Federal Reserve Bulletin, 1988-07

VOLUME 74 • NUMBER 7 • JULY 1988 BOARD OF GOVERNORS OF THE FEDERAL KESERVE SYSTEM, WASHINGTON, D.C. PUBLICATIONS COMMITTEE * ; - r .it.-'. 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 403 THE PROFITABILITY OF INSURED mittee on Banking, Finance and Urban Af- COMMERCIAL BANKS IN 1987 fairs, May 3, 1988. Huge provisions made by large banks for 445 Alan Greenspan, Chairman, Board of Govpossijjte loanjosse^ were the key to an ernors, discusses the Working Group report unpreeeu&nfed in the profitability of to the President on financial markets and U.S.-chartered insured commercial banks their points of vulnerability ;he says that in in 1987. the end, we must be prepared to accept a different pattern of behavior in our equity markets, and our objective must be to en- 419 IMPLEMENTING MONETARY POLICY hance their ability to change and withstand The Federal Reserve's policy goals and bouts of volatility, before the Subcommitoperating procedures have drawn increas- tee on Telecommunications and Finance of ing attention in recent yiars. This article the Committee on Energy and Commerce, ... examines the-formulation and implementa- U.S. House of Representatives, May 19, tion of policy in some detail. $ M'tClmiill^Alspan presented identical testimony before the Senate Committee on Banking, Housing, and Urban Af- 430 TREASURY AND FEDERAL RESERVE fairs, May 24, 1988, and before the House FOREIGN EXCHANGE OPERATIONS Committee on Agriculture, June 14, 1988.) On balance, from the end of January to the end of April, the dollar declined l!/2 percent 450 Michael Bradfield, General Counsel, Board on a trade-weighted basis in terms of the of Governors, reviews the banking law asother Group of Ten currencies, as measured pects of the U.S.-Canada Free Trade Agreement (FTA), which aims to allow fiby the index developed by the staff of the nancial institutions of both countries to op- Federal Reserve Board. erate freely in each other's markets with equality of competitive opportunity, before 435 INDUSTRIAL PRODUCTION the House Committee on Banking, Finance Industrial production increased an esti- and Urban Affairs, May 24, 1988. mated 0.7 percent in April. 453 Governor Angell presents the views of the Board on the application of federal margin 437 STATEMENTS TO CONGRESS regulations to equities and equity-related futures and options and says that the Fed- Wayne D. Angell and Edward W. Kelley, eral Reserve fully endorses a consistent Jr., Members, Board of Governors of the approach to setting margin requirements in Federal Reserve System, discuss and rethe cash, futures, and options markets for view the Federal Reserve System's 1988 equities, before the Subcommittee on Doexpenses and budget and say that the existmestic Monetary Policy of the House Coming budget processes are working well in mittee on Banking, Finance and Urban Afcontrolling costs, while at the same time fairs, May 25, 1988. encouraging improvements in the quality of services, before the Subcommittee on Do- 458 H. Robert Heller, Member, Board of Govmestic Monetary Policy of the House Com- ernors, reviews the general conditions and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

trends affecting the health of our nation's reserve conditions contemplated by the banking organizations and then discusses Committee were expected to be consistent some financial and supervisory issues and with growth in both M2 and M3 over the some of the the supervisory steps taken by period from March through June at annual the Federal Reserve to improve conditions rates of about 6 to 7 percent. The members in the banking system, before the Senate agreed that the intermeeting range for the Committee on Banking, Housing, and Ur- federal funds rate should be left unchanged ban Affairs, May 25, 1988. at 4 to 8 percent. 475 LEGAL DEVELOPMENTS 466 ANNOUNCEMENTS Various bank holding company, bank ser- New Regulation CC issued. vice corporation, and bank merger orders; Nominations sought for appointments to and pending cases. the Consumer Advisory Council. AI FINANCIAL AND BUSINESS STATISTICS Proposed amendment to Regulation C issued. A3 Domestic Financial Statistics A44 Domestic Nonfinancial Statistics Publication of the Board's 74th Annual Re- A53 International Statistics port, 1987. Three state banks admitted to the Federal A69 GUIDE TO TABULAR PRESENTATION, Reserve System. STATISTICAL RELEASES, AND SPECIAL TABLES 468 RECORD OF POLICY ACTIONS OF THE A70 BOARD OF GOVERNORS AND STAFF FEDERAL OPEN MARKET COMMITTEE At its meeting on March 29, 1988, the All FEDERAL OPEN MARKET COMMITTEE Committee adopted a directive that called AND STAFF; ADVISORY COUNCILS for a slight increase in the degree of pressure on reserve positions. With regard to A74 FEDERAL RESERVE BOARD operating procedures, the Committee PUBLICATIONS agreed that some flexibility might continue to be needed in the day-to-day conduct of A77 SCHEDULE OF RELEASE DATES FOR open market operations. Taking account of PERIODIC RELEASES conditions in financial markets, somewhat greater or somewhat lesser reserve restraint A79 INDEX TO STATISTICAL TABLES would be acceptable depending on the strength of the business expansion, indica- A81 FEDERAL RESERVE BANKS, tions of inflation, the performance of the BRANCHES, AND OFFICES dollar in foreign exchange markets, and the behavior of the monetary aggregates. The A82 MAP OF FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

403 The Profitability of Insured Commercial Banks in 1987 Mary M. McLaughlin and Martin H. Wolfson, of industry's returns on assets and equity in 1987 to the Board's Division of Monetary Affairs, pre- about one-fifth of their 1986 levels (chart 1). In pared this article. Linda Rosenberg provided 1987 the return on assets after tax fell one-half research assistance. percentage point; virtually all of this was attributable to the rise in loss provisions, from 0.78 Huge provisions made by large banks for possi- percent of assets in 1986 to 1.26 percent in 1987 ble loan losses were the key to an unprecedented (table 1). (Unless otherwise noted, the data in drop in the profitability of U.S.-chartered insured this article reflect the foreign and domestic opercommercial banks in 1987. The provisions, which ations of banks on a fully consolidated basis.) were largely to cover troubled loans to develop- These allocations reduce earnings and, if larger ing countries, sharply reduced the industry's than current income, also deplete existing equity return on assets and its ratio of equity capital to capital. On balance, the other major determiassets. Moreover, problems with energy and, nants of profitability were little changed last especially, real estate loans continued to plague year. The net interest margin remained at its 1986 commercial banks in the Southwest, the locale of level. The increase of noninterest income relative most of last year's record 182 failures of com- to noninterest expense (other than loss provimercial banks insured by the Federal Deposit sions) was enough to about offset a retreat from Insurance Corporation. More than 2,000 banks— the extraordinary level of gains on sales of inone-sixth of the total—finished the year in the vestment securities in 1986. red. But as deep as the problems of some of the nation's jirenks there were some bright spq^i last year, notably an upturn in the performance TRENDS IN PROFITABILITY AND CAPITAL of agricultural banks. : - V. -ip.' 'J' • • vi; •:': AT'/; < The loss provisions at large banks cut the Bank profitability last year varied distinctly by type of business and size of bank. In contrast to a $15 billion loss on its international operations, the industry's overall profits on its domestic business rose $3 billion in 1987, to 0.64 percent of assets. All sizes of banks shared in the domestic gains. For the more than 250 banks with foreign offices, the return on assets attributed to domestic operations rose 11 basis points in 1987, to 0.57 percent. The profitability of banks without foreign offices rose 4 basis points, to 0.74 percent; the turnaround in farm lending contributed to this improvement. PljOvisioning for domestic>lwaff losses foil relative to assets at banks of all sizes. But this drop was most pronounced at large banks, where provisioning fell to 0.43 percent of assets; correspondingly, income attributable to domestic op- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

404 Federal Reserve Bulletin • July 1988 1. Income and expenses as a percent of average net assets, all insured commercial banks, 1983-87 1.2 Item 1983 1984 1985 1986 1987 Gross interest income 9.63 10.23 9.45 8.38 8.21 Gross interest expense 6.38 6.97 6.06 5.10 4.94 Net interest margin 3.25 3.26 3.38 3.27 3.27 Noninterest income 1.03 1.19 1.33 1.40 1.55 Loss provisions .47 .57 .68 .78 1.26 Other noninterest expense 2.96 3.05 3.18 3.23 3.31 Securities gains or losses (—) .00 -.01 .06 .14 .05 Income before tax .85 .83 .90 .80 .30 Taxes3 .18 .19 .21 .19 .18 Extraordinary items .00 .01 .01 .01 .01 Net income .67 .64 .70 .62 .12 Cash dividends declared .33 .32 .33 .33 .36 Net retained earnings .34 .32 .37 .29 -.24 MEMO Net interest margin, taxable equivalent4 3.60 3.73 3.77 3.68 3.50 1. Assets are fully consolidated and net of loss reserves. 3. Includes all taxes estimated to be due on income, extraordinary 2. For the period before 1984, data are averages for call dates in gains, and security gains. December of the preceding year and in June and December of the 4. For each bank with profits before tax greater than zero, income current year. For 1984, data are averages for call dates at the from state and local obligations was increased by [(r/(l —/)] times the beginning and end of the year only. For the period after 1984, dipt aitf lesser of profits before tax or interest earned on state and local averages for the call date in December of the preceding year and all obligations, where t is the marginal federal income tax rate. This four call dates in the current year. adjustment approximates the equivalent pretax return on state and local obligations. erations rose more at the large banks than at Large banks (those, other than the money other banks, to 0.62 percent. centers, with assets of more than $5 billion) also On the other hand, in their consolidated world- lost money last year. Half of their rise of 15 basis wide operations banks showed generally lower points in net interest margin was offset by lowprofitability. (Complete dollar figures for the ered net noninterest income. Loss provisions components of net income are given in table twice the size of those in 1986 left these banks A.l.) However, the situation was far from uni- with profits before tax barely above zero; taxes form among various size groups of banks (table left net income slightly negative. International 2). The largest banks suffered the steepest de- operations accounted for almost two-thirds of cline in profits, primarily because of decisions to their loss provisions and for all of the increase in increase substantially their loan-loss reserves for provisions in 1987. The profits from the domestic credits to developing countries and because of operations of these banks were overwhelmed by Brazil's moratorium on interest payments. By losses from foreign business. contrast, the profits of smaller banks, un- In contrast, banks with assets of between $300 hampered by foreign credits, were relatively million and $5 billion continued to be profitable higher. last year, although their return on assets fell 17 The change in performance of the nine largest basis points, to 0.59 percent. This decline money center banks was the most pronounced stemmed in equal parts from higher loss proviof all the size groups in 1987. Their consoli- sions, smaller capital gains on securities, and dated return on assets dropped 1V6 percentage greater tax payments. points, to -0.86 percent, and their return on At banks with assets of less than $300 million, equity fell almost 30 ^percentage points, to profits after tax rose 8 basis points in 1987, to -19.37 percent. A sharp rise in interest expense, 0.66 percent of assets. This class was the only which decreased their net interest margin, was one to lower its loss provisions, an action that offset entirely by an increase in net noninterest more than offset the group's smaller capital income. Hence, the unusually large loss provi- gains. A significant contribution to improvement sions were directly reflected in the return on at small banks was the reversal of the fortunes of assets. agricultural banks, nearly all of which belong to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of Insured Commercial Banks in 1987 405 2. Profit rates, all insured commercial banks, 1983-87 Percent Type of return and asset size of bank1 1983 1984 1985 1986 1987 Return on assets2 All banks .67 .64 .70 .62 .12 Less than $300 million .93 .83 .74 .58 .66 $300 million to $5 billion .75 .81 .83 .76 .59 $5 billion or more Money center banks .54 .52 .45 .46 -.86 Others .36 .34 .74 .68 -.02 Return on equity3 All banks 11.24 10.59 11.18 9.97 1.94 Less than $300 million 11.41 10.40 9.19 7.21 8.02 $300 million to $5 billion 12.24 13.03 12.83 11.52 8.94 $5 billion or more Money center banks 12.57 11.42 9.60 9.50 -19.37 Others 7.56 6.58 13.56 12.18 -.28 MEMO: Return on assets Agricultural banks4 .99 .71 .51 .44 .69 Banks in Texas, Oklahoma, and Louisiana .63 .65 .43 -.47 -.79 1. Size categories are based on year-end fully consolidated assets 3. Net income as a percent of average equity capital. net of loss reserves. 4. Banks whose ratio of farm loans to domestic loans is above the 2. Net income as a percent of average fully consolidated assets net unweighted average of such ratios at all banks—15.55 percent at the of loss reserves. entPif 1987. this size group. In 1987, their return on assets that lengthened depreciation schedules and gave rose 25 basis points, to 0.69 percent, a level that, less favorable treatment to losses on income for the first time in five years, was higher than properties. that of other small banks. In 1986, banks in the Dallas District were the Bank profitability also varied geographically only District grouping to suffer losses; in 1987 (chart 2). Problems with loans in real estate and they were joined by the banks in the New York energy gave banks in the Dallas Federal Reserve and San Francisco Districts, groups with concen- District, as a whole, their second straight year of trations of major lenders to developing countries. losses. Energy-industry borrowers suffered from Nonetheless, the losses in the Dallas District the effects of lower oil prices. In addition, over- were by far the largest. Looking at results by building of commercial properties and the weak state, more than half of the bank failures last regional economy have depressed real estate year, and the vast majority of banks receiving values and thus also the collateral backing real other assistance from the Federal Deposit Insurestate loans. The decline in real estate values was ance Corporation, were in Texas, Oklahoma, and exacerbated by recent changes in federal tax law Louisiana. More generally, regional and smaller 2. Return on assets, by Federal Reserve District Percent Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

406 Federal Reserve Bulletin • July 1988 3. Dispersion of bank earnings tained income and the erosion of equity capital Return on assets, percent (table 3). Many banks with depressed earnings continued to pay dividends, apparently counting on a turnaround in profitability and reluctant to 50th percentile further erode the price of tlieir stock and thus their future ability to raise equity capital. In 1987, equity capital for all banks fell to 6.14 percentile percent of assets, from 6.48 percent in 1986. Most of this change reflected the nearly $6 billion 1 1 1 1 1 1981 1983 1985 1987 decline in equity capital at large banks, which . *jJ> ' . * _ was due largely to their provisioning for losses on banks located in eastern states, lacking a concen- loans and leases. The effect on primary capital tration of energy and problem real estate loans, was mostly one of changing composition: the have performed better on average than those in decline in equity was about balanced by the states west of the Mississippi River. increase in loss reserves. (The decline in equity Notwithstanding the marked improvements in was somewhat less than the increase in loss some areas and the sharp downturns in others, reserves because banks were able to book dethe dispersion of overall bank earnings narrowed ferred tax benefits.) Equity capital fell t^f TS* in 1987 (chart 3). The bottom 5 percent of com- percent of primary capital last year, down from mercial banks, while still performing very about 85 percent in recent years. poorly, showed a distinct uptick. The top 5 The weak performance of bank profits and percent of all commercial banks did quite well continued', concerns abcnit asset quality nfcjjj^ again last year, with returns on assets of VA reflected in the price of bank stocks, wljiehl percent, and the median bank still earned almost lagged the broad market (chart 4). The stock 1 percent on assets. The widened discrepancy prices of money center banks dipped relative to between this median and the weighted mean for the S&P 500 index after Brazil ceased payments the industry (the latter shown in chart 1) is due to on its debtsin February 1987, but they ijecdv$|i$ the concentration of losses in 1987 among a after the May announcement of large provisions relatively small number of large banks. for their developing-country debt. Since the end Despite the considerably losses recorded at of last year, the stock prices of regional banks tj&iiks, banks of all sizes paid dividends in have improved relative to the S&P 500, peHiaps at a rate slightly above tfie 19&6 pace, because of further provisioning and some"writethereby contributing to huge reductions of reoffs of loans to developing countries. 3. Retained earnings, net change in equity capital, and their ratio, all insured commercial banks, 1983-87 Millions of dollars, except as noted Item 1983 1984 1985 1986 1987 Retained earnings1 All banks 7,651 7,795 9,348 8,069 -7,057 Large banks2 1,967 2,239 4,177 4,121 -10,117 Net change in equity capital All banks 10,738 14,940 15,399 16,103 2,382 Large banks2 3,717 6,095 5,559 7,446 -5,551 Retained earnings as a share of net change in equity capital (percent) All banks 71 52 61 50 Large banks2 53 37 75 55 1. Net income less cash dividends declared on preferred and 2. Banks with fully consolidated assets of $5 billion or more at common stock. year-end, net of loss reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of Insured Commercial Banks in 1987 407 4. Ratio of bank stock price index 5. Loss provisions, by asset size category to the S&P 500 index "Percent 6T average 1987 Wednesday data. SOURCE. Standard and Poor. ASSET QUALITY Although loss provisions generally h; rising throughout the 1980s, last year an extraordinary 1.26 percent of ave (table 1). More than 70 percent of all p were accounted for by banks with as billion or more (table 4). Also, provisi percent of average assets were higher for the larger size groups (chart 5)|| 1987 to the general category of international v After Citicorp's second-quarter ar operations; for other large banks with foreign of a $3 billion loss provision for lo£ offices, the comparable figure is 63 percent. oping countries, the holding compz Other published data indicate that the money other money center banks annour center banking organizations added $11 billion to rates of provisioning. Although the reserves for losses on developing-country debt. distinguish on their call reports the specific rea- In contrast, the provisions of the banks with sons for loss provisions, the money center banks assets of less than $300 million fell, from $5.8 attributed 92 percent of their total provisions in billion in 1986 to $4 billion in 1987. Nonetheless, ?i 4. Loan losses and recoveries, all insured commercial banks, 1986-87 Millions of dollars, except as noted Net charge-olfs YYeeaarr aanndd aasssseett ssiizzee ooff bbaannkk'' LLoosssseess cchhaarrggeedd RReeccoovveerriieess LLoossss pprroovviissiioonnss Amount Percent of loans2 1986 All banks 19,225 3,025 16,200 1.01 21,538 Less than $300 million 5,621 801 4,820 1.36 5,774 $300 million to $5 billion 4,396 713 3,683 .86 5,060 $5 billion or more Money center banks 4,395 700 3,695 .94 5,124 Other 4,813 811 4,002 .92 5,580 1987 All banks 19,608 3,624 15,984 .94 36,337 Less than $300 million 4,386 847 3,539 1.00 4,105 $300 million to $5 billion 5,276 837 4,438 .91 6,218 $5 billion or more Money center banks 4,120 1,024 3,096 .80 14,062 Others 5,826 916 4,911 1.03 11,952 1. Size categories are based on year-end fully < 2. See table 1, note 2. net of loss reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

408 Federal Reserve Bulletin • July 1988 even at the smallest banks the pace of provision- These disparate movements are explained by ing was still high by historical standards (chart 5). the banks' strategies toward loans to developing In part, the better experience of the smaller countries and by a slowing of the rate of writebanks was due to a decline in loss provisions at offs in most other loan categories. The decline in agricultural banks, which reflected a recovery in loan losses Was most dramatic for agricultural the farm economy. Provisions fell to 0.65 percent banks: net charge-offs as. a percent of average of assets, about half the 1986 level. However, the loans fell by nearly half, from 2.24 percent in improvement was not confined to agricultural 1986 to 1.28 percent in 1987. For banks with banks; other small banks also lowered their loss more than $300 million in assets (the only group provisions, from 0.78 percent of average assets in for which comparable loan-loss data by category 1986 to 0.61 percent in 1987. are available), the charge-off ratio declined for In recent years, the deteriorating quality of domestic business loans and remained roughly their energy and real estate loan portfolios had constant for consumer loans. Losses continued forced banks in Texas, Oklahoma, and Louisiana to increase, however, for real estate and foreign to increase dramatically their pace of loss provi- loans, including loans to foreign governments. sioning. In 1987, however, aggregate loss provi- Nonetheless, the foreign charge-offs (which also sions relative to assets in these states declined 21 include loans to ""borrowers in industrial COTpg* basis points, to 1.55 percent. Nonetheless, the tries) were far less than announced loss provirate remained quite high, and large banks did not sions for loans tbfdeveloping countries. share in the improvement: their provisions Although some loans to these countries have climbed to 2.03 percent of average assets, from been charged off, mostly by regional banks, the 1.91 percent in 1986. vast majority remain on the books of commercial Historically, loss provisions have tended to banks. Other methods of reducing loan exposure, move in alignment in the same period with loans such as debt-for-equity swaps, secondary market charged off, net of recoveries (chart 6). Loan sales, and the recent initiative by Mexico to trade charge-offs reduce the re&ivfc for loan fosses on new bonds backed by zero-coupon U.S. Treathe balance sheet; thtis, by taking provisions sury securities for current loans discounted to generally in line with current-period charge-offs, market value, have had a relatively limited effect. banks are able to maintain the level of their Thus, as reported in the Federal Reserve's Counoutstanding loan loss reserves. Indeed, over the try Exposure Lending SiirVey, the total clairiiSof 1980s, banks gradually builf up the level of ta$s. U.S. ban£s oh 30 countries that recentlyrefifreserves by provisioning at rates somewhat in nanced their external debts declined by 6 percent excess of current charge-offs. In 1987, however, in 1987, to $88.2 billion. This small decline indithe amount by which loss provisions exceeded cates that actual losses and other liquidations of charge-offs rose substantially. Even as provi- loans to developing countries in 1987 were less sions were soaring to record levels relative to than thie substantial increases in loss reserves loans, the rate of net charge-offs declined for the related to these loans. first year since 1981. The outlook for asset quality remains clouded by the condition of loans to developing countries and the continuing increase in nonperforming 6. Net loan losses and provisions loans. Nonaccrual loans, a type of nonperform- Percent of average loans ing loan in which interest payments are recorded /— 2.0 only when actual cash payments are received, — increased from 2.30 percent of total loans in 1986 — / 1.5 to 3.01 percent in 1987. For the money center Loss provisions banks, the ratio of nonaccrual to total loans increased from 3.47 percent to 5.76 percent, and — Net loan losses .5 it also rose at other large banks. By contrast, agricultural banks and others with assets of less 1 1 1 1 I 1 I 1 1 1977 1979 1981 1983 1985 1987 than $300 million saw this ratio fall. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of Insured Commercial Banks in 1987 409 5. Selected assets as a percent of total assets, all insured commercial banks, 1983-87' Item 1983 1984 1985 1986 1987 Interest-earning assets 85.95 85.74 86.05 86.02 86.62 Loans 56.46 57.66 58.51 57.86 58.36 Securities 17.47 17.57 17.58 18.29 18.57 U.S. government 9.79 9.89 9.50 9.26 10.04 State and local government 6.84 6.76 6.99 7.49 6.25 Other bonds and stocks .83 .93 1.08 1.55 2.28 Gross federal funds sold and reverse repurchase agreements 4.34 4.17 4.43 4.72 4.43 Interest-bearing deposits 7.69 6.33 5.53 5.15 5.26 MEMO Loss reserves .63 .70 .80 .92 1.36 Average assets (billions of dollars) 2,245 2,401 2,559 2,753 2,882 1. See table 1, notes 1 and 2. NET INTEREST MARGIN taxable-equivalent interest income exceeded unadjusted interest income. The Tax Reform Act of . ' " : . ij. '! . j. Despite generally rising interest rates for most of 1986 eliminated the deduction from taxable inthe year, interest rates for 1987 on average were come of 80 percent of the interest costs of lower than they were during 1986. As a result, funding most tax-exempt obligations acquired both gross interest income and gross interest after August 7, 1986. Purchases of tax-exempt expense, as a percentage of average assets, fell in instruments therefore are generally no longer 1987. For all banks the net interest margin (in- attractive to banks, and, as the instruments acterest income minus interest expense) remained quired on or before August 7 have matured, at 3.27 percent of average assets from 1986 to holdings of tax-exempt securities have con- 1987. tracted. For example, holdings of state and local However, the net interest margin on a taxable government securities (the largest category of equivalent basis fell, from 3.68 percent in 1986 to tax-exempt assets) fell from 7.49 percent of total 3.50 percent in 1987 (table 1). The taxable equiv- average assets in 1986 to 6.25 percent in 1987 alent margin is derived by adjusting the yield on (table 5). holdings of tax-exempt obligations to recognize Differences in portfolio structure in 1987 had the tax savings they provide to profitable banks. large effects on each component of the net inter- This margin fell relative to the unadjusted margin est margin. The decline in the taxable-equivalent for two reasons. First, lower corporate income return on securities in 1987, 141 basis points, as tax rates in 1987 reduced the taxable-equivalent discussed above, was much steeper than the margin by 6 basis points. Second, the lower decline in the return on loans, 40 basis points percentage of tax-exempt securities in banks' (table 6). This difference held across the four size portfolios in 1987 reduced the amount by which classes (table A.2). Thus, the largest banks, 6. Rates of return on fully consolidated assets, all insured commercial banks, 1983-87' Percent Item 1983 1984 1985 1986 1987 Securities, total 9.83 9.95 9.27 8.34 7.89 State and local government 7.04 7.50 7.42 7.20 7.27 Loans, gross 12.69 13.65 12.07 10.84 10.44 Net of loss provisions 11.59 12.54 10.87 9.46 8.25 Taxable equivalent2 Total securities 12.06 12.18 11.45 10.52 9.11 State and local government 12.58 13.44 13.05 12.51 10.93 Total securities and gross loans 12.41 13.31 11.93 10.77 10.12 1. Calculated as described in the "Technical Note," FEDERAL income items and quarterly average balance sheet data. RESERVE BULLETIN, vol. 65 (September 1979), p. 704, for years 2. See table 1, note 4. through 1984. For years after 1984, rates of return are derived from Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

410 Federal Reserve Bulletin • July 1988 whose ratio of loans to securities is much higher of loans in their portfolios, which occurred dethan that of the smaller banks, suffered a much spite an increase in real estate and consumer smaller decline in their total interest income (on loans as a share of assets over the five-year a taxable-equivalent basis) during 1987 than did period. the smaller banks. For banks with less than $300 Interest income for the largest banks was also million in assets, interest income as a percent of reduced by the drag from nonaccrual loans. assets declined 64 basis points; for banks with Loans to Brazil, which were on nonaccrual staassets of $5 billion or more, it declined only 11 tus for nearly all of 1987, were especially signifbasis points, and for money center banks, only 13 icant in reducing interest income for the money basis points. center banks. In light of the improving loan The relative gain for the largest banks was quality at (typically small) agricultural banks, the reduced somewhat because loans as a percentage percentage of loans in nonaccrual status in 1987 of average assets increased for the smallest varied directly with bank size class. banks last year, reversing the decline that oc- On the liability side of the balance sheet, the curred in 1986. Also, the relative importance of structure of bank portfolios in 1987 worked to the loans in the portfolios of the money center banks disadvantage of the largest banks. Money market declined in 1987, as they have for the past three liabilities—large time deposits, deposits in foryears. eign offices, federal funds purchased and security Loans for the banking industry as a whole repurchase agreements, and other borrowed grew slightly faster than overall assets in 1987 money—amount to approximately one-third of (table 5). This upturn was due|>rinikrily td strong total assets for the banking industry as a whole growth in real estate loans, boosted by the in- (table 7). By the same measure,'these liabilities creasing popularity of home equity loans. As a vary greatfy by Size class of &mk!, ranging from percentage of assets, commercial and industrial 13 percent for the smallest banks to 57 percent loans on the books of the nation's banks contin- for the money center banks. ued to decline, and consumer loans were rela- The category of other deposits in table 7— tively flat after several years of rapid growth which covef retaijj-tyipe deposits such as savings, (table A.2). For the money center banks, com- small time, and money market deposit acmercial and industrial loans have fallen steadily counts—is equal to one-third of total assets for from 32 percent of average assets in 1983 to 24 all banks. Here, too, the proportion^ are quite percent in 1987, a trend reflecting in part the different among size groups., fa fact, they thtf sales of loans. This decline has been respon- mirror image of the structure of money market sible for the overall shrinkage in the percentage liabilities, with the smallest banks having the 7. Selected liabilities as a percent of total assets, all insured commercial banks, 1983-87' Item 1983 1984 1985 1986 1987 Deposit liabilities 77.68 77.93 77.30 76.72 76.42 In foreign offices 14.71 12.94 12.61 11.61 11.38 In domestic offices 62.97 64.99 64.69 65.11 65.04 Demand deposits 16.53 16.47 15.63 16.03 15.40 Other checkable deposits 4.03 4.34 4.57 5.21 6.01 Large time deposits 12,15 12.23 11.46 10.76 10.60 Other deposits3 30.26 31.95 33.03 33.11 33.02 Gross federal funds purchased and repurchase agreements 7.81 7.51 7.68 8.25 8.06 Other borrowings 2.84 2.78 3.44 4.02 4.45 MEMO Money market liabilities4 37.51 35.46 35.19 34.63 34.48 Average assets (billions of dollars) 2,245 2,401 2,559 2,753 2,882 1. See table 1, notes 1 and 2. 4. Large time deposits issued by domestic offices, deposits issued 2. Deposits of $100,000 or more. by foreign offices, repurchase agreements, gross federal funds pur- 3. Including savings, small time deposits, and money market de- chased, and other borrowings. posit accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of Insured Commercial Banks in 1987 411 highest ratio of retail deposits, 52 percent, and NONINTEREST INCOME AND EXPENSE AND the money center banks the smallest, 14 percent. SECURITIES GAINS As noted above, interest rates on average were lower in 1987 than in 1986, even though they rose Noninterest income rose twice as fast as did over much of last year. The increase in market noninterest expense last year, although both conrates during most of 1987 was reflected more in tinued the rapid climb evident throughout this rates on money market liabilities than it was in 9Cdde, especially at very large banks. As a rates on retail deposits, which tend to move result, the negative spread between noninterest sluggishly. Thus, rates paid for retail deposits fell income and noninterest expense (excluding loss by more than V/i percentage points in 1987, provisions) contracted in 1987 (table 1), leaving it whereas rates for money market liabilities either at its narrowest since 1975. Large banks other declined moderately, as they did for large certif- than the money center banks were the only group icates of deposit and federal funds purchased, or for which expenses, especially those not related rose, as they did for foreign office deposits and to salaries and premises, rose faster than inother liabilities for borrowed money (table 8). come. 1 •>' Similar results hold for all size classes. Both income and expense were almost un- As a result of these developments, the smaller changed relative to assets at banks with assets of banks enjoyed a larger reduction in interest ex- less than $5 billion. Historically, salaries have pense than did the larger banks. In fact, interest been the largest component of noninterest exexpenses of the money center banks rose LA pense and the biggest contributor to its growth. percentage point. " In 1987, these smaller banks for the first time had To sum up, although the larger banks posted their wages and benefits decline relative to asless of a decline in interest income from 1986 to sets;- fH: ' 1987 than did the smaller banks, this relative At the nine money center banks, both income advantage was mostly offset by less of a decrease and expense increased in 1987 at three times the in interest expense. Thus, in general, the change rate for all commercial banks. Their income rose in the taxable-equivalent net interest margin did sharply because of trading gains and fees from not differ significantly among size classes. The foreign exchange transactions, gains and fees one exception was the money center banks. In from assets held in trading accounts, and, espetheir case, the significant increase in interest cially, undifferentiated "other noninterest inexpense eroded their overall margin 40 basis come." The latter, which accounted for half of points, which exceeded the range of 7 to 18 basis the increase in noninterest income, was boosted points for the other size classes./?; by gains from sales of assets and from settle- 8. Rates paid for fully consolidated liabilities, all insured commercial banks, 1983-87' Percent Item 1983 1984 1985 1986 1987 Interest-bearing deposits 9.32 9.92 8.20 6.98 5.82 Large certificates of deposit 8.90 10.67 8.72 7.31 6.86 Deposits in foreign offices2 10.32 12.62 9.48 7.78 7.90 Other deposits 9.11 8.84 7.66 6.67 5.10 Gross federal funds purchased and repurchase agreements 9.69 11.22 7.97 6.77 6.51 Other liabilities for borrowed money3 11.88 13.92 10.62 8.01 9.65 Total 9.46 10.20 8.29 7.01 6.11 1. Calculated as described in the "Technical Note," FEDERAL as foreign offices thereafter. Income data are not sufficiently detailed RESERVE BULLETIN, vol. 65 (September 1979), p. 704, for years to allow construction of a consistent series on the new basis for rates through 1984. For years after 1984, rates are derived from expense of return as has been done for balance sheet data in other tables in this items and quarterly average balance sheet data. article. 2. Series break after 1983. Reporting instructions classified inter- 3. Including subordinated notes and debentures. national banking facilities as domestic offices until the end of 1983 and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

412 Federal Reserve Bulletin • July 1988 ments from pension plans that were overfunded where the general rise in rates is illustrated with relative to benefit obligations. (Under current the rate for 10-year Treasury notes). accounting rules, banks are allowed to settle the In 1987, the proportion of assets held in investpension obligations by purchasing annuities and ment securities grew throughout the banking to count the amount of the overfunding as nonin- industry. Banks of all sizes reduced their holdterest income.) "Other noninterest income" also ings of state and local obligations—largely a benefited from the growth of off-balance-sheet consequence of the 1986 tax legislation, as noted activities such as swaps, loan sales, and commit- above—and increased their holdings of U.S. govments to purchase foreign currencies. Unlike ernment and other securities. smaller institutions, salaries at the money center banks accounted for almost half the growth in noninterest expense. Capital gains on the sale of investment-account DEVELOPMENTS IN EARLY 1988 securities fell in 1987. Although the share of assets held in securities continued to be rela- The net income of most large banks in the first tively high at banks with assets of less than $5 quarter of 1988 increased relative to the same billion, their capital gains on these investments period last year. Gains in operating income arose as a share of assets were only about half those at from lower loss provisions and greater earnings larger banks. Despite a large pool of unrealized from fees and securities trading. Cost cutting capital gains atcommercial batiks at the start of programs begun last year, which at some banks 1987, the rising level of interest rates through the involved extensive layoffs of employees and iniyear reduced the market value of their securities tially raised expenses, resulted in reduced noninholdings below book value by year-end (chart 7, terest expenses in the first three months of 1988. In addition, large banks took advantage of one- 7. Unrealized capital gains on securities time gains such as asset sales and tax benefits Billions of dollars realized from previous loss provisions for loans to developing countries. The poor quality of real estate loans continued to plague large banks in Texas and required more federal assistance in the first quarter. The problems of developing-country debt, poor asset quality, and troubled banks have not disappeared; 68 commercial banks, representing $2.8 billion in assets, have been closed in 1988 as of the end of May. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of Insured Commercial Banks in 1987 413 A.l. Report of income, all insured commercial banks, 1983-87 Millions of dollars Item 1983 1984 1985 1986 1987 Operating income, total 239,255 274,255 275,741 269,152 281,215 Interest, total 216,050 245,638 241,819 230,630 236,531 Loans 153,317 178,323 177,281 168,349 173,160 Balances with banks 16,738 16,556 13,660 11,139 11,872 Gross federal funds sold and reverse repurchase agreements 9,198 10,455 9,404 8,918 8,808 Securities (excluding trading accounts) 36,797 40,304 41,473 42,223 42,691 Tax-exempt 10,618 11,812 12,838 14,957 14,118 Taxable 26,179 28,492 28,635 27,266 28,573 Service charges on deposits 5,399 6,518 7,333 7,908 8,655 Other operating income1 17,806 22,099 26,590 30,613 36,029 Operating expense, total 220,229 254,285 254,184 250,821 274,060 Interest, total 143,210 167,334 155,212 140,489 142,325 Deposits 119,839 139,331 129,440 115,898 113,634 Large certificates of deposit 22,523 25,767 22,705 19,281 18,919 Deposits in foreign offices 29,021 35,782 30,117 24,440 25,945 Other deposits 68,295 77,782 76,618 72,177 68,770 Gross federal funds purchased and repurchase agreements 16,438 19,322 16,432 15,745 15,740 Other borrowed money2 6,934 8,681 9,342 8,846 12,950 Salaries, wages, and employee benefits 33,636 36,463 39,467 42,262 44,528 Occupancy expense3 11,100 12,095 13,474 14,564 15,301 Loss provisions 10,614 13,704 17,504 21,538 36,337 Other operating expense 21,661 24,689 28,526 31.968 35,569 Securities gains or losses (—) -30 -146 1,506 3,785 1,394 Income before tax 18,995 19,824 23,063 22,115 8,548 Taxes 4.076 4,660 5,499 5,184 5,304 Extraordinary items 70 216 237 271 184 Net income 14,989 15,379 17,802 17,202 3,429 Cash dividends declared 7,338 7,584 8,455 9,133 10,486 1. Includes income from assets held in trading accounts. 3. Occupancy expense for bank premises net of any rental income 2. Includes interest paid on balances in U.S. Treasury tax and loan plus furniture and equipment expenses, accounts and on subordinated notes and debentures. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

414 Federal Reserve Bulletin • July 1988 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1983-87' A. All banks Item 1983 1984 1985 1986 1987 Balance sheet items as a percent of average consolidated assets Interest-earning assets 85.95 85.74 86.05 86.02 86.62 Loans 56.46 57.66 58.51 57.86 58.36 • Commercial and industrial 22.54 22.52 22.26 20.% 20.05 Real estate 14.13 14.77 15.71 16.71 18.68 Consumer 9.17 9.97 10.80 11.06 11.10 Securities 17.47 17.57 17.58 18.29 18.57 U.S. government 9.79 9.89 9.50 9.26 10.04 State and local government 6.84 6.76 6.99 7.49 6.25 Other bonds and stocks .83 .93 1.08 1.55 2.28 Gross federal funds sold and reverse repurchase agreements 4.34 4.17 4.43 4.72 4.43 Interest-bearing deposits 7.69 6.33 5.53 5.15 5.26 Deposit liabilities 77.68 77.93 77.30 76.72 76.42 • In foreign offices 14.71 12.94 12.61 11.61 11.38 In domestic offices 62.97 64.99 64.69 65.11 65.04 Demand deposits 16.53 16.47 15.63 16.03 15.40 Other checkable deposits 4.03 4.34 4.57 5.21 6.01 Large time deposits 12.15 12.23 11.46 10.76 10.60 Other deposits 30.26 31.95 33.03 33.11 33.02 Gross federal funds purchased and repurchase agreements 7.81 7.51 7.68 8.25 8.06 m Other borrowings 2.84 2.78 3.44 4.02 4.45 MEMO Money market liabilities 37.51 35.46 35.19 34.63 3344..4488 Loss reserves .63 .70 .80 .92 1.36 Effective interest rate (percent) Rates earned Securities 9.83 9.95 9.27 8.34 77..8899 State and local government 7.04 7.50 7.42 7.20 7.27 • Loans, gross 12.69 13.65 12.07 10.84 10.44 • 11.59 12.54 10.87 9.46 8.25 Taxable equivalent Securities 12.06 12.18 1111..4455 1100..5522 99..1111 Securities and gross loans 12.41 13.31 11.93 10.77 10.12 Rates paid Interest-bearing deposits 9.32 99..9922 88..2200 66..9988 55..8822 Large certificates of deposit 8.90 10.67 8.72 7.31 6.86 Deposits in foreign offices 10.32 12.62 9.48 7.78 7.90 Other deposits 9.11 8.84 7.66 6.67 5.10 All interest-bearing liabilities 9.46 10.20 8.29 7.01 6.11 Income and expenses as a percent of average net consolidated assets Gross interest income 9.63 10.23 9.45 8.38 8.21 Taxable equivalent 9.98 10.70 9.83 8.78 8.44 Gross interest expense 6.38 6.97 6.06 5.10 4.94 3.25 3.26 3.38 3.27 3.27 Taxable equivalent 3.60 3.73 3.77 3.68 3.50 1.03 1.19 1.33 1.40 1.55 .47 .57 .68 .78 1.26 Other noninterest expense 2.96 3.05 3.18 3.23 3.31 Securities gains or losses (-) .00 -.01 .06 .14 .05 .85 .83 .90 .80 .30 .18 .19 .21 .19 .18 .00 .01 .01 .01 .01 .67 .64 .70 .62 .12 Cash dividends declared .33 .32 .33 .33 .36 .34 .32 .37 .29 -.24 MEMO Average assets (billions of dollars) 2,245 2,401 2,559 22,,775533 22,,888822 14,074 13,952 13,898 13,733 13,268 I. See notes to tables in the text. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of Insured Commercial Banks in 1987 415 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1983-87—Continued B. Banks with less than $300 million in assets Item 1983 1984 1985 1986 1987 Balance sheet items as a percent of average consolidated assets Interest-earning assets 90.82 90.62 90.86 90.77 91.10 Loans 52.10 53.13 54.22 52.84 52.95 Commercial and industrial 14.27 14.51 15.00 14.01 13.22 Real estate 18.64 19.57 20.69 21.75 23.78 Consumer 12.44 12.57 12.78 12.15 11.51 Securities 29.75 29.22 28.23 27.89 28.45 U.S. government 18.89 19.16 18.39 17.73 18.71 State and local government 10.29 9.42 9.16 9.10 7.65 Other bonds and stocks .57 .63 .68 1.06 2.09 Gross federal funds sold and reverse repurchase agreements 5.76 5.36 5.55 7.01 6.46 Interest-bearing deposits 3.21 2.92 2.86 3.03 3.25 Deposit liabilities 87.09 87.61 87.81 88.14 88.11 Demand deposits 17.56 16.73 15.39 15.03 14.41 Other checkable deposits 7.16 7.64 8.03 9.00 10.30 Large time deposits 10.79 11.05 11.61 11.40 10.94 Other deposits 51.55 52.13 52.68 52.65 52.44 Gross federal funds purchased and repurchase agreements 2.15 1.85 1.59 1.36 1.34 Other borrowings .63 .49 .49 .50 .53 MEMO Money market liabilities 13.59 13.45 13.79 13.32 12.84 Loss reserves .55 .60 .68 .77 .83 Effective interest rate (percent) Rates earned Securities 10.37 10.44 9.61 8.69 7.88 State and local government 7.32 7.69 7.65 7.55 7.54 Loans, gross 13.36 13.% 12.50 11.52 10.85 Net of loss provisions 12.30 12.74 11.01 9.85 9.67 Taxable equivalent Securities 12.40 12.19 11.36 10.40 9.24 Securities and gross loans 12.99 13.33 12.11 11.13 10.28 Rates paid Interest-bearing deposits 9.06 9.48 7.92 6.91 5.47 Large certificates of deposit 9.12 10.92 8.67 7.31 6.54 Other deposits 9.06 9.23 7.79 6.84 5.31 All interest-bearing liabilities 9.02 9.49 7.92 6.91 5.50 Income and expenses as a percent of average net consolidated assets Gross interest income 10.40 10.76 10.17 9.18 8.63 Taxable equivalent 10.94 11.27 10.66 9.66 9.02 Gross interest expense 6.25 6.68 5.98 5.20 4.67 Net interest margin 4.15 4.08 4.18 3.97 3.97 Taxable equivalent 4.69 4.59 4.68 4.45 4.36 Noninterest income .74 .79 .81 .82 .83 Loss provisions .48 .58 .79 .87 .62 Other noninterest expense 3.29 3.26 3.35 3.36 3.33 Securities gains or losses (-) .00 -.01 .07 .15 .03 Income before tax 1.13 1.02 .92 .71 .89 Taxes .20 .20 .19 .15 .25 Extraordinary items .00 .01 .01 .02 .02 Net income .93 .83 .74 .58 .66 Cash dividends declared .40 .41 .43 .40 .41 Net retained earnings .53 .42 .32 .19 .25 MEMO Average assets (billions of dollars) 607 638 652 664 665 Number of banks 13,381 13,218 13,100 12,871 12,410 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

416 Federal Reserve Bulletin • July 1988 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1983-87—Continued C. Banks with $300 million to $5 billion in assets Item 1983 1984 1985 1986 1987 Balance sheet items as a percent of average consolidated assets Interest-earning assets 87.16 87.11 87.98 88.04 88.59 1 Loans 53.10 54.82 57.25 57.74 59.71 Commercial and industrial 18.45 19.02 19.32 18.70 18.53 Real estate 15.92 16.55 17.99 19.66 22.00 Consumer 11.78 12.68 13.93 13.% 14.27 Securities 20.85 21.40 21.56 21.66 20.% U.S. government 11.30 11.51 11.09 10.43 11.04 State and local government 8.68 8.87 9.28 9.73 7.79 Other bonds and stocks .86 1.02 1.19 1.50 2.14 Gross federal funds sold and reverse repurchase agreements 5.69 5.51 5.14 5.26 4.71 Interest-bearing deposits 7.52 5.38 4.03 3.38 3.21 Deposit liabilities 78.05 79.26 79.74 79.90 78.55 In foreign offices 3.90 2.91 2.69 2.42 2.51 In domestic offices 74.15 76.35 77.05 77.49 76.04 Demand deposits 20.48 20.24 18.72 18.68 17.43 Other checkable deposits 4.58 5.08 5.36 6.31 7.08 Large time deposits 14.63 14.04 13.57 12.55 12.54 Other deposits 34.47 36.99 39.41 39.95 39.00 Gross federal funds purchased and repurchase agreements 10.41 9.49 8.56 8.60 9.17 Other borrowings 2.12 1.88 2.33 2.27 3.02 MEMO Money market liabilities 31.06 28.31 27.14 25.84 27.24 Loss reserves .65 .70 .77 .85 1.02 Effective interest rate (percent) Rates earned Securities 9.53 9.62 9.01 8.14 7.66 U.S. government 11.52 11.27 10.34 9.13 8.01 State and local government 6.96 7.38 7.35 7.13 7.16 Other bonds and stocks 10.87 10.80 9.54 8.10 7.74 Loans, gross 12.47 13.33 11.94 10.89 10.37 Net of loss provisions 11.40 12.39 10.94 9.68 9.06 Taxable equivalent Securities 11.80 12.05 11.36 10.49 99..1177 Securities and gross loans 12.18 12.97 11.79 10.78 10.06 Rates paid Interest-bearing deposits 8.74 9.25 77..8822 66..7777 55..4466 Large certificates of deposit 8.72 10.55 8.55 7.23 6.77 Deposits in foreign offices 8.63 11.11 8.63 6.96 6.79 Other deposits 8.77 8.74 7.58 6.64 5.11 All interest-bearing liabilities 8.74 9.40 7.82 6.75 5.63 Income and expenses as a percent of average net consolidated assets Gross interest income 9.41 9.93 9.41 8.52 8.23 Taxable equivalent 9.84 10.43 9.91 9.03 8.55 Gross interest expense 5.89 6.36 5.66 4.86 4.56 Net interest margin 3.52 3.57 3.75 3.66 3.67 Taxable equivalent 3.95 4.07 4.25 4.17 3.99 Noninterest income 1.23 1.30 1.34 1.29 1.33 Loss provisions .44 .46 .56 .69 .77 Other noninterest expense 3.43 3.45 3.57 3.45 3.43 Securities gains or losses (-) -.01 -.01 .04 .11 .04 Income before tax .86 .95 1.00 .93 .84 Taxes .12 .15 .18 .18 .26 Extraordinary items .01 .01 .01 .01 .01 Net income .75 .81 .83 .76 .59 Cash dividends declared .35 .36 .37 .39 .41 Net retained earnings .41 .45 .45 .37 .17 MEMO Average assets (billions of dollars) 614 640 685 738 808 Number of banks 640 668 724 779 776 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The Profitability of Insured Commercial Banks in 1987 417 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1983-87—Continued D. Nine money center banks Item 1983 1984 1985 1986 1987 Balance sheet items as a percent of average consolidated assets Interest-earning assets 81.56 81.14 80.56 80.09 80.63 Loans 62.93 63.66 61.91 60.07 58.40 Commercial and industrial 32.31 31.78 29.46 26.49 24.22 Real estate 9.22 9.81 10.49 11.45 12.52 Consumer 4.72 5.28 5.78 6.13 5.99 Securities 6.39 6.68 7.15 8.49 9.38 U.S. government 2.60 2.33 2.31 2.28 2.75 State and local government 2.49 2.90 3.02 3.48 3.23 Other bonds and stocks 1.30 1.45 1.82 2.73 3.40 Gross federal funds sold and reverse repurchase agreements 2.52 2.51 3.54 3.62 3.95 Interest-bearing deposits 9.72 8.29 7.95 7.91 8.91 Deposit liabilities 72.18 72.08 70.74 69.92 70.15 In foreign offices 37.93 35.21 35.86 34.64 35.02 In domestic offices 34.25 36.88 34.88 35.28 35.12 Demand deposits 11.43 11.83 11.51 12.46 12.34 Other checkable deposits 1.19 1.24 1.30 1.63 2.03 Large time deposits 10.55 10.62 8.18 7.30 6.83 Other deposits 11.08 13.20 13.89 13.88 13.93 Gross federal funds purchased and repurchase agreements 7.86 7.42 7.66 8.17 6.87 Other borrowings 5.12 5.25 6.51 7.95 8.68 MEMO Money market liabilities 61.46 58.49 58.21 58.07 57.41 Loss reserves .59 .69 .83 1.02 2.11 Effective interest rate (percent) Rates earned Securities 9.56 9.72 9.41 8.51 8.48 U.S. government 11.92 11.58 10.51 9.07 8.51 State and local government 6.33 7.61 7.24 7.09 7.26 Other bonds and stocks 11.46 11.10 11.45 9.79 9.61 Loans, gross 12.64 13.85 12.08 10.53 10.41 Net of loss provisions 11.75 12.97 10.85 9.18 6.67 Taxable equivalent Securities 11.86 12.58 11.75 10.89 88..7766 Securities and gross loans 12.32 13.73 12.05 10.58 10.18 Rates paid Interest-bearing deposits 10.23 11.06 8.91 7.41 6.70 Large certificates of deposit 8.96 10.70 9.07 7.45 7.33 Deposits in foreign offices 10.77 12.90 9.59 7.88 8.01 Other deposits 10.02 7.83 7.43 6.47 4.47 All interest-bearing liabilities 10.56 11.55 9.16 7.57 7.30 Income and expenses as a percent of average net consolidated assets Gross interest income 9.40 10.22 9.10 7.85 7.90 Taxable equivalent 9.53 10.67 9.27 8.06 7.93 Gross interest expense 7.00 7.84 6.74 5.57 5.84 Net interest margin 2.40 2.38 2.36 2.28 2.06 Taxable equivalent 2.53 2.83 2.53 2.49 2.09 Noninterest income 1.12 1.42 1.75 2.02 2.51 Loss provisions .36 .50 .75 .79 2.16 Other noninterest expense 2.34 2.54 2.71 2.% 3.19 Securities gains or losses (-) .01 .02 .06 .13 .08 Income before tax .84 .78 .71 .68 -.70 Taxes .30 .26 .26 .22 .15 Extraordinary items .00 .00 .00 .00 .00 Net income .54 .52 .45 .46 -.86 Cash dividends declared .27 .24 .25 .21 .28 Net retained earnings .26 .29 .21 .25 -1.13 MEMO Average assets (billions of dollars) 578 590 618 645 650 Number of banks 9 9 9 9 9 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

418 Federal Reserve Bulletin • July 1988 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1983-87—Continued E. Large banks other than money center banks Item 1983 1984 1985 1986 1987 Balance sheet items as a percent of average consolidated assets Interest-earning assets 83.38 83.35 84.28 84.88 85.78 Loans 58.63 59.87 61.07 60.68 61.60 Commercial and industrial 26.77 26.04 26.02 24.79 24.01 Real estate 11.88 12.40 13.09 13.72 16.05 Consumer 6.90 8.80 10.25 11.52 11.78 Securities 10.45 11.13 12.24 14.74 15.36 U.S. government 4.66 5.24 5.47 6.46 7.73 State and local government 5.24 5.30 6.13 7.30 6.00 Other bonds and stocks .56 .59 .64 .97 1.64 Gross federal funds sold and reverse repurchase agreements — 2.90 2.98 3.33 3.01 2.79 Interest-bearing deposits 11.40 9.38 7.64 6.46 6.03 Deposit liabilities 71.49 71.25 69.94 68.90 69.38 In foreign offices 19.53 15.76 13.57 10.97 10.28 In domestic offices 51.97 55.49 56.37 57.93 59.10 Demand deposits 16.29 16.79 16.61 17.48 16.76 Other checkable deposits 2.70 2.94 3.26 3.77 4.59 Large time deposits 12.63 13.24 12.28 11.45 11.49 Other deposits 20.35 22.52 24.21 25.22 26.25 Gross federal funds purchased and repurchase agreements 11.86 12.01 13.24 14.40 13.76 Other borrowings 3.90 3.86 4.75 5.55 5.71 MEMO Money market liabilities 47.92 44.86 43.84 42.37 41.24 Loss reserves .74 .83 .92 1.06 1.54 Effective interest rate (percent) Rates earned Securities 8.88 9.34 8.87 7.94 7.91 U.S. government 10.93 11.11 10.23 8.90 8.09 State and local government 6.93 7.31 7.25 6.92 7.14 Other bonds and stocks 11.03 12.34 11.66 9.48 10.02 Loans, gross 12.24 13.47 11.76 10.52 10.23 Net of loss provisions 10.79 12.01 10.69 9.16 7.62 Taxable equivalent Securities 11.63 1122..1166 1111..7700 1100..6600 9.01 Securities and gross loans 11.97 13.26 11.75 10.54 9.98 Rates paid Interest-bearing deposits 9.40 10.11 8.34 66..9900 5.88 Large certificates of deposit 8.98 10.58 8.80 7.34 7.06 Deposits in foreign offices 9.71 12.28 9.37 7.67 7.83 Other deposits 9.44 8.73 7.68 6.47 5.02 All interest-bearing liabilities 9.67 10.56 8.34 6.87 6.18 Income and expenses as a percent of average net consolidated assets Gross interest income 9.16 9.97 9.08 7.95 8.07 Taxable equivalent 9.42 10.37 9.42 8.35 8.24 Gross interest expense 6.42 7.08 5.92 4.84 4.81 Net interest margin 2.74 2.89 3.16 3.12 3.27 Taxable equivalent 3.00 3.29 3.50 3.51 3.44 Noninterest income 1.05 1.30 1.43 1.49 1.59 Loss provisions 0.66 .78 .64 .79 1.58 Other noninterest expense 2.66 2.90 3.04 3.10 3.27 Securities gains or losses (-) -.01 -.02 .07 .16 .05 .45 .49 .96 .88 .06 .08 .16 .23 .21 .08 Extraordinary items .00 .01 .01 .01 .00 .36 .34 .74 .68 -.02 Cash dividends declared .27 .24 .26 .32 .35 Net retained earnings .10 .10 .48 .36 -.36 MEMO Average assets (billions of dollars) 445 534 660055 770077 775599 Number of banks 44 57 65 74 73 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

419 Implementing Monetary Policy This article was adapted from a paper that H. port a balanced allocation of international re- Robert Heller, Member, Board of Governors of sources. the Federal Reserve System, delivered in April A large literature supports the relationship 1988 to the Seminar for Economic Policy at the between money on the one hand and prices and University of Cologne, West Germany. The au- economic activity on the other. In particular, thor wishes to thank Donald L. Kohn, David E. research has shown that over extended periods Lindsey, Brian F. Madigan, and William C. of time, money and prices maintain a reasonably Whitesell for assistance in preparing the article, stable relationship. The relationship between and Elizabeth J. Eberle for statistical help. changes in money and changes in economic activity, while present, has been less certain and more transitory. The Federal Reserve's policy goals and operating In such a framework, monetary policymakers procedures have drawn increasing attention in can target the level of money supply and changes recent years. This article examines the formula- in it as an intermediate step to attaining the tion and implementation of policy in some detail. ultimate objectives. Such a procedure, clearly, It begins by describing the ultimate objectives has been the intent of the congressional mandate that the Federal Reserve tries to attain and the to the Federal Reserve to specify twice a year its use of intermediate targets in that process. It targets for monetary growth. At the same time, pays particular attention to the deterioration of members of the FOMC give their expectations the relation between money and other economic regarding prices, economic growth, and unemvariables, such as prices and income. The article ployment. then describes the three operating procedures The accompanying box illustrates this policythat have been devised in an attempt to imple- making process. The attainment of high ecoment policy efficiently and effectively: federal nomic growth and stable prices are shown as the funds targeting, nonborrowed reserves targeting, ultimate policy objectives. Monetary growth is and the borrowed reserves procedure. The paper concludes by discussing several policy issues Implementing monetary policy that have arisen in recent years. Ultimate objectives POLICY GOALS AND INTERMEDIATE /High growth.\ I stable prices J TARGETS The ultimate objective of Federal Reserve policy Intermediate target is to foster economic growth in a framework of price stability. Price stability not only is an important goal in its own right; it also contributes to economic growth by reducing the uncertainty economic decisionmakers face. Greater certainty, in turn, will foster the efficient and effective use of human, man-made, and natural re- Federal \ / Nonborrowed\ / Borrowed funds rate / I reserves J I reserves sources. Domestic price stability also will promote exchange rate stability and thereby sup- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

420 Federal Reserve Bulletin • July 1988 the intermediate target, whose attainment facili- The deterioration in the money-income relatates the achievement of the ultimate policy tionship is evident in the behavior of velocity, the objectives. Alternative operating procedures that ratio of gross national product to money. As have been used to attain the intermediate target chart 1 shows, the historical relationship beare federal funds targeting, nonborrowed re- tween spending and the narrowly defined money serves targeting, and the borrowed reserves pro- supply, Ml, departed from its long-term trend cedure. and became more volatile. Velocity also became If the relationship between money and the more volatile for the more broadly defined monultimate objectives is very stable and predict- etary aggregates, M2 and M3. able, an operating procedure that assures that the Changes in velocity have coincided with finanintermediate target is hit will also assure the cial innovations and changes in the regulatory attainment of the ultimate policy objectives. environment, as well as sizable variations in interest rates. In particular, the introduction of money market mutual funds in the mid-1970s, DETERIORATING LINKS BETWEEN MONEY, and, beginning in the late 1970s, the deregulation INCOME, AND PRICES of interest rates that banks and other depositories could pay on deposits, had a powerful influence In the 1980s, the relationship between money, on the character of many monetary assets and on nominal income, and other macroeconomic var- the substitutability among them. iables has become less stable and less predict- The deregulation of interest rates in the 1980s able. Consequently, simple monetary targeting has spurred the demand for deposit balances also became a less reliable means to attain the because it reduced the opportunity cost of holdultimate objectives. ing them. This effect has been particularly strong 1. Velocity of money and Treasury bill rate _ _ Ratio scale Velocity of M2 liMiiiiftMiis^MiSttsBWiiMftiiiM^^tt^s - 1.5 • 1 1 • M I • [ 1 1 • I I • I I I •, .! ^3.0 • J I, I jf;'^ Ir; i : ;J J, Pj j, g i.e ,"."•'.- *»*• •«.•'.>•'••,«• '' K*'". <'.Wfetpercent " " " " —160.0 Three-month Treasury bill rate i n i H M a i i i M M MH • I ; • [-III M ! • ! M • ! | C • j Mm • j 1 ) a 1 1,1.. m .1.1 1.1.H 1 11 I I • 1 1 0.5 1960 1970 1980 1988 I 960 1970 1980 1988 Quarterly data. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Implementing Monetary Policy 421 for household transaction balances, on which Part of the reason is that interest rates offered on interest was permitted to be paid for the first the non-Mi deposits included in these broader time. aggregates are adjusted more quickly as market At the same time, the ability of banks to pay conditions change, and these aggregates internalinterest on liquid money balances has made ize some of the asset shifts that make Ml so opportunity costs more variable over the short variable. Nevertheless, the opportunity costs of run, in percentage terms. This greater variability the broader aggregates, and thus their velocities, has come about because banks have been slow to do vary with market rates. adjust the rates paid on liquid retail accounts. The relationship between the opportunity cost For instance, if the interest rate on Treasury bills of M2 and its velocity of circulation is depicted in rises from 10 to 11 percent, the opportunity cost chart 2 . The opportunity cost is defined as the of an account that earns no interest increases interest rate on three-month Treasury bills minus only one-tenth. In contrast, the opportunity cost the weighted average of interest rates paid on of an account that earns interest at a constant balances contained in M2. To allow for lags in the rate of 6 percent increases one-fourth. Moreover, response of the demand for money to changing some interest-earning checkable deposits are market conditions, a two-quarter moving average now held for saving motives, and savings bal- of this difference is used. The chart reveals a ances appear to be more likely to shift into close relationship between velocity and opportualternative investments when opportunity costs nity costs. change. Moreover, many of the more sizable devia- The rise in interest rates in the late 1970s and tions can be explained by specific occurrences. early 1980s also stimulated awareness of the For example, the drop in M2 velocity in early opportunity cost of holding money and magnified 1983 occurred despite increases in opportunity the interest sensitivity of the monetary aggre- costs because non-M2 funds were shifted into gates. newly introduced deposit accounts that had no Because of the uncertainty surrounding the interest rate ceilings. Likewise, the decline in behavior of transaction balances, and because of velocity in late 1986 reflected in part a bulge in their now very high interest elasticity, the Fed- money demand resulting from a heavy volume of eral Open Market Committee has not set a target asset sales that anticipated the implementation of range for Ml since 1986. tax reform legislation. It has been suggested that the Committee Because of the interest sensitivity of money target the monetary base, composed of currency demand, the range of interest rates that may be and reserves, or Ml-A, which is currency plus associated with acceptable economic perfornon-interest-earning demand deposits. These ag- mance is carefully considered in the process of gregates seem to have the advantage of a lower arriving at money growth targets. Furthermore, interest elasticity than Ml or M2, but questions remain concerning the closeness of the relation 2. Velocity and average opportunity cost of M2 of each to U.S. economic activity. Ratio scale Ratio scale, percentage pomis The Federal Reserve staff has also evaluated experimental aggregates that incorporate innovative schemes for weighting monetary components. However, none of these alternative measures has been consistently superior with respect to all the attributes desirable in an intermediate target: controllability, stability of demand, and predictability of influence on income and prices. f.'&M I : V--T r 1 • For the present, therefore, targets are set only 1978 1980 1982 1984 1986 1988 for the broad monetary aggregates, M2 and M3. The velocities of these broader aggregates are 1. Two-quarter moving average of difference between rates on three-month Treasury bills and weighted average of rates on balances not as interest sensitive as the velocity of Ml. in M2. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

422 Federal Reserve Bulletin • July 1988 aware that the relationship between monetary ruary 1984, required reserves were fixed and growth and short-run economic performance is known before any maintenance period, as they less predictable than it was, the FOMC has were based on actual money balances during a allowed money to depart from its targeted path previous period. Since then, reserves required when doing so has seemed consistent with prog- against transaction balances have been based on ress toward its ultimate objectives. a virtually contemporaneous computation. In Responding to the increasing unpredictability principle, therefore, required reserves could now of the link between money and economic perfor- respond to concurrent changes in the federal mance, the FOMC widened the ranges of the funds rate, which is the interest rate at which annual growth rates for M2 and M3. For both banks borrow and lend reserves, to the extent aggregates, the range is 4 to 8 percent for 1988, that that rate affected the demand for money compared with 5'/2 to 8V2 percent last year. contemporaneously. In practice, the demand for To supplement frequent judgmental and money and required reserves is not very interest econometric forecasts, other leading indicators elastic over the short span of a reserve-mainteof the course of the economy and of price pres- nance period; but the elasticity increases with the sures are carefully monitored, including lead passage of time as depositors adjust to changing times in orders for production materials, com- opportunity costs. modity prices, and financial variables such as The accompanying diagram depicts a simple, relative interest rates and exchange rates. Mon- stylized model of the reserves market that capetary targeting nevertheless retains its useful- tures this demand behavior. The demand for ness, especially over the long run, because the reserves is shown to have a downward-sloping link between trend money growth and the infla- relation to the funds rate. This relation reflects tion rate is indisputable over extended periods of the demand for reservable deposits on behalf of time. the public, the reserve requirements, and the willingness of banks to hold reserve surpluses. THE OPERATING PROCEDURES The supply of reserves is the quantity of nonborrowed reserves plus borrowings from the dis- These developments in the money-spending re- count window. The nonborrowed portion is delationship have implications for the choice of termined primarily by open market operations, procedures to implement monetary policy. In the although uncontrolled market factors such as early 1980s, when the relationship still seemed currency withdrawals, Treasury balances, and reasonably stable, Federal Reserve open market operations were tied directly to the behavior of Reserves market the monetary aggregates. Fedcial funds rato Since late 1982, however, in recognition of the looser connection that has come to prevail, the FOMC has used an operating procedure that eliminates the automatic responsiveness of conditions in reserve markets and interest rates more generally to divergences of the monetary aggregates from targets. This procedure relies more heavily on judgments about the strength of spending tendencies and inflationary pressures. It is best understood against a basic model of the market for reserves in the United States. The Reserves Market 1. This schedule shifts with changes in the demand for reservable The demand for reserves is determined primarily deposits or in the willingness of banks to hold reserve surpluses. 2. This schedule shifts with changes in open market operations, in by the banks' reserve requirements. Before Feb- the discount rate, or in banks' willingness or need to borrow. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Implementing Monetary Policy 423 float play a role in the very short run. These 3. Relation of the spread between the federal funds factors are particularly important late in a re- rate and the discount rate and adjustment plus serve-maintenance period, when their effect on seasonal borrowing! reserves can no longer be offset. The discount window supplies three types of credit to depository institutions: adjustment, seasonal, and extended credit. Adjustment credit helps institutions meet temporary reserve needs, while seasonal loans mainly assist small institutions that have liquidity needs at particular times of the year because, for example, their loan portfolios are concentrated in agriculture or tour- Millions of dollar*. Percent ism. Extended credit is provided to institutions with longer-run operating difficulties. Extended Adjustment plus seasonal borrowing2 credit is not interest sensitive, and it is normally treated as part of nonborrowed reserves for purposes of policy implementation. While the Federal Reserve generally fixes its discount rate below market rates, it expects institutions to borrow from the discount window only when other sources of funds are not available on reasonable terms. Because credit is less 1. Monthly data. expensive at the discount window than in the 2. Excludes special-situation borrowing. open market, it is rationed by administrative guidelines. Banks that seek discount window 4. Relation of discount window borrowing to the spread between the federal funds rate credit frequently are discouraged from continuand the discount rate ing the pattern of balance-sheet management that gives rise to such needs. But banks are more Spread in percent willing to bear the implicit cost of using up their "privilege" of borrowing at the window when — 2.0 the spread between market rates and the discount rate is wide. For this reason, the demand for borrowed reserves rises as the spread widens, and thus the sum of borrowed plus nonborrowed reserves, as shown in the diagram, has an up- — 0 ward-sloping relation to the federal funds rate. I * • I . i • . I .5 20(1 400 600 S00 1000 1200 The slope of this function changes because as the •Vljustmcm plus sCd.->onal bono wine in million'. funds rate falls below the discount rate, borrow- Monthly data. ing drops to a small, nearly constant "frictional" amount, representing the needs of institutions diagram. While the correlation between borrowtemporarily unable to tap market sources. This ing and the spread is clearly positive, the relaschedule of borrowed plus nonborrowed re- tionship is loose, indicating much random noise serves shifts with changes in open market oper- and some long-term shifts in the willingness of ations, in the discount rate, and in banks' will- depository institutions to borrow from the disingness or need to borrow. count window. Chart 3 traces the relationship of adjustment plus seasonal borrowing to the spread between THE OPERATING DIRECTIVE the funds rate and the discount rate since 1982. Chart 4 shows the relationship between borrow- At each of its meetings, the Federal Open Market ing and the spread in the form of a scatter Committee establishes a short-run policy path Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

424 Federal Reserve Bulletin • July 1988 that is intended to be broadly consistent with the band so that higher rates would dampen money long-run monetary targets and desired economic demand. When monetary growth was weak, the performance. The Committee then issues a direc- band was lowered. tive to its agent, the Federal Reserve Bank of As the top panel of chart 5 demonstrates, this New York, concerning the conduct of open mar- practice meant that, absent a discretionary ket operations during the six to eight weeks change in the intended rate, the supply curve of before the next meeting. reserves was effectively horizontal at the speci- The directive identifies a controllable operat- fied federal funds rate. Shifts in the demand for ing variable whose course will guide the day-to- reserves, such as from D to D', were fully day purchase and sale of securities by the Trad- accommodated. Under this procedure, one might ing Desk of the Federal Reserve Bank of New expect a rather stable federal funds rate accom- York. The general course for this variable is panied by marked fluctuations in reserves—and, specified in the "principal instruction" of the indeed, that was the case. The middle panel of directive. chart 5 shows that the federal funds rate fluctu- The directive also describes qualitatively how ated very little from its trend value during the last the short-run path for the control variable is to be three years (1976-79) that this operating procealtered if particular indicators of financial devel- dure was in effect. In contrast, as revealed in the opments or economic performance diverge from bottom panel, the growth of total reserves flucexpectations, and it identifies the scope within tuated considerably around its mean value; that which the Desk may operate, in consultation is, federal funds targeting resulted in rather stawith the Chairman, without convoking the full ble movements in interest rates, but relatively Committee. 5. Federal funds targeting Federal Funds Targeting H'dcral tuniis rate The FOMC began setting explicit intermediate monetary targets in 1970. For most of the follow- •s ing decade, it used the federal funds rate as its - D' control instrument. The principal operating instruction of the policy directive specified a nar- Reserves row band within which the funds rate was to be Pi-rcont contained by open market interventions. For Variability of federal funds rate1 example, the directive issued following the FOMC meeting of September 1979 stated that open market "operations shall be directed at maintaining the weekly average federal funds —- 0 rate within the range of \VA to IP/4 percent." Under this procedure, the Desk automatically Percent adjusted the provision of nonborrowed reserves Variability of growth in total reserves2 whenever the federal funds rate tended to deviate —10 from its target band. Thus, within a reserve period, changes in reserve market pressures - 0 tended to be fully offset, whether they were 10 caused by shifts in demand for required reserves or excess reserves, a change in the willingness to 1976 1977 1978 1979 borrow, or changes in market factors. When money growth was faster than desired, S = Supply of total reserves. D = Demand for required plus excess reserves. the federal funds rate could be raised within its 1. Changes in the average weekly federal funds rate (in percent) are operating band, and if the excessive growth plotted as deviations from the mean change over the period. 2. The weekly growth rates of total reserves (in percent) are plotted persisted the Committee raised the operating as deviations from the average weekly growth rate over the period. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Implementing Monetary Policy 425 large fluctuations in reserves—and money—over take active measures to adjust the federal funds the short run. rate when monetary growth deviated from its One of the problems of the federal funds desired path; it merely had to keep nonborrowed operating procedure was that the FOMC did not reserves on target. always alter the funds rate promptly enough or Excessive growth of transaction money would sufficiently to keep monetary growth within the be reflected in required reserves that were larger target ranges and consistent with long-term price than were expected, and it would be accommostability. dated through an increase in total reserves only to the extent that banks increased their borrow- Nonborrowed Reserves Targeting ing at the discount window. As they first bid for reserves in the market, banks would also force In an environment of excessive inflation and up the funds rate, and a general increase in rates rising inflationary expectations, the Federal Re- would automatically help over time to push the serve announced in October 1979 that, to im- quantity of money demanded back down toward prove monetary control, it would begin using its target path. nonborrowed reserves rather than the federal If money began growing below its desired funds rate as its short-run operating target. This path, required reserves, discount window borchange was reflected in the language of the policy rowing, and the funds rate would all decline. directive. For example, the principal instruction Lower interest rates would eventually stimulate of the directive following the July 1982 meeting money demand and help push the aggregates stated that "the Committee seeks behavior of back up toward their intended paths. Such adreserve aggregates consistent with growth of Ml justments would be faster if nonborrowed reand M2 from June to September at annual rates serves were reduced when money growth was of about 5 percent and about 9 percent respec- high or if they were increased when money tively." The funds rate was still mentioned, but growth was low, so that the short-run movement the range allowed for it was quite wide—typically of the funds rate was amplified. In addition the 4 or 5 percentage points. discount rate could be changed. The resulting Under nonborrowed reserves targeting, an ini- prompter and bigger interest rate responses were tial implicit judgment about the level of interest believed needed to keep money under closer rates likely to be consistent with desired mone- medium-term control so as to reduce longer-term tary growth still had to be made. The implied swings in interest rates. federal funds rate then helped to determine an A stylized version of nonborrowed reserves associated level of discount window borrowing, targeting is shown in the top panel of chart 6, in given the discount rate. Money growth targets which the supply of total reserves is shown as an were disaggregated by component and by size almost vertical line. Although the supply of nonand type of depository institution, then trans- borrowed reserves is held constant, total related into a path for required reserves, after serves respond to interest rates through discount account was taken of interbank deposits and credit. Shifts in the demand for reserves result in other reservable deposits that are excluded from fluctuations of the federal funds rate, while the measured money supply. An estimate of movements in the quantity of reserves are excess reserves was added to projected required damped by variations in interest rates that modreserves, and the initial assumption for the asso- erate divergences of money from target. ciated level of borrowing was subtracted; the The middle and bottom panels of chart 6 show result was a target path for nonborrowed re- that the fluctuations in the federal funds rate serves. The Desk used open market operations in were markedly larger than they were under the order to aim at this target week by week. federal funds operating procedure discussed pre- The reserves-based procedure improved mon- viously. etary control because it incorporated an auto- Reserve growth still varied substantially matic stabilizer for the growth of narrow mea- around the mean, but variations reflected sures of money. The FOMC no longer had to changes in underlying conditions, such as credit Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

426 Federal Reserve Bulletin • July 1988 6. Nonborrowed reserves targeting ing restraint on spending in this situation, the short-run operating target for nonborrowed re- R'deral funds rate serves will have to be raised to permit accommodation of the shift in demand. In addition, unforeseen changes in interest rates, due to changes in economic conditions, can cause changes in velocity and desired patterns of money growth. Nonborrowed reserves targeting remained in effect from October 1979 until the autumn of _ _ _ __ Percent 1982. During this period, which included a severe Variability of federal funds rate1 recession, the inflation rate fell dramatically, while interest rates were highly volatile. At the same time, regulatory changes and financial innovations made the demand for Ml very unstable, and the narrow aggregate was permitted to deviate from targeted paths. _ Perccnt Variability of growth in total reserves- The Borrowed Reserves Operating Procedure Progressively over the summer and autumn of 1982, the Federal Reserve decided to de-empha- \rt~9 """' """ 1980 '""" 1981 """ 1982 size Ml relative to M2 because the demand for Ml was expected to show further instability. In S = Supply of total reserves. addition, a more flexible strategy was to be D = Demand for required plus excess reserves. 1. Changes in the average weekly federal funds rate (in percent) are followed regarding monetary targeting in general, plotted as deviations from the mean change over the period. although the Board reaffirmed a long-run com- 2. The weekly growth rates of total reserves (in percent) are plotted as deviations from the average weekly growth rate over the period. mitment to return to reasonable price stability by reducing the trend of monetary growth. controls and the onset of recession. The ampli- With regard to the short-run operating procetude of reserve fluctuations was less than it dures, the automatic control implicit in nonborwould have been under the federal funds proce- rowed reserves targeting gave way to a more dure. judgmental approach. This shift led in early 1983 As is to be expected, federal funds targeting to the implementation of the borrowed reserves results in a relatively stable funds rate and large procedure, which is still in place today. changes in reserves, while reserves targeting The language of the FOMC policy directive results in relatively larger fluctuations in the was modified slightly, to reflect the emphasis of federal funds rate and less pronounced swings in the new procedure. For example, the principal reserve growth. instruction of the directive issued following the An operating procedure based on nonbor- September 1987 meeting stated that "the Comrowed reserves is, however, not advisable when mittee seeks to maintain the degree of pressure the relationship of money to income is open to on reserve positions." By "pressure on reserve question. To achieve ultimate price and income positions," the FOMC generally means the objectives, shifts in the schedule of money de- amount of reserves supplied through adjustment plus seasonal borrowing. mand unrelated to income movements have to be accommodated. For instance, an increase in the The FOMC sets a borrowing objective that it demand for transaction balances that does not views as consistent with progress toward its stem from excessive spending nevertheless goals for the monetary aggregates and the econcauses required reserves to rise. To prevent omy. The demands for required and excess reundesired increases in interest rates and a result- serves are forecast just as they were under the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Implementing Monetary Policy 427 nonborrowed reserves procedure. The key dif- 7. Borrowed reserves procedure ference is that, absent a discretionary change in t-cderal funds rate the borrowing objective, subsequent movements i s;, .s' in the demand for reserves are usually fully accommodated by changes in nonborrowed reserves, a procedure that permits the assumed level of borrowing to be realized. This operating procedure is depicted in the top panel of chart 7. If the demand for reserves, initially at D, shifts to D', the Trading Desk will Variability of federal funds rate1 accommodate it, thereby shifting the supply of nonborrowed reserves from S to S '. The corn n responding supply schedule for total reserves is S', which includes borrowing of B. In effect, the long-run supply curve for reserves is the line LRS, and the federal funds rate is not affected by Peroi-ni the increase in the demand for reserves. Variability of growth in total reserves- In practice, the federal funds rate will vary in .... JO the short term. It will do so in response to a ••ft o variety of factors, including changes in the willingness of depositories to use discount credit or 10 in Federal Reserve policy, or shifts in the demand function. This observation is confirmed by 1984 _19£_ the data plotted in the middle panel of chart 7. It shows that under this procedure the federal funds S„ = Supply of nonborrowed reserves. S = Supply of total reserves. rate has been somewhat less stable than it was D = Demand for required plus excess reserves. under the direct federal funds targeting approach LRS = Long-run supply. B = Borrowed reserves. (chart 5), but somewhat more stable than it was 1. Changes in the average weekly federal funds rate (in percent) are under the nonborrowed reserves targeting ap- plotted as deviations from the mean change over the period. 2. The weekly growth rates of total reserves (in percent) are plotted proach (chart 6). as deviations from the average weekly growth rate over the period. While there are no marked differences among To be sure, monetary growth has varied conthe fluctuations in reserves experienced under siderably since the procedure was instituted in the three procedures, the fluctuations are slightly late 1982: the annual growth rates of Ml and M2 larger under the borrowed reserves procedure have ranged from 5 to 16 percent and from 4 to 12 than they are under nonborrowed reserves tarpercent respectively. Nevertheless, the inflation geting (see the bottom panel of chart 7.) rate has remained quite steady, averaging less The borrowed reserves procedure has been a than 4 percent per year since 1982, as measured useful tool in implementing monetary policy. by the fixed-weight GNP price index. During this But, in contrast to nonborrowed reserves targetperiod, the country has also enjoyed its longest ing, it has no automatic mechanism for controlpeacetime expansion. ling monetary growth. If money deviates from its forecast path, a discretionary change in the borrowing assumption is required to bring about the problems with wire transfers could result in large short-term changes in money market conditions that will funding needs, or a holiday may cause an end-of-period surge restore the aggregates to the path.1 in borrowing to spill over into the next reserve-maintenance period. The amount of such "special-situation borrowing" is largely unrelated to the spread, and the Desk treats it as a part of nonborrowed reserves for the purpose of policy implemen- 1. Changes in the borrowing assumption are made at times tation. In addition, the willingness of depositories to borrow for technical reasons—that is, because of temporary distur- from the discount window has sometimes changed, so that bances in the relationship of borrowing to the spread between the borrowed reserves schedule has shifted. When such shifts the federal funds rate and the discount rate. For example, persist, the FOMC may adjust its borrowing assumption. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

428 Federal Reserve Bulletin • July 1988 Operating Adjustments between Meetings degree of reserve pressure the FOMC sought during 1985 and 1986. Because of concern about The FOMC can modify the borrowing assump- the persisting overvaluation of the U.S. dollar tion it has set before the next meeting of the relative to the currencies of the country's major Committee for policy purposes, as well as for trading partners, conditions in foreign exchange technical reasons. To guide the Desk's conduct markets assumed higher priority beginning in the of open market operations between meetings, the late summer of 1985. In September of that year, policy directive identifies the key variables the G-5 countries announced a new program of whose performance could occasion a discretion- concerted currency interventions to promote a ary change in the degree of reserve pressure downward adjustment of the dollar. The dollar indicated by the principal instruction of the di- declined, sharply at times, throughout 1986. rective. Such variables include not only the be- In February 1987, the monetary authorities of havior of the monetary aggregates, but also the the countries with the most important currencies pace of economic activity, inflationary pressures announced that they would cooperate closely to and inflation expectations, conditions in financial help stabilize exchange rates around the levels markets, and the foreign exchange value of the then prevailing. Shortly thereafter, the dollar dollar. FOMC members often differ on the rela- again came under sharp downward pressure, tive importance of these factors. The table indi- accompanied by higher inflation expectations cates the consensus view by showing the order in and by fears of a withdrawal of foreign private which conditioning variables have appeared in investment and of a free fall in the currency's recent policy directives. value. As a result, long-term interest rates, which had fallen for nearly three years, began to rise. As the table reveals, developments in foreign RECENT POLICY ISSUES exchange markets were given the highest priority in conditioning reserve pressures at the FOMC As the table indicates, monetary growth and the meeting of March 1987. In the following weeks, strength of the business expansion were men- as concerns mounted about the inflationary contioned first among the variables conditioning the sequences of further declines in the dollar, cur- 1. Order in which policy variables conditioning reserve pressure appeared in the FOMC directive Meetings First Second Third Fourth Fifth May 1985 to July 1985 Monetary aggregates Strength of Inflation Credit market Exchange rates expansion conditions August 1985 ttoo AApprriill 11998866 Monetary aggregates Strength of Exchange rates Inflation Credit market expansion conditions MMaayy 11998866 Monetary aggregates Strength of Financial market Exchange rates expansion conditions July 1986 to February 1987 Monetary aggregates Strength of Exchange rates Inflation Credit market expansion conditions March 1987 Exchange rates Monetary aggregates Strength of Inflation Credit market expansion conditions May 1987 Inflation Exchange rates Monetary aggregates Strength of expansion July 1987 Inflation Monetary aggregates Strength of expansion August 1987 to September 1987 Inflation Strength of Exchange rates Monetary aggregates expansion November 1987 Financial market Strength of Inflation Exchange rates Monetary aggregates conditions expansion December 1987 Financial market Strength of Inflation Exchange rates Monetary aggregates conditions expansion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Implementing Monetary Policy 429 rency interventions were combined with a tight- avoid a sharp decline in business activity. On the ening of pressure on reserve positions and rising other hand, there were also risks that reductions short-term interest rates in the United States. At in interest rates would intensify downward presthe same time, monetary policy abroad was sure on the dollar and thereby might trigger eased. another crisis in domestic and international fi- In the summer of 1987, concern about the nancial markets. Therefore, citing the "sensitive possibility of accelerating inflation and of rising conditions in financial markets" and the "uncerinflation expectations intensified. The economy tainties in the economic outlook," the policy then was growing fast enough to stimulate high directives issued at the November and December and rising rates of resource utilization. In Sep- FOMC meetings called for "a special degree of tember, the Committee again decided to seek flexibility" in open market operations. some firming of pressures on reserve positions, These changes in operating procedures and and the discount rate was increased. priorities were temporary, and as a measure of When stock prices collapsed in mid-October, calm has been restored to financial markets and the resulting disturbances required a policy the relationship between reserve positions and stance that ensured the liquidity and stability of money market conditions has returned closer to the financial system. The FOMC not only eased normal, the FOMC gradually has reverted to its the pressure on reserve positions, but also tem- former emphasis on reserve objectives. porarily modified operating procedures to help calm financial markets. The modified approach gave more weight than usual to money market CONCLUDING OBSERVATIONS conditions, thereby minimizing the risk that the Committee's intentions would be misinterpreted. The ultimate goal of monetary policy—a financial This shift in emphasis was also considered nec- environment conducive to noninflationary ecoessary because the normal relationship between nomic growth—has remained unchanged over discount window borrowing and the federal time. However, over the years the Federal Refunds rate was apparently disrupted. In that serve has adapted its operating procedures in a period, fluctuations of the funds rate were held flexible way to take account of developments in within a narrower band. the economic and financial environment. These The FOMC recognized that open market oper- changes have been made to help the Federal ations might need to be especially sensitive and Reserve to pursue better its long-run objective of adaptable to changes in market conditions or in noninflationary growth. the economy. Further ease might be required to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

430 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report, covering the period Febru- thorities first intervened toward the end of ary through April 1988, provides information on March, when the dollar came under selling pres- Treasury and System foreign exchange opera- sure as the Japanese fiscal year was coming to a tions. It was prepared by Sam Y. Cross, Man- close. The second episode occurred in mid-April, ager of Foreign Operations of the System Open when the dollar declined after the release of Market Account and Executive Vice President in disappointing U.S. trade statistics for February. charge of the Foreign Group of the Federal Reserve Bank of New York.' FEBRUARY TO EARLY MARCH The dollar traded in a narrower range during the three-month period ending in April than it had in During February and early March, market parrecent reporting periods, remaining above the ticipants sensed that the exchange markets for record lows seen at the beginning of the year the dollar were relatively well balanced. They against the mark and the yen. On balance, how- saw the extent of foreign participation in the U.S. ever, from the end of January to the end of April, Treasury's quarterly refunding in early February the dollar declined V/2 percent on a trade- as an indication that private investors had reweighted basis in terms of the other Group of Ten gained sufficient confidence in dollar-denomicurrencies, as measured by the index developed nated assets to finance the large U.S. current by the staff of the Federal Reserve Board. In account deficit primarily by private capital inparticular, the dollar declined LA percent against flows. They were also inclined to believe that the the German mark, 214 percent against the Japa- monetary authorities of the major industrial nanese yen, 33/4 percent against the Canadian dol- tions were firmly committed to fostering exlar, and 53/4 percent against the British pound. change rate stability. Traders had been im- Among the main influences on the dollar dur- pressed by the coordinated intervention ing the period were the following: changing ex- operations conducted by the United States and pectations about the U.S. economic outlook; other authorities at the beginning of the year. shifting assessments about the progress of exter- Dealers continued to expect that the United nal adjustment, prompted by data on the U.S. States and the other Group of Seven (G-7) autrade deficit; growing perceptions in the market thorities would intervene promptly and forcefully that official policy actions, including exchange if necessary to counter any renewed sharp demarket intervention, would be taken as needed to cline in the dollar. Market participants also interfoster greater stability of exchange rates; and preted Chairman Greenspan's testimony to the improving interest rate differentials for the dol- Congress as indicating that the U.S. monetary lar. authorities would pay attention to exchange rates in administering monetary policy. There were two brief episodes of U.S. intervention to support the dollar in the foreign ex- More fundamentally, many market particichange market during the period. The U.S. au- pants became more confident that economic conditions warranted the dollar's staying around current levels for the months ahead. Though 1. The charts for the report are available on request from there were still some lingering concerns about Publications Services, Board of Governors of the Federal the possibility of recession, traders were im- Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

431 pressed with the resilience of U.S. output and Britain's decision was, therefore, seen by those employment after the October break in stock market participants as an indication of a move prices, and the prospect that interest differentials away from coordination of G-7 policy to stabilize would move adversely for the dollar began to exchange rates. A few days later, when the Bank look increasingly remote. At the same time, of France temporarily let the franc decline within some moderation of growth of U.S. domestic the European Monetary System in the face of a demand was seen as helping to curb the growth large order, some market observers saw this of U.S. imports and thereby sustaining the action as possible further evidence that the G-7 needed adjustment in the U.S. trade balance. authorities might henceforth be prepared to allow The mid-February report that the U.S. trade more exchange rate movement. deficit had narrowed again in December, this About the same time, some market particitime to $12.2 billion, seemed to provide evidence pants began to worry that the latest economic that the economic adjustment process was on statistics were pointing to a new threat to the track. process of economic adjustment. Most notably, Immediately after the release of these trade the report of a larger-than-expected increase in statistics, the dollar, after trading within a fairly U.S. nonfarm employment in February, together narrow range in early February, moved up to with data showing increased consumer confireach its highs for the three-month period of dence and a rapid expansion of consumer credit, DM1.7250, Y132.00, and $1.7275 against the suggested that U.S. domestic demand was inpound on February 12. The dollar then drifted deed stronger than had been previously exlower against these three currencies over the pected. Market participants were concerned next several weeks and on Friday, March 4, that, if these developments continued, the U.S. closed in New York at DM1.6895, Y128.75, and economy could soon reach capacity constraints $1.7750 respectively, almost unchanged from the that would choke off further export growth and levels at the beginning of the period. provide new impetus to a rise in imports. In this With the dollar trading within a fairly narrow environment, the dollar traded downward in range against these currencies during February early March, declining sharply against the pound and early March, investors shifted funds to cur- and more gently against other foreign currencies. rencies that offered high yields. The Canadian The dollar's decline against most major foreign dollar was one of the currencies to benefit as currencies paused in mid-March. Chairman investors were attracted by favorable interest rate differentials relative to the U.S. dollar and 1. Federal Reserve reciprocal currency arrangements the Bank of Canada's strong commitment to a Millions of dollars further declaration of Canadian inflation. Amount of Institution facility, April 30, 1988 EARLY TO MID-MARCH Austrian National Bank 250 National Bank of Belgium 1,000 During early March several developments led Bank of Canada 2,000 National Bank of Denmark 250 market participants to question the official re- Bank of England 3,000 Bank of France 2,000 solve to foster stability in exchange rates. On German Federal Bank 6,000 Bank of Italy 3,000 March 7, the British authorities chose not to Bank of Japan 5,000 resist the rise of sterling above the DM3.00 level Bank of Mexico 700 against the mark, a level the Bank of England had Netherlands Bank 500 Bank of Norway 250 defended with heavy intervention through much Bank of Sweden ... 300 of the past year. Some market participants had Swiss National Bank 4,000 apparently assumed that Britain's efforts to keep Bank for International Settlements Dollars against Swiss francs 600 sterling from appreciating against the mark were Dollars against other authorized European associated with the commitments of the G-7 to currencies 1,250 foster exchange rate stability more generally. Total 30,100 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

432 Federal Reserve Bulletin • July 1988 2. Drawings and repayments by foreign central banks under special swap arrangement with the U.S. Treasury1 Millions of dollars; drawings or repayments (-) Outstanding, Central bank drawing Amount of Outstanding, February 1, February March April on the U.S. Treasury facility April 29, 1988 1988 Central Bank of the Argentine Republic 550.0 (2) 390.0 160 0 160.0 -390 1. Data are on a value-date basis. 2. No facility. Greenspan reiterated in congressional testimony dollar. Throughout this period, the Japanese yen the need to be alert to the possibility of a reemer- was the currency that gained the greatest attengence of inflation and suggested the U.S. mone- tion. Market observers were most impressed tary authorities might adopt a tighter monetary with the apparent ability of the Japanese econstance if needed. At the same time, interest rates omy to adjust. A boost in domestic demand had rose in the United States, and short-term interest spurred the economy to grow at an annual rate of rate differentials favoring the dollar began to 7 percent during the fourth quarter of 1987, even widen. Market observers were also reassured of as the Japanese trade surplus was declining in the intentions of the G-7 monetary authorities to real terms. Traders also believed that the yen maintain stability in the exchange markets when was temporarily being held down ahead of the the Bank of England lowered its money market Japanese fiscal year-end on March 31 because of dealing rates Vi percentage point on March 17 in certain tax and bookkeeping considerations. a move thought to be designed to curb the Market participants expected that the underlying attractiveness of sterling in the exchange market. strength of the Japanese economy and continuing Previously, Secretary Baker had indicated in balance of payments imbalances would cause the congressional testimony that sterling's rise above yen to move substantially higher once the fiscal DM3 .00 was not inconsistent with the December year-end passed. Moreover, some market partic- 22 statement of the G-7. Of the major currencies, ipants worried that Japanese financial institutions only the Canadian dollar continued to rise against would sell their dollar assets soon after the the U.S. dollar as the former continued to benefit year-end to shift their investments either to curfrom fairly wide favorable interest rate differen- rencies with less currency risk or higher yields, tials. or back into yen. As March came to a close and it became apparent that the accounting constraints were becoming less binding, traders LATE MARCH moved to establish long yen positions against both the dollar and the mark. But in late March, the dollar did not regain the Under these circumstances, the dollar rebuoyancy it had demonstrated earlier. Although sumed its decline in late March, dropping espethe trade figures for January showed that the cially against the yen. By Friday, March 25, U.S. trade deficit had declined again for the third foreign exchange market conditions had deterioconsecutive month, the exchange market reac- rated significantly, and a sharp decline in U.S. tion to the statistics was subdued. Indeed, sev- equity prices was interpreted in the market as eral market participants expressed concern that evidence that Japanese investors had begun to future trade figures would not show much im- liquidate dollar assets. In these circumstances, provement because of the strength of demand in the U.S. monetary authorities intervened to limit the United States. In this environment, the dollar the dollar's decline and to reassure the market, quickly lost the boost it had received immedi- purchasing dollars against yen that day and again ately on the publication of the figures. after the weekend on March 28. On March 29, when the dollar was moving higher, the Trading For the rest of March, market participants Desk of the Federal Reserve Bank of New York remained skeptical about the outlook for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Foreign Exchange Operations 433 made further dollar purchases against yen to the dollar widened further, and market particiencourage the dollar's rise. Market participants pants interpreted the rise in federal funds rates in were reassured by the intervention, and the early April as an indication of a slight tightening dollar began to firm. The Desk's operations on in Federal Reserve policy. these three days, totaling $318 million against Confidence in the firmness of international yen, were undertaken in cooperation with the commitments to foster exchange rate stability Bank of Japan. was also growing. Traders looked forward to the forthcoming meeting of the G-7 industrial nations for a reaffirmation of official cooperation to sta- APRIL bilize exchange rates. On April 13, the official communique of the G-7 welcomed recent evi- Foreign exchange markets in Europe and New dence that a correction of the world's external York quieted with the approach of the long imbalances was under way and, as expected, Easter weekend early in April. Nonetheless, reaffirmed the commitment of the G-7 to exmarket participants continued to express the change rate stability. view that Japanese investors would be unwilling A test of this commitment came the next day. to invest heavily abroad in their new fiscal year. To be sure, the announcement that the U.S. Therefore, they questioned whether Japanese trade deficit had widened in February was a and possibly other foreign investors would have significant disappointment to the market and enough confidence in dollar-denominated assets triggered an abrupt decline in dollar exchange to continue financing the U.S. current account rates. But market participants noted that the deficit in the future. Thus, the dollar resumed its monetary authorities of the United States and decline briefly and reached its lows for the three- other countries quickly intervened to stabilize month period of DM1.6480 and Y123.40 in Far the dollar. The U.S. monetary authorities bought Eastern trading on April 4. With the dollar also a total of $240 million against marks and $260 declining to $1.8950 against the pound, it was million against yen on April 14 and 15 as the down 2, 3Vi, and 63A percent respectively from dollar briefly tested on April 14 its earlier low its opening levels in early February. against the yen. The prompt and concerted re- In the event, the expected heavy dollar sales sponse by the U.S. and foreign monetary authordid not materialize. Moreover, U.S. interest ities reassured the market. Consequently, after rates had risen further after the release on April having edged slightly lower to DM1.6555 as well 1 of data indicating an unexpectedly large in- as to a three-month low of $1.9065 against the crease in U.S. nonfarm employment for March. pound on April 18, the dollar soon stabilized. Market participants began to reassess the out- For the remainder of April, the dollar was look for the dollar and to reconsider whether underpinned by expectations that U.S. interest their earlier concerns about a lack of investor rates might continue to rise. Market participants interest in dollar-denominated assets were over- perceived an increasing convergence of the mondone. As market participants became more as- etary policy stance needed for domestic stability sured that private capital inflows would continue and that needed for external adjustment. News of to finance the U.S. current account deficit, the a sharp rise in U.S. consumer prices during dollar started to move higher. March, followed by evidence of strong demand The dollar continued to move higher in subse- in the preliminary first-quarter U.S. GNP figures, quent days. As evidence of sustained U.S. eco- increased market expectations that the Federal nomic growth accumulated, market perceptions Reserve might tighten monetary policy. Statethat the U.S. monetary authorities had greater ments by several Federal Reserve officials, exscope to tighten monetary policy strengthened. pressing concerns about the potential risks for The larger-than-expected employment figures for inflationary pressures of relatively tight labor March were followed on April 13 by a report of markets and capacity constraints in some indusstrong U.S. retail sales for the same month. In tries, reinforced these expectations. In these this context, interest rate differentials favoring circumstances, the dollar moved gradually higher Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

434 Federal Reserve Bulletin • July 1988 in late April. It also began to recover against the 3. Net profits or losses (-) on U.S. Treasury and Federal Reserve current foreign exchange Canadian dollar from the low of CAN$1.2213 operations1 reached on April 20 to close the period at CAN$ 1.2285. The dollar closed the period at Millions of dollars DM1.6775, Y125.10, and $1.8765 against the U.S. Treasury pound. Exchange Period Federal Reserve Stabilization During the three-month period, the U.S. mon- Fund etary authorities purchased a total of $818.0 February 1, 1988-April 30, million dollars, of which $240.0 million was 1988 888999...999 555000...999 against German marks and $578.0 million was Valuation profits and losses on outstanding assets and against Japanese yen. The Federal Reserve pro- liabilities as of April 29, 1988 111,,,777555333...666 111,,,333111888...222 vided the $240 million equivalent of German marks as well as $60 million equivalent of Japa- 1. Data are on a value-date basis. nese yen. The Treasury's Exchange Stabilization Fund (ESF) provided the remaining $518 million with the rates prevailing at the time the foreign equivalent of Japanese yen. currencies were acquired. As in the previous period, the U.S. authorities The Federal Reserve and the ESF regularly acquired yen in various ways, including $425.2 invest their foreign currency balances in a variety million equivalent of yen received through the of instruments that yield market-related rates of sale of SDRs to other monetary authorities and return and that have a high degree of quality and $2.5 million equivalent of yen received as repay- liquidity. A portion of the balances is invested in ment of borrowings from the United States under securities issued by foreign governments. As of the Supplemental Financing Facility of the Inter- the end of April, holdings of such securities by national Monetary Fund. the Federal Reserve amounted to $1,024.9 mil- In the February-April period, the Federal Re- lion equivalent, and holdings by the Treasury serve and the ESF realized profits of $89.9 mil- amounted to the equivalent of $945.8 million. lion and $50.9 million respectively from foreign On February 23, 1988, the U.S. Treasury currency operations. As of the end of April, through the ESF provided a $550 million shortcumulative bookkeeping, or valuation gains on term financing facility to Argentina. This facility outstanding foreign currency balances, provided for two separate drawings: the first for amounted to $1,753.6 million for the Federal an amount of up to $390 million and the second Reserve and $1,318.2 million for the ESF. These for an amount of up to $160 million. The Central valuation gains represented the increase in the Bank of the Argentine Republic drew $390 mildollar value of outstanding currency assets val- lion on February 24 and the additional $160 ued at end-of-period exchange rates, compared million on March 11. The first drawing of $390 million was repaid on March 24. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

435 Industrial Production Released for publication May 16 of home goods. Materials production increased sharply and has now retraced the declines that Industrial production increased 0.7 percent in occurred during the first two months of this year. April after having risen a revised 0.2 percent in At 135.6 percent of the 1977 annual average, the March. Output of business equipment rose total index in April was 6.4 percent higher than it sharply again in April, continuing the rapid ad- was a year earlier. vance that began nearly a year earlier. Produc- In market groups, production of consumer tion of consumer goods picked up in April, owing goods was up 0.5 percent in April as auto assemlargely to advances in auto assemblies and output blies rose to an annual rate of 7.0 million units Ratio scale, 1977 = 100 _ TOTAL INDEX _ 140 _ Products —-—' _ 120 — Materials — 110000 — I l I 1 1 1 80 1 1 1 1 1 1 1982 1984 1986 1988 1982 1984 1986 1988 AH series are seasonally adjusted. Latest figures: April. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

436 Federal Reserve Bulletin • July 1988 1977 = 100 Percentage change from preceding month PPPeeerrrccceeennntttaaagggeee ccchhhaaannngggeee,,, GGGrrrooouuuppp 1988 1987 1988 AAAppprrr... 111999888777 tttooo AAAppprrr... 111999888888 Mar. Apr. Dec. Jan. Feb. Mar. Apr. Major market groups Total industrial production 134.7 135.6 .5 .4 .0 .2 .7 6.4 Products, total 143.6 144.3 .2 1.0 .5 .1 .5 6.3 Final products 141.9 142.6 .4 1.0 .4 .1 .5 6.1 Consumer goods 131.2 131.9 .3 1.1 .2 -.2 .5 5.1 Durable 120.8 122.3 -2.9 1.2 -.8 .0 1.3 4.8 Nondurable 135.1 135.4 1.4 1.1 .5 -.2 .2 5.2 Business equipment 153.2 154.5 1.0 .9 .8 .6 .9 8.8 Defense and space 190.9 190.6 .1 .9 .5 -.3 -.1 .8 Intermediate products 149.3 150.1 -.5 1.1 .9 -.2 .6 7.0 Construction supplies 136.6 137.2 -.3 2.3 .6 -.8 .4 7.0 Materials 122.5 123.6 1.0 -.6 -.7 .4 .9 6.6 Major industry groups Manufacturing 140.0 140.9 .7 .3 .1 .3 .7 6.4 Durable 138.9 140.1 .4 .5 .3 .4 .9 7.0 Nondurable 141.5 142.0 1.2 .1 -.1 .2 .4 5.5 Mining 102.4 103.8 .1 -1.2 -1.6 .7 1.3 5.3 Utilities 114.4 113.5 1.3 3.1 .5 -1.1 -.8 7.1 NOTE. Indexes are seasonally adjusted. from the 6.6 million unit rate in March. Output of have been widespread; in April, the largest gains home goods, particularly appliances, rebounded occurred in automobiles for business use and in 1.5 percent in April; but because of sizable manufacturing equipment. Output of construcdeclines earlier this year, output still was below tion supplies, which surged in January, has its fourth-quarter average. The continued, robust changed little, on balance, during the past three increases in production of business equipment months. The recent gains in the production of materials mainly reflect strength in the output of parts for durable consumer goods and for equipment, as well as a rebound in the output of Total industrial production—Revisions nondurables, notably chemicals and textiles. Estimates as shown last month and current estimates In industry groups, manufacturing output in- Percentage change creased 0.7 percent in April. Durable manufac- Index (1977=100) from previous MMoonntthh months turing rose nearly 1 percent last month, reflecting widespread gains. Nondurable manufacturing Previous Current Previous Current was up 0.4 percent after having changed little January 134.4 134.4 .4 .4 over the previous three months. Mining output February 134.4 134.4 .0 .0 increased sharply in April, but production at March 134.6 134.7 .1 .2 April 135.6 .7 utilities declined. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

437 Statements to Congress Statement by Wayne D. Angell and Edward W. any increases in costs do not result in reduced Kelley, Jr., Members, Board of Governors of the earnings returned to the U.S. Treasury. In fact, Federal Reserve System, before the Subcommit- since fees cover actual costs plus imputed taxes tee on Domestic Monetary Policy of the Commit- and return on capital (what we call the private tee on Banking, Finance and Urban Affairs of sector adjustment factor) and the cost of float, the U.S. House of Representatives, May 3,1988. our revenue from priced services offsets 49 percent of all our spending. Second, many fiscal We appreciate this opportunity to discuss and agency operations are provided to the Treasury review the Federal Reserve System's 1988 ex- Department and other agencies on a reimburspenses and budget with this subcommittee. Gov- able basis. Altogether, 58 percent of our total ernor Kelley will be discussing the Board's bud- expenses are either recovered through pricing or get, and my comments today will focus primarily are reimbursable. on the Reserve Bank budgets and on several major initiatives that I believe will assist the Reserve Banks in controlling costs and in improving the quality of their services in the future. HISTORICAL OVERVIEW I will also have some brief comments on the Federal Reserve System as a whole. It may be helpful to put the budget for 1988 in The Board has recently made available to the perspective by sketching the 10-year history of public and to this subcommittee copies of our System expenses. Since 1978, Federal Reserve publication entitled Annual Report: Budget Re- expenses increased at an average annual rate of view, 1987-88 presenting detailed—but readable 6.6 percent; System employment decreased by and convenient—information about spending 442 or 1.8 percent; and volume increased 36 plans for 1988. Some of the attached tables have percent through 1987. Unit costs did increase as been updated for an actual experience in 1987, Federal Reserve volumes adjusted to pricing and, therefore, small variations exist from data in after implementation of the Monetary Control that document.1 Act. For 1988, the Federal Reserve System has Since 1983, when the transition to pricing was budgeted operating expenses of $1,335.7 million, completed, unit cost for the composite of all an increase of 4.5 percent over 1987 actual ex- functions has declined 1.4 percent per year on penses. Before getting to the substance of our average even while improvements have been 1988 budget, I would remind the subcommittee of made in the quality of services. two aspects of Federal Reserve System opera- For priced services the decline has been partions that affect our budget in unusual ways. ticularly sharp, especially in the electronic pay- First, 40 percent of System expenses arise from ment areas in which equipment is more readily services provided to depository institutions for substituted for human resources and in which which, by law, we charge fees adequate to cover volume growth has been the greatest. In Comall costs. Since additional costs of these services mercial Checks, in which there has been a signifare more than covered by additional revenues, icant effort to improve the quality of services, there has been an increase in unit cost of 1.0 percent per year since 1983, although in the most 1. The attachments to this statement are available on recent year-over-year comparison, unit cost fell request from Publications Services, Board of Governors of 2.2 percent. the Federal Reseve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

438 Federal Reserve Bulletin • July 1988 For nonpriced cash operations—involving the key planning tool for operations. We think this distribution of currency and coin—the decline in effort is justified by the low levels of growth in unit cost has also been sharp; since 1983 the the Board's expenses during a decade in which average decline has been 5.2 percent per year. In there has been significant growth in the volume fiscal agency operations, also nonpriced, there of our work. has been an increase of 1.2 percent per year since In this regard I would like to go over some 1983 but a significant decline in unit cost of 4.1 basic data about the Board's budget. In Decempercent in the past year. ber 1987 the Board approved a 1988 budget of Recently, 1987 over 1986, we have seen a $90.6 million. This amount was 5.0 percent decrease in unit costs in all individual service greater than our 1987 expenses. While this inareas as well as in the composite. crease was somewhat higher than the increases The impact of the long-term productivity gain in the two preceding years, it was necessary is perhaps best seen in our trend in total Reserve in light of new initiatives facing the Board and Bank employment. In spite of significant growth some areas in which it was necessary to commit in volumes of operations, major transition adjust- additional resources. There was no net inments after new legislation, and rapid changes crease in the number of positions in the 1988 in the banking industry, actual employment budget. has decreased from 1978 to 1987 by 469 em- Over the past 10 years the Board's expenses ployees. have grown an average of 6.4 percent per year. In In presenting our spending plans for 1988, I real terms the increase has been less than 1 would like to mention that both the Reserve percent per year. The numbers of positions and Bank budgets and the Board's budget must be employees provided in the 1988 budget are virapproved by the Board of Governors and that tually identical to the numbers at the end of 1978 Reserve Bank budgets must first be reviewed in spite of dramatic increases in the Board's work by the Committee on Federal Reserve Bank load. Examples of legislation that has affected Activities. Governor Kelley oversees the the work load include the Financial Institutions Board's budget and I will turn to him for that Regulatory and Interest Rate Control Act discussion. (FIRA), the International Banking Act, and the Monetary Control Act, of which the latter probably had the greatest impact. A legislative item affecting the 1988 budget was the Expedited BOARD BUDGET Funds Availability (EFA) title of the Competitive Equality Banking Act. Concerns, such as prob- I am happy to discuss with you today the 1988 lems in the banking industry, the debt situation in budget of the Board. Since the budget process of less developed countries, and our growing forthe Board has been discussed in testimony pro- eign involvement, have also had an impact on our vided in earlier years, and since it is thoroughly work load. covered in the Annual Report: Budget Review, We have been able to hold the line on expenses 1987-88, which was distributed to you earlier this and employment because of the dedication of our year, I will not go over the process in detail. staff and an aggressive program to improve pro- Instead I will limit myself to the major themes of ductivity through automation. As I mentioned the 1988 budget, some trend information you earlier, the 1988 budget is 5.0 percent more than may find useful, and a discussion of one of 1987 expenses. Much of this increase was for the more significant problems facing the initiatives that could not be deferred. Factors Board. leading to the increase in expenses included the The Board's budget is very carefully reviewed following: continuing our efforts to automate key functions to improve productivity and our ability by my colleagues on the Board, and I am even to respond rapidly to certain situations; investing more deeply involved in its preparation. I menin a program to reduce the costs of our currency tion this to assure you that we have a very distribution procedures; conducting special surthorough process and that we use the budget as a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 439 veys to update and expand the volume of infor- percent per year from 1978 to 1988. This is the mation available for monetary and economic smallest functional area at the Board. The major policymaking; implementing the Competitive factor causing the 1988 increase is an automation Equality Banking Act; and continuing our efforts initiative to improve the management of currency to enhance the supervision function. purchases and distribution. This improved man- During 1987 the Board formally created an agement will allow us to reduce the volume of Office of the Inspector General (IG). This Office currency we purchase and lower transportation has nine positions; however, five of these posi- costs. Annual savings in the Currency Budget tions were formerly assigned to our Internal will more than offset the one-time cost of this Audit and Operations Review Programs. These increase. There are also costs associated with the programs were consolidated under the control of Board's implementation of the provisions of the the IG. The creation of the IG Office was another Competitive Equality Banking Act for improved factor in the size of the 1988 budget increment; funds availability. however, we feel the Office will further The budget for System Policy Direction and strengthen the management control system at the Oversight increased 2.4 percent. This increase is Board. substantially lower than the 7.6 percent average The 1988 increment was not spread evenly annual rate of increase experienced over the throughout the Board's four functional areas. past 10 years. The 1988 increase is tied to the While some expenses, such as the 2 percent incremental costs associated with establishgeneral pay increase and increases in health ing the Office of the Inspector General in late insurance rates, affected all four functions 1987. evenly, the initiatives approved in the budget had Overall, it has been our objective to limit an uneven impact on the four areas. expenses while ensuring that we are able to carry In the Monetary Policy area the budget incre- out our very important responsibilities. I believe ment was 6.2 percent higher than 1987 actual that through careful management we have struck expenses. This is identical to the average annual an appropriate balance. rate of increase from 1978 to 1988. The main A problem discussed in our testimony last year causes of the 1988 increase were the surveys was our ability to attract and retain a high-quality discussed earlier and incremental operating ex- staff. While we remain convinced that at this time penses for a work station network that was we have such a staff, the growing disparity installed during 1987 in our Division of Research between our salary structure and that of competand Statistics. There was a net increase of one ing institutions poses a threat to our long-term position in this area to absorb some of the ability to maintain that quality. increasing work load associated with the debt As an interim step to combat the problem, we problems of less developed countries and with recently extended the salary ranges for several of the nation's trade deficit. our Federal Reserve grades. To date these ad- The budget for the Supervision and Regulation justments have been quite limited, applying priarea increased 2.1 percent. This increase is less marily to economists' and attorneys' entry salathan the 6.1 percent average annual rate of ries. At the same time, to avoid an unacceptable increase from 1978 to 1988. This increase sup- degree of compaction in the salary ranges for ports three new positions to provide enhanced these job families between new hires and current data management and analysis in the supervision staff, we have made some modest salary adjustarea. The increasing complexity of the nation's ments. We will continue to monitor this situation financial industry requires that we take every so that in the future we can, with confidence, opportunity to improve our ability to respond to assure this committee that we remain able to complex questions rapidly. recruit and retain the first-rate staff that Ameri- The Board's budget to provide Services to ca's central bank must have. Financial Institutions and the Public increased At this point, I would return the presentation 31.8 percent in 1988, which is substantially to Governor Angell for a discussion of the Rehigher than the average annual increase of 5.2 serve Bank budgets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

440 Federal Reserve Bulletin • July 1988 RESERVE BANK BUDGETS they did in 1987. The most significant project is in the New York District and accounts for $2.6 million of the increment. Planning for 1988 Reserve Bank budgets began 3. Increased supervision. The guidelines of the early in 1987, when the staff developed a budget Board of Governors regarding the frequency of examobjective based on forecasts of Reserve Bank inations and inspections of banks and bank holding work loads and productivity. An objective to companies and the demands for oversight of these increase System expenses by no more than 4.9 institutions will continue to require more staff and higher operating costs in supervision and regulation: percent, excluding expenses associated with costs will rise $3.5 million in 1988, and employment in EFA and a special research project that will be the supervision service will increase by 66 the average discussed later, was approved by the Board in number of personnel (ANP), to 2,213 ANP. July and was used by the Reserve Banks in 4. Improved cash operations. Growth in the volume developing their plans and budgets. At each of of currency handled by the Reserve Banks has provided an incentive for the Federal Reserve to seek the 12 Reserve Banks, the proposed 1988 budget more efficient ways of processing currency. These was given rigorous review (with the budget obinitiatives will result in an increase in the 1988 budget jective as guidance) by a committee of senior of $2.0 million and 50 ANP. Bank officials, the First Vice President, and the 5. Programs for the U.S. Treasury. Expenses for President. The budget, as modified by these centrally provided Treasury services are budgeted to reviews, was also reviewed and approved by the increase $4.7 million, or 24.3 percent, with an increase of 82 ANP. Much of the increase is due to the first full Reserve Bank's Board of Directors, many of year of operations of the Treasury Direct Access whose members are responsible in their private Book-Entry System (Treasury Direct) and the addition capacity for managing large organizations. In the of reinvestment activity to that system. Also, the fall, Reserve Bank budgets were submitted to the Federal Reserve is continuing the development of a Board of Governors where they were analyzed Public Debt Accounting and Reporting System at an increase in cost of $0.3 million and is managing two and reviewed by the Committee on Federal Resavings bonds projects at a total cost of $0.4 million in serve Bank Activities, which held a separate 1988. meeting with each Reserve Bank President on 6. Facilities. Building projects will cost $6.6 million the proposed budget. Both Governor Kelley and in 1988. Most of these expenses are associated with I serve on this committee. decisions made before 1987. New building projects account for about $1.4 million. As a result of the review process, the total budgeted expense of the Reserve Banks—both priced and nonpriced—was held to an increase of The total increase in 1988 expenses for these 4.3 percent over estimated 1987 expenditures. major initiatives is $23.6 million in 1988. If we (Over actual 1987 expenses, the increase is now were to exclude costs for these projects, the 1988 expected to be 4.5 percent since actual expenses budget for Reserve Banks would be only 2.5 for 1987 were less than those estimated at the percent greater than expenses for 1987. Budgettime budgets were reviewed.) Again these in- ing for these initiatives and at the same time creases exclude the cost of EFA and the special keeping bottom line expense growth low (4.3 research project. The Reserve Banks' 1988 bud- percent) was achieved by restrained growth or gets are affected by the following System initia- decreases in other areas. Indeed, staff increases tives: for these initiatives were more than offset by staff decreases achieved through early retirement programs approved by the Board of Governors at 1. Automation. Automation initiatives in the Sysseven Reserve Banks. tem will add $3.9 million to operating costs in 1988. These initiatives are a direct result of the System's For a look at 1988 budgeted expenses on a decision to put more emphasis on improving the reli- program basis, I will discuss our four service ability of its electronic payments services. lines in the order of their size. 2. Another part of this effort is contingency ar- Expenses for Services to Financial Institutions rangements. Back-up facilities are being established to and the Public total $827.5 million and account handle data processing contingencies for critical operations including the transfer of funds and securities; for almost two-thirds of the Reserve Banks' 1988 such facilities will cost $2.9 million more in 1988 than budgets. Expenses are budgeted to increase 3.5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 441 percent over actual 1987. Employment is bud- which total $183.4 million, are expected to ingeted to decline by 29 persons or 0.3 percent crease $13.0 million, or 7.6 percent, over 1987. from 1987, even though volume increases are This area now accounts for 14.7 percent of total expected in all major operations. System expenses, compared with 12.8 percent in Commercial check processing accounts for al- 1983. A staff level of 2,213 ANP is budgeted, an most half of the budgeted expenses in this area increase of 66, or 3.1 percent, over 1987. and, at 5,150 ANP, about 60 percent of the staff. The increase in costs is driven by changing The increase in expenses in 1988 is expected to circumstances in the banking industry. In some be only $7.3 million, or 1.8 percent, over actual Districts, the condition of banks and bank hold- 1987, with a decrease of 57 ANP. Even with a ing companies subject to our supervision continsmaller staff, the System expects to handle a 2.7 ues to require added supervisory resources. In percent increase in the annual number of checks addition, deregulation has led bank holding comprocessed, projected at 15.3 billion. Expenses panies to develop new service and product lines, associated with implementation of the Expedited which call for more and better-trained examin- Funds Availability Act are not included in these ers; moreover, firms throughout the industry are data. becoming larger and more complex. Restraining the growth of check processing As in the past, the Reserve Banks are attemptexpenses are early retirement programs, the con- ing to use resources more efficiently by increassolidation of operations, incentive pay for pro- ing the use of personal computers in the field and ductivity increases, and a new contract for inter- in the office, by accelerating the development of district shipping. examiners, and by hiring persons with relevant Expenses for currency processing ($121.5 mil- experience. lion), which are expected to increase $6.0 mil- Expenses for Services to the U.S. Treasury lion, or 5.2 percent, in 1988, will constitute and Other Government Agencies are budgeted at nearly 15 percent of the budget in this area. $142.5 million, an increase of $6.8 million, or 5.0 Changes in staffing are expected to result in a net percent, from 1987. This area accounts for apincrease of 55 ANP, or 3.5 percent, because of proximately 11 percent of operating costs. Staffsharp volume increases in some Districts. Over- ing is budgeted to decrease 36 ANP, or 2.0 all volume is anticipated to increase 6.3 percent, percent, to 1,800 ANP. with unit cost projected to rise 0.1 percent. New Consolidation of operations and higher levels contracts for maintenance on the high-speed cur- of automation contribute to controlling these rency sorting machines will also raise costs in costs. Several Districts are consolidating opera- 1988. The increase in staff arising from higher tions at one office. The Banks are seeking greater volumes at some Districts is partially offset by a efficiency through the substitution of electronic new currency handling process that will permit a ("book-entry") records for paper ("definitive") reduction of 19 ANP. securities and through the use of high-speed Expenses for the automated clearinghouse ser- sorting machines to process food coupons and vice are budgeted to rise $5.2 million, or 8.4 savings bonds. percent. The change reflects a 16.6 percent ex- The most significant initiatives are in centrally pansion in volume and an adjustment in account- provided Treasury services; expenses here are ing to distribute the costs of data processing and budgeted to increase $4.7 million, or 24.3 perdata communications more accurately. A de- cent, and 82 ANP will be added to the staff. crease of 3 ANP is budgeted. Much of this increase ($4 million and 54 ANP) The costs for funds transfer are expected to occurs because 1988 is the first full year of increase $1.9 million, or 3.3 percent, on balance, operation for the Treasury Direct system and reflecting a 6.1 percent rise in volume, an addi- because reinvestment activity has been added to tional 6 ANP, and a decrease due to a data that system. Treasury Direct, which handles all processing and data communications accounting purchases of government securities by individuchange. als in book-entry form, is managed in Philadel- Expenses for Supervision and Regulation, phia with local operations in each District. Its Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

442 Federal Reserve Bulletin • July 1988 expansion permits an offsetting decrease in the annual surveys of compensation offered by major operation that handles definitive securities— employers in its community. Nationwide surveys "other Treasury issues"—for which staff is de- are used to adjust the structure of officers' salacreasing 52 ANP and expenses, $1.6 million. ries. Besides Treasury Direct, the increase in cen- Expenses for retirement and other benefits, trally provided Treasury services includes three which account for 10 percent of the Banks' programs in the Cleveland District, which will budgeted expenses, are projected to increase increase costs $0.7 million in 1988 but will, we $9.3 million, or 7.7 percent, in 1988. This inexpect, lead to long-run efficiencies. crease reflects higher costs for hospital, medical, Expenses for Monetary and Economic Policy and dental insurance, along with the effect of at the Federal Reserve Banks total $91.7 million large claims in several Districts; an increase in and account for approximately 7 percent of their the tax rate for social security; an increase in 1988 budgets. Expenses are expected to increase benefits, reflecting payments to employees ac- $5.3 million, or 6.1 percent, over 1987. Employ- cepting early retirement; and resumption of norment will increase 13 ANP or 1.7 percent to 788. mal group life insurance premiums (the Districts The rise in cost reflects a net addition to staff, did not have to pay any in 1987). salary actions, and improvements in office auto- Nonpersonnel expenses account for 38 percent mation. Staff members were added in New York of the Banks' expenses and are projected to for testing the replacement of an eight-year-old increase 4.6 percent in 1988. Items within this system used for open market trading, intensify- category include the following. ing the monitoring and analysis of debt in less Equipment expenses account for 13 percent of developed countries, and studying the feasibility the Banks' expenses and are budgeted to inof receiving data electronically from reporting crease 3.7 percent. Developments in priced serinstitutions; in Atlanta for continuing a special vices are mainly responsible for the rise in equipeffort to improve the quality of economic re- ment costs: initiatives to meet the changing search; and in Dallas for supporting a southwest- needs and demands of check collection; efforts to ern economic development program. standardize automation and communication sys- A brief review of Reserve Bank expenses on tems in response to the consolidation of financial an object of expense basis also might be useful to institutions; progress toward encrypting commuthe subcommittee. nication links for various users of priced ser- Personnel expenses consist of salaries for of- vices; and continued work to expand and upficers and employees, other expenses to compen- grade electronic networks that provide sate personnel, and retirement and other bene- information to financial institutions. fits. The major resource of the Reserve Banks is Building expenses, which account for 9 pertheir people, and total personnel costs account cent of total expenses, are expected to increase for 62 percent of total Federal Reserve expenses. 9.9 percent in 1988. Building renovations and Personnel costs are expected to increase $32.6 repairs at Chicago, New York, Cleveland, and million, or 4.4 percent, in 1988. Salaries—the Dallas contribute to increases in depreciation, major component of this category—are budgeted taxes on real estate, and utility expenses. Rental to increase 4.7 percent. expenses are 21.6 percent higher, primarily be- Salaries and other personnel expenses account cause of a $2.8 million increase at New York. for nearly 52 percent of the Banks' budgeted These increases will be partially offset by a expenses and are expected to increase $23.3 decline in other building costs, as the majority of million, or 3.7 percent, in 1988. Salaries are Districts incurred one-time, outside contractual expected to increase 4.7 percent, while other expenses in 1987. personnel expenses are expected to decline 33.3 Shipping costs, which account for nearly 7 percent, primarily resulting from a reduction in percent of 1988 budgeted expenses, will increase the use of computer programmers on contract. only 1.6 percent, as savings from a renegotiated Each Federal Reserve office bases its salary contract for interdistrict transportation will offset structure for staff members other than officers on an increase in postal rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 443 Other nonpersonnel expenses will rise only 2.9 retrieval, has the potential for significant impercent. provements in the handling of check and return- By their nature, capital outlays vary greatly item processing both for the Federal Reserve and from year to year. As depicted in the plans of the for depository institutions. Research since 1985 Reserve Banks for capital spending in 1988, has demonstrated the feasibility of making a outlays for buildings and for data processing and computerized image on one side of a check at communications equipment continue to domi- high speed under laboratory conditions. The next nate Reserve Bank capital budgets. phases will test the high-speed capture of both sides of checks plus the ability to store and retrieve the image data. These phases will be SPECIAL BUDGET EMPHASIS conducted under laboratory conditions with a limited volume of checks and then at a Reserve Before concluding my testimony I would like to Bank under production conditions. Results will mention briefly four initiatives that are of great be shared with the financial community, where it importance to the Reserve Banks and that will might also offer widespread benefits in the storhave a major impact on Reserve Bank expendi- age and exchange of check images. This special tures and operations into the next decade. The project is budgeted to cost $6.2 million in 1988. costs of the first two initiatives are outside the These costs are recovered through check collecbudget objective set for the Reserve Banks in tion fees, and the costs of implementing digital 1988. image technology in the Reserve Banks on a As you are aware, the Expedited Funds Avail- full-scale permanent basis would also be recovability Act (EFA) gives the Federal Reserve ered through check collection fees. Board regulatory authority to improve the check These two initiatives, $15 million for EFA collection and return systems. As a result of the implementation and $6.2 million for the check EFA, the Reserve Banks are planning to imple- image project, bring the total budget for the ment several new services to expedite the han- Reserve Banks to $1,266.3 million, an increase of dling of returned checks. The Board has pro- $74.5 million or 6.3 percent over actual 1987 posed that the Reserve Banks begin to offer the expenses. new services to speed the return of unpaid During the 1980s, the Federal Reserve System checks beginning September 1, 1988. The costs has placed increasing emphasis on the quality associated with the implementation of EFA are and reliability of its electronic payment services. not included in the 1988 Reserve Bank budgets This increasing emphasis is due to a number of because at the time the budget was approved the factors, including the rapid growth in the volume cost impact was unknown. Proposals from each and value of funds and securities transfers, the Reserve Bank for operating and capital resources Payment System Risk Reduction Program, and to implement EFA are currently under review. the disruption caused by the 1985 operating out- The operating expense impact of EFA is ex- age at a money center bank in New York. The pected to be less than $15 million in 1988, with an emphasis on improving the reliability of Fedwire increase of about 350 positions. An additional operations has achieved results. During the first $15 million of capital expenditures will also be quarter of 1988, the Reserve Banks have imrequired. The costs of providing these return- proved their up-time performance for the critical item services are to be recovered through fees hours of the funds transfer service and the bookcharged to users. Later this year the Board will entry securities transfer service. Work will conapprove prices for the new return-item services. tinue on this effort and Reserve Bank initiatives Besides the efforts to speed up the return of to increase reliability of electronic payment serchecks, the Board of Governors has authorized vices will cost the Reserve Banks an additional further research and development of digitized $2.9 million in 1988. These expenditures will be image processing of checks. The technology be- recovered through fees for electronic payment ing developed, which relies on capturing check services. Significant expenditures to improve reimages electronically for computer storage and liability will also be incurred in 1989 and beyond. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

444 Federal Reserve Bulletin • July 1988 Since the late 1970s, the Federal Reserve has to improve the quality of currency in circulation focused its efforts on providing contingency and to reduce the cost of printing currency. The processing facilities to address both noncatastro- cost to the Reserve Banks for printing new phic and catastrophic operating outages. Proce- currency is expected to decline from $164.2 dures to address noncatastrophic outages are an million in 1987 to $156.3 million in 1988. This integral part of Reserve Bank procedures. Each decline results from the improved ability of Re- Reserve Bank has acquired redundant hard- serve Banks—through improved sensors on curware—both mainframes and critical components, rency processing machines—to recover substansuch as communications controllers. This redun- tial amounts of fit currency that previously would dancy permits Reserve Banks to transfer proc- have been destroyed. This initiative has allowed essing from failed, primary equipment to back-up the Reserve Banks to reduce the production equipment. To address software-related outages, demands being placed on the Bureau of Engravthe Reserve Banks have developed thorough ing and Printing, while simultaneously improving testing procedures for both applications software the quality of currency in circulation. Beginning that the System develops and environmental in 1985 the System focused on developing a software supplied by vendors. second generation of high-speed processing To address catastrophic operating outages, all equipment. Installation of the second-generation Reserve Banks, except the New York Reserve processing equipment will begin in 1989 and the Bank, currently rely upon the Contingency Proc- results should be improved Reserve Bank capaessing Center (CPC) at Culpeper. The Reserve bility to detect fit from unfit currency, and faster Banks have demonstrated that critical operations processing of currency volume, which is curcan be restored at the CPC and each Reserve rently growing at an annual rate of 9.0 percent. Bank tests its capability twice each year. The The budget for the Currency Equipment Develtime required to restore operations ranges from opment Program is $1.5 million in 1988. nine to forty-one hours. These timeframes are Given the expanding volumes and new initiadue to the time required to travel to Culpeper tives that we are currently undertaking, a partic- (two to sixteen hours) and the time required to ular concern of the Federal Reserve at this time load software, reestablish data bases, and rees- is the depletion of its authorized fund for branch tablish communication connections with deposi- Federal Reserve buildings. The cumulative stattory institutions (six to thirty-two hours). As a utory limit on these funds is $140 million and has result, many Reserve Banks would not be able to not been changed since 1974. Completion of the restore operations on the day that an outage current building in Helena will, for all practical occurred. purposes, exhaust the fund and inhibit the Fed- To have same-day capabilities, the Federal eral Reserve from undertaking modernization, Reserve Bank of New York has implemented a renovation, expansion, or new facilities plandedicated contingency processing center in ning. Rockland County, New York. For the same Our planning suggests that funds will be reason other Reserve Banks have undertaken a needed in the relatively near future to meet space study to determine the feasibility of providing requirements in Birmingham, Nashville, Salt back-up for each other. This approach, called the Lake City, Houston, San Antonio, and El Paso. "buddy system," is expected to permit opera- The expenditure of funds for branch buildings is tions to be restored at a "buddy" site within four largely recovered by the Federal Reserve hours after a catastrophic outage is declared. In through pricing of its services to financial insti- 1985 the Federal Reserve began a multiyear tutions, as required by the Monetary Control study on developing the Federal Reserve's elec- Act. Thus, the building costs will be financed in tronic payment services in the 1990s and identi- large part by the private sector. fying a production system that would permit the The House Banking Committee approved an Federal Reserve to satisfy the future needs of increase in the branch building fund in 1984, but users of these services. the provision was included in a bill that ulti- The Reserve Banks have made a major effort mately was not passed by the Congress. We Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 445 believe that it is critical that the limitation be mittee on the Federal Reserve System budget. changed in the near future to allow the Federal I would like to reemphasize that the existing Reserve to meet its future building needs for budget processes are working well in control- Branch facilities. ling costs, while at the same time encouraging quality improvements. We welcome your CONCLUSION comments and would be pleased to address any questions you may have on our In closing, both Governor Kelley and I thank budget. • you for this opportunity to address the subcom- Statement by Alan Greenspan, Chairman, Board that it will take more time before our task is of Governors of the Federal Reserve System, complete. before the Subcommittee on Telecommunica- The proposals contained in the Working Group tions and Finance of the Committee on Energy report represent, in my judgement, the proper and Commerce, U.S. House of Representatives, approach to dealing with these issues. They May 19, 1988. reflect the "one market" valuation process as it applies to cash and derivative instruments for I am pleased to have this opportunity to appear stocks, and thus the need for coherence and before the Subcommittee on Telecommunica- coordination. The proposals recognize the necestions and Finance with my Working Group col- sity for private sector solutions to many leagues to discuss our report to the President on of the system's problems. They seek to take financial markets. In the period since last Octo- advantage of the private sector's expertise ber's market break, we have learned a great deal in the many complex components of the more about the structure of our financial markets equity products market system and of the incenand their points of vulnerability. To this end, we tives that the exchanges, clearinghouses, have been aided by the many reports on the and securities firms have for developing a safe October plunge, including the one prepared by and sound marketplace. Yet the proposals rethe Presidential task force headed by Senator flect, at the same time, the need for federal Brady, and from numerous meetings with repre- oversight and cooperation to ensure that rules sentatives from the private sector. and regulations in individual markets recognize Moreover, considerable progress has been and deal with interactions among markets and made at the government and private sector levels that contingency plans are in place should anin addressing areas of weakness. This progress other emergency occur. Such an approach, I has been presented in considerable detail in the firmly believe, is the appropriate way of ensuring Working Group's report to the President, and I that our financial markets have the flexibility to shall not use this occasion to recite the details. adapt to inevitable change while limiting their Our report is to be regarded as an interim sub- vulnerability to breakdowns that could threaten mission, for we recognize that there is more work our economy. to be done. Some might be impatient with the There is no avoiding the fact that, as our pace at which our deliberations have proceeded, economy and financial system change, our finanbut it needs to be understood that we are dealing cial markets are going to behave differently than with a very complex system and inappropriate they have in the past. We cannot realistically efforts to correct this system could leave us with hope to turn back the clock and replicate behavweaker rather than stronger financial markets. ior of the past. Rather, we need to understand We do not yet have answers to all of the ques- better how the system is evolving and the consetions that have been raised about ways to quences of such change. Our efforts need to strengthen our markets, and we must recognize focus on making sure that the financial system is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

446 Federal Reserve Bulletin • July 1988 more resilient to shocks rather than embarking dealing with a single valuation process for on futile endeavors to artificially curb volatility. stocks, index futures, and options based on the The events of last October illustrated dramat- underlying value of primary claims to corporate ically the many changes that have occurred in ownership. Index futures and options have value our market for equity products and the resulting only to the extent that the corresponding stocks vulnerabilities of the system. Some of those have value, and in a normally functioning marchanges, such as the use of so-called portfolio ketplace the prices of all these instruments will insurance strategies based on the faulty premise reflect the values of the underlying equities. In of a high degree of market liquidity, have at least these circumstances, it is a mistake to single out to a degree been corrected by the October expe- one segment of the broad marketplace as the rience. Other changes, such as the heavier de- culprit for large and rapid price movements when pendence of market participants on high-speed these price movements reflect economic fundacomputers and telecommunications devices and mentals in the context of modern technology and the growing role of institutions—as the public, in the prominence of institutional investors. Moreeffect, delegates more of its asset management to over, given the integration of markets, efforts to professionals—are here to stay. curb one of the component markets may well Greater reliance on advanced computers and have adverse consequences for the functioning of telecommunications technology means that news the other related markets as well as the overall bearing on asset values reaches portfolio manag- efficiency of the financial system. ers simultaneously. And managers are able, and What many critics of equity derivatives fail to have the incentive, to react virtually instanta- recognize is that the markets for these instruneously with their market orders. Institutional ments have become so large not because of slick managers and other market professionals also sales campaigns but because they are providing can easily monitor prices across markets on a economic value to their users. By enabling penreal time basis and can react quickly to any price sion funds and other institutional users to hedge disparities across the markets and corresponding and adjust positions quickly and inexpensively, arbitrage opportunities that may emerge. these instruments have come to play an impor- The speed of information flow, together with tant role in portfolio management. The history of the institutionalization of equity holdings, im- futures and options provides numerous examples plies that new information can very promptly of contracts that did not provide much economic induce a heavy imbalance of orders on one side value and consequently failed. or the other of the market. Any resulting arbi- The delegation of asset management to profestrage opportunities will generate additional or- sional managers has spurred growth of futures ders while ensuring that the price movements are and options. The institutions that manage the spread across the various instruments and, in- assets of our retirement programs, nonprofit increasingly, across borders. It is also worth noting stitutions, equity mutual funds, and various that we routinely see the futures markets reacting kinds of trusts seek to use all of the equity to new information more rapidly than the cash products to improve yields while limiting expomarkets. Some have concluded from this regu- sure to risk. larity that movements in futures prices thus must Reducing exposure to risk, of course, implies be causing movements in cash prices. However, portfolio diversification. Thus, we should not be the costs of adjusting portfolio positions are surprised to see that these investors manage appreciably lower in the futures market and new highly diversified portfolios of equities approxipositions can be taken more quickly. Hence, mating the market in composition. Moreover, in portfolio managers may be inclined naturally to recognition of the weight of evidence pointing to transact in the futures market when new infor- only very minimal scope for improving portfolio mation is received, causing price movements to returns by applying managerial resources to inoccur there first. Arbitrage activity acts to ensure dividual stock selection, many professional manthat values in the cash market do not lag behind. agers deal in baskets of stocks representing indexes, most notably the Standard & Poor's 500. As I have noted in earlier testimony, we are Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 447 Thus, trading in baskets of stock representing tween cash and futures markets and more price indexes has been found to be a cost-effective disparities across these markets. We learned last means of achieving available returns on stock October that when large price disparities emerge portfolios. this adds to confusion and doubt in the markets In this context, it is not surprising that institu- and uncertainty premiums in stock returns rise, tional investors have come to rely heavily on adding to selling pressures. In other words, inindex products in futures and options markets as sufficient arbitrage between cash and futures can a relatively low-cost means of adjusting their be a destabilizing force in a declining market. positions and as hedging devices. Today, futures The curtailment of portfolio insurance does market trading is dominated by such investors. A imply reduced orders and less strain on system consequence, of course, is that new information capacity in a declining market. Strains on system bearing on equity values broadly will be capacity and the associated uncertainties about promptly reflected in stock index futures and in execution, as we saw last October, can reinforce those stocks making up the indexes. tendencies to withdraw from the markets; in the Institutional investors also became major users cash market for equities, for which there is a net of so-called portfolio insurance strategies before long position overall, such withdrawal implies the October break, a factor that likely contrib- more sell orders and downward pressure on uted to the high level of share prices. Equity prices. The likelihood of a recurrence of such holdings were expanded by such institutions on severe strains on system capacity also is being the mistaken belief that markets for cash and reduced through efforts of the exchanges and the derivative instruments were sufficiently liquid to over-the-counter market to augment capacity. permit investors to trim their exposures promptly The report of the Working Group lists a number and limit losses. Many of these aggressive strat- of measures that have been taken or are in egies were based on mathematical models and process. For example, the New York Stock executed by computers. The inability to liquidate Exchange is implementing a system that it expositions promptly last October, under the very pects will be able to handle comfortably a volume circumstances these programs were designed to of 600 million shares per day by this summer and protect against, has led to a major scaling back of a billion shares by late 1989. portfolio insurance strategies. Users found that Another factor contributing to the stresses of such strategies can work to limit risk for individ- last October were credit uncertainties—affecting ual portfolios under normal circumstances. How- clearinghouses, market makers, and brokers— ever, if all try to do it simultaneously, the strat- and the need to finance outsized cash flows, egies will break down, since risk can be shifted resulting in part from the lack of coordination of from one investor to another but cannot be margin payment and collection in the futures lowered for the total market. markets. The Working Group report notes that a The other type of program trading, index ar- great deal of progress has been made in the area bitrage, also has been curtailed. Cutbacks have of credit and clearing recently, and it recompartly reflected management decisions by some mends specific further actions to be taken, some securities houses to withdraw from index arbi- of which may require legislation. trage, at least in part to reassure customers, The sheer rapidity of the price decline in many of whom perceive such activity to be a October, as I noted in earlier testimony, was a source of volatility. The recent action by the major factor contributing to the near-panic atmo- New York Stock Exchange to restrict automated sphere on October 19, raising uncertainty premiorders when the Dow Index moves 50 points ums in share returns and adding to downward or more also will further reduce the use of index price momentum and pressures on execution arbitrage, especially in a declining market. We capacity. Such a rapid price move leads to must recognize, however, that although efforts to doubts about underlying values and efforts to artificially reduce program trading activity have withdraw from equities. Some investor survey found popular support, they come at a cost. results suggest that on October 19 many sellers Reduced arbitrage implies less connection be- were reacting to the large price declines them- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

448 Federal Reserve Bulletin • July 1988 selves and to other panicky investors. The po- suggest a higher margin for individual stocks than tential for greater rapidity of price moves is an for index futures. implication of the combination of modern tech- The staff of the Working Group did a substannology and the large institutional presence in the tial amount of statistical analysis of this matter, equity-related markets that I previously men- which proved to be helpful in determining the tioned. extent to which maintenance margins at present In recognition of this situation, the Working are or are not harmonized for prudential pur- Group has proposed a coordinated intermarket poses. The findings, which are presented in an circuit breaker that would be triggered by a appendix to the report, indicate that differences decline in the Dow index of 250 points. The in price movements between individual stocks resulting trading halt is intended to give the and broad indexes imply that a given degree of markets a breather to digest available informa- protection across all instruments requires that tion and to provide time for offsetting buy orders margins on individual stocks need to be about to arrive on the floor and for credit arrangements twice as high as those on broad indexes. This to be worked out. We fully recognize that price presupposes that settlement occurs on the same limits can be destabilizing, but a coordinated time schedule and that the level of price volatility circuit breaker that is known in advance is pref- that has prevailed since October continues into erable to the disorderly process of halts in indi- the future. In addition, an instrument settling in vidual stocks and derivative markets that threat- three days would need to have nearly twice as ened to get completely out of control last much margin as an instrument that settles in a October. The limits that we are proposing are single day. This evidence indicates that current sufficiently wide that they are expected to come maintenance margin levels for individual stocks into play very rarely—only when there is a major and index futures—set by the self-regulatory threat to the system. organizations—are high enough to cover recent Another important issue relating to the price movements more than 99 percent of the strength of our market systems that was ad- time. The degree of protection afforded by these dressed by the Working Group is the issue of very different levels of margin is surprisingly margin. The Brady Task Force and others have comparable across the markets. proposed that margins be harmonized across the Moreover, effective market protection against cash and derivative equity markets. Margins the consequences of a very large price movement serve to protect against a breakdown in the also is enhanced by acceleration of margin calls markets resulting from a large price move that by brokers when there are large price declines could threaten clearinghouses and brokerage and by customers honoring obligations when the firms. Achieving consistency in margins for indi- margin that they have deposited proves to be vidual stocks and options and index-based prod- inadequate to cover very large price movements. ucts must take into account differences in price Clearinghouses, in addition, are protected by behavior of these instruments and differences in member security deposits and other devices. their settlement periods. Because all stock prices Furthermore, the Working Group's recommendo not move in unison, values of broad portfolios dation on circuit breakers and on credit and of stocks are less volatile than prices of individ- clearing would add to protections in place by ual stocks and thus prudential margins on index reducing financial system risks from the extreme futures do not need to be as high as those on price movements that are not in the 99 percent individual shares. In addition, the longer the average. settlement period, the larger is the potential Beyond achieving margin levels adequate for cumulative price change and the greater is the market integrity, it has been argued frequently risk exposure of the broker and clearinghouse. that they should be set at levels that will reduce Futures contracts are cleared daily, and margin price volatility. In particular, it is thought that calls can be made several times a day, while the the lower levels of margin on options and futures standard settlement period for shares is three foster greater leveraged speculation that in turn days to a week. This consideration, too, would causes larger price fluctuations. This line of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 449 reasoning leads to the proposal that margins on trading volume and market liquidity. If this is derivative equity products be raised to levels what the Congress seeks, and I find it hard to more in line with those in the cash market. believe that less liquid markets for equity-related The empirical evidence, which is vast and instruments are consistent with congressional expanding rapidly, does not, on balance, lend intent, then I would suggest a more direct apmuch support to this argument. The available proach—say, through a tax on transactions. analyses, including work done by the Board's The prudential objectives regarding margin, on staff in recent years, provide no convincing evi- which most if not all can agree, are closely dence that margins affect price movements in any related to clearing and settlement. Adequate significant way in the cash or futures markets. margins act to protect clearinghouses and bro- For example, the volatility of stock prices has kers against customer default. But other meanot been significantly lower since the imposition sures also are needed to strengthen the clearing of margin requirements; and changes in initial and settlement system, which, in the event, last margin requirements on stocks have not been October looked to be a potential point of vulnerfollowed by predictable or significant changes in ability in the system. It has been proposed by the stock prices. Brady Task Force and others that a comprehen- Moreover, with the expanding opportunities sive unified clearing system be established as the for credit that have characterized developments preferred solution to the problems revealed by in our financial markets for some time, those who last October's experience. This concept has conwish to speculate are little constrained by margin siderable appeal, and it may be an objective levels. An individual who wishes to speculate in worth pursuing over the longer run, to reduce the market—a fairly rare event in the index- strains and risks associated with intermarket futures markets that are dominated by institu- positions of clearing members and their customtions and other professionals—can obtain funds ers. A netting of intermarket positions might through numerous other sources, including con- reduce liquidity strains on those having crosssumer loans, loans secured by collateral other market positions, and more comprehensive inforthan stocks, or by borrowing against home eq- mation on intermarket positions facilitates an uity, perhaps through a home-equity line. Large assessment of the overall risk positions of the institutional investors may borrow against their entity. But as the Working Group report notes, portfolios of securities or obtain letters of credit the achievement of a single unified clearing orgato meet margin requirements. Thus, while higher nization faces many obstacles at present, espemargin requirements may impose somewhat cially difficult legal questions regarding liability. higher costs on transactions in particular mar- Meanwhile, as the Working Group report also kets, margin requirements are unlikely to reduce notes, a number of steps already have been taken in any meaningful degree the total amount of by the clearinghouses, or are planned, that will leverage in the economy. Indeed, outstanding provide many of the benefits of unified clearing. margin credit on stocks plus the value of open For the major futures and options exchanges, interest of stock-index futures represents about 2 daily pay and collection information by custompercent of the market value of equity. ers is now being shared and plans are under way For these reasons, I believe that we should not to broaden this information sharing system. be guided in the margin area by equalization for Also, progress is being made to assemble timely leveraging reasons. Implementing such an ap- comprehensive information on the comprehenproach would only tend to give rise to a false sive positions of clearinghouse members. Other sense of security about price movements at a measures are being developed for timely confirtime when, given the underlying economic set- mation of payments to settlement banks. ting and fundamental change in the structure of Let me conclude by saying that we have come the equity markets, price movements may well a long way in the past seven months in identifyremain larger than we had come to expect in ing the vulnerabilities in our equity markets that earlier years. Raising margins will add indirectly contributed to the difficulties of last October. An to transactions costs, which will act to reduce impressive list of accomplishments has been Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

450 Federal Reserve Bulletin • July 1988 made to date, and there is every reason to believe let us seek to preserve the vibrancy of our marthat procedures in place now will succeed in kets rather than run the risk of stifling them addressing many of the remaining issues. The through overreaction to the events of last Octo- Working Group intends to continue to play an ber. active role in this process, and I believe that this We cannot provide an ironclad guarantee that will prove to be the most effective means for there will not be another October 19 in our ensuring that progress is made in strengthening future. Unforeseen economic forces could, on our financial markets and enabling them to adapt their own, conceivably trigger such an event. If, to inevitable change. In the end, we must be however, we succeed in fully addressing the prepared to accept a different pattern of be- structural inadequacies of our financial markets, havior in our equity markets, and our objective we can at least reduce the interaction between must be to enhance their ability to accommodate economic and structural forces and thereby rechange and withstand bouts of volatility. As we duce the even now very small probability of a continue to address these issues in the future, replay of last October. • Chairman Greenspan presented identical testimony before the Senate Committee on Banking, Housing, and Urban Affairs, May 24, 1988, and before the House Committee on Agriculture, June 14, 1988. Statement by Michael Bradfield, General Coun- subject to significant restrictions on their Canasel, Board of Governors of the Federal Reserve dian operations. System before the Committee on Banking, Fi- Chapter 17 of the FTA contains four separate nance and Urban Affairs, U.S. House of Repre- commitments of the United States with respect sentatives, May 24, 1988. to the operations of Canadian-controlled financial institutions in this country: (1) to allow U.S. I am pleased to appear before this committee to banking institutions to underwrite and deal in discuss the banking law aspects of the Canadian government debt obligations; (2) to U.S.-Canada Free Trade Agreement (FTA). The provide for permanent grandfathering of the geomajor purpose of the Financial Services Chapter graphic location of Canadian banks in the United of the FTA is to allow financial institutions of States; (3) to allow Canadian banks to have the both countries to operate freely in each other's benefit of the same rules as are applicable to U.S. markets with equality of competitive opportu- banks with respect to underwriting and dealing in nity. The aim is to assure that a financial institu- securities; and (4) to provide for the continuation tion from one country will receive no less favor- of the same national treatment rules as are now able treatment in the markets of the other applicable to Canadian banks. I will explain the country than is available to a local entity. commitments of the United States in the context Canadian and other foreign banks are already of current U.S. banking regulation and the conable to operate within the United States on the sequences, if any, of the implementation of such same basis as U.S. banking organizations. Thus, commitments. with the exception of one change to be enacted into U.S. banking law, which I will discuss later, legislative approval of the FTA would not result in changes in federal regulation of Canadian UNDERWRITING AND DEALING IN banks operating in the United States because in CANADIAN GOVERNMENT SECURITIES this country national treatment of foreign banks is the normal approach to regulation. The FTA The first U.S. commitment involves an amendaims at extending this type of treatment to U.S. ment to the Glass-Steagall Act that would permit banks operating in Canada, which are currently U.S. banks to underwrite and deal in the debt Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 451 obligations of the Canadian government and its Holding Company Act to engage in underwriting political subdivisions to the extent those debt and dealing in government securities, it would obligations carry the full financial backing of the have to do so before commencing underwriting Canadian governmental entities involved. The and dealing in Canadian government securities. effect of this revision is to place Canadian government debt obligations on the same footing as comparable U.S., state, and local government GEOGRAPHIC GRANDFATHERING OF securities. Such Canadian securities would be CANADIAN BANKS IN THE treated as so-called "bank eligible" securities, UNITED STATES which all national banks, and state banks so authorized by their charters, may purchase for The second U.S commitment simply provides their own account, and underwrite and deal in that the U.S. government will not change current without limitation under the Glass-Steagall Act. law or practice with respect to interstate banking This revision would also allow U.S. branches operations to a Canadian bank's disadvantage. and agencies of foreign banks to underwrite and Some background on this provision is approprideal in these Canadian government securities in ate. Before the passage of the International the United States as they now can underwrite Banking Act of 1978, there were no federal and deal in U.S. government securities. restrictions on a foreign bank's ability to estab- The parallel treatment of U.S. and Canadian lish branches and agencies in many different government securities extends to obligations not states. only of the Canadian federal government, but Consequently, many foreign banks, including also to obligations of Canadian provincial and some Canadian banks, established a multistate local governments. Currently, a U.S. bank may network of banking offices. Currently, 8 Canaunderwrite and deal in general debt obligations dian banks operate 15 subsidiary banks, 18 that are backed by the full faith and credit of state branches, and 14 agencies in the United States. and local governments of the United States. The Of these, 8 branches and 7 agencies are grandfarevision called for by the FTA provides that thered. banks may also underwrite and deal in the debt The IBA grandfathered interstate branches obligations of Canadian provinces and local gov- and agencies but required a foreign bank to ernments if they carry the financial backing of choose a "home state" and restricted the bank's those governments to the same degree that U.S. ability to establish domestic deposit-taking state and local governments back, with their full branches outside that state. Foreign banks may faith and credit, the debt obligations that they expand outside their home states only through issue. agencies and limited branches, which cannot With respect to the effect of this revision on accept domestic deposits. Article 1702:2 of the the operations of bank holding companies under FTA provides that the United States will not the Bank Holding Company Act, the Board has change those rules to the detriment of Canadian authorized nonbank subsidiaries of bank holding banks. companies, including foreign banks, to underwrite and deal in "bank-eligible securities." Consequently, if the legislation implementing the NATIONAL TREATMENT FOR FTA is enacted, bank holding company and SECURITIES ACTIVITIES foreign bank subsidiaries that have received Board approval to engage in government securi- The third U.S. commitment provides that the ties underwriting will be able to commence un- United States shall accord Canadian-controlled derwriting and dealing in Canadian government financial institutions national treatment with redebt securities without need for further review spect to changes in the Glass-Steagall Act and by the Board. If, however, a bank holding com- any implementing regulations and administrative pany or foreign bank had not yet applied for and practices. This provision is consistent with curreceived approval under section 4 of the Bank rent law and the proposals that are now before Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

452 Federal Reserve Bulletin • July 1988 the Congress to amend the Glass-Steagall Act. company engaged in financial activities, includ- As far as I am aware, none of those proposals ing a foreign insurance company, with the prior discriminates against Canadian or other foreign approval of the Board. However, the statutes banks with respect to their ability to conduct and regulations governing foreign activities of securities activities. U.S. banking organizations, which will not be affected by passage of the activities of any foreign FTA, impose restrictions on the U.S. activ- NATIONAL TREATMENT ities of any foreign companies that may be acquired. The FTA also provides that the U.S. federal The laws provide that a U.S. bank or bank government, subject to Canada's commitment to holding company may invest in a foreign comconsult and to liberalize its markets for Un- pany that does not engage in any business in the controlled institutions, shall continue to provide United States except as an incident to its inter- Canadian institutions with the rights and privi- national or foreign business. The Board has leges they currently enjoy under federal law. I interpreted "incidental" activities restrictively understand this to mean that the United States to include only those activities that may be will continue to provide national treatment to performed by an Edge corporation in the United Canadian banks operating in the United States. States. Canadian banks would not, however, have any An Edge corporation is a specialized internagreater privileges than would U.S. banks or bank tional financing vehicle that may only engage in holding companies. Thus, if there is a change in incidental foreign-related activities in the United federal law that either expands or limits the States. The Board has not permitted general powers or activities of U.S. banks or bank hold- underwriting or brokering of insurance in the ing companies, the same benefits or restrictions United States as an incidental activity. In one will also apply to Canadian banks operating in instance the Board permitted an Edge corporathe United States. tion to sell very limited insurance in the United States but only when the insurance covered international commercial risk, which is risk res- OTHER ISSUES ident outside the United States. In sum, a bank holding company or bank cannot evade the pro- I understand that some questions have been hibitions on U.S. nonbank activities through use raised concerning whether the FTA would create of a foreign subsidiary, including a Canadian a mechanism by which banking organizations subsidiary. could engage indirectly in activities in the United This is also the case with respect to Canadian States that are not otherwise permissible. As I banks operating in the United States. If a understand the agreement, this would not be Canadian bank has a branch, agency, or subsidauthorized. More specifically, it has been asked iary bank in the United States, the Canadian whether a U.S. bank holding company could, bank is subject to the provisions of the Bank under the FTA, acquire a Canadian bank that Holding Company Act with respect to nonowns a Canadian insurance company that en- banking activities in the United States. The FTA gages in the insurance business in the United does not override the Bank Holding Company States, even though U.S. banks are not generally Act to allow a foreign subsidiary of a Canadian permitted to engage in insurance activities. bank to conduct U.S. activities not currently There is nothing in the FTA—apart from the authorized. provision permitting the underwriting and deal- You have also asked me to address the issue of ing in Canadian government debt obligations— the effects of the FTA on conflicting state laws as that authorizes greater powers for bank holding provided in section 4 of the draft implementing companies than they currently have. Under the legislation. Section 4 states that the provisions of current regulatory framework a bank holding the FTA shall prevail over any conflicting state company may acquire an interest in a foreign law, including any state law regulating or taxing Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 453 the business of insurance. It appears that the controlled financial institutions with the rights provision has little relevance for the Financial and privileges they now have under federal law. Services Chapter. Article 1701 of the Financial By their terms, the U.S. commitments do not Services Chapter specifically states that no other impose obligations on the states. Consequently, provision of the FTA confers rights or obliga- in my view, no federal-state conflicts would arise tions on parties with respect to financial services, under chapter 17 that would require resolution and that the provisions of chapter 17 shall not under section 4. apply to any law enacted by a political subdivi- In conclusion, I believe that the provisions of sion of either the United States or Canada. chapter 17 of the FTA on banking services would Therefore, the U.S. commitments apply only to not conflict with or require any change in the the United States government, including the current administration of applicable banking laws commitment to continue to provide Canadian- and regulations. • Statement by Wayne D. Angell, Member, Board We have reviewed these recommendations in of Governors of the Federal Reserve System, light of last October's stock market break and before the Subcommittee on Domestic Monetary have found that our views have changed little. Policy of the Committee on Banking, Finance The Board continues to believe that the primary and Urban Affairs of the U.S. House of Repre- objective of federal margin regulation should be senatives, May 25, 1988. to ensure the financial integrity of the markets, and thereby ensure contract performance, by Thank you for this opportunity to present the limiting credit exposures of brokers, banks, other views of the Federal Reserve Board on the lenders, and, importantly, clearinghouses. The application of federal margin regulations to equi- Board does not believe that higher margins ties and equity-related futures and options. The should be imposed in an attempt to limit stock Report of the Brady Task Force and other major price volatility. In the Board's view, a link bestudies of the stock market crash have empha- tween financial leverage and stock price volatility sized that these markets are, in effect, one mar- has not been firmly established. The Board is ket and that regulatory structures must be made concerned that the imposition of higher margins consistent with this economic reality. In partic- to control speculation in futures and options ular, these reports identified margin regulation as could significantly reduce liquidity in these mara critical intermarket regulatory issue on which kets and thus diminish the economic benefits greater consistency is needed. Margin regulation they provide in terms of hedging opportunities also was reviewed carefully by the Presidential and price discovery. Working Group on Financial Markets. In the wake of the October plunge, the various At the Federal Reserve we fully endorse the futures and options exchanges raised margins on need for a consistent approach to setting margin equity-related instruments to levels that generrequirements in the cash, futures, and options ally appear adequate to preserve market integmarkets for equities. Indeed, we have been con- rity. Although margins in the stock-index futures cerned about this issue since the introduction of and options markets remain lower than those in stock-index futures in 1982. Shortly thereafter, the cash markets, they, nonetheless, provide the Board instructed its staff to prepare a thor- protection against credit losses against all but the ough review and evaluation of federal margin most extreme price movements. Lower margins regulations. The staff study was presented to the in the derivative markets can provide such pro- Congress early in 1985, along with a letter from tection because futures investors are required to the Board containing conclusions drawn from the meet daily variation margin calls and because study and recommendations regarding the appro- stock price indexes tend to be less volatile than priate regulatory structure for margins. prices of individual stocks. The various ex- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

454 Federal Reserve Bulletin • July 1988 changes also have addressed the risks of extreme the Board's views regarding the appropriate obprice movements by actions such as increasing jectives in the current economic environment. I clearing-fund guarantee deposits and enhancing will then outline the implications of those objectheir systems for collecting and paying intraday tives for appropriate levels of margins in the variation margin calls. cash, futures, and options markets. Finally, I will Nevertheless, the Board supports the expan- discuss the Board's views on how margin regusion of the scope of federal oversight of margin lations should be administered to ensure that the policies to cover equity-related futures and op- appropriate margins are established and maintions on futures. The integrity of the clearing- tained. houses was maintained during the crash, and credit losses to brokers in these markets proved manageable. In the months before the stock OBJECTIVES OF FEDERAL MARGIN market crash, however, margins in the stock- REGULATION index futures and options markets provided less protection against potential credit losses than The Securities Exchange Act of 1934 gave the those in the cash markets. There is sufficient Federal Reserve Board the authority to regulate possibility that at some point self-regulatory or- margins on all corporate securities. At that time, ganizations (SROs) might establish margins that the Congress sought to achieve three main objecwould be inconsistent enough to present market tives through margin regulations: (1) to constrain problems or set them at levels that might present the diversion of credit from productive uses in potential costs to other parties. Therefore, the commerce, industry, and agriculture to specula- Board believes that federal oversight is appropri- tion in the stock market; (2) to protect unsophisate for ensuring that margins in the cash, futures, ticated investors from using margin credit to and options markets remain adequate and con- establish excessively risky positions; and (3) to sistent. forestall excessive fluctuations in stock prices. The Board continues to believe, however, that The Board has reviewed each of the main the objective of maintaining market integrity can objectives sought by the Congress and is skeptibest be attained by delegating authority for set- cal about either the need for, or the effectiveness ting margins to the various SROs—not only in of, margin regulations for these purposes. With the futures and options markets, but also in the regard to the first objective, the diversion of cash markets. The role of federal authorities credit, the Board has concluded that margin should be to monitor the actions of the SROs and regulations are not needed. The use of credit to to discourage actions that may pose a threat to finance purchases of stock does not reduce the market integrity. Should moral suasion prove amount of credit available to industry, comunsuccessful, federal authorities should have the merce, or agriculture. The borrowed funds do authority to veto such actions. The Board be- not disappear; rather, they are transferred to the lieves that the Securities and Exchange Commis- seller, who then reinvests the proceeds. If margin sion (SEC) and the Commodity Futures Trading borrowings were very large, frictions in the Commission (CFTC) are in the best positions to credit markets might nonetheless have a small monitor the margin-setting actions of the ex- effect on the cost or availability of credit. But changes and clearinghouses they oversee. Both margin borrowings today are much smaller relaagencies have developed considerable expertise tive to the size of the economy or credit markets in the markets they regulate. than they were in the early 1930s. For example, The regulation of margins clearly is a contro- at year-end 1987, margin and other securities versial issue. Some industry experts, federal loans together accounted for little more than 1 regulators, and members of the Congress have percent of total credit outstanding in U.S. finanmade quite different recommendations for re- cial markets. form. This lack of consensus appears primarily to The Board acknowledges that margin requirereflect differences in objectives. Consequently, ments probably have contributed to achievement the next part of my testimony will elaborate on of the second objective, the protection of unso- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 455 phisticated investors from overly aggressive bro- stock holdings have focused on the substantial kers. Margin requirements, however, seem a leverage obtainable through index futures and very crude tool for this purpose; they constrain options. Here too, though, there is no clear sophisticated as well as unsophisticated inves- evidence that greater leverage has produced tors and hedging as well as speculation. The greater stock price volatility. Indeed, available Board believes that continuing and legitimate evidence indicates that the principal users of concerns about broker misconduct can and such derivative products do not actually hold should be addressed more directly and more leveraged positions. Specifically, data from the effectively by rigorous enforcement of existing CFTC's large trader reporting system indicate rules of conduct for brokers. In particular, the that before the crash about 70 percent of the open provisions that require brokers to "know" their interest in the Standard & Poor's (S&P) 500 customers and to ensure that investments are futures contracts was held by institutional inves- "suitable" for their customers should be strictly tors that held offsetting positions via stocks or enforced. other derivative instruments. More generally, a In any event, these first two objectives do not vast literature has examined the effects of futures appear to be the focus of public concerns about trading on cash market prices of commodities margin regulation. Disagreements about appro- and other financial instruments and found little priate levels of margins appear primarily to re- evidence of heightened price volatility. flect disagreements about the third objective, the The Board is concerned that attempts to remoderation of excessive stock price fluctuations duce stock price volatility by substantially raisby limiting the leveraging of equity holdings. If ing margins on equity-related futures and options the objective of margin regulation is to equalize could reduce liquidity in the markets for these the leverage obtainable in the cash, futures, and instruments. In particular, the floor traders or options markets for equities, futures margins so-called "locals" in the futures market likely would need to be raised to levels required in the would find their costs increased by higher margin cash markets and a complex schedule would requirements and might be forced to curtail their need to be created for margins on options. On the activities. To the extent liquidity were reduced, other hand, if preserving market integrity is the higher margins could actually increase the magprimary objective of margin regulation, lower nitude of short-term price movements in both the margins in the derivative markets than in the derivative markets and the cash markets. In any cash markets generally would be adequate. event, any reduction in liquidity would diminish Proponents of the use of margin requirements the usefulness of the derivative instruments for to limit leverage argue that there is an important hedging and price discovery. relationship between the availability of leverage In the Board's view, the primary objective of and the volatility of stock prices. However, margin requirements for equities and equityexisting studies of stock price behavior provide related futures and options should be to ensure no persuasive evidence of such a relationship. that market integrity is not jeopardized by credit With regard to leverage in the cash markets, the losses suffered by brokers, banks, or other lendenactment of margin regulations does not appear ers, including, in particular, the exchanges' to have reduced stock price volatility. Statistical clearinghouses. In today's world, the Board beanalyses have not found any significant relation- lieves the importance of this objective simply ships between changes in initial margin require- cannot be overstated. Because these markets are ments and stock prices. It is worth noting that so tightly interconnected, the failure or financial credit-financed cash holdings of stock have re- impairment of any one of the major participants mained a very small fraction of the value of in the clearing system would promptly place outstanding shares; the ratio of margin credit great stress on all of the others. And as we saw to stock values has fluctuated in a narrow last fall, problems in the equity markets are range between 1 and 2 percent over the past quickly transmitted to other financial markets, 30 years. both in the United States and throughout the world. Of course, recent concerns about leveraged Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

456 Federal Reserve Bulletin • July 1988 APPROPRIATE LEVELS OF MARGINS should be set to cover price movements over periods as long as five days. The Board's conclusion that the primary objec- The Board's staff has evaluated the implicative of margin requirements should be the pro- tions of these differences in the cash and futures tection of the integrity of the marketplace has markets for the adequacy and consistency of strong implications regarding the analytical margins. The staff calculated the percentage of framework appropriate for evaluating the ade- daily changes in the S&P 500 index for recent quacy and consistency of margin levels in the periods that would have been covered by maincash and derivative markets for equities. The tenance margins currently required by the Chiadequacy of the margin should be measured by cago Mercantile Exchange. They also calculated the probability that an adverse price movement the percentage of five-day price changes of indiwould result in losses that exhaust the margin. vidual New York Stock Exchange stocks cov- Margins in two markets should be considered ered by maintenance margins established by the consistent if they provide equal protection NYSE. These calculations suggest that, after against losses from adverse price movements. adjusting for differences in the margin collection Within this framework, consistency of margins period and price volatility, the level of margins does not imply equality of margins. In the cash, on index futures that are now in place would futures, and options markets for equities, in provide roughly the same or even greater protecparticular, equal margins imply very different tion against loss as the margins on stocks. Spedegrees of protection because of significant cifically, margins provided under current requirestructural differences in the markets. One differ- ments by the SROs on both futures and stocks ence between the cash, futures, and options would cover 99 percent of price movements even segments of the equity market that strongly af- in the recent volatile period. If the pattern of fects the adequacy of margins is the relative price movements in the future returns to that volatility of prices. A basic principle underlying typical of the pre-October 1987 period, some the establishment of adequate margin levels is lowering of margins would be acceptable. But if that the lower the volatility of prices, the lower price volatility were to rise, higher margins the level of margin needed for protection. Be- would be called for. cause stock indexes tend to be less volatile than Setting margins to cover 99 percent of exprices of individual stocks, margins on index- pected price movements clearly will not provide based options and futures generally can be a coverage for those rare, extraordinary price smaller percentage of the value of the contract moves such as those that occurred on October than are margins on individual stocks and mar- 19. Because margin levels sufficient to provide gins on options on individual stocks. protection against all possible price movements Another important consideration in determin- would impose unacceptable costs to market paring the appropriate level of margin requirements ticipants and the liquidity and efficiency of maris the period of time that investors are allowed to kets, the Board recognizes that mechanisms, meet margin calls. The shorter this period, the other than margins, must be used to address the smaller the size of price movements that can be risk of large price movements. Indeed, there are anticipated between the margin call and its re- safety mechanisms currently in place that adsponse, and hence the lower the required level of dress this risk, such as capital requirements, margins. In futures markets, in which investors clearing-fund guarantee deposits, and intraday are subject to daily settlement and mark-to- variation margin payments. Moreover, the recmarket procedures and can be expected to have ommendations of the Working Group on Finanliquid assets readily available to meet variation cial Markets concerning a circuit-breaker mechmargin calls, margins need to be sufficient to anism and credit, clearing, and settlement cover all but the most extreme one-day moves in improvements should add other significant proprice. In cash markets, however, in which inves- tections against financial system risks from extors are accustomed to five-day settlement peri- treme price movements. ods and tend to be less liquid, adequate margins Margin levels on stock-index futures and op- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 457 tions products were increased substantially dur- Nonetheless, the Board believes that federal ing the crash and remain elevated. In addition, oversight of the SROs would provide important the options exchanges will soon impose further benefits. First, federal authorities would review increases in margins for options on individual the process by which an SRO sets margins to stocks and stock indexes. And the Chicago Mer- ensure that margins are designed to provide cantile Exchange and the Chicago Board of protection against losses from all but the most Trade have established coordinated procedures extreme price movements. If margins do not for routine collection and payment of intraday appear to provide such protection, the federal variation margins. The Board believes that these authorities should have the power to veto the actions should significantly enhance both the SROs' actions and impose higher margins. Secfinancial integrity and the liquidity of the deriva- ond, federal oversight would foster coordination tive markets in periods of stress. among the SROs in the cash, futures, and options markets. The Board believes that the SEC and the SCOPE AND STRUCTURE OF FEDERAL CFTC are the federal agencies best suited to MARGIN REGULATION provide oversight of margin policies in the markets they regulate. The SEC has long overseen The Board's conclusion that protection of the the setting of maintenance margin requirements marketplace should be the primary objective of in the cash markets and margins in the options margin regulation also strongly influences its markets. The CFTC, by virtue of its broad expeviews on the appropriate scope and structure of rience in the regulation of futures markets, is best regulation. Because the cash, futures, and op- able to oversee the setting of margins on stocktions markets for equities are so closely interre- index futures products. Although the Board also lated, a threat to the financial integrity of any one has some expertise in the area of margin regulamarket is a threat to all of them. Consequently, if tion, it does not feel comfortable with proposals federal margin regulations are to ensure the in- to extend its margin authority to cover equitytegrity of the cash markets for equities, their related futures contracts. Oversight of margins scope should be extended to cover the markets requires an agency intimately involved with, and for equity-related futures as well. aware of, the day-to-day workings of the partic- With regard to the structure of regulation, the ular market being regulated. It would be difficult, Board believes that federal authority over mar- costly, and, in the final analysis, wasteful for the gins in the equity-related futures markets should Board to replicate the expertise developed by the be delegated to the exchanges' self-regulatory SEC and the CFTC in their respective areas. organizations. Moreover, we also think that au- Furthermore, active oversight of margins might thority for setting margins in the cash markets distract the Board from its primary responsibilishould be delegated to the SROs. These organi- ties: the conduct of monetary policy and the zations quite clearly have a strong economic establishment of regulations conducive to the interest in maintaining the integrity of their mar- safety and soundness of the banking system. The ketplaces. Moreover, in those areas in which Board anticipates, however, that it will continue they have already been delegated authority, they to participate in future discussions about regulahave taken a more flexible and sophisticated tory reforms such as those currently being conapproach to setting margins. If given authority to ducted through the Working Group on Financial set initial margins in the cash markets, they Markets. might, for example, adjust initial margin require- Thank you again for this opportunity to prements to reflect differences in the price volatility sent the Federal Reserve's views on federal of individual stocks. margin regulation. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

458 Federal Reserve Bulletin • July 1988 Statement by H. Robert Heller, Member, Board ments, our banking system has been buffeted of Governors of the Federal Reserve System, during the 1980s by general forces and specific before the Committee on Banking, Housing, and events that have challenged bank managers and Urban Affairs of the U.S. Senate, May 25, 1988. supervisors alike. The industry has had to cope with unusual volatility in interest rates, exchange rates, and commodity prices. Moreover, during I welcome the opportunity to appear before this this period, many developing countries have excommittee today on behalf of the Federal Re- perienced significant financial and economic serve Board to discuss the condition of our problems—a situation that has adversely affected nation's banking system. the earnings and asset quality of our larger insti- This morning, I will review the general condi- tutions. tions and trends affecting the health of our na- In addition, competition in banking and the tion's banking organizations and then discuss more broadly defined financial services industry some of the financial and supervisory issues has intensified, both at home and abroad. The raised in your letter of invitation. I will also change brought on by deregulation, product indescribe the supervisory steps we have taken to novation, and technological advances can only improve conditions in the banking system. In enhance long-run efficiency, but in the short run response to the committee's request, the federal it has raised the costs and increased the presbanking agencies have provided a large volume sures faced by the banking industry. of financial data to the committee's staff. Limi- On top of all of this, debt has mounted rapidly. tations of time and space do not permit me to Households, businesses, and governments have cover all of this information in detail. taken on heavier debt loads, and in the process, the relationship between the volume of outstanding debt and the equity and earnings of borrowers OVERVIEW OF BANKING CONDITIONS to support that debt has worsened. In short, this development has contributed to weaknesses in Conditions in the banking system tend to mirror asset quality and a corresponding increase in the conditions in the economy. We are now in the risks faced by banks and other providers of longest economic recovery in postwar history, credit. and one might reasonably expect the condition of In light of these developments, it is not surthe banking system and measures of its aggregate prising that major segments of the banking indusperformance to reflect that strength. Unfortu- try today confront significant problems and chalnately, these aggregates may be deceiving be- lenges. Indeed, 1987 was an extremely difficult cause certain regions and sectors of our economy year for our banking system as total nonperformhave been beset by serious structural problems ing loans increased, earnings declined, and the over the last several years. For example, the rise number of problem banks and bank failures of the dollar in the early 1980s hurt industries reached record highs. and firms in the Northeast and Midwest that While many banks continue to face serious depended on exports. Moreover, weaknesses in problems, the vast majority of all institutions the agricultural and energy sectors of our econ- have been able to cope with the challenges omy have spread distress in the Midwestern and confronting them, and they are resolving their Southwestern regions of the country. The result- difficulties. Our economy continues to grow, and ing problems for the banking system have been conditions in the agricultural sector have begun aggravated by restrictions on geographic expan- to improve. Growth of exports has helped sion that have left a large segment of strengthen our industrial and manufacturing sectors. Against this background, many institutions our banking industry vulnerable to local and rehave seen their earnings and their asset quality gional economic problems. Thus, despite a genimprove. In sum, the banking system is basically erally strong economic recovery, many financial sound, but it will continue to face many chalinstitutions are under severe financial stress. lenges in the coming years. Beyond these regional and sectoral develop- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 459 REGIONAL AND SECTORAL PROBLEMS appear to be concentrated in the Southwestern markets that also suffer from problems in the Depressed conditions in the energy sector have energy sector, they are by no means confined to resulted in enormous losses on energy loans and that region. Problems have begun to surface in more recently on commercial real estate loans for the Southeast and elsewhere. banking organizations in the Southwest. Of the An area that bears watching in the future is total of 2,870 banks in this region, 1,017 lost leveraged buyout (LBO) financing. While LBO money last year; these losses meant a negative financing offers the potential for attractive rereturn on assets of 0.64 percent for banks in the turns, it also poses high risks because it involves Southwest. Nonperforming assets of the region's lending on a highly leveraged basis. As with any banks rose significantly. Real estate loans ac- other type of lending, success depends on the counted for much of the increase, and, according quality of the credit analysis and on the manner to the available evidence, property values in in which the transactions are structured and many Texas markets have not yet bottomed out. financed. At this juncture, special caution is in The heavy losses of the past several years have order because LBO financing is a fairly new eroded the capital of banking organizations in the activity for banks and has yet to be tested in an region, forcing many to recapitalize or to restruc- environment of high interest rates or economic ture, and in some cases to seek supervisory recession. assistance. While progress is being made, we still have a way to go before the problems in the Southwest will be behind us. THE INTERNATIONAL DEBT SITUATION Similarly, banks operating in the farm belt or serving agricultural communities have shared the The international debt situation significantly afdistress in the agricultural sector. Fortunately, fected income statements and balance sheets of 1987 saw a turn for the better. Farm commodity many multinational and regional banking organiprices rose, production expanded, and farm in- zations. In this area circumstances change frecome increased. Farmland values, which had quently and progress is interrupted all too often. been declining for several years, also began to Despite these setbacks, meaningful progress has rise. Last year, the aggregate net worth of farm- been achieved. For example, leaders in a number ers increased for the first time since 1980. of borrowing countries have recognized the need Improvements in the farm sector helped to to restructure their economies by placing greater relieve the pressures on banks serving farm com- emphasis on the private sector; by reducing trade munities. The profitability of farm banks, as barriers, public sector deficits, and unnecessary measured by return on assets, rose on average government restrictions; and by improving their from 0.34 percent in 1986 to 0.65 percent in 1987. external trade accounts and economic growth. The ratio of nonperforming assets to total assets Moreover, the large amount of capital raised by also declined from a high of 2.2 percent in 1985 to U.S. banks in recent years has reduced the size 1.4 percent by the end of 1987. Finally, the of their exposure to developing countries in capital ratios of farm banks also improved in relation to their capital bases. 1987. Last year Brazil suspended interest payments Another area of concern, which appears to cut on its medium- and long-term foreign-currency across regional boundaries, is commercial real obligations. In response to this development and estate lending. In many locations, the supply of to uncertainties about the status of loans to other new office buildings has far outstripped the de- developing countries, banking organizations bemand. Vacancy rates in many downtown and gan to recognize formally the increased risk in suburban office building markets are currently at their credits to developing countries. Virtually all or near record highs. As a consequence, some of the larger banking organizations took substanfinancial institutions that lent heavily during the tial loan-loss provisions, and loans to Brazil and construction boom are now experiencing credit some other countries were placed in nonaccrual difficulties. While the most serious problems status. The result was that, at the larger banking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

460 Federal Reserve Bulletin • July 1988 organizations, earnings turned sharply negative, expertise and financial resources to help the nonperforming asset ratios soared, and equity countries to bring about external adjustment capital ratios declined. within a context of economic growth. Brazil's leaders have acknowledged that the moratorium did not serve their country's interests. Indeed, Brazil recently made some interest THE PERFORMANCE OF THE payments on these loans, and is normalizing BANKING INDUSTRY relations with its creditors in a constructive manner. The resumption of interest payments by Let me address now the performance of the Brazil reinforced the view that interruptions of banking industry in 1987. I will focus on the interest payments are not a solution to the inter- areas identified in the Committee's letter of invinational debt problem. This offers promise for tation. the continued cooperation of the parties involved in the years ahead. Asset Quality. As noted earlier, asset quality Recently, a number of options have been de- has been the greatest problem facing the indusveloped that can help banks manage their expo- try. Last year, the ratio of nonperforming assets sure to developing countries, as well as help to total assets—a key indicator of asset quality— those countries reduce their outstanding debts. reached a postwar high. For all insured commer- For example, banks have sold funds to compa- cial banks, this ratio rose from 1.6 percent in nies seeking to invest in developing countries, 1986 to 2.1 percent at the end of 1987; for the 17 engaged in debt-for-equity swaps for their own multinational bank holding companies, the ratio account, and exchanged part of their debt obli- increased from 2.2 percent to 3.6 percent of total gations for securities. assets. The principal reasons for the increase The Federal Reserve has also provided greater were the placement of a large amount of LDC flexibility to U.S. banks by liberalizing regula- debt in nonaccrual status and the continuing tions dealing with debt-for-equity swaps. Some energy- and real estate-related problems in the regional banking organizations have significantly Southwest. reduced their exposure by coupling increases in The asset quality picture has a positive side, loan-loss provisions last year with sales of de- however. If we set aside the effect of LDC veloping country loans in the secondary market. nonaccruals and the problems in Texas, we find A few smaller banks have exercised the option to that domestic asset quality, as measured by the withdraw from new money packages via so- nonperforming asset ratio, improved last year. called exit instruments—for example, in connec- This improvement occurred despite the worsention with the recent Mexican exchange offer— ing of problems in the real estate sector. For but such instruments have not yet gained wide example, after making these adjustments, the acceptance. nonperforming asset ratio for the 17 multina- Despite the progress that the borrowing coun- tional bank holding companies declined from 2.1 tries themselves have made, and despite the percent in 1986 to 1.8 percent last year. For options bankers have developed for managing banks with less than $1 billion in total assets, the their risk exposure, we have a long way to go ratio declined to its lowest level in five years. before the LDC debt problem will be resolved. Another indicator of asset quality, the ratio of net In the Board's view, the case-by-case approach loan charge-offs to total loans, confirms this put forward by Secretary Baker remains the best trend. The net loan-loss ratio for all insured solution to these problems. It focuses on a re- commercial banks decreased 6 basis points in vival of economic growth to enhance the debt- 1987 to 0.93 percent of average loans. Significant service capacity of the debtor countries and calls declines occurred also at banks with assets of upon the commercial banks to sustain their lend- less than $1 billion. ing while the countries regain access to interna- While these trends permit cautious optimism in tional capital markets. In addition, the multilatthe outlook for asset quality, both nonperforming eral financial organizations are to provide their asset ratios and charge-off ratios remain high. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 461 This is troublesome when we consider that we ings of many larger organizations, and trading are in the sixth year of an economic expansion. account income has become an important com- In the past, bank asset quality has shown im- ponent of revenue. provement at earlier stages of the economic First-quarter earnings reports reflect an imrecovery. Obviously, any unforeseen shocks or provement over last year's depressed levels. economic reversals could have serious negative While data are not available for all banks, the implications for the loan portfolios of some bank- average return on assets for state member banks ing organizations. rose to an annualized rate of 1.00 percent. The profits of the 17 multinational bank holding com- Profitability. Not surprisingly, the high level of panies were also up significantly, although many problem assets has eroded the profitability of the still relied heavily on nonrecurring gains. In banking industry in recent years. In 1987, the general, aggregate bank profits should recover in average return on assets for all insured commer- 1988 from last year's depressed level because of cial banks declined almost 50 basis points to 0.12 lower loan-loss reserves, tax benefits, and cost percent, and the average return on equity control and restructuring programs implemented dropped a precipitous 750 basis points to 2.02 by many institutions. percent. These aggregate measures of industry profit- Capital. Although capital has long been an ability mask disparities in the performance of issue in the banking industry, it took on greater banks in different size groups and in different significance in 1987 because of the heavy losses regions of the country. The special LDC provi- sustained by many of the largest organizations. sions taken last year caused significant losses or In 1987, the average ratio of equity capital (exdeclines in earnings at the large multinational and cluding loan-loss reserves) to total assets for the regional institutions. Indeed, the average return 25 largest commercial banks declined from 5.1 on assets for the 25 largest banks declined from percent to 4.3 percent. This decline marks a 0.51 percent in 1986 to a negative 0.79 percent reversal of six years of steady improvement for last year. And, as I have indicated, banking this group. The ratio of equity capital to total organizations in the Southwest continued to assets also declined significantly for banks in the experience substantial losses. Yet despite the Southwest. For the remainder of the industry, dismal earnings performance of the industry as a however, ratios of equity to assets generally whole last year, many institutions remained prof- improved in 1987. itable. More than half of all insured commercial The ratio of primary capital, which includes banks had returns on assets of 0.81 percent or loan-loss reserves, to total assets for all insured more. Many organizations that maintained well- commercial banks increased 49 basis points to balanced portfolios and avoided excessive expo- 7.8 percent at the end of 1987. Much of this sure in certain problem areas reported strong increase was accounted for by the increase in earnings. In addition, outside the Southwest, loan-loss reserves, a result of the special LDC banks with assets of less than $1 billion generally provisions. reported improved returns on assets and equity, The recent decline in equity capital ratios at reversing several years of declining profit- our larger institutions, stemming from the heavy ability. losses related to the LDC situation, has stirred Some of the very largest banking organizations understandable concern. But one of the principal have cushioned the impact of credit quality prob- functions of capital is precisely to absorb losses lems on profitability by changing the composition and cushion other financial adversities. In this of their revenues. These banks have achieved a connection, the capital guidelines program that robust growth in noninterest income, reflecting the federal banking agencies initiated in 1981 to their emphasis on fee-based services, such as encourage banks to strengthen their capital posiinvestment banking, securities processing, and tions has proved beneficial and timely, for it cash management. Nonrecurring transactions clearly has put banks in a better position to such as asset sales have also boosted the earn- withstand the financial pressures and problems Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

462 Federal Reserve Bulletin • July 1988 that have confronted our banking system over problem institutions in the eastern and central the past several years. regions of the country. Last year, 184 FDIC-insured institutions were Liquidity. We believe that the levels and trends closed and another 19 were granted open bank of liquidity within the banking system are gener- assistance, compared with 138 and 7 respectively ally satisfactory. At the same time, some finan- in 1986. In 1981, these figures stood at 7 closings cially troubled banking organizations have expe- and 3 assistance transactions. The results for last rienced liquidity difficulties. In general, such year show that 90 percent of failures and open organizations can obtain the funds they need to bank assistance transactions occurred west of continue operations but, to do so, they typically the Mississippi. While bank closings and open must pay premiums over market rates. For some bank assistance transactions declined somewhat time, this has been the case for banking and thrift in the Midwest last year, the situation in the West organizations operating in Texas. Unfortunately, and Southwest continued to deteriorate. In these the high premiums that weak institutions often regions, the number of closings and open bank pay compel healthy banks to raise their offering assistance transactions increased from 84 in 1986 rates for deposits and other funds to compete to 145 last year. Sixty percent of all bank failures with the weak institutions. in 1987 were located in only four states: Texas, Let me stress, however, that liquidity has not Oklahoma, Louisiana, and Colorado. With rebeen a problem in the system generally. The spect to the commercial banks under the superevents surrounding the stock market collapse of vision of the Federal Reserve, 10 state member last October underscored this point. During the banks failed in 1987 versus 11 the previous year. week of October 19th, concern arose that liquid- So far this year the number of state member bank ity in the banking system would dry up as a result closings is larger than it was at the same point in of doubts about the creditworthiness of major 1986. market participants. Nevertheless, banks were As these figures suggest, the problems have responsive to the legitimate funding needs of centered in states that historically have strictly their customers, and no large-scale liquidity limited branching and other forms of geographic problems developed. As you know, the Federal expansion. In addition, federal restrictions have Reserve stood ready to provide the liquidity prevented institutions from expanding across needed to prevent isolated problems from state lines. These limits have severely hampered spreading through the financial system. our financial institutions in diversifying their portfolios and, therefore, have left them more vulnerable to sectoral and regional economic PROBLEM AND FAILED INSTITUTIONS strains. We will all agree that the number of bank The problems and conditions I have described failures is too high, and much work needs to be have resulted in a steady increase in the number done to address the conditions I have described. of problem and failed banks since 1981. The While we have begun to see some improvement number of institutions on the list of FDIC-in- in domestic asset quality at many institutions sured problem banks and thrift institutions rose outside the Southwest, the continuing high level from 223 in 1981 to 1,575 at the end of 1987. Of of problem assets suggests that we are unlikely to that total, more than 95 percent had assets of less see any decline in the number of bank failures than $300 million; and 88 percent were located this year. where problems in the farm, energy, and real estate sectors have been most acute. In particular, the number of FDIC-insured problem insti- SUPERVISORY AND REGULATORY tutions in the Southwest—Texas, Oklahoma, INITIATIVES Louisiana, Arkansas, and New Mexico—increased significantly last year, more than offset- The Federal Reserve has taken steps over the ting an encouraging decline in the number of last several years to strengthen its ability to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 463 identify and address problems in the banking financial system. Organizations experiencing fisystem. These steps include more frequent on- nancial problems, including weaknesses in earnsite examinations of large and problem banking ings and deficiencies in asset quality, have been organizations, more frequent meetings between required to develop and implement plans to Reserve Bank officials and bank directors, im- broaden their capital bases. provements in techniques for communicating with management and directors, the strengthen- Mergers and Acquisitions. Capital adequacy is ing of supervisory enforcement programs for especially important in evaluating the proposals of bank holding companies to expand. The Board addressing mismanagement and unsound bankhas long believed that banking organizations uning practices, the expansion of cooperative exdertaking marked expansion or large acquisitions amination arrangements with state banking deshould maintain strong capital positions, well partments, and enhancement of examiner above minimum supervisory levels. Thus, the training programs. We have also tightened our Board requires organizations making major acstandards for reviewing and approving applicaquisitions to support these plans with adequate tions of new banks to become members of the capital, and it has discouraged merger transac- Federal Reserve System. tions that weaken the capital position of the While structural and regional economic probcombined entity. In addition, in acting on merger lems are major factors in explaining the high level applications, the Board has discouraged the use of bank failures, we find that mismanagement, of accounting techniques or financial strategies insider abuse, and criminal misconduct have intended to justify the payout or distribution of played a role in many bank closings. To address capital funds to shareholders when these rethese problems, the banking agencies have sources may be needed to support the financial worked with the law enforcement agencies to base of the merged organization. improve our ability to detect improper banking practices and to identify, refer, investigate, and Dividend Policy. In addition, we have discourprosecute instances of white collar crime involvaged excessive or unwarranted increases in diving commercial banks. This program has resulted idends by banking organizations whose capital in more enforcement actions and criminal referpositions need strengthening. Indeed, the Fedrals. In the future, the banking and law enforceeral Reserve has a fundamental policy that bankment agencies must continue to work diligently ing organizations under financial strain should to address these problems. consider reducing or even eliminating cash divi- The Federal Reserve has supported these efdends in the absence of effective alternatives for forts by devoting additional resources to the raising capital. supervision function and by augmenting its force of supervisory personnel and field examiners. Bank Holding Companies. In line with this However, the problems we have faced have emphasis on capital adequacy, the Board reiterworsened in both number and kind. We believe ated, in April last year, its longstanding regulathe steps we have taken will prove helpful, but tory policy that bank holding companies should we will not be satisfied until the number of act as sources of strength to their subsidiary problem banks and bank failures is controlled. banks by standing ready to provide capital funds While it is not expected, any further deterioraduring times of financial stress. tion in the banking industry could strain our resources and require more funds for the supervision and regulation function, as well as the Risk-Based Capital Proposal. The federal expansion of our cadre of supervisors and field banking agencies have undertaken to strengthen examiners. supervisory standards for assessing capital adequacy through the development of an interna- Capital Adequacy. The Federal Reserve con- tionally accepted, risk-based capital framework. sistently stresses the role of capital in promoting This framework will help to achieve two imthe safety and soundness of our banking and portant policy objectives of the Federal Reserve. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

464 Federal Reserve Bulletin • July 1988 First, it will encourage international banking adopt a framework that would undermine the organizations to strengthen their capital positions competitive position of our nation's banks. But, when necessary, taking into account off-balance- in the long run, only a well-capitalized banking sheet exposure as well as conventional loans and system can be a competitive and healthy banking investments. Second, the framework will serve system. Indeed, we have found that banking to narrow competitive inequalities for interna- organizations with strong capital positions are tional banking organizations stemming from dif- the most effective competitors. Strong capital ferences in national supervisory requirements. positions may actually give institutions a compet- This objective is particularly important in view of itive advantage as customers, depositors, and the internationalization of banking and financial investors seek stability and strength in their markets. banks. The risk-based capital proposal establishes a common international framework for defining an organization's capital base that emphasizes core EXPANDED POWERS stockholders' equity. It also establishes procedures for factoring into the supervisory evalua- Although we believe that all these efforts will tion of capital needs, the riskiness of assets and strengthen our banking institutions and make off-balance-sheet exposures. In addition, the pro- them more resistant to financial pressures, there posal sets out a schedule for achieving a mini- are, of course, limits on what regulators can do mum ratio of total capital to weighted risk assets: unilaterally to deal effectively with the problems it is to be 7.25 percent by year-end 1990, of which confronting our banking system. The Congress at least 3.25 percentage points are to be in the has a key role to play in establishing an approform of common equity capital; and by the end of priate legal framework. The Board strongly sup- 1992, it is to be 8.0 percent, of which at least 4.0 ports Senator Proxmire's financial modernization percentage points must be common equity capi- bill, which would broaden the range of securities tal. The risk-based framework is still in the activities permissible for banking organizations proposal stage, and the Board is currently re- by repealing the Glass-Steagall Act's separation viewing comments and resolving the outstanding of commercial and investment banking. This issues. We hope to implement the framework in legislation will not only produce important public conjunction with the other major industrial coun- benefits, it will also enable banks to compete tries by year-end. more effectively and broaden their sources of In general, the overwhelming majority of com- income. In addition, the serious problems expemunity and regional banking organizations will rienced by banks in the Midwest and Southwest have little difficulty meeting the standards incor- underscore the need to encourage greater diverporated in the proposal. However, organizations sification in our banking and financial system. whose capital positions are under pressures due Thus, it is essential that we continue to move to poor earnings, large loan losses, rapid growth, ahead on interstate banking so that banks will be or excessive risk exposure may have to temper able to diversify their loan portfolios and deposit their growth, alter their asset mix, or raise addi- bases, thereby making themselves less vulnerational capital to meet the minimum standards. As ble to regional economic difficulties. a rule, we believe that banking organizations should endeavor to operate above these standards to maintain a critical buffer during periods of financial strain or adversity. CONCLUSION One of the major issues surrounding the requirements for risk-based capital is whether they In reviewing the year's events and the aggregate will compromise the banking industry's ability to data on bank performance, one could easily compete. The competitiveness of our banking conclude that banking is not a very good business system is, of course, a matter of concern to the to be in these days. However, that conclusion Board. Clearly, it would be counterproductive to would be incorrect. To be sure, banking is no Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to Congress 465 longer a highly protected and sheltered industry. Second, bank managements have focused on Competition and deregulation have altered the the need to improve operations. They are redynamics of the industry and have created an thinking their strategies and moving to restrucenvironment in which now there are clear win- ture and streamline operations to meet the comners and losers. This new reality is evident petitive challenges and enhance their behind the aggregate statistics, in the results for profitability. They are focusing on improving individual companies. We find that although credit analysis and on strengthening lending stanmany banking organizations reported very poor dards and risk-control systems. The capital posiresults in recent years, many others have turned tions of many of the larger money-center instituin exceptionally strong performances. The large tions are also being strengthened to meet the interstate banking organizations operating in the demands of the market and to comply with the Southeast, New England, and the Middle Atlan- proposed risk-based capital standards. tic states are cases in point. We are beginning to see some improvement in In recent years the problems in the banking the asset quality of the domestic loan portfolios sector have received a good deal of attention, as of banking institutions outside the Southwest. indeed they should. But, all too little attention While long overdue, this improvement should has been given to the positive developments translate into better earnings performances. within the industry. Earnings in the first quarter of this year appear to First of all, the ability of the overwhelming support this view. Yet, despite the positive signs, majority of institutions to absorb the severe much work remains to be done by bank managers shocks and stresses of recent years reflects their and supervisors alike before we can fairly say underlying strength and that of the banking sys- that the problems that beset many of our banking tem as a whole. organizations are behind us. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

466 Announcements NEW REGULATION ISSUED beyond the statutory schedule by a reasonable period of time, as determined in the regulation. Depository institutions also are required to The Federal Reserve Board on May 13, 1988, disclose their availability policy to new customissued a new regulation to carry out provisions of ers before opening an account, to existing custhe Expedited Funds Availability Act. The Reg- tomers, and to any person upon request. Discloulation goes into effect September 1 and spells sures are also required on preprinted deposit out when funds deposited in a bank by a cus- slips, at branch locations, and at automated teller tomer must be available for use. machines. The Regulation, entitled Regulation CC, also Besides the availability rules, the regulation includes rules to speed up the collection and includes rules to speed the collection and return return of checks. of checks to reduce the risk that banks incur by The Congress adopted the Expedited Funds making funds available to their customers before Availability Act last year after expressing grow- learning that a check has been dishonored. ing concern about delayed availability—the In contrast to the high-speed automated proclength of time that some banks and other depos- essing involved in the forward collection of itory institutions place on checks deposited in checks, the current check return system is a customer accounts before the funds can be with- slow, labor-intensive operation. A bank returndrawn. ing a check must rely on deciphering the endorse- Under the law and the regulation, a temporary ments on the back of the check to determine availability schedule provides for the withdrawal where the return must be sent. Returns are often of funds by the third business day following transported by mail, rather than courier, further deposit if the deposit is a local check. A local slowing their trip to the depository bank. check is one deposited in an institution located in Moreover, checks are generally returned the same Federal Reserve check processing re- through each of the banks that collected the gion as the paying bank. There are currently 48 check, although this may not be the most efficient check processing regions in the country. path to route the return. Therefore, it now takes Proceeds of nonlocal checks must be made three times as long to return a check as it does to available for withdrawal by the seventh business collect a check. day after deposit under the temporary rules. Under the new rules, checks will be returned Beginning on September 1, 1990, these sched- in much the same way they are collected. The ules will be reduced to two business days for new regulation enables banks to return checks local checks and five business days for nonlocal directly to the depository bank using couriers checks. and banks offering check return services. The Beginning this September, receipt of electronic regulation also encourages banks to qualify repayments, deposits of cash, as well as deposits of turned checks for automated processing by highsome types of checks—such as Treasury checks, speed equipment. The regulation expands the state and local government checks, and cashier's current notice of nonpayment requirements of checks—generally must be made available for Regulation J to all returned checks of $2,500 or withdrawal the day after deposit. more, including those checks that were not collected through the Federal Reserve, and shortens The regulation contains several exceptions to the time frame within which notices must be the general rules. When an exception is invoked, provided. a bank may extend the hold on an account Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

467 To facilitate direct returns and notice of non- Regulation C (Home Mortgage Disclosure), payment, on April 4, 1988, the Board adopted which carry out provisions of the Home Mortendorsement standards that will enable banks to gage Disclosure Act enacted earlier this year. more readily identify the depository bank to Comment is requested by June 20. which the returned check or notice must be sent. Copies of Regulation CC are available upon request from the Federal Reserve Banks and the Board's Publications Services. ANNUAL REPORT: PUBLICATION NOMINATIONS SOUGHT The 74th Annual Report, 1987 of the Board of FOR APPOINTMENTS Governors of the Federal Reserve System, cov- TO CONSUMER ADVISORY COUNCIL ering operations for the calendar year 1987, is available for distribution. Copies may be ob- The Federal Reserve Board announced on May tained on request to Publications Services, Board 27, 1988, that it is seeking nominations of qualiof Governors of the Federal Reserve System, fied individuals for twelve appointments to its Washington, D.C. 20551. A separately printed Consumer Advisory Council, to replace memcompanion document entitled Annual Report: bers whose terms expire on December 31, 1988. Budget Review, 1987-88, which describes the The Consumer Advisory Council was estabbudgeted expenses of the Federal Reserve Syslished by the Congress in 1976, at the suggestion tem for 1988 and compares them with expenses of the Board, to advise the Board on the exercise for 1986 and 1987, is also available from Publicaof its duties under the Consumer Credit Protections Services. tion Act and on other consumer-related matters. The Council meets three times a year. Nominations should include the name, address, and telephone number of the nominee, past and present positions held, and special SYSTEM MEMBERSHIP: ADMISSION OF knowledge, interests, or experience related to STATE BANKS consumer credit or other consumer financial services. The following state banks were admitted to mem- Nominations should be submitted in writing to bership in the Federal Reserve System during the Dolores S. Smith, Assistant Director, Division of period May 1 through May 31, 1988: Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Florida Washington, D.C. 20551. St. Petersburg First Central Bank Illinois PROPOSED ACTION Lockport Beverly Bank of Lockport Virginia The Federal Reserve Board on May 10, 1988, Virginia Beach People's Bank of issued for public comment amendments to its Virginia Beach Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

468 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON MARCH 29, 1988 the year. That demand appeared to be bolstered by sales incentives programs, strong income 1. Domestic Policy Directive growth, and rising consumer confidence. Excluding motor vehicles, nominal retail sales were The information reviewed at this meeting sug- essentially flat since November, and the saving gested that economic activity was continuing to rate was well above its average for the year expand in the current quarter, although the rate preceding the break in the stock market. of growth was down somewhat from the rapid Housing activity picked up in February but pace in the fourth quarter. The moderation re- still was slightly below its fourth-quarter pace. flected a considerable slowing in the pace of While sales of new and existing homes continued inventory investment. However, domestic final to decline in January, housing starts rose to an sales seemed to have picked up sharply in the annual rate of 1.49 million units in February, with first quarter; business capital expenditures ap- growth stronger in the single-family sector than parently increased substantially and consumer in the multifamily area. spending also strengthened, buoyed by higher Available information suggested that business sales of motor vehicles. The rate of inflation had fixed investment was increasing rapidly since late remained relatively restrained over the course of last year, led by large gains in equipment spendrecent months and wage trends had shown little ing. Data on shipments indicated a surge in change. spending on information-processing equipment. Growth in industrial production moderated in Increases in other equipment categories were January and February from a rapid pace in late smaller but were widespread. Spending on non- 1987. After a surge in the second half of 1987, the residential structures was relatively weak in output of materials edged down. Also, auto as- early 1988. Inventory investment apparently semblies and the production of consumer home slowed in the first quarter, reflecting the strength goods dropped below their late 1987 levels, ap- in sales of motor vehicles combined with cutparently reflecting in part an effort to trim or to backs in their production. moderate the growth in inventories. In contrast, The nominal U.S. merchandise trade deficit in the production of business equipment remained January was significantly below the fourthquite strong, with gains in nearly all categories. quarter average, although essentially unchanged Capacity utilization rates were at relatively high from December. Non-oil imports and nonagricullevels in a number of industries. Gains in total tural exports both fell noticeably from their Denonfarm payroll employment continued strong cember levels. The current account deficit had over the January-February period, led by the narrowed in the fourth quarter, but the improveservice and retail trade sectors. In manufactur- ment was more than accounted for by a sharp ing, employment gains were smaller in January increase in capital gains stemming from the deand February than during the second half of preciation of the dollar and the related revalua- 1987. The unemployment rate edged down to 5.7 tion in the book value of direct U.S. investments percent in February, its lowest level since mid- abroad denominated in foreign currencies. On 1979. average, economic growth in major foreign industrial countries continued strong in the fourth Increased demand for motor vehicles proquarter and early this year, though it slowed duced a rebound in consumer spending early in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 469 somewhat from the rapid third-quarter pace. continued to be given to developments in the Growth was particularly robust in Canada and money market. In the three reserve maintenance Japan. periods ending March 23, adjustment plus sea- Increases in consumer prices remained rela- sonal borrowing averaged $238 million. Growth tively moderate in early 1988, reflecting the im- in M2 and M3 remained relatively robust in pact of declining energy prices and a relatively February and apparently also in March following small rise in food prices. At the producer level, a rebound in January. Since November both prices of finished goods fell slightly in February aggregates had expanded at an annual rate of after fluctuating irregularly in other recent about 7 percent. Growth in Ml slowed considermonths, largely because of swings in food prices. ably over the intermeeting period from a very Commodity prices registered mixed changes dur- rapid pace in January. With transaction deposits ing the first quarter. The index of hourly earnings expanding at a relatively sluggish pace on balwas unchanged in February after increasing in ance and excess reserves declining, total re- January, and on balance it rose roughly in line serves advanced at a modest rate during the with the pace in 1987. intermeeting period. At its meeting on February 9-10, 1988, the The federal funds rate averaged 6.59 percent Committee had adopted a directive that called for for the three full reserve maintenance periods maintaining the slightly reduced degree of pres- since the February meeting, close to the rate sure on reserve positions that had been sought prevailing around the time of that meeting but since late January. These reserve conditions below the average in January. Most other interwere expected to be consistent with growth in est rates rose somewhat on balance during the both M2 and M3 at annual rates of about 6 to 7 intermeeting period. The largest increases were percent over the period from November through in bond markets and they appeared to have been March. With regard to operating procedures, the prompted by evidence of more strength in the Committee had agreed that the more normal economy than had been anticipated. Broad inapproach to operations implemented especially dexes of stock prices rose somewhat over the since the year-end, which emphasized the provi- period, but price swings remained sizable on sion of reserves rather than money market con- occasion. ditions, remained generally appropriate. None- Through most of the period since the February theless, it was understood that some flexibility meeting the dollar fluctuated in a relatively narmight continue to be needed in the conduct of row range. However, it came under downward operations in light of the still somewhat unsettled pressure late in the period following reports conditions in financial markets, the uncertainties suggesting stronger than anticipated growth in in the relationship between reserve and money U.S. domestic demand that raised questions market conditions, and the substantial risks of about the pace of adjustment in the U.S. trade unanticipated economic and financial develop- balance. Over the intermeeting period the dollar ments. Taking account of conditions in financial declined 2V4 percent on a weighted-average basis markets, the members had decided that some- in relation to the other G-10 currencies. The net what less or somewhat more reserve restraint decline was largely accounted for by a 4 percent would be acceptable, depending on the strength depreciation in terms of the pound and 2 percent of the business expansion, indications of infla- in terms of the Canadian dollar and the yen, tionary pressures, developments in foreign ex- while the mark and other EMS currencies change markets, and the behavior of the mone- remained little changed in relation to the tary aggregates. The intermeeting range for the dollar. federal funds rate had been left unchanged at 4 to The staff projection prepared for today's meet- 8 percent. ing suggested more strength in business activity As contemplated at the February meeting, this year than had been forecast earlier. The primary emphasis was placed on achieving re- faster growth was expected to be associated with serve objectives during the intermeeting period, little change in the unemployment rate from although slightly greater than normal attention current levels. And while the projection for 1989 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

470 Federal Reserve Bulletin • July 1988 now indicated a somewhat reduced rate of pected at least moderate growth in total domestic growth, higher levels of capacity utilization over final demands. the projection period as a whole were associated In the view of some members any strengthenwith marginally higher rates of inflation by late ing in domestic demand could well give rise to 1988 and for the year 1989. A key adjustment in pressures on resources as net exports continued the forecast was stronger investment spending. to expand. The outlook for trade remained sub- The staff continued to anticipate that the external ject to considerable uncertainty, but further imsector would make a substantial positive contri- provement in the trade balance was nonetheless bution to business activity in 1988 and 1989. a reasonable prospect. That prospect was sup- In the Committee's discussion of the economic ported by reports from businesses of their insituation and outlook, the members generally creased ability to compete internationally. A agreed that the information available since the number of members again commented that long- February meeting pointed to a stronger expan- run adjustment in the trade balance would resion in business activity than they had antici- quire a period of relatively moderate growth in pated earlier. Unfortunately, recent develop- domestic purchases as more production was diments in the view of several members also rected to export markets. increased the risks of more pressures on produc- Turning to the outlook for inflation, some tive resources and more inflation. A number of members reported that an increasing number of members noted that the revised staff forecast was business contacts were expressing concern about in line with their own projections, and some also the prospects for prices and wages. On the indicated that any deviations were likely to be in positive side, while some deterioration seemed to the direction of somewhat faster expansion and have occurred recently, inflationary expectations even higher rates of inflation. A number of other appeared to have diminished on balance since the members did not disagree that the risks had stock market crash in October. Moreover, aggreshifted and that concerns about a recession had gate measures of prices and wages had not yet receded, but they also referred to areas of weak- shown any sustained tendency to accelerate. ness in the economy that implied the potential for This could indicate that some leeway remained in relatively moderate growth without adding to the economy before a more serious inflation price pressures. problem emerged. Inflation developments did not In the course of the Committee's discussion, depend solely on rates of capacity use but on the members referred to high or improving levels of overall inflationary and financial climate and on business activity in many parts of the country, expectations about policy responses to inflation. albeit from depressed levels in some areas or In particular, responses to rising capacity consectors of the economy. Manufacturing was ex- straints might be reduced or delayed in light of hibiting particular strength across the nation. the downtrend in inflation since the early 1980s. Despite some increasing pressures on manufac- Nonetheless, most members agreed that the risks turing capacity, business executives generally of more inflation stemming from increased presappeared to remain cautious in their plans for sures on capacity had increased and represented new production facilities, apparently reflecting a key challenge for policymakers. In a still limtheir uncertainties about the outlook for sales ited number of manufacturing industries, relagrowth in both domestic and export markets. tively high capacity utilization rates were being However, some businesses were reported to be reflected in sizable price increases for some in the process of reappraising their capacity metals and other business products, increasing needs, and with demands for business equipment lead times in filling certain orders, and some relatively strong, a number of members con- precautionary ordering in anticipation of future cluded that appreciable further growth was likely needs. While there was little evidence thus far in overall business fixed investment. The mem- that the added price pressures extended to finbers differed to some extent in their views on the ished products or that overall business buying outlook for consumer spending and business and inventory patterns were being significantly inventory accumulation, but they generally ex- affected, the economy might well be near the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 471 point where faster growth in business activity mentation for the intermeeting period ahead, would induce a higher rate of inflation, and in the nearly all the members favored some increase in view of several members, there was a potential the degree of pressure on reserve positions. Most for a sharp escalation in prices. Members were indicated a preference for only a slight move particularly concerned that any tendency for toward restraint, at least at this time, but a few greater price pressures to become embedded in urged somewhat greater tightening. Several commore rapid wage increases would make achieve- mented that a stronger economic outlook in the ment of the ultimate objective of price stability context of already high capacity utilization rates considerably more difficult. in a number of industries required timely action In further comments some members noted that to help prevent the business expansion from an assessment of the economic outlook was gathering excessive and unsustainable momencomplicated by the continuing risks associated tum that would lead to higher inflation. A policy with the troubled status of a number of financial response under emerging circumstances would institutions and the still somewhat unsettled con- also serve to confirm the System's commitment ditions in financial markets, as evidenced in part to achieving price stability over time and might by occasionally sharp movements in stock help to avert an aggravation of inflationary exprices. Some members believed that speculative pectations. Moreover, action at this time might attitudes had intensified recently as reflected for preclude the need for more substantial tightening example in increases in corporate merger, acqui- later. sition, and commercial construction activities While they favored a slight increase in reserve that typically involved heavy use of debt fi- pressures, a number of members stressed that nancing. Such a development was surprising so monetary policy should not overreact to recent soon after the October 1987 disturbances in fi- developments. The firming should proceed with nancial markets, and still growing debt burdens caution in light of the prevailing uncertainties in served to increase the vulnerability of the econ- the economic outlook and the current absence of omy to adverse developments. Some members evidence in broad measures of prices and wages also expressed considerable concern about the that rates of inflation were already rising. Other outlook for the dollar, which had been under factors cited in favor of a cautious approach downward pressure in the foreign exchange mar- included the persisting problems or incomplete kets. A sizable further decline in the dollar, while recovery in some sectors of the economy and it might have favorable implications for the U.S. areas of the country, the still sensitive conditions trade balance, would tend to raise domestic in financial markets, and the troubled status of prices and could adversely affect the nation's many financial institutions. In the view of one ability to continue to finance a massive trade member, underlying demands in the economy deficit, with disruptive effects on domestic finan- were not likely to be sufficiently robust to pose a cial markets and the domestic economy. threat of greater inflation, and so prospective At its meeting in February the Committee had economic and financial conditions did not waragreed on policy objectives that called for mon- rant any tightening of reserve conditions. etary growth ranges of 4 to 8 percent for both M2 In the course of the Committee's discussion, and M3 for the period from the fourth quarter of some members noted that growth of the broader 1987 to the fourth quarter of 1988. The associated monetary aggregates had remained fairly rapid in range for growth in total domestic nonfinancial February and March. According to a staff analdebt was set at 7 to 11 percent. The Committee ysis, the reserve conditions favored by most decided not to establish a numerical target for Ml members were likely to be associated with some growth; instead, the appropriateness of changes slowing in the expansion of those aggregates, in Ml would be evaluated during the year in the assuming a typically sluggish adjustment of oflight of the behavior of Ml velocity, develop- fering rates on retail deposits to changes in ments in the economy and financial markets, and short-term market rates. Even so, the analysis the nature of emerging price pressures. suggested that for the year through June growth of both M2 and M3 would still be appreciably In the Committee's discussion of policy imple- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

472 Federal Reserve Bulletin • July 1988 above the midpoints of the Committee's ranges not seen as detracting from the functioning of the for 1988. Some members observed that the near- market or the implementation of policy since term outlook for monetary growth was subject to market participants were well aware of the Sysmore uncertainty than usual because the impact tem's procedures, and such fluctuations could of new tax laws on mid-April tax payments and reflect important shifts in market expectations or related deposit balances could not be fully antic- underlying conditions of supply and demand for ipated. Some concern was expressed regarding reserves and credit. The shifts would be masked the inflationary potential of the recent rates of if the Federal Reserve were to focus more closely growth in the broader monetary aggregates, and on money market conditions in its day-to-day one member commented that under prevailing conduct of open market operations. Even so, a circumstances significantly stronger than ex- majority of the members felt that the uncertain pected expansion in those aggregates should be economic outlook and still sensitive conditions in resisted, especially expansion that brought the financial markets warranted some continuing cumulative growth of M2 and M3 to levels above flexibility in the conduct of open market operathe Committee's ranges by midyear. tions. During this meeting the Committee reviewed In the Committee's consideration of possible its operating procedures at some length, includ- adjustments in policy implementation during the ing the relative merits of focusing primarily on intermeeting period, some members felt that the money market conditions or on a specified de- risks of more inflation argued for giving particugree of reserve pressure in the day-to-day con- lar attention to developments that might call for duct of monetary policy. The considerable em- somewhat tighter reserve conditions. A majority phasis on stabilizing money market conditions in of the members believed, however, that there the period after the October collapse of the stock should be no presumption about the likely direcmarket had given way increasingly to the earlier tion of intermeeting adjustments, if any, in the concentration on achieving reserve position ob- implementation of policy. While these members jectives, especially since the year-end. Nonethe- generally agreed that the economic risks were in less, in keeping with the Committee's instruc- the direction of more inflation, they preferred not tions as reaffirmed at the February meeting, open to weight the directive toward possible further market operations had continued to be con- tightening in light of the firming that was already ducted with some degree of flexibility that in- contemplated at this meeting and the considervolved occasional departures from a normal fo- able uncertainties that they saw in the economic cus on targeting reserve positions and slightly and financial outlook. One member proposed greater than usual attention to money market placing more emphasis on the behavior of the conditions. In today's discussion a few members monetary aggregates as a factor that might trigger indicated that they favored paying greater atten- some firming during the intermeeting period, but tion to money market conditions in the normal other members preferred the current emphasis, course of conducting open market operations. It partly because any surge in money growth over was noted in support of this view that money the weeks ahead might reflect temporary develmarket interest rates were a key variable for opments related to mid-April tax payments. transmitting monetary policy to financial markets Some consideration was given during the discusand the economy, and that the variability in those sion to an upward adjustment in the intermeeting rates that sometimes accompanied the pursuit of range for the federal funds rate, especially since a given degree of pressure on reserve positions federal funds could trade well into the upper half injected an unneeded element of uncertainty in of the Committee's range following the decision the decisions of market participants. However, made at today's meeting. However, the members most members were in favor of either retaining concluded that increasing the range under curthe existing emphasis on reserve pressures or rent circumstances could be misread as implying completing the process of reinstating the previ- a greater move toward restraint than the Comous approach to reserve management. Short-run mittee intended. variability in money market interest rates was At the conclusion of the Committee's discus- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the FOMC 473 sion, all but one of the members indicated their ruary but were still somewhat below the reduced acceptance of a directive that called for a slight fourth-quarter average. The nominal U.S. merchanincrease in the degree of pressure on reserve dise trade deficit changed little in January and was significantly below the fourth-quarter average. In repositions. With regard to the Committee's opercent months the rise in consumer and producer prices ating procedures, a majority continued to enhas been relatively modest on balance, reflecting dedorse the view that some flexibility might be velopments in food and energy prices, and wage trends desirable in the day-to-day conduct of open mar- have shown little change. ket operations in light of the still somewhat Most interest rates were up somewhat on balance since the Committee's meeting in February, with the unsettled conditions in financial markets and the largest increases concentrated in bond markets. The uncertainties surrounding the economic outlook. trade-weighted foreign exchange value of the dollar in Taking account of conditions in financial mar- terms of the other G-10 currencies fluctuated in a kets, the members indicated that somewhat relatively narrow range over most of the intermeeting greater or somewhat lesser reserve restraint period, but declined somewhat in recent days. After strengthening in January, growth of M2 and would be acceptable depending on the strength of M3 remained relatively robust in February and in the the business expansion, indications of inflation, first part of March. Thus far this year expansion of the performance of the dollar in foreign exchange these two aggregates appears to have been in the upper markets, and the behavior of the monetary ag- portion of the ranges established by the Committee for gregates. The reserve conditions contemplated 1988. Ml has grown moderately on balance since the fourth quarter. Expansion in total domestic nonfinanby the Committee were expected to be consistent cial debt appears to be continuing at a pace close to with growth in both M2 and M3 over the period that in 1987. from March through June at annual rates of about The Federal Open Market Committee seeks mone- 6 to 7 percent. As at previous meetings, the tary and financial conditions that will foster price Committee decided not to indicate any expecta- stability over time, promote growth in output on a tion regarding the growth of Ml over the months sustainable basis, and contribute to an improved pattern of international transactions. In furtherance of ahead. The members agreed that the intermeetthese objectives, the Committee at its meeting in ing range for the federal funds rate, which pro- February established growth ranges of 4 to 8 percent vides one mechanism for initiating consultation for both M2 and M3, measured from the fourth quarter of the Committee when its boundaries are persis- of 1987 to the fourth quarter of 1988. The monitoring tently exceeded, should be left unchanged at 4 to range for growth in total domestic nonfinancial debt was set at 7 to 11 percent for the year. 8 percent. With respect to Ml, the Committee decided in At the conclusion of the meeting the following February not to establish a specific target for 1988. domestic policy directive was issued to the Fed- The behavior of this aggregate in relation to economic eral Reserve Bank of New York: activity and prices has become very sensitive to changes in interest rates, among other factors, as evidenced by sharp swings in its velocity in recent The information reviewed at this meeting suggests years. Consequently, the appropriateness of changes some moderation in the expansion of economic activ- in Ml this year will continue to be evaluated in the ity in the current quarter from the rapid pace in the light of the behavior of its velocity, developments in fourth quarter; the continuing expansion has been the economy and financial markets, and the nature of supported by a sharp pickup in domestic final sales emerging price pressures. while the accumulation of inventories appears to have In the implementation of policy for the immediate slowed. Total nonfarm payroll employment rose sub- future, the Committee seeks to increase slightly the stantially over the first two months of the year, al- degree of pressure on reserve positions. The Committhough employment growth slowed somewhat in the tee agrees that the current more normal approach to manufacturing sector. The civilian unemployment rate open market operations remains appropriate; still senfell slightly to 5.7 percent in February. Growth in sitive conditions in financial markets and uncertainties industrial production moderated in early 1988 from a in the economic outlook may continue to call for some brisk pace during the second half of 1987. Consumer flexibility in operations. Taking account of conditions spending strengthened in January and February, in financial markets, somewhat greater reserve rebuoyed by higher sales of motor vehicles. Indicators of straint or somewhat lesser reserve restraint would be business capital spending pointed to substantial gains acceptable depending on the strength of the business in the first quarter. Housing starts rebounded in Feb- expansion, indications of inflationary pressures, devel- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

474 Federal Reserve Bulletin • July 1988 opments in foreign exchange markets, as well as the 2. AUTHORIZATION FOR behavior of the monetary aggregates. The contem- DOMESTIC OPEN MARKET OPERATIONS plated reserve conditions are expected to be consistent with growth in M2 and M3 over the period from March The Committee approved a temporary increase through June at annual rates of about 6 to 7 percent. of $4 billion, to a level of $10 billion, in the limit The Chairman may call for Committee consultation if between Committee meetings on changes in Sysit appears to the Manager for Domestic Operations tem Account holdings of U.S. government and that reserve conditions during the period before the federal agency securities specified in paragraph next meeting are likely to be associated with a federal funds rate persistently outside a range of 4 to 8 1(a) of the Authorization for Domestic Open percent. Market Operations. The increase was effective for the intermeeting period starting March 30, 1988, and ending with the close of business on Votes for this action: Messrs. Greenspan, Corri- May 17, 1988. gan, Angell, Black, Forrestal, Heller, Hoskins, Johnson, Kelley, and Parry. Vote against this ac- Votes for this action: Messrs. Greenspan, Corrition: Ms. Seger. gan, Angell, Black, Forrestal, Heller, Hoskins, Johnson, Kelley, Parry, and Ms. Seger. Votes against this action: None. Ms. Seger dissented because she did not believe that economic and financial developments This action was taken on the recommendation warranted any tightening of reserve conditions. of the Manager for Domestic Operations. The She did not see a significant risk of more infla- Manager advised that the normal leeway of $6 tionary pressures on productive resources stem- billion probably would not be sufficient to accomming from prospective demands in domestic and modate desirable increases in System Account export markets. She remained concerned about holdings of securities during the intermeeting the downside risks in the economy, the fragility period. Those increases would supply reserves to in financial markets, especially the stock market, help offset very large reserve drains stemming and the weakened condition of many depository mainly from a short-term rise in Treasury balinstitutions. ances at the Federal Reserve Banks associated with mid-April tax payments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

475 Legal Developments ADOPTION OF REGULATION CC 229.20—Relation to state law. 229.21—Civil liability. The Board of Governors has adopted 12 C.F.R. Part 229, as its Regulation CC, to implement the Expedited Subpart C—Collection of Checks Funds Availability Act. This rule sets out the requirements that banks and other depository institutions 229.30—Paying bank's responsibility for return of make funds deposited into accounts available accord- checks. ing to specified time schedules and disclose funds 229.31—Returning bank's responsibility for return of availability policies to their customers. Regulation CC checks. also establishes rules designed to speed the return of 229.32—Depositary bank's responsibility for returned unpaid checks. checks. The Board has also submitted the collection of 229.33—Notice of nonpayment. information requirements in Regulation CC to the 229.34—Warranties by paying bank and returning Office of Management and Budget ("OMB") for its bank. review under the Paperwork Reduction Act (44 U.S.C. 229.35—Indorsements. 3501 et seq.) and OMB regulations on Controlling 229.36—Presentment of checks. Paperwork Burdens on the Public (5 C.F.R. Part 229.37—Variation by agreement. 1320). 229.38—Liability. Effective September 1, 1988, except for 12 C.F.R. 229.39—Insolvency of bank. 229.12, which is effective on September 1, 1990. After 229.40—Effect of merger transaction. September 1, 1990, 12 C.F.R. 229.11 will no longer be 229.41—Relation to state law. effective. 229.42—Exclusions. Appendix A—Routing Number Guide to Local PART 229 —AVAILABILITY OF FUNDS AND Checks and Certain Checks That Are Subject COLLECTIONS OF CHECKS to Next-Day Availability Subpart A—General Appendix B—Reduction of Schedules for Certain Nonlocal Checks 229.1—Authority and purpose; organization. 229.2—Definitions. Appendix C—Model Forms, Clauses, and 229.3—Administrative enforcement. Notices Subpart B—Availability of Funds and Appendix D—Indorsement Standards Disclosure of Funds Availability Policies Appendix Er—Commentary 229.10—Next-day availability. 229.11—Temporary availability schedule. Authority: Title VI of Pub. L. 100-86, 101 Stat. 552, 229.12—Permanent availability schedule. 635, 12 U.S.C. 4001 et seq. 229.13—Exceptions. 229.14—Payment of interest. Subpart A—General 229.15—General disclosure requirements. 229.16—Content of specific availability policy disclo- Section 229.1—Authority and purpose; sure. organization. 229.17—Initial disclosures. 229.18—Additional disclosure requirements. (a) Authority and purpose. This part (Regulation CC; 229.19—Miscellaneous. 12 C.F.R. Part 229) is issued by the Board of Gover- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

476 Federal Reserve Bulletin • July 1988 nors of the Federal Reserve System ("Board") to (4) An automatic transfer account, or implement the Expedited Funds Availability Act (5) Any other transaction account described in ("Act"), which is contained in Title VI of Public Law 12 C.F.R. 204.2(e). 100-86. (b) Organization. This part is divided into subparts and "Account" does not include an account where the appendices as follows — account holder is a bank, where the account holder is (1) Subpart A contains general information. It sets an office of an institution described in paragraphs forth — (e)(1) through (e)(6) of this section or an office of a (i) The authority, purpose, and organization; "foreign bank" as defined in section 1(b) of the (ii) Definition of terms; and International Banking Act (12 U.S.C. 3101) that is (iii) Authority for administrative enforcement of located outside the United States, or where the direct this part's provisions. or indirect account holder is the Treasury of the (2) Subpart B of this part contains rules regarding United States. the duty of banks to make funds deposited into (b) "Automated clearinghouse" or "ACH" means a accounts available for withdrawal, including both facility that processes debit and credit transfers under temporary and permanent availability schedules. rules established by a Federal Reserve Bank operating Subpart B of this part also contains rules regarding circular on automated clearinghouse items or under exceptions to the schedules, disclosure of funds rules of an automated clearinghouse association. availability policies, payment of interest, liability of (c) "Automated teller machine" or "ATM" means an banks for failure to comply with Subpart B of this electronic device at which a natural person may make part, and other matters. deposits to an account by cash or check and perform (3) Subpart C of this part contains rules to expedite other account transactions. the collection and return of checks by banks. These (d) "Available for withdrawal" with respect to funds rules cover the direct return of checks, the manner deposited means available for all uses generally perin which the paying bank and returning banks must mitted to the customer for actually and finally colreturn checks to the depositary bank, notification of lected funds under the bank's account agreement or nonpayment by the paying bank, rules regarding policies, such as for payment of checks drawn on the indorsement and presentment, the liability of banks account, certification of checks drawn on the account, for failure to comply with Subpart C of this part, and electronic payments, withdrawals by cash, and transother matters. fers between accounts. (e) "Bank" means — Section 229.2—Definitions. (1) An "insured bank" as defined in section 3 of the Federal Deposit Insurance Act (12U.S.C. 1813) or a As used in this part, unless the context requires bank that is eligible to apply to become an insured otherwise: bank under section 5 of that Act (12 U.S.C. 1815); (a) "Account" means a deposit as defined in (2) A "mutual savings bank" as defined in section 3 12 C.F.R. 204.2(a)(l)(i) that is a transaction account of the Federal Deposit Insurance Act (12 U.S.C. as described in 12 C.F.R. 204.2(e). As defined in these 1813); sections, "account" generally includes accounts at a (3) A "savings bank" as defined in section 3 of the bank from which the account holder is permitted to Federal Deposit Insurance Act (12 U.S.C. 1813); make transfers or withdrawals by negotiable or trans- (4) An "insured credit union" as defined in section ferable instrument, payment order of withdrawal, tele- 101 of the Federal Credit Union Act (12 U.S.C. phone transfer, electronic payment, or other similar 1752) or a credit union that is eligible to make means for the purpose of making payments or trans- application to become an insured credit union under fers to third persons or others. "Account" also in- section 201 of that Act (12 U.S.C. 1781); cludes accounts at a bank from which the account (5) A "member" as defined in section 2 of the holder may make third party payments at an ATM, Federal Home Loan Bank Act (12 U.S.C. 1422); remote service unit, or other electronic device, includ- (6) An "insured institution" as defined in section ing by debit card, but the term does not include 401 of the National Housing Act (12 U.S.C. 1724) or savings deposits or accounts described in 12 C.F.R. an institution that is eligible to make application to 204.2(d)(2) even though such accounts permit third become an insured institution under section 403 of party transfers. An account may be in the form of — that Act (12 U.S.C. 1726); or (1) A demand deposit account, (7) A "branch" of a "foreign bank" as defined in (2) A negotiable order of withdrawal account, section 1(b) of the International Banking Act (3) A share draft account, (12 U.S.C. 3101). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All For purposes of Subpart C and, in connection money. A draft may be a "check" even though it is therewith, Subpart A, the term "bank" also includes described on its face by another term, such as "money any person engaged in the business of banking, includ- order." For purposes of Subpart C, and in connection ing a Federal Reserve Bank, a Federal Home Loan therewith, Subpart A, of this part, the term "check" Bank, and a state or unit of general local government also includes a demand draft of the type described to the extent that the state or unit of general local above that is nonnegotiable. government acts as a paying bank. Unless otherwise (1) "Check clearinghouse association" means any arspecified, the term "bank" includes all of a bank's rangement by which three or more participants exoffices in the United States, but not offices located change checks on a local basis, including an entire outside the United States. metropolitan area. The term "check clearinghouse (f) "Banking day" means that part of any business day association" may include arrangements using the on which an office of a bank is open to the public for premises of a Federal Reserve Bank, but it does not carrying on substantially all of its banking functions. include the handling of checks for forward collection (g) "Business day" means a calendar day other than a or return by a Federal Reserve Bank, Saturday or a Sunday, January 1, the third Monday in (m) "Check processing region" means the geographi- January, the third Monday in February, the last Mon- cal area served by an office of a Federal Reserve Bank day in May, July 4, the first Monday in September, the for purposes of its check processing activities, second Monday in October, November 11, the fourth (n) "Consumer account" means any account used Thursday in November, or December 25. If January 1, primarily for personal, family, or household pur- July 4, November 11, or December 25 fall on a poses. Sunday, the next Monday is not a business day. (o) "Depositary bank" means the first bank to which a (h) "Cash" means United States coins and currency. check is transferred even though it is also the paying (i) "Cashier's check" means a check that is — bank or the payee. A check deposited in an account is (1) Drawn on a bank; deemed to be transferred to the bank holding the (2) Signed by an officer or employee of the bank on account into which the check is deposited, even behalf of the bank as drawer; though the check is physically received and indorsed (3) A direct obligation of the bank; and first by another bank. (4) Provided to a customer of the bank or acquired (p) "Electronic payment" means a wire transfer or an from the bank for remittance purposes. ACH credit transfer. (j) "Certified check" means a check with respect to (q) "Forward collection" means the process by which which the drawee bank certifies by signature on the a bank sends a check on a cash basis to the paying check of an officer or other authorized employee of the bank for payment. bank that — (r) "Local check" means a check drawn on or payable (1) (i) The signature of the drawer on the check is through or at a local paying bank. A depositary bank genuine; and may rely on the routing number that appears on a (ii) The bank has set aside funds that— check in magnetic ink to determine whether a check is (A) Are equal to the amount of the check, and a local check if the check is sent for payment or (B) Will be used to pay the check; or collection based on the routing number, (2) The bank will pay the check upon presentment, (s) "Local paying bank" means a paying bank to (k) "Check" means — which a check is sent for payment or collection that is (1) A negotiable demand draft drawn on or payable located in the same check processing region as the through or at an office of a bank; physical location of — (2) A negotiable demand draft drawn on a Federal (1) The branch or proprietary ATM of the depositary Reserve Bank or a Federal Home Loan Bank; bank in which that check was deposited; or (3) A negotiable demand draft drawn on the Trea- (2) Both the branch of the depositary bank at which sury of the United States; the account is held and the nonproprietary ATM at (4) A demand draft drawn on a state government or which the check is deposited. unit of general local government that is not payable (t) "Merger transaction" means— through or at a bank; (1) A merger or consolidation of two or more banks; (5) A United States Postal Service money order; or or (6) A traveler's check drawn on or payable through (2) The transfer of substantially all of the assets of or at a bank. one or more banks or branches to another bank in consideration of the assumption by the acquiring The term "check" does not include a noncash item or bank of substantially all of the liabilities of the an item payable in a medium other than United States transferring banks, including the deposit liabilities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

478 Federal Reserve Bulletin • July 1988 (u) "Noncash item" means an item that would other- envelope or placing a strip on the check and encoding wise be a check, except that — the strip or envelope in magnetic ink. A qualified (1) A passbook, certificate, or other document is returned check need not contain other elements of a attached; check drawn on the depositary bank, such as the name (2) It is accompanied by special instructions, such as of the depositary bank. a request for special advice of payment or dishonor; (cc) "Returning bank" means a bank (other than the (3) It consists of more than a single thickness of paying or depositary bank) handling a returned check paper, except a check that qualifies for handling by or notice in lieu of return. A returning bank is also a automated check processing equipment; or collecting bank for the purpose of U.C.C. § 4-202(l)(e) (4) It has not been preprinted or post-encoded in and (2). magnetic ink with the routing number of the paying (dd) "Routing number" means — bank. (1) The number printed on the face of a check in (v) "Nonlocal check" means a check payable by, fractional form or in nine-digit form that identifies a through, or at a nonlocal paying bank, paying bank; or (w) "Nonlocal paying bank" means a paying bank that (2) The number in a bank's indorsement in fractional is not a local paying bank with respect to the deposi- or nine-digit form. tary bank. (ee) "Similarly situated bank" means a bank of similar (x) "Nonproprietary ATM" means an ATM that is not size, located in the same community, and with similar a proprietary ATM. check handling activities as the paying bank or return- (y) "Participant" means a bank that — ing bank. (1) Is located in the geographic area served by a (ff) "State" means a state, the District of Columbia, check clearinghouse association; and Puerto Rico, or the U.S. Virgin Islands, (2) Both collects and receives for payment checks (gg) "Teller's check" means a check provided to a through the check clearinghouse association either customer of a bank or acquired from a bank for directly or through another participant. remittance purposes, that is drawn by the bank, and (z) "Paying bank" means — drawn on another bank or payable through or at a (1) The bank by which a check is payable, unless bank. the check is payable at or through another bank (hh) "Traveler's check" means an instrument for the and is sent to the other bank for payment or payment of money that — collection; (1) Is drawn on or payable through or at a bank; (2) The bank at or through which a check is payable (2) Is designated on its face by the term "traveler's and to which it is sent for payment or collection; check" or by any substantially similar term or is (3) The bank whose routing number appears on a commonly known and marketed as a traveler's check in magnetic ink or in fractional form and check by a corporation or bank that is an issuer of to which the check is sent for payment or col- traveler's checks; lection; (3) Provides for a specimen signature of the pur- (4) The Federal Reserve Bank or Federal Home chaser to be completed at the time of purchase; and Loan Bank by which a check is payable; or (4) Provides for a countersignature of the purchaser (5) The state or unit of general local government on to be completed at the time of negotiation. which a check is drawn. (ii) "Uniform Commercial Code," "Code," or (aa) "Proprietary ATM" means an ATM that is — "U.C.C." means the Uniform Commercial Code as (1) Owned or operated by, or operated exclusively adopted in a state. for, the depositary bank; (jj) "United States" means the states, including the (2) Located on the premises (including the outside District of Columbia, the U.S. Virgin Islands, and wall) of the depositary bank; or Puerto Rico. (3) Located within 50 feet of the premises of the (kk) "Unit of general local government" means any depositary bank, and not identified as being owned city, county, parish, town, township, village, or other or operated by another entity. general purpose political subdivision of a state. The term does not include special purpose units of govern- If more than one bank meets the owned or operated ment, such as school districts or water districts. criterion of paragraph (1) of this definition, the ATM is (11) "Wire transfer" means an unconditional order to a considered proprietary to the bank that operates it. bank to pay a fixed or determinable amount of money (bb) "Qualified returned check" means a returned to a beneficiary upon receipt or on a day stated in the check that is prepared for automated return to the order, that is transmitted by electronic or other means depositary bank by placing the check in a carrier through the Federal Reserve Communications Sys- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All tem, the New York Clearing House Interbank Pay- committed to some other government agency, the ments System, other similar network, between banks, Board shall enforce such requirements. or on the books of a bank. "Wire transfer" does not (2) If the Board determines that — include an electronic fund transfer as defined in sec- (i) Any bank that is not a bank described in tion 902(f) of the Electronic Fund Transfer Act paragraph (a) of this section; or (15 U.S.C. 1693a(6)). (ii) Any other person subject to the authority of (mm) Unless the context requires otherwise, the terms the Board under the Act and this part, has failed not defined in this section have the meanings set forth to comply with any requirement imposed by this in the U.C.C. part, the Board may issue an order prohibiting any bank, any Federal Reserve Bank, or any other person subject to the authority of the Board from Section 229.3—Administrative enforcement. engaging in any activity or transaction that directly or indirectly involves such noncomplying (a) Enforcement agencies. Compliance with this part is bank or person (including any activity or transacenforced under — tion involving the receipt, payment, collection, (1) Section 8 of the Federal Deposit Insurance Act and clearing of checks, and any related function of (12 U.S.C. 1818) in the case of— the payment system with respect to checks). (i) National banks by the Comptroller of the Currency; (ii) Member banks of the Federal Reserve System (other than national banks) by the Board; and Subpart B—Availability of Funds and (iii) Banks insured by the Federal Deposit Insur- Disclosure of Funds Availability Policies ance Corporation (other than members of the Federal Reserve System) by the Board of Direc- Section 229.10—Next-day availability. tors of the Federal Deposit Insurance Corporation; (2) Section 5(d) of the Home Owners Loan Act of (a) Cash deposits. 1933 (12 U.S.C. 1464(d)), section 407 of the National (1) A bank shall make funds deposited in an account Housing Act (12 U.S.C. 1730), and section 17 of the by cash available for withdrawal not later than the Federal Home Loan Bank Act (12 U.S.C. 1437), by business day after the banking day on which the the Federal Home Loan Bank Board (acting directly cash is deposited, if the deposit is made in person to or through the Federal Savings and Loan Insurance an employee of the depositary bank. Corporation) in the case of any institution subject to (2) A bank shall make funds deposited in an account those provisions; and by cash available for withdrawal not later than the (3) The Federal Credit Union Act (12 U.S.C 1751 second business day after the banking day on which et seq.) by the National Credit Union Administra- the cash is deposited, if the deposit is not made in tion Board with respect to any federal credit union person to an employee of the depositary bank. or credit union insured by the National Credit Union (b) Electronic payments. Share Insurance Fund. (1) In general. A bank shall make funds received for (b) Additional powers. deposit in an account by an electronic payment (1) For the purposes of the exercise by any agency available for withdrawal not later than the business referred to in paragraph (a) of this section of its day after the banking day on which the bank repowers under any statute referred to in that para- ceived the electronic payment. graph, a violation of any requirement imposed under (2) When an electronic payment is received. An the Act is deemed to be a violation of a requirement electronic payment is received when the bank reimposed under that statute. ceiving the payment has received both — (2) In addition to its powers under any provision of (i) Payment in actually and finally collected funds; law specifically referred to in paragraph (a) of this and section, each of the agencies referred to in that (ii) Information on the account and amount to be paragraph may exercise, for purposes of enforcing credited. compliance with any requirement imposed under this part, any other authority conferred on it by law. A bank receives an electronic payment only to the (c) Enforcement by the Board. extent that the bank has received payment in actually (1) Except to the extent that enforcement of the and finally collected funds. requirements imposed under this part is specifically (c) Certain check deposits. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

480 Federal Reserve Bulletin • July 1988 (1) General rule. A depositary bank shall make check or checks available for withdrawal not later funds deposited in an account by check available for than the second business day after the banking day withdrawal not later than the business day after the on which funds are deposited, in the case of a check banking day on which the funds are deposited, in the deposit described in and that meets the requirecase of — ments of paragraphs (c)(1)(H), (iii), (iv), and (v), of (i) A check drawn on the Treasury of the United this section, except that it is not deposited in person States and deposited in an account held by a to an employee of the depositary bank. payee of the check; (3) Special deposit slip. (ii) A U.S. Postal Service money order depos- (i) As a condition to making the funds available for ited— withdrawal in accordance with this section, a (A) In an account held by a payee of the money depositary bank may require that a state or local order; and government check or a cashier's, certified, or (B) In person to an employee of the depositary teller's check be deposited with a special deposit bank. slip or deposit envelope that identifies the type of (iii) A check drawn on a Federal Reserve Bank or check. Federal Home Loan Bank and deposited — (ii) If a depositary bank requires the use of a (A) In an account held by a payee of the check; special deposit slip or deposit envelope, the bank and must either provide the special deposit slip or (B) In person to an employee of the depositary deposit envelope to its customers or inform its bank; customers how the slip or envelope may be pre- (iv) A check drawn by a state or a unit of general pared or obtained and make the slip or envelope local government and deposited — reasonably available. (A) In an account held by a payee of the check; (B) In a depositary bank located in the state that Section 229.11—Temporary availability issued the check, or the same state as the unit of schedule. general local government that issued the check; (C) In person to an employee of the depositary (a) Effective date. The temporary availability schedbank; and ule contained in this section is effective from Septem- (D) With a special deposit slip or deposit enve- ber 1, 1988, through August 31, 1990. For the permalope, if such slip or envelope is required by the nent availability schedule, which is effective depositary bank under paragraph (c)(3) of this September 1, 1990, see section 229.12. section. (b) Local checks and certain other checks. (v) A cashier's, certified, or teller's check depos- (1) In general. A depositary bank shall make funds ited— deposited in an account by a check available for (A) In an account held by a payee of the check; withdrawal not later than the third business day (B) In person to an employee of the depositary following the banking day on which funds are debank; and posited, in the case of — (C) With a special deposit slip or deposit enve- (i) A local check; lope, if such slip or envelope is required by the (ii) A check drawn on the Treasury of the United depositary bank under paragraph (c)(3) of this States that is not governed by the availability section. requirements of section 229.10(c); (vi) A check deposited in a branch of the deposi- (iii) A U.S. Postal Service money order that is not tary bank and drawn on the same or another governed by the availability requirements of secbranch of the same bank if both branches are tion 229.10(c); and located in the same state or the same check (iv) A check drawn on a Federal Reserve Bank or processing region; and, Federal Home Loan Bank; a check drawn by a (vii) The lesser of — state or unit of general local government; or a (A) $100, or cashier's, certified, or teller's check; if any check (B) The aggregate amount deposited on any one referred to in this paragraph (b)(l)(iv) of this banking day to all accounts of the customer by section is a local check that is not governed by the check or checks not subject to next-day avail- availability requirements of section 229.10 (c). ability under paragraphs (c)(l)(i) through (vi) of (2) Time period adjustment for withdrawal by cash this section. or similar means. A depositary bank may extend by (2) Checks not deposited in person. A depositary one business day the time that funds deposited in an bank shall make funds deposited in an account by account by one or more local checks are available Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All for withdrawal by cash or similar means unless the through a paying bank not located in the same state checks are drawn on or payable at or through a local as the depositary bank. paying bank that is a participant in the same check clearinghouse association as the depositary bank. Section 229.12—Permanent availability Similar means include electronic payment, issuance schedule. of a cashier's or teller's check, certification of a check, or other irrevocable commitment to pay, but (a) Effective date. The permanent availability schedule do not include the granting of credit to a bank, contained in this section is effective September 1, Federal Reserve Bank, or Federal Home Loan Bank 1990. that presents a check to the depositary bank for (b) Local checks and certain other checks. A deposipayment. A depositary bank shall, however, make tary bank shall make funds deposited in an account by $400 of these funds available for withdrawal by cash a check available for withdrawal not later than the or similar means not later than 5:00 p.m. on the third second business day following the banking day on business day following the banking day on which the which funds are deposited, in the case of — funds are deposited. This $400 is in addition to the (1) A local check; $100 available under section 229.10(c)(l)(vii). (2) A check drawn on the Treasury of the United (c) Nonlocal checks. States that is not governed by the availability re- (1) In general. A depositary bank shall make funds quirements of section 229.10(c); deposited in an account by a check available for (3) A check drawn on the Treasury of the United withdrawal not later than the seventh business day States that is deposited at a nonproprietary following the banking day on which funds are de- ATM; posited, in the case of — (4) A U.S. Postal Service money order that is not (i) A nonlocal check; and governed by the availability requirements of section (ii) A check drawn on a Federal Reserve Bank or 229.10(c); and Federal Home Loan Bank; a check drawn by a (5) A check drawn on a Federal Reserve Bank or state or unit of general local government; a cash- Federal Home Loan Bank; a check drawn by a state ier's, certified, or teller's check; or a check de- or unit of general local government; or a cashier's, posited in a branch of the depositary bank and certified, or teller's check; if any check referred to in drawn on the same or another branch of the same this paragraph (b)(5) is a local check that is not bank, if any check referred to in this paragraph governed by the availability requirements of section (c)(l)(ii) is a nonlocal check that is not governed 229.10(c). by the availability requirements of section (c) Nonlocal checks. 229.10(c). (1) In general. A depositary bank shall make funds (2) Reduction in schedule for certain check depos- deposited in an account by a check available for its. Nonlocal checks specified in Appendix B-l to withdrawal not later than the fifth business day this part must be made available for withdrawal following the banking day on which funds are denot later than the times prescribed in that posited, in the case of — Appendix. (i) A nonlocal check; and (d) Deposits at nonproprietary ATMs. A depositary (ii) A check drawn on a Federal Reserve Bank or bank shall make funds deposited in an account at a Federal Home Loan Bank; a check drawn by a nonproprietary ATM by cash or check available for state or unit of general local government; a cashwithdrawal not later than the seventh business day ier's, certified, or teller's check; or a check defollowing the banking day on which the funds are posited in a branch of the depositary bank and deposited. drawn on the same or another branch of the same (e) Extension of schedule for certain deposits in bank, if any check referred to in this paragraph Alaska, Hawaii, Puerto Rico, and the U.S. Virgin (c)(l)(ii) is a nonlocal check that is not governed Islands. The depositary bank may extend the time by the availability requirements of section periods set forth in this section by one business day in 229.10(c). the case of any deposit, other than a deposit described (2) Nonlocal checks specified in Appendix B-2 to in section 229.10, that is — this part must be made available for withdrawal not (1) Deposited in an account at a branch of a later than the times prescribed in that Appendix. depositary bank if the branch is located in Alaska, (d) Time period adjustment for withdrawal by cash or Hawaii, Puerto Rico, or the U.S. Virgin Islands; similar means. A depositary bank may extend by one and business day the time that funds deposited in an (2) Deposited by a check drawn on or payable at or account by one or more checks subject to paragraphs Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

482 Federal Reserve Bulletin • July 1988 (b) or (c) of this section are available for withdrawal by another account at the depositary bank for at least cash or similar means. Similar means include elec- 30 calendar days. tronic payment, issuance of a cashier's or teller's (b) Large deposits. Sections 229.11 and 229.12 do not check, or certification of a check, or other irrevocable apply to the aggregate amount of deposits by one or commitment to pay, but do not include the granting of more checks to the extent that the aggregate amount is credit to a bank, a Federal Reserve Bank, or a Federal in excess of $5,000 on any one banking day. For Home Loan Bank that presents a check to the depos- customers that have multiple accounts at a depositary itary bank for payment. A depositary bank shall, bank, the bank may apply this exception to the aggrehowever, make $400 of these funds available for gate deposits to all accounts held by the customer, withdrawal by cash or similar means not later than even if the customer is not the sole holder of the 5:00 p.m. on the business day on which the funds are accounts and not all of the holders of the accounts are available under paragraphs (b) and (c) of this section. the same. This $400 is in addition to the $100 available under (c) Redeposited checks. Sections 229.11 and 229.12 do section 229.10(c)(l)(vii). not apply to a check that has been returned unpaid and (e) Extension of schedule for certain deposits in redeposited by the customer or the depositary bank. Alaska, Hawaii, Puerto Rico, and the U.S. Virgin This exception does not apply — Islands. The depositary bank may extend the time (1) To a check that has been returned due to a periods set forth in this section by one business day in missing indorsement and redeposited after the missthe case of any deposit, other than a deposit described ing indorsement has been obtained, if the reason for in section 229.10, that is— return indication on the check states that it was (1) Deposited in an account at a branch of a depos- returned due to a missing indorsement; or itary bank if the branch is located in Alaska, Hawaii, (2) To a check that has been returned because it was Puerto Rico, or the U.S. Virgin Islands; and postdated, if the reason for return indicated on the (2) Deposited by a check drawn on or payable at or check states that it was returned because it was through a paying bank not located in the same state postdated, and if the check is no longer postdated as the depositary bank. when redeposited. (d) Repeated overdrafts. If any account or combina- Section 229.13—Exceptions. tion of accounts of a depositary bank's customer has been repeatedly overdrawn, then for a period of six (a) New accounts. months after the last such overdraft, sections 229.11 (1) A deposit in a new account — and 229.12 do not apply to any of the accounts. A (i) Is subject to the requirements of sections depositary bank may consider a customer's account to 229.10(a) and (b) to make funds from deposits by be repeatedly overdrawn if — cash and electronic payments available for with- (1) On six or more banking days within the preceddrawal on the business day following the banking ing six months, the account balance is negative, or day of deposit or receipt; the account balance would have become negative if (ii) Is subject to the requirements of sections checks or other charges to the account had been 229.10(c)(l)(i) through (v) and section 229.10(c)(2) paid; or only with respect to the first $5,000 of funds (2) On two or more banking days within the preceddeposited on any one banking day; but the amount ing six months, the account balance is negative, or of the deposit in excess of $5,000 shall be avail- the account balance would have become negative, in able for withdrawal not later than the ninth busi- the amount of $5,000 or more, if checks or other ness day following the banking day on which charges to the account had been paid. funds are deposited; and (e) Reasonable cause to doubt collectibility. (iii) Is not subject to the availability requirements (1) In general. If a depositary bank has reasonable of sections 229.10(c)(l)(vi) and (vii) , 229.11, and cause to believe that the check is uncollectible from 229.12. the paying bank, then sections 229.10(c)(l)(iii) and (v); section 229.10(c)(2) to the extent that it applies For purposes of this paragraph, checks subject to to a check drawn on a Federal Reserve Bank or a section 229.10(c)(l)(v) include traveler's checks. Federal Home Loan Bank, or a cashier's, teller's, or (2) An account is considered a new account during certified check; section 229.11; and section 229.12 the first 30 calendar days after the account is estab- do not apply with respect to a check deposited in an lished. An account is not considered a new account account at a depositary bank. Reasonable cause to if each customer on the account has had, within 30 believe a check is uncollectible requires the existcalendar days before the account is established, ence of facts that would cause a well-grounded Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All belief in the mind of a reasonable person. Such (v) The day the funds will be available for withbelief shall not be based on the fact that the check is drawal, unless the emergency conditions excepof a particular class or is deposited by a particular tion in paragraph (f) of this section has been class of persons. The reason for the bank's belief invoked, and the depositary bank, in good faith, that the check is uncollectible shall be included in does not know the duration of the emergency and, the notice required under paragraph (g) of this consequently, when the funds must be made section. available at the time the notice must be given. (2) Overdraft and returned check fees. A depositary (2) Timing of notice. bank that extends the time when funds will be (i) The notice shall be provided to the depositor at available for withdrawal as described in paragraph the time of the deposit, unless the deposit is not (e)(1) of this section, and does not furnish the made in person to an employee of the depositary depositor with written notice at the time of deposit bank, or, if the facts upon which a determination shall not assess any fees for any subsequent over- to invoke one of the exceptions in paragraphs (b) drafts (including use of a line of credit) or return of through (f) of this section to delay a deposit only checks of other debits to the account, if — become known to the depositary bank after the (i) The overdraft or return of the check would not time of the deposit. If the notice is not given at the have occurred except for the fact that the depos- time of the deposit, the depositary bank shall mail ited funds were delayed under paragraph (e)(1) of or deliver the notice to the customer as soon as this section; and practicable, but no later than the first business day (ii) The deposited check was paid by the paying following the day the facts become known to the bank. depositary bank, or the deposit is made, whichever is later. Notwithstanding the foregoing, the depositary bank (ii) If the availability of funds is delayed under the may assess an overdraft or returned check fee if it emergency conditions exception provided in paraincludes a notice concerning overdraft and returned graph (f) of this section, the depositary bank is not check fees with the notice of exception required in required to provide a notice if the funds subject to paragraph (g) of this section and, when required, the exception become available before the notice refunds any such fees upon the request of the cus- must be sent under paragraph (g)(2)(i) of this tomer. The overdraft and returned check notice must section. state that the customer may be entitled to a refund of (3) Record retention. A depositary bank shall retain overdraft or returned check fees that are assessed if a record, in accordance with section 229.21(g), of the check subject to the exception is paid and how to each notice provided pursuant to its application of obtain a refund. the reasonable cause exception under paragraph (e) (f) Emergency conditions. Sections 229.11 and 229.12 of this section, together with a brief statement of the do not apply to funds deposited by check in a depos- facts giving rise to the bank's reason to doubt the itary bank in the case of — collectibility of the check. (1) An interruption of communications or computer (h) Availability of deposits subject to exceptions. or other equipment facilities; (1) If an exception contained in paragraphs (b) (2) A suspension of payments by another bank; through (f) of this section applies, the depositary (3) A war; or bank may extend the time periods established under (4) An emergency condition beyond the control of sections 229.11 and 229.12 by a reasonable period of the depositary bank, if the depositary bank exer- time. cises such diligence as the circumstances require. (2) If a depositary bank invokes an exception under (g) Notice of exception. paragraph (e) of this section based on its reasonable (1) In general. When a depositary bank extends the cause to doubt collectibility of a check that is time when funds will be available for withdrawal subject to sections 229.10(c)(l)(iii) or (v) or section based on the application of an exception contained 229.10(c)(2) to the extent that it applies to a check in paragraphs (b) through (f) of this section, it must drawn on a Federal Reserve Bank or a Federal provide the depositor with a written notice. The Home Loan Bank, or a cashier's, teller's, or certinotice shall include the following information — fied check, the depositary bank shall make the funds (i) The account number of the customer; available for withdrawal not later than a reasonable (ii) The date and amount of the deposit; period after the day the funds would have been (iii) The amount of the deposit that is being required to be made available had the check been delayed; subject to sections 229.11 or 229.12. (iv) The reason the exception was invoked; and (3) If a depositary bank invokes an exception under Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

484 Federal Reserve Bulletin • July 1988 paragraph (f) of this section based on an emergency contain any information not related to the disclosures condition, the depositary bank shall make the funds required by this subpart. If contained in a document available for withdrawal not later than a reasonable that sets forth other account terms, the disclosures period after the emergency has ceased or the period shall be highlighted within the document by, for exestablished in sections 229.11 and 229.12, whichever ample, use of a separate heading. is later. (b) Uniform reference to day of availability. In its (4) For the purposes of paragraphs (h)(1), (2), and (3) disclosure, a bank shall describe funds as being availof this section, an extension of up to four business able for withdrawal on "the business day days is a reasonable period. An extension of more after" the day of deposit. In this calculation, the first than four business days may be reasonable, but the business day is the business day following the banking bank has the burden of so establishing. day the deposit was received, and the last business day is the day on which the funds are made available. Section 229.14—Payment of interest. (c) Multiple accounts and multiple account holders. A bank need not give multiple disclosures to a customer (a) In general. A depositary bank shall begin to accrue that holds multiple accounts if the accounts are subject interest or dividends on funds deposited in an interest- to the same availability policies. Similarly, a bank bearing account not later than the business day on need not give separate disclosures to each customer on which the depositary bank receives credit for the a jointly held account. funds. For the purposes of this section, the depositary (d) Dormant or inactive accounts. A bank need not bank may — give availability disclosures to a customer that holds a (1) Rely on the availability schedule of its Federal dormant or inactive account. Reserve Bank, Federal Home Loan Bank, or correspondent bank to determine the time credit is actu- Section 229.16—Specific availability policy ally received; and disclosure. (2) Accrue interest or dividends on funds deposited in interest-bearing accounts by checks that the de- (a) General. To meet the requirements of a specific positary bank sends to paying banks or subsequent availability policy disclosure under sections 229.17 collecting banks for payment or collection based on and 229.18(d), a bank shall provide a disclosure dethe availability of funds the depositary bank re- scribing the bank's policy as to when funds deposited ceives from the paying or collecting banks. in an account are available for withdrawal. The disclo- (b) Special rule for credit unions. Paragraph (a) of this sure must reflect the policy followed by the bank in section does not apply to any account at a bank most cases. A bank may impose longer delays on a described in section 229.2(e)(4), if the bank — case-by-case basis or by invoking one of the excep- (1) Begins the accrual of interest or dividends at a tions in section 229.13, provided this is reflected in the later date than the date described in paragraph (a) of disclosure. this section with respect to all funds, including cash, (b) Content of specific availability policy disclosure. deposited in the account; and The specific availability policy disclosure shall contain (2) Provides notice of its interest or dividend pay- the following, as applicable— ment policy in the manner required under section (1) A summary of the bank's availability policy; 229.16(d). (2) A description of any categories of deposits or (c) Exception for checks returned unpaid. This sub- checks used by the bank when it delays availability part does not require a bank to pay interest or divi- (such as local or nonlocal checks); how to determine dends on funds deposited by a check that is returned the category to which a particular deposit or check unpaid. belongs; and when each category will be available for withdrawal (including a description of the bank's Section 229.15—General disclosure business days and when a deposit is considered requirements. received); (3) A description of any of the exceptions in section (a) Form of disclosures. A bank shall make the disclo- 229.13 that may be invoked by the bank, including sures required by this subpart clearly and conspicu- the time following a deposit that funds generally will ously in writing. Disclosures, other than those posted be available for withdrawal and a statement that the at locations where employees accept consumer depos- bank will notify the customer if the bank invokes its and ATMs and the notice on preprinted deposit one of the exceptions; slips, must be in a form that the customer may keep. (4) A description, as specified in paragraph (c)(1) of The disclosures shall be grouped together and shall not this section, of any case-by-case policy of delaying Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All availability that may result in deposited funds being subsequent overdrafts (including use of a line of available for withdrawal later than the time periods credit) or return of checks or other debits to the stated in the bank's availability policy; and account, if— (5) A description of how the customer can differen- (i) The overdraft or return of the check or other tiate between a proprietary and a nonproprietary debit would not have occurred except for the fact ATM, if the bank makes funds from deposits at that the deposited funds were delayed under paranonproprietary ATMs available for withdrawal later graph (c)(1) of this section; and than funds from deposits at proprietary ATMs, (ii) The deposited check was paid by the paying (c) Longer delays on a case-by-case basis. bank. (1) Notice in specific policy disclosure. A bank that has a policy of making deposited funds available for Notwithstanding the foregoing, the depositary bank withdrawal sooner than required by this subpart may assess an overdraft or returned check fee if it may extend the time when funds are available up to includes a notice concerning overdraft and returned the time periods allowed under this subpart on a check fees with the notice required in paragraph (c)(2) case-by-case basis, provided the bank includes the of this section and, when required, refunds any such following in its specific policy disclosure— fees upon the request of the customer. The overdraft (i) A statement that the time when deposited funds and returned check notice must state that the customer are available for withdrawal may be extended in may be entitled to a refund of overdraft or returned some cases, and the latest time following a deposit check fees that are assessed if the check subject to the that funds will be available for withdrawal; delay is paid and state how to obtain a refund, (ii) A statement that the bank will notify the (d) Credit union notice of interest payment policy. If a customer if funds deposited in the customer's bank described in section 229.2(e)(4) begins to accrue account will not be available for withdrawal until interest or dividends on all deposits made in an interlater than the time periods stated in the bank's est-bearing account, including cash deposits, at a later availability policy; and time than the day specified in section 229.14(a), the (iii) A statement that customers should ask if they bank's specific policy disclosures shall contain an need to be sure about when a particular deposit explanation of when interest or dividends on deposited will be available for withdrawal. funds begin to accrue. (2) Notice at time of case-by-case delay. (i) In general. When a depositary bank extends the time when funds will be available for with- Section 229.17—Initial disclosures. drawal on a case-by-case basis, it must provide the depositor with a written notice. The notice (a) New accounts. Before opening an account, a bank shall include the following information— shall provide a potential customer with the applicable (A) The account number of the customer; specific availability policy disclosure described in (B) The date and amount of the deposit; section 229.16. (C) The amount of the deposit that is being (b) Existing accounts. delayed; and (1) In the first regularly scheduled mailing to cus- (D) The day the funds will be available for tomers after September 1, 1988, but not later than withdrawal. October 31, 1988, a bank shall send to existing (ii) Timing of notice. The notice shall be provided customers the specific availability policy disclosure to the depositor at the time of the deposit, unless described in section 229.16, unless the bank has the deposit is not made in person to an employee previously given disclosures that meet the requireof the depositary bank or the decision to extend ments of that section. the time when the deposited funds will be avail- (2) If the disclosure required by paragraph (b)(1) of able is made after the time of the deposit. If notice this section is included with a disclosure of other is not given at the time of the deposit, the depos- account terms and conditions, the bank must direct itary bank shall mail or deliver the notice to the the customer's attention to the availability disclocustomer not later than the first business day sures by, for example, the use of an insert or a following the banking day the deposit is made. letter. (3) Overdraft and returned check fees. A depositary (3) The disclosure required by paragraph (b)(1) of bank that extends the time when funds will be this section may not be included in a mailing of available for withdrawal on a case-by-case basis and promotional material, such as a solicitation for a does not furnish the depositor with written notice at new product or service, unless the mailing also the time of deposit shall not assess any fees for any includes the customer's account statement. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

486 Federal Reserve Bulletin • July 1988 Section 229.18—Additional disclosure removed from the ATM not more than two times requirements. each week; and (5) Funds may be considered deposited on the next (a) Deposit slips. A bank shall include on all preprin- banking day, in the case of funds that are deposted deposit slips furnished to its customers a notice ited— that deposits may not be available for immediate (i) On a day that is not a banking day for the withdrawal. depositary bank; or (b) Locations where employees accept consumer de- (ii) After a cut-off hour set by the depositary bank posits. A bank shall post in a conspicuous place in for the receipt of deposits of 2:00 p.m. or later, or, each location where its employees receive deposits to for the receipt of deposits at ATMs or oflf-premise consumer accounts a notice that sets forth the time facilities, of 12:00 noon or later. Different cut-off periods applicable to the availability of funds depos- hours later than these times may be established ited in a consumer account. for receipt of different types of deposits, or receipt of deposits at different locations. (c) Automated teller machines. (1) A depositary bank shall post or provide a notice (b) Availability at start of business day. Except as at each ATM location that funds deposited in the otherwise provided in sections 229.11(b)(2) and ATM may not be available for immediate with- 229.12(d), if any provision of this subpart requires that drawal. funds be made available for withdrawal on any business day, the funds shall be available for withdrawal (2) A depositary bank that operates an off-premises ATM from which deposits are removed not more by the later of— than two times each week, as described in section (1) 9:00 a.m. (local time of the depositary bank); or 229.19(a)(4), shall disclose at or on the ATM the (2) The time the depositary bank's teller facilities days on which deposits made at the ATM will be (including ATMs) are available for customer acconsidered received. count withdrawals. (d) Upon request. A bank shall provide to any person, (c) Effect on policies of depositary bank. This part upon oral or written request, a notice containing the does not— applicable specific availability policy disclosure de- (1) Prohibit a depositary bank from making funds scribed in section 229.16. available to a customer for withdrawal in a shorter (e) Changes in policy. A bank shall send a notice to period of time than the time required by this subholders of consumer accounts at least 30 days before part; implementing a change to the bank's availability policy (2) Affect a depositary bank's right— regarding such accounts, except that a change that (i) To accept or reject a check for deposit; expedites the availability of funds may be disclosed (ii) To revoke any settlement made by the deposnot later than 30 days after implementation. itary bank with respect to a check accepted by the bank for deposit, to charge back the customer's account for the amount of a check based on the Section 229.19—Miscellaneous. return of the check or receipt of a notice of nonpayment of the check, or to claim a refund of (a) When funds are considered deposited. For the such credit; and purposes of this subpart— (iii) To charge back funds made available to its (1) Funds deposited at a staffed facility or an ATM customer for an electronic payment for which the are considered deposited when they are received at bank has not received payment in actually and the staffed facility or ATM; finally collected funds; (2) Funds mailed to the depositary bank are consid- (3) Require a depositary bank to open or otherwise ered deposited on the day they are received by the to make its facilities available for customer transacdepositary bank; tions on a given business day ; or (3) Funds deposited to a night depository, lock box, (4) Supersede any policy of a depositary bank that or similar facility are considered deposited on the limits the amount of cash a customer may withday on which the deposit is removed from such draw from its account on any one day, if that facility and is available for processing by the depos- policy— itary bank; (i) Is not dependent on the time the funds have (4) Funds deposited at an ATM that is not on, or been deposited in the account, as long as the within 50 feet of, the premises of the depositary funds have been on deposit for the time period bank are considered deposited on the day the funds specified in sections 229.10, 229.11, 229.12, or are removed from the ATM, if funds normally are 229.13; and— Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All (ii) In the case of withdrawals made in person to (2) Apply to all federally insured banks located an employee of the depositary bank— within the state. (A) Is applied without discrimination to all customers of the bank; and No amendment to a state law or regulation governing (B) Is related to security, operating, or bonding the availability of funds that becomes effective after requirements of the depositary bank. September 1, 1989, shall supersede the Act and Sub- (d) Use of calculated availability. A depositary bank part B, and, in connection therewith, Subpart A, but may provide availability to its nonconsumer accounts unamended provisions of state law shall remain in based on a sample of checks that represents the effect. average composition of the customer's deposits, if the (b) Preemption of inconsistent law. Except as terms for availability based on the sample are equiva- provided in paragraph (a), the Act and Subpart B, and, lent to or more prompt than the availability require- in connection therewith, Subpart A, supersede any ments of this subpart. provision of inconsistent state law. (e) Holds on other funds. A depositary bank that (c) Standards for preemption. A provision of a state receives a check for deposit in an account or pur- law in effect on or before September 1, 1989, is not chases a check for cash, other than a check drawn on inconsistent with the Act, or Subpart B, or in connecthat bank and presented over the counter for payment tion therewith, Subpart A, if it requires that funds shall in cash, may place a hold on any funds of the customer be available in a shorter period of time than the time at the bank, if— provided in this subpart. Inconsistency with the Act (1) The amount of funds that are held do not exceed and Subpart B, and in connection therewith, Subpart the amount of the check; and A, may exist when state law— (2) The funds are made available for withdrawal (1) Permits a depositary bank to make funds deposwithin the times specified in sections 229.10, 229.11, ited in an account by cash, electronic payment, or 229.12, and 229.13. check available for withdrawal in a longer period of (f) Employee training and compliance. Each bank time than the maximum period of time permitted shall establish procedures to ensure that the bank under Subpart B, and, in connection therewith, complies with the requirements of this subpart, and Subpart A; or shall provide each employee who performs duties (2) Provides for disclosures or notices concerning subject to the requirements of this subpart with a funds availability relating to accounts. statement of the procedures applicable to that em- (d) Preemption determinations. The Board may deterployee. mine, upon the request of any state, bank, or other (g) Effect of Merger Transaction. For purposes of this interested party, whether the Act and Subpart B, and, subpart, except for the purposes of the new accounts in connection therewith, Subpart A, preempt proviexception of section 229.13(a), and when funds are sions of state laws relating to the availability of funds. considered deposited under section 229.19(a), two or (e) Procedures for preemption determinations. A remore banks that have engaged in a merger transaction quest for a preemption determination shall include the may be considered to be separate banks for a period of following— one year following the consummation of the merger (1) A copy of the full text of the state law in transaction. question, including any implementing regulations or judicial interpretations of that law; and (2) A comparison of the provisions of state law with Section 229.20—Relation to state law. the corresponding provisions in the Act and Subparts A and B of this part, together with a discussion (a) In general. Any provision of a law or regulation of of the reasons why specific provisions of state law any state in effect on or before September 1, 1989, that are either consistent or inconsistent with correrequires funds deposited in an account at a bank sponding sections of the Act and Subparts A and B chartered by the state to be made available for with- of this part. drawal in a shorter time than the time provided in Subpart B, and, in connection therewith, Subpart A, A request for a preemption determination shall be shall— addressed to the Secretary, Board of Governors of the (1) Supersede the provisions of the Act and Subpart Federal Reserve System. B, and, in connection therewith, Subpart A, to the extent the provisions relate to the time by which Section 229.21—Civil liability. funds deposited or received for deposit in an account are available for withdrawal; and (a) Civil liability. A bank that fails to comply with any Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

488 Federal Reserve Bulletin • July 1988 requirement imposed under Subpart B, and in connec- subpart imposing any liability shall apply to any act tion therewith, Subpart A, of this part or any provision done or omitted in good faith in conformity with any of state law that supersedes any provision of Subpart rule, regulation, or interpretation thereof by the B, and in connection therewith, Subpart A, with Board, regardless of whether such rule, regulation, or respect to any person is liable to that person in an interpretation is amended, rescinded, or determined amount equal to the sum of— by judicial or other authority to be invalid for any (1) Any actual damage sustained by that person as a reason after the act or omission has occurred. result of the failure; (f) Exclusions. This section does not apply to claims (2) Such additional amount as the court may allow, that arise under Subpart C of this part or to actions for except that— wrongful dishonor. (i) In the case of an individual action, liability (g) Record retention. under this paragraph shall not be less than $100 (1) A bank shall retain evidence of compliance with nor greater than $1,000; and the requirements imposed by this subpart for not (ii) In the case of a class action— less than two years. Records may be stored by use (A) No minimum recovery shall be applicable of microfiche, microfilm, magnetic tape, or other to each member of the class; and methods capable of accurately retaining and repro- (B) The total recovery under this paragraph in ducing information. any class action or series of class actions arising (2) If a bank has actual notice that it is being out of the same failure to comply by the same investigated, or is subject to an enforcement prodepositary bank shall not be more than the ceeding by an agency charged with monitoring that lesser of $500,000 or 1 percent of the net worth bank's compliance with the Act and this subpart, or of the bank involved; and, has been served with notice of an action filed under (3) In the case of a successful action to enforce the this section, it shall retain the records pertaining to foregoing liability, the costs of the action, together the action or proceeding pending final disposition of with a reasonable attorney's fee as determined by the matter, unless an earlier time is allowed by order the court. of the agency or court. (b) Class action awards. In determining the amount of any award in any class action, the court shall consider, Subpart C—Collection of Checks among other relevant factors— (1) The amount of any damages awarded; Section 229.30—Paying bank's responsibility (2) The frequency and persistence of failures of for return of checks. compliance; (3) The resources of the bank; (4) The number of persons adversely affected; and (a) Return of checks. If a paying bank determines not (5) The extent to which the failure of compliance to pay a check, it shall return the check in an expediwas intentional. tious manner as provided in either paragraphs (a)(1) or (c) Bona fide errors. (a)(2) of this section. (1) General rule. A bank is not liable in any action (1) Two-day I four-day test. A paying bank returns a brought under this section for a violation of this check in an expeditious manner if it sends the subpart if the bank demonstrates by a preponder- returned check in a manner such that the check ance of the evidence that the violation was not would normally be received by the depositary bank intentional and resulted from a bona fide error, not later than 4:00 p.m. (local time of the depositary notwithstanding the maintenance of procedures rea- bank) of— sonably adapted to avoid any such error. (i) The second business day following the banking (2) Examples. Examples of a bona fide error include day on which the check was presented to the clerical, calculation, computer malfunction and pro- paying bank, if the paying bank is a local paying gramming, and printing errors, except that an error bank with respect to the depositary bank; or of legal judgment with respect to the bank's obliga- (ii) The fourth business day following the banking tion under this subpart is not a bona fide error. day on which the check was presented to the (d) Jurisdiction. Any action under this section may be paying bank, if the paying bank is a nonlocal brought in any United States district court or in any paying bank with respect to the depositary bank. other court of competent jurisdiction, and shall be brought within one year after the date of the occur- If the last business day on which the paying bank may rence of the violation involved. deliver a returned check to the depositary bank is not (e) Reliance on Board rulings. No provision of this a banking day for the depositary bank, the paying bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All meets the two-day/four-day test if the returned check delivery after the receiving bank's next banking is received by the depositary bank on or before the day. depositary bank's next banking day. (d) Identification of returned check. A paying bank (2) Forward collection test. A paying bank also returning a check shall clearly indicate on the face of returns a check in an expeditious manner if it sends the check that it is a returned check and the reason for the returned check in a manner that a similarly return. situated bank would normally handle a check— (e) Depositary bank without accounts. The expedi- (i) Of similar amount as the returned check; tious return requirements of paragraph (a) of this (ii) Drawn on the depositary bank; and section do not apply to checks deposited in a deposi- (iii) Deposited for forward collection in the simi- tary bank that does not maintain accounts. larly situated bank by noon on the banking day (f) Notice in lieu of return. If a check is unavailable for following the banking day on which the check was return, the paying bank may send in its place a copy of presented to the paying bank. the front and back of the returned check, or, if no such copy is available, a written notice of nonpayment Subject to the requirement for expeditious return, a containing the information specified in section paying bank may send a returned check to the depos- 229.33(b). The copy or notice shall clearly state that it itary bank, or to any other bank agreeing to handle the constitutes a notice in lieu of return. A notice in lieu of returned check expeditiously under section 229.31(a). return is considered a returned check subject to the A paying bank may convert a check to a qualified expeditious return requirements of this section and to returned check. A qualified returned check must be the other requirements of this subpart. encoded in magnetic ink with the routing number of (g) Reliance on routing number. A paying bank may the depositary bank, the amount of the returned return a returned check based on any routing number check, and a "2" in position 44 of the MICR line as a designating the depositary bank appearing on the return identifier, in accordance with the American returned check in the depositary bank's indorsement. National Standard Specifications for Placement and Location of MICR Printing, X9.13 (Sept. 1983). This paragraph does not affect a paying bank's responsibil- Section 229.31—Returning bank's responsibility ity to return a check within the deadlines required by for return of checks. the U.C.C., Regulation J (12 C.F.R. Part 210), or section 229.30(c). (b) Unidentifiable depositary bank. A paying bank that (a) Return of checks. A returning bank shall return a is unable to identify the depositary bank with respect returned check in an expeditious manner as provided to a check may send the returned check to any bank in either paragraphs (a)(1) or (a)(2) of this section. that handled the check for forward collection even if (1) Two-day I four-day test. A returning bank returns that bank does not agree to handle the check expedi- a check in an expeditious manner if it sends the tiously under section 229.31(a). A paying bank sending returned check in a manner such that the check a returned check under this paragraph to a bank that would normally be received by the depositary bank handled the check for forward collection must advise not later than 4:00 p.m. (local time) of— the bank to which the check is sent that the paying (i) The second business day following the banking bank is unable to identify the depositary bank. The day on which the check was presented to the expeditious return requirements in section 229.30(a) paying bank if the paying bank is a local paying do not apply to the paying bank's return of a check bank with respect to the depositary bank; or under this paragraph. (ii) The fourth business day following the banking (c) Extension of deadline for expedited delivery. The day on which the check was presented to the deadline for return or notice of nonpayment under the paying bank if the paying bank is a nonlocal paying bank with respect to the depositary bank. U.C.C. or Regulation J (12 C.F.R. Part 210) is extended if a paying bank, in an effort to expedite delivery of a returned check to a bank, uses a means of If the last business day on which the returning bank delivery that would ordinarily result in the returned may deliver a returned check to the depositary bank is check being received by the bank to which it is sent on not a banking day for the depositary bank, the returnor before the receiving bank's next banking day fol- ing bank meets this requirement if the returned check lowing the otherwise applicable deadline. The deadline is received by the depositary bank on or before the is extended further if a paying bank uses a highly depositary bank's next banking day. expeditious means of transportation, even if this (2) Forward collection test. A returning bank also means of transportation would ordinarily result in returns a check in an expeditious manner if it sends Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

490 Federal Reserve Bulletin • July 1988 the returned check in a manner that a similarly to identify the depositary bank, must thereafter situated bank would normally handle a check — return the check expeditiously to the depositary bank. (i) Of similar amount as the returned check; (c) Settlement. A returning bank shall settle with a (ii) Drawn on the depositary bank; and bank sending a returned check to it for return by the (iii) Received for forward collection by the simi- same means that it settles or would settle with the larly situated bank at the time the returning bank sending bank for a check received for forward collecreceived the returned check, except that a return- tion drawn on the depositary bank. This settlement is ing bank may set a cut-off hour for the receipt of final when made. returned checks that is earlier than the similarly (d) Charges. A returning bank may impose a charge situated bank's cut-off hour for checks received on a bank sending a returned check for handling the for forward collection, if the cut-off hour is not returned check. earlier than 2:00 p.m. (e) Depositary bank without accounts. The expeditious return requirements of paragraph (a) of this Subject to the requirement for expeditious return, the section do not apply to checks deposited with a returning bank may send the returned check to the depositary bank that does not maintain accounts. depositary bank, or to any bank agreeing to handle the (f) Notice in lieu of return. If a check is unavailable for returned check expeditiously under section 229.31(a). return, the returning bank may send in its place a copy The returning bank may convert the returned check to of the front and back of the returned check, or, if no a qualified returned check. A qualified returned check copy is available, a written notice of nonpayment must be encoded in magnetic ink with the routing containing the information specified in section number of the depositary bank, the amount of the 229.33(b). The copy or notice shall clearly state that it returned check, and a "2" in position 44 of the MICR constitutes a notice in lieu of return. A notice in lieu of line as a return identifier, in accordance with the return is considered a returned check subject to the American National Standard Specification for Place- expeditious return requirements of this section and to ment and Location of MICR Printing, X9.13 (Sept. the other requirements of this subpart. 1983). The time for expeditious return under the for- (g) Reliance on routing number. A returning bank ward collection test, and the deadline for return under may return a returned check based on any routing the U.C.C. and Regulation J (12 C.F.R. Part 210), are number designating the depositary bank appearing on extended by one business day if the returning bank the returned check in the depositary bank's indorseconverts a returned check to a qualified returned ment or in magnetic ink on a qualified returned check. check. This extension does not apply to the twoday/four-day test specified in paragraph (a)(1) of this Section 229.32—Depositary bank's section or when a returning bank is returning a check responsibility for returned checks. directly to the depositary bank, (b) Unidentifiable depositary bank. A returning bank (a) Acceptance of returned checks. A depositary bank that is unable to identify the depositary bank with shall accept returned checks and written notices of respect to a returned check may send the returned nonpayment— check to— (1) At a location at which presentment of checks for (1) Any collecting bank that handled the check for forward collection is requested by the depositary forward collection if the returning bank was not a bank; and collecting bank with respect to the returned check; (2) (i) At a branch, head office, or other location or consistent with the name and address of the bank (2) A prior collecting bank, if the returning bank in its indorsement on the check; was a collecting bank with respect to the returned (ii) If no address appears in the indorsement, at a check; branch or head office associated with the routing even if that collecting bank does not agree to handle number of the bank in its indorsement on the the returned check expeditiously under section check; or 229.31(a). A returning bank sending a returned check (iii) If no routing number or address appears in its under this paragraph must advise the bank to which indorsement on the check, at any branch or head the check is sent that the returning bank is unable to office of the bank. identify the depositary bank. The expeditious return A depositary bank may require that returned checks requirements in paragraph (a) of this section do not be separated from forward collection checks. apply to return of a check under this paragraph. A (b) Payment. A depositary bank shall pay the returnreturning bank that receives a returned check from a ing or paying bank returning the check to it for the paying bank under section 229.30(b), but which is able amount of the check prior to the close of business on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All the banking day on which it received the check (6) Branch name or number of the depositary bank ("payment date") by— from its indorsement; (1) Debit to an account of the depositary bank on (7) Trace number associated with the indorsement the books of the returning or paying bank; of the depositary bank; and (2) Cash; (8) Reason for nonpayment. (3) Wire transfer; or (4) Any other form of payment acceptable to the The notice may include other information from the returning or paying bank; check that may be useful in identifying the check being provided that the proceeds of the payment are avail- returned and the customer, and, in the case of a able to the returning or paying bank in cash or by written notice, must include the name and routing credit to an account of the returning or paying bank on number of the depositary bank from its indorsement. If or as of the payment date. If the payment date is not a the paying bank is not sure of an item of information, banking day for the returning or paying bank or the it shall include the information required by this paradepositary bank is unable to make the payment on the graph to the extent possible, and identify any item of payment date, payment shall be made by the next day information for which the bank is not sure of the that is a banking day for the returning or paying bank. accuracy with question marks. These payments are final when made. (c) Acceptance of notice. The depositary bank shall (c) Misrouted returned checks and written notices of accept notices during its banking day— nonpayment. If a bank receives a returned check or (1) Either at the telephone or telegraph number of written notice of nonpayment on the basis that it is the its return check unit indicated in the indorsement, depositary bank, and the bank determines that it is not or, if no such number appears in the indorsement or the depositary bank with respect to the check or if the number is illegible, at the general purpose notice, it shall either promptly send the returned check telephone or telegraph number of its head office or or notice to the depositary bank directly or by means the branch indicated in the indorsement; and of a returning bank agreeing to handle the returned (2) At any other number held out by the bank for check expeditiously under section 229.31(a), or send receipt of notice of nonpayment, and, in the case of the check or notice back to the bank from which it was written notice, as specified in section 229.32(a). received. (d) Notification to customer. If the depositary bank (d) Charges. A depositary bank may not impose a receives a returned check or notice of nonpayment, it charge for accepting and paying checks being returned shall send notice to its customer of the facts by to it. midnight of the banking day following the banking day on which it received the returned check or notice, or Section 229.33—Notice of nonpayment. within a longer reasonable time. (e) Depositary bank without accounts. The require- (a) Requirement. If a paying bank determines not to ments of this section do not apply to checks deposited pay a check in the amount of $2,500 or more, it shall in a depositary bank that does not maintain accounts. provide notice of nonpayment such that the notice is received by the depositary bank by 4:00 p.m. (local time) on the second business day following the bank- Section 229.34—Warranties by paying bank ing day on which the check was presented to the and returning bank. paying bank. If the day the paying bank is required to provide notice is not a banking day for the depositary bank, receipt of notice on the depositary bank's next (a) Warranties. Each paying bank or returning bank banking day constitutes timely notice. Notice may be that transfers a returned check and receives a settleprovided by any reasonable means, including the ment or other consideration for it warrants to the returned check, a writing (including a copy of the transferee returning bank, to any subsequent returning check), telephone, Fedwire, telex, or other form of bank, to the depositary bank, and to the owner of the telegraph. check,that— (b) Content of notice. Notice must include the— (1) The paying bank returned the check within its (1) Name and routing number of the paying bank; deadline under the U.C.C., Regulation J (12 C.F.R. (2) Name of the payee(s); Part 210), or section 229.30(c) of this part; (3) Amount; (2) It is authorized to return the check; (4) Date of the indorsement of the depositary bank; (3) The check has not been materially altered; and (5) Account number of the customer(s) of the de- (4) In the case of a notice in lieu of return, the positary bank; original check has not and will not be returned. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

492 Federal Reserve Bulletin • July 1988 These warranties are not made with respect to checks from the bank with which it settled for the check by drawn on the Treasury of the United States, a state, or revoking the settlement, charging back any credit a unit of general local government. given to an account, or obtaining a refund. A bank may (b) Warranty of notice of nonpayment. Each paying have the rights of a holder with respect to each check bank warrants to the transferee bank, to any subse- it handles. quent transferee bank, to the depositary bank, and to (c) Indorsement by a bank. After a check has been the owner of the check that— indorsed by a bank, only a bank may acquire the rights (1) The paying bank returned or will return the of a holder— check within its deadline under the U.C.C., Regu- (1) Until the check has been returned to the person lation J (12 C.F.R. Part 210), or section 229.30(c) of initiating collection; or this part; (2) Until the check has been specially indorsed by a (2) It is authorized to send the notice; and bank to a person who is not a bank. (3) The check has not been materially altered. (d) Indorsement for depositary bank. A depositary bank may arrange with another bank to apply the other These warranties are not made with respect to checks bank's indorsement as the depositary bank indorsedrawn on a state or a unit of general local government. ment, provided that any indorsement of the depositary (c) Damages. Damages for breach of these warranties bank on the check avoids the area reserved for the shall not exceed the consideration received by the depositary bank indorsement as specified in Appenpaying or returning bank, plus finance charges and dix D. The other bank indorsing as depositary bank is expenses related to the returned check, if any. considered the depositary bank for purposes of Sub- (d) Tender of defense. If a returning bank is sued for part C of this part. breach of a warranty under this section, it may give a prior returning bank or the paying bank written notice Section 229.36—Presentment of checks. of the litigation, and the bank notified may then give similar notice to any other prior returning bank or the paying bank. If the notice states that the paying or (a) Payable through and payable at checks. A check returning bank notified may come in and defend, and payable at or through a paying bank is considered to be that if the paying or returning bank notified does not do drawn on that bank for purposes of the expeditious so, it will in any action against it by the paying or return and notice of nonpayment requirements of this returning bank giving the notice be bound by any subpart. determination of fact common to the two litigations, (b) Receipt at bank office or processing center. A then unless after seasonable receipt of the notice the check is considered received by the paying bank when paying or returning bank notified does come in and it is received: defend, it is so bound. (1) At a location to which delivery is requested by the paying bank; Section 229.35—Indorsements. (2) At an address of the bank associated with the routing number on the check, whether in magnetic (a) Indorsement standards. A bank (other than a ink or in fractional form; paying bank) that handles a check during forward (3) At any branch or head office, if the bank is collection or a returned check shall indorse the check identified on the check by name without address; or in accordance with the indorsement standard set forth (4) At a branch, head office, or other location conin Appendix D to this part. sistent with the name and address of the bank on the (b) Liability of bank handling check. A bank that check if the bank is identified on the check by name handles a check for forward collection or return is and address. liable to any bank that subsequently handles the check (c) Truncation. A bank may present a check to a to the extent that the subsequent bank does not paying bank by transmission of information describing receive payment for the check because of suspension the check in accordance with an agreement with the of payments by another bank or otherwise. This para- paying bank. A truncation agreement may not extend graph applies whether or not a bank has placed its return times or otherwise vary the requirements of this indorsement on the check. This liability is not affected part with respect to parties interested in the check that by the failure of any bank to exercise ordinary care, are not party to the agreement. but any bank failing to do so remains liable. A bank (d) Liability of bank during forward collection. Settleseeking recovery against a prior bank shall send notice ments between banks for the forward collection of a to that prior bank reasonably promptly after it learns check are final when made; however, a collecting bank the facts entitling it to recover. A bank may recover handling a check for forward collection may be liable Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All to a prior collecting bank, including the depositary (d) Responsibility for back of check. A paying bank is bank, and the depositary bank's customer. responsible for damages under paragraph (a) of this section to the extent that the condition of the back of Section 229.37—Variation by agreement. a check when issued by it or its customer adversely affects the ability of a bank to indorse the check legibly The effect of the provisions of Subpart C may be in accordance with section 229.35. A depositary bank varied by agreement, except that no agreement can is responsible for damages under paragraph (a) of this disclaim the responsibility of a bank for its own lack of section to the extent that the condition of the back of good faith or failure to exercise ordinary care, or can a check arising after the issuance of the check and limit the measure of damages for such lack or failure; prior to acceptance of the check by it adversely affects but the parties may determine by agreement the stan- the ability of a bank to indorse the check legibly in dards by which such responsibility is to be measured if accordance with section 229.35. Responsibility under such standards are not manifestly unreasonable. this paragraph shall be treated as negligence of the paying or depositary bank for purposes of paragraph Section 229.38—Liability. (c) of this section. (e) Timeliness of action. If a bank is delayed in acting (a) Standard of care; liability; measure of damages. A beyond the time limits set forth in this subpart because bank shall exercise ordinary care and act in good faith of interruption of communication or computer faciliin complying with the requirements of this subpart. A ties, suspension of payments by a bank, war, emerbank that fails to exercise ordinary care or act in good gency conditions, failure of equipment, or other cirfaith under this subpart may be liable to the depositary cumstances beyond its control, its time for acting is bank, the depositary bank's customer, the owner of a extended for the time necessary to complete the accheck, or another party to the check. The measure of tion, if it exercises such diligence as the circumstances damages for failure to exercise ordinary care is the require. amount of the loss incurred, up to the amount of the (f) Exclusion. Section 229.21 of this part and sections check, reduced by the amount of the loss that party 611(a), (b), and (c) of the Act (12 U.S.C. 4010(a), (b), would have incurred even if the bank had exercised and (c)) do not apply to this subpart. ordinary care. A bank that fails to act in good faith (g) Jurisdiction. Any action under this subpart may be under this subpart may be liable for other damages, if brought in any United States district court, or in any any, suffered by the party as a proximate conse- other court of competent jurisdiction, arid shall be quence. Subject to a bank's duty to exercise ordinary brought within one year after the date of the occurcare or act in good faith in choosing the means of rence of the violation involved. return or notice of nonpayment, the bank is not liable (h) Reliance on Board rulings. No provision of this for the insolvency, neglect, misconduct, mistake, or subpart imposing any liability shall apply to any act default of another bank or person, or for loss or done or omitted in good faith in conformity with any destruction of a check or notice of nonpayment in rule, regulation, or interpretation thereof by the transit or in the possession of others. This section does Board, regardless of whether the rule, regulation, or not affect a paying bank's liability to its customer interpretation is amended, rescinded, or determined under the U.C.C. or other law. by judicial or other authority to be invalid for any (b) Paying bank's failure to make timely return. If a reason after the act or omission has occurred. paying bank fails both to comply with section 229.30(a) and to comply with the deadline for return under the Section 229.39—Insolvency of bank. U.C.C., Regulation J (12 C.F.R. Part 210), or section 229.30(c) in connection with a single nonpayment of a check, the paying bank shall be liable under either (a) Duty of receiver. A check or returned check in, or section 229.30(a) or such other provision, but not both. coming into, the possession of a paying, collecting, (c) Comparative negligence. If a person, including a depositary, or returning bank that suspends payment, bank, fails to exercise ordinary care or act in good and which is not paid, shall be returned by the refaith under this subpart in indorsing a check (section ceiver, trustee, or agent in charge of the closed bank to 229.35), accepting a returned check or notice of non- the bank or customer that transferred the check to the payment (sections 229.32(a) and 229.33(c)), or other- closed bank. wise, the damages incurred by that person under (b) Preference against paying or depositary bank. If a section 229.38(a) shall be diminished in proportion to paying or depositary bank finally pays a check or the amount of negligence or bad faith attributable to returned check and suspends payment without making that person. a settlement for the check with the prior bank which is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

494 Federal Reserve Bulletin • July 1988 or becomes final, the prior bank has a preferred claim and extended MICR capture services as permanent against the paying or depositary bank. Federal Reserve Bank services. (c) Preference against collecting, paying, or returning New services to facilitate expedited returns will be bank. If a collecting, paying, or returning bank re- offered beginning September 1, 1988. Check truncaceives settlement from a subsequent bank for a check tion and extended MICR capture are authorized as or returned check, which settlement is or becomes permanent Federal Reserve Bank services beginning final, and suspends payments without making a settle- July 15, 1988. ment for the check with the prior bank, which is or becomes final, the prior bank has a preferred claim against the collecting or returning bank. ORDERS ISSUED UNDER BANK HOLDING (d) Finality of settlement. If a paying or depositary COMPANY ACT bank gives, or a collecting, paying, or returning bank gives or receives, a settlement for a check or returned Orders Issued Under Section 3 of the Bank check and thereafter suspends payment, the suspen- Holding Company Act sion does not prevent or interfere with the settlement becoming final if such finality occurs automatically Ballston Bancorp, Inc. upon the lapse of a certain time or the happening of Arlington, Virginia certain events. Order Approving Formation of a Bank Holding Section 229.40—Effect of merger transaction. Company For purposes of this subpart, two or more banks that Ballston Bancorp, Inc., Arlington, Virginia have engaged in a merger transaction may be consid- ("Ballston"), has applied for the Board's approval ered to be separate banks for a period of one year pursuant to section 3(a)(1) of the Bank Holding Comfollowing the consummation of the merger transaction. pany Act, as amended (12 U.S.C. § 1842(a)(1)) ("BHC Act"), to become a bank holding company by Section 229.41—Relation to state law. acquiring all of the voting shares of Bank of Northern Virginia, Arlington, Virginia ("Bank").1 The provisions of this subpart supersede any inconsis- Notice of the application, affording interested pertent provisions of the U.C.C. as adopted in any state, sons an opportunity to submit comments, has been or of any other state law, but only to the extent of the given in accordance with section 3(b) of the BHC Act inconsistency. (12 U.S.C. § 1842(b)). The time for filing comments has expired, and the Board has considered the appli- Section 229.42—Exclusions. cation and all comments received in light of the factors set forth in section 3(c) of the BHC Act (12 U.S.C. The expeditious return (sections 229.30(a) and § 1842(c)). 229.31(a)) and notice of nonpayment (section 229.33) Ballston, a non-operating corporation with no subrequirements of this subpart do not apply to a check sidiaries, was organized for the purpose of becoming a drawn upon the United States Treasury, to a U.S. bank holding company by acquiring Bank, a de novo Postal Service money order, or to a check drawn on a bank. Bank will operate in the District of Columbia state or a unit of general local government that is not banking market.2 The principals of Ballston are not payable through or at a bank. affiliated with any other depository institutions in this market. Consummation of this proposal would not result in any adverse effects upon competition or NOTICE REGARDING FEDERAL RESERVE BANK increase in the concentration of banking resources in SERVICES The Board of Governors has adopted a proposal for 1. Bank has also filed an application to become a member of the Federal Reserve System, pursuant to section 9 of the Federal Reserve the Federal Reserve Banks to offer several new re- Act, 12 U.S.C. § 321, et seq. turned check services to depository institutions. These 2. The District of Columbia banking market is defined as the Washington, D.C., Ranally Metropolitan Area, which comprises the services will assist depository institutions in comply- District of Columbia; all of Arlington, Fairfax and Prince William ing with the new rules for the collection and return of Counties; and portions of Fauquier, Loudon and Stafford Counties; checks that the Board has, in its Regulation CC, the cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park in Virginia; and substantially all of Montgomery, Prince adopted to implement the Expedited Funds Availabil- Georges and Charles Counties, plus small portions of Anne Arundel, ity Act. The Board has also approved check truncation Calvert, Carroll, Frederick, and Howard Counties in Maryland. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All any relevant area. Accordingly, the Board concludes Although Ballston will incur debt in connection with that competitive considerations under the BHC Act this proposal, it appears that Ballston will be able to are consistent with approval. service its debt while maintaining capital levels in the As the Board has previously indicated, a bank bank holding company that are consistent with its holding company should serve as a source of financial status as a newly formed organization, particularly in and managerial strength to its subsidiary banks. Con- light of the commitments made by Ballston and its sistent with this policy, the Board closely examines principals. Upon consummation, Ballston's debt-tothe condition of an applicant in each case with this equity ratio will not exceed 100 percent. Ballston has consideration in mind. In addition, in acting on appli- also taken measures to assure that its initial debt-tocations for membership in the Federal Reserve System equity ratio will not increase and that it will have the the Board is required to consider the financial condi- ability to meet its debt service requirements without tion of the applying bank, including the adequacy of its additional borrowings and without reliance on cash capital structure and its future earnings prospects.3 flows of any kind from Bank until Bank establishes a Accordingly, the Board has approved applications for record of safe and sound operation.7 Federal Reserve membership subject to the condition In considering the adequacy of Bank's capital structhat the net capital and surplus funds of the applying ture, the Board notes that start-up capital in a de novo bank be maintained at a level that is adequate in state member bank should be reasonable in the context relation to the character and condition of its assets and of its location, business plan and competitive environto its deposit liabilities and other corporate ment. Specifically, the Board believes that a bank's responsibilities.4 For the reasons explained below, the initial capital would be sufficient if on the basis of Board views the financial and managerial resources projected asset growth and earnings performance, the and future prospects of Ballston and Bank as consis- bank's primary capital-to-total assets ratio can be tent with approval. maintained at an adequate level through three years of The Board has previously cautioned against the operation without the need for further capital injecassumption of substantial amounts of debt in a bank tions. In this case, Bank will have initial capital of $6.7 holding company formation because of concern that million and the record reflects that Bank is likely to the holding company would not have the financial maintain a primary capital-to-total assets ratio of at flexibility to meet unexpected problems of its subsid- least 10 percent through the end of its third year. The iary bank or would be forced to place substantial Board finds that under these circumstances, Bank's demands on its subsidiary bank to meet debt servicing initial capital will be reasonable and supports approval requirements.5 Nevertheless, the Board has recog- of the application. nized that the transfer of ownership of small existing In addition, because Bank will provide additional banks often requires the use of acquisition debt.6 banking facilities in its community, considerations Accordingly, the Board has approved such applica- relating to the convenience and needs of the commutions involving debt on the condition that the small nities to be served lend weight toward approval. one-bank holding company clearly demonstrates its The Board has also considered the factors it is ability to become a source of strength to its subsidiary required to consider when approving applications for bank within a relatively short period of time, by membership in the Federal Reserve System pursuant reducing its debt-to-equity ratio to a reasonable level to section 9 of the Federal Reserve Act (12 U.S.C. within 12 years of consummation. In cases involving § 322) and section 6 of the Federal Deposit Insurance the formation of a small one-bank holding company Act (12 U.S.C. § 1816), and finds those factors to be through the acquisition of a de novo bank, however, consistent with approval. Based on the foregoing and the Board has indicated that, due to the absence of any other facts of record, including the commitments made record of earnings or growth, further scrutiny is re- by Ballston and its principals, the Board has deterquired. In such cases, the Board will pay particular mined that the applications should be, and hereby are, attention to the amount of debt involved and the bank approved. The acquisition shall not be made before the holding company's ability to service the debt. thirtieth calendar day following the effective date of 7. In order to assure that Ballston's debt servicing requirements can 3. 12 U.S.C. §§ 322, 1814, 1816. be met without additional borrowings or cash flows from Bank, 4. See 12 C.F.R. § 208.7. Ballston has established a cash reserve that should be sufficient to 5. See Holcomb Bancshares, Inc., 69 FEDERAL RESERVE BULLETIN meet debt servicing requirements during its first two years of opera- 804 (1983). tion. Ballston has also obtained commitments for the injection of 6. Federal Reserve Board Policy Statement for Formation of Small additional equity to support its debt-to-equity ratio or to meet debt One-Bank Holding Companies, 12 C.F.R. § 225, Appendix B, service requirements if the cash reserves have been exhausted and if F.R.R.S. H 4-855. Bank is not able to provide dividends to its parent at that time. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

496 Federal Reserve Bulletin • July 1988 this Order, or later than three months after the effec- company.4 Massachusetts law requires, however, that tive date of this Order, and Bank shall be opened for the acquiring bank holding company obtain approval business not later than six months after the effective for the acquisition from the Massachusetts Board of date of this Order. These time periods may be ex- Bank Incorporation ("Massachusetts Board"). Based tended for good cause by the Board or by the Federal on the foregoing, the Board has determined that the Reserve Bank of Richmond, pursuant to delegated proposed acquisition is specifically authorized by the authority. statute laws of Massachusetts and thus Board ap- By order of the Board of Governors, effective proval is not prohibited by the Douglas Amendment, May 23, 1988. subject to Applicant's obtaining approval from the Massachusetts Board. Voting for this action: Chairman Greenspan and Governors Applicant is the fourth largest commercial banking Johnson, Seger, Angell, Heller, and Kelley. organization in Rhode Island, controlling deposits of approximately $1.6 billion, representing approxi- WILLIAM W. WILES mately 11.2 percent of the deposits in commercial Secretary of the Board banking organizations in the state.5 Bank is the 93rd largest commercial banking organization in Massachu- Citizens Financial Group, Inc. setts, controlling deposits of $175 million, representing Providence, Rhode Island less than one percent of the deposits in the state. Bank operates in the New Bedford banking market.6 Order Approving Acquisition of a Bank The principals of Applicant are not associated with any of the banking organizations in this market. Con- Citizens Financial Group, Inc., Providence, Rhode summation of this proposal would not result in any Island ("Applicant"), a bank holding company within adverse effects upon competition or increase the conthe meaning of the Bank Holding Company Act (the centration of banking resources in any relevant mar- "BHC Act") (12 U.S.C. § 1841 et seq.), has applied ket. Accordingly, the Board concludes that competifor the Board's approval pursuant to section 3(a)(3) of tive considerations under the BHC Act are consistent the BHC Act, to acquire all of the voting shares of with approval. Fairhaven Savings Bank, Fairhaven, Massachusetts In evaluating the financial resources of Applicant ("Bank"), an FDIC-insured savings bank.1 and Bank, the Board has taken into consideration the Notice of the application, affording interested per- fact that Bank engages through a subsidiary in real sons an opportunity to submit comments, has been estate investment and development activities authopublished (53 Federal Register 3,789 (1988)). The time rized pursuant to state law. The Board notes that the for filing comments has expired, and the Board has Competitive Equality Banking Act of 1987 ("CEBA") considered the application and all comments received amended the BHC Act to provide that "notwithin light of the factors set forth in section 3(c) of the standing any other provision of [the BHC] Act, any BHC Act. qualified savings bank which is a subsidiary of a bank Section 3(d) of the BHC Act (12 U.S.C. § 1842(d)), holding company may engage, directly or through a the Douglas Amendment, prohibits the Board from subsidiary, in any activity in which such savings bank approving an application by a bank holding company may engage (as a state-chartered savings bank) pursuto acquire control of any bank located outside of the ant to express, incidental or implied powers under any bank holding company's home state unless the acqui- statute or regulation, or under any judicial interpretasition is "specifically authorized by the statute laws of tion of any law, of the State in which such savings the state in which such bank is located, by language to bank is located."7 Under this provision, a qualified that effect and not merely by implication."2 The Board savings bank may engage directly or through a subsidhas previously determined that Massachusetts law3 iary in any activity permitted by state law for the authorizes a Rhode Island bank holding company to savings bank to conduct as a savings bank, even acquire a Massachusetts bank or bank holding 4. Fleet Financial Group, Inc., 70 FEDERAL RESERVE BULLETIN 1. As an FDIC-insured institution, Bank would qualify as a "bank" 834 (1984). under section 2(c) of the BHC Act, as amended by section 101(a) of 5. State data are as of June 30, 1987. the Competitive Equality Banking Act of 1987, Pub. L. No. 100-86, 6. The New Bedford banking market is approximated by the New 100 Stat. 552, 554 (1987) (to be codified at 12 U.S.C. § 1841(c)). Bedford RMA plus Wereham and that portion of Freetown not 2. A bank holding company's home state is the state in which the included in the New Bedford RMA. operations of the bank holding company's subsidiary banks were 7. 101 Stat, at 561-562 (to be codified at 12 U.S.C. § 1842(f)). This principally located on July 1, 1966, or on the date on which the exception applies only to "qualified savings banks." A savings bank company became a bank holding company, whichever is later. loses its qualification if it is controlled by a bank holding company that 3. Mass. Ann. Laws Ch. 167A, § 2 (1987). has less than 70 percent of its assets invested in savings banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All though the Board has not determined that the activity of the bank holding company and bank involved, the is closely related to banking under section 4(c)(8) of Board has considered the risk to Applicant and Bank the BHC Act and the activity is thus not generally of the real estate development activities conducted by permissible for bank holding companies under the Bank through its nonbank subsidiary. Based upon its BHC Act. review of the facts in this case as well as certain As the Board noted in Wake Bancorp, Inc., 73 commitments by Applicant regarding its capital posi- FEDERAL RESERVE BULLETIN 925 (1987) ("Wake"), tion and that of Bank, the Board concludes that the while this provision of CEBA authorizes qualified financial and managerial resources and future prossavings banks to conduct activities that may not be pects of Applicant and Bank are consistent with appermissible for bank holding companies under the proval of the proposal. In reaching this decision, the BHC Act, CEBA does not negate the Board's respon- Board has relied upon Applicant's commitment to sibility in the context of every bank holding company comply with the results of the Board's real estate application to evaluate the financial resources of the development rulemaking. The Board's approval of this bank holding company and the bank to be acquired.8 application is conditioned upon compliance with these In addition, under the International Lending Supervi- commitments. sion Act ("ILSA"), the Board is responsible for Convenience and needs considerations also are conensuring that bank holding companies and their non- sistent with approval. bank subsidiaries maintain adequate levels of capital.9 Based on the foregoing and other facts of record, the In this regard, the Board notes that the Senate Report Board has determined that the application should be, on this provision of CEBA states that, while it was and hereby is, approved, subject to Applicant's obintended to allow qualified savings banks to engage in taining approval from the Massachusetts Board. The state authorized activities, "[t]he Board would, how- acquisition of Bank shall not be consummated before ever, be authorized under its general supervisory the thirtieth calendar day following the effective date authority over bank holding companies and their sub- of this Order, or later than three months after the sidiaries to prevent unsafe and unsound activities; or effective date of this Order, unless such period is to require the bank holding company to maintain extended for good cause by the Board or by the higher levels of capital to support such activities."10 Federal Reserve Bank of Boston, pursuant to dele- In Wake, the Board stated that it had serious reser- gated authority. vations about such applications and would examine By order of the Board of Governors, effective the numerous issues raised by that application in the May 2, 1988. context of the pending real estate investment and development proposal.11 The Board also asked for Voting for this action: Chairman Greenspan and Governors comment on certain additional measures under consid- Johnson, Seger, Angell, Heller, and Kelley. eration to ensure that banking organizations and the resources of the federal safety net are appropriately JAMES MCAFEE insulated from the risks of real estate development Associate Secretary of the Board activities.12 In the interim, the Board stated that it would continue to evaluate applications involving Napa Valley Bancorp qualified savings banks on a case by case basis. Napa, California As part of the Board's analysis in this case, including its evaluation of the capital and financial resources Order Approving the Acquisition of Banks Napa Valley Bancorp, Napa, California ("Napa 8. 12 U.S.C. § 1842(c). 9. 12 U.S.C. §§ 3901-3912. Valley"), a bank holding company within the meaning 10. S. Rep. No. 100-19, 100th Cong., 1st Sess. 36 (1987). of the Bank Holding Company Act of 1956, as 11. 52 Federal Register 543,551 (1987). amended (the "Act") (12 U.S.C. § 1841 et seq.), has 12. These included proposals to determine that a real estate subsidiary of a bank, as well as, under certain circumstances, a partner or applied for the prior approval of the Board under co-venturer of such a subsidiary, would be an "affiliate" of the bank section 3 of the Act (12 U.S.C. § 1842) to acquire for purposes of section 23A of the Federal Reserve Act (12 U.S.C. 50.01 percent of Sonoma Valley Bank, Sonoma, Cali- § 371c(b)(2)), thereby regulating transactions between the bank and its real estate subsidiaries and partners; to impose special capital require- fornia ("Sonoma Valley"), and all of the voting shares ments on bank holding companies and their nonbank subsidiaries of Bank of Lake County, Lakeport, California ("Lake engaged in real estate development activities; and to require, as a matter of safety and soundness and as a condition of its approval for County"), both proposed new banks. bank holding companies to acquire qualified savings banks, that new Notice of the applications, affording interested perreal estate development investments by such organizations be made sons an opportunity to submit comments, has been by the parent bank holding company or its direct nonbank subsidiaries rather than by the bank or subsidiaries of the bank. duly published. The time for filing comments has Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

498 Federal Reserve Bulletin • July 1988 expired, and the Board has considered the applications Board's approval of these applications is conditioned and all comments received in light of the factors set upon compliance with these commitments. The banks forth in section 3(c) of the Act. will provide additional full service banking facilities in Napa Valley is the 57th largest commercial banking their communities, and thus considerations relating to organization in California, with deposits of $223.0 convenience and needs of the communities to be million, representing less than one percent of total served lend weight toward approval. deposits in commercial banking organizations in the Based on the foregoing and other facts of record, state.1 Both Sonoma Valley, which will compete in the and in reliance on the commitments made by Appli- Sonoma banking market,2 and Lake County, which cant, the Board has determined that the applications will compete in the Lake County banking market,3 are should be, and hereby are, approved. The transactions proposed new banks. Lake County will acquire three shall not be consummated before the thirtieth day after bank branches of Westamerica Bancorporation, San the effective date of the Order, or later than three Rafael, California, located in the Lake County banking months after the effective date of this Order, and the market, and Lake County will have total assets be- banks to be acquired shall be opened for business not tween $56 million and $61 million upon commence- later than six months after the effective date of this ment of operations. Napa Valley currently does not Order, unless such latter periods are extended for compete in either the Sonoma or Lake County banking good cause by the Board, or by the Federal Reserve markets. In light of these facts and all other facts of Bank of San Francisco pursuant to delegated authorrecord, consummation of the proposed transactions ity. would have no adverse effects on competition or on By Order of the Board of Governors, effective the concentration of banking resources in any relevant May 4, 1988. banking market. Applicant's existing bank subsidiary, Napa Valley Voting for this action: Chairman Greenspan and Governors Bank, engages through a wholly owned subsidiary in Johnson, Seger, Angell, Heller, and Kelley. real estate investment activities authorized for state banks pursuant to California law. The Board has JAMES MCAFEE previously stated that it has serious reservations about Associate Secretary of the Board applications involving banks engaged in real estate activities and would examine the issues raised by these Concurring Statement of Governor Seger applications in the context of the pending real estate investment and development proposal.4 In the interim, I concur in the Board's approval of these applications. the Board has stated that it will continue to evaluate In this case, Applicant engages, through a nonbank these applications on a case-by-case basis. company owned by its existing bank subsidiary, in real Based upon its review of the facts in this case as well estate investment activities authorized for state banks as certain commitments by Applicant regarding the under California law. In my view, the Board should level of its real estate investment activities and the not interfere with the authority granted banks under state law to conduct real estate investment or other capital position of Applicant and its bank subsidiaries, nonbanking activities. Thus, I believe the Board's the Board concludes that the financial and managerial acceptance of commitments limiting these activities is resources and future prospects of Applicant, Sonoma inconsistent with the authority of the states in this Valley and Lake County are consistent with approval of the proposal.5 In reaching this decision, the Board area. Accordingly, I would approve these applications without the commitments relied on by the Board has relied upon Applicant's commitments, in particulimiting the real estate investment activities of Applilar its commitment to comply with the results of the cant and its banks. Board's real estate development rulemaking. The May 4, 1988 1. All banking data are as of December 31, 1986. 2. The Sonoma banking market consists of Sonoma County, Cali- Saban, S.A. fornia. Panama City, Republic of Panama 3. The Lake County banking market consists of Lake County, California. 4. 52 Federal Register 543 (1987); 52 Federal Register 42,301 (1987). Order Approving Acquisition of Additional Shares of 5. The Board has approved a small number of similar cases involving commercial banks that have limited the level and scope of a Bank Holding Company their real estate investment activities and agreed to maintain adequate capital and conform their activity to the Board's regulations and its Saban, S.A., Panama City, Republic of Panama, a rulemaking proceeding in this area. See, e.g., Security Pacific Corporation, 72 FEDERAL RESERVE BULLETIN 800 (1986). bank holding company within the meaning of the Bank Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All Holding Company Act (12 U.S.C. § 1841 et seq.) (the -ascertain community needs through a "grassroots" "Act"), has applied for the Board's approval under outreach program which will be developed by an section 3(a)(3) of the Act (12 U.S.C. § 1842(a)(3)) to experienced individual; acquire an additional 4.82 percent of Republic New -evaluate existing products and address changing York Corporation, New York, New York ("Re- needs through analysis of market penetration by public"), thereby increasing its ownership to 37.94 product and review of consumer and small business percent. lending activity; Notice of the application, affording an opportunity -develop and introduce new products such as credit for interested persons to submit comments, has been cards, student loans, subsidized loans, and small published (52 Federal Register 48,323 (1987)). The business loans and deposit accounts; and time for filing comments has expired, and the Board -evaluate services offered and address changing needs has considered the application and all comments re- through a market research project and a program for ceived in light of the factors set forth in section 3(c) of the hearing impaired. the Act (12 U.S.C. § 1842(c)). Applicant, through Republic, is the 12th largest With regard to "Housing Services," Republic will: commercial banking organization in New York, with -promote existing mortgage products through tradiapproximately $6.8 billion in deposits, controlling ap- tional and special advertising programs; proximately 2.8 percent of the total deposits in com- -ascertain community needs through work with New mercial banking organizations in New York.1 Because York City housing offices; Applicant is only increasing its share ownership in -evaluate products and address changing needs Republic, consummation of this proposal would not through analysis of mortgage applications, approved have a significant effect on the concentration of bank- and denied by census tract, review of investments in ing resources in New York or in any relevant banking government housing related securities, obtaining apmarket. proval to be a SONYMA lender, making available The financial and managerial resources of Applicant adjustable rate mortgages and no income check mortand Republic are consistent with approval. gages; In considering the convenience and needs of the -participate in housing development and redevelopcommunities to be served, the Board has taken into ment programs; and account the records of Applicant and Republic under -make funds available for participation in rehabilitathe Community Reinvestment Act ("CRA"), 12 tion projects and mortgage loans. U.S.C. § 2901 et seq.2 The Board notes that the Office of the Comptroller of the Currency ("OCC") has With regard to "CRA Compliance," Republic will: indicated that there are certain areas in which Repub- -revise its CRA statement, as needed; lic's lead bank, Republic National Bank of New York, -review and revise community delineations, as New York, New York, should improve its CRA per- needed; formance. In response, Republic and its subsidiary -provide employee training on CRA; banks have adopted a comprehensive corporate CRA -evaluate CRA compliance; plan. The plan provides specific goals in a number of -document CRA compliance; and areas. With regard to "Banking Services," the plan -revise its community action program. provides that Republic will: -promote services to its communities through regular In addition, Republic will submit to the Federal product advertising in mass media newspapers and Reserve Bank of New York semi-annual reports outlocally targeted publications, and through special lining the progress of Republic and its subsidiary advertising programs; banks in implementing this plan. Based on the forego- -develop employee understanding and awareness ing and all the facts of record, the Board concludes through written communications, formal training, in- that convenience and needs considerations are consisternal publications, and quarterly review meetings; tent with approval. Based on the foregoing and all the facts of record, the Board has determined that the application under 1. Banking data are as of June 30, 1987. This deposit data also section 3 of the Act should be and hereby is approved. includes the deposits of Republic's subsidiary savings bank, The The acquisition of the additional shares of Republic Williamsburgh Savings Bank, Brooklyn, New York. shall not be consummated before the thirtieth calendar 2. The CRA requires the Board, in its evaluation of a bank holding company application, to assess the record of an applicant in meeting day following the effective date of this Order, or later the credit needs of the entire community, including the low- and than 90 days after the effective date of this Order, moderate-income neighborhoods, consistent with safe and sound unless such period is extended for good cause by the operation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

500 Federal Reserve Bulletin • July 1988 Board or by the Federal Reserve Bank of New York, Applicant acquired Company on September 29, pursuant to delegated authority. 1987, as part of its acquisition of Company's parent, By order of the Board of Governors, effective Nesbitt Thomson, Inc., a Canadian holding company May 17, 1988. that engages through subsidiaries in securities underwriting and dealing outside the United States. As a Voting for this action: Chairman Greenspan and Governors condition to its acquisition of Company, Applicant Johnson, Seger, Angell, Heller, and Kelley. committed to the Board that Company would not engage in any activities without obtaining the appro- WILLIAM W. WILES priate Board authorizations. Applicant has filed this Secretary of the Board application to permit Company to resume activities in the United States that are permissible for bank holding Orders Issued Under Section 4 of the Bank companies. Holding Company Act Notice of the application, affording interested persons an opportunity to submit comments, has been The Bank of Montreal duly published (53 Federal Register 12,594 and 15,139 Toronto, Canada (1988)). The time for filing comments has expired, and the Board has considered the application and all Order Approving Application to Engage in Certain comments received in light of the public interest Securities and Financial Advisory Activities factors set forth in section 4(c)(8) of the BHC Act. Applicant, with total assets of approximately $61.6 The Bank of Montreal, Toronto, Canada ("Ap- billion,2 is the second largest bank in Canada. In the plicant"), a bank holding company within the meaning United States, Applicant owns all of the outstanding of the Bank Holding Company Act ("BHC Act"), has voting shares of Bankmont Financial Corp., New applied for the Board's approval under section 4(c)(8) York, New York, which is the holding company for of the BHC Act (12 U.S.C. § 1843(c)(8)) and section Harris Bankcorp, Chicago, Illinois. Applicant also 225.21(a) of the Board's Regulation Y (12 C.F.R. operates branches in Chicago and New York, an § 225.21(a)) to engage de novo through Nesbitt Thom- agency in Houston and a representative office in Los son Securities, Inc., New York, New York ("Com- Angeles. pany"), in: (1) underwriting and dealing in commercial paper to Underwriting and Dealing in Commercial a limited extent; Paper (2) acting as agent and advisor to issuers of commercial paper in connection with the placement of On April 30, 1987, the Board approved applications by commercial paper with institutional customers; Citicorp, J.P. Morgan and Bankers Trust to under- (3) providing brokerage and investment advisory write and deal in, through their bank-eligible securities services on a combined basis to institutional cus- underwriting subsidiaries, 1-4 family mortgagetomers and Company's affiliates; backed securities, municipal revenue bonds (and cer- (4) providing advice in connection with mergers and tain industrial development bonds) and (except for acquisitions, divestitures, loan syndications, inter- Citicorp) commercial paper.3 The Board concluded est rate swaps, interest rate caps and similar trans- that the underwriting subsidiaries would not be "enactions to unaffiliated financial and nonfinancial in- gaged principally" in underwriting or dealing in secustitutions; and rities within the meaning of section 20 of the Glass- (5) providing financial advice to the Canadian fed- Steagall Act,4 provided they derived no more than 5 eral and provincial governments, such as with re- percent of their total gross revenues from underwriting spect to the issuance of their securities in the United States.1 2. Asset data are as of January 31, 1988. Banking data are as of October 31, 1988. 3. Citicorp, J.P. Morgan & Co. Incorporated and Bankers Trust New York Corporation, 73 FEDERAL RESERVE BULLETIN 473 (1987) 1. Applicant has also applied to engage in providing discount ("Citicorp!Morgan/Bankers Trust"). The Board subsequently apbrokerage services; providing investment advice and research to proved similar applications by a number of other bank holding institutional customers and Company's affiliates; furnishing general companies. economic information and advice to institutional customers and 4. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) prohibits Company's affiliates; and underwriting and dealing in bank-eligible the affiliation of a member bank with "any corporation . . . engaged securities. The Board has previously determined that these activities principally in the issue, flotation, underwriting, public sale, or distriare generally permissible for bank holding companies. 12 C.F.R. bution at wholesale or retail or through syndicate participation of §§ 225.25(b)(15), (4)(iii), (4)(iv) and (16), respectively. stocks, bonds, debentures, notes, or other securities . . . . " Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All and dealing in the approved securities over any two- Private Placement of Commercial Paper year period and their underwriting and dealing activities did not exceed 5 percent of the market for each The Board has previously determined that commercial particular type of security involved.5 The Board fur- paper placement is closely related to banking. Bankers ther found that, subject to the prudential framework of Trust New York Corporation, 73 FEDERAL RESERVE limitations established in those cases to address the BULLETIN 138 (1987) ("Bankers Trust"). Applicant potential for conflicts of interest, unsound banking has proposed to place commercial paper in accordance practices or other adverse effects, the proposed under- with all of the terms and conditions of Bankers Trust writing and dealing activities were so closely related to with one exception. banking as to be a proper incident thereto within the Unlike Bankers Trust, Applicant has not proposed meaning of section 4(c)(8) of the BHC Act. Applicant any quantitative limitations on its placement activity. has proposed to conduct Company's underwriting and The Board in Bankers Trust ruled that commercial dealing in commercial paper in the same manner and to paper placement does not constitute underwriting or the same extent as previously approved by the Board distributing under the Glass-Steagall Act and this in the foregoing Orders. ruling was upheld by the U.S. Court of Appeals for the For the reasons set forth in the Board's Citicorp/ District of Columbia Circuit.6 Accordingly, since com- Morgan/Bankers Trust Order, the Board concludes mercial paper placement as proposed here does not that Applicant's proposal to engage through Company constitute underwriting, the Board does not believe in underwriting and dealing in commercial paper that quantitative limitations on the activity are neceswould not result in a violation of section 20 of the sary to ensure compliance with the Glass-Steagall Glass-Steagall Act and is closely related and a proper Act. incident to banking within the meaning of section 4(c)(8) of the BHC Act provided Applicant limits Investment Advice and Securities Brokerage on Company's activities as provided in that Order. Ac- a Combined Basis cordingly, the Board has determined to approve the underwriting application subject to all of the terms and The Board previously has determined that the comconditions established in the CiticorplMorganlBankers bined offering of investment advice with securities Trust Order. The Board hereby adopts and incorpo- brokerage services to institutional customers is closely rates herein by reference the reasoning and analysis related to banking and a proper incident thereto and contained in that Order. does not violate the Glass-Steagall Act. See, e.g., The Board's approval of this application extends National Westminster Bank PLC, 72 FEDERAL REonly to activities conducted within the limitations of SERVE BULLETIN 584 (1986) ("NatWest"); and Royal the CiticorplMorganlBankers Trust Order, including Bank of Canada, 74 FEDERAL RESERVE BULLETIN 334 the Board's reservation of authority to establish addi- (1988). That position has been upheld by the D.C. tional limitations to ensure that the subsidiary's activ- Circuit Court of Appeals in its affirmance of the ities are consistent with safety and soundness, con- NatWest Order, and the Supreme Court has declined flicts of interest and other relevant considerations to review the matter.7 under the BHC Act. Underwriting or dealing in com- Applicant has proposed to conduct its full service mercial paper in any manner other than as approved in brokerage activity in accordance with the limitations that Order is not within the scope of the Board's approved by the Board in Royal Bank of Canada. As approval and is not authorized for Company. in Royal Bank of Canada, Applicant proposes that Company be permitted to have management interlocks with Applicant, a foreign bank. There would be no management or employee interlocks, however, between Company and Applicant's U.S. banks, branches, or agencies. In addition, Applicant proposes 5. In this regard, the Board notes that the U.S. Court of Appeals for to exercise limited investment discretion at a customthe Second Circuit has upheld the Board's determination that the underwriting subsidiaries would not be engaged principally in ineligible securities underwriting and dealing under the above revenue limitation. Securities Industry Association v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988). The court, 6. Statement Concerning the Applicability of the Glass-Steagall however, stated that the 5 percent market share limitation was not Act to the Commercial Paper Placement Activities of Bankers Trust adequately supported by the facts of record. However, a petition for Company (June 4, 1985), ajfd, Securities Industry Association v. a writ of certiorari from that decision is pending and, as proposed, Board of Governors of the Federal Reserve System, 807 F.2d 1052 Company's underwriting and dealing activity would not exceed the (D.C. Cir. 1986), cert, denied, 107 S. Ct. 3228 (1987). market share limitation. In the event the Second Circuit's decision 7. Securities Industry Association v. Board of Governors of the becomes final, the Board will consider a petition by Applicant to Federal Reserve System, 821 F.2d 810 (D.C. Cir. 1987) cert, denied, modify the approved proposal. 108 S. Ct. 697 (1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

502 Federal Reserve Bulletin • July 1988 er's specific request as approved by the Board in J.P. decreased or unfair competition, conflicts of interests, Morgan & Co. Incorporated, 73 FEDERAL RESERVE unsound banking practices, concentration of re- BULLETIN 810 (1987). sources, or other adverse effects. Based on the foregoing and other facts of record, the Merger and Acquisition Advice to Unaffiliated Board has determined that the balance of public inter- Financial and Nonfinancial Institutions est factors it must consider under section 4(c)(8) of the BHC Act is favorable. Accordingly, the Board has Applicant has proposed that Company engage in cer- determined that the application should be, and hereby tain financial advisory activities for unaffiliated finan- is, approved. This determination is further subject to cial and nonfinancial institutions. The Board previ- all of the conditions set forth in the Board's Regulation ously has determined that, subject to certain Y, including those in sections 225.4(d) and 225.23(b), limitations, these financial advisory activities are per- and to the Board's authority to require modification or missible nonbanking activities for bank holding com- termination of the activities of the holding company or panies. Signet Banking Corporation, 73 FEDERAL RE- any of its subsidiaries as the Board finds necessary to SERVE BULLETIN 59 (1987). Applicant has committed assure compliance with the provisions and purposes of to limit Company's financial advisory activities as set the BHC Act and the Board's regulations and orders forth in that Order. issued thereunder, or to prevent evasion thereof. The Board notes that the Securities Industry Asso- Financial Advisory Services to Canadian ciation has sought judicial review by the Supreme Governmental Entities Court of the Citicorp/Morgan/Bankers Trust Order to which this Order pertains. The Board notes that the The Board has determined that Applicant's proposal Court of Appeals for the Second Circuit has stayed the to provide advice to Canadian governmental entities is effectiveness of that Order and subsequent ineligible closely related to banking. Bank of Nova Scotia, 74 securities underwriting orders pending judicial review. FEDERAL RESERVE BULLETIN 249 (1988). In light of the pendency of this litigation, the Board has determined that this Order should be stayed with Proper Incident to Banking respect to the commercial paper underwriting and dealing activity for such time as the stay of the prior With respect to the "proper incident" requirement, decisions is effective. section 4(c)(8) of the BHC Act requires the Board to By order of the Board of Governors, effective consider whether the performance of the activity by an May 25, 1988. affiliate of a holding company "can reasonably be expected to produce benefits to the public, such as Voting for this action: Chairman Greenspan and Governors greater convenience, increased competition, or gains Johnson, Seger, Angell, Heller, and Kelley. in efficiency that outweigh possible adverse effects, such as undue concentration of resources, decreased JAMES MCAFEE or unfair competition, conflicts of interests, or un- Associate Secretary of the Board sound banking practices." Northern Trust Corporation Consummation of Applicant's proposal would pro- Chicago, Illinois vide increased convenience to Company's customers and gains in efficiency. In addition, the Board expects that the de novo entry of Applicant into the market for Order Approving Application to Provide Investment these services would increase the level of competition Advisory Services on Stock and Bond Index Futures among providers of these services. Accordingly, the and Options on Such Futures Board has determined that the performance of the proposed activities by Company can reasonably be Northern Trust Corporation, Chicago, Illinois ("Apexpected to produce benefits to the public. plicant"), a bank holding company within the meaning The Board has also considered the potential adverse of the Bank Holding Company Act (12 U.S.C. § 1841 effects that may be associated with this proposal. The et seq.) ("BHC Act"), has applied pursuant to section Board believes that potential adverse effects are min- 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and imized by the fact that Company will conduct the § 225.21(a) of the Board's Regulation Y (12 C.F.R. proposed activities subject to the same conditions § 225.21(a)), to engage de novo through its wholly imposed by the Board in orders approving similar owned subsidiary, Northern Investment Management activities. Accordingly, the Board has determined that Company, Chicago, Illinois ("Company"), in providconsummation of the proposal is not likely to result in ing investment advice as a commodity trading advisor Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All ("CTA") registered with the Commodity Futures The Board has previously determined that providing Trading Commission ("CFTC") on futures contracts investment advisory services on certain futures con- (and options thereon) on broad-based stock and bond tracts on stock and municipal bond indexes and indexes traded on major commodity exchanges. Ap- options on such contracts is closely related to bankplicant has also proposed to provide investment advice ing. Citicorp, 73 FEDERAL RESERVE BULLETIN 220 through Company on certain other financial futures (1987); and Bankers Trust New York Corporation, 71 and options on such futures as permitted under section FEDERAL RESERVE BULLETIN 111 (1985). The pro- 225.25(b)(19) of the Board's Regulation Y, 12 C.F.R. posed activities of Company are similar to the above § 225.25(b)(19). Company will not execute or clear proposals previously approved by the Board. While futures contracts or options thereon, nor trade for its Applicant has requested authority to provide investown account. ment advice on a broader range of futures contracts Applicant currently engages through Company in and options thereon than previously approved, the providing investment and financial advice pursuant to Board believes that such a modification does not section 225.25(b)(4) of the Board's Regulation Y, 12 alter the activity to render it less closely related to C.F.R. § 225.25(b)(4). In addition, Applicant's wholly banking. Accordingly, the Board has determined owned subsidiary, Northern Futures Corporation, that Applicant's proposal is closely related to Chicago, Illinois ("NFC"), engages in the execution banking. and clearance of futures contracts and options on In order to approve this application, the Board is futures contracts for bullion, foreign exchange, gov- also required to determine that the performance of the ernment securities, certificates of deposit and other proposed activities by Applicant "can reasonably be money market instruments, pursuant to section expected to produce benefits to the public . . . that 225.25(b)(18) of the Board's Regulation Y, 12 C.F.R. outweigh possible adverse effects, such as undue § 225.25(b)(18). NFC also provides investment advice concentration of resources, decreased or unfair comon such futures and options on futures pursuant to petition, conflicts of interests, or unsound banking section 225.25(b)(19) of Regulation Y. In addition, the practices . . . ." (12 U.S.C. § 1843(c)(8)). Board has recently authorized NFC to execute and Consummation of Applicant's proposal would proclear certain stock and municipal bond index futures vide added convenience to Company's customers. In contracts and options thereon. Northern Trust Corpoaddition, the Board expects that the de novo entry of ration, 74 FEDERAL RESERVE BULLETIN 333 (1988). Applicant into the market for these services would Notice of the application, affording interested per- increase the level of competition among providers of sons an opportunity to submit comments, has been these services. Accordingly, the Board has determined duly published (53 Federal Register 12,191 (1988)). that the performance of the proposed activities by The time for filing comments has expired, and the Applicant can reasonably be expected to produce Board has considered the application and all com- benefits to the public. ments received in light of the public interest factors set The Board has also considered the potential adverse forth in section 4(c)(8) of the BHC Act. effects that may be associated with this proposal. It Applicant, with total consolidated assets of $9.3 does not appear that the proposed activities would billion, is the fourth largest banking organization in entail risks or conflicts of interests different from those Illinois.1 Applicant operates eight subsidiary banks considered in Bankers Trust or Citicorp. The Board and engages through certain of its subsidiaries in a views Applicant's proposal as an extension of Bankers variety of nonbanking activities. Trust and Citicorp that would not be likely to give rise Section 4(c)(8) of the BHC Act imposes a two-step to adverse effects given the framework of laws and test for determining the permissibility of nonbanking regulations within which Company will conduct its activities for bank holding companies: activities. Company will comply with the requirements (1) whether the activity is closely related to banking; of section 225.25(b)(19) of Regulation Y by limiting its and advisory services to financially sophisticated custom- (2) whether the activity is a "proper incident" to ers and by not trading for its own account. Company banking —that is, whether the proposed activity can will continue to conduct its activities in compliance reasonably be expected to produce benefits to the with the Investment Advisors Act of 1940 and the rules public that outweigh possible adverse effects. and regulations promulgated thereunder by the Securities and Exchange Commission. In addition, Company will register as a CTA with the CFTC and will join the National Futures Association, the industry self-regulatory organization. Finally, many clients of 1. Asset data are as of December 31, 1987. Banking data are as of June 30, 1987. Company are employee benefit trusts subject to the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

504 Federal Reserve Bulletin • July 1988 Employee Retirement Income Security Act of 1974 include the provision of certain securities-related serand the prohibited transactions of that act. vices currently conducted by its subsidiary bank, The Board believes that the above legal and regula- Sovran Bank, N.A.1 These activities are purchasing tory framework addresses the potential for adverse and selling as agent for its corporate and other institueffects stemming from this proposal. This potential is tional customers a limited range of securities, includfurther minimized by the fact that Company will ing commercial paper, collateralized mortgage obligaprovide advisory services only with respect to futures tions, money market preferred stock, and other contracts, and options thereon, on broad-based in- nonbank-eligible securities, and providing, on occadexes of stocks and bonds traded on major commodity sion, ancillary non-fee investment advice in connecexchanges, in addition to the commodities and instru- tion with the brokerage activity. For these customers, ments set forth in section 225.25(b)(19) of Regula- SIC would not broker equity securities, long-term tion Y. corporate debt securities, or traded options.2 Based on the foregoing and other facts of record, the Applicant, a multibank holding company, has total Board has determined that the balance of public inter- consolidated assets of approximately $14.6 billion.3 est factors it must consider under section 4(c)(8) of the Applicant also engages through certain subsidiaries in BHC Act is favorable. Accordingly, the Board has other nonbanking activities permissible for bank holddetermined that the application should be, and hereby ing companies. is, approved. This determination is further subject to Notice of the application, affording interested perall of the conditions set forth in the Board's Regulation sons an opportunity to submit comments on the pro- Y, including those in sections 225.4(d) and 225.23(b), posal, has been duly published (52 Federal Register and to the Board's authority to require modification or 42,040 (1987)). The time for filing comments has extermination of the activities of the holding company or pired, and the Board has considered the application any of its subsidiaries as the Board finds necessary to and all comments received in light of the public assure compliance with the provisions and purposes of interest factors set forth in section 4(c)(8) of the Act. the BHC Act and the Board's regulations and orders The Board has previously determined that the comissued thereunder, or to prevent evasion thereof. bined offering of investment advice with securities This transaction shall not be consummated later execution services to institutional customers from the than three months after the effective date of this same bank holding company subsidiary is closely Order, unless such period is extended for good cause related and a proper incident to banking under section by the Board, or by the Federal Reserve Bank of 4(c)(8) of the BHC Act and does not violate the Glass- Chicago, pursuant to delegated authority. Steagall Act.4 By order of the Board of Governors, effective May 23, 1988. 1. SIC previously has received authorization from the Board to: (1) provide discount securities brokerage services; (2) buy and sell, as Voting for this action: Chairman Greenspan and Governors agent on behalf of unaffiliated persons, options on securities issued or Johnson, Seger, Angell, Heller, and Kelley. guaranteed by the U.S. Government and its agencies, and options on U.S. and foreign money market instruments; (3) purchase and sell WILLIAM W. WILES gold and silver bullion and gold coins solely for the account of customers; (4) underwrite and deal in government obligations and Secretary of the Board money market instruments; (5) provide investment advice relating solely to government obligations and money market instruments; (6) Sovran Financial Corporation provide certain fiduciary services; (7) provide cash management services; and (8) provide certain investment advisory services. Norfolk, Virginia 2. SIC does broker such securities for retail individual customers, however, through a separate division. The personnel which broker such securities do not provide investment advice. Order Approving an Application to Provide Certain 3. Banking data are as of March 31, 1987. Securities-Related Services 4. National Westminister Bank PLC, et al., 72 FEDERAL RESERVE BULLETIN 584 (1986) ("'NatWest"); J. P. Morgan and Company, Inc. 73 FEDERAL RESERVE BULLETIN 810 (1987) ("J. P. Morgan"); Sovran Financial Corporation, Norfolk, Virginia, a Manufacturers Hanover Corporation,73 FEDERAL RESERVE BULLEbank holding company within the meaning of the Bank TIN 930 (1987) ('*Manufacturers Hanover"). The Board's NatWest Order has been upheld by the U.S. Court of Appeals for the District Holding Company Act of 1956, as amended (12 of Columbia. Securities Industry Association v. Board of Governors, U.S.C. § 1841 et seq.) (the "Act"), has applied for the 821 F.2d 810 (D.C. Cir. 1987), cert, denied, 56 U.S.L.W. 3451 (U.S. Jan. 11, 1988) (No. 87-562). Applicant will be offering these services Board's approval under section 4(c)(8) of the Act to corporate and other institutional customers. (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Applicant defines "corporate customers" to include "national Board's Regulation Y (12 C.F.R. § 225.23), to ex- corporate customers, as well as regional and local corporations, partnerships, proprietorships, and other business organizations that pand the activities of its subsidiary, Sovran Investregularly engage in transactions in securities." "Institutional customment Corporation, Richmond, Virginia ("SIC"), to ers" include "banks, savings and loan associations, insurance com- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All Applicant's proposal is consistent with the Board's filiate, and will not release confidential customer finanprevious decisions regarding this activity. Applicant cial information in its possession to any bank or has committed that SIC will not act as a principal or nonbank affiliate, without the customer's prior conbear the financial risk for any securities it brokers or sent. recommends. SIC will execute a transaction only at Based upon the foregoing and other considerations the direction of a customer and will not exercise reflected in the record, the Board has determined that discretion with respect to any customer account. SIC the public benefits associated with consummation of will fully disclose its dual role as securities broker and this proposal can reasonably be expected to outweigh investment adviser to its customers.5 SIC will hold possible adverse effects, and that the balance of the itself out as a separate and distinct corporation with its public interest factors that the Board is required to own properties, assets, liabilities, capital, books, and consider under section 4(c)(8) of the Act is favorable. records. All of SIC's notices, tickets, advice, confir- Accordingly, the application is hereby approved, submations, correspondence, and other documentation ject to the commitments made by Applicant and the will clearly indicate that SIC is a separate corporation conditions in this Order. This determination is further from its bank affiliates. SIC will specify in all customer subject to all of the conditions set forth in the Board's agreements that SIC is solely responsible for its con- Regulation Y, including those in sections 225.4(d) and tractual obligations and commitments. SIC will not 225.23(b), and to the Board's authority to require transmit advisory research or recommendations to the modification or termination of the activities of the commercial lending department of any affiliate. bank holding company or any of its subsidiaries as the Applicant has indicated that no officer or director of Board finds necessary to assure compliance with the its affiliate banks will serve as an officer or director of provisions and purposes of the Act and the Board's SIC. SIC will have certain management interlocks regulations and orders issued thereunder, or to prewith the parent holding company. vent evasion thereof. Applicant has, however, proposed a modification to This transaction shall not be consummated later the conduct of the proposed activities as approved in than three months after the effective date of this NatWest. SIC proposes to share certain confidential Order, unless such period is extended for good cause information with its affiliates, with the customer's by the Board, or by the Federal Reserve Bank of consent. In the Board's view and for the reasons set Richmond, pursuant to delegated authority. forth below, this modification does not alter the under- By order of the Board of Governors, effective lying rationale of the Board's decision in NatWest that May 3, 1988. the combined activities are closely related to banking or a proper incident thereto.6 Voting for this action: Chairman Greenspan and Governors According to Applicant's proposal, SIC would ex- Johnson, Seger, Angell, Heller, and Kelley. change customer lists with its affiliates. SIC would not generally permit the exchange of confidential informa- JAMES MCAFEE tion concerning its customers from its affiliated banks Associate Secretary of the Board to SIC, but would permit such exchange where such information might be used by SIC in making credit Orders Issued Under Sections 3 and 4 of the decisions with respect to particular customers. This Bank Holding Company Act information would be background financial information concerning the customer. Applicant has commit- Algemene Bank Nederland, N.V. ted that SIC will not request confidential customer Amsterdam, The Netherlands financial information from any bank or nonbank af- Order Approving Acquisition of a Bank Holding Company panies, credit unions and other financial organizations." These cate- Algemene Bank Nederland, N.V. ("Algemene"), gories are consistent with previous cases. Applicant does not propose to offer these services to individuals, as did the applicants in previous ABN/Stichting, both of Amsterdam, The Netherlands, cases. Therefore, Applicant will be servicing a less inclusive category ABN/LaSalle North America, Inc., and LaSalle Naof customers than the applicants in the previous cases. 5. Under the terms of Applicant's proposal, SIC would not charge tional Corporation, both of Chicago, Illinois (collecan explicit fee for investment advice, but would only receive fees for tively "Applicant"), bank holding companies within transactions executed for customers. the meaning of the Bank Holding Company Act 6. The Board hereby incorporates by reference its rationale and findings in the NatWest, J.P. Morgan, and Manufacturers Hanover (12 U.S.C. § 1841 et seq.) (the "Act"), have applied Orders regarding the consistency of the proposed activity with the for the Board's approval under section 3 of the Act closely-related and proper incident to banking criteria of section (12 U.S.C. § 1842) to acquire Lane Financial, Inc., 4(c)(8). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

506 Federal Reserve Bulletin • July 1988 Northbrook, Illinois ("Lane"), and thereby indirectly Lisle Bancorporation, Inc., Lisle, Illinois (bank holdacquire Lake View Trust and Savings Bank, Chicago, ing company for LaSalle Bank of Lisle, Lisle, Illinois). Illinois, Northwest National Bank of Chicago, Chi- Applicant competes with Lane in the Chicago bankcago, Illinois, Northbrook Trust & Savings Bank, ing market.2 Applicant is the eighth largest of 244 Northbrook, Illinois, and Bank of Westmont, West- commercial banking organizations in the market, with mont, Illinois. deposits of approximately $1.1 billion, controlling ap- Applicant has also applied for the Board's approval proximately 1.6 percent of total deposits in commerunder section 4 of the Act (12 U.S.C. § 1843) to cial banks in the market.3 Lane is the sixth largest acquire Lane Mortgage Corporation, Northbrook, Il- commercial banking organization in the market, with linois, and thereby engage in mortgage banking; Lane deposits of approximately $1.4 billion, controlling ap- Data Services, Inc., Northbrook, Illinois, and thereby proximately 2.1 percent of total deposits in commerprovide data processing and courier services; and cial banks in the market. Upon consummation, Appli- Lane Life Insurance Company, Inc., Northbrook, cant would be the fifth largest commercial banking Illinois, and thereby engage in the sale and reinsurance organization in the market, with deposits of approxiof credit related insurance. These activities are autho- mately $2.5 billion, controlling approximately 3.7 perrized for bank holding companies pursuant to the cent of total deposits in commercial banks in the Board's Regulation Y, 12 C.F.R. §§ 225.25(b)(1), (7), market. The Chicago market is considered unconcen- (10) and (8). trated, with a Herfindahl-Hirschman Index ("HHI") Notice of the applications, affording opportunity for of 845. Upon consummation, the HHI would increase interested persons to submit comments, has been duly by 6 points to 851. On the basis of the foregoing, the published (53 Federal Register 757 and 9,808 (1988)). Board concludes that consummation of the proposal The time for filing comments has expired, and the would not have a substantial adverse competitive Board has considered the applications and all com- effect in the Chicago banking market. ments received in light of the factors set forth in In evaluating the financial factors in this case, the sections 3(c) and 4(c)(8) of the Act. Board notes that the primary capital ratio of Alge- ABN/Stichting is a nonoperating private foundation mene, as publicly reported, is below the minimum organized under the laws of The Netherlands whose level established for domestic bank holding compagoverning board consists of members of the managing nies. After making adjustments under U.S. generally and supervisory boards of Algemene. ABN/Stichting accepted accounting principles, however, Algemene's is a bank holding company by virtue of its ownership capital would be consistent with the minimum levels of all of the outstanding priority voting shares of established for domestic bank holding companies. In Algemene. ABN/Stichting has no other assets, and its addition, the Board notes that Applicant has a strong functions are limited to the ownership and manage- common tangible equity position, especially when ment of Algemene's priority shares. viewed in the context of the risk structure in its Algemene, with total assets equivalent to approxi- portfolio, and has recently improved its capital ratio mately $79.7 billion is the 46th largest bank in the significantly. Algemene is in compliance with the world.1 Algemene operates full service branches in capital and other financial requirements of the appro- New York, Chicago and Pittsburgh, a limited service priate supervisory authorities in The Netherlands and branch in Seattle, and agencies in Atlanta, Boston, its resources and prospects are viewed as satisfactory Miami, Houston, Los Angeles, and San Francisco. by those authorities. Algemene also operates an Edge Act corporation with In its evaluation of this case, the Board has considan active office in Houston and inactive offices in ered as an additional positive factor the fact that Chicago and Atlanta; ABN International Markets Cor- Algemene's domestic subsidiaries are all strongly capporation, a subsidiary in New York engaged in acting italized. Accordingly, the Board concludes that the as agent in the purchase and sale of securities on the financial as well as the managerial resources of Appli- Amsterdam Stock Exchange as permitted under the cant, Lane and their bank subsidiaries are consistent Board's regulations; ABN/LaSalle North America, with approval. Convenience and needs considerations Inc., Chicago, Illinois, parent of both LaSalle National also are consistent with approval. Corporation, Chicago, Illinois (bank holding company There is no evidence in the record to indicate that for LaSalle National Bank, Chicago, Illinois), and approval of this proposal would result in decreased competition, in undue concentration of resources, 2. The Chicago banking market is approximated by Cook, DuPage 1. Asset and banking data are as of December 31, 1987, except as and Lake Counties, all in Illinois. indicated. 3. Data are as of June 30, 1986. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All unfair competition, conflicts of interests, unsound Bank, Muncie, Indiana; Summit Bank of Hamilton banking practices, or other adverse effects on the County, Sheridan, Indiana; Summit Bank of South public interest. Accordingly, the Board has deter- Bend, South Bend, Indiana; and Decatur Financial, mined that the balance of public interest factors it must Inc., Decatur, Indiana, and thereby indirectly acquire consider under section 4(c)(8) of the Act is favorable Decatur Bank & Trust Co., Decatur, Indiana. Appliand consistent with approval of the applications to cant also has applied for the Board's approval pursuacquire Lane's nonbanking subsidiaries and activities. ant to section 4 of the BHC Act to acquire Summcorp Based on the foregoing and other facts of record, the Financial Services, Inc., Fort Wayne, Indiana, and Board has determined that the applications should be, thereby engage in discount brokerage activities pursuand hereby are, approved. The acquisition of Lane ant to section 225.25(b)(15) of the Board's Regulation shall not be consummated before the thirtieth calendar Y.i day following the effective date of this Order, or later Notice of the applications, affording interested perthan three months after the effective date of this sons an opportunity to submit comments, has been Order, unless such period is extended for good cause published (53 Federal Register 13,447 (1988)). The by the Board, or by the Federal Reserve Bank of time for filing comments has expired, and the Board Chicago, acting pursuant to delegated authority. The has considered the applications and all comments determinations as to Applicant's nonbanking activities received in light of the factors set forth in sections 3(c) are subject to all of the conditions contained in Regu- and 4(c)(8) of the BHC Act. lation Y, including those in sections 225.4(d) and Trustcorp is the eighth largest commercial banking 225.23(b)(3) (12 C.F.R. §§ 225.4(d) and 225.23(b)(3)), organization in Indiana, controlling deposits of apand to the Board's authority to require such modifica- proximately $1.2 billion, representing approximately tion or termination of the activities of a holding com- 2.8 percent of deposits in commercial banking organipany or any of its subsidiaries as the Board finds zations in Indiana.2 Summcorp is the fourth largest necessary to assure compliance with the provisions commercial banking organization in Indiana, controland purposes of the Act and the Board's regulations ling deposits of approximately $1.8 billion, representand orders issued thereunder, or to prevent evasion ing approximately 4.3 percent of total deposits in thereof. commercial banking organizations in Indiana. Upon By order of the Board of Governors, effective consummation of this proposal, Trustcorp would be- May 10, 1988. come the fourth largest commercial banking organization in Indiana, controlling deposits in Indiana of Voting for this action: Chairman Greenspan and Governors approximately $3 billion, representing approximately Seger, Angell, and Kelley. Absent and not voting: Governors 7.1 percent of total deposits in commercial banking Johnson and Heller. organizations in Indiana. Consummation of the proposal would not have a significant adverse effect on the JAMES MCAFEE concentration of banking resources in Indiana. Associate Secretary of the Board Section 3(d) of the BHC Act, the Douglas Amendment, prohibits the Board from approving an applica- Trustcorp, Inc. tion by a bank holding company to acquire control of Toledo, Ohio any bank located outside of the holding company's home state,3 unless such acquisition is "specifically Order Approving Acquisition of a Bank Holding Company 1. In connection with these applications, Trustcorp of Indiana, Inc., Fort Wayne, Indiana, has applied to become a bank holding company Trustcorp, Inc., Toledo, Ohio ("Trustcorp"), a bank by acquiring 100 percent of the voting shares of Summcorp. Trustcorp holding company within the meaning of the Bank of Indiana, Inc. also has applied to acquire Summcorp Financial Services, Inc. Holding Company Act (12 U.S.C. § 1841 et seq.) 2. Banking data are as of June 30, 1987. Trustcorp also controls ("BHC Act"), has applied for the Board's approval deposits in Ohio and Michigan. In Ohio, Trustcorp is the ninth largest under section 3 of the BHC Act to acquire Summcorp, commercial banking organization, controlling deposits of approximately $2.7 billion, representing approximately 3.7 percent of deposits Inc., Fort Wayne, Indiana ("Summcorp"), and of commercial banking organizations in Ohio. In Michigan, Trustcorp thereby indirectly to acquire its subsidiary banks: is the 13th largest commercial banking organization, controlling deposits of approximately $601 million, representing less than one Summit Bank of Johnson County, Edinburg, Indiana; percent of commercial banking organizations in Michigan. Summit Bank, Fort Wayne, Indiana; Summit Bank of 3. A bank holding company's home state is that state in which the Clinton County, Frankfort, Indiana; Summit Bank of operations of the bank holding company's banking subsidiaries were principally conducted on July 1, 1966, or the date on which the Kendallville, Kendallville, Indiana; Summit Bank of company became a bank holding company, whichever is later. Trust- Marion, Marion, Indiana; Industrial Trust & Savings corp's home state is Ohio. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

508 Federal Reserve Bulletin • July 1988 authorized by the statute laws of the State in which $117.5 million, representing approximately 31.4 per- [the] bank is located, by language to that effect and not cent of market deposits. Upon consummation of this merely by implication." 12 U.S.C. § 1842(d). The proposal, Trustcorp would become the largest com- Board has previously determined that Indiana law mercial banking organization in the market, controlauthorizes the acquisition of Indiana banks by an Ohio ling deposits of approximately $117.6 million, reprebank holding company.4 Further, the Indiana Depart- senting approximately 31.4 percent of the total ment of Financial Institutions approved Trustcorp's deposits in the market. The HHI would increase by 2 proposal on May 12, 1988. Accordingly, the Board points to 2303. concludes that approval of Applicant's proposal is not In the Huntington banking market, Trustcorp is the barred by the Douglas Amendment. largest of six commercial banking organizations, con- Trustcorp and Summcorp compete in the Ft. trolling deposits of approximately $81.5 million, rep- Wayne, Elkhart-Niles-South Bend, Huntington, Ma- resenting approximately 32.2 percent of the market rion, Muncie, and Indianapolis banking markets.5 deposits. Summcorp is the smallest commercial bank- In the Fort Wayne banking market, Trustcorp is the ing organization in the market, controlling deposits of 13th largest of 16 commercial banking organizations, approximately $2 million, representing less than 1 controlling deposits of approximately $15.8 million, percent of market deposits. Upon consummation of representing less than 1 percent of the total deposits in this proposal, Trustcorp would control deposits of commercial banks in the market.6 Summcorp is the approximately $83.5 million, representing approxilargest commercial banking organization in the mar- mately 33 percent of the market deposits. The HHI ket, controlling deposits of approximately $1.2 billion, would increase by 51 points to 2430. representing approximately 35 percent of market de- In its evaluation of this proposal, the Board has posits. Upon consummation of this proposal, Trust- considered the presence of thrift institutions in these corp would become the largest commercial banking markets. The Board previously has indicated that organization in the market, controlling deposits of thrift institutions have become, or have the potential approximately $1.2 billion, representing approxi- to become, major competitors of commercial banks.9 mately 35.5 percent of market deposits. The Herfin- Based upon the number, size, market shares and dahl-Hirschman Index ("HHI")7 would increase by commercial lending activities of thrift institutions in 34 points to 2635. these markets, the Board has concluded that thrift In the Marion banking market, Trustcorp is the institutions exert a significant competitive influence smallest of eight commercial banking organizations, that mitigates the anticompetitive effects of this procontrolling deposits of approximately $100,000, repre- posal in the Fort Wayne, Marion and Huntington senting less than 1 percent of market deposits.8 Summ- markets.10 corp is the largest commercial banking organization in In the Elkhart-Niles-South Bend11 and Muncie12 the market, controlling deposits of approximately 9. National City Corporation, 70 FEDERAL RESERVE BULLETIN 743 (1984); The Chase Manhattan Corporation, 70 FEDERAL RESERVE 4. Banc One Corporation, 72 FEDERAL RESERVE BULLETIN 422 BULLETIN 529 (1984); NCNB Bancorporation, 70 FEDERAL RESERVE (1986). BULLETIN 225 (1984); General Bancshares Corporation, 69 FEDERAL 5. Market data are as of June 30,1986. RESERVE BULLETIN 802 (1983); First Tennessee Corporation, 69 6. The Ft. Wayne banking market is approximated by Allen, De FEDERAL RESERVE BULLETIN 298 (1983). Kalb, and Whitley Counties; Preble, Root, and Union townships in 10. If 50 percent of the deposits controlled by thrift institutions were Adams County; Union and Jefferson townships in Wells County; included in the calculation of market concentration, Trustcorp and Jackson and Union townships in Huntington County; and Noble, Summcorp would control less than 1 percent and approximately 32.4 Green, and Swan townships in Noble County, all in Indiana; plus percent of the total market deposits, respectively, in the Ft. Wayne Carryall township in Paulding County, Ohio; and Hicksville township market. The HHI would increase by 28 points to 2279 upon consumin Defiance County, Ohio. mation of the proposal. In the Marion market, Trustcorp and Summ- 7. Under the revised Department of Justice Merger Guidelines (49 corp would control less than 1 percent and approximately 25.1 percent Federal Register 26,823 (1984)) a market in which the post-merger of the total market deposits, respectively. The HHI would increase by HHI is between 1000 and 1800 is considered moderately concentrated. 1 point to 1687 upon consummation of the proposal. In the Huntington In such markets, the Department is likely to challenge a merger that banking market, Trustcorp and Summcorp would control approxiincreases the HHI by more than 100 points. The Department has mately 28.6 percent and less than one point of the total market informed the Board that a bank merger or acquisition generally will deposits, respectively. The HHI would increase by 40 points to 1992. not be challenged (in the absence of other factors indicating anticom- 11. The Elkhart-Niles-South Bend banking market is approximated petitive effects) unless the post-merger HHI is at least 1800 and the by Elkhart County, St. Joseph County, excluding Olive and Warren merger increases the HHI by at least 200 points. The Justice Depart- townships, Scott, Jefferson, Van Buren, and Turkey Creek townships ment has stated that the higher than normal HHI thresholds for in Kosciusko County, all in Indiana; Cass County, and Oronoko, screening bank mergers for anticompetitive effects implicitly recog- Berrien, Buchanan, Niles, and Bertrand townships in Berrien County, nizes the competitive effect of limited purpose lenders and other all in Michigan. non-depository financial entities. 12. The Muncie banking market is approximated by Delaware 8. The Marion banking market is approximated by Grant County; County; Randolph County, except for Washington and Greensfork Jackson township in Wells County; and Washington township in townships; and Licking and Jackson townships in Blackford County, Blackford County, Indiana. all in Indiana. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All banking markets, Applicant's resulting market share in or other adverse effects on the public interest. Accordeach of these markets would be less than 25 percent ingly, the Board has determined that the balance of and the markets would remain moderately concen- public interest factors it must consider under section trated after consummation of the proposal. In the 4(c)(8) of the BHC Act is favorable and consistent with Indianapolis market,13 Applicant's resulting market approval of the applications to acquire Summcorp's share would be less than 1 percent. Accordingly, nonbanking subsidiaries and activities. based upon all the facts of record, the Board concludes Based on the foregoing and other facts of record, the that consummation of the proposal would not have a Board has determined that the applications should be, substantial adverse competitive effect in these mar- and hereby are, approved. The acquisition of Summkets. corp shall not be consummated before the thirtieth The Board also has considered the effects of Appli- calendar day following the effective date of this Order, cant's proposal on probable future competition in the or later than three months after the effective date of markets in which Trustcorp and Summcorp do not this Order, unless such period is extended for good both compete. In light of the number of probable cause by the Board or by the Federal Reserve Bank of future entrants into those markets, the Board con- Cleveland, pursuant to delegated authority. The detercludes that consummation of this proposal would not minations as to Trustcorp's nonbanking activities are have a significant adverse effect on probable future subject to all of the conditions contained in Regulation competition in any relevant banking market. Y, including those in sections 225.4(d) and 225.23(b)(3) The financial and managerial resources of Trustcorp (12 C.F.R. §§ 225.4(d) and 225.23(b)(3)), and to the and Summcorp are consistent with approval. Conve- Board's authority to require such modification or nience and needs considerations also are consistent termination of the activities of a holding company or with approval. any of its subsidiaries as the Board finds necessary to As indicated earlier, Trustcorp also has applied, assure compliance with the provisions and purposes of pursuant to section 4(c)(8), to acquire a discount the BHC Act and the Board's regulations and orders brokerage subsidiary of Summcorp. Trustcorp does issued thereunder, or to prevent evasion thereof. not operate a nonbanking subsidiary that competes By order of the Board of Governors, effective with Summcorp in this activity. Accordingly, the May 31, 1988. Board concludes that this proposal will not have any significant adverse effect upon competition in any Voting for this action: Chairman Greenspan and Governors relevant market. Johnson, Angell, Heller, and Kelley. Absent and not voting: There is no evidence in the record to indicate that Governor Seger. approval of this proposal would result in undue concentration of resources, decreased or unfair competi- JAMES MCAFEE tion, conflicts of interests, unsound banking practices, Associate Secretary of the Board 13. The Indianapolis banking market is approximated by the Indianapolis MSA, which consists of Boone, Hamilton, Hancock, Hendricks, Johnson, Marion, Morgan, and Shelby Counties in Indiana. Legal Developments continued on next page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

510 Federal Reserve Bulletin • July 1988 APPLICATIONS APPROVED UNDER THE BANK HOLDING COMPANY ACT By the Secretary of the Board Recent applications have been approved by the Secretary of the Board as listed below. Copies are available upon request to the Freedom of Information Office, Office of the Secretary, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Section 3 Applicant Bank(s) Effective date First Alabama Bancshares, Inc., Sunshine Bankshares Corporation, January 19, 1988 Montgomery, Alabama Fort Walton Beach, Florida Golden Summit Corporation, Milton, Florida First Florida Banks, Inc., First Florida Bank of Orange County, March 22, 1988 Tampa, Florida N.A., 7L Corporation, Orlando, Florida Tampa, Florida First Interstate Bancorp of Colorado, First Interstate Bank of Denver, N. A., March 2, 1988 Denver, Colorado Denver, Colorado Firstbank Holding Company of First Bank of Republic Plaza, N.A., January 27, 1988 Colorado, Denver, Colorado Lake wood, Colorado Huntington Bancshares Incorporated, State Bank, Inc., January 27, 1988 Columbus, Ohio Dayton, Kentucky Huntington Bancshares Kentucky, Inc., Covington, Kentucky One Bancorp, Ltd., Ireland Bank, March 4, 1988 Malad City, Idaho Malad City, Idaho The Union of Arkansas Corporation, Union National Bank of Arkansas, March 30, 1988 Little Rock, Arkansas Magnolia, Arkansas Wesbanco, Inc., Mountain State Bank, March 14, 1988 Wheeling, West Virginia Parkersburg, West Virginia Section 4 .. Nonbanking Effective pp Company date Deposit Guaranty Corporation, G & W Life Insurance Company, February 25, 1988 Jackson, Mississippi Jackson, Mississippi Norwest Corporation, Magnet Mortgages, Inc., April 28, 1988 Minneapolis, Minnesota Charleston, West Virginia Norwest Corporation, Dial National Bank, February 12, 1988 Minneapolis, Minnesota Des Moines, Iowa Norwest Financial Services, Inc., Des Moines, Iowa Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All Sections 3 and 4 Bank/Nonbanking Effective Applicant Company date Omnibancorp, C.C.B. Inc., March 30, 1988 Denver, Colorado Denver, Colorado Central Bancorp Life Insurance Company, Denver, Colorado PNC Financial Corp, The Central Bancorporation, Inc., January 20, 1988 Pittsburgh, Pennsylvania Cincinnati, Ohio New Financial Corporation, Pittsburgh, Pennsylvania BY FEDERAL RESERVE BANKS Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Section 3 Reserve Effective Applicant Bank(s) Bank date Alliance Bancorporation, Alliance Bank, N.A., San Francisco May 18, 1988 Seattle, Washington Seattle, Washington Banks of Iowa, Inc., United Bank & Trust, Chicago May 25, 1988 Des Moines, Iowa Ames, Iowa Centennial Bancshares Bank of Lincoln County, St. Louis May 17, 1988 Corporation, Elsberry, Missouri Elsberry, Missouri Cheshire Financial Corporation, The Monadnock Bank, Boston April 29, 1988 Keene, New Hampshire Jaffrey, New Hampshire CNB Bancshares, Inc., Haubstadt State Bank, St. Louis May 18, 1988 Evansville, Indiana Haubstadt, Indiana CNB Bancshares, Inc., Posey Bancorporation, St. Louis May 16, 1988 Evansville, Indiana Wadesville, Indiana Farmers Bank & Trust Company, Wades ville, Indiana Commercial Bancorp of Georgia, Commercial Bank of Georgia, Atlanta May 16, 1988 Inc., Atlanta, Georgia Atlanta, Georgia Community Bankers, Inc., Farmers & Merchants State Dallas May 5, 1988 Granbury, Texas Bank, Burleson, Texas Community First Financial, Inc., The Citizens National Bank, Cleveland May 6, 1988 Maysville, Kentucky Ripley, Ohio Cooper Lake Financial The First National Bank in Dallas May 6, 1988 Corporation, Cooper, Cooper, Texas Cooper, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

512 Federal Reserve Bulletin • July 1988 Section 3—Continued Reserve Effective Applicant Bank(s) Bank date Danville Bank Corp., The First National Bank of Philadelphia May 16, 1988 Danville, Pennsylvania Danville, Danville, Pennsylvania DB Holding Company, Inc., Omaha State Corporation Kansas City May 11, 1988 Omaha, Nebraska Omaha, Nebraska Delta Bancshares Company, Glasgow Savings Bank, St. Louis May 17, 1988 St. Louis, Missouri Glasgow, Missouri Douglas County Bancshares, Douglas County National Bank, St. Louis May 9, 1988 Inc., Ava, Missouri Ava, Missouri DSB Bancshares, Inc., Dermott State Bank, St. Louis May 2, 1988 Dermott, Arkansas Dermott, Arkansas Eastland Financial Corp., Eastland Savings Bank, Boston May 20, 1988 Woonsocket, Rhode Island Woonsocket, Rhode Island Eastland Savings Bank, Woonsocket Institution Boston May 20, 1988 Woonsocket, Rhode Island Corporation, Woonsocket, Rhode Island Excel Bancorp, Inc., Lincoln Trust Company, Boston May 23, 1988 Quincy, Massachusetts Hingham, Massachusetts F & M National Corporation, Merchants and Farmers Bank, Richmond May 23, 1988 Winchester, Virginia Martinsburg, West Virginia Farmers National Bancorp of Deposit Bank of Carlisle, Cleveland May 23, 1988 Cynthiana, Inc., Carlisle, Kentucky Cynthiana, Kentucky FarmMerc, Inc., The Farmers and Merchants Cleveland May 6, 1988 Caldwell, Ohio Bank, Caldwell, Ohio First City Bancorp, Inc., First City Bank, Atlanta May 4, 1988 Murfreesboro, Tennessee Murfreesboro, Tennessee First Eastern Corporation, Peoples First National Bank and Philadelphia May 26, 1988 Wilkes-Barre, Pennsylvania Trust Company, Hazleton, Pennsylvania First of America Bank Sheridan Bank of Peoria, Chicago May 9, 1988 Corporation, Peoria, Illinois Kalamazoo, Michigan First of America Bancorporation-Illinois, Inc., Libertyville, Illinois First Parker Bancshares, Inc., Weatherford Bancshares, Inc., Dallas May 6, 1988 Weatherford, Texas Weatherford, Texas The First National Bank of Weatherford, Weatherford, Texas First Weatherford Bancshares, The First National Bank of Dallas May 6, 1988 Inc., Weatherford, Weatherford, Texas Weatherford, Texas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All Section 3—Continued Reserve Effective Applicant Bank(s) Bank date First Wisconsin Corporation, Rose Holding Co., Chicago April 29, 1988 Milwaukee, Wisconsin Rose ville, Minnesota Sahara Bancorp, Inc., New Brighton, Minnesota Freedom Bancshares, Inc., Belington Bank, Richmond May 16, 1988 Belington, West Virginia Belington, West Virginia FS Bancshares, Inc., Farmers State Bank, Chicago May 4, 1988 Markesan, Wisconsin Markesan, Wisconsin Grenada Sunburst System Sunburst Bank, St. Louis May 17, 1988 Corporation, Baton Rouge, Louisiana Grenada, Mississippi Capital Bank & Trust Co., N.A., Baton Rouge, Louisiana Harris Bankcorp, Inc., Norris Bancorp, Inc., Chicago May 10, 1988 Chicago, Illinois Saint Charles, Illinois Bankmont Financial Corp., New York, New York Bank of Montreal, Montreal, Quebec, Canada Illini Community Bancorp, Inc., Elkhart Banc Shares, Inc., Chicago May 3, 1988 Springfield, Illinois Elkhart, Illinois Lamoine Bancorp., Inc., State Bank of La Harpe, Chicago May 20, 1988 La Harpe, Illinois La Harpe, Illinois Lincoln Financial Corporation Rush County National Chicago May 13, 1988 Lincoln, Illinois Corporation, Rushville, Indiana Midwest Financial Group, Inc., First Morton Bancorp, Inc., Chicago May 13, 1988 Peoria, Illinois Morton, Illinois Minnesota-Wisconsin Carver County Bancshares, Inc., Minneapolis May 11, 1988 Bancshares, Inc., Chaska, Minnesota Newport, Minnesota NewMil Bancorp, Inc., Cenvest Inc., Boston May 24, 1988 New Milford, Connecticut Meriden, Connecticut West Mass Bankshares, Greenfield, Massachusetts Peoples Bancorporation of Peoples Bank and Trust, Chicago May 3, 1988 Northwest Iowa, Rock Valley, Iowa Rock Valley, Iowa Peoples Heritage Financial Peoples Heritage Savings Bank, Boston May 3, 1988 Group, Inc., Portland, Maine Portland, Maine Porter Bancorp, Inc., The Central Bank of North St. Louis May 12, 1988 Pleasure ville, Kentucky Pleasure ville, Pleasure ville, Kentucky Raymond Bancorp, Inc., Peoples State Bank of Gillespie, St. Louis May 4, 1988 Raymond, Illinois Gillespie, Illinois Ready Bancorp, Inc., Ready State Bank, Atlanta May 4, 1988 Hialeah, Florida Hialeah, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

514 Federal Reserve Bulletin • July 1988 Section 3—Continued Reserve Effective AApppplliiccaanntt BBaannkk((ss)) Bank date Remsen Financial Services, Inc., First Trust & Savings Bank, Chicago May 16, 1988 Council Bluffs, Iowa Remsen, Iowa Western Iowa Consultants, Inc., Council Bluffs, Iowa Security National Corporation, Security National Bank of Atlanta May 23, 1988 Maitland, Florida Osceola, Kissimmee, Florida Security Trustco, Inc., Security Trust and Savings Bank, Atlanta May 6, 1988 Brilliant, Alabama Brilliant, Alabama South Alabama Holding Co., Washington County State Bank, Atlanta May 17, 1988 Inc., Mcintosh, Alabama Mcintosh, Alabama Southern Bancorp, Inc., Alliance National Bank, Atlanta May 19, 1988 Miami, Florida Miami, Florida Southern Bankshares, Inc., M & M Financial Corporation Richmond May 20, 1988 Beckley, West Virginia Oak Hill, West Virginia Southwest Missouri The Bank of Jasper, Kansas City May 12, 1988 Bancorporation, Inc., Jasper, Missouri Carthage, Missouri St. Croix Valley Bancshares, Oak Park State Bank, Minneapolis April 29, 1988 Inc., Oak Park Heights, Minnesota Bloomington, Minnesota Taylor Bancshares, Inc., Fidelity State Bank of Hector, Minneapolis May 26, 1988 North Mankato, Minnesota Hector, Minnesota Fidelity State Bank of Fairfax, Fairfax, Minnesota TSB Bancorp, Inc., Talbot State Bank, Atlanta May 6, 1988 Woodland, Georgia Woodland, Georgia UNB Corp., The Union National Bank of Philadelphia May 11, 1988 Mount Carmel, Pennsylvania Mount Carmel, Mount Carmel, Pennsylvania Union Bancshares, Inc., Union County Bank, Atlanta May 25, 1988 Blairsville, Georgia Blairsville, Georgia Union Financial Corporation, Union Bank, Chicago May 20, 1988 Lake Odessa, Michigan Lake Odessa, Michigan Vista Bancorp, Inc., The Phillipsburg National Bank New York May 20, 1988 Phillipsburg, New Jersey and Trust Company, Phillipsburg, New Jersey Workingmens Corporation, Workingmens Co-operative Bank, Boston May 9, 1988 Boston, Massachusetts Boston, Massachusetts Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments All Section 4 Nonbanking Reserve Effective Applicant Company/Activity Bank date Banc One Corporation, First Municipal Leasing Cleveland May 4, 1988 Columbus, Ohio Corporation, Denver, Colorado First Bank System, Inc., Rolofif Insurance Agency, Minneapolis May 20, 1988 Minneapolis, Minnesota Fairmont, Minnesota G. S. Dahms & Associates, Ltd., Fargo, North Dakota Florida National Banks of Florida National Insurance Atlanta May 13, 1988 Florida, Inc., Services, Inc., Jacksonville, Florida Jacksonville, Florida Key Centurion Bancshares, Inc. Reliable Mortgage Company, Richmond April 29, 1988 Charleston, West Virginia Charleston, West Virginia Manufacturers National Wilson, Kemp & Associates, Chicago May 4, 1988 Corporation, Inc., Detroit, Michigan Detroit, Michigan Meridian Bancorp, Inc., Atlantic Equipment Leasing, Co., Philadelphia May 11, 1988 Reading, Pennsylvania Inc., Wyomissing, Pennsylvania MNC Financial, Inc., Applewood U.S. Industrial Bank, Richmond May 16, 1988 Baltimore, Maryland Golden, Colorado Aurora U.S. Industrial Bank, Aurora, Colorado Boulder U.S. Industrial Bank, Boulder, Colorado Colorado Springs U.S. Industrial Bank, Colorado Springs, Colorado Fort Collins U.S. Industrial Bank, Fort Collins, Colorado Littleton U.S. Industrial Bank, Littleton, Colorado Pueblo U.S. Industrial Bank, Pueblo, Colorado Thornton U.S. Industrial Bank, Thornton, Colorado Peoples Bancorporation, Service Loan Company, Inc., Richmond May 20, 1988 Rocky Mount, North Carolina d/b/a Thomaston Finance Company, Thomaston, Georgia Progressive Bank, Inc., Lakewood Associates, New York May 20, 1988 Pawling, New York Millbrook, New York R & J Financial Corporation, engage in general insurance Chicago May 6, 1988 Elma, Iowa agency activities United Community Corporation, Unitech, Inc., Kansas City May 5, 1988 Oklahoma City, Oklahoma Oklahoma City, Oklahoma Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

516 Federal Reserve Bulletin • July 1988 ORDERS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks . „ ,, . Reserve Effective Applicant Bank(s) Bank date F & M Bank-Martinsburg, Inc., Merchants and Farmers Bank, Richmond May 23, 1988 Martinsburg, West Virginia Martinsburg, West Virginia 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. Credit Union National Association, Inc., et al., v. Barrett v. Volcker, No. 87-2280 (D.D.C., filed Board of Governors, No. 88-1295 (D.D.C. May 13, Aug. 17, 1987). 1988). Northeast Bancorp v. Board of Governors, No. 87- Bonilla v. Board of Governors, No. 88-1464 (7th Cir., 1365 (D.C. Cir., filed July 31, 1987). filed March 11, 1988). National Association of Casualty & Insurance Agents Cohen v. Board of Governors, No. 88-1061 (D.N.J., v. Board of Governors, Nos. 87-1354, 87-1355 (D.C. filed March 7, 1988). Cir., filed July 29, 1987). Irving Bank Corporation v. Board of Governors, No. The Chase Manhattan Corporation v. Board of 88-1176 (D.C. Cir., filed March 1, 1988). Governors, No. 87-1333 (D.C. Cir., filed July 20, Stoddard v. Board of Governors, No. 88-1148 (D.C. 1987). Cir., filed Feb. 25, 1988). Securities Industry Association v. Board of Gover- Securities Industry Association v. Board of Gover- nors, Nos. 87-4091, 87-4093, 87-4095 (2d Cir., filed nors, Nos. 87-4161, 88-4063 (2d Cir., filed Dec. 15, July 1 and July 15, 1987). 1987, May 3, 1988). Lewis v. Board of Governors, Nos. 87-3455, 87-3545 Independent Insurance Agents of America, Inc. v. (11th Cir., filed June 25, and Aug. 3, 1987). Board of Governors, No. 87-1686 (D.C. Cir., filed Securities Industry Association v. Board of Gover- Nov. 19, 1987). nors, et al. No. 87-4041 and consolidated cases (2d National Association of Casualty and Surety Agents, Cir., filed May 1, 1987). et al., v. Board of Governors, Nos. 87-1644, 87- Securities Industry Association v. Board of Gover- 1801, 88-1001, 88-1206, 88-1245, 88-1270 (D.C. nors, et al., No. 87-1169 (D.C. Cir., filed April 17, Cir., filed Nov. 4, Dec. 21, 1987, Jan. 4, March 18, 1987). March 30, April 7, 1988). Independent Community Bankers Association of Teichgraeber v. Board of Governors, No. 87-2505-0 South Dakota v. Board of Governors, No. 86-5373 (D. Kan., filed Oct. 16, 1987). (8th Cir., filed Oct. 3, 1986). Securities Industry Association v. Board of Jenkins v. Board of Governors, No. 86-1419 (D.C. Governors, No. 87-4135 (2d Cir., filed Oct. 8, Cir., filed July 18, 1986). 1987). CBC, Inc. v. Board of Governors, No. 86-1001 (10th Securities Industry Association v. Board of Cir., filed Jan. 2, 1986). Governors, No. 87-4115 (2d Cir., filed Sept. 9, Melcher v. Federal Open Market Committee, No. 88- 1987). 1546 (S.Ct., filed April 30, 1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1 Financial and Business Statistics CONTENTS WEEKLY REPORTING COMMERCIAL BANKS Assets and liabilities Domestic Financial Statistics A19 All reporting banks A20 Banks in New York City A21 Branches and agencies of foreign banks MONEY STOCK AND BANK CREDIT A22 Gross demand deposits—individuals, partnerships, and corporations A3 Reserves, money stock, liquid assets, and debt measures A4 Reserves of depository institutions, Reserve FINANCIAL MARKETS Bank credit A5 Reserves and borrowings—Depository A23 Commercial paper and bankers dollar institutions acceptances outstanding A6 Selected borrowings in immediately available A23 Prime rate charged by banks on short-term funds—Large member banks business loans A24 Interest rates—money and capital markets A25 Stock market—Selected statistics POLICY INSTRUMENTS A26 Selected financial institutions—Selected assets and liabilities A7 Federal Reserve Bank interest rates A8 Reserve requirements of depository institutions A9 Federal Reserve open market transactions FEDERAL FINANCE A28 Federal fiscal and financing operations FEDERAL RESERVE BANKS A29 U.S. budget receipts and outlays A30 Federal debt subject to statutory limitation A10 Condition and Federal Reserve note statements A30 Gross public debt of U.S. Treasury—Types and All Maturity distribution of loan and security ownership holdings A31 U.S. government securities dealers— Transactions A32 U.S. government securities dealers—Positions MONETARY AND CREDIT AGGREGATES and financing A33 Federal and federally sponsored credit A12 Aggregate reserves of depository institutions agencies—Debt outstanding and monetary base A13 Money stock, liquid assets, and debt measures A15 Bank debits and deposit turnover A16 Loans and securities—All commercial banks SECURITIES MARKETS AND CORPORATE FINANCE COMMERCIAL BANKING INSTITUTIONS A34 New security issues—State and local governments and corporations A17 Major nondeposit funds A35 Open-end investment companies—Net sales and A18 Assets and liabilities, last-Wednesday-of-month asset position series A35 Corporate profits and their distribution Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • July 1988 A36 Total nonfarm business expenditures on new A54 Foreign official assets held at Federal Reserve plant and equipment Banks A37 Domestic finance companies—Assets and A55 Foreign branches of U.S. banks—Balance sheet liabilities and business credit data A57 Selected U.S. liabilities 10 foreign official institutions REAL ESTATE A38 Mortgage markets REPORTED BY BANKS IN THE UNITED STATES A39 Mortgage debt outstanding A57 Liabilities to and claims on foreigners A58 Liabilities to foreigners CONSUMER INSTALLMENT CREDIT A60 Banks' own claims on foreigners A61 Banks' own and domestic customers' claims on A40 Total outstanding and net change foreigners A41 Terms A61 Banks' own claims on unaffiliated foreigners A62 Claims on foreign countries—Combined domestic offices and foreign branches FLOW OF FUNDS A42 Funds raised in U.S. credit markets REPORTED BY NONBANKING BUSINESS A43 Direct and indirect sources of funds to credit ENTERPRISES IN THE UNITED STATES markets A63 Liabilities to unaffiliated foreigners A64 Claims on unaffiliated foreigners Domestic Nonfinancial Statistics SECURITIES HOLDINGS AND TRANSACTIONS SELECTED MEASURES A65 Foreign transactions in securities A44 Nonfinancial business activity—Selected A66 Marketable U.S. Treasury bonds and notes— measures Foreign transactions A45 Labor force, employment, and unemployment A46 Output, capacity, and capacity utilization A47 Industrial production—Indexes and gross value INTEREST AND EXCHANGE RATES A49 Housing and construction A50 Consumer and producer prices A67 Discount rates of foreign central banks A51 Gross national product and income A67 Foreign short-term interest rates A52 Personal income and saving A68 Foreign exchange rates International Statistics A69 Guide to Tabular Presentation, Statistical Releases, and Special Tables SUMMARY STATISTICS A53 U.S. international transactions—Summary A54 U.S. foreign trade A54 U.S. reserve assets Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A3 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Monetary and credit aggregates (annual rates of change, seasonally adjusted in percent)1 IItteemm 1987 1988 1987 1988 Q2 Q3 Q4 Qlr Dec. Jan. Feb. Mar.' Apr. Reserves of depository institutions 1 Total 8.0 -1.6 1.4 3.4 -11.4 18.4 2.5 3.9 17.3 2 Required 8.4 -.5 .3 2.8 -13.8 13.0 6.0 8.2 18.8 3 Nonborrowed 5.4 -.4 1.2 1.3 -14.7 12.2 17.0 -24.1 -8.4 4 Monetary base3 6.9 5.1 7.7 8.7 3.1 16.6 4.7 5.3 12.3 Concepts of money, liquid assets, and debt4 5 Ml 6.6 .8 3.9 3.9 -3.0 12.9 1.1 5.5 11.2 6 M2 2.7 2.8 3.9 6.7 1.9 9.9' 8.7 8.8 9.9 7 M3 4.6 4.5' 5.4 6.7 1.4 8.3 10.4' 7.3 6.8 8 L 4.0' 4.3 5.8 6.9 .3 10.6 9.7' 7.0 n.a. 9 Debt 8.9 8.2 9.8 9.6 8.7 8.4r 10.8' 10.0 n.a. Nontrgnsaction components 10 InM25 1.3 3.5 3.8 7.8 3.6 8.9' 11.4 9.9 9.5 11 In M3 only6 12.2' ii. r 11. 2' 6.8 -.3 2.T 16.7' 1.6 -5.0 Time and savings deposits Commercial banks 12 Savings 22.4 10.1 .7 6.3 .0 5.4 13.4 14.6 5.9 13 Small-denomination time -2.7 7.4 14.8 13.7 9.4 10.6 17.6' 11.6 14.8 14 Large-denomination time9,10 17.1 6.8 10.5 3.4 4.5 -12.2 17.2' 5.9 -3.3 Thrift institutions 15 Savings 19.2 7.0 -3.8 -2.4 -4.1 -3.6 -.5 7.1 9.6 16 Small-denomination time 1.2 9.3 16.0 21.3 19.4 18.4 25.0' 18.0 13.8 17 Large-denomination time9 -5.1 9.9 22.2 15.7 23.5 11.2' 16.2 1.5 15.3 Debt components4 18 Federal 8.8 5.9 7.5 9.2 8.0 5.1 11.3 15.3 n.a. 19 Nonfederal 9.0 9.0 10.6 9.7 8.9 9.4' 10.7' 8.4 n.a. 20 Total loans and securities at commercial banks11 8.2 6.2 5.5 4.8 -1.0 5.9 8.2' 8.0 11.7 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: (1) 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 Financial Statistics • July 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 FFFaaaccctttooorrrsss 1988 1988 Feb. Mar. Apr. Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 11111 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 238,789 239,867 248,228 240,698 239,716 240,581 244,571 247,367 247,821 247,343 22222 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 214,625 215,545 221,348 216,630 214,621 215,325 217,335 220,510 221,263 221,778 33333 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 214,625 215,545 220,204 216,630 214,621 215,325 216,637 220,510 220,470 221,497 44444 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss 0 0 1,144 0 0 0 698 0 793 281 55555 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 7,402 7,401 7,665 7,402 7,401 7,399 7,476 7,382 7,485 7,341 66666 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 7,402 7,401 7,347 7,402 7,401 7,399 7,399 7,382 7,365 7,279 77777 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss 0 0 318 0 0 0 77 0 120 62 88888 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 99999 LLLLLoooooaaaaannnnnsssss 353 1,690 3,081 1,311 2,537 2,465 3,169 3,565 3,672 2,034 1111100000 FFFFFllllloooooaaaaattttt 1,627 622 694 461 461 509 1,752 573 -87 567 1111111111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 14,782 14,609 15,440 14,893 14,696 14,882 14,839 15,337 15,487 15,622 1111122222 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk22222 11,065 11,063 11,063 11.063 11,063 11,062 11,063 11,063 11,063 11,063 1111133333 SSSSSpppppeeeeeccccciiiiiaaaaalllll dddddrrrrraaaaawwwwwiiiiinnnnnggggg rrrrriiiiiggggghhhhhtttttsssss ccccceeeeerrrrrtttttiiiiifffffiiiiicccccaaaaattttteeeee aaaaaccccccccccooooouuuuunnnnnttttt............... 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 1111144444 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccuuuuurrrrrrrrrreeeeennnnncccccyyyyy ooooouuuuutttttssssstttttaaaaannnnndddddiiiiinnnnnggggg 18,265 18,315 18,366 18,310 18,320 18,330 18,341 18,355 18,369 18,383 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 1111155555 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 224,337 225,434 228,362 225,685 225,695 225,708 227,560 228,897 228,766 228,031 1111166666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss 449 468 484 467 472 477 480 488 487 483 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss,,,,, wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 1111177777 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 3,711 2,894 5,047 3,309 2,676 2,568 3,554 3,456 3,662 4,383 1111188888 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 241 238 240 249 213 226 268 245 261 236 1111199999 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss 2,301 1,909 2,000 1,823 1,914 1,863 1,939 1,922 2,311 1,935 2222200000 OOOOOttttthhhhheeeeerrrrr 335 408 364 380 428 483 369 323 366 402 2222211111 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 7,303 7,153 7,328 7,114 7,262 7,214 7,310 7,271 7,354 7,307 2222222222 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss33333 34,461 35,758 38,850 36.064 35,458 36,451 37,512 39,201 39,065 39,030 End-of-month figures Wednesday figures 1988 1988 Feb. Mar. Apr. Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 SSSSSUUUUUPPPPPPPPPPLLLLLYYYYYIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 2222233333 RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkk cccccrrrrreeeeedddddiiiiittttt 239,795 242,542 260,242 241,227 241,387 240,110 249,357 247,638 253,098 251,090 2222244444 UUUUU.....SSSSS..... gggggooooovvvvveeeeerrrrrnnnnnmmmmmeeeeennnnnttttt ssssseeeeecccccuuuuurrrrriiiiitttttiiiiieeeeesssss11111 216,891 217,4% 230,971 215,680 215,579 215,160 220,913 220,408 225,524 224,915 2222255555 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 216,891 217,4% 223,363 215,680 215,579 215,160 216,030 220,408 219,974 222,947 2222266666 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss 0 0 7,608 0 0 0 4,883 0 5,550 1,968 2222277777 FFFFFeeeeedddddeeeeerrrrraaaaalllll aaaaagggggeeeeennnnncccccyyyyy ooooobbbbbllllliiiiigggggaaaaatttttiiiiiooooonnnnnsssss 7,402 7,399 10,074 7,402 7,399 7,399 7,937 7,379 8,122 7,715 2222288888 BBBBBooooouuuuuggggghhhhhttttt ooooouuuuutttttrrrrriiiiiggggghhhhhttttt 7,402 7,399 7,279 7,402 7,399 7,399 7,399 7,379 7,279 7,279 2222299999 HHHHHeeeeelllllddddd uuuuunnnnndddddeeeeerrrrr rrrrreeeeepppppuuuuurrrrrccccchhhhhaaaaassssseeeee aaaaagggggrrrrreeeeeeeeeemmmmmeeeeennnnntttttsssss 0 0 2,795 0 0 0 538 0 843 436 3333300000 AAAAAcccccccccceeeeeppppptttttaaaaannnnnccccceeeeesssss 0 0 0 0 0 0 0 0 0 0 3333311111 LLLLLoooooaaaaannnnnsssss 336 2,311 2,590 2,%7 3,194 2,134 4,373 3,838 3,602 2,276 3333322222 FFFFFllllloooooaaaaattttt 897 298 371 488 349 430 1,006 427 208 239 3333333333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee aaaaasssssssssseeeeetttttsssss 14,269 15,038 16,236 14,690 14,866 14,987 15,128 15,586 15,642 15,945 3333344444 GGGGGooooolllllddddd ssssstttttoooooccccckkkkk22222 11,063 11,063 11,063 11,063 11,062 11,063 11,063 11,062 11,063 11,063 3333355555 SSSSSpppppeeeeeccccciiiiiaaaaalllll dddddrrrrraaaaawwwwwiiiiinnnnnggggg rrrrriiiiiggggghhhhhtttttsssss ccccceeeeerrrrrtttttiiiiifffffiiiiicccccaaaaattttteeeee aaaaaccccccccccooooouuuuunnnnnttttt............... 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 3333366666 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccuuuuurrrrrrrrrreeeeennnnncccccyyyyy ooooouuuuutttttssssstttttaaaaannnnndddddiiiiinnnnnggggg 18,289 18,339 18,395 18,319 18,329 18,339 18,353 18,367 18,381 18,395 AAAAABBBBBSSSSSOOOOORRRRRBBBBBIIIIINNNNNGGGGG RRRRREEEEESSSSSEEEEERRRRRVVVVVEEEEE FFFFFUUUUUNNNNNDDDDDSSSSS 3333377777 CCCCCuuuuurrrrrrrrrreeeeennnnncccccyyyyy iiiiinnnnn ccccciiiiirrrrrcccccuuuuulllllaaaaatttttiiiiiooooonnnnn 223,615 227,099 228,308 225,934 225,684 226,492 228,511 229,243 228,556 228,258 3333388888 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy cccccaaaaassssshhhhh hhhhhooooollllldddddiiiiinnnnngggggsssss22222 457 479 479 470 477 475 482 488 484 477 DDDDDeeeeepppppooooosssssiiiiitttttsssss,,,,, ooooottttthhhhheeeeerrrrr ttttthhhhhaaaaannnnn rrrrreeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss,,,,, wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss 3333399999 TTTTTrrrrreeeeeaaaaasssssuuuuurrrrryyyyy 2,472 2,403 16,186 3,221 2,145 3,190 4,016 3,900 5,319 11,343 4444400000 FFFFFooooorrrrreeeeeiiiiigggggnnnnn 343 534 215 265 225 207 213 239 204 236 4444411111 SSSSSeeeeerrrrrvvvvviiiiiccccceeeee-----rrrrreeeeelllllaaaaattttteeeeeddddd bbbbbaaaaalllllaaaaannnnnccccceeeeesssss aaaaannnnnddddd aaaaadddddjjjjjuuuuussssstttttmmmmmeeeeennnnntttttsssss 1,658 1,671 1,660 1,654 1,654 1,671 1,671 1,672 1,675 1,679 4444422222 OOOOOttttthhhhheeeeerrrrr 438 436 360 524 361 479 314 343 398 398 4444433333 OOOOOttttthhhhheeeeerrrrr FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee llllliiiiiaaaaabbbbbiiiiillllliiiiitttttiiiiieeeeesssss aaaaannnnnddddd cccccaaaaapppppiiiiitttttaaaaalllll 7,139 7,234 7,450 6,932 7,092 7,047 7,241 7,002 7,401 7,188 4444444444 RRRRReeeeessssseeeeerrrrrvvvvveeeee bbbbbaaaaalllllaaaaannnnnccccceeeeesssss wwwwwiiiiittttthhhhh FFFFFeeeeedddddeeeeerrrrraaaaalllll RRRRReeeeessssseeeeerrrrrvvvvveeeee BBBBBaaaaannnnnkkkkksssss33333 38,043 37,106 40,060 36,627 38,158 34,%9 41,343 39,199 43,523 35,987 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 Institutions1 Millions of dollars Monthly averages9 RReesseerrvvee ccllaassssiiffiiccaattiioonn 1985 1986 1987 1987 1988 Dec. Dec. Dec. Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Reserve balances with Reserve Banks2 27,620 37,360 37,673 36,685 37,249 37,453 37,673 37,485 34,211 36,027 2 Total vault cash3 22,953 24,079 26,155 24,854 25,587 25,431 26,155 26,919 28,119 25,926 3 Vault4 20,522 22,199 24,449 23,128 23,857 23,752 24,449 25,155 25,836 24,049 4 Surplus 2,431 1,879 1,706 1,726 1,730 1,679 1,706 1,764 2,283 1,877 5 Total reserves6 48,142 59,560 62,123 59,813 61,106 61,205 62,123 62,640 60,047 60,076 6 Required reserves 47,085 58,191 61,094 59,020 59,977 60,282 61,094 61,345 58,914 59,147 7 Excess reserve balances at Reserve Banks 1,058 1,369 1,029 793 1,129 923 1,029 1,295 1,133 929 8 Total borrowings at Reserve Banks 1,318 827 777 940 943 625 777 1,082 396 1,752 9 Seasonal borrowings at Reserve Banks 56 38 93 231 189 126 93 59 75 119 10 Extended credit at Reserve Banks 499 303 483 409 449 394 483 372 205 1,478 Biweekly averages of daily figures for weeks ending 1988 Jan. 13 Jan. 27 Feb. 1(K Feb. 24r Mar. 9' Mar. 23r Apr. 6 Apr. 2V May 4 May 18 11 Reserve balances with Reserve Banks2 39,175 37,002 33,681 34,102 35,575 35,761 37,003' 39,123 38,313 36,740 12 Total vault cash* 26,566 26,533 29,417 27,954 25,987 26,224 25,336 25,205 25,112 25,726 13 Vault* 24,937 24,840 26,967 25,685 23,998 24,332 23,610 23,709 23,549 24,122 14 Surplus 1,629 1,694 2,450 2,270 1,989 1,892 1,726 1,497 1,563 1,604 15 Total reserves 64,112 61,842 60,648 59,787 59,573 60,093 60,613r 62,831 61,862 60,862 16 Required reserves 62,805 60,554 59,366 58,700 58,607 59,182 59,696r 62,145 60,796 59,965 17 Excess reserve balances at Reserve Banks 1,307 1,288 1,282 1,087 966 911 917 686 1,067 898 18 Total borrowings at Reserve Banks 1,945 508 287 425 537 1,924 2,817 3,619 2,224 2,175 19 Seasonal borrowings at Reserve Banks 66 54 55 77 111 123 122 124 191 241 20 Extended credit at Reserve Banks 485 332 144 232 255 1,685 2,494 3,278 1,787 1,798 1. These data also appear in the Board's H.3 (502) release. For address, see in- adjustments to compensate for float, plus vault cash used to satisfy reserve side front cover. requirements. Such vault cash consists of all vault cash held during the lagged 2. 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 3. Dates refer to the maintenance periods in which the vault cash can be used maintenance period at institutions having no required reserve balances. to satisfy reserve requirements. Under contemporaneous reserve requirements, 7. 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. 4. Equal to all vault cash held during the lagged computation period by 8. Extended credit consists of borrowing at the discount window under the institutions having required reserve balances at Federal Reserve Banks plus the terms and conditions established for the extended credit program to help amount of vault cash equal to required reserves during the maintenance period at depository institutions deal with sustained liquidity pressures. Because there is institutions having no required reserve balances. not the same need to repay such borrowing promptly as there is with traditional 5. Total vault cash at institutions having no required reserve balances less the short-term adjustment credit, the money market impact of extended credit is amount of vault cash equal to their required reserves during the maintenance similar to that of nonborrowed reserves. period. 9. Before February 1984, data are prorated monthly averages of weekly 6. 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Financial Statistics • July 1988 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Member Banks1 Averages of daily figures, in millions of dollars 1987 week ending Monday Maturity and source Oct. 12 Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Nov. 23 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 76,610 75,793 74,961 75,965 79,120 76,821 70,725 70,174 2 For all other maturities 8,611 9,040 9,384 9,781 10,341 10,353 10,190 11,547 From other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies 3 For one day or under continuing contract 26,970 24,791 23,348 24,574 25,943 26,635 26,265 24,679 4 For all other maturities 6,562 7,056 8,487 8,510 8,645 8,238 7,762 8,848 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 14,4% 15,254 14,825 15,544 13,351 13,080 13,972 13,136 6 For all other maturities 11,934 11,053 12,021 12,306 12,424 13,080 12,622 13,982 All other customers 7 For one day or under continuing contract 26,338 26,758 28,608 28,666 28,274 27,616 27,840 24,071 8 For all other maturities 8,611 7,761 9,044 9,710 10,277 10,209 9,662 13,855 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 30,926 33,064 36,169 35,913 33,803 34,054 29,895 32,952 10 To all other specified customers2 12,971 13,429 14,211 14,502 14,362 14,889 12,211 11,190 1. Banks with assets of $1 billion or more as of Dec. 31, 1977. 2. Brokers and nonbank dealers in securities; other depository institutions; These data also appear in the Board's H.5 (507) release. For address, see inside foreign banks and official institutions; and United States government agencies, front cover. 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 AAddjjuussttmmeenntt ccrreeddiitt Extended credit2 aanndd FFFeeedddeeerrraaalll RRReeessseeerrrvvveee SSeeaassoonnaall ccrreeddiitt11 First 30 days of borrowing After 30 days of borrowing3 BBBaaannnkkk On Effective Previous On Effective Previous On Effective Previous 5/27/88 date rate 5/27/88 date rate 5/27/88 date rate Effective date Vi Boston 6 9/9/87 5 6 9/9/87 5V4 7.60 5/19/88 7.40 5/5/88 New York 9/4/87 9/4/87 5/19/88 5/5/88 Philadelphia 9/4/87 9/4/87 5/19/88 5/5/88 Cleveland 9/4/87 9/4/87 5/19/88 5/5/88 Richmond 9/5/87 9/5/87 5/19/88 5/5/88 Atlanta 9/4/87 9/4/87 5/19/88 5/5/88 Chicago 9/4/87 9/4/87 5/19/88 5/5/88 St. Louis 9/9/87 9/9/87 5/19/88 5/5/88 Minneapolis 9/8/87 9/8/87 5/19/88 5/5/88 Kansas City 9/4/87 9/4/87 5/19/88 5/5/88 Dallas 9/11/87 Vi 9/11/87 5Vi 5/19/88 5/5/88 San Francisco ... 6 9/9/87 5 6 9/9/87 7.60 5/19/88 7.40 5/5/88 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. Ba o n f k Effective date A le l v l e F l) . — R. B o a f n k Effective date A le l v l e F l) . — R. B o a f n k Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1977. 6 6 Vl 1980—July 28 10-11 10 1984—Apr. 9 %Vi-9 9 1978—Jan. 9 6-66V'/22 6 Vl 29 10 10 13 m9- 9 9m 20 61 Sept. 26 11 11 Nov. 21 m Vl May 11 6W-7 1 Nov. 17 12 12 26 8 12 7 Dec. 5 12-13 13 Dec. 24 8 8 July 3 7-m71/ 4 7V4 IVi Aug. 2 1 1 0 73/4 7 7 V 3/ 4 4 1981—May 5 8 13 1 - 4 1 4 1 1 4 4 1985—May 2 2 0 4 7Vmi- 8 IVi O Se c p t. t . 2 2 1 2 0 6 S 8 V - 8 8 8 V 2 VS i - 9V2 8m 8 V V ii D N e o c v . . 4 2 6 13 1 1 - 2 3 1 4 1 1 1 2 3 3 1986—Mar. 1 7 0 1- 1 1 Vi 76 7 V2 Nov. 1 m 99Vi UVl Apr. 21 6W-7 3 1982—July 20 imU-1V2 l July 11 6 56 Vi 23 llVi Aug. 12 5W-6 5V2 1979—July 20 10 10 Aug. 2 11-1 m 11 22 5 Vi Aug. 2 17 0 10 1 - 0 10 V W i 1 lo 0V w 5 1 3 6 lO 1 V 1 i 1 lO 1 V i 1987—Sept. 4 5VS-6 6 Sept. 19 KM-11 11 27 10-10W 10 11 6 6 21 11 11 30 10 910V i Oct. 8 11-12 12 Oct. 12 9W V-10i Vi IInn eeffffeecctt MMaayy 2277,, 11998888 6 6 10 12 12 13 99-9V2 99 1980—Feb. 15 12-13 13 Nov. 2 2 2 6 9 9 19 13 13 Dec. 14 8SWV-9i -9 9 Vl May 29 12-13 13 15 Vi 8m 30 12 12 17 8 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 Vl percent above the rate on adjustment In 1980 and 1981, the Federal Reserve applied a surcharge to short-term credit. The program was reestablished on Feb. 18, 1986 and again on Jan. 28, adjustment credit borrowings by institutions with deposits of $500 million or more 1987; the rate may be either the same as that for adjustment credit or a fixed rate that had borrowed in successive weeks or in more than 4 weeks in a calendar Vi percent higher. quarter. A 3 percent surcharge was in effect from Mar. 17, 1980 through May 7, 2. Extended credit is available to depository institutions, where similar assist- 1980. There was no surcharge until Nov. 17,1980, when a 2 percent surcharge was ance is not reasonably available from other sources, when exceptional circum- adopted; the surcharge was subsequently raised to 3 percent on Dec. 5,1980, and stances or practices involve only a particular institution or when an institution is to 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective experiencing difficulties adjusting to changing market conditions over a longer Sept. 22, 1981, and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981 the period of time. formula for applying the surcharge was changed from a calendar quarter to a 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 • July 1988 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Percent of deposits Depository institution requirements after implementation of the TTyyppee ooff ddeeppoossiitt,, aanndd Monetary Control Act ddeeppoossiitt iinntteerrvvaall Percent of deposits Effective date Net transaction accounts3'4 333333 111111222222//////111111555555//////888888777777 111111222222 111111222222//////111111555555//////888888777777 Nonpersonal time deposits By original maturity 333333 111111000000//////666666//////888888333333 000000 111111000000//////666666//////888888333333 Eurocurrency liabilities 333333 111111111111//////111111333333//////888888000000 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 than six preauthorized, automatic, or other transfers per month, of which no more corporations. 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 deposits subject to time deposit reserve requirements). 97-320) requires that $2 million of reservable liabilities (transaction accounts, 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 1988 TTyyppee ooff ttrraannssaaccttiioonn 11998855 11998866 11998877 Sept. Oct. Nov. Dec. Jan. Feb. Mar. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 22,214 22,602 18,983 4,528 1,095 3,388 150 0 346 556600 2 Gross sales 4,118 2,502 6,050 0 300 0 0 49 538 0 3 Exchange 0 0 0 0 0 0 0 0 0 0 4 Redemptions 3,500 1,000 9,029 3,657 0 0 0 600 1,600 0 Others within 1 year 5 Gross purchases 1,349 190 3,658 443 300 670 479 0 0 0 6 Gross sales 0 0 300 300 0 0 0 0 0 0 7 Maturity shift 19,763 18,673 21,502 1,500 816 2,247 1,400 950 1,939 2,051 8 Exchange -17,717 -20,179 -20,388 -917 -1,178 -3,728 -1,742 -754 -2,868 -2,089 9 Redemptions 0 0 70 0 70 0 0 0 0 1 to 5 years 10 Gross purchases 2,185 893 10,231 2,551 0 50 2,589 0 00 00 11 Gross sales 0 0 452 0 0 0 0 0 800 0 12 Maturity shift -17,459 -17,058 -17,974 -1,500 -761 -1,900 -1,400 -840 -952 -2,051 13 Exchange 13,853 16,984 18,938 917 1,178 3,278 1,742 749 2,643 2,089 5 to 10 years 14 Gross purchases 458 236 2,441 619 0 0 596 0 0 0 15 Gross sales 100 0 0 0 0 0 0 0 175 0 16 Maturity shift -1,857 -1,620 -3,529 0 -55 -347 0 -110 -987 0 17 Exchange 2,184 2,050 950 0 0 300 0 5 150 0 Over 10 years 18 Gross purchases 293 158 1,858 493 0 0 445 0 0 0 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 0 150 0 0 75 0 All maturities 22 Gross purchases 26,499 24,078 37,171 8,633 1,395 4,108 4,259 0 346 560 23 Gross sales 4,218 2,502 6,802 300 300 0 0 49 1,513 0 24 Redemptions 3,500 1,000 9,099 3,657 0 70 0 600 1,600 0 Matched transactions 25 Gross sales 866,175 927,997 950,923 61,321 77,497 85,288 104,833 78,358 97,892 104,527 26 Gross purchases 865,968 927,247 950,935 61,347 73,779 85,494 105,917 78,513 99,139 104,572 Repurchase agreements2 27 Gross purchases 134,253 170,431 314,620 34,080 65,675 15,853 23,512 10,591 0 0 28 Gross sales 132,351 160,268 324,666 34,080 57,380 18,751 25,264 14,237 0 0 29 Net change in U.S. government securities 20,477 29,989 11,235 4,702 5,673 1,346 3,591 -4,140 -1,520 605 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 56 1 13 131 21 3 Repurchase agreements1 33 Gross purchases 22,183 31,142 8800,,335533 7,174 18,523 6,786 9,718 4,042 00 00 34 Gross sales 20,877 30,522 81,351 7,174 15,607 7,425 10,679 5,357 0 0 35 Net change in federal agency obligations 1,144 222 -1,274 0 2,860 -640 -975 -1,446 -21 -3 36 Total net change in System Open Market Account 21,621 30,211 9,961 4,702 8,533 706 2,617 -5,586 -1,541 602 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 • July 1988 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month Account 1988 1988 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 Feb. Mar. Apr. Consolidated condition statement ASSETS 1 Gold certificate account 11,063 11,063 11,062 11,063 11,063 11,063 11,063 11,063 2 Special drawing rights certificate account 5,018 5,018 5,018 5,018 5,018 5,018 5,018 5,018 3 489 471 470 459 451 517 480 450 Loans 4 To depository institutions 2,134 4,373 3,838 3,602 2,276 336 2,311 2,590 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 7,399 7,399 7,379 7,279 7,279 7,402 7,399 77,,227799 8 Held under repurchase agreements 0 538 0 843 436 0 0 2,795 U.S. Treasury securities Bought outright 9 Bills 104,920 105,790 106,487 106,053 105,970 106,651 107,256 106,386 10 Notes 81,923 81,923 85,086 85,086 87,684 81,923 81,923 87,684 11 Bonds 28,317 28,317 28,835 28,835 29,293 28,317 28,317 29,293 12 Total bought outright2 215,160 216,030 220,408 219,974 222,947 216,891 217,4% 223,363 13 Held under repurchase agreements 0 4,883 0 5,550 1,968 0 0 7,608 14 Total U.S. Treasury securities 215,160 220,913 220,408 225,524 224,915 216,891 217,4% 230,971 15 Total loans and securities 224,693 233,223 231,625 237,248 234,906 224,629 227,206 243,635 16 Items in process of collection 5,994 7,717 6,626 7,560 6,813 5,197 6,267 7,577 17 Bank premises 716 719 718 719 717 712 716 719 Other assets 18 Denominated in foreign currencies 6,621 6,753 6,757 6,590 6,447 6,635 6,652 6,446 19 All other4 7,650 7,656 8,112 8,333 8,781 6,922 7,670 9,071 20 Total assets 262,244 272,620 270,388 276,990 274,196 260,693 265,072 283,979 LIABILITIES 21 Federal Reserve notes 209,117 211,111 211,834 211,118 210,791 206,300 209,719 210,842 Deposits 22 To depository institutions 36,640 43,014 40,871 45,198 37,666 39,701 38,777 41,720 23 U.S. Treasury—General account 3,190 4,016 3,900 5,319 11,343 2,472 2,403 16,186 24 Foreign—Official accounts 207 213 239 204 236 343 534 215 25 Other 479 314 343 398 398 438 436 360 26 Total deposits 40,516 47,557 45,353 51,119 49,643 42,954 42,150 58,481 77 Deferred credit items ^ 5,564 6,711 6,199 7,352 6,574 4,300 5,%9 7,206 28 Other liabilities and accrued dividends 2,547 2,626 2,475 2,871 2,671 2,558 2,607 2,861 29 Total liabilities 257,744 268,005 265,861 272,460 269,679 256,112 260,445 279,390 CAPITAL ACCOUNTS 30 Capital paid in 2,093 2,0% 2,095 2,095 2,0% 2,075 2,095 2,0% 31 Surplus 2,047 2,047 2,047 2,047 2,047 2,047 2,047 2,047 32 Other capital accounts 360 472 385 388 374 459 485 446 33 Total liabilities and capital accounts 262,244 272,620 270,388 276,990 274,1% 260,693 265,072 283,979 34 MEMO: Marketable U.S. Treasury securities held in custody for foreign and international account 225,449 228,237 226,764 229,118 228,833 220,250 226,340 229,054 Federal Reserve note statement 35 Federal Reserve notes outstanding issued to bank 255,333 255,236 256,030 256,470 256,762 254,289 255,201 256,806 36 LESS: Held by bank 46,216 44,125 44,1% 45,352 45,971 47,989 45,482 45,964 37 Federal Reserve notes, net 209,117 211,111 211,834 211,118 210,791 206,300 209,719 210,842 Collateral held against notes net: 38 Gold certificate account 11,063 11,063 11,062 11,063 11,063 11,063 11,063 11,063 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 193,036 195,030 195,754 195,037 194,710 190,219 193,638 194,761 42 Total collateral 209,117 211,111 211,834 211,118 210,791 206,300 209,719 210,842 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 All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holdings Millions of dollars Wednesday End of month Type and maturity groupings 1988 1988 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 Feb. 29 Mar. 31 1 Loans—Total 2,134 4,373 3,838 3,602 2,276 336 2,311 2 Within 15 days 2,113 4,326 3,783 3,585 2,252 303 2,271 3 16 days to 90 days 21 0 47 0 55 0 1 0 7 24 0 33 0 40 0 4 91 days to 1 year 0 0 0 0 0 0 0 5 Acceptances—Total 0 0 0 0 0 0 0 6 Within 15 days 0 0 0 0 0 0 0 7 16 days to 90 days 0 0 0 0 0 0 0 8 91 days to 1 year 9 U.S. Treasury securities—Total .. 215,160 216,030 220,408 225,524 224,915 216,891 217,4% 10 Within 15 days' 10,595 9,369 10,080 12,516 12,283 5,411 7,362 11 16 days to 90 days 51,377 53,101 56,225 56,038 52,676 57,207 51,566 12 91 days to 1 year 65,931 66,264 63,749 66,472 66,873 67,016 71,273 13 Over 1 year to 5 years 47,562 47,600 49,545 49,480 51,196 47,562 47,600 14 Over 5 years to 10 years 14,196 14,1% 14,792 15,001 15,422 14,196 14,1% 15 Over 10 years 25,499 25,500 26,017 26,017 26,465 25,499 25,499 16 Federal agency obligations—Total 7,399 7,399 7,379 8,122 7,715 7,402 7,399 17 Within 15 days1 385 210 130 1,003 577 364 385 18 16 days to 90 days 592 722 692 562 659 710 592 19 91 days to 1 year 1,634 1,679 1,779 1,869 1,837 1,609 1,634 20 Over 1 year to 5 years 3,381 3,381 3,399 3,309 3,292 3,203 3,381 21 Over 5 years to 10 years 1,217 1,217 1,189 1,189 1,161 1,327 1,217 22 Over 10 years 190 190 190 190 189 189 190 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 • July 1988 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1987 198 8 1984 1985 1986 1987 Dec. Dec. Dec. Dec. Sept. Oct. Nov. Dec. Jan. Feb. Mar/ Apr. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 39.91 46.06 56.17 57.44 57.83 58.50 57.99 57.44 58.32 58.44 58.63 59.47 2 Nonborrowed reserves 36.72 44.74 55.34 56.66 56.89 57.55 57.36 56.66 57.23 58.04 56.88 56.48 3 Nonborrowed reserves plus extended credit4 39.33 45.24 55.64 57.14 57.29 58.00 57.76 57.14 57.61 58.25 58.35 59.10 4 Required reserves 39.06 45.00 54.80 56.41 57.03 57.37 57.06 56.41 57.02 57.31 57.70 58.60 5 Monetary base5 199.60 217.34 239.52 256.68 252.25 254.56 256.02 256.68 260.24 261.26 262.40 265.08 Not seasonally adjusted 6 Total reserves3 40.94 47.24 57.64 58.96 57.50 58.04 58.09 58.96 60.17 57.65 57.81 59.89 7 Nonborrowed reserves 37.75 45.92 56.81 58.19 56.56 57.09 57.47 58.19 59.09 57.25 56.06 56.90 8 Nonborrowed reserves plus extended credit4 40.35 46.42 57.11 58.67 56.96 57.54 57.86 58.67 59.46 57.46 57.54 59.52 9 Required reserves 40.08 46.18 56.27 57.94 56.70 56.91 57.17 57.94 58.88 56.51 56.88 59.03 10 Monetary base5 202.70 220.82 243.63 261.21 251.60 253.29 256.82 261.21 261.20 258.19 259.93 264.16 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS6 11 Total reserves3 40.70 48.14 59.56 62.12 59.81 61.11 61.20 62.12 62.64 60.05 60.08 62.07 12 Nonborrowed reserves 37.51 46.82 58.73 61.35 58.87 60.16 60.58 61.35 61.56 59.65 58.32 59.08 13 Nonborrowed reserves plus extended credit4 40.09 47.41 59.04 61.86 58.85 61.22 60.79 61.86 62.12 59.82 59.58 61.90 14 Required reserves 39.84 47.08 58.19 61.09 59.02 59.98 60.28 61.09 61.34 58.91 59.15 61.21 15 Monetary base5 204.18 223.53 247.71 266.16 255.69 258.08 261.67 266.16 265.79 262.60 263.98 268.13 1. Latest monthly and biweekly figures are available from the Board's H.3(502) terms and conditions established for the extended credit program to help statistical release. Historical data and estimates of the impact on required reserves depository institutions deal with sustained liquidity pressures. Because there is of changes in reserve requirements are available from the Monetary and Reserves not the same need to repay such borrowing promptly as there is with traditional Projections Section. Division of Monetary Affairs. Board of Governors of the short-term adjustment credit, the money market impact of extended credit is Federal Reserve System, Washington, D.C. 20551. similar to that of nonborrowed reserves. 2. Figures incorporate adjustments for discontinuities associated with the 5. The monetary base not adjusted for discontinuities consists of total reserves implementation of the Monetary Control Act and other regulatory changes to plus required clearing balances and adjustments to compensate for float at Federal reserve requirements. To adjust for discontinuities due to changes in reserve Reserve Banks and the currency component of the money stock plus, for instirequirements on reservable nondeposit liabilities, the sum of such required tutions not having required reserve balances, the excess of current vault cash over reserves is subtracted from the actual series. Similarly, in adjusting for disconti- the amount applied to satisfy current reserve requirements. Currency and vault nuities in the monetary base, required clearing balances and adjustments to cash figures are measured over the weekly computation period ending Monday. compensate for float also are subtracted from the actual series. The seasonally adjusted monetary base consists of seasonally adjusted total 3. Total reserves not adjusted for discontinuities consist of reserve balances reserves, which include excess reserves on a not seasonally adjusted basis, plus with Federal Reserve Banks, which exclude required clearing balances and the seasonally adjusted currency component of the money stock and the remainadjustments to compensate for float, plus vault cash held during the lagged ing items seasonally adjusted as a whole. computation period by institutions having required reserve balances at Federal 6. Reflects actual reserve requirements, including those on nondeposit liabili- Reserve Banks plus the amount of vault cash equal to required reserves during the ties, with no adjustments to eliminate the effects of discontinuities associated with maintenance period at institutions having no required reserve balances. implementation of the Monetary Control Act or other regulatory changes to 4. Extended credit consists of borrowing at the discount window under the reserve requirements. 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 MEASURES1 Billions of dollars, averages of daily figures 1988 2 1984 1985 1986 1987 Dec. Dec. Dec. Dec. Jan. Feb.' Mar.' Apr. Seasonally adjusted 1 Ml 551.9 620.1 725.4 750.8 758.9 759.6 763.1 770.2 7 M2 2,363.6 2,562.6 2,807.8 2,901.0 2,924.9' 2,946.1 2,967.7 2,992.7 M3 2,978.3 3,196.4 3,491.5 3,660.8 3,686.0 3,717.8 3,741.4 3,763.9 4 L 3,519.4 3,825.9 4,134.9'' 4,325.4 4,363.5 4,398.8 4,428.0 n.a. 5 Debt 5,932.6 6,749.4 7,607.1 8,318.8 8,377. lr 8,452.7 8,523.1 n.a. Ml components 6 Currency3 156.1 167.7 180.4 196.5 198.4 199.3 200.9 202.5 7 Travelers checks 5.2 5.9 6.5 7.1 7.2 7.3 7.3 7.3 8 Demand deposits5 244.1 267.2 303.3 288.0 289.9 287.8 287.9 290.1 9 Other checkable deposits6 146.4 179.2 235.2 259.3 263.4 265.2 267.1 270.3 Nontransactions components 10 In M27 1,811.7 1,942.5 2,082.4 2,150.1 2,166.0'' 2,186.5 2,204.5 2,222.5 11 In M3 only8 614.7 633.8 683.7 759.8 761.r 771.7 773.7 771.2 Savings deposits9 17 Commercial Banks 122.6 124.8 155.5 178.2 179.0 181.0 183.2 184.1 13 Thrift institutions 162.9 176.6 215.2 236.0 235.3 235.2 236.6 238.6 Small denomination time deposits10 14 Commercial Banks 386.3 383.3 364.6 384.6 388.0 393.7 397.5 402.5 15 Thrift institutions 497.0 496.2 488.6 528.5 536.6 547.8 556.0 562.5 Money market mutual funds 16 General purpose and broker-dealer 167.5 176.5 208.0 221.1 225.0 231.1 235.0 236.2 17 Institution-only 62.7 64.5 84.4 89.6 94.4 98.7 97.4 91.9 Large denomination time deposits" 18 Commercial Banks 270.2 284.9 288.9 323.5 320.2 324.8 326.4 325.5 19 Thrift institutions 146.8 151.6 150.3 161.2 162.7' 164.9 165.1 167.2 Debt components 70 Federal debt 1,365.3 1,584.3 1,804.5 1,952.4 1,960.8 1,979.2 2,004.4 n.a. 21 Nonfederal debt 4,567.3 5,165.1 5,802.6 6,366.4 6,416.3'' 6,473.5 6,518.7 n.a. Not seasonally adjusted 7? Ml 564.5 633.5 740.6 765.9 764.8 745.1 752.3 778.4 73 M2 2,373.2 2,573.9 2,821.5 2,914.6 2,937.2' 2,933.4 2,959.1 3,000.3 74 M3 2,991.4 3,211.0 3,508.3 3,677.4 3,698.5 3,706.3 3,734.5 3,768.8 75 L 3,532.7 3,841.4 4,153.0 4,343.5 4,382.2 4,394.5 4,426.7 n.a. 26 5,927.1 6,740.6 7,592.8 8,302.6 8,358.9' 8,416.9 8,491.0 n.a. Ml components 77 Currency3 158.5 170.2 183.0 199.4 197.1 197.2 199.2 201.6 78 Travelers checks4 4.9 5.5 6.0 6.5 6.6 6.8 6.9 6.9 79 Demand deposits5 253.0 276.9 314.4 298.5 295.8 279.1 279.9 291.9 30 Other checkable deposits6 148.2 180.9 237.3 261.6' 265.3 262.0 266.3 278.0 Nontransactions components 31 M2 1,808.7 1,940.3 2,080.8 2,148.7 2,172.4' 2,188.3 2,206.7 2,221.9 32 M3 only8 618.2 637.1 686.8 762.7 761.3' 772.9 775.5 768.5 Money market deposit accounts 33 Commercial Banks 267.4 332.8 379.6 358.2 358.9 359.1 360.8 360.1 34 Thrift institutions 149.4 180.8 192.9 167.0 165.1' 163.5 163.8 163.0 Savings deposits9 Commercial Banks 121.5 123.7 115544..22 176.7 178.1' 179.4 182.5 185.0 36 Thrift institutions 161.5 174.8 212.9 233.3 233.0 232.8 236.1 239.5 Small denomination time deposits10 37 Commercial Banks 386.9 384.0 365.3 385.2 389.4 394.1 397.2 399.6 38 Thrift institutions 498.2 497.5 489.7 529.3 540.1' 550.4 556.6 561.1 Money market mutual funds 39 General purpose and broker-dealer 167.5 176.5 208.0 221.1 225.0 231.1 235.0 236.2 40 Institution-only 62.7 64.5 84.4 89.6 94.4 98.7 97.4 91.9 Large denomination time deposits" 41 Commercial Banks 270.9 285.4 289.1 323.6 321.3 325.1 328.5 325.4 42 Thrift institutions 146.8 151.9 150.7 161.8' 163.8 166.0 165.3 165.7 Debt components 43 Federal debt 1,364.7 1,583.7 1,804.0 1,951.9 1,959.4 1,972.3 1,991.0 n.a. 44 Nonfederal debt 4,562.4 5,156.9 5,788.8 6,350.8 6,399.4' 6,444.6 6,500.0 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • July 1988 NOTES TO TABLE 1.21 1. Latest monthly and weekly figures are available from the Board's H.6 (508) Debt: Debt of domestic nonfinancial sectors consists of outstanding credit release. Historical data are available from the Banking Sections, Division of market debt of the U.S. government, state and local governments, and private Research and Statistics, Board of Governors of the Federal Reserve System, nonfinancial sectors. Private debt consists of corporate bonds, mortgages, con- Washington, D.C. 20551. sumer credit (including bank loans), other bank loans, commercial paper, bankers 2. 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, 3. 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 4. 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. 5. 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 6. 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 7. 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 8. 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 9. Savings deposits exclude MMDAs. worldwide and at all banking offices in the United Kingdom and Canada, and 10. 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 11. 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 12. 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. 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. 1987 1988 BBaannkk ggrroouupp,, oorr ttyyppee ooff ccuussttoommeerr 1199885522 1199886622 1199887722 Sept. Oct. Nov. Dec. Jan. Feb. DEBITS TO Seasonally adjusted Demand deposits 1 All insured banks 156,091.6 188,345.8 217,115.9 219,182.9 234,398.3 219,386.1 203,290.6 213,270.8 221,057.3 2 Major New York City banks 70,585.8 91,397.3 104,496.3 105,149.4 110,833.6 103,693.6 92,640.1 98,733.8 104,568.3 3 Other banks , 85,505.9 96,948.8 112,619.6 114,033.4 123,564.6 115,692.5 110,650.5 114,537.0 116,489.0 4 ATS-NOW accounts4 1,823.5 2,182.5 2,402.7 2,349.0 2,591.3 2,536.1 2,525.7 2,352.7 2,730.3 5 Savings deposits 384.9 403.5 526.5 524.0 582.4 570.8 556.0 534.9 596.0 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 500.3 556.5 612.1 625.3 654.9 619.0 590.4 602.5 628.2 7 Major New York City banks. 2,196.9 2,498.2 2,670.6 2,715.1 2,744.7 2,620.2 2,608.1 2,600.3 2,844.8 8 Other banks 305.7 321.2 357.0 365.7 389.1 367.4 358.3 362.5 369.7 9 ATS-NOW accounts4 15.8 15.6 13.8 13.2 14.4 14.2 14.2 13.0 14.9 10 Savings deposits 3.2 3.0 3.1 3.0 3.3 3.3 3.2 3.0 3.3 Not seasonally adjusted Demand deposits3 11 All insured banks 156,052.3 188,506.4 217,124.8 216,728.0 233,999.8 202,230.1 222,338.9 210,029.1 208,899.2 12 Major New York City banks 70,559.2 91,500.0 104,518.6 104,234.0 111,398.9 96,035.9 102,548.7 40.3 36.8 13 Other banks 85,493.1 97,006.6 112,606.1 112,494.0 122,600.8 106,194.2 119,790.3 112,189.0 110,792.7 14 ATS-NOW accounts4 1,826.4 2,184.6 2,404.8 2,414.9 2,577.7 2,375.8 2,645.3 2,565.2 2,468.6 15 MMDA 1,223.9 1,609.4 1,954.2 1,846.6 2,247.8 1,959.8 2,276.4 2,305.6 2,102.8 16 Savings deposits 385.3 404.1 526.8 519.0 604.3 519.9 568.9 552.5 526.3 DEPOSIT TURNOVER Demand deposits3 17 All insured banks 499.9 556.7 612.3 620.2 657.8 565.6 615.0 578.7 610.5 18 Major New York City banks 2,196.3 2,499.1 2,674.9 2,751.0 2,824.8 2,467.8 2,661.4 2,430.3 2,664.6 19 Other banks , 305.6 321.2 356.9 361.1 387.6 333.3 370.9 347.7 362.8 20 ATS-NOW accounts4 15.8 15.6 13.8 13.7 14.6 13.3 14.6 13.9 13.5 21 MMDA 4.0 4.5 5.3 5.1 6.3 5.5 6.4 6.5 5.9 22 Savings deposits 3.2 3.0 3.1 3.0 3.5 3.0 3.2 3.1 3.0 1. Historical tables containing revised data for earlier periods may be obtained of states and political subdivisions. from the Banking Section, Division of Monetary Affairs, Board of Governors of 4. Accounts authorized for negotiable orders of withdrawal (NOW) and acthe Federal Reserve System, Washington, D.C. 20551. counts authorized for automatic transfer to demand deposits (ATS). ATS data are These data also appear on the Board's G.6 (406) release. For address, see inside available beginning December 1978. front cover. 5. Excludes ATS and NOW accounts, MMDA and special club accounts, such 2. Annual averages of monthly figures. as Christmas and vacation clubs. 3. Represents accounts of individuals, partnerships, and corporations and 6. Money market deposit accounts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • July 1988 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1987 1988 CCaatteeggoorryy May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Seasonally adjusted 1 Total loans and securities2 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 2,257.4r 2,272.4r 2,295.9 2 U.S. government securities 321.3 321.3 322.9 328.5 331.3 331.7 331.1 333.2 334.1 334.0 338.9 343.1 3 Other securities 195.5 195.9 194.3 193.7 193.7 194.2 196.2 196.0 194.0 195.7 197.4 198.2 4 Total loans and leases2 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 l,727.6r 1,736. lr 1,754.6 5 Commercial and industrial ..... 551.9 554.4 553.6 554.0 559.0 562.8 563.1 565.5 568.5 569.7' 567.4' 577.3 6 Bankers acceptances held3... 4.8 4.6 4.5 5.3 5.4 5.5 4.6 4.3 4.5 4.5 4.8 4.7 7 Other commercial and industrial 547.1 549.8 549.1 548.7 553.6 557.3 558.5 561.2 564.0 565.2' 562.5' 572.6 8 U.S. addressees4 539.0 541.3 540.8 540.5 545.6 549.3 550.9 553.0 555.1 556.4' 554.3' 564.5 9 Non-U.S. addressees 8.1 8.4 8.4 8.2 8.0 8.0 7.6 8.2 8.9 8.8 8.2 8.1 10 Real estate 532.6 542.6 549.6 556.8 561.7 569.4 576.2 582.3 586.9 592.4 597.9 604.3 11 Individual 319.1 318.9 319.7 321.5 322.8 324.1 325.0 325.9 327.8 330.2 334.2 337.4 12 Security 43.6 44.0 43.9 45.4 46.1 47.1 39.3 33.4 36.3 41.3 39.8 38.1 13 Nonbank financial institutions 35.8 34.5 32.5 31.5 31.4 31.7 31.9 31.9 32.1 32.7 32.1 31.2 14 Agricultural 30.0 30.0 29.8 29.7 29.6 29.6 29.3 29.2 29.4 29.5 29.5 29.5 15 State and political subdivisions 56.4 56.1 55.5 54.7 54.6 54.1 53.4 51.2 52.0 52.0 51.8 51.6 16 Foreign banks 9.3 9.6 9.0 9.1 9.2 9.6 8.8 8.2 8.3 7.9' 8.2' 8.6 17 Foreign official institutions 6.1 5.9^ 5.7 5.7 5.7 5.8 5.7 5.6 5.6 5.2 5.2 5.3 18 Lease financing receivables 23.7 23.9 23.9 24.0 24.1 24.3 24.5 24.8 25.0 25.0 24.9 25.0 19 All other loans 40.9 39.8 40.7 44.3 45.5 43.2 47.6 43.3 42.2 41.8 45.0 46.3 Not seasonally adjusted 20 Total loans and securities2 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 2,262.0r 2,272.7' 2,297.1 21 U.S. government securities 320.0 318.4 322.1 328.3 331.3 329.3 331.0 333.1 335.6 339.1 340.7 342.6 22 Other securities 195.5 195.3 193.0 193.6 193.8 193.3 195.6 196.6 196.7 196.4 197.0 197.8 23 Total loans and leases2 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 1,726.5' 1,734.9' 4,756.7 24 Commercial and industrial ..... 554.4 555.9 551.3 549.5 555.7 558.7 562.0 569.6 568.1 568.9' 572.5' 581.3 25 Bankers acceptances held ... 4.8 4.7 4.6 5.3 5.5 5.4 4.6 4.4 4.3 4.5 4.8 4.7 26 Other commercial and industrial 549.6 551.2 546.7 544.2 550.2 553.3 557.4 565.2 563.8 564.5r 567.7' 576.6 27 U.S. addressees4 541.4 542.7 538.1 535.9 542.1 545.2 549.2 557.0 555.7 556. lr 559.7r 568.7 28 Non-U.S. addressees 8.2 8.5 8.6 8.3 8.2 8.1 8.2 8.2 8.1 8.3 8.0 7.9 29 Real estate 532.0 542.4 549.7 556.8 562.4 570.0 576.8 583.2 587.3 591.7 597.0 603.3 30 Individual 316.5 316.9 318.4 321.5 324.3 325.7 326.7 330.2 331.2 329.6 331.1 334.4 31 Security 43.9 45.4 43.3 43.3 44.8 45.6 39.4 35.1 37.1 39.7 39.3 39.9 32 Nonbank financial institutions 35.6 34.6 32.3 31.4 31.8 31.7 32.3 33.2 32.4 31.6 31.1 31.1 33 Agricultural 29.7 30.3 30.5 30.6 30.7 30.4 29.6 29.0 28.6 28.5 28.5 28.7 34 State and political subdivisions 56.4 55.7 54.7 54.1 53.8 53.2 52.3 51.2 53.8 53.2 52.7 52.1 35 Foreign banks 9.0 9.5 9.0 8.9 9.5 9.8 8.8 8.6 8.5 8.2 8.1 8.2 36 Foreign official institutions 6.1 5.9^ 5.7 5.7 5.7 5.8 5.7 5.6 5.6 5.2 5.2 5.3 37 Lease financing receivables .... 23.8 24.0 23.9 23.9 24.0 23.9 24.2 24.8 25.2 25.1 25.1 25.2 38 All other loans 40.5 39.5 38.9 41.0 43.9 44.8 46.8 46.8 44.7 44.7 44.2 47.3 1. These data also appear in the Board's G.7 (407) release. For address, see 3. Includes nonfinancial commercial paper held. inside front cover. 4. United States includes the 50 states and the District of Columbia. 2. Excludes loans to commercial banks in the United States. 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 May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Total nondeposit funds 1 Seasonally adjusted2 170.7r 167.2 160.4 166.8' 177.4' 176.3' 173.8' 177.2' 177.5' 174.7' 171.8' 179.1 2 Not seasonally adjusted 170.8r 164.1 156.8' 166.9r 177.8' 176.4' 176.1' 178.0 177.8 177.2 172.7' 178.2 Federal funds, RPs, and other borrowings from nonbanks 3 Seasonally adjusted 170.6 168.4 167.3' 167.1 165.1' 164.7' lW.y 162.C 169.3' 172.9' 176.3' 178.7 4 Not seasonally adjusted 170.7' 165.3 163.6 167.2 165.5' 164.8' 168.2' 162.9' 169.6' 175.4' 177.2' 177.9 5 Net balances due to foreign-related institutions, not seasonally adjusted .1 -1.2 -6.9 -.3 12.3 11.6 7.9 15.1' 8.2' 1.8' -4.5 .3 MEMO 6 Domestically chartered banks' net positions with own foreign branches, not seasonally adjusted -15.5 -15.5 -22.2 -17.7 -11.8 -14.7 -17.1 -14.1 -17.4 -21.5 -26.7 -23.9 7 Gross due from balances 68.5 67.1 66.4 64.5 63.8 67.7 70.4 69.6 72.1 74.1 78.0 74.5 8 Gross due to balances 53.0 51.5 44.2 46.8 52.0 53.0 53.3 55.5 54.7 52.7 51.3 50.6 9 Foreign-related institutions' net positions with directly related institutions, not seasonally adjusted3 15.5 14.3 15.4 17.4 24.1 26.3 24^ 29.2' 25.6' 23.3' 22.1 24.2 10 Gross due from balances 76.0 77.4 77.4 77.7 77.3 79.7 83.2 79.8' 85.2 87.3 88.6 88.3 11 Gross due to balances 91.5 91.8 92.8 95.0 101.4 106.0 108.2 109.0 110.9 110.6' 110.7' 112.4 Security RP borrowings 12 Seasonally adjusted® 99.9 101.9 103.0 105.2 107.5 107.6 106.9 106.4 108.7 107.2 107.6 111.4 13 Not seasonally adjusted . 100.0 98.8 99.4 105.3 107.9 107.7 109.3 107.2 109.0 109.8 108.4 110.6 U.S. Treasury demand balances 14 Seasonally adjusted 25.3 26.9 24.4 28.5 24.9 34.2 35.7 26.1 18.6 22.6 24.9 21.8 15 Not seasonally adjusted 30.8 25.5 26.6 21.6 25.5 30.7 25.8 22.4 24.9 28.2 22.3 21.7 Time deposits, $100,000 or more8 16 Seasonally adjusted 365.7 372.1 372.5 372.3 373.0 380.5 387.0 389.2 389.1 394.4 396.1 394.1 17 Not seasonally adjusted 366.3 371.4 370.0 371.8 373.2 380.4 387.0 389.3 390.1' 394.7 398.2' 394.0 1. Commercial banks are those in the 50 states and the District of Columbia business. This includes borrowings from Federal Reserve Banks and from with national or state charters plus agencies and branches of foreign banks. New foreignbanks, term federal funds, overdrawn due from bank balances, loan RPs, York investment companies majority owned by foreign banks, and Edge Act and participations in pooled loans. corporations owned by domestically chartered and foreign banks. 4. Averages of daily figures for member and nonmember banks. These data also appear in the Board's G. 10(411) release. For address, see 5. Averages of daily data. inside front cover. 6. Based on daily average data reported by 122 large banks. 2. Includes seasonally adjusted federal funds, RPs, and other borrowings from 7. Includes U.S. Treasury demand deposits and Treasury tax-and-loan notes at nonbanks and not seasonally adjusted net Eurodollars. commercial banks. Averages of daily data. 3. Other borrowings are borrowings on any instrument, such as a promissory 8. Averages of Wednesday figures. note or due bill, given for the purpose of borrowing money for the banking Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • July 1988 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series1 Billions of dollars 1987 1988 AAccccoouunntt June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. ALL COMMERCIAL BANKING INSTITUTIONS2 1 Loans and securities 2,321.0 2,331.6 2,348.8 2,374.8 2,402.4 2,389.9 2,430.5 2,415.2 2,420.3' 2,442.3'' 2,461.4 2 Investment securities 492.7 497.1 501.1 501.7 503.8 508.0 514.4 515.2 513.9 518.3 520.3 3 U.S. government securities 304.6 309.4 313.7 313.8 316.0 317.3 321.4 322.9 322.2 324.7 328.2 4 Other 188.0 187.7 187.4 187.9 187.9 190.7 193.1 192.4 191.8 193.7 192.2 5 Trading account assets 20.2 20.4 19.5 19.5 19.6 20.3 16.9 18.3 22.0 20.3 19.6 6 Total loans 1,808.2 1,814.1 1,828.2 1,853.6 1,878.9 1,861.6 1,899.2 1,881.6 L,884.4R 1,903.7' 1,921.5 7 Interbank loans 150.7 156.5 160.8 157.4 172.9 162.0 172.1 160.5 162.5 160.6 161.6 8 Loans excluding interbank 1,657.5 1,657.6 1,667.5 1,696.2 1,706.1 1,699.7 1,727.2 1,721.1 1,721.9' 1,743.1' 1,759.9 9 Commercial and industrial 554.6 548.1 548.2 560.7 559.7 561.1 576.4 565.3 568.7R 575.6' 582.4 10 Real estate 544.4 552.9 558.2 564.1 571.7 577.4 586.3 588.5 591.9 599.5 606.1 11 Individual 317.3 319.4 322.1 325.3 326.7 326.9 332.4 330.8 329.8 332.5 335.6 12 All other 241.1 237.2 239.0 246.0 248.0 234.3 232.1 236.5 231.4 235.6 235.7 13 Total cash assets 214.2 208.4 210.7 223.8 223.5 215.2 232.5 209.6 202.3 207.5 210.4 14 Reserves with Federal Reserve Banks. 33.5 32.5 37.3 32.9 38.3 33.8 36.2 33.3 32.8 32.1 32.2 15 Cash in vault 24.2 24.5 24.7 24.5 25.0 24.0 28.5 25.8 25.1 24.8 25.4 16 Cash items in process of collection ... 74.7 69.0 65.9 81.6 79.0 76.1 79.9 70.7 66.8 74.1 76.4 17 Demand balances at U.S. depository institutions 30.4 31.0 30.8 32.7 32.3 32.9 36.6 31.4 30.1 31.7 30.6 18 Other cash assets 51.4 51.5 52.1 52.1 48.9 48.4 51.4 48.5 47.6 45.0 45.8 19 Other assets 197.4 182.5 184.5 193.6 186.3 187.5 184.0 176.0 178.5R 188.3' 183.9 20 Total assets/total liabilities and capital 2,732.6 2,722.6 2,744.0 2,792.2 2,812.2 2,792.6 2,847.1 2,800.7 2,801.2 2,838.2 2,855.7 21 Deposits 1,927.4 1,928.8 1,930.4 1,972.4 1,971.2 1,974.1 2,009.1 1,968.1 1,973.9 2,003.9 2,007.2 22 Transaction deposits 579.6 575.3 574.1 612.4 598.1 592.0 623.3 576.0 567.3 587.6 595.0 23 Savings deposits 537.6 538.7 537.9 535.3 531.7 531.1 528.0 531.4 535.2 539.6 536.1 24 Time deposits 810.1 814.8 818.4 824.7 841.4 851.0 857.9 860.6 871.4 876.8 876.2 25 Borrowings 419.5 414.6 426.4 416.3 435.7 420.1 426.2 443.2 440.9 444.8 454.7 26 Other liabilities 202.0 202.5 209.6 224.7 225.5 218.9 231.5 208.7 205.3 209.5 212.3 27 Residual (assets less liabilities) 183.7 176.7 177.6 178.8 179.8 179.5 180.4 180.7 181.1 180.0 181.4 MEMO 28 U.S. government securities (including trading account) 317.0 323.8 326.8 327.7 329.9 331.7 332.4 336.9 339.3 340.2 342.8 29 Other securities (including trading account) 195.8 193.8 193.8 193.5 193.5 196.6 198.9 196.7 196.6 198.4 197.1 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 2,157.0 2,162.8 2,179.6 2,195.4 2,218.6 2,213.8 2,238.5 2,231.2 2,235.6 2,255.6 2,272.0 31 Investment securities 468.1 472.1 476.2 475.9 478.7 482.6 488.3 487.0 485.9 490.3 493.8 32 U.S. Treasury securities 295.1 299.4 303.5 302.9 305.7 306.4 311.0 311.3 310.7 313.2 316.8 33 Other 173.0 172.7 172.6 173.0 173.0 176.2 177.3 175.8 175.2 177.1 177.0 34 Trading account assets 20.2 20.4 19.5 19.5 19.6 20.3 16.9 18.3 22.0 20.3 19.6 35 Total loans 1,668.7 1,670.3 1,684.0 1,700.0 1,720.3 1,711.0 1,733.3 1,725.9 1,727.6 1,745.0 1,758.6 36 Interbank loans 120.9 122.0 128.6 125.0 133.3 130.5 135.3 131.0 133.1 131.8 129.0 37 Loans excluding interbank 1,547.8 1,548.3 1,555.4 1,575.0 1,587.0 1,580.4 1,598.0 1,594.9 1,594.5 1,613.2 1,629.6 38 Commercial and industrial 471.3 465.2 464.4 470.2 470.6 472.0 479.4 472.6 475.4 481.0 487.2 39 Real estate 535.5 543.5 548.4 554.0 561.9 567.3 575.0 577.1 579.8 587.4 593.2 40 Individual 317.0 319.1 321.8 325.0 326.4 326.6 332.1 330.5 329.5 332.1 335.3 41 All other 224.0 220.4 220.8 225.8 228.1 214.6 211.6 214.7 209.8 212.7 213.9 42 Total cash assets 197.7 191.6 192.7 204.8 207.8 199.3 214.9 191.9 184.4 191.7 194.3 43 Reserves with Federal Reserve Banks. 32.1 31.3 36.2 30.9 36.5 31.5 35.1 31.7 30.5 30.1 30.8 44 Cash in vault 24.1 24.4 24.6 24.4 24.9 24.0 28.4 25.7 25.1 24.7 25.4 45 Cash items in process of collection ... 74.2 68.5 65.4 81.0 78.4 75.7 79.5 70.2 66.3 73.5 75.9 46 Demand balances at U.S. depository institutions 28.7 29.3 29.2 30.8 30.6 31.4 34.7 29.7 28.5 30.0 29.0 47 Other cash assets 38.6 38.0 37.2 37.7 37.3 36.7 37.3 34.6 34.0 33.3 33.2 48 Other assets 132.8 120.5 119.9 134.2 130.0 123.7 127.2 118.8 122.0 126.6 125.0 49 Total assets/liabilities and capital 2,487.5 2,474.9 2,492.2 2,534.5 2,556.4 2,536.8 2,580.7 2,542.0 2,541.9 2,573.9 2,591.2 50 Deposits 1,865.7 1,868.3 1,868.8 1,910.3 1,909.1 1,912.4 1,944.6 1,905.9 1,911.2 1,939.9 1,943.7 51 Transaction deposits 571.4 567.4 566.0 603.9 589.5 583.7 614.9 567.7 559.4 579.1 586.4 52 Savings deposits 535.6 536.6 535.7 533.2 529.5 528.8 525.7 529.1 532.8 537.2 533.6 53 Time deposits 758.7 764.3 767.1 773.3 790.1 799.9 804.1 809.1 819.0 823.6 823.7 54 Borrowings 327.0 318.9 333.0 324.7 345.7 323.2 331.9 344.7 342.9 343.4 351.0 55 Other liabilities 114.4 114.2 116.0 123.8 125.0 124.8 127.0 113.9 109.9 113.8 118.2 56 Residual (assets less liabilities) 180.5 173.5 174.4 175.6 176.6 176.3 177.2 177.5 177.9 176.8 178.2 1. Back data are available from the Banking and Monetary Statistics section, the last Wednesday of the month based on a weekly reporting sample of Board of Governors of the Federal Reserve System, Washington, D.C., 20551. foreign-related institutions and quarter-end condition reports. These data also appear in the Board's weekly H.8 (510) release. 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. condition report data. Data for other banking institutions are estimates made for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A19 1.26 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS1 Millions of dollars, Wednesday figures 1988 AAccccoouunntt Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 1 Cash and balances due from depository institutions 104,813 92,066 108,164 98,632 101,556 104,282 104,440 106,098 101,849 2 Total loans, leases, and securities, net 1,103,004 1,101,424 1,101,833 1,097,126 1,100,538 1,114,436 1,104,060 1,121,705 1,111,818 3 U.S. Treasury and government agency 132,810 132,663 132,140 130,920 129,797 131,553 131,424 132,821 130,107 4 Trading account 18,052 17,195 17,361 16,329 15,539 16,260 16,2% 16,966 14,609 1 Investment account 114,758 115,467 114,779 114,591 114,258 115,292 115,128 115,854 115,498 6 Mortgage-backed securities2 39,222 39,297 39,416 40,190 40,401 40,423 40,418 40,247 40,933 All other maturing in 7 One year or less 17,639 17,696 17,570 17,480 17,194 17,964 17,636 17,972 17,289 8 Over one through five years 48,046 48,503 47,796 46,930 46,647 46,985 47,050 47,640 46,992 9 Over five years 9,851 9,972 9,998 9,991 10,016 9,920 10,024 9,9% 10,285 10 Other securities 72,519 72,149 72,037 72,078 72,732 72,278 72,461 72,102 72,026 n11 I T n r v a e d s in tm g e a n c t c o a u cc n o t unt 70 2 , , 5 0 1 0 6 3 70 1 , , 2 8 9 5 2 7 70 1 , , 2 7 4 9 7 0 70 1 , , 3 7 1 5 9 9 71 1 , , 0 7 1 1 4 7 70 1 , , 9 3 6 0 9 9 71 1 , , 0 4 5 0 6 5 70 1 , , 4 6 6 3 6 6 70 1 , , 3 6 3 9 5 1 13 States and political subdivisions, by maturity 49,554 49,504 49,450 49,406 49,399 49,101 49,094 49,021 49,002 14 One year or less 5,984 6,014 5,977 5,965 5,981 5,932 5,923 5,930 5,906 11 Over one year 43,570 43,490 43,473 43,441 43,418 43,169 43,171 43,091 43,0% 16 Other bonds, corporate stocks, and securities 20,962 20,788 20,796 20,913 21,616 21,868 21,961 21,445 21,333 17 Other trading account assets 3,3%' 3,182' 2,844' 2,948' 3,052' 3,393 3,140 3,319 3,261 18 Federal funds sold3 71,232 71,552 70,146 68,735 68,683 74,212 67,172 78,699 72,713 19 To commercial banks 44,453 46,457 45,312 42,230 41,875 48,366 39,466 50,284 44,020 70 To nonbank brokers and dealers in securities 19,510 17,717 18,274 18,476 18,163 17,190 18,988 19,689 20,206 71 To others 7,269 7,378 6,560 8,028 8,645 8,656 8,719 8,726 8,487 77 Other loans and leases, gross 864,226' 863,089' 865,875' 863,833' 867,659' 874,637 871,465 876,370 875,316 73 Other loans, gross 843,383'' 842,246' 844,995' 842,885' 846,626' 853,555 850,367 855,197 854,102 74 Commercial and industrial 292,672' 291,632' 292,477' 291,342' 293,278' 298,507 2%,910 298,190 297,937 7.1 Bankers acceptances and commercial paper 2,234' 2,369' 2,396' 2,342' 2,430' 2,410 2,357 2,322 2,291 76 All other 290,438' 289,263' 290,08c 289,000' 290,848' 2%,097 294,552 295,867 295,646 77 U.S. addressees 287,604' 286,555' 287,430' 286,364' 288,209' 293,431 291,847 293,181 292,972 28 Non-U.S. addressees 2,834 2,708 2,651 2,636 2,638 2,666 2,706 2,686 2,674 79 Real estate loans 269,767' 270,104' 270,882' 271,286' 271,591' 271,223 272,212 272,949 273,834 30 Revolving, home equity 17,836' 17,899' 17,974' 18,048' 18,178' 18,291 18,453 18,713 18,891 31 All other 251,931' 252,205' 252,907' 253,238' 253,413' 252,932 253,759 254,236 254,943 32 To individuals for personal expenditures 159,679' 159,519' 159,717' 159,902' 160,423' 160,584 161,107 161,856 162,125 33 To depository and financial institutions 49,592' 48,637' 49,375' 48,733' 48,427' 50,727 49,310 49,494 48,851 34 Commercial banks in the United States 22,846' 22,792' 23,333' 22,625' 22,633' 23,744 23,235 23,348 22,692 31 Banks in foreign countries 4,516' 3,758' 3,535' 4,124' 3,521' 4,505 3,592 3,832 4,128 36 Nonbank depository and other financial institutions ... 22,230 22,087 22,507 21,984 22,274 22,478 22,484 22,314 22,031 37 For purchasing and carrying securities 12,805 13,823 13,641 13,440 14,216 13,493 12,742 13,416 13,081 38 To finance agricultural production 5,382' 5,423' 5,446' 5,443' 5,415' 5,455 5,544 5,530 5,533 39 To states and political subdivisions 31,941 31,837 31,818 31,804 31,632 31,558 31,444 31,442 31,258 40 To foreign governments and official institutions 2,318' 2,278' 2,335' 2,299' 2,199' 2,262 2,138 2,238 2,157 41 All other 19,226' 18,991' 19,304' 18,636 19,444 19,746 18,958 20,082 19,325 47 Lease financing receivables 20,843' 20,843' 20,880' 20,948' 21,034' 21,082 21,098 21,173 21,214 43 LESS: Unearned income 4,699' 4,755' 4,769' 4,774' 4,796' 4,750 4,786 4,805 4,826 44 Loan and lease reserve 36,481 36,455 36,440 36,614 36,588 36,887 36,816 36,801 36,779 41 Other loans and leases, net 823,047' 821,878' 824,666' 822,445' 826,276' 833,000 829,863 834,764 833,710 46 All other assets 125,534 128,106 128,800 126,254 125,193' 128,322 127,105 128,850 126,401 47 Total assets 1,333,352 1,321,596 1,338,797 1,322,012 1,327,287' 1,347,040 1,335,605 1,356,653 1,340,068 48 Demand deposits 230,239 215,428 230,735 214,738 223,226 229,555 228,342 232,0% 225,052 49 Individuals, partnerships, and corporations 180,012 172,798 178,766 167,993 175,045 181,381 183,731 181,033 176,867 10 States and political subdivisions 6,447 5,716 6,445 6,378 5,882 5,743 5,848 6,582 6,317 11 U.S. government 1,895 1,662 3,988 2,889 3,069 2,630 1,991 6,195 4,010 12 Depository institutions in the United States 24,266 20,928 23,633 22,176 21,954 22,663 21,402 21,699 21,590 13 Banks in foreign countries 6,986 5,938 6,600 6,463 5,991 6,758 5,551 6,481 6,362 14 Foreign governments and official institutions 674 722 650 605 943 1,035 1,021 818 754 11 Certified and officers' checks 9,957 7,665 10,652 8,234 10,342 9,344 8,797 9,289 9,152 16 Transaction balances other than demand deposits 72,107 71,637 71,532 70,745 70,977 75,140 75,661 76,677 72,244 17 Nontransaction balances 589,962 592,140 592,961 592,729 590,904 592,986 592,384 589,326 589,408 18 Individuals, partnerships, and corporations 549,567 551,625 552,525 552,380 550,777' 553,506 553,091 550,003 549,658 19 States and political subdivisions 29,698 29,797 29,722 29,612 29,340' 28,971 28,676 28,622 29,070 60 U.S. government 913 911 928 941 933 942 942 959 964 61 Depository institutions in the United States 9,003 9,037 9,026 9,059 9,099 8,817 8,942 8,912 8,890 62 Foreign governments, official institutions, and banks 780 770 759 736 756 751 733 830 824 63 Liabilities for borrowed money 275,166 277,147 278,288 276,351 273,862 280,595 273,503 290,369 278,818 64 Borrowings from Federal Reserve Banks 265 1,950 2,775 2,839 1,900 4,055 3,640 3,192 1,900 61 Treasury tax-and-loan notes 16,915 11,990 19,154 19,119 16,778' 4,249 4,678 23,522 25,085 66 All other liabilities for borrowed money5 257,986 263,206 256,358 254,393 255,183' 272,291 265,185 263,655 251,833 67 Other liabilities and subordinated notes and debentures 79,884 79,717 79,842 81,928 83,336 82,819 79,422 82,073 88,583 68 Total liabilities 1,247,357 1,236,069 1,253,358 1,236,492 1,242,305 1,261,095 1,249,312 1,270,541 1,254,106 69 Residual (total assets minus total liabilities)6 85,995 85,527 85,439 85,520 84,982' 85,944 86,293 86,112 85,%2 MEMO 70 Total loans and leases (gross) and investments adjusted7 ... 1,076,885' 1,073,386' 1,074,396' 1,073,659' 1,077,414' 1,083,963 1,082,%2 1,089,679 1,086,711 71 Total loans and leases (gross) adjusted7 868,160' 865,392' 867,376' 867,713' 871,834' 876,739 875,937 881,437 881,316 72 Time deposits in amounts of $100,000 or more 182,538' 183,026' 183,094' 182,904' 181,514' 180,282 178,819 178,850 179,997 73 U.S. Treasury securities maturing in one year or less 17,812 18,117 18,109 17,601 17,487 18,110 17,280 18,104 16,304 74 Loans sold outright to affiliates—total8 1,538 1,530 1,554 1,537 1,588 1,556 1,556 1,450 1,538 71 Commercial and industrial 1,049 1,040 1,056 1,044 1,100 1,094 1,095 990 1,069 76 Other 490 490 498 493 488 462 461 460 469 77 Nontransaction savings deposits (including MMDAs) 250,104' 251,371' 251,795' 251,486' 250,827' 253,746 253,993 250,522 249,289 1. Beginning Jan. 6, 1988, the "Large bank" reporting group was revised repurchase; for information on these liabilities at banks with assets of $1 billion or somewhat, eliminating some former reporters with less than $2 billion of assets more on Dec. 31, 1977, see table 1.13. and adding some new reporters with assets greater than $3 billion. 6. This is not a measure of equity capital for use in capital-adequacy analysis or 2. Includes U.S. government-issued or guaranteed certificates of participation for other analytic uses. in pools of residential mortgages. 7. Exclusive of loans and federal funds transactions with domestic commercial 3. Includes securities purchased under agreements to resell. banks. 4. Includes allocated transfer risk reserve. 8. Loans sold are those sold outright to a bank's own foreign branches, 5. Includes federal funds purchased and securities sold under agreements to nonconsolidated nonbank affiliates of the bank, the bank's holding company (if not a bank), and nonconsolidated nonbank subsidiaries of the holding company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • July 1988 1.28 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY1 Millions of dollars, Wednesday figures 1988 Account Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 1 Cash balances due from depository institutions 24,393 20,270 28,639 23,732 24,166 22,001 22,492 22,408 2 Total loans, leases and securities, net2 219,235 217,875 216,161 219,362 222,439 226,434 220,272 229,251 Securities 3 U.S. Treasury and government agency3 0 0 0 0 0 0 0 0 4 Trading account3 0 0 0 0 0 0 0 0 5 Investment account 15,034 15,080 15,402 15,923 15,966 16,068 16,088 16,068 6 Mortgage-backed securities4 5,954 5,954 6,116 6,464 6,483 6,505 6,501 6,4% All other maturing in 7 One year or less 2,489 2,494 2,463 2,515 2,517 2,683 2,576 2,563 8 Over one through five years 4,613 4,606 4,744 4,787 4,826 4,757 4,792 4,848 1 9 0 Other s O ec v u e r r it f i i e v s e 3 years 1,978 0 2,026 0 2,079 0 2,158 0 2,140 0 2,124 0 2,21 0 8 2,16 0 1 11 Trading account3 0 0 0 0 0 0 0 0 12 Investment account 17,493 17,357 17,271 17,219 17,306 17,342 17,408 16,907 13 States and political subdivisions, by maturity 13,617 13,585 13,593 13,552 13,597 13,546 13,550 13,542 14 One year or less 1,242 1,255 1,269 1,265 1,281 1,276 1,253 1,264 15 Over one year 12,375 12,329 12,324 12,286 12,317 12,270 12,2% 12,278 16 Other bonds, corporate stocks, and securities 3,876 3,772 3,678 3,667 3,709 3,7% 3,859 3,365 17 Other trading account assets3 0 0 0 0 0 0 0 0 Loans and leases 18 Federal funds sold5 28,620 29,161 26,430 28,988 31,102 31,448 28,331 36,798 19 To commercial banks 12,323 13,650 11,284 13,622 13,964 15,012 10,526 18,556 20 To nonbank brokers and dealers in securities 11,397 10,489 10,553 10,288 11,033 10,430 11,674 12,446 21 To others 4,899 5,022 4,594 5,078 6,105 6,005 6,131 5,7% 22 Other loans and leases, gross 173,798 172,048 172,825 172,952 173,779 177,016 173,840 174,893 23 Other loans, gross 168,888 167,133 167,895 168,016 168,829 172,101 168,912 169,953 24 Commercial and industrial 57,754 56,498 56,484 56,314 56,806 59,378 58,014 58,343 25 Bankers acceptances and commercial paper 460 478 543 482 505 463 463 526 26 All other 57,294 56,020 55,940 55,832 56,301 58,915 57,551 57,817 27 U.S. addressees 56,766 55,518 55,472 55,354 55,744 58,394 57,087 57,317 28 Non-U.S. addressees 529 502 468 478 558 521 464 499 29 Real estate loans 47,133 47,307 47,393 47,487 47,513 47,317 47,402 47,393 30 Revolving, home equity 2,868 2,877 2,891 2,900 2,913 2,949 3,008 3,036 31 Mother 44,265 44,430 44,503 44,587 44,600 44,368 44,394 44,357 32 To individuals for personal expenditures 22,651 22,657 22,656 22,694 22,820 22,988 23,095 23,168 33 To depository and financial institutions 22,158 21,366 21,861 21,964 21,444 22,500 21,605 21,778 34 Commercial banks in the United States 12,648 12,741 13,290 12,819 12,839 13,083 12,973 12,838 35 Banks in foreign countries 2,910 2,100 1.938 2,582 2,124 2,993 2,103 2,392 36 Nonbank depository and other financial institutions 6,599 6,525 6,632 6,563 6,482 6,424 6,529 6,548 37 For purchasing and carrying securities 4,870 5,020 5,159 5,386 6,078 5,378 4.927 4,994 38 To finance agricultural production 298 298 292 293 291 290 309 304 39 To states and political subdivisions 7,348 7,344 7,394 7,388 7,318 7,319 7,273 7,301 40 To foreign governments and official institutions 703 634 717 675 592 670 574 673 41 All other 5,971 6,010 5.939 5,814 5,968 6,262 5,711 5,997 42 Lease financing receivables 4,910 4,915 4,930 4,936 4,950 4,915 4.928 4,940 43 LESS: Unearned income 1,572 1,614 1,627 1,632 1,644 1,632 1,649 1,662 44 Loan and lease reserve 14,138 14,157 14,141 14,088 14,070 13,808 13,746 13,753 45 Other loans and leases, net6 158,088 156,277 157,057 157,232 158,064 161,576 158,445 159,478 46 All other assets 62,542 61,731 63,145 58,625 57,769 59,826 59,515 59,149 47 Total assets 306,169 299,875 307,945 301,719 304,374 308,261 302,280 310,807 Deposits 48 Demand deposits 57,636 52,316 60,028 54,327 56,881 56,090 53,871 56,852 49 Individuals, partnerships, and corporations 39,756 38,014 40,666 36,629 39,052 38,910 38,842 39,088 50 States and political subdivisions 926 921 1,180 1,302 1,177 893 8% 1,016 51 U.S. government 230 282 675 547 603 615 370 1,421 52 Depository institutions in the United States 5,897 4,834 6,216 6,464 5,428 5,403 4,913 5,464 53 Banks in foreign countries 5,810 4,667 5,194 5,336 4,802 5,576 4,436 5,227 54 Foreign governments and official institutions 526 593 524 465 753 870 888 668 55 Certified and officers' checks 4,490 3,005 5,572 3,583 5,067 3,823 3,526 3,969 56 Transaction balances other than demand deposits (ATS, NOW, Super NOW, telephone transfers) 9,459 9,465 9,450 9,353 9,418 9,929 10,221 10,301 57 Nontransaction balances 109,419 109,451 109,745 109,511 108,853 109,771 110,198 109,713 58 Individuals, partnerships, and corporations 100,608 100,590 100,836 100,655 100,094 100,980 101,340 100,834 59 States and political subdivisions 6,984 6,966 7,001 6,930 6,860 6,883 6,916 6,935 60 U.S. government 31 32 30 36 32 34 28 29 61 Depository institutions in the United States 1,503 1,576 1,600 1,617 1,576 1,579 1,640 1,640 62 Foreign governments, official institutions, and banks ... 291 287 278 272 289 295 274 275 6 6 4 3 Lia B b o i r li r t o ie w s i n f g o s r b fr o o r m ro w Fe e d d e m ra o l n R e e y serve Banks 74,77 0 1 76 1 , , 0 1 2 4 6 0 73,657 0 71,3 7 6 0 0 0 71,957 0 74,593 0 73,376 0 77,7 9 0 9 6 0 65 Treasury tax-and-loan notes 4,320 3,223 5,656 5,597 4,868' 1,005 1,268 6,356 66 All other liabilities for borrowed money 70,452 71,664 68,001 65,063 67,089' 73,588 72,108 70,360 67 Other liabilities and subordinated notes and debentures ... 30,452 28,077 30,489 32,594 32,942 32,933 29,508 31,212 68 Total liabilities 281,738 275,336 283,369 277,144 280,052 283,317 277,173 285,784 69 Residual (total assets minus total liabilities)9 24,432 24,540 24,576 24,575 24,322 24,944 25,106 25,023 MEMO 70 Total loans and leases (gross) and investments adjusted2,10 209,974 207,255 207,354 208,641 211,350 213,779 212,168 213,272 71 Total loans and leases (gross) adjusted10 177,446 174,818 174,681 175,498 178,078 180,368 178,672 180,2% 72 Time deposits in amounts of $100,000 or more 39,077 38,985 39,591 39,102 38,474 38,553 38,717 38,861 73 U.S. Treasury securities maturing in one year or less 4,080 4,454 4,585 4,368 4,666 4,788 4,087 4,250 1. These data also appear in the Board's H.4.2 (504) release. For address, see 7. Includes trading account securities. inside front cover. 8. Includes federal funds purchased and securities sold under agreements to 2. Excludes trading account securities. repurchase. 3. Not available due to confidentiality. 9. Not a measure of equity capital for use in capital adequacy analysis or for 4. Includes U.S. government-issued or guaranteed certificates of participation other analytic uses. Digitized for FRiAn SpoEolRs o f residential mortgages. 10. Exclusive of loans and federal funds transactions with domestic commer- 5. Includes securities purchased under agreements to resell. cial banks. http://fraser.stloui6s. feIndcl.uodregs /a llocated transfer risk reserve. 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 1988 AAccccoouunntt Mar. 2 Mar. 9 Mar. 16 Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 1 Cash and due from depository institutions ... 10,457 9,641 9,690 10,453 9,976 10,440 10,711 10,845 10,110 2 Total loans and securities 100,183r 100,341' 101,657 103,260 102,722 104,187 103,531 103,597 102,439 3 U.S. Treasury and government agency securities 7,722 8,096 8,130 8,134 7,762 77,,553344 7,790 77,,776633 77,,663388 4 Other securities 7,931 7,895 7,901 7,894 7,899 7,864 7,804 7,691 7,603 5 Federal funds sold2 5,823 7,038 7,907 9,530 7,298 9,570 8,873 10,014 9,263 6 To commercial banks in the United States . 3,947 5,004 6,016 7,554 4,924 6,785 6,072 7,081 6,367 7 To others 1,876 2,034 1,890 1,976 2,374 2,786 2,801 2,934 2,896 8 Other loans, gross 78,707' 77,312' 77,720 77,702 79,764 79,219 79,064 78,129 77,934 9 Commercial and industrial 51,235' 50,113r 51,236' 50,367' 51,585' 51,888 51,181 50,608 51,877 10 Bankers acceptances and commercial paper 1,667 1,634 1,571 1,625 1,649 1,702 1,551 1,546 1,453 11 All other 49,568' 48,478' 49,665r 48,742' 49,936' 50,185 49,630 49,063 50,424 12 U.S. addressees 47,077' 46,049' 47,201r 46,415' 47,527' 47,691 47,095 46,786 48,088 13 Non-U.S. addressees "... 2,491 2,429 2,464 2,327 2,409 2,494 2,535 2,277 2,336 14 To financial institutions 15,984 15,923 15,282 15,954 16,930 15,700 16,128 15,545 14,728 15 Commercial banks in the United States.. 11,767 11,800 11,343 11,600 12,390 11,390 11,878 11,302 10,760 16 Banks in foreign countries 1,052 1,031 994 1,313 1,398 1,270 1,284 1,159 925 17 Nonbank financial institutions 3,165 3,092 2,945 3,041 3,142' 3,040 2,966 3,084 3,042 18 To foreign governments and official institutions 429 422 460 464 484 518 513 551122 518 19 For purchasing and carrying securities 1,887 1,787 1,624 1,680 1,546 1,449 1,740 1,895 1,453 20 All other 9,172' 9,067' 9,117' 9,237' 9,22c 9,664 9,502 9,568 9,358 21 Other assets (claims on nonrelated parties) .. 30,539' 30,846' 30,792' 30,743' 30,902 29,600 30,070 30,505 30,998 22 Net due from related institutions 16,400 16,028 17,253 16,306 16,081 16,840 14,047 15,454 16,300 23 Total assets 157,580' 156,856' 159,392' 160,763' 159,682 161,068 158,359 160,402 159,848 24 Deposits or credit balances due to other than directly related institutions 41,693 41,663 42,315 42,693 42,712 42,107 41,208 41,473 42,294 25 Transaction accounts and credit balances3 . 2,940 3,082 3,444 3,341 3,271 3,054 3,226 3,120 3,620 26 Individuals, partnerships, and corporations 1,821 1,933 2,068 2,045 2,105 1,888 2,021 2,070 2,061 27 Other 1,118 1,149 1,375 1,296 1,166 1,167 1,204 1,050 1,560 28 Nontransaction accounts 38,753 38,581 38,872 39,352 39,441 39,052 37,983 38,352 38,673 29 Individuals, partnerships, and corporations 31,962' 31,741' 32,038' 32,183' 32,256' 31,837 30,891 3311,,118888 31,512 30 Other 6,791' 6,84V 6,834' 7,169' 7,184' 7,215 7,091 7,164 7,160 31 Borrowings from other than directly related institutions 61,619 62,226 63.229 61,778 61,304 66,618 65,067 66,864 63,081 32 Federal funds purchased5 30,107 30,547 31,162 31,081 28,688 34,925 32,829 34,812 30,641 33 From commercial banks in the United States 15,621 15,673 16,815 16,897 15,698 18,897 18,134 18,643 15,170 34 From others 14,486 14,874 14,347 14,184 12,990 16,027 14,695 16,169 15,471 35 Other liabilities for borrowed money 31,512 31,679 32,067 30,697 32,616 31,693 32,238 32,052 32,440 36 To commercial banks in the United States 24,015 23,722 24,211 23,069 24,030 23,995 24,356 24,113 24,332 37 To others 7,497 7,956 7,855 7,628 8,587 7,698 7,883 7,939 8,108 38 Other liabilities to nonrelated parties 31,390 32,430 32,273 32,306 32,802 31,601 31,632 31,807 32,059 39 Net due to related institutions 22,878' 20,537' 21,574' 23,984' 22,864 20,741 20,452 20,258 22,414 40 Total liabilities 157,580' 156,856' 159,392' 160,763' 159,682 161,068 158,359 160,402 159,848 MEMO 41 Total loans (gross) and securities adjusted6 .. 84,469' 83,538' 84,298 84,106 85,408 86,013 85,581 85,215 85,312 42 Total loans (gross) adjusted 68,816' 67,546' 68,267 68,078 69,748 70,615 69,987 69,761 70,070 1. Effective Jan. 1, 1986, the reporting panel includes 65 U.S. branches and 3. Includes credit balances, demand deposits, and other checkable deposits. agencies of foreign banks that include those branches and agencies with assets of 4. Includes savings deposits, money market deposit accounts, and time depos- $750 million or more on June 30, 1980, plus those branches and agencies that had its. reached the $750 million asset level on Dec. 31,1984. These data also appear in the 5. Includes securities sold under agreements to repurchase. Board's H.4.2 (504) release. For address, see inside front cover. 6. Exclusive of loans to and federal funds sold to commercial banks in the 2. Includes securities purchased under agreements to resell. United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • July 1988 1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations1 Billions of dollars, estimated daily-average balances, not seasonally adjusted Commercial banks TTyyppee ooff hhoollddeerr 1986 1987 1988 11998822 11998833 11998844 DDeecc.. DDeecc.. DDeecc.. DDeecc..^^''44 Dec. Mar. June Sept. Dec. Mar. 1 All holders—Individuals, partnerships, and corporations 291.8 293.5 302.7 321.0 363.6 335.9 340.2 339.0 344.9 n.a. 2 Financial business 35.4 32.8 31.7 32.3 41.4 35.9 36.6 36.5 36.9 n.a. 3 Nonfinancial business 150.5 161.1 166.3 178.5 202.0 183.0 187.2 188.2 191.7 n.a. 4 Consumer 85.9 78.5 81.5 85.5 91.1 88.9 90.1 88.7 89.9 n.a. 5 Foreign 3.0 3.3 3.6 3.5 3.3 2.9 3.2 3.2 3.4 n.a. 6 Other 17.0 17.8 19.7 21.2 25.8 25.2 23.1 22.4 23.0 n.a. Weekly reporting banks 1986 1987 1988 11998822 11998833 11998844 DDeecc.. DDeecc.. DDeecc..22 DDeeccjj44 Dec. Mar. June Sept. Dec. Mar.5 7 All holders—Individuals, partnerships, and corporations 144.2 146.2 157.1 168.6 195.1 178.1 179.3 179.1 187.0 181.8 8 Financial business 26.7 24.2 25.3 25.9 32.5 28.7 29.3 29.3 29.5 27.0 9 Nonfinancial business 74.3 79.8 87.1 94.5 106.4 94.4 94.8 96.0 100.8 98.2 10 Consumer 31.9 29.7 30.5 33.2 37.5 36.8 37.5 37.2 39.4 41.7 11 Foreign 2.9 3.1 3.4 3.1 3.3 2.8 3.1 3.1 3.3 3.4 12 Other 8.4 9.3 10.9 12.0 15.4 15.5 14.6 13.5 14.0 11.4 1. Figures include cash items in process of collection. Estimates of gross 4. Historical data back to March 1985 have been revised to account for deposits are based on reports supplied by a sample of commercial banks. Types corrections of bank reporting errors. Historical data before March 1985 have not of depositors in each category are described in the June 1971 BULLETIN, p. 466. been revised, and may contain reporting errors. Data for all commercial banks for Figures may not add to totals because of rounding. March 1985 were revised as follows (in billions of dollars): all holders, -.3; 2. Beginning in March 1984, these data reflect a change in the panel of weekly financial business, -.8; nonfinancial business, -.4; consumer, .9; foreign, .1; reporting banks, and are not comparable to earlier data. Estimates in billions of other, -.1. Data for weekly reporting banks for March 1985 were revised as dollars for December 1983 based on the new weekly reporting panel are: financial follows (in billions of dollars): all holders, -.1; financial business, -.7; nonfinanbusiness, 24.4; nonfinancial business, 80.9; consumer, 30.1; foreign, 3.1; other cial business, -.5; consumer, 1.1; foreign, .1; other, -.2. 9.5. 5. Beginning March 1988, these data reflect a change in the panel of weekly 3. Beginning March 1985, financial business deposits and, by implication, total reporting banks, and are not comparable to earlier data. Estimates in billions of gross demand deposits have been redefined to exclude demand deposits due to dollars for December 1987 based on the new weekly reporting panel are: financial thrift institutions. Historical data have not been revised. The estimated volume of business, 29.4; nonfinancial business, 105.1; consumer, 41.1; foreign, 3.4; other, such deposits for December 1984 is $5.0 billion at all insured commercial banks 13.1. and $3.0 billion at weekly reporting banks. 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 1988 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 . Oct. Nov.1 Dec. Jan.2 Feb. Mar. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 187,658 237,586 298,779 329,991 357,129 356,577 351,844 357,129 380,339' 388,893' 391,305 Financial companies3 Dealer-placed paper 2 Total 44,455 56,485 78,443 101,072 101,958 109,019 105,197 101,958 112200,,9933CC 112255,,991144'' 112288,,668800 3 Bank-related (not seasonally adjusted) 22,,444411 22,,003355 11,,660022 22,,226655 11,,442288 22,,668888 11,,889933 11,,442288 11,,669944 11,,772244 11,,337711 Directly placed paper 4 Total 97,042 110,543 135,320 151,820 173,939 170,403 169,779 173,939 175,467 117744,,559955 117733,,331166 5 Bank-related (not seasonally adjusted) 35,566 42,105 44,778 40,860 43,173 46,249 45,353 43,173 45,425 43,987 43,681 6 Nonfinancial companies 46,161 70,558 85,016 77,099 81,232 77,154 76,869 81,232 83,942' 88,384' 89,309 Bankers dollar acceptances (not seasonally adjusted)7 7 Total 78,309 78,364 68,413 64,974 70,565 71,891 71,068 70,565 62,957 62,419 63,454 Holder 8 Accepting banks 9,355 9,811 11,197 13,423 10,943 10,856 10,701 10,943 8,602 9,628 10,243 9 Own bills 8,125 8,621 9,471 11,707 9,464 9,742 9,714 9,464 7,759 8,561 8,825 10 Bills bought 1,230 1,191 1,726 1,716 1,479 1,114 987 1,479 843 1,067 1,417 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 1,400 1,134 965 831 833 795 13 Others 67,807 67,881 56,279 50,234 58,658 59,635 59,234 58,658 53,524 51,958 52,417 Basis 14 Imports into United States 15,649 17,845 15,147 14,670 16,483 17,814 16,942 16,483 14,468 14,354 14,575 15 Exports from United States 16,880 16,305 13,204 12,960 15,227 15,949 15,435 15,227 14,054 13,891 13,900 16 All other 45,781 44,214 40,062 37,344 38,855 38,122 38,691 38,855 34,436 34,173 34,980 1. A change in the reporting panel in November resulted in a slight understate- 5. As reported by financial companies that place their paper directly with ment of outstanding volume. investors. 2. Data reflect a break in series resulting from additions to the reporting 6. Includes public utilities and firms engaged primarily in such activities as panel and from the correction of a misclassification that had understated dealer- communications, construction, manufacturing, mining, wholesale and retail trade, piaced financial and overstated nonfinancial outstandings. transportation, and services. 3. Institutions engaged primarily in activities such as, but not limited to, 7. Beginning January 1988, the number of respondents in the bankers accepcommercial savings, and mortgage banking; sales, personal, and mortgage fi- tance survey were reduced from 155 to 111 institutions—those with $100 million nancing; factoring, finance leasing, and other business lending; insurance under- or more in total acceptances. The new reporting group accounts for over 90 writing; and other investment activities. percent of total acceptances activity. 4. Includes all financial company paper sold by dealers in the open market. 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per year Rate Effective Date Rate Av r e a r te a ge Month 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 V 9.00 June 9.78 1987—Jan. 8.00 Nov. 5 8.75 July 9.50 Feb. 7.50 Aug. 9.50 Mar. 1988—Feb. 2 8.50 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 Feb. Aug. 7.90 Mar. Apr. NOTE. These data also appear in the Board's H.15 (519) release. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • July 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. 1988 1988, week ending Instrument 11998866 Jan. Feb. Mar. Apr. Apr. 1 Apr. 8 Apr. 15 Apr. 22 Apr. 29 MONEY MARKET RATES 1 Federal funds1,2 ;iM,v 8.10 6.80 6.66 6.83 6.58 6.58 6.87 6.62 6.82 6.81 6.93 6.85 2 Discount window borrowing1 7.69 6.32 5.66 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Commercial paper '5 3 1-month 7.93 6.61 6.74 6.76 6.55 6.57 6.80 6.63 6.73 6.76 6.85 6.85 4 3-month 7.95 6.49 6.82 6.87 6.58 6.62 6.86 6.68 6.78 6.81 6.92 6.93 5 6-month 8.00 6.39 6.85 6.92 6.58 6.64 6.92 6.70 6.83 6.86 6.99 7.01 Finance paper, directly placed ' 6 1-month 7.90 6.57 6.61 6.65 6.45 6.44 6.71 6.52 6.64 6.68 6.78 6.76 7 3-month 7.77 6.38 6.54 6.62 6.39 6.38 6.67 6.45 6.58 6.63 6.73 6.75 8 6-month 7.74 6.31 6.37 6.53 6.27 6.23 6.51 6.29 6.47 6.48 6.54 6.57 Bankers acceptances • 9 3-month 7.91 6.38 6.75 6.77 6.49 6.51 6.79 6.55 6.70 6.74 6.85 6.85 10 6-month ., 7.95 6.28 6.78 6.83 6.49 6.55 6.86 6.63 6.78 6.78 6.93 6.95 Certificates of deposit, secondary market 11 1-month 7.96 6.61 6.75 6.78 6.55 6.56 6.80 6.60 6.72 6.77 6.87 6.84 12 3-month 8.04 6.51 6.87 6.92 6.60 6.63 6.92 6.67 6.82 6.87 7.01 6.99 13 6-month 8.24 6.50 7.01 7.10 6.69 6.78 7.14 6.86 7.04 7.06 7.24 7.23 14 Eurodollar deposits,, 3-month 8.28 6.71 7.06 7.11 6.73 6.74 7.05 6.78 6.88 6.99 7.08 7.18 U.S. Treasury bills' Secondary market9 3-month 7.47 5.97 5.78 5.81 5.66 5.70 5.91 5.74 5.99 5.89 5.83 5.91 6-month 7.65 6.02 6.03 6.25 5.93 5.91 6.21 6.04 6.20 6.14 6.22 6.28 1-year . 'Id' 7.81 6.07 6.33 6.52 6.21 6.28 6.56 6.36 6.55 6.49 6.58 6.60 Auction average11 3-month 7.47 5.98 5.82 5.90 5.69 5.69 5.92 5.69 5.98 5.98 5.78 5.92 6-month 7.64 6.03 6.05 6.31 5.96 5.91 6.21 6.00 6.21 6.19 6.14 6.28 1-year .. 7.80 6.18 6.33 6.67 6.18 6.30 6.57 6.57 CAPITAL MARKET RATES U.S. Treasury notes and bonds11 Constant maturities 21 1-year 8.42 6.45 6.77 6.99 6.64 6.71 7.01 6.78 7.01 6.92 7.03 7.07 22 2-year 9.27 6.86 7.42 7.63 7.18 7.27 7.59 7.42 7.55 7.52 7.62 7.67 23 3-year 9.64 7.06 7.68 7.87 7.38 7.50 7.83 7.66 7.78 7.75 7.88 7.92 24 5-year 10.12 7.30 7.94 8.18 7.71 7.83 8.19 8.03 8.13 8.12 8.25 8.27 25 7-year 10.50 7.54 8.23 8.48 8.02 8.19 8.52 8.40 8.47 8.44 8.59 8.60 26 10-year 10.62 7.67 8.39 8.67 8.21 8.37 8.72 8.57 8.62 8.63 8.81 8.82 27 20-year 10.97 7.85 28 30-year 10.79 7.78 8.59 8.83 8.43 8.63 8.95 8.82 8.84 8.85 9.05 9.07 Composite 29 Over 10 years (long-term) .. 10.75 8.14 8.64 8.82 8.41 8.61 8.91 8.80 8.80 8.82 9.01 9.02 State and local notes and bonds Moody's series14 30 Aaa 8.60 6.95 7.14 7.29 7.05 7.20 7.33 n.a. 7.40 7.30 7.30 7.30 31 Baa 9.58 7.76 8.17 8.12 7.62 7.80 7.82 n.a. 7.90 7.80 7.80 7.78 32 Bond Buyer series 9.11 7.32 7.64 7.70 7.49 7.74 7.81 n.a. 7.80 7.81 7.87 7.77 Corporate bonds Seasoned issues 33 All industries 12.05 9.71 9.91 10.37 9.89 9.86 10.15 10.01 10.08 10.11 10.22 10.20 34 Aaa 11.37 9.02 9.38 9.88 9.40 9.39 9.67 9.53 9.61 9.61 9.73 9.73 35 Aa 11.82 9.47 9.68 10.09 9.60 9.59 9.86 9.75 9.79 9.81 9.90 9.92 36 A 12.28 9.95 9.99 10.43 9.94 9.89 10.17 10.04 10.09 10.13 10.25 10.22 37 Baa 12.72 10.39 10.58 11.07 10.62 10.57 10.90 10.73 10.83 10.86 10.98 10.92 38 A-rated, recently-offered utility bonds17 12.06 9.61 9.95 10.05 9.75 9.91 10.23 10.09 10.02 10.26 10.37 10.46 MEMO: Dividend/price ratio18 39 Preferred stocks 10.49 8.76 8.37 9.04 9.02 9.07 9.19 9.10 9.14 9.21 9.20 9.22 40 Common stocks 4.25 3.48 3.08 3.66 3.56 3.48 3.57 3.60 3.51 3.46 3.70 3.61 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 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) 108.09 136.00 161.70 184.18 178.39 157.13 137.21 134.88 140.55 145.13 149.88 148.46 2 Industrial 123.79 155.85 195.31 226.49 219.52 189.86 163.42 162.19 168.47 173.44 181.57 181.01 3 Transportation 104.11 119.87 140.39 164.02 158.58 140.95 117.57 115.85 121.20 126.09 135.15 133.40 4 Utility 56.75 71.36 74.29 78.20 76.13 73.27 69.86 67.39 70.01 72.89 71.16 69.35 5 Finance 114.21 147.19 146.48 160.94 154.08 137.35 118.30 111.47 119.40 124.36 125.27 121.66 6 Standard & Poor's Corporation (1941-43 = 10)1 186.84 236.34 286.83 329.36 318.66 280.16 245.01 240.% 250.48 258.13 265.74 262.61 7 American Stock Exchange2 (Aug. 31, 1973 = 50) 229.10 264.38 316.61 361.52 353.72 306.34 249.42 248.52 267.29 276.54 295.78 300.43 Volume of trading (thousands of shares) 8 New York Stock Exchange 109,191 141,385 188,647' 193,477 177,319 277,026 179,513' 178,517 174,755 184,688 176,189' 162,518 9 American Stock Exchange 8,355 11,846 13,832 13,604 12,381 18,173 11,268 13,422 9,853 9,%1 12,442 10,706 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 28,390 36,840 31,990 41,640 44,170 38,250 34,180 31,990 31,320 31,990 32,660 33,270 Free credit balances at brokers4 11 Margin-account 2,715 4,880 4,750 4,240 4,270 8,415 6,700 4,750 4,675 4,555 4,615 4,395 12 Cash-account 12,840 19,000 15,640 16,195 15,895 18,455 15,360 15,640 15,270 14,695 14,355 13,965 Margin requirements (percent of market value and effective date)6 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance "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 July 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 or 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 • July 1988 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1987 1988 AAccccoouunntt 11998855 11998866 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. FSLIC-insured institutions 1 Assets 1,070,012 1,163,851 1,180,379 1,195,474 1,202,920 1,207,750 1,216,995 1,218,829 1,239,654 1,246,762 1,250,739 1,254,769 1,257,548 2 Mortgages 669900,,771177 697,451 692,423 6%, 561 699,500 701,262 704,815 708,433 716,579 772211,,110011 724,489 772255,,997766 727,651 3 Mortgage-backed securities 111155,,552255 158,193 170,798 178,876 180,084 182,067 186,101 191,829 193,756 1%,586 198,551 198,307 194,035 4 Contra-assets to mortgage assets . 45,219 41,799 39,949 41,046 41,893 41,935 42,023 42,438 42,149 41,360 42,155 41,075 40,730 5 Commercial loans 17,424 23,683 22,503 22,097 23,098 23,018 23,174 23,300 23,255 23,294 23,534 23,321 23,321 6 Consumer loans 45,809 51,622 53,429 53,808 54,588 55,186 56,079 56,118 56,549 57,465 57,939 58,301 58,678 7 Contra-assets to nortmortgage loans2... 2,521 3,041 2,998 2,974 3,222 3,150 3,242 3,442 3,373 •3,433 3,459 33,,557766 3,522 8 Cash and investment securities 143,538 164,844 165,571 168,705 169,9% 170,788 170,071 164,034 173,113 170,707 169,624 169,917 174,005 9 Other3 104,739 112,898 118,601 119,447 120,769 120,514 122,020 120,995 121,925 122,402 122,497 123,385 124,111 10 Liabilities and net worth 1,070,012 1,163,851 1,180,379 1,195,474 1,202,920 1,207,750 1,216,995 1,218,829 1,239,654 1,246,762 1,250,739 1,254,769 1,257,548 11 Savings capital 843,932 890,664 889,785 893,801 897,999 902,617 904,441 908,907 916,843 922,340 932,615 939,079 946,790 12 Borrowed money 157,666 196,929 210,219 219,308 226,719 226,093 232,332 234,941 246,106 247,197 249,644 245,700 239,315 13 FHLBB 84,390 100,025 98,723 100,504 102,787 102,979 104,191 106,250 109,736 111,283 116,363 114,039 112,725 14 Other 73,276 96,904 111,496 118,804 123,932 123,114 128,141 128,691 136,370 135,914 133,281 131,661 126,590 15 Other 21,756 23,975 26,179 28,417 25,345 26,599 28,170 24,599 27,097 27,409 21,922 23,870 25,834 16 Net worth 46,657 52,282 54,196 53,947 52,856 52,441 52,052 50,382 49,609 49,816 46,558 46,121 45,609 FSHC-insured federal savings banks 17 Assets 131,868 210,562 246,277 253,006 264,105 268,779 272,134 272,834 276,560 279,222 284,284 284,326 295,971 18 Mortgages 72,355 113,638 142,702 146,492 152,381 154,839 156,048 156,705 158,610 161,017 164,007 163,907 171,5% 19 Mortgage-backed securities 15,676 29,766 37,500 39,371 40,%9 42,714 43,532 44,421 45,132 45,251 45,877 46,186 46,701 20 Contra-assets to mortgage assets 8,012 8,281 8,568 8,777 8,853 8,700 8,787 8,809 9,093 8,894 9,169 21 Commercial loans 5,957 5,567 6,166 6,277 6,213 6,188 6,275 6,540 6,514 6,499 6,975 22 Consumer loans 8,361 13,180 14,547 14,789 15,627 16,089 16,549 16,583 16,566 17,343 17,728 17,644 18,789 23 Contra-assets to nonmortgage loans .. 667 636 714 741 704 702 690 712 699 701 740 24 Finance leases plus interest 492 505 580 569 577 552 550 566 592 605 585 25 Cash and investment .. 30,593 31,816 33,294 33,677 34,267 33,589 34,888 33,952 35,281 34,603 35,693 26 Other 11,723 19,034 23,164 23,383 24,371 24,133 24,506 24,199 24,120 24,077 24,084 28,7% 25,541 27 Liabilities and net worth 131,868 210,562 246,277 253,006 264,105 268,779 272,134 272,834 276,560 279,222 284,284 284,326 295,971 28 Savings capital .. 103,462 157,872 180,637 182,802 189,998 193,890 194,853 195,213 197,298 199,114 203,198 204,331 214,171 29 Borrowed money 19,323 37,329 46,125 49,8% 53,255 53,652 55,660 56,549 57,551 58,277 60,702 59,194 59,691 30 FHLBB 10,510 19,897 21,718 22,788 24,486 24,981 25,546 26,287 27,350 27,947 29,617 28,280 29,169 31 Other 8,813 17,432 24,407 27,108 28,769 28,671 30,114 30,262 30,201 30,330 31,085 30,914 30,522 32 Other 2,732 4,263 5,538 6,036 5,981 6,138 6,450 5,629 6,293 6,349 5,300 5,822 6,583 33 Net worth 6,351 11,098 13,978 14,272 14,871 15,100 15,172 15,445 15,417 15,483 15,084 14,979 15,527 Savings banks 34 Assets 216,776 236,866 243,454 245,906 244,760 246,833 249,888 251,472 255,989 260,600 259,643 258,628 259,224 Loans 35 Mortgage 110,448 118,323 122,769 124,936 128,217 129,624 130,721 133,298 135,317 137,044 138,494 137,858 139,108 36 Other 3300,,887766 3355,,116677 37,136 37,313 35,200 35,591 36,793 36,134 36,471 37,189 33,871 3355,,009955 3355,,775522 Securities 37 U.S. government 13,111 14,209 13,743 13,650 13,549 13,498 13,720 13,122 13,817 15,694 13,510 12,776 12,269 38 Mortgage-backed securities 1199,,448811 25,836 28,700 28,739 27,785 28,252 28,913 29,655 30,202 31,144 32,772 32,241 3322,,442233 39 State and local government 2,323 2,185 2,063 2,053 2,059 2,050 2,038 2,023 2,034 2,046 2,003 1,994 2,053 40 Corporate and other . 21,199 20,459 19,768 19,956 18,803 18,821 18,573 18,431 18,062 17,583 18,772 18,780 18,271 41 Cash 6,225 6,894 5,308 5,176 4,939 4,806 4,823 4,484 5,529 5,063 5,864 4,841 5,002 42 Other assets 13,113 13,793 13,967 14,083 14,208 14,191 14,307 14,325 14,557 14,837 14,357 15,043 14,346 43 Liabilities 216,776 236,866 243,454 245,906 244,760 246,833 249,888 251,472 255,989 260,600 259,643 258,628 259,224 44 Deposits 185,972 192,194 193,347 194,742 193,274 194,549 195,895 1%,824 199,336 202,030 201,497 199,545 200,391 45 Regular4 181,921 186,345 187,791 189,048 187,669 188,783 190,335 191,376 193,777 196,724 196,037 194,322 195,336 46 Ordinary savings .. 33,018 37,717 41,326 41,967 42,178 41,928 41,767 41,773 42,045 42,493 41,959 41,047 41,234 47 Time 103,311 100,809 100,308 100,607 100,604 102,603 105,133 107,063 109,486 112,231 112,429 112,781 113,751 48 Other 4,051 5,849 5,556 5,694 5,605 5,766 5,560 5,448 5,559 5,306 5,460 5,223 5,055 49 Other liabilities 1177,,441144 2255,,227744 29,105 30,436 30,515 31,655 32,467 32,827 34,226 36,167 35,720 36,836 35,787 50 General reserve accounts 12,823 18,105 19,423 19,603 19,549 19,718 20,471 20,407 20,365 21,133 20,633 20,514 20,894 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A23 1.37—Continued 1987 1988 AAccccoouunntt 11998855 11998866 Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Credit unions5 1 1 1 1 1 1 1 1 5511 TToottaall aasssseettss//lliiaabbiilliittiieess aanndd ccaappiittaall 118,010 147,726 154,549 156,086 160,644 5522 FFeeddeerraall 77,861 95,483 99,751 100,153 104,150 5533 SSttaattee 40,149 52,243 54,798 55,933 56,494 5544 LLooaannss oouuttssttaannddiinngg .... 73,513 86,137 87,089 87,765 90,912 5555 FFeeddeerraall 47,933 55,304 55,740 55,952 58,432 5566 SSttaattee 25,580 30,833 31,349 31,813 32,480 n1.a. n1.a. n1.a. n1.a. n1.a. n1.a. n1.a. n1.a. 5577 SSaavviinnggss 105,963 134,327 140,014 141,635 148,283 5588 FFeeddeerraall 70,926 87,954 92,012 97,189 96,137 5599 SSttaattee 35,037 46,373 48,002 49,248 52,146 Life insurance companies 60 Assets 825,901 937,551 978,455 985,942 995,576 1,005,592 1,017,018 1,026,919 1,021,148 1,024,460 1,033,170 1,042,350 Securities 61 Government 75,230 84,640 89,711 89,554 87,279 88,199 89,924 89,408 90,782 91,227 91,302 91,682 62 United States6.. 51,700 59,033 64,621 64,201 61,405 62,461 64,150 63,352 64,880 65,186 64,551 64,922 63 State and local . 9,708 11,659 11,068 11,208 11,485 11,277 11,190 11,087 11,363 11,539 11,758 11,749 64 Foreign 13,822 13,948 14,022 14,145 14,389 14,461 14,584 14,969 14,539 14,502 14,993 15,011 65 Business 423,712 492,807 522,097 528,789 537,507 555,423 551,701 558,787 549,426 548,767 553,486 563,019 n.a. 66 Bonds 346,216 401,943 420,474 425,788 432,095 448,146 442,604 451,453 455,678 459,537 461,942 469,207 67 Stocks 77,496 90,864 101,623 103,001 105,412 107,277 109,097 107,334 93,748 89,230 91,544 93,812 68 Mortgages 171,797 193,842 197,315 198,760 200,382 201,297 202,241 204,264 206,507 208,839 212,375 212,637 69 Real estate 28,822 31,615 32,011 32,149 32,357 32,699 32,992 33,048 33,235 33,538 34,016 34,178 70 Policy loans 54,369 54,055 53,572 53,468 53,378 53,338 53,330 53,422 53,413 53,334 53,313 53,265 71 Other assets 71,971 80,592 83,749 83,222 84,390 85,420 86,830 87,991 87,785 88,755 88,678 87,569 1. Contra-assets are credit-balance accounts that must be subtracted from the NOTE. FSLIC-insured institutions: Estimates by the FHLBB for all institutions corresponding gross asset categories to yield net asset levels. Contra-assets to insured by the FSLIC and based on the FHLBB thrift Financial Report. mortgage loans, contracts, and pass-through securities include loans in process, FSLIC-insured federal savings banks: Estimates by the FHLBB for federal unearned discounts and deferred loan fees, valuation allowances for mortgages savings banks insured by the FSLIC and based on the FHLBB thrift Financial "held for sale," and specific reserves and other valuation allowances. Report. 2. Contra-assets are credit-balance accounts that must be subtracted from the Savings banks: Estimates by the National Council of Savings Institutions for all corresponding gross asset categories to yield net asset levels. Contra-assets to savings banks in the United States and for FDIC-insured savings banks that have nonmortgage loans include loans in process, unearned discounts and deferred loan converted to federal savings banks. fees, and specific reserves and valuation allowances. Credit unions: Estimates by the National Credit Union Administration for 3. Holding of stock in Federal Home Loan Bank and Finance leases plus federally chartered and federally insured state-chartered credit unions serving interest are included in "Other" (line 9). natural persons. 4. Excludes checking, club, and school accounts. Life insurance companies: Estimates of the American Council of Life Insurance 5. Data include all federally insured credit unions, both federal and state for all life insurance companies in the United States. Annual figures are annualchartered, serving natural persons. statement asset values, with bonds carried on an amortized basis and stocks at 6. Direct and guaranteed obligations. Excludes federal agency issues not year-end market value. Adjustments for interest due and accrued and for guaranteed, which are shown in the table under "Business" securities. differences between market and book values are not made on each item separately 7. Issues of foreign governments and their subdivisions and bonds of the but are included, in total, in "other assets." International Bank for Reconstruction and Development. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics • July 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 111999888777111 Nov. Dec. Jan. Feb. Mar. Apr. U.S. budget2 1 Receipts, total 769,091 854,143 56,987 85,525 81,791 60,355 65,73(r 109,323 2 On-budget 568,862 640,741 40,630 67,645 60,645 40,610 44,958' 81,993 3 OfF-budget 200,228 213,402 16,357' 17,880 21,146 19,745 20,772 27,330 4 Outlays, total 990,258 1,004,586 83,911 109,771 65,786 84,260' 94,877' 94,433 5 On-budget 806,760 810,754 67,140 77,876 66,573 66,507' 76,858' 79,508 6 Off-budget 183,498 193,832 16,770 31,896 -787 17,753 18,020 15,925 7 Surplus, or deficit (-), total -221,167 -150,444 -26,924 -24,246 16,005 -23,905' -29,147 13,890 8 On-budget -237,898 -170,014 -26,510 -10,230 -5,928 -25,897' -31,899 2,485 9 Off-budget 16,731 19,570 -414 -14,016 21,933 1,992 2,752 11,405 Source of financing (total) 10 Borrowing from the public 236,187 150,070 23,603 9,766 5,281 20,157 17,160 -334 11 Operating cash (decrease, or increase (-)l -14,324 -5,052 17,164 -1,218 -17,555 11,002 6,009 -23,276 12 Other3 -696 5,426 -13,843 15,698 -3,730 -7,257 5,979 9,719 MEMO 13 Treasury operating balance (level, end of period) 31,384 36,436 21,151 22,369 39,924 28,922 22,913 46,189 14 Federal Reserve Banks 7,514 9,120 3,595 5,313 10,276 2,473 2,403 16,186 15 Tax and loan accounts 23,870 27,316 17,556 17,056 29,648 26,450 20,510 30,003 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 FFFiiissscccaaalll FFFiiissscccaaalll SSSooouuurrrccceee ooorrr tttyyypppeee yyyeeeaaarrr yyyeeeaaarrr 1986 1987 1988 111999888666 111999888777 HI H2 HI H2 Feb. Mar. Apr. RECEIPTS 1 All sources 769,091 854,143 394,345 387,524 447,282 421,712 60,355 65,730' 109,323 2 Individual income taxes, net 348,959 392,557 169,444 183,156 205,157 192,575 25,651 20,637' 53,334 3 Withheld 314,803 322,463 153,919 164,071 156,760 170,203 28,046 33,296 24,913 4 Presidential Election Campaign Fund 36 33 31 4 30 4 4 7 7 5 Nonwithheld 105,994 142,957 78,981 27,733 112,421 31,223 1,179 4,315 50,477 6 Refunds 71,873 72,896 63,488 8,652 64,052 8,853 3,577 16,982' 22,062 Corporation income taxes 7 Gross receipts 80,442 102,859 41,946 42,108 52,396 52,821 2,652 14,909 14,030 8 Refunds 17,298 18,933 9,557 8,230 10,881 7,119 1,677 2,203 2,004 9 Social insurance taxes and contributions, net 283,901 303,318 156,714 134,006 163,519 143,755 28,500 25,676 37,357 10 Employment taxes and contributions 255,062 273,185 139,706 122,246 146,696 130,388 25,739 25,141 34,464 11 Self-employment taxes and contributions3 11,840 13,987 10,581 1,338 12,020 1,889 1,368 880 8,833 12 Unemployment insurance 24,098 25,418 14,674 9,328 14,514 10,977 2,399 179 2,477 13 Other net receipts4 4,742 4,715 2,333 2,429 2,310 2,390 362 356 416 14 Excise taxes 32,919 32,510 15,944 15,947 15,845 17,680 2,204 2,885 2,767 15 Customs deposits 13,327 15,032 6,369 7,282 7,129 7,993 1,296 1,444 1,204 16 Estate and gift taxes 6,958 7,493 3,487 3,649 3,818 3,610 566 622 749 17 Miscellaneous receipts 19,884 19,307 10,002 9,605 10,299 10,399 1,164 1,760 1,886 OUTLAYS 18 All types 990,231 1,004,586 486,058 505,980 502,223 532,107 84,257 94,877' 95,433 19 National defense 273,375 281,999 135,367 138,544 142,886 146,995 23,670 26,484 26,747 20 International affairs 14,152 11,649 5,384 8,938' 4,374 4,487 516 1,490 1,561 21 General science, space, and technology .... 8,976 9,216 4,191' 4,594 4,324 5,469 749 956 949 22 Energy 4,735 4,115 2,484 2,446' 2,335 1,468 -1,635 538 382 23 Natural resources and environment 13,639 13,363 6,245 7,141 6,175 7,590 969 1,082 1,037 24 Agriculture 31,449 27,356 14,482 15,66c 11,824 14,640 1,014 1,160 2,099 25 Commerce and housing credit 4,890 6,182 860 3,764' 4,893 3,852 -866 2,409 1,203 26 Transportation 28,117 26,228 12,658 14,745 12,113 14,096 1,995 1,838 2,053 27 Community and regional development 7,233 5,051 3,169 3,651' 3,108 2,075 459 535 555 28 Education, training, employment, and social services 30,585 29,724 14,712 16,209' 14,182 15,592 3,041 2,545 2,253 29 Health 35,935 39,968 17,872 18,795 20,318 20,750 3,650 3,765 3,791 30 Social security and medicare 268,921 282,473 135,214 138,299 142,864 158,469 24,585 26,145 24,920 31 Income security 119,796 123,250 60,786 59,979' 62,248 61,201 11,264 12,738' 12,916 32 Veterans benefits and services 26,356 26,782 12,193 14,190' 12,264 14,956 2,170 2,555 3,748 33 Administration of justice 6,603 7,548 3,352 3,413' 3,626 4,291 704 868 825 34 General government 6,104 5,948 3,566 1,860' 3,344 3,560 806 383 697 35 General-purpose fiscal assistance 6,431 1,621 2,179 2,886 337 1,175 45 0 0 36 Net interest8 136,008 138,570 68,054 66,226' 70,110 71,933 13,988 12,187 12,592 37 Undistributed offsetting receipts -33,007 -36,455 -17,183 -16,475' -19,102 -17,684' -2,868 -2,802 -2,895 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 • July 1988 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1985 1986 1987 IItteemm Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 1 Federal debt outstanding 1,950.3 1,991.1 2,063.6 2,129.5 2,218.9 2,250.7 2,313.1 2,354.3 2,435.2 7 Public debt securities 1,945.9 1,986.8 2,059.3 2,125.3 2,214.8 2,246.7 2,309.3 2,350.3 2,431.7 3 Held by public 1,597.1 1,634.3 1,684.9 1,742.4 1,811.7 1,839.3 1,871.1 1,893.1 1,954.1 4 Held by agencies 348.9 352.6 374.4 382.9 403.1 407.5 438.1 457.2 477.6 5 Agency securities 4.4 4.3 4.3 4.2 4.0 4.0 3.8 4.0 3.5 6 Held by public 3.3 3.2 3.2 3.2 3.0 2.9 2.8 3.0 2.7 7 Held by agencies 1.1 1.1 1.1 1.1 1.1 1.1 1.0 1.0 .8 8 Debt subject to statutory limit 1,932.4 1,973.3 2,060.0 2,111.0 2,200.5 2,232.4 2,295.0 2,336.0 2,417.4 9 Public debt securities 1,931.1 1,972.0 2,058.7 2,109.7 2,199.3 2,231.1 2,293.7 2,334.7 2,416.3 10 Other debt1 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.1 11 MEMO: Statutory debt limit 2,078.7 2,078.7 2,078.7 2,111.0 2,300.0 2,300.0 2,320.0 2,800.0 2,800.0 1. Includes guaranteed debt of Treasury 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 1987 Type and holder 1984 1985 1986 1987 Q1 Q2 Q3 Q4 1 Total gross public debt 1,663.0 1,945.9 2,214.8 2,431.7 2,246.7 2,309.3 2,350.3 2,431.7 By type 2 Interest-bearing debt 1,660.6 1,943.4 2,212.0 2,428.9 2,244.0 2,306.7 2,347.7 2,428.9 3 Marketable 1,247.4 1,437.7 1,619.0 1,724.7 1,635.7 1,659.0 1.676.0 1,724.7 4 Bills 374.4 399.9 426.7 389.5 406.2 391.0 378.3 389.5 5 Notes 705.1 812.5 927.5 1,037.9 955.3 984.4 1.005.1 1,037.9 6 Bonds 167.9 211.1 249.8 282.5 259.3 268.6 277.6 282.5 7 Nonmarketable1 413.2 505.7 593.1 704.2 608.3 647.7 671.8 704.2 8 State and local government series 44.4 87.5 110.5 139.3 118.5 125.4 129.0 139.3 9 Foreign issues 9.1 7.5 4.7 4.0 4.9 5.1 4.3 4.0 10 Government 9.1 7.5 4.7 4.0 4.9 5.1 4.3 4.0 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes. 73.1 78.1 90.6 99.2 93.0 95.2 97.0 99.2 13 Government account series 286.2 332.2 386.9 461.3 391.4 421.6 440.7 461.3 14 Non-interest-bearing debt 2.3 2.5 2.8 2.8 2.7 2.6 2.5 2.8 By holder4 15 U.S. government agencies and trust funds 289.6 348.9 403.1 477.6 407.5 438.1 457.2 477.6 16 Federal Reserve Banks 160.9 181.3 211.3 222.6 196.4 212.3 211.9 222.6 17 Private investors 1,212.5 1,417.2 1,602.0 1,745.2 1,641.4 1,657.7 1,682.6 1,745.2 18 Commercial banks 183.4 192.2 230.1 252.3 232.0 237.1 250.5 252.3 19 Money market funds 25.9 25.1 28.6 14.6 18.8 20.6 15.5 14.6 20 Insurance companies 88.7 115.4 135.4 n.a. 145.3 140.0 143.0 n.a. 21 Other companies 50.1 59.0 68.8 n.a. 73.4 78.7 80.2 n.a. 22 State and local Treasurys 173.4 235.8 273.1 n.a. n.a. n.a. n.a. n.a. Individuals 23 Savings bonds 74.5 79.8 92.3 101.1 94.7 96.8 98.5 101.1 24 Other securities 69.3 75.0 70.5 n.a. 68.3 68.6 70.4 n.a. 25 Foreign and international 192.9 212.5 251.6 287.6 260.4 270.1 267.3 287.6 26 Other miscellaneous investors6 366.6 422.4 451.6 n.a. n.a. n.a. n.a. n.a. 1. Includes (not shown separately): Securities issued to the Rural Electrifica- 5. Consists of investments 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 Transactions1 Par value; averages of daily figures, in millions of dollars 1988 1988 IItteemm 11998855 11998866 11998877 Feb. Mar. Apr. Mar. 23 Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 Immediate delivery2 1 U.S. Treasury securities 75,331 95,445 110,052 105,589 90,640 94,360 96,372 102,780 88,955 94,520 110099,,666666 77,031 By maturity ? Bills 32,900 34,247 37,924 28,127 28,277 29,308 27,626 32,771 30,418 30,889 3322,,112255 22,689 3 Other within 1 year 1,811 2,115 3,272 3,708 2,986 3,578 2,960 3,301 4,022 3,457 3,226 3,567 4 1-5 years 18,361 24,667 27,918 30,072 23,706 24,702 28,087 30,484 23,051 19,985 29,959 21,952 5 5-10 years 12,703 20,456 24,014 24,285 21,797 22,630 22,646 21,641 18,730 26,019 26,573 16,961 6 Over 10 years 9,556 13,961 16,923 19,398 13,874 14,143 15,054 14,584 12,734 14,170 17,783 11,861 By type of customer 7 U.S. government securities dealers 3,336 3,670 2,936 2,996 2,743 2,815 2,393 2,786 3,111 2,650 2,219 2,392 8 U.S. government securities brokers 36,222 49,558 61,539 59,599 52,625 55,501 56,913 62,387 50,951 55,183 66,366 44,457 9 All others3 35,773 42,218 45,576 42,993 35,272 36,043 37,066 37,606 34,892 36,685 41,080 30,181 10 Federal agency securities 11,640 16,748 18,087 17,754 15,677 14,715 11,197 13,767 15,709 14,386 16,623 13,598 11 Certificates of deposit 4,016 4,355 4,112 3,634 3,127 3,429 3,232 3,717 2,818 3,377 3,824 3,701 17, Bankers acceptances 3,242 3,272 2,965 2,781 2,278 2,458 2,243 2,252 2,536 2,285 2,391 2,647 13 Commercial paper 12,717 16,660 17,135 17,981 17,257 18,470 17,575 14,712 18,808 17,509 18,925 17,462 Futures contracts* 14 Treasury bills 5,561 3,311 3,233 2,637 2,768 2,995 3,018 3,123 3,774 2,713 4,786 1,158 15 Treasury coupons 6,085 7,175 8,964 9,566 9,414 8,773 11,086 10,804 7,969 8,447 11,081 6,704 16 Federal agency securities 252 16 5 3 6 0 0 30 0 0 0 0 Forward transactions5 17 U.S. Treasury securities 1,283 1,876 2,029 3,605 1,454 1,505 2,747 955 2,413 1,137 1,142 1,028 18 Federal agency securities 3,857 7,831 9,290 6,910 8,426 7,416 9,565 5,733 6,745 8,630 8,922 6,222 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 • July 1988 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Averages of daily figures, in millions of dollars 1988 1988 IItteemm 11998855 11998866 11998877 Feb. Mar. Apr. Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 Positions Net immediate2 1 U.S. Treasury securities 7,391 12,912 -6,216 -10,233 -10,138 -15,323 -10,322 -10,087 -10,833 -13,522 -21,997 2 Bills 10,075 12,761 4,317 3,156 3,290 5,450 3,655 7,314 8,306 6,958 1,761 3 Other within 1 year 1,050 3,706 1,557 -784 -780 -970 -802 -416 -608 -848 -1,382 4 1-5 years 5,154 9,146 649 2,730 2,992 -3,248 2,834 -447 -1,938 -4,149 -5,334 5 5-10 years -6,202 -9,505 -6,564 -7,492 -8,193 -8,539 -7,590 -8,308 -8,784 -7,804 -8,807 6 Over 10 years -2,686 -3,197 -6,174 -7,843 -7,447 -8,016 -8,419 -8,230 -7,809 -7,680 -8,235 7 Federal agency securities 22,860 32,984 31,910 26,654 28,780 26,603 27,324 27,063 27,636 25,600 25,666 8 Certificates of deposit 9,192 10,485 8,188 5,314 5,619 5,678 6,175 6,257 5,870 5,541 5,337 9 Bankers acceptances 4,586 5,526 3,661 2,880 3,197 3,059 3,219 3,238 3,083 2,566 3,378 10 Commercial paper 5,570 8,089 7,496 5,819 6,204 5,591 55,,775522 55,,996622 44,,887722 55,,551177 55,,772277 Futures positions 11 Treasury bills -7,322 -18,059 -3,373 -4,556 -4,192 -3,681 -3,274 -3,541 -4,013 -4,767 -3,022 12 Treasury coupons 4,465 3,473 5,988 5,066 5,406 5,101 5,578 5,128 4,639 5,239 5,623 13 Federal agency securities -722 -153 -95 0 0 0 0 0 0 0 0 Forward positions 14 U.S. Treasury securities -911 -2,144 -1,211 736 734 1,142 1,393 1,116 1,028 872 1,423 15 Federal agency securities -9,420 -11,840 -18,817 -15,611 -16,442 -16,517 -15,738 -15,482 -17,508 -16,490 -15,879 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 6688,,003355 98,954 124,791 127,093 129,242 n.a. 129,391 128,442 124,848 128,304 128,980 17 Term 80,509 108,693 148,033 162,899 154,817 n.a. 115555,,228822 115544,,004411 117700,,225533 117766,,550033 118833,,552222 Repurchase agreements 18 Overnight and continuing 101,410 141,735 170,840 163,346 167,007 n.a. 165,035 171,037 163,268 177,062 163,766 19 Term 70,076 102,640 120,980 131,616 128,663 n.a. 130,698 123,955 136,626 139,544 145,290 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 1988 AAggeennccyy 11998844 11998855 11998866 Oct. Nov. Dec. Jan. Feb. Mar. 1 Federal and federally sponsored agencies 271,220 293,905 307,361 328,990 334,300 341,386 338,483 346,901 n.a. 2 Federal agencies 35,145 36,390 36,958 37,207 37,303 37,981 37,637 37,286 37,328 3 Defense Department1 142 71 33 15 15 13 13 12 12 4 Export-Import Bank '3 15,882 15,678 14,211 12,470 12,470 11,978 11,978 11,978 11,978 5 Federal Housing Administration 133 115 138 182 182 183 98 101 100 6 Government National Mortgage Association participation certificates 2,165 2,165 2,165 1,965 1,965 1,615 1,615 1,165 1,165 7 Postal Service6 1,337 1,940 3,104 4,603 4,603 6,103 6,103 6,103 6,103 8 Tennessee Valley Authority 15,435 16,347 17,222 17,972 18,068 18,089 17,830 17,927 17,970 9 United States Railway Association6 51 74 85 0 0 0 0 0 0 10 Federally sponsored agencies7 237,012 257,515 270,553 291,783 296,997 303,405 300,846 309,615 n.a. 11 Federal Home Loan Banks 65,085 74,447 88,752 108,108 111,185 115,725 116,374 117,569 118,250 12 Federal Home Loan Mortgage Corporation 10,270 11,926 13,589 16,703 17,762 17,645 15,581 19,405 n.a. 13 Federal National Mortgage Association 83,720 93,896 93,563 94,298 95,096 97,057 97,195 98,593 99,853 14 Farm Credit Banks 72,192 68,851 62,478 55,854 55,584 55,275 54,072 55,275 56,145 15 Student Loan Marketing Association8 5,745 8,395 12,171 16,220 16,125 16,503 16,424 16,923 18,271 16 Financing Corporation n.a. n.a. n.a. 600 1,200 1,200 1,200 1,850 1,850 MEMO 17 Federal Financing Bank debt10 145,217 153,373 157,510 156,919 156,850 152,417 152,099 150,178 149,721 Lending to federal and federally sponsored agencies 18 Export-Import Bank3 15,852 15,670 1144,,220055 12,464 1122,,446644 11,972 1111,,997722 1111,,997722 1111,,448888 19 Postal Service6 1,087 1,690 2,854 4,353 4,353 5,853 5,853 5,853 5,853 20 Student Loan Marketing Association 5,000 5,000 4,970 4,940 4,940 4,940 4,940 4,940 4,940 21 Tennessee Valley Authority 13,710 14,622 15,797 16,592 16,688 16,709 16,450 16,547 16,590 22 United States Railway Association6 51 74 85 0 0 0 0 0 0 Other Lending11 23 Farmers Home Administration 58,971 64,234 65,374 64,934 64,934 59,674 5599,,667744 5599,,667744 5599,,667744 24 Rural Electrification Administration 20,693 20,654 21,680 21,226 21,215 21,191 21,187 19,193 19,184 25 Other 29,853 31,429 32,545 32,410 32,256 32,078 32,023 31,999 31,992 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 • July 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'' Sept. Oct. Nov. Dec. Jan. Feb. Mar.' Apr. 1 AU issues, new and refunding1 214,189 147,011 102,407 5,819 6,821 8,320 8,385 5,412 8,585 9,821 5,581 Type of issue 2 General obligation 52,622 46,346 30,589 1,691 1,248 2,472 1,995 1,259 2,880 2,776 1,642 3 Revenue 161,567 100,664 71,818 4,128 5,573 5,848 6,390 4,153 5,705 7,045 3,939 Type of issuer 4 State 13,004 14,474 10,102 580 385 431 550 423 1,197 613 441 5 Spec ti district and statutory authority 134,363 89,997 65,460 3,920 5,128 5,076 5,447 3,220 5,154 5,823 3,961 6 Municipalities, counties, and townships 66,822 42,541 26,845 1,319 1,308 2,813 2,388 1,769 2,234 2,677 1,179 7 Issues for new capital, total 156,050 83,490 56,789 4,531 4,498 6,626 5,913 2,862 5,773 6,044 3,850 Use of proceeds 8 Education 16,658 16,948 9,525 682 690 1,002 931 841 754 933 885 9 Transportation 12,070 11,666 3,677 313 175 351 455 189 826 559 210 10 Utilities and conservation 26,852 35,383 7,912 555 615 1,094 377 326 655 1,016 406 11 Social welfare 63,181 17,332 11,107 825 949 1,664 1,278 740 650 1,218 1,109 12 Industrial aid 12,892 5,594 6,551 489 815 330 1,297 153 2,473 105 286 13 Other purposes 24,398 47,433 18,020 1,667 1,254 2,185 1,575 613 415 2,213 954 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 1988 Type of issue or issuer, or use 1985 1987' Aug. Sept. Oct. Nov. Dec. Jan. Feb.' Mar. 1 All issues1 239,015 423,726 391,154 21,888 29,363 20,710 14,322 11,872 22,175' 22,364 25,787 2 Bonds2 203,500 355,293 324,646 17,685 23,705 17,631 13,624 11,098 19,485' 18,474 20,815 Type of offering 3 Public, domestic 119,559 231,936 209,279 14,852 22,045 16,135 12,891 10,763 18,246' 16,683 19,827 4 Private placement, domestic3 . 46,200 80,760 91,068 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5. Sold abroad 37,781 42,596 24,299 2,833 1,660 1,496 733 335 1,239 1,791 Industry group 6 Manufacturing 63,973 91,548 61,573 3,402' 3,509' 2,784' 1,280 928' 3,053' 3,151 3,482 7 Commercial and miscellaneous 17,066 40,124 48.961 1,281 1,479 1,165 483 2,577 2,084 1,396 1,007 8 Transportation 6,020 9,971 11,974 296 25 263 0 226 0 200 1,017 9 Public utility 13,649 31,426 22.962 1,533 1,702 1,025 895 1,570 1,142 1,718 2,259 10 Communication 10,832 16,659 7,340 856 930 1,384 290 510 206 101 115 11 Real estate and financial 91,958 165,564 171,841 10,318' 16,060' 11,011' 10,676 5,287' 13,000' 11,907 12,936 12 Stocks3 35,515 68,433 66,508 4,203 5,658 3,079 698 774 2,690 3,890 4,972 Type 13 Preferred 6,505 11,514 10,123 906 1,112 236 162 61 1,388 376 625 14 Common 29,010 50,316 43,228 3,297 4,546 2,843 533 713 1,302 3,514 4,347 15 Private placement3 6,603 13,157 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Industry group 16 Manufacturing 5,700 15,027 13,880 370 858 703 237 76 268 296 258 1 1 7 8 T C r o a m n m sp e o r r c t i a a t l i o a n n d miscellaneous 9 1 , , 1 5 4 4 9 4 1 2 0 , , 4 6 2 1 7 7 1 2 2 , , 4 8 3 8 9 8 996 0 80 1 7 1 65 4 6 0 1 8 49 6 14 1 360 1 47 4 4 4 9 2 9 5 19 Public utility 1,966 4,020 4,322 85 529 75 25 0 100 142 93 20 Communication 978 1,825 1,458 277 75 107 1 11 60 0 63 21 Real estate and financial 16,178 34,517 31,521 2,475 3,378 1,498 200 672 1,901 2,933 4,434 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. Before 1987, annual totals include Excludes secondary offerings, employee stock plans, investment companies other underwritten issues only. than closed-end, intracorporate transactions, equities sold abroad, and Yankee SOURCES. IDD Information Services, Inc., U.S. Securities and Exchange bonds. Stock data include ownership securities issued by limited partnerships. Commission and the Board of Governors of the Federal Reserve System. 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 1988 IItteemm 11998866 11998877 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. INVESTMENT COMPANIES1 1 Sales of own shares2 411,751 381,260 26,455 24,834 25,990 21,927 26,494 30,343 23,265 24,588 2 Redemptions of own shares3 239,394 314,252 22,561 28,323 34,597 20,400 28,099 22,324 20,914 23,968 3 Net sales 172,357 67,008 3,894 -3,489 -8,607 1,507 -1,605 8,019 2,351 620 4 Assets4 424,156 453,842 539,171 521,007 456,422 446,479 453,842 468,998 481,232 470,929 30,716 38,006 40,802 42,397 40,929 41,432 38,006 40,157 41,232 43,511 6 Other 393,440 415,836 498,369 478,610 415,493 405,047 415,836 428,841 439,995 427,418 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. 1986 1987 1988 AAccccoouunntt 11998855 11998866 11998877 Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql 1 Corporate profits with inventory valuation and capital consumption adjustment 277.6 284.4 304.7 282.3 286.4 281.1 294.0 296.8 314.9 313.0 309.9 2 Profits before tax 224.8 231.9 274.0 224.4 236.3 247.9 257.0 268.7 284.9 285.6 280.6 3 Profits tax liability 96.7 105.0 136.3 102.1 106.1 113.9 128.0 134.2 143.0 140.0 134.2 4 Profits after tax 128.1 126.8 137.7 122.3 130.2 134.0 129.0 134.5 141.9 145.6 146.4 5 Dividends 81.3 86.8 93.8 86.6 87.7 88.6 90.3 92.4 95.2 97.3 99.3 6 Undistributed profits 46.8 40.0 43.9 35.7 42.5 45.4 38.7 42.1 46.7 48.3 47.1 7 Inventory valuation -.8 6.5 -17.5 11.3 6.0 -8.9 -11.3 -20.0 -17.6 -21.3 -16.4 8 Capital consumption adjustment 53.5 46.0 48.1 46.7 44.0 42.1 48.2 48.0 47.7 48.7 45.7 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 • July 1988 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 11998866 11998877 1199888811 Q3 Q4 Ql Q2 Q3 Q4 Ql1 Q21 1 Total nonfarm business 379.47 388.60 422.96 375.50 386.09 374.23 377.65 393.13 409.37 422.75 427.09 Manufacturing 2 Durable goods industries 69.14 70.91 7755..7755 69.42 69.87 70.47 68.76 71.78 72.64 80.13 76.92 3 Nondurable goods industries 73.56 74.55 83.93 70.01 74.20 70.18 72.03 75.78 80.20 81.00 84.53 Nonmanufacturing 4 Mining 1111..2222 1111..3344 1122..0077 10.14 1100..3311 10.31 11.02 11.64 12.39 12.26 12.41 Transportation 5 Railroad 6.66 5.91 66..5511 7.02 6.41 5.55 5.77 6.21 6.10 7.29 6.31 6 Air 6.26 6.55 7.52 5.78 6.84 7.46 5.72 5.91 7.12 7.72 7.34 7 Other 5.89 6.39 7.06 6.01 6.25 5.97 6.19 7.05 6.35 7.48 6.80 Public utilities 8 Electric 33.91 31.58 32.13 33.81 33.78 30.85 31.13 31.31 33.01 31.59 33.01 9 Gas and other 12.47 13.18 14.41 12.00 12.34 12.75 12.35 13.58 14.06 14.56 13.82 10 Commercial and other 160.38 168.19 183.57 161.31 166.08 160.70 164.69 169.87 177.50 180.72 185.97 •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 Liabilities1 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 89.9 111.9 123.4 135.3 134.7 131.1 134.7 141.6 141.1 2 Business 113.4 137.8 157.5 166.8 159.7 173.4 181.4 188.1 188.3 207.6 3 Real estate 20.5 23.8 28.0 29.8 31.0 32.6 34.7 36.5 38.0 39.5 4 Total 217.3 251.5 297.4 320.0 326.0 340.6 347.2 359.3 367.9 388.2 Less: 5 Reserves for unearned income 30.3 33.8 39.2 40.7 42.4 41.5 40.4 41.2 42.5 45.3 6 Reserves for losses 3.7 4.2 4.9 5.1 5.4 5.8 5.9 6.2 6.5 6.8 7 Accounts receivable, net 183.2 213.5 253.3 274.2 278.2 293.3 300.9 311.9 318.9 336.1 8 All other 34.4 35.7 45.3 49.5 60.0 58.6 59.0 57.7 64.5 58.2 9 Total assets 217.6 249.2 298.6 323.7 338.2 351.9 359.9 369.6 383.4 394.3 LIABILITIES 10 Bank loans 18.3 20.0 18.0 16.3 16.8 18.6 17.2 17.3 15.9 16.4 11 Commercial paper 60.5 73.1 99.2 108.4 112.8 117.8 119.1 120.4 124.2 128.4 Debt 12 Other short-term 11.1 12.9 12.7 15.8 16.4 17.5 21.8 24.8 26.9 28.0 13 Long-term 67.7 77.2 94.4 106.9 111.7 117.5 118.7 121.8 128.2 137.1 14 All other liabilities 31.2 34.5 41.5 40.9 45.0 44.1 46.5 49.1 48.6 52.8 15 Capital, surplus, and undivided profits 28.9 31.5 32.8 35.4 35.6 36.4 36.6 36.3 39.5 31.5 16 Total liabilities and capital 217.6 249.2 298.6 323.7 338.2 351.9 359.9 369.6 383.4 394.3 1. NOTE. Components may not add to totals because of rounding. 1.52 DOMESTIC FINANCE COMPANIES Business Credit Outstanding and Net Change1 Millions of dollars, seasonally adjusted 1987 1988 TTyyppee Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Total 156,297 171,966 193,752 201,129 202,829 205,869 206,755 213,337' 216,007 Retail financing of installment sales 2 Automotive (commercial vehicles) 20,660 25,952 32,656 33,865 34,454 35,674 36,419 36,318 36,914 3 Business, industrial, and farm equipment 22,483 22,950 24,328 24,763 24,764 24,987 25,474 26,976' 27,081 Wholesale financing 4 Automotive 23,988 23,419 26,792 30,396 30,901 31,059 30,115 28,654 27,329 5 Equipment 4,568 5,423 5,527 5,729 5,794 5,693 5,308 5,323 5,251 6 All other 6,809 7,079 7,956 8,074 8,151 8,408 8,454 8,331 8,347 Leasing 7 Automotive 16,275 19,783 21,842 21,883 22,013 21,943 22,943 23,100 23,493 8 Equipment 34,768 37,833 41,134 41,911 41,964 43,002 43,245 48,175' 50,411 9 Loans on commercial accounts receivable and factored commercial accounts receivable 15,765 15,959 17,713 18,362 18,501 18,024 18,506 17,862' 17,895 10 All other business credit 10,981 13,568 15,804 16,146 16,287 17,079 16,291 17,062 19,287 Net change (during period) 11 19,607 15,669 2,115 7,377 1,700 3,040 886 549' 2,670 Retail financing of installment sales 12 Automotive (commercial vehicles) 5,067 5,292 614 1,209 589 1,220 745 -101 596 13 Business, industrial, and farm equipment -363 467 458 435 1 223 487 -232 105 Wholesale financing 14 Automotive 5,423 -569 -990 3,604 505 158 -944 -1,461 -1,325 15 Equipment -867 855 23 202 65 -101 -385 14 -72 16 All other 1,069 270 188 118 77 257 46 -123 16 Leasing 17 Automotive 3,8% 3,508 509 41 130 -70 1,000 157 393 18 Equipment 2,685 3,065 498 777 53 1,038 243 632 2,236 19 Loans on commercial accounts receivable and factored commercial accounts receivable 2,161 194 295 649 139 -477 482 -643' -643 20 All other business credit 536 2,587 520 342 141 792 -788 770 689 1. These data also appear in the Board's G.20 (422) release. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • July 1988 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1987 1988 IItteemm 11998855 11998866 11998877 Oct. Nov. Dec. Jan. Feb. Mar. Apr. Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms 1 Purchase price (thousands of dollars) 104.1 118.1 137.0 145.3 135.9 147.3 150.1 139.4 147. r 147.0 2 Amount of loan (thousands of dollars) 77.4 86.2 100.5 106.1 100.2 107.7 108.4 104.3 106.3'' 109.7 3 Loan/price ratio (percent) 77.1 75.2 75.2 75.0 75.4 74.9 74.0 76.4 75.0r 76.8 4 Maturity (years) 26.9 26.6 27.8 28.3 28.3 28.2 28.2 28.1 27.3 27.7 5 Fees and charges (percent of loan amount)2 2.53 2.48 2.26 2.34 2.33 2.22 2.17 2.23 2.28r 2.23 6 Contract rate (percent per year) 11.12 9.82 8.94 8.86 8.92 8.78 8.75 8.76 8.77 8.69 Yield (percent per year) 7 FHLBB series3 11.58 10.25 9.31 9.25 9.30 9.15 9.10 9.12 9.15r 9.06 8 HUD series4 12.28 10.07 10.13 10.87 10.59 10.52 10.09 9.80 9.99 n.a. SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (HUD series)5 12.24 9.91 10.12 10.90 10.76 10.63 10.17 9.86 10.28 n.a. 10 GNMA securities6 11.61 9.30 9.42 10.53 9.96 10.18 9.83 9.53 9.53 9.67 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 94,574 98,048 95,030 95,097 95,411 96,649 97,159 98,358 99,787 100,796 12 FHA/V A-insured 34,244 29,683 21,660 21,481 21,510 20,288 20,237 20,181 20,094 19,932 13 Conventional 60,331 68,365 73,370 73,617 73,902 76,361 76,923 78,177 79,693 80,864 Mortgage transactions (during period) 14 Purchases 21,510 30,826 20,531 1,278 1,297 3,747 1,267 2,629 2,776 2,409 Mortgage commitments1 15 Contracted (during period) 20,155 32,987 25,415 1,566 2,899 3,115 2,254 2,516 3,823 2,555 16 Outstanding (end of period) 3,402 3,386 4,886 5,046 5,845 4,886 5,542 4,966 6,149 6,033 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of periodf 17 Total 12,399 13,517 12,802 12,782 12,904 12,871 13,090 n.a. n.a. n.a. 18 FHA/V A 841 746 686 666 663 657 632 646 n.a. n.a. 19 Conventional 11,559 12,771 12,116 12,115 12,240 12,215 12,458 13,280 n.a. n.a. Mortgage transactions (during period) 20 Purchases 44,012 103,474 76,845 3,079 2,978 3,267 2,168 3,293 n.a. n.a. 21 38,905 100,236 75,082 3,111 2,742 3,201 1,832 2,414 2,309 2,058 Mortgage commitments9 22 Contracted (during period) 48,989 110,855 71,467 3,011 2,668 2,693 3,868 4,910 n.a. n.a. 1. Weighted averages based on sample surveys of mortgages originated by 6. Average net yields to investors on Government National Mortgage 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 1987 1988 TTyyppee ooff hhoollddeerr,, aanndd ttyyppee ooff pprrooppeerrttyy 11998855 11998866 11998877'' Q1 Q2 Q3 Q4' Ql 1 All holders 2,269,173 2,568,562 2,908,072 2,665,339'' 2,756,383' 2,832,137' 2,908,072 2,949,977 7 1- to 4-family 1,467,409 1,668,209 1,888,158 1,712,737'' 1,780,438' 1,835,799' 1,888,158 1,919,280 3 Multifamily 214,045 247,024 273,740 257,859' 263,564' 268,019' 273,740 275,173 4 Commercial 482,029 556,569 656,203 601,207' 620,259' 637,412' 656,203 666,167 5 105,690 96,760 89,971 93,536' 92,122 90,907' 89,971 89,357 6 Selected financial institutions 1,390,394 1,507,289 1,699,922 1,559,681' 1,606,881' 1,647,928' 1,699,922 1,723,399 7 Commercial banks 429,196 502,534 590,829 519,606' 544,640' 566,60C 590,829 605,491 8 1- to 4-family 213,434 235,814 275,166 242,042' 252,589' 262,352' 275,166 282,583 9 Multifamily 23,373 31,173 33,493 29,759' 30,547' 31,614' 33,493 33,907 10 Commercial 181,032 222,799 267,679 234,619' 247,676' 258,496' 267,679 274,348 11 Farm 11,357 12,748 14,491 13,186' 13,828 14,138' 14,491 14,653 12 Savings institutions3 760,499 777,312 856,369 809,245 824,961 838,737' 856,369 861,824 13 1- to 4-family 554,301 558,412 598,441 555,693 572,075 583,432' 598,441 604,343 14 Multifamily 89,739 97,059 106,346 104,035 102,933 104,609' 106,346 105,945 15 Commercial 115,771 121,236 150,825 148,712 149,183 149,938' 150,825 150,781 16 Farm 688 605 0 805 0 0 0 0 17 Life insurance companies 171,797 193,842 212,375 195,743 200,382 204,263 212,375 214,675 18 1- to 4-family 12,381 12,827 13,226 12,903 12,745 12,742 13,226 13,226 19 Multifamily 19,894 20,952 22,524 20,934 21,663 21,968 22,524 22,524 70 Commercial 127,670 149,111 166,722 151,420 155,611 159,464 166,722 169,122 71 Farm 11,852 10,952 9,903 10,486 10,363 10,089 9,903 9,803 22 Finance companies 28,902 33,601 40,349 35,087 36,898 38,328 40,349 41,409 23 Federal and related agencies 166,928 203,800 192,721 199,509 196,514 191,520 192,721 196,613 24 Government National Mortgage Association 1,473 889 444 687 667 458 444 430 25 1- to 4-family 539 47 25 46 45 25 25 24 76 Multifamily 934 842 419 641 622 433 419 406 77 Farmers Home Administration5 733 48,421 43,051 48,203 48,085 42,978 43,051 43,051 78 1- to 4-family 183 21,625 18,169 21,390 21,157 18,111 18,169 18,169 79 Multifamily 113 7,608 8,044 7,710 7,808 7,903 8,044 8,044 30 Commercial 159 8,446 6,603 8,463 8,553 6,592 6,603 6,603 31 Farm 278 10,742 10,235 10,640 10,567 10,372 10,235 10,235 32 Federal Housing and Veterans Administration 4,920 5,047 5,574 5,177 5,268 5,330 5,574 5,679 33 1- to 4-family 2,254 2,386 2,557 2,447 2,531 2,452 2,557 2,612 34 Multifamily 2,666 2,661 3,017 2,730 2,737 2,878 3,017 3,067 35 Federal National Mortgage Association 98,282 97,895 96,649 95,140 94,064 94,884 96,649 99,787 36 1- to 4-family 91,966 90,718 89,666 88,106 87,013 87,901 89,666 92,828 37 Multifamily 6,316 7,177 6,983 7,034 7,051 6,983 6,983 6,959 38 Federal Land Banks 47,498 39,984 34,131 37,362 35,833 34,930 34,131 33,566 39 1- to 4-family 2,798 2,353 2,008 2,198 2,108 2,055 2,008 1,975 40 Farm 44,700 37,631 32,123 35,164 33,725 32,875 32,123 31,591 41 Federal Home Loan Mortgage Corporation 14,022 11,564 12,872 12,940 12,597 12,940 12,872 14,100 47 1- to 4-family 11,881 10,010 11,430 11,774 11,172 11,570 11,430 12,500 43 Multifamily 2,141 1,554 1,442 1,166 1,425 1,370 1,442 1,600 44 Mortgage pools or trusts6 415,042 531,591 670,394 575,435 615,142 648,084' 670,394 683,042 45 Government National Mortgage Association 212,145 262,697 317,555 281,116 293,246 308,339' 317,555 322,555 46 1- to 4-family 207,198 256,920 309,806 274,710 286,091 300,815' 309,806 314,684 47 Multifamily 4,947 5,777 7,749 6,406 7,155 7,524' 7,749 7,871 48 Federal Home Loan Mortgage Corporation 100,387 171,372 212,634 186,295 200,284 208,872' 212,634 215,000 49 1- to 4-family 99,515 166,667 205,977 180,602 194,238 202,308' 205,977 208,400 50 Multifamily 872 4,705 6,657 5,693 6,046 6,564 6,657 6,600 51 Federal National Mortgage Association 54,987 97,174 139,960 107,673 121,270 130,540 139,960 145,242 57 1- to 4-family 54,036 95,791 137,988 106,068 119,617 128,770 137,988 142,330 53 Multifamily 951 1,383 1,972 1,605 1,653 1,770 1,972 2,912 54 Farmers Home Administration5 47,523 348 245 351 342 333 245 245 55 1- to 4-family 22,186 142 121 154 149 144 121 121 56 Multifamily 6,675 0 0 0 0 0 0 0 57 Commercial 8,190 132 63 127 126 124 63 63 58 Farm 10,472 74 61 70 67 65 61 61 59 Individuals and others7 296,809 325,882 345,035 330,714 337,846 344,605' 345,035 346,923 60 1- to 4-family 165,835 180,8% 183,229 179,517 182,010 184,794' 183,229 184,076 61 Multifamily 55,424 66,133 75,094 70,146 73,924 74,403' 75,094 75,338 67 Commercial 49,207 54,845 64,311 57,866 59,110 62,798' 64,311 65,250 63 Farm 26,343 24,008 22,401 23,185 22,802 22,610' 22,401 22,259 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 • July 1988 1.55 CONSUMER INSTALLMENT CREDIT1 Total Outstanding, and Net Change, seasonally adjusted Millions of dollars 1987 1988 HHoollddeerr,, aanndd ttyyppee ooff ccrreeddiitt 11998866 11998877 July Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar. Amounts outstanding (end of period) 1 Total 571,833 613,022 593,513 598,190 602,977 606,926 608,728 613,022 619,258 624,294 628,754 By major holder 2 Commercial banks .... 262,139 281,564 272,287 273,879 276,805 278,855 279,550 281,564 284,753 287,344 290,899 3 Finance companies ... 133,698 140,072 136,414 137,663 138,395 139,236 138,928 140,072 141,695 142,946 144,053 4 Credit unions 76,191 81,065 79,124 79,816 80,351 80,672 80,923 81,065 81,662 81,897 82,161 5 Retailers3 39,660 42,782 41,144 41,381 41,632 42,012 42,291 42,782 42,926 43,080 43,271 6 Savings institutions ... 56,881 63,949 60,944 61,798 62,098 62,457 63,412 63,949 64,633 65,396 64,713 7 Gasoline companies ... 3,264 3,590 3,600 3,653 3,696 3,694 3,624 3,590 3,590 3,631 3,657 By major type of credit 8 Automobile 246,109 267,180 256,585 259,558 261,902 263,823 264,474 267,180 269,883 273,133 276,345 9 Commercial banks .. 100,907 108,438 104,859 105,661 106,685 107,414 107,727 108,438 109,298 111,021 113,511 10 Credit unions 38,413 43,474 40,836 41,515 42,118 42,612 43,071 43,474 43,959 44,251 44,559 11 Finance companies.. 92,350 98,026 95,132 96,287 96,809 97,261 %,733 98,026 99,147 100,123 100,669 12 Savings institutions . 14,439 17,242 15,758 16,095 16,290 16,536 16,943 17,242 17,479 17,738 17,605 13 Revolving 136,381 159,307 147,809 149,815 152,553 155,196 156,425 159,307 162,065 163,462 165,683 14 Commercial banks .. 86,757 98,808 93,025 94,142 96,083 97,416 97,378 98,808 100,879 101,537 103,309 15 Retailers 34,320 36,959 35,542 35,731 35,941 36,270 36,501 36,959 37,087 37,231 37,408 16 Gasoline companies. 3,264 3,590 3,600 3,653 3,696 3,694 3,624 3,590 3,590 3,631 3,657 17 Savings institutions . 8,366 13,279 10,956 11,194 11,333 11,922 12,636 13,279 13,601 13,945 13,980 18 Credit unions 3,674 6,671 4,686 5,095 5,500 5,894 6,286 6,671 6,908 7,117 7,329 19 Mobile home 26,883 25,957 26,966 26,879 26,845 26,698 26,604 25,957 25,926 25,857 25,681 20 Commercial banks .. 8,926 9,101 9,168 9,156 9,157 9,174 9,169 9,101 9,064 9,035 8,993 21 Finance companies.. 8,822 7,771 8,452 8,281 8,235 8,228 8,211 7,771 7,753 7,679 7,640 22 Savings institutions . 9,135 9,085 9,346 9,442 9,453 9,2% 9,224 9,085 9,109 9,143 9,048 23 Other 162,460 160,578 162,153 161,938 161,677 161,209 161,225 160,578 161,384 161,842 161,046 24 Commercial banks .. 65,549 65,217 65,235 64,920 64,880 64,851 65,276 65,217 65,512 65,750 65,086 25 Finance companies.. 32,526 34,275 32,830 33,095 33,351 33,747 33,984 34,275 34,795 35,144 35,744 26 Credit unions 34,104 30,920 33,602 33,206 32,733 32,166 31,566 30,920 30,795 30,529 30,272 27 Retailers 5,340 5,823 5,602 5,650 5,691 5,742 5,790 5,823 5,839 5,849 5,863 28 Savings institutions . 24,941 24,343 24,884 25,067 25,022 24,703 24,609 24,343 24,444 24,570 24,080 Net change (during period) 29 Total 54,078 41,189 5,635 4,677 4,787 3,949 1,802 4,294 6,236 5,036 4,460 By major holder 30 Commercial banks .... 20,495 19,425 2,576 1,592 2,926 2,050 695 2,014 3,189 2,591 3,555 31 Finance companies2... 22,670 6,374 819 1,249 732 841 -308 1,144 1,623 1,251 1,107 32 Credit unions 4,268 4,874 853 692 535 321 251 142 597 235 264 33 Retailers3 466 3,122 248 237 251 380 279 491 144 154 191 34 Savings institutions ... 7,223 7,068 1,108 854 300 359 955 537 684 763 -683 35 Gasoline companies ... -1,044 326 31 53 43 -2 -70 -34 0 41 26 By major type of credit 36 Automobile 36,473 21,071 2,373 2,973 2,344 1,921 651 2,706 2,703 3,250 3,212 37 Commercial banks .. 8,178 7,531 672 802 1,024 729 313 711 860 1,723 2,490 38 Credit unions 2,388 5,061 756 679 603 494 459 403 485 292 308 39 Finance companies.. 22,823 5,676 546 1,155 522 452 -528 1,293 1,121 976 546 40 Savings institutions . 3,084 2,803 399 337 195 246 407 299 237 259 -133 41 Revolving 14,368 22,926 3,032 2,006 2,738 2,643 1,229 2,882 2,758 1,397 2,221 42 Commercial banks .. 11,150 12,051 2,112 1,117 1,941 1,333 -38 1,430 2,071 658 1,772 43 Retailers 47 2,639 196 189 210 329 231 458 128 144 177 44 Gasoline companies . -1,044 326 31 53 43 -2 -70 -34 0 41 26 45 Savings institutions . 2,078 4,913 281 238 139 589 714 643 322 344 35 46 Credit unions 2,137 2,997 412 409 405 394 392 385 237 209 212 47 Mobile home 49 -926 156 -87 -34 -147 -94 -647 -31 -69 -176 48 Commercial banks .. -627 175 37 -12 1 17 -5 -68 -37 -29 -42 49 Finance companies.. -472 -1,051 -17 -171 -46 -7 -17 -440 -18 -74 -39 50 Savings institutions . 1,148 -50 136 96 11 -157 -72 -139 24 34 -95 51 Other 3,188 -1,882 74 -215 -261 -468 16 -647 806 458 -7% 52 Commercial banks .. 1,794 -332 -245 -315 -40 -29 425 -59 295 238 -664 53 Finance companies.. 319 1,749 290 265 256 396 237 291 520 349 600 54 Credit unions -257 -3,184 -315 -396 -473 -567 -600 -646 -125 -266 -257 55 Retailers 419 483 52 48 41 51 48 33 16 10 14 56 Savings institutions . 913 -598 292 183 -45 -319 -94 -266 101 126 -490 1. The Board's series cover most short- and intermediate-term credit extended 2. More detail for finance companies is available in the G. 20 statistical release. to individuals that is scheduled to be repaid (or has the option of repayment) in 3. Excludes 30-day charge credit held by travel and entertainment companies. two or more installments. These data also appear in the Board's G.19 (421) release. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Consumer Installment Credit A41 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent unless noted otherwise 1987 1988 IItteemm 11998855 11998866 11998877 Sept. Oct. Nov. Dec. Jan. Feb. Mar. INTEREST RATES Commercial banks2 1 48-month new car 12.91 11.33 10.45 n.a. n.a. 10.86 n.a. n.a. 10.72 n.a. 2 24-month personal 15.94 14.82 14.22 n.a. n.a. 14.58 n.a. n.a. 14.46 n.a. 3 120-month mobile home 14.96 13.99 13.38 n.a. n.a. 13.62 n.a. n.a. 13.45 n.a. 4 Credit card 18.69 18.26 17.92 n.a. n.a. 17.82 n.a. n.a. 17.80 n.a. Auto finance companies New car 11.98 9.44 10.73 8.71 10.31 12.24 12.23 12.19 12.26 12.24 6 Used car 17.59 15.95 14.60 14.58 14.76 14.90 14.97 14.56 14.75 14.77 OTHER TERMS4 Maturity (months) 7 New car 51.5 50.0 53.5 50.7 52.8 55.4 55.5 55.5 55.9 56.0 8 Used car 41.4 42.6 45.2 45.2 45.2 45.3 45.3 47.2 46.8 46.9 Loan-to-value ratio 9 New car 91 91 93 93 93 94 93 93 94 94 10 Used car 94 97 98 98 99 99 99 98 99 98 Amount financed (dollars) 11 New car 9,915 10,665 11,203 11,455 11,585 11,630 11,645 11,534 11,447 11,493 12 Used car 6,089 6,555 7,420 7,476 7,537 7,646 7,718 7,612 7,619 7,587 1. These data also appear in the Board's G.19 (421) release. For address, see 3. Before 1983 the maturity for new car loans was 36 months, and for mobile inside front cover. home loans was 84 months. 2. Data for midmonth of quarter only. 4. At auto finance companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 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 11998833 11998844 11998855 11998866 11998877 H2 HI H2 HI H2 HI H2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors 550.2 753.9 854.8 831.7 685.2 790.4 722.7 986.8 679.1 984.4 653 ^ 716.8 By sector and instrument 2 U.S. government 186.6 198.8 223.6 215.0 141.4 207.2 204.8 242.5 207.2 222.8 150.7 132.0 3 Treasury securities 186.7 199.0 223.7 214.7 142.3 207.3 204.9 242.5 207.4 222.0 i:;.7 132.9 4 Agency issues and mortgages -.1 -.2 -.1 .4 -.9 -.1 -.1 -.1 -.1 .9 -1.0 -.9 5 Private domestic nonfinancial sectors 363.6 555.1 631.1 616.7 543.9 583.3 518.0 744.3 471.8 761.6 50- 584.7 6 Debt capital instruments 253.4 313.6 447.8 452.7 456.5 342.5 350.4 545.2 365.6 539.8 47u. / 442.3 7 Tax-exempt obligations 53.7 50.4 136.4 30.8 31.3 67.0 67.0 205.8 -15.6 77.2 32.7 29.8 8 Corporate bonds 16.0 46.1 73.8 121.3 125.4 69.8 62.2 85.3 135.3 107.3 127.4 123.4 9 Mortgages 183.6 217.1 237.7 300.6 299.8 205.7 221.2 254.2 245.9 355.4 310.5 289.0 10 Home mortgages 117.5 129.7 151.9 201.2 212.6 119.9 139.2 164.7 163.9 238.6 226.9 198.3 11 Multifamily residential 14.2 25.1 29.2 33.1 23.8 22.4 25.0 33.4 31.3 34.9 29.8 17.8 12 Commercial 49.3 63.2 62.5 74.6 69.5 63.8 59.5 65.5 59.7 89.6 63.1 75.9 13 Farm 2.6 -.9 -6.0 -8.4 -6.1 -.4 -2.5 -9.5 -9.0 -7.7 -9.3 -2.9 14 Other debt instruments 110.2 241.5 183.3 164.0 87.4 240.8 167.5 199.1 106.3 221.7 32.3 142.5 15 Consumer credit 56.6 90.4 94.6 65.8 30.1 86.2 95.3 93.9 71.0 60.6 19.5 40.7 16 Bank loans n.e.c 23.2 67.1 38.6 66.5 14.2 63.0 21.0 56.2 12.2 120.8 -24.6 53.1 17 Open market paper -.8 21.7 14.6 -9.3 2.3 16.8 14.4 14.8 -13.1 -5.5 4.5 .1 18 Other 31.3 62.2 35.5 41.0 40.8 74.7 36.8 34.2 36.2 45.8 32.9 48.6 19 By borrowing sector 363.6 555.1 631.1 616.7 543.9 583.3 518.0 744.3 471.8 761.6 503.0 584.7 20 State and local governments 34.0 27.4 91.8 44.3 33.3 38.6 56.3 127.2 4.3 84.3 35.4 31.2 21 Households 188.2 234.6 293.4 281.1 245.6 234.2 259.8 327.1 233.0 329.3 240.4 250.7 22 Farm 4.1 -.1 -13.9 -15.1 -10.0 .4 -7.0 -20.8 -16.9 -13.3 -17.8 -2.2 23 Nonfarm noncorporate 77.0 97.0 93.1 116.2 102.5 92.2 85.7 100.5 96.7 135.6 100.7 104.2 24 Corporate 60.3 196.0 166.7 190.2 172.6 217.8 123.2 210.3 154.7 225.8 144.3 200.9 25 Foreign net borrowing in United States 17.3 8.3 1.2 9.0 3.1 -19.4 -5.8 8.2 21.5 -3.5 -7.4 13.5 26 Bonds 3.1 3.8 3.8 2.6 6.3 6.3 5.5 2.1 6.2 -1.1 -1.7 14.2 27 Bank loans n.e.c 3.6 -6.6 -2.8 -1.0 -3.9 -11.9 -5.8 .1 1.5 -3.5 -3.2 -4.6 28 Open market paper 6.5 6.2 6.2 11.5 2.1 -4.3 2.8 9.6 19.1 3.9 -5.3 9.5 29 U.S. government loans 4.1 5.0 -6.0 -4.0 -1.5 -9.6 -8.2 -3.7 -5.3 -2.7 2.7 -5.7 30 Total domestic plus foreign 567.5 762.2 856.0 840.7 688.3 771.0 716.9 995.0 700.5 980.9 646.4 730.3 Financial sectors 31 Total net borrowing by financial sectors 99.3 151.9 199.0 295.3 283.4 150.7 175.1 222.8 242.3 348.2 318.5 248.8 By instrument 32 U.S. government related 67.8 74.9 101.5 178.1 169.3 77.3 96.8 106.3 136.1 220.1 180.5 158.6 33 Sponsored credit agency securities 1.4 30.4 20.6 15.2 29.9 31.5 26.6 14.6 8.7 21.7 8.1 51.7 34 Mortgage pool securities 66.4 44.4 79.9 163.3 140.2 45.8 70.3 89.5 126.5 200.0 174.0 106.9 3"> 1.1 -.4 -.8 2 2 8 -1 5 -1 5 36 Private financial sectors 31.5 77.0 97.4 117.2 114.1 73.5 78.3 116.5 106.2 128.1 138.0 90.2 37 Corporate bonds 17.4 36.2 48.6 69.0 62.0 41.5 48.9 48.3 72.1 66.0 79.5 44.6 38 Mortgages * .4 .1 .1 .3 .4 * .1 .6 -.5 .2 .4 39 Bank loans n.e.c -.1 .7 2.6 4.0 -1.1 .7 2.3 2.9 4.0 4.0 -4.7 2.6 40 Open market paper 21.3 24.1 32.0 24.2 28.4 16.0 14.6 49.4 15.1 33.4 49.4 7.4 41 Loans from Federal Home Loan Banks -7.0 15.7 14.2 19.8 24.4 14.9 12.5 15.9 14.4 25.2 13.6 35.2 By sector 42 Sponsored credit agencies 1.4 30.4 21.7 14.9 29.2 31.5 26.6 16.8 9.5 20.2 6.6 51.7 43 Mortgage pools 66.4 44.4 79.9 163.3 140.2 45.8 70.3 89.5 126.5 200.0 174.0 106.9 44 Private financial sectors 31.5 77.0 97.4 117.2 114.1 73.5 78.3 116.5 106.2 128.1 138.0 90.2 45 Commercial banks 5.0 7.3 -4.9 -3.6 8.5 -5.3 -4.7 -5.0 -2.7 -4.6 14.1 2.9 46 Bank affiliates 12.1 15.6 14.5 4.6 4.8 10.8 10.2 18.9 -1.7 10.9 11.5 -1.8 47 Savings and loan associations -2.1 22.7 22.3 29.8 35.2 23.3 14.2 30.4 25.5 34.0 29.1 41.3 48 Finance companies 12.9 18.9 53.9 49.7 26.5 29.6 49.7 58.1 53.1 46.3 30.8 22.2 49 REITs -.1 .1 -.7 -.3 .9 .1 -.6 -.8 .6 -1.3 * 1.9 50 CMO Issuers 3.7 12.4 12.2 37.1 38.1 15.0 9.5 14.9 31.4 42.8 52,5 23.7 All sectors 51 Total net borrowing 666.8 914.1 1,054.9 1,136.0 971.7 921.8 892.1 1,217.8 942.8 1,329.1 964.9 979.1 52 U.S. government securities . 254.4 273.8 324.2 393.5 311.5 284.5 301.7 346.6 342.5 444.5 332.8 290.6 53 State and local obligations .. 53.7 50.4 136.4 30.8 31.3 67.0 67.0 205.8 -15.6 77.2 32.7 29.8 54 Corporate and foreign bonds 36.5 86.1 126.1 192.9 193.7 117.6 116.6 135.7 213.6 172.1 205.2 182.2 55 Mortgages 183.6 217.4 237.7 300.7 300.1 206.0 221.2 254.2 246.5 354.9 310.8 289.5 56 Consumer credit 56.6 90.4 94.6 65.8 30.1 86.2 95.3 93.9 71.0 60.6 19.5 40.7 57 Bank loans n.e.c 26.7 61.1 38.3 69.5 9.3 51.8 17.5 59.2 17.7 121.3 -32.5 51.2 58 Open market paper 26.9 52.0 52.8 26.4 32.8 28.6 31.8 73.7 21.0 31.7 48.6 17.0 59 Other loans 28.4 82.9 44.8 56.5 63.0 80.0 41.1 48.6 46.1 66.8 47.8 78.1 External corporate equity funds raised in United States 60 Total new share issues 61.8 -36.4 19.9 91.6 -9.3 -24.9 3.0 36.7 100.8 82.3 84.5 -103.2 61 Mutual funds 27.2 29.3 85.7 163.3 64.5 32.2 64.2 107.1 155.5 171.1 147.2 -18.2 62 All other 34.6 -65.7 -65.8 -71.7 -73.8 -57.1 -61.2 -70.4 -54.7 -88.7 -62.7 -85.0 63 Nonfinancial corporations 28.3 -74.5 -81.5 -80.8 -76.5 -69.4 -75.5 -87.5 -68.7 -92.7 -70.0 -83.0 64 Financial corporations 2.6 7.8 12.0 8.3 5.1 8.8 11.2 '12.8 7.5 9.1 5.4 4.8 65 Foreign shares purchased in United States 3.7 .9 3.7 .7 -2.4 3.5 3.1 4.3 6.6 -5.1 1.9 -6.8 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 11998833 11998844 11998855 11998866 11998877 H2 HI H2 HI H2 HI H2 1 Total funds advanced in credit markets to domestic nonfinancial sectors 550.2 753.9 854.8 831.7 685.2 790.4 722.7 986.8 679.1 984.4 653.7 716.8 By public agencies and foreign 7 Total net advances 114.0 157.6 202.3 319.7 233.6 118822..55 195.8 208.7 264.7 374.6 247.7 219.4 3 U.S. government securities 26.3 39.3 47.1 84.8 51.4 51.0 50.3 43.9 74.0 95.6 48.3 54.5 4 Residential mortgages 76.1 56.5 94.6 160.3 136.7 57.4 88.6 100.7 123.7 196.9 166.8 106.8 5 FHLB advances to savings and loans -7.0 15.7 14.2 19.8 24.4 14.9 12.5 15.9 14.4 25.2 13.6 35.2 6 Other loans and securities 18.6 46.2 46.3 54.7 21.0 59.2 44.4 48.2 52.6 56.9 19.0 22.9 Total advanced, by sector 7 U.S. government 9.7 17.1 16.8 9.5 -9.7 26.6 25.1 8.4 10.8 8.2 -9.3 -10.6 8 Sponsored credit agencies 69.8 74.3 101.5 177.3 166.0 75.2 96.4 106.7 128.2 226.5 168.1 164.4 9 Monetary authorities 10.9 8.4 21.6 30.2 8.6 4.8 27.5 15.8 13.2 47.2 10.8 6.5 10 Foreign 23.7 57.9 62.3 102.6 68.6 75.9 46.8 77.8 112.5 92.7 78.0 59.2 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 67.8 74.9 101.5 178.1 169.3 77.3 96.8 106.3 136.1 220.1 180.5 158.6 12 Foreign 17.3 8.3 1.2 9.0 3.1 -19.4 -5.8 8.2 21.5 -3.5 -7.4 13.5 Private domestic funds advanced 13 Total net advances 521.3 679.5 755.2 699.2 624.1 665.7 618.0 892.5 571.9 826.4 579.2 669.4 14 U.S. government securities 228.1 234.5 277.0 308.7 260.1 233.5 251.3 302.7 268.6 348.9 284.5 236.1 15 State and local obligations 53.7 50.4 136.4 30.8 31.3 67.0 67.0 205.8 -15.6 77.2 32.7 29.8 16 Corporate and foreign bonds 14.5 35.1 40.8 83.4 110.1 53.0 39.7 42.0 100.2 66.6 100.0 120.3 17 Residential mortgages 55.0 98.2 86.4 74.0 99.6 84.8 75.5 97.4 71.5 76.5 89.9 109.2 18 Other mortgages and loans 162.4 276.9 228.8 222.1 147.3 242.3 197.0 260.6 161.7 282.4 85.7 209.2 19 LESS: Federal Home Loan Bank advances -7.0 15.7 14.2 19.8 24.4 14.9 12.5 15.9 14.4 25.2 13.6 35.2 Private financial intermediation 20 Credit market funds advanced by private financial institutions 395.8 559.8 579.5 726.9 567.7 532.1 483.8 675.2 638.5 815.3 585.9 549.5 21 Commercial banking 144.3 168.9 186.3 194.7 127.5 145.5 143.3 229.4 117.2 272.3 103.1 151.8 n Savings institutions 135.6 150.2 83.0 105.5 140.7 133.5 54.5 111.4 94.5 116.6 104.5 176.8 73 Insurance and pension funds 100.1 121.8 156.0 176.7 203.6 95.3 139.4 172.5 169.0 184.4 215.9 191.4 24 Other finance 15.8 118.9 154.2 249.9 95.9 157.8 146.5 161.9 257.9 241.9 162.4 29.4 7,5 Sources of funds 395.8 559.8 579.5 726.9 567.7 532.1 483.8 675.2 638.5 815.3 585.9 549.5 26 Private domestic deposits and RPs 215.4 316.9 213.2 271.4 128.3 353.5 191.4 235.0 252.2 290.6 55.2 199.2 27 Credit market borrowing 31.5 77.0 97.4 117.2 114.1 73.5 78.3 116.5 106.2 128.1 138.0 90.2 7.8 Other sources 148.9 165.9 268.9 338.3 325.3 105.1 214.1 323.6 280.1 396.5 392.7 260.0 2.9 Foreign funds 14.6 8.8 19.7 12.9 45.3 1.7 10.8 28.6 11.9 14.0 24.5 66.0 30 Treasury balances -5.3 4.0 10.3 1.7 5.0 10.8 13.9 6.6 -4.2 7.6 4.3 5.7 31 Insurance and pension reserves 109.7 118.6 141.0 152.8 207.8 74.6 118.6 163.4 136.6 168.9 217.7 197.9 32 Other, net 30.0 34.5 98.1 170.9 67.2 18.0 71.4 124.7 135.8 206.1 146.2 -9.6 Private domestic nonfinancial investors 33 Direct lending in credit markets 157.0 196.7 273.2 89.4 170.5 207.1 212.5 333.9 39.7 139.2 131.3 210.2 34 U.S. government securities 99.3 123.6 145.3 47.1 54.8 84.3 156.2 134.5 42.2 51.9 67.3 42.8 35 State and local obligations 40.3 30.4 47.6 -5.4 52.2 50.4 14.8 80.4 -67.6 56.8 19.5 84.8 36 Corporate and foreign bonds -11.6 5.2 11.8 34.7 50.2 36.9 15.4 8.2 68.8 .7 12.1 88.3 37 Open market paper 12.0 9.3 43.9 -4.8 5.3 3.0 3.5 84.2 -17.3 7.7 24.2 -13.5 38 Other 17.0 28.1 24.6 17.9 8.0 32.5 22.6 26.6 13.6 22.1 8.2 7.8 39 Deposits and currency 232.8 320.4 223.5 291.8 141.1 354.0 198.3 248.7 261.9 321.6 40.3 239.8 40 Currency 14.3 8.6 12.4 14.4 15.6 3.6 15.9 8.8 10.7 18.2 9.6 21.6 41 Checkable deposits 28.8 28.0 41.5 100.1 -9.3 29.9 13.8 69.2 82.5 117.8 -21.5 2.8 42 Small time and savings accounts 215.4 150.7 138.6 120.8 69.3 169.9 162.1 115.1 112.6 129.0 52.1 86.5 43 Money market fund shares -39.0 49.0 8.9 43.8 22.3 73.4 10.6 7.1 46.9 40.6 -3.1 47.6 44 Large time deposits -8.3 84.3 7.6 -11.6 18.2 79.1 -7.3 22.5 .2 -23.3 5.0 29.3 45 Security RPs 18.5 5.0 16.6 18.3 27.9 1.2 12.2 21.1 10.0 26.5 22.7 33.0 46 Deposits in foreign countries 3.1 -5.1 -2.1 5.9 -2.8 -3.1 -9.0 4.9 -.9 12.8 -24.5 19.0 47 Total of credit market instruments, deposits, and currency 389.9 517.1 496.7 381.2 311.6 561.1 410.7 582.6 301.6 460.9 171.6 450.1 48 Public holdings as percent of total 20.1 20.7 23.6 38.0 33.9 23.7 27.3 21.0 37.8 38.2 38.3 30.0 49 Private financial intermediation (in percent) 75.9 82.4 76.7 104.0 91.0 79.9 78.3 75.6 111.6 98.7 101.2 82.1 50 Total foreign funds 38.2 66.7 82.0 115.5 113.9 77.6 57.7 106.4 124.4 106.7 102.6 125.2 MEMO: Corporate equities not included above SI Total net issues 61.8 -36.4 19.9 91.6 -9.3 -24.9 3.0 36.7 100.8 82.3 84.5 -103.2 57, Mutual fund shares 27.2 29.3 85.7 163.3 64.5 32.2 64.2 107.1 155.5 171.1 147.2 -18.2 53 Other equities 34.6 -65.7 -65.8 -71.7 -73.8 -57.1 -61.2 -70.4 -54.7 -88.7 -62.7 -85.0 54 Acquisitions by financial institutions 51.1 19.7 43.4 50.6 45.9 39.7 59.5 27.3 46.5 54.6 72.6 19.2 55 Other net purchases 10.7 -56.1 -22.9 41.0 -55.2 -64.6 -55.8 9.5 54.3 27.7 11.9 -122.4 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 • July 1988 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures' 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1987 1988 MMeeaassuurree 11998855 11998866 11998877 Aug. Sept. Oct. Nov. Dec. Jan. Feb.' Mar.' Apr. 1 Industrial production 123.7 125.1 129.8 131.2 131.0 132.5 133.2 133.9 134.4 134.4 134.7 135.6 Market groupings 2 Products, total 130.6 133.3 138.3 139.9 139.4 140.9 141.0 141.3 142.7' 143.5 143.6 144.3 i Final, total 131.0 132.5 136.8 138.4 137.8 139.3 139.2 139.8 141.1 141.7 141.9 142.6 4 Consumer goods 119.8 124.0 127.7 129.4 127.7 129.0 129.4 129.8 131.2' 131.5 131.2 131.9 5 Equipment 145.8 143.6 148.8 150.2 151.2 153.0 152.2 153.1 154.3' 155.3 156.1 156.9 6 Intermediate 129.3 136.2 143.5 145.3 144.9 146.1 147.3 146.5 148.1' 149.5 149.3 150.1 7 Materials 114.3 113.8 118.2 119.4 119.7 121.2 122.5 123.7 123.0 122.1 122.5 123.6 Industry groupings 8 Manufacturing 126.4 129.1 134.6 135.9 135.7 137.3 137.9 138.9 139.4' 139.5 140.0 140.9 Capacity utilization (percent)2 9 Manufacturing 80.1 79.8 81.0 81.5 81.3 82.0 82.2 82.5 82.7' 82.6 82.6 83.0 10 Industrial materials industries 80.2 78.5 80.5 81.1 81.2 82.1 82.9 83.7 83.0 82.1 82.4 82.9 11 Construction contracts (1982 = 100)3 150.0' 158.0' 161.0' 174.0 160.0 164.0 157.0 157.0 145.0 159.0 154.0 144.0 12 Nonagricultural employment, total4 118.3 120.8 123.8 124.0 124.2 124.9 125.2 125.6 125.9 126.6 126.9 127.1 13 Goods-producing, total 102.4 102.4 102.2 102.2 102.4 103.0 103.4 103.8 103.5 104.2 104.5 104.8 14 Manufacturing, total 97.8 96.5 97.1 97.2 97.4 97.8 98.2 98.5 98.5 98.6 98.7 98.9 15 Manufacturing, production-worker.... 92.6 91.2 92.1 92.2 92.5 92.9 93.3 93.6 93.7 93.9 93.8 94.1 16 Service-producing 125.0 128.9 132.9 133.1 133.4 134.1 134.4 134.8 135.3 135.9 136.3 136.5 17 Personal income, total 207.0 219.9 233.1 233.9 235.3 239.8 238.9' 240.7 240.9 242.3 245.1 245.3 18 Wages and salary disbursements 198.7 210.2 222.6 224.2 225.4 227.1 228.6 229.5 230.7 232.3 233.8 234.6 19 Manufacturing 172.8 176.4 181.5 182.0 183.7 184.7 185.7 186.0 186.6 187.1 190.1 188.1 20 Disposable personal income 206.0 219.1 230.7 231.6 232.9 237.8 236.4 238.1 239.0 241.0 243.3 241.0 21 Retail sales 189.6' 199.5' 209.3' 216.5' 212.9' 211.2' 211.9' 214.2' 214.5' 216.7 220.5 219.1 Prices7 22 Consumer (1982 = 100) 107.6 109.6 113.6 114.4 115.0 115.3 115.4 115.4 115.7 116.0 116.5 117.1 23 Producer finished goods (1982 = 100) ... 104.7 103.2 105.4 105.9 105.7 106.2' 106.3' 105.8' 106.2 105.9 106.2 106.9 1. A major revision of the industrial production index and the capacity 5. Based on data in Survey of Current Business (U.S. Department of Comutilization rates was released in July 1985. See "A Revision of the Index of merce). Industrial Production" and accompanying tables that contain revised indexes 6. Based on Bureau of Census data published in Survey of Current Business. (1977=100) through December 1984 in the FEDERAL RESERVE BULLETIN, vol. 71 7. Data without seasonal adjustment, as published in Monthly Labor Review. (July 1985), pp. 487-501. The revised indexes for January through June 1985 were Seasonally adjusted data for changes in the price indexes may be obtained from shown in the September BULLETIN. the Bureau of Labor Statistics, U.S. Department of Labor. 2. Ratios of indexes of production to indexes of capacity. Based on data from Federal Reserve, McGraw-Hill Economics Department, Department of 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 Sept. Oct. Nov. Dec. Jan. Feb/ Mar/ Apr. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 180,440 182,822 185,010 185,428 185,575 185,737 185,882 186,083 186,219 186,361 186,478 2 Labor force (including Armed Forces)1 117,695 120,078 122,122 122,230 122,651 122,861 122,984 123,436 123,598 123,153 123,569 3 Civilian labor force 115,461 117,834 119,865 119,963 120,387 120,594 120,722 121,175 121,348 120,903 121,323 4 Nonagricultural industries 103,971 106,434 109,232 109,688 109,961 110,332 110,529 110,836 111,182 110,899 111,485 5 Agriculture 3,179 3,163 3,208 3,184 3,249 3,172 3,215 3,293 3,228 3,204 3,228 Unemployment 6 Number 8,312 8,237 7,425 7,091 7,177 7,090 6,978 7,046 6,938 6,801 6,610 7 Rate (percent of civilian labor force) 7.2 7.0 6.2 5.9 6.0 5.9 5.8 5.8 5.7 5.6 5.4 8 Not in labor force 62,745 62,744 62,888 63,198 62,924 62,876 62,898 62,647 62,621 63,208 62,909 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 97,519 99,610 102,105 102,434 102,983 103,285 103,612 103,827 104,365 104,661 104,835 10 Manufacturing 19,260 18,994 19,112 19,169 19,247 19,336 19,382 19,401 19,421 19,433 19,477 11 Mining 927 783 742 759 764 759 756 746 748 751 767 12 Contract construction 4,673 4,904 5,032 4,989 5,053 5,074 5,121 5,058 5,185 5,265 5,262 13 Transportation and public utilities 5,238 5,244 5,377 5,416 5,436 5,459 5,473 5,485 5,507 5,533 5,545 14 Trade 23,073 23,580 24,056 24,129 24,239 24,294 24,329 24,503 24,611 24,617 24,648 15 Finance 5,955 6,297 6,588 6,629 6,650 6,657 6,668 6,684 6,689 6,701 6,718 16 Service 22,000 23,099 24,136 24,295 24,406 24,493 24,612 24,683 24,902 24,990 25,044 17 Government 16,394 16,710 17,063 17,048 17,188 17,213 17,271 17,267 17,302 17,371 17,374 ]. Persons 16 years of age and over. Monthly figures, which are based on 3. Data include all full- and part-time employees who worked during, or sample data, relate to the calendar week that contains the 12th day; annual data received pay for, the pay period that includes the 12th day of the month, and are averages of monthly figures. By definition, seasonality does not exist in exclude proprietors, self-employed persons, domestic servants, unpaid family population figures. Based on data from Employment and Earnings (U.S. Depart- workers, and members of the Armed Forces. Data are adjusted to the March 1984 ment of Labor). benchmark and only seasonally adjusted data are available at this time. Based on 2. Includes self-employed, unpaid family, and domestic service workers. data from Employment and Earnings (U.S. Department of Labor). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • July 1988 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1987 1988 1987 1988 1987 1988 SSeerriieess Q2 Q3 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 Qlr Output (1977 = 100) Capacity (percent of 1977 output) Utilization rate (percent) 1 Total industry 128.2 130.9 133.0 134.5 160.4 161.3 162.2 163.1 79.9 81.2 82.1 82.4 2 Mining 99.0 100.6 103.2 102.5 129.7 129.0 128.4 127.7 76.3 78.0 81.2 80.2 3 Utilities 108.3 111.6 112.5 115.1 138.3 138.8 139.4 139.8 78.3 80.5 80.6 82.3 4 Manufacturing 133.2 135.7 137.9 139.6 165.6 166.7 167.7 168.9 80.5 81.4 82.3 82.7 5 Primary processing 116.1 119.2 122.1 122.7 139.0 139.8 140.6 141.6 83.5 85.3 86.9 86.8 6 Advanced processing... 143.5 145.8 147.5 149.6 181.6 182.9 184.1 185.6 79.0 79.7 80.1 80.7 7 Materials 116.5 119.1 121.9 122.6 146.7 147.2 147.8 148.5 79.4 81.0 82.9 82.5 8 Durable goods 122.9 125.5 129.6 131.3 163.1 163.9 164.7 165.7 75.4 76.7 79.1 79.4 9 Metal materials 77.0 83.6 91.1 86.6 110.0 109.4 108.8 108.8 70.0 76.5 84.0 79.0 10 Nondurable goods 124.0 128.2 129.3 130.3 143.8 144.7 145.6 146.8 86.2 88.6 89.3 88.0 11 Textile, paper, and chemical ... 125.1 130.5 132.3 133.1 143.4 144.4 145.4 146.7 87.2 90.4 91.5 89.6 P 137.7 144.5 143.9 145.1 95.7 99.6 99.2 98.8 13 125.3 130.7 149.8 150.9 83.6 86.3 89.1 86.8 14 Energy materials 98.7 100.0 101.8 100.9 120.2 120.1 119.9 119.7 82.1 83.3 85.2 84.4 Previous cycle2 Latest cycle3 1987 1987 1988 High Low High Low Apr. Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar/ Apr. Capacity utilization rate (percent) 15 Total industry 88.6 72.1 86.9 69.5 79.6 81.4 81.1 81.9 82.1 82.4 82.5 82.4 82.4 82.7 16 Mining 92.8 87.8 95.2 76.9 75.9 78.2 79.1 80.6 81.5 81.5 80.7 79.6 80.3 81.5 17 Utilities 95.6 82.9 88.5 78.0 76.8 81.3 80.0 80.5 81.2 80.4 82.4 82.8 81.8 81.1 18 Manufacturing 87.7 69.9 86.5 68.0 80.2 81.5 81.3 82.0 82.2 82.5 82.7 82.6 82.6 83.0 19 Primary processing.... 91.9 68.3 89.1 65.1 83.5 85.3 85.1 86.2 87.0 87.8 87.1 86.6 86.6 87.1 20 Advanced processing.. 86.0 71.1 85.1 69.5 78.7 79.9 79.5 80.1 80.0 80.1 80.7 80.8 80.7 81.1 21 Materials 92.0 70.5 89.1 68.5 79.1 81.1 81.2 82.1 82.9 83.7 83.0 82.2 82.4 82.9 72 Durable goods 91.8 64.4 89.8 60.9 75.0 76.6 77.0 78.3 79.0 80.2 79.7 79.2 79.2 79.9 23 Metal materials 99.2 67.1 93.6 45.7 68.8 77.5 78.3 82.4 83.3 87.6 80.1 78.5 78.3 79.1 24 Nondurable goods .... 91.1 66.7 88.1 70.7 86.5 88.6 88.7 88.2 89.0 90.5 88.8 87.5 87.8 88.1 25 Textile, paper, and chemical 92.8 64.8 89.4 68.8 87.5 90.5 90.7 90.4 91.0 92.7 90.8 88.7 89.3 89.6 ">6 98.4 70.6 97.3 79.9 95.1 99.9 98.5 97.4 98.7 101.6 100.6 97.8 98.1 ">7 92.5 64.4 87.9 63.5 83.9 86.4 87.4 88.0 88.6 90.8 87.8 86.1 86.7 28 Energy materials 94.6 86.9 94.0 82.3 81.3 84.0 83.5 84.9 85.7 85.1 84.7 84.1 84.4 84.8 1. These data also appear in the Board's G.3 (402) release. For address, see 2. Monthly high 1973; monthly low 1975. inside front cover. 3. Monthly highs 1978 through 1980; monthly lows 1982. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A47 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data are seasonally adjusted 1977 1987 1988 1987 GGrroouuppss por- avg. tion Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan/ Feb. Mar/ Apr/ Index (1977 = 100) MAJOR MARKET 1 Total index 100.00 129.8 127.4 128.4 129.1 130.6 131.2 131.0 132.5 133.2 133.9 134.4 134.4 134.7 135.6 ?, Products 57.72 138.3 137.2 137.2 137.8 139.5 139.9 139.4 140.9 141.0 141.3 142.7 143.5 143.6 144.3 Final products 44.77 136.8 134.5 135.8 136.2 137.9 138.4 137.8 139.3 139.2 139.8 141.1 141.7 141.9 142.6 4 Consumer goods 25.52 127.7 126.6 128.2 127.2 128.9 129.4 127.7 129.0 129.4 129.8 131.2 131.5 131.2 131.9 5 Equipment 19.25 148.8 144.9 145.8 148.1 149.7 150.2 151.2 153.0 152.2 153.1 154.3 155.3 156.1 156.9 6 Intermediate products 12.94 143.4 139.9 142.1 143.3 145.0 145.3 144.9 146.1 147.3 146.5 148.1 149.5 149.3 150.1 7 Materials 42.28 118.2 116.2 116.3 117.2 118.5 119.4 119.7 121.2 122.5 123.7 123.0 122.1 122.5 123.6 Consumer goods 8 Durable consumer goods 6.89 120.2 118.1 120.2 117.4 120.4 121.2 118.6 124.3 123.9 120.3 121.7 120.8 120.8 122.3 9 Automotive products 2.98 118.5 115.7 118.0 114.9 117.5 118.0 114.2 124.3 121.3 115.4 118.7 117.6 121.0 122.3 10 Autos and trucks 1.79 115.1 111.5 113.1 107.9 112.3 112.4 107.2 122.2 118.7 110.2 112.8 111.8 116.4 118.0 11 Autos, consumer 1.16 90.7 91.8 91.0 87.4 86.4 76.8 79.1 94.7 91.9 83.7 77.5 79.5 86.3 91.0 17 Trucks, consumer .63 160.5 148.1 154.2 146.0 160.4 178.4 159.4 173.2 168.5 159.5 178.3 171.6 172.2 N Auto parts and allied goods 1.19 123.5 121.9 125.3 125.4 125.3 126.6 124.8 127.5 125.2 123.3 127.7 126.4 127.8 128.7 14 Home goods 3.91 121.6 119.9 121.8 119.3 122.5 123.6 121.9 124.3 125.8 123.9 124.0 123.2 120.6 122.4 15 Appliances, A/C and TV 1.24 141.5 137.7 142.2 133.4 141.7 147.1 141.8 145.7 150.1 142.7 142.2 140.6 133.1 137.0 16 Appliances and TV 1.19 142.1 139.2 142.3 133.4 142.6 145.5 140.6 146.1 150.5 142.6 140.9 141.4 133.0 17 Carpeting and furniture .96 130.7 133.5 133.3 132.3 134.1 132.0 131.6 132.9 133.5 133.9 134.2 132.3 133.1 18 Miscellaneous home goods 1.71 102.0 99.4 100.7 101.8 102.2 102.0 102.2 104.1 103.9 104.8 105.2 105.5 104.6 19 Nondurable consumer goods 18.63 130.5 129.8 131.1 130.9 132.1 132.5 131.0 130.8 131.5 133.3 134.7 135.4 135.1 135.4 20 Consumer staples 15.29 137.3 136.4 137.7 137.6 138.9 139.2 137.8 137.4 138.3 140.7 142.3 143.0 142.5 142.8 71 Consumer foods and tobacco 7.80 136.2 134.4 135.6 136.0 137.2 137.4 137.0 137.5 137.3 139.2 140.3 140.7 139.7 72 Nonfood staples 7.49 138.5 138.5 139.9 139.2 140.6 141.2 138.6 137.2 139.4 142.2 144.3 145.4 145.4 145.7 73 Consumer chemical products 2.75 162.9 164.7 165.9 164.4 165.7 167.4 163.6 160.0 163.5 167.7 170.7 171.7 171.7 74 Consumer paper products 1.88 151.8 148.9 152.9 153.1 153.8 153.9 153.2 151.8 152.8 157.0 157.1 158.7 158.5 75 Consumer energy 2.86 106.3 106.5 106.4 105.9 108.0 107.7 105.0 105.8 107.4 108.0 110.6 111.6 111.5 76 Consumer fuel 1.44 93.1 94.5 92.1 91.9 92.7 91.4 91.6 92.4 93.2 95.4 95.4 97.0 98.5 27 Residential utilities 1.42 119.8 118.7 121.0 120.2 123.6 124.3 118.7 119.4 121.8 120.7 126.0 126.4 Equipment 7.8 Business and defense equipment 18.01 153.6 150.0 150.8 153.2 154.4 154.5 155.2 157.2 156.6 157.8 115599..22 160.3 160.9 161.9 7,9 Business equipment 14.34 144.5 140.8 141.7 144.2 145.6 145.6 146.3 148.7 148.3 149.8 151.2 152.3 153.2 154.5 30 Construction, mining, and farm 2.08 62.2 58.6 61.2 63.0 65.0 66.4 66.1 66.5 66.3 67.4 67.1 67.6 68.4 69.0 31 Manufacturing 3.27 117.9 111.1 111.5 117.2 120.4 120.9 122.0 120.5 120.6 122.2 125.4 124.9 125.8 127.6 37, Power 1.27 82.6 82.4 84.0 84.0 81.8 82.8 81.1 83.0 83.1 84.2 86.2 88.3 88.3 88.6 33 Commercial 5.22 226.5 220.9 222.0 226.7 227.9 227.7 229.1 232.4 232.1 235.5 238.0 240.4 240.8 242.1 34 Transit 2.49 108.4 110.4 110.1 105.4 106.1 104.7 105.1 112.5 111.2 109.1 106.5 107.6 109.9 111.7 35 Defense and space equipment 3.67 188.9 186.1 186.5 188.6 188.7 189.1 189.8 190.3 188.7 188.9 190.6 191.5 190.9 190.6 Intermediate products 36 Construction supplies 5.95 131.5 127.3 128.3 131.5 133.1 132.5 132.3 133.3 134.2 133.8 136.8 137.7 136.6 137.2 37 Business supplies 6.99 153.5 150.5 153.8 153.4 155.2 156.3 155.6 157.1 158.4 157.4 157.8 159.6 160.1 38 General business supplies 5.67 158.6 155.5 158.2 158.5 160.5 161.0 160.9 162.3 164.3 163.3 163.1 165.2 165.7 39 Commercial energy products 1.31 131.1 129.0 135.0 131.1 132.3 135.8 132.7 134.6 132.9 131.8 135.0 135.5 135.7 Materials 40 Durable goods materials 20.50 125.0 122.2 121.6 124.0 125.2 125.5 126.4 128.7 130.2 132.0 131.8 131.2 131.5 132.9 41 Durable consumer parts 4.92 100.9 96.2 95.2 99.2 98.5 99.6 99.0 102.3 103.1 104.6 104.7 104.2 104.0 105.7 42 Equipment parts 5.94 159.0 157.1 156.0 158.3 159.3 159.5 161.1 162.2 163.2 165.3 167.4 167.4 168.1 169.6 43 Durable materials n.e.c 9.64 116.4 114.1 113.9 115.5 117.7 117.9 118.9 121.6 123.6 125.5 123.7 122.6 122.9 124.2 44 Basic metal materials 4.64 86.7 81.8 81.9 83.6 86.6 90.4 91.3 95.3 96.5 100.0 92.9 90.7 90.5 91.5 45 Nondurable goods materials 10.09 125.8 125.4 125.3 124.1 127.6 128.3 128.6 128.2 129.6 132.5 129.9 128.4 129.4 130.3 46 Textile, paper, and chemical materials 7.53 127.6 126.9 126.5 125.1 129.6 130.6 131.2 131.0 132.3 135.6 132.7 130.2 131.6 132.6 47 Textile materials 1.52 111.7 125.0 111.9 117.8 116.7 116.0 113.0 112.7 113.6 112.6 110.2 111.8 48 Pulp and paper materials 1.55 141.0 137.4 137.4 139.0 145.4 145.0 143.3 142.0 144.4 149.0 148.0 144.4 145.3 49 Chemical materials 4.46 128.4 125.0 125.0 124.9 128.1 130.4 132.2 133.4 134.7 138.4 134.2 132.1 133.6 50 Miscellaneous nondurable materials ... 2.57 120.4 121.1 122.0 120.9 122.0 121.4 120.9 119.7 121.7 123.3 121.8 123.2 51 Energy materials 11.69 99.8 97.5 99.3 99.4 99.0 100.9 100.2 101.8 102.8 101.7 101.4 100.7 100.9 101.4 57, Primary energy 7.57 105.0 102.3 103.6 104.0 102.5 104.6 104.6 106.8 108.4 107.7 107.3 105.0 104.8 53 Converted fuel materials 4.12 90.3 88.7 91.4 91.0 92.5 94.1 92.2 92.7 92.6 90.7 90.6 92.8 93.8 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • July 1988 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1987 1988 Groups SIC 1987 code avg. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan.r Feb. Mar.p Apr/ Index (1977 = 100) MAJOR INDUSTRY 1 Mining and utilities 15.79 104.3 101.4 103.1 103.0 103.7 105.4 105.4 106.8 107.9 107.3 107.8 107.0 106.9 107.4 2 Mining 9.83 100.7 98.6 99.2 99.2 99.2 100.9 101.9 103.6 104.6 104.6 103.3 101.7 102.4 103.8 3 Utilities 5.96 110.3 106.0 109.6 109.4 111.2 112.9 111.2 112.1 113.2 111.7 115.2 115.7 114.4 113.5 4 Manufacturing 84.21 134.6 132.4 133.2 134.0 135.6 135.9 135.7 137.3 137.9 138.9 139.4 139.5 140.0 140.9 5 Nondurable 35.11 136.7 134.6 135.7 136.9 138.5 138.8 138.6 138.1 139.6 141.3 141.4 141.2 141.5 142.0 6 Durable 49.10 133.1 130.9 131.4 132.0 133.5 133.8 133.7 136.8 136.7 137.3 137.9 138.3 138.9 140.1 Mining 7 Metal 10 .50 77.5 65.7 71.7 70.7 71.4 79.3 86.5 85.6 90.4 96.5 91.5 84.2 8 Coal 11.12 1.60 131.8 121.9 127.2 128.8 127.9 130.5 133.3 140.3 142.9 140.6 140.2 133.7 129.1 131.5 9 Oil and gas extraction 13 7.07 92.7 93.1 92.1 91.8 91.8 93.0 93.3 94.1 94.2 94.1 93.1 92.6 94.5 95.6 10 Stone and earth minerals 14 .66 128.2 125.4 127.6 128.5 130.7 130.3 130.0 131.0 134.1 135.6 132.1 134.5 135.1 Nondurable manufactures 11 Foods 20 7.96 137.7 136.0 137.4 137.7 138.5 138.8 139.5 138.0 138.9 140.1 141.2 142.0 141.4 12 Tobacco products 21 .62 103.4 99.6 106.6 107.0 106.8 110.4 101.7 103.7 106.5 110.5 105.8 105.3 13 Textile mill products 22 2.29 115.8 116.6 115.7 117.2 118.3 119.8 118.2 116.8 117.3 118.2 116.2 115.3 116.0 14 Apparel products 23 2.79 107.4 105.3 106.4 107.7 109.7 108.4 107.6 108.0 109.4 107.8 108.7 108.0 15 Paper and products 26 3.15 144.4 140.5 141.3 142.6 148.8 148.9 147.4 146.0 148.3 150.6 149.9 148.0 149.6 16 Printing and publishing 27 4.54 172.0 169.2 171.4 174.1 174.0 174.7 174.9 175.2 175.7 176.9 177.5 179.6 179.5 179.7 17 Chemicals and products 28 8.05 140.1 137.3 138.1 139.3 140.8 142.3 142.4 141.5 144.4 147.9 147.9 145.8 146.2 18 Petroleum products 29 2.40 93.5 94.0 92.6 92.3 94.1 92.9 93.5 94.6 93.3 96.1 96.3 95.9 97.6 98.7 19 Rubber and plastic products.... 30 2.80 163.6 160.5 162.2 165.4 167.2 164.8 165.2 166.7 169.9 170.6 170.5 172.3 172.5 20 Leather and products 31 .53 60.0 60.2 61.4 60.8 59.2 61.3 60.7 59.6 60.7 57.5 58.3 59.7 59.9 Durable manufactures 21 Lumber and products 24 2.30 130.3 127.8 130.3 131.1 132.8 131.1 126.9 129.8 134.0 133.6 136.3 139.4 137.1 22 Furniture and fixtures 25 1.27 152.8 148.2 150.5 153.9 156.2 155.2 155.9 156.0 158.5 159.4 158.0 158.5 159.2 23 Clay, glass, stone products 32 2.72 119.1 120.6 117.2 117.9 118.8 116.5 118.6 118.9 120.5 120.1 120.4 121.6 121.9 24 Primary metals 33 5.33 81.5 76.1 77.0 78.8 81.4 85.1 84.5 90.6 90.2 90.6 86.5 85.3 84.9 86.0 25 Iron and steel 331.2 3.49 70.8 65.0 65.7 68.3 70.9 76.0 74.6 82.0 79.7 81.9 77.8 75.6 74.3 26 Fabricated metal products 34 6.46 111.0 109.9 108.5 111.1 111.1 110.1 111.1 113.5 113.6 115.8 117.1 117.8 118.8 119.5 27 Nonelectrical machinery 35 9.54 152.7 150.4 149.7 151.8 155.3 154.3 156.6 158.0 157.2 161.0 162.9 163.5 164.6 166.2 28 Electrical machinery 36 7.15 172.3 168.4 171.1 170.5 172.5 174.3 173.4 175.5 175.6 175.9 177.4 177.6 177.0 179.3 29 Transportation equipment 37 9.13 129.2 127.8 129.4 126.5 127.6 128.1 125.5 132.0 130.4 128.1 128.6 128.4 130.0 131.3 30 Motor vehicles and parts 371 5.25 111.8 109.8 112.0 107.4 109.4 109.1 105.6 116.0 114.0 110.2 109.7 109.3 113.1 115.4 31 Aerospace and miscellaneous transportation equipment 372-6.9 3.87 152.8 152.3 153.1 152.4 152.3 153.9 152.5 153.7 152.7 152.4 154.2 154.5 153.0 153.0 32 Instruments 38 2.66 143.9 142.8 142.1 144.5 143.8 146.3 145.6 146.7 147.8 145.5 148.2 149.2 149.9 115500..88 33 Miscellaneous manufactures.... 39 1.46 102.6 101.4 101.9 101.2 100.5 102.2 102.1 104.6 104.5 105.6 105.0 106.1 105.5 Utilities 34 Electric 4.17 112266..66 112222..33 112288..88 112288..88 113311..00 113322..00 112277..55 112266..88 112277..55 112255..66 113300..33 113300..77 112299..22 Gross value (billions of 1982 dollars, annual rates) MAJOR MARKET 35 Products, total 517.5 1,735.8 1,710.0 1,723.0 1,720.4 1.732.5 1,741.7 1,735.9 1,774.1 1,772.4 1,778.8 1,790.6 1,798.7 1,808.9 1,818.2 36 Final 405.7 1,333.8 1,316.5 1,324.7 1,320.1 1.326.6 1,334.9 1,330.3 1,360.9 1,359.9 1,359.4 1,375.5 1,382.0 1,388.6 1,396.9 37 Consumer goods 272.7 866.0 857.1 862.8 855.1 863.2 866.4 856.9 876.6 879.8 881.2 893.6 894.7 896.4 901.8 38 Equipment 133.0 467.8 459.4 461.9 465.0 463.5 468.5 473.4 484.4 480.1 478.2 481.9 487.3 492.3 495.1 39 Intermediate 111.9 402.0 393.6 398.4 400.3 405.9 406.8 405.6 413.2 412.5 419.4 415.1 416.7 420.3 421.3 1. These data also appear in the Board's G.12.3 (414) release. For address, see Industrial Production" and accompanying tables that contain revised indexes inside front cover. (1977=100) through December 1984 in the FEDERAL RESERVE BULLETIN, vol. 71 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. 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 1988 IItteemm 11998855 11998866 11998877 June July Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,733 1,750 1,535' 1,5 UK 1,514' i,5or 1,453'' 1,459' 1,372'' 1,248 1,429 1,476 7 1-family 957 1,071 1,024'' 1,022' 994r 1,014' 983' 962' 971" 957' 918 1,003 1,030 3 2-or-more-family 777 679 sir 517'" 516r 50C 518' 49 r 488' 415r 330 426 446 4 Started 1,742 1,805 1,621 1,583 1,594 1,583 1,679 1,538 1,661 1,399 1,382 1,519 1,554 5 1-family 1,072 1,179 1,146 1,086 1,142 1,109 1,211 1,105 1,129 1,035 1,016 1,102 1,176 6 2-or-more-family 669 626 474 497 452 474 468 433 532 364 366 417 378 7 Under construction, end of period1 . 1,063 1,074 987 1,060 1,052 1,044 1,046 1,044 1,042 1,016 1,008 988 1,005 8 1-family 539 583 591 622 621 621 627 627 625 618 614 600 622 9 2-or-more-family 524 490 397 438 431 423 419 417 417 398 394 388 383 10 Completed 1,703 1,756 1,669 1,612 1,680 1,633 1,591 1,565 1,571 1,624 1,550 1,442 1,568 11 1-family 1,072 1,120 1,123 1,111 1,112 1,069 1,100 1,114 1,088 1,104 1,098 1,031 1,076 12 2-or-more-family 631 637 546 501 568 564 491 451 483 520 452 411 492 13 Mobile homes shipped 284 244 233 234 243 234 240 234 222 227 200 208 212 Merchant builder activity in 1-family units 14 Number sold 688 748 672 640 672 673 644 653 625 586' 552 630 655 15 Number for sale, end of period1 350 361 370 359 359 361 361 360 362 365 369 362 377 Price (thousands of dollars)2 Median 16 Units sold 84.3 92.2 104.7' 109.0 105.0 106.8 106.5 106.5 117.0 111.8' 118.0 110.0 101.1 17 Units sold 101.0 112.2 127.9 135.8 128.6 128.5 133.5 125.8 139.2 136.2' 144.9 137.8 130.3 EXISTING UNITS (1-family) 18 Number sold 3,217 3,566 3,530 3,580 3,470 3,410 3,430 3,470 3,370 3,330 3,170 3,250 3,330 Price of units sold (thousands of dollars) 19 Median 75.4 80.3 85.6 85.9 88.3 86.5 85.5 84.6 85.0 8855..44 87.4 88.1 8877..99 20 Average 90.6 98.3 106.2 107.1 109.8 107.0 106.9 106.1 106.6 107.1 108.7 110.4 110.7 Value of new construction3 millions of dollars) CONSTRUCTION 21 Total put in place 355,995 388,815 398,189 397,191 398,465 402,872 402,782 398,930 403,963 403,884 394,453 396,022 401,830 ?? Private 291,665 316,589 322,948 324,256 323,847 329,831 324,857 322,213 327,020 326,272 319,175 317,928 319,521 73 Residential 158,475 187,147 190,508 200,864 198,005 200,241 196,969 194,521 193,731 194,535 191,979 189,914 191,361 24 Nonresidential, total 133,190 129,442 132,440 123,392 125,842 129,590 127,888 127,692 133,289 131,737 127,1% 128,014 128,160 Buildings 75 Industrial 15,769 13,747 13,095 13,023 13,005 13,659 14,387 13,536 14,336 13,579 13,324 13,720 14,735 76 Commercial 59,629 56,762 53,201 51,831 52,537 54,055 52,800 53,912 57,683 54,982 54,351 54,132 53,933 77 Other 12,619 13,216 15,254 14,769 15,317 14,888 15,079 15,593 16,158 17,321 16,444 17,773 17,035 28 Public utilities and other 45,173 45,717 44,728 43,769 44,983 46,988 45,622 44,651 45,112 45,855 43,077 42,389 42,457 79 Public 64,326 72,225 75,239 72,935 74,618 73,041 77,924 76,716 76,943 77,613 75,278 78,094 82,309 30 Military 3,283 3,919 4,204 4,352 5,009 4,193 6,083 4,308 4,738 3,164 4,667 4,367 4,844 31 Highway 21,756 23,360 23,248 21,704 22,441 22,005 23,489 24,993 24,713 25,792 25,018 25,835 27,604 37 Conservation and development... 4,746 4,668 5,142 5,498 5,328 5,127 4,978 5,445 4,725 5,565 4,371 4,577 5,489 33 Other 34,541 40,278 42,645 41,381 41,840 41,716 43,374 41,970 42,767 43,092 41,222 43,315 44,372 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 • July 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 IIIttteeemmm AAAppprrr... 1987 1988 1987 1988 111999888888 11998877 11998888 (((111999888222 AApprr.. AApprr.. === 111000000)))111 June Sept. Dec/ Mar/ Dec. Jan.' Feb. Mar. Apr. CONSUMER PRICES2 1 All items 3.8 3.9 4.3 3.9 3.2 4.2 .2 .3 .2 .5 .4 117.1 2 Food 4.7 3.4 5.8 2.1 2.8 1.4 .4 .3 -.3 .3 .7 116.6 3 Energy items .2 1.0 6.6 6.0 -3.9 -4.9 -.8 -.7 -.6 .0 .8 87.3 4 All items less food and energy 4.2 4.3 3.8 3.8 4.4 5.4 .2 .5 .2 .6 .4 122.4 5 Commodities 3.1 3.6 3.7 2.9 2.5 4.7 -.2 .4 .1 .7 .6 115.5 6 Services 4.7 4.6 4.4 4.3 5.0 5.9 .4 .6 .4 .5 .2 126.5 PRODUCER PRICES 7 Finished goods 2.7 1.7 3.5 3.8 -1.9 2.3 -.3' .2 -.2 .6 .4 106.9 8 Consumer foods 4.1 .9 9.6 -1.8 -5.7 5.6 -1.3 1.7 -1.1 .7 .4 110.2 9 Consumer energy -1.9 -1.3 2.0 16.5 -9.6 -19.6 -.8R -5.3 -.8 .9 3.1 60.9 10 Other consumer goods 2.8 3.1 1.8 4.6 1.7 5.3 .3 .5 .3 .4 .0 117.2 11 Capital equipment 2.0 1.8 1.1 4.0 -.7 3.2 .2 .2 .2 .4 .2 113.6 12 Intermediate materials3 1.2 5.3 5.3 5.6 4.3 3.9 .2' .4 .0 .6 .8 105.7 13 Excluding energy 1.6 6.7 4.2 5.3 7.2 7.8 .5 1.0 .2 .7 .7 113.7 Crude materials 14 Foods 9.0 4.4 25.2 -4.8 -4.8 16.7 .7' .8 2.3 .8 .4 101.2 IS Energy 2.9 -4.9 11.3 5.9 -15.2 -23.6 -1.5' -3.9 -.3 -2.4 2.5 70.5 16 Other 3.3 23.6 27.2 39.4 18.0 13.8 .4' 1.1 .8 1.4 .2 133.6 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. 1987 1988 AAccccoouunntt 11998855 11998866 11998877 Ql Q2 Q3 Q4 Qir GROSS NATIONAL PRODUCT 1 4,010.3 4,235.0 4,488.5 4,377.7 4,445.1 4,524.0 4,607.4 4,668.7 By source 2 Personal consumption expenditures 2,629.4 2,799.8 2,967.8 2,893.8 2,943.7 3,011.3 3,022.6 3,071.9 3 Durable goods 368.7 402.4 413.7 396.1 409.0 436.8 413.0 426.4 4 Nondurable goods 913.1 939.4 982.9 969.9 982.1 986.4 993.1 998.8 5 Services 1,347.5 1,458.0 1,571.2 1,527.7 1,552.6 1,588.1 1,616.5 1,646.8 6 Gross private domestic investment 641.6 671.0 717.5 699.9 702.6 707.4 760.2 756.7 7 Fixed investment 631.6 655.2 671.5 648.2 662.3 684.5 690.8 704.3 8 Nonresidential 442.6 436.9 443.4 422.8 434.6 456.6 459.6 477.4 9 Structures 152.5 137.4 134.2 128.7 129.7 137.1 141.1 140.0 10 Producers' durable equipment 290.1 299.5 309.2 294.1 304.9 319.5 318.5 337.4 11 Residential structures 189.0 218.3 228.1 225.4 227.7 227.9 231.2 226.9 12 Change in business inventories 10.0 15.7 46.1 51.6 40.3 22.9 69.4 52.4 13 Nonfarm 13.6 16.8 36.2 48.7 27.3 11.1 57.5 36.2 14 Net exports of goods and services -79.2 -105.5 -119.6 -112.2 -118.4 -123.7 -124.3 -109.4 IS Exports 369.9 376.2 427.8 397.3 416.5 439.2 458.1 482.7 16 Imports 449.2 481.7 547.4 509.5 534.8 562.9 582.4 592.1 17 Government purchases of goods and services 818.6 869.7 922.8 896.2 917.1 929.0 948.8 949.5 18 Federal 353.9 366.2 379.4 366.9 379.6 382.1 388.9 379.7 19 State and local 464.7 503.5 543.4 529.3 537.6 546.9 559.9 569.8 By major type of product 70 Final sales, total 4,000.3 4,219.3 4,442.5 4,326.0 4,404.8 4,501.1 4,537.9 4,616.3 71 Goods 1,637.9 1,693.8 1,782.2 1,738.7 1,763.5 1,798.3 1,828.4 1,854.1 72 Durable 704.3 726.8 773.3 747.0 756.7 785.7 803.8 812.8 73 Nondurable 933.6 967.0 1,008.9 991.7 1,006.8 1,012.6 1,024.6 1,041.3 74 Services 1,969.2 2,116.2 2,271.2 2,212.0 2,252.2 2,289.3 2,331.5 2,372.8 25 Structures 403.1 425.0 435.0 426.9 429.4 436.4 447.5 441.8 26 Change in business inventories 10.0 15.7 46.1 51.6 40.3 22.9 69.4 52.4 27 Durable goods 7.3 4.8 25.3 35.2 22.1 -1.9 46.0 17.8 28 Nondurable goods 2.7 10.9 20.7 16.5 18.2 24.8 23.4 34.7 29 MEMO Total GNP in 1982 dollars 3,607.5 3,713.3 3,821.0 3,772.2 3,795.3 3,835.9 3,880.8 3,918.0 NATIONAL INCOME 30 3,229.9 3,422.0 3,636.0 3,548.3 3,593.3 3,659.0 3,743.5 3,792.8 31 Compensation of employees 2,370.8 2,504.9 2,647.6 2,589.9 2,623.4 2,663.5 2,713.5 2,764.5 32 Wages and salaries 1,974.7 2,089.1 2,212.7 2,163.3 2,191.4 2,226.5 2,269.9 2,308.7 33 Government and government enterprises 372.3 394.8 421.4 412.2 418.1 424.5 430.9 439.1 34 Other 1,602.6 1,694.3 1,791.3 1,751.1 1,773.3 1,801.9 1,839.0 1,869.6 35 Supplement to wages and salaries 396.1 415.8 434.8 426.6 432.0 437.0 443.6 455.8 36 Employer contributions for social insurance 203.8 214.7 224.6 220.0 222.5 225.9 230.1 240.5 37 Other labor income 192.3 201.1 210.2 206.7 209.5 211.1 213.5 215.4 38 Proprietors'income1 257.3 289.8 327.4 320.9 323.1 322.7 342.7 338.5 39 Business and professional 227.6 252.6 279.0 269.7 275.8 282.1 288.4 292.6 40 Farm1 29.7 37.2 48.4 51.3 47.3 40.6 54.3 45.9 41 Rental income of persons2 9.0 16.7 19.3 20.0 18.9 17.3 20.9 22.1 42 Corporate profits1 277.6 284.4 304.7 294.0 296.8 314.9 313.0 309.9 43 Profits before tax3 224.8 231.9 274.1 257.0 268.7 284.9 285.6 280.6 44 Inventory valuation adjustment -.7 6.5 -17.5 -11.3 -20.0 -17.6 -21.3 -16.4 45 Capital consumption adjustment 53.5 46.0 48.2 48.2 48.0 47.7 48.7 45.7 46 Net interest 315.3 326.1 337.1 323.6 331.1 340.6 353.3 357.8 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. , SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A52 Domestic Nonfinancial Statistics • July 1988 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1987 1988 AAccccoouunntt 11998855 11998866 Ql Q2 Q3 Q4 Ql' PERSONAL INCOME AND SAVING 1 Total personal income 3,327.0 3,534.3 3,746.5 3,662.0 3,708.6 3,761.0 3,854.4 3,902.3 2 Wage and salary disbursements 1,974.9 2,089.1 2,212.7 2,163.3 2,191.4 2,226.1 2,270.2 2,308.7 3 Commodity-producing industries 609.2 623.3 641.1 632.9 635.0 641.8 654.7 663.8 4 Manufacturing 460.9 470.5 484.0 477.2 479.0 485.1 494.7 501.2 5 Distributive industries 473.0 497.1 522.9 511.5 518.9 526.3 535.0 543.0 6 Service industries 520.4 573.9 627.3 606.7 619.3 633.9 649.3 662.8 7 Government and government enterprises 372.3 394.8 421.4 412.2 418.1 424.2 431.2 439.1 8 Other labor income 192.3 201.1 210.2 206.7 209.5 211.1 213.5 215.4 9 Proprietors' income 257.3 289.8 327.4 320.9 323.1 322.7 342.7 338.5 10 Business and professional1 227.6 252.6 279.0 269.7 275.8 282.1 288.4 292.6 11 Farm1 29.7 37.2 48.4 51.3 47.3 40.6 54.3 45.9 12 Rental income of persons2 9.0 16.7 19.3 20.0 18.9 17.3 20.9 22.1 13 Dividends 76.3 81.2 87.5 84.5 86.3 88.7 90.5 92.1 14 Personal interest income 476.5 497.6 516.2 499.8 506.3 520.0 538.8 545.8 15 Transfer payments 489.7 518.3 543.1 533.7 541.5 545.8 551.4 569.1 16 Old-age survivors, disability, and health insurance benefits ... 253.4 269.2 282.8 278.0 282.3 284.4 286.5 297.8 17 LESS: Personal contributions for social insurance 148.9 159.6 169.9 166.7 168.4 170.7 173.6 189.4 18 EQUALS: Personal income 3,327.0 3,534.3 3,746.5 3,662.0 3,708.6 3,761.0 3,854.4 3,902.3 19 LESS: Personal tax and nontax payments 485.9 512.2 564.8 536.1 578.0 565.7 579.4 576.8 20 EQUALS: Disposable personal income 2,841.1 3,022.1 3,181.7 3,125.9 3,130.6 3,195.3 3,275.0 3,325.5 21 LESS: Personal outlays 2,714.1 2,891.5 3,062.7 2,987.5 3,037.4 3,106.5 3,119.3 3,170.3 22 EQUALS: Personal saving 127.1 130.6 119.0 138.4 93.2 88.8 155.7 155.2 MEMO Per capita (1982 dollars) 23 Gross national product 15,073.7 15,369.6 15,672.6 15,523.4 15,586.4 15,714.4 15,859.4 15,972.2 24 Personal consumption expenditures 9,830.2 10,142.8 10,242.8 10,188.9 10,215.6 10,326.5 10,235.4 10,317.5 25 Disposable personal income 10,622.0 10,947.0 10,980.0 11,008.0 10,865.0 10,958.0 11,090.0 11,169.0 26 Saving rate (percent) 4.5 4.3 3.7 4.4 3.0 2.8 4.8 4.7 GROSS SAVING 531.3 532.0 565.2 554.3 551.3 559.3 595.9 618.1 28 Gross private saving 664.2 679.8 672.6 683.8 639.9 648.7 718.2 724.1 29 Personal saving 127.1 130.6 119.0 138.4 93.2 88.8 155.7 155.2 30 Undistributed corporate profits' 99.6 92.6 74.6 75.6 70.1 76.8 75.7 76.3 31 Corporate inventory valuation adjustment -.7 6.5 -17.5 -11.3 -20.0 -17.6 -21.3 -16.4 Capital consumption allowances 269.1 282.8 229966..22 229911..88 229944..55 229977..88 330000..99 330044..66 168.5 173.8 182.8 178.0 182.1 185.3 186.0 188.0 34 Government surplus, or deficit (-), national income and product accounts -132.9 -147.8 -107.4 -129.5 -88.6 -89.3 -122.3 -106.0 -196.0 -204.7 -151.4 -170.5 -139.2 -135.8 -160.2 -151.8 36 State and local 63.1 56.8 44.0 41.0 50.6 46.5 37.9 45.8 525.7 527.1 560.6 552.1 548.1 548.4 593.8 609.5 38 Gross private domestic 641.6 671.0 717.5 699.9 702.6 707.4 760.2 756.7 39 Net foreign -115.9 -143.9 -156.9 -147.7 -154.5 -159.0 -166.4 -147.3 40 Statistical discrepancy -5.6 -4.9 -4.6 -2.2 -3.1 -10.9 -2.1 -8.6 1. With inventory valuation and capital consumption adjustments. SOURCE. Survey of Current Business (Department of Commerce). 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A53 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.1 Item credits or debits 1985 1986 1987 Q4 Ql Q2 Q3 Q4" 1 Balance on current account -116,394 -141,352 -160,682 -37,977 -36,909 -41,338 -43,442 -38,993 2 Not seasonally adjusted -36,398 -33,435 -42,028 -48,317 -36,902 3 Merchandise trade balance -iii, 148 - i44,339 -i59,201 -38,595 -38,920 -39,742 -40,365 -40,174 4 Merchandise exports 215,935 224,361 250,814 57,021 56,769 59,875 65,110 69,060 5 Merchandise imports -338,083 -368,700 -410,015 -95,616 -95,689 -99,617 -105,475 -109,234 6 Military transactions, net -3,338 -3,662 -2,078 -495 -37 29 -735 -1,335 7 Investment income, net3 25,398 20,844 14,483 4,492 5,513 1,589 294 7,088 8 Other service transactions, net -1,005 1,463 -418 759 -390 -150 289 -168 9 Remittances, pensions, and other transfers -4,079 -3,885 -3,526 -1,151 -989 -837 -833 -868 10 U.S. government grants (excluding military) -11,222 -11,772 -9,942 -2,987 -2,086 -2,227 -2,092 -3,536 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) -2,831 -1,920 1,219 225 -177 355 816 12 Change in U.S. official reserve assets (increase, -) -3,858 312 9,150 132 1,956 3,419 32 3,743 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -897 -246 -509 -31 76 -171 -210 -205 15 Reserve position in International Monetary Fund 908 1,500 2,070 283 606 335 407 722 16 Foreign currencies -3,869 -942 7,590 -120 1,274 3,255 -165 3,226 17 Change in U.S. private assets abroad (increase, -)3 -24,711 -94,374 -74,166 -32,351 13,170 -18,320 -27,559 -41,457 18 Bank-reported claims -1,323 -59,039 -33,431 -31,800 25,686 -15,685 -20,107 -23,325 19 Nonbank-reported claims 1,361 -3,986 170 -1,163 2,603 -327 20 U.S. purchase of foreign securities, net -7,481 -3,302 -3,654 3,113 -1,345 384 -923 — i ,770 21 U.S. direct investments abroad, net3 -17,268 -28,047 -38,194 -3,834 -10,008 -5,622 -6,202 -16,362 22 Change in foreign official assets in the United States (increase, +) -1,140 34,698 44,289 1,003 13,953 10,070 363 19,904 23 U.S. Treasury securities -838 34,515 43,301 4,572 12,145 11,084 860 19,212 24 Other U.S. government obligations -301 -1,214 1,570 -117 -62 256 714 662 25 Other U.S. government liabilities 823 1,723 -3,227 -607 -1,381 -1,504 -377 35 26 Other U.S. liabilities reported by U.S. banks 645 554 3,705 -2,435 3,611 547 -211 -242 27 Other foreign official assets5 -1,469 -880 -1,060 -410 -360 -313 -624 237 28 Change in foreign private assets in the United States (increase, +) 131,012 178,689 158,296 57,428 12,802 39,494 67,026 38,974 29 U.S. bank-reported liabilities 41,045 77,350 77,857 34,604 -13,614 14,823 44,358 32,290 30 U.S. nonbank-reported liabilities -450 -2,791 1,035 1,761 1,526 525 31 Foreign private purchases of U.S. Treasury securities, net 20,433 8,275 ' -6,088 -3,074 -1,570 -2,211 -2,855 ''' 548 32 Foreign purchases of other U.S. securities, net 50,962 70,802 42,134 12,269 18,499 15,870 12,693 -4,928 33 Foreign direct investments in the United States, net3 19,022 25,053 40,581 12,594 7,726 9,486 12,305 11,064 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 17,920 23,947 21,892 11,750 -5,197 6,852 3,226 17,013 36 Owing to seasonal adjustments 3,904 2,959 -1,700 -4,833 3,577 37 Statistical discrepancy in recorded data before seasonal adjustment 17,920 23,947 21,892 7,846 -8,156 8,552 8,059 13,437 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) -3,858 312 9,150 132 1,956 3,419 32 3,743 39 Foreign official assets in the United States (increase, +) excluding line 25 -1,963 32,975 47,516 1,610 15,334 11,574 739 19,869 40 Change in Organization of Petroleum Exporting Countries official assets in the United States (part of line 22 above) -6,709 -8,508 -10,006 -5,195 -2,651 -1,721 -2,733 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 46 101 94 53 26 13 47 1. Seasonal factors are not calculated for lines 6, 10, 12-16, 18-20, 22-34, and 4. Primarily associated with military sales contracts and other transactions 38-41. arranged with or through foreign official agencies. 2. Data are on an international accounts (IA) basis. Differs from the Census 5. Consists of investments in U.S. corporate stocks and in debt securities of basis data, shown in table 3.11, for reasons of coverage and timing. Military private corporations and state and local governments. exports are excluded from merchandise data and are included in line 6. NOTE. Data are from Bureau of Economic Analysis, Survey of Current Business 3. Includes reinvested earnings. (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 International Statistics • July 1988 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data are not seasonally adjusted. 1987 1988 IItteemm 11998855 11998866 11998877 Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments, f.a.s. value 218,815 226,808 252,866 20,986 21,752 23,799 24,801 22,330 23,559 28,971 2 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses, c.i.f. value 352,463 382,964 424,082 35,062 39,383 37,016 37,003 34,767 37,387 38,718 3 Trade balance -133,648 -156,156 -171,217 -14,076 -17,631 -13,218 -12,202 -12,437 -13,828 -9,746 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Total 34,934 43,186 48,511 46,200 46,779 45,798 42,955 43,064 43,186 42,730 2 Gold stock, including Exchange Stabilization Fund1 11,096 11,090 11,064 11,085 11,082 11,078 11,068 11,063 11,063 11,063 3 Special drawing rights2,3 5,641 7,293 8,395 9,373 9,937 10,283 9,765 9,761 9,899 9,589 4 Reserve position in International Monetary Fund 11,541 11,947 11,730 11,157 11,369 11,349 10,804 10,445 10,645 10,803 5 Foreign currencies4 6,656 12,856 17,322 14,585 14,391 13,088 11,318 11,795 11,579 11,275 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Deposits 267 480 287 236 351 244 355 343 534 215 Assets held in custody i 2 U.S. Treasury securities 118,000 121,004 155,835 182,072 187,767 195,126 206,675 215,308 222,407 224,725 3 Earmarked gold3 14,242 14,245 14,048 13,998 13,965 13,919 13,882 13,824 13,773 13,719 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 1988 AAsssseett aaccccoouunntt 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p All foreign countries 1 Total, all currencies 453,656 458,012 456,628 490,46¥ 521,757' 525,894' 519,095' 503,665' 495,482 502,774 7 Claims on United States 113,393 119,706 114,563 137,468 138,221 140,425' 138,132 131,376 131,062 135,404 Parent bank 78,109 87,201 83,492 101,885 99,450 102,814 105,943 95,482 94,348 99,066 4 Other banks in United States 13,664 13,057 13,685 15,949 17,826 16,701 16,416 14,910 15,388 14,507 5 Nonbanks 21,620 19,448 17,386 19,634 20,945 20,910' 15,773 20,984 21,326 21,831 6 Claims on foreigners 320,162 315,676 312,955 319,861' 347,614' 346,819' 342,408' 334,110' 326,544 328,477 7 Other branches of parent bank- 95,184 91,399 96,281 103,281 116,558' 116,509 122,057 115,250' 111,595 108,947 8 Banks 100,397 102,960 105,237 108,482 118,248' 115,591' 108,856' 108,186' 105,622 106,911 9 Public borrowers 23,343 23,478 23,706 21,642r 22,157' 22,385' 21,828' 21,365' 21,339 21,930 10 Nonbank foreigners 101,238 97,839 87,731 86,456' 90,651' 92,334' 89,667' 89,309' 87,988 90,689 11 Other assets 20,101 22,630 29,110 33,140' 35,922' 38,650' 38,555' 38,179' 37,876 38,893 12 Total payable in U.S. dollars 350,636 336,520 317,487 340,956' 354,544' 353,073' 350,597' 335,651' 331,147 334,250 H Claims on United States 111,426 116,638 110,620 131,934 131,659 133,731 132,121 124,820 124,836 128,835 14 Parent bank 77,229 85,971 82,082 100,026 97,257 100,123 103,349 92,393 91,271 95,801 15 Other banks in United States 13,500 12,454 12,830 13,942 15,627 14,632 14,657 13,439 13,886 13,190 16 Nonbanks 20,697 18,213 15,708 17,966 18,775 18,976 14,115' 18,988 19,679 19,844 17 Claims on foreigners 228,600 210,129 195,063 195,125' 209,137' 203,963' 202,329 196,154' 190,846 190,693 18 Other branches of parent bank 78,746 72,727 72,197 77,699 86,695' 85,548 88,186 84,443 82,987 81,667 19 Banks 76,940 71,868 66,421 64,516 68,931 65,771 63,706 61,384 58,207 58,257 70 Public borrowers 17,626 17,260 16,708 14,943 14,988 14,952 14,730 14,720 14,619 14,813 21 Nonbank foreigners 55,288 48,274 39,737 37,967' 38,523' 37,692' 35,707' 35,607' 35,033 35,956 22 Other assets 10,610 9,753 11,804 13,897 13,748 15,379 16,147 14,677 15,465 14,722 United Kingdom 23 Total, all currencies 144,385 148,599 140,917 149,633 163,472 167,726 159,186 160,244 157,575 155,657 74 Claims on United States 27,675 33,157 24,599 32,581 33,904 35,392' 32,518 32,464 32,869 29,446 75 Parent bank 21,862 26,970 19,085 27,128 27,710 29,553 27,350 26,923 27,484 24,512 76 Other banks in United States 1,429 1,106 1,612 1,349 1,870 1,694 1,259 1,558 1,527 1,111 77 Nonbanks 4,384 5,081 3,902 4,104 4,324 4,145' 3,909 3,983 3,858 3,823 78 Claims on foreigners 111,828 110,217 109,508 108,562 120,079 121,487' 115,700 118,407 115,430 117,110 79 Other branches of parent bank 37,953 31,576 33,422 33,334 37,402 39,138 39,903 39,702 38,077 34,278 30 Banks 37,443 39,250 39,468 38,390 42,929 41,649 36,735 39,697 38,654 40,422 31 Public borrowers 5,334 5,644 4,990 4,725 4,881 5,272 4,752 4,639 4,613 5,272 32 Nonbank foreigners 31,098 33,747 31,628 32,113 34,867 35,428' 34,310 34,369 34,086 37,138 33 Other assets 4,882 5,225 6,810 8,490 9,489 10,847 10,968 9,373 9,276 9,101 34 Total payable in U.S. dollars 112,809 108,626 95,028 99,656 105,515 107,289 101,065 102,075 101,642 95,972 35 Claims on United States 26,868 32,092 23,193 30,791 31,820 33,409 30,439 30,083 30,971 27,253 36 Parent bank 21,495 26,568 18,526 26,423 26,850 28,685 26,304 25,781 26,565 23,217 37 Other banks in United States 1,363 1,005 1,475 1,105 1,504 1,408 1,044 1,132 1,273 945 38 Nonbanks 4,010 4,519 3,192 3,263 3,466 3,316 3,091 3,170 3,133 3,091 39 Claims on foreigners 82,945 73,475 68,138 64,561 69,276 68,864 64,560 67,458 66,313 64,382 40 Other branches of parent bank 33,607 26,011 26,361 25,600 27,810 29,166 28,635 29,336 29,813 26,812 41 Banks 26,805 26,139 23,251 21,522 22,941 21,833 19,188 20,814 19,516 19,831 47 Public borrowers 4,030 3,999 3,677 3,377 3,426 3,472 3,313 3,313 3,347 3,824 43 Nonbank foreigners 18,503 17,326 14,849 14,062 15,099 14,393 13,424 13,995 13,637 13,915 44 Other assets 2,996 3,059 3,697 4,304 4,419 5,016 6,066 4,534 4,358 4,337 Bahamas and Caymans 45 Total, all currencies 146,811 142,055 142,592 152,146 156,951 155,100 160,321 148,718 143,630 153,254 46 Claims on United States 77,296 74,864 78,048 81,913 83,383 82,366 85,318 79,893 78,015 85,872 47 Parent bank 49,449 50,553 54,575 53,902 53,289 52,759 60,048 51,249 48,402 56,355 48 Other banks in United States 11,544 11,204 11,156 13,538 14,721 13,980 14,277 12,472 13,042 12,400 49 Nonbanks 16,303 13,107 12,317 14,473 15,373 15,627 10,993 16,172 16,571 17,117 50 Claims on foreigners 65,598 63,882 60,005 65,622 68,713 67,658 70,162 63,469 60,111 61,927 51 Other branches of parent bank 17,661 19,042 17,296 18,698 18,936 18,905 21,277 19,777 18,460 19,343 57 Banks 30,246 28,192 27,476 31,692 35,014 33,479 33,751 29,365 27,705 28,612 53 Public borrowers 6,089 6,458 7,051 6,988 7,018 7,196 7,428 7,257 7,071 6,899 54 Nonbank foreigners 11,602 10,190 8,182 8,244 7,745 8,078 7,706 7,070 6,875 7,073 55 Other assets 3,917 3,309 4,539 4,611 4,855 5,076 4,841 5,356 5,504 5,455 56 Total payable in U.S. dollars 141,562 136,794 136,813 142,622 145,841 144,525 151,434 141,135 135,916 145,050 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 • July 1988 3.14 Continued 1987 1988 LLiiaabbiilliittyy aaccccoouunntt 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar/ All foreign countries 57 Total, all currencies 453,656 458,012 456,628 490,469' 521,757' 525,894' 519,095' 503,665' 495,482 502,774 58 Negotiable CDs 37,725 34,607 31,629 35,724 36,796 34,690 30,929 29,277' 31,158 31,854 59 To United States 147,583 156,281 152,465 153,931' 156,762' 156,206' 161,390' 150,678' 149,747 157,287 60 Parent bank 78,739 84,657 83,394 81,047' 80,297' 83,929' 87,72C 78,725' 85,198 91,673 61 Other banks in United States 18,409 16,894 15,646 17,246 18,870' 18,871' 20,559' 15,801' 14,237 14,833 62 Nonbanks 50,435 54,730 53,425 55,638 57,595 53,406 53,111 56,152' 50,312 50,781 63 To foreigners 247,907 245,939 253,775 281,191' 307,161' 312,596' 304,790' 302,040' 293,015 289,840 64 Other branches of parent bank 93,909 89,529 95,146 104,033' 114,863' 117,036' 124,601' 116,432' 111,755 109,118 65 Banks 78,203 76,814 77,809 85,700' 98,121' 97,49C 87,261' 89,552' 88,400 88,157 66 Official institutions 20,281 19,520 17,835 20,267' 20,370 21,873 19,564 21,130 20,373 18,608 67 Nonbank foreigners 55,514 60,076 62,985 71,191' 73,807' 76,197' 73,364' 74,926' 72,487 73,957 68 Other liabilities 20,441 21,185 18,759 19,623' 21,038' 22,402' 21,986' 21,67C 21,562 23,793 69 Total payable in U.S. dollars 367,145 353,712 336,406 352,276' 365,879' 361,698' 361,438' 344,805' 341,721 344,279 70 Negotiable CDs 35,227 31,063 28,466 30,933 32,117 30,075 26,768 24,785 26,386 26,869 71 To United States 143,571 150,905 144,483 143,862' 145,462' 143,188' 148,442' 139,187' 138,931 145,029 72 Parent bank 76,254 81,631 79,305 75,752' 74,788' 77,81c 81,897' 73, \W 79,419 84,846 73 Other banks in United States 17,935 16,264 14,609 15,829 17,315' 17,197' 19,155' 14,433' 12,918 13,519 74 Nonbanks 49,382 53,010 50,569 52,281 53,359 48,181 47,390 51,555' 46,594 46,664 75 To foreigners 178,260 163,583 156,806 169,59C 179,506' 179,526' 177,711' 172,283' 167,523 163,115 76 Other branches of parent bank 77,770 71,078 71,181 78,104' 84,448' 84,63C 90,469' 84,296' 82,802 81,013 77 Banks 45,123 37,365 33,850 35,312' 40,167' 38,932' 35,065' 33,315' 32,278 30,588 78 Official institutions 15,773 14,359 12,371 14,247 13,405 14,161 12,409 12,736 12,071 10,489 79 Nonbank foreigners 39,594 40,781 39,404 41,927 41,486' 41.803 39,768' 41,936' 40,372 41,025 80 Other liabilities 10,087 8,161 6,651 7,891' 8,794 8,909' 8,517' 8,550' 8,881 9,266 United Kingdom 81 Total, all currencies 144,385 148,599 140,917 149,633 163,472 167,726 159,186 160,244 157,575 155,657 82 Negotiable CDs 34,413 31,260 27,781 31,451 32,523 30,475 26,988 25,184 26,786 27,279 83 To United States 25,250 29,422 24,657 22,462 22,868 24,961 23,470 25,209 26,533 22,896 84 Parent bank 14,651 19,330 14,469 13,357 12,251 14,018 13,223 14,177 15,527 14,506 85 Other banks in United States . 3,125 2,974 2,649 2,073 2,382 2,103 1,740 1,596 1,615 1,768 86 Nonbanks 7,474 7,118 7,539 7,032 8,235 8,840 8,507 9,436 9,391 6,622 87 To foreigners 77,424 78,525 79,498 86,813 98,215 101,686 98,689 100,001 94,084 94,878 88 Other branches of parent bank 21,631 23,389 25,036 26,094 29,718 30,727 33,078 33,344 30,350 30,211 89 Banks 30,436 28,581 30,877 31,681 38,502 37,690 34,290 34,820 33,520 33,316 90 Official institutions 10,154 9,676 6,836 10,387 10,248 12,000 11,015 11,571 11,048 9,624 91 Nonbank foreigners 15,203 16,879 16,749 18,651 19,747 21,269 20,306 20,266 19,166 21,727 92 Other liabilities 7,298 9,392 8,981 8,907 9,866 10,604 10,039 9,850 10,172 10,604 93 Total payable in U.S. dollars 117,497 112,697 99,707 102,202 108,440 108,481 102,550 105,138 105,162 98,982 94 Negotiable CDs 33,070 29,337 26,169 28,776 29,991 27,999 24,926 22,875 24,281 24,716 95 To United States 24,105 27,756 22,075 19,528 18,819 19,800 17,752 20,799 23,019 19,116 96 Parent bank 14,339 18,956 14,021 12,609 11,283 12,792 12,026 13,307 14,626 13,622 97 Other banks in United States . 2,980 2,826 2,325 1,883 2,080 1,789 1,512 1,398 1,401 1,556 98 Nonbanks 6,786 5,974 5,729 5,036 5,456 5,219 4,214 6,094 6,992 3,938 99 To foreigners 56,923 51,980 48,138 50,386 55,209 56,443 55,919 57,620 53,444 50,590 100 Other branches of parent bank 18,294 18,493 17,951 17,994 20,018 20,826 22,334 22,870 21,753 21,292 101 Banks 18,356 14,344 15,203 14,359 17,786 17,024 15,580 16,119 14,401 13,106 102 Official institutions 8,871 7,661 4,934 8,060 7,115 7,970 7,530 7,993 7,045 5,181 103 Nonbank foreigners 11,402 11,482 10,050 9,973 10,290 10,623 10,475 10,638 10,245 11,011 104 Other liabilities 3,399 3,624 3,325 3,512 4,421 4,239 3,953 3,844 4,418 4,560 Bahamas and Caymans 105 Total, all currencies 146,811 142,055 142,592 152,146 156,951 155,100 160,321 148,718 143,630 153,254 106 Negotiable CDs 615 610 847 886 890 861 885 851 940 1,069 107 To United States 102,955 104,556 106,081 108,205 111,976 108,039 113,950 105,149 99,840 110,468 108 Parent bank 47,162 45,554 49,481 47,165 49,387 50,065 53,353 46,729 49,032 56,042 109 Other banks in United States . 13,938 12,778 11,715 13,596 14,872 15,204 17,224 13,017 11,455 11,829 110 Nonbanks 41,855 46,224 44,885 47,444 47,717 42,770 43,373 45,403 39,353 42,597 111 To foreigners 40,320 35,053 34,400 41,417 42,295 44,398 43,815 40,820 41,215 40,021 112 Other branches of parent bank 16,782 14,075 12,631 16,965 17,090 17,812 19,185 18,627 18,585 17,243 113 Banks 12,405 10,669 8,617 10,435 11,589 12,611 10,769 9,344 9,825 9,404 114 Official institutions 2,054 1,776 2,719 1,814 2,158 2,064 1,504 1,377 1,179 1,873 115 Nonbank foreigners 9,079 8,533 10,433 12,203 11,458 11,911 12,357 11,472 11,626 11,501 116 Other liabilities 2,921 1,836 1,264 1,638 1,790 1,802 1,671 1,898 1,635 1,696 117 Total payable in U.S. dollars .... 143,582 138,322 138,774 145,402 149,472 146,485 152,927 141,750 136,636 145,252 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 1988 IItteemm 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar/ 1 Total1 178,380 211,834 239,689 252,551 254,080 259,635 267,049r 276,355' 285,029 By type 2 Liabilities reported by banks in the United States'' 26,734 27,920 32,044 38,337 34,259 31,821 32,522r 32,113' 30,575 3 U.S. Treasury bills and certificates 53,252 75,650 75,701 78,819 82,542 88,829 9900,,663355 9933,,440077 9955,,662244 U.S. Treasury bonds and notes 4 Marketable 77,154 91,368 116,442 118,909 120,762 122,556 127,674 134,843' 142,856 5 Nonmarketable 3,550 1,300 300 300 300 300 300 300 792 6 U.S. securities other than U.S. Treasury securities 17,690 15,5% 15,202 16,186 16,217 16,129 15,918 15,692' 15,182 By area 7 Western Europe1 74,447 88,629 108,398 116,510 117,628 124,609 127,733' 127,594' 129,038 8 Canada 1,315 2,004 4,529 5,152 4,884 4,%1 6,182 6,839 7,954 9 Latin America and Caribbean 11,148 8,417 8,561 9,217 8,924 8,308 7,925 8,271 9,202 10 Asia 86,448 105,868 109,487 114,106 116,417 116,208 119,309 127,427 131,672 11 Africa 1,824 1,503 1,618 1,474 1,562 1,402 1,458 1,493 1,512 12 Other countries6 3,199 5,412 7,094 6,089 4,665 4,147 4,442 4,682 5,653 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 1987 IItteemm 11998844 11998855 11998866 Mar. June Sept. Dec.' 1 Banks' own liabilities 8,586 15,368 29,702 38,168 39,102 45,872 54,913 2 Banks' own claims 11,984 16,294 26,180 34,539 34,244 41,744 50,785 3 Deposits 4,998 8,437 14,129 15,466 12,034 15,753 18,119 4 Other claims 6,986 7,857 12,052 19,074 22,210 25,992 32,666 5 Claims of banks' domestic customers 569 580 2,507 2,012 923 1,067 551 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 • July 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 1988 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar." 1 All foreigners 407,306 435,726 540,996 586,148 605,116 605,074 618,622 601,118r 605,080 605,846 2 Banks' own liabilities 306,898 341,070 406,485 448,220 462,986 457,634 469,487 446,221r 446,077 443,709 3 Demand deposits 19,571 21,107 23,789 20,869 22,876 23,736 22,704 21,445'' 22,162 21,984 4 Time deposits1 110,413 117,278 130,891 148,106 151,925 147,162 148,152 139,077' 140,120 138,734 5 Other. 26,268 29,305 42,705 50,164 53,047 52,474 51,059 51,836r 51,537 46,291 6 Own foreign offices3 150,646 173,381 209,100 229,081 235,138 234,262 247,571 233,862' 232,259 236,701 7 Banks' custody liabilities4 100,408 94,656 134,511 137,928 142,130 147,440 149,135 154,897 159,003 162,137 8 U.S. Treasury bills and certificates 76,368 69,133 90,398 89,747 91,374 96,612 101,743 110033,,886611 110077,,008888 110099,,223344 9 Other negotiable and readily transferable instruments6 18,747 17,964 15,417 16,042 15,933 16,737 16,712 16,654 15,573 16,121 10 Other 5,293 7,558 28,696 32,139 34,823 34,090 30,680 34,383 36,342 36,783 11 Nonmonetary international and regional organizations 4,454 5,821 5,807 7,751 3,594 5,809 4,373 5,875 8,640 5,311 12 Banks' own liabilities 2,014 2,621 3,958 4,580 1,680 3,195 2,612 4,052 6,629 3,309 13 Demand deposits 254 85 199 80 107 74 249 790 1,124 234 14 Time deposits 1,267 2,067 2,065 1,235 986 1,094 1,523 1,583 2,481 1,342 15 Other. 493 469 1,693 3,264 586 2,027 839 1,678 3,024 1,734 16 Banks' custody liabilities4 2,440 3,200 1,849 3,171 1,914 2,614 1,761 1,823 2,011 2,002 17 U.S. Treasury bills and certificates 916 1,736 259 11,,779933 285 747 265 613 415 635 18 Other negotiable and readily transferable instruments 1,524 1,464 1,590 1,378 1,624 1,811 1,497 1,210 1,521 1,351 19 Other 0 0 0 0 6 55 0 0 75 16 20 Official institutions8 86,065 79,985 103,569 107,745 117,156 116,801 120,650 123,157r 125,520 126,199 21 Banks' own liabilities 19,039 20,835 25,427 28,344 34,785 31,066 28,686 29,895' 29,227 27,624 22 Demand deposits 1,823 2,077 2,267 1,800 1,905 1,820 1,948 1,605 1,861 2,020 23 Time deposits 9,374 10,949 10,497 14,266 16,584 13,707 12,429 11,907r 11,649 12,480 24 Other. 7,842 7,809 12,663 12,278 16,2% 15,539 14,309 16,383' 15,717 13,124 25 Banks' custody liabilities4 67,026 59,150 78,142 79,401 82,372 85,735 91,965 93,262 %,294 98,575 26 U.S. Treasury bills and certificates 59,976 53,252 75,650 75,701 78,819 82,542 8888,,882299 9900,,663355 9933,,440077 9955,,662244 27 Other negotiable and readily transferable instruments6 6,966 5,824 2,347 3,540 3,328 2,993 2,990 2,442 2,592 2,750 28 Other 84 75 145 160 225 200 146 185 294 201 29 Banks9 248,893 275,589 351,745 390,742 405,636 400,611 414,024 391,711' 390,862 394,367 30 Banks' own liabilities 225,368 252,723 310,166 347,002 359,316 354,402 371,204 345,529^ 344,040 346,840 31 Unaffiliated foreign banks 74,722 79,341 101,066 117,922 124,178 120,140 123,633 111,666' 111,781 110,139 32 Demand deposits- 10,556 10,271 10,303 9,799 11,369 11,862 10,918 9,774 9,747 10,014 33 Time deposits 47,095 49,510 64,232 77,468 79,583 76,658 79,926 71,284'' 71,749 71,058 34 Other2 17,071 19,561 26,531 30,656 33,225 31,621 32,790 30,608r 30,285 29,067 35 Own foreign offices 150,646 173,381 209,100 229,081 235,138 234,262 247,571 233,862' 232,259 236,701 36 Banks' custody liabilities4 23,525 22,866 41,579 43,739 46,321 46,209 42,819 46,182 46,823 47,527 37 U.S. Treasury bills and certificates 11,448 9,832 9,984 9,206 8,%1 99,,448800 99,,113344 88,,997799 99,,552266 99,,559988 38 Other negotiable and readily transferable instruments6 7,236 6,040 5,165 5,221 5,454 5,586 5,390 5,580 4,436 4,627 39 Other 4,841 6,994 26,431 29,312 31,906 31,143 28,2% 31,624 32,861 33,303 40 Other foreigners 67,894 74,331 79,875 79,911 78,729 81,853 79,575 80,374' 80,058 79,%9 41 Banks' own liabilities 60,477 64,892 66,934 68,294 67,206 68,970 66,985 66,745' 66,182 65,936 42 Demand deposits 6,938 8,673 11,019 9,190 9,495 9,981 9,589 9,275 9,430 9,716 43 Time deposits 52,678 54,752 54,097 55,137 54,772 55,703 54,275 54,303' 54,241 53,854 44 Other. 861 1,467 1,818 3,966 2,940 3,287 3,121 3,166' 2,511 2,366 45 Banks' custody liabilities4 7,417 9,439 12,941 11,617 11,523 12,882 12,589 13,629 13,876 14,034 46 U.S. Treasury bills and certificates 4,029 4,314 4,506 3,046 3,309 3,842 3,515 33,,663333 33,,774400 33,,337788 47 Other negotiable and readily transferable instruments6 3,021 4,636 6,315 5,904 5,527 6,347 6,836 7,422 7,024 7,393 48 Other 367 489 2,120 2,668 2,686 2,693 2,238 2,575 3,112 3,263 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 10,476 9,845 7,4% 6,501 6,676 7,361 7,314 7,647 7,370 7,325 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 foreign branches, agencies, or wholly owned subsidiaries of head office or parent dollars" of the International Monetary Fund. 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 1988 AArreeaa aanndd ccoouunnttrryy 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Total 407,306 435,726 540,996 586,148 605,116 605,074 618,622 601,118r 605,080 605,846 2 Foreign countries 402,852 429,905 535,189 578,397 601,522 599,265 614,249 595,243' 596,440 600,535 3 Europe 153,145 164,114 180,556 215,293 233,2% 229,008 234,662 225,499' 226,513 212,164 4 Austria 615 693 1,181 1,280 1,166 1,254 920 992 964 1,022 5 Belgium-Luxembourg 4,114 5,243 6,729 10,463 10,833 10,917 9,304 9,397' 9,798 8,677 6 Denmark 438 513 482 590 704 628 757 547 656 926 7 Finland 418 496 580 507 571 461 377 401 369 405 8 France 12,701 15,541 22,862 27,899 28,255 27,522 29,954 28,198 28,868 28,448 9 Germany 3,358 4,835 5,762 6,834 8,562 8,548 7,061 7,788 8,957 6,506 10 Greece 699 666 700 690 738 715 689 638 639 656 11 Italy 10,762 9,667 10,875 8,410 10,282 10,016 12,063 l l^ 11,001 10,077 12 Netherlands 4,731 4,212 5,600 6,119 6,725 6,490 5,013 5,272 5,302 5,445 13 Norway 1,548 948 735 663 1,187 1,074 1,362 1,1% 828 874 14 Portugal 597 652 699 684 724 858 801 725 780 877 15 Spain 2,082 2,114 22,,440077 2,526 2,683 2,614 2,619 2,359 2,433 2,617 16 Sweden 1,676 1,422 888844 1,639 1,582 2,882 1,379 1,393 1,719 1,836 17 Switzerland 31,740 29,020 30,534 27,332 29,053 30,167 33,754 31,925 32,001 31,718 18 Turkey 584 429 454 398 550 433 703 674 539 620 19 United Kingdom 68,671 76,728 85,334 110,235 119,308 115,122 116,778 111,752' 112,164 100,603 20 Yugoslavia 602 673 630 519 508 485 711 541 557 550 21 Other Western Europe 7,192 9,635 3,326 7,958 9,180 8,184 9,798 9,683' 8,340 9,304 22 U.S.S.R 79 105 80 51 87 36 31 37 49 317 23 Other Eastern Europe 537 523 702 494 599 602 588 721' 549 688 24 Canada 16,059 17,427 26,345 26,065 25,740 28,681 30,083 28,691 25,966 27,321 25 Latin America and Caribbean 153,381 167,856 210,318 214,096 217,859 214,306 220,313 212,002' 212,606 221,849 26 Argentina 4,394 6,032 4,757 4,674 5,075 5,267 4,994 4,893 5,079 5,356 77 Bahamas 56,897 57,657 73,619 70,718 72,547 70,946 74,589 69,111' 64,913 70,129 28 Bermuda 2,370 2,765 2,922 2,234 2,442 2,231 2,335 2,197' 2,021 2,1% 29 Brazil 5,275 5,373 4,325 4,413 3,691 4,136 4,000 3,936 3,745 4,070 30 British West Indies 36,773 42,674 72,263 78,582 80,303 78,236 81,632 78,503' 82,625 88,017 31 Chile 2,001 2,049 2,054 2,248 2,191 2,218 2,210 2,122 2,361 2,314 32 Colombia 2,514 3,104 4,285 4,199 4,195 4,305 4,205 3,947 3,897 3,833 33 Cuba 10 11 7 7 12 9 12 8 9 8 34 Ecuador 1,092 1,239 1,236 1,097 1,062 1,087 1,082 1,115 1,133 1,169 35 Guatemala 896 1,071 1,123 1,072 1,053 1,032 1,080 1,098 1,098 1,182 36 Jamaica 183 122 136 156 140 150 160 150 148 208 37 Mexico 12,303 14,060 13,745 14,286 14,325 14,508 14,534 15,024' 15,127 15,770 38 Netherlands Antilles 4,220 4,875 4,970 5,218 5,305 5,234 4,972 4,987 5,231 5,210 39 Panama 6,951 7,514 6,886 7,179 7,457 7,503 7,400 7,329 6,983 4,303 40 Peru 1,266 1,167 1,163 1,206 1,205 1,205 1,271 1,235 1,328 1,366 41 Uruguay 1,394 1,552 1,537 1,492 1,494 1,526 1,579 1,670 1,753 1,762 42. Venezuela 10,545 11,922 10,171 9,866 9,929 9,075 9,035 9,174 9,729 9,409 43 Other 4,297 4,668 5,119 5,451 5,434 5,639 5,223 5,502 5,426 5,545 44 7711,,118877 72,280 108,831 112,294 115,683 118,834 121,177 121,181' 122,882 129,216 China 45 Mainland 1,153 1,607 1,476 1,775 1,699 1,435 1,162 1,336 1,352 1,562 46 Taiwan 4,990 7,786 18,902 15,197 18,302 21,564 21,494 22,869 23,884 24,003 47 Hong Kong 6,581 8,067 9,393 8,653 9,590 10,541 10,1% 9,579' 9,9% 10,011 48 India 507 712 674 771 606 701 588 571' 880 662 49 Indonesia 1,033 1,466 1,547 1,440 1,336 1,677 1,399 1,474 1,587 1,547 50 Israel 1,268 1,601 1,892 1,105 2,170 1,221 1,477 1,270' 1,333 1,399 51 Japan 21,640 23,077 47,410 53,747 53,268 52,735 54,109 55,221' 56,327 60,344 52 Korea 1,730 1,665 1,141 1,714 1,557 1,606 1,599 1,709' 1,502 1,593 53 Philippines 1,383 1,140 1,866 1,152 1,331 1,259 1,085 1,035 1,009 1,095 54 Thailand 1,257 1,358 1,119 1,116 1,275 1,483 1,345 1,433 1,354 1,189 55 Middle-East oil-exporting countries3 16,804 14,523 12,352 14,043 13,660 13,379 13,993 12,503 12,409 12,733 56 Other 12,841 9,276 11,058 11,580 10,888 11,232 12,730 12,181 11,248 13,076 57 Africa 3,396 4,883 4,021 4,011 3,918 4,065 3,944 3,757 3,755 4,033 58 Egypt 647 1,363 706 1,118 1,104 1,169 1,150 1,142 1,118 1,099 59 Morocco 118 163 92 81 70 75 194 71 69 75 60 South Africa 328 388 270 198 280 246 202 214 194 387 61 Zaire 153 163 74 81 71 82 67 89 86 81 62 Oil-exporting countries4 1,189 1,494 1,519 1,179 1,081 1,108 1,014 981 1,047 1,062 63 Other 961 1,312 1,360 1,354 1,313 1,386 1,316 1,261 1,241 1,329 64 Other countries 5,684 3,347 5,118 6,638 5,026 4,372 4,069 4,114 4,717 5,952 65 Australia 5,300 2,779 4,196 5,684 4,057 3,711 3,325 3,319 3,814 4,904 66 All other 384 568 922 955 %9 661 744 795 903 1,048 67 Nonmonetary international and regional organizations 4,454 5,821 5,807 7,751 3,594 5,809 4,373 5,875 8,640 5,311 68 International5 3,747 4,806 4,620 6,103 2,107 3,724 2,739 4,301 6,600 3,609 69 Latin American regional 587 894 1,033 1,126 1,155 1,478 1,272 1,181 1,505 1,305 70 Other regional6 120 121 154 522 331 608 362 393 536 397 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 • July 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 1988 AArreeaa aanndd ccoouunnttrryy 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 Total 400,162 401,608 444,745 447,788 461,224 459,788 458,714 442,141r 440,621 439,903 2 Foreign countries 399,363 400,577 441,724 443,104 458,393 452,618 454,131 439,493' 438,418 438,048 3 Europe 99,014 106,413 107,823 105,925 111,006 107,259 101,409 97,019' 100,046 94,078 4 Austria 433 598 728 683 929 927 793 762 800 850 5 Belgium-Luxembourg 4,794 5,772 7,498 9,586 10,133 9,551 9,377 9,629 9,7% 8,236 6 Denmark 648 706 688 747 790 881 718 852 746 903 7 Finland 898 823 987 1,266 1,089 1,030 1,010 876 835 731 8 France 9,157 9,124 11,356 12,780 14,348 13,512 13,473 11,687 12,258 12,310 9 Germany 1,306 1,267 1,816 1,487 2,104 1,557 2,060 2,194' 1,928 1,902 10 Greece 817 991 648 406 430 452 463 579' 710 6% 11 Italy 9,119 8,848 9,043 6,542 7,412 7,286 7,467 6,508' 6,165 6,454 12 Netherlands 1,356 1,258 3,296 3,247 3,964 3,813 2,619 2,902 2,879 2,784 13 Norway 675 706 672 722 812 938 934 842 747 628 14 Portugal 1,243 1,058 739 638 570 545 477 471 499 429 15 Spain 2,884 1,908 1,492 2,234 1,859 2,032 1,849 1,629 1,966 1,762 16 Sweden 2,230 2,219 1,964 2,746 2,527 2,640 2,269 2,106 2,274 2,229 17 Switzerland 2,123 3,171 3,352 2,614 2,825 2,880 2,659 2,566' 3,076 2,268 18 Turkey 1,130 1,200 1,543 1,681 1,564 1,566 1,675 1,637' 1,660 1,609 19 United Kingdom 56,185 62,566 58,335 54,739 55,906 53,960 49,959 48,326' 50,111 46,829 20 Yugoslavia 1,886 1,964 1,835 1,741 1,750 1,697 1,700 1,694 1,702 1,640 21 Other Western Europe1 596 998 539 608 539 662 665 578 725 735 22 U.S.S.R 142 130 345 544 473 437 389 386 380 328 23 Other Eastern Europe 1,389 1,107 948 915 983 892 852 795' 790 757 24 Canada 16,109 16,482 21,006 21,599 21,402 25,313 25,269 23,380 21,909 21,134 25 Latin America and Caribbean 207,862 202,674 208,825 214,718 217,010 211,906 213,253 206,917' 202,483 207,433 26 Argentina 11,050 11,462 12,091 11,857 12,119 12,054 11,987 12,106 11,975 12,153 27 Bahamas 58,009 58,258 59,342 64,951 63,666 61,437 64,788 60,916' 57,549 56,670 28 Bermuda 592 499 418 328 418 331 478 380 321 3,051 29 Brazil 26,315 25,283 25,716 26,047 25,803 25,453 25,288 25,358 25,343 25,306 30 British West Indies 38,205 38,881 46,284 47,866 51,721 49,549 48,757 47,041' 46,538 52,211 31 Chile 6,839 6,603 6,558 6,469 6,388 6,429 6,304 6,332 6,260 6,028 32 Colombia 3,499 3,249 2,821 2,730 2,730 2,730 22,,773399 2,709 2,668 2,651 33 Cuba 0 0 0 0 0 0 11 0 0 0 34 Ecuador 2,420 2,390 2,439 2,367 2,3% 2,334 2,286 2,339 2,238 2,229 35 Guatemala3 158 194 140 124 131 145 144 134 140 149 36 Jamaica 252 224 198 198 191 184 188 202 190 201 37 Mexico 34,885 31,799 30,698 30,591 30,307 30,101 29,526 29,138' 29,217 27,533 38 Netherlands Antilles 1,350 1,340 1,041 1,034 1,013 1,113 980 1,009' 1,141 1,159 39 Panama 7,707 6,645 5,436 4,580 4,566 4,685 4,739 4,304 3,819 3,095 40 Peru 2,384 1,947 1,661 1,479 1,457 1,459 1,323 1,316 1,336 1,249 41 Uruguay 1,088 960 940 962 %1 975 968 %1 955 929 42 Venezuela 11,017 10,871 11,108 11,277 11,224 11,109 10,998 10,920' 11,038 10,966 43 Other Latin America and Caribbean 2,091 2,067 1,936 1,857 1,920 1,818 1,761 1,753' 1,755 1,853 44 Asia 66,316 66,212 96,126 93,361 110000,,332288 110000,,227722 110066,,223311 110044,,995511'' 110066,,773333 110088,,110088 China 45 Mainland 710 639 787 894 543 870 968 886 887 1,090 46 Taiwan 1,849 1,535 2,681 2,980 4,224 4,784 4,577 3,877' 3,813 3,549 47 Hong Kong 7,293 6,797 8,307 6,953 6,887 7,312 8,135 7,591 7,910 8,459 48 India 425 450 321 551 527 502 510 495 548 566 49 Indonesia 724 698 723 622 625 601 580 571 632 645 50 Israel 2,088 1,991 1,634 1,591 1,331 1,293 1,363 1,278' 1,211 1,237 51 Japan 29,066 31,249 59,674 60,120 65,679 64,767 69,098 71,230' 73,231 72,836 52 Korea 9,285 9,226 7,182 4,616 4,9% 4,982 5,004 4,919 4,734 5,011 53 Philippines 2,555 2,224 2,217 2,126 2,082 2,040 2,069 1,961 1,966 2,063 54 Thailand 1,125 845 578 453 446 439 491 517 520 541 55 Middle East oil-exporting countries 5,044 4,298 4,122 4,848 5,063 5,157 4,841 3,567 3,452 3,534 56 Other Asia 6,152 6,260 7,901 7,608 7,924 7,524 8,5% 8,060 7,829 8,576 57 Africa 6,615 5,407 4,650 4,707 5,375 4,668 4,742 4,807' 4,869 4,822 58 Egypt 728 721 567 541 538 526 521 513' 469 483 59 Morocco 583 575 598 582 605 585 542 491 490 471 60 South Africa 2,795 1,942 1,550 1,508 1,546 1,494 1,507 1,520 11,,446611 1,435 61 Zaire 18 20 28 40 38 36 15 36 8822 46 62 Oil-exporting countries 842 630 694 887 1,530 903 1,003 1,019 1,086 1,131 63 Other 1,649 1,520 1,213 1,149 1,118 1,123 1,153 1,229 1,280 1,256 64 Other countries 3,447 3,390 3,294 2,793 3,272 3,201 3,228 2,418 2,378 2,473 65 Australia 2,769 2,413 1,949 1,837 2,035 2,093 2,189 1,428 1,430 1,455 66 All other 678 978 1,345 955 1,237 1,109 1,039 991 947 1,018 67 Nonmonetary international and regional organizations 800 1,030 3,021 4,684 2,830 7,170 4,583 2,648' 2,204 1,855 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 1988 TTyyppee ooff ccllaaiimm 11998844 11998855 11998866 Sept. Oct. Nov. Dec. Jan/ Feb. Mar." 1 Total 444444433333333333333,,,,,,,000000077777778888888 444444433333330000000,,,,,,,444444488888889999999 444444477777778888888,,,,,,,666666655555550000000 444444488888881111111,,,,,,,555555599999997777777 444444499999996666666,,,,,,,444444444444440000000 443399,,990033 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 444444400000000000000,,,,,,,111111166666662222222 444444400000001111111,,,,,,,666666600000008888888 444444444444444444444,,,,,,,777777744444445555555 444444444444447777777,,,,,,,777777788888888888888 461,224 459,788 444444455555558888888,,,,,,,777777711111114444444 442,141 440,621 443399,,990033 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 66666662222222,,,,,,,222222233333337777777 66666660000000,,,,,,,555555500000007777777 66666664444444,,,,,,,000000099999995555555 66666667777777,,,,,,,111111100000004444444 64,967 69,483 66666665555555,,,,,,,333333322222229999999 63,360 62,334 6611,,442266 44 OOwwnn ffoorreeiiggnn ooffffiicceess 111111155555556666666,,,,,,,222222211111116666666 111111177777774444444,,,,,,,222222266666661111111 222222211111111111111,,,,,,,555555533333333333333 222222211111110000000,,,,,,,222222266666667777777 218,396 220,479 222222222222223333333,,,,,,,111111111111110000000 217,060 218,184 222200,,334499 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111122222224444444,,,,,,,999999933333332222222 111111111111116666666,,,,,,,666666655555554444444 111111122222222222222,,,,,,,999999944444446666666 111111122222227777777,,,,,,,444444477777775555555 134,104 126,389 111111122222227777777,,,,,,,333333311111119999999 119,773 118,426 111166,,448877 66 DDeeppoossiittss 44444449999999,,,,,,,222222222222226666666 44444448888888,,,,,,,333333377777772222222 55555557777777,,,,,,,444444488888884444444 66666660000000,,,,,,,111111144444443333333 63,193 58,052 66666660000000,,,,,,,222222255555550000000 54,730 55,276 5544,,554422 77 OOtthheerr 77777775555555,,,,,,,777777700000006666666 66666668888888,,,,,,,222222288888882222222 66666665555555,,,,,,,444444466666662222222 66666667777777,,,,,,,333333333333332222222 70,911 68,337 66666667777777,,,,,,,000000066666668888888 65,043 63,150 6611,,994455 88 AAllll ootthheerr ffoorreeiiggnneerrss 55555556666666,,,,,,,777777777777777777777 55555550000000,,,,,,,111111188888885555555 44444446666666,,,,,,,111111177777771111111 44444442222222,,,,,,,999999944444441111111 43,756 43,437 44444442222222,,,,,,,999999955555557777777 41,947 41,678 4411,,664411 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss33...... 33333332222222,,,,,,,999999911111116666666 22222228888888,,,,,,,888888888888881111111 33333333333333,,,,,,,999999900000005555555 33333333333333,,,,,,,888888800000009999999 33333337777777,,,,,,,777777722222226666666 3333333,,,,,,,333333388888880000000 3333333,,,,,,,333333333333335555555 4444444,,,,,,,444444411111113333333 3333333,,,,,,,111111100000003333333 3333333,,,,,,,666666677777772222222 11 Negotiable and readily transferable 22222223333333,,,,,,,888888800000005555555 11111119999999,,,,,,,333333333333332222222 22222224444444,,,,,,,000000044444444444444 22222222222222,,,,,,,000000077777771111111 22222226666666,,,,,,,666666688888884444444 12 Outstanding collections and other 5555555,,,,,,,777777733333332222222 6666666,,,,,,,222222211111114444444 5555555,,,,,,,444444444444448888888 8888888,,,,,,,666666633333336666666 7777777,,,,,,,333333377777770000000 13 MEMO: Customer liability on 33333337777777,,,,,,,111111100000003333333 22222228888888,,,,,,,444444488888887777777 22222225555555,,,,,,,777777700000006666666 22222221111111,,,,,,,777777788888888888888 22222223333333,,,,,,,888888833333334444444''''''' Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States 40,714 38,102 41,434 39,734 42,272 37,905 37,919 34,216 39,387 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 1987 MMaattuurriittyy;; bbyy bboorrrroowweerr aanndd aarreeaa 11998844 11998855 11998866 Mar. June Sept. Dec/ 1 243,952 227,903 232,295 226,297 236,828 236,490 235,092 By borrower 2 Maturity of 1 year or less 167,858 160,824 160,555 155,156 167,488 166,156 164,075 3 Foreign public borrowers 23,912 26,302 24,842 25,382 24,088 27,157 25,993 4 All other foreigners 143,947 134,522 135,714 129,774 143,400 138,998 138,082 5 Maturity over 1 year 76,094 67,078 71,740 71,141 69,340 70,334 71,017 6 Foreign public borrowers 38,695 34,512 39,103 38,751 39,341 39,470 38,591 7 All other foreigners 37,399 32,567 32,637 32,390 29,999 30,864 32,425 By area Maturity of 1 year or less X Europe 58,498 56,585 61,784 57,987 68,872 62,228 58,780 9 Canada 6,028 6,401 5,895 5,568 5,603 5,733 5,697 10 Latin America and Caribbean 62,791 63,328 56,271 54,733 55,489 58,439 56,426 11 Asia 33,504 27,966 29,457 29,688 31,155 32,133 36,437 17 Africa 4,442 3,753 2,882 3,154 2,989 2,871 2,845 13 All other2 2,593 2,791 4,267 4,026 3,380 4,751 3,891 Maturity of over 1 year 14 Europe 9,605 7,634 6,737 6,755 6,479 6,753 6,830 15 Canada 1,882 1,805 1,925 1,855 1,664 1,579 2,661 16 Latin America and Caribbean 56,144 50,674 56,719 56,214 55,580 55,089 53,758 17 Asia 5,323 4,502 4,043 4,123 3,495 3,497 3,666 18 Africa 2,033 1,538 1,539 1,630 1,512 1,622 1,726 19 All other2 1,107 926 777 564 611 1,794 2,375 1. Remaining time to maturity. 2. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • July 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 Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. I Total 434.0 405.7 385.3 385.6 389.7 389.5 389.6 393.4 382.9 384.4r 381.1' 2 G-10 countries and Switzerland 167.8 148.1 146.0 152.8 160.3 159.0 158.0 162.2 157.7 154.7'" 160.4' 3 Belgium-Luxembourg 12.4 8.7 9.2 8.2 9.0 8.5 8.4 9.0 8.3 8.2r 10.1 4 France 16.2 14.1 12.1 13.6 15.1 14.7 13.8 13.3 12.5 13.7 13.8' 5 Germany 11.3 9.0 10.5 11.2 11.5 12.5 11.7 12.7 11.2 10.5 12.6 6 Italy 11.4 10.1 9.6 8.3 9.3 8.1 9.0 8.6 7.5 6.6 7.3 7 Netherlands 3.5 3.9 3.7 3.5 3.4 3.9 4.6 4.4 7.3 4.8 4.1 8 Sweden 5.1 3.2 2.7 2.8 2.9 2.7 2.4 3.0 2.4 2.6 2.1 9 Switzerland 4.3 3.9 4.4 5.3 5.6 4.8 5.8 5.8 5.7 5.4 5.5 10 United Kingdom 65.3 60.3 63.0 67.4 69.2 70.3 71.9 73.4 71.8 71.4' 69.2' 11 Canada 8.3 7.9 6.8 6.0 7.0 6.2 5.4 5.1 4.6 4.6 5.6 12 Japan 29.9 27.1 23.9 26.5 27.2 27.4 25.0 26.9 26.3 27.0 30.1 13 Other developed countries 36.0 33.6 29.9 31.1 30.7 29.5 26.2 25.7 25.2 25.9' 26.3' 14 Austria 1.9 1.6 1.5 1.5 1.7 1.7 1.7 1.9 1.8 1.9 1.9 15 Denmark 3.4 2.2 2.3 2.5 2.4 2.3 1.7 1.7 1.5 1.6 1.7 16 Finland 2.4 1.9 1.6 1.9 1.6 1:7 1.4 1.4 1.4 1.4 1.3 17 Greece 2.8 2.9 2.6 2.5 2.6 2.3 2.3 2.1 2.0 1.9 2.0 18 Norway 3.3 3.0 2.9 2.7 3.0 2.7 2.4 2.2 2.1 2.0' 2.3 19 Portugal 1.5 1.4 1.2 1.0 1.1 1.0 .8 .8 .8 .8 .6 20 Spain 7.1 6.5 5.8 6.4 6.4 6.7 5.8 6.3 6.1 7.4 8.0 21 Turkey 1.7 1.9 1.8 2.1 2.5 2.1 2.0 1.7 1.7 1.5 1.6 22 Other Western Europe 1.8 1.7 2.0 2.4 2.1 1.6 1.4 1.4 1.5 1.6 1.6 23 South Africa 4.7 4.5 3.2 3.1 3.1 3.1 3.1 3.0 3.0 2.9 2.9 24 Australia 5.4 6.0 5.0 4.9 4.2 4.1 3.5 3.2 3.1 2.9 2.5 25 OPEC countries3 28.4 24.9 21.3 20.4 20.6 20.0 19.6 20.2 19.0 19.1 17.3 26 Ecuador 2.2 2.2 2.1 2.2 2.1 2.2 2.2 2.1 2.1 2.0 1.9 27 Venezuela 9.9 9.3 8.9 8.7 8.8 8.7 8.6 8.7 8.6 8.4 8.2 28 Indonesia 3.4 3.3 3.0 3.3 3.0 2.8 2.5 2.4 2.2 2.0 1.9 29 Middle East countries 9.8 7.9 5.3 4.5 5.0 4.6 4.5 5.4 4.4 4.9 3.6 30 African countries 3.0 2.3 2.0 1.8 1.7 1.7 1.7 1.6 1.7 1.7 1.7 31 Non-OPEC developing countries 110.8 111.8 104.2 102.9 102.0 100.0 99.7 99.3 99.6' 96.6 96.7' Latin America 32 Argentina 9.5 8.7 8.8 8.8 9.2 9.3 9.5 9.5 9.5 9.3 9.4 33 Brazil 23.1 26.3 25.4 25.6 25.5 25.4 25.3 25.5 24.4 24.5 24.1 34 Chile 6.4 7.0 6.9 7.0 7.1 7.2 7.1 7.2 7.2 7.0 6.9 35 Colombia 3.2 2.9 2.6 2.3 2.2 2.0 2.1 2.0 1.9 1.9 2.0 36 Mexico 25.8 25.7 23.9 23.9 24.0 24.0 24.0 23.9 25.3 24.7 23.6 37 Peru 2.4 2.2 1.8 1.7 1.6 1.5 1.5 1.4 1.3 1.2 1.1 38 Other Latin America 4.2 3.9 3.4 3.3 3.3 3.3 3.1 3.0 3.0 2.8 2.8 Asia China 39 Mainland .3 .7 .5 .6 .6 .6 .4 .9 .6 .3 .3 40 Taiwan 5.2 5.1 4.5 4.3 3.7 4.3 4.9 5.5 6.6 5.9 8.2 41 India .9 .9 1.2 1.2 1.3 1.3 1.2 1.7 1.7 1.9 1.9 42 Israel 1.9 1.8 1.6 1.3 1.6 1.4 1.5 1.4 1.3 1.3 1.0 43 Korea (South) 11.2 10.6 9.2 9.2 8.7 7.3 6.7 6.2 5.6 4.9 4.9 44 Malaysia 2.8 2.7 2.4 2.2 2.0 2.1 2.1 1.9 1.7 1.6 1.5 45 Philippines 6.1 6.0 5.7 5.6 5.7 5.4 5.4 5.4 5.4 5.4 5.1 46 Thailand 2.2 1.8 1.4 1.3 1.1 1.0 .9 .9 .8 .7 .7 47 Other Asia 1.0 1.1 1.0 .9 .8 .7 .7 .6 .7 .7 .6' Africa 48 Egypt 1.5 1.2 1.0 .9 .9 .7 .7 .6 .6 .6 .5 49 Morocco .8 .8 .9 .9 .9 .9 .9 .9 .9 .8 .9 50 Zaire .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .0 51 Other Africa4 2.3 2.1 1.9 1.9 1.7 1.6 1.6 .9 1.1 1.0 1.1 52 Eastern Europe 5.3 4.4 4.1 4.0 4.0 3.4 3.2 3.0 3.3 3.3' 3.0 53 U.S.S.R .2 .1 .1 .3 .3 .1 .1 .1 .3 .5 .4 54 Yugoslavia 2.4 2.3 2.2 2.0 2.0 1.9 1.7 1.6 1.7 1.7 1.6 55 Other 2.8 2.0 1.8 1.7 1.7 1.4 1.4 1.3 1.3 1.2 1.0 56 Offshore banking centers 68.9 65.6 62.9 57.5 55.4 60.5 63.2 63.2 60.2 63.1' 53.1 57 Bahamas 21.7 21.5 21.2 21.2 17.1 19.9 22.3 24.0 19.7 25.6' 17.1 58 Bermuda .9 .9 .7 .7 .4 .4 .7 .8 .6 .6 .6 59 Cayman Islands and other British West Indies 12.2 11.8 11.6 9.2 12.2 12.8 13.6 11.1 12.4 10.7 11.2 60 Netherlands Antilles 4.2 3.4 2.2 2.2 2.4 1.9 1.8 1.7 1.3 1.2 1.2 61 Panama 5.8 6.7 6.0 4.3 4.2 5.1 4.1 5.4 5.2 44..55'' 4.5 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 ..11 .1 63 Hong Kong 13.8 11.4 11.4 11.4 9.5 10.5 11.2 11.4 12.5 12.3 11.2 64 Singapore 10.3 9.8 9.8 8.4 9.3 9.7 9.4 8.6 8.3 8.1 7.0 65 Others6 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated7 16.8 17.3 16.9 16.8 16.8 17.2 19.8 19.8 18.0 21.7' 24.4' 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 Type, and area or country 11998833 11998844 11998855 Dec. Mar. June Sept. Dec. 1 Total 25,346 29,357 27,825 25,850 27,551 28,953 28,339 27,322 2 Payable in dollars 22,233 26,389 24,296 21,9% 23,361 24,466 24,018 22,192 3 Payable in foreign currencies 3,113 2,968 3,529 3,854 4,190 4,487 4,321 5,129 By type 4 Financial liabilities 10,572 14,509 13,600 12,371 13,232 14,148 12,839 11,310 5 Payable in dollars 8,700 12,553 11,257 9,886 10,496 11,249 10,127 8,068 6 Payable in foreign currencies 1,872 1,955 2,343 2,485 2,737 2,899 2,712 3,242 7 Commercial liabilities 14,774 14,849 14,225 13,479 14,318 14,805 15,500 16,012 8 Trade payables 7,765 7,005 6,685 6,447 6,985 7,139 7,389 7,394 9 Advance receipts and other liabilities .. 7,009 7,843 7,540 7,032 7,333 7,666 8,111 8,618 10 Payable in dollars 13,533 13,836 13,039 12,110 12,865 13,218 13,891 14,125 11 Payable in foreign currencies 1,241 1,013 1,186 1,368 1,453 1,587 1,609 1,887 By area or country Financial liabilities 12 Europe 5,742 6,728 7,700 8,138 8,484 9,765 9,188 7,577 13 Belgium-Luxembourg 302 471 349 270 232 257 230 202 14 France 843 995 857 661 758 822 615 415 15 Germany 502 489 376 368 463 402 386 583 16 Netherlands 621 590 861 704 693 669 641 1,014 17 Switzerland 486 569 610 646 663 655 636 480 18 United Kingdom 2,839 3,297 4,305 5,199 5,414 6,698 6,394 4,690 19 Canada 764 863 839 399 431 441 407 357 20 Latin America and Caribbean 2,5% 5,086 3,184 1,961 2,366 1,744 %1 845 21 Bahamas 751 1,926 1,123 614 669 398 280 278 22 Bermuda 13 13 4 4 0 0 0 0 23 Brazil 32 35 29 32 26 22 22 25 24 British West Indies 1,041 2,103 1,843 1,163 1,545 1,223 581 475 25 Mexico 213 367 15 22 30 29 17 13 26 Venezuela 124 137 3 0 0 2 3 0 27 Asia 1,424 1,777 1,815 1,805 1,882 2,131 2,204 2,428 28 Japan 991 1,209 1,198 1,398 1,480 1,751 1,734 2,042 29 Middle East oil-exporting countries2 . 170 155 82 8 7 7 7 8 30 Africa 19 14 12 1 3 1 2 4 0 0 0 1 1 0 0 1 31 Oil-exporting countries 27 41 50 67 67 66 76 98 32 All other4 Commercial liabilities 3,245 4,001 4,074 4,494 4,521 4,987 4,973 5,629 33 Europe 62 48 62 101 85 111 56 125 34 Belgium-Luxembourg 437 438 453 351 379 422 437 449 35 France 427 622 607 722 591 594 679 915 36 Germany 268 245 364 460 372 339 350 437 37 Netherlands 241 257 379 387 484 557 556 558 38 Switzerland 732 1,095 976 1,346 1,309 1,380 1,475 1,660 39 United Kingdom 40 Canada 1,841 1,975 1,449 1,393 1,352 1,253 1,263 1,285 41 Latin America and Caribbean 1,473 1,871 1,088 890 1,089 1,037 1,050 862 42 Bahamas 1 7 12 32 28 13 22 19 43 Bermuda 67 114 77 132 297 245 223 165 44 Brazil 44 124 58 61 82 88 40 46 45 British West Indies 6 32 44 48 88 63 44 20 46 Mexico 585 586 430 213 185 160 231 189 47 Venezuela 432 636 212 217 224 203 176 162 48 Asia 6,741 5,285 6,046 5,098 5,818 5,921 6,516 6,566 49 Japan 1,247 1,256 1,799 2,051 2,468 2,480 2,422 2,579 50 Middle East oil-exporting countries2,5 4,178 2,372 2,829 1,686 1,948 1,870 2,109 1,956 51 Africa 553 588 587 622 520 524 571 584 52 Oil-exporting countries 167 233 238 197 170 166 151 135 53 All other4 921 1,128 982 981 1,019 1,083 1,128 1,085 1. For a description of the changes in the International Statistics tables, see 3. Comprises Algeria, Gabon, Libya, and Nigeria. July 1979 BULLETIN, p. 550. 4. Includes nonmonetary international and regional organizations. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and 5. Revisions include a reclassification of transactions, which also affects the United Arab Emirates (Trucial States). totals for Asia and the grand totals. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • July 1988 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1986 1987 Type, and area or country 11998833 11998844 11998855 Dec. Mar. June Sept. Dec. 1 Total 34,911 29,901 28,876 33,519 34,103 31,644 31,390 29,965 2 Payable in dollars 31,815 27,304 26,574 30,989 31,303 28,518 28,695 26,716 3 Payable in foreign currencies 3,096 2,597 2,302 2,530 2,800 3,126 2,6% 3,249 By type 4 Financial claims 23,780 19,254 18,891 23,424 24,149 21,691 21,055 19,426 5 Deposits 18,496 14,621 15,526 17,283 17,407 14,871 15,827 13,505 6 Payable in dollars 17,993 14,202 14,911 16,726 16,573 13,666 14,954 12,132 7 Payable in foreign currencies 503 420 615 557 833 1,205 873 1,373 8 Other financial claims 5,284 4,633 3,364 6,141 6,742 6,820 5,228 5,921 9 Payable in dollars 3,328 3,190 2,330 4,792 5,400 5,551 4,114 4,772 10 Payable in foreign currencies 1,956 1,442 1,035 1,349 1,342 1,269 1,114 1,149 11 Commercial claims 11,131 10,646 9,986 10,095 9,954 9,953 10,335 10,539 12 Trade receivables 9,721 9,177 8,6% 8,902 8,898 8,910 9,394 9,538 13 Advance payments and other claims .. 1,410 1,470 1,290 1,192 1,056 1,043 942 1,001 14 Payable in dollars 10,494 9,912 9,333 9,471 9,330 9,301 9,626 9,812 15 Payable in foreign currencies 637 735 652 624 624 652 709 727 By area or country Financial claims 16 Europe 6,488 5,762 6,929 8,827 9,403 9,958 9,473 9,014 17 Belgium-Luxembourg 37 15 10 41 15 6 23 6 18 France 150 126 184 138 172 154 169 330 19 Germany 163 224 223 111 163 92 98 64 20 Netherlands 71 66 161 151 132 140 157 282 21 Switzerland 38 66 74 185 77 98 44 76 22 United Kingdom 5,817 4,864 6,007 7,957 8,491 9,268 8,783 8,046 23 Canada 5,989 3,988 3,260 3,%5 3,782 3,330 2,885 2,805 24 Latin America and Caribbean 10,234 8,216 7,846 9,209 9,550 7,553 7,502 6,725 25 Bahamas 4,771 3,306 2,698 2,628 3,951 2,588 2,518 1,865 26 Bermuda 102 6 6 6 3 6 2 2 27 Brazil 53 100 78 73 71 103 102 53 28 British West Indies 4,206 4,043 4,571 6,078 5,150 4,404 3,687 4,351 29 Mexico 293 215 180 174 164 167 173 172 30 Venezuela 134 125 48 21 20 20 18 19 31 Asia 764 961 731 1,316 1,189 776 1,105 760 32 Japan 297 353 475 999 931 439 737 480 33 Middle East oil-exporting countries2 4 13 4 7 7 6 10 10 34 Africa 147 210 103 85 84 58 71 65 35 Oil-exporting countries3 55 85 29 28 19 9 14 7 36 All other4 159 117 21 22 140 16 20 58 Commercial claims 4 3 4 4 4 3 3 2 7 0 1 3 8 9 Eu N B S G F U ro w r e e e n a p l t r i i g n h e t m t e z i c e u d e a e r m r n l l K a y a - n L i n d n d u s g x d e o m m b ourg 3,6 8 3 3 4 3 1 7 0 1 5 3 3 4 0 9 7 9 4 5 9 3 1 , , 8 2 3 4 0 3 1 0 7 6 3 4 7 6 1 1 3 5 0 4 5 3,5 2 2 8 3 4 1 3 8 9 8 4 2 7 3 4 8 4 6 6 5 3,7 9 4 2 4 1 1 1 9 1 1 4 3 7 8 8 7 0 7 3 3 3 1 , , 7 4 4 0 1 1 1 0 1 5 7 4 6 % 3 7 1 0 5 5 3 1 , , 8 0 4 5 1 1 1 5 7 3 3 8 3 8 5 2 7 2 7 7 2 4 1 , , 1 4 2 2 5 1 1 2 2 0 1 5 6 9 1 7 5 3 1 8 9 4,0 9 5 5 1 1 1 0 8 4 8 7 8 3 4 1 9 8 5 4 9 44 Canada 829 1,021 1,023 928 927 929 904 901 45 Latin America and Caribbean 2,695 2,052 1,753 1,981 1,944 1,882 1,852 2,094 46 Bahamas 8 8 13 28 11 14 12 19 47 Bermuda 190 115 93 170 157 153 125 159 48 Brazil 493 214 206 235 217 202 227 222 49 British West Indies 7 7 6 51 18 12 13 45 50 Mexico 884 583 510 411 445 347 367 369 51 Venezuela 272 206 157 234 171 201 189 294 52 Asia 3,063 3,073 2,982 2,751 2,707 2,645 2,783 2,882 53 Japan 1,114 1,191 1,016 881 926 952 1,022 1,148 54 Middle East oil-exporting countries2 737 668 638 565 529 455 436 451 55 Africa 588 470 437 495 432 379 407 406 56 Oil-exporting countries3 139 134 130 135 141 123 124 144 57 All other4 286 229 257 222 240 262 268 252 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 1988 1987 1988 Transactions, and area or country 1986 1987 J M an ar .- . Sept. Oct. Nov. Dec. Jan. Feb. Mar." U.S. corporate securities STOCKS 1 Foreign purchases 148,114 249,072 47,299 22,489 30,237 13,626 13,627 12,916 16,343 18,040 2 Foreign sales 129,395 232,849 48,059 19,455 27,784 20,325 16,630 12,891 16,720 18,448 3 Net purchases, or sales (-) 18,719 16,223 -761 3,034 2,452 -6,699 -3,004 25 -377 -408 4 Foreign countries 18,927 16,271 -727 2,944 2,438 -6,651 -2,943 56 -345 -438 5 Europe 9,559 1,886 -908 1,312 138 -5,948 -2,329 -226 -324 -358 6 France 459 905 -132 -15 58 -541 -393 -96 -29 -7 7 Germany 341 -74 201 -12 380 -183 -149 67 -37 171 8 Netherlands 936 890 -236 79 -40 -169 32 -72 59 -223 9 Switzerland 1,560 -1,163 -399 435 294 -1,574 -743 -114 -253 -32 10 United Kingdom 4,826 539 -599 770 -624 -3,407 -959 -136 -130 -333 11 Canada 816 1,048 -80 -52 252 169 111 147 -167 -60 12 Latin America and Caribbean 3,031 1,314 217 157 -512 -561 -50 -143 261 100 13 Middle East' 976 -1,360 -933 135 569 -83 -448 104 -251 -786 14 Other Asia 3,876 12,896 803 1,242 2,014 -28 -160 156 70 577 15 Africa 297 123 -6 20 7 11 -6 7 -18 5 16 Other countries 373 365 181 132 -30 -211 -61 12 85 84 17 Nonmonetary international and regional organizations -208 -48 -34 90 15 -48 -61 -32 -33 31 BONDS2 18 Foreign purchases 123,169 105,823 19,249 8,662 9,158 5,716 6,773 5,024 6,453 7,772 19 Foreign sales 72,520 78,128 16,842 4,786 7,275 5,386 5,461 5,193r 6,039 5,609 20 Net purchases, or sales (-) 50,648 27,695 2,407 3,876 1,883 330 1,313 — 169r 414 2,163 21 Foreign countries 49,801 26,955 3,149 3,836 1,874 72 913 458' 532 2,158 22 Europe 39,313 22,176 2,004 3,149 922 409 550 272' 263 1,468 23 France 389 194 121 -37 55 -34 -13 51 13 57 24 Germany -251 -8 440 -56 -98 -26 17 61 118 260 25 Netherlands 387 269 16 116 36 -16 1 -13 -1 30 26 Switzerland 4,529 1,651 -11 166 136 -39 -203 -56r 60 -14 27 United Kingdom 33,900 19,934 1,365 2,828 1,012 371 751 333 49 982 28 Canada 548 1,296 87 47 305 68 114 29 -29 87 29 Latin America and Caribbean 1,476 2,473 490 682 524 -15 292 -22 316 197 30 Middle East' -2,961 -551 -95 -87 42 -92 -20 -164 -76 144 31 Other Asia 11,270 1,606 705 52 65 -254 -25 347 88 270 32 Africa 16 16 -20 -6 24 -10 3 0 -22 3 33 Other countries 139 -61 -22 -1 -9 -33 0 -4 -8 -10 34 Nonmonetary international and regional organizations 847 740 -741 40 10 257 400 -627 -119 5 Foreign securities 35 Stocks, net purchases, or sales (-) -2,360 1,127 -882 483 2,089 704 841 517 -678 -721 36 Foreign purchases 49,587 95,208 17,391 8,816 12,974 7,592 4,897 4,989 5,717 6,685 37 Foreign sales 51,947 94,082 18,274 8,333 10,885 6,889 4,055 4,472 6,395 7,406 38 Bonds, net purchases, or sales (-) -3,685 -7,601 -3,877 -638 -2,566 -1,929 -1,379 -1,324' -1,433 -1,120 39 Foreign purchases 166,992 199,121 45,234 13,031 18,119 17,753 12,433 12,812' 15,858 16,564 40 Foreign sales 170,677 206,722 49,111 13,669 20,684 19,682 13,812 14,136 17,291 17,684 41 Net purchases, or sales (—), of stocks and bonds .... -6,045 -6,474 -4,759 -155 -477 -1,225 -538 —807' -2,111 -1,841 42 Foreign countries -7,000 -6,618 -4,941 -476 289 -1,125 -224 —873' -2,131 -1,938 43 Europe -18,533 -11,972 -3,490 -505 -926 -1,582 -381 -319 -1,626 -1,544 44 Canada -876 -4,065 -1,668 -274 -37 -498 107 -654' -648 -366 45 Latin America and Caribbean 3,476 828 202 -20 -152 329 2 126 -64 141 46 Asia 10,858 9,322 -310 85 1,330 421 159 -197 37 -149 47 Africa 52 89 60 14 16 3 10 9 3 48 48 Other countries -1,977 -820 264 224 59 201 -121 163 169 -68 49 Nonmonetary international and regional organizations 955 144 182 320 -767 -101 -314 65 20 97 1. Comprises oil-exporting countries as follows: Bahrain, Iran, Iraq, Kuwait, ties sold abroad by U.S. corporations organized to finance direct investments Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). abroad. 2. Includes state and local government securities, and securities of U.S. government agencies and corporations. Also includes issues of new debt securi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A66 International Statistics • July 1988 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1988 1987 1988 Country or area 1986 1987 J M an ar .- . Sept. Oct. Nov. Dec. Jan. Feb. Mar.p Transactions, net purchases or sales (-) during period1 1 Estimated total2 19,388 25,755 26,688 523 -1,232 6,380 2,675 4,645 12,083 9,960 2 Foreign countries2 20,491 31,057 27,584 704 -5,497 7,676 4,290 5,740 12,832 9,012 3 Europe2 16,326 23,61r 13,380 -1,167 -954 6,340 1,282 4,321 5,878 3,181 4 Belgium-Luxembourg -245 653 1,144 -25 165 -2 -103 469 242 433 5 Germany 7,670 13,295 5,358 130 31 1,820 1,121 3,045 1,397 916 6 Netherlands 1,283 -911 305 -296 -707 314 -76 -337 334 309 7 Sweden 132 233 -280 -156 4 182 51 -61 26 -245 8 Switzerland2 329 1,925 -558 -99 -609 -297 -522 118 -1,188 512 9 United Kingdom 4,546 3,955 4,013 -985 -642 3,163 1,200 -101 4,373 -260 10 Other Western Europe 2,613 4,479 3,376 259 804 1,158 -391 1,179 678 1,518 11 Eastern Europe 0 -19 23 5 0 3 1 9 16 -3 12 Canada 881 4,534 1,288 203 -389 679 720 356 559 372 13 Latin America and Caribbean 926 -2,146 1,217 -29 -117 472 -141 219 630 368 14 Venezuela -96 150 19 55 -63 35 1 0 -1 20 15 Other Latin America and Caribbean 1,130 -1,096 842 -155 -227 367 167 184 320 338 16 Netherlands Antilles -108 -1,200 356 72 173 69 -309 36 311 10 17 Asia 1,345 4,707 12,270 1,762 -5,304 1,476 2,429 772 5,921 5,577 18 Japan -22 877 12,305 799 -5,272 1,757 2,020 2,979 4,996 4330 19 Africa -54 -56 -8 3 2 -29 49 -38 25 5 20 All other 1,067 407 -563 -68 1,263 -1,260 -48 110 -182 -491 21 Nonmonetary international and regional organizations -1,104 -5,301 -896 -180 4,265 -1,296 -1,615 -1,095 -748 947 22 International -1,430 -4,387 -950 111 4,326 -1,492 -1,620 --11,,002233 -879 953 23 Latin American regional 157 3 1 -10 0 0 0 88 -2 -5 Memo 24 Foreign countries 20,491 31,057 27,584 704 -5,497 7,676 4,290 5,740 12,832 9,012 25 Official institutions 14,214 31,188 20,300 1,341 2,466 1,854 1,794 5,118 7,169 8,013 26 Other foreign2 6,283 -135 7,284 -637 -7,965 5,822 2,497 622 5,663 999 Oil-exporting countries 27 Middle East3 -1,529 -3,111 -377 -509 -695 -891 368 -809 -296 728 28 Africa4 5 16 1 0 -1 -1 -1 0 0 0 1. Estimated official and private transactions in marketable U.S. Treasury 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and securities with an original maturity of more than 1 year. Data are based on United Arab Emirates (Trucial States). monthly transactions reports. Excludes nonmarketable U.S. Treasury bonds and 4. Comprises Algeria, Gabon, Libya, and Nigeria. notes held by official institutions of foreign countries. 2. Includes U.S. Treasury notes publicly issued to private foreign residents denominated in foreign currencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interest and Exchange Rates A67 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per year Rate on Apr. 30, 1988 Rate on Apr. 30, 1988 Rate on Apr. 30, 1988 Country Country Country Percent 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 Austria.. 3.0 Dec. 1987 France 7.25 Jan. 1988 Norway 8.0 June 1983 Belgium . 6.5 Mar. 1988 Germany, Fed. Rep. of 2.5 Dec. 1987 Switzerland . 2.5 Dec. 1987 Brazil ... 49.0 Mar. 1981 Italy 12.0 Aug. 1987 United Kingdom1' Canada.. 9.06 Apr. 1988 Japan 2.5 Feb. 1987 Venezuela 8.0 Oct. 1985 Denmark 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Eurodollars 8.27 6.70 7.07 8.29 7.41 7.86 7.11 6.73 6.74 7.05 2 United Kingdom 12.16 10.87 9.65 9.92 8.87 8.71 8.84 9.18 8.83 8.25 3 Canada 9.64 9.18 8.38 9.12 8.70 8.95 8.75 8.58 8.63 8.90 4 Germany 5.40 4.58 3.97 4.70 3.92 3.65 3.40 3.29 3.38 3.37 5 Switzerland 4.92 4.19 3.67 4.03 3.65 3.51 2.09 1.48 1.61 1.83 6 Netherlands 6.29 5.56 5.24 5.63 4.99 4.65 4.24 3.98 3.97 3.98 7 France 9.91 7.68 8.14 8.15 8.66 8.48 8.19 7.54 7.89 7.99 8 14.86 12.60 11.15 11.85 11.36 11.25 10.47 10.80 11.11 10.54 9 Belgium 9.60 8.04 7.01 6.84 6.93 6.57 6.49 6.19 6.09 6.08 10 Japan 6.47 4.96 3.87 3.89 3.90 3.90 3.88 3.82 3.82 3.80 NOTE. Rates are for 3-month interbank loans except for Canada, finance company paper; Belgium, 3-month Treasury bills; and Japan, Gensaki rate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 International Statistics • July 1988 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar 1987 1988 CCoouunnttrryy//ccuurrrreennccyy 11998855 11998866 11998877 Nov. Dec. Jan. Feb. Mar. Apr. 1 Australia/dollar^ 70.026 67.093 70.136 68.60 71.06 71.11 71.40 73.29 74.80 2 Austria/schilling 20.676 15.260 12.649 11.843 11.500 11.635 11.920 11.767 , 11.744 3 Belgium/franc 59.336 44.662 37.357 35.190 34.186 34.576 35.473 35.126 34.962 4 Canada/dollar 1.3658 1.3896 1.3259 1.3167 1.3075 1.2855 1.2682 1.2492 1.2353 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 6.4962 6.3043 6.3562 6.4918 6.4261 6.4207 7 Finland/markka 6.1971 5.0721 4.4036 4.1392 4.0462 4.0391 4.1159 4.0483 4.0064 8 France/franc 8.9799 6.9256 6.0121 5.7099 5.5375 5.5808 5.7323 5.6893 5.6704 9 Germany/deutsche mark 2.9419 2.1704 1.7981 1.6821 1.6335 1.6537 1.6963 1.6770 1.6710 10 Greece/drachma 138.40 139.93 135.47 132.42 129.46 131.92 135.56 134.60 133.86 11 Hong Kong/dollar 7.7911 7.8037 7.7985 7.7968 7.7726 7.7872 7.7978 7.8028 7.8166 12 India/rupee 12.332 12.597 12.943 12.972 12.934 13.040 13.065 12.979 13.158 13 Ireland/punt2 106.62 134.14 148.79 158.08 162.63 160.64 156.87 159.33 159.81 14 Italy/lira 1908.90 1491.16 1297.03 1238.89 1203.74 1216.88 1249.62 1240.67 1240.99 15 Japan/yen 238.47 168.35 144.60 135.40 128.24 127.69 129.17 127.11 124.90 16 Malay sia/ringgit 2.4806 2.5830 2.5185 2.4989 2.4944 2.5400 2.5812 2.5689 2.5743 17 Netherlands/guilder 3.3184 2.4484 2.0263 1.8931 1.8382 1.8584 1.9051 1.8837 1.8749 18 New Zealand/dollar2 49.752 52.456 59.327 61.915 64.664 65.818 66.386 66.239 66.143 19 Norway/krone 8.5933 7.3984 6.7408 6.4233 6.3820 6.3538 6.4167 6.3337 6.2140 20 Portugal/escudo 172.07 149.80 141.20 136.84 133.77 135.87 138.84 137.48 136.77 21 Singapore/dollar 2.2008 2.1782 2.1059 2.0444 2.0127 2.0261 2.0185 2.0133 2.0044 22 South Africa/rand 2.2343 2.2918 2.0385 1.9738 1.9525 1.9755 2.0529 2.1330 2.1428 23 South Korea/won 861.89 884.61 825.93 802.30 798.34 791.31 776.85 757.37 745.31 24 Spain/peseta 169.98 140.04 123.54 113.26 110.80 112.34 114.36 112.38 110.80 25 Sri Lanka/rupee 27.187 27.933 29.471 30.519 30.644 30.825 30.859 30.892 30.939 26 Sweden/krona 8.6031 7.1272 6.3468 6.0744 5.9473 5.9749 6.0524 5.9497 5.8892 27 Switzerland/franc 2.4551 1.7979 1.4918 1.3825 1.3304 1.3466 1.3916 1.3863 1.3823 28 Taiwan/dollar 39.889 37.837 31.756 29.813 29.004 28.628 28.665 28.687 28.695 29 Thailand/baht 27.193 26.314 25.774 25.495 25.249 25.235 25.324 25.232 25.171 30 United Kingdom/pound2 129.74 146.77 163.98 177.54 182.88 180.09 175.82 183.30 187.82 MEMO 31 United States/dollar3 143.01 112.22 96.94 91.49 88.70 89.29 91.08 89.73 88.95 1. 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 2. Value in U.S. cents. RESERVE BULLETIN, vol. 64, August 1978, p. 700). 3. Index of weighted-average exchange value of U.S. dollar against the 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 July 1988 All SPECIAL TABLES Published Irregularly, with Latest Bulletin Reference 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 commercial banks, December 31, 1987 June 1988 A70 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 Assets and liabilities of U.S. branches and agencies of foreign banks, December 31, 1987 June 1988 A76 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 Terms of lending at commercial banks, November 1987 May 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A70 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 RALPH W. SMITH, JR., Assistant Director MICHAEL BRADFIELD, General Counsel 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 THOMAS D. SIMPSON, Associate Director OFFICE OF THE SECRETARY LAWRENCE SLIFMAN, Associate Director ELEANOR J. STOCKWELL, Associate Director WILLIAM W. WILES, Secretary MARTHA BETHEA, Deputy Associate Director BARBARA R. LOWREY, Associate Secretary PETER A. TINSLEY, Deputy Associate Director JAMES MCAFEE, Associate Secretary MARK N. GREENE, Assistant Director MYRON L. KWAST, Assistant Director SUSAN J. LEPPER, Assistant Director DIVISION OF CONSUMER MARTHA S. SCANLON, Assistant Director AND COMMUNITY AFFAIRS DAVID J. STOCKTON, Assistant Director JOYCE K. ZICKLER, Assistant Director LEVON H. GARABEDIAN, Assistant Director GRIFFITH L. GARWOOD, Director (Administration ) GLENN E. LONEY, Assistant Director ELLEN MALAND, Assistant Director DOLORES S. SMITH, Assistant Director DIVISION OF MONETARY AFFAIRS DONALD L. KOHN, Director DIVISION OF BANKING DAVID E. LINDSEY, Deputy Director SUPERVISION AND REGULATION BRIAN F. MADIGAN, Assistant Director RICHARD D. PORTER, Assistant Director WILLIAM TAYLOR, Staff Director NORMAND R.V. BERNARD, Special Assistant to the Board DON E. KLINE, Associate Director FREDERICK M. STRUBLE, Associate Director WILLIAM A. RYBACK, Deputy Associate Director OFFICE OF THE INSPECTOR GENERAL STEPHEN C. SCHEMERING, Deputy Associate Director RICHARD SPILLENKOTHEN, Deputy Associate Director BRENT L. BOWEN, Inspector General HERBERT A. BIERN, Assistant Director JOE M. CLEAVER, Assistant Director ANTHONY CORNYN, Assistant Director JAMES I. GARNER, Assistant Director JAMES D. GOETZINGER, Assistant Director MICHAEL G. MARTINSON, Assistant Director ROBERT S. PLOTKIN, Assistant Director SIDNEY M. SUSSAN, Assistant Director LAURA M. HOMER, Securities Credit Officer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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

All Federal Reserve Bulletin • July 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 Economist J. ALFRED BROADDUS, JR., Associate Economist NORMAND R.V. BERNARD, Assistant Secretary JOHN M. DAVIS, Associate Economist ROSEMARY R. LONEY, Deputy Assistant Secretary RICHARD G. DAVIS, Associate Economist MICHAEL BRADFIELD, General Counsel DAVID E. LINDSEY, Associate Economist ERNEST T. PATRIKIS, Deputy General Counsel CHARLES J. SIEGMAN, Associate Economist MICHAEL J. PRELL, Economist THOMAS D. SIMPSON, Associate Economist EDWIN M. TRUMAN, Economist LAWRENCE SLIFMAN, Associate Economist JOHN H. BEEBE, Associate Economist SHEILA L. TSCHINKEL, 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 (VACANCY), 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

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

A74 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. CONSUMER EDUCATION PAMPHLETS 1986. 1987. 288 pp. $15.00 per copy. Short pamphlets suitable for classroom use. Multiple copies HISTORICAL CHART BOOK. Issued annually in Sept. $1.25 are available without charge. each in the United States, its possessions, Canada, and 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. $24.00 per year or $.60 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, $22.50 per year A Guide to Business Credit and the Equal Credit Opportunity or $.55 each. Elsewhere, $30.00 per year or $.70 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

A75 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 1984. 38 pp. Out of print. STAFF STUDIES: Summaries Only Printed in the 141. A COMPARISON OF DIRECT DEPOSIT AND CHECK PAY- Bulletin MENT COSTS, by William Dudley. November 1984. Studies and papers on economic and financial subjects that 15 pp. Out of print. are of general interest. Requests to obtain single copies of 142. MERGERS AND ACQUISITIONS BY COMMERCIAL the full text or to be added to the mailing list for the series BANKS, 1960-83, by Stephen A. Rhoades. December may be sent to Publications Services. 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

A76 153. STOCK MARKET VOLATILITY, by Carolyn D. Davis A Financial Perspective on Agriculture. 1/84. and Alice P. White. September 1987. 14 pp. Survey of Consumer Finances, 1983. 9/84. 154. THE EFFECTS ON CONSUMERS AND CREDITORS OF Bank Lending to Developing Countries. 10/84. PROPOSED CEILINGS ON CREDIT CARD INTEREST Survey of Consumer Finances, 1983: A Second Report. RATES, by Glenn B. Canner and James T. Fergus. 12/84. October 1987. 783 pp. Union Settlements and Aggregate Wage Behavior in the 155. THE FUNDING OF PRIVATE PENSION PLANS, by Mark 1980s. 12/84. J. Warshawsky. November 1987. 25 pp. The Thrift Industry in Transition. 3/85. 156. INTERNATIONAL TRENDS FOR U.S. BANKS AND BANK- A Revision of the Index of Industrial Production. 7/85. ING MARKETS, by James V. Houpt. May 1988. 47 Financial Innovation and Deregulation in Foreign Industrial pages. Countries. 10/85. Recent Developments in the Bankers Acceptance Market. 1/86. The Use of Cash and Transaction Accounts by American Families. 2/86. REPRINTS OF BULLETIN ARTICLES Financial Characteristics of High-Income Families. 3/86. Most of the articles reprinted do not exceed 12 pages. Prices, Profit Margins, and Exchange Rates. 6/86. Agricultural Banks under Stress. 7/86. Foreign Lending by Banks: A Guide to International and Limit of 10 copies U.S. Statistics. 10/86. Recent Developments in Corporate Finance. 11/86. Measuring the Foreign-Exchange Value of the Dollar. 6/87. Foreign Experience with Targets for Money Growth. 10/83. Changes in Consumer Installment Debt: Evidence from the Intervention in Foreign Exchange Markets: A Summary of 1983 and 1986 Surveys of Consumer Finances. 10/87. Ten Staff Studies. 11/83. U.S. International Transactions in 1987. 5/88. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All ANTICIPATED SCHEDULE OF RELEASE DATES FOR PERIODIC RELEASES—BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM1 (Payment must accompany requests.) Annual proximate Date or period Weekly Releases rate release days to which aata refer • Aggregate Reserves of Depository Institutions and $13.00 Thursday Week ended previous the Monetary Base. H.3 (502) [1.20] Wednesday • Actions of the Board: Applications and Reports $34.00 Friday Week ended previous Saturday Received. H.2 (501) • Assets and Liabilities of Insured Domestically $13.00 Monday Wednesday, 3 weeks earlier Chartered and Foreign Related Banking Institutions. H.8 (510) [1.25] • Changes in State Member Banks. K.3 (615) $13.00 Tuesday Week ended previous Saturday • Factors Affecting Reserves of Depository $13.00 Thursday Week ended previous Institutions and Condition Statement of Federal Wednesday Reserve Banks. H.4.1 (503) [1.11] • Foreign Exchange Rates. H.10 (512) [3.28] $13.00 Monday Week ended previous Friday • Money Stock, Liquid Assets, and Debt Measures. $34.00 Thursday Week ended Monday of H.6 (508) [1.21] previous week • Selected Borrowings in Immediately Available $13.00 Wednesday Week ended Thursday of Funds of Large Member Banks. H.5 (507) [1.13] previous week • Selected Interest Rates. H.15 (519) [1.35] $13.00 Monday Week ended previous Saturday • Weekly Consolidated Condition Report of Large $13.00 Friday Wednesday, 1 week earlier Commercial Banks, and Domestic Subsidiaries. H.4.2 (504) [1.26, 1.28, 1.29, 1.30] Monthly Releases • Capacity Utilization: Manufacturing, Mining, 5 3.00 Midmonth Previous month Utilities and Industrial Materials. G.3 (402) [2.12] • Changes in Status of Banks and Branches. G.4.5 11.00 1st of month Previous month (404) • Consumer Installment Credit. G.19 (421) [1.55, 1.56] $ 3.00 5th working day of 2nd month previous month • Debits and Deposit Turnover at Commercial Banks. $ 3.00 12th of month Previous month G.6 (406) [1.22] • Finance Companies. G.20 (422) [1.51, 1.52] 3.00 5th working day of 2nd month previous month • Foreign Exchange Rates. G.5 (405) [3.28] 3.00 1st of month Previous month • Industrial Production. G.12.3 (414) [2.13] 9.00 Midmonth Previous month • Loans and Securities at all Commercial Banks. G.7 3.00 3rd week of month Previous month (407) [1.23] • Major Nondeposit Funds of Commercial Banks. 3.00 3rd week of month Previous month G. 10 (411) [1.24] • Monthly Report of Assets and Liabilities of 3.00 20th of month Wednesday, 2 weeks earlier International Banking Facilities. G.14 (416) 1. Release dates are those anticipated or usually met. However, please note that for some releases there is normally a certain variability because of reporting or processing procedures. Moreover, for all series unusual circumstances may, from time to time, result in a release date being later than anticipated. The respective BULLETIN tables that report the data are designated in brackets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Annual proximate Date or period Monthly Releases—Continued rate re A lease days to which data refer • Research Library—Recent Acquisitions. G.15 (417) Free of 1st of month Previous month charge • Selected Interest Rates. G.13 (415) [1.35] $ 3.00 3rd working day of Previous month month Quarterly Releases • Agricultural Finance Databook. E.15 (125) $ 5.00 End of March, January, April, July, and June, September, October and December • Country Exposure Lending Survey. E. 16 (126) $ 5.00 January, April, Previous 3 months July, and October • Domestic Offices, Commercial Bank Assets and $ 4.00 March, June, Previous 6 months Liabilities Consolidated Report of Condition. September, and E.3.4 (113) [1.26, 1.28] December • Flow of Funds: Seasonally Adjusted and $ 10.00 23rd of February, Previous quarter Unadjusted. Z.l (780) 1.58, 1.59 May, August, and November • Flow of Funds Summary Statistics Z.l. (788) [1.57, $3.00 15th of February, Previous quarter 1.58] May, August, and November • Geographical Distribution of Assets and Liabilities $ 3.00 15th of March, Previous quarter of Major Foreign Branches of U.S. Banks. E.ll June, September, (121) and December • Survey of Terms of Bank Lending. E.2 (111) [1.34] $3.00 Midmonth of February, May, August, and March, June, November September, and December • List of OTC Margin Stocks. E.7 (117) $ 5.00 January, April, February, May, August, and July, and November October Semiannual Releases • Balance Sheets of the U.S. Economy. C.9 (108) $ 3.00 October and April Previous year Annual Releases • Aggregate Summaries of Annual Surveys of $ 1.00 February End of previous June Securities Credit Extension. C.2 (101) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 Index to Statistical Tables References are to pages A3-A68 although the prefix 'A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Demand deposits—Continued Agricultural loans, commercial banks, 19, 20 Ownership by individuals, partnerships, and Assets and liabilities (See also Foreigners) corporations, 22 Banks, by classes, 18-20 Turnover, 15 Domestic finance companies, 37 Depository institutions Federal Reserve Banks, 10 Reserve requirements, 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 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) Dividends, corporate, 35 BANKERS acceptances, 9, 23, 24 Bankers balances, 18-20. (See also Foreigners) Bonds (See also U.S. government securities) EMPLOYMENT, 45 New issues, 34 Eurodollars, 24 Rates, 24 Branch banks, 21, 55 FARM mortgage loans, 39 Business activity, nonfinancial, 44 Federal agency obligations, 4, 9, 10, 11, 31, 32 Business expenditures on new plant and equipment, 36 Federal credit agencies, 33 Business loans (See Commercial and industrial loans) Federal finance Debt subject to statutory limitation, and types and ownership of gross debt, 30 Receipts and outlays, 28, 29 CAPACITY utilization, 46 Treasury financing of surplus, or deficit, 28 Capital accounts Treasury operating balance, 28 Banks, by classes, 18 Federal Financing Bank, 28, 33 Federal Reserve Banks, 10 Federal funds, 6, 17, 19, 20, 21, 24, 28 Central banks, discount rates, 67 Federal Home Loan Banks, 33 Certificates of deposit, 24 Federal Home Loan Mortgage Corporation, 33, 38, 39 Commercial and industrial loans Federal Housing Administration, 33, 38, 39 Commercial banks, 16, 19 Federal Land Banks, 39 Weekly reporting banks, 19-21 Federal National Mortgage Association, 33, 38, 39 Commercial banks Federal Reserve Banks Assets and liabilities, 18-20 Condition statement, 10 Commercial and industrial loans, 16, 18, 19, 20, 21 Discount rates (See Interest rates) Consumer loans held, by type, and terms, 40, 41 U.S. government securities held, 4, 10, 11, 30 Loans sold outright, 19 Federal Reserve credit, 4, 5, 10, 11 Nondeposit funds, 17 Federal Reserve notes, 10 Real estate mortgages held, by holder and property, 39 Federal Savings and Loan Insurance Corporation insured Time and savings deposits, 3 institutions, 26 Commercial paper, 23, 24, 37 Federally sponsored credit agencies, 33 Condition statements (See Assets and liabilities) Finance companies Construction, 44, 49 Assets and liabilities, 37 Consumer installment credit, 40, 41 Business credit, 37 Consumer prices, 44, 50 Loans, 40, 41 Consumption expenditures, 51, 52 Paper, 23, 24 Corporations Financial institutions Nonfinancial, assets and liabilities, 36 Loans to, 19, 20, 21 Profits and their distribution, 35 Selected assets and liabilities, 26 Security issues, 34, 65 Float, 4 Cost of living (See Consumer prices) Flow of funds, 42, 43 Credit unions, 26, 40, (See also Thrift institutions) Currency and coin, 18, 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 Foreign trade, 54 DEBITS to deposit accounts, 15 Foreigners Debt (See specific types of debt or securities) Claims on, 55, 57, 60, 61, 62, 64 Demand deposits Liabilities to, 20, 54, 55, 57, 58, 63, 65, 66 Banks, by classes, 18-21 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 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 HOUSING, new and existing units, 49 Reserves Commercial banks, 18 INCOME, personal and national, 44, 51, 52 Depository institutions, 3, 4, 5, 12 Industrial production, 44, 47 Federal Reserve Banks, 10 Installment loans, 40, 41 U.S. reserve assets, 54 Insurance companies, 26, 30, 39 Residential mortgage loans, 38 Interest rates Retail credit and retail sales, 40, 41, 44 Bonds, 24 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 Special drawing rights, 4, 10, 53, 54 Federal Reserve Banks, 10, 11 State and local governments Financial institutions, 26, 39 Deposits, 19, 20 Holdings of U.S. government securities, 30 LABOR force, 45 New security issues, 34 Life insurance companies (See Insurance companies) Ownership of securities issued by, 19, 20, 26 Loans (See also specific types) Rates on securities, 24 Banks, by classes, 18-20 Stock market, selected statistics, 25 Commercial banks, 3, 16, 18-20 Stocks (See also Securities) Federal Reserve Banks, 4, 5, 7, 10, 11 New issues, 34 Financial institutions, 26, 39 Prices, 25 Insured or guaranteed by United States, 38, 39 Student Loan Marketing Association, 33 MANUFACTURING Capacity utilization, 46 TAX receipts, federal, 29 Production, 46, 48 Margin requirements, 25 Thrift institutions, 3. (See also Credit unions and Savings Member banks (See also Depository institutions) and loan associations) Federal funds and repurchase agreements, 6 Time and savings deposits, 3, 13, 17, 18, 19, 20,21 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 Dealer transactions, positions, and financing, 32 NATIONAL defense outlays, 29 Federal Reserve Bank holdings, 4, 10, 11, 30 National income, 51 Foreign and international holdings and transactions, 10, 30, 66 OPEN market transactions, 9 Open market transactions, 9 Outstanding, by type and holder, 26, 30 PERSONAL income, 52 Rates, 24 Prices U.S. international transactions, 53-67 Consumer and producer, 44, 50 Utilities, production, 48 Stock market, 25 Prime rate, 23 VETERANS Administration, 38, 39 Producer prices, 44, 50 Production, 44, 47 WEEKLY reporting banks, 19-21 Profits, corporate, 35 Wholesale (producer) prices, 44, 50 REAL estate loans Banks, by classes, 16, 19, 20, 39 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 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 To be announced 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 M. 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 James Curry III Nashville 37203 Condon S. Bush Donald E. Nelson New Orleans 70161 Sharon A. Perlis Robert J. Musso 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, IIP 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 F1R. ASeSnEioRr Vice President. http://fraser.s2tl.o uEixsefceudt.iover gV/ ice President. Federal Reserve Bank of St. Louis

A82 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories April 1984 i / / ALASKA / 1 1 © \ / y yp 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