 0 0 0 0 0 0 12 Foreign correspondents 949 729 671 937 1,317 1,131 1,052 1,317 983 1,230 1,453 13 Others 66,204 67,807 67,881 56,279 50,234 52,220 51,113 50,234 50,843 52,087 52,377 Basis 14 Imports into United States 17,683 15,649 17,845 15,147 14,670 15,980 15,354 14,670 14,459 14,615 14,688 15 Exports from United States 16,328 16,880 16,305 13,204 12,960' 12,612 12,699 12,960 12,783 12,897 13,193 16 All other 45,531 45,781 44,214 40,062 26,344'' 37,327 36,899 26,344r 37,808'- 37,632 38,244 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 rate 10.50 1986—July 11 8.00 1985—Jan. 10.61 1986—Apr 10.00 Aug. 26 7.50 Feb. 10.50 May 9.50 Mar. 10.50 June 1987—Apr. 1 7.75 Apr. 10.50 July 9.00 May 1 8.00 May 10.31 Aug 8.50 15 8.25 June 9.78 Sept July 9.50 Oct Aug. 9.50 Sept. 9.50 Dec Oct. 9.50 Nov. 9.50 1987—Jan Dec. 9.50 Feb Mar 1986—Jan. 9.50 Feb. 9.50 May Mar. 9.10 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 • July 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. 1987 1987, week ending IInnssttrruummeenntt 11998844 11998855 11998866 Jan. Feb. Mar. Apr. Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 MONEY MARKET RATES 1 Federal funds1-2 10.22 8.10 6.80 6.43 6.10 6.13 6.37 6.14 6.21 6.13 6.41 6.26 2 Discount window borrowing12,3 8.80 7.69 6.33 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 Commercial paper4-5 3 1-month 10.05 7.94 6.62 5.95 6.12 6.22 6.39 6.29 6.30 6.23 6.50 6.39 4 3-month 10.10 7.95 6.49 5.84 6.05 6.16 6.45 6.22 6.27 6.24 6.56 6.49 5 6-month 10.16 8.01 6.39 5.76 5.99 6.10 6.50 6.15 6.22 6.23 6.60 6.60 Finance paper, directly placed4-5 6 1-month 9.97 7.91 6.58 5.86 6.02 6.11 6.28 6.17 6.21 6.14 6.36 6.31 7 3-month 9.73 7.77 6.38 5.59 5.88 5.95 6.22 5.99 6.09 6.10 6.20 6.29 8 6-month 9.65 7.75 6.31 5.60 5.79 5.88 6.14 5.93 6.02 6.04 6.15 6.19 Bankers acceptances5-6 9 3-month 10.14 7.92 6.39 5.74 5.99 6.09 6.41 6.17 6.19 6.21 6.50 6.47 10 6-month 10.19 7.96 6.29 5.65 5.93 6.02 6.44 6.09 6.14 6.18 6.52 6.58 Certificates of deposit, secondary market7 11 1-month 10.17 7.97 6.61 5.94 6.10 6.18 6.42 6.24 6.29 6.27 6.55 6.45 12 3-month 10.37 8.05 6.52 5.87 6.10 6.17 6.52 6.22 6.30 6.30 6.65 6.58 13 6-month 10.68 8.25 6.51 5.85 6.10 6.18 6.65 6.22 6.33 6.35 6.76 6.76 14 Eurodollar deposits, 3-month8 10.73 8.28 6.71 6.10 6.32 6.37 6.73 6.36 6.46 6.48 6.73 6.79 U.S. Treasury bills' Secondary market9 15 3-month 9.52 7.48 5.98 5.43 5.59 5.59 5.64 5.60 5.56 5.62 5.79 5.54 16 6-month 9.76 7.65 6.03 5.44 5.59 5.60 5.90 5.61 5.75 5.76 6.01 5.93 17 1-year 9.92 7.81 6.08 5.46 5.63 5.68 6.09 5.71 5.81 5.87 6.19 6.24 Auction average10 18 3-month 9.57 7.49 5.97 5.45 5.59 5.56 5.76 5.55 5.72 5.53 5.98 5.77 19 6-month 9.80 7.66 6.02 5.47 5.60 5.56 5.93 5.55 5.80 5.63 6.08 6.00 20 1-year 9.91 7.76 6.07 5.44 5.74 5.68 5.92 n.a. n.a. n.a. 5.92 n.a. CAPITAL MARKET RATES U.S. Treasury notes and bonds11 Constant maturities12 21 1-year 10.89 8.43 6.46 5.78 5.96 6.03 6.50 6.07 6.18 6.26 6.60 6.67 22 2-year 11.65 9.27 6.87 6.23 6.40 6.42 7.02 6.45 6.61 6.69 7.05 7.24 23 3-year 11.89 9.64 7.06 6.41 6.56 6.58 7.32 6.63 6.86 6.98 7.39 7.57 24 5-year 12.24 10.13 7.31 6.64 6.79 6.79 7.57 6.83 7.09 7.24 7.68 7.83 25 7-year 12.40 10.51 7.55 6.92 7.06 7.06 7.83 7.08 7.36 7.51 7.91 8.10 26 10-year 12.44 10.62 7.68 7.08 7.25 7.25 8.02 7.27 7.56 7.71 8.12 8.30 27 20-year 12.48 10.97 7.85 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 28 30-year 12.39 10.79 7.80 7.39 7.54 7.55 8.25 7.59 7.87 7.98 8.30 8.48 Composite13 29 Over 10 years (long-term) 11.99 10.75 8.14 7.60 7.69 7.62 8.31 7.65 7.91 8.02 8.38 8.56 State and local notes and bonds Moody's series14 30 Aaa 9.61 8.60 6.95 6.12 6.05 6.25 7.20 6.45 6.65 6.95 7.55 7.45 31 Baa 10.38 9.58 7.76 6.93 6.98 7.25 8.29 7.45 7.60 8.10 8.65 8.55 32 Bond Buyer series15 10.10 9.11 7.32 6.61 6.61 6.66 7.55 6.79 6.93 7.27 7.90 7.82 Corporate bonds Seasoned issues16 33 All industries 13.49 12.05 9.71 9.04 9.03 8.99 9.35 8.98 9.09 9.11 9.35 9.51 34 Aaa 12.71 11.37 9.02 8.36 8.38 8.36 8.85 8.36 8.50 8.56 8.82 9.07 35 Aa 13.31 11.82 9.47 8.86 8.88 8.84 9.15 8.83 8.94 8.93 9.18 9.26 36 A 13.74 12.28 9.95 9.23 9.20 9.13 9.36 9.11 9.16 9.18 9.35 9.49 37 Baa 14.19 12.72 10.39 9.72 9.65 9.61 10.04 9.62 9.72 9.77 10.05 10.23 38 A-rated, recently-offered utility bonds17 13.81 12.06 9.61 8.92 8.82 8.84 9.51 8.91 9.07 9.33 9.52 9.96 MEMO: Dividend/price ratio18 39 Preferred stocks 11.59 10.49 8.76 7.91 7.93 7.52 7.94 7.51 7.68 7.63 8.06 8.09 40 Common stocks 4.64 4.25 3.48 3.17 3.02 2.90 2.99 2.97 2.92 2.93 3.03 3.01 1. Weekly and monthly figures are averages of all calendar days, where the places. Thus, average issuing rates in bill auctions will be reported using two rate for a weekend or holiday is taken to be the rate prevailing on the preceding rather than three decimal places. business day. The daily rate is the average of the rates on a given day weighted by 11. Yields are based on closing bid prices quoted by at least five dealers. the volume of transactions at these rates. 12. Yields adjusted to constant maturities by the U.S. Treasury. That is, yields 2. Weekly figures are averages for statement week ending Wednesday. are read from a yield curve at fixed maturities. Based on only recently issued, 3. Rate for the Federal Reserve Bank of New York. actively traded securities. 4. Unweighted average of offering rates quoted by at least five dealers (in the 13. Averages (to maturity or call) for all outstanding bonds neither due nor case of commercial paper), or finance companies (in the case of finance paper). callable in less than 10 years, including one very low yielding "flower" bond. Before November 1979, maturities for data shown are 30-59 days, 90-119 days, 14. General obligations based on Thursday figures; Moody's Investors Service. and 120-179 days for commercial paper; and 30-59 days, 90-119 days, and 150- 15. General obligations only, with 20 years to maturity, issued by 20 state and 179 days for finance paper. local governmental units of mixed quality. Based on figures for Thursday. 5. Yields are quoted on a bank-discount basis, rather than an investment yield 16. Daily figures from Moody's Investors Service. Based on yields to maturity basis (which would give a higher figure). on selected long-term bonds. 6. Dealer closing offered rates for top-rated banks. Most representative rate 17. Compilation of the Federal Reserve. This series is an estimate of the yield (which may be, but need not be, the average of the rates quoted by the dealers). on recently-offered, A-rated utility bonds with a 30-year maturity and 5 years of 7. Unweighted average of offered rates quoted by at least five dealers early in call protection. Weekly data are based on Friday quotations. the day. 18. Standard and Poor's corporate series. Preferred stock ratio based on a 8. Calendar week average. For indication purposes only. sample of ten issues: four public utilities, four industrials, one financial, and one 9. Unweighted average of closing bid rates quoted by at least five dealers. transportation. Common stock ratios on the 500 stocks in the price index. 10. Rates are recorded in the week in which bills are issued. Beginning with the NOTE. These data also appear in the Board's H.15 (519) and G.13 (415) releases. Treasury bill auction held on Apr. 18, 1983, bidders were required to state the For address, see inside front cover. percentage yield (on a bank discount basis) that they would accept to two decimal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A25 1.36 STOCK MARKET Selected Statistics 1986 1987 IInnddiiccaattoorr 11998844 11998855 11998866 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) 92.46 108.09 136.00 140.91 137.06 136.74 140.84 142.12 151.17 160.23 166.43 163.88 2 Industrial 108.01 123.79 155.85 160.10 156.52 156.56 162.10 163.85 175.60 189.17 198.95 199.03 3 Transportation 85.63 104.11 119.85 111.24 114.06 120.04 122.27 121.26 126.61 135.49 138.55 137,91 4 Utility 46.44 56.75 71.35 77.84 74.56 73.38 75.77 76.07 78.54 78.19 77.15 72.74 5 Finance 89.28 114.21 147.18 152.90 145.56 143.89 142.97 144.29 153.32 158.41 162.41 150.52 6 Standard & Poor's Corporation (1941-43 = 10)' ... 160.50 186.84 236.34 245.00 238.27 237.36 245.09 248.61 264.51 280.93 292.47 289.32 7 American Stock Exchange2 (Aug. 31, 1973 = 50) 207.96 229.10 264.38 268.55 264.30 257.82 265.14 264.65 289.02 315.60 332.55 330.65 Volume of trading (thousands of shares) 8 New York Stock Exchange 91,084 109,191 141,306 128,661 150,831 131,155 154,770 148,228 192,419 183,478 180,251 187,135 9 American Stock Exchange 6,107 8,355 11,846 9,885 10,853 8,930 10,513 12,272 14,755 14,962 15,678 14,420 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 22,470 28,390 36,840 34,550 34,580 36,310 37,090 36,840 34,960 35,740 38,080 39,820 Free credit balances at brokers4 11 Margin-account5 1,755 2,715 4,880 3,035 3,395 3,805 3,765 4,880 5,060 4,470 4,730 4,660 12 Cash-account 10,215 12,840 19,000 14,210 14,060 14,445 15,045 19,000 17,395 17,325 17,370 17,285 Margin requirements (percent of market value and effective date)6 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance 4. Free credit balances are in accounts with no unfulfilled commitments to the companies. With this change the index includes 400 industrial stocks (formerly brokers and are subject to withdrawal by customers on demand. 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40 5. New series beginning June 1984. financial. 6. Regulations G, T, and U of the Federal Reserve Board of Governors, 2. Beginning July 5, 1983, the American Stock Exchange rebased its index prescribed in accordance with the Securities Exchange Act of 1934, limit the effectively cutting previous readings in half. amount of credit to purchase and carry margin stocks that may be extended on 3. Beginning July 1983, under the revised Regulation T, margin credit at securities as collateral by prescribing a maximum loan value, which is a specified broker-dealers includes credit extended against stocks, convertible bonds, stocks percentage of the market value of the collateral at the time the credit is extended. acquired through exercise of subscription rights, corporate bonds, and govern- Margin requirements are the difference between the market value (100 percent) ment securities. Separate reporting of data for margin stocks, convertible bonds, and the maximum loan value. The term "margin stocks" is defined in the and subscription issues was discontinued in April 1984. corresponding regulation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • July 1987 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1986 1987 AAccccoouunntt 11998844 11998855 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Savings and loan associations 1 Assets 903,488 948,781 954,869 963,274 954,226 957,945 965,032' 957,229' 961,894' 964,096' 963,291' 935,424 936,903 2 Mortgages 555,291' 583,235' 575,177 574,992 565,037 565,353 566,438 557,137 557,303 556,780 553,552 n.a. n.a. 97,303 103,415 108,324 113,158 113,100 113,621 117,617' 121,606' 122,682' 123,257' 128,695 128,097 4 Cash and investment securities' . 124,801 126,712 132,351 134,881 130,877 132,787 138,863' 138,619' 138,231' 141,527' 142,680' 133,237 136,226 5 Other 223,396 238,833 247,339 253,400 258,310 259,798 259,726' 261,415' 250,735' 250,248' 251,763' 260,892 262,921 6 Liabilities and net worth 903,488 948,781 954,869 963,274 954,226 957,945 965,032' 957,229' 961,894' 964,096' 963,291' 935,424 936,903 7 Savings capital 725,045 750,071 750,299 751,138 744,026 747,020 749,020 743,518 742,747 740,066 740,974' 721,574 722,082 8 Borrowed money 125,666 138,798 140,427 145,032 148,054 146,578 148,541' 155,748 152,567 156,920 159,705' 152,981 151,786 9 FHLBB 64,207 73,888 73,815 73,520 73,553 75,058 75,594 80,364 75,295 75,626 80,194 75,552 75,673 10 Other 61,459 64,910 66,612 71,512 74,501 71,520 72,947' 75,384 77,272 81,294 79,511' 77,429 76,113 11 Other 17,944 19,045 21,978 24,722 20,792 22,785 24,706 15,461 23,255' 24,078' 20,144' 19,969 22,015 12 Net worth2 34,833 41,064 42,163 42,382 41,353 41,560 42,764' 42,503' 43,326 43,034' 42,468' 40,901 41,019 MEMO 13 Mortgage loan commitments outstanding3 61,305 54,475' 55,818' 57,997' 57,20c 55,687' 53,180' 51,163' 49,887' 48,222' 41,650' n.a. n.a. FSLlC-insured federal savings banks 14 Assets 98,559 131,868 155,686 164,129 180,124 183,317 186,810 196,225' 202,106 204,918 210,562' 235,351 235,661 15 Mortgages 57,429 72,355 86,598 89,108 99,758 101,755' 103,019 108,627' 110,826 112,117 113,638 136,707 136,428 16 Mortgage-backed securities.... 9,949 15,676 18,661 19,829 21,598 23,247 24,097 26,431' 27,516 28,324 29,766 33,393 34,457 17 Other 10,971 11,723 14,590 15,083 16,774 17,027 17,056 18,509' 18,697 19,266 19,034' 15,948 16,209 18 Liabilities and net worth 98,559 131,868 155,686 164,129 180,124 183,317 186,810 196,225' 202,106 204,918 210,562' 235,351 235,661 19 Savings capital 79,572 103,462 121,133 126,123 138,168 140,610 142,858 149,074 152,834 154,447 157,872' 176,722 177,335 20 Borrowed money 12,798 19,323 23,196 25,686 28,502 28,722 29,390 32,319 33,430 33,937 37,329 40,502 39,623 21 FHLBB 7,515 10,510 12,476 12,830 15,301 15,866 16,123 16,853 17,382 17,863 19,897 20,730 20,226 22 Other 5,283 8,813 10,720 12,856 13,201 12,856 13,267 15,466 16,048 16,074 17,432 19,772 19,397 23 Other 1,903 2,732 3,758 4,338 4,279 4,564 4,914 4,666 5,330 5,652 4,263' 5,321 5,540 24 Net worth 4,286 6,351 7,599 7,982 9,175 9,422 9,647 10,165' 10,511 10,883 11,098' 12,811 13,165 MEMO 25 Mortgage loan commitments outstanding3 3,234 5,355 8,287 8,762 9,410 10,139 9,770 10,221 9,356 9,952 8,686 n.a. n.a. Savings banks 26 Assets 203,898 216,776 222,542 226,495 223,367 224,569 227,011 228,854 230,919 232,577 236,866 235,603 238,074 Loans 27 Mortgage 102,895 110,448 111,813 112,417 110,958 111,971 113,265 114,188 116,648 117,612 118,323 119,199 119,737 28 Other 24,954 30,876 34,591 35,500 36,692 36,421 37,350 37,298 36,130 36,149 35,167 36,122 37,207 Securities 29 U.S. government 14,643 13,111 12,013 13,210 12,115 12,297 12,043 12,357 12,585 13,037 14,209 13,332 13,525 30 Mortgage-backed securities ... 19,215 19,481 21,885 22,546 22,413 22,954 21,161 23,216 23,437 24,051 25,836 26,220 26,893 31 State and local government... 2,077 2,323 2,372 2,343 2,281 2,309 2,400 2,407 2,347 2,290 2,185 2,180 2,168 32 Corporate and other 23,747 21,199 20,439 20,260 2,036 20,862 20,602 20,902 21,156 20,749 20,459 19,795 19,770 33 Cash 4,954 6,225 5,570 6,225 5,301 4,651 5,018 4,811 5,195 5,052 6,894 5,239 5,143 34 Other assets 11,413 13,113 13,859 13,994 13,244 13,104 13,172 13,675 13,421 13,637 13,793 13,516 13,631 35 Liabilities 203,898 216,776 222,542 226,495 223,367 224,569 227,011 228,854 230,919 232,577 236,866 235,603 238,074 36 Deposits 180,616 185,972 189,025 190,310 189,109 188,615 189,937 190,210 190,334 190,858 192,194 191,441 192,559 37 Regular4 177,418 181,921 184,580 185,716 183,970 183,433 184,764 185,002 185,254 185,958 186,345 186,385 187,597 38 Ordinary savings 33,739 33,018 33.057 33,577 34,008 34,166 34,530 35,227 36,165 36,739 37,717 38,467 39,370 39 Time 104,732 103,311 105,550 105,146 103,083 102,374 102,668 102,191 101,125 101,240 100,809 100,604 100,922 40 Other 3,198 4,051 4,445 4,594 5,139 5,182 5,173 5,208 5,080 4,900 5,849 5,056 4,962 41 Other liabilities 12,504 17,414 19,074 21,384 19,226 20,641 21,360 21,947 23,319 24,254 25,274 24,710 25,663 42 General reserve accounts 10,510 12,823 14,114 14,519 14,731 15,084 15,427 16,319 16,896 17,146 18,105 18,236 18,486 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All 1.37—Continued 1986 1987 AAccccoouunntt 11998844 11998855 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Credit unions5 43 Total assets/liabilities and capital . 93,036 118,010 128,229 132,415 134,703 137,901 139,233 140,496 143,662 145,653 147,726 i i 44 Federal 63,205 77,861 83,543 86,289 87,579 89,539 90,367 91,981 93,257 94,638 95,483 45 State 29,831 40,149 44,686 46,126 47,124 48,362 48,866 48,515 50,405 51,015 52,243 46 Loans outstanding 62,561 73,513 76,385 76,774 77,847 79,647 80,656 81,820 83,388 84,635 86,137 n a. n a. 47 Federal 42,337 47,933 49,756 49,950 50,613 51,331 52,007 53,042 53,434 53,877 55,304 48 State 20,224 25,580 26,629 26,824 27,234 28,316 28,649 28,778 29,954 30,758 30,833 49 Savings 84,348 105,963 116,703 120,331 122,952 125,331 126,268 128,125 130,483 131,778 134,327 50 Federal 57,539 70,926 77,112 79,479 80,975 82,596 83,132 84,607 86,158 87,009 87,954 51 State 26,809 35,037 39,591 40,852 41,977 42,735 43,136 43,518 44,325 44,769 46,373 Life insurance companies 52 Assets 722,979 825,901 855,605 863,610 872,359 877,919 887,255 892,304 860,682 910,691 920,771 931,962 Securities 53 Government 63,899 75,230 78,494 79,051 78,284 78,722 79,188 81,636 82,047 84,858 85,849 85,000 54 United States6 42,204 51,700 54,705 55,120 54,197 54,321 54,487 56,698 57,511 59,802 61,494 61,014 55 State and local 8,713 9,708 9,869 9,930 10,114 10,350 10,472 10,606 10,212 10,712 10,267 10,048 .56 Foreign7 12,982 13,822 13,920 14,001 13,973 14,051 14,229 14,332 14,324 14,344 14,088 13,938 57 Business 359,333 423,712 445,573 450,279 455,119 455,013 463,135 462,540 467,433 473,860 474,485 487,837 n a. 58 Bonds 295,998 346,216 361,306 364,122 367,966 369,704 374,670 378,267 381,381 386,293 386,994 395,994 59 Stocks 63,335 77,496 84,267 86,157 87,153 85,309 88,465 84,273 86,052 87,567 87,491 91,843 60 Mortgages 156,699 171,797 175,951 177,554 180,041 182,542 183,943 185,268 186,976 189,460 192,975 193,395 61 Real estate 25,767 28,822 30,059 30,025 30,350 31,151 31,844 31,725 31,918 32,184 32,079 32,229 62 Policy loans 54,505 54,369 54,272 54,351 57,342 54,249 54,247 54,273 54,199 54,152 54,016 53,692 63 Other assets 63,776 71,971 71,256 72,352 74,223 76,214 74,898 76,862 77,798 76,177 81,367 79,809 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 DomesticN onfinancial Statistics • July 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 1987 111999888444 111999888555 111999888666 Nov. Dec. Jan. Feb. Mar. Apr. U.S. budget 1 Receipts, total 666,457 734,057 769,091 52,967 78,035 81,771 55,463 56,515 122,897 2 On-budget 500,382 547,886 568,862 38,158 60,694 62,981 37,919 38,469 99,083 3 Off-budget 166,075 186,171 200,228 14,809 17,341 18,790 17,544 18,046 23,814 4 Outlays, total 851,781 946,316 989,815 79,973 89,158 83,942 83,828 84,527 84,240 5 On-budget 685,968 769,509 806,318 63,639 74,669 68,176 67,138 67,872 69,215 6 Off-budget 165,813 176,807 183,498 16,334 14,489 15,766 16,690 16,655 15,025 7 Surplus, or deficit (-), total -185,324 -212,260 -220,725 -27,006 -11,123 -2,170 -28,366 -28,012 38,657 8 On-budget -185,586 -221,623 -237,455 -25,481 -13,976 -5,195 -29,219 -29,403 29,867 9 Off-budget 262 9,363 16,371 -1,524 2,853 3,024 854 1,391 8,790 Source of financing (total) 10 Borrowing from the public 170,817 197,269 236,284 40,352 22,824 4,353 15,248 7,884 9,075 U Cash and monetary assets (decrease, or increase (-))2 6,631 13,367 -14,324 -2,721 -14,751 -9,564 16,574 15,621 -47,189 12 Other3 7,875 1,630 -1,235 -10,625 4,004 7,381 -3,456 4,506 -543 MEMO 13 Treasury operating balance (level, end of period) 30,426 17.060 31,384 17,007 30,946 41,307 24,816 8,969 55,744 14 Federal Reserve Banks 8,514 4,174 7,514 2,529 7,588 15,746 3,482 3,576 29,688 15 Tax and loan accounts 21,913 12,886 23,870 14,478 23,357 25,561 21,334 5,394 26,056 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 SOURCES. "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 Budget of the U.S. Government. 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 1987 1985 1986 HI HI H2 Feb. Apr. RECEIPTS 1 All sources 734,057 769,091 380,618 364,790 394,345 387,524 55,463 56,515 122,897 2 Individual income taxes, net 334,531 348,959 166,783 169,987 169,444 183,156 22,805 14,240 71,850 6 4 3 5 R P W N r e o i e f t n s h u w i h n d i e e d t l s n h d t h i e al l d Election Campaign Fund . 2 1 9 6 0 8 5 1 , , , 9 7 3 4 4 2 3 1 3 8 5 3 1 1 7 0 4 1 5 , , , 8 8 9 3 7 9 3 8 3 4 6 1 7 5 4 6 8 9 , , , 1 6 2 5 8 8 2 5 4 8 9 1 2 5 2 8 5 , , , 2 0 7 9 2 3 5 5 8 6 1 7 6 5 8 3 3 , , , 9 4 9 8 8 1 3 1 8 9 1 1 2 6 7 8 4 , , , 7 6 0 3 5 7 3 2 1 4 25 4 1 , , , 4 0 3 8 0 2 6 3 0 2 2 1 7 4 7 , , , 6 1 4 0 0 8 1 8 6 2 0 2 6 1 6 2 8 , , , 9 9 0 4 3 3 3 9 9 7 7 8 Co G R rp e r o o fu r ss a n t d r i s o e n c e i i n p c ts o me taxes 7 1 7 6 , , 4 0 1 8 3 2 8 1 0 7 , , 4 2 4 9 2 8 42 8 , , 1 3 9 7 3 0 36 7 , , 5 7 2 5 8 1 41 9 , , 9 5 4 5 6 7 42 8 , , 1 2 0 3 8 0 2 1 , , 3 4 6 3 9 3 1 2 5 , , 8 9 3 4 4 8 1 2 3 , , 1 29 0 0 1 9 Socia n l et i nsurance taxes and contributions 265,163 283,901 144,598 128,017 156,714 134,006 25,590 23,689 33,646 10 Emp c lo o y n m tr e ib n u t t t i a o x n e s s 1 and 234,646 255,062 126,038 116,276 139,706 122,246 22,594 23,128 30,457 11 Self-employment taxes and contributions2 10,468 11,840 9,482 985 10,581 1,338 809 669 7,403 12 Unemployment insurance 25,758 24,098 16,213 9,281 14,674 9,328 2,633 186 2,827 13 Other net receipts3 4,759 4,742 2,350 2,458 2,333 2,429 364 375 361 14 Excise taxes 35,992 32,919 17,259 18,470 15,944 15,947 2,291 2,511 2,471 15 Customs deposits 12,079 13,323 5,807 6,354 6,369 7,282 1,052 1,220 1,165 16 Estate and gift taxes 6,422 6,958 3,204 3,323 3,487 3,649 553 570 810 17 Miscellaneous receipts4 18,539 19,887 9,144 9,861 10,002 9,605 2,235 1,171 1,767 OUTLAYS 18 All types 946,223 989,789 463,842 487,188 486,037 504,785 83,828 84,527 84,240 19 National defense 252,748 273,369 124,186 134,675 135,367 138,544 23,475 24,742 24,407 2 2 2 2 2 0 3 4 1 2 I G N A E n n e a g t n t e e r u i r r e c r n g r u a 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 r c a c e f , e f s a s i p r a s a n d c e, e n a v n i d r o t n ec m h e n n o t logy . 2 1 1 5 8 5 6 3 , , , , , 5 6 6 1 3 6 2 8 5 7 5 7 5 7 6 3 1 1 1 9 4 4 3 , , , , , 1 7 0 4 5 6 9 1 7 0 9 2 7 1 8 1 6 4 5 1 , , , , 6 2 8 6 7 7 9 3 8 0 5 2 0 0 5 1 8 4 7 3 5 , , , , , 3 7 5 3 4 6 0 1 2 5 7 5 2 7 3 1 1 2 6 5 4 2 , , , , , 2 4 3 4 5 4 8 8 8 1 5 4 4 2 9 1 4 8 2 7 6 , , , , , 5 1 7 8 1 9 4 3 7 6 4 1 5 6 0 2 1 , , 2 3 7 8 1 9 1 9 7 8 3 9 1 1 9 2 1 , , 4 6 4 0 7 5 4 8 9 0 3 1 1 2 3 2 1 , , 6 6 3 0 1 4 5 6 5 6 1 3 1 2 3 25 Commerce and housing credit 4,229 4,258 -260 644 860 3,647 -334 1,677 1,129 26 Transportation 25,838 28,058 11,440 15,360 12,658 14,745 1,697 1,982 1,936 27 Community and regional development .. 7,680 7,510 3,408 3,901 3,169 3,494 380 490 592 28 Education, training, employment, social services 29,342 29,662 14,149 14,481 14,712 15,268 2,669 2,440 2,317 29 Health 33,542 35,936 16,945 17,237 17,872 19,814 3,166 3,263 3,672 30 Social security and medicare 254,446 190,850 128,351 129,037 135,214 138,296 23,081 23,407 23,615 31 Income security 128,200 120,686 65,246 59,457 60,786 59,628 10,551 10,910 11,282 32 Veterans benefits and services 26,352 26,614 11,956 14,527 12,193 14,497 2,053 1,137 2,360 3 3 3 3 3 4 3 5 6 7 G G N A U e e d e n t n n m d e e i i i s r n r n a t a t i r l e l s i - r b t g p e r u o a u s t v t t r e 5 i p e d o r o n n s o e m f o f f e s f i n j e s u t t c t s a i l t n i g c a e s r s e i c s e ta ip n t c s e 6 - 1 3 2 2 6 5 6 9 , , , , , 7 2 3 2 4 5 7 5 2 3 9 7 3 8 6 - 1 3 3 3 6 6 6 5 , , , , , 2 5 4 7 2 4 5 3 9 8 4 5 0 6 4 -1 6 4 2 2 5 3 , , , , , 4 6 8 1 0 3 5 5 4 1 6 9 7 3 6 -1 6 7 7 3 3 3 , , , , , 9 4 3 2 6 5 9 4 1 3 3 1 8 2 4 -1 6 7 8 2 3 3 , , , , , 1 0 1 3 5 9 5 7 5 6 3 4 9 2 6 -1 6 7 5 2 3 2 , , , , , 4 7 8 3 7 2 6 1 6 8 6 7 6 0 6 - 1 2 2 , , 7 6 6 9 1 0 3 6 1 2 8 1 7 9 0 - 1 2 0 , , 9 9 5 4 3 7 6 7 3 2 1 1 0 9 - 1 4 1 , , 2 2 6 1 1 3 9 1 9 7 0 5 9 6 9 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 1988. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • July 1987 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1984 1985 1986 IItteemm Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 1 Federal debt outstanding 1,667.4 1,715.1 1,779.0 1,827.5 1,950.3 1,991.1 2,063.6 2,129.5 2,218.9 2 Public debt securities 1,663.0 1,710.7 1,774.6 1,823.1 1,945.9 1,986.8 2,059.3 2,125.3 2,214.8 3 Held by public 1,373.4 1,415.2 1,460.5 1,506.6 1,597.1 1,634.3 1,684.9 1,742.4 1,811.7 4 Held by agencies 289.6 295.5 314.2 316.5 348.9 352.6 374.4 382.9 403.1 5 Agency securities 4.5 4.4 4.4 4.4 4.4 4.3 4.3 4.2 4.0 6 Held by public 3.4 3.3 3.3 3.3 3.3 3.2 3.2 3.2 3.0 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 1,663.7 1,711.4 1,775.3 1,823.8 1,932.4 1,973.3 2,060.0 2,111.0 2,200.5 9 Public debt securities 1,662.4 1,710.1 1,774.0 1,822.5 1,931.1 1,972.0 2,058.7 2,109.7 2,199.3 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 1,823.8 1,823.8 1,823.8 1,823.8 2,078.7 2,078.7 2,078.7 2,111.0 2,300.0 1. Includes guaranteed debt of government agencies, specified participation SOURCES. Treasury Bulletin and Monthly Statement of the Public Debt of the certificates, notes to international lending organizations, and District of Columbia United States. stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1986 TTyyppee aanndd hhoollddeerr 11998833 11998844 11998855 11998866 Q1 Q2 Q3 Q4 1 Total gross public debt 1,410.7 1,663.0 1,945.9 2,214.8 1,986.8 2,059.3 2,125.3 2,214.8 By type 2 Interest-bearing debt 1,400.9 1,660.6 1,943.4 2,212.0 1,984.2 2,056.7 2,122.7 2,212.0 3 Marketable 1,050.9 1,247.4 1,437.7 1,619.0 1,472.8 1,498.2 1,564.3 1,619.0 4 Bills 343.8 374.4 399.9 426.7 393.2 396.9 410.7 426.7 5 Notes 573.4 705.1 812.5 927.5 842.5 869.3 896.9 927.5 6 Bonds 133.7 167.9 211.1 249.8 223.0 232.3 241.7 249.8 7 Nonmarketable1 350.0 413.2 505.7 593.1 511.4 558.5 558.4 593.1 8 State and local government series 36.7 44.4 87.5 110.5 88.5 98.2 102.4 110.5 9 Foreign issues2 10.4 9.1 7.5 4.7 6.7 5.3 4.1 4.7 10 Government 10.4 9.1 7.5 4.7 6.7 5.3 4.1 4.7 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes 70.7 73.1 78.1 90.6 79.8 82.3 85.6 90.6 13 Government account series3 231.9 286.2 332.2 386.9 336.0 372.3 365.9 386.9 14 Non-interest-bearing debt 9.8 2.3 2.5 2.8 2.6 2.6 2.6 2.8 By holder4 15 U.S. government agencies and trust funds 236.3 289.6 348.9 403.1 352.6 374.4 382.9 403.1 16 Federal Reserve Banks 151.9 160.9 181.3 211.3 184.8 183.8 190.8 211.3 17 Private investors 1,022.6 1,212.5 1,417.2 1,602.0 1,473.1 1,502.7 1,553.3 1,602.0 18 Commercial banks 188.8 183.4 192.2 225.0 195.1 197.2 212.5 225.0 19 Money market funds 22.8 25.9 25.1 28.6 29.9 22.8 24.9 28.6 20 Insurance companies 56.7 76.4 93.2 n.a. 95.8 n.a. n.a. n.a. 21 Other companies 39.7 50.1 59.0 68.8 59.6 59.8 67.0 68.8 22 State and local governments 155.1 179.4 n.a. n.a. n.a. n.a. n.a. n.a. Individuals 23 Savings bonds 71.5 74.5 79.8 92.3 81.4 83.8 87.1 92.3 ?4 Other securities 61.9 69.3 75.0 68.0 76.2 73.9 69.0 68.0 25 Foreign and international5 166.3 192.9 214.6 257.0 225.4 239.8 256.3 257.0 26 Other miscellaneous investors6 259.8 360.6 n.a. n.a. n.a. n.a. n.a. n.a. 1. Includes (not shown separately): Securities issued to the Rural Electrifica- 5. Consists of investments offoreign 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 1987 1987 IItteemm 11998844 11998855 11998866'' Feb. Mar. Apr. Mar. 25 Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 Immediate delivery2 1 U.S. government securities 52,778 75,331 95,447 124,519 102,209 138,007 101,618 132,106 116,699 157,559 142,263 135,360 By maturity 7 Bills 26,035 32,900 34,249 48,972 37,027 50,528 34,142 44,699 45,924 58,413 52,915 45,951 3 Other within 1 year 1,305 1,811 2,115 2,815 2,647 3,190 2,218 3,041 2,917 2,947 3,262 3,485 4 1-5 years 11,733 18,361 24,667 30,231 24,322 29,094 30,147 30,686 23,918 31,964 30,550 29,460 5 5-10 years 7,606 12,703 20,455 24,326 22,444 31,476 20,567 31,355 24,540 38,160 30,883 32,297 6 Over 10 years 6,099 9,556 13,961 18,174 15,769 23,718 14,544 22,325 19,400 26,075 24,652 24,167 By type of customer 7 U.S. government securities dealers 2,919 3,336 3,646 4,082 3,506 3,113 3,337 5,119 33,,008811 3,141 2,678 33,,113344 8 U.S. government securities brokers 25,580 36,222 49,368 67,913 52,671 78,533 51,619 72,477 63,802 93,307 80,973 79,222 9 All others3 24,278 35,773 42,218 51,853 45,446 55,648 46,661 54,510 49,815 61,111 58,611 53,004 10 Federal agency securities 7,846 11,640 16,746 22,764 20,984 22,184 23,023 18,111 17,866 26,711 28,811 17,516 11 Certificates of deposit 4,947 4,016 4,355 4,750 3,570 4,964 3,227 3,574 4,557 5,495 5,344 4,553 1? Bankers acceptances 3,243 3,242 3,272 3,272 2,917 3,453 2,509 3,066 3,356 3,861 3,605 3,166 13 Commercial paper 10,018 12,717 16,660 16,513 15,489 17,914 15,058 13,924 16,976 15,438 21,206 18,625 Futures transactions4 14 Treasury bills 6,947 5,561 3,311 4,898 3,577 3,575 3,231 2,836 2,509 4,350 4,240 3,092 15 Treasury coupons 4,533' 6,085' 7,175 8,092 6,891 12,018 4,853 10,152 10,173 12,984 11,497 13,109 16 Federal agency securities 264' 252' 16 0 9 1 0 0 0 3 0 0 Forward transactions5 17 U.S. government securities 1,364 1,283 1,876 4,074 1,952 2,760 3,059 2,235 2,055 1,995 4,591 2,476 18 Federal agency securities 2,843 3,857 7,830 11,440 10,656 15,961 11,268 8,638 12,463 21,790 20,145 11,921 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 • July 1987 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Averages of daily figures, in millions of dollars 1987 1987 Feb. Mar.' Apr. Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 Positions Net immediate2 1 U.S. government securities 5,429 7,391 13,047r 6,057 7,840 -6,975 2,814 1,956 -3,512 -9,274 -16,927 2 Bills 5,500 10,075 12,724' 7,365 7,070 -778 499 4,168 2,487 -2,392 -6,448 3 Other within 1 year 63 1,050 3,698 3,709 3,513 3,046 2,712 3,348 3,081 3,236 2,694 4 1-5 years 2,159 5,154 9,297 7,399 7,451 2,537 7,968 3,120 2,182 2,599 2,224 5 5-10 years -1,119 -6,202 -9,503' -5,890 -5,208 -5,942 -3,682 -3,657 -5,139 -6,608 -8,802 6 Over 10 years -1,174 -2,686 -3,169 -6,526 -4,986 -5,838 -4,682 -5,023 -6,122 -6,109 -6,595 7 Federal agency securities 15,294 22,860 33,075 32,048 33,296 32,916 32,234 31,463 35,650 34,194 31,514 8 Certificates of deposit 7,369 9,192 10,533 9,671 8,615 8,502 8,059 8,287 8,550 8,295 8,818 9 Bankers acceptances 3,874 4,586 5,533 4,934 5,015 3,694 4,003 4,502 3,786 3,469 3,154 10 Commercial paper 3,788 5,570 8,087 9,215 8,954 6,261 7,159 5,492 6,674 6,356 6,454 Futures positions 11 Treasury bills -4,525 -7,322 -18,062' -13,476 -10,805 -5,000 -8,708 -5,971 -6,336 -4,179 -3,467 12 Treasury coupons 1,794 4,465 3,492' 6,669 4,313 3,949 4,413 4,740 3,834 3,830 3,586 13 Federal agency securities 233 -722 -153 -94 -98 -95 -98 -98 -90 -98 -96 Forward positions 14 U.S. government securities -1,643 -911 -2,304' 357 -2,151 -2,388 -1,766 -1,008 -1,920 -3,791 -2,996 15 Federal agency securities -9,205 -9,420 -11,91 lr -16,383 -16,703 -15,760 -15,639 -14,151 -16,441 -17,166 -15,351 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 44,078 68,035 98,954 128,668 127,183 n.a. 135,111 128,410 129,370 134,383 125,916 17 Term agreements 68,357 80,509 108,693 132,531 130,489 n.a. 127,349 124,115 121,485 138,459 149,607 Repurchase agreements5 18 Overnight and continuing 75,717 101,410 141,735 174,370 177,021 n.a. 180,009 174,398 175,298 186,887 170,842 19 Term agreements 57,047 70,076 102,640 115,522 112,078 n.a. 105,626 104,632 100,894 105,821 122,608 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 1987 AAggeennccyy 11998833 11998844 11998855 Oct. Nov. Dec. Jan. Feb. Mar. 1 Federal and federally sponsored agencies 240,068 271,220 293,905 305,199 305,097 307,361 n.a. n.a. 2 Federal agencies 33,940 35,145 36,390 36,716 36,952 36,958 37,041 37,083 3 Defense Department1 243 142 71 36 35 33 32 27 4 Export-Import Bank2 3 14,853 15,882 15,678 14,274 14,274 14,211 14,211 14,211 5 Federal Housing Administration4 194 133 115 123 124 138 136 147 n.a. 6 Government National Mortgage Association participation certificates5 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 3,104 3,104 3,104 3,104 3,104 8 Tennessee Valley Authority 14,970 15,435 16,347 16,940 17,176 17,222 17,308 17,344 9 United States Railway Association6 111 51 74 74 74 85 85 85 10 Federally sponsored agencies7 206,128 236,075 257,515 268,483 268,145 270,403 n.a. n.a. n a. 11 Federal Home Loan Banks 48,930 65,085 74,447 87,146 86,891 88,752 90,225 91,313 92,087 12 Federal Home Loan Mortgage Corporation 6,793 10,270 11,926 14,007 13,606 13,589 n.a. n.a. n.a. 13 Federal National Mortgage Association 74,594 83,720 93,896 93,272 93,477 93,563 92,588 91,522 91,618 14 Farm Credit Banks 72,816 71,193 68,851 63,079 62,693 62,328 59,984 59,367 58,364 15 Student Loan Marketing Association8 3,402 5,745 8,395 10,979 11,478 12,171 11,784 12,481 13,230 MEMO 16 Federal Financing Bank debt 135,791 145,217 153,373 157,371 157,452 157,510 157,650 115577,,772244 Lending to federal and federally sponsored 17 Export-Import Bank3 14,789 15,852 15,670 14,268 14,268 14,205 14,205' 14,205 18 Postal Service6 1,154 1,087 1,690 2,854 2,854 2,854 2,854 2,854 19 Student Loan Marketing Association 5,000 5,000 5,000 4,970 4,970 4,970 4,970 4,970 n a. 20 Tennessee Valley Authority 13,245 13,710 14,622 15,515 15,751 15,797 15,928 15,954 21 United States Railway Association6 111 51 74 74 74 85 85 85 Other Lending10 22 Farmers Home Administration 55,266 58,971 64,234 65,374 65,374 65,374 65,374 6655,,337744 23 Rural Electrification Administration 19,766 20,693 20,654 21,506 21,531 21,680 21,719 21,749 24 Other 26,460 29,853 31,429 32,810 32,630 32,545 32,515 32,533 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 generally being 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 • July 1987 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1986 1987 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar/ Apr. 1 All issues, new and refunding1 106,641 214,189 134,606 4,532 8,825 10,085 14,082 6,829 8,738 14,350 6,530 Type of issue 2 General obligation 26,485 52,622 44,801 1,267 2,104 1,427 4,254 960 3,543 3,796 3,369 3 Revenue 80,156 161,567 89,806 3,265 6,721 8,658 9,828 5,869 5,195 10,554 3,161 Type of issuer 4 State 9,129 13,004 14,935 9 697 111 961 153 1,441 1,217 419 5 Special district and statutory authority2 63,550 134,363 79,291 3,275 5,757 7,761 9,414 5,044 5,634 9,856 4,562 6 Municipalities, counties, townships 33,962 66,822 40,374 1,248 2,371 2,213 3,707 1,632 1,663 3,277 1,549 7 Issues for new capital, total 94,050 156,050 79,195 2,558 3,789 4,085 8,831 2,556 2,699 4,701 3,298 Use of proceeds 8 Education 7,553 16,658 16,948 558 928 1,486 1,588 823 1,291 1,723 973 9 Transportation 7,552 12,070 11,666 827 1,195 976 588 146 604 280 642 10 Utilities and conservation 17,844 26,852 35,383 1,365 2,396 3,239 2,330 2,574 2,861 4,619 567 11 Social welfare 29,928 63,181 17,332 812 2,098 2,635 3,944 1,670 1,080 2,472 1,041 12 Industrial aid 15,415 12,892 5,594 138 499 331 2,159 101 165 667 42 13 Other purposes 15,758 24,398 47,433 832 1,708 1,418 3,473 1,515 2,738 4,590 3,265 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 1987 Type of issue or issuer, or use 11998844 11998855 11998866 Aug. Sept. Oct. Nov. Dec. Jan. Feb.' Mar. 1 All issues1 132,531 155,074 294,326 24,245 16,093 28,582 28,835 25,181 23,133' 23,986 32,799 2 Bonds2 109,903 155,074 294,326 18,481 12,830 23,476 22,236 18,933 20,218' 20,219 22,983 Type of offering 3 Public 73,579 119,559 232,496 18,481 12,829' 23,476 22,236 18,933 20,218' 20,219 22,983 4 Private placement 36,324 46,195 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Industry group 5 Manufacturing 24,607 52,128 53,358 4,536 2,345 2,055 3,378 3,276 4,165 3,679 6,349 6 Commercial and miscellaneous 13,726 15,140 19,188 1,030 1,387 1,067 1,213 2,067 1,074 1.714 3,723 7 Transportation 4,694 5,743 4,262 550 375 170 0 70 0 100 521 8 Public utility 10,679 12,957 25,585 2,098 1,915 2,537 2,587 2,498 1,491 2.715 694 9 Communication 2,997 10,456 13,430 1,615 417 1,255 1,158 776 65 250 300 10 Real estate and financial 53,199 69,332 116,675 8,652 6,390 16,392 13,901 9,736 13,423' 11,762 11,397 11 Stocks3 22,628 35,515 61,830 5,764 3,263 5,106 6,599 6,248 2,915 3,767 9,816 Type 12 Preferred 4,118 6,505 11,514 1,290 402 817 1,390 1,293 429 905 2,321 13 Common 18,510 29,010 50,316 4,474 2,861 4,289 5,209 4,955 2,486 2,862 7,495 Industry group 14 Manufacturing 4,054 5,700 14,234 982 250 570 2,565 1,781 365 814 2,134 15 Commercial and miscellaneous 6,277 9,149 9,252 803 1,009 1,271 535 709 148 437 2,264 16 Transportation 589 1,544 2,392 57 28 511 15 183 0 191 299 17 Public utility 1,624 1,966 3,791 208 174 410 218 873 237 509 893 18 Communication 419 978 1,504 379 0 59 104 101 16 9 57 19 Real estate and financial 9,665 16,178 30,657 3,335 1,802 2,285 3,162 2,601 2,149 1,807 4,169 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 1987 IItteemm 11998855 11998866 Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar. INVESTMENT COMPANIES1 1 Sales of own shares2 222,670 411,739 32,636 34,690 37,150 33,672 44,796 50,116 36,307 39,217 2 Redemptions of own shares3 132,440 239,396 20,102 21,338 20,782 20,724 34,835 26,565 21,576 24,103 3 Net sales 90,230 172,343 12,534 13,352 16,368 12,948 9,961 23,551 14,731 15,114 4 Assets4 251,695 424,156 387,547 381,872 402,644 416,939 424,156 464,415 490,643 505,864 5 Cash position5 20,607 30,716 28,682 29,540 30,826 29,579 30,716 34,098 35,279 36,010 6 Other 231,088 393,440 358,865 352,332 371,818 387,360 393,440 430,317 455,364 469,854 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. 1985 1986 1987 AAccccoouunntt 11998844 11998855 11998866 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 1 Corporate profits with inventory valuation and capital consumption adjustment 264.7 280.6 300.7 274.3 296.3 285.6 296.4 293.1 302.0 311.2 333.5 2 Profits before tax 235.7 223.1 237.5 213.8 229.2 235.8 222.5 227.7 240.4 259.6 266.5 3 Profits tax liability 95.4 91.8 103.5 87.1 95.8 96.4 95.7 99.0 104.4 115.1 129.9 4 Profits after tax 140.3 131.4 134.0 126.7 133.4 139.4 126.9 128.8 135.9 144.5 136.6 5 Dividends 78.3 81.6 87.8 81.4 81.6 82.5 85.2 87.5 88.8 89.7 91.4 6 Undistributed profits 62.0 49.8 46.2 45.3 51.8 57.0 41.7 41.2 47.2 54.8 45.2 7 Inventory valuation -5.5 -.6 6.5 1.6 6.1 -9.4 16.5 10.6 6.1 -7.2 -7.4 8 Capital consumption adjustment 34.5 58.1 56.6 58.9 61.0 59.2 57.3 54.8 55.5 58.8 74.4 SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Nonfinancial Statistics • July 1987 t.49 NONFINANCIAL CORPORATIONS Assets and Liabilities Billions of dollars, except for ratio 1985 1986 AAccccoouunntt 11998800 11998811 11998822 11998833 11998844 Q1 Q2 Q3 Q4 Q1 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 ratio' 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 • Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1985 1986 1987 IInndduussttrryy 11998855 11998866 11998877'' Q3 Q4 Q1 Q2 Q3 Q4 Ql' Q21 1 Total nonfarm business 387.13 397.27 390.80 389.23 397.88 377.94 375.92 374.55 388.69 384.02 396.22 Manufacturing 2 Durable goods industries 73.27 69.08 70.60 72.99 75.47 68.01 68.33 69.31 70.68 69.06 73.02 3 Nondurable goods industries 80.21 73.65 74.27 81.48 82.79 76.02 73.35 69.89 75.33 73.89 74.37 Nonmanufacturing 4 Mining 15.88 11.25 10.10 15.89 15.25 12.99 11.22 10.15 10.63 10.22 10.54 Transportation 5 Railroad 7.08 6.63 6.15 7.79 6.74 6.22 6.77 7.31 6.25 55..9922 6.46 6 Air 4.79 6.26 6.48 5.17 6.07 6.58 5.77 5.69 6.99 6.93 6.05 7 Other 6.15 5.86 6.44 5.85 6.34 5.42 5.74 6.03 6.24 6.18 6.59 Public utilities 8 Electric 36.11 33.93 32.58 35.58 36.38 34.21 33.81 33.91 33.78 32.33 32.82 9 Gas and other 12.71 12.51 13.62 12.86 13.41 12.82 12.74 11.99 12.49 13.13 13.55 10 Commercial and other2 150.93 160.10 170.55 151.62 155.42 155.67 158.18 160.25 166.31 166.36 172.80 •Trade and services are no longer being reported separately. They are included 2. "Other" consists of construction; wholesale and retail trade; finance and in Commercial and other, line 10. insurance; personal and business services; and communication. 1. Anticipated by business. SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Markets and Corporate Finance A37 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities Billions of dollars, end of period 1985 1986 1987 AAccccoouunntt 11998822 11998833 11998844 Q3 Q4 Q1 Q2 Q3 Q4' Q1 ASSETS Accounts receivable, gross 1 Consumer 75.3 83.3 89.9 108.6 113.4 117.2 125.1 137.1 136.5 133.9 2 Business 100.4 113.4 137.8 143.7 158.3 165.9 167.7 161.0 174.8 182.8 3 Real estate 18.7 20.5 23.8 26.3 28.9 29.9 30.8 32.1 33.7 35.1 4 Total 194.3 217.3 251.5 278.6 300.6 312.9 323.6 330.2 345.0 351.8 Less: 5 Reserves for unearned income 29.9 30.3 33.8 38.0 39.2 40.0 40.7 42.4 41.4 40.4 6 Reserves for losses 3.3 3.7 4.2 4.6 4.9 5.0 5.1 5.4 5.8 5.9 7 Accounts receivable, net 161.1 183.2 213.5 236.0 256.5 268.0 277.8 282.4' 297.8 305.5 8 All other 30.4 34.4 35.7 46.3 45.3 48.8 48.8' 59.9' 57.9 59.0 9 Total assets 191.5 217.6 249.2 282.3 301.9 316.8 326.6' 342.3' 355.6 364.5 LIABILITIES 10 Bank loans 16.5 18.3 20.0 18.9 20.6' 19.0' 19.2' 20.2' 22.2 17.3 11 Commercial paper 51.4 60.5 73.1 93.2 99.2 104.3 108.4 112.8 117.8 119.1 Debt 12 Other short-term 11.9 11.1 12.9 12.4 12.5 13.4 15.4' 16.0 17.2 21.6 13 Long-term 63.7 67.7 77.2 85.5 93.1' 101.0' 105.2' 109.8' 115.6 118.4 14 All other liabilities 21.6 31.2 34.5 38.2 40.9' 42.3' 40.1' 44.1' 43.4 46.3 15 Capital, surplus, and undivided profits 26.4 28.9 31.5 34.1 35.7 36.7 38.4' 39.4 39.4 41.8 16 Total liabilities and capital 191.5 217.6 249.2 282.3 301.9 316.8 326.6' 342.3' 355.6 364.5 NOTE. Components may not add to totals because of rounding. 1.52 DOMESTIC FINANCE COMPANIES Business Credit Millions of dollars, seasonally adjusted except as noted Changes in accounts Extensions Repayments receivable AAAccccccooouuunnntttsss rrreeeccceeeiiivvvaaabbbllleee TTTyyypppeee ooouuutttssstttaaannndddiiinnnggg 1987 1987 1987 MMMaaarrr... 333111,,, 111999888777''' Jan. Feb. Mar. Jan. Feb. Mar. Jan. Feb. Mar. 1 Total 182,848 2,577' 1,850' 1,579 28,737' 28,193' 29,836 26,160' 26,342' 28,257 Retail financing of installment sales 2 Automotive (commercial vehicles) 27,099 185 602 570 801 1,036 1,138 616 434 568 3 Business, industrial, and farm equipment 22,330 -417 -429 -40 1,112 1,067 1,255 11,,552299 1,496 11,,229955 Wholesale financing 4 Automotive 29,735 2,119' -1,081' 995 11,175' 11,573' 12,676 9,056' 10,492' 11,681 5 Equipment 5,314 -46 31 -235 597 658 672 643 626 907 6 All other 8,812 918 -41 269 3,219 2,919 3,064 22,,330011 22,,996600 22,,779955 Leasing 7 Automotive 20,013 -373 161 77 1,263 1,259 1,148 1,636 1,099 1,071 8 Equipment 39,361 827 121 440 1,009 885 995 182 764 555 9 Loans on commercial accounts receivable and factored commercial accounts receivable 16,255 -22 238 -652 7,841 7,619 7,664 7,862 7,381 8,316 10 All other business credit 13,929 -615 86 155 1,719 1,177 1,224 2,334 1,092 1,069 These data also appear in the Board's G.20 (422) release. For address, see 1. Not seasonally adjusted, inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • July 1987 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1986 1987 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms' 1 Purchase price (thousands of dollars) 96.8 104.1 118.1 127.5 124.2 124.8 132.6 135.6 130.2' 134.2 2 Amount of loan (thousands of dollars) 73.7 77.4 86.2 93.9 92.5 93.2 97.3 99.1 95 .C 98.8 3 Loan/price ratio (percent) 78.7 77.1 75.2 75.6 76.2 76.4 75.5 75.3 74.3' 75.0 4 Maturity (years) 27.8 26.9 26.6 27.9 27.3 27.4 27.7 27.6 27.1 26.9 5 Fees and charges (percent of loan amount)2 2.64 2.53 2.48 2.66 2.64 2.46 2.23 2.21 2.2(Y 2.25 6 Contract rate (percent per annum) 11.87 11.12 9.82 9.57 9.45 9.28 9.14 8.87 8 .77 8.86 Yield (percent per annum) 7 FHLBB series5 12.37 11.58 10.25 10.02 9.91 9.69 9.51 9.23 9.14' 9.23 8 HUD series" 13.80 12.28 10.07 9.89 9.47 9.33 9.09 9.04 9.19 n.a. SECONDARY MARKETS Yield (percent per annum) 9 FHA mortgages (HUD series)5 13.81 12.24 9.91 9.80 9.26 9.21 8.79 8.81 8 .94 n.a. 10 GNMA securities6 13.13 11.61 9.30 9.06 8.83 8.62 8.46 8.28 8 .18 8.85 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 83,339 94,574 98,048 98,402 98,210 97,895 96,382 95,514 95,140 94,404 12 FHA/VA-insured 35,148 34,244 29,683 25,435 24,300 23,121 22,178' 22,063r 21,843' 21,765 13 Conventional 48,191 60,331 68,365 72,967 73,910 74,774 74,204' 73,451' 73,297' 72,639 Mortgage transactions (during period) 14 Purchases 16,721 21,510 30,826 3,784 2,549 2,336 1,346 979 1,435 2,118 Mortgage commitments1 15 Contracted (during period) 21,007 20,155 32,987 2,375 1,811 1,272 948 912 2,805' 3,208 16 Outstanding (end of period) 6,384 3,402 3,386 5,740 4,625 3,386 2,258 2,175 3,539' 4,421 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)8 1 1 7 8 To F ta H l A/VA 9,2 9 8 1 3 0 12, 8 3 4 9 1 9 13,5 7 1 4 7 6 12, 7 90 2 5 2 12, 7 3 0 1 7 5 11, 6 56 9 4 4 10,9 6 6 8 4 6 AT 1| 19 Conventional 8,373 11,558 12,837 12,183 11,607 10,870 10,279 1 1 Mortgage transactions (during period) 20 Purchases 21,886 44,012 103,474 11,566 9,862 11,305 7,950 n.a. n.a. n.a. 21 Sales 18,506 38,905 100,236 11,417 10,510 11,169 8,269 1 1 Mortgage commitments9 1 22 Contracted (during period) 32,603 48,989 110,855 9,356 11,233 8,742 7,685 T T 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 1986 1987 Type of holder, and type of property 11998844 11998855 11998866 Ql Q2 Q3 Q4 Ql 1 All holders 2,033,654 2,266,923 2,563,833r 2,315,962 2,383,989' 2,469,954' 2,563,833' 2,622,446 2 1- to 4-family 1,317,940 1,466,773 1,665,510' 1,494,603 1,543,681' 1,607,238' 1,665,510' 1,709,954 3 Multifamily 185,414 213,816 246,576' 221,587 229,145' 237,423' 246,576' 250,601 4 Commercial 418,300 480,719 554,087' 495,879 509,574' 525,112' 554,087' 566,045 5 Farm 112,000 105,615 97,660' 103,893 101,589' 100,181' 97,660' 95,846 6 Selected financial institutions 1,269,702 1,390,394 1,506,046' 1,408,665 1,435,437' 1,464,371' 1,506,046' 1,519,771 7 Commercial banks2 379,498 429,196 502,158' 441,096 456,163' 474,816' 502,158' 515,953 8 1- to 4-family 196,163 213,434 235,704' 216,290 221,640' 228,718' 235,704' 239,918 9 Multifamily 20,264 23,373 31,139' 25,389 26,799' 28,636' 31,139' 32,660 10 Commercial 152,894 181,032 222,579' 187,620 195,484' 204,986' 222,579' 230,373 11 Farm 10,177 11,357 12,736' 11,797 12,240' 12,476' 12,736' 13,002 12 Savings banks 154,441 177,263 224,232 188,154 203,398 215,036 224,232 226,409 13 1- to 4-family 107,302 121,879 154,801 131,381 142,174 149,786 154,801 156,236 14 Multifamily 19,817 23,329 30,161 23,980 26,543 28,400 30,161 30,476 15 Commercial 27,291 31,973 39,166 32,707 34,577 36,762 39,166 39,592 16 Farm 31 82 104 86 104 88 104 105 17 Savings and loan associations 555,277 583,236 553,080 574,732 565,037 557,139 553,080 545,976 18 1- to 4-family 421,489 432,422 403,611 420,073 413,865 408,152 403,611 398,017 19 Multifamily 55,750 66,410 66,898 67,140 66,020 65,827 66,898 66,609 20 Commercial 77,605 83,798 82,070 86,860 84,618 82,644 82,070 80,914 21 Farm 433 606 501 659 534 516 501 436 22 Life insurance companies 156,699 171,797 192,975 174,823 180,041 185,269 192,975 196,575 23 I- to 4-family 14,120 12,381 12,763 12,605 12,608 12,927 12,763 12,763 24 Multifamily 18,938 19,894 20,847 20,009 20,181 20,709 20,847 20,997 25 Commercial 111,175 127,670 148,367 130,569 135,924 140,213 148,367 151,867 26 Farm 12,466 11,852 10,998 11,640 11,328 11,420 10,998 10,948 27 Finance companies3 23,787 28,902 33,601 29,860 30,798 32,111 33,601 34,858 28 Federal and related agencies 158,993 166,928 203,800 165,041 161,398 159,505 203,800 198,996 29 Government National Mortgage Association 2,301 1,473 889 1,533 876 887 889 846 30 1- to 4-family 585 539 47 527 49 48 47 46 31 Multifamily 1,716 934 842 1,006 827 839 842 800 32 Farmers Home Administration4 1,276 733 48,421 704 570 457 48,421 48,471 33 1- to 4-family 213 183 21,625 217 146 132 21,625 21,525 34 Multifamily 119 113 7,608 33 66 57 7,608 7,708 35 Commercial 497 159 8,446 217 111 115 8,446 8,496 36 Farm 447 278 10,742 237 247 153 10,742 10,742 37 Federal Housing and Veterans Administration 4,816 4,920 5,047 4,964 5,094 4,966 5,047 5,091 38 1- to 4-family 2,048 2,254 2,386 2,309 2,449 2,331 2,386 2,440 39 Multifamily 2,768 2,666 2,661 2,655 2,645 2,635 2,661 2,651 40 Federal National Mortgage Association .... 87,940 98,282 97,895 98,795 97,295 97,717 97,895 95,140 41 1- to 4-family 82,175 91,966 90,718 92,315 90,460 90,508 90,718 88,126 42 Multifamily 5,765 6,316 7,177 6,480 6,835 7,209 7,177 7,014 43 Federal Land Banks 52,261 47,498 39,984 45,422 43,369 42,119 39,984 38,684 44 1- to 4-family 3,074 2,798 2,353 2,673 2,552 2,478 2,353 2,276 45 Farm 49,187 44,700 37,631 42,749 40,817 39,641 37,631 36,408 46 Federal Home Loan Mortgage Corporation. 10,399 14,022 11,564 13,623 14,194 13,359 11,564 10,764 47 1- to 4-family 9,654 11,881 10,010 12,231 11,890 11,127 10,010 9,610 48 Multifamily 745 2,141 1,554 1,392 2,304 2,232 1,554 1,154 49 Mortgage pools or trusts5 . . . . 332,057 415,042 529,763 440,701 475,615 522,721 529,763 575,567 50 Government National Mortgage Association 179,981 212,145 260,869 220,348 229,204 241,230 260,869 279,598 51 1-to 4-family 175,589 207,198 255,132 215,148 223,838 235,664 255,132 273,449 52 Multifamily 4,392 4,947 5,737 5,200 5,366 5,566 5,737 6,149 53 Federal Home Loan Mortgage Corporation. 70,822 100,387 171,372 110,337 125,903 146,871 171,372 187,962 54 1- to 4-family 70,253 99,515 166,667 108,020 123,676 143,734 166,667 182,857 55 Multifamily 569 872 4,705 2,317 2,227 3,137 4,705 5,105 56 Federal National Mortgage Association .... 36,215 54,987 97,174 62,310 72,377 86,359 97,174 107,673 57 1- to 4-family 35,965 54,036 95,791 61,117 71,153 85,171 95,791 106,068 58 Multifamily 250 951 1,383 1,193 1,224 1,188 1,383 1,605 59 Farmers Home Administration4 45,039 47,523 348 47,706 48,131 48,261 348 334 60 1- to 4-family 21,813 22,186 142 22,082 21,987 21,782 142 137 61 Multifamily 5,841 6,675 n.a. 6,943 7,170 7,353 0 0 62 Commercial 7,559 8,190 132 8,150 8,347 8,409 132 127 63 Farm 9,826 10,472 74 10,531 10,627 10,717 74 70 64 Individuals and others6 272,902 294,559 324,224 301,555 311,539 323,357 324,224 328,112 65 1- to 4-family 153,710 165,199 180,159 167,755 174,396 182,569 180,159 181,628 66 Multifamily 48,480 55,195 65,864 57,850 60,938 63,635 65,864 67,673 67 Commercial 41,279 47,897 53,327 49,756 50,513 51,983 53,327 54,676 68 Farm 29,433 26,268 24,874 26,194 25,692 25,170 24,874 24,135 1. Based on data from various institutional and governmental sources, with reallocated from FmHA mortgage pools to FmHA mortgage holdings in 1986: 4, some quarters estimated in part by the Federal Reserve. Multifamily debt refers to because of accounting changes by the Farmers Home Administration. loans on structures of five or more units. 5. Outstanding principal balances of mortgage pools backing securities insured 2. Includes loans held by nondeposit trust companies but not bank trust or guaranteed by the agency indicated. departments. 6. Other holders include mortgage companies, real estate investment trusts, 3. Assumed to be entirely 1- to 4-family loans. state and local credit agencies, state and local retirement funds, noninsured 4. FmHA-guaranteed securities sold to the Federal Financing Bank were pension funds, credit unions, and other U.S. agencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • July 1987 1.55 CONSUMER INSTALLMENT CREDIT1-4 Total Outstanding, and Net Change, seasonally adjusted Millions of dollars 1986 1987 noiuer, anu lype oi creun 11998855 11998866 July Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar. Amounts outstanding (end of period) 1 Total 522,805 577,784 558,059 563,660 571,280 576,874 577,656 577,784 578,578 579,591 579,528 By major holder 2 Commercial banks 242,084 261,604 255.744 257,482 258,990 260,940 262,949 261,604 261,694 262,105 262,344 3 Finance companies2 113,070 136,494 127,380 129,265 135,516 138,038 136,314 136,494 135,802 136,009 136,050 4 Credit unions 72,119 77,857 74,865 75,637 76,299 76,995 77,508 77,857 78,284 78,492 78,325 5 Retailers3 38,864 40,586 40,158 40,379 40,455 40,565 40,496 40,586 40,617 40,644 40,469 6 Savings institutions 52,433 58,037 56,500 57,524 56,687 57,046 57,168 58,037 58,906 59,031 58,936 7 Gasoline companies 4,235 3,205 3,411 3,372 3,333 3,289 3,221 3,205 3,276 3,311 3,405 By major type of credit 8 Automobile 208,057 245,055 227,822 231,200 239,014 243,400 243,005 245,055 245,472 246,064 246,114 9 Commercial banks 93,003 100,709 95,972 96,871 98,057 99,385 100,221 100,709 101,389 101,688 101,589 10 Credit unions 35,635 39,029 37,529 37,916 38,248 38,597 38,854 39,029 39,243 39,347 39,264 1111 Finance companies 70,091 93,274 83,066 84,868 91,241 93,786 92,188 93,274 92,617 92,780 93,032 1122 Savings institutions 9,328 12,043 11,255 11,545 11,468 11,632 11,742 12,043 12,223 12,249 12,229 13 Revolving 122,021 134,938 132,181 133,180 133,123 113333,,881166 134,391 134,938 134,916 135,663 135,150 14 Commercial banks 75,866 85,652 83,987 84,545 84,430 8844,,886688 85,426 85,652 85,395 86,053 85,631 15 Retailers 34,695 36,240 35,827 36,028 36,086 36,190 36,137 36,240 36,277 36,308 36,141 16 Gasoline companies 4,235 3,205 3,411 3,372 3,333 3,289 3,221 3,205 3,276 3,311 3,405 17 Savings institutions 5,705 7,713 7,105 7,325 7,308 7,445 7,529 7,713 7,829 7,845 7,833 18 Credit unions 1,520 2,128 1,851 1,910 1,966 2,024 2,078 2,128 2,139 2,145 2,141 19 Mobile home 25,488 25,710 25,891 25,939 25,732 25,784 25,731 25,710 25,852 25,789 25,563 20 Commercial banks 9,538 8,812 9,126 9,055 9,016 9,025 8,951 8,812 8,787 8,739 8,749 21 Finance companies 9,391 9,028 9,414 9,337 9,216 9,149 9,091 9,028 9,077 9,045 8,823 22 Savings institutions 6,559 7,870 7,351 7,547 7,500 7,610 7,689 7,870 7,988 8,005 7,992 23 Other 167,239 172,081 172,165 173,341 173,411 173,874 174,529 172,081 172,338 172,076 172,701 24 Commercial banks 63,677 66,431 66,659 67,011 67,487 67,662 68,351 66,431 66,122 65,625 66,375 25 Finance companies 33,588 34,192 34,900 35,061 35,059 35,104 35,035 34,192 34,108 34,183 34,196 26 Credit unions 34,964 36,700 35,485 35,811 36,085 36,374 36,576 36,700 36,901 36,999 36,921 27 Retailers 4,169 4,346 4,331 4,351 4,369 4,375 4,359 4,346 4,340 4,336 4,327 28 Savings institutions 30,841 30,412 30,790 31,107 30,411 30,359 30,208 30,412 30,867 30,932 30,882 Net change (during period) 29 Total 76,622 54,979 6,289 5,601 7,620 5,594 782 128 794 1,013 -63 By major holder 30 Commercial banks 32,926 19,520 2,366 1,738 1,508 1,950 2,009 -1,345 90 411 239 31 Finance companies2 23,566 23,424 2,234 1,885 6,251 2,522 -1,724 180 -692 207 41 32 Credit unions 6,493 5,738 622 772 662 696 513 349 427 208 -167 a Retailers3 1,660 1,722 175 221 76 110 -69 90 31 27 -175 34 Savings institutions 12,103 5,604 931 1,024 -837 359 122 869 869 125 -95 35 Gasoline companies -126 -1,030 -41 -39 -39 -44 -68 -16 71 35 94 By major type of credit 36 Automobile 35,705 36,998 3,415 3,378 7,814 4,386 -395 22,,005500 417 592 50 37 Commercial banks 9,103 7,706 707 899 1,186 1,328 836 448888 680 299 -99 38 Credit unions 5,330 3,394 312 387 332 349 257 175 214 104 -83 39 Finance companies 17,840 23,183 2,121 1,802 6,373 2,545 -1,598 1,086 -657 163 252 40 Savings institutions 3,432 2,715 275 290 -77 164 110 301 180 26 -20 41 Revolving 22,401 12,917 1,444 999 -57 693 575 547 -22 747 -513 42 Commercial banks 17,721 9,786 1,076 558 -115 438 558 226 -257 658 -422 43 Retailers 1,488 1,545 149 201 58 104 -53 103 37 31 -167 44 Gasoline companies -126 -1,030 -41 -39 -39 -44 -68 -16 71 35 94 45 Savings institutions 2,771 2,008 206 220 -17 137 84 184 116 16 -12 46 Credit unions 547 608 54 59 56 58 54 50 11 6 -4 47 Mobile home 778 222 85 48 -207 52 -53 -21 142 -63 -226 48 Commercial banks -85 -726 -62 -71 -39 9 -74 -139 -25 -48 10 49 Finance companies -405 -363 -36 -77 -121 -67 -58 -63 49 -32 -222 50 Savings institutions 1,268 1,311 183 196 -47 110 79 181 118 17 -13 51 Other 17,738 4,842 1,345 1,176 70 463 655 -2,448 257 -262 625 52 Commercial banks 6,187 2,754 645 352 476 175 689 -1,920 -309 -497 750 53 Finance companies 6,131 604 149 161 -2 45 -69 -843 -84 75 13 54 Credit unions 616 1,736 256 326 274 289 202 124 201 98 -78 55 Retailers 172 177 26 20 18 6 -16 -13 -6 -4 -9 56 Savings institutions 4,632 -429 269 317 -696 -52 -151 204 455 65 -50 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 1987 IItteemm 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar. INTEREST RATES Commercial banks1 1 48-month new car2 13.71 12.91 11.33 n.a. n.a. 10.58 n.a. n.a. 10.35 n.a. 2 24-month personal 16.47 15.94 14.82 n.a. n.a. 14.19 n.a. n.a. 14.10 n.a. 3 120-month mobile home2 15.58 14.% 13.99 n.a. n.a. 13.49 n.a. n.a. 13.42 n.a. 4 Credit card 18.77 18.69 18.26 n.a. n.a. 18.09 n.a. n.a. 18.10 n.a. i Au N to e w fi n c a a n r ce companies 14.62 11.98 9.44 5.40 6.12 11.83 11.71 11.65 10.78 10.59 6 Used car 17.85 17.59 15.95 15.23 15.17 15.20 15.12 14.62 14.56 14.40 OTHER TERMS3 Maturity (months) 7 New car 48.3 51.5 50.0 44.5 45.3 53.4 53.3 53.8 53.6 53.7 8 Used car 39.7 41.4 42.6 42.5 42.2 42.6 42.7 44.8 44.7 44.9 Loan-to-value ratio 9 New car 88 91 91 92 92 93 93 94 94 94 10 Used car 92 94 97 98 97 97 98 98 99 99 Amount financed (dollars) 11 New car 9,333 9,915 10,665 11,162 11,340 11,160 10,835 10,902 10,602 10,641 12 Used car 5,691 6,089 6,555 6,763 6,746 6,946 7,168 7,067 7,075 7,145 1. Data for midmonth of quarter only. 3. At auto finance companies. 2. Before 1983 the maturity for new car loans was 36 months, and for mobile NOTE. These data also appear in the Board's G.19 (421) release. For address, home loans was 84 months. see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1987 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; half-yearly data are at seasonally adjusted annual rates. 1984 1985 1986 HI H2 HI H2 HI H2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors .... 375.8 387.4 548.8 756.3 869.3 827.7 727.8 784.8 732.6 1,006.1 705.2 950.7 By sector and instrument 2 U.S. government 87.4 161.3 186.6 198.8 223.6 214.3 181.3 216.3 201.8 245.5 211.3 217.5 3 Treasury securities 87.8 162.1 186.7 199.0 223.7 214.7 181.5 216.4 201.9 245.5 211.4 218.0 4 Agency issues and mortgages -.5 -.9 -.1 -.2 -.1 -.3 -.2 -.1 -.1 -.1 -.1 -.5 5 Private domestic nonfinancial sectors 288.5 226.2 362.2 557.5 645.7 613.3 546.5 568.5 530.8 760.6 494.0 733.2 6 Debt capital instruments 155.5 148.3 252.8 314.0 461.7 447.0 298.4 329.6 355.4 568.0 384.3 509.7 7 Tax-exempt obligations 23.4 44.2 53.7 50.4 152.4 48.5 42.8 58.0 67.5 237.3 15.9 81.1 8 Corporate bonds 22.8 18.7 16.0 46.1 73.9 109.2 31.2 61.1 72.7 75.1 129.2 89.1 9 Mortgages 109.3 85.4 183.0 217.5 235.4 289.4 224.5 210.5 215.2 255.7 239.2 339.5 10 Home mortgages 72.2 50.5 117.1 129.9 150.3 200.6 135.2 124.7 133.1 167.5 156.4 244.7 11 Multifamily residential 4.8 5.4 14.1 25.1 29.2 30.4 27.5 22.7 24.6 33.7 30.9 29.9 12 Commercial 22.2 25.2 49.0 63.3 62.4 64.4 62.9 63.7 60.3 64.4 59.3 69.5 13 Farm 10.0 4.2 2.8 -.8 -6.4 -6.0 -1.1 -.5 -2.8 -10.0 -7.4 -4.6 14 Other debt instruments 133.0 77.9 109.5 243.5 184.0 166.3 248.1 238.9 175.4 192.6 109.6 223.5 13 Consumer credit 22.6 17.7 56.8 95.0 96.6 67.9 98.7 91.3 97.3 95.9 75.3 61.2 16 Bank loans n.e.c 57.0 52.9 25.8 80.1 41.3 80.2 91.9 68.4 24.9 57.7 22.0 138.4 17 Open market paper 14.7 -6.1 -.8 21.7 14.6 -9.3 24.8 18.7 12.3 16.9 -15.7 -2.9 18 Other 38.7 13.4 27.7 46.6 31.4 27.4 32.7 60.5 40.9 22.0 28.1 26.8 19 By borrowing sector 288.5 226.2 362.2 557.5 645.7 613.3 546.5 568.5 530.8 760.6 494.0 733.2 20 State and local governments 6.8 21.5 34.0 27.4 107.8 60.0 25.2 29.6 56.8 158.7 35.7 84.2 21 Households 121.4 88.4 188.0 239.5 295.0 291.2 232.8 246.2 253.6 336.4 231.8 351.1 22 Farm 16.6 6.8 4.3 .1 -13.6 -11.7 -.4 .5 -5.9 -21.3 -15.2 -8.3 23 Nonfarm noncorporate 38.5 40.2 76.6 97.1 92.8 100.7 101.4 92.7 85.6 99.9 95.7 105.7 24 Corporate 105.2 69.2 59.3 193.4 163.7 173.2 187.4 199.5 140.7 186.8 145.9 200.5 25 Foreign net borrowing in United States 23.5 16.0 17.4 6.1 1.7 14.4 35.5 -23.3 -4.1 7.5 24.3 4.4 26 Bonds 5.4 6.7 3.1 1.3 4.0 5.2 1.1 1.5 5.5 2.6 7.1 3.3 27 Bank loans n.e.c 3.0 -5.5 3.6 -6.6 -2.8 -2.1 -2.2 -11.1 -6.1 .4 1.4 -5.6 28 Open market paper 3.9 1.9 6.5 6.2 6.2 11.5 18.0 -5.6 4.2 8.2 20.6 2.4 29 U.S. government loans 11.1 13.0 4.1 5.3 -5.7 -.2 18.7 -8.1 -7.8 -3.6 -4.8 4.4 30 Total domestic plus foreign 399.3 403.4 566.2 762.4 871.0 842.0 763.3 761.5 728.4 1,013.5 729.5 955.1 Financial sectors 31 Total net borrowing by financial sectors 101.9 90.1 94.0 139.0 186.9 242.0 134.2 143.8 154.8 218.9 189.0 295.0 By instrument 32 U.S. government related 47.4 64.9 67.8 74.9 101.5 171.1 69.8 80.0 92.9 110.2 129.5 212.7 33 Sponsored credit agency securities 30.5 14.9 1.4 30.4 20.6 12.4 29.1 31.8 25.3 15.9 4.4 20.5 34 Mortgage pool securities 15.0 49.5 66.4 44.4 79.9 159.0 40.7 48.2 67.6 92.1 124.3 193.7 35 Loans from U.S. government 1.9 .4 1.1 -.4 2.2 .8 -1.5 36 Private financial sectors 54.5 25.2 26.2 64.1 85.3 71.0 64.4 63.8 61.9 108.8 59.6 82.4 37 Corporate bonds 4.4 12.5 12.1 23.3 36.5 22.3 17.3 29.3 35.3 37.7 28.7 15.9 38 Mortgages * .1 * .4 .1 .1 .4 .4 * .1 .6 -.5 39 Bank loans n.e.c 1.2 1.9 -.1 .7 2.6 3.6 -.1 1.4 .9 4.2 2.4 4.7 40 Open market paper 32.7 9.9 21.3 24.1 32.0 25.2 31.1 17.0 13.9 50.1 14.4 36.1 41 Loans from Federal Home Loan Banks 16.2 .8 -7.0 15.7 14.2 19.8 15.7 15.7 11.7 16.7 13.5 26.2 By sector 42 Sponsored credit agencies 32.4 15.3 1.4 30.4 21.7 12.1 29.1 31.8 25.3 18.1 5.2 18.9 43 Mortgage pools 15.0 49.5 66.4 44.4 79.9 159.0 40.7 48.2 67.6 92.1 124.3 193.7 44 Private financial sectors 54.5 25.2 26.2 64.1 85.3 71.0 64.4 63.8 61.9 108.8 59.6 82.4 45 Commercial banks 11.6 11.7 5.0 7.3 -4.9 -2.2 15.4 -.9 -9.2 -.6 -6.7 2.3 46 Bank affiliates 9.2 6.8 12.1 15.6 14.5 4.5 23.7 7.5 13.7 15.3 1.7 7.2 47 Savings and loan associations 15.5 2.5 -2.1 22.7 22.3 31.3 20.2 25.1 12.1 32.6 23.1 39.5 48 Finance companies 18.5 4.3 11.4 17.8 52.8 36.9 4.3 31.3 44.8 60.9 40.6 33.2 49 REITs -.2 * -.2 .8 .5 .5 .8 .8 .5 .5 .9 .1 All sectors 50 Total net borrowing 501.3 493.5 660.2 901.4 1057.8 1084.1 897.5 905.3 833.3 1,232.4 918.6 1250.1 51 U.S. government securities 133.0 225.9 254.4 273.8 324.2 385.8 251.2 296.4 294.8 353.5 340.0 431.7 52 State and local obligations 23.4 44.2 53.7 50.4 152.4 48.5 42.8 58.0 67.5 237.3 15.9 81.1 53 Corporate and foreign bonds 32.6 37.8 31.2 70.7 114.4 136.6 49.6 91.9 113.5 115.3 165.0 108.3 54 Mortgages 109.2 85.4 183.0 217.8 235.4 289.4 224.8 210.8 215.2 255.7 239.7 339.0 55 Consumer credit 22.6 17.7 56.8 95.0 96.6 67.9 98.7 91.3 97.3 95.9 75.3 61.2 56 Bank loans n.e.c 61.2 49.3 29.3 74.2 41.0 81.7 89.6 58.8 19.8 62.3 25.9 137.5 57 Open market paper 51.3 5.7 26.9 52.0 52.8 27.4 73.8 30.1 30.4 75.2 19.3 35.5 58 Other loans 68.0 27.6 24.8 67.6 41.0 46.7 67.1 68.1 44.8 37.3 37.5 55.8 External corporate equity funds raised in United States 59 Total new share issues -3.3 33.6 67.0 -31.1 37.5 115.3 -40.1 -22.2 33.3 41.6 149.6 81.1 60 Mutual funds 6.0 16.8 32.1 38.0 103.4 187.6 39.3 36.6 93.6 113.1 201.5 173.6 61 All other -9.3 16.8 34.9 -69.1 -65.9 -72.3 -79.4 -58.8 -60.4 -71.5 -52.0 -92.6 62 Nonfinancial corporations -11.5 11.4 28.3 -77.0 -81.6 -80.8 -84.5 -69.4 -75.7 -87.5 -68.7 -92.7 63 Financial corporations 1.9 4.0 2.7 6.7 11.7 6.7 5.9 7.6 11.0 12.4 8.3 5.1 64 Foreign shares purchased in United States .3 1.5 3.9 1.2 4.0 1.8 -.7 3.0 4.3 3.6 8.5 -4.9 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A43 1.58 DIRECT AND INDIRECT SOURCES OF FUNDS TO CREDIT MARKETS Billions of dollars, except as noted; half-yearly data are at seasonally adjusted annual rates. Transaction category, or sector 1982 1983 1984 HI H2 HI 1 Total funds advanced in credit markets to domestic nonfinancial sectors 375.8 387.4 548.8 756.3 869.3 727.8 784.8 732.6 1,006.1 705.2 950 .7 By public agencies and foreign 2 Total net advances 104.4 115.4 115.3 154.6 203.3 313.0 132.5 176.6 201.8 204.9 261.3 364 .6 3 U.S. government securities 17.1 22.7 27.6 36.0 47.2 85.5 26.8 45.2 53.1 41.3 77.4 93 .5 4 Residential mortgages 23.5 61.0 76.1 56.5 94.6 156.5 52.7 60.2 85.6 103.7 121.0 191 .9 5 FHLB advances to savings and loans 16.2 .8 -7.0 15.7 14.2 19.8 15.7 15.7 11.7 16.7 13.5 26 .2 6 Other loans and securities 47.7 30.8 18.6 46.5 47.3 51.2 37.5 55.5 51.4 43.2 49.4 53 .0 Total advanced, by sector 7 U.S. government 24.0 15.9 9.7 17.4 17.8 14.2 9.0 25.7 28.8 6.7 14.6 13 .8 8 Sponsored credit agencies 48.2 65.5 69.8 73.3 101.5 170.6 74.0 72.5 98.2 104.9 127.3 214 .0 9 Monetary authorities 9.2 9.8 10.9 8.4 21.6 30.2 8.0 23.7 19.5 9.8 50 .6 10 Foreign 23.0 24.1 24.9 55.5 62.4 98.0 40.7 70.4 51.0 73.8 109.7 86 '.2 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools . 47.4 64.9 67.8 74.9 101.5 171.1 69.8 80.0 92.9 110.2 129.5 212 .7 12 Foreign 23.5 16.0 17.4 6.1 1.7 14.4 35.5 -23.3 -4.1 7.5 24.3 4 .4 Private domestic funds advanced 13 Total net advances 342.3 352.9 518.7 682.7 769.2 700.1 700.5 664.9 619.6 918.8 597.7 803 .2 14 U.S. government securities 115.9 203.1 226.9 237.8 277.0 300.3 224.4 251.2 241.7 312.2 262.5 338 .2 15 State and local obligations 23.4 44.2 53.7 50.4 152.4 48.5 42.8 58.0 67.5 237.3 15.9 81 .1 16 Corporate and foreign bonds 19.8 14.8 14.6 32.6 41.2 75.3 25.6 39.6 49.7 32.7 96.4 54 .3 17 Residential mortgages 53.5 -5.3 55.0 98.5 84.8 74.5 109.9 87.0 72.0 97.5 66.2 82 .7 18 Other mortgages and loans 145.9 96.9 161.5 279.1 228.1 221.3 313.6 244.7 200.4 255.9 170.1 273 .0 19 LESS: Federal Home Loan Bank advances 16.2 -7.0 15.7 14.2 19.8 15.7 15.7 11.7 16.7 13.5 26 .2 Private financial intermediation 20 Credit market funds advanced by private financial institutions 320.2 261.9 391.9 550.5 554.4 659.2 581.8 519.1 471.3 637.4 572.5 746 .6 21 Commercial banking 106.5 110.2 144.3 168.9 186.3 203.2 184.2 153.5 133.8 238.8 106.9 299 .8 22 Savings institutions 26.2 21.8 135.6 149.2 83.4 109.6 173.5 124.9 63.0 103.9 101.4 117 .8 23 Insurance and pension funds 93.5 86.2 97.8 124.0 141.0 137.3 144.5 103.5 121.8 160.1 124.6 150 .1 24 Other finance 94.0 43.7 14.1 108.3 143.6 209.1 79.5 137.2 152.7 134.5 239.6 178 .8 25 Sources of funds 320.2 261.9 391.9 550.5 554.4 659.2 581.8 519.1 471.3 637.4 572.5 746 .6 26 Private domestic deposits and RPs 214.5 195.2 212.2 317.6 204.8 253.3 300.2 334.9 203.0 206.6 224.5 282 .3 27 Credit market borrowing 54.5 25.2 26.2 64.1 85.3 71.0 64.4 63.8 61.9 108.8 59.6 82 .4 28 Other sources 51.2 41.5 153.4 168.8 264.2 334.9 217.2 120.4 206.5 322.0 288.4 381 .9 29 Foreign funds -23.7 -31.4 16.3 5.4 17.7 14.7 3.0 7.8 11.2 24.3 .9 28 .6 30 Treasury balances -1.1 6.1 -5.3 4.0 10.3 1.9 -.1 8.2 14.4 6.1 -5.5 9 .4 31 Insurance and pension reserves 89.6 92.5 110.6 112.5 107.0 120.2 146.5 78.5 97.4 116.6 104.5 135 .9 32 Other, net -13.6 -25.7 31.8 46.8 129.2 198.1 67.8 25.9 83.5 175.0 188.5 208 .1 Private domestic nonfinancial investors 33 Direct lending in credit markets 76.6 116.3 153.0 196.4 300.2 111.9 183.1 209.6 210.2 390.2 84.8 139 .0 34 U.S. government securities 37.1 69.9 95.5 132.9 150.9 65.7 142.2 123.6 130.8 171.0 53.4 78 .2 35 State and local obligations 11.1 25.0 39.0 29.6 59.2 6.4 25.0 34.3 20.5 98.0 -24.5 37 .3 36 Corporate and foreign bonds -4.0 2.0 -12.7 -3.4 13.2 11.5 -26.8 19.9 25.4 1.0 44.6 -21 .6 37 Open market paper 1.4 -1.3 15.1 8.9 51.8 7.0 15.7 2.2 7.3 96.3 -13.0 27 .1 38 Other 31.0 20.6 16.2 28.3 25.1 21.3 26.9 29.7 26.3 24.0 24.3 18 .0 39 Deposits and currency 222.4 204.5 229.7 321.1 215.1 274.9 311.3 330.9 215.9 214.3 241.6 308 .3 40 Currency 9.5 9.7 14.3 8.6 12.4 14.4 13.1 4.1 15.8 9.0 10.9 18 .0 41 Checkable deposits 18.5 18.6 28.8 27.8 42.0 99.2 29.4 26.3 18.2 65.8 83.9 114 .6 42 Small time and savings accounts 47.3 135.7 215.3 150.7 137.5 117.9 136.4 164.9 167.1 108.0 117.5 118 .3 43 Money market fund shares 107.5 24.7 -44.1 47.2 -2.2 20.8 30.2 64.2 4.2 -8.6 29.0 12 .7 44 Large time deposits 36.0 5.2 -6.3 84.9 14.0 1.6 93.4 76.5 -.8 28.9 2.0 .3 45 Security RPs 5.2 11.1 18.5 7.0 13.4 13.7 10.8 3.1 14.3 12.5 -7.9 .3 46 Deposits in foreign countries -1.7 -.4 3.1 -5.1 -2.1 7.1 -2.0 -8.2 -2.9 -1.3 6.2 .1 47 Total of credit market instruments, deposits and currency 320.7 382.7 517.4 494.4 540.5 426.0 604.5 326.4 .3 48 Public holdings as percent of total 26.2 28.6 20.4 20.3 23.3 37.2 17.4 23.2 27.7 20.2 35.8 38 .2 49 Private financial intermediation (in percent) 93.6 74.2 75.5 80.6 72.1 94.2 83.1 78.1 76.1 69.4 95.8 93 .0 50 Total foreign funds -.7 -7.3 41.3 60.9 80.1 112.7 43.7 78.2 62.2 98.1 110.5 114 .8 MEMO: Corporate equities not included above 51 Total net issues -3.3 33.6 67.0 -31.1 37.5 115.3 -40.1 -22.2 33.3 41.6 149.6 81 .1 52 Mutual fund shares 6.0 16.8 32.1 38.0 103.4 187.6 39.3 36.6 93.6 113.1 201.5 173 .6 53 Other equities -9.3 16.8 34.9 -69.1 -65.9 -72.3 -79.4 -58.8 -60.4 -71.5 -52.0 -92 .6 54 Acquisitions by financial institutions 19.9 27.6 46.8 8.2 33.3 27.8 -4.1 20.6 54.0 12.6 35.4 20 .3 55 Other net purchases -23.2 6.0 20.2 -39.4 4.1 87.5 -36.0 -42.7 -20.7 29.0 114.2 60 .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 • July 1987 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures1 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1986 1987 MMeeaassuurree 11998844 11998855 11998866 Aug. Sept. Oct. Nov. Dec. Jan. Feb.' Mar.' Apr. 1 Industrial production 121.4 123.8 125.0 125.1 124.9 125.3 126.0 126.7 126.5 127.1 126.8 126.3 Market groupings 2 Products, total 126.7 130.8 133.2 133.8 133.3 134.0 134.5 135.0 134.9' 136.0 135.6 134.9 3 Final, total 127.3 131.1 132.3 132.6 132.2 132.7 133.1 133.7 133.6' 135.0 134.4 133.5 4 Consumer goods 118.0 120.2 124.4 125.1 124.2 124.7 125.6 127.2 126.8' 127.5 127.0 125.9 5 Equipment 139.6 145.4 142.7 142.5 142.8 143.3 143.1 142.2 142.8' 144.9 144.2 143.6 6 Intermediate 124.7 130.0 136.4 137.8 137.0 138.7 139.2 139.7 139.1' 139.3 139.7 139.5 7 Materials 114.2 114.2 113.9 113.2 113.5 113.3 114.3 115.2 115.2' 115.0 114.8 114.7 Industry groupings 8 Manufacturing 123.4 126.4 129.1 129.5 129.5 129.9 130.3 131.1 131.1' 132.0 131.7 131.1 Capacity utilization (percent)2 9 Manufacturing 80.5 80.1 79.8 79.7 79.6 79.6 79.8 80.0 80.(K 80.3 80.0 79.5 10 Industrial materials industries 82.0 80.2 78.5 77.9 78.1 77.8 78.4 78.9 78.8' 78.6 78.4 78.2 11 Construction contracts (1982 = 100)3 135.0 148.0 155.0 155.0 155.0 151.0 156.0 155.0 150.0 145.0 160.0 158.0 12 Nonagricultural employment, total4 114.6 118.4 121.5 121.6 121.9 122.3 122.6 122.9 123.2 123.5 123.7 124.1 13 Goods-producing, total 101.6 102.4 102.4 102.2 102.1 102.1 102.3 102.4 102.7 102.9 102.7 102.9 14 Manufacturing, total 98.4 98.1 97.5 97.1 97.0 97.1 97.3 97.5 97.4 97.6 97.6 97.6 15 Manufacturing, production-worker ... 94.1 92.9 92.1 91.7 91.7 91.8 92.1 92.3 92.2 92.4 92.5 92.6 16 Service-producing 120.0 125.0 129.4 129.7 130.2 130.7 131.1 131.4 131.8 132.2 132.5 133.0 W Personal income, total 193.5 206.2 216.8 217.6 218.2 218.8 219.2 220.4 221.1 223.9 224.3 225.0 18 Wages and salary disbursements 184.8 197.8 208.6 209.6 210.1 211.5 212.5 212.8 214.2 215.9 216.7 217.4 19 Manufacturing 164.6 172.5 176.7 176.6 176.5 179.0 177.8 178.1 178.7 179.6 179.3 179.0 20 Disposable personal income5 193.6 205.0 215.5 215.9 216.4 216.7 216.8 217.5 218.7' 222.6 222.7 217.3 21 Retail sales6 179.0 190.6 199.9 201.7 213.0 201.9 200.9 211.8 196.8 206.3 207.9 208.1 Prices7 22 Consumer (1967=100) 311.1 322.2 328.4 328.6 330.2 330.5 330.8 331.1 333.1 334.4 335.9 337.7 23 Producer finished goods (1967= 100) .... 291.1 293.7 289.6 288.1 287.3 290.7' 290.7 290.4' 291.7 292.3 292.3 295.0 1. A major revision of the industrial production index and the capacity 5. Based on data in Survey of Current Business (U.S. Department of Comutilization rates was released in July 1985. See "A Revision of the Index of merce). Industrial Production" and accompanying tables that contain revised indexes 6. Based on Bureau of Census data published in Survey of Current Business. (1977=100) through December 1984 in the FEDERAL RESERVE BULLETIN, vol. 71 7. Data without seasonal adjustment, as published in Monthly Labor Review. (July 1985), pp. 487-501. The revised indexes for January through June 1985 were Seasonally adjusted data for changes in the price indexes may be obtained from shown in the September BULLETIN. the Bureau of Labor Statistics, U.S. Department of Labor. 2. Ratios of indexes of production to indexes of capacity. Based on data from Federal Reserve, McGraw-Hill Economics Department, Department of Com- NOTE. Basic data (not index numbers) for series mentioned in notes 4, 5, and 6, merce, and other sources. and indexes for series mentioned in notes 3 and 7 may also be found in the Survey 3. Index of dollar value of total construction contracts, including residential, of Current Business. nonresidential and heavy engineering, from McGraw-Hill Information Systems Figures for industrial production for the last two months are preliminary and Company, F. W. Dodge Division. estimated, respectively. 4. Based on data in Employment and Earnings (U.S. Department of Labor). Series covers employees only, excluding personnel in the Armed Forces. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A45 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data are seasonally adjusted. Exceptions noted. 1986 1987 CCaatteeggoorryy 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 178,602 180,440 182,822 183,261 183,450 183,628 183,815 184,092 184,259 184,436 184,597 2 Labor force (including Armed Forces)1 115,763 117,695 120,078 120,536 120,678 120,940 120,854 121,299 121,610 121,479 121,588 3 Civilian labor force 113,544 115,461 117,834 118,272 118,414 118,675 118,586 119,034 119,349 119,222 119,335 4 Nonagricultural industries2 101,685 103,971 106,434 106,845 107,030 107,217 107,476 107,866 108,146 108,084 108,545 Agriculture 3,321 3,179 3,163 3,142 3,162 3,215 3,161 3,145 3,236 3,284 3,290 Unemployment 6 Number 8,539 8,312 8,237 8,285 8,222 8,243 7,949 8,023 7,967 7,854 7,500 7 Rate (percent of civilian labor force) ... 7.5 7.2 7.0 7.0 6.9 6.9 6.7 6.7 6.7 6.6 6.3 8 Not in labor force 62,839 62,745 62,744 62,725 62,772 62,688 62,961 62,793 62,649 62,957 63,009 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 94,496 97,614 100,167 100,560 100,826 101,068 101,322 101,626 101,854' 102,009' 102,325 10 Manufacturing 19,378 19,314 19,186 19,105 19,118 19,156 19,186 19,168 19,211' 19,210' 19,224 11 Mining 966 930 792 743 746 742 738 731 733' 735 740 12 Contract construction 4,383 4,687 4,960 5,010 5,001 4,993 4,996 5,109 5,094 5,059' 5,082 13 Transportation and public utilities 5,159 5,242 5,286 5,316 5,316 5,351 5,359 5,382 5,394' 5,412' 5,415 14 Trade 22,100 23,100 23,831 23,924 24,007 24,056 24,065 24,153 24,245' 24,279' 24,351 15 Finance 5,689 5,953 6,305 6,388 6,409 6,429 6,472 6,495 6,519' 6,544' 6,581 16 Service 20,797 21,974 23,072 23,300 23,359 23,451 23,578 23,670 23,752' 23,815' 23,918 17 Government 16,023 16,415 16,735 16,774 16,870 16,890 16,928 16,918 16,906' 16,955' 17,014 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 • July 1987 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION Seasonally adjusted 1986 1987 1986 1987 1986 1987 aeries Q2 Q3 Q4' Ql' Q2 Q3 Q4 Ql Q2 Q3 Q4 QK Output (1977 = 100) Capacity (percent of 1977 output) Utilization rate (percent) 1 Total industry 124.4 125.0 126.0 126.8 157.1 157.9 158.7 159.6 79.2 79.1 79.3 79.5 2 Mining 99.9 96.6 96.6 95.9 132.1 131.9 131.7 131.3 75.6 73.2 73.4 73.1 3 Utilities 108.9 108.8 110.4 109.8 136.9 137.5 138.1 138.7 79.5 79.1 79.8 79.2 4 Manufacturing 128.4 129.4 130.4 131.6 161.4 162.4 163.4 164.4 79.5 79.7 79.8 80.1 5 Primary processing ... 111.1 112.1 114.0 114.9 134.0 134.6 135.1 135.6 82.9 83.3 84.4 84.7 6 Advanced processing , 138.9 139.7 140.4 141.6 177.9 179.1 180.4 181.7 78.0 78.0 77.8 78.0 7 Materials 113.3 113.4 114.3 115.0 144.7 145.3 145.8 146.3 78.3 78.1 78.4 78.6 8 Durable goods 118.8 118.8 120.1 120.9 160.7 161.5 162.2 163.0 73.9 73.6 74.0 74.2 9 Metal materials .... 75.1 73.1 75.7 75.5 114.5 114.0 113.4 112.7 65.6 64.2 66.7 67.0 10 Nondurable goods.... 116.9 119.7 121.2 123.0 139.5 139.9 140.4 141.0 83.8 85.6 86.4 87.2 11 Textile, paper, and chemical.. 117.0 120.4 122.4 124.6 138.8 139.2 139.6 140.4 84.3 86.5 87.6 88.8 12 Paper 130.1 135.1 136.0 136.6 138.1 138.9 139.7 140.8r 94.2 97.3 97.3' 97.0 13 Chemical 115.4 117.7 120.1 122.9 144.3 144.7 145.0 145.6' 80.0 81.4 82.8 84.5 14 Energy materials 100.6 98.6 98.2 97.7 121.3 121.4 121.6 121.6 82.9 81.2 80.7 80.4 Previous cycle1 Latest cycle2 1986 1986 1987 High Low High Low Apr. Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar.' Apr. Capacity utilization rate (percent) 15 Total industry 88.6 72.1 86.9 69.5 79.5 79.2 79.0 79.0 79.4 79.6 79.4 79.6 79.3 78.9 16 Mining 92.8 87.8 95.2 76.9 76.4 73.1 72.9 72.5 73.9 73.8 73.9 72.8 72.5 72.8 17 Utilities 95.6 82.9 88.5 78.0 80.0 78.8 78.7 79.3 80.5 79.5 79.1 79.2 79.3 79.5 18 Manufacturing 87.7 69.9 86.5 68.0 79.9 79.7 79.6 79.6 79.8 80.0 80.0 80.3 80.0 79.5 19 Primary processing ... 91.9 68.3 89.1 65.1 83.2 83.2 83.7 83.8 84.4 85.0 84.9 84.7 84.6 84.2 20 Advanced processing . 86.0 71.1 85.1 69.5 78.5 78.0 77.6 77.8 77.7 77.9 77.8 78.3 77.8 77.3 21 Materials 92.0 70.5 89.1 68.4 78.7 77.9 78.1 77.8 78.4 78.9 78.8 78.6 78.4 78.2 22 Durable goods 91.8 64.4 89.8 60.9 74.9 73.5 73.5 73.6 74.2 74.3 74.0 74.4 74.1 73.9 23 Metal materials 99.2 67.1 93.6 45.7 68.3 63.8 64.8 65.2 68.4 66.5 65.9 67.2 68.0 68.8 24 Nondurable goods .... 91.1 66.7 88.1 70.6 83.6 85.5 86.1 85.8 85.7 87.7 87.5 87.0 87.1 86.7 25 Textile, paper, and chemical 92.8 64.8 89.4 68.6 83.6 86.5 87.4 87.0 86.7 89.2 89.3 88.5 88.5 88.1 26 Paper 98.4 70.6 97.3 79.9 93.6 97.9 96.1 95.7 96.0 100.2 98.3 97.1 95.7 27 Chemical 92.5 64.4 87.9 63.3 79.4 81.2 82.6 82.5 81.7 84.3 84.9 84.2 84.2 28 Energy materials 94.6 86.9 94.0 82.2 82.8 80.6 80.7 79.7 81.2 81.2 81.3 80.0 79.8 79.9 1. Monthly high 1973; monthly low 1975. NOTE. These data also appear in the Board's G.3 (402) release. For address, see 2. Monthly highs 1978 through 1980; monthly lows 1982. inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value A Monthly data are seasonally adjusted Grouping por- avg. tion Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Mar.P Apr.f Index (1977 = 100) MAJOR MARKET 1 Total index 100.00 125.0 124.7 124.2 124.2 124.9 125.1 124.9 125.3 126.0 126.7 126.5 127.1 126.8 126.3 2 Products 57.72 133.2 132.7 132.4 132.4 133.2 133.8 133.3 134.0 134.5 135.0 134.9 136.0 135.6 134.9 3 Final products 44.77 132.3 132.1 131.6 131.1 132.0 132.6 132.2 132.7 133.1 133.7 133.6 135.0 134.4 133.5 4 Consumer goods 25.52 124.4 124.5 124.3 124.4 125.2 125.1 124.2 124.7 125.6 127.2 126.8 127.5 127.0 125.9 5 Equipment 19.25 142.7 142.3 141.2 140.0 141.0 142.5 142.8 143.3 143.1 142.2 142.8 144.9 144.2 143.6 6 Intermediate products 12.94 136.4 134.5 135.1 137.0 137.3 137.8 137.0 138.7 139.2 139.7 139.1 139.3 139.7 139.5 7 Materials 42.28 113.9 113.8 113.0 113.1 113.6 113.2 113.5 113.3 114.3 115.2 115.2 115.0 114.8 114.7 Consumer goods 8 Durable consumer goods 6.89 116.2 115.9 113.8 114.3 116.3 115.7 117.4 116.3 118.4 121.5 120.0 122.3 121.3 118.3 9 Automotive products 2.98 115.1 116.4 113.2 113.7 116.4 114.5 117.0 112.7 114.6 117.7 117.6 123.3 121.3 115.0 10 Autos and trucks 1.79 112.9 115.1 110.3 112.2 114.5 110.4 116.8 107.7 107.6 115.6 117.9 125.2 121.6 111.5 11 Autos, consumer 1.16 97.3 100.8 94.8 99.3 95.3 87.8 96.2 91.9 92.3 99.5 94.3 105.3 100.9 91.8 12 Trucks, consumer .63 141.8 141.5 139.1 136.1 150.3 152.4 155.1 137.1 136.0 145.6 161.9 162.1 13 Auto parts and allied goods 1.19 118.4 118.4 117.4 116.1 119.1 120.7 117.3 120.1 125.2 120.8 117.1 120.6 120.7 120.3 14 Home goods 3.91 117.1 115.5 114.3 114.8 116.3 116.7 117.7 119.0 121.2 124.4 121.9 121.6 121.3 120.7 15 Appliances, A/C and TV 1.24 139.5 138.8 133.9 137.5 138.9 139.4 141.2 142.6 148.1 153.2 146.9 145.2 144.1 143.9 16 Appliances and TV 1.19 141.6 140.6 135.8 139.1 141.6 142.5 143.5 144.3 150.0 155.1 148.9 146.7 145.0 17 Carpeting and furniture .96 125.8 121.8 123.3 122.5 126.6 125.8 126.2 128.8 131.1 132.0 129.1 129.4 130.4 18 Miscellaneous home goods 1.71 96.0 95.0 95.0 94.1 94.1 95.1 96.0 96.5 96.3 99.4 99.8 100.2 99.7 19 Nondurable consumer goods 18.63 127.5 127.7 128.1 128.1 128.4 128.6 126.7 127.8 128.3 129.4 129.2 129.4 129.1 128.7 20 Consumer staples 15.29 97.0 134.3 135.0 135.1 135.3 135.5 133.6 134.4 135.0 136.0 135.9 136.0 135.8 135.5 21 Consumer foods and tobacco 7.80 134.1 131.9 132.4 133.3 132.2 133.2 131.0 131.6 132.6 133.9 132.9 133.7 133.6 22 Nonfood staples 7.49 131.9 136.7 137.7 137.0 138.5 137.9 136.3 137.2 137.4 138.2 139.0 138.4 138.1 138.2 23 Consumer chemical products . 2.75 136.5 163.1 162.4 163.6 166.4 163.4 161.1 161.7 161.0 163.1 165.9 165.4 165.1 24 Consumer paper products 1.88 161.2 145.1 148.6 147.1 146.4 147.7 145.7 150.3 151.5 150.1 149.4 148.6 148.2 25 Consumer energy 2.86 147.4 106.0 106.8 104.8 106.6 107.1 106.3 105.2 105.5 106.4 106.3 105.7 105.6 26 Consumer fuel 1.44 105.7 93.7 96.4 91.8 91.2 94.9 92.0 90.8 91.7 92.2 95.0 92.5 92.0 27 Residential utilities 1.42 92.8 118.4 117.5 118.1 122.3 119.6 120.9 119.8 119.6 120.8 117.8 119.2 Equipment 28 Business and defense equipment 18.01 147.1 146.6 146.0 145.1 146.4 147.8 148.0 148.4 148.1 147.0 147.7 150.0 149.2 148.7 29 Business equipment 14.34 138.6 138.6 137.9 136.6 137.9 139.3 139.3 139.1 138.6 137.1 138.1 140.7 139.6 139.0 30 Construction, mining, and farm . 2.08 59.8 58.6 60.9 61.9 60.6 58.3 58.1 58.0 56.6 58.2 57.2 56.8 57.0 31 Manufacturing 3.27 112.0 111.9 111.9 111.7 112.6 113.3 113.0 112.7 109.6 108.8 110.1 111.1 110.0 109.9 32 Power 1.27 81.6 83.0 82.9 83.5 81.7 81.7 80.3 80.5 79.5 80.2 79.6 80.1 79.1 78.8 33 Commercial 5.22 214.6 213.4 212.9 208.2 214.5 217.5 215.1 215.4 217.3 213.7 215.9 218.6 218.0 218.8 34 Transit 2.49 109.2 112.1 107.3 108.8 103.9 106.9 113.3 111.8 110.7 108.9 109.5 117.4 114.0 109.3 35 Defense and space equipment 3.67 180.3 178.0 178.0 178.4 179.5 181.0 182.0 184.6 184.9 185.8 185.2 186.5 186.7 186.6 Intermediate products 36 Construction supplies 5.95 124.7 123.6 123.5 124.1 124.0 125.4 125.9 126.3 126.8 127.9 128.3 127.9 128.1 127.9 37 Business supplies 6.99 146.4 143.8 145.0 147.9 148.6 148.4 146.4 149.3 149.7 149.8 148.3 149.1 149.6 38 General business supplies 5.67 150.6 148.0 148.3 151.6 153.3 152.5 151.2 154.1 153.7 154.3 153.3 153.8 154.4 39 Commercial energy products 1.31 128.3 125.8 130.7 131.9 128.3 130.6 125.8 128.8 132.4 130.3 126.8 128.8 128.9 Materials 40 Durable goods materials 20.50 119.7 120.2 118.4 117.8 118.8 118.8 118.9 119.2 120.4 120.7 120.5 121.3 121.0 120.7 41 Durable consumer parts 4.92 98.5 99.3 96.4 96.3 96.7 95.2 95.3 97.0 98.0 98.8 99.0 99.9 98.5 97.2 42 Equipment parts 5.94 153.9 154.8 152.3 151.8 154.3 155.6 154.8 153.5 154.5 154.2 154.0 155.5 155.2 155.0 43 Durable materials n.e.c 9.64 109.4 109.4 108.8 107.9 108.2 108.1 108.8 109.4 110.7 111.2 110.8 111.2 111.4 111.5 44 Basic metal materials 4.64 80.0 82.9 78.9 76.7 77.4 76.9 78.4 78.8 82.1 80.3 79.2 80.3 80.9 45 Nondurable goods materials 10.09 118.3 116.5 116.5 117.7 118.9 119.7 120.6 120.3 120.2 123.2 123.2 122.8 123.1 122.8 46 Textile, paper, and chemical materials 7.53 118.9 115.9 116.9 118.2 119.0 120.5 121.8 121.3 121.0 124.7 125.0 124.3 124.5 124.3 47 Textile materials 1.52 110.6 106.7 108.4 109.5 111.2 113.4 116.0 114.3 115.6 116.1 116.5 116.6 118.5 48 Pulp and paper materials 1.55 132.1 129.0 128.6 132.7 135.6 136.0 133.7 133.5 134.2 140.2 137.9 136.7 135.1 49 Chemical materials 4.46 117.1 114.5 115.7 116.1 115.9 117.5 119.7 119.5 118.5 122.3 123.4 122.6 122.8 50 Miscellaneous nondurable materials 2.57 116.5 118.2 115.3 116.4 118.3 117.2 117.1 117.5 117.6 118.5 118.0 118.3 51 Energy materials 11.69 99.9 100.4 100.5 100.8 99.9 97.9 98.0 96.9 98.7 98.8 98.9 97.2 96.9 97.1 52 Primary energy 7.57 105.5 106.2 106.7 106.5 104.8 103.7 103.8 102.7 104.8 105.1 104.1 101.8 101.1 53 Converted fuel materials 4.12 89.6 89.7 89.2 90.4 90.9 87.3 87.4 86.2 87.6 87.3 89.4 88.9 89.3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • July 1987 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value—Continued 1977 1986 1987 SIC pro- 1986 Grouping code por- avg. tion Apr. May June July Aug. Sept. Oct. Nov. Dec Feb. Mar.P Apr.' Index (1977 = 100) MAJOR INDUSTRY 1 Mining and utilities 15.79 103.4 104.2 103.1 102.6 101.8 100.9 100.8 100.7 102.6 101.9 101.9 100.9 100.7 101.0 2 Mining 9.83 99.6 101.0 99.8 98.9 97.1 96.4 96.2 95.6 97.4 96.7 97.2 95.6 95.0 95.2 3 Utilities 5.96 109.6 109.4 108.5 108.6 109.7 108.3 108.3 109.3 111.2 110.6 109.5 109.8 110.2 110.5 4 Manufacturing 84.21 129.1 128.7 128.2 128.3 129.2 129.5 129.5 129.9 130.3 131.1 131.1 132.0 131.7 131.1 5 Nondurable 35.11 130.9 129.6 129.9 131.2 131.7 132.2 131.4 132.3 132.7 133.7 134.1 134.3 134.3 134.3 6 Durable 49.10 127.9 128.1 127.0 126.2 127.4 127.5 128.1 128.1 128.6 129.2 129.0 130.3 129.9 128.9 Mining 7 Metal 10 .50 76.0 72.0 65.9 69.2 70.9 70.7 68.5 68.3 73.5 72.1 71.9 8 Coal 11.12 1.60 124.2 124.4 124.0 127.3 120.2 122.2 120.8 117.6 130.1 124.3 133.5 127.7 121.8 121.1 9 Oil and gas extraction 13 7.07 94.7 96.2 95.1 93.3 92.4 90.7 91.0 90.5 90.4 90.9 89.9 88.6 89.0 89.5 10 Stone and earth minerals 14 .66 113.9 115.0 112.4 114.5 111.8 114.8 111.7 116.4 115.2 109.6 107.1 109.9 111.6 Nondurable manufactures 11 Foods 20 7.96 133.6 133.1 133.7 134.6 134.3 135.1 134.3 133.7 134.4 135.3 135.3 135.4 135.6 12 Tobacco products 21 .62 96.6 100.3 101.6 97.6 97.9 97.1 89.8 100.1 96.8 92.9 89.1 98.7 13 Textile mill products 22 2.29 113.2 111.4 111.3 112.6 113.4 114.7 116.0 116.1 117.8 118.4 118.0 118.7 118.5 14 Apparel products 23 2.79 103.6 103.1 102.6 101.7 102.5 102.5 102.7 104.2 105.1 107.2 108.2 15 Paper and products 26 3.15 136.4 134.1 133.2 137.2 138.1 138.6 136.9 137.8 139.5 141.6 139.8 140.5 139.4 16 Printing and publishing 27 4.54 163.4 161.6 161.9 164.0 165.4 164.6 163.0 167.8 168.5 167.7 168.1 166.6 168.1 169.0 17 Chemicals and products 28 8.05 133.0 132.8 131.5 134.2 134.1 134.4 133.9 133.9 132.3 134.6 137.4 138.0 138.5 18 Petroleum products 29 2.40 92.1 91.3 95.7 91.8 90.6 94.0 93.3 91.1 92.0 92.5 94.7 91.9 90.5 92.0 19 Rubber and plastic products... 30 2.80 153.3 146.8 150.1 152.2 155.5 155.5 154.9 157.6 159.0 160.7 158.1 158.4 159.1 20 Leather and products 31 .53 61.3 61.5 59.5 57.9 61.9 62.0 59.4 60.2 61.3 59.4 58.3 59.7 59.1 Durable manufactures 21 Lumber and products 24 2.30 123.4 121.3 121.6 120.9 120.8 122.5 125.0 125.9 129.5 133.1 130.2 129.9 130.2 22 Furniture and fixtures 25 1.27 146.7 145.9 146.2 147.1 149.5 148.3 147.7 149.2 148.6 150.5 148.7 151.2 152.8 23 Clay, glass, stone products.... 32 2.72 120.2 121.6 120.2 120.8 119.6 119.7 121.6 118.1 120.6 121.7 122.8 121.0 120.9 24 Primary metals 33 5.33 75.8 78.1 74.8 71.4 73.6 73.4 74.1 74.2 76.8 73.5 73.6 76.3 77.0 77.8 25 Iron and steel 331.2 3.49 63.4 65.6 60.2 58.3 61.7 60.8 61.1 62.2 64.8 60.5 60.2 63.1 64.7 26 Fabricated metal products .... 34 6.46 107.4 108.2 106.5 106.6 105.7 105.9 107.3 108.3 107.1 108.3 108.0 107.5 108.0 107.0 27 Nonelectrical machinery 35 9.54 141.9 140.8 141.3 140.4 142.6 142.6 140.9 142.2 141.2 139.9 140.3 142.7 142.3 142.7 28 Electrical machinery 36 7.15 166.5 166.8 166.0 163.2 166.8 167.2 166.9 167.7 168.3 170.2 169.2 168.6 166.7 166.2 29 Transportation equipment 37 9.13 125.8 126.2 124.1 125.1 125.6 125.1 127.7 125.2 125.6 127.0 128.1 131.7 130.6 126.4 30 Motor vehicles and parts.... 371 5.25 110.9 112.6 108.7 110.6 111.2 108.2 112.2 107.1 107.9 111.2 112.2 117.8 115.5 108.9 31 Aerospace and miscellaneous transportation equipment 372-6.9 3.87 146.1 144.8 145.0 144.7 145.2 148.0 148.7 149.7 149.6 148.4 149.6 150.6 151.0 150.1 32 Instruments 38 2.66 141.3 142.4 140.3 139.9 141.7 142.0 141.7 140.3 141.1 142.4 142.5 143.0 142.0 141.5 33 Miscellaneous manufactures.. . 39 1.46 99.3 99.2 101.0 98.3 97.5 98.3 97.7 99.0 98.9 103.1 101.8 101.6 102.0 Utilities 34 Electric 44..1177 112222..22 112211..66 112211..77 112233..11 112255..44 112222..44 112222..88 112233..88 112255..11 112233..55 112211..77 112222..33 112222..77 Gross value (billions of 1982 dollars, annual rates) MAJOR MARKET 35 Products, total 517.S 1,702.2 1,686.3 1,687.6 1,676.7 1,669.9 1,681.3 1,677.8 1,683.9 1,690.8 1,701.9 1,707.1 1,719.6 1,714.7 1,700.8 36 Final 405.7 1,314.5 1,307.0 1,301.1 1,289.5 1,282.7 1,292.6 1,292.3 1,292.5 1,297.6 1,306.7 1,315.1 1,330.9 1,321.8 1,306.7 37 Consumer goods . 272.7 853.8 852.3 852.4 843.8 842.4 846.9 839.8 839.3 847.2 860.5 865.5 869.4 864.4 854.4 38 Equipment 133.0 458.2 454.7 448.7 445.7 440.4 445.7 452.5 453.2 450.4 446.2 449.6 461.4 457.5 452.2 39 Intermediate 111.9 387.6 379.3 386.4 387.2 387.1 388.7 385.5 391.4 393.2 395.3 391.9 388.7 392.9 394.2 • 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 1987 IItteemm 11998844 11998855 11998866 June July Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,682 1,733 1,750 1,793' 1,778' 1,728' 1,687' 1,664' 1,667' 1,862' 1,652 1,676 1,719 2 1-family 922 957 1,071 1,110' 1,098' 1,059' 1,071' 1,036' 1,028' 1,184' 1,085 1,204 1,150 3 2-or-more-family 759 777 679 683' 68C 669' 616' 628' 639' 678' 567 472 569 4 Started 1,749 1,742 1,805 1,842 1,786 1,800 1,689 1,657 1,637 1,813 1,816 1,838 1,749 5 1-family 1,084 1,072 1,179 1,212 1,147 1,180 1,123 1,114 1,129 1,233 1,253 1,303 1,226 6 2-or-more-family 665 669 626 630 639 620 566 543 508 580 563 535 523 7 Under construction, end of period1 1,051 1,063 1,074 1,147 1,154 1,163 1,154 1,142 1,125 1,104 1,089 1,097 1,090 8 1-family 556 539 583 609 620 628 627 625 619 610 609 622 620 9 2-or-more-family 494 524 490 537 534 534 527 518 506 494 480 476 470 10 Completed 1,652 1,703 1,756 1,644 1,750 1,757 1,740 1,745 1,774 1,894 1,956 1,725 1,668 11 1-family 1,025 1,072 1,120 1,068 1,074 1,124 1,113 1,165 1,158 1,184 1,217 1,106 1,126 12 2-or-more-family 627 631 637 576 676 633 627 580 616 710 739 619 542 13 Mobile homes shipped 296 284 244 232 238 231 243 241 237 251 242 231 228 Merchant builder activity in 1-family units 14 Number sold 639 688 748 723 691 623 744 675 691 768' 701 725 699 15 Number for sale, end of period1 358 350 361' 340 350 352 355 357 353 357' 357 358 360 PPrriiccee ((tthhoouussaannddss ooff ddoollllaarrss))11 MMeeddiiaann 1166 UUnniittss ssoolldd 80.0 84.3 92.2 91.2 94.1 91.5 95.0 96.4 94.0 95.C 99.0 94.8 101.5 AAvveerraaggee 1177 UUnniittss ssoolldd 97.5 101.0 112.2' 110.9 116.8 113.2 114.0 114.9 113.6 118.9' 123.1 120.5 122.4 EXISTING UNITS (1-family) 18 Number sold 2,868 3,217 3,566 3,43(K 3,460' 3,590' 3,710' 3,760' 3,850' 4,060' 3,470 3,690 3,680 Price of units sold (thousands of dollars)2 19 Median 72.3 75.4 80. y 82.6 79.9 82.0 80.3' 79.4 80.4 80.8 82.4 85.0 85.6 20 Average 85.9 90.6 98. y 102.1 99.2 100.3 98.2' 97.3 99.1 100.6 100.3 104.3 104.7 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 327,209 355,570 377,903 375,397 380,722 382,603 382,581 388,471 383,142 378,527 381,084 383,934 378,987 n?? Pri R v e a s te id ential 2 1 7 5 1 5 , , 9 1 7 4 3 8 2 1 9 5 2 8 , , 7 8 9 1 2 8 3 1 0 7 6 5 , , 6 5 9 9 7 7 3 1 0 7 4 4 , , 5 4 6 7 7 8 3 1 0 7 9 8 , , 0 82 0 1 3 3 1 1 7 0 8 , , 1 7 5 6 5 1 3 1 0 7 8 8 , , 6 4 1 8 7 0 3 1 1 8 5 6 , , 2 9 6 6 7 2 3 1 1 8 1 5 , , 6 7 6 1 8 6 3 1 0 8 5 1 , , 4 5 8 1 9 4 3 1 0 8 7 5 , , 1 3 9 7 9 3 3 1 0 8 9 3 , ,0 1 3 0 1 9 3 1 0 8 5 3 , , 1 7 0 8 9 6 24 Nonresidential, total 116,825 133,974 131,100 130,089 130,182 131,394 130,137 128.305 125,952 123,975 121,826 126,078 121,323 Buildings ?5 Industrial 13,746 15,769 13,653 13,027 12,866 12,543 13,180 12,948 13,532 12,582 12,155 12,640 11,730 26 Commercial 48,100 59,626 52,084 57,443 58,132 60,054 58,001 56,220 54,884 54,419 51,908 55,167 52,557 27 Other 12,547 12,619 13,433 13,263 13,277 13,315 14,001 14,324 13,937 13,880 14,100 14,617 14,512 28 Public utilities and other 42,432 45,960 51,930 46,356 45,907 45,482 44,955 44,813 43,599 43,094 43,663 43,654 42,524 79 Public 55,232 62,777 71,204 70,830 71,719 72,448 73,964 73,204 71,474 73,039 73,885 74,826 73,878 30 Military 2,839 3,283 3,893 3,761 3,553 4,132 5,050 3,540 3,980 4,295 4,025 3,616 4,156 31 Highway 16,343 19,998 21,260 22,001 21,603 21,607 20,552 20,480 18,425 18,989 22,895 21,898 21,558 32 Conservation and development 4,654 4,952 4,728 4,657 4,415 4,294 4,841 4,754 4,516 5,038 5,100 4,751 4,907 33 Other 31,396 34,544 41,323 40,411 42,148 42,415 43,521 44,430 44,553 44,717 41,865 44,561 43,257 1. Not at annual rates. NOTE. Census Bureau estimates for all series except (a) mobile homes, which 2. Not seasonally adjusted. are private, domestic shipments as reported by the Manufactured Housing 3. Value of new construction data in recent periods may not be strictly Institute and seasonally adjusted by the Census Bureau, and (b) sales and prices of comparable with data in prior periods because of changes by the Bureau of the existing units, which are published by the National Association of Realtors. All Census in its estimating techniques. For a description of these changes see back and current figures are available from originating agency. Permit authoriza- Construction Reports (C-30—76-5), issued by the Bureau in July 1976. tions are those reported to the Census Bureau from 16,000 jurisdictions beginning with 1978. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • July 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 months earlier (at annual rate) Change from 1 month earlier IIInnndddeeexxx llleeevvveeelll IIIttteeemmm AAAppprrr... 1986 1987 1986 1987 111999888777 11998866 11998877 (((111999666777 AApprr.. AApprr.. === 111000000)))111 June Sept. Dec/ Mar/ Dec. Jan. Feb. Mar. Apr. CONSUMER PRICES2 1 All items 1.6 3.8 1.6 2.0 2.5 6.2 .2 .7 .4 .4 .4 337.7 2 Food 2.1 4.7 3.9 8.4 4.1 2.5 .2 .4 .3 -.1 .3 331.0 3 Energy items -14.8 .2 -12.6 -21.0 -9.9 26.1 -.2 3.0 1.9 1.0 .3 362.4 4 All items less food and energy 4.2 4.2 3.3 3.7 3.7 5.2 .2 .5 .3 .5 .5 338.3 5 Commodities .8 3.1 .3 2.6 1.4 5.1 .1 .6 .0 .7 .6 270.3 6 Services 6.2 4.7 4.9 4.3 5.1 5.3 .3 .5 .4 .4 .4 412.3 PRODUCER PRICES 7 Finished goods -2.0 2.7 .7 -.4 1.8 3.9 .1' .4' .1 .4 .7 295.0 8 Consumer foods -.1 4.2 8.2 11.2 1.0 -6.7 -,5R -1.8 -.5 .5 1.5 283.3 9 Consumer energy -27.7 -1.1 -20.7 -42.7 -12.5 57.6 .7' 7.9' 4.0 -.2 2.1 511.5 10 Other consumer goods 2.5 2.6 .9 2.3 4.4 3.4 .2' .4' -.3 .8 .2 264.1 11 Capital equipment 1.9 2.0 2.4 2.0 3.4 .1 .1 .2 -.3 .1 .3 311.7 12 Intermediate materials3 -3.8 1.2 -5.1 -1.5 -1.2 8.0 .0 1.0 .5 .4 .3 316.8 13 Excluding energy -.4 1.6 -1.2 1.5 1.2 3.3 .0 .4 .2 .3 .2 309.3 Crude materials 14 Foods -8.2 8.7 5.9 18.1 -2.7 -11.3 -1.3' -3.3' .0 .4 4.3 239.4 15 Energy -23.0 2.4 -29.1 -19.6 -.5 41.2 -.7' 7.2' 2.6 -.9 1.7 590.9 16 Other -3.2 3.4 6.6 -24.1 8.5 16.3 .3' 4.8' .0 -.9 .7 257.6 1. Not seasonally adjusted. 3. Excludes intermediate materials for food manufacturing and manufactured 2. Figures for consumer prices are those for all urban consumers and reflect a animal feeds. rental equivalence measure of homeownership after 1982. SOURCE. Bureau of Labor Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A51 2.16 GROSS NATIONAL PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates. 1986 1987 AAccccoouunntt 11998844 11998855 11998866 QL Q2 Q3 Q4 Ql' GROSS NATIONAL PRODUCT 1 Total 3,765.0 3,998.1 4,206.1 4,149.2 4,175.6 4,240.7 4,258.7 4,348.4 By source 2 Personal consumption expenditures 2,428.2 2,600.5 2,762.5 2,697.9 2,732.0 2,799.8 2,820.4 2,850.7 3 Durable goods 331.2 359.3 388.1 360.8 373.9 414.5 403.1 384.6 4 Nondurable goods 870.1 905.1 932.7 929.7 928.4 932.8 940.1 961.7 5 Services 1,227.0 1,336.1 1,441.7 1,407.4 1,429.8 1,452.4 1,477.2 1,504.5 6 Gross private domestic investment 662.1 661.1 683.6 708.3 687.3 675.8 663.2 718.1 7 Fixed investment 598.0 650.0 677.0 664.4 672.8 680.3 690.3 678.1 8 Nonresidential 416.5 458.2 460.0 459.2 457.5 459.0 464.3 451.4 9 Structures 139.3 154.8 143.3 154.6 141.5 139.5 137.5 133.9 10 Producers' durable equipment 277.3 303.4 316.7 304.6 316.0 319.5 326.8 317.6 11 Residential structures 181.4 191.8 217.0 205.3 215.3 221.3 226.0 226.7 12 Change in business inventories 64.1 11.1 6.7 43.8 14.5 -4.5 -27.1 40.0 13 Nonfarm 56.6 12.2 7.7 41.2 10.5 -10.3 -10.8 37.1 14 Net exports of goods and services -58.7 -78.9 -104.3 -93.7 -104.5 -108.9 -110.2 -111.9 15 Exports 382.7 369.8 373.0 374.8 363.0 370.8 383.5 391.6 16 Imports 441.4 448.6 477.3 468.5 467.5 479.7 493.7 503.4 17 Government purchases of goods and services 733.4 815.4 864.2 836.7 860.8 874.0 885.3 891.4 18 Federal 311.3 354.1 366.2 355.7 367.6 369.3 372.1 369.2 19 State and local 422.2 461.3 498.0 480.9 493.3 504.7 513.2 522.2 By major type of product 20 Final sales, total 3,700.9 3,987.0 4,199.4 4,105.4 4,161.2 4,245.2 4,285.8 4,308.4 21 Goods 1,576.7 1,630.2 1,670.5 1,669.0 1,661.6 1,680.2 1,671.3 1,723.5 22 Durable 675.0 700.2 716.8 710.6 703.1 730.1 723.5 746.0 73 Nondurable 901.7 930.0 953.7 958.4 958.5 950.1 947.8 977.5 24 Services 1,813.1 1,959.8 2,105.6 2,057.7 2,087.4 2,125.2 2,152.1 2,190.7 25 Structures 375.1 408.1 430.0 422.6 426.7 435.3 435.3 434.2 26 Change in business inventories 64.1 11.1 6.7 43.8 14.5 -4.5 -27.1 40.0 27 Durable goods 39.2 6.6 -1.0 28.6 -.1 -15.6 -16.9 29.8 28 Nondurable goods 24.9 4.5 7.7 15.3 14.6 11.1 -10.2 10.2 29 MEMO: Total GNP in 1982 dollars 3,489.9 3,585.2 3,674.9 3,655.9 3,661.4 3,686.4 3,696.1 3,735.9 NATIONAL INCOME 30 Total 3,032.0 3,222.3 3,386.4 3,340.7 3,376.4 3,396.1 3,432.3 3,507.4 31 Compensation of employees 2,214.7 2,368.2 2,498.0 2,461.5 2,480.2 2,507.4 2,542.8 2,578.1 32 Wages and salaries 1,837.0 1,965.8 2,073.5 2,044.1 2,058.8 2,081.1 2,109.8 2,142.7 33 Government and government enterprises 346.2 372.2 395.7 387.2 392.5 398.4 404.4 413.0 34 Other 1,490.6 1,593.9 1,677.8 1,656.8 1,666.3 1,682.7 1,705.4 1,729.7 35 Supplement to wages and salaries 377.7 402.4 424.5 417.4 421.3 426.3 433.0 435.4 36 Employer contributions for social insurance 193.1 205.5 215.7 212.9 214.1 215.9 220.1 220.0 37 Other labor income 184.5 196.9 208.8 204.5 207.3 210.4 213.0 215.4 38 Proprietors' income1 236.9 254.4 278.8 265.3 289.1 277.5 283.2 298.2 39 Business and professional1 205.3 225.2 252.7 240.9 249.6 258.0 262.2 269.7 40 Farm1 31.5 29.2 26.1 24.4 39.5 19.6 21.0 28.5 41 Rental income of persons2 8.3 7.6 15.0 12.8 16.3 16.2 14.8 15.3 42 Corporate profits1 264.7 280.7 299.7 296.4 293.1 302.0 311.2 333.5 43 Profits before tax3 235.7 223.2 237.5 222.5 227.7 240.4 259.6 266.5 44 Inventory valuation adjustment -5.5 -.6 6.5 16.5 10.6 6.1 -7.2 -7.4 45 Capital consumption adjustment 34.5 58.1 56.6 57.3 54.8 55.5 58.8 74.4 46 Net interest 307.4 311.4 294.0 304.9 297.7 292.9 280.4 282.2 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 • July 1987 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1986 1987 AAccccoouunntt 11998844 11998855 1986 Q1 Q2 Q3 Q4 Ql' PERSONAL INCOME AND SAVING 1 Total personal income 3,110.2 3,314.5 3,485.7 3,432.6 3,483.3 3,498.8 3,527.9 3,586.2 2 Wage and salary disbursements 1,836.8 1,966.1 2,073.5 2,044.1 2,058.8 2,081.1 2,109.8 2,142.7 3 Commodity-producing industries 577.8 607.7 623.2 622.0 620.8 621.8 628.3 633.0 4 Manufacturing 439.1 460.1 471.2 470.5 468.8 470.0 475.4 478.0 5 Distributive industries 442.2 469.8 487.9 485.2 484.3 488.3 493.9 500.9 6 Service industries 470.6 516.4 566.7 549.6 561.3 572.6 583.2 595.9 7 Government and government enterprises 346.2 372.2 395.7 387.2 392.5 398.4 404.4 413.0 8 Other labor income 184.5 196.9 208.8 204.5 207.3 210.4 213.0 215.4 9 Proprietors' income1 236.9 254.4 278.8 265.3 289.1 277.5 283.2 298.2 10 Business and professional1 205.3 225.2 252.7 240.9 249.6 258.0 262.2 269.7 11 Farm1 31.5 29.2 26.1 24.4 39.5 19.6 21.0 28.5 12 Rental income of persons2 8.3 7.6 15.0 12.8 16.3 16.2 14.8 15.3 13 Dividends 74.7 76.4 81.2 79.1 81.1 82.0 82.7 84.1 446.9 476.2 475.0 480.8 480.1 473.8 465.2 468.0 15 Transfer payments 455.6 487.1 513.8 504.7 510.1 518.5 521.8 530.2 16 Old-age survivors, disability, and health insurance benefits... 235.7 253.4 266.8 263.2 264.1 269.6 270.2 273.7 17 LESS: Personal contributions for social insurance 133.5 150.2 160.3 158.6 159.5 160.8 162.4 167.7 18 EQUALS: Personal income 3,110.2 3,314.5 3,485.7 3,432.6 3,483.3 3,498.8 3,527.9 3,586.2 19 LESS: Personal tax and nontax payments 439.6 486.5 514.1 497.5 504.8 519.0 534.9 533.1 20 EQUALS: Disposable personal income 2,670.6 2,828.0 2,971.6 2,935.1 2,978.5 2,979.9 2,993.0 3,053.1 21 LESS: Personal outlays 2,501.9 2,684.7 2,857.4 2,789.4 2,825.5 2,895.8 2,918.8 2,949.1 22 EQUALS: Personal saving 168.7 143.3 114.2' 145.6 153.1 84.1 74.2 104.0 MEMO Per capita (1982 dollars) 23 Gross national product 14,721.1 14,982.0 15,216.9 15,188.0 15,178.9 1155,,224466..33 1155,,224499..11 1155,,338800..44 24 Personal consumption expenditures 9,475.4 9,713.7 10,015.3 9,857.1 9,984.4 10,124.0 10,089.9 10,040.7 25 Disposable personal income 10,421.0 10,563.0 10,773.0 10,723.0 10,886.0 10,776.0 10,708.0 10,755.0 26 Saving rate (percent) 6.3 5.1 3.8 5.0 5.1 2.8 2.5 3.4 GROSS SAVING 27 Gross saving 573.3 551.5 538.7 583.2 539.7 517.2 514.9 561.6 28 Gross private saving 674.8 687.8 679.0 708.3 713.0 650.5 644.3 684.5 29 Personal saving 168.7 143.3 114.2' 145.6 153.1 84.1 74.2 104.0 30 Undistributed corporate profits1 91.0 107.3 109.4 115.5 106.6 108.8 106.4 112.2 31 Corporate inventory valuation adjustment -5.5 -.6 6.5 16.5 10.6 6.1 -7.2 -7.4 Capital consumption allowances 32 Corporate 253.9 268.2 280.3 275.3 227788..99 228811..66 228855..55 228877..55 33 Noncorporate 161.2 169.0 175.1 171.8 174.4 176.0 178.2 180.7 34 Government surplus, or deficit (-), national income and -101.5 -136.3 -140.3 -125.1 -173.3 --113333..33 -129.4 --112222..99 35 Federal -170.0 -198.0 -203.3 -195.0 -232.2 -197.4 -188.8 -174.4 36 State and local 68.5 61.7 63.1 69.9 58.9 64.0 59.4 51.5 571.4 545.9 541.7 579.6 544.3 527.5 515.5 572.4 38 Gross private domestic 662.1 661.1 683.6 708.3 687.3 675.8 663.2 718.1 39 Net foreign -90.7 -115.2 -141.9 -128.6 -143.0 -148.3 -147.7 -145.7 40 Statistical discrepancy -1.9 -5.5 3.0 -3.6 4.6 10.3 .6 10.8 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 Item credits or debits 1985 Q4 Q1 Q2 Q3 Q4 p 1 Balance on current account -106,466 117,677 -140,569 -33,695 -34,040 -34,397 -35,299 -36,837 2 Not seasonally adjusted -31,510 -31,020 -35,458 -39,245 -34,847 3 Merchandise trade balance2 -112,522 -124,439 -147,708 -37,352 -36,489 -35,700 -37,149 -38,370 4 Merchandise exports 219,900 214,424 221,753 52,727 53,588 55,075 55,764 57,326 5 Merchandise imports -332,422 -338,863 -369,461 -90,079 -90,077 -90,775 -92,913 -95,696 6 Military transactions, net -1,827 -2,917 -2,402 -1,322 -1,066 -695 -570 -71 7 Investment income, net3 18,751 25,188 22,865 9,255 6,500 5,328 6,146 4,890 8 Other service transactions, net -525 1,821 -32 6 717 437 659 9 Remittances, pensions, and other transfers -3,621 -3,787 -3,320 -937 -922 -802 -744 -853 10 U.S. government grants (excluding military) -8,536 -11,196 -11,825 -3,307 -2,069 -3,245 -3,419 -3,092 11 Change in U.S. government assets, other than official reserve assets, net (increase, —) -5,523 -2,824 -1,978 -540 -250 -209 -1,429 12 Change in U.S. official reserve assets (increase, -) -3,130 -3,858 312 -3,148 -115 16 280 132 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -979 -897 -246 -189 -274 -104 163 -31 15 Reserve position in International Monetary Fund -995 908 1,501 168 344 366 508 283 16 Foreign currencies -1,156 -3,869 -942 -3,126 -185 -246 -391 -120 17 Change in U.S. private assets abroad (increase, -)3 -14,987 -25,754 -98,149 -19,579 -12,644 -25,468 -27,052 -32,985 18 Bank-reported claims -11,127 -691 -57,312 -8,485 6,333 -14,387 -19,326 -29,932 19 Nonbank-reported claims 5,081 1,665 -4,150 418 -2,842 -1,220 -88 20 U.S. purchase of foreign securities, net -5,082 -7,977 -4,765 -1,411 -6,133 -1,664 349 2,683 21 U.S. direct investments abroad, net3 -3,859 -18,752 -31,922 -10,101 -10,002 -8,197 -7,987 -5,736 22 Change in foreign official assets in the United States (increase, +) 3,037 -1,324 33,394 -1,322 2,469 14,704 15,448 774 23 U.S. Treasury securities 4,690 -546 34,495 -1,976 3,256 14,538 12,193 4,508 24 Other U.S. government obligations 13 -295 -1,214 -171 -177 -644 -276 -117 25 Other U.S. government liabilities4 436 483 1,067 263 288 679 900 -799 26 Other U.S. liabilities reported by U.S. banks 555 522 -126 722 -1,261 662 2,933 -2,460 27 Other foreign official assets5 -2,657 -1,488 -828 -160 363 -531 -302 -358 28 Change in foreign private assets in the United States (increase, +)3 99,730 128,430 179,900 53,158 34,151 32,822 54,075 58,851 29 U.S. bank-reported liabilities 33,849 40,387 77,435 20,427 8,434 3,553 30,128 35,320 30 U.S. nonbank-reported liabilities 4,704 -1,172 -3,112 2,232 -2,057 -1,644 589 31 Foreign private purchases of U.S. Treasury securities, net 23,059 20,500 9,334 5,676 7,666 3,807 541 ' -2,680 32 Foreign purchases of other U.S. securities, net 12,759 50,859 70,658 22,441 18,686 23,018 17,185 11,769 33 Foreign direct investments in the United States, net3 25,359 17,856 25,585 2,382 1,422 4,088 5,632 14,442 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 27,338 23,006 27,091 5,125 10,429 12,532 -6,023 10,156 36 Owing to seasonal adjustments 3,771 1,329 -1,410 -3,956 4,040 37 Statistical discrepancy in recorded data before seasonal adjustment 27,338 23,006 27,091 9,100 13,942 -2,068 6,116 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -3,130 -3,858 312 -3,148 -115 16 280 132 39 Foreign official assets in the United States (increase, +) 2,601 -1,807 32,327 -1,585 2,181 14,025 14,548 1,573 40 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 22 above) -4,304 -6,599 -8,649 -1,002 1,421 -1,938 -2,847 -5,285 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 190 64 73 28 22 12 19 19 1. Seasonal factors are not calculated for lines 6, 10, 12-16, 18-20, 22-34, and 4. Primarily associated with military sales contracts and other transactions 38-41. arranged with or through foreign official agencies. 2. Data are on an international accounts (IA) basis. Differs from the Census 5. Consists of investments in U.S. corporate stocks and in debt securities of basis data, shown in table 3.11, for reasons of coverage and timing; military private corporations and state and local governments. exports are excluded from merchandise data and are included in line 6. NOTE. Data are from Bureau of Economic Analysis, Survey of Current Business 3. Includes reinvested earnings. (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • July 1987 3.11 U.S. FOREIGN TRADE Millions of dollars; monthly data are not seasonally adjusted. 1986 1987 IItteemm 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments 200,486 217,865 213,146 17,518 19,330 18,595 18,431 16,421 18,660 21,064 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 258,048 325,726 345,276 28,695 30,018 36,187 27,795 27,466 32,307 33,198 3 Trade balance -57,562 107,861 -132,129 -11,177 -10,688 -17,592 -9,364 -11,045 -13,647 -12,134 NOTE. The data through 1981 in this table are reported by the Bureau of Census not covered in Census statistics, and (2) the exclusion of military sales (which are data of a free-alongside-ship (f.a.s.) value basis—that is, value at the port of combined with other military transactions and reported separately in the "service export. Beginning in 1981, foreign trade of the U.S. Virgin Islands is included in account" in table 3.10, line 6). On the import side, additions are made for gold, the Census basis trade data; this adjustment has been made for all data shown in ship purchases, imports of electricity from Canada, and other transactions; the table. Beginning with 1982 data, the value of imports are on a customs military payments are excluded and shown separately as indicated above. As of valuation basis. Jan. 1, 1987 census data are released 45 days after the end of the month. The Census basis data differ from merchandise trade data shown in table 3.10, SOURCE. FT900 "Summary of U.S. Export and Import Merchandise Trade" U.S. International Transactions Summary, for reasons of coverage and timing. On (Department of Commerce, Bureau of the Census). the export side, the largest adjustments are; (1) the addition of exports to Canada 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1986 1987 Type 1983 1985 Oct. Nov. Dec. Feb. Mar. Apr." 1 Total 33,747 34,934 43,186' 47,089 47,824 48,517' 49,386' 49,358 48,824 46,591 2 Gold stock, including Exchange Stabilization Fund1 11,121 11,096 11,090 11,066 11,070 11,064 11,062 11,085 11,081 11,076 3 Special drawing rights2,3 5,025 5,641 7,293 8,090 8,310 8,395 8,470 8,615 8,740 8,879 4 Reserve position in International Monetary Fund 11,312 11,541 11,947' 11,575 11,659 11,730 11,872 11,699 11,711 11,745 5 Foreign currencies4 6,289 6,656 12,856 16,358 16,785 17,328 17,982 17,959 17,292 14,891 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 1987 AAsssseettss 11998833 11998844 11998855 Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Deposits 190 267 480 303 224 287 226 255 268 342 Assets held in custody 2 U.S. Treasury securities1 117,670 118,000 121,004 156,076 156,919 155,835 159,597 160,942 167,423 172,929 3 Earmarked gold2 14,414 14,242 14,245 14,110 14,057 14,048 14,041 14,046 14,036 14,031 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 1987 AAsssseett aaccccoouunntt 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan. Feb. Mar.'' All foreign countries 1 Total, all currencies 477,090 453,656 458,012 474,567 446,581 446,618' 456,628' 458,305 457,819 456,522 ? Claims on United States 115,542 113,393 119,706' 116,392 112,078 108,420 113,178' 115,273 113,815 111,864 Parent bank 82,026 78,109 87,201 82,302 79,999 76,280' 81,985' 83,185 81,953 78,475 4 Other banks in United States2 13,664 13,057 13,624 11,659 12,034 13,685 12,723 13,158 15,894 5 Nonbanks2 21,620 19,448' 20,466 20,420 20,106' 17,508 19,365 18,704 17,495 6 Claims on foreigners 342,689 320,162 315,676' 328,553 305,562 308,322' 314,340 311,411 312,0% 311,600 7 Other branches of parent bank 96,004 95,184 91,399 103,278 90,412 91,576' 97,788 93,290 90,326 89,360 8 Banks 117,668 100,397 102,960 107,503 100,707 103,293 105,237 105,377 109,748 109,375 9 Public borrowers 24,517 23,343 23,478 23,505 24,215 23,314 23,584 23,337 23,192 23,579 10 Nonbank foreigners 107,785 101,238 97,839' 94,267 90,228 90,139 87,731 89,407 88,830 89,286 11 Other assets 18,859 20,101 22,630' 29,622 28,941 29,876 29,110 31,621 31,908 33,058 12 Total payable in U.S. dollars 371,508 350,636 336,520' 330,597 309,087 306,683' 317,486 309,719 311,669 306,025 n Claims on United States 113,436 111,426 116,638' 112,133 107,612 104,281 109,234 110,5% 109,341 107,015 14 Parent bank 80,909 77,229 85,971 80,753 78,335 74,762 80,575' 81,423 80,359 76,615 15 Other banks in United States2 1 13,500 12,454 12,802 10,544 10,986 12,830 11,531 12,102 14,757 16 Nonbanks2 20,697 18,213' 18,578 18,733 18,533 15,830 17,642 16,880 15,643 17 Claims on foreigners 247,406 228,600 210,129' 207,701 190,030 190,656' 196,448 187,2% 189,875 185,364 18 Other branches of parent bank 78,431 78,746 72,727' 78,400 67,835 67,841' 73,704 67,479 65,220 64,006 19 Banks 93,332 76,940 71,868' 68,596 62,836 64,920 66,421 63,637 68,320 65,874 ?0 Public borrowers 17,890 17,626 17.26C 16,521 17,455 16,820 16,586 16,459 16,320 16,223 21 Nonbank foreigners 60,977 55,288 48,274' 44,184 41,904 41,075 39,737 39,721 40,015 39,261 22 Other assets 10,666 10,610 9,753' 10,763 11,445 11,746 11,804 11,827 12,453 13,646 United Kingdom 23 Total, all currencies 158,732 144,385 148,599 151,596 142,398 143,806' 140,917 144,093 146,188 145,486 74 Claims on United States 34,433 27,675 33,157 30,879 30,747 28,940 24,599 28,720 28,851 28,503 75 Parent bank 29,111 21,862 26,970 24,291 24,800 22,671 19,085 23,330 23,326 23,303 76 Other banks in United States2 1,429 1,106 2,092 1,314 1,534 1,612 1,220 1,258 1,288 77 Nonbanks2 4,384 5,081 4,496 4,633 4,735 3,902 4,170 4,267 3,912 28 Claims on foreigners 119,280 111,828 110,217 113,368 105,534 108,153' 109,508 108,720 110,274 109,297 79 Other branches of parent bank 36,565 37,953 31,576 34,678 31,268 29,966' 33,422 30,218 29,575 28,782 30 Banks 43,352 37,443 39,250 40,204 37,836 41,145 39,468 40,677 43,189 42,537 31 Public borrowers 5,898 5,334 5,644 5,086 5,157 5,038 4,990 4,942 4,983 4,897 32 Nonbank foreigners 33,465 31,098 33,747 33,400 31,273 32,004 31,628 32,883 32,527 33,081 33 Other assets 5,019 4,882 5,225 7,349 6,117 6,713 6,810 6,653 7,063 7,686 34 Total payable in U.S. dollars 126,012 112,809 108,626 103,228 97,295 97,125' 95,028 95,359 97,568 95,319 35 Claims on United States 33,756 26,868 32,092 29,512 29,312 27,564 23,193 27,070 27,290 26,665 36 Parent bank 28,756 21,495 26,568 23,826 24,323 22,106 18,526 22,673 22,749 22,662 37 Other banks in United States2 1,363 1,005 1,848 1,110 1,364 1,475 996 1,061 980 18 Nonbanks2 4,010 4,519 3,838 3,879 4,094 3,192 3,401 3,480 3,023 39 Claims on foreigners 88,917 82,945 73,475 70,325 64,873 66,304' 68,138 65,022 66,872 64,466 40 Other branches of parent bank 31,838 33,607 26,011 27,151 24,632 23,229' 26,361 22,720 22,578 21,785 41 Banks 32,188 26,805 26,139 22,917 21,011 24,020 23,251 23,656 25,685 24,225 4? Public borrowers 4,194 4,030 3,999 3,778 3,859 3,811 3,677 3,683 3,716 3,660 43 Nonbank foreigners 20,697 18,503 17,326 16,479 15,371 15,244 14,849 14,963 14,893 14,796 44 Other assets 3,339 2,996 3,059 3,391 3,110 3,257 3,697 3,267 3,406 4,188 Bahamas and Caymans 45 Total, all currencies 152,083 146,811 142,055 143,082 134,060 131,363 142,592 135,627 133,229 133,837 46 Claims on United States 75,309 77,296 74,864 71,918 68,624 66,078 76,663 72,643 68,238 67,356 47 Parent bank 48,720 49,449 50,553 46,635 44,476 42,223 53,068 48,036 44,124 41,290 4 4 8 9 O N t o h n e b r a b n a k n s k 2 s in United States2 1 it con 1 1 6 1 , , 3 5 0 4 3 4 1 1 3 1 , , 1 2 0 0 7 4 1 10 4 , , 6 6 4 5 1 2 1 9 4 , , 5 5 5 9 7 1 1 9 4 , , 6 2 2 2 8 7 1 1 2 1 , , 4 1 3 5 9 6 1 10 3 , , 6 9 2 8 5 2 1 1 0 3 , , 9 1 2 9 4 0 1 1 2 3 , , 3 7 5 1 1 5 50 Claims on foreigners 72,868 65,598 63,882 66,610 59,612 59,436 61,390 57,825 59,671 60,644 51 Other branches of parent bank 20,626 17,661 19,042 22,763 16,985 18,139 18,803 16,258 16,151 16,529 57 Banks 36,842 30,246 28,192 27,779 26,205 25,743 27,476 26,366 28,139 28,574 53 Public borrowers 6,093 6,089 6,458 6,434 7,263 6,697 6,929 7,026 6,974 6,914 54 Nonbank foreigners 12,592 11,602 10,190 9,634 9,159 8,857 8,182 8,175 8,407 8,627 55 Other assets 3,906 3,917 3,309 4,544 5,824 5,849 4,539 5,159 5,320 5,837 56 Total payable in U.S. dollars 145,641 141,562 136,794 136,615 127,361 124,801 136,813 129,474 126,605 126,808 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 • July 1987 3.14 Continued 1986 1987 Sept. Oct. Nov. Dec. Jan. Feb. Mar.P All foreign countries 57 Total, all currencies 477,090 453,656 458,012 474,567 446,581 446,618' 456,628' 458,305 457,819 456,522 58 Negotiable CDs3 n.a. 37,725 34,607 33,642 32,444 32,926 31,629 33,395 36,074 34,873 39 To United States 188,070 147,583 155,538 151,281 141,126 137,029' 151,632' 140,089' 140,046 141,093 60 Parent bank 81,261 78,739 83,914 87,927 75,777 75,062 82,561' 70,047' 73,095 70,777 61 Other banks in United States 29,453 18,409 16,894 14,153 14,791 14,532' 15,646' 15,068 13,602 13,666 62 Nonbanks 77,356 50,435 54,730 49,201 50,558 47,435 53,425' 54,974 53,349 56,650 63 To foreigners 269,685 247,907 245,939' 269,322 253,202 256,611' 253,775 264,463' 261,944 260,736 64 Other branches of parent bank 90,615 93,909 89,529 102,245 87,883 87,993' 95,146 90,303' 88,524 87,897 63 Banks 92,889 78,203 76,814 81,953 80,709 83,784' 77,809' 89,199 86,474 84,875 66 Official institutions 18,896 20,281 19,520' 20,109 19,436 18,831 17,835 19,532 19,818 20,591 67 Nonbank foreigners 68,845 55,514 60,076 65,015 65,174 66,003' 62,985' 65,429 67,128 67,373 68 Other liabilities 19,335 20,441 21,928' 20,322 19,809 20,052 19,592' 20,358 19,755 19,820 69 Total payable in U.S. dollars 388,291 367,145 353,712' 349,259 323,699 320,348' 336,406 323,900 325,951 321,349 70 Negotiable CDs3 n.a. 35,227 31,063 30,560 29,206 29,752 28,466 29,921 32,407 31,148 71 To United States 184,305 143,571 150,162' 143,627 133,301 129,224' 143,65c 131,557' 131,617 132,258 72 Parent bank 79,035 76,254 80,888 83,790 71,858 71,017 78,472' 65,419' 68,540 65,755 73 Other banks in United States 28,936 17,935 16,264 13,173 13,768 13,679^ 14,609' 14,047 12,505 12,564 74 Nonbanks 76,334 49,382 53,010' 46,664 47,675 44,528 50,569' 52,091 50,572 53,939 75 To foreigners 194,139 178,260 163,583' 167,356 153,536 153,972' 156,806 155,182' 154,343 150,091 76 Other branches of parent bank 73,522 77,770 71,078' 77,464 65,077 64,178' 71,181 64.38C 63,272 62,202 77 Banks 57,022 45,123 37,365' 35,358 33,802 35,306' 33,85c 37,159 37,253 35,111 78 Official institutions 13,855 15,773 14,359' 13,697 13,320 13,139 12,371 13,688 13,189 13,392 79 Nonbank foreigners 51,260 39,594 40,781' 40,837 41,337 41,349' 39,404' 39,955 40,629 39,386 80 Other liabilities 9,847 10,087 8,904' 7,716 7,656 7,400 7,484' 7,240 7,584 7,852 United Kingdom 81 Total, all currencies 158,732 144,385 148,599 151,596 142,398 143,806' 140,917 144,093 146,188 145,486 82 Negotiable CDs3 n.a. 34,413 31,260 30,352 28,847 28,984 27,781 29,432 32,233 30,968 83 To United States 55,799 25,250 29,422 26,540 24,610 22,585' 24,657 19,465 22,501 21,433 84 Parent bank 14,021 14,651 19,330 17,399 14,014 13,811 14,469 10,004 12,735 12,332 83 Other banks in United States 11,328 3,125 2,974 2,062 2,382 2,184' 2,649 2,154 2,154 1,816 86 Nonbanks 30,450 7,474 7,118 7,079 8,214 6,590 7,539 7,307 7,612 7,285 87 To foreigners 95,847 77,424 78,525 85,554 80,252 83,455' 79,498 86,229 82,418 83,723 88 Other branches of parent bank 19,038 21,631 23,389 28,272 24,194 23,739' 25,036 23,595 21,230 21,371 89 Banks 41,624 30,436 28,581 31,190 31,001 34,321' 30,877 36,479 35,434 35,971 90 Official institutions 10,151 10,154 9,676 8,652 8,068 7,875 6,836 8,484 7,832 7,827 91 Nonbank foreigners 25,034 15,203 16,879 17,440 16,989 17,520 16,749 17,671 17,922 18,554 92 Other liabilities 7,086 7,298 9,392 9,150 8,689 8,782 8,981 8,967 9,036 9,362 93 Total payable in U.S. dollars 131,167 117,497 112,697 108,249 99,820 99,327' 99,707 98,741 101,603 98,967 94 Negotiable CDs3 n.a. 33,070 29,337 28,490 26,927 27,166 26,169 27,701 30,175 28,868 95 To United States 54,691 24,105 27,756 24,039 21,960 20,055' 22,075 16,829 19,894 18,940 96 Parent bank 13,839 14,339 18,956 16,984 13,591 13,438 14,021 9,451 12,157 11,606 97 Other banks in United States 11,044 2,980 2,826 1,735 2,108 1,880' 2,325 1,887 1,926 1,602 98 Nonbanks 29,808 6,786 5,974 5,320 6,261 4,737 5,729 5,491 5,811 5,732 99 To foreigners 73,279 56,923 51,980 52,645 47,491 49,056' 48,138 51,174 48,242 47,531 100 Other branches of parent bank 15,403 18,294 18,493 21,305 17,289 16,695' 17,951 16,386 14,323 14,471 101 Banks 29,320 18,356 14,344 14,491 14,123 15,984' 15,203 18,626 18,207 18,027 102 Official institutions 8,279 8,871 7,661 6,015 5,685 5,655 4,934 6,096 5,176 4,924 103 Nonbank foreigners 20,277 11,402 11,482 10,834 10,394 10,722 10,050 10,066 10,536 10,109 104 Other liabilities 3,197 3,399 3,624 3,075 3,442 3,050 3,325 3,037 3,292 3,628 Bahamas and Caymans 105 Total, all currencies 152,083 146,811 142,055 143,082 134,060 131,363 142,592 135,627 133,229 133,837 106 Negotiable CDs3 n.a. 615 610 527 683 784 847 995 855 813 107 To United States 111,299 102,955 103,813 102,012 95,840 94,493 105,248' 98,733 95,221 98,401 108 Parent bank 50,980 47,162 44,811 49,981 43,470 43,572 48,648' 40,845 40,409 39,625 109 Other banks in United States 16,057 13,938 12,778 10,986 11,144 11,131 11,715' 11,687 10,151 10,539 110 Nonbanks 44,262 41,855 46,224 41,045 41,226 39,790 44,885' 46,201 44,661 48,237 111 To foreigners 38,445 40,320 35,053 38,447 35,427 33,841 34,400 33,831 35,053 32,652 112 Other branches of parent bank 14,936 16,782 14,075 15,918 13,574 12,661' 12,631 12,323 12,972 11,673 113 Banks 11,876 12,405 10,669 10,158 8,964 8,545 8,617' 8,402 8,507 8,169 114 Official institutions 1,919 2,054 1,776 2,834 2,665 2,577 2,719 2,808 3,013 2,836 115 Nonbank foreigners 11,274 9,079 8,533 9,537 10,224 10,058' 10,433' 10,298 10,561 9,974 116 Other liabilities 2,339 2,921 2,579 2,096 2,110 2,245 2,097' 2,068 2,100 1,971 117 Total payable in U.S. dollars 148,278 143,582 138,322 138,733 130,084 127,309 138,774 131,572 129,183 129,048 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 1987 IItteemm 11998844 11998855 Sept. Oct. Nov. Dec. Jan/ Feb. Mar.P 1 Total1 180,552 178,385 209,743 211,297 211,121 211,356 213,369 214,865 225,845 By type 2 Liabilities reported by banks in the United States2 26,089 26,734 29,722 27,392 27,777 27,288 27,594 28,964 31,032 3 U.S. Treasury bills and certificates3 59,976 53,252 75,095 75,457 75,132 75,650 75,718 75,434 79,629 U.S. Treasury bonds and notes 4 Marketable 69,019 77,154 87,503 91,092 91,225 91,521 93,019 93,701 98,707 5 Nonmarketable4 5,800 3,550 1,300 1,300 1,300 1,300 1,300 1,300 1,300 6 U.S. securities other than U.S. Treasury securities5 19,668 17,695 16,123 16,056 15,687 15,597 15,738 15,466 15,177 By area 7 Western Europe1 69,776 74,418 87,314 88,658 87,725 87,859 89,570 90,367 98,764 8 Canada 1,528 1,314 1,626 1,699 1,891 2,004 3,382 3,761 5,111 9 Latin America and Caribbean 8,561 11,144 10,328 10,136 9,086 8,358 7,672 7,415 8,231 10 Asia 93,954 86,490 105,704 105,422 105,580 106,119 107,526 108,804 108,436 11 Africa 1,264 1,824 1,864 1,716 1,545 1,503 1,299 1,164 1,188 12 Other countries6 5,469 3,195 2,907 3,666 5,294 5,513 3,920 3,354 4,115 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 1986 IItteemm 11998833 11998844 11998855 Mar. June Sept. Dec. 1 Banks' own liabilities 5,219 8,586 15,368 21,264 24,130 29,353 29,481 2 Banks' own claims 7,231 11,984 16,294 19,728 21,264 24,567 25,441 3 Deposits 2,731 4,998 8,437 11,311 11,413 13,716 13,359 4 Other claims 4,501 6,986 7,857 8,417 9,851 10,851 12,083 5 Claims of banks' domestic customers1 1,059 569 580 1,426 1,385 1,659 2,613 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 • July 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 1987 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan/ Feb. Mar.P 1 All foreigners 369,607 407,306 435,726 506,104 501,095 512,653 537,778 524,912 522,815 523,523 2 Banks' own liabilities 279,087 306,898 341,070 372,533 365,956 378,023 404,395 391,417 388,315 388,307 3 Demand deposits 17,470 19,571 21,107 21,347 21,730 24,772 23,786 22,492 22,439 22,261 4 Time deposits' 90,632 110,413 117,278 125,241 123,752 125,618 131,281 125,010 127,112 124,522 5 Other2 25,874 26,268 29,305 37,795 36,332 35,915 40,545 39,373 39,967 42,041 6 Own foreign offices3 145,111 150,646 173,381 188,150 184,142 191,718 208,782 204,543 198,797 199,483 7 Banks' custody liabilities4 90,520 100,408 94,656 133,571 135,139 134,630 133,383 133,495 134,500 135,216 8 U.S. Treasury bills and certificates5 68,669 76,368 69,133 90,467 91,305 90,351 90,257 89,278 90,695 93,048 9 Other negotiable and readily transferable instruments6 17,467 18,747 17,964 15,303 15,649 15,343 16,523 14,656 13,839 14,881 10 Other 4,385 5,293 7,558 27,800 28,184 28,936 26,603 29,561 29,966 27,287 11 Nonmonetary international and regional organizations7 5,957 4,454 5,821 3,038 3,902 4,315 4,826 5,081 4,520 3,739 12 Banks' own liabilities 4,632 2,014 2,621 1,721 2,426 2,944 2,977 3,732 2,193 2,360 13 Demand deposits 297 254 85 180 175 135 199 183 157 246 14 Time deposits' 3,584 1,267 2,067 1,243 1,939 2,299 2,166 2,515 1,488 1,230 15 Other2 750 493 469 299 312 511 611 1,034 548 883 16 Banks' custody liabilities4 1,325 2,440 3,200 1,317 1,476 1,371 1,849 1,349 2,326 1,379 17 U.S. Treasury bills and certificates 463 916 1,736 218 308 262 259 86 1,213 154 18 Other negotiable and readily transferable instruments6 862 1,524 1,464 1,099 1,162 1,104 1,590 1,261 1,112 1,225 19 Other 0 0 0 0 6 5 0 2 1 0 20 Official institutions8 79,876 86,065 79,985 104,818 102,849 102,909 102,938 103,311 104,398 110,662 21 Banks' own liabilities 19,427 19,039 20,835 26,969 24,268 25,165 24,796 25,367 26,406 27,771 22 Demand deposits 1,837 1,823 2,077 1,895 1,840 2,188 2,267 1,487 1,513 1,923 23 Time deposits' 7,318 9,374 10,949 10,923 10,593 11,271 10,577 11,311 11,385 10,951 24 Other2 10,272 7,842 7,809 14,151 11,835 11,706 11,952 12,569 13,508 14,896 25 Banks' custody liabilities4 60,448 67,026 59,150 77,849 78,581 77,744 78,142 77,944 77,992 82,891 26 U.S. Treasury bills and certificates5 54,341 59,976 53,252 75,095 75,457 75,132 75,650 75,718 75,434 79,629 27 Other negotiable and readily transferable instruments6 6,082 6,966 5,824 2,554 2,920 2,480 2,347 2,158 2,418 3,129 28 Other 25 84 75 199 204 132 145 69 140 132 29 Banks9 226,887 248,893 275,589 319,013 314,433 325,392 349,605 339,131 336,242 333,334 30 Banks' own liabilities 205,347 225,368 252,723 276,511 271,790 282,785 309,792 296,436 293,834 294,186 31 Unaffiliated foreign banks 60,236 74,722 79,341 88,361 87,648 91,067 101,010 91,893 95,037 94,703 32 Demand deposits 8,759 10,556 10,271 9,254 9,714 11,626 10,301 10,432 10,097 9,502 33 Time deposits' 37,439 47,095 49,510 57,412 55,601 57,515 64,480 57,772 61,425 61,407 34 Other2 14,038 17,071 19,561 21,694 22,333 21,927 26,229 23,689 23,515 23,794 35 Own foreign offices3 145,111 150,646 173,381 188,150 184,142 191,718 208,782 204,543 198,797 199,483 36 Banks' custody liabilities4 21,540 23,525 22,866 42,502 42,643 42,607 39,812 42,695 42,408 39,147 37 U.S. Treasury bills and certificates 10,178 11,448 9,832 10,635 10,601 10,491 9,962 9,826 10,486 9,744 38 Other negotiable and readily transferable instruments6 7,485 7,236 6,040 5,803 5,600 5,550 5,513 5,433 4,340 4,377 39 Other 3,877 4,841 6,994 26,064 26,442 26,566 24,338 27,436 27,582 25,026 40 Other foreigners 56,887 67,894 74,331 79,236 79,911 80,037 80,411 77,389 77,655 75,788 41 Banks' own liabilities 49,680 60,477 64,892 67,333 .7,472 67,129 66,830 65,882 65,881 63,990 42 Demand deposits 6,577 6,938 8,673 10,018 10,000 10,824 11,019 10,389 10,672 10,589 43 Time deposits 42,290 52,678 54,752 55,664 55,620 54,533 54,059 53,412 52,815 50,933 44 Other2 813 861 1,467 1,651 1,852 1,772 1,752 2,081 2,395 2,468 45 Banks' custody liabilities4 7,207 7,417 9,439 11,903 12,439 12,908 13,580 11,507 11,774 11,798 46 U.S. Treasury bills and certificates 3,686 4,029 4,314 4,519 4,939 4,465 4,387 3,648 33,,556633 3,520 47 Other negotiable and readily transferable instruments6 3,038 3,021 4,636 5,846 5,968 6,209 7,074 5,804 5,969 6,150 48 Other 483 367 489 1,537 1,532 2,234 2,120 2,055 2,242 2,128 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 10,346 10,476 9,845 6,584 6,759 6,609 7,343 7,191 7,722 7,674 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

Bank-Reported Data A59 3.17 Continued 1986 1987 AArreeaa aanndd ccoouunnttrryy 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan/ Feb. Mar.'' 1 Total 369,607 407,306 435,726 506,104 501,095 512,653 537,778 524,912 522,815 523,523 2 Foreign countries 363,649 402,852 429,905 503,066 497,193 508,338 532,953 519,831 518,295 519,784 3 Europe 138,072 153,145 164,114 173,702 173,578 176,077 180,521 179,104 180,833 181,897 4 585 615 693 1,073 972 1,197 1,186 972 944 976 Belgium-Luxembourg 2,709 4,114 5,243 6,165 6,070 6,863 6.788 6,729 7,591 7,024 6 466 438 513 483 478 576 485 449 520 618 7 531 418 496 406 606 448 580 565 762 925 8 9,441 12,701 15,541 21,339 21,243 21,917 22,849 21,372 22,699 23,753 9 Germany 3,599 3,358 4,835 5,609 6,624 5,856 5,688 6,813 5,591 7,290 1100 520 699 666 623 646 755 706 745 749 641 1111 Italy 8,462 10,762 9,667 8,836 8,807 9,304 10,866 9,374 8,491 10,088 17 Netherlands 4,290 4,731 4,212 4,952 4,858 4,410 5,558 5,075 5,237 4,894 13 Norway 1,673 1,548 948 538 654 512 745 678 554 490 14 373 597 652 758 738 685 700 657 709 688 15 Spain 1,603 2,082 2,114 2,082 2,297 2,197 2,393 2,238 2,345 2,192 16 Sweden 1,799 1,676 1,422 1,253 1,016 1,301 889 884 1,062 1,051 17 Switzerland 32,246 31,740 29,020 29,177 29,695 30,406 31,239 28,886 27,594 27,570 18 Turkey 467 584 429 448 401 418 454 375 359 412 19 United Kingdom 60,683 68,671 76,728 85,960 84,308 84,913 85,336 87,871 90,158 88,034 ?0 Yugoslavia 562 602 673 562 515 544 631 554 565 564 71 Other Western Europe1 7,403 7,192 9,635 2,809 3,141 3,308 2,705 4,309 4,332 3,982 7? U.S.S.R 65 79 105 84 25 16 23 21 23 30 23 Other Eastern Europe2 596 537 523 545 484 452 702 535 546 674 24 Canada 16,026 16,059 17,427 24,150 24,340 25,753 26,256 26,072 25,146 26,523 75 Latin America and Caribbean 140,088 153,381 167,856 197,526 191,916 189,773 208,057 195,263 191,880 195,013 76 4,038 4,394 6,032 6,069 5,718 5,202 4,754 4,497 4,668 4,869 77 55,818 56,897 57,657 69,173 64,106 62,613 72,347 64,945 63,159 62,082 78 Bermuda 2,266 2,370 2,765 2,209 1,918 2,549 2,965 2,295 2,392 2,392 79 Brazil 3,168 5,275 5,373 5,359 8.895 4,684 4,321 3,813 3,795 3,883 30 British West Indies 34,545 36,773 42,674 62,141 59,143 61,855 70,918 66,470 65,735 69,634 31 Chile 1,842 2,001 2,049 2,426 2,398 2,325 2,053 2,208 2,046 2,059 37 Colombia 1,689 2,514 3,104 3,373 3,775 3,873 4,281 4,293 4,267 4,270 33 Cuba 8 10 11 7 6 6 7 6 7 6 34 Ecuador 1,047 1,092 1,239 1,261 1,217 1,199 1,235 1,049 1,118 1,012 35 Guatemala 788 896 1,071 1,129 1,126 1,129 1,122 1,124 1,081 1,081 36 Jamaica 109 183 122 187 151 153 136 149 145 230 37 10,392 12,303 14,060 13,137 13,209 13,488 13,631 13,484 13,362 13,093 38 Netherlands Antilles 3,879 4,220 4,875 5,045 4,645 4,706 4,903 5,570 5,629 5,643 39 5,924 6,951 7,514 6,415 6,524 6,729 6,865 7,361 6,509 6,670 40 1,166 1,266 1,167 1,256 1,167 1,146 1,163 1,110 1,130 1,062 41 1,244 1,394 1,552 1,589 1,608 1,610 1,537 1,609 1,583 1,630 4? 8,632 10,545 11,922 11,709 11,392 11,592 10,452 10,494 10,361 10,364 43 Other Latin America and Caribbean 3,535 4,297 4,668 5,041 4,917 4,914 5,368 4,786 4,894 5,031 44 58,570 71,187 72,280 100,097 99,360 107,054 108,973 112,054 113,711 108,896 China 45 Mainland 249 1,153 1,607 1,940 1,585 1,450 1,476 2,046 1,630 1,973 46 4,051 4,990 7,786 16,132 16,534 17,540 18,903 19,553 21,127 20,131 47 Hong Kong 6,657 6,581 8,067 9,349 8,663 9,347 9,517 9,383 9,538 9,159 48 464 507 712 651 755 701 673 664 686 501 49 Indonesia 997 1,033 1,466 1,611 1,530 1,528 1,548 1,410 1,591 1,379 50 1,722 1,268 1,601 2,109 1,986 2,380 1,890 1,761 1,892 1,666 SI 18,079 21,640 23,077 39,986 41,340 46,184 47,436 49,997 50,920 48,934 5? 1,648 1,730 1,665 1,282 1,446 1,128 1,146 1,063 1,022 1,179 53 1,234 1,383 1,140 1,400 1,707 1,720 1,865 1,811 1,779 1,737 54 747 1,257 1,358 1,100 1,115 1,083 1,120 1,282 1,224 1,235 55 Middle-East oil-exporting countries3 12,976 16,804 14,523 13,056 12,045 13,010 12,356 12,325 12,160 11,554 56 Other Asia 9,748 12,841 9,276 11,481 10,654 10,984 11,042 10,760 10,142 9,448 57 2,827 3,396 4,883 4,166 3,973 4,018 4,018 3,662 3,500 3,475 58 Egypt 671 647 1,363 843 640 710 706 608 791 753 59 Morocco 84 118 163 91 86 84 92 74 76 99 60 South Africa 449 328 388 325 347 264 271 341 200 196 61 87 153 163 80 79 96 74 54 42 40 6? Oil-exporting countries4 620 1,189 1,494 1,625 1,623 1,593 1,518 1,336 1,156 1,108 63 Other Africa 917 961 1,312 1,203 1,199 1,272 1,358 1,249 1,233 1,278 64 Other countries 8,067 5,684 3,347 3,425 4,026 5,662 5,128 3,674 3,226 3,981 65 Australia 7,857 5,300 2,779 2,785 2,943 4,286 4,205 2,677 2,459 3,020 66 All other 210 384 568 639 1,083 1,376 922 997 767 960 67 Nonmonetary international and regional organizations 5,957 4,454 5,821 3,038 3,902 44,,331155 4,826 5,081 4,520 3,739 68 International 5,273 3,747 4,806 1,759 2,748 3,232 3,512 3,958 3,606 2,747 69 Latin American regional 419 587 894 972 957 927 1,033 960 762 788 70 Other regional5 265 120 121 307 197 157 281 164 152 204 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 • July 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 1987 AArreeaa aanndd ccoouunnttrryy 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan. Feb. Mar.P 1 Total 391,312 400,162 401,608 416,601 407,832 418,485 444,458 420,632' 416,857 412,210 2 Foreign countries 391,148 399,363 400,577 416,401 407,460 418,313 441,475' 420,570' 416,679 411,661 3 Europe 91,927 99,014 106,413 106,755 104,647 107,047 107,549 100,817' 102,399 99,199 4 Austria 401 433 598 654 595 748 738 654 559 655 5 Belgium-Luxembourg 5,639 4,794 5,772 6,574 7,712 8,149 7,511 7,571 8,882 8,030 6 Denmark 1,275 648 706 807 796 764 700 667 631 645 7 Finland 1,044 898 823 1,085 1,111 1,176 947 797 1,050 1,117 8 France 8,766 9,157 9,124 10,209 9,600 9,574 11,401 9,095' 10,001 9,693 9 Germany 1,284 1,306 1,267 1,609 1,432 1,769 1,826 2,277 1,736 1,639 10 Greece 476 817 991 706 626 792 648 635 634 525 11 Italy 9,018 9,119 8,848 6,795 7,713 8,391 9,051 7,916 7,339 6,985 12 Netherlands 1,267 1,356 1,258 2,040 2,592 2,427 3,314 2,087 2,063 2,391 13 Norway 690 675 706 732 711 712 654 741 766 662 14 Portugal 1,114 1,243 1,058 734 699 682 706 677' 679 737 15 Spain 3,573 2,884 1,908 1,995 1,922 1,722 1,459 1,479 1,637 1,767 16 Sweden 3,358 2,230 2,219 2,487 2,375 2,343 1,945 2,280 2,422 2,457 17 Switzerland 1,863 2,123 3,171 2,665 2,832 3,574 3,049 2,622 2,423 2,334 18 Turkey 812 1,130 1,200 1,586 1,612 1,539 1,541 1,469 1,436 1,568 19 United Kingdom 47,364 56,185 62,566 62,017 58,248 59,120 58,380 55,765' 56,467 53,969 20 Yugoslavia 1,718 1,886 1,964 1,871 1,886 1,813 1,833 1,775' 1,769 1,840 21 Other Western Europe1 477 596 998 791 799 600 556 536 491 801 22 U.S.S.R 192 142 130 405 296 225 345 396 401 364 23 Other Eastern Europe2 1,598 1,389 1,107 992 1,090 927 944 1,379' 1,009 1,020 24 Canada 16,341 16,109 16,482 18,112 19,532 20,338 20,957 20,749 19,192 19,701 25 Latin America and Caribbean 205,491 207,862 202,674 205,584 196,861 196,768 208,902 195,094' 195,776 198,431 26 Argentina 11,749 11,050 11,462 12,119 12,243 12,017 12,079 12,114' 12,211 12,162 27 Bahamas 59,633 58,009 58,258 61,705 53,557 54,196 59,877 51,694' 52,489 53,725 28 Bermuda 566 592 499 320 452 447 418 415 376 544 29 Brazil 24,667 26,315 25,283 24,856 24,740 25,882 25,586 25,766' 25,796 25,889 30 British West Indies 35,527 38,205 38,881 40,364 39,981 39,694 46,305 41,128' 41,063 42,368 31 Chile 6,072 6,839 6,603 6,489 6,514 6,526 6,533 6,472' 6,565 6,492 32 Colombia 3,745 3,499 3,249 2,633 2,674 2,665 2,819 2,801 22,,774433 2,692 33 Cuba 0 0 0 0 0 1 0 2 11 6 34 Ecuador 2,307 2,420 2,390 2,387 2,420 2,395 2,430 2,425' 2,422 2,339 35 Guatemala3 129 158 194 135 122 138 140 133 145 135 36 Jamaica3 215 252 224 224 209 216 198 199 199 192 37 Mexico 34,802 34,885 31,799 31,037 31,061 30,659 30,490 30,273' 29,857 29,755 38 Netherlands Antilles 1,154 1,350 1,340 1,133 967 931 1,039 960 1,072 992 39 Panama 7,848 7,707 6,645 6,377 6,094 5,354 5,423 5,270 5,204 5,454 40 Peru 2,536 2,384 1,947 1,600 1,625 1,618 1,637 1,624' 1,616 1,583 41 Uruguay 977 1,088 960 1,051 930 943 940 937 932 959 42 Venezuela 11,287 11,017 10,871 11,177 11,185 11,019 11,052 10,018' 11,175 11,276 43 Other Latin America and Caribbean 2,277 2,091 2,067 1,977 2,086 2,067 1,937 1,864' 1,910 1,868 44 Asia 67,837 66,316 66,212 78,073 78,631 86,236 %,148 9955,,998888'' 9911,,779988 8866,,661144 China 45 Mainland 292 710 639 758 758 793 787 983 873 1,034 46 Taiwan 1,908 1,849 1,535 1,903 1,528 1,812 2,675 2,617 2,890 2,696 47 Hong Kong 8,489 7,293 6,797 8,883 8,337 7,575 8,250 8,443 9,225 8,248 48 India 330 425 450 355 316 327 321 333 325 485 49 Indonesia 805 724 698 689 694 722 718 699 679 652 50 Israel 1,832 2,088 1,991 1,622 1,630 1,615 1,645 1,611 1,531 1,526 51 Japan 30,354 29,066 31,249 42,751 45,240 53,351 59,852 58,315 55,623 51,817 52 Korea 9,943 9,285 9,226 7,846 7,023 6,533 7,155 6,783 6,161 5,941 53 Philippines 2,107 2,555 2,224 2,148 2,071 1,972 2,202 2,147' 2,120 2,269 54 Thailand 1,219 1,125 845 636 611 595 577 521 556 454 55 Middle East oil-exporting countries4 4,954 5,044 4,298 3,724 3,3% 3,778 4,122 5,483 4,892 5,130 56 Other Asia 5,603 6,152 6,260 6,758 7,027 7,162 7,845 8,053 6,922 6,362 57 Africa 6,654 6,615 5,407 4,651 4,531 4,737 4,621 4,599 4,637 4,834 58 Egypt 747 728 721 593 577 560 567 577 593 618 59 Morocco 440 583 575 636 621 621 598 590 585 584 60 South Africa 2,634 2,795 1,942 1,607 1,549 1,586 1,531 1,516 1,507 1,531 61 Zaire 33 18 20 33 35 27 28 36 42 42 62 Oil-exporting countries5 1,073 842 630 512 545 690 688 725 743 856 63 Other 1,727 1,649 1,520 1,270 1,203 1,253 1,208 1,156 1,168 1,204 64 Other countries 2,898 3,447 3,390 3,225 3,259 3,187 3,297 3,323 2,878 2,882 65 Australia 2,256 2,769 2,413 2,221 2,143 1,980 1,952 2,081 1,906 1,991 66 All other 642 678 978 1,004 1,115 1,207 1,345 1,242 971 892 67 Nonmonetary international and regional organizations6 164 800 1,030 200 372 171 2,983 62 178 549 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 1987 TTyyppee ooff ccllaaiimm 11998833 11998844 11998855 Sept. Oct. Nov. Dec. Jan/ Feb. Mar.'' 1 Total . 444444422222226666666,,,,,,,222222211111115555555 444444433333333333333,,,,,,,000000077777778888888 444444433333330000000,,,,,,,444444488888889999999 444444444444448888888,,,,,,,333333377777775555555 444444477777778888888,,,,,,,444444422222229999999 441122,,221100 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 333333399999991111111,,,,,,,333333311111112222222 444444400000000000000,,,,,,,111111166666662222222 444444400000001111111,,,,,,,666666600000008888888 444444411111116666666,,,,,,,666666600000001111111 407,832 418,485 444444444444444444444,,,,,,,444444455555558888888 420,632 416,857 441122,,221100 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 55555557777777,,,,,,,555555566666669999999 66666662222222,,,,,,,222222233333337777777 66666660000000,,,,,,,555555500000007777777 66666660000000,,,,,,,666666600000003333333 60,745 60,785 66666663333333,,,,,,,555555588888882222222 61,833 61,698 6622,,112222 44 OOwwnn ffoorreeiiggnn ooffffiicceess'' 111111144444446666666,,,,,,,333333399999993333333 111111155555556666666,,,,,,,222222211111116666666 111111177777774444444,,,,,,,222222266666661111111 111111199999993333333,,,,,,,333333355555550000000 182,548 189,732 222222211111112222222,,,,,,,000000022222223333333 192,120 190,529 118899,,774455 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111122222223333333,,,,,,,888888833333337777777 111111122222224444444,,,,,,,999999933333332222222 111111111111116666666,,,,,,,666666655555554444444 111111111111116666666,,,,,,,888888833333337777777 117,865 120,485 111111122222222222222,,,,,,,888888811111119999999 121,005 120,311 111166,,448833 66 DDeeppoossiittss 44444447777777,,,,,,,111111122222226666666 44444449999999,,,,,,,222222222222226666666 44444448888888,,,,,,,333333377777772222222 55555552222222,,,,,,,111111177777778888888 53,546 53,300 55555557777777,,,,,,,333333344444449999999 54,266 55,493 5533,,448877 77 OOtthheerr 77777776666666,,,,,,,777777711111111111111 77777775555555,,,,,,,777777700000006666666 66666668888888,,,,,,,222222288888882222222 66666664444444,,,,,,,666666666666660000000 64,319 67,185 66666665555555,,,,,,,444444477777771111111 66,740 64,817 6622,,999966 88 AAllll ootthheerr ffoorreeiiggnneerrss 66666663333333,,,,,,,555555511111114444444 55555556666666,,,,,,,777777777777777777777 55555550000000,,,,,,,111111188888885555555 44444445555555,,,,,,,888888811111111111111 46,675 47,483 44444446666666,,,,,,,000000033333334444444 45,674 44,319 4433,,885599 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss22 .... 33333334444444,,,,,,,999999900000003333333 33333332222222,,,,,,,999999911111116666666 22222228888888,,,,,,,888888888888881111111 33333331111111,,,,,,,777777777777774444444 33333333333333,,,,,,,999999977777771111111 2222222,,,,,,,999999966666669999999 3333333,,,,,,,333333388888880000000 3333333,,,,,,,333333333333335555555 3333333,,,,,,,666666666666668888888 4444444,,,,,,,444444411111113333333 11 Negotiable and readily transferable 22222226666666,,,,,,,000000066666664444444 22222223333333,,,,,,,888888800000005555555 11111119999999,,,,,,,333333333333332222222 22222222222222,,,,,,,333333333333337777777 22222224444444,,,,,,,000000044444444444444 12 Outstanding collections and other 5555555,,,,,,,888888877777770000000 5555555,,,,,,,777777733333332222222 6666666,,,,,,,222222211111114444444 5555555,,,,,,,777777766666669999999 5555555,,,,,,,555555511111114444444 13 MEMO: Customer liability on 33333337777777,,,,,,,777777711111115555555 33333337777777,,,,,,,111111100000003333333 22222228888888,,,,,,,444444488888887777777 22222227777777,,,,,,,000000088888882222222 22222225555555,,,,,,,666666600000006666666 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States4 .... 46,337 40,714 37,780 43,753 42,771 44,772 43,597R 46,506 47,835 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 1986 MMaattuurriittyy;; bbyy bboorrrroowweerr aanndd aarreeaa 11998833 11998844 11998855 Mar. June Sept. Dec/ 1 243,715 243,952 227,903 221,294 222,597 224,693 230,897 By borrower 2 Maturity of 1 year or less' 176,158 167,858 160,824 152,782 152,589 155,116 159,414 3 Foreign public borrowers 24,039 23,912 26,302 23,883 23,171 22,527 24,920 4 All other foreigners 152,120 143,947 134,522 128,900 129,418 132,589 134,494 5 Maturity of over 1 year' 67,557 76,094 67,078 68,512 70,008 69,577 71,483 6 Foreign public borrowers 32,521 38,695 34,512 36,875 37,365 38,189 39,816 7 All other foreigners 35,036 37,399 32,567 31,637 32,643 31,388 31,667 By area Maturity of 1 year or less' 8 Europe 56,117 58,498 56,585 53,432 57,948 59,383 61,057 9 Canada 6,211 6,028 6,401 6,013 6,074 6,160 5,794 10 Latin America and Caribbean 73,660 62,791 63,328 59,550 57,397 58,191 55,879 11 Asia 34,403 33,504 27,966 28,013 25,802 26,474 29,372 1? Africa 4,199 4,442 3,753 3,331 3,297 3,071 2,854 13 All other2 1,569 2,593 2,791 2,443 2,073 1,838 4,458 Maturity of over 1 year' 14 Europe 13,576 9,605 7,634 7,812 7,934 7,297 6,796 15 Canada 1,857 1,882 1,805 1,925 2,256 1,930 1,930 16 Latin America and Caribbean 43,888 56,144 50,674 52,167 53,572 54,093 56,336 17 Asia 4,850 5,323 4,502 4,251 4,034 3,976 4,091 18 Africa 2,286 2,033 1,538 1,634 1,497 1,479 1,534 19 All other2 1,101 1,107 926 722 714 802 795 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 • July 1987 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks1-2 Billions of dollars, end of period 1985 1986 AArreeaa oorr ccoouunnttrryy 11998822 11998833 11998844 Mar. June Sept. Dec. Mar. June Sept. Dec.P 1 Total 436.1 433.9 405.7 405.5 3%. 8 394.9 391.9 394.4 391.0 391.3 395.5 2 G-10 countries and Switzerland 179.6 167.8 148.1 153.0 146.7 152.0 148.5 156.3 159.9 158.9 159.6 3 Belgium-Luxembourg 13.1 12.4 8.7 9.3 8.9 9.5 9.3 8.3 9.0 8.5 8.5 4 France 17.1 16.2 14.1 14.5 13.5 14.8 12.3 13.8 15.1 14.6 13.8 5 Germany 12.7 11.3 9.0 8.9 9.6 9.8 10.5 11.2 11.5 12.5 11.2 6 Italy 10.3 11.4 10.1 10.0 8.6 8.4 9.8 8.5 9.3 8.1 9.2 7 Netherlands 3.6 3.5 3.9 3.8 3.7 3.4 3.7 3.5 3.4 3.9 4.6 8 Sweden 5.0 5.1 3.2 3.1 2.9 3.1 2.8 2.9 2.9 2.7 2.4 9 Switzerland 5.0 4.3 3.9 4.2 4.0 4.1 4.4 5.4 5.6 4.8 5.5 10 United Kingdom 72.1 65.3 60.3 65.4 65.7 67.1 64.6 68.5 68.9 70.0 72.0 11 Canada 10.4 8.3 7.9 9.1 8.1 7.6 7.0 6.2 6.8 6.1 5.4 12 Japan 30.2 29.9 27.1 24.7 21.7 24.3 24.2 28.1 27.4 27.7 26.9 13 Other developed countries 33.5 36.0 33.6 32.8 32.3 32.0 30.4 31.6 30.6 29.4 26.2 14 Austria 1.9 1.9 1.6 1.6 1.6 1.7 1.6 1.6 1.7 1.7 1.7 15 Denmark 2.4 3.4 2.2 2.1 1.9 2.1 2.4 2.5 2.4 2.3 1.7 16 Finland 2.2 2.4 1.9 1.8 1.8 1.8 1.6 1.9 1.6 1.7 1.4 17 Greece 3.0 2.8 2.9 2.9 2.9 2.8 2.6 2.5 2.6 2.3 2.3 18 Norway 3.3 3.3 3.0 2.9 2.9 3.4 2.9 2.7 3.0 2.7 2.4 19 Portugal 1.5 1.5 1.4 1.4 1.3 1.4 1.3 1.1 1.0 1.0 .9 20 Spain 7.5 7.1 6.5 6.4 5.9 6.1 5.8 6.4 6.4 6.7 5.8 21 Turkey 1.4 1.7 1.9 1.9 2.0 2.1 1.9 2.3 2.5 2.1 2.0 22 Other Western Europe 2.3 1.8 1.7 1.7 1.8 1.7 2.0 2.4 2.1 1.6 1.5 23 South Africa 3.7 4.7 4.5 4.2 3.9 3.3 3.2 3.2 3.1 3.1 3.1 24 Australia 4.3 5.4 6.0 6.1 6.2 5.6 5.0 4.9 4.2 4.1 3.5 25 OPEC countries3 26.9 28.4 24.9 24.5 22.8 22.7 21.6 20.7 20.6 20.0 19.6 26 Ecuador 2.2 2.2 2.2 2.2 2.2 2.2 2.1 2.2 2.1 2.1 2.2 27 Venezuela 10.5 9.9 9.3 9.3 9.3 9.0 8.9 8.7 8.8 8.7 8.6 28 Indonesia 2.9 3.4 3.3 3.3 3.1 3.1 3.0 3.3 3.0 2.8 2.6 29 Middle East countries 8.5 9.8 7.9 7.4 6.1 6.2 5.5 4.8 5.0 4.6 4.5 30 African countries 2.8 3.0 2.3 2.3 2.2 2.3 2.0 1.8 1.7 1.7 1.7 31 Non-OPEC developing countries 106.5 110.8 111.8 110.8 110.0 107.8 105.1 103.5 101.5 99.7 100.1 Latin America 32 Argentina 8.9 9.5 8.7 8.6 8.6 8.9 8.9 8.9 9.2 9.3 9.5 33 Brazil 22.9 23.1 26.3 26.4 26.6 25.5 25.6 25.6 25.3 25.2 25.3 34 Chile 6.3 6.4 7.0 7.0 6.9 6.6 7.0 7.0 7.1 7.1 7.1 35 Colombia 3.1 3.2 2.9 2.8 2.7 2.6 2.7 2.3 2.2 2.0 2.1 36 Mexico 24.2 25.8 25.7 25.5 25.3 24.4 24.2 24.0 23.8 23.8 23.9 37 Peru 2.6 2.4 2.2 2.2 2.1 1.9 1.8 1.7 1.6 1.5 1.4 38 Other Latin America 4.0 4.2 3.9 3.8 3.7 3.5 3.4 3.3 3.3 3.3 3.7 Asia China 39 Mainland .2 .3 .7 .7 .3 1.1 .5 .6 .6 .6 .4 40 Taiwan 5.3 5.2 5.1 5.3 5.5 5.1 4.5 4.3 3.7 4.3 4.9 41 India .5 .9 .9 .9 .9 1.1 1.2 1.2 1.3 1.3 1.2 42 Israel 2.3 1.9 1.8 1.7 2.3 1.5 1.6 1.3 1.6 1.4 1.6 43 Korea (South) 10.7 11.2 10.6 10.4 10.0 10.4 9.4 9.5 8.7 7.3 6.8 44 Malaysia 2.1 2.8 2.7 2.7 2.8 2.7 2.4 2.2 2.0 2.1 2.1 45 Philippines 6.3 6.1 6.0 6.1 6.0 6.0 5.7 5.6 5.7 5.4 5.4 46 Thailand 1.6 2.2 1.8 1.7 1.6 1.7r 1.4 1.3 1.1 1.0 .9 47 Other Asia 1.1 1.0 1.1 1.1 .9 .9 1.0 .9 .8 .7 .7 Africa 48 Egypt 1.2 1.5 1.2 1.1 1.0 1.0 1.0 .9 .9 .7 .7 49 Morocco .7 .8 .8 .8 .8 .9 .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 2.1 2.2 2.0 2.0 1.9 1.9 1.7 1.6 1.6 52 Eastern Europe 6.2 5.3 4.4 4.3 4.3 4.6 4.2 4.0 4.0 3.4 4.0 53 U.S.S.R .3 .2 .1 .2 .3 .2 .1 .3 .3 .1 .4 54 Yugoslavia 2.2 2.4 2.3 2.2 2.2 2.4 2.2 2.0 2.0 1.9 1.7 55 Other 3.7 2.8 2.0 1.9 1.8 1.9 1.8 1.7 1.7 1.4 1.9 56 Offshore banking centers 66.0 68.9 65.6 63.2 63.9 58.8 65.4 61.6 57.2 62.6 65.6 57 Bahamas 19.0 21.7 21.5 20.1 21.1 16.6 21.4 21.5 17.3 20.0 22.6 58 Bermuda .9 .9 .9 .7 .9 .8 .7 .7 .4 .4 .7 59 Cayman Islands and other British West Indies 12.8 12.2 11.8 12.3 12.1 12.3 13.4 11.3 12.8 13.2 14.6 60 Netherlands Antilles 3.3 4.2 3.4 3.3 3.2 2.3 2.3 2.3 2.3 1.9 1.9 61 Panama5 7.5 5.8 6.7 5.5 5.4 6.1 6.0 5.9 5.5 6.8 5.1 62 Lebanon .1 .1 .1 .1 .1 .0 .1 .1 .1 .1 .1 63 Hong Kong 13.3 13.8 11.4 11.4 11.4 11.4 11.5 11.4 9.4 10.4 11.2 64 Singapore 9.1 10.3 9.8 9.9 9.7 9.4 9.9 8.4 9.3 9.7 9.4 65 Others6 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated7 17.5 16.8 17.3 16.9 16.9 17.3 16.9 16.7 17.2 17.5 20.3 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 States' Millions of dollars, end of period 1985 1986 Type, and area or country 998822 11998833 11998844 Dec. Mar. June Sept. Dec.? 1 Total 27,512 25,346 29,357 27,741 26,301 24,698 24,460 25,336 2 Payable in dollars 24,280 22,233 26,389 24,352 22,544 21,040 20,633 21,568 3 Payable in foreign currencies 3,232 3,113 2,968 3,389 3,757 3,657 3,827 3,768 By type 4 Financial liabilities 11,066 10,572 14,509 13,516 12,971 11,578 11,700 12,070 5 Payable in dollars 8,858 8,700 12,553 11,313 10,705 9,515 9,418 9,705 6 Payable in foreign currencies 2,208 1,872 1,955 2,203 2,267 2,063 2,281 2,365 7 Commercial liabilities 16,446 14,774 14,849 14,225 13,329 13,120 12,760 13,267 8 Trade payables 9,438 7,765 7,005 6,685 5,618 5,472 5,592 6,306 9 Advance receipts and other liabilities .. 7,008 7,009 7,843 7,540 7,711 7,648 7,168 6,961 10 Payable in dollars 15,423 13,533 13,836 13,039 11.839 11,525 11,214 11,863 11 Payable in foreign currencies 1,023 1,241 1,013 1,186 1,490 1,595 1,546 1,404 By area or country Financial liabilities 12 Europe 6,501 5,742 6,728 7,616 7,460 7,022 7,254 7,851 13 Belgium-Luxembourg 505 302 471 329 338 288 322 245 14 France 783 843 995 857 851 686 501 729 15 Germany 467 502 489 434 388 280 319 372 16 Netherlands 711 621 590 745 630 635 708 701 17 Switzerland 792 486 569 676 692 561 692 714 18 United Kingdom 3,102 2,839 3,297 4,254 4,217 4,274 4,272 4,790 19 Canada 746 764 863 839 832 367 362 403 20 Latin America and Caribbean 2,751 2,596 5,086 3,184 2,810 2,443 2,269 1,969 21 Bahamas 904 751 1,926 1,123 958 874 863 621 22 Bermuda 14 13 13 4 4 14 4 4 23 Brazil 28 32 35 29 26 27 28 32 24 British West Indies 1,027 1,041 2,103 1,843 1,639 1,386 1,256 1,160 25 Mexico 121 213 367 15 20 30 18 22 26 Venezuela 114 124 137 3 3 3 5 3 27 Asia 1,039 1,424 1,777 1,815 1,824 1,685 1,790 1,767 28 Japan 715 991 1,209 1,198 1,217 1,214 1,354 1,352 29 Middle East oil-exporting countries2.. 169 170 155 82 78 43 3 8 30 Africa 17 19 14 12 12 12 4 1 0 0 0 0 0 0 2 1 31 Oil-exporting countries3 12 27 41 50 32 49 21 79 32 All other4 Commercial liabilities 3,831 3,245 4,001 4,074 3,925 3,826 4,337 4,422 33 Europe 52 62 48 62 66 58 75 99 34 Belgium-Luxembourg 598 437 438 453 382 358 369 314 35 France 468 427 622 607 546 561 628 693 36 Germany 346 268 245 364 545 586 613 493 37 Netherlands 367 241 257 379 261 284 360 384 38 Switzerland 1,027 732 1,095 976 957 864 1,086 1,279 39 United Kingdom 40 Canada 1,495 1,841 1,975 1,449 1,445 1,357 1,240 1,387 41 Latin America and Caribbean 1,570 1,473 1,871 1,088 1,107 1,242 843 856 42 Bahamas 16 1 7 12 26 10 37 19 43 Bermuda 117 67 114 77 218 294 172 132 44 Brazil 60 44 124 58 64 45 43 59 45 British West Indies 32 6 32 44 7 35 45 46 46 Mexico 436 585 586 430 256 235 196 211 47 Venezuela 642 432 636 212 364 488 207 215 48 Asia 8,144 6,741 5,285 6,046 5,384 5,075 4,781 5,018 49 Japan 1,226 1,247 1,256 1,799 2,039 2,100 2,114 2,046 50 Middle East oil-exporting countries2-5. 5,503 4,178 2,372 2,829 2,171 1,787 1,490 1,668 51 Africa 753 553 588 587 486 567 578 622 52 Oil-exporting countries3 277 167 233 238 148 215 176 197 53 All other4 651 921 1,128 982 983 1,053 980 962 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 • July 1987 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1985 1986 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998822 11998833 11998844 Dec. Mar. June Sept. Dec.'' 1 Total 28,725 34,911 29,901 28,437 31,383 33,282 32,599 32,847 2 Payable in dollars 26,085 31,815 27,304 26,135 29,196 31,100 30,123 30,244 3 Payable in foreign currencies 2,640 3,096 2.597 2,302 2,187 2,182 2,475 2,603 By type 4 Financial claims 17,684 23,780 19,254 18,451 21,996 24,139 23,503 23,277 5 Deposits 13,058 18,496 14,621 15,204 18,612 20,833 18,566 18,573 6 Payable in dollars 12,628 17,993 14,202 14,589 18,155 20,278 18,078 18,024 7 Payable in foreign currencies 430 503 420 615 457 555 488 549 8 Other financial claims 4,626 5,284 4,633 3,248 3,384 3,306 4,937 4,704 9 Payable in dollars 2,979 3,328 3,190 2,213 2,291 2,285 3,717 3,406 10 Payable in foreign currencies 1,647 1,956 1,442 1,035 1,093 1,021 1,220 1,298 11 Commercial claims 11,041 11,131 10,646 9,986 9,387 9,142 9,096 9,570 12 Trade receivables 9,994 9,721 9,177 8,696 8,087 7,802 7,924 8,424 13 Advance payments and other claims 1,047 1,410 1,470 1,290 1,300 1,341 1,172 1,146 14 Payable in dollars 10,478 10,494 9,912 9,333 8,750 8,537 8,329 8,814 15 Payable in foreign currencies 563 637 735 652 637 606 767 756 By area or country Financial claims 16 Europe 4,873 6,488 5,762 6,530 7,183 9,626 9,548 8,466 17 Belgium-Luxembourg 15 37 15 10 10 11 67 41 18 France 134 150 126 184 217 257 418 131 19 Germany 178 163 224 223 174 148 129 86 20 Netherlands 97 71 66 61 61 17 44 87 21 Switzerland 107 38 66 74 166 177 138 134 22 United Kingdom 4,064 5,817 4,864 5,725 6,310 8,799 8,525 7,736 23 Canada 4,377 5,989 3,988 3,260 4,020 4,429 3,817 4,119 24 Latin America and Caribbean 7,546 10,234 8,216 7,841 10,073 9,253 9,300 9,245 25 Bahamas 3,279 4,771 3,306 2,698 3,516 3,310 2,912 2,574 26 Bermuda 32 102 6 6 2 17 19 13 27 Brazil 62 53 100 78 77 75 101 67 28 British West Indies 3,255 4,206 4,043 4,571 6,034 5,402 5,871 6,068 29 Mexico 274 293 215 180 178 176 173 173 30 Venezuela 139 134 125 48 43 42 40 24 31 698 764 961 696 619 723 673 1,335 32 Japan 153 297 353 475 350 499 387 1,003 33 Middle East oil-exporting countries2 15 4 13 4 2 2 2 11 34 Africa 158 147 210 103 87 89 84 85 35 Oil-exporting countries3 48 55 85 29 27 25 18 26 36 All other4 31 159 117 21 14 20 81 27 Commercial claims 37 Europe 3,826 3,670 3,801 3,533 3,390 3,304 3,344 3,530 38 Belgium-Luxembourg 151 135 165 175 148 131 123 129 39 France 474 459 440 426 384 391 412 386 40 Germany 357 349 374 346 399 418 397 429 41 Netherlands 350 334 335 284 221 230 183 199 42 Switzerland 360 317 271 284 247 228 232 213 43 United Kingdom 811 809 1,063 898 795 674 830 822 44 Canada 633 829 1,021 1,023 1,061 965 929 902 45 Latin America and Caribbean 2,526 2,695 2,052 1,753 1,592 1,611 1,665 1,827 46 Bahamas 21 8 8 13 27 24 29 29 47 Bermuda 261 190 115 93 82 148 132 157 48 Brazil 258 493 214 206 217 193 206 228 49 British West Indies 12 7 7 6 7 29 23 54 50 Mexico 775 884 583 510 388 323 299 385 51 Venezuela 351 272 206 157 172 181 190 219 52 Asia 3,050 3,063 3,073 2,982 2,609 2,574 22,,447711 2,630 53 Japan 1,047 1,114 1,191 1,016 801 845 778888 842 54 Middle East oil-exporting countries2 751 737 668 638 630 622 597 507 55 Africa 588 588 470 437 491 450 456 463 56 Oil-exporting countries3 140 139 134 130 167 170 168 135 57 All other4 417 286 229 257 244 237 231 218 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 1987 1986 1987 TTrraannssaaccttiioonnss,, aanndd aarreeaa oorr ccoouunnttrryy 11998855 11998866 Jan.-Mar. Sept. Oct. Nov. Dec. Jan. Feb. Mar .P U.S. corporate securities STOCKS 1 Foreign purchases 81,995 148,134 61,439 12,250 10,979 12,033 14,096 17,617 20,758 23,064 2 Foreign sales 77,054 129,436 51,605 10,991 12,300 12,086 12,320 15,956 17,651 17,998 3 Net purchases, or sales (-) 4,941 18,698 9,833 1,259 -1,322 -52 1,776 1,661 3,107 5,066 4 Foreign countries 4,857 18,905 9,976 1,304 -1,179 -19 1,696 1,741 3,206 5,028 5 Europe 2,057 9,559 4,682 573 -1,124 -485 557 1,061 1,778 1,843 6 France -438 459 1,242 30 -92 -69 113 140 446 656 7 Germany 730 341 97 9 -104 -3 24 62 16 19 8 Netherlands -123 936 213 36 -19 -50 14 53 91 69 9 Switzerland -75 1,560 379 71 -405 -236 47 101 99 180 10 United Kingdom 1,665 4,826 2,419 448 -481 -114 363 647 989 783 11 Canada 356 807 327 106 -115 41 102 100 -116 343 1? Latin America and Caribbean 1,718 3,029 1,011 147 154 367 220 308 331 372 13 Middle East1 238 975 -270 58 -51 -92 267 136 -175 -230 14 Other Asia 296 3,865 3,886 346 16 80 450 88 1,159 2,639 IS Africa 24 297 15 -13 39 23 17 -1 15 1 16 Other countries 168 373 324 86 -97 48 84 49 214 61 17 Nonmonetary international and regional organizations 84 -208 -142 -45 -143 -34 80 -80 -100 37 BONDS2 18 Foreign purchases 86,587 122,743 29,449 10,235 9,752 9,277 11,879 9,308 8,022 12,120 19 Foreign sales 42,455 71,840 20,900 5,597 5,539 6,105 7,733 7,178 5,453 8,270 20 Net purchases, or sales (—) 44,132 50,903 8,549 4,638 4,213 3,172 4,147 2,130 2,569 3,850 21 Foreign countries 44,227 50,056 8,410 4,934 4,455 2,853 4,251 2,218 2,183 4,008 22 Europe 40,047 39,307 6,390 3,445 3,475 2,100 3,074 1,375 1,406 3,609 23 France 210 388 105 -29 0 328 32 6 17 81 24 Germany 2,001 -251 129 26 82 -108 -19 -213 145 198 Netherlands 222 387 33 51 -55 113 52 -7 -29 69 76 Switzerland 3,987 4,529 702 30 265 204 -117 66 78 558 27 United Kingdom 32,762 33,899 5,514 3,468 3,177 1,416 2,770 1,392 1,182 2,940 7,8 Canada 190 548 451 2 88 154 153 -103 364 190 29 Latin America and Caribbean 498 1,468 270 64 101 66 102 103 98 70 30 Middle East1 -2,648 -2,961 -207 -169 -33 -355 -258 -57 -139 -11 31 Other Asia 6,091 11,539 1,555 1,590 817 902 1,174 917 469 169 32 Africa 11 16 5 6 -3 3 3 0 1 3 33 Other countries 38 139 -54 -4 11 -15 3 -16 -16 -22 34 Nonmonetary international and regional organizations -95 847 139 -296 -243 319 -104 -88 386 -159 Foreign securities 35 Stocks, net purchases, or sales (—) -3,941 -1,452 -1,324 679 1,311 391 65 - 167R -463 -693 36 Foreign purchases 20,861 50,292 19,449 5,120 6,426 4,190 4,709 5,001' 7,247 7,201 37 Foreign sales 24,803 51,744 20,773 4,440 5,115 3,799 4,644 5,169 7,710 7,894 38 Bonds, net purchases, or sales (-) -3,999 -3,098 -413 -2,340 2,125 -683 -441 32C -217 -516 39 Foreign purchases 81,216 166,700 43,856 15,239 16,274 12,663 16,316 11,427' 15,821 16,609 40 Foreign sales 85,214 169,798 44,269 17,578 14,149 13,346 16,756 11,107' 16,037 17,125 41 Net purchases, or sales (—), of stocks and bonds .... -7,940 -4,550 -1,737 -1,660 3,436 -292 -376 152' -680 -1,209 42 Foreign countries -9,003 -5,665 -2,293 -1,598 3,117 -294 -825 10' -789 -1,514 43 Europe -9,887 -17,675 -2,123 -3,390 -657 -1,010 -1,369 -188' -1,271 -665 44 Canada -1,686 -875 -1,222 109 94 -106 -264 -3% -622 -204 45 Latin America and Caribbean 1,797 3,469 84 351 502 16 203 389 124 -429 46 659 11,342 1,411 1,764 3,237 820 1,511 168 935 309 47 Africa 75 52 3 3 -1 4 3 4 0 -1 48 Other countries 38 -1,977 -446 -434 -59 -19 -909 33' 45 -524 49 Nonmonetary international and regional organizations 1,063 1,115 556 -63 320 2 449 143 109 305 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 • July 1987 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1987 1986 1987 11998855 11998866 Country or area Jan.- Sept. Oct. Nov. Dec. Jan. Feb. Mar.P Mar. Transactions, net purchases or sales (-) during period1 1 Estimated total2 29,208 24,173 13,855 5,105 3,032 -2,259 991 -156' 7,782 6,229 2 Foreign countries2 28,768 25,277 5,786 4,062 2,717 -301 -488 58C 1,818 3,388 3 Europe2 4,303 16,851 8,115 -722 3,046 -727 1,001 1,376 1,709 5,031 4 Belgium-Luxembourg 476 349 235 239 4 -53 75 59 211 -35 5 Germany2 1,917 7,531 3,353 1,098 2,497 700 -487 581 1,118 1,655 6 Netherlands 269 1,283 -607 -313 112 38 -58 -366 41 -283 7 Sweden 976 132 536 85 -6 -70 -236 -229 440 325 8 Switzerland2 773 310 1,721 -53 449 -498 -428 -135 473 1,383 9 United Kingdom -1,810 4,648 1,530 -1,972 141 -335 1,036 1,227 -57 360 10 Other Western Europe 1,701 2,598 1,347 195 -149 -510 1,099 236 -518 1,628 11 Eastern Europe 0 0 0 0 0 0 0 3 0 -3 12 Canada -188 881 1,145 -190 -230 19 297 846 -403 702 13 Latin America and Caribbean 4,315 878 -1,358 220 -219 75 97 -1,006' -290 -62 14 Venezuela 248 -95 87 266 69 -139 29 -33 18 102 15 Other Latin America and Caribbean 2,336 1,131 -228 32 -314 6 96 -445' 374 -156 16 Netherlands Antilles 1,731 -159 -1,218 -78 26 208 -28 -528 -682 -8 17 Asia 19,919 5,466 -2,017 4,942 -30 -152 -2,067 -922 1,231 -2,327 18 Japan 17,909 4,048 -688 4,489 -450 188 -2,086 -76 1,776 -2,388 19 Africa 112 -54 -15 11 -13 2 -14 6 -34 12 20 All other 308 1,255 -83 -200 163 482 198 280 -396 32 21 Nonmonetary international and regional organizations 442 -1,105 8,070 1,043 315 -1,958 1,478 -736 5,966 -2,840 22 International -436 -1,430 7,949 937 365 -2,010 1,412 -791 5,964 -2,776 23 Latin American regional 18 157 11 39 -5 0 0 0 0 11 MEMO 24 Foreign countries'1 28,768 25,277 5,786 4,062 2,717 -301 -488 580' 1,818 3,388 25 Official institutions 8,135 14,366 7,186 1,878 3,589 133 295 1,498' 682 5,007 26 Other foreign2 20,631 10,913 -1,400 2,183 -872 -434 -782 -918 1,135 -1,617 Oil-exporting countries 27 Middle East3 -1,547 -1473 -1,456 -205 -377 -1,014 -21 -721 -962 226 28 Africa4 7 5 19 2 -1 1 0 1 1 17 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 Apr. 30, 1987 Rate on Apr. 30, 1987 Rate on Apr. 30, 1987 Country Country Country Per- Month Per- Month Per- Month cent effective cent effective cent effective Austria.. 3.5 Jan. 1987 France1 7.75 Mar. 1987 Norway 8.0 June 1983 Belgium . 8.5 Jan. 1987 Germany, Fed. Rep. of 3.5 Mar. 1986 Switzerland 3.5 Jan. 1987 Brazil... 49.0 Mar. 1981 Italy 11.5 Mar. 1987 United Kingdom2. Canada.. 7.90 Apr. 1987 Japan 2.5 Feb. 1987 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 1987 CCoouunnttrryy,, oorr ttyyppee 11998844 11998855 11998866 Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Eurodollars 10.75 8.27 6.70 5.88 5.96 6.23 6.10 6.32 6.37 6.73 2 United Kingdom 9.91 12.16 10.87 11.08 11.12 11.30 10.98 10.79 9.90 9.72 3 Canada 11.29 9.64 9.18 8.45 8.39 8.34 7.95 7.44 7.14 7.62 4 Germany 5.96 5.40 4.58 4.56 4.67 4.80 4.45 3.94 3.97 3.85 5 Switzerland 4.35 4.92 4.19 3.96 3.88 4.08 3.63 3.58 3.93 3.65 6 Netherlands 6.08 6.29 5.56 5.32 5.48 6.03 5.58 5.31 5.38 5.31 7 France 11.66 9.91 7.68 7.38 7.51 7.92 8.49 8.36 7.85 7.87 8 Italy 17.08 14.86 12.60 10.85 11.05 11.40 11.39 11.13 10.65 10.03 9 Belgium 11.41 9.60 8.04 7.29 7.38 7.39 7.88 7.75 7.49 7.21 10 Japan 6.32 6.47 4.96 4.75 4.39 4.40 4.23 3.98 4.00 3.92 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 • July 1987 3.28 FOREIGN EXCHANGE RATES Currency units per dollar 1986 1987 CCoouunnttrryy//ccuurrrreennccyy 11998844 11998855 11998866 Nov. Dec. Jan. Feb. Mar. Apr. 1 Australia/dollar1 87.937 70.026 67.093 64.45 65.95 66.09 66.77 68.17 71.19 2 Austria/schilling 20.005 20.676 15.260 14.251 13.9% 13.087 12.833 12.905 12.739 3 Belgium/franc 57.749 59.336 44.662 42.069 41.381 38.616 37.789 38.029 35.562 4 Brazil/cruzeiro 1841.50 6205.10 13.051 14.10 14.54 15.58 18.08 20.56 22.59 5 Canada/dollar 1.2953 1.3658 1.38% 1.3863 1.3801 1.3605 1.3340 1.3194 1.3183 6 China, P.R./yuan 2.3308 2.9434 3.4615 3.7314 3.7314 3.7314 3.7314 3.7314 3.7314 7 Denmark/krone 10.354 10.598 8.0954 7.6444 7.5235 7.0591 6.8939 6.9166 6.8388 8 Finland/markka 6.0007 6.1971 5.0721 4.9576 4.8980 4.6419 4.5556 4.5102 4.4227 9 France/franc 8.7355 8.9799 6.9256 6.6206 6.5296 6.2007 6.0760 6.1091 6.0332 10 Germany/deutsche mark 2.8454 2.9419 2.1704 2.0243 1.9880 1.8596 1.8239 1.8355 1.8125 11 Greece/drachma 112.73 138.40 139.93 139.12 140.13 134.80 133.88 134.68 133.502 12 Hong Kong/dollar 7.8188 7.7911 7.8037 7.7974 7.7931 7.7698 7.7952 7.8017 7.8023 13 India/rupee 11.348 12.332 12.597 13.076 13.149 13.029 13.062 12.924 12.8224 14 Ireland/pound1 108.64 106.62 134.14 134.64 136.78 143.90 145.93 145.54 147.49 15 Italy/lira 1756.10 1908.90 1491.16 1401.08 1379.44 1317.17 1297.74 1305.90 1292.% 16 Japan/yen 237.45 238.47 168.35 162.85 162.05 154.83 153.41 151.43 143.00 17 Malaysia/ringgit 2.3448 2.4806 2.5830 2.6131 2.5%6 2.5701 2.5418 2.5230 2.4861 18 Netherlands/guilder 3.2083 3.3184 2.4484 2.2870 2.2470 2.0978 2.0592 2.0731 2.0447 19 New Zealand/dollar1 57.837 49.752 52.456 51.382 51.339 53.605 54.815 56.333 57.751 20 Norway/krone 8.1596 8.5933 7.3984 7.5401 7.5294 7.1731 7.0067 6.9335 6.7781 21 Portugal/escudo 147.70 172.07 149.80 149.54 148.61 142.90 141.62 141.48 140.339 22 Singapore/dollar 2.1325 2.2008 2.1782 2.1922 2.1900 2.1510 2.1410 2.1418 2.1350 23 South Africa/rand1 69.534 45.57 43.952 44.37 44.94 47.70 47.97 48.21 49.55 24 South Korea/won 807.91 861.89 884.61 873.54 868.43 862.86 857.38 856.11 845.00 25 Spain/peseta 160.78 169.98 140.04 136.10 134.49 129.54 128.62 128.86 126.975 26 Sri Lanka/rupee 25.428 27.187 27.933 28.471 28.532 28.578 28.662 28.823 28.902 27 Sweden/krona 8.2706 8.6031 7.1272 6.9683 6.9081 6.6188 6.5016 6.4202 6.3210 28 Switzerland/franc 2.3500 2.4551 1.7979 1.6858 1.6647 1.5616 1.5403 1.5391 1.4968 29 Taiwan/dollar 39.633 39.889 37.837 36.438 36.001 35.304 35.056 34.681 33.863 30 Thailand/baht 23.582 27.193 26.314 26.278 26.239 26.037 25.933 25.881 25.695 31 United Kingdom/pound1 133.66 129.74 146.77 142.38 143.93 150.54 152.80 159.23 162.99 MEMO 32 United States/dollar2 138.19 143.01 112.22 107.90 106.54 101.13 99.46 98.99 97.09 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 June 1987 A89 SPECIAL TABLES Published Irregularly, with Latest Bulletin Reference Assets and liabilities of commercial banks, March 31, 1986 June 1987 A70 Assets and liabilities of commercial banks, June 30, 1986 June 1987 A76 Assets and liabilities of commercial banks, September 30, 1986 July 1987 A70 Assets and liabilities of commercial banks, December 31, 1986 July 1987 A76 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 Assets and liabilities of U.S. branches and agencies of foreign banks, September 30, 1986 March 1987 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, December 31, 1986 May 1987 A76 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 Terms of lending at commercial banks, February 1987 May 1987 A70 Digitized Sfopre FcRiaAlS EtaRb les begin on next page. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • July 1987 4.20 DOMESTIC AND FOREIGN OFFICES, Insured Commercial Bank Assets and Liabilities'2 Consolidated Report of Condition, September 30, 1986 Millions of dollars Banks with foreign offices3-4 Bank o s f f w ic i e th s o d n o l m y5 e stic IItteemm TToottaall Total Foreign Domestic Over 100 Under 100 1 Total assets6 2,772,938 1,612,911 423,841 1,244,421 731,739 428,288 2 Cash and balances due from depository institutions 325,280 226,168 113,326 112,843 62,191 36,920 3 Cash items in process of collection, unposted debits, and currency A 74,225 1,969 72,257 25,005 1 4 Cash items in process of collection and unposted debits and coin 1 n.a. n.a. 61,552 17,432 5 Currency and coin n.a. n.a. n.a. 10,705 7,573 n.a. 6 7 B B a a l l a a n n c c e e s s d d u u e e f f r r o o m m d b e a p n o ks s it in o ry fo r i e n i s g t n it u c t o io u n n s t ri i e n s th a e n d U f n o i r t e e i d g n S t c a e t n e t s r al banks 1 I 9 3 5 3 , , 7 2 6 7 5 4 9 1 2 9 , , 0 1 6 7 1 8 1 3 4 , , 7 0 0 9 4 6 2 5 2 , , 7 0 8 9 5 4 |1 8 Balances due from Federal Reserve Banks 22,904 118 22,786 9,307 1 MEMO 9 Noninterest-bearing balances due from commercial banks in the United States (included in balances due from depository institutions in the U.S.) n.a. n.a. n.a. 9,577 13,446 13,789 10 Total securities, loans and lease financing receivables, net 2,234,431 1,223,405 n.a. n.a. 638,776 372,250 11 Total securities, book value 469,428 184,496 24,235 160,260 163,512 121,420 12 U.S. Treasury securities and U.S. government agency and corporation obligations 267,929 87,919 722 87,198 96,423 83,587 13 U.S. Treasury securities n.a. 57,802 630 57,171 62,439 n.a. 14 U.S. government agency and corporation obligations n.a. 30,118 91 30,027 33,984 n.a. 15 All holdings of U.S. government-issued or guaranteed certificates of participation in pools of residential mortgages 39,088 21,266 76 21,189 10,119 7,704 16 All other n.a. 8,852 15 8,837 23,865 n.a. 17 Securities issued by states and political subdivisions in the United States 151,397 63,238 773 62,465 55,387 32,771 18 Other securities 50,102 33,338 22,740 10,597 11,702 5,062 19 Other domestic securities n.a. 9,182 427 8,755 11,236 20 All holdings of private certificates of participation in pools of residential mortgages 3,847 2,049 8 2,041 1,197 601 21 All other 21,632 7,133 418 6,714 10,039 4,461 22 Foreign securities n.a. 24,156 22,314 1,842 467 23 Federal funds sold and securities purchased under agreements to resell 125,476 53,956 193 53,763 41,545 29,976 24 Total loans and lease financing receivables, gross 1,682,700 1,008,931 237,054 771,877 446,291 227,478 25 LESS: Unearned income on loans 16,216 7,007 2,020 4,988 5,913 3,296 26 Total loans and leases (net of unearned income) 1,666,478 1,001,917 235,020 766,897 440,379 224,182 27 LESS: Allowance for loan and lease losses 26,847 16,861 n.a. n.a. 6,660 3,327 28 LESS: Allocated transfer risk reserves 103 102 n.a. n.a. 0 1 29 EQUALS: Total loans and leases, net 1.639,527 984,954 n.a. n.a. 433,719 220,854 Total loans, gross, by category 30 Loans secured by real estate 482,701 229,425 16,341 213,084 159,833 93,442 31 Construction and land development n.a. n.a. n.a. 67,300 25,850 8,520 32 Farmland n.a. n.a. n.a. 1,478 3,182 7,798 33 1-4 family residential properties n.a. n.a. n.a. 83,703 75,559 50,928 34 Multifamily (5 or more) residential properties n.a. n.a. n.a. 7,293 5,120 1,905 35 Nonfarm nonresidential properties n.a. n.a. n.a. 53,310 50,123 24,292 36 Loans to depository institutions 65,187 59,312 32,392 26,920 5,153 722 37 To commercial banks in the United States n.a. 18,404 1,304 17,099 4,073 n.a. 38 To other depository institutions in the United States n.a. 4,830 311 4,519 832 n.a. 39 To banks in foreign countries n.a. 36,079 30,777 5,302 248 n.a. 40 Loans to finance agricultural production and other loans to farmers 34,142 6,098 420 5,678 7,056 20,987 41 Commercial and industrial loans 570,242 398,825 122,592 276,233 118,529 52,889 42 To U.S. addressees (domicile) n.a. 289,792 18,035 271,757 118,124 n.a. 43 To non-U.S. addressees (domicile) n.a. 109,033 104,557 4,476 404 n.a. 44 Acceptances of other banks 2,511 933 299 634 887 690 45 U.S. banks n.a. 292 7 285 n.a. n.a. 46 Foreign banks n.a. 642 292 350 n.a. n.a. 47 Loans to individuals for household, family and other personal expenditures (includes purchased paper) 315,907 141,851 11,063 130,788 122,355 51,701 48 Credit cards and related plans 79,824 44,120 n.a. n.a. 33,318 2,386 49 Other (includes single payment and installment) 236,083 97,731 n.a. n.a. 89,036 49,315 50 Obligations (other than securities) of states and political subdivisions in the U.S. . 60,757 38,778 631 38,147 18,923 3,056 51 Nonrated industrial development obligations 45,926 28,634 107 28,526 15,274 2,019 52 Other obligations (excluding securities) 14,831 10,144 523 9,621 3,649 1,038 53 All other loans 125,449 112,313 48,949 63,363 9,760 3,376 54 Loans to foreign governments and official institutions n.a. 38,913 35,761 3,152 236 n.a. 55 Other loans n.a. 73,399 13,188 60,211 9,525 n.a. 56 Loans for purchasing and carrying securities n.a. n.a. n.a. 17,541 2,171 n.a. 57 All other loans n.a. n.a. n.a. 42,671 7,353 n.a. 58 Lease financing receivables 25,804 21,396 4,366 17,030 3,795 614 59 Assets held in trading accounts 44,294 43,169 16,181 26,988 900 225 60 Premises and fixed assets (including capitalized leases) 41,656 21,169 1 n.a. 12,657 7,831 61 Other real estate owned 8,835 3,570 T n.a. 2,703 2,562 62 Investments in unconsolidated subsidiaries and associated companies 2,160 1.811 1 n.a. 286 62 63 Customers' liability on acceptances outstanding 42,348 41,990 n.a. n.a. 332 26 6 6 4 5 N In e t t a n d g u i e b l f e r o a m ss e o t w s n foreign offices, Edge and Agreement subsidiaries and IBFs ... 3 n , . 6 a 2 . 0 2 n , . 3 a 3 . 8 1I 47 n , . 4 a 2 . 0 n 1, . 1 a 1 . 9 n.a 1 . 6 3 66 Other assets 70,315 49,290 1 n.a. 12,775 8,249 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A71 4.20 Continued Banks with foreign offices3-4 Bank o s f f w ic i e th s o d n o l m y5 e stic Total Total Foreign Over 100 Under 100 67 Total liabilities, limited-life preferred stock and equity capital 2,772,938 1,612,911 731,739 68 Total liabilities7 2,595,682 1,524,999 421,566 1,158,784 679,408 69 Limited-life preferred stock 74 62 n.a. n.a. 12 70 Total deposits 2,137,457 ,147,308 324,022 823,286 609,369 71 Individuals, partnerships, and corporations 171,500 725,255 550,061 72 U.S. government 3,075 1,761 73 States and political subdivisions in the United States I 34,923 38,227 7 7 4 5 O Co th m er m e d r e c p i o al s it b o a r n y k s i n i s n t i t t h u e t io U n n s it in ed th S e t a U te n s ited States n \ .a . 3 4 5 , , 9 3 8 8 7 0 1 2 1 , , 6 2 5 0 0 5 76 Banks in foreign countries 7,436 175 7 7 7 8 C Fo er r t e i i f g i n ed g a o n v d e r o n f m fic e i n a t l s c a h n e d c k o s f ficial institutions 18,718 3 1 2 0 , , 7 8 4 1 7 7 30,7 6 1 1 7 9 1 2 0 , , 0 1 3 9 0 8 5,1 1 0 8 7 3 79 All other8 121,186 80 Total transaction accounts 293,231 177,938 81 Individuals, partnerships, and corporations 235,032 154,718 82 U.S. government 2,323 1,260 83 States and political subdivisions in the United States 7,496 8,201 84 Commercial banks in the United States 26,014 6,896 85 Other depository institutions in the United States 4,296 1,688 86 Banks in foreign countries 6,697 56 87 Foreign governments and official institutions 1,173 11 88 Certified and official checks 10,198 5,107 89 All other 90 Demand deposits (included in total transaction accounts) 240,852 122,365 91 Individuals, partnerships, and corporations 184,072 102,650 92 U.S. government 2,320 1,246 93 States and political subdivisions in the United States 6,083 4,727 94 Commercial banks in the United States 26,013 6,893 95 Other depository institutions in the United States 4,295 1,675 % Banks in foreign countries 6,697 55 97 Foreign governments and official institutions 1,172 10 98 Certified and official checks 10,198 5,107 99 All other 100 Total nontransaction accounts 530,055 431,432 101 Individuals, partnerships, and corporations 490,223 395,342 102 U.S. government 752 500 103 States and political subdivisions in the United States 27,428 30,026 104 Commercial banks in the United States 9,366 4,309 105 U.S. branches and agencies of foreign banks 337 730 106 Other commercial banks in the United States 9,029 3,580 107 Other depository institutions in the United States 691 961 108 Banks in foreign countries 739 120 109 Foreign branches of other U.S. banks 24 5 110 Other banks in foreign countries 715 115 111 Foreign governments and official institutions 856 172 112 All other 113 Federal funds purchased and securities sold under agreements to repurchase 231,895 188,388 775 187,614 40,073 114 Demand notes issued to the U.S. Treasury n.a. n.a. n.a. 18,886 4,295 115 Other borrowed money 76,982 63,128 24,748 38,380 12,994 116 Banks liability on acceptances executed and outstanding 42,534 42,176 8,545 33,631 332 117 Notes and debentures subordinated to deposits 16,426 14,003 n.a. 2,041 118 Net due to own foreign offices, Edge and Agreement subsidiaries and IBFs n.a. n.a. 7,931 n.a. 119 All other liabilities 66,475 51,111 10,304 120 Total equity capital9 177,181 87,850 52,319 121 Perpetual preferred stock 1,310 938 251 122 Common stock 28,904 13,946 7,872 123 Surplus 60,265 28,045 19,030 124 Undivided profits and capital reserves 87,204 45,243 25,166 125 Cumulative foreign currency translation adjustments n.a. -322 MEMO 126 Holdings of commercial paper included in total loans, gross 294 1,116 127 Total individual retirement accounts (IRA) and Keogh plan accounts 28,749 27,314 128 Total brokered deposits 22,145 3,624 129 Total brokered retail deposits 5,125 2,494 130 Issued in denominations of $100,000 or less 1,209 1,079 131 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 3,916 1,415 132 Nontransaction savings deposits 229,204 182,038 133 Total time deposits of less than $100,000 134,353 165,477 134 Time certificates of deposit of $100,000 or more 138,439 79,606 135 Open-account time deposits of $100,000 or more 28,059 4,311 136 Super NOW accounts 48,123 52,677 137 Money market deposit accounts (MMDAs) 174,241 127,718 138 Total time and savings deposits 582,434 487,004 Quarterly averages 139 Total loans 736,580 434,786 140 Obligations (other than securities) of states and political subdivisions in the United States 38,997 18,523 141 Time certificates of deposit of $100,000 or more 137,563 80,230 142 Super NOW accounts, money market deposit accounts, and time deposits (other than certificates of deposits of $100,000 or more) 378,143 350,376 143 Number of banks 14,167 n.a. 2,202 Footnotes appear at the end of table 4.22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Special Tables • July 1987 4.21 DOMESTIC OFFICES, Insured Commercial Banks with Assets of $100 Million or more or with foreign offices '-2-3 Consolidated Report of Condition, September 30, 1986 Millions of dollars Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State I Total assets6 1,976,159 1,618,609 1,270,965 347,644 357,551 7. Cash and balances due from depository institutions 175,034 146,197 114,849 31,348 28,837 3 Cash items in process of collection and unposted debits 78,984 72,510 55,960 16,550 6,474 4 Currency and coin 18,278 15,149 12,472 2,677 3,129 5 Balances due from depository institutions in the United States 36,190 23,813 19,861 3,952 12,377 6 Balances due from banks in foreign countries and foreign central banks 9,489 7,154 5,686 1,468 2,335 7 Balances due from Federal Reserve Banks 32,093 27,571 20,870 6,701 4,522 8 Total securities, loans and lease financing receivables, (net of unearned income) 1,626,356 1,314,160 1,047,702 266,459 312,196 9 Total securities, book value 323,772 247,264 193,749 53,515 76,508 10 U.S. Treasury securities 119,610 91,040 73,192 17,848 28,570 11 U.S. government agency and corporation obligations 64,011 48,336 40,492 7,844 15,675 12 All holdings of U.S. government-issued or guaranteed certificates of participation in pools of residential mortgages 3311,,330099 26,521 22,568 33,,995533 44,,778888 n All other 32,702 21,815 17,924 3,891 10,887 14 Securities issued by states and political subdivisions in the United States 117,852 92,573 68,530 24,043 25,279 15 Other domestic securities 19,991 13,553 10,903 2,651 6,437 16 All holdings of private certificates of participation in pools of residential mortgages 3,238 2,679 1,973 707 558 17 All other 16,753 10,874 8,930 1,944 5,879 18 Foreign securities 2,309 1,762 633 1,129 547 19 Federal funds sold and securities purchased under agreements to resell 95,308 78,823 59,440 19,383 16,485 20 Total loans and lease financing receivables, gross 1,218,168 996,539 800,970 195,569 221,629 21 LESS: Unearned income on loans 10,900 8,474 6,466 2,009 2,426 22 Total loans and leases (net of unearned income) 1,207,276 988,073 794,512 193,561 219,203 Total loans, gross, by category 23 Loans secured by real estate 337722,,991188 288,899 246,257 4422,,664422 8844,,001199 24 Construction and land development 93,149 76,113 62,756 13,357 17,036 ?5 Farmland 4,660 3,166 2,815 351 1,494 26 1-4 family residential properties 159,263 122,282 105,825 16,457 36,981 27 Multifamily (5 or more) residential properties 12,413 9,597 8,226 1,371 2,816 28 Nonfarm nonresidential properties 103,433 77,741 66,635 11,106 25,692 29 Loans to commercial banks in the United States 21,172 17,353 12,963 4,390 3,819 30 Loans to other depository institutions in the United States 5,351 5,095 4,224 871 256 31 Loans to banks in foreign countries 5,549 5,399 3,274 2,125 150 32 Loans to finance agricultural production and other loans to farmers 12,734 10,257 9,014 1,243 2,477 33 Commercial and industrial loans 394,761 326,410 254,071 72,339 68,351 34 To U.S. addressees (domicile) 389,881 321,859 250,339 71,520 68,023 35 To non-U.S. addressees (domicile) 4,880 4,551 3,732 819 329 36 Acceptances of other banks10 1,521 1,190 1,099 91 332 37 Of U.S. banks 553 453 414 39 100 38 Of foreign banks 396 349 331 18 47 39 Loans to individuals for household, family and other personal expenditures 253,143 207,120 172,178 34,942 46,022 40 Loans to foreign governments and official institutions 3,388 3,216 2,291 924 172 41 Obligations (other than securities) of states and political subdivisions in the United States 57,070 47,939 35,772 12,166 9,131 42 Nonrated industrial development obligations 43,800 36,088 26,329 9,758 7,712 43 Other obligations (excluding securities) 13,270 11,851 9,443 2,408 1,419 44 69,736 65,015 44,807 20,208 4,721 45 Loans for purchasing and carrying securities 19,712 18,584 11,219 7,364 1,128 46 50,024 46,432 33,588 12,844 3,592 47 Lease financing receivables 20,825 18,647 15,020 3,627 2,178 48 Customers' liability on acceptances outstanding 32,199 31,480 22,249 9,231 719 49 Net due from own foreign offices, Edge and Agreement subsidiaries and IBFs 47,420 43,743 30,149 13,595 3,676 50 142,570 126,771 86,165 40,606 15,799 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A71 4.20 Continued State 51 Total liabilities and equity capital 1,976,159 1,618,609 1,270,965 347,644 52 Total liabilities7 1,838,192 1,506,932 1,185,325 321,607 53 Total deposits 1,432,655 1,135,073 915,239 219,834 54 Individuals, partnerships, and corporations 1,275,316 1,005,534 817,574 187,960 55 U.S. government 4,836 4,035 3,481 554 56 States and political subdivisions in the United States 73,151 55,051 45,918 9,133 57 Commercial banks in the United States 46,586 42,655 31,678 10,977 58 Other depository institutions in the United States 7,636 6,161 4,124 2,037 59 Banks in foreign countries 7,612 7,162 3,301 3,861 60 Foreign governments and official institutions 2,212 1,998 1,040 958 61 Certified and official checks 15,305 12,478 8,124 4,354 62 Total transaction accounts 471,168 387,954 303,642 84,312 63 Individuals, partnerships, and corporations 389,750 315,249 251,731 63,518 64 U.S. government 3,583 3,012 2,523 489 65 States and political subdivisions in the United States 15,697 12,759 10,321 2,438 66 Commercial banks in the United States 32,910 31,456 23,914 7,542 67 Other depository institutions in the United States 5,984 5,331 3,528 1,803 68 Banks in foreign countries 6,753 6,582 2,966 3,616 69 Foreign governments and official institutions 1,184 1,086 534 551 70 Certified and official checks 15,305 12,478 8,124 4,354 71 Demand deposits (included in total transaction accounts) 363,216 304,822 233,491 71,331 72 Individuals, partnerships, and corporations 286,722 235,805 184,583 51,223 73 U.S. government 3,566 2,997 2,508 489 74 States and political subdivisions in the United States 10,810 9,091 7,338 1,754 75 Commercial banks in the United States 32,907 31,456 23,914 7,542 76 Other depository institutions in the United States 5,971 5,328 3,526 1,802 77 Banks in foreign countries 6,752 6,582 2,966 3,616 78 Foreign governments and official institutions 1,181 1,084 532 551 79 Certified and official checks 15,305 12,478 8,124 4,354 80 Total nontransaction accounts % 1,487 747,120 611,597 135,522 81 Individuals, partnerships, and corporations 885,565 690,285 565,843 124,442 82 U.S. government 1,252 1,024 958 65 83 States and political subdivisions in the United States 57,454 42,292 35,597 6,696 84 Commercial banks in the United States 13,676 11,198 7,764 3,435 85 U.S. branches and agencies of foreign banks 1,067 655 579 76 86 Other commercial banks in the United States 12,608 10,543 7,184 3,358 87 Other depository institutions in the United States 1,652 830 596 234 88 Banks in foreign countries 859 579 335 245 89 Foreign branches of other U.S. banks 29 28 23 5 90 Other banks in foreign countries 830 551 311 240 91 Foreign governments and official institutions 1,028 912 505 407 92 Federal funds purchased and securities sold under agreements to repurchase 227,687 208,949 155,435 53,514 93 Demand notes issued to the U.S. Treasury 23,181 21,257 16,525 4,732 94 Other borrowed money 51,373 46,505 30,677 15,828 95 Banks liability on acceptances executed and outstanding 33,963 33,244 23,303 9,941 96 Notes and debentures subordinated to deposits 2,041 1,362 1,192 170 97 Net due to own foreign offices, Edge and Agreement subsidiaries and IBFs 7,931 6,788 4,910 1,878 98 Remaining liabilities 67,292 60,542 42,955 17,588 99 Total equity capital9 137,968 111,677 85,640 26,038 MEMO 100 Holdings of commercial paper included in total loans, gross 1,410 892 736 156 101 Total individual retirement accounts (IRA) and Keogh plan accounts 56,063 43,645 36,266 7,379 102 Total brokered deposits 25,769 21,528 18,088 3,440 103 Total brokered retail deposits 7,618 6,113 5,346 767 104 Issued in denominations of $100,000 or less 2,288 1,391 1,358 33 105 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 5,331 4,722 3,988 734 106 Nontransaction savings deposits 411,242 323,133 262,037 61,096 107 Total time deposits of less than $100,000 299,830 225,835 192,563 33,273 108 Time certificates of deposit of $100,000 or more 218,045 169,554 137,971 31,584 109 Open-account time deposits of $100,000 or more 32,370 28,597 19,027 9,570 110 Super NOW accounts 100,800 77,584 65,012 12,572 111 Money market deposit accounts (MMDAs) 301,959 238,573 193,905 44,668 112 Total time and savings deposits ,069,439 830,252 681,748 148,503 Quarterly averages 113 Total loans 1,171,366 956,577 771,102 185,475 114 Obligations (other than securities) of states and political subdivisions in the United States — 57,519 48,856 36,136 12,720 115 Time certificates of deposit of $100,000 or more 217,793 169,049 138,990 30,058 116 Super NOW accounts, money market deposit accounts, and time deposits (other than certificates of deposits of $100,000 or more) 728,520 565,433 468,003 117 Number of banks 2,461 1,426 1,214 212 Footnotes appear at the end of table 4.22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • July 1987 4.22 DOMESTIC OFFICES, Insured Commercial Bank Assets and Liabilities'2 3 Consolidated Report of Condition, September 30, 1986 Millions of dollars Members NNoonn-- IItteemm mmeemmbbeerrss Total National State 1 Total assets6 2,404,447 1,801,962 1,422,048 379,914 602,485 2 Cash and balances due from depository institutions 211,954 162,810 128,751 34,060 49,143 3 Currency and coin 22,603 17,043 14,031 3,012 5,561 4 Noninterest-bearing balances due from commercial banks 36,811 20,450 16,989 3,462 16,361 5 Other 152,540 125,317 97,731 27,587 27,222 6 Total securities, loans, and lease financing receivables (net of unearned income) 2,001,934 1,474,257 1,179,346 294,910 527,677 7 Total securities, book value 445,193 296,497 233,867 62,630 148,696 8 U.S. Treasury securities and U.S. government agency and corporation obligations 267,207 172,714 140,639 32,075 94,494 9 Securities issued by states and political subdivisions in the United States 150,623 106,301 79,894 26,407 44,323 10 Other securities 27,362 17,482 13,335 4,148 9,880 11 All holdings of private certificates of participation in pools of residential mortgages 3,839 2,918 2,159 759 921 12 All other 23,523 14,564 11,175 3,389 8,959 13 Federal funds sold and securities purchased under agreements to resell 125,284 93,207 71,575 21,632 32,077 14 Total loans and lease financing receivables, gross 1,445,646 1,094,453 881,524 212,929 351,193 15 LESS: Unearned income on loans 14,196 9,908 7,628 2,280 4,288 16 Total loans and leases (net of unearned income) 1,431,458 1,084,553 873,904 210,649 346,905 Total loans, gross, by category 17 Loans secured by real estate 466,360 328,946 279,021 49,925 113377,,441144 18 Construction and land development 101,669 80,079 66,129 13,950 21,590 19 Farmland 12,459 5,864 4,981 882 6,595 20 1-4 family residential properties 210,190 144,394 123,662 20,732 65,796 21 Multifamily (5 or more) residential properties 14,317 10,417 8,895 1,523 3,900 22 Nonfarm nonresidential properties 127,724 88,192 75,354 12,838 39,532 23 Loans to depository institutions 32,795 28,247 20,820 7,427 4,547 24 Loans to finance agricultural production and other loans to farmers 33,721 17,860 15,068 2,793 15,861 25 Commercial and industrial loans 447,650 350,243 273,911 76,333 97,407 26 Acceptances of other banks 2,212 1,512 1,366 146 700 27 Loans to individuals for household, family and other personal expenditures (includes purchased paper) 304,844 229,791 190,909 38,882 75,053 28 Obligations (other than securities) of states and political subdivisions in the United States .... 60,126 49,218 36,881 12,337 10,908 29 Nonrated industrial development obligations 45,819 36,912 27,031 9,881 8,906 30 Other obligations (excluding securities) 14,307 12,306 9,850 2,456 2,001 31 All other loans 76,500 69,700 48,304 21,397 6,800 32 Lease financing receivables 21,439 18,934 15,245 3,689 2,505 33 Customers' liability on acceptances outstanding 32,225 31,495 22,258 9,237 730 34 Net due from own foreign offices, Edge and Agreement subsidiaries and IBFs 47,420 43,743 30,149 13,595 3,676 35 Remaining assets 158,334 133,399 91,693 41,707 24,935 36 Total liabilities and equity capital 2,404,447 1,801,962 1,422,048 379,914 602,485 37 Total liabilities7 2,229,467 1,674,630 1,323,633 350,997 554,837 1,813,435 1,297,836 1,049,590 248,246 515,599 39 Individuals, partnerships, and corporations 1,622,385 1,154,298 940,363 213,935 446688,,008888 40 U.S. government 5,631 4,397 3,788 609 11,,223344 41 States and political subdivisions in the United States 100,076 65,628 54,702 10,926 34,447 42 Commercial banks in the United States 48,402 43,763 32,508 11,255 4,639 43 Other depository institutions in the United States 8,981 6,835 4,711 2,124 2,146 44 Certified and official checks 18,099 13,741 9,166 4,575 4,358 45 All other 9,859 9,174 4,353 4,821 685 46 Total transaction accounts 571,173 431,074 339,351 91,724 140,098 47 Individuals, partnerships, and corporations 478,764 353,673 283,616 70,057 125,091 48 U.S. government 4,190 3,292 2,763 530 898 49 States and political subdivisions in the United States 22,259 15,320 12,460 2,860 6,939 50 Commercial banks in the United States 33,357 31,770 24,071 7,699 1,587 51 Other depository institutions in the United States 6,554 5,606 3,772 1,833 948 52 Certified and official checks 18,099 13,741 9,166 4,575 4,358 53 All other 7,948 7,672 3,502 4,170 276 54 Demand deposits (included in total transaction accounts) 422,364 330,897 255,085 75,811 91,467 55 Individuals, partnerships, and corporations 338,788 258,707 203,624 55,083 80,081 56 U.S. government 4,153 3,267 2,740 528 888855 57 States and political subdivisions in the United States 13,491 10,142 8,217 1,925 33,,334499 58 Commercial banks in the United States 33,353 31,770 24,071 7,699 1,583 59 Other depository institutions in the United States 6,533 5,600 3,767 1,832 933 60 Certified and official checks 18,099 13,741 9,166 4,575 4,358 61 All other 7,944 7,669 3,500 4,169 275 62 Total nontransaction accounts 1,242,262 866,762 710,240 156,522 375,500 63 Individuals, partnerships, and corporations 1,143,622 800,625 656,747 143,878 342,997 64 U.S. government 1,441 1,105 1,025 80 336 65 States and political subdivisions in the United States 77,816 50,308 42,242 8,066 27,508 66 Commercial banks in the United States 15,045 11,993 8,437 3,556 3,052 67 Other depository institutions in the United States 2,427 1,230 939 291 1,197 68 All other 1,911 1,502 851 652 409 69 Federal funds purchased and securities sold under agreements to repurchase 231,121 210,821 156,816 54.004 20,300 70 Demand notes issued to the U.S. Treasury 23,914 21,604 16,810 4,795 2,309 71 Other borrowed money 52,234 47,030 31,153 15,878 5,203 72 Banks liability on acceptances executed and outstanding 33,989 33,259 23,312 9,946 730 73 Notes and debentures subordinated to deposits 2,423 1,451 1,270 181 972 74 Net due to own foreign offices, Edge and Agreement subsidiaries and IBFs 7,931 6.788 4,910 1,878 1,143 75 Remaining liabilities 72,353 62,629 44,681 17,947 9,724 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A71 4.20 Continued Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 76 Total equity capital9 174,980 127,332 98,415 28,917 47,648 MEMO 77 Assets held in trading accounts10 28,113 27,743 17,545 10,198 370 78 U.S. Treasury securities 13,116 13,079 7,917 5,162 37 79 U.S. government agency corporation obligations 3,897 3,896 1,992 1,904 1 80 Securities issued by states and political subdivisions in the United States 5,132 5,090 3,478 1,612 41 81 Other bonds, notes and debentures 247 247 133 114 0 82 Certificates of deposit 1,427 1,417 1,195 222 10 83 Commercial paper 286 286 286 0 0 84 Bankers acceptances 2,559 2,544 1,754 790 15 85 Other 813 802 435 366 11 86 Total individual retirement accounts (IRA) and Keogh plan accounts 71,436 49,904 41,452 8,452 21,532 87 Total brokered deposits 26,319 21,796 18,315 3,481 4,523 88 Total brokered retail deposits 8,024 6,317 5,521 796 1,707 89 Issued in denominations of $100,000 or less 2,580 1,528 1,477 51 1,052 90 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 5,444 4,789 4,044 745 655 91 Nontransaction savings deposits 505,318 364,626 296,040 68,586 140,692 92 Total time deposits of less than $100,000 439,055 281,555 238,055 43,500 157,500 93 Time certificates of deposit of $100,000 or more 263,698 191,223 156,474 34,749 72,475 94 Open-account time deposits of $100,000 or more 34,191 29,358 19,671 9,687 4,833 95 Super NOW accounts 138,971 93,616 78,387 15,228 45,355 96 Money market deposit accounts (MMDAs) 364,482 266,551 217,009 49,543 97,930 97 Total time and savings deposits 1,319,071 966,939 794,505 172,434 424,132 Quarterly averages 98 Total loans 1,393,367 1,051,978 849,730 202,248 341,389 99 Time certificates of deposit of $100,000 or more 263,450 190,521 157,318 33,203 72,929 100 Super NOW accounts, money market deposit accounts, and time deposits (other than certificates of deposit of $100,000 or more) 971,253 666,141 551,014 115,127 305,112 101 Number of banks 14,167 5,960 4,867 1,093 8,207 1. Effective Mar. 31, 1984, the report of condition was substantially revised 5. The 'over 100' column refers to those respondents whose assets, as of June for commercial banks. Some of the changes are as follows: (1) Previously, banks 30 of the previous calendar year, were equal to or exceeded $100 million, (These with international banking facilities (IBFs) that had no other foreign offices were respondents file the FFIEC 032 or FFIEC 033 call report.) The 'under 100' column considered domestic reporters. Beginning with the Mar. 31, 1984 call report these refers to those respondents whose assets, as of June 30 of the previous calendar banks are considered foreign and domestic reporters and must file the foreign and year, were less than $100 million. (These respondents filed the FFIEC 034 call domestic report of condition; (2) banks with assets greater than $1 billion have report.) additional items reported; (3) the domestic office detail for banks with foreign 6. Since the domestic portion of allowances for loan and lease losses and offices has been reduced considerably; and (4) banks with assets under $25 million allocated transfer risk reserve are not reported for banks with foreign offices, the have been excused from reporting certain detail items. components of total assets (domestic) will not add to the actual total (domestic). 2. The "n.a." for some of the items is used to indicate the lesser detail 7. Since the foreign portion of demand notes issued to the U.S. Treasury is not available from banks without foreign offices, the inapplicability of certain items to reported for banks with foreign offices, the components of total liabilities (foreign) banks that have only domestic offices and/or the absence of detail on a fully will not add to the actual total (foreign). consolidated basis for banks with foreign offices. 8. The definition of 'all other' varies by report form and therefore by column 3. All transactions between domestic and foreign offices of a bank are in this table. See the instructions for more detail. reported in "net due from" and "net due to." All other lines represent 9. Equity capital is not allocated between the domestic and foreign offices of transactions with parties other than the domestic and foreign offices of each bank. banks with foreign offices. Since these intraoffice transactions are nullified by consolidation, total assets and 10. Components of assets held in trading accounts are only reported for banks total liabilities for the entire bank may not equal the sum of assets and liabilities with total assets of $1 billion or more; therefore the components will not add to the respectively, of the domestic and foreign offices. totals for this item. 4. Foreign offices include branches in foreign countries, Puerto Rico, and in U.S. territories and possessions; subsidiaries in foreign countries; all offices of Edge Act and Agreement corporations wherever located and IBFs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Special Tables • July 1987 4.20 DOMESTIC AND FOREIGN OFFICES, Insured Commercial Bank Assets and Liabilities' 2 Consolidated Report of Condition, December 31, 1986 Millions of dollars Banks with foreign offices1'4 Bank o s f f w ic i e th s o d n o l m y5 e stic IItteemm Total Total Foreign Domestic Over 100 Under 100 1 Total assets6 2,904,857 1,688,566 421,468 1,334,748 774,879 441,412 2 Cash and balances due from depository institutions 374,475 255,538 116,143 139,395 76,852 42,085 3 Cash items in process of collection, unposted debits, and currency A 94,312 1,609 92,703 32,432 A 4 Cash items in process of collection and unposted debits and coin T n.a. n.a. 80,295 23,811 T 5 Currency and coin 1 n.a. n.a. 12,409 8,621 1 6 Balances due from depository institutions in the United States n.a. 35,665 20,882 14,784 25,155 n.a. 7 Balances due from banks in foreign countries and foreign central banks I 97,053 93,470 3,583 6,859 1 8 Balances due from Federal Reserve Banks T 28,507 182 28,325 12,406 T MEMO 9 Noninterest-bearing balances due from commercial banks in the United States (included in balances due from depository institutions in the U.S.) n.a. n.a. n.a. 9,961 15,885 15,185 10 Total securities, loans and lease financing receivables, net 2,322,155 1,274,846 n.a. n.a. 666,838 380,472 11 Total securities, book value 477,168 192,286 24,532 167,754 162,794 122,089 12 U.S. Treasury securities and U.S. government agency and corporation obligations 283,869 100,474 929 99,545 98,850 8844,,554455 13 U.S. Treasury securities n.a. 63,249 787 62,462 61,951 n.a. 14 U.S. government agency and corporation obligations n.a. 37,224 142 37,082 36,899 n.a. 15 All holdings of U.S. government-issued or guaranteed certificates of participation in pools of residential mortgages 49,775 28,004 126 27,877 12,853 88,,991188 16 All other n.a. 9,221 16 9,205 24,046 n.a. 17 Securities issued by states and political subdivisions in the United States 138,623 57,266 798 56,468 50,365 30,992 18 Other securities 54,678 34,546 22,805 11,742 13,580 6,551 19 Other domestic securities n.a. 10,601 336 10,266 13,199 20 All holdings of private certificates of participation in pools of residential mortgages 5,682 3,349 9 3,340 1,558 774 21 All other 24,669 7,252 327 6,925 11,641 5,777 22 Foreign securities n.a. 23,945 22,469 1,476 382 23 Federal funds sold and securities purchased under agreements to resell 138,256 52,929 209 52,720 49,367 35,959 24 Total loans and lease financing receivables, gross 1,750,837 1,054,562 226,788 827,774 467,363 228,911 25 LESS: Unearned income on loans 15,853 7,041 2,123 4,918 5,737 3,075 26 Total loans and leases (net of unearned income) 1,734,987 1,047,524 224,668 822,856 461,626 225,837 27 LESS: Allowance for loan and lease losses 28,150 17,789 n.a. n.a. 6,949 3,412 28 LESS: Allocated transfer risk reserves 105 105 n.a. n.a. 0 0 29 EQUALS: Total loans and leases, net 1,706,731 1,029,631 n.a. n.a. 454,676 222,424 Total loans, gross, by category 30 Loans secured by real estate 509,535 242,835 17,241 225,595 169,910 %,790 31 Construction and land development n.a. n.a. n.a. 71,035 27,131 8,625 32 Farmland n.a. n.a. n.a. 1,429 3,362 7,921 33 1 4 family residential properties n.a. n.a. n.a. 86,376 78,956 52,625 34 Multifamily (5 or more) residential properties n.a. n.a. n.a. 8,237 5,567 2,014 35 Nonfarm nonresidential properties n.a. n.a. n.a. 58,518 54,894 25,605 36 Loans to depository institutions 69,834 62,644 30,330 32,315 6,359 830 37 To commercial banks in the United States n.a. 21,285 978 20,307 5,205 n.a. 38 To other depository institutions in the United States n.a. 5,908 284 5,625 824 n.a. 39 To banks in foreign countries n.a. 35,451 29,069 6,383 330 n.a. 40 Loans to finance agricultural production and other loans to farmers 31,640 5,988 399 5,589 6,534 19,118 41 Commercial and industrial loans 598,676 421,106 114,150 306,956 124,621 52,949 42 To U.S. addressees (domicile) n.a. 319,009 15,998 303,011 124,229 n.a. 43 To non-U.S. addressees (domicile) n.a. 102.0% 98,152 3,944 392 n.a. 44 Acceptances of other banks 3,167 1,222 458 765 1,007 937 45 U.S. banks n.a. 460 25 435 n.a. n.a. 46 Foreign banks n.a. 762 433 329 n.a. n.a. 47 Loans to individuals for household, family and other personal expenditures (includes purchased paper) 323,670 146,087 11,233 134,854 126,013 51,570 48 Credit cards and related plans 84,836 46,148 n.a. n.a. 35,675 3,013 49 Other (includes single payment and installment) 238,834 99,939 n.a. n.a. 90,339 48,557 50 Obligations (other than securities) of states and political subdivisions in the U.S.. 58,640 37,178 611 36,567 18,451 3,011 51 Nonrated industrial development obligations 44,265 27,258 111 27,146 15,038 1,969 52 Other obligations (excluding securities) 14,375 9,920 499 9,421 3,413 1,041 53 AH other loans 128,253 114,540 47,826 66,714 10,609 3,104 54 Loans to foreign governments and official institutions n.a. 39,051 35,783 3,269 233 n.a. 55 Other loans n.a. 75,489 12,043 63,446 10,376 n.a. 56 Loans for purchasing and carrying securities n.a. n.a. n.a. 16,158 2,143 n.a. 57 All other loans n.a. n.a. n.a. 47,288 8,233 n.a. 58 Lease financing receivables 27,423 22,962 4,542 18,420 3,859 602 59 Assets held in trading accounts 42,775 41,496 15,630 25,866 964 315 60 Premises and fixed assets (including capitalized leases) 42,269 21,454 1 n.a. 12,934 7,881 61 Other real estate owned 9,055 3,578 T n.a. 2,849 2,628 62 Investments in unconsolidated subsidiaries and associated companies 2,175 1,799 1 n.a. 320 56 63 Customers' liability on acceptances outstanding 40,161 39,820 n.a. n.a. 324 18 64 Net due from own foreign offices, Edge and Agreement subsidiaries and lBFs ... n.a. n.a. 1 54,530 n.a. n.a. 65 Intangible assets 4,227 2,776 1 n.a. 1,276 175 66 Other assets 67,564 47,262 T n.a. 12,520 7,782 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A71 4.20 Continued Banks with foreign offices3 4 Bank o s f f w ic i e th s o d n o l m y5 e stic IItteemm TToottaall Total Foreign Domestic Over 100 Under 100 67 Total liabilities, limited-life preferred stock and equity capital 2,904,857 1,688,566 n.a. n.a. 774,879 441,412 68 Total liabilities7 2,724,926 1,598,413 421,797 1,244,266 721,727 404,786 69 Limited-life preferred stock 82 64 n.a. n.a. 15 2 70 Total deposits 2,255,200 1,213,663 313,174 900,489 647,119 394,418 71 Individuals, partnerships, and corporations i J 171,067 789,116 583,258 358,392 72 U.S. government 2,603 1,757 867 73 States and political subdivisions in the United States 36,895 38,925 27,472 74 Commercial banks in the United States n a. n a. n. a. 39,961 11,921 2,038 75 Other depository institutions in the United States 5,932 2,928 1,461 76 Banks in foreign countries 8,428 147 n.a. 77 Foreign governments and official institutions 28,214 26,581 1,633 170 n.a. 78 Certified and official checks 28,892 16,724 801 15,922 8,013 4,156 79 All other8 114,725 33 80 Total transaction accounts 358,944 208,610 112,323 81 Individuals, partnerships, and corporations 288,492 180,316 99,100 82 U.S. government 1,824 1,294 689 83 States and political subdivisions in the United States 8,844 9,572 7,210 84 Commercial banks in the United States n a. n a. n.a. 30,107 7,468 537 85 Other depository institutions in the United States 5,058 1,876 620 86 Banks in foreign countries 7,742 64 n.a. 87 Foreign governments and official institutions 956 88 n.a. 88 Certified and official checks 15,922 88,,001133 4,156 89 All other 12 90 Demand deposits (included in total transaction accounts) 295,819 143,930 66,882 91 Individuals, partnerships, and corporations 226,894 119,586 57,997 92 U.S. government 1,820 1,276 666688 93 States and political subdivisions in the United States 7,322 5,651 22,,990055 94 Commercial banks in the United States 30,107 7,467 535 95 Other depository institutions in the United States 5,058 1,867 610 96 Banks in foreign countries 7,739 64 n.a. 97 Foreign governments and official institutions 954 7 n.a. 98 Certified and official checks 15,922 8,013 4,156 99 All other 12 100 Total nontransaction accounts 541,545 438,509 282,095 101 Individuals, partnerships, and corporations n a. n a. n a. 500,624 402,942 259,292 102 U.S. government 779 463 177 103 States and political subdivisions in the United States 28,052 29,354 20,262 104 Commercial banks in the United States 9,854 4,453 1,502 105 U.S. branches and agencies of foreign banks 388 726 n.a. 106 Other commercial banks in the United States 9,466 3,727 n.a. 107 Other depository institutions in the United States 874 1,052 841 108 Banks in foreign countries 687 83 n.a. 109 Foreign branches of other U.S. banks 23 0 n.a. 110 Other banks in foreign countries 663 83 n.a. 111 Foreign governments and official institutions 677 162 n.a. 112 All other 21 113 Federal funds purchased and securities sold under agreements to repurchase 246,214 200,031 881 199,150 42,934 3,250 114 Demand notes issued to the U.S. Treasury n.a. n a. n.a. 18,894 4,055 710 IIS Other borrowed money 81,695 65,417 27,629 37,788 15,087 1,190 116 Banks liability on acceptances executed and outstanding 40,425 40,084 8,904 31,179 324 17 117 Notes and debentures subordinated to deposits 16,785 14,505 n.a. 1,893 387 118 Net due to own foreign offices, Edge and Agreement subsidiaries and IBFs n a. n.a. 13,120 n.a. n.a. 1 All other liabilities 60,949 45,820 10,315 4,814 120 Total equity capital9 179,849 90, 089 53,136 36,624 121 Perpetual preferred stock 1,409 1,028 n a. 1 255 126 17? Common stock 29,007 14,010 n.a. 7,886 7,111 173 Surplus 62,288 29,152 I 19,625 13,511 124 Undivided profits and capital reserves 87,463 46,217 1 25,369 15,877 125 Cumulative foreign currency translation adjustments 318 t MEMO 176 Holdings of commercial paper included in total loans, gross 825 581 244 1,889 n.a. 127 Total individual retirement accounts (IRA) and Keogh plan accounts 35,571 28,247 15,527 128 Total brokered deposits 24,901 3,698 590 129 Total brokered retail deposits 5,434 2,645 411 NO Issued in denominations of $100,000 or less 1,103 1,351 318 131 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 4,331 1,293 93 132 Nontransaction savings deposits n.a. n a. n.a. 241,138 191,706 98,109 133 Total time deposits of less than $100,000 132,185 163,228 136,312 134 Time certificates of deposit of $100,000 or more 140,888 79,558 45,944 135 Open-account time deposits of $100,000 or more 27,334 4,016 1,730 136 Super NOW accounts 57,754 61,663 42,756 137 Money market deposit accounts (MMDAs) 178,089 132,272 64,619 138 Total time and savings deposits 604,670 503,188 327,536 Quarterly averages 139 Total loans K \ 1 776633,,224499 444433,,778888 222211,,992277 140 Obligations (other than securities) of states and political subdivisions in the United States n a. n a. n.a. 3377,,661166 1188,,223355 n.a. 141 Time certificates of deposit of $100,000 or more 138,321 78,933 45,205 14? Super NOW accounts, money market deposit accounts, and time deposits (other than certificates of deposits of $100,000 or more) r 382,647 335588,,990077 224444,,668844 143 Number of banks 14,040 258 n.a. 2,179 11,603 Footnotes appear at the end of table 4.22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Special Tables • July 1987 4.21 DOMESTIC OFFICES, Insured Commercial Banks with Assets of $100 Million or more or with foreign offices 1-2-3 Consolidated Report of Condition, December 31, 1986 Millions of dollars Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 1 Total assets6 2,109,627 1,735,653 1,357,208 378,445 373,974 7 Cash and balances due from depository institutions 216,247 181,871 139,406 42,465 34,376 Cash items in process of collection and unposted debits 104,105 94,807 72,697 22,111 9,298 4 Currency and coin 21,030 17,521 14,297 3,224 3,509 5 Balances due from depository institutions in the United States 39,939 26,396 21,581 4,815 13,543 6 Balances due from banks in foreign countries and foreign central banks 10,442 7,840 6,119 1,721 2,601 7 Balances due from Federal Reserve Banks 40,731 35,306 24,712 10,594 5,424 8 Total securities, loans and lease financing receivables, (net of unearned income) 1,717,118 1,395,139 1,106,224 288,915 321,979 9 Total securities, book value 330,548 255,327 198,985 56,342 75,221 10 U.S. Treasury securities 124,414 96,195 77,545 18,649 28,219 11 U.S. government agency and corporation obligations 73,981 56,649 45,454 11,195 17,333 12 All holdings of U.S. government-issued or guaranteed certificates of participation in pools of residential mortgages 40,731 34,455 26,935 7,520 66,,227766 N All other 33,251 22,194 18,519 3,675 11,057 14 Securities issued by states and political subdivisions in the United States 106,833 84,777 62,697 22,079 22,056 IS Other domestic securities 23,464 16,272 12,638 3,635 7,192 16 All holdings of private certificates of participation in pools of residential mortgages 4,899 4,187 2,671 1,515 712 17 All other 18,566 12,085 9,966 2,119 6,481 18 Foreign securities 1,858 1,437 651 786 420 19 Federal funds sold and securities purchased under agreements to resell 102,088 83,102 64,167 18,935 18,985 20 Total loans and lease financing receivables, gross 1,295,138 1,064,942 849,401 215,541 230,195 71 LESS: Unearned income on loans 10,655 8,233 6,330 1,903 2,423 22 Total loans and leases (net of unearned income) 1,284,482 1,056,709 843,071 213,638 227,773 Total loans, gross, by category 23 Loans secured by real estate 395,505 307,298 260,821 46,477 88,207 24 Construction and land development 98,166 80,282 65,915 14,367 17,884 ?5 Farmland 4,790 3,310 2,911 400 1,480 26 1-4 family residential properties 165,332 127,591 110,367 17,223 37,742 27 Multifamily (5 or more) residential properties 13,803 10,799 9,258 1,541 3,004 28 Nonfarm nonresidential properties 113,412 85,315 72,370 12,946 28,097 29 Loans to commercial banks in the United States 25,512 21,812 16,477 5,335 3,701 30 Loans to other depository institutions in the United States 6,449 6,185 4,793 1,391 264 31 Loans to banks in foreign countries 6,713 6,579 4,206 2,373 134 32 Loans to finance agricultural production and other loans to farmers 12,123 9,816 8,593 1,223 2,307 33 Commercial and industrial loans 431,577 359,949 278,787 81,162 71,627 34 427,241 355,961 275,464 80,497 71,279 35 To non-U.S. addressees (domicile) 4,336 3,988 3,323 665 348 36 Acceptances of other banks10 1,772 1,326 1,199 127 446 37 Of U.S. banks 734 601 533 69 133 38 Of foreign banks 394 312 307 5 82 39 Loans to individuals for household, family and other personal expenditures (includes purchased paper) 260,867 213,853 175,413 38,441 47,014 40 Loans to foreign governments and official institutions 3,502 3,330 2,408 921 172 41 Obligations (other than securities) of states and political subdivisions in the United States .... 55,018 46,409 34,417 11,992 8,610 42 Nonrated industrial development obligations 42,184 34,894 25,194 9,701 7,289 43 Other obligations (excluding securities) 12,834 11,514 9,223 2,291 1,320 44 73,822 68,342 46,562 21,780 5,480 45 Loans for purchasing and carrying securities 18,301 17,082 10,691 6,392 1,219 46 55,521 51,259 35,871 15,388 4,261 47 Lease financing receivables 22,279 20,045 15,725 4,320 2,234 48 Customers' liability on acceptances outstanding 30,608 29,760 21,241 8,518 848 49 Net due from own foreign offices, Edge and Agreement subsidiaries and IBFs 54,530 50,140 36,001 14,139 4,390 145,655 128,884 90,337 38,547 16,771 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A71 4.20 Continued Members Total Total National 51 Total liabilities and equity capital 2,109,627 1,735,653 1,357,208 378,445 52 Total liabilities7 1,965,992 1,618,876 1,267,685 351,191 53 Total deposits 1,547,608 1,234,133 983,369 250,764 54 Individuals, partnerships, and corporations 1,372,374 1,089,458 875,628 213,830 55 U.S. government 4,360 3,664 3,200 464 56 States and political subdivisions in the United States 75,821 57,617 47,826 9,791 57 Commercial banks in the United States 51,881 47,006 33,631 13,375 58 Other depository institutions in the United States 8,861 7,208 5,123 2,084 59 Banks in foreign countries 8,575 8,144 4,123 4,021 60 Foreign governments and official institutions 1,803 1,599 823 776 61 Certified and official checks 23,935 19,440 13,018 6,422 62 Total transaction accounts 567,554 470,222 362,271 107,952 63 Individuals, partnerships, and corporations 468,808 382,531 300,366 82,165 64 U.S. government 3,117 2,603 2,192 412 65 States and political subdivisions in the United States 18,416 15,181 12,244 2,936 66 Commercial banks in the United States 37,574 35,751 25,852 9,899 67 Other depository institutions in the United States 6,934 6,194 4,339 1.854 68 Banks in foreign countries 7,806 7,634 3,790 3,843 69 Foreign governments and official institutions 964 890 469 421 70 Certified and official checks 23,935 19,440 13,018 6,422 71 Demand deposits (included in total transaction accounts) 439,749 370,919 279,076 91,842 72 Individuals, partnerships, and corporations 346,480 287,271 220,485 66,786 73 U.S. government 3,096 2,586 2,176 410 74 States and political subdivisions in the United States 12,973 11,162 8,952 2,209 75 Commercial banks in the United States 37,574 35,750 25,852 9,8 76 Other depository institutions in the United States 6,926 6,190 4,337 1,853 77 Banks in foreign countries 7,803 7,631 3,788 3,843 78 Foreign governments and official institutions 961 888 467 421 79 Certified and official checks 23,935 19,440 13,018 6,422 80 Total nontransaction accounts 980,054 763,911 621,099 142,812 81 Individuals, partnerships, and corporations 903,566 706,927 575,262 131,665 82 U.S. government 1,243 1,060 1,008 52 83 States and political subdivisions in the United States 57,405 42,437 35,582 6.855 84 Commercial banks in the United States 14,307 11,256 7,779 3,477 85 U.S. branches and agencies of foreign banks 1,114 661 598 63 86 Other commercial banks in the United States 13,193 10,595 7,181 3,414 87 Other depository institutions in the United States 1,926 1,014 784 230 88 Banks in foreign countries 770 510 333 178 89 Foreign branches of other U.S. banks 23 23 18 5 90 Other banks in foreign countries 746 487 314 173 91 Foreign governments and official institutions 839 709 353 355 92 Federal funds purchased and securities sold under agreements to repurchase 242,084 224,047 170,220 53,827 93 Demand notes issued to the U.S. Treasury 22,950 21,070 15,678 5,392 94 Other borrowed money 52,875 47,970 34,384 13,586 95 Banks liability on acceptances executed and outstanding 31,503 30,656 22,085 8,570 96 Notes and debentures subordinated to deposits 1,893 1,296 1,140 156 97 Net due to own foreign offices, Edge and Agreement subsidiaries and IBFs 13,120 11,587 6,207 5,380 98 Remaining liabilities 67,080 59,704 40,808 18,896 99 Total equity capital9 143,635 116,778 89,523 27,255 MEMO 100 Holdings of commercial paper included in total loans, gross 2,133 1,525 1,279 246 101 Total individual retirement accounts (IRA) and Keogh plan accounts 63,819 51,442 37,579 13,863 102 Total brokered deposits 28,599 22,276 19,055 3,221 103 Total brokered retail deposits 8,079 5,776 4,954 821 104 Issued in denominations of $100,000 or less 2,454 1,272 1,232 39 105 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 5,624 4,504 3,722 782 106 Nontransaction savings deposits 432,844 342,154 273,992 68,161 107 Total time deposits of less than $100,000 295,413 224,205 190,407 33,798 108 Time certificates of deposit of $100,000 or more 220,446 169,635 138,288 31,347 109 Open-account time deposits of $100,000 or more 31,350 27,917 18,412 9,505 110 Super NOW accounts 119,417 92,785 77,082 15,704 111 Money market deposit accounts (MMDAs) 310,361 246,592 199,783 46,809 112 Total time and savings deposits 1,107,858 863,214 704,292 158,921 Quarterly averages 113 Total loans ,207,038 988,721 790,685 198,036 114 Obligations (other than securities) of states and political subdivisions in the United States 55,851 47,583 35,033 12,550 115 Time certificates of deposit of $100,000 or more 217,254 168,157 136,809 31,348 116 Super NOW accounts, money market deposit accounts, and time deposits (other than certificates of deposits of $100,000 or more) 741,554 577,267 474,065 103,202 117 Number of banks 2,437 1,415 1,203 212 Footnotes appear at the end of table 4.22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 Special Tables • July 1987 4.22 DOMESTIC OFFICES, Insured Commercial Bank Assets and Liabilities'2 3 Consolidated Report of Condition, December 31, 1986 Millions of dollars Members NNoonn-- IItteemm mmeemmbbeerrss Total National State 1 Total assets6 2,551,039 1,925,460 1,512,997 412,463 625,579 2 Cash and balances due from depository institutions 258,332 200,802 155,152 45,650 57,530 3 Currency and coin 25,646 19,518 15,940 3,578 6,128 4 Noninterest-bearing balances due from commercial banks 41,030 22,676 18,636 4,040 18,354 5 Other 191,656 158,608 120,576 38,031 33,048 6 Total securities, loans, and lease financing receivables (net of unearned income) 2,101,002 1,559,512 1,240,852 318,660 541,490 7 Total securities, book value 452,637 304,758 239,142 65,617 147,878 8 U.S. Treasury securities and U.S. government agency and corporation obligations 282,940 186,523 150,120 36,403 96,417 9 Securities issued by states and political subdivisions in the United States 137,825 97,681 73,327 24,354 40,145 10 Other securities 31,873 20,556 15,695 4,861 11,317 11 All holdings of private certificates of participation in pools of residential mortgages 5,673 4,537 2,938 1,599 1,136 12 All other 26,205 16,024 12,756 3,267 10,182 13 Federal funds sold and securities purchased under agreements to resell 138,047 100,188 78,565 21,623 37,859 14 Total loans and lease financing receivables, gross 1,524,049 1,164,148 930,567 233,582 359,901 15 LESS: Unearned income on loans 13,730 9,582 7,422 2,160 4,148 16 Total loans and leases (net of unearned income) 1,510,319 1,154,566 923,145 231,421 355,753 Total loans, gross, by category 17 Loans secured by real estate 492,295 348,911 294,729 54,182 114433,,338833 18 Construction and land development 106,792 84,277 69,268 15,009 22,515 19 Farmland 12,711 6,095 5,145 950 6,616 20 1 4 family residential properties 217,957 150,481 128,759 21,722 67,477 21 Multifamily (5 or more) residential properties 15,817 11,646 9,949 1,696 4,171 22 Nonfarm nonresidential properties 139,017 96,413 81,608 14,805 42,605 23 Loans to depository institutions 39,504 35,080 25,947 9,133 4,424 24 Loans to finance agricultural production and other loans to farmers 31,241 16,877 14,210 2,666 14,364 25 Commercial and industrial loans 484,525 383,879 298,534 85,345 100,646 26 Acceptances of other banks 2,709 1,754 1,547 207 955 27 Loans to individuals for household, family and other personal expenditures (includes purchased paper) 312,438 236,629 194,081 42,547 75,809 28 Obligations (other than securities) of states and political subdivisions in the United States .... 58,029 47,686 35,514 12,172 10,343 29 Nonrated industrial development obligations 44,153 35,706 25,878 9,827 8,447 30 Other obligations (excluding securities) 13,876 11,981 9,636 2,345 1,895 31 All other loans 80,428 73,012 50,061 22,952 7,415 32 Lease financing receivables 22,881 20,320 15,944 4,376 2,561 33 Customers' liability on acceptances outstanding 30,625 29,771 21,249 8,522 855 34 Net due from own foreign offices, Edge and Agreement subsidiaries and IBFs 54,530 50,140 36,001 14,139 4,390 35 Remaining assets 161,080 135,376 95,745 39,631 25,704 36 Total liabilities and equity capital 2,551,039 1,925,460 1,512,997 412,463 625,579 37 Total liabilities7 2,370,779 1,793,191 1,410,873 382,319 577,588 38 Total deposits 1,942,026 1,403,382 1,122,549 280,833 538,644 39 Individuals, partnerships, and corporations 1,730,766 1,243,641 1,002,485 241,156 487,125 40 U.S. government 5,227 4,037 3,516 521 1,190 41 States and political subdivisions in the United States 103,293 68,398 56,670 11,728 34,895 42 Commercial banks in the United States 53,920 48,283 34,614 13,669 5,636 43 Other depository institutions in the United States 10,321 7,921 5,735 2,186 2,400 44 Certified and official checks 28,091 21,343 14,570 6,774 6,747 45 All other 10,411 9,760 4,961 4,799 651 46 Total transaction accounts 679,877 518,715 402,119 116,596 161,162 47 Individuals, partnerships, and corporations 567,908 425,339 335,606 89,733 142,569 48 U.S. government 3,807 2,902 2,447 456 904 49 States and political subdivisions in the United States 25,625 17,973 14,559 3,414 7,652 50 Commercial banks in the United States 38,111 36,144 26,087 10,057 1,966 51 Other depository institutions in the United States 7,554 6,485 4,588 1,897 1,069 52 Certified and official checks 28,091 21,343 14,570 6,774 6,747 53 All other 8,781 8,529 4,263 4,266 253 54 Demand deposits (included in total transaction accounts) 506,631 400,499 303,364 97,135 106,133 55 Individuals, partnerships, and corporations 404,478 312,851 241,552 71,299 91,627 56 U.S. government , 3,764 2,873 2,421 452 891 57 States and political subdivisions in the United States 15,879 12,285 9,893 2,392 3,594 58 Commercial banks in the United States 38,108 36,144 26,087 10,057 1,964 59 Other depository institutions in the United States 7,535 6,477 4,581 1,895 1,059 60 Certified and official checks 28,091 21,343 14,570 6,774 6,747 61 All other 8,776 8,525 4,259 4,266 252 62 Total nontransaction accounts 1,262,149 884,666 720,430 164,237 377,483 63 Individuals, partnerships, and corporations 1,162,858 818,302 666,879 151,423 344,556 64 U.S. government 1,420 1,135 1,070 65 285 65 States and political subdivisions in the United States 77,667 50,425 42,111 8,314 27,243 66 Commercial banks in the United States 15,809 12,139 8,527 3,612 3,670 67 Other depository institutions in the United States 2,767 1,436 1,147 290 1,331 68 All other 1,630 1,232 698 533 398 69 Federal funds purchased and securities sold under agreements to repurchase 245,333 225,842 171,586 54,256 19,492 70 Demand notes issued to the U.S. Treasury 23,660 21,400 15,944 5,456 2,260 71 Other borrowed money 54,065 48,833 35,039 13,794 5,232 72 Banks liability on acceptances executed and outstanding 31,520 30,666 22,093 8,574 854 73 Notes and debentures subordinated to deposits 2,280 1,385 1,219 166 895 74 Net due to own foreign offices, Edge and Agreement subsidiaries and IBFs 13,120 11,587 6,207 5,380 1,533 75 Remaining liabilities 71,894 61,684 42,444 19,240 10,210 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A71 4.20 Continued Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 76 Total equity capital9 180,260 132,269 102,124 30,145 47,991 MEMO 77 Assets held in trading accounts10 27,145 26,723 16.211 10,512 423 78 U.S. Treasury securities 10,820 10,777 5,393 5,384 43 79 U.S. government agency corporation obligations 3,997 3,988 2,778 1,210 9 80 Securities issued by states and political subdivisions in the United States 5,874 5,845 3,647 2,198 28 81 Other bonds, notes and debentures 271 271 147 124 0 82 Certificates of deposit 1,502 1,502 1,343 158 0 83 Commercial paper 200 200 199 1 0 84 Bankers acceptances 2,454 2,445 1,730 715 9 85 Other 1,154 1,143 454 688 11 86 Total individual retirement accounts (IRA) and Keogh plan accounts 79,345 57,752 42,801 14,951 21,593 87 Total brokered deposits 29,190 22,551 19,287 3,265 6,638 88 Total brokered retail deposits 8,489 5,980 5,122 857 2,509 89 Issued in denominations of $100,000 or less 2,772 1,425 1,359 65 1,347 90 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 5,717 4,555 3,763 792 1,162 91 Nontransaction savings deposits 530,953 385,541 309,372 76,169 145,412 92 Total time deposits of less than $100,000 431,726 278,853 235,013 43,840 152,872 93 Time certificates of deposit of $100,000 or more 266,390 191,689 157,084 34,605 74,701 94 Open-account time deposits of $100,000 or more 33,080 28,583 18,961 9,622 4,497 95 Super NOW accounts 162,174 110,671 91,872 18,798 51,503 96 Money market deposit accounts (MMDAs) 374,980 275,635 223,662 51,973 99,345 97 Total time and savings deposits 1,435,394 1,002,882 819,184 183,698 432,511 Quarterly averages 98 Total loans 1,428,965 1,084,563 869,252 215.311 344,402 99 Time certificates of deposit of $100,000 or more 262,458 189,655 155,112 34,544 72,803 100 Super NOW accounts, money market deposit accounts, and time deposits (other than certificates of deposit of $100,000 or more) 986,238 678,755 557,580 121,175 307,483 101 Number of banks 14,040 5,907 4,812 1,095 8,133 1. Effective Mar. 31, 1984, the report of condition was substantially revised for 5. The 'over 100' column refers to those respondents whose assets, as of June commercial banks. Some of the changes are as follows: (1) Previously, banks 30 of the previous calendar year, were equal to or exceeded $100 million. (These with international banking facilities (IBFs) that had no other foreign offices were respondents file the FFIEC 032 or FFIEC 033 call report.) The under 100' column considered domestic reporters. Beginning with the Mar. 31, 1984 call report these refers to those respondents whose assets, as of June 30 of the previous calendar banks are considered foreign and domestic reporters and must file the foreign and year, were less than $100 million. (These respondents filed the FFIEC 034 call domestic report of condition; (2) banks with assets greater than $1 billion have report.) additional items reported; (3) the domestic office detail for banks with foreign 6. Since the domestic portion of allowances for loan and lease losses and offices has been reduced considerably; and (4) banks with assets under $25 million allocated transfer risk reserve are not reported for banks with foreign offices, the have been excused from reporting certain detail items. components of total assets (domestic) will not add to the actual total (domestic). 2. The "n.a." for some of the items is used to indicate the lesser detail available 7. Since the foreign portion of demand notes issued to the U.S. Treasury is not from banks without foreign offices, the inapplicability of certain items to banks reported for banks with foreign offices, the components of total liabilities (foreign) that have only domestic offices and/or the absence of detail on a fully consolidated will not add to the actual total (foreign). basis for banks with foreign offices. 8. The definition of 'all other' varies by report form and therefore by column in 3. All transactions between domestic and foreign offices of a bank are reported this table. See the instructions for more detail. in "net due from" and "net due to." All other lines represent transactions with 9. Equity capital is not allocated between the domestic and foreign offices of parties other than the domestic and foreign offices of each bank. Since these banks with foreign offices. intraoffice transactions are nullified by consolidation, total assets and total 10. Components of assets held in trading accounts are only reported for banks liabilities for the entire bank may not equal the sum of assets and liabilities with total assets of $1 billion or more; therefore the components will not add to the respectively, of the domestic and foreign offices. totals for this item. 4. Foreign offices include branches in foreign countries, Puerto Rico, and in U.S. territories and possessions; subsidiaries in foreign countries; all offices of Edge Act and Agreement corporations wherever located and IBFs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 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

A83 and Official Staff H. ROBERT HELLER EDWARD W. KELLEY, JR. 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 PORTIA W. THOMPSON, Equal Employment Opportunity Programs Officer DIVISION OF FEDERAL RESERVE BANK OPERATIONS DIVISION OF PERSONNEL CLYDE H. FARNSWORTH, JR., Director ELLIOTT C. MCENTEE, Associate Director DAVID L. SHANNON, Director DAVID L. ROBINSON, Associate Director JOHN R. WEIS, Assistant Director C. WILLIAM SCHLEICHER, JR., Associate Director CHARLES W. WOOD, Assistant Director CHARLES W. BENNETT, 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, Associate 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

A84 Federal Reserve Bulletin • July 1987 Federal Open Market Committee FEDERAL OPEN MARKET COMMITTEE MEMBERS PAUL A. VOLCKER, Chairman E. GERALD CORRIGAN, Vice Chairman WAYNE D. ANGELL H. ROBERT HELLER EDWARD W. KELLEY, JR. EDWARD G. BOEHNE MANUEL H. JOHNSON MARTHA R. SEGER ROBERT tl. BOYKIN SILAS KEEHN GARY H. STERN ALTERNATE MEMBERS ROBERT P. BLACK ROBERT P. FORRESTAL ROBERT T. PARRY THOMAS M. TIMLEN STAFF DONALD L. KOHN, Secretary and Staff Adviser RICHARD W. LANG, Associate Economist NORMAND R.V. BERNARD, Assistant Secretary DAVID E. LINDSEY, Associate Economist ROSEMARY R. LONEY, Deputy Assistant Secretary MICHAEL J. PRELL, Associate Economist MICHAEL BRADFIELD, General Counsel ARTHUR J. ROLNICK, Associate Economist JAMES H. OLTMAN, Deputy General Counsel HARVEY ROSENBLUM, Associate Economist JAMES L. KICHLINE, Economist KARL A. SCHELD, Associate Economist EDWIN M. TRUMAN, Economist (International) CHARLES J. SIEGMAN, Associate Economist PETER FOUSEK, Associate Economist THOMAS D. SIMPSON, Associate Economist PETER D. STERNLIGHT, Manager for Domestic Operations, System Open Market Account SAM Y. CROSS, Manager for Foreign Operations, System Open Market Account FEDERAL ADVISORY COUNCIL JOHN G. MEDLIN JR., President JULIEN L. MCCALL, Vice President JOHN F. MCGILLICUDDY, DEWALT H. ANKENY, JR., AND F. PHILLIPS GILTNER, Directors JOHN P. LAWARE, 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

A85 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 JAMIE J. JACKSON, Houston, Texas, Vice President GERALD M. CZARNECKI, Mobile, Alabama DONALD F. MCCORMICK, Livingston, New Jersey JOHN C. DICUS, Topeka, Kansas JANET M. PAVLISKA, Arlington, Massachusetts BETTY GREGG, Phoenix, Arizona HERSCHEL ROSENTHAL, Miami, Florida THOMAS A. KINST, Hoffman Estates, Illinois WILLIAM G. SCHUETT, Milwaukee, Wisconsin RAY MARTIN, Los Angeles, California GARY L. SIRMON, Walla Walla, Washington Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A86 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, payment should accompany request and be made to the $13.50 each. Board of Governors of the Federal Reserve System. Payment FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; updatfrom foreign residents should be drawn on a U.S. bank. ed at least monthly. (Requests must be prepaid.) Stamps and coupons are not accepted. Consumer and Community Affairs Handbook. $75.00 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNC- Monetary Policy and Reserve Requirements Handbook. TIONS. 1984. 120 pp. $75.00 per year. ANNUAL REPORT. Securities Credit Transactions Handbook. $75.00 per year. ANNUAL REPORT: BUDGET REVIEW, 1986-87. Federal Reserve Regulatory Service. 3 vols. (Contains all FEDERAL RESERVE BULLETIN. Monthly. $20.00 per year or three Handbooks plus substantial additional material.) $2.00 each in the United States, its possessions, Canada, $200.00 per year. and Mexico; 10 or more of same issue to one address, Rates for subscribers outside the United States are as $18.00 per year or $1.75 each. Elsewhere, $24.00 per follows and include additional air mail costs: year or $2.50 each. Federal Reserve Regulatory Service, $250.00 per year. BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint Each Handbook, $90.00 per year. of Part I only) 1976. 682 pp. $5.00. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A BANKING AND MONETARY STATISTICS. 1941-1970. 1976. MULTICOUNTRY MODEL, May 1984. 590 pp. $14.50 each. 1,168 pp. $15.00. WELCOME TO THE FEDERAL RESERVE. ANNUAL STATISTICAL DIGEST PROCESSING AN APPLICATION THROUGH THE FEDERAL RE- 1974-78. 1980. 305 pp. $10.00 per copy. SERVE SYSTEM. August 1985. 30 pp. 1981. 1982. 239 pp. $ 6.50 per copy. WRITING IN STYLE AT THE FEDERAL RESERVE. August 1984. 1982. 1983. 266 pp. $ 7.50 per copy. 93 pp. $2.50 each. 1983. 1984. 264 pp. $11.50 per copy. INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. 1984. 1985. 254 pp. $12.50 per copy. 440 pp. $9.00 each. 1985. 1986. 231 pp. $15.00 per copy. FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. HISTORICAL CHART BOOK. Issued annually in Sept. $1.25 December 1986. 264 pp. $10.00 each. 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

A87 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

A88 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. Mahoney, Alice P. White, Paul F. O'Brien, and Mary 12/84. M. McLaughlin. January 1987. 30 pp. Union Settlements and Aggregate Wage Behavior in the 152. DETERMINANTS OF CORPORATE MERGER ACTIVITY: A 1980s. 12/84. REVIEW OF THE LITERATURE, by Mark J. Warshawsky. The Thrift Industry in Transition. 3/85. April 1987. 18 pp. A Revision of the Index of Industrial Production. 7/85. Financial Innovation and Deregulation in Foreign Industrial Countries. 10/85. REPRINTS OF BULLETIN ARTICLES Recent Developments in the Bankers Acceptance Market. 1/86. Most of the articles reprinted do not exceed 12 pages. The Use of Cash and Transaction Accounts by American Families. 2/86. Financial Characteristics of High-Income Families. 3/86. Limit of 10 copies Prices, Profit Margins, and Exchange Rates. 6/86. Foreign Experience with Targets for Money Growth. 10/83. Agricultural Banks under Stress. 7/86. Intervention in Foreign Exchange Markets: A Summary of Foreign Lending by Banks: A Guide to International and Ten Staff Studies. 11/83. U.S. Statistics. 10/86. A Financial Perspective on Agriculture. 1/84. Recent Developments in Corporate Finance. 11/86. Survey of Consumer Finances, 1983. 9/84. U. S. International Transactions in 1986. 5/87. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A89 Index to Statistical Tables References are to pages A3-A81 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 19, 20 Ownership by individuals, partnerships, and Assets and liabilities (See also Foreigners) corporations, 22 Banks, by classes, 18-20, 70-81 Turnover, 15 Domestic finance companies, 37 Depository institutions Federal Reserve Banks, 10 Reserve requirements, 8 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, 71, 73, 75, 77, 79, 81 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, 76, 78, 80. (See also Foreigners) EMPLOYMENT, 45 Bonds (See also U.S. government securities) Eurodollars, 24 New issues, 34 Rates, 24 FARM mortgage loans, 39 Branch banks, 21, 55 Federal agency obligations, 4, 9, 10, 11, 31, 32 Business activity, nonfinancial, 44 Federal credit agencies, 33 Business expenditures on new plant and equipment, 36 Federal finance Business loans (See Commercial and industrial loans) Debt subject to statutory limitation, and types and ownership of gross debt, 30 CAPACITY utilization, 46 Receipts and outlays, 28, 29 Capital accounts Treasury financing of surplus, or deficit, 28 Banks, by classes, 18, 71, 73, 75, 77, 79, 81 Treasury operating balance, 28 Federal Reserve Banks, 10 Federal Financing Bank, 28, 33 Central banks, discount rates, 67 Federal funds, 6, 17, 19, 20, 21, 24, 28 Certificates of deposit, 24 Federal Home Loan Banks, 33 Commercial and industrial loans Federal Home Loan Mortgage Corporation, 33, 38, 39 Commercial banks, 16, 19, 70, 72, 74, 76, 78, 80 Federal Housing Administration, 33, 38, 39 Weekly reporting banks, 19-21 Federal Land Banks, 39 Commercial banks Federal National Mortgage Association, 33, 38, 39 Assets and liabilities, 18-20, 70-81 Federal Reserve Banks Commercial and industrial loans, 16, 18, 19, 20, 21 Condition statement, 10 Consumer loans held, by type, and terms, 40, 41 Discount rates (See Interest rates) Loans sold outright, 19 U.S. government securities held, 4, 10, 11, 30 Nondeposit funds, 17 Federal Reserve credit, 4, 5, 10, 11 Number, by classes, 71, 73, 75, 77, 79, 81 Federal Reserve notes, 10 Real estate mortgages held, by holder and property, 39 Federal Savings and Loan Insurance Corporation insured Time and savings deposits, 3 institutions, 26 Commercial paper, 23, 24, 37 Federally sponsored credit agencies, 33 Condition statements (See Assets and liabilities) Finance companies Construction, 44, 49 Assets and liabilities, 37 Consumer installment credit, 40, 41 Business credit, 37 Consumer prices, 44, 50 Loans, 40, 41 Consumption expenditures, 51, 52 Paper, 23, 24 Corporations Financial institutions Nonfinancial, assets and liabilities, 36 Loans to, 19, 20, 21 Profits and their distribution, 35 Selected assets and liabilities, 26 Security issues, 34, 65 Float, 4 Cost of living (See Consumer prices) Flow of funds, 42, 43 Credit unions, 26, 40. (See also Thrift institutions) Foreign banks, assets and liabilities of U.S. branches and Currency and coin, 18, 70, 72, 74, 76, 78, 80 agencies, 21 Currency in circulation, 4, 13 Foreign currency operations, 10 Customer credit, stock market, 25 Foreign deposits in U.S. banks, 4, 10, 19, 20 Foreign exchange rates, 68 DEBITS to deposit accounts, 15 Foreign trade, 54 Debt (See specific types of debt or securities) Foreigners Demand deposits Claims on, 55, 57, 60, 61, 62, 64 Banks, by classes, 18-21, 71, 73, 75, 77, 79, 81 Liabilities to, 20, 54, 55, 57, 58, 63, 65, 66 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A90 GOLD Financial institutions, 26 Certificate account, 10 Terms, yields, and activity, 38 Stock, 4, 54 Type of holder and property mortgaged, 39 Government National Mortgage Association, 33, 38, 39 Repurchase agreements, 6, 17, 19, 20, 21 Gross national product, 51 Reserve requirements, 8 Reserves HOUSING, new and existing units, 49 Commercial banks, 18, 71, 77 Depository institutions, 3, 4, 5, 12 INCOME, personal and national, 44, 51, 52 Federal Reserve Banks, 10 Industrial production, 44, 47 U.S. reserve assets, 54 Installment loans, 40, 41 Residential mortgage loans, 38 Insurance companies, 26, 30, 39 Retail credit and retail sales, 40, 41, 44 Interest rates Bonds, 24 SAVING Consumer installment credit, 41 Flow of funds, 42, 43 Federal Reserve Banks, 7 National income accounts, 51 Foreign central banks and foreign countries, 67 Savings and loan associations, 26, 39, 40, 42. {See also Money and capital markets, 24 Thrift institutions) Mortgages, 38 Savings banks, 26, 39, 40 Prime rate, 23 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, 70, 76 State and local governments Federal Reserve Banks, 10, 11 Deposits, 19, 20 Financial institutions, 26, 39 Holdings of U.S. government securities, 30 New security issues, 34 LABOR force, 45 Ownership of securities issued by, 19, 20, 26 Life insurance companies (See Insurance companies) Rates on securities, 24 Loans (See also specific types) Stock market, selected statistics, 25 Banks, by classes, 18-20 Stocks (See also Securities) Commercial banks, 3, 16, 18-20, 70, 72, 74, 76, 78, 80 New issues, 34 Federal Reserve Banks, 4, 5, 7, 10, 11 Prices, 25 Financial institutions, 26, 39 Insured or guaranteed by United States, 38, 39 Student Loan Marketing Association, 33 MANUFACTURING Capacity utilization, 46 TAX receipts, federal, 29 Production, 46, 48 Thrift institutions, 3. (See also Credit unions and Savings Margin requirements, 25 and loan associations) Member banks (See also Depository institutions) Time and savings deposits, 3, 13, 17, 18, 19, 20, 21, 71, 73, Federal funds and repurchase agreements, 6 75, 77, 79, 81 Reserve requirements, 8 Trade, foreign, 54 Mining production, 48 Treasury cash, Treasury currency, 4 Mobile homes shipped, 49 Treasury deposits, 4, 10, 28 Monetary and credit aggregates, 3, 12 Treasury operating balance, 28 Money and capital market rates, 24 UNEMPLOYMENT, 45 Money stock measures and components, 3, 13 U.S. government balances Mortgages (See Real estate loans) Commercial bank holdings, 18, 19, 20 Mutual funds, 35 Treasury deposits at Reserve Banks, 4, 10, 28 Mutual savings banks, (See Thrift institutions) U.S. government securities Bank holdings, 18-20, 21, 30, 70, 72, 74, 76, 78, 80 Dealer transactions, positions, and financing, 32 NATIONAL defense outlays, 29 Federal Reserve Bank holdings, 4, 10, 11, 30 National income, 51 Foreign and international holdings and transactions, 10, 30, 66 OPEN market transactions, 9 Open market transactions, 9 Outstanding, by type and holder, 26, 30 PERSONAL income, 52 Rates, 24 Prices U.S. international transactions, 53-67 Consumer and producer, 44, 50 Utilities, production, 48 Stock market, 25 Prime rate, 23 VETERANS Administration, 38, 39 Producer prices, 44, 50 Production, 44, 47 WEEKLY reporting banks, 19-21 Profits, corporate, 35 Wholesale (producer) prices, 44, 50 REAL estate loans Banks, by classes, 16, 19, 20, 39 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A91 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 William H. Stone, Jr. CLEVELAND* 44101 Charles W. Parry vacancy John R. Miller 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. Monhoilon 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 James R. Rodgers John F. Breen Louisville 40232 Raymond M. Burse James E. Conrad Memphis 38101 Katherine H. Smythe 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 Enis Alldredge, Jr. 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 Tony J. Salvaggio El Paso 79999 Mary Carmen Saucedo Sammie C. Clay Houston 77252 Walter M. Mischer, Jr. J. Z. Rowe San Antonio 78295 Robert F. McDermott 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 Portland 97208 Paul E. Bragdon Angelo S. Carella Salt Lake City 84125 Don M. Wheeler E. Ronald Liggett Seattle 98124 John W. Ellis Gerald R. Kelly * Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; Cranford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A92 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories April 1984 LEGEND Boundaries of Federal Reserve Districts ® Federal Reserve Bank Cities Boundaries of Federal Reserve Branch * Federal Reserve Branch Cities Territories Federal Reserve Bank Facility Q Board of Governors of the Federal Reserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE REGULATORY SERVICE The Securities Credit Transactions Handbook contains Regulations G, T, U, and X, dealing with exten- To promote public understanding of its regulatory sions of credit for the purchase of securities, together functions, the Board publishes the Federal Reserve with all related statutes, Board interpretations, rul- Regulatory Service, a three-volume looseleaf service ings, and staff opinions. Also included is the Board's containing all Board regulations and related statutes, list of OTC margin stocks. interpretations, policy statements, rulings, and staff The Consumer and Community Affairs Handbook opinions. For those with a more specialized interest in contains Regulations B, C, E, M, Z, AA, and BB and the Board's regulations, parts of this service are associated materials. published separately as handbooks pertaining to mon- For domestic subscribers, the annual rate is $200 for etary policy, securities credit, and consumer affairs. the Federal Reserve Regulatory Service and $75 for These publications are designed to help those who each handbook. For subscribers outside the United must frequently refer to the Board's regulatory materi- States, the price including additional air mail costs is als. They are updated at least monthly, and each $250 for the Service and $90 for each Handbook. All contains conversion tables, citation indexes, and a subscription requests must be accompanied by a check subject index. or money order payable to Board of Governors of the The Monetary Policy and Reserve Requirements Federal Reserve System. Orders should be addressed Handbook contains Regulations A, D, and Q plus to Publications Services, Mail Stop 138, Federal Rerelated materials. For convenient reference, it also serve Board, 20th Street and Constitution Avenue, contains the rules of the Depository Institutions N.W., Washington, D.C. 20551. Deregulation Committee. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE CONSUMER CREDIT sumer credit protections. This 44-page booklet ex- PUBLICATIONS plains how to use the credit laws to shop for credit, apply for it, keep up credit ratings, and complain about an unfair deal. The Federal Reserve Board publishes a series of Protections offered by the Electronic Fund Transfer pamphlets covering individual credit laws and topics, Act are explained in Alice in Debitland. This booklet as pictured below. The series includes such subjects as offers tips for those using the new "paperless" syshow the Equal Credit Opportunity Act protects wom- tems for transferring money. en against discrimination in their credit dealings, how Copies of consumer publications are available free to use a credit card, and how to use Truth in Lending of charge from Publications Services, Mail Stop 138, information to compare credit costs. Board of Governors of the Federal Reserve System, The Board also publishes the Consumer Handbook Washington, D.C. 20551. Multiple copies for classto Credit Protection Laws, a complete guide to con- room use are also available free of charge. Fair Credit Billing 1——, 1 What Thithln Lending Means To You Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis