Federal Reserve Bulletin, 1990-07

VOLUME 76 • NUMBER 7 • JULY 1990 FEDERAL RESERVE BULLETIN 1 ^ BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, WASHINGTON, D.C. PUBLICATIONS COMMITTEE Joseph R. Coyne, Chairman • S. David Frost • Griffith L. Garwood • Donald L. Kohn • J. Virgil Mattingly, Jr. • 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 477 DEVELOPMENTS AFFECTING THE in the new globally competitive setting; and PROFITABILITY OF COMMERCIAL then discusses some policy implications, BANKS before the Subcommittee on Financial Institutions Supervision, Regulation and In- The profitability of U.S.-chartered insured surance of the House Committee on Bankcommercial banks declined in 1989 after ing, Finance and Urban Affairs, May 14, rebounding in 1988 mainly because banks 1990. (Chairman Greenspan presented simincreased loss provisions. Despite the deilar testimony before the Task Force on the cline in profitability, dividends paid as a International Competitiveness of U.S. Fishare of assets continued at high levels. nancial Institutions, Subcommittee on Financial Institutions Supervision, Regulation 500 TREASURY AND FEDERAL RESERVE and Insurance of the House Committee on FOREIGN EXCHANGE OPERATIONS Banking, Finance and Urban Affairs, April 4, 1990.) In the period from February through April 1990, the dollar declined less than Vi per- 512 John P. LaWare, Member, Board of Govcent against the mark and more against ernors, reports on the Federal Reserve Syssome other European currencies, ending tem's ongoing programs to ensure equal the period about 18 percent below its midaccess to housing credit and to promote June 1989 highs against the mark. It rose 10 private sector reinvestment in low and modpercent against the yen to trade nearly 5 erate income communities, before the Subpercent above its mid-June 1989 levels. On committee on Consumer and Regulatory a trade-weighted basis, as measured by the Affairs of the Senate Committee on Bankstaff of the Board of Governors, the dollar ing, Housing, and Urban Affairs, May 16, rose more than 1 percent to end the period 1990. 12V* percent below its highs of mid-June 1989. 517 Clyde H. Farnsworth, Jr., Director, Division of Federal Reserve Bank Operations, Board of Governors, comments on pro- 505 INDUSTRIAL PRODUCTION AND posed legislation related to money launder- CAPACITY UTILIZATION ing and says that the Federal Reserve Industrial production fell 0.4 percent in places a high priority on supporting efforts April after having increased 0.5 percent in to attack the laundering of proceeds from March; industrial capacity utilization de- illegal activities, before the Senate Commitcreased 0.5 percentage point in April to 83.0 tee on Banking, Housing, and Urban Afpercent. fairs, May 18, 1990. 519 Chairman Greenspan discusses issues in- 507 STATEMENTS TO THE CONGRESS volving the regulation of securities markets Alan Greenspan, Chairman, Board of Gov- and says that some changes to the existing ernors, describes the global environment in regulatory system for financial futures are which U.S. financial firms are likely to be necessary to avoid the prospect that jurisoperating over the foreseeable future; as- dictional disputes among regulators will imsesses how well U.S. banks are competing pede innovation in our financial markets, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

but consolidation of jurisdiction is not nec- through June. The intermeeting range for essary to achieve this objective, before the the federal funds rate was left unchanged at Subcommittee on Telecommunications and 6 to 10 percent. Finance of the House Committee on Energy and Commerce, May 24, 1990. 535 LEGAL DEVELOPMENTS 524 ANNOUNCEMENTS Various bank holding company, bank service corporation, and bank merger orders; Resignation of Manuel H. Johnson as Vice and pending cases. Chairman of the Board of Governors. Appointment of David W. Mullins, Jr., as a 591 MEMBERSHIP OF THE BOARD OF member of the Board of Governors. GOVERNORS OF THE FEDERAL RESERVE SYSTEM, 1913-90 Amendments to Regulation CC to amend the Expedited Funds Availability Act. List of appointive and ex officio members. Extension of public comment period on proposed revisions to the bank holding Ai FINANCIAL AND BUSINESS STATISTICS company reporting requirements; proposal These tables reflect data available as of to add non-full-payout leasing to the list of May 31, 1990. permissible activities in Regulation Y. A3 Domestic Financial Statistics Changes in Board staff. A46 Domestic Nonfinancial Statistics A55 International Statistics 526 RECORD OF POLICY ACTIONS OF THE FEDERAL OPEN MARKET COMMITTEE A71 GUIDE TO TABULAR PRESENTATION, At its meeting on March 27, 1990, the STATISTICAL RELEASES, AND SPECIAL Committee adopted a directive that called TABLES for maintaining the current degree of pressure on reserve positions and that did not A72 BOARD OF GOVERNORS AND STAFF include any presumption about the likely direction of any intermeeting adjustments in A74 FEDERAL OPEN MARKET COMMITTEE policy. Accordingly, slightly greater or AND STAFF; ADVISORY COUNCILS slightly lesser reserve restraint would be appropriate during the intermeeting period A76 FEDERAL RESERVE BOARD depending on progress toward price stabil- PUBLICATIONS ity, the strength of the business expansion, the behavior of the monetary aggregates, A78 INDEX TO STATISTICAL TABLES and developments in foreign exchange and domestic financial markets. The unchanged reserve conditions contemplated at this A80 FEDERAL RESERVE BANKS, meeting were expected to be consistent BRANCHES, AND OFFICES with growth of M2 and M3 at annual rates of about 6 percent and 4 percent respectively A81 MAP OF THE FEDERAL RESERVE over the three-month period from March SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks John V. Duca and Mary M. McLaughlin, of the the year as the Federal Reserve took steps to Board's Division of Monetary Affairs, prepared sustain economic growth (chart 3). Nevertheless, this article. Douglas Carpenter and Vernon by the end of 1989, short-term market rates were McKinley provided research assistance. still well above their 1988 averages. Reflecting the higher average level of rates, interest expense In 1989, the profitability of U.S.-chartered in- as a share of assets rose about 1 percentage sured commercial banks declined after having point. Increases in delinquent loans restrained rebounded in 1988. In recent years, variations in the pickup in the rate of return on banks' loan loss provisioning have accounted for variations portfolios stemming from higher market rates. As in profits; abstracting loss provisions, net income a result, the spread between interest income and has been quite stable as a share of assets. Last interest expense (net interest margin) narrowed year, another surge in loan loss provisions, con- slightly, although it remained above the average centrated at large banks with substantial loans to of recent years (table 1). developing countries, pulled down the industry's On a year-end basis, overall growth of interestreturn on assets to 0.51 percent, the second earning assets at U.S. banks picked up to a lowest level since 1970 (chart 1), and its return on moderate rate, reflecting mainly stronger expanequity to 7.94 percent. Despite the decline in sion of bank holdings of securities (table 2). Bank profitability, dividends paid as a share of assets loan growth was near the pace of 1988 as reduced continued at high levels, reducing retained earn- runoffs in foreign loans and a turnaround in ings to very low levels. In the aggregate, the security loans roughly offset a moderation of primary capital ratio of banks decreased, but growth in consumer loans and domestic commermost of the decline was at money center banks, cial and industrial (C&I) loans. Much of the which dipped into capital to pay dividends. slowing in business loans to domestic addressees Banks increased loss provisions more than net occurred in lending that was unrelated to mergcharge-offs and ended the year with somewhat ers. Growth in consumer loans held by banks higher loan loss reserves (chart 2). was reduced by the issuance of securities backed After peaking early in 1989, short-term interest by consumer loan receivables, a transaction that rates declined from the spring through the end of removes loans from bank balance sheets. By 1. Net income and loss provisions 2. Reserves for loan losses, loss provisions, and as a percentage of assets net loan losses as a percentage of loans Percent Percent 10 / \ Net income \ / 5 _Loss provisions M il 1 1 II II 1 1 II 1 1 1 1 II 1 1970 1975 1980 1985 1989 1977 1979 1981 1983 1985 1987 1989 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

478 Federal Reserve Bulletin • July 1990 3. Selected market and commercial bank interest rates response to declines in very high deposit rates offered by troubled institutions. A record 204 federally insured commercial banks failed last year, up slightly from 1988. As in recent years, the majority of the nation's failed banks were located in the Southwest, where banks continued to post high real estate losses. However, the number of banks classified by the Federal Deposit Insurance Corporation as being in danger of becoming insolvent fell sharply last year. BALANCE SHEET DEVELOPMENTS Changes in the balance sheet of the banking industry during 1989 largely reflected responses of banks to impending capital requirements, problems in loan quality, and circumstances in the thrift industry. Assets As measured from year-end 1988 to year-end 1989, the expansion of bank credit strengthened to a moderate pace last year, mainly because of a pickup in the acquisition of U.S. government guaranteed mortgage-backed securities. Real es- 1. Income and expense as a percentage of average net assets, all insured commercial banks, 1985-89' contrast, holdings of U.S. government securities, Item 1985 1986 1987 1988 1989 especially of mortgage-backed securities issued by government-sponsored agencies, picked up. Gross interest income 9.58 8.50 8.34 8.95 9.92 Gross interest expense 6.08 5.11 4.95 5.42 6.41 This strength was particularly pronounced late in Net interest margin 3.50 3.39 3.40 3.53 3.51 Noninterest income 1.20 1.28 1.41 1.47 1.55 the year, when loan growth slowed and deposit Loss provisions .68 .78 1.27 .54 .93 inflows surged as households shifted funds out of Other noninterest expense... 3.17 3.22 3.30 3.33 3.37 Securities gains .06 .14 .05 .01 .02 thrift institutions and thrift institutions sold off Income before tax .90 .80 .28 1.14 .80 mortgage assets. Taxes2 .21 .19 .18 .33 .31 Events in the thrift industry enabled commer- Extraordinary items .01 .01 .01 .03 .01 Net income .70 .62 .11 .84 .51 cial banks in 1989 to rely more on retail deposits Cash dividends declared .. .33 .33 .36 .44 .44 Net retained earnings .37 .29 -.24 .40 .07 for funding relative to managed liabilities, such as large time deposits. Banks gained retail depos- MEMO Net interest margin, taxable its directly from thrift institutions by purchasing equivalent3 3.88 3.79 3.61 3.78 3.70 the deposits in several resolutions of failed insti- 1. Assets are fully consolidated and net of loss reserves. tutions. In another and likely more important 2. Includes all taxes estimated to be due on income, extraordinary gains, development, many households shifted or di- and security gains. 3. For each bank with profits before tax greater than zero, income from verted their deposits from savings and loan asso- tax-exempt state and local obligations was increased by [f/(l - t)l times the ciations into bank accounts in response to con- lesser of profits before tax or interest earned on tax-exempt obligations (f is the marginal federal income-tax rate). This adjustment approximates the cerns about the viability of thrift institutions or in equivalent pretax return on tax-exempt obligations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 479 tate loans continued to grow at a fast pace partly unrelated to mergers apparently owed, in part, to because the role of banks in residential mortgage corporations' reliance on commercial paper, markets increased as the thrift industry con- which increased sharply last year. Responses to tracted. the May 1990 Lending Practices Survey (LPS) of sixty large banks indicated that the major reasons Commercial and Industrial Loans. C&I loans for this deceleration in more traditional C&I grew somewhat faster in 1989, as those to foreign lending were, in order of importance, weaker loan addressees declined at a slower rate than in 1988. demand, tighter credit standards, and greater use By contrast, the growth of C&I loans made by of commercial paper by large businesses. U.S. commercial banks to domestic addressees The slowdown in merger-related lending and eased to about 5 percent in 1989 from about 7 merger-related activity late last year was in part percent in 1988 (table 2). Domestic C&I loans a result of more caution in providing such figrew at a moderate pace in the first half of 1989, nancing. In the January 1990 LPS, many responwhen stronger expansion in estimated merger- dents indicated that they had tightened their related loans—those associated with acquisi- credit standards and credit terms for loans to tions, mergers, and other corporate restructur- finance mergers during the last half of 1989, ings—outweighed declines in loans for other mainly because of a less favorable economic business purposes. However, despite renewed outlook, problems specific to different industries, growth in nonmerger-related loans, domestic and problems in asset quality. Respondents to C&I loan expansion slowed in the second half the February 1990 LPS, indicated, on balance, because of a deceleration in merger-related that although the charge-off rate on mergerloans. Merger-related loans had been the primary related loans remained lower than that on other source of growth in business loans over recent C&I loans, it had risen somewhat from the rate in years; indeed, abstracting from such loans, C&I 1988. With respect to loans unrelated to mergers, loans were about unchanged last year. The slow- very few respondents reported that they had down in business borrowing from banks that was tightened their credit standards on loans to firms 2. Annual growth rate of selected balance sheet items, all insured commercial banks, 1985-89' Percent, except as noted Outstanding Item 1985 1986 1987 1988 1989 Dec. 31, 1989 (billions of dollars) Assets Interest-earning assets 9.3 8.0 3.9 4.1 6.3 2,862 Total loans 7.6 7.6 4.2 6.1 6.8 2,019 C&I loans 1.8 4.0 -1.2 2.5 3.3 616 U.S. addressees 6.0 10.7 .4 6.9 4.9 533 Foreign addressees -6.2 -12.1 -5.5 -14.0 -.7 83 Consumer 14.2 7.3 3.3 6.3 5.9 375 Real estate 13.1 17.7 16.6 13.8 13.6 744 Foreign government -3.8 -.3 -.2 -9.7 -19.4 28 Agricultural -10.0 -11.1 -6.2 3.2 3.4 31 Security 21.5 -22.2 -11.2 -.4 15.8 18 Total securities 13.9 10.2 7.2 1.9 5.0 541 U.S. government 2.5 17.3 10.0 5.0 10.4 356 State and local government 32.9 -12.6 -13.7 -12.0 -10.2 133 Liabilities Deposits 7.7 7.8 2.3 4.2 5.5 2,489 Foreign office 1.2 -2.7 8.8 -7.8 -.5 311 Domestic office 9.0 9.7 1.4 6.3 6.4 2,177 Demand 8.9 13.6 -10.3 1.4 .7 454 OCD 17.8 33.4 8.3 8.1 2.8 204 Savings (includes MMDAs) 16.6 17.5 -.9 1.3 .9 531 Small time 3.4 -1.1 7.6 14.6 17.7 613 Large time 2.0 -1.5 13.0 8.9 7.1 375 Other liabilities for borrowed money 36.1 13.4 10.3 14.0 1.2 147 1. Growth rates calculated from year-end to year-end. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

480 Federal Reserve Bulletin • July 1990 that were below investment grade, but about half treatment of residential mortgages under imindicated that loan policies had become more pending risk-based capital guidelines. restrictive toward lower-rated businesses, which The largest category of real estate loans outprobably include many smaller firms. Respon- standing on commercial bank balance sheets is dents indicated that a deterioration in the general that secured by one- to four-family residences. economic outlook and the problems specific to Expansion of this component in 1989 continued various industries were the two most important at about the pace of 1988, as a deceleration in factors motivating the tightening of lending poli- revolving home equity loans was roughly offset cies on C&I loans during the last half of 1989. by stronger growth in more traditional residential mortgages. Helping to boost the growth rate and Consumer Loans. The growth of consumer portfolio share of residential mortgages, excludloans held by banks was restrained by the secu- ing home equity loans, last year was the inritization of more than $11 billion of consumer creased role of banks in the primary mortgage receivables last year—mostly credit card debt— market as the thrift industry contracted. up substantially from the pace in 1988. Even so, Home equity credit has expanded rapidly since credit card receivables edged up as a share of the passage of the Tax Reform Act of 1986, bank assets. By reducing loans held on balance which phased out the interest deductibility of sheets, securitization lowers the amount of cap- most nonmortgage debt. Although home equity ital that banks are required to hold. For banks loans continued growing as a share of bank that package enough loans to offset the fixed assets, expansion in this loan category eased last costs of issuance, securitization is a less-expen- year. This deceleration likely reflected the probsive way of funding loans than holding them on able lessening over time in the share of eligible the balance sheet, which entails the cost of households without home equity lines and a maintaining or raising expensive capital. Securi- consequent slowing in the number of new lines tization thereby reduces lending costs while en- being put in place. Also, survey data suggest that abling banks to continue to earn fee income from individuals' use of home equity lines may taper originating and servicing the loans backing the off after initial drawdowns. Responses to the securities. Since the announcement in May 1987 February 1990 LPS indicated that other factors that risked-based capital standards would be holding down the growth of home equity credit, imposed—effectively raising the capital require- at least in the second half of 1989, may have been ment on most loans—banks have securitized banks' efforts to reduce the size of such lines and consumer loans at a quickening pace. These the attractiveness of initial teaser rates offered on factors may promote some consolidation of the these loans. credit card market: Several banks and thrift Expansion in longer-term credit secured by institutions have sold their credit card accounts nonresidential commercial real estate also to larger banks that specialize in securitizing and slowed in 1989, particularly in the last half when servicing this type of credit. there was heightened concern about high vacancy rates, especially in the commercial office Real Estate Loans. In recent years, real market. Respondents to the November 1989 LPS estate credit has grown to become the largest indicated that they had, on balance, tightened type of loan held by banks. In 1989, real estate their credit standards for approving commercial loans again increased as a share of bank assets real estate loans in the last half of 1989. Howas expansion in mortgage credit continued at ever, expansion in the commercial mortgage about the strong pace of 1988. However, the credit category has been increased somewhat in composition of growth shifted away from com- recent years—and may continue to be supportmercial and toward residential mortgages, ed—by a shift from straight C&I lending to C&I likely reflecting a deterioration in commercial lending secured by real estate. real estate markets, the shrinking role of thrifts On a year-end basis, the growth of real estate in residential mortgage markets, regulatory loans for construction and land development also pressures, and the relatively more favorable moderated last year. Overbuilding in commer- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 481 cial, and to some extent in condominium, mar- farm economy. Banks also garnered a larger kets has contributed to losses on such loans. share of the total farm lending market, as total These losses have been particularly noteworthy farm debt continued a decline that had begun in in the Northeast—where problems have recently 1985. emerged—and in the Southwest—where charge- Positive developments in the farm economy offs have cut into the amounts outstanding. Over- have continued to benefit small banks, the size all, net charge-offs of construction and land de- group that encompasses almost all of the agriculvelopment loans noticeably held down growth of tural banks. All small banks reduced their loss this category in the fourth quarter of 1989. Also, provisions relative to assets—in contrast to the poor prospects in real estate, coupled with closer industrywide rise—and the decline at agricultural regulatory scrutiny, evidently induced banks to banks was a little faster than at their peers. be more cautious in making such loans in the last Nonperforming assets represented a smaller prohalf of 1989. portion of total loans for agricultural banks than In the January 1990 Lending Practices Survey, they did for other small banks and for the whole nearly four-fifths of respondents reported a re- industry (table 3). Partly because of these differduced willingness, compared with that of six ences and the relatively lower deposit rates at months earlier, to make loans for construction agricultural banks, the return on assets at agriand land development. Of these banks, nearly cultural banks was higher than that at other small three-fifths reduced permissible loan-to-value ra- banks and was almost double that for the industios, and substantial proportions reported re- try. This position contrasts sharply with the stricting credit for the building of income-gener- relative profitability of agricultural banks early in ating properties and of single-family homes that the 1980s. were not sold before construction. Securities. In 1989, expansion in security Loans to Foreign Addressees. The sum of holdings picked up. Strong inflows of retail loans to foreign governments and C&I loans to deposits spurred by thrift industry problems foreign addressees, which includes many loans coupled with moderating loan growth encourmade to developing countries, contracted again aged banks to purchase U.S. government seculast year, reflecting the ongoing retrenchment of rities. Bank holdings of mortgage-backed secuinternational lending by U.S. banks. Large rities guaranteed by the U.S. government banks, which hold almost all of these loans, (MBSs) surged. According to respondents in continued the process of restructuring and reduc- the November 1989 LPS, banks found these ing their loans to heavily indebted developing securities attractive for two reasons. The first countries. (Table A.2 presents detailed balance reason was that yields on MBSs rose somewhat sheet ratios by size of bank.) This process was relative to those on U.S. Treasury issues, partly most evident at large regional banks, where— because troubled thrifts sold off many MBSs to owing in part to charge-offs—loans to foreign pare down their balance sheets. The second, governments fell nearly one-third and C&I loans but less frequently indicated, factor was that to foreign addressees declined 6V2 percent. As in risk-based capital guidelines require less capital 1988, loans to foreign governments declined to be maintained for government-guaranteed more slowly at the money center banks. Business MBSs than for most other items on a bank's loans to foreigners were flat at these very large balance sheet. To some extent, increased holdbanks. ings of MBSs and of one- to four-family mortgages reflect the expansion of banks' role in Agricultural Loans. The volume of farm lend- mortgage markets as the thrift industry coning by banks (including unsecured loans to fi- tracts. By contrast, bank holdings of state and nance agricultural production and other loans to local government securities continued to defarmers and loans secured by farmland) rose for cline as they have since the passage of the Tax the second consecutive year, the increase re- Reform Act of 1986, which ended a tax advanflecting in part the continued improvement in the tage of holding such securities. Indeed, runoffs Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

482 Federal Reserve Bulletin • July 1990 3. Nonperforming assets, all insured commercial banks, 1988-89 Percent of total loans outstanding, except as noted Nonaccrual loans TTTToooottttaaaallll Selected components2 nnnnoooonnnnaaaaccccccccrrrruuuuaaaallll llllooooaaaannnnssss pppplllluuuussss YYYYeeeeaaaarrrr aaaannnndddd ssssiiiizzzzeeee ooooffff bbbbaaaannnnkkkk'''' PPPPaaaasssstttt dddduuuueeee ooootttthhhheeeerrrr rrrreeeeaaaallll TTToootttaaalll Commercial and industrial eeeessssttttaaaatttteeee RReeaall eessttaattee oooowwwwnnnneeeedddd3333 Foreign Domestic 1989 All banks 2.31 2.46 2.33 n.a. n.a. 3.06 Less than $300 million 2.77 1.32 1.23 n.a. n.a. 2.39 $300 million to $5 billion 2.39 1.53 2.12 4.51 1.81 2.12 $5 billion or more Money center banks 1.61 5.29 3.08 8.12 3.30 5.71 Other 2.40 2.19 3.16 3.97 1.93 2.63 1988 All banks 2.09 2.37 1.72 n.a. n.a. 2.87 Less than $300 million 2.62 1.33 1.25 n.a. n.a. 2.39 $300 million to $5 billion 2.11 1.25 1.62 7.14 1.52 1.75 $5 billion or more Money center banks 1.59 5.56 2.25 10.06 3.34 5.90 Other 2.08 1.95 1.98 6.47 1.47 2.24 1. Size categories are based on year-end fully consolidated assets. 3. As a percentage of total loans outstanding plus other real estate owned, 2. As a percentage of total loans in that category. n.a. Not available. of tax-exempt securities in 1989 were especially situation in the thrift industry. A portion of the pronounced at banks posting large losses, 1989 growth in commercial bank retail deposits banks that were not in need of sheltering in- reflected funds transferred out of or diverted come from taxation. Also, the less favorable from savings and loan institutions. Most of the treatment of municipal securities compared strength in retail-type accounts occurred in small with that of U.S. Treasury securities under time deposits, which traditionally have been the risk-based capital guidelines may have contrib- main source of thrift funding. These inflows uted to the decline in holdings of these securi- helped reduce the need for banks to issue manties, from IVi percent of bank assets in 1986 to aged liabilities to fund moderate asset growth in about 3 percent in 1989. the face of flat demand deposits. Because these inflows were not spurred primarily by increased Liabilities advertising or by the rapid expansion of deposit offices and because spreads between yields on Commercial bank deposits grew somewhat U.S. Treasury securities and rates on retail faster at 5V2 percent in 1989 compared with deposit widened, such retail deposit inflows their rate of growth in 1988; at the same time, likely helped bank profitability, as rates paid on several factors worked to change the composi- managed liabilities, such as term Eurodollars tion of bank liabilities. Demand deposits were and large time deposits, are typically higher about flat, declining sharply in relation to bank than those on retail deposits. Growth in the assets. To a large extent, the weakness in more liquid retail bank deposits, such as money demand deposits reflected higher average inter- market deposit accounts (MMDAs), other est rates, which lowered required deposits un- checkable deposits, and savings deposits, der compensating-balance arrangements and slowed from the pace of 1988. The deceleration encouraged depositors to minimize their non- in the growth of liquid retail deposits and the interest-bearing balances. Also, over the past acceleration in the growth of small time deposdecade businesses have tended increasingly to its at banks reflect, in part, the more sluggish compensate their banks for services with fees adjustment of rates offered on liquid retail derather than through holding idle balances. posits to higher market interest rates than that By contrast, retail deposits became a larger of yields on small time deposits. Indeed, rates source of funding for banks partly because of the on money market mutual funds (MMMFs), a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 483 close substitute for MMDAs, rose more in line 4. Loss provisions by size of bank with market rates than did MMDA rates. As a Percent of average assets result, households shifted or diverted funds into MMMFs last year. TRENDS IN PROFITABILITY While small banks continued to post healthy profits in 1989, the money center banks reported a loss, and other large banks recorded a drop in their profits (table 4). Most of this difference reflects sizable additions to loss provisions by large banks for loans to developing countries (chart 4). A saw-tooth pattern in loss provisioning has developed in recent years as large banks have adopted a strategy of periodically declaring huge loss provisions virtually en masse, possibly on the theory that shareholders and others will more likely regard additions to loss provisions as one-time occurrences if one's major peers are also declaring large loss provisions. When viewed from the perspective of banks' domestic business, net income in 1989, at 0.70 In 1987, when all large banks registered large percent of average assets, remained close to that losses, profits on domestic business barely kept of 1988. The commercial banking industry in- the industry's return on assets positive. Sevencreased its loss provisions attributable to domes- teen percent of commercial banks ended 1987 in tic loans by 30 percent over those of the previous the red. In both 1987 and 1989, loss provisions year, less than half the increase in total provi- attributable to business abroad more than acsions. This difference reflects the rise of about counted for the total negative income actually 350 percent last year in loss provisions on loans registered. In 1989, however, fewer large reto foreign addressees. gional banks and only half the money center 4. Profit rates, all insured commercial banks, 1985-89 Percent Type of return and size of bank' 1985 1986 1987 1988 1989 Return on assets2 All banks .70 .62 .11 .84 .51 Less than $300 million .74 .58 .63 .74 .88 $300 million to $5 billion .83 .76 .58 .76 .74 $5 billion or more Money center banks .45 .46 -.86 1.06 -.30 Other .74 .68 -.02 .82 .58 Return on equity3 All banks 11.18 9.97 1.80 13.52 7.94 Less than $300 million 9.19 7.21 7.76 8.89 10.32 $300 million to $5 billion 12.83 11.52 8.79 11.39 10.93 $5 billion or more Money center banks 9.60 9.50 -19.46 23.40 -6.17 Other 13.56 12.18 -.28 15.16 10.34 1. Size categories are based on year-end fully consolidated assets. 3. Net income as a percentage of average equity capital. 2. Net income as a percentage of average fully consolidated assets net of loss reserves. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

484 Federal Reserve Bulletin • July 1990 banks showed negative income, and losses attrib- Unlike the experience in 1987, large banks utable to international operations offset only one- other than the money center banks in 1989 outfourth of domestic net income. Also, the share of performed the industry as a whole in total profbanks with net losses continued to decline, to 10 itability, and profits on their domestic business percent. were only slightly lower than that of the industry. At money center banks, the percentage of loss Those among this group with foreign offices provisions attributable to international business showed virtually the same domestic return on rose to 88 percent in 1989, near the high reached assets in 1989 as that two years earlier; the in 1987. As in 1987, much of the high level difference in consolidated net income was attribreflected provisioning against loans to developing utable entirely to their international operations. countries. Since the third quarter of 1989, many To some extent, after-tax income has been of the money center banks have made large held down in 1988 and 1989 by higher tax liabiladditions to reserves for such loans. For this reason, ities that probably owe, in part, to the phasing in somewhat less scope exists for problems with loans of tax provisions approved in 1986. Before the to developing countries to affect further the re- Tax Reform Act of 1986, banks could deduct corded profitability of money center banks. from taxable income their additions to the re- These very large banks achieved a 0.55 percent serve for loan losses. This legislation, however, return on their domestic business. Operations at denies the reserve method and limits banks to home accounted for three-fourths of their net deducting their actual net charge-offs. Provisions interest margin and 60 percent of their noninter- for loan losses are deducted from net income on est income, up slightly over results in 1988. their financial reports but must be excluded from Loss provisions made by other large banks the calculation of their taxable income. The nearly doubled as a share of assets last year, result is a higher tax liability. likely reflecting a deterioration in the quality of The regional pattern of loss provisioning was real estate loans as well as developing country reflected in the profitability of banks by Federal debt (table 5). For all banks with foreign offices, Reserve District (chart 5). The return on assets reported income losses from business abroad turned negative in the Boston District—where were somewhat larger than the positive net in- large provisions were made for real estate come reported on a consolidated basis; at money loans—and in the New York District—where the center banks, foreign income losses were almost money center banks added to reserves for loans three times the total net loss reported by this to developing countries. On the brighter side, group. additions to loss provisions at banks in the Dallas 5. Loan losses and recoveries, all insured commercial banks, 1988-89 Millions of dollars, except as noted Net charge-offs YYeeaarr aanndd ssiizzee ooff bbaannkk'' LLoosssseess cchhaarrggeedd RReeccoovveerriieess LLoossss pprroovviissiioonnss Percent Amount of loans 1989 All banks 25,240 3,870 21,370 1.09 28,702 Less than $300 million 3,213 735 2,478 .67 2,947 $300 million to $5 billion 5,791 959 4,831 .88 6,154 $5 billion or more Money center banks 6,719 961 5,758 1.46 9,638 Other 9,516 1,215 8,302 1.30 9,963 1988 All banks 21,742 4,024 17,718 .97 15,825 Less than $300 million 3,545 779 2,766 .78 3,280 $300 million to $5 billion 5,260 898 4,362 .85 4,864 $5 billion or more Money center banks 4,589 1,107 3,482 .90 2,324 Other 8,348 1,240 7,108 1.25 5,358 1. Size categories are based on year-end fully consolidated assets. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 485 5. Bank stock indexes and oping countries but also increased charge-offs the Standard and Poor's 500 against real estate and consumer loans, as well as loans to depository institutions. Index, January 11, 1989 = 100 Noninterest Income and Expense and Security Gains The increase in noninterest income in 1989 was twice as large as the increase in noninterest expense (excluding loss provisions). As a consequence, the negative spread between these two components continued to contract. On the ex- 1989 1990 pense side, layoffs and consolidations at several large banks prevented employment in the bank- District diminished last year, reversing the worsing industry from growing much last year. Partly ening trend between 1985 and 1988. This develas a result, salaries and employee benefits grew opment reflected, in part, improved economic no faster than total industry assets last year. conditions in this area and the declining, albeit One source of increased noninterest income still large, backlog of troubled loans from the was fee income from merger-related financing mid-1980s. Banks in the Dallas District continued activities, particularly at money center banks, reducing their exposure to commercial real estate which originate most of these loans. The ratio of loans and increased the share of U.S. governnoninterest income to assets was bolstered furment securities in their portfolios. ther by the pickup in issuance of consumer- For the banking system as a whole, the net loan-backed securities last year as banks recharge-off rate on all loans rose from 0.96 percent corded income from originating and servicing the of loans in 1988 to 1.09 percent last year. Detailed underlying loans. Noninterest income also was data on charge-offs net of recoveries by type of supported by a small rise in fees received for loan are available for banks with assets of more deposit services. To some extent, such fee inthan $300 million (table 6). At this large subset of come reflects the ongoing shift by businesses the banking industry, which accounts for nearly away from compensating balances and toward 80 percent of bank assets, the net charge-off rate fees as a means of paying banks for services. on all loans rose from 1.03 percent in 1988 to 1.21 Capital gains on the sale of investment account percent last year. This development reflected not securities edged up last year but were still low only a steep rise in charge-offs of loans to develrelative to the high levels earned between 1985 and 1987. As in recent years, money center 6. Net charge-offs, by type of loan, large insured commercial banks, 1985-89' banks have outperformed other banks in realiz- Percent of average loans ing gains on holdings of securities. Item 1985 1986 1987 1988 1989 Net Interest Margins Total loans .75 .89 .91 1.03 1.21 Commercial and industrial.. 1.02 1.14 .96 .95 .93 U.S. addressees .94 1.10 .86 .82 .78 The banking industry's net interest margin Foreign addressees 1.25 1.29 1.35 1.55 1.70 edged down, as declines at money center banks Consumer 1.24 1.58 1.58 1.52 1.63 outweighed slight increases at small- and medi- Credit-card 2.57 3.28 3.26 3.08 3.05 Other .63 .75 .74 .73 .90 um-sized banks. As a result of higher average Real estate .22 .38 .47 .42 .52 market interest rates during 1989, interest expense and income rose. However, interest ex- Foreign government .84 .47 2.58 9.35 17.01 pense increased somewhat more, particularly Depository institutions.... .15 .36 .56 .98 1.35 U.S. depositories .12 .33 .11 .15 .19 for money center and large banks, which, as a Foreign banks .15 .36 .96 1.83 2.52 group, rely more on managed liabilities for 1. Banks with assets of $300 million or more or with foreign offices. funding than do smaller banks. The interest Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

486 Federal Reserve Bulletin • July 1990 costs of managed liabilities, such as large time 7. Sources of changes in total equity capital, all insured deposits and foreign deposits (for example, commercial banks, 1985-89 Eurodollar deposits), adjust more quickly to Millions of dollars, except as noted changes in market interest rates than do yields Item 1985 1986 1987 1988 1989 on retail deposits. Net interest margins were depressed at very large banks by a sharp rise in Retained earnings' All banks 9,348 8,069 -7,324 11,691 2,065 interest paid on Treasury tax and loan note Large banks2 4,177 4,121 -10,142 7,567 -2,565 balances and other borrowed funds. Net change in The ongoing resolution of problems in the equity capital All banks 15,399 16,103 2,226 19,340 11,322 thrift industry, however, is helping reduce up- Large banks 5,559 7,446 -5,554 10,914 2,638 ward pressures on retail deposit rates. In recent Percent of change in equity capital years, troubled thrift institutions had attracted from retained small time deposits by offering unusually high earnings' All banks 61 50 n.m. 60 18 rates and thereby put upward pressures on de- Large banks 75 55 n.m. 69 n.m. posit rates at sound thrift institutions and banks. 1. Net income less cash dividends declared on preferred and common stock. Regulatory intervention over several quarters 2. Banks with fully consolidated assets of $5 billion or more at year-end. before the passage of thrift legislation in the 3. Retained earnings divided by the net change in equity capital. n.m. Not meaningful. summer of 1989 had curtailed such practices. Since August 1989, when regulators obtained capital to pay dividends, as they had in 1987 funds to resolve some insolvent thrift institu- when they also boosted loss provisions against tions, such deposit pricing practices have abated loans to developing countries. Reflecting differfurther. Partly as a result, spreads of short-term ences in dividend policy as well as changes in market interest rates over small time deposit relative profitability, retained earnings as a share rates at banks have recently widened. of assets at small and medium-sized banks continued at levels near those of 1988 but fell for Dividends and Retained Earnings large banks and turned negative for money center banks (table 7). Despite the drop in profitability (table A.l), com- Stock price indexes for money center and mercial banks paid dividends of 0.44 percent of regional banks generally had increased someassets in 1989, equaling the record performance what faster than the Standard and Poor's 500 of 1988. Smaller institutions continued paying index through the third quarter (chart 6). Howout about two-thirds of profits in dividends. But ever, in the fourth quarter both bank indexes fell, dividends as a share of profits surged at large partly on information suggesting that the perforbanks other than money centers, reflecting mance of merger-related and real estate loans mainly the maintenance of dividend payouts in was deteriorating. Such problems particularly the face of a substantial decline in profitability. affected stock prices of several New England Money center banks, as a group, dipped into bank holding companies. Concerns over eco- 6. Return on assets by Federal Reserve District Percent —1980 rl988 1.5 11989 1.0 .5 + Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City San Francisco — .5 Dallas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 487 7. Equity and total capital as a percentage nomic problems in several heavily indebted deof assets, by size of bank veloping countries further depressed the stock prices of money center banks with large loan exposures to these nations. | Equity capital | Total capital Capital As a whole, the banking industry added less equity last year than it did in 1988, reflecting the very low level of retained earnings and the damping effect of the fall in bank stock prices in late 1989 on the incentive to issue new equity. How- More Money ever, some banks that are less well capitalized than center $5 billion banks continued raising equity, securitizing loans, and paring down low-earning assets last year in advance of the initial phase-in of risk-based capital reserves were almost as large as equity capital standards at the end of 1990. reflected in part that money center banks account By year-end 1992, banks must meet three basic for most loans made to developing countries. required capital ratios. First, they must maintain tier 1 capital, mainly common equity and perpetual preferred stock, equal to at least 4 percent of DEVELOPMENTS IN EARLY 1990 their risk-based assets. Second, tier 1 capital must equal at least 3 percent of their unweighted Concerns about credit quality continued to troutotal assets. Third, total capital must equal at ble the commercial banking industry into 1990. In least 8 percent of risk-adjusted assets. Currently, the Northeast and some other areas of the counmany banks already meet the interim 1990 and try, real estate loan problems mounted further, the final 1992 capital standards with respect to and banks set aside additional loss provisions. In tier 1 capital. Besides tier 1 capital, total capital response to problems of loan quality, some New includes other types of preferred stock, subordi- England banks have sold off a large volume of nated debt, loan loss reserves (up to 1.25 percent assets to meet capital requirements. Concerns of risk-based capital), and mandatory convertible about the quality of real estate loans appear debt. In the calculation of the risk-based capital strongest in areas in which land prices had risen ratio, 0 percent weights are applied to U.S. sharply in previous years. For example, a num- Treasury securities, FHA and VA mortgages, ber of banks in the Southeast reported a decline and MBSs guaranteed by GNMA. The risk-based in profitability in the first quarter of 1990 because weights are 20 percent for most other MBSs and of increased provisioning for nonperforming agency securities, 50 percent for qualifying one- commercial real estate loans. In addition, signs to four-family conventional mortgages, and 100 of a possible deterioration in the performance of percent for most other loans, including C&I, merger-related lending have grown stronger. consumer, and commercial real estate. To vary- The profitability of money center banks sufing degrees, capital also must be maintained on fered in the first quarter of 1990 mainly because off-balance-sheet exposures to risk. of mounting real estate loss provisions, declining Across banks of different size categories, the performance of loans to highly leveraged firms, a ratio of total capital to assets was about the drop in fee income from arranging merger fisame. However, as illustrated in chart 7, equity nancing, and the failure of Brazil to make interest capital composed a greater share of total capital payments. These developments likely induced at smaller banks, whereas subordinated debt, much of the additional decline in the stock inmandatory convertible debt, and loan loss re- dexes for regional and money center banks. serves constituted a greater share at large banks. Thus far in 1990, banks and a number of Indeed, at money center banks, that loan loss countries, including Mexico, have started imple- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

488 Federal Reserve Bulletin • July 1990 menting debt-restructuring packages. The pack- is not clear, and the impact of more restrictive age with Mexico has resulted mainly in debt and lending policies on firms is even less quantifiable, debt-service reduction and, to a lesser extent, especially amid signs of weakening bank loan some provision of new credits. demand. Other surveys conducted by Federal Survey responses to the May 1990 LPS indi- Reserve Banks generally confirmed that credit cated that banks had continued to tighten selec- standards were tightened for loans to real estate tively their credit standards and nonprice terms developers but suggested that business loan deof credit for riskier types of loans in early 1990. mands from banks continued to be met for most Such tightening was particularly pronounced for of the firms that were contacted. commercial real estate loans. Somewhat fewer Issuance of securities backed by consumer banks, about half, indicated that loan policies loans surged in the first quarter and enabled became more restrictive for nonmerger-related banks to reduce consumer loans on their balance C&I loans to small- and medium-sized busi- sheets around $6 billion, about twice the quarnesses, but few reported that they had tightened terly rate of 1989. As a result, consumer loans their credit standards on such loans to large held on the balance sheets at large banks actually firms. Respondents indicated that a decline in the declined in the first quarter. general economic outlook and a deterioration in On the liability side of their balance sheets, loan quality were the most important reasons for deposit outflows from the thrift industry enabled tighter lending policies toward small- and medi- banks to continue substituting retail deposits for um-sized firms. Other factors frequently men- more expensive, managed liabilities while fundtioned included regulatory pressures and indus- ing a more moderate expansion in assets. Indeed, try-specific problems. Although large numbers of large time deposits issued by banks have run off banks reported tightening credit standards for since the new year. This development will help certain types of loans, the extent of the tightening support net interest margins in 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 489 A.l. Report of income, ail insured commercial banks, 1985-89 Millions of dollars Item 1985 1986 1987 1988 1989 Operating income, total 275,741 269,152 281,218 308,580 357,033 Interest, total 245,152 233,961 240,548 264,999 308,691 Loans 181,368 172,712 177,217 196,119 231,711 Balances with banks 13,660 11,139 11,874 13,198 14,750 Gross federal funds sold and reverse repurchase agreements 9,404 8,918 8,810 10,025 12,585 Securities (excluding trading accounts) 37,387 37,860 38,698 40,738 45,219 Tax-exempt 8,752 10,594 9,085 8,014 7,186 Taxable 28,635 27,266 29,613 32,724 38,033 Trading account assets 3,333 3,332 3,948 4,918 4,427 Service charges on deposits 7,333 7,908 8,659 9,323 10,151 Other operating income 23,257 27,282 32,012 34,258 38,192 Operating expense, total 254,184 250,821 274,330 275,050 332,889 Interest, total 155,549 140,762 142,649 160,455 199,342 Deposits 129,439 115,898 113,687 125,961 153,466 Large certificates of deposit 22,705 19,281 18,935 21,907 28,739 Deposits in foreign offices 30,117 24,440 25,946 28,248 33,436 Other deposits 76,618 72,177 68,806 75,806 91,290 Gross federal funds purchased and repurchase agreements 16,432 15,745 15,472 18,146 24,007 Other borrowed money 9,677 9,119 13,220 16,347 21,869 Salaries, wages, and employee benefits 39,467 42,262 44,463 45,595 48,129 Occupancy expense 13,137 14,291 15,041 15,496 16,249 Loss provisions 17,504 21,538 36,534 15,990 28,806 Other operating expense 28,527 31,968 35,643 37,515 40,363 Securities gains 1,506 3,785 1,397 285 774 Income before tax 23,063 22,115 8,286 33,815 24,918 Taxes 5,499 5,184 5,267 9,871 9,504 Extraordinary items 237 271 162 833 315 Net income 17,802 17,202 3,181 24,777 15,730 Cash dividends 8,455 9,133 10,505 13,086 13,665 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

490 Federal Reserve Bulletin • July 1990 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89' A. All banks Item 1985 1986 1987 1988 1989 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 86.05 86.02 86.62 87.94 87.84 Loans 58.51 57.86 58.36 60.59 61.30 Commercial and industrial 22.26 20.96 20.04 19.55 19.20 U.S. addressees 17.50 16.93 16.60 16.55 16.60 Foreign addressees 4.76 4.03 3.44 3.00 2.60 Real estate 15.71 16.71 18.69 20.56 22.18 Construction 3.20 3.49 3.87 4.01 4.14 Farmland .41 .43 .46 .49 .51 One- to four-family residential 7.20 7.31 8.00 9.03 9.94 Home equity .97 1.13 1.41 Other 7.74 7.90 8.53 Multifamily residential .44 .49 .56 .58 .59 Nonfarm nonresidential 4.00 4.43 5.21 5.77 6.29 Consumer 10.80 11.06 11.10 11.31 11.40 Credit card 2.48 2.75 2.97 3.13 3.26 Installment and other 8.32 8.31 8.13 8.18 8.14 Foreign government 1.56 1.43 1.34 1.23 1.03 Agricultural production 1.51 1.22 1.03 .99 .96 Security .83 .79 .63 .53 .54 Other 7.19 7.27 6.92 6.42 5.97 Securities 17.58 18.29 18.58 16.84 16.74 U.S. government 9.50 9.26 10.03 10.35 10.78 U.S. Treasury 4.40 4.29 5.58 5.47 4.75 Government-backed mortgage pools .96 1.16 2.08 2.59 3.27 Other 4.05 3.80 2.38 2.29 2.75 State and local government 6.99 7.49 6.25 3.69 3.14 Taxable .06 .06 .08 Tax-exempt 3.35 3.63 3.06 Other bonds and stocks 1.08 11..5555 2.29 2.80 2.82 Trading account assets 1.24 1.55 1.32 1.26 1.25 Gross federal funds sold and reverse repurchase agreements 4.43 4.72 4.43 4.26 4.20 Interest-bearing deposits 5.53 5.15 5.26 4.99 4.36 Other assets 12.62 12.10 11.20 10.52 10.66 Deposit liabilities 77.30 76.72 76.43 76.22 76.01 In foreign offices 12.61 11.61 11.38 10.85 10.05 In domestic offices 64.69 65.11 65.06 65.37 65.96 Demand deposits 15.63 16.03 15.41 14.34 13.63 Other checkable deposits 4.57 5.21 6.01 6.27 6.16 MMDAs 11.72 12.64 12.32 11.44 10.55 Other savings 4.64 4.79 5.76 6.08 5.81 Small time deposits 16.67 15.68 14.95 16.16 18.15 Large time deposits 11.46 10.76 10.60 11.08 11.66 Gross federal funds purchased and repurchase agreements 7.68 8.25 8.06 7.72 7.95 Other liabilities for borrowed money 3.44 4.02 4.45 4.93 4.87 Other borrowings 5.70 5.17 4.90 3.49 3.39 MEMO Money market liabilities 35.19 34.63 34.49 34.58 34.53 I Loss reserves .80 .92 1.36 1.54 1.50 Total equity capital 6.17 6.21 6.06 6.10 6.27 1. See notes to tables in the text. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 491 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-891—Continued A. All banks-Continued Item 1985 1986 1987 1988 1989 Effective interest rates (percent) Rates earned Securities 9.27 8.34 7.89 8.06 8.58 State and local government 7.42 7.20 7.28 7.38 7.46 Loans, gross 12.07 10.84 10.44 10.80 11.97 Net of loss provisions 10.87 9.46 8.24 9.92 10.48 Taxable equivalent Securities 11.45 10.52 9.11 8.06 9.32 Securities and gross loans 11.93 10.77 10.12 10.31 11.48 Rates paid Interest-bearing deposits 8.20 6.98 5.82 6.81 7.84 In foreign offices 9.48 7.78 7.90 8.92 10.89 In domestic offices 7.66 6.67 5.10 5.34 NOW accounts 4.81 MMDAs 6.51 Other savings 5.49 Small time deposits 8.25 Large time deposits 8.72 7.31 6.86 7.39 8.63 All interest-bearing liabilities 8.29 7.01 6.11 7.26 8.52 Income and expenses as a percentage of average net consolidated assets Gross interest income 9.45 8.38 8.21 8.95 9.92 Gross interest expense 6.06 5.10 4.94 5.42 6.41 Net interest margin 3.38 3.27 3.27 3.53 3.51 Taxable equivalent 3.77 3.68 3.50 3.61 3.70 Noninterest income 1.33 1.40 1.55 1.47 1.55 Loss provisions .68 .78 1.27 .54 .93 Other noninterest expense 3.18 3.23 3.31 3.33 3.37 Securities gains .06 .14 .05 .01 .02 Income before tax .90 .80 .29 1.14 .80 Taxes .21 .19 .18 .33 .31 Extraordinary items .01 .01 .01 .03 .01 Net income .70 .62 .11 .84 .51 Cash dividends declared .33 .33 .36 .44 .44 Net retained earnings .37 .29 -.25 .40 .07 MEMO Average assets (billions of dollars) 2,559 2,753 2,883 2,959 3,112 Number of banks 13,898 13,733 13,273 12,691 12,323 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

492 Federal Reserve Bulletin • July 1990 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89'—Continued B. Banks with less than $300 million in assets Item 1985 1986 1987 1988 1989 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 90.86 90.77 91.10 90.83 90.97 Loans 54.22 52.84 52.96 54.32 55.11 Commercial and industrial 15.00 14.01 13.23 12.74 12.45 U.S. addressees 14.96 13.99 13.21 12.72 12.42 Foreign addressees .04 .02 .02 .02 .03 Real estate 20.69 21.75 23.78 25.69 27.02 Construction 2.22 2.22 2.22 2.19 2.27 Farmland 1.27 1.38 1.55 1.73 1.81 One- to four-family residential 11.20 11.48 12.55 13.89 14.59 Home equity .64 .72 .95 Other 12.96 13.16 13.64 Multifamily residential .49 .53 .59 .60 .61 Nonfarm nonresidential 5.70 6.14 6.87 7.29 7.74 Consumer 12.78 12.15 11.51 11.28 11.22 Credit card .48 .53 .66 .74 .82 Installment and other 12.29 11.62 10.85 10.53 10.40 Foreign government .02 .02 .01 .01 .01 Agricultural production 4.27 3.62 3.23 3.24 3.28 Security .08 .07 .06 .06 .05 Other 1.37 1.48 1.47 1.30 1.08 Securities 28.23 27.89 28.44 28.07 27.79 U.S. government 18.39 17.73 18.70 19.64 20.13 U.S. Treasury 9.11 9.77 8.79 Government-backed mortgage pools 1.52 1.40 2.58 3.25 3.76 Other 7.01 6.61 7.59 State and local government 9.16 9.10 7.65 5.72 4.99 Taxable .17 .20 .22 Tax-exempt 5.08 5.52 4.77 Other bonds and stocks .68 1.06 2.09 2.71 2.67 Trading account assets .03 .06 .07 .05 .07 Gross federal funds sold and reverse repurchase agreements 5.55 7.01 6.45 5.29 5.66 Interest-bearing deposits 2.86 3.03 3.25 3.10 2.35 9.47 9.23 8.66 8.31 8.17 Deposit liabilities 87.81 88.14 88.11 87.96 87.71 In foreign offices .09 .06 .03 .04 .08 In domestic offices 87.71 88.08 88.09 87.92 87.63 Demand deposits 15.39 15.03 14.41 13.74 13.20 Other checkable deposits 8.03 9.00 10.30 10.68 10.47 MMDAs 13.99 14.94 14.77 13.21 11.34 Other savings 7.07 7.25 8.41 8.73 8.20 Small time deposits 31.61 30.46 29.25 30.67 33.22 Large time deposits 11.61 11.40 10.95 10.89 11.20 Gross federal funds purchased and repurchase agreements 1.59 1.36 1.34 1.32 1.32 Other liabilities for borrowed money .49 .50 .53 .55 .57 1.73 1.54 1.38 1.05 1.14 MEMO 13.79 13.32 12.85 12.80 13.16 .68 .77 .84 .85 .86 8.04 8.01 8.09 8.26 8.40 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 493 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89'—Continued B. Banks with less than $300 million in assets—Continued Item 1985 1986 1987 1988 1989 Effective interest rates (percent) Rates earned Securities 9.61 8.69 7.88 7.91 8.37 State and local government 7.65 7.55 7.53 7.58 7.59 Loans, gross 12.50 11.52 10.84 10.96 11.70 Net of loss provisions 11.01 9.85 9.63 10.04 10.89 Taxable equivalent Securities 11.36 10.40 9.24 7.91 9.19 Securities and gross loans 12.11 11.13 10.27 9.98 10.91 Rates paid Interest-bearing deposits 7.92 6.91 5.47 6.34 7.07 In foreign offices In domestic offices 7.79 6.84 5.31 5.46 NOW accounts 5.07 MMDAs 6.11 Other savings 5.36 Small time deposits 8.00 Large time deposits 8.67 7.31 6.54 7.09 8.35 All interest-bearing liabilities 7.92 6.91 5.50 6.36 7.11 Income and expenses as a percentage of average net consolidated assets Gross interest income 10.17 9.18 8.63 8.91 9.60 Gross interest expense 5.98 5.20 4.67 4.89 5.48 Net interest margin 4.18 3.97 3.97 4.03 4.12 Taxable equivalent 4.68 4.45 4.35 4.07 4.39 Noninterest income .81 .82 .83 .85 .90 Loss provisions .79 .87 .64 .51 .45 Other noninterest expense 3.35 3.36 3.33 3.35 3.37 Securities gains .07 .15 .03 .01 .01 Income before tax .92 .71 .86 1.01 1.22 Taxes .19 .15 .24 .29 .36 Extraordinary items .01 .02 .02 .02 .02 Net income .74 .58 .63 .74 .88 Cash dividends declared .43 .40 .41 .47 .51 Net retained earnings .32 .19 .23 .27 .37 MEMO Average assets (billions of dollars) 652 664 666 647 656 Number of banks 13,100 12,871 12,414 11,796 11,393 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

494 Federal Reserve Bulletin • July 1990 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89'-Continued C. Banks with $300 million to $5 billion in assets Item 1985 1986 1987 1988 1989 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 87.98 88.04 88.60 88.82 88.96 Loans 57.25 57.74 59.71 63.23 64.28 Commercial and industrial 19.32 18.70 18.51 18.22 17.73 U.S. addressees 18.79 18.33 18.13 17.92 17.56 Foreign addressees .53 .37 .38 .23 .17 Real estate 17.99 19.66 22.00 24.23 25.95 Construction 4.05 4.42 4.82 4.80 4.83 Farmland .20 .23 .24 .27 .27 One- to four-family residential 7.93 8.23 9.07 10.49 11.50 Home equity 1.51 1.70 2.04 Other 8.47 8.79 9.46 Multifamily residential .55 .64 .65 .66 .68 Nonfarm nonresidential 5.25 6.13 7.21 8.01 8.65 Consumer 13.93 13.96 14.28 14.66 15.15 Credit card 3.28 3.46 4.01 4.02 4.43 Installment and other 10.65 10.50 10.28 10.64 10.72 Foreign government .43 .33 .33 .23 .15 Agricultural production .69 .57 .46 .46 .43 Security .65 .61 .54 .39 .36 Other 6.62 6.59 5.86 5.03 4.51 Securities 21.56 21.66 20.98 18.17 18.08 U.S. government 11.09 10.43 11.01 11.18 11.77 U.S. Treasury 7.96 7.20 6.86 6.37 5.63 Government-backed mortgage pools 1.01 1.18 2.13 2.39 3.08 Other 2.12 2.04 2.02 2.43 3.07 State and local government 9.28 9.73 7.80 6.45 3.52 Taxable .05 .05 .05 Tax-exempt 3.81 4.14 3.47 Other bonds and stocks 1.19 1.50 2.17 2.84 2.79 Trading account assets .29 .34 .26 .32 .37 Gross federal funds sold and reverse repurchase agreements 5.14 5.26 4.71 4.16 3.91 Interest-bearing deposits 4.03 3.38 3.21 2.94 2.33 Other assets 11.80 11.48 10.71 10.16 10.01 Deposit liabilities 79.74 79.90 78.56 78.75 78.77 In foreign offices 2.69 2.42 2.50 2.31 1.96 In domestic offices 77.05 77.49 76.05 76.44 76.81 Demand deposits 18.72 18.68 17.43 16.10 15.15 Other checkable deposits 5.36 6.31 7.08 7.44 7.26 MMDAs 14.75 15.92 15.22 13.87 12.77 Other savings 5.98 6.12 6.90 7.37 7.09 Small time deposits 18.68 17.91 16.88 19.13 21.87 Large time deposits 13.57 12.55 12.54 12.53 12.66 Gross federal funds purchased and repurchase agreements 8.56 8.60 9.17 8.79 8.60 Other liabilities for borrowed money 2.33 2.27 3.03 3.20 3.20 Other borrowings 3.13 2.82 2.70 1.65 1.66 MEMO Money market liabilities 27.14 25.84 27.24 26.83 26.43 Loss reserves .77 .85 1.02 1.02 1.03 Total equity capital 6.39 6.52 6.51 6.59 6.74 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 495 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89'—Continued C. Banks with $300 million to $5 billion in assets—Continued Item 1985 1986 1987 1988 1989 Effective interest rates (percent) Rates earned Securities 9.01 8.14 7.66 7.86 8.36 State and local government 7.35 7.13 7.19 7.14 7.33 Loans, gross 11.94 10.89 10.37 10.59 11.55 Net of loss provisions 10.94 9.68 9.04 9.63 10.42 Taxable equivalent Securities 11.36 10.49 9.19 7.86 9.21 Securities and gross loans 11.79 10.78 10.06 10.12 11.15 Rates paid Interest-bearing deposits 7.82 6.77 5.46 6.47 7.33 In foreign offices 8.63 6.96 6.79 7.65 8.97 In domestic offices 7.58 6.64 5.11 5.37 NOW accounts 4.85 MMDAs 6.58 Other savings 5.33 Small time deposits 8.27 Large time deposits 8.55 7.23 6.79 7.39 8.72 All interest-bearing liabilities 7.82 6.75 5.63 6.68 7.66 Income and expenses as a percentage of average net consolidated assets Gross interest income 9.41 8.52 8.23 8.73 9.62 Gross interest expense 5.66 4.86 4.56 4.98 5.78 Net interest margin 3.75 3.66 3.67 3.75 3.84 Taxable equivalent 4.25 4.17 3.99 3.87 4.09 Noninterest income 1.34 1.29 1.33 1.33 1.35 Loss provisions .56 .69 .78 .61 .73 Other noninterest expense 3.57 3.45 3.44 3.41 3.42 Securities gains .04 .11 .04 .00 .01 Income before tax 1.00 .93 .83 1.06 1.05 Taxes .18 .18 .26 .31 .31 Extraordinary items .01 .01 .01 .01 .01 Net income .83 .76 .58 .76 .74 Cash dividends declared .37 .39 .42 .46 .48 Net retained earnings .45 .37 .16 .30 .26 MEMO Average assets (billions of dollars) 685 738 808 804 842 Number of banks 724 779 777 800 831 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

496 Federal Reserve Bulletin • July 1990 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89'-Continued D. Nine money center banks Item 1985 1986 1987 1988 1989 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 80.56 80.09 80.65 84.84 84.64 Loans 61.91 60.07 58.41 58.53 59.31 Commercial and industrial 29.46 26.49 24.23 22.77 21.77 U.S. addressees 14.34 13.24 12.57 12.04 11.90 Foreign addressees 15.12 13.25 11.60 10.73 9.87 Real estate 10.49 11.45 12.52 13.71 16.10 Construction 2.18 2.52 2.88 2.96 3.14 Farmland .07 .06 .04 .04 .05 One- to four-family residential 4.22 4.17 4.35 5.03 6.46 Home equity .43 .55 .81 Other 4.26 4.48 5.66 Multifamily residential .38 .45 .56 .60 .63 Nonfarm nonresidential 1.89 2.09 2.33 2.34 2.75 Consumer 5.78 6.13 5.99 5.82 5.84 Credit card 2.21 2.21 2.05 1.77 1.68 Installment and other 3.57 3.92 3.94 4.04 4.16 Foreign government 3.92 3.82 3.65 3.67 3.47 Agricultural production .49 .36 .28 .26 .23 Security 1.21 1.16 .82 .65 .64 Other 11.57 11.67 11.75 11.65 11.26 Securities 7.15 8.49 9.38 8.65 8.90 U.S. government 2.31 2.28 2.75 3.08 3.24 U.S. Treasury 1.85 1.58 1.43 1.34 1.18 Government-backed mortgage pools .38 .61 1.25 1.64 1.83 Other .09 .09 .07 .10 .24 State and local government 3.02 3.48 3.23 1.85 1.60 Taxable .01 .01 .02 Tax-exempt 1.57 1.84 1.58 Other bonds and stocks 1.82 2.73 3.40 3.72 4.07 Trading account assets 3.67 4.90 4.52 4.33 4.29 Gross federal funds sold and reverse repurchase agreements 3.54 3.62 3.95 4.64 4.10 Interest-bearing deposits 7.95 7.91 8.91 8.69 8.03 Other assets 15.31 14.38 13.13 12.47 12.55 Deposit liabilities 70.74 69.92 70.16 69.57 69.03 In foreign offices 35.86 34.64 35.03 34.02 32.62 In domestic offices 34.88 35.28 35.13 35.56 36.42 Demand deposits 11.51 12.46 12.34 11.53 11.09 Other checkable deposits 1.30 1.63 2.03 2.23 2.25 MMDAs 7.35 7.70 6.89 6.72 6.51 Other savings 1.77 2.06 3.09 3.56 3.73 Small time deposits 4.76 4.12 3.95 4.38 4.98 Large time deposits 8.18 7.30 6.83 7.14 7.87 Gross federal funds purchased and repurchase agreements 7.66 8.17 6.83 6.02 6.15 Other liabilities for borrowed money 6.51 7.95 8.69 9.52 9.80 Other borrowings '. 11.02 9.93 9.64 7.78 7.54 MEMO Money market liabilities 58.21 58.07 57.41 56.69 5566..4444 Loss reserves .83 1.02 2.11 2.69 2.81 Total equity capital 4.69 4.78 4.33 4.42 4.66 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 497 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89' —Continued D. Nine money center banks—Continued Item 1985 1986 1987 1988 1989 Effective interest rates (percent) Rates earned Securities 9.41 8.51 8.48 8.67 9.16 State and local government 7.24 7.09 7.26 7.70 7.65 Loans, gross 12.08 10.53 10.41 11.40 13.35 Net of loss provisions 10.85 9.18 6.67 10.77 10.88 Taxable equivalent Securities 11.75 10.89 8.76 88..6677 9.32 Securities and gross loans 12.05 10.58 10.18 11.13 12.82 Rates paid Interest-bearing deposits 8.91 7.41 6.70 7.89 9.39 In foreign offices 9.59 7.88 8.01 9.01 10.97 In domestic offices 7.43 6.47 4.47 5.00 NOW accounts 4.56 MMDAs 6.66 Other savings 6.23 Small time deposits 8.50 Large time deposits 9.07 7.45 7.33 8.04 8.68 All interest-bearing liabilities 7.96 7.57 7.30 8.89 11.02 Income and expenses as a percentage of average net consolidated assets Gross interest income 9.10 7.85 7.90 9.55 10.92 Gross interest expense 6.74 5.57 7.93 6.63 8.24 Net interest margin 2.36 2.28 2.06 2.91 2.68 Taxable equivalent 2.53 2.49 2.09 2.97 2.70 Noninterest income 1.75 2.02 2.50 2.11 2.22 Loss provisions .75 .79 2.16 .38 1.50 Other noninterest expense 2.71 2.96 3.18 3.27 3.42 Securities gains .06 .13 .08 .03 .04 Income before tax .71 .68 -.70 1.40 .02 Taxes .26 .22 .15 .41 .35 Extraordinary items .00 .00 .00 .08 .03 Net income .45 .46 -.86 1.06 -.30 Cash dividends declared .25 .21 .28 .38 .36 Net retained earnings .21 .25 -1.14 .69 -.66 MEMO Average assets (billions of dollars) 618 645 650 641 643 Number of banks 9 9 | 9 9 9 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

498 Federal Reserve Bulletin • July 1990 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89'-Continued E. Large banks other than money center banks Item 1985 1986 1987 1988 1989 Balance sheet items as a percentage of average consolidated assets Interest-earning assets 84.28 84.88 85.78 87.30 86.92 Loans 61.07 60.68 61.58 64.33 64.21 Commercial and industrial 26.02 24.79 23.98 23.42 23.29 U.S. addressees 21.96 21.60 21.36 21.42 21.74 Foreign addressees 4.06 3.19 2.62 1.99 1.55 Real estate 13.09 13.72 16.05 18.49 19.77 Construction 4.33 4.61 5.15 5.43 5.46 Farmland .08 .10 .11 .12 .14 One- to four-family residential 5.29 5.32 6.04 7.08 7.79 Home equity 1.16 1.33 1.57 Other 5.43 5.75 6.22 Multifamily residential .33 .34 .44 .47 .48 Nonfarm nonresidential 2.91 3.18 4.11 5.15 5.66 Consumer 10.25 11.52 11.78 12.35 12.02 Credit card 4.00 4.60 4.68 5.09 4.95 Installment and other 6.26 6.91 7.10 7.26 7.07 Foreign government 2.08 1.71 1.59 1.23 .84 Agricultural production .50 .42 .38 .35 .35 Security 1.43 1.32 1.04 .91 .98 Other 9.64 9.40 8.63 7.57 6.97 Securities 12.24 14.74 15.37 13.42 13.42 U.S. government 5.47 6.46 7.73 8.15 8.70 U.S. Treasury 4.14 4.45 4.72 4.55 3.69 Government-backed mortgage pools .88 1.41 2.29 3.00 4.08 Other .45 .60 .71 .60 .93 State and local government 6.13 7.30 6.00 3.14 2.61 Taxable .02 .01 .05 Tax-exempt 2.90 3.13 2.56 Other bonds and stocks .64 .97 1.64 2.13 2.11 Trading account assets 1.12 1.14 .79 .74 .77 Gross federal funds sold and reverse repurchase agreements 3.33 3.01 2.80 3.31 3.52 Interest-bearing deposits 7.64 6.46 6.03 5.50 4.99 Other assets 14.18 13.37 12.29 11.02 11.62 Deposit liabilities 69.94 68.90 69.41 70.17 70.48 In foreign offices 13.57 10.97 10.28 9.40 8.58 In domestic offices 56.37 57.93 59.13 60.77 61.90 Demand deposits 16.61 17.48 16.77 15.26 14.31 Other checkable deposits 3.26 3.77 4.59 4.96 4.96 MMDAs 10.29 11.56 11.79 11.40 10.80 Other savings 3.44 3.60 4.56 4.83 4.51 Small time deposits 10.48 10.06 9.91 11.48 13.67 Large time deposits 12.28 11.45 11.50 12.84 13.64 Gross federal funds purchased and repurchase agreements 13.24 14.40 13.76 12.73 13.03 Other liabilities for borrowed money 4.75 5.55 5.73 6.34 5.90 Other borrowings 7.46 6.67 6.22 3.79 3.60 MEMO Money market liabilities 43.84 42.37 41.27 41.31 41.15 Loss reserves .92 1.06 1.54 1.68 1.46 Total equity capital 5.42 5.50 5.29 5.29 5.53 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Developments Affecting the Profitability of Commercial Banks 499 A.2. Portfolio composition, interest rates, and income and expenses, insured commercial banks, 1985-89'—Continued E. Large banks other than money center banks—Continued Item 1985 1986 1987 1988 1989 Effective interest rates (percent) Rates earned Securities 8.87 7.94 7.90 8.25 8.86 State and local government 7.25 6.92 7.14 7.26 7.35 Loans, gross 11.76 10.52 10.24 10.49 11.63 Net of loss provisions 10.69 9.16 7.63 9.54 10.05 Taxable equivalent Securities 11.70 10.60 8.99 8.25 9.63 Securities and gross loans 11.75 10.54 9.98 10.22 11.38 Rates paid w Interest-bearing deposits ) 8.34 6.90 5.88 6.82 7.98 In foreign offices 9.37 7.67 7.83 8.93 11.07 In domestic offices 7.68 6.47 6.63 5.29 NOW accounts 4.48 MMDAs 6.67 Other savings 5.43 Small time deposits 8.55 Large time deposits 8.80 7.34 7.06 7.40 8.70 All interest-bearing liabilities 8.09 6.87 6.18 7.27 8.58 Income and expenses as a percentage of average net consolidated assets Gross interest income 9.08 7.95 8.08 8.76 9.73 Gross interest expense 5.92 4.84 4.81 5.33 6.36 Net interest margin 3.16 3.12 3.27 3.42 3.37 Taxable equivalent 3.50 3.51 3.44 3.52 3.55 Noninterest income 1.43 1.49 1.59 1.61 1.73 Loss provisions .64 .79 1.58 .62 1.03 Other noninterest expense 3.04 3.10 3.27 3.29 3.29 Securities gains .07 .16 .05 .00 .04 Income before tax .96 .88 .06 1.13 .82 Taxes .23 .21 .08 .33 .24 Extraordinary items .01 .01 .00 .02 .00 Net income .74 .68 -.02 .82 .58 Cash dividends declared .26 .32 .35 .45 .41 Net retained earnings .48 .36 -.36 .37 .17 MEMO Average assets (billions of dollars) 605 707 759 867 971 Number of banks 65 74 73 86 90 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

500 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report, covering the period Febru- than 1 percent to end the period \2Vi percent ary through April 1990, provides information on below its highs of mid-June 1989. Treasury and System foreign exchange opera- Intervention operations carried out by the tions. It was presented by Sam Y. Cross, Man- U.S. monetary authorities during the period were ager of Foreign Operations of the System Open aimed primarily at moderating the rise of the Market Account and Executive Vice President in dollar against the yen. During the three-month charge of the Foreign Group of the Federal period, the Trading Desk at the Federal Reserve Reserve Bank of New York. George G. Bentley Bank of New York sold a total of $1,780 million, was primarily responsible for preparation of the of which $1,580 million was sold against yen and report.1 the remainder against marks. Of these totals, $375 million of the dollar sales against yen was financed by the Federal Reserve System. The The dollar gained support during the Februaryremaining $1,205 million sold against yen, to- April reporting period as the prospects for U.S. gether with the entire $200 million sold against growth came to be viewed as somewhat better, marks, was financed by the U.S. Treasury and earlier expectations that monetary policy through the Exchange Stabilization Fund (ESF). would ease were replaced by consideration of a possible tightening. At the same time, factors abroad strongly influenced individual exchange rates. Accordingly, the dollar moved up the most FEBRUARY THROUGH THE BEGINNING against the Japanese yen, which was affected by OF APRIL political uncertainties and weakness in Japan's stock market. The dollar also stopped its decline Reports indicating that U.S. economic growth against the German mark amid concern about the was quickening helped improve sentiment potential inflationary implications for Germany toward the dollar as the period opened, tending of economic and monetary union between East to dispel the prevailing impression that U.S. and West. monetary policy was likely to ease. In the first During the three-month period, the dollar de- weeks of February, data were released showing clined less than Vi percent against the mark and strong increases in employment, a strengthening more against some other European currencies, of retail sales, and a sharp rise in producer prices ending the period about 18 percent below its for January. About the same time, comments mid-June 1989 highs against the mark. In con- from some Federal Reserve officials suggested trast, the dollar rose 10 percent against the yen to that the likelihood of a recession in the United trade nearly 5 percent above its mid-June 1989 States had diminished. Subsequent data and teslevels. On a trade-weighted basis, as measured timony by U.S monetary officials reinforced the by the staff of the Board of Governors of the view that the balance of policy concerns had Federal Reserve System, the dollar rose more shifted from supporting growth to restraining inflation. This shift in assessments of economic and policy conditions in the United States provided a 1. The charts for the report are available on request from foundation for a firmer tone to the dollar for much Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. of the period under review. Within that frame- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

501 1. Federal Reserve reciprocal currency arrangements ened, and yields hit levels above comparable Millions of dollars U.S. bond yields for the first time in ten years. Against the yen, the dollar was trading in a Amount of Institution facility, fairly narrow range when the period opened, as April 30, 1990 market participants awaited the results of parlia- Austrian National Bank 250 mentary elections in Japan on February 18 to see National Bank of Belgium 1,000 Bank of Canada 2,000 whether the ruling Liberal Democratic party National Bank of Denmark 250 Bank of England 3,000 (LDP) could maintain control in the lower house. Bank of France 2,000 On news that the LDP had won a majority larger Deutsche Bundesbank 6,000 Bank of Italy 3,000 than expected, the dollar declined to touch its Bank of Japan 5,000 period low against the yen of ¥143.60 on Febru- Bank of Mexico 700 ary 19. But soon thereafter, the dollar began to Netherlands Bank 500 Bank of Norway 250 firm as market participants questioned whether Bank of Sweden 300 Swiss National Bank 4,000 the LDP's strong showing would be sufficient to Bank for International Settlements ward off pressures from the opposition-domi- Dollars against Swiss Francs 600 nated upper house and address in a meaningful Dollars against other authorized European currencies 1,250 way the challenging economic and trade issues Total 3300,,110000 confronting Japan. Before the elections, Japanese short- and long-term money market yields work, the extent to which the dollar advanced had been rising slowly in the expectation that an against another country's currency depended increase in the Bank of Japan's discount rate very much on developments in that country. would be announced soon afterward. In the Thus, as the period began, the European cur- event, concerns over escalating interest rates rencies continued to gain support from the en- abroad and accelerating monetary expansion at thusiasm engendered late last year by reforms in home combined to trigger a sharp drop in Japa- Eastern Europe. With institutional investors, es- nese stock and bond prices in the weeks followpecially Japanese investors, reportedly expand- ing the elections. The Nikkei Dow index of the ing their portfolio investments in European cur- Tokyo stock market fell 10 percent, and the rencies, the dollar extended the decline against yields of Japanese government bonds climbed the mark that had begun when the Berlin Wall well above 7 percent. Market participants came was opened in October. On February 7, the to believe that the Bank of Japan would be dollar reached DM1.6490—its lowest level reluctant to tighten monetary policy in these against the mark in almost two years. circumstances, but they remained concerned Then on February 7, the West German govern- about whether adequate measures would be ment announced plans for immediate talks on taken to break the rapidly deteriorating sentimonetary union between East and West Ger- ment surrounding Japan's financial markets. many, and the dollar began to firm against the Against this background, upward pressure on mark as attention quickly focused on the possible the dollar against the yen intensified. On Februinflationary consequences of such a move. Mar- ary 23, the U.S. monetary authorities, in keeping ket participants feared that the conversion of with the Group of Seven (G-7) understandings on East German marks into West German marks exchange rate cooperation, intervened to resist would result in a worrisome increase in German the dollar's rise against the Japanese currency. monetary aggregates or unleash pent-up demand As upward pressure on the dollar against the yen for German products. They noted that the new continued, the U.S. authorities intervened in source of demand would materialize at the same moderate amounts through March 2, selling a time that West German residents would be feel- total of $650 million against yen. Financing of ing the effects of a tax cut. A new round of wage these operations was shared equally by the Fednegotiations by the country's largest trade union eral Reserve and the U.S. Treasury. was an additional source of concern. As inflation At that time, the dollar also came under more anxieties mounted, German bond prices soft- intense upward pressure against the mark as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

502 Federal Reserve Bulletin • July 1990 fears of German inflation intensified. As the tions under the Structural Impediments Initiative dollar advanced to DM1.7237 on March 1, its was getting under way between the United States highest level against that currency since January, and Japan in an atmosphere of growing U.S. widespread reports circulated through the mar- concern and considerable uncertainty in Japan kets that the Bundesbank and other European over their possible outcome. On the first trading central banks were intervening in the foreign day of the Japanese new fiscal year, the Nikkei exchange markets to support the mark and resist Dow index closed nearly 25 percent below—and the dollar's rise. On March 5, with the dollar yields on Japanese government bonds about 75 rising against both currencies, U.S. Treasury basis points above—levels prevailing at the beofficials decided to reinforce their intervention in ginning of the period. Against that background, yen with sales of dollars against marks. Before the dollar reached ¥160.35 on April 2, the highthose mark sales, several officials within the est level for the dollar against that currency since Federal Reserve had expressed concern that the December 1986. size of the intervention operations might contrib- Up to that point, most market participants had ute to uncertainty about the Federal Reserve's not expected the upcoming G-7 meeting to focus priority toward achieving price stability. Con- strongly on currency issues. But as developcerns were also voiced that expanding the oper- ments in Japan unfolded, reports began to circuations to include other currencies might be seen late that the G-7 might implement a massive as an attempt to promote a broad-based decline package supporting the yen. Market participants in dollar exchange rates. At the time, Federal therefore adopted a more cautious attitude as the Reserve holdings of foreign currencies, taking April 7 meeting approached, and the dollar began into account anticipated further interest earn- to ease somewhat against the yen. ings, were approaching the limit of $21 billion authorized by the Federal Open Market Committee (FOMC). Under these circumstances, the APRIL DEVELOPMENTS AFTER THE decision was made not to seek authorization PARIS G-7 MEETING from the FOMC for continued Federal Reserve operations pending a review of Federal Reserve The statement released after the G-7 meeting on foreign currency operations at the FOMC's April 7 reported that the G-7 "Ministers and March 27 meeting. Thus, from March 5 through Governors discussed developments in global fi- March 27, all U.S. intervention operations, total- nancial markets, especially the decline of the yen ing $830 million against yen and $200 million against other currencies, and its undesirable conagainst marks, were financed solely by the U.S. sequences for the global adjustment process and Treasury through the ESF. At the March 27 . . . reaffirmed their commitment to economic meeting, the FOMC voted to approve an increase policy coordination, including cooperation in the in the authorized limit on Federal Reserve hold- exchange markets." ings of foreign currencies from $21 billion to $25 On the Monday after the G-7 meeting, the billion. When the dollar again came under up- dollar moved erratically as market participants ward pressure against the yen on March 28, the assessed the implications of the statement. In Far Desk intervened to sell $50 million against yen, Eastern trading before the opening of the Tokyo financed once more by the Federal Reserve and market, the dollar rose sharply against the yen as the U.S. Treasury equally. market participants interpreted the statement as As April began, sentiment toward the yen was indicating a lack of G-7 commitment to aggresstill negative, and Japanese stock and bond prices sive intervention in support of the yen. In Tokyo, remained under downward pressure amid market however, market reports predicting stepped-up concerns about political leadership and economic concerted intervention by the G-7 countries policy in Japan. A March 20 increase of 1 per- brought the dollar under strong downward prescentage point in the Bank of Japan's discount sure, and the dollar moved down from ¥160 rate had not immediately relieved the pressures to ¥155.45 within a few hours. During the day, against the yen. An important round of negotia- the dollar began to rise once again on reports of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 503 2. Drawings and repayments by foreign central banks1 Millions of dollars; drawings or repayments (—) Outstanding as Outstanding as Central bank Amount of of January 31, February March April of April 30, facility 1990 1990 Under reciprocal currency arrangements with the Federal Reserve System BBBBaaaannnnkkkk ooooffff MMMMeeeexxxxiiiiccccoooo 700.02 700.02 -700.02 ... ... 0 700.03 ... ... 700.03 —158.23 541.83 Under special swap arrangements with the Federal Reserve System BBBBaaaannnnkkkk ooooffff MMMMeeeexxxxiiiiccccoooo2222 125.0 34.1 -34.1 1. Data are on a value-date basis. 3. Represents the FOMC portion of a $1,300 million short-term credit facility 2. Drawn as part of the $2,000 million near-term credit facility established established on March 23,1990. on September 14,1989. Facility expired on February 15,1990. 3. Drawings and repayments by foreign central banks under special swap arrangements with the U. S. Treasury1 Millions of dollars; drawings or repayments (—) Outstanding as Outstanding as Central bank drawing Amount of of January 31, February March April of April 30, on the U.S. Treasury facility 1990 1990 Bank of Mexico [425.02 334.12 —334.12 ... ... ...) (600.03 ... ... 600.03 —135.63 464.43j Central Bank of Venezuela 4 104.0 ... ... 25.0 -25.0 National Bank of Poland5 200.0 86.0 -86.0 0 0 0 1. Data are on a value-date basis. 4. Represents the ESF portion of a $400 million near-term support facility 2. Represents the ESF portion of $2,000 million near-term credit facility that expired on April 30,1990. that expired on February 15,1990. 5. Represents the ESF portion of a $500 million short-term credit facility 3. Represents the ESF portion of a $1,300 million short-term credit facility established on December 27, 1989. The ESF facility will expire on May 31, established on March 23,1990. 1990. coordinated, but not large-scale, intervention. As feel that the inflationary risks of monetary union the dollar continued to rise against the yen in had been exaggerated. As confidence grew that New York, the U.S. monetary authorities, in Bundesbank policy would be sufficiently restrictheir only intervention in April, sold $50 million tive to contain pressures that might emerge, against yen, shared equally between the Federal sentiment toward the mark became more favor- Reserve and the U.S. Treasury. able. In the weeks that followed, several develop- Under these circumstances, the dollar stopped ments combined to lessen negative sentiment advancing against the mark and yen during April. toward the yen. First, market participants came But at the same time that sentiment toward these to view the Bank of Japan's discount rate in- other currencies was improving, the dollar concrease in March as sufficient, at least for the time tinued to draw support from U.S. data releases being, and expectations of a further rise in inter- suggesting strong economic activity and from the est rates dissipated. Furthermore, in retrospect, belief that U.S. monetary policy would remain market participants came to see the variety of directed at dealing with price pressures. The international negotiations leading up to the Struc- dollar therefore closed the period near its threetural Impediments Initiative talks and the G-7 month high against the yen at ¥158.90 and meeting as being rather successful and diminish- around the midpoint of its three-month trading ing the strains within the Japanese leadership. range against the mark at DM1.6790. Finally, Japanese stock and bond markets became more settled in early April, recouping some TOTAL OPERATIONS OF U.S. MONETARY of the losses sustained earlier in the period. AUTHORITIES In Europe, the focus of market attention during April remained on Germany and German For the period as a whole, the U.S. monetary monetary union. Market participants began to authorities sold a total of $1,780 million—$1,580 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

504 Federal Reserve Bulletin • July 1990 million against Japanese yen and $200 million 4. Net profits or losses (-) on U. S. Treasury and against German marks. The U.S. Treasury, Federal Reserve current foreign exchange operations1 through the ESF, sold $1,205 million against yen Millions of dollars and $200 million against marks, while the Federal Reserve sold $375 million against yen. During U.S. Treasury Federal Exchange March, the ESF "warehoused" $2,000 million Period and item Reserve Stabilization equivalent of foreign currencies with the Federal Fund Reserve, bringing the total of warehoused funds February 1,1990-April 30,1990 to $9,000 million equivalent. The warehousing Realized 00 229922..44 Valuation profits and losses transactions resulted in realized profits of $292.4 on outstanding assets and liabilities as of million for the ESF, reflecting the difference April 30, 1990 11,,999966..99 888811..88 between the rate at which the warehoused funds 1. Data are on a value-date basis. had originally been acquired in the market and the rate at which they were exchanged with the • On March 16, 1990, the U.S. Treasury and Federal Reserve. the Bank for International Settlements (acting for Other operations during the period were the certain participating member banks) agreed to following: provide the Republic of Venezuela with short- • On February 9, 1990, Poland repaid in full its term support of $400 million for economic adjustoutstanding commitment to the ESF of $86.0 ment efforts. The ESF's share in the facility was million. The commitment was from a drawing $104 million, of which $25.0 million was drawn made at the end of 1989 under a $500 million on March 30. Venezuela repaid $15.3 million to short-term support package established with the the ESF on April 6 and the balance on April 30, ESF and the Bank for International Settlements thereby liquidating the facility. (acting for certain participating member banks). • Also in February, Mexico repaid in full its As of the end of April, cumulative bookkeepoutstanding commitments under the $2,000 mil- ing or valuation gains on outstanding foreign lion multilateral facility established on Septem- currency balances were $1,996.9 million for the ber 14, 1989. Mexico made partial repayments of Federal Reserve and $881.8 million for the ESF $6.1 million each to the Federal Reserve and the (the latter figure includes valuation gains on ESF on February 2. Final repayments of $728.0 warehoused funds). These valuation gains repmillion and $328.0 million were made to the resent the increase in dollar value of outstand- Federal Reserve and ESF respectively on Feb- ing currency assets valued at end-of-period ruary 15. exchange rates, compared with the rates pre- • On March 23, the Federal Reserve and Trea- vailing at the time the foreign currencies were sury agreed to establish a $1,300 million short- acquired. term credit facility with Mexico. The Federal The Federal Reserve and the ESF regularly Reserve's share of $700 million was provided invest their foreign currency balances in a variety under an existing reciprocal swap line, while the of instruments that yield market-related rates of ESF's share of $600 million was provided under return and that have a high degree of quality and a special swap arrangement. On March 28, Mex- liquidity. A portion of the balances is invested in ico drew the entire amount of the facility. Sub- securities issued by foreign governments. As of sequently, Mexico made partial repayments on the end of April, holdings of such securities by two occasions in April, reducing its outstanding the Federal Reserve amounted to $6,631.3 milcommitments to $541.8 million for the Federal lion equivalent, and holdings by the Treasury Reserve and $464.4 million for the ESF by the amounted to the equivalent of $6,977.3 million end of the period. valued at end-of-period exchange rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

505 Industrial Production and Capacity Utilization Released for publication May 15 cline in industrial production. Industrial production excluding motor vehicles and parts was un- Industrial production fell 0.4 percent in April changed in April and has shown little movement after having increased 0.5 percent in March; since January. Total industrial production fell in industrial capacity utilization decreased 0.5 percentage point in April to 83.0 percent. April to 108.7 percent of its 1987 annual average, A sharp drop in the production of motor vehi- about the same as its level a year earlier. The cles and parts, affecting both consumer goods and decline in output lowered capacity utilization 2.0 business equipment, accounted for the April de- percentage points below last April's level. Industrial production indexes Twelve-month percent change Twelve-month percent change Capacity and industrial production All series are seasonally adjusted. Latest figures: April. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

506 Federal Reserve Bulletin • July 1990 In market groups, output of consumer goods contrast, output in mining and at utilities rose declined 1.0 percent in April as production of significantly in April. The increase for mining autos and light trucks fell nearly 14 percent. resulted from gains in oil and gas extraction and Apart from autos and trucks, production of du- continued strength in coal mining. The operating rable consumer goods declined 0.7 percent owing rate for coal mines reached 94.3 percent in April, mainly to a drop in output of appliances. The its highest level in more than a year. output of nondurable consumer goods remained Within manufacturing, capacity utilization in sluggish in April. Production of business equip- both primary and advanced processing industries ment excluding motor vehicles declined slightly fell more than 0.5 percent in April. Operating in April and has changed little, on balance, since rates for most industries declined, reflecting January. Output of construction supplies dropped widespread weakness in output. Aside from mosharply in both March and April, retracing the gains tor vehicles and parts, the largest drops in utiliposted during the fall and winter months. Materials zation in April came in the nonferrous metals and output was little changed again in April as increases fabricated metals products industries. Output in in paper, chemicals, and coal were about offset by a both these industries has retreated substantially decline in production of parts and materials for the since the start of 1989: Production of nonferrous motor vehicle industry. metals has fallen nearly 7 percent, bringing its In industry groups, manufacturing output fell operating rate down to 84 percent, and output of 0.6 percent in April, bringing the factory operating fabricated metals products has fallen about 4 rate down 0.7 percentage point to 82.2 percent. percent, bringing its utilization rate down to 80 Excluding the output of motor vehicles and parts, percent. Nonetheless, the operating rates for manufacturing output declined 0.2 percent. In both are still above their long-run averages. 1987 = 100 Percentage change from preceding month PPPeeerrrccceeennnttt--aaagggeee ccchhhaaannngggeee,,, IIInnnddduuussstttrrriiiaaalll ppprrroooddduuuccctttiiiooonnn 1990 1990 AAAppprrr... 111999888999 tttooo AAAppprrr... Jan. Feb. Mar. Apr/ Jan.r Feb/ Mar/ Apr P 111999999000 Total index 107.5 108.5 109.1 108.7 -1.0 .9 .5 -.4 .1 Previous estimates 107.2 108.1 108.8 -1.3 .8 .7 Major market groups Products, total 108.5 109.8 110.9 110.0 -1.6 1.2 1.1 -.8 .5 Consumer goods 106.0 107.2 108.2 107.1 -2.1 1.1 .9 -1.0 .1 Business equipment 118.0 119.9 121.8 120.6 -1.6 1.6 1.5 -.9 .9 Construction supplies 107.9 108.3 106.2 105.2 .5 .3 -1.9 -.9 -1.1 Materials 106.2 107.0 107.0 107.1 -.6 .7 .0 .1 -.9 Major industry groups Manufacturing 108.1 109.5 109.9 109.2 -.6 1.3 .3 -.6 -.2 Durable 108.6 110.7 111.6 110.4 -1.7 1.9 .8 -1.0 -1.1 Nondurable 107.5 108.0 107.7 107.6 .8 .5 -.3 -.1 1.0 Mining 101.7 100.3 101.0 101.9 1.5 -1.4 .7 .9 .2 Utilities 106.8 105.9 109.2 109.9 -8.1 -.8 3.2 .6 3.3 Percent of capacity CCCaaapppaaaccciiitttyyy gggrrrooowwwttthhh,,, CCCaaapppaaaccciiitttyyy uuutttiiillliiizzzaaatttiiiooonnn 1989 1990 AAAppprrr... 111999888999 AAvveerraaggee,, LLooww,, HHiigghh,, tttooo 11996677--8899 11998822 11998888--8899 Apr. Jan.r Feb/ Mar/ Apr/ AAAppprrr... 111999999000 Total industry 82.2 71.8 85.0 85.0 82.7 83.2 83.5 83.0 2.5 Manufacturing 81.5 70.0 85.1 84.8 82.0 82.9 82.9 82.2 3.0 Advanced processing 81.1 71.4 83.6 83.6 80.5 81.6 82.0 81.2 3.3 Primary processing 82.3 66.8 89.0 87.8 85.7 86.0 85.1 84.5 2.4 Mining 87.3 80.6 87.2 86.6 87.8 86.7 87.4 88.3 -1.7 Utilities 86.8 76.2 92.3 84.9 84.8 84.0 86.6 87.1 .8 NOTE. Indexes are seasonally adjusted. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

507 Statements to the Congress Statement by Alan Greenspan, Chairman, Board rates early in the decade. U.S. purchases and of Governors of the Federal Reserve System, in sales of foreign stocks and bonds also increased Chicago, Illinois, before the Subcommittee on sharply during the 1980s, as did the activities Financial Institutions Supervision, Regulation abroad of U.S. financial intermediaries. This and Insurance of the Committee on Banking, surge in cross-border financial transactions has Finance and Urban Affairs, U.S. House of Rep- paralleled a large advance in the magnitude of resentatives, May 14, 1990. cross-border trade of goods and services. A key factor behind these trends in interna- I am pleased to appear before the subcommittee tional trade and securities transactions is a prothis morning. The issues you are raising are both cess that I have described elsewhere as the wide-ranging and of immense importance to the "downsizing of economic output." By this I evolution of the financial system. I could not mean that the creation of economic value has possibly do justice to all of them this morning. shifted increasingly toward conceptual values What I will attempt to do, and what I hope will be with decidedly less reliance on physical volumes. useful to you, is first to describe the global Today, for example, major new insights have led environment in which U.S. financial firms are to thin fiber optics replacing vast tonnages of likely to be operating over the foreseeable future. copper in communications. Financial transac- Against this background, I will comment on the tions historically buttressed with reams of paper effectiveness of U.S. banks' competition today are being progressively reduced to electronic and will then discuss some policy implications. I charges. Such advances not only reduce the will also comment briefly on competition in se- amount of human physical effort required in curities and financial futures markets and on making and completing financial transactions proposals to change regulatory jurisdiction in across national borders, but facilitate more accuthese markets. racy, speed, and ease in execution. Underlying this process have been quantum advances in technology, spurred by economic GLOBALIZATION OF FINANCIAL MARKETS forces. In recent years, the explosive growth in information-gathering and processing techniques Globalization and interdependence are becoming has greatly extended our analytic capabilities of the dominant elements of world finance. Foreign- substituting ideas for physical volume. The purbased financial intermediaries play an increas- pose of production of economic value has not ingly prominent role in U.S. financial markets, changed and will not change. It will continue as and foreign investors are adding to their already before to serve human needs and values. But the significant holdings of U.S. financial and other form of output increasingly will be less tangible assets. The volume of transactions by foreigners and hence more easily traded across internain U.S. securities markets has increased even tional borders. It should not come as a surprise, more dramatically than foreign holdings. For therefore, that in recent decades the growth in example, foreign purchases and sales of U.S. world trade has far outstripped the growth in Treasury securities surpassed $4 trillion on a domestic demand for goods and services. This gross basis in 1989, up from $100 billion to $200 development, of necessity, implies that on averbillion early in the decade. Similarly, foreign age the share of imports as a percentage of gross purchases and sales of U.S. corporate stocks and domestic product has grown dramatically worldbonds have been running dramatically above wide. Since irreversible conceptual gains are Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

508 Federal Reserve Bulletin • July 1990 propelling the downsizing process, these trends dollar is still the key international currency, such almost surely will continue into the twenty-first diversification has been, and may continue to be, century and beyond. disproportionately into assets denominated in the New technology—especially computer and dollar. For the same reason, many foreign finantelecommunications technology—is boosting cial institutions find it beneficial to be repregross financial transactions across national bor- sented by banking offices in this country so that ders at an even faster pace than the net transac- they can play an intermediary role based in tions supporting the increase in trade in goods dollars. and services. Rapidly expanding data processing Another factor facilitating the globalization of capabilities and virtually instantaneous informa- capital markets and the growth of foreign investtion transmission are facilitating the development ments in the United States has been deregulation of a broad spectrum of complex financial instru- here and abroad. Technological change and inments that can be tailored to the hedging, fund- novations that have tied international economies ing, and investment needs of a growing array of more closely together have increased opportunimarket participants. These types of instruments ties for arbitrage around domestic regulations, were simply not feasible a decade or two ago. controls, and taxes, undermining the effective- Some of this activity has involved an unbundling ness of these policies. Many governments have of financial risk to meet the increasingly special- responded by dismantling increasingly less effecized risk management requirements of market tive domestic regulations designed to allocate participants. Exchange rate and interest rate credit and by removing controls on international swaps, together with financial futures and op- capital flows, relying more heavily instead on tions, have become important means by which market forces to allocate capital. currency and interest rate risks are shifted to The globalization of capital markets offers those more willing to take them on. The prolifmany benefits in terms of increased competition, eration of financial instruments, in turn, implies reduced costs of financial intermediation benean increasing number of arbitrage opportunities, fiting both savers and borrowers, more efficient which tend to boost further the volume of gross allocation of capital, and the more rapid spread financial transactions in relation to output and of innovations. trade. Moreover, these technological advances and innovations have reduced the costs of managing operations around the globe and have fa- COMPETITIVE POSITION OF U.S. BANKS cilitated international investment. Investment considerations also are playing an A proper assessment of how well U.S. banks are important role in the globalization of securities competing today in the new globally competitive markets. As the economy of the United States setting must recognize several points. First, U.S. becomes increasingly intertwined with foreign banks are not all alike. In particular, only a very economies, it is to be expected that both individ- small subset of U.S. banks is active internationual investors and institutions will raise the share ally. Second, among those internationally active of foreign securities in their investment portfo- banks, the extent to which they are competitive lios. Such diversification provides investors a varies across products and over time. Third, means of protecting against the prospect of de- particularly with the considerable intermediation preciation of the local currency on foreign ex- involving foreign lenders and borrowers in this change markets and against domestic economic country and U.S. lenders and borrowers abroad, disturbances affecting asset values on local mar- it follows that simple measures of competitivekets. As international trade continues to expand ness based on gross assets of national banking more rapidly than global output and as domestic systems must be interpreted with care. Let me economies become even more closely linked to elaborate on these points. those abroad, the objective of diversifying port- We have nearly 10,000 banking organizations folios of international securities will become inin this country—treating a multibank holding creasingly important. Moreover, since the U.S. company as one firm. They vary significantly in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 509 terms of size, the nature of their business, and banks have devoted their resources instead to the areas they serve. banking services that often do not result in assets The great bulk of U.S. banking organizations, held by the bank. These activities, such as risk by number, are fairly small, functioning as inter- management involving relatively high-tech, somediaries largely between local savers and local phisticated products, are also the areas in which household and business borrowers. However, U.S. banks remain among the world's leaders. some of these local banks have become quite Outside the banking arena, our markets for large and have evolved into sizable regional securities and securities derivatives—most notabanks. The regional, or superregional, banks bly futures and options—also have become part draw on a large base of core retail deposits and of a globally integrated marketplace. In these serve needs of retail borrowers in their regions, areas, especially in the financial futures markets, but they also do a large and growing corporate we have been world leaders, developing new and business. These banks generally are strongly highly popular risk-shifting instruments along capitalized and so can support growth in their with generally sound clearing and settlement portfolios. It is these banks that have experi- systems. Today, most major international finanenced the fastest growth in the United States cial markets depend on futures and options for over the past decade, benefiting importantly from enhancing liquidity and, in the case of futures, existing interstate banking compacts. price discovery. In the period just ahead we are International banking—that is, involving trans- likely to remain in the vanguard of financial actions that extend across geographic borders— innovation, especially through the introduction has not been an important business for regional of new electronic trading systems such as the banks. International assets typically have been Globex and Aurora systems being developed by less than 5 percent of a regional bank's total the Chicago Mercantile Exchange and the Chiassets. Instead, international banking is, and has cago Board of Trade respectively. However, as been, concentrated in a small number of U.S. in the area of banking, global competition has banks. Four out of the 10,000 U.S. banking become intense in the markets for securities and organizations account for roughly half of interna- derivatives, and we cannot be assured that our tional assets; ten of them account for a little more lead in these markets will be preserved. than 80 percent. It has become commonplace to express con- For those banks involved in it, the nature of cern about the increasing share of U.S. banking international business has changed. As I noted markets that is controlled by foreign banks or the previously, technological innovations, as well as declining standing of major U.S. banks in interthe need for large investors and borrowers to national rankings of the world's largest banks. protect themselves against the increased volatil- However, measures of total assets, or market ity in asset prices that we experienced in the shares related to particular national markets, can 1980s, have led to an unbundling of financial be very misleading as measures of international products. With this unbundling and the more competitiveness, partly for reasons I have alefficient dissemination of information, the value ready mentioned: Only a handful of U.S. banks of the banking franchise—to the extent that it are internationally active, and a significant elewas based on a unique role in evaluating credit ment of their international business does not risks—has eroded. The international role of the show up on their balance sheets. Moreover, banks has changed from one of simply extending banks' operations can be booked at locations credit to one of facilitating transactions. Partly throughout the world, and the large businesses for this reason, and partly also to economize on that borrow from foreign banks in the United costly equity capital, U.S. banks have tended to States themselves operate around the world and cut back on those activities that result in assets can and do borrow from the same lenders at that must be booked on a balance sheet. For many spots on the globe. example, they have chosen to reduce drastically Nevertheless, some have argued that U.S. their interbank lending business, which is essen- banks are becoming less competitive as a result tially a high-volume, low-spread business. U.S. of the increasing relative size of their foreign Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

510 Federal Reserve Bulletin • July 1990 bank rivals. While it is important to make sure competitiveness of U.S. banks and other finanthat we understand why foreign banks have cial firms. grown relatively quickly, there is no evidence in the professional literature that the size of an internationally active bank by itself has a signif- POLICY IMPLICATIONS icant bearing on a bank's costs or efficiency. To be sure, that literature has not specifically ad- What, then, can the government do to enhance dressed the possibility that some economies of the competitiveness of U.S. banks? Perhaps the scale could be realized by extremely large banks. most important thing to do is to reduce the cost But even if so-called economies of superscale of capital to U.S. banks. By the cost of capital, I exist, such economies would need to be of sig- mean broadly the cost to a bank of raising equity nificant magnitude to draw inferences about com- and debt, or more precisely the real pretax rate of petitiveness among major internationally active return that it must pay to attract debt and equity banks. Our research suggests that cost controls funds to finance its portfolio of assets. It is often and differences in management across banks of argued that U.S. banks are at a competitive the same size are more relevant for competitive- disadvantage because their cost of capital is more ness than any economies of superscale are likely than that of their foreign rivals. to be. For example, the Japanese stock market Having said that, I hasten to confess that I places very high price-earnings ratios on Japacannot offer you satisfactory alternative mea- nese equities, and some have argued that the sures of competitiveness. Conceptually, I believe resulting lower cost of equity capital gives Japathat profitability, as measured by rates of return nese firms a competitive edge over U.S. firms. on equity or assets, is a proper measure of However, the use of different accounting concompetitiveness. In practice, it is difficult to ventions in Japan tends to understate Japanese obtain comparable, up-to-date data on banks firms' earnings relative to earnings of U.S. firms from various countries or to adjust the data we and hence to overstate price-earnings ratios in do have for differences in tax or accounting Japan. Minority interests are not completely consystems. It would be necessary also to adjust solidated in Japanese financial statements. Japarealized rates of return for risk; banks can realize nese firms issue the same report for tax purposes higher rates of return at least over some period of and for stockholders, so that their financial statetime by engaging in riskier activities, but of ments fully reflect the maximum deductions from course those returns are likely to be more vola- earnings for such items as depreciation that can tile. be taken for tax purposes; in contrast, U.S. firms However, rather than dwell on comparing the issue different reports for tax purposes and for competitiveness of U.S. banks versus foreign stockholders. Japanese share prices also reflect banks, I suggest that it is more important to focus considerable cross-holdings of equities and of on the performance of U.S. banks themselves. land, both of which have risen sharply in value in From the perspectives of the U.S. financial sys- recent years without contributing commensutem, of shareholders of U.S. banks, and, most rately to reported earnings. It remains to be seen important, of U.S. consumers of financial ser- whether the weakening earlier this year in Japavices, it is desirable that U.S. banks be operated nese stock markets is signaling an end to such in as low cost and efficient a manner as possible, increases, but in any event the benefits of such subject to concerns about their safety and sound- holdings will not be captured in earnings unless ness. This would be true even if U.S. banks the assets are sold. already were the most competitive banks in the However, even after adjusting for accounting world. If we get bogged down in struggling to differences, one is left with real economic differmake comparisons of competitiveness, policy- ences. Besides Japanese firms' holdings of equimakers risk losing sight of the fundamental need ties and land, analysts point to the high Japanese to ensure that government policy does not hinder savings rate, an expectation of strong growth of but rather enhances in an absolute sense the earnings, and more generally, the overall macro- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 511 economic performance of Japan. These latter gued that existing split jurisdiction over securieconomic differences are under the influence of ties and derivatives—with the SEC having reguthe policymakers. I, among many others, refer latory authority over securities and securities often to the substantial decline in the national options and the Commodity Futures Trading savings rate in the United States. All other things Commission (CFTC) having regulatory authority being equal, our lower savings causes a higher over financial futures and options on such fureal interest rate, raising the cost of capital in the tures—has added to volatility in these markets. United States and lowering private investment. The Board has not found convincing evidence to Although higher real interest rates themselves support this view nor have we found convincing may encourage more private savings, reducing evidence that differences in margin treatment our fiscal deficit would be a more certain way to across these instruments—another frequent asadd to savings available for private investment, sertion—have contributed to price volatility. lower the cost of capital, and thereby increase However, as I have noted in other congressional the potential competitiveness of U.S. financial testimony, we do see a role for federal oversight and nonfinancial firms. of margins on equities index futures and equity- Government policy also has a constructive role related options to ensure that margins are mainto play in avoiding macroeconomic instability. If tained at levels that are adequate for prudential investors think that U.S. banks, for example, purposes. face a more risky macroeconomic environment, All of the frequently mentioned proposals for they will expect lower or less stable earnings jurisdictional reform in this area—transferring and, therefore, will be willing to pay less for each equity index products to the SEC, transferring all dollar of such earnings. financial futures to the SEC, and merging the two Beyond changing the macroeconomic environ- agencies—have important costs that must be ment, the government should consider structural weighed carefully against any potential benefits. policies that could also help the competitiveness For our part, we are concerned about any jurisof U.S. banks. For example, there is reason to dictional restructuring that would limit innovabelieve that the opportunity for a bank to diver- tion, a danger that rises as jurisdiction becomes sify the products or services it offers or to concentrated in a single regulatory authority. We diversify geographically may, in some cases, also are concerned about existing impediments to raise its rate of return and lower its risk. In innovation in this area, in particular, the soaddition, our laws greatly inhibit the ability of called exclusivity provision of the Commodity U.S. banks to evolve along with technological Exchange Act. As the Board has already noted, and other changes and to achieve the synergies we favor changes to this provision that would that come from producing multiple, but similar, enhance the process of financial innovation withproducts and services. Particularly burdensome out compromising the original objectives of the in this regard is the Glass-Steagall Act. There act. has been some liberalization in recent years both Competitiveness of U.S. financial firms and in geographic restrictions, through regional bank- markets also is affected by those rules and reguing compacts, and in securities activities, lations that can impinge on costs. Examples through section 20 securities subsidiaries. But include noninterest-bearing reserve requirethe ad hoc nature of this process of liberalization ments, deposit insurance premiums, capital stanis not a desirable way of approaching significant dards, antitrust laws, consumer protection laws, structural reform. The Federal Reserve has sup- and laws to deal with money laundering. I am not ported, and continues to support, congressional suggesting that they be abandoned simply beefforts to address these matters in a more sys- cause they impose costs on banks. What I am tematic way. suggesting, however, is that we be cognizant of We also are facing important regulatory issues such costs when we weigh the benefits of our in the area of securities markets, in particular policies in terms of our other objectives. Social jurisdiction over securities and their financial and regulatory policies are not free, no matter futures and option derivatives. Some have ar- how desirable they may be perceived to be. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

512 Federal Reserve Bulletin • July 1990 On the bank supervisory side, we are proceed- nature of that progress or its timing; such efforts ing with the implementation of the risk-based should continue. capital standards that were negotiated in Basle. In this regard, however, it would clearly be Efforts also are under way to coordinate other counterproductive to close our own markets to aspects of supervisory policy, with respect to foreign competition merely because foreign marboth banking and other financial services. As kets are less open than we would like. Such an banking and other financial services become in- action would invite retaliation and would not be creasingly indistinct, banking and securities su- very effective in any case. The globalization of pervisors must work more closely together. The financial markets means that most of the business aims of such coordination are basically twofold. that foreign banks do with U.S. customers could One is to monitor and ultimately guard against alternatively be done offshore. To the limited risks to the financial system—risks that are be- extent that closing of our markets to foreigners coming increasingly global and complex in na- was effective, and that U.S. firms were thereby ture. The other is to minimize the extent to which protected from foreign competition, the result legitimate prudential concerns distort the oppor- would be reduced pressure on U.S. banks and on tunities for different kinds of financial firms, from U.S. policymakers to implement the policies and different countries, to compete fairly with one management procedures necessary to improve another. the underlying competitiveness of U.S. banks. In That leads me to my final point. We should the long run, this would clearly be harmful to the continue our informal and formal, bilateral and best interests of both U.S. consumers and U.S. multilateral, efforts to open domestic markets producers of financial services. • abroad to U.S. and other foreign banks, both in terms of access and scope of activities. Much Chairman Greenspan presented similar testiprogress has been made in this area over recent mony before the Task Force on the International years, in large part, I believe, because the Competitiveness of U.S. Financial Institutions, worldwide process of financial integration I Subcommittee on Financial Institutions Supervidiscussed earlier is forcing a liberalization of sion, Regulation and Insurance of the Commitmarkets. In some instances, diplomatic initia- tee on Banking, Finance and Urban Affairs, U.S. tives on our part may also have affected the House of Representatives, April 4, 1990. Statement by John P. LaWare, Member, Board On an interagency level, our efforts have been of Governors of the Federal Reserve System, focused for the past several months on two major before the Subcommittee on Consumer and Reg- fronts, both of which have important implicaulatory Affairs of the Committee on Banking, tions for our work in enforcing fair housing and Housing, and Urban Affairs, U.S. Senate, May fair lending laws. The first involves changes in 16, 1990. the Community Reinvestment Act (CRA), under which the agencies have been charged with en- Thank you very much for this opportunity to couraging financial institutions to help meet the speak to the subcommittee in follow-up to our credit needs of their entire communities, for testimony on mortgage lending discrimination example, for housing, small business, and rural last October. I am pleased to report to you on the economic development, and with assessing their progress made on initiatives envisioned at that performance in doing so. Traditionally, those time, as well as other activities developed more CRA assessments, like all other findings reached recently through the Federal Reserve System's by the agencies during the course of examinaongoing programs to ensure equal access to tion, have been kept strictly confidential as part housing credit and to promote private sector of the supervisory dialogue between us as regureinvestment in low and moderate income com- lators and the institutions we supervise. munities. Starting with examinations conducted on or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 513 after July 1 of this year, that tradition will be the regulatory amendments and to develop a new broken in a dramatic way. Provisions contained loan register format designed to make the inin the Financial Institutions Reform, Recovery creased reporting requirements less cumbersome and Enforcement Act (FIRREA) require the for lenders. After receipt of public comment, agencies to prepare and to make public written final amendments to HMDA were issued by the evaluations of institutions' CRA performance, Board last December and became effective on based on our examination findings, along with January 1, 1990. the ratings assigned using a descriptive, four- Our job with respect to implementing the new tiered rating system. This mandate makes clear HMDA provisions has yet another phase, howthe need for a concerted effort by all four agen- ever. For the many years since HMDA's enactcies, under the umbrella of the Federal Financial ment in 1975, the Board has acted as the agent for Institutions Examination Council (FFIEC), to the FFIEC to compile and aggregate the data and take a uniform approach to assigning ratings, to produce tables that present lending patterns by presenting the evaluations in a consistent, readily factors such as the racial composition and inunderstandable manner and ensuring that the come characteristics of the neighborhood as well public has access to these evaluations. as the age of the housing stock. Anticipating a That is precisely what we have tried to do, significant increase in the volume of data to be through the efforts of the FFIEC. The FFIEC reported next year for 1990, we are working to spearheaded the development of draft guidelines enhance our data processing capabilities, to enfor implementing the CRA changes, which were courage electronic submission of data from lendissued for public comment last December. In ers through our Federal Reserve Banks to expelight of input received from community organi- dite its ultimate availability to the public, and to zations, financial institutions, members of the develop new disclosure formats to give a concise Congress, and others, the guidelines were final- presentation of lending patterns using the new ized by the FFIEC last month, and it is currently data. putting on an extensive training program and These changes to both the CRA and the revising the interagency examination procedures HMDA represent a considerable challenge for for CRA. us. We are very much aware that the public At the same time, work proceeded on equally disclosure provisions make the CRA examinasignificant changes to the Home Mortgage Dis- tion process subject to greater scrutiny than ever closure Act (HMDA), which expand the cover- before. It will be incumbent on our examiners to age of the act to include mortgage lenders not discuss each of the assessment factors relating to affiliated with depository institutions or holding the state member bank's performance—including companies—effectively bringing all types of the assessment factor relating to discrimination mortgage lenders in the United States under the or other illegal credit practices—and to show act. The scope of data collected has also been how each factor affects overall performance. expanded to include the race, sex, and income of They must fully justify their conclusions and borrowers and loan applicants, as well as the assigned rating, without divulging the institudisposition of applications (approval, denial, or tion's financial condition, information about its withdrawal by the applicant). These provisions employees or customers, or anything else the law should better equip us to determine whether instructs us to keep confidential. The new mortgage credit standards are being fairly ap- HMDA data promise to be valuable in the rating plied, and to judge a given lender's efforts in the process, but usefulness will largely depend on context of a more complete picture of the entire the examiners' ability to analyze it and to draw mortgage market. Because the Federal Reserve appropriate conclusions from it. Board has rulewriting responsibility for the reg- A major step toward meeting the challenge is ulation-implementing HMDA, Board staff mem- the interagency examiner training program being bers worked closely with staff members from the carried out this month at four locations nation- FFIEC agencies and from the Department of wide. It involves eight sessions for approxi- Housing and Urban Development (HUD) to draft mately 800 examiners from the bank regulatory Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

514 Federal Reserve Bulletin • July 1990 agencies. The training gives examiners guidance encouraged on a wider scale. Initially a matter of on how the disclosures should be prepared, how concern is the very small number of appeals that the rating system should be applied, and it em- have been brought forward in the experience of phasizes the importance of thorough, insightful, both states, and whether other, quite different and well-supported evaluations. localities around the country would be receptive While the spotlight is sure to fall on the work of to the notion. our examiners after July 1, to an even greater In the course of its study, the FFIEC's attendegree the attention will fall on financial institu- tion was drawn to a somewhat similar vehicle tions themselves, and how well they are, or are that may have favorable prospects for replication not, helping to meet local credit needs. The new in other communities. Under the Philadelphia CRA and HMDA provisions come at a time when Mortgage Plan (PMP), a group of large commerpublic concern for affordable housing, the ade- cial banks agreed to refrain from rejecting mortquacy of financial services within reach of the gage applicants until the credit committee repreless affluent, the problems of economic develop- senting all PMP lenders has an opportunity to ment and growth, and the need to assure fair review the case and, if possible, place the loan lending practices run high. Their combined im- with one of the other participating lenders. The pact in putting more information in the public lenders also offer "creative" mortgage products domain will, we hope, foster a more open and by providing some flexibility in underwriting productive dialogue about such concerns be- criteria, such as considering rent receipts, landtween financial institutions and the people they lord references, and utility bill payments to help serve. We are also hopeful that the impact will establish credit histories. In its fifteen years of bolster institutions' awareness of both their im- existence, the plan has secured loans for 13,000 age and record as a fair lender and will further families totaling $180 million, and was expanded our efforts to promote compliance with the letter to cover the entire Delaware Valley in January of and spirit of the antidiscrimination laws. this year. The FFIEC is committed to exploring Putting in place the changes mandated by this approach, as well as others that have worked FIRREA and the examiner training sessions has well in widening access to mortgage credit in consumed a great deal of the agencies' staff time, lower income and minority neighborhoods. especially of those having expertise in the fair Another focus of our initiatives is education— lending and fair housing arena. Nevertheless, we for consumers as well as for lenders—on their have moved ahead on other interagency initia- rights and responsibilities under the law. Federal tives that I outlined when I last appeared before Reserve Board staff members are in the process the subcommittee. of drafting a brochure designed to better acquaint Through the FFIEC, the agencies have begun potential homebuyers with the mortgage originato take a close look at the concept of mortgage tion process, the factors lenders usually consider review boards, which bring together lenders and in determining whether a person is creditworthy, community representatives to provide an appeals and the statutory protections and agency procemechanism in cases in which applicants feel that dures that provide recourse to those who believe they have been unfairly denied credit for pur- they have been subjected to unlawful discriminachasing a home. As a first step, inquiries were tion. The FFIEC has also approved plans to made through the agencies' field offices around produce a brochure targeted to mortgage lenders the country to determine the extent to which discussing how to avoid practices that may, even mortgage review boards exist. Follow-up visits unintentionally, result in unfair lending patterns, were then made to Massachusetts and Michigan or the appearance of them. We anticipate that (the two states in which functioning boards were both brochures will be ready for distribution in identified) to learn how they operate, the kinds of the second half of this year. support they require, and the degree of success The emphasis on consumer education stems, that each has achieved. The FFIEC is reviewing at least in part, from our concern about the very the information gathered to explore whether, and small number of complaints that we and our how, the formation of such boards should be sister agencies have received over the years Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 515 alleging illegal credit discrimination. In an effort a thorough self-assessment of geographic lending to make our work in investigating and responding patterns and the reasons for them. Because it is to such complaints more visible, we have written being developed in tandem with the computer to several hundred fair housing and civil rights- appplications to accommodate the new HMDA oriented groups to reacquaint them with our role data, the summary probably will not be comin enforcing the legal protections afforded loan pleted until 1991, although Board and Reserve applicants, and to seek their cooperation in re- Bank staff have been testing for several months ferring complainants to us. the use of a very preliminary model. We have Our testimony last October voiced the belief also revised the FFIEFC publication, A Guide to that much could be gained by the agencies shar- HMDA Reporting: Getting it Right!, to facilitate ing among themselves the information obtained accurate reporting under the law's new requirethrough interviews with community contacts— ments. including consumer advocacy and housing orga- Besides these interagency initiatives, the Fednizations, local business people, trade associa- eral Reserve System has, on its own, been utiliztions, realtors, government officials, and many ing various avenues to strengthen our enforceothers—during the course of CRA examinations. ment efforts and to bring constructive Their perceptions about the state of the local approaches to resolve fair lending concerns to economy, what types of credit would most help the forefront of public attention. For example, the community grow and prosper, the role played the Federal Reserve Board has continued to by financial institutions in addressing credit monitor closely developments in Atlanta, Deneeds, and whether credit is available to minority troit, and Boston. This effort has taken several and low- and moderate-income persons have forms. First, the Board has updated the statistiproved valuable to examiners in making a bal- cal analysis presented in the Atlanta and Detroit anced assessment of CRA performance. I am newspapers to take account of the availability of pleased to say that the FFIEC has approved more recent HMDA data. The 1987 and 1988 going forward with procedures for facilitating HMDA data continue to show disparities in that flow of information. home mortgage and home improvement lending. We believe that we should aim not only to As before, predominately white middle-income share the information we develop among fellow neighborhoods received more home purchase regulators but also to communicate effectively loans per single family housing unit than did with institution management about what we find predominately minority middle-income areas, in analyzing their lending data. This effort takes while the opposite pattern holds for home imon particular importance in light of the recently provement loans. However, as we have indicated expanded HMDA requirements and the addi- in prior testimony, while these patterns are sugtional insight regarding lending patterns that the gestive of lending problems in the home purchase data should provide. With this in mind the area, they do not allow one to conclude whether FFIEC has approved an initiative to make better discrimination exists or not. use of the HMDA data. Additionally, we are The Board, with the assistance of Reserve working to develop what might best be termed an Bank staff, has also begun work on a new "executive summary" of HMDA data—a suc- on-line consumer complaint and inquiry tracing cinct presentation of a given institution's mort- system to be implemented in early 1991. We gage and home improvement lending patterns envision that the new tracing system will enbroken down by demographic factors such as hance the Board's ability to monitor and anarace and income, and compared with the record lyze its consumer complaint and inquiry data, of lenders as a whole in the community. This including data involving allegations of illegal summary could be conveyed to institution man- credit discrimination. We expect that the new agement during a CRA examination. By provid- system's reporting capabilities will enable us to ing such a profile, we hope to draw manage- spot more easily trends that might involve such ment's attention to market segments the practices. institution may be failing to reach, and to prompt We are using the resources of our Reserve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

516 Federal Reserve Bulletin • July 1990 Banks in a number of ways. The Federal Re- ically depressed individuals. Mr. Parker is also serve Bank of Atlanta has developed a com- Chairman of the Ad Hoc Coalition on Fair Bankputer model that illustrates how various lending ing Practices in Detroit, which was actively inparameters affect the affordability of home volved in a recent financial settlement with banks loans in connection with the lending consortium calling for reinvestment in low-income neighborestablished for low- and moderate-income resi- hoods. dents of Atlanta. The Federal Reserve Bank of The Board also appointed to the council Boston, together with the Boston Federal George C. Galster, Professor of Economics at Home Loan Bank, recently cohosted a sympo- the College of Wooster. Professor Galster is sium of the National Association of Affordable widely recognized as an expert in discrimination Housing Lenders attended by more than 300 issues. He has been an expert witness and conlenders from New England as well as others sultant in fair housing disputes and currently is a from throughout the country. Last year the research consultant for the Metropolitan Milwau- Federal Reserve Bank of San Francisco was kee Fair Housing Council. He also serves on the instrumental in the creation of the California advisory board for the HUD National Housing Community Reinvestment Corporation (CCRC), Discrimination Survey. a lender consortium pooling more than $100 A special committee of the Consumer Advismillion to provide long-term loans for affordable ory Council is looking into various aspects of the housing development throughout the state. issue, including mortgage review boards, exami- With the California consortium off to a success- nation processes and examiner training, the use ful start, senior management and staff members of testers, additional studies, and brochures that of the Reserve Bank have been invited to give guidance to lenders. Over the years we have Hawaii and Nevada to help bankers and com- often received helpful input from the council, and munity organizers launch similar programs in we feel fortunate to have this resource to assist those states. Late last year, the Federal Re- us in this difficult area. serve Bank of Chicago convened a seminar with We have also sought to draw on the expertise some 250 area bankers to discuss specific CRA- of individuals and groups outside the bounds of related policies and activities that have worked the federal financial regulatory framework to gain well in that Federal Reserve District. In Phila- a fresh perspective on our enforcement actividelphia, the Federal Reserve Bank is planning ties. Members of our staff have been in contact to produce a video that will share some of the with representatives of the National Fair Housexperiences and lessons learned relating to the ing Alliance to arrange for a briefing on their CRA. This is but a sample of the activities of experience with credit discrimination cases. I Reserve Banks undertaken in the past six have personally met with representatives from a months to promote sound and creative lending civil rights group from Boston that was active in that is responsive to the special needs of low working with the Massachusetts Bankers Assoand moderate income communities. At the ciation on an ambitious housing and economic Board level, besides the initiatives discussed development program that is an outgrowth of the above, Board staff members have been partici- Federal Reserve Bank of Boston's mortgage dispating in a series of HUD seminars dedicated to crimination study. We have consulted with the fair housing-fair lending issues at law schools. Department of Justice about its experiences in We have also enlisted the help of the Federal civil rights enforcement and its investigation, Reserve's Consumer Advisory Council. In se- now in progress, of housing lending practices in lecting new members this year, we gave special Atlanta. attention to adding council members who have In line with the subcommittee's questions reexpertise in the civil rights area. One of the new garding our enforcement program (our detailed members, Bernard Parker, testified at your hear- responses to the committee's questions accoming last October. He is executive director of pany our testimony), we have taken a close look Community Resource Projects, a human services at our examination and consumer complaint organization based in Detroit that helps econom- experience over the past three years. In particu- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 517 lar, we have completed a detailed analysis of find practices that involve racial discrimination System enforcement activity involving serious in lending. From our discussions with examinviolations of the Fair Housing and Equal Credit ers we know that they take their work and the Opportunity Acts by reviewing our examination issue of possible racial discrimination very seand consumer complaint data bases. Addition- riously. They have been, and will continue, ally, we have asked experienced staff at the evaluating quite closely any questionable lend- Reserve Banks for the types of problems that ing practices that could "effectively" result in they are seeing involving the Fair Housing and subtle discrimination. We will continue to mon- Equal Credit Opportunity Acts and mortgage itor our enforcement and complaint activities to lending in particular. As we said at the October ensure that practices involving possible racial hearing, state member banks do not play a discrimination are addressed and that correcmajor role in the granting of mortgage credit in tive action is taken as needed. The new data the United States. Examiners routinely review and procedures I have mentioned above will available mortgage lending data, including lend- help us in this effort. ing standards and appraisal practices. While we In short, we have had our hands full in the past find violations during examinations and receive few months completing a number of major initia few complaints involving the fair lending atives. And although we are in the early stages of statutes, they typically involve marital status development with others, we believe that they issues, such as improperly required spousal have considerable promise and will be pleased to signatures. Only in very isolated cases do we report to you further on their progress. • Statement by Clyde H. Farnsworth, Jr., Direc- Reserve's contribution to the government's eftor, Division of Federal Reserve Bank Opera- forts to combat money laundering activities is tions, Board of Governors of the Federal Re- maximized. serve System, before the Committee on In the regulatory area, financial institutions Banking, Housing, and Urban Affairs, U.S. under our jurisdiction are continually subjected Senate, May 18, 1990. to Bank Secrecy Act compliance audits as part of our examination process. Besides enforce- I am pleased to appear before the Committee on ment actions we may initiate as a result of Banking, Housing, and Urban Affairs to com- violations of the Bank Secrecy Act, we provide ment on proposed legislation related to money quarterly reports to the Department of the laundering. Treasury, which detail all Bank Secrecy Act The Federal Reserve places a high priority on violations discovered during the examinations supporting efforts to attack the laundering of of the financial institutions. Additionally, finanproceeds from illegal activities. We provide all cial institutions under our jurisdiction are reavailable currency flow data, at any level of quired to file a Criminal Referral Form when detail, to all federal law enforcement agencies, criminal activity, specifically including Bank upon request. Every month, we send cash flow Secrecy Act money laundering violations, is reports to relevant Treasury and Justice De- suspected. The Criminal Referral Forms are partment organizations for use by their investi- forwarded to the appropriate law enforcement gative and intelligence experts. Individual Fed- agency for further action. eral Reserve offices have also been providing I am emphasizing the System's active role to additional detailed depository institution data illustrate how strongly the Federal Reserve is in to the Customs Service, Internal Revenue Ser- accord with the same objectives that the Convice, Drug Enforcement Administration, and gress has in combating money laundering. We others with a need to know. Also, we continu- have reviewed the various legislative proposals, ally engage in a dialogue with federal law en- and we appreciate the opportunity to provide you forcement officials to ensure that the Federal with comments. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

518 Federal Reserve Bulletin • July 1990 REVOCATION OF CHARTERS; TERMINATION ters. This prohibition may discourage banks from OF INSURANCE providing funds transfers for individuals or legitimate businesses when the bank is unsure as to The Federal Reserve recognizes that it is neces- whether the individual or business is engaged in sary for financial institution regulators and de- the business of transmitting funds. When a bank pository institutions to take an aggressive role in is aware that a customer is engaged in that the battle against money laundering. S.2327, as business, it will be unable to effect funds transwell as the legislation passed by the House, fers before checking with the Treasury Departaddresses charter revocation or insurance termi- ment to determine whether the customer has nation of depository institutions convicted of registered with the Treasury. money laundering or a cash transaction reporting offense. We have previously stated that any proposed sanctions should take into consider- WIRE TRANSFER RECORDKEEPING ation the nature of the violation and the effect of the sanction on the depositors and creditors of The design of wire transfer recordkeeping rethe institution, as well as ensuring that proce- quirements is a very complex and technical undures for imposing any such sanctions take into dertaking, with potentially significant ramificaconsideration requirements for due process. tions on the efficiency of large-dollar wire S.2327 and the legislation passed by the House transfer systems. If the Congress does adopt have addressed the concerns raised by the Fed- requirements in this area, we concur with the eral Reserve. approach taken by both Senator D'Amato in his When the Congress enacted the Financial In- bill and by legislation passed by the House of stitutions Reform, Recovery, and Enforcement Representatives. Section 7 of Senator D'Amato's Act of 1989, federal bank regulators were given bill directs the Department of the Treasury to significantly enhanced enforcement powers. An adopt rules governing records of international expansion of these enforcement powers as pro- wire transfers that would have a high degree of posed in S.2327, coupled with the banking regu- usefulness in government investigations and prolators' traditional cease and desist and removal ceedings. The Board believes that a regulatory, authority, should assist banking regulators in rather than a statutory, approach provides the their efforts to eliminate the ability of persons flexibility that is most often needed to adapt and institutions to continue the illegal practices requirements to an evolving environment. and to deter others from engaging in illegal We believe that a particularly important eleactivities. ment of the wire transfer provisions in both Senator D'Amato's bill and the House legislation is the direction to the Treasury to balance the REGISTRATION OF MONEY TRANSMITTERS regulation's usefulness to law enforcement with the effect of the ensuing requirements on the cost The Federal Reserve believes that it is important and efficiency of the payments system. These to oversee the activities of providers of financial considerations should result in requirements that services, including money transmitters, to ensure target those classes of international wire transthat they do not serve as a vehicle for avoiding fers that are most likely to be used in money the controls applicable to financial institutions. laundering and that focus on the completeness of Nevertheless, the form of oversight must recog- information that can be accommodated in existnize the importance of these services to those ing wire transfer formats. segments of the community that might choose not to use banking services and ensure that the requirements do not discourage the availability CONCLUSION of legitimate services. For example, Senator D'Amato's bill would prohibit banks from trans- In closing, let me state that we realize that the ferring funds for unregistered money transmit- Congress faces a difficult task of improving the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 519 ability of the law enforcement authorities to deter money laundering and to cooperate fully in detect money laundering activities while, at the providing assistance to law enforcement officials same time, protecting the public from overly who are charged with the very important task of intrusive and potentially harmful laws. Please be uncovering money laundering wherever it may assured of the Federal Reserve's commitment to exist. • Statement by Alan Greenspan, Chairman, Board Commission (CFTC) or in the Securities and of Governors of the Federal Reserve System, Exchange Commission (SEC). before the Subcommittee on Telecommunica- On the broader issue of consolidating jurisdictions and Finance of the Committee on Energy tion for stocks and stock index futures (or all and Commerce, U.S. House of Representatives, financial futures) in one agency, there are good May 24, 1990. arguments for and against such a consolidation and, accordingly, differences of views on It is a pleasure to appear on this panel today to whether such consolidation would, on balance, discuss issues involving the regulation of securi- be beneficial. We believe some changes to the ties markets. In my comments this morning, I existing regulatory system are necessary to avoid would like to address the broad economic policy the prospect that jurisdictional disputes among issues raised in your letter of invitation. I would regulators will impede innovation in our financial prefer to pass on the questions relating to the markets, but consolidation of jurisdiction is not more narrow, technical issues under the jurisdic- necessary to achieve this objective. tion of the other agencies. I would like to focus my remarks on three major issues: (1) the adequacy of margin requirements on stock index FEDERAL MARGIN REGULATION futures as a prudential safeguard and the impact of existing margin-setting procedures and other A prominent area of disagreement among those differences in regulation on market volatility; (2) interested in the smooth functioning of our capexisting impediments to innovation; and (3) ital markets has been the appropriate level of whether there is a need to modify the existing margins for stock index futures and the need for regulatory system for stocks and stock deriva- federal authority over such margins. In part, tives. My evaluation will be done against the these disagreements reflect different views as to objective of a regulatory structure that, while the purposes of margins and the appropriate limiting risks to the system, results in highly objectives of federal margin regulation. Accordefficient and innovative U.S. financial markets ingly, at the outset I would like to clarify the that can compete effectively in the global mar- position of the Board of Governors on these ketplace. issues. As I will discuss in more detail, the Board does We continue to believe that the primary objecnot believe that the existing division of regula- tive of federal margin regulation should be to tory authority has increased volatility in the protect the financial integrity of market particisecurities markets, nor in this regard is it a threat pants and thereby ensure contract performance. to the capital formation process. We continue to Margins should be adequate to protect clearing view the primary purpose of margins to be to organizations, brokers, and other lenders from protect the clearing organizations, brokers, and credit losses arising from changes in securities other intermediaries from credit losses that could prices. As such, they are one important element jeopardize contract performance. While we think of a package of prudential safeguards, including that federal oversight of margins is appropriate capital requirements, liquidity requirements, and for prudential purposes, there are different views operational controls, aimed at limiting the vulamong Board members on whether that authority nerability of the financial markets to losses or is best vested in the Commodity Futures Trading disruptions arising from the failure of one or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

520 Federal Reserve Bulletin • July 1990 more key participants. The failure of, or even the concerns about the reliability of our market loss of public confidence in, a major intermediary mechanisms, especially clearing and payment in any of the stock, futures, or options markets systems, in times of adversity. could immediately place significant strains on The Board believes that federal oversight is other markets, their clearing systems, and on our appropriate to ensure that margins on stocks and nation's payment system. stock index futures are established at levels that The Board remains skeptical, however, of are adequate under a wide range of market whether setting margins on stock index futures at conditions. Futures self-regulatory organizations levels higher than necessary for prudential pur- (SROs) should continue to have primary responposes will reduce excessive stock price volatility. sibility for developing and refining margin poli- We, too, are concerned about what seems to be cies. But the appropriate federal agency should a higher frequency of large price movements in have both the authority to initiate changes in the equity markets, but we are not convinced margins on stock index futures and the authority that such movements can be attributed to the to veto changes proposed by the relevant SRO. introduction of stock index futures and the op- That authority should not be limited to emerportunities they offer for greater leverage. Al- gency authority such as the CFTC currently has though available statistical evidence on the rela- over futures margins. tionship between margins and stock price Either the CFTC or the SEC could play this volatility is mixed, the preponderance of that role. The principal argument in favor of assigning evidence suggests that neither margins in the oversight responsibility for stock index futures to cash markets nor in the futures markets have the CFTC is that it has overall responsibility for affected volatility in any measurable manner. prudential supervision of futures exchanges and Moreover, we are concerned that raising mainte- clearing organizations and futures commission nance margins on stock index futures to levels merchants (FCMs). Assignment of oversight rewell above those necessary for prudential pur- sponsibility to the CFTC would avoid certain poses could substantially reduce futures market regulatory burdens and potential conflicts that liquidity or drive business offshore. could arise if responsibility for critical aspects of Thus, in the Board's view, the critical question prudential oversight of such entities were divided is whether margins on stock index futures have between the CFTC and SEC. been maintained at levels that are adequate for The principal argument for assigning oversight prudential purposes. Although no futures clear- responsibility for stock index futures margins to inghouse has ever suffered a loss from a default the SEC is that it would foster consistency of on a stock index futures contract, certain actions margins in the stock and stock derivative marby futures exchanges and their clearinghouses in kets. The Board believes that margins in these recent years raise questions about the adequacy markets should be consistent in the sense that of futures margins from a public policy perspec- they provide comparable protection against adtive. Specifically, we have concerns about the verse price movements. The degree of protection tendency for these organizations to lower mar- provided by margin requirements depends on the gins on stock index futures to such a degree in magnitude of potential future price volatility. periods of price stability that they feel compelled Although studies of past price movements can to raise them during periods of extraordinary shed light on potential movements in the future, price volatility. While such a practice has here- the forecasting of future volatility necessarily tofore protected the financial interests of the involves elements of judgment. Because different clearinghouses and their members, it tends to agencies are likely to come to different judgcompound already substantial liquidity pressures ments, there is a case to be made for having only on their customers, on lenders to their custom- one regulator with margin authority over all the ers, and on other payment and clearing systems. equity products markets to achieve consistency In the Board's view, somewhat higher margin of margins across these markets. levels on stock index futures would obviate the On balance, the Board does not see a clear need to raise them in a crisis and thereby reduce basis for choosing between CFTC and SEC over- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 521 sight of stock index futures margins. The Board In a more fundamental sense, we believe that it feels strongly, however, that authority should is counterproductive to lay blame on one sector, not be given to the Federal Reserve because it in this case the market for stock index derivadoes not have overall prudential responsibility tives, for the increasing occurrence of wide and for any of the futures commission merchants rapid price swings in equity markets. Rather, the (FCMs), broker-dealers, or clearing organiza- volatility we observe reflects more basic changes tions that margins are intended to protect. The in economic and financial processes prompted by existing margin authority for stock and stock technological advances and the increasing conoptions assigned to the Board under the Securi- centration of assets in institutional portfolios. ties Exchange Act of 1934 should be transferred The delegation by the public of the management to the SROs and the SEC. of a large proportion of its assets to professional managers through pension funds and other institutions and the desire of these managers for ISSUES OF REGULATORY JURISDICTION low-cost methods to manage risk and adjust portfolios has spurred growth in the new instru- The question of regulatory responsibility for mar- ments; improvements in telecommunications and gins is one element of the broader question of computer technology mean that information on regulatory jurisdiction over futures and options economic fundamentals will be received and markets. In light of the strong linkages among the translated by these managers more quickly into markets for futures, options, and their underlying market prices. To the extent that price moveinstruments, some have argued that the division ments reflect these basic forces, efforts to reof oversight responsibilities among agencies may strain volatility by imposing more restrictions on impede the effective regulation and supervision particular markets or instruments could have that is essential to ensure sound and efficient unintended effects, resulting in significant costs financial markets. on the system and a shifting of transactions One particular concern relates to volatility. It activity offshore. is frequently argued that leveraged trading in A second issue frequently raised in evaluating stock-index futures and options, encouraged by the adequacy of our current regulatory system low margin requirements on derivative products, concerns product innovation. Many of the new has led to increased volatility in the prices of the products being developed on futures and options underlying stocks. More generally, it has been markets are not easy to classify. They have suggested that other inconsistencies in market important similarities to, or are otherwise linked mechanisms involving, for example, circuit to, a variety of existing instruments subject to breakers and short-selling rules, contribute to different regulators; and, as a consequence, varmarket instability. It is feared that increased ious uncertainties and frictions have emerged price volatility, in turn, will reduce the attractive- about the appropriate exchanges that should ness of equity markets and could impede the trade these instruments and the agencies that capital formation process. These concerns have should provide regulatory oversight. One recent prompted calls for one regulator who will take example involves the "index-participation" or IP steps to remove inconsistencies that may con- contracts that were introduced by several of the tribute to sharp price swings. stock exchanges, approved by the SEC for secu- The Board does not share the view that split rities trading and, in essence, disapproved when regulatory authority over equity instruments has the courts ruled that IPs were futures products in any meaningful way contributed to volatility. subject to the exclusive jurisdiction of the CFTC As I noted earlier, we have found no substantial and could not be traded off exchanges regulated evidence linking margin levels to price volatility by the CFTC. in the cash or the index-product markets. Nor Under the Commodities Exchange Act (CEA), have studies revealed a clear understanding of any commodity contract with an element of how circuit breakers and other market rules futurity cannot be entered into except on a affect price movements in the different markets. CFTC-regulated exchange. Moreover, this act Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

522 Federal Reserve Bulletin • July 1990 defines the term "commodity" very broadly to of many financial futures contracts. Should include not only physical commodities, like corn losses from stock index futures trading—to be and wheat, but intangible contractual interests, subject to SEC regulation under this alternaincluding financial instruments. This restriction, tive—jeopardize the financial integrity of a clearwhen interpreted broadly, serves to discourage ing organization or futures brokerage firm the development of new financial products that (FCM), it would threaten contract performance might be offered outside of the futures exchanges on all of the futures traded by the entity, includand tends to stifle the innovation process. In a ing tangible commodity futures. Similarly, a failvery general sense, all financial instruments have ure in the commodity futures markets could, an element of futurity in them, in that their value because of the effects on the clearing organizadepends on future events. We believe that the tion or brokerage firm, have consequences for CEA can be modified in ways that preserve the the equity markets. In another area, many expublic safeguards that motivated this provision, change rules related to trading and clearing cut while preventing conflicts in this area from hav- across a wide range of contracts rather than ing to be dealt with by the courts and without being specific to stock index contracts, and close impeding the process of innovation in equity and coordination between the SEC and CFTC would other instruments. Such modifications might in- be important in evaluating such rules. clude an exemption for transactions subject to Thus, the SEC would have an important interother regulatory safeguards, sophisticated trader est in other aspects of futures market regulation exemptions, or more stringent fraud liability. while the CFTC would continue to have a strong interest in the regulation of stock index futures. The logic of transferring stock index futures to ALTERNATIVE REGULATORY STRUCTURES the SEC because of their tight linkage to the cash market suggests that futures contracts on other As I have noted, a case can be made for having instruments also might be regulated differently. only one federal agency with oversight authority That is, Treasury futures would be regulated by over margins in the equity and equity derivative the Treasury and Eurodollar and foreign curmarkets. This case rests not on the issue of rency futures by the Federal Reserve. Such a volatility but on the fact that setting prudential change, however, would increase the regulatory margins requires judgments concerning potential fragmentation in the securities markets and future price volatility in the linked markets for would not appear to be a particularly useful stocks and derivative products. One regulator realignment. Consequently, the benefits of transwould provide a single view of potential future ferring regulatory jurisdiction to the SEC for volatility in these markets and thereby foster purposes of achieving more consistency of reguconsistency of margins across the various seg- lation across equity instruments must be balments of the equity markets. Others would go anced against these drawbacks, and there is further and transfer all regulatory authority over scope for legitimate differences of view on stock index futures and options on such futures whether such a measure would be a net improveto the SEC. Such an approach recently has been ment. proposed by the Administration. Treasury Secretary Brady earlier this year had This alternative would help achieve consistent suggested much more far-reaching measures to prudential regulation across these tightly linked deal with the jurisdictional issue—the transfermarkets for equity instruments. However, a mea- ring of all financial products to the SEC or the sure of this sort would result in two regulators of merging of the two agencies. We would urge futures exchanges and futures clearinghouses, caution in considering these alternatives. A full and hence would still require a considerable merger of the two agencies—now embodied in amount of coordination on the part of the SEC H.R. 4477—would avoid many of the problems and CFTC. One must recognize that stock index just mentioned about overlapping jurisdiction in futures are but one of many futures contracts the regulation of exchanges and clearinghouses, offered by these organizations—indeed, only one and the transfer of all financial instruments to the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 523 SEC might be accompanied by the separate that bureaucratic inertia in a larger agency could clearing of all financial futures subject to only be an impediment to the process of innovation. one regulator. However, these solutions would We should not lose sight of the fact that under the concentrate a great deal of regulatory authority existing system of split jurisdiction over financial over the financial system in a single agency and instruments, our financial markets have been the this has been a concern of the Congress for a long most innovative in the world, with many of the time. Besides the potential management diffi- new products spurred by the introduction of culties of a larger organization, there is the risk index futures and other futures. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

524 Announcements MANUEL H. JOHNSON: RESIGNATION AS have had the pleasure of serving this great country VICE CHAIRMAN OF THE BOARD OF almost ten consecutive years. While I will always cherish this experience, the time has come to return to GOVERNORS private life. I am extremely proud to have played a part in the On June 7, 1990, Vice Chairman Manuel H. unprecedented period of sustained economic growth Johnson announced his resignation as a member and low inflation that has characterized the decade of of the Board of Governors of the Federal Re- the 1980s and continues into the 1990s. Although there are still major issues to be addressed as this country serve System, effective August 3, 1990. Dr. moves ahead, I feel optimistic about our future. In- Johnson has been a member of the Board since deed, part of my reasoning for leaving at this time is February 7, 1986, and has served as Vice Chair- the confidence I have in my colleagues at the Federal man since August 4, 1986. Reserve and in the economic team you have assembled in your administration. Accordingly, I hereby In his letter of resignation to President Bush, Dr. tender my resignation as a member of the Board of Johnson noted that he had served in government for Governors, effective at the end of my term as Vice almost a decade and that "the time has come to Chairman on August 3, 1990. return to private life." Before his appointment to the I am grateful to President Reagan and to you for Board, he was an Assistant Secretary and Deputy having given me this opportunity to serve the nation. Assistant Secretary of the Treasury. Respectfully yours, Dr. Johnson plans to return to George Mason University and assume the Koch Chair in Inter- Manuel H. Johnson national Economics and become Director of the Center for Global Market Studies. He will also help establish a nonprofit council that will exam- DAVID W. MULLINS, JR.: APPOINTMENT ine international coordination of policy. AS A MEMBER OF THE BOARD OF Federal Reserve Chairman Alan Greenspan GOVERNORS issued the following statement concerning the resignation: On December 8, 1989, President Bush announced his intention to nominate David W. I deeply regret, but understand, Manley Johnson's deci- Mullins, Jr., as a member of the Board of Govsion to return to the private sector after ten consecutive ernors. Dr. Mullins was subsequently confirmed years of government service. The Vice Chairman and I have been an effective team. I'll miss him. by the Senate on May 16, 1990, and took the oath of office, administered by Chairman Greenspan, The letter of resignation follows. on May 21. The text of the White House announcement of December 8 follows: June 7, 1990 President George Bush The President today announced his intention to nom- The White House inate David W. Mullins, Jr., to be a member of the Washington, D.C. 20500 Board of Governors of the Federal Reserve System for the unexpired term of fourteen years from February 1, Dear Mr. President: 1982. He would succeed H. Robert Heller. It has been both an honor and a privilege to have Since 1989, Dr. Mullins has served as Assistant Secserved as Vice Chairman of the Board of Governors of retary for Domestic Finance at the United States the Federal Reserve System since August of 1986. Department of the Treasury in Washington, D.C. Prior Including my tenure at the Treasury Department, I to this, he served as Acting Assistant Secretary for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

525 Domestic Finance, 1988-89; and Professor of Busi- revisions to the bank holding company reporting ness Administration at the Harvard University Grad- requirements. uate School of Business Administration. The Federal Reserve Board issued for public comment on May 25, 1990, a proposal to add Dr. Mullins was graduated from Yale University (B.S., 1968) and the Massachusetts Institute of Tech- non-full-payout leasing to the list of permissible nology (S.M., 1972; Ph.D., 1974). He was born April activities in Regulation Y. Comment is requested 28, 1946, in Memphis, Tennessee. Dr. Mullins served by July 16, 1990. in the National Guard, 1968-70. He resides in Washington, D.C. CHANGES IN BOARD STAFF REGULATION CC: AMENDMENTS The Board of Governors has announced the The Federal Reserve Board announced on May following changes in the official staff: 25, 1990, approval of amendments to Regulation In the Division of International Finance, Dale CC (Availability of Funds and Collection of W. Henderson has been appointed Assistant Checks), which implements the Expedited Funds Director. Availability Act. The amendments include In the Division of Federal Reserve Bank Opchanges to the model forms and other technical erations, C. William Schleicher, Jr., Associate and clarifying modifications to the regulation and Director, has resigned, effective May 25, 1990. its official commentary. Edward T. Mulrenin, Assistant Director, Of- The Board has not approved a proposed fice of the Staff Director for Management, has amendment that would shorten the time require- transferred to the Office of the Executive Direcment for sending a notice of nonpayment of a tor for Information Resources Management to fill large-dollar returned check to a depository bank. the newly established position of Assistant Director for Special Projects reporting to the Executive Director. The appointment is effective June 1. PROPOSED ACTIONS Mr. Henderson first joined the Board's staff in September 1971. In September 1985, he resigned The Federal Reserve Board announced on May to join the faculty at Georgetown University and 3, 1990, the extension of the public comment then returned to the Board in July 1989. He holds period from May 7 to May 31, 1990, for proposed a Ph.D. from Yale University. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

526 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON MARCH 27,1990 In February, industrial production retraced more than half of a sharp January decline, reflecting a swing in the production of motor vehi- 1. Domestic Policy Directive cles. Abstracting from a variety of transitory influences associated with unusual winter The information reviewed at this meeting sug- weather, a strike in the aircraft industry late last gested some pickup in the expansion of economic year, and an inventory correction in the motor activity from the upward-revised but still slug- vehicles sector, industrial production had been gish pace now indicated for the fourth quarter. flat on balance since last autumn. In February, Although the strengthening reflected, at least in total industrial capacity utilization partially repart, favorable weather and a rebound from covered from a substantial January decline but strike-related disturbances late in 1989, underly- remained below the high level of a year earlier. ing demands appeared to be continuing to expand Real personal consumption expenditures, abat a moderate pace. Revised data signaled more stracting from swings in spending for motor momentum in final sales near year-end than had vehicles and energy-related items, were about been indicated previously, and robust employ- flat in January after expanding at a relatively ment growth in January and February suggested slow pace in the two previous months. Outlays that output, especially in the service-producing for goods other than fuel oil and motor vehicles sector, was being well maintained. Despite a had been weak while expenditures for services rebound in the motor vehicles industry, manu- had remained strong. Total retail sales rose on facturing activity remained sluggish. Consumer balance in January and February, but adjusted prices rose more rapidly over January and Feb- for recent increases in prices, sales in February ruary, only partly as a result of increases in the probably were little changed from the fourthprices of food and energy items; wage data quarter average. Unusually mild weather conpointed to no significant change in prevailing tributed to a higher level of housing starts in trends. January and February. Single-family construc- Total nonfarm payroll employment increased tion was strong in both months; in the multisharply in the first two months of the year after family sector, starts fell sharply in February but growing at a reduced pace on average in previous averaged somewhat above the fourth-quarter months. Employment in construction jumped, pace over the two months. apparently as a result of unusually good weather, Business capital spending, adjusted for inflaand job gains in the services industries continued tion, appeared to have turned up after a decline strong, notably in health services. In the manu- in the fourth quarter. Shipments of nondefense facturing sector, employment was down on bal- capital goods rose sharply in February following ance over the January-February period despite a sizable advance in January associated with a the return to work in February of auto workers rebound in shipments of aircraft to domestic laid off at the start of the year; job losses were firms after the strike late in the fourth quarter. evident in a number of industries, including elec- The February increase reflected greater purtrical equipment, machinery, and lumber. The chases of communications equipment and many civilian unemployment rate remained at 5.3 per- types of industrial machinery, as well as a further cent in both January and February. rise in shipments of aircraft. New orders for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

527 nondefense capital goods, excluding aircraft, At its meeting on February 6-7, 1990, the rose in February and were considerably above Committee had adopted a directive that called for their fourth-quarter level. Nonresidential con- maintaining the existing degree of pressure on struction activity rebounded in January from a reserve positions and that provided for giving substantial December decline, as the weather equal weight to developments that might require turned unseasonably warm; however, data on an adjustment in either direction during the inconstruction contracts and building permits con- termeeting period. The Committee had agreed tinued to suggest a soft outlook for coming that some firming or some easing in reserve months. Manufacturers' inventories rose in Jan- conditions would be equally acceptable during uary, largely because of increases in stocks of the intermeeting period, depending on progress work-in-process in the transportation equipment toward price stability, the strength of the busisector. Outside of transportation equipment, the ness expansion, the behavior of the monetary inventory-to-shipments ratio had changed little aggregates, and developments in foreign exon balance since mid-1988. At the retail level, change and domestic financial markets. The conreductions in auto dealers' stocks more than templated reserve conditions were expected to accounted for declines in inventories in Decem- be consistent with growth of M2 and M3 over the ber and January. period from December through March at annual The nominal U.S. merchandise trade deficit rates of about 7 and 3V2 percent respectively. widened in January from a sharply lower Decem- Reserve conditions had remained essentially ber rate, as the value of imports rose more than unchanged over the period since the February that of exports. Nevertheless, the deficit re- meeting. Excluding some special-situation bormained essentially unchanged from the fourth- rowing early in the intermeeting period that was quarter average. Much of the sharp increase in related to liquidity pressures at one sizable bank, the value of imports in January reflected a jump adjustment plus seasonal borrowing had averin imports of oil; however, imports of consumer aged about $160 million in the three full reserve goods, foods, and industrial supplies also rose maintenance periods since the meeting. The fedstrongly. Exports increased substantially in Jan- eral funds rate held steady at about 8V4 percent uary to a level well above their fourth-quarter over the period, but other short- and intermediaverage. Indicators of economic activity in the ate-term interest rates edged higher, apparently major foreign industrial countries generally sug- reflecting the interpretation by financial markets gested strength in the continental European of incoming economic data as pointing, on baleconomies, notably France, Germany, and Italy. ance, to some firming of economic activity and to Among other industrial countries, growth had persisting price pressures. Treasury bond yields slowed in Japan and had remained sluggish in the fluctuated over a fairly wide range, falling slightly United Kingdom and Canada. on balance over the period, while major indexes Producer prices for finished goods were un- of stock prices rose somewhat. The collapse of a changed in February, as energy prices partially major securities firm had little effect on investretraced their sharp rise in January and food ment-grade financial markets, but the failure, prices rose more slowly. At the consumer level, along with potential sales of low-rated bonds by prices rose less rapidly in February than in Janu- some large institutional holders, contributed to a ary, but the increases in both months were sub- further widening of the yield spread between stantial and the pickup from 1989 was only partly noninvestment-grade instruments and other longthe result of increases in prices of food and energy term securities. items. Among other goods and services, several In foreign exchange markets, the tradecomponents posted sizable increases. Average weighted value of the dollar in terms of the other hourly earnings fluctuated considerably in Janu- G-10 currencies rose over the intermeeting peary and February, owing to shifts in employment riod. The dollar's appreciation occurred at a time status among manufacturing and construction when short- and long-term interest rates abroad workers, but the year-over-year increase re- were increasing relative to interest rates in the mained in the range evident since late 1988. United States. Much of the rise of the dollar was Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

528 Federal Reserve Bulletin • July 1990 against the yen and the pound sterling, but the the latest information, including recent revisions dollar also gained relative to the mark. The to data released earlier, suggested a somewhat strength of the dollar apparently owed in part to stronger economic performance than had been perceptions that the U.S. economy might be apparent at the time of the February meeting. strengthening and to market concerns regarding The employment statistics for January and Febvarious political and financial difficulties in key ruary exhibited particular strength, but members foreign countries. cautioned that the latter had to be weighed Growth of M2 rose in February from a reduced against indications of relatively restrained January pace, reflecting strength in transaction growth in overall spending. Several commented and other liquid accounts; partial data suggested that it was more difficult than usual to discern some moderation in March. On balance, the underlying economic trends because of the temexpansion of M2 had been damped somewhat in porary effects of unusual weather conditions and early 1990 by the rise in opportunity costs of other special factors in recent months. Developholding M2 instruments, as offering rates on ments on the financial side, including the possiretail deposits, especially at shorter maturities, bility of reduced credit availability, constituted a had not been adjusted upward in line with the rise risk to the continuing expansion. On balance, in market rates. Growth of M3 also picked up in however, the members viewed sustained growth February but remained below that of M2. The in business activity as a reasonable expectation expansion of this aggregate continued to be for the next several quarters. With regard to the curbed by the apparent ongoing contraction in outlook for inflation, they recognized that much the assets and associated funding needs of thrift of the recent surge in key measures of inflation institutions. could be attributed to transitory, weather-related factors that had resulted in sharp increases in the The staff projection prepared for this meeting prices of food and energy, but they also exsuggested that the economy was likely to expand pressed a great deal of concern about the apparat a somewhat faster pace over the next several ent lack of improvement in underlying inflation quarters than in the fourth quarter of 1989. trends. While the economy seemed to be on a Consumer demand was expected to pick up course that should prove consistent with reduced substantially from the fourth-quarter pace but to inflationary pressures over time, given approprigrow at a more moderate rate later. Business ate fiscal and monetary policies, recent developcapital spending was likely to increase, though ments suggested that little or no progress toward the rise could be limited by further downward lower inflation was likely to be made during the pressure on profit margins associated with relaquarters immediately ahead. tively sluggish growth of final demands. Greater caution on the part of lenders might tend to Members reported that business conditions restrain spending, especially for commercial real remained uneven in different sectors of the econestate, and some of the recent weather-related omy and in different parts of the country, deboost to nonresidential construction activity and pending on the mix of local industries, but overall homebuilding was expected to be reversed in activity appeared to be growing at least modestly coming months. Net exports were projected to in most if not all regions. Further expansion for make little contribution to growth of domestic the nation as a whole was likely to be sustained production over the rest of the year. The projec- mainly by consumer expenditures, though tion assumed moderate restraint on expenditures growth in the latter might well moderate someat all levels of government. On balance, the need what over the quarters ahead in conjunction with to contain inflation might involve some additional reduced gains in disposable incomes. In addition, pressures in financial markets. Price pressures the agricultural and energy sectors of the econwere expected to ease only gradually, and little omy, which appeared to have strengthened in improvement was anticipated in the underlying some regions, could provide important support trend of inflation over the projection horizon. to the overall expansion in business activity. Foreign trade was characterized by some mem- In the Committee's discussion of the economic bers as the area of greatest uncertainty in the situation and outlook, members observed that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 529 business outlook. Foreign demand was helping to for past excesses and adjusting to a more modmaintain production in a number of industries erate pace of business activity, but a number of that were experiencing reduced domestic de- members expressed concern that significant furmand, and some improvement in the overall ther restraint on credit availability, should it trade balance was anticipated in response to the occur, could have adverse consequences for the earlier depreciation of the dollar and to stronger overall economy. economic growth in a number of foreign coun- Turning to the outlook for prices and wages, tries. Business fixed investment could continue members commented that, while increases in key to be inhibited by weak profit margins and an measures of inflation were likely to moderate excess of commercial space in many parts of the after their recent spurt, the prospects for inflation country, though members reported that substan- remained the most disturbing aspect of the ecotial commercial building activity remained under nomic outlook. Apart from what appeared to be way in several regions. Residential construction transitory hikes in food and energy costs in late had been relatively vigorous in recent months, 1989 and early 1990, a number of other prices had reflecting exceptionally favorable weather condi- increased somewhat more rapidly than earlier, tions in many parts of the country; however, and that development tended to underscore the current mortgage rates together with financing deeply embedded nature of the current inflation difficulties being experienced by some builders problem. Despite relatively tight conditions in and depressed housing markets in many areas labor markets, the trend in labor compensation were seen as pointing to weaker housing activity costs did not appear to be worsening, but some over the quarters ahead. With regard to the members expressed concern that wage pressures government sector, growth in federal spending might increase if inflation did not recede from its for goods and services was projected to be rela- recent pace. On the other hand, the intensity of tively restrained; in addition, many state and competition in many markets made it difficult or local governments were experiencing budgetary impossible for affected businesses to pass on cost problems that were likely to lead them to curb increases in the form of higher prices, and the spending or to raise taxes. addition of new plant capacity would heighten Financial developments introduced a degree of competition in a number of industries. On baluncertainty into the current economic situation; ance, little or no progress in reducing inflation on the whole, they were likely to exert some appeared to be in prospect for the quarters restraining influence on overall economic activ- immediately ahead, but if recent developments ity, though it was difficult to judge their quanti- did not lead to a worsening of inflationary expectative significance. Interest rates had increased tations, a decline in cost pressures and the unnoticeably since year-end; this rise probably re- derlying rate of inflation still appeared likely for flected growing concerns about inflation in con- the longer run in the context of sustained, modjunction with a stronger near-term outlook for erate growth in economic activity. the economy, but higher interest rates likely In the Committee's discussion of policy for the would damp demand, especially in construction intermeeting period ahead, most of the members and other interest-sensitive sectors. In addition, indicated a preference for maintaining an unmembers had heard numerous reports of reduced changed degree of pressure on reserve positions. availability of credit to smaller businesses, nota- While recent economic information could be bly home builders. Credit terms also were re- interpreted as pointing to a reduced risk of a ported to have been tightened by some lenders recession and to greater or at least more deeply on new auto loans and home equity loans. How- embedded inflationary pressures than were foreever, outside of lending for corporate restructur- seen earlier, these members concluded that it ing purposes and certain real estate transactions, would be premature to tighten reserve conditions it was difficult to find firm indications of greater on the basis of a few months of data, particularly credit rationing in aggregate financial statistics. in light of the special factors at work that made it Some tightening of credit standards probably was difficult to assess underlying trends. Some of a desirable development in terms of correcting these members also noted that various develop- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

530 Federal Reserve Bulletin • July 1990 ments, including the rise in most interest rates growth at a rate somewhat below the pace that since the beginning of the year, the more recent had prevailed on average since mid-1989 and strength of the dollar in foreign exchange mar- more comfortably within the Committee's range kets, indications of some slowing in monetary for the year would be a welcome development; growth, and the apparent tightening of credit such growth would enhance the prospects of standards could be viewed as having the same reconciling the objectives of sustained economic effects on the economy as a modest firming of expansion with the need for progress in bringing reserve conditions. Because a firming of policy inflation under control. would be unexpected, it could prove unsettling in In regard to possible intermeeting adjustments the foreign exchange markets and in financial in the degree of reserve pressure, a majority of markets more generally. On balance, in light of the members indicated that they preferred a the uncertainties that were involved, these mem- directive that did not bias prospective operations bers preferred to maintain a steady policy course toward tightening or easing. Many of these memfor now, subject to a careful evaluation during bers agreed that the risks of a recession appeared the intermeeting period of developments that to have receded and that intermeeting developmight signal some intensification of inflationary ments should be watched with special attention pressures. A few members, who were particu- to potential developments that might signal an larly concerned about the outlook for inflation, intensification of inflationary pressures. Nonepreferred an immediate move to somewhat theless, because of the considerable uncertainty tighter reserve conditions, especially if the direc- surrounding the near-term outlook, they did not tive for this meeting did not include a presump- want to include a presumption in the directive tion that any intermeeting adjustments were about the likely direction of any adjustment. In more likely to be in the direction of some tight- addition, adoption of a directive tilted toward ening. In their view, the risks to the expansion of some firming could be viewed as having greater some modest firming were minimal under current policy implications than usual because it would conditions, and those risks needed to be ac- represent a change from recent directives and cepted to place monetary policy more firmly on from the thrust of policy since the spring of 1989. an anti-inflationary course consistent with the It also would be inconsistent with the preference Committee's objectives. of a number of members for making any inter- During the Committee's discussion, members meeting adjustment toward tightening at this referred to a staff analysis that pointed to some stage only on the basis of relatively conclusive reduction in the expansion of M2 over the economic, financial, or money supply developmonths ahead on the assumption of an un- ments. Other members indicated that their conchanged degree of reserve pressures. It was cerns about the prospects for inflation inclined recognized that the rate of M2 growth could them to favor a directive that was tilted toward fluctuate over a relatively wide range during the possible firming during the intermeeting period. second quarter, as balances were adjusted in It was noted in this connection that even in the conjunction with large seasonal tax payments. absence of any firming during the period ahead, Additional uncertainty related to the possibility the subsequent release of such a directive would of a major increase in expenditures by the Res- underscore the Committee's readiness to take olution Trust Corporation, associated with re- prompt and appropriate steps to bring inflation solving the affairs of intervened thrift institu- under control. tions, that would tend to depress monetary At the conclusion of the Committee's discusgrowth, especially M3, by substituting in effect sion, all but two of the members indicated that Treasury financing for monetary liabilities. Apart they preferred or could accept a directive that from such special factors, monetary growth called for maintaining the current degree of prescould be expected to moderate somewhat in sure on reserve positions and that did not include lagged response to the earlier updrift in interest any presumption about the likely direction of any rates and less rapid expansion of nominal GNP. intermeeting adjustments in policy. Accordingly, A number of members commented that M2 slightly greater or slightly lesser reserve restraint Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 531 would be appropriate during the period ahead intermeeting period; much of the appreciation of the depending on progress toward price stability, dollar was against the yen. Growth of M2 and M3 picked up considerably in the strength of the business expansion, the February, reflecting strength in transaction and other behavior of the monetary aggregates, and deliquid accounts; partial data for March suggested some velopments in foreign exchange and domestic slowing from the February pace. financial markets. The unchanged reserve con- The Federal Open Market Committee seeks monditions contemplated at this meeting were ex- etary and financial conditions that will foster price stability, promote growth in output on a sustainable pected to be consistent with growth of M2 and basis, and contribute to an improved pattern of M3 at annual rates of about 6 percent and 4 international transactions. In furtherance of these percent respectively over the three-month pe- objectives, the Committee at its meeting in February riod from March through June. The intermeet- established ranges for growth of M2 and M3 of 3 to 7 ing range for the federal funds rate, which percent and 2x/i to 6Vi percent respectively, measured from the fourth quarter of 1989 to the fourth provides one mechanism for initiating consultaquarter of 1990. The monitoring range for growth of tion of the Committee when its boundaries are total domestic nonfinancial debt was set at 5 to 9 persistently exceeded, Was left unchanged at 6 percent for the year. The behavior of the monetary to 10 percent. aggregates will continue to be evaluated in the light of progress toward price level stability, movements At the conclusion of the meeting, the following in their velocities, and developments in the economy domestic policy directive was issued to the Fedand financial markets. eral Reserve Bank of New York: In the implementation of policy for the immediate future, the Committee seeks to maintain the existing degree of pressure on reserve positions. Taking The information reviewed at this meeting suggests account of progress toward price stability, the some pickup in the expansion of economic activity strength of the business expansion, the behavior of from the sluggish rate in the fourth quarter. Total the monetary aggregates, and developments in fornonfarm payroll employment increased sharply in eign exchange and domestic financial markets, January and February after growing at a reduced slightly greater reserve restraint or slightly lesser pace on average in previous months; a surge in the reserve restraint would be acceptable in the interservice-producing sector and a weather-related re- meeting period. The contemplated reserve condibound in construction were only partly offset by a net tions are expected to be consistent with growth of decline in manufacturing. The civilian unemploy- M2 and M3 over the period from March through June ment rate remained at 5.3 percent. In February, at annual rates of about 6 and 4 percent respectively. production in the manufacturing sector retraced its The Chairman may call for Committee consultation if large January decline, reflecting a swing in the pro- it appears to the Manager for Domestic Operations duction of motor vehicles. Consumer spending has that reserve conditions during the period before the been affected in recent months by fluctuations in next meeting are likely to be associated with a federal expenditures for motor vehicles and energy-related funds rate persistently outside a range of 6 to 10 items but on balance has expanded at a relatively percent. slow pace; outlays for goods have been weak while expenditures for services have remained strong. Unusually mild weather contributed to a higher level of Votes for this action: Messrs. Greenspan, Corhousing starts in January and February. Business rigan, Angell, Boehne, Johnson, Kelley, LaWare, capital spending, adjusted for inflation, appears to Ms. Seger, and Mr. Stern. Votes against this achave turned up after a decline in the fourth quarter, tion: Messrs. Boykin and Hoskins. reflecting a pickup in expenditures on motor vehicles and aircraft. The nominal U.S. merchandise trade Mr. Boykin dissented because he felt that the deficit widened in January from its low December risks were on the side of accelerating inflation, rate but remained at roughly its fourth-quarter average. Consumer prices rose more rapidly over January and he therefore preferred a policy directive and February, only partly as a result of increases in tilted toward increased reserve pressures should prices of food and energy. there be indications of greater-than-anticipated Most short- and intermediate-term interest rates strength in economic activity during the interhave risen a little since the Committee meeting on meeting period. He stated that an asymmetric February 6-7; rates in long-term debt markets show directive leaning toward firmer reserve pressures mixed changes over the period. In foreign exchange markets, the trade-weighted value of the dollar in would convey important and stabilizing informaterms of the other G-10 currencies rose over the tion to the financial markets about the serious- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

532 Federal Reserve Bulletin • July 1990 ness of the Federal Reserve in pursuing its goal cally in conjunction with similar transactions for of price stability. the U.S. Treasury's Exchange Stabilization Mr. Hoskins dissented because he preferred an Fund (ESF). Members commented that such immediate firming of reserve conditions. In his operations at times can serve a useful purpose, view, inflation pressures remained relatively especially in helping to avert or to correct disorstrong and suggested that greater monetary re- derly conditions in the foreign exchange markets. straint was necessary to facilitate progress At the same time, many expressed strong skeptoward the Committee's long-term goal of price ticism that intervention operations can by themstability. He was concerned that any delay in selves have a lasting effect on the value of the tightening policy might lead to the need for more dollar in foreign currency markets, given that the aggressive actions later. effects of these operations on bank reserves are routinely sterilized. However, some argued that even sterilized intervention can, in some circum- 2. Authorization for stances, have desired effects on exchange rates, Domestic Open Market Operations especially if carried out in concert with parallel operations by the monetary authorities of other The Committee approved a temporary increase nations or if such operations signal adjustments of $4 billion, to a level of $12 billion, in the limit to fiscal or monetary policies. between Committee meetings on changes in Sys- Over the past year, very large purchases of tem Account holdings of U.S. government and foreign currencies had raised System Account federal agency securities. The increase amended holdings to historically high levels, although relparagraph 1(a) of the Authorization for Domestic ative to U.S. imports such holdings were still Open Market Operations and was effective for moderate compared with those of other counthe intermeeting period ending with the close of tries. Some members expressed concern that the business on May 15, 1990. increased System Account holdings carried the risk of sizable losses if the dollar were to Votes for this action: Messrs. Greenspan, Corstrengthen substantially. rigan, Angell, Boehne, Boykin, Hoskins, Johnson, Kelley, LaWare, Ms. Seger, and Mr. Stern. Votes While recognizing the potential difficulties that against this action: None. were involved, a majority of the members agreed that continued System operations in the foreign This action was taken on the recommendation exchange markets in association with Treasury of the Manager for Domestic Operations. The transactions can serve a useful purpose. Such Manager had advised that the current leeway of operations can contribute to national economic $8 billion for changes in System Account holdobjectives under certain circumstances, and the ings might not be sufficient over the intermeeting System should continue to participate in the period because of a large projected rise in Treaformulation of exchange rate policy. However, sury balances at the Federal Reserve Banks after they also felt that the cumulative amount of the tax payment date in mid-April. foreign currency operations for the System Account might have been more limited than had 3. Authorization for been the case over the past year. Foreign Currency Operations At the conclusion of this discussion, the Committee approved an increase from $21 billion to At this meeting, the Committee reviewed its $25 billion in the limit on holdings of foreign operations in the foreign currency markets. currencies that is specified in paragraph l.D of Transactions for the System Open Market Ac- the Committee's Authorization for Foreign Curcount in those markets are carried out within the rency Operations. That limit applies to the overgeneral framework of policy on exchange rates all open position in all foreign currencies held in established by the U.S. Treasury in consultation the System Open Market Account and is based with the Federal Reserve and are implemented at on historical acquisition costs. The limit had the Federal Reserve Bank of New York, typi- been increased in steps from $12 billion in May Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 533 1989 to $21 billion in December 1989. While being warehoused for the ESF. The purpose of purchases of foreign currencies had been rela- the facility is to supplement as needed the retively limited in recent months, such purchases sources of the Treasury and the ESF for financing in combination with accruing interest on holdings their purchases of foreign currencies. Warehoushad raised the total to nearly $21 billion at the ing involves spot purchases of foreign currencies time of the meeting. from the Treasury or the ESF and simultaneous forward sales of the same currencies at the same exchange rates to the Treasury or the ESF. Under Votes for this action: Messrs. Greenspan, Corrigan, Boehne, Boykin, Johnson, Kelley, a longstanding interpretation by the Committee Ms. Seger, and Mr. Stern. Votes against these and its General Counsel, warehousing transacactions: Messrs. Angell, Hoskins, and LaWare. tions are open market operations in foreign currencies that are authorized under the Federal Messrs. Angell, Hoskins, and LaWare dis- Reserve Act. Warehousing is included under sented because they did not want to provide paragraphs l.A and l.B of the Committee's Au- System funding for additional intervention in the thorization for Foreign Currency Operations and foreign exchange markets. They were uncom- its use is referenced under paragraph 3.B of the fortable with the large holdings of foreign curren- Committee's Foreign Currency Directive. cies now in the System Account and felt that At this meeting, the Committee agreed to aggressive intervention policies could lead to accommodate any further Treasury and ESF sizable additional increases in such holdings. requests for financing under the warehousing Messrs. Angell and Hoskins expressed concern facility up to a limit of $15 billion. that the intervention carried out over the past year had undermined the credibility of the Sys- Votes for this action: Messrs. Greenspan, tem's monetary policy by contributing to uncer- Corrigan, Boehne, Boykin, Johnson, Kelley, tainty concerning the System's priority toward Ms. Seger, and Mr. Stern. Votes against these achieving price level stability. Mr. Hoskins also actions: Messrs. Angell, Hoskins, and LaWare. believed that intervention was ineffective unless Messrs. Angell, Hoskins, and LaWare indicated accompanied by changes in monetary policy that that in light of the significant policy issues raised by would be inconsistent with price stability objecthe duration and scale of the intervention activity, tives. Mr. LaWare felt that massive and frequent they were unable to concur, as a matter of policy, operations tended to reduce the effectiveness of with the Committee's decisions to increase further intervention when the latter might otherwise the authorization for warehousing foreign currenprove useful in countering disorderly conditions cies. Messrs. Angell and Hoskins also were conin the exchange markets. cerned that substantial increases in the authorized limits on holdings of foreign currencies by the Fed- 4. Agreement to "Warehouse" eral Reserve System for the U.S. Treasury and the Foreign Currencies ESF under the warehousing authority were inappropriate in the absence of a definitive indication of On September 19, 1989, the Committee had congressional intent in this area. The transactions in approved an increase from $5.0 billion to $10.0 question, which are repurchase agreements that billion in the amount of eligible foreign curren- have the characteristics of a loan to the Treasury, cies that the System was prepared to "ware- could be viewed as avoiding the congressional aphouse" for the Treasury and the ESF. Currently, propriations process called for under the Constitua total of $9.0 billion of such currencies was tion. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

535 Legal Developments FINAL RULE—AMENDMENT TO Section 229.13—Exceptions REGULATION CC The Board of Governors is amending 12 C.F.R. Part (h) Availability of deposits subject to exceptions. * * * 229, its Regulation CC (Availability of Funds and (4) For the purposes of paragraphs (h)(1), (h)(2), and Collection of Checks). The regulation requires banks (h)(3) of this section, an extension of up to five to make funds available to their customers within business days for local checks and six business days specified times, to disclose their funds availability for nonlocal checks is a reasonable period. A longer policies to their customers, and to handle returned extension may be reasonable, but the bank has the checks expeditiously. The final amendments include burden of so establishing. changes to the model forms and other technical and clarifying modifications to the regulation and its Offi- 4. In section 229.30, paragraph (c) is revised to read as cial Commentary (Appendix E to the regulation). The follows: Board has determined not to adopt the proposed amendment that would shorten the time requirements for giving notice of nonpayment. The amendments to section 229.13(h)(4) and its Section 229.30—Paying Bank's Responsibility Commentary are effective September 1, 1990. The for Return of Checks amendment to the Commentary to section 229.36(e) is effective February 1, 1991. All other amendments are effective May 22, 1990. 12 C.F.R. Part 229 is amended (c) Extension of deadline. The deadline for return or as follows: notice of nonpayment under the UCC or Regulation J (12 C.F.R. Part 210) is extended: Part 229—I Amended] (1) if a paying bank, in an effort to expedite delivery of a returned check to a bank, uses a means of 1. The authority citation for Part 229 continues to read delivery that would ordinarily result in the returned check being received by the bank to which it is sent as follows: on or before the receiving bank's next banking day Authority: Title VI of Pub. L. 100-86, 101 Stat. 552, following the otherwise applicable deadline; this 635, 12 U.S.C. 4001 et seq. deadline is extended further if a paying bank uses a highly expeditious means of transportation, even if this means of transportation would ordinarily result 2. In section 229.3, paragraph (a)(2) is revised to read in delivery after the receiving bank's next banking as follows: day; or (2) if the deadline falls on a Saturday that is a Section 229.3—Administrative Enforcement banking day, as defined in the applicable UCC, for the paying bank, and the paying bank uses a means (a) Enforcement agencies. * * * of delivery that would ordinarily result in the re- (2) Section 8 of the Federal Deposit Insurance Act, turned check being received by the bank to which it by the Director of the Office of Thrift Supervision in is sent prior to the cut-off hour for the next prothe case of savings associations the deposits of cessing cycle, in the case of a returning bank, or on which are insured by the Federal Deposit Insurance the next banking day, in the case of a depositary Corporation; and bank, after midnight Saturday night. 3. In section 229.13, paragraph (h)(4) is revised to read 5. In section 229.35, paragraph (a) is revised to read as as follows: follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

536 Federal Reserve Bulletin • July 1990 Section 229.35—Indorsements receive your deposit. Electronic direct deposits will be available on the day we receive the deposit. Once they are (a) Indorsement standards. A bank (other than a available, you can withdraw the funds in cash and we will paying bank) that handles a check during forward use the funds to pay checks that you have written. collection or a returned check shall legibly indorse the check in accordance with the indorsement standard set forth in Appendix D to this part. b. In model form C-3, the heading is revised, and under the subheading "Longer Delays May Apply," the second sentence of the first paragraph is 6. In section 229.36, a new sentence is added to the revised to read as follows: end of paragraph (e) concluding text to read as follows: Section 229.36—Presentment and Issuance of C-3. Next-day availability, case-by-case holds Checks * * * ** to statutory limits, and section 229.13 exceptions (permanent schedule) (e) Issuance of payable through checks. * * * Q) * * * (2) * * * * * * A bank is responsible for damages under Longer Delays May Apply section 229.38 of this part to the extent that a check payable by it and not payable through another bank is * * * Depending on the type of check that you deposit, labelled as provided in this section. funds may not be available until the fifth business day after the day of your deposit. * * * APPENDIX A—[AMENDED] c. In model forms C-4, C-5, C-6, and C-l, a new 7. In Appendix A, two new numbers are added, in paragraph and a subheading is added immediately numerical order, to the list of numbers under the preceding the subheading "Next-Day Availability," subheading "Federal Home Loan Banks" as follows: and the first sentence under the subheading "Next- Day Availability" is revised to read as follows: Federal Home Loan Banks * * * Same-Day Availability 0654 0348 0 Funds from electronic direct deposits to your account * * * will be available on the day we receive the deposit. 1110 1083 7 Next-day Availability * * * Funds from the following deposits are available on the first business day after the day of your deposit: APPENDIX C—[AMENDED] U.S. Treasury checks that are payable to you. Wire transfers. 8. Appendix C is amended as set forth below: Checks drawn on [bank name] (unless [any limitations related to branches in different states or checka. In model forms C-l, C-2, and C-3, the first processing regions]). paragraph is revised to read as follows: Your Ability to Withdraw Funds at [bank name d. In model forms C-4, C-6, and C-7, the second and location] paragraph under the subheading "Other Check Deposits" is revised to read as follows: Our policy is to make funds from your deposits available to you on the first business day after the day we Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 537 Other Check Deposits the second paragraph is deleted, and the third paragraph is revised to read as follows: If the first four digits of the routing number (1234 in the Special Rules for New Accounts examples above) are [local numbers], then the check is a local check. Otherwise, the check is a nonlocal check. Some checks are marked "payable through" and have a Funds from electronic direct deposits to your acfour or nine-digit number nearby. For these checks, use count will be available on the day we receive the the four-digit number (or the first four digits of the deposit. Funds from deposits of cash, wire transfers, nine-digit number), not the routing number on the bottom and the first $5,000 of a day's total deposits of cashof the check, to determine if these checks are local or ier's, certified, teller's, traveler's, and federal, state nonlocal. Our policy is to make funds from local and and local government checks will be available on the nonlocal checks available as follows. first business day after the day of your deposit if the deposit meets certain conditions. For example, the checks must be payable to you (and you may have to e. In model form C-5, the heading is revised, and use a special deposit slip). The excess over $5,000 will two new sentences are added at the beginning of be available on the ninth business day after the day of the second paragraph under the subheading "Othyour deposit. If your deposit of these checks (other er Check Deposits" to read as follows: than a U.S. Treasury check) is not made in person to one of our employees, the first $5,000 will not be C-5. Holds to statutory limits on all deposits available until the second business day after the day of (permanent schedule, includes chart) your deposit. * * * * * h. In form C-7, under the subheading "Special Other Check Deposits Rules for New Accounts," the second, third, and fourth sentences of the first paragraph are deleted Some checks are marked "payable through" and and the second paragraph is revised to read as have a four or nine-digit number nearby. For these follows: checks, use this four-digit number (or the first four digits of the nine-digit number), not the routing num- Special Rules for New Accounts ber on the bottom of the check, to determine if these checks are local or nonlocal. * * * Funds from electronic direct deposits to your account will be available on the day we receive the f. In model form C-5, in the chart under the deposit. Funds from deposits of cash, wire transfers, subheading "Other Check Deposits," the second and the first $5,000 of a day's total deposits of cashand fourth entries are revised to read as follows: ier's, certified, teller's, traveler's, and federal, state and local government checks will be available on the first business day after the day of your deposit if the deposit meets certain conditions. For example, the When funds are First four digits When funds are available if a checks must be payable to you (and you may have to from routing number available: deposit is made on use a special deposit slip). The excess over $5,000 will a Monday be available on the ninth business day after the day of * * * * * * * * * * * * * ** your deposit. If your deposit of these checks (other Remaining funds Wednesday. than a U.S. Treasury check) is not made in person to on the second business day one of our employees, the first $5,000 will not be after the day of available until the second business day after the day of your deposit. your deposit. * * * * * * * * ** * * * ** Remaining funds Monday of the on the fifth following week. business day i. In model clause C-8, the last sentence is deafter the day of your deposit. leted. j. In model form C-15, the heading is revised, a new entry to be the first entry in the chart is g. In forms C-2, C-3, C-4, C-5, and C-6, under the added, and the third and fourth entries are revised subheading "Special Rules for New Accounts," to read as follows: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

538 Federal Reserve Bulletin • July 1990 C-15. Notice at locations where employees ac- * * * On a calendar day that is a banking day for the cept consumer deposits (permanent schedule) branch or other location of the depositary bank at which the account is maintained, a deposit received at an ATM before the ATM's cut-off hour is considered Funds Availability Policy deposited on that banking day, and a deposit received at an ATM after the ATM's cut-off hour is considered deposited on the next banking day of the branch or When funds can be Description of deposit withdrawn by cash or other location where the account is maintained. On a check calendar day that is not a banking day for the accountholding location, all ATM deposits are considered DDiirreecctt ddeeppoossiittss.. The day we receive the deposit. received on that location's next banking day. This rule * * * ** * * * ** for determining the day of deposit would also apply to a deposit to an off-premise facility, such as a night Local checks. The second business day after the day of depository or lock box, which is considered deposited deposit. when removed from the facility and available for Nonlocal checks. The fifth business day processing under section 229.19(a)(3). If an unstaffed after the day of facility, such as a night depository or lock box, is on deposit. branch premises, the day of deposit is determined by the banking day at the branch at which the deposit is k. In model form C-15A, the heading is revised, a received, whether or not it is the branch at which the new sentence is added after the first sentence of account is maintained. the paragraph, and the last sentence of the paragraph is revised to read as follows: C-15A. Notice at locations where employees (k) Check * * * The definition of "check" does not accept consumer deposits (case-by-case holds) include an instrument payable in foreign currency (permanent schedule) (i.e., other than in United States money as defined in 31 U.S.C. 5101), a credit card draft (i.e., a sales draft used by a merchant or a draft generated by a Funds Availability Policy bank as a result of a cash advance), or an ACH debit transfer. * * * * * * Funds from electronic direct deposits will be available on the day we receive the deposit. * * * Then, the funds will generally be available by the fifth (r) Local check * * * Until the labelling requirebusiness day after the day of deposit. ments in section 229.36(e) for payable through 1. Model clauses C-19 and C-19A are deleted. checks become effective on February 1, 1991, there may be cases where the payable through bank will be designated only by routing number APPENDIX E—[AMENDED] and will not be named on the check. * * * For payable through checks that meet the labelling 9. Appendix E is amended as set forth below: requirements of section 229.36(e), the depositary bank may rely on the four-digit routing symbol of a. In the Commentary to section 229.2, the last the paying bank that is printed on the face of the four sentences of the third paragraph of para- check as required by that section, e.g., in the title graphs (f) and (g) are deleted and four new sen- plate, but not on the first four digits of the payable tences are added to the end, the first sentence of through bank's routing number printed in magthe last paragraph of paragraph (k) is revised, the netic ink in the MICR line or in fractional form, to next to last sentence of paragraph (r) is revised determine whether the check is local or nonlocal. and a new sentence is added to the end, and a new sentence is added to the end of the first paragraph of paragraph (u) to read as follows: (u) Noncash item. * * * To qualify as a noncash item, an item must be handled as such and may Section 229.2—Definitions not be handled as a cash item by the depositary bank. (f) and (g) Banking Day and Business Day. * Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 539 b. In the Commentary to section 229.13, in para- sentences are added to the end of the second paragraph (h), the second sentence of the first para- graph of paragraph (c) to read as follows: graph, the first sentence of the second paragraph, and the fourth paragraph are revised to read as Section 229.19—Miscellaneous follows: (a) When funds are considered deposited. * * * For Section 229.13—Exceptions receipt of deposits at ATMs or off-premise facilities, such as night depositories or lock boxes, the depositary bank may establish a cut-off hour of 12:00 noon or later (either local time of the branch or other location (h) Availability of deposits subject to exceptions. of the depositary bank at which the account is main- * * * This provision establishes that an extension of tained or local time of the ATM or off-premise faciliup to five business days for local checks and six ty). The depositary bank must use the same method business days for nonlocal checks is reasonable. * * * for establishing the cut-off hour for all ATMs and For example, assume a bank extended the hold on a off-premise facilities used by its customers. The choice local check deposit by five business days based on its of cut-off hour must be reflected in the bank's internal reasonable cause to believe that the check is uncolprocedures, and the bank must inform its customers of lectible. *** * * * ** the cut-off hour upon request. * * * Five business days for local checks and six business days for nonlocal checks, in addition to the time period (c) Effect on policies of depositary bank. * * * For provided in the schedule, should provide adequate example, even if a check is returned or a notice of time for the depositary bank to learn of the nonpaynonpayment is received after the time by which ment of virtually all checks that are returned. funds must be made available for withdrawal in accordance with this regulation, the depositary bank may charge back the customer's account for the full c. In the Commentary to section 229.18, a new amount of the check. (See section 229.33(d) and paragraph is added after the last paragraph of Commentary.) paragraph (e) to read as follows: Section 229.18—Additional Disclosure e. In the Commentary to section 229.30, the Requirements heading and first two paragraphs of paragraph (c) are revised to read as follows: * * * ** (e) Changes in policy. * * * Section 229.30—Paying Bank's Responsibility In disclosing changes due to the implementation of for Return of Checks the permanent schedule, a bank may provide notice in any form that is clear and conspicuous. For example, in disclosing the change in the maximum period for (c) Extension of deadline. This paragraph permits case-by-case holds, banks that used the previous ver- extension of the midnight deadline, but not of the duty sion of Form C-3 could use language such as the of expeditious return, in two circumstances: following on account statements or inserts: "Our (1) A paying bank may have a courier that leaves disclosure on funds availability indicated that, in cer- after midnight to deliver its forward collection tain circumstances, funds from deposits would not be checks. This paragraph removes the constraint of available until the seventh business day following the the midnight deadline for returned checks if the day of your deposit. Effective September 1, 1990, that returned check reaches either the depositary bank period [was/will be] reduced to five business days." A or the returning bank to which it is sent on that bank reserving the right to apply the cash withdrawal bank's banking day following the expiration of the limitation in section 229.12(d) when invoking a case- midnight deadline or other applicable time for reby-case hold should indicate that the period is reduced turn. The extension also applies if the check reaches to six, rather than five, business days, the bank to which it is sent later than the close of d. In the Commentary to section 229.19, the third that bank's banking day, if highly expeditious means sentence in the fifth paragraph of paragraph (a) is of transportation are used. For example, a West revised and two new sentences are added immedi- Coast paying bank may use this further extension to ately following the third sentence, and two new ship a returned check by air courier directly to an Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

540 Federal Reserve Bulletin • July 1990 East Coast depositary bank even if the check arrives g. In the Commentary to section 229.35, a new after the close of the depositary bank's banking day. sentence is added before the last sentence of the (2) A paying bank may observe a banking day, as first paragraph of paragraph (a) to read as follows: defined in the applicable UCC, on a Saturday, which is not a business day and therefore not a banking day Section 229.35—Indorsements under Regulation CC. In such a case, the UCC midnight deadline for checks received on Friday (a) Indorsement standards. * * * The regulation places might require the bank to return the checks by a duty on banks to ensure that their indorsements are midnight Saturday. However, the bank may not legible.* * * have couriers leaving on Saturday to carry returned checks, and even if it did, the returning or depositary bank to which the returned checks were sent h. In the Commentary to section 229.36, five new might not be open until Sunday night or Monday sentences are added after the second sentence in morning to receive and process the checks. This the second paragraph of paragraph (e) to read as paragraph extends the midnight deadline if the re- follows: turned checks reach the returning bank by a cut-off hour (usually on Sunday night or Monday morning) Section 229.36—Presentment and Issuance of that permits processing during its next processing Checks * * * ** cycle or reach the depositary bank by the cut-off hour on its next banking day following the Saturday (e) Issuance of payable through checks. * * * midnight deadline. * * * Similarly, a bank may be liable under section 229.38 if a check payable by it that is not payable The time limits that are extended in each case are through another bank is labelled as provided in this the paying bank's midnight deadline in UCC section section. For example, a bank that holds checking 4-301 and 4-302 and section 210.12 of Regulation J accounts and processes checks at a central location but (12 C.F.R. 210.12). As these extensions are designed has widely-dispersed branches may be liable under this to speed (section 229.30(c)(1)), or at least not slow section if it labels all of its checks as "payable through" (section 229.30(c)(2)), the overall return of checks, no a single branch and includes the name, address, and four-digit routing symbol of another branch. These modification or extension of the expeditious return checks would not be payable through another bank and requirements in section 229.30(a) is required. should not be labelled as payable through checks. (All of a bank's offices within the United States are considered part of the same bank; see section 229.2(e).) In this f. In the Commentary to section 229.34, the first example, the bank by which the checks are payable sentence of paragraph (a) is revised to read as could be liable to a depositary bank that suffers a loss, follows: such as lost interest or liability under subpart B, due to the mislabelled check. * * * i. In the Commentary to Appendix C, under the Section 229.34—Warranties by Paying Bank subheading "Models C-l Through C-l Generaland Returning Bank ly," the second and fifth paragraphs are deleted, the last paragraph is revised, and a new paragraph (a) Warranty of returned check. This paragraph includes is added at the end thereof to read as follows: warranties that a returned check, including a notice in lieu of return, was returned by the paying bank, or in the case of a check payable by a bank and payable through another APPENDIX C—MODEL FORMS, CLAUSES, AND bank, the bank by which the check is payable, within the NOTICES deadline under the UCC, Regulation J, or section 229.30(c); that the paying or returning bank is authorized to return the check; that the returned check has not been materially altered; and that, in the case of a notice in lieu Models C-l through C-7 generally. * * * of return, the original check has not been and will not be returned for payment (see the Commentary to section 229.30(f)). * * * While section 229.10(b) of the regulation requires next-day availability for electronic payments, Treasury regulations (31 C.F.R. Part 210) and ACH asso- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 541 ciation rules require that preauthorized credits ("di- First Formoso, Inc. rect deposits") be made available on the day the Formoso, Kansas bank receives the funds. Model Forms C-l through C-7 reflect these rules. Wire transfers, however, are Order Approving the Acquisition of a Bank Holding not governed by Treasury or ACH rules, but banks Company generally make funds from wire transfers available on the day received or on the business day following First Formoso, Inc., Formoso, Kansas ("First Forreceipt. Banks should ensure that their disclosures moso"), a bank holding company within the meaning reflect the availability given in most cases for wire of the Bank Holding Company Act ("BHC Act"), has transfers. applied for the Board's approval under section 3(a)(3) Banks that have used earlier versions of the model of the BHC Act (12 U.S.C. § 1842(a)(3)) to acquire 100 forms or clauses (such as those forms that gave Social percent of the voting shares of Mankato Bankshares, Security benefits and payroll payments as examples of Inc., Mankato, Kansas ("MBI"), and thereby acquire preauthorized credits available the day after deposit) The First National Bank in Mankato, Mankato, Kanare protected from civil liability under section sas ("Mankato Bank").1 229.21(e). Banks are encouraged, however, to use Notice of the application, affording interested percurrent versions of the forms when reordering or sons an opportunity to submit comments, has been reprinting supplies of forms. published (55 Federal Register 5067 (1990)). The time for filing comments has expired, and the Board has considered the application and all comments received j. In the Commentary to Appendix C, under the in light of the factors set forth in section 3(c) of the subheading "Model C-3," a new sentence is BHC Act. added to the end thereof to read as follows: First Formoso and MBI are among the smaller commercial banking organizations in Kansas, control- Model C-3 ling together deposits of $21.6 million, representing less than one percent of the total deposits in commer- * * * A bank reserving the right to impose the cash cial banking organizations in the state.2 Consummawithdrawal limitation in section 229.12(d) should tion of this proposal would not have a significantly disclose that funds may not be available until the adverse effect on the concentration of banking resixth (rather than fifth) business day in the first sources in Kansas. paragraph under the heading "Longer Delays May Formoso Bank and Mankato Bank compete di- Apply." rectly in the Jewell County banking market.3 Fork. In the Commentary to Appendix C, under the moso Bank is the fifth largest bank of the six banks subheading "Model C-5," the references to that operate in the market, controlling deposits of "C-4" are revised to read "C-7." $6.0 million, representing 10.6 percent of the total 1. In the Commentary to Appendix C, under the deposits in commercial banking organizations in the subheading "Model C-15 and C-15A," the second market. Mankato Bank is the largest commercial sentence is revised to read as follows: bank in the market, controlling deposits of $15.6 million, representing 27.5 percent of the total depos- Model C-15 and C-15A its in commercial banking organizations in the market. Upon consummation of this proposal, First * * * Model C-15 is based on an availability policy that Formoso would become the largest commercial is the same as the permanent schedule in the regulation banking organization in the market, controlling 38.1 and the policy reflected in models C-5 and C-7. * * * percent of the total deposits in commercial banking m. In the Commentary to Appendix C, the sub- organizations in the market. The market is highly heading "Model C-19 and C-19A" and the accompanying paragraph are deleted. 1. After consummation of this proposal, First Formoso will merge its sole subsidiary bank, Formoso Bank, Formoso, Kansas, into ORDERS ISSUED UNDER BANK HOLDING Mankato Bank. The principal shareholder of First Formoso will provide the funding for the proposed acquisition. Formoso Bank will COMPANY ACT operate at the current location of Mankato Bank and will operate a branch in Formoso, Kansas. Orders Issued Under Section 3 of the Bank 2. All banking data are as of December 31, 1989. 3. The Jewell County banking market is approximated by Jewell Holding Company Act County, Kansas. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

542 Federal Reserve Bulletin • July 1990 concentrated, and the Herfindahl-Hirschman Index County has a population-per-bank ratio of 767, sub- ("HHI") would increase by 583 points to 2551.4 stantially lower than the statewide average of 4360, Although consummation of this proposal would re- and, as noted above, five commercial banking organisult in the loss of a competitor in a highly concentrated zations would remain in the market after consummamarket, the Board believes that certain factors miti- tion of the proposal.8 gate the potential anticompetitive effects of this pro- Consequently, the Board has determined that, in posal. The Board has placed significant weight on the view of all of the facts of record and in the particular fact that five banks will remain in the market following context of the market conditions in this case, consumconsummation of this proposal. In addition, a number mation of this proposal would not have a significantly of factors indicate that the ability of the market to adverse effect on competition or the concentration of support a large number of competitors has deterio- banking resources in the Jewell County banking marrated. Jewell County is a sparsely populated area that ket. Thus, competitive effects are consistent with has experienced a substantial and sustained decline in approval. population.5 Formoso, Kansas, which is the commu- The financial and managerial resources of Formoso, nity in which Formoso Bank operates its only office, MBI and their subsidiaries are consistent with aphas a population of approximately 170. Formoso is not proval. After the proposed acquisition, First Formoso located on any major road and currently supports only intends to operate a full-service branch facility at the two full-time businesses other than Formoso Bank. present location of Formoso Bank, and thus banking Mankato, Kansas, the community in which Mankato services would be maintained in Formoso. Accord- Bank operates its only office, is located less than 10 ingly, considerations relating to convenience and miles from Formoso, Kansas. Mankato is the largest needs of the community to be served are also consistown in Jewell County with a population of approxi- tent with approval. mately 1000.6 Based on the foregoing and other facts of record, the Jewell County's per capita retail sales and per capita Board has determined that the application should be, income are lower than the average of five adjacent and hereby is, approved. The proposal shall not be counties, the average of all rural counties in Kansas, consummated before the thirtieth calendar day followand the average of the state as a whole. While bank ing the effective date of this Order, or later than three deposits in Jewell County have grown during the months after the effective date of this Order, unless period between 1983 and 1989, the rate of deposit such period is extended for good cause by the Board or growth in this market has been considerably lower by the Federal Reserve Bank of Kansas City, acting than the average rate of deposit growth in adjacent pursuant to delegated authority. rural counties and in the state as a whole.7 Jewell By order of the Board of Governors, effective May 9, 1990. 4. Under the revised Department of Justice Merger Guidelines (49 Voting for this action: Vice Chairman Johnson and Gover- Federal Register 26,823 (June 29, 1984)), any market in which the nors Seger and LaWare. Abstaining from this action: Goverpost-merger HHI is over 1800 is considered highly concentrated, and nor Angell. Absent and not voting: Chairman Greenspan and the Department of Justice is likely to challenge a merger that increases the HHI by more than 50 points unless other factors indicate that the Governor Kelley. merger will not substantially lessen competition. The Department of Justice has informed the Board that a bank merger or acquisition is JENNIFER J. JOHNSON likely to be challenged (in the absence of other factors indicating an Associate Secretary of the Board anticompetitive effect) if the post-merger HHI is at least 1800 and the merger increases the HHI by at least 200 points. The Department of Justice has stated that the higher than normal HHI thresholds for SunTrust Banks, Inc. screening bank mergers for anticompetitive effects implicitly recog- Atlanta, Georgia nize the competitive effect of limited-purpose lenders and other nondepository financial entities. 5. Census data indicate that Jewell County's population declined by Order Approving Acquisition of Shares of a Bank 13.8 percent between 1970 and 1980. U.S. Bureau of the Census, Census of Population (1970 and 1980). Since 1980, the population has continued its substantial decline, decreasing by an estimated 12.2 SunTrust Banks, Inc., Atlanta, Georgia ("SunTrust"), percent to approximately 4600. The 1990 Rand McNally Commercial a bank holding company within the meaning of the Atlas and Marketing Guide. During the period 1980 to 1988, Jewell Bank Holding Company Act ("BHC Act"), has ap- County experienced the second greatest rate of population decline among the 105 counties in Kansas. Id. In comparison, the population in Kansas has increased by 11.0 percent since 1970. 6. Since 1970, the population in Mankato, Kansas, has decreased by 8. Only ten of the 268 counties in the United States with estimated approximately 25 percent. populations of 5000 or less, including Jewell County, and only six of 7. Jewell County's rate of growth in deposits between 1983 and 1989 the 74 counties with estimated populations of 4000 to 5000 are served averaged 7.6 percent while, in the same period, deposit growth in by more than five banks. Of the ten counties in Kansas with populaadjacent rural counties averaged 18.0 percent and the rate of deposit tions of 4000 to 5000, only Jewell County is served by more than five growth in the state of Kansas as a whole averaged 29.7 percent. banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 543 plied for the Board's approval under section 3(a)(3) of controls approximately $419 million in deposits, repthe BHC Act (12 U.S.C. § 1842(a)(3)) to acquire up to resenting approximately 31.2 percent of total deposits 24.99 percent of the voting shares of Peoples Bank of in commercial banks in the market. SunTrust controls Lakeland, Lakeland, Florida ("Bank"). SunTrust has the fourth largest bank in the market, with approxipreviously received the Board's approval to acquire mately $163.7 million in deposits, representing approxup to 15 percent of the voting shares of Bank.1 imately 12.3 percent of total deposits in commercial Notice of the application, affording interested per- banks in the market. sons an opportunity to submit comments, has been If this proposal involved the acquisition of control of published (54 Federal Register 22,367 (1989)). The Bank by SunTrust, it appears likely, based on the facts time for filing comments has expired, and the Board as presented, that consummation of the proposal has considered the application and all comments re- would lessen competition in the West Polk County ceived in light of the factors set forth in section 3(c) of banking market.6 In that event, the Board would have the BHC Act (12 U.S.C. § 1842(c)). to consider whether consummation of this proposal The Board has previously indicated that the acqui- would have such a detrimental effect on competition in sition of less than a controlling interest in a bank is not this market as to warrant denial of this application. a normal acquisition for a bank holding company.2 Based on the facts of record and SunTrust's com- However, the requirement in section 3(a)(3) of the mitments, however, the Board has concluded that BHC Act that the Board's prior approval be obtained SunTrust would not acquire control or the ability to before a bank holding company acquires more than 5 exercise a controlling influence over Bank upon conpercent of the voting shares of a bank suggests that summation of this proposal. The record shows that Congress contemplated the acquisition by bank hold- SunTrust has applied to acquire no more than 24.99 ing companies of between 5 and 25 percent of the percent of the shares of Bank and that over 50 percent voting shares of banks. Accordingly, the Board has of Bank's voting shares are owned by a family (not previously approved the acquisition by a bank holding connected with SunTrust) that has controlled Bank for company of less than a controlling interest in a bank.3 at least 37 years, and whose members currently serve Section 3(c) of the BHC Act requires the Board to as chairman and vice chairman of Bank. In addition, analyze the competitive, financial, managerial, future SunTrust has committed that it will not, without prior prospects, and convenience and needs considerations consent from the Board: in every case under section 3 of the BHC Act. In (1) take any action that would cause Bank to become accordance with that section, the Board has consid- a subsidiary of SunTrust; ered all of these factors in its analysis of this applica- (2) acquire or retain shares that would cause the tion. combined interests of SunTrust and its officers, SunTrust is the second largest commercial banking directors, and affiliates to equal or exceed 25 percent organization in Florida, controlling total domestic de- of the outstanding voting shares of Bank; posits of approximately $13.3 billion, representing (3) exercise or attempt to exercise a controlling approximately 13 percent of all deposits in commercial influence over the management or policies of Bank; banks in the state. Bank is the 20th largest commercial (4) seek or accept representation on the board of banking organization in Florida, controlling deposits directors of Bank; of approximately $419 million, representing less than 1 (5) have or seek to have any representative serve as percent of all deposits in commercial banks in the an officer, agent, or employee of Bank; state.4 SunTrust and Bank compete in the West Polk (6) propose a director or slate of directors in oppo- County banking market.5 Bank is the largest of nine sition to a nominee or slate of nominees proposed by commercial banking organizations in the market and the management or board of directors of Bank; (7) solicit or participate in soliciting proxies with respect to any matter presented to the shareholders of Bank; 1. Sun Banks, Inc., 71 Federal Reserve Bulletin 243 (1985); see also SunTrust Banks, Inc., 71 Federal Reserve Bulletin 176 (1985). (8) attempt to influence the dividend policies or 2. Id. See also Midlantic Banks, Inc., 70 Federal Reserve Bulletin practices of Bank; 776 (1984); State Street Boston Corporation, 67 Federal Reserve Bulletin 862 (1981). 3. Id. See also The Summit Bancorporation, 75 Federal Reserve Bulletin 712 (1989); Comerica Incorporated, 69 Federal Reserve Bulletin (1983); Lincoln National Company, 63 Federal Reserve 6. Acquisition of Bank by SunTrust would increase the Herfindahl- Bulletin 405 (1977), and First Piedmont Corporation, 59 Federal Hirschman Index ("HHI") from 1952 to 2728, an increase of 776 Reserve Bulletin 456 (1973). points. If 50 percent of the deposits in thrift institutions in the market 4. All banking data are as of June 30, 1989. are included, the HHI would rise from 1544 to 2127, an increase of 583 5. The West Polk County banking market consists of Lakeland, points. Under either of these assumptions, the proposal might be Mulberry, and Fort Meade, Florida. challenged under the Department of Justice Merger Guidelines. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

544 Federal Reserve Bulletin • July 1990 (9) attempt to influence the loan and credit decisions companies compete in the market. On the basis of all or policies of Bank, the pricing of services, any of the facts of record in this case, including reliance on personnel decisions, the location of any offices, SunTrust's commitments not to control Bank, the branching, the hours of operation, or similar activi- Board has determined that competitive factors in this ties of Bank; or case do not warrant denial of this proposal. (10) enter into any other banking or nonbanking In considering the convenience and needs of the transactions with Bank, except that SunTrust's sub- communities to be served, the Board has taken into sidiary bank, Sun Bank, N.A., may continue to account the record of SunTrust's subsidiary banks conduct only correspondent banking business and under the Community Reinvestment Act (12 U.S.C. limited government and agency securities trading § 2901 et seq.) ("CRA"). The CRA requires the fedwith Bank, provided that the extent of such business eral financial supervisory agencies to encourage finandealings will not at any time substantially exceed cial institutions to help meet the credit needs of the current levels. Any business transaction between local communities in which they operate consistent Bank and any SunTrust affiliate will be on an arm's- with the safe and sound operation of such institutions. length, non-exclusive basis, and shall be on substan- To accomplish this end, the CRA requires the approtially the same terms as those prevailing for compa- priate federal supervisory authority to "assess an rable transactions with persons unaffiliated with institution's record of meeting the credit needs of its Bank. entire community, including low- and moderate-income neighborhoods, consistent with the safe and The Board's inquiry does not end, however, with its sound operation of the institution," and to take this finding that SunTrust will not control Bank. The Board record into account in its evaluation of bank holding continues to believe that noncontrolling interests in company applications.8 The Statement of the Federal directly competing banks may raise serious questions Financial Supervisory Agencies Regarding the Comunder the BHC Act and views these acquisitions with munity Reinvestment Act ("Agency CRA Stateconcern. The Board has previously noted that one ment") suggests that decisions by agencies to allow company need not acquire control of another in order financial institutions to expand will be made pursuant to lessen substantially competition between them.7 It to an analysis of the institution's overall CRA perforis possible, for example, that the acquisition of a mance, and will be based on the actual record of substantial ownership interest in a competitor or po- performance of the institution.9 tential competitor of the acquiring firm may alter the In this regard, the record indicates that substantially market behavior of both firms in such a way as to all of SunTrust's subsidiary banks, controlling subweaken or eliminate independence of action between stantially all of SunTrust's assets, have received satthe organizations and increase the likelihood of coop- isfactory ratings from their primary regulators during erative operations. the most recent examinations of each bank's CRA Whether a substantial lessening of competition performance. SunTrust has also adopted a corporate would result from a minority investment in a compet- CRA program that contains the elements of an effecing bank must be answered in light of the specific facts tive CRA policy as outlined in the Agency CRA of each case. In this case, it is the Board's judgment, Statement. The Board notes that four bank subsidiarbased upon careful analysis of the record, that no ies, representing a small percentage of SunTrust's substantial lessening of competition is likely to result assets, received less than satisfactory CRA perforfrom the acquisition. The record shows that Bank is mance ratings in recent CRA examinations of these still under the firm and active control of a family not institutions. SunTrust has taken some steps to imconnected with SunTrust, that there will continue to prove the CRA performance of these banks and has be no officer or director interlocks between SunTrust made a number of commitments to address further the and Bank, and that SunTrust intends the acquisition to deficiencies in the CRA performance of these banks. remain strictly a passive investment. Moreover, Bank These commitments include establishing standards to is an institution of substantial asset size and is the be implemented by each subsidiary bank to assure leading institution in the market, controlling a signifi- organizational continuity in the areas of CRA overcantly greater share of the market's deposits than sight, community delineations, community outreach, SunTrust's subsidiary bank. The Board also views as marketing, branch closings, and technical CRA comsignificant the fact that six other major bank holding pliance. Additionally, each bank must appoint a CRA 7. See The Summit Bancorporation, 75 Federal Reserve Bulletin 712 (1989); see also North Platte Corporation, 66 Federal Reserve Bulletin 8. 12 U.S.C. § 2903. 782 (1980). 9. 54 Federal Register 13,742 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 545 oversight committee and complete an annual CRA By order of the Board of Governors, effective performance report to be reviewed by SunTrust's May 7, 1990. corporate CRA officer. The Board believes that, under the circumstances of Voting for this action: Chairman Greenspan and Governors this case, it is appropriate to rely on the commitments Seger, Angell, Kelley, and La Ware. Absent and not voting: Governor Johnson. made by SunTrust. While commitments for future action generally cannot be used by an institution to JENNIFER J. JOHNSON overcome a seriously deficient record of CRA perfor- Associate Secretary of the Board mance, the Agency CRA Statement specifically states that commitments may be given weight in addressing Orders Issued Under Section 4 of the Bank specific problems in an otherwise satisfactory CRA Holding Company Act record.10 Overall, the Board believes that SunTrust has a The Bank of Nova Scotia generally satisfactory record of performance under the Toronto, Ontario, Canada CRA as indicated by the satisfactory examination ratings received by substantially all of SunTrust's Order Approving Application to Act as Agent in the banks, the establishment of a detailed corporate CRA Private Placement of All Types of Securities and Act program, and the actions taken by SunTrust in the past as Riskless Principal in Buying and Selling to address deficiencies identified in its CRA perfor- Securities mance record. The Board has also considered that the problems identified at the SunTrust banks with less The Bank of Nova Scotia, Toronto, Ontario, Canada than satisfactory ratings do not indicate chronic insti- ("Applicant"), a bank holding company within the tutional deficiencies or a pattern of CRA deficiencies meaning of the Bank Holding Company Act ("BHC at SunTrust banks. Moreover, SunTrust in the past Act"), has applied for the Board's approval under has taken steps immediately to address deficiencies section 4(c)(8) of the BHC Act, 12 U.S.C. identified in the CRA performance of its banks, and § 1843(c)(8), and section 225.23(a)(3) of the Board's has done so in the case of these banks. In light of these Regulation Y, 12 C.F.R. 225.23(a)(3), for its indirect and the other facts of record, the Board believes that it subsidiary, ScotiaMcLeod (USA) Inc., New York, is appropriate in this case to give weight to the New York ("Company"), to act as agent in the private commitments made by SunTrust to improve the CRA placement of all types of securities, including providperformance of certain of its banks. The Reserve Bank ing related advisory services, and to buy and sell all will monitor steps taken by SunTrust to fulfill these types of securities on the order of investors as a commitments. "riskless principal." For the foregoing reasons, and based upon all of the Applicant has total consolidated assets equivalent to facts of record, the Board concludes that consider- $68.7 billion.1 It owns a bank subsidiary in Puerto Rico ations relating to the convenience and needs of the and operates branches in Boston and Portland, Orecommunity to be served are consistent with approval. gon, and agencies in Atlanta, New York City, and San The financial and managerial resources and future Francisco. Applicant also operates a limited purpose prospects of SunTrust and its subsidiaries and Bank trust company, the Bank of Nova Scotia Trust Comare also satisfactory and consistent with approval of pany of New York, pursuant to section 4(c)(8) of the this application. BHC Act. In addition, Applicant has received Board Based on the foregoing and all of the facts of record, approval to engage directly and through subsidiaries in and particularly in light of SunTrust's commitments, a broad range of nonbanking activities, including enthe Board has determined that this application should gaging through Company in underwriting and dealing be, and hereby is, approved. The acquisition of shares in, to a limited extent, debt and equity securities that shall not be consummated before the thirtieth calendar are not eligible to be underwritten by a state member day following the effective date of this Order, or later bank ("ineligible securities").2 Company is and will than three months after the effective date of this continue to be a broker-dealer registered with the Order, unless that period is extended for good cause Securities and Exchange Commission and subject to by the Board or by the Federal Reserve Bank of the record-keeping, reporting, fiduciary standards, and Atlanta, pursuant to delegated authority. other requirements of the Securities Exchange Act of 1. Data are as of October 31, 1989. 10. 54 Federal Register 13,742, 13,746 (1989). 2. The Bank of Nova Scotia, 76 Federal Reserve Bulletin 455 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

546 Federal Reserve Bulletin • July 1990 1934, the New York Stock Exchange, and the National Consummation of this proposal would provide Association of Securities Dealers. greater efficiencies and added convenience to Appli- Notice of the application, affording interested per- cant's customers by allowing the provision of a wider sons an opportunity to submit comments on the pro- range of services by a single entity. In addition, the posal, has been published (55 Federal Register 17,670 Board expects that the de novo entry of Applicant into (1990)). The time for filing comments has expired, and the market for these services would increase the level the Board has considered the application and all com- of competition among providers of these services. ments received in light of the public interest factors set Under the framework established in this and prior forth in section 4(c)(8) of the BHC Act. The Board decisions, consummation of this proposal is not likely received written comments regarding the application to result in any significant undue concentration of from the Investment Company Institute ("ICI"), a resources, decreased or unfair competition, conflicts trade association of the mutual fund industry.3 of interest, unsound banking practices, or other ad- The Board has previously determined that acting as verse effects. Accordingly, the Board has determined agent in the private placement of securities and pur- that the performance of the proposed activities by chasing and selling securities on the order of investors Applicant can reasonably be expected to produce as a riskless principal do not constitute underwriting public benefits that would outweigh possible adverse and dealing in securities for purposes of section 20 of effects under the proper incident to banking standard the Glass-Steagall Act, and that revenue derived from of section 4(c)(8) of the BHC Act. these activities is not subject to the 10 percent revenue Based on the foregoing, the Board has determined to limitation on ineligible securities underwriting and approve this application subject to all of the terms and dealing.4 Additionally, in those decisions the Board conditions set forth above. The Board's determination found that, subject to a number of prudential limita- is subject to all of the conditions set forth in the tions that address the potential for conflicts of interest, Board's Regulation Y, including those in sections unsound banking practices, or other adverse effects, 225.4(d) and 225.23(b), and to the Board's authority to private placement and riskless principal activities are require modification or termination of the activities of so closely related to banking as to be proper incidents a bank holding company or any of its subsidiaries as thereto within the meaning of section 4(c)(8) of the the Board finds necessary to assure compliance with, BHC Act. In order to address the potential for con- and to prevent evasion of, the provisions of the BHC flicts of interest, unsound banking practices, or other Act and the Board's regulations and Orders issued adverse effects, Applicant has proposed that Company thereunder. conduct these activities consistent with the limita- This transaction shall not be consummated later tions, methods, and procedures established by the than three months after the effective date of this Board in Bankers Trust and J.P. Morgan, as modified Order, unless such period is extended for good cause to reflect Applicant's status as a foreign bank.5 by the Board or by the Federal Reserve Bank of New York, pursuant to delegated authority. By order of the Board of Governors, effective 3. The ICI has objected to Applicant's proposal to the extent that it May 23, 1990. could be construed to seek approval for Company to privately place, or act as a riskless principal with respect to, securities of investment companies that are sponsored or advised by Company or Applicant or Voting for this action: Vice Chairman Johnson and Goverany of Applicant's bank or nonbank affiliates. Applicant has not nors Seger, Angell, Kelley, La Ware, and Mullins. Absent requested approval to place, or act as a riskless principal with respect and not voting: Chairman Greenspan. to, such securities. 4. J.P. Morgan & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. Morgan")-, Bankers Trust New York Corpo- JENNIFER J. JOHNSON ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). Associate Secretary of the Board 5. In Canadian Imperial Bank of Commerce, The Royal Bank of Canada, and Barclays PLC, 76 Federal Reserve Bulletin 158 (1990), the Board considered and approved applications by foreign banks to engage The Bank of Tokyo, Ltd. in underwriting and dealing in all types of debt and equity securities. In Tokyo,Japan that Order, the Board modified the prudential framework imposed in J.P. Morgan & Company, Incorporated, The Chase Manhattan Corporation, Bankers Trust New York Corporation, and Citicorp, 75 Order Approving Application to Engage in Leasing Federal Reserve Bulletin 192 (1989), to account for the fact that the applicants were foreign banks that operate predominately outside the and Other Nonbanking Activities United States. The Board determined in those decisions to adjust the funding and certain operational requirements of the framework previously established for those activities in order to take into account The Bank of Tokyo, Ltd., Tokyo, Japan ("Appliprinciples of national treatment and the Board's policy not to extend cant"), a bank holding company within the meaning of U.S. bank supervisory standards extraterritorially. See also The Toronto-Dominion Bank, 76 Federal Reserve Bulletin 573 (1990); Canadian the Bank Holding Company Act ("BHC Act"), has Imperial Bank of Commerce, 76 Federal Reserve Bulletin 548 (1990). applied for the Board's approval under section 4(c)(8) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 547 of the BHC Act (12 U.S.C. § 1843(c)(8)) and section . . . that outweigh possible adverse effects, such as 225.23(a)(2) of the Board's Regulation Y (12 C.F.R. undue concentration of resources, decreased or unfair 225.23(a)(2)) to acquire, through its wholly owned competition, conflicts of interests, or unsound banking subsidiary, BOT Financial Corporation, New York, practices." 12 U.S.C. § 1843(c)(8). New York ("BOT Financial"), certain lease servicing In every case involving a nonbanking acquisition assets, such as software and equipment, from Bank of by a bank holding company under section 4 of the New England, N.A., Boston, Massachusetts BHC Act, the Board considers the financial condition ("BNENA"), a subsidiary of the Bank of New En- and resources of the applicant and its subsidiaries gland Corporation, Boston, Massachusetts ("BNEC"), and the effect of the transaction on these resources.5 and to engage in the following activities: making, ac- In this case, the primary capital ratio of Applicant, as quiring, or servicing loans; providing investment or publicly reported, is below the minimum level specfinancial advice; leasing personal or real property; and ified in the Board's Capital Adequacy Guidelines. providing certain data processing services. Applicant After making adjustments to reflect Japanese bankproposes to conduct these activities pursuant to the ing and accounting practices, however, including provisions of the Board's Regulation Y.1 consideration of a portion of the unrealized appreci- Notice of the application, affording interested per- ation in Applicant's portfolio of equity securities sons an opportunity to submit comments, has been consistent with the principles of the Basle capital duly published (54 Federal Register 50,650 (1989)). framework, Applicant's capital ratio meets United The time for filing comments has expired, and the States standards. Board has considered the application and all com- The Board also has considered additional factors ments received in light of the public interest factors set that mitigate its concern in this case. The Board forth in section 4(c)(8) of the BHC Act. notes that Applicant is in compliance with the capital Applicant, with consolidated assets equivalent to and other financial requirements for banking organiapproximately $171.4 billion, is the 18th largest bank- zations in Japan. In addition, the Board notes that ing organization in the world.2 Applicant owns a bank the capital of Applicant currently accords with the in California and a bank in New York. Applicant minimum requirements established by the Basle acquired bank subsidiaries in New York and California Committee capital framework for year-end 1990. prior to the enactment in 1956 of the Douglas Amend- Based on these and other facts of record, the Board ment's interstate banking requirement and, therefore, concludes that financial and managerial considermay retain these companies under the Douglas ations are consistent with approval of the applica- Amendment and section 5(b) of International Banking tion. Act (12 U.S.C. § 3103(b)).3 Applicant also operates In evaluating the public benefits, the Board notes agencies in New York, Miami, San Francisco, Los that BNENA has stated that consummation of the Angeles, and Honolulu; branches in Portland and proposal would provide net financial benefits to Seattle; and representative offices in Chicago, Wash- BNENA and BNEC by providing additional capital ington, D.C., Houston, and Atlanta.4 and liquidity. In this regard, the Office of the Comp- The Board has previously determined by regulation troller of the Currency, which is BNENA's primary that the activities that Applicant proposes to conduct regulator, has been consulted and does not object to through BOT Financial are closely related to banking the transaction in its current form. The Board exand permissible for bank holding companies. pects that the de novo entry of Applicant into the 12 C.F.R. 225.25(b)(1), (4), (5), and (7). Applicant and market for the proposed activities would increase the BOT Financial propose to conduct these activities level of competition among providers of these serpursuant to the requirements of the Board's regula- vices. Moreover, there is no evidence in the record tions. The Board must also find that the performance that consummation of this proposal would result in of the proposed activities by the applicant "can rea- any adverse effects such as undue concentration of sonably be expected to produce benefits to the public resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. Based on the foregoing and other facts of record, the Board has determined that the balance of public inter- 1. 12 C.F.R. 225.25(b)(1), (4), (5), and (7). As part of this transaction, the bank subsidiaries of Applicant are also acquiring certain lease est factors it is required to consider under section assets of BNENA. 4(c)(8) is favorable. Accordingly, the Board has deter- 2. Banking data are as of March 31, 1988. 3. See The Bank of Tokyo, Ltd., 74 Federal Reserve Bulletin 685 (1988). 4. In addition, Applicant owns BOT Securities Inc., a wholly owned 5. 12 C.F.R. 225.24; The Fuji Bank Limited, 75 Federal Reserve subsidiary in New York that is engaged primarily in the delivery and Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve placement of U.S. Treasury bills. Bulletin 155, 156 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

548 Federal Reserve Bulletin • July 1990 mined that the application should be, and hereby is, Canadian Imperial Bank of Commerce approved. This determination is subject to all of the Toronto, Ontario, Canada conditions set forth in the Board's Regulation Y, including those in sections 225.4(d) and 225.23(b), Order Approving Application to Act as Agent in the and to the Board's authority to require modification Private Placement of All Types of Securities and Act or termination of the activities of a holding company as Riskless Principal in Buying and Selling to assure compliance with, or to prevent evasion of, Securities the provisions and purposes of the BHC Act and the Board's regulations and orders issued thereunder. Canadian Imperial Bank of Commerce, Toronto, On- This transaction shall not be consummated later than tario, Canada ("Canadian Imperial"), a bank holding three months after the effective date of this Order, company within the meaning of the Bank Holding unless such period is extended for good cause by the Company Act ("BHC Act"), has applied for the Board or by the Federal Reserve Bank of San Fran- Board's approval under section 4(c)(8) of the BHC cisco, pursuant to delegated authority. Act, 12 U.S.C. § 1843(c)(8), and section 225.23(a)(3) By order of the Board of Governors, effective of the Board's Regulation Y, 12 C.F.R. 225.23(a)(3), May 21, 1990. for its indirect subsidiary, Wood Gundy Corp., New York, New York ("Company"), to act as agent in the Voting for this action: Vice Chairman Johnson and Gover- private placement of all types of securities, including nors Seger and La Ware. Voting against this action: Governor providing related advisory services, and to buy and Angell. Absent and not voting: Chairman Greenspan and sell all types of securities on the order of investors as Governor Kelley. a "riskless principal". Canadian Imperial has total consolidated assets WILLIAM W. WILES Secretary of the Board equivalent to $82.6 billion.1 It owns bank subsidiaries in Los Angeles, and New York City, and operates agencies in Atlanta, New York City, Los Angeles, and Dissenting Statement of Governor Angell San Francisco. Canadian Imperial has received Board approval to engage directly and through subsidiaries in After careful review of the terms of this proposal, I a broad range of nonbanking activities, including apam unable to conclude that the proposal satisfies the proval for Company to underwrite and deal in, to a public benefits test in section 4(c)(8) of the Bank limited extent, debt and equity securities that are not Holding Company Act. I must, therefore, vote eligible to be underwritten by a state member bank against approval of this application. This proposal ("ineligible securities").2 Company is and will concombines the sale of certain leasing assets by Bank of tinue to be a broker-dealer registered with the Secu- New England Corporation and some of its subsidiar- rities and Exchange Commission and subject to the ies to Bank of Tokyo, an ongoing obligation by Bank record-keeping, reporting, fiduciary standards, and of New England to obtain lease servicing and remar- other requirements of the Securities Exchange Act of keting services from Bank of Tokyo, and the prepay- 1934, the New York Stock Exchange and the National ment of those services for a protracted period. Association of Securities Dealers. In my view, the complexity of the arrangement and Notice of the application, affording interested perthe attempt to integrate the various parts of the sons an opportunity to submit comments on the proproposal into a single contractual arrangement obfus- posal, has been published (55 Federal Register 6684 cate the true pricing and economic substance of the (1990)). The time for filing comments has expired, and various parts of the proposal. This complexity and the Board has considered the application and all integration make it impossible for me to evaluate the comments received in light of the public interest reasonableness of the asset sale and of the servicing factors set forth in section 4(c)(8) of the BHC Act. The agreement insofar as they bear on the public interest. Board received written comments opposing the appli- As a result, I am unable properly to determine the cation from the Securities Industry Association public benefits and potential adverse effects of the ("SIA"), a trade association of the investment bankproposed asset sale and the ongoing servicing con- ing industry, and the Investment Company Institute tract, or to find, as required under section 4(c)(8) of the Bank Holding Company Act, that the public benefits of this proposal outweigh the potential adverse effects. 1. Data are as of April 30, 1989. 2. See Canadian Imperial Bank of Commerce, The Royal Bank of Canada, Barclays PLC, Barclays Bank PLC, 76 Federal Reserve May 21, 1990 Bulletin 158 (1990) ("Canadian Imperial Order"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 549 ("ICI"), a trade association of the mutual fund Consummation of this proposal would provide industry.3 greater efficiencies and added convenience to Cana- The Board has previously determined that acting as dian Imperial's customers by allowing the provision of agent in the private placement of securities and pur- a wider range of services by a single entity. In addichasing and selling securities on the order of investors tion, the Board expects that the de novo entry of as a riskless principal do not constitute underwriting Canadian Imperial into the market for these services and dealing in securities for purposes of section 20 of would increase the level of competition among providthe Glass-Steagall Act, and that revenue derived from ers of these services. Under the framework estabthese activities is not subject to the 10 percent revenue lished in this and prior decisions, consummation of limitation on ineligible securities underwriting and this proposal is not likely to result in any significant dealing.4 Additionally, in those decisions the Board undue concentration of resources, decreased or unfair found that, subject to a number of prudential limita- competition, conflicts of interest, unsound banking tions that address the potential for conflicts of inter- practices, or other adverse effects. Accordingly, the ests, unsound banking practices or other adverse Board has determined that the performance of the effects, private placement and riskless principal activ- proposed activities by Canadian Imperial can reasonities were so closely related to banking as to be a ably be expected to produce public benefits that would proper incident thereto within the meaning of section outweigh adverse effects under the proper incident to 4(c)(8) of the BHC Act.5 In order to address the banking standard of section 4(c)(8) of the BHC Act. potential for conflict of interest, unsound banking Based on the above, the Board has determined to practices, or other adverse effects, Canadian Imperial approve Canadian Imperial's application, subject to all has proposed that Company will conduct these activof the terms and conditions set forth above. The ities consistent with the limitations, methods and Board's determination is subject to all of the condiprocedures established by the Board in Bankers Trust tions set forth in the Board's Regulation Y, including and J.P. Morgan, as modified to reflect Canadian those in sections 225.4(d) and 225.23(b), and to the Imperial's status as a foreign bank.6 Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to assure compliance with, and to prevent evasion of, the 3. The ICI has objected to Canadian Imperial's proposal to the extent that it could be construed to seek approval for Company to provisions of the BHC Act and the Board's regulations privately place, or act as a riskless principal with respect to, securities and Orders issued thereunder. of investment companies that are sponsored or advised by Company or Canadian Imperial or any of Canadian Imperial's bank or nonbank This transaction shall not be consummated later affiliates. Canadian Imperial has not requested approval to place or act than three months after the effective date of this as a riskless principal with respect to such securities. Order, unless such period is extended for good cause 4. J.P. Morgan & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corpo- by the Board, or by the Federal Reserve Bank of New ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). York, pursuant to delegated authority. 5. The SI A argues that the fact that Canadian Imperial is proposing that Company privately place all types of securities, as opposed to By order of the Board of Governors, effective only high-grade commercial paper notes as had been previously May 15, 1990. approved by the Board, is significant in assessing the applicability of the Glass-Steagall Act prohibitions in this case. Securities Industry Association v. Board of Governors, 807 F.2d 1052 (D.C. Cir. 1986), Voting for this action: Chairman Greenspan and Governors cert, denied, 483 U.S. 1005 (1987) ("Bankers Trust //"). The Board Angell, Kelley, and LaWare. Absent and not voting: Goverconsidered this argument in Bankers Trust and noted that, because the nors Johnson and Seger. Board and the Bankers Trust II court clearly recognized that commercial paper is a security for purposes of the Glass-Steagall Act, the fact that a bank holding company wishes to privately place all types of JENNIFER J. JOHNSON securities in a manner similar to that used in the commercial paper Associate Secretary of the Board case, would not, by itself, change the activity into underwriting and dealing. 6. In the Canadian Imperial Order, in which the Board approved Citicorp applications by foreign banks to engage in underwriting and dealing in New York, New York all types of debt and equity securities, the Board modified the prudential framework imposed in J.P. Morgan & Company, Incorporated, The Chase Manhattan Corporation, Bankers Trust New York Order Approving Acquisition of Merchant Credit Corporation, and Citicorp, 75 Federal Reserve Bulletin 192 (1989), to account for the fact that the applicants were foreign banks that operate Card Processing Assets predominately outside the United States. The Board determined in those cases to adjust the funding and certain operational requirements of the framework previously established for those activities in order to Citicorp, New York, New York, a bank holding comtake into account principles of national treatment and the Board's pany within the meaning of the Bank Holding Compolicy not to extend U.S. bank supervisory standards extraterritorially. See also The Toronto-Dominion Bank, 76 Federal Reserve pany Act ("BHC Act"), has applied for the Board's Bulletin 573 (1990). approval under section 4(c)(8) of the BHC Act Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

550 Federal Reserve Bulletin • July 1990 (12 U.S.C. § 1843(c)(8)) and section 225.23(a)(2) of The market for merchant credit card processing the Board's Regulation Y (12 C.F.R. 225.23(a)(2)) to services is national in scope. The advanced technolacquire, through its wholly owned subsidiary, Citi- ogy for credit authorization and for processing and corp Credit Services, Inc., Melville, New York settling credit card transactions is such that close ("CCSI"), the merchant credit card processing as- proximity to the credit authorization or processing sets of FCC National Bank, Wilmington, Delaware facility is not a requirement for this service. For ("FCC"). The merchant credit card processing bus- example, Citicorp's credit authorization facility in iness includes the following activities: credit card Sioux Falls, South Dakota, and its processing facility authorization, acquiring and processing credit card in Hagerstown, Maryland, service merchants from transactions, settlement of credit card transactions, across the nation. The market is unconcentrated, and and depositing funds in the merchants' accounts. consummation of the proposal would result in an These activities are encompassed within the autho- increase in the Herfindahl-Hirschman Index of only rization in Regulation Y for bank holding companies 8 points to 249. In light of the facts of record, to make, acquire, or service loans (12 C.F.R. consummation of this proposal would not have a 225.25(b)(1)). significantly adverse effect on competition in the Notice of the application, affording interested per- merchant credit card processing business. sons an opportunity to submit comments, has been Consummation of Citicorp's proposal would produly published (54 Federal Register 53,750 (1989)). vide increased services to merchants currently served The time for filing comments has expired, and the by FCC, such as access to CCSI's electronic delivery, Board has considered the application and all com- authorization and payment systems. The financial and ments received in light of the public interest factors set managerial resources of Citicorp and CCSI are considforth in section 4(c)(8) of the BHC Act. ered consistent with approval. Moreover, there is no Citicorp, with total consolidated assets of $230.6 evidence in the record that consummation of this billion, operates ten banking subsidiaries and is the proposal would result in any adverse effects such as largest commercial banking organization in the United undue concentration of resources, decreased or unfair States.1 Citicorp also engages through its nonbank competition, conflicts of interests, or unsound banking subsidiaries in various nonbanking activities such as practices. data processing, leasing, and providing investment Based on the foregoing and other facts of record, advice. the Board has determined that the balance of public Under section 4 of the BHC Act, the Board is interest factors it is required to consider under required to determine whether the performance of section 4(c)(8) is favorable. Accordingly, the Board the proposed activities by the applicant "can reason- has determined that the application should be, and ably be expected to produce benefits to the public . . . hereby is, approved. This determination is subject to that outweigh possible adverse effects, such as undue all of the conditions set forth in the Board's Regulaconcentration of resources, decreased or unfair compe- tion Y, including those in sections 225.4(d) and tition, conflicts of interests, or unsound banking prac- 225.23(b), and to the Board's authority to require tices." 12 U.S.C. § 1843(c)(8). modification or termination of the activities of a CCSI currently provides merchant credit card pro- holding company to assure compliance with, or to cessing services for merchants throughout the prevent evasion of, the provisions and purposes of United States. CCSI is the fourth largest merchant the BHC Act and the Board's regulations and orders credit card processing organization, representing ap- issued thereunder. This transaction shall not be proximately 5.3 percent of the market for merchant consummated later than three months after the effeccredit card processing services. FCC is the 20th tive date of this Order, unless such period is exlargest merchant credit card processing organization, tended for good cause by the Board or by the Federal representing approximately 0.7 percent of the market Reserve Bank of New York, pursuant to delegated for merchant credit card processing services. Upon authority. consummation of the proposal, CCSI would remain By order of the Board of Governors, effective the fourth largest merchant credit card processing May 2, 1990. organization, representing approximately 6.0 percent of the market for merchant credit card processing Voting for this action: Chairman Greenspan and Governors services. Johnson, Seger, Angell, and LaWare. Abstaining from this action: Governor Kelley. JENNIFER J. JOHNSON 1. Banking data are as of December 31, 1989. Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 551 FBOP Corporation credit-related insurance agency activities. The Board Oak Park, Illinois has previously determined that such activities are permissible for bank holding companies under section Order Approving Application to Acquire a Savings 225.25(b)(8) of the Board's Regulation Y (12 C.F.R. Association 225.25(b)(8)). In order to approve this application, the Board is FBOP Corporation, Oak Park, Illinois ("FBOP"), a required to determine that the performance of the bank holding company within the meaning of the Bank proposed activities by FBOP "can reasonably be Holding Company Act ("BHC Act"), has applied expected to produce benefits to the public. . . that pursuant to section 4(c)(8) of the BHC Act (12 U.S.C. outweigh possible adverse effects, such as undue § 1843(c)(8)) and section 225.23(a) of the Board's concentration of resources, decreased or unfair com- Regulation Y (12 C.F.R. 225.23(a)), to acquire Re- petition, conflicts of interests, or unsound banking gency Savings Bank, F.S.B., Naperville, Illinois ("Re- practices." 12 U.S.C. § 1843(c)(8). gency"), a savings association, and engage in credit- Upon consummation of the proposed acquisition, related insurance agency activities.1 FBOP would be the 43rd largest commercial banking Notice of the application, affording interested per- organization in Illinois, controlling deposits of approxsons an opportunity to submit comments, has been imately $363.7 million, representing less than one perpublished (55 Federal Register 7565 (1990)). The time cent of deposits in depository institutions in the state. for filing comments has expired, and the Board has In the Board's view, consummation of this proposal considered the application and all comments received would not have a significantly adverse effect upon the in light of the public interest factors set forth in section concentration of banking resources in Illinois. 4(c)(8) of the BHC Act. Regency and the bank subsidiary of FBOP both FBOP, with total consolidated assets of $134.4 operate in the Chicago, Illinois banking market.4 Each million, is the 159th largest commercial banking orga- depository institution controls less than one percent of nization in Illinois, with deposits of approximately total deposits in the Chicago banking market, and $109.5 million.2 FBOP currently does not engage in upon consummation of this proposal, the depository any nonbanking activities. Regency has total consoli- institution subsidiaries of FBOP would continue to dated assets of $338.7 million, and operates five control less than one percent of total deposits in branches in Illinois. Regency is currently operating as depository institutions in the market.5 Based on these a mutual savings association. Prior to the acquisition, and all of the facts of record, the Board concludes that Regency will convert from mutual to stock form. the acquisition would not have a significantly adverse Section 601 of the Financial Institutions Reform, effect on competition in any relevant market. Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, § 601, 101 Stat. 183, 408 (as codified at 12 U.S.C. § 1843(i)), permits the Board to approve an application by a bank holding company to acquire a 225.25(b)(9). See also National City Corporation, 76 Federal Reserve savings association under section 4(c)(8) of the BHC Bulletin 11 (1990). FBOP proposes to conform all of the direct and Act. Pursuant to this authority, the Board has deter- indirect activities of Regency to the requirements of section 4(c)(8) of the BHC Act and Regulation Y upon consummation except for two mined by regulation that the operation of a savings activities conducted in two subsidiaries. FBOP has committed that it association is closely related to banking and permissi- will limit the insurance activities of RFS to renewal of existing policies for two years after the date of consummation, and will engage only in ble for bank holding companies. 12 C.F.R. credit-related insurance agency activities which are permissible pur- 225.25(b)(9).3 FBOP has also applied to engage in suant to section 225.25(b)(8) of the Board's Regulation Y (12 C.F.R. 225.25(b)(8)). FBOP has also committed to cease all brokerage activities conducted by RFS by virtue of its lease arrangement within six months of consummation of this transaction. In addition, FBOP has 1. As a result of this transaction, FBOP will acquire indirectly committed that the impermissible activities of RSBD will be divested Regency's wholly owned subsidiaries, Regency Financial Services, within two years of consummation and that during this two year period Inc. ("RFS"), RSB Development Corporation ("RSBD"), and Re- it will not undertake any new real estate projects or investments. See, gency Mortgage Investments, Inc. ("RMI"), all of Naperville, Illi- e.g., F.N.B. Corporation, 71 Federal Reserve Bulletin 340 (1985). nois. RFS engages in insurance agency activities and also offers a full RMI engages in no activity, will engage in no new activity, and will be range of investment and brokerage services through a leasing arrange- liquidated upon termination of its outstanding note obligations. ment with a licensed broker-dealer; RSBD engages in certain real 4. The Chicago banking market is approximated by Cook, DuPage, estate activities; and RMI is a limited-purpose finance subsidiary. and Lake Counties, all in Illinois. FBOP has committed to divest all of the impermissible activities of 5. The pre-consummation market share statistics are based on RFS, RSBD, and RMI, as explained more fully below. calculations in which the deposits of Regency and all other thrifts are 2. Data are as of December 31, 1988. included at 50 percent. Upon consummation of the proposal, Regency 3. In making this determination, the Board required that savings would be affiliated with a commercial banking organization, thus, on a associations acquired by bank holding companies conform their direct pro forma basis, the deposits of Regency are included at 100 percent, and indirect activities to those activities permissible for bank holding while the deposits of other savings associations continue to be companies under section 4 of the BHC Act. See 12 C.F.R. included at 50 percent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

552 Federal Reserve Bulletin • July 1990 The financial and managerial resources and future J.P. Morgan & Co. Incorporated prospects of FBOP and its bank subsidiaries, and New York, New York Regency are consistent with approval. In assessing the financial factors, the Board believes that bank Order Approving Application to Engage in Platinum holding companies must maintain adequate capital at Dealing Activities in the United Kingdom savings associations that they propose to acquire. In this case, FBOP's acquisition of Regency will result J.P. Morgan & Co. Incorporated ("Morgan"), New in a capital infusion of approximately $20 million into York, New York, a bank holding company within the Regency. Upon consummation, FBOP will raise the meaning of the Bank Holding Company Act, has Tier 1 capital of Regency, exclusive of all intangible applied for the Board's consent under section 4(c)(13) assets, to at least 3 percent of the total assets of of the Act (12 U.S.C. § 1843(c)(13)) and section Regency. In addition, FBOP commits that Regency 211.5(c)(3) of the Board's Regulation K (12 C.F.R. will meet all present and future minimum capital 211.5(c)(3)) for its wholly owned subsidiary, J.P. Morratios adopted for savings associations by the Office gan Trading and Finance Limited ("JPMTF"), Lonof Thrift Supervision or the Federal Deposit Insur- don, England, to engage in trading and dealing in ance Corporation. platinum and in related activities. There is no evidence in the record to indicate that Morgan is the third largest commercial banking orgaapproval of this proposal would result in undue nization in the United States, with consolidated assets concentration of resources, decreased or unfair com- of $90.8 billion as of March 31,1990. Morgan's principal petition, conflicts of interests, unsound banking prac- bank subsidiary, Morgan Guaranty Trust Company of tices, or other adverse effects on the public interest. New York ("Morgan Guaranty"), is one of the three Accordingly, the Board has determined that the largest dealers in gold and silver in the world. JPMTF, balance of public interest factors it must consider a de novo company, would engage in platinum dealing under section 4(c)(8) of the BHC Act is favorable and activities in the United Kingdom. It would trade platiconsistent with approval of FBOP's application to num as principal in the spot, forward, and futures acquire Regency and certain of its nonbanking sub- markets and lend platinum to industrial users of the sidiaries. metal. JPMTF would become an associate member of Based on the foregoing and all the facts of record, the London Platinum and Palladium Market, a profesand subject to the commitments made by FBOP as sional association that sets standards, prices and settleset forth in its application and in this Order, the ment procedures for platinum trading. In the future, Board has determined that the application should be, JPMTF may engage in options trading in platinum and and hereby is, approved. This determination is also in other activities authorized by Regulation K. JPMTF subject to all of the conditions set forth in the would not engage in any business in the United States Board's Regulation Y, including sections 225.4(d) except as an incident to its operations abroad. and 225.23, and to the Board's authority to require In reviewing proposals by U.S. banking organizasuch modifications or termination of the activities of tions to engage in activities overseas, the Board has a bank holding company or any of its subsidiaries as recognized that local institutions in other banking and the Board finds necessary to assure compliance with, financial systems are often permitted to engage in or to prevent evasion of, the provisions and purposes activities that have not been authorized for U.S. bankof the BHC Act and the Board's regulations and ing organizations under applicable U.S. laws and regu- Orders issued thereunder. The transaction shall be lations. In the Bank Holding Company Act, the Board made not later than three months after the effective has been granted authority to permit activities abroad date of this Order, unless such period is extended for that are generally not authorized in the United States good cause by the Board or the Federal Reserve for bank holding companies. 12 U.S.C. § 1843(c)(13). Bank of Chicago, pursuant to delegated authority. In the exercise of that authority, the Board has By order of the Board of Governors, effective adhered to the policy that the foreign activities that it May 29, 1990. authorizes should be of a banking or financial, as opposed to commercial, nature, or that such activities should be usual in connection with banking or other Voting for this action: Chairman Greenspan and Governors financial operations abroad. The Board may also con- Angell, Kelley, and Mullins. Absent and not voting: Gover- sider whether the conduct of the activity will enable nors Johnson, Seger, and La Ware. U.S. banking organizations to compete more effectively with foreign organizations in the provision of banking and other financial services. In addition, the JENNIFER J. JOHNSON Associate Secretary of the Board Board takes into account whether the performance of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 553 the activity by a U.S. banking organization overseas is In assessing the risks associated with this activity, consistent with the prudent conduct and management the Board notes that they are qualitatively and quanof the company's banking and nonbanking organiza- titatively similar to the risks of dealing in bullion, an tions. In this regard the Board takes into consideration activity in which Morgan has substantial expertise. the risks inherent in the activity, especially whether JPMTF will have policies and procedures designed to those risks are of a type and nature normally associ- assess and control the credit and market risks of ated with banking or activities conducted by banks. platinum dealing. These include establishment of ap- The Board also examines the effect of the activity on propriate credit lines for customers prior to dealing the capital and managerial resources of the U.S. with the customer and review of such lines at least banking organization. annually; requirements for margin to be provided The activity of trading or dealing in platinum is not based on the creditworthiness of the counterparty, contained in the list of activities that the Board has size of the transaction, or volatility of market prices; found to be usual in connection with the transaction of and requirements that foreign exchange risks be banking or financial operations abroad.1 12 C.F.R. hedged. JPMTF will establish appropriate limits for its 211.5(d). In applying to engage in the proposed activi- own position, and daily settlement limits for each ties, Morgan has stated that the platinum dealing activ- counterparty that take into account all spot and forities are inherently financial in nature. Dealing in plati- ward transactions maturing on the same settlement num is not functionally different from dealing in gold date. Morgan Guaranty will provide operational and and silver bullion, which, as activities expressly autho- financial control support to JPMTF on a fee basis on rized for national banks, are regarded as financial in terms consistent with section 23B of the Federal nature. In addition, Morgan stated that the kinds of Reserve Act (12 U.S.C. § 371c-l).2 participants in the platinum market are the same as in Morgan's initial investment in JPMTF will be small in the bullion markets, that is, central banks, international relation to Morgan's total capital. Morgan does not financial institutions, institutional investors, industrial expect that any additional investments in JPMTF would manufacturers, refiners, and end users. Morgan noted be needed in the foreseeable future. In light of the small that over one quarter of its bullion counterparties are size of the investment, Morgan's expertise in similar also actively trading platinum. activities, and the policies and procedures that will be Morgan has also presented evidence that at least established to control the operations of JPMTF, it does eight major banking organizations currently engage in not appear that the conduct of these activities would platinum dealing and trading in the United Kingdom, result in undue risk to Morgan. either directly or through subsidiaries. Morgan asserts Based on the foregoing and other facts of record, that these banks, all of which are highly-experienced and the fact that the proposed platinum activities will dealers in the London bullion markets, view platinum enhance Morgan's ability to compete in the London trading as an integral part of the services demanded by bullion markets, the Board has determined that the their precious metals customers. Morgan has asserted platinum dealing activities proposed by Morgan are that its competitive position in its existing precious usual in connection with the transaction of banking or metals activities will be enhanced by its ability to offer other financial operations in the United Kingdom. The platinum services to its customers. Morgan anticipates Board has further determined on the basis of the that JPMTF's proposed activities will be conducted in record that the conduct of the proposed activities is all respects similarly to the bullion dealing activities of consistent with the supervisory purposes of the Bank Morgan Guaranty. Based on all the facts of record, Holding Company Act. Accordingly, the application is including the participation of banking organizations in approved. the activities in London, the Board has determined By order of the Board of Governors, effective that the platinum dealing activities proposed by Mor- May 31, 1990. gan are financially-related and usual in connection with the transaction of banking or other financial Voting for this action: Chairman Greenspan and Governors operations in the United Kingdom. Johnson, Seger, Angell, Kelley, and Mullins. Absent and not voting: Governor LaWare. JENNIFER J. JOHNSON Associate Secretary of the Board 1. In 1985, the Board permitted a bank holding company to acquire the shares of a Swiss bank engaged in trading platinum for the account and upon the order of customers. United Mizrahi Overseas Holding Company B.V., 71 Federal Reserve Bulletin 63 (1985). The bank 2. Transactions between Morgan Guaranty and JPMTF will be holding company committed that its subsidiary would not trade subject to the requirements of sections 23A (12 U.S.C. § 371c) and platinum for its own account, an activity in which JPMTF proposes to 23B of the Federal Reserve Act, regarding transactions by a member engage. bank with an affiliate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

554 Federal Reserve Bulletin • July 1990 The Long-Term Credit Bank of Japan, Limited Notice of the application, affording interested per- Tokyo,Japan sons an opportunity to submit comments, has been duly published (54 Federal Register 7030 (1990)). The Order Approving Application to Underwrite and time for filing comments has expired, and the Board Deal in Certain Securities to a Limited Extent, to has considered the application and all comments re- Engage in Futures Commission Merchant Activities, ceived in light of the factors set forth in section 4(c)(8) and to Purchase and Sell Precious Metals of the BHC Act. The Long-Term Credit Bank of Japan, Limited, To- Underwriting and Dealing in Ineligible Securities kyo, Japan ("Applicant"), a foreign bank subject to the provisions of the Bank Holding Company Act (the The Board previously has determined that the con- "BHC Act"), has applied for the Board's approval duct of the proposed ineligible securities underwritunder section 4(c)(8) of the BHC Act (12 U.S.C. ing and dealing activity is consistent with section 20 § 1843(c)(8)) and section 225.23(a) of the Board's of the Glass-Steagall Act (12 U.S.C. § 377), pro- Regulation Y (12 C.F.R. 225.23(a)), for its subsidiary, vided the underwriting subsidiary derives no more Greenwich Capital Markets, Inc., Greenwich, Con- than 10 percent of its total gross revenue from necticut ("Company"): underwriting and dealing in the approved securities 1) to underwrite and deal in, to a limited extent, over any two-year period.2 The Board also found municipal revenue bonds, 1-4 family mortgage-re- that, subject to the prudential framework of limitalated securities, commercial paper, and consumer- tions established in those cases to address the potenreceivable-related securities ("ineligible securi- tial for conflicts of interests, unsound banking practies"); tices or other adverse effects, the proposed 2) to act as a futures commission merchant ("FCM") underwriting and dealing activities are so closely in the execution, clearance, and provision of advis- related to banking as to be a proper incident thereto ory services with respect to previously approved within the meaning of section 4(c)(8) of the BHC Act. The Board subsequently modified that prudential financial futures contracts (See appendix A); and framework in the case of a foreign banking organiza- 3) to purchase and sell, for the account of Company, tion to take into account principles of national treatgold and silver bullion, bars, rounds and coins. ment and the Board's policy not to extend U.S. bank supervisory standards extraterritorially. The Sanwa Applicant is the 21st largest banking organization Bank, Limited, 76 Federal Reserve Bulletin 568 (1990) worldwide and the 12th largest in Japan, controlling ("Sanwa"). Applicant has committed that Company total consolidated assets of approximately U.S. $194 billion.1 Applicant is a registered bank holding com- will conduct its underwriting and dealing activities with respect to bank-ineligible securities subject to pany by virtue of its ownership of LTCB Trust the 10 percent revenue test and the prudential limi- Company, New York, New York, a state-chartered tations established by the Board in its Sanwa Order.3 trust company the deposits of which are insured by the Federal Deposit Insurance Corporation. In addition, Applicant maintains a branch in New York, New York, a limited branch in Chicago, Illinois, and an agency in Los Angeles, California. Company has received Board approval to engage directly and 2. Citicorp, J.P. Morgan & Co. Incorporated and Bankers Trust through subsidiaries in a broad range of nonbanking New York Corporation, 73 Federal Reserve Bulletin 473 (1987) ("Citicorp! Morgan/Bankers Trust"), ajfd sub nom., Securities Industry activities. Company has been designated a primary Association v. Board of Governors of the Federal Reserve System, 839 dealer in United States government securities by the F.2d 47 (2d Cir. 1988), cert, denied, 108 S.Ct. 2830 (1988) ("S/A v. Federal Reserve Bank of New York. Company is, Board")-, and Chemical New York Corporation, The Chase Manhattan Corporation, Bankers Trust New York Corporation, Citicorp, and will continue to be, a broker-dealer registered Manufacturers Hanover Corporation and Security Pacific Corporawith the Securities and Exchange Commission and tion, 73 Federal Reserve Bulletin 731 (1987) ("Chemical"); as modified by Order Approving Modifications to Section 20 Orders, 75 subject to the record-keeping, reporting, fiduciary Federal Reserve Bulletin 751 (1989) ("Modification Order"). standards, and other requirements of the Securities 3. The Board notes that lending by U.S. branches and agencies of Exchange Act of 1934 and the National Association foreign banks to affiliates is not restricted by section 23A of the of Securities Dealers. Federal Reserve Act. In view of the limited nature of these activities, the Board does not believe that the record at this time would require extending the restrictions of section 23A to Applicant's U.S. branches and agencies, none of which is insured by the FDIC. The Board, however, reserves the right to require that Applicant's U.S. branches and agencies adhere to the restrictions of section 23A should circum- 1. All banking data are as of September 30, 1989. stances change to make such requirement appropriate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 555 Futures Commission Merchant Activities proved this activity as permissible for bank holding companies. Westpac Banking Corporation, 73 Federal Applicant has proposed to act as a futures commission Reserve Bulletin 61 (1987). merchant and provide investment advice with respect In every case involving a nonbanking acquisition by to the futures contracts listed in Appendix A. Com- a bank holding company under section 4 of the BHC pany is currently conducting FCM activities with Act, the Board considers the financial condition and respect to similar indexes, and its prior experience resources of the applicant and its subsidiaries and the indicates that it would have the expertise to provide effect of the transaction on these resources.7 In this the proposed services.4 case, the primary capital ratio of Applicant, as publicly The Board has by Order also previously permitted reported, is below the minimum level specified in the bank holding companies to provide investment advis- Board's Capital Adequacy Guidelines. After making ory services as an FCM with respect to the purchase adjustments to reflect Japanese banking and accountand sale of similar stock and bond indexes.5 Applicant ing practices, however, including consideration of a has committed to limit its investment advisory ser- portion of the unrealized appreciation in Applicant's vices as an FCM for Company so as to be consistent portfolio of equity securities consistent with the prinwith the limits in Regulation Y that are placed on the ciples in the Basle capital framework, Applicant's provision of similar advisory services. Furthermore, capital ratio meets United States standards. FCMs are subject to regulation under the Commodity The Board also has considered several additional Exchange Act and the regulations of the Commodity factors that mitigate its concern in this case. The Futures Trading Commission ("CFTC") in order to Board notes that Applicant is in compliance with the prevent potential abuses by a registered advisor. Un- capital and other financial requirements of Japanese der these circumstances, and in light of the Board's banking organizations. In addition, the Board notes approval of all of the indexes for purposes of execution that the capital of Applicant currently accords with the and clearance activities, the Board believes that the minimum requirements established by the Basle Comproposed investment advisory activity is closely re- mittee capital framework for year-end 1992. Based on lated to banking. these and other facts of record, the Board concludes The Board also has considered the potential for that financial and managerial considerations are conadverse effects that may be associated with this pro- sistent with approval of the application. posal. There is no evidence in the record that consum- Consummation of the proposal to engage in each of mation of the proposed FCM activities would result in the activities discussed above would provide greater any adverse effects such as undue concentration of efficiencies and added convenience to Applicant's resources, decreased or unfair competition, conflicts customers by allowing the provision of a wider range of interests, or unsound banking practices. In addition, of services by a single entity. In addition, the Board the Board has taken into account and has relied on the expects that the de novo entry of Applicant into the regulatory framework established pursuant to law by market for these services would increase the level of the CFTC for the trading of futures, as well as the competition among providers of these services. Under conditions set forth in section 225.25(b)(18) of Regu- the framework established in prior decisions and dislation Y with respect to executing and clearing futures cussed in this order, consummation of this proposal is contracts and in section 225.25(b)(19) of Regulation Y not likely to result in any undue concentration of with respect to the provision of investment advice as resources, decreased or unfair competition, conflicts an FCM as to futures contracts or options thereon. of interests, unsound banking practices, or other adverse effects. Accordingly, the Board has determined Dealing in Precious Metals that the performance of the proposed activities by Applicant can reasonably be expected to produce Applicant also has applied to purchase and sell, for the public benefits that would outweigh adverse effects account of Company, gold and silver bullion, bars, rounds, and coins.6 The Board previously has apunderlying commodity, i.e., gold and silver. Accordingly, this activity is permissible under section 4(c)(1)(C) of the BHC Act, 12 U.S.C. 4. The Long-Term Credit Bank of Japan, Limited, 74 Federal § 1843(c)(1)(C), which allows bank holding companies to "furnish(ing) Reserve Bulletin 573 (1988) ("Long-Term Credit Bank"). services to or perform(ing) services for such bank holding company or 5. See Citicorp, 73 Federal Reserve Bulletin 220 (1987); Long-Term its banking subsidiaries," and is consistent with the requirements of Credit Bank. sections 225.25(b)(18) and (b)(19) of the Board's Regulation Y 6. Applicant has proposed to purchase and sell for its own account (12 C.F.R. 225.25(b)(18) and (b)(19)). forward, options, futures and options on futures contracts on gold and 7. 12 C.F.R. 225.24; The Fuji Bank, Limited, 75 Federal Reserve silver ("precious metals contracts"). Applicant would take positions Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve in these investments only as a means of hedging its positions in the Bulletin 155, 156 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

556 Federal Reserve Bulletin • July 1990 under the proper incident to banking standard of (1) the National Over-the-Counter Index futures section 4(c)(8) of the BHC Act. contract, and Based on the above, the Board has determined to (m) the NASD Financial futures contract. approve this application, subject to all of the terms The Board has by Order previously authorized FCM and conditions set forth above. The Board's deter- subsidiaries of bank holding companies to execute and mination is subject to all of the conditions set forth in clear all of the above futures contracts and options.1 the Board's Regulation Y, including those in sections 225.4(d) and 225.23(b), and to the Board's authority Marshall & Ilsley Corporation to require modification or termination of the activi- Milwaukee, Wisconsin ties of a bank holding company or any of its subsidiaries as the Board finds necessary to assure compli- Order Approving Application to Acquire a Savings ance with, and to prevent evasion of, the provisions Association of the BHC Act and the Board's regulations and Orders issued thereunder. Marshall & Ilsley Corporation, Milwaukee, Wisconsin This transaction shall not be consummated later ("Applicant"), a bank holding company within the than three months after the effective date of this meaning of the Bank Holding Company Act (the Order, unless such period is extended for good cause "BHC Act"), has applied for the Board's approval by the Board or by the Federal Reserve Bank of New under section 4(c)(8) of the BHC Act (12 U.S.C. York, pursuant to delegated authority. § 1843(c)(8)) and section 225.23 of the Board's Regu- By order of the Board of Governors, effective lation Y (12 C.F.R. 225.23), to acquire Central Federal May 29, 1990. Bank, F.S.B., Ripon, Wisconsin ("CFB"), a savings association, pursuant to section 225.25(b)(9) of the Board's Regulation Y (12 C.F.R. 225.25(b)(9)). Voting for this action: Chairman Greenspan and Governors Applicant has also requested Board approval of its Angell, Kelley, and Mullins. Absent and not voting: Gover- proposal under section 5(d)(3) of the Federal Deposit nors Johnson, Seger, and LaWare. Insurance Act ("FDI Act"), as amended by the Financial Institutions Reform, Recovery, and Enforcement JENNIFER J. JOHNSON Act of 1989 (Pub. L. No. 101-73, § 206, 101 Stat. 183, Associate Secretary of the Board 199 (1989)) ("FIRREA"), to merge CFB into one of Applicant's existing subsidiary banks, M&I Ripon State Bank, Ripon, Wisconsin ("State Bank"), after Appendix A Applicant acquires the shares of CFB.1 Applicant has proposed to act as an FCM in the execution, clearance, and provision of advisory ser- 1. The Chase Manhattan Corporation, 72 Federal Reserve Bulletin 203 (1986) (the Standard & Poor's Over-the-Counter 250 Stock Index vices with respect to: futures contracts, National Over-the-Counter Index futures contracts, (a) the Standard & Poor's Over-the-Counter 250 and NASD Financial futures contracts); Republic New York Corpora- Stock Index futures contract, tion, 73 Federal Reserve Bulletin 224 (1987) (the Major Market Index Maxi Stock Index futures contracts, Major Market Index Mini Stock (b) the Major Market Index Maxi Stock Index Index futures contracts, New York Stock Exchange Index Composite futures contract, futures contracts, options on New York Stock Index Composite futures contracts, Value Line Futures (Maxi) Index futures contracts, Value (c) the Major Market Index Mini Stock Index fu- Line Futures (Mini) Index futures contracts, and GNMA Cash Settled tures contract, futures contracts); Manufacturers Hanover Corporation, 72 Federal (d) the New York Stock Exchange Composite Index Reserve Bulletin 144 (1986) (the Value Line Average Stock Index futures contracts); and BankAmerica Corporation, 75 Federal Reserve futures contract, Bulletin 78 (1989) (the Financial Times Stock Index futures contracts, (e) options on New York Stock Exchange Compos- and the Nikkei Stock Average futures contracts). ite Index futures contracts, (f) the Value Line Average Stock Index futures 1. 12 U.S.C. § 1815(d)(3). Section 5(d)(3) of the FDI Act ("the contract, Oakar Amendment") permits the merger of a savings association owned by a bank holding company into a subsidiary bank owned by (g) the Value Line Futures (Maxi) Index futures the same bank holding company. In this case, the merger of CFB, contract, which is a savings association, into State Bank will be facilitated by the intermediate conversion of CFB into an interim bank. The interim (h) the Value Line Futures (Mini) Index futures bank is chartered solely to accommodate the requirements of the contract, appropriate merger statutes and will cease to exist immediately upon (i) the Financial Times Stock Index futures contract, consummation of the underlying transaction without ever having conducted any banking business. Under the circumstances, the Board (j) the Nikkei Stock Average futures contract, believes the structure of the proposal does not appear to cause an (k) the GNMA Cash Settled futures contract, otherwise qualifying transaction to fall outside of the bounds of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 557 Notice of the application, affording interested per- posits of $85.9 million and operates five offices in sons an opportunity to submit comments, has been Wisconsin. The financial and managerial resources published (55 Federal Register 2699 (1990)). The time and future prospects of Applicant and its bank subsidfor filing comments has expired, and the Board has iaries, and CFB are consistent with approval. Upon considered the application and all comments received, consummation, Applicant and its bank subsidiaries including those of various insurance trade associations would meet applicable capital requirements. ("Protestants"), in light of the public interest factors After the proposed acquisition is consummated, set forth in section 4(c)(8) of the BHC Act.2 Applicant would remain the second largest commer- Section 601 of FIRREA (as codified at 12 U.S.C. cial banking organization in Wisconsin, controlling § 1843(i)) permits the Board to approve an application $5.4 billion in deposits in the State, representing an by a bank holding company to acquire a savings approximate 14.3 percent share of deposits in commerassociation under section 4(c)(8) of the BHC Act. cial banking organizations in Wisconsin. In the Pursuant to this authority, the Board has determined Board's view, consummation of this proposal would that the operation of a savings association is closely not have a significantly adverse effect upon the conrelated to banking and permissible for bank holding centration of banking organizations in Wisconsin. companies. 12 C.F.R. 225.25(b)(9). In making this Applicant and CFB operate depository institutions determination, the Board required that savings asso- in the Fond du Lac, Wisconsin,5 and the Green Lake, ciations acquired by bank holding companies conform Wisconsin,6 banking markets. Upon consummation of their direct and indirect activities to those activities this proposal, Applicant would be the third largest permissible for bank holding companies under section depository institution in the Fond du Lac banking 4 of the BHC Act. Applicant states that CFB does not market with 13.5 percent of the deposits in depository engage in any activities that would be impermissible institutions7 in this market, and the largest depository for bank holding companies under section 4 of the institution in the Green Lake banking market with 21.0 BHC Act.3 percent of the deposits in depository institutions in this In order to approve the application, the Board also market. The acquisition would result in an increase in is required to determine that the performance of the the Herfindahl-Hirschman Index ("HHI") of 21 proposed activities by Applicant "can reasonably be points, to a level of 1608, in the Fond du Lac market expected to produce benefits to the public . . . that and an increase in the HHI of 211 points, to a level of outweigh possible adverse effects, such as undue 1032, in the Green Lake market.8 Although consumconcentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices." 12 U.S.C. § 1843(c)(8). 5. The Fond du Lac banking market includes all of Fond du Lac County except the townships of Ashford, Auburn, and Calumet. Applicant operates 44 banking subsidiaries in Wis- 6. The Green Lake banking market includes: Green Lake County; consin and one banking subsidiary in Arizona. Appli- Waushara County, except the townships of Plainfield and Hancock; cant, with total consolidated assets of $7.2 billion, is and Marquette County, except the townships of Oxford, Packwaukee, Douglas, Moundville, and Buffalo. the second largest commercial banking organization in 7. The pre-consummation market share statistics are based on Wisconsin, with deposits of $5.3 billion in Wisconsin.4 calculations in which the deposits of CFB and all other thrifts are included at 50 percent. Upon consummation of the proposal, CFB Applicant also engages through several subsidiaries in would be merged with a commercial banking organization, thus, on a permissible nonbanking activities. CFB has total de- pro forma basis, the deposits of CFB are included at 100 percent, while the deposits of other savings associations continue to be included at 50 percent. In the Fond du Lac market, Applicant is the third largest depository Oakar Amendment. This interpretation is consistent with the stated institution, with 8.1 percent of the deposits in the market. CFB is the purposes of the Oakar Amendment, namely, to provide an incentive tenth largest depository institution, with 2.9 percent of the deposits in for bank holding companies to provide needed private capital to the the market. In the Green Lake banking market, Applicant is the thrift industry, and to permit bank holding companies to take advan- second largest depository institution, with 11.4 percent of the deposits tage of the cost efficiencies of consolidating the operations of the thrift in the market. CFB is the tenth largest depository institution, with 5.4 with an existing bank subsidiary. See 135 Cong. Rec. H4998 (Aug. 3, percent of the deposits in the market. 1989). 8. Under the revised Department of Justice Merger Guidelines, 49 2. The Board has received comments protesting the application Federal Register 26,823 (1984), a market in which the post-merger from The Independent Insurance Agents of America, Inc.; National HHI is between 1000 and 1800 is considered moderately concentrated. Association of Casualty & Surety Agents; National Association of In such markets, the Justice Department is unlikely to challenge a Life Underwriters; National Association of Professional Insurance merger if the increase in HHI is less than 100 points. Any market in Agents; National Association of Surety Bond Producers; New York which the post-merger HHI is over 1800 is considered highly concen- State Association of Life Underwriters; Independent Insurance trated, and the Justice Department is likely to challenge a merger that Agents of New York, Inc.; and the Professional Insurance Agents of increases the HHI by more than 50 points unless other factors indicate New York, Inc. that the merger will not substantially lessen competition. The Justice 3. CFB has divested its insurance agency subsidiary. Accordingly, Department has informed the Board that a bank merger or acquisition Applicant does not seek approval for this nonbanking activity. generally will not be challenged (in the absence of other factors 4. State banking data are as of December 31, 1989. Market banking indicating anticompetitive effects) unless the post-merger HHI market data are as of December 31, 1988. is at least 1800 and the merger increases the HHI by at least 200 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

558 Federal Reserve Bulletin • July 1990 mation of this proposal would eliminate some existing where the record demonstrates the type of evasion competition between Applicant and CFB in the Fond described in Citicorp (American State Bank) (71 Feddu Lac and Green Lake banking markets, thirteen and eral Reserve Bulletin 789 (1985)). Protestants do not fourteen other depository institutions, respectively, allege, and the record does not demonstrate, the type would continue to compete in these markets. In addi- of evasion described in that case. tion, the Fond du Lac and Green Lake banking mar- To the extent insurance agency activities are conkets would remain only moderately concentrated. Ac- ducted through nonbank subsidiaries of Applicant's cordingly, the Board concludes that the acquisition subsidiary state banks, they are authorized insofar as would not have a substantially adverse effect on the BHC Act is concerned by section 225.22(d)(2)(H) of existing competition in these markets. There is no the Board's Regulation Y (12 C.F.R. 225.22(d)(2)(H)). evidence in the record to indicate that approval of this This regulation permits state banks owned by bank proposal would result in undue concentration of re- holding companies to acquire, without Board approval sources, decreased or unfair competition, conflicts of under the BHC Act, companies that are wholly owned interests, unsound banking practices, or other adverse by the state bank and that engage only in activities that effects. the bank may conduct directly under state law. The Protestants have objected to the application on the Board has asked for comment on this regulation,12 grounds that the sale of insurance by subsidiary banks and, in the Board's view, Protestants' questions reof Applicant or operations subsidiaries of these banks garding the operations of these subsidiaries are approis impermissible for bank holding companies under the priately considered in the context of this rulemaking. insurance prohibitions of the Garn-St Germain Depos- Given the above considerations, and based on all the itory Institutions Act of 1982 ("Garn-St Germain facts of record, the Board has determined that the Act").9 As the Board has previously indicated, the balance of public interest factors it must consider analysis required under section 4(c)(8) of the BHC Act under section 4(c)(8) of the BHC Act is favorable and focuses on whether permitting the affiliation of the consistent with approval of Applicant's application to applying bank holding company and the particular acquire CFB. Accordingly, the Board has determined nonbank company to be acquired can reasonably be that the proposed application pursuant to section expected to produce public benefits that outweigh 4(c)(8) of the BHC Act should be, and hereby is, possible adverse effects that may result from the approved. affiliation.10 State Bank will not engage in insurance In considering Applicant's request for approval of activities directly or through an operations subsidiary, the merger of CFB into State Bank pursuant to section and the subsidiary banks of Applicant that are engaged 5(d)(3) of the FDI Act, the record in this case shows in insurance agency activities are not the subject of that: this application. (1) The aggregate amount of the total assets of all Moreover, the Board notes that, to the extent that depository institution subsidiaries of Applicant is Applicant's subsidiary banks engage directly in insur- $7.2 billion, an amount which is not less than 200 ance agency activities as authorized by state law, percent of the total assets of CFB, which currently these activities would not be subject to the insurance has $97.1 million in total assets; prohibitions of the Garn-St Germain Act under the (2) Applicant and all of its bank subsidiaries cur- Board's decision in Merchants National,11 except rently meet all applicable capital standards and, upon consummation of the proposed transactions, will continue to meet all applicable capital stanpoints. The Justice Department has stated that the higher than normal dards; HHI thresholds for screening bank mergers for anticompetitive effects (3) The transaction is not in substance the acquisiimplicitly recognizes the competitive effect of limited-purpose lenders and other non-depository financial entities. tion of a Bank Insurance Fund member bank by a 9. Section 4(c)(8) of the BHC Act, as amended by Title VI of the Savings Association Insurance Fund member; Garn-St Germain Act, provides that, with seven exceptions (not at (4) CFB had tangible capital of less than 4 percent issue in this application), insurance activities are not closely related to banking and thus are not generally permissible for bank holding during the quarter preceding its acquisition by Apcompanies. These allegations have also been raised in a separate plicant; petition filed by certain of these commenters regarding Applicant, and Protestants have requested that the Board act on this petition. 10. The Mitsui Bank, Limited, 76 Federal Reserve Bulletin 381 (1990). 11. Merchants National Corporation, 75 Federal Reserve Bulletin activities are not permitted for bank holding companies. The Court 388 (1989); affirmed by the United States Court of Appeals for the of Appeals for the Second Circuit lifted its stay order in Merchants Second Circuit in Independent Insurance Agents of America, Inc., National on February 1, 1990, and the United States Supreme Court et al. v. Board of Governors, 890 F.2d 1275 (2d Cir. 1989). Thus, a has denied Protestants' request for a stay pending petitioners' holding company's state bank may engage directly in insurance request for review by that Court. agency activities authorized under state law even though such 12. 53 Federal Register 48,915 (1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 559 (5) The transaction, which involves the merger of under section 4(c)(8) of the BHC Act, as amended by CFB, a savings association located in Wisconsin, by Title VI of the Garn-St Germain Depository Institua bank subsidiary of Applicant, a bank holding tions Act of 1982 ("Garn-St Germain Act").1 The company whose banking subsidiaries' operations Garn-St Germain Act amended section 4(c)(8) of the are principally conducted in Wisconsin, would com- BHC Act to provide that, with seven exceptions, ply with the requirements of section 3(d) of the Bank insurance activities are not closely related to banking Holding Company Act if CFB were a state bank and thus are not generally permissible for bank holding which Applicant were applying to acquire. companies. 12 U.S.C. § 1843(c)(8); see also 12 C.F.R. 225.25(b)(8). Based on the foregoing and all of the other facts of In response to these protests, MidAmerican comrecord, the Board has determined that the proposed mitted that, within two years of consummation of its application under section 5(d)(3) of the FDI Act should merger with Merchants, MidAmerican would termibe, and hereby is, approved. This approval is subject nate or divest the insurance business of MAIA unless to Applicant's obtaining the required approvals of the during that time MidAmerican received Board apappropriate federal and state banking agencies for the proval under section 4 of the BHC Act to retain proposed merger. MAIA and continue to conduct these insurance The transactions approved in this Order shall be agency activities. In the present application, Midmade not later than three months after the effective American seeks approval to retain MAIA and condate of this Order, unless such period is extended for tinue its insurance agency activities pursuant to one good cause by the Board or by the Federal Reserve of the seven exemptions to the insurance prohibi- Bank of Chicago, pursuant to delegated authority. tions in the Garn-St Germain Act, Exemption D.2 By order of the Board of Governors, effective 12 U.S.C. § 1843(c)(8)(D). Exemption D provides an May 3, 1990. exception to the general insurance prohibitions in the Garn-St Germain Act for any insurance agency activity that was conducted by a bank holding company Voting for this action: Chairman Greenspan and Governors Johnson, Seger, Angell, Kelley, and La Ware. or any of its subsidiaries on May 1, 1982, subject to certain geographic and functional limitations.3 JENNIFER J. JOHNSON Notice of the application, affording interested per- Associate Secretary of the Board sons an opportunity to submit comments, has been published (54 Federal Register 29,388 (1989)). The MidAmerican Corporation time for filing comments has expired, and the Board Shawnee Mission, Kansas has considered the application and all comments received, including comments from several insurance Order Approving Retention of Shares of a General industry trade associations ("Protestants"), in light of Insurance Agency the factors set forth in section 4 of the BHC Act.4 MidAmerican Corporation, Shawnee Mission, Kansas 1. Pub. L. 97-320, Title VI, 96 Stat. 1469, 1536-38 (1982). ("MidAmerican"), a bank holding company within the 2. MidAmerican had also originally argued that it was permitted meaning of the Bank Holding Company Act ("BHC under the general grandfather provisions of section 4(a)(2) of the BHC Act"), has applied for the Board's approval under Act to engage in insurance agency activities. Section 4(a)(2) of the BHC Act is more expansive than Exemption D and provides grandsection 4(c)(8)(D) of the BHC Act ("Exemption D") father rights for certain bank holding companies lawfully engaged in (12 U.S.C. § 1843(c)(8)(D)) to retain the shares of its any activities on June 30, 1968. In response to challenges made by nonbank subsidiary, MidAmerican Insurance Agency, various protestants that the merger of MidAmerican with Merchants extinguished this grandfather privilege, MidAmerican has withdrawn Inc., Roeland Park, Kansas ("MAIA"), and to permit its request for a Board determination under section 4(a)(2) of the BHC this subsidiary to continue to engage in certain general Act. 3. Exemption D restricts grandfathered insurance agency activities insurance agency activities. On May 30, 1989, the to the state in which the grandfathered bank holding company has its Board approved an application by MidAmerican under principal place of business, any state immediately adjacent to that section 3 of the BHC Act to acquire by merger state, and any state or states in which insurance activities were conducted by the bank holding company or any of its subsidiaries on Merchants Bancorporation, Topeka, Kansas ("Meror before May 1, 1982. Exemption D also restricts these activities to chants"), and thereby to acquire its subsidiary banks, insurance agency activities that were conducted by the grandfathered Merchants National Bank, Topeka, Kansas, and First company on May 1, 1982, and sales of insurance coverages that become available after that date so long as those coverages insure National Bank of Lawrence, Lawrence, Kansas. against the same types of risks as coverages sold before that date, or The earlier application was protested by various are otherwise functionally equivalent to those coverages. 12 U.S.C. § 1843(c)(8)(D); 12 C.F.R. 225.25(b)(8)(iv). insurance industry trade associations on the grounds 4. The Board has received comments opposing Board approval of that the insurance activities of MAIA are prohibited this application from the Independent Insurance Agents of America, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

560 Federal Reserve Bulletin • July 1990 Protestants argue that MidAmerican has been en- MidAmerican under section 4(c)(8)(D) of the BHC Act. gaged in insurance agency activities unlawfully since MidAmerican argues that this transfer of business rep- 1980, and, consequently, does not qualify for grandfa- resented an internal reorganization and did not involve ther rights under Exemption D; that MidAmerican lost any change in the beneficial ownership of MidAmerican any grandfather rights that may have accrued to its or any of MidAmerican's subsidiaries. insurance agency subsidiary when MidAmerican Section 4(c)(ll) of the BHC Act permits a "compamerged with Merchants in 1989; and that, in the event ny covered in 1970," such as MidAmerican, to own MidAmerican does qualify for grandfather rights under shares of any company "which does not engage in any Exemption D, MidAmerican has failed to establish a activities other than those in which the bank holding sufficient record to determine the scope of those company, or its subsidiaries, may engage under [secrights. tion 4 of the BHC Act]." 12 U.S.C. § 1843(c)(ll). Under this exception, MidAmerican would have Entitlement to Exemption D Rights been permitted in 1980 to establish and own shares of a subsidiary that engaged only in activities that MidAmerican is the third largest commercial banking MidAmerican was at that time permitted under secorganization in Kansas, controlling deposits of tion 4 to conduct directly. $636.6 million, representing approximately 2.7 per- MidAmerican claims that, at the time that it estabcent of the total deposits in commercial banks in the lished MAIA in 1980, MidAmerican was permitted state.5 MidAmerican was originally formed as Roe- under section 4(a) of the BHC Act to conduct insurland Park Agency, Inc., Roeland, Kansas ("Roe- ance agency activities directly. Section 4(a) of the land"), in 1953, and was chartered to engage in BHC Act permits bank holding companies covered by various insurance agency activities. Roeland ac- the 1970 Amendments to the BHC Act to continue to quired a majority interest in the Roeland Park State engage in any activity that the company or any of its Bank & Trust Company, Roeland, Kansas, in 1958, subsidiaries lawfully conducted on June 30, 1968, and and became a bank holding company for purposes of continuously conducted after that date.7 MidAmerican the BHC Act with the enactment of the 1970 Amend- became a bank holding company as a result of the 1970 ments to the BHC Act.6 In 1971, when Roeland filed Amendments to the BHC Act, and as noted above, its registration statement with the Board that it was a engaged directly in insurance agency activities continone bank holding company, it was primarily engaged uously from 1953 until it established MAIA in 1980. As in insurance agency activities. In 1976, Roeland a result, MidAmerican was a "company covered in changed its name to MidAmerican, and in 1980 formed 1970" and could, in 1980, conduct insurance agency activities pursuant to section 4(a) of the BHC Act. MAIA as a separate subsidiary of the holding company Because MidAmerican could conduct these activities to conduct all of its insurance agency activities previdirectly, MidAmerican could, under section 4(c)(ll), ously conducted directly by the holding company. establish and own a subsidiary engaged in these same Protestants argue that the transfer of insurance activities without obtaining prior Board approval.8 agency activities by MidAmerican to MAIA in 1980 violated the BHC Act because it was accomplished without Board approval under the BHC Act. Protestants claim that, as a result, MAIA was illegally 7. While the Board has discretion under section 4(a) of the BHC Act engaged in insurance agency activities prior to 1982, to terminate this exemption, the Board has not done so in the case of MidAmerican's insurance agency activities. Moreover, the record and forfeited any grandfather rights to conduct insur- does not indicate that MidAmerican took any other action that would ance agency activities under Exemption D. appear to have caused it to lose its grandfather rights under section 4(a) of the BHC Act prior to 1980. MidAmerican contends that the transfer of insur- 8. Accord Schroders Limited, 66 Federal Reserve Bulletin 255, 256 ance business from MidAmerican to a wholly owned n.4 (1980). subsidiary was permissible under the BHC Act and Protestants cite MorAmerica Financial Corporation, 39 Federal Register 36,391 (1974), for the proposition that grandfather prividid not disturb the insurance grandfather rights of leges are lost even if the grandfathered entity only alters its affiliations within a single holding company system. MorAmerica is inapposite, however. MorAmerica Financial Corporation ("Mor- Inc., National Association of Casualty and Surety Agents, National America") had been engaged in a number of nonbanking activities Association of Life Underwriters, National Association of Profes- prior to June 30, 1968. MorAmerica sought to acquire an unaffiliated sional Insurance Agents, National Association of Surety Bond Pro- company, Bezanson Investments, Inc. ("Bezanson"), which had ducers, New York State Association of Life Underwriters, Indepen- been engaged in certain other grandfathered activities in which dent Insurance Agents of New York, Inc., and Professional Insurance MorAmerica was not engaged. The Board declined to permit Mor- Agents of New York, Inc. America to engage in activities in which MorAmerica was not 5. Deposit data are as of December 31, 1989. engaged on June 30, 1968, on the basis of grandfather rights accruing 6. See Registration Statement filed on Form Y-5 pursuant to section to Bezanson. In this case, the acquisition of MAIA by MidAmerican 5(a) of the BHC Act, submitted by Roeland Park Agency, Inc., on represents an internal reorganization, not an acquisition of an June 25, 1971, and accepted for processing on September 9, 1971. unaffiliated company, as in MorAmerica. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 561 Thus, MAI A appears to have been legally established agency activities on the basis of grandfather privileges and held by MidAmerican in 1980, and engaged law- of MAIA. On this basis, and for the reasons stated in fully in insurance agency activities at that time. its prior decisions and proceedings, the Board con- MAIA has been a lawful subsidiary of MidAmerican cludes that MidAmerican and MAIA may retain their since that time and has continuously engaged in cer- Exemption D privileges even assuming that these tain general insurance agency activities since that companies were acquired by Merchants. time, including on May 1, 1982. Accordingly, under the terms of section 4(c)(8)(D) of the BHC Act and Scope of Grandfathered Activities section 225.25(b)(8)(iv) of the Board's Regulation Y, MAIA qualifies for the privileges of Exemption D. Protestants also argue that MidAmerican has not provided an adequate basis for determining the particular Acquisition of Exempt Company lines of insurance that MAIA was selling on May 1, 1982. Exemption D grandfathers insurance agency Protestants' second contention, that MidAmerican activities that were "engaged in" by the bank holding lost entitlement to Exemption D rights upon its merger company or any of its subsidiaries on "May 1, 1982." with Merchants, is based on the claim that MidAmer- In its recent decision reviewing an application by ican and MAIA were in fact acquired by Merchants, a Citicorp to retain two insurance subsidiaries in Aribank holding company that has not established enti- zona under Exemption D, the Board stated that the tlement to Exemption D privileges. Even assuming requirement that the grandfathered company have that Merchants was in fact the acquiror of MidAmer- been "engaged in" insurance agency activities does ican, however, the Board has previously considered not require grandfathered companies to show that they and rejected Protestants' claim that a company that actually engaged in a sale of each particular type of qualifies for privileges under Exemption D loses those insurance product on the specific grandfather date.11 privileges upon its indirect acquisition by another bank Instead, the Board found that a company would holding company.9 On September 9, 1988, the United meet the requirements of Exemption D for particular States Court of Appeals for the District of Columbia types of insurance if the company provides evidence upheld this Board determination, and on May 30, 1989, that it was legally permitted to act as agent for those the United States Supreme Court refused to consider a types of insurance on May 1, 1982, that the company further appeal of this case, thereby upholding the held itself out to the public as agent for the particular Board's decision.10 types of insurance for which the company seeks grand- The Board notes that MAIA will be retained as a father privileges, and that the company had not abanseparate nonbank subsidiary of MidAmerican and will doned the business prior to the grandfather date. In conduct the insurance agency activities that are the that decision, the Board indicated that a variety of subject of this application. In this regard, MidAmeri- types of evidence could establish Exemption D rights, can's other subsidiaries will not conduct insurance including copies of insurance agency licenses in effect on and around May 1, 1982, copies of policies for which the company acted as agent during the 12 months prior to May 1, 1982, material advertising the Protestants also cite Wyoming Bancorporation, 59 Federal Reserve Bulletin 180 (1973), for the proposition that grandfather rights cannot types of insurance policies sold by the company, and be transferred. However in 1980, when MidAmerican established summaries prepared by insurance underwriters of pol- MAIA, there was no merger or transfer, other than a corporate reorganization as permitted by section 4(c)(ll) of the BHC Act. icies sold and revenues received by the agency. Other 9. See Shawmut National Corporation, 74 Federal Reserve Bulletin evidence, including affidavits of the company's em- 182 (1988); Sovran Financial Corporation, 73 Federal Reserve Bulleployees, may also support a finding that a company tin 672 (1987). In Sovran, the Board determined that Exemption D permits a bank holding company that did not control a company qualifies for Exemption D rights. conducting insurance activities on the grandfather date to acquire a MidAmerican has submitted state licensing records bank holding company and its subsidiaries that qualify for grandfather indicating that an employee of MAIA was licensed to privileges under Exemption D, if the grandfathered entity retains its separate corporate structure and its insurance activities are conducted act as agent for the sale of general life, accident and only by the companies that were actually engaged in insurance health, and property and casualty insurance throughactivities on the grandfather date and not by other companies within the acquiring banking organization. As discussed below, MAIA will out 1982.12 MidAmerican has also submitted financial meet these conditions. statements of MAIA showing that MAIA derived 10. National Association of Casualty and Surety Agents v. Board of Governors, 856 F.2d 282, reh'g denied en banc, 862 F.2d 351 (D.C. Cir. 1988), cert, denied, _ U.S. _, 109 S. Ct. 2430 (1989). Subsequent to its Sovran decision, the Board, in reliance on that decision, 11 .See Citicorp, 76 Federal Reserve Bulletin 70, 73 (1990). approved acquisitions of eight other bank holding companies that had 12. Until May 1, 1989, Kansas licensed only individuals to act as or controlled companies that had Exemption D grandfather rights. insurance agents and did not license companies to serve as insurance Each of these approvals was also upheld on judicial review. agencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

562 Federal Reserve Bulletin • July 1990 premium revenues from the sale during April and May, insurance agency activities of MAIA may be con- 1982, of automobile, homeowners (including flood and ducted only in Kansas, states adjacent thereto, or theft insurance), fire & casualty, builder's risk, yacht, states in which MAIA lawfully engaged in insurance outboard, liability, compensation, and accident and activities on May 1, 1982.14 12 U.S.C. § 1843(c)(8)(D). health insurance, in addition to insurance packages In acting on an application under section 4(c)(8) of specified as umbrella (a combination of commercial the BHC Act, the Board must consider whether an casualty and liability insurance), personal (a combina- applicant's performance of the proposed activities tion of automobile and homeowners' insurance), and "can reasonably be expected to produce benefits to commercial (a combination of commercial property the public, such as greater convenience, increased (fire) and casualty (liability) insurance). The Treasurer competition, or gains in efficiency, that outweigh posof MidAmerican has provided an affidavit confirming sible adverse effects, such as undue concentration of that MAIA gained income during 1982 from the sale as resources, decreased or unfair competition, conflicts agent of group and individual health insurance prod- of interests, or unsound banking practices." ucts, group and individual life insurance products, The Board believes that approval of this application individual and commercial property and casualty cov- would permit MAIA to be a viable competitor and erages and surety bonds. Additionally, MidAmerican permit consumers in the area served by MAIA to has provided copies of annual renewable term life benefit from resumed access to MAIA as a source of insurance and graded premium whole life insurance insurance products and services. This proposal would policies in effect on and around May 1, 1982, which also serve to increase competition in the provision of MidAmerican sold as agent. MidAmerican has also insurance agency services in the areas served by submitted statements from two insurance underwriters MAIA, and avoid disrupting established relationships stating that MidAmerican currently is, and has, since between MAIA and its customers by permitting MAIA prior to 1982, continuously been authorized to act as to resume selling new policies to these customers. In agent for these underwriters in the sale of a full line of addition, the Board finds that the record does not property and casualty, life, and accident and health indicate that approval of this application would result insurance. in undue concentration of resources, unfair or de- Based on these and the other facts of record in this creased competition, conflicts of interest, unsound case, the Board believes that MidAmerican has dem- banking practices, or other adverse effects. Accordonstrated that, on May 1, 1982, MAIA was engaged in ingly, the Board believes that the balance of public acting as agent in the sale of the following types of interest factors in this case weighs in favor of approval insurance: automobile, homeowners (including flood of this application. and theft insurance), accident and health, fire & casu- Based on the foregoing and all the facts of record, alty, outboard, yacht, builder's risk, term and ordinary the Board has determined that the application should (or whole) life insurance products, liability, surety be, and hereby is, approved. This determination is bonds, and compensation, in addition to packages subject to the conditions that the insurance activities specified as umbrella, personal, and commercial.13 be conducted solely by MAIA, which must remain an Under the terms of Exemption D, MAIA may continue independent subsidiary of MidAmerican, that MAIA to conduct these insurance agency activities that it limit its insurance activities to the insurance agency conducted on May 1, 1982. Under Exemption D, the activities that the Board has found in this Order were conducted by MAIA on May 1, 1982, and that MAIA conduct these activities only in Kansas, states adja- 13. The Board has also considered MidAmerican's argument that cent to Kansas, and states in which MAIA was law- MAIA was engaged in "a general insurance agency business" and fully engaged in the activity on May 1, 1982, as well as should be permitted to continue to act as agent for all types of insurance as a general insurance agency. The Board believes that this to all of the conditions contained set forth in Regulabroad categorization is not supportable under the terms of Exemption tion Y. It is also subject to the Board's authority to D, which permits a grandfathered company to conduct "any insurance require such modifications or termination of activities agency activity which was engaged in by the bank holding company ... on May 1,1982,... including .. . sales of insurance coverages of the bank holding company or any of its subsidiaries which may become available after May 1, 1982, so long as those as the Board finds necessary to assure compliance coverages ensure against the same types of risk as, or are otherwise with, and prevent evasions of, the provisions and functionally equivalent to, coverages sold on May 1, 1982. . . ." 12 U.S.C. § 1843(c)(8)(D). In the Board's view, this specific reference to new types of coverages, with its reference to same types of risk, would not be necessary if Exemption D were intended broadly to authorize "general insurance agency business." Rather, the limitations 14. This determination does not prevent MAIA or MidAmerican in Exemption D indicate that it was intended to permit grandfathered from providing additional evidence that it acted as agent in the sale of companies to act as agent only for the specific types of insurance these other types of insurance on May 1,1982. Upon such a showing, MAIA companies provided on May 1, 1982, and certain types of related would be permitted under Exemption D to continue to act as agent for coverages developed after that date. these types of insurance. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 563 purposes of the BHC Act and the Board's regulations Notice of the application, affording interested perand orders issued thereunder. sons an opportunity to submi comments, has been By order of the Board of Governors, effective published (55 Federal Register 1728 and 13,958 May 31, 1990. (1990)). The time for filing comments has expired, and the Board has considered the application and all Voting for this action: Chairman Greenspan and Governors comments received in light of the factors set forth in Johnson, Seger, Angell, Kelley, and Mullins. Absent and not section 4 of the BHC Act.4 voting: Governor LaWare. Upon the merger of The Mitsui Bank, Limited, Tokyo, Japan, with total consolidated assets equiva- JENNIFER J. JOHNSON lent to approximately $226 billion, with The Taiyo Associate Secretary of the Board Kobe Bank, Limited, Kobe, Japan, with total consolidated assets equivalent to approximately $187.6 bil- The Mitsui Taiyo Kobe Bank, Limited lion, Mitsui became the second largest banking orga- Tokyo,Japan nization in the world.5 In the United States, Mitsui owns a bank subsidiary in Los Angeles, California, Order Approving Acquisition of Shares of Nonbank and operates a branch and a limited purpose trust Companies company in New York, limited branches in Illinois and Washington, and an agency in California. The Mitsui Taiyo Kobe Bank, Limited, Tokyo, Japan In acting on this application, the Board must con- ("Mitsui"), a bank holding company within the meansider whether the standards in section 4(c)(8) of the ing of the Bank Holding Company Act ("BHC Act"), BHC Act are satisfied. The Board has previously has applied for the Board's approval under section determined that all of the proposed activities in this 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) to application are closely related to banking within the acquire up to 10 percent of the outstanding shares of meaning of section 4(c)(8) of the BHC Act and the voting common stock of each of Security Pacific Companies will engage in the activities within the Financial Services System, Inc. ("Security Pacific limitations specified in the Board's Regulation Y or in Financial"), and SPFSS, Inc. ("SPFSS"), both loapplicable orders governing the BHC Act. The Board cated in San Diego, California ("Companies"). Both must also consider whether the performance of the Companies are wholly owned subsidiaries of Security proposed activities "can reasonably be expected to Pacific Corporation, Los Angeles, California ("Securproduce benefits to the public, such as greater conveity Pacific").1 Companies engage in the following nience, increased competition, or gains in efficiency, nonbanking activities pursuant to the Board's Regulathat outweigh possible adverse effects, such as undue tion Y: concentration of resources, decreased or unfair com- (i) making, acquiring and servicing loans; petition, conflicts of interests, or unsound banking (ii) leasing personal or real property;2 practices." (iii) furnishing collection services and charge-off In every case involving a nonbanking acquisition by recovery services; a bank holding company under section 4 of the BHC (iv) furnishing data processing and data transmission Act, the Board considers the financial condition and services; and resources of the applicant and its subsidiaries and the (v) offering to customers credit life insurance, credit effect of the transaction on these resources.6 In this accident and health insurance, involuntary unemcase, the primary capital ratio of Mitsui, as publicly ployment insurance and home mortgage redemption reported, is below the minimum level specified in the insurance underwritten by Security Pacific.3 4. The Board has received a comment referencing Mitsui's record of performance under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.)("CRA") filed in response to an application under section 3 of the BHC Act by Security Pacific Corporation to acquire a 1. Security Pacific Financial is a wholly owned subsidiary of 20 percent interest in Mitsui's subsidiary bank, Mitsui Manufacturer's Security Pacific. SPFSS is a wholly owned subsidiary of Security Bank, Los Angeles, California, but untimely filed for this application. Pacific National Bank which, in turn, is a wholly owned subsidiary of The Board will consider this comment in conjunction with the section Security Pacific. 3 application. The Board has also determined that the CRA does not 2. Leasing activities will be conducted to the extent and under the apply to the Board's consideration of an application under section 4 of terms recently approved by the Board in Security Pacific Corporation, the BHC Act. The Mitsui Bank, Limited, 76 Federal Reserve Bulletin 76 Federal Reserve Bulletin (1990) (Order dated April 30, 1990). 381 (1990). 3. These activities are permitted for bank holding companies 5. Data are as of September 30, 1989. pursuant to sections 225.25(b)(1), (b)(5), (b)(23), (b)(7), and (b)(8)(i) of 6. 12 C.F.R. 225.24; The Fuji Bank, Limited, 75 Federal Reserve the Board's Regulation Y (12 C.F.R. 225.25(b)(1), (b)(5), (b)(23), Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve (b)(7), and (b)(8)(i). Bulletin 155, 156 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

564 Federal Reserve Bulletin • July 1990 Board's Capital Adequacy Guidelines. After making (8)(A)) and section 225.25(b)(8)(i) of the Board's adjustments to reflect Japanese banking and account- Regulation Y( 12 C.F.R. 225.25(b)(8)(i)).» Companies ing practices, however, including consideration of a will not perform any service, receive any fees or portion of the unrealized appreciation in Mitsui's engage in any activity that is not permissible under portfolio of equity securities consistent with the prin- Exemption A. ciples of the Basle capital framework, Mitsui's capital Protestants have also raised questions regarding the ratio meets United States standards. insurance activities of other Security Pacific affiliates, The Board also has considered additional factors including Security Pacific State Bank, the insurance that mitigate its concern in this case. The Board notes activities conducted by Security Pacific under Exempthat Mitsui is in compliance with the capital and other tion D of the Garn-St Germain Act (12 U.S.C. financial requirements for banking organizations in § 1843(c)(8)(D)) and section 225.25(b)(8)(iv) of the Japan. In addition, the Board notes that the capital of Board's Regulation Y (12 C.F.R. 225.25(b)(8)(iv)), and Mitsui currently accords with the minimum require- certain activities conducted pursuant to section ments established by the Basle Committee capital 4(c)(1)(C) of the BHC Act. The Board does not believe framework for year-end 1990. Based on these and that the analysis required under section 4(c)(8) of the other facts of record, the Board concludes that finan- BHC Act in this case requires a review of activities cial and managerial considerations are consistent with that are not or will not be conducted by the applicant approval of the application. or the nonbank company to be acquired.10 Companies Mitsui and Security Pacific compete directly in are not engaged in insurance activities not permissible providing certain financing services.7 Consummation for bank holding companies under section 4(c)(8) of of the proposal, however, would have a de minimis the BHC Act, and Mitsui has not proposed to acquire effect on existing competition in each of these markets any interest in the Security Pacific affiliates engaged in and there are numerous competitors for these ser- insurance activities questioned by Protestants. Nor do vices. Accordingly, the Board has determined that Companies intend to conduct in the future any insurconsummation of this proposal would not have signif- ance activities, except the previously noted Exempicantly adverse effects on either existing or potential tion A activities of Companies, in conjunction with competition in any relevant market. There is no evi- these affiliates. For these reasons, the Board condence in the record to indicate that approval of this cludes that issues raised by the Protestants are irreleproposal would result in undue concentration of re- vant to the Board's consideration of the statutory sources, decreased or unfair competition, conflicts of factors set forth in section 4 of the BHC Act. interest, or unsound banking practices. Based on the foregoing and all the facts of record, The Board has received comments from various the Board has determined that the public benefits insurance trade associations protesting this associated with this proposal can reasonably be application.8 The insurance activities of Security expected to outweigh possible adverse effects, and Pacific Financial in this application, however, have that the balance of the public interest factors that the been restructured to restrict its activities to offering Board is required to consider under section 4(c)(8) of credit life insurance, credit accident and health in- the BHC Act is favorable. Accordingly, the Board surance, involuntary unemployment insurance and home mortgage redemption insurance underwritten by Security Pacific and permissible under Exemption 9. Employees of Security Pacific Financial perform certain admin- A of the Garn-St Germain Act (12 U.S.C. § 1843(c) istrative services for Security Pacific's companies underwriting credit life insurance, credit accident and health insurance, involuntary unemployment insurance and home mortgage redemption insurance. These services include the introduction of the customer to the 7. These financial services include asset-based financing, commer- availability of Security Pacific's credit life, accident and health, cial real estate financing, lease financing, corporate finance, machin- involuntary unemployment and home mortgage redemption insurance ery and equipment loans, aircraft loans, automobile loans and leasing, programs and assistance to the customer in the completion of the recreational vehicle loans, homeowner loans, mobile home loans, forms required to apply for such insurance coverage. Some states revolving lines of credit, factoring, leveraged buy-out financing and require insurance licensure for these "enroller" activities. The underleasing. writing companies remit a fee of 15 percent of collected premiums to 8. The Board received comments protesting the application from the Security Pacific Financial as reimbursement for the time spent and Independent Insurance Agents of America, Inc., National Association costs incurred in assisting the Security Pacific credit insurance underof Casualty & Surety Agents, National Association of Life Underwrit- writers. These activities are performed only in connection with the ers, National Association of Professional Insurance Agents, National extension of credit by Security Pacific, and are permissible under Association of Surety Bond Producers, New York Association of Life Exemption A of the Garn-St Germain Act. Moreover, the insurance Underwriters, Professional Insurance Agents of New York, Inc., activities of Security Pacific Financial will also be subject to the Independent Insurance Agents of New York, Inc., California Associ- anti-tying restrictions of the 1970 Amendments to the BHC Act. ation of Life Underwriters, Professional Insurance Agents of Califor- 12 U.S.C. § 1972(1). nia and Nevada, Inc., and Independent Insurance Agents & Brokers 10. See, e.g. The Mitsui Bank, Limited, 76 Federal Reserve Bulletin of California. 381 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 565 has determined that the application should be, and Norwest Corporation hereby is, approved, subject to the conditions con- Minneapolis, Minnesota tained in this Order. This determination is further subject to all of the conditions set forth in the Order Approving Acquisition of a Company Engaged Board's Regulation Y, including those in sections in Crop Insurance Agency Activities 225.4(d) and 225.23(b), and to the Board's authority to require modification or termination of the activi- Norwest Corporation, Minneapolis, Minnesota ("Norties of the holding company or any of its subsidiaries west"), a bank holding company within the meaning of as the Board finds necessary to assure compliance the Bank Holding Company Act of 1956, as amended with, or to prevent evasion of, the provisions and (the "BHC Act"), has applied under section 4(c)(8) of purposes of the BHC Act and the Board's regulations the BHC Act (12 U.S.C. § 1843(c)(8)) and section and orders issued thereunder. 225.23(a) of the Board's Regulation Y (12 C.F.R. The transaction shall not be consummated later than 225.23(a)) for the Board's approval to acquire all the three months after the effective date of this Order, outstanding shares of Crop Hail Management, Kalisunless such period is extended for good cause by the pell, Montana ("Agency"), and for Agency to engage Board or by the Federal Reserve Bank of San Fran- in crop insurance agency activities pursuant to section cisco, acting pursuant to delegated authority. 4(c)(8)(G) of the BHC Act and section 225.25(b)(8)(vii) By order of the Board of Governors, effective of the Board's Regulation Y (12 C.F.R. May 7, 1990. 225.25(b)(8)(vii)). Notice of the application, affording interested per- Voting for this action: Chairman Greenspan, Governors sons an opportunity to submit comments, has been Angell, Kelley, and LaWare. Voting against this action: duly published (55 Federal Register 7776 (1990)). The Governor Seger. Absent and not voting: Governor Johnson. time for filing comments has expired, and the Board has considered the application and all comments re- JENNIFER J. JOHNSON ceived, including the comments of several insurance Associate Secretary of the Board trade associations ("Protestants") in light of the public interest factors set forth in section 4(c)(8) of the BHC Act.' Dissenting Statement of Governor Seger Norwest, with consolidated assets of $24.7 billion, is the largest banking organization in Minnesota.2 Norwest controls 30 banking subsidiaries in eight states in I dissent from the Board's action in this case. I believe the Midwest and owns a number of subsidiaries enthat foreign banking organizations whose primary cap- gaged in nonbanking activities. ital, based on U.S. accounting principles, is below the Title VI of the Garn-St Germain Depository Insti- Board's minimum capital guidelines for U.S. banking tutions Act of 1982 ("Garn Act") amended section organizations have an unfair competitive advantage in 4(c)(8) of the BHC Act to provide that insurance the United States over domestic banking organiza- agency, brokerage and underwriting activities are not tions. In my view, such foreign organizations should "closely related to banking" and thus are not permisbe judged against the same financial and managerial sible activities for bank holding companies, unless the standards, including the Board's capital adequacy activities are included within one of seven specific guidelines, as are applied to domestic banking organi- exemptions (A through G) contained in section 4(c)(8). zations. The majority concludes that Applicant's pri- Norwest is authorized to engage in insurance agency mary capital meets United States standards. To do so, activities pursuant to exemption G in section however, the majority makes adjustments that are not 4(c)(8)(G) of the BHC Act ("exemption G"), which available for U.S. banks under guidelines that have not authorizes those bank holding companies that enyet become effective for U.S. or foreign banking gaged, with Board approval, in insurance agency acorganizations. In addition, I am concerned that while some progress is being made in opening Japanese markets to 1. The Board received comments protesting this application from U.S. banking organizations, U.S. banking organiza- the Independent Insurance Agents of America, Inc., the National tions and other financial institutions, in my opinion, Association of Casualty & Surety Agents, the National Association of Life Underwriters, the National Association of Professional Insurance are still far from being afforded the full opportunity to Agents, the National Association of Surety Bond Producers, the New compete in Japan. York State Association of Life Underwriters, the Independent Insurance Agents of New York, Inc., and the Professional Insurance Agents of New York, Inc. May 9, 1990 2. Asset data are as of March 31, 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

566 Federal Reserve Bulletin • July 1990 tivities prior to 1971, to engage, or control a company ance companies so that underwriters are reinsured engaged, in insurance agency activities.3 Accordingly, against casualty losses, and provides a variety of as a qualified bank holding company under exemption administrative services to the insurance underwriters. G, Norwest may engage in general insurance agency However, under no circumstances does Agency asactivities without restriction as to location or type of sume any casualty risk of loss in performing its agent insurance sold.4 services.7 However, bank holding companies grandfathered For its services, Agency receives a base commission under exemption G are not authorized to engage in rate which can be increased if the underwriter realizes insurance underwriting activities because these activ- a certain level of underwriting gain on its policies. ities had not been approved by the Board prior to the When a casualty loss is incurred, the underwriters and 1971 grandfather date. Accordingly, Regulation Y's reinsurers contribute the necessary funds due to cover implementation of exemption G extends only to insur- the loss in proportion to their underwriting risk. ance agency activities and the Board has noted that Agency is required to pay the underwriter an issuing general underwriting activities appear to be precluded fee on the policies written and must reimburse the under exemption G.5 underwriter in the event of premium nonpayment. Protestants assert that Agency's insurance agent Agency also reimburses the underwriters for all their activities taken as a whole extend beyond permissible expenses incurred in supervising and conducting their insurance agency activities and constitute impermissi- underwriting businesses. ble underwriting activities under exemption G. In In commenting on proposed legislation regarding Protestant's view, Agency's activities are impermissi- bank holding company insurance powers, the Board ble underwriting even though Agency performs all has noted that exposure to risk of casualty loss has activities in its capacity as an agent on behalf of crop been an important factor in distinguishing insurance insurance underwriters. brokerage from insurance underwriting.8 Indeed, in- Agency acts as a managing general agent for a surance underwriting is generally defined as the asnetwork of 13 crop insurance underwriters and en- sumption of cost risk resulting from a specified event gages primarily in the sale and distribution of crop in exchange for the payment of premiums. The prininsurance products through its independent network of cipal as underwriter undertakes the casualty risk of approximately 3,000 insurance agents throughout the loss for a premium payment. Insurance agents or country.6 Under its general managing agency agree- brokers traditionally perform services for insurance ments with the insurance underwriters, Agency is underwriters, usually on a commission fee basis, withauthorized generally to supervise and conduct the out sharing in the risk of loss associated with the peril writing of crop insurance on behalf of the insurance insured against by the underwriter. underwriter, including the authority to appoint and Moreover, the comprehensiveness of Agency's acremove agents, accept and decline risks, collect pre- tivities as agent, including sharing in underwriting miums, and adjust, compromise, and pay losses. gains, must be considered in the context of its princi- Agency also arranges for the reinsurance of policies by pal insurance product. A significant portion of Agenthe federal government, foreign, and domestic reinsur- cy's revenues is derived from the sale of multiple peril crop insurance which is a comprehensive insurance program managed by the federal government.9 The 3. In 1959, Norwest received Board approval to retain its general government establishes the policy premium rates on a insurance agency subsidiaries. Northwest Bancorporation, 45 Federal commodity by commodity basis in addition to under- Reserve Bulletin 963 (1959). 4. See First Wisconsin Corporation, 71 Federal Reserve Bulletin 171 writing and establishing the terms for the reinsurance (1985); Norwest Corporation, 70 Federal Reserve Bulletin 470 and 235 (1984). 5. Section 225.25(b)(8)(vii) of the Board's Regulation Y permits qualifying bank holding companies to "engag[e] in any insurance 7. During the processing of this application, it was noted that under agency activity" in the United States. In promulgating this provision, one of the management agreements Agency assumed a portion of the the Board noted that it had not proposed nor adopted a provision that risk of casualty loss on the policies written. This agreement was would permit qualifying exemption G companies to engage in general amended to remove the risk of loss sharing provision. Agency has underwriting activities. See also First Wisconsin Corporation, 71 committed that it will no longer assume any casualty risk of loss on Federal Reserve Bulletin, 171, 172, n.7 (1985). policies written. 6. Agency acts as agent for two basic crop insurance products 8. See Statement by Paul V. Volcker, before the Committee on through its network of independent agencies: Banking, Housing, and Urban Affairs, U.S. Senate, March 27, 1984, (i) crop hail insurance which provides protection from crop damage reprinted in 70 Federal Reserve Bulletin 298, 395 (1984). caused by hail through a program operated within the private 9. In 1988, multiple peril crop insurance and crop hail insurance sector; and constituted approximately 70 percent and 30 percent, respectively, of (ii) multiple peril crop insurance which is more comprehensive in the total premiums issued by Agency. Agency possessed a market coverage and although operated in the private sector, is reinsured share of approximately 12 percent of the multiple peril market and 7 and operationally supported by the federal government through percent of the crop hail market. Agency's income from these premiexpense and premium subsidies. ums was approximately $1 million. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 567 of these policies. The government also specifies the assure compliance with, or to prevent evasion of, the commission rate payable to Agency for its services. provisions and purposes of the BHC Act and the Agency's capability to broker this insurance product Board's regulations and Orders issued thereunder. on behalf of an underwriter is therefore subject to The transaction shall be consummated not later than constraints not normally associated with more tradi- three months after the effective date of this Order, tional forms of insurance. Furthermore, in light of unless such period is extended for good cause by the Agency's delegated authority to accept or decline Board or by the Federal Reserve Bank of Minneapolis, underwriting risk on behalf of the underwriter, sharing pursuant to delegated authority. in the underwriting gain provides a prudential incen- By order of the Board of Governors, effective tive to exercise this authority consistent with the best May 30, 1990. interest of the underwriter. In light of these considerations, the Board believes Voting for this action: Chairman Greenspan and Governors that the proposed insurance agency activities do not Johnson, Seger, Angell, Kelley, and Mullins. Absent and not voting: Governor LaWare. constitute underwriting and are consistent with general insurance agency activities authorized by exemp- JENNIFER J. JOHNSON tion G and the Board's Regulation Y. In order to Associate Secretary of the Board approve this application, the Board also is required to determine that the performance of the proposed activ- The Royal Bank of Canada ities by Norwest "can reasonably be expected to Montreal, Quebec, Canada produce benefits to the public. . . that outweigh possible adverse effects, such as undue concentration of Order Approving Application to Act as Agent in the resources, decreased or unfair competition, conflicts Private Placement of All Types of Securities of interest, or unsound banking practices." 12 U.S.C. § 1843(c)(8). The Royal Bank of Canada, Montreal, Quebec, Can- The financial and managerial resources and future ada ("Applicant"), a bank holding company within the prospects of Norwest and Agency are consistent with meaning of the Bank Holding Company Act ("BHC approval. In addition, Norwest does not currently Act"), has applied for the Board's approval under engage in crop insurance management agency activisection 4(c)(8) of the BHC Act, 12 U.S.C. ties and these activities of Agency represent a small § 1843(c)(8), and section 225.23(a)(3) of the Board's share of the total market for these services. Moreover, Regulation Y, 12 C.F.R. 225.23(a)(3), for its indirect there are numerous competitors in the crop insurance subsidiary, RBC Dominion Securities Corporation, agency market and Norwest will provide an additional New York, New York ("Company"), to act as agent source for this type of insurance for its customers. in the private placement of all types of securities, Accordingly, consummation of this proposal would including providing related advisory services. not have a significantly adverse effect on competition Applicant has total consolidated assets equivalent to in any relevant market. approximately $96.0 billion.1 It owns bank subsidiaries There is no evidence in the record to indicate that in New York, New York, and San Juan, Puerto Rico, approval of this proposal would result in undue conand operates branches in Portland, Oregon, New centration of resources, decreased or unfair competi- York, New York, and San Juan, Puerto Rico, and tion, conflicts of interests, unsound banking practices, agencies in Miami and San Francisco. Applicant has or other adverse effects on the public interest. Accordreceived Board approval to engage in a broad range of ingly, the Board has determined that the balance of nonbanking activities, including engaging through public interest factors it must consider under section Company in underwriting and dealing in, to a limited 4(c)(8) of the BHC Act is favorable and consistent with extent, debt and equity securities that are not eligible approval of Norwest's application to acquire Agency. to be underwritten by a state member bank ("ineligible Based upon the foregoing and all facts of record, the securities").2 Company is and will continue to be a Board has determined that the proposed application broker-dealer registered with the Securities and Exshould be, and hereby is, approved. This determinachange Commission and subject to the record-keeping, tion is subject to the condition that under no circumreporting, fiduciary standards, and other requirements stances does Agency assume any casualty risk of loss of the Securities Exchange Act of 1934, the New York and to all of the conditions set forth in the Board's Regulation Y, including sections 225.4(d) and 225.23, and the Board's authority to require such modification 1. Data are as of April 30, 1989. or termination of the activities of a holding company or 2. See Canadian Imperial Bank of Commerce, The Royal Bank, Barclays PLC, 76 Federal Reserve Bulletin 158 (1990) ("Canadian any of its subsidiaries as the Board finds necessary to ImperiaV). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

568 Federal Reserve Bulletin • July 1990 Stock Exchange, and the National Association of single entity. In addition, the Board expects that the de Securities Dealers. novo entry of Applicant into the market for these Notice of the application, affording interested per- services would increase the level of competition sons an opportunity to submit comments on the pro- among providers of these services. Under the frameposal, has been published (54 Federal Register 37,830 work established in this and prior decisions, consum- (1989)). The time for filing comments has expired, and mation of this proposal is not likely to result in any the Board has considered the application and all significant undue concentration of resources, decomments received in light of the public interest creased or unfair competition, conflicts of interests, factors set forth in section 4(c)(8) of the BHC Act. The unsound banking practices, or other adverse effects. Board received written comments opposing the appli- Accordingly, the Board has determined that the percation from the Investment Company Institute formance of the proposed activities by Applicant can ("ICI"), a trade association of the mutual fund reasonably be expected to produce public benefits that industry.3 would outweigh adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC The Board has previously determined that acting as Act. agent in the private placement of securities does not constitute underwriting and dealing in securities for Based on the above, the Board has determined to purposes of section 20 of the Glass-Steagall Act. approve Applicant's application, subject to all of the Therefore, revenue derived from this activity is not terms and conditions set forth above and in the abovesubject to the 10 percent revenue limitation on ineligi- noted Board Orders that relate to these activities. ble securities underwriting and dealing.4 Additionally, The Board's determination is subject to all of the the Board found that, subject to the prudential limita- conditions set forth in the Board's Regulation Y, tions established in those cases to address the poten- including those in sections 225.4(d) and 225.23(b), and tial for conflicts of interests, unsound banking prac- to the Board's authority to require modification or tices or other adverse effects, private placement termination of the activities of a bank holding comactivities are so closely related to banking as to be a pany or any of its subsidiaries as the Board finds proper incident thereto within the meaning of section necessary to assure compliance with, and to prevent 4(c)(8) of the BHC Act. Applicant has committed that evasion of, the provisions of the BHC Act and the Company will conduct its private placement activities Board's regulations and Orders issued thereunder. using the same methods and procedures and subject to This transaction shall not be consummated later all of the prudential limitations approved by the Board than three months after the effective date of this in the Bankers Trust and J.P. Morgan Orders, as Order, unless such period is extended for good cause modified to reflect Applicant's status as a foreign by the Board or the Federal Reserve Bank of New bank, consistent with the framework adopted in the York, pursuant to delegated authority. Canadian Imperial Order.5 By order of the Board of Governors, effective Consummation of this proposal would provide May 15, 1990. added convenience to Applicant's customers by allowing the provision of a wider range of services by a Voting for this action: Chairman Greenspan and Governors Angell, Kelley, and La Ware. Absent and not voting: Governors Johnson and Seger. 3. The ICI has objected to Applicant's proposal to the extent that it could be construed to seek approval for Company to privately place JENNIFER J. JOHNSON securities of investment companies that are sponsored or advised by Associate Secretary of the Board Applicant or any of its subsidiaries. Applicant has not requested approval to place such securities. 4. J.P. Morgan & Company Incorporated, 76 Federal Reserve The Sanwa Bank, Limited Bulletin 26 (1990) ("J.P. Morgan '); Bankers Trust New York Corpo- Osaka, Japan ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). 5. In the Canadian Imperial Order, in which the Board considered and approved applications by foreign banks to engage in underwriting Order Approving Application to Underwrite and and dealing in all types of debt and equity securities, the Board modified the prudential framework imposed in J.P. Morgan & Co. Deal in Certain Securities to a Limited Extent and to Incorporated, The Chase Manhattan Corporation, Bankers Trust Engage in Full Service Brokerage Activities New York Corporation, and Citicorp, 75 Federal Reserve Bulletin 192 (1989), to account for the fact that the applicants were foreign banks that operate predominately outside the United States. The Board The Sanwa Bank, Limited, Osaka, Japan ("Applidetermined in those cases to adjust the funding and certain operational cant"), a bank holding company within the meaning of requirements of the framework previously established for those activities in order to take into account principles of national treatment and the Bank Holding Company Act ("BHC Act"), has the Board's policy not to extend U.S. bank supervisory standards applied for the Board's approval under section 4(c)(8) extraterritorially. See also The Toronto-Dominion Bank, 76 Federal Reserve Bulletin 573 (1990). of the BHC Act (12 U.S.C. § 1843(c)(8)) and section Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 569 225.23 of the Board's Regulation Y (12 C.F.R. 225.23), Steagall Act, provided the underwriting subsidiary for its subsidiary, Sanwa-BGK Securities Co., L.P., derives no more than 10 percent of its total gross New York, New York ("Company"), to: revenue from underwriting and dealing in the ap- (1) underwrite and deal in, to a limited extent, proved securities over any two-year period.3 The municipal revenue bonds, 1-4 family mortgage-re- Board also found that, subject to the prudential framelated securities, commercial paper, and consumer- work of limitations established in those cases to adreceivable-related securities ("ineligible securi- dress the potential for conflicts of interests, unsound ties"); banking practices or other adverse effects, the pro- (2) provide investment advisory and brokerage ser- posed underwriting and dealing activities are so vices on a combined basis to institutional and retail closely related to banking as to be a proper incident customers ("full service brokerage"); and thereto within the meaning of section 4(c)(8) of the (3) engage in investment advisory activities pursuant BHC Act. to 12 C.F.R. 225.25(b)(4). Applicant has requested certain modifications to the prudential framework established in Citicorp and Applicant, with total consolidated assets equivalent Chemical to account for the fact that Applicant is a to approximately $363.7 billion, is the fifth largest foreign bank that operates predominately outside the banking organization in the world.1 Applicant owns a United States. The Board has previously considered federally insured bank in San Francisco and operates such a request in the context of applications by foreign branches in Boston, Chicago, Los Angeles, New banking organizations to engage in underwriting and York, and San Francisco, and representative offices in dealing in all types of debt and equity securities.4 The Houston, Texas, and Lexington, Kentucky. Applicant Board determined in those cases to adjust the funding has previously received Board approval under section and certain operational requirements of the framework 4(c)(8) of the BHC Act for Company to underwrite and previously established for those activities5 in order to deal in securities eligible to be underwritten and dealt take into account principles of national treatment and in by state member banks and to engage in various the Board's policy not to extend U.S. bank superviother activities permissible for bank holding sory standards extraterritorially. Consistent with the companies.2 policies expressed in Canadian Imperial, the Board Notice of the application, affording interested per- has determined that the prudential framework estabsons an opportunity to submit comments on the pro- lished in Citicorp and Chemical should apply to a posal, has been published (54 Federal Register 12,955 foreign banking organization that engages in the pro- (1989)). The time for filing comments has expired, and posed limited ineligible securities activities, modified the Board has considered the application and all only to reflect the concerns addressed in Canadian comments received in light of the public interest Imperial regarding a foreign banking organization that factors set forth in section 4(c)(8) of the BHC Act. engages in securities activities in the United States.6 The Board has previously determined by regulation that investment advisory activities are generally permissible for bank holding companies. 12 C.F.R. 3. Citicorp, J.P. Morgan & Co. Incorporated and Bankers Trust New York Corporation, 73 Federal Reserve Bulletin 473 (1987) ("Cit- 225.25(b)(4). In addition, the Board has previously icorp"), aff d sub nom. Securities Industry Association v. Board of determined by order that full-service brokerage is a Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), permissible nonbanking activity for bank holding com- cert, denied, 108 S.Ct. 2830 (1988) ("S/A v. Board")', and Chemical New York Corporation, The Chase Manhattan Corporation, Bankers panies under section 4(c)(8) of the BHC Act. PNC Trust New York Corporation, Citicorp, Manufacturers Hanover Cor- Financial Corp., 75 Federal Reserve Bulletin 396 poration and Security Pacific Corporation, 73 Federal Reserve Bulletin 731 (1987) ("Chemical"); as modified by Order Approving Modi- (1989); Bankers Trust New York Corporation, 74 Fedfications to Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989) eral Reserve Bulletin 695 (1988); Bank of New England ("Modification Order"). Corporation, 74 Federal Reserve Bulletin 700 (1988). 4. Canadian Imperial Bank of Commerce, The Royal Bank of Canada, and Barclays PLC, 76 Federal Reserve Bulletin 158 (1990) Applicant has stated that Company will engage in this ("Canadian Imperial "). activity in accordance with all of the conditions set 5. J.P. Morgan & Co. Incorporated, The Chase Manhattan Corpoforth in these Orders. ration, Bankers Trust New York Corporation, and Citicorp, 75 Federal Reserve Bulletin 192 (1989). The Board has previously determined that the pro- 6. The Board notes that lending by U.S. branches and agencies of posed ineligible securities underwriting and dealing foreign banks to affiliates is not restricted by section 23A of the activity is consistent with section 20 of the Glass- Federal Reserve Act. In view of the limited nature of these activities, the Board does not believe that the record at this time would require extending the restrictions of section 23A to Applicant's U.S. branches and agencies, none of which is insured by the FDIC. The Board, 1. Asset data are as of September 30, 1989. Ranking data are as of however, reserves the right to require that Applicant's U.S. branches March 31, 1989. and agencies adhere to the restrictions of section 23A should circum- 2. 74 Federal Reserve Bulletin 578 (1988). stances change to make such requirement appropriate. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

570 Federal Reserve Bulletin • July 1990 The modified framework is set forth in the Appendix to by the Board or by the Federal Reserve Bank of San this Order. Applicant has committed that Company Francisco, pursuant to delegated authority. will conduct its underwriting and dealing activities By order of the Board of Governors, effective with respect to ineligible securities subject to the 10 May 2, 1990. percent revenue test and the prudential limitations set forth in the Appendix. Voting for this action: Chairman Greenspan and Governors Consummation of the proposal would provide added Johnson, Seger, Angell, Kelley, and LaWare. convenience to Applicant's customers. In addition, the Board expects that the de novo entry of Applicant JENNIFER J. JOHNSON Associate Secretary of the Board into the market for some of these services would increase the level of competition among providers of these services. Under the framework established in Appendix this and prior decisions, consummation of this proposal is not likely to result in any significant undue A. Types of Securities to be Underwritten concentration of resources, decreased or unfair com- 1. The underwriting subsidiary shall limit its underpetition, conflicts of interests, unsound banking prac- writing and dealing in ineligible securities to the tices, or other adverse effects. Accordingly, the Board following: has determined that the performance of the proposed (a). Municipal revenue bonds that are rated as activities by Applicant can reasonably be expected to investment quality (i.e., in one of the top four produce public benefits which would outweigh adverse categories) by a nationally recognized rating effects under the proper incident to banking standard agency, except that industrial development bonds of section 4(c)(8) of the BHC Act.7 in these categories shall be limited to "public Based on the above, the Board has determined to ownership" industrial development bonds (i.e., approve Applicant's application subject to all of the those tax exempt bonds where the issuer, or the terms and conditions set forth in the above-noted governmental unit on behalf of which the bonds provisions of Regulation Y that relate to these activi- are issued, is the sole owner, for federal income ties, and subject as well to all of the terms and tax purposes, of the financed facility (such as conditions set forth in this Order and in the above- airports and mass commuting facilities)). noted Board Orders that relate to these activities.8 (b). Mortgage-related securities (obligations se- The Board's determination is subject to all of the cured by or representing an interest in 1-4 family conditions set forth in the Board's Regulation Y, residential real estate), rated as investment qualincluding those in sections 225.4(d) and 225.23(b), and ity (i.e., in one of the top four categories) by a to the Board's authority to require modification or nationally recognized rating agency. termination of the activities of a bank holding com- (c). Commercial paper that is exempt from the pany or any of its subsidiaries as the Board finds registration and prospectus requirements of the necessary to assure compliance with, and to prevent S.E.C. pursuant to the Securities Act of 1933 and evasion of, the provisions of the BHC Act and the that is short term, of prime quality, and issued in Board's regulations and Orders issued thereunder. denominations no smaller than $100,000. This transaction shall not be consummated later (d). Consumer-receivable-related securities (oblithan three months after the effective date of this gations secured by or representing an interest in a Order, unless such period is extended for good cause diversified pool of loans to or receivables from individuals for the purpose of financing the purchase of consumer goods and services), rated as 7. Company also intends to make private placements and sales of investment quality (i.e., in one of the top four eligible and ineligible securities as agent, and to purchase and sell for categories) by a nationally recognized rating Company's own account futures, forward, and options contracts on agency. ineligible securities for hedging purposes, as incidents to these approved activities. Any activity conducted as a necessary incident to the ineligible securities underwriting and dealing activity must be B. Capital Investment treated as part of the ineligible securities activity unless Company has received specific approval under section 4(c)(8) of the BHC Act to 2. For purposes of determining compliance with conduct the activity independently. Until such approval is obtained, internationally-accepted risk-based capital requireany revenues from the incidental activity must be counted as ineligible ments, any investment by Applicant in the underrevenue subject to the 10 percent gross revenue limit set forth in the Modification Order. writing subsidiary that is treated as capital in that 8. In light of the decision in SI A v. Board, Applicant will not be subsidiary and the assets of the underwriting subsubject to the market share limitation with respect to its ineligible sidiary shall be excluded in determining Applicant's activities that was originally imposed in the Citicorp and Chemical Orders. consolidated capital. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 571 C. Capital Adequacy underwrites during the period of the underwriting, 3. The underwriting subsidiary shall maintain at all or to purchase from the underwriting subsidiary times capital adequate to support its activity and any ineligible security in which the underwriting cover reasonably expected expenses and losses in subsidiary makes a market, accordance with industry norms. (c). These limitations extend to all customers of a 4. Applicant shall submit quarterly to the Federal U.S. lending affiliate or branch or agency of Reserve Bank of San Francisco FOCUS reports Applicant, including broker-dealers and unaffilfiled with the NASD or other self-regulatory organi- iated banks, but do not include lending to a zations, and detailed information breaking down the broker-dealer for the purchase of securities where underwriting subsidiary's business with respect to an affiliated bank is the clearing bank for such eligible and ineligible securities, in order to permit broker-dealer. monitoring of the underwriting subsidiary's compli- 7(a). No U.S. affiliate or branch or agency of Appliance with the provisions of this Order. cant may directly or indirectly extend credit to issuers of ineligible securities underwritten by the D. Credit Extensions to Customers of the Underwrit- underwriting subsidiary for the purpose of the ing Subsidiary1 payment of principal and interest on such securi- 5(a). No U.S. affiliate or branch or agency of Appli- ties. cant shall directly or indirectly extend credit or (b). The underwriting subsidiary shall not arrange issue or enter into a stand-by letter of credit, asset for Applicant or any of its subsidiaries to extend, purchase agreement, indemnity, guarantee, insur- or knowingly participate in any arrangement ance or other facility that might be viewed as whereby Applicant or any of its subsidiaries exenhancing the creditworthiness or marketability tends, credit to an issuer of ineligible securities of an ineligible securities issue underwritten or underwritten by the underwriting subsidiary for distributed by the underwriting subsidiary, the purpose of the payment of principal and (b). The underwriting subsidiary shall not under- interest on such securities and shall not underwrite or distribute ineligible securities if the un- write any ineligible securities of an issuer if it derwriting subsidiary is aware in the ordinary becomes aware that an affiliate is providing credit course of conducting a due diligence review that to an issuer for such purposes. an affiliate is extending credit or issuing or enter- (c). These limitations would be inapplicable to any ing into a stand-by letter of credit, asset purchase credit lines extended to an issuer by Applicant or agreement, indemnity, guarantee, insurance or any subsidiary of Applicant that provide for subother facility that might be viewed as enhancing stantially different timing, terms, conditions and the creditworthiness or marketability of such in- maturities from the ineligible securities being uneligible securities. derwritten. It would be clear, for example, that a 6(a). No U.S. lending affiliate or branch or agency of credit has substantially different terms and timing Applicant (other than the underwriting subsidiary) if it is for a documented special purpose (other shall knowingly extend credit to a customer di- than the payment of principal and interest) or rectly or indirectly secured by, or for the purpose there is substantial participation by other lenders. of purchasing, any ineligible security that the 8. Applicant shall adopt appropriate procedures, underwriting subsidiary underwrites during the including maintenance of necessary documentary period of the underwriting, or to purchase from records, to assure that any extensions of credit by the underwriting subsidiary any ineligible security any of its U.S. affiliates, branches, or agencies to in which the underwriting subsidiary makes a issuers of ineligible securities underwritten or dealt market. in by the underwriting subsidiary are on an arm's (b). The underwriting subsidiary shall not arrange length basis for purposes other than payment of for Applicant or any of its subsidiaries to extend, principal and interest on the issuer's ineligible secuor knowingly participate in any arrangement rities being underwritten or dealt in by the underwhereby Applicant or any of its subsidiaries ex- writing subsidiary. An extension of credit is considtends, credit to a customer directly or indirectly ered to be on an arm's length basis if the terms and secured by, or for the purpose of purchasing, any conditions are substantially the same as those preineligible security that the underwriting subsidiary vailing at the time for comparable transactions with issuers whose securities are not underwritten or dealt in by the underwriting subsidiary. 1. Unless otherwise stated, these conditions shall apply to a 9. The requirements relating to credit extensions to subsidiary of a bank or thrift institution to the same extent as they apply to the bank or thrift institution. issuers noted in paragraphs 5-8 above shall also Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

572 Federal Reserve Bulletin • July 1990 apply to extensions of credit to parties that are tuses and sales literature of the underwriting subsidmajor users of projects that are financed by indus- iary may not be distributed by a U.S. bank or thrift trial revenue bonds. subsidiary or U.S. branch or agency of Applicant; nor should any such literature be made available to E. Limitations to Maintain Separateness of an Under- the public at any offices of any such bank, thrift, writing Affiliate's Activity branch, or agency, unless specifically requested by a 10. There will be no officer, director, or employee customer. interlocks between the underwriting subsidiary and any of Applicant's U.S. bank or thrift subsidiaries, G. Investment Advice by Bank/Thrift Affiliates, branches, or agencies, except that one officer of a Branches, and Agencies branch or agency may act as a director of the 14. No U.S. bank or thrift subsidiary or U.S. branch underwriting subsidiary. The underwriting subsid- or agency of Applicant may express an opinion with iary will have separate offices from any U.S. or thrift respect to the advisability of the purchase of inelisubsidiary or branch or agency of Applicant.2 gible securities underwritten or dealt in by the underwriting subsidiary unless the bank, thrift, F. Disclosure by the Underwriting Subsidiary branch, or agency notifies the customer that the 11. The underwriting subsidiary will provide each of underwriting subsidiary is underwriting or making a its customers with a special disclosure statement market in the security. describing the difference between the underwriting subsidiary and its U.S. bank and thrift affiliates and H. Conflicts of Interest its U.S. branches and agencies and pointing out that 15. The underwriting subsidiary may not sell to any an affiliated U.S. bank or thrift or U.S. branch or affiliate that is acting as principal in the transaction, agency could be a lender to an issuer and referring ineligible securities that are underwritten by the the customer to the disclosure documents for de- underwriting subsidiary during the period of the tails. The statement shall also indicate that the underwriting and for 60 days after the close of the obligations of the underwriting subsidiary are not underwriting period, or any ineligible security in those of any affiliated bank, thrift, branch, or agency which the underwriting subsidiary makes a market, and that no such bank, thrift, branch, or agency is except that, in the case of ineligible securities that responsible for securities sold by the underwriting are being issued in a simultaneous cross-border subsidiary. The underwriting subsidiary should also underwriting in which the underwriting subsidiary disclose any material lending relationship between and a foreign affiliate or affiliates are participating, the issuer and a bank or lending affiliate of the such securities may be purchased or sold pursuant underwriting subsidiary as required under the secu- to an intersyndicate agreement for the period of the rities laws and in every case whether the proceeds of underwriting where the purchase or sale results the issue will be used to repay outstanding indebt- from bona fide indications of interest from customedness to affiliates. ers. Such purchases or sales shall not be made for 12. No underwriting subsidiary nor any affiliated purposes of providing liquidity or capital support to U.S. bank or thrift institution, branch, or agency the underwriting subsidiary or otherwise to evade will engage in advertising or enter into an agreement the requirements of this Order. The underwriting stating or suggesting that an affiliated U.S. bank, subsidiary shall maintain documentation on such thrift, branch, or agency is responsible in any way transactions. for the underwriting subsidiary's obligations as re- 16. No U.S. bank, thrift, or trust or investment quired for affiliates of member banks under section advisory subsidiaries, or U.S. branches or agencies, 23B of the Federal Reserve Act. of Applicant shall purchase, as a trustee or in any 13. No U.S. bank or thrift subsidiary or U.S. branch other fiduciary capacity, for accounts over which or agency of Applicant will act as agent for, or they have investment discretion ineligible securities engage in marketing activities on behalf of, the (a) underwritten by the underwriting subsidiary as underwriting subsidiary.3 In this regard, prospec- lead underwriter or syndicate member during the period of any underwriting or selling syndicate, and for a period of 60 days after the termination 2. An underwriting subsidiary may have offices in the same building thereof, and as a bank or thrift subsidiary or branch or agency of Applicant if the underwriting subsidiary's offices are clearly distinguished from those (b) from the underwriting subsidiary if it makes a of the bank, thrift, branch, or agency. market in that security, unless, in either case, 3. This condition does not prevent a bank, thrift, branch, or agency such purchase is specifically authorized under the from informing its customers of the available services of the underwriting subsidiary. instrument creating the fiduciary relationship, by Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 573 court order, or by the law of the jurisdiction under ada ("Applicant"), a foreign bank subject to the Bank which the trust is administered. Holding Company Act ("BHC Act"), has applied for 17. The underwriting subsidiary may not underwrite the Board's approval under section 4(c)(8) of the BHC or deal in any ineligible securities issued by its Act (12 U.S.C. § 1843(c) (8)) and section 225.23 of the affiliates or representing interests in, or secured by, Board's Regulation Y (12 C.F.R. 225.23), for its indiobligations originated or sponsored by its affiliates rect wholly owned subsidiary, Toronto Dominion Se- (except for grantor trusts or special purpose corpo- curities Corp., New York, New York ("Company"), rations created to facilitate underwriting of securi- to: ties backed by assets originated by a non-affiliated (1) underwrite and deal in, to a limited extent, lender) unless such securities are rated by an unaf- municipal revenue bonds, 1-4 family mortgage-refiliated, nationally recognized rating organization or lated securities, commercial paper and consumerare issued or guaranteed by the Federal National receivable-related securities ("bank-ineligible secu- Mortgage Association, the Federal Home Loan rities"); Mortgage Corporation, or the Government National (2) act as agent in the private placement of all types Mortgage Association or represent interests in secu- of securities, including providing related advisory rities issued or guaranteed by such agencies. services; 18. All purchases and sales of assets between a U.S. (3) provide investment advisory and brokerage serbank or thrift subsidiary or U.S. branch or agency of vices on a combined basis to institutional and retail Applicant and the underwriting subsidiary (or third customers ("full- service brokerage"); parties in which the underwriting subsidiary is a (4) provide financial and transaction advice to finanparticipant or has a financial interest or acts as agent cial and nonfinancial institutions, including or broker or receives a fee for its services) will be at (i) providing advice in connection with mergers arm's length and on terms no less stringent than and acquisitions, divestitures, financing transacthose applicable to unrelated third parties, and will tions, capital structuring, loan syndications, internot involve low-quality securities, as defined in est rate swaps, interest rate caps, and similar section 23A of the Federal Reserve Act. currency and interest rate transactions; and (ii) providing valuations and fairness opinions in I. Limitations to Address Possible Unfair Competition connection with mergers, acquisitions, and simi- 19. No U.S. bank or thrift subsidiary or U.S. branch lar transactions; or agency of Applicant may disclose to the under- (5) act as broker with respect to interest rate swaps, writing subsidiary any nonpublic customer informa- caps, and similar currency and interest rate transaction consisting of an evaluation of the creditworthi- tions; ness of an issuer or other customer of the (6) arrange for sales of loans or other extensions of underwriting subsidiary (other than as required by credit originated by affiliated and unaffiliated lenders securities laws and with the customer's consent) and as agent; and no officers or employees of the underwriting subsid- (7) provide financial advice to Canadian federal, iary may disclose such information to its affiliates. provincial, and municipal governments and their agents with respect to the issuance of their securities J. Formation of Subsidiaries of an Underwriting Sub- in the United States. sidiary to Engage in Underwriting and Dealing 20. Pursuant to Regulation Y, no corporate reorga- Applicant has total consolidated assets equivalent to nization of the underwriting subsidiary, such as the $53.7 billion. It operates branch offices in Chicago and establishment of subsidiaries of the underwriting New York, agencies in Houston and Los Angeles, a subsidiary to conduct the activities, may be consum- limited purpose trust company in New York, and mated without prior Board approval. representative offices in Chicago, Houston, and New York.1 Applicant has previously received Board ap- The Toronto-Dominion Bank proval under section 4(c)(8) of the BHC Act for Toronto, Ontario, Canada Company to underwrite and deal in securities eligible to be underwritten and dealt in by state member Proposal to Underwrite and Deal in Certain banks. Securities to a Limited Extent, Conduct Private Notice of the application, affording interested per- Placements of All Types of Securities as Agent, and sons an opportunity to submit comments on the pro- Engage in Other Securities-Related Activities The Toronto-Dominion Bank, Toronto, Ontario, Can- 1. Data are as of October 31, 1989. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

574 Federal Reserve Bulletin • July 1990 posal, has been published (54 Federal Register 50,279 With regard to the proposed ineligible securities (1989)). The time for filing comments has expired, and underwriting and dealing activity, the conduct of such the Board has considered the application and all activity has been determined by the Board to be comments received in light of the public interest consistent with section 20 of the Glass-Steagall Act factors set forth in section 4(c)(8) of the BHC Act. The provided the underwriting subsidiary derives no more Board received written comments opposing Board than 10 percent of its total gross revenue from underapproval of the application from the Securities Indus- writing and dealing in the approved securities over any try Association ("SIA"), a trade association of the two-year period.3 The Board also found that, subject investment banking industry, and the Investment to the prudential framework of limitations established Company Institute ("ICI"), a trade association of the in those cases to address the potential for conflicts of mutual fund industry. interests, unsound banking practices or other adverse The Board has previously determined by order that effects, the proposed underwriting and dealing activiproviding financial advice to Canadian governmental ties are so closely related to banking as to be a proper entities and their agents, providing financial and trans- incident thereto within the meaning of section 4(c)(8) of the BHC Act. The Board subsequently modified action advice to financial and nonfinancial institutions, that prudential framework in the case of a foreign acting as a broker with respect to interest rate and banking organization to take into account principles of currency swaps, and engaging in full-service brokernational treatment and the Board's policy not to exage as proposed by Applicant are permissible nontend U.S. bank supervisory standards extraterritoribanking activities for bank holding companies under ally. The Sanwa Bank, Limited, 76 Federal Reserve section 4(c)(8) of the BHC Act. Canadian Imperial Bulletin, 568 (1990) ("Sanwa"). Applicant has com- Bank of Commerce, 14 Federal Reserve Bulletin 571 mitted that Company will conduct its underwriting and (1988) (providing financial advice to Canadian governdealing activities with respect to bank-ineligible secumental entities and financial and transaction advice to rities subject to the 10 percent revenue test and the financial and nonfinancial institutions); Signet Banking prudential limitations as established by the Board in its Corporation, 73 Federal Reserve Bulletin 59 (1987) Sanwa Order.4 (providing financial and transaction advice to financial and nonfinancial institutions); The Sumitomo Bank, Finally, the Board has previously determined that Limited, 75 Federal Reserve Bulletin 582 (brokerage of acting as agent in the private placement of securities interest rate and currency swaps); and PNC Financial does not constitute underwriting and dealing in secu- Corp, 75 Federal Reserve Bulletin 396 (1989), Bankers rities for purposes of section 20 of the Glass-Steagall Trust New York Corporation, 74 Federal Reserve Act, and that revenue derived from these activities is Bulletin 695 (1988), Bank of New England Corpora- not subject to the 10 percent revenue limitation on tion, 14 Federal Reserve Bulletin 700 (1988), and The ineligible securities underwriting and dealing.5 Addi- Bank of Nova Scotia, 74 Federal Reserve Bulletin 249 tionally the Board found that subject to the prudential (1988) (full-service brokerage). Applicant has stated limitations established in that case to address the that Company will engage in these activities in accordance with the conditions set forth in these Orders.2 The Board has previously determined that arranging 3. Citicorp, J.P. Morgan & Co. Incorporated and Bankers Trust for sales of loans or other extensions of credit origi- New York Corporation, 73 Federal Reserve Bulletin 473 (1987) ("Citnated by affiliated and unaffiliated lenders as agent is icorp/Morgan/Bankers Trust"), affd sub nom., Securities Industry Association v. Board of Governors of the Federal Reserve System. 839 encompassed within the authorization of section F.2d 47 (2d Cir. 1988), cert, denied, 108 S.Ct. 2830 (1988) ("S/A v. 225.25(b)(1) of the Board's Regulation Y, 12 C.F.R. Board "); and Chemical New York Corporation, The Chase Manhattan Corporation, Bankers Trust New York Corporation, Citicorp, 225.25(b)(1). See Bryn Mawr Bank Corporation, 74 Manufacturers Hanover Corporation and Security Pacific Corpora- Federal Reserve Bulletin 329 (1988). Applicant has tion, 73 Federal Reserve Bulletin 731 (1987) ("Chemical "); as modistated that Company will engage in this activity in fied by Order Approving Modifications to Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989) ("Modification Order"). accordance with the Board's previous Order. 4. The Board notes that lending by U.S. branches and agencies of foreign banks to affiliates is not restricted by section 23A of the Federal Reserve Act. In view of the limited nature of these activities, 2. The ICI has objected that, to the extent that Company proposes the Board does not believe that the record at this time would require to broker securities issued by investment companies advised by extending the restrictions of section 23A to Applicant's U.S. branches Applicant or any of its affiliates or to advise brokerage customers and agencies, none of which is insured by the FDIC. The Board, regarding such securities, the proposed activities are inconsistent with however, reserves the right to require that Applicant's U.S. branches the Glass-Steagall Act and with the Board's interpretive rule govern- and agencies adhere to the restrictions of section 23A should circuming investment advisory services by bank holding companies. Appli- stances change to make such requirement appropriate. cant has indicated, however, that Company will not broker, or provide 5. Bankers Trust New York Corporation, 75 Federal Reserve any investment advice with respect to, shares of any investment Bulletin 829 (1989) ("Bankers Trust"); See also J.P. Morgan & company for which a bank or nonbank affiliate acts as an investment Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. advisor without seeking the prior approval of the Board. Morgan"). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 575 potential for conflicts of interests, unsound banking ies, individually and in the aggregate.8 These policies practices or other adverse effects, the proposed pri- and procedures, as well as the purchases themselves, vate placement activities are so closely related to will be reviewed by the Federal Reserve Bank of New banking as to be a proper incident thereto within the York. The Reserve Bank shall also review within six meaning of section 4(c)(8) of the BHC Act.6 Applicant months all policies and procedures relating to Comhas committed that Company will conduct its private pany's conduct of private placement activities. placement activities using the same methods and pro- Consummation of the proposal would provide added cedures and subject to the prudential limitations estab- convenience to Applicant's customers. In addition, lished by the Board in the Bankers Trust and J.P. the Board expects that the de novo entry of Applicant Morgan Orders, as modified to reflect Applicant's into the market for some of these services would status as a foreign bank, consistent with the frame- increase the level of competition among providers of work adopted in the Sanwa Order and in Canadian these services. Under the framework established in Imperial Bank of Commerce, The Royal Bank of this and prior decisions, consummation of this pro- Canada, and Barclays PLC, 76 Federal Reserve Bul- posal is not likely to result in any significant undue letin 158 (1990).7 concentration of resources, decreased or unfair com- Accordingly, Company may place securities with petition, conflicts of interests, unsound banking pracnonbank affiliates, including non-U.S. offices of Appli- tices, or other adverse effects. Accordingly, the Board cant. As was discussed in J.P. Morgan, however, the has determined that the performance of the proposed Board recognizes that the potential for certain con- activities by Applicant can reasonably be expected to flicts of interest may be increased if affiliates were to produce public benefits which would outweigh adverse purchase the entire issue of securities placed by Com- effects under the proper incident to banking standard pany or a substantial portion of such an issue. The of section 4(c)(8) of the BHC Act.9 Board therefore believes that it is appropriate to Based on the above, the Board has determined to require that affiliates of Company limit their invest- approve Applicant's application subject to all of the ment, both individually and in the aggregate, in any terms and conditions set forth in this Order, including particular issue of securities that is placed by Com- the conditions set forth in the Appendix to this Order, pany. The Board expects that aggregate placements by and in the above-noted Board Orders that relate to Company with affiliates shall not exceed 50 percent of these activities.10 the issue being placed. In addition, Applicant shall The Board's determination is subject to all of the establish appropriate internal policies, procedures, conditions set forth in the Board's Regulation Y, and limitations regarding the amount of securities of including those in sections 225.4(d) and 225.23(b), and any particular issue placed by Company that may be to the Board's authority to require modification or purchased by Applicant's U.S. nonbanking subsidiar- termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to assure compliance with, and to prevent evasion of, the provisions of the BHC Act and the 6. The SIA argues that the fact that Applicant is proposing that Company privately place all types of securities, as opposed to only Board's regulations and Orders issued thereunder. high grade commercial paper notes, is significant in assessing the This transaction shall not be consummated later applicability of the Glass-Steagall Act prohibitions in this case. Securities Industry Association v. Board of Governors, 807 F.2d 1052 than three months after the effective date of this (D.C. Cir. 1986), cert, denied. 483 U.S. 1005 (1987). The Board considered and rejected this argument in Bankers Trust, where the Board found that the fact that a bank holding company wishes to privately place all types of securities in a manner similar to that used 8. In the development of these policies and procedures, Applicant in placing high grade commercial paper, would not, by itself, change should incorporate, with respect to placements of securities, approthe activity into underwriting and dealing activities that would be priate policies, procedures, and limitations regarding exposure of prohibited under the Glass-Steagall Act. Applicant's U.S. offices and subsidiaries on a consolidated basis to The ICI has objected to Applicant's proposal to the extent that it any single customer whose securities are placed by Company. could be construed to seek approval for Company to privately place as 9. Company may also engage in certain incidental activities for agent securities of investment companies that are advised or spon- purposes of hedging the risks of Company's proposed bank-ineligible sored by Applicant or any of its affiliates. Applicant has not requested securities underwriting and dealing activities. Any activity conducted approval to privately place as agent such securities. as a necessary incident to the ineligible securities underwriting and 7. Company will place securities with investors who qualify as dealing activity must be treated as part of the ineligible securities "institutional customers" as that term was defined in Manufacturers activity unless Company has received specific approval under section Hanover Corporation, 73 Federal Reserve Bulletin 930, at 930 n.l 4(c)(8) of the BHC Act to conduct the activity independently. Until (1987), with two additional categories. Applicant also defines "insti- such approval is obtained, any revenues from the incidental activity tutional customer" to include: must be counted as ineligible revenue subject to the 10 percent gross (i) a Canadian federal, provincial, or municipal government or agent revenue limit set forth in the Modification Order. or subdivision thereof; and 10. In light of the decision in SIA v. Board, Applicant will not be (ii) any other person, institution, or entity that may qualify as an subject to the market share limitation with respect to its ineligible accredited investor under Regulation D of the Securities and activities that was originally imposed in the Citicorp/Morgan/Bankers Exchange Commission. Trust and Chemical Orders. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

576 Federal Reserve Bulletin • July 1990 Order, unless such period is extended for good cause C. Capital Adequacy by the Board or by the Federal Reserve Bank of New 3. Company shall maintain at all times capital ade- York, pursuant to delegated authority. quate to support its underwriting activities and By order of the Board of Governors, effective cover reasonably expected expenses and losses in May 9, 1990. accordance with industry norms. 4. Applicant shall submit quarterly to the Federal Voting for this action: Vice Chairman Johnson and Gover- Reserve Bank of New York FOCUS reports filed nors Seger, Angell, and Laware. Absent and not voting: with the NASD or other self-regulatory organiza- Chairman Greenspan and Governor Kelley. tions, and detailed information breaking down Company's business with respect to eligible and ineligi- JENNIFER J. JOHNSON ble securities, in order to permit monitoring of Associate Secretary of the Board Company's compliance with the provisions of this Order. Appendix D. Credit Extensions to Customers of Company1 A. Types of Securities to be Underwritten 5(a). No U.S. affiliate or branch or agency of Appli- 1. Company shall limit its underwriting and dealing cant shall directly or indirectly extend credit or in ineligible securities to the following: issue or enter into a stand-by letter of credit, asset (a). Municipal revenue bonds that are rated as purchase agreement, indemnity, guarantee, insurinvestment quality (i.e., in one of the top four ance or other facility that might be viewed as categories) by a nationally recognized rating enhancing the creditworthiness or marketability agency, except that industrial development bonds of an ineligible securities issue underwritten, disin these categories shall be limited to "public tributed, or placed by Company. ownership" industrial development bonds (i.e., (b). Company shall not underwrite, distribute, or those tax exempt bonds where the issuer, or the place ineligible securities if Company is aware in governmental unit on behalf of which the bonds the ordinary course of conducting a due diligence are issued, is the sole owner, for federal income review that an affiliate is extending credit or tax purposes, of the financed facility (such as issuing or entering into a stand-by letter of credit, airports and mass commuting facilities)). asset purchase agreement, indemnity, guarantee, (b). Mortgage-related securities (obligations se- insurance or other facility that might be viewed as cured by or representing an interest in 1-4 family enhancing the creditworthiness or marketability residential real estate), rated as investment qual- of such ineligible securities. ity (i.e., in one of the top four categories) by a 6(a). No U.S. lending affiliate or branch or agency of nationally recognized rating agency. Applicant (other than Company) shall knowingly (c). Commercial paper that is exempt from the extend credit to a customer directly or indirectly registration and prospectus requirements of the secured by, or for the purpose of purchasing, any S.E.C. pursuant to the Securities Act of 1933 and ineligible security that Company underwrites or that is short term, of prime quality, and issued in places during the period of the underwriting or denominations no smaller than $100,000. private placement, or to purchase from Company (d). Consumer-receivable-related securities (obli- any ineligible security in which Company makes a gations secured by or representing an interest in a market. diversified pool of loans to or receivables from (b). Company shall not arrange for Applicant or individuals for the purpose of financing the pur- any of its subsidiaries to extend, or knowingly chase of consumer goods and services), rated as participate in any arrangement whereby Applicant investment quality (i.e., in one of the top four or any of its subsidiaries extends, credit to a categories) by a nationally recognized rating customer directly or indirectly secured by, or for agency. the purpose of purchasing, any ineligible security that Company underwrites or places during the B. Capital Investment period of the underwriting or private placement, 2. For purposes of determining compliance with or to purchase from Company any ineligible seinternationally-accepted risk-based capital require- curity in which Company makes a market. ments, any investment by Applicant in Company that is treated as capital in Company and the assets 1. Unless otherwise stated, these conditions shall apply to a of Company shall be excluded in determining Applisubsidiary of a bank or thrift institution to the same extent as they cant's consolidated capital. apply to the bank or thrift institution. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 577 (c). These limitations extend to all customers of a 9. The requirements relating to credit extensions to U.S. lending affiliate or branch or agency of issuers noted in paragraphs 5-8 above shall also Applicant, including broker-dealers and unaffil- apply to extensions of credit to parties that are iated banks, but do not include lending to a major users of projects that are financed by indusbroker-dealer for the purchase of securities where trial revenue bonds. an affiliated bank is the clearing bank for such broker-dealer. E. Limitations to Maintain Separateness of Com- 7(a). No U.S. affiliate or branch or agency of Appli- pany's Activity cant may directly or indirectly extend credit to 10. There will be no officer, director, or employee issuers of ineligible securities underwritten by interlocks between Company and any of Applicant's Company for the purpose of the payment of U.S. bank or thrift subsidiaries, branches, or agenprincipal and interest on such securities.2 cies, except that one officer of a branch or agency (b). Company shall not arrange for Applicant or may act as a director of Company. Company will any of its subsidiaries to extend, or knowingly have separate offices from any U.S. bank or thrift participate in any arrangement whereby Appli- subsidiary or branch or agency of Applicant.3 cant or any of its subsidiaries extends, credit to an issuer of ineligible securities underwritten by F. Disclosure by Company Company for the purpose of the payment of 11. Company will provide each of its customers principal and interest on such securities and with a special disclosure statement describing the shall not underwrite any ineligible securities of difference between Company and its U.S. bank an issuer if it becomes aware that an affiliate is and thrift affiliates and its U.S. branches and providing credit to an issuer for such purposes. agencies and pointing out that an affiliated U.S. (c). These limitations would be inapplicable to bank or thrift or U.S. branch or agency could be a any credit lines extended to an issuer by Appli- lender to an issuer and referring the customer to cant or any subsidiary of Applicant that provide the disclosure documents for details. The statefor substantially different timing, terms, condi- ment shall also indicate that the obligations of tions and maturities from the ineligible securities Company are not those of any affiliated bank, being underwritten or placed. It would be clear, thrift, branch, or agency and that no such bank, for example, that a credit has substantially dif- thrift, branch, or agency is responsible for securiferent terms and timing if it is for a documented ties sold by Company. Company should also disspecial purpose (other than the payment of prin- close any material lending relationship between cipal and interest) or there is substantial partic- the issuer of securities that are being underwritten ipation by other lenders. or privately placed and a bank or lending affiliate of 8. Applicant shall adopt appropriate procedures, Company as required under the securities laws and including maintenance of necessary documentary in every case whether the proceeds of the issue will records, to assure that any extensions of credit by be used to repay outstanding indebtedness to affilany of its U.S. affiliates, branches, or agencies to iates. issuers of ineligible securities underwritten, dealt in, 12. Neither Company nor any affiliated U.S. bank or or placed by Company are on an arm's length basis thrift institution, branch, or agency will engage in for purposes other than payment of principal and advertising or enter into an agreement stating or interest on the issuer's ineligible securities being suggesting that an affiliated U.S. bank, thrift, underwritten, dealt in, or placed by Company. An branch, or agency is responsible in any way for extension of credit is considered to be on an arm's Company's obligations as required for affiliates of length basis if the terms and conditions are substan- member banks under section 23B of the Federal tially the same as those prevailing at the time for Reserve Act. comparable transactions with issuers whose securi- 13. No U.S. bank or thrift subsidiary or U.S. branch ties are not underwritten, dealt in, or placed by or agency of Applicant will act as agent for or Company. engage in marketing activities on behalf of, Company.4 In this regard, prospectuses and sales 2. With respect to private placements of ineligible securities, the restrictions on extensions of credit shall apply to credit extended to repay principal, interest, or dividends, except that Applicant and its 3. Company may have offices in the same building as a bank or thrift subsidiaries may extend credit to repay at maturity the principal subsidiary or branch or agency of Applicant if Company's offices are amount of debt securities that have been privately placed by Company clearly distinguished from those of the bank, thrift, branch, or agency. subject to the conditions established in the J.P. Morgan & Company 4. This condition does not prevent a bank, thrift, branch, or agency Incorporated Order, 76 Federal Reserve Bulletin 26, 28 (1990). from informing its customers of the available services of Company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

578 Federal Reserve Bulletin • July 1990 literature of Company may not be distributed by a (b) placed by Company during the period of any U.S. bank or thrift subsidiary or U.S. branch or private placement, and for a period of 60 days agency of Applicant; nor should any such literature after the termination thereof, and be made available to the public at any offices of any (c) from Company if it makes a market in that such bank, thrift, branch, or agency, unless specif- security, unless, in any such case, such purchase ically requested by a customer. is specifically authorized under the instrument creating the fiduciary relationship, by court order, or by the law of the jurisdiction under which the G. Investment Advice by Bank/Thrift Affiliates, trust is administered. Branches, and Agencies 17. Company may not underwrite, deal in, or place 14. No U.S. bank or thrift subsidiary or U.S. any ineligible securities issued by its affiliates or branch or agency of Applicant may express an representing interests in, or secured by, obligaopinion with respect to the advisability of the tions originated or sponsored by its affiliates (expurchase of ineligible securities underwritten, cept for grantor trusts or special purpose corporadealt in, or placed by Company unless the bank, tions created to facilitate underwriting of securities thrift, branch, or agency notifies the customer that backed by assets originated by a non-affiliated Company is underwriting, making a market in, or lender) unless such securities are rated by an placing the security. unaffiliated, nationally recognized rating organization or are issued or guaranteed by the Federal H. Conflicts of Interest National Mortgage Association, the Federal Home 15. Company may not sell to any affiliate that is Loan Mortgage Corporation, or the Government acting as principal in the transaction ineligible National Mortgage Association or represent interests in securities issued or guaranteed by such securities that are underwritten by Company duragencies; except that Company may privately ing the period of the underwriting and for 60 days place unrated securities issued by its affiliates or after the close of the underwriting period, or any representing interests in, or secured by, obligaineligible security in which Company makes a tions originated or sponsored by its affiliates with market, except that, in the case of ineligible secuinstitutional customers. rities that are being issued in a simultaneous crossborder underwriting in which Company and a 18. All purchases and sales of assets between a U.S. foreign affiliate or affiliates are participating, such bank or thrift subsidiary or U.S. branch or agency of securities may be purchased or sold pursuant to an Applicant and Company (or third parties in which intersyndicate agreement for the period of the Company is a participant or has a financial interest or underwriting where the purchase or sale results acts as agent or broker or receives a fee for its from bona fide indications of interest from custom- services) will be at arm's length and on terms no less ers. Such purchases or sales shall not be made for stringent than those applicable to unrelated third purposes of providing liquidity or capital support parties, and will not involve low-quality securities, as to Company or otherwise to evade the require- defined in section 23A of the Federal Reserve Act. ments of this Order. Company shall maintain documentation on such transactions. In addition, I. Limitations to Address Possible Unfair Competition Company may not place with any U.S. bank or 19. No U.S. bank, thrift, branch, or agency shall thrift affiliate or U.S. branch or agency that is disclose to Company, nor shall Company disclose to acting as principal in the transaction ineligible an affiliated U.S. bank, thrift, branch, or agency, securities that are placed by Company during the any nonpublic customer information (including an period of the private placement and for 60 days evaluation of the creditworthiness of an issuer or after the close of the private placement period. other customer of that bank, thrift, branch, agency, 16. No U.S. bank, thrift, or trust or investment or Company) without the consent of that customer. advisory subsidiaries, or U.S. branches or agencies, of Applicant shall purchase, as a trustee or in any other fiduciary capacity, for accounts over J. Formation of Subsidiaries of Company to Engage in which they have investment discretion, ineligible Underwriting and Dealing or Private Placement securities: 20. Pursuant to Regulation Y, no corporate reorga- (a) underwritten by Company as lead underwriter nization of Company, such as the establishment of or syndicate member during the period of any subsidiaries of Company to conduct the underwritunderwriting or selling syndicate, and for a period ing, dealing, or placement activities, may be conof 60 days after the termination thereof, summated without prior Board approval. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 579 Orders Issued Under Financial Institutions Based on the foregoing and all of the other facts of Reform, Recovery, and Enforcement Act record, the Staff Director of the Division of Banking Supervision and Regulation and the General Counsel May 18, 1990 of the Board, acting pursuant to authority delegated by the Board of Governors, hereby approve your request Michael H. Schaut to engage in the proposed transaction under section Senior Vice President 5(d)(3) of the FDI Act. This approval is subject to Ameritrust Company National Association Ameritrust obtaining the required approval of the 900 Euclid Avenue appropriate Federal banking agency for the proposed Cleveland, Ohio 44101 merger under the Bank Merger Act. Dear Mr. Schaut: Very truly yours, Ameritrust Corporation, Cleveland, Ohio ("Ameri- William W. Wiles trust"), proposes that its bank subsidiary, Ameritrust Secretary of the Board National Bank, Michiana, Elkhart, Indiana, purchase the assets and assume the liabilities of Ameritrust cc: Federal Reserve Bank of Cleveland Savings, F.A., Elkhart, Indiana, its savings association subsidiary, ("Ameritrust Savings"). Ameritrust May 4, 1990 has requested Board approval of this transaction pursuant to section 5(d)(3) of the Federal Deposit Insur- Lee S. Adams ance Act ("FDI Act") as amended by the Financial Counsel Institutions Reform, Recovery, and Enforcement Act Banc One Corporation of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 100 East Broad Street (1989)). Ameritrust Savings has been established to Columbus, Ohio 43271 acquire certain assets and assume deposit liabilities of Pioneer Savings, F.A., Plymouth, Indiana ("Pio- Dear Mr. Adams: neer"). The record in this case shows that: Banc One Corporation, Columbus, Ohio ("Banc (1) The aggregate amount of the total assets of all One"), proposes that its bank subsidiary, Bank One, depository institution subsidiaries of Ameritrust is Texas, N.A., Dallas, Texas, purchase the assets and $10.8 billion, an amount which is not less than 200 assume the liabilities of Banc One San Antonio Fedpercent of the total assets of Ameritrust Savings, eral Savings Bank, San Antonio, Texas, its savings which currently has $85.0 million in total assets; association subsidiary, ("Banc One San Antonio"). (2) Ameritrust and all of its bank subsidiaries cur- Banc One has requested Board approval of this transrently meet all applicable capital standards and, action pursuant to section 5(d)(3) of the Federal Deupon consummation of the proposed transactions, posit Insurance Act ("FDI Act") as amended by the will continue to meet all applicable capital stan- Financial Institutions Reform, Recovery, and Endards; forcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 (3) The transaction is not in substance the acquisi- Stat. 183, 199 (1989)). Banc One San Antonio has been tion of a Bank Insurance Fund member bank by a established to acquire certain assets and assume de- Savings Association Insurance Fund member; posit liabilities of First State Federal Savings Associ- (4) Pioneer, the predecessor to Ameritrust Savings, ation, San Antonio, Texas ("First State"). had tangible capital of less than 4 percent during the The record in this case shows that: quarter preceding its acquisition by Ameritrust; (1) The aggregate amount of the total assets of all (5) The transaction, which involves the purchase of depository institution subsidiaries of Banc One is assets and assumption of liabilities of Ameritrust $26.7 billion, an amount which is not less than 200 Savings, a savings association located in Indiana, percent of the total assets of Banc One San Antonio, by a bank subsidiary of Ameritrust, a bank holding which currently has $175 million in total assets; company whose banking subsidiaries' operations (2) Banc One and all of its bank subsidiaries curare principally conducted in Ohio, would comply rently meet all applicable capital standards and, with the requirements of section 3(d) of the Bank upon consummation of the proposed transactions, Holding Company Act if Ameritrust Savings were will continue to meet all applicable capital stana state bank which Ameritrust was applying to dards; acquire. (3) The transaction is not in substance the acquisi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

580 Federal Reserve Bulletin • July 1990 tion of a Bank Insurance Fund member bank by a Insurance Act ("FDI Act") as amended by the Savings Association Insurance Fund member; Financial Institutions Reform, Recovery, and En- (4) First State, the predecessor to Banc One San forcement Act of 1989 (Pub. L. No. 101-73, § 206, Antonio, had tangible capital of less than 4 percent 103 Stat. 183, 199 (1989)). Broadway Savings has during the quarter preceding its acquisition by Banc been established to acquire certain assets and as- One; sume deposit liabilities of First Federal Savings and (5) The transaction, which involves the purchase of Loan Association, Cape Girardeau, Missouri ("First assets and assumption of liabilities of Banc One San Federal"). Antonio, a savings association located in Texas, by The record in this case shows that: a bank subsidiary of Banc One, a bank holding (1) The aggregate amount of the total assets of all company whose banking subsidiaries' operations depository institution subsidiaries of County is are principally conducted in Ohio, would comply $660.6 million, an amount which is not less than with the requirements of section 3(d) of the Bank 200 percent of the total assets of Broadway Sav- Holding Company Act if Banc One San Antonio ings, which currently has $275.0 million in total were a state bank which Banc One was applying to assets; acquire. (2) County and all of its bank subsidiaries currently meet all applicable capital standards and, upon Based on the foregoing and all of the other facts of consummation of the proposed transactions, will record, the Staff Director of the Division of Banking continue to meet all applicable capital standards; Supervision and Regulation and the General Counsel (3) The transaction is not in substance the acquisiof the Board, acting pursuant to authority delegated tion of a Bank Insurance Fund member bank by a by the Board of Governors, hereby approve your Savings Association Insurance Fund member; request to engage in the proposed transaction under (4) First Federal, the predecessor to Broadway section 5(d)(3) of the FDI Act. This approval is Savings, had tangible capital of less than 4 percent subject to Banc One obtaining the required approval during the quarter preceding its acquisition by of the appropriate Federal banking agency for the County; proposed merger under the Bank Merger Act. (5) The transaction, which involves the purchase of assets and assumption of liabilities of Broadway Very truly yours, Savings, a savings association located in Missouri, by a bank subsidiary of County, a bank holding William W. Wiles company whose banking subsidiaries' operations Secretary of the Board are principally conducted in Missouri, would comply with the requirements of section 3(d) of the cc: Federal Reserve Bank of Cleveland Bank Holding Company Act if Broadway Savings were a state bank which County was applying to May 18, 1990 acquire. Van H. Puis Based on the foregoing and all of the other facts of President and Chief Executive Officer record, the Staff Director of the Division of Banking County Bancorporation, Inc. Supervision and Regulation and the General Counsel 407 North Kingshighway of the Board, acting pursuant to authority delegated Fourth Floor by the Board of Governors, hereby approve your request to engage in the proposed transaction under Cape Girardeau, Missouri 63701 section 5(d)(3) of the FDI Act. This approval is subject to County obtaining the required approval of Dear Mr. Puis: the appropriate Federal banking agency for the pro- County Bancorporation, Inc., Cape Girardeau, Mis- posed merger under the Bank Merger Act. souri ("County"), proposes that its bank subsidiary, Cape County Bank of Cape Girardeau, Cape Gi- Very truly yours, rardeau, Missouri, purchase the assets and assume the liabilities of Broadway Savings and Loan Association, Cape Girardeau, Missouri, its savings asso- William W. Wiles ciation subsidiary, ("Broadway Savings"). County Secretary of the Board has requested Board approval of this transaction pursuant to section 5(d)(3) of the Federal Deposit cc: Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 581 May 25, 1990 were a state bank which First Bankshares was applying to acquire. Dale L. Leighty President Based on the foregoing and all of the other facts of First Bankshares of Las Animas, Inc. record, the Staff Director of the Division of Banking P.O. Box 270 Supervision and Regulation and the General Counsel 535 Bent Avenue of the Board, acting pursuant to authority delegated by Las Animas, Colorado 81054 the Board of Governors, hereby approve your request to engage in the proposed transaction under section Dear Mr. Leighty: 5(d)(3) of the FDI Act. This approval is subject to First Bankshares obtaining the required approval of the First Bankshares of Las Animas, Inc., Las Animas, appropriate Federal banking agency for the proposed Colorado ("First Bankshares"), proposes that its merger under the Bank Merger Act. bank subsidiary, The First National Bank of Las Animas, Las Animas, Colorado, purchase the assets Very truly yours, and assume the liabilities of Otero Savings (Interim Association), Las Animas, Colorado, its savings William W. Wiles association subsidiary, ("Interim Association"). Secretary of the Board First Bankshares has requested Board approval of this transaction pursuant to section 5(d)(3) of the cc: Federal Reserve Bank of Kansas City Federal Deposit Insurance Act ("FDI Act") as amended by the Financial Institutions Reform, Re- May 18, 1990 covery, and Enforcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). Interim Allen H. Blake Association has been established to acquire certain Vice President assets and assume deposit liabilities of the Las First Banks, Inc. Animas branch of Otero Savings, Colorado Springs, 11901 Olive Blvd. Colorado ("Otero"). St. Louis, Missouri 63141 The record in this case shows that: (1) The aggregate amount of the total assets of all Dear Mr. Blake: depository institution subsidiaries of First Bankshares is $32 million, an amount which is not less First Banks, Inc., St. Louis, Missouri ("First than 200 percent of the total assets of Interim Banks"), proposes that its bank subsidiary, First Bank Association, which currently has $12 million in total of Illinois, O'Fallon, Illinois, purchase the assets and assets; assume the liabilities of First Interim Savings and (2) First Bankshares and all of its bank subsidiaries Loan Association, its savings association subsidiary, currently meet all applicable capital standards and, ("First Interim Savings"). First Banks has requested upon consummation of the proposed transactions, Board approval of this transaction pursuant to section will continue to meet all applicable capital stan- 5(d)(3) of the Federal Deposit Insurance Act ("FDI dards; Act") as amended by the Financial Institutions Re- (3) The transaction is not in substance the acquisi- form, Recovery, and Enforcement Act of 1989 (Pub. tion of a Bank Insurance Fund member bank by a L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). First Savings Association Insurance Fund member; Interim Savings has been established to acquire cer- (4) Otero, a branch of which is the predecessor to tain assets and assume deposit liabilities of the Granite Interim Association, had tangible capital of less than City, Illinois branch of Madison County Federal Sav- 4 percent during the quarter preceding its acquisi- ings and Loan Association, Granite City, Illinois tion by First Bankshares; ("Madison County"). (5) The transaction, which involves the purchase of The record in this case shows that: assets and assumption of liabilities of Interim Asso- (1) The aggregate amount of the total assets of all ciation, a savings association located in Colorado, depository institution subsidiaries of First Banks is by a bank subsidiary of First Bankshares, a bank $1.1 billion, an amount which is not less than 200 holding company whose banking subsidiaries' oper- percent of the total assets of First Interim Savings, ations are principally conducted in Colorado, would which currently has $96.1 million in total assets; comply with the requirements of section 3(d) of the (2) First Banks and all of its bank subsidiaries Bank Holding Company Act if Interim Association currently meet all applicable capital standards and, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

582 Federal Reserve Bulletin • July 1990 upon consummation of the proposed transactions, F.S.B."). Integra has requested Board approval of will continue to meet all applicable capital stan- this transaction pursuant to section 5(d)(3) of the dards; Federal Deposit Insurance Act ("FDI Act") as (3) The transaction is not in substance the acquisition amended by the Financial Institutions Reform, Reof a Bank Insurance Fund member bank by a covery, and Enforcement Act of 1989 (Pub. L. No. Savings Association Insurance Fund member; 101-73, § 206, 103 Stat. 183, 199 (1989)). Integra (4) Madison County, the predecessor to First In- F.S.B. has been established to acquire certain assets terim Savings, had tangible capital of less than 4 and assume deposit liabilities of the western franpercent during the quarter preceding its acquisition chise of Horizon Financial, F.A., Southhampton, by First Banks; Pennsylvania ("Horizon West"). (5) The transaction, which involves the purchase of The record in this case shows that: assets and assumption of liabilities of First Interim (1) The aggregate amount of the total assets of all Savings, a savings association located in Illinois, by depository institution subsidiaries of Integra is $6.7 a bank subsidiary of First Banks, a bank holding billion, an amount which is not less than 200 percent company whose banking subsidiaries' operations of the total assets of Integra F.S.B., which currently are principally conducted in Missouri, would com- has $553 million in total assets; ply with the requirements of section 3(d) of the Bank (2) Integra and all of its bank subsidiaries currently Holding Company Act if First Interim Savings were meet all applicable capital standards and, upon a state bank which First Banks was applying to consummation of the proposed transactions, will acquire. continue to meet all applicable capital standards; (3) The transaction is not in substance the acquisi- Based on the foregoing and all of the other facts of tion of a Bank Insurance Fund member bank by a record, the Staff Director of the Division of Banking Savings Association Insurance Fund member; Supervision and Regulation and the General Counsel (4) Horizon West, the predecessor to Integra of the Board, acting pursuant to authority delegated by F.S.B., had tangible capital of less than 4 percent the Board of Governors, hereby approve your request during the quarter preceding its acquisition by to engage in the proposed transaction under section Integra; 5(d)(3) of the FDI Act. This approval is subject to First (5) The transaction, which involves the purchase of Banks obtaining the required approval of the appro- assets and assumption of liabilities of Integra priate Federal banking agency for the proposed merger F.S.B., a savings association located in Pennsylunder the Bank Merger Act. vania, by a bank subsidiary of Integra, a bank holding company whose banking subsidiaries' op- Very truly yours, erations are principally conducted in Pennsylvania, would comply with the requirements of sec- William W. Wiles tion 3(d) of the Bank Holding Company Act if Secretary of the Board Integra F.S.B. were a state bank which Integra was applying to acquire. cc: Federal Reserve Bank of St. Louis Based on the foregoing and all of the other facts of record, the Staff Director of the Division of Banking May 25, 1990 Supervision and Regulation and the General Counsel of the Board, acting pursuant to authority delegated by Mark B. Greenlee the Board of Governors, hereby approve your request to engage in the proposed transaction under section Integra Financial Corporation 5(d)(3) of the FDI Act. This approval is subject to 300 Fourth Avenue Integra obtaining the required approval of the appro- Pittsburgh, Pennsylvania 15278-7576 priate Federal banking agency for the proposed merger Dear Mr. Greenlee: under the Bank Merger Act. Integra Financial Corporation, Pittsburgh, Pennsyl- Very truly yours, vania ("Integra"), proposes that its bank subsidiary, The Union National Bank of Pittsburgh, Pittsburgh, William W. Wiles Pennsylvania, purchase the assets and assume the Secretary of the Board liabilities of Integra F.S.B., Pittsburgh, Pennsylvania, its savings association subsidiary, ("Integra cc: Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 583 May 9, 1990 of the Board, acting pursuant to authority delegated by the Board of Governors, hereby approve your request Jan Robey Alonzo to engage in the proposed transaction under section Thompson & Mitchell 5(d)(3) of the FDI Act. This approval is subject to One Mercantile Center Magna obtaining the required approval of the appro- Suite 3400 priate Federal banking agency for the proposed merger under the Bank Merger Act. St. Louis, Missouri 63101 Very truly yours, Dear Ms. Alonzo: Magna Group, Inc., St. Louis, Missouri ("Magna"), William W. Wiles proposes that its bank subsidiary, Magna Bank of Secretary of the Board Centralia, Centralia, Illinois, purchase the assets and assume the liabilities of Magna Centralia Interim Fed- cc: Federal Reserve Bank of St. Louis eral Savings and Loan Association, Centralia, Illinois, its savings association subsidiary, ("Interim Feder- May 4, 1990 al"). Magna has requested Board approval of this transaction pursuant to section 5(d)(3) of the Federal Harley T. Godard Deposit Insurance Act ("FDI Act") as amended by Secretary the Financial Institutions Reform, Recovery, and En- River Bend Bancshares forcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 Main and West St. Louis Avenue Stat. 183, 199 (1989)). Interim Federal has been estab- P.O. Box 100 lished to acquire certain assets and assume deposit East Alton, Illinois 62024 liabilities of Home Federal Savings and Loan Association, Centralia, Illinois ("Home Federal"). Dear Mr. Godard: The record in this case shows that: (1) The aggregate amount of the total assets of all River Bend Bancshares, Inc., East Alton, Illinois depository institution subsidiaries of Magna is $2.2 ("River Bend"), proposes that its bank subsidiary, billion, an amount which is not less than 200 percent Illinois State Bank, East Alton, Illinois, purchase the of the total assets of Interim Federal, which cur- assets and assume the liabilities of Interim Federal rently has $35.9 million in total assets; Savings and Loan, East Alton, Illinois, its savings (2) Magna and all of its bank subsidiaries currently association subsidiary, ("Interim Federal"). River meet all applicable capital standards and, upon Bend has requested Board approval of this transaction consummation of the proposed transactions, will pursuant to section 5(d)(3) of the Federal Deposit continue to meet all applicable capital standards; Insurance Act ("FDI Act") as amended by the Finan- (3) The transaction is not in substance the acquisi- cial Institutions Reform, Recovery, and Enforcement tion of a Bank Insurance Fund member bank by a Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, Savings Association Insurance Fund member; 199 (1989)). Interim Federal has been established to (4) Home Federal, the predecessor to Interim Fed- acquire certain assets and assume deposit liabilities of eral, had tangible capital of less than 4 percent First Federal Savings Bank, East Alton, Illinois during the quarter preceding its acquisition by ("First Federal"). Magna; The record in this case shows that: (5) The transaction, which involves the purchase of (1) The aggregate amount of the total assets of all assets and assumption of liabilities of Interim Fed- depository institution subsidiaries of River Bend is eral, a savings association located in Illinois, by a $89.1 million, an amount which is not less than 200 bank subsidiary of Magna, a bank holding company percent of the total assets of Interim Federal, which whose banking subsidiaries' operations are princi- currently has $36.2 million in total assets; pally conducted in Illinois, would comply with the (2) River Bend and all of its bank subsidiaries requirements of section 3(d) of the Bank Holding currently meet all applicable capital standards and, Company Act if Interim Federal were a state bank upon consummation of the proposed transactions, which Magna was applying to acquire. will continue to meet all applicable capital standards; Based on the foregoing and all of the other facts of (3) The transaction is not in substance the acquisirecord, the Staff Director of the Division of Banking tion of a Bank Insurance Fund member bank by a Supervision and Regulation and the General Counsel Savings Association Insurance Fund member; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

584 Federal Reserve Bulletin • July 1990 (4) First Federal, the predecessor to Interim Fed- to section 5(d)(3) of the Federal Deposit Insurance eral, had tangible capital of less than 4 percent Act ("FDI Act") as amended by the Financial Instiduring the quarter preceding its acquisition by River tutions Reform, Recovery, and Enforcement Act of Bend; 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 (5) The transaction, which involves the purchase of (1989)). SouthTrust Savings has been established to assets and assumption of liabilities of Interim Fed- acquire certain assets and assume deposit liabilities eral, a savings association located in Illinois, by a of Guaranty Federal Savings and Loan Association, bank subsidiary of River Bend, a bank holding Birmingham, Alabama ("Guaranty"). company whose banking subsidiaries' operations The record in this case shows that: are principally conducted in Illinois, would comply (1) The aggregate amount of the total assets of all with the requirements of section 3(d) of the Bank depository institution subsidiaries of SouthTrust is Holding Company Act if Interim Federal were a $7.9 billion, an amount which is not less than 200 state bank which River Bend was applying to ac- percent of the total assets of SouthTrust Savings, quire. which currently has $303.5 million in total assets; (2) SouthTrust and all of its bank subsidiaries cur- Based on the foregoing and all of the other facts of rently meet all applicable capital standards and, record, the Staff Director of the Division of Banking upon consummation of the proposed transactions, Supervision and Regulation and the General Counsel will continue to meet all applicable capital stanof the Board, acting pursuant to authority delegated by dards; the Board of Governors, hereby approve your request (3) The transaction is not in substance the acquisito engage in the proposed transaction under section tion of a Bank Insurance Fund member bank by a 5(d)(3) of the FDI Act. This approval is subject to Savings Association Insurance Fund member; River Bend obtaining the required approval of the (4) Guaranty, the predecessor to SouthTrust Savappropriate Federal banking agency for the proposed ings, had tangible capital of less than 4 percent merger under the Bank Merger Act. during the quarter preceding its acquisition by SouthTrust; Very truly yours, (5) The transaction, which involves the purchase of assets and assumption of liabilities of SouthTrust William W. Wiles Savings, a savings association located in Alabama, Secretary of the Board by bank subsidiaries of SouthTrust, a bank holding company whose banking subsidiaries' operations cc: Federal Reserve Bank of St. Louis are principally conducted in Alabama, would comply with the requirements of section 3(d) of the Bank Holding Company Act if SouthTrust Savings were a May 4, 1990 state bank which SouthTrust was applying to acquire. Anitta Pross Senior Administrative Officer Based on the foregoing and all of the other facts of SouthTrust Corporation record, the Staff Director of the Division of Banking P.O. Box 2554 Supervision and Regulation and the General Counsel Birmingham, Alabama 35290 of the Board, acting pursuant to authority delegated by the Board of Governors, hereby approve your Dear Ms. Pross: request to engage in the proposed transaction under section 5(d)(3) of the FDI Act. This approval is SouthTrust Corporation, Birmingham, Alabama subject to SouthTrust obtaining the required ap- ("SouthTrust"), proposes that its bank subsidiaries, proval of the appropriate Federal banking agency for SouthTrust Bank of Alabama, N.A., Birmingham, the proposed mergers under the Bank Merger Act. Alabama; SouthTrust Bank of Huntsville, N.A., Huntsville, Alabama; SouthTrust Bank, N.A., Mont- Very truly yours, gomery Alabama; and SouthTrust Bank of Mobile, Mobile, Alabama, purchase the assets and assume William W. Wiles the liabilities of SouthTrust Federal Savings Bank, Secretary of the Board Birmingham, Alabama, its savings association subsidiary, ("SouthTrust Savings"). SouthTrust has requested Board approval of this transaction pursuant cc: Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 585 May 25, 1990 (3) The transaction is not in substance the acquisition of a Bank Insurance Fund member bank by a Michael A. Greenspan Savings Association Insurance Fund member; Thompson & Mitchell (4) Horizon East, the predecessor to First Valley 1120 Vermont Avenue, N.W. Interim, had tangible capital of less than 4 percent Suite 1000 during the quarter preceding its acquisition by UJB; Washington, D.C. 20005 (5) The transaction, which involves the purchase of assets and assumption of liabilities of First Valley Dear Mr. Greenspan: Interim, a savings association located in Pennsylva- UJB Financial Corp., Princeton, New Jersey ("UJB"), nia, by a bank subsidiary of UJB, a bank holding proposes that its bank subsidiary, First Valley Bank, company whose banking subsidiaries' operations Bethlehem, Pennsylvania, purchase the assets and are principally conducted in New Jersey, would assume the liabilities of First Valley Interim, F.A., comply with the requirements of section 3(d) of the Bethlehem, Pennsylvania, its savings association sub- Bank Holding Company Act if First Valley Interim sidiary, ("First Valley Interim"). UJB has requested were a state bank which UJB was applying to Board approval of this transaction pursuant to section acquire. 5(d)(3) of the Federal Deposit Insurance Act ("FDI Act") as amended by the Financial Institutions Re- Based on the foregoing and all of the other facts of form, Recovery, and Enforcement Act of 1989 (Pub. record, the Staff Director of the Division of Banking L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). First Supervision and Regulation and the General Counsel Valley Interim has been established to acquire certain of the Board, acting pursuant to authority delegated by assets and assume deposit liabilities of the eastern the Board of Governors, hereby approve your request franchise of Horizon Financial, F.A., Southhampton, to engage in the proposed transaction under section Pennsylvania ("Horizon East"). 5(d)(3) of the FDI Act. This approval is subject to UJB The record in this case shows that: obtaining the required approval of the appropriate (1) The aggregate amount of the total assets of all Federal banking agency for the proposed merger under depository institution subsidiaries of UJB is $12.2 the Bank Merger Act. billion, an amount which is not less than 200 percent of the total assets of First Valley Interim, which Very truly yours, currently has $948 million in total assets; (2) UJB and all of its bank subsidiaries currently William W. Wiles meet all applicable capital standards and, upon Secretary of the Board consummation of the proposed transactions, will continue to meet all applicable capital standards; cc: Federal Reserve Bank of Philadelphia APPLICATIONS APPROVED UNDER 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(s) Bank(s) ^date^ BankAmerica Corporation, Bank of America Arizona, May 25, 1990 San Francisco, California Phoenix, Arizona Wells Fargo & Company, Wells Fargo Bank (Arizona), May 25, 1990 San Francisco, California Phoenix, Arizona Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

586 Federal Reserve Bulletin • July 1990 Section 4 Effective Applicant(s) Bank(s) date First Security Corporation, BHC Holding, Inc., May 31, 1990 Salt Lake City, Utah Philadelphia, Pennsylvania FNB Rochester Corp., REMS, Inc., May 17, 1990 Rochester, New York Rochester, New York Security Pacific Corporation, Western Federal Interim Savings and May 25, 1990 Los Angeles, California Loan Association, Security Pacific Bancorporation Phoenix, Arizona Southwest, Phoenix, Arizona 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(s) Bank(s) Bank date ANB Financial Corporation, American National Bank, San Francisco May 7, 1990 Kennewick, Washington Kennewick, Washington Barrett Bancorporation, Inc., Citizens State Bank of Barrett, Minneapolis May 11, 1990 Barrett, Minnesota Barrett, Minnesota Brewer Bancorp, Inc., Ryan Bancshares, Inc., Kansas City May 18, 1990 Ryan, Oklahoma Ryan, Oklahoma Business Banc of America, Inc., Citizens Bank Services, Inc., Kansas City April 27, 1990 Abilene, Kansas Abilene, Kansas Central Bancorporation, Central Bank & Trust Company, San Francisco May 16, 1990 Provo, Utah Provo, Utah Commercial Bancorp of Commercial Bank of Gwinnett, Atlanta May 22, 1990 Gwinnett, Inc., N.A., Lawrenceville, Georgia Lawrenceville, Georgia CSRA Bank Corp., First State Bank, Atlanta May 9, 1990 Wrens, Georgia Wrens, Georgia Diamond State Bancorp, Inc., Diamond State Bank, N.A., Philadelphia April 26, 1990 Dover, Delaware Dover, Delaware Eagle Bancorp, Inc., Eagle Bank and Trust, Atlanta May 11, 1990 Statesboro, Georgia Statesboro, Georgia Financial Bancshares, Inc., First Bank of East Prairie, St. Louis May 8, 1990 St. Louis, Missouri East Prairie, Missouri First Illinois Corporation, Valley Financial Services, Inc., Chicago May 8, 1990 Evanston, Illinois South Elgin, Illinois First Maryland Bancorp, Columbia National Bank, Richmond May 2, 1990 Baltimore, Maryland Washington, D.C. Allied Irish Banks pic, Dublin, Ireland Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 587 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank date First National of Nebraska, Inc., Circle Management Company, Kansas City May 4, 1990 Omaha, Nebraska Kearney, Nebraska First Seven Day Financial, Inc., Antelope Valley Bank, San Francisco April 27, 1990 Lancaster, California Lancaster, California Georgetown National Bank Central Texas Bancshares, Inc. Dallas May 3, 1990 Holding Company, Inc., Austin, Texas Georgetown, Texas Honor Bancorp, Inc., The Honor State Bank, Chicago May 2, 1990 Honor, Michigan Honor, Michigan Kirbyville Bancshares, Inc., Vidor Bancshares, Inc., Dallas May 18, 1990 Beaumont, Texas Vidor, Texas First National Bank of Woodville, Woodville, Texas Lafayette Bancshares, Lafayette County Bancshares, Kansas City May 23, 1990 Independence, Missouri Inc., Lexington, Missouri MidAmerican Corporation, The Kansas Trust Company, Kansas City May 8, 1990 Prairie Village, Kansas Prairie Village, Kansas Midlothian State Bank Midlothian State Bank, Chicago May 21, 1990 Employees Stock Ownership Midlothian, Illinois Trust, Midlothian, Illinois Olney Bancshares, Inc., The Farmers National Bank of Dallas May 10, 1990 Olney, Texas Seymour, Seymour, Texas Pikeville National Corporation, First American Kentucky Cleveland May 21, 1990 Pikeville, Kentucky Bancorp, Inc., Ashland, Kentucky River Forest Bancorp, Inc., Madison Financial Corporation, Chicago May 11, 1990 Chicago, Illinois Chicago, Illinois Saban S.A., Republic New York Corporation, New York May 7, 1990 Panama City, Republic of New York, New York Panama Sandwich Banco, Inc., First Harvard Corporation, Chicago May 22, 1990 DeKalb, Illinois Harvard, Illinois Steuben Trust Corporation, Steuben Trust Company, New York May 22, 1990 Hornell, New York Hornell, New York Summit Bancorp, Inc., Summit Bank, Philadelphia May 22, 1990 Johnstown, Pennsylvania Johnstown, Pennsylvania Summit Financial Corporation, Summit National Bank (in Richmond May 9, 1990 Greenville, South Carolina organization), Greenville, South Carolina Wasatch Bancorp, Inc., Wasatch Bank, San Francisco May 14, 1990 Orem, Utah Orem, Utah Wayne Bancorp, Inc., Wayne National Bank, Atlanta May 11, 1990 Jesup, Georgia Jesup, Georgia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

588 Federal Reserve Bulletin • July 1990 Section 4 Nonbanking Reserve Effective Applicant(s) Activity/Company Bank date AMCORE Financial, Inc., AMCORE Trust Company, Chicago April 27, 1990 Rockford, Illinois Rockford, Illinois Bank Shares Incorporated, Marquette Bank, Minneapolis May 18, 1990 Minneapolis, Minnesota Minneapolis, Minnesota Barclays PLC, First Charter Mortgage New York May 7, 1990 London, England Company, Barclays Bank PLC, Concord, North Carolina London, England Barclays USA Inc., New York, New York Barclays U.S. Holdings, Inc., New York, New York BarclaysAmericanCorporation, Charlotte, North Carolina First Sioux Bancshares, Ltd., First Sioux Financial, Inc., Chicago May 3, 1990 Sioux Center, Iowa Sioux Center, Iowa The Mitsubishi Trust and Spectrum Capital, Ltd., New York April 27, 1990 Banking Corporation, New York, New York Tokyo,Japan National Bank of Canada, Bank of New England, N.A., New York May 9, 1990 Montreal, Canada Boston, Massachusetts Saastopankkien Union Mortgage Company, Inc., New York May 22, 1990 Keskus-Osake-Pankki Dallas, Texas (Skopbank), Astrum Funding Corp., Helsinki, Finland Great Neck, New York SBC Financial Corporation, New South Capital Corporation, St. Louis May 18, 1990 Como, Mississippi Batesville, Mississippi Team Bancshares, Inc., Texas American Life Insurance Dallas May 24, 1990 Dallas, Texas Company, Texop Bancshares II, Inc., Fort Worth, Texas Wilmington, Delaware APPLICATIONS APPROVED UNDER BANK MERGER ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Reserve Effective Applicant(s) Bank(s) Bank date First of America Bank-Northern First of America Bank-Alpena, Chicago May 10, 1990 Michigan, Alpena, Michigan Traverse City, Michigan United Nebraska Bank, North Platte Trust Company, Kansas City May 7, 1990 North Platte, Nebraska North Platte, Nebraska Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 589 PENDING CASES INVOLVING THE BOARD OF ber 22, 1989). Petition for review of Board deter- GOVERNORS mination that a company would control a proposed insured bank for purposes of the Bank Holding Company Act. This list of pending cases does not include suits Consumers Union of U.S., Inc. v. Board of Goveragainst the Federal Reserve Banks in which the Board nors, No. 89-3008 (D.D.C., filed November 1, of Governors is not named a party. 1989). Challenge to various aspects of amendments to Regulation Z implementing the Home California Association of Life Underwriters v. Board Equity Loan Consumer Protection Act. On May 2, of Governors, No. 90-70123 (9th Circuit, filed 1990, the court upheld the Board's regulatory March 15, 1990). Petition for review of Board order action. approving acquisition of bank subsidiary to engage Synovus Financial Corp. v. Board of Governors, No. in insurance activities pursuant to state law. 89-1394 (D.C. Cir., filed June 21, 1989). Petition for Burke v. Board of Governors, No. 90-9505 (10th review of Board order permitting relocation of a Circuit, filed February 27, 1990). Petition for review bank holding company's national bank subsidiary of Board orders assessing civil money penalties and from Alabama to Georgia. issuing orders of prohibition. MCorp v. Board of Governors, No. 89-2816 (5th Cir., BancTEXAS Group, Inc. v. Board of Governors, No. filed May 2, 1989). Appeal of preliminary injunction CA3-90-0236-R (N.D. Texas, filed February 2, against the Board enjoining pending and future 1990). Plaintiff seeks temporary restraining order enforcement actions against a bank holding comand preliminary injunction enjoining the Board from pany now in bankruptcy. On May 15, 1990, the Fifth enforcing a temporary order to cease and desist Circuit vacated the district court's order enjoining requiring injection of capital into plaintiff's subsid- the Board from proceeding with enforcement aciary banks under the Board's source of strength tions based on section 23A of the Federal Reserve doctrine. The district court denied plaintiff's request Act, but upheld the district court's order enjoining for a temporary restraining order on February 6, such actions based on the Board's source- 1990. of-strength doctrine. Rutledge v. Board of Governors, No. CV90-L-0137S Independent Insurance Agents of America v. Board (N.D. Alabama, filed January 27, 1990). Tort suit of Governors, No. 89-4030 (2d Cir., filed March 9, challenging Board and Reserve Bank supervisory 1989). Petition for review of Board order ruling actions. The Board's motion to dismiss or for sum- that the non-banking restrictions of section 4 of the mary judgment is pending. Bank Holding Company Act apply only to non- Woodward v. Board of Governors, No. 90-3031 (11th bank subsidiaries of bank holding companies. The Cir., filed January 16, 1990); Kaimowitz v. Board of Board's order was upheld on November 29, 1989. Governors, No. 90-3067 (11th Cir., filed January 23, Petition for certiorari filed on April 18, 1990. 1990). Petitions for review of Board order dated Securities Industry Association v. Board of Gover- December 22, 1989, approving application by First nors, No. 89-1127 (D.C. Cir., filed February 16, Union Corporation to acquire Florida National 1989). Petition for review of Board order permitting Banks. Petitioners object to approval on Commu- five bank holding companies to engage to a limited nity Reinvestment Act grounds. The court denied extent in additional securities underwriting and dealtheir motion for a stay of the Board's order on ing activities. Board's order upheld on April 10, January 26, 1990, and is considering jurisdictional 1990. issues raised by the Board. MCorp v. Board of Governors, No. CA3-88-2693 Securities Industry Association v. Board of Gover- (N.D. Tex., filed October 10, 1988). Application for nors, No. 89-1730 (D.C. Cir., filed November 29, injunction to set aside temporary cease and desist 1989). Petition for review of Board order approving orders. Stayed pending outcome of MCorp v. Board application under section 4(c)(8) to engage in of Governors in Fifth Circuit. private placement and riskless principal activ- White v. Board of Governors, No. CU-S-88-623-RDF ities. The case has been held in abeyance pending (D. Nev., filed July 29, 1988). Age discrimination the outcome of Securities Industry Association complaint. Board's motion to dismiss or for sumv. Board of Governors, No. 89-1127 (D.C. mary judgment pending. Circuit). Cohen v. Board of Governors, No. 88-1061 (D.N.J., Babcock and Brown Holdings, Inc. v. Board of filed March 7, 1988). Action seeking disclosure of Governors, No. 89-70518 (9th Cir., filed Novem- documents under the Freedom of Information Act. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

590 Federal Reserve Bulletin • July 1990 Lewis v. Board of Governors, Nos. 87-3455, 87-3545 ities of Florida trust company subsidiaries. Matter (11th Cir., filed June 25, August 3,1987). Petitions for stayed pending Supreme Court review of Continental review of Board orders approving applications of Illinois Corp. v. Lewis, 827 F.2d 1517 (11th Cir. non-Florida bank holding companies to expand activ- 1987), vacated and remanded, 110 S. Ct. 1249(1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

591 Membership of the Board of Governors of the Federal Reserve System, 1913-90 APPOINTIVE MEMBERS1 Federal Reserve Date of initial Other dates and information relating Name District oath of office to membership2 Charles S. Hamlin Boston Aug. 10, 1914 Reappointed in 1916 and 1926. Served until Feb. 3, 1936.3 Paul M. Warburg New York do. Term expired Aug. 9, 1918. Frederic A. Delano Chicago do. Resigned July 21, 1918. W.P.G. Harding Atlanta do. Term expired Aug. 9, 1922. Adolph C. Miller San Francisco do. Reappointed in 1924. Reappointed in 1934 from the Richmond District. Served until Feb. 3, 1936.3 Albert Strauss New York Oct. 26, 1918 Resigned Mar. 15, 1920. Henry A. Moehlenpah.. Chicago Nov. 10, 1919 Term expired Aug. 9, 1920. Edmund Piatt New York June 8, 1920 Reappointed in 1928. Resigned Sept. 14, 1930. David C. Wills Cleveland Sept. 29, 1920 Term expired Mar. 4, 1921. John R. Mitchell Minneapolis May 12, 1921 Resigned May 12, 1923. Milo D. Campbell Chicago Mar. 14, 1923 Died Mar. 22, 1923. Daniel R. Crissinger Cleveland May 1, 1923 Resigned Sept. 15, 1927. George R. James St. Louis May 14, 1923 Reappointed in 1931. Served until Feb. 3, 1936.4 Edward H. Cunningham Chicago do Died Nov. 28, 1930. Roy A. Young Minneapolis Oct. 4, 1927 Resigned Aug. 31, 1930. Eugene Meyer New York Sept. 16, 1930 Resigned May 10, 1933. Way land W. Magee Kansas City May 18, 1931 Term expired Jan. 24, 1933. Eugene R. Black Atlanta May 19, 1933 Resigned Aug. 15, 1934. M.S. Symczak Chicago June 14, 1933 Reappointed in 1936 and 1948. Resigned May 31, 1961. J.J. Thomas Kansas City do Served until Feb. 10, 1936.3 Marriner S. Eccles San Francisco Nov. 15, 1934 Reappointed in 1936, 1940, and 1944. Resigned July 14, 1951. Joseph A. Broderick New York Feb. 3, 1936 Resigned Sept. 30, 1937. John K. McKee Cleveland . do Served until Apr. 4, 1946.3 Ronald Ransom Atlanta .do Reappointed in 1942. Died Dec. 2, 1947. Ralph W. Morrison Dallas Feb. 10, 1936 Resigned July 9, 1936. Chester C. Davis Richmond June 25, 1936 Reappointed in 1940. Resigned Apr. 15, 1941. Ernest G. Draper New York Mar. 30, 1938 Served until Sept. 1, 1950.3 Rudolph M. Evans Richmond Mar. 14, 1942 Served until Aug. 13, 1954.3 James K. Vardaman, Jr. St. Louis Apr. 4, 1946 Resigned Nov. 30, 1958. Lawrence Clayton Boston Feb. 14, 1947 Died Dec. 4, 1949. Thomas B. McCabe Philadelphia Apr. 15, 1948 Resigned Mar. 31, 1951. Edward L. Norton Atlanta Sept. 1, 1950 Resigned Jan. 31, 1952. Oliver S. Powell Minneapolis .do Resigned June 30, 1952. Wm. McC. Martin, Jr... New York April 2, 1951 Reappointed in 1956. Term expired Jan. 31, 1970. A.L. Mills, Jr San Francisco Feb. 18, 1952 Reappointed in 1958. Resigned Feb. 28, 1965. J.L. Robertson Kansas City do Reappointed in 1964. Resigned Apr. 30, 1973. C. Canby Balderston.... Philadelphia Aug. 12, 1954 Served through Feb. 28, 1966. Paul E. Miller Minneapolis Aug. 13, 1954 Died Oct. 21, 1954. Chas. N. Shepardson.... Dallas Mar. 17, 1955 Retired Apr. 30, 1967. G.H. King, Jr Atlanta Mar. 25, 1959 Reappointed in 1960. Resigned Sept. 18, 1963. George W. Mitchell Chicago Aug. 31, 1961 Reappointed in 1962. Served until Feb. 13, 1976.3 2 J. Dewey Daane Richmond Nov. 29, 1963 Served until Mar. 8, 1974.3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

592 Federal Reserve Date of initial Other dates and information relating Name District oath of office to membership2 Sherman J. Maisel.... .San Francisco Apr. 30, 1965 Served through May 31, 1972. Andrew F. Brimmer, .Philadelphia Mar. 9, 1966 Resigned Aug. 31, 1974. William W. Sherrill., .Dallas May 1, 1967 Reappointed in 1968. Resigned Nov. 15, 1971. Arthur F. Burns .New York Jan. 1, 1970 Term began Feb. 1, 1970. Resigned Mar. 31, 1978. John E. Sheehan .St. Louis Jan. 4, 1972 Resigned June 1, 1975. Jeffrey M. Bucher .San Francisco June 5, 1972 Resigned Jan. 2, 1976. Robert C. Holland .Kansas City June 11, 1973 Resigned May 15, 1976. Henry C. Wallich .Boston Mar. 8, 1974 Resigned Dec. 15, 1986 Philip E. Coldwell .Dallas Oct. 29, 1974 Served through Feb. 29, 1980. Philip C. Jackson, Jr... .Atlanta July 14, 1975 Resigned Nov. 17, 1978. J. Charles Partee .Richmond Jan. 5, 1976 Served until Feb. 7, 1986.3 Stephen S. Gardner.... .Philadelphia Feb. 13, 1976 Died Nov. 19, 1978. David M. Lilly .Minneapolis June 1, 1976 Resigned Feb. 24, 1978. G. William Miller .San Francisco Mar. 8, 1978 Resigned Aug. 6, 1979. Nancy H. Teeters .Chicago Sept. 18, 1978 Served through June 27, 1984. Emmett J. Rice .New York June 20, 1979 Resigned Dec. 31, 1986. Frederick H. Schultz.. .Atlanta July 27, 1979 Served through Feb. 11, 1982. Paul A. Volcker .Philadelphia Aug. 6, 1979 Resigned August 11, 1987. Lyle E. Gramley .Kansas City May 28, 1980 Resigned Sept. 1, 1985. Preston Martin .San Francisco Mar. 31, 1982 Resigned April 30, 1986. Martha R. Seger .Chicago July 2, 1984 Wayne D. Angell .Kansas City Feb. 7, 1986 Manuel H. Johnson.... .Richmond Feb. 7, 1986 H. Robert Heller .San Francisco Aug. 19, 1986 Resigned July 31, 1989. Edward W. Kelley, Jr. .Dallas May 26, 1987 Reappointed in 1990. Alan Greenspan .New York Aug. 11, 1987 John P. LaWare .Boston Aug. 15, 1988 David W. Mullins, Jr.... .St. Louis May 21, 1990 Chairmen4 Vice Chairmen4 Charles S. Hamlin .Aug. 10, 1914-Aug. 9, 1916 Frederic A. Delano Aug. 10, 1914-Aug. 9, 1916 W.P.G. Harding .Aug. 10, 1916-Aug. 9, 1922 Paul M. Warburg Aug. 10, 1916-Aug. 9, 1918 Daniel R. Crissinger... .May 1, 1923-Sept. 15, 1927 Albert Strauss Oct. 26, 1918-Mar. 15, 1920 Roy A. Young .Oct. 4, 1927-Aug. 31, 1930 Edmund Piatt July 23, 1920-Sept. 14, 1930 Eugene Meyer .Sept. 16, 1930-May 10, 1933 J.J. Thomas Aug. 21, 1934-Feb. 10, 1936 Eugene R. Black .May 19, 1933-Aug. 15, 1934 Ronald Ransom Aug. 6, 1956-Dec. 2, 1947 Marriner S. Eccles .... .Nov. 15, 1934—Jan. 31, 1948 C. Canby Balderston Mar. 11, 1955-Feb. 28, 1966 Thomas B. McCabe... .Apr. 15, 1948-Mar. 31, 1951 J.L. Robertson Mar. 1, 1966-Apr. 30, 1973 Wm. McC. Martin, Jr. .Apr. 2, 1951-Jan. 31, 1970 George W. Mitchell May 1, 1973-Feb. 13, 1976 Arthur F. Burns .Feb. 1, 1970-Jan. 31, 1978 Stephen S. Gardner Feb. 13, 1976-Nov. 19, 1978 G. William Miller .Mar. 8, 1978-Aug. 6, 1979 Frederick H. Schultz ....July 27, 1979-Feb. 11, 1982 Paul A. Volcker .Aug. 6, 1979-Aug. 11, 1987 Preston Martin Mar. 31, 1982-Mar. 31, 1986 Alan Greenspan .Aug. 11, 1987- Manuel H. Johnson Aug. 24, 1986- EX-OFFICIO MEMBERS1 Secretaries of the Treasury Comptrollers of the Currency W.G. McAdoo Dec. 23, 1913-Dec. 15, 1918 John Skelton Williams...Feb. 2, 1914-Mar. 2, 1921 Carter Glass Dec. 16, 1918-Feb. 1, 1920 Daniel R. Crissinger Mar. 17, 1921-Apr. 30, 1923 David F. Houston Feb. 2, 1920-Mar. 3, 1921 Henry M. Dawes May 1, 1923-Dec. 17, 1924 Andrew W. Mellon Mar. 4, 1921-Feb. 12, 1932 Joseph W. Mcintosh Dec. 20, 1924-Nov. 20, 1928 Ogden L. Mills Feb. 12, 1932-Mar. 4, 1933 J.W. Pole Nov. 21, 1928-Sept. 20, 1932 William H. Woodin Mar. 4, 1933-Dec. 31, 1933 J.F.T. O'Connor May 11, 1933-Feb. 1, 1936 Henry Morgenthau Jr. ...Jan. 1, 1934-Feb. 1, 1936 1. Under the provisions of the original Federal Reserve Act, the composed of seven appointive members; that the Secretary of the Federal Reserve Board was composed of seven members, including Treasury and the Comptroller of the Currency should continue to five appointive members, the Secretary of the Treasury, who was serve as members until Feb. 1, 1936, or until their successors were ex-officio chairman of the Board, and the Comptroller of the Cur- appointed and had qualified; and that thereafter the terms of members rency. The original term of office was ten years, and the five original should be fourteen years and that the designation of Chairman and appointive members had terms of two, four, six, eight, and ten years Vice Chairman of the Board should be for a term of four years. respectively. In 1922 the number of appointive members was in- 2. Date after words "Resigned" and "Retired" denotes final day of creased to six, and in 1933 the term of office was increased to twelve service. years. The Banking Act of 1935, approved Aug. 23, 1935, changed the 3. Successor took office on this date. name of the Federal Reserve Board to the Board of Governors of the 4. Chairman and Vice Chairman were designated Governor and Federal Reserve System and provided that the Board should be Vice Governor before Aug. 23, 1935. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1 Financial and Business Statistics NOTE. The following tables may have some 3.11, 3.15-3.20, 3.22-3.25, 3.27, 3.28, and 4.30. discontinuities in historical data for some series For a more detailed explanation of the changes, beginning with the December 1989 issue: 1.12, see the announcement on page 16 of the January 1.33, 1.44, 1.52, 1.57-1.60, 2.10, 2.12, 2.13, 3.10, 1990 BULLETIN. CONTENTS COMMERCIAL BANKING INSTITUTIONS All Major nondeposit funds Domestic Financial Statistics A18 Assets and liabilities, last-Wednesday-of-month series MONEY STOCK AND BANK CREDIT A3 Reserves, money stock, liquid assets, and debt WEEKLY REPORTING COMMERCIAL BANKS measures A4 Reserves of depository institutions, Reserve Assets and liabilities Bank credit A19 All reporting banks A5 Reserves and borrowings—Depository A20 Banks in New York City institutions A21 Branches and agencies of foreign banks A6 Selected borrowings in immediately available A22 Gross demand deposits—individuals, funds—Large member banks partnerships, and corporations FINANCIAL MARKETS POLICY INSTRUMENTS A23 Commercial paper and bankers dollar acceptances outstanding A7 Federal Reserve Bank interest rates A23 Prime rate charged by banks on short-term A8 Reserve requirements of depository institutions business loans A9 Federal Reserve open market transactions A24 Interest rates—money and capital markets A25 Stock market—Selected statistics A26 Selected financial institutions—Selected assets and liabilities FEDERAL RESERVE BANKS A10 Condition and Federal Reserve note statements FEDERAL FINANCE All Maturity distribution of loan and security holdings A28 Federal fiscal and financing operations A29 U.S. budget receipts and outlays A30 Federal debt subject to statutory limitation A30 Gross public debt of U.S. Treasury—Types and ownership MONETARY AND CREDIT AGGREGATES A31 U.S. government securities dealers—Trans- A12 Aggregate reserves of depository institutions actions and monetary base A32 U.S. government securities dealers—Positions A13 Money stock, liquid assets, and debt measures and financing A15 Bank debits and deposit turnover A3 3 Federal and federally sponsored credit A16 Loans and securities—All commercial banks agencies—Debt outstanding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • July 1990 SECURITIES MARKETS AND International Statistics CORPORATE FINANCE SUMMARY STATISTICS A34 New security issues—State and local governments and corporations A55 U.S. international transactions—Summary A35 Open-end investment companies—Net sales A56 U.S. foreign trade and asset position A56 U.S. reserve assets A35 Corporate profits and their distribution A56 Foreign official assets held at Federal Reserve A35 Total nonfarm business expenditures on new Banks plant and equipment A57 Foreign branches of U.S. banks—Balance A36 Domestic finance companies—Assets and sheet data liabilities and business credit A59 Selected U.S. liabilities to foreign official institutions REAL ESTATE REPORTED BY BANKS IN THE UNITED STATES A37 Mortgage markets A59 Liabilities to and claims on foreigners A38 Mortgage debt outstanding A60 Liabilities to foreigners A62 Banks' own claims on foreigners A63 Banks' own and domestic customers' claims on CONSUMER INSTALLMENT CREDIT foreigners A39 Total outstanding and net change A63 Banks' own claims on unaffiliated foreigners A40 Terms A64 Claims on foreign countries—Combined domestic offices and foreign branches FLOW OF FUNDS REPORTED BY NONBANKING BUSINESS A41 Funds raised in U.S. credit markets ENTERPRISES IN THE UNITED STATES A43 Direct and indirect sources of funds to credit A65 Liabilities to unaffiliated foreigners markets A66 Claims on unaffiliated foreigners A44 Summary of credit market debt outstanding A45 Summary of credit market claims, by holder SECURITIES HOLDINGS AND TRANSACTIONS Domestic Nonfinancial Statistics A67 Foreign transactions in securities A68 Marketable U.S. Treasury bonds and notes—Foreign transactions SELECTED MEASURES A46 Nonfinancial business activity—Selected measures INTEREST AND EXCHANGE RATES A47 Labor force, employment, and unemployment A69 Discount rates of foreign central banks A48 Output, capacity, and capacity utilization A69 Foreign short-term interest rates A49 Industrial production—Indexes and gross value A70 Foreign exchange rates A51 Housing and construction A52 Consumer and producer prices A71 Guide to Tabular Presentation, A53 Gross national product and income Statistical Releases, and Special A54 Personal income and saving Tables 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 Annual rates of change, seasonally adjusted in percent1 1989 1990 1989 1990 MMoonneettaarryy aanndd ccrreeddiitt aaggggrreeggaatteess Q2' Q3r Q4' Qlr Dec/ Jan.r Feb/ Mar/ Apr. Reserves of depository institutions2 1 Total -8.5 .6 5.1 2.4 7.8 -2.7 6.4 1.6 -.4 2 Required -7.7 .5 5.0 2.5 8.4 -4.7 7.1 4.2 -1.2 3 Nonborrowed -10.0 8.6 7.2 -3.9 9.5 -6.2 -13.9 -12.1 9.8 4 Monetary base 1.8 3.2 4.0 8.5 7.3 10.8 9.2 8.7 7.1 Concepts of money, liquid assets, and debt4 5 Ml -4.4 1.8 5.1 4.8 8.2 .0 10.0 5.1 3.9 6 M2 1.6 6.9 7.0 6.0 7.6 3.1 8.6 5.1 2.3 7 M3 3.2 3.9 1.8 2.8 3.9 1.3 4.7 .7 1.5 8 L 5.0 4.2 2.8 2.7 5.4 .6 2.2 3.8 n.a. 9 Debt 7.7 7.2 7.9 6.5 4.8 5.6 7.6 7.5 n.a. Nontransaction components 10 In M2' 3.7 8.7 7.7 6.4 7.4 4.1 8.1 5.1 1.9 11 In M3 only6 9.1 -6.8 -17.1 -9.6 -10.7 -5.7 -11.0 -16.9 -1.7 Time and savings deposits Commercial banks 12 Savings - 11.6 .4 7.2 9.5 7.7 8.3 12.6 10.0 2.5 n MMDA -10.8 5.2 12.3 9.1 10.3 3.1 12.3 10.4 10.7 14 Small-denomination time 25.9 11.9 11.3 7.8 9.6 6.4 7.5 5.6 9.4 15 Large-denomination time8, 16.3 2.9 2.7 -1.7 .0 -.9 -5.7 -9.0 -4.8 Thrift institutions 16 Savings -14.8 -5.2 .2 1.3 .0 -.5 7.6 -3.2 4.3 17 MMDA -30.6 -6.2 4.7 5.7 -.9 2.7 8.2 21.6 7.1 18 Small-denomination time 10.7 8.7 -2.5 -4.3 -.8 -5.1 -9.0 .2 -7.7 19 Large-denomination time 7.5 -10.7 -28.6 -24.9 -20.3 -29.8 -22.0 -23.2 -34.2 Debt components4 20 Federal 6.9 4.7 9.5 7.8 3.7 5.3 10.5 14.8 n.a. 21 Nonfederal 7.9 7.9 7.4 6.1 5.2 5.7 6.8 5.2 n.a. 1. Unless otherwise noted, rates of change are calculated from average funds. Excludes individual retirement accounts (IRA) and Keogh balances at amounts outstanding in preceding month or quarter. depository institutions and money market funds. Also excludes all balances held 2. Figures incorporate adjustments for discontinuities associated with the by U.S. commercial banks, money market funds (general purpose and brokerimplementation of the Monetary Control Act and other regulatory changes to dealer), foreign governments and commercial banks, and the U.S. government. reserve requirements. To adjust for discontinuities due to changes in reserve M3: M2 plus large-denomination time deposits and term RP liabilities (in requirements on reservable nondeposit liabilities, the sum of such required amounts of $100,000 or more) issued by commercial banks and thrift institutions, reserves is subtracted from the actual series. Similarly, in adjusting for discon- term Eurodollars held by U.S. residents at foreign branches of U.S. banks tinuities in the monetary base, required clearing balances and adjustments to worldwide and at all banking offices in the United Kingdom and Canada, and compensate for float also are subtracted from the actual series. balances in both taxable and tax-exempt, institution-only money market mutual 3. The monetary base not adjusted for discontinuities consists of total funds. Excludes amounts held by depository institutions, the U.S. government, reserves plus required clearing balances and adjustments to compensate for float money market funds, and foreign banks and official institutions. Also subtracted at Federal Reserve Banks plus the currency component of the money stock less is the estimated amount of overnight RPs and Eurodollars held by institution-only the amount of vault cash holdings of thrift institutions that is included in the money market mutual funds. currency component of the money stock plus, for institutions not having required L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term reserve balances, the excess of current vault cash over the amount applied to Treasury securities, commercial paper and bankers acceptances, net of money satisfy current reserve requirements. After the introduction of contemporaneous market mutual fund holdings of these assets. reserve requirements (CRR), currency and vault cash figures are measured over Debt: Debt of domestic nonfinancial sectors consists of outstanding credit the weekly computation period ending Monday. market debt of the U.S. government, state and local governments, and private Before CRR, all components of the monetary base other than excess reserves nonfinancial sectors. Private debt consists of corporate bonds, mortgages, conare seasonally adjusted as a whole, rather than by component, and excess sumer credit (including bank loans), other bank loans, commercial paper, bankers reserves are added on a not seasonally adjusted basis. After CRR, the seasonally acceptances, and other debt instruments. The source of data on domestic adjusted series consists of seasonally adjusted total reserves, which include nonfinancial debt is the Federal Reserve Board's flow of funds accounts. Debt excess reserves on a not seasonally adjusted basis, plus the seasonally adjusted data are based on monthly averages. Growth rates for debt reflect adjustments for currency component of the money stock plus the remaining items seasonally discontinuities over time in the levels of debt presented in other tables. adjusted as a whole. 5. Sum of overnight RPs and Eurodollars, money market fund balances 4. Composition of the money stock measures and debt is as follows: (general purpose and broker-dealer), MMDAs, and savings and small time Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults deposits less the estimated amount of demand deposits and vault cash held by of depository institutions; (2) travelers checks of nonbank issuers; (3) demand thrift institutions to service their time and savings deposit liabilities. deposits at all commercial banks other than those due to depository institutions, 6. Sum of large time deposits, term RPs, and Eurodollars of U.S. residents, the U.S. government, and foreign banks and official institutions less cash items in money market fund balances (institution-only), less a consolidation adjustment the process of collection and Federal Reserve float; and (4) other checkable that represents the estimated amount of overnight RPs and Eurodollars held by deposits (OCD) consisting of negotiable order of withdrawal (NOW) and auto- institution-only money market mutual funds. matic transfer service (ATS) accounts at depository institutions, credit union 7. 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 depository institutions and overnight Eurodollars issued to U.S. 8. Large-denomination time deposits are those issued in amounts of $100,000 residents by foreign branches of U.S. banks worldwide, Money Market Deposit or more, excluding those booked at international banking facilities. Accounts (MMDAs), savings and small-denomination time deposits (time depos- 9. Large-denomination time deposits at commercial banks less those held by its—including retail RPs—in amounts of less than $100,000), and balances in both money market mutual funds, depository institutions, and foreign banks and taxable and tax-exempt general purpose and broker-dealer money market mutual official institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A4 Domestic Financial Statistics • July 1990 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 Factors 1990 1990 Feb/ Mar. Apr. Mar. 14 Mar. 21 Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit 263,995 268,483 272,853 268,385 268,634 268,005 269,422 272,978 275,557 272,437 U.S. government securities1, 2 2 Bought outright-system account 215,7% 219,148 223,445 219,198 218,977 218,070 219,527 224,003 223,679 224,307 3 Held under repurchase agreements 0 306 361 0 332 0 610 0 1,346 0 Federal agency obligations 4 Bought outright 6,525 6,524 6,504 6,524 6,524 6,524 6,524 6,524 6,524 6,492 5 Held under repurchase agreements 0 0 156 0 144 0 218 0 596 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions2 7 Adjustment credit 872 83 111 9 207 45 148 23 190 96 8 Seasonal credit 49 78 119 65 85 96 96 93 106 135 9 Extended credit 508 1,982 1,424 2,056 1,934 2,023 1,906 1,898 1,454 1,090 10 Float 1,059 431 659 717 539 144 523 603 1,579 94 11 Other Federal Reserve assets 39,188 39,852 40,073 39,815 39,892 41,104 39,869 39,833 40,083 40,224 12 Gold stock 11,059 11,059 11,060 11,060 11,059 11,059 11,060 11,060 11,060 11,060 13 Special drawing rights certificate account.. 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 14 Treasury currency outstanding 19,734 19,802 19,878 19,790 19,806 19,823 19,839 19,858 19,877 19,896 ABSORBING RESERVE FUNDS 15 Currency in circulation 254,662 256,791 260,024 256,944 257,133 257,026 258,098 259,944 260,952 260,313 16 Treasury cash holdings 494 524 549 519 525 532 540 542 543 557 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,867 5,349 4,351 4,928 5,001 5,506 4,455 4,745 4,981 4,022 18 Foreign 214 215 230 188 221 217 269 224 216 219 19 Service-related balances and adjustments 2,078 2,161 1,905 2,115 1,819 2,206 2,119 1,853 1,989 2,021 20 Other 325 339 316 266 392 389 295 253 258 326 21 Other Federal Reserve liabilities and capital 8,913 8,997 9,033 9,005 9,180 9,172 8,567 8,787 9,285 9,162 22 Reserve balances with Federal Reserve Banks 30,753 33,486 35,903 33,788 33,746 32,358 34,496 36,064 36,789 35,291 End-of-month figures Wednesday figures 1990 1990 Feb/ Mar. Apr. Mar. 14 Mar. 21 Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 SUPPLYING RESERVE FUNDS 23 Reserve Bank credit 265,427 268,705 273,008 267,957 272,413 269,356 269,286 272,256 279,425 271,245 U.S. government securities1, 2 24 Bought outright-system account 217,811 217,899 224,468 218,669 218,448 220,529 220,700 223,271 224,073 223,944 25 Held under repurchase agreements.... 0 1,423 0 0 2,324 0 0 0 4,957 0 Federal agency obligationsr 26 Bought outright 6,525 6,524 6,446 6,524 6,524 6,524 6,524 6,524 6,524 6,446 27 Held under repurchase agreements 0 510 0 0 1,009 0 0 0 2,191 0 28 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 2 3 9 0 S A e d a j s u o s n tm al e n cr t e c d r i e t dit 7 6 5 1 1 9 5 2 4 1 9 8 7 3 6 1 9 1 1,3 9 3 2 5 9 3 4 0 % 18 9 1 4 3 1,0 1 9 1 4 9 1 14 1 5 3 31 Extended credit 1,738 1,917 732 1,889 1,784 1,771 1,623 1,609 24 183 32 Float 885 262 277 898 717 -146 719 686 276 -24 33 Other Federal Reserve assets 38,333 39,925 40,805 39,897 40,180 40,554 39,607 40.059 40,167 40,437 34 Gold stock 11,059 11,060 11,060 11,060 11,059 11,059 11,060 11.060 11,060 11,060 35 Special drawing rights certificate account.. 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 36 Treasury currency outstanding 19,756 19,839 19,915 19,790 19,806 19,823 19,839 19,858 19,877 19,8% ABSORBING RESERVE FUNDS 37 Currency in circulation 254,999 257,675 259,890 257,298 257,129 257,372 258,994 260,689 260,892 259,961 38 Treasury cash holdings 498 540 561 524 531 540 541 552 557 561 Deposits, other than reserve balances, with Federal Reserve Banks 39 Treasury 6,133 4,832 5,205 4,747 5,816 6,218 4,138 4,310 5,208 4,125 40 Foreign 218 300 402 179 1% 285 210 249 171 266 41 Service-related balances and adjustments 1,918 2,119 2,344 2,115 1,819 2,206 2,119 1,853 1,989 2,021 42 Other 398 304 352 257 292 397 269 234 265 714 43 Other Federal Reserve liabilities and capital 8,973 8,455 9,866 8,673 8,987 8,979 8,409 8,912 9,141 8,948 44 Reserve balances with Federal Reserve Banks3 31,623 33,897 33,881 33,530 37,026 32,758 34,025 34,892 40,657 34,124 1. Includes securities loaned—fully guaranteed by U.S. government securities 3. Excludes required clearing balances and adjustments to compensate for pledged with Federal Reserve Banks—and ex eludes any securities sold and float. scheduled to be bought back under matched sale-purchase transactions. NOTE. For amounts of currency and coin held as reserves, see table 1.12. 2. Beginning with the May 1990 Bulletin, this table has been revised to Components may not add to totals because of rounding. correspond with the H.4.1 statistical release. 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 1987 1988 1989 1989 1990 Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar/ Apr. 1 Reserve balances with Reserve Banks2 37,691 37,837 35,436 33,123 33,941 35,436 34,090 30,929 33,407 35,416 2 Total vault cashJ 26,675 28,204 29,812 29,910 29,549 29,812 31,301 32,489 29,581 29,281 3 Vault4. 24,449 25,909 27,374 27,275 27,048 27,374 28,841 29,693 27,251 27,106 4 Surplus 2,226 2,295 2,439 2,636 2,502 2,439 2,461 2,795 2,330 2,175 5 Total reserves6 62,141 63,746 62,810 60,397 60,989 62,810 62,931 60,623 60,658 62,521 6 Required reserves i 61,094 62,699 61,888 59,378 60,044 61,888 61,914 59,634 59,797 61,618 7 Excess reserve balances at Reserve Banks' 1,046 1,047 922 1,020 945 922 1,016 989 861 903 8 Total borrowings at Reserve Banks 777 1,716 265 555 349 265 440 1,448 2,124 1,628 9 Seasonal borrowings at Reserve Banks 93 130 84 330 134 84 47 51 78 122 10 Extended credit at Reserve Banks8 483 1,244 20 21 21 20 26 535 1,950 1,403 Biweekly averages of daily figures for weeks ending 1989 1990 Dec. 27 Feb. 7 Feb. 21 Mar. 7 Mar. 21 Apr. 4r Apr. 18 May 2 11 Reserve balances with Reserve Banks2 35,130 36,627 34,423 29,799 30,597 32,724 33,730 33,433 36,421 34,903 12 Total vault cash1 30,445 30,725 30,277 34,175 32,780 30,220 29,259 29,585 28,931 29,588 13 Vault4.. 27,903 28,335 28,045 31,156 29,956 27,706 27,004 27,278 26,920 27,266 14 Surplus5.... 2,543 2,390 2,233 3,019 2,824 2,514 2,255 2,307 2,011 2,323 15 Total reserves6 63,033 64,961 62,468 60,955 60,553 60,430 60,734 60,711 63,341 62,169 16 Required reserves 62,015 63,844 61,627 59,735 59,585 59,633 59,997 59,633 62,675 61,047 17 Excess reserve balances at Reserve Banks 1,018 1,117 841 1,220 968 797 737 1,078 665 1,122 18 Total borrowings at Reserve Banks 351 339 300 865 1,480 1,967 2,179 2,157 1,882 1,155 19 Seasonal borrowings at Reserve Banks .. 89 58 41 44 50 60 75 96 100 158 20 Extended credit at Reserve Banks8 19 19 27 33 133 1,841 1,995 1,965 1,676 899 1. These data also appear in the Board's H.3 (502) release. For address, see in- with Federal Reserve Banks, which exclude required clearing balances and side front cover. adjustments to compensate for float, plus vault cash used to satisfy reserve 2. Excludes required clearing balances and adjustments to compensate for requirements. Such vault cash consists of all vault cash held during the lagged float. computation period by institutions having required reserve balances at Federal 3. Dates refer to the maintenance periods in which the vault cash can be used Reserve Banks plus the amount of vault cash equal to required reserves during the to satisfy reserve requirements. Under contemporaneous reserve requirements, maintenance period at institutions having no required reserve balances. maintenance periods end 30 days after the lagged computation periods in which 7. Reserve balances with Federal Reserve Banks plus vault cash used to satisfy the balances are held. reserve requirements less required reserves. 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. Data are prorated monthly averages of biweekly averages. 6. Total reserves not adjusted for discontinuities consist of reserve balances Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A6 Domestic Financial Statistics • July 1990 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Member Banks1 Averages of daily figures, in millions of dollars 1989 week ending Monday MMaattuurriittyy aanndd ssoouurrccee Feb. 27 Mar. 6 Mar. 13 Mar. 20 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 Federal funds purchased, repurchase agreements, and other selected borrowing in immediately available funds From commercial banks in the United States 1 For one day or under continuing contract 72,395 74,375 74,764 72,665 69,297 69,402 72,009 71,695 66,249 2 For all other maturities 11,378 11,061 11,208 11,240 12,075 10,248 1100,,000066 9,792 10,143 From other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies 3 For one day or under continuing contract 25,142 31,371 30,195 29,143 25,678 28,748 30,030 28,621 27,391 4 For all other maturities 7,403 7,190 8,378 7,648 8,758 7,805 8,706 8,359 8,013 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 15,031 16,834 15,413 15,916 14,954 15,764 13,578 12,348 11,338 6 For all other maturities 13,484 13,598 14,456 14,881 17,268 13,971 13,450 14,098 14,718 All other customers 7 For one day or under continuing contract 29,237 27,612 27,710 27,124 25,489 27,596 27,406 27,310 26,416 8 For all other maturities 9,978 10,104 10,085 10,591 13,275 10,482 10,128 10,376 9,819 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 37,275 43,328 40,929 41,534 40,157 39,236 37,805 37,107 38,258 10 To all other specified customers2 15,684 17,158 16,936 16,104 15,799 17,056 16,592 16,521 13,848 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 Extended credit2 AAddjjuussttmmeenntt ccrreeddiitt aanndd FFFeeedddeeerrraaalll RRReeessseeerrrvvveee SSeeaassoonnaall ccrreeddiitt11 First 30 days of borrowing After 30 days of borrowing3 BBBaaannnkkk 5/1 O 7 n / 90 Eff d e a c t t e i ve Pre ra v t i e o us 5/1 O 7 n /9 0 Eff d e a c t t e i ve Pre ra v t i e o us 5/1 O 7 n / 90 Ef d fe a c t t e i ve Pre ra v t i e o us Effective date Boston 7 2/24/89 6 Yi 7 2/24/89 6Y2 8.80 5/17/90 8.85 5/3/90 New York 2/24/89 2/24/89 5/17/90 5/3/90 Philadelphia 2/24/89 2/24/89 5/17/90 5/3/90 Cleveland 2/24/89 2/24/89 5/17/90 5/3/90 Richmond 2/24/89 2/24/89 5/17/90 5/3/90 Atlanta 2/24/89 2/24/89 5/17/90 5/3/90 Chicago 2/24/89 2/24/89 5/17/90 5/3/90 St. Louis 2/24/89 2/24/89 5/17/90 5/3/90 Minneapolis 2/24/89 2/24/89 5/17/90 5/3/90 Kansas City 2/24/89 2/24/89 5/17/90 5/3/90 Dallas 2/27/89 2/27/89 5/17/90 5/3/90 San Francisco ... 7 2/24/89 6Y1 7 2/24/89 6Y1 8.80 5/17/90 8.85 5/3/90 Range of rates for adjustment credit in recent years4 Range (or F.R. Range (or F.R. Range (or F.R. level)— Bank level)— Bank level)— Bank Effective date All F.R. of Effective date All F.R. of Effective date All F.R. of Banks N.Y. Banks N.Y. Banks N.Y. In effect Dec. 31, 1977. 6 6 1980—July 28 10-11 10 11998844——AApprr.. 9 8W-9 9 1978—Jan. 9 6-6'/! 6Y1 29 10 10 13 9 9 20 6Y2 6Yi Sept. 26 11 11 Nov. 21 8W-9 8 Yl May 11 bYl-1 7 Nov. 17 12 12 26 8W m 12 1 7 Dec. 5 12-13 13 Dec. 24 8 8 July 3 7-7!/4 71/4 10 m IV* 1981—May 5 13-14 14 11998855——MMaayy 20 7W-8 lYi Aug. 21 7V4 IV* 8 14 14 24 IVl 7W Sept. 22 8 8 Nov. 2 13-14 13 Oct. 16 8-8W SYi 6 13 13 1986—Mar. 7 i-m 1 20 m SYi Dec. 4 12 12 10 1 7 Nov. 1 m-9 vi 9 Yi Apr. 21 6W-7 6 Yl 3 9Yi 9 Yi 1982—July 20 11VS-12 1 1W July 11 6 6 23 11W 11 W ' AAuugg.. 21 5W-6 5W 1979—July 20 10 10 Aug. 2 11-1 \Yi 11 22 5 W 5 Yi Aug. 17 10-10W 10W 3 11 11 20 10 Yi low 16 low 10W 11998877——SSeepptt.. 4 5W-6 6 Sept. 19 10W-U 11 27 10-10W 10 11 6 6 21 11 11 30 10 10 Oct. 8 11-12 12 Oct. 12 9W-10 9Vl 11998888——AAuugg.. 9 6-6 Vi 10 12 12 13 9W 9 W 11 6 Yi 6 Yi Nov. 22 9-9W 9 1980—Feb. 15 12-13 13 26 9 9 1989—Feb. 24 (>Yi-l 1 19 13 13 Dec. 14 m-9 9 27 1 1 May 29 12-13 13 15 8W-9 8W 30 12 12 17 8 W 8 W In effect May 17, 1990 1 7 June 13 11-12 11 16 11 11 1. Adjustment credit is available on a short-term basis to help depository in no case will the rate charged be less than the basic discount rate plus 50 basis institutions meet temporary needs for funds that cannot be met through reason- points. The flexible rate is reestablished on the first business day of each able alternative sources. After May 19, 1986, the highest rate established for loans two-week reserve maintenance period. At the discretion of the Federal Reserve to depository institutions may be charged on adjustment credit loans of unusual Bank, the time period for which the basic discount rate is applied may be size that result from a major operating problem at the borrower's facility. shortened. Seasonal credit is available to help smaller depository institutions meet regular, 4. For earlier data, see the following publications of the Board of Governors: seasonal needs for funds that cannot be met through special industry lenders and Banking and Monetary Statistics, 1914-1941, and 1941-1970; Annual Statistical that arise from a combination of expected patterns of movement in their deposits Digest, 1970-1979. and loans. A temporary simplified seasonal program was established on Mar. 8, In 1980 and 1981, the Federal Reserve applied a surcharge to short-term 1985, and the interest rate was a fixed rate Yi percent above the rate on adjustment adjustment credit borrowings by institutions with deposits of $500 million or more credit. The program was reestablished for 1986 and 1987 but was not renewed for that had borrowed in successive weeks or in more than four weeks in a calendar 1988. quarter. A 3 percent surcharge was in effect from Mar. 17, 1980 through May 7, 2. Extended credit is available to depository institutions, when 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 3. For extended-credit loans outstanding more than 30 days, a flexible rate moving 13-week period. The surcharge was eliminated on Nov. 17, 1981. somewhat above rates on market sources of funds ordinarily will be charged, but Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • July 1990 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS1 Percent of deposits Depository institution requirements after implementation of the Monetary Control Act Type of deposit, ai deposit interval Effective date Net transaction accounts3,4 $0 million-$40.4 million.... 12/19/89 More than $40.4 million ... 12/19/89 Nonpersonal time deposits5 By original maturity Less than 1 Vi years 10/6/83 1V5 years or more 10/6/83 Eurocurrency liabilities All types 11/13/80 1. Reserve requirements in effect on Dec. 31, 1989. 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. ber institutions may maintain reserve balances with a Federal Reserve Bank 3. Transaction accounts include all deposits on which the account holder is indirectly on a pass-through basis with certain approved institutions. For previous permitted to make withdrawals by negotiable or transferable instruments, payreserve requirements, see earlier editions of the Annual Report or 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, 4. The Monetary Control Act of 1980 requires that the amount of transaction nonpersonal time deposits, and Eurocurrency liabilities) of each depository accounts against which the 3 percent reserve requirement applies be modified institution be subject to a zero percent reserve requirement. The Board is to adjust annually by 80 percent of the percentage change in transaction accounts held by the amount of reservable liabilities subject to this zero percent reserve require- all depository institutions, determined as of June 30 each year. Effective Dec. 19, ment each year for the succeeding calendar year by 80 percent of the percentage 1989 for institutions reporting quarterly and Dec. 26, 1989 for institutions increase in the total reservable liabilities of all depository institutions, measured reporting weekly, the amount was decreased from $41.5 million to $40.4 million. on an annual basis as of June 30. No corresponding adjustment is to be made in 5. In general, nonpersonal time deposits are time deposits, including savings the event of a decrease. On Dec. 20, 1988, the exemption was raised from $3.2 deposits, that are not transaction accounts and in which a beneficial interest is million to $3.4 million. In determining the reserve requirements of depository held by a depositor that is not a natural person. Also included are certain institutions, the exemption shall apply in the following order: (1) net NOW transferable time deposits held by natural persons and certain obligations issued accounts (NOW accounts less allowable deductions); (2) net other transaction to depository institution offices located outside the United States. For details, see accounts; and (3) nonpersonal time deposits or Eurocurrency liabilities starting section 204.2 of Regulation D. with those with the highest reserve ratio. With respect to NOW accounts and 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 1989 1990 TTyyppee ooff ttrraannssaaccttiioonn 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb. Mar. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 18,983 8,223 14.284 0 219 88,,779944 1,883 442233 110088 554433 ? Gross sales 6,051 587 12,818 0 1,633 0 0 1,489 33,,338844 0 Exchange 239,740 241,876 228.710 18,442 15,025 18,554 18,054 15,960 18,113 19,051 4 Redemptions 9,029 2,200 12,730 0 1,400 3,530 0 1,000 400 0 Others within 1 year 5 Gross purchases 3,659 2,176 327 0 0 155 0 00 00 110000 6 Gross sales 300 0 0 0 0 0 0 0 0 0 7 Maturity shift 21,504 23,854 28,848 1,832 852 3,915 1,268 1,201 2,845 1,876 8 Exchange -20,388 -24,588 -25,783 0 -2,678 -5,502 0 -2,489 -5,418 0 9 Redemptions 70 0 500 0 500 0 0 0 0 0 1 to 5 years 10 Gross purchases 10,231 5,485 1,436 0 0 0 0 00 00 110000 11 Gross sales 452 800 490 0 24 0 0 0 0 0 1? Maturity shift -17,975 -17,720 -25,534 -1,832 -758 -2,869 -1,268 -1,163 -1,713 -1,876 13 Exchange 18,938 22,515 23,250 0 2,552 4,902 0 2,373 4,743 0 5 to 10 years 14 Gross purchases 2,441 1,579 287 0 00 00 00 00 00 00 15 Gross sales 0 175 29 0 0 0 0 0 0 0 16 Maturity shift -3,529 -5,946 -2,231 0 -95 -1,046 0 -38 -451 0 17 Exchange 950 1,797 1,934 0 126 400 0 116 450 0 Over 10 years 18 Gross purchases 1,858 1,398 284 0 0 00 0 00 00 00 19 Gross sales 0 0 0 0 0 0 0 0 0 0 70 Maturity shift 0 -188 -1,086 0 0 0 0 0 -681 0 21 Exchange 500 275 600 0 0 200 0 0 226 0 All maturities 77 Gross purchases 37,170 18,863 16,617 0 219 8,949 1,883 442233 110088 774433 73 6,803 1,562 13,337 0 1,657 0 0 1,489 3,384 0 24 Redemptions 9,099 2,200 13,230 0 1,900 3,530 0 1,000 400 0 Matched transactions 950,923 1,168,484 1,323,480 116,502 111,430 105,696 103,077 127,729 116,220 9999,,110044 26 Gross purchases 950,935 1,168,142 1,326,542 120,144 111,893 105,243 104,827 121,411 120,637 97,128 Repurchase agreements2 71 314,621 152,613 129,518 9,396 0 1155,,335500 2222,,773377 1166,,118855 00 88,,005500 28 Gross sales 324,666 151,497 132,688 9,396 0 15,350 21,145 17,777 0 6,627 29 Net change in U.S. government securities 11,234 15,872 -10,055 3,642 -2,875 4,966 5,225 -9,976 741 190 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 00 00 00 00 00 00 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 276 587 442 54 30 0 0 0 0 0 Repurchase agreements2 Gross purchases 80,353 57,259 38,835 2,874 0 11..224477 22,,999922 11,,774411 00 11,,996666 34 Gross sales 81,350 56,471 40,411 2,874 0 1,247 2,467 2,266 0 1,457 35 Net change in federal agency obligations -1,274 198 -2,018 -54 -30 0 525 -525 0 509 16 Total net change in System Open Market Account 9,961 16,070 -12,073 3,588 -2,905 44,,996666 5,750 --1100,,550011 774411 669999 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 1990 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1990 1990 Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 Feb. Mar. Apr. Consolidated condition statement ASSETS 1 Gold certificate account 11,059 11,060 11,060 11,060 11,060 11,059 11,060 11,060 2 Special drawing rights certificate account 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 3 572 561 557 540 533 568 568 532 Loans 4 To depository institutions 1,895 1,737 1,716 1,237 441 1,779 2,163 1,012 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 6,524 6,524 6,524 6,524 6,446 6,525 6,524 6,446 8 Held under repurchase agreements 0 0 0 2,191 0 0 510 0 U.S. Treasury securities Bought outright 9 Bills 98,134 98,305 100,776 101,578 101,450 96,937 95,504 101,973 10 Notes 91,439 91,439 91,539 91,539 91,539 91,239 91,440 91,540 11 Bonds 30,955 30,955 30,955 30,955 30,955 30,955 30,955 30,955 12 Total bought outright2 220,529 220,700 223,271 224,073 223,944 219,132 217,899 224,468 13 Held under repurchase agreements 0 0 0 4,957 0 0 1,423 0 14 Total U.S. Treasury securities 220,529 220,700 223,271 229,030 223,944 219,132 219,322 224,468 15 Total loans and securities 228,948 228,961 231,511 238,982 230,832 227,435 228,518 231,926 16 Items in process of collection 5,348 7,140 6,636 7,179 6,328 5,936 6,549 4,499 17 Bank premises 793 794 795 796 796 791 793 795 Other assets 18 Denominated in foreign currencies 34,186 33,456 33,508 33,536 33,556 31,041 33,452 33,982 19 All other4 5,538 5,373 5,606 5,840 5,826 6,320 5,679 5,958 20 Total assets 294,962 295,862 298,191 306,452 297,448 291,669 295,137 297,270 LIABILITIES 21 Federal Reserve notes 238,662 240,256 241,940 242,112 241,159 236,534 238,944 241,068 Deposits 22 To depository institutions 35,536 36,527 36,918 42,777 36,283 33,811 36,129 36,076 23 U.S. Treasury—General account 6,218 4,138 4,310 5,208 4,125 6,613 4,832 5,205 24 Foreign—Official accounts 285 210 249 171 266 309 300 402 25 Other 397 269 234 265 714 409 304 352 26 Total deposits 42,436 41,144 41,711 49,645 41,388 41,142 41,565 42,036 27 Deferred credit items 4,886 6,054 5,628 6,778 5,954 5,543 6,173 4,301 28 Other liabilities and accrued dividends' 3,981 3,835 3,930 4,081 3,892 3,853 3,969 4,199 29 Total liabilities 289,964 291,289 293,208 301,392 292,392 287,073 290,651 291,603 CAPITAL ACCOUNTS 30 Capital paid in 2,295 2,311 2,314 2,315 2,320 2,275 2,313 2,327 31 Surplus 2,243 2,189 2,232 2,243 2,243 2,219 2,139 2,243 32 Other capital accounts 461 73 437 502 493 103 34 1,098 33 Total liabilities and capital accounts 294,962 228,961 298,191 306,452 297,448 291,669 295,137 297,270 34 MEMO: Marketable U.S. Treasury securities held in custody for foreign and international accounts 223,490 224,500 222,067 223,465 222,991 224,626 254,767 224,256 Federal Reserve note statement 35 Federal Reserve notes outstanding issued to bank 278,938 278,782 280,467 282,095 283,053 280,388 278,709 283,191 36 LESS: Held by bank 40,276 38,526 38,527 39,983 41,894 43,854 39,765 42,123 37 Federal Reserve notes, net 238,662 240,256 241,940 242,112 241,159 236,534 238,944 241,068 Collateral held against notes net: 38 Gold certificate account 11,059 11,060 11,060 11,060 11,060 11,059 11,060 11,060 39 Special drawing rights certificate account 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 219,084 220,678 222,362 222,534 221,581 216,957 219,366 221,490 42 Total collateral 238,662 240,256 241,940 242,112 241,159 236,534 238,944 241,068 1. Some of these data also appear in the Board's H.4.1 (503) release. For 3. Valued monthly at market exchange rates. address, see inside front cover. Components may not add to totals because of 4. Includes special investment account at the Federal Reserve Bank of Chicago rounding. 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. 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 Holding Millions of dollars Wednesday End of month Type and maturity groupings 1990 1990 Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 Feb. 28 Mar. 30 1 Loans—Total 1,895 1,737 1,716 1,237 441 1,874 2,039 2 Within 15 days 1,891 1,671 1,654 1,227 428 1,867 2,024 3 16 days to 90 days 0 4 6 0 6 6 0 2 1 0 0 1 0 3 0 7 1 0 5 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 .. 220,529 220,700 223,271 229,030 223,944 219,132 217,899 10 Within 15 days1 12,095 9,591 7,822 11,613 8,780 10.656 6,281 11 16 days to 90 days 46,985 48,822 53,497 53,206 50,596 46,479 50,149 12 91 days to 1 year 66,010 66,078 65,641 67,894 68.251 66.657 66,030 13 Over 1 year to 5 years 56,581 57,351 57,451 57,489 57,489 56,481 56,581 14 Over 5 years to 10 years 12,607 12,607 12,607 12,576 12,576 12,607 12,607 15 Over 10 years 26,252 26,252 26,252 26,252 26.252 26,252 26,252 16 Federal agency obligations—Total 6,524 6,524 6,524 8,715 6,446 6,525 6,524 17 Within 15 days' 175 25 78 2,374 160 255 175 18 16 days to 90 days 574 759 721 616 639 558 574 19 91 days to 1 year 1,426 1,391 1,432 1,432 1,480 1,342 1,426 20 Over 1 year to 5 years 3,098 3,098 3,018 3,018 2,892 3,123 3,098 21 Over 5 years to 10 years 1,062 1,062 1,087 1,087 1,087 1,057 1,062 22 Over 10 years 188 188 188 188 188 188 188 1. Holdings under repurchase agreements are classified as maturing within 15 NOTE: Components may not add to totals because of rounding, days in accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 DomesticN onfinancial Statistics • July 1990 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1989 1990 IItteemm 1986 1987 1988 1989 Dec. Dec. Dec. Dec. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 58.02 58.59 60.59 60.03 59.29 59.64 59.65 60.03 59.90 60.22 60.30 60.28 2 Nonborrowed reserves 57.20 57.82 58.88 59.77 58.60 59.08 59.30 59.77 59.46 58.77 58.17 58.66 3 Nonborrowed reserves plus extended credit4 57.50 58.30 60.12 59.79 58.62 59.11 59.32 59.79 59.48 59.30 60.12 60.06 4 Required reserves 56.65 57.55 59.55 59.11 58.35 58.62 58.70 59.11 58.88 59.23 59.44 59.38 5 Monetary base 241.43 258.06 275.24 284.95 281.81 282.79 283.22 284.95 287.51 289.71 291.82 293.55 Not seasonally adjusted 6 Total reserves3 59.46 60.07 62.22 61.67 59.02 59.27 59.87 61.67 61.58 59.20 59.23 61.06 7 Nonborrowed reserves 58.64 59.30 60.50 61.40 58.33 58.72 59.52 61.40 61.14 57.75 57.11 59.43 8 Nonborrowed reserves plus extended credit4 58.94 59.78 61.75 61.42 58.35 58.74 59.54 61.42 61.17 58.29 59.06 60.83 9 Required reserves 58.09 59.03 61.17 60.75 58.09 58.25 58.92 60.75 60.56 58.21 58.37r 60.15 10 Monetary base5 245.17 262.00 279.54 289.45 280.65 281.34 284.11 289.45 288.67 286.50 288.86 293.36 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS6 11 Total reserves3 59.56 62.14 63.75 62.81 60.13 60.40 60.99 62.81 62.93 60.62 60.66 62.52 12 Nonborrowed reserves 58.73 61.36 62.03 62.54 59.43 59.84 60.64 62.54 62.49 59.17 58.53 60.89 13 Nonborrowed reserves plus extended credit4 59.04 61.85 63.27 62.56 59.46 59.86 60.66 62.56 62.52 59.71 60.49r 62.30 14 Required reserves 58.19 61.09 62.70 61.89 59.19 59.38 60.04 61.89 61.91 59.63 59.80 61.62 15 Monetary base5 247.62 266.06 283.00 292.55 283.61 284.33 287.19 292.55 292.13 290.02 292.38r 296.88 1. Latest monthly and biweekly figures are available from the Board's H.3(502) the terms and conditions established for the extended credit program to helpdestatistical release. Historical data and estimates of the impact on required reserves pository institutions deal with sustained liquidity pressures. Because there isnot of changes in reserve requirements are available from the Monetary and Reserves 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 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 1990 IItteemm22 D 19 e 8 c 6 . D 19 e 8 c 7 . D 19 e 8 c 8 . D 19 e 8 c 9 . Jan.' Feb.' Mar.' Apr. Seasonally adjusted 1 Ml 724.7 750.4 787.5 794.8 794.8 801.4 804.8 807.4 2 M2 2,814.2 2,913.2 3,072.4 3,221.0' 3,229.3 3,252.4 3,266.2 3,272.5 3 M3 3,494.5 3,678.7 3,918.4 4,041.7' 4,046.1 4,061.8 4,064.2 4,069.4 4 L 4,135.5 4,338.9 4,676.0 4,868.4' 4,870.7 4,879.5 4,895.0 n.a. 5 Debt 7,588.3' 8,307.5' 9,062.0' 9,762.9' 9,808.5 9,871.0 9,932.5 n.a. Ml components 6 Currency3 180.6 196.7 211.8 221.9 224.6 226.6 228.4 230.1 7 Travelers checks 6.5 7.0 7.5 7.4 7.5 7.6 7.6 7.6 8 Demand deposits 302.1 287.0 287.0 279.7 277.3 280.2 279.3 277.8 9 Other checkable deposits6 235.5 259.7 281.3 285.7 285.4 287.0 289.5 291.8 Nontransactions components 10 In M2 2,089.6 2,162.8 2,284.9 2,426.2' 2,434.5 2,451.0 2,461.4 2,465.2 11 In M3 only8 680.3 765.5 845.9 820.7' 816.8 809.3 797.9 796.8 Money market deposit accounts 12 Commercial banks 377.7 356.4 350.2 351.5 352.4 356.0 359.1 362.3 13 Thrift institutions 193.3 167.4 150.1 132.2 132.5 133.4 135.8 136.6 Savings deposits 14 Commercial Banks 155.8 178.3 192.0 188.5 189.8 191.8 193.4 193.8 15 Thrift institutions 214.3 236.6 235.9 220.5 220.4 221.8 221.2 222.0 Small-denomination time deposits9 16 Commercial Banks 366.3 388.1 447.5 528.6 531.4 534.7 537.2 541.4 17 Thrift institutions 489.9 529.7 583.5 613.7 611.1 606.5 606.6 602.6 Money market mutual funds 18 General purpose and broker-dealer 208.7 222.0 240.9 312.4' 318.1 324.5 325.0 324.8 19 Institution-only 83.8 89.0 87.1 102.3 103.2 103.7 105.4 106.8 Large-denomination time deposits10 20 Commercial Banks" 289.8 326.9 368.2 401.5 401.2 399.3 396.3 394.7 21 Thrift institutions 150.0 161.9 172.9 156.8 152.9 150.1 147.2 143.0 Debt components 22 Federal debt 1,805.8 1,957.4 2,113.5 2,265.4 2,275.4 2,295.4 2,323.8 n.a. 23 Nonfederal debt 5,782.5' 6,350.1' 6,948.5' 7,497.5' 7,533.0 7,575.5 7,608.6 n.a. Not seasonally adjusted 74 Ml 740.5 766.4 804.5 812.1 802.3 788.0 795.7 817.3 75 M2 2,826.5 2,925.6 3,085.2 3,233.9' 3,241.0 3,240.4 3,261.0 3,283.7 76 M3 3,508.8 3,692.7 3,932.5 4,055.8' 4,055.2 4,050.4 4,062.8 4,076.0 77 L 4,151.5 4,355.2 4,692.7 4,885.9' 4,889.4 4,874.6 4,892.9 n.a. 28 Debt 7,572.0' 8,289.0' 9,047.3' 9,748.3' 9,799.0 9,845.8 9,900.8 n.a. Ml components 7.9 Currency3 183.0 199.3 214.8 225.3 222.9 224.2 227.0 229.5 30 Travelers checks 6.0 6.5 6.9 6.9 7.0 7.2 7.3 7.3 31 Demand deposits3 314.0 298.6 298.9 291.6 283.0 271.4 271.6 279.8 32 Other checkable deposits6 237.5 262.0 283.8 288.4 289.4 285.2 289.7 300.7 Nontransactions components 33 M2 2,086.0 2,159.2 2,280.8 2,421.8' 2,438.8 2,452.4 2,465.3 2,466.4 34 M3 only8 682.3 767.0 847.3 821.9' 814.2 810.0 801.8 792.3 Money market deposit accounts 35 Commercial Banks 379.8 359.0 353.2 355.0 356.3 357.7 360.8 362.5 36 Thrift institutions 192.9 167.5 150.6 132.8 132.9 133.3 136.1 135.9 Savings deposits 37 Commercial Banks 115544..44 117766..99 190.6 187.2 189.0 190.5 193.2 194.3 38 Thrift institutions 212.7 234.9 234.2 219.0 218.8 219.5 220.9 222.4 Small-denomination time deposits9 39 Commercial Banks 366.1 387.3 446.0 526.4 530.8 535.2 538.3 541.7 40 Thrift institutions 489.8 529.1 582.4 612.3 613.2 608.7 605.9 602.3 Money market mutual funds 41 General purpose and broker-dealer 208.0 221.5 240.5 312.2' 317.0 326.1 329.5 328.4 42 Institution-only 84.4 89.6 87.6 102.9 106.0 107.0 106.8 105.8 Large-denomination time deposits10 43 Commercial Banks 289.2 325.8 366.9 399.8 398.9 399.1 399.1 394.7 44 Thrift institutions 150.7 162.9 174.2 158.3 154.1 150.5 146.3 141.5 Debt components 45 Federal debt 11,,880033..99 11,,995555..66 2,111.8 2,264.2 2,275.5 2,292.5 2,316.1 n.a. 46 Nonfederal debt 5,768.1' 6,333.4' 6,935.5' 7,484.1' 7,523.5 7,553.3 7,584.7 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 1990 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 Monetary and Reserves Projection market debt of the U.S. government, state and local governments, and private section, Division of Monetary Affairs, Board of Governors of the Federal Reserve nonfinancial sectors. Private debt consists of corporate bonds, mortgages, con- System, 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 depository institutions and overnight Eurodollars issued to U.S. and official institutions less cash items in the process of collection and Federal residents by foreign branches of U.S. banks worldwide, MMDAs, savings and Reserve float. small-denomination time deposits (time deposits—including retail RPs—in 6. Consists of NOW and ATS balances at all depository institutions, credit amounts of less than $100,000), and balances in both taxable and tax-exempt union share draft balances, and demand deposits at thrift institutions. general purpose and broker-dealer money market mutual funds. Excludes indi- 7. Sum of overnight RPs and overnight Eurodollars, money market fund vidual retirement accounts (IRA) and Keogh balances at depository institutions balances (general purpose and broker-dealer), MMDAs, and savings and small and money market funds. Also excludes all balances held by U.S. commercial time deposits. banks, money market funds (general purpose and broker-dealer), foreign govern- 8. Sum of large time deposits, term RPs, and term Eurodollars of U.S. ments and commercial 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. Small-denomination time deposits—including retail RPs—are those issued worldwide and at all banking offices in the United Kingdom and Canada, and in amounts of less than $100,000. All individual retirement accounts (IRA) and balances in both taxable and tax-exempt, institution-only money market mutual Keogh accounts at commercial banks and thrifts are subtracted from small time funds. Excludes amounts held by depository institutions, the U.S. government, deposits. money market funds, and foreign banks and official institutions. Also subtracted 10. Large-denomination time deposits are those issued in amounts of $100,000 is the estimated amount of overnight RPs and Eurodollars held by institution-only or more, excluding those booked at international banking facilities. money market mutual funds. 11. Large-denomination time deposits at commercial banks less those held by L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term money market mutual funds, depository institutions, and foreign banks and Treasury securities, commercial paper and bankers acceptances, net of money official institutions. market mutual fund holdings of these assets. 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. 1989 1990 BBaannkk ggrroouupp,, oorr ttyyppee ooff ccuussttoommeerr 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb. DEBITS TO Seasonally adjusted Demand deposits3 1 All insured banks 217,116.2 226,888.4 272,793.1 281,432.2 293,424.9 296,768.7 280,074.4 286,425.2 299,450.2 2 Major New York City banks 104,496.3 107,547.3 121,727.5 125,206.9 136,039.0 130,440.2 131,681.3 123,744.6 132,031.4 3 Other banks 112,619.8 119,341.2 150,898.9 156,225.3 155,385.9 166,328.5 148,393.1 162,680.5 167,418.8 4 ATS-NOW accounts4 2,402.7 2,757.7 3,501.8 3,601.9 3,911.9 3,855.2 3,727.5 3,910.4 4,115.7 5 Savings deposits 526.5 583.0 636.6 672.3 665.4 610.3 615.8 609.2 587.3 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 612.1 641.2 781.0 802.2 826.4 855.7 797.7 820.0 851.4 7 Major New York City banks 2,670.6 2,903.5 3,401.6 3,482.2 3,486.5 3,499.8 3,578.1 3,422.4 3,677.3 8 Other banks 357.0 376.8 481.5 496.2 492.5 537.3 472.1 519.5 530.1 9 ATS-NOW accounts4 13.8 14.7 18.3 18.8 20.1 19.7 18.9 19.8 20.6 10 Savings deposits 3.1 3.1 3.5 3.7 3.6 3.3 3.3 3.3 3.1 DEBITS TO Not seasonally adjusted Demand deposits3 11 All insured banks 217,125.1 227,010.7 271,957.3 266,882.2 292,750.0 285,372.8 283,603.3 303,668.0 270,852.7 12 Major New York City banks 104,518.8 107,565.0 122,241.8 115,187.4 138,964.6 129,905.5 129,690.0 131,796.0 119,305.2 13 Other banks 112,606.2 119,445.7 149,715.5 151,694.7 153,785.5 155,467.3 153,913.3 171,872.0 151,547.5 14 ATS-NOW accounts4 2,404.8 2,754.7 3,496.5 3,702.7 3,891.4 3,611.5 3,904.0 4,263.7 3,721.3 15 MMDA 1,954.2 2,430.1 2,790.8 2,554.3 2,651.5 2,569.1 2,880.5 3,075.9 2,551.2 16 Savings deposits 526.8 578.0 635.8 665.2 690.4 555.9 630.1 629.3 518.7 DEPOSIT TURNOVER Demand deposits3 17 All insured banks 612.3 641.7 779.0 763.1 829.6 815.6 769.3 847.9 791.8 18 Major New York City banks 2,674.9 2,901.4 3,415.4 3,279.7 3,594.8 3,548.5 3,250.4 3,433.3 3,314.9 19 Other banks 356.9 377.1 477.8 482.2 489.4 496.3 468.1 537.5 495.2 20 ATS-NOW accounts4 13.8 14.7 18.3 19.5 20.3 18.5 19.5 21.1 18.7 21 MMDA 5.3 6.9 8.3 7.6 7.8 7.4 8.2 8.7 7.2 22 Savings deposits 3.1 3.1 3.5 3.7 3.8 3.0 3.4 3.4 2.8 1. Historical tables containing revised data for earlier periods may be obtained of states and political subdivisions. from the Monetary and Reserves Projections Section, Division of Monetary 4. Accounts authorized for negotiable orders of withdrawal (NOW) and ac- Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. counts authorized for automatic transfer to demand deposits (ATS). ATS data are 20551. available beginning December 1978. These data also appear on the Board's G.6 (406) release. For address, see inside 5. Excludes ATS and NOW accounts, MMDA and special club accounts, such front cover. as Christmas and vacation clubs. 2. Annual averages of monthly figures. 6. Money market deposit accounts. 3. Represents accounts of individuals, partnerships, and corporations and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Financial Statistics • July 1990 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1989 1990 May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Seasonally adjusted 1 Total loans and securities2 2,482.9 2,496.0 2,512.4 2,527.4 2,538.9 2,563.3 2,579.0 2,582.6 2,585.8 2,603.8 2,623.8 2,634.3 2 U.S. government securities 372.5 373.7 374.0 375.5 378.1 389.9 394.8 394.4 402.4 412.2 418.9 422.7 3 Other securities 187.8 187.3 186.3 183.8 183.1 180.9 179.3 180.3 180.2 180.1 180.2 180.9 4 Total loans and leases2 1,922.6 1,935.0 1,952.1 1,968.2 1,977.7 1,992.5 2,004.9 2,007.9 2,003.2 2,011.6 2,024.7 2,030.8 5 Commercial and industrial 626.6 627.1 631.8 636.1 637.7 641.9 645.9 642.9 639.0 637.9 642.8 647.6 6 Bankers acceptances held3... 8.3 8.2 7.9 8.1 8.4 8.8 8.1 7.6 7.4 88..00 88..33rr 88..44 7 Other commercial and 8 U. in S d . u a s d tr d i r a e l ssees4 6 6 1 1 2 8 . . 8 4 6 61 1 3 8 . . 2 9 6 6 1 2 9 3 . . 8 9 6 62 2 4 8 . . 3 0 6 6 2 2 5 9 . . 4 3 6 6 2 3 8 3 . . 9 2 6 6 3 3 2 7 . . 7 8 6 6 2 3 9 5 . . 8 3 6 6 2 3 3 1 . . 9 6 6 6 2 2 4 9 . . 0 8 6 6 2 3 8 4 . . 3 4 6 6 3 3 3 9 . . 3 3 9 Non-U.S. addressees4 5.6 5.8 4.0 3.7 3.9 4.2 5.1 5.5 7.7 5.8 6.1 6.0 10 Real estate 705.6 713.0 720.1 727.7 735.8 742.6 749.2 756.4 759.6 768.1 774.4 779.3 11 Individual 363.5 363.8 365.8 367.5 370.3 372.6 374.6 375.9 377.9 378.9 379.2 377.8 12 Security 38.4 40.6 40.1 39.0 39.7 41.2 41.5 39.6 39.2 3399..77 3377..77 3366..99 13 Nonbank financial institutions 29.3 30.5 31.3 31.5 31.8 32.7 33.3 32.7 32.3 33.0 34.1 34.2 14 Agricultural 29.9 30.0 30.0 29.9 29.6 29.6 29.9 30.3 3300..99 3311..00 3311..22 3311..33 15 State and political subdivisions 43.1 42.8 42.5 42.2 41.7 41.3 40.8 40.1 38.6 38.9 38.4 38.2 16 Foreign banks 8.0 7.9 7.9 8.1 7.5 8.5 8.0 8.6 7.9 7.8 8.4 9.0 17 Foreign official institutions 4.7 4.4 4.4 4.1 4.2 3.9 3.6 3.7 3.3 3.1 3.0 3.2 18 Lease financing receivables 30.2 30.2 30.7 31.0 31.3 31.7 31.6 31.4 31.6 31.6 31.8 31.6 19 All other loans 43.2 44.8 47.6 51.0 48.0 46.4 46.4 46.5 42.9 41.5 43.5r 41.7 Not seasonally adjusted 20 Total loans and securities2 2,482.2 2,496.3 2,507.0 2,521.1 2,537.5 2,563.6 2,581.0 2,590.6 2,591.5 2,606.2 2,618.1 2,634.6 21 U.S. government securities 371.6 371.3 372.1 376.1 377.2 387.3 394.9 395.6 404.1 416.7 420.4 422.5 2 2 2 3 T O o t t h e e d r l s o e a c n u s r i a t n ie d s leases2 1,9 1 2 8 3 7 . . 5 1 1,9 1 3 8 8 6 . . 5 5 1,9 1 5 8 0 4 . . 2 7 1,9 1 6 8 1 3 . . 2 8 1,9 1 7 8 7 3 . . 0 3 1,9 1 9 8 4 1 . . 5 8 2,0 1 0 8 5 0 . . 6 5 2,0 1 1 8 3 1 . . 8 2 2,0 1 0 8 6 0 . . 7 7 2,0 1 0 7 9 9 . . 5 9 2,0 1 1 7 7 9 . . 9 8 ' 2,0 1 3 8 1 0 . . 8 2 24 Commercial and industrial 630.6 629.6 631.9 633.4 633.7 639.3 643.1 642.8 637.5 663388..55 644.4 651.9 25 Bankers acceptances held3... 8.1 8.0 7.6 8.1 8.4 8.9 8.2 7.7 7.5 88..11 88..22 88..22 26 Other commercial and industrial 622.5 621.6 624.3 625.3 625.3 630.4 634.9 635.1 630.0 630.4 636.2 643.7 27 U.S. addressees4. 616.9 616.0 618.6 619.8 619.8 624.7 629.4 629.8 625.0 625.7 631.6 639.1 28 Non-U.S. addressees 5.6 5.6 5.7 5.5 5.5 5.6 5.5 5.3 5.0 4.8 4.6 4.7 29 Real estate 704.6 712.9 720.7 729.2 737.8 743.9 750.9 757.1 759.7 765.5 771.7 777.4 30 Individual 361.2 362.1 364.3 367.7 372.1 373.7 376.0 380.3 381.5 378.1 376.0 375.0 31 Security 39.0 42.9 40.2 38.4 38.8 40.1 40.3 38.6 37.5 3399..22 3388..66 3399..44 32 Nonbank financial institutions 29.2 30.8 31.4 31.3 31.4 32.4 33.6 33.8 33.0 32.6 33.3 34.0 33 Agricultural 29.5 30.3 30.7 30.7 30.5 30.4 30.2 30.2 3300..33 3300..11 3300..11 3300..44 34 State and political subdivisions 43.0 42.6 42.1 41.9 41.6 41.2 40.6 39.7 39.5 39.3 38.6 38.2 35 Foreign banks 7.9 8.1 8.0 8.1 7.8 8.8 8.1 8.4 8.0 7.7 7.9 8.5 36 Foreign official institutions 4.7 4.4 4.4 4.1 4.2 3.9 3.6 3.7 3.3 3.1 3.0 3 2 37 Lease financing receivables .... 30.2 30.2 30.4 30.9 31.2 31.6 31.6 31.5 32.0 31.8 31.7 31.7 38 All other loans 43.6 44.7 46.1 45.6 47.8 49.2 47.5 47.7 44.4 43.6 42.5 42.2 1. Data have been revised because of benchmarking and seasonal adjustment 2. Excludes loans to commercial banks in the United States, revisions beginning January 1973. These data also appear in the Board's G.7 (407) 3. Includes nonfinancial commercial paper held, release. For address, see inside front cover. 4. United States includes the 50 states and the District of Columbia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A17 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS1 Monthly averages, billions of dollars May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Seasonally adjusted 1 Total nondeposit funds2 217.0 235.8 238.8 238.6 246.2 253.5 255.0 255.4 256.0 265.0 268.1 265.2 2 Net balances due to related foreign offices3... 1.3 8.2 11.4 9.7 11.1 10.2 8.6 7.4 10.9 14.6 17.2 16.8 3 Borrowings from other than commercial banks in United States 215.7 227.5 227.4 228.9 235.0 243.3 246.4 248.0 245.1 250.4 250.9 248.4 4 Domestically chartered banks 173.8 185.4 182.8 183.9 189.1 195.3 196.8 198.5 194.4 198.4 195.0 189.8 5 Foreign-related banks 41.9 42.2 44.6 44.9 46.0 48.0 49.6 49.5 50.7 51.9 56.0 58.6 Not seasonally adjusted 6 Total nondeposit funds 224.8 239.8 234.4 238.1 242.8 248.8 253.9 248.9 252.6' 268.1 273.9 268.0 7 Net balances due to related foreign offices3 ... 3.3 8.9 9.2 10.1 11.7 9.6 9.7 9.7r 10.5 14.2 16.0 14.5 8 Domestically chartered banks -21.9 -18.3 -16.4 -15.5 -14.3 -15.0 -15.5 -19.2' -14.5 -11.1 -11.5 -10.5 9 Foreign-related banks 25.2 27.2 25.6 25.6 26.0 24.6 25.2 28.9 25.0 25.3 27.5 25.0 10 Borrowings from other than commercial banks in United States4 221.5 230.9 225.2 228.0 231.1 239.1 244.2 239.2 242.0 253.9 257.9r 253.4 11 Domestically chartered banks 178.9 187.0 180.2 183.5 186.1 192.3 197.0 192.2 190.5 200.4 200.7 193.8 12 Federal funds and security RP borrowings 174.8 183.2 177.2 180.5 183.1 189.3 194.6 189.6 187.9 196.6 196.2 190.1 13 Other 4.0 3.8 3.1 3.0 3.0 3.0 2.4 2.5 2.7 3.7 4.5 3.7 14 Foreign-related banks6 42.6 44.0 45.0 44.5 45.0 46.8 47.2 47.1 51.5 53.5 51.2' 59.6 MEMO Gross large time deposits7 15 Seasonally adjusted 457.0 460.0 463.4 462.0 460.0 461.4 464.0 464.3 462.7 460.6 457.3 455.2 16 Not seasonally adjusted 457.4 459.4 461.1 462.6 461.5 462.6 464.4 462.7 460.4 460.3 460. r 455.2 U.S. Treasury demand balances at commercial banks8 17 Seasonally adjusted 25.5 25.7 22.4 22.3 22.8 21.5 20.4 21.1 20.2 17.8 19.2 21.2 18 Not seasonally adjusted 34.3 26.2 23.0 15.8 24.9 20.6 14.7 19.6 23.2 22.0 16.7 20.0 1. Data have been revised because of benchmarking and seasonal adjustment 4. Other borrowings are borrowings through any instrument", such as a revisions beginning January 1973. Commercial banks are those in the 50 states and promissory note or due bill, given for the purpose of borrowing money for the the District of Columbia with national or state charters plus agencies and branches banking business. This includes borrowings from Federal Reserve Banks and of foreign banks, New York investment companies majority owned by foreign from foreign banks, term federal funds, loan RPs, and sales of participations in banks, and Edge Act corporations owned by domestically chartered and foreign pooled loans. banks. 5. Based on daily average data reported weekly by approximately 120 large These data also appear in the Board's G.10 (411) release. For address, see banks and quarterly or annual data reported by other banks. inside front cover. 6. Figures are partly daily averages and partly averages of Wednesday data. 2. Includes federal funds, RPs, and other borrowing from nonbanks and net 7. Time deposits in denominations of $100,000 or more. Estimated averages of balances due to related foreign offices. daily data. 3. Reflects net positions of U.S. chartered banks, Edge Act corporations, and 8. U.S. Treasury demand deposits and Treasury tax-and-loan notes at com- U.S. branches and agencies of foreign banks with related foreign offices plus net mercial banks. Averages of daily data. positions with own IBFs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 DomesticN onfinancial Statistics • July 1990 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series' Billions of dollars 1989 1990 AAccccoouunntt June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. ALL COMMERCIAL BANKING INSTITUTIONS2 1 Loans and securities 2,664.8 2,679.0 2,694.2 2,700.5 2,734.8 2,771.2 2,779.0 2,789.0 2,797.6 2,806.9 2,822.6 2 Investment securities 541.0 538.2 542.8 541.4 544.7 548.3 549.0 561.2 568.0 573.5 578.7 3 U.S. government securities 360.9 359.6 364.7 365.1 370.0 374.4 374.1 387.5 395.3 401.8 408.0 4 Other 180.0 178.6 178.1 176.3 174.7 173.9 174.9 173.8 172.7 171.7 170.6 5 Trading account assets 18.2 19.8 18.7 18.3 26.6 27.6 23.4 31.9 30.4 26.0 23.9 6 Total loans 2,105.6 2,120.9 2,132.7 2,140.8 2,163.6 2,195.3 2,206.5 2,195.8 2,199.2 2,207.4 2,220.1 7 Interbank loans 163.9 168.6 170.4 165.4 171.8 187.6 190.5 189.0 187.3 189.7 187.7 8 Loans excluding interbank 1,941.8 1,952.4 1,962.3 1,975.3 1,991.8 2,007.7 2,016.0 2,006.8 2,011.9 2,017.7 2,032.4 9 Commercial and industrial 628.6 636.6 632.4 632.1 638.9 643.0 644.3 636.4 640.6 643.8 651.5 10 Real estate 716.2 722.4 732.6 739.6 745.0 753.6 758.3 761.3 767.2 774.3 779.1 11 Individual 363.1 364.9 369.6 373.8 374.3 376.8 382.4 381.4 378.0 374.7 376.5 12 All other 233.8 228.4 227.8 229.9 233.6 234.2 231.1 227.6 226.2 224.9 225.3 13 Total cash assets 212.2 210.5 210.6 218.5 212.0 234.2 258.0 222.0 228.5 217.0 216.6 14 Reserves with Federal Reserve Banks. 28.0 30.6 28.8 31.8 28.5 38.7 42.8 24.5 29.3 31.8 31.3 15 Cash in vault 27.5 27.4 28.4 27.9 27.8 30.7 31.5 28.0 27.9 27.8 28.6 16 Cash items in process of collection ... 78.8 75.4 77.5 82.6 77.5 84.2 98.9 89.8 91.5 80.0 80.1 17 Demand balances at U.S. depository institutions 28.7 28.1 29.1 28.5 28.3 28.5 32.1 29.6 31.0 27.5 26.5 18 Other cash assets 49.2 49.1 46.9 47.6 49.9 52.2 52.7 50.1 48.9 49.8 50.1 19 Other assets 208.6 213.4 209.8 214.1 210.3 207.1 212.7 219.3 214.0 209.9 207.0 20 Total assets/total liabilities and capital.... 3,085.6 3,102.9 3,114.6 3,133.1 3,157.2 3,212.5 3,249.6 3,230.3 3,240.1 3,233.7 3,246.3 21 Deposits 2.140.9 2,154.2 2,169.0 2,177.0 2,196.0 2,223.2 2,267.6 2,243.3 2,257.8 2,246.6 2,252.5 22 Transaction deposits 578.5 577.4 581.4 586.5 585.8 600.4 641.5 611.3 615.9 593.9 600.5 23 Savings deposits 505.7 512.0 516.9 518.6 525.6 535.6 538.2 540.5 545.8 551.1 548.1 24 Time deposits 1,056.7 1,064.9 1,070.7 1,072.0 1,084.6 1,087.2 1,087.8 1,091.5 1,096.1 1,101.6 1,104.0 25 Borrowings 516.7 513.8 507.6 519.8 529.7 546.0 534.3 556.1 546.0 548.3 562.3 26 Other liabilities 219.5 226.3 227.4 226.0 225.2 236.0 239.8 223.8 227.4 228.1 219.7 27 Residual (assets less liabilities) 208.5 208.7 210.6 210.3 206.3 207.4 208.0 207.1 208.9 210.7 211.8 MEMO 28 U.S. government securities (including trading account) 373.1 372.8 376.9 377.2 389.6 394.8 390.7 412.6 418.6 419.5 423.2 29 Other securities (including trading account) 186.1 185.2 184.6 182.5 181.7 181.1 181.8 180.6 179.7 180.0 179.3 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 2,440.3 2,452.5 2,467.5 2,477.6 2,511.0 2,531.2 2,540.4 2,552.7 2,559.7 2,562.4 2,572.1 31 Investment securities 517.3 514.7 519.9 519.1 521.3 522.6 523.3 534.2 540.6 544.6 548.2 32 U.S. government securities 349.8 348.6 354.4 355.4 359.4 362.6 363.3 374.7 382.1 387.4 393.6 33 Other 167.5 166.1 165.5 163.7 161.9 160.0 160.1 159.5 158.5 157.2 154.6 34 Trading account assets 18.2 19.8 18.7 18.3 26.6 27.6 23.4 31.9 30.4 26.0 23.9 35 Total loans 1,904.9 1,918.0 1,928.8 1,940.2 1,963.2 1,981.0 1,993.7 1,986.5 1,988.7 1,991.7 2,000.0 36 Interbank loans 123.8 130.5 132.3 130.7 140.7 148.4 152.8 151.4 149.8 148.6 149.4 37 Loans excluding interbank 1,781.1 1,787.5 1,796.5 1,809.5 1,822.5 1,832.5 1,840.9 1,835.1 1,838.9 1,843.1 1,850.6 38 Commercial and industrial 511.3 516.0 512.4 511.3 515.7 516.9 516.9 513.4 517.7 518.9 522.7 39 Real estate 691.5 696.8 706.2 713.0 718.0 725.0 729.7 731.6 736.5 743.1 746.4 40 Individual 363.1 364.9 369.6 373.8 374.3 376.8 382.4 381.4 378.0 374.7 376.5 41 All other 215.2 209.9 208.3 211.4 214.4 213.9 211.9 208.7 206.8 206.4 205.2 42 Total cash assets 188.7 187.3 188.9 194.9 188.7 206.7 231.7 198.2 203.1 191.1 191.5 43 Reserves with Federal Reserve Banks. 26.6 29.6 27.0 29.5 26.7 37.9 41.7 22.7 27.5 29.8 29.8 44 Cash in vault 27.5 27.3 28.4 27.9 27.8 30.6 31.5 28.0 27.8 27.8 28.5 45 Cash items in process of collection ... 77.9 74.5 76.6 81.3 76.3 82.3 97.5 88.3 90.2 78.5 78.7 46 Demand balances at U.S. depository institutions 26.7 26.4 27.4 26.8 26.4 26.6 30.2 27.7 28.9 25.9 24.8 47 Other cash assets 30.0 29.5 29.5 29.3 31.6 29.3 30.8 31.4 28.6 29.1 29.6 48 Other assets 139.7 136.5 136.2 140.1 131.0 137.1 140.9 143.2 139.6 136.4 135.1 49 Total assets/liabilities and capital 2,768.7 2,776.2 2,792.6 2,812.5 2,830.8 2,875.0 2,913.0 2,894.0 2,902.4 2,889.9 2,898.7 50 Deposits 2,061.2 2,073.2 2,088.9 2,095.8 2,113.8 2,140.8 2,184.3 2,160.7 2,175.6 2,165.0 2,170.0 51 Transaction deposits 569.1 568.0 572.6 576.6 576.1 590.5 631.3 600.8 605.7 584.2 590.8 52 Savings deposits 503.0 509.3 514.3 515.8 523.0 532.8 535.4 537.7 542.9 548.2 545.1 53 Time deposits 989.1 995.9 1,002.0 1,003.4 1,014.7 1,017.5 1,017.7 1,022.2 1,027.0 1,032.6 1,034.1 54 Borrowings 389.2 381.8 376.7 392.4 395.1 406.8 400.6 407.3 397.3 395.9 402.3 55 Other liabilities 113.5 116.2 120.0 117.5 119.2 123.6 123.7 122.5 124.2 122.0 118.3 56 Residual (assets less liabilities) 204.9 205.1 207.0 206.7 202.7 203.7 204.4 203.4 205.3 207.1 208.1 MEMO 57 Real estate loans, revolving 45.2 45.5 46.8 47.6 48.0 48.6 49.3 50.4 50.8 51.2 52.4 58 Real estate loans, other 646.3 651.2 659.4 665.4 670.1 676.4 680.4 681.1 685.7 691.9 693.9 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 1990 AAccccoouunntt Feb. 28 Mar. 7' Mar. 14 Mar. 21' Mar. 28' Apr. 4 Apr. 11 Apr. 18 Apr. 25 1 Cash and balances due from depository institutions 113,304 109,204 114,562' 107,385 108,129 116,163 110,390 120,374 107,521 2 Total loans, leases, and securities, net 1,286,102 1,290,884 1,283,913' 1,288,646 1,280,740 1,288,812 1,281,756 1,303,428 1,287,912 3 U.S. Treasury and government agency 176,128' 177,393 173,812' 172,438 169,961 171,636 171,791 172,451 171,132 4 Trading account 23,349 24,884 21,840 20,587 17,708 19,080 18,419 18,704 15,196 5 Investment account 152,780'' 152,508 151,972' 151,850 152,253 152,556 153,372 153,747 155,936 6 Mortgage-backed securities2 77,751' 77,929 77,867' 78,819 78,955 79,064 79,212 78,352 78,507 All other maturing in 7 One year or less 23,533' 23,632 23,478' 23,005 23,112 22,745 22,914 23,166 24,598 8 Over one through five years 34,424' 33,746 33,356' 32,834 32,816 32,837 33,105 34,140 34,611 9 Over five years 17,072 17,201 17,270 17,192 17,369 17,909 18,140 18,089 18,220 10 Other securities 66,338' 65,862 65,902' 65,585 65,156 64,390 64,229 63,918 63,729 11 Trading account 680 679 726 722 840 701 714 833 762 12 Investment account 65,658' 65,183 65,175' 64,863 64,316 63,689 63,515 63,085 62,967 13 States and political subdivisions, by maturity 36,747 36,427 36,333 36,177 35,541 35,088 35,025 34,782 34,625 14 One year or less 4,761 4,754 4,758 4,728 4,412 4,214 4,159 4,010 4,010 IS Over one year 31,987 31,673 31,575 31,449 31,129 30,874 30,866 30,772 30,615 16 Other bonds, corporate stocks, and securities 28,911' 28,756 28,842' 28,686 28,775 28,602 28,490 28,303 28,343 17 Other trading account assets 6,350 6,554 7,228 7,462 7,483 8,357 8,458 8,720 7,903 18 Federal funds sold3 69,764' 71,184 70,486 71,894 70,047 77,410 71,211 83,437 74,790 19 To commercial banks 50,079 50,518 49,576 50,994 49,844 57,566 51,054 61,670 53,198 20 To nonbank brokers and dealers in securities 13,397' 14,651 13,924 14,325 14,698 14,530 15,321 15,838 15,934 21 To others 6,288 6,015 6,985 6,575 5,504 5,315 4,836 5,929 5,659 72 Other loans and leases, gross 1,010,432' 1,012,888 1,009,490' 1,014,314 1,010,587 1,008,350 1,007,612 1,016,364 1,011,785 73 Other loans, gross 983,892' 986,225 982,865' 987,633 983,939 981,686 980,935 989,644 985,106 74 Commercial and industrial 322,147 323,250 322,446' 323,897 322,696 324,748 324,592 327,740 325,848 25 Bankers acceptances and commercial paper 1,536 1,750 1,611' 1,563 1,629 1,614 1,518 1,638 1,549 76 All other 320,612 321,500 320,835' 322,334 321,068 323,134 323,074 326,102 324,299 71 U.S. addressees 319,182 320,089 319,411' 320,771 319,698 321,715 321,707 324,802 322,989 28 Non-U.S. addressees 1,430 1,411 1,424 1,563 1,370 1,420 1,367 1,299 1,310 79 Real estate loans 362,737 363,351 364,983' 365,474 365,808 364,029 365,262 364,905 366,124 30 Revolving, home equity 28,392 28,433 28,531 28,596 28,450 28,310 28,578 28,765 29,028 31 All other 334,344 334,918 336,452' 336,878 337,358 335,720 336,684 336,140 337,096 32 To individuals for personal expenditures 177,450 176,709 176,672' 176,298 174,642 173,047 173,432 174,115 174,149 33 To depository and financial institutions 50,548 53,410 52,591 53,172 50,961 50,667 50,656 52,638 51,306 34 Commercial banks in the United States 24,523 26,740 26,030 26,678 24,824 23,709 24,174 24,809 25,212 35 Banks in foreign countries 3,867 3,985 4,151 4,391 4,339 4,280 3,589 4,882 3,942 36 Nonbank depository and other financial institutions .. 22,159 22,685 22,409 22,104 21,797 22,677 22,892 22,947 22,151 37 For purchasing and carrying securities 16,364' 16,687 14,037 15,841 16,608 15,696 14,549 16,495 14,934 38 To finance agricultural production 5,439 5,448 5,487 5,462 5,445 5,503 5,534 5,612 5,664 39 To states and political subdivisions 24,582 24,416 24,321 24,297 24,301 24,076 24,052 24,141 23,996 40 To foreign governments and official institutions 1,470 1,193 1,179 1,224 1,487 1,599 1,505 1,426 1,583 41 All other 23,153 21,761 21,149' 21,967 21,992 22,319 21,353 22,571 21,502 42 Lease financing receivables 26,540 26,663 26,625' 26,681 26,648 26,663 26,677 26,720 26,679 43 LESS: Unearned income 4,811 4,792 4,804 4,809 4,796 4,617 4,638 4,640 4,564 44 Loan and lease reserve4 38,100 38,203 38,201' 38,239 37,699 36,713 36,908 36,822 36,864 45 Other loans and leases, net 967,521' 969,892 966,485' 971,267 968,092 967,019 966,066 974,902 970,357 46 All other assets 135,497 136,413 135,697' 135,552 132,516 138,047 135,674 134,071 129,337 47 Total assets 1,534,903 1,536,501 1,534,171' 1,531,584 1,521,384 1,543,022 1,527,820 1,557,874 1,524,770 48 Demand deposits 233,273 221,046 227,655' 215,932 220,033 234,551 227,767 235,440 219,107 49 Individuals, partnerships, and corporations 185,750 177,148 182,756' 173,140 176,880 185,158 182.449 184,791 174,131 50 States and political subdivisions 6,935 5,225 5,398 6,169 5,661 5,842 6,153 6,375 6,477 51 U.S. government 2,987 3,663 3,776 1,557 2,430 6,236 3,799 7,137 4,007 5? Depository institutions in the United States 22,352 20,553 20,784 19,391 19,570 21,147 20,126 20,155 19,247 53 Banks in foreign countries 5,679 5,520 5,883 6,300 6,349 6,631 5,661 6,413 5,601 54 Foreign governments and official institutions 669 614 870 921 646 728 595 784 606 55 Certified and officers' checks 8,902 8,322 8,187 8,453 8,496 8,809 8,985 9,785 9,039 56 Transaction balances other than demand deposits 81,235 83,096 81,750 81,077 80,619 86,100 86,074 89,232 83,580 57 Nontransaction balances 724,937 731,453 729,991 730,572 730,971 734,741 734,607 729,707 730,312 58 Individuals, partnerships, and corporations 685,518 692,360 690,716 691,296 691,572 695,554 695,259 690,748 691,235 59 States and political subdivisions 30,894 30,602 30,732 30,648 30,733 30,335 30,475 29,963 30,091 60 U.S. government 868 869 861 862 867 868 856 849 849 61 Depository institutions in the United States 7,079 7,059 7,123 7,143 7,181 7,429 7,471 7,613 7,591 62 Foreign governments, official institutions, and banks .. 577 562 559 622 617 555 546 534 545 63 Liabilities for borrowed money 299,908 304,394 302,596' 308,184 297,344 294,376 289,599 314,388 300,188 64 Borrowings from Federal Reserve Banks 1,613 1,673 1,844 3,031 1,741 1,607 1,592 1,056 176 65 Treasury tax-and-loan notes 10,569 7,149 3,512 13,724 10,629 583 397 26,317 27,184 66 All other liabilities for borrowed money5 287,726 295,573 297,240' 291,428 284,974 292,187 287,611 287,015 272,828 67 Other liabilities and subordinated notes and debentures .. 94,576 94,922 90,308' 94,202 90,379 90,423 86,594 86,330 88,931 68 Total liabilities 1,433,930 1,434,912 1,432,300' 1,429,968 1,419,346 1,440,192 1,424,641 1,455,099 1,422,119 69 Residual (total assets minus total liabilities)6 100,973 101,590 101,871' 101,616 102,038 102,830 103,178 102,775 102,652 MEMO 70 Total loans and leases (gross) and investments adjusted . 1,254,411 1,256,622 1,251,310' 1,254,022 1,248,566 1,248,868 1,248,073 1,258,411 1,250,931 71 Total loans and leases (gross) adjusted7 1,005,595 1,006,814 1,004,369' 1,008,537 1,005,966 1,004,485 1,003,595 1,013,322 1,008,166 72 Time deposits in amounts of $100,000 or more 215,330 219,372 216,352 216,797 216,830 216,867 216,070 214,016 214.264 73 U.S. Treasury securities maturing in one year or less 23,158' 23,475 22,781' 22,012 21,819 23,300 22,759 22,787 20,338 74 Loans sold outright to affiliates—total8 494' 504 soc 502 495 279 278 270 275 75 Commercial and industrial 244' 255 25C 251 238 144 142 134 133 76 Other 25 (T 249 250' 250 257 134 136 136 142 77 Nontransaction savings deposits (including MMDAs) 276,990 278,941 279,988 279,683 279,604 283,342 283,212 279,389 277,934 1. Beginning Jan. 6, 1988, the "Large bank" reporting group was revised or more on Dec. 31, 1977, see table 1.13. somewhat, eliminating some former reporters with less than $2 billion of assets 6. This is not a measure of equity capital for use in capital-adequacy analysis or and adding some new reporters with assets greater than $3 billion. for other analytic uses. 2. Includes U.S. government-issued or guaranteed certificates of participation 7. Exclusive of loans and federal funds transactions with domestic commercial in pools of residential mortgages. banks. 3. Includes securities purchased under agreements to resell. 8. Loans sold are those sold outright to a bank's own foreign branches, 4. Includes allocated transfer risk reserve. nonconsolidated nonbank affiliates of the bank, the bank's holding company (if 5. Includes federal funds purchased and securities sold under agreements to not a bank), and nonconsolidated nonbank subsidiaries of the holding company. repurchase; for information on these liabilities at banks with assets of $1 billion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • July 1990 1.28 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY1 Millions of dollars, Wednesday figures 1990 AAccccoouunntt Feb. 28 Mar. 7 Mar. 14 Mar. 21 Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 1 Cash balances due from depository institutions 20,672 21,607 22,343 23,602 21,300 21,797 21,744 23,768 19,682 2 Total loans, leases, and securities, net2 214,702 216,870 215,247 216,737 215,049 215,991 211,316 218,353 216,381 Securities 3 U.S. Treasury and government agency3 0 0 0 0 0 0 0 0 0 4 Trading account3 0 0 0 0 0 0 0 0 0 5 Investment account 19,568 19,602 19,574 19,623 19,756 20,099 20,153 20,076 22,216 6 Mortgage-backed securities4 11,886 11,936 11,933 12,012 12,146 1122,,119955 1122,,119933 1122,,117777 1122,,446633 All other maturing in 7 One year or less 1,860 1,787 1,764 1,724 1,824 1,849 1,861 1,806 3,813 8 Over one through five years 3,542 3,542 3,553 3,556 3,458 3,413 3,458 3,501 3,348 9 Over five years 2,279 2,337 2,323 2,330 2,329 2,642 2,642 2,592 2,593 10 Other securities3 0 0 0 0 0 0 0 0 0 11 Trading account3 0 0 0 0 0 0 0 0 0 12 Investment account 14,832 14,729 14,649 14,527 14,503 14,188 14,088 14,052 14,028 13 States and political subdivisions, by maturity 7,616 7,561 7,475 7,384 7,313 6,968 6,892 6,893 6,880 14 One year or less 1,052 1,049 1,058 1,057 1,036 728 655 662 649 15 Over one year 6,564 6,512 6,417 6,327 6,278 6,240 6,237 6,231 6,231 16 Other bonds, corporate stocks, and securities 7,216 7,168 7,174 7,142 7,190 7,220 7,197 7,159 7,148 17 Other trading account assets 0 0 0 0 0 0 0 0 0 Loans and leases 18 Federal funds sold5 17,848 18,600 19,701 18,548 17,689 18,057 16,158 18,834 17,311 19 To commercial banks 10,376 10,232 11,164 10,928 9,982 10,113 8,326 11,176 9,498 20 To nonbank brokers and dealers in securities 3,425 4,298 3,638 3,237 4,302 5,151 4,998 4,535 4,510 21 To others 4,047 4,069 4,898 4,383 3,405 2,793 2,834 3,123 3,303 22 Other loans and leases, gross 181,713 183,163 180,558 183,286 182,251 181,975 179,424 183,759 181,190 23 Other loans, gross 176,149 177,602 175,012 177,721 176,698 176,433 173,904 178,254 175,672 24 Commercial and industrial 58,878 59,025 58,570 58,390 57,548 58,342 5577,,990000 59,149 58,472 25 Bankers acceptances and commercial paper 98 99 115 108 102 108 9988 142 104 26 All other 58,780 58,926 58,455 58,282 57,446 58,234 57,802 59,007 58,367 27 U.S. addressees 58,184 58,351 57,888 57,573 56,856 57,495 57,086 58,332 57,714 28 Non-U.S. addressees 596 575 567 709 590 738 716 674 654 29 Real estate loans 61,854 61,949 62,195 62,344 62,380 62,156 62,746 62,441 62,537 30 Revolving, home equity 3,978 3,979 3,985 3,993 3,996 4,001 4,017 4,026 4,038 31 All other 57,875 57,971 58,210 58,350 58,384 58,155 58,729 58,415 58,499 32 To individuals for personal expenditures 20,060 19,994 19,966 19,942 19,939 19,859 19,876 20,009 20,013 33 To depository and financial institutions 18,714 20,457 19,908 20,950 19,590 19,918 18,576 20,103 19,129 34 Commercial banks in the United States 7,941 9,602 8,904 9,901 8,768 8,624 7,848 7,959 8,094 35 Banks in foreign countries 2,741 2,782 3,067 3,336 3,314 3,376 2,684 3,955 3,035 36 Nonbank depository and other financial institutions 8,032 8,072 7,937 7,713 7,509 7,918 8,043 8,189 7,999 37 For purchasing and carrying securities 5,768 6,150 4,629 5,750 6,454 5,592 4,762 6,166 5,394 38 To finance agricultural production 114 106 109 102 117 114 120 126 122 39 To states and political subdivisions 5,316 5,292 5,294 5,286 5,276 5,199 5,187 5,184 5,163 40 To foreign governments and official institutions 486 245 251 283 235 298 221 198 358 41 All other 4,958 4,383 4,090 4,675 5,159 4,954 4,514 4,878 4,484 42 Lease financing receivables 5,564 5,561 5,546 5,565 5,552 5,542 5,520 5,505 5,518 43 LESS: Unearned income 1,827 1,822 1,824 1,836 1,838 1,814 1,833 1,835 1,831 44 Loan and lease reserve 17,431 17,401 17,410 17,411 17,313 16,513 16,674 16,532 16,534 45 Other loans and leases, net6 162,455 163,940 161,323 164,039 163,100 163,648 160,916 165,392 162,825 46 All other assets7 64,191 63,116 62,654 61,336 57,317 58,848 57,445 57,869 56,226 47 Total assets 299,566 301,593 300,245 301,675 293,666 296,637 290,505 299,990 292,289 Deposits 48 Demand deposits 49,208 45,162 48,448 47,617 49,125 50,381 46,556 49,706 44,977 49 Individuals, partnerships, and corporations 35,072 32,467 34,055 33,123 35,307 35,970 33,184 34,577 31,875 50 States and political subdivisions 613 667 521 638 520 645 573 626 508 51 U.S. government 450 685 701 199 383 1,258 659 1,262 699 52 Depository institutions in the United States 5,761 4,111 5,082 4,587 4,375 4,092 3,988 4,127 3,992 53 Banks in foreign countries 4,218 4,060 4,620 5,128 5,113 5,326 4,522 5,224 4,274 54 Foreign governments and official institutions 504 477 725 801 503 590 455 630 474 55 Certified and officers' checks 2,590 2,694 2,743 33,,113399 22,,992244 22,,550011 33,,117744 33,,226611 33,,115555 56 Transaction balances other than demand deposits (ATS, NOW, Super NOW, telephone transfers) 8,661 8,821 8,723 8,708 8,715 9,276 9,463 10,052 9,453 57 Nontransaction balances 117,022 120,440 117,499 116,946 116,641 116,358 115,700 114,708 116,312 58 Individuals, partnerships, and corporations 108,522 111,9% 109,088 108,421 108,126 107,898 107,275 106,313 107,879 59 States and political subdivisions 6,643 6,577 6,549 6,560 6,548 6,240 6,210 6,195 6,255 60 U.S. government 39 40 38 37 38 41 38 33 34 61 Depository institutions in the United States 1,608 1,619 1,617 1,624 1,625 1,937 1,933 1,932 1,903 62 Foreign governments, official institutions, and banks 209 208 207 305 304 242 243 235 241 63 Liabilities for borrowed money 65,667 65,967 70,375 67,936 63,134 67,548 64,447 70,408 64,778 64 Borrowings from Federal Reserve Banks 0 0 0 1,000 0 0 0 975 0 65 Treasury tax-and-loan notes 2,237 1,423 631 3,009 2,231 53 36 5,807 6,042 66 All other liabilities for borrowed money8 63,431 64,543 69,744 63,927 60,904 67,495 64,410 63,626 58,736 67 Other liabilities and subordinated notes and debentures 34,973 36,890 30,887 36,146 31,714 28,071 29,557 30,516 32,037 68 Total liabilities 275,531 277,279 275,932 277,354 269,329 271,635 265,724 275,390 267,557 69 Residual (total assets minus total liabilities)9 24,034 24,314 24,312 24,321 24,337 25,002 24,780 24,600 24,732 MEMO 70 Total loans and leases (gross) and investments adjusted2,10 215,643 216,258 214,414 215,155 215,450 215,582 213,649 217,586 217,153 71 Total loans and leases (gross) adjusted10 181,243 181,928 180,191 181,005 181,190 181,295 179,407 183,459 180,909 72 Time deposits in amounts of $100,000 or more 41,027 44,305 40,821 40,636 40,450 40,184 39,588 39,436 39,430 73 U.S. Treasury securities maturing in one year or less 3,224 3,077 2,822 2,403 2,373 2,184 2,416 2,533 2,339 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. in pools of residential mortgages. 10. Exclusive of loans and federal funds transactions with domestic commer- Digitized for FRA5S. EInRclu des securities purchased under agreements to resell. cial banks. 6. Includes allocated transfer risk reserve. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS1 Assets and Liabilities Millions of dollars, Wednesday figures 1990 AAccccoouunntt Feb. 28 Mar. 7 Mar. 14 Mar. 21 Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 1 Cash and due from depository institutions ... 13,155 13,317 12,756 13,815 13,501 13,688 13,018 13,567 12,650 2 Total loans and securities 145,879 149,202' 150,566' 150,833' 150,263' 148,807 147,239 149,270 150,774 3 U.S. Treasury and government agency securities 10,009' 10,192' 10,523' 10,924' 10,768' 10,741 10,072 10,277 10,929 4 Other securities 6,828' 6,782' 6,710' 6,711' 6,941' 7,466 7,463 7,309 7,233 5 Federal funds sold 5,904 6,410 7,505 6,133 8,045 5,593 4,468 4,789 6,383 6 To commercial banks in the United States . 4,482 5,109 5,904 4,714 6,810 4,080 3,032 3,417 5,034 7 To others 1,422 1,301 1,601 1,419 1,235 1,513 1,436 1,372 1,349 8 Other loans, gross 123,138 125,818 125,828 127,065 124,509 125,007 125,236 126,895 126,229 9 Commercial and industrial 73,994 74,645 74,218 75,502 75,237 75,169 75,338 76,597 75,245 10 Bankers acceptances and commercial paper 2,183 2,336 2,307 2,153 1,944 1,996 1,955 2,424 2,356 11 All other 71,811 72,309 71,911 73,349 73,293 73,173 73,383 74,173 72,889 12 U.S. addressees 70,387 70,955 70,566 71,928 71,881 71,726 71,952 72,673 71,483 13 Non-U.S. addressees 1,424 1,354 1,345 1,421 1,412 1,447 1,431 1,500 1,406 14 Loans secured by real estate 19,848 20,094 20,207 20,251 20,440 20,858 20,834 21,189 21,801 15 To financial institutions 25,963 27,455 28,438 28,158 25,382 25,830 25,684 25,484 26,249 16 Commercial banks in the United States.. 19,569 20,867 21,843 21,524 19,096 19,340 19,011 18,387 19,081 17 Banks in foreign countries 1,651 1,649 1,699 1,733 1,401 1,572 1,769 1,980 2,174 18 Nonbank financial institutions 4,743 4,939 4,896 4,901 4,885 4,918 44,,990044 5,117 4,994 19 To foreign governments and official institutions 247 243 266 235 228 221 224 221 223 20 For purchasing and carrying securities .... 1,601 1,724 1,398 1,609 1,812 1,681 1,641 2,066 1,376 21 All other3 1,485 1,657 1,301 1,310 1,410 1,248 1,515 1,338 1,335 22 Other assets (claims on nonrelated parties) .. 36,042 35,690 36,995 35,301 34,474 33,563 33,782 33,154 33,697 23 Net due from related institutions 14,128 12,689 11,703 12,345 14,727 15,741 14,684 16,204 13,939 24 Total assets 209,204 210,899 212,020 212,294 212,966 211,799 208,722 212,195 211,061 25 Deposits or credit balances due to other than directly related institutions 49,563 48,662 48,792 49,514 49,447 49,173 49,653 49,983 50,142 26 Transaction accounts and credit balances4 . 4,036 3,684 3,464 3,633 4,149 3,789 4,150 4,057 3,943 27 Individuals, partnerships, and corporations 2,750 2,464 2,545 2,491 2,760 2,612 2,450 2,616 2,778 28 Other 1,286 1,220 919 1,142 1,389 1,177 1,700 1,441 1,165 29 Nontransaction accounts 45,527 44,978 45,328 45,881 45,298 45,384 45,503 45,926 46,199 30 Individuals, partnerships, and corporations 38,697' 38,309' 38,581' 38,439' 38,448' 38,429 38,561 38,560 39,177 31 Other 6,830' 6,669' 6,747' 7,442' 6,85(r 6,955 66,,994422 7,366 7,022 32 Borrowings from other than directly related institutions 96,665 100,642 99,596 98,113 99,358 104,705 100,691 103,069 102,252 33 Federal funds purchased6 47,187 48,879 45,783 45,422 47,825 49,750 45,137 49,622 43,352 34 From commercial banks in the United States 22,276 21,330 18,847 17,666 22,058 23,261 19,152 23,081 20,390 35 From others 24,911 27,549 26,936 27,756 25,767 26,489 25,985 26,541 22,962 36 Other liabilities for borrowed money 49,478 51,763 53,813 52,691 51,533 54,955 55,554 53,447 58,900 37 To commercial banks in the United States 30,569 32,843 32,759 33,347 31,310 32,487 32,009 31,288 32,635 38 To others 18,909 18,920 21,054 19,344 20,223 22,468 23,545 22,159 26,265 39 Other liabilities to nonrelated parties 36,510 34,845 36,059 34,565 33,567 33,037 33,143 32,300 32,781 40 Net due to related institutions 26,465 26,752 27,574 30,103 30,593 24,882 25,234 26,844 25,886 41 Total liabilities 209,204 210,899 212,020 212,294 212,966 211,799 208,722 212,195 211,061 MEMO 42 Total loans (gross) and securities adjusted7 .. 121,828 123,226' 122,819' 124,595' 124,357' 125,387 125,196 127,466 126,659 43 Total loans (gross) adjusted7 104,991 106,252 105,586 106,960 106,648 107,180 107,661 109,880 108,497 1. Effective Jan. 4, 1989, the reporting panel includes a new group of large U.S. separate component of Other loans, gross. Formerly, these loans were included in branches and agencies of foreign banks. Earlier data included 65 U.S. branches "All other", line 21. and agencies of foreign banks that included those branches and agencies with 4. Includes credit balances, demand deposits, and other checkable deposits. assets of $750 million or more on June 30, 1980, plus those branches and agencies 5. Includes savings deposits, money market deposit accounts, and time that had reached the $750 million asset level on Dec. 31, 1984. These data also deposits. appear in the Board's H.4.2 (504) release. For address, see inside front cover. 6. Includes securities sold under agreements to repurchase. 2. Includes securities purchased under agreements to resell. 7. Exclusive of loans to and federal funds sold to commercial banks in the 3. Effective Jan. 4, 1989, loans secured by real estate are being reported as a United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • July 1990 1.31 GROSS DEMAND DEPOSITS Individuals, Partnerships, and Corporations1 Billions of dollars, estimated daily-average balances, not seasonally adjusted Commercial banks TTyyppee ooff hhoollddeerr 1989 1990 11998844 11998855 11998866 11998877 11998888 DDeecc.. DDeecc.. DDeecc.. DDeecc.. DDeecc.. Mar. June Sept. Dec. Mar. 1 All holders—Individuals, partnerships, and corporations 302.7 321.0 363.6 343.5 354.7 330.4 329.3 337.3 352.2 t 2 Financial business 31.7 32.3 41.4 36.3 38.6 36.3 33.0 33.7 33.8 1 3 Nonfinancial business 166.3 178.5 202.0 191.9 201.2 182.2 185.9 190.4 202.5 n.a. 4 Consumer 81.5 85.5 91.1 90.0 88.3 87.4 86.6 87.9 90.3 1 5 Foreign 3.6 3.5 3.3 3.4 3.7 3.7 2.9 2.9 3.1 1 6 Other 19.7 21.2 25.8 21.9 22.8 20.7 21.0 22.4 22.5 ? Weekly reporting banks 1989 1990 11998844 11998855 11998866 11998877 11998888 DDeecc.. DDeecc.. DDeecc.. DDeecc.. DDeecc.. Mar. June Sept. Dec. Mar. 7 All holders—Individuals, partnerships, and corporations 157.1 168.6 195.1 183.8 198.3 181.9 182.2 186.6 196.7 183.6 8 Financial business 25.3 25.9 32.5 28.6 30.5 27.2 25.4 26.3 27.6 25.3 9 Nonfinancial business 87.1 94.5 106.4 100.0 108.7 98.6 99.8 101.6 108.8 100.0 10 Consumer 30.5 33.2 37.5 39.1 42.6 41.1 42.4 43.0 44.1 42.9 11 Foreign 3.4 3.1 3.3 3.3 3.6 3.3 2.9 2.8 3.0 2.8 12 Other 10.9 12.0 15.4 12.7 12.9 11.7 11.7 12.9 13.2 12.7 1. Figures include cash items in process of collection. Estimates of gross Historical data back to March 1985 have been revised to account for corrections deposits are based on reports supplied by a sample of commercial banks. Types of bank reporting errors. Historical data before March 1985 have not been revised, of depositors in each category are described in the June 1971 Bulletin, p. 466. and may contain reporting errors. Data for all commercial banks for March 1985 Figures may not add to totals because of rounding. were revised as follows (in billions of dollars): all holders, -.3; financial business, 2. Beginning in March 1984, these data reflect a change in the panel of weekly -.8; nonfinancial business, -.4; consumer, .9; foreign, .1; other, -.1. Data for reporting banks, and are not comparable to earlier data. Estimates in billions of weekly reporting banks for March 1985 were revised as follows (in billions of dollars for December 1983 based on the new weekly reporting panel are: financial dollars): all holders, -.1; financial business, -.7; nonfinancial business, -.5; business, 24.4; nonfinancial business, 80.9; consumer, 30.1; foreign, 3.1; other consumer, 1.1; foreign, .1; other, -.2. 9.5. 3. Beginning March 1988, these data reflect a change in the panel of weekly 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 1989 1990 1985 1986 1987 1988 1989 Dec. Dec. Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 298,779 329,991 358,056 457,297 529,055 512,711 521,634 529,055 533,137 540,148 546,786 Financial companies' Dealer-placed paper2 2 Total 78,443 101,072 102,844 160,094 118877,,008844 117777,,119944 118833,,228844 118877,,008844 118833,,440011 118855,,339911 118844,,009977 3 Bank-related (not seasonally adjusted) 1,602 2,265 1,428 1,248 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Directly placed paper4 4 Total 135,320 115511,,882200 117733,,998800 119944,,553377 221122,,221100 221111,,445544 221122,,221155 221122,,221100 221144,,999966 221155,,665500 221155,,550011 5 Bank-related (not seasonally adjusted) 44,778 40,860 43,173 43,155 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6 Nonfinancial companies5 85,016 77,099 81,232 102,666 129,761 124,063 126,135 129,761 134,740 139,107 147,188 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 68,413 64,974 70,565 66,631 62,972 63,660 63,802 62,972 60,019 57,852 55,865 Holder 8 Accepting banks 11,197 13,423 10,943 9,086 9,433 10,811 9,923 9,433 9,954 10,351 9,574 9 Own bills 9,471 11,707 9,464 8,022 8,510 9,108 8,548 8,510 8,467 8,907 8,386 10 Bills bought 1,726 1,716 1,479 1,064 924 1,703 1,375 924 11,,448888 1,444 1,188 Federal Reserve Banks 11 Own account 0 0 0 0 0 0 0 0 0 0 0 12 Foreign correspondents 937 1,317 965 1,493 1,066 1,016 1,034 1,066 1,069 1,123 1,180 13 Others 56,279 50,234 58,658 56,052 52,473 51,833 52,846 52,473 48,996 46,379 45,111 Basis 14 Imports into United States 15,147 14,670 16,483 14,984 15,651 16,157 15,691 15,651 15,100 14,522 14,418 15 Exports from United States 13,204 12,960 15,227 14,410 13,683 14,275 14,385 13,683 13,437 12,567 12,161 16 All other 40,062 37,344 38,855 37,237 33,638 33,228 33,726 33,638 31,482 30,764 29,286 1. Institutions engaged primarily in activities such as, but not limited to, 5. Includes public utilities and firms engaged primarily in such activities as commercial savings, and mortgage banking; sales, personal, and mortgage fi- communications, construction, manufacturing, mining, wholesale and retail trade, nancing; factoring, finance leasing, and other business lending; insurance under- transportation, and services. writing; and other investment activities. 6. Beginning January 1988, the number of respondents in the bankers accep- 2. Includes all financial company paper sold by dealers in the open market. tance survey were reduced from 155 to 111 institutions—those with $100 million 3. Beginning January 1989, bank-related series have been discontinued. or more in total acceptances. The panel is revised every January and currently has 4. As reported by financial companies that place their paper directly with about 100 respondents. The current reporting group accounts for over 90 percent investors. of total acceptances activity. 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per year Average Average Period rate Period rate Period 1987 .. 8.21 1988— 8.75 1989— July 1988 .. 9.32 Feb. .. 8.51 Aug. 7.75 1989 .. 10.87 Mar. .. 8.50 Sept. 8.00 1987— 7.50 Apr. .. 8.50 Oct. 8.25 Feb. 7.50 May ... 8.84 Nov. 8.75 Mar. 7.50 June . 9.00 Dec. 9.25 Apr. 7.75 July ... 9.29 1990— Jan. 9.00 May . 8.14 Aug. . 9.84 Feb. 8.75 June 8.25 Sept. .. 10.00 Mar. 8.50 July . 8.25 Oct. ... 10.00 Apr. 9.00 Aug. 8.25 10.05 May 9.50 Sept. 8.70 Dec. .. 10.50 10.00 Oct. . 9.07 1989— Jan. ... 10.50 1 1 0 1 . .0 50 0 Nov. 8.78 Feb. .. 10.93 Dec. 8.75 11.50 1 1 1 1 . .0 50 0 11.50 May . 11.50 10.50 June .. 11.07 10.00 NOTE. These data also appear in the Board's H.15 (519) and G.13 (415) releases. For address, see inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A24 Domestic Nonfinancial Statistics • July 1990 1.35 INTEREST RATES Money and Capital Markets Averages, percent per year; weekly, monthly and annual figures are averages of business day data unless otherwise noted. 1990 IInnssttrruummeenntt 11998877 11998888 11998899 Jan. Feb. Mar. Apr. Mar. 30 Apr. 6 Apr. 13 Apr. 20 Apr. 27 MONEY MARKET RATES 1 Federal funds1'2 6.66 7.57 9.21 8.23 8.24 8.28 8.26 8.26 8.33 8.25 8.27 8.24 2 Discount window borrowing1,3 5.66 6.20 6.93 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 Commercial paper4'5 3 1-month 6.74 7.58 9.11 8.20 8.22 8.32 8.32 8.35 8.34 8.30 8.30 8.35 4 3-month 6.82 7.66 8.99 8.10 8.14 8.28 8.30 8.30 8.30 8.24 8.27 8.37 5 6-month 6.85 7.68 8.80 7.96 8.04 8.23 8.29 8.27 8.28 8.21 8.24 8.38 Finance paper, directly placed4,5 6 1-month 6.61 7.44 8.99 8.09 8.13 8.23 8.23 8.25 8.25 8.20 8.20 8.27 7 3-month 6.54 7.38 8.72 7.90 7.97 8.04 8.13 8.08 8.09 8.08 8.10 8.20 8 6-month 6.37 7.14 8.16 7.34 7.40 7.49 7.74 7.52 7.61 7.61 7.74 7.96 Bankers acceptances5'6 9 3-month 6.75 7.56 8.87 7.97 8.03 8.15 8.21 8.18 8.17 8.14 8.18 8.30 10 6-month 6.78 7.60 8.67 7.83 7.91 8.11 8.18 8.15 8.14 8.09 88..1144 88..3322 Certificates of deposit, secondary market7 11 1-month 6.75 7.59 9.11 8.17 8.19 8.30 8.32 8.31 8.31 8.29 8.30 8.38 12 3-month 6.87 7.73 9.09 8.16 8.22 8.35 8.42 8.35 8.37 8.35 8.38 8.53 13 6-month 7.01 7.91 9.08 8.17 8.26 8.48 8.57 8.52 8.54 8.47 8.51 8.72 14 Eurodollar deposits. 3-month8 7.07 7.85 9.16 8.39 8.24 8.37 8.44 8.38 8.40 8.38 8.38 8.49 U.S. Treasury bills Secondary market9 15 3-month 5.78 6.67 8.11 7.64 7.74 7.90 7.77 7.85 7.77 7.78 7.76 7.78 16 6-month 6.03 6.91 8.03 7.55 7.70 7.85 7.84 7.84 7.77 7.78 7.81 7.94 17 1-year 6.33 7.13 7.92 7.38 7.55 7.76 7.80 7.75 7.71 7.70 7.81 7.94 Auction average10 18 3-month 5.82 6.68 8.12 7.64 7.76 7.87 7.78 7.85 7.83 7.80 7.71 7.78 19 6-month 6.05 6.92 8.04 7.52 7.72 7.83 7.82 7.83 7.81 7.80 7.75 7.91 20 1-year 6.33 7.17 7.91 7.21 7.42 7.76 7.72 n.a. n.a. 7.72 n.a. n.a. CAPITAL MARKET RATES U.S. Treasury notes and bonds" Constant maturities12 21 1-year 6.77 7.65 8.53 7.92 8.11 8.35 8.40 8.34 8.29 8.29 8.41 8.57 22 2-year 7.42 8.10 8.57 8.09 8.37 8.63 8.72 8.61 8.57 8.55 8.75 8.95 23 3-year 7.68 8.26 8.55 8.13 8.39 8.63 8.78 8.63 8.62 8.61 8.80 9.02 24 5-year 7.94 8.47 8.50 8.12 8.42 8.60 8.77 8.57 8.59 8.60 8.79 9.01 25 7-year 8.23 8.71 8.52 8.20 8.48 8.65 8.81 8.62 8.65 8.65 8.84 9.04 26 10-year 8.39 8.85 8.49 8.21 8.47 8.59 8.79 8.56 8.59 8.62 8.83 9.02 27 30-year 8.59 8.96 8.45 8.26 8.50 8.56 8.76 8.53 8.56 8.58 8.80 9.00 Composite15 28 Over 10 years (long-term) 8.64 8.98 8.58 8.39 8.66 8.74 8.92 8.71 8.74 8.74 8.97 9.15 State and local notes and bonds Moody's series14 29 Aaa 7.14 7.36 7.00 6.81 7.05 6.98 7.04 7.05 6.83 7.09 7.05 7.19 30 Baa 8.17 7.83 7.40 7.35 7.24' 7.41 7.43 7.45 7.40 7.50 7.45 7.40 31 Bond Buyer series'" 7.63 7.68 7.23 7.10 7.22 7.29 7.39 7.33 7.33 7.31 7.39 7.51 Corporate bonds Seasoned issues16 32 All industries 9.91 10.18 9.66 9.43 9.64 9.73 9.82 9.73 9.74 9.73 9.82 9.95 33 Aaa 9.38 9.71 9.26 8.99 9.22 9.37 9.46 9.37 9.38 9.38 9.45 9.59 34 Aa 9.68 9.94 9.46 9.27 9.45 9.51 9.64 9.54 9.55 9.53 9.64 9.77 35 A 9.99 10.24 9.74 9.54 9.75 9.82 9.89 9.80 9.82 9.81 9.89 9.98 36 Baa 10.58 10.83 10.18 9.94 10.14 10.21 10.30 10.20 10.22 10.18 1100..2299 1100..4455 37 A-rated, recently offered utility bonds17 9.96 10.20 9.79 9.63 9.84 9.92 10.09 9.98 9.93 9.96 1100..2255 10.32 MEMO; Dividend/price ratio18 38 Preferred stocks 8.37 9.23 9.05 8.80 8.90 9.02 9.05 9.00 9.04 9.09 9.02 9.04 39 Common stocks 3.08 3.64 3.45 3.41 3.54 3.49 3.51 3.47 3.48 3.48 3.49 3.59 1. Weekly, monthly and annual figures are averages of all calendar days, places. Thus, average issuing rates in bill auctions will be reported using two where the rate for a weekend or holiday is taken to be the rate prevailing on the rather than three decimal places. preceding business day. The daily rate is the average of the rates on a given day 11. Yields are based on closing bid prices quoted by at least five dealers. weighted by 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 A25 1.36 STOCK MARKET Selected Statistics 1989 1990 IInnddiiccaattoorr 11998877 11998888 11998899 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) 161.78 149.97 180.13 192.93 193.02 192.49 188.50 192.67 187.96 182.55 186.26 185.61 2 Industrial 195.31 180.83 228.04 231.32 230.86 229.40 224.38 230.12 225.79 220.60 226.14 226.86 3 Transportation 140.52 134.09 174.90 197.53 202.02 190.36 174.26 177.25 173.67 166.69 175.08 173.54 4 Utility 74.29 72.22 94.33 92.90 93.44 94.67 94.95 99.73 95.69 92.15 92.99 91.92 5 Finance 146.48 127.41 162.01 164.86 165.51 166.55 160.89 155.63 150.11 142.68 143.14 138.57 6 Standard & Poor's Corporation (1941-43 = 10)' 287.00 265.88 323.05 346.61 347.33 347.40 340.22 348.57 339.97 330.45 338.47 338.18 7 American Stock Exchange (Aug. 31, 1973 = 50? 316.78 295.08 356.67 379.28 382.75 383.63 371.92 373.87 367.40 355.30 360.77 353.32 Volume of trading (thousands of shares) 8 New York Stock Exchange 188,922 161,386 165,568 171,683 151,752 182,394 144,389 160,671 172,420 155,960 149,240 140,062 9 American Stock Exchange 13,832 9,955 13,124 14,538 12,631 13,853 12,001 13,298 14,831 13,735 15,133 13,961 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 31,990 32,740 34,320 33,940 35,020 35,110 34,630 34,320 32,640 31,480 30,760 31,060 Free credit balances at brokers4 11 Margin-account5 4,750 5,660 7,040 5,580 5,680 6,000 5,815 7,040 6,755 6,575 6,525 6,465 12 Cash-account 15,640 16,595 18,505 16,015 15,310 16,340 16,345 18,505 17,370 16,200 16,510 15,375 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 collatercompanies. With this change the index includes 400 industrial stocks (formerly alized 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 of data for margin stocks, convertible bonds, Sept. 30, 1985, the Board changed the required initial margin, allowing it to be the and subscription issues was discontinued in April 1984. same as the option maintenance margin required by the appropriate exchange or 4. Free credit balances are in accounts with no unfulfilled commitments to the self-regulatory organization; such maintenance margin rules must be approved by brokers and are subject to withdrawal by customers on demand. the Securities and Exchange Commission. Effective Jan. 31, 1986, the SEC 5. New series beginning June 1984. approved new maintenance margin rules, permitting margins to be the price of the 6. These regulations, adopted by the Board of Governors pursuant to the option plus 15 percent of the market value of the stock underlying the option. Securities Exchange Act of 1934, limit the amount of credit to purchase and carry Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • July 1990 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1989 1990 AAccccoouunntt 11998877 1988 May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. SAIF-insured institutions 1 Assets 1,250,855 1,350,500 1,344,050 1,336,143 1,329,503 1,315,921 1,298,904 1,286,827 1,277,314 1,250,068 1,237,627 2 Mortgages 721,593 764,513 764,759 763,328 762,206 760,786 755,428 748,800 745,093 734,422 727,636 3 Mortgage-backed securities 201,828 214,587 216,256 211,325 204,365 195,309 188,493 181,641 176,552 170,725 169,482 4 Contra-assets to mortgage assets' . 42,344 37,950 27,905 28,148 27,659 27,433 27,131 25,972 25,001 25,397 23,408 5 Commercial loans 23,163 33,889 33,008 33,072 33,206 33,035 32,936 32,572 32,327 32,162 31,941 6 Consumer loans 57,902 61,922 61,868 60,768 61,079 60,958 60,405 59,727 59,396 58,728 56,940 7 Contra-assets to nonmortgage loans . 3,467 3,056 2,916 3,190 3,199 3,163 3,127 3,106 3,199 3,482 1,866 n.a. 8 Cash and investment securities 169,717 186,986 174,333 175,222 175,135 171,564 169,478 172,582 172,302 165,849 160,600 9 Other3 122,462 129,610 124,648 123,766 124,370 124,864 122,421 120,584 119,845 117,061 116,301 10 Liabilities and net worth . 1,250,855 1,350,500 1,344,050 1,336,143 1,329,503 1,315,921 1,298,904 1,286,827 1,277,314 1,250,068 1,237,627 11 Savings capital 932,616 971,700 955,566 960,073 963,158 960,344 958,901 948,500 946,655 945,649 933,794 12 Borrowed money 249,917 299,400 318,367 312,093 301,571 289,634 281,473 275,978 268,462 252,193 253,519 13 FHLBB 116,363 134,168 146,520 144,217 141,875 138,331 133,633 130,514 127,671 124,578 121,697 14 Other 133,554 165,232 171,847 167,876 159,696 151,303 147,840 145,464 140,791 127,615 131,822 15 Other 21,941 24,216 33,585 29,892 31,886 33,811 29,952 30,%5 31,992 27,462 26,742 16 Net worth n.a. n.a. 36,532 34,084 32,888 32,131 28,578 31,384 30,205 24,763 23,563 SAIF-insured federal savings banks 17 Assets 284,270 425,966' 469,928' 495,688 506,988' 504,233' 500,937' 502,484 499,995 498,522 18 Mortgages 161,926 230,734' 257,191' 276,603 285,061 285,557 283,162' 283,652 282,510 283,844 19 Mortgage-backed securities 45,826 64,957 73,909' 73,940 74,379 72,124 72,478 72,332 71,204 70,499 20 Contra-assets to mortgage assets . 9,100 13,140 13,234' 13,647 13,974' 13,872' 13,801' 13,506 13,216 13,548 21 Commercial loans 6,504 16,731 16,940' 18,083 18,346 18,233 18,256 18,299 18,172 18,143 22 Consumer loans 17,696 24,222 27,946' 28,156 28,993 28,987 28,762 28,322 28,079 28,212 23 Contra-assets to nonmortgage loans . 678 889 892' 1,027 1,022 1,026 1,073' 1,048 1,082 1,193 n.a. n.a. 24 Finance leases plus interest 591 880 1,072 1,083 1,089 1,076 1,092 1,085 1,092 1,101 25 Cash and investment ... 35,347 61,029 62,053' 65,736 65,979 65,040 64,073' 65,193 65,191 64,538 26 Other 24,069 35,412' 38,025' 39,619 40,352' 40,542' 40,659' 40,799 40,852 39,981 27 Liabilities and net worth 284,270 425,966' 469,928' 495,688 506,988' 504,233' 500,937' 502,484 499,995 498,522 28 Savings capital 203,196 298,197 324,369 342,146 352,547 352,158 353,474 355,923 355,874 360,547 29 Borrowed money 60,716 99,286 114,853' 121,893 121,194 117,973 115,627 114,231 111,369 108,448 30 FHLBB 29,617 46,265 55,463 58,505 59,781 59,189 57,941 57,793 56,842 57,032 31 Other 31,099 53,021 59,390' 63,388 61,413 58,784 57,686 56,438 54,527 51,416 32 Other 5,324 8,075 10,168' 9,822 10,6%' 11,443' 9,904' 10,317 10,749 9,041 33 Net worth 15,034 20,218' 23,922' 25,688 26,253' 26,381' 25,952' 25,983 25,958 22,716 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A27 1.37—Continued 1989 1990 AAccccoouunntt 11998877 11998888 May June July Aug. Sept. Oct. Nov Dec. Jan. Feb. Credit unions4 34 Total assets/liabilities and capital \ 174,593 178,812 180,664 179,029 180,035 181,812 181,527 182,856 183,688 183,301 186,119 35 Federal 114,566 116,705 117,632 117,475 117,463 118,746 118,887 119,682 120,666 120,489 122,885 36 State 1 60,027 62,107 63,032 61,554 62,572 63,066 62,640 63,174 63,022 62,812 63,234 37 Loans outstanding n.a. 113,191 116,947 119,101 119,720 120,577 122,522 122,997 122,899 122,608 122,332 121,968 38 Federal 1 73,766 76,052 77,729 78,472 78,946 80,548 80,570 80,601 80,272 80,041 79,715 39 State 39,425 40,895 41,372 41,248 41,631 41,874 42,427 42,298 42,336 42,291 42,253 40 Savings 159,010 162,134 164,415 162,405 162,754 164,050 164,695 165,533 167,371 166,629 168,609 41 Federal 1 104,431 105,787 106,984 106,266 106,038 106,633 107,588 108,319 109,653 109,818 111,246 42 State • 54,579 56,347 57,431 56,139 56,716 57,417 57,107 57,214 57,718 56,811 57,363 Life insurance companies 43 Assets 1,044,459 1,157,140 1,221,332 1,232,195 1,247,341 1,257,045 1,266,773 1,276,181 1,289,467 1,303,691 Securities 44 Government 84,426 84,051 83,847 84,564 84,438 83,225 82,867 83,727 83,609 84,381 45 United States5 57,078 58,564 57,790 57,817 57,698 56,978 56,684 57,726 57,290 58,169 46 State and local 10,681 9,136 8,953 9,036 9,061 9,002 9,037 9,019 9,280 9,191 47 Foreign 16,667 16,351 17,104 17,711 17,679 17,245 17,146 16,982 17,039 17,021 48 Business 569,199 660,416 706,960 714,398 726,599 735,441 742,537 748,075 758,803 777,415 n.a. n.a. 49 Bonds 472,684 556,043 595,500 601,786 606,686 614,585 621,856 628,695 637,690 642,445 50 Stocks 96,515 104,373 111,460 112,612 119,913 120,856 120,681 119,380 121,113 134,970 51 Mortgages 203,545 232,863 236,651 237,444 237,865 238,944 240,189 242,391 243,728 246,345 52 Real estate 34,172 37,371 38,598 38,190 38,622 33,822 38,942 39,343 39,339 39,368 53 Policy loans 53,626 54,236 55,525 55,746 55,812 56,077 56,403 56,727 56,916 57,141 54 Other assets 89,586 93,358 99,751 101,853 104,005 104,536 105,835 105,918 107,072 110,284 1. Contra-assets are credit-balance accounts that must be subtracted from the International Bank for Reconstruction and Development. corresponding gross asset categories to yield net asset levels. Contra-assets to NOTE. SAIF-insured institutions: Estimates by the OTC for all institutions mortgage loans, contracts, and pass-through securities include loans in process, insured by the SAIF and based on the OTC thrift Financial Report. unearned discounts and deferred loan fees, valuation allowances for mortgages SAIF-insured federal savings banks: Estimates by the OTC for federal savings "held for sale," and specific reserves and other valuation allowances. banks insured by the SAIF and based on the OTC thrift Financial Report. 2. Contra-assets are credit-balance accounts that must be subtracted from the Credit unions: Estimates by the National Credit Union Administration for corresponding gross asset categories to yield net asset levels. Contra-assets to federally chartered and federally insured state-chartered credit unions serving nonmortgage loans include loans in process, unearned discounts and deferred loan natural persons. fees, and specific reserves and valuation allowances. Life insurance companies: Estimates of the American Council of Life Insurance 3. Holding of stock in Federal Home Loan Bank and Finance leases plus for all life insurance companies in the United States. Annual figures are annualinterest are included in "Other" (line 9). statement asset values, with bonds carried on an amortized basis and stocks at 4. Data include all federally insured credit unions, both federal and state year-end market value. Adjustments for interest due and accrued and for chartered, serving natural persons. differences between market and book values are not made on each item separately 5. Direct and guaranteed obligations. Excludes federal agency issues not but are included, in total, in "other assets." guaranteed, which are shown in the table under "Business" securities. As of June 1989 Savings bank data are no longer available. 6. Issues of foreign governments and their subdivisions and bonds of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics • July 1990 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year FFFiiissscccaaalll FFFiiissscccaaalll FFFiiissscccaaalll TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn yyyeeeaaarrr yyyeeeaaarrr yyyeeeaaarrr 1989 1990 111999888777 111999888888 111999888999''' Nov. Dec. Jan. Feb. Mar. Apr. U.S. budget1 1 Receipts, total 854,143 908,166 990,701 71,213 89,130 99,538 65,170 64,819 139,624 2 On-budget 640,741 666,675 727,035 51,989 69,052 74,243 44,133 38,989 106,775 Off-budget 213,402 241,491 263,666 19,223 20,077 25,295 21,037 25,829 32,849 4 Outlays, total 1,003,804 1,063,318 1,142,691 100,958 103,903 91,271 100,434 118,155 97,107 5 On-budget 809,972 860,626 931,470 81,055 92,306 72,956 80,872 97,631 78,990 6 Off-budget 193,832 202,691 211,221 19,904 11,598 18,315 19,563 20,524 18,116 7 Surplus, or deficit (-), total -149,661 -155,151 -151,989 -29,746 -14,774 8,267 -35,264 -53,336 42,518 8 On-budget -169,231 -193,951 -204,434 -29,065 -23,253 1,286 -36,738 -58,642 27,785 9 Off-budget 19,570 38,800 52,445 -680 8,480 6,980 1,474 5,306 14,733 Source of financing (total) 10 Borrowing from the public 151,717 166,139 140,156 19,790 6,821 15,841 18,221 56,090 -5,935 11 Operating cash (decrease, or increase (-)) . -5,052 -7,%3 3,425 21,772 -5,221 -18,116 25,462 1,123 -20,830 12 Other 2 2,9% -3,025 8,408 -11,816 13,174 -5,992 -8,419 -3,876 -15,754 MEMO 13 Treasury operating balance (level, end of period) 36,436 44,398 40,973 21,715 26,935 45,051 19,589 18,466 39,2% 14 Federal Reserve Banks 9,120 13,024 13,452 5,501 6,217 13,153 6,613 4,832 5,205 15 Tax and loan accounts 27,316 31,375 27,521 16,214 20,718 31,899 12,976 13,634 34,091 1. In accordance with the Balanced Budget and Emergency Deficit Control Act international monetary fund; other cash and monetary assets; accrued interest of 1985, all former off-budget entries are now presented on-budget. The Federal payable to the public; allocations of special drawing rights; deposit funds; Financing Bank (FFB) activities are now shown as separate accounts under the miscellaneous liability (including checks outstanding) and asset accounts; agencies that use the FFB to finance their programs. The act has also moved two seigniorage; increment on gold; net gain/loss for U.S. currency valuation adjustsocial security trust funds (Federal old-age survivors insurance and Federal ment; net gain/loss for IMF valuation adjustment; and profit on the sale of gold. disability insurance trust funds) off-budget. SOURCE. Monthly Treasury Statement of Receipts and Outlays of the U.S. 2. Includes SDRs; reserve position on the U.S. quota in the IMF; loans to Government and the Budget of the U.S. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A3 3 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Calendar year Fiscal Fiscal Source or type year year 1988 1989 1990 11998888 11998899 HI H2 HI H2 Feb. Mar. Apr. RECEIPTS 1 All sources 908,166 990,701r 475,724 449,330r 527,574 470,329 65,170 64,819 139,624 2 Individual income taxes, net 401,181 445,690 207,659 200,300 233,572 218,661 28,830 13,174 74,375 3 Withheld 341,435 361,386 169,300 179,600 174,230 193,296 32,852 31,323 27,855 4 Presidential Election Campaign Fund 33 32 28 4 28 3 4 9 6 Nonwithheld 132,199 154,839 101,614 29,880 121,563 33,303 960 5,455 62,629 6 Refunds 72,487 70,567 63,283 9,186 62,251 7,943 4,986 23,614 16,115 Corporation income taxes 7 Gross receipts 109,683 117,015 58,002 56,409 61,585 52,269 2,678 14,477 15,424 8 Refunds 15,487 13,723 8,706 7,250 7,259 6,842 1,447 1,823 2,049 9 Social insurance taxes and contributions, net 334,335 359,416 181,058 157,603 200,127 162,574 29,055 32,961 43,821 10 Employment taxes and contributions 305,093 332,859 164,412 144,983 184,569 152,407 26,473 32,376 41,090 11 Self-employment taxes and contributions 17,691 18,504' 14,839 3,032 16,371 1,947 1,500 1,213 10,685 12 Unemployment insurance 24,584 22,011 14,363 10,359 13,279 7,909 2,230 173 2,377 13 Other net receipts 4,659 4,547 2,284 2,262 2,277 2,260 352 412 354 14 Excise taxes 35,604' 34,386 16,440 19,299 16,814 16,844 2,260 2,814 3,181 15 Customs deposits 15,411 16,334 7,522 8,107 7,918 8,667 1,228 1,397 1,273 16 Estate and gift taxes 7,594 8,745 3,863 4,054 4,583 4,451 664 769 2,307 17 Miscellaneous receipts3 19,909 22,839' 9,950 10,809' 10,235 13,703 1,902 1,050 1,291 OUTLAYS 18 All types 1,063,318 1,142,691 512,856 552,737' 565,524 587,304r 100,434 118,155 97,107 19 National defense 290,361 303,551 143,080 150,496 148,098 149,613 24,870 29,516 22,155 20 International affairs 10,471 9,596 7,150 2,636 6,605 5,981 1,144 1,568 1,026 21 General science, space, and technology 10,841 12,891 5,361 5,852 6,238 7,091 1,066 1,244 1,247 22 Energy 2,297 3,745 555 1,966 2,221 1,397 83 486 269 23 Natural resources and environment 14,625 16,084 6,776 9,072 7,022 9,183 1,034 1,200 1,211 24 Agriculture 17,210 16,948 7,872 6,911 9,619 4,132 949 1,875 2,089 25 Commerce and housing credit 18,828 27,810 5,951 19,836 4,129 22,200 1,886 7,328 3,890 26 Transportation 27,272 27,623 12,700 14,922 13,035 14,982 2,097 2,103 2,190 27 Community and regional development 5,294 5,755 2,765 2,690 1,833 4,879 575 797 534 28 Education, training, employment, and social services 31,938 35,697 15,451 16,162' 18,083 18,663 3,421 3,135 3,266 29 Health 44,490 48,391 22,643 23,360 24,078 25,339 4,459 4,809 5,210 30 Social security and medicare 297,828 317,506 135,322 149,017 162,195 162,322 28,291 29,032 28,536 31 Income security 129,332 136,765 65,555 64,978 70,937 67,950 13,609 16,069 12,714 32 Veterans benefits and services 29,406 30,066 13,241 15,797 14,891 14,864 2,608 3,857 1,316 33 Administration of justice 8,436 9,396 4,369 4,361 4,801 4,963 819 738 861 34 General government 9,518 8,940 4,337 5,137 3,858 4,753 484 984 379 35 General-purpose fiscal assistance 1,816 n.a. 448 0 0 n.a. n.a. n.a. n.a. 36 Net interest® 151,748 169,314 76,098 78,317 86,009 87,927 15,924 15,853 13,881 37 Undistributed offsetting receipts -36,967 -37,212 -17,766 -18,771 -18,131 -18,935 -2,884 -2,437 -3,668 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 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A30 Domestic Nonfinancial Statistics • July 1990 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1988 1989 * 1990 IItteemm Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 1 Federal debt outstanding 2,493.2 2,555.1 2,614.6 2,707.3 2,763.6 2,824.0 2,881.1 2,975.5 3,081.9 2 Public debt securities 2,487.6 2,547.7 2,602.2 2,684.4 2,740.9 2,799.9 2,857,4 2,953.0 3,052.0 3 Held by public 1,996.7 2,013.4 2,051.7 2,095.2 2,133.4 2,142.1 2,180.7 2,245.2 n.a. 4 Held by agencies 490.8 534.2 550.4 589.2 607.5 657.8 676.7 707.8 n.a. 5 Agency securities 5.6 7.4 12.4 22.9 22.7 24.0 23.7 22.5 n.a. 6 Held by public 5.1 7.0 12.2 22.6 22.3 23.6 23.5 22.4 n.a. 7 Held by agencies .6 .5 .2 .3 .4 .5 .1 .1 n.a. 8 Debt subject to statutory limit 2,472.6 2,532.2 2,586.9 2,669.1 2,725.6 2,784.6 2,829.8 2,921.7 2,988.9 9 Public debt securities 2,472.1 2,532.1 2,586.7 2,668.9 2,725.5 2,784.3 2,829.5 2,921.4 2,988.6 10 Other debt1 .5 .1 .1 .2 .2 .2 .3 .3 .3 11 MEMO: Statutory debt limit 2,800.0 2,800.0 2,800.0 2,800.0 2,800.0 2,800.0 2,870.0 3,122.7 3,122.7 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 1989 1990 Type and holder 1986 1987 1988 1989 Q2 Q3 Q4 Q1 1 Total gross public debt 2,214.8 2,431.7 2,684.4 2,953.0 2,799.9 2,857.4 2,953.0 3,052.0 By type 2 Interest-bearing debt 2,212.0 2,428.9 2,663.1 2,931.8 2,797.4 2,836.3 2,931.8 3,029.5 3 Marketable 1,619.0 1,724.7 1,821.3 1.945.4 1,877.3 1,892.8 1.945.4 1.995.3 4 Bills 426.7 389.5 414.0 430.6 397.1 406.6 430.6 453.1 5 Notes 927.5 1,037.9 1,083.6 1.151.5 1,137.2 1,133.2 1.151.5 1.169.4 6 Bonds 249.8 282.5 308.9 348.2 328.0 338.0 348.2 357.9 7 Nonmarketable1 593.1 704.2 841.8 986.4 920.1 943.5 986.4 1,034.2 8 State and local government series 110.5 139.3 151.5 163.3 156.0 158.6 163.3 163.5 9 Foreign issues 4.7 4.0 6.6 6.8 6.2 6.8 6.8 37.1 10 Government 4.7 4.0 6.6 6.8 6.2 6.8 6.8 37.1 11 Public .0 .0 .0 .0 .0 .0 .0 .0 12 Savings bonds and notes. 90.6 99.2 107.6 115.7 112.3 114.0 115.7 118.0 13 Government account series 386.9 461.3 575.6 695.6 645.2 663.7 695.6 705.1 14 Non-interest-bearing debt 2.8 2.8 21.3 21.2 2.5 21.1 21.2 22.4 By holder4 15 U.S. government agencies and trust funds 403.1 477.6 589.2 707.8 657.8 676.7 707.8 n.a. 16 Federal Reserve Banks 211.3 222.6 238.4 228.4 231.8 220.6 228.4 n.a. 17 Private investors 1,602.0 1,745.2 1,852.8 2,011.0 1,905.4 1,954.0 2,011.0 n.a. 18 Commercial banks 203.5 201.5 193.8 190.0 199.2 181.5 190.0 n.a. 19 Money market funds 28.0 14.6 11.8 14.4 11.3 12.9 14.4 n.a. 20 Insurance companies 105.6 104.9 107.3 n.a. 106.3 107.7 n.a. n.a. 21 Other companies 68.8 84.6 87.1 93.8 92.1 93.5 93.8 n.a. 22 State and local Treasurys 262.8 284.6 313.6 n.a. 322.1 325.2 n.a. n.a. Individuals 23 Savings bonds 92.3 101.1 109.6 117.7 114.0 115.7 117.7 n.a. 24 Other securities 70.4 70.2 76.4 91.5 92.5 92.1 91.5 n.a. 25 Foreign and international 263.4 299.7 362.1 392.9 367.9 393.5 392.9 n.a. 26 Other miscellaneous investors6 506.6 584.0 591.1 n.a. 600.0 631.9 n.a. n.a. 1. Includes (not shown separately): Securities issued to the Rural Electrifica- 5. Consists of investments of foreign and international accounts. Excludes 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 and the are actual holdings; data for other groups are Treasury estimates. Treasury Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A3 3 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Par value; averages of daily figures, in millions of dollars 1990 1990 IItteemm 11998877 11998888 11998899 Feb. Mar. Apr. Mar. 21 Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 Immediate delivery2 1 U.S. Treasury securities 110,050 101,623 112,722 122,793 105,335 106,861 98,236 109,210 109,731 98,147 111,708 112,403 By maturity 2 Bills 37,924 29,387 30,737' 31,175 30,659 32,972 29,213 27,227 37,497 29,382 33,291 33,150 3 Other within 1 year 3,271 3,426 3,183' 2,960 2,121 2,687 2,333 1,850 2,851 2,131 2,163 3,069 4 1-5 years 27,918 27,777 33,664' 36,425 31,177 30,178 26,251 40,261 30,838 25,458 31,359 33,784 5 5-10 years 24,014 24,939 28,680 31,398 25,090 26,199 24,181 23,438 23,877 26,300 27,411 27,823 6 Over 10 years 16,923 16,093 16,458 20,835 16,289 14,824 16,259 16,434 14,669 14,877 17,486 14,578 By type of customer 7 U.S. government securities dealers 2,936 2,761 3,286 3,941 3,802 3,354 4,271 3,341 4,492 33,,117722 3,131 3,370 8 U.S. government securities brokers 61,539 59,844 6666,,441199'' 72,038 60,271 59,623 55,174 63,172 60,197 54,816 61,619 63,823 9 All others3 45,575 39,019 43,016' 46,814 41,262 43,884 38,791 42,697 45,042 40,159 46,959 45,211 10 Federal agency securities 18,084 15,903 18,626 19,069 19,146 19,763 21,976 17,214 19,433 22,220 19,603 18,575 11 Certificates of deposit 4,112 3,369 2,798 1,756 1,518 1,728 1,802 1,277 1,636 1,708 1,496 1,796 12 Bankers acceptances 2,965 2,316 2,222 1,574 1,382 1,532 1,381 1,347 1,368 1,613 1,441 1,672 13 Commercial paper 17,135 22,927 31,805 35,190 37,018 39,797 37,982 36,513 38,569 37,043 41,389 39,623 Futures contracts* 14 Treasury bills 3,233 2,627 2,525 2,393 2,078 2,607 1,264 1,850 3,160 2,523 2,168 2,772 15 Treasury coupons 8,963 9,695 9,602 13,730 11,826 9,799 11,621 11,135 10,179 8,723 11,989 9,669 16 Federal agency securities 5 1 8 23 10 12 4 0 7 6 5 29 Forward transactions 17 U.S. Treasury securities 2,029 2,095 2,127 3,006 1,260 1,845 864 1,949 1,256 1,896 1,963 1,845 18 Federal agency securities 9,290 8,008 9,483 12,885 9,598 10,071 9,873 7,558 7,874 13,493 9,369 7,948 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 1990 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Averages of daily figures, in millions of dollars 1990 1990 IItteemm 11998877 11998888 11998899 Feb. Mar. Apr. Mar. 28 Apr. 4 Apr. 11 Apr. 18 Apr. 25 Positions Net immediate2 1 U.S. Treasury securities -6,216 -22,765 -5,940r 7,882 2,200r -6,494 -3,0Mr 1,655 2,660 -436 -16,811 2 Bills 4,317 2,238 7,835' 19,033 16,162 9,823 13,385 14,389 15,884 13,843 4,178 3 Other within 1 year 1,557 -2,236 -1,528 -933 -884 837 -793 -107 1,030 949 1,145 4 1-5 years 649 -3,020 2,338r 11,232 5,304' 4,171 3,983' 6,477 7,002 4,316 86 5 5-10 years -6,564 -9,663 -8,133 -8,464 -5,894 -5,891 -7,244 -6,064 -7,527 -4,378 -5,104 6 Over 10 years -6,174 -10,084 -6,452 -12,985 -12,488 -15,434 -12,393 -13,040 -13,729 -15,166 -17,116 7 Federal agency securities 31,911 28,230 31,913' 36,745 37,064 34,928 34,524 31,375 37,387 38,569 33,401 8 Certificates of deposit 8,188 7,300 6,674 5,338 4,581 3,577 4,294 3,621 3,923 3,460 3,327 9 Bankers acceptances 3,660 2,486 2,089 1,653 1,459 1,277 1,218 1,267 1,417 1,582 1,096 10 Commercial paper 7,496 6,152 8,242' 7,925 7,285 7,492 6,120 6,736 6,299 8,580 7,805 Futures positions 11 Treasury bills -3,373 -2,210 -4,599 -12,779 -8,417 -7,017 -7,666 -6,483 -6,724 -7,406 -7,225 12 Treasury coupons 5,988 6,224 -2,918' -4,845 -5,561 -4,738 -7,857 -6,681 -7,241 -5,428 -2,596 13 Federal agency securities -95 0 14 103 45 22 26 27 28 21 -8 Forward positions 14 U.S. Treasury securities -1,211 346 -545 -1,046 -1,723 -1,189 -1,064 -468 -1,373 -1,333 -1,432 15 Federal agency securities -18,817 -16,348 -16,878 -15,942 -16,271 -12,143 -13,069 -10,828 -15,513 -13,948 -9,813 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 126,709 136,327 157,955 167,362 157,137' 135,985 156,319 154,599 157,628 162,548 158,201 17 Term 148,288 177,477 225,126 216,957 205,804' 187,569 206,435 205,310 221,483 215,026 228,093 Repurchase agreements 18 Overnight and continuing 170,763 172,695 219,083 242,687 226,475' 195,998 220,243 223,173 229,757 237,445 222,085 19 Term 121,270 137,056 179,557' 180,708 167,324' 148,743 172,322 162,427 172,871 171,596 182,798 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 A3 3 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1989 1990 AAggeennccyy 11998855 11998866 11998877 11998888 Nov. Dec. Jan. Feb. Mar. 1 Federal and federally sponsored agencies 293,905 307,361 341,386 381,498 412,234 411,805 414,414 420,309 420,246 2 Federal agencies 36,390 36,958 37,981 35,668 35,855 35,664 34,995 42,974 42,491 3 Defense Department1 71 33 13 8 7 7 7 7 7 4 Export-Import Bank2,3 15,678 14,211 11,978 11,033 10,990 10,985 10,985 10,985 11,016 5 Federal Housing Administration4 115 138 183 150 308 328 239 280 318 6 Government National Mortgage Association participation certificates3 2,165 2,165 1,615 0 0 0 0 0 0 7 Postal Service6 1,940 3,104 6,103 6,142 6,445 6,445 6,445 6,445 6,445 8 Tennessee Valley Authority 16,347 17,222 18,089 18,335 18,105 17,899 17,319 25,257 24,705 9 United States Railway Association 74 85 0 0 0 0 0 0 0 10 Federally sponsored agencies7 257,515 270,553 303,405 345,830 376,379 376,141 0 377,335 377,755 11 Federal Home Loan Banks 74,447 88,758 115,727 135,836 138,229 136,087 133,699 132,975 131,526 12 Federal Home Loan Mortgage Corporation 11,926 13,589 17,645 22,797 27,018 26,148 25,298 25,017 26,152 N Federal National Mortgage Association 93,896 93,563 97,057 105,459 115,774 116,064 115,164 116,207 116,815 14 Farm Credit Banks8 68,851 62,478 55,275 53,127 54,131 54,864 55,809 53,790 53,732 15 Student Loan Marketing Association9 8,395 12,171 16,503 22,073 27,688 28,705 30,908 30,806 30,988 16 Financing Corporation10 0 0 1,200 5,850 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation 0 0 0 690 847 847 847 847 847 18 Resolution Funding Corporation12 0 0 0 0 4,522 4,522 9,524 9,524 9,524 MEMO 19 Federal Financing Bank debt" 153,373 157,510 152,417 142,850 135,213 134,873 134,263 133,567 135,448 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 15,670 14,205 11,972 11,027 10,984 10,979 1100,,997799 1100,,997799 1111,,001100 21 Postal Service6 1,690 2,854 5,853 5,892 6,195 6,195 6,195 6,195 6,195 22 Student Loan Marketing Association 5,000 4,970 4,940 4,910 4,880 4,880 4,880 4,880 4,880 23 Tennessee Valley Authority 14,622 15,797 16,709 16,955 16,725 16,519 15,939 15,877 15,325 24 United States Railway Association 74 85 0 0 0 0 0 0 0 Other Lending14 25 Fanners Home Administration 64,234 65,374 59,674 58,4% 53,311 53,311 53,461 52,831 52,726 26 Rural Electrification Administration 20,654 21,680 21,191 19,246 19,249 19,265 19,212 19,219 19,221 27 31,429 32,545 32,078 26,324 23,869 23,724 23,597 23,586 26,091 1. Consists of mortgages assumed by the Defense Department between 1957 10. The Financing Corporation, established in August 1987 to recapitalize the and 1963 under family housing and homeowners assistance programs. Federal Savings and Loan Insurance Corporation, undertook its first borrowing in 2. Includes participation certificates reclassified as debt beginning Oct. 1,1976. October 1987. 3. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget thereafter. 11. The Farm Credit Financial Assistance Corporation (established in January 4. Consists of debentures issued in payment of Federal Housing Administration 1988 to provide assistance to the Farm Credit System) undertook its first insurance claims. Once issued, these securities may be sold privately on the borrowing in July 1988. securities market. 12. The Resolution Funding Corporation, established by the Financial Institu- 5. Certificates of participation issued before fiscal 1969 by the Government tions Reform, Recovery, and Enforcement Act of 1989, undertook its first National Mortgage Association acting as trustee for the Farmers Home Admin- borrowing in October 1989. istration; Department of Health, Education, and Welfare; Department of Housing 13. Includes FFB purchases of agency assets and guaranteed loans; the latter and Urban Development; Small Business Administration; and the Veterans contain loans guaranteed by numerous agencies with the guarantees of any Administration. particular agency being generally small. The Fanners Home Administration item 6. Off-budget. consists exclusively of agency assets, while the Rural Electrification Administra- 7. Includes outstanding noncontingent liabilities: notes, bonds, and deben- tion entry contains both agency assets and guaranteed loans. tures. Some data are estimated. 14. The FFB, which began operations in 1974, is authorized to purchase or sell 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, obligations issued, sold, or guaranteed by other federal agencies. Since FFB shown in line 17. incurs debt solely for the purpose of lending to other agencies, its debt is not 9. Before late 1981, the Association obtained financing through the Federal included in the main portion of the table in order to avoid double counting. Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is shown on line 21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • July 1990 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1989 1990 TTyyppee ooff iissssuuee oorr iissssuueerr,, 11998877 11998888 11998899 oorr uussee Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 AU issues, new and refunding1 102,407 114,522 113,646 10,818 9,075 9,564 13,636 6,694 6,329 9,880 7,996 Type of issue 2 General obligation 30,589 30,312 35,774 3,500 3,273 3,328 2,158 2,675 3,010 3,199 3,326 3 Revenue 71,818 84,210 77,873 7,318 5,802 6,237 11,478 4,019 3,319 6,681 4,670 Type of issuer 4 State 10,102 8,830 11,819 764 1,330 930 911 712 1,196 707 1,387 5 Special district and statutory authority2 65,460 74,409 71,022 7,567 4,770 5,473 9,391 4,744 3,277 6,247 4,366 6 Municipalities, counties, and townships 26,845 31,193 30,805 2,487 2,975 3,161 3,334 1,238 1,856 2,926 2,243 7 Issues for new capital, total 56,789 79,665 84,062 7,470 7,266 7,777 10,195 6,263 5,635 6,667 7,457 Use of proceeds 8 Education 9,524 15,021 15,133 1,639 1,006 1,058 1,495 1,374 1,420 1,018 1,003 9 Transportation 3,677 6,825 6,870 976 280 675 645 98 511 1,158 1,193 10 Utilities and conservation 7,912 8,496 11,427 622 718 1,137 2,219 1,747 718 502 970 11 Social welfare 11,106 19,027 16,703 1,242 1,803 1,441 2,518 1,017 432 1,425 n.a. 12 Industrial aid 7,474 5,624 5,036 381 345 444 1,119 200 115 432 n.a. 13 Other purposes 18,020 24,672 28,894 2,610 3,114 3,022 2,199 1,827 2,439 2,132 n.a. 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 1989 1990 TTyyppee ooff iissssuuee oorr iissssuueerr,, 11998877 11998888 11998899 oorr uussee Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 AU issues1 392,339 409,925 233,103 15,100 14,704 24,893 20,706 21,584 15,042' 13,826r 21,294 2 Bonds2 325,838 352,124 201,827 13,065 12,431 21,213 16,466 17,639 12,764r 10,907' 17,500 Type of offering 3 Public, domestic 209,455 201,246 179,069 12,249 11,211 20,085 14,383 16,013 10,712' 10,000 15,500 4 Private placement, domestic3 92,070 127,700 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5. Sold abroad 24,308 23,178 22,758 816 1,220 1,128 2,083 1,626 2,052 1,000 2,000 Industry group 6 Manufacturing 61,266 70,595 42,366 2,670 2,247 3,646 3,551 4,193 2,036' 2,389' 3,090 7 Commercial and miscellaneous 49,773 62,070 15,968 1,090 1,393 1,830 1,253 347 655 131 253 8 Transportation 11,974 10,076 3,586 423 30 906 312 1,083 35 53' 386 9 Public utility 23,004 19,318 13,682 705 1,059 1,748 1,022 1,098 1,043' 1,057 317 10 Communication 7,340 5,951 3,859 358 308 632 812 577 23 35 704 11 Real estate and financial 172,474 184,114 122,370 7,819 7,395 12,452 9,516 10,342 8,973' 7,242' 12,750 12 Stocks2 66,508 57,802 32,225 2,035 2,273 3,680 4,240 3,945 2,278 2,919 3,794 Type 13 Preferred 10,123 6,544 6,194 1,013 519 570 160 626 50 167 1,028 14 Common 43,225 35,911 26,030 1,023 1,754 3,110 4,080 3,319 2,228 2,752 2,767 15 Private placement3 13,157 15,346 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Industry group 16 Manufacturing 13,880 7,608 5,081 393 193 190 378 279 835 431 521 17 Commercial and miscellaneous 12,888 8,449 4,428 343 155 728 498 1,045 248 1,017 552 18 Transportation 2,439 1,535 532 0 0 50 0 0 0 0 0 19 Public utility 4,322 1,898 2,297 137 709 465 211 244 106 582 533 20 Communication 1,458 515 471 20 0 0 0 0 0 0 0 21 Real estate and financial 31,521 37,798 19,250 1,020 1,195 2,214 3,153 2,377 1,090 889 2,188 1. Figures which represent gross proceeds of issues maturing in more than one 3. Data are not available on a monthly basis. Before 1987, annual totals include year, are principal amount or number of units multiplied by offering price. underwritten issues only. Excludes secondary offerings, employee stock plans, investment companies other SOURCES. IDD Information Services, Inc., the Board of Governors of the than closed-end, intracorporate transactions, equities sold abroad, and Yankee Federal Reserve System, and before 1989, the U.S. Securities and Exchange bonds. Stock data include ownership securities issued by limited partnerships. Commission. 2. Monthly data include only public offerings. 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 1989 1990 IItteemm 11998888 11998899 Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar. INVESTMENT COMPANIES1 1 Sales of own shares2 271,237 306,445 26,800 23,911 23,872 24,673 30,982 35,620 26,118 28,817 2 Redemptions of own shares3 267,451 272,165 22,262 21,499 21,702 19,573 24,967 27,331 20,978 23,777 3 Net sales 3,786 34,280 4,538 2,412 2,170 5,100 6,015 8,289 5,140 5,040 4 Assets4 472,297 553,871 539,553 539,814 534,922 549,892 553,871 535,165 542,725 549,638 5 Cash position3 45,090 44,780 47,209 47,163 46,146 47,875 44,780 48,865 51,356 50,454 6 Other 427,207 509,091 492,344 492,651 488,776 502,017 509,091 486,300 491,369 499,184 1. Data on sales and redemptions exclude money market mutual funds but 4. Market value at end of period, less current liabilities. include limited maturity municipal bond funds. Data on asset positions exclude 5. Also includes all U.S. government securities and other short-term debt both money market mutual funds and limited maturity municipal bond funds. securities. 2. Includes reinvestment of investment income dividends. Excludes reinvest- NOTE. Investment Company Institute data based on reports of members, which ment of capital gains distributions and share issue of conversions from one fund comprise substantially all open-end investment companies registered with the to another in the same group. Securities and Exchange Commission. Data reflect newly formed companies after 3. Excludes share redemption resulting from conversions from one fund to their initial offering of securities. another in the same group. SOURCE. Survey of Current Business (Department of Commerce). 1.48 CORPORATE PROFITS AND THEIR DISTRIBUTION Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1988 1989 1990 AAccccoouunntt 11998877 11998888 11998899 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 1 Corporate profits with inventory valuation and capital consumption adjustment 298.7 328.6 301.3 325.3 330.9 340.2 316.3 307.8 295.2 285.9' 287.8 2 Profits before tax 266.7 306.8 290.6 305.3 314.4 318.8 318.0 296.0 275.0 273.7' 281.6 3 Profits tax liability 124.7 137.9 129.7 138.4 141.2 143.2 144.4 134.9 122.6 116.9 124.6 4 Profits after tax 142.0 168.9 160.9 166.9 173.2 175.6 173.6 161.1 152.4 156.7 157.0 5 Dividends 98.7 110.4 122.1 108.6 112.2 115.2 118.5 120.9 123.3 125.6 128.1 6 Undistributed profits 43.3 58.5 38.9 58.3 61.1 60.4 55.1 40.2 29.1 31.1 28.9 7 Inventory valuation -18.9 -25.0 n.a. -28.8 -30.4 -20.1 -38.3 -21.0 n.a. n.a. n.a. 8 Capital consumption adjustment 50.9 46.8 29.3 48.9 46.9 41.5 36.6 32.3 26.5 21.9 17.4 Source. Survey of Current Business (Department of Commerce). 1.50 TOTAL NONFARM BUSINESS EXPENDITURES on New Plant and Equipment • Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1988 1989 1990 IInndduussttrryy 11998888 11998899 11999900 Q3 Q4 Q1 Q2 Q3 Q4 Ql Q2 1 Total nonfarm business 430.76 475.52 512.82 435.61 442.11 459.47 470.86 484.93 486.80 502.65 509.08 Manufacturing 2 Durable goods industries 78.30 83.68 85.48 79.15 80.56 81.26 82.97 85.66 84.84 86.35 83.92 3 Nondurable goods industries 88.01 100.86 108.02 89.62 92.76 93.96 98.57 102.00 108.92 105.30 105.74 Nonmanufacturing 4 Mining 12.66 12.52 13.31 12.53 12.38 12.15 12.70 12.59 12.65 13.07 13.55 Transportation 5 Railroad 7.06 8.12 8.61 6.84 7.45 8.02 7.37 8.16 8.94 8.69 8.32 6 Air 7.28 8.91 12.09 8.09 7.69 7.04 9.49 12.48 6.61 11.11 12.28 7 Other 7.00 7.56 7.88 7.08 6.89 8.07 7.40 7.89 6.87 8.49 7.11 Public utilities 8 Electric 32.03 34.20 35.99 32.07 33.69 33.69 35.34 33.73 34.04 34.95 36.84 9 Gas and other 14.64 16.52 17.15 14.61 15.04 17.12 16.67 15.84 16.46 16.56 16.92 10 Commercial and other2 183.76 203.14 224.30 185.61 185.65 198.15 200.36 206.59 207.46 218.13 224.41 •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

A36 Domestic Nonfinancial Statistics • July 1990 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period 1988 1989 AAccccoouunntt 11998855 11998866 11998877 Q2 Q3 Q4 Qr Q2' Q3' Q4' ASSETS Accounts receivable, gross2 1 Consumer 111.9 134.7 141.1 144.4 146.3 146.2 139.1 143.9 146.3 140.8 2 Business 157.5 173.4 207.4 224.0 223.3 236.5 243.3 250.9 246.8 256.0 3 Real estate 28.0 32.6 39.5 42.5 43.1 43.5 45.1 47.1 48.7 48.9 4 Total 297.4 340.6 388.1 410.9 412.7 426.2 427.5 441.9 441.8 445.8 Less: 5 Reserves for unearned income 39.2 41.5 45.3 46.3 48.4 50.0 51.0 52.2 52.9 52.0 6 Reserves for losses 4.9 5.8 6.8 6.8 7.1 7.3 7.4 7.5 7.7 7.7 7 Accounts receivable, net 253.3 293.3 336.0 357.8 357.3 368.9 369.2 382.2 381.3 386.1 8 Mother 45.3 58.6 58.3 70.5 68.7 72.4 75.1 81.4 85.2 91.6 9 Total assets 298.6 351.9 394.2 428.3 426.0 441.3 444.3 463.6 466.4 477.6 LIABILITIES 10 Bank loans 18.0 18.6 16.4 13.3 11.9 15.4 11.3 12.1 12.2 14.5 11 Commercial paper 99.2 117.8 128.4 131.6 129.4 142.0 147.8 149.0 147.2 149.5 Debt 12 Other short-term 12.7 17.5 28.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 13 Long-term 94.4 117.5 137.1 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 14 Due to parent n.a. n.a. n.a. 51.4 51.5 50.6 56.9 59.8 60.3 63.8 15 Not elsewhere classified n.a. n.a. n.a. 139.8 139.3 137.9 133.6 140.5 145.1 147.8 16 All other liabilities 41.5 44.1 52.8 58.7 58.9 59.8 58.1 63.5 61.8 62.6 17 Capital, surplus, and undivided profits 32.8 36.4 31.5 33.5 34.9 35.6 36.6 38.8 39.8 39.4 18 Total liabilities and capital 298.6 351.9 394.2 428.3 426.0 441.3 444.3 463.6 466.4 477.6 1. Components may not add to totals because of rounding. 2. Excludes pools of securitized assets. 1.52 DOMESTIC FINANCE COMPANIES Business Credit Outstanding and Net Change1 Millions of dollars, seasonally adjusted 1989 1990 TTyyppee Oct/ Nov/ Dec/ Jan/ Feb/ Mar. 1 Total 205,992 234,578 258,504 255,726 255,999 258,504 259,467 259,015 261,622 Retail financing of installment sales 2 Automotive 36,139 36,957 39,139 39,185 39,053 39,139 39,252 39,125 39,264 3 Equipment 25,075 28,199 29,674 29,468 29,477 29,674 29,690 29,483 29,789 4 Pools of securitized assets2 n.a. n.a. 698 715 739 698 720 681 704 Wholesale 5 Automotive 30,070 32,357 33,074 34,148 32,660 33,074 30,463 29,491 29,963 6 Equipment 5,578 5,954 6,896 6,845 7,027 6,896 9,183 9,155 9,408 7 All other 8,329 9,312 9,918 9,982 9,963 9,918 9,943 9,877 10,030 8 Pools of securitized assets2 n.a. n.a. 0 0 0 0 0 0 0 Leasing 9 Automotive 22,097 24,875 27,074 27,288 27,461 27,074 26,978 27,161 28,325 10 Equipment 43,493 57,658 68,112 64,835 65,988 68,112 68,904 69,335 68,755 11 Pools of securitized assets n.a. n.a. 1,247 11,,119999 1,093 11,,224477 11,,224422 11,,337777 11,,339933 12 Loans on commercial accounts receivable and factored commercial accounts receivable 18,170 18,103 19,081 19,131 18,996 19,081 18,975 19,155 19,426 13 All other business credit 17,042 21,162 23,590 22,930 23,543 23,590 24,118 24,176 24,565 Net change (during period) 14 33,866 22,434 22,580 893 273 2,504 -1,255 -452 2,607 Retail financing of installment sales 15 Automotive 9,925 819 2,182 -75 -133 87 112 -127 140 16 Equipment 2,056 1,386 1,475 -105 9 197 16 -207 306 17 Pools of securitized assets2 n.a. n.a. -26 -40 24 -41 22 -39 23 Wholesale 18 Automotive 7,158 2,288 716 -1,806 -1,488 414 -2,611 -972 472 19 Equipment 250 377 940 215 182 -131 68 -28 254 20 All other 1,293 983 605 34 -19 -45 26 -66 153 21 Pools of securitized assets2 n.a. n.a. 0 0 0 0 0 0 0 Leasing 22 Automotive 2,174 2,777 2,201 483 174 -387 -97 183 1,164 23 Equipment 5,271 9,752 9,187 1,733 1,153 2,124 792 431 -580 24 Pools of securitized assets2 n.a. n.a. 526 251 -106 154 -5 135 16 25 Loans on commercial accounts receivable and factored commercial accounts receivable 2,245 -65 979 66 -136 86 -107 180 272 26 All other business credit 3,498 4,119 3,796 137 614 46 528 59 388 1. These data also appear in the Board's G.20 (422) release. For address, see 2. Data on pools of securitized assets are not seasonally adjusted, inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Real Estate A37 1.53 MORTGAGE MARKETS Millions of dollars; exceptions noted. 1989 1990 IItteemm 11998877 11998888 11998899 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) 137.0 150.0 159.6 153.1 152.8 162.7 148.5 148.9 138.2 155.5 2 Amount of loan (thousands of dollars) 100.5 110.5 117.0 111.3 110.4 119.9 107.3 109.0 100.9 114.6 3 Loan/price ratio (percent) 75.2 75.5 74.5 73.2 73.0 74.4 73.4 74.6 74.7 75.4 4 Maturity (years) 27.8 28.0 28.1 27.3 27.1 27.9 27.1 27.4 26.6 26.6 5 Fees and charges (percent of loan amount) 2.26 2.19 2.06 1.95 1.81 2.18 1.85 1.87 1.% 2.00 6 Contract rate (percent per year) 8.94 8.81 9.76 9.77 9.78 9.70 9.59 9.56 9.70 9.83 Yield (percent per year) 7 OTS series3 9.31 9.18 10.11 10.11 10.09 10.07 9.91 9.88 10.03 10.17 8 HUD series4 10.17 10.30 10.21 9.79 9.72 9.72 10.00 10.12 10.20 10.46 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (HUD series)5 10.16 10.49 10.24 9.73 9.69 9.72 10.01 10.22 10.30 10.75 10 GNMA securities 9.44 9.83 9.71 9.21 9.07 9.07 9.24 9.44 9.53 9.77 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 95,030 101,329 104,974 108,180 109,076 110,721 111,329 111,628 112,353 112,463 12 FHA/V A-insured 21,660 19,762 19,640 19,843 19,953 20,283 20,471 20,614 20,688 20,707 13 Conventional 73,370 81,567 85,335 88,337 89,123 90,438 90,858 91,014 91,665 91,756 Mortgage transactions (during period) 14 Purchases 20,531 23,110 22,518 2,267 2,376 2,982 2,214 1,537 1,945 1,705 Mortgage commitments7 15 Contracted (during period) 25,415 23,435 27,409 2,963 2,536 2,495 1,787 3,216 3,789 5,700 16 Outstanding (end of period) 4,886 2,148 6,037 6,548 6,645 6,037 5,619 4,977 6,765 10,534 FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)* 17 Total 12,802 15,105 20,105 21,342 21,809 21,852 20,361 20,112 n.a. n.a. 18 FHA/VA 686 620 590 588 588 584 578 572 n.a. n.a. 19 Conventional 12,116 14,485 19,516 20,754 21,221 21,269 19,782 19,540 n.a. n.a. Mortgage transactions (during period) 20 Purchases 76,845 44,077 78,588 7,884 7,653 8,718 6,423 5,676 n.a. n.a. 21 Sales 75,082 39,780 73,446 7,058 7,058 8,526 7,764' 5,796r 6,121 5,356 Mortgage commitments9 22 Contracted (during period) 71,467 66,026 88,519 7,555 10,949 7,820 8,020 5,922 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

A38 Domestic Nonfinancial Statistics • July 1990 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1989 Type of holder, and type of property 1987 1989 Q4 Q1 Q2 Q3 1 All holders 2,977,293 3,268,285 3,524,474 3,268,285 3,328,824 3,391,259 3,454,053 2 1- to 4-family 1,959,607 2,189,475 2,384,076 2,189,475 2,230,006 2,281,317 2,331,366 3 Multifamily 273,954 290,355 306,652 290,355 2%, 139 297,860 302,121 4 Commercial 654,863 701,652 747,277 701,652 716,695 725,341 733,988 5 Farm 88,869 86,803 86,468 86,803 85,984 86,741 86,578 6 Selected financial institutions 1,664,211 1,831,446 1,919,269 1,831,446 1,859,663 1,884,903 1,901,728 7 Commercial banks 591,369 669,160 756,786 669,160 688,662 715,049 737,979 8 1- to 4-family 276,270 314,283 358,652 314,283 324,681 338,872 349,739 9 Multifamily 33,330 34,131 36,994 34,131 34,172 34,954 36,075 10 Commercial 267,340 305,242 343,841 305,242 313,941 324,878 335,296 11 Farm 14.429 15,504 17,299 15,504 15,868 16,345 16,869 12 Savings institutions3 860,467 929,647 921,410 929,647 936,091 933,694 927,982 13 1- to 4-family 602,408 678,263 675,891 678,263 682,658 684,828 680,572 14 Multifamily 106,359 111,302 108,534 111,302 112,507 110,009 109,353 15 Commercial 150,943 139,416 136,343 139,416 140,255 138,201 137,406 16 Farm 757 666 641 666 671 656 651 17 Life insurance companies 212,375 232,639 241,073 232,639 234,910 236,160 235,767 18 1- to 4-family 13,226 15,284 13,531 15,284 12,690 12,745 13,045 19 Multifamily 22,524 23,562 26,646 23,562 24,636 25,103 25,913 20 Commercial 166,722 184,124 191.369 184,124 188,073 188,756 187,208 21 Farm 9,903 9,669 9,527 9,669 9,511 9,556 9,601 22 Finance companies4 40,349 43,521 50,728 43,521 45,389 47,251 48,906 23 Federal and related agencies 192,721 200,570 212.370 200,570 199,847 201,909 206,673 24 Government National Mortgage Association.. 444 26 24 26 26 24 23 2 2 5 6 M 1- u t l o t i 4 fa - m fa i m ly i ly 41 2 9 5 26 0 24 0 26 0 26 0 24 0 23 0 27 Farmers Home Administration 43,051 42,018 42,080 42,018 41,780 40,711 41,117 28 1- to 4-family 18,169 18,347 19,091 18,347 18,347 18,391 18,405 29 Multifamily 8,044 8,513 9,168 8,513 8,615 8,778 8,916 30 Commercial 6,603 5,343 4,463 5,343 5,101 3,885 4,366 31 Farm 10,235 9,815 9,358 9,815 9,717 9,657 9,430 32 Federal Housing and Veterans Administration 5,574 5,973 6,220 5,973 6,075 6,424 6,023 33 1- to 4-family 2,557 2,672 3,009 2,672 2,550 2,827 2,900 34 Multifamily 3,017 3,301 3,211 3,301 3,525 3,597 3,123 35 Federal National Mortgage Association 96,649 103,013 110,970 103,013 101,991 103.309 107,052 36 1- to 4-family 89,666 95,833 102,863 95,833 94,727 95,714 99,168 37 Multifamily 6,983 7,180 8,107 7,180 7,264 7,595 7,884 38 Federal Land Banks 34,131 32,115 30,788 32,115 31,261 31,467 30,943 39 1- to 4-family 2,008 1,890 1,889 1,890 1,839 1,851 1,821 40 Farm 32,123 30,225 28,899 30,225 29,422 29,616 29,122 41 Federal Home Loan Mortgage Corporation .. 12,872 17,425 22,289 17,425 18,714 19,974 21,515 42 1- to 4-family 11.430 15,077 19,182 15,077 16,192 17,305 18,493 43 Multifamily 1,442 2,348 3,107 2,348 2,522 2,669 3,022 44 Mortgage pools or trusts6 718,297 810,887 931,619 810,887 839,684 861,827 898,388 45 Government National Mortgage Association.. 317,555 340,527 374,650 340,527 348,622 353,154 361,291 46 1- to 4-family 309,806 331,257 362,865 331,257 337,563 341,951 349,830 47 Multifamily 7,749 9,270 11,785 9,270 11,059 11,203 11,461 48 Federal Home Loan Mortgage Corporation .. 212,634 226,406 266,407 226,406 234,695 242,789 256,896 49 1- to 4-family 205,977 219,988 259,443 219,988 228,389 236,404 250,123 50 Multifamily 6,657 6,418 6,965 6,418 6,306 6,385 6,773 51 Federal National Mortgage Association 139,960 178,250 216,600 178,250 188,071 196,501 208,894 52 1- to 4-family 137,988 172,331 207,765 172,331 181,352 188,774 200,302 53 Multifamily 1,972 5,919 8,835 5,919 6,719 7,727 8,592 54 Farmers Home Administration 245 104 79 104 96 85 78 5 5 6 5 M 1- u t l o t i 4 fa -f m a i m ly i ly 1201 2 0 6 2 0 3 2 0 6 2 0 4 2 0 3 2 0 2 5 5 7 8 C Fa o r m m m ercial 6 6 3 1 4 3 0 8 2 34 2 4 3 0 8 3 3 4 8 2 3 6 6 2 3 2 4 59 Individuals and others7 402,064 425,382 461,216 425,382 429,630 442,620 447,264 60 1- to 4-family 242,053 258,598 285,966 258,598 260,768 272.310 275,694 61 Multifamily 75,458 78,411 83,299 78,411 78,814 79,840 81,009 62 Commercial 63,192 67,489 71,239 67,489 69,291 69,595 69,690 63 Farm 21,361 20,884 20,711 20,884 20,757 20,875 20,871 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. Includes private pools which are not 3. Includes savings banks and savings and loan associations. Beginning 1987:1, shown as a separate line item. data reported by FSLIC-insured institutions include loans in process and other 7. Other holders include mortgage companies, real estate investment trusts, contra assets (credit balance accounts that must be subtracted from the corre- state and local credit agencies, state and local retirement funds, noninsured sponding gross asset categories to yield net asset levels). 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

Consumer Installment Credit A39 1.55 CONSUMER INSTALLMENT CREDIT1 Total Outstanding, and Net Change, seasonally adjusted Millions of dollars, amounts outstanding, end of period 1989 1990 HHoollddeerr,, aanndd ttyyppee ooff ccrreeddiitt 11998888 11998899 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Seasonally adjusted 11 TToottaall 664,701 716,624 700,000 703,518 705,703 710,133 713,903 716,624 718,824 718,886 721,506 22 AAuuttoommoobbiillee 284,556 290,770 289,882 289,961 288,839 290,210 290,972 290,770 291,191 289,921 291,738 33 RReevvoollvviinngg 174,057 197,110 186,284 189,185 190,378 191,734 194,679 197,110 199,270 200,056 202,078 44 MMoobbiillee hhoommee 25,201 22,343 23,240 22,734 22,661 22,621 22,197 22,343 22,751 22,784 22,801 55 OOtthheerr 180,887 206,401 200,594 201,638 203,825 205,568 206,055 206,401 205,611 206,126 204,889 Not seasonally adjusted 6 Total 674,719 727,561 698,232 705,908 708,370 711,295 715,145 727,561 722,024 718,079 714,187 By major holder 7 Commercial banks 324,792 343,865 325,893 330,488 332,502 335,657 337,285 343,865 342,266 339,418 334,597 8 Finance companies 146,212 140,832 144,425 145,033 146,2% 143,293 142,802 140,832 140,740 139,115 137,857 9 Credit unions 88,340 90,875 90,004 91,017 91,285 91,291 90,%5 90,875 90,452 90,127 90,043 10 Retailers 48,302 42,638 37,668 37,942 37,400 37,045 37,906 42,638 39,959 37,904 37,677 11 Savings institutions 63,399 57,228 60,454 60,243 59,556 58,720 58,236 57,228 56,423 55,788 54,690 12 Gasoline companies 3,674 3,935 4,077 4,255 4,052 3,947 3,853 3,935 4,013 3,803 3,792 13 Pools of securitized assets n.a. 48,188 35,711 36,930 37,279 41,342 44,098 48,188 48,171 51,924 55,531 By major type of credit3 14 Automobile 284,328 290,421 290,549 292,948 293,114 293,664 292,543 290,421 289,269 288,326 287,333 15 Commercial banks 123,392 126,613 124,389 126,571 126,972 128,213 128,111 126,613 127,075 127,149 126,633 16 Finance companies 97,245 82,721 89,363 89,968 90,217 86,655 85,725 82,721 81,918 80,227 79,523 17 Pools of securitized assets n.a. 18,191 12,770 12,072 11,785 15,024 15,376 18,191 17,827 18,931 19,595 18 Revolving 183,909 208,188 184,049 187,917 188,684 189,913 194,640 208,188 203,415 200,276 199,754 19 Commercial banks 123,020 130,956 116,214 118,083 119,413 120,484 122,728 130,956 128,384 124,821 121,756 20 Retailers 43,697 37,967 33,262 33,503 32,961 32,618 33,432 37,%7 35,359 33,378 33,169 21 Gasoline companies 3,674 3,935 4,077 4,255 4,052 3,947 3,853 3,935 4,013 3,803 3,792 22 Pools of securitized assets n.a. 22,977 17,785 19,327 19,731 20,371 22,186 22,977 23,450 26,204 29,150 23 Mobile home 25,143 22,283 23,321 22,800 22,808 22,849 22,319 22,283 22,865 22,877 22,518 24 Commercial banks 9,025 9,155 9,045 9,046 9,121 9,130 9,144 9,155 9,109 9,162 9,145 25 Finance companies 7,191 4,716 5,649 5,119 5,106 5,205 4,682 4,716 5,411 5,410 5,178 26 Other 181,339 206,669 200,313 202,243 203,764 204,869 205,643 206,669 206,475 206,600 204,582 27 Commercial banks 69,355 77,141 76,245 76,788 76,9% 77,830 77,302 77,141 77,698 78,286 77,063 28 Finance companies 41,776 53,395 49,413 49,946 50,973 51,433 52,395 53,395 53,411 53,478 53,156 29 Retailers 4,605 4,671 4,406 4,439 4,439 4,427 4,474 4,671 4,600 4,526 4,508 30 Pools of securitized assets n.a. 7,020 5,156 5,531 5,763 5,947 6,536 7,020 6,894 6,789 6,786 1. The Board's series cover most short- and intermediate-term credit extended 2. Outstanding balances of pools upon which securities have been issued; these to individuals that is scheduled to be repaid (or has the option of repayment) in balances are no longer carried on the balance sheets of the loan originator. two or more installments. 3. Totals include estimates for certain holders for which only consumer credit These data also appear in the Board's G.19 (421) release. For address, see totals are available. inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • July 1990 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent unless noted otherwise 1989 1990 IItteemm 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb. Mar. INTEREST RATES Commercial banks2 1 48-month new car 10.45 10.85 12.07 n.a. n.a. 11.94 n.a. n.a. 11.80 n.a. 2 24-month personal 14.22 14.68 15.44 n.a. n.a. 15.42 n.a. n.a. 15.27 n.a. 3 120-month mobile home3 13.38 13.54 14.11 n.a. n.a. 13.97 n.a. n.a. 13.91 n.a. 4 Credit card 17.92 17.78 18.02 n.a. n.a. 18.07 n.a. n.a. 18.12 n.a. Auto finance companies 5 New car 10.73 12.60 12.62 12.42 13.04 13.27 13.27 12.64 12.67 12.31 6 Used car 14.60 15.11 16.18 16.22 16.17 16.09 16.10 15.77 15.91 15.97 OTHER TERMS4 Maturity (months) 7 New car 53.5 56.2 54.2 53.1 54.4 55.1 55.1 54.7 54.7 54.3 8 Used car 45.2 46.7 46.6 46.2 45.8 45.6 45.5 45.5 46.4 46.4 Loan-to-value ratio 9 New car 93 94 91 88 88 89 89 89 88 88 10 Used car 98 98 97 96 96 % % 95 96 95 Amount financed (dollars) 11 New car 11,203 11,663 12,001 11,841 11,965 12,279 12,301 12,381 12,053 12,216 12 Used car 7,420 7,824 7,954 7,856 7,904 8,063 8,0% 8,040 8,065 8,132 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

Flow of Funds A41 1.57 FUNDS RAISED IN U.S. CREDIT MARKETS Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1988 1989 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998855 11998866 11998877 11998888 11998899 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors 846.3 831.1 693.2 754.5 695.2 817.5 749.3 734.2 770.6 641.7 693.6 675.1 By sector and instrument 2 U.S. government 223.6 215.0 144.9 157.5 149.8 113.7 162.5 142.1 199.9 70.9 149.0 179.4 3 Treasury securities 223.7 214.7 143.4 140.0 150.0 106.0 141.6 100.5 201.1 65.8 149.1 184.0 4 Agency issues and mortgages -.1 .4 1.5 17.4 -.2 7.7 20.9 41.6 -1.2 5.1 -.2 -4.6 5 Private domestic nonfinancial sectors 622.7 616.1 548.3 597.1 545.4 703.8 586.8 592.2 570.6 570.8 544.7 495.7 6 Debt capital instruments 451.4 460.3 458.5 454.6 393.8 551.0 458.8 432.4 418.0 396.9 374.8 385.6 7 Tax-exempt obligations 135.4 22.7 34.1 34.0 24.2 37.9 34.8 34.3 29.3 23.0 32.2 12.4 8 Corporate bonds 73.8 121.3 99.9 114.1 114.2 135.2 110.9 98.4 100.0 127.9 102.4 126.4 9 Mortgages 242.2 316.3 324.5 306.5 255.5 377.9 313.1 299.7 288.7 246.1 240.2 246.9 10 Home mortgages 156.8 218.7 234.9 231.0 196.1 299.8 230.9 214.0 206.6 197.6 180.6 199.8 11 Multifamily residential 29.8 33.5 24.4 16.7 15.8 14.5 19.4 17.3 27.4 7.9 19.0 8.7 12 Commercial 62.2 73.6 71.6 60.8 43.9 65.2 65.4 67.7 59.1 38.5 40.6 37.3 13 Farm -6.6 -9.5 -6.4 -2.1 -.3 -1.6 -2.6 .7 -4.4 2.1 .0 1.0 14 Other debt instruments 171.3 155.8 89.7 142.5 151.6 152.8 128.0 159.8 152.6 173.9 169.9 110.0 15 Consumer credit 82.5 58.0 32.9 51.1 46.1 51.9 35.5 73.1 34.8 46.0 34.5 69.2 16 Bank loans n.e.c 38.6 66.7 10.8 38.4 33.0 58.8 7.3 66.6 23.1 29.9 59.0 20.0 17 Open market paper 14.6 -9.3 2.3 11.6 20.8 6.8 17.1 20.0 41.4 39.2 16.7 -14.3 18 Other 35.6 40.5 43.8 41.5 51.7 35.2 68.0 .1 53.3 58.7 59.7 35.1 19 By borrowing sector 622.7 616.1 548.3 597.1 545.4 703.8 586.8 592.2 570.6 570.8 544.7 495.7 20 State and local governments 90.9 36.2 33.6 29.8 24.7 37.0 28.1 30.6 29.7 27.6 29.5 11.9 7,1 Households 284.6 289.2 271.9 289.8 258.5 346.2 291.4 283.5 264.5 239.4 258.4 271.9 22 Nonfinancial business 247.2 290.7 242.8 277.5 262.2 320.6 267.3 278.0 276.4 303.7 256.8 211.9 73 Farm -14.5 -16.3 -10.6 -7.5 .3 -3.3 -2.2 -11.8 -2.2 .2 4.7 -1.5 24 Nonfarm noncorporate 129.3 103.2 107.9 87.4 65.9 83.6 100.5 80.4 85.9 65.8 67.2 44.7 25 Corporate 132.4 203.7 145.5 197.5 196.0 240.3 169.0 209.4 192.8 237.7 184.9 168.7 26 Foreign net borrowing in United States 1.2 9.7 4.9 6.9 8.0 5.4 4.1 13.3 -1.1 -1.9 24.3 10.6 7,7 Bonds 3.8 3.1 7.4 6.9 5.1 2.6 5.9 5.1 3.2 10.7 8.4 -1.9 78 Bank loans n.e.c -2.8 -1.0 -3.6 -1.8 1.0 -3.3 .0 -5.7 4.9 1.7 -1.2 -1.4 29 Open market paper 6.2 11.5 2.1 9.6 12.3 6.5 10.3 21.0 12.1 -8.1 20.4 24.9 30 U.S. government loans -6.0 -3.9 -1.0 -7.8 -10.5 -.4 -12.1 -7.1 -21.4 -6.3 -3.3 -10.9 31 Total domestic plus foreign 847.5 840.9 698.1 761.4 703.2 822.9 753.3 747.6 769.5 639.8 718.0 685.7 Financial sectors 32 Total net borrowing by financial sectors 201.3 318.9 315.0 246.5 201.5 245.9 216.3 302.5 384.0 119.0 141.1 161.9 By instrument 33 U.S. government related 101.5 187.9 185.8 119.8 140.4 86.3 128.6 156.7 205.7 101.4 129.7 124.8 34 Sponsored credit agency securities 20.6 15.2 30.2 44.9 25.0 11.1 46.5 62.3 84.9 12.5 10.0 -7.4 35 Mortgage pool securities 79.9 173.1 156.4 74.9 115.4 75.1 82.1 94.4 120.8 88.9 119.6 132.2 36 Loans from U.S. government 1.1 -.4 -.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 37 Private financial sectors 99.7 131.0 129.2 126.7 61.1 159.6 87.7 145.8 178.3 17.6 11.4 37.1 38 Corporate bonds 50.9 82.9 78.9 51.7 38.7 71.1 32.5 43.0 52.7 31.4 25.5 45.0 39 Mortgages .1 .1 .4 .3 -.1 .1 -.1 1.2 .3 .0 .0 -.5 40 Bank loans n.e.c 2.6 4.0 -3.3 1.4 1.3 5.7 -5.6 -.3 3.0 .3 1.7 .1 41 Open market paper 32.0 24.2 28.8 53.6 32.2 70.5 35.1 70.4 53.2 2.8 27.9 44.9 42 Loans from Federal Home Loan Banks 14.2 19.8 24.4 19.7 -11.0 12.3 25.8 31.4 69.1 -16.9 -43.7 -52.4 By sector 43 201.3 318.9 315.0 246.5 201.5 245.9 216.3 302.5 384.0 119.0 141.1 161.9 44 Sponsored credit agencies 21.7 14.9 29.5 44.9 25.0 11.1 46.5 62.3 84.9 12.5 10.0 -7.4 45 Mortgage pools 79.9 173.1 156.4 74.9 115.4 75.1 82.1 94.4 120.8 88.9 119.6 132.2 46 Private financial sectors 99.7 131.0 129.2 126.7 61.1 159.6 87.7 145.8 178.3 17.6 11.4 37.1 47 Commercial banks -4.9 -3.6 7.1 -3.9 .7 -1.6 -.9 3.7 -13.4 -.9 12.3 4.7 48 Bank affiliates 16.6 15.2 14.3 5.2 7.5 22.4 6.1 .8 6.4 6.5 16.5 .8 49 Savings and loan associations 17.3 20.9 19.6 19.9 -14.6 19.1 24.1 26.3 71.3 -16.2 -48.3 -65.2 50 Mutual savings banks 1.5 4.2 8.1 1.9 -1.6 1.1 .5 3.8 -2.8 -1.1 -3.3 .8 51 Finance companies 57.2 54.5 40.3 67.0 49.0 85.4 40.7 63.6 78.4 32.8 29.7 55.0 5? REITs .5 1.0 .8 4.1 -1.2 1.7 -5.9 15.0 -.9 -2.2 -1.4 -.4 53 SCO Issuers 11.5 39.0 39.1 32.5 21.3 31.5 23.1 32.5 39.3 -1.4 5.9 41.5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • July 1990 1.57—Continued 1988 1989 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998855 11998866 11998877 11998888 11998899 Q2 Q3 Q4 Ql Q2 Q3 Q4 All sectors 54 Total net borrowing 1,048.8 1,159.8 1,013.2 1,007.9 904.7 1,068.8 969.7 1,050.1 1,153.4 758.8 859.1 847.6 55 U.S. government securities 324.2 403.4 331.5 277.2 290.2 200.0 291.1 298.8 405.6 172.3 278.6 304.2 56 State and local obligations 135.4 22.7 34.1 34.0 24.2 37.9 34.8 34.3 29.3 23.0 32.2 12.4 57 Corporate and foreign bonds 128.4 207.3 186.3 172.7 157.9 208.8 149.3 146.4 155.9 170.0 136.3 169.5 58 Mortgages 242.2 316.4 324.9 306.7 255.4 378.0 313.0 300.8 289.0 246.1 240.3 246.4 59 Consumer credit 82.5 58.0 32.9 51.1 46.1 51.9 35.5 73.1 34.8 46.0 34.5 69.2 60 Bank loans n.e.c 38.3 69.7 3.8 38.0 35.3 61.2 1.7 60.7 31.1 31.9 59.6 18.7 61 Open market paper 52.8 26.4 33.2 74.9 65.3 83.9 62.5 111.5 106.8 34.0 65.0 55.5 62 Other loans 45.0 56.1 66.5 53.4 30.2 47.1 81.7 24.4 101.0 35.5 12.7 -28.2 63 MEMO: U.S. government, cash balance 14.4 .0 -7.9 10.4 -10.7 1.2 10.6 -17.9 -22.5 43.7 -16.6 -47.5 Totals net of changes in U.S. government cash balances 64 Net borrowing by domestic nonfinancial 831.9 831.2 701.1 744.2 706.0 816.3 738.6 752.2 793.1 598.0 710.2 722.6 65 Net borrowing by U.S. government 209.3 215.0 152.8 147.1 160.5 112.5 151.8 160.0 222.4 27.2 165.6 227.0 External corporate equity funds raised in United States 66 Total net share issues 20.1 90.5 14.3 -117.9 -60.9 -133.7 -73.5 -163.5 -163.9 -48.8 -40.8 10.0 67 Mutual funds 84.4 159.0 71.6 -.7 38.2 -6.6 1.5 11.9 3.6 24.0 54.3 70.9 68 All other -64.3 -68.5 -57.3 -117.2 -99.0 -127.0 -75.0 -175.4 -167.4 -72.7 -95.1 -60.9 69 Nonfinancial corporations -81.5 -80.8 -76.5 -130.5 -130.8 -140.0 -92.0 -195.0 -180.0 -105.0 -145.0 -93.0 70 Financial corporations 13.5 11.1 21.4 12.4 14.1 19.0 14.6 13.5 9.0 17.3 16.0 14.0 71 Foreign shares purchased in United States 3.7 1.2 -2.1 .9 17.7 -6.0 2.4 6.1 3.6 15.0 33.9 18.2 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; quarterly data are at seasonally adjusted annual rates. 1988 1989 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11998855 11998866 11998877 11998888 11998899 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 Total funds advanced in credit markets to domestic nonfinancial sectors 846.3 831.1 693.2 754.5 695.2 817.5 749.3 734.2 770.6 641.7 693.6 675.1 By public agencies and foreign 2 Total net advances 202.0 314.0 262.8 215.5 202.8 167.5 181.2 255.8 326.4 -1.1 255.0 223300..77 3 U.S. government securities 45.9 69.4 70.1 85.0 45.9 43.3 24.1 119.6 97.6 -103.9 130.2 59.5 4 Residential mortgages 94.6 170.1 153.2 86.3 129.7 89.9 82.4 105.5 122.9 102.2 139.3 154.3 5 FHLB advances to thrifts 14.2 19.8 24.4 19.7 -11.0 12.3 25.8 31.4 69.1 -16.9 -43.7 -52.4 6 Other loans and securities 47.3 54.7 15.1 24.4 38.2 22.1 49.0 -.7 36.8 17.6 29.2 69.4 Total advanced, by sector 7 U.S. government 17.8 9.7 -7.9 -9.4 -.9 -7.6 4.3 -27.1 -2.4 -3.7 -5.6 8.1 8 Sponsored credit agencies 103.5 187.2 183.4 112.0 127.4 87.7 114.4 152.8 211.0 11.2 157.9 129.5 9 Monetary authorities 18.4 19.4 24.7 10.5 -7.3 5.0 15.5 18.9 5.2 -3.9 -30.7 .1 10 Foreign 62.3 97.8 62.7 102.3 83.6 82.5 47.0 111.2 112.5 -4.6 133.3 93.0 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 101.5 187.9 185.8 119.8 140.4 86.3 128.6 156.7 205.7 101.4 129.7 124.8 12 Foreign 1.2 9.7 4.9 6.9 8.0 5.4 4.1 13.3 -1.1 -1.9 24.3 10.6 Private domestic funds advanced 13 Total net advances 747.0 714.8 621.1 665.8 640.8 741.6 700.8 648.5 648.8 742.2 592.6 579.7 14 U.S. government securities 278.2 333.9 261.4 192.2 244.3 156.7 267.0 179.3 308.0 276.2 148.5 244.7 15 State and local obligations 135.4 22.7 34.1 34.0 24.2 37.9 34.8 34.3 29.3 23.0 32.2 12.4 16 Corporate and foreign bonds 40.8 84.2 87.5 97.6 98.3 117.5 86.8 66.5 80.5 131.0 103.8 78.0 17 Residential mortgages 91.8 82.0 106.1 161.3 82.2 224.5 167.9 125.8 111.1 103.3 60.4 54.2 18 Other mortgages and loans 214.8 211.8 156.5 200.3 180.7 217.4 170.0 274.0 188.9 191.8 204.2 138.0 19 LESS: Federal Home Loan Bank advances 14.2 19.8 24.4 19.7 -11.0 12.3 25.8 31.4 69.1 -16.9 -43.7 -52.4 Private financial intermediation 20 Credit market funds advanced by private financial institutions 579.9 744.0 560.8 561.2 492.4 553.6 429.1 634.9 600.6 492.1 308.7 568.5 21 Commercial banking 186.0 197.5 136.8 155.3 171.6 194.5 118.4 220.5 120.6 158.6 166.6 240.6 72 Savings institutions 87.9 107.6 136.8 120.4 -75.3 135.0 156.9 94.0 62.6 -100.2 -136.3 -127.2 73 Insurance and pension funds 154.4 174.6 210.9 198.0 177.1 182.5 152.2 190.1 257.1 162.7 121.6 166.9 24 Other finance 151.6 264.2 76.3 87.4 219.1 41.6 1.7 130.3 160.4 271.1 156.8 288.2 7,5 Sources of funds 579.9 744.0 560.8 561.2 492.4 553.6 429.1 634.9 600.6 492.1 308.7 568.5 26 Private domestic deposits and RPs 214.3 262.6 144.1 219.9 215.1 103.5 191.3 277.9 146.8 186.8 271.9 254.7 77 Credit market borrowing 99.7 131.0 129.2 126.7 61.1 159.6 87.7 145.8 178.3 17.6 11.4 37.1 78 Other sources 265.9 350.4 287.5 214.6 216.3 290.5 150.1 211.2 275.5 287.7 25.3 276.6 7,9 Foreign funds 19.7 12.9 43.7 9.3 -1.1 94.5 -41.5 45.2 -28.6 -19.4 22.7 20.9 30 Treasury balances 10.3 1.7 -5.8 7.3 -8.3 -16.3 5.6 -4.1 -21.6 26.6 -15.0 -23.1 31 Insurance and pension reserves 131.9 149.3 176.1 177.6 143.7 176.0 87.3 253.9 187.9 123.1 33.8 229.8 32 Other, net 104.1 186.5 73.6 20.4 82.0 36.4 98.8 -83.7 137.7 157.3 -16.2 49.1 Private domestic nonfinancial investors 33 Direct lending in credit markets 266.8 101.8 189.6 231.3 209.5 347.6 359.3 159.4 226.5 267.7 295.4 48.4 34 U.S. government securities 157.8 60.9 100.0 131.8 141.6 78.0 209.3 140.5 194.7 126.8 164.6 80.4 35 State and local obligations 37.7 -21.7 45.6 33.9 14.7 37.4 56.0 22.1 35.8 -9.1 33.0 -.9 36 Corporate and foreign bonds 4.2 39.3 24.1 -4.1 11.3 63.2 -6.1 -29.4 -34.7 72.5 8.9 -1.5 37 Open market paper 47.5 5.4 6.6 37.2 17.3 95.0 75.6 -1.3 50.4 16.3 63.8 -61.2 38 Other 19.6 17.9 13.3 32.6 24.6 74.0 24.5 27.4 -19.7 61.3 25.1 31.5 39 Deposits and currency 224.6 283.0 160.2 222.5 236.4 111.4 215.1 248.7 192.0 226.2 248.1 279.4 40 Currency 12.4 14.4 19.0 14.7 12.5 13.8 29.3 5.1 19.3 12.6 9.1 9.0 41 Checkable deposits 41.9 95.0 -3.0 12.4 6.8 -30.2 -22.3 97.8 -56.3 -91.4 -2.9 178.0 42 Small time and savings accounts 138.5 120.6 76.0 122.8 105.1 131.8 73.1 86.1 23.7 114.5 124.0 158.4 43 Money market fund shares 8.9 38.3 27.2 22.8 85.2 -21.0 -3.5 58.1 51.1 111.8 124.3 53.6 44 Large time deposits 7.4 -11.4 26.7 40.7 2.3 -3.6 136.9 12.6 96.8 24.4 14.6 -126.7 45 Security RPs 17.7 20.2 17.2 21.2 15.6 26.5 7.0 23.3 31.6 27.5 12.0 -8.6 46 Deposits in foreign countries -2.1 5.9 -2.8 -12.1 8.9 -5.9 -5.5 -34.4 25.9 26.8 -32.9 15.7 47 Total of credit market instruments, deposits, and currency 491.4 384.8 349.8 453.8 445.9 459.1 574.4 408.1 418.5 493.9 543.5 327.8 48 Public holdings as percent of total 23.8 37.3 37.6 28.3 28.8 20.4 24.1 34.2 42.4 -.2 35.5 33.7 49 Private financial intermediation (in percent) 77.6 104.1 90.3 84.3 76.8 74.7 61.2 97.9 92.6 66.3 52.1 98.1 50 Total foreign funds 82.0 110.7 106.4 111.6 82.5 177.0 5.4 156.4 83.9 -24.0 156.0 113.9 MEMO: Corporate equities not included above 51 Total net issues 20.1 90.5 14.3 -117.9 -60.9 -133.7 -73.5 -163.5 -163.9 -48.8 -40.8 10.0 57 Mutual fund shares 84.4 159.0 71.6 -.7 38.2 -6.6 1.5 11.9 3.6 24.0 54.3 70.9 53 Other equities -64.3 -68.5 -57.3 -117.2 -99.0 -127.0 -75.0 -175.4 -167.4 -72.7 -95.1 -60.9 54 Acquisitions by financial institutions 45.6 53.7 21.4 .5 5.7 -.6 13.2 20.9 -1.1 -8.4 -7.0 39.3 55 Other net purchases -25.5 36.8 -7.1 -118.4 -66.6 -133.1 -86.7 -184.4 -162.8 -40.4 -33.8 -29.4 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 1990 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING Billions of dollars; period-end levels. 1988 1989 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998855 11998866 11998877 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 6,795.1 7,631.2 8,335.0 9,080.8 8,682.6 8,856.6 9,080.8 9,246.2 9,413.0 9,591.5 9,790.1 By sector and instrument 2 U.S. government 1,600.4 1,815.4 1,960.3 2,117.8 2,022.3 2,063.9 2,117.8 2,155.7 2,165.7 2,204.3 2,267.6 3 Treasury securities 1,597.1 1,811.7 1,955.2 2,095.2 2,015.3 2,051.7 2,095.2 2,133.4 2,142.1 2,180.7 2,245.2 4 Agency issues and mortgages 3.3 3.6 5.2 22.6 7.0 12.2 22.6 22.3 23.6 23.5 22.4 5 Private domestic nonfinancial sectors 5,194.7 5,815.8 6,374.7 6,963.1 6,660.4 6,792.7 6,963.1 7,090.5 7,247.3 7,387.3 7,522.5 6 Debt capital instruments 3,485.5 3,957.5 4,428.0 4,881.8 4,648.4 4,763.3 4,881.8 4,973.4 5,073.3 5,173.3 5,275.7 7 Tax-exempt obligations 655.5 679.1 713.2 759.8 727.2 746.1 759.8 764.7 769.9 780.8 784.0 8 Corporate bonds 542.9 664.2 764.1 878.2 825.9 853.6 878.2 903.2 935.2 960.7 992.3 9 Mortgages 2,287.1 2,614.2 2,950.7 3,243.8 3,095.3 3,163.6 3,243.8 3,305.5 3,368.2 3,431.7 3,499.3 10 Home mortgages 1,490.2 1,720.8 1,943.1 2,173.9 2,055.1 2,117.8 2,173.9 2,215.4 2,266.8 2,317.3 2,370.1 11 Multifamily residential 213.0 246.2 270.0 286.7 276.6 281.0 286.7 292.6 294.4 298.8 302.5 12 Commercial 478.1 551.4 648.7 696.4 675.9 677.9 696.4 711.5 720.3 729.0 740.2 13 Farm 105.9 95.8 88.9 86.8 87.8 87.0 86.8 86.0 86.7 86.6 86.5 14 Other debt instruments 1,709.3 1,858.4 1,946.7 2,081.3 2,012.0 2,029.4 2,081.3 2,117.0 2,174.0 2,214.0 2,246.8 15 Consumer credit 601.8 659.8 692.7 743.7 705.8 721.2 743.7 745.0 761.0 776.2 797.9 16 Bank loans n.e.c 592.7 656.1 664.3 702.6 687.2 687.7 702.6 717.6 729.8 743.8 745.6 17 Open market paper 72.2 62.9 73.8 85.4 77.8 80.3 85.4 96.1 110.1 113.3 107.1 18 Other 442.6 479.6 516.0 549.5 541.1 540.2 549.5 558.3 573.2 580.7 596.2 19 By borrowing sector 5,194.7 5,815.8 6,374.7 6,963.1 6,660.4 6,792.7 6,963.1 7,090.5 7,247.3 7,387.3 7,522.5 20 State and local governments 473.9 510.1 543.7 573.5 556.0 565.7 573.5 578.5 584.8 595.1 598.2 21 Households 2,295.5 2,591.8 2,864.5 3,151.7 2,989.9 3,068.0 3,151.7 3,206.1 3,269.2 3,342.1 3,423.2 22 Nonfinancial business 2,425.4 2,714.0 2,966.5 3,237.9 3,114.4 3,159.0 3,237.9 3,305.9 3,393.2 3,450.1 3,501.1 23 Farm 173.4 156.6 145.5 137.6 143.9 143.6 137.6 135.9 139.5 141.2 137.9 24 Nonfarm noncorporate 898.3 1,001.6 1,109.4 1,200.9 1,151.9 1,172.6 1,200.9 1,223.3 1,239.1 1,251.2 1,266.8 25 Corporate 1,353.6 1,555.8 1,711.6 1,899.4 1,818.6 1,842.9 1,899.4 1,946.6 2,014.7 2,057.8 2,096.4 26 Foreign credit market debt held in United States 234.7 236.4 242.9 249.8 245.9 246.1 249.8 249.8 249.4 254.6 257.6 27 Bonds 71.8 74.9 82.3 89.2 86.0 87.4 89.2 90.5 92.1 94.2 94.3 28 Bank loans n.e.c 27.9 26.9 23.3 21.5 22.4 22.7 21.5 21.6 22.7 22.6 22.5 29 Open market paper 33.9 37.4 41.2 50.9 44.0 46.3 50.9 54.9 52.7 57.5 63.0 30 U.S. government loans 101.1 97.1 96.1 88.3 93.5 89.8 88.3 82.8 81.9 80.3 77.8 31 Total domestic plus foreign 7,029.9 7,867.6 8,578.0 9,330.7 8,928.5 9,102.8 9,330.7 9,496.0 9,662.4 9,846.1 10,047.7 Financial sectors 32 Total credit market debt owed by financial sectors 1,213.2 1,563.6 1,885.5 2,084.1 1,942.8 1,996.5 2,084.1 2,190.5 2,229.6 2,264.5 2,318.1 By instrument 33 U.S. government related 632.7 844.2 1,026.5 1,098.4 1,019.2 1,054.6 1,098.4 1,140.8 1,166.5 1,202.6 1,238.7 34 Sponsored credit agency securities 257.8 273.0 303.2 348.1 317.9 328.5 348.1 364.3 369.0 370.4 373.1 35 Mortgage pool securities 368.9 565.4 718.3 745.3 6%. 3 721.1 745.3 771.5 792.5 827.2 860.7 36 Loans from U.S. government 6.1 5.7 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 37 Private financial sectors 580.5 719.5 859.0 985.7 923.6 941.9 985.7 1,049.7 1,063.1 1,062.0 1,079.3 38 Corporate bonds 204.5 287.4 366.3 418.0 397.9 406.4 418.0 458.2 465.8 472.5 484.6 39 Mortgages 2.7 2.7 3.1 3.4 3.1 3.1 3.4 3.5 3.5 3.5 3.3 40 Bank loans n.e.c 32.1 36.1 32.8 34.2 34.3 32.9 34.2 32.2 33.8 34.1 35.5 41 Open market paper 252.4 284.6 323.8 377.4 353.4 358.0 377.4 392.0 398.3 400.8 414.1 42 Loans from Federal Home Loan Banks 88.8 108.6 133.1 152.8 134.8 141.6 152.8 163.8 161.9 151.1 141.8 43 Total, by sector 1,213.2 1,563.6 1,885.5 2,084.1 1,942.8 1,996.5 2,084.1 2,190.5 2,229.6 2,264.5 2,318.1 44 Sponsored credit agencies 263.9 278.7 308.2 353.1 322.9 333.5 353.1 369.3 374.0 375.4 378.1 45 Mortgage pools 368.9 565.4 718.3 745.3 696.3 721.1 745.3 771.5 792.5 827.2 860.7 46 Private financial sectors 580.5 719.5 859.0 985.7 923.6 941.9 985.7 1,049.7 1,063.1 1,062.0 1,079.3 47 Commercial banks 79.2 75.6 82.7 78.8 77.2 76.6 78.8 73.3 74.5 77.0 79.4 48 Bank affiliates 106.2 116.8 131.1 136.2 136.3 136.3 136.2 140.0 141.2 143.9 143.8 49 Savings and loan associations 98.9 119.8 139.4 159.3 141.9 148.1 159.3 170.1 167.9 155.7 144.7 50 Mutual savings banks 4.4 8.6 16.7 18.6 17.6 18.1 18.6 17.8 17.7 17.5 17.1 51 Finance companies 261.2 328.1 378.8 445.8 419.8 427.7 445.8 463.8 478.0 483.0 499.2 52 REITs 5.6 6.5 7.3 11.4 9.1 7.6 11.4 11.1 10.6 10.3 10.2 53 SCO issuers 25.0 64.0 103.1 135.7 121.8 127.5 135.7 173.5 173.1 174.6 185.0 All sectors 54 Total credit market debt 8,243.1 9,431.2 10,463.4 11,414.8 10,871.3 11,099.3 11,414.8 11,686.5 11,892.0 12,110.7 12,365.7 55 U.S. government securities.. 2,227.0 2,653.8 2,981.8 3,211.1 3,036.4 3,113.5 3,211.1 3,291.5 3,327.2 3,401.8 3,501.3 56 State and local obligations... 655.5 679.1 713.2 759.8 727.2 746.1 759.8 764.7 769.9 780.8 784.0 57 Corporate and foreign bonds 819.2 1,026.4 1,212.7 1,385.4 1,309.8 1,347.4 1,385.4 1,451.9 1,493.1 1,527.5 1,571.3 58 Mortgages 2,289.8 2,617.0 2,953.8 3,247.2 3,098.5 3,166.7 3,247.2 3,309.0 3,371.7 3,435.2 3,502.6 59 Consumer credit 601.8 659.8 692.7 743.7 705.8 721.2 743.7 745.0 761.0 776.2 797.9 60 Bank loans n.e.c 652.7 719.1 720.3 758.3 744.0 743.3 758.3 771.4 786.2 800.5 803.6 61 Open market paper 358.5 384.9 438.8 513.6 475.3 484.6 513.6 543.1 561.1 571.6 584.2 62 Other loans 638.6 691.1 750.2 795.6 774.4 776.5 795.6 809.9 821.9 817.1 820.8 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Flow of Funds A45 1.60 SUMMARY OF CREDIT MARKET CLAIMS, BY HOLDER Billions of dollars, except as noted; period-end levels. 1988 1989 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11998855 11998866 11998877 11998888 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 Total funds advanced in credit markets to domestic nonfinancial sectors 6,795.1 7,631.2 8,335.0 9,080.8 8,682.6 8,856.6 9,080.8 9,246.2 9,413.0 9,591.5 9,790.1 By public agencies and foreign 7. Total held 1,460.5 1,794.7 2,044.9 2,196.5 2,093.6 2,130.2 2,196.5 2,256.3 2,262.5 2,328.6 22,,339944..33 3 U.S. government securities 423.8 493.2 563.3 648.3 610.1 613.3 648.3 666.2 644.2 673.6 694.2 4 Residential mortgages 518.2 712.3 862.0 900.4 848.3 873.3 900.4 927.1 951.2 990.9 1,030.1 5 FHLB advances to thrifts 88.8 108.6 133.1 152.8 134.8 141.6 152.8 163.8 161.9 151.1 141.8 6 Other loans and securities 429.7 480.5 486.6 495.0 500.3 502.1 495.0 499.3 505.1 513.0 528.2 7 Total held, by type of lender 1,460.5 1,794.7 2,044.9 2,196.5 2,093.6 2,130.2 2,196.5 2,256.3 2,262.5 2,328.6 2,394.3 8 U.S. government 246.7 253.3 238.0 212.7 235.8 226.3 212.7 208.0 207.7 206.7 206.8 9 Sponsored credit agencies and mortgage pools ... 659.8 869.8 1,048.9 1,113.0 1,037.9 1,071.2 1,113.0 1,155.3 1,159.6 1,204.1 1,240.4 10 Monetary authority 186.0 205.5 230.1 240.6 229.7 230.8 240.6 235.4 238.4 227.6 233.3 11 Foreign 367.9 466.1 527.9 630.3 590.2 601.9 630.3 657.6 656.8 690.2 713.8 Agency and foreign debt not in line 1 12 Sponsored credit agencies and mortgage pools ... 632.7 844.2 1,026.5 1,098.4 1,019.2 1,054.6 1,098.4 1,140.8 1,166.5 1,202.6 11,,223388..77 13 Foreign 234.7 236.4 242.9 249.8 245.9 246.1 249.8 249.8 249.4 254.6 257.6 Private domestic holdings 14 Total private holdings 6,202.1 6,917.1 7,559.5 8,232.5 7,854.1 8,027.2 8,232.5 8,380.4 8,566.4 8,720.2 8,892.1 15 U.S. government securities 1,803.2 2,160.6 2,418.5 2,562.8 2,426.4 2,500.3 2,562.8 2,625.3 2,683.0 2,728.2 2,807.2 16 State and local obligations 655.5 679.1 713.2 759.8 727.2 746.1 759.8 764.7 769.9 780.8 784.0 17 Corporate and foreign bonds 517.6 601.3 689.6 787.2 748.9 770.6 787.2 808.6 840.0 865.9 885.6 18 Residential mortgages 1,185.1 1,254.7 1,351.1 1,560.2 1,483.3 1,525.5 1,560.2 1,581.0 1,610.0 1,625.3 1,642.5 19 Other mortgages and loans 2,129.7 2,330.0 2,520.1 2,715.2 2,603.2 2,626.3 2,715.2 2,764.6 2,825.4 2,871.1 2,914.7 20 LESS: Federal Home Loan Bank advances 88.8 108.6 133.1 152.8 134.8 141.6 152.8 163.8 161.9 151.1 141.8 Private financial intermediation 71 Credit market claims held by private financial institutions 5,283.1 6,025.7 6,604.6 7,167.5 6,903.0 7,002.7 7,167.5 7,310.3 7,456.5 7,537.9 7,676.6 7.7 Commercial banking 1,978.9 2,176.3 2,313.1 2,468.4 2,382.6 2,421.6 2,468.4 2,490.9 2,538.2 2,588.6 2,640.0 73 Savings institutions 1,191.2 1,297.9 1,445.5 1,567.7 1,505.5 1,535.2 1,567.7 1,567.3 1,551.1 1,521.1 1,491.0 74 Insurance and pension funds 1,369.7 1,544.3 1,755.2 1,953.3 1,861.4 1,901.9 1,953.3 2,007.0 2,051.1 2,085.0 2,130.3 25 Other finance 743.4 1,007.1 1,090.7 1,178.1 1,153.5 1,144.0 1,178.1 1,245.1 1,316.1 1,343.2 1,415.2 76 Sources of funds 5,283.1 6,025.7 6,604.6 7,167.5 6,903.0 7,002.7 7,167.5 7,310.3 7,456.5 7,537.9 7,676.6 77 Private domestic deposits and RPs 2,930.0 3,188.4 3,324.8 3,560.2 3,438.6 3,480.0 3,560.2 3,589.0 3,639.0 3,702.4 3,775.3 28 Credit market debt 580.5 719.5 859.0 985.7 923.6 941.9 985.7 1,049.7 1,063.1 1,062.0 1,079.3 79 Other sources 1,772.7 2,117.9 2,420.8 2,621.5 2,540.7 2,580.7 2,621.5 2,671.6 2,754.4 2,773.6 2,822.0 30 Foreign funds 5.6 18.6 62.2 71.5 62.2 52.0 71.5 61.8 50.0 55.7 70.4 31 Treasury balances 25.8 27.5 21.6 29.0 32.6 34.2 29.0 13.5 34.4 30.3 20.7 37 Insurance and pension reserves 1,289.4 1,427.9 1,597.2 1,761.8 1,692.5 1,722.3 1,761.8 1,811.1 1,843.8 1,861.9 1,898.5 33 Other, net 451.8 643.9 739.6 759.2 753.5 772.4 759.2 785.2 826.2 825.7 832.3 Private domestic nonfinancial investors 34 Credit market claims 1,499.5 1,610.8 1,813.9 2,050.7 1,874.8 1,966.4 2,050.7 2,119.9 2,173.1 2,244.2 2,294.9 35 U.S. government securities 814.7 899.1 992.0 1,077.8 962.4 1,022.3 1,077.8 1,105.2 1,127.4 1,177.5 1,219.4 36 Tax-exempt obligations 231.9 211.2 256.8 303.7 270.3 289.0 303.7 307.2 308.8 315.6 318.4 37 Corporate and foreign bonds 38.0 77.8 102.2 93.9 104.8 106.1 93.9 125.3 135.4 140.6 134.6 38 Open market paper 131.0 136.4 160.7 200.9 177.4 185.8 200.9 209.4 218.7 224.7 223.5 39 Other 283.8 286.2 302.3 374.5 359.9 363.2 374.5 372.8 382.8 385.9 399.0 40 Deposits and currency 3,120.4 3,399.2 3,553.9 3,791.9 3,668.5 3,710.3 3,791.9 3,824.0 3,887.8 3,939.6 4,028.4 41 Currency 171.9 186.3 205.4 220.1 209.9 213.4 220.1 220.7 226.4 224.4 232.6 47 Checkable deposits 422.5 517.4 514.0 525.3 510.4 495.9 525.3 492.3 493.8 485.1 532.2 43 Small time and savings accounts 1,831.9 1,948.3 2,017.1 2,156.5 2,117.0 2,137.3 2,156.5 2,170.2 2,191.5 2,225.1 2,261.7 44 Money market fund shares 227.3 265.6 292.8 315.6 306.1 303.6 315.6 340.3 359.9 389.2 400.8 45 Large time deposits 339.9 328.5 355.2 395.9 349.0 384.7 395.9 412.1 415.4 421.0 398.2 46 Security RPs 108.3 128.5 145.7 166.9 156.2 158.6 166.9 174.1 178.4 182.0 182.5 47 Deposits in foreign countries 18.5 24.5 23.7 11.6 19.9 16.8 11.6 14.4 22.5 12.8 20.5 48 Total of credit market instruments, deposits, and currency 4,619.9 5,010.0 5,367.8 5,842.6 5,543.2 5,676.7 5,842.6 5,943.9 6,060.9 6,183.8 6,323.2 49 Public holdings as percent of total 20.8 22.8 23.8 23.5 23.4 23.4 23.5 23.8 23.4 23.6 23.8 50 Private financial intermediation (in percent) 85.2 87.1 87.4 87.1 87.9 87.2 87.1 87.2 87.0 86.4 86.3 51 Total foreign funds 373.5 484.7 590.2 701.8 652.4 653.8 701.8 719.4 706.8 745.9 784.3 MEMO: Corporate equities not included above 52 Total market value 2,823.9 3,360.6 3,325.0 3,620.3 3,622.7 3,577.6 3,620.3 3,731.5 4,072.2 4,398.7 4,311.7 53 Mutual fund shares 240.2 413.5 460.1 478.3 486.8 478.1 478.3 486.3 514.8 539.6 548.0 54 Other equities 2,583.7 2,947.1 2,864.9 3,142.0 3,136.0 3,099.5 3,142.0 3,245.2 3,557.4 3,859.1 3,763.7 55 Holdings by financial institutions 800.0 972.1 1,013.8 1,186.1 1,167.4 1,160.0 1,186.1 1,253.4 1,377.4 1,509.4 1,496.7 56 Other holdings 2,023.9 2,388.4 2,311.2 2,434.2 2,455.4 2,417.6 2,434.2 2,478.1 2,694.8 2,889.3 2,815.0 NOTES BY LINE NUMBER. 32. Excludes net investment of these reserves in corporate equities. 1. Line 1 of table 1.59. 33. Mainly retained earnings and net miscellaneous liabilities. 2. Sum of lines 3-6 or 7-10. 34. Line 14 less line 21 plus line 28. 6. Includes farm and commercial mortgages. 35-39. Lines 15-19 less amounts acquired by private finance plus amounts 12. Credit market debt of federally sponsored agencies, and net issues of borrowed by private finance. Line 39 includes mortgages. federally related mortgage pool securities. 41. Mainly an offset to line 10. 14. Line 1 less line 2 plus line 12 and 13. Also line 21 less line 28 plus line 34. 48. Lines 34 plus 40, or line 14 less line 29 plus 41 and 47. Also sum of lines 29 and 48 less lines 41 and 47. 49. Line 2/line 1 and 13. 19. Includes farm and commercial mortgages. 50. Line 21/line 14. 27. Line 40 less lines 41 and 47. 51. Sum of lines 11 and 30. 28. Excludes equity issues and investment company shares. Includes line 20. 52-54. Includes issues by financial institutions. 30. Foreign deposits at commercial banks plus bank borrowings from foreign NOTE. Full statements for sectors and transaction types in flows and in amounts affiliates, less claims on foreign affiliates and deposits by banking in foreign banks. outstanding may be obtained from Flow of Funds Section, Stop 95, Division of 31. Demand deposits and note balances at commercial banks. Research and Statistics, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • July 1990 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures' 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1989 1990 MMeeaassuurree 11998877 11998888 11998899 Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar/ Apr. 1 Industrial production (1987 = 100) 100.0 105.4 108.1 108.2 108.2 107.7 108.1 108.6 107.5 108.5 109.1 108.7 Market groupings 2 Products, total (1987 = 100) 100.0 105.3 108.6 108.5 108.8 108.1 108.9 109.7 108.4 109.5 110.4 109.7 3 Final, total (1987 = 100) 100.0 105.6 109.1 109.1 109.6 108.5 109.4 110.3 108.5 109.8 110.9 110.0 4 Consumer goods (1987 = 100) 100.0 104.0 106.7 105.6 106.3 107.3 107.4 108.3 106.0 107.2 108.2 107.1 5 Equipment (1987 = 100) 100.0 107.6 112.3 113.6 113.8 110.1 112.0 112.9 111.8 113.2 114.6 113.8 6 Intermediate (1987 = 100) 100.0 104.4 106.8 106.4 106.3 106.9 107.3 107.9 108.0 108.6 108.8 108.5 7 Materials (1987 = 100) 100.0 105.6 107.4 107.8 107.4 107.1 107.0 106.9 106.2 107.0 107.0 107.1 Industry groupings 8 Manufacturing (1987 = 100) 100.0 105.8 108.9 109.1 109.1 108.4 108.9 108.8 108.1 109.5 109.9 109.2 Capacity utilization (percent)2 9 Manufacturing 81.4 83.9 83.9 83.8 83.6 82.9 83.0 82.8 82.0 82.9 82.9 82.2 10 Industrial materials industries 80.5 83.7 83.7 83.9 83.6 83.5 83.3 82.3 81.7 81.6 n.a. n.a. 11 Construction contracts (1982 = 100)3 164.8 166.1 167.5r 168.0 181.0 173.0 158.0 160.0 154.0 147.0 156.0 146.0 12 Nonagricultural employment, total4 123.9 128.0 131.6 132.0 132.3 132.4 132.7 132.9 133.3 133.8 133.9 134.0 13 Goods-producing, total 101.5 103.7 105.3 105.5 105.2 105.2 105.2 104.9 104.8 105.5 105.2 104.7 14 Manufacturing, total 96.7 98.6 99.6 99.8 99.4 99.2 99.1 99.0 98.3 98.8 98.7 98.5 15 Manufacturing, production- worker ... 91.9 93.9 94.8 94.8 94.2 94.1 93.9 93.8 92.8 93.5 93.3 93.3 16 Service-producing 133.3 138.2 142.7 143.1 143.6 143.8 144.2 144.6 145.2 145.6 145.9 146.2 17 Personal income, total 235.0 252.8 275.4 277.3 277.9 280.0 282.5 283.9 286.3 288.5 290.7 291.6 18 Wages and salary disbursements 226.3 244.4 264.7 266.7 268.5 271.0 271.1 272.9 274.1 276.5 278.0 280.0 19 Manufacturing 183.8 196.5 207.3 208.8 208.8 211.1 209.1 209.2 208.1 210.3 212.1 211.3 20 Disposable personal income5 232.4 252.1 274.0 276.1 276.5 278.4 281.2 282.4 285.3 287.4 289.8 290.5 21 Retail sales® 213.6 228.0 240.6 244.2 245.2 241.9 243.7 242.8 249.6 249.7 249.1 247.6 Prices7 22 Consumer (1982-84 = 100) 113.6 118.3 124.0 124.6 125.0 125.6 125.9 126.1 127.4 128.0 128.7 128.9 23 Producer finished goods (1982 = 100) ... 105.4 108.0 113.6 113.4 113.6 114.9 114.9 115.4r 117.5 117.4 117.0 117.0 1. A major revision of the industrial production index and the capacity 5. Based on data in Survey of Current Business (U.S. Department of Comutilization rates was released in April 1990. See "Industrial Production: 1989 merce). Developments and Historical Revision" in the Federal Reserve Bulletin, vol. 76 6. Based on Bureau of Census data published in Survey of Current Business. (April 1990), pp. 187-204. The revised indexes for January through June 1985 were 1. Data without seasonal adjustment, as published in Monthly Labor Review. shown in the September Bulletin. Seasonally adjusted data for changes in the price indexes may be obtained from 2. Ratios of indexes of production to indexes of capacity. Based on data from the Bureau of Labor Statistics, U.S. Department of Labor. 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 A47 2.11 LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT Thousands of persons; monthly data are seasonally adjusted. Exceptions noted. 1989 1990 CCaatteeggoorryy 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb. Mar.' Apr. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 185,010 186,837 188,601 188,948 189,096 189,238 189,381 189,506 189,607 189,717 189,844 2 Labor force (including Armed Forces)1 122,122 123,893 126,077 126,245 126,373 126,709 126,762 126,610 126,825 127,017 127,061 3 Civilian labor force 119,865 112211,,666699 123,869 112244,,002233 112244,,114488 112244,,448888 112244,,554466 112244,,339977 112244,,663300 112244,,882299 112244,,888866 Employment 4 Nonagricultural industries2 109,232 111,800 114,142 114,200 114,388 114,676 114,691 114,728 114,957 115,133 114,983 5 Agriculture 3,208 3,169 3,199 3,219 3,197 33,,116600 33,,119977 33,,113344 33,,007799 33,,220000 33,,113333 Unemployment 6 Number 7,425 6,701 6,528 6,604 6,563 6,652 6,658 6,535 6,594 6,495 6,770 7 Rate (percent of civilian labor force) 6.2 5.5 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.2 5.4 8 Not in labor force 62,888 62,944 62,524 62,703 62,723 62,529 62,619 62,896 62,782 62,700 62,783 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 102,200 105,584 108,573 109,096 109,171 109,452 109,570 109,931 110,304r 110,407 110,471 10 Manufacturing 19,024 19,403 19,611 19,559 19,537 19,517 19,489 19,355 19,452' 19,422 19,400 U Mining 717 721 722 730 731 737 739 745 749 749 755 12 Contract construction 4,967 5,125 5,302 5,325 5,335 5,355 5,304 5,418 5,485' 5,433 5,334 13 Transportation and public utilities 5,372 5,548 5,703 5,709 5,729 5,753 5,834 5,850 5,865' 5,864 5,866 14 Trade 24,327 25,139 25,807 25,896 25,957 26,044 26,029 26,154 26,126' 26,121 26,147 15 Finance 6,547 6,676 6,814 6,852 6,851 6,871 6,885 6,896 6,916' 6,926 6,926 16 Service 24,236 25,600 26,889 27,159 27,188 27,345 27,419 27,557 27,709' 27,782 27,805 17 Government 17,010 17,372 17,726 17,866 17,843 17,830 17,871 17,956 18,002' 18,110 18,238 1. Persons 16 years of age and over. Monthly figures, which are based on 3. Data include all full- and part-time employees who worked during, or sample data, relate to the calendar week that contains the 12th day; annual data received pay for, the pay period that includes the 12th day of the month, and are averages of monthly figures. By definition, seasonality does not exist in exclude proprietors, self-employed persons, domestic servants, unpaid family population figures. Based on data from Employment and Earnings (U.S. Depart- workers, and members of the Armed Forces. Data are adjusted to the March 1984 ment of Labor). benchmark and only seasonally adjusted data are available at this time. Based on 2. Includes self-employed, unpaid family, and domestic service workers. data from Employment and Earnings (U.S. Department of Labor). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • July 1990 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1989 1990 1989 1990 1989 1990 SSeerriieess Q2 Q3 Q4 Qr Q2 Q3 Q4 Q1 Q2 Q3 Q4r Ql' Output (1987 = 100) Capacity (percent of 1987 output) Utilization rate (percent) 1 Total industry 108.4 108.1 108.1 108.4 128.0 128.8 129.5 130.3 84.7 84.0 83.5 83.1 2 Mining 101.1 100.8 100.6 101.0 117.2 116.7 116.1 115.7 86.2 86.4 86.7 87.3 3 Utilities 106.3 106.2 110.6 107.3 125.3 125.5 125.7 126.0 84.9 84.6 88.0 85.2 4 Manufacturing 109.3 108.9 108.7 109.2 129.2 130.2 131.1 132.1 84.5 83.7 82.9 82.6 5 Primary processing 106.4 106.4 106.1 106.3 122.0 122.7 123.4 124.2 87.3 86.7 85.9 85.6 6 Advanced processing... 110.6 110.1 109.9 110.5 132.6 133.7 134.7 135.8 83.4 82.4 81.6 81.4 Previous cycle2 Latest cycle3 1989 1990 High Low High Low Apr. Aug. Sept. Oct. Nov/ Dec. Jan/ Feb/ Mar/ Apr. Capacity utilization rate (percent) 7 Total industry 89.2 72.6 87.3 71.8 85.0 84.0 83.9 83.3 83.5 83.7 82.7 83.2 83.5 83.0 8 Mining 94.4 88.4 96.6 80.6 86.6 86.4 87.2 86.5 87.1 86.3 87.8 86.7 87.4 88.3 9 Utilities 95.6 82.5 88.3 76.2 84.9 84.7 84.3 85.5 86.2 92.3 84.8 84.0 86.6 87.1 10 Manufacturing 88.9 70.8 87.3 70.0 84.8 83.8 83.6 82.9 83.0 82.8 82.0 82.9 82.9 82.2 11 Primary processing.... 92.2 68.9 89.7 66.8 87.8 86.9 86.1 86.6 86.1 85.2 85.7 86.0 85.1 84.5 12 Advanced processing.. 87.5 72.0 86.3 71.4 83.6 82.4 82.5 81.4 81.7 81.8 80.5 81.6 82.0 81.2 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 A49 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data are seasonally adjusted 1987 1989 1990 1989 GGrroouuppss por- avg. tion Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar." Apr.' Index (1987 = 100) MAJOR MARKET' 1 Total index 100.00 108.1 108.6 108.3 108.4 107.8 108.2 108.2 107.7 108.1 108.6 107.5 108.5 109.1 108.7 2 Products 60.79 108.6 108.9 108.9 109.1 108.2 108.5 108.8 108.1 108.9 109.7 108.4 109.5 110.4 109.7 3 Final products 46.05 109.1 109.5 109.6 109.8 108.7 109.1 109.6 108.5 109.4 110.3 108.5 109.8 110.9 110.0 4 Consumer goods 26.02 106.7 107.0 106.8 106.3 105.2 105.6 106.3 107.3 107.4 108.3 106.0 107.2 108.2 107.1 5 Equipment 20.03 112.3 112.6 113.1 114.3 113.2 113.6 113.8 110.1 112.0 112.9 111.8 113.2 114.6 113.8 6 Intermediate products 14.74 106.8 107.2 106.6 106.7 106.7 106.4 106.3 106.9 107.3 107.9 108.0 108.6 108.8 108.5 7 Materials 39.21 107.4 108.0 107.3 107.6 107.3 107.8 107.4 107.1 107.0 106.9 106.2 107.0 107.0 107.1 Consumer goods 8 Durable consumer goods 5.58 107.9 110.0 109.2 108.4 105.6 105.8 107.6 106.8 105.7 106.8 99.4 106.2 110.8 106.3 9 Automotive products 2.47 106.9 110.2 109.2 106.7 101.1 103.2 104.9 102.9 102.4 104.5 85.2 99.0 108.7 99.9 10 Autos and trucks 1.48 105.7 109.8 109.6 106.2 97.1 101.1 103.1 99.7 98.4 100.1 66.3 92.1 106.6 92.0 11 Autos, consumer .93 101.2 106.2 105.7 100.5 89.3 95.1 102.0 100.7 92.8 92.6 62.1 86.9 100.5 87.6 12 Trucks, consumer .55 113.3 115.8 116.2 115.7 110.1 111.3 105.0 98.2 108.0 112.6 73.3 100.8 117.0 99.3 13 Auto parts and allied goods .99 108.7 110.7 108.5 107.4 107.0 106.3 107.4 107.6 108.2 111.2 113.6 109.4 111.8 111.8 14 Home goods 3.11 108.7 110.0 109.3 109.8 109.2 107.9 109.8 109.8 108.4 108.6 110.6 111.8 112.4 111.3 15 Appliances, A/C and TV .79 106.7 108.6 105.9 110.5 107.5 106.5 109.3 107.6 102.0 101.0 108.4 107.8 108.9 106.3 16 Carpeting and furniture .91 101.5 103.2 104.1 102.1 101.0 98.1 100.9 101.1 100.4 102.0 103.7 104.7 105.9 105.5 17 Miscellaneous home goods 1.42 114.5 115.1 114.6 114.3 115.4 114.8 115.8 116.6 117.1 117.1 116.2 118.6 118.5 117.9 18 Nondurable consumer goods 20.44 106.4 106.2 106.2 105.8 105.1 105.6 106.0 107.4 107.8 108.7 107.8 107.4 107.5 107.4 19 Consumer chemical products 3.54 109.4 107.8 110.1 109.8 109.6 110.1 107.8 110.3 111.3 110.3 112.7 111.8 111.3 111.2 20 Consumer paper products 2.55 114.3 112.8 112.7 112.9 113.1 114.1 116.2 117.2 118.1 116.9 116.2 115.4 116.9 117.0 21 Consumer energy 2.68 106.7 106.5 106.1 106.1 105.2 104.7 106.0 106.0 108.0 115.2 107.9 105.5 106.5 107.3 22 Consumer fuel .73 102.8 101.8 100.6 103.0 104.5 102.3 103.4 103.1 103.0 100.5 105.1 106.6 101.6 102.2 23 Residential utilities 1.96 108.1 108.2 108.1 107.2 105.5 105.6 106.9 107.0 109.8 120.7 109.0 105.1 108.3 109.1 Equipment 24 Business equipment 13.93 119.1 119.6 120.2 121.4 119.9 120.4 120.7 116.0 118.7 119.9 118.0 111199..99 121.8 120.6 25 Transit 2.46 123.8 127.9 127.6 128.3 123.8 128.4 127.0 112.9 117.0 123.4 111.4 123.6 132.3 126.7 26 Defense and space equipment 5.35 97.4 97.1 97.6 98.3 98.7 98.9 98.9 96.6 96.7 96.6 97.5 97.6 97.4 96.8 Intermediate products 27 Construction supplies 6.05 106.1 106.3 105.9 106.2 106.5 105.5 105.2 106.3 107.0 107.4 107.9 108.3 106.2 105.2 28 Business supplies 8.69 107.3 107.8 107.1 107.0 106.8 106.9 107.0 107.3 107.5 108.2 108.0 108.8 110.6 110.8 Materials 29 Durable goods materials 19.35 111.6 112.3 111.5 112.1 111.5 112.0 112.0 110.8 110.8 110.4 109.4 110.7 110.6 110.1 30 Durable consumer parts 4.16 109.0 110.8 110.6 110.3 107.7 109.2 108.8 106.9 105.7 102.5 96.5 102.8 104.5 102.0 31 Equipment parts 7.25 114.7 114.9 114.2 115.0 115.0 115.6 115.5 114.4 115.3 115.8 116.5 117.4 117.0 117.2 32 Durable materials n.e.c 7.94 110.2 110.7 109.7 110.4 110.4 110.4 110.6 109.5 109.4 109.5 109.7 108.8 108.0 108.0 33 Basic metal materials 2.78 112.1 114.9 109.9 111.9 113.1 113.0 112.9 111.0 108.6 109.3 108.5 110.2 107.1 106.8 34 Nondurable goods materials 9.01 105.3 106.0 105.4 105.5 106.7 105.7 104.2 106.1 104.9 104.3 105.4 105.7 105.2 105.5 35 Textile materials 1.18 99.8 101.9 101.5 103.2 104.9 102.1 99.6 98.6 96.1 95.8 94.6 96.0 96.0 95.8 36 Pulp and paper materials 1.87 103.8 103.1 102.1 102.4 104.8 103.6 104.1 107.7 104.6 103.7 105.0 105.2 103.8 104.5 37 Chemical materials 3.81 106.4 108.1 106.1 106.5 108.2 107.3 104.5 106.8 105.8 103.8 105.8 107.0 106.6 106.9 38 Miscellaneous nondurable materials 2.14 107.6 107.0 109.1 107.9 106.8 107.0 106.5 107.5 108.4 110.4 110.9 109.2 109.0 109.1 39 Energy materials 10.85 101.4 101.9 101.2 101.0 100.1 101.7 101.6 101.3 101.9 102.7 101.2 101.4 102.1 102.9 40 Primary energy 7.18 99.9 99.8 100.6 100.8 100.0 102.5 100.7 99.8 100.5 99.0 101.1 101.4 101.5 102.1 41 Converted fuel materials 3.68 104.3 106.0 102.5 101.7 100.4 100.4 103.6 104.2 104.5 110.0 101.4 101.3 103.1 104.6 1. The following series in major market groups will no longer be published: business supplies, commercial energy products, and textile, paper, and chemical consumer staples, nonfood staples, business and defense equipment, general materials. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • July 1990 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1987 1989 Groups c S o I d C e p p r o o r - - a 1 v 98 g 9 . tion Apr. May June July Aug. Sept. Oct. Nov. Jan/ Feb/ Mar.p Apr, Index (1987 = 100) MAJOR INDUSTRY 1 Mining 7.93 100.5 101.7 101.1 100.4 100.0 100.7 101.6 100.7 101.2 100.1 101.7 100.3 101.0 101.9 2 Utilities 7.63 107.1 106.4 106.3 106.3 106.6 106.2 105.9 107.4 108.3 116.1 106.8 105.9 109.2 109.9 3 Manufacturing . 84.44 108.9 109.4 109.2 109.3 108.6 109.1 109.1 108.4 108.9 108.8 108.1 109.5 109.9 109.2 4 Nondurable . 37.17 106.4 106.5 106.4 106.2 106.1 106.2 106.0 107.2 107.3 106.7 107.5 108.0 107.7 107.6 5 Durable 47.27 110.9 111.6 111.4 111.8 110.6 111.3 111.5 109.4 110.1 110.4 108.6 110.7 111.6 110.4 Mining 6 7 C M o e a t l a l 1 11 0 . 12 1 . . 3 2 2 2 1 10 4 5 1 . . 7 4 1 1 3 1 5 1 . . 7 1 1 1 3 0 6 4 . . 1 7 1 1 4 0 3 0 . . 3 3 1 10 5 1 1 . . 1 7 1 10 4 3 4 . . 1 3 1 1 4 0 5 9 . . 4 6 1 1 4 0 3 9 . . 2 9 1 10 4 8 5 . . 1 9 1 1 5 0 5 3 . . 5 5 1 1 4 14 4 . . 1 8 1 1 4 1 2 1 . . 0 9 1 1 4 1 5 2 . . 2 9 1 1 4 1 3 5 . . 4 2 8 Oil and gas extraction 13 5.73 95.5 96.7 97.0 96.3 94.9 96.3 95.9 94.3 95.5 94.0 94.4 93.2 94.4 95.3 9 Stone and earth minerals .. 14 .67 113.9 111.2 113.0 115.0 116.8 113.3 114.1 118.0 115.8 119.7 121.2 120.0 114.3 114.6 Nondurable manufactures 10 Foods 20 8.76 105.5 106.2 105.5 104.2 104.0 104.8 105.4 106.8 107.4 108.0 106.8 107.5 107.9 107.5 11 Tobacco products 21 1.02 99.7 104.0 101.7 100.4 94.2 95.0 93.3 99.7 98.8 98.5 101.3 102.3 100.0 98.0 12 Textile mill products 22 1.84 101.9 104.1 103.2 102.4 104.2 101.5 101.5 101.9 99.3 99.8 100.6 102.9 101.5 101.0 13 Apparel products 23 2.36 104.3 105.1 104.9 105.2 104.4 104.7 104.5 103.9 103.7 102.6 102.4 102.1 99.9 100.1 14 Paper and products 26 3.58 103.2 103.0 102.1 101.8 104.1 103.0 102.2 105.3 104.1 103.4 103.8 105.0 103.2 103.7 15 Printing and publishing 27 6.37 108.5 108.6 108.4 108.6 106.6 107.8 109.4 109.3 109.6 109.6 110.7 111.4 112.3 112.4 16 Chemicals and products 28 8.60 108.5 107.5 108.4 109.1 109.7 109.6 107.5 109.4 109.8 107.6 109.9 110.0 109.7 110.1 17 Petroleum products 29 1.32 106.1 104.5 104.6 106.6 108.2 107.0 108.7 106.9 109.3 104.3 108.6 112.0 109.5 107.9 18 Rubber and plastic products.. 30 3.02 108.9 108.5 109.8 109.0 109.0 109.0 108.5 108.8 109.1 110.1 110.7 109.1 109.4 108.7 19 Leather and products 31 .30 103.7 105.1 102.8 102.2 103.7 103.2 103.5 102.2 99.4 103.0 104.3 102.9 102.7 102.0 Durable manufactures 20 Lumber and products . 24 2.00 103.0 102.7 102.3 103.5 102.8 102.4 102.6 103.2 104.8 106.4 106.0 104.3 105.6 104.0 21 Furniture and fixtures. 25 1.45 105.3 105.8 107.9 107.0 104.9 104.5 105.7 105.6 104.4 105.1 105.1 104.8 106.0 105.7 22 Clay, glass, and stone products 32 2.46 108.0 107.7 108.2 108.0 106.2 107.8 106.5 107.7 108.2 108.6 110.0 108.0 106.7 106.1 23 Primary metals 33 3.32 109.2 112.7 107.0 108.7 108.8 111.7 109.9 108.6 104.8 102.6 105.0 108.2 105.1 104.2 24 Iron and steel 331,2 1.95 109.3 115.4 104.8 107.1 107.5 109.8 109.7 109.2 104.1 100.3 104.6 110.5 106.7 106.2 25 Fabricated metal products .. 34 5.38 107.2 106.9 107.9 108.3 107.6 106.5 106.0 105.9 106.9 106.3 105.1 105.6 105.3 104.5 26 Nonelectrical machinery 35 8.55 121.8 121.6 121.8 123.4 121.6 121.8 123.4 119.0 122.9 123.8 123.7 123.5 123.5 123.4 27 Electrical machinery 36 8.62 109.5 110.1 108.8 109.1 108.6 110.6 110.8 110.2 110.1 110.1 110.1 111.0 112.1 111.9 28 Transportation equipment ... 37 9.80 107.2 109.4 109.6 109.0 106.6 107.8 108.0 102.1 102.8 104.4 94.7 103.6 108.2 104.2 29 Motor vehicles and parts .. 371 4.65 104.9 108.6 107.8 105.0 99.6 102.7 103.2 99.7 99.0 98.7 76.8 94.4 103.9 94.9 30 Aerospace and miscellaneous transportation equipment 372-6,9 5.15 109.3 110.1 111.2 112.6 113.0 112.4 112.3 104.3 106.3 109.6 111.0 111.9 112.1 112.6 31 Instruments 38 3.26 116.4 117.5 118.0 118.3 118.5 116.4 116.2 116.1 115.6 114.8 116.0 116.4 115.8 116.5 32 Miscellaneous manufactures . 39 1.24 114.9 115.1 116.9 116.1 115.9 116.5 116.2 116.9 117.0 116.4 117.0 118.6 118.7 117.7 Utilities 33 Electric. 6.01 108.1 107.1 107.4 107.6 108.5 108.1 107.1 109.7 109.5 116.3 108.3 107.9 111.5 112.2 Gross value (billions of 1982 dollars, annual rates) MAJOR MARKET 34 Products, total 1,734.82 1,889.8 1,894.0 1,894.8 1,894.4 1,869.0 1,883.7 1,894.3 1,878.3 1,896.9 1,905.5 1,863.6 1,905.7 1,925.9 19,001 35 Final 1,350.87 1,480.1 1,485.5 1,485.3 1,485.6 1,459.6 1,475.3 1,486.2 1,465.6 1,482.8 1,492.5 1,447.9 1,489.3 1,506.6 14,844 36 Consumer goods 833.36 884.6 888.4 885.7 878.5 868.9 870.1 878.8 883.2 889.0 898.6 864.3 890.5 897.2 8,861 Equipment 517.51 595.5 597.1 599.6 607.1 590.8 605.3 607.5 582.4 593.8 594.0 583.6 598.8 609.3 6,013 38 Intermediate 383.95 409.7 408.5 409.5 408.8 409.3 408.4 408.1 412.7 414.1 413.0 415.7 416.4 419.4 4,156 NOTE. Mining and utilities series is no longer published. Industrial Production" and accompanying tables that contain revised indexes 1. These data also appear in the Board's G. 12.3 (414) release. Foraddress, see (1977=100) through December 1984 in the Federal Reserve Bulletin, vol. 71 (July inside front cover. 1985), pp. 487-501. The revised indexes for January through June 1985 were A major revision of the industrial production index and the capacity shown in the September Bulletin. utilization rates was released in July 1985. See "A Revision of the Index of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A51 2.14 HOUSING AND CONSTRUCTION Monthly figures are at seasonally adjusted annual rates except as noted. 1989 1990 IItteemm 11998877 11998888 11998899 June July Aug. Sept. Oct. Nov. Dec. Jan.' Feb.' Mar. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,535 1,456 1,339' 1,323' 1,281 1,334' UW 1,362' 1,364' 1,416' 1,739 1,297 1,232 2 1-family 1,024 994 932' 877' 910' 933' 946 959' 984' 984' 985 974 912 3 2-or-more-family 511 462 407' 446' 371' 401 364' 403' 38C 432' 754 323 320 4 Started 1,621 1,488 1,376 1,414 1,424 11,,332255 1,263 1,423 1,347 1,273 1,568 1,488 1,321 5 1-family 1,146 1,081 1,003 971 1,029 998877 969 1,023 1,010 931 1,099 1,154 1,010 6 2-or-more-family 474 407 373 443 395 338 294 400 337 342 469 334 311 7 Under construction, end of period1 . 987 919 850 915 918 901 892 894 881 886 892 901 891 8 1-family 591 570 535 572 576 565 565 565 558 567 571 576 571 9 2-or-more-family 397 350 315 343 342 336 327 329 323 319 321 325 320 10 Completed 1,669 1,530 1,423 1,355 1,375 1,437 1,366 1,317 1,486 1,302 1,443 1,358 1,373 11 1-family 1,123 1,085 1,026 964 967 1,037 959 987 1,078 933 1,031 1,046 1,026 12 2-or-more-family 546 445 3% 391 408 400 407 330 408 369 412 312 347 13 Mobile homes shipped 233 218 198 200 179 194 186 190 189 189 195 200 193 Merchant builder activity in I -family units 14 Number sold 672 675 650 646 741 719 638 636 687 633' 613 606 555 15 Number for sale, end of period 366 367 362' 376 369 364 364 363 363 362' 365 365 363 Price (thousands of dollars)2 Median 16 Units sold 104.7 113.3 120.4 122.8 116.0 122.9 120.0 123.0 125.0 125.2' 125.0 125.2 119.4 Average 17 Units sold 127.9 139.0 148.3' 153.6 140.3 158.6 151.1 147.8 151.4 154.3' 151.7 150.1 144.1 EXISTING UNITS (1-family) 18 Number sold 3,530 3,594 3,439 3,330 3,380 3,440 3,510 3,490 3,560 3,560 3,520 3,400 3,400 Price of units sold (thousands of dollars) 19 Median 85.6 89.2 93.0 93.5 95.2 95.8 93.8 92.4 93.1 92.5 96.3 95.2 96.3 20 Average 106.2 112.5 118.0 119.0 121.0 121.6 118.3 116.7 117.9 118.1 120.0 118.3 119.5 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 397,721 409,663 414,273 412,523 410,269 416,279 416,176 411,544 416,509 415,135 425,043 438,562 432,472 22 Private 320,108 328,738 330,250 329,035 328,785 331,884 329,564 328,687 327,761 321,380 334,216 343,223 341,749 23 Residential 194,656 198,101 195,385 194,229 195,165 194,393 192,765 191,428 190,313 189,452 196,659 199,6% 203,162 24 Nonresidential, total 125,452 130,637 134,865 134,806 133,620 113377,,449911 113366,,779999 113377,,225599 113377,,444488 113311,,992288 113377,,555577 114433,,552277 138,587 Buildings 25 Industrial 13,707 14,931 16,756 16,302 16,424 17,526 17,927 17,856 17,997 17,296 19,323 21,036 20,165 26 Commercial 55,448 58,104 57,485 57,434 56,640 57,680 57,132 58,213 57,845 54,368 55,376 59,556 54,%8 27 Other 15,464 17,278 17,366 17,179 16,768 18,455 17,962 17,332 17,813 16,248 17,511 16,951 17,306 28 Public utilities and other 40,833 40,324 43,258 43,891 43,788 43,830 43,778 43,858 43,793 44,016 45,347 45,984 46,148 29 Public 77,612 80,922 84,019 81,914 81,484 84,395 86,612 82,857 88,748 93,755 90,827 95,339 90,723 30 Military 4,327 3,579 3,504 4,324 3,194 3,779 4,916 2,076 3,664 3,552 3,325 3,206 3,677 31 Highway 25,343 28,524 27,663 27,321 26,128 27,367 27,581 26,214 28,670 32,502 29,358 34,021 29,956 32 Conservation and development... 5,162 4,474 4,772 4,699 4,567 4,708 4,906 5,145 5,075 5,664 4,934 5,363 4,950 33 Other 42,780 44,345 48,080 45,570 47,595 48,541 49,209 49,422 51,339 52,037 53,210 52,749 52,140 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 previous 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

A52 Domestic Nonfinancial Statistics • July 1990 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 IIIttteeemmm 1989 1990 1989 1990 l A l A l A eee ppp vvv rrr eee ... lll 11998899 11999900 111999999000 AApprr.. AApprr.. June Sept. Dec/ Mar/ Dec. Jan. Feb. Mar. Apr. CONSUMER PRICES2 (1982-84=100) 1 All items 5.1 4.7 5.3 2.3 4.9 8.5 .4 1.1 .5 .5 .2 128.9 2 Food 6.5 5.7 5.6 3.6 5.5 11.4 .5 2.0 .5 .3 -.2 131.3 4 3 A E l n l e i r t g e y m s it e le m s s s food and energy 4 8 . . 6 7 4. . 8 8 2 3 2 . . 8 7 -12 3 . . 6 5 4 3 . . 7 9 1 7 4 . . 5 8 . . 3 3 5. . 1 6 -.7 .5 -.8 .7 -.4 .2 1935.74 .2 5 Commodities 3.5 3.4 2.4 1.3 3.4 7.8 .2 .4 1.0 .5 .0 123.7 6 Services 5.1 5.6 4.6 4.5 5.7 7.2 .4 .7 .4 .7 .4 140.3 PRODUCER PRICES (1982=100) 7 Finished goods 5.6 3.5 5.8 .4 5.0 6.7 .6 1.8 .0 -.2 -.3 117.0 8 Consumer foods 6.7 4.7 -2.3 .7 12.4 9.5 .7 2.0R .9 -.6 -.6 123.2 9 Consumer energy 12.3 -1.8 34.3 -15.3 -5.3 24.0 1.4R 13.8' -5.0 -2.4 -1.7 67.2 10 Other consumer goods 4.6 4.0 6.0 2.3 4.2 3.5 ,5R .R .6 .2 .1 127.6 11 Capital equipment 3.5 3.8 4.5 4.4 2.0 3.4 .2 .2 .2 .4 .2 122.1 1 1 2 3 Int E e x rm clu ed d i i a n t g e e m ne a r te g r y i als3 6 6. . 1 2 -.1 .4 2. . 9 3 - -. . 7 7 -1 -. . 4 0 2 1 . . 5 3 -,2R 1..3o' r -.7 .1 . . 2 0 . . 1 0 1 1 1 2 2 0 . . 8 6 Crude materials 14 Foods 10.4 2.9 -16.9 -2.2 19.2 8.7 2.2' .8F 1.0 .3 -.8 114.8 1 lb 5 O En th e e r r g y 9 6. . 1 5 - - 2 6 . . 7 1 - 2 7 3 .7 .6 -7.0 .6 -1 1 5 3 .3 .2 4 1 . . 3 0 -\2..1r -5..20 ' -.8 .1 -4 2 . . 6 0 -7 2 . . 8 2 1 7 3 2 7 . . 6 4 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 A53 2.16 GROSS NATIONAL PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates. 1989 1990 AAccccoouunntt 11998877 11998888 11998899 QL Q2 Q3 Q4 Ql' GROSS NATIONAL PRODUCT 1 Total 4,524.3 4,880.6 5,234.0 5,113.1 5,201.7 5,281.0 5,340.2 5,431.4 By source 2 Personal consumption expenditures 3,010.8 3,235.1 3,471.1 3,381.4 3,444.1 3,508.1 3,550.6 3,639.0 3 Durable goods 421.0 455.2 473.2 466.4 471.0 486.1 469.5 491.3 4 Nondurable goods 998.1 1,052.3 1,123.4 1,098.3 1,121.5 1,131.4 1,142.4 1,169.3 5 Services 1,591.7 1,727.6 1,874.4 1,816.7 1,851.7 1,890.6 1,938.7 1,978.4 6 Gross private domestic investment 699.9 750.3 773.4 769.6 775.0 779.1 770.1 751.1 7 Fixed investment 670.6 719.6 746.3 742.0 747.6 751.7 744.0 764.0 8 Nonresidential 444.3 487.2 511.7 503.1 512.5 519.6 511.4 524.6 9 Structures 133.8 140.3 144.9 144.7 142.4 146.2 146.4 149.9 10 Producers' durable equipment 310.5 346.8 366.7 358.5 370.1 373.4 365.0 374.7 11 Residential structures 226.4 232.4 234.6 238.8 235.1 232.1 232.6 239.4 12 Change in business inventories 29.3 30.6 27.1 27.7 27.4 27.4 26.1 -12.9 13 Nonfarm 30.5 34.2 22.2 19.1 23.6 19.8 26.4 -18.0 14 Net exports of goods and services -112.6 -73.7 -47.1 -54.0 -50.6 -45.1 -38.8 -40.8 15 Exports 448.6 547.7 625.9 605.6 626.1 628.5 643.5 655.6 16 Imports 561.2 621.3 673.0 659.6 676.6 673.6 682.3 696.4 17 Government purchases of goods and services 926.1 968.9 1,036.6 1,016.0 1,033.2 1,038.9 1,058.3 1,082.1 18 Federal 381.6 381.3 403.2 399.0 406.0 402.7 405.1 413.4 19 State and local 544.5 587.6 633.4 617.0 627.2 636.2 653.2 668.7 By major type of product 70 Final sales, total 4,495.0 4,850.0 5,206.9 55,,008855..44 55,,117744..33 55,,225533..66 55,,331144..22 55,,444444..33 71 Goods 1,785.2 1,931.9 2,072.3 2,030.9 2,079.1 2,096.3 2,082.8 2,109.5 72 Durable 777.6 863.6 909.1 894.7 905.2 930.1 906.5 923.9 73 Nondurable 1,007.6 1,068.3 1,163.2 1,136.2 1,173.9 1,166.2 1,176.3 1,185.6 74 Services 2,304.5 2,499.2 2,702.7 2,620.8 2,667.5 2,728.1 2,794.2 2,844.6 25 Structures 434.6 449.5 459.1 461.3 455.1 456.6 463.2 477.3 26 Change in business inventories 29.3 30.6 27.1 27.7 27.4 27.4 26.1 -12.9 77 Durable goods 22.0 25.0 11.9 22.0 6.0 5.2 14.2 -18.8 28 Nondurable goods 7.2 5.6 15.3 5.7 21.4 22.2 11.8 5.9 MEMO 29 Total GNP In 1982 dollars 3,853.7 4,024.4 4,144.1 4,106.8 4,132.5 4,162.9 4,174.1 4,188.0 NATIONAL INCOME 30 3,665.4 3,972.6 4,266.5 4,185.2 4,249.6 4,287.3 4,344.0 4,434.7 31 Compensation of employees 2,690.0 2,907.6 3,144.4 3,061.7 3,118.2 3,171.9 3,225.9 3,285.3 32 Wages and salaries 2,249.4 2,429.0 2,631.1 2,560.7 2,608.8 2,654.7 2,700.1 2,745.3 33 Government and government enterprises 419.2 446.5 476.9 466.9 473.5 480.2 487.0 497.0 34 Other 1,830.1 1,982.5 2,154.2 2,093.8 2,135.3 2,174.5 2,213.1 2,248.3 35 Supplement to wages and salaries 440.7 478.6 513.3 501.0 509.4 517.2 525.8 540.1 36 Employer contributions for social insurance 227.8 249.7 265.0 259.7 263.4 266.6 270.4 278.5 37 Other labor income 212.8 228.9 248.3 241.3 246.0 250.7 255.3 261.5 38 Proprietors' income1 311.6 327.8 352.1 359.3 355.5 343.3 350.3 374.8 39 Business and professional 270.0 288.0 305.9 300.3 304.2 307.2 311.8 322.7 40 Farm1 41.6 39.8 46.2 59.0 51.3 36.1 38.5 52.1 41 Rental income of persons2 13.4 15.7 7.9 11.8 9.8 5.4 4.8 8.0 42 Corporate profits' 298.7 328.6 301.3 316.3 307.8 295.2 285.9 287.8 43 Profits before tax3 266.7 306.8 290.6'' 318.0 296.0 275.0 273.7 281.6 44 Inventory valuation adjustment -18.9 -25.0 -18.7 -38.3 -20.5 -6.3 -9.7 -11.2 45 Capital consumption adjustment 50.9 46.8 29.3 36.6 32.3 26.5 21.9 17.4 46 Net interest 351.7 392.9 460.8 436.1 458.4 471.5 477.2 478.7 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

A54 Domestic Nonfinancial Statistics • July 1990 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1989 1990 AAccccoouunntt 11998877 11998888 11998899 Ql Q2 Q3 Q4 Qlr PERSONAL INCOME AND SAVING 1 Total personal income 3,777.6 4,064.5 4,427.3 4,317.8 4,400.3 4,455.9 4,535.3 4,638.0 2 Wage and salary disbursements 2,249.4 2,429.0 2,631.1 2,560.7 2,608.8 2,654.7 2,700.1 2,745.3 3 Commodity-producing industries 649.9 696.3 738.2 726.6 733.7 742.6 749.7 754.0 4 Manufacturing 490.3 524.0 552.9 546.3 549.9 555.7 559.6 560.6 5 Distributive industries 531.9 571.9 615.1 598.8 610.8 619.4 631.2 644.8 6 Service industries 648.3 714.4 801.0 768.4 790.8 812.4 832.2 849.5 7 Government and government enterprises 419.2 446.5 476.9 466.9 473.5 480.2 487.0 497.0 8 Other labor income 212.8 228.9 248.3 241.3 246.0 250.7 255.3 261.5 9 Proprietors' income 311.6 327.8 352.1 359.3 355.5 343.3 350.3 374.8 10 Business and professional1 270.0 288.0 305.9 300.3 304.2 307.2 311.8 322.7 11 Farm1 41.6 39.8 46.2 59.0 51.3 36.1 38.5 52.1 12 Rental income of persons 13.4 15.7 7.9 11.8 9.8 5.4 4.8 8.0 13 Dividends 92.0 102.2 112.4 109.4 111.4 113.2 115.7 118.0 14 Personal interest income 523.2 571.1 657.4 629.0 655.1 667.8 677.7 684.4 15 Transfer payments 548.2 584.7 632.3 616.4 626.8 636.4 649.7 672.5 16 Old-age survivors, disability, and health insurance benefits ... 282.9 300.5 325.3 316.9 322.9 327.9 333.4 345.8 17 LESS: Personal contributions for social insurance 172.9 194.9 214.2 210.0 213.0 215.4 218.2 226.5 18 EQUALS: Personal income 3,777.6 4,064.5 4,427.3 4,317.8 4,400.3 4,455.9 4,535.3 4,638.0 19 LESS: Personal tax and nontax payments 571.7 586.6 648.5 628.3 652.6 649.1 664.1 672.3 20 EQUALS: Disposable personal income 3,205.9 3,477.8 3,778.8 3,689.5 3,747.7 3,806.8 3,871.3 3,965.7 21 LESS: Personal outlays 3,104.1 3,333.1 3,574.4 3,483.8 3,547.0 3,611.7 3,655.3 3,745.0 22 EQUALS: Personal saving 101.8 144.7 204.4 205.7 200.7 195.1 216.0 220.7 MEMO Per capita (1982 dollars) 23 Gross national product 15,793.9 16,332.8 16,656.4 16,566.4 16,629.8 16,711.8 1166,,770099..88 1166,,772255..22 24 Personal consumption expenditures 10,302.0 10,545.5 10,729.9 10,653.5 10,678.9 10,799.3 10,783.4 10,821.1 25 Disposable personal income 10,970.0 11,337.0 11,680.0 11,625.0 11,622.0 11,717.0 11,755.0 11,793.0 26 Saving rate (percent) 3.2 4.2 5.4 5.6 5.4 5.1 5.6 5.6 GROSS SAVING 27 Gross saving 553.8 642.4 701.7 693.5 695.8 709.9 707.7 683.6 28 Gross private saving 663.8 738.6 806.2 792.1 793.7 809.7 829.4 818.2 29 Personal saving 101.8 144.7 204.4 205.7 200.7 195.1 216.0 220.7 30 Undistributed corporate profits 75.3 80.3 49.5 53.4 52.0 49.3 43.3 35.1 31 Corporate inventory valuation adjustment -18.9 -25.0 -18.7 -38.3 -20.5 -6.3 -9.7 -11.2 Capital consumption allowances 32 Corporate 303.1 321.7 344.9 335.2 339.7 349.9 335544..99 335544..22 33 Noncorporate 183.6 191.9 207.4 197.8 201.3 215.3 215.2 208.1 34 Government surplus, or deficit (-), national income and product accounts -110.1 -96.1 -104.6r -98.7 -97.9 -99.8 -121.8 -134.6 35 Federal -161.4 -145.8 -148.5 -147.5 -145.4 -144.7 -156.5 -172.2 36 State and local 51.3 49.7 44.0 48.8 47.5 44.9 34.7 37.6 37 Gross investment 549.0 632.8 677.3 669.3 677.5 684.3 677.8 660.4 38 Gross private domestic 699.9 750.3 773.4 769.6 775.0 779.1 770.1 751.1 39 Net foreign -150.9 -117.5 -96.2 -100.3 -97.5 -94.8 -92.2 -90.7 40 Statistical discrepancy -4.7 -9.6 -24.4 -24.1 -18.3 -25.5 -29.8 -23.2 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 A55 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.1 1988 1989 Item credits or debits 11998877 11998888 11998899 Q4 Q1 Q2 Q3 Q4 1 Balance on current account -143,700 -126,548 -105,879 -28,677 -30,391 -31,999 -22,909 -20,571 2 Not seasonally adjusted -28,191 -25,994 -31,888 -27,854 -20,142 3 Merchandise trade balance2 -159,500 -127,215 -113,248 -32,019 -28,355 -27,529 -28,558 -28,806 4 Merchandise exports 250,266 319,251 361,872 83,729 87,783 91,284 90,691 92,114 5 Merchandise imports -409,766 -446,466 -475,120 -115,748 -116,138 -118,813 -119,249 -120,920 6 Military transactions, net -2,856 -4,606 -5,662 -1,604 -1,498 -1,518 -1,175 -1,471 7 Investment income, net 22,283'' 2,228' 4,489' -2,484' -6,104' 2,860' 6,757 8 Other service transactions, net 10,585 17,702 26,279 5,475 5,433 5,981 7,449 7,425 9 Remittances, pensions, and other transfers . -4,063 -4,279 -4,028 -1,090 -1,147 -972 -975 -935 10 U.S. government grants (excluding military) -10,149 -10,377 -10,248 -3,928 -2,340 -1,857 -2,510 -3,541 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) 997 2,999 1,037 3,413 1,049 -309 502 -206 12 Change in U.S. official reserve assets (increase, -). 9,149 -3,566 -25,293 2,271 -4,000 -12,095 -5,996 -3,202 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -509 474 -535 173 -188 68 -211 -204 15 Reserve position in International Monetary Fund. 2,070 1,025 471 307 316 -159 337 -23 16 Foreign currencies 7,588 -5,064 -25,229 1,791 -4,128 -12,004 -6,122 -2,975 17 Change in U.S. private assets abroad (increase, -). -86,363 -81,544 -101,451 -38,332 -27,939 13,210 -39,228 -47,495 18 Bank-reported claims -42,119 -54,481 -47,244 -30,916 -22,132 27,238 -20,700 -31,650 19 Nonbank-reported claims 5,201 -1,684 608 4,569 1,835 -2,954 1,727 20 U.S. purchase of foreign securities, net -5,251 -7,846 -22,551 -3,047 -2,568 -5,737 -10,392 -3,854 21 U.S. direct investments abroad, net -44,194 -17,533 -32,264 -8,938 -5,074 -5,337 -9,863 -11,991 22 Change in foreign official assets in United States (increase, +) 45,193 38,882 7,369 10,589 7,477 -5,201 12,097 -7,005 23 U.S. Treasury securities 43,238 41,683 323 11,897 4,634 -9,738 12,746 -7,319 24 Other U.S. government obligations 1,564 1,309 1,383 697 721 -97 190 569 25 Other U.S. government liabilities -2,520 -1,284 55 -232 -304 417 -385 326 26 Other U.S. liabilities reported by U.S. banks' 3,918 -331 3,751 -1,036 1,974 3,620 -1,097 -746 27 Other foreign official assets -1,007 -2,495 1,857 -737 452 597 643 165 28 Change in foreign private assets in United States (increase, 172,847 180,417 189,302 70,170 52,529 3,412 58,619 74,742 29 U.S. bank-reported liabilities3 89,026 68,832 57,983 32,223 13,261 -21,422 25,177 40,967 30 U.S. nonbank-reported liabilities 2,450 6,558 313 2,702 2,852 -361 -2,178 31 Foreign private purchases of U.S. Treasury securities, net -7,643 20,144 29,411 5,336 8,590 2,252 12,714 5,855 32 Foreign purchases of other U.S. securities, net 42,120 26,448 40,334 6,871 8,665 9,676 10,470 11,523 33 Foreign direct investments in United States, net 46,894 58,435 61,261 23,038 19,161 13,267 12,436 16,397 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 1,878 -10,641 34,914 -19,434 1,275 32,982 -3,085 3,737 36 Owing to seasonal adjustments 4,431 3,700 -2,825 -5,370 4,490 37 Statistical discrepancy in recorded data before seasonal adjustment 1,878 -10,641 34,914 -23,865 -2,425 35,807 2,285 -753 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) 9,149 -3,566 -25,293 2,271 -4,000 -12,095 -5,996 -3,202 39 Foreign official assets in United States (increase, +) excluding line 25 47,713 40,166 7,314 10,821 7,781 -5,618 12,482 -7,331 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22 above) -9,956 -3,109 10,680 672 7,143 433 4,515 -1,411 41 Transfers under military grant programs (excluded from lines 4, 6, and 10 above) 53 92 47 40 12 13 8 14 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. Reporting banks include all kinds of depository institutions besides commer- (Department of Commerce). cial banks, as well as some brokers and dealers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A56 International Statistics • July 1990 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data are seasonally adjusted. 1989 1990 IItteemm 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb/ Mar.p 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments, f.a.s. value 254,073 322,426 363,983 30,367 31,474 30,627 30,843 31,940 31,818 33,277 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 2 Customs value 406,241 440,952 472,977 38,524 41,915 40,739 38,522 41,261 37,916 41,723 Trade balance 3 Customs value -152,169 -118,526 -108,994 -8,157 -10,441 -10,112 -7,678 -9,321 -6,099 -8,446 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; the timing. On the export side, the largest adjustment is the exclusion of military sales previous month is revised to reflect late documents. Total exports and the trade (which are combined with other military transactions and reported separately in balance reflect adjustments for undocumented exports 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 1989 1990 TTyyppee 11998866 11998877 11998888 Sept. Oct. Nov. Dec. Jan. Feb. Mar." 1 Total 48,511 45,798 47,802 68,418 70,560 70,560 74,609 75,506 74,173 76,303 2 Gold stock, including Exchange Stabilization Fund1 11,064 11,078 11,057 11,065 11,062 11,060 11,059 11,059 11,059 11,060 3 Special drawing rights2'3 8,395 10,283 9,637 9,487 9,473 9,751 9,951 10,041 10,216 10,092 4 Reserve position in International Monetary Fund 11,730 11,349 9,745 8,786 8,722 9,047 9,048 9,173 8,985 8,727 5 Foreign currencies4 17,322 13,088 17,363 39,080 41,552 42,702 44,551 45,233 43,913 46,424 1. Gold held under earmark at Federal Reserve Banks for foreign and interna- 3. Includes allocations by the International Monetary Fund of SDRs as follows: tional accounts is not included in the gold stock of the United States; see table $867 million on Jan. 1, 1970; $717 million on Jan. 1, 1971; $710 million on Jan. 1, 3.13. Gold stock is valued at $42.22 per fine troy ounce. 1972; $1,139 mUlion on Jan. 1, 1979; $1,152 million on Jan. 1, 1980; and $1,093 2. Beginning July 1974, the IMF adopted a technique for valuing the SDR based million on Jan. 1, 1981; plus transactions in SDRs. on a weighted average of exchange rates for the currencies of member countries. 4. Valued at current market exchange rates. From July 1974 through December 1980, 16 currencies were used; from January 1981, 5 currencies have been used. The U.S. SDR holdings and reserve position in the IMF also are valued on this basis beginning July 1974. 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1989 1990 AAsssseettss 11998866 11998877 11998888 p Sept. Oct. Nov. Dec. Jan. Feb. Mar. 1 Deposits 287 244 347 325 252 307 589 251 309 300 Assets held in custody 2 U.S. Treasury securities 155,835 195,126 232,547 235,597 230,804 231,059 224,911 225,618 221,798 250,447 3 Earmarked gold 14,048 13,919 13,636 13,506 13,460 13,458 13,456 13,458 13,458 13,458 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 A57 3.14 FOREIGN BRANCHES OF U.S. BANKS Balance Sheet Data1 Millions of dollars, end of period 1989 1990 AAsssseett aaccccoouunntt 11998866 11998877 11998888 Sept. Oct. Nov. Dec. Jan. Feb. Mar. All foreign countries 1 Total, all currencies 456,628 518,618 505,595 520,038 532,912 548,074 545,366 549,368 553,815' 535,039 2 Claims on United States 114,563 138,034 169,111 182,192 184,327 195,913 198,835 192,688 188,700 176,095 3 Parent bank 83,492 105,845 129,856 142,475 145,200 154,825 157,092 149,285 145,156 135,171 4 Other banks in United States 13,685 16,416 14,918 14,029 14,084 15,301 17,042 17,840 18,064 15,511 5 Nonbanks 17,386 15,773 24,337 25,688 25,043 25,787 24,701 25,563 25,480 25,413 6 Claims on foreigners 312,955 342,520 299,728 289,754 300,567 302,525 300,575 307,937 313,934' 308,097 7 Other branches of parent bank 96,281 122,155 107,179 104,691 110,681 111,053 113,810 120,359 122,525 120,553 8 Banks 105,237 108,859 96,932 90,375 93,190 95,098 90,703 91,712 93,997 89,817 9 Public borrowers 23,706 21,832 17,163 16,222 16,720 16,148 16,456 15,392 15,148' 15,973 10 Nonbank foreigners 87,731 89,674 78,454 78,466 79,976 80,226 79,606 80,474 82,264 81,754 11 Other assets 29,110 38,064 36,756 48,092 48,018 49,636 45,956 48,743 51,181 50,847 12 Total payable in U.S. dollars 317,487 350,107 357,573 359,950 369,737 380,282 382,414 374,984 375,210 358,619 13 Claims on United States 110,620 132,023 163,456 174,379 176,047 188,105 191,184 184,782 180,738 168,833 14 Parent bank 82,082 103,251 126,929 137,616 139,390 149,908 152,294 144,055 139,920 130,350 15 Other banks in United States 12,830 14,657 14,167 13,082 13,432 14,543 16,386 17,018 17,187 14,992 16 Nonbanks 15,708 14,115 22,360 23,681 23,225 23,654 22,504 23,709 23,631 23,491 17 Claims on foreigners 195,063 202,428 177,685 164,758 171,854 168,404 169,690 167,722 172,132 167,692 18 Other branches of parent bank 72,197 88,284 80,736 78,298 84,224 79,585 82,949 86,114 87,471 85,093 19 Banks 66,421 63,707 54,884 46,710 47,274 48,966 48,3% 45,385 46,514 43,403 20 Public borrowers 16,708 14,730 12,131 11,646 11,579 11,446 10, %1 10,332 10,529 11,110 21 Nonbank foreigners 39,737 35,707 29,934 28,104 28,777 28,407 27,384 25,891 27,618 28,086 22 Other assets 11,804 15,656 16,432 20,813 21,836 23,773 21,540 22,480 22,340 22,094 United Kingdom 23 Total, all currencies 140,917 158,695 156,835 156,866 163,426 164,916 161,947 166,915 169,727 167,162 24 Claims on United States 24,599 32,518 40,089 39,837 42,246 44,661 39,212 41,208 40,161 38,809 25 Parent bank 19,085 27,350 34,243 36,182 39,104 40,848 35,847 37,292 36,311 34,648 26 Other banks in United States 1,612 1,259 1,123 1,130 1,036 1,199 1,058 1,441 1,365 1,301 27 Nonbanks 3,902 3,909 4,723 2,525 2,106 2,614 2,307 2,475 2,485 2,860 28 Claims on foreigners 109,508 115,700 106,388 101,855 106,183 105,349 107,657 109,837 110,911 109,227 29 Other branches of parent bank 33,422 39,903 35,625 32,619 35,249 35,064 37,728 37,701 38,410 39,636 30 Banks 39,468 36,735 36,765 37,011 37,881 36,317 36,159 37,668 36,488 34,803 31 Public borrowers 4,990 4,752 4,019 3,272 3,345 3,181 3,293 3,128 3,076 3,857 32 Nonbank foreigners 31,628 34,310 29,979 28,953 29,708 30,787 30,477 31,340 32,937 30,931 33 Other assets 6,810 10,477 10,358 15,174 14,997 14,906 15,078 15,870 18,655 19,126 34 Total payable in U.S. dollars 95,028 100,574 103,503 99,264 106,708 106,086 103,427 103,038 103,752 101,024 35 Claims on United States 23,193 30,439 38,012 36,859 39,534 41,504 36,404 38,261 37,006 35,752 36 Parent bank 18,526 26,304 33,252 34,672 37,570 39,304 34,329 35,731 34,462 32,697 37 Other banks in United States 1,475 1,044 964 882 786 861 843 1,118 1,036 1,122 38 Nonbanks 3,192 3,091 3,796 1,305 1,178 1,339 1,232 1,412 1,508 1,933 39 Claims on foreigners 68,138 64,560 60,472 55,637 59,552 56,872 59,062 56,939 58,763 57,166 40 Other branches of parent bank 26,361 28,635 28,474 25,982 28,363 26,961 29,872 28,655 30,224 30,421 41 Banks 23,251 19,188 18,494 17,536 18,200 16,884 16,579 16,399 15,984 13,748 42 Public borrowers 3,677 3,313 2,840 2,521 2,553 2,404 2,371 2,321 2,266 3,074 43 Nonbank foreigners 14,849 13,424 10,664 9,598 10,436 10,623 10,240 9,564 10,289 9,923 44 Other assets 3,697 5,575 5,019 6,768 7,622 7,710 7,%1 7,838 7,983 8,106 Bahamas and Caymans 45 Total, all currencies 142,592 160,321 170,639 164,684 164,836 172,762 176,006 167,385 164,908 155,125 46 Claims on United States 78,048 85,318 105,320 111,043 109,910 118,037 124,205 117,177 114,263 105,466 47 Parent bank 54,575 60,048 73,409 76,426 75,900 82,605 87,882 79,525 76,475 70,535 48 Other banks in United States 11,156 14,277 13,145 12,141 12,059 13,185 15,071 15,403 15,827 13,564 49 Nonbanks 12,317 10,993 18,766 22,476 21,951 22,247 21,252 22,249 21,961 21,367 50 Claims on foreigners 60,005 70,162 58,393 45,962 47,214 46,391 44,168 42,610 43,162 42,373 51 Other branches of parent bank 17,296 21,277 17,954 14,688 16,961 14,414 11,309 13,371 14,477 13,236 52 Banks 27,476 33,751 28,268 20,162 19,579 21,641 22,611 20,119 19,527 19,350 53 Public borrowers 7,051 7,428 5,830 5,435 5,289 5,340 5,217 4,764 4,753 4,684 54 Nonbank foreigners 8,182 7,706 6,341 5,677 5,385 4,9% 5,031 4,356 4,405 5,103 55 Other assets 4,539 4,841 6,926 7,679 7,712 8,334 7,633 7,598 7,483 7,286 56 Total payable in U.S. dollars 136,813 151,434 163,518 160,274 159,643 167,182 170,780 160,832 159,484 150,041 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

A58 International Statistics • July 1990 3.14—Continued 1989 1990 LLiiaabbiilliittyy aaccccoouunntt 11998866 11998877 11998888 Sept. Oct. Nov. Dec. Jan. Feb. Mar. All foreign countries 57 Total, all currencies 456,628 518,618 505,595 520,038 532,912 548,074 545,366 549,368 553,815' 535,039 58 Negotiable CDs 31,629 30,929 28,511 26,680 26,776 26,555 23,500 23,510 23,620 21,767 59 To United States 152,465 161,390 185,577 182,899 183,484 190,149 197,239 178,452' 181,164 173,654 60 Parent bank 83,394 87,606 114,720 120,853 123,281 128,799 138,803 117,724'" 120,414 114,636 61 Other banks in United States 15,646 20,355 14,737 12,866 11,333 10,811 11,704 11,850 11,990 10,574 62 Nonbanks 53,425 53,429 56,120 49,180 48,870 50,539 46,732 48,878 48,760 48,444 63 To foreigners 253,775 304,803 270,923 283,196 294,294 302,346 296,850 315,991' 317,318' 309,756 64 Other branches of parent bank 95,146 124,601 111,267 104,850 114,175 115,484 119,591 126,965 126,786' 124,084 65 Banks 77,809 87,274 72,842 77,530 75,601 81,200 76,452 82,042' 77,449' 75,044 66 Official institutions 17,835 19,564 15,183 17,348 19,484 18,938 16,750 19,004 20,637 17,677 67 Nonbank foreigners 62,985 73,364 71,631 83,468 85,034 86,724 84,057 87,980 92,446 92,951 68 Other liabilities 18,759 21,496 20,584 27,263 28,358 29,024 27,777 31,415 31,713 29,862 69 Total payable in U.S. dollars 336,406 361,438 367,483 372,664 385,117 392,983 396,282 384,579 385,203 369,264 70 Negotiable CDs 28,466 26,768 24,045 22,927 22,260 22,539 19,619 18,512 18,783 17,084 71 To United States 144,483 148,442 173,190 171,948 172,305 179,927 187,286 167,754 169,669 162,564 72 Parent bank 79,305 81,783 107,150 113,845 116,308 122,910 132,954 111,734 113,934 108,570 73 Other banks in United States , 14,609 18,951 13,468 11,688 10,129 9,512 10,519 10,560 10,684 9,074 74 Nonbanks 50,569 47,708 52,572 46,415 45,868 47,505 43,813 45,460 45,051 44,920 75 To foreigners 156,806 177,711 160,766 165,215 177,610 177,459 176,460 185,192 183,378 176,939 76 Other branches of parent bank 71,181 90,469 84,021 77,986 85,780 82,912 87,636 91,736 90,360 86,908 77 Banks 33,850 35,065 28,493 30,146 31,886 33,370 30,537 32,551 28,741 27,666 78 Official institutions 12,371 12,409 8,224 10,195 11,446 11,713 9,873 11,063 11,740 9,221 79 Nonbank foreigners 39,404 39,768 40,028 46,888 48,498 49,464 48,414 49,842 52,537 53,144 80 Other liabilities 6,651 8,517 9,482 12,574 12,942 13,058 12,917 13,121 13,373 12,677 United Kingdom 81 Total, all currencies 140,917 158,695 156,835 156,866 163,426 164,916 161,947 166,915 169,727 167,162 82 Negotiable CDs 27,781 26,988 24,528 23,123 23,152 22,837 20,056 19,791 19,656 18,266 83 To United States 24,657 23,470 36,784 30,772 34,089 33,101 36,036 31,893 32,686 32,780 84 Parent bank 14,469 13,223 27,849 23,863 25,113 25,430 29,726 23,256 23,752 22,970 85 Other banks in United States 2,649 1,536 2,037 1,538 1,859 1,096 1,256 1,545 2,115 1,827 86 Nonbanks 7,539 8,711 6,898 5,371 7,117 6,575 5,054 7,092 6,819 7,983 87 To foreigners 79,498 98,689 86,026 90,862 93,508 96,509 92,307 99,720 101,565 101,160 88 Other branches of parent bank 25,036 33,078 26,812 24,766 26,931 26,656 27,397 29,216 28,074 29,848 89 Banks 30,877 34,290 30,609 31,242 30,531 33,016 29,780 33,568 32,110 29,143 90 Official institutions 6,836 11,015 7,873 8,877 10,255 9,724 8,551 9,368 10,758 9,157 91 Nonbank foreigners 16,749 20,306 20,732 25,977 25,791 27,113 26,579 27,568 30,623 33,012 92 Other liabilities 8,981 9,548 9,497 12,109 12,677 12,469 13,548 15,511 15,820 14,956 93 Total payable in U.S. dollars 99,707 102,550 105,907 103,724 110,980 109,116 108,178 106,676 106,416 103,522 94 Negotiable CDs 26,169 24,926 22,063 21,156 20,433 20,715 18,143 16,931 16,910 15,660 95 To United States 22,075 17,752 32,588 28,028 31,280 30,130 33,056 28,542 28,817 29,361 96 Parent bank 14,021 12,026 26,404 23,178 24,241 24,578 28,812 22,428 22,513 22,194 97 Other banks in United States 2,325 1,308 1,752 1,362 1,691 863 1,065 1,217 1,807 1,555 98 Nonbanks 5,729 4,418 4,432 3,488 5,348 4,689 3,179 4,897 4,497 5,612 99 To foreigners 48,138 55,919 47,083 48,451 52,809 52,135 50,517 54,574 53,751 52,095 100 Other branches of parent bank 17,951 22,334 18,561 16,672 18,925 16,845 18,384 19,660 18,556 19,182 101 Banks 15,203 15,580 13,407 12,245 13,077 13,587 12,244 14,701 11,920 10,003 102 Official institutions 4,934 7,530 4,348 5,532 6,606 6,755 5,454 5,649 6,717 5,165 103 Nonbank foreigners 10,050 10,475 10,767 14,002 14,201 14,948 14,435 14,564 16,558 17,745 104 Other liabilities 3,325 3,953 4,173 6,089 6,458 6,136 6,462 6,629 6,938 6,406 Bahamas and Caymans 105 Total, all currencies 142,592 160,321 170,639 164,684 164,836 172,762 176,006 167,385 164,908 155,125 106 Negotiable CDs 847 885 953 669 669 671 678 681 671 522 107 To United States 106,081 113,950 122,332 117,611 114,701 121,021 124,859 114,829 113,137 107,983 108 Parent bank 49,481 53,239 62,894 64,859 66,292 70,107 75,579 65,786 64,532 61,995 109 Other banks in United States . 11,715 17,224 11,494 10,026 8,088 8,438 8,883 8,677 8,198 7,085 110 Nonbanks 44,885 43,487 47,944 42,726 40,321 42,476 40,397 40,366 40,407 38,903 111 To foreigners 34,400 43,815 45,161 43,818 46,906 47,521 47,382 48,974 48,726 44,314 112 Other branches of parent bank 12,631 19,185 23,686 20,678 23,086 23,352 23,414 24,911 25,110 20,778 113 Banks 8,617 10,769 8,336 8,802 8,985 9,137 8,823 8,439 8,059 7,983 114 Official institutions 2,719 1,504 1,074 928 1,003 1,131 1,097 1,528 1,290 1,078 115 Nonbank foreigners 10,433 12,357 12,065 13,410 13,832 13,901 14,048 14,096 14,267 14,475 116 Other liabilities 1,264 1,671 2,193 2,586 2,560 3,549 3,087 2,901 2,374 2,306 117 Total payable in U.S. dollars 138,774 152,927 162,950 160,133 160,028 167,835 171,250 162,141 160,212 150,738 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A59 3.15 SELECTED U.S. LIABILITIES TO FOREIGN OFFICIAL INSTITUTIONS Millions of dollars, end of period 1989 1990 IItteemm 11998877 11998888 Sept. Oct. Nov. Dec. Jan. Feb. Mar." 1 Total1 259,556 299,782 315,703 315,632 315,051 308,275 305,OW 299,726' 296,830 By type 2 Liabilities reported by banks in the United States"' 31,838 31,519 37,279 42,615 39,090 36,458 33,889'' 33,339' 34,532 3 U.S. Treasury bills and certificates3 88,829 103,722 8866,,335500 8811,,446666 8822,,447744 7766,,998855 7766,,115577 7733,,009999 7733,,003399 U.S. Treasury bonds and notes 4 Marketable 122,432 149,056 174,072 173,093 174,778 176,084 176,411 174,986 171,153 5 Nonmarketable 300 523 557 561 564 568 572 576 580 6 U.S. securities other than U.S. Treasury securities5 16,157 14,962 17,445 17,897 18,145 18,180 17,990 17,726 17,526 By area 7 Western Europe1 124,620 125,097 134,338 134,378 137,760 134,907 135,277 133,749'' 135,984 8 Canada 4,961 9,584 9,026 8,688 9,130 99,,555533 9,368 7,976r 8,386 9 Latin America and Caribbean 8,328 10,099 9,516 10,003 9,892 88,,880088 7,927' 8,308 9,329 10 116,098 145,608 154,549 154,130 149,745 147,038 143,962r 140,920' 134,744 11 Africa 1,402 1,369 867 910 1,019 994 834 1,020 930 12 Other countries 4,147 7,501 6,849 6,962 6,941 6,406 7,077 7,177 6,878 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. 3. Includes nonmarketable certificates of indebtedness (including those payable NOTE. Based on Treasury Department data and on data reported to the in foreign currencies through 1974) and Treasury bills issued to official institutions Treasury Department by banks (including Federal Reserve Banks) and securities of foreign countries. dealers in the United States. 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 1989 IItteemm 11998866 11998877 11998888 Mar. June Sept. Dec/ 1 Banks' own liabilities 222999,,,777000222 555555,,,444333888 777444,,,999888000 777666,,,666666888 666999,,,222111333 777222,,,777888222 666666,,,444111888 2 Banks' own claims 222666,,,111888000 555111,,,222777111 666888,,,999888333 777333,,,000555000 666222,,,888777444 777000,,,999222999 666555,,,111333666 111444,,,111222999 111888,,,888666111 222555,,,111000000 222666,,,000888444 222333,,,999222222 222222,,,999999888 222000,,,333444666 111222,,,000555222 333222,,,444111000 444333,,,888888444 444666,,,999666666 333888,,,999555222 444777,,,999333111 444444,,,777999000 5 Claims of banks' domestic customers2 222,,,555000777 555555111 333666444 333777666 777222333 222,,,555555888 333,,,111000000 1. Data on claims exclude foreign currencies held by U.S. monetary author- 2. Assets owned by customers of the' reporting bank located in the United ities. States that represent claims on foreigners held by reporting banks for the accounts of the domestic customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A60 International Statistics • July 1990 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1989 1990 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb. Mar.p 1 All foreigners 618,874 685,339 735,896 702,613 709,321 731,874 735,896 704,593' 687,005' 702,695 2 Banks' own liabilities 470,070 514,532 576,515 535,044 544,913 565,702 576,515 543,382' 528,759' 540,204 3 Demand deposits 22,383 21,863 21,722 21,467 20,955 21,315 21,722 19,836' 20,979' 20,429 4 Time deposits 148,374 152,164 170,472 157,424 162,531 166,044 170,472 160,677' 157,465' 155,785 5 Other. 51,677 51,366 65,758 56,399 65,085 66,130 65,758 61,331' 57,135' 59,291 6 Own foreign offices 247,635 289,138 318,563 299,753 2%,342 312,213 318,563 301,538' 293,180' 304,699 7 Banks' custody liabilities5 148,804 170,807 159,380 167,570 164,409 166,172 159,380 161,211 158,246 162,492 8 U.S. Treasury bills and certificates6 101,743 115,056 91,100 99,856 95,893 97,018 91,100 90,703 87,800 88,015 9 Other negotiable and readily transferable instruments 16,776 16,426 19,526 20,226 19,883 19,236 19,526 18,658 18,655 21,028 10 Other 30,285 39,325 48,754 47,487 48,633 49,918 48,754 51,851 51,791 53,449 11 Nonmonetary inteniational and regional organizations 4,464 3,224 4,772 4,409 5,833 5,905 4,772 44,,777788'' 3,970 4,929 12 Banks' own liabilities 2,702 2,527 3,156 2,811 3,797 4,587 3,156 3,178' 2,423 3,367 13 Demand deposits 124 71 96 89 53 62 96 36 55 46 14 Time deposits 1,538 1,183 927 1,159 1,107 1,075 927 1,048 615 956 15 Other. 1,040 1,272 2,133 1,555 2,638 3,449 2,133 2,094' 1,753 2,365 16 Banks' custody liabilities5 1,761 698 1,616 1,598 2,036 1,318 1,616 1,599 1,547 1,562 17 U.S. Treasury bills and certificates6 265 57 197 84 568 321 197 102 160 191 18 Other negotiable and readily transferable instruments7 1,497 641 1,417 1,479 1,454 996 1,417 1,497 1,387 1,371 19 Other 0 0 2 35 14 0 2 0 0 0 20 Official institutions9 120,667 135,241 113,443 123,629 124,081 121,563 113,443 110,046' 106,437' 107,571 21 Banks' own liabilities 28,703 27,109 31,070 32,469 37,538 34,119 31,070 30,342' 30,148' 30,691 22 Demand deposits 1,757 1,917 2,189 1,936 1,941 1,829 2,189 1,599' 1,662' 1,822 23 Time deposits 12,843 9,767 10,530 9,545 12,101 11,237 10,530 9,358' 10,615' 9,874 24 Other. 14,103 15,425 18,351 20,989 23,496 21,053 18,351 19,385 17,872' 18,996 25 Banks' custody liabilities5 91,965 108,132 82,373 91,159 86,542 87,444 82,373 79,704 76,289 76,881 26 U.S. Treasury bills and certificates6 88,829 103,722 76,985 86,350 81,466 82,474 76,985 76,157 73,099 73,039 27 Other negotiable and readily transferable instruments 2,990 4,130 5,028 4,620 4,774 4,845 5,028 3,459 2,892 3,671 28 Other 146 280 361 189 303 125 361 88 298 171 29 Banks10 414,280 459,523 514,395 480,989 483,498 507,346 514,395 491,589' 475,519' 489,928 30 Banks' own liabilities 371,665 409,501 453,880 420,212 421,805 444,491 453,880 427,22c 412,03c 421,713 31 Unaffiliated foreign banks 124,030 120,362 135,317 120,466 125,463 132,278 135,317 125,682' 118,851' 117,014 32 Demand deposits 10,898 9,948 10,339 10,701 9,885 10,736 10,339 9,601 10,354' 9,611 33 Time deposits 79,717 80,189 92,278 80,935 83,983 87,444 92,278 81,51* 76,111' 76,387 34 Other. 33,415 30,226 32,701 28,830 31,594 34,099 32,701 34,562' 32,386' 31,016 35 Own foreign offices 247,635 289,138 318,563 299,746 296,342 312,213 318,563 301,538' 293,18c 304,699 36 Banks' custody liabilities5 42,615 50,022 60,514 60,777 61,693 62,855 60,514 64,369 63,488 68,215 37 U.S. Treasury bills and certificates6 9,134 7,602 9,367 9,230 9,427 9,670 9,367 9,614 9,342 9,359 38 Other negotiable and readily transferable instruments 5,392 5,725 5,124 5,408 5,102 4,797 5,124 5,090 4,918 7,608 39 Other 28,089 36,694 46,023 46,138 47,165 48,388 46,023 49,665 49,229 51,247 40 Other foreigners 79,463 87,351 103,286 93,586 95,909 97,060 103,286 98,180' 101,078' 100,267 41 Banks' own liabilities 67,000 75,396 88,409 79,551 81,773 82,505 88,409 82,641' 84,157' 84,433 47 Demand deposits 9,604 9,928 9,098 8,741 9,077 8,689 9,098 8,599' 8,908' 8,950 43 54,277 61,025 66,738 65,784 65,338 66,288 66,738 68,752' 70,124' 68,569 44 Other. 3,119 4,443 12,573 5,026 7,357 7,528 12,573 5.29C 5,124' 6,914 45 Banks' custody liabilities5 12,463 11,956 14,877 14,035 14,137 14,555 14,877 15,539 16,922 15,834 46 U.S. Treasury bills and certificates6 3,515 3,675 4,551 4,192 4,432 4,553 4,551 4,830 5,199 5,425 47 Other negotiable and readily transferable instruments 6,898 5,929 7,958 8,718 8,553 8,597 7,958 8,612 9,457 8,378 48 Other 2,050 2,351 2,368 1,125 1,152 1,405 2,368 2,098 2,265 2,031 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 7,314 6,425 7,203 7,515 7,434 7,050 7,203 8,576 8,457 7,634 1. Reporting banks include all kinds of depository institutions besides commer- 5. Financial claims on residents of the United States, other than long-term cial banks, as well as some brokers and dealers. securities, held by or through reporting banks. 2. Excludes negotiable time certificates of deposit, which are included in 6. Includes nonmarketable certificates of indebtedness and Treasury bills "Other negotiable and readily transferable instruments." issued to official institutions of foreign countries. 3. Includes borrowing under repurchase agreements. 7. Principally bankers acceptances, commercial paper, and negotiable time 4. U.S. banks: includes amounts due to own foreign branches and foreign certificates of deposit. subsidiaries consolidated in "Consolidated Report of Condition" filed with bank 8. Principally the International Bank for Reconstruction and Development, and regulatory agencies. Agencies, branches, and majority-owned subsidiaries of the Inter-American and Asian Development Banks. Data exclude "holdings of foreign banks: principally amounts due to head office or parent foreign bank, and dollars" of the International Monetary Fund. foreign branches, agencies, or wholly owned subsidiaries of head office or parent 9. Foreign central banks, foreign central governments, and the Bank for foreign bank. International Settlements. 10. 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 A61 3.17—Continued 1989 1990 AArreeaa aanndd ccoouunnttrryy 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb. Mar." 1 Total 618,874 685,339 735,896 702,613 709,321 731,874 735,896 704,593' 687,005' 702,695 2 Foreign countries 614,411 682,115 731,124 698,204 703,488 725,970 731,124 699,815' 683,035' 697,766 3 Europe 234,641 231,912 237,292 223,312 233,250 242,602 237,292 230,730' 224,048' 223,740 4 Austria 920 1,155 1,232 1,354 1,201 1,475 1,232 1,422 1,817 1,759 5 Belgium-Luxembourg 9,347 10,022 10,491 10,169 10,852 10,333 10,491 11,348 11,3%' 11,922 6 Denmark 760 2,200 1,410 1,378 1,444 1,913 1,410 1,240 1,244 1,760 7 Finland 377 285 570 519 464 577 570 685 611 431 8 France 29,835 24,777 26,893 23,137 23,971 26,018 26,893 22,985 21,841' 21,928 9 Germany 7,022 6,772 7,578 8,404 8,757 9,145 7,578 7,580 8,649' 7,468 10 Greece 689 672 1,017 803 850 1,030 1,017 1,092 1,024 906 11 Italy 12,073 14,599 16,159 14,567 14,244 14,673 16,159 13,050' 11,978 12,840 12 Netherlands 5,014 5,316 6,613 5,221 5,634 7,259 6,613 7,732' 8,214' 9,416 13 Norway 1,362 1,559 2,401 1,701 1,344 1,954 2,401 1,256 997 2,620 14 Portugal 801 903 2,407 2,209 2,293 2,251 2,407 2,381 2,285 2,384 15 Spain 2,621 5,494 4,364 5,304 5,007 4,911 4,364 5,421 4,279' 4,908 16 Sweden 1,379 1,284 1,491 1,682 1,665 1,921 1,491 2,303 1,468 1,524 17 Switzerland 33,766 34,199 34,511 29,218 29,765 31,714 34,511 33,288' 33,174 34,333 18 Turkey 703 1,012 1,818 1,088 1,202 1,372 1,818 1,047' 886 1,039 19 United Kingdom 116,852 111,811 102,334 102,055 106,371 108,914 102,334 101,968' 99,361' %,242 20 Yugoslavia 710 529 1,474 774 858 1,017 1,474 1,349 1,401 1,613 2 2 2 1 O U t . h S e .S r .R W estern Europe1 9,79 3 8 2 8,5 1 9 3 8 8 13,5 3 6 50 3 12,9 2 2 44 3 16,3 3 9 38 4 15, 2 1 8 7 6 0 13,5 3 6 5 3 0 13, 2 2\ 2 < 9 f 11, 3 7 7 6 7 2 ' 9,1 1 7 4 1 1 23 Other Eastern Europe2 582 591 618 564 597 669 618 1,138 1,285' 1,337 24 Canada 30,095 21,062 18,861 18,016 16,744 18,245 18,861 19,243 21,328' 18,541 25 Latin America and Caribbean 220,372 271,146 310,737 291,239 289,329 299,765 310,737 300,123' 296,348' 313,949 26 Argentina 5,006 7,804 7,294 8,552 8,178 7,803 7,294 7,368 7,494' 8,036 27 Bahamas 74,767 86,863 99,341 90,850 93,246 %,386 99,341 95,254' 94,353' 97,278 28 Bermuda 2,344 2,621 2,869 2,182 2,525 2,628 2,869 2,539 2,250' 2,456 29 Brazil 4,005 5,314 6,287 5,944 6,139 6,282 6,287 6,660 7,135' 7,376 30 British West Indies 81,494 113,840 138,177 127,247 122,108 129,378 138,177 131,820' 126,943' 140,738 31 Chile 2,210 2,936 3,209 2,800 3,050 3,097 3,209 3,045 3,129 3,261 32 Colombia 4,204 4,374 4,652 4,317 5,006 4,805 4,652 4,395 4,593 4,481 33 Cuba 12 10 10 14 10 15 10 30 10 9 34 Ecuador 1,082 1,379 1,391 1,381 1,359 1,343 1,391 1,229 1,304 1,337 35 Guatemala 1,082 1,195 1,312 1,313 1,2% 1,309 1,312 1,332 1,362 1,403 36 Jamaica 160 269 209 235 209 191 209 202 217 245 37 Mexico 14,480 15,185 15,398 15,608 15,285 15,012 15,398 14,767 15,743 15,424 38 Netherlands Antilles 4,975 6,420 6,300 6,090 5,973 6,287 6,300 6,189 6,534' 6,461 39 Panama 7,414 4,353 4,361 4,610 4,579 4,537 4,361 4,569 4,746 4,762 40 Peru 1,275 1,671 1,982 1,852 1,924 1,944 1,982 1,921 1,968 1,836 41 Uruguay 1,582 1,898 2,283 2,362 2,235 2,335 2,283 2,418 2,400' 2,513 42 Venezuela 9,048 9,147 9,466 9,579 9,609 9,855 9,466 9,841 9,628 9,871 43 Other 5,234 5,868 6,1% 6,302 6,598 6,558 6,1% 6,544' 6,540' 6,464 44 121,288 147,838 155,857 154,829 151,967 151,679 155,857 140,942' 131,073' 132,238 China 45 Mainland 1,162 1,895 1,871 1,808 1,989 1,659 1,871 1,780 1,569 1,673 46 Taiwan 21,503 26,058 19,562 24,206 22,492 21,316 19,562 19,147 17,898' 15,552 47 Hong Kong 10,180 12,248 12,245 12,404 12,209 12,111 12,245 11,653 10,950' 11,3% 48 India 582 699 780 881 842 990 780 907 762' 1,032 49 Indonesia 1,404 1,180 1,279 1,045 1,147 1,303 1,279 1,057 1,161 1,545 50 Israel 1,292 1,461 1,243 1,058 2,237 1,096 1,243 1,038 894' 1,508 51 Japan 54,322 74,015 80,991 79,527 74,039 75,368 80,991 70,084' 64,921' 66,270 52 Korea 1,637 2,541 3,213 3,227 3,288 3,528 3,213 2,616 2,560' 2,318 53 Philippines 1,085 1,163 1,759 1,097 1,185 1,269 1,759 1,143 1,256' 1,197 54 Thailand 1,345 1,236 2,093 1,445 1,707 1,909 2,093 2,379 2,523' 1,926 55 Middle-East oil-exporting countries3 13,988 12,083 13,362 13,057 13,485 13,610 13,362 13,258 12,550' 12,432 56 Other 12,788 13,260 17,459 15,073 17,346 17,519 17,459 15,879 14,030' 15,388 57 Africa 3,945 3,991 3,819 3,561 3,507 3,767 3,819 4,293' 4,920 4,431 58 Egypt 1,151 911 685 578 581 637 685 640 721 600 59 Morocco 194 68 78 97 72 76 78 86 95 80 60 South Africa 202 437 205 249 222 293 205 255 261 277 61 Zaire 67 85 86 81 71 60 86 82 77 75 62 Oil-exporting countries 1,014 1,017 1,120 1,038 1,048 1,120 1,120 1,671' 2,259 1,839 63 Other 1,316 1,474 1,644 1,518 1,513 1,581 1,644 1,559' 1,507 1,560 64 Other countries 4,070 6,165 4,558 7,248 8,690 9,912 4,558 4,485 5,317 4,867 65 Australia 3,327 5,293 3,866 6,540 8,072 9,141 3,866 3,806 4,597 3,987 66 All other 744 872 692 708 618 771 692 679 719 881 67 Nonmonetary international and regional organizations 4,464 3,224 4,772 4,409 5,833 5,905 4,772 4,778' 3,970 4,929 68 International5 2,830 2,503 3,825 2,855 4,515 4,768 3,825 3,706' 2,970' 3,717 69 Latin American regional 1,272 589 684 1,201 919 586 684 857 655 949 70 Other regional6 362 133 263 353 400 551 263 214 345' 263 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 (TruciaJ States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • July 1990 3.18 BANKS' OWN CLAIMS ON FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1989 1990 AArreeaa aanndd ccoouunnttrryy 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb.' Mar." 1 Total 459,877 491,165 535,706 500,211 515,422 535,459 535,706 514,647r 502,174 493,019 2 Foreign countries 456,472 489,094 532,055 497,264 512,771 532,471 532,055 510,395r 498,505 490,194 3 Europe 102,348 116,928 118,956 111,860 113,288 111,987 118,956 105,817'' 104,424 104,705 4 Austria 793 483 415 475 575 559 415 658 429 500 Belgium-Luxembourg 9,397 8,515 6,478 7,391 7,497 6,606 6,478 6,645 6,988 6,382 6 Denmark 717 483 582 557 513 609 582 664 635 608 7 Finland 1,010 1,065 1,027 1,233 1,707 1,129 1,027 1,214 1,218 1,150 8 France 13,548 13,243 16,146 16,249 16,391 16,055 16,146 15,832 16,366 15,700 9 Germany 2,039 2,329 2,865 3,466 3,371 2,657 2,865 1,990 2,800 2,798 10 Greece 462 433 788 634 650 700 788 735 773 674 11 Italy 7,460 7,936 6,662 5,938 5,472 5,718 6,662 4,931' 5,369 5,020 12 Netherlands 2,619 2,541 1,904 1,991 1,886 2,259 1,904 1,656 1,567 2,053 13 Norway 934 455 609 644 647 635 609 599 672 770 14 Portugal 477 261 376 252 258 275 376 309 288 274 15 Spain 1,853 1,823 1,930 1,684 1,733 1,840 1,930 2,766 2,038 2,237 lb Sweden 2,254 1,977 1,773 2,286 2,087 2,555 1,773 2,718 2,158 2,265 17 Switzerland 2,718 3,895 6,141 5,018 4,522 4,940 6,141 4,797 4,911 5,018 18 Turkey 1,680 1,233 1,049 1,028 1,021 1,044 1,049 1,065' 1,064 1,124 19 United Kingdom 50,823 65,706 65,426 57,9% 59,838 59,919 65,426 54,567' 52,224 53,253 20 Yugoslavia 1,700 1,390 1,329 1,338 1,373 1,281 1,329 1,243 1,158 1,157 21 Other Western Europe2 619 1,152 1,302 1,312 1,504 1,245 1,302 1,373' 1,521 1,364 22 U.S.S.R 389 1,255 1,234 1,569 1,448 1,075 1,234 1,192' 1,322 1,449 23 Other Eastern Europe3 852 754 921 799 794 883 921 864' 925 908 24 Canada 25,368 18,889 16,087 14,791 13,800 16,177 16,087 18,33c 18,483 17,139 25 Latin America and Caribbean 214,789 214,264 231,540 220,832 221,040 232,878 231,540 225,332' 221,330 214,312 26 Argentina 11,996 11,826 9,444 10,460 10,444 10,274 9,444 8,986' 8,718 8,179 27 Bahamas 64,587 66,954 78,656 70,845 71,379 78,487 78,656 74,336' 72,825 70,065 28 Bermuda 471 483 1,315 1,104 804 841 1,315 485' 401 566 29 Brazil 25,897 25,735 23,888 25,002 25,075 24,418 23,888 23,503' 23,208 21,920 30 British West Indies 50,042 55,888 68,572 64,416 63,840 69,450 68,572 70,894' 70,188 72,338 31 Chile 6,308 5,217 4,353 4,707 4,601 4,474 4,353 4,212' 4,209 4,081 32 Colombia 2,740 2,944 22,,778811 22,,447777 22,,880000 22,,778844 22,,778811 2,530' 2,609 2,738 33 Cuba 1 1 11 11 11 11 11 0 0 0 34 Ecuador 2,286 2,075 1,698 1,905 1,864 1,858 1,698 1,588' 1,570 1,529 35 Guatemala4 144 198 197 1% 188 190 197 213 200 178 36 Jamaica 188 212 297 282 270 260 297 284 274 264 37 Mexico 29,532 24,637 23,563 22,813 22,751 23,292 23,563 22,136' 21,400 17,063 38 Netherlands Antilles 980 1,306 1,921 1,175 1,201 1,099 1,921 1,763 1,702 1,694 39 Panama 4,744 2,521 1,740 1,829 1,834 1,792 1,740 1,748 1,688 1,735 40 Peru 1,329 1,013 771 823 849 836 771 750 752 733 41 Uruguay 963 910 928 899 903 915 928 932 935 927 42 Venezuela 10,843 10,733 9,688 10,061 10,269 10,119 9,688 9,289' 8,956 8,528 43 Other Latin America and Caribbean 1,738 1,612 1,726 1,838 1,965 1,787 1,726 1,682 1,695 1,776 44 106,0% 130,881 157,187 113399,,990099 115533,,774444 115588,,776666 115577,,118877 115511,,993344'' 114444,,222288 114444,,999900 China Mainland 968 762 634 616 594 610 634 620' 619 601 46 Taiwan 4,592 4,184 2,776 3,358 2,858 2,702 2,776 2,137 1,823 2,001 47 Hong Kong 8,218 10,143 11,103 10,353 10,047 10,442 11,103 7,679 6,557 7,3% 48 India 510 560 621 638 617 637 621 625 893 723 49 Indonesia 580 674 651 615 685 655 651 641 611 602 50 Israel 1,363 1,136 813 859 1,185 758 813 748' 751 731 51 Japan 68,658 90,149 111,066 %,876 110,425 114,498 111,066 113,327' 108,295 108,494 52 Korea 5,148 5,213 5,2% 5,694 5,713 5,838 5,2% 5,156 4,880 5,004 53 Philippines 2,071 1,876 1,344 1,617 1,549 1,498 1,344 1,297' 1,163 1,204 54 Thailand < 4% 848 1,140 1,191 1,046 1,064 1,140 1,171 1,046 992 55 Middle East oil-exporting countries 4,858 6,213 10,149 8,589 8,357 8,675 10,149 8,655 9,248 8,776 56 Other Asia 8,635 9,122 11,594 9,502 10,669 11,387 11,594 9,880' 8,344 8,465 57 Africa 4,742 5,718 5,931 6,029 5,771 5,914 5,931 6,593' 7,317 6,749 58 Egypt 521 507 502 501 475 471 502 470 493 474 59 Morocco 542 511 559 524 538 547 559 575 588 581 60 South Africa 1,507 1,681 1,628 1,709 1,679 1,686 1,628 1,619 1,628 1,647 61 Zaire 15 17 16 20 15 16 16 16 17 25 62 Oil-exporting countries6 1,003 1,523 1,689 1,629 1,554 1,641 1,689 1,667' 3,099 2,517 63 Other 1,153 1,479 1,537 1,647 1,510 1,553 1,537 2,247' 1,491 1,505 64 Other countries 3,129 2,413 2,354 3,842 5,129 6,750 2,354 2,390 2,724 2,299 65 Australia 2,100 1,520 1,781 3,077 4,301 6,174 1,781 1,761 1,824 1,607 66 All other 1,029 894 573 765 828 576 573 629 900 692 67 Nonmonetary international and regional organizations 33,,440044 22,,007711 3,651 2,947 2,651 2,987 3,651 4,252' 3,670 2,825 1. Reporting banks include all kinds of depository institutions besides commer- 4. Included in "Other Latin America and Caribbean" through March 1978. cial banks, as well as some brokers and dealers. 5. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and 2. Includes the Bank for International Settlements. Beginning April 1978, also United Arab Emirates (Trucial States). includes Eastern European countries not listed in line 23. 6. Comprises Algeria, Gabon, Libya, and Nigeria. 3. Beginning April 1978 comprises Bulgaria, Czechoslovakia, the German 7. Excludes the Bank for International Settlements, which is included in Democratic Republic, Hungary, Poland, and Romania. "Other Western Europe." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Nonbank-Reported Data A63 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 1989 1990 TTyyppee ooff ccllaaiimm 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan.' Feb.' Mar." 1 Total 444444499999997777777,,,,,,,666666633333335555555 555555533333338888888,,,,,,,666666688888889999999 555555588888889999999,,,,,,,777777722222221111111 555555555555552222222,,,,,,,333333355555550000000 555555588888889999999,,,,,,,777777722222221111111 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 444444455555559999999,,,,,,,888888877777777777777 444444499999991111111,,,,,,,111111166666665555555 555555533333335555555,,,,,,,777777700000006666666 555555500000000000000,,,,,,,222222211111111111111 515,422 535,459 555555533333335555555,,,,,,,777777700000006666666 514,647 502,174 493,019 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 66666664444444,,,,,,,666666600000005555555 66666662222222,,,,,,,666666655555558888888 66666660000000,,,,,,,555555522222223333333 66666662222222,,,,,,,000000099999993333333 63,398 62,488 66666660000000,,,,,,,555555522222223333333 58,967 56,821 53,104 44 OOwwnn ffoorreeiiggnn ooffffiicceess 222222222222224444444,,,,,,,777777722222227777777 222222255555557777777,,,,,,,444444433333336666666 222222299999997777777,,,,,,,111111188888884444444 222222266666666666666,,,,,,,666666633333337777777 277,330 297,592 222222299999997777777,,,,,,,111111188888884444444 292,561 286,628 278,095 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111122222227777777,,,,,,,666666600000009999999 111111122222229999999,,,,,,,444444422222225555555 111111133333334444444,,,,,,,888888844444442222222 111111133333330000000,,,,,,,999999922222225555555 131,133 133,803 111111133333334444444,,,,,,,888888844444442222222 123,784 120,382 123,295 66 DDeeppoossiittss 66666660000000,,,,,,,666666688888887777777 66666665555555,,,,,,,888888899999998888888 77777777777777,,,,,,,999999900000000000000 77777772222222,,,,,,,666666600000005555555 72,220 75,629 77777777777777,,,,,,,999999900000000000000 69,752 67,346 70,091 77 OOtthheerr 66666666666666,,,,,,,999999922222222222222 66666663333333,,,,,,,555555522222227777777 55555556666666,,,,,,,999999944444442222222 55555558888888,,,,,,,333333311111119999999 58,913 58,174 55555556666666,,,,,,,999999944444442222222 54,033 53,036 53,205 88 AAllll ootthheerr ffoorreeiiggnneerrss 44444442222222,,,,,,,999999933333336666666 44444441111111,,,,,,,666666644444446666666 44444443333333,,,,,,,111111155555558888888 44444440000000,,,,,,,555555555555556666666 43,562 41,577 44444443333333,,,,,,,111111155555558888888 39,334 38,344 38,525 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss33...... 33333337777777,,,,,,,777777755555558888888 44444447777777,,,,,,,555555522222224444444 55555554444444,,,,,,,000000011111114444444 55555552222222,,,,,,,111111133333339999999 55555554444444,,,,,,,000000011111114444444 3333333,,,,,,,666666699999992222222 8888888,,,,,,,222222288888889999999 11111110000000,,,,,,,333333388888883333333rrrrrrr 11111111111111,,,,,,,222222255555553333333 11111110000000,,,,,,,333333388888883333333''''''' 11 Negotiable and readily transferable 22222226666666,,,,,,,666666699999996666666 22222225555555,,,,,,,777777700000000000000 22222229999999,,,,,,,00000004444444CCCCCCC 22222224444444,,,,,,,222222277777777777777 22222229999999,,,,,,,000000044444440000000''''''' 12 Outstanding collections and other 7777777,,,,,,,333333377777770000000 11111113333333,,,,,,,555555533333335555555 11111114444444,,,,,,,555555599999991111111 11111116666666,,,,,,,666666600000009999999 11111114444444,,,,,,,555555599999991111111 13 MEMO: Customer liability on 22222223333333,,,,,,,111111100000007777777 11111119999999,,,,,,,555555599999996666666 11111112222222,,,,,,,888888811111118888888''''''' 11111113333333,,,,,,,111111111111119999999 11111112222222,,,,,,,888888811111118888888''''''' Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States 40,909 45,568 45,413r 47,292 45,742 47,288 45,413' 44,081 45,219 n.a. 1. Data for banks' own claims are given on a monthly basis, but the data for parent foreign bank. claims of banks' own domestic customers are available on a quarterly basis only. 3. Assets owned by customers of the reporting bank located in the United Reporting banks include all kinds of depository institutions besides commercial States that represent claims on foreigners held by reporting banks for the account banks, as well as some brokers and dealers. of their domestic customers. 2. U.S. banks: includes amounts due from own foreign branches and foreign 4. Principally negotiable time certificates of deposit and bankers acceptances. subsidiaries consolidated in "Consolidated Report of Condition" filed with bank 5. Includes demand and time deposits and negotiable and nonnegotiable regulatory agencies. Agencies, branches, and majority-owned subsidiaries of certificates of deposit denominated in U.S. dollars issued by banks abroad. For foreign banks: principally amounts due from head office or parent foreign bank, description of changes in data reported by nonbanks, see July 1979 Bulletin, and foreign branches, agencies, or wholly owned subsidiaries of head office or p. 550. 3.20 BANKS' OWN CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Banks in the United States1 Payable in U.S. Dollars Millions of dollars, end of period 1989 MMaattuurriittyy;; bbyy bboorrrroowweerr aanndd aarreeaa 11998866 11998877 11998888 Mar. June Sept. Dec.' 1 Total 232,295 235,130 233,184 231,600 231,606 236,265 238,458 By borrower 2 Maturity of 1 year or less2 160,555 163,997 172,634 168,527 167,663 169,192 178,065 3 Foreign public borrowers 24,842 25,889 26,562 24,499 24,295 24,054 23,687 4 All other foreigners 135,714 138,108 146,071 144,028 143,368 145,138 154,378 5 Maturity over 1 year2 71,740 71,133 60,550 63,073 63,944 67,072 60,392 6 Foreign public borrowers 39,103 38,625 35,291 38,430 38,605 41,806 35,%7 7 All other foreigners 32,637 32,507 25,259 24,643 25,339 25,266 24,425 By area Maturity of 1 year or less 8 Europe 61,784 59,027 55,909 57,697 58,260 53,030 53,584 9 Canada 5,895 5,680 6,282 5,119 5,693 6,236 5,901 10 Latin America and Caribbean 56,271 56,535 57,991 53,255 50,527 52,320 53,082 11 Asia 29,457 35,919 46,224 45,703 45,448 50,358 57,932 12 Africa 2,882 ' 2,833 3,337 3,610 3,601 3,514 3,238 13 All other3 4,267 4,003 2,891 3,143 4,134 3,735 4,329 Maturity of over 1 year2 14 Europe 6,737 6,6% 4,666 4,503 4,554 8,746 4,769 15 Canada 1,925 2,661 1,922 2,309 2,592 2,459 2,338 16 Latin America and Caribbean 56,719 53,817 47,547 49,790 50,095 48,586 45,801 17 Asia 4,043 3,830 3,613 3,699 3,823 4,223 4,139 18 Africa 1,539 1,747 2,301 2,292 2,408 2,475 2,662 19 All other3 777 2,381 501 480 472 584 684 1. Reporting banks include all kinds of depository institutions besides commer- 2. Remaining time to maturity, cial banks, as well as some brokers and dealers. 3. Includes nonmonetary international and regional organizations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A64 International Statistics • July 1990 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 1987 1988 1989 AArreeaa oorr ccoouunnttrryy 11998855 11998866 Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. 1 Total 389.1 386.5 382.4 370.9 351.9 354.0 346.3 345.3 339.2 345.0 339.9 2 G-10 countries and Switzerland 147.0 156.6 159.7 156.3 150.7 148.7 152.7 145.1 144.7 145.9 152.9 3 Belgium-Luxembourg 9.4 8.4 10.0 9.1 9.2 9.5 9.0 8.6 7.8 6.9 6.3 4 France 12.3 13.6 13.7 11.8 10.9 10.3 10.5 11.2 10.8 11.1 11.7 5 Germany 10.5 11.6 12.6 11.8 10.6 9.2 10.3 10.2 10.6 10.4 10.5 6 Italy 9.7 9.0 7.5 7.4 6.3 5.6 6.8 5.2 6.1 6.8 7.4 7 Netherlands 3.8 4.6 4.1 3.3 3.2 2.9 2.7 2.8 2.8 2.4 3.1 8 Sweden 2.8 2.4 2.1 2.1 1.9 1.9 1.8 2.3 1.8 2.0 2.0 9 Switzerland 4.4 5.8 5.6 5.1 5.6 5.2 5.4 5.1 5.4 6.1 7.1 10 United Kingdom 63.3 70.9 68.8 71.7 70.4 67.6 66.2 65.3 64.2 63.5 66.8 11 Canada 6.8 5.2 5.5 4.7 5.3 4.9 5.0 4.0 5.1 5.9 6.1 12 Japan 24.1 25.1 29.8 29.2 27.3 31.6 34.9 30.4 30.1 30.8 31.9 13 Other developed countries 30.3 26.1 26.4 26.4 24.0 23.0 21.0 21.0 21.1 20.9 20.7 14 Austria 1.6 1.7 1.9 1.6 1.6 1.6 1.5 1.4 1.7 1.5 1.7 15 Denmark 2.4 1.7 1.7 1.4 1.1 1.2 1.1 1.1 1.4 1.1 1.1 16 Finland 1.6 1.4 1.2 1.0 1.2 1.3 1.1 1.0 1.0 1.1 1.0 17 Greece 2.6 2.3 2.0 2.3 2.1 2.1 1.8 2.1 2.3 2.3 2.5 18 Norway 2.9 2.4 2.2 1.9 1.9 2.0 1.8 1.6 1.8 1.4 1.4 19 Portugal 1.3 .9 .6 .5 .4 .4 .4 .4 .6 .4 .4 20 Spain 5.8 5.8 8.0 8.9 7.2 6.3 6.2 6.6 6.2 6.9 7.1 21 Turkey 2.0 2.0 2.0 2.0 1.8 1.6 1.5 1.3 1.1 1.1 1.2 22 Other Western Europe 2.0 1.5 1.6 1.9 1.7 1.9 1.3 1.1 1.1 1.0 .7 23 South Africa 3.2 3.0 2.9 2.8 2.8 2.7 2.4 2.2 2.1 2.1 2.0 24 Australia 5.0 3.4 2.4 2.0 2.2 1.8 1.8 2.4 1.9 2.1 1.4 25 OPEC countries3 21.5 19.4 17.4 17.6 17.0 17.9 16.6 16.2 16.0 16.2 17.2 26 Ecuador 2.1 2.2 1.9 1.9 1.8 1.8 1.7 1.6 1.5 1.5 1.3 27 Venezuela 9.0 8.7 8.1 8.1 8.0 7.9 7.9 7.9 7.5 7.3 7.1 28 Indonesia 3.0 2.5 1.9 1.8 1.8 1.8 1.7 1.7 1.9 2.0 2.0 29 Middle East countries 5.4 4.3 3.6 3.9 3.5 4.6 3.4 3.3 3.4 3.5 5.0 30 African countries 2.0 1.8 1.9 1.9 1.9 1.9 1.9 1.7 1.6 1.9 1.8 31 Non-OPEC developing countries 105.0 99.6 97.8 94.4 91.8 87.2 85.3 85.4 83.1 80.8 78.0 Latin America 32 Argentina 8.9 9.5 9.5 9.6 9.5 9.3 9.0 8.4 7.9 7.6 6.4 33 Brazil 25.5 25.3 24.7 23.8 23.7 22.4 22.4 22.7 22.0 20.8 19.1 34 Chile 7.0 7.1 6.9 6.6 6.4 6.3 5.6 5.7 5.1 4.9 44..66 35 Colombia 2.6 2.1 2.0 2.0 2.2 2.1 2.1 1.9 1.7 1.6 11..88 36 Mexico 24.3 24.0 23.5 22.4 21.1 20.4 18.8 18.0 17.5 17.0 17.8 37 Peru 1.8 1.4 1.1 1.1 .9 .8 .8 .7 .6 .6 .6 38 Other Latin America 3.5 3.1 2.8 2.8 2.6 2.5 2.6 2.7 2.6 2.9 2.8 Asia China 39 Mainland .5 .4 .3 .4 .4 .2 .3 .5 .3 .3 .3 40 Taiwan 4.5 4.9 8.2 6.1 4.9 3.2 3.7 4.9 5.2 5.0 4.5 41 India 1.2 1.2 1.9 2.1 2.3 2.0 2.1 2.6 2.4 2.7 3.1 42 Israel 1.6 1.5 1.0 1.0 1.0 1.0 1.2 .9 .8 .7 .7 43 Korea (South) 9.3 6.7 5.0 5.7 5.9 6.0 6.1 6.1 6.6 6.5 5.9 44 Malaysia 2.4 2.1 1.5 1.5 1.5 1.7 1.6 1.7 1.6 1.7 1.7 45 Philippines 5.7 5.4 5.2 5.1 4.9 4.7 4.5 4.4 4.4 4.0 4.1 46 Thailand 1.4 .9 .7 1.0 1.1 1.2 1.1 1.0 1.0 1.3 1.3 47 Other Asia 1.0 .7 .7 .7 .8 .8 .9 .8 .8 1.0 1.0 Africa 48 Egypt 1.0 .7 .6 .5 .6 .5 .4 .5 .6 .5 .4 49 Morocco .9 .9 .9 .9 .9 .8 .9 .9 .9 .8 .9 50 Zaire .1 .1 .0 .1 .1 .0 .0 .0 .0 .0 .0 51 Other Africa4 1.9 1.6 1.3 1.2 1.2 1.2 1.1 1.1 1.1 1.0 1.0 52 Eastern Europe 4.4 3.5 3.2 3.1 3.3 3.1 3.6 3.5 3.4 3.5 3.5 53 U.S.S.R .1 .1 .3 .3 .4 .4 .7 .7 .6 .8 .7 54 Yugoslavia 2.4 2.0 1.8 1.9 1.9 1.8 1.8 1.7 1.7 1.7 1.5 55 Other 1.9 1.4 1.1 1.0 1.0 1.0 1.1 1.1 1.1 1.1 1.2 56 Offshore banking centers 64.0 61.5 54.5 51.5 43.0 47.3 44.2 48.5 43.1 48.9 37.4 57 Bahamas 21.5 22.4 17.3 15.9 8.9 12.9 11.0 15.8 11.0 11.1 5.8 58 Bermuda .7 .6 .6 .8 1.0 .9 .9 1.1 .7 1.3 1.7 59 Cayman Islands and other British West Indies 12.2 12.3 13.5 11.6 10.3 11.9 12.9 12.0 10.8 1155..33 9.4 60 Netherlands Antilles 2.2 1.8 1.2 1.3 1.2 1.2 1.0 .9 1.0 11..11 2.3 61 Panama 6.0 4.0 3.7 3.2 3.0 2.6 2.5 2.2 1.9 11..55 11..44 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 ..11 ..11 63 Hong Kong 11.5 11.1 11.2 11.3 11.6 10.5 9.6 9.6 10.4 10.7 9.6 64 Singapore 9.8 9.2 7.0 7.4 6.9 7.0 6.1 6.8 7.3 7.8 7.0 65 Others6 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated7 16.9 19.8 23.2 21.5 22.2 26.7 22.6 25.1 27.4 28.5 30.1 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 A65 3.22 LIABILITIES TO UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1988 1989 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998866 11998877 11998888 Sept. Dec. Mar. June Sept. Dec. 1 Total 25,587 28,302 33,989 32,614 33,989 37,646 37,371 35,263 39,679 2 Payable in dollars 21,749 22,785 28,382 27,365 28,382 31,856 32,298 30,425 34,851 3 Payable in foreign currencies 3,838 5,517 5,606 5,249 5,606 5,790 5,073 4,838 4,828 By type 4 Financial liabilities 12,133 12,424 15,480 15,314 15,480 17,738 17,324 16,256 17,409 5 Payable in dollars 9,609 8,643 11,593 11,700 11,593 13,658 13,465 12,428 13,516 6 Payable in foreign currencies 2,524 3,781 3,888 3,614 3,888 4,080 3,860 3,829 3,893 7 Commercial liabilities 13,454 15,878 18,508 17,299 18,508 19,908 20,047 19,006 22,269 8 Trade payables 6,450 7,305 6,458 6,455 6,458 7,009 6,339 6,416 9,593 9 Advance receipts and other liabilities 7,004 8,573 12,050 10,844 12,050 12,899 13,708 12,590 12,676 10 Payable in dollars 12,140 14,142 16,790 15,665 16,790 18,197 18,834 17,997 21,335 11 Payable in foreign currencies 1,314 1,737 1,719 1,635 1,719 1,711 1,213 1,009 934 By area or country Financial liabilities 12 Europe 7,917 8,320 10,268 10,732 10,268 12,731 11,479 10,362 10,583 13 Belgium-Luxembourg 270 213 289 339 289 320 357 308 340 14 France 661 382 344 372 344 249 278 262 243 15 Germany 368 551 749 690 749 741 838 809 734 16 Netherlands 542 866 879 996 879 933 834 853 946 17 Switzerland 646 558 1,183 707 1,183 954 978 839 578 18 United Kingdom 5,140 5,557 6,658 7,459 6,658 9,341 8,014 7,075 7,481 19 Canada 399 360 663 431 663 616 544 599 583 20 Latin America and Caribbean 1,944 1,189 1,239 1,057 1,239 677 1,216 1,315 1,226 21 Bahamas 614 318 184 238 184 189 165 186 157 22 Bermuda 4 0 0 0 0 0 0 0 17 23 Brazil 32 25 0 0 0 0 0 0 0 24 British West Indies 1,146 778 645 812 645 471 621 698 594 25 Mexico 22 13 1 2 1 15 17 4 6 26 Venezuela 0 0 0 0 0 0 0 0 0 27 Asia 1,805 2,451 3,306 3,088 3,306 3,708 3,985 3,878 4,916 28 Japan 1,398 2,042 2,563 2,435 2,563 2,950 3,225 3,130 4,064 29 Middle East oil-exporting countries 8 8 3 4 3 1 12 2 2 30 Africa 1 4 1 3 1 5 3 4 2 31 Oil-exporting countries 1 1 0 1 0 3 2 2 0 32 Allother4 67 100 2 3 2 2 97 97 100 Commercial liabilities 33 Europe 4.446 5,516 7,344 6,681 7,344 7,944 7,865 7,985 9,475 34 Belgium-Luxembourg 101 132 170 206 170 134 117 138 172 35 France 352 426 455 432 455 579 549 767 899 36 Germany 715 909 1,699 1,185 1,699 1,372 1,190 1,1% 1,574 37 Netherlands 424 423 591 647 591 670 689 549 709 38 Switzerland 385 559 417 486 417 458 458 416 621 39 United Kingdom 1,341 1,599 2,065 2,110 2,065 2,585 2,709 2,729 2,821 40 Canada 1,405 1,301 1,217 1,091 1,217 1,163 1,132 1,191 2,711 41 Latin America and Caribbean 924 864 1,118 997 1,118 1,267 1,669 1,092 1,130 42 Bahamas 32 18 49 19 49 35 34 27 41 43 Bermuda 156 168 286 222 286 426 388 305 308 44 Brazil 61 46 95 58 95 103 541 113 100 45 British West Indies 49 19 34 30 34 31 42 30 27 46 Mexico 217 189 179 177 179 198 182 191 246 47 Venezuela 216 162 177 204 177 179 185 140 154 48 Asia 5,080 6,565 6,923 6,637 6,923 7,329 6,970 7,018 7,085 49 Japan 2,042 2,578 3,097 2,763 3,097 3,059 2,712 2,649 2,732 50 Middle East oil-exporting countries7, 1,679 1,964 1,386 1,298 1,386 1,526 1,431 1,406 1,347 51 Africa 619 574 578 477 578 706 768 643 838 52 Oil-exporting countries 197 135 202 106 202 272 253 246 300 53 AU other4 980 1,057 1,328 1,415 1,328 1,499 1,643 1,078 1,031 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

A66 International Statistics • July 1990 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1988 1989 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998866 11998877 11998888 Sept. Dec. Mar. June Sept. Dec. 1 36,265 30,964 33,816 38,691 33,816 31,964 34,348 32,474 32,228r 2 Payable in dollars 33,867 28,502 31,481 36,179 31,481 29,650 32,232 30,261 29,898' 3 Payable in foreign currencies 2,399 2,462 2,335 2,512 2,335 2,315 2,115 2,212 2,330 By type 4 Financial claims 26,273 20,363 21,882 27,597 21,882 20,045 22,051 19,644 17,956' i> Deposits 19,916 14,894 15,887 19,367 15,887 14,865 16,986 12,985 11,375' 6 Payable in dollars 19,331 13,765 14,788 18,340 14,788 13,950 16,065 12,120 10,449' 7 Payable in foreign currencies 585 1,128 1,099 1,027 1,099 914 921 865 926 8 Other financial claims 6,357 5,470 5,9% 8,230 5,9% 5,181 5,065 6,659 6,581' 9 Payable in dollars 5,005 4,656 5,265 7,288 5,265 4,287 4,349 5,795 5,784' 10 Payable in foreign currencies 1,352 814 731 943 731 893 716 864 798 11 Commercial claims 9,992 10,600 11,933 11,094 11,933 11,919 12,297 12,830 14,272' 12 Trade receivables 8,783 9,535 10,859 10,097 10,859 10,658 10,866 11,401 12,715' 13 Advance payments and other claims 1,209 1,065 1,074 998 1,074 1,261 1,430 1,429 1,557 14 Payable in dollars 9,530 10,081 11,428 10,552 11,428 11,412 11,818 12,347 13,666' 15 Payable in foreign currencies 462 519 505 543 505 507 479 483 606' By area or country Financial claims 16 Europe 10,744 9,531 10,2% 10,975 10,2% 9,245 8,845 8,005 7,409' 17 Belgium-Luxembourg 41 7 18 57 18 22 161 166 13 18 France 138 332 226 280 226 233 198 209 181 19 Germany 116 102 138 123 138 180 218 147 194 20 Netherlands 151 350 348 363 348 384 297 292 303 21 Switzerland 185 65 217 84 217 260 71 113 92 22 United Kingdom 9,855 8,467 8,997 9,742 8,997 7,856 7,587 6,819 6,364' 23 Canada 4,808 2,844 2,339 3,612 2,339 2,210 2,617 2,428 1,923 24 Latin America and Caribbean 9,291 7,012 8,142 11,862 8,142 7,498 9,361 8,309 7,472' 25 Bahamas 2,628 1,994 1,857 4,069 1,857 2,172 1,891 1,707 1,513 26 Bermuda 6 7 19 188 19 25 125 33 7 27 Brazil 86 63 47 44 47 49 78 70 224' 28 British West Indies 6,078 4,433 5,733 7,098 5,733 4,832 6,858 6,111 5,316' 29 Mexico 174 172 151 133 151 117 114 105 94 30 Venezuela 21 19 21 27 21 25 31 36 20 31 Asia 1,317 879 830 1,027 830 951 1,109 801 829 32 Japan 999 605 561 737 561 627 640 440 440 33 Middle East oil-exporting countries2 7 8 5 5 5 8 8 7 8 34 Africa 85 65 106 95 106 89 80 75 140 35 Oil-exporting countries3 28 7 10 9 10 8 8 8 12 36 All other4 28 33 170 26 170 52 37 27 183 Commercial claims 37 Europe 3,725 4,180 5,007 4,287 5,007 4,934 5,162 5,442 6,801' 3 3 8 9 B Fr e a lg n i c u e m -Luxembourg 4 1 3 3 1 3 6 1 5 7 0 8 6 1 6 7 0 7 5 1 1 7 7 2 6 1 6 7 0 7 2 7 0 5 2 8 2 7 0 5 1 5 2 8 1 2 9 0 2 95 0 0o' r 40 Germany 444 562 613 615 613 647 643 672 67C 41 Netherlands 164 133 208 146 208 159 409 394 490 42 Switzerland 217 185 322 183 322 249 220 217 304 43 United Kingdom 999 1,073 1,307 1,191 1,307 1,284 1,356 1,470 2,210' 44 Canada 934 936 972 978 972 1,110 1,175 1,226 996' 45 Latin America and Caribbean 1,857 1,930 2,234 2,104 2,234 2,110 2,089 2,120 2,164 46 Bahamas 28 19 36 12 36 34 13 10 57 47 Bermuda 193 170 229 161 229 234 238 270 323 48 Brazil 234 226 298 234 298 277 313 232 284 49 British West Indies 39 26 21 22 21 23 29 32 36 50 Mexico 412 368 459 463 459 481 431 502 510r 51 Venezuela 237 283 226 266 226 211 228 187 148 52 Asia 2,755 2,915 2,958 3,027 2,958 3,086 3,123 3,276 3,511r 53 Japan 881 1,158 934 %7 934 1,038 990 1,168 1,178 54 Middle East oil-exporting countries2 563 450 445 437 445 427 430 406 508 55 Africa 500 401 434 424 434 386 402 388 419 56 Oil-exporting countries3 139 144 122 137 122 95 111 79 108 57 All other4 222 238 329 274 329 294 346 378 381' 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 A67 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1990 1989 1990 Transactions, and area or country 1988 1989 Jan.- Sept. Oct. Nov. Dec. Jan. Feb/ Mar." Mar. U.S. corporate securities STOCKS 1 Foreign purchases 181,185 212,975 43,636 19,597 22,350 13,830 15,410 13,745' 13,462 16,429 2 Foreign sales 183,185 203,385 46,935 17,049 20,988 14,947 16,868 14,128' 13,691 19,116 3 Net purchases, or sales (—) -2,000 9,589 -3,299 2,548 1,363 -1,117 -1,458 —383r -229 -2,688 4 Foreign countries -1,825 9,834 -3,316 2,600 1,340 -1,116 -1,411 -353' -230 -2,733 5 Europe -3,350 248 -1,316 1,461 -107 -1,655 -281 -183 -144 -990 6 France -281 -700 -305 -5 -265 -2% -255 -155 -157 7 7 Germany 218 -866 148 -65 -117 -119 -41 41 3 105 8 Netherlands -535 168 -8 37 226 -34 -9 -18 -38 48 9 Switzerland -2,243 -3,471 -923 63 -244 -509 -442 -240 -242 -441 10 United Kingdom • -954 3,728 -811 894 -34 -718 391 -275 183 -720 11 Canada 1,087 -860 -251 -265 -140 -137 -459 -139' 51 -163 1? Latin America and Caribbean 1,238 3,0% -497 602 149 -24 -478 -111 -178 -208 13 Middle East1 -2,474 3,530 -360 110 112 303 69 -27 93 -425 14 Other Asia 1,365 3,414 -720 631 1,138 342 -124 231 -30 -921 15 Japan 1,922 3,348 -702 611 975 310 -53 166 -104 -764 16 Africa 188 131 -31 24 -6 19 9 2 -34 1 17 Other countries 121 274 -140 38 193 37 -147 -125 12 -27 18 Nonmonetary international and regional organizations -176 -245 16 -52 23 -1 -48 --3300'' 1 46 BONDS2 19 Foreign purchases 86,381 120,466 28,993 8,603 10,930 11,133 13,702 9,463 10,2% 9,234 20 Foreign sales 58,417 86,291 23,399 6,857 6,803 6,656 9,313 7,809 7,713 7,877 21 Net purchases, or sales (—) 27,964 34,175 5,594 1,746 4,127 4,476 4,388 1,654 2,583 1,358 22 Foreign countries 28,506 33,822 5,807 1,740 4,074 4,464 4,336 2,054 2,556 1,197 73 Europe 17,239 19,873 2,568 1,400 1,955 2,712 1,429 1,135 245 1,189 74 143 372 132 78 -41 -14 6 118 9 5 7.5 Germany 1,344 -239 -382 -33 113 -117 -33 -114 -253 -15 76 Netherlands 1,514 850 -38 28 30 143 41 -43 15 -11 77 Switzerland 505 -165 146 -27 74 54 -277 157 58 -69 28 United Kingdom 13,084 18,488 2,890 1,311 1,679 2,328 1,954 1,132 475 1,282 79 Canada 711 1,112 760 155 175 -86 204 178 474 108 30 Latin America and Caribbean 1,931 3,682 1,661 233 247 539 492 493 883 286 31 Middle East1 -178 -179 224 20 140 -57 242 87 100 36 3? Other Asia 8,900 9,060 488 -108 1,553 1,343 1,954 152 796 -461 33 Japan 7,686 6,331 854 -179 1,263 1,045 1,728 170 1,103 -419 34 Africa -8 56 30 -3 0 8 27 3 36 -8 35 Other countries -89 218 76 42 4 4 -11 5 22 48 36 Nonmonetary international and regional organizations -542 353 -212 6 53 12 52 -399 27 160 Foreign securities 37 Stocks, net purchases, or sales (-)3 .. -1,959 -12,515 -355 -277 -1,558 -525 -2,150 772' -981 -146 38 Foreign purchases 75,356 108,917 35,222 9,803 11,399 10,304 9,857 12,982' 10,479 11,760 39 Foreign sales3 77,315 121,433 35,577 10,080 12,958 10,829 12,007 12,21c 11,461 11,906 40 Bonds, net purchases, or sales (-) ... -7,434 -5,921 -2,597 -1,848 -638 478 -270 556' -159 -2,995 41 Foreign purchases 218,521 234,099 61,541 18,325 21,266 20,463 18,543 18,512' 20,671 22,359 42 Foreign sales 225,955 240,020 64,139 20,173 21,904 19,986 18,812 17,955' 20,830 25,354 43 Net purchases, or sales (—), of stocks and bonds .... -9,393 -18,436 -2,952 -2,125 -2,1% -47 -2,420 1,329' -1,140 -3,141 44 Foreign countries -9,873 -18,423 -1,549 -1,561 -1,860 -122 -2,428 1,221' -1,229 -1,540 45 Europe -7,864 -17,613 -189 -1,730 -2,728 210 -904 1,398' -1,226 -361 46 Canada -3,747 -4,063 -1,466 -201 924 -325 -%7 -58' -144 -1,265 47 Latin America and Caribbean 1,384 426 99 -65 187 -102 -269 33 161 -% 48 Asia 979 2,952 499 411 -232 -2 -512 111' -307 6% 49 -54 93 -6 -3 12 13 56 -14 9 -1 50 Other countries -571 -219 -485 26 -22 84 168 -249' 277 -513 51 Nonmonetary international and regional organizations 480 -13 -1,404 -564 -336 75 8 108 89 -1,601 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. 3. As a result of the merger of a U.S. and U.K. company in July 1989, the government agencies and corporations. Also includes issues of new debt securi- former stockholders of the U.S. company received $5,453 million in shares of the new combined U.K. company. This transaction is not reflected in the data above. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A68 International Statistics • July 1990 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1990 1989 1990 Country or area 1988 1989 Jan.- Mar. Sept. Oct. Nov. Dec. Jan. Feb. Mar." Transactions, net purchases or sales (-) during period1 1 Estimated total2 48,832 54,723 -6,527 4,704 -2,138 8,195 1,149 sis' 1,454 -8,799 2 Foreign countries2 48,170 52,747 -5,718 5,786 -3,392 8,311 -362 1,090' 1,795 -8,603 3 Europe2 14,319 36,016 1,049 2,494 -2,137 4,259 2,434 1,238 2,191 -2,380 4 Belgium-Luxembourg 923 1,053 -448 216 90 210 -85 144 -337 -256 5 Germany2 -5,268 7,907 981 510 137 1,666 1,735 -216 1,672 -475 6 Netherlands -356 -1,137 -2,141 302 -1,200 54 -386 -330 -1,400 -411 7 Sweden -323 886 177 -50 140 -232 29 -71 270 -22 8 Switzerland2 -1,074 1,097 -540 374 -187 -780 -355 -284 -5 -251 9 United Kingdom 9,640 20,250 1,473 339 -919 3,823 1,286 150 1,627 -303 10 Other Western Europe 10,786 5,982 1,545 802 -199 -481 209 1,845 363 -664 11 Eastern Europe -10 -21 0 0 0 0 0 0 0 0 12 Canada 3,761 700 -4,063 -398 191 375 164 -543 -2,137 -1,383 • 13 Latin America and Caribbean 713 477 430 137 -1,568 1,372 -886 -333 91 672 14 Venezuela -109 311 -118 29 72 163 -36 -107 -48 38 15 Other Latin America and Caribbean 1,130 -310 547 -392 -96 576 -610 262 16 270 16 Netherlands Antilles -308 475 0 500 -1,545 634 -240 -488 123 365 17 Asia 27,603 14,000 -2,386 2,857 -131 1,646 -2,669 447r 2,287 -5,119 18 Japan 21,750 2,383 -3,941 2,402 1,330 1,085 -1,036 837' 852 -5,630 19 Africa -13 116 -21 0 13 9 39 9 13 -43 20 All other 1,786 1,439 -728 697 240 649 555 273 -650 -351 21 Nonmonetary international and regional organizations 661 1,976 -808 -1,082 1,254 -116 1,511 -272 -341 -196 22 International 1,106 1,473 -738 -719 1,158 -143 1,335 -360 -286 -92 23 Latin America regional -31 231 1 -228 160 0 0 38 -11 -26 Memo 24 Foreign countries 48,170 52,747 -5,718 5,786 -3,392 8,311 -362 1,09c 1,795 -8,603 25 Official institutions 26,624 27,028 -4,931 773 -979 1,686 1,305 328 -1,425 -3,833 26 Other foreign2 21,546 25,720 -788 5,013 -2,413 6,626 -1,667 762' 3,220 -4,770 Oil-exporting countries 27 Middle East5 1,963 8,148 2,906 695 -2,183 -26 -640 916 970 1,020 28 Africa4 1 -1 -1 0 0 -1 0 -1 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 find 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 A69 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per year Rate on May 31, 1990 Rate on May 31, 1990 Rate on May 31, 1990 CCoouunnttrryy CCoouunnttrryy CCoouunnttrryy Percent e M ffe o c n t t i h ve Percent e M ffe o c n t t i h ve Percent e M ffe o c n t t i h ve 666666......000000 JJJJJJuuuuuunnnnnneeeeee 111111999999888888999999 999999......555555 AAAAAApppppprrrrrr...... 111111999999999999000000 888...000 JJJuuunnneee 111999888333 111111000000......222222555555 OOOOOOcccccctttttt...... 111111999999888888999999 GGeerrmmaannyy,, FFeedd.. RReepp.. ooff...... 666666......000000 OOOOOOcccccctttttt...... 111111999999888888999999 666...000 OOOcccttt... 111999888999 444444999999......000000 MMMMMMaaaaaarrrrrr...... 111111999999888888111111 IIttaallyy 111111333333......555555 MMMMMMaaaaaarrrrrr...... 111111999999888888999999 111111333333......999999222222 MMMMMMaaaaaayyyyyy 111111999999999999000000 555555......222222555555 MMMMMMaaaaaarrrrrr...... 111111999999999999000000 888...000 OOOcccttt... 111999888555 111111000000......555555 OOOOOOcccccctttttt...... 111111999999888888999999 777777......000000 OOOOOOcccccctttttt...... 111111999999888888999999 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 1989 1990 CCoouunnttrryy,, oorr ttyyppee 11998877 11998888 11998899 Nov. Dec. Jan. Feb. Mar. Apr. May 1 Eurodollars 7.07 7.85 9.16 8.42 8.39 8.22 8.24 8.37 8.44 8.35 2 United Kingdom 9.65 10.28 13.87 15.07 15.07 15.13 15.07 15.23 15.17 15.11 3 Canada 8.38 9.63 12.20 12.35 12.34 12.24 12.% 13.35 13.59 13.77 4 Germany 3.97 4.28 7.04 8.22 8.06 8.22 8.27 8.42 8.20 8.27 5 Switzerland 3.67 2.94 6.83 7.68 8.14 9.35 9.31 8.88 9.01 8.83 6 Netherlands 5.24 4.72 7.28 8.40 8.47 8.82 8.93 8.70 8.46 8.37 7 France 8.14 7.80 9.27 10.41 10.71 11.19 10.93 10.56 9.92 9.70 8 Italy 11.15 11.04 12.44 12.67 12.83 12.88 13.22 13.03 12.11 12.09 9 Belgium 7.01 6.69 8.65 9.81 10.03 10.48 10.54 10.39 10.19 9.90 10 Japan 3.87 3.96 4.73 5.71 5.80 6.02 6.22 6.33 6.62 6.84 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

A70 International Statistics • July 1990 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar 1989 1990 CCoouunnttrryy//ccuurrrreennccyy 11998877 11998888 11998899 Dec. Jan. Feb. Mar. Apr. May 1 Australia/dollar2 70.137 78.409 79.186 78.586 78.111 75.932 75.562 76.366 76.106 2 Austria/schilling 12.649 12.357 13.236 12.241 11.904 11.803 11.514 11.862 11.699 3 Belgium/franc 37.358 36.785 39.409 36.544 35.451 34.998 35.398 34.868 34.325 4 Canada/dollar 1.3259 1.2306 1.1842 1.1613 1.1720 1.1965 1.1800 1.1641 1.1747 5 China, P.R./yuan 3.7314 3.7314 3.7673 4.1825 4.7339 4.7339 4.7339 4.7339 4.7339 6 Denmark/krone 6.8478 6.7412 7.3210 6.7610 6.5620 6.4729 6.5349 6.4305 6.3349 7 Finland/markka 4.4037 4.1933 4.2963 4.1231 4.0080 3.9642 4.0276 3.9923 3.9270 8 France/franc 6.0122 5.9595 6.3802 5.9391 5.7568 5.6897 5.7555 5.6638 5.5989 9 Germany/deutsche mark 1.7981 1.7570 1.8808 1.7378 1.6914 1.6758 1.7053 1.6863 1.6630 10 Greece/drachma 135.47 142.00 162.60 160.32 157.68 158.04 162.44 163.77 163.82 11 Hong Kong/dollar 7.7986 7.8072 7.8008 7.8102 7.8116 7.8103 7.8129 7.7966 7.7877 12 India/rupee 12.943 13.900 16.213 16.932 16.963 16.990 17.116 17.294 17.325 13 Ireland/punt 148.79 152.49 141.80 151.65 156.31 158.28 156.26 158.97 161.39 14 Italy/lira 1,297.03 1,302.39 1,372.28 1,291.93 1,261.87 1,243.68 1,257.67 1,238.38 1,221.93 15 Japan/yen 144.60 128.17 138.07 143.69 144.98 145.69 153.31 158.46 154.04 16 Malaysia/rinegit 2.5186 2.6190 2.7079 2.7032 2.7041 2.7137 2.7170 2.7264 2.7024 17 Netherlands/guilder 2.0264 1.9778 2.1219 1.9619 1.9073 1.8892 1.9204 1.8984 1.8704 18 New Zealand/dollar2 59.328 65.560 59.354 59.458 60.220 59.156 58.471 57.883 57.307 19 Norway/krone 6.7409 6.5243 6.9131 6.7021 6.5462 6.4760 6.5972 6.5457 6.4477 20 Portugal/escudo 141.20 144.27 157.53 152.34 149.17 147.71 150.59 149.29 147.08 21 Singapore/dollar 2.1059 2.0133 1.9511 1.9183 1.8873 1.8641 1.8777 1.8783 1.8589 22 South Africa/rand 2.0385 2.2773 2.6215 2.5679 2.5532 2.5449 2.6158 2.6552 2.6468 23 South Korea/won 825.94 734.52 674.29 677.66 686.18 692.47 700.50 708.76 711.85 24 Spain/peseta 123.54 116.53 118.44 112.24 109.71 108.27 109.37 107.00 104.02 25 Sri Lanka/rupee 29.472 31.820 35.947 40.018 40.018 40.018 40.018 40.018 40.023 26 Sweden/krona 6.3469 6.1370 6.4559 6.2920 6.1776 6.1250 6.1683 6.1160 6.0560 27 Switzerland/franc 1.4918 1.4643 1.6369 1.5686 1.5175 1.4879 1.5133 1.4866 1.4198 28 Taiwan/dollar 31.753 28.636 26.407 26.139 26.081 26.118 26.361 26.369 26.961 29 Thailand/baht 25.775 25.312 25.725 25.778 25.745 25.733 25.926 26.024 25.928 30 United Kingdom/pound 163.98 178.13 163.82 159.65 165.12 169.61 162.45 163.72 167.74 MEMO 31 United States/dollar3 96.94 92.72 98.60 94.88 93.00 92.25 94.11 93.51 92.04 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 Reserve 2. Value in U.S. cents. 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

A71 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 po- "U.S. government securities" may include guaranteed litical subdivisions. issues of U.S. government agencies (the flow of funds figures In some of the tables, details do not add to totals because also include not fully guaranteed issues) as well as direct of rounding. STATISTICAL RELEASES—List Published Semiannually, with Latest BULLETIN Reference Issue Page Anticipated schedule of release dates for periodic releases June 1990 A88 SPECIAL TABLES—Published Irregularly, with Latest BULLETIN Reference Title and Date Issue Page Assets and liabilities of commercial banks March 31, 1989 December 1989 All June 30, 1989 January 1990 All September 30, 1989 February 1990 All December 31, 1989 June 1990 All Terms of lending at commercial banks February 1989 June 1989 A84 May 1989 March 1990 A73 August 1989 November 1989 A73 November 1989 March 1990 A79 Assets and liabilities of U.S. branches and agencies of foreign banks March 31, 1989 August 1989 A84 June 30, 1989 November 1989 A78 September 30, 1989 March 1990 A84 December 31, 1989 June 1990 A78 Pro forma balance sheet and income statements for priced service operations March 31, 1988 August 1988 A70 March 31, 1989 September 1989 All June 30, 1989 February 1990 A78 September 30, 1989 March 1990 A88 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All 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 BOB STAHLY MOORE, Special Assistant to the Board CHARLES J. SIEGMAN, Senior Associate Director DAVID H. HOWARD, Deputy Associate Director ROBERT F. GEMMILL, Staff Adviser LEGAL DIVISION DONALD B. ADAMS, Assistant Director DALE W. HENDERSON, Assistant Director PETER HOOPER III, Assistant Director J. VIRGIL MATTINGLY, JR., General Counsel KAREN H. JOHNSON, Assistant Director RICHARD M. ASHTON, Associate General Counsel RALPH W. SMITH, JR., Assistant Director OLIVER IRELAND, Associate General Counsel RICKI R. TIGERT, Associate General Counsel SCOTT G. ALVAREZ, Assistant General Counsel DIVISION OF RESEARCH AND STATISTICS MARYELLEN A. BROWN, Assistant to the General Counsel MICHAEL J. PRELL, Director EDWARD C. ETTIN, Deputy Director OFFICE OF THE SECRETARY THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director WILLIAM W. WILES, Secretary DAVID J. STOCKTON, Associate Director JENNIFER J. JOHNSON, Associate Secretary MARTHA BETHEA, Deputy Associate Director BARBARA R. LOWREY, Associate Secretary PETER A. TINSLEY, Deputy Associate Director MYRON L. KWAST, Assistant Director PATRICK M. PARKINSON, Assistant Director DIVISION OF CONSUMER MARTHA S. SCANLON, Assistant Director AND COMMUNITY AFFAIRS JOYCE K. ZICKLER, Assistant Director LEVON H. GARABEDIAN, Assistant Director (Administration) GRIFFITH L. GARWOOD, Director GLENN E. LONEY, Assistant Director ELLEN MALAND, Assistant Director DIVISION OF MONETARY AFFAIRS DOLORES S. SMITH, Assistant Director DONALD L. KOHN, Director DAVID E. LINDSEY, Deputy Director DIVISION OF BANKING BRIAN F. MADIGAN, Assistant Director SUPERVISION AND REGULATION RICHARD D. PORTER, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board WILLIAM TAYLOR, Staff Director DON E. KLINE, Associate Director FREDERICK M. STRUBLE, Associate Director OFFICE OF THE INSPECTOR GENERAL WILLIAM A. RYBACK, Deputy Associate Director STEPHEN C. SCHEMERING, Deputy Associate Director BRENT L. BOWEN, Inspector General RICHARD SPILLENKOTHEN, Deputy Associate Director BARRY R. SNYDER, Assistant Inspector General HERBERT A. BIERN, Assistant Director JOE M. CLEAVER, Assistant Director ROGER T. COLE, 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

A73 and Official Staff EDWARD W. KELLEY, JR. DAVID W. MULLINS, JR. JOHN P. LA WARE 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 WILLIAM SCHNEIDER, Special Assignment: Project Director, National Information Center PORTIA W. THOMPSON, Equal Employment Opportunity DIVISION OF FEDERAL RESERVE Programs Officer BANK OPERATIONS DIVISION OF HUMAN RESOURCES MANAGEMENT CLYDE H. FARNSWORTH, JR., Director DAVID L. ROBINSON, Associate Director DAVID L. SHANNON, Director BRUCE J. SUMMERS, Associate Director JOHN R. WEIS, Associate Director CHARLES W. BENNETT, Assistant Director ANTHONY V. DIGIOIA, Assistant Director JACK DENNIS, JR., Assistant Director JOSEPH H. HAYES, JR., Assistant Director EARL G. HAMILTON, Assistant Director FRED HOROWITZ, Assistant Director JOHN H. PARRISH, Assistant Director LOUISE L. ROSEMAN, Assistant Director OFFICE OF THE CONTROLLER FLORENCE M. YOUNG, Assistant Director 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, Deputy Executive Director MARIANNE M. EMERSON, Assistant Director EDWARD T. MULRENIN, Assistant Director for Special Projects DIVISION OF HARDWARE AND SOFTWARE SYSTEMS BRUCE M. BEARDSLEY, Director DAY W. RADEBAUGH, JR., Assistant Director ELIZABETH B. RIGGS, Assistant Director DIVISION OF APPLICATIONS DEVELOPMENT AND STATISTICAL SERVICES WILLIAM R. JONES, Director ROBERT J. ZEMEL, Associate Director Po KYUNG KIM, Assistant Director RAYMOND H. MASSEY, Assistant Director RICHARD C. STEVENS, Assistant Director Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Federal Reserve Bulletin • July 1990 Federal Open Market Committee FEDERAL OPEN MARKET COMMITTEE MEMBERS ALAN GREENSPAN, Chairman E. GERALD CORRIGAN, Vice Chairman WAYNE D. ANGELL W. LEE HOSKINS DAVID W. MULLINS, JR. EDWARD G. BOEHNE MANUEL H. JOHNSON MARTHA R. SEGER ROBERT H. BOYKIN EDWARD W. KELLEY, JR. GARY H. STERN JOHN P. LA WARE ALTERNATE MEMBERS ROBERT P. BLACK SILAS KEEHN JAMES H. OLTMAN ROBERT P. FORRESTAL ROBERT T. PARRY STAFF DONALD L. KOHN, Secretary and Economist RICHARD W. LANG, Associate Economist NORMAND R.V. BERNARD, Assistant Secretary DAVID E. LINDSEY, Associate Economist GARY P. GILLUM, Deputy Assistant Secretary LARRY J. PROMISEL, Associate Economist J. VIRGIL MATTINGLY, JR., General Counsel ARTHUR J. ROLNICK, Associate Economist ERNEST T. PATRIKIS, Deputy General Counsel HARVEY ROSENBLUM, Associate Economist MICHAEL J. PRELL, Economist CHARLES J. SIEGMAN, Associate Economist EDWIN M. TRUMAN, Economist THOMAS D. SIMPSON, Associate Economist JOHN M. DAVIS, Associate Economist DAVID J. STOCKTON, Associate Economist RICHARD G. DAVIS, 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 THOMAS H. O'BRIEN, President PAUL HAZEN, Vice President IRA STEPANIAN, First District B. KENNETH WEST, Seventh District WILLARD C. BUTCHER, Second District DAN W. MITCHELL, Eighth District TERRENCE A. LARSEN, Third District LLOYD P. JOHNSON, Ninth District THOMAS H. O'BRIEN, Fourth District JORDAN L. HAINES, Tenth District FREDERICK DEANE, JR., Fifth District RONALD G. STEINHART, Eleventh District KENNETH L. ROBERTS, 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 WILLIAM E. ODOM, Dearborn, Michigan, Chairman JAMES W. HEAD, Berkeley, California, Vice Chairman GEORGE H. BRAASCH, Oakbrook, Illinois KATHLEEN E. KEEST, Boston, Massachusetts BETTY TOM CHU, Arcadia, California A. J. (JACK) KING, Kalispell, Montana CLIFF E. COOK, Tacoma, Washington COLLEEN D. MCCARTHY, Kansas City, Missouri JERRY D. CRAFT, Atlanta, Georgia MICHELLE S. MEIER, Washington, D.C. DONALD C. DAY, Boston, Massachusetts LINDA K. PAGE, Worthington, Ohio R.B. (JOE) DEAN, JR., Columbia, South Carolina BERNARD F. PARKER, JR., Detroit, Michigan WILLIAM C. DUNKELBERG, Philadelphia, Pennsylvania SANDRA PHILLIPS, Pittsburgh, Pennsylvania JAMES FLETCHER, Chicago, Illinois VINCENT P. QUAYLE, Baltimore, Maryland GEORGE C. GALSTER, Wooster, Ohio CLIFFORD N. ROSENTHAL, New York, New York E. THOMAS G ARM AN, Blacksburg, Virginia ALAN M. SILBERSTEIN, New York, New York DEBORAH B. GOLDBERG, Washington, D.C. RALPH E. SPURGIN, Columbus, Ohio MICHAEL M. GREENFIELD, St. Louis, Missouri NANCY HARVEY STEORTS, Dallas, Texas ROBERT A. HESS, Washington, D.C. DAVID P. WARD, Chester, New Jersey BARBARA KAUFMAN, San Francisco, California LAWRENCE WINTHROP, Portland, Oregon THRIFT INSTITUTIONS ADVISORY COUNCIL DONALD B. SHACKELFORD, Columbus, Ohio, President MARION O. SANDLER, Oakland, California, Vice President CHARLOTTE CHAMBERLAIN, LOS Angeles, California ELLIOT K. KNUTSON, Seattle, Washington DAVID L. HATFIELD, Kalamazoo, Michigan JOHN WM. LAISLE, Oklahoma City, Oklahoma LYNN W. HODGE, Greenwood, South Carolina PHILIP E. LAMB, Springfield, Massachusetts ADAM A. JAHNS, Chicago, Illinois JOHN A. PANCETTI, New York, New York H. C. KLEIN, Jacksonville, Arkansas CHARLES B. STUZIN, Miami, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SER- Federal Reserve Regulatory Service, $250.00 per year. VICES, MS-138, Board of Governors of the Federal Reserve Each Handbook, $90.00 per year. System, Washington, D.C. 20551 or telephone (202) 452- THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A 3244. When a charge is indicated, payment should accom- MULTICOUNTRY MODEL, May 1984. 590 pp. $14.50 each. pany request and be made payable to the Board of Governors WELCOME TO THE FEDERAL RESERVE. March 1989. 14 pp. of the Federal Reserve System. Payment from foreign resi- INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. dents should be drawn on a U.S. bank. 440 pp. $9.00 each. FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. December 1986. 264 pp. $10.00 each. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNC- TIONS. 1984. 120 pp. CONSUMER EDUCATION PAMPHLETS ANNUAL REPORT. ANNUAL REPORT: BUDGET REVIEW, 1988-89. Short pamphlets suitable for classroom use. Multiple copies FEDERAL RESERVE BULLETIN.Monthly. $25.00 per year or $2.50 are available without charge. each in the United States, its possessions, Canada, and Mexico. Elsewhere, $35.00 per year or $3.00 each. Consumer Handbook on Adjustable Rate Mortgages BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint Consumer Handbook to Credit Protection Laws of Part I only) 1976. 682 pp. $5.00. Federal Reserve Glossary ANNUAL STATISTICAL DIGEST A Guide to Business Credit and the Equal Credit Opportunity 1974-78. 1980. 305 pp. $10.00 per copy. Act 1981. 1982. 239 pp. $ 6.50 per copy. How to File A Consumer Credit Complaint 1982. 1983. 266 pp. $ 7.50 per copy. Series on the Structure of the Federal Reserve System 1983. 1984. 264 pp. $11.50 per copy. The Board of Governors of the Federal Reserve System 1984. 1985. 254 pp. $12.50 per copy. The Federal Open Market Committee 1985. 1986. 231 pp. $15.00 per copy. Federal Reserve Bank Board of Directors 1986. 1987. 288 pp. $15.00 per copy. Federal Reserve Banks 1987. 1988. 272 pp. $15.00 per copy. Organization and Advisory Committees 1988. 1989. 256 pp. $25.00 per copy. A Consumer's Guide to Mortgage Lock-Ins A Consumer's Guide to Mortgage Settlement Costs SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SE- RIES OF CHARTS. Weekly. $30.00 per year or $.70 each in A Consumer's Guide to Mortgage Refinancing the United States, its possessions, Canada, and Mexico. Making Deposits: When Will Your Money Be Available? Elsewhere, $35.00 per year or $.80 each. When Your Home is on the Line: What You Should Know THE FEDERAL RESERVE ACT and other statutory provisions About Home Equity Lines of Credit affecting the Federal Reserve System, as amended through August 1988. 608 pp. $10.00. PAMPHLETS FOR FINANCIAL INSTITUTIONS REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- Short pamphlets on regulatory compliance, primarily suit- ERAL RESERVE SYSTEM. ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— able for banks, bank holding companies, and creditors. Regulation Z) Vol. I (Regular Transactions). 1969. 100 pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each Limit of 50 copies volume $2.25; 10 or more of same volume to one address, $2.00 each. The Board of Directors' Opportunities in Community Rein- INTRODUCTION TO FLOW OF FUNDS. 1980. 68 pp. $1.50 each; vestment 10 or more to one address, $1.25 each. The Board of Directors' Role in Consumer Law Compliance FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; up- Combined Construction/Permanent Loan Disclosure and dated at least monthly. (Requests must be prepaid.) Regulation Z Consumer and Community Affairs Handbook. $75.00 per Community Development Corporations and the Federal Reyear. serve Monetary Policy and Reserve Requirements Handbook. Construction Loan Disclosures and Regulation Z $75.00 per year. Finance Charges Under Regulation Z Securities Credit Transactions Handbook. $75.00 per year. How to Determine the Credit Needs of Your Community The Payment System Handbook. $75.00 per year. Regulation Z: The Right of Rescission Federal Reserve Regulatory Service. 3 vols. (Contains all The Right to Financial Privacy Act three Handbooks plus substantial additional material.) Signature Rules in Community Property States: Regulation B $200.00 per year. Signature Rules: Regulation B Rates for subscribers outside the United States are as Timing Requirements for Adverse Action Notices: Regulafollows and include additional air mail costs: tion B Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All What An Adverse Action Notice Must Contain: Regulation B 158. THE ADEQUACY AND CONSISTENCY OF MARGIN RE- Understanding Prepaid Finance Charges: Regulation Z QUIREMENTS IN THE MARKETS FOR STOCKS AND DE- RIVATIVE PRODUCTS, by Mark J. Warshawsky with the assistance of Dietrich Earnhart. September 1989. STAFF STUDIES: Summaries Only Printed in the 23 pp. Bulletin Studies and papers on economic and financial subjects that are of general interest. Requests to obtain single copies of REPRINTS OF BULLETIN ARTICLES the full text or to be added to the mailing list for the series may be sent to Publications Services. Most of the articles reprinted do not exceed 12 pages. Staff Studies 114-145 are out of print. Limit of 10 copies 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF Foreign Experience with Targets for Money Growth. 10/83. BUSINESS LOANS BV COMMERCIAL BANKS, 1977-84, by Intervention in Foreign Exchange Markets: A Summary of Thomas F. Brady. November 1985. 25 pp. Ten Staff Studies. 11/83. 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) IN- A Financial Perspective on Agriculture. 1/84. DEXES OF THE MONETARY AGGREGATES, by Helen T. Survey of Consumer Finances, 1983. 9/84. Farr and Deborah Johnson. December 1985. 42 pp. Bank Lending to Developing Countries. 10/84. 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF THE Survey of Consumer Finances, 1983: A Second Report. ECONOMIC RECOVERY TAX ACT: SOME SIMULATION 12/84. RESULTS, by Flint Brayton and Peter B. Clark. Decem- Union Settlements and Aggregate Wage Behavior in the ber 1985. 17 pp. 1980s. 12/84. 149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS IN The Thrift Industry in Transition. 3/85. BANKING BEFORE AND AFTER ACQUISITION, by Stephen A Revision of the Index of Industrial Production. 7/85. A. Rhoades. April 1986. 32 pp. Financial Innovation and Deregulation in Foreign Industrial 150. STATISTICAL COST ACCOUNTING MODELS IN BANKING: Countries. 10/85. A REEXAMINATION AND AN APPLICATION, by John T. Recent Developments in the Bankers Acceptance Market. Rose and John D. Wolken. May 1986. 13 pp. 1/86. 151. RESPONSES TO DEREGULATION: RETAIL DEPOSIT PRIC- The Use of Cash and Transaction Accounts by American ING FROM 1983 through 1985, by Patrick I. Mahoney, Families. 2/86. Alice P. White, Paul F. O'Brien, and Mary M. Financial Characteristics of High-Income Families. 3/86. McLaughlin. January 1987. 30 pp. Prices, Profit Margins, and Exchange Rates. 6/86. 152. DETERMINANTS OF CORPORATE MERGER ACTIVITY: A Agricultural Banks under Stress. 7/86. REVIEW OF THE LITERATURE, by Mark J. Warshawsky. Foreign Lending by Banks: A Guide to International and April 1987. 18 pp. U.S. Statistics. 10/86. 153. STOCK MARKET VOLATILITY, by Carolyn D. Davis and Recent Developments in Corporate Finance. 11/86. Alice P. White. September 1987. 14 pp. Measuring the Foreign-Exchange Value of the Dollar. 6/87. 154. THE EFFECTS ON CONSUMERS AND CREDITORS OF PRO- Changes in Consumer Installment Debt: Evidence from the POSED CEILINGS ON CREDIT CARD INTEREST RATES, by 1983 and 1986 Surveys of Consumer Finances. 10/87. Glenn B. Canner and James T. Fergus. October 1987. Home Equity Lines of Credit. 6/88. 26 pp. U.S. International Transactions in 1988. 5/89. 155. THE FUNDING OF PRIVATE PENSION PLANS, by Mark J. Mutual Recognition: Integration of the Financial Sector in the Warshawsky. November 1987. 25 pp. European Community. 9/89. 156. INTERNATIONAL TRENDS FOR U.S. BANKS AND BANK- The Activities of Japanese Banks in the United Kingdom and ING MARKETS, by James V. Houpt. May 1988. 47 pp. in the United States, 1980-88. 2/90. 157. M2 PER UNIT OF POTENTIAL GNP AS AN ANCHOR FOR Industrial Production: 1989 Developments and Historical THE PRICE LEVEL, by Jeffrey J. Hallman, Richard D. Revision. 4/90. Porter, and David H. Small. April 1989. 28 pp. U.S. International Transactions in 1989. 5/90. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Index to Statistical Tables References are to pages A3-A70 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Depository institutions Agricultural loans, commercial banks, 19, 20 Reserve requirements, 8 Assets and liabilities (See also Foreigners) Reserves and related items, 3, 4, 5, 12 Banks, by classes, 18-20 Deposits (See also specific types) Domestic finance companies, 36 Banks, by classes, 3, 18-20, 21 Federal Reserve Banks, 10 Federal Reserve Banks, 4, io Financial institutions, 26 Turnover, 15 Foreign banks, U.S. branches and agencies, 21 Discount rates at Reserve Banks and at foreign central Automobiles banks and foreign countries (See Interest rates) Consumer installment credit, 39, 40 Discounts and advances by Reserve Banks (See Loans) Production, 49, 50 Dividends, corporate, 35 BANKERS acceptances, 9, 23, 24 EMPLOYMENT, 47 Bankers balances, 18-20 (See also Foreigners) Eurodollars, 24 Bonds (See also U.S. government securities) New issues, 34 FARM mortgage loans, 38 Rates, 24 Federal agency obligations, 4, 9, 10, 11, 31, 32 Branch banks, 21, 57 Federal credit agencies, 33 Business activity, nonfinancial, 46 Federal finance Business expenditures on new plant and equipment, 35 Debt subject to statutory limitation, and types and own- Business loans (See Commercial and industrial loans) ership of gross debt, 30 Receipts and outlays, 28, 29 CAPACITY utilization, 48 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, 69 Federal Home Loan Banks, 33 Certificates of deposit, 24 Federal Home Loan Mortgage Corporation, 33, 37, 38 Commercial and industrial loans Federal Housing Administration, 33, 37, 38 Commercial banks, 16, 19 Federal Land Banks, 38 Weekly reporting banks, 19-21 Federal National Mortgage Association, 33, 37, 38 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, 39, 40 U.S. government securities held, 4, 10, 11, 30 Loans sold outright, 19 Federal Reserve credit, 4, 5, 10, li Nondeposit funds, 17 Federal Reserve notes, 10 Real estate mortgages held, by holder and property, 38 Federal Savings and Loan Insurance Corporation insured Time and savings deposits, 3 institutions, 26 Commercial paper, 23, 24, 36 Federally sponsored credit agencies, 33 Condition statements (See Assets and liabilities) Finance companies Construction, 46, 51 Assets and liabilities, 36 Consumer installment credit, 39, 40 Business credit, 36 Consumer prices, 46, 48 Loans, 39, 40 Consumption expenditures, 53, 54 Paper, 23, 24 Corporations Financial institutions Nonfinancial, assets and liabilities, 35 Loans to, 19, 20, 21 Profits and their distribution, 35 Selected assets and liabilities, 26 Security issues, 34, 67 Float, 4 Cost of living (See Consumer prices) Flow of funds, 41, 43, 44, 45 Credit unions, 27, 39. (See also Thrift institutions) Foreign banks, assets and liabilities of U.S. branches and Currency and coin, 18 agencies, 21 Currency in circulation, 4, 13 Foreign currency operations, 10 Customer credit, stock market, 25 Foreign deposits in U.S. banks, 4, 10, 19, 20 Foreign exchange rates, 70 DEBITS to deposit accounts, 15 Foreign trade, 56 Debt (See specific types of debt or securities) Foreigners Demand deposits Claims on, 57, 59, 62, 63, 64, 66 Banks, by classes, 18-21 Liabilities to, 20, 56, 57, 59, 60, 65, 67, 68 Ownership by individuals, partnerships, and corporations, 22 GOLD Turnover, 15 Certificate account, 10 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 Gold—Continued Financial institutions, 26 Stock, 4, 56 Terms, yields, and activity, 37 Government National Mortgage Association, 33, 37, 38 Type of holder and property mortgaged, 38 Gross national product, 53 Repurchase agreements, 6, 17, 19, 20, 21 Reserve requirements, 8 HOUSING, new and existing units, 51 Reserves Commercial banks, 18 INCOME, personal and national, 46, 53, 54 Depository institutions, 3, 4, 5, 12 Industrial production, 46, 49 Federal Reserve Banks, 10 Installment loans, 39, 40 U.S. reserve assets, 56 Insurance companies, 26, 30, 38 Residential mortgage loans, 37 Interest rates Retail credit and retail sales, 39, 40, 46 Bonds, 24 Consumer installment credit, 40 SAVING Federal Reserve Banks, 7 Flow of funds, 41, 43, 44, 45 Foreign central banks and foreign countries, 69 National income accounts, 53 Money and capital markets, 24 Savings and loan associations, 26, 38, 39, 41. (See also Mortgages, 37 Thrift institutions) Prime rate, 23 Savings banks, 26, 38, 39 International capital transactions of United States, 55-69 Savings deposits (See Time and savings deposits) International organizations, 59, 60, 62, 65, 66 Securities (See also specific types) Inventories, 53 Federal and federally sponsored credit agencies, 33 Investment companies, issues and assets, 35 Foreign transactions, 67 Investments (See also specific types) New issues, 34 Banks, by classes, 18, 19, 20, 21, 26 Prices, 25 Commercial banks, 3, 16, 18-20, 38 Special drawing rights, 4, 10, 55, 56 Federal Reserve Banks, 10, 11 State and local governments Financial institutions, 26, 38 Deposits, 19, 20 Holdings of U.S. government securities, 30 LABOR force, 47 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, 38 Prices, 25 Insured or guaranteed by United States, 37, 38 Student Loan Marketing Association, 33 MANUFACTURING Capacity utilization, 48 TAX receipts, federal, 29 Production, 48, 50 Margin requirements, 25 Thrift institutions, 3. (See also Credit unions and Savings and loan associations) Member banks (See also Depository institutions) Time and savings deposits, 3, 13, 17, 18, 19, 20, 21 Federal funds and repurchase agreements, 6 Trade, foreign, 56 Reserve requirements, 8 Treasury cash, Treasury currency, 4 Mining production, 50 Treasury deposits, 4, 10, 28 Mobile homes shipped, 51 Treasury operating balance, 28 Monetary and credit aggregates, 3, 12 UNEMPLOYMENT, 47 Money and capital market rates, 24 U.S. government balances Money stock measures and components, 3, 13 Commercial bank holdings, 18, 19, 20 Mortgages (See Real estate loans) Treasury deposits at Reserve Banks, 4, 10, 28 Mutual funds, 35 U.S. government securities Mutual savings banks (See Thrift institutions) 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, 53 Foreign and international holdings and transactions, 10, 30, 68 OPEN market transactions, 9 Open market transactions, 9 Outstanding, by type and holder, 26, 30 PERSONAL income, 54 Rates, 24 Prices U.S. international transactions, 55-69 Consumer and producer, 46, 52 Utilities, production, 50 Stock market, 25 Prime rate, 23 Producer prices, 46, 52 VETERANS Administration, 37, 38 Production, 46, 49 Profits, corporate, 35 WEEKLY reporting banks, 19-21 Wholesale (producer) prices, 46, 52 REAL estate loans Banks, by classes, 16, 19, 20, 38 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 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 Richard N. Cooper Richard F. Syron Richard L. Taylor Robert W. Eisenmenger NEW YORK* 10045 Cyrus R. Vance E. Gerald Corrigan Ellen V. Futter James H. Oltman Buffalo 14240 Mary Ann Lambertsen James O. Aston PHILADELPHIA 19105 Peter A. Benoliel Edward G. Boehne Gunnar E. Sarsten William H. Stone, Jr. CLEVELAND* 44101 Charles W. Parry W. Lee Hoskins John R. Miller William H. Hendricks Cincinnati 45201 Kate Ireland Charles A. Cerino1 Pittsburgh 15230 Robert P. Bozzone Harold J. Swart1 RICHMOND* 23219 Hanne M. Merriman Robert P. Black Anne Marie Whittemore Jimmie R. Monhollon Baltimore 21203 John R. Hardesty, Jr. Robert D. McTeer, Jr.1 Charlotte 28230 William E. Masters Albert D. Tinkelenberg1 Culpeper Communications John G. Stoides1 and Records Center 22701 ATLANTA 30303 Larry L. Prince Robert P. Forrestal Edwin A. Huston Jack Guynn Donald E. Nelson Birmingham 35283 A. G. Trammell Fred R. Herr1 Jacksonville 32231 Lana Jane Lewis-Brent James D. Hawkins1 Miami 33152 Robert D. Apelgren James T. Curry III Nashville 37203 Victoria B. Jackson Melvyn K. Purcell New Orleans 70161 Andre M. Rubenstein Robert J. Musso CHICAGO* 60690 Marcus Alexis Silas Keehn Charles S. McNeer Daniel M. Doyle Detroit 48231 Phyllis E. Peters Roby L. Sloan1 ST. LOUIS 63166 H. Edwin Trusheim Thomas C. Melzer Robert H. Quenon James R. Bowen Little Rock 72203 L. Dickson Flake Karl W. Ashman Louisville 40232 Raymond M. Burse Howard Wells Memphis 38101 Katherine H. Smythe Ray Laurence MINNEAPOLIS 55480 Michael W. Wright Gary H. Stern Delbert W. Johnson Thomas E. Gainor Helena 59601 J. Frank Gardner John D. Johnson KANSAS CITY 64198 Fred W. Lyons, Jr. Roger Guffey Burton A. Dole, Jr. Henry R. Czerwinski Denver 80217 Barbara B. Grogan Kent M. Scott Oklahoma City 73125 John F. Snodgrass David J. France Omaha 68102 Herman Cain Harold L. Shewmaker DALLAS 75222 Bobby R. Inman Robert H. Boykin Hugh G. Robinson William H. Wallace Tony J. Salvaggio1 El Paso 79999 Donald G. Stevens Sammie C. Clay Houston 77252 Andrew L. Jefferson, Jr. Robert Smith, III1 San Antonio 78295 Roger R. Hemminghaus Thomas H. Robertson SAN FRANCISCO 94120 Robert F. Erburu Robert T. Parry Carolyn S. Chambers Carl E. Powell Los Angeles 90051 Yvonne B. Burke Thomas C. Warren2 Portland 97208 William A. Hilliard Angelo S. Carella1 Salt Lake City 84125 Don M. Wheeler E. Ronald Liggett1 Seattle 98124 Bruce R. Kennedy 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. 1. Senior Vice President. 2. Executive Vice President. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories "rr/e M % * m m \ jL ® ^ \ ,J Minneapolis^. •"A\ —Chwicag oT Omak»*\ j \ I Kansas City^ • 1 r >—r-' Jvgk Dallas® \ >" ' I ) ® A _ 5 Mi LEGEND —"" Boundaries of Federal Reserve Districts ® Federal Reserve Bank Cities Boundaries of Federal Reserve Branch • Federal Reserve Branch Cities Territories Federal Reserve Bank Facility Q Board of Governors of the Federal Reserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest NEW HANDBOOK AVAILABLE FROM THE containing all Board regulations and related statutes, REGULATORY SERVICE interpretations, policy statements, rulings, and staff opinions. For those with a more specialized interest in The Federal Reserve Board has announced publica- the Board's regulations, parts of this service are pubtion of The Payment System Handbook. The new lished separately as handbooks pertaining to monetary handbook, which is part of the Federal Reserve Reg- policy, securities credit, consumer affairs, and, availulatory Service, deals with expedited funds availabil- able for the first time in September 1988, The Payment ity, check collection, wire transfers, and risk-reduc- System Handbook. tion policy. It includes Regulation CC (Availability of For domestic subscribers, the annual rate for The Funds and Collection of Checks), Regulation J (Col- Payment System Handbook is $75. For subscribers lection of Checks and Other Items and Wire Transfers outside the United States, the price, including addiof Funds by Federal Reserve Banks), the Expedited tional air mail costs, is $90. For the Federal Reserve Funds Availability Act and related statutes, official Regulatory Service, not including handbooks, the an- Board commentary on Regulation CC, and policy nual rate is $200 for domestic subscribers and $250 for statements on risk reduction in the payment system. In subscribers outside the United States. All subscription addition, it contains detailed subject and citation in- requests must be accompanied by a check payable to dexes. It is published in loose-leaf binder form and is "Board of Governors of the Federal Reserve updated monthly. System." Orders should be addressed to Publications To promote public understanding of its regulatory Services, Mail Stop 138, Board of Governors of the functions, the Board publishes the Federal Reserve Federal Reserve System, Washington, D.C. 20551. Regulatory Service, a three-volume loose-leaf service Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE CONSUMER CREDIT Three booklets on the mortgage process are also PUBLICATIONS available: A Consumer's Guide to Mortgage Refinancings, A Consumer's Guide to Mortgage Lock-Ins, and The Federal Reserve Board publishes a series of A Consumer's Guide to Mortgage Settlement Costs. pamphlets covering individual credit laws and topics, These booklets were prepared in conjunction with the as pictured below. The series includes such subjects as Federal Home Loan Bank Board and in consultation how the Equal Credit Opportunity Act protects wom- with other federal agencies and trade and consumer en against discrimination in their credit dealings, how groups. to use a credit card, and how to resolve a billing error. Copies of consumer publications are available free The Board also publishes the Consumer Handbook of charge from Publications Services, Mail Stop 138, to Credit Protection Laws, a complete guide to con- Board of Governors of the Federal Reserve System, sumer credit protections. This 44-page booklet ex- Washington, D.C. 20551. Multiple copies for classplains how to use the credit laws to shop for credit, room use are also available free of charge. apply for it, keep up credit ratings, and complain about an unfair credit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis