Federal Reserve Bulletin, 1988-04

VOLUME 74 • NUMBER 4 • APRIL 1988 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 • Donald L. Kohn • Michael J. Prell • 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 195 THE RECENT BEHAVIOR ate Committee on Banking, Housing, and OF DEMAND DEPOSITS Urban Affairs on February 24, 1988.) Demand deposits have become somewhat more volatile month to month, and, more 232 ANNOUNCEMENTS important from a policy perspective, their Meeting of Consumer Advisory Council. longer-run relationship to income and to interest rates appears to be changing. Amendment to Regulation K. Admission of three state banks to member- 209 TREASURY AND FEDERAL RESERVE ship in the Federal Reserve System. FOREIGN EXCHANGE OPERATIONS The dollar experienced recurrent periods of 234 RECORD OF POLICY ACTIONS OF THE downward pressure throughout November FEDERAL OPEN MARKET COMMITTEE and December and then firmed in early At its meeting on December 15-16, 1987, January. the Committee approved a directive that called for maintaining the existing degree of 215 INDUSTRIAL PRODUCTION pressure on reserve positions and for phas- Industrial production increased an esti- ing open market operations into a more mated 0.4 percent in January. normal approach to policy implementation keyed increasingly to a desired degree of reserve pressure while giving less emphasis 217 STATEMENTS TO CONGRESS than recently to money market conditions. Alan Greenspan, Chairman, Board of Gov- The members recognized that the conduct ernors, addresses questions about the Fed- of open market operations might continue eral Reserve's response to the turbulence in to require a special degree of flexibility, financial markets last October, the function- given still quite sensitive conditions in fiing of our financial markets during that nancial markets and the uncertainties in the period, and proposals for structural and business outlook. Taking account of condiregulatory reforms, before the Senate Com- tions in financial markets, the members mittee on Banking, Housing, and Urban indicated that somewhat less or somewhat Affairs, February 2, 1988. more reserve restraint would be acceptable, depending on the strength of the business 225 Chairman Greenspan discusses the conduct expansion, indications of inflation, the perof monetary policy and the economic and formance of the dollar in foreign exchange financial situation, as detailed in the markets, with consideration also taken of Board's semiannual Monetary Policy Re- the behavior of the monetary aggregates. If port to the Congress, and says that the current reserve conditions were mainsetting for monetary policy for the year tained, the members expected growth in M2 and M3 to pick up from the pace in recent 1988 and beyond is more than normally months to annual rates of about 5 percent complex, before the House Committee on and 6 percent respectively over the four- Banking, Finance and Urban Affairs, Febmonth period from November to March. ruary 23, 1988. (Chairman Greenspan pre- Growth of Ml was expected to remain sented identical testimony before the Sen- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

relatively limited over the same period; 243 LEGAL DEVELOPMENTS because of the substantial uncertainty that Various bank holding company, bank sercontinued to surround the outlook for Ml, vice corporation, and bank merger orders; the Committee continued its practice of not and pending cases. specifying a numerical expectation for its growth. The members agreed that the inter- AI FINANCIAL AND BUSINESS STATISTICS meeting range for the federal funds rate, which provides a mechanism for initiating A3 Domestic Financial Statistics consultation of the Committee when its A44 Domestic Nonfinancial Statistics boundaries are persistently exceeded, A53 International Statistics should be left unchanged at 4 to 8 percent. At a telephone meeting on January 5, A69 GUIDE TO TABULAR PRESENTATION, 1988, the Committee agreed that with the STATISTICAL RELEASES, AND SPECIAL further passage of time since the October TABLES disturbances in financial markets and with year-end pressures in the money market in A76 BOARD OF GOVERNORS AND STAFF the process of unwinding, further progress could be made toward restoring a normal A78 FEDERAL OPEN MARKET COMMITTEE approach to open market operations. Some AND STAFF; ADVISORY COUNCILS flexibility might continue to be needed in the conduct of operations, given the still A80 FEDERAL RESERVE BOARD somewhat unsettled conditions in financial PUBLICATIONS markets and the uncertainties in the economic outlook. A83 INDEX TO STATISTICAL TABLES A85 FEDERAL RESERVE BANKS, BRANCHES, AND OFFICES A86 MAP OF FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Recent Behavior of Demand Deposits - ' -I ..••' ' - . . ' .•'•. " ' " ' .... Patrick I. Mahoney of the Board's Division of year. The results of the survey, reported in the Monetary Affairs prepared this article. Mary T. second part of this article, confirm the influence Hoffman and Linda C. Rosenberg provided re- of interest rate movements on the recent behavsearch assistance for the article, and Lyle S. ior of demand deposits and shed some light on Kumasaka provided extensive research assis- changing ways of using demand balances to tance on the survey. compensate banks for services. The monetary aggregate Ml, consisting of currency, demand deposits, and other checkable DEMAND DEPOSIT BEHAVIOR IN THE 1980S deposits, has been less reliable as an economic indicator during the 1980s than it was during The short-run behavior of demand deposits has previous decades. In part, the deterioration in been more volatile in the 1980s than it was in the the link between Ml and economic activity is previous decade. For example, the monthly attributable to the inclusion in Ml of negotiable growth rates of demand deposits have varied order of withdrawal (NOW) accounts. These over a wider range in the 1980s (chart 1). In deposits, which were authorized nationwide statistical terms, the. standard deviation of annueffective at the end of 1980, serve as a hybrid alized monthly growth rates of seasonally savings and transaction instrument and therefore adjusted demand deposits, which was slightly blur the definition of Ml as a transaction aggre- less than 6 percent over the 1970s, jumped to gate and increase its interest sensitivity. In addi- nearly 14 percent for the 1980-87 period. Betion, the behavior of the demand-deposit compo- cause data on demand deposits for earlier years nent of Ml has changed in the 1980s. The shift of have been subject to the smoothing effects of household transaction deposits to NOW ac- more revisions in seasonal factors, the figures as counts, changes in the way businesses manage first published for both periods were examined to cash and compensate banks for services, and provide the same review of seasonal factors. The innovations in financial instruments are among standard deviation of these monthly growth rates the factors responsible for that change. Demand was about 8 percent over the 1970s and has been deposits have become somewhat more volatile 15 percent so far in the 1980s. And for not month to month and, more important from a policy perspective, their longer-run relationship 1. Monthly growth rate of demand deposits, 1970-87 to income and to interest rates appears to be changing. In particular, growth in demand deposits was considerably stronger in 1986 and considerably weaker in 1987 than historical relationships suggested. To obtain more information about the weakness of demand deposits in 1987 and in particular to understand better the role of compensatingbalance arrangements in the behavior of these deposits, the staff at the Board of Governors of the Federal Reserve System and at the Federal Reserve Banks conducted a survey of senior financial officers of large banks in January of this Seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

196 Federal Reserve Bulletin • April 1988 seasonally adjusted data, the comparable stan- But the responses of demand deposits to changes dard deviations also rose though by smaller in interest rates were greater than past norms amounts, from 26 to 32 percent. Statistical tests suggested. This change is illustrated by the reconfirmed the significance of the increases in sults of a simulation of a typical money-demand variability. These wider monthly swings in model for demand deposits (see the appendix for growth have made it more difficult to predict and its specification and discussion of other work). to interpret the behavior of demand deposits in The model explains the annual growth in demand the short run. deposits fairly accurately through 1985, but then More important, the relationship between underpredicts growth by 5.6 percentage points in longer-run movements in demand deposits and 1986, when rates were falling, and overpredicts it aggregate spending, which was relatively stable by 5.2 percentage points in 1987, when rates in the 1960s and 1970s, has weakened in the were rising (table 1). The misses in the simulation 1980s. Movements in the velocity of demand generally are related to movements in interest deposits, the ratio of gross national product to rates; coupled with the results of estimations of demand deposits, were fairly steady and predict- the model over more recent periods, they suggest able through the end of the 1970s; over this that the interest elasticity of demand deposits has period, velocity rose at an average annual rate of increased, though to an uncertain extent. 4.1 percent per year, in part reflecting rising This development has caused the growth of interest rates. Velocity jumped at the beginning demand deposits to diverge increasingly from of 1981, however, as consumers shifted funds out predictions implied by its historical relationship of demand deposits and into interest-bearing with spending and interest rates. To be sure, this NOW accounts (chart 2). Later, in 1985 and relationship had had episodes of unpredictability particularly in 1986, the velpcity of demand de- before, such as the surprising weakness of these posits declined substantially, and then it re- deposits in the mid-1970s. But, the divergence of bounded in 1987. demand deposits from their previously normal The shifts in velocity in the past three years relationship to spending and interest rates has appear to be related to the pattern of interest rate widened in the 1980s. movements and to an increasing responsiveness 1. Results of a long-run simulation to changes in rates. Rates declined in 1985 and of demand-deposit growth 1986, reducing incentives for depositors to economize on cash balances and increasing the levels Demand-deposit growth CChhaannggee iinn (percent) DDiiffffeerreennccee 33--mmoonntthh of balances businesses needed to compensate YYeeaarr ((ppeerrcceennttaaggee TTrreeaassuurryy bbiillll their banks for credit and operational services ppooiinnttss)) rraattee22 ((bbaassiiss Actual Predicted1 ppooiinnttss)) (see the discussion below). Rates then rose through most of 1987, reversing these effects. 1981 -12.8 -12.83 .0 200 1982 .8 -1.0 1.8 -480 1983 2.4 4.9 -2.6 40 1984 1.5 2.1 -.6 60 2. Velocity of demand deposits, 1970-87 1985 8.9 8.7 .1 -250 1986 11.8 6.3 5.6 -170 Ratio scale 1987 -.9 4.2 -5.2 60 1. Simulation beginning in 1981. 2. Change from fourth quarter to fourth quarter of a two-quarter moving average. 3. The model includes a variable to capture the effects of the availability of NOW accounts. FACTORS IN THE BEHAVIOR OF DEMAND DEPOSITS IN THE 1980S The 1980s have been characterized by many financial events that have directly or indirectly affected the behavior of demand deposits, includ- Quarterly data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Recent Behavior of Demand Deposits 197 ing the deregulation of interest rates on other movements in demand deposits are more likely deposits, changes in the structure of federal to reflect unanticipated changes in interest rates income taxes, numerous innovations in financial than variations in aggregate spending. Even a instruments and in the technology for executing one-time increase in this interest elasticity—that transactions, and greater volatility in interest is, the percent change in demand-deposit balrates and financial markets. In some cases single ances demanded given a 1 percent change in the events have had easily identifiable effects, while level of interest rates—loosens the observed linkin others the interactions of several develop- age between demand deposits and underlying ments appear to have contributed to the changes economic developments and produces wider in the behavior of demand deposits. swings in velocity. Because demand deposits are a significant component of the very narrow mon- Special Occurrences and Monthly Growth etary aggregates, such an increase in interest Rates elasticity lessens the usefulness of these aggregates as intermediate monetary targets. In addi- Certain unique developments, such as credit tion, if the interest elasticity of demand deposits controls and the nationwide authorization of continually changes, both predicting the behav- NOW accounts, explain some of the unusually ior of demand deposits and relating it to ecowide short-run swings in the growth of demand nomic activity become even more uncertain and deposits since 1979. Some affected the level of complicated. demand deposits permanently, as when house- The economic literature has identified two holds shifted transaction balances to NOW ac- channels through which movements in interest counts. Others affected the monthly growth rates rates affect the level of demand deposits: opporof demand deposits briefly, but had no long-run tunity costs and, for business deposits, compeneffect on their levels. Monthly growth in demand sating-balance arrangements. deposits can swing widely when the volumes of major types of transactions diverge markedly Opportunity Costs. The opportunity cost of from their trends. For example, demand deposits holding demand-deposit balances is the return jumped in late 1986 when investors scrambled to that could have been earned if those balances had complete transactions under the more favorable been placed in an interest-bearing instrument, capital gains and other tax provisions that the less any implicit return on the deposit itself. Tax Reform Act of 1986 eliminated or reduced. Managing balances in a demand-deposit account They then fell rapidly in January 1987 as the is not costless, however. Shifting funds to earnbulge worked its way through, only to rise mark- ing assets entails transaction costs and often edly in April with income tax payments that were reduces the liquidity of these funds. When marconsiderably higher than normal because they ket interest rates decline, the opportunity cost of reflected the increase in income tax liabilities holding demand-deposit balances also declines, incurred by the transactions at the end of 1986. and balances tend to rise, ceteris paribus, as the Another temporary surge in October 1987 re- loss of liquidity and the transaction costs of sulted from the huge increase in financial trans- frequent shifts of funds out of these deposits actions associated with the plunge in share prices outweigh the explicit interest that might be in midmonth. earned elsewhere. When rates increase, the opportunity cost of holding demand-deposit bal- ' s. sv.-tV^MHRc.-a • Financial Developments and the Interest ances also increases, and depositors, both house- Sensitivity of Demand Deposits holds and businesses, have more incentive to economize on balances and invest funds in other The relationship between movements in interest instruments. The elasticities that opportunity rates and the deviations of the velocity of de- costs impart to demand deposits probably are not mand deposits from historical patterns suggests large. Theoretical models of the behavior of that the interest sensitivity of demand deposits demand deposits suggest that the interest elastichas increased. As this sensitivity increases, ity from this channel is considerably less than Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

198 Federal Reserve Bulletin • April 1988 unity; that is, a 1 percent change in the level of half, the firm's required compensating balances interest rates results in a change of less than 1 and thus its demand deposits will double. percent in the level of balances demanded by But, while demand deposits held to compendepositors. sate banks for services earn an implicit return, they still entail opportunity costs because of the Compensating Balances. The other channel existence of reserve requirements on demand through which changes in interest rates affect the deposits. As shown by the formula above, the level of demand deposits is the use of compen- implicit return on balances held for compensasating-balance arrangements by businesses. Un- tion purposes is lower than the market rate by the der such arrangements, firms compensate their amount of reserves banks are required to hold banks for credit and operational services by against demand deposits. This reserve requiremaintaining a specified level of demand-deposit ment, currently 12 percent, represents an opporbalances. The amount of balances required to tunity cost. Firms thus have an incentive to compensate the bank for a given level of services reimburse their banks at least partially for seris determined by the earnings credit rate (ECR). vices by paying explicit fees rather than holding The ECR usually is based on a short-term market compensating balances. This practice, in turn, interest rate, reduced by 12 percent to reflect the can cause the interest elasticity of their demand reserve requirements on demand deposits. Spe- deposits to be less than unity. When a firm— cifically, required compensating balances are cal- given the level of interest rates, its own funding culated by the following formula: needs, and its demand for services—can choose a combination of balances and fees to remunerate its bank, it may keep its balances at the level MR( 1 - RR) desired for transaction purposes and simply make up the difference in required compensation where by paying higher explicit fees. Because the interest elasticity associated with the opportunity cost RCB = required compensating balances of holding balances for transactional purposes is S = the dollar value of services used less than unity, using such a combination reduces MR = the market rate, expressed as a deci- the interest elasticity of the firm's demand deposmal its below that implied by the strict application of RR = the percentage reserve requirement, the formula for computing required compensatexpressed as a decimal; MR(\ - RR) ing balances. = the earnings credit rate. When interest rates are low, however, the absolute value of the opportunity cost arising When market interest rates rise and thus the from reserve requirements is small relative to the ECR rises, the balance that a firm must hold to transaction and liquidity costs of shifting balcompensate its bank for a given amount of ser- ances out of demand deposits. Firms then have vices declines. As market interest rates fall, firms little incentive to reduce their balances below must hold higher compensating balances. those required for compensation purposes and to The ultimate effect of compensating-balance make up the difference with fees. In this situation arrangements on the interest elasticity of busi- firms may stop paying fees and alter the level of ness demand deposits is considerably more com- their demand deposits in line with changes in plex than this formula suggests, and it may vary their required compensating balances. When inwith interest rates. If, for a given amount of terest rates rise, firms may shift back to compenservices, the level of a firm's demand deposits on sating banks by a combination of fees and balthe margin is determined solely by compensat- ances. The importance of such shifts on ing-balance requirements and thus changes in the movements of demand deposits as interest rates ECR, its deposits will have a relatively large change is unknown, but to the extent that they are present, they may compound the difficulty of interest elasticity; specifically, it will be unity; measuring interest elasticity empirically. that is, if interest rates and thus the ECR fall by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Recent Behavior of Demand Deposits 199 At a given level of interest rates, levels of Survey (DDOS), consumers held one-third of demand deposits of some firms probably are demand deposits at all insured commercial banks determined on the margin primarily by transac- in 1980 (table 2). This share had declined to about tion needs, while those of other firms are deter- one-quarter by 1987, largely because of the namined by required compensating balances, and tionwide authorization of NOW accounts. Holdthis mix may vary with the level of interest rates. ings of demand deposits by financial and nonfi- In addition, this mix and the importance of these nancial businesses, which may not own NOW types of demand-deposit arrangements to the accounts, rose from three-fifths to about twobehavior of aggregate demand deposits likely thirds of total demand deposits. The rise in vary over time in response to technological businesses' share of demand deposits likely has change, deregulation, and changes in cash-man- increased the interest elasticity of demand deposagement practices. Thus the rapid pace of change its as a whole. Earlier empirical work at the in financial markets in the 1980s probably has Federal Reserve Board has shown that demand significantly altered the traditional channels deposits of businesses are more interest elastic through which interest elasticity is imparted to than are those of households, possibly because demand balances. New instruments have ap- firms use compensating-balance arrangements peared, new cash-management techniques have and because they manage cash more carefully. developed that facilitate shifts of funds from But changes in ownership shares probably exnon-interest-bearing demand deposits to interest- plain the apparent increase in the interest elasearning financial assets, and the ways businesses ticity only partially; the increase in the business compensate banks for credit and operational share of total demand deposits, while significant, services have been evolving. In addition, com- was limited, and the shares have remained relaplex transactions involving the relatively new tively stable over the past few years. mortgage-backed securities market appear to have contributed to variations in demand-deposit Effects of Innovations in Mortgage Markets. holdings, and the ownership of demand deposits The tremendous growth in the market for morthas shifted away somewhat from households gage-backed securities in the 1980s appears to following the introduction of NOW accounts. have opened a new channel through which interest rates affect demand deposits. When a mort- Changes in the Ownership of Demand Depos- gage underlying two types of mortgage-backed its. Changes over the 1980s in the shares of securities is prepaid, the proceeds must be demand deposits that various sectors of the econ- placed in custodial accounts until they are disomy hold partly explain an increase in the inter- bursed to the security holders on a specific date est elasticity of these deposits. According to the the following month. For one of these types of Federal Reserve's Demand Deposit Ownership mortgage-backed securities, mortgage servicers 2. Ownership of demand deposits, by type of holder, all insured commercial banks Percent 1. Details may not add to totals because of rounding. SOURCE. Board of Governors of the Federal Reserve System, 2. Data through 1987:3. Demand Deposit Ownership Survey. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

200 Federal Reserve Bulletin • April 1988 are required to use non-interest-bearing ac- 3. Mortgage interest rates and refinancings as counts, and they typically use demand deposits a percent of mortgage activity, 1980-87 for custodial purposes. As a result, some prepay- Percent (Vrcci i ments may be held in demand deposits for as long as 49 days. Thus major changes in the pace of Interest rate on Refinancin g » 40 20 fixed-rate mortgages1 mortgage prepayments can affect both the level of demand deposits and their growth rates. — 30 The wide variation in mortgage interest rates in the 1980s may have resulted in unexpected movements in demand deposits through this new — 10 channel. A substantial amount of mortgages was made at the very high interest rates prevailing 1981. 1983 1985 1987 earlier in the decade and, with the significant 1. Commitment rate on 30-year fixed-rate mortgages at thrift instidrop in mortgage interest rates over the last few tutions. 2. Commitments to refinance as a percent of total mortgage comyears, mortgage refinancings—and thus prepaymitments at thrift institutions. ments—rose sharply. Commitments for refinanc- Monthly data. ings as a share of all mortgage commitments at thrift institutions jumped from less than 20 per- interest elasticity of demand deposits over the cent in the early 1980s to more than 35 percent in past few years, it is difficult to sort through the 1986 and early 1987 (chart 3). Mortgage refi- interactions of the many financial innovations nancing at thrift institutions is estimated to have that facilitated the management of demand balrisen from a monthly rate of $1 billion or $2 ances by businesses and to identify all of the billion to more than $15 billion over the same changes in the ways businesses and banks interperiod; it fell off sharply in the late spring of 1987, act. Rising interest rates spurred innovations in both in dollar terms and as a share of total cash-management techniques and encouraged mortgage activity. As a result of the institutional their implementation. In the mid-1970s, banks practices discussed above, these movements began aggressively to market instruments of very may have been a factor in the strong growth in short maturity such as repurchase agreements demand deposits in 1986 and in their subsequent and overnight dollar-denominated deposits at weakness in the second half of last year. They their offshore branches. The introduction of also may have increased the volatility in the money market deposit accounts in December monthly growth rate of demand deposits, al- 1982 gave businesses, especially smaller firms for though in either case the effect is difficult to which the more sophisticated forms of cash manquantify. agement were not feasible, a new vehicle for It is too soon to determine the longer-run obtaining returns on liquid balances. Together effects of this development on the behavior of with more recent advances in telecommunicademand deposits. The surge in refinancings re- tions and the rise of electronic funds transfers, sulted from the existence of a large stock of these innovations have allowed businesses to mortgages issued during the earlier period of manage their demand deposits more effectively. very high interest rates, and that stock has been Theoretical models of money demand suggest reduced. Another surge in refinancings likely that marginal changes in the transaction costs would require another substantial, sustained associated with managing demand balances will drop in interest rates. Nevertheless, the size of not affect the interest elasticity of demand deposthe mortgage-backed securities market and its its. At the same time, they imply that the quaninstitutional practices have opened a new chan- tum jumps in the availability of alternative innel through which changes in interest rates ap- vestments and the spread of cash-management parently can affect the levels of demand deposits. services can increase the interest elasticity of demand deposits of some firms, especially Evolving Cash-Management Practices. While smaller ones. Smaller businesses may, for examempirical evidence points to an increase in the ple, have been constrained in managing cash Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Recent Behavior of Demand Deposits 201 balances by transaction costs that were high fostered the unbundling of fees for services. The compared with their relatively small balances. trend in cash management has been to substitute By dramatically lowering these costs and by explicit fees entirely for compensating-balance offering investments that theretofore were not arrangements as the means for reimbursing available, the new instruments may have allowed banks for services. This transition has been slow these firms to adjust their balances more closely for a variety of reasons; one reason often noted than before to changes in opportunity costs. in the cash-management literature is that such Furthermore, small and medium-sized firms changes require the education of senior managelikely are making more use of cash-management ment because explicit fees must be budgeted for services than they did in the past, as banks and approved while the costs of compensating increasingly compete for business customers and balances are indirect. Using a combination of market these services more aggressively. Fi- fees and compensating balances narrows the nally, one legacy of the rise in interest rates in the opportunity cost associated with reserve requirelate 1970s and early 1980s probably was an ments, but when interest rates are low, the increase in businesses' sensitivity to the oppor- absolute cost of this wedge, as discussed above, tunity costs of holding demand deposits, with also is low. When interest rates rise, the cost of consequent investment in the technology and the this wedge also rises, increasing the incentive for professional staff needed to manage balances firms to shift entirely out of compensating-balmore closely. Indeed, the cash-management lit- ance arrangements. erature and corporate cash managers see a Changes in the use of compensating-balance spread in this expertise, especially to medium- arrangements and other innovations obviously sized and small firms, which likely increases the have implications for the interest elasticity of interest sensitivity of demand deposits. demand deposits. To the extent that firms hold Other innovations are affecting the behavior of balances only to meet transaction needs and use business demand deposits, but with uncertain fees for the rest of their reimbursement to banks, implications for their interest elasticity. Banks the interest sensitivity of their deposits could be have marketed sweep accounts, in which all lower. As firms shift out of compensating-balbalances remaining at the end of the day are ance arrangements completely to zero-balance placed in overnight investments, so that these accounts so that a larger proportion of the rebalances are eliminated from the demand depos- maining demand deposits are held under comits reported in Ml. Controlled disbursement ac- pensating-balance arrangements, the interest counts have the same effect: all debits are effec- elasticity of these deposits could increase. No tively cleared early in the day, allowing funds to data exist to determine whether such an increase be swept sooner. By removing demand-deposit has occurred over the 1980s. balances of firms with extensive cash-management expertise from aggregate demand deposits, these innovations may be increasing the impor- SURVEY DATA ON COMPENSATING tance in aggregate demand deposits of accounts BALANCES AND THE BEHAVIOR that exhibit more traditional responses to OF DEMAND DEPOSITS IN LATE 1987 changes in opportunity costs; no available data measure this phenomenon, however. Perhaps To obtain additional information about the bemore important, these innovations weaken the havior of demand deposits in late 1987 and comlink between aggregate spending and demand pensating balances, the Federal Reserve surdeposits because changes in transaction activity veyed senior financial officers at 60 large in such accounts are not reflected in the levels of commercial banks in mid-January 1988. The dedemand deposits. mand deposits at these banks account for ap- Compensating-balance arrangements also proximately 37 percent of total demand deposits have been changing, in reflection both of the at all federally insured commercial banks. spread of cash-management expertise and of the The results of the survey indicate that compenincrease in competition among banks, which has sating balances are an important component of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

202 Federal Reserve Bulletin • April 1988 business demand deposits and that movements in rangements. This proportion should be seen only market interest rates continue to affect the levels as a confirmation that compensating balances are of demand deposits both through compensating- an important component of demand deposits; balance arrangements and through changing op- some may have been held in any event to meet portunity costs, sometimes with a considerable current transaction needs, and the survey results lag. The survey also revealed an acceleration of do not indicate what proportion of business deshifts out of compensating balances in 1987. The mand deposits are constrained at the margin by interaction of these factors, coupled with volatile compensating-balance requirements. interest rates and shifts away from compensat- Five out of six respondents based their ing-balance arrangements, underscores the diffi- ECR on the three-month Treasury bill rate, culty in assessing seasonal patterns and interest using either secondary market or auction rates. elasticities for demand deposits. Because most Other rates used included the federal funds rate compensating-balance arrangements effectively and rates on wholesale certificates of deposit; all require year-end settlement of accounts, year- banks adjusted for reserve requirements. Oneend flows of demand deposits may be affected in third of all respondents indicated that they lag complex ways by rate movements and by other their ECR a month or more in calculating redevelopments over the year. quired balances. Besides questions about compensating-bal- Compensating-balance requirements also are ance arrangements, respondents were asked measured over a variety of periods. Although 83 about the sharp declines in demand deposits in percent of the respondents indicated that they November and December 1987. These declines, measured balances primarily on a monthly basis at annual rates of nearly 19 and 14 percent and another 15 percent reported quarterly comrespectively for the two months, were larger than putation periods, many commented that such could be accounted for by the runoff of the surge arrangements were open to negotiation with inin demand deposits associated with the October dividual customers or were left to the discretion plunge in the stock market. The results of this of the account manager. As a result, some banks portion of the survey verify that movements use various periods for various customers. The in interest rates significantly affected the levels of lags in applying ECRs, coupled with varying demand deposits, if with considerable lags, and computation periods, result in lags in the changes confirm that other factors, such as shifts by in the levels of demand deposits in response to firms away from compensating-balance arrange- changes in interest rates and, if these arrangements, also affected the growth of demand de- ments shift over time, contribute to the uncerposits. tainty and unpredictability of this response. Variation in compensating-balance arrange- The Current Structure of Compensating ments also is evident in the willingness of banks Balances to allow carryovers of surpluses or deficits. About two-thirds of the respondents allow carry- According to the survey, compensating-balance overs from one computation period to the next. arrangements vary widely across banks and Some allow it only for certain customers, and a across customers within individual banks. few institutions allow carryovers only of over- Twelve percent of the responding banks report ages, not deficits. About three-fourths of the that 20 percent or less of their business demand respondents that allow carryovers do not deposits are held under formal compensating- allow them beyond the end of the calendar year, balance arrangements, while a quarter of the effectively requiring account settlement at yearrespondents cited proportions of over 80 percent. end. (See table A.l. for detailed responses to this The survey results confirm the view expressed portion of the survey.) On average, about 62 in the cash-management literature and by corpopercent of balances in business demand deposits rate cash managers that businesses have been at the respondent banks are made up of funds moving away from compensating-balance arheld under formal compensating-balance ar- rangements in favor of reimbursing their banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Recent Behavior of Demand Deposits 203 for services by explicit fees. Nearly three-fourths business demand deposits attributed it to more of the bank respondents reported such a shift, careful cash management by firms in response to and 38 percent of these indicated that it had higher interest rates, and 29 percent indicated accelerated in 1987. Thus the combination of that higher rates (and thus higher ECRs) had spreading cash-management expertise and the permitted reductions in required compensating reserve-requirement wedge appears to have re- balances. duced the use of compensating-balance arrange- Other factors, including changes in cash-manments. Indeed, one bank commented that recent agement practices, also affected growth in dearticles in cash-management journals have mand deposits in November and December. spurred shifts by some of their customers. One-third of the respondents stated that customers switching from compensating-balance arrangements to explicit fees as payment for ser- Evidence from November-December 1987 vices had depressed demand-deposit levels at their banks. A few senior financial officers noted The most striking result from this section of the that some customers had reduced their balances survey was the importance of lagged effects of below the minimums required late last year, changes in market interest rates on demand- making up the difference with fees; in the past deposit levels. Apart from any unusual move- corporate cash managers have stated that firms ments related to the drop in the stock market, the may be looking to reductions in compensating weakness in demand deposits in November and balances as a source of funds. December reflected most importantly the lagged Twenty-nine percent of the survey responadjustment of account levels to earlier increases dents saw a slowing in business activity at in interest rates, which peaked in mid-October. some firms as a factor in the weakness in busi- This development was attributed both to closer ness demand deposits, while about 13 percent management of balances and to reductions in cited a reduction in financial activity associated required compensating balances as rates rose in with leveraged buyouts and merger financing. A 1987. reduction in demands by corporate customers for Half of the respondents reported that growth in credit and operational services combined, which demand deposits at their institutions was below perhaps mirrored these developments, were renormal or very weak in November and Decem- ported as a factor by about 30 percent of the ber (see table A.2.). Only a few reported above- banks with lower than normal growth in business normal growth in demand deposits, and none deposits. Slow loan growth and the financial experienced very strong growth. Of those with troubles of one bank also were cited. growth that was lower than normal, 83 percent The contraction in business demand deposits experienced weakness in business deposits, was not concentrated in any one sector: over while slightly less than half cited weakness in three-fourths of the respondents reported weakhousehold accounts. Data from the DDOS of ness across all of their business accounts. The weekly reporting banks for the fourth quarter of fourth-quarter DDOS data for financial and non- 1987 also point to weakness in business ac- financial businesses confirm this result. The recounts. Demand deposits held by financial and spondents who cited specific sectors named real nonfinancial business at these banks declined at estate and mortgage banking most often. In terms seasonally adjusted annual rates of 12 percent of account structure, most of the institutions and 9 percent respectively over the fourth quar- reported that the falloflf in business demand ter of last year. Consumer demand deposits grew deposits resulted from lower average balances; at a 7 percent rate, noticeably below their pace of about 14 percent reported a decline in the the fourth quarter of 1986. number of accounts as some customers contin- Higher interest rates were the most important ued to consolidate demand accounts to reduce single factor in the weakness in demand deposits: expenses and to facilitate cash management, a 54 percent of the respondents to the senior trend also noted in the cash-management literafinancial officer survey who reported weakness in ture. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

204 Federal Reserve Bulletin • April 1988 SUMMARY in cash-management techniques, and retail deposit deregulation, all prompted to some extent The behavior of demand deposits in the 1980s has by the high and rising market interest rates of the diverged from previous patterns, and movements 1970s and early 1980s, may have contributed to a of these deposits have become more unpredict- heightened interest elasticity of demand deposits able, in both the short and the longer run, than by providing new techniques and vehicles for they were in the 1970s. In the short run, the managing cash balances and by increasing the variability in monthly growth rates of demand proportion of aggregate demand deposits that are deposits is greater than it was in the previous held by businesses. decade. Special factors, such as the nationwide In addition, survey data tend to confirm previintroduction of NOW accounts, the Tax Reform ous indications that compensating-balance ar- Act of 1986, and the stock market plunge, have rangements figure large in the interest sensitivity accounted for specific episodes of wide swings in of demand deposits and also involve practices the month-to-month growth of demand deposits. that add to the unpredictability of deposit move- Practices in some relatively new markets, cou- ments resulting from changes in interest rates. A pled with volatile interest rates, also appear to shift by firms from compensating-balance arhave had noticeable, if not readily quantifiable, rangements to explicit fees as a way of paying effects on short- and longer-run movements in banks for services also affects movements in demand deposits. demand deposits and possibly their interest elas- The longer-run behavior of demand deposits ticity. Overall, there seem to have been signifialso appears to have changed from what their cant shifts in the behavior and predictability of historical relationships with income and interest demand deposits in the 1980s. These shifts aprates suggest. Available evidence indicates that pear to have stemmed from a variety of causes, part of this change in the behavior of demand some of which probably will continue to operate deposits reflects an increase in their interest in the future. elasticity. Financial innovations, improvements Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Recent Behavior of Demand Deposits 205 APPENDIX RTBE = rate on three-month Treasury bills (effective yield) SHIFT = 0 through 1974:2, 1 in 1974:3; increases This technical appendix presents the specificain increments of 1 until reaching 10 in tion of the model of the demand for demand 1976:4 and remains at 10 thereafter (a deposits, and detailed responses to the Senior dummy variable for the "missing Financial Officer Opinion Survey conducted by money") the staff at the Federal Reserve Board and at the TYME = time variable: 1947:1 = 1; increases in Reserve Banks in January 1988. increments of 1 each quarter. Specification of the demand-deposit model All variables are quarterly averages. Alog (£>£>) = -.1192 - .0180 log(RTBE)_ i Sample period: 1961:1-1986:2; R2 = .763; Durbin H statistic [-2.5] [-3.2] = -.7908; standard error of regression = .0069. The numbers in brackets are t statistics. -.1686 [log(DD) - \og(EPCEN)]_ } One convergence restriction is imposed on the [-2.5] estimates: - .0009 TYME_, - .0030 SHIFT 2 [-2.2] [-2.7] X dyi + coefficient on Alog (DD)_, = 1. i=0 + .1605 log(l - JNOWT) This restriction imposes on the short-run dynamic [2.2] terms the same unitary elasticity with respect to consumption that is imposed in the long run by the second line of the model. + Z dr, Alog (RTBE)_ I i= 0 This model and the results of the simulation are presented as an illustration of the extent to + X dy, Alog (EPCEN)_, which the behavior of demand deposits in the 1=0 1980s has departed from that suggested by past - .0089 A SHIFT relationships with interest rates and aggregate [-3.3] spending. The results presented in text table 1 are from a quarterly dynamic simulation of the + .8926 Alog (1 - JNOWT) [11.3] model beginning in 1981:1. The parameter estimates of the model are based on quarterly data + .1481 Alog CDD)_ X from 1961:1-1986:2 and thus incorporate data [2.5] from the 1960s, including a part of 1986-87, the period when the most serious simulation errors X dr = - .0295 £ dy, = .8519 { emerge. By including information on demand- [-3.3] [13.5] deposit behavior in the 1980s, rather than a pure dr = -.0072 dy = .4889 out-of-sample simulation, this approach illus- 0 0 trates the extent to which the longer-run predictdr, = -.0222 dy = .1984 ability of demand deposits has deteriorated. In x addition, economists at the Board have run simdy 2 = .1645 ulations of demand-deposit models with different where specifications, estimated over 1961-86 and over DD = demand deposits (business and con- 1983-87, and found similar patterns of errors in sumer) 1986 and 1987. As noted in the text, the apparent EPCEN = personal consumption expenditures in relation of the errors to movements in interest current dollars rates implies that the interest elasticity of de- JNOWT = index of the availability of NOW acmand deposits has increased. counts (held constant from 1985 onward) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

206 Federal Reserve Bulletin • April 1988 Because of the wide swings in demand depos- Officer Opinion Survey. Of the survey panel of 60 its in late 1986 and in various periods in 1987 banks, 59 responded. Not all of the 59 banks, induced by the special factors discussed in the however, responded to all questions on the surtext, it is difficult to sort out elasticity effects by vey. Nonresponses were not included in tabulatestimating models over periods that include ing the survey results and computing the percent 1986:3-1987:4. The model specified here also of institutions answering in a particular category was estimated from the early 1970s through mid- of a question. For example, 51 banks responded 1986,and the results, when compared to those to the question, reported in table A.I., about the from estimating the model over the entire proportion of business demand balances held 1961:1-1986:2 period, indicate an increase in the under formal compensating-balance arrangelong-run interest elasticity of demand deposits. ments, and the percentage of responses in each This result supports the conclusion of a higher category is based on 51 respondents. On quesinterest elasticity of demand deposits implied by tions to which 59 banks responded, the percentthe pattern of errors in the various simulations. ages are based on 59 respondents. Of course, A detailed technical discussion of such empir- some questions applied to only a subset of the ical work at the Board is contained in a draft panel, depending on their answers to a previous paper, "Modeling the Disaggregated Demands question. For example, only the 37 banks that for M2 and Ml in the 1980s: the U.S. Experi- reported a shift from compensating balances to ence," by George Moore, Richard Porter, and explicit fees answered the question about David Small, presented at a workshop at the whether such shifts had accelerated in 1987. In Board in mid-January 1988. all cases, if a bank responded that it was uncertain as to the answer to a question, its response was included in the totals and reported in the RESPONSES TO THE SENIOR "uncertain" category. FINANCIAL OFFICER OPINION SURVEY Tables A. 1. and A.2. contain detailed data on the responses to the January 1988 Senior Financial Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Recent Behavior of Demand Deposits 207 A.l. Importance and structure of compensating balances at selected large U.S. banks, 1987 Percent Number Number Percent Survey item of banks of Survey item of banks of banks' banks' Proportion of business demand Period for measuring interest rate balances held under formal used for ECR3 compensating-balance Week 1 2 arrangements (percent) Month 47 81 0-20 6 12 Quarter 9 16 21-40 2 4 Longer 1 2 41-60 16 31 All banks 58 100 61-80 14 27 MEMO Over 80 13 25 Lagged ECR 19 33 All banks2 51 100 Moving average 10 17 Change in proportion in 1987 Period for measuring compensating Increase 2 4 balances Decrease 6 12 Month 49 83 None 41 80 Quarter 9 15 Uncertain 2 4 Year 1 2 All banks 51 100 All banks 59 100 Shift from compensating Carryover of surpluses or deficiencies balances to explicit fees in permitted period to period recent years Yes 40 68 Yes 37 73 No 16 27 Acceleration in 1987 For some customers 3 5 Yes 14 38 All banks 59 100 No 22 59 Uncertain 1 3 Limits on carryovers All banks 37 100 Yes 4 9 No 14 27 No 38 88 All banks 51 100 For some customers 1 2 All banks 43 100 Most common ECR formula for compensating balance Carryovers permitted beyond end of Adjusted for required reserves .. 48 100 calendar year All banks 48 100 Yes 10 23 No 32 74 Interest rate used as basis for For some customers 1 2 ECR All banks 43 100 Three-month Treasury bills 49 83 Ninety-day CDs 3 5 Change in ECR formula or other Other 3 5 compensating-balance feature in Average of several rates 4 7 1987 All banks 59 100 No change 51 86 Change by customer 2 3 Change by bank 4 7 Adjustment for FDIC insurance 2 3 All banks 59 100 1. Details may not add to totals because of rounding. January 1988 Senior Financial Officer Opinion Survey. The survey 2. Mean for all banks, 61.6 percent. panel consists of 60 large commercial banks with total combined 3. A bank may have responded in more than one category. domestic assets of $810 billion as of June 30, 1987; all federally insured SOURCE. Board of Governors of the Federal Reserve System, commercial banks have $2.5 trillion in commercial assets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

208 Federal Reserve Bulletin • April 1988 A.2. Behavior of demand deposits at selected large U.S. banks, November and December 1987 Survey item Number of banks Percent of banks Strength of demand-deposit growth Very strong 0 0 Above normal 4 7 About normal 25 43 Below normal 23 40 Very weak 6 10 All banks 58 100 Accounts with below-normal or very weak growth1 Business 24 83 Household 14 48 Other 5 17 All banks 29 Reason for below-normal or very weak growth in business accounts1 Slowing business activity 7 29 Less leveraged-buyout and merger activity 3 13 Stricter cash management 13 54 Reduction in compensating balances, by cause Higher interest rate 7 29 Less use of credit services 3 13 Less use of operational services 4 17 Overages earlier in the year 2 8 Shift from compensating balances to fees 8 33 Other 6 25 All banks 24 Concentration of below-normal or very weak growth in business accounts, by type of business1 Financial institutions 2 9 Securities firms 1 4 Real estate firms 3 13 Firms involved in merger and acquisition activity 1 4 Energy-related firms 1 4 No apparent concentration 18 78 All banks 23 Manifestation of below-normal or very weak growth in business accounts1 Reduction in number of accounts 2 7 Reduction in average account balance 20 69 Both 2 7 Uncertain 5 17 All banks 29 1. A bank may have responded in more than one category. SOURCE. See table A.l. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

209 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report, covering the period No- declined less sharply. As a result, interest rate vember 1987 through January 1988, provides differentials favoring the dollar had narrowed. information on Treasury and System foreign Following the stock market developments in exchange operations. It was prepared by Sam Y. October, market participants looked to the ad- Cross, Manager of Foreign Operations of the ministration and the Congress for decisive action System Open Market Account and Executive to reduce the U.S. fiscal deficit. Progress was not Vice President in charge of the Foreign Group of yet visible, even though the administration and the Federal Reserve Bank of New York J the Congress had begun discussions on a twoyear deficit reduction program. The dollar experienced recurrent periods of In light of these factors and the continuing downward pressure throughout November and large trade imbalances, many doubts were ex- December, then firmed in early January. On pressed in the press and in the market that the balance, the dollar ended the three-month period Group of Seven (G-7) countries would place a IVi percent lower against the Japanese yen and 3 high priority on maintaining exchange rate stabilto 4 percent lower against most European cur- ity and international policy coordination. As a rencies and the Canadian dollar. The U.S. au- result, market participants were looking for evithorities intervened to support the dollar at var- dence that the economic policy coordinating ious times during the period, most heavily in mechanisms established at the February 1987 early November and around the turn of the year. Louvre accord were still intact. During the first week of November, the dollar's decline began to accelerate. Some press EARLY NOVEMBER PRESSURE reports asserted that the U.S. authorities' pri- ON THE DOLLAR mary concern, at least for the moment, was to prevent a recession, even at the risk of a further In November, as the period under review decline in the dollar. Other reports tended to opened, the dollar was already under selling reinforce doubts about the strength of the compressure stemming from several sources. mitment of the G-7 countries to foster stability in Given the sharp decline in stock prices in exchange rates. The dollar's decline continued October and the relatively greater importance of despite explicit reaffirmation of the U.S. adherequity holdings in the United States than in other ence to the Louvre accord. countries, the U.S. economy was seen to be in In fact, the Trading Desk at the Federal Redanger of weakening considerably, and more so serve Bank of New York had already begun to than the economies of other countries. Under intervene in the market on behalf of the U.S. these circumstances and with the Federal Re- monetary authorities. In concert with other censerve acting to provide liquidity to the market, tral banks, the Desk purchased $1,095 million U.S. interest rates had declined significantly. from November 2 through November 10, of Meanwhile interest rates in other countries had which $717 million was against marks and $378 million against yen. The dollar traded as low as DM1.6485 against the mark and Y133.20 against 1. The charts for the report are available on request from the yen on November 10. Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Following these intervention operations and a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

210 Federal Reserve Bulletin • April 1988 statement by President Reagan on November 10 to foster stability in exchange rates, the dollar that he did not want to see a further decline of the continued to move lower. dollar, the selling pressures subsided. The report During late November and early December, a few days later that the U.S. trade deficit had the U.S. authorities again entered the market to declined in September, and President Reagan's contain the dollar's decline on various occasions subsequent statement that the budget negotia- when it came under pressure. Between Novemtions could result in $80 billion in deficit reduc- ber 27 and December 4, the U.S. authorities tions over two years, seemed to suggest progress purchased $272 million against marks and yen, toward reducing the U.S. external and internal again in cooperation with other central banks. imbalances. At the same time, the Bundesbank The dollar steadied during the first week of took action to lower German short-term interest December. The Bundesbank cut its discount rate rates, which reduced the tendency for the Ger- on December 3 to 2XH percent in a move accomman mark to appreciate against its partner cur- panied by official rate cuts in France, the United rencies within the European Monetary System Kingdom, Switzerland, Belgium, the Nether- (EMS) as well as against the dollar. In that lands, and Austria. Market participants were environment, market participants questioned encouraged by these signs of renewed internawhether the stage was being set for a G-7 meeting tional cooperation. that would reaffirm the commitment to exchange The announcement on December 10 that the rate stability. The dollar firmed to DM1.7170 U.S. trade deficit had jumped to a record $17.6 against the mark and Y137.30 against the yen on billion (not seasonally adjusted) in October un- November 16. derlined the difficulties in reducing the U.S. external imbalance and had a strong market impact. As traders rushed to liquidate their dollar positions, the dollar gapped downward IV2 to 2 REEMERGENCE OF PRESSURE IN LATE percent within a few minutes of the announce- NOVEMBER AND DECEMBER ment. The U.S. authorities entered the market, in concert with several European central banks, The dollar came under pressure again as hopes to restrain the dollar's decline. The next day, faded for rapid progress in the budget reduction when market conditions again deteriorated, the negotiations. Expectations of an early G-7 meet- Desk reentered the market. Over the two-day ing receded after statements by several foreign period, the U.S. authorities purchased $351 milofficials seemed to indicate that a meeting would lion against marks and yen. not occur until a U.S. budget accord had been For the rest of the month, market sentiment negotiated and approved by the Congress. By remained bearish as the dollar came under recur- November 20, when the administration and con- rent strong selling pressure in an atmosphere of gressional negotiators agreed upon a plan to pessimism and uncertainty. Market participants reduce the budget deficit about $75 billion over remained skeptical that the budget reductions two years, the dollar was already moving lower being considered by the Congress would be sufas market participants wondered whether the ficient to deal effectively with the U.S. fiscal program would be adequate and how long it deficit problem. Erroneous press reports, though would take for the Congress to enact the mea- quickly denied, raised doubts about the commitsures. With market attention focused almost ex- ment of the administration to exchange rate clusively on the progress of the budget reduction stability and added to the uncertainty. plan through the Congress, news of coordinated Meanwhile, market participants were reassessinterest rate adjustments in Germany and several ing the economic outlook generally and found the other European countries on November 24 again performance abroad to be mixed. The Japanese helped to ease tensions within the European economy remained buoyant, driven by acceler- Monetary System but provided only limited sup- ating domestic demand, while in Germany the port for the dollar. In the presence of continued mark's continuing rise was seen as possibly doubts about the strength of the G-7 commitment leading to a decline in both German net exports Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 211 1. Federal Reserve reciprocal currency arrangements October stock market decline on the U.S. econ- Millions of dollars omy. Evidence that consumer confidence may have fallen sharply in October and remained Amount of weak in November kept alive concerns about the Institution facility, January 31, 1988 possible effect of the stock market decline on U.S. economic growth. But the release of other Austrian National Bank 250 National Bank of Belgium 1,000 statistics, including employment and industrial Bank of Canada 2,000 production figures for November that were better National Bank of Denmark 250 Bank of England 3,000 than expected, suggested that the market's initial Bank of France 2,000 German Federal Bank 6,000 worries that the decline might seriously weaken Bank of Italy 3,000 U.S. economic activity were exaggerated. Bank of Japan 5,000 On December 22, officials of the G-7 nations Bank of Mexico 700 Netherlands Bank 500 issued a statement reaffirming the basic objec- Bank of Norway 250 Bank of Sweden 300 tives and policy directions set forth in the Louvre Swiss National Bank 4,000 accord agreeing that a further decline of the Bank for International Settlements dollar could be counterproductive. However, Dollars against Swiss francs 600 Dollars against other authorized European traders were disappointed that the statement currencies 1,250 offered no explicit new economic policy moves Total 30,100 aimed at stabilizing exchange rates and redressing trade imbalances. and investment spending. The view that the Against this background, the dollar again came Japanese economy was fairly strong, and that the under strong downward pressure as the year Japanese authorities had less scope than others drew to a close. U.S. corporations and Japanese to lower interest rates, added to the selling banks sold dollars in thin holiday markets, at a pressure on the dollar against the yen. In these time when most banks in Europe and the United circumstances, the dollar fell more rapidly States were unwilling to adjust their positions against the yen than other major foreign curren- ahead of the year-end, and the market became cies during the second half of December. The one-sided. The U.S. monetary authorities interstrength of the yen relative to European curren- vened heavily in concerted intervention operacies also was consistent with a view that, since tions. During the period December 16 through Japan's trade surplus with Europe had widened December 31, the Desk purchased a total of in previous months, the yen had considerable $1,707 million, approximately half of which was scope to appreciate vis-a-vis the European cur- against marks and half against yen. By early rencies. morning January 4, the dollar had declined to At the same time, market participants were no record lows of DM1.5615 against the mark and longer quite so pessimistic about the effect of the Y 120.20 against the yen in the Asian-Pacific markets. At that point, the dollar was almost 10 percent lower against the mark and more than 13 Net profits or losses (-) on U.S. Treasury and Federal Reserve current foreign exchange percent lower against the yen from the start of operations1 the period. Millions of dollars U.S. Treasury Federal Exchange RECOVERY OF THE DOLLAR IN JANUARY Period Reserve Stabilization Fund Market sentiment changed dramatically begin- November 1, 1987- ning later that day, when active trading resumed January 31, 1988 612.4 749.7 Valuation profits and in New York after New Year's Day, in response losses on outstanding assets and liabilities to unmistakable evidence of concerted, visible, as of January 31, 1988 1,846.8 1,350.5 and aggressive intervention operations. These operations provided a clear signal that U.S. and 1. Data are on a value-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

212 Federal Reserve Bulletin • April 1988 foreign officials were seriously committed to fos- STATEMENT OF THE GROUP OF SEVEN tering exchange rate stability and gave new ON DECEMBER 22,1987 weight to the December G-7 statement. Reported comments by foreign officials also reinforced the Paragraph 8 view that the new initiatives to halt the dollar's decline might be under way. The dollar advanced The Ministers and Governors agreed that either PA percent against the mark and 2LA percent excessive fluctuation of exchange rates, a further against the yen by the close of New York trading, decline of the dollar, or a rise in the dollar to an from its lows earlier that day, and continued to extent that becomes destabilizing to the adjuststrengthen during the remainder of the first week ment process could be counterproductive by damof January. aging growth prospects in the world economy. They re-emphasized their common interest in In this context, the announcement of reducmore stable exchange rates among their currentions in official interest rates in three European cies and agreed to continue to cooperate closely in countries on January 5 was interpreted as a monitoring and implementing policies to further sign that officials were willing to take strengthen underlying economic fundamentals to steps to adjust their monetary stance and coorfoster stability of exchange rates. In addition, dinate policy to support the dollar. The release they agreed to cooperate closely on exchange on January 8 of U.S. employment statistics for markets. The Ministers and Governors stressed December that were better than expected helped the need for consistent and mutually supportive to strengthen the view that a sharp slowdown in policies and believe that the measures being taken domestic economic activity was not imminent, will accelerate progress toward the increased, and accordingly, that there might be less down- more balanced economic growth and sustainable ward pressure on U.S. interest rates. On January external positions necessary for greater exchange rate stability. 13, Japanese Prime Minister Takeshita and President Reagan met in Washington and reaffirmed the December G-7 statement. They indicated that arrangements had been made to assure the adelikely in the immediate future. The dollar closed quacy of resources needed for their cooperative on January 15 at Y130.85 against the yen and at efforts. DM1.6865 against the mark, 9 percent and 8 On January 15, the report that the U.S. trade percent higher respectively, from its period lows deficit for November had narrowed to $13.2 on the morning of January 4. Although profitbillion (not seasonally adjusted) pushed the dol- taking brought the dollar back from its highs, lar sharply higher. Market participants were en- market participants had gained confidence in the couraged that the deficit, which had declined view that the dollar had stabilized, at least for the with virtually all geographic regions and across time being. all commodity groups, was finally narrowing, Between January 4 and January 15, intervenalbeit slowly and erratically. U.S. retail sales tion dollar purchases by the U.S. monetary aufigures for December that were stronger than thorities totaled $685 million against marks and expected, released at about the same time, rein- yen. The bulk was purchased during the first two forced earlier evidence that a recession was not business days of the new year. 3. Drawings and repayments by foreign central banks under special swap arrangement with the U.S. Treasury1 Millions of dollars; drawings or repayments (-) Central bank drawing Amount of Outstanding, Outstanding, on the U.S. Treasury facility November 1, November December January January 31, 1987 1988 Central Bank of Argentina 200 0 190 -190 0 (2) Central Bank of Ecuador 31 0 (2) 31 -31 (2) 1. Data are on a value-date basis. 2. No facility. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 213 The dollar traded within a narrow range from Over the same period, the U.S. authorities the release of the U.S. trade figures through the acquired yen in a variety of ways. In particular, remainder of the month. Market participants $30.9 million equivalent was received representwere impressed by the early January intervention ing interest payments under the Supplemental operations and expected the U.S. authorities to Financing Facility of the International Monetary act forcefully to counter any renewed sharp Fund (IMF), $184.5 million equivalent resulted decline of the dollar. As it happened, the U.S. from the exchange of SDRs with other monetary authorities intervened on only one other occa- authorities, and $1.4 million equivalent was pursion, purchasing $30 million against yen on Jan- chased from customers. uary 21 when the dollar came under some down- In the November-January period, the Federal ward pressure. At the same time, events abroad Reserve and the ESF realized profits of $612.4 reinforced the sense that policies were being million and $749.7 million respectively, from directed toward lessening exchange market pres- foreign currency operations. As of the end of sures. In Germany, the Bundesbank changed its January, cumulative bookkeeping or valuation monetary target to a broader aggregate (M3) from gains on outstanding foreign currency balances the narrower aggregate for central bank money. were $1,846.8 million for the Federal Reserve The Bundesbank issued a statement that the new and $1,350.5 million for the ESF. These valuatarget would allow the German authorities to tion gains represent the increase in the dollar pursue the twin goals of providing monetary value of outstanding currency assets valued at stability and stimulating domestic demand. Al- end-of-period exchange rates, compared with the though the change was technical, observers felt rates prevailing at the time the foreign currencies that it might imply a reduced likelihood of a were acquired. tightening of monetary policy. The Federal Reserve and the ESF regularly As the period came to a close, the exchange invest their foreign currency balances in a variety market was quiet and the dollar was trading in a of instruments that yield market-related rates of narrow range. However, the dollar was per- return and that have a high degree of quality and ceived as still vulnerable to disappointing trade liquidity. A portion of the balances is invested in figures. Market participants, therefore, awaited securities issued by foreign governments. As of further evidence that a bottom for the dollar had the end of January, holdings of such securities been reached and that the underlying economic by the Federal Reserve amounted to $1,051.7 conditions were in place for a more sustained million equivalent, and holdings by the Treaperiod of exchange rate stability. The dollar sury amounted to the equivalent of $996.1 closed the three-month period at DM1.68 against million. the mark and at Y128 against the yen, down on balance almost 3 percent and IV2 percent respectively, from levels at the end of TREASURY SWAP ARRANGEMENTS WITH October. FOREIGN CENTRAL BANKS During the three-month period, the U.S. monetary authorities purchased a total of $4,140 During the period under review, the U.S. Treamillion dollars, of which $2,388.5 million was sury through the ESF provided short-term against German marks and $1,751.5 million financing facilities to Argentina and Ecuador. against Japanese yen. The U.S. Treasury and the Federal Reserve intervened in nearly equal Argentina. As noted in the previous report dollar amounts, though the currency compo- (pages 14-17 of the January 1988 BULLETIN), on sition differed. The Federal Reserve sold $2,030 October 30, 1987, a near-term credit facility of million equivalent of German marks and no $500 million was made available jointly by the yen; the Treasury's Exchange Stabilization Fund ESF, the Bank for International Settlements (ESF) sold $358.5 million equivalent of marks (acting for certain central banks), and the central and the entire $1,751.5 million equivalent banks of Mexico, Uruguay, and Colombia to the of yen. Central Bank of the Argentine Republic. On Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

214 Federal Reserve Bulletin • April 1988 November 12, the Argentine central bank drew Ecuador. On December 3, 1987, the ESF $190 million from the ESF's portion of $200 agreed to provide a $31 million short-term credit million. The central bank of Argentina repaid facility for the Central Bank of Ecuador. On the $90.1 million on December 7, $84.3 million on next day, the Central Bank of Ecuador drew the December 21, $10.3 million on December 23, and full amount, which was subsequently repaid on the remaining $5.3 million on December 30. January 26, 1988. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

215 Industrial Production Released for publication February 17 of materials, which rose sharply throughout the second half of last year, was little changed in Industrial production increased 0.2 percent fur- January. At 133.8 percent of the 1977 average, ther in January after a revised rise of 0.4 percent the total index in January was 6 percent higher in December. Gains were concentrated in the than it was a year earlier. production of trucks for consumer use, nondura- In market groups, production of consumer ble consumer goods, business supplies, and man- goods rose 0.4 percent in January as large inufacturing equipment; automobile production de- creases in lightweight truck assemblies and in clined about 7.5 percent over the month. Output nondurable consumer goods—particularly food Ratio scale, 1977 = 100 Products Materials J I L _ MANUFACTURING 140 _ MATERIALS Nondurable Durable 120 100 80 INTERMEDIATE PRODUCTS Business supplies y Construction supplies 240 240 OIL AND GAS DRILLING FINAL PRODUCTS 200 Defense and space 200 160 160 120 140 100 Consumer goods 120 80 100 60 80 1982 1984 1986 1988 1982 1984 1986 1988 All series are seasonally adjusted. Latest figures: January. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

216 Federal Reserve Bulletin • April 1988 1977 = 100 Percentage change from preceding month Percentage cchhaannggee,, Group 1987 1988 1987 1988 JJaann.. 11998877 ttoo JJaann.. 11998888 Dec. Jan. Sept. Oct. Nov. Dec. Jan. Major market groups Total industrial production 133.6 133.8 -.2 1.1 .4 .4 .2 6.0 Products, total 141.1 141.5 -.4 1.1 .0 .1 .2 5.2 Final products 139.2 139.5 -.4 1.1 -.2 .1 .2 4.7 Consumer goods 129.3 129.8 -1.3 1.1 .1 .1 .4 3.4 Durable 120.3 120.8 -2.2 4.8 -.5 -2.7 .4 1.6 Nondurable 132.6 133.1 -1.1 -.2 .3 1.1 .4 4.0 Business equipment... 148.7 148.6 .4 1.6 -.3 .3 -.1 7.2 Defense and space 189.7 190.2 .4 .3 -.3 -.1 .3 1.5 Intermediate products... 147.7 148.2 -.3 .9 .7 .3 .4 6.8 Construction supplies. 134.6 134.6 -.2 .8 .5 .4 .0 3.3 Materials 123.3 123.4 .2 1.3 .9 .9 .1 7.4 Major industry groups Manufacturing 138.5 138.9 -.1 1.2 .4 .5 .2 6.2 Durable 137.1 137.2 -.1 2.3 .0 .2 .1 6.1 Nondurable 140.6 141.2 -.1 -.3 1.0 .8 .4 6.4 Mining 103.2 102.6 1.0 1.7 .5 -.9 -.6 3.2 Utilities 112.6 114.0 -1.4 .8 .8 -.3 1.3 5.6 NOTE. Indexes are seasonally adjusted. and energy—were only partially offset by contin- percent last month, largely reflecting a decline in ued weakness in auto output. Auto assemblies assemblies of motor vehicles other than light were reduced in January to an annual rate of 6.0 trucks. million units from a rate of 6.5 million units in The indexes for both durable and nondurable December. Output of business equipment was materials were unchanged in January, but were little changed, on balance. Production of manu- appreciably stronger in December than originally facturing and power equipment advanced published. In January, output of chemical matestrongly, and output of commercial equipment, rials and parts for equipment continued to post which includes computers, edged up. However, strong gains, but production of paper and basic output of transit equipment fell more than 3.5 metals registered declines. Production of energy materials was up in January, with generation of electricity providing the major impetus. Total industrial production—Revisions In industry groups, manufacturing output in- Estimates as shown last month and current estimates creased 0.2 percent in January. Although many machinery industries continued to show gains, Percentage change production of iron and steel fell back in January Index (1977=100) from previous MMoonntthh months following a sharp rise in December. As a result, durable manufacturing was about unchanged in Previous Current Previous Current January. Output of nondurable goods increased October 132.5 132.5 1.1 1.1 0.4 percent in January, and production at utilities November 133.1 133.0 .4 .4 December 133.3 133.6 .2 .4 was up an estimated 1.3 percent. However, min- January 133.8 ... .2 ing production declined 0.6 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

217 Statements to Congress Statement by Alan Greenspan, Chairman, Board to become safer and more liquid. Savers and of Governors of the Federal Reserve System, lenders attempt to disengage from markets, esbefore the Committee on Banking, Housing, and pecially those involving risk-bearing instru- Urban Affairs, U.S. Senate, February 2, 1988. ments, and look for preservation of principal rather than capital gains and earnings potential. I appreciate this opportunity to appear before the This increased demand for liquidity and safety is Banking Committee to address questions about a phenomenon that in recent years has often been the Federal Reserve's response to the turbulence described as a flight to quality. At the same time, in financial markets last October, the functioning some private borrowers might find that their of our financial markets during that period, and credit needs have been enlarged by a stock proposals for structural and regulatory reforms. market crisis, especially the securities dealers who need to finance a larger inventory of equity shares acquired from a panicky public. Others FEDERAL RESERVE RESPONSE may increase their borrowing just to have a larger TO THE OCTOBER CRISIS cushion of cash on hand, given the financial uncertainties. During the stock market crash, and in the days This combination of supply and demand facfollowing, the Federal Reserve undertook a num- tors can add up to a situation in which private ber of actions to deal with emerging problems borrowers could have difficulty obtaining credit, and restore confidence. Our purpose was to limit or at least find it very much more expensive. any damage to the economy from the collapse in Short-term interest rates on private instruments financial markets. and the cost of borrowing from intermediaries History teaches us that central banks have a could rise sharply, compounding the crisis and crucial role to play in responding to episodes of increasing the potential for major damage to the acute financial distress. Before the founding of economy and the financial markets. the Federal Reserve, the early stages of stock There certainly can be a rational component market crashes or their equivalent were com- underlying the heightened demand for liquidity pounded by a sharp escalation of short-term and increased reluctance to lend to private borinterest rates and a reduction in credit availabil- rowers. A stock market crash can patently inity. For example, during the Panic of 1893, rates crease the credit risk involved in lending to on call loans to brokers in New York City were certain borrowers, such as those dealers holding quoted at the extraordinary level of as much as large inventories of equity relative to their capi- 74 percent per annum; the rates on prime com- tal, or firms planning to retire debt by selling mercial paper reached 18 percent. Interest rate shares of stock, or companies that may experiquotes during the Panic of 1907 were similar. ence reduced demand for their products as a Moreover, these rates were for the most part result of the decline in equity prices. But there purely formal quotes; even at such high interest can be, and almost always is, an exaggerated rates, very little money was actually forthcoming market reaction as well, based on little hard from nervous lenders. evidence, that builds on itself and ultimately These rates are a product of natural market affects borrowers whose creditworthiness has reactions to the dramatic increases in uncertainty not been materially impaired by the drop in that accompany such episodes. Fearful people equity values. This irrational component of the tend to withdraw; they pull back; they endeavor demand for liquidity may reflect concerns that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

218 Federal Reserve Bulletin • April 1988 the crisis could affect the financial system or the cautious. In addition, demand deposits bulged economy more generally, spreading beyond the after the stock market fall, probably in conjuncindividual participants directly involved. It also tion with the surge in financial transactions. The can be a strong reaction to heightened uncertain- Federal Reserve supplied extra reserves to acties before firm information becomes available on commodate these needs. which potential borrowers have been weakened By helping to reduce irrational liquidity deand which are still sound. mands and by accommodating the remainder, the The irrational aspect of the flight to liquidity Federal Reserve avoided a tightening in overall and quality is similar in some respects to a run on pressures on reserve positions and an increase in a bank that is fundamentally sound. In the days short-term interest rates. In fact, we went even before deposit insurance, banks attempted to further and eased policy moderately after the fend off such runs by putting cash in the front stock market collapse in light of the greater risk window. By reassuring depositors that ample to continued economic expansion. The federal supplies were on hand, the run might be discour- funds rate dropped from more than IVi percent aged from even beginning. just before October 19th to about 63/4 percent in In a sense, the Federal Reserve adopted a the first half of November, and regular adjustsimilar strategy after October 19, one aimed at ment and seasonal borrowing at the discount shrinking irrational reactions in the financial sys- window fell from about $500 million to less than tem to an irreducible minimum. Early on Tues- $300 million in November. Rather than the spikes day morning, October 20th, we issued a state- in rates observed in panics earlier in our history, ment indicating that the Federal Reserve stood short-term rates actually declined after October ready to provide liquidity to the economy and 19, even on private instruments. financial markets. In support of that policy, we At the same time, I should add that it was very maintained a highly visible presence through important that our actions not be perceived as open market operations, arranging System repur- merely flooding the markets with reserves. That chase agreements each day from October 19th to would not have addressed the problem. We unthe 30th. These repurchase agreements were dertook open market operations in a measured substantial in amount and were frequently ar- and calibrated way. Haphazard or excessive reranged at an earlier time than usual, underscoring serve creation would have fostered a notion that our intent to keep markets liquid. the Federal Reserve was willing to tolerate a rise By demonstrating openly our determination to in inflation, which could itself have impaired meet liquidity demands, we could, in practice, market confidence. We were cautious to attack reduce those demands to the extent that they the problem that existed and not cause one that arose from exaggerated fears. Through its ac- did not. tions, the central bank can help to assure market In addition, the Federal Reserve took a numparticipants that systemic concerns are being ber of other steps after the stock market crash addressed and the risk is being contained—that that were focused on the functioning of the isolated problems will not be allowed to infect markets and the financial strength of important the entire financial system. participants. These steps were designed to en- The Federal Reserve's activities seem to have able us to be in a position to address the consecontributed to a calming of the extreme concerns quences of the crash on markets, especially if generated by the stock market collapse. Gradu- they threatened further disruption to the financial ally, risk premiums for private borrowers sub- system, and to assure the markets of our efforts sided, suggesting that the flight to quality had to contain the damage. Our actions dealt with a abated. However, fear-based demands for liquid- number of actual and potential specific problems, ity remained, generated temporarily in the course but more generally were also a key aspect of our of the financial turmoil, and there were also strategy to contain the effects of the market understandable and reasonable demands for ex- disruption by maintaining a high visibility that cess reserves at depository institutions, whose would calm markets and reduce irrational dereserve management appropriately turned more mands for liquidity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 219 We recognized that the safety and stability of protect their financial stability. At the same time, the banking system are essential to the success of banks have always been relied upon as important this strategy. History teaches us that stock mar- sources of credit in financial markets, especially ket declines that do not adversely affect the when those markets are troubled and normal banking system have a much less serious effect access may have been impaired. In our converon the overall economy than ones that do. sations with banks, we stressed the importance For example, the stock market crashed in of ensuring adequate liquidity to meet legitimate March 1907, but the Panic of 1907 was not customer funding needs, even if they were uninitiated until the failure of the Knickerbocker usually large, while recognizing explicitly the Trust Company in October. The damage to the responsibility of market participants to make economy after the stock market crash in October their own independent credit judgments. 1929 was much magnified by the series of bank In the event, banks did make a large volume of failures that occurred in 1930-33. Conversely, securities loans after the stock price decline. the stock market fell sharply in May and June They apparently reviewed their credit exposure 1962; however, the banking system was not carefully, in some cases asking for additional seriously affected, and the effect on the overall collateral. However, our information suggests economy was limited. that there were only a few instances in which Accordingly, during the recent events, the credit was withdrawn or requests for new credit System placed examiners in major banking insti- were refused, and these instances involved relatutions and monitored bank developments care- tively minor amounts. The generally good perfully in several ways. formance of this key lending function may be For example, the Federal Reserve Banks kept attributable, at least in part, to the knowledge close track of currency shipments to banking that the Federal Reserve was making reserves institutions to identify potential emerging bank freely available so that banks would not be facing runs. These shipments did increase after October escalating funding costs. 19 but seemed to involve banks that were taking The Federal Reserve also took particular interprecaution against runs that never occurred. In est in the government securities market. We have addition, there was a generalized increase in the long had a special involvement in this market demand for precautionary balances in currency through our open market operations and as fiscal by the public, not associated with runs on banks, agent for the Treasury. that was also satisfied. In the wake of the stock market decline, we We reviewed the potential impact of stock stepped up our daily monitoring of primary govmarket activity on pending bank holding com- ernment securities dealers and interdealer govpany mergers and acquisitions. We monitored ernment securities brokers. We held discussions the announced or unannounced intention of bank with regulators and other market practitioners holding companies to buy back their stock. When regarding particular situations in which firms discussing these possible actions with holding were having difficulty meeting capital requirecompanies, we took the position that such pur- ments. Officials of the Federal Reserve Bank of chases would be inappropriate other than on a New York met with representatives of governlimited basis to restore order in the market for ment securities dealers and with interdealer govtheir stock. ernment securities brokers with regard to con- We paid particular attention to the credit rela- cerns about counterparty risk, especially in tionships between banks and securities dealers. when-issued trading associated with the Trea- We assessed the banking industry's credit expo- sury's November refunding. sure to securities firms through loans, loan com- One problem that arose resulted from a relucmitments, and letters of credit. We were in tance of some holders of government securities contact with both banks and securities firms to lend them as freely as they typically do. As a regarding the liquidity and funding of brokers and consequence, the incidence of failures to deliver dealers. We recognized that banks needed to particular government securities rose, potentially exercise caution in their credit judgments to disrupting trading and liquidity in this key mar- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

220 Federal Reserve Bulletin • April 1988 ket. In response, the Federal Reserve tempo- ently prevented the sharp interest rate spikes rarily liberalized the rules governing lending of observed in earlier crisis periods. Interest rate securities from its portfolio. For a time, we lifted spreads have come back more into line, and per-dealer and per-issue limits on such lending market functioning appears to have returned and set aside the rule against lending to facilitate toward more normal conditions. Although it apshort sales. pears that the acute crisis period has passed, Beyond these eflforts in the banking and gov- markets remain quite sensitive, and could react ernment securities areas, the Federal Reserve strongly to developments that seemed to portend was in frequent contact with market participants more market instability. and officials at the Treasury and at other regulatory agencies regarding the functioning of other markets as well. The efforts proved essential to STOCK MARKET FUNCTIONING gather information, identifying developing prob- AT THE BREAK lems, and coordinate responses with other authorities. Regarding the matter of the overall functioning of Many of the contacts occurred through the our markets for equities and derivative instru- Federal Reserve Banks of New York and Chi- ments during the October turbulence, we now cago, which have special knowledge and under- have the benefit of several major studies. More standing of nearby markets and contacts with studies will be forthcoming. Clearly, the findings key officials. Through them and at the Board of and the recommendations of these studies de- Governors, we were in touch with officials at the serve careful consideration. Senator Brady and stock, options, and futures exchanges, as well as the other members of the Presidential task force, with the Securities and Exchange Commission along with their staff, have done a remarkable job (SEC) and the Commodity Futures Trading Com- of assembling information and preparing their mission (CFTC), regarding the liquidity of the report on the October plunge in so short a span of markets, the functioning of market makers, op- time. The nation owes them a debt of gratitude erational problems, and settlement issues. In for their eflforts. We find their analysis of the addition, we discussed the possible effect of causes of the stock break particularly instructive sharp swings in markets on participants' financial and subscribe to its general lines. We differ, in conditions to obtain advance warning of any part, on some of their recommendations for problems that might be developing. To facilitate reform. The Brady report, along with those of the timely margin collections in futures markets, the CFTC, the General Accounting Office (GAO), Federal Reserve extended the hours of operation and various private organizations, are adding of its funds transfer system on October 19 and 20. much to our understanding of these events and Furthermore, we closely monitored the inter- the vulnerabilities of our securities markets to national ramifications of the stock market crash, rapidly changing developments. and the effect of developments in foreign markets It hardly needs to be said that we are dealing on U.S. market participants. We communicated with an extremely complex set of issues involvwith officials of foreign central banks with regard ing the factors that influence price movements in to general market conditions and with various securities markets and the capability of our finanmarket participants abroad regarding the effects cial institutions to withstand extreme shocks. of the stock market developments in specific Not only do the studies emerging on this matter markets. reinforce the point that there are close relation- In summary, the Federal Reserve acted in ships among the various domestic securities marresponse to the stock market crash to reduce kets and between these markets and their derivirrational fear-based demands for liquidity, to ative counterparts but also the extent to which meet remaining unusual liquidity demands, and our financial marketplace has become interto monitor developments in the government se- twined with those abroad. curities and equities markets and in the banking In addressing the issues before us, we must system. Our reactions to provide liquidity appar- keep these dependencies in mind. We must also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 221 recognize that the financial system is in the tive instruments would enable them to promptly process of evolution and that much of the change trim their exposure and limit losses should they since mid-October has been in reaction to weak- fear a turndown in prices. Many users of portfonesses displayed at that time. Some of these lio insurance strategies, especially those aggresadaptations—such as a reduction in the use of sive formal programs that were model driven and portfolio insurance strategies—are taking forms executed by computers, believed that they could that limit pressures that would be placed on the limit their losses in a declining market, and hence system if circumstances similar to those of mid- were willing to be more than usually exposed in October were to recur. Others are adding to the cash equity markets. However, the experience of system's capacity to bear large shocks. last October vividly illustrates that timely execu- A central question is the cause of the market tion cannot be assured, especially under those collapse and its suddenness. Only if we under- conditions when it matters the most—when the stand why it happened can we gain insights into markets are under heavy selling pressure. In how the structure of markets for equities and essence, there was an illusion of liquidity that their derivatives can be improved. Not only was likely encouraged larger equity positions on the the stock price break very large, but it was part of many investors. Of course, while an compressed into a very short span of time. We individual investor can in principle reduce expocan point to a number of price declines in our sure to price declines, the system as a whole with history of a magnitude similar to last October, rare exceptions cannot.1 Thus strategies by so but none have been as rapid. Also, the plunge many investors to shed risk associated with a was an international phenomenon. The drop was large decline in price were vulnerable in ways of fairly uniform severity across the major equity that had not been fully contemplated. The nearly markets, affecting those with well-developed and simultaneous efforts of so many investors to less-developed derivative markets similarly. contain losses pushed the system beyond its Before the drop, the market had run up to very limits, exacerbating problems of execution and high levels. The bull market from 1982 onward leading to portfolio losses that had not been was nurtured by a favorable economic setting for envisioned when these strategies were adopted. businesses, which investors came increasingly to The dramatic experience of October has, howview as likely to be sustained. In particular, ever, introduced more realism into such riskinflation expectations were greatly reduced over shedding investment strategies, and in the prothis period, even as the economic expansion cess has defused some of the potential pressures continued. However, stock prices finally reached on the system in the future. The mere fact of levels that stretched to incredulity expectations sharply lower prices has significantly reduced the of rising real earnings and falling discount fac- risk of a replication of October 19. tors. Something had to snap. If it had not hap- Modern technology coupled with the greater pened in October, it would have happened soon presence of sophisticated institutional investors thereafter. The immediate cause of the break was undoubtedly contributed to the suddenness of incidental. The market plunge was an accident the October drop. Through modern telecommuwaiting to happen. Measures of real rates of nications and information processing, investors return on equity investments indicated that such can follow events as they unfold and react very returns were at historically low levels last sum- promptly. What formerly took hours or days now mer—a situation that in the past has been re- can be done in seconds or minutes. Moreover, stored to more normal levels either by a subse- institutional investors have taken on a major role quent sharp increase in earnings or a pronounced in the market for equities and derivative proddrop in share prices. In the event, we got the latter. Probably contributing to high share prices 1. To the degree that derivative instruments facilitate a were efforts by investors previous to October to better redistribution of price risk to those most willing and able to bear it, they can add to the appeal of cash equity extend their cash equity positions on the thought investments to investors, encouraging them to hold larger that the availability of liquid markets for deriva- permanent equity positions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

222 Federal Reserve Bulletin • April 1988 ucts—accounting for about two-thirds of trading The emerging incoherence between the prices volume—and these sophisticated investors are of stocks, stock index futures, and options last capable of reacting almost instantaneously to October also contributed to uncertainty premiinformation as it becomes available; these inves- ums and the downward pressure on prices. There tors also were heavy users of portfolio insurance is, of course, only one valuation process in these programs that key oflf movements in market markets, that being the underlying value of the prices and reinforce buying or selling pressures. primary claims to corporate ownership. Index Modern technology, along with major institu- futures and options are claims on the primary tional presence in the market, implies that an claims and can have value only to the extent the enormous volume of buy and sell orders can be underlying stocks have value. In fact, index sent to the markets at any moment, leading to futures and options merely gross up the demand very sudden pressures on prices. Furthermore, and supply for equity-related products. Every sharp downward price moves by themselves, such contract has equal outstanding long and such as those occurring last October, can act to short positions, the net of which is, of necessity, heighten uncertainty in the markets and eflforts to a wash. Stocks, in contrast, reflect a net long disengage, thereby compounding selling pres- position representing the total value of the comsures. Under these circumstances, many poten- bined equity and derivative products. In normal tial buyers become reluctant to enter the market circumstances, when markets are functioning as the sharp price move, outside the range of efficiently, arbitrage keeps the prices of these normal experience, leads to doubts about under- so-called derivative instruments in line with eqlying values. In other words, a rapid decline in uities. But under the strains of last October, the prices can act to raise the uncertainty premium in individual markets for these instruments were share returns, adding, at least for a while, to fragmented, generating considerable price disdownward price momentum and pressures on parities. These disparities were able to persist for execution capacity. In earlier periods of large extended periods of time—adding to confusion market declines, such as the Panic of 1907, news and doubt—owing to a breakdown of the arbiof the initial drop reached investors more slowly, trage process associated with the withdrawal for many, the next day. As a consequence, price process and execution problems. declines were spread over a longer period of time Other factors added to strains on the markets and some of the trauma caused by a sudden price last October. The lack of coordination of margin break and the corresponding pressures on system collection and payment crimped the liquidity of capacity was thus avoided. some market makers and their ability to maintain On top of these factors, system capacity be- positions. Also, rumors and discussion of excame an influence on investor behavior. As in- change closings and possibly insolvent clearingvestors came to recognize that the capacity of the houses added to confusion in the markets and system to execute trades was faltering, they evidently encouraged some investors to liquidate sought to get out while they could. In other portfolios before the markets shut down, further words, the realization by investors that the sys- adding to strains on the system. In short, the tem cannot simultaneously accommodate all the initial rapidity of the price correction to an overeflforts under way to reduce long positions in valued market, and a faltering execution capacstocks or their derivative instruments prompts ity, sharply raised risk or uncertainty premiums, still others to attempt to get out, too. This which contributed to historic declines in prices. situation is not at all unlike the conditions asso- While much of the attention given to the perciated with a classic bank run once it becomes formance of the equity and derivative markets apparent to depositors that the bank's liquidity last October has been on the strains and weakwill be exhausted. The problem is compounded. nesses displayed, we must nonetheless not lose The confusion and uncertainty about execution sight of the fact that we came through the crisis last October likely contributed to uncertainty remarkably well given what happened. No major premiums in share returns and thus to additional brokerage firms failed, unprecedented margin downward pressures on prices. calls by the futures clearinghouses were met by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 223 their members, and stock prices reached a new investors play in managing our retirement protrading range shortly after the plunge. grams and the assets of nonprofit institutions, though their very sophistication and rapid response accelerated price moves in October. It STRUCTURAL AND REGULATORY REFORMS also is important to realize that the so-called portfolio insurance programs that institutions Turning to recommendations for structural re- have used are strategies and not products. These form, I particularly appreciate the opportunity to strategies frequently involve active use of derivappear after Senator Brady. The Brady task ative instruments, but they would exist, though force observes, as do others, that the weight of probably on a smaller scale, even without the the evidence clearly indicates that the markets availability of such products. Moreover, the for securities and their derivative products are experience of last October demonstrated to these very closely interrelated and can and should be investors that aggressive strategies aimed at ekviewed as one market. They conclude that these ing out a little more yield are inherently much circumstances require a common regulatory ap- more risky than had been thought, especially in proach. those circumstances for which protection is most Recognizing that we are dealing fundamentally sought. Thus, the pressures that they would with a single market system is basic to addressing place on the system in the event of a future the structural and regulatory issues before us. market contraction would be much diminished. We must appreciate that there is a single valua- It is clear from the Brady report and from other tion process affecting stocks, index futures, and studies that the capacity of the infrastructure of options, and that arbitrage across these markets our financial system to absorb the extraordinary in the normal course of events acts to keep the demands placed on it last October was insuffiprices of these various instruments in alignment. cient. We must be aware that demands on the Thus, we must not jump to the conclusion that system could again exceed execution capability movements in futures prices by themselves cause and that remedies may well be needed that movements in the cash market just because they expand capacity or that establish an orderly frequently precede them. We must be careful to adjustment process once capacity limits have avoid confusing symptoms with causes. When been reached. information affecting the value of equities be- Expansion of execution capacity, which rarely comes available, portfolio adjustments naturally comes into play, may imply a misuse of reoccur first in those markets in which the costs of sources. As a consequence, the Brady task force making adjustments are lowest, which commonly recommendation for circuit breakers has some has been in the futures markets. Arbitrage, in- appeal. We now have a better idea of the consecluding index arbitrage, acts to ensure that val- quences of relying on a disorderly process for ues in the cash market and elsewhere reflect the dealing with massive volume and demands on new information. market-maker capital in the context of volatile We must also recognize that some of the price behavior. Relying on the disorderly process factors contributing to the October break cannot of last October discourages buyers from entering realistically be corrected by public policy. In as well as compounds investor uncertainty. The part, the sharpness of the October decline re- Brady report suggests circuit breakers in the flected modern telecommunications and informa- form of price limits and coordinated trading halts tion processing systems. But this technology also as worthy of consideration. In a sense, this could tends to enhance the efficiency of our markets be viewed as a way of slowing things down when and is beneficial to many other aspects of our market conditions become hectic and threaten to welfare and, nevertheless, is here to stay. We get out of control, thereby replicating conditions must learn to adapt to this development, as we of the past. The use of price limits, provided that have to so many others that have advanced our they are known in advance and sufficiently wide society. Similarly, we do not want to lose sight of to permit trading in all but the most extreme the important role that professional institutional circumstances, could prove to be a constructive Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

224 Federal Reserve Bulletin • April 1988 measure for prompting a pause in trading, espe- We have reviewed the matter of federal overcially if there is unusual uncertainty on the part sight again and believe that such a concept of lenders about the financial position of various continues to be appropriate. We appreciate the market makers and brokers and uncertainties on confidence that the Brady task force has implicthe part of such borrowers about access to credit. itly placed in the Federal Reserve and also its They could also provide more time for policymak- reasons for recommending that a single agency ers to respond if the conditions giving rise to the have full intermarket oversight authority. Howtrading halt were deemed to be an emergency. ever, we seriously question this recommenda- On the other hand, large price moves may lead tion. To be effective, an oversight authority must to fears that the limits will be reached and that have considerable expertise in the markets subportfolio adjustments will not then be possible, ject to regulation, something that the CFTC and putting more pressure on the system and assuring SEC have developed over some time. Moreover, that the limits are hit. The recent proposal of the were the Federal Reserve to be given a dominant New York Stock Exchange to place temporary role in securities market regulation, there could price limits on individual stocks could prove be a presumption by many that the federal safety helpful in assessing the viability of price limits. net applicable to depository institutions was be- Ad hoc methods for closing markets should best ing extended to these markets and that the Fedbe avoided, as reliance on such methods is likely eral Reserve stood ready to jump in whenever a to encourage rumors of closings and add to securities firm or clearing corporation was in market confusion. Also, a system that leads to difficulty. Coherence of federal oversight over market closings should be one that is coordinated the market for equity instruments could be among the markets, perhaps internationally; if achieved through merging the relevant portions not, trading likely would shift to those markets of the CFTC with the SEC or by a joint oversight remaining open, potentially pushing them be- authority including the SEC, CFTC, and perhaps yond their capacity constraints. Price limits and the Federal Reserve or the Treasury. other circuit breakers must be viewed as being We continue to view the achievement of coninherently destabilizing, but they may be the sistent margins across the various instruments as least bad of all the solutions. When orders ex- being appropriate and believe that a federal overceed execution capacity, the system will break sight authority would be well positioned to acdown. The only question is whether it is better complish this. The proper level of margin, for it to take the form of a controlled disruption though, is a very complicated issue and must be or leave the solution to a haphazard set of forces. addressed carefully. There are fundamental dif- On the matter of regulatory structure, the ferences in the price behavior of individual Board in 1985 reviewed the appropriate form of stocks, stock indexes, options, and futures that margin regulation and suggested that margins on are likely to call for different levels of margin if stocks and derivative instruments be set by self- our primary objective is to preserve the integrity regulatory organizations (SROs) subject to fed- of these markets while promoting liquidity. We eral oversight. It was thought that SROs were in must recognize that setting margin too high on an the best position to determine the appropriate equity instrument would discourage the use of level of margin and had the incentive to do so to such an instrument and reduce its liquidity, indiprotect the integrity of their markets. It also was rectly affecting the markets for the other instruthought that federal oversight would be appropri- ments as well. ate to assure coordination of margin setting On the related matter of clearing mechanisms, across cash, futures, and options markets, and a we concur with the spirit of the Brady task force direct federal role might be needed in emergency that improvements in the clearing system are situations. The CFTC and SEC were viewed as needed, based on a more unified approach. The playing an important role in federal oversight, evidence for mid-October shows that lack of given their knowledge and expertise in the mar- synchronization of margin collection and paykets that they regulate. The Board expressed its ment across the markets led to cases in which willingness to be a part of such a system. brokers or market makers were in a position of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 225 having to pay out margin in one market before developments and identifying market abuses. being able to collect from another; this situation The information to be collected would include, tended to squeeze liquidity and contributed to besides the trade, the time of the trade and the the overall problem. The need for better coordi- ultimate customer. While recognizing the potennation of margin calls and collection and pay- tial value of such information, my colleagues on ment seems clear if the system is to be better able the Board and I oppose such data collection, to withstand the kinds of strains that were placed except on a voluntary basis. The right to privacy on it last October. Whether a single clearing is important for a free society, and we believe organization servicing all of the exchanges or that the case for collecting such information must tighter coordination of the clearing process be a compelling one, which this one does not among the existing exchanges is required re- seem to be. Also, such an action by the United mains an open question at this point. Another States alone could well reduce the attractiveness approach would be for a new intermarket clear- of our securities markets to foreign investors at a ing corporation to be established to handle the time when we are heavily dependent on foreign accounts of brokers, market makers, and inves- capital for financing our external deficit. tors with intermarket positions. In any event, the In sum, the Brady proposals and those forrelation between margin and clearing suggests a mulated by others represent an important basis role for federal oversight in the intermarket clear- for public discussion. Reactions to these and ing process. other proposals by a wide cross section Finally, the Brady task force proposes that of the public will prove helpful in clarifying detailed trading information be collected on a methods for strengthening our securities regular basis for purposes of monitoring market markets. • Statement by Alan Greenspan, Chairman, Board those of earlier in the decade, are still high in a of Governors of the Federal Reserve System, long-term perspective. Moreover, uncertainties before the Committee on Banking, Finance and persist about key indicators of policy—the mon- Urban Affairs, U.S. House of Representatives, etary aggregates—and their relation to the per- February 23, 1988. formance of the economy. Our approach to monetary policy in 1988 will require a delicate I appreciate this opportunity to appear before balancing of considerations that must take acyou to discuss the conduct of monetary policy count of the difficult multiyear challenge that we and the economic and financial situation. You face in seeking to wind down our external deficits have received the more formal Monetary Policy in a manner that is consistent with the mainte- Report to the Congress of the Board of Gover- nance of sustainable growth in the United States nors detailing the economic and financial situa- and the world economy in 1988 and beyond. tion and reviewing our policy actions in 1987, and Toward this end, the Federal Open Market presenting our approach to monetary policy this Committee (FOMC) two weeks ago set someyear. (See pages 151-64 of the March 1988 BUL- what lower target ranges for 1988, consistent LETIN.) with a moderate pace of monetary expansion this The setting for monetary policy for the year year. The ranges for M2 and M3 are 4 to 8 1988 and beyond is more than normally complex. percent; for debt, we have set a monitoring range While the economy itself is well into the sixth of 7 to 11 percent. The annual ranges are wider year of expansion, the forward momentum of than in the past, recognizing that the linkage that expansion has been brought into question, between money and credit growth and economic and we continue to run sizable external deficits performance has become noticeably looser in with associated dependencies on foreign savings; recent years. at the same time, inflation rates, while below Before discussing our monetary policy plans Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

226 Federal Reserve Bulletin • April 1988 for 1988 in detail, I would like to review with you tion in this industry from about 65 percent at the the developments of the past year. end of 1986 to more than 90 percent at the end of 1987. And other areas of our economy, such as farming, mining, and oil extraction, that had been 1987 IN PERSPECTIVE notably depressed earlier in the 1980s, showed some signs of improvement. The year 1987 was a time of economic transition, The robust growth of the economy—in combiand, like many periods of change, it had its nation with the budgetary actions of the Condifficult moments. Nevertheless, clear progress gress and the President, and a one-time boost was made in achieving a healthier, more bal- from tax reform—brought about a major reducanced economy. For the year as a whole, output tion in the federal budget deficit last year. To be and employment expanded strongly. As mea- sure, the flow of federal red ink was still heavy, sured by the gross national product, production but last December's agreement was at least a first increased nearly 4 percent from fourth quarter step in needed actions for the future. 1986 to fourth quarter 1987, according to the On the negative side, inflation increased in Commerce Department's preliminary estimates. 1987. This development was not altogether sur- Almost 3 million persons were added to payrolls prising, given the bounceback in energy prices over this period. And the civilian unemployment early in the year and the effects on import prices rate dropped to about 53/4 percent—the lowest of the decline in the dollar. Although wage gains level in this decade. have remained subdued, we clearly need sus- We achieved this growth with a better relation- tained effort to bring about a more stable price ship between domestic spending and domestic level. production. Growth of private domestic final As you may recall, the Federal Reserve set purchases has slowed progressively from 73/4 ranges for monetary growth in 1987 that were Vz percent in 1983 as the economy emerged from percentage point lower than in 1986. We also recession to about 1 percent last year. Mean- noted that we would be conducting monetary while, real exports of goods and services rose policy with an eye toward a variety of economic more than 15 percent over the four quarters of indicators, including the strength of the econ- 1987, as our international competitiveness was omy, pressures on prices, and developments in enhanced by the success of business and labor in international markets, as well as money growth increasing productivity and restraining cost pres- relative to the ranges. sures. In addition, the lower level of the dollar on Although the aggregates from very early in the foreign exchange markets, because much of it year tended to run low relative to the ranges, the was not passed through into wage and other costs challenge as we perceived it through much of domestically, also helped our firms to price more 1987 was less to buoy money growth than to competitively in foreign markets and to compete prevent one-time price rises related to developwith imports in the United States. The improve- ments in energy and foreign exchange markets ment in the trade sector accounted for more than from becoming rooted in a renewed inflation a quarter of the overall gain in gross national process. Concerns about potential inflationary product. pressures were clearly manifested in financial One aspect of the improved trade situation was markets as well. During the spring and again in better balance of our economy internally, with late summer, inflation worries pushed up compreviously lagging sectors showing particular modities prices and long-term interest rates, and strength. The manufacturing sector revived in heavy downward pressures on the dollar devel- 1987: industrial production in manufacturing oped in light of growing pessimism about the surged 5VI percent between December 1986 and prospects for significant improvement in U.S. December 1987, and capacity utilization rose to external balances; concerns about the financing its highest level in seven years. For example, of our external deficit in turn apparently added to output of steel rose especially strongly, which pressures on interest rates during these episodes. was the main factor in bringing capacity utiliza- In view of the inflationary potential, the Federal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 227 Reserve increased somewhat restraint on re- last year. M2 and M3 grew 4 percent and 5l/2 serves in both episodes, and in September raised percent respectively over the four quarters of last the discount rate from 5V2 to 6 percent. year, leaving them below and just at the lower The balance of risks shifted after the stock ends of their annual ranges. Ml increased 6 market collapse of October 19. The Federal percent. Reserve immediately modified its approach to Debt growth slowed to the midpoint of its monetary policy in light of the turbulent financial monitoring range. The progress in reducing the market conditions. During the crisis, the System federal budget deficit helped reduce borrowing, temporarily altered its focus somewhat from re- and debt issuance by the private sector dropped serve positions to more direct measures of off as well. Debt growth could scarcely be charmoney market pressures, and took several steps acterized as slow; at 91/2 percent, it continued the to ensure adequate liquidity in the financial sys- pattern of increases relative to GNP. tem. Moreover, we encouraged some decline in short-term interest rates, as a precautionary step in light of the possibility that the contraction in ECONOMIC OUTLOOK AND MONETARY financial wealth and the deterioration in con- POLICY FOR 1988 sumer and business confidence might lead to a significant drop-off in spending. In formulating its monetary policy plans for 1988, These actions helped to restore a degree of the FOMC sought to further a number of comconfidence in financial markets. As this oc- plementary objectives. The Committee contincurred, the Federal Reserve returned some way ued to focus on maintaining the economic expantoward our earlier focus on reserve positions in sion and on progress toward price stability, the day-to-day implementation of policy. But I which was seen as a necessary condition for think it is fair to say that markets still are long-term sustained economic growth. It also exhibiting a certain edginess, and we cannot be recognized that satisfactory performance of the sure yet that normal market functioning has been economy depended on moving over time toward fully restored after the events of October. In better balance in our external accounts. addition, the effects of the stock market events For 1988, the Committee members generally on the economy may not be fully evident. In- were optimistic that policy could be geared to deed, indications of some softening in the econ- meeting these goals. Most members foresee conomy as the year began, against the background of tinued economic growth next year with no signifa more stable dollar in foreign exchange markets, icant pickup in inflation, although at current led us to take a further small easing step a few levels of resource utilization and with rising weeks earlier. prices of imports likely from recent dollar de- In the context of a monetary policy that, for clines, vigilance against signs of a reemergence much of the year, needed to counter inflationary of greater inflationary pressures will continue to pressures, and in light of the very rapid money be needed. The central tendency of the forecasts growth in 1986 and marked variations in velocity of FOMC members and other Reserve Bank in recent years, modest expansion of the mone- presidents is for growth in real GNP of about 2 to tary aggregates in 1987 was viewed as acceptable 2Vz percent from the fourth quarter of 1987 to the and appropriate. As market interest rates rose, fourth quarter of 1988—slower than in 1987, but interest rates on deposits became less competi- likely close to what is a sustainable pace over the tive. This development encouraged a shifting longer haul. The unemployment rate may not away from monetary assets, and growth of all of drop further, but employment gains could again the monetary aggregates slowed sharply. In ad- be substantial and better distributed across indition, some special factors, such as the effects of dustries and geographical regions. Much of the the new tax law, changes in bank funding impetus to growth is expected to come from a sources, and evolving business practices with rapid pace of expansion of net exports of goods respect to cash management and compensating and services, which would promote the process balances, may also have damped money growth of adjustment to better balance internally and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

228 Federal Reserve Bulletin • April 1988 externally. This should involve slow growth in pears to have become looser in the 1980s. As you domestic demand, probably encompassing know, most historical experience has suggested a damped gains in consumption and a much- fairly close relationship between spending and reduced pace of inventory building from the pace the quantity of money and, over a longer run, near year-end. between money and prices. These relationships Recent patterns of wage negotiations and set- established the basis for adopting specific targets tlements do not seem to indicate any imminent for growth of money to attain the ultimate goals break from the restrained behavior of the mid- of macroeconomic policy. 1980s. Although capacity utilization has risen in But these relationships appear to have changed our manufacturing sector, bottlenecks are not as considerably in the 1980s, partly reflecting the yet a problem and are not expected to become effects of deregulation, innovation, and changing one if growth follows the subdued path of the technology. The spectrum of stores of value is Committee's outlook for real GNP. Even so, we extremely broad, extending from real capital, cannot be complacent about the potential for like plant and equipment and houses, on the one higher inflation; by the time an acceleration of hand, through stocks, bonds, and time deposits, costs and price pressure were to become evident, to perfectly liquid currency and checking acthe inflation process would already be well en- counts, on the other hand. Both households and trenched. businesses are continually adjusting their balance With its objectives in mind, as I noted earlier, sheets and the allocation of their income flows the FOMC established ranges for M2 and M3 of between accumulation of financial assets of 4 percent to 8 percent over the four quarters of different sorts and acquisition of goods and ser- 1988, with the debt of domestic nonfinancial vices. sectors expected to increase between 7 and 11 Transactions balances are on the edge of the percent. The growth ranges for money represent exchange of financial claims for goods and sera decrease from those for 1987—1 percentage vices. Regulation and established practices prepoint in terms of the midpoints. This reduction is viously acted to enforce a marked separation viewed as another step in the longer-term pro- between transactions money balances and all cess of reducing targeted money growth to rates other balances and supported a fairly close relamore in line with reasonable price stability. tionship between spending and the quantity of Moreover, the lower end of the ranges allows for transactions money—as measured by Ml—which the possibility of little pickup in money growth, allowed it to serve as a monetary policy guide. especially M2, from 1987 under certain circum- Businesses and households maintained transacstances. If, for example, inflation expectations tions balances in demand deposits in fairly close were to strengthen, market interest rates would relation to their spending requirements and relied tend to rise, and relatively slow money growth on other forms of deposits to serve as longer-run could again be an appropriate policy stance. stores of value. The FOMC does not anticipate that circum- But now, deregulation and improved informastances will call for such slow money growth. In tion and communications technologies have fact, it expects some acceleration of monetary blurred distinctions between transactions balexpansion in 1988, perhaps to around the middle ances and other assets. Businesses can move of the ranges. But changing circumstances could unneeded transactions balances at each day's easily require a considerably different outcome. close into Eurodollars, repurchase agreements, In recognition of the unusual degree of uncer- commercial paper, or certificates of deposit tainty in the economic outlook and the large (CDs), at little cost, with the choice among these movements of money relative to income in recent instruments often depending on yield differenyears, we have widened the specified ranges for tials of only a few basis points. In addition, firms monetary growth from the more traditional 3 now can maintain balances in hybrid instruments percentage points to 4 points. like money market deposit accounts (MMDAs) This change was advisable partly because the and money funds and retrieve them nearly as linkage of money to spending and income ap- easily as they can from a regular checking ac- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 229 count. Remaining business demand deposits selves imply changes in spending tendencies. serve importantly as balances that compensate Such shifts have been responsive to movements banks for services, and these arrangements, too, in the rates on alternative investments relative to are evolving over time. For households, nego- returns on M2 balances. This sensitivity, though tiable order of withdrawal (NOW) accounts— considerably less than for Ml, also seems to have interest-earning, fully checkable deposits—are increased since the late 1970s, perhaps as imimportant savings as well as transactions vehi- proved information and communications techcles, and have contributed greatly to the decreas- nologies have facilitated transfers of funds being usefulness of Ml as a monetary target. tween M2 assets and those outside this This process of innovation and deregulation aggregate. Over the longer run, once rates on has affected the behavior of the monetary aggre- instruments in M2 adjust to changes in market gates in several ways, only some of which we rates, this aggregate tends to grow in line with fully understand. To some extent, it seems sim- income, as it has on average over the postwar ply to have introduced more "noise" in the period. money-spending relationship. In addition, M3 adds to M2 a number of the managed though, it appears that one important conse- liabilities that banks and thrift institutions use to quence has been to increase the sensitivity of the supplement their retail deposits to fund credit demand for monetary assets to changes in market expansion. Unlike Ml and M2, it is highly reinterest rates—at least over the short run. While sponsive to the decisions of institutions as to how deregulation has allowed institutions to vary the fast to expand their balance sheets and what rates on deposits, in practice returns on many particular sources of funds to rely on. Small categories of deposits are adjusted sluggishly in changes in interest rate relationships can have response to changes in market rates, giving rise very substantial impacts on the funding decisions to relatively large swings in incentives to hold of these institutions and consequently on M3, these instruments. without major implications for income and NOW accounts may be the most prominent prices. example of this. Because these accounts are M3, then, is determined largely by the deciclose substitutes for other liquid instruments as a sions of depository institutions on how many store for savings, holders of NOW accounts are liabilities and of what type they wish to supply to highly sensitive to changes in interest rates on the markets. The managed liabilities in M3 are these alternative investments. They place a very close substitutes for other money market larger volume of funds into NOW accounts when instruments in the public's portfolio. Ml and M2, rates on other deposits at banks and thrift insti- by contrast, can be thought of as depending more tutions are relatively low and deposit smaller directly on the public's desire to hold the assets amounts or actually draw down checking ac- included in these aggregates, given the returns on count balances when investment opportunities various alternative investments as well as levels are more attractive elsewhere. of wealth and income. Banks and thrift institu- Widespread compensating-balance arrange- tions, of course, do vary the offering rates on ments for businesses imply a strong interest their M2-type deposits to affect the quantity of responsiveness of demand deposits, as well. these deposits that they receive. But these ad- Changes in market interest rates alter the earn- justments tend to lag market rates, and while the ings value of these deposits to banks, with result- M2-holding public is sensitive to alternative ing adjustments to the balances required to com- yields, it is not nearly so sensitive as the money pensate the bank for a given package of services. market investors holding managed liabilities. In M2 is a broader collection of the public's liquid these circumstances, the connection between Ml assets, and as a consequence internalizes some and M2 and the economy rests importantly on of the shifts that have plagued Ml. But M2 is still the effect of interest rates on the demand for somewhat limited in its coverage of financial these aggregates. For example, a more expansive wealth held in liquid forms, and shifts between monetary policy, increasing reserve availability M2 and other financial assets may not by them- or lowering the discount rate, boosts demand for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

230 Federal Reserve Bulletin • April 1988 these aggregates as interest rates decline, and other indicators of the impact of monetary polwith a lag stimulates economic activity. icy. Given uncertainties about how financial market pressures in fact may need to vary in response to changing conditions in the economy, it THE CHALLENGES AHEAD is difficult to decide in advance on the appropriate growth of an aggregate that is sensitive to We face formidable challenges over 1988 and movements in interest rates. Such growth could beyond in meeting national economic goals of range over a fairly wide spectrum and still be sustaining growth and progress toward price staconsistent with satisfactory performance of the bility. Some of these challenges relate to the economy. In these circumstances, the Commit- short-run outlook for the economy, as the possitee decided that a modest widening of the ranges ble effects of the stock market decline and the for M2 and M3 would better encompass appro- buildup of inventories late last year work through priate monetary growth, while still providing a in 1988. guide to policy. But our more fundamental task remains man- This analysis also underlies our decision again aging the process of restoring internal and externot to establish a target range for Ml. We have nal balance that is now under way. This is a monitored the behavior of Ml and have con- challenge that cannot be negotiated by the Fedducted careful analyses of its properties. While eral Reserve alone. It will require complemensome of the erratic behavior of Ml remains tary and consistent actions by our colleagues in unexplained, we now believe that most of its the Congress and the administration, as well as unusual movements relative to income in recent by our major trading partners. years are attributable to a heightened and now For the United States, the most direct and quite large interest elasticity. beneficial approach would be to address the In view of this behavior, our calculations sug- problem at its major source—the federal budget gest that something like a 7-percentage-point deficit. Reducing the deficit further would give us range would be needed for Ml to encompass the the opportunity to add to domestic saving and same range of uncertainties as is captured by our reduce dependence on foreign capital, while still 4-percentage-point range for M2. Such a wide encouraging much-needed investment spending. range would be of little use in the conduct of Because the United States is now operating at monetary policy or in communicating the stance relatively high rates of resource utilization, doof monetary policy to the public. mestic demand must be restrained if our interna- One should not conclude from this that the tional sector is to expand without more inflation. Federal Reserve is giving up on monetary target- In the absence of fiscal restraint, greater pressure ing. We are not. The linkages between money on would be felt in financial markets, with negative the one hand and prices and spending on the consequences for investment and other private other may have loosened, but that is mainly a spending. problem over the short run. The chain still exists. While recognizing the need to supply the li- We are continuing to study these relationships quidity required to keep our economy expanding, carefully; at some point, the shorter-run link monetary policy cannot lose sight of the need to could well become tighter again. In any event, keep inflation pressures under control. We caneconomic theory as well as historical evidence not permit the price level adjustments associated are quite persuasive that, over the long run, with restoring external balance to feed through money, income, and prices tend to move to- into a renewed inflation process. Escalating gether. prices and costs would reverse the hard-won The FOMC expects to achieve its aggregate gains in our international competitive position, ranges for 1988. We will, however, need to leading inevitably to more difficult and wrenching continue to interpret the incoming information on adjustments down the road. Progress toward these measures in light of other data on the price stability is the foundation on which the performance of the economy and prices, and longest peacetime expansion in our nation's his- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 231 tory has been built, and continued efforts along markets for exports from the United States and this line will be the framework for future eco- elsewhere. nomic advances. The buildup of imbalances occurred over a Our gains in international competitiveness period of years, and has involved major adjusthave reflected a number of factors. But we ments to the structure of economies here and should not underestimate the effects of the efforts abroad. These imbalances will not be reversed of business and labor over recent years to en- easily—but they must be addressed. We must hance productivity and restrain costs. And gov- resist the lure of "short-cuts," such as protecernment has made a contribution through dereg- tionist measures that would only entrench ineffiulation and through the absence of major ciencies and reduce living standards at home as initiatives that would involve higher business well as around the world. We can make this costs. difficult transition, and monetary policy has a key Our adjustment process by definition has a role to play. But if we are to have a chance of counterpart for our trading partners. They must doing so without dislocations and detours in our promote expansion in their demands and reduce national economic advance, we will have to work trade barriers to assure active and receptive together to utilize all the tools at our command. Chairman Greenspan presented identical testimony before the Senate Committee on Banking, Housing, and Urban Affairs, February 24, 1988. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

232 Announcements MEETING OF investments in up to 40 percent of the shares of CONSUMER ADVISORY COUNCIL any private sector company in a heavily indebted developing country. The amendment also sub- The Federal Reserve Board announced that its stantially lengthens the permissible holding pe- Consumer Advisory Council met on March 17 riod for investments made through debt-forand 18. equity swaps. The Consumer Advisory Council was estab- The key elements of the amendment are the lished by the Board in 1976, at the direction of following: the Congress, to represent the interests of the financial industry and consumers. The Council • A U.S. banking organization may invest in advises and consults with the Board on the up to 40 percent of the shares of a private sector exercise of the Board's functions under the Con- company through a debt-for-equity swap in a sumer Credit Protection Act and on other con- heavily indebted country. sumer-related matters of interest to the Board. • The U.S. banking organization that makes an investment in a private sector company under the revised regulation will also be permitted to AMENDMENT TO REGULATION K provide loans or other financing in amounts up to 50 percent of the total loans and extensions of The Federal Reserve Board announced on Feb- credit to the affiliated company. ruary 18, 1988, that it had further liberalized the • The U.S. banking organization may hold the provisions of Regulation K to permit investments investments made through debt-for-equity swaps abroad by U.S. banking organizations through for two years beyond the end of the period during debt-for-equity swaps in private sector nonfinan- which full repatriation of the investment is recial companies in heavily indebted developing stricted by the debtor country, up to a maximum countries. The amendment was effective Febru- of 15 years. ary 24, 1988. • Investments may be made under revised This action is a follow-up step to the Board's general consent procedures, which require no revision of Regulation K in August 1987 to permit prior notice to the Board unless the size of the banking organizations, through debt-for-equity investment exceeds the greater of $15 million or swaps, to own up to 100 percent of nonfinancial 1 percent of the bank holding company's equity companies that are acquired from the govern- capital. ment of a heavily indebted developing country. As a prudential measure, the amendment pro- The Board's regulation had already provided vides that if a bank holding company holds more banking organizations with considerable flexi- than 25 percent of the voting shares of a private bility to do the following: (1) reduce exposure by sector nonfinancial company, there must be anselling debt to other investors or (2) take advan- other larger shareholder of the company unaffitage of debt-for-equity swap programs by ex- liated with the bank holding company. In addichanging debt obligations for controlling equity tion, the investment must be held through the interests in companies engaged in financial activ- bank holding company unless the Board specifiities or for portfolio investments in up to 20 cally permits the investment to be held through a percent of the shares of nonfinancial companies. bank or bank subsidiary. The Board's new amendment provides bank These measures will add to the menu of opholding companies with broad flexibility to make tions available to banking organizations for man- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

233 aging exposure to heavily indebted developing Kansas countries. Overland Park Galleria Bank Michigan SYSTEM MEMBERSHIP: Manistee First of America ADMISSION OF STATE BANKS Bank-Manistee Pennsylvania The following banks were admitted to member- Wayne United Valley Bank ship in the Federal Reserve System during the period February 1 through February 29, 1988: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

234 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON DECEMBER 15-16,1987 weak. Retail sales edged up in November after two months of substantial declines. Spending on 1. Domestic Policy Directive furniture and appliances fell sharply in September and October and moved lower again in No- The data on the economy reviewed at this meet- vember. Outlays for apparel recovered a bit in ing largely reflected the impact of developments November, but spending on general merchandise that were under way before the stock market registered another decline. collapse in mid-October. The ultimate effects of Housing starts rebounded in November, but the decline in stock prices and associated devel- their average level in October and November opments in financial markets remained uncertain. remained somewhat below the averages in the Available data suggested that growth in output second and third quarters. The improvement in was moderating from a brisk pace in the third November reflected a sharp rise in the multiquarter. Spending indicators pointed to a consid- family category, which had dropped noticeably erable slowing in the expansion of domestic in October. Single-family starts edged up, supprivate final demands in the current quarter. ported by lower interest rates, but remained Prices and wages continued to increase at about below their third-quarter average. The number of the same pace as in earlier months of the year. permits issued was about unchanged in Novem- Industrial production rose 0.4 percent in No- ber. vember, following a strong rise in the previous The expansion in business fixed investment month. In November, gains were widespread appeared to have decelerated markedly from the with the exception of the motor vehicles indus- exceptional pace of the third quarter. Outlays for try. Capacity utilization in mining, manufactur- capital equipment were damped by the drop in ing, and utilities rose slightly further in Novem- auto sales and a sharp decline in purchases of ber, and the overall rate in manufacturing was at heavy trucks. Outside of motor vehicles, equipits highest level since August 1984. ment demand remained strong early in the cur- Total nonfarm payroll employment continued rent quarter. Nominal shipments of nondefense to rise strongly over October and November. capital goods, although down somewhat in Octo- The manufacturing sector again recorded rela- ber, remained above the third-quarter average. tively large gains, with hiring increases wide- In addition, new orders moved up further, sugspread across durable and nondurable goods gesting that shipments were likely to retain some industries. At the same time, job growth in momentum in the near term. Spending for nonservice industries continued at a brisk pace. residential structures softened in recent months; Aggregate hours worked by production and non- petroleum drilling appeared to have leveled off, supervisory workers remained on a strong up- and nonresidential construction put-in-place detrend. The civilian unemployment rate fell back clined somewhat in September and October. to 5.9 percent in November. Inventory investment was strong in October. Growth in consumer spending appeared to Nonetheless, factory stocks remained low relahave weakened thus far in the fourth quarter, tive to sales by historical standards. In the auto mainly because of a drop in purchases of new sector, production exceeded sales in both Octocars after incentive programs ended in Septem- ber and November, and dealer stocks again rose ber, although sales of other items also were to relatively high levels. At other retail trade Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

235 establishments, inventory accumulation slowed in the economic outlook might continue to call in October. for a special degree of flexibility in open market The nominal U.S. merchandise trade deficit operations. Taking account of conditions in fiappeared to have deteriorated substantially in nancial markets, the members decided that October from the average rate in the third quar- somewhat lesser reserve restraint would, or ter, reflecting in part large seasonal swings in slightly greater reserve restraint might, be acboth exports and imports. Exports were up ceptable depending on the strength of the busislightly in October; about half of the increase was ness expansion, indications of inflationary presaccounted for by a strong seasonal rise in agri- sures, developments in foreign exchange cultural products. The rise in nonagricultural markets, as well as the behavior of the monetary exports was concentrated in shipments of a va- aggregates. The intermeeting range for the fedriety of products to Canada while exports of eral funds rate was reduced by 1 percentage point commercial aircraft dropped. Imports rose con- to 4 to 8 percent. siderably in October. Most of the increase was in During the interval since the November meetnon-oil products, particularly machinery imports ing, reserves continued to be supplied on a more and imports of passenger cars from Japan, Can- flexible basis than usual to help maintain relaada, and Korea. tively steady conditions in the money market at a Economic growth in the major foreign indus- time of unusual sensitivity and uncertainty in trial countries increased markedly in the third financial markets generally. Adjustment plus seaquarter. Real GNP rose substantially in Japan sonal borrowing tended to be relatively low and mainly because of a large increase in domestic averaged about $225 million during the two maindemand, although net exports made a small pos- tenance periods ending December 2. As evidence itive contribution to growth; expansion in resi- of a reduced willingness to borrow accumulated, dential investment was particularly strong. Ger- such borrowing behavior was accommodated man GNP, which had declined over the first half through provision of nonborrowed reserves in of the year, also increased sharply largely in order to keep money market conditions from response to domestic demand. Industrial produc- firming. Borrowing declined somewhat further so tion data for October showed some further ex- far in the latest maintenance period. After expansion of activity in Japan and Germany. Avail- panding at a double-digit pace in October, total able data suggested that GDP growth in the third and nonborrowed reserves contracted in Novemquarter was strong in France, the United King- ber, reflecting a drop in required reserves assodom, and Canada, as well. ciated in large measure with the reversal of the The rise in most broad measures of prices and postcrash bulge in transactions accounts and a wages in recent months generally was close to lower average level of demands for excess rethat experienced earlier in the year. Retail energy serves. prices dropped in October, and crude oil prices Federal funds traded mainly in the 63A to 6% edged down in recent weeks. However, apart percent range over the intermeeting period, close from energy, increases in consumer prices to the average level around the time of the picked up recently, including higher prices for November meeting. Most other short-term rates food, new cars, apparel, and rents. At the pro- rose somewhat on balance. The increases apparducer level, prices of finished goods turned down ently reflected some ebbing of preferences for in October, but prices for intermediate and crude liquidity as financial markets calmed further. In materials remained on a strong uptrend. addition, expectations of further ease in mone- At its meeting on November 3, the Committee tary policy tended to diminish as incoming data adopted a directive that called for maintaining suggested continued, albeit moderate, expansion the degree of pressure on reserve positions that in the economy and as the dollar fell in foreign had been sought around the time of that meeting. exchange markets. To some extent rates on very The Committee recognized that the volatile con- short-term instruments increased because of poditions in financial markets, including potential sitioning in advance of anticipated pressures in shifts in demands for liquidity, and uncertainties money markets around the year-end. Yields on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

236 Federal Reserve Bulletin • April 1988 long-term Treasury securities were up about 20 the 5l/i to 8V2 percent annual ranges established basis points after early November, while corpo- by the Committee. Ml growth also slowed rate bond yields rose half that much. In contrast, sharply this year. The reduced growth of these municipal bond yields and mortgage rates fell aggregates and a turnaround of their velocities over the intermeeting period. Stock prices de- appeared to be attributable primarily to the reclined slightly further on balance. In general, bound in interest rates and opportunity costs in while financial markets appeared to be function- 1987 after steep declines in 1985 and 1986. ing more normally, they remained unsettled with The staff projection continued to point to reloccasional episodes of unusually wide price atively sluggish growth in economic activity durswings and of flights to liquidity and quality ing the first part of 1988 and to some pickup later echoing the experience after mid-October. in the year. The contour of the projection was Since the November meeting, the foreign ex- dominated by the anticipated effects of the dechange value of the dollar declined about 5 cline in stock prices and the accompanying depercent on a weighted-average basis in terms of velopments in financial markets, although these the other G-10 currencies. The dollar came under effects now were projected to be more muted pressure early in the period, partly because of than was expected in early November. In the market disappointment over U.S. eflforts to re- context of recent decisions to reduce the federal duce the budget deficit. In early December con- budget deficit, fiscal policy would exert a modcerted reductions in official interest rates by erately restraining impact on aggregate demand. Germany and several other European countries As in the previous projection, consumer spendtemporarily boosted the dollar; over the entire ing was projected to slow in coming quarters, but intermeeting period short-term interest rates de- to strengthen later in 1988 as most of the adjustclined about ¥z percentage point, on average, in ment to the lower level of stock market wealth major foreign industrial countries, while long- was completed. Growth in spending for plant and term rates were down slightly on balance. How- equipment was likely to slow in response to the ever, the dollar's decline resumed, especially sluggish pace of domestic sales—offset only in after the very disappointing U.S. trade figures for part by further growth in export sales—and the October were released on December 10. resulting diminished requirements for additional The monetary aggregates weakened substan- capacity. The decline in mortgage interest rates tially in November. While some of the weakness was expected to stimulate a modest improvement reflected a runoff of the bulge in demand deposits in residential construction. The external sector that followed the stock market plunge in Octo- would provide a substantial positive contribution ber, demand deposits dropped below early Octo- to activity over the entire projection horizon. ber levels. Other checkable deposits also de- Prices were likely to rise at a moderate rate in creased. With the nontransactions portion of M2 1988. Energy prices were expected to be flat, but expanding only sluggishly, the level of M2 was nonpetroleum import prices were projected to about unchanged in November. Only small time continue to place upward pressure on inflation deposits and money fund shares showed any and nominal gains in compensation were anticistrength, as their yields remained attractive rel- pated to increase. However, continuing eflforts to ative to rates on market instruments and liquid improve competitiveness were expected to damp deposits. To supplement weak growth in core real wages and labor costs over the projection deposits, banks and thrift institutions issued horizon. managed liabilities at a robust pace in November, In the Committee's discussion of the economic and flows into institution-only money funds situation and outlook, members referred to conmoved up sharply, as returns on these funds flicting signs with regard to the prospective lagged the downward movement of market rates strength of the business expansion. On the one in late October. Even so, M3 expanded at an hand, employment and production had been well annual rate of only 43A percent. For the year maintained in recent months and financial marthrough November, M2 and M3 grew respec- kets had calmed since late October. To date, the tively at rates well below and at the lower ends of sharp decline in stock prices appeared to have Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 237 had little impact on domestic business activity, tic markets against imported goods had imperhaps because it had merely reversed a runup proved. The members generally agreed that the in earlier months of the year and because it was foreign trade sector was positioned to make an associated with a reduction in market interest appreciable contribution to sustained expansion rates. Moreover, recent declines in the foreign in domestic economic activity at a time when exchange value of the dollar would help to sus- growth in overall domestic demands might be tain the improvement in net exports. In these weakening. However, the likely extent of actual circumstances, business investment also might gains from trade would depend to some degree remain fairly strong. Members cited favorable on the strength of the economies of foreign reports from businesses in many parts of the industrial nations. country that tended to support an optimistic In further discussion members observed that, outlook for overall business activity, although given the higher rate of utilization of domestic some areas or industries had recovered only capital and labor resources, substantial improveslightly thus far from relatively depressed condi- ment in the nation's trade balance implied the tions. On the negative side, a number of mem- need for relatively restrained growth in domestic bers observed that the risks to the economy were demands over time as more production was in the direction of slower growth than foreseen in diverted to export markets. The adjustment in the staff forecast. Consumer spending in partic- trade, which appeared inevitable in light of the ular had been relatively weak, as evidenced by unsustainable size of the current trade deficit and recent trends and the apparent need for wide- the rapid growth in the nation's external indebtspread discounting to buttress sales. Moreover, edness, appeared feasible over time without growth in disposable incomes was believed likely causing major disruptions in domestic business to remain relatively sluggish, and together with activity. However, such an adjustment would an already low saving rate and rising consumer require the implementation of appropriate fiscal, debt burdens would tend to retard expansion in monetary, and trade policies by the United retail sales. It also was noted that the full effects States and its major trading partners. of the decline in stock prices might not yet have Turning to the outlook for inflation, some been felt. In addition, money growth had been members commented that inflationary expectaquite weak, and at some point the slow growth tions seemed to have abated to some extent since might be reflected in incomes and spending. the collapse in stock prices during October. The Several members commented that current pro- depreciation of the dollar would continue to exert jections were subject to a great deal of uncer- upward pressures on domestic prices, but intainty, especially in light of still unusually sensi- creases in wages and other costs did not appear tive conditions in domestic financial markets and to be worsening, and in the view of some memthe uncertain prospects for the dollar and the bers inflation might be in the process of easing. nation's foreign trade balance. Concern was expressed by a number of mem- The members gave considerable attention dur- bers, however, that wage and price pressures ing the discussion to the outlook for foreign trade might well intensify if the economy were to and its implications for domestic economic activ- expand at an appreciably faster pace than many ity. Recent data on nominal net exports were members currently expected or if the dollar were disappointing, but real net exports had shown to decline substantially in the foreign exchange considerable improvement so far this year. Gains markets. in exports were especially encouraging. The data At its meeting in July the Committee reviewed indicating an improved real trade balance were the basic policy objectives that it had set in supported by members' observations from February for growth of the monetary and debt around the country. Many business contacts aggregates in 1987 and established tentative obwere reporting greatly enhanced export opportu- jectives for expansion of those aggregates in nities as a result of the dollar's depreciation, 1988. For the period from the fourth quarter of although there were exceptions, and they also 1986 to the fourth quarter of 1987, the Committee indicated that their ability to compete in domes- reaffirmed the ranges established in February Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

238 Federal Reserve Bulletin • April 1988 involving growth of 51/2 to 8V2 percent for both subject to considerable volatility around the M2 and M3. Given developments through mid- year-end. In this situation most of the members year, the Committee agreed in July that growth in felt that open market operations should continue these aggregates around the lower ends of their to be conducted with a special degree of flexiranges might be appropriate, depending on the bility and should give considerable weight to circumstances. The monitoring range for expan- conditions in the money market, at least over the sion in total domestic nonfinancial debt also was nearer term, to accommodate shifting demands left unchanged at 8 to 11 percent for 1987. For for liquidity and reserves and to temper poten- 1988 the Committee agreed on tentative reduc- tially excessive fluctuations in short-term martions of V2 percentage point to growth ranges of kets. However, most of the members also fa- 5 to 8 percent for both M2 and M3. The Commit- vored looking for opportunities to move toward tee also reduced the associated range for growth more normal procedures for implementing policy in total domestic nonfinancial debt by V2 percent- if financial markets continued to stabilize. age point to IV2 to IOI/2 percent for 1988. With In the majority view the risks associated with respect to Ml, the Committee decided at the July either firming or easing under current circummeeting not to set a specific target for the remain- stances outweighed the potential benefits. It was der of 1987 or to establish a tentative range for noted, for example, that any significant firming 1988. It was understood that all the ranges for would have unsettling effects on domestic finan- 1988 were provisional and that they would be cial markets and the associated rise in interest reviewed in early 1988 in the light of intervening rates would pose considerable risks to the ecodevelopments. The issues involved with estab- nomic expansion. At the same time, many memlishing a target for Ml would be carefully reap- bers felt that any appreciable easing would not be praised at the same time. desirable currently, especially in light of the At this meeting the Committee held a prelimi- dollar's weakness and the risks to domestic finary discussion of issues relating to its target nancial markets and the economy that a sharp ranges for monetary growth in 1988. The behav- further decline in the dollar would incur. Other ioral characteristics of the aggregates in recent members weighed such risks differently, includyears were reviewed. Considerable attention was ing one member who concluded that monetary devoted to the question of whether or not to policy should move toward somewhat easier establish a target for Ml or some possible alter- reserve conditions in light of the potential for native such as MIA or the monetary base. While appreciably slower growth in the economy, given no decisions were made at this meeting, the in this view the prospects for substantially remembers were not currently inclined to reestab- duced growth in domestic demands and the poslish a range for Ml, given the continued large sibility that improvement in the nation's foreign interest rate sensitivity of the demand for this trade balance would not provide a sufficient aggregate and the associated wide swings in its offset. In light of the differences among the velocity. The Committee will complete its review members with regard to policy for the short run, of these issues and decide on its target ranges for including the Committee's operating procedures 1988 at the February meeting. in the near term, and the uncertainties surround- In the Committee's discussion of policy for the ing financial markets and the economy, it was next intermeeting period, most of the members understood that the members might need to agreed that on balance economic and financial consult on policy implementation before the next developments called for unchanged conditions of scheduled meeting on February 9-10, 1988. reserve availability. Such a policy was viewed as Several members expressed some concern consistent with continuing growth in the econ- about the generally sluggish growth in the monomy at a moderate pace. The members recog- etary aggregates since the early months of the nized that financial markets remained unsettled year, including indications of little or no growth despite the emergence of a much calmer atmo- in M2 in recent weeks and much slower expansphere since the latter part of October, and they sion in M3 than had been expected earlier. The believed that money market conditions might be members recognized that the relationship be- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 239 tween monetary growth and economic perfor- operating procedures. Some endorsed the mance had been very imprecise in recent years. prompt implementation of those procedures. Nonetheless, money growth and the economy However, a majority felt that a gradual shift were not unrelated and the reemergence of a stron- toward greater emphasis on reserve objectives ger linkage could not be ruled out. In these circum- should be implemented during the intermeeting stances, a continuation of sluggish growth of the period. Such an approach would continue to give monetary aggregates needed to be monitored some attention to moderating fluctuations in closely as a potential danger signal with regard to money market conditions but would tolerate the sustainability of the economic expansion. somewhat greater fluctuations than had occurred The members also focused on the question of in recent weeks. A few members disagreed and possible adjustments in policy implementation indicated a preference for retaining the recent during the intermeeting period. A majority felt operating procedures at least for now. These that there should be no presumptions about the members emphasized that a normal or predictlikely direction of such adjustments, if any. In able relationship between the provision of retheir view the risks that economic and financial serves and money market conditions had not developments might differ significantly from cur- been reestablished and was not likely to rerent expectations were fairly evenly balanced in emerge in the near term, at least in the period both directions. A number of other members through the year-end when interest rates and believed that the Committee should remain espe- reserves were expected to be subject to considcially alert to developments that might call for erable variations associated with the bank statesomewhat easier reserve conditions. In particu- ment date. The procedures could be reviewed in lar, these members felt that incoming information early January and a decision delayed until then. regarding the performance of the economy At the conclusion of the Committee's discusshould be evaluated with particular care for sion, all but two of the members indicated their evidence of a possible slowing in the expansion. support of a directive that called for maintaining The members recognized that the performance of the existing degree of pressure on reserve posithe dollar in foreign exchange markets might tions and that would phase open market operahave a key bearing on policy implementation in tions into a more normal approach to policy this period. No member wanted to tie monetary implementation keyed increasingly to a desired policy exclusively to the dollar, but some degree of reserve pressure while giving less emstrongly emphasized that further substantial de- phasis than recently to money market conditions. preciation in the dollar could have highly adverse The members recognized that the conduct of repercussions on domestic financial markets and open market operations might continue to rethe economy. quire a special degree of flexibility, given still During this meeting the members reviewed the quite sensitive conditions in financial markets Committee's operating procedures. These had and the uncertainties in the business outlook. been directed toward greater emphasis on stabi- Taking account of conditions in financial marlizing money market conditions since the stock kets, the members indicated that somewhat less market collapse in October and had given rela- or somewhat more reserve restraint would be tively less attention to the implementation of a acceptable, depending on the strength of the specified degree of pressure on reserve positions. business expansion, indications of inflation, the The members generally agreed that the Commit- performance of the dollar in foreign exchange tee should return to its earlier operating proce- markets, with consideration also taken of the dures. The latter were seen to possess a number behavior of the monetary aggregates. If current of advantages, including greater scope for market reserve conditions were maintained, the memforces to be reflected in money market condi- bers expected growth in M2 and M3 to pick up tions. Given the still sensitive conditions in finan- from the pace in recent months to annual rates of cial markets, however, the members expressed a about 5 percent and 6 percent respectively over range of views with regard to the appropriate the four-month period from November to March. timing of a return to the Committee's former Growth of Ml was expected to remain relatively Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

240 Federal Reserve Bulletin • April 1988 limited over the same period; because of the For 1987 through November, expansion of M2 fell substantial uncertainty that continued to sur- somewhat further below the lower end of the range established by the Committee for the year, while round the outlook for Ml, the Committee contingrowth of M3 remained around the lower end of its ued its practice of not specifying a numerical range. Growth of Ml was close to that of nominal GNP expectation for its growth. The members agreed for the year to date and expansion in total domestic that the intermeeting range for the federal funds nonfinancial debt remained well within the Commitrate, which provides a mechanism for initiating tee's monitoring range for the year. consultation of the Committee when its bound- The Federal Open Market Committee seeks monetary and financial conditions that will foster reasonable aries are persistently exceeded, should be left price stability over time, promote growth in^output on unchanged at 4 to 8 percent. a sustainable basis, and contribute to an improved At the conclusion of the meeting the following pattern of international transactions. In furtherance of domestic policy directive was issued to the Fed- these objectives, the Committee agreed at its meeting in July to reaffirm the ranges established in February eral Reserve Bank of New York: for growth of 5l/i to 8V2 percent for both M2 and M3 measured from the fourth quarter of 1986 to the fourth The economic information reviewed at this meeting quarter of 1987. The Committee agreed that growth in largely reflected the influence of developments that these aggregates around the lower ends of their ranges were under way before the financial disturbances of might be appropriate in light of developments with mid-October. The extent to which those disturbances respect to velocity and signs of the potential for some would affect the economy remained uncertain. Infor- strengthening in underlying inflationary pressures, mation available for the current quarter suggested that provided that economic activity was expanding at an the expansion in economic activity was moderating acceptable pace. The monitoring range for growth in from a brisk pace in the third quarter. Total nonfarm total domestic nonfinancial debt set in February for the payroll employment rose strongly further over Octo- year was left unchanged at 8 to 11 percent. ber and November, with the manufacturing sector For 1988, the Committee agreed in July on tentative recording relatively large gains. The civilian unem- ranges of monetary growth, measured from the fourth ployment rate, at 5.9 percent in November, remained quarter of 1987 to the fourth quarter of 1988, of 5 to 8 close to its level since mid-year. Industrial production percent for both M2 and M3. The Committee provialso increased considerably further over October and sionally set the associated range for growth in total November, following sizable advances since late domestic nonfinancial debt at IV2 to IOV2 percent. spring. Retail sales edged up in November after two With respect to Ml, the Committee recognized that, months of substantial declines. Recent indicators of based on experience, the behavior of that aggregate business capital spending suggested modest further must be judged in the light of other evidence relating to growth after a surge in the third quarter. Housing economic activity and prices; fluctuations in Ml have starts rose somewhat in November, after slowing in become much more sensitive in recent years to October, but were little changed from the average pace changes in interest rates, among other factors. Bein the second and third quarters. The nominal U.S. cause of this sensitivity, which had been reflected in a merchandise trade deficit in October appeared to have sharp slowing of the decline in Ml velocity over the deteriorated substantially from the average rate in the first half of the year, the Committee again decided at third quarter. The rise in broad measures of prices and the July meeting not to establish a specific target for wages in recent months generally has been close to growth in Ml over the remainder of 1987 and no that experienced earlier in the year. tentative range was set for 1988. The appropriateness Financial markets remained somewhat unsettled. of changes in Ml this year would continue to be Stock and bond prices continued to fluctuate over a evaluated in the light of the behavior of its velocity, relatively wide range during the period since the developments in the economy and financial markets, previous Committee meeting on November 3. On and the nature of emerging price pressures. The Combalance, share prices fell somewhat further in this mittee welcomed substantially slower growth of Ml in period. Changes in long-term yields were mixed while 1987 than in 1986 in the context of continuing ecoshort-term interest rates rose, especially on short- nomic expansion and some evidence of greater inflamaturity private market instruments. The trade- tionary pressures. The Committee indicated in July weighted foreign exchange value of the dollar in terms that in reaching operational decisions over the balance of the other G-10 currencies declined considerably of the year it would take account of growth in Ml in further. the light of circumstances then prevailing. The issues The monetary aggregates weakened in November involved with establishing a target for Ml will be after strengthening in October in conjunction with a carefully reappraised at the beginning of 1988. temporary surge in demands for transaction balances In the implementation of policy for the immediate and other liquid assets in the latter part of that month. future, the Committee seeks to maintain the existing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 241 degree of pressure on reserve positions. The Commit- approved a temporary increase of $3 billion, to $9 tee recognizes that still sensitive conditions in financial billion, in the limit between Committee meetings markets and uncertainties in the economic outlook on changes in System Account holdings of may continue to call for a special degree of flexibility U.S. government and federal agency securities in open market operations. Taking account of conditions in financial markets, somewhat lesser reserve specified in paragraph 1(a) of the Authorization restraint or somewhat greater reserve restraint would for Domestic Open Market Operations. The inbe acceptable depending on the strength of the busi- crease was effective for the intermeeting period ness expansion, indications of inflationary pressures, ending with the close of business on February 10, developments in foreign exchange markets, as well as 1988. the behavior of the monetary aggregates. The contemplated reserve conditions are expected to be consistent with growth in M2 and M3 over the period from Votes for this action: Messrs. Greenspan, Corri- November through March at annual rates of about 5 gan, Angell, Boehne, Boykin, Heller, Johnson, percent and 6 percent, respectively. Over the same Keehn, Kelley, Ms. Seger, and Mr. Stern. Votes period, growth in Ml is expected to remain relatively against this action: None. limited. The Chairman may call for Committee consultation if it appears to the Manager for Domestic This action was taken on the recommendation Operations that reserve conditions during the period of the Manager for Domestic Operations. The before the next meeting are likely to be associated with Manager advised that the normal leeway of $6 a federal funds rate persistently outside a range of 4 to 8 percent. billion for changes in System Account holdings of securities probably would not be sufficient Votes for this action: Messrs. Greenspan, Corri- to accommodate desirable reductions in the ingan, Angell, Boehne, Boykin, Heller, Keehn, Kel- termeeting period because of seasonal declines in ley, and Stern. Votes against this action: Mr. John- currency in circulation and required reserves. son and Ms. Seger. On January 5, 1988, the Committee held a meeting by telephone conference to review mon- Mr. Johnson dissented because he believed etary and financial developments since mid-Dethat policy implementation should continue to cember and to assess the Committee's decisions focus on maintaining generally stable conditions at the December meeting to begin to redirect its in the money market, at least through the yearoperating procedures toward more emphasis on end, pending the emergence of more settled achieving a desirable degree of pressure on reconditions in financial markets and a more preserve positions. In the period after the stock dictable relationship between reserve objectives market collapse in October, open market operaand money market conditions. He also preferred tions had been guided to an important extent by a directive that gave greater weight to the possithe objective of restoring and sustaining stability bility for some easing, given potential developin the money market, and less attention was ments during the intermeeting period. given than previously to the implementation of Ms. Seger dissented because she favored some objectives relating to reserve conditions. slight easing of reserve conditions in light of her In the Committee's discussion most of the concern about the downside risks in the econmembers agreed that with the further passage of omy, especially in the context of sluggish growth time since the October disturbances in financial in reserves and the monetary aggregates over an markets and with year-end pressures in the extended period. She also wanted to continue to money market now unwinding, further progress focus on money market conditions in System could be made toward restoring the Committee's open market operations and in particular to counearlier approach to open market operations. The ter upward pressures on short-term interest members recognized that conditions in financial rates. markets were still somewhat unsettled and that 2. Authorization for the relationship between reserves and money Domestic Open Market Operations market conditions had not been reestablished on a fully normal or predictable basis. In the circum- Effective December 17, 1987, the Committee stances and in light of the uncertainties in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

242 Federal Reserve Bulletin • April 1988 economic outlook, it was agreed that some would be acceptable depending on the strength of the amount of flexibility might continue to be needed business expansion, indications of inflationary pressures, developments in foreign exchange markets, as in the conduct of open market operations. well as the behavior of the monetary aggregates. The To reflect and endorse the further progress contemplated reserve conditions are expected to be toward the operating procedures in use before consistent with growth in M2 and M3 over the period mid-October, the Committee decided to amend from November through March at annual rates of the relevant reference in the operational para- about 5 percent and 6 percent, respectively. Over the same period, growth in Ml is expected to remain graph of its directive issued at its December relatively limited. The Chairman may call for Commitmeeting. The amendment encompassed solely a tee consultation if it appears to the Manager for change in emphasis relating to operating proce- Domestic Operations that reserve conditions during dures and did not include any change in the the period before the next meeting are likely to be Committee's short-run policy objectives. associated with a federal funds rate persistently outside a range of 4 to 8 percent. At the conclusion of this telephone meeting, the Committee voted to change the operational paragraph of its directive to read as follows: Vote for this action: Messrs. Greenspan, Corrigan, Angell, Boehne, Boykin, Heller, Johnson, Keehn, Kelley, and Stern. Vote against this action: Ms. In the implementation of policy for the immediate Seger. future, the Committee seeks to maintain the existing degree of pressure on reserve positions. The Committee agrees that the passing of time and the year-end Ms. Seger dissented because she continued to should permit further progress toward restoring a believe that open market operations should be normal approach to open market operations, although directed toward some slight easing. She also felt still sensitive conditions in financial markets and unthat financial markets remained too unsettled to certainties in the economic outlook may continue to warrant any shift at this time in operational call for some flexibility in operations. Taking account of conditions in financial markets, somewhat lesser procedures toward more emphasis on reserve reserve restraint or somewhat greater reserve restraint objectives. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

243 Legal Developments AMENDMENT TO REGULATION K of credit by the bank holding company or its affiliates to a company acquired pursuant to this The Board of Governors is amending 12 C.F.R. Part paragraph; 211, its Regulation K. The regulation is revised to (iv) "loans and extensions of credit" means all permit investors to acquire up to 40 percent of the direct and indirect advances of funds to a person shares of foreign nonfinancial companies where sover- made on the basis of any obligation of that person eign debt obligations are being exchanged for owner- to repay the funds. ship interests in the companies. The regulation also is (2) Permissible investments. In addition to investrevised to permit companies acquired through debt- ments that may be made under other provisions of for-equity conversions in heavily indebted developing this section, a bank holding company may make the countries to be held for up to 15 years and to liberalize following investments through the conversion of the investment procedures for such investments. sovereign debt obligations of an eligible country, Effective Feburary 24, 1988, the Board amends 12 either through direct exchange of the debt obliga- C.F.R. Part 211 as follows: tions for the investment or by a payment for the debt in local currency, the proceeds of which are used to Part 211—International Banking Operations purchase the investment: (i) Public sector companies. A bank holding com- 1. The authority citation for 12 C.F.R. Part 211 con- pany may acquire up to and including 100 percent tinues to read as follows: of the shares of (or other ownership interests in) any foreign company located in an eligible coun- Authority: 12 U.S.C. 221 et seq.; 12 U.S.C. 1841 try if the shares are acquired from the government et seq.; Pub. L. 95-369; 92 Stat. 607; 12 U.S.C. 3101 of the eligible country or from its agencies or et seq.; Title II, Pub. L. 97-290, 96 Stat. 1235; Title instrumentalities. IX, Pub. L. 98-181, 97 Stat. 1153, 12 U.S.C. 3901 (ii) Private sector companies. A bank holding et seq., unless otherwise noted. company may acquire up to and including 40 percent of the shares, including voting shares, of 2. Section 211.5 is amended by revising paragraph (or other ownership interests in) any other foreign 211.5(f) to read as follows: company located in an eligible country subject to the following conditions: Section 211.5—Investments and Activities (A) a bank holding company may acquire more Abroad than 25 percent of the voting shares of the foreign company only if another shareholder or control group of shareholders unaffiliated with (f) Investments made through debt-for-equity conver- the bank holding company holds a larger block sions. of voting shares of the company; (1) Definitions. For purposes of this paragraph: (B) the bank holding company and its affiliates (i) "eligible country" means a country that, since may not lend or otherwise extend credit to the 1980, has restructured its sovereign debt held by foreign company in amounts greater than 50 foreign creditors, and any other country the percent of the total loans and extension of Board deems to be eligible; credit to the foreign company; and (ii) "equity" includes common stockholder's eq- (C) the bank holding company's representation uity and minority interests in consolidated subsid- on the board of directors or on management iaries, less goodwill; committees of the foreign company may be no (iii) "investment" has the meaning set forth in more than proportional to its shareholding in section 211.2(i) of this regulation and, for pur- the foreign company. poses of the investment procedures of this para- (3) Investments by bank subsidiary of bank holding graph only, shall include loans or other extensions company. Upon application, the Board may permit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

244 Federal Reserve Bulletin • April 1988 an investment to be made pursuant to this paragraph mation concerning customers that are engaged in through an insured bank subsidiary of the bank the same or related lines of business as the comholding company where the bank holding company pany. demonstrates that such ownership is necessary due to special circumstances such as the requirements of local law. In granting its consent, the Board may impose such conditions as it deems necessary or appropriate to prevent adverse effects, including PREEMPTION DETERMINATION UNDER prohibiting loans from the bank to the company in REGULATION Z which the investment is made. (4) Divestiture. The Board of Governors has determined that a provi- (i) Time limits for divestiture. The bank holding sion in the law of Indiana is inconsistent with the Truth company shall divest the shares of or other own- in Lending Act and Regulation Z and therefore preership interests in any company acquired pursu- empted. ant to this paragraph (unless the retention of the Effective October 1, 1988, with compliance optional shares or other ownership interest is otherwise before that date, the Board has determined that the permissible at the time required for divestiture) provision in the state law of Indiana specified below is within two years of the date on which the bank preempted by 12 C.F.R. Part 226. holding company is permitted to repatriate in full the investment in the foreign company, but in any Part 226—Truth in Lending event within 15 years of the date of acquisition. (ii) Report to Board. The bank holding company 1. The authority citation for 12 C.F.R. Part 226 conshall report to the Board on its plans for divesting tinues to read as follows: an investment made under this paragraph no later than 10 years after the date the investment is Authority: Sec. 105 as amended by sec. 605, Pub. L. made if the investment may be held for longer 96-221, 94 Stat. 170 (15 U.S.C. 1604 et seq.). than 10 years and shall report to the Board again two years prior to the final date for divestiture, in 2. In section 23-2-5-8 of Indiana's "Loan Broker" a manner to be prescribed by the Board. statute, the inclusion of the loan broker's fees and (iii) Other conditions requiring divestiture. All charges in the calculation of, among other items, the investments made pursuant to this paragraph shall finance charge and annual percentage rate disclosed to be subject to paragraphs (b)(3)(i)(A) and (B) of potential borrowers is inconsistent with sections this section requiring prompt divestiture (unless 106(a) and 226.4(a) of the Truth in Lending Act and the Board upon application authorizes retention) Regulation Z, respectively, and is preempted in those if the company invested in engages in impermis- instances where the use of the same term would sible business in the United States. disclose a different amount than that required to be (5) Investment procedures. disclosed under federal law. (i) General consent. Subject to the other limitations of this paragraph, the Board grants its general consent for investments made under this ORDERS ISSUED UNDER BANK HOLDING paragraph if the total amount invested does not COMPANY ACT exceed the greater of $15 million or one percent of the equity of the investor. Orders Issued Under Section 3 of the Bank (ii) All other investments shall be made in accord- Holding Company Act ance with the procedures of paragraph (c) of this section requiring prior notice or specific consent. First Bancshares, Inc. (6) Conditions. Grove Hill, Alabama (i) Name. Any company acquired pursuant to this paragraph shall not bear a name similar to the Order Approving Acquisition of a Bank name of the acquiring bank holding company or any of its affiliates. First Bancshares, Inc., Grove Hill, Alabama, a bank (ii) Confidentiality. Neither the bank holding com- holding company within the meaning of the Bank pany nor its affiliates shall provide to any com- Holding Company Act, as amended (the "Act") pany acquired pursuant to this paragraph any (12 U.S.C. § 1841 et seq.), has applied under section confidential business information or other infor- 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to acquire Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 245 all of the voting shares of Jackson Bank & Trust Although consummation of this proposal would Company, Jackson, Alabama ("Bank"). eliminate existing competition between Applicant and Notice of the application, affording interested per- Bank, the Board believes that the anticompetitive sons an opportunity to submit comments, has been effects of this proposal are mitigated by several signifgiven in accordance with section 3(b) of the Act, 52 icant factors. First, the number of competitors remain- Federal Register 42,340 (1987). The time for filing ing in the market upon consummation of the proposal comments has expired, and the Board has considered is significant given the characteristics of the Jackson the application and all comments received in light of banking market. The Jackson banking market has a the factors set forth in section 3(c) of the Act population of approximately 30,000 residents and is (12 U.S.C. § 1842(c)). currently served by seven commercial banks with a Applicant, with one subsidiary bank, is the 106th total of 13 offices. The ratio of bank offices to the largest commercial banking organization in Alabama, population in the market is more than double the controlling total deposits of $34.6 million, representing comparable ratio statewide. Upon consummation of approximately 0.1 percent of total deposits in commer- the proposal, the Jackson market will continue to be cial banks in the state.1 Bank is the 99th largest served by six unaffiliated commercial banks and two commercial banking organization in Alabama, control- thrift institutions and will continue to have nearly ling total deposits of $36.3 million, representing ap- twice as many bank offices per capita as the statewide proximately 0.2 percent of total deposits in commer- average. In this connection, Applicant contends that cial banks in the state. Upon consummation of this the market's size and number of offices are largely proposal, Applicant would become the 42nd largest responsible for the fact that the owners of Bank have commercial banking organization in Alabama, with been unable to obtain an acceptable bid from any total domestic deposits of $70.9 million, representing out-of-market banking organization. approximately 0.3 percent of total deposits in commer- In addition, Bank has not been an aggressive comcial banks in the state. Consummation of this proposal petitor in the market. In this regard, Bank has lost would not have any significant adverse effects on the approximately 33 percent of its market share in the last concentration of banking resources in Alabama. ten years, falling in rank from the largest bank to the Applicant operates in the Jackson banking market,2 third largest bank in the market. Moreover, Bank has where it is the fourth largest of seven commercial not been an active lender in the market, with a banking organizations, controlling 16.1 percent of total loan-to-asset ratio below 30 percent. Applicant has deposits in commercial banks in the market.3 Bank proposed to increase the lending activities of Bank in also operates in the Jackson banking market where it is the Jackson banking market. the third largest commercial banking organization, The Board has also considered the presence of thrift controlling 16.9 percent of the total deposits in com- institutions in the banking market in its analysis of this mercial banks in the market. Upon consummation of proposal. The Board has previously indicated that this proposal, Applicant would become the largest thrift institutions have become, or have the potential commercial banking organization in the market, con- to become, major competitors of commercial banks.5 trolling 33 percent of the total deposits in commercial The largest and third largest savings and loan associbanks in the market. ations in Alabama operate branch offices in the Jack- The Jackson banking market is considered highly son banking market. These savings and loan associaconcentrated, with a four-firm concentration ratio of tions offer a variety of transaction accounts, credit 81.8 percent and a Herfindahl-Hirschman Index cards, consumer loans, and commercial loans. Based ("HHI") of 1950. Upon consummation of this pro- on the size, market share, and commercial lending posal the four-firm concentration ratio would increase activities of thrift institutions in the market, the Board by 9.3 percentage points to 91.1 percent and the HHI has concluded that thrift institutions exert a competiwould increase by 541 points to 2491.4 tive influence that also mitigates in part the anticom- 1. State deposit data are as of December 31, 1986. Justice informed the Board that a bank merger or acquisition is not 2. The Jackson banking market is defined as Clarke County plus the likely to be challenged (in the absence of other factors indicating an towns of Sweet Water in Marengo County, Leroy in Washington anticompetitive effect) unless the post-merger HHI is at least 1800 and County, and Pine Hill in Wilcox County, all in Alabama. the merger increases the HHI by at least 200 points. The Department 3. Market deposit data are as of June 30, 1986. of Justice has stated that the higher than normal HHI thresholds for 4. Under the revised Department of Justice Merger Guidelines (49 screening bank acquisitions recognizes the competitive effects of Federal Register 26,823 (June 29, 1984)) any market in which the limited purpose lenders and other non-depository financial entities. post-merger HHI is over 1800 is considered highly concentrated, and 5. See Eastern Michigan Financial Corporation, 74 FEDERAL REthe Department is likely to challenge a merger that increases the HHI SERVE BULLETIN 49 (1988); National City Corporation, 70 FEDERAL by more than 50 points unless other factors indicate that the merger RESERVE BULLETIN 743 (1984); NCNB Corporation, 70 FEDERAL will not substantially lessen competition. In 1985, the Department of RESERVE BULLETIN 225 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

246 Federal Reserve Bulletin • April 1988 petitive effects of this proposal.6 Accordingly, in view Notice of the application, affording interested perof all the facts of record, the Board has concluded that sons an opportunity to submit comments, has been consummation of this proposal would not have a published (53 Federal Register 3,078 (1988)). The time significantly adverse effect on existing competition in for filing comments has expired, and the Board has the Jackson banking market. considered the application and all comments received The financial and managerial resources of Appli- in light of the factors set forth in section 3(c) of the cant, its subsidiary bank, and Bank, and their future Act. prospects are consistent with approval. Applicant pro- First Bank is the largest commercial banking orgaposes upon consummation of this proposal to increase nization in Minnesota, controlling deposits of $11.1 the number and size of the loans made by Bank, to billion, representing 28.5 percent of the total deposits extend Bank's business hours, and to build a new in commercial banking organizations in the state.1 facility for Bank to accommodate customer needs. Firstar is the 10th largest commercial banking organi- Accordingly, factors relating to the convenience and zation in Minnesota, controlling deposits of $196.0 needs of the community to be served lend weight million, representing 0.5 percent of total deposits in toward approval that outweighs any adverse compet- commercial banking organizations in the state. Upon itive effects of this proposal. consummation of this proposal, First Bank would Based on the foregoing and other facts of record, the control $11.3 billion in deposits, representing 29.0 Board has determined that the proposal should be, and percent of total deposits in commercial banking orgahereby is, approved. The transaction shall not be nizations in the state. Consummation of the proposal consummated before the thirtieth calendar day follow- would not increase significantly the concentration of ing the effective date of this Order, or later than three banking resources in Minnesota. months after the effective date of this Order, unless First Bank competes directly with Firstar in the such period is extended for good cause by the Board or Minneapolis - St. Paul banking market.2 First Bank is the Federal Reserve Bank of Atlanta, acting pursuant the largest commercial banking organization in the to delegated authority. market, with deposits of $9.1 billion, representing 39.2 By order of the Board of Governors, effective Feb- percent of the total deposits in commercial banks in ruary 8, 1988. the market. Firstar is the 8th largest commercial banking organization in the market, with $196.0 million in deposits, representing 0.8 percent of the total Voting for this action: Chairman Greenspan and Governors Johnson, Seger, Angell, Heller, and Kelley. deposits in commercial banks in the market. Upon consummation of this proposal, First Bank would JAMES MCAFEE control $9.3 billion in deposits, representing 40.0 per- Associate Secretary of the Board cent of the total commercial banking deposits in the market. The Minneapolis - St. Paul banking market is First Bank System, Inc. considered concentrated, with a four-firm concentra- Minneapolis, Minnesota tion ratio of 73.3 percent. The Herfindahl-Hirschman Index ("HHI") of the market is 2210 and would Order Approving Acquisition of a Bank Holding increase by 65 points to 2275 upon consummation of Company this proposal.3 First Bank System, Inc., Minneapolis, Minnesota ("First Bank"), a bank holding company within the 1. Banking data are as of December 31, 1986. Thrift market data meaning of the Bank Holding Company Act (12 are as of June 30, 1986. U.S.C. § 1841 et seq.) (the "Act"), has applied for the 2. The Minneapolis - St. Paul banking market is defined as the Board's approval under section 3(a)(3) of the Act (12 Minneapolis - St. Paul Ranally Metropolitan Area adjusted to include all of Scott and Carver Counties and Lanesburgh Township in Le U.S.C. § 1842(a)(3)) to acquire Firstar Corporation, Sueur County. Bloomington, Minnesota ("Firstar") and thereby indi- 3. Under the revised Department of Justice Merger Guidelines (49 rectly to acquire Firstar's subsidiary bank, Marine Federal Register 26,823 (June 29, 1984)), any market in which the post-merger HHI is over 1800 is considered highly concentrated, and Bank, Bloomington, Minnesota. the Department is likely to challenge a merger that increases the HHI by more than 50 points unless other factors indicate that the merger will not substantially lessen competition. The Department of Justice has informed the Board that a bank merger or acquisition is not likely 6. If 50 percent of the deposits controlled by thrift institutions were to be challenged (in the absence of other factors indicating an included in the calculation of market concentration. Applicant and anticompetitive effect) unless the post-merger HHI is at least 1800 and Bank would control 15.1 percent and 15.8 percent of total market the merger increases the HHI by at least 200 points. The Justice deposits, respectively. The pre-merger HHI would be 1724, and upon Department has stated that the higher than normal HHI thresholds for consummation of this proposal, would increase by 477 points to 2201. screening bank acquisitions for anti-competitive effects implicitly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 247 Although consummation of this proposal would and hereby is, approved. The acquisition shall not be eliminate existing competition between First Bank and consummated before the thirtieth calendar day follow- Firstar in the Minneapolis - St. Paul banking market, ing the effective date of this Order or later than three over 115 other commercial banks would continue to months after the effective date of this Order, unless operate in the market after consummation of this such period is extended for good cause by the Board, proposal.4 In addition, the Board has considered the or by the Federal Reserve Bank of Minneapolis, acting presence of thrift institutions in the banking market in pursuant to delegated authority. its analysis of this proposal. The Board previously has By order of the Board of Governors, effective indicated that thrift institutions have become, or have February 29, 1988. the potential to become, major competitors of commercial banks.5 Thrift institutions already exert a Voting for this action: Chairman Greenspan and Governors considerable competitive influence in the market as Johnson, Seger, Angell, and Heller. Absent and not voting: providers of NOW accounts and consumer loans, and Governor Kelley. many are engaged in the business of making commercial loans. Based upon the size, market share and JAMES MCAFEE commercial lending activities of thrift institutions in Associate Secretary of the Board the market, the Board has concluded that thrift institutions exert a significant influence that mitigates the Tri-State Financial Bancorp, Inc. anticompetitive effects of this proposal in the Minne- Bryan, Ohio apolis - St. Paul banking market.6 Accordingly, in view of all of the facts of record, including the small Order Approving Acquisition of a Bank increase in concentration in the market, the Board has determined that consummation of this proposal would Tri-State Financial Bancorp, Inc., Bryan, Ohio ("Trinot have a significant adverse effect on existing com- State"), a bank holding company within the meaning petition in the Minneapolis - St. Paul banking market. of the Bank Holding Company Act ("Act"), The financial and managerial resources of First 12 U.S.C. § 1842 et seq., has applied pursuant to Bank and its subsidiary banks as well as Firstar and its section 3(a)(3) of the Act, 12 U.S.C. § 1842(a)(3), to subsidiary bank are consistent with approval. Consid- acquire all of the voting shares of Mid American erations relating to the convenience and needs of the National Bank and Trust Company, Northwood, Ohio community to be served are also consistent with ("Mid American"). approval. Notice of the application, affording interested per- Based on the foregoing and other facts of record, the sons an opportunity to submit comments, has been Board has determined that the application should be, duly published (52 Federal Register 43,673 (1987)). The time for filing comments has expired, and the Board has considered the application and all comments received in light of the factors set forth in recognizes the competitive effects of limited purpose lenders and other non-depository financial entities. section 3(c) of the Act. 4. The Board received comments from the Minnesota Commis- Tri-State is the 53rd largest commercial banking sioner of Commerce expressing his concern about the competitive effects of this acquisition. Although the Commissioner did not disap- organization in Ohio, with deposits of $116.8 million, prove First Bank's application, he requested that the Board hold a representing less than 1 percent of total deposits in public hearing to consider the application. Because the Commissioner commercial banking organizations in the state.1 Mid did not recommend denial of the application, the Board is not required to hold a hearing. 12 U.S.C. § 1842(b). The Board, however, has American is the 18th largest commercial banking orcarefully reviewed the facts of record, and does not believe that a ganization in Ohio, controlling deposits of $365.1 hearing wouid provide it with any additional facts that are not already million, representing less than 1 percent of total dein the record. The Board has also carefully considered the Commissioner's views regarding the competitive effects of this acquisition. posits in commercial banking organizations in the Accordingly, the Commissioner's request for a hearing is denied, and, state. Upon consummation of this proposal, Tri-State for the reasons set out below, the Board does not believe that the would become the 15th largest commercial banking competitive effects of this acquisition are so adverse as to warrant denial of this application. organization in the state, controlling $481.9 million in 5. National City Corporation, 70 FEDERAL RESERVE BULLETIN 743 deposits, representing less than 1 percent of total (1984); NCNB Bancorporation, 70 FEDERAL RESERVE BULLETIN 225 deposits in commercial banking organizations in the (1984); General Bancshares Corporation, 69 FEDERAL RESERVE BUL- LETIN 802 (1983); and First Tennessee National Corporation, 69 state. Consummation of the proposal would not in- FEDERAL RESERVE BULLETIN 298 (1983). 6. If 50 percent of the deposits controlled by thrift institutions were included in the calculation of market concentration, First Bank and Firstar would control 35.4 percent and 0.8 percent of total market deposits, respectively. The HHI would increase by 55 points to 1890 upon consummation of this proposal. 1. All banking data are as of June 30, 1987. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

248 Federal Reserve Bulletin • April 1988 crease significantly the concentration of banking re- ket already exert a considerable competitive influence sources in Ohio. as providers of NOW accounts and consumer loans, Tri-State competes directly with Mid American in and are engaged in the business of making commercial the Williams County banking market.2 Tri-State is the loans. Based upon the relative size, market share and second largest commercial banking organization in the commercial lending activities of thrift institutions in market, with deposits of $67.2 million, representing the market, the Board has concluded that thrift insti- 20.3 percent of the total deposits in commercial banks tutions exert a significant competitive influence that in the market. Mid American is the fourth largest mitigates the anti-competitive effects of this proposal commercial banking organization in the market, with in the Williams County banking market.5 $35.6 million in deposits, representing 10.7 percent of The financial and managerial resources of Tri-State total deposits in commercial banks in the market. and Mid American are consistent with approval. Upon consummation of this proposal, Tri-State would In considering the convenience and needs of the remain the second largest commercial banking organi- communities to be served, the Board has taken into zation in the market, with $102.8 million in deposits, account a comment received from the Superintendent representing 31.0 percent of the total commercial of Edgerton Local Schools located in Edgerton, Ohio. banking deposits in the market. The market is consid- The Superintendent argues that Mid American and ered highly concentrated, with a four-firm concentra- Tri-State are the only two commercial banking orgation ratio of 76.4 percent. The Herfindahl-Hirschman nizations in Edgerton, Ohio, one of the towns in the Index ("HHI") of the market is 1906 and would Williams County banking market. Upon consummaincrease by 435 points to 2341 upon consummation of tion of the proposed transaction, Tri-State would be this proposal.3 the only commercial banking organization in Edger- Although consummation of this proposal would ton, Ohio. The Superintendent states that consummaeliminate existing competition between Tri-State and tion of the proposed transaction would eliminate some Mid American in the Williams County banking market, of the banking options available to the school district numerous other commercial banks would continue to and requests that the Board not approve the applicaoperate in the market after consummation of this tion unless the vacated bank is purchased by another proposal. Moreover, the Board notes that the market bank. is attractive for entry, as evidenced by the fact that In analyzing the competitive effects of a proposal, two commercial banking organizations have entered the Board is required to examine an acquisition in light the market in recent years, including one de novo of the geographic area in which customers may pracentry. Furthermore, the record indicates that other ticably turn to for alternatives. The geographic market commercial banking organizations have expressed in- for banking services is generally an area larger than an terest in entering the market. individual town, and in this case, the Board believes In addition, the Board has considered the presence that the area where customers can practicably turn to of thrift institutions in the banking market in its for banking services is approximated by Williams analysis of this proposal. The Board previously has County. Because of the number of alternatives in the indicated that thrift institutions have become, or have Williams County banking market and other facts of the potential to become, major competitors of com- record, the Board concludes that the elimination of a mercial banks.4 The two thrift institutions in the mar- competitor in the town of Edgerton does not warrant denial of the application. Based on the foregoing and other facts of record, the 2. The Williams County banking market is approximated by Wil- Board has determined that the application should be, liams County, Ohio. and hereby is, approved. The acquisition shall not be 3. Under the revised Department of Justice Merger Guidelines (49 Federal Register 26,823 (June 29, 1984)), any market in which the consummated before the thirtieth calendar day followpost-merger HHI is over 1800 is considered highly concentrated, and ing the effective date of this Order, or later than three the Department is likely to challenge a merger that increases the HHI months after the effective date of this Order, unless by more than 50 points unless other factors indicate that the merger will not substantially lessen competition. The Department of Justice such period is extended for good cause by the Board or has informed the Board that a bank merger or acquisition is not likely to be challenged (in the absence of other factors indicating an anti-competitive effect) unless the post-merger HHI is at least 1800 and the merger increases the HHI by at least 200 points. The Justice Department has stated that the higher than normal HHI thresholds for RESERVE BULLETIN 802 (1983); and First Tennessee National Corposcreening bank acquisitions for anti-competitive effects implicitly ration, 69 FEDERAL RESERVE BULLETIN 298 (1983). recognizes the competitive effects of limited purpose lenders and 5. If 50 percent of the deposits controlled by thrift institutions were other non-depository financial entities. included in the calculation of market concentration, Tri-State and Mid 4. See, e.g., National City Corporation, 70 FEDERAL RESERVE American would control 17.6 percent and 9.3 percent of total market BULLETIN 743 (1984); NCNB Bancorporation, 70 FEDERAL RESERVE deposits, respectively. The HHI would increase by 329 points to 1912 BULLETIN 225 (1984); General Bancshares Corporation, 69 FEDERAL upon consummation of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 249 by the Federal Reserve Bank of Cleveland, acting (3) providing financial advice to the Canadian fedpursuant to delegated authority. eral and provincial governments, such as with re- By order of the Board of Governors, effective Feb- spect to the issuance of their securities in the U.S.1 ruary 2, 1988. Company currently engages in a wide range of securities underwriting, dealing, brokerage and advis- Voting for this action: Chairman Greenspan and Governors Johnson, Seger, and Kelley. Voting against this action: ory activities.2 Applicant has committed to limit Com- Governor Angell. Absent and not voting: Governor Heller. pany to those activities for which it seeks approval here. JAMES MCAFEE Notice of the application, affording interested per- Associate Secretary of the Board sons an opportunity to submit comments, has been duly published (52 Federal Register 49,089 (1987)). Dissenting Statement of Governor Angell The time for filing comments has expired, and the Board has considered the application and all com- I believe this application raises serious questions con- ments received in light of the public interest factors set cerning the anticompetitive effects of mergers and forth in section 4(c)(8) of the BHC Act. acquisitions in those markets with a small number of Applicant, with total consolidated assets equivalent banking competitors. Tri-State's subsidiary bank and to approximately $54 billion, is the 78th largest bank- Mid American are the only two banks competing in the ing organization in the world.3 Applicant owns a bank town of Edgerton. Although there are banking alter- subsidiary in San Juan, Puerto Rico and maintains natives in towns close to Edgerton, I am concerned branches in New York City, Portland and Boston and that these distances might be sufficiently great to allow agencies in Atlanta, Miami and San Francisco. Applianticompetitive behavior with respect to the pricing cant also owns The Bank of Nova Scotia Trust Comand conditions of agricultural, small business and pany, New York, New York, an uninsured limitedconsumer loans in Edgerton. purpose trust company that neither accepts deposits February 2, 1988 nor makes commercial loans, and engages in various activities in the United States under sections 4(c)(8) and 4(c)(9) of the BHC Act and the Board's Regulations Y and K (12 C.F.R. Parts 225 and 211, respec- Orders Issued Under Section 4 of the Bank tively). Holding Company Act The Bank of Nova Scotia Toronto, Canada 1. Applicant has also applied to engage in providing discount brokerage services to non-institutional customers; furnishing general economic information and advice, general economic statistical fore- Order Approving Application to Engage in Securities casting services and industry studies to institutional customers; proand Financial Advisory Activities viding portfolio investment advice and research to institutional customers; and underwriting and dealing in obligations of the United States, general obligations of states and their political subdivisions, The Bank of Nova Scotia, Toronto, Canada ("Ap- and other obligations that state member banks are authorized to plicant"), a foreign bank subject to the Bank Holding underwrite and deal in under 12 U.S.C. §§ 24 and 335. The Board has previously found these activities, as proposed here, to be closely Company Act, 12 U.S.C. § 1841 etseq. ("BHC Act"), related to banking and a proper incident thereto. 12 C.F.R. §§ has applied for the Board's approval under section 225.25(b)(15), (4)(iv), (4)(iii) and (16) respectively. 4(c)(8) of the BHC Act, 12 U.S.C. § 1843(c)(8), and 2. Company's current activities consist of providing brokerage and execution services to institutional customers; acting as agent in the section 225.21(a) of the Board's Regulation Y, private placement of corporate securities; providing investment ad- 12 C.F.R. § 225.21(a), to acquire McLeod Young Weir vice and research to institutional customers; trading for its own account in Canadian federal and provincial government securities, Incorporated, New York, New York ("Company"), U.S. government and agency securities and corporate debt and equity and thereby engage in: securities; underwriting and distributing Canadian federal and provincial government securities and corporate debt and equity securities; (1) providing advice in connection with mergers and and other incidental securities activities such as borrowing and acquisitions, divestitures, loan syndications, inter- lending securities and entering into repurchase and reverse repurchase est rate swaps, interest rate caps and similar trans- arrangements involving U.S. government and agency securities. Company also provides financial advice to institutional customers relating actions to unaffiliated financial and nonfinancial into acquisitions, mergers, divestitures, restructurings and public and stitutions; private financing transactions, and to the Canadian federal and provincial governments and agencies thereof relating to financing trans- (2) providing securities brokerage and investment actions in the U.S. advisory services to institutional customers on a 3. Asset data are as of June 30, 1987. Banking data are as of combined basis; and December 31, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

250 Federal Reserve Bulletin • April 1988 I. Merger and Acquisition Advice to directors of Company. No officers of Applicant will Unaffiliated Financial and Nonfinancial serve as officers of Company. Institutions The Board has determined that the proposed interlocks are consistent with NatWest because Applicant Applicant has proposed that Company engage in cer- does not accept insured deposits in the U.S. and hence tain financial advisory activities for unaffiliated finan- does not function as a domestic banking organization. cial and nonfinancial institutions. The Board previ- Moreover, Applicant has committed that Company ously has determined that, subject to certain will not have officer or director interlocks with its U.S. limitations, these financial advisory activities are per- bank subsidiaries, branches or agencies. missible nonbanking activities for bank holding companies. Signet Banking Corporation, 73 FEDERAL RE- III. Financial Advisory Services to Canadian SERVE BULLETIN 59 (1987). Applicant has committed Governmental Entities to limit Company's financial advisory activities as set forth in that Order. The Board has not previously approved Applicant's third proposed activity, providing financial advice to II. Providing Investment Advice and Securities the Canadian federal and provincial governments, Brokerage on a Combined Basis such as with respect to the issuance of their securities in the U.S. The Board previously has determined that the com- In order to approve this aspect of the proposal, the bined offering of investment advice with securities Board must determine: brokerage services to institutional customers is a per- (1) that the proposed activity is closely related to missible nonbanking activity and does not violate the banking; and Glass-Steagall Act. See, e.g., National Westminster (2) that the public benefits associated with the pro- Bank PLC, 72 FEDERAL RESERVE BULLETIN 584 posed activity outweigh any possible adverse (1986) ("NatWest"); and Manufacturers Hanover effects.6 Corporation, 73 FEDERAL RESERVE BULLETIN 930 (1987) ("Manufacturers Hanover"). That position has In determining if an activity is closely related to been upheld by the U.S. Court of Appeals for the banking under section 4(c)(8) of the BHC Act, the District of Columbia Circuit in its affirmance of the Board has relied on guidelines established by the Board's NatWest Order.4 federal courts. Under these guidelines, an activity may Applicant has proposed to conduct its brokerage be found to be closely related to banking if it is activity in accordance with the limitations approved demonstrated: by the Board in NatWest and Manufacturers Hanover (1) that banks generally have, in fact, provided the with one exception.5 In NatWest, the Board permitted proposed services; officer, director and employee interlocks between the (2) that banks generally provide services that are brokerage subsidiary and its holding company but did operationally or functionally so similar to the pronot permit officer and director interlocks with its bank posed services as to equip them particularly well to affiliates. Here, Applicant proposes that officers of provide the proposed services; or Applicant, a foreign bank, be permitted to serve as (3) that banks generally provide services that are so integrally related to the proposed activity as to require their provision in a specialized form.7 4. Securities Industry Ass'n v. Board of Governors, 821 F.2d 810 (D.C. Cir. 1987). The U.S. Supreme Court recently has declined to In this case, the record reflects that banks in genreview that decision, cert, denied, 56 U.S.L.W. 3451 (U.S. Jan. 11, 1988) (No. 87-562). eral, as well as Company, which currently engages in 5. As in Manufacturers Hanover, under this proposal, Company this activity, do provide services similar to those will not act as principal or take a position (i.e., bear the financial risk) proposed here and have developed expertise in proin any securities it brokers or recommends. Company will execute a transaction only at the direction of a customer and will not exercise discretion with respect to any customer account. Company will not execute any transaction where an affiliate exercises investment dis- 6. 12 U.S.C. § 1843(c)(8). cretion without customer authorization. Company will offer invest- 7. National Courier Association v. Board of Governors, 516 F.2d ment advice, as well as provide securities execution services, to 1229 (D.C. Cir. 1975). However, the National Courier guidelines are institutional customers on an integrated basis, i.e.. Company will not not the exclusive basis for finding a close relationship between a charge an explicit fee for the investment advice and will receive fees proposed activity and banking. The Board has stated that in acting on only for transactions executed for customers. In addition, as in a request to engage in a new nonbanking activity, it will consider any Manufacturers Hanover, Company will employ a $1 million threshold other factor that an applicant may advance to demonstrate a reasonin determining institutional customers and will share customer lists able or close connection or relationship of the activity to banking. 49 with its affiliates, but not confidential information obtained from its Federal Register 794, 806 (1984); Securities Industry Association v. customers. Board of Governors, 468 U.S. 207, 210-11 n.5 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 251 viding financial advice to foreign governments and By order of the Board of Governors, effective their subdivisions. February 12, 1988. The Board notes that the proposed activity is functionally and operationally similar to the activity of Voting for this action: Chairman Greenspan and Governors providing financial advice to state and local govern- Johnson, Seger, Angell, Heller, and Kelley. ments, such as with respect to the issuance of their securities, which the Board has found to be generally JAMES MCAFEE permissible for bank holding companies and incorpo- Associate Secretary of the Board rated into Regulation Y. 12 C.F.R. § 225.25(b)(4)(v). In addition, the Board's Regulation K authorizes the FFB, Inc. provision of such financial advisory services to foreign Newark, New Jersey governmental entities. 12 C.F.R. § 211.5(d)(8). Ac- Philadelphia, Pennsylvania cordingly, the Board concludes that the proposed activity is closely related to banking. Order Approving Acquisition of Nonbank Subsidiary With respect to the "proper incident" requirement, section 4(c)(8) of the BHC Act requires the Board to FFB, Inc., Newark, New Jersey, and Philadelphia, consider whether the performance of the activity by an Pennsylvania ("FFB"), a bank holding company affiliate of a holding company "can reasonably be within the meaning of the Bank Holding Company Act expected to produce benefits to the public, such as ("Act") (12 U.S.C. § 1841 et seq.) has applied under greater convenience, increased competition, or gains section 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8)) and in efficiency that outweigh possible adverse effects, section 225.25(b)(8) of the Board's Regulation Y (12 such as undue concentration of resources, decreased C.F.R. § 225.25(b)(8)) to acquire Broad & Lombardy or unfair competition, conflicts of interests, or un- Associates, Inc., Newark, New Jersey ("B & L"), a sound banking practices." company which acts as an agent or broker for the sale The record indicates that no adverse effects are of credit-related life, accident and health, property and likely to occur from the provision of such advice to casualty insurance. Canadian federal and provincial governments. More- Notice of the application, affording interested perover, Company, through its association with a large sons an opportunity to submit comments on the profinancial institution, will have access to increased posal, has been duly published (52 Federal Register resources and will become a more effective competitor 43,672 (1987)). The time for filing comments has exin this area. Hence, this aspect of the proposal will pired, and the Board has considered the application result in net public benefits. and all comments received1 in light of the public Consummation of the proposal is not likely to result interest factors set forth in section 4(c)(8) of the Act. in decreased or unfair competition, conflicts of inter- FFB was formed to acquire First Fidelity Bancorest, unsound banking practices, concentration of re- poration, Newark, New Jersey, and Fidelcor, Inc., sources, or other adverse effects. Based on the fore- Philadelphia, Pennsylvania, and their respective bankgoing and other facts of record, the Board has ing and nonbanking subsidiaries.2 B & L, a subsidiary determined that the balance of public interest factors it of First Fidelity Bancorporation, conducts its insurmust consider under section 4(c)(8) of the BHC Act is ance activities from one office in Newark, New Jersey, favorable. Accordingly, the Board has determined that primarily serving the northern New Jersey and New the application should be, and hereby is, approved. York metropolitan areas. This determination is further subject to all of the On February 14, 1979, the Federal Reserve Bank of conditions set forth in the Board's Regulation Y, New York, acting pursuant to delegated authority, including those in sections 225.4(d) and 225.23(b), and approved the application of First Fidelity Bancorporato the Board's authority to require modification or tion to engage through a de novo subsidiary, B & L, in termination of the activities of the holding company or the activity of acting as agent or broker for the sale of any of its subsidiaries as the Board finds necessary to assure compliance with the provisions and purposes of the BHC Act and the Board's regulations and orders 1. The Board has received comments in opposition to this proposal issued thereunder, or to prevent evasion thereof. from the Independent Insurance Agents of America, Inc.; the National Association of Casualty and Surety Agents; the National This transaction shall not be consummated later Association of Surety Bond Producers; the National Association of than three months after the effective date of this Life Underwriters; and the National Association of Professional Order, unless such period is extended for good cause Insurance Agents (collectively, "Protestants"). 2. The Board previously approved the application of FFB to by the Board, or by the Federal Reserve Bank of New acquire First Fidelity Bancorporation, Fidelcor, and their respective York, pursuant to delegated authority. subsidiaries other than B & L, by Order dated January 11, 1988. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

252 Federal Reserve Bulletin • April 1988 life, accident and health insurance and property and undue concentration of resources, unfair competition, casualty insurance related to extensions of credit by its conflicts of interest, unsound banking practices, or First Fidelity affiliates. Thus on May 1, 1982, B & L other adverse effects. was engaged lawfully in acting as an insurance agent or Based on the foregoing and other facts of record, the broker for credit-related life, accident and health, Board has determined that the balance of the public property and casualty insurance and therefore meets interest factors it must consider under section 4(c)(8) the qualifications for grandfather rights under exemp- of the Act is favorable. Accordingly, the application tion D. should be, and hereby is, approved. This determina- Protestants argue that even if B & L was authorized tion is subject to all of the conditions set forth in under section 4(c)(8)(D) of the Act to engage in insur- Regulation Y, including sections 225.4(d) and ance agency activities, these rights are not transferable 225.23(b) (12 C.F.R. §§ 225.4(d) and 225.23(b)), and to and expire upon the acquisition of a grandfathered the Board's authority to require such modification or company by another bank holding company. As the termination of the activities of a holding company or Board previously has determined, however, a com- any of its subsidiaries as the Board finds necessary to pany that is entitled to engage in insurance activities assure compliance with the provisions and purposes of under exemption D does not lose those rights upon its the Act and the Board's regulations and orders issued acquisition by another bank holding company, pro- thereunder, or to prevent evasion thereof. vided that the grandfathered entity retains its separate The transaction shall not be consummated later than corporate structure and its insurance activities are not three months after the effective date of this Order, conducted by other companies within the acquiring unless such period is extended for good cause by the banking organization.3 In the instant case, following Board or by the Federal Reserve Bank of Philadelphia, its acquisition by FFB, First Fidelity Bancorporation acting pursuant to delegated authority. would remain a separate bank holding company and By order of the Board of Governors, effective B & L would remain a separate nonbank subsidiary February 19, 1988. thereof, and their grandfathered insurance activities would not be conducted by FFB or other entities Voting for this action: Chairman Greenspan and Governors within FFB's organization. First Fidelity Bancorpora- Angell, Heller, and Kelley. Absent and not voting: Govertion and B & L therefore may retain their exemption D nors Johnson and Seger. grandfather privileges after acquisition by FFB.4 The Protestants also request that the Board delay JAMES MCAFEE consideration of this proposal until the expiration of Associate Secretary of the Board the insurance activities moratorium contained in the Competitive Equality Banking Act of 1987 ("CEBA"), Midland Bank, PLC Pub. L. No. 100-86, § 201, 101 Stat. 581 (1987). The London, England Board notes that, by its terms, the moratorium on insurance activities in CEBA does not apply to insurance activities expressly authorized for bank holding Order Approving Application to Issue Variably companies under subparagraphs (A) through (G) of Denominated Payment Instruments Payable in section 4(c)(8) of the Act (12 U.S.C. § 1843(c)(8) Foreign Currencies With Unlimited Face Values (A-G)). Inasmuch as the insurance agency activities of B & L are authorized pursuant to section 4(c)(8)(D), Midland Bank, PLC, London, England ("Midland"), the continued conduct of those activities is explicitly a foreign bank subject to the Bank Holding Company preserved under CEBA. Act, 12 U.S.C. § 1841 et seq. ("BHC Act"), has The record reflects that FFB's acquisition of B & L applied for the Board's approval under section 4(c)(8) would not significantly affect competition in any rele- of the BHC Act (12 U.S.C. § 1843(c)(8)) and section vant market. Moreover, there is no evidence to indi- 225.23(a)(3) of the Board's Regulation Y (12 C.F.R. § cate that approval of this proposal would result in 225.23(a)(3)), to engage de novo through its wholly owned subsidiary, Thomas Cook, Inc., Princeton, New Jersey ("TCI"), in the issuance and sale of foreign drafts and wire transfers (collectively, 3. See e.g., U. S. Bancorp, 73 FEDERAL RESERVE BULLETIN 941 (1987); Trustcorp, Inc., 73 FEDERAL RESERVE BULLETIN 934 (1987); "payment instruments") that are payable in foreign MNC Financial, Inc., 73 FEDERAL RESERVE BULLETIN 740 (1987); currencies and are without limitation as to their face and Sovran Financial Corporation, 73 FEDERAL RESERVE BULLETIN 672 (1987). amount. Midland proposes to conduct these activities 4. Applicant also has committed that B & L will continue to abide through TCI, as well as to market such instruments by the geographic and functional limitations of exemption D with respect to its insurance activities. through a nationwide network of unaffiliated selling Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 253 agents, including commercial banks, thrift institutions in efficiency, that outweigh possible adverse effects, and others.1 such as undue concentration of resources, decreased Notice of the application, affording interested per- or unfair competition, conflicts of interest, or unsound sons an opportunity to comment, has been published banking practices." (52 Federal Register 46,003 (1987)). The time for filing In considering previous applications regarding varicomments has expired, and the Board has considered ably denominated payment instruments, the Board has the application and all comments received in light of expressed concern that the issuance of instruments in the public interest factors set forth in section 4(c)(8) of denominations larger than $1,000 would result in an the BHC Act. adverse effect on the reserve base because such instru- Midland, with total consolidated assets equivalent ments are not subject to transaction account reserve to approximately $51.1 billion, is the 34th largest requirements. The Board has noted that because rebanking organization in the world.2 Midland operates a serve requirements serve as an essential tool of mon- U.S. branch and an Edge corporation both located in etary policy, the conduct of that policy could be New York, New York, and engages in various activi- adversely affected by the erosion of reservable deposties in the United States under sections 4(c)(8) and its in the banking system. Accordingly, in order to 4(c)(9) of the BHC Act and the Board's Regulations Y guard against such potential adverse effects, the Board and K (12 C.F.R. Parts 225 and 211 respectively). conditioned its approval of the Wells Fargo proposal The Board previously has determined that the issu- on a commitment that Wells Fargo cause to be deposance and sale of money orders and similar payment ited into a demand deposit account at its bank subsidinstruments with a maximum face value of $1,000 are iary all of the proceeds of any official check having a closely related to banking. 12 C.F.R. § 225.25(b)(12).3 face value in excess of $10,000, thereby rendering the The Board also has approved by order a limited proceeds subject to reserve requirements. The Board number of applications to engage in the issuance and also made its approval subject to certain reporting sale of payment instruments with a $10,000 maximum requirements, as well as its own continued evaluation face value.4 In addition, the Board has approved the of the activity's effects on monetary policy. issuance and sale of certain payment instruments with To address the monetary policy concerns expressed no maximum limitation on their face amount, subject in the Board's Wells Fargo Order, Midland has comto a number of operational restrictions and reporting mitted that the proceeds of all sales of foreign-currequirements similar to those proposed in the instant rency denominated instruments will be held in demand application. Wells Fargo & Company, 72 FEDERAL deposit accounts at U.S. commercial banks. Deposits RESERVE BULLETIN 148 (1986) ("Wells Fargo"). In stemming from the sale of instruments with denomithe Wells Fargo Order, the Board determined that an nations of $10,000 or less will be swept daily into increase in the denomination of such instruments nonreservable instruments. The entire proceeds of the would not affect the fundamental nature of the paysale of any payment instrument with a face value ment instruments, and the Board concluded that the greater than $10,000 will be deposited in a demand issuance and sale of the proposed instruments in deposit account at a U.S. depository institution. Such increased denominations, such as proposed here, are proceeds will then be used to purchase foreign curclosely related to banking. rency for each particular payment instrument at the In order to approve this application under section time of the transaction. Midland states that its pur- 4(c)(8), the Board must also find that the performance chases of foreign currency are typically value-dated of the proposed activity by Midland "can reasonably two days hence, at which time the demand deposit be expected to produce benefits to the public, such as account will be debited and the U.S. dollar funds will greater convenience, increased competition, or gains leave the U.S. monetary system. Midland has committed that the U.S. dollar fund proceeds of all instruments with a face value greater than $10,000 will not be swept out overnight while in demand deposit ac- 1. Midland also proposes to engage in data processing activities related to the issuance and sale of such payment instruments. The counts, and thus will be reservable. Midland has Board previously has determined that data processing activities for committed to submit to the Board weekly reports of the processing and transmission of financial, banking, or economic balances held in demand deposit accounts. data, such as proposed here, are closely related to banking. 12 C.F.R. § 225.25(b)(7)(ii). Midland contends that implementation of the fore- 2. Asset data are as of June 30, 1987. Banking data are as of going commitments and procedures will adequately December 31, 1986. address the Board's monetary policy concerns. After 3. TCI currently issues and sells travelers checks in various foreign currencies with a maximum denomination of $1,000 pursuant to that reviewing the proposal, the Board has determined that section. the commitments and procedures outlined therein ad- 4. See e.g., BankAmerica Corporation, 73 FEDERAL RESERVE equately address the Board's concerns regarding po- BULLETIN 727 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

254 Federal Reserve Bulletin • April 1988 tential adverse effects on the reserve base. The (collectively "NatWest"), both bank holding compa- Board's approval for Midland to engage in this activity nies within the meaning of the Bank Holding Company is subject to the continued evaluation of its potential Act (12 U.S.C. § 1841 et seq.) ("Act"), have applied for adverse effects on the conduct of monetary policy. for the Board's approval under section 4(c)(8) of the If the Board discerns such effects in the future, the Act (12 U.S.C. § 1843(c)(8)) and section Board would require appropriate modification of the 225.25(b)(4)(iv) of the Board's Regulation Y (12 activity and/or imposition of additional reserve re- C.F.R. § 225.25(b)(4)(iv)) to acquire, through a wholly quirements. owned subsidiary, County NatWest Inc., New York, The record reflects that the sale of these payment New York ("CNI"), 100 percent of the voting shares instruments by Midland would increase competition in of Washington Analysis Corporation, Washington, an industry that currently is highly concentrated and D.C. ("WAC"), which engages in furnishing general enhance the convenience of purchasers. The Board economic information and advice, general economic finds that these instruments, which will be issued by a statistical forecasting services and industry studies to large financial organization, will enjoy ready accept- "Institutional Customers."1 ability and provide benefits to the public. Moreover, Notice of the application, affording interested perthere is no evidence in the record that consummation sons an opportunity to submit comments, has been of this proposal would result in adverse effects, such duly published (52 Federal Register 49,508 (1987)). as unsound banking practices, unfair competition, The time for filing comments has expired, and the conflicts of interest, or undue concentration of re- Board has considered the application and all comsources. ments received in light of the public interest factors set Based upon the foregoing and other considerations forth in section 4(c)(8) of the Act. reflected in the record, the Board has determined that National Westminster Bank PLC ("NatWest Bank the balance of the public interest factors it is required PLC"), with approximately $140.3 billion in total to consider under section 4(c)(8) is favorable. This consolidated assets as of June 30, 1987, is the sevendetermination is subject to all of the conditions set teenth largest banking organization in the world and forth in Regulation Y, including sections 225.4(d) and provides a full range of retail and wholesale banking 225.23(b), and to the Board's authority to require such services worldwide. In the United States, NatWest modification or termination of the activities of a hold- Bank PLC operates four representative offices, ing company or any of its subsidiaries as the Board branches in New York and Chicago, agencies in San finds necessary to assure compliance with the provi- Francisco and Dallas, and six nonbanking subsidiaries sions and purposes of the BHC Act and the Board's (engaged in data processing, factoring, and securities regulations and orders issued thereunder, or to pre- brokerage and dealing). NatWest Bank PLC also convent evasion thereof. trols applicant NatWest Holdings, Inc., and its subsid- The activity shall be commenced no later than three iary National Westminster Bank USA, N.A., New months after the effective date of this Order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of New York, acting pursuant to delegated authority. By order of the Board of Governors, effective February 3, 1988. Voting for this action: Chairman Greenspan and Governors 1. An Institutional Customer is defined by NatWest to be a person Johnson, Seger, Angell, Heller, and Kelley. that is: (1) a bank (acting in an individual or fiduciary capacity); an JAMES MCAFEE insurance company; a registered investment company under the Associate Secretary of the Board Investment Company Act of 1940; or a corporation, partnership, proprietorship, organization or institutional entity that regularly National Westminster Bank PLC invests in types of securities as to which investment advice is given, London, England or that regularly engages in transactions in securities; (2) an employee benefit plan with assets exceeding $5,000,000, or NatWest Holdings, Inc. whose investment decisions are made by a bank, insurance company or investment advisor registered under the Investment Advi- New York, New York sors Act of 1940; (3) a natural person whose individual net worth (or joint net worth Order Approving Application to Acquire Washington with his or her spouse) at a time of receipt of the investment advice Analysis Corporation, Washington, D.C. or brokerage services exceeds $5,000,000; (4) a broker-dealer or option trader registered under the Securities Exchange Act of 1934, or other securities professional; or National Westminster Bank PLC, London, England (5) an entity all of the equity owners of which are institutional and NatWest Holdings, Inc., New York, New York customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 255 York, New York, which holds total deposits individual industries within the context of providing of approximately $11.3 billion as of September 30, investment advice to institutional customers is permis- 1987.2 sible, supports the permissibility of WAC's activities. WAC engages in monitoring and analyzing U.S. On this basis, the Board finds the activities of WAC to legislative and regulatory developments exclusively be closely related to banking. within the context of probable effects on the general With regard to the "proper incident" requirement, economy and individual markets, industries, compa- section 4(c)(8) of the Act requires the Board to deternies and products. Upon consummation of this pro- mine that NatWest's performance of WAC's activities posal, NatWest will transfer the activities of WAC to could "reasonably be expected to produce benefits to County Securities Corporation USA, New York, New the public, such as greater convenience, increased York ("CSC"), an indirect subsidiary of NatWest competition, or gains in efficiency, that outweigh poswholly owned by CNI.3 CSC currently engages in the sible adverse effects, such as undue concentration of combined offering of investment advice and securities resources, decreased or unfair competition, conflicts execution services to institutional customers, pursuant of interest, or unsound banking practices." 12 U.S.C. to prior Board approval. National Westminster Bank § 1843(c)(8). PLC, et al., 72 FEDERAL RESERVE BULLETIN 584 Although NatWest and WAC both engage in provid- (1986).4 CSC will offer WAC's services to its institu- ing investment advice, the market for their activities is tional customers either as a stand-alone service or in relatively unconcentrated with no significant barriers connection with brokerage services.5 to entry. In addition, NatWest, through CSC, cur- Section 4(c)(8) imposes a two-step test for determin- rently engages in investment advice activities that ing the permissibility of nonbanking activities for bank emphasize security-specific analysis, unlike WAC's holding companies: investment advice activities which emphasize the ef- (1) whether the activity is closely related to banking; fects of legislative and regulatory developments on and general industry and economic trends. Accordingly, (2) whether the activity is a "proper incident" to the Board concludes that consummation of this probanking—that is, whether the proposed activity can posal would not have a significant adverse effect on reasonably be expected to produce benefits to the existing or potential competition. There is no evidence public that outweigh possible adverse effects. in the record that consummation of this proposal 12 U.S.C. § 1843(c)(8). would result in unsound banking practices, unfair competition, conflicts of interest, or undue concentra- The Board has previously determined that analysis tion of resources. NatWest's investment advice capaof regulatory developments, in the context of provid- bilities would be enhanced by offering WAC's sering investment research advice, is closely related to vices, allowing it to provide more comprehensive banking and permissible for bank holding companies investment advice to its customers. Accordingly, the under section 225.25(b)(4). Security Pacific Corpora- Board believes that the public benefits of the proposal tion, 71 FEDERAL RESERVE BULLETIN 118 (1984) ("Se- outweigh any potential adverse effects. curity Pacific Order"). WAC's activities are very Based upon the foregoing and other considerations similar to the activities approved in the Security Pa- reflected in the record, and NatWest's adherence to cific Order. Moreover, the underlying rational of the the commitments and conditions contained in Na- Board's decision in the Security Pacific Order, that tional Westminster Bank PLC, et al., the Board has analysis of the effects of regulatory developments on determined that the balance of public interest factors that the Board is required to consider under section 4(c)(8) is favorable. Accordingly, the application is 2. Total deposit data reflects NatWest's acquisition of First Jersey National Corporation, Jersey City, New Jersey, approved by the hereby approved. This determination is subject to all Board on December 21, 1987. of the conditions set forth in Regulation Y, including 3. WAC's former employees will operate as part of CSC's research sections 225.4(d) and 225.23(b), and to the Board's staff. WAC's services will be offered as CSC's services to CSC's institutional customers. authority to require such modification or termination 4. The Board determined that the combined offering of investment of the activities of a holding company or any of its advice with securities execution services to institutional customers subsidiaries as the Board finds necessary to assure from the same bank holding company subsidiary is closely related and a proper incident to banking under section 4(c)(8) of the Act compliance with the provisions and purposes of the and does not violate the Glass-Steagall Act. National Westminister Act and the Board's regulations and orders issued Bank PLC, et al., 72 FEDERAL RESERVE BULLETIN 584 (1986): thereunder, or to prevent evasion thereof. J.P. Morgan and Company, Inc., 73 FEDERAL RESERVE BULLETIN 810 (1987). This transaction shall be consummated not later 5. NatWest has reaffirmed its adherence to the commitments and than three months after the effective date of this conditions set forth in National Westminister Bank PLC, et al., 72 Order, unless such period is extended for good cause FEDERAL RESERVE BULLETIN 584 (1986). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

256 Federal Reserve Bulletin • April 1988 by the Board or by the Federal Reserve Bank of New By order of the Board of Governors, effective Feb- York, pursuant to delegated authority. ruary 4, 1988. By order of the Board of Governors, effective February 8, 1988. Voting for this action: Chairman Greenspan and Governors Johnson, Seger, and Angell. Absent and not voting: Governors Heller and Kelley. Voting for this action: Chairman Greenspan and Governors Seger, Angell, Heller, and Kelley. Absent and not voting: Governor Johnson. JAMES MCAFEE Associate Secretary of the Board JAMES MCAFEE Associate Secretary of the Board SunTrust Banks, Inc. Atlanta, Georgia Security Pacific Corporation Los Angeles, California Order Approving an Application to Engage in Certain Financial Advisory Activities Order Vacating Prior Order Approving Application To Establish an Automated Trading System for SunTrust Banks, Inc., Atlanta, Georgia ("SunTrust"), Options on United States Government Securities a bank holding company within the meaning of the Bank Holding Company Act (12 U.S.C. § 1841 By Order dated August 5, 1987, the Board of Gover- et seq.) (the "Act"), has applied for the Board's nors of the Federal Reserve System ("Board") ap- approval under section 4(c)(8) of the Act (12 U.S.C. proved an application submitted by Security Pacific § 1843(c)(8)) and section 225.23 of the Board's Regu- Corporation, Los Angeles, California ("Security Pa- lation Y (12 C.F.R. § 225.23), to engage directly in cific") under section 4(c)(8) of the Bank Holding certain financial advisory activities. Company Act by issuing an Order Approving Appli- Notice of the application, affording interested percation to Establish an Automated Trading System for sons an opportunity to submit comments on the pro- Options on United States Government Securities posal, has been duly published (52 Federal Register ("August 5, 1987 Order").1 46,002 (1987)). The time for filing comments has ex- On September 1, 1987, the Board of Trade of the pired, and the Board has considered the application City of Chicago, the Chicago Board Options Ex- and all comments received in light of the public change, Inc., and the Chicago Mercantile Exchange interest factors set forth in section 4(c)(8) of the Act. ("Petitioners"), each of which had protested Security SunTrust, with total consolidated assets of approx- Pacific's application before the Board, filed a timely imately $25.9 billion,1 controls banking subsidiaries in petition for review in the United States Court of Florida, Georgia and Tennessee, and engages through Appeals for the Seventh Circuit ("Court of Appeals"). other subsidiaries in various permissible nonbanking On December 9, 1987, Security Pacific advised the activities. SunTrust now proposes to engage directly Board that its subsidiaries had sold all of their rights, in certain activities currently conducted by its lead title, and interest in and to the automated trading bank and other banking affiliates. These activities are: system that was the subject of the August 5, 1987 (1) furnishing general economic information and Order. advice, general economic statistical forecasting On December 11, 1987, Petitioners filed their brief in services and industry studies; support of their petition for review with the Court of (2) providing financial advice to state and local Appeals. On January 26, 1988, the Court of Appeals governments, such as with respect to the issuance of granted a motion by Petitioners and the Board to their securities; dismiss the pending petition for review and remand the (3) providing advice regarding the structuring of and August 5, 1987 Order to the Board so that the Board arranging for loan syndications, interest rate may vacate that Order. Because of the dismissal of the "swaps," interest rate "caps," and similar transacpetition for review, the Order approving this applica- tions; tion is hereby vacated and is no longer effective. (4) providing advice in connection with financing transactions for nonaffiliated financial and nonfinancial institutions; (5) providing valuation services for nonaffiliated financial and nonfinancial institutions; 1. 73 FEDERAL RESERVE BULLETIN 815. 1. Banking data are as of September 30, 1987. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 257 (6) advising nonaffiliated financial and nonfinancial iaries will be conducted directly by SunTrust. Because institutions in connection with merger, acquisition the proposal essentially would result in a transfer of and divestiture considerations; the activities within the same corporate structure, (7) rendering fairness opinions in connection with approval of the application would have no adverse merger, acquisition and similar transactions for non- competitive effects. Moreover, there is no evidence in affiliated financial and nonfinancial institutions; and the record that SunTrust's performance of these activ- (8) conducting feasibility studies for corporations. ities is likely to result in any undue concentration of resources, decreased or unfair competition, unsound The activities described in paragraphs (1) and (2) banking practices, or other adverse effects. are included on the list of permissible nonbanking Based upon a consideration of all the relevant facts, activities in the Board's Regulation Y (12 C.F.R. the Board concludes that the balance of the public § 225.25(b)(4)(iv) and (v)). The Board has previously interest factors that the Board is required to consider determined by Order that the remaining proposed under section 4(c)(8) is favorable. Financial and manactivities are closely related to banking and permissi- agerial resources also are consistent with approval of ble for bank holding companies.2 the proposal. Accordingly, the application is hereby The Board previously has expressed its concerns approved. This determination is subject to the condiregarding conflicts of interest and related adverse tions set forth in this Order and in sections 225.4(d) effects that, absent certain limitations, may be associ- and 225.23(b)(3) of Regulation Y. This approval is also ated with financial feasibility studies that may be subject to the Board's authority to require such modconducted as part of these activities. SunTrust has ification or termination of the activities of a bank committed to abide by the conditions established in holding company or any of its subsidiaries as the these cases in order to avoid such adverse effects. Board finds necessary to assure compliance with the Specifically, SunTrust has agreed that: provisions and purposes of the Act and the Board's regulations and orders issued thereunder, or to pre- (1) SunTrust's financial advisory activities shall not vent evasion thereof. encompass the performance of routine tasks or operations for a customer on a daily or continuous The transaction shall not be consummated later than basis; three months after the effective date of this Order, (2) advice rendered by SunTrust on an explicit fee unless such period is extended for good cause by the basis will be without regard to correspondent bal- Board or by the Federal Reserve Bank of Atlanta, ances maintained by a customer of SunTrust at any pursuant to delegated authority. depository subsidiary of SunTrust; and By order of the Board of Governors, effective Feb- (3) SunTrust will not make available to any of its ruary 8, 1988. subsidiaries confidential information received from SunTrust's clients, except as authorized by the Voting for this action: Chairman Greenspan and Governors respective client. Seger, Angel), Heller, and Kelley. Absent and not voting: Governor Johnson. Under these conditions, SunTrust's performance of this activity is unlikely to result in conflicts of interest JAMES MCAFEE or other potential adverse effects. Associate Secretary of the Board In order to approve this application, the Board must also find that performance of the proposed activities Orders Issued Under Sections 3 and 4 of the "can reasonably be expected to produce benefits to Bank Holding Company Act the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh pos- The Bank of New York Company, Inc. sible adverse effects, such as undue concentration of New York, New York resources, decreased or unfair competition, conflicts of interest, or unsound banking practices." SunTrust's Order Conditionally Approving the Acquisition of a proposal represents a corporate reorganization Bank Holding Company wherein activities currently performed by its subsid- The Bank of New York Company, Inc., New York, New York ("BNY"), a bank holding company within the meaning of the Bank Holding Company Act of 2. Signet Banking Corporation, 73 FEDERAL RESERVE BULLETIN 59 (1987) (paragraphs (3), (5). (6) and (7)); Sovran Financial Corpora- 1956, as amended (the "Act" or the "BHC Act") tion, 73 FEDERAL RESERVE BULLETIN 744 (1987) (paragraph (4)); and (12 U.S.C. § 1841 et seq.), has applied for the Board's Security Pacific Corporation Duff & Phelps, Inc., 71 FEDERAL RE- SERVE BULLETIN 118 (1985) (paragraph (8)). approval under section 3 of the Act (12 U.S.C. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

258 Federal Reserve Bulletin • April 1988 § 1842) to acquire 100 percent of the voting shares of, sections 3(c) and 4 of the Act and the purposes of the and/or to effect a merger with, Irving Bank Corpora- Edge Act. The Board notes that on February 25, 1988, tion, New York, New York ("IBC"), and thereby to the New York State Banking Board unanimously acquire IBC's subsidiary banks.1 approved BNY's proposal to acquire IBC, after exam- BNY also has applied under section 4(c)(8) of the ining the proposal from the standpoint of safety and Act (12 U.S.C. § 1843(c)(8)) to acquire the nonbank- soundness, banking competition, maintenance of fiing subsidiaries of IBC listed in the Appendix to this nancial services and the public convenience and needs Order. In addition, BNY has applied to acquire indi- and considering IBC's comments in opposition to the rectly the shares of Irving Trust International Bank proposal. and Irving International Financing Corporation, cor- The Board has received comments from IBC objectporations chartered pursuant to section 25(a) of the ing to Board approval of the proposed acquisition. IBC Federal Reserve Act (the "Edge Act") (12 U.S.C. also has requested that the Board hold a hearing §§ 611-631). regarding the applications.2 IBC raises questions con- BNY also has provided notice of its intention to cerning, among other things, the ability of BNY to acquire indirectly Banca Delia Svizzera Italiana, Lu- consummate this transaction under New York law and gano, Switzerland; Banco Irving Austral, Buenos IBC's Shareholders' Purchase Rights Plan, the defin- Aires, Argentina; International Commercial Bank itiveness of the proposal, the adequacy of the specifi- PLC, London, United Kingdom; Irving Bank Canada, cations in BNY's application regarding the proposal, Toronto, Ontario, Canada; Sociedad Financiera Con- the adequacy of the capital position of the resulting solidada, Caracas, Venezuela; Turkiye Tutunculer organization, its managerial resources and future pros- Bankasi A.S., Izmir, Turkey; Wing Hang Bank Lim- pects, BNY's plans regarding the retention and operited, Hong Kong; and Banco Weng Hang, Hong Kong, ation of certain IBC subsidiaries, the effect of the under section 4(c)(13) of the Act (12 U.S.C. presence of a minority shareholder on the operations § 1843(c)(13)) and Irving International Trade, Inc., and future prospects of IBC, and the effect of the under section 4(c)(14) of the Act (12 U.S.C. proposed acquisition on the convenience and needs of § 1843(c)(14». the communities served by IBC's subsidiaries. Because of certain provisions of state law discussed The Board has considered these comments carebelow and IBC's Shareholders' Purchase Rights Plan, fully, as well as the responses to these comments BNY may decide to acquire initially no more than 19.9 submitted by BNY, and has reviewed the application percent of IBC's voting stock and through a proxy in light of all of the information presented and othersolicitation to seek to elect at least a majority of IBC's wise available to the Board. Based upon this considboard of directors. If BNY is successful, it would then eration and subject to BNY's commitments and the proceed to acquire the remainder of IBC's shares. conditions established by the Board as described be- Accordingly, BNY has also requested approval under low, the Board has concluded that BNY's proposal the BHC Act to acquire 19.9 percent of IBC's shares satisfies the criteria set out in the Act. Accordingly, and to acquire voting control of such number of IBC's the Board has determined to approve the applications voting shares as will enable BNY to elect at least a subject to the fulfillment of BNY's commitments and majority of IBC's directors. the conditions established herein by the Board. Notice of these applications, affording interested persons an opportunity to submit comments, has been Board Policy in Evaluating Contested published (52 Federal Register 38,273 and 45,689 Proposals (1987)). The time for filing comments has expired, and the Board has considered the applications and all BNY's proposal raises issues concerning the Board's comments received in light of the factors set forth in general policy toward bank holding company acquisitions that are opposed by the management of the institution to be acquired and the adequacy of the 1. These are Irving Trust Company, New York, New York; The Board's procedures in considering these applications. Bank of Lake Placid, Lake Placid, New York; Bank of Long Island, Section 3(c) of the BHC Act requires the Board to Babylon, New York; Central Trust Company, Rochester, New York; review each application on its merits in light of the Dutchess Bank & Trust Company, Poughkeepsie, New York; Endicott Trust Company, Endicott, New York; The First National Bank of Hancock, Hancock, New York; The First National Bank of Moravia, Moravia, New York; The Fulton County National Bank and Trust 2. In addition to the IBC comments, the application was protested Company, Gloversville, New York; Hayes National Bank, Clinton, under the Community Reinvestment Act, 12 U.S.C. § 2901 et seq. New York; The Merchants National Bank & Trust Company of The Board also received comments from members of the public, Syracuse, Syracuse, New York; Nanuet National Bank, Nanuet, New members of Congress, and various organizations. As discussed more York; Scarsdale National Bank and Trust Company, Scarsdale, New fully in this Order, the Board has carefully considered all these York; and Union National Bank, Albany, New York. comments in reaching its decision. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 259 Act's competitive standards, the financial and mana- approved proposal. The Board would not expect to gerial resources and future prospects of the companies grant more than one extension of this period and then and banks concerned, and the convenience and needs only if the Board is satisfied regarding bank safety and of the community to be served. The Act does not draw soundness considerations and the likelihood of conany distinction between acquisitions that are agreed to summation of the proposal within the extended period. between the parties and those where, as here, there is no agreement. The Board's experience over the years Adequacy of Board Procedures indicates that the criteria established by Congress in the BHC Act are adequate for the Board to carry out The Board has also considered whether the Board's the Congressional mandate of maintaining competi- current procedures for processing bank holding comtion, assuring safety and soundness, and meeting pany applications are sufficient in a contested situation community convenience and needs. The Board be- such as presented here. The Board believes that these lieves this is true regardless of whether the proposed procedures are fully adequate to provide all interested acquisition is friendly or hostile. parties the opportunity to review the proposal, to bring In accordance with the requirements of the Act, the to the Board's attention any issue bearing on the Board evaluates each bank holding company acquisi- statutory criteria, and to present evidence and comtion proposal to ensure that these criteria are satisfied. ment on the issue. The Board's rules establish detailed Where the statutory criteria are met, the Board would procedures that govern the submission and content of be acting outside its delegated discretion to withhold applications, require notice of the application to the approval based upon other factors such as whether the public in newspapers and in the Federal Register, and proposal is acceptable to the management of the provide interested persons with an opportunity to banking organization to be acquired.3 The Board thus comment on the proposal for at least 30 days.5 In applies the statutory criteria equally in the case of addition, in 1984, the Board issued a policy statement applications supported by the management of the setting out in detail the procedures that should be used acquired company as well as in those that are opposed in protested applications. 12 C.F.R. § 262.25. There by management.4 are also detailed staff guidelines that govern every In some cases, however, the lack of agreement aspect of the application process, including procebetween the applicant and the organization to be dures for the exchange of communications between acquired may introduce an element of uncertainty in applicant and protestants and relevant time periods for the analysis of certain of the effects of the proposed rebuttal.6 Under these procedures, the applicant and acquisition on the statutory factors. The Board is protesting party are provided an opportunity to commindful of the potential contested situations may pose ment on each other's submissions and to provide data for adverse effects on the financial and managerial and information to support their positions. In this resources of the company to be acquired as well as case, for example, there have been numerous and with respect to the acquiring organization. Thus, in the lengthy submissions by both BNY and IBC throughout case of applications involving contested acquisitions, the application process regarding the issues raised by as in the case of the present application, the Board the application as well as each other's comments. pays special attention to assuring that the statutory Moreover, in this case IBC has been provided, by criteria are met. stipulation between IBC, BNY, and the Board, access The Board will also take into account the potential to major portions of the application normally not made for adverse effects on bank safety and soundness in the available to the public, which contain Applicant's event that a contested situation is prolonged. Thus, as financial projections, underlying assumptions and discussed below, the Board intends to review carefully other confidential business information. As a result, any request by BNY to extend the normal 90-day IBC was able to comment meaningfully on key finanperiod provided for an applicant to consummate an cial considerations in the application that in a number of instances resulted in modifications of BNY's previous submissions. This procedure available under the 3. For example, where the Board rejected an application because Board's current rules has provided the Board with the the applicant's offer did not treat all shareholders equally, a reviewing benefit of extensive submissions by IBC regarding the court found that the Board's decision was unauthorized under the Act. Western Bartcshares, Inc. v. Board of Governors of the Federal Reserve System, 480 F.2d 749 (10th Cir. 1973). 4. See McLeodBancshares, Inc., 73 FEDERAL RESERVE BULLETIN 724 (1987); Crescent Holding Company, 73 FEDERAL RESERVE BUL- 5. 12 C.F.R. § 262.3. This comment period may be extended by the LETIN 457 (1987); Lloyds Bank PLC, 72 FEDERAL RESERVE BULLETIN Secretary of the Board, as it was in this application, for good cause. 841 (1986); Simmer Development Company, 72 FEDERAL RESERVE 12 C.F.R. § 265.2(a)(10). BULLETIN 494 (1986); Hudson Financial Associates, 72 FEDERAL 6. Manual on Procedures for Processing Applications, AD 87-20 RESERVE BULLETIN 150 (1986). (FIS) (May, 1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

260 Federal Reserve Bulletin • April 1988 issues and BNY's submissions and has produced, in for the market would increase by only 23 points to 710 the Board's view, a sufficient record for considering upon consummation of the proposal. The four-firm this application under the criteria in the Act. The concentration ratio (of 46.3 percent) for the market Board believes these procedures have provided IBC would remain unchanged. with a fully adequate opportunity to comment on this In the Mid-Hudson banking market, BNY is the proposal. tenth largest of fifteen commercial banking organizations, with $82 million in deposits, representing 5.0 Competitive Considerations percent of deposits in the market. IBC is the fourth largest commercial banking organization in the mar- BNY is the seventh largest commercial banking orga- ket, with $188 million in deposits, representing 11.5 nization in New York, with one subsidiary bank that percent of deposits in the market. Upon consummacontrols domestic deposits of $11.9 billion, represent- tion of the proposal, BNY would become the largest ing 5.0 percent of total domestic deposits in commer- commercial bank organization in the market with a cial banks (hereinafter "deposits") in New York.7 IBC 16.5 percent market share. The Mid-Hudson banking operates fourteen banking subsidiaries in New York market will become moderately concentrated, with the and is the ninth largest commercial banking organiza- four largest commercial banking organizations controltion in the state, controlling domestic deposits of $9.9 ling 51.8 percent of total deposits. Upon consummabillion, representing 4.1 percent of deposits in New tion of this proposal, the HHI would increase by 115 York. Upon consummation of the proposed acquisi- points to 1105 and the four-firm concentration ratio tion, BNY would become the fifth largest commercial would increase to 56.5 percent.9 banking organization in New York, controlling $21.8 On the basis of the above facts, including the billion in domestic deposits, representing approxi- presence of numerous thrift institutions in each marmately 9.1 percent of deposits in that state. Consum- ket, the Board concludes that consummation of the mation of this proposal would have no significant proposal is not likely to lessen substantially existing adverse effect upon the concentration of commercial competition for banking services in any relevant geobanking resources in New York. graphic market or otherwise result in anticompetive Insofar as the commercial banking product market is effects of the type described in sections 3(c)(1) or (2) of concerned, BNY and IBC compete directly in two the BHC Act. relevant geographic banking markets: the Metropoli- IBC operates in ten banking markets in which BNY tan New York-New Jersey and Mid-Hudson banking does not operate.10 Nine of these markets are not markets.8 In the Metropolitan New York-New Jersey concentrated and all of the markets have numerous banking market, BNY is the seventh largest of 159 probable future entrants. Based upon these and other commercial banking organizations, controlling $10.5 facts of record, the Board concludes that consummabillion in deposits, which represents 4.4 percent of the tion of the proposal would not substantially lessen deposits in that market. IBC is the eleventh largest probable future competition in any relevant banking commercial banking organization in this market, con- market. trolling $6.1 billion in deposits, which represents 2.5 percent of deposits in the market. Upon consumma- Government Securities Clearance and tion of this proposal, BNY would become the fifth American Depository Receipts (ADR) Services largest commercial banking organization, controlling $16.6 billion in deposits, or 6.9 percent of the market's IBC and BNY each provide government securities deposits. The Metropolitan New York-New Jersey clearance and settlement and ADR services to third banking market is considered to be unconcentrated and would remain so upon consummation of the 9. Under the revised Department of Justice Merger Guidelines (49 proposal. The Herfindahl-Hirschman Index ("HHI") Federal Register 26,823 (June 29, 1984)), a market in which the post-merger HHI is between 1000 and 1800 is considered moderately concentrated. In such markets, the Department is likely to challenge a merger that increases the HHI by more than 50 points. The 7. State deposit data are as of September 30, 1987, and market Department has informed the Board that a bank merger or acquisition deposit data are as of June 30, 1986. BNY also operates a credit card generally will not be challenged (in the absence of other factors bank in Delaware. indicating anticompetitive effects) unless the post-merger HHI is at 8. The Metropolitan New York-New Jersey market is defined to least 1800 and the merger increases the HHI by at least 200 points. The include New York City and Long Island, New York; Putnam, Justice Department has stated that the higher than normal HHI Sullivan, Westchester, Rockland, and Orange Counties in New York; thresholds for screening bank mergers for anticompetitive effects Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, implicitly recognizes the competitive effect of limited purpose lenders Ocean, Passaic, Somerset, Sussex, Union, and Warren Counties in and other non-depository financial entities. New Jersey; and portions of Fairfield County in Connecticut. 10. These markets are the Albany, Binghamton, Buffalo, Elmira- The Mid-Hudson banking market consists of Dutchess and Ulster Corning, Ithaca, Oneonta, Plattsburgh, Rochester, Syracuse and Counties in New York. Utica-Rome banking markets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 261 parties.11 As part of its protest, IBC contends that the traditionally provided, such as funds transmissions, Board must consider the competitive effects of the settlement services and custodial services. Clearing proposal viewing government securities clearance and services are also closely tied to lending activities ADR services each as separate product markets. IBC because clearing may involve credit extension by the asserts that these products constitute highly concen- bank to the dealer. Similarly, ADR services have been trated markets separately defined from the commercial provided only by banks and are composed of tradibanking product market and that competition in each tional banking activities such as custodial and trust market will be adversely affected by the merger of IBC services, depositary services, transfer agency services and BNY. BNY asserts that commercial banking is the and lending services. On the basis of these factors, the appropriate line of commerce; or, in the alternative, if Board believes that government securities clearing and the activities are separate lines of commerce, that ADR services should be viewed as elements of the consummation will not result in any substantial com- cluster of services that traditionally has constituted the petitive harm. commercial banking line of commerce, as articulated In delineating the relevant product market in which by the Supreme Court in Philadelphia. As discussed to assess the probable competitive effects of a bank above, in this product market, consummation of the acquisition or merger, the Supreme Court has deter- proposal would have no substantial adverse effect on mined that "commercial banking" is the appropriate competition in any relevant geographic area or otherline of commerce on the basis that the "cluster of wise violate the competitive standards in section 3(c) products . . . and services" provided by commercial of the Act. banks is unique relative to other institutions.12 Under- Even if government securities clearance and ADR lying this analysis is the recognition that the relation- services were each viewed as constituting separate ship among the products and services that constitute lines of commerce that are distinct from the commercommercial banking creates an "economic signifi- cial banking product market delineated in Philadelcance well beyond the various products and services phia, the Board does not believe that consummation of involved."13 To measure the "cluster of products," this proposal would substantially lessen competition in the Court has used bank deposits as a proxy for the either market. market share of the bank. This approach has reason- In defining the government securities clearing marably approximated economic reality in commercial ket, IBC includes only those depository institutions banking and has provided a practical and workable that provide clearing and settlement services for the basis for competitive assessments. more active government securities dealers and brokers Government securities clearing and settlement ser- unaffiliated with a depository institution.14 Under this vices are generally provided by depository institutions approach, BNY has the second largest market share of and involve a combination of services that banks have the five clearing banks in the business with a 28.3 percent market share. IBC is the fourth largest participant with a 18.7 percent market share. Upon consummation of the proposal, IBC projects that BNY would 11. ADRs are receipts, similar to domestic stock certificates, issued be the largest participant in the market, with almost a by a U.S. bank that represent a stated number of shares of a foreign 47.0 percent market share and that the four-firm consecurity. The foreign securities represented by the ADRs are held by a foreign depository trust company, which serves as agent for the centration ratio would increase to 100 percent, with an issuing domestic bank. ADRs are dollar denominated and permit a increase in the HHI of over 1000 points to over 3400.15 United States investor to own and trade foreign stocks without If transactions cleared for affiliates are not excluded, directly trading on the foreign stock exchange. The bank issuing ADRs effectively commits to the valid ownership rights in the shares, BNY's market share would upon consummation be monitors all foreign corporate activities and subscription rights asso- about 43 percent and the HHI would increase by 900 ciated with the shares, and distributes dividends (less applicable taxes and fees) to the ADR holders in dollars. ADRs do not, of course, points to just over 3100. provide the only available means of foreign stock ownership. For BNY disputes IBC's market definition as being too example, United States investors may purchase foreign shares dinarrow. BNY would include all depository institutions rectly and, in instances where a foreign issuer has appointed its own United States transfer agent, purchase United States equity equivalents known as "New York shares." Additionally, for some investors a mutual fund specializing in international markets could provide a substitute for direct stock ownership. 14. Market shares are estimated by analyzing the number of trans- 12. United States v. Philadelphia National Bank, 374 U.S. 321, 356 actions performed by these clearing banks, excluding transactions (1963)0'Philadelphia"). In United States v. Phillipsburg National originated by their own affiliates. Bank, 399 U.S. 350 (1970), the Court stressed that banks were the only 15. Under the revised Department of Justice Merger Guidelines, a financial institution in which a wide variety of financial products and market in which the post-merger HHI is above 1800 is considered services were gathered in one place and that this "clustering" of highly concentrated. In such markets, the Department is likely to financial products and services facilitated convenient access to them challenge a merger that increases the HHI by more than 50 points, in for all banking customers. 399 U.S. at 359. the absence of other factors indicating that the merger would not 13. United States v. Phillipsburg Nat'I Bank, 399 U.S. at 361. substantially lessen competition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

262 Federal Reserve Bulletin • April 1988 that clear government securities transfers, including market is likely to remain competitive after the prothose that are technically unable to meet the clearing posed acquisition. In this market, a relatively small requirements of dealers and brokers or that do not number of large, sophisticated customers account for a choose to provide clearing services to third parties. significant portion of the clearing transactions.19 These Under this market definition, IBC and BNY would large customers promote competition among clearing control 11.7 percent and 15.7 percent of the market, banks through their ability to move, or threaten to respectively. Upon consummation, BNY would con- move, their large volume of business to another trol 27 percent of the market; the four-firm concentra- clearer. In addition, dealers often divide business tion ratio would increase from 57.7 to 63.7 percent; among clearing banks based on the type of security. and the HHI would increase from 368 points to 1397. Because of these established business relationships The Board is inclined to the view that the product and technological interface, changing from one clearmarket for clearing government securities should in- ing bank to another can be relatively easy. Customers clude only those depository institutions that clear for have been successful in promoting competition in this third parties, although the Board notes that under the manner because of sensitivity of clearing bank profits Department of Justice Merger Guidelines, banks that to the volume of transactions. Indeed, the significant clear only for themselves or affiliates would be in- economies of scale in the government securities clearcluded, since these organizations could offer such ing business serve to explain the high concentration services to third parties within one year.16 While this ratios. view excludes from the market institutions clearing The Board also has considered two other factors only for themselves or their affiliates, the Board be- that should provide added pressure to ensure that the lieves that the presence of these institutions, which market remains competitive after consummation of the include at least five large money-center banks on the proposal. Government securities industry participants fringe of the market, exerts a strong mitigating effect have recently explored using industry associations to on the potential for a significant reduction in competi- develop a more efficient and cost-effective clearing tion in the market.17 This influence, along with the system, which should result in the reduction of transother mitigating factors described below, would, in the action volume handled by the clearing banks. For Board's view, be likely to prevent substantial anticom- example, the Government Securities Clearing Corpopetitive effects from arising as a result of consumma- ration ("GSCC"), which is organized by primary tion of the proposal. dealers and major banks, is developing a computer Although the market for clearing government secu- system to reduce the volume of transactions currently rities (as defined by IBC) is concentrated, there is processed by clearing banks through netting the trades substantial competition in the market for customers on among participating brokers and dealers before the the basis of price and quality of service,18 and the trades are cleared by a clearing bank. The resulting decline in demand for clearing bank services should create excess capacity, which should in turn promote 16. If the five large New York City banks that clear for themselves competition among clearing banks. (Citibank, Morgan Guaranty, Bankers Trust, Chase Manhattan and Second, as noted, the potential for de novo entry Chemical Bank) were included in the product market, BNY would provides a strong force preventing anticompetitive control, upon consummation, 27.3 percent of the market and the HHI would increase by 598 points to 2118. The Board notes that these five behavior in the market. There are numerous banking clearing banks are among the nation's largest financial institutions and organizations large enough to enter the clearing marhave in place, or readily available, the personnel and technology to be ket. For these organizations, entry cost and start-up able to provide within a short period of time clearing services for third parties. time do not present insurmountable barriers. The 17. While three of these institutions have terminated clearing highest estimate in the record, $25 million, is still services for third parties within the last few years, there have been significant improvements in clearing technology since and technology relatively small in relation to the resources of most is available through purchase of software packages. potential entrants. Furthermore, currently available 18. The Board notes that significant concentration ratios can be software packages permit de novo entrants to begin unreliable indicators of actual market behavior, and the prima facie case that is established by such ratios under relevant judicial prece- operations more quickly than if they were required to dent may be rebutted by a showing that these ratios do not accurately develop this software in-house. As noted above, there reflect the true economic characteristics of the relevant market. are at least five large money-center banks that clear for United States v. Marine Bancorporation, 418 U.S. 602, 631 (1973). Accord: Brown Shoe v. United States, 370 U.S. 294, 322 n.38 (1961) (statistics concerning market share are not conclusive, as "only a further examination of the particular market—its structure, history, and probable future—can provide the appropriate setting forjudging of analysis; one must thereafter study actual performance of market the probable anticompetitive eflfect of the merger"); United States v. participants to determine the competitiveness of the market). General Dynamics Corp., 415 U.S. 486, 497-98 (1973); United States 19. Large customers include primary dealers, aspiring primary v. First National State Bancorporation, 499 F. Supp. 793, 804-805 dealers and the seven interdealer brokers, who are among the major (D.N.J. 1980) (concentration ratios are useful only as a starting point participants in the government securities market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 263 themselves that could readily provide the same ser- ence in the United States and large brokerage houses vices to third parties should competition in the market are potential entrants into this market. The activities falter significantly.20 If the degree of customer dissat- required to offer ADR services are relatively common isfaction over price or quality of service is sufficient, for the potential entrants.22 ADR marketing requires potential entrants could be encouraged by commit- custodial, depositary transfer agent and lending activments by the customer to provide business to the ities. Custodians to hold the foreign securities underentrant. Finally, past history in this area demonstrates lying the ADRs can be provided without large capital that market participants are able and will take action to costs through foreign offices or agency agreements reduce costs and improve services. with foreign institutions. To provide ADR services, an entrant must have ADR Services personnel and a computer system capable of tracking ADR ownership, collecting and converting dividends, As with government securities clearing services, IBC exercising rights offerings, controlling pre-release and BNY present significantly different market struc- lending23 and monitoring the lending limits of brotures for ADRs. IBC defines the market as the number kers. These services do not differ materially from the of shares against which each bank has issued ADRs. requirements for establishing other securities trading IBC estimates that the post-merger share would make operations and therefore would not constitute a BNY the second largest participant with a market significant barrier to entry into the ADR service share of 28 percent.21 The four-firm concentration market. ratio would be 100 percent and the HHI would in- A de novo entrant may experience a cost disadvancrease 384 points to 4823. tage in securing sponsored ADRs24 because a foreign BNY disputes IBC's definition of the market as company that wishes to convert to sponsored ADRs being too narrowly limited to the number of foreign must pay a cancellation fee to the holders of all shares against which banks issue ADRs. According to previously issued unsponsored ADRs. Banks with BNY, other methods of foreign share ownership, such large holdings of shares against which unsponsored as direct investments and mutual funds comprised of ADRs have been issued could have a cost advantage foreign shares, should be included when defining the over a new entrant because they do not have to pay applicable market. Under this approach, and assuming cancellation fees for the shares they are holding, thus that ADRs represented one-third of all foreign shares reducing the cost of switching to a sponsored ADR. A owned by U.S. investors (an over-estimation accord- new entrant without the benefit of such holdings would ing to BNY), the relevant market would be 200 percent be forced to absorb the cancellation fees on an outlarger than IBC projects with an HHI below 1000 and standing unsponsored ADR which the issuer of the a post-merger change of less than 40 points. underlying security has determined to convert to a Even if IBC's market definition is accepted, the sponsored ADR. This cost disadvantage is not present Board concludes that the number of potential entrants, when introducing sponsored ADRs that have not prethe ease of entry into the ADR market, the rapid viously been traded on an unsponsored basis, howgrowth in the use of ADRs, as well as the availability ever. By aggressively competing for this type of ADR, of close substitutes for ADRs would preclude consum- a de novo entrant can overcome this cost disadvanmation of the proposal from substantially lessening competition in the market. The number of potential entrants into the ADR market is large; major New York banks, other large United States banks with experience in clearing and 22. For example, a number of banks and other firms issue custody receipts for securities other than foreign securities, including instrutransfer operations, large foreign banks with a presments representing interests in the "stripped" U.S. government securities known by acronyms: LIONS, TIGRS, and CATS. The services provided to holders of these receipts are very similar to those provided to holders of ADRs. 20. Moreover, the Board notes that the true dimension of the 23. Pre-release lending occurs when depositaries provide shortgovernment securities clearing market, as proposed by IBC, ignores term loans that cover the ADR until the actual underlying foreign the fact that a number of nonbanking companies engage in the clearing security is delivered. This process is necessary because foreign business even though they ultimately must clear their net positions countries often do not require the delivery of purchased securities through a depository institution. The figures supplied by IBC do not within the same time frame required under United States law. include the full volume of clearing business effected by these firms. 24. Unsponsored ADRs are issued by a bank without the partici- This volume of business would tend to reduce the concentration pation of the company whose securities underlie the receipt. They figures noted above. may be issued by a number of different banks for the same underlying 21. On this basis, this market would be dominated by Morgan security issue. Sponsored ADRs are issued by only one bank under an Guaranty Trust Company of New York with a market share of agreement with the foreign issuer. Although unsponsored ADRs approximately 63 percent. IBC traditionally has been the second constitute approximately 75 percent of the market, sponsored ADRs largest firm in the market with a 17 percent market share. account for an increasing share of all ADRs traded in this country. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

264 Federal Reserve Bulletin • April 1988 tage. The rapid growth of the ADR market25 makes Capital Adequacy Guidelines28 without significant reit attractive for entry and entry is presently liance on intangibles, particularly goodwill. The Board occurring.26 carefully analyzes the elfect of expansion proposals on Finally, the Board notes the availability of a number the preservation or achievement of strong capital of substitutes for ADR services for certain types of levels and has adopted a policy that there should be no customers, principally direct investment in foreign significant diminution of financial strength below these shares, particularly by larger financially sophisticated levels for the purpose of effecting major expansion customers and mutual funds with portfolios of foreign proposals.29 securities. As in the case of government clearing The proposed transaction represents a substantial services, the immediate customers of ADRs are bro- acquisition for BNY that would double its size in terms kers and similar financially sophisticated customers, of total assets and make it one of the nation's largest who are able to demand competitive prices and ser- banking organizations. BNY proposes to acquire all of vices by moving or threatening to move their business the outstanding common shares of IBC stock through to another competitor or potential competitor or uti- a stock and cash offer based on a $60.00 per share lizing competitive alternatives, such as direct invest- value of IBC stock.30 The cash portion of the purchase ment for certain types of investors. amounts to $264 million and will be funded through the For the above reasons, the Board concludes that the liquidation of $220 million of investments and the proposed transaction would not have a significant issuance of $44 million of short-term debt. adverse effect on competition in government securities While financial projections submitted by the Appliclearing and ADR services even assuming these ser- cant indicate that the capital ratios of the resulting vices were considered to constitute distinct product organization would remain above the minimum levels markets. In this regard, the Board has been advised by specified in the Board's Capital Adequacy the Antitrust Division of the U.S. Department of Guidelines,31 the proposal will result in a lessening of Justice, which has investigated the competitive effect the capital strength of the two organizations on a of the proposal, that it has concluded that the proposal combined basis as a result of the proposed $264 million would not have a significantly adverse effect on com- payment of a portion of the purchase price in cash. To petition. address these effects, BNY has committed that, at consummation of the acquisition of IBC, its consoli- Financial Factors dated tangible common equity to assets ratio will equal at least 3.5 percent and that it will achieve a 4.1 In evaluating these applications, the Board has care- percent tangible common equity to assets ratio within fully considered the financial resources of the compa- one year of consummation.32 nies and banks involved and the elfect on those These commitments, however, are not fully suffiresources of the proposed acquisition. The Board has cient to satisfy the Board's policy regarding the avoidstated and continues to believe that capital adequacy is ance of declines in existing capital levels and the an especially important factor in the analysis of bank maintenance of strong capital levels in significant bank holding company expansion proposals, particularly in transactions, such as this, where a major acquisition is proposed.27 In this regard, the Board has stated that it expects 28. Capital Adequacy Guidelines, 50 Federal Register 16,057 (April 24, 1985). banking organizations contemplating expansion pro- 29. Thus, for example, the Board has generally approved proposals posals to maintain strong capital levels substantially involving a decline in capital only where the applicants have promptly above the minimum levels specified in the Board's restored their capital to pre-acquisition levels following consummation of the proposals and have implemented programs of capital improvement to raise capital significantly above minimum levels. See, e.g., Citicorp, 72 FEDERAL RESERVE BULLETIN 726 (1986); Security Pacific Corporation, 72 FEDERAL RESERVE BULLETIN 800 (1986). See 25. For example, based on trading volume, as measured by the also Security Banks of Montana, 71 FEDERAL RESERVE BULLETIN 246 volume of ADRs traded on NASDAQ, the market increased by 38 (1985). percent from 1985 through 1986. 30. Each share of IBC common stock will be exchanged for 1.575 26. For example, the Bankers Trust Company appears to be shares of BNY's common stock and $15.00 net to the seller in cash. expanding its involvement in the market. The Board also notes that The total consideration for the acquisition is $1.1 billion. BNY itself entered the market only four years ago and has accumu- 31. In analyzing the financial aspects of the proposal, the Board has lated an 11 percent market share. used financial statements as of December 31, 1987, for both parties, 27. Chemical New York Corporation, 73 FEDERAL RESERVE BUL- adjusted for projected operations of the organizations through April LETIN 378 (1987); Citicorp, 72 FEDERAL RESERVE BULLETIN 497 30, 1988, BNY's anticipated consummation date, as well as IBC's (1986); National City Corporation, 70 FEDERAL RESERVE BULLETIN issuance on February 23, 1988, of approximately $100 million of 743 (1984); Banks of Mid-America, Inc., 70 FEDERAL RESERVE cumulative convertible preferred stock. BULLETIN 460 (1984); Manufacturers Hanover Corporation (CIT), 70 32. BNY's commitments are based on the deduction of all intangi- FEDERAL RESERVE BULLETIN 452 (1984). bles from the calculation of this ratio, not only goodwill. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 265 expansion proposals. To achieve full compliance with assets.34 The primary dispute concerns the accounting this policy, particularly given the size of the proposed treatment of IBC's loans to heavily indebted developcombination, the Board believes that, in order for ing countries and IBC's nonperforming loans.35 BNY to proceed with consummation of its proposal, BNY proposes to write down the value of $250 BNY should support at least 60 percent of the cash million of IBC's debt to heavily indebted developing outlay required by its proposed purchase through the countries to be sold within one year following consumissuance of an equal amount of new equity capital in mation to reflect the estimated secondary market value the form of common stock or noncumulative, perpet- of this debt but proposes to make no further accountual preferred stock. Moreover, the Board believes ing adjustments for the remaining portion of this that, within six months of consummation of the pro- portfolio or IBC's nonperforming loans. BNY relies on posal, the remaining 40 percent of the cash outlay for its interpretation of generally accepted accounting the purchase should be supported by common stock or principles governing purchase transactions to support perpetual preferred stock. The Board conditions its its accounting treatment of IBC's loans. order on compliance with these capital requirements. IBC counters with its interpretation of prevailing The new equity capital BNY must raise to comply with accounting principles that would require all of its debt these capital requirements will not be considered in to heavily indebted developing countries and nonperdetermining whether BNY has complied with its comforming loans to be written down to current market mitment to the Board that at consummation BNY values. Under these accounting adjustments, addiwould have a tangible common equity to assets ratio of tional goodwill would be created thus requiring BNY at least 3.5 percent. to raise more capital in absolute terms to achieve its On the basis of these requirements, the capital of the capital ratio commitments. combined organization would be restored to pre-acqui- The Board's requirement for additional capital at sition levels within a short period of time after con- and shortly after consummation of the proposal assummation. The proposal, thus, would be consistent sumes the purchase accounting adjustments submitted with the Board's capital policy that an expansionary by BNY and in the amounts stated in its proposal. As acquisition not interfere with an applicant's ability to noted, this capital level, higher than that proposed by maintain a strong capital position above the minimum BNY, was established in part on the basis of the levels required under the Board's guidelines, without Board's consideration of asset quality and the uncersignificant reliance on intangibles. tainties that are naturally raised in an acquisition of Further, on the basis of these capital requirements, this size. Thus, the Board's requirement for a strong BNY's capital position at consummation would not tangible equity position takes into account the cononly be in full compliance with the Board's Capital cerns raised by IBC. Adequacy Guidelines but would also be at or above Based on the above considerations, including the the current average levels of its peer group of the capital requirements established by the Board in this nation's largest banking organizations. The increased Order and the commitments by BNY regarding its capital will serve to offset the goodwill BNY would tangible common equity to assets ratio at consummaincur to effect the acquisition and will provide addi- tion and within 12 months of consummation, and tional capital to cushion the impact of any potentially the facts of record, the Board concludes that the adverse financial effects raised in an acquisition of this financial resources of BNY and the banks and compamagnitude.33 These capital requirements fully address nies involved are consistent with approval of the IBC's contention that BNY's cash payment to IBC proposal. shareholders and the costs of effecting the acquisition In its application, BNY requested approval for the will weaken the capital position of the combined acquisition of IBC's shares under three different purorganization. chase prices, which included variations on the cash IBC has challenged BNY's pro forma capital ratio and stock portions of the purchase price. BNY also commitments on the basis of the purchase accounting has reserved the right to modify its offer and, as noted, adjustments projected by BNY for certain IBC has done so during the pendency of this application. 34. Accounting adjustments directly impact on these commitments by potentially increasing the amount of goodwill generated by the acquisition and producing a complementary diminution in the capital 33. For example, this would allow for any additional costs that ratios if all other circumstances remained unchanged. BNY might incur in rationalizing the computer systems of the two 35. Recent loan loss reserve provisions for the debt to heavily organizations or offset any reduction in BNY's projected cost savings indebted developing countries taken by IBC in the fourth quarter have arising from the acquisition. significantly reduced the quantitative impact of this dispute. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

266 Federal Reserve Bulletin • April 1988 The Board's approval in this Order, however, is BNY would have the resources to be able to attract limited to the current offer made by BNY for IBC's adequate replacement personnel. Further, BNY has shares as described in this Order. Accordingly, if BNY demonstrated its ability to manage a large banking further amends or alters the offer, it must consult with organization. The Board finds no evidence to support the Board to determine whether the amendment is so a finding that BNY's managerial resources are inadematerial, as it relates to the Board's analysis and quate to undertake the proposal. The Board also finds conclusions under the statutory factors, that it would no evidence that pension fund purchases of BNY require a new application or further proceedings be- stock reflect adversely on the integrity or the managefore the Board. rial ability of BNY. IBC also questions the future prospects of the Managerial Resources and Future Prospects combined institutions on the following bases: (1) BNY's proposed asset divestitures are necessi- The Board has also considered the managerial re- tated by its commitment to meet capital ratios and sources of the companies and banks involved, includ- will adversely affect IBC's core business operations ing those of the combined organization upon consum- by significantly weakening its future financial remation, as well as their future prospects, as required sources; under section 3(c) of the Act. At the outset, the Board (2) disparate IBC technology will make BNY's notes that both organizations have management re- systems integration difficult, costly and extremely sources which have established records of positive risky; and earnings and operations. (3) BNY's cost savings projections are unrealistic IBC comments that several considerations in the and ill-conceived. proposal will result in inadequate managerial resources for the combined organization. In its view, BNY responds that: disparate technological systems and management phi- (1) proposed asset divestitures are based on stratelosophies will make it extremely difficult to combine gic planning incorporating BNY's greater emphasis successfully the two organizations. IBC predicts sig- on profit; nificant employee defection, with an irreplaceable loss (2) IBC's and BNY's technological systems are not of expertise in such key areas as its international so dissimilar as to prevent an efficient integration; operations. Additionally, IBC criticizes BNY's past and management record and questions the propriety of the (3) cost savings are based on reasonable projections BNY employee pension plan's purchase of BNY of employee attrition and more efficient use of stock. present resources. BNY disputes any negative managerial considerations by focusing on its commitment to retain IBC's IBC attributes a loss of core business primarily to management personnel after consummation of the BNY's proposed $1 billion reductions in its interesttransaction. BNY has offered contracts to senior man- bearing foreign deposits and foreign short-term loans. agement and has committed to establish a committee Additionally, BNY's proposed reduction in trading comprised of officers from each institution for the assets and federal funds transactions will, according to purpose of determining staffing decisions for the com- IBC, impair its current status as a primary dealer bined institutions solely on the basis of merit. Accord- thereby making it more difficult to attract foreign ing to BNY, its decision to foster the goodwill of IBC institutional customers. The Board finds, however, management and personnel through these commit- that BNY's strategic planning differs from IBC's apments significantly reduces potential difficulties in- proach in allocating financial resources. In short, BNY volved in merging the two organizations. BNY also does not propose to run IBC's international operations defends its past management record and maintains that under IBC's business assumptions. Moreover, when the pension benefits of its employees were increased these reductions are considered in the context of the by the purchase of BNY stock. combined organization's resources for international The Board believes that BNY's personnel commit- operations, there appears to be sufficient flexibility for ments and the involvement of IBC management in BNY to make adjustments that may be required if future staffing decisions mitigate potential concerns IBC's projections are accurate. BNY also has aderaised by a consolidation of this magnitude and com- quate alternatives for achieving its capital commitplexity. Through these commitments, BNY enhances ments without total reliance on these proposed divesthe availability of experienced employees to assist in titures. both the technological and organizational integrations. IBC has alleged in detail the incompatibility of the To the extent that IBC employees voluntarily depart, IBC and BNY technological systems, and although the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 267 extent of the difficulty and costs involved in integrating and banks involved are consistent with approval of the these systems is in dispute, the Board recognizes that application.38 this process is a significant undertaking that requires careful consideration. BNY has committed to devote Convenience and Needs Considerations its internal resources as well as those of outside experts toward extensive analysis and planning before IBC contends that the public convenience and needs the integration is initiated, and the record in this would not be served by BNY's proposal for the application does not demonstrate that BNY is unable following reasons: to undertake this process. The Board recognizes that (1) an increase in concentration in the government there may be significant costs in integrating the two securities clearing market would increase operasystems. However, even if BNY's projected cost tional risks to federal debt financing; savings from the acquisition are totally eliminated, the (2) problems associated with the integration of IBC Board believes that BNY will have sufficient financial and BNY would decrease IBC's present quality of resources to meet the challenge of integrating the service to local communities; technological systems, particularly given the level of (3) services to certain local counties would be lost capital required of BNY in order for it to consummate because branches would replace local subsidiary the acquisition. banks; and IBC states that other BNY costs savings resulting (4) non-negotiated takeovers threaten the public from staff reductions through attrition and reduced interest. office space needs for the combined organizations are unrealistic. The record in this application does not, The Board has carefully considered the potential in however, support a finding that BNY's projections this proposal for aggravating the risks posed by the on employee attrition are unrealistic.36 Additionally, possible operational failure of a major participant in BNY's decision not to sell immediately IBC's building the government securities clearing market. In this at 1 Wall Street increases BNY's flexibility to pro- regard, BNY has committed to run both BNY's and vide sufficient office space for the combined IBC's clearing systems separately for a considerable workforce. period of time while BNY conducts an extensive Regarding its future prospects, BNY submitted fi- review and analysis to determine how the systerhs may nancial projections showing certain cost savings from be properly integrated. During this period the two reduction in salaries, benefits, advertising and market- systems will be operated as they are now by generally ing, and occupancy. In evaluating the future prospects the same personnel. BNY further commits to fully of the organization, the Board has excluded BNY's inform the Federal Reserve Bank of New York of projected cost savings (due to their inherently subjec- its plans and progress and not to effect any consolidative nature and the fact they could be offset by tion without Federal Reserve Bank approval. Under additional expenses in integrating the two organiza- these circumstances, the Board concludes that the tions, particularly with respect to their data processing acquisition of IBC's government securities clearing systems) and has projected earnings on a more con- operation is not a negative consideration in this proservative basis than advocated by BNY based upon posal. the historical performance of the two organizations. The record of this application does not support Even at this level, however, BNY would be able to IBC's second and third concerns. As previously dismeet its 4.1 percent tangible common equity commit- cussed, BNY's personnel plans will minimize any ment, particularly given the Board's requirement for disruption caused by combining the two companies. new equity capital to offset the cash portion of the Similarly, BNY appears to have sufficient financial purchase price.37 flexibility to minimize the possibility of any abnormal On the basis of its review of the record, including disruption in customer service when integrating the the organizations' records of earnings and capital technological systems. The record is equally unsupimprovement, the Board concludes that the manage- portive of IBC's assertion that conversion of current rial resources and future prospects of the companies IBC subsidiary banks into branches of BNY would be injurious to the public convenience and needs of certain local New York counties. The Board has never 36. In light of BNY's personnel commitments, IBC's suggested determined that, as a general matter, one form of cost to account for involuntary termination benefits has diminished relevance. 37. The Board has considered growth in assets above that projected by BNY. The Board notes, however, that BNY would be 38. The Board requires as a condition of approval that BNY submit required to limit asset growth to deal with any capital demand that is to the Federal Reserve Bank of New York the names and qualificanot met by earnings retention or issuance of additional capital. tions of the persons it intends to nominate to the IBC board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

268 Federal Reserve Bulletin • April 1988 corporate organization provides superior services to proval of the application. On February 19, 1988, the public over the other. In the context of this specific ACORN advised the Board that it had reached a application, the record fails to demonstrate that BNY community reinvestment agreement with BNY to will be any less able than IBC to serve the public strengthen substantially BNY's commitment to help convenience and needs through its branches instead of meet the housing credit needs of low- and moderatethrough individually chartered banks.39 The Board income neighborhoods in the City of New York. notes that there are in New York and in many areas of ACORN further stated that it therefore recommends United States, large numbers of banking organizations approval of the proposal. that effectively serve different communities through In accordance with the Board's practice and procebranch systems rather than through individual dure the Board has reviewed the CRA record of banks. BNY's subsidiary bank, the allegations made by pro- As noted, the Board does not believe the non- testants, and BNY's response.40 The Board notes that negotiated nature of the proposal in and of itself should while the CRA record of BNY's subsidiary bank be given negative weight in the Board's evaluation ("Bank") has been generally satisfactory, there are under the financial and public convenience and needs certain areas where the Board believes Bank needs to criteria Congress has set out in the Act. Moreover, the take steps to strengthen its CRA performance. In Board does not believe that the non-negotiated nature particular, the Board believes Bank must reassess its of the proposal would, under the facts and circum- local community delineations in the New York City stances and given the conditions established in this area to ensure that they reflect Bank's lending territory Order, result in adverse effects on the public conve- and do not arbitrarily exclude major portions of New nience and needs, or the financial or managerial re- York City, including low- and moderate-income sources and future prospects of the organizations neighborhoods.41 In addition, upon consummation, involved, that would warrant denial under the Act's BNY should also take steps to reassess the community statutory criteria. delineations for Irving Trust Company to ensure that they reflect that institution's lending territory and do Community Reinvestment Act not arbitrarily exclude low- and moderate-income neighborhoods. In considering the convenience and needs of the Regarding Bank's efforts to ascertain and help meet community to be served, the Board has taken into community credit needs, to participate in community account the record of BNY under the Community development and to institute appropriate procedures Reinvestment Act ("CRA") (12 U.S.C. § 2901 et seq.). The CRA requires the federal bank supervi- 40. Although UTA joined with ACORN's protest of this applicasory agencies to encourage financial institutions to tion, its primary concern was the potential negative impact on banking help meet the credit needs of the local communities in services in low- and moderate-income neighborhoods in the Albany- Troy SMSA that may be caused by BNY's proposed sale of IBC's which they operate, including low- and moderatebank subsidiary located in this area. To the extent that these concerns income neighborhoods, consistent with the safe and are based on a potential lack of effective competition, BNY has sound operation of the institutions. To accomplish this committed to sell IBC's subsidiary banks only to purchasers satisfying current Department of Justice competitive guidelines. Other concerns end, the CRA requires the appropriate supervisory may best be addressed in the context of a specific proposal before the authority to "assess the institution's record of meeting appropriate federal or state regulatory authority required to approve the credit needs of its entire community, including the purchase. Under the relevant statutory criteria that would be applied, the reviewing authority would have to determine that the low- and moderate-income neighborhoods, consistent acquisition would not be competitively harmful, that the acquiror has with the safe and sound operation of the institution." the financial and managerial resources to manage the institution effectively, and that the convenience and needs of the community The Board is required to "take such record into would continue to be served by the institution. account in its evaluation" of applications under sec- Other commentators have viewed BNY's proposed sale of IBC's tion 3 of the Act. upstate bank subsidiaries as potentially causing widespread unemployment. There is, however, no evidence that the proposed sales will With regard to BNY's CRA record, the Board cause significant unemployment because the purchasers will need received comments from the New York chapter of the personnel to staff offices. Moreover, immediate, significant changes in Association of Community Organizations for Reform personnel at these banks would be inconsistent with BNY's announced intent to sell the upstate subsidiaries. Accordingly, BNY's Now ("ACORN") and the United Tenants of Albany response to these concerns reflects an intent to continue current ("UTA") (collectively "Protestants") opposing ap- personnel levels at the bank subsidiaries proposed for divestiture. As noted by the New York State Banking Board, BNY has pledged to attempt to achieve any necessary personnel reductions in the resulting organization through attrition. 39. BNY has committed that it will not close any branch acquired 41. The Board notes that while Bank's CRA delineations appear from IBC if, as a consequence, any neighborhood previously served too narrow under the standards in the Board's regulations (12 C.F.R. by a particular IBC branch is left without a branch of either BNY or § 228.3), the Board finds no evidence that Bank has discriminated in IBC. its lending geographically. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 269 to monitor CRA performance, the Board has consid- • emphasize home mortgage and home improvement ered the action taken by the board of directors of Bank loans for development and rehabilitation of one-to on February 16, 1988, to adopt a formal CRA state- four-family structures, as well as housing development ment for Bank. The statement pledges Bank's commit- loans for multi-family structures; and ment to the goals of CRA and institutes a four-point plan to strengthen Bank's service to its local commu- • implement a CRA compliance reporting and moninities, including low- and moderate-income neighbor- toring system, with at least quarterly reports by local hoods. In particular, the statement requires Bank to: CRA officers to Bank's CRA compliance officer as well as review of the reports by a CRA committee of • adopt an education and information program for Bank's board of directors and the entire board of bank officers and employees regarding their responsi- directors. bilities under CRA and fair lending practices laws, including information regarding Bank's policies re- The Board believes that Bank's effective implemengarding loans to small and minority-owned businesses tation of the measures spelled out in this statement will and low- and moderate-income housing; strengthen Bank's CRA performance in the areas noted. In light of this statement, and the other facts of • designate a lending officer for each of its principal record, including Bank's overall satisfactory CRA geographical areas who will be responsible for moni- record, and subject to Bank's reassessment of its local toring the availability of Bank's lending programs for communities as discussed above, the Board concludes small and minority-owned business and low- and mod- that convenience and needs considerations are conerate-income housing in that area; sistent with approval. In order to monitor implementation of Bank's state- • provide specialized training to designated CRA of- ment, particularly Bank's emphasis on housing-related ficers to assist Bank's lending employees and officers lending, as well as Bank's reassessment of its local in connection with specialized government and com- communities in New York City, the Board requires munity development programs directed to low- and that BNY submit periodically reports to the Federal moderate-income communities; Reserve Bank of New York describing Bank's progress in these areas beginning six months after consum- • continue Bank's broad-based advertising and mar- mation of its acquisition and continuing thereafter until keting programs to inform low- and moderate-income the Federal Reserve Bank is satisfied that the stategroups and minority communities of Bank's lending ment has been implemented and the reassessment of programs and services, including making available in its communities has been accomplished. branches in New York City and other appropriate areas, marketing and informational materials printed Provisions of New York Law and IBC's in Spanish as well as English; Shareholders' Purchase Rights Plan • inform itself of community credit needs through a IBC argues that New York corporate takeover law and program of periodic meetings with public and private IBC's shareholders' rights plan present potential barcommunity groups to discuss the credit needs of low- riers to BNY's contested acquisition of IBC.42 Under and moderate-income groups and minorities and pro- New York law ("Section 912"),43 a shareholder acvide a mechanism by which these communications quiring more than 20 percent of the stock in a target regarding the community needs are made available to corporation without the approval of its board of direc- Bank's officers with responsibility in the CRA area; tors may not subsequently merge the two organizations for a minimum period of five years. Similarly, • develop loan programs responsive to the credit IBC's Shareholders' Purchase Rights Plan permits needs of low- and moderate-income neighborhoods, IBC stockholders to acquire $400 of BNY's stock after by providing financing for low- and moderate-income the acquisition for $200, the current exercise price for housing, small business and commercial real estate the rights, unless these rights are redeemed by IBC's projects in its communities consistent with safe and sound banking practices; 42. In recognition of these issues, BNY has conditioned its tender offer upon their satisfactory resolution. Other conditions to the tender • attempt to be flexible in the application of its general offer include a valid tendering of at least two-thirds of the total number underwriting credit criteria within the bounds of pru- of outstanding IBC shares on a fully diluted basis, approval by BNY's shareholders, and other appropriate regulatory approvals without dent lending practices and safe and sound banking material conditions unacceptable to BNY. operations; 43. N.Y. Bus. Corp. Law § 912 (McKinney 1986). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

270 Federal Reserve Bulletin • April 1988 board of directors before a third party acquires 20 IBC challenges BNY's approach under the Deposipercent of IBC's voting shares.44 tory Institution Management Interlocks Act ("In- At the outset, the Board notes that BNY proposes to terlocks Act") (12 U.S.C. § 3201 et seq.) and the initiate a tender offer for all of IBC's shares, and has Board's decision in NBC Co.46 The Interlocks Act applied to the Board for approval under the Act to prohibits director interlocks between two nonaffiliated acquire the shares tendered. If the tender is success- institutions in the same metropolitan statistical area ful, IBC's board of directors could reconsider and and between large bank holding companies unless an approve the acquisition of 20 percent or more of IBC's institution is a "subsidiary" for purposes of section shares or its merger with BNY, thus satisfying Section 2(d) of the Bank Holding Company Act.47 In light of 912. Similarly, in such a situation, the board of direc- BNY's proposal to acquire at least 19.9 percent of tors may decide to redeem the Shareholders' Purchase IBC's shares and its commitment to elect at least a Rights Plan. majority of the IBC board of directors, the Board BNY has presented an alternative proposal to over- concludes that the two organizations would become come these obstacles, however, in the event IBC's "affiliates" for purposes of the Interlocks Act, and board does not consent to the acquisition. With Board thus the interlocking directors between IBC and BNY approval under the BHC Act, BNY proposes to ini- would not be prohibited. tiate a proxy contest at its next annual meeting for IBC also challenges BNY's proposed acquisition control of IBC's board of directors at IBC's next under the Board's decision in NBC Co. In that case, annual shareholders meeting (scheduled for April 21, the Board denied a bank holding company's applica- 1988) and to acquire up to 19.9 percent of IBC's voting tion to acquire between 20 to 25 percent of the voting shares prior to that time to increase the likelihood of a shares of a bank. In NBC Co., the Board stated that, successful proxy solicitation. If this approach is suc- because a single shareholder held over 50 percent of cessful, the newly constituted board could, according the voting shares of the bank and vigorously opposed to BNY, approve BNY's offer and redeem the share- the acquisition, the proposal "would only perpetuate holders rights before the 20 percent thresholds in or aggravate dissension in Bank's management" with- Section 912 or the rights plan are triggered. BNY has out the applicant having any opportunity to obtain committed not to elect its nominees to IBC's board, control of the bank.48 The Board also noted that the however, unless the nominees constitute at least a proposed acquisition in NBC Co. could detract from majority of the IBC directors.45 the overall financial condition of the applicant, which planned to rely on the bank's dividends to service the applicant's acquisition debt. The Board has considered the effects of BNY's proposed minority ownership position on the manage- 44. Under this plan, holders of the rights are entitled to purchase one share of new IBC common stock for $200. If IBC is subsequently ment of IBC. In this case, unlike in NBC Co., BNY acquired in a merger or other business combination transaction, or 50 will become the largest single shareholder of IBC, and percent or more of its consolidated assets are sold, each holder of an unexercised right is entitled to purchase that number of the acquiror's its acquisition of a minority interest is a first step in common shares that have a market value of two times the then-current seeking control of IBC. The Board has recently apexercise price. proved the acquisition of a minority interest in a bank 45. BNY also proposes alternative resolutions to these state law questions, such as litigation to challenge the legality of these provi- holding company "where there is a possibility or sions or a continuing refusal of IBC's directors to accept the offer. IBC likelihood that the applicant will eventually gain conchallenges these alternatives by asserting the constitutionality of New York law and the legality of all actions by the IBC board of directors trol, despite claims by management of possible under BNY's view of applicable corporate case law precedent. dissension."49 Moreover, the proposed 19.9 percent Regarding constitutional challenges to state laws, the Board has previously stated that it will not hold a state statute unconstitutional without "clear and unequivocal evidence of the inconsistency of the state law with the federal Constitution." Chemical New York Corpo- 46. 60 FEDERAL RESERVE BULLETIN 782 (1974). ration, 73 FEDERAL RESERVE BULLETIN 609, 610 (1987); Bank of New 47. Under the relevant alternative tests in the Act, a "subsidiary" England Corporation, 70 FEDERAL RESERVE BULLETIN 374, 376 is: (i) "any company the election of a majority of whose directors is (1984); NCNB Corp., 68 FEDERAL RESERVE BULLETIN 54, 56 (1982); controlled in any manner by such bank holding company"; or (ii) "any Whitney National Bank in Jefferson Parish v. Bank of New Orleans & company with respect to the management or policies of which such Trust Company, 379 U.S. 411, 419 (1965). The Board concludes that bank holding company has the power, directly or indirectly, to Section 912 has not been demonstrated to be unconstitutional under exercise a controlling influence . . ." 12 U.S.C. § 1841(d). this standard. In any event, the Board finds it unnecessary to resolve 48. Id. at 784. the remaining legal issues presented by BNY's alternative proposals. 49. Crescent Holding Company, 73 FEDERAL RESERVE BULLETIN BNY's proposed proxy contest to elect a majority of the IBC board 457 (1987). See also Lloyds Bank PLC, 72 FEDERAL RESERVE BULprovides a reasonably certain resolution of the issues presented by LETIN 841, 844 (1986). The position taken by IBC could preclude the both of these potential barriers. If BNY is unable to effect its proposal Board from approving any proposal to acquire less than an absolute within three months, under the terms of this Order the Board will have majority of the shares of a bank holding company if the management the opportunity at that time to reassess BNY's ability to consummate of the bank holding company disapproves the acquisition. Crescent the transaction. Holding Company at 458; Lloyds Bank PLC at 844. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 271 investment will not impair the financial resources or als, as well as responses from BNY have not provided capital position of BNY, and BNY would not be any basis to support the belief that the facts already dependent upon dividends from IBC to meet any debt before the Board are incomplete or insufficient to servicing requirement. Consequently, even if BNY is permit the Board to carry out its responsibility under unsuccessful in its proxy solicitation, this case more the BHC Act to evaluate the applications under the closely resembles the facts of several cases approved statutory criteria or that further investigation would by the Board, which involved acquisitions by bank produce additional relevant information. The Board is holding companies of minority positions in other insti- not required to hold a formal hearing where a party tutions without the consent of the institutions' disputes the conclusions to be drawn from established management.50 The Board finds no evidence in the facts or where such proceedings would not serve to record that BNY's retention of a 19.9 percent interest develop new or useful facts. in IBC, if BNY's efforts to acquire all of the shares of IBC asserts several factual disputes, including IBC are unsuccessful, would adversely affect in a whether BNY has satisfied the Board's capital adesignificant manner IBC's operations. In this regard, quacy requirements with accurate pro forma financial the Board notes that BNY has committed that if it is projections; whether proposed assets sales would adunsuccessful in electing at least a majority of IBC's versely affect IBC's business; whether BNY's cost board through the proposed proxy solicitation, BNY savings estimates are justified; whether the technologwould not elect any representative to the IBC board. ical systems can be integrated; whether the managerial BNY has stated that if it decides to acquire this 19.9 resources will be sufficient; whether government secupercent interest, it will fund the acquisition with the rities clearance and ADR operations are distinct prodissuance of new primary capital, thus avoiding any uct markets; and whether the combined institution will diminution of BNY's capital position. The Board's serve the needs of the community. These assertions approval for BNY to acquire these shares, as pro- are not designed to dispute facts in the record or even posed, is, however, conditioned upon BNY raising to elicit new facts. Rather than challenging existing common equity in an amount that is at least equal to facts, these assertions draw into question inferences the cost of these shares. This common equity must be and conclusions drawn from the factual presentations raised within six months following the expiration of in the application.52 The Board finds that IBC and the period provided in this Order for BNY to consum- BNY have had ample opportunity to present evidence mate its proposal to acquire 100 percent of IBC, or and arguments in writing and to respond to one anwithin six months of any extension of such period by other's submissions and concludes that the parties' the Board. extensive written submissions have been an adequate means of clarifying the issues in this case, including Hearing Request the factual questions raised by IBC. A formal hearing is unnecessary to develop new or useful facts and, accordingly, IBC's request for a hearing is denied. IBC has requested a formal hearing on the application. Section 3(b) of the BHC Act does not require the Board to hold a hearing concerning an application Other Matters unless the appropriate banking authority for the banks to be acquired makes a timely written recommenda- IBC has raised the question regarding the propriety of tion of denial of the application. In this case, no such certain communications between the New York Rerecommendation of denial has been received from the serve Bank staff and BNY concerning BNY's pro Comptroller of the Currency or the New York Super- forma tangible common equity. The record in this intendent of Banks, and thus no hearing is required case, however, demonstrates that these communicaunder the terms of the BHC Act.51 tions occurred early in the application process, well Further, IBC has been given the opportunity, and before the time IBC protested the application. Accordhas submitted, extensive written facts and arguments ingly, the Board does not regard the communications to the Board regarding this application. These materi- as ex parte or improper. The Board notes that the existence and substance of these communications were made known to IBC and IBC has commented 50. Hudson Financial Associates, 72 FEDERAL RESERVE BULLE- thereon. TIN 151 (1986); See, e.g., City Holding Company, 71 FEDERAL RESERVE BULLETIN 575 (1985). 51. 12 U.S.C. § 1842(b); Farmers & Merchants Bank of Las Cruces v. Board of Governors, 567 F.2d 1082, 1085 (D.C. Cir. 1977); Grandview Bank & Trust Co. v. Board of Governors, 550 F. 2d 415, 421 (8th 52. For example, IBC's contentions regarding financial projections Cir. 1977), cert, denied, 434 U.S. 821 (1977); and Northwest Bancor- and cost savings have been addressed by the Board through the poration v. Board of Governors, 303 F.2d 832, 842-44 (8th Cir. 1962). requirement for stronger capital initially. 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272 Federal Reserve Bulletin • April 1988 IBC has questioned the propriety of BNY's supple- banking, equipment lease financing, credit life, accimentation of its application to the Board with copies of dent and health insurance, corporate trust and cus- Securities and Exchange Commission filings and other tody, personal trust and retail discount brokerage materials, instead of restating and refiling the applica- subsidiaries that directly compete with IBC and its tion with the Board. The Board's procedures and subsidiaries in these activities. Consummation of the practice do not require an applicant to file a new proposal, however, would have a de minimis effect on restated application to reflect changes occurring dur- existing competition in each of these markets and ing the application process, but permit the applicant to there are numerous competitors for these services. amend the initial application by letter or other written Accordingly, the Board concludes that the proposal submissions to reflect the changes. In this case, that would not have any significant adverse effect on practice was followed. BNY's proposal is fully de- existing or probable future competition in any relevant tailed in the initial application (FR Form Y-2) and market. Furthermore, there is no evidence in the subsequent amendments filed to reflect changes occur- record to indicate that approval of this proposal would ring during the pendency of the application, and BNY result in undue concentration of resources, decreased has responded fully to all requests by the Board for or unfair competition, conflicts of interests, unsound information regarding the proposal. The Board finds banking practices, or other adverse effects on the no inadequacies in BNY's amendatory submissions public interest. Accordingly, the Board has deterthat would impair the Board's ability to evaluate the mined that the balance of public interest factors it must financial or other relevant aspects of the proposal consider under section 4(c)(8) of the Act is favorable under the criteria specified in the Act. Accordingly, and consistent with approval of the applications to the Board does not believe that it is necessary or acquire the nonbanking subsidiaries of IBC. appropriate to require BNY to restate or refile its The Board has also considered the notice of BNY's original application. proposed investment in Irving International Trade Inc., under section 4(c)(14) of the BHC Act and the Extension of the 90-day Period for acquisition of Irving International Financing Corpora- Consummation tion under the Edge Act. Based on all the facts of record, the Board has determined that disapproval of As discussed at the outset, the Board is concerned that the proposed investment is not warranted. the extension of the post-approval consummation period over a prolonged period in a contested situation could result in adverse effects on the financial and Conclusion managerial resources of the organizations in a variety of different areas. For example, when ownership of an Based on the foregoing and other facts of record, the institution is in doubt over a prolonged period of time, Board has determined that the applications under the personnel and financial resources of both the sections 3 and 4 of the BHC Act and under the Edge offeror and the target are subject to strain. Act should be and hereby are approved. This approval Accordingly, the Board has determined not to fol- is also subject to the condition that BNY obtain all low its normal procedure of permitting the appropriate required state approvals and comply with all condi- Reserve Bank to extend the 90-day consummation tions and commitments stated in this Order. The period upon a showing by the applicant of no material acquisition of IBC shall not be consummated before change in the facts and circumstances underlying the the thirtieth calendar day following the effective date Board's approval decision. The Board will carefully of this Order, or later than three months after the evaluate any request by BNY to extend the period for effective date of this Order, unless such period is consummation of the application in light of bank safety extended by the Board. and soundness concerns. The Board would not expect The determinations as to BNY's nonbanking activto extend the 90-day period more than once and then ities are subject to all of the conditions contained in only if the Board is satisfied regarding bank safety and Regulation Y, including those in section 225.4(d) and soundness considerations and that consummation of 225.23(b)(3) (12 C.F.R. §§ 225.4(d) & 225.23(b)(3)), the proposal is likely within the extended period. and to the Board's authority to require such modification or termination of the activities of a holding com- Nonbanking Acquisitions pany or any of its subsidiaries as the Board finds necessary to assure compliance with the provisions BNY also has applied, pursuant to section 4(c)(8), to and purposes of the Act and the Board's regulations acquire certain nonbanking subsidiaries of IBC. BNY and orders issued thereunder, or to prevent evasion operates loan production and loan servicing, mortgage thereof. 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Legal Developments 273 By order of the Board of Governors, effective Irving Services Corporation, and thereby engage in February 25, 1988. servicing loans primarily related to credit card purchases and providing data processing services to oth- Voting for this action: Chairman Greenspan and Governors ers; Irving Trust Company California, and thereby Johnson, Seger, Angell, and Heller. Absent and not voting: engage in providing fiduciary, custody and investment Governor Kelley. management services; Irving Trust Company Florida, and thereby engage in providing fiduciary, custody and WILLIAM W. WILES investment management services; One Wall Street Secretary of the Board Brokerage, Inc., and thereby engage in securities brokerage activities; Briggs, Schaedle Futures Inc., and thereby engage in futures commission merchant for nonaffiliated persons in the execution and clear- APPENDIX ance of futures contracts and options on futures contracts; Liberty Brokerage, Inc., and thereby engage as Nonbanking Subsidiaries To Be Acquired interdealer broker of United States government securities; and Irving Leasing Corporation and its twelve Irving Business Center, Inc., and thereby engage in subsidiaries (Airlease Incorporated, Airlease Foreign the business of marketing the lending and leasing Sales Corporation, IRE-AC Inc., IRE-AC, Parent, products and services of Irving Trust Company; Irving Inc., IRE-AC, Subsidiary, Inc., IRE-BC, Inc., IRE-1, Financial Centers, Inc., and thereby engage in con- Inc., IRE-3, Inc., IRE-4, Inc., Irving Leasing Foreign sumer lending and commercial lending to local busi- Sales Corporation, ITC Leasing Corporation and SDM ness; Irving Life Insurance Company, and thereby Development Enterprises, Inc.), and thereby engage engage in providing credit-related life, mortgage and in leasing personal or real property or acting as agent, health insurance sold in connection with extensions of broker or advisor in leasing such property. The Board credit to customers of IBC's bank and nonbank sub- has determined that these activities are closely related sidiaries; Irving Securities, Inc., and thereby engage in to banking and permissible for bank holding compasecurities trading activities, including acting as a pri- nies. 12 C.F.R. §§ 225.25 (b)(1), (3), (5), (7), (8), (15), mary dealer in United States government securities; (16), and (18). 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 ,. t-j i / \ Reserve Effective AApplicant Bank(s) ^ ^ Anmer Corporation, First United Bank, Kansas City February 12, 1988 Neligh, Nebraska Neligh, Nebraska Banc One Corporation, Universal Corporation, Cleveland February 16, 1988 Columbus, Ohio Ypsilanti, Michigan Capital Directions, Inc., Mason State Bank, Chicago February 22, 1988 Mason, Michigan Mason, Michigan CB&T Bancshares, Inc., Northwest Florida Banking Atlanta January 11, 1988 Columbus, Georgia Corporation, Quincy, Florida Central of Kansas, Inc., The Peoples National Bank of Kansas City February 4, 1988 Junction City, Kansas Clay Center, Clay Center, Kansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

274 Federal Reserve Bulletin • April 1988 Section 3—Continued . w \ Reserve Effective Applicant Bank(s) ^ ^ Century Financial Corporation, Century National Bank and Trust Cleveland February 23, 1988 Rochester, Pennsylvania Company, Rochester, Pennsylvania Citizens Holdings, El Camino Bancorp, San Francisco February 11, 1988 Newport Beach, California Anaheim, California CNB Financial Corporation, First National Bank of Overland Kansas City February 16, 1988 Kansas City, Kansas Park, Overland Park, Kansas Community Bancorp, Inc., Three Cities Bancorp, Inc., St. Louis January 28, 1988 Manchester, Missouri Manchester, Missouri Second Illinois Bancorp, Inc., Manchester, Missouri Third Illinois Bancorp, Inc., Manchester, Missouri First Bank of Red Bud, N.A., Red Bud, Illinois Citizens State Bank of Pleasant Hill, Pleasant Hill, Illinois Roodhouse National Bank, Roodhouse, Illinois The Winchester National Bank, Winchester, Illinois C.P. Burnett & Sons, Inc., C.P. Burnett & Sons, Bankers, St. Louis January 29, 1988 Eldorado, Illinois Eldorado, Illinois Dominion Bankshares Corporation, Citizens Union Corporation, Richmond February 22, 1988 Roanoke, Virginia Rogersville, Tennessee Dominion Bankshares Corporation, Merchants & Planters Corporation, Richmond February 18, 1988 Roanoke, Virginia Newport, Tennessee Farmers State Holding Company, Farmers State Bank, Minneapolis February 9, 1988 Marion, South Dakota Marion, South Dakota Fidelity BancShares (N.C.), Inc., The Fidelity Bank, Richmond February 11, 1988 Fuquay-Varina, North Carolina Fuquay-Varina, North Carolina First Bancorp of Louisiana, Inc., First Bancorp of Louisiana, Inc., Dallas February 2, 1988 Employee Stock Ownership Plan, West Monroe, Louisiana West Monroe, Louisiana First Commerce Corporation, First Commercial Bancshares, Inc., Atlanta February 9, 1988 New Orleans, Louisiana Chalmette, Louisiana First Farmers Financial First Farmers National Bank, Chicago February 19, 1988 Corporation, Converse, Indiana Converse, Indiana First National Agency of Blackduck State Bank, Minneapolis February 2, 1988 Baudette, Inc., Blackduck, Minnesota Baudette, Minnesota First National Financial The First National Bank of Chicago January 29, 1988 Corporation, Mt. Pulaski, Mt. Pulaski, Illinois Mt. Pulaski, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 275 Section 3—Continued . .. . -pv i / \ Reserve Effective Applicant Bank(s) ^ ^ First National Massillon The First National Bank in Cleveland February 8, 1988 Corporation, Massillon, Massillon, Ohio Massillon, Ohio First United Corporation, The First National Bank of Richmond February 11, 1988 Oakland, Maryland Piedmont, Piedmont, West Virginia First West Virginia Bancorp, Inc., Farmers and Merchants National Cleveland January 29, 1988 Wheeling, West Virginia Bank in Bellaire, Bellaire, Ohio First Woburn Bancorp, Inc., Woburn Five Cents Savings Bank, Boston February 1, 1988 Woburn, Massachusetts Woburn, Massachusetts FSB Bancorp, Frontier State Bank, San Francisco February 5, 1988 Show Low, Arizona Show Low, Arizona Harrison Bankshares, Inc., The Harrison County Bank, Richmond February 17, 1988 Lost Creek, West Virginia Lost Creek, West Virginia Independent Community Bancorp, Kentucky Independent Bank, Inc., St. Louis February 17, 1988 Inc., Frankfort, Kentucky Frankfort, Kentucky Jasand, Inc., City National Bank of Cedar Rapids, Chicago February 4, 1988 Cedar Rapids, Iowa Cedar Rapids, Iowa Lake City Bancorporation, Lake City State Bank, Chicago February 5, 1988 Lake City, Iowa Lake City, Iowa Liberty National Bancorp, Inc., The Bank of Elizabethtown, Inc., St. Louis February 23, 1988 Louisville, Kentucky Elizabethtown, Kentucky Lincoln Financial Corporation, WABANC, Inc., Chicago February 25, 1988 Fort Wayne, Indiana Wabash, Indiana Logan Bancshares, Inc., The First National Bank of Logan, Kansas City February 19, 1988 Logan, Kansas Logan, Kansas Market Place Bancshares, Inc., Market Place National Bank, Chicago February 19, 1988 Champaign, Illinois Champaign, Illinois NCB Corp., NorCen Bank, Chicago February 22, 1988 Culver, Indiana Culver, Indiana Ormside Proprietary Limited, El Camino Bank, San Francisco February 11, 1988 Melbourne, Australia Anaheim, California Overseas Finance Holdings Proprietary Limited, Melbourne, Australia Aylworth Proprietary Limited, Melbourne, Australia Costa Mesa Limited, London, England Costa Mesa Holding N.V., Curacao, Netherlands Antilles Citizens Financial Holdings, B.V., Amsterdam, Netherlands Orrstown Financial Services, Inc., Orrstown Bank, Philadelphia February 5, 1988 Orrstown, Pennsylvania Orrstown, Pennsylvania Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

276 Federal Reserve Bulletin • April 1988 Section 3—Continued . ~ , , . Reserve Effective Applicant Bank(s) ^ date PBT Bancshares, Inc., Peoples Bank and Trust Company, Kansas City January 29, 1988 McPherson, Kansas McPherson, Kansas Premier Bancorporation, Inc. Michigan Bank-Midwest, Chicago February 3, 1988 Jackson, Michigan Jackson, Michigan Michigan Bank - Mid South, Litchfield, Michigan Sea Island Bankshares, Inc., Sea Island Bank, Atlanta February 17, 1988 Statesboro, Georgia Statesboro, Georgia Southold Bancorp, Inc., Southold Savings Bank, New York February 22, 1988 Southold, New York Southold, New York T & C Bancorp, Inc., LaBelle Bancshares, Inc., St. Louis February 19, 1988 Lewistown, Missouri LaBelle, Missouri Great River Bancshares, Inc., La Grange, Missouri Unibancorp, Inc., The Farmers State Bank of Lostant, Chicago February 10, 1988 Chicago, Illinois Lostant, Illinois Section 4 Nonbanking Reserve Effective Applicant Company/Activity Bank date Bank of Boston Corporation, First Trust Company of Florida, Boston January 29, 1988 Boston, Massachusetts National Association, Sarasota, Florida Business Bancorp, provide data processing services San Francisco February 19, 1988 San Jose, California throughout the state of California CoreStates Financial Corp., First Interstate Commercial Philadelphia February 8, 1988 Philadelphia, Pennsylvania Corporation, Pasadena, California Lane Financial, Inc., Lane Data Services, Inc., Chicago February 5, 1988 Northbrook, Illinois Northbrook, Illinois MCorp, Security Courier Corporation, Dallas February 9, 1988 Dallas, Texas Carrollton, Texas MCorp Financial, Inc., acquire certain additional assets Wilmington, Delaware and certain liabilities of related companies Paducah Bank Shares, Inc., assets of Commonwealth Financial St. Louis January 29, 1988 Paducah, Kentucky Services Corporation, Bowling Green, Kentucky Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 277 Sections 3 and 4 Bank(s)/Nonbanking Reserve Effective Applicant Company Bank date AmSouth Bancorporation, Gulf First Holding Corporation, Atlanta February 18, 1988 Birmingham, Alabama Panama City, Florida ATM Network, Inc., Panama City, Florida Carlson Bankshares, Inc., First State Bank of New London, Minneapolis February 25, 1988 Comfrey, Minnesota New London, Minnesota New London Agency, Inc., New London, Minnesota Sioux National Company, Security State Bank, Kansas City February 19, 1988 Lincoln, Nebraska Holbrook, Nebraska engage in the sale of general insurance in a town with a population of less than 5,000 ORDERS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Reserve Effective Applicant Bank(s) Bank date Farmer & Merchants Bank and Bank of Cresbard, Minneapolis February 3, 1988 Trust Company, Cresbard, South Dakota Aberdeen, South Dakota Farmers State Bank of Alpha, Bank of Viola, Chicago February 18, 1988 Alpha, Illinois Viola, Illinois 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. National Association of Casualty and Surety Agents, Independent Insurance Agents of America, Inc. v. et al., v. Board of Governors, Nos. 87-1644, Board of Governors, No. 87-4118 (2d Cir., filed 87-1801, 88-1001 (D.C. Cir., filed Nov. 4, Dec. 21, Sept. 17, 1987). 1987, Jan. 4, 1988). Citicorp v. Board of Governors, No. 87-1475 (D.C. Securities Industry Association v. Board of Gover- Cir., filed Sept. 9, 1987). nors, No. 87-4161 (2d Cir., filed Dec. 15, 1987). Securities Industry Association v. Board of Gov- Independent Insurance Agents of America, Inc. v. ernors, No. 87-4115 (2d Cir., filed Sept. 9, Board of Governors, No. 87-1686 (D.C. Cir., filed 1987). Nov. 19, 1987). Barrett v. Volcker, No. 87-2280 (D.D.C., filed Aug. Teichgraeber v. Board of Governors, No. 87-2505-0 17, 1987). (D. Kan., filed Oct. 16, 1987). Northeast Bancorp v. Board of Governors, No. Securities Industry Association v. Board of Gover- 87-1365 (D.C. Cir., filed July 31, 1987). nors, No. 87-4135 (2d Cir., filed Oct. 8, 1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

278 Federal Reserve Bulletin • April 1988 National Association of Casualty & Insurance Agents Independent Community Bankers Association of v. Board of Governors, Nos. 87-1354, 87-1355 (D.C. South Dakota v. Board of Governors, No. 86-5373 Cir., filed July 29, 1987). (8th Cir., filed Oct. 3, 1986). The Chase Manhattan Corporation v. Board of Gov- Jenkins v. Board of Governors, No. 86-1419 (D.C. ernors, No. 87-1333 (D.C. Cir., filed July 20, 1987). Cir., filed July 18, 1986). Securities Industry Association v. Board of Gover- CBC, Inc. v. Board of Governors, No. 86-1001 (10th nors, Nos. 87-4091, 87-4093, 87-4095 (2d Cir., filed Cir., filed Jan. 2, 1986). July 1 and July 15, 1987). Urwyler, et al. v. Internal Revenue Service, et al., Lewis v. Board of Governors, Nos. 87-3455, 87-3545 No. 85-2877 (9th Cir., filed July 18, 1985). (11th Cir., filed June 25, Aug. 3, 1987). Wight, et al. v. Internal Revenue Service, et al., No. Securities Industry Association v. Board of Gover- 85-2826 (9th Cir., filed July 12, 1985). nors, et al. No. 87-4041 and consolidated cases (2d Brown v. United States Congress, et al., No. 84- Cir., filed May 1, 1987). 2887-6(IG) (S.D. Cal., filed Dec. 7, 1984). Securities Industry Association v. Board of Gover- Melcher v. Federal Open Market Committee, nors, et al., No. 87-1169 (D.C. Cir., filed April 17, No. 86-5692 (D.C. Cir., filed April 30, 1984). 1987). Independent Insurance Agents of America, et al. v. Board of Governors, Nos. 86-1572, 1573, 1576 (D.C. Cir., filed Oct. 24, 1986). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 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 ALL Gross demand deposits—individuals, MONEY STOCK AND BANK CREDIT partnerships, and corporations A3 Reserves, money stock, liquid assets, and debt measures FINANCIAL MARKETS A4 Reserves of depository institutions, Reserve Bank credit A23 Commercial paper and bankers dollar A5 Reserves and borrowings—Depository acceptances outstanding institutions A23 Prime rate charged by banks on short-term A6 Selected borrowings in immediately available business loans funds—Large member banks A24 Interest rates—money and capital markets A25 Stock market—Selected statistics A26 Selected financial institutions—Selected assets POLICY INSTRUMENTS and liabilities A7 Federal Reserve Bank interest rates A8 Reserve requirements of depository institutions FEDERAL FINANCE A9 Federal Reserve open market transactions A28 Federal fiscal and financing operations A29 U.S. budget receipts and outlays FEDERAL RESERVE BANKS A30 Federal debt subject to statutory limitation A30 Gross public debt of U.S. Treasury—Types and A10 Condition and Federal Reserve note statements ownership All Maturity distribution of loan and security A31 U.S. government securities dealers— holdings Transactions A32 U.S. government securities dealers—Positions and financing MONETAR Y AND CREDIT AGGREGA TES A33 Federal and federally sponsored credit agencies—Debt outstanding A12 Aggregate reserves of depository institutions and monetary base A13 Money stock, liquid assets, and debt measures SECURITIES MARKETS AND A15 Bank debits and deposit turnover CORPORATE FINANCE A16 Loans and securities—All commercial banks A34 New security issues—State and local governments and corporations COMMERCIAL BANKING INSTITUTIONS A35 Open-end investment companies—Net sales and asset position A17 Major nondeposit funds A35 Corporate profits and their distribution A18 Assets and liabilities, last-Wednesday-of-month A36 Nonfinancial corporations—Assets and series liabilities Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • April 1988 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, 1987 A54 U.S. reserve assets A54 Foreign official assets held at Federal Reserve Banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A3 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Monetary and credit aggregates (annual rates of change, seasonally adjusted in percent) IItteemm 1987'" 1987r 1988 Ql Q2 Q3 Q4 Sept. Oct. Nov. Dec. Jan. Reserves of depository institutions2 1 Total 16.4 8.0 -1.6 1.4 -1.0 13.9 -10.4 -11.4 18.4 7 Required 16.5 8.4 -.5 .3 4.0 7.1 -6.4 -13.8 13.0 3 Nonborrowed 18.5 5.4 -.4 1.2 -7.2 14.1 -4.0 -14.7 12.2 4 Monetary base 11.1 6.9 5.1 7.7 6.0 11.0 6.9 3.1 16.7 Concepts of money, liquid assets, and debt4 S Ml 13.2 6.6 .8 3.9 1.6 14.0 -5.6 -3.0 12.9 6 M2 6.5 2.6 2.8 4.0 4.7 6.0 1.0 1.8 9.8 7 M3 6.5 4.7 4.5 5.5 5.0 7.5 4.9 1.5 8.5 8 L 6.1 4.1 4.2 6.1 7.0 8.4 3.9 1.9 n.a. 9 Debt 10.5 8.7 8.1 9.7 9.0 10.1 11.3 8.1 n.a. Nontrgnsaction components 10 In M2y 4.2 1.2 3.5 4.0 5.8 3.2 3.3 33..55 88..77 11 In M3 only6 6.7 13.2 11.1 11.5 6.0 13.4 20.0 .3 3.9 Time and savings deposits Commercial banks 12 Savings7 35.2 22.4 10.1 .7 2.7 -2.0 -1.3 .0 5.4 13 Small-denomination time -5.6 -2.7 7.4 14.8 5.2 19.2 23.7 9.4 10.6 14 Large-denomination time 8.7 17.1 6.8 10.5 3.8 14.1 18.1 4.5 -12.6 Thrift institutions IS Savings 25.4 19.2 7.0 -3.8 2.5 -7.0 -9.1 -4.1 -3.1 16 Small-denomination time -4.2 1.2 9.3 16.0 11.3 12.6 25.9 19.4 19.1 17 Large-denomination time9 -12.6 -5.1 9.9 22.2 15.2 26.1 25.6 23.5 11.2 Debt components4 18 Federal 12.2 8.8 5.9 7.5 6.5 3.9 12.6 8.0 n.a. 19 Nonfederal 10.0 8.7 8.8 10.4 9.8 12.0 10.9 8.1 n.a. 20 Total loans and securities at commercial banks 10.4 8.2 6.2 5.8 8.6 7.0 2.6 -1.0 5.9 1. Unless otherwise noted, rates of change are calculated from average institutions and money market funds. Also excludes all balances held by U.S. amounts outstanding in preceding month or quarter. commercial banks, money market funds (general purpose and broker-dealer), 2. Figures incorporate adjustments for discontinuities associated with the foreign governments and commercial banks, and the U.S. government. implementation of the Monetary Control Act and other regulatory changes to M3: M2 plus large-denomination time deposits and term RP liabilities (in reserve requirements. To adjust for discontinuities due to changes in reserve amounts of $100,000 or more) issued by commercial banks and thrift institutions, requirements on reservable nondeposit liabilities, the sum of such required term Eurodollars held by U.S. residents at foreign branches of U.S. banks reserves is subtracted from the actual series. Similarly, in adjusting for discon- worldwide and at all banking offices in the United Kingdom and Canada, and tinuities in the monetary base, required clearing balances and adjustments to balances in both taxable and tax-exempt, institution-only money market mutual compensate for float also are subtracted from the actual series. funds. Excludes amounts held by depository institutions, the U.S. government, 3. The monetary base not adjusted for discontinuities consists of total money market funds, and foreign banks and official institutions. Also subtracted reserves plus required clearing balances and adjustments to compensate for float is the estimated amount of overnight RPs and Eurodollars held by institution-only at Federal Reserve Banks plus the currency component of the money stock less money market mutual funds. the amount of vault cash holdings of thrift institutions that is included in the L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term currency component of the money stock plus, for institutions not having required Treasury securities, commercial paper and bankers acceptances, net of money reserve balances, the excess of current vault cash over the amount applied to market mutual fund holdings of these assets. satisfy current reserve requirements. After the introduction of contemporaneous Debt: Debt of domestic nonfinancial sectors consists of outstanding credit reserve requirements (CRR), currency and vault cash figures are measured over market debt of the U.S. government, state and local governments, and private the weekly computation period ending Monday. nonfinancial sectors. Private debt consists of corporate bonds, mortgages, con- Before CRR, all components of the monetary base other than excess reserves sumer credit (including bank loans), other bank loans, commercial paper, bankers are seasonally adjusted as a whole, rather than by component, and excess acceptances, and other debt instruments. The source of data on domestic reserves are added on a not seasonally adjusted basis. After CRR, the seasonally nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt adjusted series consists of seasonally adjusted total reserves, which include data are based on monthly averages. Growth rates for debt reflect adjustments for excess reserves on a not seasonally adjusted basis, plus the seasonally adjusted discontinuities over time in the levels of debt presented in other tables. currency component of the money stock plus the remaining items seasonally 5. Sum of overnight RPs and Eurodollars, money market fund balances adjusted as a whole. (general purpose and broker-dealer), MMDAs, and savings and small time 4. Composition of the money stock measures and debt is as follows: deposits less the estimated amount of demand deposits and vault cash held by Ml: (I) currency outside the Treasury, Federal Reserve Banks, and the vaults thrift institutions to service their time and savings deposit liabilities. of depository institutions: (2) travelers checks of nonbank issuers; (3) demand 6. Sum of large time deposits, term RPs, and Eurodollars of U.S. residents, deposits at all commercial banks other than those due to depository institutions, money market fund balances (institution-only), less a consolidation adjustment the U.S. government, and foreign banks and official institutions less cash items in that represents the estimated amount of overnight RPs and Eurodollars held by the process of collection and Federal Reserve float; and (4) other checkable institution-only money market mutual funds. deposits (OCD) consisting of negotiable order of withdrawal (NOW) and auto- 7. Excludes MMDAs. matic transfer service (ATS) accounts at depository institutions, credit union 8. Small-denomination time deposits—including retail RPs—are those issued share draft accounts, and demand deposits at thrift institutions. 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. Ex- official institutions. cludes individual retirement accounts (IRA) and Keogh balances at depository 11. Changes calculated from figures shown in table 1.23. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Nonfinancial Statistics • April 1988 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 1987 1988 1987 1988 Nov. Dec. Jan. Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit 240,088 245,975 246,090 245,050 244,657 247,325 251,166 247,132 244,506 244,769 2 U.S. government securities' 214,695 219,761 219,855 219,006 219,179 220,447 222,278 220,074 218,734 219,489 3 Bought outright 213,706 218,734 219,069 219,006 219,179 218,704 219,272 219,578 218,734 218,988 4 Held under repurchase agreements.... 989 1,027 786 0 0 1,743 3,006 496 0 501 5 Federal agency obligations 7,956 8,062 7,806 7,558 7,556 8,529 8,616 7,815 7,534 7,627 6 Bought outright 7,567 7,559 7,503 7,558 7,556 7,555 7,553 7,553 7,534 7,423 7 Held under repurchase agreements.... 389 503 303 0 0 974 1,063 262 0 204 8 Acceptances 0 0 0 0 0 0 0 0 0 0 9 Loans 610 836 1,028 875 586 755 2,908 981 593 422 10 Float 866 1,545 1,784 1,942 1,123 1,580 1,224 2,737 1,855 1,464 11 Other Federal Reserve assets 15,961 15,771 15,617 15,668 16,212 16,013 16,141 15,524 15,790 15,767 12 Gold stock2 11,084 11,080 11,074 11,081 11,080 11,079 11,078 11,076 11,074 11,071 13 Special drawing rights certificate account.. 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 14 Treasury currency outstanding 18,102 18,153 18,205 18,148 18,158 18,168 18,179 18,193 18,207 18,221 ABSORBING RESERVE FUNDS 15 Currency in circulation 223,078 227,366 226,414 226,447 227,673'' 229,747' 229,919 227,843 225,981 224,244 16 Treasury cash holdings" 471 454 441 454 453r 452r 446 438 446 436 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 3,755 4,209 5,774 4,817 4,219 3,719 5,031 3,871 2,521 8,941 18 Foreign 299 233 274 233 240 192 263 235 347 226 19 Service-related balances and adjustments 2,063 2,168 2,233 2,128 1,960 2,269 2,286 2,278 2,101 2,697 20 Other 374 366 432 321 326 377 909 254 329 383 21 Other Federal Reserve liabilities and capital 7,418 7,443 7,432 7,306 7,270 7,468 7,201 7,522 7,548 7,618 22 Reserve balances with Federal Reserve Banks3 36,834 37,986 37,389 37,591 36,772 37,366 39,386 38,981 39,533 34,534 End-of-month figures Wednesday figures 1987 1988 1987 1988 Nov. Dec. Jan. Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 SUPPLYING RESERVE FUNDS 23 Reserve Bank credit 245,472 251,883 242,517 245,729 244,963 250,948 248,914 246,529 249,362 245,867 24 U.S. government securities' 218,960 222,551 218,411 216,715 219,049 222,383 220,983 219,332 218,442 220,282 25 Bought outright 213,563 218,906 218,411 216,715 219,049 218,549 218,863 219,332 218,442 218,892 26 Held under repurchase agreements.... 5,397 3,645 0 0 0 3,834 2,120 0 0 1,390 27 Federal agency obligations 9,844 8,869 7,423 7,556 7,556 9,349 8,429 7,553 7,423 8,034 28 Bought outright 7,567 7,553 7,423 7,556 7,556 7,553 7,553 7,553 7,423 7,423 29 Held under repurchase agreements.... 2,277 1,316 0 0 0 1,796 876 0 0 611 30 Acceptances 0 0 0 0 0 0 0 0 0 0 31 Loans 790 3,815 333 836 492 951 749 2,717 450 363 32 Float 428 811 396 4,560 1,951 2,011 2,830 1,204 7,381 943 33 Other Federal Reserve assets 15,450 15,837 15,954 16,062 15,915 16,254 15,923 15,723 15,666 16,245 34 Gold stock2 11,082 11,078 11,068 11,081 11,079 11,078 11,077 11,075 11,072 11,071 35 Special drawing rights certificate account.. 5,018 5,018 5,018 5,018 5,018 5.018 5,018 5,018 5,018 5,018 36 Treasury currency outstanding 18,127 18,177 18,233 18,157 18,167 18,177 18,191 18,205 18,219 18,233 ABSORBING RESERVE FUNDS 37 Currency in circulation 225,090 230,213' 223,188 226,88lr 229,226'' 230,403r 229,065 227,031 225,640 223,650 38 Treasury cash holdings" 465 446r 438 453r 452' 45 V 446 448 436 437 Deposits, other than reserve balances, with Federal Reserve Banks 39 Treasury 3,594 5,313 10,276 9,036 2,992 4,773 4,098 3,421 3,859 9,481 40 Foreign 352 244 355 270 215 207 237 212 231 220 41 Service-related balances and adjustments 1,717 1,687 1,674 1,699 1,697 1,699 1,687 1,687 1,681 1,677 42 Other 450 1,027 315 359 293 364 284 289 358 383 43 Other Federal Reserve liabilities and capital 7,968 7,129 6,926 7,095 7,096 7,453 7,376 7,438 7,300 7,459 44 Reserve balances with Federal Reserve Banks3 40,064 40,097 33,664 34,192 37,256 39,871 40,007 40,302 44,167 36,882 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 1985 1986 1987 1987 Dec. Dec. Dec. June July Aug. Sept. Oct. Nov. Dec. 1 Reserve balances with Reserve Banks1 27,620 37,360 37,673 36,309 36,110 35,616 36,685 37,249 37,453 37,673 7 Total vault cash 22,953 24,079 26,155 24,369 24,613 24,644 24,854r 25,587' 25,431 26,155 3 Vault3 20,522 22,199 24,449 22,475 22,728 22,745 23,128 23,857 23,752 24,449 4 Surplus 2,431 1,879 1,706 1,893 1,885 1,899 1,726' 1,730' 1,679 1,706 Total reserves 48,142 59,560 62,123 58,784 58,838 58,361 59,813 61,106 61,205 62,123 6 Required reserves 47,085 58,191 61,094 57,594 58,078 57,329 59,020 59,977 60,282 61,094 7 Excess reserve balances at Reserve Banks 1,058 1,369 1,029 1,190 761 1,032 793 1,129' 923 1,029 8 Total borrowings at Reserve Banks 1,318 827 777 776 672 647 940 943' 625 777 9 Seasonal borrowings at Reserve Banks 56 38 93 259 283 279 231 189 126 93 10 Extended credit at Reserve Banks 499 303 483 273 194 132 409 449 394 483 Biweekly averages of daily figures for weeks ending 1987 1988 Oct. 21 Nov. 4 Nov. 18 Dec. 2 Dec. 16 Dec. 30 Jan. 13 Jan. 27 Feb. 10 Feb. 24 11 Reserve balances with Reserve Banks1 36,672 38,353 37,525 37,069 38,272 37,055 39,175 37,002 33,691 34,087 1? Total vault cash 26,183 25,174 25,188 25,802 25,372 26,960 26,566 26,533 29,417 27,954 13 Vault3 24,410 23,464 23,622 23,999 23,824 25,105 24,937 24,840 26,965 25,673 14 Surplus4. 1,773 1,710 1,566 1,803 1,549 1,855 1,629 1,694 2,452 2,282 15 Total reserves 61,082 61,817 61,147 61,068 62,095 62,160 64,112 61,842 60,656 59,759 16 Required reserves 60,115 60,256 60,665 59,855 60,890 61,354 62,805 60,554 59,368 58,688 17 Excess reserve balances at Reserve Banks 967 1,561 492 1,213 1,206 806 1,307 1,288 1,288 1,071 18 Total borrowings at Reserve Banks 1,007 677 561 683 815 671 1,945 508 287 425 19 Seasonal borrowings at Reserve Banks 183 169 125 114 83 102 66 54 55 77 20 Extended credit at Reserve Banks 482 390 334 465 653 316 485 332 144 232 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 maintenance period at institutions having no required reserve balance's. to 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 amount of vault cash equal to their required reserves during the maintenance similar to that of nonborrowed reserves. period. 8. Before February 1984, data are prorated monthly averages of weekly 5. Total reserves not adjusted for discontinuities consist of reserve balances averages; beginning February 1984, data are prorated monthly averages of with Federal Reserve Banks, which exclude required clearing balances and biweekly averages. adjustments to compensate for float, plus vault cash used to satisfy reserve NOTE. These data also appear in the Board's H.3 (502) release. For address, see requirements. Such vault cash consists of all vault cash held during the lagged inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Nonfinancial Statistics • April 1988 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Member Banks1 Averages of daily figures, in millions of dollars 1987 week ending Monday MMaattuurriittyy aanndd ssoouurrccee Aug. 10 Aug. 17 Aug. 24 Aug. 31 Sept. 7 Sept. 14 Sept. 21 Sept. 28 Oct. 5 Federal funds purchased, repurchase agreements, and other selected borrowing in immediately available funds From commercial banks in the United States 1 For one day or under continuing contract 72,747 71,952 69,808 70,480 75,786 75,048 70,262 66,374 74,386 2 For all other maturities 9,252 8,970 9,098 9,442 9,171 8,848 8,888 9,170 8,209 From other depository institutions, foreign banks and foreign official institutions, and United States government agencies 3 For one day or under continuing contract 32,923 32,524 30,368 30,994 29,160 30,085 27,159 25,696 25,513 4 For all other maturities 6,753 6,517 6,387 6,622 6,160 6,560 6,895 6,773 5,978 Repurchase agreements on U.S. government and federal agency securities in immediately available funds Brokers and nonbank dealers in securities 5 For one day or under continuing contract 13,744 12,715 12,756 13,002 13,332 13,966 13,289 13,685 15,505 6 For all other maturities 12,363 12,546 13,455 13,619 13,880 13,827 15,032 15,720 12,059 All other customers 7 For one day or under continuing contract 27,417 27,613 27,496 27,128 26,288 26,501 26,808 26,957 27,240 8 For all other maturities 8,165 8,550 9,188 9,657 9,120 9,036 8,943 8,891 8,054 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 30,410 29,547 28,622 29,053 30,568 28,193 30,303 29,348 33,209 10 To all other specified customers2 12,886 11,853 13,676 14,024 14,062 14,067 14,172 14,600 14,751 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 United States 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 year Current and previous levels Extended credit2 Adjustment credit and Federal Reserve Seasonal credit1 First 30 days of borrowing After 30 days of borrowing Bank 2/2 O 4 n / 88 Eff d e a c te ti ve Pre r v at i e o us 2/2 O 4 n / 88 Eff d e a c te ti ve Pre r v at i e o us 2/2 O 4 n / 88 Eff d e a c te ti ve Pre r v at i e o us Efifective date Boston 9/9/87 5W 919181 5W 2/11/88 1/28/88 New York ... 9/4/87 9/4/87 2/11/88 1/28/88 Philadelphia.. 9/4/87 9/4/87 2/11/88 1/28/88 Cleveland.... 9/4/87 9/4/87 2/11/88 1/28/88 Richmond.... 9/5/87 9/5/87 2/11/88 1/28/88 Atlanta 9/4/87 9/4/87 2/11/88 1/28/88 Chicago 9/4/87 9/4/87 2/11/88 1/28/88 St. Louis 9/9/87 9/9/87 2/11/88 1/28/88 Minneapolis .. 9/8/87 9/8/87 2/11/88 1/28/88 Kansas City.. 9/4/87 9/4/87 2/11/88 1/28/88 Dallas 9/11/87 9/11/87 2/11/88 1/28/88 San Francisco 9/9/87 5W 9/9/87 5!A 2/11/88 7.30 1/28/88 Range of rates for adjustment credit in recent years4 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 A le l v l e F l) . — R. Ba of n k Efifective date A le l v l e F l) . — R. B o a f n k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1977. 6 6 1980-——JJuullyy 78 10-11 10 1984—Apr. 9 8 W-9 9 1978—Jan. 9 6-6W 6W 79 10 10 13 9 9 20 6W 6W Sept. 76 11 11 Nov. 21 8 W-9 8W May 1 1 1 2 6W 1 -7 i i N De o c v . . 1 5 7 12 1 - 2 1 3 1 1 2 3 Dec. 2 2 4 6 8W 8 8 8 W July 3 7-7V4 m Aug. 2 1 1 0 mIV* I 7 V 3/ A 4 1981-——MMaayy 8 5 13 1 - 4 1 4 1 1 4 4 1985—May 2 2 0 4 7 7 W W -8 7 7 W W Sept. 22 8 8 Nov. 7 13-14 13 Oct. 16 8-8W 8W 6 13 13 1986—Mar. 7 7-7 W 7 20 sw 8 Vi Dec. 4 12 12 10 7 7 Nov. 1 8 W-9 W 9Vi Apr. 21 6W-7 6W 3 9 W 9W 1982---JJuullyy 70 11W-12 11W July 11 6 6 73 UW 11W Aug. 12 5W-6 5W 1979—July 20 10 10 Aug. 7 11-11W 11 22 5W 5W Aug. 17 10-10W 10W 3 11 11 20 10W low 16 10W 10W 1987—Sept. 4 5W-6 6 Sept. 19 10W-11 11 77 10-10W 10 11 6 6 21 11 11 30 10 10 Oct. 8 11-12 12 Oct. 17 9W-10 9W IInn eeffffeecctt FFeebbrruuaarryy 2244,, 11998888........ 6 6 10 12 12 n 9 W 9W Nov. 77 9-9 Vi 9 1980—Feb. 15 12-13 13 76 . 9 9 19 13 13 Dec. 14 8W-9 9 May 29 12-13 13 15 8 W-9 8W 30 12 12 17 8W 8W June 13 11-12 11 16 11 11 1. Adjustment credit is available on a short-term basis to help depository somewhat above rates on market sources of funds ordinarily will be charged, but institutions meet temporary needs for funds that cannot be met through reason- in no case will the rate charged be less than the basic discount rate plus 50 basis able alternative sources. After May 19, 1986, the highest rate established for loans points. The flexible rate is reestablished on the first business day of each to depository institutions may be charged on adjustment credit loans of unusual two-week reserve maintenance period. At the discretion of the Federal Reserve size that result from a major operating problem at the borrower's facility. Bank, the time period for which the basic discount rate is applied may be Seasonal credit is available to help smaller depository institutions meet regular, shortened. seasonal needs for funds that cannot be met through special industry lenders and 4. For earlier data, see the following publications of the Board of Governors: that arise from a combination of expected patterns of movement in their deposits Banking and Monetary Statistics, 1914-1941, and 1941-1970; Annual Statistical and loans. A temporary simplified seasonal program was established on Mar. 8, Digest, 1970-1979. 1985, and the interest rate was a fixed rate W percent above the rate on adjustment In 1980 and 1981, the Federal Reserve applied a surcharge to short-term adjustment credit borrowings by institutions with deposits of $500 million or more credit. The program was reestablished on Feb. 18, 1986 and again on Jan. 28, that had borrowed in successive weeks or in more than 4 weeks in a calendar 1987; the rate may be either the same as that for adjustment credit or a fixed rate quarter. A 3 percent surcharge was in effect from Mar. 17, 1980 through May 7, Vi percent higher. 1980. There was no surcharge until Nov. 17,1980, when a 2 percent surcharge was 2. Extended credit is available to depository institutions, where similar assis- adopted; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and tance is not reasonably available from other sources, when exceptional circum- to 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective stances or practices involve only a particular institution or when an institution is Sept. 22, 1981, and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981 the experiencing difficulties adjusting to changing market conditions over a longer formula for applying the surcharge was changed from a calendar quarter to a period of time. moving 13-week period. The surcharge was eliminated on Nov. 17, 1981. 3. For extended-credit loans outstanding more than 30 days, a flexible rate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • April 1988 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 interval Effective date Net transaction accounts $0 million-$40.5 million... 12/15/87 More than $40.5 million .. 12/15/87 Nonpersonal time deposits'- By original maturity Less than 1 Vi years 10/6/86 1 Vi years or more 10/6/83 Eurocurrency liabilities All types 11/13/80 1. Reserve requirements in effect on Dec. 31, 1987. Required reserves must be other transaction accounts, the exemption applies only to such accounts that held in the form of deposits with Federal Reserve Banks or vault cash. Nonmem- would be subject to a 3 percent reserve requirement. bers may maintain reserve balances with a Federal Reserve Bank indirectly on a 3. Transaction accounts include all deposits on which the account holder is pass-through basis with certain approved institutions. For previous reserve permitted to make withdrawals by negotiable or transferable instruments, payrequirements, see earlier editions of the Annual Report and of the FEDERAL ment orders of withdrawal, and telephone and preauthorized transfers in excess of RESERVE BULLETIN. Under provisions of the Monetary Control Act, depository three per month for the purpose of making payments to third persons or others. institutions include commercial banks, mutual savings banks, savings and loan However, MMDAs and similar accounts subject to the rules that permit no more associations, credit unions, agencies and branches of foreign banks, and Edge corporations. than six preauthorized, automatic, or other transfers per month, of which no more than three can be checks, are not transaction accounts (such accounts are savings 2. The Garn-St Germain Depository Institutions Act of 1982 (Public Law 97-320) 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 liabilities 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. 15, increase in the total reservable liabilities of all depository institutions, measured 1987 for institutions reporting quarterly and Dec. 29, 1987 for institutions on an annual basis as of June 30. No corresponding adjustment is to be made in reporting weekly, the amount was increased from $36.7 million to $40.5 million. the event of a decrease. On Dec. 15, 1987, the exemption was raised from $2.9 5. In general, nonpersonal time deposits are time deposits, including savings million to $3.2 million. In determining the reserve requirements of depository deposits, that are not transaction accounts and in which a beneficial interest is institutions, the exemption shall apply in the following order: (1) net NOW held by a depositor that is not a natural person. Also included are certain accounts (NOW accounts less allowable deductions); (2) net other transaction transferable time deposits held by natural persons and certain obligations issued accounts; and (3) nonpersonal time deposits or Eurocurrency liabilities starting to depository institution offices located outside the United States. For details, see with those with the highest reserve ratio. With respect to NOW accounts and 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 1987 TTyyppee ooff ttrraannssaaccttiioonn 11998855 11998866 11998877 June July Aug. Sept. Oct. Nov. Dec. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 22,214 22,602 18,983 575 575 499 4,528 1,095 3,388 150 2 Gross sales 4,118 2,502 6,050 22 912 0 0 300 0 0 3 Exchange 0 0 0 0 0 0 0 0 0 0 4 Redemptions 3,500 1,000 9,029 0 4,572 0 3,657 0 0 0 Others within 1 year 5 Gross purchases 1,349 190 3,658 535 0 0 443 300 670 479 6 Gross sales 0 0 300 0 0 0 300 0 0 0 7 Maturity shift 19,763 18,673 21,502 1,715 1,437 2,723 1,500 816 2.247 1,400 8 Exchange -17,717 -20,179 -20,388 -1,812 -613 -1,787 -917 -1,178 -3,728 -1,742 9 Redemptions 0 0 70 0 0 0 0 0 70 0 1 to 5 years 10 Gross purchases 2,185 893 10,231 1,394 0 5 2,551 0 50 2,589 11 Gross sales 0 0 452 0 200 0 0 0 0 0 12 Maturity shift -17,459 -17,058 -17,974 -1,715 -1,397 -2,122 -1,500 -761 -1,900 -1,400 13 Exchange 13,853 16,984 18,938 1,812 613 1,612 917 1,178 3,278 1,742 5 to 10 years 14 Gross purchases 458 236 2,441 312 0 0 619 0 0 596 15 Gross sales 100 0 0 0 0 0 0 0 0 0 16 Maturity shift -1,857 -1,620 -3,529 0 -40 -601 0 -55 -347 0 17 Exchange 2,184 2,050 950 0 0 100 0 0 300 0 Over 10 years 18 Gross purchases 293 158 1,858 251 0 0 493 0 0 445 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shift -447 0 0 0 0 0 0 0 0 0 21 Exchange 1,679 1,150 500 0 0 75 0 0 150 0 All maturities 22 Gross purchases 26,499 24,078 37,171 3,066 575 504 8,633 1,395 4,108 4,259 23 Gross sales 4,218 2,502 6,802 22 1,112 0 300 300 0 0 24 Redemptions 3,500 1,000 9,099 0 4,572 0 3,657 0 70 0 Matched transactions 25 Gross sales 866,175 927,997 950,923 87,228 80,304 60,731 61,321 77,497 85,288 104,833 26 Gross purchases 865,968 927,247 950,935 87,128 80,037 62,594 61,347 73,779 85,494 105,917 Repurchase agreements2 27 Gross purchases 134,253 170,431 314,620 24,167 3,298 9,013 34,080 65,675 15,853 23,512 28 Gross sales 132,351 160,268 324,666 22,108 2,058 12,311 34,080 57,380 18,751 25,264 29 Net change in U.S. government securities 20,477 29,989 11,235 5,002 -4,136 -931 4,702 5,673 1,346 3,591 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 0 0 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 162 398 276 0 59 0 0 56 1 13 Repurchase agreements2 33 Gross purchases 22,183 31,142 80,353 3,907 929 2,369 7,174 18,523 6,786 9,718 34 Gross sales 20,877 30,522 81,351 2,910 996 3,298 7,174 15,607 7,425 10,679 35 Net change in federal agency obligations 1,144 222 -1,274 997 -126 -929 0 2,860 -640 -975 36 Total net change in System Open Market 2211,,662211 3300,,221111 99,,996611 5,999 --44,,226622 --11,,886611 44,,770022 8,533 706 22,,661177 1. Sales, redemptions, and negative figures reduce holdings of the System Open 2. In July 1984 the Open Market Trading Desk discontinued accepting bankers Market Account; all other figures increase such holdings. Details may not add to acceptances in repurchase agreements, totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • April 1988 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements' Millions of dollars Wednesday End of month Account 1987 1988 1987 1988 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 Nov. Dec. Jan. Consolidated condition statement ASSETS 1 Gold certificate account 11,078 11,077 11,075 11,072 11,071 11,082 11,078 11,068 2 Special drawing rights certificate account 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 3 Coin 413 401 409 442 465 446 408 478 Loans 4 To depository institutions 951 749 2,717 450 363 790 3,815 333 5 Other 0 0 0 0 0 0 0 0 6 Acceptances held under repurchase agreements 0 0 0 0 0 0 0 0 Federal agency obligations 7 Bought outright 7,553 7,553 7,553 7,423 7,423 7,567 7,553 7,423 8 Held under repurchase agreements 1,796 876 0 0 611 2,277 1,316 0 U.S. Treasury securities Bought outright 9 Bills 107,334 107,648 108,117 107,227 107,677 106,457 107,691 107,1% 10 Notes 82,973 82,973 82,973 82,973 82,973 79,345 82,973 82,973 11 Bonds 28,242 28,242 28,242 28,242 28,242 27,761 28,242 28,242 12 Total bought outright2 218,549 218,863 219,332 218,442 218,892 213,563 218,906 218,411 13 Held under repurchase agreements 3,834 2,120 0 0 1,390 5,397 3,645 0 14 Total U.S. Treasury securities 222,383 220,983 219,332 218,442 220,282 218,960 222,551 218,411 15 Total loans and securities 232,683 230,161 229,602 226,315 228,679 229,594 235,235 226,167 16 Items in process of collection 7,973 10,643 7,692 18,168 7,086 4,901 7,990 6,489 17 Bank premises 704 705 705 707 704 698 705 705 Other assets 18 Denominated in foreign currencies 7,757 7,451 7,420 7,364 7,371 8,064 7,773 6,714 19 All other4 7,793 7,767 7,598 7,595 8,170 6,688 7,359 8,535 20 Total assets 273,419 273,223 269,519 276,681 268,564 266,491 275,566 265,174 LIABILITIES 21 Federal Reserve notes 213,090 211,721 209,682 208,298 206,319 207,873 212,890 205,871 Deposits 22 To depository institutions 41,570 41,694 41,989 45,848 3388,,555599 4411,,778811 41,784 35,338 23 U.S. Treasury—General account 4,773 4,098 3,421 3,859 9,481 3,594 5,313 10,276 24 Foreign—Official accounts 207 237 212 231 220 352 244 355 25 Other 364 284 289 358 383 450 1,027 315 26 Total deposits 46,914 46,313 45,911 50,296 48,643 46,177 48,368 46,284 27 Deferred credit items 5,962 7,813 6,488 10,787 6,143 4,473 7,179 6,093 28 Other liabilities and accrued dividends5 3,053 3,015 2,985 2,857 3,020 2,985 3,035 2,654 29 Total liabilities 269,019 268,862 265,066 272,238 264,125 261,508 271,472 260,902 CAPITAL ACCOUNTS 30 Capital paid in 2,045 2,044 2,049 2,058 2,060 2,032 2,047 2,062 31 Surplus 1,873 2,047 2,047 2,047 2,047 1,873 2,047 2,042 32 Other capital accounts 482 270 357 338 332 1,078 0 168 33 Total liabilities and capital accounts 273,419 273,223 269,519 276,681 268,564 266,491 275,566 265,174 34 MEMO: Marketable U.S. Treasury securities held in custody for foreign and international account 198,823 201,499 204,386 205,233 210,231 193,044 198,288 210,410 Federal Reserve note statement 35 Federal Reserve notes outstanding issued to bank 253,508 252,950 252,838 252,883 253,163 254,499 253,313 253,303 36 LESS: Held by bank 40,418 41,229 43,156 44,585 46,844 46,626 40,423 47,432 37 Federal Reserve notes, net 213,090 211,721 209,682 208,298 206,319 207,873 212,890 205,871 Collateral held against notes net: 38 Gold certificate account 11,078 11,077 11,075 11,072 11,071 11,082 11,078 11,068 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. Treasury and agency securities 196,994 195,626 193,589 192,208 190,230 191,773 196,794 189,785 42 Total collateral 213,090 211,721 209,682 208,298 206,319 207,873 212,890 205,871 1. Some of these data also appear in the Board's H.4.1 (503) release. For 4. Includes special investment account at the Federal Reserve Bank of Chicago address, see inside front cover. in Treasury bills maturing within 90 days. 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities 5. Includes exchange-translation account reflecting the monthly revaluation at pledged with Federal Reserve Banks—and excludes securities sold and scheduled market exchange rates of foreign-exchange commitments. to be bought back under matched sale-purchase transactions. 3. Valued monthly at market exchange rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks A11 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holdings Millions of dollars Wednesday End of month TTTyyypppeee aaannnddd mmmaaatttuuurrriiitttyyy gggrrrooouuupppiiinnngggsss 1987 1988 1987 1988 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 Nov. 30 Dec. 31 Jan. 29 951 749 2,717 450 363 790 3,815 333 2 Within 15 days 943 738 2,639 445 362 765 3,806 326 4 3 9 1 1 6 d d a a y y s s t t o o 9 1 0 y e d a a r y s 0 8 1 0 1 7 0 8 0 5 0 1 2 0 5 0 9 7 0 5 Acceptances—Total 0 0 0 0 0 0 0 0 6 7 8 9 W 1 1 6 i t d d h a a in y y s s 1 t t 5 o o d 9 1 a 0 y y s d e a a r y s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 U.S. Treasury securities—Total 222,383 220,983 219,332 218,442 220,282 218,960 222,551 218,411 10 Within 15 days' 11,583 10,503 7,667 8,554 9,123 9,805 11,363 4,402 11 16 days to 90 days 50,901 50,752 52,124 53,598 52,598 52,165 46,112 55,664 1 1 1 2 3 4 O 9 O 1 v v e e d r r a y 5 1 s y y t e e o a a r r 1 s t y o t e o a 5 r 1 y 0 e a y r e s a rs 4 7 2 1 7 5 1 5 , , , , 1 4 9 3 6 2 9 1 9 4 3 3 4 2 7 1 5 7 1 5 , , , , 4 5 4 3 2 1 7 1 4 2 9 3 4 2 7 1 7 5 1 5 , , , , 5 4 2 3 1 2 9 1 2 4 2 3 4 2 6 1 7 5 8 5 , , , , 4 4 2 2 2 1 4 0 4 0 8 8 7 4 2 1 5 7 0 5 , , . , 4 4 5 2 2 1 1 0 4 0 9 8 4 2 7 1 4 4 2 4 , , . . 5 9 7 7 7 8 1 1 7 0 6 7 7 4 2 1 5 7 6 5 , , , , 4 5 8 3 2 1 2 1 4 2 7 3 4 2 7 1 7 5 0 5 , , , , 4 4 3 2 2 1 0 0 4 0 3 8 16 Federal agency obligations—Total 9,349 8,429 7,553 7,423 8,034 9,843 8,868 7,423 2 2 2 1 1 1 0 1 2 9 7 8 O O O 9 W 1 1 6 v v v i e e e t d d h r r r a a i y n y 5 1 1 s s 0 y y 1 t t e y e 5 o o a a e d r r a 9 1 s a r 0 t s y o y t d e o s 5 ' a a r y 1 y s 0 e a y r e s a rs 2 3 1 1 , , , , 0 4 6 6 3 1 4 1 9 5 5 9 1 6 1 3 8 0 3 1 1 1 , , , , 4 0 8 3 5 1 1 4 8 3 5 9 6 6 3 6 8 0 3 1 1 , , , 4 9 4 3 1 1 4 2 7 7 5 8 1 6 3 3 1 9 3 1 1 , , , 4 7 4 3 1 1 8 8 7 3 6 9 1 1 3 3 5 0 3 1 1 , , , 3 3 5 7 8 1 2 1 8 3 8 8 3 7 1 8 6 9 2 3 1 1 , , , , 5 5 5 3 6 2 2 2 8 2 6 1 7 4 7 1 8 6 3 1 1 1 , , , , 4 6 3 6 5 1 1 9 5 6 5 9 6 1 3 0 8 0 3 1 1 , , , 3 3 5 8 1 1 2 1 3 8 7 8 3 7 8 6 0 9 1. Holdings under repurchase agreements are classified as maturing within 15 days in accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Nonfinancial Statistics • April 1988 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE Billions of dollars, averages of daily figures 1987 1988 1984 1985 1986 1987 IItteemm Dec. Dec. Dec. Dec. June July Aug. Sept. Oct. Nov. Dec. Jan. Seasonally adjusted CHANGES IN RESERVE REQUIREMENTS' 1 Total reserves2 39.91 46.06 56.17 57.44 57.71 57.60 57.88 57.83 58.50 57.99 57.44 58.32 7 Nonborrowed reserves 36.72 44.74 55.34 56.66 56.93 56.93 57.23 56.89 57.55 57.36 56.66 57.24 3 Nonborrowed reserves plus extended credit 39.33 45.24 55.64 57.14 57.20 57.12 57.36 57.29 58.00 57.76 57.14 57.61 4 Required reserves 39.06 45.00 54.80 56.41 56.52 56.84 56.84 57.03 57.37 57.06 56.41 57.02 5 Monetary base4 199.60 217.34R 239.52' 256.68R 248.48 249.5 V 251.00' 252.25R 254.56' 256.02' 256.68R 260.25 Not seasonally adjusted 6 Total reserves2 40.94 47.24 57.64 58.96 57.63 57.74 57.39 57.50 58.04 58.09 58.96r 60.17 7 Nonborrowed reserves 37.75 45.92 56.81 58.19 56.85 57.07 56.74 56.56 57.09 57.47 58.19 59.09 8 Nonborrowed reserves plus extended credit" 40.35 46.42 57.11 58.67 57.12 57.27 56.88 56.96 57.54 57.86 58.67 59.46 9 Required reserves 40.08 46.18 56.27 57.94 56.43 56.98 56.36 56.70 56.91 57.17 57.94 58.88 10 Monetary base4 202.70 220.82 243.63 261.21 249.29 251.42 251.42 251.60 253.29 256.82 261.21 261.21 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS5 11 Total reserves2 40.70 48.14 59.56 62.12 58.78 58.84 58.36 59.81 61.11 61.20 62.12 62.64 12 Nonborrowed reserves 37.51 46.82 58.73 61.35 58.01 58.17 57.71 58.87 60.16 60.58 61.35 61.56 13 Nonborrowed reserves plus extended credit 40.09 47.41 59.04 61.86 58.34 58.37 57.76 58.85 61.22 60.79 61.86 62.13 14 Required reserves 39.84 47.08 58.19 61.09 57.59 58.08 57.33 59.02 59.98 60.28 61.09 61.34 15 Monetary base4 204.18 223.53 247.71 266.16 252.54 254.67 254.36 255.69 258.08 261.67 266.16 265.79 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 disconti- requirements (CRR), currency and vault cash figures are measured over the nuities 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 held during the lagged adjusted series consists of seasonally adjusted total reserves, which include computation period by institutions having required reserve balances at Federal excess reserves on a not seasonally adjusted basis, plus the seasonally adjusted Reserve Banks plus the amount of vault cash equal to required reserves during the currency component of the money stock and the remaining items seasonally maintenance period at institutions having no required reserve balances. adjusted as a whole. 3. Extended credit consists of borrowing at the discount window under the 5. Reflects actual reserve requirements, including those on nondeposit liabiliterms and conditions established for the extended credit program to help ties, with no adjustments to eliminate the effects of discontinuities associated with depository institutions deal with sustained liquidity pressures. Because there is implementation of the Monetary Control Act or other regulatory changes to not the same need to repay such borrowing promptly as there is with traditional reserve requirements. short-term adjustment credit, the money market impact of extended credit is NOTE. Latest monthly and biweekly figures are available from the Board's similar to that of nonborrowed reserves. H.3(502) statistical release. Historical data and estimates of the impact on 4. The monetary base not adjusted for discontinuities consists of total reserves required reserves of changes in reserve requirements are available from the plus required clearing balances and adjustments to compensate for float at Federal Banking Section, Division of Research and Statistics, Board of Governors of the Reserve Banks and the currency component of the money stock less the amount Federal Reserve System, Washington, D.C. 20551. 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 1987r 1988 1984 1985 1986 1987 IItteemm'' Dec/ Dec/ Dec/ Dec/ Oct. Nov. Dec. Jan. Seasonally adjusted 1 Ml 551.9 620.1 725.4 750.8 756.2 752.7 750.8 758.9 2 M2 2,363.6 2,562.6 2,807.8 2,901.3 2,894.6 2,897.0 2,901.3 2,925.0 M3 2,978.3 3,196.0 3,490.4 3,663.0 3,643.5 3,658.5 3.663.0 3,689.1 4 L 3,519.4 3,825.4 4,134.1 4,332.8 4,312.0 4,325.9 4,332.8 n.a. 5 Debt 5,932.9 6,746.9 7,598.5 8,284.9 8,161.5 8,231.7 8,284.9 n.a. Ml components ft Currency2 156.1 167.7 180.4 196.5 193.1 195.0 196.5 198.4 7 Travelers checks3 5.2 5.9 6.5 7.1 7.0 7.0 7.1 7.2 8 Demand deposits4 244.1 267.2 303.3 288.0 295.9 291.3 288.0 289.9 9 Other checkable deposits5 146.4 179.2 235.2 259.3 260.3 259.4 259.3 263.3 Nontransactions components 10 In M26 1,811.7 1,942.5 2,082.4 2,150.5 2,138.4 2,144.3 2,150.5 2,166.1 11 In M3 only7 614.7 633.3 682.6 761.6 748.9 761.4 761.6 764.1 Savings deposits8 12 Commercial Banks 122.6 124.8 155.5 178.2 178.4 178.2 178.2 179.0 13 Thrift institutions 162.9 176.6 215.2 236.0 238.6 236.8 236.0 235.4 Small denomination time deposits9 14 Commercial Banks 386.3 383.3 364.6 384.6 374.2 381.6 384.6 388.0 15 Thrift institutions 497.0 496.2 488.6 528.5 509.1 520.1 528.5 536.9 Money market mutual funds 16 General purpose and broker-dealer 167.5 176.5 208.0 222.2 218.8 220.9 222.2 226.2 17 Institution-only 62.7 64.5 84.4 89.6 82.5 89.5 89.6 94.4 Large denomination time deposits10 18 Commercial Banks" 270.2 284.9 288.9 323.5 317.5 322.3 323.5 320.1 19 Thrift institutions 146.8 151.6 150.3 161.2 154.8 158.1 161.2 162.7 Debt components 20 Federal debt 1,365.3 1,584.3 1,804.5 1,953.3 1,919.3 1,939.6 1,953.3 n.a. 21 Nonfederal debt 4,567.6 5,162.6 5,794.0 6,331.7 6,242.1 6,292.0 6,331.7 n.a. Not seasonally adjusted 77 Ml 564.5 633.5 740.6 765.9 753.7 756.0 765.9 764.8 73 M2 2,373.2 2,573.9 2,821.5 2,915.0 2,895.2 2,900.5 2,915.0 2,937.3 24 M3 2,991.4 3,210.5 3,507.2 3,679.5 3,643.5 3,665.8 3,679.5 3,701.6 7.5 L 3,532.7 3,840.9 4,152.1 4,350.9 4,312.3 4,335.8 4,350.9 n.a. 26 Debt 5,927.1 6,740.6 7,591.7 8,277.6 8,147.3 8,216.5 8,277.6 n.a. Ml components 27 Currency2 158.5 170.2 183.0 199.4 192.6 195.9 199.4 197.1 28 Travelers checks3 4.9 5.5 6.0 6.5 7.0 6.6 6.5 6.6 29 Demand deposits4 253.0 276.9 314.4 298.5 295.7 294.1 298.5 295.8 30 Other checkable deposits5 148.2 180.9 237.3 261.5 258.4 259.3 261.5 265.3 Nontransactions components 31 M26.... 1,808.7 1,940.3 2,080.8 2,149.1 2,141.5 2,144.5 2,149.1 2,172.5 32 M3 only7 618.2 636.7 685.7 764.5 748.3 765.2 764.5 764.3 Money market deposit accounts 33 Commercial Banks 267.4 332.8 379.6 358.2 360.0 358.1 358.2 358.9 34 Thrift institutions 149.4 180.8 192.9 167.0 173.9 169.6 167.0 165.2 Savings deposits8 3S Commercial Banks 121.5 123.7 154.2 176.7 178.6 177.5 176.7 178.2 36 Thrift institutions 161.5 174.8 212.9 233.3 239.3 235.7 233.3 233.0 Small denomination time deposits9 37 Commercial Banks 386.9 384.0 365.3 385.2 375.0 382.6 385.2 389.3 38 Thrift institutions 498.2 497.5 489.7 529.3 510.5 521.1 529.3 540.5 Money market mutual funds 39 General purpose and broker-dealer 167.5 176.5 208.0 222.2 218.8 220.9 222.2 226.2 40 Institution-only 62.7 64.5 84.4 89.6 82.5 89.5 89.6 94.4 Large denomination time deposits10 41 Commercial Banks" 270.9 285.4 289.1 323.6 317.3 322.4 323.6 321.1 42 Thrift institutions 146.8 151.9 150.7 161.7 155.7 159.0 161.7 163.8 Debt components 43 Federal debt 1,364.7 1,583.7 1,804.0 1,952.7 1,909.8 1,935.3 1,952.7 n.a. 44 Nonfederal debt 4,562.4 5,156.9 5,787.8 6,324.9 6,237.5 6,281.2 6,324.9 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • April 1988 NOTES TO TABLE 1.21 1. Composition of the money stock measures and debt is as follows: acceptances, and other debt instruments. The source of data on domestic Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt of depository institutions; (2) travelers checks of nonbank issuers; (3) demand data are based on monthly averages. deposits at all commercial banks other than those due to depository institutions, 2. Currency outside the U.S. Treasury, Federal Reserve Banks, and vaults of the U.S. government, and foreign banks and official institutions less cash items in depository institutions. the process of collection and Federal Reserve float; and (4) other checkable 3. Outstanding amount of U.S. dollar-denominated travelers checks of nondeposits (OCD) consisting of negotiable order of withdrawal (NOW) and auto- bank issuers. Travelers checks issued by depository institutions are included in matic transfer service (ATS) accounts at depository institutions, credit union demand deposits. share draft accounts, and demand deposits at thrift institutions. 4. Demand deposits at commercial banks and foreign-related institutions other M2: Ml plus overnight (and continuing contract) repurchase agreements (RPs) than those due to depository institutions, the U.S. government, and foreign banks issued by all commercial banks and overnight Eurodollars issued to U.S. residents and official institutions less cash items in the process of collection and Federal by foreign branches of U.S. banks worldwide, MMDAs, savings and small- Reserve float. denomination time deposits (time deposits—including retail RPs—in amounts of 5. Consists of NOW and ATS balances at all depository institutions, credit less than $100,000), and balances in both taxable and tax-exempt general purpose union share draft balances, and demand deposits at thrift institutions. and broker-dealer money market mutual funds. Excludes individual retirement 6. Sum of overnight RPs and overnight Eurodollars, money market fund accounts (IRA) and Keogh balances at depository institutions and money market balances (general purpose and broker-dealer), MMDAs, and savings and small funds. Also excludes all balances held by U.S. commercial banks, money market time deposits. funds (general purpose and broker-dealer), foreign governments and commercial 7. Sum of large time deposits, term RPs, and term Eurodollars of U.S. banks, and the U.S. government. residents, money market fund balances (institution-only), less the estimated M3: M2 plus large-denomination time deposits and term RP liabilities (in amount of overnight RPs and Eurodollars held by institution-only money market amounts of $100,000 or more) issued by commercial banks and thrift institutions, funds. term Eurodollars held by U.S. residents at foreign branches of U.S. banks 8. Savings deposits exclude MMDAs. worldwide and at all banking offices in the United Kingdom and Canada, and 9. Small-denomination time deposits—including retail RPs—are those issued balances in both taxable and tax-exempt, institution-only money market mutual in amounts of less than $100,000. All individual retirement accounts (IRA) and funds. Excludes amounts held by depository institutions, the U.S. government, Keogh accounts at commercial banks and thrifts are subtracted from small time money market funds, and foreign banks and official institutions. Also subtracted deposits. is the estimated amount of overnight RPs and Eurodollars held by institution-only 10. Large-denomination time deposits are those issued in amounts of $100,000 money market mutual funds. or more, excluding those booked at international banking facilities. L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term 11. Large-denomination time deposits at commercial banks less those held by Treasury securities, commercial paper and bankers acceptances, net of money money market mutual funds, depository institutions, and foreign banks and market mutual fund holdings of these assets. official institutions. Debt: Debt of domestic nonfinancial sectors consists of outstanding credit NOTE. Latest monthly and weekly figures are available from the Board's H.6 market debt of the U.S. government, state and local governments, and private (508) release. Historical data are available from the Banking Section, Division of nonfinancial sectors. Private debt consists of corporate bonds, mortgages, con- Research and Statistics, Board of Governors of the Federal Reserve System, sumer credit (including bank loans), other bank loans, commercial paper, bankers Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Monetary and Credit Aggregates A15 1.22 BANK DEBITS AND DEPOSIT TURNOVER1 Debits are shown in billions of dollars, turnover as ratio of debits to deposits. Monthly data are at annual rates. Bank group, or type of customer June July Aug. Sept. Oct. Seasonally adjusted Demand deposits3 1 All insured banks 156,091.6 188,345.8 217,115.9 212,414.4 219,501.3 221,729.0 219,182.9 234,398.3 219,386.1 2 Major New York City banks 70,585.8 91,397.3 104,496.3 103,027.6 106,428.9 109,062.5 105,149.4 110,833.6 103,693.6 3 Other banks 85,505.9 96,948.8 112,619.8 109,386.8 113,072.3 112,666.5 114,033.4 123,564.6 115,692.5 4 ATS-NOW accounts4 1,823.5 2,182.5 2,402.7 2,417.6 2,498.7 2,333.1 2,349.0 2,591.3 2,536.1 5 Savings deposits 384.9 403.5 526.5 565.8 548.2 518.8 524.0 582.4 570.8 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 500.3 556.5 612.1 601.6 628.6 623.3 625.3 654.9 619.0 7 Major New York City banks 2,196.9 2,498.2 2,670.6 2,671.6 2,837.4 2,718.2 2,715.1 2,744.7 2,620.2 8 Other banks 305.7 321.2 357.0 347.8 362.8 357.0 365.7 389.1 367.4 9 ATS-NOW accounts4 15.8 15.6 13.8 13.9 14.3 13.2 13.2 14.4 14.2 10 Savings deposits 3.2 3.0 3.1 3.3 3.1 3.0 3.0 3.3 3.3 DEBITS TO Not seasonally adjusted Demand deposits3 11 All insured banks 156,052.3 188,506.4 217,124.8 221,038.4 228,764.2 214,145.9 216,728.0 233,999.8 202,230.1 12 Major New York City banks 70,559.2 91,500.0 104,518.6 106,171.3 111,157.7 103,822.8 104,234.0 111,398.9 96,035.9 13 Other banks 85,493.1 97,006.6 112,606.1 114,867.0 117,606.5 110,323.1 112,494.0 122,600.8 106,194.2 14 ATS-NOW accounts4 1,826.4 2,184.6 2,404.8 2,466.9 2,466.0 2,226.4 2,414.9 2,577.7 2,375.8 15 MMDA 1,223.9 1,609.4 1,954.2 1,987.9 2,002.7 1,752.7 1,846.6 2,247.8 1,959.8 16 Savings deposits 385.3 404.1 526.8 565.2 576.5 524.2 519.0 604.3 519.9 DEPOSIT TURNOVER Demand deposits3 17 All insured banks 499.9 556.7 612.3 625.0 651.7 612.5 620.2 657.8 565.6 18 Major New York City banks 2,196.3 2,499.1 2,674.9 2,801.5 2,928.4 2,721.9 2,751.0 2,824.8 2,467.8 19 Other banks 305.6 321.2 356.9 363.8 375.7 354.2 361.1 387.6 333.3 20 ATS-NOW accounts4 15.8 15.6 13.8 14.3 14.3 12.8 13.7 14.6 13.3 21 MMDA 4.0 4.5 5.3 5.4 5.5 4.8 5.1 6.3 5.5 22 Savings deposits5 3.2 3.0 3.1 3.3 3.3 3.0 3.0 3.5 3.0 1. These series have been revised to reflect new benchmark adjustments and 3. Represents accounts of individuals, partnerships, and corporations and of revised seasonal factors as well as some revisions of reported data. Historical states and political subdivisions. tables containing revised data for earlier periods may be obtained from the 4. Accounts authorized for negotiable orders of withdrawal (NOW) and ac- Banking Section, Division of Monetary Affairs, Board of Governors of the counts authorized for automatic transfer to demand deposits (ATS). ATS data are Federal Reserve System, Washington, D.C. 20551. available beginning December 1978. These data also appear on the Board's G.6 (406) release. For address, see inside 5. Excludes ATS and NOW accounts, MMDA and special club accounts, such front cover. as Christmas and vacation clubs. 2. Annual averages of monthly figures. 6. Money market deposit accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • April 1988 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1987r 1988 CCaatteeggoorryy Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Seasonally adjusted 1 Total loans and securities2 2,120.1 2,130.7 2,152.0 2,166.0 2,176.7 2,181.3 2,199.0 2,214.7 2,227.6 2,232.1 2,230.6 2,242.0 2 U.S. government securities 314.7 315.4 318.1 321.3 321.3 322.9 328.5 331.3 331.7 331.1 333.2 334.1 3 Other securities 192.0 193.1 194.4 195.5 195.9 194.3 193.7 193.7 194.2 196.2 196.0 194.0 4 Total loans and leases2 1,613.5 1,622.3 1,639.6 1,649.3 1,659.6 1,664.1 1,676.8 1,689.8 1,701.7 1,704.8 1,701.4 1,713.9 5 Commercial and industrial ..... 548.0 546.2 549.1 551.9 554.4 553.6 554.0 559.0 562.8 563.1 565.5 568.5 6 Bankers acceptances held ... 5.0 4.7 4.8 4.8 4.6 4.5 5.3 5.4 5.6 4.6 4.3 4.5 7 Other commercial and industrial 543.0 541.5 544.3 547.1 549.8 549.1 548.7 553.6 557.3 558.5 561.2 564.0 8 U.S. addressees4. 534.3 533.2 536.0 539.0 541.3 540.8 540.5 545.6 549.3 550.9 553.0 555.0 9 Non-U.S. addressees 8.8 8.3 8.3 8.1 8.4 8.4 8.2 8.0 8.0 7.6 8.2 8.9 10 Real estate 509.7 517.1 524.8 532.6 542.6 549.6 556.8 561.7 569.4 576.2 582.3 586.9 11 Individual 316.0 316.8 317.8 319.1 318.9 319.7 321.5 322.8 324.1 325.0 325.9 327.8 12 Security 39.8 40.1 44.6 43.6 44.0 43.9 45.4 46.1 47.1 39.3 33.6 36.6 13 Nonbank financial institutions 35.1 35.4 35.6 35.8 34.6 32.9 32.0 31.8 32.1 32.3 32.3 32.0 14 Agricultural 30.7 30.2 29.9 30.0 30.0 29.8 29.7 29.6 29.6 29.4 29.3 29.4 15 State and political subdivisions 56.4 56.6 56.4 56.2 55.9 55.3 54.5 54.5 54.1 53.4 51.2 53.9 16 Foreign banks 9.5 9.1 9.3 9.3 9.6 9.0 9.1 9.2 9.6 8.8 8.2 8.3 17 Foreign official institutions 6.2 6.8 6.8 6.1 5.8 5.7 5.7 5.7 5.8 5.7 5.6 5.7 18 Lease financing receivables .... 22.5 22.7 23.3 23.7 23.9 23.9 24.0 24.1 24.3 24.5 24.8 25.0 19 All other loans 39.3 41.2 42.0 41.1 39.9 40.5 44.0 45.2 42.7 47.1 42.7 41.6 Not seasonally adjusted 20 Total loans and securities2 2,124.0 2,130.7 2,153.1 2,163.4 2,173.7 2,172.8 2,188.8 2,211.6 2,222.4 2,231.3 2,247.0 2,254.7 21 U.S. government securities 319.3 317.4 318.0 320.0 318.4 322.1 328.3 331.3 329.3 331.0 333.1 335.6 22 Other securities 192.7 192.7 194.0 195.5 195.3 193.0 193.6 193.8 193.3 195.6 196.6 196.7 23 Total loans and leases2 1,612.0 1,620.6 1,641.1 1,647.9 1,660.0 1,657.7 1,666.9 1,686.6 1,699.8 1,704.7 1,717.3 1,722.4 24 Commercial and industrial 547.3 550.7 552.8 554.4 555.9 551.3 549.5 555.7 558.7 562.0 569.6 568.1 25 Bankers acceptances held3... 5.0 4.6 4.8 4.8 4.7 4.6 5.3 5.5 5.4 4.6 4.4 4.3 26 Other commercial and industrial 542.3 546.1 548.0 549.6 551.2 546.7 544.2 550.2 553.3 557.4 565.2 563.8 27 U.S. addressees4 533.8 537.9 539.9 541.4 542.7 538.1 535.9 542.1 545.2 549.2 557.0 555.7 28 Non-U.S. addressees 8.5 8.1 8.2 8.2 8.5 8.6 8.3 8.2 8.1 8.2 8.2 8.1 29 Real estate 509.1 516.4 523.9 532.0 542.4 549.7 556.8 562.4 570.0 576.8 583.2 587.3 30 Individual 315.4 313.8 315.0 316.5 316.9 318.4 321.5 324.3 325.7 326.7 330.2 331.2 31 Security 38.4 39.6 46.4 43.9 45.4 43.3 43.3 44.8 45.6 39.4 35.3 37.5 32 Nonbank financial institutions 34.1 34.3 35.5 35.6 34.7 32.7 31.9 32.3 32.2 32.7 33.6 32.3 33 Agricultural 29.7 29.2 29.1 29.7 30.3 30.5 30.6 30.7 30.4 29.6 29.1 28.7 34 State and political subdivisions 57.8 57.6 56.9 56.2 55.5 54.5 53.9 53.7 53.2 52.3 51.2 53.9 35 Foreign banks 9.8 9.0 8.9 9.0 9.5 9.0 8.9 9.5 9.8 8.8 8.6 8.5 36 Foreign official institutions 6.2 6.8 6.8 6.1 5.8 5.7 5.7 5.7 5.8 5.7 5.6 5.7 37 Lease financing receivables .... 22.7 22.9 23.5 23.8 24.0 23.9 23.9 24.0 23.9 24.2 24.8 25.2 38 All other loans 41.5 40.3 42.4 40.7 39.6 38.7 40.8 43.6 44.4 46.4 46.2 44.1 1. Data have been revised because of benchmarking and new seasonal factors. 2. Excludes loans to commercial banks in the United States. Back data are available from the Banking and Monetary Statistics section, Board 3. Includes nonfinancial commercial paper held, of Governors of the Federal Reserve System, Washington, D.C. 20551. These 4. United States includes the 50 states and the District of Columbia, data also appear in the Board's G.7 (407) release. 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 1987' 1988 SSoouurrccee Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Total nondeposit funds 1 Seasonally adjusted 159.7 165.4 161.6 170.8 167.1 160.3 166.6 177.2 176.2 173.6 117766..99 117777..33 2 Not seasonally adjusted 162.3 166.5 161.1 170.9 164.0 156.6 166.7 177.6 176.2 175.9 177.8 177.7 Federal funds, RPs, and other borrowings from nonbanks 3 Seasonally adjusted 172.0 171.9 172.1 170.5 168.3 167.2 167.1 165.0 164.6 165.7 161.8 169.0 4 Not seasonally adjusted 174.5 173.0 171.6 170.6 165.2 163.6 167.2 165.4 164.7 168.1 162.7 169.4 5 Net balances due to foreign-related institutions, not seasonally adjusted -12.3 -6.5 --1100..55 ..22 --11..22 --66..99 --..44 1122..22 1111..55 77..88 1155..11 88..33 MEMO 6 Domestically chartered banks' net positions with own foreign branches, not seasonally adjusted -23.8 -21.1 -23.0 -15.5 -15.5 -22.2 -17.7 -11.8 -14.7 -17.1 -14.1 -17.4 7 Gross due from balances 68.3 66.0 70.5 68.5 67.1 66.4 64.5 63.8 67.7 70.4 69.6 72.1 8 Gross due to balances 44.5 44.9 47.5 53.0 51.5 44.2 46.8 52.0 53.0 53.3 55.5 54.7 9 Foreign-related institutions' net positions with directly related institutions, not seasonally adjusted5 11.5 14.6 12.5 15.7 14.3 15.3 17.3 24.0 26.2 24.9 29.2 25.6 10 Gross due from balances 73.9 71.7 73.1 75.8 77.4 77.4 77.6 77.2 79.7 83.2 79.8 85.2 11 Gross due to balances 85.4 86.3 85.6 91.5 91.7 92.7 94.9 101.3 105.9 108.0 109.0 110.8 Security RP borrowings 12 Seasonally adjusted 97.9 96.4 99.2 99.9 101.8 103.0 105.2 107.5 107.6 106.9 106.2 108.5 13 Not seasonally adjusted 100.4 97.4 98.7 100.0 98.7 99.4 105.3 107.9 107.7 109.2 107.1 108.9 U.S. Treasury demand balances 14 Seasonally adjusted 22.7 18.9 21.4 25.3 26.9 24.4 28.5 24.9 34.2 35.7 26.1 18.6 15 Not seasonally adjusted 28.6 17.1 21.6 30.8 25.5 26.6 21.6 25.5 30.7 25.8 22.4 24.9 Time deposits, $100,000 or more8 16 Seasonally adjusted 354.2 355.9 358.9 365.7 372.1 372.5 372.3 373.0 380.5 387.0 389.2 389.1 17 Not seasonally adjusted 354.1 357.7 358.5 366.3 371.4 370.0 371.8 373.2 380.4 387.0 389.3 390.2 1. Commercial banks are those in the 50 states and the District of Columbia 3. Other borrowings are borrowings on any instrument, such as a promissory with national or state charters plus agencies and branches of foreign banks. New note or due bill, given for the purpose of borrowing money for the banking York investment companies majority owned by foreign banks, and Edge Act business. This includes borrowings from Federal Reserve Banks and from corporations owned by domestically chartered and foreign banks. foreignbanks, term federal funds, overdrawn due from bank balances, loan RPs, Data have been revised because of benchmarking to new Call Reports and to and participations in pooled loans. new seasonal factors. Back data are available from the Banking and Monetary 4. Averages of daily figures for member and nonmember banks. Statistics section, Board of Governors of the Federal Reserve System, Washing- 5. Averages of daily data. ton, D.C. 20551. 6. Based on daily average data reported by 122 large banks. These data also appear in the Board's G. 10(411) release. 7. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at 2. Includes seasonally adjusted federal funds, RPs, and other borrowings from commercial banks. Averages of daily data. nonbanks and not seasonally adjusted net Eurodollars. 8. Averages of Wednesday figures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • April 1988 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series1 Billions of dollars 1987R 1988 AAccccoouunntt Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. ALL COMMERCIAL BANKING INSTITUTIONS2 1 Loans and securities 2,286.1 2,314.2 2,325.8 2,321.0 2,331.6 2,348.8 2,374.8 2,402.4 2,389.9 2,430.5 2,415.2 2 Investment securities 484.6 491.7 494.5 492.7 497.1 501.1 501.7 503.8 508.0 514.4 515.2 3 U.S. government securities 299.6 305.6 307.4 304.6 309.4 313.7 313.8 316.0 317.3 321.4 322.9 4 Other 185.0 186.1 187.0 188.0 187.7 187.4 187.9 187.9 190.7 193.1 192.4 5 Trading account assets 25.3 23.4 21.4 20.2 20.4 19.5 19.5 19.6 20.3 16.9 18.3 6 Total loans 1,776.3 1,799.2 1,810.0 1,808.2 1,814.1 1,828.2 1,853.6 1,878.9 1,861.6 1,899.2 1,881.6 7 Interbank loans 158.6 154.0 161.8 150.7 156.5 160.8 157.4 172.9 162.0 172.1 160.5 8 Loans excluding interbank 1,617.7 1,645.2 1,648.1 1,657.5 1,657.6 1,667.5 1,696.2 1,706.1 1,699.7 1,727.2 1,721.1 9 Commercial and industrial 551.4 551.9 555.1 554.6 548.1 548.2 560.7 559.7 561.1 576.4 565.3 10 Real estate 517.2 526.4 533.8 544.4 552.9 558.2 564.1 571.7 577.4 586.3 588.5 11 Individual 313.8 316.3 316.9 317.3 319.4 322.1 325.3 326.7 326.9 332.4 330.8 12 All other 235.4 250.6 242.3 241.1 237.2 239.0 246.0 248.0 234.3 232.1 236.5 13 Total cash assets 205.8 211.6 231.9 214.2 208.4 210.7 223.8 223.5 215.2 232.5 209.6 14 Reserves with Federal Reserve Banks. 30.7 29.4 37.5 33.5 32.5 37.3 32.9 38.3 33.8 36.2 33.3 15 Cash in vault 22.8 24.0 25.1 24.2 24.5 24.7 24.5 25.0 24.0 28.5 25.8 16 Cash items in process of collection ... 68.3 74.8 81.6 74.7 69.0 65.9 81.6 79.0 76.1 79.9 70.7 17 Demand balances at U.S. depository institutions 32.0 33.1 36.5 30.4 31.0 30.8 32.7 32.3 32.9 36.6 31.4 18 Other cash assets 51.9 50.3 51.2 51.4 51.5 52.1 52.1 48.9 48.4 51.4 48.5 19 Other assets 198.9 199.2 203.7 197.4 182.5 184.5 193.6 186.3 187.5 184.0 176.0 20 Total assets/total liabilities and capital.... 2,690.8 2,724.9 2,761.4 2,732.6 2,722.6 2,744.0 2,792.2 2,812.2 2,792.6 2,847.1 2,800.7 21 Deposits 1,903.0 1,922.8 1,942.5 1,927.4 1,928.8 1,930.4 1,972.4 1,971.2 1,974.1 2,009.1 1,968.1 22 Transaction deposits 569.7 591.6 598.1 579.6 575.3 574.1 612.4 598.1 592.0 623.3 576.0 23 Savings deposits 542.0 537.6 541.0 537.6 538.7 537.9 535.3 531.7 531.1 528.0 531.4 24 Time deposits 791.2 793.6 803.4 §10.1 814.8 818.4 824.7 841.4 851.0 857.9 860.6 25 Borrowings 415.4 420.2 429.9 419.5 414.6 426.4 416.3 435.7 420.1 426.2 443.2 26 Other liabilities 186.2 194.1 200.0 202.0 202.5 209.6 224.7 225.5 218.9 231.5 208.7 27 Residual (assets less liabilities) 186.2 187.8 189.0 183.7 176.7 177.6 178.8 179.8 179.5 180.4 180.7 MEMO 28 U.S. government securities (including trading account) 316.8 319.4 321.0 317.0 323.8 326.8 327.7 329.9 331.7 332.4 336.9 29 Other securities (including trading account) 193.0 195.6 194.8 195.8 193.8 193.8 193.5 193.5 196.6 198.9 196.7 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 2,125.3 2,152.0 2,160.3 2,157.0 2,162.8 2,179.6 2,195.4 2,218.6 2,213.8 2,238.5 2,231.2 31 Investment securities 461.0 468.1 469.5 468.1 472.1 476.2 475.9 478.7 482.6 488.3 487.0 32 U.S. Treasury securities 289.2 295.5 296.9 295.1 299.4 303.5 302.9 305.7 306.4 311.0 311.3 33 Other 171.7 172.6 172.5 173.0 172.7 172.6 173.0 173.0 176.2 177.3 175.8 34 Trading account assets 25.3 23.4 21.4 20.2 20.4 19.5 19.5 19.6 20.3 16.9 18.3 35 Total loans 1,639.1 1,660.5 1,669.5 1,668.7 1,670.3 1,684.0 1,700.0 1,720.3 1,711.0 1,733.3 1,725.9 36 Interbank loans 124.9 124.3 128.7 120.9 122.0 128.6 125.0 133.3 130.5 135.3 131.0 37 Loans excluding interbank 1,514.2 1,536.3 1,540.8 1,547.8 1,548.3 1,555.4 1,575.0 1,587.0 1,580.4 1,598.0 1,594.9 38 Commercial and industrial 474.5 473.4 475.1 471.3 465.2 464.4 470.2 470.6 472.0 479.4 472.6 39 Real estate 509.2 517.8 525.0 535.5 543.5 548.4 554.0 561.9 567.3 575.0 577.1 40 Individual 313.5 316.0 316.5 317.0 319.1 321.8 325.0 326.4 326.6 332.1 330.5 41 All other 217.1 229.1 224.2 224.0 220.4 220.8 225.8 228.1 214.6 211.6 214.7 42 Total cash assets 189.3 195.2 215.4 197.7 191.6 192.7 204.8 207.8 199.3 214.9 191.9 43 Reserves with Federal Reserve Banks. 29.7 27.2 35.9 32.1 31.3 36.2 30.9 36.5 31.5 35.1 31.7 44 Cash in vault 22.8 24.0 25.0 24.1 24.4 24.6 24.4 24.9 24.0 28.4 25.7 45 Cash items in process of collection ... 68.0 74.3 81.2 74.2 68.5 65.4 81.0 78.4 75.7 79.5 70.2 46 Demand balances at U.S. depository institutions 30.4 31.3 34.5 28.7 29.3 29.2 30.8 30.6 31.4 34.7 29.7 47 Other cash assets 38.4 38.5 38.8 38.6 38.0 37.2 37.7 37.3 36.7 37.3 34.6 48 Other assets 142.1 142.6 142.3 132.8 120.5 119.9 134.2 130.0 123.7 127.2 118.8 49 Total assets/liabilities and capital 2,456.8 2,489.7 2,517.9 2,487.5 2,474.9 2,492.2 2,534.5 2,556.4 2,536.8 2,580.7 2,542.0 50 Deposits 1,844.4 1,860.7 1,880.1 1,865.7 1,868.3 1,868.8 1,910.3 1,909.1 1,912.4 1,944.6 1,905.9 51 Transaction deposits 562.3 583.7 590.0 571.4 567.4 566.0 603.9 589.5 583.7 614.9 567.7 52 Savings deposits 540.0 535.6 539.0 535.6 536.6 535.7 533.2 529.5 528.8 525.7 529.1 53 Time deposits 742.1 741.5 751.1 758.7 764.3 767.1 773.3 790.1 799.9 804.1 809.1 54 Borrowings 320.3 328.2 336.3 327.0 318.9 333.0 324.7 345.7 323.2 331.9 344.7 55 Other liabilities 109.2 116.2 115.8 114.4 114.2 116.0 123.8 125.0 124.8 127.0 113.9 56 Residual (assets less liabilities) 182.9 184.6 185.7 180.5 173.5 174.4 175.6 176.6 176.3 177.2 177.5 1. Data have been revised because of benchmarking to new Call Reports condition report data. Data for other banking institutions are estimates made for beginning July 1986. Back data are available from the Banking and Monetary the last Wednesday of the month based on a weekly reporting sample of Statistics section, Board of Governors of the Federal Reserve System, Washing- foreign-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 1987 Account Nov. 4 Nov. 11 Nov. 18 Nov. 25 Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30' 1 Cash and balances due from depository institutions 104,047 106,338 100,794 99,175 108,378' 97,636' 105,037' 106,811' 113,394 2 Total loans, leases, and securities, net l,029,460r 1,020,093' 1,020,636' 1,014,084' 1,023,781' 1,012,808' 1,024,791' 1,016,071' 1,024,441 3 U.S. Treasury and government agency 116,718 115,659 118,856 117,548 119,364' 119,092' 118,436' 118,239' 116,679 4 Trading acount 14,666 13,988 15,399 14,452 15,383 14,787 13,483 12,242 11,022 5 Investment account, by maturity 102,052 101,671 103,457 103,0% 103,981' 104,305' 104,953' 105,9%' 105,658 6 One year or less 15,884 15,953 15,934 15,798 16,193 16,075 16,075 16,034 15,891 7 Over one through five years 44,412 44,332 44,997 44,952 45,854 46,142 46,773 46,730 46,705 8 Over five years 41,757 41,385 42,525 42,346 41,933 42,086 42,102 43,230 43,060 9 Other securities 68,571 68,499 68,772 69,038 68.36C 68,156' 68,295' 68,442' 69,370 10 Trading account 2,5% 2,467 2,415 2,551 2,187 1,981 2,230 2,377 2,953 11 Investment account 65,975 66,031 66,357 66,486 66,173' 66,175' 66,066' 66,064' 66,417 12 States and political subdivisions, by maturity 47,846 47,797 47,598 47,541 47,256 47,201 47,083 46,982 47,012 13 One year or less 5,212 5,216 5,227 5,219 5,144 5,192 5,187 5,186 5,201 14 Over one year 42,633 42,580 42,370 42,322 42,112 42,008 41,896 41,7% 41,811 15 Other bonds, corporate stocks, and securities 18,129 18,234 18,759 18,945 18,917' 18,974' 18,982' 19,083' 19,404 16 Other trading account assets 2,960 3,027 3,114 3,293 3,161 2,869 2,629 2,675 2,880 17 Federal funds sold1 74,436 69,181 66,010 61,422 67,365 59,129 66,172 56,107 63,563 18 To commercial banks 46,827 40,005 40,003 37,024 43,149 36,279 44,741 35,884 44,223 19 To nonbank brokers and dealers in securities 19,153 20,972 18,031 16,687 17,442 15,957 14,506 13,776 13,109 20 To others 8,455 8,204 7,976 7,712 6,774 6,893 6,925 6,447 6,231 21 Other loans and leases, gross 805,708' 802,686' 802,814' 801,693' 804,288' 802,283' 807,894' 809,02C 810,060 22 Other loans, gross 785,712r 782,504' 782,636' 781,488' 784,353' 782,273' 787,816' 788,820' 789,740 23 Commercial and industrial 276,918' 276,351' 276,558' 275,645' 276,665' 275,938' 277,657' 278,380' 279,499 24 Bankers acceptances and commercial paper 2,289 2,275 2,353 2,224 2,180 2,200 2,063 1,9% 2,010 25 All other 274,628' 274,075' 274,204' 273,421' 274,485' 273,738' 275,594' 276,384' 277,489 26 U.S. addressees 271,598r 271,001' 271,254' 270,462' 271,495' 270,676' 272,549' 273,295' 274,507 27 Non-U.S. addressees 3,030 3,075 2,950 2,959 2,990 3,061 3,045 3,089 2,982 28 Real estate loans 241,261' 242,024' 242,755' 243,111' 243,577' 243,778' 244,746' 245,420' 245,894 29 Revolving, home equity 14,174 14,240 14,318 14,428 14,436 14,532 14,676 14,784 15,026 30 All other 227,087' 227,784' 228,436' 228,683' 229,140' 229,246' 230,07C 230,636' 230,868 31 To individuals for personal expenditures 142,520' 142,567' 142,333' 142,321' 142,448' 142,8%' 143,944' 144,953' 144,541 32 To depository and financial institutions 51,347' 51,020' 50,739' 49,766' 50,652' 50,494' 50,516' 50,295' 50,062 33 Commercial banks in the United States 22,429' 22,735' 22,058' 22,112' 22,422' 21,993' 22,006' 21,694' 21,723 34 Banks in foreign countries 5,289 4,770 4,970 4,314 4,400 4,516 4,225 4,506 4,210 35 Nonbank depository and other financial institutions 23,628 23,514 23,711 23,341 23,647' 23,803' 24,102' 23,912' 24,128 36 For purchasing and carrying securities 14,679 12,650 12,407 12,488 12,898 12,507 13,064' 12,792' 12,861 37 To finance agricultural production 5,601 5,504 5,573 5,508 5,531 5,522 5,557 5,560 5,713 38 To states and political subdivisions 31,474 31,366 31,443 31,301 31,124 30,894 30,807 30,609 30,413 39 To foreign governments and official institutions 2,888 2,840 2,844 2,813 2,799 2,752 2,810 2,734 2,660 40 All other 19,024' 18,184' 17,985' 18,534' 18,656' 17,488' 18,714' 18,075' 18,099 41 Lease financing receivables 19,9%' 20,181' 20,178' 20,204' 19,935' 20,011' 20,077' 20.20C 20,320 42 LESS: Unearned income 4,586' 4,592' 4,601' 4,548' 4,499' 4,523' 4,524' 4,545' 4,428 43 Loan and lease reserve 34,336 34,356 34,318 34,352 34,498 34,439 34,351 34,108 33,925 44 Other loans and leases, net 766,775' 763,727' 763,884' 762,782' 765,531' 763,561' 769,259' 770,607' 771,948 45 All other assets 127,818' 125,462' 124,154' 119,758' 121,954' 120,564' 124,501' 121,937' 122,137 46 Total assets 1,261,325' 1,251,892' 1,245,584' 1,233,016' 1,254,113' 1,231,008' 1,254,33C 1,244,819' 1,259,988 47 Demand deposits 234,023 223,223 224,%5 217,809 225,666' 213,082' 237,814' 230,206' 239,164 48 Individuals, partnerships, and corporations 180,167 175,482 173,804 171,882 177,824 168,885 183,331 180,792 184,002 49 States and political subdivisions 5,493 5,140 5,344 5,601 5,658 5,193 6,192 6,0% 5,887 50 U.S. government 4,581 1,460 3,852 2,190 1,474 1,364 3,716 3,427 3,139 51 Depository institutions in the United States 24,947 25,261 24,805 23,154 23,529' 21,663' 27,731' 23,98C 26,991 52 Banks in foreign countries 6,928 6,445 6,604 6,467 7,090 7,017 6,499 6,652 6,883 53 Foreign governments and official institutions 810 848 651 755 809 763 1,035 689 1,199 54 Certified and officers' checks 11,098 8,587 9,906 7,761 9,282 8,195 9,309 8,570 11,063 55 Transaction balances other than demand deposits 62,477 61,824 61,228 60,792 62,753 62,306 62,399 62,574 62,235 56 Nontransaction balances 535,335 535,904 536,595 535,801 536,090 536,826 536,098 536,529 534,985 57 Individuals, partnerships, and corporations 498,289 499,007 499,467 498,327 499,014 499,662 498,785 498,816 497,334 58 States and political subdivisions 25,345 25,159 25,088 25,357 25,022 25,292 25,381 25,425 25,370 59 U.S. government 773 748 764 832 779 763 910 898 892 60 Depository institutions in the United States 10,095 10,165 10,452 10,451 10,429 10,278 10,208 10,580 10,602 61 Foreign governments, official institutions, and banks ... 833 825 824 834 846 831 815 810 788 62 Liabilities for borrowed money 258,040' 259,414' 250,946' 245,5%' 257,183' 242,752' 246,563' 242,417' 250,072 63 Borrowings from Federal Reserve Banks 345 260 369 330 415 630 565 185 430 64 Treasury tax-and-loan notes 14,033 20,490 16,626 16,895 16,117 5,382 12,394 22,168 23,170 65 All other liabilities for borrowed money 243,662' 238,663' 233,952' 228,370' 240,651' 236,740' 233,604' 220,064' 226,321 66 Other liabilities and subordinated note and debentures . 92.02C 91,586' 92,244' 94,202' 92.82C 95,612' 91,834' 93,468' 94,630 67 Total liabilities 1,181,895' 1,171,951' 1,165,978' 1,154,20c 1,174,513' 1,150,579' 1,174,709' 1,165,195' 1,181,087 68 Residual (total assets minus total liabilities)3 79,430 79,942 79,606 78,816 79,600 80,429 79,621 79,624 78,901 MEMO 69 Total loans and leases (gross) and investments adjusted . 999,137' 9%,311' 997,505' 993,858' 997,219' 993,510' 996,931' 997,157' 996,859 70 Total loans and leases (gross) adjusted4 810,888' 809,126' 806,763' 803,980' 806,082' 803,141' 807,319' 807,549' 807,677 71 Time deposits in amounts of $100,000 or more 172,558 172,597 172,906 172,866 171,172 172,264 172,002 173,729 173,501 72 Loans sold outright to affiliates—total5 1,708 1,718 1,778 1,812 1,731 1,699 1,557 1,500 1,366 73 Commercial and industrial 1,248 1,263 1,321 1,352 1,270 1,245 1,126 1,080 1,057 74 Other 459 455 456 460 461 454 431 420 309 75 Nontransaction savings deposits (including MMDAs) 224,976 224,971 225,070 224,050 225,674 225,236 224,754 223,278 222,410 1. Includes securities purchased under agreements to resell. 4. Exclusive of loans and federal funds transactions with domestic commercial 2. Includes federal funds purchased and securities sold under agreements to banks. repurchase; for information on these liabilities at banks with assets of $1 billion or 5. Loans sold are those sold outright to a bank's own foreign branches, more on Dec. 31, 1977, see table 1.13. nonconsolidated nonbank affiliates of the bank, the bank's holding company (if 3. This is not a measure of equity capita) for use in capital-adequacy analysis or not a bank), and nonconsolidated nonbank subsidiaries of the holding company. for other analytic uses. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • April 1988 1.28 LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY Assets and Liabilities Millions of dollars, Wednesday figures except as noted 1987 Account Nov. 4 Nov. 11 Nov. 18 Nov. 25 Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 1 Cash balances due from depository institutions 25,488 26,426 23,107 22,068 25,598 25,475 24,132 25,476 29,583 2 Total loans, leases and securities, net1 219,192r 214,775' 215,004' 210,788' 216,198r 210,923' 216,740r 211,881'' 215,505' Securities 3 U.S. Treasury and government agency 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 14,141 13,821 14,368 13,718 14,311 14,224 14,451 14,333 14,553 6 One year or less 1,441 1,469 1,517 1,498 1,452 1,417 1,523 1,245 1,381 7 Over one through five years 4,216 4,122 4,640 4,663 4,681 4,608 4,609 4,643 4,707 8 Over five years 8,483 8,230 8,212 7,557 8,178 8,199 8,319 8,445 8,465 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 16,572 16,657 16,736 16,753 16,926 16,953 17,029 16,927 17,144 12 States and political subdivisions, by maturity 13,482 13,453 13,355 13,291 13,262 1133,,225588 13,262 13,274 1133,,330022 13 One year or less 788 795 786 775 874 888800 865 879 886688 14 Over one year 12,694 12,659 12,568 12,515 12,387 12,379 12,397 12,395 12,434 15 Other bonds, corporate stocks, and securities 3,090 3,203 3,381 3,462 3,664 3,694 3,766 3,653 3,842 16 Other trading account assets 0 0 0 0 0 0 0 0 0 Loans and leases 17 Federal funds sold3 31,439 29,539 30,165 26,826 30,182 26,163 28,858 24,645 26,753 18 To commercial banks 14,259 11,479 14,241 11,953 15,313 11,985 16,333 12,412 15,081 19 To nonbank brokers and dealers in securities 11,826 12,850 10,959 9,992 10,779 9,544 8,947 8,312 8,320 20 To others 5,354 5,209 4,965 4,881 4,090 4,635 3,578 3,921 3,352 21 Other loans and leases, gross 172,576' 170,326' 169,285' 169,035' 170,345' 169,153' 171,924' 171,384' 172,395' 22 Other loans, gross 168,068' 165,813' 164,796' 164,515' 165,860' 164,614' 167,378' 166,830' 167,830' 23 Commercial and industrial 59,181 58,562 57,841 56,954 57,463 57,105 58,195 58,010 58,447 24 Bankers acceptances and commercial paper 438 380 411 358 357 336 318 306 304 25 All other 2,313 2,329 2,353 2,373 2,389 2,407 2,424 2,441 2,463 26 U.S. addressees 42,374' 42,506' 42,653' 42,708' 42,972' 43,209' 43,668' 44,201' 44,699' 27 Non-U.S. addressees 58,742 58,182 57,430 56,596 57,105 56,769 57,878 57,704 58,142 28 Real estate loans 58,214 57,635 56,957 56,142 56,655 56,277 57,406 57,244 57,743 29 Revolving, home equity 529 547 473 455 450 491 472 460 400 30 All other 44,687' 44,836' 45,006' 45,080' 45,361' 45,616' 46,092' 46,642' 47,162' 31 To individuals for personal expenditures 21,331' 21,405' 21,037' 21,163' 21,180' 21,255' 21,451' 21,581' 21,747' 32 To depository and financial institutions 21,918' 21,804' 21,541' 21,380' 21,649' 21,727' 21,999' 21,897' 21,704' 33 Commercial banks in the United States 11,836' 12,222' 11,799' 11,997' 12,185' 12,088' 12,208' 12,253' 12,196' 34 Banks in foreign countries 3,287 2,784 2,968 2,460 2,487 2,682 2,342 2,625 2,316 35 Nonbank depository and other financial institutions 6,795 6,798 6,774 6,923 6,978 6,957 7,449 7,020 7,193 36 For purchasing and carrying securities 5,882 4,394 4,794 5,037 5,560 4,824 5,291 4,944 4,724 37 To finance agricultural production 331 324 342 300 297 307 323 284 282 38 To states and political subdivisions 7,721 7,697 7,770 7,745 7,665 7,502 7,423 7,347 7,386 39 To foreign governments and official institutions 742 638 664 625 663 610 712 657 597 40 All other 6,274' 6,152' 5,801' 6,230' 6,022' 5,667' 5,891' 5,468' 5,780' 41 Lease financing receivables 4,509 4,512 4,489 4,520 4,485 4,539 4,546 4,554 4,565 42 LESS: Unearned income 1,346' 1,352' 1,365' 1,348' 1,329' 1,338' 1,346' 1,360' 1,365' 43 Loan and lease reserve 14,190 14,216 14,186 14,196 14,237 14,233 14,176 14,048 13,975 44 Other loans and leases, net 157,040' 154,758' 153,734' 153,491' 154,779' 153,583' 156,402' 155,975' 157,055' 45 All other assets 61,178' 58,434' 60,186' 55,869' 57,380' 53,896' 55,736' 51,836' 53,385' 46 Total assets 305,858 299,635 298,296 288,726 299,176 290,294 296,608 289,192 298,474 Deposits 41 Demand deposits 63,618 56,801 60,251 54,185 56,287 53,403 62,863 58,495 63,743 48 Individuals, partnerships, and corporations 44,225 39,952 40,612 38,671 39,683 37,296 43,119 41,654 42,692 49 States and political subdivisions 879 1,066 889 791 912 846 968 810 758 50 U.S. government 870 261 717 367 192 187 595 566 593 51 Depository institutions in the United States 6,118 5,871 7,116 5,715 5,292 5,434 7,680 5,999 7,573 52 Banks in foreign countries 5,623 5,226 5,303 5,223 5,846 5,759 5,337 5,277 5,640 53 Foreign governments and official institutions 671 703 517 587 678 626 889 553 1,061 54 Certified and officers' checks 5,232 3,722 5,098 2,831 3,684 3,255 4,274 3,636 5,424 55 Transaction balances other than demand deposits (ATS, NOW, Super NOW, telephone transfers) 8,073 8,094 8,002 7,932 8,171 8,062 8,163 8,249 8,337 56 Nontransaction balances 101,446 101,376 101,404 101,097 101,566 101,144 101,300 101,225 101,540 57 Individuals, partnerships, and corporations 92,300 92,527 92,574 92,342 93,046 92,551 92,737 92,647 92,979 58 States and political subdivisions 6,794 6,530 6,542 6,481 6,238 6,326 6,248 6,127 6,122 59 U.S. government 67 55 57 56 57 60 59 50 50 60 Depository institutions in the United States 1,870 1,876 1,844 1,833 1,829 1,833 1,886 2,015 2,015 61 Foreign governments, official institutions, and banks .. 415 388 388 385 395 373 370 386 373 62 Liabilities for borrowed money 70,652 73,380 69,556 64,759 73,560 65,077 63,327 58,880 61,299 63 Borrowings from Federal Reserve Banks 0 0 0 0 0 0 0 0 0 64 Treasury tax-and-Ioan notes 3,283 5,007 4,222 4,327 4,173 1,269 3,602 5,570 5,642 65 All other liabilities for borrowed money5 67,369 68,372 65,334 60,432 69,387 63,808 59,726 53,310 55,656 66 Other liabilities and subordinated note and debentures .. 38,767 36,398 35,763 37,632 36,196 39,044 37,553 38,953 40,347 67 Total liabilities 282,557 276,049 274,976 265,606 275,780 266,731 273,208 265,802 275,266 68 Residual (total assets minus total liabilities)6 23,301 23,586 23,321 23,120 23,396 23,562 23,401 23,390 23,208 MEMO 69 Total loans and leases (gross) and investments adjusted • 208,633' 206,641' 204,515' 202,383' 204,266' 202,42c 203,721' 202,624' 203,569' 70 Total loans and leases (gross) adjusted 177,920' 176,163' 173,410' 171,912' 173,029' 171,243' 172,241' 171,363' 171,871' 71 Time deposits in amounts of $100,000 or more 38,448 38,397 38,361 38,016 37,776 37,761 37,476 37,881 37,437 1. Excludes trading account securities. 6. Not a measure of equity capital for use in capital adequacy analysis or for 2. Not available due to confidentiality. other analytic uses. 3. Includes securities purchased under agreements to resell. 7. Exclusive of loans and federal funds transactions with domestic commercial 4. Includes trading account securities. banks. 5. Includes federal funds purchased and securities sold under agreements to NOTE. These data also appear in the Board's H.4.2 (504) release. For address, repurchase. see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS1 Assets and Liabilities Millions of dollars, Wednesday figures 1987 AAccccoouunntt Nov. 4 Nov. 11 Nov. 18 Nov. 25 Dec. 2 Dec. 9 Dec. 16 Dec. 23 Dec. 30 1 Cash and due from depository institutions ... 10,434 10,013 10,922 9,970 11,801 9,920 10,326 10,150 10,878 2 Total loans and securities 97,204 96,081 98,486 96,156 96,785 99,280 100,996 102,108 106,201 3 U.S. Treasury and government agency securities 7,466 7,290 7,558 7,328 7,681 7,626 7,511 7,370 7,056 4 Other securities 7,402 7,516 7,456 7,450 7,394 7,299 7,341 7,474 7,811 5 Federal funds sold 8,474 8,073 10,615 7,679 6,947 8,988 10,272 9,364 11,688 6 To commercial banks in the United States . 6,730 6,081 8,191 5,663 4,174 6,354 8,152 7,490 10,136 7 To others 1,744 1,992 2,423 2,016 2,772 2,634 2,120 1,874 1,552 8 Other loans, gross 73,860 73,202 72,857 73,698 74,763 75,367 75,872 77,899 79,645 9 Commercial and industrial 49,111 47,548 48,072 47,700 48,231 49,280 49,217 50,530 5522,,225522rr 10 Bankers acceptances and commercial paper 3,361 1,553 1,448 1,501 1,488 1,524 1,457 1,528 1,668 11 All other 45,751 45,995 46,624 46,199 46,744 47,756 47,760 49,002 50,584r 12 U.S. addressees 43,421 43,597 44,234 43,743 44,400 45,281 45,192 46,751 48,526 13 Non-U.S. addressees 2,330 2,398 2,391 2,456 2,344 2,475 2,568 2,251 2,183 14 To financial institutions 15,597 15,815 15,605 16,805 16,618 16,237 16,279 16,901 16,766 15 Commercial banks in the United States.. 11,644 11,872 11,437 12,688 12,218 11,806 11,924 12,429 12,153 16 Banks in foreign countries 1,012 913 1,133 1,093 1,288 1,272 1,223 1,208 1,245 17 Nonbank financial institutions 2,940 3,029 3,035 3,024 3,112 3,159 3,132 3,264 3,368 18 To foreign governments and official institutions 388 400 407 403 401 411 398 400 418 19 For purchasing and carrying securities 2,062 2,339 1,655 1,738 1,991 1,971 2,200 2,201 2,121 20 All other 6,701 7,100 7,118 7,052 7,522 7,468 7,777 7,866 7,962 21 Other assets (claims on nonrelated parties) .. 28,927 31,776 31,619 31,805 31,787 31,798 31,264 31,427 31,500 22 Net due from related institutions 15,953 14,071 13,816 16,081 14,182 13,879 12,498 13,256 12,676 23 Total assets 152,517 151,942 154,844 154,012 154,555 154,877 155,084 156,942 161,255 24 Deposits or credit balances due to other than directly related institutions 42,747 42,397 41,917 41,849 41,773 42,366 43,088 43,349 44,244 25 Transaction accounts and credit balances . 3,527 3,341 3,221 2,918 2,841 3,092 33,,220066 3,033 33,,446611 26 Individuals, partnerships, and corporations 1,865 1,908 1,932 1,714 1,709 1,969 1,876 1,909 1,895 27 Other 1,662 1,432 1,289 1,204 1,132 1,123 1,330 1,124 1,566 28 Nontransaction accounts 39,219 39,056 38,696 38,931 38,932 39,274 39,882 40,315 40,783 29 Individuals, partnerships, and corporations 31,889 31,954 31,655 31,912 31,234 31,430 32,290 32,718 33,190 30 Other 7,330 7,102 7,042 7,018 7,699 7,844 77,,559922 7,597 7,593 31 Borrowings from other than directly related institutions 56,494 54,297 57,873 58,464 58,777 56,187 56,865 54,285 56,753 32 Federal funds purchased5 27,448 25,598 28,195 27,249 28,495 25,886 25,380 22,167 24,201 33 From commercial banks in the United States 17,568 15,592 17,030 16,924 16,373 13,943 15,256 12,413 15,115 34 From others 9,880 10,007 11,166 10,326 12,122 11,943 10,124 9,754 9,086 35 Other liabilities for borrowed money 29,046 28,699 29,678 31,215 30,282 30,302 31,486 32,118 32,552 36 To commercial banks in the United States 22,743 22,672 23,826 24,299 23,841 23,081 24,295 24,359 25,128 37 To others 6,303 6,027 5,851 6,916 6,441 7,221 7,190 7,759 7,424 38 Other liabilities to nonrelated parties 33,004 32,830 32,928 33,016 33,304 33,338 32,544 32,639 32,557 39 Net due to related institutions 20,272 22,417 22,124 20,683 20,701 22,986 22,587 26,668 27,701 40 Total liabilities 152,517 151,942 154,844 154,012 154,555 154,877 155,084 156,942 161,255 MEMO 41 Total loans (gross) and securities adjusted .. 78,829 78,128 78,857 77,804 80,393 81,121 80,920 82,189 83,912 42 Total loans (gross) adjusted6 63,960 63,322 63,843 63,026 65,317 66,195 66,068 67,344 69,044 1. Effective Jan. 1, 1986, the reporting panel includes 65 U.S. branches and 4. Includes savings deposits, money market deposit accounts, and time deposagencies of foreign banks that include those branches and agencies with assets of its. $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 • April 1988 1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations1 Billions of dollars, estimated daily-average balances, not seasonally adjusted Commercial banks TTTyyypppeee ooofff hhhooollldddeeerrr 1986 1987 11998822 11998833 11998844 DDeecc.. DDeecc.. DDeecc.. DDeecc..^^ Sept. Dec. Mar. June Sept. Dec. 11111 AAAAAllllllllll hhhhh ccccc ooooo ooooo lllll rrrrr ddddd ppppp eeeee ooooo rrrrr rrrrr sssss aaaaa ————— tttttiiiiiooooo IIIIInnnnn nnnnn ddddd sssss iiiii vvvvviiiiiddddduuuuuaaaaalllllsssss,,,,, pppppaaaaarrrrrtttttnnnnneeeeerrrrrssssshhhhhiiiiipppppsssss,,,,, aaaaannnnnddddd 291.8 293.5 302.7 321.0 333.6 363.6 335.9 340.2 339.0 t 22222 FFFFFiiiiinnnnnaaaaannnnnccccciiiiiaaaaalllll bbbbbuuuuusssssiiiiinnnnneeeeessssssssss 35.4 32.8 31.7 32.3 35.9 41.4 35.9 36.6 36.5 33333 NNNNNooooonnnnnfffffiiiiinnnnnaaaaannnnnccccciiiiiaaaaalllll bbbbbuuuuusssssiiiiinnnnneeeeessssssssss 150.5 161.1 166.3 178.5 185.9 202.0 183.0 187.2 188.2 nI.a. 44444 CCCCCooooonnnnnsssssuuuuummmmmeeeeerrrrr 85.9 78.5 81.5 85.5 86.3 91.1 88.9 90.1 88.7 55555 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 3.0 3.3 3.6 3.5 3.3 3.3 2.9 3.2 3.2 66666 OOOOOttttthhhhheeeeerrrrr 17.0 17.8 19.7 21.2 22.2 25.8 25.2 23.1 22.4 Weekly reporting banks 1986 1987 11998822 11998833 11998844 DDeecc.. DDeecc.. DDeecc..22 DDeeccjj''44 Sept. Dec. Mar. June Sept. Dec. 77777 AAAAAllllllllll hhhhhooooollllldddddeeeeerrrrrsssss—————IIIIInnnnndddddiiiiivvvvviiiiiddddduuuuuaaaaalllllsssss,,,,, pppppaaaaarrrrrtttttnnnnneeeeerrrrrssssshhhhhiiiiipppppsssss,,,,, aaaaannnnnddddd cccccooooorrrrrpppppooooorrrrraaaaatttttiiiiiooooonnnnnsssss 144.2 146.2 157.1 168.6 174.7 195.1 178.1 179.3 179.1 187.0 88888 FFFFFiiiiinnnnnaaaaannnnnccccciiiiiaaaaalllll bbbbbuuuuusssssiiiiinnnnneeeeessssssssss 26.7 24.2 25.3 25.9 28.9 32.5 28.7 29.3 29.3 29.5 99999 NNNNNooooonnnnnfffffiiiiinnnnnaaaaannnnnccccciiiiiaaaaalllll bbbbbuuuuusssssiiiiinnnnneeeeessssssssss 74.3 79.8 87.1 94.5 94.8 106.4 94.4 94.8 96.0 100.8 1111100000 CCCCCooooonnnnnsssssuuuuummmmmeeeeerrrrr 31.9 29.7 30.5 33.2 35.0 37.5 36.8 37.5 37.2 39.4 1111111111 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 2.9 3.1 3.4 3.1 3.2 3.3 2.8 3.1 3.1 3.3 1111122222 OOOOOttttthhhhheeeeerrrrr 8.4 9.3 10.9 12.0 12.8 15.4 15.5 14.6 13.5 14.0 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 such deposits for December 1984 is $5.0 billion at all insured commercial banks of 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 1987 IInnssttrruummeenntt D 19 e 8 c 3 . D 19 e 8 c 4 . D 19 e 8 c 5 . D 19 e 8 c 6 . D 19 e 8 c 7 . July Aug. Sept. Oct. Nov.1 Dec. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 187,658 237,586 300,899 331,016 357,130 349,976 350,780 357,019 356,578 351,846 357,130 Financial companies2 Dealer-placed paper 2 Total 44,455 56,485 78,443 100,207 101,958 108,470 109,941 114,435 109,020 105,197 101,958 3 Bank-related (not seasonally adjusted) 2,441 2,035 1,602 2,265 1,428 2,311 2,404 2,590 2,689 1,893 1,428 Directly placed paper4 4 Total 97,042 110,543 113355,,550044 152,385 173,940 162,764 162,674 165,344 170,403 169,779 173,940 5 Bank-related (not seasonally adjusted) 35,566 42,105 44,778 40,860 43,173 46,354 45,487 46,815 46,249 45,353 43,173 6 Nonfinancial companies5 46,161 70,558 86,952 78,424 81,232 78,742 78,165 77,240 77,155 76,870 81,232 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 78,309 78,364 68,413 64,974 70,565 68,495 68,645 68,771 71,891 71,068 70,565 Holder 8 Accepting banks 9,355 9,811 11,197 13,423 10,942 10,664 10,870 10,521 10,856 10,701 10,942 9 Own bills 8,125 8,621 9,471 11,707 9,464 9,630 9,905 9,400 9,742 9,714 9,464 10 Bills bought 1,230 1,191 1,726 1,716 1,479 1,035 965 1,121 1,114 987 1,479 Federal Reserve Banks 11 Own account 418 0 0 0 0 0 0 0 0 0 0 12 Foreign correspondents 729 671 937 1,317 965 1,463 1,397 1,467 1,400 1,134 965 13 Others 67,807 67,881 56,279 50,234 58,658 56,367 56,378 56,784 59,635 59,234 58,658 Basis 14 Imports into United States 15,649 17,845 15,147 14,670 16,483 17,431 17,087 17,198 17,814 16,942 16,483 15 Exports from United States 16,880 16,305 13,204 12,960 15,227 14,659 14,967 15,046 15,949 15,435 15,227 16 All other 45,781 44,214 40,062 37,344 38,847 36,405 36,590 36,526 38,122 38,691 38,847 1. A change in the reporting panel in November resulted in a slight understate- 5. Includes public utilities and firms engaged primarily in such activities as ment of outstanding volume. communications, construction, manufacturing, mining, wholesale and retail trade, 2. Institutions engaged primarily in activities such as, but not limited to, transportation, and services. commercial savings, and mortgage banking; sales, personal, and mortgage fi- 6. Beginning October 1984, the number of respondents in the bankers accepnancing; factoring, finance leasing, and other business lending; insurance under- tance survey were reduced from 340 to 160 institutions—those with $50 million or writing; and other investment activities. more in total acceptances. The new reporting group accounts for over 95 percent 3. Includes all financial company paper sold by dealers in the open market. of total acceptances activity. 4. As reported by financial companies that place their paper directly with investors. 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per year Average Effective Date Month rate 10.50 1987—Apr. 1 7.75 1985—Jan. 10.61 1986—Sept. 10.00 May 1 8.00 Feb. 10.50 Oct. 9.50 IS 8.25 Mar. 10.50 Nov. Sept. 4 8.75 Apr. 10.50 Dec. 9.00 Oct. 7 9.25 May 10.31 8.50 ?? 9.00 June 9.78 1987—Jan. 8.00 Nov. 5 8.75 July 9.50 Feb. 7.50 Aug. 9.50 Mar. Sept. 9.50 Apr. Oct. 9.50 May Nov. 9.50 June Dec. 9.50 July Aug. 1986—Jan. 9.50 Sept. Feb. 9.50 Oct. Mar. 9.10 Nov. Apr. 8.83 Dec. May 8.50 June 8.50 1988—Jan. July 8.16 Aug. 7.90 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 • April 1988 1.35 INTEREST RATES Money and Capital Markets Averages, percent per year; weekly and monthly figures are averages of business day data unless otherwise noted. 1987 1988 1988, week ending IInnssttrruummeenntt 11998855 11998866 11998877rr Oct. Nov. Dec. Jan. Jan. 1 Jan. 8 Jan. 15 Jan. 22 Jan. 29 MONEY MARKET RATES 1 8.10 6.80 6.66 7.29 6.69 6.77 6.83 6.81 7.02 6.81 6.89 6.66 ? 7.69 6.33 5.66 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Commercial paper ' 3 7.94 6.62 6.73 7.38 6.77 7.76 6.76 7.45 6.85 6.80 6.75 6.66 4 7.95 6.49 6.81 7.89 7.17 7.61 6.87 7.30 6.95 6.92 6.85 6.75 S 8.01 6.39 6.84 7.96 7.17 7.49 6.92 7.22 7.00 7.00 6.91 6.78 Finance paper, directly placed4. 6 7.91 6.58 6.61 7.28 6.63 7.23 6.65 6.97 6.74 6.69 6.61 6.54 7 7.77 6.38 6.54 7.40 6.91 6.97 6.62 6.78 6.67 6.68 6.61 6.51 8 7.75 6.31 6.37 7.17 6.69 6.64 6.53 6.63 6.59 6.60 6.53 6.41 Bankers acceptances ,6 9 7.92 6.39 6.74 7.85 7.07 7.48 6.77 7.17 6.89 6.83 6.73 6.61 in 7.96 6.29 6.77 7.92 7.07 7.41 6.83 7.14 6.97 6.93 6.76 6.63 Certificates of deposit, secondary market7 N 7.97 6.61 6.74 7.39 6.80 7.86 6.78 7.57 6.87 6.81 6.76 6.66 I? 8.05 6.52 6.86 8.02 7.24 7.66 6.92 7.38 7.03 6.99 6.87 6.77 N 8.25 6.51 7.00 8.19 7.31 7.67 7.10 7.40 7.21 7.21 7.07 6.09 14 8.28 6.71 7.06 8.29 7.41 7.86 7.11 7.69 7.23 7.23 7.11 7.03 U.S. Treasury bills' Secondary market 15 7.48 5.98 5.78 6.13 5.69 5.77 5.81 5.73 5.86 5.81 5.85 5.74 16 7.65 6.03 6.03 6.69 6.19 6.36 6.25 6.26 6.36 6.29 6.25 6.11 17 7.81 6.08 6.32 7.05 6.50 6.69 6.52 6.66 6.66 6.63 6.45 6.33 Auction average10 18 7.49 5.97 5.82 6.40 5.81 5.80 5.90 5.73 5.90 5.85 5.98 5.85 19 7.66 6.02 6.05 6.86 6.23 6.36 6.31 6.32 6.35 6.33 6.37 6.19 2200 7.81 6.07 6.33 6.89 6.48 6.74 6.67 n.a. n.a. n.a. 6.67 nn..aa.. CAPITAL MARKET RATES U.S. Treasury notes aqd bonds" Constant maturities1- 71 8.43 6.46 6.77 7.59 6.96 7.17 6.99 7.15 7.15 7.12 6.90 6.77 11 9.27 6.87 7.41 8.40 7.69 7.86 7.63 7.82 7.81 7.75 7.57 7.39 73 9.64 7.06 7.67 8.75 7.99 8.13 7.87 8.08 8.05 7.99 7.80 7.63 74 10.13 7.31 7.94 9.08 8.35 8.45 8.18 8.38 8.37 8.33 8.08 7.91 ?5 10.51 7.55 8.22 9.37 8.69 8.82 8.48 8.69 8.69 8.65 8.37 8.19 ?6 10.62 7.68 8.39 9.52 8.86 8.99 8.67 8.85 8.84 8.84 8.57 8.39 77 20-year 10.97 7.85 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. ?8 10.79 7.80 8.58 9.61 8.95 9.12 8.83 8.95 8.98 9.01 8.74 8.56 Composite ?9 10.75 8.14 8,63 9.61 8.99 9.12 8.82 8.96 9.00 9.01 8.72 8.55 State and local notes and bonds Moody's series'4 30 8.60 6.95 7.14 7.90 7.50 7.45 7.29 n.a. 7.40 7.35 7.25 7.15 31 Baa 9.58 7.76 8.17 8.85 8.47 8.42 8.12 n.a. 8.40 8.30 8.00 7.80 V> 9.11 7.32 7.64 8.70 7.95 7.96 7.70 n.a. 7.86 7.83 7.61 7.51 Corporate bonds Seasoned issues16 33 12.05 9.71 9.91 10.97 10.54 10.59 10.37 10.53 10.49 10.48 10.34 10.16 34 11.37 9.02 9.38 10.52 10.01 10.11 9.88 10.06 10.00 10.00 9.88 9.64 35 Aa 11.82 9.47 9.68 10.74 10.27 10.33 10.09 10.25 10.19 10.19 10.06 9.90 36 A 12.28 9.95 9.99 10.98 10.63 10.62 10.43 10.58 10.54 10.52 10.41 10.58 37 Baa 12.72 10.39 10.58 11.62 11.23 11.29 11.07 11.24 11.22 11.19 11.02 10.85 38 A-rated, recently-offered utility bonds17 12.06 9.61 9.95 11.07 10.39 10.42 10.05 10.25 10.30 9.99 9.92 9.76 MEMO: Dividend/price ratio18 39 10.49 8.76 8.37 8.99 9.11 9.08 9.04 9.12 9.14 9.11 8.99 8.93 4400 4.25 3.48 3.08 3.25 3.66 3.71 3.66 3.66 3.51 3.70 3.75 3.66 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 15. General obligations only, with 20 years to maturity, issued by 20 state and 150-179 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 in an investment 16. Daily figures from Moody's Investors Service. Based on yields to maturity yield 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 often issues: four public utilities, four industrials, one financial, and one 9. Unweighted average of closing bid rates quoted by at least five dealers. transportation. Common stock ratios on the 500 stocks in the price index. 10. Rates are recorded in the week in which bills are issued. Beginning with the NOTE. These data also appear in the Board's H. 15 (519) and G. 13 (415) releases. Treasury bill auction held on Apr. 18, 1983, bidders were required to state the For address, see inside front cover. percentage yield (on a bank discount basis) that they would accept to two decimal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A23 1.36 STOCK MARKET Selected Statistics 1987 1988 IInnddiiccaattoorr 11998855 11998866 11998877 May June July Aug. Sept. Oct. Nov. Dec. Jan. Prices and trading (averages of daily figures) CCCCCCCooooooommmmmmmmmmmmmmooooooonnnnnnn ssssssstttttttoooooooccccccckkkkkkk ppppppprrrrrrriiiiiiiccccccceeeeeeesssssss 1111111 NNNNNNNeeeeeeewwwwwww YYYYYYYooooooorrrrrrrkkkkkkk SSSSSSStttttttoooooooccccccckkkkkkk EEEEEEExxxxxxxccccccchhhhhhhaaaaaaannnnnnngggggggeeeeeee (((((((DDDDDDDeeeeeeeccccccc....... 33333331111111,,,,,,, 1111111999999966666665555555 ======= 55555550000000))))))) 108.09 136.00 161.70 163.00 169.58 174.28 184.18 178.39 157.13 137.21 134.88 140.55 2222222 IIIIIIInnnnnnnddddddduuuuuuussssssstttttttrrrrrrriiiiiiiaaaaaaalllllll 123.79 155.85 195.31 198.78 206.61 214.12 226.49 219.52 189.86 163.42 162.19 168.47 3333333 TTTTTTTrrrrrrraaaaaaannnnnnnssssssspppppppooooooorrrrrrrtttttttaaaaaaatttttttiiiiiiiooooooonnnnnnn 104.11 119.87 140.39 141.30 150.39 157.49 164.02 158.58 140.95 117.57 115.85 121.20 4444444 UUUUUUUtttttttiiiiiiillllllliiiiiiitttttttyyyyyyy 56.75 71.36 74.29 71.64 74.25 74.18 78.20 76.13 73.27 69.86 67.39 70.01 5555555 FFFFFFFiiiiiiinnnnnnnaaaaaaannnnnnnccccccceeeeeee 114.21 147.19 146.48 145.97 152.73 152.27 160.94 154.08 137.35 118.30 111.47 119.40 6666666 SSSSSSStttttttaaaaaaannnnnnndddddddaaaaaaarrrrrrrddddddd &&&&&&& PPPPPPPoooooooooooooorrrrrrr'''''''sssssss CCCCCCCooooooorrrrrrrpppppppooooooorrrrrrraaaaaaatttttttiiiiiiiooooooonnnnnnn (((((((1111111999999944444441111111-------44444443333333 ======= 11111110000000)))))))1111111 186.84 236.34 286.83 289.12 301.36 310.09 329.36 318.66 280.16 245.01 240.96 250.48 7777777 AAAAAAAmmmmmmmeeeeeeerrrrrrriiiiiiicccccccaaaaaaannnnnnn SSSSSSStttttttoooooooccccccckkkkkkk EEEEEEExxxxxxxccccccchhhhhhhaaaaaaannnnnnngggggggeeeeeee2222222 (((((((AAAAAAAuuuuuuuggggggg....... 33333331111111,,,,,,, 1111111999999977777773333333 ======= 55555550000000))))))) 229.10 264.38 316.61 328.77 334.49 348.68 361.52 353.72 306.34 249.42 248.52 267.29 VVVVVVVooooooollllllluuuuuuummmmmmmeeeeeee ooooooofffffff tttttttrrrrrrraaaaaaadddddddiiiiiiinnnnnnnggggggg (((((((ttttttthhhhhhhooooooouuuuuuusssssssaaaaaaannnnnnndddddddsssssss ooooooofffffff ssssssshhhhhhhaaaaaaarrrrrrreeeeeeesssssss))))))) 8888888 NNNNNNNeeeeeeewwwwwww YYYYYYYooooooorrrrrrrkkkkkkk SSSSSSStttttttoooooooccccccckkkkkkk EEEEEEExxxxxxxccccccchhhhhhhaaaaaaannnnnnngggggggeeeeeee 109,191 141,385 188,642 170,898 163,380 180,356 193,477 177,319 277,026 179,481 178,517 174,754 9999999 AAAAAAAmmmmmmmeeeeeeerrrrrrriiiiiiicccccccaaaaaaannnnnnn SSSSSSStttttttoooooooccccccckkkkkkk EEEEEEExxxxxxxccccccchhhhhhhaaaaaaannnnnnngggggggeeeeeee 8,355 11,846 13,832 11,655 12,813 12,857 13,604 12,381 18,173 11,268 13,422 9,853 Customer financing (end-of-period balances, in millions of dollars) 11111110000000 MMMMMMMaaaaaaarrrrrrrgggggggiiiiiiinnnnnnn cccccccrrrrrrreeeeeeedddddddiiiiiiittttttt aaaaaaattttttt bbbbbbbrrrrrrroooooookkkkkkkeeeeeeerrrrrrr-------dddddddeeeeeeeaaaaaaallllllleeeeeeerrrrrrrsssssss3333333 28,390 36,840 31,990 38,890 38,420 40,250 41,640 44,170 38,250 34,180 31,990 31,320 FFFFFFFrrrrrrreeeeeeeeeeeeee cccccccrrrrrrreeeeeeedddddddiiiiiiittttttt bbbbbbbaaaaaaalllllllaaaaaaannnnnnnccccccceeeeeeesssssss aaaaaaattttttt bbbbbbbrrrrrrroooooookkkkkkkeeeeeeerrrrrrrsssssss4444444 11111111111111 MMMMMMMaaaaaaarrrrrrrgggggggiiiiiiinnnnnnn-------aaaaaaaccccccccccccccooooooouuuuuuunnnnnnnttttttt 2,715 4,880 4,750 4,355 3,680 4,095 4,240 4,270 8,415 6,700 4,750 4,675 11111112222222 CCCCCCCaaaaaaassssssshhhhhhh-------aaaaaaaccccccccccccccooooooouuuuuuunnnnnnnttttttt 12,840 19,000 15,640 16,985 15,405 15,930 16,195 15,895 18,455 15,360 15,640 15,270 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 11111113333333 MMMMMMMaaaaaaarrrrrrrgggggggiiiiiiinnnnnnn ssssssstttttttoooooooccccccckkkkkkksssssss 70 80 65 55 65 50 11111114444444 CCCCCCCooooooonnnnnnnvvvvvvveeeeeeerrrrrrrtttttttiiiiiiibbbbbbbllllllleeeeeee bbbbbbbooooooonnnnnnndddddddsssssss 50 60 50 50 50 50 11111115555555 SSSSSSShhhhhhhooooooorrrrrrrttttttt sssssssaaaaaaallllllleeeeeeesssssss 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance "margin securities" (as defined in the regulations) when such credit is collateracompanies. With this change the index includes 400 industrial stocks (formerly lized by securities. Margin requirements on securities other than options are the 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40 difference between the market value (100 percent) and the maximum loan value of financial. collateral as prescribed by the Board. Regulation T was adopted effective Oct. 15, 2. Beginning July 5, 1983, the American Stock Exchange rebased its index 1934; Regulation U, effective May 1, 1936; Regulation G, effective Mar. 11, 1968; effectively cutting previous readings in half. and Regulation X, effective Nov. 1, 1971. 3. Beginning Juiy 1983, under the revised Regulation T, margin credit at On Jan. 1, 1977, the Board of Governors for the first time established in broker-dealers includes credit extended against stocks, convertible bonds, stocks Regulation T the initial margin required for writing options on securities, setting acquired through exercise of subscription rights, corporate bonds, and govern- it at 30 percent of the current market-value of the stock underlying the option. On ment securities. Separate reporting of data for margin stocks, convertible bonds, Sept. 30, 1985, the Board changed the required initial margin, allowing it to be the and subscription issues was discontinued in April 1984. same as the option maintenance margin required by the appropriate exchange or 4. Free credit balances are in accounts with no unfulfilled commitments to the self-regulatory organization; such maintenance margin rules must be approved by brokers and are subject to withdrawal by customers on demand. the Securities and Exchange Commission. Effective Jan. 31, 1986, the SEC 5. New series beginning June 1984. approved new maintenance margin rules, permitting margins to be the price of the 6. These regulations, adopted by the Board of Governors pursuant to the option plus 15 percent of the market value of the stock underlying the option. Securities Exchange Act of 1934, limit the amount of credit to purchase and carry Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • April 1988 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1987 AAccccoouunntt 11998855 11998866 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Savings and loan associations 1 Assets 948,781 963,316 935,438' 936,858' 939,721' 944,229' 952,671' 949,069' 949,238' 955,253 956,744 973,992 975,809 2 Mortgage-backed securities 97,303 123,257 129,338' 128,856 129,274' 134,746' 141,023' 142,241' 140,897' 144,058 146,247 150,230 151,986 Cash and investment securities 126,712 142,700 133,028' 135,885' 138,746' 136,370 138,303' 138,125' 138,520' 137,323 131,729 139,675 135,297 4 Other 238,833 251,769 261,858' 263,829' 266,393' 274,812' 283,644' 285,473' 287,55C 292,737 295,225 301,229 304,686 5 Liabilities and net worth 948,781 963,316 935,438' 936,858' 939,721' 944,229' 952,671' 949,069' 949,238' 955,253 956,744 973,992 975,809 6 Savings capital 750,071 741,081 721,714' 722,226' 722,548 716,798 718,633 715,662 716,389 717,259 721,409 727,274 730,324 7 Borrowed money 138,798 159,742 153,381' 152,176' 158,192' 165,883' 171,279' 175,394' 174,357 178,642 180,360 190,706 188,778 K FHLBB 73,888 80,194 75,552 75,671 76,469 77,857 78,583 79,188 78,888 79,546 80,848 83,303 84,421 9 Other 64,910 79,548 77,829' 76,505' 81,723' 88,026' 92,696' 96,206' 95,469 99,0% 99,512 107,403 104,357 10 Other 19,045 20,071 19,829' 21,878' 18,958 20,869' 22,628' 19,584' 20,682' 21,941 19,158 20,9% 21,587 11 Net worth2 41,064 42,423 40,514' 40,579' 40,023' 40,678' 40,127' 38,428' 37,809' 37,406 35,814 35,003 35,106 FSLIC-insured federal savings banks 12 Assets 131,868 210,562 235,428 235,763 241,418 246,277 253,006 264,106 268,813 272,088 272,789 276,490 279,153 13 Mortgages 72,355 113,638 136,782' 136,505' 138,882 140,854 144,581 150,421 152,881' 154,058 154,658 156,460 158,874 14 Mortgage-backed securities 15,676 29,766 33,570 34,634 36,088 37,500 39,371 40,969 42,713' 43,531 44,422 45,132 45,255 15 Other 11,723 19,034 15,769 16,060 16,605 17,034 17,200 17,924 17,546 17,779 17,559 17,383 17,325 16 Liabilities and net worth 131,868 210,562 235,428 235,763 241,418 246,277 253,006 264,106 268,813 272,088 272,789 276,490 279,153 17 Savings capital 103,462 157,872 176,938' 177,355' 178,672 180,637 182,802 189,998 193,890 194,853 195,213 197,2% 199,114 18 Borrowed money 19,323 37,329 40,614 39,777 43,919 46,125 49,896 53,255 53,652 55,660 56,540 57,551 58,276 19 FHLBB 10,510 19,897 20,730 20,226 21,104 21,718 22,788 24,486 24,981 25,546 26,287 27,350 27,947 70 Other 8,813 17,432 19,884 19,551 22,815 24,407 27,108 28,769 28,671 30,114 30,253 30,201 30,329 71 Other 2,732 4,263 5,308' 5,484' 5,264' 5,547 6,044 5,987' 6,142' 6,454 5,630 6,308 6,361 22 Net worth 6,351 11,098 12,774 13,151 13,564 13,978 14,272 14,871 15,134 15,123 15,408 15,348 15,415 Savings banks 23 Assets 216,776 236,866 235,603 238,074 240,739 243,454 245,906 244,760 246,833 249,888 251,472 255,989 260,600 Loans 24 Mortgage 110,448 118,323 119,199 119,737 121,178 122,769 124,936 128,217 129,624 130,721 133,298 135,317 137,044 25 Other 3300,,887766 3355,,116677 3366,,112222 3377,,220077 3388,,001122 3377,,113366 3377,,331133 3355,,220000 3355,,559911 3366,,779933 3366,,113344 3366,,447711 3377,,118899 Securities 26 U.S. government 13,111 14,209 13,332 13,525 13,631 13,743 13,650 13,549 13,498 13,720 13,122 13,817 15,694 27 Mortgage-backed securities .. 19,481 25,836 26,220 26,893 27,463 28,700 28,739 27,785 28,252 28,913 29,655 30,202 31,144 28 State and local government .. 2,323 2,185 2,180 2,168 2,041 2,063 2,053 2,059 2,050 2,038 2,023 2,034 2,046 29 Corporate and other 21,199 20,459 19,795 19,770 19,598 19,768 19,956 18,803 18,821 18,573 18,431 18,062 17,583 30 Cash 6,225 6,894 5,239 5,143 5,703 5,308 5,176 4,939 4,806 4,823 4,484 5,529 5,063 31 Other assets 13,113 13,793 13,516 13,631 13,713 13,967 14,083 14,208 14,191 14,307 14,325 14,557 14,837 32 Liabilities 216,776 236,866 235,603 238,074 240,739 243,454 245,906 244,760 246,833 249,888 251,472 255,989 260,600 33 Deposits 185,972 192,194 191,441 192,559 193,693 193,347 194,742 193,274 194,549 195,895 196,824 199,336 202,030 34 Regular3 181,921 186,345 186,385 187,597 188,432 187,791 189,048 187,669 188,783 190,335 191,376 193,777 1%,724 35 Ordinary savings 33,018 37,717 38,467 39,370 40,558 41,326 41,967 42,178 41,928 41,767 41,773 42,045 42,493 36 Time 103,311 100,809 100,604 100,922 100,896 100,308 100,607 100,604 102,603 105,133 107,063 109,486 112,231 37 Other 4,051 5,849 5,056 4,962 5,261 5,556 5,694 5,605 5,766 5,560 5,448 5,559 5,306 38 Other liabilities 17,414 25,274 24,710 25,663 27,003 29,105 30,436 30,515 31,655 32,467 32,827 34,226 36,167 39 General reserve accounts 12,823 18,105 18,236 18,486 18,830 19,423 19,603 19,549 19,718 20,471 20,407 20,365 21,133 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A23 1.37—Continued 1987 AAccccoouunntt 11998855 11998866 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Credit unions4 40 Total assets/liabilities and capital 118,010 147,726 149,383 149,751 153,253 154,549 156,086 160,644 41 Federal 77,861 95,483 96,801 96,753 98,799 99,751 100,153 104,150 42 State 40,149 52,243 52,586 52,998 54,454 54,798 55,933 56,494 43 Loans outstanding .. 73,513 86,137 85,984 85,651 86,101 87,089 87,765 90,912 n. a. n a. n. a. n a. n a. 44 Federal 47,933 55,304 55,313 54,912 55,118 55,740 55,952 58,432 45 State 25,580 30,833 30,671 30,739 30,983 31,349 31,813 32,480 46 Savings 105,963 134,327 135,907 136,441 138,810 140,014 141,635 148,283 47 Federal 70,926 87,954 89,717 89,485 91,042 92,012 97,189 96,137 48 State 35,037 46,373 46,130 46,956 47,768 48,002 49,248 52,146 Life insurance companies 49 Assets 825,901 937,551 948,665 961,937 978,455 978,455 985,942 995,576 1,005,592 1,017,018 1,026,919 1,021,148 Securities 50 Government 75,230 84,640 84,923 88,003 90,337 89,711 89,554 87,279 88,199 89,924 89,408 90,782 51 United States5.. 51,700 59,033 59,596 62,724 65,661 64,621 64,201 61,405 62,461 64,150 63,352 64,880 52 State and local . 9,708 11,659 11,245 11,315 10,860 11,068 11,208 11,485 11,277 11,190 11,087 11,363 53 Foreign6 13,822 13,948 14,082 13,964 13,816 14,022 14,145 14,389 14,461 14,584 14,969 14,539 54 Business 423,712 492,807 504,582 514,328 519,766 522,097 528,789 537,507 555,423 551,701 558,787 549,426 n.a. 55 Bonds 346,216 401,943 408,788 415,004 417,933 420,474 425,788 432,095 448,146 442,604 451,453 455,678 56 Stocks 77,496 90,864 95,794 99,324 101,833 101,623 103,001 105,412 107,277 109,097 107,334 93,748 57 Mortgages 171,797 193,842 194,213 194,935 195,743 197,315 198,760 200,382 201,297 202,241 204,264 206,507 58 Real estate 28,822 31,615 31,718 32,003 31,834 32,011 32,149 32,357 32,699 32,992 33,048 33,235 59 Policy loans 54,369 54,055 53,832 53,806 53,652 53,572 53,468 53,378 53,338 53,330 53,422 53,413 60 Other assets 71,971 80,592 79,397 78,842 82,105 83,749 83,222 84,390 85,420 86,830 87,991 87,785 1. Holdings of stock of the Federal Home Loan Banks are in "other assets." Savings banks: Estimates by the National Council of Savings Institutions for all 2. Includes net undistributed income accrued by most associations. savings banks in the United States and for FDIC-insured savings banks that have 3. Excludes checking, club, and school accounts. converted to federal savings banks. 4. Data include all federally insured credit unions, both federal and state Credit unions: Estimates by the National Credit Union Administration for chartered, serving natural persons. federally chartered and federally insured state-chartered credit unions serving 5. Direct and guaranteed obligations. Excludes federal agency issues not natural persons. guaranteed, which are shown in the table under "Business" securities. Life insurance companies: Estimates of the American Council of Life Insurance 6. Issues of foreign governments and their subdivisions and bonds of the for all life insurance companies in the United States. Annual figures are annual- International Bank for Reconstruction and Development. statement asset values, with bonds carried on an amortized basis and stocks at NOTE. Savings and loan associations: Estimates by the FHLBB for all year-end market value. Adjustments for interest due and accrued and for associations in the United States based on annual benchmarks for non-FSLIC- differences between market and book values are not made on each item separately insured associations and the experience of FSLIC-insured associations. but are included, in total, in "other assets." FSLIC-insured federal savings banks: Estimates by the FHLBB for federal savings banks insured by the FSLIC and based on monthly reports of federally insured institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics • April 1988 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year FFFiiissscccaaalll FFFiiissscccaaalll TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn yyyeeeaaarrr yyyeeeaaarrr 1987 1988 111999888666 111999888777 Aug. Sept. Oct. Nov. Dec. Jan. U.S. budget2 1 Receipts, total 769,091 854,143 60,213 92,410 62,354 56,987 85,525 81,791 2 On-budget 568,862 640,741 43,511 73,755 45,992 40,630 67,645 60,645 3 Off-budget 200,228 213,402 16,703 18,656 16,362 13,357 17,880 21,146 4 Outlays, total 990,258 1,004,586 81,890 76,980 93,095 83,920 109,741 65,706 5 On-budget 806,760 810,754 65,021 60,337 76,910 67,150 77,845 66,493 6 Off-budget 183,498 193,832 16,869 16,643 16,185 16,770 31,896 -787 7 Surplus, or deficit (-), total -221,167 -150,444 -21,677 15,430 -30,741 -26,934 -24,216 16,085 8 On-budget -237,898 -170,014 -21,511 13,417 -30,918 -26,520 -10,200 -5,848 9 Off-budget 16,731 19,570 -166 2,013 176 -414 -14,016 21,933 Source of financing (total) 10 Borrowing from the public 236,187 150,070 33,060 -8,060 27,282 23,603 9,766 5,281 11 Operating cash (decrease, or increase (~k -14,324 -5,052 -3,219 -13,800 -1,879 17,164 -1,218 -17,555 12 Other3 -696 5,426 -8,165 6,430 5,338 -13,833 15,668 -3,810 MEMO 13 Treasury operating balance (level, end of period) 31,384 36,436 22,635 36,436 38,315 21,151 22,369 39,924 14 Federal Reserve Banks 7,514 9,120 3,764 9,120 8,898 3,595 5,313 10,276 15 Tax and loan accounts 23,870 27,316 18,872 27,316 29,416 17,556 17,056 29,648 1. FY 1987 total outlays and deficit do not correspond to the monthly data disability insurance trust funds) off-budget. because the Monthly Treasury Statement has not completed the monthly distri- 3. Includes SDRs; reserve position on the U.S. quota in the IMF; loans to bution of revisions reflected in the fiscal year total in The Budget of the U.S. international monetary fund; other cash and monetary assets; accrued interest Government, Fiscal Year 1989. payable to the public; allocations of special drawing rights; deposit funds; 2. In accordance with the Balanced Budget and Emergency Deficit Control Act miscellaneous liability (including checks outstanding) and asset accounts; of 1985, all former off-budget entries are now presented on-budget. The Federal seigniorage; increment on gold; net gain/loss for U.S. currency valuation adjust- Financing Bank (FFB) activities are now shown as separate accounts under the ment; net gain/loss for IMF valuation adjustment; and profit on the sale of gold. agencies that use the FFB to finance their programs. The act has also moved two SOURCE. Monthly Treasury Statement of Receipts and Outlays of the U.S. social security trust funds (Federal old-age survivors insurance and Federal Government and the Budget of the U.S. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Calendar year Fiscal Fiscal Source or type year year 1986 1987 1987 1988 1986 1987r HI H2 HI H2 Nov. Dec. Jan. RECEIPTS 1 All sources 769,091 854,143 394,345 387,524 447,282 421,712 56,987 85,525 81,791 2 Individual income taxes, net 348,959 392,557 169,444 183,156 205,157 192,575 25,039 36,537 43,987 3 Withheld 314,803 322,463 153,919 164,071 156,760 170,203 24,888 34,020 24,979 4 Presidential Election Campaign Fund .... 36 33 31 4 30 4 0 0 0 5 Nonwithheld 105,994 142,957 78,981 27,733 112,421 31,223 1,664 3,309 19,262 6 Refunds 71,873 72,896 63,488 8,652 64,052 88,,885533 1,512 793 255 Corporation income taxes 7 Gross receipts 80,442 102,859 41,946 42,108 52,396 52,821 2,558 18,633 4,450 8 Refunds 17,298 18,933 9,557 8,230 10,881 7,119 891 884 820 9 Social insurance taxes and contributions, net 283,901 303,318 156,714 134,006 163,519 143,755 23,756 23,361 28,162 10 Employment taxes and contributions 255,062 273,185 139,706 122,246 146,696 130,388 20,731 22,735 26,920 11 Self-employment taxes and contributions 11,840 13,987 10,581 1,338 12,020 1,889 144 0 819 12 Unemployment insurance 24,098 25,418 14,674 9,328 14,514 10,977 2,661 170 883 13 Other net receipts 4,742 4,715 2,333 2,429 2,310 2,390 364 457 360 14 Excise taxes 32,919 32,510 15,944 15,947 15,845 17,680 2,854 3,838 2,393 15 Customs deposits 13,327 15,032 6,369 7,282 7,129 7,993 1,247 1,361 1,195 16 Estate and gift taxes 6,958 7,493 3,487 3,649 3,818 3,610 617 540 531 17 Miscellaneous receipts 19,884 19,307 10,002 9,605 10,299 10,399 1,807 2,141 1,893 OUTLAYS 18 All types 990,231 1,004,586 486,OSS' 505,980' 502,206r 532,045' 83,920r 109,741' 65,706 19 National defense 273,375 281,999 135,367 138,544 142,886 147,009 21,366 29,070 19,895 20 International affairs 14,152 11,649 5,384 8,876 4,374 4,589 65 517 1,074 21 General science, space, and technology 8,976 9,216 12,519 4,594 4,324 5,441 867 937 773 22 Energy 4,735 4,115 2,484 2,735 2,335 1,531 316 316 247 23 Natural resources and environment 13,639 13,363 6,245 7,141 6,175 7,452 1,121 1,371 1,097 24 Agriculture 31,449 27,356 14,482 16,160 11,824 13,775 3,139 1,278 2,275 25 Commerce and housing credit 4,823 6,182 860 3,647 4,893 1,402 585 -688 1,216 26 Transportation 28,117 26,228 12,658 14,745 12,113 14,096 2,304 2,287 1,990 27 Community and regional development 7,233 5,051 3,169 3,494 3,108 2,358 450 701 452 28 Education, training, employment, and social services 30,585 29,724 14,712 15,287 14,182 14,590 3,045 2,301 2,771 29 Health 35,935 39,968 17,872 18,795 20,318 20,750 3,744 3,176 3,577 30 Social security and medicare 268,921 282,473 135,214 138,299 142,864 158,469 23,153 40,992 6,951 31 Income security 119,796 123,250 60,786 60,628 62,248 61,449 9,595 11,485 10,220 32 Veterans benefits and services 26,356 26,782 12,193 14,447 12,264 14,974 899 3,773 1,207 33 Administration of justice 6,603 7,548 3,352 3,360 3,626 4,251 649 774 706 34 General government 6,104 5,948 3,566 2,786 3,344 3,617 1,085 1,577 -52 35 General-purpose fiscal assistance 6,431 1,621 2,179 2,886 337 1,175 148 129 403 36 Net interest6 136,008 138,570 68,054 65,816 70,110 71,882 13,215 12,177 13,551 37 Undistributed offsetting receipts -33,007 -36,455 -17,193 -17,376 -18,104 -18,149 -2,990 -2,770 -2,647 1. Functional details do not add to total outlays for calendar year data because 5. Deposits of earnings by Federal Reserve Banks and other miscellaneous revisions to monthly totals have not been distributed among functions. Fiscal year receipts. total for outlays does not correspond to calendar year data because revisions from 6. Net interest function includes interest received by trust funds. the Budget have not been fully distributed across months. 7. Consists of rents and royalties on the outer continental shelf and U.S. 2. Old-age, disability, and hospital insurance, and railroad retirement accounts. government contributions for employee retirement. 3. Old-age, disability, and hospital insurance. SOURCES. U.S. Department of the Treasury, Monthly Treasury Statement of 4. Federal employee retirement contributions and civil service retirement and Receipts and Outlays of the U.S. Government, and the U.S. Office of Managedisability fund. ment and Budget, 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 • April 1988 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1985 1986 1987 IItteemm Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 1 Federal debt outstanding 1,827.5 1,950.3 1,991.1 2,063.6 2,129.5 2,218.9 2,250.7 2,313.1 2,354.3 2 Public debt securities 1,823.1 1,945.9 1,986.8 2,059.3 2,125.3 2,214.8 2,246.7 2,309.3 2,350.3 3 Held by public 1,506.6 1,597.1 1,634.3 1,684.9 1,742.4 1,811.7 1,839.3 1,871.1 1,893.1 4 Held by agencies 316.5 348.9 352.6 374.4 382.9 403.1 407.5 438.1 457.2 5 Agency securities 4.4 4.4 4.3 4.3 4.2 4.0 4.0 3.8 4.0 6 Held by public 3.3 3.3 3.2 3.2 3.2 3.0 2.9 2.8. 3.0 7 Held by agencies 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.0 1.0 8 Debt subject to statutory limit 1,823.8 1,932.4 1,973.3 2,060.0 2,111.0 2,200.5 2,232.4 2,295.0 2,336.0 9 Public debt securities 1,822.5 1,931.1 1,972.0 2,058.7 2,109.7 2,199.3 2,231.1 2,293.7 2,334.7 10 Other debt1 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 11 MEMO: Statutory debt limit 1,823.8 2,078.7 2,078.7 2,078.7 2,111.0 2,300.0 2,300.0 2,320.0 2,800.0 1. Includes guaranteed debt of Treasui^ and other federal agencies, specified SOURCES. Treasury Bulletin and Monthly Statement of the Public Debt of the participation certificates, notes to international lending organizations, and District United States, of Columbia stadium bonds. 1.41 GROSS PUBLIC DEBT OF U.S. TREASURY Types and Ownership Billions of dollars, end of period 1986 1987 TTyyppee aanndd hhoollddeerr 11998833 11998844 11998855 11998866 Q4 Q1 Q2 Q3 1 Total gross public debt 1,410.7 1,663.0 1,945.9 2,214.8 2,214.8 2,246.7 2,309.3 2,350.3 By type 7 Interest-bearing debt 1,400.9 1,660.6 1,943.4 2,212.0 2,212.0 2,244.0 2,306.7 2,347.8 3 Marketable 1,050.9 1,247.4 1,437.7 1,619.0 1,619.0 1,635.7 1,659.0 1,676.0 4 Bills 343.8 374.4 399.9 426.7 426.7 406.2 391.0 378.3 5 573.4 705.1 812.5 927.5 927.5 955.3 984.4 1,005.1 6 Bonds 133.7 167.9 211.1 249.8 249.8 259.3 268.6 277.6 7 Nonmarketable1 350.0 413.2 505.7 593.1 593.1 608.3 647.7 671.8 8 State and local government series 36.7 44.4 87.5 110.5 110.5 118.5 125.4 129.0 9 Foreign issues2 10.4 9.1 7.5 4.7 4.7 4.9 5.1 4.4 10 Government 10.4 9.1 7.5 4.7 4.7 4.9 5.1 4.4 11 Public .0 .0 .0 .0 .0 .0 .0 .0 1? Savings bonds and notes. 70.7 73.1 78.1 90.6 90.6 93.0 95.2 97.0 13 Government account series 231.9 286.2 332.2 386.9 386.9 391.4 421.6 440.7 14 Non-interest-bearing debt 9.8 2.3 2.5 2.8 2.8 2.7 2.6 2.5 By holder4 15 U.S. government agencies and trust funds 236.3 289.6 348.9 403.1 403.1 407.5 438.1 457.2 16 Federal Reserve Banks 151.9 160.9 181.3 211.3 211.3 196.4 212.3 211.9 17 Private investors 1,022.6 1,212.5 1,417.2 1,602.0 1,602.0 1,641.4 1,657.7 1,682.6 18 Commercial banks 188.8 183.4 192.2 230.1' 230.1' 232.0 237.1 250.5 19 Money market funds 22.8 25.9 25.1 28.6 28.6 18.8 20.6 n.a. 20 Insurance companies 56.7 76.4 95.8 106.9 106.9 n.a. n.a. n.a. 21 Other companies 39.7 50.1 59.0 68.8 6688..88 73.4 78.7 80.2 22 State and local Treasurys 150.5' 173.4' 235.8' 273.1' 227733..11'' n.a. n.a. n.a. Individuals 73 Savings bonds 71.5 74.5 79.8 92.3 92.3 94.7 96.8 98.5 74 Other securities 61.9 69.3 75.0 70.5 70.5 68.3 68.6 70.4 75 Foreign and international 166.3 192.9 212.5 251.5 251.5 250.7 270.1 268.4 26 Other miscellaneous investors6 264.4' 366.6' 442.0" 486.(y 486.0' n.a. n.a. n.a. 1. Includes (not shown separately): Securities issued to the Rural Electrifica- 5. Consists of investments of foreign and international accounts. Excludes tion Administration; depository bonds, retirement plan bonds, and individual non-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. Treasury deposit accounts, and federally-sponsored agencies. 3. Held almost entirely by U.S. Treasury agencies and trust funds. SOURCES. Data by type of security, U.S. Treasury Department, Monthly 4. Data for Federal Reserve Banks and U.S. Treasury agencies and trust funds Statement of the Public Debt of the United States; data by holder. Treasury 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 1988 1987 and 1988 IItteemm 11998855 11998866 11998877'' Nov. Dec.' Jan. Dec. 23r Dec. 30r Jan. 6 Jan. 13 Jan. 20 Jan. 27 Immediate delivery2 1 U.S. Treasury securities 75,331 95,445 109,866 95,689 75,157 108,588 81,517 54,635 82,922 99,913 111,025 111,057 By maturity ? Bills 32,900 34,247 37,853 30,259 25,227 31,965 25,862 19,753 25,198 30,252 38,800 30,052 3 Other within 1 year 1,811 2,115 3,266 4,070 2,965 3,788 2,488 3,027 4,389 3,287 3,665 3,564 4 1-5 years 18,361 24,667 27,857 28,364 20,802 28,717 24,191 17,076 20,836 26,382 26,401 29,863 S 5-10 years 12,703 20,456 23,949 19,153 15,796 27,346 17,507 9,365 19,905 25,196 26,979 28,853 6 Over 10 years 9,556 13,961 16,922 13,844 10,367 16,773 11,469 5,415 12,594 14,797 15,180 17,726 By type of customer 7 U.S. government securities dealers 3,336 3,670 2,923 1,894 2,089 2,757 2,866 1,775 2,023 2,492 22,,997755 22,,772266 8 U.S. government securities brokers 36,222 49,558 61,493 55,448 43,458 63,586 46,317 28,602 48,800 61,263 6633,,118800 6633,,004466 9 All others3 35,773 42,218 45,449 38,346 29,609 42,244 32,334 24,257 32,098 36,157 44,869 44,285 10 Federal agency securities 11,640 16,748 18,882 17,919 14,394 18,103 12,262 11,763 15,867 16,761 19,410 16,341 II Certificates of deposit 4,016 4,355 4,106 3,392 3,019 4,723 2,870 2,819 6,057 4,172 4,471 3,9% 12 Bankers acceptances 3,242 3,272 2,966 2,727 2,259 3,201 1,938 1,804 3,841 2,950 3,059 3,069 13 Commercial paper 12,717 16,660 17,104 16,007 15,163 19,442 14,625 11,229 19,199 18,562 20,279 17,654 Futures contracts 14 Treasury bills 5,561 3,311 3,224 2,774 2,342 2,783 1,451 1,708 1,438 2,517 33,,338833 33,,110055 15 Treasury coupons 6,085 7,175 8,956 8,489 7,364 9,410 7,511 3,993 7,704 9,512 8,321 9,792 16 Federal agency securities 252 16 5 2 5 1 0 25 0 0 0 0 Forward transactions 17 U.S. Treasury securities 1,283 1,876 2,061 2,167 1,097 1,698 1,632 360 1,567 1,343 11,,001166 11,,669900 18 Federal agency securities 3,857 7,831 9,824 7,191 5,704 6,545 6,268 3,364 3,978 7,464 8,615 4,972 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. Treasury 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 Treasury securities (Treasury bills, notes, and 2. Data for immediate transactions do not include forward transactions. bonds) or after 30 days for mortgage-backed agency issues. 3. Includes, among others, all other dealers and brokers in commodities and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • April 1988 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Averages of daily figures, in millions of dollars 1987 1988 1987 and 1988 IItteemm 11998855 11998866 11998877 Nov. Dec/ Jan. Dec. 30r Jan. 6 Jan. 13 Jan. 20 Jan. 27 Positions Net immediate2 1 U.S. Treasury securities 7,391 12,912 -6,258 -6,865 -8,657 -13,257 -7,310 11,424 -15,083 -12,145 -13,476 2 Bills 10,075 12,761 4,325 5,702 2,506 2,269 1,529 179 -340 4,641 3,700 3 Other within 1 year 1,050 3,706 1,556 -565 -564 -712 -1,238 -1,639 -961 -629 -79 4 1-5 years 5,154 9,146 592 1,750 785 -61 5,486 4,351 634 -1,391 -1,994 5 5-10 years -6,202 -9,505 -6,560 -6,214 -3,565 -5,615 -4,695 -5,321 -4,869 -5,354 -617 6 Over 10 years -2,686 -3,197 -6,172 -7,538 -7,819 -9,138 -8,392 -8,994 -9,547 -9,413 -8,933 7 Federal agency securities 22,860 32,984 31,900 29,108 25,314 23,944 22,226 23,375 24,374 24,630 23,164 8 Certificates of deposit 9,192 10,485 8,187 6,821 6,815 5,863 7,844 7,654 6,040 5,451 5,289 9 Bankers acceptances 4,586 5,526 3,661 3,151 2,409 2,246 2,838 2,573 2,056 2,191 2,321 10 Commercial paper 5,570 8,089 7,492 7,729 7,953 5,533 9,095 6,873 5,054 5,528 5,213 Futures positions 11 Treasury bills -7,322 -18,059 -3,372 1,158 450 -2,162 -1,354 -2,159 -1,411 -2,125 -2,727 12 Treasury coupons 4,465 3,473 5,989 9,170 8,179 7,829 7,709 8,189 8,833 8,342 7,223 13 Federal agency securities -722 -153 -95 -90 -84 0 -72 0 0 0 0 Forward positions 14 U.S. Treasury securities -911 -2,144 -1,190 145 -1,641 -1,174 -315 -1,364 -1,302 -2,287 -609 15 Federal agency securities -9,420 -11,840 -18,817 -18,489 -15,024 -14,389 -12,499 -13,870 -15,875 -14,933 -13,015 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 68,035 98,954 n.a. 117,6% n.a. 126,667 121,267 128,224 122,371 125,177 131,187 17 Term 80,509 108,693 n.a. 164,332 n.a. 155,658 130,567 145,945 150,236 153,567 n.a. Repurchase agreements 18 Overnight and continuing 101,410 141,735 n.a. 152,504 n.a. 160,399 149,481 162,475 153,439 162,704 n.a. 19 Term 70,076 102,640 n.a. 138,724 n.a. 122,464 108,767 114,106 115,756 118,393 n.a. 1. Data for dealer positions and sources of financing are obtained from reports reverses to maturity, which are securities that were sold after having been submitted to the Federal Reserve Bank of New York by the U.S. Treasury 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. Treasury and federal agency securithe number of trading days in the period. Positions are net amounts and are shown ties, 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 5. Includes both repurchase agreements undertaken to finance positions and a 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 1987 AAggeennccyy 11998844 11998855 11998866 July Aug. Sept. Oct. Nov. Dec. 1 Federal and federally sponsored agencies 271,220 293,905 307,361 313,859 316,940 320,789 328,990 334,678 2 Federal agencies 35,145 36,390 36,958 36,%3 37,845 37,177 37,207 37,303 3 Defense Department 142 71 33 18 16 15 15 15 4 Export-Import Bank '3 15,882 15,678 14,211 13,416 13,416 12,650 12,470 12,470 5 Federal Housing Administration 133 115 138 175 174 178 182 182 6 Government National Mortgage Association participation certificates 2,165 2,165 2,165 1,965 1,965 1,965 1,965 1,965 n.a. 7 Postal Service6 1,337 1,940 3,104 3,718 4,603 4,603 4,603 4,603 8 Tennessee Valley Authority 15,435 16,347 17,222 17,586 17,586 17,766 17,972 18,068 9 United States Railway Association6 51 74 85 85 85 0 0 0 10 Federally sponsored agencies7 237,012 257,515 270,553 276,8% 279,095 283,612 291,783 297,375 11 Federal Home Loan Banks 65,085 74,447 88,752 100,976 102,422 104,380 108,108 111,185 115,725 12 Federal Home Loan Mortgage Corporation 10,270 11,926 13,589 12,309 14,150 14,949 16,703 17,762 n.a. 13 Federal National Mortgage Association 83,720 93,8% 93,563 91,637 91,568 92,618 94,298 95,0% 97,057 14 Farm Credit Banks 72,192 68,851 62,478 55,715 55,408 55,276 55,854 55,629 54,964 15 Student Loan Marketing Association8 5,745 8,395 12,171 16,259 15,547 16,389 16,220 16,362 16,503 16 Financing Corporation . n.a. n.a. n.a. n.a. n.a. n.a. 600 1,200 1,200 MEMO 17 Federal Financing Bank debt10 145,217 153,373 157,510 157,302 158,117 157,252 156,9ir 156,850 n.a. Lending to federal and federally sponsored agencies 18 Export-Import Bank3 15,852 1155,,667700 14,205 13,410 13,410 12,644 1122,,446644 1122,,446644 -i 19 Postal Service6 1,087 1,690 2,854 3,468 4,353 4,353 4,353 4,353 20 Student Loan Marketing Association 5,000 5,000 4,970 4,970 4,970 4,970 4,97<T 4,970 21 Tennessee Valley Authority 13,710 14,622 15,797 16,206 16,206 16,386 16,592 16,688 n.a. 22 United States Railway Association6 51 74 85 85 85 0 0 0 Other Lending11 73 Farmers Home Administration 58,971 64,234 65,374 65,049 65,069 65,009 6644,,993344 6644,,993344 74 Rural Electrification Administration 20,693 20,654 21,680 21,529 21,503 21,197 21,226 21,215 25 29,853 31,429 32,545 32,585 32,521 32,693 32,380'' 32,226 1. Consists of mortgages assumed by the Defense Department between 1957 8. Before late 1981, the Association obtained financing through the Federal and 1963 under family housing and homeowners assistance programs. Financing Bank (FFB). 2. Includes participation certificates reclassified as debt beginning Oct. 1,1976. 9. The Financing Corporation, established in August 1987 to recapitalize the 3. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget thereafter. Federal Savings and Loan Insurance Corporation, undertook its first borrowing in 4. Consists of debentures issued in payment of Federal Housing Administration October 1987. insurance claims. Once issued, these securities may be sold privately on the 10. The FFB, which began operations in 1974, is authorized to purchase or sell securities market. obligations issued, sold, or guaranteed by other federal agencies. Since FFB 5. Certificates of participation issued before fiscal 1969 by the Government incurs debt solely for the purpose of lending to other agencies, its debt is not National Mortgage Association acting as trustee for the Farmers Home Administration; Department of Health, Education, and Welfare; Department of Housing included in the main portion of the table in order to avoid double counting. and Urban Development; Small Business Administration; and the Veterans 11. Includes FFB purchases of agency assets and guaranteed loans; the latter Administration. contain loans guaranteed by numerous agencies with the guarantees of any 6. Off-budget. particular agency being generally small. The Farmers Home Administration item 7. Includes outstanding noncontingent liabilities: notes, bonds, and deben- consists exclusively of agency assets, while the Rural Electrification Administratures. Some data are estimated. 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 • April 1988 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1987 1988 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11998855 11998866 11998877 June July Aug. Sept. Oct. Nov. Dec.' Jan. 1 All issues, new and refunding1 214,189 147,011 95,029 10,718 6,967 6,500 5,510 6,257 7,758 7,671 5,202 Type of issue 2 General obligation 52,622 46,346 29,599 3,329 2,238 1,975 1,755 1,127 2,449 1,894 1,243 3 Revenue 161,567 100,664 65,430 7,389 4,729 4,525 3,755 5,130 5,309 5,777 3,959 Type of issuer 4 State 13,004 14,474 8,426 1,138 834 398 535 385 431 550 423 5 Special district and statutory authority2 134,363 89,997 61,663 6,453 3,951 4,508 3,712 4,668 4,612' 4,972 3,055 6 Municipalities, counties, and townships 66,822 42,541 24,940 3,126' 2,182 1,594 1,263 1,204 2,715' 2,149 1,724 7 Issues for new capital, total 156,050 83,490 53,677 7,552 4,478 5,084 4,340 4,095 6,628 5,351 2,886 Use of proceeds 8 Education 16,658 16,948 9,217 1,554 773 869 653 480 1,006 748 851 9 Transportation 12,070 11,666 3,589 705 647 226 311 168 329 451 176 10 Utilities and conservation 26,852 35,383 7,299 1,313 823 424 491 590 1,042 350 302 11 Social welfare 63,181 17,332 9,627 1,082 465 903 647 8% 1,784 1,134 833 12 Industrial aid 12,892 5,594 6,083 498 469 1,630 412 683 229 1,155 133 13 Other purposes 24,398 47,433 17,862 2,399 1,301 1,033 1,826 1,278 2,238 1,513 591 1. Par amounts of long-term issues based on date of sale. SOURCES. Securities Data/Bond Buyer Municipal Data Base beginning 1986. 2. Includes school districts beginning 1986. Public Securities Association for earlier data. 1.46 NEW SECURITY ISSUES U.S. Corporations Millions of dollars 1987 TTyyppee ooff ii oo ss rr ss uu uu ee ss ee oo rr iissssuueerr,, 11998855 11998866 11998877 May June July Aug. Sept. Oct. Nov. Dec. 1 All issues' 239,015 423,726 286,320 19,977' 28,450' 27,411 21,888 29,363 20,682' 14,230' 11,383 2 Bonds2 203,500 355,293 232,969 13,439r 22,098' 22,071 17,685 23,705 17,603' 13,532' 10,609 Type of offering 3 Public, domestic 119,559 231,936 208,670 11,402' 20,568' 19,045 14,852 22,045 16,107' 12,799' 10,274 4 Private placement, domestic3 46,195 80,761 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5. Sold abroad 37,781 42,5% 24,299 2,037 1,530 3,026 2,833 1,660 1,4% 733 335 Industry group 6 Manufacturing 63,973 91,548 45,209 5,035 4,104 5,552 3,343 3,506 2,724' 1,280' 860 7 Commercial and miscellaneous 17,066 40,124 19,918 754 2,061 1,037 1,281 1,479 1,165 483 2,577 8 Transportation 6,020 9,971 2,039 21 0 343 2% 25 263 0 226 9 Public utility 13,649 31,426 17,382 572 2,091 1,654 1,533 1,702 997 893 1,570 10 Communication 10,832 16,659 5,772 138 205 119 856 930 1,384 270 510 11 Real estate and financial 91,958 165,564 142,633 6,920' 13,636' 13,366 10,377 16,063 11,071 10,586' 4,865 12 Stocks3 35,515 68,433 53,351 6,538 6,352 5,340 4,203 5,658 3,079 698' 774 Type 13 Preferred 6,505 11,514 10,123 1,170 1,202 1,157 906 1.112 236 162 61 14 Common 29,010 50,316 43,228 5,368 5,150 4,183 3,297 4,546 2,843 533 713 15 Private placement3 35,515 68,433 53,351 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Industry group 16 Manufacturing 5,700 15,027 9,642 1,066 1,438 1,046 370 858 703 237 76 17 Commercial and miscellaneous 9,149 10,617 11,461 1,516 1,353 879 9% 807 656 86 14 18 Transportation 1,544 2,427 1,795 3 492 379 0 11 40 149 1 19 Public utility 1,966 4,020 3,839 374 329 472 85 529 75 25 0 20 Communication 978 1,825 1.264 200 199 294 277 75 107 1 11 21 Real estate and financial 16,178 34,517 25,350 3,379 2,541 2,270 2,475 3,378 1,498 200 672 1. Figures which represent gross proceeds of issues maturing in more than one 2. Monthly data include only public offerings. year, are principal amount or number of units multiplied by offering price. 3. Data are not available on a monthly basis. Excludes secondary offerings, employee stock plans, investment companies other SOURCES. IDD Information Services, Inc., U.S. Securities and Exchange than closed-end, intracorporate transactions, equities sold abroad, and Yankee Commission and the Board of Governors of the Federal Reserve System. bonds. Stock data include ownership securities issued by limited partnerships. 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 1987 IItteemm 11998866 11998877 May June July Aug. Sept. Oct. Nov/ Dec. INVESTMENT COMPANIES1 1 Sales of own shares2 411,751 380,260 28,295 28,637 27,970 26,455 24,834 25,990 21,927 26,494 2 Redemptions of own shares3 239,394 314,253 23,453 23,693 22,807 22,561 28,323 34,597 20,400 28,100 3 Net sales 172,357 66,007 4,842 4,944 5,763 3,894 -3,489 -8,607 1,507 -1,606 4 Assets4 424,156 453,793 500,634 516,866 531,022 539,171 521,007 456,422 446,479 453,793 5 Cash position5 30,716 38,175 39,158 41,467 41,587 40,802 42,397 40,929 41,432 38,175 6 Other 393,440 415,618 461,476 475,099 489,435 498,369 478,610 415,493 405,047 415,618 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 Q4 QL Q2 Q3 Q4 QL Q2 Q3 1 Corporate profits with inventory valuation and capital consumption adjustment 266.9 277.6 284.4 277.8 288.0 282.3 286.4 281.1 294.0 296.8 314.9 2 Profits before tax 239.9 224.8 231.9 233.5 218.9 224.4 236.3 247.9 257.0 268.7 284.9 3 Profits tax liability 93.9 96.7 105.0 99.1 98.1 102.1 106.1 113.9 128.0 134.2 143.0 4 Profits after tax 146.1 128.1 126.8 134.4 120.9 122.3 130.2 134.0 129.0 134.5 141.9 5 Dividends 79.0 81.3 86.8 81.7 84.3 86.6 87.7 88.6 90.3 92.4 95.2 6 Undistributed profits 67.0 46.8 40.0 52.7 36.6 35.7 42.5 45.4 38.7 42.1 46.7 7 Inventory valuation -5.8 -.8 6.5 -9.8 17.8 11.3 6.0 -8.9 -11.3 -20.0 -17.6 8 Capital consumption adjustment 32.8 53.5 46.0 54.2 51.3 46.7 44.0 42.1 48.2 48.0 47.7 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 • April 1988 1.49 NONFINANCIAL CORPORATIONS Assets and Liabilities1 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 1,565.9 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 ratio2 1.492 1.462 1.459 1.487 1.464 1.467 1.466 1.455 1.447 1.469 1. For a description of this series, see "Working Capital of Nonfinancial 2. Ratio of total current assets to total current liabilities. Corporations" in the July 1978 BULLETIN, pp. 533-37. Data are not currently SOURCE. Federal Trade Commission and Bureau of the Census, available after 1986:1. 1.50 TOTAL NONFARM BUSINESS EXPENDITURES on New Plant and Equipment • Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1986 1987 1988 IInndduussttrryy 11998855 11998866 1199887711 Q2 Q3 Q4 Ql Q2 Q3 Q41 Ql2 1 Total nonfarm business 387.13 379.47 390.57 376.21 375.50 386.09 374.23 377.65 393.13 417.25 427.97 Manufacturing 2 Durable goods industries 73.27 69.14 71.85 68.56 69.42 69.87 70.47 68.76 71.78 76.40 78.41 3 Nondurable goods industries 80.21 73.56 76.01 73.62 70.01 74.20 70.18 72.03 75.78 86.05 86.27 Nonmanufacturing 4 Mining 15.88 11.22 11.18 11.29 10.14 10.31 10.31 11.02 11.64 11.74 11.86 Transportation 5 Railroad 7.08 6.66 6.15 6.70 7.02 6.41 5.55 5.77 6.21 7.08 7.66 6 Air 4.79 6.26 6.53 5.87 5.78 6.84 7.46 5.72 5.91 7.03 8.35 7 Other 6.15 5.89 6.42 5.83 6.01 6.25 5.97 6.19 7.05 6.48 66..9922 Public utilities 8 Electric 36.11 33.91 31.65 33.77 33.81 33.78 30.85 31.13 31.31 33.32 31.65 9 Gas and other 12.71 12.47 12.88 12.66 12.00 12.34 12.75 12.35 13.58 12.84 13.72 10 Commercial and other2 150.94 160.38 167.89 157.91 161.31 166.08 160.70 164.69 169.87 176.29 183.15 •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 1986 1987 AAccccoouunntt 11998833 11998844 11998855 Q2 Q3 Q4 Ql Q2 Q3 Q4 ASSETS Accounts receivable, gross 1 Consumer 83.3 89.9 113.4 125.1 137.1 136.5 133.9 138.0 144.4 143.8 2 Business 113.4 137.8 158.3 167.7 161.0 174.8 182.8 189.0 188.7 202.6 3 Real estate 20.5 23.8 28.9 30.8 32.1 33.7 35.1 36.9 38.3 40.3 4 Total 217.3 251.5 300.6 323.6 330.2 345.0 351.8 363.9 371.5 386.8 Less: 5 Reserves for unearned income 30.3 33.8 39.2 40.7 42.4 41.4 40.4 41.2 42.8 45.3 6 Reserves for losses 3.7 4.2 4.9 5.1 5.4 5.8 5.9 6.2 6.6 6.8 7 Accounts receivable, net 183.2 213.5 256.5 277.8 282.4 297.8 305.5 316.5 322.1 334.7 8 All other 34.4 35.7 45.3 48.8 59.9 57.9 59.0 57.7 65.0 58.2 9 Total assets 217.6 249.2 301.9 326.6 342.3 355.6 364.5 374.2 387.1 392.9 LIABILITIES 10 Bank loans 18.3 20.0 20.6 19.2 20.2 22.2 17.3 17.2 16.2 16.5 11 Commercial paper 60.5 73.1 99.2 108.4 112.8 117.8 119.1 120.4 123.5 126.5 Debt 12 Other short-term 11.1 12.9 12.5 15.4 16.0 17.2 21.6 24.4 26.9 27.0 13 Long-term 67.7 77.2 93.1 105.2 109.8 115.6 118.4 121.5 128.0 130.1 14 All other liabilities 31.2 34.5 40.9 40.1 44.1 43.4 46.3 48.3 48.7 50.1 15 Capital, surplus, and undivided profits 28.9 31.5 35.7 38.4 39.4 39.4 41.8 42.3 43.8 42.6 16 Total liabilities and capital 217.6 249.2 301.9 326.6 342.3 355.6 364.5 374.2 387.1 392.9 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 AAAccccccooouuunnntttsss receivable rrreeeccceeeiiivvvaaabbbllleee TTTyyypppeee ooouuu DDD tttsss eee ttt ccc aaa ... nnn ddd 333 iii 111 nnn ggg 1987 1987 1987 111999888777111 Oct. Nov. Dec. Oct. Nov. Dec. Oct. Nov. Dec. 1 Total 202,585 4,337 1,250 1,070 30,929 30,336 31,262 26,592 29,087 30,192 Retail financing of installment sales 2 Automotive (commercial vehicles) 34,387 735 447 991 1,159 1,283 1,676 424 836 684 3 Business, industrial, and farm equipment 24,945 258 -25 376 1,526 1,395 1,564 1,268 1,420 1,188 Wholesale financing 4 Automotive 30,760 3,485 261 -167 12,557 12,662 12,188 9,072 12,401 12,355 5 Equipment 5,512 249 61 -116 886 623 679 637 562 795 6 All other 7,948 -1,455 121 171 2,983 3,043 3,182 4,437 2,921 3,011 Leasing 7 Automotive 21,711 -197 211 71 1,117 1,117 1,086 1,314 906 1,015 8 Equipment 41,675 188 -92 -494 1,245 881 608 1,057 973 1,102 9 Loans on commercial accounts receivable and factored commercial accounts receivable 18,358 704 331 -337 8,241 8,005 8,564 7,537 7,674 8,901 10 All other business credit 17,289 369 -67 573 1,215 1,326 1,714 846 1,393 1,141 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 • April 1988 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1987 1988 IItteemm 11998866 July Aug. Sept. Oct. Nov. Dec/ Jan. Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars) 104.1 118.1 137.0 134.6 141.2 140.2 145.3 135.9 147.3 150.8 2 Amount of loan (thousands of dollars) 77.4 86.2 100.5 99.4 102.6 100.8 106.1 100.2 107.7 109.4 3 Loan/price ratio (percent) 77.1 75.2 75.2 75.4 75.0 74.6 75.0 75.4 74.9 74.5 4 Maturity (years) 26.9 26.6 27.8 27.9 27.8 27.3 28.3 28.3 28.2 28.3 5 Fees and charges (percent of loan amount) 2.53 2.48 2.26 2.42 2.19 2.08 2.34 2.33 2.22 2.22 6 Contract rate (percent per year) 11.12 9.82 8.94 9.01 9.01 9.03 8.86 8.92 8.78 8.77 Yield (percent per year) 7 FHLBB series3 11.58 10.25 9.31 9.41 9.38 9.37 9.25 9.30 9.15 9.13 8 HUD series4 12.28 10.07 10.13 10.22 10.37 10.86 10.87 10.59 10.52 n.a. SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (HUD series) 12.24 9.91 10.12 10.38 10.55 10.71 10.90 10.76 10.63 n.a. 10 GNMA securities6 11.61 9.30 9.42 9.59 9.77 10.40 10.53 9.96 10.18 9.83 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 94,574 98,048 95,030 94,154 94,600 94,884 95,097 95,411 96,649 4 12 FHA/VA-insured 34,244 29,683 21,660 21,730 21,555 21,620 21,481 21,510 20,288 I 13 Conventional 60,331 68,365 73,370 72,424 73,045 73,264 73,617 73,902 76,361 Mortgage transactions (during period) 1 14 Purchases 21,510 30,826 20,531 1,569 1,613 1,743 1,278 1,297 3,747 n.a. Mortgage commitments7 1 13 Contracted (during period) 20,155 32,987 25,415 2,373 2,276 1,842 1,566 2,899 3,115 1 16 Outstanding (end of period) 3,402 3,386 4, H86 5,071 5,690 5,627 5,046 5,845 4,886 t FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period f 17 Total 12,399 13,517 12,834 12,924 12,940 12,782 12,904 4 4 18 FHA/VA 841 746 684 679 672 666 663 T T 19 Conventional 11,559 12,771 12,150 12,245 12,269 12,115 12,240 Mortgage transactions (during period) 1 1 20 Purchases 44,012 103,474 n. a. 7,252 5,031 4,297 3,079 2,978 n.a. n.a. 21 38,905 100,236 6,831 4,723 4,160 3,111 2,742 1 1 Mortgage commitments9 22 Contracted (during period) 48,989 110,855 5,611 4,506 3,507 3,011 2,668 t t 1. Weighted averages based on sample surveys of mortgages originated by 6. Average net yields to investors on Government National Mortgage Associmajor institutional lender groups; compiled by the Federal Home Loan Bank ation guaranteed, mortgage-backed, fully modified pass-through securities, as- Board in cooperation with the Federal Deposit Insurance Corporation. suming prepayment in 12 years on pools of 30-year FHA/VA mortgages carrying 2. Includes all fees, commissions, discounts, and "points" paid (by the 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 OUTSTANDING1 Millions of dollars, end of period 1986 1987 TTyyppee ooff hhoollddeerr,, aanndd ttyyppee ooff pprrooppeerrttyy 11998855 11998866 11998877 04 Ql Q2 Q3' 04 1 All holders 2,269,173 2,568,562' 2,906,394 2,568,562' 2,665,20T 2,756,124' 2,831,431 2,906,394 2 1- to 4-family 1,467,409 1,668,209' 1,889,364 1,668,209' 1,714,213' 1,783,521' 1,835,671 1,889,364 3 Multifamily 214,045 247,024' 272,604 247,024' 257,615' 263,513' 268,322 272,604 4 Commercial 482,029 556,569 654,288 556,569 599,822' 616,968' 636,508 654,288 5 105,690 96,760 90,138 %,760 93,557' 92,122' 90,930 90,138 6 Selected financial institutions 1,390,394 1,507,289 1,699,702 1,507,289 1,559,549' 1,606,622' 1,650,462 1,699,702 7 Commercial banks2 429,196 502,534 587,557 502,534 519,474 544,381 566,213 587,557 8 1- to 4-family 213,434 235,814 273,214 235,814 243,518 255,672 262,869 273,214 9 Multifamily 23,373 31,173 32,433 31,173 29,515 30,4% 31,311 32,433 10 Commercial 181,032 222,799 267,221 222,799 233,234 244,385 257,882 267,221 11 Farm 11,357 12,748 14,689 12,748 13,207 13,828 14,151 14,689 12 Savings institutions3 760,499 777,312 861,233 777,312 809,245' 824,%1' 841,658 861,233 13 1- to 4-family 554,301 558,412 602,740 558,412 555,693' 572,075' 586,221 602,740 14 Multifamily 89,739 97,059 107,054 97,059 104,035' 102,933' 104,764 107,054 15 Commercial 115,771 121,236 150,680 121,236 148,712' 149,183' 149,904 150,680 16 Farm 688 605 n.a. 605 805' n.a. n.a. n.a. 17 Life insurance companies 171,797 193,842 210,563 193,842 195,743 200,382 204,263 210,563 18 1- to 4-family 12,381 12,827 13,142 12,827 12,903 12,745 12,742 13,142 19 Multifamily 19,894 20,952 22,168 20,952 20,934 21,663 21,968 22,168 70 Commercial 127,670 149,111 165,364 149,111 151,420 155,611 159,464 165,364 71 Farm 11,852 10,952 9,889 10,952 10,486 10,363 10,089 9,889 22 Finance companies 28,902 33,601 40,349 33,601 35,087 36,898 38,328 40,349 23 Federal and related agencies 166,928 203,800 192,401 203,800 199,509 196,514 191,520 192,401 24 Government National Mortgage Association 1,473 889 455 889 687 667 458 455 25 1- to 4-family 539 47 24 47 46 45 25 24 26 Multifamily 934 842 431 842 641 622 433 431 77 Fanners Home Administration3 733 48,421 42,978 48,421 48,203 48,085 42,978 42,978 28 1- to 4-family 183 21,625 18,111 21,625 21,390 21,157 18,111 18,111 29 Multifamily 113 7,608 7,903 7,608 7,710 7,808 7,903 7,903 30 Commercial 159 8,446 6,592 8,446 8,463 8,553 6,592 6,592 31 Farm 278 10,742 10,372 10,742 10,640 10,567 10,372 10,372 37, Federal Housing and Veterans Administration 4,920 5,047 5,479 5,047 5,177 5,268 5,330 5,479 33 1- to 4-family 2,254 2,386 2,551 2,386 2,447 2,531 2,452 2,551 34 Multifamily 2,666 2,661 2,928 2,661 2,730 2,737 2,878 2,928 35 Federal National Mortgage Association 98,282 97,895 %,649 97,895 95,140 94,064 94,884 96,649 36 1- to 4-family 91,966 90,718 89,666 90,718 88,106 87,013 87,901 89,666 37 Multifamily 6,316 7,177 6,983 7,177 7,034 7,051 6,983 6,983 38 Federal Land Banks 47,498 39,984 33,930 39,984 37,362 35,833 34,930 33,930 39 1- to 4-family 2,798 2,353 1,9% 2,353 2,198 2,108 2,055 1,9% 40 Farm 44,700 37,631 31,934 37,631 35,164 33,725 32,875 31,934 41 Federal Home Loan Mortgage Corporation 14,022 11,564 12,910 11,564 12,940 12,597 12,940 12,910 47. 1- to 4-family 11,881 10,010 11,580 10,010 11,774 11,172 11,570 11,580 43 Multifamily 2,141 1,554 1,330 1,554 1,166 1,425 1,370 1,330 44 Mortgage pools or trusts6 415,042 531,591' 671,749 531,591' 575,435' 615,142' 648,219 671,749 45 Government National Mortgage Association 212,145 262,697' 319,360 262,697' 281,116' 293,246' 308,9% 319,360 46 1- to 4-family 207,198 256,920' 311,567 256,92C 274,710' 286,091' 301,456 311,567 47 Multifamily 4,947 5,777' 7,793 5,777' 6,406' 7,155' 7,540 7,793 48 Federal Home Loan Mortgage Corporation 100,387 171,372 212,105 171,372 186,295 200,284 208,350 212,105 49 1- to 4-family 99,515 166,667 205,460 166,667 180,602 194,238 201,786 205,460 50 Multifamily 872 4,705 6,645 4,705 5,693 6,046 6,564 6,645 51 Federal National Mortgage Association 54,987 97,174 139,960 97,174 107,673 121,270 130,540 139,960 57 1- to 4-family 54,036 95,791 137,988 95,791 106,068 119,617 128,770 137,988 53 Multifamily , 951 1,383 1,972 1,383 1,605 1,653 1,770 1,972 54 Farmers Home Administration5 47,523 348 324 348 351 342 333 324 55 1- to 4-family 22,186 142 139 142 154 149 144 139 56 Multifamily 6,675 0 0 0 0 0 0 0 57 Commercial 8,190 132 122 132 127 126 124 122 58 Farm 10,472 74 63 74 70 67 65 63 59 Individuals and others7 2%,809 325,882 342,542 325,882 330,714 337,846 341,230 342,542 60 1- to 4-family 165,835 180,8% 180,837 180,8% 179,517 182,010 181,241 180,837 61 Multifamily 55,424 66,133 74,964 66,133 70,146 73,924 74,838 74,964 67 Commercial 49,207 54,845 64,309 54,845 57,866 59,110 62,542 64,309 63 Farm 26,343 24,008 22,432 24,008 23,185 22,802 22,609 22,432 1. Based on data from various institutional and governmental sources, with 5. FmHA-guaranteed securities sold to the Federal Financing Bank were some quarters estimated in part by the Federal Reserve. Multifamily debt refers reallocated from FmHA mortgage pools to FmHA mortgage holdings in 1986:4, to loans on structures of five or more units. because of accounting changes by the Farmers Home Administration. 2. Includes loans held by nondeposit trust companies but not bank trust 6. Outstanding principal balances of mortgage pools backing securities insured departments. or guaranteed by the agency indicated. 3. Includes savings banks and savings and loan associations. Beginning 1987:1, 7. Other holders include mortgage companies, real estate investment trusts, data reported by FSLIC-insured institutions include loans in process and other state and local credit agencies, state and local retirement funds, noninsured contra assets. pension funds, credit unions, and other U.S. agencies. 4. Assumed to be entirely 1- to 4-family loans. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • April 1988 1.55 CONSUMER INSTALLMENT CREDIT1 Total Outstanding, and Net Change, seasonally adjusted Millions of dollars 1987 Apr. May June July Aug. Sept. Oct. Nov/ Dec. Amounts outstanding (end of period) 1 Total 577,784 612,571 583,595 583,276 587,821 591,175 596,182 602,607 605,488 608,122 612,571 By major holder 2 Commercial banks 261,604 274,984 263,433 263,463 264,3% 265,085 265,893 269,155 270,836 272,274 274,984 3 Finance companies 136,494 143,788 137,091 136,398 138,038 138,745 140,689 142,648 143,118 142,767 143,788 4 Credit unions 77,857 84,839 79,255 79,476 80,585 81,492 82,486 83,340 83,639 84,419 84,839 i Retailers3 40,586 40,647 40,467 40,318 40,287 40,364 40,391 40,482 40,678 40,559 40,647 6 Savings institutions 58,037 64,788 59,826 60,045 60,983 61,910 63,080 63,279 63,525 64,502 64,788 7 Gasoline companies 3,205 3,525 3,522 3,576 3,532 3,580 3,643 3,703 3,691 3,600 3,525 By major type of credit 8 Automobile 245,055 261,654 247,663 247,578 250,130 250,980 254,013 257,470 258,710 259,134 261,654 9 Commercial banks 100,709 106,487 101,781 102,189 102,810 102,829 103,382 104,662 105,382 106,036 106,487 10 Credit unions 39,029 42,529 39,730 39,841 40,3% 40,851 41,349 41,777 41,927 42,318 42,529 11 Finance companies 93,274 99,195 93,738 93,089 94,270 94,455 96,193 97,900 98,219 97,395 99,195 12 Savings institutions 12,043 13,444 12,414 12,459 12,654 12,846 13,089 13,130 13,182 13,384 13,444 13 Revolving 134,938 145,940 136,706 136,869 137,401 138,741 139,837 141,704 143,142 143,620 145,940 14 Commercial banks 85,652 95,273 86,929 87,133 87,590 88,685 89,535 91,226 92,459 92,992 95,273 15 Retailers 36,240 36,213 36,139 36,009 35,971 36,021 36,022 36,087 36,264 36,148 36,213 16 Gasoline companies 3,205 3,525 3,522 3,576 3,532 3,580 3,643 3,703 3,691 3,600 3,525 17 Savings institutions 7,713 8,610 7,951 7,980 8,105 8,228 8,383 8,410 8,443 8,572 8,610 18 Credit unions 2,128 2,319 2,166 2,172 2,202 2,227 2,254 2,278 2,286 2,307 2,319 19 Mobile home 25,710 25,612 25,626 25,542 25,685 25,860 25,695 25,699 25,677 25,731 25,612 20 Commercial banks 8,812 8,357 8,698 8,615 8,609 8,626 8,518 8,538 8,453 8,407 8,357 21 Finance companies 9,028 8,470 8,816 8,785 8,807 8,839 8,623 8,580 8,610 8,578 8,470 22 Savings institutions 7,870 8,785 8,112 8,142 8,269 8,395 8,554 8,581 8,614 8,746 8,785 23 Other 172,081 179,365 173,600 173,287 174,605 175,594 176,637 177,733 177,959 179,637 179,365 24 Commercial banks 66,431 64,867 66,026 65,527 65,387 64,945 64,458 64,728 64,542 64,840 64,867 25 Finance companies 34,192 36,123 34,537 34,524 34,%2 35,452 35,874 36,168 36,289 36,794 36,123 26 Credit unions 36,700 39,992 37,359 37,463 37,986 38,413 38,882 39,285 39,426 39,794 39,992 27 Retailers 4,346 4,433 4,328 4,310 4,315 4,343 4,369 4,395 4,415 4,411 4,433 28 Savings institutions 30,412 33,949 31,349 31,463 31,955 32,441 33,054 33,158 33,287 33,799 33,949 Net change (during period) 29 Total 54,979 34,787 3,682 -319 4,545 3,354 5,007 6,425 2,881 2,634 4,449 By major holder 30 Commercial banks 19,520 13,380 1,500 30 933 689 808 3,262 1,681 1,438 2,710 31 Finance companies 23,424 7,294 1,041 -693 1,640 707 1,944 1,959 470 -351 1,021 32 Credit unions 5,738 6,982 686 221 1,109 907 994 854 299 780 420 33 Retailers 1,722 61 -2 -149 -31 77 27 91 196 -119 88 34 Savings institutions 5,604 6,751 338 219 938 927 1,170 199 246 977 286 35 Gasoline companies -1,030 320 117 54 -44 48 63 60 -12 -91 -75 By major type of credit 36 Automobile 36,998 16,599 1,373 -85 2,552 850 3,033 3,457 1,240 424 2,520 37 Commercial banks 7,706 5,778 253 408 621 19 553 1,280 720 654 451 38 Credit unions 3,394 3,500 344 111 555 455 498 428 150 391 211 39 Finance companies 23,183 5,921 706 -649 1,181 185 1,738 1,707 319 -824 1,800 40 Savings institutions 2,715 1,401 70 45 195 192 243 41 52 202 60 41 Revolving 12,917 11,002 1,540 163 532 1,340 1,0% 1,867 1,438 478 2,320 42 Commercial banks 9,786 9,621 1,362 204 457 1,095 850 1,691 1,233 533 2,281 43 Retailers 1,545 -27 -2 -130 -38 50 1 65 177 -116 65 44 Gasoline companies -1,030 320 117 54 -44 48 63 60 -12 -91 -75 45 Savings institutions 2,008 897 45 29 125 123 155 27 33 129 38 46 Credit unions 608 191 19 6 30 25 27 24 8 21 12 47 Mobile home 222 -98 12 -84 143 175 -165 4 -22 54 -119 48 Commercial banks -726 -455 -27 -83 -6 17 -108 20 -85 -46 -50 49 Finance companies -363 -558 -7 -31 22 32 -216 -43 30 -32 -108 50 Savings institutions 1,311 915 45 30 127 126 159 27 33 132 39 51 Other 4,842 7,284 756 -313 1,318 989 1,043 1,0% 226 1,678 -272 52 Commercial banks 2,754 -1,564 -87 -499 -140 -442 -487 270 -186 298 27 53 Finance companies 604 1,931 341 -13 438 490 422 294 121 505 -671 54 Credit unions 1,736 3,292 323 104 523 427 469 403 141 368 198 55 Retailers 177 87 1 -18 5 28 26 26 20 -4 22 56 Savings institutions -429 3,537 177 114 492 486 613 104 129 512 150 1. The Board's series cover most short- and intermediate-term credit ex- 2. More detail for finance companies is available in the G.20 statistical release, tended to individuals that is scheduled to be repaid (or has the option of 3. Excludes 30-day charge credit held by travel and entertainment companies, repayment) in two or more installments. 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 1987 IItteemm 11998855 11998866 11998877 June July Aug. Sept. Oct. Nov. Dec. INTEREST RATES Commercial banks' 1 48-month new car 12.91 11.33 n.a. n.a. n.a. 10.37 n.a. n.a. 10.86 n.a. 2 24-month personal 15.94 14.82 n.a. n.a. n.a. 14.22 n.a. n.a. 14.58 n.a. 3 120-month mobile home2 14.96 13.99 n.a. n.a. n.a. 13.24 n.a. n.a. 13.62 n.a. 4 Credit card 18.69 18.26 n.a. n.a. n.a. 17.85 n.a. n.a. 17.82 n.a. Auto finance companies 5 New car 11.98 9.44 10.73 10.64 10.52 9.63 8.71 10.31 12.24 12.23 6 Used car 17.59 15.95 14.60 14.47 14.53 14.53 14.58 14.76 14.90 14.97 OTHER TERMS3 Maturity (months) 7 New car 51.5 50.0 53.5 53.6 53.4 52.1 50.7 52.8 55.4 55.5 8 Used car 41.4 42.6 45.2 45.4 45.5 45.4 45.2 45.2 45.3 45.3 Loan-to-value ratio 9 New car 91 91 93 93 93 93 93 93 94 93 10 Used car 94 97 98 98 98 98 98 99 99 99 Amount financed (dollars) 11 New car 9,915 10,665 11,203 11,214 11,267 11,374 11,455 11,585 11,630 11,645 12 Used car 6,089 6,555 7,420 7,479 7,527 7,763 7,476 7,537 7,646 7,718 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 • April 1988 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; half-yearly data are at seasonally adjusted annual rates. 1984 1985 1986 1987 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998822 11998833 11998844 11998855 11998866 HI H2 HI H2 HI H2 HI Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors 388.9 550.2 753.9 854.8 833.4 717.3 790.4 722.7 986.8 676.9 989.9 568.3 By sector and instrument 161.3 186.6 198.8 223.6 214.3 190.4 207.2 204.8 242.5 207.2 221.5 151.4 3 162.1 186.7 199.0 223.7 214.7 190.7 207.3 204.9 242.5 207.4 222.0 151.7 4 Agency issues and mortgages -.9 -.1 -.2 -.1 -.3 -.2 -.1 -.1 -.1 -.1 -.5 -.4 5 Private domestic nonfinancial sectors 227.6 363.6 555.1 631.1 619.0 526.9 583.3 518.0 744.3 469.6 768.4 417.0 6 Debt capital instruments 148.3 253.4 313.6 447.8 445.0 284.7 342.5 350.4 545.2 363.4 546.7 407.1 7 Tax-exempt obligations 44.2 53.7 50.4 136.4 35.4 33.8 67.0 67.0 205.8 -16.9 87.7 20.0 8 18.7 16.0 46.1 73.8 121.7 22.5 69.8 62.2 85.3 135.3 108.1 89.0 9 Mortgages 85.4 183.6 217.1 237.7 298.0 228.5 205.7 221.2 254.2 245.0 350.9 298.1 10 Home mortgages 50.5 117.5 129.7 151.9 199.4 139.5 119.9 139.2 164.7 163.8 234.9 217.5 11 Multifamily residential 5.4 14.2 25.1 29.2 33.0 27.8 22.4 25.0 33.4 31.2 34.8 27.7 17 Commercial 25.2 49.3 63.2 62.5 73.9 62.6 63.8 59.5 65.5 58.9 88.9 62.5 13 4.2 2.6 -.9 -6.0 -8.3 -1.4 -.4 -2.5 -9.5 -8.9 -7.7 -9.6 14 Other debt instruments 79.3 110.2 241.5 183.3 164.0 242.2 240.8 167.5 199.1 106.2 221.8 9.9 15 Consumer credit 19.3 56.6 90.4 94.6 65.8 94.7 86.2 95.3 93.9 71.0 60.6 15.7 16 Bank loans n.e.c 50.4 23.2 67.1 38.6 66.5 71.2 63.0 21.0 56.2 12.2 120.8 -40.2 17 -6.1 -.8 21.7 14.6 -9.3 26.6 16.8 14.4 14.8 -13.1 -5.5 4.5 18 Other 15.8 31.3 62.2 35.5 41.0 49.7 74.7 36.8 34.2 36.2 45.9 29.9 19 By borrowing sector 227.6 363.6 555.1 631.1 619.0 526.9 583.3 518.0 744.3 469.6 768.4 417.0 70 State and local governments 21.5 34.0 27.4 91.8 46.4 16.2 38.6 56.3 127.2 3.1 89.7 28.6 71 Households 90.0 188.2 234.6 293.4 279.9 235.0 234.2 259.8 327.1 232.8 326.9 224.0 7? Farm 6.8 4.1 -.1 -13.9 -15.1 -.5 .4 -7.0 -20.8 -16.8 -13.3 -19.5 73 40.2 77.0 97.0 93.1 115.9 101.8 92.2 85.7 100.5 96.2 135.5 92.8 24 Corporate 69.0 60.3 196.0 166.7 192.0 174.3 217.8 123.2 210.3 154.3 229.7 91.2 25 Foreign net borrowing in United States 16.0 17.3 8.3 1.2 9.0 36.1 -19.4 -5.8 8.2 21.5 -3.5 -12.6 76 Bonds 6.6 3.1 3.8 3.8 2.6 1.3 6.3 5.5 2.1 6.2 -1.1 -1.1 77 Bank loans n.e.c -5.5 3.6 -6.6 -2.8 -1.0 -1.3 -11.9 -5.8 .1 1.5 -3.5 -3.5 78 Open market paper 1.9 6.5 6.2 6.2 11.5 16.6 -4.3 2.8 9.6 19.1 3.9 -5.3 29 U.S. government loans 13.0 4.1 5.0 -6.0 -4.0 19.5 -9.6 -8.2 -3.7 -5.3 -2.7 -2.8 30 Total domestic plus foreign 404.8 567.5 762.2 856.0 842.4 753.4 771.0 716.9 995.0 698.3 986.4 555.7 Financial sectors 31 Total net borrowing by financial sectors ... 90.3 99.3 151.9 199.0 291.1 153.0 150.7 175.1 222.8 238.8 343.4 317.5 By instrument 32 U.S. government related 64.9 67.8 74.9 101.5 174.3 72.5 77.3 96.8 106.3 133.8 214.8 180.2 33 Sponsored credit agency securities 14.9 1.4 30.4 20.6 13.2 29.4 31.5 26.6 14.6 6.4 20.0 7.8 34 Mortgage pool securities 49.5 66.4 44.4 79.9 161.4 43.1 45.8 70.3 89.5 126.6 196.3 171.8 35 Loans from U.S. government .4 1.1 -.4 2.2 .8 -1.5 .5 36 Private financial sectors 25.4 31.5 77.0 97.4 116.8 80.5 73.5 78.3 116.5 105.0 128.6 137.4 37 Corporate bonds 12.7 17.4 36.2 48.6 68.7 30.8 41.5 48.9 48.3 70.9 66.5 92.5 38 Mortgages .1 * .4 .1 .1 .4 .4 * .1 .6 -.5 .2 39 Bank loans n.e.c 1.9 -.1 .7 2.6 4.0 .6 .7 2.3 2.9 4.0 4.0 -7.4 40 Open market paper 9.9 21.3 24.1 32.0 24.2 32.1 16.0 14.6 49.4 15.1 33.4 38.3 41 Loans from Federal Home Loan Banks .8 -7.0 15.7 14.2 19.8 16.5 14.9 12.5 15.9 14.4 25.2 13.6 By sector 42 Sponsored credit agencies 15.3 1.4 30.4 21.7 12.9 29.4 31.5 26.6 16.8 7.2 18.5 8.3 43 Mortgage pools 49.5 66.4 44.4 79.9 161.4 43.1 45.8 70.3 89.5 126.6 196.3 171.8 44 Private financial sectors 25.4 31.5 77.0 97.4 116.8 80.5 73.5 78.3 116.5 105.0 128.6 137.4 45 Commercial banks 11.7 5.0 7.3 -4.9 -3.6 19.8 -5.3 -4.7 -5.0 -2.7 -4.6 4.4 46 Bank affiliates 6.8 12.1 15.6 14.5 4.6 20.4 10.8 10.2 18.9 -1.7 10.9 21.6 47 Savings and loan associations 2.5 -2.1 22.7 22.3 29.3 22.0 23.3 14.2 30.4 25.5 33.1 30.7 48 Finance companies 4.5 12.9 18.9 53.9 50.2 8.2 29.6 49.7 58.1 53.1 47.2 27.2 49 REITs -.2 -.1 .1 -.7 -.3 .2 .1 -.6 -.8 .6 -1.3 -.2 50 CMO Issuers .2 3.7 12.4 12.2 36.7 9.8 15.0 9.5 14.9 30.2 43.3 53.7 All sectors 51 Total net borrowing 495.1 666.8 914.1 1,054.9 1,133.5 906.4 921.8 892.1 1,217.8 937.1 1,329.8 873.2 52 U.S. government securities . 225.9 254.4 273.8 324.2 389.0 263.1 284.5 301.7 346.6 340.2 437.8 331.0 53 State and local obligations .. 44.2 53.7 50.4 136.4 35.4 33.8 67.0 67.0 205.8 -16.9 87.7 20.0 54 Corporate and foreign bonds 38.0 36.5 86.1 126.1 192.9 54.6 117.6 116.6 135.7 212.4 173.5 180.5 55 Mortgages 85.4 183.6 217.4 237.7 298.0 228.8 206.0 221.2 254.2 245.6 350.4 298.3 56 Consumer credit 19.3 56.6 90.4 94.6 65.8 94.7 86.2 95.3 93.9 71.0 60.6 15.7 57 Bank loans n.e.c 46.7 26.7 61.1 38.3 69.5 70.4 51.8 17.5 59.2 17.7 121.3 -51.0 58 Open market paper 5.7 26.9 52.0 52.8 26.4 75.4 28.6 31.8 73.7 21.0 31.7 37.5 59 Other loans 30.0 28.4 82.9 44.8 56.5 85.7 80.0 41.1 48.6 46.1 66.9 41.1 External corporate equity funds raised in United States 60 Total new share issues 25.8 61.8 -36.4 19.9 91.6 -47.9 -24.9 3.0 36.7 100.8 82.3 61.8 61 Mutual funds 8.8 27.2 29.3 85.7 163.3 26.5 32.2 64.2 107.1 155.5 171.1 123.3 62 All other 17.0 34.6 -65.7 -65.8 -71.7 -74.4 -57.1 -61.2 -70.4 -54.7 -88.7 -61.5 63 Nonfinancial corporations 11.4 28.3 -74.5 -81.5 -80.8 -79.5 -69.4 -75.5 -87.5 -68.7 -92.7 -70.0 64 Financial corporations 4.2 2.6 7.8 12.0 8.3 6.8 8.8 11.2 12.8 7.5 9.1 6.7 65 Foreign shares purchased in United States 1.4 3.7 .9 3.7 .7 -1.6 3.5 3.1 4.3 6.6 -5.1 1.9 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. 1984 1985 1986 1987 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11998822 11998833 11998844 11998855 11998866 HI H2 HI H2 HI H2 HI 1 Total funds advanced in credit markets to domestic nonfinancial sectors 388.9 550.2 753.9 854.8 833.4 717.3 790.4 722.7 986.8 676.9 989.9 568.3 By public agencies and foreign 7 Total net advances 114.9 114.0 157.6 202.3 317.3 132.7 182.5 195.8 208.7 264.1 370.6 241.3 3 U.S. government securities 22.3 26.3 39.3 47.1 84.8 27.6 51.0 50.3 43.9 74.0 95.6 46.3 4 Residential mortgages 61.0 76.1 56.5 94.6 158.5 55.5 57.4 88.6 100.7 123.8 193.2 164.9 5 FHLB advances to savings and loans .8 -7.0 15.7 14.2 19.8 16.5 14.9 12.5 15.9 14.4 25.2 13.6 6 Other loans and securities 30.8 18.6 46.2 46.3 54.2 33.2 59.2 44.4 48.2 52.0 56.5 16.5 Total advanced, by sector 7 U.S. government 15.9 9.7 17.1 16.8 9.5 7.5 26.6 25.1 8.4 10.8 8.2 -4.1 8 Sponsored credit agencies 65.5 69.8 74.3 101.5 175.5 73.3 75.2 96.4 106.7 128.2 222.8 167.7 9 Monetary authorities 9.8 10.9 8.4 21.6 30.2 12.0 4.8 27.5 15.8 13.2 47.2 10.8 10 Foreign 23.7 23.7 57.9 62.3 102.1 39.8 75.9 46.8 77.8 111.9 92.3 66.9 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 64.9 67.8 74.9 101.5 174.3 72.5 77.3 96.8 106.3 133.8 214.8 180.2 12 Foreign 16.0 17.3 8.3 1.2 9.0 36.1 -19.4 -5.8 8.2 21.5 -3.5 -12.6 Private domestic funds advanced N Total net advances 354.8 521.3 679.5 755.2 699.3 693.2 665.7 618.0 892.5 568.0 830.6 494.6 14 U.S. government securities 203.6 228.1 234.5 277.0 304.2 235.5 233.5 251.3 302.7 266.3 342.2 284.7 15 State and local obligations 44.2 53.7 50.4 136.4 35.4 33.8 67.0 67.0 205.8 -16.9 87.7 20.0 16 Corporate and foreign bonds 14.7 14.5 35.1 40.8 84.3 17.3 53.0 39.7 42.0 100.8 67.8 61.6 17 Residential mortgages -5.3 55.0 98.2 86.4 73.8 111.7 84.8 75.5 97.4 71.3 76.4 80.3 18 Other mortgages and loans 98.3 162.4 276.9 228.8 221.4 311.5 242.3 197.0 260.6 161.0 281.8 61.6 19 LESS: Federal Home Loan Bank advances .8 -7.0 15.7 14.2 19.8 16.5 14.9 12.5 15.9 14.4 25.2 13.6 Private financial intermediation 70 Credit market funds advanced by private financial institutions 274.2 395.8 559.8 579.5 726.1 587.5 532.1 483.8 675.2 638.9 813.2 485.1 71 Commercial banking 110.2 144.3 168.9 186.3 194.7 192.2 145.5 143.3 229.4 117.2 272.3 49.9 77 Savings institutions 22.9 135.6 150.2 83.0 105.8 167.0 133.5 54.5 111.4 94.5 117.2 85.7 73 Insurance and pension funds 96.6 100.1 121.8 156.0 175.9 148.3 95.3 139.4 172.5 170.6 181.2 213.3 24 Other finance 44.5 15.8 118.9 154.2 249.6 80.0 157.8 146.5 161.9 256.7 242.4 136.2 75 Sources of funds 274.2 395.8 559.8 579.5 726.1 587.5 532.1 483.8 675.2 638.9 813.2 485.1 26 Private domestic deposits and RPs 196.2 215.4 316.9 213.2 272.8 280.2 353.5 191.4 235.0 252.2 293.4 15.1 27 Credit market borrowing 25.4 31.5 77.0 97.4 116.8 80.5 73.5 78.3 116.5 105.0 128.6 137.4 78 Other sources 52.6 148.9 165.9 268.9 336.4 226.8 105.1 214.1 323.6 281.7 391.1 332.6 79 Foreign funds -31.4 16.3 5.4 17.7 12.4 10.9 -.1 21.3 14.2 12.3 12.5 41.8 30 Treasury balances 6.1 -5.3 4.0 10.3 1.7 -2.8 10.8 13.9 6.6 -4.2 7.6 -4.4 31 Insurance and pension reserves 106.0 109.7 118.6 141.0 152.5 162.5 74.6 118.6 163.4 138.6 166.4 234.4 32 Other, net -28.1 28.2 37.9 99.9 169.8 56.1 19.7 60.3 139.4 134.9 204.6 60.8 Private domestic nonfinancial investors 33 Direct lending in credit markets 106.0 157.0 196.7 273.2 90.1 186.2 207.1 212.5 333.9 34.1 146.1 146.9 34 U.S. government securities 68.5 99.3 123.6 145.3 43.4 162.8 84.3 156.2 134.5 37.4 49.4 69.9 35 State and local obligations 25.0 40.3 30.4 47.6 -.8 10.4 50.4 14.8 80.4 -68.7 67.2 21.7 36 Corporate and foreign bonds * -11.6 5.2 11.8 34.4 -26.4 36.9 15.4 8.2 68.1 .8 39.0 37 Open market paper -5.7 12.0 9.3 43.9 -4.8 15.6 3.0 3.5 84.2 -16.3 6.7 7.7 38 Other 18.2 17.0 28.1 24.6 17.9 23.8 32.5 22.6 26.6 13.6 22.1 8.5 39 Deposits and currency 205.5 232.8 320.4 223.5 293.2 286.8 354.0 198.3 248.7 262.0 324.4 10.2 40 Currency 9.7 14.3 8.6 12.4 14.4 13.7 3.6 15.9 8.8 10.7 18.2 10.0 41 Checkable deposits 18.0 28.6 27.9 41.4 97.7 26.0 29.8 14.6 68.2 79.9 115.5 -28.5 42 Small time and savings accounts 136.0 215.7 150.1 139.1 122.5 129.0 171.2 161.5 116.7 115.4 129.5 33.9 43 Money market fund shares 33.5 -39.0 49.0 8.9 43.8 24.5 73.4 10.6 7.1 46.9 40.6 -4.6 44 Large time deposits -2.4 -8.4 84.9 7.2 -9.3 92.0 77.9 -7.6 21.9 * -18.7 1.5 45 Security RPs 11.1 18.5 5.0 16.6 18.3 8.7 1.2 12.2 21.1 10.0 26.5 12.7 46 Deposits in foreign countries -.4 3.1 -5.1 -2.1 5.9 -7.1 -3.1 -9.0 4.9 -.9 12.8 -14.9 47 Total of credit market instruments, deposits, and currency 311.5 389.9 517.1 496.7 383.3 473.0 561.1 410.7 582.6 296.0 470.5 157.1 48 Public holdings as percent of total 28.4 20.1 20.7 23.6 37.7 17.6 23.7 27.3 21.0 37.8 37.6 43.4 49 Private financial intermediation (in percent) 77.3 75.9 82.4 76.7 103.8 84.7 79.9 78.3 75.6 112.5 97.9 98.1 50 Total foreign funds -7.7 40.0 63.3 80.1 114.5 50.7 75.8 68.1 92.0 124.2 104.9 108.7 MEMO: Corporate equities not included above 51 Total net issues 25.8 61.8 -36.4 19.9 91.6 -47.9 -24.9 3.0 36.7 100.8 82.3 61.8 57 Mutual fund shares 8.8 27.2 29.3 85.7 163.5 26.5 32.2 64.2 107.1 155.5 171.1 123.3 53 Other equities 17.0 34.6 -65.7 -65.8 -71.7 -74.4 -57.1 -61.2 -70.4 -54.7 -88.7 -61.5 54 Acquisitions by financial institutions 25.9 51.1 19.7 42.8 48.2 -.2 39.7 58.8 26.8 56.6 39.7 65.5 55 Other net purchases -.1 10.7 -56.1 -22.9 43.4 -47.7 -64.6 -55.8 10.0 44.2 42.6 -3.6 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. 47. Lines 33 plus 39, or line 13 less line 28 plus 40 and 46. Also 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 • April 1988 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures1 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1987 1988 Measure 11998855 11998866 11998877 May June July Aug. Sept. Oct.' Nov.' Dec.' Jan. 1 Industrial production 123.8 125.1 129.8 128.2 129.1 130.6 131.2 131.0 132.5 133.0 133.6 133.8 Market groupings 2 Products, total 130.8 133.2 138.3 136.9 137.8 139.5 139.9 139.4 140.9 140.9 141.1 141.5 3 Final, total 131.1 132.3 136.8 135.5 136.2 137.9 138.4 137.8 139.3 139.1 139.2 139.5 4 Consumer goods 120.2 124.5 127.7 127.3 127.2 128.9 129.4 127.7 129.0 129.1 129.3 129.8 5 Equipment 145.4 142.7 148.8 146.3 148.1 149.7 150.2 151.2 153.0 152.4 152.4 152.4 6 Intermediate 130.0 136.4 143.5 141.8 143.3 145.0 145.3 144.9 146.1 147.2 147.7 148.2 7 Materials 114.2 113.9 118.2 116.3 117.2 118.5 119.4 119.7 121.2 122.2 123.3 123.4 Industry groupings 8 Manufacturing 126.4 129.1 134.6 133.2 134.0 135.6 135.9 135.7 137.3 137.9 138.5 138.9 Capacity utilization (percent)2 9 Manufacturing 80.1 79.8 80.4 80.8 81.5 81.5 81.3 82.0 82.2 82.4 82.4 10 Industrial materials industries 80.2 78.5 79.3 79.8 80.6 81.1 81.2 82.1 82.7 83.3 83.3 11 Construction contracts (1982 = 100)3 136.0' 158.0' 162.0 157.0' 167.0' 165.0' 174.0' 160.0r 164.0 157.0 157.0 145.0 12 Nonagricultural employment, total4 118.3 120.8 123.8 123.3 123.5 123.8 124.0 124.2 124.9 125.2 125.6 125.7 13 Goods-producing, total 102.4 102.4 102.2 101.7 101.7 102.1 102.2 102.4 103.0 103.4 103.8 103.6 14 Manufacturing, total 97.8 96.5 97.1 96.6 96.6 97.0 97.2 97.4 97.8 98.2 98.4 98.6 15 Manufacturing, production-worker 92.6 91.2 92.1 91.6 91.6 92.1 92.2 92.5 92.9 93.3 93.6 93.7 16 Service-producing 125.0 128.9 132.9 132.4 132.6 132.9 133.1 133.4 134.1 134.4 134.8 135.0 17 Personal income, total 207.0 219.9 233.1 230.7 231.1 232.6 233.9 235.3 239.8 238.8 240.5 241.3 18 Wages and salary disbursements 198.7 210.2 222.6 220.7 221.2 222.3 224.2 225.4 227.1 228.6 229.5 231.0 19 Manufacturing 172.8 176.4 181.5 179.9 180.0 180.1 182.0 183.7 184.7 185.7 186.1 186.8 20 Disposable personal income 206.0 219.1 230.7 229.6 228.9 230.4 231.6 232.9 237.9 236.4 237.9 239.4 21 Retail sales 190.6 199.9 208.7 207.3 209.6 210.9 214.0 210.5 208.5 209.1 211.6 212.6 Prices? 22 Consumer (1967 = 100) 107.6' 109.6' 113.6 113.1' 113.5' 113.8' 114.4' 115.0' 115.3 115.4 115.4 115.7 23 Producer finished goods (1967 = 100) ... 104.7' 103.2' 105.4 105.4' 105.5' 106.0' 105.9' 105.7' 106.3 106.2 105.7 106.2 1. A major revision of the industrial production index and the capacity 5. Based on data in Survey of Current Business (U.S. Department of Comutilization rates was released in July 1985. See "A Revision of the Index of merce). Industrial Production" and accompanying tables that contain revised indexes 6. Based on Bureau of Census data published in Survey of Current Business. (1977=100) through December 1984 in the FEDERAL RESERVE BULLETIN, vol. 71 1. Data without seasonal adjustment, as published in Monthly Labor Review. (July 1985), pp. 487-501. The revised indexes for January through June 1985 were Seasonally adjusted data for changes in the price indexes may be obtained from shown in the September BULLETIN. the Bureau of Labor Statistics, U.S. Department of Labor. 2. Ratios of indexes of production to indexes of capacity. Based on data from Federal Reserve, McGraw-Hill Economics Department, Department of Commerce, and other sources. NOTE. Basic data (not index numbers) for series mentioned in notes 4, 5,and 6, 3. Index of dollar value of total construction contracts, including residential, and indexes for series mentioned in notes 3 and 7 may also be found in the Survey nonresidential and heavy engineering, from McGraw-Hill Information Systems of Current Business. Company, F. W. Dodge Division. Figures for industrial production for the last two months are preliminary and 4. Based on data in Employment and Earnings (U.S. Department of Labor). estimated, respectively. 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. 1987 1988 CCaatteeggoorryy 11998855 11998866 11998877 June July Aug. Sept. Oct. Nov. Dec/ Jan. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 180,440 182,822 185,010 184,941 185,127 185,264 185,428 185,575 185,737 185,882 186,083 2 Labor force (including Armed Forces)1 117,695 120,078 122,122 121,846 122,132 122,568 122,230 122,651 122,861 122,984 123,436 3 Civilian labor force 115,461 117,834 119,865 119,608 119,890 120,306 111199,,996633 120,387 112200,,559944 120,722 121,175 Employment 4 Nonagricultural industries 103,971 106,434 109,232 109,108 109,427 109,907 109,688 109,961 110,332 110,529 110,836 5 Agriculture 3,179 3,163 3,208 3,192 3,212 3,143 3,184 3,249 3,172 3,215 3,293 Unemployment 6 Number 8,312 8,237 7,425 7,308 7,251 7,256 7,091 7,177 7,090 6,978 7,046 7 Rate (percent of civilian labor force) 7.2 7.0 6.2 6.1 6.0 6.0 5.9 6.0 5.9 5.8 5.8 8 Not in labor force 62,745 62,744 62,888 63,095 62,995 62,6% 63,198 62,924 62,876 62,898 62,647 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 97,519 99,610 102,105 101,818 102,126 102,275 102,434 102,983 103,285' 103,5% 103,703 10 Manufacturing 19,260 18,994 19,112 19,015 19,104 19,129 19,169 19,247 19,336 19,377 19,402 11 Mining 927 783 742 738 744 751 759 764 759r 759 745 12 Contract construction 4,673 4,904 5,032 5,008 5,002 5,006 4,989 5,053 5,074r 5,122 5,072 13 Transportation and public utilities 5,238 5,244 5,377 5,350 5,363 5,377 5,416 5,436 5,459r 5,468 5,476 14 Trade 23,073 23,580 24,056 24,007 24,071 24,063 24,129 24,239 24,294r 24,306 24,479 15 Finance 5,955 6,297 6,588 6,586 6,608 6,624 6,629 6,650 6,657r 6,667 6,671 16 Service 22,000 23,099 24,136 24,083 24,214 24,279 24,295 24,406 24,493r 24,623 24,651 17 Government 16,394 16,710 17,063 17,031 17,020 17,046 17,048 17,188 17,213r 17,274 17,207 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 • April 1988 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION Seasonally adjusted 1987 1987 1987 SSeerriieess Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Output (1977 = 100) Capacity (percent of 1977 output) Utilization rate (percent) 1 Total industry 126.9 128.2 130.9 133.0 159.5 160.4 161.3 162.2 79.5 79.9 81.2 82.0 2 Mining 98.8 99.0 100.6 103.2 130.4 129.7 129.0 128.4 75.8 76.3 78.0 80.3 3 Utilities 108.1 108.3 111.6 112.5 137.7 138.3 138.8 139.4 78.5 78.3 80.5 80.7 4 Manufacturing 131.6 133.2 135.7 137.9 164.5 165.6 166.7 167.7 80.0 80.5 81.4 82.2 5 Primary processing 114.3 116.1 119.2 122.1 138.2 139.0 139.8 140.6 82.7 83.5 85.3 86.9 6 Advanced processing, . 142.0 143.5 145.8 147.5 180.3 181.6 182.9 184.1 78.7 79.0 79.7 80.1 7 Materials 115.0 116.5 119.1 121.9 146.1 146.7 147.2 147.8 78.7 79.4 81.0 82.5 8 Durable goods 121.4 122.9 125.5 129.6 162.3 163.1 163.9 164.7 74.8 75.4 76.7 78.7 9 Metal materials 74.7 77.0 83.6 91.1 110.6 110.0 109.4 108.8 67.5 70.0 76.5 83.8 10 Nondurable goods 121.2 124.0 128.2 129.3 145.6 143.8 144.7 145.6 84.8 86.2 88.6 91.0 11 122.3 125.1 130.5 113322..33 142.4 143.4 144.4 114455..44 85.9 87.2 9900..44 P 136.4 137.7 144.5 142.8 143.9 145.1 95.5 95.7 13 122.9 125.3 130.7 148.8 149.8 150.9 82.6 83.6 14 Energy materials 98.3 98.7 100.0 101.8 120.3 120.2 120.1 119.9 81.7 82.1 83.3 84.9 Previous cycle1 Latest cycle2 1987 1987 1988 High Low High Low Jan. May June July Aug. Sept. Oct/ Nov/ Dec/ Jan. Capacity utilization rate (percent) 15 Total industry 88.6 72.1 86.9 69.5 79.2 79.9 80.3 81.1 81.4 81.1 81.9 82.0 82.2 82.2 16 Mining 92.8 87.8 95.2 76.9 76.1 76.5 76.6 76.8 78.2 79.1 80.6 81.1 80.5 80.2 17 Utilities 95.6 82.9 88.5 78.0 78.5 79.2 79.0 80.2 81.3 80.0 80.5 81.0 80.7 81.6 18 Manufacturing 87.7 69.9 86.5 68.0 79.6 80.4 80.8 81.5 81.5 81.3 82.0 82.2 82.4 82.4 19 Primary processing 91.9 68.3 89.1 65.1 82.7 83.2 84.0 85.4 85.3 85.1 86.2 87.0 88.1 88.1 20 Advanced processing.. 86.0 71.1 85.1 69.5 78.2 79.2 79.2 79.8 79.9 79.5 80.1 80.0 79.8 79.9 21 Materials 92.0 70.5 89.1 68.5 78.7 79.3 79.8 80.6 81.1 81.2 82.1 82.7 83.3 83.3 22 Durable goods 91.8 64.4 89.8 60.9 74.4 75.1 75.9 76.5 76.6 77.0 78.3 78.9 79.9 79.8 23 Metal materials 99.2 67.1 93.6 45.7 66.2 69.7 71.5 73.9 77.5 78.3 82.4 83.1 87.3 85.9 24 Nondurable goods 91.1 66.7 88.1 70.7 85.1 86.2 86.1 88.4 88.6 88.7 88.2 88.9 90.0 89.8 25 Textile, paper, and ~ ~ > > 1 f< chemical 9 9 9 2 8 2 . . . 5 4 8 6 7 6 4 4 0 . . . 4 8 6 8 9 89 7 7 . . . 4 9 3 6 6 7 8 3 9 . . . 5 8 9 8 9 8 3 6 6 . . . 4 4 4 8 9 8 3 5 7. . . 1 9 7 8 9 8 3 6 7 . . . 1 3 1 1 8 9 0 5 0 0 . . . 1 0 5 8 9 9 6 0 9 . . . 4 5 9 8 9 9 7 8 0 . . . 4 5 7 8 9 9 8 7 0 . . . 0 4 4 8 9 9 8 8 1 . . . 1 6 1 9 9 9 0 2 9 . . . 0 3 8 92.3 28 Energy materials 94.6 86.9 94.0 82.3 82.5 82.1 82.8 82.4 84.0 83.5 84.9 85.4 84.5 84.8 1. Monthly high 1973; monthly low 1975. NOTE. These data also appear in the Board's G.3 (402) release. For address, see 2. Monthly highs 1978 through 1980; monthly lows 1982. inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value A Monthly data are seasonally adjusted 1977 1986 1987 1988 1986 GGrroouuppss por- aavvgg.. tion Dec. Feb. Mar. Apr. May June July Aug. Sept. Oct/ Nov. Dec/ Jan/ Index (1977 = 100) MAJOR MARKET 1 Total index 100.00 125.0 126.7 127.2 127.3 127.4 128.4 129.1 130.6 131.2 131.0 132.5 133.0 133.6 133.8 ? Products 57.72 133.2 135.0 136.1 136.2 137.2 137.2 137.8 139.5 139.9 139.4 140.9 140.9 141.1 141.5 Final products 44.77 132.3 133.7 135.0 135.0 134.5 135.8 136.2 137.9 138.4 137.8 139.3 139.1 139.2 139.5 4 Consumer goods 25.52 124.5 127.2 127.5 127.5 126.6 128.2 127.2 128.9 129.4 127.7 129.0 129.1 129.3 129.8 S Equipment 19.25 142.7 142.2 144.9 145.0 144.9 145.8 148.1 149.7 150.2 151.2 153.0 152.4 152.4 152.4 6 Intermediate products 12.94 136.4 139.7 139.7 140.4 139.9 142.1 143.3 145.0 145.3 144.9 146.1 147.2 147.7 148.2 7 Materials 42.28 113.9 115.2 115.1 115.2 116.2 116.3 117.2 118.5 119.4 119.7 121.2 122.2 123.3 123.4 Consumer goods 8 Durable consumer goods 6.89 116.2 121.5 122.4 121.2 118.1 120.2 117.4 120.4 112211..22 118.6 112244..33 112233..77 112200..33 112200..88 9 Automotive products 2.98 115.1 117.7 123.5 121.2 115.7 118.0 114.9 117.5 118.0 114.2 124.3 121.4 116.0 117.2 10 Autos and trucks 1.79 112.9 115.6 125.2 121.6 111.5 113.1 107.9 112.3 112.4 107.2 122.2 118.7 110.2 112.8 II Autos, consumer 1.16 97.3 99.5 105.3 100.9 91.8 91.0 87.4 86.4 76.8 79.1 94.7 91.9 83.7 77.5 1? Trucks, consumer .63 141.8 145.6 162.1 159.9 148.1 154.2 146.0 160.4 178.4 159.4 173.2 168.5 N Auto parts and allied goods 1.19 118.4 120.8 121.0 120.5 121.9 125.3 125.4 125.3 126.6 124.8 127.5 125.4 124.6 123.9 14 Home goods 3.91 117.1 124.4 121.6 121.2 119.9 121.8 119.3 122.5 123.6 121.9 124.3 125.4 123.6 123.9 15 Appliances, A/C and TV 1.24 139.5 153.2 145.2 142.9 137.7 142.2 133.4 141.7 147.1 141.8 145.7 150.1 143.5 142.5 Appliances and TV 1.19 141.6 155.1 146.7 143.8 139.2 142.3 133.4 142.6 145.5 140.6 146.1 150.5 143.4 17 Carpeting and furniture .96 125.8 132.0 130.8 131.3 133.5 133.3 132.3 134.1 132.0 131.6 132.9 133.0 132.9 18 Miscellaneous home goods 1.71 96.0 99.4 99.3 99.8 99.4 100.7 101.8 102.2 102.0 102.2 104.1 103.4 104.0 19 Nondurable consumer goods 18.63 127.5 129.4 129.4 129.8 129.8 131.1 130.9 132.1 132.5 131.0 130.8 131.1 132.6 133.1 70 Consumer staples 15.29 97.0 136.0 135.9 136.5 136.4 137.7 137.6 138.9 139.2 137.8 137.4 137.9 139.9 140.5 71 Consumer foods and tobacco 7.80 134.1 133.9 134.0 134.8 134.4 135.6 136.0 137.2 137.4 137.0 137.5 137.1 139.0 ?? Nonfood staples 7.49 131.9 138.2 137.9 138.2 138.5 139.9 139.2 140.6 141.2 138.6 137.2 138.6 140.8 141.2 73 Consumer chemical products 2.75 136.5 163.1 164.7 165.7 164.7 165.9 164.4 165.7 167.4 163.6 160.0 162.1 166.6 74 Consumer paper products 1.88 161.2 150.1 147.8 147.5 148.9 152.9 153.1 153.8 153.9 153.2 151.8 153.0 154.6 75 Consumer energy 2.86 147.4 106.4 105.7 105.8 106.5 106.4 105.9 108.0 107.7 105.0 105.8 106.7 107.0 76 Consumer fuel 1.44 105.7 92.2 92.5 94.1 94.5 92.1 91.9 92.7 91.4 91.6 92.4 93.2 94.7 27 Residential utilities 1.42 92.8 120.8 119.2 117.7 118.7 121.0 120.2 123.6 124.3 118.7 119.4 120.5 Equipment 78 Business and defense equipment 18.01 147.1 147.0 150.1 150.1 150.0 150.8 153.2 154.4 115544..55 155.2 115577..22 115566..77 115577..00 115577..11 79 Business equipment 14.34 138.6 137.1 140.8 140.8 140.8 141.7 144.2 145.6 145.6 146.3 148.7 148.3 148.7 148.6 30 Construction, mining, and farm 2.08 59.8 58.2 56.8 58.1 58.6 61.2 63.0 65.0 66.4 66.1 66.5 67.1 67.0 67.1 31 Manufacturing 3.27 112.0 108.8 111.5 110.9 111.1 111.5 117.2 120.4 120.9 122.0 120.5 120.0 121.3 122.5 3? Power 1.27 81.6 80.2 81.2 81.7 82.4 84.0 84.0 81.8 82.8 81.1 83.0 83.8 84.7 85.5 33 Commercial 5.22 214.6 213.7 218.4 219.7 220.9 222.0 226.7 227.9 227.7 229.1 232.4 231.9 232.8 233.3 34 Transit 2.49 109.2 108.9 117.4 114.0 110.4 110.1 105.4 106.1 104.7 105.1 112.5 111.2 109.5 105.6 35 Defense and space equipment 3.67 180.3 185.8 186.5 186.6 186.1 186.5 188.6 188.7 189.1 189.8 190.3 189.8 189.7 190.2 Intermediate products 36 Construction supplies 5.95 124.7 127.9 128.4 128.5 127.3 112288..33 113311..55 133.1 113322..55 113322..33 113333..33 113344..00 113344..66 113344..66 37 Business supplies 6.99 146.4 149.8 149.4 150.5 150.5 153.8 153.4 155.2 156.3 155.6 157.1 158.5 158.8 38 General business supplies 5.67 150.6 154.3 154.1 155.2 155.5 158.2 158.5 160.5 161.0 160.9 162.3 164.3 164.5 39 Commercial energy products 1.31 128.3 130.3 128.8 130.3 129.0 135.0 131.1 132.3 135.8 132.7 134.6 133.2 134.2 Materials 40 Durable goods materials 20.50 119.7 120.7 121.5 121.8 122.2 121.6 124.0 125.2 112255..55 126.4 128.7 130.0 113311..88 113311..99 41 Durable consumer parts 4.92 98.5 98.8 100.0 98.9 96.2 95.2 99.2 98.5 99.6 99.0 102.3 103.0 103.7 103.0 4? Equipment parts 5.94 153.9 154.2 155.6 155.8 157.1 156.0 158.3 159.3 159.5 161.1 162.2 163.2 164.8 166.0 43 Durable materials n.e.c 9.64 109.4 111.2 111.5 112.6 114.1 113.9 115.5 117.7 117.9 118.9 121.6 123.2 125.9 125.7 44 Basic metal materials 4.64 80.0 80.3 80.3 80.8 81.8 81.9 83.6 86.6 90.4 91.3 95.3 96.3 100.7 99.5 45 Nondurable goods materials 10.09 118.3 123.2 122.5 122.8 125.4 125.3 124.1 127.6 128.3 128.6 128.2 129.4 131.3 131.4 46 Textile, paper, and chemical 7.53 118.9 124.7 123.6 124.0 126.9 126.5 125.1 129.6 130.6 131.2 131.0 132.4 134.5 134.9 47 Textile materials 1.52 110.6 116.1 115.8 118.5 125.0 111.9 117.8 116.7 116.0 113.0 114.2 114.6 48 Pulp and paper materials 1.55 132.1 140.2 136.7 134.7 137.4 137.4 139.0 145.4 145.0 143.3 142.0 143.5 146.4 49 Chemical materials 4.46 117.1 122.3 121.8 122.1 125.0 125.0 124.9 128.1 130.4 132.2 133.4 134.7 137.2 50 Miscellaneous nondurable materials ... 2.57 116.5 118.5 119.0 119.2 121.1 122.0 120.9 122.0 121.4 120.9 119.7 120.9 51 Energy materials 11.69 99.9 98.8 97.6 97.0 97.5 99.3 99.4 99.0 100.9 100.2 101.8 102.4 101.3 101.6 5? Primary energy 7.57 105.5 105.1 102.6 101.5 102.3 103.6 104.0 102.5 104.6 104.6 106.8 107.8 106.3 53 Converted fuel materials 4.12 89.6 87.3 88.5 88.9 88.7 91.4 91.0 92.5 94.1 92.2 92.7 92.6 92.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • April 1988 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value—Continued 1986 1987 1988 1977 Groups c S o I d C e propor- aa 1 vv 98 gg 6 .. Dec. Feb. Mar. Apr. May June July Aug. Sept. Oct/ Nov. Dec." Jan/ Index (1977 = 100) MAJOR INDUSTRY 1 Mining and utilities 15.79 103.4 101.6 102.4 101.9 101.4 103.1 103.0 103.7 105.4 105.4 106.8 107.5 106.8 106.9 2 Mining 9.83 99.6 97.1 98.8 98.3 98.6 99.2 99.2 99.2 100.9 101.9 103.6 104.2 103.2 102.6 3 Utilities 5.% 109.6 109.0 108.5 107.9 106.0 109.6 109.4 111.2 112.9 III.2 112.1 112.9 112.6 114.0 4 Manufacturing 84.21 129.1 131.3 131.6 132.4 132.4 133.2 134.0 135.6 135.9 135.7 137.3 137.9 138.5 138.9 5 Nondurable 35.11 130.9 133.4 132.9 133.7 134.6 135.7 136.9 138.5 138.8 138.6 138.1 139.4 140.6 141.2 6 Durable 49.10 127.9 129.7 130.8 131.5 130.9 131.4 132.0 133.5 133.8 133.7 136.8 136.7 137.1 137.2 Mining 7 Metal 10 .50 76.2 73.6 71.2 65.7 71.7 70.7 71.4 79.3 86.5 85.6 90.0 8 Coal 11.12 1.60 124.2 125.4 131.7 122.3 121.9 127.2 128.8 127.9 130.5 133.3 140.3 142.9 140.6 139.0 9 Oil and gas extraction 13 7.07 94.7 89.8 90.9 92.4 93.1 92.1 91.8 91.8 93.0 93.3 94.1 93.6 92.7 92.3 10 Stone and earth minerals 14 .66 113.9 122.5 122.1 123.8 125.4 127.6 128.5 130.7 130.3 130.0 131.0 134.1 135.7 Nondurable manufactures 11 Foods 20 7.96 133.6 136.7 136.4 137.3 136.0 137.4 137.7 138.5 138.8 139.5 138.0 138.4 139.4 12 Tobacco products 21 .62 96.6 93.4 99.9 101.1 99.6 106.6 107.0 110.4 101.7 103.7 103.4 13 Textile mill products 22 2.29 113.2 113.4 110.8 112.6 116.6 115.7 117.2 118.3 119.8 118.2 116.8 118.3 119.2 14 Apparel products 23 2.79 103.6 104.9 106.5 105.4 105.3 106.4 107.7 109.7 108.4 107.6 108.0 109.3 15 Paper and products 26 3.15 136.4 141.1 139.9 139.9 140.5 141.3 142.6 148.8 148.9 147.4 146.0 148.3 149.8 16 Printing and publishing 27 4.54 163.4 166.4 164.4 167.6 169.2 171.4 174.1 174.0 174.7 174.9 175.2 175.6 175.9 178.0 17 Chemicals and products 28 8.05 133.0 135.7 135.7 135.3 137.3 138.1 139.3 140.8 142.3 142.4 141.5 144.2 146.8 18 Petroleum products 29 2.40 92.1 93.5 91.6 92.1 94.0 92.6 92.3 94.1 92.9 93.5 94.6 93.3 96.0 97.4 19 Rubber and plastic products 30 2.80 153.3 157.1 156.2 158.6 160.5 162.2 165.4 167.2 164.8 165.2 166.7 169.4 169.9 20 Leather and products 31 .53 61.3 60.2 59.8 59.4 60.2 61.4 60.8 59.2 61.3 60.7 59.6 60.7 58.3 Durable manufactures 21 Lumber and products 24 2.30 123.4 133.5 129.6 128.9 127.8 130.3 131.1 132.8 131.1 126.9 129.8 134.0 135.8 22 Furniture and fixtures 25 1.27 146.7 148.8 145.0 149.9 148.2 150.5 153.9 156.2 155.2 155.9 156.0 158.1 159.2 23 Clay, glass, stone products 32 2.72 120.2 119.4 118.8 119.8 120.6 117.2 117.9 118.8 116.5 118.6 118.9 120.5 122.1 24 Primary metals 33 5.33 75.8 73.4 75.1 77.0 76.1 77.0 78.8 81.4 85.1 84.5 90.6 90.0 92.6 91.0 25 Iron and steel 331.2 3.49 63.4 61.3 62.3 65.4 65.0 65.7 68.3 70.9 76.0 74.6 82.0 79.7 85.0 26 Fabricated metal products 34 6.46 107.4 109.6 108.3 110.5 109.9 108.5 111.1 111.1 110.1 111.1 113.5 113.8 115.5 116.0 27 Nonelectrical machinery 35 9.54 141.9 144.8 145.5 148.5 150.4 149.7 151.8 155.3 154.3 156.6 158.0 157.3 158.6 159.2 28 Electrical machinery 36 7.15 166.5 170.4 171.0 168.5 168.4 171.1 170.5 172.5 174.3 173.4 175.5 175.7 175.3 176.3 29 Transportation equipment 37 9.13 125.8 126.8 132.7 132.2 127.8 129.4 126.5 127.6 128.1 125.5 132.0 130.4 128.4 128.0 30 Motor vehicles and parts 371 5.25 110.9 109.7 117.7 116.5 109.8 112.0 107.4 109.4 109.1 105.6 116.0 114.0 110.5 109.0 31 Aerospace and miscellaneous transportation equipment 372-6.9 3.87 146.1 150.1 153.0 153.4 152.3 153.1 152.4 152.3 153.9 152.5 153.7 152.8 152.6 153.8 32 Instruments 38 2.66 141.3 140.2 142.0 140.3 142.8 142.1 144.5 143.8 146.3 145.6 146.7 147.3 144.8 145.8 33 Miscellaneous manufactures 39 1.46 99.3 103.8 101.6 103.9 101.4 101.9 101.2 100.5 102.2 102.1 104.6 104.5 103.6 Utilities 34 Electric 44..1177 112222..22 112222..66 112222..33 112233..66 112222..33 112288..88 112288..88 113311..00 113322..00 112277..55 112266..88 112277..55 112266..99 Gross value (billions of 1982 dollars, annual rates) MAJOR MARKET 35 Products, total. 517.5 1,702.2 1,700.7 1,718.7 1.725.2 1,710.0 1,723.0 1,720.4 1.732.5 1,741.7 1,735.9 1,774.1 1,771.1 1,771.0 1,780.2 36 Final 405.7 1,314.5 1,307.3 1,329.2 1.330.3 1,316.5 1,324.7 1,320.1 1.326.6 1,334.9 1,330.3 1,360.9 1,358.5 1,355.3 1,363.1 37 Consumer goods. 272.7 853.8 857.1 865.3 868.1 857.1 862.8 855.1 863.2 866.4 856.9 876.6 877.9 878.2 885.5 38 Equipment 133.0 458.2 450.2 463.9 462.2 459.4 461.9 465.0 463.5 468.5 473.4 484.4 480.6 477.1 477.6 39 Intermediate 111.9 387.6 393.4 389.5 394.9 393.6 398.4 400.3 405.9 406.8 405.6 413.2 412.6 415.7 417.1 • 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. 1987 Item 1985 1986 1987 Mar. Apr. May June July Aug. Sept. Oct/ Nov/ Dec Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,733 1,750 1,524 1,719 1,598 1,493 1,517 1,487 1,502 1,502 1,463 1,469 1,361 2 1-family 957 1,071 1,030 1,150 1,058 1,009 1,039 993 1,023 992 977 983 974 3 2-or-more-family 777 679 495 569 540 484 478 494 479 510 486 486 387 4 Started 1,742 1,805 1,621 1,723' 1,635' l^ 1,583' 1,594' 1,583' 1,679' 1,538 1,661 1,404 5 1-family 1,072 1,179 1,147 1,206' 1,201' 1,125' 1,086' 1,142' 1,109' 1,211 1,105 1,129 1,041 6 2-or-more-family 669 626 474 517' 434' 474' 497' 452' 474 468' 433 532 363 7 Under construction, end of period1 1,063 1,074 1,002 1,085 1,070 1,061 1,059 1,053 1,049 1,052 1,049 1,050 1,030 8 1-family 539 583 599 618 623 621 620 623 625 631 631 630 625 9 2-or-more-family 524 490 403 467 446 441 439 430 424 421 418 420 406 10 Completed 1,703 1,756 1,664 1,689 1,830 1,621 1,601 1,698 1,666 1,581 1,549 1,562 1,635 11 1-family 1,072 1,120 1,120 1,141 1,148 1,158 1,101 1,120 1,067 1,112 1,111 1,080 1,110 12 2-or-more-family 631 637 545 548 682 463 500 578 599 469 438 482 525 13 Mobile homes shipped 284 244 233 23C 229r 224' 234' 243' 234' 24C 234 222 227 Merchant builder activity in 1-family units 14 Number sold 688 748 675 720 733 649 641 671 675 644' 659 643 603 15 Number for sale, end of period1 ... 350 361 371 358 359 355 359 359 361 361 360 363 366 Price (thousands of dollars)2 Median 16 Units sold 84.3 92.2 104.4 98.4 96.5 104.9 109.0 105.0 106.8 106.5' 106.0 117.0 108.9 Average 17 Units sold 101.0 112.2 127.8 119.5 118.1 126.6 135.8 128.6 128.5 133.5' 125.0 139.0 135.8 EXISTING UNITS (1-family) 18 Number sold 3,217 3,566 3,523 3,680 3,560 3,770 3,500 3,430 3,410 3,450 3,570 3,370 3,330 Price of units sold (thousands of dollars)1 19 Median 75.4 80.3 84.9 85.6 85.0 85.2 85.2 86.2 85.1 85.1 84.8 83.7 85.4 20 Average 90.6 98.3 105.3 104.9 105.0 106.3 106.0 107.6 105.3 106.2 106.3 105.0 107.1 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 355,995 388,815 399,468 388,303 396,222 396,680 397,191 398,465 402,872 402,782' 403,482 411,325 409,730 22 Private 291,665 316,589 324,065 312,203 320,483 321,414 324,256 323,847 329,831 324,857' 326,658 333,581 330,090 23 Residential 158,475 187,147 198,103 190,812 199,523 195,871 200,864 198,005 200,241 196,969' 198,803 199,823 200,762 24 Nonresidential, total 133,190 129,442 125,962 121,391 120,960 125,543 123,392 125,842 129,590 127,888 127,855 133,758 129,328 Buildings 25 Industrial 15,769 13,747 13,072 11,354 11,492 13,376 13,023 13,005 13,659 14,387 13,561 14,363 13,412 26 Commercial 51,315 48,592 43,892 52,285 50,924 53,224 51,831 52,537 54,055 52,800 53,788 57,602 53,935 27 Other 12,619 13,216 15,199 15,143 14,950 14,926 14,769 15,317 14,888 15,079 15,567 16,158 16,515 28 Public utilities and other — 53,487 53,887 53,799 42,609 43,594 44,017 43,769 44,983 46,988 45,622 44,939 45,635 45,466 29 Public 64,326 72,225 75,401 76,100 75,739 75,266 72,935 74,618 73,041 77,924 76,824 77,744 79,641 30 Military 3,283 3,919 4,204 3,893 3,403 4,397 4,352 5,009 4,193 6,083 4,308 4,738 3,164 31 Highway 21,756 23,360 23,275 23,575 22,673 22,607 21,704 22,441 22,005 23,489 24,975 24,832 26,400 32 - Conservation and development 4,746 4,668 5,222 4,792 5,551 4,839 5,498 5,328 5,127 4,978 5,491 5,188 6,060 33 Other 34,541 40,278 42,700 43,840 44,112 43,423 41,381 41,840 41,716 43,374 42,050 42,986 44,017 1. Not at annual rates. NOTE. Census Bureau estimates for all series except (1) 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 (2) sales and prices comparable with data in prior periods because of changes by the Bureau of the of 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 the originating agency. Permit Construction Reports (C-30-76-5), issued by the Bureau in July 1976. authorizations 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 • April 1988 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 JJJaaannn... iiittteeemmm 1987r 1987r 1988 111999888888 11998877 11998888 (((111999666777 JJaann.. JJaann.. === 111000000)))''' Mar. June Sept. Dec. Sept. Oct. Nov. Dec. Jan. CONSUMER PRICES2 1 All items 1.5 4.0 6.3 4.3 3.9 3.2 .3 .3 .3 .2 .3 115.7 2 4.2 3.2 3.6 5.8 2.1 2.8 .5 .2 .1 .4 .3 115.7 3 Energy items -17.1 4.2 25.5 6.6 6.0 -3.9 -.4 -.6 .3 -.8 -.7 87.4 4 All items less food and energy 3.8 4.3 4.9 3.8 3.8 4.4 .2 .5 .3 .2 .5 120.8 5 Commodities 1.4 3.4 4.8 3.7 2.9 2.5 .4 .4 .4 -.2 .4 113.2 6 Services 5.0 4.8 4.8 4.4 4.3 5.0 .2 .6 .2 .4 .6 125.2 PRODUCER PRICES 7 Finished goods -1.4 2.1 4.3 3.5 3.8 -2.6 .4 -.2 -.1 -.4 .4 106.2 8 Consumer foods 1.8 2.4 -2.5 9.6 -1.8 -5.7 .6 -.4 .3 -1.4 1.7 110.6 9 Consumer energy -31.9 1.7 40.6 2.0 16.5 -12.5 -.5 -.8 -.9 -1.6 -4.5 59.0 10 Other consumer goods 3.1 2.7 2.9 1.8 4.6 1.4 .5 .1 -.1 .3 .6 116.3 11 Capital equipment 2.4 1.2 1.1 1.1 4.0 -.7 .5 -.3 -.1 .2 .2 112.7 12 Intermediate materials3 -3.3 5.1 6.7 5.3 5.6 4.8 .2 .5 .5 .2 .3 104.2 13 Excluding energy .7 5.8 4.2 4.2 5.3 7.6 .6 .7 .5 .5 .9 111.7 Crude materials 14 Foods -1.8 5.6 -2.5 25.2 -4.8 -5.2 .0 .5 -2.7 .8 .9 96.9 15 Energy -21.1 -1.9 50.0 11.3 5.9 -15.7 -2.8 -1.6 -1.2 -1.5 -3.8 70.7 16 Other 1.8 22.4 8.7 27.2 39.4 16.9 3.4 2.8 .7 .5 1.3 128.6 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 11998855 11998866 11998877'' Q4 Ql Q2 Q3 Q4' GROSS NATIONAL PRODUCT 1 4,010.3 4,235.0 4,487.7 4,288.1 4,377.7 4,445.1 4,524.0 4,604.0 By source 2 Personal consumption expenditures 2,629.4 2,799.8 2,967.0 2,858.6 2,893.8 2,943.7 3,011.3 3,019.2 3 Durable goods 368.7 402.4 413.8 419.8 396.1 409.0 436.8 413.1 4 Nondurable goods 913.1 939.4 981.6 946.3 969.9 982.1 986.4 988.1 5 Services 1,347.5 1,458.0 1,571.6 1,492.4 1,527.7 1,552.6 1,588.1 1,617.9 6 Gross private domestic investment 641.6 671.0 716.7 660.2 699.9 702.6 707.4 756.8 7 Fixed investment 631.6 655.2 671.3 666.6 648.2 662.3 684.5 690.1 8 Nonresidential 442.6 436.9 442.9 439.7 422.8 434.6 456.6 457.8 9 Structures 152.5 137.4 133.9 132.9 128.7 129.7 137.1 140.1 10 Producers' durable equipment 290.1 299.5 309.0 306.7 294.1 304.9 319.5 317.6 11 Residential structures 189.0 218.3 228.4 226.9 225.4 227.7 227.9 232.3 1? Change in business inventories 10.0 15.7 45.4 -6.4 51.6 40.3 22.9 66.7 13 Nonfarm 13.6 16.8 36.6 5.1 48.7 27.3 11.1 59.3 14 Net exports of goods and services -79.2 -105.5 -120.3 -116.9 -112.2 -118.4 -123.7 -126.9 IS Exports 369.9 376.2 427.4 383.3 397.3 416.5 439.2 456.8 16 Imports 449.2 481.7 547.7 500.2 509.5 534.8 562.9 583.7 17 Government purchases of goods and services 818.6 869.7 924.3 886.3 896.2 917.1 929.0 954.8 18 Federal 353.9 366.2 380.9 368.6 366.9 379.6 382.1 395.1 19 State and local 464.7 503.5 543.4 517.7 529.3 537.6 546.9 559.7 By major type of product 70 Final sales, total 4,000.3 4,219.3 4,442.3 4,294.6 4,326.0 44,,440044..88 44,,550011..11 44,,553377..33 71 Goods 1,637.9 1,693.8 1,782.5 1,698.9 1,738.7 1,763.5 1,798.3 1,829.4 77 Durable 704.3 726.8 772.9 737.3 747.0 756.7 785.7 802.2 ?3 Nondurable 933.6 967.0 1,009.6 961.6 991.7 1,006.8 1,012.6 1,027.2 74 Services 1,969.2 2,116.2 2,270.1 2,160.0 2,212.0 2,252.2 2,289.3 2,327.0 25 Structures 403.1 425.0 435.1 429.3 426.9 429.4 436.4 447.6 76 Change in business inventories 10.0 15.7 45.4 -6.4 51.6 40.3 22.9 66.7 2.7 7.3 4.8 24.8 -4.5 35.2 22.1 -1.9 43.7 28 Nondurable goods 2.7 10.9 20.6 -1.9 16.5 18.2 24.8 23.0 29 MEMO Total GNP in 1982 dollars 3,607.5 3,713.3 3,820.3 3,731.5 3,772.2 3,795.3 3,835.9 3,877.9 NATIONAL INCOME 30 3,229.9 3,422.0 3,637.7 3,471.0 3,548.3 3,593.3 3,659.0 n.a. 31 Compensation of employees 2,370.8 2,504.9 2,647.5 2,552.0 2,589.9 2,623.4 2,663.5 2,713.4 3? Wages and salaries 1,974.7 2,089.1 2,212.7 2,128.5 2,163.3 2,191.4 2,226.5 2,269.8 33 Government and government enterprises 372.3 394.8 421.4 403.8 412.2 418.1 424.5 430.9 34 Other 1,602.6 1,694.3 1,791.3 1,724.7 1,751.1 1,773.3 1,801.9 1,838.9 35 Supplement to wages and salaries 396.1 415.8 434.8 423.5 426.6 432.0 437.0 443.6 36 Employer contributions for social insurance 203.8 214.7 224.6 219.1 220.0 222.5 225.9 230.0 37 Other labor income 192.3 201.1 210.2 204.4 206.7 209.5 211.1 213.5 38 257.3 289.8 327.8 297.8 320.9 323.1 322.7 344.5 39 Business and professional 227.6 252.6 279.0 261.2 269.7 275.8 282.1 288.4 40 Farm1 29.7 37.2 48.8 36.6 51.3 47.3 40.6 56.1 41 Rental income of persons2 9.0 16.7 19.1 18.4 20.0 18.9 17.3 20.1 42 Corporate profits1 277.6 284.4 306.5 281.1 294.0 296.8 314.9 n.a. 43 Profits before tax3 224.8 231.9 275.7 247.9 257.0 268.7 284.9 n.a. 44 Inventory valuation adjustment -.7 6.5 -17.3 -8.9 -11.3 -20.0 -17.6 -20.4 45 Capital consumption adjustment 53.5 46.0 48.2 42.1 48.2 48.0 47.7 48.7 46 Net interest 315.3 326.1 336.7 321.7 323.6 331.1 340.6 351.6 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 • April 1988 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1986 1987 AAccccoouunntt 11998855 11998866 11998877'' Q4 Ql Q2 Q3 Q4' PERSONAL INCOME AND SAVING 1 Total personal income 3,327.0 3,534.3 3,746.3 3,593.6 3,662.0 3,708.6 3,761.0 3,853.6 2 Wage and salary disbursements 1,974.9 2,089.1 2,212.7 2,128.5 2,163.3 2,191.4 2,226.1 2,270.2 3 Commodity-producing industries 609.2 623.3 641.1 628.4 632.9 635.0 641.8 654.8 4 Manufacturing 460.9 470.5 484.0 474.5 477.2 479.0 485.1 494.7 5 Distributive industries 473.0 497.1 522.9 504.7 511.5 518.9 526.3 534.8 6 Service industries 520.4 573.9 627.3 591.6 606.7 619.3 633.9 649.3 7 Government and government enterprises 372.3 394.8 421.4 403.8 412.2 418.1 424.2 431.2 8 Other labor income 192.3 201.1 210.2 204.4 206.7 209.5 211.1 213.5 9 Proprietors' income1 257.3 289.8 327.8 297.8 320.9 323.1 322.7 344.5 10 Business and professional 227.6 252.6 279.0 261.2 269.7 275.8 282.1 288.4 11 Farm1 29.7 37.2 48.8 36.6 51.3 47.3 40.6 56.1 12 Rental income of persons2 9.0 16.7 19.1 18.4 20.0 18.9 17.3 20.1 13 Dividends 76.3 81.2 87.5 82.9 84.5 86.3 88.7 90.5 14 Personal interest income 476.5 497.6 515.8 496.8 499.8 506.3 520.0 537.2 15 Transfer payments 489.7 518.3 543.0 526.6 533.7 541.5 545.8 551.2 16 Old-age survivors, disability, and health insurance benefits ... 253.4 269.2 282.8 273.5 278.0 282.3 284.4 286.5 17 LESS: Personal contributions for social insurance 148.9 159.6 169.8 161.8 166.7 168.4 170.7 173.6 18 EQUALS: Personal income 3,327.0 3,534.3 3,746.3 3,593.6 3,662.0 3,708.6 3,761.0 3,853.6 19 LESS: Personal tax and nontax payments 485.9 512.2 564.8 532.0 536.1 578.0 565.7 579.4 20 EQUALS: Disposable personal income 2,841.1 3,022.1 3,181.5 3,061.6 3,125.9 3,130.6 3,195.3 3,274.2 21 LESS: Personal outlays 2,714.1 2,891.5 3,061.9 2,952.6 2,987.5 3,037.4 3,106.5 3,116.4 22 EQUALS: Personal saving 127.1 130.6 119.6 109.0 138.4 93.2 88.8 157.9 MEMO Per capita (1982 dollars) 23 Gross national product 15,073.7 15,369.6 15,669.8 15,387.6 15,523.4 15,586.4 15,714.4 1155,,884477..55 24 Personal consumption expenditures 9,830.2 10,142.8 10,239.1 10,228.8 10,188.9 10,215.6 10,326.5 10,220.2 25 Disposable personal income 10,622.0 10,947.0 10,979.0 10,956.0 11,008.0 10,865.0 10,958.0 11,083.0 26 Saving rate (percent) 4.5 4.3 3.8 3.6 4.4 3.0 2.8 4.8 GROSS SAVING 27 Gross saving 531.3 532.0 566.2 515.3 554.3 551.3 559.3 n.a. 28 Gross private saving 664.2 679.8 673.3 653.4 683.8 639.9 648.7 n.a. 29 Personal saving 127.1 130.6 119.6 109.0 138.4 93.2 88.8 157.9 30 Undistributed corporate profits 99.6 92.6 74.6 78.5 75.6 70.1 76.8 n.a. 31 Corporate inventory valuation adjustment -.7 6.5 -17.3 -8.9 -11.3 -20.0 -17.6 -20.4 Capital consumption allowances 32 Corporate 269.1 282.8 229966..22 228899..33 291.8 229944..55 229977..88 330000..99 33 Noncorporate 168.5 173.8 182.9 176.6 178.0 182.1 185.3 186.3 34 Government surplus, or deficit (-), national income and product accounts -132.9 -147.8 -107.1 -138.1 -129.5 -88.6 -89.3 n.a. 35 Federal -196.0 -204.7 -151.4 -188.7 -170.5 -139.2 -135.8 n.a. 36 State and local 63.1 56.8 44.3 50.6 41.0 50.6 46.5 n.a. 37 Gross investment 525.7 527.1 559.5 503.7 552.1 548.1 548.4 589.2 38 Gross private domestic 641.6 671.0 716.7 660.2 699.9 702.6 707.4 756.8 39 Net foreign -115.9 -143.9 -157.2 -156.5 -147.7 -154.5 -159.0 -167.7 40 Statistical discrepancy -5.6 -4.9 -6.8 -11.6 -2.2 | -3.1 -10.9 -10.9 1. With inventory valuation and capital consumption adjustments. SOURCE. Survey of Current Business (Department of Commerce). 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A53 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.1 1986 1987 Item credits or debits 11998844 11998855 11998866 Q3 Q4 Ql Q2 Q3P 1 Balance on current account 110077,,001133 -116,394 --114411,,335522 -36,583 -37,977 -36,784 -41,190 -43,378 2 Not seasonally adjusted -40,230 -36,398 -33,435 -42,006 -48,525 3 Merchandise trade balance -112,522 -122,148 -144,339 -37,115 -38,595 -38,757 -39,558 -39,832 4 Merchandise exports 219,900 215,935 224,361 56,534 57,021 56,992 60,097 65,263 5 Merchandise imports 332,422 -338,083 -368,700 -93,649 -95,616 -95,749 -99,655 -105,095 6 Military transactions, net -1,942 -3,338 -3,662 -815 -495 -37 29 -443 7 Investment income, net 18,490 25,398 20,844 5,339 4,492 5,500 1,577 -267 Other service transactions, net 1,138 -1,005 1,463 342 759 -387 -146 95 Remittances, pensions, and other transfers . -3,637 -4,079 -3,885 -875 -1,151 -1,017 -865 -872 U.S. government grants (excluding military) . -8,541 -11,222 -11,772 -3,459 -2,987 -2,086 -2,227 -2,059 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) -5,476 -2,831 -1,920 -1,454 15 225 -177 232 12 Change in U.S. official reserve assets (increase, -). -3,130 -3,858 312 280 132 1,956 3,419 32 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -979 -897 -246 163 -31 76 -171 -210 15 Reserve position in International Monetary Fund. -995 908 1,500 508 283 606 335 407 16 Foreign currencies -1,156 -3,869 -942 -391 -120 1,274 3,255 -165 17 Change in U.S. private assets abroad (increase, -)3 -13,685 -24,711 -94,374 -23,304 -32,351 13,352 -18,137 -29,467 18 Bank-reported claims -11,127 -1,323 -59,039 -18,878 -31,800 25,686 -15,685 -21,249 19 Nonbank-reported claims 5,019 1,361 -3,986 685 170 -1,163 2,603 20 U.S. purchase of foreign securities, net -4,756 -7,481 -3,302 620 3,113 -1,345 384 -930 21 U.S. direct investments abroad, net3 -2,821 -17,268 -28,047 -5,731 -3,834 -9,826 -5,439 -7,288 22 Change in foreign official assets in the United States (increase, +) 2,987 -1,140 34,698 15,551 1,003 13,953 10,070 359 23 U.S. Treasury securities 4,690 -838 34,515 12,167 4,572 12,145 11,084 1,200 24 Other U.S. government obligations 13 -301 -1,214 -276 -117 -62 256 714 25 Other U.S. government liabilities 586 823 1,723 999 -607 -1,381 -1,504 -506 26 Other U.S. liabilities reported by U.S. banks 555 645 554 2,963 -2,435 3,611 547 -425 27 Other foreign official assets5 -2,857 -1,469 -880 -302 -410 -360 -313 -624 28 Change in foreign private assets in the United States (increase, +)3 99,481 131,012 178,689 54,040 57,428 12,802 39,494 67,650 29 U.S. bank-reported liabilities 33,849 41,045 77,350 30,360 34,604 -13,614 14,823 48,872 30 U.S. nonbank-reported liabilities 4,704 -450 -2,791 -80 1,035 1,761 1,526 31 Foreign private purchases of U.S. Treasury securities, net 23,001 20,433 8,275 609 -3,074 -1,570 -2,211 -2,832 32 Foreign purchases of other U.S. securities, net 12,568 50,962 70,802 17,074 12,269 18,499 15,870 12,669 33 Foreign direct investments in the United States, net 25,359 19,022 25,053 6,077 12,594 7,726 9,486 8,941 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 2266,,883377 17,920 2233,,994477 -8,530 11,750 -5,504 6,521 4,572 36 Owing to seasonal adjustments -4,153 3,904 2,652 -2,009 -5,177 37 Statistical discrepancy in recorded data before seasonal adjustment 26,837 17,920 23,947 -4,377 7,846 -8,156 8,530 9,749 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -3,130 -3,858 312 280 132 1,956 3,419 32 39 Foreign official assets in the United States (increase, +) excluding line 25 2,401 — 1,963 32,975 14,552 1,610 15,334 11,574 865 40 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 22 above) -4,504 -6,709 -8,508 -3,023 -5,195 -2,901 -2,651 -1,681 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 153 46 101 19 53 8 26 10 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 • April 1988 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data are not seasonally adjusted. 1987 IItteemm 11998855 11998866 11998877 June July Aug. Sept. Oct. Nov. Dec. 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments, f.a.s. value 218,815 226,808 252,866 21,126 21,008 20,222 20,986 21,752 23,799 24,801 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses, c.i.f. value .... 352,463 382,964 424,082 36,838 37,483 35,905 35,062 39,383 37,016 37,003 3 Trade balance -133,648 -156,156 -171,217 -15,711 -16,475 -15,683 -14,076 -17,631 -13,218 -12,202 1. The Census basis data differ from merchandise trade data shown in table tions; military payments are excluded and shown separately as indicated above. 3.10, U.S. International Transactions Summary, for reasons of coverage and As of Jan. 1, 1987 census data are released 45 days after the end of the month. timing. On the export side, the largest adjustment is the exclusion of military sales Total exports and the trade balance reflect adjustments for undocumented exports (which are combined with other military transactions and reported separately in to Canada. the "service account" in table 3.10, line 6). On the import side, additions are made SOURCE. FT900 "Summary of U.S. Export and Import Merchandise Trade" for gold, ship purchases, imports of electricity from Canada, and other transac- (Department of Commerce, Bureau of the Census). 3.12 U.S. RESERVE ASSETS Millions of dollars, end of period 1987 1988 TTyyppee 11998844 11998855 11998866 July Aug. Sept. Oct. Nov. Dec. Jan. 1 Total 34,934 43,186 48,511 44,318 45,944 45,070 46,200 46,779 45,798 42,955 2 Gold stock, including Exchange Stabilization Fund1 11,096 11,090 11,064 11,069 11,068 11,075 11,085 11,082 11,078 11,068 3 Special drawing rights2'3 5,641 7,293 8,395 8,813 9,174 9,078 9,373 9,937 10,283 9,765 4 Reserve position in International Monetary Fund 11,541 11,947 11,730 10,964 11,116 10,918 11,157 11,369 11,349 10,804 5 Foreign currencies4 6,656 12,856 17,322 13,472 14,586 13,999 14,585 14,391 13,088 11,318 1. Gold held under earmark at Federal Reserve Banks for foreign and interna- in the IMF also are valued on this basis beginning July 1974. tional accounts is not included in the gold stock of the United States; see table 3. Includes allocations by the International Monetary Fund of SDRs as follows: 3.13. Gold stock is valued at $42.22 per fine troy ounce. $867 million on Jan. 1, 1970; $717 million on Jan. 1, 1971; $710 million on Jan. 1, 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 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1987 1988 AAsssseettss 11998844 11998855 11998866 July Aug. Sept. Oct. Nov. Dec. Jan. 1 Deposits 267 480 287 261 294 456 236 351 244 355 Assets held in custody 1 U.S. Treasury securities2 118,000 121,004 155,835 171,269 179,484 179,097 182,072 187,767 195,126 206,675 3 Earmarked gold 14,242 14,245 14,048 14,010 14,022 14,015 13,998 13,965 13,919 13,882 1. Excludes deposits and U.S. Treasury securities held for international and 3. Earmarked gold and the gold stock are valued at $42.22 per fine troy ounce, regional organizations. Earmarked gold is gold held for foreign and international accounts and is not 2. Marketable U.S. Treasury bills, notes, and bonds; and nonmarketable U.S. included in the gold stock of the United States. Treasury securities payable in dollars and in foreign currencies. 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 1987 AAsssseett aaccccoouunntt 11998844 11998855 11998866 June July Aug. Sept. Oct. Nov. Dec." All foreign countries 1 Total, all currencies 453,656 458,012 456,628 475,188 470,391 473,540 489,692r 520,860r 524,980 518,149 2 Claims on United States 113,393 119,706 114,563 123,400 123,687 124,737 137,218 138,016'" 140,693 137,751 3 Parent bank 78,109 87,201 83,492 89,376 89,793 89,958 101,635 99,245' 102,609 105,562 4 Other banks in United States 13,664 13,057 13,685 15,981 14,303 14,739 15,949 17,826 16,701 16,416 5 Nonbanks 21,620 19,448 17,386 18,043 19,591 20,040 19,634 20,945 21,383 15,773 6 Claims on foreigners 320,162 315,676 312,955 319,546 314,078 314,727 319,365 347,014' 345,735 341,936 7 Other branches of parent bank 95,184 91,399 96,281 101,326 %,582 97,988 103,277 116,547' 116,498 122,057 8 Banks 100,397 102,960 105,237 107,747 110,124 108,068 108,230 118,051 115,372 108,643 9 Public borrowers 23,343 23,478 23,706 22,590 21,412 21,537 21,463 21,843 22,131 21,659 10 Nonbank foreigners 101,238 97,839 87,731 87,883 85,960 87,134 86,395 90,573 91,734 89,577 11 Other assets 20,101 22,630 29,110 32,242 32,626 34,076 33,109r 35,830 38.552 38,462 12 Total payable in U.S. dollars 350,636 336,520 317,487 329,499 322,300 322,286 340,653' 354,122 352,584 350,166 n Claims on United States 111,426 116,638 110,620 118,411 118,563 118,964 131,684 131,454' 133,911 131,740 14 Parent bank 77,229 85,971 82,082 87,540 87,779 87,844 99,776 97,052' 99,844 102,968 15 Other banks in United States 13,500 12,454 12,830 14,669 12,794 12,830 13,942 15,627 14,632 14,657 16 Nonbanks 20,697 18,213 15,708 16,202 17,990 18,290 17,966 18,775 19,435 14,115 17 Claims on foreigners 228,600 210,129 195,063 198,465 190,590 189,958 195,075 208,934' 203,298 202,280 18 Other branches of parent bank 78,746 72,727 72,197 75,771 72,515 73,327 77,699 86,687' 85,545 88,186 19 Banks 76,940 71,868 66,421 67,287 65,673 64,106 64,506 68,888 65,728 63,704 20 Public borrowers 17,626 17,260 16,708 16,271 15,062 15,115 14,942 14,889 14,854 14,730 21 Nonbank foreigners 55,288 48,274 39,737 39,136 37,340 37,410 37,928 38,470 37,171 35,660 22 Other assets 10,610 9,753 11,804 12,623 13,147 13,364 13,894r 13,734 15,375 16,146 United Kingdom 23 Total, all currencies 144,385 148,599 140,917 146,678 149,760 148,039 149,633' 163,472 167,726 159,186 74 Claims on United States 27,675 33,157 24,599 30,859 32,694 31,377 32,581 33,904' 35,406 32,518 25 Parent bank 21,862 26,970 19,085 25,944 27,288 25,627 27,128 27,71C 29,553 27,350 26 Other banks in United States 1,429 1,106 1,612 1,194 1,537 1,585 1,349 1,870 1,694 1,259 27 Nonbanks 4,384 5,081 3,902 3,721 3,869 4,165 4,104 4,324 4,159 3,909 28 Claims on foreigners 111,828 110,217 109,508 107,407 108,732 108,293 108,562 120,079' 121,473 115,700 29 Other branches of parent bank 37,953 31,576 33,422 32,641 31,241 30,794 33,334 37,402' 39,138 39,903 30 Banks 37,443 39,250 39,468 37,745 41,219 40,082 38,390 42,929 41,649 36,735 31 Public borrowers 5,334 5,644 4,990 4,684 4,617 4,761 4,725 4,881 5,272 4,752 32 Nonbank foreigners 31,098 33,747 31,628 32,337 31,655 32,656 32,113 34,867 35,414 34,310 33 Other assets 4,882 5,225 6,810 8,412 8,334 8,369 8,490' 9,489 10,847 10,%8 34 Total payable in U.S. dollars 112,809 108,626 95,028 97,672 99,170 %,510 99,656r 105,515 107,215 101,065 35 Claims on United States 26,868 32,092 23,193 29,252 31,076 29,519 30,791 31,82c 33,335 30,439 36 Parent bank 21,495 26,568 18,526 25,286 26,661 24,853 26,423 26,850' 28,611 26,304 37 Other banks in United States 1,363 1,005 1,475 950 1,294 1,309 1,105 1,504 1,408 1,044 38 Nonbanks 4,010 4,519 3,192 3,016 3,121 3,357 3,263 3,466 3,316 3,091 39 Claims on foreigners 82,945 73,475 68,138 64,676 64,024 63,265 64,561 69,276' 68,864 64,560 40 Other branches of parent bank 33,607 26,011 26,361 25,409 23,827 23,155 25,600 27,810' 29,166 28,635 41 Banks 26,805 26,139 23,251 21,355 22,975 22,646 21,522 22,941 21,833 19,188 42 Public borrowers 4,030 3,999 3,677 3,470 3,400 3,473 3,377 3,426 3,472 3,313 43 Nonbank foreigners 18,503 17,326 14,849 14,442 13,822 13,991 14,062 15,099 14,393 13,424 44 Other assets 2,9% 3,059 3,697 3,744 4,070 3,726 4,304' 4,419 5,016 6,066 Bahamas and Caymans 45 Total, all currencies 146,811 142,055 142,592 142,170 140,512 139,986 151,909 156,752 154,901 159,940 46 Claims on United States 77,2% 74,864 78,048 72,541 72,772 72,558 81,679 83,187 82,629 84,937 47 Parent bank 49,449 50,553 54,575 45,891 46,256 45,697 53,668 53,093 52,563 59,667 48 Other banks in United States 11,544 11,204 11,156 13,684 11,824 12,111 13,538 14.721 13,980 14,277 49 Nonbanks 16,303 13,107 12,317 12,966 14,692 14,750 14,473 15,373 16,086 10,993 50 Claims on foreigners 65,598 63,882 60,005 65,280 63,027 62,336 65,619 68,710 67,196 70,160 51 Other branches of parent bank 17,661 19,042 17,2% 18,873 17,493 18,228 18,698 18,936 18,905 21,277 52 Banks 30,246 28,192 27,476 30,987 30,372 29,160 31,690 35,012 33,477 33,749 53 Public borrowers 6,089 6,458 7,051 7,025 7,046 6,873 6,987 7,017 7,195 7,428 54 Nonbank foreigners 11,602 10,190 8,182 8,395 8,116 8,075 8,244 7,745 7,619 7,706 55 Other assets 3,917 3,309 4,539 4,349 4,713 5,092 4,611 4,855 5,076 4,843 56 Total payable in U.S. dollars 141,562 136,794 136,813 135,323 131,636 130,985 142,385 145,642 144,326 151,053 1. Beginning with June 1984 data, reported claims held by foreign branches from $50 million to $150 million equivalent in total assets, the threshold now have been reduced by an increase in the reporting threshold for "shell" branches applicable to all reporting branches. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • April 1988 3.14 Continued 1987 Liability account 1984 1985 1986 June July Aug. Sept. Oct. Nov. All foreign countries 57 Total, all currencies 453,656 458,012 456,628 475,188 470,391 473,540 489,692' 520,86c 524,980 518,149 58 Negotiable CDs 37,725 34,607 31,629 31,776 32,993 33,648 35,724 36,796 34,630 30,929 59 To United States 147,583 156,281' 152,465' 150,939' 144,267' 141,913' 153,758' 156,598' 156,007 161,213 60 Parent bank 78,739 84,657' 83,394' 78,976' 72,376' 74,361' 80,559' 79,592' 83,308 86,326 61 Other banks in United States 18,409 16,894 15,646 16,814 15,005 15,289 17,229 18,853' 18,843 20,476 62 Nonbanks 50,435 54,730 53,425 55,149 56,886 52,263 55,970 58,153' 53,856 54,411 63 To foreigners 247,907 245,939 253,775 274,061 274,407 278,883 280,651 306,472 311,997 304,080 64 Other branches of parent bank 93,909 89,529 95,146 100,826 95,376 97,908 103,921 114,559 116,809 123,527 65 Banks 78,203 76,814 77,809 81,229 87,734 87,449 85,512 98,025 97,342 87,969 66 Official institutions 20,281 19,520 17,835 22,264 21,528 21,016 20,116 20,235 21,777 19,464 67 Nonbank foreigners 55,514 60,076 62,985 69,742 69,769 72,510 71,102 73,653 76,069 73,120 68 Other liabilities 20,441 21,185' 18,759' 18,412' 18,724' 19,096' 19,559' 20,994 22,346 21,927 69 Total payable in U.S. dollars 367,145 353,712 336,406 340,985 334,218 333,673 351,879' 365,244' 361,068 360,272 70 Negotiable CDs 35,227 31,063 28,466 27,929 28,781 29,634 30,933 32,117 30,075 26,768 71 To United States 143,571 150,905' 144,483' 142,491' 135,564' 132,907' 143,707' 145,326' 143,027 148,134 72 Parent bank 76,254 81,631' 79,305' 74,833' 67,707' 69,581' 75,282' 74,111' 77,227 80,527 73 Other banks in United States , 17,935 16,264 14,609 15,602 13,895 14,086 15,812 17,298' 17,169 19,072 74 Nonbanks 49,382 53,010 50,569 52,056 53,962 49,240 52,613 53,917' 48,631 48,535 75 To foreigners 178,260 163,583 156,806 163,505 162,766 163,723 169,342 179,011 179,063 176,860 76 Other branches of parent bank 77,770 71,078 71,181 74,202 70,911 72,620 78,036 84,208 84,409 89,395 77 Banks 45,123 37,365 33,850 31,812 35,250 35,104 35,202 40,078 38,772 35,384 78 Official institutions 15,773 14,359 12,371 15,985 15,806 15,527 14,209 13,323 14,119 12,351 79 Nonbank foreigners 39,594 40,781 39,404 41,506 40,799 40,472 41,895 41,402 41,763 39,730 80 Other liabilities 10,087 8,161' 6,651' 7,06c 7,107' 7,409' 7,897' 8,790 8,903 8,510 United Kingdom 81 Total, all currencies 144,385 148,599 140,917 146,678 149,760 148,039 149,633' 163,472 167,726 159,186 82 Negotiable CDs 34,413 31,260 27,781 27.511 28,590 29,363 31,451 32,523 30,475 26,988 83 To United States 25,250 29,422 24,657 24.512 24,347 22,202 22,462 22,868 24,961 23,625 84 Parent bank 14,651 19,330 14,469 14,745 14,010 13,234 13,357 12,251 14,018 13,223 85 Other banks in United States 3,125 2,974 2,649 2,109 2,021 1,875 2,073 2,382' 2,103 1,740 86 Nonbanks 7,474 7,118 7,539 7,658 8,316 7,093 7,032 8,235' 8,840 8,662 87 To foreigners 77,424 78,525 79,498 86,041 87,942 87,745 86,813 98,215 101,686 98,534 88 Other branches of parent bank 21,631 23,389 25,036 25,350 23,572 23,379 26,094 29,718 30,727 32,600 89 Banks 30,436 28,581 30,877 32,036 35,647 34,414 31,681 38,502 37,690 34,768 90 Official institutions 10,154 9,676 6,836 9,748 9,241 9,670 10,387 10,248 12,000 11,015 91 Nonbank foreigners 15,203 16,879 16,749 18,907 19,482 20,282 18,651 19,747 21,269 20,151 92 Other liabilities 7,298 9,392 8,981 8,614 8,881 8,729 8,907' 9,866 10,604 10,039 93 Total payable in U.S. dollars 117,497 112,697 99,707 100,031 101,593 99,459 102,202' 108,440 108,481 102,072 94 Negotiable CDs 33,070 29,337 26,169 25,695 26,397 27,264 28,776 29,991 27,999 24,926 95 To United States 24,105 27,756 22,075 21,850 21,689 19,578 19,528 18,819 19,800 17,752 96 Parent bank 14,339 18,956 14,021 14,252 13,399 12,608 12,609 11,283 12,792 12,026 97 Other banks in United States 2,980 2,826 2,325 1,899 1,776 1,694 1,883 2,08C 1,789 1,512 98 Nonbanks 6,786 5,974 5,729 5,699 6,514 5,276 5,036 5,456' 5,219 4,214 99 To foreigners 56,923 51,980 48,138 49,089 50,294 49,479 50,386 55,209 56,443 55,441 100 Other branches of parent bank 18,294 18,493 17,951 17,654 16,171 15,565 17,994 20,018 20,826 21,856 101 Banks 18,356 14,344 15,203 13,566 16,330 15,767 14,359 17,786 17,024 15,580 102 Official institutions 8,871 7,661 4,934 7,283 7,203 7,872 8,060 7,115 7,970 7,530 103 Nonbank foreigners 11,402 11,482 10,050 10,586 10,590 10,275 9,973 10,290 10,623 10,475 104 Other liabilities 3,399 3,624 3,325 3,397 3,213 3,138 3,512' 4,421 4,239 3,953 Bahamas and Caymans 105 Total, all currencies 146,811 142,055 142,592 142,170 140,512 139,986 151,909 156,752 154,901 159,940 106 Negotiable CDs 615 610 847 1,067 1,119 975 886 890 801 885 107 To United States 102,955 104,556' 106,081' 103,831' 100,073' 98,085' 108,10C 111,925 107,967 113,735 108 Parent bank 47,162 45,554' 49,481' 44,112' 40,675' 41,730' 46,745' 48,793 49,568 52,075 109 Other banks in United States 13,938 12,778 11,715 13,382 11,989 12,276 13,579 14,857 15,179 17,142 110 Nonbanks 41,855 46,224 44,885 46,337 47,409 44,079 47,776 48,275 43,220 44,518 111 To foreigners 40,320 35,053 34,400 36,004 37,988 39,437 41,277 42,147 44,331 43,650 112 Other branches of parent bank 16,782 14,075 12,631 14,023 14,803 16,465 16,925 17,032 17,812 18,745 113 Banks 12,405 10,669 8,617 7,943 9,395 9,514 10,395 11,587 12,611 11,119 114 Official institutions 2,054 1,776 2,719 3,185 3,263 2,935 1,786 2,113 2,023 1,466 115 Nonbank foreigners 9,079 8,533 10,433 10,853 10,527 10,523 12,171 11,415 11,885 12,320 116 Other liabilities 2,921 1,836' 1,264' 1,268' 1,332' l^ 1,646' 1,790 1,802 1,670 117 Total payable in U.S. dollars 143,582 138,322 138,774 137,763 135,376 134,354 145,166 149,273 146,286 152,546 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 1987' IItteemm 11998855 11998866 June July Aug. Sept. Oct. Nov. Dec/ 1 Total1 178,380 211,782 238,797 232,370 237,728 239,534 252,476 253,852 259,410 By type 2 Liabilities reported by banks in the United States^ 26,734 27,868 32,079 31,513 29,638 31,869 38,273 34,038 31,627 3 U.S. Treasury bills and certificates3 53,252 75,650 80,663 73,435 78,210 75,701 78,819 82,542 88,829 U.S. Treasury bonds and notes 4 Marketable 77,154 91,368 110,238 112,490 115,101 116,462 118,898 120,755 122,544 5 Nonmarketable 3,550 1,300 700 500 300 300 300 300 300 6 U.S. securities other than U.S. Treasury securities 17,690 15,596 15,117 14,432 14,479 15,202 16,186 16,217 16,110 By area 1 Western Europe 74,447 88,623 111,625 107,823 106,873 108,248 116,360 117,372 124,341 8 Canada 1,315 2,004 3,502 3,559 4,189 4,529 5,152 4,884 4,961 9 Latin America and Caribbean 11,148 8,372 7,583 7,904 8,712 8,561 9,217 8,916 8,308 10 86,448 105,868 108,702 105,505 109,529 109,482 114,160 116,464 116,276 11 Africa 1,824 1,503 1,400 1,590 1,837 1,618 1,474 1,562 1,402 12 Other countries 3,199 5,412 5,985 5,989 6,589 7,094 6,109 4,655 4,122 1. Includes the Bank for International Settlements. bonds and notes payable in foreign currencies. 2. Principally demand deposits, time deposits, bankers acceptances, commer- 5. Debt securities of U.S. government corporations and federally sponsored cial paper, negotiable time certificates of deposit, and borrowings under repur- agencies, and U.S. corporate stocks and bonds. chase agreements. 6. Includes countries in Oceania and Eastern Europe. NOTE. Based on Treasury Department data and on data reported to the 3. Includes nonmarketable certificates of indebtedness (including those payable Treasury Department by banks (including Federal Reserve Banks) and securities in foreign currencies through 1974) and Treasury bills issued to official institutions dealers in the United States. of foreign countries. 4. Excludes notes issued to foreign official nonreserve agencies. Includes 3.16 LIABILITIES TO AND CLAIMS ON FOREIGNERS Reported by Banks in the United States Payable in Foreign Currencies1 Millions of dollars, end of period 1986 1987 IItteemm 11998833 11998844 11998855 Dec. Mar. June Sept.r 1 Banks' own liabilities 5,219 8,586 15,368 29,702 37,873 38,470 45,515 2 Banks' own claims 7,231 11,984 16,294 26,180 34,153 34,006 41,159 3 Deposits 2,731 4,998 8,437 14,129 16,102 12,735 15,404 4 Other claims 4,501 6,986 7,857 12,052 18,050 2211,,227711 25,755 5 Claims of banks' domestic customers 1,059 569 580 2,507 2,012 888899 1,067 1. Data on claims exclude foreign currencies held by U.S. monetary author- States that represent claims on foreigners held by reporting banks for the accounts ities. of the domestic customers. 2. Assets owned by customers of the reporting bank located in the United Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A58 International Statistics • April 1988 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States Payable in U.S. dollars Millions of dollars, end of period 1987 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998844 11998855 11998866 June July Aug. Sept. Oct. Nov. Dec.'' 1 All foreigners 407,306 435,726 540,996 551,362 545,630 555,185 584,448 605,009'' 604,540 620,140 2 Banks' own liabilities 306,898 341,070 406,485 410,834 410,881 415,824 446,520 462,879' 457,081 469,816 3 Demand deposits 19,571 21,107 23,789 22,837 20,219 22,117 21,150 23,201' 24,046 23,125 4 Time deposits 110,413 117,278 130,891 133,393 134,127 137,861 148,354 152,292 147,183 148,115 5 Other2 26,268 29,305 42,705 42,385 44,721 42,317 48,903 52,797' 52,210 52,534 6 Own foreign offices 150,646 173,381 209,100 212,219 211,814 213,530 228,113 234,589' 233,642 246,042 7 Banks' custody liabilities4 100,408 94,656 134,511 140,528 134,749 139,361 137,928 142,130' 147,460 150,325 8 U.S. Treasury bills and certificates 76,368 69,133 90,398 93,695 88,193 92,705 89,747 91,374 95,869 101,794 9 Other negotiable and readily transferable instruments6 18,747 17,964 15,417 16,371 15,632 15,259 16,042 15,933' 17,500 16,717 10 Other 5,293 7,558 28,696 30,462 30,924 31,397 32,139 34,823 34,090 31,814 11 Nonmonetary international and regional organizations 4,454 5,821 5,807 4,005 5,946 5,332 7,845 3,594' 5,703 5,065 12 Banks' own liabilities 2,014 2,621 3,958 2,515 2,367 2,498 4,674 1,680' 3,089 3,304 13 Demand deposits 254 85 199 72 76 44 80 107 74 328 14 Time deposits' 1,267 2,067 2,065 987 599 807 1,235 986 1,094 1,523 15 Other2 493 469 1,693 1,456 1,692 1,647 3,358 586' 1,921 1,452 16 Banks' custody liabilities4 2,440 3,200 1,849 1,490 3,579 2,834 3,171 1,914 2,614 1,761 17 U.S. Treasury bills and certificates 916 1,736 259 266 2,339 1,635 1,793 285 747 265 18 Other negotiable and readily transferable instruments6 1,524 1,464 1,590 1,224 1,240 1,193 1,378 1,624 1,811 1,497 19 Other 0 0 0 0 0 6 0 6 55 0 20 Official institutions8 86,065 79,985 103,569 112,742 104,948 107,848 107,570 117,092' 116,580 120,456 21 Banks' own liabilities 19,039 20,835 25,427 28,690 28,343 26,342 28,169 34,720' 30,873 28,510 22 Demand deposits 1,823 2,077 2,267 1,743 1,711 1,907 1,800 1,905 1,810 1,948 23 Time deposits 9,374 10,949 10,497 13,266 13,567 13,489 14,246 16,574' 13,505 12,480 24 Other2 7,842 7,809 12,663 13,680 13,065 10,946 12,123 16,241' 15,557 14,082 25 Banks' custody liabilities4 67,026 59,150 78,142 84,052 76,605 81,505 79,401 82,372' 85,707 91,947 26 U.S. Treasury bills and certificates 59,976 53,252 75,650 80,663 73,435 78,210 75,701 78,819 82,542 88,829 27 Other negotiable and readily transferable instruments6 6,966 5,824 2,347 3,141 2,950 3,151 3,540 3,328' 2,965 2,972 28 Other 84 75 145 248 220 144 160 225 200 146 29 Banks9 248,893 275,589 351,745 357,145 358,378 362,883 388,625 405,027' 400,043 414,885 30 Banks' own liabilities 225,368 252,723 310,166 314,621 315,096 319,883 344,886 358,706' 353,816 370,808 31 Unaffiliated foreign banks 74,722 79,341 101,066 102,402 103,283 106,353 116,772 124,117' 120,174 124,766 32 Demand deposits 10,556 10,271 10,303 10,293 8,741 9,901 9,801 11,364 11,877 10,842 33 Time deposits1 47,095 49,510 64,232 67,045 66,865 69,588 77,743 79,995' 77,077 79,860 34 Other2 17,071 19,561 26,531 25,063 27,677 26,864 29,228 32,758' 31,220 34,064 35 Own foreign offices 150,646 173,381 209,100 212,219 211,814 213,530 228,113 234,589' 233,642 246,042 36 Banks' custody liabilities4 23,525 22,866 41,579 42,524 43,281 43,000 43,739 46,321 46,227 44,077 37 U.S. Treasury bills and certificates 11,448 9,832 9,984 9,066 9,142 9,100 9,206 8,961 8,792 9,185 38 Other negotiable and readily transferable instruments6 7,236 6,040 5,165 5,611 5,850 5,320 5,221 5,454 6,292 5,461 39 Other 4,841 6,994 26,431 27,848 28,289 28,581 29,312 31,906 31,143 29,430 40 Other foreigners 67,894 74,331 79,875 77,470 76,359 79,122 80,408 79,296' 82,215 79,734 41 Banks' own liabilities 60,477 64,892 66,934 65,009 65,075 67,101 68,791 67,773' 69,303 67,194 42 Demand deposits 6,938 8,673 11,019 10,729 9,691 10,264 9,468 9,825' 10,285 10,006 43 Time deposits 52,678 54,752 54,097 52,095 53,096 53,977 55,130 54,736 55,507 54,251 44 Other2 861 1,467 1,818 2,185 2,287 2,860 4,193 3,211 3,511 2,936 45 Banks' custody liabilities4 7,417 9,439 12,941 12,462 11,284 12,022 11,617 11,523 12,912 12,540 46 U.S. Treasury bills and certificates 4,029 4,314 4,506 3,701 3,276 3,761 3,046 3,309 3,787 3,515 47 Other negotiable and readily transferable instruments6 3,021 4,636 6,315 6,395 5,592 5,594 5,904 5,527 6,432 6,787 48 Other 367 489 2,120 2,366 2,415 2,667 2,668 2,686 2,693 2,238 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 10,476 9,845 7,496 7,356 6,313 6,458 6,501 6,676' 7,521 7,340 1. Excludes negotiable time certificates of deposit, which are included in securities, held by or through reporting banks. "Other negotiable and readily transferable instruments." 5. Includes nonmarketable certificates of indebtedness and Treasury bills 2. Includes borrowing under repurchase agreements. issued to official institutions of foreign countries. 3. U.S. banks: includes amounts due to own foreign branches and foreign 6. Principally bankers acceptances, commercial paper, and negotiable time subsidiaries consolidated in "Consolidated Report of Condition" filed with bank certificates of deposit. regulatory agencies. Agencies, branches, and majority-owned subsidiaries of 7. Principally the International Bank for Reconstruction and Development, and foreign banks: principally amounts due to head office or parent foreign bank, and the Inter-American and Asian Development Banks. Data exclude "holdings of dollars" of the International Monetary Fund. foreign branches, agencies, or wholly owned subsidiaries of head office or parent foreign bank. 8. Foreign central banks, foreign central governments, and the Bank for 4. Financial claims on residents of the United States, other than long-term International Settlements. 9. Excludes central banks, which are included in "Official institutions." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A59 3.17 Continued 1987 AArreeaa aanndd ccoouunnttrryy 11998844 11998855 11998866 June July Aug. Sept. Oct. Nov. Dec.p 1 Total 407,306 435,726 540,996 551,362 545,630 555,185 584,448 605,009' 604,540 620,140 2 Foreign countries 402,852 429,905 535,189 547,358 539,685 549,853 576,603 601,415' 598,838 615,075 3 Europe 153,145 164,114 180,556 210,606 204,865 208,715 214,145 233,370r 228,976 235,098 4 Austria 615 693 1,181 974 795 1,066 1,281 1,166 1,262 920 5 Belgium-Luxembourg 4,114 5,243 6,729 9,577 9,154 9,754 10,460 10,743 10,909 9,263 6 Denmark 438 513 482 425 486 576 590 704 628 811 7 Finland 418 496 580 616 497 545 517 581 471 372 8 France 12,701 15,541 22,862 27,951 25,486 27,003 27,899 28,255 27,519 29,980 9 Germany 3,358 4,835 5,762 8,218 7,162 7,715 6,823 8,557' 8,527 7,206 10 Greece 699 666 700 690 667 636 690 738 699 688 11 Italy 10,762 9,667 10,875 11,990 10,031 7,667 8,410 10,254 9,936 12,050 12 Netherlands 4,731 4,212 5,600 5,367 5,447 5,461 6,106 6,773r 6,490 5,016 13 Norway 1,548 948 735 502 562 593 663 1,179 1,074 1,374 14 Portugal 597 652 699 704 586 700 684 724 858 799 15 Spain 2,082 2,114 2,407 2,340 2,103 2,287 2,526 2,683 2,614 2,618 16 Sweden 1,676 1,422 884 1,296 1,235 1,387 1,639 1,567 2,862 1,363 17 Switzerland 31,740 29,020 30,534 27,796 24,607 28,260 27,325 29,153' 30,178 34,634 18 Turkey 584 429 454 454 365 514 398 550' 433 703 19 United Kingdom 68,671 76,728 85,334 105,2% 107,641 107,369 109,269 119,478 115,308 116,994 20 Yugoslavia 602 673 630 433 459 491 519 508 485 711 21 Other Western Europe1 7,192 9,635 3,326 5,284 6,410 6,016 7,808 9,060' 8,085 8,950 22 U.S.S.R 79 105 80 36 550 45 51 87 36 31 23 Other Eastern Europe 537 523 702 656 622 629 485 609' 601 612 24 Canada 16,059 17,427 26,345 21,942 21,232 22,556 26,066 25,733 28,557 30,080 25 Latin America and Caribbean 153,381 167,856 210,318 198,010 200,119 201,441 214,364 217,763' 214,132 220,911 26 Argentina 4,394 6,032 4,757 4,794 5,122 5,074 4,674 5,075 5,277 5,000 27 Bahamas 56,897 57,657 73,619 66,313 62,518 62,470 71,502 72,768' 70,886 73,673 78 Bermuda 2,370 2,765 2,922 2,050 2,317 2,267 2,234 2,437 2,246 2,749 29 Brazil 5,275 5,373 4,325 3,672 3,783 3,955 4,377 3,943' 4,090 4,028 30 British West Indies 36,773 42,674 72,263 68,830 73,678 73,722 78,116 79,702' 78,162 81,481 31 Chile 2,001 2,049 2,054 1,971 2,035 2,119 2,248 2,191 2,218 3,041 37 Colombia 2,514 3,104 4,285 4,304 4,424 4,426 4,195 4,190 4,299 4,205 33 Cuba 10 11 7 8 8 7 7 12 9 12 34 Ecuador 1,092 1,239 1,236 1,118 1,088 1,101 1,097 1,115 1,087 1,081 35 Guatemala 896 1,071 1,123 1,121 1,109 1,087 1,072 1,053 1,032 1,078 36 Jamaica 183 122 136 158 146 171 156 140 150 159 37 Mexico 12,303 14,060 13,745 13,855 14,159 14,549 14,290 14,338 14,508 14,534 38 Netherlands Antilles 4,220 4,875 4,970 5,192 5,291 5,338 5,218 5,305 5,234 4,972 39 Panama 6,951 7,514 6,886 7,157 6,994 7,130 7,188 7,467 7,513 7,403 40 Peru 1,266 1,167 1,163 1,139 1,147 1,203 1,206 1,205 1,205 1,268 41 Uruguay 1,394 1,552 1,537 1,504 1,536 1,485 1,492 1,493 1,526 1,579 47 Venezuela 10,545 11,922 10,171 9,739 9,679 10,146 9,824 9,882 9,032 9,000 43 Other 4,297 4,668 5,119 5,085 5,085 5,189 5,469 5,447 5,657 5,648 44 71,187 72,280 108,831 108,162 104,394 106,999 111,401 115,626' 118,741 120,931 China 45 Mainland 1,153 1,607 1,476 1,737 1,744 2,011 1,775 1,699 1,435 1,157 46 Taiwan 4,990 7,786 18,902 16,353 16,436 15,377 15,197 18,302 21,564 21,488 47 Hong Kong 6,581 8,067 9,393 9,109 8,595 9,015 8,637 9,579' 10,531 10,116 48 India 507 712 674 714 572 902 771 606 701 586 49 Indonesia 1,033 1,466 1,547 1,773 1,404 1,541 1,435 1,336 1,677 1,399 50 Israel 1,268 1,601 1,892 1,229 928 1,036 1,105 2,170 1,271 2,676 51 Japan 21,640 23,077 47,410 50,867 48,145 49,872 52,945 53,212 52,634 52,878 57 Korea 1,730 1,665 1,141 1,406 1,410 1,388 1,714 1,577 1,591 1,573 53 Philippines 1,383 1,140 1,866 1,222 1,148 1,208 1,152 1,331 1,259 1,082 54 Thailand 1,257 1,358 1,119 1,144 1,096 1,190 1,118 1,275 1,483 1,344 55 Middle-East oil-exporting countries 16,804 14,523 12,352 11,463 11,676 12,676 14,043 13,660 13,373 13,954 56 Other 12,841 9,276 11,058 11,145 11,241 10,782 11,507 10,878 11,222 12,677 57 Africa 3,396 4,883 4,021 3,751 4,023 4,194 4,011 3,919 4,066 3,942 58 Egypt 647 1,363 706 1,009 1,113 1,158 1,118 1,104 1,169 1,148 59 Morocco 118 163 92 106 75 74 81 70 75 194 60 South Africa 328 388 270 188 229 227 199 280 246 202 61 Zaire 153 163 74 58 64 69 81 71 82 67 62 Oil-exporting countries4 1,189 1,494 1,519 1,111 1,275 1,331 1,178 1,081 1,108 1,014 63 Other 961 1,312 1,360 1,281 1,267 1,335 1,354 1,313 1,386 1,316 64 Other countries 5,684 3,347 5,118 4,887 5,052 5,948 6,616 5,005 4,367 4,114 65 Australia 5,300 2,779 4,196 4,113 4,333 5,019 5,641 4,011 3,666 3,323 66 All other 384 568 922 774 718 929 975 994 701 791 67 Nonmonetary international and regional organizations 4,454 5,821 5,807 4,005 5,946 5,332 7,845 3,594' 5,703 5,065 68 International5 3,747 4,806 4,620 2,597 4,486 3,819 6,197 2,107' 3,617 3,432 69 Latin American regional 587 894 1,033 1,047 1,075 1,070 1,126 1,155 1,478 1,272 70 Other regional 120 121 154 362 384 443 522 331 608 362 1. Includes the Bank for International Settlements and Eastern European 4. Comprises Algeria, Gabon, Libya, and Nigeria. countries that are not listed in line 23. 5. Excludes "holdings of dollars" of the International Monetary Fund. 2. Comprises Bulgaria, Czechoslovakia, the German Democratic Republic, 6. Asian, African, Middle Eastern, and European regional organizations, Hungary, Poland, and Romania. except the Bank for International Settlements, which is included in "Other 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and Western Europe." United Arab Emirates (Trucial States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • April 1988 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 1987 AArreeaa aanndd ccoouunnttrryy 11998844 11998855 11998866 June July Aug. Sept. Oct. Nov. Dec.p 1 Total 400,162 401,608 444,745 435,817 424,392 427,057 447,727 461,110'' 458,854 457,223 2 Foreign countries 399,363 400,577 441,724 433,685 421,289 423,993 443,043 458,280' 451,684 452,769 3 Europe 99,014 106,413 107,823 114,469 108,062 104,180 105,930 110,999' 107,223 101,111 4 Austria 433 598 728 758 698 785 684 930 1,038 790 3 Belgium-Luxembourg 4,794 5,772 7,498 9,828 10,239 99,,555500 9,591 10,131 99,,444411 9,355 6 Denmark 648 706 688 706 604 886688 747 795 888866 722 7 Finland 898 823 987 1,045 1,037 1,031 1,266 1,089 1,030 992 8 France 9,157 9,124 11,356 12,036 11,673 12,530 12,781 14,350 13,513 13,479 9 Germany 1,306 1,267 1,816 1,612 2,009 1,333 1,485 2,092' 1,546 2,042 10 Greece 817 991 648 457 433 375 406 430 452 463 U Italy 9,119 8,848 9,043 8,409 6,784 6,407 6,541 7,418 7,2% 7,271 12 Netherlands 1,356 1,258 3,296 5,744 4,429 3,078 3,247 3,976 3,798 2,747 13 Norway 675 706 672 774 830 803 722 812 938 933 14 Portugal 1,243 1,058 739 659 645 667 638 570 542 472 13 Spain 2,884 1,908 1,492 1,872 1,830 1,945 2,233 1,859 2,032 1,832 16 Sweden 2,230 2,219 1,964 2,330 2,287 2,473 2,752 2,533 2,646 2,225 17 Switzerland 2,123 3,171 3,352 2,618 2,464 2,664 2,612 2,825 2,880 2,638 18 Turkey 1,130 1,200 1,543 1,785 1,753 1,757 1,689 1,564 1,566 1,674 19 United Kingdom 56,185 62,566 58,335 59,937 56,544 54,144 54,710 55,860' 53,908 49,845 20 Yugoslavia 1,886 1,964 1,835 1,757 1,764 1,742 1,741 1,750 1,697 1,700 21 Other Western Europe1 596 998 539 567 647 548 619 549 672 670 22 U.S.S.R 142 130 345 582 420 521 549 473 437 394 23 Other Eastern Europe 1,389 1,107 948 993 974 958 915 994' 904 865 24 Canada 16,109 16,482 21,006 20,731 18,676 18,494 21,578 21,402 25,313 25,347 25 Latin America and Caribbean 207,862 202,674 208,825 202,378 200,728 202,384 214,716 216,783' 209,138 212,597 26 Argentina 11,050 11,462 12,091 12,212 12,151 12,221 11,857 12,117' 12,052 11,963 27 Bahamas 58,009 58,258 59,342 56,670 53,842 55,935 65,309 63,699' 59,333 64,154 28 Bermuda 592 499 418 297 387 359 328 423 331 529 29 Brazil 26,315 25,283 25,716 25,522 25,999 26,594 26,056 25,820' 25,472 25,258 30 British West Indies 38,205 38,881 46,284 43,939 44,626 43,290 47,512 51,473 48,926 48,758 31 Chile 6,839 6,603 6,558 6,339 6,500 6,510 6,469 6,388' 6,429 6,282 32 Colombia 3,499 3,249 2,821 2,649 2,743 2,784 2,729 2,73 C 2,758 2,734 33 Cuba 0 0 0 0 0 0 0 0 0 2 34 Ecuador 2,420 2,390 2,439 2,354 2,396 2,384 2,367 2,449 2,334 2,282 35 Guatemala3 158 194 140 109 107 105 124 131 145 145 36 Jamaica 252 224 198 182 268 202 198 191 184 233 3/ Mexico 34,885 31,799 30,698 30,353 30,271 30,638 30,542 30,259' 30,044 29,493 38 Netherlands Antilles 1,350 1,340 1,041 1,346 1,084 994 1,041 1,019 1,115 1,125 39 Panama 7,707 6,645 5,436 4,986 4,633 4,616 4,579 4,546' 4,666 4,571 40 Peru 2,384 1,947 1,661 1,568 1,567 1,549 1,479 1,457 1,459 1,323 41 Uruguay 1,088 960 940 950 949 966 946 961 975 %3 42 Venezuela 11,017 10,871 11,108 10,982 11,306 11,366 11,308 11,200' 11,098 10,981 43 Other Latin America and Caribbean 2,091 2,067 1,936 1,920 1,902 1,872 1,872 1,920 1,818 1,799 44 66,316 66,212 96,126 88,401 8866,,551166 9911,,442299 9933,,332222 110000,,444400'' 110022,,113322 110055,,886655 China 45 Mainland 710 639 787 993 929 919 894 543' 615 981 46 Taiwan 1,849 1,535 2,681 3,303 2,487 2,772 2,980 4,224' 4,784 4,413 4/ Hong Kong 7,293 6,797 8,307 7,731 7,495 6,556 6,933 6,889 7,301 8,112 48 India 425 450 321 430 416 565 541 527 517 499 49 Indonesia 724 698 723 677 639 624 622 625 601 580 50 Israel 2,088 1,991 1,634 1,450 1,413 1,450 1,591 1,331 1,293 1,362 51 Japan 29,066 31,249 59,674 55,415 54,596 61,072 60,121 65,787 64,767 69,002 52 Korea 9,285 9,226 7,182 5,325 4,954 4,589 4,606 4,9%' 4,807 4,952 53 Philippines 2,555 2,224 2,217 2,112 2,211 2,148 2,126 2,082 2,040 2,070 54 Thailand 1,125 845 578 538 565 545 453 446' 439 487 53 Middle East oil-exporting countries 5,044 4,298 4,122 3,808 3,914 4,315 4,848 5,063 5,157 4,833 36 Other Asia 6,152 6,260 7,901 6,619 6,897 5,875 7,607 7,926' 9,811 8,575 57 Africa 6,615 5,407 4,650 4,704 4,705 4,739 4,704 5,376 4,669 4,719 38 Egypt 728 721 567 600 572 586 541 538 526 521 39 Morocco 583 575 598 563 568 603 582 605 527 542 60 South Africa 2,795 1,942 1,550 1,501 1,479 1,497 1,504 1,546 1,494 1,507 61 Zaire 18 20 28 39 38 35 40 38 36 15 62 Oil-exporting countries 842 630 694 818 866 862 888 1,531 %3 1,004 63 Other 1,649 1,520 1,213 1,184 1,182 1,156 1,149 1,118 1,123 1,130 64 Other countries 3,447 3,390 3,294 3,001 2,601 2,766 2,794 3,280 3,208 3,131 65 Australia 2,769 2,413 1,949 1,980 1,693 1,686 1,834 2,034 2,090 2,100 66 All other 678 978 1,345 1,021 908 1,080 959 1,246 1,118 1,031 67 Nonmonetary international and regional organizations6 880000 1,030 3,021 2,132 3,103 3,063 4,684 2,830 7,170 4,454 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 States1 Payable in U.S. Dollars Millions of dollars, end of period 1987 TTyyppee ooff ccllaaiimm 11998844 11998855 11998866 June July Aug. Sept. Oct/ Nov. Dec." 11 TToottaall 444444333333333333,,,,,,000000777777888888 444444333333000000,,,,,,444444888888999999 444444777777888888,,,,,,666666555555000000 444444666666888888,,,,,,888888777777666666 424,392 427,057 444444888888111111,,,,,,666666555555222222 461,110 458,854 457,223 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 444444000000000000,,,,,,111111666666222222 444444000000111111,,,,,,666666000000888888 444444444444444444,,,,,,777777444444555555 444444333333555555,,,,,,888888111111777777 424,392 427,057 444444444444777777,,,,,,777777222222777777 461,110 458,854 457,223 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 666666222222,,,,,,222222333333777777 666666000000,,,,,,555555000000777777 666666444444,,,,,,000000999999555555 666666333333,,,,,,555555111111666666 65,857 65,808 666666777777,,,,,,000000777777777777 65,147 69,329 65,157 44 OOwwnn ffoorreeiiggnn ooffffiicceess 111111555555666666,,,,,,222222111111666666 111111777777444444,,,,,,222222666666111111 222222111111111111,,,,,,555555333333333333 222222000000111111,,,,,,555555000000111111 189,142 196,182 222222111111000000,,,,,,555555000000333333 218,391 219,952 222,478 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111222222444444,,,,,,999999333333222222 111111111111666666,,,,,,666666555555444444 111111222222222222,,,,,,999999444444666666 111111222222666666,,,,,,444444666666222222 124,364 121,939 111111222222777777,,,,,,222222888888555555 134,106 126,397 126,790 66 DDeeppoossiittss 444444999999,,,,,,222222222222666666 444444888888,,,,,,333333777777222222 555555777777,,,,,,444444888888444444 666666111111,,,,,,000000000000444444 59,612 56,788 555555999999,,,,,,666666999999666666 62,872 57,683 59,996 77 OOtthheerr 777777555555,,,,,,777777000000666666 666666888888,,,,,,222222888888222222 666666555555,,,,,,444444666666222222 666666555555,,,,,,444444555555888888 64,753 65,151 666666777777,,,,,,555555888888999999 71,234 68,714 66,794 88 AAllll ootthheerr ffoorreeiiggnneerrss 555555666666,,,,,,777777777777777777 555555000000,,,,,,111111888888555555 444444666666,,,,,,111111777777111111 444444444444,,,,,,333333333333777777 45,029 43,128 444444222222,,,,,,888888666666333333 43,466 43,176 42,798 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss33...... 333333222222,,,,,,999999111111666666 222222888888,,,,,,888888888888111111 333333333333,,,,,,999999000000555555 333333333333,,,,,,000000555555999999 333333333333,,,,,,999999222222555555 333333,,,,,,333333888888000000 333333,,,,,,333333333333555555 444444,,,,,,444444111111333333 333333,,,,,,444444777777444444 333333,,,,,,222222111111888888 11 Negotiable and readily transferable 222222333333,,,,,,888888000000555555 111111999999,,,,,,333333333333222222 222222444444,,,,,,000000444444444444 222222111111,,,,,,333333888888444444 222222222222,,,,,,000000777777111111 12 Outstanding collections and other 555555,,,,,,777777333333222222 666666,,,,,,222222111111444444 555555,,,,,,444444444444888888 888888,,,,,,222222000000222222 888888,,,,,,666666333333666666 13 MEMO: Customer liability on 333333777777,,,,,,111111000000333333 222222888888,,,,,,444444888888777777 222222555555,,,,,,777777000000666666 222222333333,,,,,,666666999999111111 222222111111,,,,,,777777888888222222 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States 40,714 38,102 42,079 38,061 40,302 41,412 39,768 42,951 38,819 n.a. 1. Data for banks' own claims are given on a monthly basis, but the data for 3. Assets owned by customers of the reporting bank located in the United claims of banks' own domestic customers are available on a quarterly basis only. States that represent claims on foreigners held by reporting banks for the account 2. U.S. banks: includes amounts due from own foreign branches and foreign of their domestic customers. subsidiaries consolidated in "Consolidated Report of Condition" filed with bank 4. Principally negotiable time certificates of deposit and bankers acceptances. regulatory agencies. Agencies, branches, and majority-owned subsidiaries of 5. Includes demand and time deposits and negotiable and nonnegotiable foreign banks: principally amounts due from head office or parent foreign bank, certificates of deposit denominated in U.S. dollars issued by banks abroad. For and foreign branches, agencies, or wholly owned subsidiaries of head office or description of changes in data reported by nonbanks, see July 1979 BULLETIN, parent foreign bank. p. 550. 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 1987 MMaattuurriittyy;; bbyy bboorrrroowweerr aanndd aarreeaa 11998833 11998844 11998855 Dec. Mar. June Sept. 1 Total 243,715 243,952 227,903 232,295 226,426 236,392 235,812 By borrower 2 Maturity of 1 year or less1 176,158 167,858 160,824 160,555 154,789 167,244 165,451 3 Foreign public borrowers 24,039 23,912 26,302 24,842 24,154 23,270 27,008 4 All other foreigners 152,120 143,947 134,522 135,714 130,635 143,973 138,442 5 Maturity over 1 year1 67,557 76,094 67,078 71,740 71,637 69,149 70,361 6 Foreign public borrowers 32,521 38,695 34,512 39,103 39,168 39,483 39,757 7 All other foreigners 35,036 37,399 32,567 32,637 32,468 29,665 30,605 By area Maturity of 1 year or less 8 Europe 56,117 58,498 56,585 61,784 58,042 68,891 62,045 9 Canada 6,211 6,028 6,401 5,895 5,625 5,622 5,733 10 Latin America and Caribbean 73,660 62,791 63,328 56,271 54,223 55,429 58,138 11 Asia 34,403 33,504 27,966 29,457 29,714 30,936 32,065 1?. Africa 4,199 4,442 3,753 2,882 3,154 2,980 2,878 13 All other2 1,569 2,593 2,791 4,267 4,031 3,385 4,592 Maturity of over 1 year1 14 Europe 13,576 9,605 7,634 6,737 6,742 6,417 6,747 15 Canada 1,857 1,882 1,805 1,925 1,873 1,631 1,577 16 Latin America and Caribbean 43,888 56,144 50,674 56,719 56,705 55,572 55,097 17 Asia 4,850 5,323 4,502 4,043 4,122 3,387 3,535 18 Africa 2,286 2,033 1,538 1,539 1,630 1,522 1,612 19 All other2 1,101 1,107 926 777 564 621 1,793 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 • April 1988 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 1987 AArreeaa oorr ccoouunnttrryy 11998833 11998844 Sept. Dec. Mar. June Sept. Dec. Mar. June Sept. 1 Total 434.0 405.7 394.9 391.2r 393.4r 389.7' 389.5r 389.6r 398.9' 391.1' 391.7' 2 G-10 countries and Switzerland 167.8 148.1 152.0 148.5 157.0 160.3 159.0 158.0 164.5' 161.8' 156.8' 3 Belgium-Luxembourg 12.4 8.7 9.5 9.3 8.4 9.0 8.5 8.4 9.1 8.5 8.3' 4 France 16.2 14.1 14.8 12.3 13.8 15.1 14.7 13.8 13.4 12.6 13.8 5 Germany 11.3 9.0 9.8 10.5 11.3 11.5 12.5 11.7 12.8 11.4 10.6 6 Italy 11.4 10.1 8.4 9.8 8.5 9.3 8.1 9.0 8.6 7.5 6.7 7 Netherlands 3.5 3.9 3.4 3.7 3.5 3.4 3.9 4.6 4.4 7.3 4.8 8 Sweden 5.1 3.2 3.1 2.8 2.9 2.9 2.7 2.4 3.0 2.4 2.7 9 Switzerland 4.3 3.9 4.1 4.4 5.4 5.6 4.8 5.8 5.8 5.7 5.4 10 United Kingdom 65.3 60.3 67.1 64.6 68.8 69.2 70.3 71.9 74.0' 72.7' 72.1 11 Canada 8.3 7.9 7.6 7.0 6.4 7.0 6.2 5.4 5.3 6.9 4.7 12 Japan 29.9 27.1 24.3 24.2 28.1 27.2 27.4 25.0 28.1 26.7 27.8' 13 Other developed countries 36.0 33.6 32.0 30.4 31.6 30.7 29.5 26.2 26.0 25.7 26.8' 14 Austria 1.9 1.6 1.7 1.6 1.6 1.7 1.7 1.7 1.9 1.8 1.9 15 Denmark 3.4 2.2 2.1 2.4 2.5 2.4 2.3 1.7 1.7 1.5 1.6 16 Finland 2.4 1.9 1.8 1.6 1.9 1.6 1.7 1.4 1.4 1.5 1.4 17 Greece 2.8 2.9 2.8 2.6 2.5 2.6 2.3 2.3 2.1 2.0 1.9 18 Norway 3.3 3.0 3.4 2.9 2.7 3.0 2.7 2.4 2.2 2.2 2.4 19 Portugal 1.5 1.4 1.4 1.3 1.1 1.1 1.0 .8 .9 .8 .8 20 Spain 7.1 6.5 6.1 5.8 6.5 6.4 6.7 5.8 6.3 6.1 7.4 21 Turkey 1.7 1.9 2.1 1.9 2.3 2.5 2.1 2.0 1.9 2.1 1.9 22 Other Western Europe 1.8 1.7 1.7 2.0 2.4 2.1 1.6 1.4 1.4 1.6 1.6' 23 South Africa 4.7 4.5 3.3 3.2 3.2 3.1 3.1 3.1 3.1 3.1 3.0 24 Australia 5.4 6.0 5.6 5.0 4.9 4.2 4.1 3.5 3.2 3.1 2.9 25 OPEC countries3 28.4 24.9 22.7 21.6 20.7 20.6 20.0 19.6 20.5 19.2 19.4' 26 Ecuador 2.2 2.2 2.2 2.1 2.2 2.1 2.2 2.2 2.1 2.1 2.1 27 Venezuela 9.9 9.3 9.0 8.9 8.7 8.8 8.7 8.6 8.8 8.7 8.5 28 Indonesia 3.4 3.3 3.1 3.0 3.3 3.0 2.8 2.5 2.4 2.2 2.0 29 Middle East countries 9.8 7.9 6.2 5.5 4.7 5.0 4.6 4.5 5.5 4.5 5.1 30 African countries 3.0 2.3 2.3 2.0 1.8 1.7 1.7 1.7 1.7 1.7 1.7 31 Non-OPEC developing countries 110.8 111.8 107.8 105.1 103.9 102.0 100.0 99.7 99.9 100.3' 97.4 Latin America 32 Argentina 9.5 8.7 8.9 8.9 8.9 9.2 9.3 9.5 9.5 9.5 9.3 33 Brazil 23.1 26.3 25.5 25.6 25.8 25.5 25.4 25.3 25.7 24.6 24.6 34 Chile 6.4 7.0 6.6 7.0 7.1 7.1 7.2 7.1 7.3 7.2 7.1 35 Colombia 3.2 2.9 2.6 2.7 2.3 2.2 2.0 2.1 2.0 2.0 2.0 36 Mexico 25.8 25.7 24.4 24.2 24.1 24.0 24.0 24.0 23.7 25.4 24.7 37 Peru 2.4 2.2 1.9 1.8 1.7 1.6 1.5 1.5 1.4 1.4 1.2 38 Other Latin America 4.2 3.9 3.5 3.4 3.3 3.3 3.3 3.1 3.0 3.0 2.8 Asia China 39 Mainland .3 .7 1.1 .5 .6 .6 .6 .4 .9 .6 .3 40 Taiwan 5.2 5.1 5.1 4.5 4.3 3.7 4.3 4.9 5.5 6.6 5.9 41 India .9 .9 1.1 1.2 1.2 1.3 1.3 1.2 1.6 1.7 1.9 42 Israel 1.9 1.8 1.5 1.6 1.3 1.6 1.4 1.5 1.4 1.3 1.3 43 Korea (South) 11.2 10.6 10.4 9.4 9.5 8.7 7.3 6.7 6.2 5.7' 5.1 44 Malaysia 2.8 2.7 2.7 2.4 2.2 2.0 2.1 2.1 1.9 1.7 1.6 45 Philippines 6.1 6.0 6.0 5.7 5.6 5.7 5.4 5.4 5.4 5.4 5.4 46 Thailand 2.2 1.8 1.7 1.4 1.3 1.1 1.0 .9 .9 .8 .7 47 Other Asia 1.0 1.1 .9 1.0 .9 .8 .7 .7 .6 .8 .7 Africa 48 Egypt 1.5 1.2 1.0 1.0 .9 .9 .7 .7 .6 .6 .6 49 Morocco .8 .8 .9 .9 .9 .9 .9 .9 .9 .9 .8 50 Zaire .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 51 Other Africa4 2.3 2.1 2.0 1.9 1.9 1.7 1.6 1.6 1.4 1.3 1.3 52 Eastern Europe 5.3 4.4 4.6 4.2 4.0 4.0 3.4 3.2 3.1 3.4 3.4 53 U.S.S.R .2 .1 .2 .1 .3 .3 .1 .1 .1 .3 .5 54 Yugoslavia 2.4 2.3 2.4 2.2 2.0 2.0 1.9 1.7 1.6 1.7 1.7 55 Other 2.8 2.0 1.9 1.8 1.7 1.7 1.4 1.4 1.3 1.4 1.3 56 Offshore banking centers 68.9 65.6 58.8 64.6r 59.4r 55.4' 60.5' 63.2' 65.1' 62.6' 66.6' 57 Bahamas 21.7 21.5 16.6 21.4 21.4 17.1 19.9 22.3 24.1 20.0 26.4 58 Bermuda .9 .9 .8 .7 .7 .4 .4 .7 .8 .6 .6 59 Cayman Islands and other British West Indies 12.2 11.8 12.3 12.7' 10.6' 12.2r 12.8' 13.6' 12.7' 14.2' 12.4' 60 Netherlands Antilles 4.2 3.4 2.3 2.3 2.3 2.4 1.9 1.8 1.7 1.3 1.2 61 Panama 5.8 6.7 6.1 6.0 4.4 4.2 5.1 4.1 5.4 5.3 5.3 62 Lebanon .1 .1 .0 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 13.8 11.4 11.4 11.5 11.5 9.5 10.5 11.2 11.4 12.6 12.3 64 Singapore 10.3 9.8 9.4 9.9 8.5 9.3 9.7 9.4 8.8 8.5 8.3 65 Others6 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated7 16.8 17.3 17.3 16.9 16.8 16.8 17.2 19.8 19.8 IS.C 21.4' 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. This group comprises the Organization of Petroleum Exporting Countries (2) foreign subsidiaries of U.S. banks. To minimize duplication, the data are shown individually, other members of OPEC (Algeria, Gabon, Iran, Iraq, Kuwait, adjusted to exclude the claims on foreign branches held by a U.S. office or another Libya, Nigeria, Qatar, Saudi Arabia, and United Arab Emirates), and Bahrain and foreign branch of the same banking institution. The data in this table combine Oman (not formally members of OPEC). foreign branch claims in table 3.14 (the sum of lines 7 through 10) with the claims 4. Excludes Liberia. of U.S. offices in table 3.18 (excluding those held by agencies and branches of 5. Includes Canal Zone beginning December 1979. foreign banks and those constituting claims on own foreign branches). 6. Foreign branch claims only. 2. Beginning with June 1984 data, reported claims held by foreign branches 7. Includes New Zealand, Liberia, and international and regional organizahave been reduced by an increase in the reporting threshold for "shell" branches tions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A63 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1986 1987 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998833 11998844 11998855 Sept. Dec. Mar. June Sept. 1 Total 25,346 29,357 27,825 26,429 25,717 27,432 28,751 28,167 2 Payable in dollars 22,233 26,389 24,296 22,432 21,885 23,264 24,286 23,846 3 Payable in foreign currencies 3,113 2,968 3,529 3,997 3,833 4,169 4,466 4,321 By type 4 Financial liabilities 10,572 14,509 13,600 13,501 12,239 13,114 13,946 12,667 5 Payable in dollars 8,700 12,553 11,257 11,071 9,774 10,398 11,068 9,955 6 Payable in foreign currencies 1,872 1,955 2,343 2,430 2,464 2,716 2,878 2,712 7 Commercial liabilities 14,774 14,849 14,225 12,929 13,479 14,318 14,805 15,500 8 Trade payables 7,765 7,005 6,685 5,728 6,447 6,985 7,139 7,389 9 Advance receipts and other liabilities 7,009 7,843 7,540 7,201 7,032 7,333 7,666 8,111 10 Payable in dollars 13,533 13,836 13,039 11,361 12,110 12,865 13,218 13,891 11 Payable in foreign currencies 1,241 1,013 1,186 1,567 1,368 1,453 1,587 1,609 By area or country Financial liabilities 12 Europe 5,742 6,728 7,700 8,907 8,023 8,383 9,645 9,081 13 Belgium-Luxembourg 302 471 349 448 270 232 257 230 14 France 843 995 857 501 644 742 807 574 15 Germany 502 489 376 319 270 368 305 291 16 Netherlands 621 590 861 741 704 693 669 677 17 Switzerland 486 569 610 567 646 711 703 684 18 United Kingdom 2,839 3,297 4,305 5,880 5,199 5,378 6,642 6,349 19 Canada 764 863 839 362 399 431 441 407 20 Latin America and Caribbean 2,596 5,086 3,184 2,283 1,964 2,369 1,747 961 21 Bahamas 751 1,926 1,123 842 614 669 398 280 22 Bermuda 13 13 4 4 4 0 0 0 23 Brazil 32 35 29 28 32 26 22 22 24 British West Indies 1,041 2,103 1,843 1,291 1,163 1,545 1,223 581 25 Mexico 213 367 15 18 22 30 29 17 26 Venezuela 124 137 3 5 3 3 5 3 27 Asia 1,424 1,777 1,815 1,881 1,784 1,861 2,046 2,140 28 Japan 991 1,209 1,198 1,446 1,377 1,459 1,666 1,653 29 Middle East oil-exporting countries 170 155 82 3 8 7 7 7 30 Africa 19 14 12 4 1 3 1 2 31 Oil-exporting countries3 0 0 0 2 1 1 0 0 32 Mother4 27 41 50 63 67 67 66 76 Commercial liabilities 33 Europe 3,245 4,001 4,074 4,344 4,494 4,521 4,987 4,973 34 Belgium-Luxembourg 62 48 62 75 101 85 111 56 35 France 437 438 453 370 351 379 422 437 36 Germany 427 622 607 633 722 591 594 679 37 Netherlands 268 245 364 581 460 372 339 350 38 Switzerland 241 257 379 361 387 484 557 556 39 United Kingdom 732 1,095 976 1,142 1,346 1,309 1,380 1,475 40 Canada 1,841 1,975 1,449 1,313 1,393 1,352 1,253 1,263 41 Latin America and Caribbean 1,473 1,871 1,088 848 890 1,089 1,037 1,050 42 Bahamas 1 7 12 37 32 28 13 22 43 Bermuda 67 114 77 172 132 297 245 223 44 Brazil 44 124 58 44 61 82 88 40 45 British West Indies 6 32 44 45 48 89 64 44 46 Mexico 585 586 430 197 213 185 160 231 47 Venezuela 432 636 212 207 217 224 203 176 48 Asia 6,741 5,285 6,046 4,856 5,098 5,818 5,921 6,516 49 Japan 1,247 1,256 1,799 2,137 2,051 2,468 2,480 2,422 50 Middle East oil-exporting countries '5 4,178 2,372 2,829 1,507 1,686 1,948 1,870 2,109 51 Africa 553 588 587 585 622 520 524 571 52 Oil-exporting countries3 167 233 238 176 197 170 166 150 53 All other4 921 1,128 982 982 981 1,019 1,083 1,128 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 • April 1988 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1986 1987 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998833 11998844 11998855 Sept. Dec. Mar. June Sept. 1 Total 34,911 29,901 28,876 34,157 33,451 34,034 31,515 31,211 2 Payable in dollars 31,815 27,304 26,574 31,446 30,923 31,238 28,405 28,546 3 Payable in foreign currencies 3,096 2,597 2,302 2,711 2,528 2,7% 3,110 2,666 By type 4 Financial claims 23,780 19,254 18,891 24,833 23,357 24,080 21,580 20,906 5 Deposits 18,4% 14,621 15,526 18,953 17,899 17,994 15,437 15,920 6 Payable in dollars 17,993 14,202 14,911 18,389 17,343 17,168 14,253 15,086 7 Payable in foreign currencies 503 420 615 565 555 826 1,183 834 8 Other financial claims 5,284 4,633 3,364 5,880 5,458 6,086 6,143 4,985 9 Payable in dollars 3,328 3,190 2,330 4,506 4,110 4,740 4,868 3,860 10 Payable in foreign currencies 1,956 1,442 1,035 1,374 1,349 1,345 1,275 1,125 11 Commercial claims 11,131 10,646 9,986 9,324 10,095 99,,995544 9,935 10,305 12 Trade receivables 9,721 9,177 8,6% 8,079 8,902 88,,889988 8,892 9,364 13 Advance payments and other claims 1,410 1,470 1,290 1,245 1,192 1,056 1,043 942 14 Payable in dollars 10,494 9,912 9,333 8,551 9,471 9,330 9,283 9,599 15 Payable in foreign currencies 637 735 652 773 624 624 652 706 By area or country Financial claims 16 Europe 6,488 5,762 6,929 10,545 8,759 9,337 9,859 9,336 17 Belgium-Luxembourg 37 15 10 67 41 15 6 23 18 France 150 126 184 418 138 172 154 169 19 Germany 163 224 223 129 111 163 92 83 20 Netherlands 71 66 161 73 86 69 75 94 21 Switzerland 38 66 74 138 182 74 95 44 22 United Kingdom 5,817 4,864 6,007 9,478 7,957 8,491 9,237 8,709 23 Canada 5,989 3,988 3,260 3,970 3,964 3,779 3,329 2,883 24 Latin America and Caribbean 10,234 8,216 7,846 9,438 9,207 9,547 7,539 7,491 25 Bahamas 4,771 3,306 2,698 2,806 2,624 3,945 2,572 2,507 26 Bermuda 102 6 6 19 6 3 6 2 27 Brazil 53 100 78 105 73 71 103 102 28 British West Indies 4,206 4,043 4,571 6,060 6,078 5,128 4,349 3,687 29 Mexico 293 215 180 173 174 164 167 173 30 Venezuela 134 125 48 40 24 23 22 18 31 Asia 764 %1 731 715 1,320 1,193 779 1,105 32 Japan 297 353 475 365 999 931 439 721 33 Middle East oil-exporting countries2 4 13 4 2 11 11 10 10 34 Africa 147 210 103 84 85 84 58 71 35 Oil-exporting countries3 55 85 29 18 28 19 9 14 36 All other4 159 117 21 81 22 140 16 20 Commercial claims 37 Europe 3,670 3,801 3,533 3,389 3,718 3,703 3,850 4,114 38 Belgium-Luxembourg 135 165 175 125 133 145 137 168 39 France 459 440 426 415 410 417 435 411 40 Germany 349 374 346 401 447 451 531 550 41 Netherlands 334 335 284 157 173 165 182 199 42 Switzerland 317 271 284 233 217 1% 187 208 43 United Kingdom 809 1,063 898 874 998 1,070 1,071 1,224 44 Canada 829 1,021 1,023 960 928 927 927 903 45 Latin America and Caribbean 2,695 2,052 1,753 1,686 1,981 1,944 1,878 1,844 46 Bahamas 8 8 13 29 28 11 14 12 47 Bermuda 190 115 93 132 170 157 153 125 48 Brazil 493 214 206 202 235 217 202 226 49 British West Indies 7 7 6 23 51 25 17 20 50 Mexico 884 583 510 317 411 445 346 365 51 Venezuela 272 206 157 192 234 171 201 188 52 Asia 3,063 3,073 2,982 2,588 22,,775511 2,707 2,640 2,772 53 Japan 1,114 1,191 1,016 797 888811 926 950 1,018 54 Middle East oil-exporting countries 737 668 638 682 565 529 455 436 55 Africa 588 470 437 470 495 432 379 407 56 Oil-exporting countries3 139 134 130 168 135 141 123 123 57 All other4 286 229 257 231 222 240 261 267 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 1987 Transactions, and area or country 1985 1986 J D a e n c . . - June July Aug. Sept. Oct. Nov. Dec.p U.S. corporate securities STOCKS 1 Foreign purchases 81,995 148,114 248,887 18,687 23,645 24,774 22,473 30,207 13,616 13,632 2 Foreign sales 77,054 129,395 232,613 17,054 21,883 24,554 19,433 27,768 20,302 16,620 3 Net purchases, or sales (-) 4,941 18,719 16,273 1,634 1,763 220 3,040 2,438 -6,687 -2,988 4 Foreign countries 4,857 18,927 16,322 1,679 1,749 117 2,951 2,424 -6,639 -2,927 5 Europe 2,057 9,559 1,864 669 717 81 1,312 138 -5,948 -2,326 6 France -438 459 903 107 66 -69 -15 58 -541 -395 7 Germany 730 341 -74 -155 -96 28 -12 380 -183 -149 8 Netherlands -123 936 890 232 153 135 79 -40 -169 32 9 Switzerland -75 1,560 -1,162 -206 -80 -325 435 294 -1,574 -741 10 United Kingdom 1,665 4,826 517 671 635 125 770 -624 -3,407 -956 11 Canada 356 816 1,116 -238 255 -21 -46 238 181 120 12 Latin America and Caribbean 1,718 3,031 1,318 2% 387 188 157 -512 -561 -46 13 Middle East1 238 976 -1,361 -26 -913 -255 135 569 -83 -448 14 Other Asia 296 3,876 12,896 1,009 1,290 171 1,242 2,014 -28 -160 15 Africa 24 297 123 -30 -14 16 20 7 11 -6 16 Other countries 168 373 365 -1 27 -63 132 -30 -211 -61 17 Nonmonetary international and regional organizations 84 -208 -48 -45 14 102 90 15 -48 -61 BONDS2 18 Foreign purchases 86,587 123,169 105,802 10,432 9,414 7,027 8,662 9,158' 5,691 6,838 19 Foreign sales 42,455 72,520 78,116 8,311 6,533 5,638 4,786 7,275' 5,346 5,470 20 Net purchases, or sales (- ) 44,132 50,648 27,686 2,121 2,881 1,389 3,876 1,883' 345 1,368 21 Foreign countries 44,227 49,801 26,945 2,030 2,872 1,548 3,836 1,874' 88 939 22 Europe 40,047 39,313 22,143 2,266 2,328 1,616 3,149 922' 417 565 23 France 210 389 195 43 64 26 -37 55 -34 -12 24 Germany 2,001 -251 -8 80 116 -22 -56 -98 -26 17 25 Netherlands 222 387 269 37 -65 44 116 36 -16 1 7,6 Switzerland 3,987 4,529 1,650 105 245 306 166 136 -39 -203 27 United Kingdom 32,762 33,900 19,911 1,857 1,897 1,317 2,828 1,012' 379 776 28 Canada 190 548 1,296 49 87 -8 47 305 68 114 29 Latin America and Caribbean 498 1,476 2,473 -4 305 44 682 524 -15 292 30 Middle East1 -2,648 -2,961 -551 -128 -166 -14 -87 42 -92 -20 31 Other Asia 6,091 11,270 1,630 -169 301 -93 52 65 -247 -14 32 Africa 11 16 16 8 1 -17 -6 24 -10 3 33 Other countries 38 139 -61 8 15 20 -1 -9 -33 0 34 Nonmonetary international and regional organizations -95 847 740 91 9 -159 40 10 257 429 Foreign securities 35 Stocks, net purchases, or sales (-) -3,941 -2,360 1,422 -257 -15 -373 448 2,053' 725 928 36 Foreign purchases 20,861 49,587 94,231 8,781 8,585 8,674 8,657 12,857' 7,534 4,898 37 Foreign sales 24,803 51,947 92,809 9,038 8,599 9,047 8,208 10,804' 6,809 3,970 38 Bonds, net purchases, or sales (-) -3,999 -3,555 -7,051 2,285 -588 -241 -674 -2,566' -1,929 -1,153 39 Foreign purchases 81,216 166,992 198,564 25,797 16,303 12,292 12,923 18,118' 17,674 12,399 40 Foreign sales 85,214 170,548 205,615 23,512 16,891 12,532 13,597 20,684' 19,603 13,552 41 Net purchases, or sales (—), of stocks and bonds -7,940 -5,915 -5,629 2,028 -602 -614 -226 -513' -1,204 -225 42 Foreign countries -9,003 -7,000 -5,773 1,985 -329 -1,207 -546 253' -1,104 90 43 Europe -9,887 -18,533 -11,800 -27 -572 -896 -510 -931' -1,591 -354 44 Canada -1,686 -876 -3,855 -489 -5% -484 -263 -71 -465 133 45 Latin America and Caribbean 1,797 3,476 829 106 -62 83 -20 -152 329 4 46 659 10,858 9,553 2,513 1,078 224 82 1,333 418 193 47 Africa 75 52 89 6 5 5 14 16 3 10 48 Other countries 38 -1,977 -590 -124 -182 -140 150 59' 201 105 49 Nonmonetary international and regional organizations 1,063 1,084 144 44 -274 594 320 -767 -101 -314 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 • April 1988 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1987 1987 Country or area 1985 1986 J D a e n c . . - June July Aug. Sept. Oct. Nov. Dec.p Transactions, net purchases or sales (-) during period' 1 Estimated total2 29,208 19,388 25,936 12,281 807 1,110 523 —l,262r 6,380 2,675 2 Foreign countries2 28,768 20,491 31,027 8,646 3,610 2,787 704 -5,527r 7,676 4,290 3 Europe2 4,303 16,326 23,610 3,640 4,453 -1,007 -1,167 -954r 6,340 1,282 4 Belgium-Luxembourg 476 -245 653 58 -2 366 -25 165r -2 -103 5 Germany2 1,917 7,670 13,295 1,534 1,516 780 130 31 1,820 1,121 6 Netherlands 269 1,283 -911 111 204 -254 -296 -707 314 -76 7 8 S S w w e it d z e e n rl an .. d s2 9 77 7 3 6 3 1 2 3 9 2 1,9 2 2 3 5 3 -1 5 8 8 3 5 5 7 1 6 2 - -1 6 5 8 3 8 -1 -9 5 9 6 -609 4 -2 1 9 8 7 2 -52 5 2 1 9 United Kingdom -1,810 4,546 3,955 617 1,105 -431 -985 -642r 3,163 1,200 10 Other Western Europe 1,701 2,613 4,479 913 1,042 -631 259 804r 1,158 -391 11 Eastern Europe 0 0 -19 5 0 4 5 0 3 1 12 Canada -188 881 4,534 413 654 378 203 -389 679 720 13 Latin America and Caribbean 4,315 926 -2,146 780 -673 -675 -29 -117 472 -141 14 Venezuela 248 -96 150 -17 -4 30 55 -63 35 1 15 Other Latin America and Caribbean 2,336 1,130 -1,096 -514 15 -49 -155 -227 367 167 16 Netherlands Antilles 1,731 -108 -1,200 1,311 -684 -656 72 173 69 -309 17 Asia 19,919 1,345 4,677 3,531 -676 4,318 1,762 -5,333 1,476 2,429 18 Japan 17,909 -22 877 4,199 -597 1,839 799 -5,272 1,757 2,020 19 Africa 112 -54 -56 -18 20 -24 3 2 -29 49 20 All other 308 1,067 407 300 -168 -204 -68 1,263 -1,260 -48 21 Nonmonetary international and regional organizations 442 -1,104 -5,090 3,635 -2,802 -1,677 -180 4,265 -1,296 -1,615 22 International -436 -1,430 -4,177 3,517 -2,875 -1,722 111 4,326 -1,492 -1,620 23 Latin American regional 18 157 3 3 0 0 -10 0 0 0 Memo 24 Foreign countries2 28,768 20,491 31,027 8,646 3,610 2,787 704 -5,527' 7,676 4,290 25 Official institutions 8,135 14,214 31,176 3,719 2,251 2,612 1,360 2,437 1,857 1,789 26 Other foreign2 20,631 6,283 -152 4,927 1,358 175 -657 -7,964' 5,819 2,502 Oil-exporting countries 27 Middle East3 -1,547 -1,529 -3,111 -857 107 329 -509 -695 -891 368 28 Africa4 7 5 16 1 0 0 0 -1 -1 -1 1. Estimated official and private transactions in marketable U.S. Treasury 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and securities with an original maturity of more than 1 year. Data are based on United Arab Emirates (Trucial States). monthly transactions reports. Excludes nonmarketable U.S. Treasury bonds and 4. Comprises Algeria, Gabon, Libya, and Nigeria, notes held by official institutions of foreign countries. 2. Includes U.S. Treasury notes publicly issued to private foreign residents denominated in foreign currencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interest and Exchange Rates A67 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per year Rate on Feb. 29, 1988 Rate on Feb. 29, 1988 Rate on Feb. 29, 1988 Country Country e M ffe o c n t t i h v e e M ffe o c n t t i h v e Percent e M ffe o c n t t i h v e 3.0 Dec. 1987 France 7.25 Jan. 1988 Norway 8.0 June 1983 6.75 Jan. 1988 Germany, Fed. Rep. of. 2.5 Dec. 1987 Switzerland „ 2.5 Dec. 1987 49.0 Mar. 1981 Italy 12.0 Aug. 1987 United Kingdom' 8.58 Feb. 1988 Japan 2.5 Feb. 1987 Venezuela 8.0 Oct. 1985 7.0 Oct. 1983 Netherlands 3.25 Jan. 1988 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 comdiscounts Treasury bills for 7 to 10 days. mercial banks or brokers. For countries with more than one rate applicable to 2. Minimum lending rate suspended as of Aug. 20, 1981. such 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 year, averages of daily figures 1987 1988 CCoouunnttrryy,, oorr ttyyppee 11998855 11998866 11998877 Aug. Sept. Oct. Nov. Dec. Jan. Feb. 1 8.27 6.70 7.07 6.91 7.51 8.29 7.41 7.86 7.11 6.73 ? United Kingdom 12.16 10.87 9.65 9.95 10.12 9.92 8.87 8.71 88..8844 9.18 3 9.64 9.18 8.38 9.11 9.32 9.12 8.70 8.95 88..7755 8.58 4 5.40 4.58 3.97 3.93 3.98 4.70 3.92 3.65 3.40 3.29 5 Switzerland 4.92 4.19 3.67 3.55 3.51 4.03 3.65 3.51 2.09 1.48 6 6.29 5.56 5.24 5.27 5.31 5.63 4.99 4.65 4.24 3.98 7 9.91 7.68 8.14 7.88 7.85 8.15 8.66 8.48 8.19 7.54 8 14.86 12.60 11.15 11.96 12.36 11.85 11.36 11.25 10.47 10.80 9 9.60 8.04 7.01 6.55 6.56 6.84 6.93 6.57 6.49 6.19 10 Japan 6.47 4.96 3.87 3.71 3.77 3.89 3.90 3.90 3.88 3.82 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 • April 1988 3.28 FOREIGN EXCHANGE RATES Currency units per dollar 1987 1988 Country/currency 11998855 11998866 11998877 Sept. Oct. Nov. Dec. Jan. Feb. 1 Australia/dollar 70.026 67.093 70.136 72.68 71.12 68.60 71.06 71.11 71.40 2 Austria/schilling 20.676 15.260 12.649 12.765 12.674 11.843 11.500 11.635 11.920 3 Belgium/franc 59.336 44.662 37.357 37.657 37.494 35.190 34.186 34.576 35.473 4 Canada/dollar 1.3658 1.3896 1.3259 1.3154 1.3097 1.3167 1.3075 1.2855 1.2682 5 China, P.R./yuan 2.9434 3.4615 3.7314 3.7314 3.7314 3.7314 3.7314 3.7314 3.7314 6 Denmark/krone 10.598 8.0954 6.8477 6.9893 6.9262 6.4962 6.3043 6.3562 6.4918 7 Finland/markka 6.1971 5.0721 4.4036 4.3954 4.3570 4.1392 4.0462 4.0391 4.1159 8 France/franc 8.9799 6.9256 6.0121 6.0555 6.0160 5.7099 5.5375 5.5808 5.7323 9 Germany/deutsche mark 2.9419 2.1704 1.7981 1.8134 1.8006 1.6821 1.6335 1.6537 1.6963 10 Greece/drachma 138.40 139.93 135.47 138.40 138.61 132.42 129.46 131.92 135.56 11 Hong Kong/dollar 7.7911 7.8037 7.7985 7.8035 7.8077 7.7968 7.7726 7.7872 7.7978 12 India/rupee 12.332 12.597 12.943 12.993 12.995 12.972 12.934 13.040 13.065 13 Ireland/punt1 106.62 134.14 148.79 147.54 148.72 158.08 162.63 160.64 156.87 14 Italy/lira 1908.90 1491.16 1297.03 1310.86 1302.58 1238.89 1203.74 1216.88 1249.62 15 Japan/yen 238.47 168.35 144.60 143.29 143.32 135.40 128.24 127.69 129.17 16 Malaysia/ringgit 2.4806 2.5830 2.5185 2.5189 2.5308 2.4989 2.4944 2.5400 2.5812 17 Netherlands/guilder 3.3184 2.4484 2.0263 2.0413 2.0267 1.8931 1.8382 1.8584 1.9051 18 New Zealand/dollar1 ... 49.752 52.456 59.327 63.352 64.031 61.915 64.664 65.818 66.386 19 Norway/krone 8.5933 7.3984 6.7408 6.6505 6.6311 6.4233 6.3820 6.3538 6.4167 20 Portugal/escudo 172.07 149.80 141.20 142.94 142.82 136.84 133.77 135.87 138.84 21 Singapore/dollar 2.2008 2.1782 2.1059 2.0924 2.0891 2.0444 2.0127 2.0261 2.0185 22 South Africa/rand1 45.57 43.952 49.081 48.86 48.79 50.67 51.22 50.62 48.73 23 South Korea/won 861.89 884.61 825.93 810.07 808.47 802.30 798.34 791.31 776.85 24 Spain/peseta 169.98 140.04 123.54 121.34 118.60 113.26 110.80 112.34 114.36 25 Sri Lanka/rupee 27.187 27.933 29.471 29.902 30.347 30.519 30.644 30.825 30.859 26 Sweden/krona 8.6031 7.1272 6.3468 6.3844 6.3560 6.0744 5.9473 5.9749 6.0524 27 Switzerland/franc 2.4551 1.7979 1.4918 1.5029 1.4940 1.3825 1.3304 1.3466 1.3916 28 Taiwan/dollar 39.889 37.837 31.756 30.151 30.036 29.813 29.004 28.628 28.665 29 Thailand/baht 27.193 26.314 25.774 25.765 25.783 25.495 25.249 25.235 25.324 30 United Kingdom/pound1 129.74 146.77 163.98 164.46 166.20 177.54 182.88 180.09 175.82 MEMO 31 United States/dollar2 ... 143.01 112.22 96.94 97.23 96.65 91.49 88.70 89.29 91.08 1. Value in U.S. cents. 3. Currency reform. 2. Index of weighted-average exchange value of U.S. dollar against the NOTE. Averages of certified noon buying rates in New York for cable transfers. currencies of 10 industrial countries. The weight for each of the 10 countries is the Data in this table also appear in the Board's G.5 (405) release. For address, see 1972-76 average world trade of that country divided by the average world trade of inside front cover. all 10 countries combined. Series revised as of August 1978 (see FEDERAL RESERVE BULLETIN, vol. 64, August 1978, p. 700). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A69 Guide to Tabular Presentation, Statistical Releases, and Special Tables GUIDE TO TABULAR PRESENTATION Symbols and Abbreviations c Corrected 0 Calculated to be zero e Estimated n.a. Not available p Preliminary n.e.c. Not elsewhere classified r Revised (Notation appears on column heading when IPCs Individuals, partnerships, and corporations about half of the figures in that column are changed.) REITs Real estate investment trusts * Amounts insignificant in terms of the last decimal place RPs Repurchase agreements shown in the table (for example, less than 500,000 SMSAs Standard metropolitan statistical areas when the smallest unit given is millions) .... Cell not applicable General Information Minus signs are used to indicate (1) a decrease, (2) a negative obligations of the Treasury. "State and local government" figure, or (3) an outflow. also includes municipalities, special districts, and other politi- "U.S. government securities" may include guaranteed cal subdivisions. issues of U.S. government agencies (the flow of funds figures In some of the tables, details do not add to totals because of also include not fully guaranteed issues) as well as direct rounding. STATISTICAL RELEASES List Published Semiannually, with Latest Bulletin Reference Issue Page Anticipated schedule of release dates for periodic releases December 1987 A77 SPECIAL TABLES Published Irregularly, with Latest Bulletin Reference Assets and liabilities of commercial banks, December 31, 1986 July 1987 A76 Assets and liabilities of commercial banks, March 31, 1987 October 1987 A70 Assets and liabilities of commercial banks, June 30, 1987 February 1988 A70 Assets and liabilities of commercial banks, September 30, 1987 April 1988 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, December 31, 1986 May 1987 A76 Assets and liabilities of U.S. branches and agencies of foreign banks, March 31, 1987 August 1987 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, June 30, 1987 November 1987 A70 Assets and liabilities of U.S. branches and agencies of foreign banks, September 30, 1987 February 1988 A76 Terms of lending at commercial banks, November 1986 February 1987 A70 Terms of lending at commercial banks, February 1987 May 1987 A70 Terms of lending at commercial banks, May 1987 September 1987 A70 Terms of lending at commercial banks, August 1987 January 1988 A70 Pro forma balance sheet and income statements for priced service operations, June 30, 1987 November 1987 A74 Pro forma balance sheet and income statements for priced service operations, September 30, 1987 . February 1988 A80 Special tables begin on next page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • April 1988 4.20 DOMESTIC AND FOREIGN OFFICES, Insured Commercial Bank Assets and Liabilities'2 Consolidated Report of Condition, September 30, 1987 Millions of dollars Banks with foreign offices5-7 Bank o s f f w ic i e t s h o d n o l m y8 e stic IItteemm TToottaall Total Foreign Domestic Over 100 Under 100 1 Total assets6 2,894,489 1,684,802 441,058 1,296,832 803,068 406,619 2 Cash and balances due from depository institutions 328,029 233,616 125,439 108,178 61,028 33,384 3 Cash items in process of collection, unposted debits, and currency 73,102 1,858 71,244 24,871 i 4 Cash items in process of collection and unposted debits and coin n.a. n.a. 59,488 16,407 T 5 Currency and coin n.a. n.a. 11,756 8,464 1 6 Balances due from depository institutions in the United States 37,255 22,757 14,498 21,284 n.a. 7 Balances due from banks in foreign countries and foreign central banks n.a. 103,562 100,565 2,997 4,673 1 8 Balances due from Federal Reserve Banks 19,697 258 19,439 10,200 MEMO 1T 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. 9,349 12,457 10,672 10 Total securities, loans and lease financing receivables, net 2,348,381 1,284,886 n.a. n.a. 708,080 355,415 11 Total securities, book value 496, 588 202,781 27,242 175,539 173,136 120,672 12 U.S. Treasury securities and U.S. government agency and corporation obligations 302,730 107,629 786 106,843 108,696 86,405 13 U.S. Treasury securities n.a. 64,907 581 64,326 64,732 n.a. 14 U.S. government agency and corporation obligations n.a. 42,722 205 42,517 43,965 n.a. 15 All holdings of U.S. government-issued or guaranteed certificates of participation in pools of residential mortgages 64,103 33,001 159 32,841 17,799 13,304 16 All other n.a. 9,721 46 9,675 26,166 n.a. 17 Securities issued by states and political subdivisions in the United States 122,788 51,248 951 50,297 45,929 25,611 18 Taxable 1,733 344 1 343 661 727 19 Tax-exempt 121,055 50,904 950 49,954 45,268 24,884 20 Other securities 71,070 43,904 25,504 18,400 18,510 8,656 ">1 1177,,888811 11,,009966 1166,,778855 1188,,115599 22 All holdings of private certificates of participation in pools of residential mortgages 7,240 3,759 8 3,751 2,619 863 23 All other 37,456 14,122 1,089 13,034 15,541 7,793 14 26,023 24,408 1,615 351 25 Federal funds sold and securities purchased under agreements to resell 130,388 65,748 257 65,491 41,408 23,233 26 Total loans and lease financing receivables, gross 1,782,977 1,058,176 224,842 833,334 507,238 217,563 27 LESS: Unearned income on loans 14,814 6,553 1,972 4,581 5,637 2,624 28 Total loans and leases (net of unearned income) 1,768,163 1,051,624 222,870 828,753 501,600 214,939 29 LESS: Allowance for loan and lease losses 46,580 35,088 n.a. n.a. 8,063 3,429 30 LESS: Allocated transfer risk reserves 179 178 n.a. n.a. 1 0 31 EQUALS: Total loans and leases, net 1,721,404 1,016,357 n.a. n.a. 493,537 211,511 Total loans, gross, by category 32 Loans secured by real estate 570,590 270,494 18,433 252,061 202,322 97,774 3 3 3 4 C Fa o r n m st l r a u n c d t ion and land development i 1 1 T A 77 1 , , 4 5 7 6 6 1 3 3 1 , , 8 4 8 6 4 0 8 7, , 8 6 9 7 5 3 35 1-4 family residential properties n.a. n.a. n.a. 96,511 95,133 53,561 3 3 6 7 M No u n lt f i a fa rm m il n y o n (5 re o s r id m en o t r i e a ) l p re r s o i p d e e r n t t i i e a s l properties I 1 1t t1 67 8 , , 6 8 8 2 5 8 65 5 , ,9 9 4 0 2 4 2 2 5 , , 0 6 1 3 3 1 38 Loans to depository institutions 65,049 58,880 28,204 30,676 5,293 877 39 To commercial banks in the United States n a. 22,600 1,063 21,537 4,345 n.a. 40 To other depository institutions in the United States n a. 4,730 212 4,518 786 n.a. 41 To banks in foreign countries n a. 31,550 26,930 4,621 162 n.a. 42 Loans to finance agricultural production and other loans to farmers 31,001 5,645 360 5,285 6,685 18,670 43 Commercial and industrial loans 577,911 404,193 110,296 293,897 126,139 47,579 44 To U.S. addressees (domicile) n a. 307,996 17,412 290,584 125,774 n.a. 45 To non-U.S. addressees (domicile) n a. 96,197 92,884 3,313 365 n.a. 46 Acceptances of other banks 3,332 1,027 336 691 1,255 1,049 47 U.S. banks n a. 313 6 307 n.a. n.a. 48 n.a. 715 330 384 n.a. n.a. 49 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 323,845 144,387 11,543 132,844 133,385 46,072 50 Credit cards and related plans 82,759 43,044 n.a. n.a. 37,527 2,188 51 Other (includes single payment and installment) 241,086 101,344 n.a. n.a. 95,858 43,885 52 Obligations (other than securities) of states and political subdivisions in the U.S. (includes nonrated industrial development obligations) 54,679 33,878 665 33,213 18,285 2,516 53 1,615 433 -183 615 1,038 144 54 53,064 33,445 848 32,597 17,247 2,372 55 127 838 115,700 50,781 64,919 9,700 2,439 56 Loans to foreign governments and official institutions n.a. 38,932 35,907 3,025 228 n.a. 57 n a. 76,768 14,874 61,894 9,472 n.a. 58 Loans for purchasing and carrying securities n.a. n.a. n.a. 19,373 1,977 n.a. 59 All other loans n.a. n.a. n.a. 42,521 7,494 n.a. 60 Lease financing receivables 28,733 23,972 4,224 19,748 4,174 587 61 Assets held in trading accounts 36,864 36,014 17,085 18,929 660 190 62 Premises and fixed assets (including capitalized leases) 43,761 22,618 1 n.a. 13,840 7,303 63 Other real estate owned 10,729 4,532 t n.a. 3,441 2,755 64 Investments in unconsolidated subsidiaries and associated companies 2,498 1,758 1 n.a. 677 63 65 Customers' liability on acceptances outstanding 35,512 35,077 n.a. n.a. 409 25 66 Net due from own foreign offices, Edge and agreement subsidiaries, and IBFs ... n .a. n.a. 1 35,070 n.a. n.a. 67 Intangible assets 4,515 2,893 1 n.a. 1,455 168 68 84,201 63,409 t n.a. 13,477 7,316 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 Domestic Over 100 Under 100 69 Total liabilities, limited-life preferred stock, and equity capital .,894,489 1,684,802 n.a. n.a. 803,067 406,619 70 Total liabilities7 .,717,730 1,601,815 441,846 1,213,056 744,938 370,977 71 Limited-life preferred stock 84 67 n.a. n.a. 16 1 72 Total deposits .,229,527 11,,220066,, 885 343,443 863,442 661,372 361,271 73 Individuals, partnerships, and corporations JJ 186,525 763,834 601,890 329,997 74 U.S. government A 4,000 2,037 833 75 States and political subdivisions in the United States 1 t 36,607 38,986 24,974 76 Commercial banks in the United States n a. n.a. n.a. 33,060 10,449 1,821 77 Other depository institutions in the United States J 1 5,141 2,598 1,153 78 Banks in foreign countries 1 T 7,967 154 n.a. 79 Foreign governments and official institutions 1 32,763 31,002 1,761 236 n.a. 80 Certified and official checks 19,340 11,854 779 11,075 5,021 2,464 81 All other8 n a. n a. 125,138 28 82 Total transaction accounts 308,721 194,067 97,208 83 Individuals, partnerships, and corporations 250,889 171,036 86,719 84 U.S. government 3,161 1,566 634 85 States and political subdivisions in the United States 7,921 8,821 6,451 86 Commercial banks in the United States n a. n.a. n. a. 23,383 6,100 547 87 Other depository institutions in the United States 3,927 1,447 384 88 Banks in foreign countries 7,344 66 n.a. 89 Foreign governments and official institutions 1,021 8 n.a. 90 Certified and official checks 11,075 5,021 2,464 91 All other 10 92 Demand deposits (included in total transaction accounts) 246,031 125,468 53,390 93 Individuals, partnerships, and corporations 189,766 106,566 46,983 94 U.S. government 3,148 1,548 618 95 States and political subdivisions in the United States 6,371 4,720 2,394 96 Commercial banks in the United States 23,383 6,098 546 97 Other depository institutions in the United States 3,926 1,443 376 98 Banks in foreign countries 7,337 66 n.a. 99 Foreign governments and official institutions 1,020 8 n.a. 100 Certified and official checks 11,075 5,021 2,464 101 Allother 10 102 Total nontransaction accounts 554,721 467,305 264,062 103 Individuals, partnerships, and corporations n a. n.a. n.a. 512,946 430,854 243,277 104 U.S. government 839 471 200 105 States and political subdivisions in the United States 28,686 30,165 18,524 106 Commercial banks in the United States 9,677 4,349 1,274 107 U.S. branches and agencies of foreign banks 884 806 n.a. 108 Other commercial banks in the United States 8,794 3,542 n.a. 109 Other depository institutions in the United States 1,214 1,150 770 110 Banks in foreign countries 623 88 n.a. 111 Foreign branches of other U.S. banks 4 4 n.a. 112 Other banks in foreign countries 620 84 n.a. 113 Foreign governments and official institutions 740 228 n.a. 114 Allother 18 115 Federal funds purchased and securities sold under agreements to repurchase.. 234,089 184,795 605 184,190 46,050 3,244 116 Demand notes issued to the U.S. Treasury n.a. n.a. n a. 21,701 4,881 764 117 Other borrowed money 97,426 77,682 35,116 42,566 18,757 987 118 Banks liability on acceptances executed and outstanding 35,648 35,213 7,019 28,194 409 25 119 Notes and debentures subordinated to deposits 17,289 14,899 n.a. n.a. 2,019 370 120 Net due to own foreign offices, Edge and agreement subsidiaries, and IBFs... n.a. n.a. n a. 18,017 n.a. n.a. 121 All other liabilities 76,405 60,639 n.a. n.a. 11,450 4,316 122 Total equity capital9 176, 675 82,920 n.a. n.a. 58,114 35,641 MEMO 123 Holdings of commercial paper included in total loans, gross 1,755 1,245 511 720 n.a. 124 Total individual retirement accounts (IRA) and Keogh plan accounts 32,901 32,219 15,948 125 Total brokered deposits 24,590 4,519 627 126 Total brokered retail deposits 4,937 2,553 459 127 Issued in denominations of $100,000 or less 1,439 1,967 391 128 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 3,497 586 68 Savings deposits 129 Money market deposit accounts (MMDAs) 166,942 129,345 55,939 130 Other savings deposits (excluding MMDAs) 71,546 68,833 34,895 131 Total time deposits of less than $100,000 137,990 177 129,451 132 Time certificates of deposit of $100,000 or more n a. n.a. n.a. 151,138 88,272 42,163 133 Open-account time deposits of $100,000 or more 27,106 3,987 1,614 134 All NOW accounts (including Super NOW) 58,475 65,713 41,893 135 Total time and savings deposits 617,410 535,903 307,880 Quarterly averages 136 Total loans 796,738 491,920 211,743 137 Obligations (other than securities) of states and political subdivisions in the United States 33,971 18,065 n.a. 138 Transaction accounts in domestic offices (NOW accounts, ATS accounts, and telephone and preauthorized transfer accounts) 64,390 68,970 43,551 Nontransaction accounts in domestic offices 139 Money market deposit accounts (MMDAs) 167,909 131,021 56,455 140 Other savings deposits 72,379 69,156 34,633 141 Time certificates of deposit of $100,000 or more 148,426 87,607 41,611 142 All other time deposits 163,070 178,191 130,481 143 Number of banks 13,687 254 n.a. 2,342 11,091 Footnotes appear at the end of table 4.22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • April 1988 4.21 DOMESTIC OFFICES, Insured Commercial Banks with Assets of $100 Million or more or with foreign offices12-3 Consolidated Report of Condition, September 30, 1987 Millions of dollars Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 1 Total assets6 2,099,900 1,705,750 1,334,944 370,807 394,149 2 Cash and balances due from depository institutions 169,206 141,480 108,781 32,698 27,727 3 Cash items in process of collection and unposted debits 75,896 69,692 52,099 17,592 6,204 4 Currency and coin 20,220 16,718 13,787 2,931 3,502 5 Balances due from depository institutions in the United States 35,782 24,862 20,046 4,816 10,920 6 Balances due from banks in foreign countries and foreign central banks 7,669 5,797 4,491 1,306 1,873 7 Balances due from Federal Reserve Banks 29,638 24,411 18,358 6,054 5,227 8 Total securities, loans and lease financing receivables, (net of unearned income) 1,785,926 1,437,867 1,138,567 299,300 348,060 9 Total securities, book value 348,674 267,957 209,949 58,007 80,718 10 U.S. Treasury securities 129,058 99,874 79,852 20,022 29,184 11 U.S. government agency and corporation obligations 86,481 64,707 52,755 11,952 21,774 12 All holdings of U.S. government-issued or guaranteed certificates of participation in pools of residential mortgages 50,640 41,940 33,493 8,447 8,701 13 All other 35,841 22,767 19,262 3,505 13,073 14 Securities issued by states and political subdivisions in the United States 96,226 76,391 56,185 20,206 19,835 1") 1,004 703 588 115 301 16 Tax-exempt 95,222 75,688 55,597 20,091 19,534 17 Other domestic securities 34,944 25,272 20,636 4,636 9,672 18 All holdings of private certificates of participation in pools of residential mortgages 6,369 5,125 3,171 1,955 1,244 19 All other 28,575 20,147 17,466 2,681 8,428 20 Foreign securities 1,966 1,713 521 1,192 252 21 Federal funds sold and securities purchased under agreements to resell 106,899 90,524 65,607 24,917 16,374 2,2 Total loans and lease financing receivables, gross 1,340,572 1,087,160 868,932 218,228 253,412 7,3 LESS: Unearned income on loans 10,218 7,773 5,922 1,851 2,444 24 Total loans and leases (net of unearned income) 1,330,353 1,079,386 863,010 216,375 250,968 Total loans, gross, by category 75 Loans secured by real estate 454,383 347,823 295,467 52,356 106,559 26 Construction and land development 108,935 88,933 72,878 16,055 20,002 77 5,445 3,669 3,226 444 1,776 28 1-4 family residential properties 191,644 144,031 123,305 20,726 47,613 29 Multifamily (5 or more) residential properties 14,770 11,507 10,010 1,497 3,263 30 Nonfarm nonresidential properties .. 133,589 99,683 86,048 13,635 33,905 31 Loans to commercial banks in the United States 25,883 22,351 16,881 5,469 3,532 32 Loans to other depository institutions in the United States 5,304 5,060 3,769 1,292 244 33 Loans to banks in foreign countries 4,782 4,699 2,698 2,001 83 34 Loans to finance agricultural production and other loans to farmers 11,971 9,542 8,444 1,098 2,429 35 Commercial and industrial loans 420,036 347,701 269,420 78,281 72,335 36 To U.S. addressees (domicile) 416,358 344,332 266,696 77,636 72,026 37 To non-U.S. addressees (domicile) 3,678 3,369 2,723 645 309 38 Acceptances of other banks10 1,946 1,366 1,218 147 581 39 Of U.S. banks 758 553 482 71 205 40 Of foreign banks 452 355 334 22 97 41 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 266,229 215,473 175,345 40,128 50,756 42 Loans to foreign governments and official institutions 3,252 3,102 2,111 991 151 43 Obligations (other than securities) of states and political subdivisions in the United States .... 51,498 43,113 32,333 10,780 8,385 44 1,653 1,150 1,003 147 503 45 Tax-exempt 49,844 41,963 31,330 10,633 7,881 46 Other loans 71,366 65,473 44,116 21,357 5,893 47 Loans for purchasing and carrying securities 21,350 19,483 11,613 7,870 1,868 48 50,015 45,990 32,503 13,487 4,025 49 Lease financing receivables 23,922 21,457 17,130 4,328 2,465 50 Customers' liability on acceptances outstanding 27,752 26,844 19,286 7,558 908 51 Net due from own foreign offices, Edge and agreement subsidiaries, and IBFs 35,070 31,570 23,482 8,087 3,501 52 117,015 99,560 68,310 31,250 17,455 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A73 4.21 Continued Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 53 Total liabilities and equity capital 2,099,900 1,705,750 1,334,944 370,807 394,149 54 Total liabilities7 1,957,994 1,592,985 1,247,168 345,817 365,009 55 Total deposits 1,524,813 1,204,077 962,658 241,419 320,737 56 Individuals, partnerships, and corporations 1,365,724 1,073,427 864,366 209,061 292,298 57 U.S. government 6,037 5,137 4,251 886 900 58 States and political subdivisions in the United States 75,593 57,379 47,932 9,447 18,213 59 Commercial banks in the United States 43,509 39,487 28,950 10,537 4,022 60 Other depository institutions in the United States 7,739 5,870 4,133 1,738 1,868 61 Banks in foreign countries 8,121 7,596 3,953 3,643 525 62 Foreign governments and official institutions 1,997 1,725 796 930 272 63 Certified and official checks 16,096 13,459 8,282 5,177 2,638 64 Total transaction accounts 502,787 411,987 318,563 93,424 90,800 65 Individuals, partnerships, and corporations 421,925 339,717 268,574 71,143 82,208 66 U.S. government 4,727 4,055 3,259 796 672 67 States and political subdivisions in the United States 16,742 13,590 11,050 2,540 3,152 68 Commercial banks in the United States 29,482 28,144 20,032 8,113 1,338 69 Other depository institutions in the United States 5,374 4,818 3,220 1,597 557 70 Banks in foreign countries 7,410 7,214 3,724 3,490 196 71 Foreign governments and official institutions 1,029 989 422 567 40 72 Certified and official checks 16,096 13,459 8,282 5,177 2,638 73 Demand deposits (included in total transaction accounts) 371,500 311,449 234,303 77,146 60,051 74 Individuals, partnerships, and corporations 296,332 243,475 187,805 55,670 52,857 75 U.S. government 4,696 4,028 3,236 792 668 76 States and political subdivisions in the United States 11,091 9,329 7,584 1,745 1,762 77 Commercial banks in the United States 29,480 28,143 20,031 8,113 1,337 78 Other depository institutions in the United States 5,369 4,816 3,219 1,597 553 79 Banks in foreign countries 7,404 7,207 3,720 3,488 196 80 Foreign governments and official institutions 1,028 988 421 567 40 81 Certified and official checks 16,096 13,459 8,282 5,177 2,638 87 Total nontransaction accounts 1,022,026 792,090 644,095 147,995 229,936 83 Individuals, partnerships, and corporations 943,800 733,710 595,792 137,918 210,090 84 U.S. government 1,310 1,081 992 90 228 85 States and political subdivisions in the United States 58,851 43,789 36,882 6,907 15,061 86 Commercial banks in the United States 14,026 11,342 8,918 2,424 2,684 87 U.S. branches and agencies of foreign banks 1,690 1,049 998 50 642 88 Other commercial banks in the United States 12,336 10,294 7,920 2,374 2,042 89 Other depository institutions in the United States 2,364 1,053 912 140 1,311 90 Banks in foreign countries 711 382 229 153 329 91 Foreign branches of other U.S. banks 8 6 4 1 2 9? Other banks in foreign countries 703 376 224 152 327 93 Foreign governments and official institutions 968 737 374 363 232 94 Federal funds purchased and securities sold under agreements to repurchase 230,241 206,736 158,744 47,993 23,504 95 Demand notes issued to the U.S. Treasury 26,583 24,457 19,542 4,915 2,125 % 61,322 52,548 38,142 14,405 8,774 97 Banks liability on acceptances executed and outstanding 28,603 27,696 20,100 7,5% 908 98 Notes and debentures subordinated to deposits 2,019 1,230 1,102 128 789 99 Net due to own foreign offices, Edge and agreement subsidiaries, and IBFs 18,017 16,630 9,840 6,790 1,387 100 84,413 76,242 46,880 29,362 8,172 101 141,905 112,765 87,776 24,989 29,140 MEMO 102 Holdings of commercial paper included in total loans, gross 1,231 959 812 147 227722 103 Total individual retirement accounts (IRA) and Keogh plan accounts 65,120 50,393 41,629 8,764 14,727 104 Total brokered deposits 29,109 24,163 20,333 3,830 4,946 105 Total brokered retail deposits 7,490 5,944 5,042 902 1,546 106 Issued in denominations of $100,000 or less 3,406 2,297 2,151 146 1,109 107 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 4,083 3,647 2,891 755 437 Savings deposits 108 Money market deposit accounts (MMDAs) 229966,,228877 234,149 119900,,224455 4433,,990055 6622,,113377 109 140,379 108,282 84,864 23,418 32,097 NO Total time deposits of less than $100,000 314,858 235,275 198,539 36,736 79,583 111 Time certificates of deposit of $100,000 or more 239,410 186,911 151,974 34,937 52,499 11? Open-account time deposits of $100,000 or more 31,093 27,472 18,474 8,998 3,620 113 All NOW accounts (including Super NOW accounts) 124,189 95,020 79,128 15,892 29,168 114 Total time and savings deposits 1,153,314 892,628 728,355 164,273 260,686 Quarterly averages 115 11,,228888,,665588 1,042,931 883366,,665544 220066,,227777 224455,,772277 116 Obligations (other than securities) of states and political subdivisions in the United States 52,036 43,692 32,327 11,365 8,344 117 Transaction accounts (NOW accounts, ATS accounts, and telephone preauthorized 133,359 102,676 84,523 18,152 30,684 Nontransaction accounts 118 Money market deposit accounts (MMDAs) 298,930 236,422 192,167 44,254 62,508 119 141,535 109,357 86,228 23,128 32,179 170 Time certificates of deposit of $100,000 or more 236,033 184,211 150,177 34,034 51,821 121 341,260 259,078 213,634 45,444 82,182 122 2,596 1,505 1,272 233 1,091 Footnotes appear at the end of table 4.22 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 Special Tables • April 1988 4.22 DOMESTIC OFFICES, Insured Commercial Bank Assets and Liabilities'-2 3 Consolidated Report of Condition, September 30, 1987 Millions of dollars Members NNoonn-- IItteemm mmeemmbbeerrss Total National State 2,506,519 1,876,616 1,474,812 401,805 629,903 2 Cash and balances due from depository institutions 202,590 156,250 121,201 35,050 46,340 24,402 18,498 15,250 3,248 5,904 4 Noninterest-bearing balances due from commercial banks 32,478 19,112 15,483 3,629 13,366 5 Other 145,710 118,640 90,467 28,173 27,070 6 Total securities, loans, and lease financing receivables (net of unearned income) 2,144,771 1,587,952 1,261,027 326,926 556,818 7 Total securities, book value 469,347 316,383 249,575 66,808 152,963 8 U.S. Treasury securities and U.S. government agency and corporation obligations 301,945 198,812 160,436 38,376 103,132 9 Securities issued by states and political subdivisions in the United States 121,837 86,671 64,642 22,029 35,166 1,731 965 804 162 766 120,106 85,706 63,838 21,868 34,400 45,566 30,900 24,497 6,403 14,665 13 All holdings of private certificates of participation in pools of residential mortgages 7,232 5,521 3,441 2,080 1,711 14 All other 38,333 25,379 21,056 4,323 12,954 15 Federal funds sold and securities purchased under agreements to resell 130,131 101,338 74,615 26,723 28,793 16 Total loans and lease financing receivables, gross 1,558,135 1,179,140 943,674 235,466 378,995 17 LESS: Unearned income on loans 12,842 8,909 6,837 2,072 3,933 18 Total loans and leases (net of unearned income) 1,545,293 1,170,231 936,837 233,394 375,062 Total loans, gross, by category 19 Loans secured by real estate 552,156 338888,,996622 332288,,992255 6600,,003377 116633,,119944 20 Construction and land development 116,830 92,421 75,731 16,689 24,409 21 Farmland 14,118 6,647 5,620 1,028 7,471 22 1-4 family residential properties 245,205 166,958 141,802 25,157 78,247 23 Multifamily (5 or more) residential properties 16,783 12,342 10,696 1,646 4,441 24 Nonfarm nonresidential properties 159,220 110,593 95,076 15,517 48,627 25 Loans to depository institutions 36,846 32,641 23,835 8,806 4,205 26 Loans to finance agricultural production and other loans to farmers 30,641 16,253 13,744 2,509 14,388 27 Commercial and industrial loans 467,615 368,706 286,476 82,230 98,909 28 Acceptances of other banks 2,996 1,869 1,646 223 1,127 29 Loans to individuals for household, family, and other personal expenditures (includes purchased paper) 312,302 235,319 191,522 43,797 76,983 30 Obligations (other than securities) of states and political subdivisions in the United States 54,014 44,112 33,170 10,942 9,902 31 Nonrated industrial development obligations 1,798 1,210 1,050 160 587 32 Other obligations (excluding securities) 52,216 42,901 32,120 10,782 9,315 33 All other loans 77,057 69,604 47,052 22,553 7,453 34 Lease financing receivables 24,509 21,675 17,304 4,371 2,834 35 Customers' liability on acceptances outstanding 27,777 26,854 19,294 7,561 923 36 Net due from own foreign offices, Edge and agreement subsidiaries, and IBFs 35,070 31,570 23,482 8,087 3,501 131,381 105,559 73,291 32,269 25,822 38 Total liabilities and equity capital 2,506,519 1,876,616 1,474,812 401,805 629,903 39 Total liabilities7 2,328,971 1,749,086 1,375,118 373,968 579,885 40 Total deposits 1,886,084 1,355,751 1,087,193 268,558 530,333 41 Individuals, partnerships, and corporations 1,695,721 1,212,351 978,489 233,862 483,369 42 U.S. government 6,870 5,482 4,546 937 1,388 43 States and political subdivisions in the United States 100,567 66,925 55,772 11,153 33,642 44 Commercial banks in the United States 45,330 40,628 29,818 10,810 4,702 45 Other depository institutions in the United States 8,892 6,440 4,608 1,832 2,451 46 Certified and official checks 18,561 14,587 9,199 5,388 3,973 47 All other 10,147 9,339 4,765 4,574 808 48 Total transaction accounts 599,996 452,989 352,412 100,577 147,007 49 Individuals, partnerships, and corporations 508,644 376,297 298,849 77,448 132,347 50 U.S. government 5,361 4,325 3,490 835 1,036 51 States and political subdivisions in the United States 23,193 16,011 13,059 2,952 7,182 52 Commercial banks in the United States 30,029 28,564 20,297 8,267 1,465 53 Other depository institutions in the United States 5,758 4,995 3,369 1,626 763 54 Certified and official checks 18,561 14,587 9,199 5,388 3,973 55 All other 8,449 8,209 4,151 4,059 240 56 Demand deposits (included in total transaction accounts) 424,890 334,564 253,296 81,269 90,326 57 Individuals, partnerships, and corporations 343,315 263,691 204,480 59,211 79,624 58 U.S. government 5,314 4,292 3,462 830 1,022 59 States and political subdivisions in the United States 13,485 10,237 8,345 1,892 3,248 60 Commercial banks in the United States 30,026 28,563 20,296 8,267 1,463 61 Other depository institutions in the United States 5,745 4,990 3,364 1,626 755 62 Certified and official checks 18,561 14,587 9,199 5,388 3,973 63 All other 8,442 8,202 4,145 4,056 240 64 Total nontransaction accounts 1,286,088 902,762 734,781 167,982 383,326 65 Individuals, partnerships, and corporations 1,187,077 836,055 679,641 156,414 351,023 66 U.S. government 1,509 1,158 1,056 102 352 67 States and political subdivisions in the United States 77,374 50,915 42,713 8,201 26,460 68 Commercial banks in the United States 15,300 12,064 9,521 2,543 3,236 69 Other depository institutions in the United States 3,134 1,446 1,240 206 1,688 70 All other 1,697 1,130 614 516 567 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banks A75 4.22 Continued Members NNoonn-- IItteemm TToottaall mmeemmbbeerrss Total National State 71 Federal funds purchased and securities sold under agreements to repurchase 233,484 208,398 160,001 48,397 25,087 72 Demand notes issued to the U.S. Treasury 27,346 24,816 19,827 4,988 2,530 73 Other borrowed money 62,310 53,143 38,522 14,620 9,167 74 Banks liability on acceptances executed and outstanding 28,628 27,706 20,107 7,599 923 75 Notes and debentures subordinated to deposits 2,389 1,304 1,168 136 1,085 76 Net due to own foreign offices, Edge and agreement subsidiaries, and IBFs 18,017 16,630 9,840 6,790 1,387 77 Remaining liabilities 88,730 77,969 48,300 29,669 10,761 78 Total equity capital9 177,548 127,530 99,694 27,836 50,017 MEMO 79 Assets held in trading accounts10 19,779 19,467 11,723 7,743 313 80 U.S. Treasury securities 9,735 9,704 4,801 4,903 32 81 U.S. government agency corporation obligations 4,285 4,284 3,030 1,254 1 82 Securities issued by states and political subdivisions in the United States 2,440 2,426 1,710 715 14 83 Other bonds, notes and debentures 182 181 96 85 1 84 Certificates of deposit 385 381 345 36 4 85 Commercial paper 46 46 46 0 0 86 Bankers acceptances 1,371 1,363 880 483 8 87 Other 874 863 608 255 11 88 Total individual retirement accounts (IRA) and Keogh plan accounts 81,068 56,811 46,938 9,873 24,257 89 Total brokered deposits 29,736 24,454 20,556 3,898 5,282 90 Total brokered retail deposits 7,949 6,136 5,184 952 1,813 91 Issued in denominations of $100,000 or less 3,797 2,462 2,277 184 1,336 92 Issued in denominations greater than $100,000 and participated out by the broker in shares of $100,000 or less 4,151 3,674 2,907 768 477 Savings deposits 93 Money market deposit accounts (MMDAs) 352,226 258,832 210,510 48,322 93,394 94 Other savings deposits 175,275 122,941 96,612 26,330 52,333 95 Total time deposits of less than $100,000 444,308 286,414 240,267 46,147 157,894 96 Time certificates of deposit of $100,000 or more 281,573 206,516 168,454 38,061 75,057 97 Open-account time deposits of $100,000 or more 32,707 28,059 18,937 9,121 4,648 98 All NOW accounts (including Super NOW) 166,081 112,308 93,500 18,808 53,773 99 Total time and savings deposits 1,461,194 1,021,187 833,898 187,289 440,007 Quarterly averages 100 Total loans 1,500,401 1,132,484 909,558 222,926 367,917 101 Transaction accounts (NOW accounts, ATS accounts, and telephone and preauthorized transfer accounts) 176,910 120,427 99,248 21,179 56,483 Nontransaction accounts 102 Money market deposit accounts (MMDAs) 355,384 261,300 212,613 48,687 94,084 103 Other savings deposits 176,169 123,918 97,896 26,021 52,251 104 Time certificates of deposit of $100,000 or more 277,643 203,595 166,540 37,055 74,048 105 All other time deposits 471,741 310,498 255,643 54,856 161,243 106 Number of banks 13,687 5,747 4,649 1,098 7,940 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 Federal Reserve Board of Governors ALAN GREENSPAN, Chairman MARTHA R. SEGER MANUEL H. JOHNSON, Vice Chairman WAYNE D. ANGELL OFFICE OF BOARD MEMBERS DIVISION OF INTERNATIONAL FINANCE JOSEPH R. COYNE, Assistant to the Board EDWIN M. TRUMAN, Staff Director DONALD J. WINN, Assistant to the Board LARRY J. PROMISEL, Senior Associate Director LYNN SMITH Fox, Special Assistant to the Board CHARLES J. SIEGMAN, Senior Associate Director BOB STAHLY MOORE, Special Assistant to the Board DAVID H. HOWARD, Deputy Associate Director ROBERT F. GEMMILL, Staff Adviser DONALD B. ADAMS, Assistant Director LEGAL DIVISION PETER HOOPER III, Assistant Director KAREN H. JOHNSON, Assistant Director MICHAEL BRADFIELD, General Counsel RALPH W. SMITH, JR., Assistant Director J. VIRGIL MATTINGLY, JR., Deputy General Counsel RICHARD M. ASHTON, Associate General Counsel OLIVER IRELAND, Associate General Counsel DIVISION OF RESEARCH AND STATISTICS RICKI R. TIGERT, Assistant General Counsel MARYELLEN A. BROWN, Assistant to the General Counsel MICHAEL J. PRELL, Director EDWARD C. ETTIN, Deputy Director JARED J. ENZLER, Associate Director OFFICE OF THE SECRETARY THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director WILLIAM W. WILES, Secretary ELEANOR J. STOCKWELL, Associate Director BARBARA R. LOWREY, Associate Secretary MARTHA BETHEA, Deputy Associate Director JAMES MCAFEE, Associate Secretary PETER A. TINSLEY, Deputy Associate Director MARK N. GREENE, Assistant Director MYRON L. KWAST, Assistant Director DIVISION OF CONSUMER SUSAN J. LEPPER, Assistant Director AND COMMUNITY AFFAIRS MARTHA S. SCANLON, Assistant Director DAVID J. STOCKTON, Assistant Director JOYCE K. ZICKLER, Assistant Director GRIFFITH L. GARWOOD, Director GLENN E. LONEY, Assistant Director LEVON H. GARABEDIAN, Assistant Director (Administration) ELLEN MALAND, Assistant Director DOLORES S. SMITH, Assistant Director DIVISION OF MONETARY AFFAIRS DIVISION OF BANKING SUPERVISION AND REGULATION DONALD L. KOHN, Director DAVID E. LINDSEY, Deputy Director WILLIAM TAYLOR, Staff Director BRIAN F. MADIGAN, Assistant Director DON E. KLINE, Associate Director RICHARD D. PORTER, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board FREDERICK M. STRUBLE, Associate Director WILLIAM A. RYBACK, Deputy Associate Director STEPHEN C. SCHEMERING, Deputy Associate Director OFFICE OF THE INSPECTOR GENERAL RICHARD SPILLENKOTHEN, Deputy Associate Director HERBERT A. BIERN, Assistant Director BRENT L. BOWEN, Inspector General 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. SUSS AN, Assistant Director LAURA M. HOMER, Securities Credit Officer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All 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 HUMAN RESOURCES MANAGEMENT CLYDE H. FARNSWORTH, JR., Director DAVID L. SHANNON, Director ELLIOTT C. MCENTEE, Associate Director JOHN R. WEIS, Associate Director DAVID L. ROBINSON, Associate Director ANTHONY V. DIGIOIA, Assistant Director C. WILLIAM SCHLEICHER, JR., Associate Director JOSEPH H. HAYES, JR., Assistant Director CHARLES W. BENNETT, Assistant Director FRED HOROWITZ, Assistant Director JACK DENNIS, JR., Assistant Director EARL G. HAMILTON, Assistant Director JOHN H. PARRISH, Assistant Director OFFICE OF THE CONTROLLER LOUISE L. ROSEMAN, Assistant Director FLORENCE M. YOUNG, Adviser GEORGE E. LIVINGSTON, Controller STEPHEN J. CLARK, Assistant Controller (Programs and Budgets) DARRELL R. PAULEY, Assistant Controller (Finance) DIVISION OF SUPPORT SERVICES ROBERT E. FRAZIER, Director GEORGE M. LOPEZ, Assistant Director DAVID L. WILLIAMS, 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

78 Federal Reserve Bulletin • April 1988 Federal Open Market Committee FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman E. GERALD CORRIGAN, Vice Chairman WAYNE D. ANGELL H. ROBERT HELLER EDWARD W. KELLEY, JR. ROBERT P. BLACK W. LEE HOSKINS ROBERT T. PARRY ROBERT P. FORRESTAL MANUEL H. JOHNSON MARTHA R. SEGER ALTERNATE MEMBERS ROGER GUFFEY THOMAS C. MELZER THOMAS M. TIMLEN SILAS KEEHN FRANK E. MORRIS STAFF DONALD L. KOHN, Secretary and Staff Adviser JOHN M. DAVIS, Associate Economist NORMAND R.V. BERNARD, Assistant Secretary RICHARD G. DAVIS, Associate Economist ROSEMARY R. LONEY, Deputy Assistant Secretary DAVID E. LINDSEY, Associate Economist MICHAEL BRADFIELD, General Counsel MICHAEL J. PRELL, Associate Economist ERNEST T. PATRIKIS, Deputy General Counsel CHARLES J. SIEGMAN, Associate Economist EDWIN M. TRUMAN, Economist (International) THOMAS D. SIMPSON, Associate Economist JOHN H. BEEBE, Associate Economist SHEILA L. TSCHINKEL, Associate Economist J. ALFRED BROADDUS, JR., 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 CHARLES T. FISHER, III, President BENNETT A. BROWN, Vice President J. TERRENCE MURRAY, First District CHARLES T. FISHER, III, Seventh District WILLARD C. BUTCHER, Second District DONALD N. BRANDIN, Eighth District SAMUEL A. MCCULLOUGH, Third District DEWALT H. ANKENY, JR., Ninth District THOMAS H. O'BRIEN, Fourth District F. PHILLIPS GILTNER, Tenth District FREDERICK DEANE, JR., Fifth District GERALD W. FRONTERHOUSE, Eleventh District BENNETT A. BROWN, Sixth District PAUL HAZEN, Twelfth District HERBERT V. PROCHNOW, Secretary WILLIAM J. KORSVIK, Associate Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 and Advisory Councils CONSUMER ADVISORY COUNCIL STEVEN W. HAMM, Columbia, South Carolina, Chairman EDWARD J. WILLIAMS, Chicago, Illinois, Vice Chairman NAOMI G. ALBANESE, Greensboro, North Carolina ROBERT A. HESS, Washington, D.C. STEPHEN BROBECK, Washington, D.C. ROBERT J. HOBBS, Boston, Massachusetts EDWIN B. BROOKS, JR., Richmond, Virginia RAMON E. JOHNSON, Salt Lake City, Utah JUDITH N. BROWN, Edina, Minnesota ROBERT W. JOHNSON, West Lafayette, Indiana MICHAEL S. CASSIDY, New York, New York A. J. (JACK) KING, Kalispell, Montana BETTY TOM CHU, Arcadia, California JOHN M. KOLESAR, Cleveland, Ohio JERRY D. CRAFT, Atlanta, Georgia ALAN B. LERNER, Dallas, Texas DONALD C. DAY, Boston, Massachusetts RICHARD L. D. MORSE, Manhattan, Kansas RICHARD B. DOBY, Denver, Colorado WILLIAM E. ODOM, Dearborn, Michigan RICHARD H. FINK, Washington, D.C. SANDRA R. PARKER, Richmond, Virginia NEIL J. FOGARTY, Jersey City, New Jersey SANDRA PHILLIPS, Pittsburgh, Pennsylvania STEPHEN GARDNER, Dallas, Texas JANE SHULL, Philadelphia, Pennsylvania KENNETH A. HALL, Picayune, Mississippi RALPH E. SPURGIN, Columbus, Ohio ELENA G. HANGGI, Little Rock, Arkansas LAWRENCE WINTHROP, Portland, Oregon THRIFT INSTITUTIONS ADVISORY COUNCIL JAMIE J. JACKSON, Houston, Texas, President GERALD M. CZARNECKI, Honolulu, Hawaii, Vice President ROBERT S. DUNCAN, Hattiesburg, Mississippi JOSEPH W. MOSMILLER, Baltimore, Maryland BETTY GREGG, Phoenix, Arizona JANET M. PAVLISKA, Arlington, Massachusetts THOMAS A. KINST, Hoffman Estates, Illinois LOUIS H. PEPPER, Seattle, Washington RAY MARTIN, Los Angeles, California WILLIAM G. SCHUETT, Milwaukee, Wisconsin JOE C. MORRIS, Emporia, Kansas DONALD B. SHACKELFORD, Columbus, Ohio Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 Federal Reserve Board Publications Copies are available from PUBLICATIONS SERVICES, PUBLIC POLICY AND CAPITAL FORMATION. 1981. 326 pp. Mail Stop 138, Board of Governors of the Federal Reserve $13.50 each. System, Washington, D.C. 20551. When a charge is indicat- FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; updated, payment should accompany request and be made to the ed at least monthly. (Requests must be prepaid.) Board of Governors of the Federal Reserve System. Payment Consumer and Community Affairs Handbook. $75.00 per from foreign residents should be drawn on a U.S. bank. year. Stamps and coupons are not accepted. Monetary Policy and Reserve Requirements Handbook. $75.00 per year. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNC- Securities Credit Transactions Handbook. $75.00 per year. TIONS. 1984. 120 pp. Federal Reserve Regulatory Service. 3 vols. (Contains all ANNUAL REPORT. three Handbooks plus substantial additional material.) ANNUAL REPORT: BUDGET REVIEW, 1986-87. $200.00 per year. FEDERAL RESERVE BULLETIN. Monthly. $20.00 per year or Rates for subscribers outside the United States are as $2.00 each in the United States, its possessions, Canada, follows and include additional air mail costs: and Mexico; 10 or more of same issue to one address, Federal Reserve Regulatory Service, $250.00 per year. $18.00 per year or $1.75 each. Elsewhere, $24.00 per Each Handbook, $90.00 per year. year or $2.50 each. THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint MULTICOUNTRY MODEL, May 1984. 590 pp. $14.50 each. of Part I only) 1976. 682 pp. $5.00. WELCOME TO THE FEDERAL RESERVE. BANKING AND MONETARY STATISTICS. 1941-1970. 1976. PROCESSING AN APPLICATION THROUGH THE FEDERAL RE- 1,168 pp. $15.00. SERVE SYSTEM. August 1985. 30 pp. ANNUAL STATISTICAL DIGEST INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. 1974-78. 1980. 305 pp. $10.00 per copy. 440 pp. $9.00 each. 1981. 1982. 239 pp. $ 6.50 per copy. FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. 1982. 1983. 266 pp. $ 7.50 per copy. December 1986. 264 pp. $10.00 each. 1983. 1984. 264 pp. $11.50 per copy. 1984. 1985. 254 pp. $12.50 per copy. 1985. 1986. 231 pp. $15.00 per copy. 1986. 1987. 288 pp. $15.00 per copy. CONSUMER EDUCATION PAMPHLETS HISTORICAL CHART BOOK. Issued annually in Sept. $1.25 Short pamphlets suitable for classroom use. Multiple copies each in the United States, its possessions, Canada, and are available without charge. Mexico; 10 or more to one address, $1.00 each. Elsewhere, $1.50 each. Consumer Handbook on Adjustable Rate Mortgages SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SE- Consumer Handbook to Credit Protection Laws RIES OF CHARTS. Weekly. $21.00 per year or $.50 each in Fair Credit Billing the United States, its possessions, Canada, and Mexico; Federal Reserve Glossary 10 or more of same issue to one address, $19.50 per year A Guide to Business Credit and the Equal Credit Opportunity or $.45 each. Elsewhere, $26.00 per year or $.60 each. Act THE FEDERAL RESERVE ACT, and other statutory provisions Guide to Federal Reserve Regulations affecting the Federal Reserve System, as amended How to File A Consumer Credit Complaint through April 20, 1983, with Supplements covering If You Borrow To Buy Stock amendments through August 1987. 576 pp. $7.00. If You Use A Credit Card REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- Series on the Structure of the Federal Reserve System ERAL RESERVE SYSTEM. The Board of Governors of the Federal Reserve System ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— The Federal Open Market Committee Regulation Z) Vol. I (Regular Transactions). 1969. 100 Federal Reserve Bank Board of Directors pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each Federal Reserve Banks volume $2.25; 10 or more of same volume to one Organization and Advisory Committees address, $2.00 each. FEDERAL RESERVE MEASURES OF CAPACITY AND CAPACITY UTILIZATION. 1978. 40 pp. $1.75 each; 10 or more to one address, $1.50 each. PAMPHLETS FOR FINANCIAL INSTITUTIONS THE BANK HOLDING COMPANY MOVEMENT TO 1978: A Short pamphlets on regulatory compliance, primarily suit- COMPENDIUM. 1978. 289 pp. $2.50 each; 10 or more to able for banks, bank holding companies and creditors. one address, $2.25 each. INTRODUCTION TO FLOW OF FUNDS. 1980. 68 pp. $1.50 each; 10 or more to one address, $1.25 each. Limit of 50 copies Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 The Board of Directors' Opportunities in Community Rein- 134. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET vestment INTERVENTION: A REVIEW OF THE LITERATURE, by The Board of Directors' Role in Consumer Law Compliance Ralph W. Tryon. October 1983. 14 pp. Out of print. Combined Construction/Permanent Loan Disclosure and 135. SMALL EMPIRICAL MODELS OF EXCHANGE MARKET Regulation Z INTERVENTION: APPLICATIONS TO CANADA, GERMA- Community Development Corporations and the Federal Re- NY, AND JAPAN, by Deborah J. Danker, Richard A. serve Haas, Dale W. Henderson, Steven A. Symansky, and Construction Loan Disclosures and Regulation Z Ralph W. Tryon. April 1985. 27 pp. Out of print. Finance Charges Under Regulation Z 136. THE EFFECTS OF FISCAL POLICY ON THE U.S. ECONO- How to Determine the Credit Needs of Your Community MY, by Darrell Cohen and Peter B. Clark. January Regulation Z: The Right of Rescission 1984. 16 pp. Out of print. The Right to Financial Privacy Act 137. THE IMPLICATIONS FOR BANK MERGER POLICY OF Signature Rules in Community Property States: Regulation B FINANCIAL DEREGULATION, INTERSTATE BANKING, Signature Rules: Regulation B AND FINANCIAL SUPERMARKETS, by Stephen A. Timing Requirements for Adverse Action Notices: Regula- Rhoades. February 1984. Out of print. tion B 138. ANTITRUST LAWS, JUSTICE DEPARTMENT GUIDE- What An Adverse Action Notice Must Contain: Regulation B LINES, AND THE LIMITS OF CONCENTRATION IN LO- Understanding Prepaid Finance Charges: Regulation Z CAL BANKING MARKETS, by James Burke. June 1984. Closing the Loan: A Consumer's Guide to Mortgage Settle- 14 pp. Out of print. ment Costs 139. SOME IMPLICATIONS OF FINANCIAL INNOVATIONS IN Refinancing Your Mortgage THE UNITED STATES, by Thomas D. Simpson and A Consumer's Guide to Lock-Ins Patrick M. Parkinson. August 1984. 20 pp. 140. GEOGRAPHIC MARKET DELINEATION: A REVIEW OF THE LITERATURE, by John D. Wolken. November STAFF STUDIES.- Summaries Only Printed in the 1984. 38 pp. Out of print. Bulletin 141. A COMPARISON OF DIRECT DEPOSIT AND CHECK PAY- Studies and papers on economic and financial subjects that MENT COSTS, by William Dudley. November 1984. are of general interest. Requests to obtain single copies of 15 pp. Out of print. the full text or to be added to the mailing list for the series 142. MERGERS AND ACQUISITIONS BY COMMERCIAL may be sent to Publications Services. BANKS, 1960-83, by Stephen A. Rhoades. December 1984. 30 pp. Out of print. 143. COMPLIANCE COSTS AND CONSUMER BENEFITS OF Staff Studies 115-125 are out of print. THE ELECTRONIC FUND TRANSFER ACT: RECENT SURVEY EVIDENCE, by Frederick J. Schroeder. April 1985. 23 pp. Out of print. 114. MULTIBANK HOLDING COMPANIES: RECENT EVI- 144. SCALE ECONOMIES IN COMPLIANCE COSTS FOR CON- DENCE ON COMPETITION AND PERFORMANCE IN SUMER CREDIT REGULATIONS: THE TRUTH IN LEND- BANKING MARKETS, by Timothy J. Curry and John T. ING AND EQUAL CREDIT OPPORTUNITY LAWS, by Rose. Jan. 1982. 9 pp. Gregory E. Elliehausen and Robert D. Kurtz. May 126. DEFINITION AND MEASUREMENT OF EXCHANGE MAR- 1985. 10 pp. KET INTERVENTION, by Donald B. Adams and Dale 145. SERVICE CHARGES AS A SOURCE OF BANK INCOME W. Henderson. August 1983. 5 pp. Out of print. AND THEIR IMPACT ON CONSUMERS, by Glenn B. 127. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- Canner and Robert D. Kurtz. August 1985. 31 pp. Out VENTION: JANUARY-MARCH 1975, by Margaret L. of print. Greene. August 1984. 16 pp. Out of print. 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF 128. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- BUSINESS LOANS BY COMMERCIAL BANKS, 1977-84, VENTION: SEPTEMBER 1977-DECEMBER 1979, by Mar- by Thomas F. Brady. November 1985. 25 pp. garet L. Greene. October 1984. 40 pp. Out of print. 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) 129. U.S. EXPERIENCE WITH EXCHANGE MARKET INTER- INDEXES OF THE MONETARY AGGREGATES, by Helen VENTION: OCTOBER I98O-OCTOBER 1981, by Margaret T. Farr and Deborah Johnson. December 1985. 42 pp. L. Greene. August 1984. 36 pp. 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF 130. EFFECTS OF EXCHANGE RATE VARIABILITY ON IN- THE ECONOMIC RECOVERY TAX ACT: SOME SIMULA- TERNATIONAL TRADE AND OTHER ECONOMIC VARIA- TION RESULTS, by Flint Brayton and Peter B. Clark. BLES: A REVIEW OF THE LITERATURE, by Victoria S. December 1985. 17 pp. Farrell with Dean A. DeRosa and T. Ashby McCown. 149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS January 1984. Out of print. IN BANKING BEFORE AND AFTER ACQUISITION, by 131. CALCULATIONS OF PROFITABILITY FOR U.S. DOLLAR- Stephen A. Rhoades. April 1986. 32 pp. DEUTSCHE MARK INTERVENTION, by Laurence R. 150. STATISTICAL COST ACCOUNTING MODELS IN BANK- Jacobson. October 1983. 8 pp. ING: A REEXAMINATION AND AN APPLICATION, by 132. TIME-SERIES STUDIES OF THE RELATIONSHIP BE- John T. Rose and John D. Wolken. May 1986. 13 pp. TWEEN EXCHANGE RATES AND INTERVENTION: A 151. RESPONSES TO DEREGULATION: RETAIL DEPOSIT REVIEW OF THE TECHNIQUES AND LITERATURE, by PRICING FROM 1983 THROUGH 1985, by Patrick I. Kenneth Rogoff. October 1983. 15 pp. Mahoney, Alice P. White, Paul F. O'Brien, and Mary 133. RELATIONSHIPS AMONG EXCHANGE RATES, INTER- M. McLaughlin. January 1987. 30 pp. VENTION, AND INTEREST RATES: AN EMPIRICAL IN- 152. DETERMINANTS OF CORPORATE MERGER ACTIVITY: A VESTIGATION, by Bonnie E. Loopesko. November REVIEW OF THE LITERATURE, by Mark J. War- 1983. Out of print. shawsky. April 1987. 18 pp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 153. STOCK MARKET VOLATILITY, by Carolyn D. Davis Bank Lending to Developing Countries. 10/84. and Alice P. White. September 1987. 14 pp. Survey of Consumer Finances, 1983: A Second Report. 154. THE EFFECTS ON CONSUMERS AND CREDITORS OF 12/84. PROPOSED CEILINGS ON CREDIT CARD INTEREST Union Settlements and Aggregate Wage Behavior in the RATES, by Glenn B. Canner and James T. Fergus. 1980s. 12/84. October 1987. 783 pp. The Thrift Industry in Transition. 3/85. 155. THE FUNDING OF PRIVATE PENSION PLANS, by Mark A Revision of the Index of Industrial Production. 7/85. J. Warshawsky. November 1987. 25 pp. Financial Innovation and Deregulation in Foreign Industrial Countries. 10/85. Recent Developments in the Bankers Acceptance Market. 1/86. REPRINTS OF BULLETIN ARTICLES The Use of Cash and Transaction Accounts by American Most of the articles reprinted do not exceed 12 pages. Families. 2/86. Financial Characteristics of High-Income Families. 3/86. Prices, Profit Margins, and Exchange Rates. 6/86. Limit of 10 copies Agricultural Banks under Stress. 7/86. Foreign Lending by Banks: A Guide to International and U.S. Statistics. 10/86. Foreign Experience with Targets for Money Growth. 10/83. Recent Developments in Corporate Finance. 11/86. Intervention in Foreign Exchange Markets: A Summary of U.S. International Transactions in 1986. 5/87. Ten Staff Studies. 11/83. Measuring the Foreign-Exchange Value of the Dollar. 6/87. A Financial Perspective on Agriculture. 1/84. Changes in Consumer Installment Debt: Evidence from the Survey of Consumer Finances, 1983. 9/84. 1983 and 1986 Surveys of Consumer Finances. 10/87. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A83 Index to Statistical Tables References are to pages A3-A75 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 19, 20 Ownership by individuals, partnerships, and Assets and liabilities (See also Foreigners) corporations, 22 Banks, by classes, 18-20, 70-75 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 Automobiles Federal Reserve Banks, 4, 10 Consumer installment credit, 40, 41 Turnover, 15 Production, 47, 48 Discount rates at Reserve Banks and at foreign central banks and foreign countries (See Interest rates) Discounts and advances by Reserve Banks (See Loans) BANKERS acceptances, 9, 23, 24 Dividends, corporate, 35 Bankers balances, 18-20, 70, 72, 74. (See also Foreigners) Bonds (See also U.S. government securities) EMPLOYMENT, 45 New issues, 34 Eurodollars, 24 Rates, 24 Branch banks, 21, 55 Business activity, nonfinancial, 44 FARM mortgage loans, 39 Business expenditures on new plant and equipment, 36 Federal agency obligations, 4, 9, 10, 11, 31, 32 Business loans (See Commercial and industrial loans) Federal credit agencies, 33 Federal finance Debt subject to statutory limitation, and types and CAPACITY utilization, 46 ownership of gross debt, 30 Capital accounts Receipts and outlays, 28, 29 Banks, by classes, 18, 71, 73, 75 Treasury financing of surplus, or deficit, 28 Federal Reserve Banks, 10 Treasury operating balance, 28 Central banks, discount rates, 67 Federal Financing Bank, 28, 33 Certificates of deposit, 24 Federal funds, 6, 17, 19, 20, 21, 24, 28 Commercial and industrial loans Federal Home Loan Banks, 33 Commercial banks, 16, 19, 70, 72, 74 Federal Home Loan Mortgage Corporation, 33, 38, 39 Weekly reporting banks, 19-21 Federal Housing Administration, 33, 38, 39 Commercial banks Federal Land Banks, 39 Assets and liabilities, 18-20, 70, 75 Federal National Mortgage Association, 33, 38, 39 Commercial and industrial loans, 16, 18, 19, 20, 21 Federal Reserve Banks Consumer loans held, by type, and terms, 40, 41 Condition statement, 10 Loans sold outright, 19 Discount rates (See Interest rates) Nondeposit funds, 17 U.S. government securities held, 4, 10, 11, 30 Number, by classes, 71, 73, 75 Federal Reserve credit, 4, 5, 10, 11 Real estate mortgages held, by holder and property, 39 Federal Reserve notes, 10 Time and savings deposits, 3 Federal Savings and Loan Insurance Corporation insured Commercial paper, 23, 24, 37 institutions, 26 Condition statements (See Assets and liabilities) Federally sponsored credit agencies, 33 Construction, 44, 49 Finance companies Consumer installment credit, 40, 41 Assets and liabilities, 37 Consumer prices, 44, 50 Business credit, 37 Consumption expenditures, 51, 52 Loans, 40, 41 Corporations Paper, 23, 24 Nonfinancial, assets and liabilities, 36 Financial institutions Profits and their distribution, 35 Loans to, 19, 20, 21 Security issues, 34, 65 Selected assets and liabilities, 26 Cost of living (See Consumer prices) Float, 4 Credit unions, 26, 40. (See also Thrift institutions) Flow of funds, 42, 43 Currency and coin, 18, 70, 72, 74 Foreign banks, assets and liabilities of U.S. branches and Currency in circulation, 4, 13 agencies, 21 Customer credit, stock market, 25 Foreign currency operations, 10 Foreign deposits in U.S. banks, 4, 10, 19, 20 Foreign exchange rates, 68 DEBITS to deposit accounts, 15 Foreign trade, 54 Debt (See specific types of debt or securities) Foreigners Demand deposits Claims on, 55, 57, 60, 61, 62, 64 Banks, by classes, 18-21, 71, 73, 75 Liabilities to, 20, 54, 55, 57, 58, 63, 65, 66 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A84 GOLD Real estate loans—Continued Certificate account, 10 Financial institutions, 26 Stock, 4, 54 Terms, yields, and activity, 38 Government National Mortgage Association, 33, 38, 39 Type of holder and property mortgaged, 39 Gross national product, 51 Repurchase agreements, 6, 17, 19, 20, 21 Reserve requirements, 8 Reserves HOUSING, new and existing units, 49 Commercial banks, 18, 71 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 Consumer installment credit, 41 SAVING Federal Reserve Banks, 7 Flow of funds, 42, 43 Foreign central banks and foreign countries, 67 National income accounts, 51 Money and capital markets, 24 Savings and loan associations, 26, 39, 40, 42. (See also Mortgages, 38 Thrift institutions) Prime rate, 23 Savings banks, 26, 39, 40 International capital transactions of United States, 53-67 Savings deposits (See Time and savings deposits) International organizations, 57, 58, 60, 63, 64 Securities (See also specific types) Inventories, 51 Federal and federally sponsored credit agencies, 33 Investment companies, issues and assets, 35 Foreign transactions, 65 Investments (See also specific types) New issues, 34 Banks, by classes, 18, 19, 20, 21, 26 Prices, 25 Commercial banks, 3, 16, 18-20, 39, 70 Special drawing rights, 4, 10, 53, 54 Federal Reserve Banks, 10, 11 State and local governments Financial institutions, 26, 39 Deposits, 19, 20 Holdings of U.S. government securities, 30 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 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 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 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 Profits, corporate, 35 WEEKLY reporting banks, 19-21 Wholesale (producer) prices, 44, 50 REAL estate loans Banks, by classes, 16, 19, 20, 39, 72 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A85 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK, Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON* 02106 George N. Hatsopoulos Frank E. Morris Richard N. Cooper Robert W. Eisenmenger NEW YORK* 10045 John R. Opel E. Gerald Corrigan To be announced Thomas M. Timlen Buffalo 14240 Mary Ann Lambertsen John T. Keane PHILADELPHIA 19105 Nevius M. Curtis Edward G. Boehne Peter A. Benoliel William H. Stone, Jr. CLEVELAND* 44101 Charles W. Parry W. Lee Hoskins John R. Miller William H. Hendricks Cincinnati 45201 Owen B. Butler Charles A. Cerino1 Pittsburgh 15230 James E. Haas Harold J. Swart1 RICHMOND* 23219 Robert A. Georgine Robert P. Black Hanne Merriman Jimmie R. Monhollon Baltimore 21203 Thomas R. Shelton Robert D. McTeer, Jr.1 Charlotte 28230 G. Alex Bernhardt Albert D. Tinkelenberg1 Culpeper Communications John G. Stoides1 and Records Center 22701 ATLANTA 30303 Bradley Currey, Jr. Robert P. Forrestal Larry L. Prince Jack Guynn Delmar Harrison1 Birmingham 35283 Roy D. Terry Fred R. Herr1 Jacksonville 32231 E. William Nash, Jr. James D. Hawkins1 Miami 33152 Sue McCourt Cobb Patrick K. Barron1 Nashville 37203 Condon S. Bush Donald E. Nelson New Orleans 70161 Sharon A. Perlis Henry H. Bourgaux CHICAGO* 60690 Robert J. Day Silas Keehn Marcus Alexis Daniel M. Doyle Detroit 48231 Richard T. Lindgren Roby L. Sloan1 ST. LOUIS 63166 Robert L. Virgil, Jr. Thomas C. Melzer H. Edwin Trusheim James R. Bowen Little Rock 72203 James R. Rodgers John F. Breen Louisville 40232 Lois H. Gray James E. Conrad Memphis 38101 Sandra B. Sanderson Paul I. Black, Jr. MINNEAPOLIS 55480 Michael W. Wright Gary H. Stern John A. Rollwagen Thomas E. Gainor Helena 59601 Marcia S. Anderson Robert F. McNellis KANSAS CITY 64198 Irvine O. Hockaday, Jr. Roger Guffey Fred W. Lyons, Jr. Henry R. Czerwinski Denver 80217 James C. Wilson 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. Salvaggio1 El Paso 79999 Peyton Yates Sammie C. Clay Houston 77252 Walter M. Mischer, Jr. Robert Smith, III1 San Antonio 78295 Robert F. McDermott Thomas H. Robertson SAN FRANCISCO 94120 Robert F. Erburu Robert T. Parry Carolyn S. Chambers Carl E. Powell John F. Hoover1 Los Angeles 90051 Richard C. Seaver Thomas C. Warren2 Portland 97208 Paul E. Bragdon Angelo S. Carella1 Salt Lake City 84125 Don M. Wheeler E. Ronald Liggett1 Seattle 98124 Carol A. Nygren Gerald R. Kelly1 *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 1. Senior Vice President. http://fraser.stlouisfed.org/ 2. Executive Vice President. Federal Reserve Bank of St. Louis

A86 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories ® w 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 CONSUMER CREDIT plains how to use the credit laws to shop for credit, PUBLICATIONS 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 resolve a billing error. of charge from Publications Services, Mail Stop 138, The Board also publishes the Consumer Handbook Board of Governors of the Federal Reserve System, to Credit Protection Laws, a complete guide to con- Washington, D.C. 20551. Multiple copies for classsumer credit protections. This 44-page booklet ex- room use are also available free of charge. Fair Credit Billing hrrrr^ i i Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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