Federal Reserve Bulletin, 1990-08

VOLUME 76 • NUMBER 8 • AUGUST 1990 FEDERAL RESERVE BULLETIN 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 593 RECENT DEVELOPMENTS IN pervisory or examination process, itself, CORPORATE FINANCE may be contributing to reduced credit for certain sectors or regions of the country, Recent years have seen dramatic changes in and says that a slowdown in lending in the financial structure of U.S. nonfinancial certain markets seems entirely warranted corporations, in corporate securities margiven current economic conditions and the kets, and in corporate financing techniques. need for some lenders to strengthen under- Many of these changes have been associwriting standards in light of higher levels of ated with the wave of mergers, acquisitions, loan losses, before the House Committee and other corporate restructurings during on Small Business, June 6, 1990. the last half of the 1980s. This article explores restructurings and corporate finan- 619 Wayne D. Angell and Edward W. Kelley, cial developments, corporate balance Jr., Members, Board of Governors, discuss sheets and profitability, and the implicaand review the Federal Reserve System's tions of shifts in the relative importance of expenses and budget for 1990, including the various debt instruments in financing busi- Board's budget and major initiatives and ness activity. the Reserve Bank budgets and System initiatives, before the Subcommittee on Do- 604 MORTGAGE REFINANCING mestic Monetary Policy of the House Committee on Banking, Finance and Urban This article focuses on mortgage refinanc- Affairs, June 14, 1990. ing, particularly as it is used to tap accumulated home equity. To the extent possible, 629 Alan Greenspan, Chairman, Board of Govthe article draws comparisons between ernors, discusses the issue of credit availthose who increase their net borrowing by ability and its effects on the health of the refinancing and those who do so through the economy and says that the Federal Reserve use of home equity loans. Most of the has found that lenders have tightened their material regarding refinancings presented is standards in certain sectors and locales but drawn from a consumer survey sponsored that there has not been a broad-based by the Federal Reserve Board in mid-1989. squeeze on credit, before the Senate Committee on Banking, Housing, and Urban Affairs, June 21, 1990. 613 INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION 632 William Taylor, Staff Director, Division of Industrial production rose 0.6 percent in Banking Supervision and Regulation, Board of Governors, reviews the condition of May after no change in April; industrial Texas banks and their ability to meet the capacity utilization increased 0.3 percentexisting and potential credit demands of the age point in May to 83.6 percent. Texas economy and says that there are adequately capitalized banks and lending 615 STATEMENTS TO THE CONGRESS institutions in Texas and elsewhere that John P. LaWare, Member, Board of Gov- have the capacity to make sound loans for ernors, discusses credit availability to small economically viable business purposes, in businesses, including concerns that the su- Houston, Texas, before the House Commit- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

tee on Banking, Finance and Urban Affairs, AI FINANCIAL AND BUSINESS STATISTICS June 22, 1990. These tables reflect data available as of June 28, 1990. 638 ANNOUNCEMENTS Meeting of Consumer Advisory Council. A3 Domestic Financial Statistics A46 Domestic Nonfinancial Statistics Amendments to implement changes in the A55 International Statistics Community Reinvestment Act. Amendments to Regulations H (Member- All GUIDE TO TABULAR PRESENTATION, ship of State Banking Institutions in the STATISTICAL RELEASES, AND SPECIAL Federal Reserve System) and Y (Bank TABLES Holding Companies and Change in Bank Control) to implement provisions in the A76 BOARD OF GOVERNORS AND STAFF Financial Institutions Reform, Recovery, and Enforcement Act of 1989 regarding real A78 FEDERAL OPEN MARKET COMMITTEE estate appraisal standards. AND STAFF; ADVISORY COUNCILS Comments requested on a proposed revision and on a proposed amendment to Reg- A80 FEDERAL RESERVE BOARD ulation Y; comment requested on a pro- PUBLICATIONS posed revision to the Board's interpretive rule regarding investment advisory activi- A82 INDEX TO STATISTICAL TABLES ties of bank holding companies. A84 FEDERAL RESERVE BANKS, 639 LEGAL DEVELOPMENTS BRANCHES, AND OFFICES Various bank holding company, bank service corporation, and bank merger orders; A85 MAP OF THE FEDERAL RESERVE and pending cases. SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Corporate Finance This article was prepared by Leland E. Crabbe, erated; and bond default rates, while still rela- Margaret H. Pickering, and Stephen D. Prowse tively low, began to climb. In contrast, debtof the Board's Division of Research and Statis- equity ratios based on market values increased tics. Brian H. Levey provided research assis- very little, as higher stock prices offset much of tance. the growth in corporate indebtedness. Nonetheless, the nonfinancial corporate sector appears, Recent years have seen dramatic changes in the on balance, to be more exposed to potential financial structure of U.S. nonfinancial corpo- financial problems than it was in 1984. In this rations, in corporate securities markets, and in environment, banks and other investors have corporate financing techniques. Many of these become more cautious in extending credit to changes have been associated with the wave of finance highly leveraged mergers and acquisimergers, acquisitions, and other corporate re- tions, a shift that has contributed to an increase structurings during the last half of the 1980s. In in the use of equity financing and to a slowing in particular, the outstanding debt of the nonfinan- merger activity. cial corporate sector soared as corporations While the changes associated with the reborrowed heavily to finance retirements of eq- structurings captured the public's attention, uity resulting from restructuring activity. Fur- significant developments were occurring elsethermore, a substantial portion of this step-up where during the last half of the decade. The in borrowing involved low-grade debt. At the differences between debt and equity as sources same time, investors became more receptive to of funds to finance corporate activity narrowed these bonds, responding to the promise of at- significantly with the expansion in the use of tractive yields and recognizing the opportuni- financial instruments having features of both. ties for diversification of their portfolios. This Interest rate swaps and other methods for hedgshift not only provided funds for mergers and ing interest rate risk also blurred the traditional restructurings, but also enabled more firms that distinction between short-term and long-term were less well-known to tap public debt mar- debt. Nonfinancial corporations relied more kets. heavily on bonds, commercial paper, and loans With the repayment of the debt from many from foreign banks for new funding and less on mergers hinging on subsequent sales of assets, credit extended by domestic banks. For investacquirers turned to new sources of temporary ment-grade nonfinancial corporations, mediumfinancing from commercial and investment banks term notes became a growing source of funds. and made innovative use of bonds with deferred Issuance of privately placed debt was robust interest payments and variable coupon rates. over the last half of the 1980s, despite growth in Because bondholders were dissatisfied with the public junk bond market, which many belosses occasioned by downgradings in the wake lieved might supplant the private market. Moreof unanticipated restructurings, many corpora- over, in a recent ruling the Securities and tions included protection against this special risk Exchange Commission removed restrictions on in their new bond issues to reduce borrowing secondary trading of private placements by costs. larger institutional investors. The ruling likely With the rise in debt, many measures of cor- will spur continued growth in the private marporate financial condition deteriorated: Interest ket fed by increases in the participation by expenses claimed a significantly higher share of foreign issuers and, perhaps, by domestic issucorporate cash flow; downgradings of debt accel- ers drawn from the public market. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

594 Federal Reserve Bulletin • August 1990 RESTRUCTURINGS AND CORPORATE sophisticated investors who doubted that the FINANCIAL DEVELOPMENTS equity values of many firms fully reflected the appreciation in their assets during the inflation of Merger and acquisition activity, which was in- the 1970s and early 1980s. These investors were strumental in shaping corporate financial pat- aided by legal advisers and financial intermediarterns, was strong throughout the decade (chart ies who increased investors' awareness of the 1). The number of transactions rose moderately potential gains and developed financial instruthrough 1983 and then accelerated between 1984 ments to facilitate the transactions. A final explaand 1986. Although the number fell over the nation points to a less restrictive antitrust enremainder of the decade, it remained high by past forcement policy that permitted most of the standards. More important, the dollar value of proposed mergers and acquisitions to go unchalthe transactions continued to climb rapidly until lenged. Although it is early to draw firm conclu- 1989, easing only briefly in 1987, after the Octo- sions, preliminary research has suggested that ber stock market break. Acquisitions of U.S. several of these factors played a role in the firms by foreign companies since 1987 have restructuring boom. added significantly to the volume of merger activity. Divestitures rose at a strong pace through- Corporate Balance Sheets and Profitability out the 1980s, accounting in the last five years for nearly one-third of the dollar value of all mergers Whatever their cause, corporate restructurings have and acquisitions. resulted in an unprecedented retirement of out- Many explanations have been offered for the standing equity shares, which far outstripped the dramatic expansion of mergers and acquisitions. moderate level of new equity issuance (chart 2). One is the search for the fullest potential of the Overall, retirements of nonfinancial corporate stock firm's assets through a transfer of corporate have exceeded new issues by about $600 billion control to new management teams. Another fo- since 1983, in sharp contrast to the rest of the cuses on the tax benefits of higher leverage, the postwar period, when retirements of shares excapture of tax-loss carryovers, and an increase in ceeded new issues in only a handful of years, and the asset basis used for depreciation allowances then by very small amounts. Even the stock market and other purposes (although the Tax Reform break in 1987 had little effect on retirements because Act of 1986 and subsequent legislation essentially a pickup in stock repurchases by many corporations eliminated the last two incentives). A third ex- largely offset the brief pause in merger activity. planation views the restructurings as vehicles for Unlike the mergers of the 1960s, which were transferring wealth from bondholders, workers, financed largely by an exchange of securities, and other corporate stakeholders to sharehold- 2. Net equity financing of nonfinancial corporations ers. A fourth ascribes the merger boom to highly Billions of dollars 1. Mergers and acquisitions A Number Billions of dollars + I 8,(XX) / —200 - \ — 50 6,000 — Dollar valueJ - 150 \ —100 4,000 - v- 100 M il 1 1 1 1 1 1 1 1 II 1 1 1 II 1 1 1 1 1 1 1 1 2,000 — Number. — 50 1960 1965 1970 1975 1980 1985 1989 Annual data. Net equity financing is gross equity issuance less 1 1 t i ll 1 1 1 1 1 1 1 1 1 retirements. Gross issues include public offerings and private place- 1970 1975 1980 1985 1989 ments for cash, stock issued for stock dividends, dividend reinvest- The data reflect transactions of $1 million or more of all corpora- ment programs, and employee participation programs, and stock tions, including financial firms. Partial acquisitions and divestitures issues arising from the exercise of warrants and conversion privileges. are included. The dollar value is not available before 1979. Retirements include equity retired through leveraged buyouts, other SOURCE. Mergers & Acquisitions, various issues. mergers and acquisitions, and share repurchases. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Corporate Finance 595 acquisitions in the 1980s relied heavily on bor- 4. Domestic profits, net interest payments, and rowed funds to pay cash to selling shareholders. capital income of nonfinancial corporations Leveraged buyouts (LBOs), the most highly le- Percent of gross domestic product veraged acquisitions, mushroomed from less than $5 billion in 1983 to more than $60 billion in 1989, the year that included the $25 billion RJR- Nabisco transaction. LBOs served to transfer assets from publicly held corporations to closely held partnerships and private corporations. Some were structured with as little as 10 percent equity, provided largely by buyout pools that takeover specialists assembled. To finance the I I I I I I I I I I I 1981 1983 1985 1987 1989 remainder, the new firm effectively pledged the Quarterly data. Total capital income is before-tax profits plus net assets of the acquired company as collateral for interest payments. new debt obligations. The LBO firms then sought to lower the debt burden through improved cash 1980s, and that expansion was one factor acting flow and sales of some operations. Many of these to depress corporate profitability. Before-tax divestitures were themselves structured as profits slipped from roughly 9 percent of corpo- LBOs. rate output in 1987 to about VA percent in 1989. In addition to financing LBOs and other merg- Over the same period, net interest payments rose ers and acquisitions, debt commonly was used to from about AVA percent to more than 5 percent of finance defensive measures such as leveraged corporate gross product, accounting for more recapitalizations undertaken to discourage unso- than half of the drop in the profits share. licited or "hostile" takeovers. As a result of all Cyclical developments also played a part in the these restructuring activities, the indebtedness of shrinkage of the share of before-tax profits. The nonfinancial corporations grew rapidly, as illus- slowing of gains in output and productivity trated by the sharp increase in the ratio of the toward the end of the decade, along with faster market value of debt to the gross domestic prod- gains in compensation, squeezed corporate profuct of nonfinancial corporations (chart 3). its, especially in 1989. Moreover, in the face of The rapid buildup of debt in the nonfinancial foreign competition, businesses were forced to corporate sector was accompanied by rising net exercise restraint in passing rising production interest payments that absorbed a growing share costs through to prices, further damping corpoof corporate gross product (chart 4). The interest rate profits originating from domestic operations. share expanded even though interest rates were The Tax Reform Act of 1986 had important lower, on balance, during the last half of the effects on after-tax profitability. The average corporate tax rate on nonfinancial corporations— 3. Ratio of corporate credit market debt to corporate the ratio of federal, state, and local tax accruals gross domestic product of nonfinancial corporations to economic profits—rose from 31 percent in 1985 to 44 percent in 1989. Although the act Ratio reduced the maximum marginal rate of corporate taxation and permitted more accelerated depreciation for tax purposes, the elimination of the -.6 investment tax credit and of the preferential taxation of long-term capital gains more than -.5 offset these benefits. The increase in the corporate tax rate has meant that, over the past five years, before-tax profits have shown more 1 1 1 1 1 I M1 i ll II 1 1 1 M i ll 1 1 1 strength, on balance, than after-tax profits. Com- 196!5 1970 1975 1980 1985 bined with the loss of some nondebt tax shields, Annual data. The data on debt are based on market value. Shaded the increase in the effective corporate tax rate areas indicate business recessions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

596 Federal Reserve Bulletin • August 1990 also may have strengthened the incentive to use loans from commercial banks and on private debt finance, even for firms not directly involved placements, primarily with life insurance compain restructuring activity. nies. When policy loans began to absorb the The use of debt to retire equity boosted corpo- investible assets of life insurance companies in rate borrowing beyond that required to finance the late 1970s and early 1980s, these institutions capital outlays. The financing gap, the difference turned from the private placement market toward between capital expenditures and internal funds, more liquid investments. Consequently, many of represents the extent to which corporations must these higher-risk companies were forced to seek draw on external sources of funds—credit market new sources of credit. In response, securities borrowing, new equity issuance, or asset liquida- firms, led by Drexel Burnham Lambert, began tions—to finance capital expenditures. Although actively promoting public offerings of high-yield credit market borrowing exceeded corporations' bonds in the early 1980s. At the same time, needs for external funds for most of the postwar institutional investors in the public market beperiod, changes in total borrowing generally re- came convinced that the bonds' higher yields flected changes in the financing gap. However, this more than compensated for their greater risks, pattern changed dramatically after 1983 (chart 5). especially when the bonds were held in a diver- The financing gap showed little trend between sified portfolio. The economic expansion also 1982 and 1989, while borrowing increased provided a favorable environment by seeming to sharply, reflecting the surge in merger activity. mitigate risk. These developments interacted with the Merger Financing and the Junk Bond growth of financing needs arising from mergers Market and restructurings to spur a dramatic increase in the issuance of junk bonds. Between 1983 and Although the merger and buyout activity of the 1989, nonfinancial corporations issued $160 bilpast decade contributed significantly to the radi- lion of junk bonds to the public; that sum accal transformation of the junk bond market, part counted for more than 35 percent of public bond of the early growth of that market was related to offerings by the sector. About two-thirds of the developments in private placements. Before the high-yield bonds offered during this period were 1980s, few new speculative-grade bonds (bonds associated with restructurings—leveraged buyrated below Baa3 by Moody's Investors Service outs, other mergers and acquisitions, divestior below BBB- by Standard and Poor's Corpo- tures, stock repurchases, leveraged recapitalizaration) were publicly offered because most inves- tions, or other restructuring activities (chart 6). tors shied away from their higher risk of default. In most cases, junk bonds provided permanent Higher-risk borrowers, typically small and medi- 6. New public issues of low-rated bonds um-sized companies, tended instead to rely on by nonfinancial corporations Billions of dollars 5. Total credit market borrowing and financing gap of nonfinancial corporations •40 Billions of dollars Restructuring related! 1983 1984 1985 1986 1987 1988 1989 Low-rated bonds are bonds offered publicly in the United States rated below Baa3 by Moody's Investors Service or below BBB- by I I M 1 I 1 I I I I 1 I I I I I I I I I I II I I I I M I I I I I I I I I ~ 1955 1960 1965 1970 1975 1980 1985 1989 Standard and Poor's Corporation, or with no known rating. Restructuring issues are those associated with leveraged buyouts, other Annual data. The financing gap is defined as capital expenditures mergers and acquisitions, divestitures, stock repurchases, leveraged less internal funds. recapitalizations, and other restructuring activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Corporate Finance 597 financing for cash buyouts, which replaced part 1. OID and PIK bonds as percentages of gross issuance or all of the funds supplied initially by commer- of junk bonds, 1985-89 cial or investment banks. As the high-yield market matured, new instru- Type of bond ments that offered issuers greater leeway in man- YYeeaarr Zero Deferred Payment aging the timing of their interest payments were coupon coupon in kind introduced. These instruments grew out of the 1985 444444......555555777777 need to minimize interest payments until cash 1986 ......999999444444 333333......000000666666 222222......333333000000 1987 ......999999666666 777777......111111666666 444444......333333999999 flow improved or until debt loads could be re- 1988 111111......222222999999 111111444444......666666666666 444444......444444999999 1989 222222......000000000000 999999......222222222222 444444......000000888888 duced with the proceeds from sales of assets. The deferred-cash-payment bond and the reset comparable Treasury securities; and the interest note were commonly used for these purposes. expense corresponding to the yield that is between 5 and 6 percentage points above compara- Deferred-Cash-Payment Bonds. Several types ble Treasury securities can be deducted only at of bonds enable borrowers to postpone the cash maturity. The legislation has greatly reduced the payment of interest. Payment-in-kind (PIK) attractiveness of issuing debt with delayed cash bonds give the issuer the option of issuing more payments. debt in lieu of a cash coupon payment over the first years of the bond's life. These bonds typi- Reset Notes. Reset notes have characteristics cally have a stated maturity of about ten years, of both floating- and fixed-rate debt. The coupon and a payment-in-kind period of about five years. rate is fixed for an initial period, usually one to After this period, the issuer must make the three years, after which it is reset to make the coupon payment in cash. Original-issue-discount bond trade at a predetermined, or reset, price, (OID) bonds also delay cash interest payments. usually 100 to 102 percent of par value. The These bonds, which are issued at a large discount coupon rate would be raised if the market price from par, include zero coupon bonds and bonds were less than the reset price and lowered if the with coupon rates set well below market yields at market price were greater than the reset price. the time of issuance. After an initial period, the The reset feature appeals particularly to firms coupon rate is raised. Because securities with that anticipate improvements in their credit qualdeferred cash payment typically have a subordi- ity before the reset date, for they will be able to nated standing in the issuer's capital structure benefit from lower borrowing costs. The appeal and shorter call protection than conventional may be especially great to companies that have debt, their yields to maturity tend to be at least experienced a downgrading in credit rating as a 200 basis points above those on conventional result of a buyout but expect debt paydowns debt. Moreover, the returns on deferred-cash- from asset sales to lead to an upgrade. payment bonds usually are more volatile than From the investor's viewpoint, the reset feathose on straight debt, reflecting their junior ture offers some protection against a deteriorastanding and longer duration. tion in an issuer's credit quality. This protection During the years 1987-89, PIK and OID bonds is, however, limited to modest declines in credit accounted for more than 15 percent of new funds quality because if the issuer faces severe finanraised in the junk bond market (table 1). Until cial distress, there may be no affordable coupon recently, issuers of PIK bonds were allowed to rate that makes the note trade at its reset price. deduct coupon payments on the additional debt Moreover, even if its financial condition is not as an interest expense, even though no cash deteriorating, the company may have to raise the outlay was made. Similarly, issuers of OID coupon rate if the reset date falls in a period of bonds were allowed to deduct the accrued inter- heightened concerns about credit quality. To est as an expense. As a result of legislation lessen the risk that reset notes will exacerbate passed in 1989, however, no interest deductions financial stress, many issuers place caps on the are allowed on that portion of the accrued inter- coupon rate. More than two-thirds of the notes est that is 6 percentage points above the yield on yet to be reset have caps, generally ranging from Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

598 Federal Reserve Bulletin • August 1990 100 to 400 basis points above the original coupon ration in creditworthiness is noteworthy because rate. Since this type of security first appeared in it occurred while the economy was expanding. the U.S. public market in 1985, more than fifty As a result of these changes in ratings, the reset notes, with an aggregate face value of about median rating that Standard and Poor's assigned $131/2 billion, have been issued in the junk bond to industrial bonds dropped from an investmentmarket. The dollar volume accounts for about grade A in the early 1980s to a below-investment- IVi percent of public issuance of junk bonds grade BB at the close of the decade (chart 8). during this period. By year-end 1989, about a One-third of the estimated $600 billion of rated dozen of these publicly issued reset notes had nonfinancial corporate bonds outstanding at the been either called or reset. In addition to issu- end of 1989 was rated as noninvestment grade. In ance in the public market, at least $23/4 billion the early 1980s, before the recent wave of rewas placed privately between 1987 and 1989. structurings, these low-grade bonds accounted for less than one-tenth of the total outstanding. Corporate Credit Quality Some of the growth in below-investment-grade debt stemmed from the downgrading of outstand- The increase in the use of debt finance has been ing debt to speculative grade because of events associated with a deterioration in many indica- related to restructuring. More important, that tors of corporate financial health. Interest pay- growth was boosted by new debt issues of these ments in the aggregate have claimed an increas- downgraded companies. Furthermore, in the late ing proportion of the cash flow of nonfinancial 1980s, many new issues carried ratings at the corporations since 1983 (chart 7). Furthermore, lower end of the credit spectrum—B and Caa on the number of firms whose interest expense Moody's scale. In the past these ratings generally exceeded cash flow rose significantly between appeared only when corporations on the edge of 1983 and 1988, despite favorable economic con- default were downgraded. The relative imporditions and falling interest rates. In these circum- tance of the other component of speculative stances, concerns have arisen about the ability of issuers, those companies downgraded to noninhighly leveraged firms to service their debt, es- vestment grade because of a long-term decline in pecially in light of the slowing of the economy in business fundamentals, has changed little over 1989. the past ten years. The secular erosion in corporate credit quality Default rates on corporate bonds of belowaccelerated in the last half of the 1980s, an investment grade, while still low, have risen, erosion evidenced by the increase in downgrad- from 1.4 percent of outstanding bonds in 1987 to ings of corporate bonds relative to upgradings. 4 percent in 1989 (table 2). Moreover, many The growth in new issues by lower-rated firms, market analysts expect much higher default rates which are more prone to downgradings, has over the next few years, both because the overall meant that more frequent changes in credit ratings are likely. Nonetheless, the general deterio- 8. Distribution of bonds by rating, 1983 and 1989 7. Ratio of gross interest payments to cash flow of nonfinancial corporations Percent I I I I I I I I I 1 1 1980 1982 1984 1986 1988 Annual data. Cash flow includes after-tax economic profits, depre- The distribution is based on ratings of outstanding industrial issues ciation, and gross interest expense less dividends. Shaded areas by Standard and Poor's Corporation. The median rating was A in 1983 indicate business recessions. and BB in 1989. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Corporate Finance 599 2. Outstanding amount and default rate of low-rated Event Risk corporate bonds, 1980-89 About one-fourth of the reductions of ratings in Year amo O un u t t st ( a p n a d r in v g a lue, D ( e p f e a r u c l e t n r t a ) t e the past five years were related to restructurings. billions of dollars)' The downgradings were concentrated in the industrial sector, where leverage-increasing events 1980 15.13 1.48 1981 17.36 .16 occasioned downgradings for about 40 percent of 1982 18.54 3.11 1983 28.23 1.07 outstanding bonds. According to Moody's Inves- 1984 41.70 .82 tors Service, these downgradings inflicted losses 1985 59.08 1.68 of nearly $14 billion on bondholders between 1986 92.98 3.39 1987 136.95 1.352 1984 and 1988. 1988 159.22 2.48 1989 201.00 4.03 As a result, investors in industrial bonds became increasingly sensitive to event risk—the 1. Par value of straight debt. Financial issues are included. risk that an unforeseen, major change in a firm's 2. Excludes Texaco default of $1.8 billion; with Texaco, the rate was 5.5 percent. capital structure will lead to a large decline in the SOURCE. Edward Altman, New York University. market value of the firm's outstanding bonds. To compensate investors for event risk, yields on quality of the noninvestment-grade bonds has investment-grade industrial bonds rose relative declined and because defaults tend to rise as to yields on high-grade utility bonds. After the bonds age. Indeed, several recent studies have RJR-Nabisco buyout proposal in late 1988 disfound cumulative default rates for particular copelled the notion that bonds of very large indushorts of bonds to be as high as 30 percent over trial corporations were free of event risk, investhe first ten years after issue. tors stepped up their demands for stronger bond Other measures of the condition of corporate covenants for protection against that risk, and balance sheets suggest that stockholders have several issuers have found it worthwhile to comnot been overly concerned with the growing ply. The terms of the covenants have varied from indebtedness of corporations. In particular, the issue to issue, but they have had common fearatio of debt to equity, both measured at market tures. For example, most covenants written values, has increased only slightly since 1982, as since late 1988 have specified that bondholders rising equity prices have largely countered the may sell their bonds back to the issuer at par if rise in corporate indebtedness (chart 9). Nevertwo events occur: a major change in the issuing theless, the deterioration in other indicators of firm's capital structure and a downgrading of the corporate financial condition, especially the ratio bond by the major rating agencies from investof interest expense to cash flow, indicates that ment grade to speculative grade. In 1989, nearly the financial health of the business sector may be half of the new offerings of long-term bonds by vulnerable to a significant slowing in economic investment-grade industrial firms included eventactivity. risk covenants. Estimates suggest that industrial firms have saved about lA percentage point on 9. Ratio of debt to equity of nonfinancial corporations borrowing costs by including this protection. Ratio A Market value / — A RECENT DEVELOPMENTS IN MERGER AND RESTRUCTURING ACTIVITY — .6 Early in 1989, the hectic pace of debt-financed Book value restructuring began to subside. The amount of - .4 stock-for-stock exchanges in merger transactions rebounded in 1989 from the extremely low levels | | M i ll 1 1 1 1 1 1 1 II 1 II 1 1 1M i ll 1 1 1 1965 1970 1975 1980 1985 1989 of 1987 and 1988. This rebound largely reflected Annual data. Shaded areas indicate business recessions. the increase in emphasis last year on friendly Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

600 Federal Reserve Bulletin • August 1990 strategic corporate acquisitions in which the associations from the junk bond market and new, combined company issued new common outflows from high-yield mutual funds further shares to stockholders of the two original com- curtailed demand for these issues. The liquidapanies. Then, late in the year, the deepening tion of Drexel Burnham Lambert early this year difficulties in the market for below-investment- was another negative factor for the market to grade bonds further encouraged combination of- absorb, even though Drexel's participation had fers of cash and securities, particularly preferred already dwindled. stock, to shareholders of the acquired company. New merger proposals dropped off noticeably The acquisition market was jolted last fall during the first part of 1990 as a consequence of when a few companies involved in highly lever- the virtual unavailability of funds for new fiaged transactions failed to perform up to expec- nancing in the low-grade bond market; the more tations, defaulted on bond issues, and sought cautious attitude of commercial banks, both dobankruptcy protection. Others, seeking to pre- mestic and foreign; and the weakening in the vent default, have reached agreement with bond- market for asset sales. Nevertheless, although holders to reschedule debt or are attempting to restructuring activity is considerably less than it do so. These "distressed" exchanges typically was in 1988 and 1989, it remains substantial. replace existing debt with securities carrying a Despite the disarray in the junk bond market and longer maturity, lower interest rate, some substi- investor caution, well-structured acquisition protution of equity, or a combination of these fea- posals, especially those aimed at enhancing a tures; and they must be approved by a predeter- firm's competitiveness within its own lines of mined share of bondholders specified in the business, have been well received by investors. original bond's covenant. Whereas such exchanges are still few, these unravelings of acquisitions and the general vulnerability of highly IMPLICATIONS OF FINANCIAL leveraged firms to adverse economic develop- INNOVATIONS ments have heightened concerns in the financial markets; and thus they have made investors The past several years have seen many shifts in much more cautious in extending funds to highly the relative importance of various debt instruleveraged borrowers. ments in financing business activity (table 3). Uneasiness about rising bond defaults contrib- One of the most significant changes has been the uted to chaotic conditions in the market for increase in the importance of bonds and notes, speculative-grade bonds early this year as prices which were responsible for roughly 58 percent of of restructuring-related issues dropped precipi- estimated total credit market debt raised in 1989, tously. The withdrawal of the savings and loan compared with 46 percent in 1983. Another has 3. Distribution of funds raised in credit markets by nonfinancial corporations, by type of instrument, 1983-89 Percent Type of instrument 1983 1984 1985 1986 1987 1988 1989 Bank loans U.S. banks 32.1 28.8 22.6 24.4 3.2 15.7 14.2 Foreign banks 4.9 7.7 1.1 5.5 1.3 5.3 6.8 Commercial paper -1.5 12.8 11.0 -4.6 1.6 5.6 10.6 Finance company loans 14.1 9.7 9.6 5.5 11.6 7.6 5.4 Bonds and notes1 46.5 39.3 72.8 54.7 68.0 58.3 57.7 Mortgages -8.0 -.8 -13.5 13.9 10.7 8.3 3.1 Bankers acceptances and U.S. government loans 11.9 2.5 -3.6 .6 3.6 -.8 2.2 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 MEMO Total funds raised in credit markets (billions of dollars)... 54.8 169.6 132.4 203.8 145.5 207.5 196.0 1. Includes bonds and notes issued abroad by U.S. corporations and tax-exempt bonds issued for the benefit of nonfinancial corporations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Corporate Finance 601 been the steady decline in loans from domestic debt. In a similar sense, currency swaps have banks over the same period, from 32 percent of blurred the distinction between debt denomitotal credit market debt to 14 percent. Loans nated in dollars and in foreign currencies. In a from foreign banks, on the other hand, increased, currency swap, an issuer of, say, dollar-denomto just under 7 percent of total credit market debt inated bonds agrees with a dealer to make prinraised in 1989; and the issuance of commercial cipal and interest payments in, say, French paper continued its rapid expansion, interrupted francs, and in return the dealer provides the only by a pause in 1986. The strong growth has issuer with dollar payments for the principal and been fueled by heavy inflows to money market interest on the issuer's bonds. The swap protects mutual funds, which are the largest buyers of against foreign exchange risk. commercial paper. Related transactions, such as caps, floors, and The implications of these changes for the ma- collars, can be used to alter the characteristics of turity structure of the corporate sector's debt are floating- and fixed-rate debt. A cap places a not so clear as they would have been in the past. maximum on the interest rate paid by a floating- For one thing, many of the financial develop- rate issuer: The seller of the cap agrees to ments and innovations in the past decade have provide funds to the holder of the cap to cover eroded the traditional distinctions between short- the interest payments that exceed a specified and long-term debt, as well as those between rate. Similarly, a floor places a minimum on the debt and equity. Furthermore, a recent regula- interest rate a floating-rate issuer is required to tory change by the Securities and Exchange pay. And a collar combines a cap and a floor to Commission (which is discussed in some detail confine the interest rate to a given range. The below), has blurred the traditional distinction be- tighter the range associated with the collar, the tween private and public markets for securities. closer the floating-rate obligation comes to fixedrate debt. By similar reasoning, an issuer of a Short-Term and Long-Term Debt fixed-rate security can use caps, floors, and collars to introduce elements of short-term debt into Before the 1980s, it was reasonable in aggregate its obligation. analysis to characterize commercial paper and The introduction of extendible notes, which bank loans as short-term debt and corporate give the issuer the option of extending the matubonds and mortgages as long-term debt. Such rity of an issue, also has eroded the differences characterizations often were used to gauge cor- between intermediate- and long-term securities. porate exposure to interest rate and liquidity Some extendible issues permit the issuer to exrisk, under the assumption that interest rates on tend the maturity for one, two, or three years and short-term debt were variable whereas those on permit the exercise of this option for up to seven long-term debt were fixed. years. On other notes, the feature is more rigid, Financial developments and innovations in the specifying a date on which the option may be past decade have made this classification of debt exercised to extend the maturity to a specified less useful. One such development is the $1.3 number of years. Frequently, the option to extrillion swap market. In an interest rate swap, an tend has been included in offerings of reset notes, issuer of fixed-rate debt, for example, agrees with the coupon reset if the issuer exercises the with a counterparty—typically a swaps dealer— option. to make floating-rate payments in exchange for fixed-rate payments. Because the fixed-rate issue Medium-Term Notes often has an intermediate or long-term maturity, the exchange effectively allows the fixed-rate In the corporate bond market, the classification issuer to convert its debt into an obligation with of bond issuance as long-term financing also has an essential feature of short-term debt. By the become less meaningful as the market for medisame token, a floating-rate issuer can convert its um-term notes has grown. Medium-term notes interest obligations to a fixed rate through a are continuously offered corporate bonds that swap, thereby lengthening the duration of its generally are sold by agents on a "best efforts" Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

602 Federal Reserve Bulletin • August 1990 basis; they have maturities that usually range 10. New issues of securities from one to five years (utility issues, however, by nonfinancial corporations routinely have thirty-year maturities). The mar- Billions of dollars ket for medium-term notes, which expanded rapidly after the Securities and Exchange Commission began permitting so-called shelf registration of security offerings in 1982, was dominated at first by the finance subsidiaries of automobile companies, but by 1989 more than 200 U.S. corporations had raised funds in the market; the gross issuance in that year was $35 billion (table 4). Offerings of medium-term notes by nonfinancial firms are likely to rise further as more of these issuers establish new programs and as mediate-term financing, particularly the Euroothers draw down on established programs. Con- bond market. (Eurobonds are bonds issued tinued growth of issuance by nonfinancial corpo- outside of the home market.) Favorable interest rations also appears likely to produce a length- rates and the removal of the withholding tax on ening in maturities. interest paid on bonds to foreign investors fos- At first, many borrowers used medium-term tered borrowing by U.S. corporations in the notes to raise relatively small amounts of funds Eurobond market in the mid-1980s (table 5). quickly, since the market afforded a flexible Since 1986, as the rate advantage in the Euromeans to match the maturities of intermediate- market has diminished, U.S. corporate borrowterm assets. Primary issues averaged about $5 ing in that market has fallen off. Although several million. As the market has matured, medium- U.S. corporations have established global proterm notes have become more competitive with grams for issuing medium-term notes, issuance traditional corporate underwritings, and trades abroad has not grown so fast as domestic issuhave approached $50 million to $100 million. ance. On the demand side, a high degree of Most issuers have investment-grade ratings: Of sensitivity of foreign investors to the threat of the $72 billion in medium-term notes outstanding event risk damped demand in the Euromarket for at the end of 1989, only $l!/4 billion had ratings U.S. corporate issues, particularly issues of nonbelow investment grade, and most of those notes financial corporations. were issued originally as investment-grade debt. Some recent programs by nonfinancial issuers Debt and Equity have included covenants that protect against event risk. The difference between debt and equity as Although the market for medium-term notes sources of corporate financing has narrowed sigwas structured as an extension of the commercial nificantly. One factor has been the expansion of paper market, its recent growth may be attribut- the market for speculative-grade bonds. Because able to a shift from traditional markets for inter- low-grade bonds typically have a junior standing 4. Gross issuance of medium-term notes by U.S. firms, 1983-89 Billions of dollars Total, Type of issuer 1983 1984 1985 1986 1987 1988 1989 1983-89 Auto finance companies 4.8 6.8 6.8 8.9 11.0 7.7 11.1 57.0 Bank holding companies .1 .9 2.0 2.6 2.5 4.3 3.7 16.0 Business and personal finance companies .4 1.3 2.0 2.0 3.0 4.3 7.1 20.0 Other financial companies .2 .9 1.5 3.6 4.8 6.8 6.5 24.3 Nonfinancial companies * .4 1.3 3.0 3.2 8.1 6.5 22.5 Total 5.5 10.2 13.6 20.0 24.3 31.3 34.9 139.8 •Less than $50 million. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Recent Developments in Corporate Finance 603 in the issuing firm's capital structure and, more 5. Gross bond issuance by U.S. firms in foreign important, because their high returns are partic- markets, 1983-891 ularly vulnerable to a drop in earnings, these Billions of dollars bonds have risk and return characteristics similar All Nonfinancial Financial to those of both common stock and debt. In YYeeaarr corporations corporations corporations addition, many new offerings of speculative- 1983 8.3 4.1 4.2 grade bonds have been convertible into equity or 1984 22.6 10.1 12.5 1985 37.8 14.9 22.9 have included equity-like features, such as war- 1986 42.8 18.0 24.8 1987 24.3 11.3 13.0 rants. There also has been an expansion in the 1988 23.2 8.8 14.3 issuance of a kind of preferred stock that gives 1989 22.8 5.7 17.0 the issuer the option to exchange it for debt. Total, 1983-89 ... 181.8 72.9 108.7 Most of this exchangeable preferred stock has 1. Details may not sum to totals because of rounding been placed directly with shareholders as part of Annual data. leveraged restructurings. Many of the issuing firms have exercised the exchange option. sion funds have found in the private market an Innovations in the use of variable-rate pre- attractive outlet for their growing pool of inferred stock likewise have served to narrow the vestible funds. The wave of corporate restructurdifference between debt and equity. Because ings spurred this growth, as many firms involved corporations are allowed to deduct 70 percent of in restructuring tapped the private market for the dividend income they receive from unaffil- part of their financing. iated corporations, fully taxed corporate inves- The lines between public and private markets tors, given all else, favor preferred stock over have faded because major lending institutions debt investments. Variable-rate preferred stock and corporations participate in both markets. combines this tax advantage with a floating div- The difference between private and public ofidend rate that makes the stock a substitute for ferings is expected to narrow even further now commercial paper. The dividend rate is com- that the Securities and Exchange Commission monly adjusted several times a year either by a has adopted Rule 144A. The rule exempts U.S. remarketing agent or through a Dutch auction, in and foreign corporations from registration rewhich bids are ranked from lowest to highest and quirements for bonds and stock sold to instituthe highest bid that clears the issue will be the tional investors with investment assets of $100 price paid for the bids by all winning bidders million or more (and, in the case of banks and regardless of their initial bid. The rate is often thrift institutions, net worth of at least $25 capped at 110 percent of the AA-rated commer- million). Perhaps more important, the rule percial paper rate. The caps lend variable-rate pre- mits the resale of these private securities to ferred stock an equity feature, inasmuch as buy- qualified institutions at any time. Before the ers of these securities bear the risk of a price new rule was promulgated, private securities decline should the cap become effective. generally could not be resold for two years, although some carried registration rights that Private Placements permitted their subsequent unrestricted resale in the public market. The National Association The private market, in which corporate securities of Securities Dealers' screen-based trading sysare placed directly with institutional investors, tem, called Portal, is designed to increase lihas grown steadily since the early 1980s, and in quidity in the marketplace for primary and 1988 and 1989, the volume of privately placed secondary market sales of 144A securities. The bonds exceeded that of publicly offered bonds additional liquidity in the private market is (chart 10). While the extraordinary expansion in likely to attract new buyers and issuers, both the public market for non-investment-grade debt domestic and foreign. It also may draw in is partly an outgrowth of the private placement mutual funds, pension funds, and other lenders market, the public market has not supplanted the who have faced restrictions or limitations on private one. Life insurance companies and pen- their holdings of nonregistered securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

604 Mortgage Refinancing This article was prepared by Glenn B. Canner here is drawn from a consumer survey sponsored and Charles A. Luckett of the Board's Division by the Federal Reserve Board during mid-1989. of Research and Statistics, and Thomas A. Dur- (For a description of the survey, see the appenkin of the Office of the Secretary, with research dix.) Comparative information on the use of assistance from Ian W. Burns and Wayne C. home equity loans comes from a consumer sur- Cook. vey conducted in 1988.3 In recent years, homeowners have raised substantial amounts of funds for various purposes by THE ECONOMICS OF REFINANCING liquidizing some of the equity in their homes. One means of doing so, and the main topic of this Most discussions of the decision to refinance a article, has been to refinance an existing mort- home mortgage have concentrated on the case in gage for an amount greater than the outstanding which the existing principal is refinanced but no mortgage balance plus closing costs. new borrowing is undertaken.4 A homeowner In an earlier article, we discussed the preva- faces the question of whether to refinance whenlence and use of home equity loans as another ever current mortgage interest rates drop below means of converting home equity to liquid form.1 the rate on the homeowner's existing mortgage. That report distinguished two types of such To determine the attractiveness of refinancing, loans: "traditional home equity loans," which homeowners must weigh the prospective afterare closed-end loans that typically require repay- tax savings from lower interest costs against the ment of interest and principal in equal monthly costs of the refinancing transaction itself, includinstallments, and the newer "home equity lines ing any mortgage fees (points), application and of credit," which are revolving accounts that appraisal fees, and other costs associated with permit borrowing from time to time at the discre- obtaining a new mortgage, as well as any prepaytion of the account holder up to the amount of the ment penalty on the old mortgage. Because savcredit line. Using either type of home equity ings on interest accumulate gradually over time loan, homeowners are able to borrow against the as scheduled payments are made, the amounts accumulated equity in their residential property saved with each payment must be discounted to to finance the purchase of goods and services or their present value by some appropriate rate, and to repay other debts.2 their sum compared with the total cost of the This article focuses on mortgage refinancing, refinancing. If the discounted present value of particularly as it is used to tap accumulated home the stream of prospective after-tax savings in equity. To the extent possible, this report draws interest payments exceeds the after-tax refinanccomparisons between those who increase their net borrowing by refinancing and those who do so through the use of home equity loans. Most of 3. See Canner, Luckett, and Durkin, "Home Equity Lendthe material regarding refinancings presented ing." 4. For examples, see John Marquardt and Walt Woerheide, "Mortgage Refinancing: A Better Decision Rule and the Impact of Tax Reform," Journal of Retail Banking, vol. 10, 1. Glenn B. Canner, Charles A. Luckett, Thomas A. (Fall 1988), pp. 23-31; Jeremy J. Siegel, "The Mortgage Durkin, "Home Equity Lending," Federal Reserve Bulletin, Refinancing Decision," Housing Finance Review, vol. 3 vol. 75 (May 1989) pp. 333-44. (January 1984), pp. 91-97; Arefaine G-Yohannes, "Mortgage 2. Of course, a fourth method of extracting equity is to sell Refinancing," Journal of Consumer Affairs, vol. 22 (Summer the property and either purchase a lower-priced home or rent. 1988), pp. 85-95. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Mortgage Refinancing 605 ing costs, a homeowner might opt to refinance. Generally speaking, if a rise in rates and a fall in However, several other considerations generally rates of the same amount were viewed as equally complicate the decision. likely, and the savings currently available from refinancing were relatively modest, the typical Cost Motivations Affecting the Decision homeowner with a fixed-rate mortgage would probably choose to wait. The most that could be One consideration is the possibility that the home- lost in the event of rising rates would be the owner might sell the property before the mort- relatively small savings currently available—a gage maturity date, thus reducing the total (and large rise in rates would have no more adverse present value) of expected future interest sav- effect than a small rise in rates. But a large drop ings. If the property were sold relatively soon in rates in the future would allow a large reducafter a refinancing, the savings in interest costs tion in interest costs, so that the possible benefits that had accumulated by that time would proba- of waiting to refinance would outweigh the posbly not offset the transaction costs associated sible costs. The situation is different if the homewith obtaining the new loan, unless the reduction owner has an adjustable-rate mortgage; in that in rate were unusually large.5 This uncertainty case, the prospect of rising rates creates a greater about length of residence is one reason that most incentive to refinance because it is possible for rules-of-thumb about whether to refinance incor- the rate on the existing mortgage to adjust to porate the dictum that the costs of refinancing be some level above the current one. recoverable within two years. Before the 1980s, virtually all refinancings in- Uncertainty about the future course of interest volved the payoff of one fixed-rate mortgage with rates also affects the refinancing decision. Seem- the adoption of a new fixed-rate mortgage. But ingly, a homeowner should refinance whenever the growth of adjustable-rate financing in the past mortgage interest rates drop enough to generate a decade has multiplied the possible configurations positive net saving on interest costs within a a refinancing can have: A homeowner can also reasonable period of time. However, the timing move from a fixed-rate loan to an adjustable one, of this decision is important because, if interest from an adjustable to a fixed, or from one adjustrates continue to fall, the homeowner will reap able-rate loan to another. even larger savings by waiting to refinance. The decision to refinance with an adjustable- Thus, the decision to refinance depends on the or with a fixed-rate mortgage involves many of homeowner's expectations about future interest the same factors considered in the creation of the rates weighed against the amount of savings original home-purchase mortgage. Adjustableavailable from an immediate refinancing, guided rate mortgages (ARMs) are typically offered with by the homeowner's willingness to forgo a initial rates lower than those available on fixedknown gain for the possibility of a larger one.6 rate loans—sometimes with deeply discounted rates for the first year or two.7 But, because the 5. The closing costs associated with a refinancing are generally treated as a front-end, lump-sum cost. Although 7. On most ARMs, the interest rate is set in reference to these closing costs are frequently added to the balance owed some "index" rate determined by market forces, such as the on the new loan, the present value of the payments associated yield on one-year Treasury securities. A markup over the with financing the closing costs is essentially equal to a index rate, the "margin," is also specified in the contract. lump-sum payment if the discount rate applied is equal to the The mortgage rate, calculated as the index rate plus the interest rate on the new loan. A small difference between the margin, is reset from time to time, frequently at one-year two amounts may exist, however, owing to tax effects. If the intervals. Rate adjustments are usually subject to certain closing costs on a refinancing are financed, the interest paid limitations: Most ARMs contain "caps" on how much the on those borrowed funds is fully tax deductible. On the other rate may rise in a year and over the life of a loan; annual caps hand, if a lump-sum payment of closing costs is made, only of 2 percentage points and lifetime caps of 5 percentage the portion of the closing costs that constitutes points (pre- points are common. The initial rate on an ARM is virtually paid interest) is tax-deductible, and it must be amortized over always lower than the rate on a fixed-rate loan of comparable the life of the loan. maturity and loan-to-value ratio. The lower rate reflects the 6. The option of a rapid sequence of refinancings as rates fact that much of the "interest rate risk" of long-term loan decline is generally not feasible because prepayment penal- contracts is shifted from the lender to the borrower in an ties and mortgage fees make it too costly. ARM transaction. The borrower needs the incentive of a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

606 Federal Reserve Bulletin • August 1990 rate is adjustable, the borrower is exposed to Another reason to refinance, as noted, is to increasing interest expense should rates rise, raise additional funds. In the household survey, subject to the allowed frequency of adjustment nearly 60 percent of those who refinanced also and the limitations of any annual and lifetime borrowed additional funds. Many of these housecaps on the mortgage rate. Expectations regard- holds obtained a lower rate than that on their old ing future rates may thus play a key role in the mortgage, but some accepted the same or a homebuyer's opting for a fixed- or adjustable- higher rate. The decision to raise new funds rate loan initially or in a refinancing. In general, through refinancing hinges on the size of the when rates are at the low end of the homebuyer's existing loan relative to the amount of new funds expectations, it makes sense to obtain fixed-rate sought, the comparative rates on the existing and financing, "locking in" the comparatively low prospective substitute loans, and the rates and rate. If rates are expected to rise sharply in the terms available through alternative means of future, a homeowner with an ARM, as noted financing. If they can qualify for a refinancing, above, may choose to refinance into a fixed-rate most homeowners, depending on the amount loan (FRM), even when the new (fixed) rate is needed, will also be able to obtain funds using a close to or above the rate currently in force on home equity loan, a personal loan, or a credit the ARM. card account. In most cases, a first mortgage Expected length of residence may also be a carries the most attractive available rate, so that crucial factor in deciding whether to refinance refinancing is often the best choice for raising a with an adjustable- or with a fixed-rate loan. As large amount of new funds. On the other hand, if noted earlier, homeowners who expect to move the existing mortgage carries a very low rate and very soon would probably not benefit from refi- is large relative to the new funds required, a nancing. However, those who plan to move refinancing might best be avoided. The homewithin two years or so might find it optimal to owner would probably not benefit by giving up refinance with an initially discounted ARM, since the attractive old rate. Nonrate considerations the brunt of an upward adjustment to higher also affect the decision. A home equity credit market interest rates might not take effect until line, for instance, provides more flexibility for the move was imminent. Some homeowners subsequent borrowing and might be more appromight attempt a strategy of refinancing at regular priate for handling repetitive credit needs, such intervals into initially discounted ARMs, assum- as tuition expenses, even when rate comparisons ing that such instruments continue to be offered. seemed to favor a refinancing. Other Reasons to Refinance RESULTS OF THE BOARD'S CONSUMER Mortgage debtors may also elect to refinance for SURVEY reasons other than obtaining lower interest costs on the existing principal. For example, liquidity- To obtain information about mortgage refinancconstrained homeowners might wish to reduce ing, the Federal Reserve Board sponsored a the size of their monthly payments, even if lower survey of households in 1989. In total, the survey rates are not available. This reduction in monthly included a nationally representative sample of payments could be accomplished by refinancing 1,514 families. The following sections present the for a longer term than the remaining life of the results of the survey. existing mortgage. Prevalence of Refinancing lower initial cost to accept the risk of a higher future cost. Nationwide, the consumer surveys show that Sometimes, as a stronger inducement for the borrower to choose an ARM, the lender reduces the initial rate even roughly 67 percent of all households own their below the level implied by the index-plus-margin formula; homes, a figure consistent with Census Bureau these initially discounted rates are popularly known as "teasstatistics. The majority of these homeowners er rates." In the past two years, roughly 60 percent of ARMs originated carried an initial rate discount. have an outstanding mortgage obligation on their Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Mortgage Refinancing 607 1. Holdings of first mortgages and refinancing activity, nancing activity over time undoubtedly reflects by region, 1989 the greater swings in interest rates in the period Percentage distribution since 1977, which have presented more opportunities for homeowners to benefit from refinanc- All North North- Debt status of homeowners regions West Central east South ing, and also reflects the availability of more home equity, created in substantial part by rap- Mortgage status No mortgage 46 34 49 44 49 idly rising house prices during the late 1970s and First mortgage or land portions of the 1980s. contract 54 66 51 56 51 The effects of interest rate levels on the volume Total 100 100 100 100 100 of refinancing are illustrated in table 2, which Refinancing activity shows the percentage distribution of refinancing Percentage of mortgage by the year of the refinancing for the families debt holders who refinanced first surveyed in 1989. Relatively few homeowners mortgage or land contract 20 26 20 27 13 refinanced during the early 1980s, when mortgage rates were well into double-digit figures. How- MEMO: Percentage of mortgage ever, refinancing activity picked up in the middebt holders who held a home equity 1080s and was especially strong in 1986 and 1987, loan 15 14 12 26 11 when interest rates were substantially lower than NOTE. All statistics in this and the following tables are based on weighted in previous years. Aggregate data on refinancing observations. activity, which are available only for thrift insti- SOURCES. For refinancing, see Surveys of Consumer Attitudes, June, July, September 1989, Survey Research Center, University of Michigan. For home tutions and for loans guaranteed by the Veterans equity loans, see Survey of Consumer Attitudes, July-December 1988, Sur- Administration, show a similar pattern (chart 1). vey Research Center, University of Michigan. In both cases, refinancing accounted for a much primary residence (table 1). However, there is larger portion of loan originations in 1986 and 1987 considerable regional variation in the holding of than in other years. In 1986, for example, nearly such debt. For example, two-thirds of the homeowning families in the Western region of the 2. Year in which first mortgage was refinanced and country have mortgage debt, while only half of prevailing interest rates on conventional home mortgage loans those in the South and in the North Central region have such an obligation. There is also consider- Percentage of all a m b o le rt g v a a g ri e a t d io eb n t a h c o ro ld s e s r s r e w gi h o o n s h a in v e t h r e e f p in ro a p n o ce rt d i o t n h e o ir f Year in w oc h c ic u h rr e r d ef inancing refi i n n a n s c u e r d v e l y o ' ans In ( t p e e r r e c s e t n r t) a 2 t e home loans. Nationally, one-fifth of all mortgage Before 1980 8 debt holders have refinanced their first mortgage. 1980 5 12.25 1981 0 14.16 However, the proportion of mortgage debt hold- 1982 1 14.47 1983 2 12.20 ers who have refinanced ranges from a low of 13 1984 4 11.87 percent in the South to slightly more than 25 1985 10 11.12 1986 23 9.82 percent in the Northeast and Western regions. 1987 27 8.94 1988 12 8.81 The overall proportion of mortgage debt hold- 1989' 9 9.76 ers who have refinanced their primary mortgage Total 100 has increased markedly over the past decade or so. Results from the 1977 Survey of Consumer 1. Refinancing activity in years before 1986 may be understated somewhat in this table. Some homeowners may have refinanced a loan more than once; Credit indicate that as of 1977 only 8 percent of however, only the most current refinancing activity is reported. Multiple homeowners with first mortgage debt had refi- refinancing is most likely to have occurred with respect to loans originated in 1981 or 1982 and refinanced in the 1983-85 period, when mortgage rates nanced, well below the current figure of 20 dropped well below those in effect in the early 1980s, then subsequently percent.8 This change in the prevalence of refi- refinanced a second time in 1986 or 1987, when mortgage rates dropped sharply again. 2. Average contract rate on conventional mortgages for new homes. 3. Through September 1989. SOURCES. For the distribution of refinancings, see Surveys of Consumer 8. Thomas A. Durkin and Gregory E. Elliehausen, 1977 Attitudes, June, July, September 1989, Survey Research Center, University Consumer Credit Survey (Board of Governors of the Federal of Michigan. For prevailing interest rates, see Federal Reserve Bulletin, Reserve System, 1978) p. 92. table 1.53, p. A37, selected years. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

608 Federal Reserve Bulletin • August 1990 1. Refinancing as a proportion of total dollar 3. Sources of refinancing and home equity loans amount of mortgage loan originations Percentage distribution, by type of loan Percent Home Traditional Source Refinancings equity lines home equity of credit loans Commercial banks 34 54 33 Savings institutions' 40 31 27 Credit unions 3 11 8 Other creditors2 24 4 32 Total 100 100 100 1. Includes savings and loan associations and savings banks. 2. Incudes finance companies, brokerage firms, mortgage companies, previous owner, contractor or developer, employer, government agency, relative, friend, or other private party. SOURCES. For refinancings, see Surveys of Consumer Attitudes, June, July, September 1989, Survey Research Center, University of Michigan. For home equity loans, see Surveys of Consumer Attitudes, July-December 1988, Survey half of all mortgage loan originations (measured in Research Center, University of Michigan. dollars) at thrift institutions were refinancings. credit play a much smaller role in the market for As noted, roughly 20 percent of all mortgage home equity lines of credit.9 debt holders have refinanced their first mortgage loan. However, the proportion of total first Reasons for Refinancing mortgage debt outstanding accounted for by these refinanced loans is about 23 percent. The As discussed earlier, consumers who refinance share accounted for by refinancing is larger in may do so for two very different reasons, alterms of the amount of total debt because many though in some instances both reasons may be of the refinancings involved additional borrowmotivating factors. For some mortgage debt ing, and most of the refinanced mortgages were holders, the sole motive to refinance is to reduce more recent in origin, and therefore larger, than the payment burden of the existing debt, either the average of all loans outstanding. The eviby obtaining a lower interest rate or by extending dence suggests that refinanced loans include a the term of the loan.10 For other homeowners, heavy concentration of loans replacing ones the decision to refinance reflects primarily a originated in the early 1980s, while the total desire to extract accumulated home equity in stock of mortgage debt includes many loans order to finance the purchase of goods and sermade earlier when house prices were lower. vices, including additional real estate, or to repay other debts.11 Of course, some homeowners who refinance and liquidize equity may also be influ- Sources of Refinancing and Home Equity Loans 9. See Canner, Luckett, and Durkin, "Home Equity Lend- Homeowners have refinanced mortgage debts ing" table 1, p. 335. 10. In addition, some consumers may elect to refinance an through a wide range of financial institutions, adjustable-rate mortgage with a fixed-ratel oan, even without although commercial banks and savings institu- a lower rate, in order to eliminate the risk of future increases tions (savings and loan associations and savings in payments. 11. In a recent paper, Manchester and Poterba found a banks) have been the predominant sources of negative correlation between the occurrence of a refinancing funds (table 3). Other creditors, such as mort- and changes in net worth. This suggests that, on average, a gage and finance companies, also have a signif- portion of equity liquidized during refinancings is used for consumption rather than investment purposes (reinvesting icant market share, together accounting for liquidized equity would leave net worth unchanged), although about one-quarter of the refinancings. This di- it could reflect portfolio adjustments made in response to vision of the market is similar to that for tradi- declines in the value of other assets. See Joyce M. Manchester and James M. Poterba, "Second Mortgages and Housetional home equity loans. In contrast, finance hold Saving," Regional Science and Urban Economics, vol. companies and other nondepository sources of 19 (May 1989), pp. 325-46. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Mortgage Refinancing 609 enced by the opportunity to obtain more attrac- 4. Uses of liquidized equity, by type of loan tive rates than the ones on their existing mort- Proportion of debtors citing use1 gage loans.12 Consumer responses to the Board- Home equity sponsored surveys are consistent with these lines of credit TTrraaddiittiioonnaall RReeffiinnaanncciinngg hhoommee rreessuullttiinngg iinn broad motivational distinctions. Eighty percent UUssee Initial All other eeqquuiittyy lliiqquuiiddiizzeedd of those who refinanced but did not simultane- draw draws2 llooaann eeqquuiittyy ously liquidize equity mentioned more attractive Home improvement. 38 58 45 46 credit terms (mainly lower interest rates) as their Repayment of other debts 40 28 35 36 motive to refinance. On the other hand, fewer Education 11 20 1 3 Real estate 10 2 16 17 than half of those who liquidized equity cited Auto, truck 7 30 5 5 better terms as a motive to refinance. Thus, it Medical 3 16 0 2 Business 4 7 6 8 appears that the majority of those who liquidize Vacation 1 11 0 2 Other5 11 23 5 7 equity in the course of refinancing are motivated primarily by the opportunity to extract equity 1. Proportions add to more than 100 percent because multiple uses could from their homes rather than by the opportunity be cited for a single loan or drawdown and because a number of draws could be cited for one line of credit. to obtain better financial terms on their new 2. One-third of account users made no drawdown after the original one. versus old mortgage loan. 3. Includes purchases of furniture or appliances, tax payments, personal financial investments, and purchases of boats or other recreational vehicles. Comparisons with the results of Board-spon- SOURCES. For refinancings, see Surveys of Consumer Attitudes, June, July, sored consumer surveys in 1988 suggest that September 1989, Survey Research Center, University of Michigan. For home equity loans, see Surveys of Consumer Attitudes, July-December 1988, Survey those who refinance to mobilize equity use their Research Center, University of Michigan. "extra" borrowed funds in much the same mananother FRM, and 13 percent of the cases ner as those who have obtained home equity involved a switch from an ARM to an FRM. loans (table 4). For both groups the two most The large number of refinancers that opted for frequent uses of borrowed funds are to finance fixed-rate financing is not surprising insofar as home improvements and to repay other debts. borrowers tend to refinance when rates are The latter motivation has likely become particuperceived as low, and the inclination is to lock larly important in recent years because the Tax in low rates with fixed-rate loans. Still, 17 Reform Act of 1986 has largely eliminated the percent of those who refinanced switched from deductibility of interest paid on nonmortgage a fixed-rate loan to an adjustable one. These consumer credit. The purchase of real estate is "fixed-to-adjustable" refinancers seemed to dianother fairly common use of both home equity vide into two main groups. About half had loans and extra funds obtained during a refirelatively small balances remaining on their nancing. original mortgages, often with a very low interest rate, and they borrowed substantial Adjustable- and Fixed-Rate Refinancing amounts of new funds. In these cases, the primary objective was clearly to raise new Among the refinancing transactions studied in funds. Refinancing an existing mortgage was the survey, slightly more than 80 percent of the apparently the cheapest way to do it, notwithoriginal loans had fixed rates (table 5), roughly the same proportion of FRMs as among all 5. Percentage of refinanced loans with fixed and with mortgages surveyed. Sixty-five percent of all adjustable rates, 1989 refinancings involved payoff of one FRM with Type of original loan TTyyppee ooff rreeffiinnaanncceedd llooaann Adjustable Fixed _ „ . 12. In some cases homeowners need to refinance to repay rate rate Total the balance due on a short-term mortgage. Such loans, commonly referred to as balloon mortgages, typically incor- Adjustable rate 5.4 16.9 22.3 porate periodic payments based on a relatively long amorti- Fixed rate 13.0 64.7 77.7 zation period, but with a lump-sum principal payment due in Total 18.4 81.6 100.0 the near term, typically five years. Such loans are the standard method of financing home purchases in Canada but SOURCE. Surveys of Consumer Attitudes, June, July, September 1989, are relatively rare in the United States. Survey Research Center, University of Michigan. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

610 Federal Reserve Bulletin • August 1990 standing the sacrifice of the low rate on the old 7. Percentage of refinancers who liquidized equity, balance. The other half refinanced fairly large by region, 1989 balances, in most cases with cost reduction as a key objective. Many of these refinancers were All North North- Refinancing status' regions West Central east South apparently attracted by big initial rate discounts: Their refinancings were generally re- Mortgage holders with a refinanced loan cent (in 1986 or later), and the initial rate after No equity liquidized .... 43 31 51 29 68 Equity liquidized 57 69 49 71 32 the refinancing was substantially below the current rate, although interest rates generally have Total 100 100 100 100 100 not risen much since 1986. Interestingly, the 1. Equity is liquidized when homeowners refinance mortgage debt and current rate in most of these cases was still at borrow more than is necessary to repay the balance on the old mortgage plus least somewhat below the rate on the original closing costs on the new loan. SOURCES. Surveys of Consumer Attitudes, June, July, September 1989, Surfixed-rate loan. vey Research Center, University of Michigan. Regional Pattern of Equity Extraction Amount Borrowed When Liquidizing Equity As noted above, nationwide, nearly 60 percent of those who refinanced their first mortgage On average, consumers who liquidize equity liquidized some equity (table 7). The sample during refinancings borrow about 25 percent of size is too small to draw strong conclusions their accumulated equity. For some refinancabout regional patterns, but the limited eviers, the amount of extra funds borrowed can be dence suggests that borrowing additional funds quite large. For those who borrowed additional through refinancing may have been more comfunds during refinancings between 1986 and mon in the Western and Northeastern regions of September 1989, 15 percent obtained more than the country. If so, this regional pattern would $25,000 (table 6). The mean and median be similar to the one that holds for the use of amounts of extra funds borrowed were $25,145 i and $15,941 respectively. These amounts were home equity credit: The proportion of mortgage about the same as for homeowners who bor- debt holders with a home equity loan in the rowed through traditional home equity loans Northeast is more than twice that pertaining in during a similar time period. The mean and the South or in the North Central region. Use of median for the latter were $22,534 and $15,905 home equity loans is also higher in the West respectively. than in these latter two regions, although by a much smaller margin. These regional variations in refinancing activ- 6. Amount of home equity liquidized in a refinancing, ity appear mainly to reflect underlying differ- 1986-September 1989 ences in the levels of home equity in the different Percentage distribution, except as noted sections of the country. Among the regions, both the Western and Northeastern areas have had Amount of liquidized equity Percentage of total (current dollars)1 refinanced loans relatively rapid appreciation in house prices over the past several years, although prices in the 51 1-9,999 19 Northeast have softened recently. From the be- 10,000-24,999 15 25,000 or more 15 ginning of 1985 to the time of the survey in 1989, average prices on sales of existing homes rose 43 Total 110000 percent in the Northeast and 27 percent in the MEMO: Mean (dollars) 25,145 West, as compared with 14 percent in the South Median (dollars) 15,941 and 20 percent in the North Central region.13 1. Amount borrowed during refinancing that exceeds repayment of old mortgage plus closing costs. Includes only those homeowners who refinanced in the period 1986 through September 1989 and who borrowed more than 13. "Home Sales," Monthly Reports (1985-89), National necessary to repay old mortgage plus closing costs. SOURCE. Surveys of Consumer Attitudes, June, July, September 1989, Association of Realtors, Economics and Research Division, Survey Research Center, University of Michigan. Washington, D.C. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Mortgage Refinancing 611 SUMMARY AND CONCLUDING principally by income, the availability of home OBSERVATIONS equity credit likely affects the timing of a household's consumption more than its total over a The two major reasons that homeowners refi- lifetime. nance the mortgages on their homes are to re- Overall refinancing activity in coming years duce their debt-servicing costs by obtaining a will depend in an important way on movements lower interest rate or to raise additional funds by in interest rates, as it always has. Unless mortincreasing the principal owed. These reasons gage interest rates drop substantially or exhibit are by no means mutually exclusive, of course; wider swings in the next few years than they those who raise new funds may be motivated by have since the mid-1980s, the incentive to refian opportunity to lower the interest rate as well. nance as a cost-reducing measure will probably In the survey discussed here, about 60 percent be muted in the near to medium term. However, of the refinancers interviewed had borrowed refinancing to raise new funds, as well as boradditional funds in the process of refinancing. rowing through home equity loans, could be Homeowners contemplating new borrowings expected to grow proportionately with general have several alternatives to consider besides economic activity. Although more sluggish inrefinancing an existing mortgage. They can also creases in real estate values recently may damp tap the equity in their homes by taking out a consumer appetites for liquidizing equity and traditional closed-end second mortgage or by may influence creditors to lend more cauobtaining a revolving home equity line of credit. tiously, the amount of untapped equity in the Survey data indicate that these latter alterna- country remains substantial and growing. tives have been the more frequently chosen means of extracting equity in recent years. In one survey, 7 percent of all homeowners had a refinanced mortgage that involved the raising of APPENDIX: SURVEY OF CONSUMER additional funds; in another survey, about 11 ATTITUDES percent of homeowners had a home equity loan of one type or the other. Whatever the means of To obtain information on the prevalence of borrowing against home equity, the surveys residential mortgage refinancings by homeownindicate that the principal uses of the additional ers and the extent to which refinancings are funds are the same: namely, to finance home used to liquidize accumulated equity, the Fedimprovements and to repay other debts. Also, eral Reserve Board sponsored questions that the additional amounts borrowed through refi- were included in the Survey of Consumer Attinancing, roughly $25,000 on average, appear tudes for the months of June, July, and Septemsimilar in size to the amounts owed on tradi- ber 1989. The Survey Research Center at the tional home equity loans, and somewhat larger University of Michigan conducted the surveys. than the average balances owed on equity- Interviews were conducted by telephone, with secured lines of credit. telephone numbers chosen from a cluster sam- The ability to borrow against accumulated ple of residential numbers. The sample was home equity provides homeowners with a chosen to be broadly representative of the four means to reduce liquidity constraints on their main regions—Northeast, North Central, consumption patterns; that is, it enables them South, and West—in proportion to their poputo tailor expenditures to current needs in light lations (Alaska and Hawaii were not included). of expectations about their income and asset For each telephone number drawn, an adult holdings over the long term. The generally from the family was randomly selected as the lower cost of borrowing against home equity respondent. The survey defines the family as compared with other types of financing suggests any group of persons living together who are some positive effect of its availability on total related by marriage, blood, or adoption, and consumption. However, insofar as most re- any individual living alone or with persons to search has found consumption to be determined whom the individual is not related. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

612 Federal Reserve Bulletin • August 1990 Together the surveys sampled 1,514 families, A.l Approximate sampling errors of survey results, 1,050 of whom were homeowners. Among the by size of sample1 homeowners, roughly 54 percent had an outstanding mortgage or land contract. Overall, Size of sample SSuurrvveeyy rreessuulltt ((ppeerrcceenntt)) 114 homeowners reported that their outstanding 100 300 1,400 3,000 first mortgage was a refinanced loan. The sur- 50 10.5 6.2 3.2 2.5 vey data have been weighted to be repre- 30 or 70 9.6 5.7 2.9 2.3 20 or 80 8.4 4.9 2.6 2.0 sentative of the population, thereby correcting 10 or 90 6.3 3.7 1.9 1.5 for differences among families in the probability 5 or 95 4.6 2.7 1.4 1.1 of their being selected as survey respondents. 1. Ninety-five percent confidence level, 1.96 standard errors. All statistics in the tables are based on weighted observations. Estimates of population charac- differs from the general population. Table A.l teristics derived from samples are subject to indicates the sampling errors for proportions errors based on the degree to which the sample derived from samples of different sizes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

613 Industrial Production and Capacity Utilization Released for publication June 15 cluding motor vehicles and parts, industrial production increased 0.2 percent in May and 0.4 Industrial production rose 0.6 percent in May percent in April. During the past year, total after no change in April; industrial capacity uti- industrial production has risen 1.3 percent to lization increased 0.3 percentage point in May to 109.7 percent of its 1987 annual average. 83.6 percent. In market groups, the increase in production of A rebound from last month's sharp decline in motor vehicles and related parts in May boosted motor vehicle production accounted for much of significantly the indexes for durable consumer the May increase in industrial production. Ex- goods, business equipment, and durable goods Industrial production indexes Twelve -month percent change Twelve-month percent change Products Materials Durable manufacturing 1985 1986 1987 1988 1989 1990 1985 1986 1987 1988 1989 1990 Capacity and industrial production Ratio scale, 1987 production = 100 Ratio scale, 1987 production = 100 —Total industry — 140 —Manufacturing 140 _ Capacity ' ~~ _ 120 Capacity — 120 100 100 ^ ^^ ^"^^^^^roduction ^^^ — 80 y/ Production _ 80 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Percent of capacity Percent of capacity Total industry Manufacturing 90 90 Utilization —-v. 80 80 70 70 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1978 1980 1982 1984 1986 1988 1990 1978 1980 1982 1984 1986 1988 1990 All series are seasonally adjusted. Latest series: May. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

614 Federal Reserve Bulletin • August 1990 1987 = 100 Percentage change from preceding month Perchange, Industrial production 1990 1990 May 1989 to May Feb.r Mar.r Apr.r MayP Feb/ Mar.r Apr/ May" 1990 Total index 108.5 109.0 109.0 109.7 .9 .5 .0 .6 1.3 Previous estimates 108.5 109.1 108.7 .9 .5 -.4 Major market groups Products, total 109.7 110.8 110.6 111.6 1.1 1.0 -.1 .9 1.9 Consumer goods 107.0 107.6 107.4 108.0 .9 .6 -.2 .5 1.1 Business equipment 120.1 122.3 121.9 123.9 1.7 1.8 -.3 1.7 3.1 Construction supplies 108.2 106.9 106.6 106.5 .3 -1.3 -.3 -.1 .5 Materials 107.1 107.2 107.5 108.0 .8 .1 .3 .5 .6 Major industry groups Manufacturing 109.6 109.9 109.7 110.6 1.4 .2 -.2 .8 1.3 Durable 110.7 111.9 111.2 112.6 2.0 1.0 -.6 1.3 1.1 Nondurable 108.3 107.3 107.8 107.9 .7 -.9 .4 .2 1.5 Mining 101.0 100.8 102.5 102.5 -.7 -.2 1.7 -.0 1.4 Utilities 104.0 107.7 108.5 107.3 -2.6 3.6 .7 -1.1 1.0 Percent of capacity Capacity growth, CCaappaacciittyy uuttiilliizzaattiioonn 1989 1990 May 1989 Average, Low, HHiigghh,, to 1967-89 1982 1988-89 May 1990 May Feb. Mar. Apr. May Total industry 82.2 71.8 85.0 84.6 83.2 83.4 83.3 83.6 2.5 Manufacturing 81.5 70.0 85.1 84.5 83.0 82.9 82.6 83.0 3.0 Advanced processing 81.1 71.4 83.6 83.4 81.7 82.0 81.5 82.1 3.3 Primary processing 82.3 66.8 89.0 87.0 86.1 85.2 85.1 85.2 2.4 Mining 87.3 80.6 87.2 86.3 87.3 87.2 88.9 88.9 -1.7 Utilities 86.8 76.2 92.3 84.8 82.5 85.4 85.9 84.9 .9 '"Revised. ^Preliminary. NOTE. Indexes are seasonally adjusted. materials. Excluding autos and trucks, produc- advanced processing industries rose 0.6 percenttion of consumer goods was about unchanged in age point in May, principally as a result of the May and has been flat, on balance, since last fall. rebound in motor vehicle production, while the Business equipment, excluding motor vehicles, rate for primary processing industries was little rose 1 percent in May, reflecting widespread changed. Aside from motor vehicles and parts, gains; since February, output in this sector has sizable output gains in May also occurred in risen sharply owing mainly to advances in infor- nonferrous metals, fabricated metals products mation processing and industrial equipment. Pro- (reflecting, in part, increased auto body stampduction of construction supplies edged down in ings), instruments, miscellaneous manufactures, May, continuing its recent weakness. Among and rubber and plastic products. However, for materials, output of nondurables grew little in most of these industries, their recent improve- May and has risen only slightly since January; ments have only brought their utilization rates production of energy materials fell 0.8 percent as back to levels reached since late last year; the electricity generation and crude oil extraction operating rate for miscellaneous manufactures declined. has increased in every month since January to In industry groups, production in manufac- reach its highest rate since March 1972. At the turing increased 0.8 percent in May, bringing the same time, however, output for lumber and clay, factory operating rate up 0.4 percentage point to glass, and stone products—both construction- 83.0 percent. Output at mines was unchanged related industries—has weakened significantly while utilities production fell 1.1 percent. since the start of the year, and their operating Within manufacturing, capacity utilization for rates have dropped several percentage points. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

615 Statements to the Congress Statement by John P. LaWare, Member, Board of bank credit, especially for particular sectors of Governors of the Federal Reserve System, and regions. As I will discuss in a moment, there before the Committee on Small Business, U.S. are clearly pockets of slowing business activity House of Representatives, June 6, 1990. that are affecting both large and small firms. In response, banks have tightened terms and cut I am pleased to be here on behalf of the Board of back lending in those sectors. The effects are Governors to discuss credit availability to small most dramatic for commercial real estate and businesses. The Board recognizes the important merger-related types of transactions, and it role played by small firms and commercial enter- seems likely that activity in both of these areas is prises in providing jobs and fostering economic being affected to some extent. growth. We also recognize the responsibilities of Tighter terms also are evident in lending to commercial banks as major suppliers of credit to small- and medium-sized businesses. Still, there the business sector and, in particular, to many is little evidence of a widespread overreaction to small businesses that lack the diversified funding changing conditions—an overreaction that could sources or to larger ones. One of the Federal materially worsen the situation for these firms. Reserve's principal objectives in its capacity as a Growth of bank credit has slowed in recent bank supervisory agency is to promote a sound, months, but on balance it appears that the econcompetitive, and innovative banking system—a omy's credit needs are being met. system that can effectively provide credit and Let me review the evidence more closely. other important banking services within the con- Aggregate statistics show that the flow of credit text of a strong and stable economy. through banks to businesses and households In my remarks today, I would like first to slowed during the first five months of this year review what the relevant data suggest about the from the pace in 1989. Weak real estate markets, availability of credit in the economy. Then, I will especially in the construction and commercial address the supervisory role and objectives of areas, have contributed to this decline. The softthe Federal Reserve and briefly discuss concerns ness reflects a combination of factors related to that the supervisory or examination process, overbuilding, high prices in some areas, a peritself, may be contributing to reduced credit for ceived slowing of the economy, and specific certain sectors or regions of the country. At the market conditions. In some overbuilt areas— outset, I would point out that a slowdown in notably New England and the Southwest—the lending in certain markets seems entirely war- quality of mortgage credit has deteriorated markranted given current economic conditions and edly as reflected in high delinquency rates and the need for some lenders to strengthen under- rising loan charge-oflfs. writing standards in light of higher levels of loan In this environment, banks should be taking a losses. more cautious approach, and recent surveys indicate that they are. Most commonly, banks have strengthened their lending criteria, for example, GENERAL AVAILABILITY OF CREDIT by lowering their maximum loan to value ratios on construction loans, requiring more collateral, Historically, commercial banks have played a and imposing stricter covenants on loans. Many key role in financing economic growth, and, banks also have curtailed lending on incomeobviously, they still do. In this regard, there has producing properties; about 80 percent of the been much concern of late about the availability respondents to a recent Federal Reserve survey Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

616 Federal Reserve Bulletin • August 1990 of senior lending officers indicated that they had main well below the number registered during tightened lending for commercial office buildings. 1980-81. These results seem broadly consistent In contrast to their actions in commercial real with our own survey, in which most banks reestate lending, banks appear not to have pulled ported "somewhat" rather than "much" tighter back from the single family housing market. lending terms. While slowing some in response to higher inter- There are some notable exceptions to this est rates, the growth of residential mortgage picture. In New England, commercial bank loans credit seems to have been reasonably main- fell in the first quarter more than 1.0 percent, tained. Existing home sales this year are not after having adjusted for loan sales and chargemuch changed from last year's average, and offs. This decline followed an extended period of spreads between home mortgage rates and other rapid growth and lends credence to the many market rates, such as those on government anecdotal stories of credit restraint in that area. bonds, are currently narrow by historical stan- On balance, aggregate measures of credit dards, despite the contraction in residential lend- flows, while slowing, do not show evidence of a ing at thrift institutions. The development of the significant change in credit availability. We recmortgage-backed securities market has undoubt- ognize, however, that to the extent that terms edly eased much of the pressure that we might and conditions of lending have changed, they otherwise have felt in this market because of the would be expected to show through to aggregate problems of the thrift institutions by making it measures of credit flows with a lag. The Federal possible for other investors to readily fill the Reserve, of course, will continue to monitor the void. credit markets carefully. In other areas, the most notable cutbacks have been in lending either to finance mergers and acquisitions or to defend against them. This SUPER VISOR Y ROLE decline reflects greater caution on the part of lenders as well as a reassessment by corporations It is important to point out here that the tightenof the benefits of restructuring in view of the ing of credit standards that has occurred so far is problems in certain sectors and the recent diffi- appropriate from the point of view of macroecoculties of some highly leveraged borrowers. I nomic stability, as well as from a supervisory view that slowdown as appropriate in these cir- perspective, if the purpose is to correct for past cumstances. deficiencies or to accommodate a slower, more Other business lending—that is, lending unre- sustainable pace of economic growth. Neverthelated to real estate or mergers—also has slowed less, some people have argued that the activities since year-end. However, our survey suggests of bank examiners have contributed to a tightenthat this decline is related mostly to reduced ing of credit. The Federal Reserve would, of credit demands, presumably caused by a slower course, be concerned if the examination process economy. Those banks that indicated they were resulted in an unwarranted decline in lending to taking steps to tighten credit most often cited as creditworthy borrowers or for projects that are reasons their concerns about the general econ- economically or financially sound. To address omy or the prospects for particular industries, that point, I would now like to discuss briefly the followed by concerns with the quality of their Federal Reserve's supervisory activities and obloan portfolios. Regulatory pressures were also jectives. mentioned, but less frequently. The Federal Reserve has long had the view A recent survey of small businesses conducted that frequent on-site examinations based on an by the National Federation of Independent Bus- evaluation of asset quality are central to a strong inesses (NFIB) found less borrowing by small supervisory process. That approach is founded firms, but it supported the view that during the on the knowledge that credit losses have almost first quarter these firms had no unusual difficulty always been the principal cause of commercial obtaining the credit they sought. Complaints bank failures. Accordingly, a key function of the about credit stringency in the NFIB survey re- examiners is to evaluate credits and ensure that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 617 assets are reflected in the financial statements of operate prudently while meeting legitimate credit the banks at appropriate values. Without per- needs of their communities. forming that review, examiners cannot evaluate Regulatory reviews should not cause bankers the underlying adequacy of a bank's capital or to stop lending to creditworthy borrowers or to the real profitability and solvency of its business. refuse to work in a constructive fashion with Such a review is also necessary to identify prob- borrowers who are attempting to strengthen their lems in a timely fashion and to encourage appro- financial positions. Banks should frequently repriate corrective actions before the problems assess their lending and credit review procereach a more serious stage. dures, especially when economic conditions When evaluating credits, examiners consider change, to ensure that their lending decisions are the adequacy of a borrower's cash flow, the sound. However, they must also work with their value of any collateral, the existence of guaran- customers to resolve problems and to permit new tees, and a variety of other factors, importantly and emerging companies to grow. Doing so is in including changes in market conditions. They their own long-term interest and that of their review credit files containing appraisals and cus- communities. tomer financial statements and make judgments During recent months, the media have carried about the nature of any expected loss. Much numerous stories about problems that small to depends on the skill of the examiner, the infor- medium-sized businesses have had lately in getmation available to the bank, and the procedures ting or renewing their loans. Some companies used to evaluate market conditions. Loans that have reported that they were required to provide involve specific weaknesses or deficiencies that more collateral than they had to in the past or could jeopardize repayment or loans that involve were turned away altogether. Others have the distinct possibility of loss are subject to claimed that their banks dishonored prior comexaminer criticism. Such loans would generally mitments to lend, leaving construction projects include those that are based upon cash flow unfinished. projections or collateral values not supported by While such cases no doubt exist, as a former current market conditions. banker, I do not believe that bankers normally Examiners also evaluate loan administration deny loans to customers that they believe are and underwriting standards and internal risk con- creditworthy. It is certainly not good banking to trol systems of the banks. Our experience sug- do so. Most banks simply spend too much time gests that these standards and controls have and money building customer relationships to do declined at some institutions or at least have not that. Rather, as our survey evidence confirms, kept pace with the rising risks associated with banks have tightened credit standards in view of certain lending activities. One of the goals of softening real estate markets, a less favorable supervision is to encourage such institutions to economic outlook for certain sectors, increased take appropriate steps to strengthen their internal business risks, and, in some cases, rising levels procedures. In the context of commercial lend- of problem loans and loan losses. Undoubtedly, ing, such steps might include requiring higher concerns about potential regulatory actions, or levels of borrower net worth, obtaining addi- perceptions about the impact of examinations on tional collateral or guarantees, applying more other institutions, also have played a role in intense scrutiny to the creditworthiness of pro- fostering a more cautious attitude toward extendspective borrowers, and placing greater empha- ing credit in certain situations. Nevertheless, as I sis on the adequacy of the borrower's net income have suggested, I believe that strengthened lendand cash flow. ing standards are a reasonable and appropriate In carrying out their responsibilities, examin- response to the economic and business condiers do not attempt to allocate credit or tell tions facing many banking organizations. bankers not to lend. That is not an examiner's While the Federal Reserve has not changed its role, nor is it the role of the regulatory agencies. examination standards, examiners must apply Bankers, themselves, must determine what loans these standards, using their own experiences and to make in recognition of their responsibilities to skills, in the current environment. We must Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

618 Federal Reserve Bulletin • August 1990 recognize that an examiner's assessment of loans there, and elsewhere, have decided to meet their involves a measure of judgment and that this capital requirements, at least partly, by curtailing judgment may sometimes differ from that of bank new lending and selling assets. management. Nevertheless, bankers and exam- Although reduced lending may disproportioniners have the common objective of ensuring that ately affect small firms with no resort to money problem credits are identified and that underwrit- markets or businesses without a proved credit ing and lending standards are prudent. Banks are history, it is important that regulators continue to subject to losses; that goes with lending funds. maintain and enforce their standards, including They have the responsibility, though, to use their minimum capital requirements. The thrift situafunds wisely to serve their communities appro- tion demonstrates all too vividly the adverse priately, protect the safety of customer deposits, consequences that can flow from institutions and minimize undue risks to the deposit insur- assuming significant risks without an adequate ance system. commitment of owner or shareholder resources. Current problems in real estate markets may Only well-managed and well-capitalized institube traced, in part, to earlier trends in credit tions will be in a position to weather market cycles flows. Until recently, real estate in most parts of and meet the long-term credit needs of their the country has enjoyed strong growth and customers. Ultimately, we serve neither the strong support from commercial banks. In the banks nor the taxpayers if we fail to identify past four years, for example, commercial bank problems on a timely basis or permit undercapilending secured by nonfarm-nonresidential prop- talized banks to grow. erties (in large part commercial office buildings) increased 123 percent, and total real estate loans virtually doubled. By comparison, total bank CONCLUSION loans grew only 34 percent and bank assets less than that. In closing, I would stress that the Federal Re- This increased real estate lending, combined serve is mindful of concerns about the availabilwith the lending activities of the savings and loan ity of credit and has been watching for evidence associations, has led to excessive office capacity that would validate these concerns. Lending in many markets throughout the country. In terms have tightened in selected areas or for 1980, for example, downtown office vacancy certain types of borrowers, but, as yet, we conrates in major cities averaged less than 4 percent tinue to see little indication of a process that is nationwide. Currently, the average is more than out of proportion with changes in underlying 16 percent. In parts of the Northeast and South- business conditions. west, vacancy rates are much higher than that. In our examination and regulation of banks, we Many banks that previously financed only the are working to avoid actions that would prevent construction phase now find themselves provid- creditworthy borrowers from receiving loans. At ing medium-term financing after construction is the same time, we have a responsibility to foster completed because long-term investors cannot prudent lending policies and adequate capital be found. bases to promote stability in financial markets We should also recognize that several institu- and to protect the taxpayer, whose credit ultitions need to strengthen their capital positions. mately backs insured deposits. Only in that con- That includes some banks in New England, text can we be certain of the continued vitality of where examinations have revealed large losses our banking organizations, whose lending activand other asset problems. Faced with a generally ities are essential to the further advance of the weak market for issuing new securities, banks economy. • Additional statement follows. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 619 Statement by Wayne D. Angell, and Edward W. banking services, in which we operate in provid- Kelley, Jr., Members, Board of Governors of the ing those services, are highly competitive, Federal Reserve System, before the Subcommit- thereby providing a strong and direct incentive to tee on Domestic Monetary Policy of the Commit- maintain our efficiency. Given these internal and tee on Banking, Finance and Urban Affairs of external restraints on costs, the Federal Reserve the U.S. House of Representatives, June 14, System's expenses are projected to increase by 1990. an average annual rate of 5.1 percent from 1986 through 1990. This increase includes expenses It is a pleasure for Governor Kelley and me to for Supervision and Regulation initiatives, Expevisit with this subcommittee today. This is the dited Funds Availability (EFA) legislation refourth time that I have had the opportunity to quirements, contingency planning initiatives, and discuss and review the Federal Reserve System's several major initiatives for the U.S. Treasury expenses and budget with you. Today, as we Department. I would add that it is difficult to look at the Federal Reserve System's budget for judge the degree of restraint in an organization's 1990, Governor Kelley will discuss the Board's budget based solely on the growth rate of exbudget and major initiatives, and my comments penses. Our objective is to provide services at will focus on the Reserve Bank budgets as well as prices that promote efficiency and to perform major System initiatives. those responsibilities given to us by the Congress The Board has recently made available to the in an effective manner. public and to this subcommittee copies of our For 1990, the Federal Reserve System has publication entitled Annual Report: Budget Re- budgeted operating expenses of $1.5 billion, an view, 1989-90 presenting detailed information increase of 5.0 percent over 1989 actual exabout spending plans for 1990. The attached penses. Before getting to the substance of our tables have been updated for 1989 actual experi- 1990 budget, I would remind the subcommittee of ence, and, therefore, some variations exist from two aspects of Federal Reserve System operadata in that document.1 tions that affect our budget in unusual ways. In January 1990 the Board decided to reduce First, 41 percent of System expenses arise from the approved budgets of the Federal Reserve services provided to depository institutions for System $4.4 million to achieve a degree of re- which, by law, we charge fees adequate to cover straint in the Federal Reserve comparable to the all costs. Since additional costs of these services restraint imposed on the federal government by are more than recovered by additional revenues, Gramm-Rudman-Hollings. Because the budgets any increases in costs result in increased earnwere approved before making the Gramm-Rud- ings returned to the U.S. Treasury Department. man-Hollings cuts, the Board and the Reserve Second, many fiscal agency operations are pro- Banks are responsible for meeting this overall vided to the Treasury Department and other target but were not asked to detail the reductions. agencies on a reimbursable basis. Altogether, 59 While the Federal Reserve has been concerned percent of our total expenses are either recovhistorically about controlling costs, the Mone- ered through pricing or are reimbursable. On a tary Control Act of 1980 has provided additional net basis the cost to the public of operating the motivation to control costs. As a matter of law, Federal Reserve System is $621 million of the services provided to depository institutions must total $1.5 billion budget. meet a clear market test. Specifically, all expenses (including overhead and the imputed cost of capital and taxes) involved in providing HISTORICAL OVERVIEW "priced" services are covered by charges to users. The markets for these correspondent It may be helpful to put the budget for 1990 in perspective by sketching the most recent tenyear history of System expenses. Between 1979 1. The attachments to this statement are available on and 1989, Federal Reserve System expenses inrequest from Publications Services, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. creased at an average annual rate of 6.8 percent; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

620 Federal Reserve Bulletin • August 1990 System employment increased at an average and gave the Federal Reserve the authority to annual rate of 0.2 percent; and volume increased make improvements in the payments system to 32 percent over the ten-year period. Unit cost did speed the collection and return of checks. Thus, increase in the early eighties as Federal Reserve the Board's Regulation CC mandated expedi- Bank volumes adjusted to pricing after imple- tious return of unpaid checks to reduce banks' mentation of the Monetary Control Act. How- risks in providing the prompt availability reever, after the transition to pricing was com- quired by the act. To facilitate banks' complipleted in 1983, the composite unit cost for all ance, the Reserve Banks implemented new refunctions has actually declined 0.2 percent at an turned check services for which they had to add annual rate, even while improvements have been about 600 employees throughout 1988 and 1989 made in the quality of services. and spend more than $60 million. For priced services, a decline in unit cost has It is difficult to measure productivity improvebeen particularly noticeable in the electronic ments in the supervision and regulation area, but payments areas. Volume growth has averaged these activities have required significant inmore than 6 percent per year for funds transfers creases in resources over the past ten years. and more than 25 percent for automated clear- Supervision and regulation has added 786 staff inghouse (ACH) transactions. In commercial members and increased expenditures $127.2 milcheck processing, on the other hand, when there lion since 1979. These resources have been emhas been a significant effort to improve the qual- ployed to strengthen the ability of the Reserve ity of service through increased availability and Banks to identify and address problems in the improved deposit deadlines, there has been an banking organizations under their jurisdiction. increase in unit cost of 2.5 percent per year since Obviously, the problems that the Reserve Banks 1983. In the most recent year-over-year compar- have had to deal with in the past several years ison (1989 over 1988) unit cost of check pro- have increased greatly, as reflected in the record cessing rose 6.6 percent due primarily to imple- number of bank failures and problem banks, as menting provisions of the Expedited Funds well as in the increasingly complex issues that Availability legislation (EFA). they have had to face in reviewing and pro- For nonpriced cash operations—involving the cessing regulatory applications and in developing distribution of currency and coin—the decline in supervisory policies to deal with new and changunit cost has also been noticeable; since 1983 the ing banking risks. average decline has been 3.0 percent per year. In presenting our spending plans for 1990, I Currency paying and receiving volume has in- would like to mention that both the Reserve creased an average rate of 6.7 percent annually Bank budgets and the Board's budget must be since 1979. In fiscal agency operations, also approved by the Board of Governors. Reserve nonpriced, there has been an increase in unit cost Bank budgets are first approved by the Banks' of 2.1 percent per year since 1983, reflecting new Boards of Directors and then reviewed by the operations. Also in the nonpriced area, the Fed- Committee on Federal Reserve Activities before eral Reserve System has managed several initia- submission to the Board of Governors. Governor tives for the Treasury to improve long-term effi- Kelley oversees the Board's budget, and I will ciency in Treasury securities and savings bonds. turn to him for that discussion. Through 1989 the Federal Reserve has added 175 staff members and spent $42 million on these Treasury initiatives. INTRODUCTION As for the impact of EFA on our cost structure, in 1989 we have seen an overall unit cost I am pleased to appear before this subcommittee increase of 2.3 percent, compared with that dur- again this year. In the past we have discussed our ing 1988. This increase was primarily due to the budget process and the comprehensive planning implementation of the Expedited Funds Avail- process that the Board has in place to ensure that ability legislation. This legislation required banks we identify and accomplish key objectives in an to provide prompt availability for check deposits effective and efficient manner. The Annual Re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 621 port: Budget Review, 1989-90 describes these essary to meet Board objectives. The approved processes, discusses the Board's record of budget contained sufficient funding to meet the sound budget management, and provides trend major Board objectives in each program area and data. Therefore, I will confine my testimony to included the following: (1) funding and positions the 1990 budget unless the committee has ques- to support major increases in the work load tied tions. to the supervision and regulation area discussed The 1990 budget posed difficult challenges. earlier; (2) resources for the continued develop- Problems in the thrift industry, which culminated ment of the National Information Center; (3) in passage of the Financial Institutions Reform, continued investments in productivity enhance- Recovery, and Enforcement Act (FIRREA), ments, including office automation and an elecplaced substantial new pressures on our supervi- tronic Records Management initiative; and (4) sion and regulation program. As a result, the funds to maintain a safe and effective working banking supervision program had a large increase environment. in terms of funding. Staff increases in supervi- In terms of people employed, ten new posision, however, were offset by decreases else- tions were created to support the new and addiwhere throughout the Board. Full implementa- tional work requirements associated with the tion of our new compensation system also supervision and regulation function. This incontributed to the rate of increase in the budget crease was offset by a reduction of eleven posibeing above normal levels. Finally, there was a tions elsewhere in the budget. major increase in the level of resources devoted to our Inspector General Program. BUDGET HIGHLIGHTS THE BOARD OPERATING BUDGET Supervision and Regulation The 1990 Board operating budget is composed of This budget supports necessary enhancements two components: regular operations and the Of- in our ability to respond effectively to the fice of the Inspector General (OIG). The regular continuing regulatory and supervisory issues operations budget of $102.9 million represented caused by problems in the financial industry an increase of 7.9 percent. The OIG budget of and to meet new obligations posed by the $1.7 million represented an increase of $0.8 mil- FIRREA legislation aimed at correcting those lion, or 114 percent, for operations and $0.2 problems. The budget addressed these requiremillion for facilities. ments in several ways. The initial regular operations budget submis- The enactment of the Financial Institutions sions totaled $105,550,300. During the budget Reform, Recovery, and Enforcement Act and the reviews, reductions of $2,380,400 lowered the underlying problems that required that legislation approved budget to $103,169,900. Voluntary im- caused additional expense of $550,000. The added plementation of Gramm-Rudman-Hollings re- expense was for ten new positions, offset elseductions paralleling those of other agencies fur- where in the budget, and accelerated hiring to ther reduced the budget to $102,865,200, an meet the expanded work load in the areas of increase of 7.9 percent over 1989 expenses. This policy, financial analysis, and enforcement. We increase is larger than in recent years. Growing are also working with other agencies, through the supervisory responsibilities, including the Federal Financial Institutions Examination Counchanges brought about by the FIRREA and the cil, to implement new reporting requirements of implementation of our new compensation pro- the Home Mortgage Disclosure Act and, among gram, contributed to the increase in the 1990 other things, to expand the coverage of the act to budget level. include mortgage lenders not affiliated with lend- Division budget submissions minimized ex- ing institutions. The number of records mainpenses, reallocated resources to higher priority tained will grow tenfold from 600,000 to 6,000,000 work, and included new initiatives only as nec- as a result of this expanded coverage. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

622 Federal Reserve Bulletin • August 1990 Besides the resources added in supervision Compensation and regulation, Board resources were reallocated in the other operational areas to meet In earlier testimony and letters to this committee, requirements of the FIRREA legislation. Our Chairmen Volcker and Greenspan indicated conresearch divisions anticipated substantial work cerns over the adequacy of our compensation on issues relating to deposit insurance, moni- system to attract and retain the type of staff toring the savings and loan industry, and sup- required for the Board to fulfill its mission. Last port to the Chairman in his responsibilities as a year I testified that our compensation system was member of the Oversight Board. This incremen- being revised and that there would be some tal staff effort is estimated at six work years for significant costs as we tried to reduce the gap that 1990. To repeat, the work is being accom- had developed between staff salaries and those in plished by reallocating resources; no new posi- the market. In 1990, the first full year of the tions were added. Board's new compenstion program, the budget Our legal staff is encountering a major work provided approximately $3.5 million for the full, load increase in litigation and enforcement. Two one-time cost of transition to the new salary of three new attorney positions added in 1989 schedule. We had anticipated phasing the insupport FIRREA-related work. Again, no new crease to lessen its impact on any one budget positions were added in the 1990 budget. year; however, events in the marketplace, in- Other Board program areas are also feeling cluding substantial increases at the other finanthe effects of the FIRREA legislation. For in- cial regulatory agencies, caused us to accelerate stance, senior staff members in several areas our schedule. The budget also provided $4.2 are providing substantial start-up assistance to million to fund the increase in salary rates caused the real estate appraisal subcommittee of the by increases in salaries in the marketplace during FFIEC. the previous year. The National Information Center (NIC) is a major Systemwide standard automation project Inspector General providing important support to the supervision and regulation operational area. It was estab- The Office of the Inspector General (OIG) was lished in 1988 to provide the Board and Reserve created by the Board in July 1987. Its reporting Banks with a single-source, high-quality data- relationships, duties, and responsibilities were base from which information about financial formalized by the Inspector General Act Amendinstitutions will be drawn to monitor safety and ments of 1988. soundness, process applications, and maintain A review by the Inspector General of how his accuracy of published data series. The growth office is carrying out those duties and responsibilof interstate banking, the acquisitions of finan- ities led to the development of a five-year strategic cial institutions tied to the resolution of bank plan. The plan proposes a phase-in of broader and savings and loan failures, and the growing audit and investigation coverage of the Board's complexity of the interrelationships between mission areas as well as attention to the legal financial institutions make the establishment of requirement to review new and existing laws and a central database critical to the System's su- regulations for their impact on the economy and pervision and regulation function. efficiency of Board programs and operations. A significant commitment of existing re- To implement the findings of the review, a sources continues in a number of the Board's significant increase was approved for the buddivisions in support for this project. The 1990 get of the Office of the Inspector General. The budget requirement for data processing re- approved 1990 OIG budget is $1.7 million, an sources (at the Board only) is $1.6 million. This increment of $0.8 million for the mission activamount is slightly higher than the level of data ities of the office and $0.2 million for office processing resources committed in 1989. The space. The mission increment provides $0.4 NIC project is now scheduled to be imple- million for six new positions. It also covers a mented in mid-1991. substantial increase in travel for the IG staff and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 623 shifts the burden of travel costs for staff borrowed penses. Besides maintaining the quality of ecofor reviews of Board operations to the Board from nomic forecasts and analysis, the budget reallothe Reserve Banks. The increment also provides cates resources to support FIRREA, continue for a higher level of contract support. development of the National Information Center, and process the data from the Survey of Con- Contingency Processing Center (CPC) sumer Finances conducted in 1989. In 1989 the Board transferred the management Supervision and Regulation of the CPC, the System's backup data processing facility, to the Federal Reserve Bank of This function is expected to cost $26.8 million Richmond. This transfer was done to recognize in 1990, an increase of 14.1 percent. This ina substantial increase in the Reserve Banks' crease is the largest by operational area and utilization of the CPC for operational require- reflects the seriousness of the issues facing the ments, with corresponding requirements for financial regulators. The main causes of the equipment upgrades, while the Board's require- increase are new positions and the NIC. ments for a backup capability and relocation site remained stable. The change in require- Services to Financial Institutions ments substantially reduced the Board's share and the Public of the overall cost of the CPC. Positions added when the Board established the CPC in 1985 This area is the smallest operational one of the were deleted from the Board's budget concurrent Board. It is composed entirely of the System's with the transfer of management to Richmond. payments functions. The 1990 budget of $2.7 Although this action was not implemented as part million is an increase of approximately of the 1990 budget, since it occurred in the middle $250,000, or 10.2 percent over 1989 expenses. of 1989, it resulted in a reduction in Board ex- An important factor in the increase is the estabpenses in both 1989 and 1990. The total change lishment of a payments risk program in midwas a reduction of approximately $1.7 million in 1989. The program coordinates the analysis of the Board's expenses. risks associated with national and international payment and settlement systems. BUDGET BY OPERATIONAL AREA System Policy Direction and Oversight The Board's activities fall into four broadly This function will cost $19.7 million, an indefined operational areas: (1) monetary and crease of 3.0 percent. Resources in lower prieconomic policy, (2) supervision and regulation ority areas of this category were reallocated to of financial institutions, (3) services to financial higher priority work in the other operational institutions and the public, and (4) System areas, thus this rate of increase was the lowest policy direction and oversight. I would like to one at the Board. take a minute to discuss the budget for each of these operational areas. Since each area was affected by general factors, such as the compensation program and the higher costs for health BUDGET BY OBJECT CLASS insurance, I will focus only on the unique factors affecting each. Excluding the budget of the Office of the Inspector General, the 1990 budget was $7.6 million, or 7.9 percent more than 1989 expenses. The in- Monetary and Economic Policy crease for salaries, $7.8 million or 12.8 percent, was the major factor in the increase. The net This function is expected to cost $53.6 million in effect of all object classes other than salaries was 1990, an increase of 6.9 percent from 1989 ex- a decline of $0.2 million. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

624 Federal Reserve Bulletin • August 1990 Personnel Costs crease. Without the reduced expense associated with the change in utilization and cost sharing for The increase in salaries was closely related to the the Contingency Processing Center, the increase new compensation program. As mentioned ear- in 1990 would have been larger. lier, $3.5 million was for the accelerated transi- The 1,555 positions approved in the 1990 regtion into the new system while an additional $4.2 ular operations budget is forty-eight fewer than million was to make up for the changes that the number of positions at the end of 1980. occurred in the market during 1989. The remain- Implementation of the provisions of the Moneing increase in salaries of $0.1 million was caused tary Control Act and other significant legislation by technical factors such as promotions. had increased the number of positions to 1,653 in Insurance and retirement costs rose $0.6 mil- 1984. Automation and other efforts to control lion and $0.2 million respectively. The former expenses and improve productivity have assisted rose because of increases in health insurance us in reducing to the current level, which did not rates, while the latter rose because of the higher increase over 1989 in spite of FIRREA and other salary levels and increases in the tax rate and pressures associated with the supervision and taxable wage base for social security. regulation area. Goods and Services CAPITAL BUDGET The overall cost of goods and services declined $1.0 million in 1990. The main reasons were the The approved capital budget was $4.0 million, change in the cost sharing formula for the CPC which is comparable to the expenditure of $3.9 and the completion of the Survey of Consumer million in 1989. The largest category of expen- Finances. diture is $1.6 million for important workstation, network, office automation, and records management investments. Facilities investments of POSITIONS $1.3 million provide funds for a new roof for the Martin Building, a replacement fire intrusion The 1990 budget authorizes 1,555 positions, a and detection system, and miscellaneous enreduction of one position from 1989. ergy conservation investments. Central auto- Ten new positions were added in the budget mation initiatives costing $0.7 million provide a while eleven were abolished. The ten new posi- system to connect distributed workstations to tions support the function of supervision and the mainframe, additional disk space to support regulation, eight of which are related to work the NIC and growth on the research departmenstemming from FIRREA, while two positions tal computers, and mainframe software. The will support implementation of the National In- remainder of the capital budget provides $0.4 formation Center. The eleven positions that have million for miscellaneous small capital expendibeen abolished include eight positions at the tures. CPC. Three additional positions will be eliminated during the 1990 budget year. CONCLUSION TRENDS The 1990 budget was 7.9 percent higher than 1989 expenses and this increase is the largest incre- The regular operations budget increase in 1990 of ment since 1982; it is also larger than the average 7.9 percent is larger than the compound annual annual rate of increase of 5.7 percent over the rate of increase of 5.7 percent from 1980 to 1990. last ten years. The large increase stems from the The pressures in the supervision and regulation convergence of two unrelated actions: full implearea and unique 1990 costs of the new compen- mentation of our compensation program and sation program account for the size of the in- passage of FIRREA. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 625 This budget added positions in critical areas Food and Nutrition Service in processing food but eliminated them elsewhere. Excluding the coupons. These changes, first tested at the Mem- Office of the Inspector General, the number of phis and Dallas offices, will add $0.6 million and positions is 126 below the peak reached in 1984 increase staff members by twenty-two in 1990. when the Board was still reacting to the changes Expenses for both savings bond and food coupon brought about the Monetary Control Act, Inter- initiatives are fully reimbursable. national Banking Act, and Financial Institutions Other initiatives include improvements to fa- Deregulation and Interest Rate Control Acts, and cilities, many of which are aging and no longer to a deteriorating situation at that time in the have efficient support systems or the space to banking industry. allow an efficient flow of work. Each year steady I would be happy to address any questions you progress is made toward achieving the type of may have after Governor Angell concludes our space needed for modern central bank operajoint testimony. tions. Reserve Bank operations in today's environment require more reliable and secure computer RESERVE BANK BUDGETS systems, more use of office automation, extended communication networks, and the most The Reserve Bank expense increase—both efficient high-speed sorters and counters for priced and nonpriced—was budgeted at 5.8 per- checks and currency. The initiatives classified cent, which fell well below the 1990 budget under "automation," "check operations," "curobjective of 6.1 percent. Again, the Banks' ap- rency processing," and "contingency back-up," proved 1990 budget was further reduced $4.1 all result from this requirement. million in January 1990, with the restraint im- Also, the Reserve Banks require added reposed on the federal government by Gramm- sources for supervision and regulation due to Rudman-Hollings. With this cut in place and current conditions in the banking industry and using actual 1989 expenses instead of estimated the greater complexity of examinations gener- 1989 expenses as the base, the anticipated ex- ally. pense increase for 1990 is now only 4.8 percent. Besides these major initiatives, it may be help- Seven major initiatives account for almost half of ful to look at 1990 budgeted expenses on the the budgeted increase in Reserve Bank expenses. basis of our four service lines. A particularly noteworthy initiative in 1990 is Expenses for services to financial institutions the enhancement of fiscal agency services for the and the public, which include both priced and U.S. Treasury and the U.S. Department of Ag- nonpriced services, are budgeted at $947.0 milriculture's Food and Nutrition Service. The ef- lion and account for two-thirds of total expenses. fort of the U.S. Treasury involves an expenditure Expenses are increasing $30.7 million, or 3.3 of $4.1 million for the nationwide expansion of a percent, over 1989. Staffing is budgeted at 9,335, Regional Delivery System, which consolidates down 87, or 0.9 percent, primarily because of issuance of over-the-counter savings bonds. Sys- reductions of fifty-two in commercial check protemwide implementation of the project, which cessing, and thirty in services rendered others. began as a pilot program at the Federal Reserve The reduction in services rendered others is Bank of Cleveland, will continue through 1993. A associated with an anticipated reduction in staff staff increase of 116 is expected in 1990, and a assistance provided to other agencies to address total staff increase of 350 is projected by the time problems in the savings and loan industry. Exthe project is fully implemented. Although this penses of priced services are budgeted at $622.1 initiative results in additional short-term ex- million, an increase of 2.3 percent. Expenses of penses for the Federal Reserve Banks, the costs nonpriced services are budgeted to increase 5.4 are more than offset by savings at government percent. agencies and commercial banks. Commercial check processing is by far the The second 1990 fiscal agency initiative is largest service ($477.8 million), comprising half implementation of changes requested by the the budgeted expenses of this operational area Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

626 Federal Reserve Bulletin • August 1990 and employing 5,814 persons. The anticipated ing, and automation. Most Districts project an increase in expenses is $7.6 million, or 1.6 per- increase in the number and complexity of examcent over 1989. Staffing levels for 1990 include a inations in 1990. Also, the number of supervised reduction of fifty-two persons resulting from the institutions is increasing in some Districts. Exstabilization of work loads in the commercial aminations deferred during 1989 because of the check, check adjustment, and check return item reallocation of resources to assist other agencies areas. Commercial check volume is budgeted to with the savings and loan crisis will be reschedincrease 1.5 percent; the volume of return items uled for 1990. Another factor contributing to the is expected to be stable during 1990. expense increase is the program on daylight Expenses for the currency service are ex- overdraft pricing. pected to increase $9.9 million, or 7.9 percent. Expenses for services to the U.S. Treasury Unit cost is expected to increase 2.6 percent. The and other government agencies are budgeted at net staffing levels will decrease by thirteen, pri- $158.6 million, an increase of $ 13.1 million, or 9.0 marily because of a staff reduction of ten in percent, from 1989, and represent approximately Boston resulting from a change in operating 11 percent of the Reserve Banks' total operating controls and a staff reduction of thirteen in New costs. Staffing levels are budgeted to increase York related to a shift from medium-speed to 119, or 6.7 percent. The major initiatives, as high-speed currency processing. Volume will discussed earlier, driving the increases in both continue to increase in the currency areas. Other expenses and staff levels are the nationwide initiatives affecting this service are automation expansion of the Regional Delivery System, efforts in various Districts and a project to de- which consolidates issuance of over-the-counter velop a second generation of high-speed cur- savings bonds at one office within each District, rency processing equipment. and the nationwide expansion of changes in the Expenses for the automated clearinghouse requirements for processing food coupons. (ACH) service are budgeted to increase $3.8 By the end of 1993, the Regional Delivery million, or 5.1 percent, with a minimal change in System is scheduled to replace the existing netstaffing. There is a shift in expense growth from work of issuing agents. Under the system, appligovernment ACH to commercial ACH that cor- cations for savings bonds are accepted at various responds to the faster growth of the latter. Total financial institutions and forwarded to the Fed- ACH volume is projected to increase 14 percent eral Reserve, where the inscription data for the in 1990. The major initiative affecting this service bond are entered into a computer database, is Fedline II, which is the standard intelligent transmittals are balanced, accounting entries terminal software for access to Federal Reserve made, and the bonds are printed and mailed to services. the customers. During 1990 the program will Expenses associated with public programs are expand to cover all or parts of eight Districts. budgeted to increase $3.7 million, or 8.7 percent. The changes in the processing of food coupons The staff level will increase by seventeen. The requested by the Food and Nutrition Service of increases result from a greater involvement in the U.S. Department of Agriculture require regional and public forums, provision of outreach Federal Reserve Banks to verify that the value of programs, and additional efforts in the automa- redemption certificates and the value of food tion of mailing and subscription lists. coupons match in each deposit. Financial insti- Expenses for supervision and regulation, bud- tutions are also required to encode the redempgeted at $214.5 million for 1990, are expected to tion certificates to allow their processing on increase $19.4 million, or 9.9 percent, over 1989. check equipment and the transmittal of the data This service line now constitutes 15.1 percent of to the Minneapolis data center of the Food and total System expenses, compared with 13.6 per- Nutrition Service via FRCS-80, the Federal Recent in 1985. The budgeted staff level is 2,258, an serve's data communications system. These proincrease of 61, or 2.8 percent, over 1989. cedures were successfully tested in the Dallas and Memphis territories for the six months end- The increase in expense reflects the additional ing March 1989. staff and increases in compensation, travel, train- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 627 Expenses in 1990 for the conduct of monetary penses are expected to increase 9.2 percent and and economic policy at the Federal Reserve to account for 12.2 percent of total costs in 1990. Banks total $98.9 million and account for 7.0 Most of the increase is for depreciation, resulting percent of their budgets. The increase of $5.3 from acquisitions to expand data processing and million, or 5.7 percent, from 1989 expenses data communications capability to handle inreflects staff increases, salary administration creased work loads, and the full-year effect of actions, and additional equipment and data pro- equipment purchased in 1989. cessing costs associated with automation initi- Shipping costs (primarily for checks) account atives. Employment at 786 is an increase of for 6.0 percent of the 1990 budget and are prothree over 1989. The 1989 employment is below jected to increase 2.8 percent in 1990. The inthe approved budget for 1989 because of the crease is primarily the result of rate increases by Banks' inability to fill all positions authorized. contract carriers and carriers supporting the In- The number of authorized positions is the same terdistrict Transportation System. Partially offfor both 1989 and 1990. setting the 1990 increase is the reduction in A brief review of Reserve Bank expenses on postage expense due to a lower projected volume an object of expense basis also might be useful to in the fiscal area. the subcommittee. Building expenses, which account for 9.2 per- Operating expenses for personnel comprise cent of total expenses, are expected to increase officer and employee salaries, other compensa- 8.8 percent in 1990. The newly renovated Chition to personnel, and retirement and other ben- cago office, an Atlanta addition and renovation, efits. Total personnel costs account for 63.8 and the full-year effects of the new Charlotte percent of Reserve Bank expenses and are ex- Branch contribute to higher costs for property pected to increase 6.3 percent in 1990. depreciation and utilities. These projects, along Salaries and other personnel expenses account with a Dallas building project, are expected to for nearly 52 percent of 1990 budgeted expenses increase real estate taxes $5.5 million, or 23.6 and are expected to be $36.5 million, or 5.2 percent. The decline of $1.2 million in other percent, above 1989 expenses. Salaries are bud- building expenses is the result of the completion geted to increase $41.3 million, or 6.1 percent, of renovations at the New York Bank. and will be partially offset by a decline in other Recoveries are expected to increase $2.9 milpersonnel expenses of $4.8 million, or 32.2 per- lion, or 8.4 percent, in 1990, primarily because of cent. The decrease in other personnel expenses new leases with outside organizations in the New results from a declining use of personnel agen- York and Chicago offices. cies. Merit pay increases of $34.7 million, or 5.0 By their nature, capital outlays vary greatly from percent, are the primary reasons for salary ex- year to year. Outlays for buildings and for data pense growth. Also contributing to additional processing and communications equipment consalary expenses are promotions, reclassifica- tinue to dominate Reserve Bank capital budgets. tions, structure adjustments, and staffing level increases. These increases are partially offset by short-term position vacancies and reduced over- SPECIAL BUDGET EMPHASIS time. Expenses for retirement and other benefits, I would like to mention briefly several initiawhich account for 11.8 percent of Reserve Bank tives intended to provide long-range benefits to budgets, are anticipated to increase $17.0 mil- the Federal Reserve System, the banking induslion, or 11.3 percent, in 1990. This increase is try, and the public at large. Because spending the result of continued escalation in hospital on such projects is relatively high and shortand medical costs and a rise in the social term, the Federal Reserve System accounts for security tax. it separately from its operating expenses but Nonpersonnel expenses account for 36.2 per- includes it in its total budget. The budget for cent of Reserve Bank expenses and are projected "Special Projects" in 1990 is $6.7 million, or to increase 3.0 percent in 1990. Equipment ex- $0.8 million less than expenses in 1989. About Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

628 Federal Reserve Bulletin • August 1990 35 percent of the $6.7 million will be recovered in the payments system. The study also indithrough prices. cated that users of electronic payments will A major inefficiency of the present check sys- need more flexibility in the range of services tem is that settlement depends on presentment of offered as well as cost effectiveness. physical checks. The process could be made The Federal Reserve is evaluating the use of more efficient by a transition to collection based nonstop, fault-tolerant equipment, known as on transmission of an electronic image. We the electronic payments processor (EPP), for expect that, in the future, checks will undergo a processing electronic payments, including transition from paper delivery to electronic funds and securities transfers and ACH transdelivery. In mid-1985 the System began testing actions. This approach is of the type frequently of digital image technologies to produce high used by commercial banks for transaction proquality images of check documents in a sus- cessing. The Federal Reserve should complete tained high-speed check processing environ- its evaluation of this approach by September ment. The primary applications chosen for the 1990 at a 1990 cost of $1.9 million. testing were truncation of government checks The Federal Reserve knows that a rigorous and the processing of return items. Both these budget process is only one part of financial check processes provide rigorous tests for im- management. We are equally concerned about age technology in that they require the storage other areas of financial integrity. The structure of large amounts of data and require a high level of the Federal Reserve System provides for of quality in the retrieved image. Total ex- appropriate segregation of responsibilities; a penses in 1990 associated with this project are reasonable accounting control over assets, liaestimated to be $1.6 million. bilities, revenues, and expenses; and an organi- In 1990, the project will complete the testing of zational structure that establishes responsibilia prototype system integrated with existing high- ties for audit and oversight of the objectives and speed check processors at two Federal Reserve goals of the Federal Reserve System. Bank sites. Given the positive results to date, the It is the policy of the Federal Reserve System project will continue to focus on government that the Board and each Reserve Bank maintain checks and return items. A request for a proposal a system of internal controls that is designed to will be issued in late 1990 for a pilot test involving ensure that objectives of each are achieved and government check processing. that they each operate in compliance with all In 1988, the Federal Reserve initiated a spe- prescribed rules, regulations, and policies. The cial project for the development of an optical management of each is responsible for maincounterfeit-detection system (OCDS). During taining adequate internal financial, custody, and 1989 and continuing in 1990 the project will be data security controls over all aspects of their expanded to include other means of authentica- respective operations. tion. The 1990 special project budget includes To ensure that these controls are operating in $3.2 million in support of these developmental an effective manner at the Federal Reserve efforts. Banks, the following procedures have been set in In 1990, the Federal Reserve will request place: proposals from vendors to share the costs of (1) An internal audit function at each Reserve continued development and testing a prototype Bank is responsible for assessing practices and OCDS. This effort and several others, both procedures for soundness and conformity with long-term and short-term, are designed to pro- regulations in accordance with professional auduce conterfeit detection devices to be placed diting standards. on the Federal Reserve's high-speed currency (2) The Board of Governors' examiners conprocessing equipment. duct financial, operational, and procedural re- A study by the Federal Reserve has indicated views at each of the Banks. that the System will need to extend the number (3) A CPA firm reviews the procedures and of hours and improve the reliability of elec- practices of the Board's examination program. tronic payments services to control risk better (4) The Board specialists review the effective- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 629 ness of each Reserve Bank's internal audit func- subcommittee on the Federal Reserve System budtion. get. The existing budget processes are working We believe that these measures, although not well in controlling costs, while at the same time fail-safe, offer excellent protection against finan- encouraging quality improvements. We welcome cial impropriety. your comments and would be pleased to address We thank you for this opportunity to address the any questions you may have on our budget. • Statement by Alan Greenspan, Chairman, Board Vigilant, consistent supervision, strong capital of Governors of the Federal Reserve System, positions, as well as actions by lenders to avoid before the Committee on Banking, Housing, and excessive exposure when new risks appear, are Urban Affairs, U.S. Senate, June 21, 1990. all essential to retaining public trust in our depository system. Mr. Chairman and members of the Banking Com- The efforts of our examiners reflect this dicmittee, I welcome this opportunity to discuss the tum. When examiners visit a bank, they deterissue of credit availability—whether it has mine whether it has adequate systems in place to changed and, if so, why—and its effects on the measure and control its risk exposure. In addihealth of the economy. We at the Federal Re- tion, they ascertain whether borrowers have sufserve have for some time been monitoring vari- ficient collateral and cash flow, given local marous indicators of credit supply and have been ket conditions, to service their loans. Our assessing implications for the economic expan- standards in these areas have not been tightened, sion. To date, we have found that lenders have though they may, because of deteriorating conditightened their standards in certain sectors and tions in certain markets, be catching more doubtlocales but that there has not, so far at least, been ful loans than before. This process may cause a broad-based squeeze on credit, and lenders difficult, short-run adjustments in those markets, are generally not retreating from lending oppor- but these adjustments must be viewed as reactunities. Nonetheless, significant problems can- tions to changing circumstances and a correction not be ruled out in the period ahead, and we will of earlier overenthusiasm on the part of lenders. continue to devote close attention to credit Ultimately this process should prove to be a conditions. positive force for the economy by preserving the The topic of credit availability is intertwined health of our commercial banking system. with the issue of the asset quality of depository Of course, anecdotal reports suggest that some institutions. Let me preface my remarks today by bankers and their regulators have become overly emphasizing the necessity of a stable, efficient cautious and have thereby exacerbated the very financial system, including sound depository in- problems that they have been trying to avoid. It stitutions, for satisfactory economic perfor- is difficult to get hard evidence to assess the mance. Healthy commercial banks and thrift extent of this problem, but I suspect that, since institutions promote growth by providing a ready many loan extensions of recent years are now source of loans, especially to households and nonperforming, it is inconceivable that bankers smaller businesses that lack direct access to and their regulators would not currently have credit markets. By exercising sound credit judg- turned cautious, either consciously or subconments, deposit intermediaries direct funds to sciously. To believe otherwise presumes a productive uses, and by offering secure, liquid change in human nature. Although some indeposits to the public, they encourage thrift. creased caution unquestionably is prudent in Doubts about the soundness of depositories current circumstances, the issue is whether, owcan disturb this process. When depositors and ing to an overreaction on the part of some lenders investors become reluctant to entrust their funds or regulators, creditworthy borrowers are being to these institutions, access to depository credit denied funds. Potentially, such unwarranted caucan be curtailed or become more expensive. tion can put downward pressures on asset val- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

630 Federal Reserve Bulletin • August 1990 ues, stunt investment or spending more gener- The cause of this weakness almost surely rests ally, and curtail employment. in the excesses of earlier years. Developers and To date, however, whatever overreaction may their equity partners built housing and commerhave occurred does not appear to have been cial structures at a more rapid pace than could be widespread, and access to credit has not been supported by economic fundamentals. The overreduced to an extent that has had a significant building was supported in part by the ready damping influence on the American economy availability of credit from thrift institutions and overall. On balance, the economy appears to be banks that, in hindsight, partly reflected lax growing at a subdued pace so far this year, in line lending standards and, unfortunately, insufficient with the recent slower growth of our labor force, attention by supervisors. Speculation, fed by thus keeping the unemployment rate around 5V4 visions of ever-rising prices, also led to new percent. In several sectors conditions have been construction that simply outpaced demand in difficult to read, owing to distortions such as last many markets. When properties were comwinter's unusual weather. But, available indica- pleted, there were not enough buyers willing to tors suggest that overall activity remains on a pay prices that covered construction costs or slow uptrend. tenants willing to pay enough rent to cover Indeed, moderate growth is inevitable at this mortgage payments and operating costs. The stage of the expansion given that we no longer most obvious signs of this overshoot are the high have considerable slack in resources to be taken vacancy rates for office buildings, rental apartup. Late last year, indications that a slowdown ments, and condominiums. For example, the was in train led to concerns that the weakness average office vacancy rate for downtown areas would cumulate to a recession. Now those con- increased from near 5 percent at the start of the cerns seem to have less basis. One reason is that 1980s to more than 16 percent by the end of the producers and distributors apparently trimmed decade, and has reached 25 percent to 30 percent their inventories rather promptly this winter, in some parts of New England and the Southmost notably in the auto industry, but elsewhere west. Residential markets also have been afas well. With this period of adjustment complete, fected, though less severely, with prices leveling factory output in recent months has picked up a off and even falling in some markets, in sales of bit, and, at this stage, inventories appear to new homes at their lowest rate since 1982. present no impediment to further growth in pro- Paralleling the softness in activity, lending by duction. depository institutions for real estate purposes Some sectors of the economy, however, are has slowed this year. In large measure, this stronger than others, and pertinent to the topic of slowing reflects the absolute contraction of the these hearings, particular weakness is apparent assets of thrift institutions, which, historically, in some real estate markets. In the residential specialized in this market. And, while banks' real market, unusually favorable weather early this estate lending has slowed only slightly, they year temporarily boosted housing starts, but have been unwilling to fill all of the void left by more recent monthly numbers appear to reveal thrift institutions. Both banks and thrift institusome underlying softness in this market. The tions appear to be reacting to the worsened most substantial adjustments have been under prospects for real estate projects and, particuway for some time in the commercial real estate larly for thrift institutions, a more stringent and construction industry. Construction of office regulatory environment. buildings and other commercial structures is In the case of savings and loan associations, down from last year's pace. There are, of course, provisions of the Financial Institutions Reform, regional differences to the real estate slowdown. Recovery, and Enforcement Act of 1989 Nonetheless, in the aggregate, the statistics (FIRREA) legislation limited the amount a thrift clearly indicate considerable softness. And for- institution could lend to one borrower. This limiward-looking measures, such as contract awards tation reportedly had a marked effect on construcand building permits, suggest that this weakness tion financing in many markets, and some develis likely to continue a while. opers have been forced to find new sources of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 631 credit. Commercial banks also have pulled back securities, such as pension funds, insurance comfrom commercial real estate lending. Data for all panies, and mutual funds, have stepped up to commercial banks show a small contraction in acquire assets shed by thrift institutions and to credit for construction and land development in fund new lending. Commercial banks have been the first quarter of 1990, and a reduced rate of avid purchasers as well, even while they have expansion in mortgages on existing commercial slowed the pace of their direct residential mortproperties. In the several surveys of senior bank gage lending. lending officers we have conducted this year, a Outside the real estate sector, one area where large majority consistently have indicated that banks unquestionably have made credit less they were very reluctant to extend credit in these available is the financing of corporate mergers areas. and restructuring. Banking regulators have spe- A falloff in credit demand and deteriorating cifically instructed banks to review their proceconditions in the real estate sector appear to lie dures in this area, and a majority of bank lending behind much of banks' reduced lending. In one officers surveyed in January reported that they survey taken last January, almost all banks that had tightened their standards for loans to highly had pulled back from construction lending did so leveraged borrowers. This sector is one in which because of a less favorable economic outlook. In the decisions of banks can be corroborated by addition, half of them cited problems with such financial markets more generally. As you well credits in their own portfolios as a factor. These know, the market for junk bonds slumped badly concerns are substantiated in an increased delin- earlier this year, and new issuance has slowed to quency rate for real estate loans, which, in the a trickle. first quarter, reached its highest level since 1984. A pullback from lending to highly leveraged Only a minority of bankers have reported to us borrowers has contributed to recent sluggish that increased regulatory pressure or tighter cap- growth in commercial lending, though it is not ital requirements caused them to curb their sup- the only factor. In last month's survey, senior ply of credit. lending officers reported weakness in commercial In contrast to the situation with commercial lending to all sizes of borrowers. In the case of real estate, credit market conditions appear more larger borrowers, reduced demands for credit resilient in the market for residential property. were cited by survey respondents as the primary This market was the main one of the savings and reasons for the slower pace of lending, while loan industry, and residential mortgage credit has more stringent credit standards and tighter loan accounted for the bulk of their asset reductions. terms were quoted more frequently than reduced Nevertheless, there are no indications that per- demand for smaller borrowers. Recent surveys manent financing for the purchase of an existing of small businesses do reveal some near-term home has become more difficult to obtain. Inter- reduction in credit availability. However, small est rates charged on home loans have not risen businesses consistently report difficulties in obon balance relative to other long-term rates, and taining loans, and credit conditions have not lenders generally have not tightened downpay- become appreciably tighter relative to a year ago. ment requirements. A recent trade association Greater caution with regard to commercial survey of mortgage bankers concluded that am- lending probably is warranted in the current ple funds were available for home buying, and, economic environment. The decade of the 1980s indeed, the volume of existing home sales, which was a period of rapid leveraging of many corpois sensitive to credit availability, so far this year rations, and the resulting debt burdens probably has held close to the pace of last year. made some deterioration of credit quality all but The continued flow of credit in residential inevitable. Indeed, banks are reporting increased mortgage markets probably owes to the many delinquency rates on commercial lending. alternatives to depository credit. The securitiza- Nonetheless, with the exception, perhaps, of tion of home mortgages has become a routine the troublesome situation in the New England financial transaction, with about $1 trillion in region, credit availability more broadly appears mortgage debt held in that form. Buyers of these not to be significantly impaired. Banks report- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

632 Federal Reserve Bulletin • August 1990 edly remain ready to make loans to larger and slowed to relatively low growth rates this year, more creditworthy commercial borrowers, and more so than we had anticipated last February. they consistently have reported increases in their The massive redirection of credit flows that has willingness to extend credit to consumers. More- accompanied the government's program to close over, it is worth noting that while banks are insolvent savings and loan institutions appears to principal suppliers of credit to certain classes of have depressed growth of M2 as well as M3, borrowers, they supply less than a quarter of somewhat degrading the value of both aggregates total net borrowing in the broader economy. as indicators. On net, commercial banks are tak- Other credit conduits generally show little or no ing up relatively little of the lending forgone by the stress. For example, the volume of issuance in shrinking thrift industry; the resultant cutback in most securities markets, smoothing through the total lending by depository institutions has volatility, generally has been well maintained. In slashed their needs for funds, showing through addition, spreads of interest rates on private over directly to M3. Even at the M2 level, the reduced government issues in these markets have re- need for funds by both commercial banks and mained quite narrow. If reluctance by banks and thrift institutions appears great enough to have thrift institutions to make loans were inhibiting reduced the aggressiveness with which these inthe overall flow of credit in the economy, it stitutions have pursued deposits. Terms offered should be visible in conditions in credit markets, on deposits have become less generous, and deincluding higher yield spreads. positors have been turning to alternative financial The pace of aggregate credit flows upholds this assets. At least some of the recent weakness of impression. Credit growth has eased, but debt still M2 has come from this channel. However, there appears to be growing about as fast as gross national is still some unexplained weakness in M2 and M3 product, a relationship typical of the three dec- that will require continuing scrutiny. ades before the 1980s. In part, at least, the economy may be seeing the cessation of the unusually heavy borrowing pace of the 1980s, certainly a SUMMARY salutary development to the extent that it promises lower leverage and healthier balance sheets. All things considered, continued modest eco- Of course, the link between current debt nomic growth remains the most likely outcome, growth and economic activity is a loose one. and looking at the economy as a whole, enough Indeed, it is plausible to expect that impaired credit appears to be available to fuel this growth. credit availability would have lagged effects on Certain sectors or individual borrowers appear to debt and spending, as first commitments are cut be having trouble obtaining credit, but these back, then actual lending, and finally consump- specific difficulties are largely consistent with tion and investment. Naturally we are alert to lenders' and regulators' reactions to shifting this possibility and are complementing our atten- risks. We are attentive to the possibility that this tion to debt and credit flows with close scrutiny more cautious stance in the granting of credit of a full panoply of related indicators. could cumulate to threaten the economic expan- The monetary aggregates are among such indi- sion and are closely monitoring the evolving cators, containing, as they often do, portents of complex interrelationships between credit availfuture spending trends. Both M2 and M3 have ability and economic expansion. • Statement by William Taylor, Staff Director, I welcome the opportunity to appear before this Division of Banking Supervision and Regulation, committee to discuss the condition of Texas Board of Governors of the Federal Reserve Sys- banks and their ability to meet the existing and tem, in Houston, Texas, before the Committee potential credit demands of the Texas economy. on Banking, Finance and Urban Affairs, U.S. In my remarks today, I will review briefly the House of Representatives, June 22, 1990. financial problems experienced by Texas banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 633 during the 1980s, discuss the current financial heading back up to the $15.00 to $20.00 range— condition of Texas banks, address the question and economic activity slowed. of whether these banks have the ability to play a As a result of these developments, real estate significant role in financing economic recovery in markets in the major cities of the state grew the state, and finally, offer some general obser- progressively weaker. Prices for both residential vations regarding the asset disposition policies and commercial properties declined, and unsold and practices of the Resolution Trust Corpora- inventories increased sharply. The oversupply in tion (RTC). the commercial sector was considerable. Downtown office vacancy rates in Houston and Dallas, which had been on the rise since late 1982, BACKGROUND reached peak levels in mid-1987 of approximately 25 percent. The downtown Austin area was even At the beginning of the 1980s, Texas banking more adversely affected, with a peak office vainstitutions were considered by most observers cancy rate of almost 40 percent in spring 1988. As to be among the strongest in the nation. In a consequence of the generally deteriorated congeneral, they reported good earnings and capi- dition in the real estate sector, Texas banks have tal positions, and little in the way of unusual or experienced heavy losses on real estate in each severe asset quality problems. Their prospects year since 1985. looked bright. The world in 1979 had just expe- Economic factors were not the only cause of rienced the second "oil shock," sending the trouble experienced by Texas banks and thrift price of oil, which had been hovering around institutions. Another very strong contributing $10.00 a barrel, to as high as $40.00. This element was the fact that loans were often preddevelopment, combined with widely held ex- icated on overly optimistic cash flow projections, pectations that prices would continue to rise, rather than on what economic and market condiinduced a sharp acceleration in the demand for tions would support at the time these loans were exploration and production of domestic oil. made. The assumption was that oil and then real Texas banks financed a major portion of the estate would increase in value at rates that were growth in energy and energy-related activities not necessarily tied to the current returns availthat initially added to the general prosperity in able in the market place. Given such a "sure the state's economy. thing," down payments or project equity became As we all know, this situation soon reversed a thing of the past. Thus, lax underwriting stanitself. In 1982, oil markets became glutted, and dards and lending decisions contributed to the the price of oil, instead of soaring to new heights, energy loan problems and the overbuilding in real dropped to less than $30.00 a barrel. This col- estate markets. Moreover, the use of brokered lapse triggered a major retrenchment in energy deposits enabled institutions in less than satisfacand energy-related business and translated into tory condition to raise funds to finance highly high loss rates on the more speculative bank risky ventures, primarily real estate loans and energy loans. investments. In response to these losses and to declining A review of the causes of problems of financial demands for credit to finance energy-related ac- institutions in the state of Texas would not be tivities, Texas banking institutions pulled back complete without reference to criminal misconfrom energy lending and began to channel loan- duct. While it is sometimes difficult to determine able funds to other sectors that still looked the extent to which criminal misconduct has been relatively attractive, primarily the then-booming the cause of financial institution failures, there is real estate sector. Real estate lending at Texas little doubt that in several cases criminal misconbanks grew sharply, climbing from $13.5 billion duct became a major contributing factor. outstanding at year-end 1981 to $46.5 billion by The collapse of the energy and real estate the end of 1986. This situation, too, came to an sectors created serious dislocations in the Texas end in the mid-1980s as oil prices dropped banking system. The severity of those dislocasharply again—falling to as low as $10.00 before tions is evident in the number of Texas banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

634 Federal Reserve Bulletin • August 1990 that failed in the past decade. In 1980, not a the decade is striking in view of the fact that in single bank in Texas failed. By contrast, in 1989, 1986 the state's thrift industry was a little less there were 133 failures—the largest number of than half the size of its banking industry in terms failures for the state during the 1980s. From 1980 of aggregate assets. Finally, it should be noted to 1989, 349 Texas banks, with assets of $63 that the losses experienced by thrift institutions billion, failed. This represents more than one- in Texas have caused the aggregate net worth of third of the 1,008 U.S. banks that failed in the these institutions, including those in conservatordecade. More striking still, failed Texas banks ship, to fall to a deficit of $9.4 billion at year-end accounted for roughly 70 percent of the total 1989. assets of all banks that failed in the 1980s. From 1985 to the end of the decade, aggregate assets of Texas banks contracted $35 billion, or 17 per- CURRENT CONDITION OF TEXAS BANKS cent. Bank lending during this period declined even more—$43 billion, or 35 percent. The difficult conditions experienced by Texas The structure of banking in Texas was also banks in the last decade continue to have a affected by other developments. Besides outright significant effect on their performance as they failures, the problems of some large institutions enter the 1990s. Of the 89 U.S. banks that failed in Texas were addressed through open bank through June 15th of this year, 58 were located in assistance by the Federal Deposit Insurance Cor- Texas. As of year-end 1989, nonperforming asset poration (FDIC) assistance. Indeed, of the top ratios of Texas banks remain higher than the ten Texas banking organizations in 1985, nine national average, with real estate loans and foreeither subsequently failed, received open bank closed real estate representing more than half of assistance, or were acquired and recapitalized by total nonperforming assets. out-of-state institutions.1 These nine institutions But while failure rates at Texas banks remain in 1985 represented 59 percent of total Texas at high levels and asset quality problems have not banking assets. been fully resolved, there are many indications Although the decade of the 1980s took a severe that the outlook for recovery is favorable. In toll on the banks operating in Texas, the toll on general, the loan quality of Texas banks appears the state's thrift industry was worse. Over the to be improving. Their nonperforming asset radecade, the number of commercial banks in tios have declined materially since 1987, drop- Texas declined from approximately 1,500 to ap- ping from 11.2 percent to 6.9 percent by March proximately 1,300, or 14 percent. This decline 31, 1990. occurred even though 682 new banks were char- Although total net income of all Texas banks tered in the state during this period. Failures, of was a negative $500 million in 1989, this loss is an course, contributed to the drop, but mergers also improvement over the 1987 and 1988 losses of contributed as banks took advantage of their new $2.7 billion and $2.1 billion respectively. It is also ability to branch statewide. The number of thrift encouraging to note that, for the first quarter of institutions in the state declined during the 1980s 1990, the state's banks reported aggregate profits from 318 to 197, or nearly 40 percent. Moreover, of $166 million. from the beginning of 1986 through year-end Another factor indicative of improving trends 1989, thrift institutions in Texas reported aggre- at Texas banks is that the capital positions of the gate losses of roughly $17 billion, compared with largest Texas banks have been strengthened. losses of $5 billion for Texas banks over this Aggregate equity capital of Texas banks, as a period. The fact that thrift losses were more than percentage of their total assets, increased to 5.8 triple those of banks during the last four years of percent in the first quarter of 1990, after having declined every year since 1985. The FDIC has provided in excess of $6 billion of financial 1. The nine include Interfirst, which was merged into First assistance to close or assist Texas commercial Republic in 1987 without federal assistance; the latter was banking organizations over the past several subsequently acquired by an out-of-state organization, with years. Besides this assistance, private sources federal assistance. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 635 and out-of-state financial institutions have in- trial loans, 35 percent. Comparable figures of the jected in excess of $2 billion of equity into Texas nation's banks as a whole are 19 percent for banks. nonresidential real estate, 17 percent for residen- The liquidity of Texas banks has improved in tial mortgages, and 30 percent for commercial recent years. For example, liquid assets of banks and industrial loans. in the state at the end of the first quarter stood at $76.4 billion, or 45 percent of total banking assets. While this figure exceeds the nationwide ABILITY AND WILLINGNESS OF TEXAS average of 32 percent, it should be viewed in BANKS TO FINANCE ECONOMIC ACTIVITY relation to the very difficult problems experienced by Texas banks and the economy in the The recent restructuring of bank asset portfolios 1980s. On the liability side, Texas banks have to those categories generally considered inherdecreased their reliance on volatile sources of ently less risky, and the overall contraction of funds since 1987. For example, the more stable credit extended by Texas banks during the pecore deposits have risen from $105 billion, or 56 riod, are no doubt a result of a decline in both the percent of assets, to $115 billion, or 68 percent of supply of and demand for credit. A drop-off of assets—a level in line with the nationwide credit demand is a natural consequence of a average.2 By these measures of liquidity, Texas slowing regional economy and widespread weakbanks now compare favorably, or at least are ness in real estate markets. But, a tightening of consistent, with banks in the rest of the nation. supply resulting from strengthened credit stan- As the proportion of liquid assets to total dards, the need to address existing asset quality assets of Texas banks increased, the proportion problems, and the need to restore capital posiof loans to total assets decreased. Over the tions would also appear to be important factors. second half of the decade, total loans as a per- That Texas banks have strengthened credit centage of total assets declined to 47 percent standards should come as no surprise. Experifrom 60 percent. As a result of problem loan ence over the past decade has underscored the write-offs and reduced lending activity, total importance of sound credit analysis. This reloans declined during this period $43 billion, or newed sense of prudence and conservatism, 35 percent. Commercial and industrial lending when viewed in the context of the aggressive fell 42 percent, or $20 billion. Construction and lending practices of the recent past, is a positive land development lending by Texas banks de- development—one that can build a strong base creased 76 percent, or $13 billion from 1985 to for renewed expansion with the turnaround of 1989. Commercial real estate loans fell 8 percent, the Texas economy. or $1.1 billion. During the period, aggregate Against this background, questions have home mortgage lending by banks remained vir- arisen about both the ability and willingness of tually unchanged and actually increased relative Texas banks to perform their appropriate role in to total lending by banks in the state. financing economic activity in the state. To be Although the difficult conditions experienced sure, there have been instances in which inadeby Texas banks in the 1980s have resulted in a quately capitalized banks have been forced to lower level of loans to total assets than the curtail lending to meet regulatory capital requirenational average, the composition of Texas bank ments. Growth by inadequately capitalized instiloan portfolios is not out of line with the national tutions should be curtailed, and indeed must be picture. As of March 31, 1990, nonresidential real curtailed, if we are to maintain the soundness of estate loans represented 21 percent of Texas our banking system. Moreover, the asset quality banks' loan portfolios, residential mortgages rep- problems of some institutions have put them in a resented 14 percent, and commercial and indus- position in which they are no longer able to satisfy fully the credit needs of their borrowers. However, it would be a mistake to conclude that 2. Core deposits are defined as total deposits less certifi- the needs of creditworthy borrowers in Texas cates of deposit greater than or equal to $100,000, minus cannot be met by our banking system. There are brokered deposits. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

636 Federal Reserve Bulletin • August 1990 adequately capitalized banks and lending institu- position of managing and financing large real tions in Texas and elsewhere that have the ca- estate holdings and speculating on future real pacity to make sound loans for economically estate prices. This position can also have an viable business purposes. adverse effect on the competitive vitality neces- I would stress that the Federal Reserve is sary for markets to function effectively. Obvimindful of, and sensitive to, concerns about the ously, this is not a desirable situation. availability of credit and has been watching for Consistent with the RTC's charge to dispose of evidence that would validate these concerns. We assets on an expeditious basis, securitization and are aware of anecdotal evidence indicating that, bulk sales will be essential if the RTC is to in some instances, firms may have experienced a maximize recovery on its assets. Indeed, the decline of credit availability to carry out their RTC is pursuing these avenues, including ways business activities. We have endeavored to be to use the auction process creatively to dispose cognizant of these concerns in our supervision of large volumes of assets. The RTC is also and regulation of banks, and we are working to working to ensure that its assets are fully invenavoid regulatory actions that would prevent cred- toried and that information on these assets is itworthy borrowers from receiving loans. In- readily available to all prospective buyers. The deed, we feel it is in the banks' interest to make aim, of course, is to move assets into private sound loans to creditworthy customers and to hands, reduce the role of the government as a work in a constructive and prudent fashion with competitor with the private sector, and let martroubled borrowers who are attempting to kets function efficiently. strengthen their financial positions. At the same Obviously, adequate financing is important to time, we have a responsibility to foster sound a successful asset disposition program. The RTC lending policies to promote stability in financial recognizes this situation and recently announced markets and to protect the taxpayer, whose that it will provide up to $1 billion in revolving credit ultimately backs insured deposits. Only in short-term credit to finance its asset sales. Other that context can we be certain of the continued steps have also been taken. For example, the vitality of our banking organizations, whose RTC has reduced the downpayment necessary, lending activities are essential to the strength of under certain circumstances, to facilitate the our economy. Lending terms have tightened in sales of assets. Private sector financing is also selected areas or for certain types of borrowers; important. Certainly, recent efforts, of which I but, as yet, we continue to see little indication of am aware, by the Houston Clearing House to a process that is out of proportion with changes structure financing for the RTC's affordable in the underlying banking conditions or the re- housing inventory in the Houston area speak well gional economy. for the local banks' desire to participate in the asset disposition process while responding to the needs of their communities. EFFECTS OF RTC'S ASSET DISPOSITION The disposition of real estate assets by the PROGRAM RTC will no doubt complicate the management of bank lending activities, particularly as it re- Clearly, there is a trade-off with regard to the lates to real estate loans. Prices in various seg- RTC's disposition of troubled assets. One view is ments of the real estate market will be affected, that if properties are forced onto the market, and managers of lending institutions will have to general real estate prices and market conditions monitor carefully the potential impact on their could be adversely affected. On the other hand, if institutions' loan portfolios. The result may well assets are held off the market, the lingering be that the full resolution of problems related to overhang, by fostering uncertainty about the real estate may take longer than it otherwise effects of future asset liquidations and real estate would. Moreover, in their lending activities, prices, could also tend to depress prices. More- bank lenders will have to place greater emphasis over, not disposing of assets in a timely manner on a property's cash generating capacity under puts the government in the potentially costly prevailing market conditions and less on the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 637 assumption or expectation of continually rising riod, we must continue to explore all prudent and real estate prices. While creating difficulties in financially sound methods for advancing this the short run, this adjustment process is neces- process. To be sure, we must be ever mindful of sary if the economy and financial institutions are the potential impact of the disposition of assets to be in a position to respond adequately to on the local economy and its financial institufuture growth opportunities. tions. Most important, however, we must be In sum, the disposition of failed thrift assets guided by the need to minimize the government's will be a difficult and challenging process that will losses—losses that, as we all know, are ultitake several years to complete. During this pe- mately borne by the U.S. taxpayer. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

638 Announcements MEETING OF The amendments are designed to protect fed- CONSUMER ADVISORY COUNCIL eral financial and public policy interests in real estate transactions requiring the services of an The Federal Reserve Board announced on June appraiser. The amendments identify which trans- 15, 1990, that its Consumer Advisory Council actions require an appraiser, set forth minimum would hold its next meeting on June 28. The standards for performing appraisals, and distin- Council's function is to advise the Board on the guish those appraisals requiring the services of a exercise of the Board's responsibilities under the state-certified appraiser from those requiring the Consumer Credit Protection Act and on other services of a state-licensed appraiser. matters on which the Board seeks its advice. The effective dates are August 9, 1990, for the appraisal standards and July 1, 1991, for the appraiser certification and licensing require- AMENDMENT TO IMPLEMENT CHANGES TO ments. THE COMMUNITY REINVESTMENT ACT The Federal Reserve Board, along with other PROPOSED ACTIONS financial institutions regulatory agencies, has issued a temporary rule to amend regulations to The Federal Reserve Board issued for public implement changes in the Community Reinvest- comment on June 22, 1990, a proposal to revise ment Act (CRA) contained in Title XII of the Section 225.4(d) of the Board's Regulation Y Financial Institutions Reform, Recovery, and (12 C.F.R. 225.4(d)) to provide a limited exemp- Enforcement Act of 1989 (FIRREA). tion from the tie-in prohibitions in Section 106 of The amendments are intended to establish and the Bank Holding Company Act Amendments of set forth requirements for the institutions super- 1970 (12 U.S.C. 1971-78). Comment is requested vised by the agencies with regard to the public by July 30, 1990. availability of the public section of the Commu- The Federal Reserve Board requested on July nity Reinvestment Act Performance Evaluations 2, 1990, public comment on a proposed amendand CRA examination ratings of the institutions ment to Regulation Y (Banking Holding Compaas prepared by the agencies. nies and Change in Bank Control) to reduce the filing requirements under the Change in Bank Control Act. Comment is requested by August 8, REGULATIONS H AND Y: AMENDMENTS 1990. The Federal Reserve Board issued for public The Federal Reserve Board announced on June comment on June 19, 1990, a proposal to revise 28, 1990, approval of amendments to Regulation the Board's interpretive rule regarding invest- H (Membership of State Banking Institutions in ment advisory activities of bank holding compathe Federal Reserve System) and Regulation Y nies to clarify that a bank holding company and (Bank Holding Companies and Change in Bank its nonbank subsidiaries may act as an agent for Control) to implement provisions in the Financial customers in the brokerage of shares of an in- Institutions Reform, Recovery, and Enforcement vestment company advised by the holding com- Act of 1989 (FIRREA) regarding real estate ap- pany or any of its subsidiaries. Comment is praisal standards. requested by August 9, 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

639 Legal Developments FINAL RULE — AMENDMENT TO gust 9, 1990, do not have to comply with the standards REGULATIONS H AND Y of this regulation; moreover, sales of loans that were originated before August 9, 1990, will not require an The Board of Governors is amending 12 C.F.R. Parts appraisal to be performed in accordance with this 208 and 225, its Regulations H and Y (Appraisal regulation. A transaction will be deemed entered into Standards for Federally Related Transactions). Title and a loan will be deemed originated if there is a XI of the Federal Financial Institutions Reform, Re- binding commitment to perform before the effective covery, and Enforcement Act of 1989 ("FIRREA")1 date of this regulation. requires the Board to adopt regulations regarding the For the reasons set forth, 12 C.F.R. Parts 208 and performance and utilization of appraisals by state 225 are amended as follows: member banks, bank holding companies, and nonbank subsidiaries of bank holding companies. Title XI and these implementing regulations are intended to protect Part 208—Membership of State Banking federal financial and public policy interests in real Institutions in the Federal Reserve System estate-related financial transactions requiring the services of an appraiser. This regulation, and similar 1. The authority citation for Part 208 is revised to read regulations adopted by the other financial institutions as follows: regulatory agencies2 and the Resolution Trust Corporation ("RTC"), provide affected parties with added Authority: Sections 9,11(a), 11(c), 19, 21, 25, and 25(a) assurance that real estate appraisals used in connec- of the Federal Reserve Act, as amended (12 U.S.C. tion with federally related transactions are performed 321-338, 248(a), 248(c), 461, 481-486, 601, and 611, in accordance with uniform standards by individuals respectively); sections 4 and 13(j) of the Federal Dewhose competency has been demonstrated and whose posit Insurance Act, as amended (12 U.S.C. 1814 and professional conduct will be subject to effective super- 1823(j), respectively); section 7(a) of the International vision. Toward this end, the regulation identifies Banking Act of 1978 (12 U.S.C. 3105); sections 907which transactions require an appraiser, sets forth 910 of the International Lending Supervision Act of minimum standards for performing appraisals, and 1983 (12 U.S.C. 3906-3909); sections 2, 12(b), 12(g), distinguishes those appraisals requiring the services of 12(i), 15B(c)(5), 17, 17A, and 23 of the Securities a State certified appraiser from those requiring a State Exchange Act of 1934 (15 U.S.C. 78b, 781(b), 781(g), licensed appraiser. 781(i), 78o-4(c)(5), 78q, 78q-l, and 78w, respectively); section 5155 of the Revised Statutes (12 U.S.C. 36) as Appraisals performed in connection with federally amended by the McFadden Act of 1927; and sections related transactions are to comply with the standards 1101-1122 of the Financial Institutions Reform, Reset forth in this regulation by August 9, 1990. State covery, and Enforcement Act of 1989 (12 U.S.C. 3310 certified or licensed appraisers, as appropriate, must and 3331-3351). be used for federally related transactions by July 1, 1991, unless this deadline is extended by the Appraisal Subcommittee of the Federal Financial Institutions 2. Section 208.18 is added to read as follows: Examination Council for a given state pursuant to provisions of Title XI. Appraisals for real estaterelated financial transactions entered into before Au- Section 208.18—Appraisal standards for federally related transactions. 1. Pub. L. No. 101-73, 103 Stat. 183 (1989); 12 U.S.C. 3310, 3331-3351. The standards applicable to appraisals rendered in 2. The Federal Deposit Insurance Corporation ("FDIC"), the Office connection with federally related transactions entered of the Comptroller of the Currency ("OCC"), the Office of Thrift into by state member banks are set forth in Subpart G Supervision ("OTS"), and the National Credit Union Administration ("NCUA"). of the Board's Regulation Y, 12 C.F.R. Part 225. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

640 Federal Reserve Bulletin • August 1990 Part 225—Bank Holding Companies and (i) identifies which real estate-related financial Change in Bank Control transactions require the services of an appraiser; (ii) prescribes which categories of federally re- 1. The authority citation for Part 225 is revised to read lated transactions shall be appraised by a State as follows: certified appraiser and which by a State licensed appraiser; and Authority: 12 U.S.C. 1817(j)(13), 1818, 1831i, (iii) prescribes minimum standards for the perfor- 1843(c)(8), 1844(b), 3106, 3108, 3907, and 3909; and mance of real estate appraisals in connection with sections 1101-1122 of the Financial Institutions Re- federally related transactions under the jurisdicform, Recovery, and Enforcement Act of 1989 tion of the Board. (12 U.S.C. 3310 and 3331-3351). Section 225.62—Definitions. 2. Subpart G, consisting of sections 225.61 through 225.67, is added immediately following Subpart F to (a) "Appraisal" means a written statement indepenread as follows: dently and impartially prepared by a qualified appraiser setting forth an opinion as to the market value Subpart G—Appraisal Standards for Federally of an adequately described property as of a specific Related Transactions date(s), supported by the presentation and analysis of relevant market information. Section 225.61—Authority, purpose, and scope. (b) "Appraisal Foundation" means the Appraisal Section 225.62—Definitions. Foundation established on November 30, 1987, as a Section 225.63—Appraisals not required; transactions not-for-profit corporation under the laws of Illinois. requiring a State certified or licensed appraiser. (c) "Appraisal Subcommittee" means the Appraisal Section 225.64—Appraisal standards. Subcommittee of the Federal Financial Institutions Section 225.65—Appraiser independence. Examination Council. Section 225.66—Professional association member- (d) "Complex l-to-4 family residential property apship; competency. praisal" means one in which the property to be ap- Section 225.67—Enforcement. praised, the form of ownership, or market conditions are atypical. (e) "Federally related transaction" means any real Subpart G—Appraisals estate-related financial transaction entered into on or after August 9, 1990, that: Section 225.61—Authority, purpose, and scope. (1) the Board or any regulated institution engages in or contracts for; and (a) Authority. This subpart is issued by the Board of (2) requires the services of an appraiser. Governors of the Federal Reserve System (the (f) "Market value" means the most probable price "Board") under Title XI of the Financial Institutions which a property should bring in a competitive and Reform, Recovery, and Enforcement Act of 1989 open market under all conditions requisite to a fair ("FIRREA") (Pub. L. No. 101-73, 103 Stat. 183 sale, the buyer and seller each acting prudently and (1989)), 12 U.S.C. 3310, 3331-3351, and section 5(b) of knowledgeably, and assuming the price is not affected the Bank Holding Company Act, 12 U.S.C. 1844(b). by undue stimulus. Implicit in this definition is the (b) Purpose and scope. consummation of a sale as of a specified date and the (1) Title XI provides protection for federal financial passing of title from seller to buyer under conditions and public policy interests in real estate related whereby: transactions by requiring real estate appraisals used (1) buyer and seller are typically motivated; in connection with federally related transactions to (2) both parties are well informed or well advised, be performed in writing, in accordance with uniform and acting in what they consider their own best standards, by appraisers whose competency has interests; been demonstrated and whose professional conduct (3) a reasonable time is allowed for exposure in the will be subject to effective supervision. This subpart open market; implements the requirements of Title XI, and ap- (4) payment is made in terms of cash in U.S. dollars plies to all federally related transactions entered into or in terms of financial arrangements comparable by the Board or by institutions regulated by the thereto; and Board ("regulated institutions"). (5) the price represents the normal consideration for (2) This subpart: the property sold unaffected by special or creative Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 641 financing or sales concessions granted by anyone lated with respect to each such loan or interest in associated with the sale. real property. (g) "Real estate-related financial transaction" means any transaction involving: Section 225.63—Appraisals not required; (1) the sale, lease, purchase, investment in or extransactions requiring a State certified or change of real property, including interests in proplicensed appraiser. erty, or the financing thereof; or (2) the refinancing of real property or interests in real property; or (a) Appraisals not required. An appraisal performed (3) the use of real property or interests in property as by a State certified or licensed appraiser is not resecurity for a loan or investment, including mort- quired for any real estate-related financial transaction gage-backed securities. in which: (h) "State certified appraiser" means any individual (1) the transaction value is $100,000 or less; who has satisfied the requirements for certification in a (2) a lien on real property has been taken as collat- State or territory whose criteria for certification as a eral solely through an abundance of caution and real estate appraiser currently meet or exceed the where the terms of the transaction as a consequence minimum criteria for certification issued by the Ap- have not been made more favorable than they would praiser Qualifications Board of the Appraisal Founda- have been in the absence of a lien; tion. No individual shall be a State certified appraiser (3) a lease of real estate is entered into, unless the unless such individual has achieved a passing grade lease is the economic equivalent of a purchase or upon a suitable examination administered by a State or sale of the leased real estate; territory that is consistent with and equivalent to the (4) there is a subsequent transaction resulting from a Uniform State Certification Examination issued or maturing extension of credit, provided that: endorsed by the Appraiser Qualifications Board of the (i) the borrower has performed satisfactorily ac- Appraisal Foundation. In addition, the Appraisal Sub- cording to the original terms; committee must not have issued a finding that the (ii) no new monies have been advanced other than policies, practices, or procedures of the State or as previously agreed; territory are inconsistent with Title XI of FIRREA. (iii) the credit standing of the borrower has not The Board may, from time to time, impose additional deteriorated; and qualification criteria for certified appraisers perform- (iv) there has been no obvious and material deteing appraisals in connection with federally related rioration in market conditions or physical aspects transactions within its jurisdiction. of the property which would threaten the institu- (i) "State licensed appraiser" means any individual tion's collateral protection; or who has satisfied the requirements for licensing in a (5) a regulated institution purchases a loan or inter- State or territory where the licensing procedures com- est in a loan, pooled loans, or interests in real ply with Title XI of FIRREA and where the Appraisal property, including mortgage-backed securities, Subcommittee has not issued a finding that the poli- provided that the appraisal prepared for each pooled cies, practices, or procedures of the State or territory loan or real property interest met the requirements are inconsistent with Title XI. The Board may, from of this regulation, if applicable. time to time, impose additional qualification criteria for licensed appraisers performing appraisals in con- Any transaction for which a State certified or linection with federally related transactions within the censed appraiser is not required nevertheless must Board's jurisdiction. have an appropriate evaluation of real property collat- (j) "Tract development" means a project of five units eral that is consistent with the Board's Guidelines for or more that is constructed or is to be constructed as a Real Estate Appraisal Policies and Review Procesingle development, dures. (k) "Transaction value" means: (btransactions requiring a State certified appraiser. (1) for loans or other extensions of credit, the (1) All transactions of $1,000,000 or more. All fedamount of the loan or extension of credit; erally related transactions having a transaction (2) for sales, leases, purchases, and investments in value of $1,000,000 or more shall require an apor exchanges of real property, the market value of praisal prepared by a State certified appraiser. the real property interest involved; and (2) Nonresidential transactions of $250,000 or more. (3) for the pooling of loans or interests in real All federally related transactions having a transacproperty for resale or purchase, the amount of the tion value of $250,000 or more, other than those loan or the market value of the real property calcu- involving appraisals of l-to-4 family residential Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

642 Federal Reserve Bulletin • August 1990 properties, shall require an appraisal prepared by a (i) for l-to-4 family residential property, one year State certified appraiser. preceding the date when the appraisal was pre- (3) Complex residential transactions of $250,000 or pared; and more. All complex l-to-4 family residential property (ii) for all other property, three years preceding appraisals rendered in connection with federally re- the date when the appraisal was prepared; lated transactions shall require a State certified ap- (6) analyze and report data on current revenues, praiser if the transaction value is $250,000 or more. A expenses, and vacancies for the property if it is and regulated institution may presume that appraisals of will continue to be income-producing; l-to-4 family residential properties are not complex, (7) analyze and report a reasonable marketing period unless the institution has readily available informa- for the subject property; tion that a given appraisal will be complex. The (8) analyze and report on current market conditions regulated institution shall be responsible for making and trends that will affect projected income or the the final determination of whether the appraisal is absorption period, to the extent they affect the value complex. If during the course of the appraisal a of the subject property; licensed appraiser identifies factors that would result (9) analyze and report appropriate deductions and disin the property, form of ownership, or market condi- counts for any proposed construction, or any comtions being considered atypical, then either: pleted properties that are partially leased or leased at (i) the regulated institution may ask the licensed other than market rents as of the date of the appraisal, appraiser to complete the appraisal and have a or any tract developments with unsold units; certified appraiser approve and co-sign the ap- (10) include in the certification required by the USPAP praisal; or an additional statement that the appraisal assignment (ii) the institution may engage a certified appraiser was not based on a requested minimum valuation, a to complete the appraisal. specific valuation, or the approval of a loan; (c) Transactions requiring either a State certified or (11) contain sufficient supporting documentation licensed appraiser. All appraisals for federally related with all pertinent information reported so that the transactions not requiring the services of a State appraiser's logic, reasoning, judgment, and analysis certified appraiser shall be prepared by either a State in arriving at a conclusion indicate to the reader the certified appraiser or a State licensed appraiser. reasonableness of the market value reported; (12) include a legal description of the real estate being appraised, in addition to the description re- Section 225.64—Appraisal standards. quired by the USPAP; (13) identify and separately value any personal prop- (a) Minimum standards. For federally related transac- erty, fixtures, or intangible items that are not real tions, all appraisals shall, at a minimum: property but are included in the appraisal, and (1) conform to the Uniform Standards of Professional discuss the impact of their inclusion or exclusion on Appraisal Practice ("USPAP") adopted by the Ap- the estimate of market value; and praisal Standards Board of the Appraisal Foundation, (14) follow a reasonable valuation method that adexcept that the Departure Provision of the USPAP dresses the direct sales comparison, income, and shall not apply to federally related transactions; cost approaches to market value, reconciles those (2) disclose any steps taken that were necessary or approaches, and explains the elimination of each appropriate to comply with the Competency Provi- approach not used. sion of the USPAP; (b) Unavailability of information. If information re- (3) be based upon the definition of market value as quired or deemed pertinent to the completion of an set forth in section 225.62(f); appraisal is unavailable, that fact shall be disclosed (4) (i) be written and presented in a narrative format and explained in the appraisal. or on forms that satisfy all the requirements of this (c) Additional standards. Nothing contained herein section; shall prevent a regulated institution from requiring (ii) be sufficiently descriptive to enable the reader additional appraisal standards if deemed appropriate. to ascertain the estimated market value and the rationale for the estimate; and Section 225.65—Appraiser independence. (iii) provide detail and depth of analysis that reflect the complexity of the real estate appraised; (a) Staff appraisers. If an appraisal is prepared by a (5) analyze and report in reasonable detail any prior staff appraiser, that appraiser must be independent of sales of the property being appraised that occurred the lending, investment, and collection functions and within the following time periods: not involved, except as an appraiser, in the federally Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 643 related transaction, and have no direct or indirect removal and/or prohibition orders, cease and desist interest, financial or otherwise, in the property. If the orders, and the imposition of civil money penalties only qualified persons available to perform an ap- pursuant to the Federal Deposit Insurance Act, praisal are involved in the lending, investment, or 12 U.S.C 1811 et seq., as amended, or other applicacollection functions of the regulated institution, the ble law. regulated institution shall take appropriate steps to ensure that the appraisers exercise independent judgment and that the appraisal is adequate. Such steps ORDERS ISSUED UNDER BANK HOLDING include, but are not limited to, prohibiting an indi- COMPANY ACT vidual from performing appraisals in connection with federally related transactions in which the appraiser Orders Issued Under Section 3 of the Bank is otherwise involved and prohibiting directors and Holding Company Act officers from participating in any vote or approval involving assets on which they performed an ap- Muskingum Valley Bancshares, Inc. praisal. Beverly, Ohio (b) Fee appraisers. If an appraisal is prepared by a fee appraiser, the appraiser shall be engaged directly by Order Approving the Acquisition of a Bank the regulated institution or its agent, and have no direct or indirect interest, financial or otherwise, in the Muskingum Valley Bancshares, Inc., Beverly, Ohio property or transaction. A regulated institution may ("Muskingum"), a bank holding company within the accept an appraisal that was prepared by an appraiser meaning of the Bank Holding Company Act (the engaged directly by another institution subject to "BHC Act"), has applied for the Board's approval Title XI of FIRREA, if the regulated institution that under section 3(a)(3) of the BHC Act (12 U.S.C. accepts the appraisal has: § 1842(a)(3)) to acquire up to 100 percent of the voting (1) established procedures for review of real estate shares of The Bartlett Farmers Bank, Bartlett, Ohio appraisals; ("Bartlett Bank"). (2) reviewed the appraisal under the established Notice of the application, affording interested perreview procedures, finding the appraisal acceptable; sons an opportunity to submit comments, has been and published (55 Federal Register 5890 (1990)). The time (3) documented the review in writing. for filing comments has expired, and the Board has considered the application and all comments received Section 225.66—Professional association in light of the factors set forth in section 3(c) of the membership; competency. BHC Act. Muskingum controls one bank, the Citizens Bank (a) Membership in appraisal organizations. A State Company, Beverly, Ohio ("Citizens Bank"), and is certified appraiser or a State licensed appraiser may the 134th largest commercial banking organization in not be excluded from consideration for an assignment Ohio, controlling approximately $33.2 million in defor a federally related transaction solely by virtue of posits, representing less than one percent of the total membership or lack of membership in any particular deposits in commercial banks in the state.1 Bartlett appraisal organization. Bank is the 181st largest commercial banking organi- (b) Competency. All staff and fee appraisers perform- zation in Ohio, controlling approximately $17.5 million ing appraisals in connection with federally related in deposits, representing less than one percent of the transactions must be State certified or licensed, as total deposits in commercial banks in the state. Upon appropriate. However, a State certified or licensed consummation of this proposal, Muskingum would appraiser may not be considered competent solely by become the 105th largest commercial banking organivirtue of being certified or licensed. Any determina- zation in Ohio, controlling $50.7 million in deposits, tion of competency shall be based upon the individ- representing less than one percent of the total deposits ual's experience and educational background as they in commercial banks in the state. Consummation of relate to the particular appraisal assignment for this proposal would not have a significantly adverse which he or she is being considered. effect on the concentration of banking resources in Ohio. Section 225.67—Enforcement. Institutions and institution-affiliated parties, including staff appraisers and fee appraisers, may be subject to 1. State banking data are as of December 31, 1989. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

644 Federal Reserve Bulletin • August 1990 Muskingum and Bartlett Bank compete directly in Citizens Bank and Bartlett Bank. Specifically, Protesthe Marietta-Parkersburg banking market.2 Muskin- tant alleges that neither bank has conducted a formal gum is the eighth largest commercial banking organi- assessment of its community to ascertain the banking zation in the market, controlling 3.0 percent of the needs of all segments and socioeconomic groups deposits in commercial banks in the market. Bartlett within its market area and that neither bank has special Bank is the 13th largest commercial banking organiza- programs for low-income areas or minorities. Protestion, controlling 1.8 percent of the total deposits in tant also states that Citizens Bank and Bartlett Bank commercial banks in the market. Upon consumma- appear to have no involvement in loan programs tion, Muskingum would become the seventh largest developed by the federal government that are aimed at commercial banking organization in the market, con- low- and moderate-income individuals, such as FHA, trolling 4.8 percent of total deposits in commercial FmHA, or VA loan programs. banks in the market. The market is moderately con- The Board has carefully reviewed the CRA perforcentrated, and the Herfindahl-Hirschman Index mance record of Citizens Bank and Bartlett Bank, as ("HHI") for the market would increase by 11 points to well as Protestant's comments and Muskingum's re- 1308.3 Accordingly, consummation of this proposal sponse to those comments, in light of the CRA, the would not have a significantly adverse effect on exist- Board's regulations and the Statement of the Federal ing competition in the Marietta-Parkersburg banking Financial Supervisory Agencies Regarding the Commarket. In addition, the financial and managerial remunity Reinvestment Act ("Agency CRA sources of Bartlett Bank, Muskingum and its subsid- Statement").5 The Agency CRA Statement provides iary are consistent with approval of this application. guidance regarding the types of policies and proce- In considering the convenience and needs of the dures that the supervisory agencies believe financial communities to be served, the Board has taken into institutions should have in place in order to fulfill their account the record of Muskingum's subsidiary bank responsibilities under the CRA on an ongoing basis and Bartlett Bank under the Community Reinvestment and the procedures that the supervisory agencies will Act ("CRA") (12 U.S.C. § 2901 et seq.) The CRA use during the application process to review an instirequires the federal financial supervisory agencies to tution's CRA compliance and performance. encourage financial institutions to help meet the credit Initially, the Board notes in this case that Citizens needs of the local communities in which they operate, Bank and Bartlett Bank have each received satisfacconsistent with the safe and sound operation of such tory ratings from their primary regulators in examinainstitutions. To accomplish this end, the CRA requires tions of their CRA performance. Each board of directhe appropriate federal supervisory authority to assess tors annually reviews the bank's CRA record and CRA the institution's record of meeting the credit needs of policy statement. Each bank has a CRA officer. The its entire community, including low- and moderate- CRA officer at Citizens Bank is a member of a wide income neighborhoods, consistent with the safe and variety of community organizations and is responsible sound operation of the institution, and to take this for reporting to the board of directors about the record into account in its evaluation of bank holding banking needs of the community and informing those company applications.4 community organizations of the products and services In this regard, the Board has received a comment offered by Citizens Bank. Other officers and directors filed by the Ohio State Legal Services Association of Citizens Bank are also involved in community ("Protestant") critical of the CRA performance of organizations and provide similar input to the board of directors and information to the community. In addition to personal contact with its customers and pro- 2. Market data are as of June 30, 1988. The Marietta-Parkersburg spective customers, Citizens Bank advertises in two banking market is approximated by Washington County, Ohio, Wood County, West Virginia and portions of Athens and Morgan Counties, local newspapers and on local radio and television Ohio. stations to inform the community about its products 3. Under the revised Department of Justice Merger Guidelines, 49 and services. Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is above 1000 is considered moderately concen- The Agency CRA Statement provides that an effectrated. In such markets, the Justice Department is likely to challenge tive CRA process must include methods to ascertain a merger that increases the HHI by more than 100 points. The Justice community needs on an ongoing basis through out- Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors reach efforts to local governments, businesses, comindicating an anticompetitive effect) unless the post-merger HHI is at munity members and organizations. The appropriate least 1800 and the merger increases the HHI by at least 200 points. The methods by which an institution ascertains the needs Justice Department has stated that the higher than normal HHI thresholds for screening bank acquisitions for anticompetitive effects implicitly recognizes the competitive effects of limited purpose lenders and other non-depository financial entities. 4. 12 U.S.C. § 2903. 5. 54 Federal Register 13,742 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 645 of its community depends upon a number of factors, Bartlett Bank has participated significantly in a including the size of the institution and the size, nature guaranteed student loan program and actively makes and needs of the community involved. The Agency small consumer loans. Over one-third of Bartlett CRA Statement recognizes that the specific steps Bank's consumer loans in 1988 were made with printaken by a small rural institution to meet its CRA cipal balances of less than $500. These loans were responsibilities may be quite different from those offered without a minimum balance at substantially the required of an institution in a metropolitan area. In this same terms as loans for larger amounts. In addition, case, both Citizens Bank and Bartlett Bank operate in upon consummation of this proposal, Muskingum has small rural communities. The banks' management and stated that it will provide guidance to enhance existing staff are active in a broad range of community, civic, programs and services at Bartlett Bank and will impleand religious organizations that help provide the banks ment programs and services at Bartlett Bank that have with the information needed to develop new products been developed and successfully offered by Citizens and services to serve all segments of the community. Bank. The Board recognizes that management participa- For the foregoing reasons, and based upon the tion in community-oriented organizations is not by overall CRA record of Citizens Bank and Bartlett itself adequate in many cases to provide banks with Bank, the compliance of their CRA statements with sufficient information to identify the credit needs of a applicable regulations, and other facts of record, the community. In this case, however, the products and Board concludes that convenience and needs considservices offered by the banks demonstrate that the erations, including the record of performance under involvement and availability of bank personnel in their the CRA of Citizens Bank and Bartlett Bank are market area has provided the banks with information consistent with approval of this application. necessary to develop many programs that are benefi- Based on the foregoing and other facts of record, the cial to low- and moderate-income areas. For example, Board has determined that the application should be, Citizens Bank offers credit cards with no annual fee, and hereby is, approved. The acquisition of Bartlett and no-interest and low-interest loans offered in con- Bank shall not be consummated before the thirtieth junction with the Ohio Energy Action Corporation. calendar day following the effective date of this Order, During 1988 and 1989, Citizens Bank also made a or later than three months after the effective date of significant number of guaranteed student loans. Citi- this Order, unless such period is extended for good zens Bank also offers mortgage loans with no points cause by the Board or by the Federal Reserve Bank of and flexible down payment requirements, and special Cleveland, acting pursuant to delegated authority. loans for exterior improvements. In addition, Citizens By order of the Board of Governors, effective Bank provides senior citizens club accounts at no June 11, 1990. charge and with no minimum balance. Citizens Bank cashes all government checks with no check cashing Voting for this action: Vice Chairman Johnson and Goverfee and offers basic service checking accounts. In nors Kelley, LaWare, and Mullins. Absent and not voting: Chairman Greenspan and Governors Seger and Angell. 1988-89, Citizens Bank granted extensions of credit totaling $470,000 to local nonprofit organizations. JENNIFER J. JOHNSON Moreover, while Citizens Bank does not appear to Associate Secretary of the Board offer FHA and VA loans at this time, it offers FmHA and Small Business Administration guaranteed loans. The Nippon Credit Bank, Ltd. Citizens Bank also refinances loans made directly by Tokyo,Japan the FmHA for housing or farm operations for borrowers whose financial situations have improved sufficiently to qualify them for bank loans. Citizens Bank is Order Approving Formation of a Bank Holding one of the few institutions in its banking market that Company provides such loans. During 1988 and 1989, Citizens Bank made a significant number of its real estate The Nippon Credit Bank, Ltd., Tokyo, Japan ("Apmortgage loans to low- and moderate-income recipi- plicant"), has applied for the Board's approval under ents. Finally, Citizens Bank made over 44 percent of section 3(a)(1) of the Bank Holding Company Act (the the total number of its consumer loans to low- and "BHC Act") (12 U.S.C. § 1842(a)(1)), to become a moderate-income recipients, which represents over 35 bank holding company by acquiring 100 percent of the percent of the total dollar volume of consumer loans. voting shares of Nippon Credit Trust Company, New Citizens Bank does not maintain a minimum loan York, New York ("Trust Company"), a de novo bank. amount requirement for consumer loans and there is Notice of the application, affording an opportunity no origination fee for any consumer loans. for interested persons to submit comments, has been Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

646 Federal Reserve Bulletin • August 1990 given in accordance with section (3)(b) of the BHC Act primary capital of Applicant, as publicly reported, is (55 Federal Register 8194 (1990)). The time for filing well below the minimum level specified in the Board's comments has expired, and the Board has considered Capital Adequacy Guidelines. After making adjustthe application and all comments received in light of ments to reflect Japanese banking and accounting the factors set forth in section 3(c) of the BHC Act. practices, however, including consideration of a por- Applicant, with total consolidated assets equivalent tion of the unrealized appreciation in Applicant's to approximately $118 billion,1 ranks as the 17th portfolio of equity securities consistent with the prinlargest bank in Japan. Worldwide, Applicant ranks as ciples in the Basle capital framework, Applicant's the 32nd bank. Applicant engages in a variety of capital ratio meets United States standards. banking activities on a world-wide basis. The Board also has considered several additional In the United States, Applicant operates a branch factors that mitigate its concern in this case. The in New York, New York, with total assets of Board has placed considerable emphasis on the fact $5.4 billion,2 and an agency in Los Angeles, California, that Applicant will establish Trust Company de novo, with total assets of $2 billion. Applicant has selected and that Trust Company will be strongly capitalized New York as its home state under the Board's Regula- and small in relation to Applicant. The Board expects tion K (12 C.F.R. 211.22(b)). Trust Company will be that Applicant will maintain Trust Company among located in Applicant's home state. Accordingly, the the more strongly capitalized banking organizations of Board concludes that the acquisition of Trust Company comparable size in the United States. The Board by Applicant is consistent with section 5 of the Inter- further notes that Applicant is in compliance with the national Banking Act of 1978 (12 U.S.C. § 3103). capital and other financial requirements of Japanese Trust Company, a de novo institution, is being banking organizations. organized as a state-chartered, nonmember bank. It Based on these and other facts of record, including will place primary emphasis on providing wholesale certain commitments made by Applicant, the Board banking and trust-related services in the Metropolitan concludes that the financial and managerial factors are New York-New Jersey banking market.3 In view of consistent with approval of this application. Considerthe de novo status of Trust Company and based upon ations relating to the convenience and needs of the the facts of record, the Board concludes that the community to be served are also consistent with proposed transaction will have no significantly adverse approval. Based upon the foregoing and other facts of effects on existing or probable future competition, and record, the Board has determined that consummation will not significantly increase the concentration of of the transaction would be in the public interest and resources in any relevant market. Thus, competitive that the application should be, and hereby is, apconsiderations are consistent with approval of the proved. The transaction shall not be consummated application. before the thirtieth calendar day following the effective Section 3(c) of the BHC Act requires the Board in date of this Order, or later than three months after the every case to consider the financial resources of the effective date of this Order, and Trust Company shall applicant organization and the bank or bank holding be opened for business not later than six months after company to be acquired. In accordance with the the effective date of this Order. The latter two periods principles of national treatment and competitive eq- may be extended for good cause by the Board or the uity, the Board has previously stated that it expects Federal Reserve Bank of New York, pursuant to foreign banks seeking to establish or acquire banking delegated authority. organizations in the United States to meet the same By order of the Board of Governors, effective general standards of strength, experience, and reputa- June 4, 1990. tion as domestic banking organizations, and to be able to serve as a source of strength to their banking Voting for this action: Chairman Greenspan and Governors operations in the United States.4 In this case, the Johnson, Kelley, LaWare, and Mullins. Voting against this action: Governor Seger. Absent and not voting: Governor Angell. 1. Banking data and rankings are as of December 31, 1988. 2. Banking data for branch and agency are as of March 31, 1990. JENNIFER J. JOHNSON 3. The Metropolitan New York-New Jersey market is defined to Associate Secretary of the Board include New York City and Long Island, New York; Putman, Sullivan, Westchester, Rockland, and Orange Counties in New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, and Warren Counties in New Jersey; and portions of Fairfield County in Connecticut. 4. See, e.g., The Dai-Ichi Kangyo Bank, Limited, 76 Federal Federal Reserve Bulletin 518 (1984); See also Policy Statement on Reserve Bulletin 75 (1990); Toyo Trust and Banking Co., Ltd., 74 Supervision and Regulation of Foreign-Based Holding Companies, Federal Reserve Bulletin 623 (1988); The Mitsubishi Bank, Limited, 70 Federal Reserve Regulatory Service 11 4-835 (1979). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 58 Dissenting Statement of Governor Seger less than one percent of all deposits in commercial banks in the state.1 Bank is a de novo institution that I dissent from the Board's action in this case. I believe will compete in the Orlando Area banking market.2 that foreign banking organizations whose primary cap- SouthTrust does not currently operate in this market. ital, based on U.S. accounting principles, is below the Accordingly, the Board has concluded that consum- Board's minimum capital guidelines for U.S. banking mation of this proposal would not have a significantly organizations have an unfair competitive advantage in adverse effect on the concentration of banking rethe United States over domestic banking organiza- sources in Florida, or have a significantly adverse tions. In my view, such foreign organizations should effect upon competition in any relevant banking marbe judged against the same financial and managerial ket. The financial and managerial resources and future standards, including the Board's capital adequacy prospects of SouthTrust and its subsidiary banks and of Bank are also considered satisfactory and consisguidelines, as are applied to domestic banking organitent with approval. zations. The majority concludes that Applicant's primary capital meets United States standards. To do so, In considering the convenience and needs of the however, the majority makes adjustments that are not communities to be served, the Board has taken into available for United States banks under guidelines that account the record of SouthTrust's subsidiary banks have not yet become effective for U.S. or foreign under the Community Reinvestment Act (12 U.S.C. banking organizations. § 2901 et seq.) ("CRA"). The CRA requires the fed- In addition, I am concerned that while some prog- eral financial supervisory agencies to encourage finanress is being made in opening Japanese markets to cial institutions to help meet the credit needs of the U.S. banking organizations and other financial institu- local communities in which they operate consistent with the safe and sound operation of such institutions. tions, U.S. banking organizations, in my opinion, are To accomplish this end, the CRA requires the approstill far from being afforded the full opportunity to priate federal supervisory authority to "assess an compete in Japan. institution's record of meeting the credit needs of its entire community, including low- and moderate-in- June 4, 1990 come neighborhoods, consistent with the safe and sound operation of the institution," and to take this SouthTrust Corporation record into account in its evaluation of bank holding Birmingham, Alabama company applications.3 In this regard, the Board has received comments SouthTrust of Florida, Inc. filed by the Center for Human Rights, Birmingham, St. Petersburg, Florida Alabama ("Protestant"), critical of the CRA performance of SouthTrust Corporation's lead bank, South- Order Approving Acquisition of a Bank Trust Bank of Alabama, N.A., Birmingham, Alabama ("SouthTrust Bank"). Specifically, the Protestant al- SouthTrust Corporation, Birmingham, Alabama, and leges that SouthTrust Bank is not meeting the need for its subsidiary, SouthTrust of Florida, Inc., St. Peters- mortgage loans in the low- to moderate-income and burg, Florida (together, "SouthTrust"), both bank minority communities of Birmingham.4 holding companies within the meaning of the Bank Holding Company Act ("BHC Act"), have applied for the Board's approval under section 3(a)(3) of BHC Act 1. Deposit data are as of December 31, 1989. 2. The Orlando Area banking market is comprised of Orange, (12 U.S.C § 1842(a)(3)) to acquire 100 percent of the Osceola and Seminole counties. voting shares of SouthTrust Bank of Orlando, Winter 3. 12 U.S.C. § 2903. Park, Florida, a de novo bank ("Bank"). 4. As evidence to support this allegation, Protestant has submitted a study which appeared in The Birmingham News in August, 1989 Notice of the application, affording interested persuggesting that, in recent years, there has been a significant disparity sons an opportunity to submit comments, has been in the home mortgage loans made by Birmingham lenders to highpublished (54 Federal Register 38,437 (1989)). The income and white as opposed to low- and moderate-income and minority residents in Birmingham. In the "Report on Loan Discrimtime for filing comments has expired, and the Board ination" submitted to Congress by the Board on October 13, 1989 has considered the application and all comments re- pursuant to section 1220 of the Financial Institutions Reform, Recovceived in light of the factors set forth in section 3(c) of ery, and Enforcement Act of 1989 (the "Report"), the Board generally reviewed various public studies of mortgage lending in Atlanta, the BHC Act (12 U.S.C. § 1842(c)). Cleveland, Detroit and Boston. The Report noted that, while these SouthTrust is the 14th largest commercial banking studies appeared to indicate that disparities existed in home mortgage lending between minority and non-minority areas, they did not draw organization in Florida, controlling total domestic dedefinitive conclusions about the existence or extent of racial discrimposits of approximately $650.4 million, representing ination in mortgage lending and did not account for certain factors Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

648 Federal Reserve Bulletin • August 1990 The Board has carefully reviewed the CRA perfor- low- and moderate-income and minority neighbormance record of SouthTrust and SouthTrust Bank, hoods throughout Alabama. as well as Protestant's comments and SouthTrust's SouthTrust Bank has established a CRA Commitresponse to those comments, in light of the CRA, the tee, comprised of individuals representing all areas of Board's regulations and the Statement of the Federal the bank's operations, to coordinate SouthTrust Financial Supervisory Agencies Regarding the Com- Bank's efforts to meet its responsibilities under the munity Reinvestment Act ("Agency CRA CRA. The CRA Committee meets quarterly to re- Statement").5 The Agency CRA Statement provides view the information, opinions, and requests that it guidance regarding the types of policies and proce- receives regarding SouthTrust Bank's products and dures that the supervisory agencies believe financial services, and considers new bank products and serinstitutions should have in place in order to fulfill vices to respond to identified community credit their responsibilities under the CRA on an ongoing needs. basis, and the procedures that the supervisory agen- SouthTrust Bank has endeavored to assess commucies will use during the application process to review nity credit needs through the use of various commuan institution's CRA compliance and performance. nity outreach programs, including an extensive officer The Agency CRA Statement also suggests that deci- call program whereby SouthTrust Bank officials consions by agencies to allow financial institutions to tact members of the community representing commerexpand will be made pursuant to an analysis of the cial and professional interests, as well as individuals institution's overall CRA performance, and will be representing churches and civic and community based on the actual record of performance of the groups. All SouthTrust Bank branch offices distribute institution.6 a questionnaire entitled "What's On Your Mind?" as Initially, the Board notes in this case that South- a means of gathering information on consumer credit Trust's subsidiary banks—including SouthTrust needs. SouthTrust Bank has also conducted several Bank—have each received satisfactory ratings from market surveys to pinpoint community credit needs, their primary regulators in the most recent examina- including a survey of minority business owners contions of their CRA performance. The Agency CRA ducted in 1987. Moreover, various minority-oriented Statement provides that, although CRA examination media are utilized by SouthTrust Bank to advertise its reports do not provide conclusive evidence of an products and services. institution's CRA record, these reports will be given The Board notes that there have been disparities in great weight in the applications process.7 In addition, SouthTrust Bank's Home Mortgage Disclosure Act SouthTrust and SouthTrust Bank have put in place ("HMDA") data for the years 1987 and 1988. An various elements outlined in the Agency CRA State- analysis of this HMDA data indicates that, during 1987 ment that contribute to an effective CRA program. and 1988, there was a significant disparity between the SouthTrust has established a program for reviewing number of mortgage loans made by SouthTrust Bank and supervising the CRA programs of its subsidiary in low- to moderate-income and minority areas and banks. This program includes regular review of reports similar lending by other lenders in the Birmingham made by each subsidiary bank to SouthTrust concern- Metropolitan Statistical Area ("MSA"). The disparity ing the bank's CRA program, and annual review of in lending to low- and moderate-income individuals each bank's CRA statement. SouthTrust provides decreased significantly in 1989, however. In 1989, information to subsidiary banks regarding evolving approximately 17.5 percent of SouthTrust Bank's areas of emphasis under the CRA, and suggests guide- home mortgage loans originated in low- to moderatelines to assure that subsidiary banks are meeting their income areas, as compared to approximately 14.5 responsibilities to the community under the CRA. percent for other Birmingham lenders. Also during this SouthTrust has also taken initiatives at the corporate period, SouthTrust Bank increased the number of level to meet its responsibilities under the CRA, in- mortgage loans made in the Birmingham MSA by more cluding contributing as a partner in a community than 400 percent. Thus, in 1989, SouthTrust Bank development corporation that refurbishes homes in substantially increased the absolute amount of home purchase loans that it made in the Birmingham MSA as well as the percentage of that amount of home purother than discrimination in lending that might account for these chase lending in low- and moderate-income neighbordisparities—including differences in demand for mortgage loans, dif- hoods. This increase in the percentage of home mortferences in the types of mortgage products offered by depository and gage lending in low- and moderate-income nondepository institutions, and the tendency of nondepository lenders to dominate the minority mortgage loan market. neighborhoods represents substantial improvement in 5. 54 Federal Register 13,742 (1989). SouthTrust Bank's home mortgage lending. The 6. Id. record also indicates that SouthTrust Bank has made a 7. 54 Federal Register at 13,745. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 649 significant percentage of its home improvement loans Trust's other subsidiary banks, are consistent with to low- and moderate-income areas of Birmingham, approval of this application.8 with 24 percent of its home improvement loans origi- Based on the foregoing and other facts of record, the nating in low- to moderate-income areas in 1987, and Board has determined that the application should be, 27 percent of these loans originating in low- to moder- and hereby is, approved. This transaction shall not be ate-income areas in 1988. consummated before the thirtieth calendar day follow- With regard to lending in minority areas, the ing the effective date of this Order, or later than three disparities between the amount of home mortgage months after the effective date of this Order, unless lending by SouthTrust Bank and similar lending by such period is extended for good cause by the Board or other banks in the Birmingham MSA remained in by the Federal Reserve Bank of Atlanta, acting pur- 1989. In order to address this, however, SouthTrust suant to delegated authority. Bank has implemented various programs targeted to By Order of the Board of Governors, effective providing credit to minorities in Birmingham. South- June 25, 1990. Trust Bank has sponsored seminars on business ownership and home buying in minority areas in Voting for this action: Chairman Greenspan and Governors Birmingham, and is an active participant in various Johnson, Seger, Angell, Kelley, LaWare, and Mullins. loan and grant programs, including the Birmingham Plan, a loan pool established by several Birmingham JENNIFER J. JOHNSON Associate Secretary of the Board banks to meet minority business and home mortgage needs in the area. Financing is also provided to small Orders Issued Under Section 4 of the Bank minority-owned businesses through the SouthTrust Holding Company Act Business Center. SouthTrust Bank also participates through its subsidiary, SouthTrust Mortgage Com- Banca Commerciale Italiana S.p.A. pany, in the Community Home Buyer's Program, a Milan, Italy loan program that provides financing and investment counseling to minorities and low- to moderate-in- Order Approving Application to Provide Securities come individuals who seek to buy homes for under Brokerage and Investment Advisory Services on a $50,000.00. Combined Basis, Provide Corporate Finance The Office of the Comptroller of the Currency Advisory Services, Provide Foreign Exchange ("OCC") has identified certain aspects of SouthTrust Services, and Act as Riskless Principal Bank's CRA program in need of improvement. In Banca Commerciale Italiana S.p.A., Milan, Italy response to the OCC's suggestions, and in an effort to ("Applicant"), a foreign bank subject to the Bank strengthen its CRA program, SouthTrust and South- Holding Company Act ("BHC Act"), has applied for Trust Bank have already begun to take steps to formalthe Board's approval under section 4(c)(8) of the ize CRA policies and procedures at all levels and to BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 develop a self-assessment program to be utilized at all of the Board's Regulation Y (12 C.F.R. 225.23), for SouthTrust banks. its subsidiary, BCI Capital Corporation, New York, The Board believes that, on balance, the CRA New York ("Company"), to engage in the following record of SouthTrust and SouthTrust Bank is consisactivities: tent with approval of this application. The Board expects SouthTrust and SouthTrust Bank to implement fully their CRA programs and to continue to improve their record of CRA performance. The Fed- 8. Protestant also has requested that the Board hold a public hearing eral Reserve Bank of Atlanta will monitor the prog- or meeting to assess further facts surrounding SouthTrust Bank's ress of SouthTrust and SouthTrust Bank and the CRA performance. Generally under the Board's rules, the Board may, in its discretion, hold a public hearing or meeting on an application to steps that they have taken to improve their CRA clarify factual issues related to the application and to provide an program, and the Board will consider the progress of opportunity for testimony, if appropriate. 12 U.S.C. §§ 262.3(e) and SouthTrust and SouthTrust Bank under the CRA in 262.25. (d). The Board has carefully considered the Protestant's request for a future applications to expand their deposit-taking public meeting or hearing in this case. In the Board's view, the operations. For the foregoing reasons, and based parties have had ample opportunity to present their arguments in upon the overall CRA record of SouthTrust and writing and to respond to one another's submissions, and have submitted substantial written comments that have been considered SouthTrust Bank and other facts of record, the Board by the Board. In light of these facts, the Board has determined that concludes that convenience and needs consider- a public meeting or hearing is not necessary to clarify the factual record in these applications, or otherwise warranted in this case. ations, including the record of performance under the Accordingly, Protestant's request for a public meeting or hearing on CRA of SouthTrust, SouthTrust Bank, and South- this application is hereby denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

650 Federal Reserve Bulletin • August 1990 (1) providing securities brokerage and investment Securities Brokerage, Riskless Principal, and advisory services on a combined basis to institu- Financial Advisory Services tional customers, including discretionary management services; The Board has previously determined by order that (2) providing corporate finance advisory and related providing securities brokerage and investment advisservices by: ory services on a combined basis, providing corporate (i) acting as a financial advisor with respect to finance advisory and related services, and acting as structuring, financing, and negotiating domestic riskless principal in buying and selling securities are and international mergers and acquisitions, joint permissible nonbanking activities for bank holding ventures, divestitures, leveraged buyouts, capital companies under section 4(c)(8) of the BHC Act.2 raising vehicles, interest rate swaps, interest rate Applicant has stated that Company will engage in caps, interest rate collars, currency swaps, similar these activities in accordance with the conditions set hedging devices, and other corporate transac- forth in these Orders.3 tions; (ii) performing feasibility studies, principally in Foreign Exchange Advisory and Transactional the context of determining the attractiveness and Services feasibility of particular corporate transactions; (iii) providing valuation services; and The Board has recognized that commercial banks do (iv) rendering fairness opinions in connection with combine the functions of giving advice on foreign corporate transactions; exchange transactions and executing foreign exchange (3) providing general information and statistical transactions. See Hongkong and Shanghai Banking forecasting with respect to foreign exchange mar- Corporation, 69 Federal Reserve Bulletin 221, 223 kets, advisory services designed to assist customers (1983). Accordingly, the Board finds that the proposed in monitoring, evaluating, and managing their for- combination of foreign exchange advisory and transeign exchange exposures, and transactional and actional services is closely related to banking. execution services with respect to foreign exchange; The Board's regulations currently impose a separa- (4) acting as riskless principal in buying and selling tion between foreign exchange advisory services and securities; and execution services in foreign exchange in order to (5) acting as riskless principal by entering into spot address the potential conflicts of interest from combinand forward transactions in the foreign exchange ing these two activities.4 In this case, the potential market. adverse effects related to the proposed activities are limited due to the nature of Company's proposed Company would provide the proposed services to services. Company expects its foreign exchange serinstitutional customers throughout the United States vices to be a relatively small aspect of its overall and abroad. business and to arise primarily in connection with the Applicant has total consolidated assets equivalent to $65.2 billion. It operates branch offices in Chicago and New York and an agency in Los Angeles.1 2. The Royal Bank of Canada, 74 Federal Reserve Bulletin 334 (1988); The Bank of Nova Scotia, 74 Federal Reserve Bulletin 249 Notice of the application, affording interested per- (1988); and The Chase Manhattan Corporation, 74 Federal Reserve sons an opportunity to submit comments on the pro- Bulletin 704 (1988) (securities brokerage and investment advisory services on a combined basis); The Fuji Bank, Limited, 75 Federal posal, has been published (55 Federal Register 10,494 Reserve Bulletin 577 (1989) (corporate finance advisory services); (1990)). The time for filing comments has expired, and Bankers Trust New York Corporation, 75 Federal Reserve Bulletin 829 the Board has considered the application and all (1989) ("Bankers Trust"); and J.P. Morgan & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. Morgan") (riskless comments received in light of the public interest principal activities with respect to securities). factors set forth in section 4(c)(8) of the BHC Act. The 3. The ICI has objected that, to the extent that Company proposes to broker or act as riskless principal or advise brokerage customers Board received written comments opposing Board with respect to securities issued by investment companies advised or approval of the application from the Investment Com- sponsored by Applicant or any of its affiliates, the proposed activities pany Institute ("ICI"), a trade association of the are inconsistent with the Glass-Steagall Act and with the Board's interpretive rule governing investment advisory services by bank mutual fund industry. holding companies. Applicant has committed, however, that Company will not broker or act as riskless principal or provide investment advice to customers regarding shares of any investment company for which an affiliate acts as an investment advisor or sponsor. For these reasons and the reasons discussed by the Board in its Order in Norwest Corporation, the Board believes that the comments made by the ICI do not warrant denial of this application. 76 Federal Reserve Bulletin 79 (1990). 1. Data are as of June 30, 1989. 4. 12 C.F.R. 225.25(b)(17). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 651 securities brokerage services Company proposes to pany would act as a riskless principal in foreign provide to its customers. Company proposes to exe- exchange if it expects to be able to enter into a cute foreign exchange transactions on behalf of cus- transaction as principal at a better price than it could tomers as necessary to facilitate securities brokerage obtain for a customer as an agent. transactions for its international customers and to While the Board has determined that acting as riskpermit these customers to hedge foreign exchange less principal in buying and selling securities is permisrisks related to positions in foreign securities. Com- sible under the BHC Act,6 it has not to date considered pany will not hold itself out as conducting a foreign riskless principal activities with respect to foreign exexchange business, except in connection with its se- change. The Board has recognized, however, that curities brokerage services. banks have long executed foreign exchange transac- Because Company's foreign exchange services tions for their customers.7 As noted in Bankers Trust, would be provided primarily in connection with its riskless principal transactions are "essentially equivasecurities brokerage services, Company does not ex- lent" to brokerage services.8 In addition, the Board has pect to execute foreign exchange transactions on be- approved the similar activity of acting as an intermedihalf of its customers for investment or speculative ary in interest rate and currency swap transactions.9 purposes or to advise its customers with respect to The Board finds, therefore, that the proposed riskless foreign exchange transactions for such purposes. Ac- principal services in foreign exchange as proposed in cordingly, the possibility that Company might provide this case are closely related to banking for purposes of section 4(c)(8) of the BHC Act. biased or unsuitable advice designed to generate increased trades and thus increase its commissions is substantially reduced. Financial and Managerial Resources and Other In addition, Company will limit its services to insti- Factors tutional customers, who will be financially sophisticated and therefore likely to be aware of alternative In order to approve this application, the Board must sources of advisory and execution services and to also find that performance of the proposed activities have the resources to compare performance and "can reasonably be expected to produce benefits to prices.5 Company will not purchase or sell foreign the public . . . that outweigh possible adverse effects, exchange for its own account, will not take or maintain such as undue concentration of resources, decreased positions in foreign exchange, and will not hold itself or unfair competition, conflicts of interests, or unout as a dealer in foreign exchange. Based on these sound banking practices." 12 U.S.C. § 1843(c)(8). and the other facts of record, the Board finds that the In evaluating these factors under section 4 of the combination of the proposed foreign exchange advis- BHC Act, the Board considers the financial condition ory and transactional services with the execution of and resources of the applicants and its subsidiaries and foreign exchange transactions as proposed in this case the effect of the proposal on these resources.10 The is not likely to result in significant conflicts of interest financial and managerial resources of Applicant are or other adverse effects. consistent with approval. In addition, consummation of the proposal would provide added convenience to Riskless Principal Activities in Foreign Exchange Applicant's customers. The Board also expects that the de novo entry of Applicant into the market for Applicant has also applied to act as riskless principal some of these services would increase the level of in spot and forward transactions in the foreign exchange market. When a customer decides to purchase 6. Bankers Trust; J.P. Morgan. or sell foreign currency or a forward contract in a 7. See Hongkong and Shanghai Banking Corporation, supra, and foreign currency, Company would locate a counter- The Nippon Credit Bank, Ltd., 75 Federal Reserve Bulletin 308 (1989). party (or counterparties) willing to enter into an off- 8. Consistent with the Bankers Trust Order, as noted above, Company will not purchase or sell foreign exchange for its own setting transaction prior to confirming the customer's account, nor will Company take or maintain positions in foreign order. Company then would enter into contemporane- exchange. Company will not hold itself out as a dealer in foreign ous offsetting transactions with its customer and the exchange and will observe the standards of care and conduct applicable to a fiduciary with respect to its foreign exchange advisory and counterparty. Company expects to engage in such transactional services. riskless principal transactions in situations similar to 9. The Sumitomo Bank, Limited, 75 Federal Reserve Bulletin 582 those in which companies typically engage in riskless (1990). An intermediary in the swap markets is a party who is willing to step between the two parties to a swap agreement and act as the principal transactions in securities. In addition, Comprincipal counterparty with each of the other participants, thus taking on the credit risk of each of the participants. Upon entering into a swap with one counterparty, the intermediary enters into an equivalent and offsetting swap with another counterparty. 5. See National Westminster Bank PLC, supra. 10. 12 C.F.R. 225.24. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

652 Federal Reserve Bulletin • August 1990 competition among providers of these services. Ac- meaning of the Bank Holding Company Act ("BHC cordingly, the Board has determined that the perfor- Act"), has applied for the Board's approval under mance of the proposed activities by Company can section 4(c)(8) of the BHC Act, 12 U.S.C. reasonably be expected to produce benefits to the § 1843(c)(8), and section 225.23(a)(3) of the Board's public. Regulation Y, 12 C.F.R. 225.23(a)(3), for its indirect Under the framework established in this and prior subsidiary, Nesbitt Thomson Securities, Inc., New decisions, the Board believes that the proposal is not York, New York ("Company"), to act as agent in the likely to result in any significant adverse effects, such private placement of all types of securities, including as undue concentration of resources, decreased or providing related advisory services, to buy and sell all unfair competition, conflicts of interests, or unsound types of securities on the order of investors as a banking practices. Accordingly, the Board has deter- "riskless principal", and to underwrite and deal in, on mined that the performance of the proposed activities a limited basis, all types of debt securities, including, by Applicant can reasonably be expected to produce without limitation, sovereign debt securities, corpopublic benefits which would outweigh adverse effects rate debt, debt securities convertible into equity secuunder the proper incident to banking standard of rities, and securities issued by a trust or other vehicle section 4(c)(8) of the BHC Act. secured by or representing interests in debt obliga- Based on the above, the Board has determined to, tions, including municipal revenue bonds and mortand hereby does, approve this application subject to all gage and consumer receivable related securities. of the terms and conditions set forth in this Order and in Bank of Montreal has also applied for approval to the above-noted Board Orders that relate to these underwrite and deal in equity securities, including, activities. The Board's determination is also subject to without limitation, common stock, preferred stock, all of the conditions set forth in the Board's Regulation American Depositary Receipts, and other direct and Y, including those in sections 225.4(d) and 225.23(b), indirect equity ownership interests in corporations and and to the Board's authority to require modification or other entities.1 termination of the activities of a bank holding company Bank of Montreal has total consolidated assets or any of its subsidiaries as the Board finds necessary to equivalent to $67.6 billion.2 It owns all of the outstandassure compliance with, and to prevent evasion of, the ing voting shares of Bankmont Financial Corp., which provisions of the BHC Act and the Board's regulations is the holding company for Harris Bankcorp, Chicago, and Orders issued thereunder. Illinois. Bank of Montreal also operates branches in This transaction shall not be consummated later Chicago and New York, an agency in Houston and a than three months after the effective date of this representative office in Los Angeles. Bank of Montreal Order, unless such period is extended for good cause has previously received Board approval to engage by the Board or by the Federal Reserve Bank of New directly and indirectly in a broad range of nonbanking York, pursuant to delegated authority. activities, including engaging through Company in By order of the Board of Governors, effective underwriting and dealing in commercial paper to a June 22, 1990. limited extent, acting as agent in the private placement of commercial paper to institutional customers, and Voting for this action: Chairman Greenspan and Governors providing brokerage and investment advisory services Johnson, Seger, Angell, Kelley, LaWare, and Mullins. on a combined basis to institutional customers.3 Company is and will continue to be a broker-dealer regis- JENNIFER J. JOHNSON tered with the Securities and Exchange Commission Associate Secretary of the Board and subject to the record-keeping, reporting, fiduciary standards, and other requirements of the Securities The Bank of Montreal Exchange Act of 1934, the New York Stock Exchange Toronto, Ontario, Canada and the National Association of Securities Dealers. Notice of the application, affording interested per- Order Approving Application to Engage, to a sons an opportunity to submit comments on the pro- Limited Extent, in Underwriting and Dealing in Debt posal, has been published (55 Federal Register 10,495 and Equity Securities and to Act as Agent in the Private Placement of All Types of Securities and Act as Riskless Principal in Buying and Selling 1. Bank of Montreal has not proposed to underwrite or deal in securities issued by open-end investment companies and, accordingly, Securities may not do so without further application under section 4(c)(8) of the BHC Act. Bank of Montreal has proposed, however, to underwrite and deal in securities issued by closed-end investment companies. Bank of Montreal, Toronto, Ontario, Canada ("Bank 2. Data are as of January 31, 1990. of Montreal"), a bank holding company within the 3. The Bank of Montreal, 74 Federal Reserve Bulletin 500 (1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 653 (1990)). The time for filing comments has expired, and and to the prudential limitations established by the the Board has considered the application and all Board in its Canadian Imperial, et al. Order.8 comments received in light of the public interest In recent decisions, the Board found that, subject to factors set forth in section 4(c)(8) of the BHC Act. The a number of prudential limitations that address the Board received written comments opposing the appli- potential for conflicts of interests, unsound banking cation from the Investment Company Institute practices or other adverse effects, private placement ("ICI"), a trade association of the mutual fund and riskless principal activities are so closely related industry.4 to banking as to be a proper incident thereto within the Because Company would be affiliated through meaning of section 4(c)(8) of the BHC Act. The Board common ownership with a member bank, Company also determined in those decisions that acting as agent may not be "engaged principally" in underwriting or in the private placement of securities and purchasing dealing in securities within the meaning of section 20 and selling securities on the order of investors as a of the Banking Act of 1933 (the "Glass-Steagall "riskless principal" do not constitute underwriting Act").5 In earlier decisions, the Board has deter- and dealing in securities for purposes of section 20 of mined that a company is not "engaged principally" the Glass-Steagall Act, and therefore revenue derived in section 20 activities if revenues from underwriting from these activities is not subject to the 10 percent and dealing in securities that banks are not autho- revenue limitation on ineligible securities underwriting rized to underwrite and deal in directly ("ineligible and dealing.9 Bank of Montreal has committed that securities") do not exceed 10 percent of Company's Company will conduct these activities consistent with gross revenues.6 the methods and procedures, and subject to all of the prudential limitations, established by the Board in The Board has also found that, subject to the Bankers Trust and J.P. Morgan,10 as modified to prudential framework of limitations established in reflect Bank of Montreal's status as a foreign bank.11 those cases to address the potential for conflicts of The Board has reviewed the capitalization of Bank interests, unsound banking practices or other adverse of Montreal and Company and finds each to be coneffects, the proposed underwriting and dealing activisistent with approval. With respect to the capitalizaties were so closely related to banking as to be a tion of Company, approval of the requested activities proper incident thereto within the meaning of section 4(c)(8) of the BHC Act.7 Bank of Montreal has com- is limited to a level consistent with the projections of position size and types of securities contained in the mitted to conduct its ineligible underwriting and dealapplication. The Board also notes that the size of ing activities subject to the 10 percent revenue test, 8. The Board hereby adopts and incorporates herein by reference 4. The ICI has objected to Bank of Montreal's proposal to the extent the reasoning and analysis from the Canadian Imperial Order, and that it requests authority to underwrite and deal in securities issued by from the section 20 Orders except as that reasoning was specifically closed-end investment companies, incorporating by reference the modified by the Canadian Imperial Order. Compliance with the arguments it made relating to the Board's Order in J.P. Morgan & revenue limits shall be calculated in the manner set forth in J.P. Co., Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989) Morgan & Company, Incorporated, et al., 75 Federal Reserve Bulle- ("January 1989 Order"). The ICI contends that this activity would tin 192, 196-197 (1989). result in a violation of section 20 of the Glass-Steagall Act and that it 9. J.P. Morgan & Company Incorporated, 76 Federal Reserve does not meet the "closely related" and "proper incident to banking" Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corpostandards of section 4(c)(8) of the BHC Act. The Board considered ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). and rejected such comments in its January 1989 Order, and for the 10. With regard to its proposed riskless principal activities, Bank of reasons stated in that order, reconfirms that these comments do not Montreal has committed that Company will not: warrant denial of the proposal in this case. 1) act as riskless principal in selling securities at the order of a The ICI has also objected to Bank of Montreal's proposal to the customer that is the issuer of the securities to be sold or in any extent that it could be construed as seeking authority to underwrite transaction where the Company has a contractual agreement to and deal in securities issued by unit investment trusts. Bank of place the securities as agent of the issuer; Montreal has not requested authority to underwrite and deal in such 2) act as a riskless principal in any transaction involving a security securities. for which it makes a market; 5. Section 20 of the Glass-Steagall Act (12 U.S.C. § 377) provides 3) engage in any riskless principal transaction for any security that ". . . no member bank shall be affiliated . . . with any . . . carried in its inventory; organization engaged principally in the issue, flotation, underwriting, 4) hold itself out as making a market in the securities it buys and public sale, or distribution at wholesale or retail or through syndicate sells as riskless principal, nor enter quotes for specific securities in participation of stocks, bonds, debentures, notes, or other securities. the NASDAQ or any other dealer quotation system in connection with riskless principal transactions; or 6. Canadian Imperial Bank of Commerce, The Royal Bank of 5) engage in riskless principal transactions on behalf of its foreign Canada, Barclays PLC, Barclays Bank PLC, 76 Federal Reserve affiliates that engage in securities dealing activities outside the Bulletin 158 (1990) ("Canadian Imperial, et al."); and J.P. Morgan & United States. Company will maintain specific records that clearly Company Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989), identify all riskless principal transactions. as modified by Order, dated September 21, 1989, 75 Federal Reserve 11. The Board has previously approved applications by foreign Bulletin 751 (1989); and Citicorp/Morgan/Bankers Trust, 73 Federal banking organizations to engage in private placement activities in this Reserve Bulletin 473 (1987) (collectively, the "section 20 Orders"). manner. See, e.g., The Toronto-Dominion Bank, 76 Federal Reserve 7. Canadian Imperial, et al., 76 Federal Reserve Bulletin 158 (1990). Bulletin 573 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

654 Federal Reserve Bulletin • August 1990 Company's activities will be relatively small. In sum, including those in sections 225.4(d) and 225.23(b), and the record shows that under the framework estab- to the Board's authority to require modification or lished in this and prior decisions, consummation of termination of the activities of a bank holding comthis proposal is not likely to result in any significant pany or any of its subsidiaries as the Board finds adverse effects, including undue concentration of re- necessary to assure compliance with, and to prevent sources, decreased or unfair competition, conflicts of evasion of, the provisions of the BHC Act and the interest, or unsound banking practices. Board's regulations and Orders issued thereunder. Consummation of this proposal would provide By order of the Board of Governors, effective greater efficiencies and added convenience to Bank of June 18, 1990. Montreal's customers by allowing the provision of a wider range of services by a single entity. Accord- Voting for this action: Chairman Greenspan and Governors ingly, the Board has determined that the performance Johnson, Seger, Angell, Kelley, LaWare, and Mullins. of the proposed activities by Bank of Montreal can reasonably be expected to produce benefits to the JENNIFER J. JOHNSON Associate Secretary of the Board public. Accordingly, and for the reasons set forth in the The Bank of Tokyo, Ltd. section 20 Orders, the Board concludes that Bank of Tokyo,Japan Montreal's proposal to engage through Company in the requested activities is consistent with the Glass- Order Approving Application to Engage in Certain Steagall Act and is so closely related to banking as to Securities-Related, Foreign Exchange, and be a proper incident thereto within the meaning of Investment and Financial Advisory Activities section 4(c)(8) of the BHC Act, provided Bank of Montreal limits Company's activities as provided in The Bank of Tokyo, Ltd., Tokyo, Japan ("Applithe Canadian Imperial, J.P. Morgan and Bankers cant"), a bank holding company within the meaning of Trust Orders. The application is hereby approved, the Bank Holding Company Act ("BHC Act"), has subject to all the terms and conditions of those applied for the Board's approval under section 4(c)(8) Orders. The Board's approval of this proposal exof the BHC Act (12 U.S.C. § 1843(c)(8)) and section tends only to activities conducted within the limita- 225.23(a)(2) of the Board's Regulation Y (12 C.F.R. tions of the Canadian Imperial Order, including the 225.23(a)(2)) to engage, through its wholly owned Board's reservation of authority to establish addisubsidiary, BOT Securities, Inc., New York, New tional limitations to ensure that the subsidiary's York ("BOTS"), in the following activities: activities are consistent with safety and soundness, (1) providing brokerage services and investment conflict of interest, and other relevant considerations advisory services to institutional customers1 on a under the BHC Act. Underwriting and dealing in any combined basis; manner other than as approved in that Order is not (2) furnishing general economic information and within the scope of the Board's approval and is not advice, general economic statistical forecasting serauthorized for Company. vices and industry studies to institutional custom- Included among these conditions is that Bank of ers; Montreal may not commence the proposed debt or equity securities underwriting and dealing activities until the Board has determined that Bank of Montreal and Company have established policies and proce- 1. An institutional customer is defined by Applicant to be: dures to ensure compliance with the requirements of (1) a bank (acting in an individual or fiduciary capacity), a savings and loan association, an insurance company, a registered investthis Order, including computer, audit and accounting ment company under the Investment Company Act of 1940, or a systems, internal risk management controls and the corporation, partnership, proprietorship, organization or institutional entity that regularly invests in the types of securities as to necessary operational and managerial infrastructure. which investment advice is given, regularly engages in transactions In this regard, the Board will review whether Bank of in securities or has a net worth exceeding $1,000,000; Montreal may commence underwriting and dealing in (2) an employee benefit plan with assets exceeding $1,000,000 or whose investment decisions are made by a bank, insurance comequity securities based on a determination by the pany or investment adviser registered under the Investment Advis- Board that it has established the managerial and oper- ers Act of 1940; ational infrastructure and other policies and proce- (3) a natural person whose individual net worth (or joint net worth with his or her spouse) at the time of receipt of the investment dures necessary to comply with the requirements of advice or brokerage services exceeds $1,000,000; this Order. (4) a broker-dealer or option trader registered under the Securities Exchange Act, or other securities professional, or The Board's determination is subject to all of the (5) an entity all of the equity owners of which are institutional conditions set forth in the Board's Regulation Y, customers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 655 (3) providing advice in connection with certain do- Amendment and section 5(b) of International Banking mestic and international financial transactions, in- Act (12 U.S.C. § 3103(b)).4 Applicant also operates cluding interest rate swaps, interest rate caps and agencies in New York, Miami, San Francisco, Los floors, loan syndications and similar transactions, to Angeles, and Honolulu; branches in Portland and financial and nonfinancial institutions; Seattle; and representative offices in Chicago, Wash- (4) trading for its own account in certain foreign ington, D.C., Houston, and Atlanta. exchange spot, forward, futures, and options transactions; Brokerage, Investment Advisory and Financial (5) providing general information and statistical Advisory Activities forecasting with respect to foreign exchange markets; and Applicant proposes to provide investment advisory (6) providing financial advice to the Japanese na- and brokerage activities on a combined basis ("fulltional and municipal governments and their agencies service brokerage") as well as separately.5 The Board such as with respect to the issuance of their securi- has previously determined by order that full-service ties in the United States. brokerage is a permissible nonbanking activity for bank holding companies under section 4(c)(8) of the BOTS currently engages in underwriting and dealing in BHC Act. PNC Financial Corp., 75 Federal Reserve government obligations throughout the United States Bulletin 396 (1989); Bankers Trust New York Corporapursuant to section 225.25(b)(16) of Regulation Y tion, 74 Federal Reserve Bulletin 695 (1988) ("Bankers (12 C.F.R. 225.25(b)(16)). Trust"). Applicant proposes to engage in full-service Notice of the application, affording interested per- brokerage in accordance with all of the conditions set sons an opportunity to submit comments, has been forth in these Orders. Applicant also proposes that duly published (55 Federal Register 14,860 (1990)). officers of Applicant be permitted to serve as directors The time for filing comments has expired, and the of BOTS and that one officer of a U.S. branch or Board has considered the application and all com- agency of Applicant be permitted to serve as a director ments received in light of the public interest factors set of BOTS.6 The individual from the U.S. branch or forth in section 4(c)(8) of the BHC Act.2 agency will not represent BOTS in its dealings with Applicant, with consolidated assets equivalent to customers, but the individual will permit Applicant to approximately $171.4 billion, is the 18th largest bank- supervise effectively the operations of BOTS. According organization in the world.3 Applicant owns a bank ingly, this interlock would not increase the likelihood in California and a bank in New York. Applicant of customer association of BOTS with any of Appliacquired bank subsidiaries in New York and California cant's U.S. branches or agencies. The Board notes prior to the enactment in 1956 of the Douglas Amend- that BOTS is not engaged in underwriting and dealing ment's interstate banking restrictions and, therefore, in securities other than U.S. government obligations may retain these companies under the Douglas as noted above. In light of these facts, Applicant's proposal in this respect is consistent with previous Board orders. See The Bank of Nova Scotia, 74 2. The Investment Company Institute ("ICI") has protested this Federal Reserve Bulletin 249; National Westminster application to the extent that it would permit BOTS to broker or advise customers regarding securities issued by investment companies Bank PLC, 72 Federal Reserve Bulletin 584 (1986). sponsored or advised by Applicant or any of its bank or nonbank See also Canadian Imperial Bank of Commerce, The affiliates. Applicant has committed that BOTS will not provide invest- Royal Bank of Canada, Barclays PLC, Barclays Bank ment advice to its brokerage customers regarding shares of investment companies that are sponsored or advised by Applicant or any of its PLC, 76 Federal Reserve Bulletin 158 (1990). affiliates. Applicant has also committed that BOTS will not provide The Board has previously determined by regulation brokerage services to its customers regarding shares of investment companies that are sponsored or advised by Applicant or any of its that furnishing general economic information and adnonbank affiliates. Applicant has proposed, however, that BOTS vice, general economic statistical forecasting services broker shares of investment companies sponsored or advised by and industry studies to institutional customers is a Applicant's bank affiliates in accordance with all of the conditions set forth in Norwest Corporation, 76 Federal Reserve Bulletin 79 (1990) permissible nonbanking activity for bank holding com- ("Norwest"). As the Board noted in Norwest, the prohibitions contained in the Board's interpretive rule on investment adviser activities (12 C.F.R. 225.125) would not prevent a bank holding company subsidiary from brokering shares of investment companies 4. See The Bank of Tokyo, Ltd., 74 Federal Reserve Bulletin 685 that are advised by a bank affiliate of the brokerage subsidiary and not (1988). by the parent bank holding company or any of its direct or indirect 5. The Board has previously determined by regulation that the nonbank subsidiaries. For the reasons set forth in Norwest, the Board separate provision of securities brokerage services and of investment does not believe that the potential conflicts of interest that the advisory services is closely related to banking for purposes of the Glass-Steagall Act and the Board's interpretive rule were intended to BHC Act. 12 C.F.R. 225.25(b)(4) and (15). prevent would be present should BOTS broker such securities. 6. Deposits in the U.S. branches and agencies of Applicant are not 3. Banking data are as of March 31, 1988. insured by the FDIC. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

656 Federal Reserve Bulletin • August 1990 panies under section 4(c)(8) of the BHC Act and the and monitoring of BOTS's primary business activities. Board's Regulation Y. 12 C.F.R. 225.25(b)(4). In Applicant has indicated that the proposed foreign addition, the Board has previously determined by exchange activities would bear a reasonable relationorder that providing advice in connection with certain ship to the size of BOTS's government securities domestic and international financial transactions, in- portfolio, that revenues to be generated from these cluding interest rate swaps, interest rate caps and activities are expected to represent only a small perfloors, loan syndications and similar transactions, to centage of BOTS's gross revenues, and that the tradfinancial and nonfinancial institutions is a permissible ing of foreign exchange products will comprise only a nonbanking activity for bank holding companies under small portion of BOTS's total trading volume. Moresection 4(c)(8) of the BHC Act. Signet Banking Cor- over, as a broker-dealer in U.S. government securiporation, 73 Federal Reserve Bulletin 59 (1987); Ca- ties, BOTS is subject to regular review and reporting nadian Imperial Bank of Commerce, 74 Federal Re- requirements by the Securities and Exchange Comserve Bulletin 571 (1988). Applicant has proposed to mission. engage in these activities in accordance with all of the Applicant will not engage in pit arbitrage activities.7 requirements established by the Board in its regula- Floor traders who will execute BOTS's transactions tions and the orders governing these activities. will not have any discretion to engage in transactions other than those directed by BOTS's staff. BOTS's Foreign Exchange Trading staff will have limited trading authority based upon established position limits as determined by senior Applicant proposes to engage in foreign exchange management. Moreover, BOTS will not engage in forward, futures, options, and options on futures market-making or specialist activities, and, as noted, transactions for its own account other than for hedging above, will trade in foreign currency only within purposes. The Board has previously found that these specified and regularly monitored limits.8 The Board activities are closely related to banking for purposes of believes that these controls and limitations should section 4(c)(8) of the BHC Act. The Hongkong and minimize the potential adverse effects involved in the Shanghai Banking Corporation ("Hongkong"), 75 proposed activity. Federal Reserve Bulletin 217 (1989). In that case, the Board also found that the special expertise of the Advice on Foreign Exchange Markets applicant as a primary dealer equipped the applicant particularly well to establish and maintain the opera- BOTS has also proposed to provide, on a limited basis, tional, accounting and control systems necessary to general information and statistical forecasting to instimonitor and conduct prudently the proposed trading tutional customers with respect to foreign exchange activities. The Board also relied on the significant markets in connection with its activities as a broker in experience of the applicant in that case in conducting U.S. government securities. For example, BOTS proforeign exchange trading activities. poses periodically to distribute to institutional inves- In evaluating whether the public benefits of the tors likely to participate in the U.S. government secuproposal outweigh potential adverse effects in this rities market research reports that include a discussion case, the Board has taken into account Applicant's of trends and prospects in the foreign exchange marexperience in trading in foreign exchange markets, kets. In addition, BOTS proposes to provide general including the futures and options markets. Applicant advice on trends in the foreign exchange markets in contends that, as Japan's sole specialized foreign response to specific requests from customers for such exchange bank, its special resources, experience, and advice in connection with the purchase or sale by the expertise in the area of foreign exchange trading will customers of U.S. government securities. make BOTS particularly well-suited to engage in the The Board has previously determined by regulation proposed activity. In this regard, the board of direc- that the activity of providing general information and tors of BOTS will adopt, and periodically review and statistical forecasting with respect to foreign exchange revise, written policies, position limits, internal review markets is closely related to banking. See 12 C.F.R. procedures and financial controls regarding BOTS's 225.25(b)(17). foreign exchange activities. Management will review The combination of the proposed advisory services these activities on a regular basis and the internal audit and the foreign exchange trading activities discussed department will review contract positions regularly to ensure conformity with established policies and position limits. 7. See Citicorp/Citicorp Futures Corporation, 68 Federal Reserve Bulletin 776 (1982). The proposed activities would similarly be moni- 8. Compagnie Financiere de Suez and Banque Indosuez, 72 Federal tored in connection with the overall risk management Reserve Bulletin 141 (1986). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 657 above raises the potential for conflicts of interest.9 In BOTS proposes to provide financial advisory serorder to address these potential adverse effects, BOTS vices of the type permitted by the Board's regulations proposes to provide foreign exchange advice only to to domestic governments. Applicant contends that it institutional customers and only as an adjunct to the has long provided financial advice to the Japanese U.S. government securities brokerage activities of national and municipal governments with respect to the BOTS. BOTS proposes to disclose its role as a prin- issuance of these governments' securities outside of the cipal in foreign exchange to any customers seeking United States. Applicant further contends that the advice from BOTS on foreign exchange matters.10 provision of such financial advice by BOTS, including BOTS will not execute transactions in foreign ex- advice in connection with the issuance in the United change for its customers and BOTS does not propose States of securities of these governments, will provide to hold itself out to the public generally as a source of these governments with valuable market information advice on foreign exchange transactions. from a daily participant in the market, thereby enhanc- The Board believes that these limitations and com- ing competition and promoting efficiency. There is no mitments substantially address the potential conflicts evidence in the record that the conduct of this activity of interests that may result from the proposal by BOTS would result in any adverse effects. to combine the activities of trading in foreign exchange In light of these facts and prior decisions, the Board for its own account and providing limited advice to finds that the proposed advisory services to Japanese customers on foreign exchange transactions. governments and their agencies are closely related to banking for purposes of section 4(c)(8) of the BHC Act. Financial Advice to Japanese Governments and Agencies Financial Factors, Managerial Resources and Other Considerations Applicant has also applied to provide financial advice to the Japanese national and municipal governments In order to approve this application, the Board is and their agencies. The Board has not previously required to determine that the performance of the authorized bank holding companies to provide finan- proposed activities by Applicant "can reasonably be cial advice to Japanese governments and agencies expected to produce benefits to the public, such as pursuant to section 4(c)(8) of the BHC Act. The Board greater convenience, increased competition, or gains has by regulation, however, determined that providing in efficiency, that outweigh possible adverse effects, financial advice to domestic state and local govern- such as undue concentration of resources, decreased ments, such as advice regarding the issuance of their or unfair competition, conflicts of interests, or unsecurities, is closely related to banking for purposes of sound banking practices." 12 U.S.C. § 1843(c)(8). section 4(c)(8) of the BHC Act and, therefore, permis- In evaluating these factors under section 4 of the sible for bank holding companies. 12 C.F.R. BHC Act, the Board considers the financial condition 225.25(b)(4)(v). In addition, the Board has by order and resources of the applicant and its subsidiaries and previously approved providing financial advice to the the effect of the proposal on these resources.12 In this Canadian federal, provincial and municipal govern- case, the primary capital ratio of Applicant, as publicly ments and their agencies,11 and has authorized foreign reported, is below the minimum level specified in the subsidiaries of domestic bank holding companies to Board's Capital Adequacy Guidelines. After making provide financial advisory services to foreign govern- adjustments to reflect Japanese banking and accountmental entities. 12 C.F.R. 211.5(d)(8). ing practices, however, including consideration of a portion of the unrealized appreciation in Applicant's portfolio of equity securities consistent with the prin- 9. The Board's regulations authorize a bank holding company to ciples of the Basle capital framework, Applicant's provide investment advice regarding foreign exchange transactions capital ratio meets United States standards. only where the bank holding company does not trade in foreign The Board also has considered additional factors exchange for its own account. 12 C.F.R. 225.25(b)(17)(i). 10. In particular, BOTS intends to inform its institutional customers that mitigate its concern in this case. The Board notes of its role as a principal in foreign exchange trading in two ways. First, that Applicant is in compliance with the capital and it will send out a special disclosure statement to each customer at the other financial requirements for banking organizations commencement of the customer relationship (or at the time of commencing foreign exchange trading) informing the customer that, in Japan. In addition, the Board notes that the capital as a general matter, BOTS might hold a principal's position in certain of Applicant currently accords with the minimum of the foreign exchange markets as to which advice is being provided. Second, at the time BOTS provides advice relating to the foreign exchange markets, the customer will be informed that BOTS may hold a principal's position in the relevant foreign exchange markets. 12. 12 C.F.R. 225.24; The Fuji Bank Limited, 75 Federal Reserve 11. The Bank of Nova Scotia, 74 Federal Reserve Bulletin 249 Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve (1988). Bulletin 155, 156 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

658 Federal Reserve Bulletin • August 1990 requirements established by the Basle Committee cap- organizations have an unfair competitive advantage in ital framework for year-end 1990. Based on these and the United States over domestic banking organizaother facts of record, the Board concludes that finan- tions. In my view, such foreign organizations should cial and managerial considerations are consistent with be judged against the same financial and managerial approval of the application. standards, including the Board's capital adequacy Consummation of the proposal as a whole would guidelines, as are applied to domestic banking organiprovide added convenience to Applicant's and BOTS's zations. The majority concludes that Applicant's pricustomers. In addition, the Board expects that the de mary capital meets United States standards. To do so, novo entry of BOTS into the market for the proposed however, the majority makes adjustments that are not services would increase the level of competition among available for United States banks under guidelines that providers of these services. Consummation of this have not yet become effective for U.S. or foreign proposal subject to the terms and conditions discussed banking organizations. in this order is not likely to result in any significantly In addition, I am concerned that while some progadverse effects. Accordingly, the Board has determined ress is being made in opening Japanese markets to that the performance of the proposed activities by U.S. banking organizations and other financial institu- Applicant can reasonably be expected to produce pub- tions, U.S. banking organizations, in my opinion, are lic benefits that would outweigh potential adverse ef- still far from being afforded the full opportunity to fects under the proper incident to banking standard of compete in Japan. section 4(c)(8) of the BHC Act. Based on the foregoing and other facts of record, June 4, 1990 and subject to the commitments made by Applicant, the Board has determined that the balance of public The Chase Manhattan Corporation interest factors it is required to consider under section New York, New York 4(c)(8) is favorable. Accordingly, the Board has determined that the application should be, and hereby is, Order Approving Application to Act as Agent in the approved. This determination is subject to all of the Private Placement of All Types of Securities and conditions set forth in the Board's Regulation Y, Engage in Riskless Principal Activities including those in sections 225.4(d) and 225.23(b), and to the Board's authority to require modification or The Chase Manhattan Corporation, New York, New termination of the activities of a holding company to York ("Applicant"), a bank holding company within assure compliance with, or to prevent evasion of, the the meaning of the Bank Holding Company Act provisions and purposes of the BHC Act and the ("BHC Act"), has applied for the Board's approval Board's regulations and orders issued thereunder. under section 4(c)(8) of the BHC Act (12 U.S.C. This transaction shall not be consummated later than § 1843(c)(8)) and section 225.23 of the Board's Reguthree months after the effective date of this Order, lation Y (12 C.F.R. 225.23), for its subsidiary, Chase unless such period is extended for good cause by the Securities, Inc., New York, New York ("Company"), Board or by the Federal Reserve Bank of San Franto act as agent in the private placement of all types of cisco, pursuant to delegated authority. securities, including providing related advisory ser- By order of the Board of Governors, effective vices, and to buy and sell all types of securities on the June 4, 1990. order of investors as a "riskless principal". Applicant, with consolidated assets of $107.4 bil- Voting for this action: Chairman Greenspan and Governors lion, is the second largest banking organization in the Johnson, Kelley, LaWare, and Mullins. Voting against this nation.1 It operates seven subsidiary banks and enaction: Governor Seger. Absent and not voting: Governor gages in a broad range of permissible nonbanking Angell. activities in the United States, including engaging JENNIFER J. JOHNSON through Company to a limited extent in underwriting Associate Secretary of the Board and dealing in certain types of securities.2 Company is Dissenting Statement of Governor Seger 1. Data are as of December 31, 1989. 2. J.P. Morgan & Co. Incorporated, The Chase Manhattan Corporation, Bankers Trust New York Corporation, Citicorp and Security I dissent from the Board's action in this case. I believe Pacific Corporation, 75 Federal Reserve Bulletin 192 (1989); The that foreign banking organizations whose primary cap- Chase Manhattan Corporation, 74 Federal Reserve Bulletin 391 (1988); Chemical New York Corporation, The Chase Manhattan ital, based on U.S. accounting principles, is below the Corporation, Bankers Trust New York Corporation, Citicorp, Manu- Board's minimum capital guidelines for U.S. banking facturers Hanover Corporation and Security Pacific Corporation, 73 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 659 and will continue to be a broker-dealer registered with activities are so closely related to banking as to be a the Securities and Exchange Commission and subject proper incident thereto within the meaning of section to the record-keeping, reporting, fiduciary standards, 4(c)(8) of the BHC Act.5 Applicant has committed that and other requirements of the Securities Exchange Act Company will conduct its private placement and riskof 1934 and the National Association of Securities less principal activities using the same methods and Dealers. procedures and subject to the same prudential limita- Notice of the application, affording interested per- tions approved by the Board in the J.P. Morgan sons an opportunity to submit comments on the pro- Order.6 posal, has been published (54 Federal Register 31,249 The financial and managerial resources of Applicant (1989)). The time for filing comments has expired, and are consistent with approval. In addition, consummathe Board has considered the application and all tion of the proposal would provide added convenience comments received in light of the public interest to Applicant's customers. The Board also expects that factors set forth in section 4(c)(8) of the BHC Act. The the de novo entry of Applicant into the market for Board received written comments opposing Board these services would increase the level of competition approval of the application from the Securities Indus- among providers of these services. Under the frametry Association ("SIA"), a trade association of the work established in this and prior decisions, consuminvestment banking industry, and the Investment mation of this proposal is not likely to result in any Company Institute ("ICI"), a trade association of the significant adverse effects, such as undue concentramutual fund industry.3 The Board received written tion of resources, decreased or unfair competition, comments in favor of Board approval of the applica- conflicts of interests, or unsound banking practices. tion from the Bank Capital Markets Association, a Accordingly, the Board has determined that the pertrade association of commercial banks and their affil- formance of the proposed activities by Applicant can iates. reasonably be expected to produce public benefits that would outweigh adverse effects under the proper inci- The Board has previously determined that acting as dent to banking standard of section 4(c)(8) of the BHC agent in the private placement of securities and pur- Act. chasing and selling securities on the order of investors as a "riskless principal" do not constitute underwrit- Based on the above, the Board has determined to ing and dealing in securities for purposes of section 20 approve Applicant's application subject to all of the of the Glass-Steagall Act, and that revenue derived terms and conditions set forth in this Order and in the from these activities is not subject to the 10 percent above-noted Board Orders that relate to these activirevenue limitation on ineligible securities underwriting ties. and dealing.4 Additionally, the Board found that sub- The Board's determination is subject to all of the ject to the prudential limitations established in those conditions set forth in the Board's Regulation Y, cases to address the potential for conflicts of interests, including those in sections 225.4(d) and 225.23(b), and unsound banking practices or other adverse effects, to the Board's authority to require modification or the proposed private placement and riskless principal 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 Federal Reserve Bulletin 731 (1987); The Chase Manhattan Corpora- evasion of, the provisions of the BHC Act and the tion, 73 Federal Reserve Bulletin 607 (1987). Board's regulations and Orders issued thereunder. 3. The ICI has objected to the proposal to the extent that it would This transaction shall not be consummated later allow Applicant to privately place ineligible securities issued by its affiliates or representing interests in, or secured by, obligations than three months after the effective date of this originated or sponsored by its affiliates. For the reasons set forth in the Order Approving Modifications to Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989), and in Bankers Trust New York Corporation, 75 Federal Reserve Bulletin 829 (1989), and subject to the 5. The SIA argues that the fact that Applicant is proposing that limitations set forth in those Orders, the Board believes that Company Company privately place all types of securities, as opposed to only may, consistent with the Glass-Steagall Act, privately place such high grade commercial paper notes, is significant in assessing the securities. Applicant has committed that Company will comply with applicability of the Glass-Steagall Act prohibitions in this case. the limitations set forth in the above-mentioned Orders with respect to Securities Industry Association v. Board of Governors, 807 F.2d 1052 this activity. (D.C. Cir. 1986), cert, denied, 483 U.S. 1005 (1987). The Board has The ICI has also objected to Applicant's proposal to the extent that fully considered and rejected this argument in Bankers Trust, where it could be construed to seek approval for Company to privately place the Board found that the fact that a bank holding company wishes to as agent securities of investment companies that are sponsored or privately place all types of securities in a manner similar to that used advised by Applicant or any of its affiliates. Applicant has not in placing high grade commercial paper would not, by itself, change requested approval to privately place as agent such securities. the activity into underwriting and dealing activities that would be 4. Bankers Trust New York Corporation, 75 Federal Reserve prohibited under the Glass-Steagall Act. Bulletin 829 (1989) ("Bankers Trust"); See also J.P. Morgan & 6. Company will place securities with investors who qualify as Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. "institutional customers" as that term was defined in The Chase Morgan"). Manhattan Corporation, 74 Federal Reserve Bulletin 704 (1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

660 Federal Reserve Bulletin • August 1990 Order, unless such period is extended for good cause merchant ("FCM"). Chemical Futures engages in the by the Board or by the Federal Reserve Bank of New solicitation, execution and clearance of futures con- York, pursuant to delegated authority. tracts and options on futures contracts for a variety of By order of the Board of Governors, effective financial commodities and instruments pursuant to June 11, 1990. section 225.25(b)(18) of the Board's Regulation Y. Chemical Futures also provides advisory services to Voting for this action: Vice Chairman Johnson and Gover- non-affiliated persons with respect to such futures nors Kelley, LaWare, and Mullins. Absent and not voting: contracts pursuant to section 225.25(b)(19) of the Chairman Greenspan, and Governors Seger and Angell. Board's Regulation Y. Chemical, has applied to expand de novo both Chemical Futures execution and invest- JENNIFER J. JOHNSON ment advisory services to include futures contracts Associate Secretary of the Board and options on futures contracts on certain stock indexes traded on major commodity exchanges set Chemical Banking Corporation forth in the attached Appendix. Chemical Manage- New York, New York ment is a newly-formed nonoperating subsidiary of Chemical currently seeking registration as a commod- Order Approving Application to Solicit, Execute and ity trading advisor ("CTA") to the Commodity Fu- Clear Financially-Related Index Futures Contracts tures Trading Commission. Chemical Management and Options on Futures Contracts on Major proposes to provide investment advice on futures Commodity Exchanges and to Provide Investment contracts and options on futures contracts on stock Advice Thereon indexes on major commodities exchanges described in the attached Appendix. Chemical Banking Corporation, New York, New York The Board has by Order previously approved the ("Chemical"), a bank holding company within the execution and clearance of futures contracts and opmeaning of the Bank Holding Company Act ("BHC tions on futures contracts on all of the stock indexes Act"), has applied pursuant to section 4(c)(8) of the proposed by Chemical in this case.2 Chemical Futures BHC Act (12 U.S.C. § 1843(c)(8)) and section is currently conducting FCM activities on similar 225.23(a)(3) of the Board's Regulation Y (12 C.F.R. indexes and its prior experience indicates that it would 225.23(a)(3)), to engage de novo through Chemical have the expertise to provide the proposed services. Futures, Inc., New York, New York ("Chemical Accordingly, the Board believes that, in the manner Futures"), in soliciting, executing, and clearing cerproposed, and subject to the conditions set forth in tain futures contracts and options on futures contracts Regulation Y, the proposed execution and clearance on major commodity exchanges and providing investactivities are closely related to banking. ment advice on these contracts, and to engage through The Board has by Order also previously permitted Chemical Futures Management, Inc., New York, New bank holding companies to provide investment advis- York ("Chemical Management"), in providing investory services as an FCM or CTA with respect to the ment advice on these contracts. purchase and sale of most of these indexes.3 Chemical Notice of the application, affording interested perhas committed to limit its investment advisory sersons an opportunity to submit comments has been vices for Chemical Futures as an FCM, and Chemical duly published (55 Federal Register 3103 (1990)). The Futures and Chemical Management as CTAs, so as to time for filing comments has expired, and the Board be consistent with the limits in Regulation Y that are has considered the application and all comments replaced on the provision of similar advisory services. ceived in light of the public interest factors set forth in Furthermore, both CTAs and FCMs are subject to section 4(c)(8) of the BHC Act. regulation under the Commodity Exchange Act and Chemical, with total consolidated assets of $74.2 the regulations of the Commodity Futures Trading billion, is the third largest banking organization in New Commission in order to prevent potential abuses by a York.1 Chemical operates banking subsidiaries in New registered advisor. Under these circumstances, and in York, New Jersey, Delaware, and Texas, and engages through certain other subsidiaries in a variety of nonbanking activities. 2. Chemical New York Corporation, 74 Federal Reserve Bulletin Chemical Futures is a wholly owned nonbanking 393 (1988). subsidiary of Chemical registered with the Commodity 3. See The Long-Term Credit Bank of Japan, Limited, 74 Federal Futures Trading Commission as a futures commission Reserve Bulletin 573 (1988); Citicorp, 73 Federal Reserve Bulletin 220 (1987); Manufacturers Hanover Corporation, 72 Federal Reserve Bulletin 144 (1986); Bankers Trust New York Corporation, 71 Federal Reserve Bulletin 111 (1985); Manufacturers Hanover Corporation, 70 1. All financial data are as of March 31, 1990. Federal Reserve Bulletin 369 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 661 light of the Board's approval of all of the indexes for months after the effective date of this Order, unless purposes of execution and clearance activities, the such period is extended for good cause by the Board or Board believes that the proposed investment advisory by the Federal Reserve Bank of New York, pursuant activity is closely related to banking. to delegated authority. In order to approve this application, the Board is By order of the Board of Governors, effective also required to determine that the performance of the June 11, 1990. proposed activities by Chemical "can reasonably be expected to produce benefits to the public . . . that Voting for this action: Vice Chairman Johnson and Goveroutweigh possible adverse effects, such as undue nors Kelley, LaWare, and Mullins. Absent and not voting: Chairman Greenspan and Governors Seger and Angell. concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking JENNIFER J. JOHNSON practices." 12 U.S.C. § 1843(c)(8). Associate Secretary of the Board The Board expects that the de novo entry of Chemical into the market for these services would increase the level of competition among providers of these APPENDIX services already in operation and provide greater convenience to Chemical's customers. Accordingly, Index and Options Provisions the Board concludes that the performance of the proposed activities by Chemical can reasonably be Chicago Mercantile Exchange expected to provide benefits to the public. The Board also has considered the potential for — Standard & Poor's 100 Stock Price Index futures adverse effects that may be associated with this procontract;1 posal. There is no evidence in the record that consum- — Standard & Poor's 500 Stock Price Index futures mation of the proposed FCM and CTA activities contract (the "S&P 500");2 would result in any adverse effects such as undue — options on the S&P 500;3 concentration of resources, decreased or unfair com- — Standard & Poor's Over-the-Counter 250 Stock petition, conflicts of interests, or unsound banking Index futures contract;4 practices. In addition, the Board has taken into ac- — the Major Market Index futures contract;5 count and has relied on the regulatory framework established pursuant to law by the CFTC for the Chicago Board of Trade trading of futures, as well as the conditions set forth in section 225.25(b)(18) of Regulation Y with respect to — the Major Market Index Maxi Stock Index fuexecuting and clearing futures contracts and in section tures contract;6 225.25(b)(19) of Regulation Y with respect to the — the Major Market Index Mini Stock Index futures provision of investment advice as a FCM or CTA as to contract;7 futures contracts or options thereon. — the GNMA Cash Settled futures contract;8 The financial and managerial resources and future — the NASD Financial Index futures contract;9 prospects of Chemical are considered consistent with approval. Based on consideration of all the relevant facts, the Board concludes that the balance of the public interest factors that it is required to consider under section 4(c)(8) is favorable. Accordingly, based 1. The Long-Term Credit Bank of Japan, Limited, 74 Federal on all the facts of record, and subject to the conditions Reserve Bulletin (1988) (execution, clearance and advice) [hereinafter in this Order, the Board has determined that the pro- "Long-Term Credit"]; Citicorp, 73 Federal Reserve Bulletin 220 posed application should be, and hereby is, approved. (1987) (advice); J.P. Morgan & Co., Incorporated, 71 Federal Reserve Bulletin 251 (1985) (execution and clearance) [hereinafter "J.P. This determination is subject to all of the conditions Morgan"]. set forth in Regulation Y, including sections 225.4(d) 2. Long-Term Credit, supra; J.P. Morgan, supra; Citicorp, supra. and 225.23(b)(3)(12 C.F.R. 225.4(d) and 225.23(b)(3)), 3. Long-Term Credit, supra; J.P. Morgan, supra; Citicorp, supra. 4. Saban, S.A., 73 Federal Reserve Bulletin 224 (1987) (execution and to the Board's authority to require such modificaand clearance) [hereinafter "Saban"]. tion or termination of the activities of a bank holding 5. Long-Term Credit, supra; J.P. Morgan, supra; Northern Trust company or any of its subsidiaries as the Board finds Corporation, 74 Federal Reserve Bulletin 333 (1988) (execution and clearance) [hereinafter "Northern Trust /"]. necessary to assure compliance with, or to prevent 6. Saban, supra. evasion of, the provisions and purposes of the BHC Act 7. Saban, supra. and the Board's regulations and orders thereunder. 8. Saban, supra. 9. Chase Manhattan Corporation, 72 Federal Reserve Bulletin 203 The transaction shall be made not later than three (1986) (execution and clearance) [hereinafter "Chase"]. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

662 Federal Reserve Bulletin • August 1990 New York Futures Exchange (a subsidiary of the ny"), to provide investment advisory and brokerage New York Stock Exchange) services on a combined basis to institutional and retail customers ("full-service brokerage activities"), to act — the New York Stock Exchange Composite as agent in the private placement of all types of Index futures contract (the "NYSE securities, including providing related advisory ser- Composite");10 vices, and to purchase and sell all types of securities on the order of investors as a "riskless principal". — options on the NYSE Composite;11 Chemical, with consolidated assets of $75.8 billion, is the third largest banking organization in the nation.1 Kansas City Board of Trade It operates 38 subsidiary banks and engages directly and through subsidiaries in a variety of nonbanking — the Value Line Average Stock Index futures activities, including engaging through Company in contract;12 underwriting and dealing in, to a limited extent, certain — the Value Line Futures (Maxi) Index futures securities.2 contract;13 Notice of the application, affording interested persons an opportunity to submit comments on the pro- — the Value Line Futures (Mini) futures contract;14 posal, has been published (54 Federal Register 41,163 (1989)). The time for filing comments has expired, and London International Financial Futures Exchange the Board has considered the application and all — the Financial Times Stock Index Futures comments received in light of the public interest contract;15 factors set forth in section 4(c)(8) of the BHC Act. The Board received written comments opposing the appli- Singapore International Monetary Exchange cation from the Securities Industry Association ("SIA"), a trade association of the investment bank- — the Nikkei Stock Average futures contract;16 ing industry, and the Investment Company Institute ("ICI"), a trade association of the mutual fund Philadelphia Board of Trade industry.3 The Board has previously determined by Order that — the National Over-the-Counter Index futures full-service brokerage activities are permissible noncontract.17 banking activities for bank holding companies under section 4(c)(8) of the BHC Act. PNC Financial Corp., Chemical Banking Corporation 75 Federal Reserve Bulletin 396 (1989); Bank of New New York, New York Order Approving Application to Conduct Private 1. Data are as of September 30, 1989. 2. See Chemical Banking Corporation, 73 Federal Reserve Bulletin Placements as Agent of All Types of Securities and 616, 731 (1987), and 12 C.F.R. 225.25(b)(16). Company also engages Engage in Full Service Brokerage Activities in investment advisory and securities brokerage activities on a separate basis pursuant to sections 225.25(b)(4) and (15) of the Board's Regulation Y. 12 C.F.R. 225.25(b)(4) and (15). Chemical Banking Corporation, New York, New 3. The ICI has objected to Chemical's proposal to the extent that York, ("Chemical"), a bank holding company within Company would privately place, broker, or recommend shares of investment companies that are sponsored or advised by Chemical or the meaning of the Bank Holding Company Act its affiliates. Chemical has committed not to recommend such shares, ("BHC Act"), has applied for the Board's approval and has not applied to privately place such shares. Chemical proposes, however, that Company be permitted to act as broker for under section 4(c)(8) of the BHC Act (12 U.S.C. shares of investment companies that are advised by a bank affiliate of § 1843(c)(8)) and section 225.23 of the Board's Regu- Company or an operating subsidiary of a bank affiliate of Company. lation Y (12 C.F.R. 225.23), for its subsidiary, Chem- As the Board has previously noted in Norwest Corporation, 76 Federal Reserve Bulletin 79 (1990) and Fleet/Norstar Financial ical Securities, Inc., New York, New York ("Compa- Group, Inc., 76 Federal Reserve Bulletin 459 (1990). The prohibitions contained in the Board's interpretive rule on investment adviser activities (12 C.F.R. 225.125) would not prevent a bank holding company subsidiary from acting as broker with respect to shares of 10. Northern Trust J, supra. investment companies that are advised solely by a bank affiliate of the 11. Northern Trust I, supra. brokerage subsidiary, and are not advised by the parent holding 12. Manufacturers Hanover Corporation, 72 Federal Reserve Bulcompany or any of its direct or indirect nonbank subsidiaries. For the letin 144 (1986) (execution and clearance). reasons set forth in those Orders, the Board does not believe that the 13. Saban, supra. potential conflicts of interest that the Glass-Steagall Act and the 14. Saban, supra. Board's interpretive rule were intended to prevent would be present 15. BankAmerica Corporation, 75 Federal Reserve Bulletin 78 should Company broker shares of investment companies that are (1989) (execution and clearance) [hereinafter "BankAmerica"]. advised directly by a bank affiliate of Company or an operating 16. BankAmerica, supra. subsidiary of a bank affiliate of Company. 17. Chase, supra. 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Legal Developments 663 England Corporation, 74 Federal Reserve Bulletin 700 affiliates to ensure that an independent and thorough (1988). Chemical has stated that Company will engage credit evaluation has been undertaken with respect to in these activities in accordance with all of the condi- the participation of the bank in these credit extensions tions set forth in these Orders. to issuers of securities privately placed by an agent The Board has also found that, subject to certain affiliated with the bank. prudential limitations to address the potential for con- Chemical also has proposed to have Company place flicts of interests, unsound banking practices or other securities with its parent holding company or with a adverse effects, the proposed private placement and nonbank subsidiary of the parent company consistent riskless principal activities are so closely related to with the Board's ruling in J.P. Morgan. In this regard, banking as to be a proper incident thereto within the Chemical will establish both individual and aggregate meaning of section 4(c)(8) of the BHC Act. In addition, limits on the investment by affiliates of the section 20 the Board has previously determined that acting as subsidiary, in any particular issue of securities that is agent in the private placement of securities and pur- placed by the section 20 subsidiary and will establish chasing and selling securities on the order of investors appropriate internal policies, procedures, and limitaas a "riskless principal" do not constitute underwrit- tions regarding the amount of securities of any particing and dealing in securities for purposes of section 20 ular issue placed by Company that may be purchased of the Glass-Steagall Act, and that revenue derived by Chemical and each of its nonbanking subsidiaries, from these activities is not subject to the 10 percent individually and in the aggregate.7 These policies and revenue limitation on ineligible securities underwriting procedures, as well as the purchases themselves, will and dealing.4 Chemical has committed that Company be reviewed by the Federal Reserve Bank of New will conduct its private placement and riskless princi- York. pal activities using the same methods and procedures, The record shows that under the framework estaband subject to the same prudential limitations estab- lished in" this and prior decisions, consummation of lished by the Board in the Bankers Trust Order as this proposal is not likely to result in any significant modified by the J.P. Morgan Order.5 adverse effects, such as undue concentration of re- Chemical has proposed to have its affiliated banks sources, decreased or unfair competition, conflicts of extend credit to an issuer whose debt securities have interest, or unsound banking practices. Consummabeen placed by the section 20 subsidiary where the tion of the proposal would provide added convenience proceeds would be used to pay the principal amount of to Chemical's customers. In addition, the Board exthe securities at maturity. Chemical has committed pects that the de novo entry of Chemical into the that these extensions of credit will conform to the market for these services would increase the level of limitations set forth in the Board's decision in J.P. competition among providers of these services. Ac- Morgan, including the requirement that a period of at cordingly, the Board has determined that the perforleast three years elapse from the time of the placement mance of the proposed activities by Chemical can of the securities to the decision to extend credit, that reasonably be expected to produce public benefits Chemical maintain adequate documentation of these which would outweigh adverse effects under the transactions and decisions, and that the extensions of proper incident to banking standard of section 4(c)(8) credit meet prudent and objective standards as well as of the BHC Act. the standards set out in section 23B of the Federal Based on the above, the Board has determined to Reserve Act.6 The Federal Reserve Bank of New approve Chemical's application subject to all of the York will closely review loan documentation of bank terms and conditions set forth in the above-noted provisions of Regulation Y that relate to these activities, and subject as well to all of the terms and conditions set forth in the above-noted Board Orders 4. J.P. Morgan & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corpo- that relate to these activities. The Board's determinaration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). tion is subject to all of the conditions set forth in the 5. The SIA argues that the fact that Chemical is proposing that Company privately place all types of securities, as opposed to only high grade commercial paper notes, is significant in assessing the applicability of the Glass-Steagall Act prohibitions in this case. 7. The limit established shall not exceed 50 percent of the issue Securities Industry Association v. Board of Governors, 807 F.2d 1052 being placed. Additionally, in the development of these policies and (D.C. Cir. 1986), cert, denied, 483 U.S. 1005 (1987) ("Bankers Trust procedures, Chemical will incorporate, with respect to placements of II"). The Board has fully considered and rejected this argument in securities, the limitations established by the Board in condition 12 of Bankers Trust, where the Board found that the fact that a bank holding its Order regarding aggregate exposure of the holding company on a company wishes to privately place all types of securities in a manner consolidated basis to any single customer whose securities are undersimilar to that used in placing high grade commercial paper, would written or dealt in by Company. J.P. Morgan & Co. Incorporated, not, by itself, change the activity into underwriting and dealing The Chase Manhattan Corporation, Bankers Trust New York Corpoactivities that would be prohibited under the Glass-Steagall Act. ration, Citicorp and Security Pacific Corporation, 75 Federal Reserve 6. 12 U.S.C. § 371c-l. Bulletin 192 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

664 Federal Reserve Bulletin • August 1990 Board's Regulation Y, including those in sections Citicorp, with total assets of $230.6 billion,1 is the 225.4(d) and 225.23(b), and to the Board's authority largest banking organization in the United States. It to require modification or termination of the activi- operates nine banking subsidiaries and engages, dities of a bank holding company or any of its subsid- rectly and through subsidiaries, in a variety of noniaries as the Board finds necessary to assure compli- banking activities. CFC is a futures commission ance with, and to prevent evasion of, the provisions merchant ("FCM") registered with the Commodity of the BHC Act and the Board's regulations and Futures Trading Commission ("CFTC") that en- Orders issued thereunder. This transaction shall not gages in the execution and clearance of futures be consummated later than three months after the contracts and provides advisory services with reeffective date of this Order, unless such period is spect to these futures.2 extended for good cause by the Board or by the In order to approve this application, the Board is Federal Reserve Bank of New York, pursuant to required to determine whether the proposed activity delegated authority. is so closely related to banking as to be a proper By order of the Board of Governors, effective incident thereto within the meaning of section 4(c)(8) June 11, 1990. of the BHC Act. In determining whether an activity is a "proper incident" to banking, the Board must Voting for this action: Vice Chairman Johnson and Gover- consider whether the activity can reasonably be nors Kelley, La Ware, and Mullins. Absent and not voting: expected to produce benefits to the public that out- Chairman Greenspan and Governors Seger and Angell. weigh possible adverse effects. This consideration also requires an evaluation of the financial and JENNIFER J. JOHNSON managerial aspects associated with the proposal. Associate Secretary of the Board 12 C.F.R. 225.24. FCM activities with respect to the Yen/Dollar Citicorp futures contracts are permissible under Regulation Y New York, New York as futures contracts on foreign exchange. 12 C.F.R. 225.25(b)(18) and (b)(19). FCM activities with respect to the Euroyen and Eurodollar Futures, which Order Approving Application to Execute and Clear are futures contracts based on the Tokyo Interbank Futures Contracts on the Tokyo International offered rates for three-month Euroyen and Eurodol- Financial Futures Exchange and to Provide Futures lar deposits, have not been previously approved by Advisory Services the Board under section 4(c)(8) of the BHC Act.3 The Euroyen and Eurodollar futures contracts, while not Citicorp, New York, New York ("Citicorp"), a bank futures contracts on money market instruments holding company within the meaning of the Bank themselves, are futures contracts based on the yield Holding Company Act (the "BHC Act"), has ap- on money market instruments. Like futures contracts plied, pursuant to section 4(c)(8) of the BHC Act based on stock and bond indices, the Euroyen and (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Eurodollar futures contracts are settled in cash and Board's Regulation Y (12 C.F.R. 225.23), to engage, are designed to allow customers to hedge the market de novo, through its wholly owned subsidiary, Citi- risk associated with holding financial assets, includcorp Futures Corporation, New York, New York ing the underlying money market instruments. As is ("CFC"), in the provision of execution, clearance, the case with futures contracts based on bond indiand investment advisory services on futures con- ces, the pricing of Euroyen and Eurodollar futures tracts traded on the Tokyo International Financial contracts is determined by reference to interest Futures Exchange ("TIFFE"). The contracts pro- rates.4 posed to be traded on the TIFFE are Euroyen futures contracts, Eurodollar futures contracts, and Yen/ Dollar futures contracts. Citicorp proposes to offer 1. Data are as of December 31, 1989. these services worldwide. 2. Citicorp, 73 Federal Reserve Bulletin 220 (1987) ("Citicorp"). 3. The Board has approved a subsidiary of a bank to conduct Notice of the application, affording interested peractivities on the TIFFE under Regulation K (12 C.F.R. 211). See sons an opportunity to submit comments, has been Board Letter, dated April 2, 1990. duly published (54 Federal Register 38,437 (1989)). 4. In addition, the Board has approved the application of a bank holding company to act as a broker and principal with respect to The time for filing comments has expired, and the interest rate swaps and swap derivative products and to act as an Board has considered the application and all com- investment advisor with respect to such instruments. The Sumitomo Bank, Limited, 75 Federal Reserve Bulletin 582 (1989). Interest rate ments received in light of the public interest factors set swaps are similar in function to the futures contracts for which forth in section 4(c)(8) of the BHC Act. Citicorp proposes to provide FCM services. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 665 Execution and Clearance Services transactions for futures and options that are not specifically listed in the Board's Regulation Y.9 The The execution and clearance services for Euroyen and futures advisory services that Citicorp proposes to Eurodollar futures contracts are analogous to execu- provide are identical to the advisory services prevition and clearance services on financial futures con- ously approved by the Board by regulation and Order tracts previously approved by the Board under section with respect to other financially related futures con- 4(c)(8) of the BHC Act. For example, the Board has tracts. previously determined, by regulation, that the provi- Thus, for the reasons specified above and in the sion of FCM services with respect to money market Board's previous determinations regarding FCM adinstruments is closely related to banking.5 The Board visory services, the Board concludes that, subject to also has approved the execution and clearance of the conditions set forth in section 225.25(b)(19) of the futures contracts based on major stock and bond Board's Regulation Y, Citicorp's proposal to provide, indices.6 In addition, the Board has authorized a through CFC, advisory services with respect to the subsidiary of an Edge corporation to execute and clear specified futures contracts traded on the TIFFE is interest rate futures contracts based on money market closely related to banking. instruments, pursuant to section 25(a) of the Federal In order to approve this application, the Board also Reserve Act (12 U.S.C. § 611) and Regulation K is required to determine that the performance of the (12 C.F.R. 211.5).7 proposed activity by Citicorp "can reasonably be Thus, for the reasons specified above and in the expected to produce benefits to the public . . . that Board's previous determinations regarding FCM exe- outweigh possible adverse effects ..."12 U.S.C. § cution and clearance services the Board concludes 1843. The record indicates that consummation of Citthat, subject to the conditions set forth in section icorp's proposal can reasonably be expected to pro- 225.25(b)(18) of the Board's Regulation Y, Citicorp's vide benefits to the public. Citicorp's performance of proposal to provide, through CFC, execution and these activities would provide added convenience to clearance services with respect to the specified futures those clients of Citicorp and its subsidiaries that trade contracts traded on the TIFFE is closely related to in the futures markets for these instruments. In addibanking. tion, the Board expects that the de novo entry of Citicorp into the market for these services would Futures Advisory Services increase the level of competition among providers of these services already in operation. Accordingly, the Citicorp has proposed that CFC provide investment Board concludes that the performance of the proposed advice, separately and in conjunction with execution activities by Citicorp can reasonably be expected to and clearance services, on the Euroyen and Eurodol- provide benefits to the public. lar futures contracts. The Board has previously deter- The Board has considered the potential for adverse mined that providing investment advice as an FCM, effects that may be associated with this proposal. The and the combination of advisory services with execu- Board has previously determined that the combination tion and clearance services for financially sophisti- of investment advisory services and the execution and cated customers with respect to financially related clearance of futures contracts would not give rise to futures contracts, such as money market instruments, adverse effects.10 The Board found that the provision is closely related to banking, and, subject to conditions of investment advisory services on futures contracts to address possible risk or conflicts, is a proper inci- that an FCM may execute and clear would not entail dent to banking.8 In addition, the Board has approved risks or conflicts of interest different from those conas closely related to banking the combination of advis- sidered and addressed by the Board in its approval of ory services and execution and clearance of futures FCM execution and clearing services. In making its determination, the Board relied upon the regulatory framework established by the CFTC for the trading of 5. 12 C.F.R. 225.25(b)(18). 6. J.P. Morgan & Co., Incorporated, 71 Federal Reserve Bulletin 251 (1985) ("J.P. Morgan "); Bankers Trust New York Corporation, 71 Federal Reserve Bulletin 801 (1985) ("Bankers Trust"). 9. Northern Trust Corporation, 74 Federal Reserve Bulletin 333 1. Citicorp Overseas Investment Corporation, 68 Federal Reserve (1988); Bankers Trust New York Corporation, 71 Federal Reserve Bulletin 671 (1982) ("Citicorp Overseas"). Bulletin 111 (1985); and Citicorp. In Citicorp, the Board decided that 8. 12 C.F.R. 225.25(b)(19). Section 225.25(b)(19) of the Board's the proposed combination of futures advisory and execution and Regulation Y (12 C.F.R. 225.25(b)(19)) limits an FCM that is provid- clearance services would not result in an alteration of the functional ing investment advice related to futures contracts it is executing and nature and scope of the two component services or their close clearing to providing such advice to financial institutions and other relationship to banking. financially sophisticated customers that have significant dealings or 10. 12 C.F.R. 225.25(b)(19); Bankers Trust New York Corporation, holdings in the underlying commodities, securities, or instruments. 71 Federal Reserve Bulletin 111 (1985); and Citicorp. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

666 Federal Reserve Bulletin • August 1990 futures contracts, and the conditions set forth in tions and Orders issued thereunder, or to prevent Regulation Y with respect to the execution and clear- evasion thereof. ance of futures contracts, including the requirement The transaction shall be made not later than three that advice be limited to financially sophisticated cus- months after the effective date of this Order, unless tomers that have significant dealings or holdings in the such Order is extended for good cause by the Board or underlying commodities, securities or instruments. by the Federal Reserve Bank of New York, pursuant Citicorp will be subject to the Board's regulations to delegated authority. concerning FCM activities,11 which require, among By order of the Board of Governors, effective other things, that the activity be conducted through a June 11, 1990. separate subsidiary,12 be subject to the regulatory framework established pursuant to law by the CFTC Voting for this action: Vice Chairman Johnson, and Govfor the trading of futures, and be limited to financial ernors Kelley and LaWare. Abstaining from this action: institutions and other financially sophisticated custom- Governor Mullins. Absent and not voting: Chairman Greenspan, and Governors Seger and Angell. ers that have significant dealings or holdings in the underlying commodities, securities, or instruments. In JENNIFER J. JOHNSON addition, while Citicorp intends to price its investment Associate Secretary of the Board advisory services as part of a package of services, it also will make its futures advisory services available Citicorp on a separate fee basis to customers who wish to New York, New York receive only advisory services. For these reasons, the Board concludes that the limitations proposed by Citicorp and required by the Order Approving Application to Act as Agent in the Board's regulations would be sufficient to prevent any Private Placement of All Types of Securities and significant conflicts of interest or unsound banking Engage in Riskless Principal and Other practices. Securities-Related Activities The financial and managerial resources of Citicorp are considered consistent with approval. Based upon Citicorp, New York, New York, a bank holding comconsideration of all the relevant facts, the Board pany within the meaning of the Bank Holding Comconcludes that the balance of the public interest fac- pany Act ("BHC Act"), has applied for the Board's tors that the Board is required to consider under approval under section 4(c)(8) of the BHC Act section 4(c)(8) of the BHC Act is favorable. Accord- (12 U.S.C. § 1843(c)(8)) and section 225.23 of the ingly, based on all facts of record, and subject to the Board's Regulation Y (12 C.F.R. 225.23), for its commitments made by Citicorp and the conditions set subsidiary, Citicorp Securities Markets, Inc., New forth in this Order, the Board has determined that the York, New York ("CSMI"), to: proposed application should be, and hereby is, ap- (1) act as agent in the private placement of all types proved. of securities, including providing i;elated advisory This determination is also subject to all of the services; and conditions set forth in the Board's Regulation Y, (2) purchase and sell all types of securities on the including sections 225.4(d) and 225.23, and to the order of investors as a "riskless principal". Board's authority to require such modifications or termination of the activities of a bank holding com- Citicorp has also applied for prior approval to enpany or any of its subsidiaries as the Board finds gage through its subsidiary, Newbridge Securities, necessary to assure compliance with the provisions Inc., New York, New York, and CSMI (together and purposes of the BHC Act and the Board's regula- "Companies") in: (1) providing investment advisory and brokerage services on a combined basis to institutional customers; 11. 12 C.F.R. 225.25(b)(18) and (19). (2) providing financial and transaction advice, in- 12. Citicorp has entered into a Letter of Undertaking with the cluding: TIFFE whereby Citicorp guarantees that CFC will have funds, in the aggregate, of 5 billion yen. This represents Citicorp's maximum (i) advice in connection with mergers and acquisiaggregate exposure and represents the minimum initial requirements tions, divestitures, financing transactions, valuaof TIFFE exchange members. The Letter does not constitute an unconditional guarantee of the obligations of CFC and would not tions and fairness opinions in connection with require Citicorp to assume the obligations of CFC. Accordingly, the merger, acquisition and similar transactions, and Board has determined that the proposal is consistent with the Board's tender offer evaluations for unaffiliated financial regulations and previous decisions governing the conduct of the proposed activities. and nonfinancial institutions; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 667 (ii) advice regarding the structuring of and arrang- by Citicorp is a permissible nonbanking activity for ing for loan syndications and similar transactions; bank holding companies under section 4(c)(8) of the and BHC Act. Citicorp has committed that it will conduct (iii) advice regarding the structuring of and arrang- these activities pursuant to the Board's Orders in ing swaps, caps, and similar transactions relating Signet Banking Corporation, 73 Federal Reserve Bulto factors such as interest rates, currency ex- letin 59 (1987); Canadian Imperial Bank of Commerce, change rates, prices, and economic and financial 74 Federal Reserve Bulletin 571 (1988); and The Nipindices; and pon Credit Bank, Ltd., 75 Federal Reserve Bulletin 308 (3) providing foreign exchange advisory and trans- (1989). actional services. The Board has also previously determined that acting as agent in the private placement of securities Citicorp, with consolidated assets of $230.6 billion, and purchasing and selling securities on the order of is the largest banking organization in the nation. It investors as a "riskless principal" do not constitute operates ten subsidiary banks.1 Citicorp has previ- underwriting and dealing in securities for purposes of ously received Board approval under section 4(c)(8) of section 20 of the Glass-Steagall Act, and that revenue the BHC Act for CSMI to underwrite and deal in, on a derived from these activities is not subject to the limited basis, all types of debt securities and, subject 10 percent revenue limitation on ineligible securities to further review, all types of equity securities.2 Citi- underwriting and dealing.5 Additionally, the Board corp has also received Board approval to underwrite found that subject to the prudential limitations estaband deal in, on a limited basis, 1-4 family mortgage- lished in those cases to address the potential for backed securities, municipal revenue bonds, commer- conflicts of interests, unsound banking practices or cial paper, and consumer-receivable-related other adverse effects, the proposed private placement securities3 and underwrite and deal in securities eligi- and riskless principal activities are so closely related ble to be underwritten and dealt in by state member to banking as to be a proper incident thereto within the banks.4 CSMI is and will continue to be a broker- meaning of section 4(c)(8) of the BHC Act. Citicorp dealer registered with the Securities and Exchange has committed that CSMI will conduct its private placement and riskless principal activities using the Commission and subject to the record-keeping, reportsame methods and procedures and subject to the same ing, fiduciary standards, and other requirements of the prudential limitations approved by the Board in the Securities Exchange Act of 1934 and the National J.P. Morgan Order.6 Association of Securities Dealers. Notice of the application, affording interested per- Finally, the Board has previously determined by sons an opportunity to submit comments on the pro- order that providing securities brokerage services in posal, has been published (55 Federal Register 4909 combination with investment advisory services to in- (1990)). The time for filing comments has expired, and stitutional customers is a permissible nonbanking acthe Board has considered the application and all tivity for bank holding companies under section 4(c)(8) comments received in light of the public interest of the BHC Act. Citicorp has stated that Companies factors set forth in section 4(c)(8) of the BHC Act. The will engage in this activity in accordance with all of the Board received written comments opposing Board conditions set forth in Bankers Trust New York Corapproval of the application from the Investment Com- poration, 74 Federal Reserve Bulletin 695 (1988). pany Institute ("ICI"), a trade association of the The ICI has objected that, to the extent that Commutual fund industry. The Board has previously deter- panies propose to broker securities issued by investmined by regulation that foreign exchange advisory ment companies advised by Citicorp or any of its bank and transactional services are permissible nonbanking or nonbank affiliates, the proposed activities are inconactivities for bank holding companies under section sistent with the Glass-Steagall Act, the Bank Holding 4(c)(8) of the BHC Act and the Board's Regulation Y. Company Act, and the Board's interpretive rule gov- 12 C.F.R. 225.25(b)(17). Citicorp has proposed to engage in these activities in accordance with all of the conditions set forth in Regulation Y. 5. Bankers Trust New York Corporation, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"); See also J.P. Morgan & The Board has previously determined by order that Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. providing financial and transaction advice as proposed Morgan"). 6. The ICI has also objected to Citicorp's proposal to the extent that it could be construed to seek approval for CSMI to privately place as agent, or to engage in riskless principal transactions with respect to, 1. Data are as of December 31, 1989. securities of investment companies that are sponsored or advised by 2. 75 Federal Reserve Bulletin 192 (1989). Citicorp or any of its affiliates. Citicorp has not requested approval to 3. 73 Federal Reserve Bulletin 473, 618, 731 (1987). privately place as agent or act as riskless principal with respect to such 4. 68 Federal Reserve Bulletin 249 (1982). securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

668 Federal Reserve Bulletin • August 1990 erning investment advisory services by bank holding are sponsored by third parties independent of Banks companies. Companies propose to act as broker for and their affiliates. The disclosure statement will also shares of investment companies that are advised by state that such shares or interests are not endorsed or bank affiliates of Companies ("Banks"). The Board's guaranteed by, and do not constitute obligations of, interpretive rule prevents a bank holding company Banks or their affiliates. Finally, this statement will from engaging directly or indirectly in the sale or state that the investment company shares are not distribution of securities of any investment company insured by the Federal Deposit Insurance Corporafor which it acts as investment adviser. 12 C.F.R. tion. Accordingly, the Board does not believe that the 225.125(h). potential conflicts of interest that the Glass-Steagall As the Board has previously noted, the Board's Act and the Board's interpretive rule were intended to interpretive rule does not apply in this situation be- prevent would be present should Companies broker cause Banks, and not Citicorp or one of its direct or shares of investment companies that are advised diindirect nonbank subsidiaries, would be advising the rectly by Banks. investment companies in question.7 Furthermore, the The Board noted in Norwest that it issued its regupractices at which the prohibition against sale or lation and interpretive rule in 1972, and that subsedistribution of shares of investment companies being quent developments, such as court decisions in advised are directed are not present here. The main Schwab and in other cases, suggest the need for purpose of the prohibition was to assure that the reexamination of some of the views expressed at that holding company does not become involved in under- time. As a result, the Board is considering seeking writing and dealing in the shares of investment com- public comment regarding a proposed revision of the panies it advises.8 In this case, as in Norwest, Com- interpretive rule. panies propose to act only as agent for customers The financial and managerial resources of Citicorp desiring to purchase or sell investment company secu- are consistent with approval. In addition, consummarities, and therefore would not underwrite or deal in tion of the proposal would provide added convenience those securities.9 to Citicorp's customers. The Board also expects that Moreover, Citicorp has committed that Companies the de novo entry of Citicorp into the market for some will not provide investment advice to brokerage cus- of these services would increase the level of competitomers regarding shares of investment companies that tion among providers of these services. Under the are advised by Citicorp or any of its affiliates, includ- framework established in this and prior decisions, ing Banks. Citicorp has also committed that Compa- consummation of this proposal is not likely to result in nies will disclose to their brokerage customers who any significant adverse effects, such as undue concenpurchase such shares that these investment companies tration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. Accordingly, the Board has determined that the per- 7. See Norwest Corporation, 76 Federal Reserve Bulletin 79 (1990) formance of the proposed activities by Citicorp can ("Norwest"). As the Board explained in Norwest, by its terms, the Board's interpretive rule does not apply where an investment com- reasonably be expected to produce public benefits pany is advised by a subsidiary bank, rather than by a parent bank which would outweigh adverse effects under the holding company or a nonbank subsidiary. The interpretive rule was proper incident to banking standard of section 4(c)(8) issued in connection with the Board's adoption of a regulation pursuant to its authority under section 4(c)(8) of the BHC Act to of the BHC Act. approve nonbanking activities for bank holding companies and their Based on the above, the Board has determined to nonbanking subsidiaries. Section 4(c)(8) does not empower the Board to authorize activities for banks. The Supreme Court has recognized approve Citicorp's application subject to all of the that the authority of national banks and state banks to engage in terms and conditions set forth in the above-noted investment advisory activities does not derive from the Board's provisions of Regulation Y that relate to these activiregulation, and that the Board's interpretive rule applies only to the investment advisory activities of bank holding companies and their ties, and subject as well to all of the terms and nonbank subsidiaries. Board of Governors of Federal Reserve System conditions set forth in this Order and in the abovev. Investment Company Institute, 450 U.S. 46, 59 n.25 (1981). Indeed, noted Board Orders that relate to these activities. the Office of the Comptroller of the Currency has issued an interpretive letter authorizing national banks and their subsidiaries to broker The Board's determination is subject to all of the and recommend securities of investment companies for which such conditions set forth in the Board's Regulation Y, national banks or their subsidiaries serve as investment adviser. See OCC Interpretive Letter No. 403 (December 9, 1987), reprinted in including those in sections 225.4(d) and 225.23(b), and Fed. Banking L. Rep. (CCH) para. 85,627, at 77,962. to the Board's authority to require modification or 8. 450 U.S. at 62, 66. termination of the activities of a bank holding com- 9. It is settled that buying and selling securities as a broker on the pany or any of its subsidiaries as the Board finds order and for the account of customers does not constitute underwriting or dealing in securities for purposes of section 20 of the Glass- necessary to assure compliance with, and to prevent Steagall Act (12 U.S.C. § 377), which regulates the activities of evasion of, the provisions of the BHC Act and the affiliates of member banks. Securities Industry Association v. Board of Governors, 468 U.S. 207, 216-21 (1984) ("Schwab"). Board's regulations and Orders issued thereunder. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 669 This transaction shall not be consummated later savings association under section 4(c)(8) of the BHC than three months after the effective date of this Act. Pursuant to this authority, the Board has deter- Order, unless such period is extended for good cause mined by regulation that the operation of a savings by the Board or by the Federal Reserve Bank of New association is closely related to banking and permissi- York, pursuant to delegated authority. ble for bank holding companies. 12 C.F.R. By order of the Board of Governors, effective 225.25(b)(9). In making this determination, the Board June 11, 1990. required that savings associations acquired by bank holding companies conform their direct and indirect Voting for this action: Vice Chairman Johnson and Gover- activities to those activities permissible for bank holdnors Kelley and LaWare. Abstaining from this action: Gov- ing companies under section 4 of the BHC Act. First ernor Mullins. Absent and not voting: Chairman Greenspan, Banks has committed to conform all activities of and Governors Seger and Angell. Clayton to the requirements of section 4(c)(8) of the BHC Act and Regulation Y.2 JENNIFER J. JOHNSON Associate Secretary of the Board The Board has previously determined by regulation that mortgage lending, credit-related life, accident and First Banks, Inc. health, and involuntary unemployment insurance, and St. Louis, Missouri discount securities brokerage are closely related to banking and permissible for bank holding companies. 12 C.F.R. 225.25(b)(1), (b)(8)(i), and (b)(15). First Order Approving Application to Acquire a Savings Banks and Clayton propose to conduct these activities Association pursuant to the requirements of the Board's regulations.3 First Banks, Inc., St. Louis, Missouri ("First In order to approve this application, the Board also Banks"), a bank holding company within the meaning is required by section 4(c)(8) of the BHC Act to of the Bank Holding Company Act ("BHC Act"), has determine that the ownership and operation of Clayton applied pursuant to section 4(c)(8) of the BHC Act by First Banks "can reasonably be expected to pro- (12 U.S.C. § 1843(c)(8)) and section 225.23(a) of the duce benefits to the public . . . that outweigh possible Board's Regulation Y (12 C.F.R. 225.23(a)), to acadverse effects, such as undue concentration of require Clayton Savings and Loan Association, Clayton, sources, decreased or unfair competition, conflicts of Missouri ("Clayton"), a savings association, pursuant interest, or unsound banking practices." 12 U.S.C. to section 225.25(b)(9) of the Board's Regulation Y § 1843(c)(8). (12 C.F.R. 225.25(b)(9)).1 In connection with this First Banks operates one banking subsidiary in proposed acquisition, First Banks has also applied Missouri and four banking subsidiaries in Illinois. First pursuant to section 4(c)(8) of the BHC Act to engage Banks is the 11th largest commercial banking organithrough Clayton and subsidiaries of Clayton in the zation in Missouri, controlling deposits of $485.7 milfollowing activities: making, acquiring, or servicing lion, representing 1.1 percent of the total commercial loans; acting as principal, agent, or broker for creditbank deposits in the state.4 Clayton is the 17th largest related life, accident and health, and involuntary unsavings association in Missouri, with total deposits of employment insurance; and providing securities brokerage services. Notice of the application, affording interested per- 2. First Banks has committed to divest Clayton's investments in sons an opportunity to submit comments, has been impermissible joint venture real estate projects within two years of the date of consummation of this proposal and that during this two-year published (55 Federal Register 10,498 and 21,097 period it will make no additional investments in these or other real (1990)). The time for filing comments has expired, and estate development projects. In addition, First Banks has committed the Board has considered the application and all to divest all insurance activities not permitted for bank holding companies under section 4(c)(8)(A) of the BHC Act and section comments received in light of the public interest 225.25(b)(8)(i) of Regulation Y within two years of the date of factors set forth in section 4(c)(8) of the BHC Act. consummation, and, during this period, to limit insurance activities, including annuities, to renewals of existing policies and activities Section 601 of the Financial Institutions Reform, permitted under these sections. First Banks will conform all other Recovery, and Enforcement Act of 1989, Pub. L. No. activities of Clayton to activities permissible under section 4(c)(8) 101-73, § 601, 101 Stat. 183, 408 (as codified at upon consummation of the proposal. 12 U.S.C. § 1843(i)), permits the Board to approve an 3. 12 C.F.R. 225.25(b)(1), (b)(8)(i), and (b)(15). Clayton engages in the origination and sale of residential and commercial mortgage loans application by a bank holding company to acquire a through a wholly owned subsidiary, C.F. Service, Inc. ("CFS"). Clayton will engage in credit-related insurance activities and securities brokerage activities through C.F. Agency, Inc., a wholly owned subsidiary of CFS. 1. Clayton currently operates as a mutual savings association. Prior 4. All deposit data are as of June 30,1989, and are adjusted to reflect to the acquisition, Clayton will convert from mutual to stock form. known mergers and acquisitions consummated or approved. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

670 Federal Reserve Bulletin • August 1990 $275.4 million, representing 1.4 percent of the total Hermann banking market is considered to be highly thrift deposits in the state. After consummation of the concentrated, with the four largest depository instituproposed acquisition, First Banks would become the tions controlling 83.3 percent of the total deposits in 18th largest banking organization in Missouri with the market. The HHI for the market is 1871 and would aggregate deposits of $761.1 million, representing 1.2 increase by 230 points, to a level of 2101, as a result of percent of total deposits in the state. In the Board's this acquisition. view, consummation of this proposal would not have a While consummation of this proposal would elimisignificantly adverse effect upon the concentration of nate some existing competition in the Hermann bankresources of depository institutions in Missouri. ing market, the Board believes that a number of First Banks and Clayton compete directly in the factors mitigate the potential anticompetitive effects of Washington, St. Louis, and Hermann banking mar- this proposal. The Hermann market is a rural area with kets, all located in Missouri. The proposed acquisition a population of approximately 10,000. After consumwould have a de minimis effect on competition in the mation, a total of seven depository institutions includ- Washington and St. Louis banking markets. While the ing the largest thrift institution in Missouri would Washington, Missouri, banking market5 would remain continue to compete in the Hermann market. The highly concentrated after consummation of the pro- Hermann banking market has become less concenposal, the Herfindahl-Hirschman Index ("HHI") trated in recent years with a 262-point decrease in the would increase only six points, to a level of 1835, as a HHI over the period 1984-89. The Board also has result of the acquisition.6 Upon consummation, the taken into consideration that Clayton currently has a St. Louis, Missouri, banking market would remain limited impact on competition in the Hermann market. unconcentrated with a post-acquisition HHI of 859.7 Clayton operates a single branch in this market and In the Hermann, Missouri, banking market,8 First offers only limited services at that location. The Her- Banks is the second largest of eight depository insti- mann branch office of Clayton is used primarily as a tutions, controlling $33.1 million in deposits, repre- deposit-gathering office, and business, consumer, and senting 23.3 percent of total deposits. Clayton is the mortgage loans are not offered directly at this location. seventh largest depository institution, controlling Moreover, Clayton has not been an active competitor $10.6 million in deposits, representing 3.7 percent of in the market because of its impaired financial condimarket deposits. Upon consummation of the proposal, tion. In light of this and other facts of record, the First Banks would become the largest depository Board concludes that the acquisition would not have a institution in the market with $43.7 million in deposits, significantly adverse effect on competition in the Herrepresenting 29.7 percent of market deposits.9 The mann, St. Louis, or Washington banking markets. First Banks and Clayton compete to a very limited extent in mortgage banking, credit-related insurance, 5. The Washington, Missouri, banking market is approximated by and discount brokerage service activities. Based on Franklin County, except for Pacific and Boeuf townships, and by the the facts of record, the Board has determined that community of Dutzow in Warren County. 6. Under the revised Department of Justice Merger Guidelines, 49 consummation of this proposal would not adversely Federal Register 26,823 (1984), a market in which the post-merger affect competition for these nonbanking services in HHI is between 1000 and 1800 is considered moderately concentrated. any relevant market. In such markets, the Justice Department is unlikely to challenge a merger if the increase in the HHI is less than 100 points. Any market The financial and managerial resources and future in which the post-merger HHI is over 1800 is considered highly prospects of First Banks and its bank subsidiaries and concentrated, and the Justice Department is likely to challenge a merger that increases the HHI by more than 50 points unless other of Clayton are consistent with approval. In assessing factors indicate that the merger will not substantially lessen competi- the financial factors, the Board believes that bank tion. The Justice Department has informed the Board that a bank holding companies must maintain adequate capital at merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post- savings associations that they propose to acquire. merger HHI is at least 1800 and the merger increases the HHI by at Upon consummation, First Banks and its bank subsidleast 200 points. The Justice Department has stated that the higher iaries would meet applicable capital requirements, and than normal HHI thresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited- First Banks would cause Clayton to meet all applicable purpose lenders and other non-depository financial entities. capital requirements. In this regard, First Banks has 7. The St. Louis, Missouri, banking market is approximated by the committed that Clayton will have Tier 1 capital, ex- St. Louis Ranally Metro Area, adjusted to include all of Jefferson and St. Charles Counties, Missouri; Pin Oak and Hamel townships in Madison County, Illinois; and Smithton, Englemann, Lebanon, and Mascoutah townships in St. Clair County, Illinois. 8. The Hermann, Missouri, banking market is approximated by included at 50 percent. Upon consummation of the proposal, Clayton northeastern Osage County, southern Montgomery County, northern would be affiliated with a commercial banking organization, thus, on a Gasconade County and northwestern Franklin County. pro forma basis, the deposits of Clayton are included at 100 percent, 9. The pre-consummation market share statistics are based on while the deposits of other savings associations continue to be calculations in which the deposits of Clayton and all other thrifts are included at 50 percent. 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Legal Developments 671 elusive of all intangible assets, of at least 3 percent of Test Farm, Inc., Wellington, Kansas ("WATF"), and its total assets. The Board expects that Clayton will through WATF engage in community development meet all present and future minimum capital ratios activities pursuant to section 225.25(b)(6) of Regulaadopted for savings associations by the Office of Thrift tion Y (12 C.F.R. 225.25(b)(6)). WATF proposes to Supervision or the Federal Deposit Insurance Corpo- acquire a 55-acre tract of agricultural land for the ration. There is no evidence in the record to indicate purpose of engaging in these activities. This acquisithat consummation of this proposal would result in any tion would be a one-time purchase of real property, other significantly adverse effects, such as undue which would be used in performing the following concentration of resources, unfair competition, con- activities: flicts of interest, or unsound banking practices. (1) Testing varieties of wheat and alternative crops; Based on the foregoing and all the facts of record, (2) Testing equipment and methods of farming; the Board has determined that the balance of public (3) Testing alternative uses of chemicals for farming; interest factors it must consider under section 4(c)(8) (4) Providing agricultural research opportunities for of the BHC Act is favorable and consistent with students; and approval of First Banks' application to acquire Clay- (5) Conducting agricultural workshops.1 ton and its nonbanking subsidiaries. Accordingly, the Board has determined that the proposed application Notice of the application, affording interested perpursuant to section 4(c)(8) of the BHC Act should be, sons an opportunity to submit comments, has been and hereby is, approved. This determination is subject published (55 Federal Register 21,245 (1990)). The to all of the conditions set forth in the Board's Regu- time for filing comments has expired, and the Board lation Y, including sections 225.4(d) and 225.23, and to has considered the application and all comments rethe Board's authority to require modification or termi- ceived in light of the public interest factors set forth in nation of the activities of a bank holding company or section 4(c)(8) of the BHC Act. any of its subsidiaries as the Board finds necessary to First Financial, with approximately $4.2 million in assure compliance with, or to prevent evasion of, the assets, is the 106th largest commercial banking orgaprovisions and purposes of the BHC Act and the nization in Kansas.2 It operates one subsidiary bank, Board's regulations and Orders issued thereunder. First National Bank, Wellington, Kansas. This transaction shall not be consummated later than The Board previously has recognized the benefit of three months after the effective date of this Order, allowing bank holding companies to participate in unless such period is extended for good cause by the community development activities based on their Board or by the Federal Reserve Bank of St. Louis, unique role in the community. Section 225.25(b)(6) pursuant to delegated authority. permits bank holding companies to make debt and By order of the Board of Governors, effective equity investments in community development corpo- June 25, 1990. rations or projects.3 The Board also has determined that the provision of advisory and related services to Voting for this action: Chairman Greenspan and Governors programs designed to promote community develop- Johnson, Seger, Angell, Kelley, LaWare, and Mullins. ment is permissible for bank holding companies. See First American Corporation, 75 Federal Reserve Bul- JENNIFER J. JOHNSON letin 576 (1989); Shorebank Corporation, 14 Federal Associate Secretary of the Board Reserve Bulletin 140 (1988). In this regard, the Board has not defined the full scope of investments that may First Financial Corporation be made through community development corpora- Wellington, Kansas tions in order to provide bank holding companies flexibility in approaching community problems. Order Approving Application to Engage in 12 C.F.R. 225.127. Community Development Activities First Financial's proposal is designed to lessen the community's dependence on wheat, while providing First Financial Corporation, Wellington, Kansas training to the area's farmers and financial counseling ("First Financial"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has applied for the Board's approval 1. WATF also proposes to provide financial planning counselling to farmers. under section 4(c)(8) of the BHC Act (12 U.S.C. 2. Asset and ranking data are as of December 31, 1989. § 1843(c)(8)) and section 225.23 of the Board's Regu- 3. See 12 C.F.R. 225.127 ("Bank holding companies possess a unique combination of financial and managerial resources making lation Y (12 C.F.R. 225.23), to acquire all of the them particularly suited for a meaningful and substantial role in voting shares of a de novo subsidiary, Wellington Area remedying our social ills."). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

672 Federal Reserve Bulletin • August 1990 to families. WATF will conduct its activities in Well- months after the effective date of this Order, unless ington, Kansas, a primarily agricultural community such period is extended for good cause by the Board or with wheat farming as the main source of income for the Federal Reserve Bank of Kansas City, acting its residents. The acquisition of the tract of land would pursuant to delegated authority. be a one-time investment by First Financial, and By order of the Board of Governors, effective would not be for the purpose of real estate develop- June 25, 1990. ment. The proposed activity is consistent with past inter- Voting for this action: Chairman Greenspan and Governors pretations of community development activities under Johnson, Seger, Angell, Kelley, LaWare, and Mullins. Regulation Y. The community welfare of agricultural communities such as Wellington is directly benefitted JENNIFER J. JOHNSON Associate Secretary of the Board by agricultural research and training. By investing in WATF's efforts to develop techniques to grow new Fleet/Norstar Financial Group, Inc. crops, First Financial would be providing a broader Providence, Rhode Island base of income for local farmers and thereby would be contributing to the creation and retention of jobs. In Order Approving Application to Conduct Private addition, First Financial's investment is likely to ben- Placements as Agent of All Types of Securities and efit the community by creating new agricultural meth- Engage in Investment Advisory and Full Service ods to grow crops that currently provide the major Brokerage Activities source of income. These benefits may reasonably be expected to out- Fleet/Norstar Financial Group, Inc., Providence, weigh possible adverse effects. First Financial's role is Rhode Island, and its wholly owned subsidiary, Fleet/ limited to purchasing the land; the comparatively small nature of the investment4 is unlikely to pose any Norstar New York, Inc., Albany, New York (together "Fleet/Norstar"), bank holding companies within the significant risk to the safety or soundness of First meaning of the Bank Holding Company Act ("BHC Financial. The activities would be conducted in a Act"), have applied for the Board's approval under subsidiary of the bank holding company, mainly by section 4(c)(8) of the BHC Act (12 U.S.C. individuals who are not employed by First Financial or § 1843(c)(8)) and section 225.23 of the Board's Reguits bank subsidiary; any involvement by bank employlation Y (12 C.F.R. 225.23), for their subsidiary, ees would be on a strictly voluntary basis. Adams McEntee Fleet Norstar Securities, Inc., New Financial and managerial factors are consistent with York, New York ("Company"), to provide investapproval. Consummation of this proposal is not likely ment advisory and brokerage services on a combined to result in any significant adverse effects, such as basis to institutional and retail customers ("full-serundue concentration of resources, decreased or unfair vice brokerage activities"), act as agent in the private competition, conflicts of interest, or unsound banking placement of all types of securities, including providpractices. ing related advisory services, and purchase and sell all Based on the foregoing and all the facts of record, types of securities on the order of investors as a the Board has determined that the balance of the "riskless principal". public interest factors it is required to consider under Fleet/Norstar, with consolidated assets of $33.4 section 4(c)(8) is favorable. Accordingly, the Board billion, is the 16th largest banking organization in the has determined that the application should be, and nation.1 It operates eight subsidiary banks and engages hereby is, approved. This determination is subject to directly and through subsidiaries in a variety of nonall the conditions set forth in the Board's Regulabanking activities, including engaging through Comtion Y, including sections 225.4(d) and 225.23(b), and pany in underwriting and dealing in, to a limited to the Board's authority to require such modification extent, certain securities.2 or termination of the activities of a holding company or Notice of the application, affording interested perany of its subsidiaries as the Board finds necessary to sons an opportunity to submit comments on the proassure compliance with, or to prevent evasion of, the posal, has been published (54 Federal Register 48,681 provisions and purposes of the BHC Act and the (1989)). The time for filing comments has expired, and Board's regulations and orders issued thereunder. The activity shall be commenced no later than three 1. Data are as of December 31, 1989. 2. See Fleet/Norstar Financial Group, Inc., 74 Federal Reserve Bulletin 819 (1988), and 12 C.F.R. 225.25(b)(16). Company also 4. First Financial, with total assets of $4.2 million as of engages in securities brokerage activities pursuant to section December 31, 1989, will invest $34,000 in the proposal. 225.25(b)(15) of the Board's Regulation Y. 12 C.F.R. 225.25(b)(15). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 673 the Board has considered the application and all and dealing.4 Fleet/Norstar has committed that Comcomments received in light of the public interest pany will conduct its private placement and riskless factors set forth in section 4(c)(8) of the BHC Act. The principal activities using the same methods and proce- Board received written comments opposing the appli- dures, and subject to the same prudential limitations cation from the Securities Industry Association established by the Board in the Bankers Trust Order as ("SIA"), a trade association of the investment bank- modified by the J.P. Morgan Order.5 ing industry, and the Investment Company Institute Fleet/Norstar has proposed to have its affiliated ("ICI"), a trade association of the mutual fund banks extend credit to an issuer whose debt securiindustry.3 ties have been placed by the section 20 subsidiary The Board has previously determined by Order where the proceeds would be used to pay the princithat full-service brokerage activities are permissible pal amount of the securities at maturity. Fleet/ nonbanking activities for bank holding companies Norstar has committed that these extensions of under section 4(c)(8) of the BHC Act. PNC Financial credit will conform to the limitations set forth in the Corp., 75 Federal Reserve Bulletin 396 (1989); Bank Board's decision in J.P. Morgan, including the reof New England Corporation, 74 Federal Reserve quirement that a period of at least three years elapse Bulletin 700 (1988). Fleet/Norstar has stated that from the time of the placement of the securities to the Company will engage in these activities in accord- decision to extend credit, that Fleet/Norstar maintain ance with all of the conditions set forth in these adequate documentation of these transactions and Orders. Company will engage in investment advisory decisions, and that the extensions of credit meet activities pursuant to the Board's Regulation Y. prudent and objective standards as well as the stan- 12 C.F.R. 225.25(b)(4). dards set out in section 23B of the Federal Reserve Act.6 The Federal Reserve Bank of Boston will The Board has also found that, subject to certain closely review loan documentation of bank affiliates prudential limitations to address the potential for conto ensure that an independent and thorough credit flicts of interests, unsound banking practices or other evaluation has been undertaken with respect to the adverse effects, the proposed private placement and participation of the bank in these credit extensions to riskless principal activities are so closely related to issuers of securities privately placed by an agent banking as to be a proper incident thereto within the affiliated with the bank. meaning of section 4(c)(8) of the BHC Act. In addition, the Board has previously determined that acting as Fleet/Norstar also has proposed to have Company agent in the private placement of securities and pur- place securities with its parent holding company or chasing and selling securities on the order of investors with a nonbank subsidiary of the parent company as a "riskless principal" do not constitute underwrit- consistent with the Board's ruling in J.P. Morgan. In ing and dealing in securities for purposes of section 20 this regard, Fleet/Norstar will establish both individof the Glass-Steagall Act, and that revenue derived ual and aggregate limits on the investment by affilfrom these activities is not subject to the 10 percent iates of the section 20 subsidiary in any particular revenue limitation on ineligible securities underwriting issue of securities that is placed by the section 20 subsidiary and will establish appropriate internal policies, procedures, and limitations regarding the 3. The ICI has objected to Fleet/Norstar's proposal to the extent amount of securities of any particular issue placed by that Company would privately place, broker, or recommend shares of Company that may be purchased by Fleet/Norstar investment companies that are sponsored or advised by Fleet/Norstar and each of its nonbanking subsidiaries, individually or its affiliates. Fleet/Norstar has committed not to recommend such shares, and has confirmed that it is not seeking authority to privately place such shares. Fleet/Norstar proposes, however, that Company be permitted to act as broker for shares of investment companies that are advised by a national bank affiliate of Company or an operating 4. J.P. Morgan & Company Incorporated, 76 Federal Reserve subsidiary of a national bank affiliate of Company. As the Board has Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corpopreviously noted in Norwest Corporation, 76 Federal Reserve Bulletin ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). 79 (1990) and Fleet/Norstar Financial Group, Inc., 76 Federal Reserve 5. The SIA argues that the fact that Fleet/Norstar is proposing that Bulletin 459 (1990). The prohibitions contained in the Board's interpre- Company privately place all types of securities, as opposed to only tive rule on investment adviser activities (12 C.F.R. 225.125) would not high grade commercial paper notes, is significant in assessing the prevent a bank holding company subsidiary from acting as broker with applicability of the Glass-Steagall Act prohibitions in this case. respect to shares of investment companies that are advised solely by a Securities Industry Association v. Board of Governors, 807 F.2d 1052 national bank affiliate of the brokerage subsidiary, and are not advised (D.C. Cir. 1986), cert, denied, 483 U.S. 1005 (1987) ("Bankers Trust by the parent holding company or any of its direct or indirect nonbank II"). The Board has fully considered and rejected this argument in subsidiaries. For the reasons set forth in those Orders, the Board does Bankers Trust, where the Board found that the fact that a bank holding not believe that the potential conflicts of interest that the Glass-Steagall company wishes to privately place all types of securities in a manner Act and the Board's interpretive rule were intended to prevent would similar to that used in placing high grade commercial paper, would be present should Company broker shares of investment companies not, by itself, change the activity into underwriting and dealing that are advised directly by a national bank affiliate of Company or an activities that would be prohibited under the Glass-Steagall Act. operating subsidiary of a national bank affiliate of Company. 6. 12 U.S.C. § 371c-l. 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674 Federal Reserve Bulletin • August 1990 and in the aggregate.7 These policies and procedures, Manufacturers Hanover Corporation as well as the purchases themselves, will be reviewed New York, New York by the Federal Reserve Bank of Boston. The record shows that under the framework estab- Order Approving Application to Act as Agent in the lished in this and prior decisions, consummation of this Private Placement of All Types of Securities and Act proposal is not likely to result in any significant adverse as Riskless Principal in Buying and Selling effects, such as undue concentration of resources, Securities decreased or unfair competition, conflicts of interest, or unsound banking practices. Consummation of the pro- Manufacturers Hanover Corporation, New York, posal would provide added convenience to Fleet/ New York, ("Manufacturers"), a bank holding com- Norstar's customers. In addition, the Board expects pany within the meaning of the Bank Holding Comthat the de novo entry of Fleet/Norstar into the market pany Act ("BHC Act"), has applied for the Board's for these services would increase the level of competi- approval under section 4(c)(8) of the BHC Act tion among providers of these services. Accordingly, (12 U.S.C. § 1843(c)(8)) and section 225.23 of the the Board has determined that the performance of the Board's Regulation Y (12 C.F.R. 225.23), for its proposed activities by Fleet/Norstar can reasonably be subsidiary, Manufacturers Hanover Securities Corpoexpected to produce public benefits which would out- ration, New York, New York ("Company"), to act as weigh adverse effects under the proper incident to agent in the private placement of all types of securibanking standard of section 4(c)(8) of the BHC Act. ties, including providing related advisory services, and Based on the above, the Board has determined to to purchase and sell all types of securities on the order approve Fleet/Norstar's application subject to all of of investors as a "riskless principal". the terms and conditions set forth in the above-noted Manufacturers, with consolidated assets of $60.5 provisions of Regulation Y that relate to these activi- billion, is the eighth largest banking organization in the ties, and subject as well to all of the terms and nation.1 It operates two subsidiary banks and engages conditions set forth in the above-noted Board Orders directly and through subsidiaries in a variety of nonthat relate to these activities. The Board's determina- banking activities, including engaging through Comtion is subject to all of the conditions set forth in the pany in underwriting and dealing in, to a limited Board's Regulation Y, including those in sections extent, certain securities.2 225.4(d) and 225.23(b), and to the Board's authority to Notice of the application, affording interested perrequire modification or termination of the activities of sons an opportunity to submit comments on the proa bank holding company or any of its subsidiaries as posal, has been published (54 Federal Register 48,941 the Board finds necessary to assure compliance with, (1989)). The time for filing comments has expired, and and to prevent evasion of, the provisions of the BHC the Board has considered the application and all com- Act and the Board's regulations and Orders issued ments received in light of the public interest factors set thereunder. This transaction shall not be consum- forth in section 4(c)(8) of the BHC Act. The Board mated later than three months after the effective date received written comments with respect to the applicaof this Order, unless such period is extended for good tion from the Investment Company Institute ("ICI"), a cause by the Board, or by the Federal Reserve Bank of trade association of the mutual fund industry. Boston, pursuant to delegated authority. The Board has previously found that, subject to By order of the Board of Governors, effective certain prudential limitations that address the potential June 18, 1990. for conflicts of interests, unsound banking practices or other adverse effects, the proposed private placement Voting for this action: Chairman Greenspan and Governors and riskless principal activities are so closely related Johnson, Seger, Angell, Kelley, LaWare, and Mullins. to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the BHC Act.3 The Board JENNIFER J. JOHNSON has also previously determined that acting as agent in Associate Secretary of the Board 7. The limit established shall not exceed 50 percent of the issue being 1. Data are as of December 31, 1989. placed. Additionally, in the development of these policies and procedures, 2. See Manufacturers Hanover Corporation, 73 Federal Reserve Fleet/Norstar will incorporate, with respect to placements of securities, Bulletin 731 (1987); and Manufacturers Hanover Corporation, 73 the limitations established by the Board in condition 12 of its Order Federal Reserve Bulletin 620 (1987). regarding aggregate exposure of the holding company on a consolidated 3. The ICI has objected to Manufacturers's proposal to the extent basis to any single customer whose securities are underwritten or dealt in that it could be construed to seek approval for Company to privately by Company. J.P. Morgan & Co. Incorporated, The Chase Manhattan place securities of investment companies that are advised by Manu- Corporation, Bankers Trust New York Corporation, Citicorp and Security facturers or any of its subsidiaries. Manufacturers has not requested Pacific Corporation, 75 Federal Reserve Bulletin 192 (1989). approval to place such securities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 675 the private placement of securities and purchasing and the purchases themselves, will be reviewed by the selling securities on the order of investors as a "risk- Federal Reserve Bank of New York. less principal" do not constitute underwriting and The record shows that under the framework estabdealing in securities for purposes of section 20 of the lished in this and prior decisions, consummation of Glass-Steagall Act, and therefore revenue derived this proposal is not likely to result in any significant from these activities is not subject to the 10 percent adverse effects, such as undue concentration of rerevenue limitation on ineligible securities underwriting sources, decreased or unfair competition, conflicts of and dealing.4 Manufacturers has committed that Com- interest, or unsound banking practices. Consummapany will conduct its private placement and riskless tion of the proposal would provide added convenience principal activities using the same methods and proce- to Manufacturers's customers. In addition, the Board dures, and subject to the same prudential limitations expects that the de novo entry of Manufacturers into established by the Board in the Bankers Trust Order as the market for these services would increase the level modified by the J.P. Morgan Order. of competition among providers of these services. Manufacturers has proposed to have its affiliated Accordingly, the Board has determined that the perbanks extend credit to an issuer whose debt securities formance of the proposed activities by Manufacturers have been placed by the section 20 subsidiary where the can reasonably be expected to produce public benefits proceeds would be used to pay the principal amount of which would outweigh adverse effects under the proper incident to banking standard of section 4(c)(8) the securities at maturity. Manufacturers has commitof the BHC Act. ted that these extensions of credit will conform to the limitations set forth in the Board's decision in J.P. Based on the above, the Board has determined to Morgan, including the requirement that a period of at approve Manufacturers's application subject to all of least three years elapse from the time of the placement the terms and conditions set forth in the above-noted of the securities to the decision to extend credit, that provisions of Regulation Y that relate to these activi- Manufacturers maintain adequate documentation of ties, and subject as well to all of the terms and these transactions and decisions, and that the exten- conditions set forth in the above-noted Board Orders sions of credit meet prudent and objective standards as that relate to these activities. The Board's determinawell as the standards set out in section 23B of the tion is subject to all of the conditions set forth in the Federal Reserve Act.5 The Federal Reserve Bank of Board's Regulation Y, including those in sections New York will closely review loan documentation of 225.4(d) and 225.23(b), and to the Board's authority to bank affiliates to ensure that an independent and thor- require modification or termination of the activities of ough credit evaluation has been undertaken with re- a bank holding company or any of its subsidiaries as spect to the participation of the bank in these credit the Board finds necessary to assure compliance with, extensions to issuers of securities privately placed by and to prevent evasion of, the provisions of the BHC an agent affiliated with the bank. Act and the Board's regulations and Orders issued thereunder. This transaction shall not be consum- Manufacturers also has proposed to have Company mated later than three months after the effective date place securities with its parent holding company or of this Order, unless such period is extended for good with a nonbank subsidiary of the parent company cause by the Board or by the Federal Reserve Bank of consistent with the Board's ruling in J.P. Morgan. In New York, pursuant to delegated authority. this regard, Manufacturers will establish both individual and aggregate limits on the investment by affiliates By order of the Board of Governors, effective of the section 20 subsidiary, in any particular issue of June 11, 1990. securities that is placed by the section 20 subsidiary and will establish appropriate internal policies, proce- Voting for this action: Vice Chairman Johnson and Goverdures, and limitations regarding the amount of securi- nors Kelley, LaWare, and Mullins. Absent and not voting: Chairman Greenspan and Governors Seger and Angell. ties of any particular issue placed by Company that may be purchased by Manufacturers and each of its nonbanking subsidiaries, individually and in the JENNIFER J. JOHNSON aggregate.6 These policies and procedures, as well as Associate Secretary of the Board 4. J.P. Morgan & Company Incorporated, 75 Federal Reserve ments of securities, the limitations established by the Board in Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corpo- condition 12 of its Order regarding aggregate exposure of the holding ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). company on a consolidated basis to any single customer whose 5. 12 U.S.C. § 371c-l. securities are underwritten or dealt in by Company. J.P. Morgan & 6. The limit established shall not exceed 50 percent of the issue Co. Incorporated, The Chase Manhattan Corporation, Bankers Trust being placed. Additionally, in the development of these policies and New York Corporation, Citicorp and Security Pacific Corporation, 75 procedures, Manufacturers will incorporate, with respect to place- Federal Reserve Bulletin 192 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

676 Federal Reserve Bulletin • August 1990 Metrocorp, Inc. activity would not be a proper incident to banking, East Moline, Illinois would not result in any significant public benefits, and would result in undue concentration of resources, Metro Armored Courier, Inc. decreased or unfair competition, conflicts of interest, East Moline, Illinois and unsound banking practices. Protestant further argues that the proposal violates state branching laws Order Determining Armored Car Services to be and might result in Metrocorp's subsidiary bank vio- Closely Related to Banking lating the restrictions on payment of interest on demand deposits set forth in the Board's Regulation Q. Metrocorp, Inc., East Moline, Illinois ("Metrocorp"), Accordingly, the Board directed that the issues to be a bank holding company within the meaning of the considered at the hearing were whether the proposed Bank Holding Company Act ("BHC Act"), has ap- armored car services are "so closely related to bankplied, pursuant to section 4(c)(8) of the BHC Act ing or managing or controlling banks as to be a proper (12 U.S.C. § 1843(c)(8)) and section 225.23(a)(3) of the incident thereto," within the meaning of section Board's Regulation Y (12 C.F.R. 225.23(a)(3)), for 225.4(a) of Regulation Y and section 4(c)(8) of the permission to engage in armored car activities through BHC Act, and whether the proposed activities can a subsidiary to be known as Metro Armored Courier, reasonably be expected to produce benefits to the Inc., East Moline, Illinois ("MAC"). Metrocorp pro- public that outweigh the possible adverse effects. In poses to engage, through MAC, in the following activ- addition, the Board requested evidence on the risks ities: involved in conducting the activity, the availability of (i) fully-insured transportation of cash, negotiable insurance against such risks, and the issue of state instruments, securities, and valuables; collecting branching restrictions. currency and checks from commercial customers A formal public administrative hearing, conducted and nonbank financial institutions and transport- in accordance with the Board's Rules of Practice for ing and depositing these collections at financial Hearings (12 C.F.R. Part 263), was held on June 16 institutions; and delivering cash, negotiable in- and July 11, 1989, before an Administrative Law Judge struments, securities, and valuables to commer- ("ALJ") appointed at the request of the Board. At the cial customers and nonbank financial institutions; hearing, the ALJ granted motions to intervene in (ii) providing related services such as interbank opposition to the application by Brink's, Inc., Federal transfers, coin wrapping, change delivery, mail Armored Express, Inc., and Independent Armored delivery, and payroll check cashing; and Car Operators Association (collectively, the "Inter- (iii) providing incidental courier services as per- veners"). A substantial record on the application was mitted under section 225.25(b)(10) of Regula- developed through the submission of exhibits and tion Y. testimony and through the participation of Protestant, Metrocorp, and the Intervenors. These activities would be performed in the Quad City In a Recommended Decision dated January 23, market, comprising Rock Island County, Illinois and 1990, the ALJ concluded that the proposed armored Scott County, Iowa. With the exception of the pro- car activities were not "closely related to banking" posed incidental courier services, these activities have within the meaning of section 4(c)(8) of the BHC Act, not previously been approved by the Board for bank and recommended that the Board deny the applicaholding companies. tion. In light of his conclusion, the ALJ did not reach Notice of Metrocorp's application, affording inter- the questions of whether such activities were a "propested persons the opportunity to submit comments, er incident" to banking or would violate state branchwas duly published (53 Federal Register 50,292 ing laws. Both Metrocorp and Board Counsel filed (1988)). Following publication of notice of the applica- timely exceptions to the Recommended Decision, and tion, the National Armored Car Association ("Protes- the Protestant and Intervenors timely filed a response tant") submitted comments in opposition to the appli- to those exceptions. cation, and asked that the Board order a formal Having carefully considered the entire record of the hearing. proceeding, including the transcript, exhibits, written On May 10, 1989, the Board published an Order testimony, rulings, and briefs filed in connection with requiring a public formal administrative hearing on the hearing, the Recommended Decision filed by the Metrocorp's proposal (54 Federal Register 20,200 ALJ, together with the exceptions thereto and the (1989)). The Hearing Order observed that Protestant response to the exceptions, the Board has determined contends both that the proposed activities are not that the ALJ erred in concluding that armored car closely related to banking, and that the proposed services are not "closely related to banking" under Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 677 the relevant statute, case law and prior Board deter- Closely Related to Banking minations. Accordingly, the Board now states its findings on the facts and its conclusions drawn there- Section 4(c)(8) of the BHC Act permits a bank holding from and issues its Order. company to engage, directly or through a subsidiary, in activities that the Board, after due notice and Findings opportunity for a hearing, has determined by order or regulation to be "so closely related to banking or At the time of the application in November 1988, managing or controlling banks as to be a proper Metrocorp owned 100 percent of the common stock of incident thereto." Congress delegated to the Board Metrobank, a state bank located in East Moline, "the power to determine how closely related a partic- Illinois, and 62.26 percent of Colona Avenue State ular activity must be to meet the closely related test, Bank, also in East Moline.1 Metrocorp holds total subject only to limited judicial review."5 deposits of $149 million.2 Metrobank operates a num- Nonetheless, the Board and the courts have previber of automatic teller machines throughout the Illi- ously recognized the utility of certain guidelines first nois side of the Quad Cities market area. set forth in the National Courier case.6 Under Na- In February 1983, Metrobank purchased and placed tional Courier, an activity may be found to be closely into service an armored van to service its expanding related to banking if it is demonstrated that: network of ATMs. The van made daily stops at each (1) banks generally have in fact provided the pro- ATM location, collecting deposits, replenishing cash posed services; supplies, and performing maintenance. These activi- (2) banks generally provide services that are operaties did not fully utilize the capacity of the van, so tionally or functionally so similar to the proposed Metrobank began providing for-hire service of cash services as to equip them particularly well to prodelivery and pick-up for several credit unions and vide the proposed service; or other commercial accounts. In May 1984, the Illinois (3) banks generally provide services that are so Commissioner of Banks and Trust Companies in- integrally related to the proposed service as to formed Metrobank that its activities for third parties require their provision in a specialized form. were inconsistent with the Illinois Banking Act, presumably because they constituted branch banking, and These tests are disjunctive, not cumulative; demonthe for-hire activities ceased.3 Although the bank's stration of any one of them may suffice to show the ATM network has grown since that time, the armored required relationship.7 In addition, the Board will van is in service only about 60 percent of the time. consider any other factor that an applicant may ad- In order to better utilize its armored van, Metrocorp vance to demonstrate "a reasonable or close connecproposes to transfer ownership of the armored van, at tion or relationship of the activity to banking." 49 an appraised market value, to a de novo subsidiary, Federal Register 806 (1984). MAC, and to make armored car services available to The ALJ found that none of the National Courier the public on an explicit-fee basis.4 In its application, criteria was demonstrated by the record. The Board Metrocorp made certain commitments aimed at mini- concludes, however, that both the second and third mizing possible conflicts of interest and anti-competi- tests have been met on the present record. The ALJ's tive practices, similar to those required of bank hold- conclusion relies on certain operational distinctions ing company-owned courier services. See 12 C.F.R. between the proposed armored car services to third 225.129. Included among those commitments was a parties and the services banks traditionally perform for representation that the armored car subsidiary would operate as a separate profit center, and would not be 5. Securities Industry Ass'n v. Board of Governors of the Federal subsidized in any way by the bank holding company or Reserve System, 900 F.2d 360, 365 (D.C. Cir. 1990) (emphasis in its banking subsidiaries. original). 6. National Courier Ass'n v. Board of Governors of the Federal Reserve System, 516 F.2d 1229 (D.C. Cir. 1975) ("National Courier"). The National Courier guidelines have been followed by other courts of appeals and approved by the Supreme Court. See, e.g., Securities Industry Association v. Board of Governors of the Federal Reserve System, 468 U.S. 207, 210 n.5 (1984); NCNB Corp. v. Board 1. Since the application was filed, the two subsidiary banks have of Governors of the Federal Reserve System, 599 F.2d 609 (4th Cir. merged, and Colona was established as a branch of Metrobank. 1979); Alabama Association of Insurance Agents v. Board of Gover- 2. Data are as of December 31, 1989. nors of the Federal Reserve System, 533 F.2d 224, 241 (5th Cir. 1976), 3. The State Commissioner of Banks and Trust Companies deter- modified on other grounds, 588 F.2d 729 (1977), cert, denied, 435 U.S. mined that the provision of armored car services for the bank's own 904 (1978). operations was not prohibited by law. Application at 64. 7. Association of Data Processing Organizations, Inc. v. Board of 4. Metrocorp has committed to limit MAC's ATM maintenance Governors of the Federal Reserve System, 745 F.2d 677, 686 (D.C. activities to affiliates. Cir. 1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

678 Federal Reserve Bulletin • August 1990 themselves. Even accepting the ALJ's factual find- Comptroller of the Currency and several states have ings, the Board concludes that the slight operational explicitly authorized banks to provide armored car distinctions he cites are not significant. services to their customers subject to certain contrac- The Applicant did not rely on the first National tual conditions.12 Courier test to support its application. Although Although there may be some distinctions between Board Counsel argued that this test was met due to such services and the proposed full-service, for-hire the substantial evidence of banks engaged in armored armored car services, the nature of the customers car services in-house or for their own customers, the served and the economic basis of the services pro- ALJ found that the evidence did not support a finding vided do not fundamentally alter the functions inthat banks "have been or are transporting currency volved. Thus, it is clear that the services provided by and valuables by armored car for the general pub- the Applicant and other banks and bank holding comlic." Recommended Decision at 26. panies to themselves and their customers are suffi- Protestant and Intervenors argue that there is a ciently "operationally and functionally similar" to the distinction between armored car services provided proposed service as to equip banking organizations in-house or at reduced or no cost to bank customers, particularly well to provide the proposed service. As and such services provided on a for-hire basis to the discussed below, such internal services include the general public. The evidence in the record does not same need for secure and timely transportation of cash provide sufficient information to permit a conclusion as is required when providing armored car services to that banks have provided for-hire services for the unaffiliated parties, and so, in the Board's view, equip general public, as the Applicant proposes to do. For bank holding companies well to provide such services. this reason, the evidence relating to the provision of In addition, Protestant and Intervenors did not armored car services by banks and bank holding dispute that banks generally handle large amounts of companies is more appropriately viewed under the currency under tight security, as do armored car second National Courier test. The second National services; that banks have extensive experience in Courier test requires a showing that banks generally safeguarding valuables and handling large currency provide services that are "operationally and function- transactions and transfers; and that banks' increasing ally so similar" to the proposed service as to equip experience with servicing automatic teller machines them particularly well to provide that service.8 The requires the safe transportation of currency. record is replete with evidence of banks and bank Moreover, bank holding companies are permitted to holding companies providing armored car services at provide courier services for unaffiliated parties pursuleast for themselves and their customers. Several ant to existing provisions of Regulation Y, 12 C.F.R. witnesses providing statements in opposition to the 225.25(b)(10). Such services, like armored car serapplication reported personal knowledge of numerous vices, constitute a specialized form of transportation of banks or bank holding companies offering armored of commercially important documents used in banking car services.9 Even the comment letter of the Protes- and finance. The only essential difference between the tant indicated that banks have provided these services two services relates to the intrinsic value of the at times.10 Moreover, several court cases have dealt material transported, as courier services operated by with branching issues in connection with the provision bank holding companies may not transport cash. of armored car services by banks or bank holding Clearly, the increased value of the material transcompany subsidiaries, affording further indication that ported by an armored car service requires additional such services have historically been provided by security measures, additional insurance, and somebanks.11 In addition, the Board, the Office of the what different equipment. But the services themselves — transporting commercially important and time-sensitive documents in a secure manner — are certainly functionally and operationally similar. 8. See National Courier, 516 F.2d at 1238. The ALJ concluded that for-hire armored car trans- 9. See, e.g., Statement of Herman J. Koehler, III, Hearing Exhibit ("HE") 7, at 2-3, identifying fourteen banks in the New York/New portation was not functionally or operationally similar Jersey area alone that have engaged in armored car operations in the past 10 years; Statement of Charles S. Allen, Jr., HE 6, at 9, recalling "numerous" banks in New Jersey with their own armored car companies, either as part of the bank, a subsidiary of the bank, F.2d 1200 (5th Cir. 1970); Browne v. Clarke, 878 F.2d 627 (2d Cir. or a subsidiary of the holding company, Statement of William L. 1989). Cole, National Armored Car Association, HE 4, at 2-3; Statement of 12. See, e.g., 12 C.F.R. 208.110 (permitting State member banks to Peter F. Wright, HE 14, at 1. provide messenger services by armored car to their banking custom- 10. Comments of the National Armored Car Association, Jan- ers at no cost to the customers, subject to an agreement that the uary 27, 1989, at 9. messenger is the agent of the customer); 12 C.F.R. 7.7490; Ark. Stat. 11. See, e.g., First National Bank in Plant City v. Dickinson, 396 Ann. § 23-32-701 (Michie 1987); Fla. Stat. Ann. § 658.26 (West 1984); U.S. 122 (1969); Jackson v. First National Bank of Gainesville, 430 N.J. Stat. Ann. § 17:9A-25.5 (West 1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 679 to services provided by banks, because of certain for such measures. With respect to storage for customalleged unique aspects of for-hire armored car trans- ers' valuables, Metrocorp intends to lease any necesportation. Those aspects, as identified by the ALJ, sary vault space from Metrobank. Thus, the record were that the provision of armored car services to the indicates that Metrocorp has the present ability to general public "requires the acquisition, maintenance, provide safe and reliable vehicles for its proposed and secure storage of unique and highly expensive armored car operations. vehicles in sufficient number to assure the public of The record also reflects that Metrocorp's personnel safe and continuous service, the employment and practices are consistent with a finding that providing training of adequate personnel qualified to handle such armored car services to the general public is functionequipment and provide the necessary service, and the ally very similar to services currently provided by efficient and economical planning and provision of banks. All of Metrobank's armored car employees are such service to the public in a manner that will secure present or former police officers.16 Their training is not only the money and valuables transported but also supplemented by periodic specialized training by prowill provide security to the public using the highways, fessional consultants.17 There appears to be no reason streets and facilities to, from, and over which the why these employees, who have successfully operated armored car services move."13 Metrobank's internal armored car service without loss In the Board's view, these operational factors do not since its inception, cannot provide similar services to provide a reasonable basis for finding that the proposed unaffiliated customers. for-hire services are not closely related to banking, Finally, the record evidence relating to Metrobank's because the record shows that these aspects of armored operations supports the conclusion that banking orgacar service are not unique to for-hire services. All nizations generally, and Metrocorp in particular, have armored car transportation, whether limited to a bank's the ability to operate efficiently and economically in own internal needs or available to the general public, planning their services. Currently, the Metrobank arrequires special vehicles, trained personnel, efficient mored car travels approximately 70 miles a day, and economical planning, and provision of safe and making 14 stops along the way, in approximately five secure services. The evidence suggests that the banks hours.18 This indicates an ability to plan for and and bank holding companies that have provided ar- coordinate armored car service along a route with mored car services in the past have addressed these many stops. Metrocorp believes that a number of issues successfully. Certainly these factors have been additional businesses along its existing route may be addressed by Metrocorp in its current in-house armored potential customers for its services, which would add car operation, and these aspects of the operation would substantially to its revenues while leaving fixed costs not change significantly if the service were to be made approximately the same, resulting in economies of available to unaffiliated customers. scale.19 With regard to safety, Metrobank has demonstrated that it can operate its armored car service With respect to the vehicular requirements, the internally over a substantial period of time safely and record demonstrates that MAC plans to purchase and without loss.20 Metrocorp has also obtained all-risk use the vehicle currently used by Metrobank in its insurance of a type standard in the industry, and has armored car operation, and that the vehicle has been adequate for that purpose.14 Metrocorp has stated its its insurance coverage reviewed annually by independent consultants to ensure sufficient coverage.21 Metintention to acquire a second vehicle so that its present rocorp has committed to limit the value of the goods its one will be available as a back-up, and its financial armored car carries at any one time to its insurance projections indicate an ability to do so. Neither the limits, and to obtain additional insurance if necessary vehicle itself nor its storage have been the subject of in the event of expansion.22 criticism by the independent consultants who have reviewed Metrobank's armored car service periodically.15 With respect to storage, though there were suggestions that armored car firms such as 16. Protestant's argument that bank personnel are trained to act passively in the event of attack is clearly not applicable to these Brink's provide secure storage for the armored vehiindividuals. cles themselves, nothing in the record indicated a need 17. Hearing Transcript at 117 (testimony of Ben H. Ryan, Jr.). 18. Application at 11; Financial Supplement at 11. 19. Financial Supplement at 8-11. 20. Hearing Transcript at 116 (testimony of Ryan) (no losses in the 13. Recommended Decision at 26. six years of operation by Metrobank). 14. Metrobank has suffered no losses from its armored car activities 21. Letter to Metrocorp from Financial Insurance Service, Inc., since their inception in 1983. Hearing Transcript at 116 (testimony of dated February 10, 1989 ("The policy currently in effect for your Ben H. Ryan, Jr.). Armored Car Transit Liability is comparable to policies written for 15. An independent consultant made certain suggestions regarding regular Armored Car Services."); Rebuttal Statement of Ben H. the vehicle in 1988; these suggestions were carried out in full. HE 9; Ryan, Jr., HE 8, at 2. Hearing Transcript at 358-60 (testimony of Gary Anderson). 22. Hearing Transcript at 134 (testimony of Ryan). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

680 Federal Reserve Bulletin • August 1990 The ALJ specifically found that "pickup for pickup, mination that the third National Courier test is also delivery for delivery, or pound for pound it is not met. shown that armored car services for banks differ For the above reasons, the Board concludes that the significantly from armored car service for any other provision of armored car services to the general public customers of the armored carriers."23 Since the record on a for-hire basis is an activity that is "closely related clearly demonstrates that banks provide armored car to banking or managing or controlling banks" within services for their own operations, this finding compels the meaning of section 4(c)(8) of the BHC Act, the legal conclusion that banks provide services that 12 U.S.C. § 1843(c)(8). are operationally and functionally so similar to for-hire armored car activities as to equip banks well to per- Additional Issues form those services, and thus that the proposed services are closely related to banking under the second The determination that an activity is closely related National Courier test.24 to banking is, of course, only the first step in a As an alternative to this test, the third National two-step process of approving that activity for a bank Courier test requires an applicant to show "the holding company.29 In addition, the Board must find dependence of banks on a specialized form of the that the activity is a "proper incident" thereto, a proposed services."25 The ALJ interpreted this test determination that requires the Board to consider to require the applicant to show "that in its opera- whether performance of an activity by a bank holding tions generally it requires a specialized form of company affiliate can reasonably be expected to armored car services, a form of armored car service produce benefits to the public, such as greater conthat differs significantly from the service ordinarily venience, increased competition, or gains in effiprovided to other commercial and industrial and ciency, that outweigh possible adverse effects, such other entities that regularly receive armored car as undue concentration of resources, decreased or service."26 This standard is too narrow, and is incon- unfair competition, or unsound banking practices.30 sistent with National Courier itself. There, the appli- The Board's original Hearing Order instructed the cant was able to demonstrate the need for a special- ALJ to consider these issues,31 and a substantial ized form of transportation service, the portion of the record is devoted to matters relevant transportation of cash letters.27 The court there was to the "proper incident" test. In addition, the Hearnot concerned with whether courier services pro- ing Order instructed the ALJ to examine the state vided to bank customers differed from those services branching issues raised by the application.32 Noneprovided to other commercial customers. theless, in light of his determination of the "closely Here, too, the record amply demonstrates that related" issue, the ALJ declined to make any factual banks are highly dependent upon the specialized trans- or legal determinations concerning the proper inciportation services provided by armored cars transport- dent test or the state branching laws. ing cash and valuables in a highly secure environment. Under the Board's regulations made applicable to Metrocorp is proposing to engage, through its subsid- this case,33 an administrative law judge is required to iary, in just these specialized transportation services; provide a recommended decision with regard to these it does not propose to start a general moving or unresolved issues prior to final determination by the trucking service.28 Thus, the record supports a deter- Board. 12 C.F.R. 263.11. Thus a final disposition of Metrocorp's application is not possible at this juncture. The Board therefore remands the case to the ALJ 23. Recommended Decision at 27. for a recommended decision on the "proper incident" 24. It should be noted that in National Courier itself, the court standard and other unresolved issues. In view of the upheld the Board's finding that banks generally have provided the service based on the fact that three bank holding companies had passage of time since the application was filed, and provided the service. 516 F.2d at 1237. certain deficiencies existing in the current record, the 25. 516 F.2d at 1238. ALJ should specifically address and, to the extent 26. Recommended Decision at 27 (emphasis added). 27. 516 F.2d at 1238. See also, AmeriTrust Corporation, 72 Federal Reserve Bulletin 794 (1986) (approving check printing as a closely related activity on the ground that "[t]he printing of checks ... is a specialized field of printing . . . ."). 29. See Securities Industry Ass'n v. Board of Governors of the 28. Metrocorp's application indicates its intention to provide "re- Federal Reserve System, 468 U.S. 207, 210 (1984); Alabama Ass'n of lated services such as interbank transfers, coin wrapping, change Insurance Agents v. Board of Governors of the Federal Reserve delivery, mail delivery, [and] payroll check cashing" in addition to the System, 533 F.2d 224, 235 (5th Cir. 1976), cert, denied, 435 U.S. 904 transportation of cash, negotiable instruments, and other valuables. (1978); National Courier, 516 F.2d at 1232-1233. Application at 5. The present record contains no showing that these 30. 12 U.S.C. § 1843(c)(8). services are "incidental" to armored car services. Cf. National 31. 54 Federal Register 20,200 (May 10, 1989). Courier, 516 F.2d at 1240 (disapproving bank courier handling of 32. Id. nonfinancial material). 33. See 12 C.F.R. 262.4 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 681 necessary, reopen the record, certain issues relevant is subject to section 4 of the BHC Act by virtue of its to the "proper incident" test.34 several agencies and branches in the United States. By order of the Board of Governors, effective Mocatta is currently engaged in the purchase and sale June 18, 1990. of gold and silver bullion and coin and related activities.2 Voting for this action: Chairman Greenspan and Governors Mocatta would acquire platinum coins issued by the Johnson, Seger, Angell, Kelley, LaWare, and Mullins. Canadian and Australian governments solely for the purpose of effecting their distribution. Although Mo- JENNIFER J. JOHNSON catta would maintain an inventory of the coins, Mo- Associate Secretary of the Board catta would not purchase the coins for investment or speculation for its own account. Mocatta may enter Standard Chartered PLC into forward contracts with its customers to sell the London, England coins at fixed prices, although it does not expect to do so on a regular basis.3 Mocatta would not offer its Order Approving Application to Purchase and Sell customers investment advice concerning the purchase Platinum Coins or sale of these coins. The Board has not previously approved the pro- Standard Chartered PLC, London, England ("Stanposed activities under section 4(c)(8) of the BHC Act. dard Chartered"), a foreign bank subject to the provi- In order to approve an application submitted pursuant sions of the Bank Holding Company Act, (the "BHC to section 4(c)(8) of the BHC Act, the Board is Act"), has applied, pursuant to section 4(c)(8) of the required to determine that the proposed activity is "so BHC Act, for the Board's approval to engage, through closely related to banking as to be a proper incident its wholly owned subsidiary, Mocatta Metals Corpo- thereto." 12 U.S.C. § 1843(c)(8). In considering ration, New York, New York ("Mocatta"), in the whether a proposed new activity would be a proper purchase and sale of platinum coins issued by the incident to banking, the Board is required to determine Canadian and Australian governments as legal tender. that the performance of the proposed activity can Notice of the application, affording interested per- reasonably be expected to produce benefits to the sons an opportunity to submit comments, has been public that outweigh possible adverse effects. Id. duly published (55 Federal Register 19,788 (1990)). In determining whether an activity is closely related The time for filing comments has expired, and the to banking for purposes of section 4(c)(8) of the BHC Board has considered the application and all com- Act, the Board has considered a number of alternative ments received in light of the public interest factors set factors, including whether banks generally have, in forth in section 4(c)(8) of the BHC Act. fact, provided the proposed activity; banks generally Standard Chartered, with approximately $39.4 bil- provide services that are operationally or functionally lion in total consolidated assets, is the fifth largest so similar to the proposed activity as to equip them banking organization in England.1 Standard Chartered particularly well to provide the proposed activity; or banks generally provide services that are so integrally related to the proposed activity as to require their 34. The areas in which additional information is necessary include: provision in a specialized form.4 (1) the effect, if any, on current operations of the merger of Metrobank and its sister bank, Colona Avenue State Bank; In considering the activity proposed in this case, the (2) the reasons for Metrobank's decline in earnings, and the effect Board notes that the Office of the Comptroller of the such decline might have on the application; (3) the insurance MAC would have to cover items stored overnight Currency has authorized national banks to purchase in Metrobank's vault; (4) the current all-risk insurance policy and the most recent independent consultant's review of Metrobank's armored car service; (5) further information on pricing in order to comply with the 2. See Standard and Chartered Banking Group Limited, 38 Federal Applicant's commitment not to subsidize the operations of MAC Register 27,552 (1973) ("Standard Chartered"). In this Order the (the present pricing information suggests that the Applicant's bank Board determined that dealing in platinum was not closely related to subsidiary would pay more per pick-up than new customers on the banking. existing route); 3. Standard Chartered has stated that to the extent Mocatta enters (6) projections that include marketing and advertising expenses, if into contracts to deliver coins it has not yet received, it would hedge any; its exposure to rising platinum prices, and the contracts would provide (7) a precise breakdown of the services MAC will purchase from an appropriate remedy in the event of a curtailment of the issuing Metrobank and the projected costs of these services; and countries' production or delivery of the coins. (8) updated information concerning the second armored car Appli- 4. National Courier Association v. Board of Governors, 516 F.2d cant plans to purchase, including cost and source of funds for the 1229, 1237 (D.C. Cir. 1975). The Board may also consider any other purchase. factor that an applicant may advance to demonstrate a reasonable or close connection or relationship to banking. 49 Federal Register 794, 806 (1984); Securities Industry Ass'n v. Board of Governors, 468 U.S. 1. Banking data are as of December 31, 1989. 207, 210-211 n. 5 (1984). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

682 Federal Reserve Bulletin • August 1990 and sell platinum coins.5 In addition, the proposed There is no evidence in the record that consummaservices with respect to platinum coins that are legal tion of the proposal would result in any adverse tender are operationally and functionally similar to effects, such as undue concentration of resources, purchasing and selling gold and silver coins, which decreased or unfair competition, conflicts of interests, the Board has determined is closely related to bank- or unsound banking practices. Based on the foregoing ing and a proper incident thereto.6 For these rea- and other facts of record, the Board has determined sons, the Board concludes that the proposed activi- that the public benefits associated with this proposal ties of purchasing and selling platinum coins that can reasonably be expected to outweigh possible adfunction as legal tender is closely related to banking verse effects, and that the balance of the public interfor purposes of section 4(c)(8) of the BHC Act.7 est factors that the Board is required to consider under In order to approve this application, the Board is section 4(c)(8) of the BHC Act is favorable. also required to determine that the performance of the Accordingly, based on all facts of record in this proposed activities by Standard Chartered "can rea- case, the Board has determined that, subject to the sonably be expected to produce benefits to the public, commitments made by Standard Chartered, this applisuch as greater convenience, increased competition, cation, should be, and hereby is, approved. This or gains in efficiency, that outweigh possible adverse determination is subject to all of the conditions set effects, such as undue concentration of resources, forth in the Board's Regulation Y, including those in decreased or unfair competition, conflicts of inter- sections 225.4(d) and 225.23(b), and to the Board's ests, or unsound banking practices." 12 U.S.C. authority to require modification or termination of the § 1843(c)(8). activities of the holding company or any of its subsid- Consummation of the proposal may be expected to iaries as the Board finds necessary to assure compliresult in increased convenience resulting from the ance with, or to prevent evasion of, the provisions and offering of additional services to customers. In addi- purposes of the BHC Act and the Board's regulations tion, the Board expects that the entry of Standard and orders issued thereunder. Chartered into the market for these services will This transaction shall not be consummated later increase the level of competition among providers of than three months after the effective date of this these services. Order, unless such period is extended for good cause Standard Chartered has proposed to conduct the by the Board or by the Federal Reserve Bank of San activities in this case within limitations and with pro- Francisco, pursuant to delegated authority. cedural safeguards designed to mitigate potential ad- By order of Board of Governors, effective June 25, verse effects from the activities. In particular, Mocatta 1990. would implement inventory controls designed to limit its investment in the coins,8 and would engage in Voting for this action: Chairman Greenspan and Governors hedging transactions to reduce the risk of holding the Johnson, Seger, Angell, Kelley, LaWare, and Mullins. coins in inventory. Standard Chartered has committed that Mocatta will not engage in spot, forward, futures, JENNIFER J. JOHNSON and options contracts transactions on platinum or Associate Secretary of the Board purchase physical platinum; it would, however, do so for hedging purposes only and as an incident to its Stichting Amro purchases and sales of the platinum coins.9 Amsterdam, The Netherlands Amsterdam-Rotterdam Bank N.V. Amsterdam, The Netherlands 5. See Letter dated July 29, 1987, from William J. Stolte, Chief National Bank Examiner, Office of the Comptroller of the Currency. 6. Westpac Banking Corporation, 73 Federal Reserve Bulletin 61 Proposal to Underwrite and Deal in Certain (1987). Securities to a Limited Extent, and Engage in 7. As part of its application, Standard Chartered has proposed to purchase and sell physical platinum and spot, forward, futures, and Certain Other Securities and Financial Advisory options contracts based on platinum to hedge its activities in platinum Services coins. The Board has not determined that these activities, if conducted independently of the purchase and sale of platinum coins, are closely related to banking. However, within the limits discussed Stichting Amro and its subsidiary, Amsterdam-Rotterbelow, the Board believes that these activities are incidental to the proposed activities in platinum coins. dam Bank N.V. ("Amro"), both of Amsterdam, The 8. Standard Chartered has stated that it expects to maintain an Netherlands (together, "Applicants"), foreign bankinventory adequate to meet customer demand for approximately one ing organizations subject to the Bank Holding Commonth. 9. See Westpac. pany Act ("BHC Act"), have applied for the Board's Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 683 approval under section 4(c)(8) of the BHC Act Board has considered the applications and all com- (12 U.S.C. § 1843(c)(8)) and section 225.23 of the ments received in light of the public interest factors set Board's Regulation Y (12 C.F.R. 225.23), to engage, forth in section 4(c)(8) of the BHC Act. through its subsidiary, Amro Securities, Inc., New Amro, with consolidated assets equivalent to ap- York, New York ("Company"), in the following ac- proximately $92.9 billion, is the second largest banking tivities: organization in The Netherlands.2 In the United (1) underwriting and dealing in, to a limited extent, States, Applicants maintain a branch in New York and municipal revenue bonds, 1-4 family mortgage- representative offices in Chicago, Houston, and Los related securities, commercial paper and consumer- Angeles. Accordingly, Applicants are subject to the receivable-related securities ("bank-ineligible secu- nonbanking restrictions of section 4 of the BHC Act as rities") and obligations of the United States, general a bank holding company pursuant to section 8 of the obligations of states and their political subdivisions, International Banking Act of 1978. 12 U.S.C. § 3106. and other obligations that state member banks of the Each of the activities that Applicants propose to Federal Reserve System may be authorized to un- conduct has previously been found by the Board to be derwrite and deal in under 12 U.S.C. §§ 24 and 335, closely related to banking and permissible for bank including bankers acceptances and certificates of holding companies. Applicants have proposed to condeposit ("bank-eligible securities");1 duct these activities in accordance with the Board's (2) acting as agent in the private placement of all regulations and orders governing these activities. types of securities; (3) providing investment advisory and securities Securities Underwriting and Dealing Activities brokerage services on a combined basis to institutional and retail customers ("full-service brokerage The Board has found that a bank holding company or activities"); its subsidiary may underwrite and deal in bank-eligible (4) buying and selling securities on the order of securities pursuant to section 4(c)(8) of the BHC Act investors as riskless principal; and section 225.25(b)(16) of Regulation Y (12 C.F.R. (5) exercising discretion in buying and selling secu- 225.25(b)(16). The Board has also found that, subject rities on behalf of institutional customers, and pro- to the prudential framework of limitations established viding discretionary management of short-term in previous cases to address the potential for conflicts monies for a small number of corporate or other of interests, unsound banking practices or other adinstitutional clients ("discretionary investment ac- verse effects, the proposed bank-ineligible securities tivities"); and underwriting and dealing activities are so closely re- (6) providing for institutional customers; lated to banking as to be a proper incident thereto (i) advice in connection with the structuring of and within the meaning of section 4(c)(8) of the BHC Act. arranging for interest rate and currency "swaps," The conduct of these bank-ineligible securities underinterest rate caps and similar transactions, and writing and dealing activities has also been determined (ii) advice in connection with merger, acquisition/ by the Board to be consistent with section 20 of the divestiture and financing transactions and valua- Glass-Steagall Act provided the underwriting subsidtions and fairness opinions in connection with iary derives no more than 10 percent of its total gross merger, acquisition and similar transactions (col- revenue from underwriting and dealing in the banklectively referred to as "financial and transaction ineligible securities over any two-year period.3 The advice"). Board subsequently modified that prudential framework in the case of a foreign banking organization to take into account principles of national treatment and Notice of the applications, affording interested perthe Board's policy not to extend U.S. bank supervisons an opportunity to submit comments, has been duly published (55 Federal Register 18,176 (1990)). The time for filing comments has expired, and the 2. Data are as of December 31, 1989. 3. Citicorp, J.P. Morgan and Co. Incorporated and Bankers Trust New York Corporation, 73 Federal Reserve Bulletin 473 (1987) ("Cit- 1. Applicants seek approval for Company to engage in the following icorp/Morgan/Bankers Trust"), afifd sub nom., Securities Industry activities which the Board has found to be incidental to underwriting Association v. Board of Governors of the Federal Reserve System, 839 and dealing in bank-eligible securities: engaging in repurchase and F.2d 47 (2d Cir. 1988), cert, denied, 108 S.Ct 2830 (1988) ("S/A v. reverse repurchase transactions, securities borrowing and lending Board")', and Chemical New York Corporation, The Chase Manhattransactions, and the provision of dealing, settling, accounting, record tan Corporation, Bankers Trust New York Corporation, Citicorp, keeping and other ancillary services to those counterparties with Manufacturers Hanover Corporation and Security Pacific Corporawhich it deals that do not maintain accounts with clearing agencies. tion, 73 Federal Reserve Bulletin 731 (1987) ("Chemical"); as modi- See The Long-Term Credit Bank of Japan, Limited, 74 Federal fied by Order Approving Modifications to Section 20 Orders, 75 Reserve Bulletin 573 (1988). Federal Reserve Bulletin 751 (1989) ("Modification Order"). 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684 Federal Reserve Bulletin • August 1990 sory standards extraterritorially. The Sanwa Bank, a riskless principal, Company and its subsidiaries Limited, 76 Federal Reserve Bulletin 568 (1990). would only engage in transactions in the secondary ("Sanwa"). Applicants have committed that Com- market and not at the order of a customer that is the pany will conduct its underwriting and dealing activi- issuer of the securities to be sold, and would not hold ties with respect to bank-ineligible securities subject to themselves out as making a market in the securities the 10 percent revenue test and the prudential limita- that they buy and sell as riskless principal. Moreover, tions as established by the Board in its Sanwa Order.4 Company and its subsidiaries would not engage in riskless principal transactions with Applicants or any Private Placement and Riskless Principal Activities of Applicants' affiliates, including foreign affiliates that engage in securities dealing activities overseas. The Board has found that, subject to the prudential Company may place securities with nonbank affillimitations established in previous cases to address the iates, including non-U.S. offices of Applicants. In potential for conflicts of interest, unsound banking previous cases, the Board has recognized that the practices or other adverse effects, the proposed pri- potential for certain conflicts of interest may be invate placement and riskless principal activities are so creased if affiliates were to purchase the entire issue of closely related to banking as to be a proper incident securities placed by Company or a substantial portion thereto within the meaning of section 4(c)(8) of the of such an issue.7 The Board therefore believes that it BHC Act.5 The Board has also previously determined is appropriate to require that affiliates of Company that acting as agent in the private placement of secu- limit their investment, both individually and in the rities does not constitute underwriting and dealing in aggregate, in any particular issue of securities that is securities for purposes of section 20 of the Glass- placed by Company. The Board expects that aggregate Steagall Act, and that revenue derived from these placements by Company with affiliates shall not exactivities is not subject to the 10 percent revenue ceed 50 percent of the issue being placed. In addition, limitation on ineligible securities underwriting and Applicants shall establish appropriate internal polidealing.6 cies, procedures, and limitations regarding the amount of securities of any particular issue placed by Com- Applicants have committed that Company will conpany that may be purchased by Applicants' U.S. duct its private placement and riskless principal activnonbanking subsidiaries, individually and in the ities using the same method and procedures and subaggregate.8 These policies and procedures, as well as ject to the prudential limitations established by the the purchases themselves, will be reviewed by the Board in the Bankers Trust and J.P. Morgan II Or- Federal Reserve Bank of New York. The Reserve ders, as modified to reflect Applicants' status as a Bank shall also review within six months all policies foreign bank, consistent with the framework adopted and procedures relating to Company's conduct of in The Royal Bank of Canada, 76 Federal Reserve private placement activities. Bulletin 567 (1990), Toronto Dominion, and in Canadian Imperial Bank of Commerce/The Royal Bank of Canada!Barclays PLC, 76 Federal Reserve Bulletin Full-Service Brokerage Activities 158 (1990). In this regard, Company will maintain specific rec- The Board has also previously determined by Order ords that will clearly identify all riskless principal that combined investment advisory and securities brotransactions, and Company and its subsidiaries would kerage services are closely related to banking and not engage in any riskless principal transactions for permissible for bank holding companies, subject to any securities carried in its inventory. When acting as certain limitations.9 For the reasons stated in these Orders, the Board confirms that engaging in full-service brokerage activities within the limits described in 4. The Board notes that lending by U.S. branches and agencies of the Board's Orders is closely related to banking for foreign banks to affiliates is not restricted by section 23A of the purposes of the BHC Act. Applicants propose that 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 Applicants' U.S. branches and agencies, none of which is insured by the FDIC. The Board, however, reserves the right to require that Applicants' U.S. branches 7. J.P. Morgan II. and agencies adhere to the restrictions of section 23A should circum- 8. In the development of these policies and procedures, Applicants stances change to make such requirement appropriate. See The should incorporate, with respect to placements of securities, appro- Toronto Dominion Bank, 76 Federal Reserve Bulletin 573 (1990). priate policies, procedures, and limitations regarding exposure of 5. Toronto Dominion; Bankers Trust New York Corporation, 75 Applicants' U.S. offices and subsidiaries on a consolidated basis to Federal Reserve Bulletin 829 (1989) ("Bankers Trust"); J.P. Morgan any single customer whose securities are placed by Company. & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) 9. See PNC Financial Corp., 75 Federal Reserve Bulletin 396 ("J.P. Morgan II"). (1989); Bank of New England Corporation, 74 Federal Reserve 6. Id. Bulletin 700 (1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 685 Company and its subsidiaries conduct these activities of resources, decreased or unfair competition, consubject to the requirements of the Board's regulations flicts of interests, unsound banking practices, or other and previous Board Orders. adverse effects. Accordingly, the Board has determined that the performance of the proposed activities Other Securities Related Activities by Applicants can reasonably be expected to produce public benefits which would outweigh adverse effects The Board has previously determined by Order that under the proper incident to banking standard of engaging in discretionary investment activities, and section 4(c)(8) of the BHC Act. providing financial and transaction advice to institu- Based on the above, the Board has determined to, tional customers are permissible nonbanking activities and hereby does, approve the applications subject to all for bank holding companies under section 4(c)(8) of of the terms and conditions set forth in this Order, and the BHC Act.10 Applicants have stated that Company in the above-noted Board Orders that relate to these will engage in these activities in accordance with the activities. The Board's determination is also subject to conditions set forth in these Orders. all of the conditions set forth in the Board's Regulation Y, including those in sections 225.4(d) and 225.23(b), Financial Factors, Managerial Resources and Other and to the Board's authority to require modification or Considerations termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to In order to approve this application, the Board is assure compliance with, and to prevent evasion of, the required to determine that the performance of the provisions of the BHC Act and the Board's regulations proposed activities by Applicants "can reasonably be and Orders issued thereunder. expected to produce benefits to the public, such as This transaction shall not be consummated later greater convenience, increased competition, or gains than three months after the effective date of this in efficiency, that outweigh possible adverse effects, Order, unless such period is extended for good cause such as undue concentration of resources, decreased by the Board or by the Federal Reserve Bank of New or unfair competition, conflicts of interests, or un- York, pursuant to delegated authority. sound banking practices." 12 U.S.C. § 1843(c)(8). By order of the Board of Governors, effective In evaluating these factors under section 4 of the June 4, 1990. BHC Act, the Board considers the financial condition and resources of the Applicants and its subsidiaries Voting for this action: Chairman Greenspan and Governors and the effect of the proposal on these resources.11 In Johnson, Seger, Kelley, LaWare, and Mullins. Absent and not voting: Governor Angell. this case, the Board notes that the stated primary capital ratio of Amro meets the minimum capital JENNIFER J. JOHNSON guidelines for United States multinational bank hold- Associate Secretary of the Board ing companies. Further, Amro meets the 1990 interim risk-based guidelines, and its core capital exceeds the 1992 minimum standard adopted by the Basle Commit- SunTrust Banks, Inc. tee. In view of these and other facts of record, the Atlanta, Georgia Board has determined that financial factors are consistent with approval of the applications. Order Approving Application to Acquire a Savings Consummation of the proposal would provide added Association convenience to Applicants' customers. In addition, the Board expects that the de novo entry of Applicants into the market for these services would increase the SunTrust Banks, Inc., Atlanta, Georgia, and its subsidlevel of competition among providers of these ser- iary, Trust Company of Georgia, Atlanta, Georgia vices. Under the framework established in this and (collectively, "Applicant"), both bank holding compaprior decisions, consummation of this proposal is not nies within the meaning of the Bank Holding Company likely to result in any significant undue concentration Act ("BHC Act"), have applied for the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.23 of the Board's Regula- 10. J.P. Morgan & Co. Incorporated, 73 Federal Reserve Bulletin tion Y (12 C.F.R. 225.23), to acquire Albany First 810 (1987); Sovran Financial Corporation, 73 Federal Reserve Bulletin 744 (1987) (investment discretion); Signet Banking Corporation, 73 Federal Savings and Loan Association, Albany, Geor- Federal Reserve Bulletin 59 (1987) (financial and transaction advice). gia ("Albany First"), a savings association, pursuant 11. 12 C.F.R. 225.24; The Fuji Bank Limited, 75 Federal Reserve to section 225.25(b)(9) of the Board's Regulation Y Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve Bulletin 155, 156 (1987). (12 C.F.R. 225.25 (b)(9)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

686 Federal Reserve Bulletin • August 1990 Applicant has also requested Board approval of its subsidiaries in Tennessee. Applicant is the second proposal under section 5(d)(3) of the Federal Deposit largest commercial banking organization in Georgia, Insurance Act ("FDI Act"), as amended by the Finan- with deposits of $6.6 billion, representing 14.4 percent cial Institutions Reform, Recovery, and Enforcement of the total deposits in commercial banks in the state.3 Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, Applicant also engages through several subsidiaries in 199 (1989)) ("FIRREA"), to merge Albany First into permissible nonbanking activities. Albany First is the one of Applicant's existing subsidiary banks, Trust 18th largest thrift institution in Georgia and operates Company Bank of South Georgia, N.A., Albany, nine offices in Georgia. Albany First has total deposits Georgia ("TCB"), after Applicant acquires the shares of $178.6 million, representing 1.2 percent of the total of Albany First.1 deposits in thrift institutions in the state. Notice of the application, affording interested per- After the proposed acquisition is consummated, sons an opportunity to submit comments, has been Applicant would remain the second largest commerpublished (55 Federal Register 8195 and 19,666 cial banking organization in Georgia, controlling (1990)). The time for filing comments has expired, and 14.7 percent of total deposits in commercial banking the Board has considered the application and all organizations in Georgia. In the Board's view, concomments received in light of the public interest summation of this proposal would not have a signififactors set forth in section 4(c)(8) of the BHC Act. cantly adverse effect upon the concentration of bank- Section 601 of FIRREA (as codified at 12 U.S.C. ing organizations in Georgia. § 1843(i)) permits the Board to approve an application Applicant and Albany First compete directly in the by a bank holding company to acquire a savings Albany banking market.4 In the Albany market, Apassociation under section 4(c)(8) of the BHC Act. plicant is the third largest of eight depository institu- Pursuant to this authority, the Board has determined tions, controlling $126.7 million in deposits, representthat the operation of a savings association is closely ing approximately 18.8 percent of total deposits in the related to banking and permissible for bank holding market. Albany First is the fourth largest depository companies. 12 C.F.R. 225.25(b)(9). In making this institution in the market, controlling $69.1 million in determination, the Board required that savings asso- deposits, representing approximately 10.3 percent of ciations acquired by bank holding companies conform total deposits in the market. Upon consummation of their direct and indirect activities to those activities this proposal, Applicant would become the largest permissible for bank holding companies under section depository institution in the Albany market, control- 4 of the BHC Act. Applicant has committed to con- ling $195.8 million in deposits, representing approxiform all activities of Albany First to the requirements mately 35.7 percent of market deposits.5 The Albany of section 4 and Regulation Y.2 banking market is considered to be highly concen- In order to approve the application, the Board also trated, with the four largest depository institutions is required by section 4(c)(8) of the BHC Act to controlling 77.3 percent of the market deposits. The determine that the ownership and operation of First Herfindahl-Hirschman Index ("HHI"), which is cur- Albany by Applicant "can reasonably be expected to rently 1800, would increase by 575 points, to a level of produce benefits to the public . . . that outweigh 2375, after consummation of the proposal.6 possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices." 3. All deposit data are as of June 30, 1989. 4. The Albany, Georgia, banking market includes all of Dougherty 12 U.S.C. § 1843(c)(8). and Lee Counties plus the southern half of Worth County. Applicant operates 18 banking subsidiaries in Geor- 5. The pre-consummation market share statistics are based on gia, 21 banking subsidiaries in Florida, and 14 banking calculations in which the deposits of Albany First and all other thrifts are included at 50 percent. Upon consummation of the proposal, Albany First would be merged with a commercial banking organization, thus on a pro forma basis, the deposits of Albany First are 1. 12 U.S.C. § 1815(d)(3). Section 5(d)(3) of the FDI Act (the included at 100 percent, while the deposits of other savings associa- "Oakar Amendment") permits the merger of a savings association tions continue to be included at 50 percent. owned by a bank holding company into a subsidiary bank owned by 6. Under the revised Department of Justice Merger Guidelines, 49 the same bank holding company under certain circumstances. In this Federal Register 26,823 (1984), a market in which the post-merger case, the merger of Albany First, which is a mutual savings associa- HHI is over 1800 is considered highly concentrated, and the Justice tion, into TCB will be facilitated by the intermediate conversion of Department is likely to challenge a merger that increases the HHI by Albany First into a federally chartered stock savings association and more than 50 points unless other factors indicate that the merger will thereafter into a state-chartered savings association. not substantially lessen competition. The Justice Department has 2. Upon consummation of this proposal, Applicant would not informed the Board that a bank merger or acquisition generally will engage in any activities not permissible for bank holding companies not be challenged (in the absence of other factors indicating anticomunder section 4 of the BHC Act. Applicant has also committed to petitive effects) unless the post-merger HHI is at least 1800 and the divest within two years certain real estate assets currently owned by merger increases the HHI by at least 200 points. The Justice Depart- Albany First and its subsidiaries that may not be retained by a bank ment has stated that the higher than normal HHI thresholds for holding company under the BHC Act. screening bank mergers for anticompetitive effects implicitly recog- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 687 Although this proposal would eliminate some exist- ity to require such modifications or termination of the ing competition in the Albany banking market, the activities of a bank holding company or any of its Board believes that a number of factors mitigate the subsidiaries as the Board finds necessary to assure potential anticompetitive effects of this proposal. Five compliance with, or to prevent evasion of, the provicommercial banking organizations and two thrift insti- sions and purposes of the BHC Act and the Board's tutions would continue to compete in the market regulations and Orders issued thereunder. following consummation, and these remaining compet- In considering the request by Applicant for approval itors would include two of Georgia's six largest bank of the merger of Albany First into TCB pursuant to holding companies other than Applicant. In addition, section 5(d)(3) of the FDI Act, the record in this case the strength of Albany First as a competitor in the shows that: market has diminished in recent years, reducing the (1) The aggregate amount of the total assets of all competitive impact of the acquisition. Albany First depository institution subsidiaries of Applicant is $31 has experienced a decrease in market share over the billion, an amount which is not less than 200 percent past several years and recently has closed one of its of the total assets of Albany First, which currently five offices in the market. Furthermore, Albany First has approximately $180 million in total assets; currently does not meet regulatory capital require- (2) Applicant and all of its bank subsidiaries curments, which limits its ability to compete. In reaching rently meet all applicable capital standards and, its decision, the Board also notes that the Albany upon consummation of the proposed transactions, market, which is the smallest Metropolitan Statistical will continue to meet all applicable capital stan- Area ("MSA") in Georgia, is considered reasonably dards; attractive for entry. Although it is not growing as (3) The transaction is not in substance the acquisirapidly as other Georgia MS As, the Albany market is tion of a Bank Insurance Fund member bank by a relatively large with approximately $800 million in Savings Association Insurance Fund member; deposits. A large Georgia bank holding company en- (4) Albany First had tangible capital of less than tered the market by acquisition in 1986, and a new 4 percent during the quarter preceding its acquisition national bank recently has received preliminary char- by Applicant; ter approval. In light of these facts, the Board has (5) The transaction, which involves the merger of concluded that consummation of the proposal is not Albany First, a savings association located in Georlikely to have a significantly adverse effect on compe- gia, into a bank subsidiary of Applicant, a bank tition in the Albany banking market. There is no holding company whose banking subsidiaries' operevidence in the record to indicate that approval of this ations are principally conducted in Florida, would proposal would result in any significant adverse ef- comply with the requirements of section 3(d) of the fects, such as undue concentration of resources, de- BHC Act if Albany First were a state bank which creased or unfair competition, conflicts of interest, or Applicant was applying to acquire. unsound banking practices. The financial and managerial resources and future Based on the foregoing and all of the other facts of prospects of Applicant and its bank subsidiaries, and record, the Board has determined that the proposed Albany First are consistent with approval. Upon con- application under section 5(d)(3) of the FDI Act should summation, Applicant and its bank subsidiaries would be, and hereby is, approved. This approval is subject meet applicable capital requirements. to Applicant's obtaining the required approvals of the In light of the above considerations, and based on all appropriate federal and state banking agencies for the the facts of record, the Board has determined that the proposed merger. balance of public interest factors it must consider under The transactions approved in this Order shall be section 4(c)(8) of the BHC Act is favorable and consis- made not later than three months after the effective tent with approval of Applicant's application to acquire date of this Order, unless such period is extended for Albany First. Accordingly, the Board has determined good cause by the Board or by the Federal Reserve that the proposed application pursuant to section 4(c)(8) Bank of Atlanta, pursuant to delegated authority. of the BHC Act should be, and hereby is, approved. By order of the Board of Governors, effective This determination is also subject to all of the condi- June 25, 1990. tions set forth in the Board's Regulation Y, including sections 225.4(d) and 225.23, and to the Board's author- Voting for this action: Chairman Greenspan and Governors Johnson, Seger, Angell, Kelley, La Ware, and Mullins. JENNNIFER J. JOHNSON nize the competitive effects of limited-purpose lenders and other non-depository financial entities. Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

688 Federal Reserve Bulletin • August 1990 Orders Issued Under the 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 June 28, 1990 of the Board, acting pursuant to authority delegated by the Board of Governors, hereby approve your request Daniel C. McKay, II to engage in the proposed transaction under section Vedder, Price, Kaufman & Kammholz 5(d)(3) of the FDI Act. This approval is subject to 222 North LaSalle Street Ambank obtaining the required approval of the appro- Suite 2600 priate Federal banking agency for the proposed merger under the Bank Merger Act. Chicago, Illinois 60601 Very truly yours, Dear Mr. McKay: Ambank Financial Services, Inc., Rock Island, Illinois ("Ambank"), proposes that its bank subsidiary, William W. Wiles American Bank of Rock Island, Rock Island, Illinois, Secretary of the Board purchase the assets and assume the liabilities of Interim American Savings Association, F.A., Rock Is- cc: Federal Reserve Bank of Chicago land, Illinois, its savings association subsidiary, ("Interim American Savings"). Ambank has requested June 19, 1990 Board approval of this transaction pursuant to section 5(d)(3) of the Federal Deposit Insurance Act ("FDI William H. Allen, Jr. Act") as amended by the Financial Institutions Re- Chairman of the Board form, Recovery, and Enforcement Act of 1989 (Pub. Atico Financial Corporation L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). 200 Southeast First Street Interim American Savings has been established to Miami, Florida 33131 acquire certain assets and assume deposit liabilities of Blackhawk Savings and Loan Association, F.A., Rock Dear Mr. Allen: Island, Illinois ("Blackhawk"). The record in this case shows that: Atico Financial Corporation, Miami, Florida (1) The aggregate amount of the total assets of all ("Atico"), proposes that its savings association subdepository institution subsidiaries of Ambank is $115.0 sidiary, Atico Savings Bank, Miami, Florida ("Atico million, an amount which is not less than 200 percent of Savings"), merge into its bank subsidiary, Intercontithe total assets of Interim American Savings, which nental Bank, Miami, Florida ("Intercontinental"). currently has $54.2 million in total assets; Atico has requested Board approval of this transaction (2) Ambank and all of its bank subsidiaries currently pursuant to section 5(d)(3) of the Federal Deposit meet all applicable capital standards and, upon Insurance Act ("FDI Act") as amended by the Financonsummation of the proposed transactions, will cial Institutions Reform, Recovery, and Enforcement continue to meet all applicable capital standards; Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, (3) The transaction is not in substance the acquisi- 199 (1989)). In 1987 the Board approved the acquisition of a Bank Insurance Fund member bank by a tion of Intercontinental by Atico which at that time Savings Association Insurance Fund member; was a unitary savings and loan holding company. See (4) Blackhawk, the predecessor to Interim American Atico Financial Corporation, 73 Federal Reserve Bul- Savings, had tangible capital of less than 4 percent letin 111 (1987). during the quarter preceding its acquisition by Am- The record in this case shows that: bank; (1) The aggregate amount of the total assets of all (5) The transaction, which involves the purchase of depository institution subsidiaries of Atico is $648 assets and assumption of liabilities of Interim American million, an amount which is not less than 200 per- Savings, a savings association located in Illinois, by a cent of the total assets of Atico Savings, which bank subsidiary of Ambank, a bank holding company currently has $287 million in total assets; whose banking subsidiaries' operations are principally (2) Atico and all of its bank subsidiaries currently conducted in Illinois, would comply with the require- meet all applicable capital standards and, upon ments of section 3(d) of the Bank Holding Company consummation of the proposed transactions, will Act if Interim American Savings were a state bank continue to meet all applicable capital standards; which Ambank was applying to acquire. (3) The transaction is not in substance the acquisi- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 689 tion of a Bank Insurance Fund member bank by a forcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 Savings Association Insurance Fund member; Stat. 183, 199 (1989)).' (4) Atico Savings had tangible capital of less than 4 The record in this case shows that: percent during the quarter preceding its acquisition (1) The aggregate amount of the total assets of all by Atico; depository institution subsidiaries of Bancorp is $3.3 (5) The transaction involves the merger of a sav- billion, an amount which is not less than 200 percent ings association located in Florida into a bank of the total assets of Municipal, which currently has subsidiary of Atico that is also located in Florida. $102.6 million in total assets; Atico is a bank holding company whose banking (2) Bancorp and all of its bank subsidiaries currently subsidiary's operations are principally conducted meet all applicable capital standards and, upon in Florida. Accordingly, the transaction would consummation of the proposed transactions, will comply with the requirements of section 3(d) of continue to meet all applicable capital standards; the Bank Holding Company Act if Atico Savings (3) The transaction is not in substance the acquisiwere a state bank which Atico was applying to tion of a Bank Insurance Fund member bank by a acquire. Savings Association Insurance Fund member; (4) Municipal had tangible capital of less than 4 percent Based on the foregoing and all of the other facts of during the quarter preceding its acquisition by Bancorp; record, the Staff Director of the Division of Banking (5) The transaction, which involves the merger of Supervision and Regulation and the General Counsel Municipal, a savings association located in Maryof the Board, acting pursuant to authority delegated land, into a bank subsidiary of Bancorp, a bank by the Board of Governors, hereby approve your holding company whose banking subsidiaries' oprequest to engage in the proposed transaction under erations are principally conducted in Maryland, section 5(d)(3) of the FDI Act. Atico has advised us would comply with the requirements of section that it has obtained approval from the Federal De- 3(d) of the Bank Holding Company Act if Municiposit Insurance Corporation for the proposed merger pal were a state bank which Bancorp was applying under the Bank Merger Act. to acquire. Very truly yours, Based on the foregoing and all of the other facts of record,2 the Staff Director of the Division of Banking Supervision and Regulation and the General Counsel William W. Wiles of the Board, acting pursuant to authority delegated Secretary of the Board by the Board of Governors, hereby approve your request to engage in the proposed transaction under cc: Federal Reserve Bank of Atlanta section 5(d)(3) of the FDI Act. This approval is subject to Bancorp obtaining the required approval June 15, 1990 1. 12 U.S.C. § 1815(d)(3). Section 5(d)(3) of the FDI Act ("the Mr. Timothy F. Cox Oakar Amendment") permits the merger of a savings association Piper & Marbury owned by a bank holding company into a subsidiary bank owned by the same bank holding company. In this case, the merger of Munici- 1100 Charles Center South pal, which is a federally-chartered savings association, into Bank will 36 South Charles Street be facilitated by the intermediate conversion of Municipal into a Baltimore, Maryland 21201-3010 state-chartered savings association and then into a state-chartered trust company ("the interim bank"). The interim bank is chartered solely to accommodate the requirements of the appropriate merger Dear Mr. Cox: statutes under Maryland law and will cease to exist immediately upon consummation of the underlying transaction without ever having conducted any banking business. Under the circumstances, the struc- Baltimore Bancorp, Baltimore, Maryland ("Bancorp"), ture of the proposal does not appear to cause an otherwise qualifying proposes that its bank subsidiary, The Bank of Balti- transaction to fall outside of the bounds of the Oakar Amendment. See Marshall & Ilslev Corporation, 76 Federal Reserve Bulletin 556 more, Baltimore, Maryland ("Bank"), merge with its (1990). savings association subsidiary, Municipal Savings 2. Municipal has a wholly owned subsidiary, Towson Service Bank, F.S.B., Towson, Maryland ("Municipal"). Corporation, Towson, Maryland ("Towson"), which is engaged in impermissible real estate development activities through equity inter- Bancorp has requested Board approval of this trans- ests in joint ventures. Prior to the merger of Municipal into Bank, action pursuant to section 5(d)(3) of the Federal De- Bancorp will acquire all of the stock of Towson and all loans made by Municipal to the Towson joint ventures. Bancorp remains subject to a posit Insurance Act ("FDI Act") as amended by the previous requirement to divest these nonconforming assets by Octo- Financial Institutions Reform, Recovery, and En- ber 31, 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

690 Federal Reserve Bulletin • August 1990 of the appropriate Federal banking agency for the assets and assumption of liabilities of Palo Alto proposed merger under the Bank Merger Act. Savings, a savings association located in Iowa, by a bank subsidiary of Brenton, a bank holding com- Very truly yours, pany whose banking subsidiaries' operations are principally conducted in Iowa, would comply with the requirements of section 3(d) of the Bank Holding William W. Wiles Company Act if Palo Alto Savings were a state bank Secretary of the Board which Brenton was applying to acquire. cc: Federal Reserve Bank of Richmond Based on the foregoing and all of the other facts of record, the Staff Director of the Division of Banking June 15, 1990 Supervision and Regulation and the General Counsel of the Board, acting pursuant to authority delegated by Steven T. Schuler the Board of Governors, hereby approve your request Chief Financial Officer and to engage in the proposed transaction under section Vice President/Treasurer/Secretary 5(d)(3) of the FDI Act. This approval is subject to Brenton Banks, Inc. Brenton obtaining the required approval of the appro- 400 Locust Street, Suite 300 priate Federal banking agency for the proposed merger Des Moines, Iowa 50304 under the Bank Merger Act. Dear Mr. Schuler: Very truly yours, Brenton Banks, Inc., Des Moines, Iowa ("Brenton"), William W. Wiles proposes that its bank subsidiary, Brenton Bank of Secretary of the Board Palo Alto County, Emmetsburg, Iowa, purchase the assets and assume the liabilities of Palo Alto County cc: Federal Reserve Bank of Chicago State Savings and Loan Association, Emmetsburg, Iowa, its savings association subsidiary, ("Palo Alto June 15, 1990 Savings"). Brenton has requested Board approval of this transaction pursuant to section 5(d)(3) of the Fed- Craig N. Landrum, Esq. eral Deposit Insurance Act ("FDI Act") as amended by Heidelberg & Woodliff the Financial Institutions Reform, Recovery, and En- Post Office Box 23040 forcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 Jackson, Mississippi 39225 Stat. 183, 199 (1989)). Palo Alto Savings has been established to acquire certain assets and assume de- Dear Mr. Landrum: posit liabilities of the Emmetsburg branch of First Federal Savings & Loan Association of Estherville, Citizens Financial Corporation, Belzoni, Mississippi Estherville, Iowa ("First Federal"). The record in this ("Citizens"), proposes that its bank subsidiary, Citicase shows that: zens Bank and Trust Company, Belzoni, Mississippi, (1) The aggregate amount of the total assets of all purchase the assets and assume the liabilities of Citidepository institution subsidiaries of Brenton is zens Bank for Savings, F.S.B., Yazoo City, Missis- $985.0 million, an amount which is not less than 200 sippi, its savings association subsidiary, ("Citizens percent of the total assets of Palo Alto Savings, Savings"). Citizens has requested Board approval of which currently has $9.9 million in total assets; this transaction pursuant to section 5(d)(3) of the (2) Brenton and all of its bank subsidiaries currently Federal Deposit Insurance Act ("FDI Act") as meet all applicable capital standards and, upon amended by the Financial Institutions Reform, Recovconsummation of the proposed transactions, will ery, and Enforcement Act of 1989 (Pub. L. No. continue to meet all applicable capital standards; 101-73, § 206, 103 Stat. 183, 199 (1989)). Citizens (3) The transaction is not in substance the acquisi- Savings has been established to acquire certain assets tion of a Bank Insurance Fund member bank by a and assume deposit liabilities of the Yazoo City branch Savings Association Insurance Fund member; of Unifirst Bank for Savings, FS&LA, Jackson, Mis- (4) First Federal, the predecessor to Palo Alto Savings, sissippi ("Unifirst"). had tangible capital of less than 4 percent during the The record in this case shows that: quarter preceding its acquisition by Brenton; (1) The aggregate amount of the total assets of all (5) The transaction, which involves the purchase of depository institution subsidiaries of Citizens is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 691 $118.4 million, an amount which is not less than 200 Georgia, purchase the assets and assume the liabilities of percent of the total assets of Citizens Savings, which FAB, FSB, Atlanta, Georgia, its savings association subcurrently has $30.0 million in total assets; sidiary, ("FAB"). First Wachovia has requested Board (2) Citizens and all of its bank subsidiaries currently approval of this transaction pursuant to section 5(d)(3) of meet all applicable capital standards and, upon the Federal Deposit Insurance Act ("FDI Act") as consummation of the proposed transactions, will amended by the Financial Institutions Reform, Recovery, continue to meet all applicable capital standards; and Enforcement Act of 1989 (Pub. L. No. 101-73, § 206, (3) The transaction is not in substance the acquisi- 103 Stat. 183, 199 (1989)). FAB has been established to tion of a Bank Insurance Fund member bank by a acquire certain assets and assume deposit liabilities of Savings Association Insurance Fund member; Great Southern Federal Savings and Loan Association (4) Unifirst, the predecessor to Citizens Savings, Savannah, Georgia ("Great Southern"). had tangible capital of less than 4 percent during the The record in this case shows that: quarter preceding its acquisition by Citizens; (1) The aggregate amount of the total assets of all (5) The transaction, which involves the purchase of depository institution subsidiaries of First Wachovia assets and assumption of liabilities of Citizens Sav- is $23.9 billion, an amount which is not less than 200 ings, a savings association located in Mississippi, by percent of the total assets of FAB, which currently a bank subsidiary of Citizens, a bank holding com- has $472.4 million in total assets; pany whose banking subsidiaries' operations are (2) First Wachovia and all of its bank subsidiaries principally conducted in Mississippi, would comply currently meet all applicable capital standards and, with the requirements of section 3(d) of the Bank upon consummation of the proposed transactions, will Holding Company Act if Citizens Savings were a continue to meet all applicable capital standards; state bank which Citizens was applying to acquire. (3) The transaction is not in substance the acquisition of a Bank Insurance Fund member bank by a Based on the foregoing and all of the other facts of Savings Association Insurance Fund member; record, the Staff Director of the Division of Banking (4) Great Southern, the predecessor to FAB, had Supervision and Regulation and the General Counsel tangible capital of less than 4 percent during the of the Board, acting pursuant to authority delegated by quarter preceding its acquisition by First Wachovia; the Board of Governors, hereby approve your request (5) The transaction, which involves the purchase of to engage in the proposed transaction under section assets and assumption of liabilities of FAB, a sav- 5(d)(3) of the FDI Act. This approval is subject to ings association located in Georgia, by a bank Citizens obtaining the required approval of the appro- subsidiary of First Wachovia, a bank holding compriate Federal banking agency for the proposed merger pany whose banking subsidiaries' operations are under the Bank Merger Act. principally conducted in North Carolina, would comply with the requirements of section 3(d) of the Very truly yours, Bank Holding Company Act if FAB were a state bank which First Wachovia was applying to acquire. William W. Wiles Based on the foregoing and all of the other facts of Secretary of the Board record, the Staff Director of the Division of Banking Supervision and Regulation and the General Counsel cc: Federal Reserve Bank of St. Louis of the Board, acting pursuant to authority delegated by the Board of Governors, hereby approve your request June 21, 1990 to engage in the proposed transaction under section 5(d)(3) of the FDI Act. This approval is subject to First Kenneth W. McAllister Wachovia obtaining the required approval of the ap- General Counsel propriate Federal banking agency for the proposed First Wachovia Corporation merger under the Bank Merger Act. 301 North Main Street Winston-Salem, North Carolina 27150 Very truly yours, Dear Mr. McAllister: William W. Wiles First Wachovia Corporation, Winston-Salem, North Secretary of the Board Carolina ("First Wachovia"), proposes that its bank subsidiary, The First National Bank of Atlanta, Atlanta, cc: Federal Reserve Bank of Richmond Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

692 Federal Reserve Bulletin • August 1990 June 22, 1990 record, the Staff Director of the Division of Banking Supervision and Regulation and the General Counsel Bruce A. Hocking of the Board, acting pursuant to authority delegated Coopers & Lybrand by the Board of Governors, hereby approve your 700 Cornhusker Plaza request to engage in the proposed transaction under Lincoln, Nebraska 68508 section 5(d)(3) of the FDI Act. This approval is subject to First York obtaining the required approval Dear Mr. Hocking: of the appropriate Federal banking agency for the proposed merger under the Bank Merger Act. First York Ban Corp., York, Nebraska ("First York"), proposes that its bank subsidiary, The First Very truly yours, National Bank of York, York, Nebraska, purchase the assets and assume the liabilities of First York Federal Savings Association, York, Nebraska, its savings as- William W. Wiles sociation subsidiary, ("First York Savings"). First Secretary of the Board York has requested Board approval of this transaction pursuant to section 5(d)(3) of the Federal Deposit cc: Federal Reserve Bank of Kansas City Insurance Act ("FDI Act") as amended by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, June 21, 1990 199 (1989)). First York Savings has been established to acquire certain assets and assume deposit liabilities of Ronald L. Baldwin the First Federal Savings Association of York, York, Executive Vice President Nebraska ("First Federal"). Fourth Financial Corporation The record in this case shows that: 100 N. Broadway (1) The aggregate amount of the total assets of all Wichita, Kansas 67202 depository institution subsidiaries of First York is $134.6 million, an amount which is not less than Dear Mr. Baldwin: 200 percent of the total assets of First York Savings, which currently has $48.0 million in total Fourth Financial Corporation, Wichita, Kansas assets; ("Fourth Financial"), proposes that its bank subsid- (2) First York and all of its bank subsidiaries iary, Bank IV Olathe, N.A., Olathe, Kansas, purcurrently meet all applicable capital standards and, chase the assets and assume the liabilities of IV upon consummation of the proposed transactions, Anchor Savings, F.S.B., Kansas City, Kansas, its will continue to meet all applicable capital stan- savings association subsidiary, ("IV Anchor Savdards; ings"). Fourth Financial has requested Board ap- (3) The transaction is not in substance the acquisi- proval of this transaction pursuant to section 5(d)(3) tion of a Bank Insurance Fund member bank by a of the Federal Deposit Insurance Act ("FDI Act") as Savings Association Insurance Fund member; amended by the Financial Institutions Reform, Re- (4) First Federal, the predecessor to First York covery, and Enforcement Act of 1989 (Pub. L. No. Savings, had tangible capital of less than 4 percent 101-73, § 206, 103 Stat. 183, 199 (1989)). IV Anchor during the quarter preceding its acquisition by Savings has been established to acquire certain as- First York; sets and assume deposit liabilities of Anchor Federal (5) The transaction, which involves the purchase of Savings and Loan Association, Kansas City, Kansas assets and assumption of liabilities of First York ("Anchor"). Savings, a savings association located in Ne- The record in this case shows that: braska, by a bank subsidiary of First York, a bank (1) The aggregate amount of the total assets of all holding company whose banking subsidiaries' op- depository institution subsidiaries of Fourth Fierations are principally conducted in Nebraska, nancial is $3.3 billion, an amount which is not less would comply with the requirements of section than 200 percent of the total assets of IV Anchor 3(d) of the Bank Holding Company Act if First Savings, which currently has $694.0 million in total York Savings were a state bank which First York assets; was applying to acquire. (2) Fourth Financial and all of its bank subsidiaries currently meet all applicable capital standards and, Based on the foregoing and all of the other facts of upon consummation of the proposed transactions, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 693 will continue to meet all applicable capital stan- Fort Dodge, Iowa, its savings association subsidiary, dards; ("FD Savings"). Ida Grove has requested Board (3) The transaction is not in substance the acquisi- approval of this transaction pursuant to section tion of a Bank Insurance Fund member bank by a 5(d)(3) of the Federal Deposit Insurance Act ("FDI Savings Association Insurance Fund member; Act") as amended by the Financial Institutions Re- (4) Anchor, the predecessor to IV Anchor Savings, form, Recovery, and Enforcement Act of 1989 (Pub. had tangible capital of less than 4 percent during L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). FD the quarter preceding its acquisition by Fourth Savings has been established to acquire certain as- Financial; sets and assume deposit liabilities of Sun Federal (5) The transaction, which involves the purchase of Savings Association, Fort Dodge, Iowa ("Sun Savassets and assumption of liabilities of IV Anchor ings"). Savings, a savings association located in Kansas, The record in this case shows that: by a bank subsidiary of Fourth Financial, a bank (1) The aggregate amount of the total assets of all holding company whose banking subsidiaries' op- depository institution subsidiaries of Ida Grove is erations are principally conducted in Kansas, $79.4 million, an amount which is not less than would comply with the requirements of section 200 percent of the total assets of FD Savings, which 3(d) of the Bank Holding Company Act if IV currently has $17.5 million in total assets; Anchor Savings were a state bank which Fourth (2) Ida Grove and all of its bank subsidiaries cur- Financial was applying to acquire. rently meet all applicable capital standards and, upon consummation of the proposed transactions, Based on the foregoing and all of the other facts will continue to meet all applicable capital stanof record, the Staff Director of the Division of dards; Banking Supervision and Regulation and the Gen- (3) The transaction is not in substance the acquisieral Counsel of the Board, acting pursuant to author- tion of a Bank Insurance Fund member bank by a ity delegated by the Board of Governors, hereby Savings Association Insurance Fund member; approve your request to engage in the proposed (4) Sun Savings, the predecessor to FD Savings, transaction under section 5(d)(3) of the FDI Act. This had tangible capital of less than 4 percent during approval is subject to Fourth Financial obtaining the the quarter preceding its acquisition by Ida Grove; required approval of the appropriate Federal banking (5) The transaction, which involves the purchase of agency for the proposed merger under the Bank assets and assumption of liabilities of FD Savings, a Merger Act. savings association located in Iowa, by a bank subsidiary of Ida Grove, a bank holding company Very truly yours, whose banking subsidiaries' operations are principally conducted in Iowa, would comply with the requirements of section 3(d) of the Bank Holding William W. Wiles Company Act if FD Savings were a state bank which Secretary of the Board Ida Grove was applying to acquire. cc: Federal Reserve Bank of Kansas City Based on the foregoing and all of the other facts of record, the Staff Director of the Division of Banking June 28, 1990 Supervision and Regulation and the General Counsel of the Board, acting pursuant to authority delegated by Howard O. Hagen the Board of Governors, hereby approve your request Dickinson, Throckmorton, Parker to engage in the proposed transaction under section Mannheimer & Raife 5(d)(3) of the FDI Act. This approval is subject to Ida 1600 Hub Tower Grove obtaining the required approval of the appro- 699 Walnut Street priate Federal banking agency for the proposed merger Des Moines, Iowa 50309 under the Bank Merger Act. Very truly yours, Dear Mr. Hagen: Ida Grove Bancshares, Inc., Ida Grove, Iowa ("Ida William W. Wiles Grove"), proposes that its bank subsidiary, Ida Secretary of the Board County State Bank, Ida Grove, Iowa, purchase the assets and assume the liabilities of FD Savings Bank, cc: Federal Reserve Bank of Richmond Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

694 Federal Reserve Bulletin • August 1990 June 28, 1990 the Board of Governors, hereby approve your request to engage in the proposed transaction under section Dennis E. Nixon 5(d)(3) of the FDI Act. This approval is subject to IBC President obtaining the required approval of the appropriate International Bancshares Corporation Federal banking agency for the proposed merger under 1200 San Bernardo the Bank Merger Act. Laredo, Texas 78040 Very truly yours, Dear Mr. Nixon: International Bancshares Corporation, Laredo, William W. Wiles Texas ("IBC"), proposes that its bank subsidiary, Secretary of the Board International Bank of Commerce, Laredo, Texas, purchase the assets and assume the liabilities of New cc: Federal Reserve Bank of Dallas Valley Federal Savings Association, McAllen, Texas, its savings association subsidiary, ("New Valley"). IBC has requested Board approval of this June 22, 1990 transaction pursuant to section 5(d)(3) of the Federal Deposit Insurance Act ("FDI Act") as amended by Jan Robey Alonzo the Financial Institutions Reform, Recovery, and Thompson & Mitchell Enforcement Act of 1989 (Pub. L. No. 101-73, § 206, One Mercantile Center 103 Stat. 183, 199 (1989)). New Valley has been Suite 3400 established to acquire certain assets and assume deposit liabilities of Valley Federal Savings Associ- St. Louis, Missouri 63101 ation, McAllen, Texas ("Valley Federal"). The record in this case shows that: Dear Ms. Alonzo: (1) The aggregate amount of the total assets of all Magna Group, Inc., Belleville, Illinois ("Magna"), depository institution subsidiaries of IBC is proposes that its bank subsidiary, Magna Bank of $1.2 billion, an amount which is not less than 200 Springfield, Springfield, Illinois, purchase the assets percent of the total assets of New Valley, which and assume the liabilities of Magna Springfield Incurrently has $527.7 million in total assets; terim Federal Savings and Loan Association, Spring- (2) IBC and all of its bank subsidiaries currently field, Illinois, its savings association subsidiary, ("Mameet all applicable capital standards and, upon gna Savings"). Magna has requested Board approval consummation of the proposed transactions, will of this transaction pursuant to section 5(d)(3) of the continue to meet all applicable capital standards; Federal Deposit Insurance Act ("FDI Act") as (3) The transaction is not in substance the acquisi- amended by the Financial Institutions Reform, Recovtion of a Bank Insurance Fund member bank by a ery, and Enforcement Act of 1989 (Pub. L. No. Savings Association Insurance Fund member; 101-73, § 206, 103 Stat. 183, 199 (1989)). Magna (4) Valley Federal, the predecessor to New Valley, Savings has been established to acquire certain assets had tangible capital of less than 4 percent during the and assume deposit liabilities of the Citizens Savings quarter preceding its acquisition by IBC; and Loan Association, F.A., Springfield, Illinois (5) The transaction, which involves the purchase of ("Citizens"). assets and assumption of liabilities of New Valley, a The record in this case shows that: savings association located in Texas, by a bank (1) The aggregate amount of the total assets of all subsidiary of IBC, a bank holding company whose depository institution subsidiaries of Magna is banking subsidiaries' operations are principally con- $2.3 billion, an amount which is not less than 200 ducted in Texas, would comply with the require- percent of the total assets of Magna Savings, which ments of section 3(d) of the Bank Holding Company currently has $71.4 million in total assets; Act if New Valley were a state bank which IBC was (2) Magna and all of its bank subsidiaries currently applying to acquire. meet all applicable capital standards and, upon consummation of the proposed transactions, will Based on the foregoing and all of the other facts of continue to meet all applicable capital standards; record, the Staff Director of the Division of Banking (3) The transaction is not in substance the acquisi- Supervision and Regulation and the General Counsel tion of a Bank Insurance Fund member bank by a of the Board, acting pursuant to authority delegated by Savings Association Insurance Fund member; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 695 (4) Citizens, the predecessor to Magna Savings, (1989)). Merchants Savings has been established had tangible capital of less than 4 percent dur- to acquire certain assets and assume deposit liabiling the quarter preceding its acquisition by ities of the Vicksburg branches of Unifirst Bank Magna; for Savings, FS&LA, Jackson, Mississippi ("Uni- (5) The transaction, which involves the purchase of first"). assets and assumption of liabilities of Magna Sav- The record in this case shows that: ings, a savings association located in Illinois, by a (1) The aggregate amount of the total assets of all bank subsidiary of Magna, a bank holding company depository institution subsidiaries of Merchants is whose banking subsidiaries' operations are princi- $154.7 million, an amount which is not less than pally conducted in Illinois, would comply with the 200 percent of the total assets of Merchants Savrequirements of section 3(d) of the Bank Holding ings, which currently has $31.9 million in total Company Act if Magna Savings were a state bank assets; which Magna was applying to acquire. (2) Merchants and all of its bank subsidiaries currently meet all applicable capital standards and, Based on the foregoing and all of the other facts of upon consummation of the proposed transactions, record, the Staff Director of the Division of Banking will continue to meet all applicable capital stan- Supervision and Regulation and the General Counsel dards; of the Board, acting pursuant to authority delegated by (3) The transaction is not in substance the acquisithe Board of Governors, hereby approve your request tion of a Bank Insurance Fund member bank by a to engage in the proposed transaction under section Savings Association Insurance Fund member; 5(d)(3) of the FDI Act. This approval is subject to (4) Unifirst, the predecessor to Merchants Savings, Magna obtaining the required approval of the appro- had tangible capital of less than 4 percent durpriate Federal banking agency for the proposed merger ing the quarter preceding its acquisition by Merunder the Bank Merger Act. chants; (5) The transaction, which involves the purchase of Very truly yours, assets and assumption of liabilities of Merchants Savings, a savings association located in Mississippi, by a bank subsidiary of Merchants, a bank William W. Wiles holding company whose banking subsidiaries' op- Secretary of the Board erations are principally conducted in Mississippi, would comply with the requirements of section cc: Federal Reserve Bank of St. Louis 3(d) of the Bank Holding Company Act if Merchants Savings were a state bank which Merchants was applying to acquire. June 15, 1990 Based on the foregoing and all of the other facts Carl J. Chaney, Esq. of record, the Staff Director of the Division of Heidelberg & Woodliff Banking Supervision and Regulation and the General Post Office Box 23040 Counsel of the Board, acting pursuant to authority Jackson, Mississippi 39225 delegated by the Board of Governors, hereby approve your request to engage in the proposed trans- Dear Mr. Chaney: action under section 5(d)(3) of the FDI Act. This approval is subject to Merchants obtaining the re- Merchants Capital Corporation, Vicksburg, Missisquired approval of the appropriate Federal banking sippi ("Merchants"), proposes that its bank subsidagency for the proposed merger under the Bank iary, Merchants National Bank, Vicksburg, Missis- Merger Act. sippi, purchase the assets and assume the liabilities of Merchants Bank for Savings, F.S.B., Vicksburg, Very truly yours, Mississippi, its savings association subsidiary, ("Merchants Savings"). Merchants has requested Board approval of this transaction pursuant to sec- William W. Wiles tion 5(d)(3) of the Federal Deposit Insurance Act Secretary of the Board ("FDI Act") as amended by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 cc: Federal Reserve Bank of Richmond Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

696 Federal Reserve Bulletin • August 1990 June 22, 1990 of the Board, acting pursuant to authority delegated by the Board of Governors, hereby approve your request Carol B. Shaw to engage in the proposed transaction under section Kirkland & Ellis 5(d)(3) of the FDI Act. This approval is subject to 1999 Broadway, Suite 4000 Mountain Financial obtaining the required approval of Denver, Colorado 80202 the appropriate Federal banking agency for the proposed merger under the Bank Merger Act. Dear Ms. Shaw: Very truly yours, Mountain Financial Holding Company, Woodland Park, Colorado ("Mountain Financial"), proposes that its bank subsidiary, Mountain National Bank, William W. Wiles Woodland Park, Colorado, purchase the assets and Secretary of the Board assume the liabilities of Mountain (Interim) Federal Savings Bank, Woodland Park, Colorado, its savings cc: Federal Reserve Bank of Kansas City association subsidiary, ("Mountain Savings"). Mountain Financial has requested Board approval of this June 8, 1990 transaction pursuant to section 5(d)(3) of the Federal Deposit Insurance Act ("FDI Act") as amended by Paul J. Polking the Financial Institutions Reform, Recovery, and En- Executive Vice President and General Counsel forcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 NCNB Corporation Stat. 183, 199 (1989)). Mountain Savings has been One NCNB Plaza established to acquire certain assets and assume de- Charlotte, North Carolina 28255 posit liabilities of Rocky Mountain Savings, F.S.B., Woodland Park, Colorado ("Rocky Mountain"). Dear Mr. Polking: The record in this case shows that: (1) The aggregate amount of the total assets of all NCNB Corporation, Charlotte, North Carolina depository institution subsidiaries of Mountain Finan- ("NCNB"), proposes that its bank subsidiary, NCNB cial is $36.6 million, an amount which is not less than Texas National Bank, Dallas, Texas, purchase the 200 percent of the total assets of Mountain Savings, assets and assume the liabilities of Interim Eight which currently has $17.6 million in total assets; NCNB Texas, F.S.B., Tyler, Texas, its savings asso- (2) Mountain Financial and all of its bank subsidiaries ciation subsidiary, ("Interim Eight NCNB"). NCNB currently meet all applicable capital standards and, has requested Board approval of this transaction purupon consummation of the proposed transactions, will suant to section 5(d)(3) of the Federal Deposit Insurcontinue to meet all applicable capital standards; ance Act ("FDI Act") as amended by the Financial (3) The transaction is not in substance the acquisi- Institutions Reform, Recovery, and Enforcement Act tion of a Bank Insurance Fund member bank by a of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 Savings Association Insurance Fund member; (1989)). Interim Four NCNB has been established to (4) Rocky Mountain, the predecessor to Mountain acquire certain assets and assume deposit liabilities of Savings, had tangible capital of less than 4 percent East Texas Savings and Loan Association, F.A., during the quarter preceding its acquisition by Tyler, Texas ("East Texas"). Mountain Financial; The record in this case shows that: (5) The transaction, which involves the purchase of (1) The aggregate amount of the total assets of assets and assumption of liabilities of Mountain all depository institution subsidiaries of NCNB is Savings, a savings association located in Colorado, $63.0 billion, an amount which is not less than 200 by a bank subsidiary of Mountain Financial, a bank percent of the total assets of Interim Eight NCNB, holding company whose banking subsidiaries' oper- which currently has $319.6 million in total assets; ations are principally conducted in Colorado, would (2) NCNB and all of its bank subsidiaries currently comply with the requirements of section 3(d) of the meet all applicable capital standards and, upon Bank Holding Company Act if Mountain Savings consummation of the proposed transactions, will were a state bank which Mountain Financial was continue to meet all applicable capital standards; applying to acquire. (3) The transaction is not in substance the acquisition of a Bank Insurance Fund member bank by a Based on the foregoing and all of the other facts of Savings Association Insurance Fund member; record, the Staff Director of the Division of Banking (4) East Texas, the predecessor to Interim Eight Supervision and Regulation and the General Counsel NCNB, had tangible capital of less than 4 percent Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 697 during the quarter preceding its acquisition by The record in this case shows that: NCNB; (1) The aggregate amount of the total assets of all (5) The transaction, which involves the purchase of depository institution subsidiaries of Newton is assets and assumption of liabilities of Interim Eight $88.5 million, an amount which is not less than NCNB, a savings association located in Texas, by 200 percent of the total assets of Newton Savings, a bank subsidiary of NCNB, a bank holding com- which currently has $11.1 million in total assets; pany whose banking subsidiaries' operations are (2) Newton and all of its bank subsidiaries currently principally conducted in North Carolina, would meet all applicable capital standards and, upon comply with the requirements of section 3(d) of the consummation of the proposed transactions, will Bank Holding Company Act if Interim Eight continue to meet all applicable capital standards; NCNB were a state bank which NCNB was apply- (3) The transaction is not in substance the acquisiing to acquire. tion of a Bank Insurance Fund member bank by a Savings Association Insurance Fund member; Based on the foregoing and all of the other facts of (4) Unifirst, the predecessor to Newton Savings, had record, the Staff Director of the Division of Banking tangible capital of less than 4 percent during the Supervision and Regulation and the General Counsel quarter preceding its acquisition by Newton; of the Board, acting pursuant to authority delegated by (5) The transaction, which involves the purchase of the Board of Governors, hereby approve your request assets and assumption of liabilities of Newton Savto engage in the proposed transaction under section ings, a savings association located in Mississippi, by 5(d)(3) of the FDI Act. This approval is subject to a bank subsidiary of Newton, a bank holding com- NCNB obtaining the required approval of the appro- pany whose banking subsidiaries' operations are priate Federal banking agency for the proposed merger principally conducted in Mississippi, would comply under the Bank Merger Act. with the requirements of section 3(d) of the Bank Very truly yours, Holding Company Act if Newton Savings were a state bank which Newton was applying to acquire. William W. Wiles Based on the foregoing and all of the other facts of Secretary of the Board record, the Staff Director of the Division of Banking Supervision and Regulation and the General Counsel cc: Federal Reserve Bank of Richmond of the Board, acting pursuant to authority delegated by the Board of Governors, hereby approve your request June 15, 1990 to engage in the proposed transaction under section 5(d)(3) of the FDI Act. This approval is subject to Carl J. Chaney, Esq. Newton obtaining the required approval of the appro- Heidelberg & Woodliff priate Federal banking agency for the proposed merger Post Office Box 23040 under the Bank Merger Act. Jackson, Mississippi 39225 Very truly yours, Dear Mr. Chaney: William W. Wiles Newton County Bancorporation, Inc., Newton, Mis- Secretary of the Board sissippi ("Newton"), proposes that its bank subsidiary, Newton County Bank, Newton, Mississippi, cc: Federal Reserve Bank of Atlanta purchase the assets and assume the liabilities of Newton County Bank for Savings, F.S.B., Newton, Mis- June 15, 1990 sissippi, its savings association subsidiary, ("Newton Savings"). Newton has requested Board approval of Carl J. Chaney, Esq. this transaction pursuant to section 5(d)(3) of the Heidelberg & Woodliff Federal Deposit Insurance Act ("FDI Act") as Post Office Box 23040 amended by the Financial Institutions Reform, Recov- Jackson, Mississippi 39225 ery, and Enforcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). Newton Dear Mr. Chaney: Savings has been established to acquire certain assets and assume deposit liabilities of the Newton branch of Port Gibson Capital Corporation, Port Gibson, Missis- Unifirst Bank for Savings, FS&LA, Jackson, Missis- sippi ("Port Gibson"), proposes that its bank subsidsippi ("Unifirst"). iary, Port Gibson Bank, Port Gibson, Mississippi, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

698 Federal Reserve Bulletin • August 1990 purchase the assets and assume the liabilities of Port June 18, 1990 Gibson Bank for Savings, F.S.B., Port Gibson, Mississippi, its savings association subsidiary, ("Port Gib- Frits R. Pronk son Savings"). Port Gibson has requested Board ap- President proval of this transaction pursuant to section 5(d)(3) of SCB Bancorp, Inc. the Federal Deposit Insurance Act ("FDI Act") as 1501 East Eldorado Street amended by the Financial Institutions Reform, Recov- Decatur, Illinois 62521 ery, and Enforcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). Port Gibson Dear Mr. Pronk: Savings has been established to acquire certain assets and assume deposit liabilities of the Port Gibson SCB Bancorp, Inc., Decatur, Illinois ("SCB"), probranch of Unifirst Bank for Savings, FS&LA, Jack- poses that its bank subsidiary, Soy Capital Bank and son, Mississippi ("Unifirst"). Trust Company, Decatur, Illinois, purchase the assets The record in this case shows that: and assume the liabilities of First Federal Savings and (1) The aggregate amount of the total assets of all Loan Association of Macon County, Decatur, Illinois, depository institution subsidiaries of Port Gibson is its savings association subsidiary, ("First Federal"). $50.2 million, an amount which is not less than 200 SCB has requested Board approval of this transaction percent of the total assets of Port Gibson Savings, pursuant to section 5(d)(3) of the Federal Deposit which currently has $7.8 million in total assets; Insurance Act ("FDI Act") as amended by the Finan- (2) Port Gibson and all of its bank subsidiaries cial Institutions Reform, Recovery, and Enforcement currently meet all applicable capital standards and, Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, upon consummation of the proposed transactions, 199 (1989)). will continue to meet all applicable capital standards; The record in this case shows that: (3) The transaction is not in substance the acquisi- (1) The aggregate amount of the total assets of all tion of a Bank Insurance Fund member bank by a depository institution subsidiaries of SCB is Savings Association Insurance Fund member; $166 million, an amount which is not less than 200 (4) Unifirst, the predecessor to Port Gibson Savings, percent of the total assets of First Federal, which had tangible capital of less than 4 percent during the currently has $64 million in total assets; quarter preceding its acquisition by Port Gibson; (2) SCB and all of its bank subsidiaries currently (5) The transaction, which involves the purchase of meet all applicable capital standards and, upon assets and assumption of liabilities of Port Gibson consummation of the proposed transaction, will Savings, a savings association located in Mississippi, continue to meet all applicable capital standards; by a bank subsidiary of Port Gibson, a bank holding (3) The transaction is not in substance the acquisicompany whose banking subsidiaries' operations are tion of a Bank Insurance Fund member bank by a principally conducted in Mississippi, would comply Savings Association Insurance Fund member; with the requirements of section 3(d) of the Bank (4) First Federal had tangible capital of less than Holding Company Act if Port Gibson Savings were a 4 percent during the quarter preceding its acquisistate bank which Port Gibson was applying to acquire. tion by SCB; (5) The transaction, which involves the purchase of Based on the foregoing and all of the other facts of assets and assumption of liabilities of First Federal, record, the Staff Director of the Division of Banking a savings association located in Illinois, by a bank Supervision and Regulation and the General Counsel subsidiary of SCB, a bank holding company whose of the Board, acting pursuant to authority delegated by banking subsidiaries' operations are principally conthe Board of Governors, hereby approve your request ducted in Illinois, would comply with the requireto engage in the proposed transaction under section ments of section 3(d) of the Bank Holding Company 5(d)(3) of the FDI Act. This approval is subject to Port Act if First Federal were a state bank which SCB Gibson obtaining the required approval of the appro- was applying to acquire. priate Federal banking agency for the proposed merger under the Bank Merger Act. Based on the foregoing and all of the other facts of Very truly yours, record, the Staff Director of the Division of Banking Supervision and Regulation and the General Counsel of the Board, acting pursuant to authority delegated by William W. Wiles the Board of Governors, hereby approve your request Secretary of the Board to engage in the proposed transaction under section 5(d)(3) of the FDI Act. This approval is subject to SCB cc: Federal Reserve Bank of Atlanta obtaining the required approval of the appropriate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 699 Federal banking agency for the proposed merger under ply with the requirements of section 3(d) of the Bank the Bank Merger Act. Holding Company Act if Security Thrift were a state Very truly yours, bank which Security was applying to acquire. Based on the foregoing and all of the other facts of William W. Wiles record, the Staff Director of the Division of Banking Secretary of the Board Supervision and Regulation and the General Counsel of the Board, acting pursuant to authority delegated by cc: Federal Reserve Bank of Chicago the Board of Governors, hereby approve your request to engage in the proposed transaction under section June 15, 1990 5(d)(3) of the FDI Act. This approval is subject to Security obtaining the required approval of the appro- Warren Nunn priate Federal banking agency for the proposed merger President under the Bank Merger Act. Security Bancorp of Tennessee, Inc. Very truly yours, 101 W. Main Street Halls, Tennessee 38040 William W. Wiles Dear Mr. Nunn: Secretary of the Board Security Bancorp of Tennessee, Inc., Halls, Tennes- cc: Federal Reserve Bank of St. Louis see ("Security"), proposes that its bank subsidiary, Security Bank, Newbern, Tennessee, purchase the June 29, 1990 assets and assume the liabilities of Security Thrift Association, Trenton, Tennessee, its savings associa- James E. Scott tion subsidiary, ("Security Thrift"). Security has re- Associate General Counsel quested Board approval of this transaction pursuant to and Assistant Secretary section 5(d)(3) of the Federal Deposit Insurance Act Security Pacific Corporation ("FDI Act") as amended by the Financial Institutions 333 South Hope Street Reform, Recovery, and Enforcement Act of 1989 Los Angeles, California 90071 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). Security Thrift has been established to acquire certain Dear Mr. Scott: assets and assume deposit liabilities of Century Federal Savings Bank, Trenton, Tennessee ("Century"). Security Pacific Corporation, Los Angeles, California The record in this case shows that: ("Security Pacific"), proposes that its bank subsid- (1) The aggregate amount of the total assets of all iary, Security Pacific Bank Washington, N.A., Seattle, depository institution subsidiaries of Security is Washington, purchase the assets and assume the lia- $143.0 million, an amount which is not less than 200 bilities of Gibraltar Interim Savings Bank, its savings percent of the total assets of Security Thrift, which association subsidiary, ("Gibraltar Savings"). Securcurrently has $64.0 million in total assets; ity Pacific has requested Board approval of this trans- (2) Security and all of its bank subsidiaries currently action pursuant to section 5(d)(3) of the Federal Demeet all applicable capital standards and, upon posit Insurance Act ("FDI Act") as amended by the consummation of the proposed transactions, will Financial Institutions Reform, Recovery, and Encontinue to meet all applicable capital standards; forcement Act of 1989 (Pub. L. No. 101-73, § 206, 103 (3) The transaction is not in substance the acquisi- Stat. 183, 199 (1989)). Gibraltar Savings 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 Gibraltar Savings, F.S.B., Bellevue, (4) Century, the predecessor to Security Thrift, had Washington ("Gibraltar"). tangible capital of less than 4 percent during the The record in this case shows that: quarter preceding its acquisition by Security; (1) The aggregate amount of the total assets of all (5) The transaction, which involves the purchase of depository institution subsidiaries of Security Pacific assets and assumption of liabilities of Security is $74.4 billion, an amount which is not less than 200 Thrift, a savings association located in Tennessee, percent of the total assets of Gibraltar Savings, which by a bank subsidiary of Security, a bank holding currently has $548.0 million in total assets; company whose banking subsidiaries' operations (2) Security Pacific and all of its bank subsidiaries are principally conducted in Tennessee, would com- currently meet all applicable capital standards and, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

700 Federal Reserve Bulletin • August 1990 upon consummation of the proposed transactions, sociation subsidiary, ("Gibraltar Interim"). Security will continue to meet all applicable capital standards; Pacific has requested Board approval of this transac- (3) The transaction is not in substance the acquisi- tion pursuant to section 5(d)(3) of the Federal Deposit tion of a Bank Insurance Fund member bank by a Insurance Act ("FDI Act") as amended by the Finan- Savings Association Insurance Fund member; cial Institutions Reform, Recovery, and Enforcement (4) Gibraltar, the predecessor to Gibraltar Savings, Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, had tangible capital of less than 4 percent during the 199 (1989)). Gibraltar Interim has been established to quarter preceding its acquisition by Security Pacific; acquire certain assets and assume deposit liabilities of (5) The transaction, which involves the purchase of Gibraltar Federal Savings and Loan Association, assets and assumption of liabilities of Gibraltar Savings, F.A., Simi Valley, California ("Gibraltar"). a savings association located in California, by a bank The record in this case shows that: subsidiary of Security Pacific, a bank holding company (1) The aggregate amount of the total assets of all whose banking subsidiaries' operations are principally depository institution subsidiaries of Security Pacific conducted in California, would comply with the re- is $74.4 billion, an amount which is not less than 200 quirements of section 3(d) of the Bank Holding Com- percent of the total assets of Gibraltar Interim, which pany Act if Gibraltar Savings were a state bank which currently has $5.3 billion in total assets; Security Pacific was applying to acquire. (2) Security Pacific and all of its bank subsidiaries currently meet all applicable capital standards and, Based on the foregoing and all of the other facts of upon 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 by tion of a Bank Insurance Fund member bank by a the Board of Governors, hereby approve your request Savings Association Insurance Fund member; to engage in the proposed transaction under section (4) Gibraltar, the predecessor to Gibraltar Interim, 5(d)(3) of the FDI Act. This approval is subject to had tangible capital of less than 4 percent during the Security Pacific obtaining the required approval of the quarter preceding its acquisition by Security Pacific; appropriate Federal banking agency for the proposed (5) The transaction, which involves the purchase of merger under the Bank Merger Act. assets and assumption of liabilities of Gibraltar Interim, a savings association located in California, by a bank Very truly yours, subsidiary of Security Pacific, a bank holding company whose banking subsidiaries' operations are principally conducted in California, would comply with the re- William W. Wiles quirements of section 3(d) of the Bank Holding Com- Secretary of the Board pany Act if Gibraltar Interim were a state bank which Security Pacific was applying to acquire. cc: Federal Reserve Bank of San Francisco Pamela Allen, FDIC Based on the foregoing and all of the other facts of record, the Staff Director of the Division of Banking June 29, 1990 Supervision and Regulation and the General Counsel of the Board, acting pursuant to authority delegated by James E. Scott the Board of Governors, hereby approve your request Associate General Counsel to engage in the proposed transaction under section and Assistant Secretary 5(d)(3) of the FDI Act. This approval is subject to Security Pacific Corporation Security Pacific obtaining the required approval of the 333 South Hope Street appropriate Federal banking agency for the proposed Los Angeles, California 90071 merger under the Bank Merger Act. Dear Mr. Scott: Very truly yours, Security Pacific Corporation, Los Angeles, California ("Security Pacific"), proposes that its bank subsid- William W. Wiles iary, Security Pacific National Bank, Los Angeles, Secretary of the Board California, purchase the assets and assume the liabilities of Gibraltar Federal Interim Savings and Loan cc: Federal Reserve Bank of San Francisco Association, Los Angeles, California, its savings as- Pamela Allen, FDIC Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 701 June 28, 1990 Supervision and Regulation and the General Counsel of the Board, acting pursuant to authority delegated by Fortis M. Lawder, Esq. the Board of Governors, hereby approve your request Peper, Martin, Jensen, Maichel & Hetlage to engage in the proposed transaction under section 720 Olive Street, Suite 2400 5(d)(3) of the FDI Act. This approval is subject to St. Louis, Missouri 63101 Southside obtaining the required approval of the appropriate Federal banking agency for the proposed Dear Mr. Lawder: merger under the Bank Merger Act. Southside Bancshares Corporation, St. Louis, Mis- Very truly yours, souri ("Southside"), proposes that its bank subsidiary, South Side National Bank in St. Louis, St. Louis, Missouri, purchase the assets and assume the liabili- William W. Wiles ties of Grand & Gravois Federal Savings and Loan Secretary of the Board Association, St. Louis, Missouri ("Grand & Gravois"), its savings association subsidiary. Southside cc: Federal Reserve Bank of St. Louis has requested Board approval of this transaction pursuant to section 5(d)(3) of the Federal Deposit Insur- June 15, 1990 ance Act ("FDI Act") as amended by the Financial Institutions Reform, Recovery, and Enforcement Act Leigh B. Allen, III, Esq. of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 Brunini, Grantham, Grower & Hewes (1989)). Grand & Gravois has been established to 248 East Capitol Street, Suite 1400 acquire certain assets and assume deposit liabilities of Jackson, Mississippi 39201 St. Louis County Savings Association, F.A., Ferguson, Missouri ("County Savings"). Dear Mr. Allen: The record in this case shows that: (1) The aggregate amount of the total assets of all Trustmark Corporation, Jackson, Mississippi ("Trustdepository institution subsidiaries of Southside is mark"), proposes that its bank subsidiary, Trustmark $504.6 million, an amount which is not less than 200 National Bank, Jackson, Mississippi, purchase the percent of the total assets of Grand & Gravois, assets and assume the liabilities of Trustmark Interim, which currently has $84.0 million in total assets; F.S.B., Jackson, Mississippi, its savings association (2) Southside and all of its bank subsidiaries cur- subsidiary, ("Trustmark Interim"). Trustmark has rerently meet all applicable capital standards and, quested Board approval of this transaction pursuant to upon consummation of the proposed transaction, section 5(d)(3) of the Federal Deposit Insurance Act will continue to meet all applicable capital stan- ("FDl Act") as amended by the Financial Institutions dards; Reform, Recovery, and Enforcement Act of 1989 (3) The transaction is not in substance the acquisi- (Pub. L. No. 101-73, § 206, 103 Stat. 183, 199 (1989)). tion of a Bank Insurance Fund member bank by a Trustmark Interim has been established to acquire Savings Association Insurance Fund member; certain assets and assume deposit liabilities of the (4) County Savings, the predecessor to Grand & Jackson, Hattiesburg, Meridian, and Louisville, Mis- Gravois, had tangible capital of less than 4 percent sissippi, branches of Unifirst Bank for Savings, during the quarter preceding its acquisition by FS&LA, Jackson, Mississippi ("Unifirst"). Southside; 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 Grand & depository institution subsidiaries of Trustmark is Gravois, a savings association located in Missouri, $3.1 billion, an amount which is not less than by a bank subsidiary of Southside, a bank holding 200 percent of the total assets of Trustmark Interim, company whose banking subsidiaries' operations which currently has $238.9 million in total assets; are principally conducted in Missouri, would com- (2) Trustmark and all of its bank subsidiaries curply with the requirements of section 3(d) of the Bank rently meet all applicable capital standards and, upon Holding Company Act if Grand & Gravois were a consummation of the proposed transactions, will state bank which Southside was applying to 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; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

702 Federal Reserve Bulletin • August 1990 (4) Unifirst, the predecessor to Trustmark Interim, tion would permit the credit card bank subsidiaries of had tangible capital of less than 4 percent during the Norwest and NCNB to offer a credit card at lower cost quarter preceding its acquisition by Trustmark; in conjunction with traditional banking services pro- (5) The transaction, which involves the purchase of vided by their affiliated banks. assets and assumption of liabilities of Trustmark Notices of these requests, affording interested per- Interim, a savings association located in Mississippi, sons an opportunity to submit comments, have been by a bank subsidiary of Trustmark, a bank holding published (54 Federal Register 36,901 and 53,750 company whose banking subsidiaries' operations (1989)). The time for filing comments has expired, and are principally conducted in Mississippi, would the Board has considered these requests and all comcomply with the requirements of section 3(d) of the ments received in light of the Board's authority to Bank Holding Company Act if Trustmark Interim grant exemptions to Section 106's tie-in prohibitions. were a state bank which Trustmark was applying to Norwest, with consolidated assets of $24.7 billion, is acquire. the 31st largest banking organization in the nation. It operates 30 subsidiary banks and engages directly and Based on the foregoing and all of the other facts of indirectly in a variety of permissible nonbanking record, the Staff Director of the Division of Banking activities.1 NCNB is the eighth largest banking orga- Supervision and Regulation and the General Counsel nization in the nation with consolidated assets of of the Board, acting pursuant to authority delegated by $63.7 billion. It operates eight subsidiary banks and the Board of Governors, hereby approve your request also engages in permissible nonbanking activities. to engage in the proposed transaction under section Norwest and NCNB each propose to consolidate 5(d)(3) of the FDI Act. This approval is subject to their systemwide credit card operations into card- Trustmark obtaining the required approval of the issuing banks. These banks will provide credit cards appropriate Federal banking agency for the proposed on advantageous terms to customers of their affiliated merger under the Bank Merger Act. banks. Section 106 would prohibit the credit card bank from offering this price reduction to customers of Very truly yours, affiliated banks without an exemption from the Board. Under the proposals, Norwest and NCNB would vary the consideration (including interest rates and William W. Wiles fees) charged on a credit card issued by one of their Secretary of the Board banks if the cardholder also obtained one or more traditional banking services (defined in the statute as a cc: Federal Reserve Bank of Atlanta loan, discount, deposit or trust service) from any of their other subsidiary banks. For example, a depositor maintaining a minimum deposit balance at any of their Order Issued Under Section 106 of the Bank affiliate banks might be eligible for a credit card with Holding Company Act Amendments of 1970 no membership fee. Regardless of the combination of banking services offered, the variation of consider- Norwest Corporation ation would occur on the credit card and would be Minneapolis, Minnesota conditioned upon also obtaining traditional banking services from a subsidiary bank of the cardissuing NCNB Corporation bank's parent holding company. All products offered Charlotte, North Carolina in combination would be available to consumers for separate purchase. Norwest and NCNB maintain that Order Approving Exemption from Anti-Tying granting an exemption would permit consumers to Provisions in Section 106 of the Bank Holding benefit from cost-savings realized through consolida- Company Act Amendments of 1970 tion and generally increased competition in the credit card market. Norwest Corporation, Minneapolis, Minnesota ("Nor- A total of 21 comments were received with 19 west"), and NCNB Corporation, Charlotte, North commenters in favor of granting the proposed exemp- Carolina ("NCNB"), both bank holding companies tion. The Independent Bankers of Minnesota associawithin the meaning of the Bank Holding Company Act tion has opposed Norwest's proposal, maintaining that ("BHC Act"), have requested that the Board grant a it would permit Norwest to compete unfairly with limited exemption from the anti-tying provisions in Section 106 of the BHC Act Amendments of 1970 (12 U.S.C. §§ 1971-78) ("Section 106"). This exemp- 1. Data are as of March 31, 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 703 smaller banks within a regional credit card market and bank to tie its own traditional banking services, it does would be inconsistent with Section 106 by permitting not permit the bank to tie one of its services to a Norwest to import higher interest rates allowed by the traditional banking service offered by a holding comhome state of its credit-card bank.2 Insurance industry pany affiliate. In other words, without an exemption trade groups have commented that such an exemption under Section 106, a bank holding company is prohibwould permit an evasion of Section 106 and is contrary ited from offering a reduced-rate credit card at one of its to the legislative history produced in Congressional banks on condition that a customer also obtain a considerations of tie-in prohibitions.3 For the reasons traditional banking service from one of its other subsidstated below, the Board believes that the proposals iary banks. would not lead to anticompetitive practices and therefore would not be inconsistent with the legislative Legislative History and Purpose for Exemptions purpose of Section 106. Section 106 provides that the Board may, by regulation Statutory Framework or order, "permit such exceptions ... as it considers will not be contrary to the purpose" of this section. The Section 106 generally prohibits a bank from tying Senate banking committee's report explains that Secreduced consideration for credit or other service to the tion 106 was added to the House proposal in order to requirement that a customer also obtain some addi- prevent the anticompetitive effects of tying arrangetional service from the bank or a holding company ments: "The purpose of this provision is to prohibit affiliate of the bank. Tying occurs when the customer anticompetitive practices which require bank customis forced or induced to purchase a product that the ers to accept or provide some other service or product customer does not want (the tied product) in order to or refrain from dealing with other parties in order to obtain a product that the customer desires (the tying obtain the bank product or service they desire."6 product). There is an exception to this tying prohibi- The underlying Congressional concern addressed by tion that permits a bank to reduce the consideration for Section 106 was fair competition and its provisions credit or other service if the customer obtains some were "intended to provide specific statutory assurance other "traditional banking service" from that bank.4 that the use of the economic power of a bank will not This exception does not apply, however, where the lead to a lessening of competition or unfair competitive credit from one bank is tied to an additional service practices."7 The Conference Report explains that tiefrom an affiliate.5 Thus, while Section 106 permits a ins may produce anticompetitive results because customers, forced to accept other products or services along with the product which the customer seeks, "no longer purchase a product or service on its own eco- 2. This group also requested a hearing on the Norwest proposal. However, Section 106 does not provide for an opportunity to have a nomic merit."8 In this regard, Section 106's prohibihearing on requests for exemptions. Furthermore, commenters have tions exceeded applicable antitrust standards and imbeen given the opportunity to submit, and have submitted, written posed a per se prohibition against tie-ins involving facts and arguments to the Board regarding these requests. These materials have not provided any basis to believe that the material facts credit.9 before the Board are incomplete or insufficient to permit the Board to evaluate the application under Section 106 or that further investigation would serve to develop new or useful material facts. Accordingly, the request for a hearing is denied. 3. The Board has received comments opposing these requests from the National Association of Life Underwriters; National Association 6. S. Rep. No. 1084, 91st Cong., 2d Sess. 17 (1970) ("Senate of Professional Insurance Agents; National Association of Surety Report"). Senator Sparkman, Chairman of the Senate banking com- Bond Producers; Independent Insurance Agents of America, Inc.; mittee, explained that although Section 106 had been modified on the National Association of Casualty & Surety Agents; New York Asso- Senate floor to include an exemption for traditional banking products ciation of Life Underwriters; Professional Insurance Agents of New (.see 116 Cong. Rec. 32,124-33 for debate on this amendment), this York; and Independent Insurance Agents of New York, Inc. explanation should continue to be the basis for interpreting the tie-in 4. Section 106(1)(A) (12 U.S.C. § 1972(1)(A)) provides that a "bank prohibitions. 116 Cong. Rec. 42,426. shall not in any manner extend credit ... or fix or vary the 7. Senate Report at 16. consideration for any of the foregoing, on the condition or require- 8. Rep. No. 91-1747, 91st Cong., 2d Sess. 18 (1970). ment . . . that the customer shall obtain some additional credit, 9. In commenting on the effects of Section 106, the Justice Departproperty, or service from such bank other than a loan, discount, ment noted that "the proposed new section would go beyond [Fortner deposit, or trust service." As noted, for purposes of Section 106, a Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495 (1968)], traditional banking service is defined as "a loan, discount, deposit, or which did not go so far as to hold tie-ins involving credit illegal per trust service." se." Senate Report at 48. Accordingly, it has been held that imper- 5. Section 106(1)(B) (12 U.S.C. § 1972(1)(B)) provides that a "bank missible tying arrangements under Section 106 are unlawful even shall not in any manner extend credit . .. or fix or vary the without a showing of adverse effects on competition or the degree of consideration for any of the foregoing, on condition or requirement bank control over the tying product. See Gage v. First Federal . . . that the customer shall obtain some additional credit, property, or Savings and Loan Ass'n of Hutchinson, Kansas, 717 F. Supp. 745 service from a bank holding company of such bank or from any other (D.Kan. 1989); Parsons Steel, Inc. v. First Alabama Bank of Montsubsidiary of such bank holding company." gomery, 679 F.2d 242 (11th Cir. 1982). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

704 Federal Reserve Bulletin • August 1990 The legislative history also indicates that the Board permit exemptions for traditional banking services on should exercise its exemptive authority selectively. the basis of economic analysis. The Senate Report states that "the committee expects In this regard, the Board notes that subsequent that by such regulation or order the Board will con- Congressional actions in other contexts regarding antitinue to allow appropriate traditional banking tying provisions tend to support granting an exception practices."10 The Supplementary Views of Senator in this case. For example, Federal thrifts are permitted Brooke filed with the Senate Report noted that "ade- to tie traditional banking services obtained from the quate discretion is vested in the Federal Reserve thrift's affiliates.15 In the Competitive Equality Bank- Board to provide exceptions where such are founded ing Act of 1987, which applied the tie-in restrictions to on sound economic analysis."11 nonbank banks, Congress indicated that "the anti- In determining whether the proposed exemption tying restrictions [of Section 106] would not be viowould be inconsistent with Section 106's legislative lated by tying one of these traditional banking services history, it is appropriate to consider the competitive- offered by a grandfathered nonbank bank to another ness of the relevant credit card market. In the Board's traditional banking service offered by an affiliate."16 view, unless it is likely that the seller's market power While this excerpt does not accurately reflect the in the credit card market for the tying product is high terms of Section 106, it lends support for granting the enough to force a consumer to also purchase on proposed exemption, given the lack of any economic uncompetitive terms a traditional banking service in evidence of anticompetitive effects. the tied product market, the proposed tie-in between In light of the fact of the specific nature of the credit cards and traditional banking services would not exemption, however, the Board reserves the right to appear to produce anticompetitive effects. modify or terminate these exemptions in the event that The relevant market for credit cards is national in the Board determines that the tying arrangement is scope12 and, with nearly 5,000 card-issuers, relatively resulting in anticompetitive practices and thus would unconcentrated. Norwest accounts for less than one be inconsistent with the purpose of Section 106. percent of total credit card balances outstanding and Based on the above, and all facts of record, the NCNB holds only one percent.13 These relatively Board has determined to grant an exception to permit small market shares and the presence of many other banks owned by Norwest and NCNB to vary the competitors providing credit cards in the tying product consideration (including interest rates and fees) market indicate that Norwest and NCNB could not charged in connection with extensions of credit purexercise sufficient market power to impair competition suant to a credit card offered by the bank (including a in the tied product market for the traditional banking credit card bank) on the basis of the condition or services. In addition, as noted, both companies will requirement that a customer also obtain a loan, discontinue to offer credit cards and traditional banking count, deposit, or trust service from another bank that services separately,14 and given the competitive nature is a subsidiary of the card-issuing bank's parent holdof the credit card market, Norwest and NCNB will be ing company, provided that the products so offered are required to offer these separately available credit cards separately available for purchase by a customer. This at competitive prices. Accordingly, the Board believes approval is subject to Board's authority to modify or that the requested exemptions are not contrary to the terminate the exemption as set forth above and to all of purpose of Section 106, and that granting the exempthe conditions that may be imposed by the Board in tion is consistent with the legislative authorization to Regulation Y. By order of the Board of Governors, effective June 20, 1990. 10. Senate Report at 17. Voting for this action: Chairman Greenspan and Governors 11. Senate Report at 46. Johnson, Seger, Angell, Kelley, LaWare, and Mullins. 12. First Chicago Corporation, 73 Federal Reserve Bulletin 600 (1987); RepublicBank Corporation, 73 Federal Reserve Bulletin 510 JENNIFER J. JOHNSON (1987). 13. Market data are as of December 31, 1988. Among the top 100 Associate Secretary of the Board card-issuers, Norwest owns the 48th and 89th largest competitors, while NCNB owns the 43rd, 46th and 95th largest issuers. The top 100 card-issuing institutions account for approximately 80 percent of total 15. 12 U.S.C. § 1464(q)(l). During the consideration of the Finanindustry outstandings and Citicorp, the largest single issuer, accounts cial Institutions Reform, Recovery, and Enforcement Act of 1989, for 18 percent of all credit card balances outstanding. unsuccessful amendments to similarly exempt traditional banking 14. Under antitrust precedent, concerns over tying arrangements services offered by subsidiaries of bank holding companies from are substantially reduced where the buyer is free to take either product Section 106's tying prohibition were offered in both House and Senate by itself even though the seller may also offer the two items as a unit banking committees. at a single price. Northern Pacific R. Co. v. United States, 356 U.S. 16. Conference Report, Rep. No. 261,100th Cong., 1st Sess. 128-29 1, 6, n.4. (1958). (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 705 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 Effective Applicant(s) Bank(s) date First Commercial Corporation, First Commercial Bank N.A. of June 8, 1990 Little Rock, Arkansas Memphis, Memphis, Tennessee Section 4 Effective Applicant(s) Bank(s) date Arkansas Bank and Trust Company, Arkansas Trust Savings Bank, June 22, 1990 Hot Springs, Arkansas Hot Springs, Arkansas Benton State Bank, Benton Savings Bank, Benton Arkansas Hot Springs Village, Arkansas First Commercial Corporation, Arkansas Trust Savings Bank, June 22, 1990 Little Rock, Arkansas Hot Springs, Arkansas Benton Savings Bank, Hot Springs Village, Arkansas First Commercial Corporation, Landmark Savings Bank, F.S.B., June 22, 1990 Little Rock, Arkansas Hot Springs, Arkansas First Wachovia Corporation, FAB,FSB, June 22, 1990 Winston-Salem, North Carolina Atlanta, Georgia Meridian Bancorp, Inc., Keystone Mortgage Corporation, June 21, 1990 Reading, Pennsylvania Indianapolis, Indiana Park National Corporation, Mutual Federal Savings Bank, June 14, 1990 Newark, Ohio Zanesville, Ohio APPLICATIONS APPROVED UNDER BANK MERGER 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. Applicant(s) Bank(s) ^date^ Arkansas Bank and Trust Company, Arkansas Trust Savings Bank, June 22, 1990 Hot Springs, Arkansas Hot Springs, Arkansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

706 Federal Reserve Bulletin • August 1990 APPLICATIONS APPROVED UNDER BANK HOLDING COMPANY ACT By Federal Reserve Banks Recent applications have been approved by the Federal Reserve Banks as listed below. Copies are available upon request to the Reserve Banks. Section 3 Reserve Effective Applicant(s) Bank(s) Bank date 50th State Bancorporation, 50th State Bank, San Francisco May 25, 1990 Honolulu, Hawaii Honolulu, Hawaii Arrow Bank Corporation, United Vermont Bancorporation, New York May 25, 1990 Glens Falls, New York Rutland, Vermont Cass Commercial Corporation, Cass Bank of St. Louis, St. Louis May 29, 1990 St. Louis, Missouri St. Louis, Missouri Central Banc, Inc., Central Trust & Savings Bank of Chicago June 8, 1990 Geneseo, Illinois Geneseo, Geneseo, Illinois Century Bancshares, Inc., Century Bank, National Minneapolis June 1, 1990 Minneapolis, Minnesota Association, Eden Prairie, Minnesota CNB Financial Corporation, First Bank and Trust, Kansas City May 29, 1990 Kansas City, Kansas Concordia, Kansas First National Bank of Glasco, Glasco, Kansas Commonwealth Bancshares The First Bank of Greater Philadelphia June 13, 1990 Corporation, Pittston, Williamsport, Pennsylvania Pittston, Pennsylvania Community Financial Bancorp, Chestnut Hill National Bank, Philadelphia June 13, 1990 Inc., Philadelphia, Pennsylvania Philadelphia, Pennsylvania Cumberland Savings Bancshares, Cumberland Savings Bank, Atlanta June 18, 1990 Inc., Carthage, Tennessee Carthage, Tennessee Dassel Investment Company, Hutchinson Bancorp, Inc., Minneapolis June 13, 1990 Minneapolis, Minnesota Minneapolis, Minnesota Enterprise Financial Corporation, Enterprise National Bank of Atlanta June 6, 1990 Orlando, Florida Tampa, Tampa, Florida The Enterprise Bank, N.A., Winter Park, Florida Evergreen Bancshares, Inc., Guaranty National Bank of Atlanta June 6, 1990 Tallahassee, Florida Tallahassee, Tallahassee, Florida First American Bank Meadowview Bancorp, Inc., Chicago May 25, 1990 Corporation, Kankakee, Illinois Elk Grove Village, Illinois Northern Illinois Bancorp, Inc. Joliet, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 707 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank date Firstar Corporation, First Western Company, Chicago May 30, 1990 Milwaukee, Wisconsin St. Louis Park, Minnesota Firstar Corporation of Minnesota, Milwaukee, Wisconsin Firstar Corporation, Elkhorn Bankshares Corporation, Chicago May 30, 1990 Milwaukee, Wisconsin Elkhorn, Wisconsin F.W.S.F. Corporation, Milwaukee, Wisconsin First Charlotte Financial First Charlotte Bank and Trust Richmond June 8, 1990 Corporation, Company, Charlotte, North Carolina Charlotte, North Carolina First Fidelity Bancorp, Inc., FirstBank Shinnston, Richmond June 5, 1990 Fairmont, West Virginia Shinnston, West Virginia First Grayson Bancorp, Inc., The First National Bank of Cleveland June 6, 1990 Grayson, Kentucky Grayson, Grayson, Kentucky First Midwest Bancorp, Inc., Plainfield National Bank, Chicago May 24, 1990 Naperville, Illinois Plainfield, Illinois First of Fort Morgan, Inc., First Community Bancshares, Kansas City May 31, 1990 Fort Morgan, Colorado Inc., Fort Morgan, Colorado John Warner Financial The John Warner Bank, Chicago June 1, 1990 Corporation, Clinton, Illinois Clinton, Illinois Key Centurion Bancshares, Inc., The Farmers and Citizens State Richmond June 15, 1990 Charleston, West Virginia Bank, Clendenin, West Virginia Manning Financial Services, Inc., The First National Bank of Chicago May 25, 1990 Manning, Iowa Manning, Manning, Iowa Montgomery County Bancshares, Junction City Holding Company, St. Louis June 5, 1990 Inc., Junction City, Arkansas Little Rock, Arkansas NBN Corporation, First Peoples Bancorp, Inc., Atlanta June 15, 1990 Newport, Tennessee Jefferson City, Tennessee Newfield Bancorp, Inc., First National Bank in Newfield, Philadelphia June 4, 1990 Newfield, New Jersey Newfield, New Jersey NI Bancshares Corporation, The National Bank & Trust Chicago June 11, 1990 Sycamore, Illinois Company of Sycamore, Sycamore, Illinois Palm Desert Investments, Palm Desert National Bank, San Francisco May 25, 1990 Palm Desert, California Palm Desert, California Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

708 Federal Reserve Bulletin • August 1990 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank date The Peoples Bank Employee The Peoples Bank, St. Louis May 23, 1990 Stock Ownership Plan, Marion, Kentucky Marion, Kentucky Prairie Capital, Inc., Haysville Bancshares, Inc., Kansas City May 25, 1990 Augusta, Kansas Haysville, Kansas Prime Banc Corp., The First National Bank of St. Louis May 31, 1990 Dieterich, Illinois Dieterich, Dieterich, Illinois Readlyn Bancshares, Inc., Tripoli Bancshares, Inc., Chicago May 25, 1990 St. Paul, Minnesota St. Paul, Minnesota Resource Bancshares Kingsley Bank, Richmond May 29, 1990 Corporation, Orange Park, Florida Columbia, South Carolina Second National Financial Second National Bank, Richmond May 30, 1990 Corporation, Culpeper, Virginia Culpeper, Virginia T.C.N.B., Inc., Treasure Coast National Bank, Atlanta June 13, 1990 Fort Pierce, Florida Fort Pierce, Florida Valley Bancshares, Inc., Valley State Bank, Atlanta June 11, 1990 Russellville, Alabama Russellville, Alabama Section 4 Nonbanking Reserve Effective Applicant(s) Activity/Company Bank date The Industrial Bank of Japan, D'Accord Group, Inc., New York May 25, 1990 Limited, San Francisco, California Tokyo,Japan Norton Bankshares, Inc., Rouse Insurance Agency, Kansas City June 5, 1990 Norton, Kansas Norton, Kansas Univest Corporation, Pennview Savings Association, Philadelphia June 8, 1990 Souderton, Pennsylvania Souderton, Pennsylvania Sections 3 and 4 . . Nonbanking Reserve Effective P Activity/Company Bank date Premier Bankshares Corporation, Shawsville Bancorp, Inc., Richmond June 11, 1990 Tazewell, Virginia Shawsville, Virginia Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 709 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 Bank of Commerce, The State Bank of Fraser, Chicago June 16, 1990 Hamtramck, Michigan Fraser, Michigan First Business Bank of Arizona, VCC Acquisition Bank, San Francisco June 1, 1990 Phoenix, Arizona Phoenix, Arizona Marine Bank of Monticello, Citizens Federal Bank, Chicago May 25, 1990 Monticello, Illinois Miami, Florida Northern Neck State Bank, Perpetual Savings Bank, F.S.B., Richmond June 19, 1990 Warsaw, Virginia McLean, Virginia Trust Company Bank, Trust Company Bank of Douglas Atlanta June 12, 1990 Atlanta, Georgia County, Douglasville, Georgia PENDING CASES INVOLVING THE BOARD OF Board from enforcing a temporary order to cease GOVERNORS and desist requiring injection of capital into plaintiffs subsidiary banks under the Board's source of strength doctrine. District court granted preliminary This list of pending cases does not include suits injunction on June 5, 1990, in light of 5th Circuit's against the Federal Reserve Banks in which the Board decision in MCorp v. Board of Governors. of Governors is not named a party. Rutledge v. Board of Governors, No. CV90-L-0137S Laufman v. State of California, et al., No. CIVS-89- (N.D. Alabama, filed January 27, 1990). Tort suit 1755 EJM-EM (E.D. California, filed April 2, 1990). challenging Board and Reserve Bank supervisory Action to require bank regulatory agencies to exam- actions. The Board's motion to dismiss or for summary judgment held in abeyance pending compleine or bring enforcement action against bank. tion of discovery. May v. Board of Governors, No. 90-1316 (D. D.C., filed June 5, 1990). Action under Freedom of Infor- Woodward v. Board of Governors, No. 90-3031 (11th mation and Privacy Acts. Cir., filed January 16, 1990); Kaimowitz v. Board of California Association of Life Underwriters v. Board Governors, No. 90-3067 (11th Cir., filed January 23, of Governors, No. 90-70123 (9th Circuit, filed 1990). Petitions for review of Board order dated March 15, 1990). Petition for review of Board order December 22, 1989, approving application by First approving acquisition of bank subsidiary to engage Union Corporation to acquire Florida National in insurance activities pursuant to state law. Peti- Banks. Petitioners object to approval on Commutioner's motion to dismiss the petition filed on nity Reinvestment Act grounds. The court denied June 21, 1990. their motion for a stay of the Board's order on Burke v. Board of Governors, No. 90-9505 (10th January 26, 1990, and on June 26 granted the Circuit, filed February 27, 1990). Petition for review Board's motion to dismiss the Woodward case. of Board orders assessing civil money penalties and Securities Industry Association v. Board of Goverissuing orders of prohibition. nors, No. 89-1730 (D.C. Cir., filed November 29, BancTEXAS Group, Inc. v. Board of Governors, No. 1989). Petition for review of Board order approving CA 3-90-0236-R (N.D. Texas, filed February 2, application under section 4(c)(8) to engage in private 1990). Suit for preliminary injunction enjoining the placement and riskless principal activities. The case Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

710 Federal Reserve Bulletin • August 1990 has been held in abeyance pending the outcome of Independent Insurance Agents of America v. Board of Securities Industry Association v. Board of Gover- Governors, No. 89-4030 (2d Cir., filed March 9, nors, No. 89-1127 (D.C. Circuit). 1989). Petition for review of Board order ruling that Babcock and Brown Holdings, Inc. v. Board of Gov- the non-banking restrictions of section 4 of the Bank ernors, No. 89-70518 (9th Cir., filed November 22, Holding Company Act apply only to non-bank sub- 1989). Petition for review of Board determination sidiaries of bank holding companies. The Board's that a company would control a proposed insured order was upheld on November 29, 1989. Petition bank for purposes of the Bank Holding Company for certiorari filed on April 18, 1990. Act. Awaiting scheduling of oral argument. Securities Industry Association v. Board of Gover- Consumers Union of U.S., Inc. v. Board of Gover- nors, No. 89-1127 (D.C. Cir., filed February 16, nors, No. 89-3008 (D.D.C., filed November 1, 1989). Petition for review of Board order permitting 1989). Challenge to various aspects of amendments five bank holding companies to engage to a limited to Regulation Z implementing the Home Equity extent in additional securities underwriting and deal- Loan Consumer Protection Act. On May 2, 1990, ing activities. Board's order upheld on April 10, the court upheld the Board's regulatory action. On 1990. June 27, Consumers Union filed a notice of appeal in MCorp v. Board of Governors, No. CA3-88-2693 the D.C. Circuit. (N.D. Tex., filed October 10, 1988). Application for Synovus Financial Corp. v. Board of Governors, No. injunction to set aside temporary cease and desist 89-1394 (D.C. Cir., filed June 21, 1989). Petition for orders. Stayed pending outcome of MCorp v. Board review of Board order permitting relocation of a of Governors in Fifth Circuit. bank holding company's national bank subsidiary White v. Board of Governors, No. CU-S-88-623-RDF from Alabama to Georgia. Oral argument scheduled (D. Nev., filed July 29, 1988). Age discrimination for October 11, 1990. complaint. Board's motion to dismiss or for sum- MCorp v. Board of Governors, No. 89-2816 (5th Cir., mary judgment pending. filed May 2, 1989). Appeal of preliminary injunction Cohen v. Board of Governors, No. 88-1061 (D.N.J., against the Board enjoining pending and future filed March 7, 1988). Action seeking disclosure of enforcement actions against a bank holding com- documents under the Freedom of Information Act. pany now in bankruptcy. On May 15, 1990, the Fifth Lewis v. Board of Governors, Nos. 87-3455, 87-3545 Circuit vacated the district court's order enjoining (11th Cir., filed June 25, August 3,1987). Petitions for the Board from proceeding with enforcement ac- review of Board orders approving applications of tions based on section 23A of the Federal Reserve non-Florida bank holding companies to expand activ- Act, but upheld the district court's order enjoining ities of Florida trust company subsidiaries. Matter such actions based on the Board's source-of- stayed pending Supreme Court review of Continental strength doctrine. Board's petition for rehearing Illinois Corp. v. Lewis, 827 F.2d 1517 (11th Cir. filed on June 27, 1990. 1987), vacated and remanded, llOS.Ct. 1249(1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A1 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 WEEKLY REPORTING COMMERCIAL BANKS Domestic Financial Statistics Assets and liabilities A19 All reporting banks MONEY STOCK AND BANK CREDIT A20 Banks in New York City A21 Branches and agencies of foreign banks A3 Reserves, money stock, liquid assets, and debt A22 Gross demand deposits—individuals, measures partnerships, and corporations A4 Reserves of depository institutions, Reserve Bank credit A5 Reserves and borrowings—Depository institutions A6 Selected borrowings in immediately available FINANCIAL MARKETS funds—Large member banks A23 Commercial paper and bankers dollar POLICY INSTRUMENTS 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 A24 Interest rates—money and capital markets A9 Federal Reserve open market transactions A25 Stock market—Selected statistics A26 Selected financial institutions—Selected assets FEDERAL RESERVE BANKS and liabilities A10 Condition and Federal Reserve note statements All Maturity distribution of loan and security holdings FEDERAL FINANCE MONETARY AND CREDIT AGGREGATES A12 Aggregate reserves of depository institutions A28 Federal fiscal and financing operations and monetary base A29 U.S. budget receipts and outlays A13 Money stock, liquid assets, and debt measures A30 Federal debt subject to statutory limitation A15 Bank debits and deposit turnover A30 Gross public debt of U.S. Treasury—Types A16 Loans and securities—All commercial banks and ownership A31 U.S. government securities dealers—Transactions COMMERCIAL BANKING INSTITUTIONS A32 U.S. government securities dealers—Positions All Major nondeposit funds and financing A18 Assets and liabilities, last-Wednesday-of-month A33 Federal and federally sponsored credit series agencies—Debt outstanding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • August 1990 SECURITIES MARKETS AND A56 U.S. reserve assets CORPORATE FINANCE A56 Foreign official assets held at Federal Reserve Banks A34 New security issues—State and local A57 Foreign branches of U.S. banks—Balance governments and corporations sheet data A35 Open-end investment companies—Net sales A59 Selected U.S. liabilities to foreign official and asset position institutions A35 Corporate profits and their distribution A35 Total nonfarm business expenditures on new plant and equipment A36 Domestic finance companies—Assets and REPORTED BY BANKS IN THE UNITED STATES liabilities and business credit A59 Liabilities to and claims on foreigners A68 Liabilities to foreigners REAL ESTATE A62 Banks' own claims on foreigners A37 Mortgage markets A63 Banks' own and domestic customers' claims on A38 Mortgage debt outstanding foreigners A63 Banks' own claims on unaffiliated foreigners A64 Claims on foreign countries—Combined CONSUMER INSTALLMENT CREDIT domestic offices and foreign branches A39 Total outstanding and net change A40 Terms REPORTED BY NONBANKING BUSINESS FLOW OF FUNDS ENTERPRISES IN THE UNITED STATES A41 Funds raised in U.S. credit markets A65 Liabilities to unaffiliated foreigners A43 Direct and indirect sources of funds to credit A66 Claims on unaffiliated foreigners markets A44 Summary of credit market debt outstanding A45 Summary of credit market claims, by holder SECURITIES HOLDINGS AND TRANSACTIONS A67 Foreign transactions in securities Domestic Nonfinancial Statistics 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 A78 Foreign exchange rates A51 Housing and construction A52 Consumer and producer prices A53 Gross national product and income A71 Guide to Tabular Presentation, A54 Personal income and saving Statistical Releases, and Special Tables International Statistics SUMMARY STATISTICS SPECIAL TABLE A55 U.S. international transactions—Summary All Assets and liabilities of U.S. branches and A56 U.S. foreign trade agencies of foreign banks, December 31, 1989 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 1990 MMoonneettaarryy aanndd ccrreeddiitt aaggggrreeggaatteess Q2 Q3 Q4 Q1 Jan. Feb. Mar. Apr. May Reserves of depository institutions2 1 Total -8.5 .6 5.1 2.4 -2.7 6.4 1.6 -.4 -9.8 2 Required -7.7 .5 5.0 2.5 -4.7 7.1 4.2 -1.2 -11.3 3 Nonborrowed -10.0 8.6 7.2 -3.9 -6.2 -13.9 -12.1 9.8 -4.1 4 Monetary base3 1.8 3.2 4.0 8.5 10.8 9.2 8.7 7.1 3.5 Concepts of money, liquid assets, and debt4 5 Ml -4.4 1.8 5.1 4.8 .0 10.0 5.1 3.9 -2.8 6 M2 1.6 6.9 7.0 6.0 3.1 8.6 5.1 1.9 -2.9 7 M3 3.2 3.9 1.8 2.6 .9 4.2 .8 1.0 -2.6 8 L 5.0 4.2 2.8 2.8 .4 2.4 4.5 -.1 n.a. 9 Debt 7.8 7.3 8.2 7.0 6.1 8.0 7.5 6.0 n.a. Nontrqnsaction components 10 In M25 3.7 8.7 7.7 6.4 4.1 8.1 5.1 1.4 -3.0 11 In M3 only6 9.1 -6.8 -17.1 -10.7 -7.6 -13.2 -16.7 -3.0 -1.2 Time and savings deposits Commercial banks 12 Savings -11.6 .4 7.2 9.5 8.3 12.6 10.0 2.5 -1.9 13 MMDA -10.8 5.2 12.3 9.1 3.1 12.3 10.4 10.7 10.3 14 Small-denomination time7 25.9 11.9 11.3 7.8 6.4 7.5 5.6 9.4 21.5 15 Large-denomination time ' 16.3 2.9 2.7 -1.6 -.9 -5.4 -9.3 -5.1 5.5 Thrift institutions 16 Savings -14.8 -5.2 .2 1.3 -.5 7.6 -3.2 4.3 -2.2 17 MMDA -30.6 -6.2 4.7 5.7 2.7 8.2 21.6 7.1 -16.7 18 Small-denomination time 10.7 8.7 -2.5 -4.3 -5.1 -9.0 .2 -7.7 -16.5 19 Large-denomination time8 7.5 -10.7 -28.6 -24.9 -29.8 -22.0 -23.2 -34.2 -40.3 Debt components4 20 Federal 23.0 37.6 29.1 18.8 21.9 24.1 1.8 -.7 -20.0 21 Nonfederal 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 Nonfinancial Statistics • August 1990 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT Millions of dollars Monthly averages of Weekly averages of daily figures for week ending daily figures Factors 1990 1990 Mar. Apr. May Apr. 18 Apr. 25 May 2 May 9 May 16 May 23 May 30 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit 268,483 272,853 273,073 275,557 272,437 272,424 273,138 274,097 271,336 273,318 U.S. government securities1' 2 2 Bought outright-system account 219,148 223,445 224,344 223,679 224,307 223,996 224,571 224,357 223,075 224,942 3 Held under repurchase agreements 306 361 185 1,346 0 0 0 819 0 0 Federal agency obligations 4 Bought outright 6,524 6,504 6,446 6,524 6,492 6,446 6,446 6,446 6,446 6,446 5 Held under repurchase agreements 0 156 156 596 0 0 0 691 0 0 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 7 Adjustment credit 83 111 205 190 96 101 67 98 62 634 8 Seasonal credit 78 119 248 106 135 181 220 221 265 290 9 Extended credit 1,982 1,424 852 1,454 1,090 707 582 763 1,036 1,159 10 Float 431 659 720 1,579 94 377 576 601 1,237 432 11 Other Federal Reserve assets 39,852 40,073 39,917 40,083 40,224 40,615 40,677 40,099 39,214 39,416 12 Gold stock 11,059 11,060 11,063 11,060 11,060 11,060 11,060 11,061 11,065 11,065 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 19,802 19,878 19,949 19,877 19,896 19,915 19,929 19,943 19,957 19,971 ABSORBING RESERVE FUNDS 15 Currency in circulation 256,791 260,024 262,394 260,952 260,313 259,956 261,281 262,218 262,427 263,790 16 Treasury cash holdings 524 549 572 543 557 561 573 570 572 577 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,349 4,351 5,054 4,981 4,022 4,543 4,841 5,037 5,274 4,562 18 Foreign 215 230 214 216 219 230 197 220 213 215 19 Service-related balances and adjustments 2,161 1,905 2,038 1,989 2,021 2,344 1,994 2,018 2,031 1,992 20 Other 339 316 334 258 326 437 244 264 269 575 2! Other Federal Reserve liabilities and capital 8,997 9,033 9,468 9,285 9,162 9,377 9,558 9,497 9,327 9,386 22 Reserve balances with Federal Reserve Banks 33,486 35,903 32,529 36,789 35,291 34,470 33,958 33,794 30,764 31,774 End-of-month figures Wednesday figures 1990 1990 Mar. Apr. May Apr. 18 Apr. 25 May 2 May 9 May 16 May 23 May 30 SUPPLYING RESERVE FUNDS 23 Reserve Bank credit 268,705 273,008 275,183 279,425 271,245 273,449 272,972 275,253 271,714 272,240 U.S. government securities1' 2 24 Bought outright-system account 217,899 224,468 227,455 224,073 223,944 224,207 224,110 223,872 224,092 224,463 25 Held under repurchase agreements 1,423 0 0 4,957 0 0 0 3,013 0 0 Federal agency obligationsr 26 Bought outright 6,524 6,446 6,446 6,524 6,446 6,446 6,446 6,446 6,446 6,446 27 Held under repurchase agreements.... 510 0 0 2,191 0 0 0 2,077 0 0 28 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions 29 Adjustment credit 154 97 94 1,094 113 84 94 36 64 75 30 Seasonal credit 92 183 289 119 145 215 214 230 900 291 31 Extended credit 1,917 732 717 24 183 233 312 716 274 1,009 32 Float 262 277 316 276 -24 1,368 874 953 662 441 33 Other Federal Reserve assets 39,925 40,805 39,866 40,167 40,437 40,896 40,922 37,908 39,277 39,514 34 Gold stock 11,060 11,060 11,065 11,060 11,060 11,060 11,060 11,062 11,065 11,065 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 19,839 19,915 19,985 19,877 19,896 19,915 19,929 19,943 19,957 19,971 ABSORBING RESERVE FUNDS 37 Currency in circulation 257,675 259,890 265,336 260,892 259,961 260,592 261,989 262,573 262,855 264,828 38 Treasury cash holdings 540 561 579 557 561 561 573 572 575 581 Deposits, other than reserve balances, with Federal Reserve Banks 39 Treasury 4,832 5,205 4,426 5,208 4,125 8,230 6,172 3,817 5,740 4,420 40 Foreign 300 402 309 171 266 221 186 215 200 207 41 Service-related balances and adjustments 2,119 2,344 2,242 1,989 2,021 2,344 1,994 2,018 2,031 1,992 42 Other 304 352 303 265 714 274 232 318 214 377 43 Other Federal Reserve liabilities and capital 8,455 9,866 9,928 9,141 8,948 9,382 9,115 9,203 9,209 9,206 44 Reserve balances with Federal Reserve Banks3 33,897 33,881 31,628 40,657 34,124 31,339 32,219 36,059 30,430 30,183 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 excludes any securities sold and float. scheduled to be bought back under matched sale-purchase transactions. NOTE. For amounts of currency and coin held as reserves, see table 1.12. 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. Nov. Dec. Jan. Feb. Mar. Apr/ May 1 Reserve balances with Reserve Banks2 37,691 37,837 35,436 33,941 35,436 34,090 30,929 33,407 35,409 32,770 2 Total vault cash3 26,675 28,204 29,812 29,549 29,812 31,301 32,489 29,581 29,281 29,811 3 Vault4 24,449 25,909 27,374 27,048 27,374 28,841 29,693 27,251 27,103 27,461 4 Surplus 2,226 2,295 2,439 2,502 2,439 2,461 2,795 2,330 2,178 2,350 5 Total reserves6 62,141 63,746 62,810 60,989 62,810 62,931 60,623 60,658 62,512 60,231 6 Required reserves 61,094 62,699 61,888 60,044 61,888 61,914 59,634 59,797 61,615 59,269 7 Excess reserve balances at Reserve Banks 1,046 1,047 922 945 922 1,016 989 861 897 962 8 Total borrowings at Reserve Banks 777 1,716 265 349 265 440 1,448 2,124 1,628 1,335 9 Seasonal borrowings at Reserve Banks 93 130 84 134 84 47 51 78 122 244 10 Extended credit at Reserve Banks 483 1,244 20 21 20 26 535 1,950 1,403 875 Biweekly averages of daily figures for weeks ending 1990 Feb. 7 Feb. 21 Mar. 7 Mar. 21 Apr. 4 Apr. 18 May 2r May 16 May 30 June 13 11 Reserve balances with Reserve Banks2 29,799 30,597 32,724 33,730 33,433 36,421 34,887 33,855 31,269 34,373 12 Total vault cash3 34,175 32,780 30,220 29,259 29,585 28,931 29,588 28,862 30,851 28,985 13 Vault4 31,156 29,956 27,706 27,004 27,278 26,920 27,259 26,730 28,268 26,801 14 Surplus5 3,019 2,824 2,514 2,255 2,307 2,011 2,330 2,132 2,583 2,185 15 Total reserves6 60,955 60,553 60,430 60,734 60,711 63,341 62,145 60,584 59,537 61,174 16 Required reserves 59,735 59,585 59,633 59,997 59,633 62,675 61,040 59,657 58,526 60,714 17 Excess reserve balances at Reserve Banks 1,220 968 797 737 1,078 665 1,105 927 1,011 460 18 Total borrowings at Reserve Banks 865 1,480 1,967 2,179 2,157 1,882 1,155 976 1,723 1,291 19 Seasonal borrowings at Reserve Banks 44 50 60 75 96 100 158 221 278 282 20 Extended credit at Reserve Banks 33 133 1,841 1,995 1,965 1,676 899 673 1,098 559 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 Nonfinancial Statistics • August 1990 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Member Banks' Averages of daily figures, in millions of dollars 1990 week ending Monday2 Maturity and source Apr. 23 Apr. 30 May 7 May 14 May 21 May 28 June 4 June 18 Federal funds purchased, repurchase agreements, and other selected borrowing in immediately available funds From commercial banks in the United States For one day or under continuing contract 86,678 78,751 81,480 79,570 79,518 77,536 85,413 88,698 89,848 For all other maturities 18,617 19,973 19,964 19,456 19,360 19,784 18,706 19,734 21,135 From other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies For one day or under continuing contract 43,192 37,104 37,896 37,113 37,650 38,536 37,418 40,495 40,424 For all other maturities 17,427 17,418 17,678 19,029 18,536 18,494 18,065 17,758 17,495 Repurchase agreements on U.S. government and federal agency securities in immediately available funds Brokers and nonbank dealers in securities 5 For one day or under continuing contract 14,654 15,196 15,504 15,722 16,796 13,950 13,898 13,874 13,354 6 For all other maturities 19,304 20,002 20,252 19,812 19,758 19,978 20,438 20,695 20,503 All other customers 7 For one day or under continuing contract 31,622 31,928 31,590 31,489 32,431 32,122 33,987 32,321 32,506 8 For all other maturities 11,972 12,514 11,917 12,668 12,583 13,421 13,263 14,130 13,964 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 48,432 47,869 48,122 45,068 45,328 44,999 49,490 44,708 61,783 10 To all other specified customers 14,411 14,427 14,969 13,537 13,661 12,317 15,168 13,419 14,314 1. Banks with assets of $1 billion or more as of Dec. 31, 1977. Division of Applications Development and Statistical Services, Financial State- These data also appear in the Board's H.5 (507) release. For address, see inside ment Reports Section, (202) 452-3349. front cover. 3. Brokers and nonbank dealers in securities; other depository institutions; 2. Beginning with the August Bulletin data appearing are the most current foreign banks and official institutions; and United States government agencies. available. To obtain data from May 1, 1989, through April 16, 1990, contact the 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 ccrreeddiitt First 30 days of borrowing After 30 days of borrowing3 BBBaaannnkkk 6/1 O 4 n /9 0 Ef d fe a c t t e i ve Pr r e a v t i e o us 6/1 O 4 n /9 0 Ef d fe a c t t e i ve Pr r e a v t i e o us 6/1 O 4 n /9 0 Ef d fe a c t t e i ve Pr r e a v t i e o us Effective date Vi 6Vl Boston. % 7 2/24/89 6 7 2/24/89 8.75 6/14/90 8.75 5/31/90 New York 2/24/89 2/24/89 6/14/90 5/31/90 Philadelphia 2/24/89 2/24/89 6/14/90 5/31/90 Cleveland 2/24/89 2/24/89 6/14/90 5/31/90 Richmond 2/24/89 2/24/89 6/14/90 5/31/90 Atlanta 2/24/89 2/24/89 6/14/90 5/31/90 Chicago 2/24/89 2/24/89 6/14/90 5/31/90 St. Louis 2/24/89 2/24/89 6/14/90 5/31/90 Minneapolis 2/24/89 2/24/89 6/14/90 5/31/90 Kansas City 2/24/89 2/24/89 6/14/90 5/31/90 Dallas 2/27/89 Vl 2/27/89 Vl 6/14/90 5/31/90 San Francisco ... 7 2/24/89 6 7 2/24/89 6 8.75 6/14/90 8.75 5/31/90 Range of rates for adjustment credit in recent years4 Range (or F.R. Range (or F.R. Range (or F.R. Effective date A le l v l e F l) . — R. Ba o n f k Effectiv A le l v l e F l) . — R. Ba o n f k Effective date A le l v l e F l) . — R. Ba o n f k Banks N.Y. Banks N.Y. Banks N.Y. I 1 n 9 7 e 8 f — fec J t a n D . ec. 2 9 0 3 1, 1977 6 6 6- V 6 6 V V l- i l 7 6 6 67 V V l l 1980-—— S JJuu ep llyy t . 7 7 7 8 9 6 10 1 1 - 0 1 1 1 1 1 1 0 0 1 11998844——AA N pp o rr v .. . 2 1 1 9 3 8 8W V 9 V i - - 9 9 l 9m 9 V l May 11 1 Nov. 17 12 12 26 8 8 12 7 Dec. 5 12-13 13 Dec. 24 8 8 July 3 7-71/4 7^4 IVi 10 7V4 7V4 1981-——MMaayy 5 13-14 14 11998855——MMaayy 20 7WIV-8i IVi Aug. 21 73/4 73/4 8 14 14 24 O Se c p t. t . 2 1 2 6 S S -8 8 V V l 1 m 8 8 V 2 Nov. 6 7 13 1 - 3 1 4 1 1 3 3 1986—Mar. 7 7-71 V l 1 1 Nov. 20 1 8V 9 1- 1 9 / 1/ 1 1 9 V V l l Dec. 4 UV 12 l-\2 1 U 2 Vl Apr. 2 1 1 0 6Vi-7 6 Vi 3 9 1982---JJuullyy 70 Vi UVi July 11 6 S6 Vl 1979—July 20 10 10 V i Aug. 7 7 3 11— 11 HVts 11 AAuugg.. 2 2 1 2 5V 5W 4-6 5 Vl Aug. 2 1 0 7 1 \ 0 01 - 0 1 V' 0 /! V i - 2 U 1 1 0 0 Vi 1 3 6 10 1 1 V i 1 10 1 V ^ 11998877——SSeepptt.. 4 51/2-6 6 Sept. 19 11 77 10-10W 10 11 6 6 Oct. 2 1 1 8 0 11 1 1 - 1 2 1 2 1 1 11 2 2 Oct. 3 1 1 0 7 3 9> 9 / 1 2V 0 V -1 l0 i 9 9 1 0V V i i 11998888——AAuugg.. 1 9 1 6- ( 6\VWi 6 6 V V l 1 Nov. 77 9-9 9 1980—Feb. 15 12-13 13 76 SV9 l-9 9 1989—Feb. 24 6W-7 7 19 13 13 Dec. 14 9 Vi 27 7 7 May 29 12-13 13 IS 8'/>-9 8 Vi 30 12 12 17 8W 8 In effect June 14, 1990 7 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 Vl 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 • August 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 accounts ' $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 Vl years 10/6/83 1 Vz 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 18,983 8,223 14,284 219 8,794 1,883 423 110088 554433 55,,779966 ? 6,051 587 12,818 1,633 0 0 1,489 3,384 0 0 Exchange 0 0 0 0 0 0 0 0 0 0 4 Redemptions 9,029 2,200 12,730 1,400 3,530 0 1,000 400 0 0 Others within 1 year Gross purchases 3,659 2,176 327 0 115555 00 00 00 110000 00 6 300 0 0 0 0 0 0 0 0 0 7 Maturity shift 21,504 23,854 28,848 852 3,915 1,268 1,201 2,845 1,876 993 8 -20,388 -24,588 -25,783 -2,678 -5,502 0 -2,489 -5,418 0 -4,304 9 Redemptions 70 0 500 500 0 0 0 0 0 0 1 to 5 years 10 Gross purchases 10,231 5,485 1,436 0 0 0 0 0 100 100 11 452 800 490 24 0 0 0 0 0 0 V -17,975 -17,720 -25,534 -758 -2,869 -1,268 -1,163 -1,713 -1,876 -739 13 Exchange 18,938 22,515 23,250 2,552 4,902 0 2,373 4,743 0 4,081 5 to 10 years 14 Gross purchases 2/41 1,579 287 0 00 00 00 00 00 00 IS 0 175 29 0 0 0 0 0 0 0 16 Maturity shift -3,529 -5,946 -2,231 -95 -1,046 0 -38 -451 0 -254 17 Exchange 950 1,797 1,934 126 400 0 116 450 0 223 Over 10 years 18 Gross purchases 1,858 1,398 228844 0 00 00 00 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 -681 0 0 21 500 275 600 0 200 0 0 226 0 0 ?? 37,170 18,863 16,617 219 8,949 1,883 423 108 774433 55,,889966 n 6,803 1,562 13,337 1,657 0 0 1,489 3,384 0 0 24 Redemptions 9,099 2,200 13,230 1,900 3,530 0 1,000 400 0 0 Matched transactions 950,923 1,168,484 1,323,480 111,430 105,696 103,077 112277,,772299 111166,,222200 9999,,110044 9977,,997700 26 Gross purchases 950,935 1,168,142 1,326,542 111,893 105,243 104,827 121,411 120,637 97,128 98,643 Repurchase agreements2 77 314,621 152,613 129,518 0 15,350 22,737 16,185 0 8,050 6,409 28 324,666 151,497 132,688 0 15,350 21,145 17,777 0 6,627 7,832 29 Net change in U.S. government securities 11,234 15,872 -10,055 -2,875 4,966 5,225 -9,976 741 190 5,146 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 30 0 0 0 0 0 78 Repurchase agreements2 33 Gross purchases 80,353 57,259 38,835 0 1,247 2,992 1,741 0 1,966 2,595 34 Gross sales 81,350 56,471 40,411 0 1,247 2,467 2,266 0 1,457 3,104 35 Net change in federal agency obligations -1,274 198 -2,018 -30 0 525 -525 0 509 -587 36 Total net change in System Open Market Account 9,961 16,070 -12,073 -2,905 44,,996666 5,750 -10,501 774411 669999 44,,555599 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 • August 1990 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1990 1990 May 2 May 9 May 16 May 23 May 30 Mar. Apr. May Consolidated condition statement ASSETS 1 Gold certificate account 11,060 11,060 11,062 11,065 11,065 11,060 11,060 11,065 2 Special drawing rights certificate account 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 3 523 516 509 504 473 568 532 468 Loans 4 To depository institutions 532 619 982 1,237 1,375 1,779 2,163 1,100 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 6,446 6,446 6,446 6,446 6,446 6,524 6,446 6,446 8 Held under repurchase agreements 0 0 2,077 0 0 510 0 0 U.S. Treasury securities Bought outright 9 Bills 101,712 101,616 101,378 101,597 101,968 95,504 101,973 104,960 10 Notes 91,539 91,539 91,732 91,732 91,732 91,440 91,540 91,732 11 Bonds 30,955 30,955 30,763 30,763 30,763 30,955 30,955 30,763 12 Total bought outright 224,207 224,110 223,872 224,092 224,463 217,899 224,468 227,455 13 Held under repurchase agreements 0 0 3,013 0 0 1,423 0 0 14 Total U.S. Treasury securities 224,217 224,110 226,886 224,092 224,463 219,322 224,468 227,455 15 Total loans and securities 231,185 231,176 236,392 231,776 232,284 228,518 231,926 235,001 16 Items in process of collection 8,172 6,167 7,202 5,718 8,450 6,549 4,499 6,661 17 Bank premises 795 796 797 795 795 793 795 795 Other assets 18 Denominated in foreign currencies3 33,983 34,031 34,033 34,098 34,098 33,452 33,982 34,574 19 All other4 5,896 6,214 4,082 4,274 4,573 5,679 5,958 4,563 20 Total assets 300,133 298,478 302,594 296,748 300,256 295,137 297,270 301,646 LIABILITIES 21 Federal Reserve notes 241,761 243,150 243,710 243,978 245,910 238,944 241,068 246,398 Deposits 22 To depository institutions 33,283 34,287 39,157 32,213 32,694 36,129 36,076 34,094 23 U.S. Treasury—General account 8,230 6,172 3,817 5,740 4,420 4,832 5,205 4,426 24 Foreign—Official accounts 221 186 215 200 207 300 402 309 25 Other 274 232 318 214 377 304 352 303 26 Total deposits 42,007 40,876 43,507 38,367 37,699 41,565 42,036 39,132 77 Deferred credit items 6,983 5,337 6,174 5,194 7,441 6,173 4,301 6,188 28 Other liabilities and accrued dividends 4,029 4,040 4,182 4,115 4,131 3,969 4,199 4,365 29 Total liabilities 294,780 293,403 297,574 291,654 295,181 290,651 291,603 296,083 CAPITAL ACCOUNTS 30 Capital paid in 2,321 2,329 2,332 2,338 2,339 2,313 2,327 2,339 31 Surplus 2,243 2,243 2,243 2,243 2,243 2,139 2,243 2,243 32 Other capital accounts 789 503 445 513 493 34 1,098 981 33 Total liabilities and capital accounts 300,133 298,478 302,594 296,748 300,256 295,137 297,270 301,646 34 MEMO: Marketable U.S. Treasury securities held in custody for foreign and international accounts 223,360 223,171 223,637 229,273 227,961 254,767 224,256 225,879 Federal Reserve note statement 35 Federal Reserve notes outstanding issued to bank 283,347 284,307 284,789 285,538 285,846 278,709 283,191 285,819 36 LESS: Held by bank 41,586 41,157 41,079 41,561 39,936 39,765 42,123 39,421 37 Federal Reserve notes, net 241,761 243,150 243,710 243,978 245,910 238,944 241,068 246,398 Collateral held against notes net: 38 Gold certificate account 11,060 11,060 11,062 11,065 11,065 11,060 11,060 11,065 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 222,183 223,572 224,130 224,395 226,327 219,366 221,490 227,815 42 Total collateral 241,761 243,150 243,710 243,978 245,910 238,944 241,068 247,398 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 TTTyyypppeee aaannnddd mmmaaatttuuurrriiitttyyy gggrrrooouuupppiiinnngggsss 1990 1990 May 2 May 9 May 16 May 23 May 30 Mar. 30 Apr. 30 May 31 532 619 982 1,237 1,375 2,039 1,012 1,100 4 3 2 9 W 1 1 6 i t d d h a a i y n y s s 1 t t 5 o o d 9 1 a 0 y y d e s a a r y s 3 1 9 4 0 0 2 4 1 7 4 0 1 8 8 9 8 6 0 7 1,2 2 1 0 4 3 1,33 3 0 9 7 2,02 1 4 0 5 9 6 5 0 2 1 1,0 8 1 0 6 4 0 0 0 0 0 0 0 0 6 7 W 16 i t d h a in y s 1 t 5 o d 9 a 0 y d s ays 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 9 0 1 2 3 4 U. W O 9 O S 1 1 . 6 v v i t e T e d d h r r a a r i n e y y 5 1 a s s s y y 1 u t t e 5 e o o r a a d y r r 9 1 a s 0 t s y y o e t d e s o c 1 a 5 a u r y 1 r y s 0 i e t i a y e r e s s a — rs T otal 2 4 6 2 2 5 1 1 7 8 6 4 8 0 2 , , , , , , , 7 2 7 2 1 7 5 5 0 6 5 1 4 7 1 7 8 2 5 6 6 2 4 2 2 6 5 1 1 9 6 4 6 8 1 2 , , , , , , , 1 2 1 0 1 9 5 2 1 1 4 5 9 7 8 0 6 6 2 3 6 2 4 7 2 5 2 1 1 8 1 7 6 6 1 1 , , , , , , , 3 7 6 8 4 0 6 6 9 3 0 8 6 1 5 5 8 2 6 9 7 2 4 6 2 5 2 1 1 9 8 4 7 6 1 0 , , , , , , , 1 6 0 7 4 6 4 9 8 9 2 1 0 7 5 3 2 0 7 2 5 2 4 2 6 5 2 1 1 9 4 7 8 6 0 1 , , , , , , , 6 4 1 8 4 7 6 9 6 9 2 0 3 1 5 3 3 0 2 7 7 21 5 6 5 2 1 6 7 6 0 6 6 2 , , , , , , , 2 5 8 1 0 2 6 8 8 9 4 5 3 0 1 1 9 9 2 0 7 2 6 3 5 5 2 1 9 6 0 8 7 6 2 , , , , , , , 2 4 5 1 7 2 5 2 6 6 4 0 5 7 8 8 6 6 0 2 6 22 5 7 5 2 1 7 6 7 0 6 5 1 , , , , , , , 4 1 3 4 4 4 6 5 6 7 3 6 1 0 5 7 1 2 6 7 2 2 2 2 1 1 1 1 0 1 2 6 7 8 9 Fe O 9 O O W d 1 1 6 e v v v i r e e e t d d a h r r r a a l i n y y 5 1 1 a s s 0 g y y 1 t e t e e y 5 o o n a a e d c r r a 9 1 y s a r 0 t y s y o t o e d s o b a ' 5 a l r 1 y i y g 0 s e a a y ti r e o s a n r s s — Total 6 2 1 1 , , , , 4 8 6 5 0 1 4 9 7 5 4 8 8 6 2 8 5 6 7 8 6 2 1 1 , , , , 8 4 4 7 0 1 3 9 4 5 9 8 8 1 2 6 5 3 7 8 8 2 2 1 1 , , , , , 1 5 9 4 1 7 1 3 3 2 1 1 3 8 7 1 4 7 7 3 8 6 2 1 1 , , , , 4 4 9 4 1 3 1 6 4 3 1 1 2 8 7 6 1 7 7 6 8 6 2 1 1 , , , , 8 4 1 2 5 4 1 9 4 1 6 6 1 8 5 6 7 4 6 6 8 6 3 1 1 , , , , 5 0 5 0 4 1 1 2 7 9 6 2 8 7 4 4 8 2 6 8 5 6 2 1 1 , , , , 4 6 4 8 0 1 1 4 4 7 8 9 8 6 1 6 8 7 2 8 0 6 2 1 1 , , , , 4 8 5 4 1 2 1 4 6 9 1 1 6 8 6 4 5 6 7 6 8 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 Domestic Nonfinancial Statistics • August 1990 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1989 1990 1986 1987 1988 1989 Dec. Dec. Dec. Dec. Oct. Nov. Dec. Jan. Feb. Mar. Apr/ May Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 58.02 58.59 60.59 60.03 59.64 59.65 60.03 59.90 60.22 60.30 60.28 59.78 2 Nonborrowed reserves 57.20 57.82 58.88 59.77 59.08 59.30 59.77 59.46 58.77 58.17 58.65 58.45 3 Nonborrowed reserves plus extended credit4 57.50 58.30 60.12 59.79 59.11 59.32 59.79 59.48 59.30 60.12 60.05 59.32 4 Required reserves 56.65 57.55 59.55 59.11 58.62 58.70 59.11 58.88 59.23 59.44 59.38 58.82 5 Monetary base5 241.43 258.06 275.24 284.95 282.79 283.22 284.95 287.51 289.71 291.82 293.54 294.40 Not seasonally adjusted 6 Total reserves3 59.46 60.07 62.22 61.67 59.27 59.87 61.67 61.58 59.20 59.23 61.05 58.74 7 Nonborrowed reserves 58.64 59.30 60.50 61.40 58.72 59.52 61.40 61.14 57.75 57.11 59.42 57.41 8 Nonborrowed reserves plus extended credit4 58.94 59.78 61.75 61.42 58.74 59.54 61.42 61.17 58.29 59.06 60.82 58.28 9 Required reserves 58.09 59.03 61.17 60.75 58.25 58.92 60.75 60.56 58.21 58.37 60.15 57.78 10 Monetary base5 245.17 262.00 279.54 289.45 281.34 284.11 289.45 288.67 286.50 288.86 293.35 293.52 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS6 11 Total reserves3 59.56 62.14 63.75 62.81 60.40 60.99 62.81 62.93 60.62 60.66 62.51 60.23 12 Nonborrowed reserves 58.73 61.36 62.03 62.54 59.84 60.64 62.54 62.49 59.17 58.53 60.88 58.90 13 Nonborrowed reserves plus extended credit4 59.04 61.85 63.27 62.56 59.86 60.66 62.56 62.52 59.71 60.49 62.29 59.77 14 Required reserves 58.19 61.09 62.70 61.89 59.38 60.04 61.89 61.91 59.63 59.80 61.62 59.27 15 Monetary base5 247.62 266.06 283.00 292.55 284.33 287.19 292.55 292.13 290.02 292.38 296.87 297.03 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 1986 1987 1988 1989 Item Dec. Dec. Dec. Dec. Feb. Mar. Apr. May Seasonally adjusted 1 724.7 750.4 787.5 794.8 801.4 804.8 807.4 805.5 7 2,814.2 2,913.2 3,072.4 3,221.0 3,252.4 3,266.2 3,271.5' 3,263.6 3 3,494.5 3,678.7 3,918.4 4,041.7 4,058.9' 4,061.6' 4,064.9' 4,056.1 4 4,135.5 4,338.9 4,676.0 4,867.8r 4,879.5 4,897.7' 4,897.2 n.a. 5 7,588.3 8,307.5 9,062.0 9,777.6' 9,892.8' 9,954.3' 10,004.3 n.a. Ml components 6 Currency3 180.6 196.7 211.8 221.9 226.6 228.4 230.1 231.6 7 6.5 7.0 7.5 7.4 7.6 7.6 7.6 7.7 8 Demand deposits 302.1 287.0 287.0 279.7 280.2 279.3 277.8 274.6 9 Other checkable deposits6 235.5 259.7 281.3 285.7 287.0 289.5 291.8 291.5 Nontransactions components 10 In M2 2,089.6 2,162.8 2,284.9 2,426.2 2,451.0 2,461.4 2,464.2' 2,458.1 11 In M3 only8 680.3 765.5 845.9 820.7 806.5' 795.3' 793.3' 792.5 Money market deposit accounts 1? Commercial banks 377.7 356.4 350.2 351.5 335566..00 335599..11 336622..33 336655..44 13 Thrift institutions 193.3 167.4 150.1 132.2 133.4 135.8 136.6 134.7 Savings deposits 14 155.8 178.3 192.0 188.5 119911..88 119933..44 119933..88 119933..55 15 Thrift institutions 214.3 236.6 235.9 220.5 221.8 221.2 222.0 221.6 Small-denomination time deposits9 16 366.3 388.1 447.5 528.6 553344..77 553377..22 554411..44 555511..11 17 Thrift institutions 489.9 529.7 583.5 613.7 606.5 606.6 602.7' 594.4 Money market mutual funds 18 General purpose and broker-dealer 208.7 222.0 240.9 312.4 332244..55 332255..00 332244..88 331199..44 19 Institution-only 83.8 89.0 87.1 102.3 103.7 105.4 106.8 107.3 Large-denomination time deposits10 70 Commercial Banks11 289.8 326.9 368.2 401.5 399.4' 339966..33 339944..66'' 339966..44 21 Thrift institutions 150.0 161.9 172.9 156.8 150.1 147.2 143.0 138.2 Debt components ?? Federal debt 1,805.8 1,957.4 2,113.5 2,265.7' 22,,229977..33'' 22,,332255..99'' 22,,334422..33 n.a. 23 Nonfederal debt 5,782.5 6,350.1 6,948.5 7,511.9' 7,595.5' 7,628.3' 7,662.0 n.a. Not seasonally adjusted 24 Ml 740.5 766.4 804.5 812.1 788.0 795.7 817.3 796.5 2 2 2 2 7 8 5 6 M L D M e 3 2 b t 2 4 7 3 , , , , 5 8 1 5 7 2 5 0 2 6 1 8 . . . . 0 5 5 8 8 2 3 4 , . , . 2 6 3 9 8 9 5 2 9 2 5 5 . . . . 7 0 2 6 4 9 3 3 . , , . 0 6 9 0 4 9 3 8 7 2 2 5 . . . . 3 5 7 2 4 4 9 3 , , , , 0 8 7 2 5 3 8 6 5 3 5 2 . . . . 8 9 3 2 ' ' 4 4 9 3 , , , , 8 0 8 2 7 4 6 4 4 7 2 0 . . . . 6 4 5 6 ' ' 4 4 9 3 , , , , 8 9 0 2 9 1 6 6 5 5 0 1 . . . .0 6 6 2 ' ' ' 4 4 9 3 , , , , 9 9 0 2 6 0 7 8 2 0 1 2 . . . . 5 7 8 6 ' ' 4 3 , , n n 0 2 4 . . 4 a a 0 8 . . . . 5 6 Ml components 2 3 9 0 T C r u a r v r e e l n e c r y s 3 checks 18 6 3 . . 0 0 19 6 9 . . 5 3 21 6 4 . . 9 8 22 6 5 . . 9 3 22 7 4 . . 2 2 22 7 7 . . 3 0 22 7 9. . 5 3 23 7 1. . 7 5 31 Demand deposits 314.0 298.6 298.9 291.6 271.4 271.6 279.8 268.6 32 Other checkable deposits6 237.5 262.0 283.8 288.4 285.2 289.7 300.8' 288.8 Nontransactions components 33 M27.... 2,086.0 2,159.2 2,280.8 2,421.8 2,452.4 2,465.4' 2,465.4' 2,452.1 34 M3 only8 682.3 767.0 847.3 821.9 807.1' 799.2' 788.8' 791.8 Money market deposit accounts 35 Commercial Banks 379.8 359.0 353.2 355.0 357.7 360.8 362.5 361.1 36 Thrift institutions 192.9 167.5 150.6 132.8 133.3 136.1 135.9 133.8 Savings deposits 37 Commercial Banks 154.4 176.9 190.6 187.2 190.5 193.2 194.3 194.1 38 Thrift institutions 212.7 234.9 234.2 219.0 219.5 220.9 222.4 221.9 Small-denomination time deposits9 39 Commercial Banks 366.1 387.3 446.0 526.4 535.2 538.3 541.7 550.0 40 Thrift institutions 489.8 529.1 582.4 612.3 608.7 605.9 602.4' 592.7 Money market mutual funds 41 General purpose and broker-dealer. 208.0 221.5 240.5 312.2 326.1 329.5 328.4 318.7 42 Institution-only 84.4 89.6 87.6 102.9 107.0 106.8 105.8 106.7 Large-denomination time deposits10 43 Commercial Banks11 289.2 325.8 366.9 399.8 399.1 399.2' 394.6' 396.9 44 Thrift institutions 150.7 162.9 174.2 158.3 150.5 146.4' 141.6' 137.4 Debt components 45 Federal debt 1,803.9 1,955.6 2,111.8 2,264.1' 2,293.1' 2,317.3' 2,329.1 n.a. 46 Nonfederal debt 5,768.1 6,333.4 6,935.5 7,498.1' 7,569.5' 7,598.3' 7,633.4 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • August 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. Data are derived from the Federal Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults Reserve Board's flow of funds accounts. Debt data are based on monthly of depository institutions; (2) travelers checks of nonbank issuers; (3) demand 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, money market deposit Reserve float. accounts (MMDAs), savings and small-denomination time deposits (time depos- 6. Consists of NOW and ATS balances at all depository institutions, credit its—including retail RPs—in amounts of less than $100,000), and balances in both union share draft balances, and demand deposits at thrift institutions. taxable and tax-exempt general purpose and broker-dealer money market mutual 7. Sum of overnight RPs and overnight Eurodollars, money market fund funds. Excludes individual retirement accounts (IRA) and Keogh balances at balances (general purpose and broker-dealer), MMDAs, and savings and small depository institutions and money market funds. Also excludes all balances held time deposits. by U.S. commercial banks, money market funds (general purpose and broker- 8. Sum of large time deposits, term RPs, and term Eurodollars of U.S. dealer), foreign governments and commercial banks, and the U.S. government. residents, money market fund balances (institution-only), less a consolidated M3: M2 plus large-denomination time deposits and term RP liabilities (in adjustment that represents the estimated amount of overnight RPs and Eurodolamounts of $100,000 or more) issued by all depository institutions, term Eurodol- lars held by institution-only money market funds. lars held by U.S. residents at foreign branches of U.S. banks worldwide and at all 9. Small-denomination time deposits—including retail RPs—are those issued banking offices in the United Kingdom and Canada, and balances in both taxable in amounts of less than $100,000. All individual retirement accounts (IRA) and and tax-exempt, institution-only money market mutual funds. Excludes amounts Keogh accounts at commercial banks and thrifts are subtracted from small time held by depository institutions, the U.S. government, money market funds, and deposits. foreign banks and official institutions. Also subtracted is the estimated amount of 10. Large-denomination time deposits are those issued in amounts of $100,000 overnight RPs and Eurodollars held by institution-only money market mutual or more, excluding those booked at international banking facilities. 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 Oct. Nov. Dec. Jan. Feb. Mar. DEBITS TO Seasonally adjusted Demand deposits 1 All insured banks 217,116.2 226,888.4 272,793.1 293,424.9 296,768.7 280,074.4 286,425.2 299,450.2 285,111.5 2 Major New York City banks 104,496.3 107,547.3 121,727.5 136,039.0 130,440.2 131,681.3 123,744.6 132,031.4 132,470.3 3 Other banks 112,619.8 119,341.2 150,898.9 155,385.9 166,328.5 148,393.1 162,680.5 167,418.8 152,641.2 4 ATS-NOW accounts4 2,402.7 2,757.7 3,501.8 3,911.9 3,855.2 3,727.5 3,910.4 4,115.7 4,075.7 5 Savings deposits 526.5 583.0 636.6 665.4 610.3 615.8 609.2 587.3 617.6 DEPOSIT TURNOVER Demand deposits' 6 All insured banks 612.1 641.2 781.0 826.4 855.7 797.7 820.0 851.4 813.3 7 Major New York City banks 2,670.6 2,903.5 3,401.6 3,486.5 3,499.8 3,578.1 3,422.4 3,677.3 3,760.2 8 Other banks 357.0 376.8 481.5 492.5 537.3 472.1 519.5 530.1 484.0 9 ATS-NOW accounts4 13.8 14.7 18.3 20.1 19.7 18.9 19.8 20.6 20.2 10 Savings deposits 3.1 3.1 3.5 3.6 3.3 3.3 3.3 3.1 3.2 Not seasonally adjusted Demand deposits 11 All insured banks 217,125.1 227,010.7 271,957.3 292,750.0 285,372.8 283,603.3 303,668.0 270,852.7 291,868.6 12 Major New York City banks 104,518.8 107,565.0 122,241.8 138,964.6 129,905.5 129,690.0 131,796.0 119,305.2 137,029.5 13 Other banks 112,606.2 119,445.7 149,715.5 153,785.5 155,467.3 153,913.3 171,872.0 151,547.5 154,839.2 14 ATS-NOW accounts4 2,404.8 2,754.7 3,4%. 5 3,891.4 3,611.5 3,904.0 4,263.7 3,721.3 4,030.4 15 MMDA 1,954.2 2,430.1 2,790.8 2,651.5 2,569.1 2,880.5 3,075.9 2,551.2 2,714.9 16 Savings deposits 526.8 578.0 635.8 690.4 555.9 630.1 629.3 518.7 594.2 DEPOSIT TURNOVER Demand deposits3 17 All insured banks 612.3 641.7 779.0 829.6 815.6 769.3 847.9 791.8 850.4 18 Major New York City banks 2,674.9 2,901.4 3,415.4 3,594.8 3,548.5 3,250.4 3,433.3 3,314.9 3,836.2 19 Other banks 356.9 377.1 477.8 489.4 496.3 468.1 537.5 495.2 503.6 20 ATS-NOW accounts4 13.8 14.7 18.3 20.3 18.5 19.5 21.1 18.7 20.0 21 MMDA6 5.3 6.9 8.3 7.8 7.4 8.2 8.7 7.2 7.6 22 Savings deposits 3.1 3.1 3.5 3.8 3.0 3.4 3.4 2.8 3.1 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 Nonfinancial Statistics • August 1990 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1989 1990 CCaatteeggoorryy June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.' May Seasonally adjusted 1 Total loans and securities2 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 2,635.0 2,644.7 2 U.S. government securities 373.7 374.0 375.5 378.1 389.9 394.8 394.4 402.4 412.2 418.9 422.7 428.3 3 Other securities 187.3 186.3 183.8 183.1 180.9 179.3 180.3 180.2 180.1 180.2 180.8 179.2 4 Total loans and leases2 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 2,031.6 2,037.2 5 Commercial and industrial ..... 627.1 631.8 636.1 637.7 641.9 645.9 642.9 639.0 637.9 642.8 648.2 647.8 6 Bankers acceptances held ... 8.2 7.9 8.1 8.4 8.8 8.1 7.6 7.4 8.0 8.3 8.4 8.4 7 Other commercial and industrial 618.9 623.9 628.0 629.3 633.2 637.8 635.3 631.6 629.8 634.5' 639.8 639.4 8 U.S. addressees 613.2 619.8 624.3 625.4 628.9 632.7 629.8 623.9 623.9' 628.2' 633.7 634.7 9 Non-U.S. addressees 5.8 4.0 3.7 3.9 4.2 5.1 5.5 7.7 5.9' 6.3' 6.1 4.7 10 Real estate 713.0 720.1 727.7 735.8 742.6 749.2 756.4 759.6 768.1 774.4 779.4 787.5 11 Individual 363.8 365.8 367.5 370.3 372.6 374.6 375.9 377.9 378.9 379.2 377.8 379.2 12 Security 40.6 40.1 39.0 39.7 41.2 41.5 39.6 39.2 39.7 37.2' 36.6 35.4 13 Nonbank financial institutions 30.5 31.3 31.5 31.8 32.8' 33.3 32.7 32.3 33.0 34.1 34.2 33.9 14 Agricultural 30.0 30.0 29.9 29.6 29.6 29.9 30.3 30.9 31.0 31.3' 31.3 30.9 15 State and political subdivisions 42.8 42.5 42.2 41.7 41.3 40.8 40.1 38.6 38.9 38.4 38.2 37.9 16 Foreign banks 7.9 7.9 8.1 7.5 8.5 8.0 8.6 7.9 7.8 8.4 9.0 8.8 17 Foreign official institutions 4.4 4.3r 4.1 4.2 3.9 3.6 3.6' 3.2' 3.1 3.0 3.2 3.2 18 Lease financing receivables .... 30.2 30.7 31.0 31.3 31.7 31.6 31.4 31.6 31.6 31.8 31.6 31.8 19 All other loans 44.8 47.7' 51.0 48.0 46.3r 46.4 46.5 42.9 41.5 44.1' 42.2 40.8 Not seasonally adjusted 20 Total loans and securities2 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 2,635.3 2,644.3 21 U.S. government securities 371.3 372.1 376.1 377.2 387.3 394.9 395.6 404.1 416.7 420.4 422.5 427.3 22 Other securities 186.5 184.7 183.8 183.3 181.8 180.5 181.2 180.7 179.9 179.8 180.2 178.6 23 Total loans and leases2 1,938.5 1,950.2 1,961.2 1,977.0 1,994.5 2,005.6 2,013.8 2,006.7 2,009.5 2,017.9 2,032.6 2,038.4 24 Commercial and industrial 629.6 631.9 633.4 633.7 639.3 643.1 642.8 637.5 638.5 644.5' 652.5 651.9 25 Bankers acceptances held3... 8.0 7.6 8.1 8.4 8.9 8.2 7.7 7.5 8.1 8.2 8.2 8.3 26 Other commercial and industrial 621.6 624.3 625.3 625.3 630.4 634.9 635.1 630.0 630.4 636.3' 644.3 643.7 27 U.S. addressees 616.0 618.6 619.8 619.8 624.7 629.4 629.8 625.0 625.6' 631.5' 639.5 638.9 28 Non-U.S. addressees 5.6 5.7 5.5 5.5 5.6 5.5 5.3 5.0 4.9' 4.8' 4.8 4.8 29 Real estate 712.9 720.7 729.2 737.8 743.9 750.9 757.1 759.7 765.5 771.7 777.5 786.4 30 Individual 362.1 364.3 367.7 372.1 373.7 376.0 380.3 381.5 378.1 376.0 375.0 376.7 31 Security 42.9 40.2 38.4 38.8 40.1 40.3 38.6 37.5 39.2 38.1' 39.0 35.9 32 Nonbank financial institutions 30.8 31.4 31.3 31.4 32.5' 33.6 33.8 33.0 32.6 33.3 34.0 33.8 33 Agricultural 30.3 30.7 30.7 30.5 30.4 30.2 30.2 30.3 30.1 30.1 30.4 30.6 34 State and political subdivisions 42.6 42.1 41.9 41.6 41.2 40.6 39.7 39.5 39.3 38.6 38.2 37.8 35 Foreign banks 8.1 8.0 8.1 7.8 8.8 8.1 8.4 8.0 7.7 7.9 8.5 8.8 36 Foreign official institutions 4.4 4.3r 4.1 4.2 3.9 3.6 3.6' 3.2' 3.1 3.0 3.2 3.2 37 Lease financing receivables .... 30.2 30.4 30.9 31.2 31.6 31.6 31.5 32.0 31.8 31.7 31.7 31.8 38 All other loans 44.7 46.2'' 45.6 47.8 49. r 47.5 47.8' 44.5r 43.6 43.1' 42.6 41.4 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 All 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS1 Monthly averages, billions of dollars 1989 1990 SSoouurrccee June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr.' May Seasonally adjusted 1 Total nondeposit funds 235.8 238.8 238.6 246.2 253.5 255.1" 255.5r 225566..22rr 226655..44'' 226688..88'' 226666..11 226666..22 7 Net balances due to related foreign offices 8.2 11.4 9.7 11.1 10.2 8.6 7.4 10.9 14.6 17.2 16.5 24.3 3 Borrowings from other than commercial banks in United States4 227.5 227.4 228.9 235.0 243.3 246.4 248.1' 245.3' 250.8' 251.6' 224499..55 224411..99 4 Domestically chartered banks 185.4 182.8 183.9 189.1 195.3 196.9' 198.6' 194.7' 198.9' 195.7' 190.9 185.0 5 Foreign-related banks 42.2 44.6 44.9 46.0 48.0 49.6 49.5 50.7 51.9 56.0 58.7 56.9 Not seasonally adjusted 6 Total nondeposit funds . 239.8 234.4 238.1 242.8 248.8 254.0r 249.0' 252.8' 268.6' 274.6' 268.8 274.6 7 Net balances due to related foreign offices3 8.9 9.2 10.1 11.7 9.6 9.7 9.7 10.5 14.2 16.0 14.3 26.2 8 Domestically chartered banks -18.3 -16.4 -15.5 -14.3 -15.0 -15.5 -19.2 -14.5 -11.1 -11.5 -10.7 -1.5 9 Foreign-related banks 27.2 25.6 25.6 26.0 24.6 25.2 28.9 25.0 25.3 27.6' 24.9 27.6 1100 Borrowings from other than commercial banks 230.9 225.2 228.0 231.1 239.1 244.3' 239.3' 224422..33'' 225544..33'' 225588..66'' 225544..66 224488..55 11 Domestically chartered banks 187.0 180.2 183.5 186.1 192.3 197.1' 192.2 190.7' 200.8' 201.4' 194.9 190.7 1? Federal funds and security RP 183.2 177.2 180.5 183.1 189.3 194.6 189.7' 118888..11'' 119977..11'' 119977..00'' 119911..22 118877..33 13 Other 3.8 3.1 3.0 3.0 3.0 2.4 2.5 2.7 3.7 4.5 3.7 3.4 14 Foreign-related banks6 44.0 45.0 44.5 45.0 46.8 47.2 47.1 51.5 53.5 57.2 59.7 57.8 MEMO Gross large time deposits' 15 460.0 463.4 462.0 460.0 461.4 464.0 464.3 446622..77 446600..66 445577..33 445555..11 445544..66 16 Not seasonally adjusted 459.4 461.1 462.6 461.5 462.6 464.4 462.7 460.4 460.3 460.1 455.1 455.1 U.S. Treasury demand balances at commercial banks8 17 Seasonally adjusted 25.7 22.4 22.3 22.8 21.5 20.4 21.1 20.2 17.8 19.2 2211..22 1188..66 18 Not seasonally adjusted 26.2 23.0 15.8 24.9 20.6 14.7 19.6 23.2 22.0 16.7 20.0 25.2 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 Domestic Nonfinancial Statistics • August 1990 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series1 Billions of dollars 1989 1990 AAccccoouunntt July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr/ May ALL COMMERCIAL BANKING INSTITUTIONS2 1 Loans and securities 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 2,823.6 2,831.1 2 Investment securities 538.2 542.8 541.4 544.7 548.3 549.0 561.2 568.0 573.5 578.6 586.9 3 U.S. government securities 359.6 364.7 365.1 370.0 374.4 374.1 387.5 395.3 401.8 408.2 416.6 4 Other 178.6 178.1 176.3 174.7 173.9 174.9 173.8 172.7 171.7 170.5 170.2 5 Trading account assets 19.8 18.7 18.3 26.6 27.6 23.4 31.9 30.4 26.0 23.9 21.3 6 Total loans 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 2,221.1 2,222.9 7 Interbank loans 168.6 170.4 165.4 171.8 187.6 190.5 189.0 187.3 189.7 187.7 186.0 8 Loans excluding interbank 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 2,033.4 2,036.9 9 Commercial and industrial 636.6 632.4 632.1 638.9 643.0 644.3 636.4 640.6 643.8 652.2 650.2 10 Real estate 722.4 732.6 739.6 745.0 753.6 758.3 761.3 767.2 774.3 779.5 789.7 11 Individual 364.9 369.6 373.8 374.3 376.8 382.4 381.4 378.0 374.7 376.4 377.0 12 All other 228.4 227.8 229.9 233.6 234.2 231.1 227.6 226.2 224.9 225.3 220.1 13 Total cash assets 210.5 210.6 218.5 212.0 234.2 258.0 222.0 228.5 217.0 216.6 244.7 14 Reserves with Federal Reserve Banks. 30.6 28.8 31.8 28.5 38.7 42.8 24.5 29.3 31.8 31.3 27.5 15 Cash in vault 27.4 28.4 27.9 27.8 30.7 31.5 28.0 27.9 27.8 28.6 29.9 16 Cash items in process of collection ... 75.4 77.5 82.6 77.5 84.2 98.9 89.8 91.5 80.0 80.1 100.7 17 Demand balances at U.S. depository institutions 28.1 29.1 28.5 28.3 28.5 32.1 29.6 31.0 27.5 26.5 32.2 18 Other cash assets 49.1 46.9 47.6 49.9 52.2 52.7 50.1 48.9 49.8 50.1 54.4 19 Other assets 213.4 209.8 214.1 210.3 207.1 212.7 219.3 214.0 209.9 206.9 202.7 20 Total assets/total liabilities and capital.... 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 3,247.0 3,278.5 21 Deposits 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 2,252.3 2,288.1 22 Transaction deposits 577.4 581.4 586.5 585.8 600.4 641.5 611.3 615.9 593.9 600.5 617.7 23 Savings deposits 512.0 516.9 518.6 525.6 535.6 538.2 540.5 545.8 551.1 548.1 553.7 24 Time deposits 1,064.9 1,070.7 1,072.0 1,084.6 1,087.2 1,087.8 1,091.5 1,0%. 1 1,101.6 1,103.8 1,116.6 25 Borrowings 513.8 507.6 519.8 529.7 546.0 534.3 556.1 546.0 548.3 562.8 543.1 26 Other liabilities 226.3 227.4 226.0 225.2 236.0 239.8 223.8 227.4 228.1 220.0 235.3 27 Residual (assets less liabilities) 208.7 210.6 210.3 206.3 207.4 208.0 207.1 208.9 210.7 211.9 212.0 MEMO 28 U.S. government securities (including trading account) 372.8 376.9 377.2 389.6 394.8 390.7 412.6 418.6 419.5 423.4 429.7 29 Other securities (including trading account) 185.2 184.6 182.5 181.7 181.1 181.8 180.6 179.7 180.0 179.1 178.4 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 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 2,573.1 2,576.6 31 Investment securities 514.7 519.9 519.1 521.3 522.6 523.3 534.2 540.6 544.6 548.2 554.2 32 U.S. government securities 348.6 354.4 355.4 359.4 362.6 363.3 374.7 382.1 387.4 393.7 399.7 33 Other 166.1 165.5 163.7 161.9 160.0 160.1 159.5 158.5 157.2 154.5 154.6 34 Trading account assets 19.8 18.7 18.3 26.6 27.6 23.4 31.9 30.4 26.0 23.9 21.3 35 Total loans 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 2,001.0 2,001.0 36 Interbank loans 130.5 132.3 130.7 140.7 148.4 152.8 151.4 149.8 148.6 149.4 145.2 37 Loans excluding interbank 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 1,851.6 1,855.9 38 Commercial and industrial 516.0 512.4 511.3 515.7 516.9 516.9 513.4 517.7 518.9 523.3 519.6 39 Real estate 696.8 706.2 713.0 718.0 725.0 729.7 731.6 736.5 743.1 746.7 756.7 40 Individual 364.9 369.6 373.8 374.3 376.8 382.4 381.4 378.0 374.7 376.4 377.0 41 All other 209.9 208.3 211.4 214.4 213.9 211.9 208.7 206.8 206.4 205.2 202.6 42 Total cash assets 187.3 188.9 194.9 188.7 206.7 231.7 198.2 203.1 191.1 191.5 214.7 43 Reserves with Federal Reserve Banks. 29.6 27.0 29.5 26.7 37.9 41.7 22.7 27.5 29.8 29.8 26.6 44 Cash in vault 27.3 28.4 27.9 27.8 30.6 31.5 28.0 27.8 27.8 28.5 29.9 45 Cash items in process of collection ... 74.5 76.6 81.3 76.3 82.3 97.5 88.3 90.2 78.5 78.7 99.2 46 Demand balances at U.S. depository institutions 26.4 27.4 26.8 26.4 26.6 30.2 27.7 28.9 25.9 24.8 30.3 47 Other cash assets 29.5 29.5 29.3 31.6 29.3 30.8 31.4 28.6 29.1 29.6 28.7 48 Other assets 136.5 136.2 140.1 131.0 137.1 140.9 143.2 139.6 136.4 135.0 137.5 49 Total assets/liabilities and capital 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 2,899.5 2,928.8 50 Deposits 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 2,205.9 51 Transaction deposits 568.0 572.6 576.6 576.1 590.5 631.3 600.8 605.7 584.2 590.8 607.8 52 Savings deposits 509.3 514.3 515.8 523.0 532.8 535.4 537.7 542.9 548.2 545.1 550.8 53 Time deposits 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 1,047.3 54 Borrowings 381.8 376.7 392.4 395.1 406.8 400.6 407.3 397.3 395.9 402.8 389.1 55 Other liabilities 116.2 120.0 117.5 119.2 123.6 123.7 122.5 124.2 122.0 118.4 125.4 56 Residual (assets less liabilities) 205.1 207.0 206.7 202.7 203.7 204.4 203.4 205.3 207.1 208.3 208.4 MEMO 57 Real estate loans, revolving 45.5 46.8 47.6 48.0 48.6 49.3 50.4 50.8 51.2 52.4 53.3 58 Real estate loans, other 651.2 659.4 665.4 670.1 676.4 680.4 681.1 685.7 691.9 694.3 703.4 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 Apr. 4' Apr. IT Apr. 18' Apr. 25' May 2 May 9 May 16 May 23 May 30 1 Cash and balances due from depository institutions 116,221 110,377 120,274 106,676 116,610 103,214 114,424 104,169 123,104 2 Total loans, leases, and securities, net 1,289,056 1,282,007 1,303,301 1,287,810 1,300,829 1,284,252 1,287,516 1,284,059 1,287,529 3 U.S. Treasury and government agency 171,642 171,798 172,457 171,139 172,040 170,266 171,909 173,915 172,737 4 Trading account 19,080 18,419 18,704 15,196 15,035 13,301 15,399 14,548 13,120 5 Investment account 152,563 153,378 153,753 155,942 157,004 156,966 156,510 159,367 159,617 6 Mortgage-backed securities 78,937 79,074 78,214 78,412 79,217 79,298 78,846 82,168 82,442 All other maturing in 7 One year or less 22,742 22,910 23,162 24,603 24,357 24,241 23,848 23,267 22,966 8 Over one through five years 32,763 33,039 34,074 34,600 34,411 34,401 34,638 34,763 34,817 9 Over five years 18,120 18,355 18,302 18,327 19,020 19,026 19,176 19,169 19,392 10 Other securities 64,397 64,236 63,925 63,736 63,497 63,439 63,652 63,435 63,387 11 Trading account 701 714 833 762 785 800 746 744 727 12 Investment account 63,6% 63,521 63,092 62,974 62,712 62,638 62,905 62,691 62,660 13 States and political subdivisions, by maturity 35,088 35,025 34,782 34,625 34,362 34,364 34,359 34,241 34,077 14 One year or less 4,216 4,159 4,010 4,010 3,922 3,873 3,914 3,939 3,945 15 Over one year 30,872 30,866 30,772 30,615 30,439 30,492 30,446 30,302 30,132 16 Other bonds, corporate stocks, and securities 28,608 28,496 28,310 28,349 28,350 28,274 28,546 28,450 28,583 17 Other trading account assets 8,357 8,458 8,720 7,903 8,115 8,353 7,545 7,014 7,468 18 Federal funds sold3 77,410 71,211 83,437 74,790 80,955 68,869 70,063 67,680 70,306 19 To commercial banks 58,185 51,666 62,284 53,777 57,231 49,367 48,974 48,555 51,496 20 To nonbank brokers and dealers in securities 14,378 15,319 15,274 15,361 16,738 13,604 14,834 13,905 13,390 21 Toothers 4,847 4,226 5,880 5,652 6,986 5,898 6,256 5,220 5,419 22 Other loans and leases, gross 1,008,562 1,007,839 1,016,212 1,011,671 1,017,738 1,014,973 1,016,078 1,013,754 1,015,111 23 Other loans, gross 981,912 981,176 989,502 984,989 990,864 988,143 989,231 986,750 988,142 24 Commercial and industrial 324,483 324,344 327,115 325,340 327,040 326,368 325,343 323,504 322,750 25 Bankers acceptances and commercial paper 1,625 1,529 1,649 1,560 1,558 1,584 1,555 1,582 1,604 26 All other 322,858 322,816 325,466 323,780 325,481 324,783 323,788 321,922 321,147 27 U.S. addressees 321,294 321,304 324,022 322,325 323,975 323,406 322,268 320,528 319,774 28 Non-U.S. addressees 1,564 1,512 1,444 1,455 1,506 1,378 1,519 1,393 1,372 29 Real estate loans 364,444 365,708 365,331 366,487 367,333 368,368 369,139 371,036 371,681 30 Revolving, home equity 28,315 28,584 28,772 29,036 29,030 29,100 29,283 29,413 29,594 31 All other 336,129 337,124 336,559 337,451 338,303 339,269 339,856 341,623 342,086 32 To individuals for personal expenditures 173,137 173,488 174,185 174,187 174,375 174,156 174,612 174,889 174,689 33 To depository and financial institutions 50,662 50,650 52,632 51,300 53,466 51,818 52,460 51,503 52,405 34 Commercial banks in the United States 23,707 24,173 24,808 25,210 25,874 24,863 25,572 24,900 24,552 35 Banks in foreign countries 4,271 3,580 4,873 3,933 4,675 3,948 3,972 4,278 5,220 36 Nonbank depository and other financial institutions . 22,683 22,897 22,952 22,157 22,917 23,007 22,916 22,326 22,633 37 For purchasing and carrying securities 15,696 14,549 16,495 14,934 14,358 14,389 14,044 13,382 13,526 38 To finance agricultural production 5,511 5,542 5,618 5,671 5,763 5,750 5,812 5,863 5,875 39 To states and political subdivisions 24,071 24,047 24,136 23,991 23,911 23,886 23,812 23,748 23,716 40 To foreign governments and official institutions 1,599 1,505 1,426 1,583 1,412 1,538 1,614 1,472 1,495 41 All other 22,308 21,342 22,562 21,496 23,205 21,869 22,396 21,353 22,005 42 Lease financing receivables 26,650 26,664 26,710 26,681 26,874 26,830 26,847 27,004 26,969 43 LESS: Unearned income 4,605 4,626 4,628 4,564 4,529 4,535 4,544 4,571 4,552 44 Loan and lease reserve 36,707 36,909 36,822 36,865 36,986 37,114 37,186 37,168 36,927 45 Other loans and leases, net 967,250 966,305 974,762 970,242 976,223 973,324 974,348 972,015 973,632 46 All other assets 137,969 135,596 134,237 129,471 132,958 132,646 130,829 129,743 130,928 47 Total assets 1,543,246 1,527,980 1,557,812 1,523,958 1,550,397 1,520,111 1,532,769 1,517,972 1,541,562 48 Demand deposits 234,581 227,756 235,360 218,245 233,251 213,629 228,601 213,174 234,528 49 Individuals, partnerships, and corporations 185,123 182,437 184,786 173,269 183,472 172,465 181,560 169,632 183,220 50 States and political subdivisions 5,842 6,153 6,375 6,477 7,218 5,511 6,079 5,688 6,086 51 U.S. government 6,301 3,799 7,137 4,007 2,766 1,638 3,689 3,157 1,472 52 Depository institutions in the United States 21,148 20,126 20,080 19,247 21,956 18,462 21,836 18,736 23,897 53 Banks in foreign countries 6,631 5,661 6,413 5,601 6,446 5,924 6,146 6,089 7,385 54 Foreign governments and official institutions 728 595 784 606 960 1,210 892 720 818 55 Certified and officers' checks 8,809 8,985 9,785 9,039 10,433 8,420 8,399 9,153 11,652 56 Transaction balances other than demand deposits 86,100 86,074 89,232 83,580 82,643 81,068 80,655 79,545 80,102 57 Nontransaction balances 734,729 734,595 729,732 730,357 732,057 734,480 736,049 740,458 741,181 58 Individuals, partnerships, and corporations . 695,540 695,241 690,771 691,280 693,089 695,248 697,202 701,305 702,186 59 States and political subdivisions 30,335 30,479 29,963 30,091 30,030 30,280 30,265 30,392 30,275 60 U.S. government 868 856 849 849 856 814 825 818 809 61 Depository institutions in the United States 7,432 7,473 7,615 7,591 7,539 7,606 7,217 7,411 7,381 62 Foreign governments, official institutions, and banks . 555 546 534 545 542 531 540 531 529 63 Liabilities for borrowed money 294,553 289,776 314,383 300,183 308,672 295,353 292,650 288,407 288,196 64 Borrowings from Federal Reserve Banks 1,607 1,592 1,056 176 215 360 565 720 797 65 Treasury tax-and-loan notes 583 397 26,316 27,184 26,816 22,164 10,838 9,374 7,672 66 All other liabilities for borrowed money 292,363 287,787 287,011 272,823 281,641 272,829 281,247 278,313 279,727 67 Other liabilities and subordinated notes and debentures . 90,398 86,612 86,666 88,932 91,267 92,631 92,057 93,433 94,903 68 Total liabilities . 1,440,362 1,424,813 1,455,374 1,421,298 1,447,890 1,417,162 1,430,012 1,415,017 1,438,910 69 Residual (total assets minus total liabilities)6 102,884 103,167 102,438 102,660 102,507 102,949 102,757 102,954 102,652 70 T M o E t M al O l oans and leases (gross) and investments adjusted 7 . 1,248,476 1,247,703 1,257,659 1,250,252 1,259,239 1,251,670 1,254,702 1,252,343 1,252,960 71 Total loans and leases (gross) adjusted 1,004,080 1,003,212 1,012,558 1,007,474 1,015,588 1,009,612 1,011,596 1,007,979 1,009,368 72 Time deposits in amounts of $100,000 or more 216,997 216,049 213,937 214,186 214,144 215,362 215,084 215,613 215,305 73 U.S. Treasury securities maturing in one year or less ... 23,280 22,723 22,751 20,308 19,826 19,593 19,879 19,467 18,950 74 Loans sold outright to affiliates—total8 279 278 270 275 281 278 281 275 284 75 Commercial and industrial 144 142 134 133 138 135 138 156 145 76 Other 134 136 136 142 142 143 142 119 140 77 Nontransaction savings deposits (including MMDAs) 283,343 283,179 279,390 277,934 278,475 279,016 280,516 280,714 280,979 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 • August 1990 1.28 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY1 Millions of dollars, Wednesday figures 1990 Account Apr. 4 Apr. 11 Apr. 18 Apr. 25 May 2 May 9 May 16 May 23 May 30 1 Cash balances due from depository institutions 21,790' 21,737' 23,768 19,682 22,051 21,671 22,491 22,815 28,161 2 Total loans, leases, and securities, net2 216,377' 211,702' 218,353 216,381 221,559 217,093 218,306 216,033 218,334 Securities 3 U.S. Treasury and government agency 0 0 0 0 0 0 0 0 0 4 Trading account 0 0 0 0 0 0 0 0 0 5 Investment account 20,099 20,153 20,076 22,216 22,358 22,406 22,213 22,306 22,311 6 Mortgage-backed securities4 12,195 12,193 12,177 12,463 12,502 12,501 12,561 12,537 12,528 All other maturing in 7 One year or less 1,849 1,861 1,806 3,813 3,734 3,779 3,723 3,734 3,718 8 Over one through five years 3,413 3,458 3,501 3,348 3,396 3,401 3,204 3,348 3,325 9 Over five years 2,642 2,642 2,592 2,593 2,725 2,725 2,725 2,687 2,740 10 Other securities3 0 0 0 0 0 0 0 0 0 11 Trading account 0 0 0 0 0 0 0 0 0 12 Investment account 14,188 14,088 14,052 14,028 13,957 13,953 13,972 13,821 13,744 13 States and political subdivisions, by maturity 6,968 6,892 6,893 6,880 6,760 6,770 6,755 6,619 6,536 14 One year or less 728 655 662 649 535 544 549 556 557 15 Over one year 6,240 6,237 6,231 6,231 6,225 6,226 6,206 6,062 5,980 16 Other bonds, corporate stocks, and securities 7,220 7,197 7,159 7,148 7,197 7,183 7,217 7,202 7,207 17 Other trading account assets3 0 0 0 0 0 0 0 0 0 Loans and leases 18 Federal funds sold 18,057 16,158 18,834 17,311 21,389 17,412 17,400 16,805 18,194 19 To commercial banks 10,113 8,326 11,176 9,498 11,322 9,300 8,318 8,924 10,594 70 To nonbank brokers and dealers in securities 5,612' 5,608' 4,535 4,510 5,761 4,881 5,420 4,897 4,770 7.1 To others 2,332' 2,224' 3,123 3,303 4,306 3,231 3,662 2,984 2,829 7? Other loans and leases, gross 182,361' 179,810' 183,759 181,190 182,012 181,489 182,921 181,313 182,236 7.3 Other loans, gross 176,823' 174,293' 178,254 175,672 176,507 175,993 177,443 175,674 176,608 7.4 Commercial and industrial 58,732' 58.29C 59,149 58,472 59,221 58,962 59,854 58,605 58,487 25 Bankers acceptances and commercial paper 108 98 142 104 109 149 105 125 112 76 All other 58,623' 58,192' 59,007 58,367 59,112 58,814 59,749 58,480 58,376 7,7 U.S. addressees 57,885' 57,476' 58,332 57,714 58,448 58,236 59,104 57,878 57,819 78 Non-U.S. addressees 738 716 674 654 664 577 645 602 557 79 Real estate loans 62,156 62,746 62,441 62,537 62,571 62,754 62,740 62,931 62,798 30 Revolving, home equity 4,001 4,017 4,026 4,038 4,051 4,050 4,055 4,061 4,064 31 All other 58,155 58,729 58,415 58,499 58,520 58,704 58,685 58,870 58,733 32 To individuals for personal expenditures 19,859 19,876 20,009 20,013 19,966 19,878 19,976 20,090 19,986 33 To depository and financial institutions 19,918 18,576 20,103 19,129 19,738 19,446 19,461 19,512 20,419 34 Commercial banks in the United States 8,624 7,848 7,959 8,094 7,866 8,002 8,042 7,823 7,908 35 Banks in foreign countries 3,376 2,684 3,955 3,035 3,530 3,093 3,076 3,452 4,232 36 Nonbank depository and other financial institutions 7,918 8,043 8,189 7,999 8,342 8,350 8,343 8,238 8,278 37 For purchasing and carrying securities 5,592 4,762 6,166 5,394 4,720 5,063 4,792 4,132 4,222 38 To finance agricultural production 114 120 126 122 125 118 140 138 138 39 To states and political subdivisions 5,199 5,187 5,184 5,163 5,173 5,168 5,188 5,154 5,125 40 To foreign governments and official institutions 298 221 198 358 209 325 391 255 294 41 All other 4,954 4,514 4,878 4,484 4,783 4,280 4,900 4,857 5,140 42. Lease financing receivables 5,539' 5,517' 5,505 5,518 5,506 5,495 5,479 5,639 5,628 43 LESS: Unearned income 1,814 1,833 1,835 1,831 1,808 1,819 1,827 1,826 1,812 44 Loan and lease reserve 16,514' 16,675' 16,532 16,534 16,350 16,348 16,373 16,386 16,341 45 Other loans and leases, net" 164,033' 161,302' 165,392 162,825 163,855 163,322 164,721 163,101 164,084 46 All other assets 58,653' 57,249' 57,869 56,226 58,219 54,713 54,663 52,029 52,032 47 Total assets 296,820' 290,687' 299,990 292,289 301,830 293,477 295,460 290,878 298,526 Deposits 48 Demand deposits 50,381 46,556 49,706 44,977 49,661 45,136 48,617 46,740 52,878 49 Individuals, partnerships, and corporations 35,969' 33,184 34,577 31,875 34,156 31,489 33,551 31,800 35,220 50 States and political subdivisions 645 573 626 508 743 548 633 477 567 51 U.S. government 1,258 659 1,262 699 343 244 741 582 217 52 Depository institutions in the United States 4,092 3,988 4,127 3,992 4,317 3,670 5,103 4,642 4,793 S3 Banks in foreign countries 5,326 4,522 5,224 4,274 5,187 4,772 4,844 4,851 5,999 54 Foreign governments and official institutions 590 455 630 474 804 1,061 740 567 637 55 Certified and officers' checks 2,501 3,174 3,261 3,155 4,110 3,352 3,004 3,820 5,445 56 Transaction balances other than demand deposits (ATS, NOW, Super NOW, telephone transfers) 9,276 9,463 10,052 9,453 8,969 8,742 8,634 8,547 8,642 57 Nontransaction balances 116,346' 115,689' 114,708 116,312 117,048 116,745 117,135 116,797 116,943 58 Individuals, partnerships, and corporations 107,887' 107,264' 106,313 107,879 108,765 108,362 108,750 108,378 108,588 59 States and political subdivisions 6,240 6,210 6,195 6,255 6,201 6,280 6,270 6,2% 6,234 60 U.S. government 41 38 33 34 36 36 38 42 35 61 Depository institutions in the United States 1,937 1,933 1,932 1,903 1,803 1,823 1,832 1,842 1,844 62 Foreign governments, official institutions, and banks 242 243 235 241 244 245 244 239 242 63 Liabilities for borrowed money 67,730' 64,628' 70,408 64,778 68,223 62,772 62,012 58,746 60,522 64 Borrowings from Federal Reserve Banks 0 0 975 0 0 0 0 0 0 65 Treasury tax-and-loan notes 53 36 5,807 6,042 5,837 4,787 2,138 1,775 1,488 66 All other liabilities for borrowed money 67,677' 64,592' 63,626 58,736 62,386 57,984 59,874 56,972 59,034 67 Other liabilities and subordinated notes and debentures 28,088' 29,574' 30,516 32,037 33,292 35,375 34,495 35,567 35,378 68 Total liabilities 271,821' 265,910' 275,390 267,557 277,192 268,771 270,893 266,398 274,364 69 Residual (total assets minus total liabilities)9 24,999' 24,777' 24,600 24,732 24,637 24,707 24,567 24,480 24,162 MEMO 70 Total loans and leases (gross) and investments adjusted21" 215,968' 214,035' 217,586 217,153 220,529 217,958 220,146 217,498 217,984 71 Total loans and leases (gross) adjusted 181,681' 179,793' 183,459 180,909 184,214 181,598 183,961 181,371 181,928 72 Time deposits in amounts of $100,000 or more 40,184 39,588 39,436 39,430 39,841 39,507 39,708 39,622 39,663 73 U.S. Treasury securities maturing in one year or less 2,184 2,416 2,533 2,339 1,994 1,871 1,853 1,806 1,887 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 FRA5.S IEncRlu des securities purchased under agreements to resell. cial banks. http://fraser.stlou6i. sIfnecdlu.doersg a/l located transfer risk reserve. Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS1 Assets and Liabilities Millions of dollars, Wednesday figures 1990 AAccccoouunntt Apr. 4 Apr. 11 Apr. 18 Apr. 25 May 2 May 9 May 16 May 23 May 30 1 Cash and due from depository institutions ... 13,688 13,018 13,567 12,650 14,055 13,096 14,084 13,302 15,056 7 Total loans and securities 148,523'" 146,953' 148,983' 150,509' 152,114 151,163 152,408 151,526 154,351 3 U.S. Treasury and government agency 10,741 10,072 10,277 10,929 1111,,449933 1100,,114422 1100,,111122 1133,,334422 1133,,884499 4 7,466 7,463 7,309 7,233 7,269 7,356 7,127 6,953 6,933 5 Federal funds sold 5,593 4,468 4,789 6,383 7,475 7,479 8,578 5,658 7,917 6 To commercial banks in the United States . 4,080 3,032 3,417 5,034 5,972 6,276 7,307 4,352 6,688 7 1,513 1,436 1,372 1,349 1,503 1,203 1,271 1,306 1,229 8 124,723' 124,950' 126,608' 125,964' 125,877 126,186 126,591 125,573 125,652 9 Commercial and industrial 75,169 75,338 76,597 75,245 75,835 76,116 75,565 75,734 76,099 1100 Bankers acceptances and commercial 1,996 1,955 2,424 2,356 2,302 2,344 22,,228855 22,,332277 22,,332233 11 All other 73,173 73,383 74,173 72,889 73,533 73,772 73,280 73,407 73,776 1? U.S. addressees 71,726 71,952 72,673 71,483 72,088 72,339 71,834 71,947 72,306 13 Non-U.S. addressees 1,447 1,431 1,500 1,406 1,445 1,433 1,446 1,460 1,470 14 Loans secured by real estate 20,858 20.834 21,189 21,801 21,890 21,924 22,139 22,118 22,207 15 To financial institutions 25,546' 25,398' 25,197' 25,984' 25,241 25,536 25,715 24,898 24,580 16 Commercial banks in the United States.. 19,340 19,011 18,387 19,081 18,235 18,289 18,565 18,270 18,211 17 Banks in foreign countries 1,572 1.769 1,980 2,174 2,281 2,524 2,367 1,913 1,668 18 Nonbank financial institutions 4,634' 4,618' 4,830' 4,729' 4,725 4,723 4,783 4,715 4,701 19 To foreign governments and official 221 224 221 223 220 221100 221188 118888 118855 70 For purchasing and carrying securities .... 1,681 1,641 2,066 1,376 1,319 1,042 1,336 1,237 1,231 71 All other3 1,248 1,515 1,338 1,335 1,372 1,358 1,618 1,398 1,350 7? Other assets (claims on nonrelated parties) .. 33,563 33,782 33,154 33,697 33,922 33,984 32,702 33,341 33,166 ?3 Net due from related institutions 16,025' 14,97(r 16,491' 14,204' 15,690 13,269 10,206 11,270 10,396 74 Total assets 211,799 208,722 212,195 211,061 215,780 211,510 209,401 209,439 212,971 75 Deposits or credit balances due to other than directly related institutions ...... 49,173 49,653 49,984' 50,142 51,577 5500,,995555 5500,,224455 5500,,337733 5500,,222244 76 Transaction accounts and credit balances . 3,789 4,150 4,058' 3,923' 4,247 4,052 4,053 3,996 3,871 77 Individuals, partnerships, and 2,612 2,450 2,617' 2,758' 2,930 22,,770077 22,,665566 22,,771188 22,,668844 78 Other 1,177 1,700 1,441 1,165 1,317 1,345 1,397 1,278 1,187 79 Nontransaction accounts 45,384 45,503 45,926 46,219' 47,330 46,903 46,192 46,377 46,353 3300 Individuals, partnerships, and corporations 38,429 38,561 38,560 39,197' 39,616 39,429 39,165 3388,,889900 3388,,887700 31 Other 6,955 6,942 7,366 7,022 7,714 7,474 7,027 7,487 7,483 37 Borrowings from other than directly related institutions 104,705 100,691 103,069 102,252 101,464 110022,,228822 9977,,114411 9966,,880088 9977,,003322 33 Federal funds purchased6 49,750 45,137 49,622 43,352 43,714 43,043 39,019 38,843 39,523 3344 From commercial banks in the United States 23,261 19,152 23,081 20,390 19,920 19,116 16,915 1188,,007733 1188,,993344 35 26,489 25,985 26,541 22,962 23,794 23,927 22,104 20,770 20,589 36 Other liabilities for borrowed money 54,955 55,554 53,447 58,900 57,750 59,239 58,122 57,965 57,509 3377 To commercial banks in the 32,487 32,009 31,288 32,635 31,501 31,927 3322,,998844 3322,,000000 3322,,229977 38 22,468 23,545 22,159 26,265 26,249 27,312 25,138 25,965 25,212 39 Other liabilities to nonrelated parties 33,037 33,143 32,300 32,781 33,324 33,021 32,066 36,175 37,360 40 Net due to related institutions 24,882 25,234 26,843' 25,886 29,416 25,253 29,947 26,083 28,353 41 Total liabilities 211,799 208,722 212,195 211,061 215,780 211,510 209,401 209,439 212,971 MEMO 47 Total loans (gross) and securities adjusted .. 125,103' 124,910' 127,179' 126,394' 127,907 126,598 126,536 128,904 129,452 43 Total loans (gross) adjusted7 106,896' 107,375' 109,593' 108,232' 109,145 109,100 109,297 108,609 108,670 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 • August 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 302.7 321.0 363.6 343.5 354.7 330.4 329.3 337.3 352.2 328.7r 2 Financial business 31.7 32.3 41.4 36.3 38.6 36.3 33.0 33.7 33.8 34. V 3 Nonfinancial business 166.3 178.5 202.0 191.9 201.2 182.2 185.9 190.4 202.5 183.3r 4 Consumer 81.5 85.5 91.1 90.0 88.3 87.4 86.6 87.9 90.3 86.6r 5 Foreign 3.6 3.5 3.3 3.4 3.7 3.7 2.9 2.9 3.1 3.0r 6 Other 19.7 21.2 25.8 21.9 22.8 20.7 21.0 22.4 22.5 21.7 Weekly reporting banks 1989 1990 11998844 11998855 11998866 11998877 11998888 DDeecc.. DDeecc.. DDeecc.. DDeecc.. DDeecc.. Mar. June Sept. Dec. Mar. 7 AH holders—Individuals, partnerships, and corporations 157.1 168.6 195.1 183.8 198.3 181.9 182.2 186.6 196.7 183.7' 8 Financial business 25.3 25.9 32.5 28.6 30.5 27.2 25.4 26.3 27.6 25.6r 9 Nonfinancial business 87.1 94.5 106.4 100.0 108.7 98.6 99.8 101.6 108.8 100.1' 10 Consumer 30.5 33.2 37.5 39.1 42.6 41.1 42.4 43.0 44.1 42.4r 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 12.8'' 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 IInnssttrruummeenntt D 19 e 8 c 5 . D 19 e 8 c 6 . D 19 e 8 c 7 . D 19 e 8 c 8 . D 19 e 8 c 9 . Nov. Dec. Jan. Feb. Mar. Apr. Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 298,779 329,991 358,056 457,297 529,055 521,634 529,055 533,137 540,148 546,786 544,481 Financial companies1 Dealer-placed paper2 2 Total 78,443 101,072 102,844 160,094 187,084 183,284 187,084 183,401 185,391 184,097 185,107 3 Bank-related (not seasonally adjusted)3 1,602 2,265 1,428 1,248 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Directly placed paper* 4 Total 135,320 151,820 173,980 194,537 212,210 212,215 212,210 214,9% 215,650 215,501 213,843 5 Bank-related (not seasonally adjusted)3 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 81,232 102,666 129,761 126,135 129,761 134,740 139,107 147,188 145,531 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 68,413 64,974 70,565 66,631 62,972 63,802 62,972 60,019 57,852 55,865 53,945 Holder 8 Accepting banks 11,197 13,423 10,943 9,086 9,433 9,923 9,433 9,954 10,351 9,574 9,069 9 Own bills 9,471 11,707 9,464 8,022 8,510 8,548 8,510 8,467 8,907 8,386 7,719 10 Bills bought 1,726 1,716 1,479 1,064 924 1,375 924 1,488 1,444 1,188 1,350 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 1,034 1,066 1,069 1,123 1,180 1,141 13 Others 56,279 50,234 58,658 56,052 52,473 52,846 52,473 48,9% 46,379 45,111 43,735 Basis 14 Imports into United States 15,147 14,670 16,483 14,984 15,651 15,691 15,651 15,100 14,522 14,418 13,413 15 Exports from United States 13,204 12,960 15,227 14,410 13,683 14,385 13,683 13,437 12,567 12,161 12,610 16 All other 40,062 37,344 38,855 37,237 33,638 33,726 33,638 31,482 30,764 29,286 27,922 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 Rate Av r e a r t a e g e Period Av r e a r t a e g e PPeerriioodd Av r e a r t a e g e 7.75 1987 8.21 1988— Jan. 8.75 1989—July 10.98 8.00 1988 9.32 Feb. 8.51 Aug 10.50 8.25 1989 10.87 Mar. 8.50 Sept 10.50 8.75 Apr. 8.50 Oct 10.50 9.25 1987— Jan. 7.50 May 8.84 Nov 10.50 9.00 Feb. 7.50 June 9.00 Dec 10.50 8.75 Mar. 7.50 Inly 9.29 Apr. 7.75 Aug. 9.84 1990— Jan 10.11 8.50 May 8.14 Sept. 10.00 Feb 10.00 9.00 June 8.25 Oct. 10.00 Mar 10.00 9.50 July 8.25 Nov. 10.05 Apr 10.00 10.00 Aug. 8.25 Dec. 10.50 May 10.00 10.50 Sept. 8.70 June 10.00 Oct. 9.07 1989— Jan. 10.50 11.00 Nov. 8.78 Feb. 10.93 11.50 Dec. 8.75 Mar. 11.50 11.00 Apr. 11.50 10.50 May . 11.50 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 • August 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 Feb. Mar. Apr. May Apr. 27 May 4 May 11 May 18 May 25 MONEY MARKET RATES 1 Federal funds1'2 6.66 7.57 9.21 8.24 8.28 8.26 8.18 8.24 8.12 8.20 8.16 8.22 2 Discount window borrowing1,2'3 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. 3 1-month 6.74 7.58 9.11 8.22 8.32 8.32 8.24 8.35 8.36 8.26 8.21 8.19 4 3-month 6.82 7.66 8.99 8.14 8.28 8.30 8.25 8.37 8.42 8.26 8.20 8.17 5 6-month 6.85 7.68 8.80 8.04 8.23 8.29 8.23 8.38 8.45 8.25 8.16 8.15 Finance paper, directly placed • 6 1-month 6.61 7.44 8.99 8.13 8.23 8.23 8.14 8.27 8.27 8.16 8.10 8.08 7 3-month 6.54 7.38 8.72 7.97 8.04 8.13 8.12 8.20 8.23 8.15 8.08 8.07 8 6-month 6.37 7.14 8.16 7.40 7.49 7.74 8.04 7.96 8.12 8.06 8.00 8.00 Bankers acceptances5' 9 3-month 6.75 7.56 8.87 8.03 8.15 8.21 8.12 8.30 8.29 8.13 8.09 8.06 10 6-month 6.78 7.60 8.67 7.91 8.11 8.18 8.08 8.32 8.32 8.10 8.01 8.00 Certificates of deposit, secondary market7 11 1-month 6.75 7.59 9.11 8.19 8.30 8.32 8.25 8.38 8.38 8.26 8.22 8.20 12 3-month 6.87 7.73 9.09 8.22 8.35 8.42 8.35 8.53 8.56 8.37 8.29 8.29 13 6-month 7.01 7.91 9.08 8.26 8.48 8.57 8.48 8.72 8.74 8.51 8.40 8.38 14 Eurodollar deposits. 3-month 7.07 7.85 9.16 8.24 8.37 8.44 8.35 8.49 8.59 8.48 8.30 8.30 U.S. Treasury bills Secondary market9 15 3-month 5.78 6.67 8.11 7.74 7.90 7.77 7.74 7.78 7.85 7.74 7.67 7.71 16 6-month 6.03 6.91 8.03 7.70 7.85 7.84 7.76 7.94 7.97 7.75 7.68 7.73 17 1-year 6.33 7.13 7.92 7.55 7.76 7.80 7.73 7.94 7.94 7.75 7.66 7.64 Auction average 18 3-month 5.82 6.69 8.12 7.76 7.87 7.78 7.78 7.78 7.91 7.79 7.67 7.74 19 6-month 6.05 6.92 8.04 7.72 7.83 7.82 7.82 7.91 8.03 7.84 7.68 7.79 20 1-year 6.33 7.17 7.91 7.42 7.76 7.72 8.05 n.a. n.a. 8.05 n.a. n.a. CAPITAL MARKET RATES U.S. Treasury notes and bonds11 Constant maturities12 21 1-year 6.77 7.65 8.53 8.11 8.35 8.40 8.32 8.57 8.56 8.36 8.24 8.22 22 2-year 7.42 8.10 8.57 8.37 8.63 8.72 8.64 8.95 8.94 8.68 8.56 8.54 23 3-year 7.68 8.26 8.55 8.39 8.63 8.78 8.69 9.02 9.01 8.73 8.60 8.58 24 5-year 7.94 8.47 8.50 8.42 8.60 8.77 8.74 9.01 9.01 8.79 8.67 8.64 25 7-year 8.23 8.71 8.52 8.48 8.65 8.81 8.78 9.04 9.03 8.83 8.71 8.70 26 10-year 8.39 8.85 8.49 8.47 8.59 8.79 8.76 9.02 9.02 8.81 8.68 8.66 27 30-year 8.59 8.96 8.45 8.50 8.56 8.76 8.73 9.00 8.98 8.80 8.64 8.63 Composite13 28 Over 10 years (long-term) 8.64 8.98 8.58 8.66 8.74 8.92 8.90 9.15 9.14 8.96 8.81 8.80 State and local notes and bonds Moody's series14 29 Aaa 7.14 7.36 7.00 7.05 6.98 7.04 6.97 7.19 7.19 7.15 7.15 6.80 30 Baa 8.17 7.83 7.40 7.24 7.41 7.43 7.37 7.40 7.50 7.75 7.50 7.13 31 Bond Buyer series 7.63 7.68 7.23 7.22 7.29 7.39 7.35 7.51 7.54 7.39 7.29 7.26 Corporate bonds Seasoned issues15 32 All industries 9.91 10.18 9.66 9.64 9.73 9.82 9.87 9.95 10.00 9.94 9.82 9.79 33 Aaa 9.38 9.71 9.26 9.22 9.37 9.46 9.47 9.59 9.62 9.54 9.39 9.39 34 Aa 9.68 9.94 9.46 9.45 9.51 9.64 9.70 9.77 9.81 9.77 9.67 9.64 35 A 9.99 10.24 9.74 9.75 9.82 9.89 9.89 9.98 10.03 9.95 9.85 9.80 36 Baa 10.58 10.83 10.18 10.14 10.21 10.30 10.41 10.45 10.54 10.49 10.36 10.34 37 A-rated, recently offered utility bonds17 9.96 10.20 9.79 9.84 9.92 10.09 10.04 10.32 10.16 10.02 10.02 9.98 MEMO: Dividend/price ratio 38 Preferred stocks 8.37 9.23 9.05 8.90 9.02 9.05 9.04 9.04 9.10 9.05 9.02 9.02 39 Common stocks 3.08 3.64 3.45 3.54 3.49 3.51 3.44 3.59 3.58 3.51 3.40 3.37 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 of ten issues: four public utilities, four industrials, one financial, and one 9. Unweighted average of closing bid rates quoted by at least five dealers. transportation. Common stock ratios on the 500 stocks in the price index. 10. Rates are recorded in the week in which bills are issued. Beginning with the NOTE. These data also appear in the Board's H.15 (519) and G.13 (415) releases. Treasury bill auction held on Apr. 18, 1983, bidders were required to state the For address, see inside front cover. percentage yield (on a bank discount basis) that they would accept to two decimal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A25 1.36 STOCK MARKET Selected Statistics 1989 1990 IInnddiiccaattoorr 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) 161.78 149.97 180.13 193.02 192.49 188.50 192.67 187.96 182.55 186.26 185.61 191.35 2 Industrial 195.31 180.83 228.04 230.86 229.40 224.38 230.12 225.79 220.60 226.14 226.86 234.85 3 Transportation 140.52 134.09 174.90 202.02 190.36 174.26 177.25 173.67 166.69 175.08 173.54 173.53 4 Utility 74.29 72.22 94.33 93.44 94.67 94.95 99.73 95.69 92.15 92.99 91.92 93.29 5 Finance 146.48 127.41 162.01 165.51 166.55 160.89 155.63 150.11 142.68 143.14 138.57 142.94 6 Standard & Poor's Corporation (1941-43 = 10)' 287.00 265.88 323.05 347.33 347.40 340.22 348.57 339.97 330.45 338.47 338.18 350.25 7 American Stock Exchange (Aug. 31, 1973 = 50? 316.78 295.08 356.67 382.75 383.63 371.92 373.87 367.40 355.30 360.77 353.32 353.82 Volume of trading (thousands of shares) 8 New York Stock Exchange 188,922 161,386 165,568 151,752 182,394 144,389 160,671 172,420 155,960 149,240 140,062 163,486 9 American Stock Exchange 13,832 9,955 13,124 12,631 13,853 12,001 13,298 14,831 13,735 15,133 13,961 14,005 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers 31,990 32,740 34,320 35,020 35,110 34,630 34,320 32,640 31,480 30,760 31,060 31,600 Free credit balances at brokers4 11 Margin-account5 4,750 5,660 7,040 5,680 6,000 5,815 7,040 6,755 6,575 6,525 6,465 6,215 12 Cash-account 15,640 16,595 18,505 15,310 16,340 16,345 18,505 17,370 16,200 16,510 15,375 15,470 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 DomesticN onfinancial Statistics • August 1990 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1989 1990 AAccccoouunntt 11998877 11998888 June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. SAIF-insured institutions 1 Assets 1,250,855 1,350,500 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 721,593 764,513 763,328 762,206 760,786 755,428 748,800 745.093 734,422 727,636 3 Mortgage-backed securities 201,828 214,587 211,325 204,365 195,309 188,493 181,641 176,552 170,725 169,482 4 Contra-assets to mortgage assets . 42,344 37,950 28,148 27,659 27,433 27,131 25,972 25,001 25,397 23,408 5 Commercial loans 23,163 33,889 33,072 33,206 33,035 32,936 32,572 32,327 32,162 31,941 6 Consumer loans 57,902 61,922 60,768 61,079 60,958 60,405 59,727 59,3% 58,728 56,940 7 Contra-assets to nonmortgage loans . 3,467 3,056 3,190 3,199 3,163 3,127 3,106 3,199 3,482 1,866 n. a. n. a. 8 Cash and investment securities 169,717 186,986 175,222 175,135 171,564 169,478 172,582 172,302 165,849 160,600 9 Other3 122,462 129,610 123,766 124,370 124,864 122,421 120,584 119,845 117,061 116,301 10 Liabilities and net worth . 1,250,855 1,350,500 1,336,143 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 %0,073 963,158 960,344 958,901 948,500 946,655 945,649 933,794 12 Borrowed money 249,917 299,400 312,093 301,571 289,634 281,473 275,978 268,462 252,193 253,519 13 FHLBB 116,363 134,168 144,217 141,875 138,331 133,633 130,514 127,671 124,578 121,697 14 Other 133,554 165,232 167,876 159,6% 151,303 147,840 145,464 140,791 127,615 131,822 15 Other 21,941 24,216 29,892 31,886 33,811 29,952 30,%5 31,992 27,462 26,742 16 Net worth n.a. n.a. 34,084 32,888 32,131 28,578 31,384 30,205 24,763 23,563 SAIF-insured federal savings banks 17 Assets 284,270 425,966 495,688 506,988 504,233 500,937 502,484 499,995 498,522 18 Mortgages 161,926 230,734 276,603 285,061 285,557 283,162 283,652 282,510 283,844 19 Mortgage-backed securities 45,826 64,957 73,940 74,379 72,124 72,478 72,332 71,204 70,499 20 Contra-assets to mortgage assets1 . 9,100 13,140 13,647 13,974 13,872 13,801 13,506 13,216 13,548 21 Commercial loans 6,504 16,731 18,083 18,346 18,233 18,256 18,299 18,172 18,143 22 Consumer loans 17,6% 24,222 28,156 28,993 28,987 28,762 28,322 28,079 28,212 23 Contra-assets to nonmortgage loans . 678 889 1,027 1,022 1,026 1,073 1,048 1,082 1,193 24 Finance leases plus interest 591 880 1,083 1,089 1,076 1,092 1,085 1,092 1,101 25 Cash and investment ... 35,347 61,029 65,736 65,979 65,040 64,073 65,193 65,191 64,538 n.a. n.a. n.a. 26 Other 24,069 35,412 39,619 40,352 40,542 40,659 40,799 40,852 39,981 27 Liabilities and net worth . 284,270 425,966 495,688 506,988 504,233 500,937 502,484 499,995 498,522 28 Savings capital 203,1% 298,197 342,146 352,547 352,158 353,474 355,923 355,874 360,547 29 Borrowed money 60,716 99,286 121,893 121,194 117,973 115,627 114,231 111,369 108,448 30 FHLBB 29,617 46,265 58,505 59,781 59,189 57,941 57,793 56,842 57,032 31 Other 31,099 53,021 63,388 61,413 58,784 57,686 56,438 54,527 51,416 32 Other 5,324 8,075 9,822 10,696 11,443 9,904 10,317 10,749 9,041 33 Net worth 15,034 20,218 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 All 1.37—Continued 1989 1990 AAccccoouunntt 11998877 11998888 June July Aug. Sept. Oct. Nov Dec. Jan. Feb. Mar. Credit unions4 34 Total assets/liabilities and capital 174,593 180,664 179,029 180,035 181,812 181,527 182,856 183,688 183,301 186,119 192,718 f 35 Federal 114,566 117,632 117,475 117,463 118,746 118,887 119,682 120,666 120,489 122,885 126,690 36 State 1 60,027 63,032 61,554 62,572 63,066 62,640 63,174 63,022 62,812 63,234 66,028 37 Loans outstanding n.a. 113,191 119,101 119,720 120,577 122,522 122,997 122,899 122,608 122,332 121,968 121,660 38 Federal 1 73,766 77,729 78,472 78,946 80,548 80,570 80,601 80,272 80,041 79,715 79,407 39 State 39,425 41,372 41,248 41,631 41,874 42,427 42,298 42,336 42,291 42,253 42,253 40 Savings 159,010 164,415 162,405 162,754 164,050 164,695 165,533 167,371 166,629 168,609 175,942 41 Federal 1 104,431 106,984 106,266 106,038 106,633 107,588 108,319 109,653 109,818 111,246 115,714 42 State • 54,579 57,431 56,139 56,716 57,417 57,107 57,214 57,718 56,811 57,363 60,228 Life insurance companies 43 Assets 1,044,459 1,157,140 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 84,564 84,438 83,225 82,867 83,727 83,609 84,381 45 United States5 57,078 58,564 57,817 57,698 56,978 56,684 57,726 57,290 58,169 46 State and local 10,681 9,136 9,036 9,061 9,002 9,037 9,019 9,280 9,191 47 Foreign6 16,667 16,351 17,711 17,679 17,245 17,146 16,982 17,039 17,021 48 Business 569,199 660,416 714,398 726,599 735,441 742,537 748,075 758,803 777,415 n.a. n a. n.a. 49 Bonds 472,684 556,043 601,786 606,686 614,585 621,856 628,695 637,690 642,445 50 Stocks 96,515 104,373 112,612 119,913 120,856 120,681 119,380 121,113 134,970 51 Mortgages 203,545 232,863 237,444 237,865 238,944 240,189 242,391 243,728 246,345 52 Real estate 34,172 37,371 38,190 38,622 38,822 38,942 39,343 39,339 39,368 53 Policy loans 53,626 54,236 55,746 55,812 56,077 56,403 56,727 56,916 57,141 54 Other assets 89,586 93,358 101,853 104,005 104,536 105,835 105,918 107,072 110,284 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 OTS for all institutions mortgage loans, contracts, and pass-through securities include loans in process, insured by the SAIF and based on the OTS thrift Financial Report. unearned discounts and deferred loan fees, valuation allowances for mortgages SAIF-insured federal savings banks: Estimates by the OTS for federal savings "held for sale," and specific reserves and other valuation allowances. banks insured by the SAIF and based on the OTS 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 Nonfinancial Statistics • August 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''' Dec. Jan. Feb. Mar. Apr. May U.S. budget1 1 Receipts, total 854,143 908,166 990,701 89,130 99,538 65,170 64,819 139,624 69,212 2 On-budget 640,741 666,675 727,035 69,052 74,243 44,133 38,989 106,775 45,514 3 Off-budget 213,402 241,491 263,666 20,077 25,295 21,037 25,829 32,849 23,697 4 Outlays, total 1,003,830 1,063,318 1,142,576 103,903 91,271 100,434 118,155 97,866 111,764 5 On-budget 809,998 860,626 931,355 92,306 72,956 80,872 97,631 79,750 91,814 6 Off-budget 193,832 202,691 211,221 11,598 18,315 19,563 20,524 18,116 19,950 7 Surplus, or deficit (-), total -149,687 -155,151 -151,875 -14,774 8,267 -35,264 -53,336 41,759 -42,552 8 On-budget -169,257 -193,951 -204,320 -23,253 1,286 -36,738 -58,642 27,025 -46,299 9 Off-budget 19,570 38,800 52,445 8,480 6,980 1,474 5,306 14,733 3,747 Source of financing (total) 10 Borrowing from the public 151,717 166,139 140,81) 6,821 15,841 18,221 56,090 -5,935 23,380 11 Operating cash (decrease, or increase (-)) . -5,052 -7,963 3,425 -5,221 -18,116 25,462 1,123 -20,830 25,594 12 Other 3,022 -3,025 7,639 13,174 -5,992 -8,419 -3,876 -14,994 -6,422 MEMO 13 Treasury operating balance (level, end of period) 36,436 44,398 40,973 26,935 45,051 19,589 18,466 39,296 13,702 14 Federal Reserve Banks 9,120 13,024 13,452 6,217 13,153 6,613 4,832 5,205 4,426 15 Tax and loan accounts 27,316 31,375 27,521 20,718 31,899 12,976 13,634 34,091 9,276 1. In accordance with the Balanced Budget and Emergency Deficit Control Act international monetae 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 A29 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS1 Millions of dollars Calendar year Fiscal Fiscal Source or type year year 1988 1989 1990 1988 1989 HI H2 H2 Apr. May RECEIPTS 1 All sources 908,166 990,701 475,724 449,330 527,574 470,329 64,819 139,624 69,212 2 Individual income taxes, net 401,181 445,690 207,659 200,300 233,572 218,661 13,174 74,375 21,467 6 4 5 3 R N W Pr e o i e f n t s u h w i n h d i d e e t l s n h d t h i e a l l d E lection Campaign Fund . 3 1 7 4 3 2 1 2 , , , 4 4 1 8 3 9 3 7 5 9 3 3 1 7 6 5 0 1 4 , , , 5 3 8 6 8 3 3 7 6 9 2 1 1 6 0 6 3 1 9 , , , 2 6 3 8 1 0 2 3 4 0 8 1 2 7 9 9 9 , , , 1 8 6 8 8 0 6 0 0 4 1 1 6 2 7 2 1 4 , , , 2 5 2 5 6 3 2 1 3 0 8 1 3 9 7 3 3 , , , 9 3 2 4 0 % 3 3 3 2 3 3 5 1 , , , 6 4 3 1 5 2 4 5 3 9 2 6 1 7 2 6 , , , 8 6 1 5 1 2 5 5 9 6 3 1 2 7 8 , , , 5 2 3 4 3 2 8 5 2 6 Corporation income taxes 7 Gross receipts 109,683 117,015 58,002 56,409 61,585 52,269 14,477 15,424 2,461 8 Refunds 15,487 13,723 8,706 7,250 7,259 6,842 1,823 2,049 904 9 Social insurance taxes and contributions net 334,335 359,416 181,058 157,603 200,127 162,574 32,961 43,821 37,450 10 Employment taxes and contributions 305,093 332,859 164,412 144,983 184,569 152,407 32,376 41,090 29,869 11 Self-employment taxes and contributions 17,691 18,504 14,839 3,032 16,371 1,947 1,213 10,685 1,472 12 Unemployment insurance 24,584 22,011 14,363 10,359 13,279 7,909 173 2,377 7,155 13 Other net receipts 4,659 4,547 2,284 2,262 2,277 2,260 412 354 426 14 Excise taxes 35,604 34,386 16,440 19,299 16,814 16,844 2,814 3,181 3,743 15 Customs deposits 15,411 16,334 7,522 8,107 7,918 8,667 1,397 1,273 1,371 16 Estate and gift taxes 7,594 8,745 3,863 4,054 4,583 4,451 769 2,307 1,045 17 Miscellaneous receipts 19,909 22,839 9,950 10,809 10,235 13,703 1,050 1,291 2,579 OUTLAYS 18 All types 1,063,318 L,142,576R 512,856 552,737 565,406R 587,343R 118,155 97,866R 111,764 19 National defense 290,361 303,551 143,080 150,4% 148,098 149,613 29,516 22,155 26,339 2 2 2 2 2 0 1 2 3 4 I N E G A n n a g e t t r n e e u i r r e c r g n r u a y a a l l l t t i u r o s r e c n e s i a o e l n u a r c f c e f , e a s i s r p a s a n c d e , e n a v n i d r o t n e m ch e n n o t logy . 1 1 1 1 2 0 0 4 7 , , , , , 2 4 8 6 2 9 7 4 2 1 7 1 1 5 0 1 1 1 9 3 2 6 6 , , , , , 7 5 8 9 0 4 9 9 4 8 5 1 6 8 4 5 6 7 7 , , , , 3 8 7 1 5 6 7 7 5 5 1 2 6 0 5 9 6 2 5 1 , , , , , 9 0 8 6 9 1 7 5 3 6 1 2 2 6 6 6 6 7 2 9 , , , , , 0 2 2 6 5 2 3 2 1 6 2 8 1 9 9 ' 6 7 9 4 1 , , , , , 0 1 1 0 3 9 8 3 1 9 1 3 2 7 7 r 1 1 1 1 , , , , 4 2 8 5 2 4 8 7 6 0 4 6 5 0 8 2 1 1 1 , , , , 0 2 2 2 0 8 4 1 6 2 9 7 1 9 6 1 1 1 1 , , , , 5 1 3 2 2 % 3 0 5 0 6 6 4 4 25 Commerce and housing credit 18,828 27,810 5,951 19,836 4,129 22,200 7,328 13,8,2901 2' 8,937 26 Transportation 27,272 27,623 12,700 14,922 12,953r 14,982 2,103 2,452 27 Community and regional development .. 5,294 5,755 2,765 2,690 1,833 4,879 797 534 681 28 Education, training, employment, and social services 31,938 35,697 15,451 16,162 18,083 18,663 3,135 3,266 3,127 29 Health 44,490 48,391 22,643 23,360 24,078 25,339 4,809 5,210 5,098 30 Social security and medicare 297,828 317,506 135,322 149,017 162,195 162,322 29,032 28,536 29,372 31 Income security 129,332 136,765 65,555 64,978 70,937 67,950 16,069 12,714 13,031 32 Veterans benefits and services 29,406 30,066 13,241 15,797 14,891 14,864 3,857 1,316 2,608 3 3 3 3 4 3 5 6 G G A N d e e e n t n m e e i i r r n n a a t i l e l s - t r g p r e o u a s v t t r 6 i e p o r o n n s m e o f e f j i n s u t c s a t l i c a e s sistance 15 9 8 1 1 , , , , 5 4 7 8 1 3 4 1 8 6 8 6 1 n 6 9 8 9 .a , , , 3 9 3 . 9 4 1 6 0 4 7 4 4 6 , , , 3 3 0 4 3 6 9 4 7 9 8 8 7 4 5 8 , , , 3 1 3 6 3 1 1 7 7 0 8 4 3 6 , , , 8 8 0 0 5 0 1 8 9 0 8 n 4 4 7 . , , , a 7 % 9 . 2 5 3 7 9 ' 1 n 5 . , a 7 9 8 . 5 3 8 3 8 4 1 n 4 . , a 8 3 5 . 9 4 6 2 5 1 r r 1 n 6 . , a 0 8 6 . 9 6 7 5 2 0 37 Undistributed offsetting receipts' -36,967 -37,212 -17,766 -18,771 -18,131 -18,935 -2,437 -3,668 -3,002 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 • August 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 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 16 Federal Reserve Banks 211.3 222.6 238.4 228.4 231.8 220.6 228.4 17 Private investors 1,602.0 1,745.2 1,852.8 2,011.0 1,905.4 1,954.0 2,011.0 18 Commercial banks 203.5 201.5 193.8 190.0 199.2 181.5 190.0 19 Money market funds 28.0 14.6 11.8 14.4 11.3 12.9 14.4 20 Insurance companies 105.6 104.9 107.3 n.a. 106.3 107.7 n.a. 21 Other companies 68.8 84.6 87.1 93.8 92.1 93.5 93.8 22 State and local Treasurys 262.8 284.6 313.6 n.a. 322.1 325.2 n.a. Individuals 23 Savings bonds 92.3 101.1 109.6 117.7 114.0 115.7 117.7 24 Other securities 70.4 70.2 76.4 91.5 92.5 92.1 91.5 25 Foreign and international5 263.4 299.7 362.1 392.9 367.9 393.5 392.9 26 Other miscellaneous investors 506.6 584.0 591.1 n.a. 600.0 631.9 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 A31 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Par value; averages of daily figures, in millions of dollars 1990 1990 IItteemm 11998877 11998888 11998899 Mar. Apr. May Apr. 25 May 2 May 9 May 16 May 23 May 30 Immediate delivery2 1 U.S. Treasury securities 110,050 101,623 112,722 105,335 106,861 114,598 112,403 109,052 122,511 113355,,997700 110011,,440022 9944,,999977 By maturity ? Bills 37,924 29,387 30,737 30,659 32,972 30,736 33,150 34,151 29,973 3311,,771100 2266,,554400 2288,,668844 3 Other within 1 year 3,271 3,426 3,183 2,121 2,687 2,810 3,069 3,894 2,350 3,249 1,925 2,278 4 1-5 years 27,918 27,777 33,664 31,177 30,178 37,007 33,784 32,316 41,190 43,486 37,805 27,806 S 5-10 years 24,014 24,939 28,680 25,090 26,199 26,077 27,823 25,113 30,716 28,406 20,926 24,148 6 Over 10 years 16,923 16,093 16,458 16,289 14,824 17,968 14,578 13,579 18,282 29,119 14,206 12,081 By type of customer 7 U.S. government securities dealers 2,936 2,761 3,286 3,802 3,354 3,837 3,370 3,053 44,,552200 44,,113344 33,,557766 22,,669922 8 U.S. government securities 61,539 59,844 66,419 60,271 59,623 65,489 63,823 61,741 70,573 7777,,224422 5588,,771166 5544,,331144 9 45,575 39,019 43,016 41,262 43,884 45,272 45,211 44,259 47,419 54,595 39,110 37,991 10 Federal agency securities 18,084 15,903 18,626 19,146 19,763 17,993 18,575 19,874 22,034 20,340 13,303 14,998 11 Certificates of deposit 4,112 3,369 2,798 1,518 1,728 1,437 1,796 1,906 1,618 1,483 1,100 1,350 1? Bankers acceptances 2,965 2,316 2,222 1,382 1,532 1,391 1,672 1,369 1,407 1,533 1,253 1,306 13 Commercial paper 17,135 22,927 31,805 37,018 39,797 36,605 39,623 41,373 35,938 34,787 36,112 37,516 Futures contracts 14 Treasury bills 3,233 2,627 2,525 2,078 2,607 2,022 2,772 2,317 2,573 22,,001155 1,431 11,,556633 n Treasury coupons 8,963 9,695 9,602 11,826 9,799 10,772 9,669 10,385 10,000 14,325 10,481 8,550 16 Federal agency securities 5 1 8 10 12 12 29 14 17 14 20 0 Forward transactions 17 U.S. Treasury securities 2,029 2,095 2,127 1,260 1,845 2,449 1,845 2,791 3,611 11,,990044 2,218 11,,117700 18 Federal agency securities 9,290 8,008 9,483 9,598 10,071 12,826 7,948 10,197 15,570 16,672 11,360 8,360 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 DomesticN onfinancial Statistics • August 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 Mar. Apr. May May 2 May 9 May 16 May 23 May 30 Positions Net immediate2 1 U.S. Treasury securities -6,216 -22,765 —5,940 2,200 —6,494r -14,453 -21,155 -19,596 -11,016 -14,044 -10,765 2 Bills 4,317 2,238 7,835 16,162 9,823' 2,713 268 2,817 3,257 3,232 1,072 3 Other within 1 year 1,557 -2,236 -1,528 -884 837 190 137 468 44 118 210 4 1-5 years 649 -3,020 2,338 5,304 4,171 1,673 3,395 2,133 1,711 -776 3,806 5 5-10 years -6,564 -9,663 -8,133 -5,894 -5,891 -3,728 -6,490 -6,587 -2,623 -3,065 -1,393 6 Over 10 years -6,174 -10,084 -6,452 -12,488 -15,434 -15,302 -18,464 -18,427 -13,406 -13,554 -14,459 7 Federal agency securities 31,911 28,230 31,913 37,064 34,928 36,214 32,902 35,622 41,385 37,279 32,745 8 Certificates of deposit 8,188 7,300 6,674 4,581 3,577 3,509 3,452 3,410 3,595 3,628 3,440 9 Bankers acceptances 3,660 2,486 2,089 1,459 1,277 1,081 862 1,036 1,223 1,083 1,021 10 Commercial paper 7,4% 6,152 8,242 7,285 7,492 7,410 8,199 8,213 8,274 6,096 6,265 Futures positions 11 Treasury bills -3,373 -2,210 -4,599 -8,417 -7,017 -8,091 -6,890 -7,514 -9,298 -8,769 -7,556 12 Treasury coupons 5,988 6,224 -2,918 -5,561 -4,738 -5,604 -1,166 -2,679 -7,137 -7,545 -6,939 13 Federal agency securities -95 0 14 45 22 22 59 27 -6 45 5 Forward positions 14 U.S. Treasury securities -1,211 346 -545 -1,723 -1,189 -305 -1,108 -2,023 -174 1,265 297 15 Federal agency securities -18,817 -16,348 -16,878 -16,271 -12,143 -14,888 -10,678 -13,405 -19,459 -16,195 -12,750 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 126,709 136,327 157,955 157,137 160,104' 0 168,835 160,333 170,416 157,808 155,850 17 Term 148,288 177,477 225,126 205,804 220,483' 0 230,402 234,686 210,400 217,021 211,400 Repurchase agreements 18 Overnight and continuing 170,763 172,695 219,083 226,475 222277,,882299'' 0 222,817 213,149 231,162 213,123 214,737 19 Term 121,270 137,056 179,557 167,324 175,175' 0 185,024 193,262 175,398 185,774 174,829 1. Data for dealer positions and sources of financing are obtained from reports reverses to maturity, which are securities that were sold after having been submitted to the Federal Reserve Bank of New York by the U.S. Treasury obtained under reverse repurchase agreements that mature on the same day as the securities dealers on its published list of primary dealers. securities. Data for immediate positions do not include forward positions. Data for positions are averages of daily figures, in terms of par value, based on 3. Figures cover financing involving U.S. Treasury and federal agency securithe number of trading days in the period. Positions are net amounts and are shown ties, negotiable CDs, bankers acceptances, and commercial paper. on a commitment basis. Data for financing are in terms of actual amounts 4. Includes all reverse repurchase agreements, including those that have been borrowed or lent and are based on Wednesday figures. arranged to make delivery on short sales and those for which the securities 2. Immediate positions are net amounts (in terms of par values) of securities obtained have been used as collateral on borrowings, that is, matched agreements. owned by nonbank dealer firms and dealer departments of commercial banks on 5. Includes both repurchase agreements undertaken to finance positions and a commitment, that is, trade-date basis, including any such securities that have "matched book" repurchase agreements. been sold under agreements to repurchase (RPs). The maturities of some NOTE. Data on positions for the period May 1 to Sept. 30, 1986, are partially repurchase agreements are sufficiently long, however, to suggest that the securi- estimated. ties involved are not available for trading purposes. Immediate positions include Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A33 1.44 FEDERAL AND FEDERALLY SPONSORED CREDIT AGENCIES Debt Outstanding Millions of dollars, end of period 1989 1990 AAggeennccyy 11998855 11998866 11998877 11998888 Dec. Jan. Feb. Mar. Apr. 1 Federal and federally sponsored agencies 293,905 307,361 341,386 381,498 411,805 414,414 420,309 420,246 0 2 Federal agencies 36,390 36,958 37,981 35,668 35,664 34,995 42,974 42,492' 42,526 3 Defense Department1 71 33 13 8 7 7 7 7 7 4 Export-Import Bank • 15,678 14,211 11,978 11,033 10,985 10,985 10,985 11,017' 11,017 5 Federal Housing Administration4 115 138 183 150 328 239 280 318 352 6 Government National Mortgage Association participation certificates 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 17,899 17,319 25,257 24,705 24,705 9 United States Railway Association6 74 85 0 0 0 0 0 0 0 10 Federally sponsored agencies7 257,515 270,553 303,405 345,830 376,141 0 377,335 377,755 0 11 Federal Home Loan Banks 74,447 88,758 115,727 135,836 136,087 133,699 132,975 131,526 127,401 12 Federal Home Loan Mortgage Corporation 11,926 13,589 17,645 22,797 26,148 25,298 25,017 26,152 0 13 Federal National Mortgage Association 93,896 93,563 97,057 105,459 116,064 115,164 116,207 116,815 117,357 14 Farm Credit Banks8 68,851 62,478 55,275 53,127 54,864 55,809 53,790 53,732 53,700 15 Student Loan Marketing Association 8,395 12,171 16,503 22,073 28,705 30,908 30,806 30,988 0 16 Financing Corporation 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 9,524 9,524 9,524 13,026 MEMO 19 Federal Financing Bank debt13 153,373 157,510 152,417 142,850 134,873 134,263 133,567 135,448 136,957 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 15,670 14,205 11,972 11,027 10,979 10,979 10,979 11,011' 11,011 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 16,519 15,939 15,877 15,325 15,325 24 United States Railway Association6 74 85 0 0 0 0 0 0 0 Other Lending14 25 Farmers Home Administration 64,234 65,374 59,674 58,496 53,311 53,461 52,831 52,726 51,916 26 Rural Electrification Administration 20,654 21,680 21,191 19,246 19,265 19,212 19,219 19,221 19,191 27 Other 31,429 32,545 32,078 26,324 23,724 23,597 23,586 26,090' 28,439 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 Farmers 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 • August 1990 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1989 1990 TTyyppee ooff ii oo ss rr ss uu uu ee ss ee oo rr iissssuueerr,, 11998877 11998888 11998899 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May 1 All issues, new and refunding1 102,407 114,522 113,646 9,075 9,564 13,636 6,694 6,329 9,880 8,582' 9,147 Type of issue 2 General obligation 30,589 30,312 35.774 3,273 3,328 2,158 2,675 3,010 3,199 3,386' 2,381 3 Revenue 71,818 84,210 77,873 5.802 6,237 11,478 4,019 3,319 6,681 5,1%' 7,384 Type of issuer 4 State , 10.102 8,830 11,819 1,330 930 911 712 1,196 707 1,387 4,032 5 Special district and statutory authority- 65,460 74,409 71,022 4,770 5,473 9,391 4,744 3,277 6,247 4,366 2,676 6 Municipalities, counties, and townships 26,845 31,193 30,805 2,975 3,161 3,334 1,238 1,856 2,926 2,243 2,539 7 Issues for new capital, total 56,789 79,665 84,062 7,266 7,777 10,195 6,263 5,635 6,667 7,744r 9,055 Use of proceeds 8 Education 9,524 15.021 15,133 1,006 1,058 1,495 1,374 1,420 1,018 1,054 1,694 9 Transportation 3,677 6,825 6,870 280 675 645 98 511 1,158 1,215 1,375 10 Utilities and conservation 7,912 8,4% 11.427 718 1,137 2,219 1,747 718 502 991 n.a. 11 Social welfare 11,106 19,027 16,703 1,803 1,441 2,518 1,017 432 1,425 226 1,232 12 Industrial aid 7,474 5,624 5,036 345 444 1,119 200 115 432 232 681 13 Other purposes 18,020 24,672 28,894 3,114 3,022 2,199 1,827 2,439 2,132 2,426 2,155 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 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 All issues' 392,339 409,925 347,732' 14,704 24,893 20,706 21,584 15,084' 13,680' 21,188' 15,056 2 Bonds2 325,838 352,124 201,827 12,431 21,213 16,466 17,639 12,806' 10,761' 17,394' 13,300 Type of offering 3 Public, domestic 209,455 201,246 179.069 11.211 20,085 14,383 16,013 10,754' 9,899' 15,500 12,300 4 Private placement, domestic3 92,070 127,700 114,629 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5. Sold abroad 24,306r 23,178 22.758 1,220 1.128 2,083 1.626 2,052 907' 1,894' 1,000 Industry group 6 Manufacturing 61,266 70,595 75,916' 2,247 3,646 3,551 4,193 2,036 2,389 3,089' 3,445 7 Commercial and miscellaneous 49,773 62,038' 49,270' 1,393 1,830 1,253 347 655 131 253 617 8 Transportation 11,974 10,076 10,050' 30 906 312 1,083 35 53 386 194 9 Public utility 23,004 19,318 16,576' 1,059 1,748 1,022 1,098 1,043 1,057 317 435 10 Communication 7,340 5,951 8,328' 308 632 812 577 23 35 704 500 11 Real estate and financial 172,474 184,146' 156,319' 7,395 12,452 9,516 10,342 9,016' 7,096' 12,645' 8,109 12 Stocks2 66,508 57,802 32,225 2,273 3,680 4,240 3,945 2,278 2,919 3,794 1,756 Type 13 Preferred 10,123 6,544 6,194 519 570 160 626 50 167 1,028 193 14 Common 43,225 35,911 26,030 1,754 3,110 4,080 3,319 2,228 2,752 2,767 1,564 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 5,081 193 190 378 279 835 431 521 253 17 Commercial and miscellaneous 12,888 8,449 4,428 155 728 498 1,045 248 1,017 552 666 18 Transportation 2,439 1,535 532 0 50 0 0 0 0 0 0 19 Public utility 4,322 1,898 2.297 709 465 211 244 106 582 533 219 20 Communication 1,458 515 471 0 0 0 0 0 0 0 0 21 Real estate and financial 31,521 37,798 19,250 1,195 2,214 3,153 2,377 1,090 889 2.188 619 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 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. INVESTMENT COMPANIES1 1 Sales of own shares2 271,237 306,445 23,911 23,872 24,673 30,982 35,620 26,118 28,817 29,800 2 Redemptions of own shares3 267,451 272,165 21,499 21,702 19,573 24,967 27,331 20,978 23,777 27,307 3 Net sales 3,786 34,280 2,412 2,170 5,100 6,015 8,289 5,140 5,040 2,493 4 Assets4 472,297 553,871 539,814 534,922 549,892 553,871 535,165 542,725 549,638 542,061 5 Cash position5 45,090 44,780 47,163 46,146 47,875 44,780 48,865 51,356 50,454 55,236 6 Other 427,207 509,091 492,651 488,776 502,017 509,091 486,300 491,369 499,184 486,998 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. 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 Ql Q2 Q3 Q4 Qlr 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 229955..22 228855..99 228899..77 2 Profits before tax 266.7 306.8 290.6 305.3 314.4 318.8 318.0 296.0 275.0 273.7 283.3 3 Profits tax liability 124.7 137.9 129.7 138.4 141.2 143.2 144.4 134.9 122.6 116.9 124.8 4 Profits after tax 142.0 168.9 160.9 166.9 173.2 175.6 173.6 161.1 152.4 156.7 158.5 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 30.4 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 17.5 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 Q4 Ql Q2 Q3 Q4 Ql Q2 Q3 1 Total nonfarm business 430.76 475.52 507.23 442.11 459.47 470.86 484.93 486.80 500.29 506.84 511.59 Manufacturing 2 Durable goods industries 78.30 83.68 85.71 80.56 81.26 82.97 85.66 84.84 88.04 83.97 84.99 3 Nondurable goods industries 88.01 100.86 105.18 92.76 93.96 98.57 102.00 108.92 104.32 105.56 105.33 Nonmanufacturing 4 Mining 12.66 12.52 13.40 12.38 1122..1155 12.70 12.59 12.65 12.86 13.77 14.02 Transportation 5 Railroad 7.06 8.12 8.14 77..4455 88..0022 7.37 8.16 8.94 8.58 7.99 7.78 6 Air 7.28 8.91 12.39 7.69 7.04 9.49 12.48 6.61 11.10 12.11 15.09 7 Other 7.00 7.56 7.68 6.89 8.07 7.40 7.89 6.87 8.39 7.01 7.61 Public utilities 8 Electric 32.03 34.20 34.87 33.69 33.69 35.34 33.73 34.04 31.94 36.75 35.52 9 Gas and other 14.64 16.52 17.65 15.04 17.12 16.67 15.84 16.46 17.59 17.79 18.44 10 Commercial and other 183.76 203.14 222.22 185.65 198.15 200.36 206.59 207.46 217.46 221.89 222.82 •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 DomesticN onfinancial Statistics • August 1990 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period 1988 1989 1990 AAccccoouunntt 11998855 11998866 11998877 Q3 Q4 Ql Q2 Q3 Q4 Ql ASSETS Accounts receivable, gross2 1 Consumer 111.9 134.7 141.1 146.3 146.2 139.1 143.9 146.3 140.8 137.9 2 Business 157.5 173.4 207.4 223.3 236.5 243.3 250.9 246.8 256.0 262.9 3 Real estate 28.0 32.6 39.5 43.1 43.5 45.1 47.1 48.7 48.9 52.1 4 Total 297.4 340.6 388.1 412.7 426.2 427.5 441.9 441.8 445.8 452.8 Less: 5 Reserves for unearned income 39.2 41.5 45.3 48.4 50.0 51.0 52.2 52.9 52.0 51.9 6 Reserves for losses 4.9 5.8 6.8 7.1 7.3 7.4 7.5 7.7 7.7 7.9 7 Accounts receivable, net 253.3 293.3 336.0 357.3 368.9 369.2 382.2 381.3 386.1 393.0 8 All other 45.3 58.6 58.3 68.7 72.4 75.1 81.4 85.2 91.6 92.5 9 Total assets 298.6 351.9 394.2 426.0 441.3 444.3 463.6 466.4 477.6 485.5 LIABILITIES 10 Bank loans 18.0 18.6 16.4 11.9 15.4 11.3 12.1 12.2 14.5 13.9 11 Commercial paper 99.2 117.8 128.4 129.4 142.0 147.8 149.0 147.2 149.5 152.9 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. 51.5 50.6 56.9 59.8 60.3 63.8 70.5 15 Not elsewhere classified n.a. n.a. n.a. 139.3 137.9 133.6 140.5 145.1 147.8 145.7 16 All other liabilities 41.5 44.1 52.8 58.9 59.8 58.1 63.5 61.8 62.6 61.7 17 Capital, surplus, and undivided profits 32.8 36.4 31.5 34.9 35.6 36.6 38.8 39.8 39.4 40.7 18 Total liabilities and capital 298.6 351.9 394.2 426.0 441.3 444.3 463.6 466.4 477.6 485.5 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 11998877 11998888 11998899 Nov. Dec. Jan. Feb. Mar. Apr. 1 Total 205,992 234,578 258,504 255,999 258,504 259,467 259,015 261,662' 262,379 Retail financing of installment sales 2 Automotive 36,139 36,957 39,139 39,053 39,139 39,252 39,125 39,264 39,550 3 Equipment 25,075 28,199 29,674 29,477 29,674 29,690 29,483 29,789 30,115 4 Pools of securitized assets n.a. n.a. 698 739 698 720 681 704 662 Wholesale 5 Automotive 30,070 32,357 33,074 32,660 33,074 30,463 29,491 29,963 29,672 6 Equipment 5,578 5,954 6,896 7,027 6,896 9,183 9,155 9,408 9,372 7 All other 8,329 9,312 9,918 9,963 9,918 9,943 9,877 10,030 9,961 8 Pools of securitized assets n.a. n.a. 0 0 0 0 0 0 0 Leasing 9 Automotive 22,097 24,875 27,074 27,461 27,074 26,978 27,161 28,325 28,528 10 Equipment 43,493 57,658 68,112 65,988 68,112 68,904 69,335 68,755 69,473 11 Pools of securitized assets n.a. n.a. 1,247 1,093 1,247 1,242 1,377 ll,,443333rr 1,646 12 Loans on commercial accounts receivable and factored commercial accounts receivable 18,170 18,103 19,081 18,996 19,081 18,975 19,155 19,426 18,716 13 All other business credit 17,042 21,162 23,590 23,543 23,590 24,118 24,176 24,565 24,685 Net change (during period) 14 33,866 22,434 22,580 273 2,504 -1,255 -452 2,647r 717 Retail financing of installment sales 15 Automotive 9,925 819 2,182 -133 87 112 -127 140 286 16 Equipment 2,056 1,386 1,475 9 197 16 -207 306 327 17 Pools of securitized assets n.a. n.a. -26 24 -41 22 -39 23 -42 Wholesale 18 Automotive 7,158 2,288 716 -1,488 414 -2,611 -972 472 -291 19 Equipment 250 377 940 182 -131 68 -28 254 -37 20 All other 1,293 983 605 -19 -45 26 -66 153 -69 21 Pools of securitized assets2 n.a. n.a. 0 0 0 0 0 0 0 Leasing 22 Automotive 2,174 2,777 2,201 174 -387 -97 183 1,164 203 23 Equipment 5,271 9,752 9,187 1,153 2,124 792 431 -580 718 24 Pools of securitized assets2 n.a. n.a. 526 -106 154 -5 135 56' 213 25 Loans on commercial accounts receivable and factored commercial accounts receivable 2,245 -65 979 -136 86 -107 180 272 -711 26 All other business credit 3,498 4,119 3,796 614 46 528 59 388 120 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 11998888 11998899 Nov. Dec. Jan. Feb. Mar. Apr. May Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars) 137.0 150.0 159.6 152.8 162.7 148.5 148.9 138.2 155.5 162.1 2 Amount of loan (thousands of dollars) 100.5 110.5 117.0 110.4 119.9 107.3 109.0 100.9 114.6 119.7 3 Loan/price ratio (percent) 75.2 75.5 74,5 73.0 74.4 73.4 74.6 74.7 75.4 75.0 4 Maturity (years) 27.8 28.0 28.1 27.1 27.9 27.1 27.4 26.6 26.6 28.1 5 Fees and charges (percent of loan amount)2 2.26 2.19 2.06 1.81 2.18 1.85 1.87 1.96 2.00 2.41 6 Contract rate (percent per year) 8.94 8.81 9.76 9.78 9.70 9.59 9.56 9.70 9.83 9.87 Yield (percent per year) 7 OTS series3 9.31 9.18 10.11 10.09 10.07 9.91 9.88 10.03 10.17 10.28 8 HUD series4 10.17 10.30 10.21 9.72 9.72 10.00 10.12 10.20 10.46 10.19 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (HUD series)5 10.16 10.49 10.24 9.69 9.72 10.01 10.22 10.30 10.75 10.23 10 GNMA securities6 9.44 9.83 9.71 9.07 9.07 9.24 9.44 9.53 9.77 9.77 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 95,030 101,329 104,974 109,076 110,721 111,329 111,628 112,353 112,463 112,791 12 FHA/VA-insured 21,660 19,762 19,640 19,953 20,283 20,471 20,614 20,688 20,707 20,723 13 Conventional 73,370 81,567 85,335 89,123 90,438 90,858 91,014 91,665 91,756 92,068 Mortgage transactions (during period) 14 Purchases 20,531 23,110 22,518 2,376 2,982 2,214 1,537 1,945 1,705 1,630 Mortgage commitments7 15 Contracted (during period) 25,415 23,435 27,409 2,536 2,495 1,787 3,216 3,789 5,700 n.a. 16 Outstanding (end of period) 4,886 2,148 6,037 6,645 6,037 5,619 4,977 6,765 10,534 n.a. FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period f 17 Total 12,802 15,105 20,105 21,809 21,852 20,361 20,112 19,823 n.a. n.a. 18 FHA/VA 686 620 590 588 584 578 572 561 n.a. n.a. 19 Conventional 12,116 14,485 19,516 21,221 21,269 19,782 19,540 19,261 n.a. n.a. Mortgage transactions (during period) 20 Purchases 76,845 44,077 78,588 7.653 8,718 6,423 5,676 6,301 n.a. n.a. 21 Sales 75,082 39,780 73,446 7,058 8,526 7,764 5,796 6,121 5,356 4,575 Mortgage commitments9 22 Contracted (during period) 71,467 66,026 88,519 10,949 7,820 8,020 5,922 6,119 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 • August 1990 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1988 1989 TTyyppee ooff hhoollddeerr,, aanndd ttyyppee ooff pprrooppeerrttyy 11998877 11998888 11998899 Q4 Q1 Q2 Q3 Q4 1 All holders 2,977,293 3,268,285 3,524,474 3,268,285 3,328,824 3,391,259 3,454,053 3,524,474 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 2,384,076 3 Multifamily 273,954 290,355 306,652 290,355 296,139 297,860 302,121 306,652 4 Commercial 654,863 701,652 747,277 701,652 716,695 725,341 733,988 747,277 5 88,869 86,803 86,468 86,803 85,984 86,741 86,578 86,468 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 1,919,269 7 Commercial banks2 591,369 669,160 756,786 669,160 688,662 715,049 737,979 756,786 8 1- to 4-family 276,270 314,283 358,652 314,283 324,681 338,872 349,739 358,652 9 Multifamily 33,330 34,131 36,994 34,131 34,172 34,954 36,075 36,994 10 Commercial 267,340 305,242 343,841 305,242 313,941 324,878 335,2% 343,841 11 Farm 14,429 15,504 17,299 15,504 15,868 16,345 16,869 17,299 12 Savings institutions3 860,467 929,647 921,410 929,647 936,091 933,694 927,982 921,410 13 1- to 4-family 602,408 678,263 675,891 678,263 682,658 684,828 680,572 675,891 14 Multifamily 106,359 111,302 108,534 111,302 112,507 110,009 109,353 108,534 15 Commercial 150,943 139,416 136,343 139,416 140,255 138,201 137,406 136,343 16 Farm 757 666 641 666 671 656 651 641 17 Life insurance companies 212,375 232,639 241,073 232,639 234,910 236,160 235,767 241,073 18 1- to 4-family 13,226 15,284 13,531 15,284 12,690 12,745 13,045 13,531 19 Multifamily 22,524 23,562 26,646 23,562 24,636 25,103 25,913 26,646 20 Commercial 166,722 184,124 191,369 184,124 188,073 188,756 187,208 191,369 21 Farm 9,903 9,669 9,527 9,669 9,511 9,556 9,601 9,527 22 Finance companies4 40,349 43,521 50,728 43,521 45,389 47,251 48,906 50,728 23 Federal and related agencies 192,721 200,570 212,370 200,570 199,847 201,909 206,673 212,370 24 Government National Mortgage Association 444 26 24 26 26 24 23 24 25 1- to 4-family 25 26 24 26 26 24 23 24 26 Multifamily 419 0 0 0 0 0 0 0 27 Farmers Home Administration 43,051 42,018 42,080 42,018 41,780 40,711 41,117 42,080 28 1- to 4-family 18,169 18,347 19,091 18,347 18,347 18,391 18,405 19,091 29 Multifamily 8,044 8,513 9,168 8,513 8,615 8,778 8,916 9,168 30 Commercial 6,603 5,343 4,463 5,343 5,101 3,885 4,366 4,463 31 Farm 10,235 9,815 9,358 9,815 9,717 9,657 9,430 9,358 32 Federal Housing and Veterans Administration 5,574 5,973 6,220 5,973 6,075 6,424 6,023 6,220 33 1- to 4-family 2,557 2,672 3,009 2,672 2,550 2,827 2,900 3,009 34 Multifamily 3,017 3,301 3,211 3,301 3,525 3,597 3,123 3,211 35 Federal National Mortgage Association 96,649 103,013 110,970 103,013 101,991 103,309 107,052 110,970 36 1- to 4-family 89,666 95,833 102,863 95,833 94,727 95,714 99,168 102,863 37 Multifamily 6,983 7,180 8,107 7,180 7,264 7,595 7,884 8,107 38 Federal Land Banks 34,131 32,115 30,788 32,115 31,261 31,467 30,943 30,788 39 1- to 4-family 2,008 1,890 1,889 1,890 1,839 1,851 1,821 1,889 40 Farm 32,123 30,225 28,899 30,225 29,422 29,616 29,122 28,899 41 Federal Home Loan Mortgage Corporation 12,872 17,425 22,289 17,425 18,714 19,974 21,515 22,289 42 1- to 4-family 11,430 15,077 19,182 15,077 16,192 17,305 18,493 19,182 43 Multifamily 1,442 2,348 3,107 2,348 2,522 2,669 3,022 3,107 44 Mortgage pools or trusts6 718,297 810,887 931,619 810,887 839,684 861,827 898,388 931,619 45 Government National Mortgage Association 317,555 340,527 374,650 340,527 348,622 353,154 361,291 374,650 46 1- to 4-family 309,806 331,257 362,865 331,257 337,563 341,951 349,830 362,865 47 Multifamily 7,749 9,270 11,785 9,270 11,059 11,203 11,461 11,785 48 Federal Home Loan Mortgage Corporation 212,634 226,406 266,407 226,406 234,695 242,789 256,8% 266,407 49 1- to 4-family 205,977 219,988 259,443 219,988 228,389 236,404 250,123 259,443 50 Multifamily 6,657 6,418 6,965 6,418 6,306 6,385 6,773 6,965 51 Federal National Mortgage Association 139,960 178,250 216,600 178,250 188,071 196,501 208,894 216,600 52 1- to 4-family 137,988 172,331 207,765 172,331 181,352 188,774 200,302 207,765 53 Multifamily 1,972 5,919 8,835 5,919 6,719 7,727 8,592 8,835 54 Farmers Home Administration 245 104 79 104 96 85 78 79 55 1- to 4-family 121 26 23 26 24 23 22 23 56 Multifamily 0 0 0 0 0 0 0 0 57 Commercial 63 38 22 38 34 26 22 22 58 Farm 61 40 34 40 38 36 34 34 59 Individuals and others7 402,064 425,382 461,216 425,382 429,630 442,620 447,264 461,216 60 1- to 4-family 242,053 258,598 285,966 258,598 260,768 272,310 275,694 285,966 61 Multifamily 75,458 78,411 83,299 78,411 78,814 79,840 81,009 83,299 62 Commercial 63,192 67,489 71,239 67,489 69,291 69,595 69,690 71,239 63 Farm 21,361 20,884 20,711 20,884 20,757 20,875 20,871 20,711 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 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar.' Apr. Seasonally adjusted 11 TToottaall 664,701 716,624 703,518 705,703 710,133 713,903 716,624 717,829' 717,869' 720,278 720,862 22 AAuuttoommoobbiillee 284,556 290,770 289,961 288,839 290,210 290,972 290,770 290,904r 289,629' 291,445 288,942 33 RReevvoollvviinngg 174,057 197,110 189,185 190,378 191,734 194,679 197,110 199,146' 199,927' 201,625 203,984 44 MMoobbiillee hhoommee 25,201 22,343 22,734 22,661 22,621 22,197 22,343 22,604' 22,633' 22,710 22,702 55 OOtthheerr 180,887 206,401 201,638 203,825 205,568 206,055 206,401 205,175' 205,680' 204,499 205,234 Not seasonally adjusted 6 Total 674,719 727,561 705,908 708,370 711,295 715,145 727,561 721,026' 717,062' 712,970 715,827 By major holder 7 Commercial banks 324,792 343,865 330,488 332,502 335,657 337,285 343,865 342,266 339,418 334,508 337,760 8 Finance companies 146,212 140,832 145,033 146,296 143,293 142,802 140,832 140,740 139,115 137,857 138,174 9 Credit unions 88,340 90,875 91,017 91,285 91,291 90,965 90,875 90,452 90,127 89,723 89,760 10 Retailers2 48,302 42,638 37,942 37,400 37,045 37,906 42,638 39,959 37,904 37,677 37,207 II Savings institutions 63,399 57,228 60,243 59,556 58,720 58,236 57,228 55,425' 54,771' 54,095 53,606 12 Gasoline companies 3,674 3,935 4,255 4,052 3,947 3,853 3,935 4,013 3,803 3,792 3,928 13 Pools of securitized assets2 n.a. 48,188 36,930 37,279 41,342 44,098 48,188 48,171 51,924 55,318 55,392 By major type of credit3 14 Automobile 284,328 290,421 292,948 293,114 293,664 292,543 290,421 288,984' 228888,,003366'' 287,044 286,226 15 Commercial banks 123,392 126,613 126,571 126,972 128,213 128,111 126,613 127,075 127,149 126,676 126,453 16 Finance companies 97,245 82,721 89,968 90,217 86,655 85,725 82,721 81,918 80,227 79,523 79,295 17 Pools of securitized assets n.a. 18,191 12,072 11,785 15,024 15,376 18,191 17,827 18,931 19,595 19,406 18 Revolving 183,909 208,188 187,917 188,684 189,913 194,640 208,188 203,288' 200,147' 199,306 201,801 19 Commercial banks 123,020 130,956 118,083 119,413 120,484 122,728 130,956 128,384 124,821 121,614 124,282 20 Retailers 43,697 37,967 33,503 32,961 32,618 33,432 37,967 35,359 33,378 33,169 32,721 21 Gasoline companies 3,674 3,935 4,255 4,052 3,947 3,853 3,935 4,013 3,803 3,792 3,928 22 Pools of securitized assets n.a. 22,977 19,327 19,731 20,371 22,186 22,977 23,450 26,204 28,937 29,174 23 Mobile home 25,143 22,283 22,800 22,808 22,849 22,319 22,283 22,717' 22,726' 22,428 22,484 74 Commercial banks 9,025 9,155 9,046 9,121 9,130 9,144 9,155 9,109 9,162 9,144 9,231 25 Finance companies 7,191 4,716 5,119 5,106 5,205 4,682 4,716 5,411 5,410 5,178 5,168 26 Other 181,339 206,669 202,243 203,764 204,869 205,643 206,669 206,037' 206,153' 204,192 205,316 77 Commercial banks 69,355 77,141 76,788 76,996 77,830 77,302 77,141 77,698 78,286 77,074 77,794 28 Finance companies 41,776 53,395 49,946 50,973 51,433 52,395 53,395 53,411 53,478 53,156 53,711 29 Retailers 4,605 4,671 4,439 4,439 4,427 4,474 4,671 4,600 4,526 4,508 4,486 30 Pools of securitized assets n.a. 7,020 5,531 5,763 5,947 6,536 7,020 6,894 6,789 6,786 6,812 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 • August 1990 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent unless noted otherwise 1989 1990 IItteemm 11998877 11998888 11998899 Oct. Nov. Dec. Jan. Feb. Mar. Apr. INTEREST RATES Commercial banks2 1 48-month new car3 10.45 10.85 12.07 n.a. 11.94 n.a. n.a. 11.80 n.a. n.a. 2 24-month personal 14.22 14.68 15.44 n.a. 15.42 n.a. n.a. 15.27 n.a. n.a. 3 120-month mobile home3 13.38 13.54 14.11 n.a. 13.97 n.a. n.a. 13.91 n.a. n.a. 4 Credit card 17.92 17.78 18.02 n.a. 18.07 n.a. n.a. 18.12 n.a. n.a. Auto finance companies .5 New car 10.73 12.60 12.62 13.04 13.27 13.27 12.64 12.67 12.31 12.21 6 Used car 14.60 15.11 16.18 16.17 16.09 16.10 15.77 15.91 15.97 16.02 OTHER TERMS4 Maturity (months) 7 New car 53.5 56.2 54.2 54.4 55.1 55.1 54.7 54.7 54.3 54.2 8 Used car 45.2 46.7 46.6 45.8 45.6 45.5 45.5 46.4 46.4 46.5 Loan-to-value ratio 9 New car 93 94 91 88 89 89 89 88 88 87 10 Used car 98 98 97 96 96 96 95 96 95 96 Amount financed (dollars) 11 New car 11,203 11,663 12,001 11,965 12,279 12,301 12,381 12,053 12,216 12,089 12 Used car 7,420 7,824 7,954 7,904 8,063 8,096 8,040 8,065 8,132 8,105 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 1990 Transaction category, sector 11998855 11998866 11998877 11998888 11998899rr Q3 Q4 Ql' Q2 Q3' Q4' Ql Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors 846.3 831.1 693.2 754.5 711.8 749.3 734.2 748.9 672.4R 684.7 741.1 771.2 By sector and instrument 2 U.S. government 223.6 215.0 144.9 157.5 149.8 162.5 142.1 199.9 70.9 149.0 179.4 295.8 3 Treasury securities 223.7 214.7 143.4 140.0 150.0 141.6 100.5 201.1 65.8 149.1 184.0 266.2 4 Agency issues and mortgages -.1 .4 1.5 17.4 -.2 20.9 41.6 -1.2 5.1 -.2 -4.6 29.6 5 Private domestic nonfinancial sectors 622.7 616.1 548.3 597.1 562.0 586.8 592.2 549.0 601.5' 535.8 561.7 475.4 6 Debt capital instruments 451.4 460.3 458.5 454.6 412.4 458.8 432.4 412.0 429.0' 400.2 408.2 364.5 7 Tax-exempt obligations 135.4 22.7 34.1 34.0 25.4 34.8 34.3 29.3 23.0 35.0 14.3 37.4 8 Corporate bonds 73.8 121.3 99.9 114.1 114.3 110.9 98.4 100.4 127.9 102.5 126.6 87.9 9 Mortgages 242.2 316.3 324.5 306.5 272.6 313.1 299.7 282.3 278.2' 262.7 267.3 239.2 10 Home mortgages 156.8 218.7 234.9 231.0 214.9 230.9 214.0 205.6 217.7' 207.7 228.7 190.6 11 Multifamily residential 29.8 33.5 24.4 16.7 14.4 19.4 17.3 18.3 16.C 14.7 8.5 19.7 12 Commercial 62.2 73.6 71.6 60.8 43.7 65.4 67.7 62.8 42.4' 40.2 29.3 30.3 13 Farm -6.6 -9.5 -6.4 -2.1 -.3 -2.6 .7 -4.4 2.2' .1 .8 -1.3 14 Other debt instruments 171.3 155.8 89.7 142.5 149.6 128.0 159.8 137.0 172.5' 135.6 153.4 110.9 15 Consumer credit 82.5 58.0 32.9 51.1 39.1 35.5 73.1 22.5 42.2' 30.5 61.1 3.4 16 Bank loans n.e.c 38.6 66.7 10.8 38.4 45.5 7.3 66.6 15.6 35.1' 60.1 71.2 -3.0 17 Open market paper 14.6 -9.3 2.3 11.6 20.8 17.1 20.0 41.4 39.2 16.7 -14.3 68.8 18 Other 35.6 40.5 43.8 41.5 44.3 68.0 .1 57.4 56.C 28.3 35.4 41.7 19 By borrowing sector 622.7 616.1 548.3 597.1 562.0 586.8 592.2 549.0 601.5' 535.8 561.7 475.4 20 State and local governments 90.9 36.2 33.6 29.8 24.6 28.1 30.6 29.7 27.6 29.5 11.7 32.8 21 Households 284.6 289.2 271.9 289.8 277.6 291.4 283.5 243.7 260.9' 282.7 323.3 223.6 22 Nonfinancial business 247.2 290.7 242.8 277.5 259.7 267.3 278.0 275.6 313.C 223.6 226.7 219.0 23 Farm -14.5 -16.3 -10.6 -7.5 -.4 -2.2 -11.8 1.0 -3.C -9.4 9.6 9.3 24 Nonfarm noncorporate 129.3 103.2 107.9 87.4 64.1 100.5 80.4 86.3 66.1' 58.1 46.1 52.8 25 Corporate 132.4 203.7 145.5 197.5 196.0 169.0 209.4 188.2 249.9' 174.9 171.0 156.8 26 Foreign net borrowing in United States 1.2 9.7 4.9 6.9 9.8 4.1 13.3 -2.3 .4' 25.6 15.5 16.8 27 Bonds 3.8 3.1 7.4 6.9 4.9 5.9 5.1 3.2 10.7 8.4 -2.5 6.6 28 Bank loans n.e.c -2.8 -1.0 -3.6 -1.8 -.1 .0 -5.7 4.9 1.7 -1.2 -5.8 -2.5 29 Open market paper 6.2 11.5 2.1 9.6 12.3 10.3 21.0 10.2 -6.1' 20.4 24.9 16.0 30 U.S. government loans -6.0 -3.9 -1.0 -7.8 -7.4 -12.1 -7.1 -20.7 -5.9T -2.0 -1.1 -3.3 31 Total domestic plus foreign 847.5 840.9 698.1 761.4 721.6 753.3 747.6 746.6 672.8' 710.3 756.6 788.0 Financial sectors 32 Total net borrowing by financial sectors ... 201.3 318.9 315.0 246.5 210.8 216.3 302.5 387.2 117.0' 132.9 205.9 189.9 By instrument 33 U.S. government related 101.5 187.9 185.8 119.8 155.8 128.6 156.7 205.7 101.4 129.7 186.3 151.9 34 Sponsored credit agency securities 20.6 15.2 30.2 44.9 25.2 46.5 62.3 84.9 12.5 10.0 -6.5 32.0 35 Mortgage pool securities 79.9 173.1 156.4 74.9 130.5 82.1 94.4 120.8 88.9 119.6 192.8 120.0 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 55.0 87.7 145.8 181.5 15.6' 3.3 19.6 38.0 38 Corporate bonds 50.9 82.9 78.9 51.7 37.0 32.5 43.0 54.0 31.4 24.9 37.7 37.1 39 Mortgages .1 .1 .4 .3 .0 -.1 1.2 .3 .0 .3 -.6 -.4 40 Bank loans n.e.c 2.6 4.0 -3.3 1.4 1.8 -5.6 -.3 3.0 .3 1.7 2.1 9.1 41 Open market paper 32.0 24.2 28.8 53.6 27.2 35.1 70.4 55.2 20.0 32.8 1.7 42 Loans from Federal Home Loan Banks 14.2 19.8 24.4 19.7 -11.0 25.8 31.4 69.1 -16.9 -43.7 -52.4 -9.6 By sector 43 Total 201.3 318.9 315.0 246.5 210.8 216.3 302.5 387.2 117.0' 132.9 205.9 189.9 44 Sponsored credit agencies 21.7 14.9 29.5 44.9 25.2 46.5 62.3 84.9 12.5 10.0 -6.5 32.0 45 Mortgage pools 79.9 173.1 156.4 74.9 130.5 82.1 94.4 120.8 88.9 119.6 192.8 120.0 46 Private financial sectors 99.7 131.0 129.2 126.7 55.0 87.7 145.8 181.5 15.6' 3.3 19.6 38.0 47 Commercial banks -4.9 -3.6 7.1 -3.9 -1.4 -.9 3.7 -13.4 -.9 12.3 -3.5 4.4 48 Bank affiliates 16.6 15.2 14.3 5.2 6.2 6.1 .8 6.4 6.5 16.8 -4.9 -9.6 49 Savings and loan associations 17.3 20.9 19.6 19.9 -14.1 24.1 26.3 71.3 -16.2 -48.3 -63.3 -12.4 50 Mutual savings banks 1.5 4.2 8.1 1.9 -1.4 .5 3.8 -2.8 -1.1 -3.3 1.4 -.9 51 Finance companies 57.2 54.5 40.3 67.0 46.2 40.7 63.6 80.3 22.5 51.1 24.3 52 REITs .5 1.0 .8 4.1 -1.2 -5.9 15.0 -.9 -2.2 -2.4 .5 -1.0 53 SCO Issuers 11.5 39.0 39.1 32.5 20.8 23.1 32.5 40.6 -1.4 5.7 38.2 33.3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • August 1990 1.57—Continued 1988 1989 1990 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998855 11998866 11998877 11998888 II9988YY Q3 Q4 Ql' Q2 Q3' Q4' Ql All sectors 54 Total net borrowing 1,048.8 1,159.8 1,013.2 1,007.9 932.4 969.7 1,050.1 1,133.8 789.8' 843.3 962.5 977.9 55 U.S. government securities 324.2 403.4 331.5 277.2 305.6 291.1 298.8 405.6 172.3 278.6 365.7 447.7 56 State and local obligations 135.4 22.7 34.1 34.0 25.4 34.8 34.3 29.3 23.0 35.0 14.3 37.4 57 Corporate and foreign bonds 128.4 207.3 186.3 172.7 156.3 149.3 146.4 157.6 170.0 135.7 161.8 131.6 58 Mortgages 242.2 316.4 324.9 306.7 272.6 313.0 300.8 282.6 278.1' 263.0 266.7 238.9 59 Consumer credit 82.5 58.0 32.9 51.1 39.1 35.5 73.1 22.5 42.2' 30.5 61.1 3.4 60 Bank loans n.e.c 38.3 69.7 3.8 38.0 47.2 1.7 60.7 23.6 37.1' 60.6 67.5 3.7 61 Open market paper 52.8 26.4 33.2 74.9 60.3 62.5 111.5 106.8 34.0 57.1 43.4 86.5 62 Other loans 45.0 56.1 66.5 53.4 25.9 81.7 24.4 105.9 33.1' -17.3 -18.0 28.8 63 MEMO: U.S. government, cash balance 14.4 .0 -7.9 10.4 -5.9 10.6 -17.9 -22.5 43.7 -16.6 -28.2 27.3 Totals net of changes in U.S. government cash balances 64 Net borrowing by domestic nonfinancial 831.9 831.2 701.1 744.2 717.7 738.6 752.2 771.4 628.7' 701.4 769.3 743.9 65 Net borrowing by U.S. government 209.3 215.0 152.8 147.1 155.7 151.8 160.0 222.4 27.2 165.6 207.7 268.5 External corporate equity funds raised in United States 66 Total net share issues 20.1 90.5 14.3 -117.9 -60.8 -73.5 -163.5 -162.9 -48.8 -41.0 9.3 -7.2 67 Mutual funds 84.4 159.0 71.6 -.7 38.3 1.5 11.9 3.6 24.0 54.8 70.8 55.9 68 All other -64.3 -68.5 -57.3 -117.2 -99.1 -75.0 -175.4 -166.5 -72.7 -95.8 -61.5 -63.1 69 Nonfinancial corporations -81.5 -80.8 -76.5 -130.5 -130.8 -92.0 -195.0 -180.0 -105.0 -145.0 -93.0 -78.0 70 Financial corporations 13.5 11.1 21.4 12.4 14.0 14.6 13.5 10.0 17.3 14.2 14.6 16.5 71 Foreign shares purchased in United States 3.7 1.2 -2.1 .9 17.6 2.4 6.1 3.6 15.0 35.0 16.9 -1.7 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 1990 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11998855 11998866 11998877 11998888 11998899^^ Q3 Q4 Qir Q2' Q3' Q4' Ql 1 Total funds advanced in credit markets to domestic nonfinancial sectors 846.3 831.1 693.2 754.5 711.8 749.3 734.2 748.9 672.4 668844..77 774411..11 777711..22 By public agencies and foreign 7 Total net advances 202.0 314.0 262.8 215.5 193.8 118811..22 225555..88 331100..88 --22..44 222200..44 224466..33 113322..22 3 U.S. government securities 45.9 69.4 70.1 85.0 30.1 24.1 119.6 77.6 -105.9 116.5 32.3 -25.7 4 Residential mortgages 94.6 170.1 153.2 86.3 144.2 82.4 105.5 123.4 101.7 139.3 212.3 137.6 5 FHLB advances to thrifts 14.2 19.8 24.4 19.7 -11.0 25.8 31.4 69.1 -16.9 -43.7 -52.4 -9.6 6 Other loans and securities 47.3 54.7 15.1 24.4 30.4 49.0 -.7 40.7 18.7 8.3 54.1 29.8 Total advanced, by sector 7 U.S. government 17.8 9.7 -7.9 -9.4 -1.4 4.3 -27.1 -1.1 -3.9 --1122..22 1111..55 88..88 8 Sponsored credit agencies 103.5 187.2 183.4 112.0 130.1 114.4 152.8 194.3 8.0 132.1 186.2 113377..44 9 Monetary authorities 18.4 19.4 24.7 10.5 -7.3 15.5 18.9 5.2 -3.9 -30.7 ..11 -7.7 10 Foreign 62.3 97.8 62.7 102.3 72.4 47.0 111.2 112.5 -2.6 131.1 4488..55 -6.4 Agency and foreign borrowing not in line 1 II Sponsored credit agencies and mortgage pools 101.5 187.9 185.8 119.8 155.8 128.6 115566..77 220055..77 110011..44 112299..77 118866..33 115511..99 12 Foreign 1.2 9.7 4.9 6.9 9.8 4.1 13.3 -2.3 .4 25.6 15.5 16.8 Private domestic funds advanced 13 Total net advances 747.0 714.8 621.1 665.8 683.6 700.8 648.5 641.4 777766..77 661199..77 669966..66 880077..77 14 U.S. government securities 278.2 333.9 261.4 192.2 275.4 267.0 179.3 328.0 278.2 162.2 333.4 473.4 15 State and local obligations 135.4 22.7 34.1 34.0 25.4 34.8 34.3 29.3 23.0 35.0 14.3 37.4 16 Corporate and foreign bonds 40.8 84.2 87.5 97.6 103.7 86.8 66.5 80.9 129.0 107.2 97.9 80.8 17 Residential mortgages 91.8 82.0 106.1 161.3 85.1 167.9 125.8 100.5 131.9 83.1 24.9 72.7 18 Other mortgages and loans 214.8 211.8 156.5 200.3 182.9 170.0 274.0 171.8 197.6 188.5 173.8 133.8 19 LESS: Federal Home Loan Bank advances 14.2 19.8 24.4 19.7 -11.0 25.8 31.4 69.1 -16.9 -43.7 -52.4 -9.6 Private financial intermediation 70 Credit market funds advanced by private financial 579.9 744.0 560.8 561.2 514.2 429.1 634.9 556644..99 552233..33 332233..44 664455..33 661111..11 71 Commercial banking 186.0 197.5 136.8 155.3 177.1 118.4 220.5 120.6 158.6 166.6 262.5 169.9 77 Savings institutions 87.9 107.6 136.8 120.4 -92.9 156.9 94.0 34.3 -73.2 -135.9 -197.1 -63.7 71 154.4 174.6 210.9 198.0 183.1 152.2 190.1 257.1 162.1 122.8 190.5 196.4 24 Other finance 151.6 264.2 76.3 87.4 247.0 1.7 130.3 152.9 275.8 169.8 389.4 308.5 75 579.9 744.0 560.8 561.2 514.2 429.1 634.9 564.9 523.3 323.4 645.3 611.1 76 Private domestic deposits and RPs 214.3 262.6 144.1 219.9 207.7 191.3 277.9 128.4 174.2 255.4 273.0 196.6 77 Credit market borrowing 99.7 131.0 129.2 126.7 55.0 87.7 145.8 181.5 15.6 3.3 19.6 38.0 78 Other sources 265.9 350.4 287.5 214.6 251.5 150.1 211.2 255.0 333.5 64.7 352.8 376.5 79 Foreign funds 19.7 12.9 43.7 9.3 -11.6 -41.5 45.2 -28.6 -19.4 22.7 -21.3 5.1 30 10.3 1.7 -5.8 7.3 -3.4 5.6 -4.1 -21.6 26.6 -15.0 -3.6 15.9 31 Insurance and pension reserves 131.9 149.3 176.1 177.6 153.6 87.3 253.9 187.9 125.1 37.9 263.6 103.3 32 Other, net 104.1 186.5 73.6 20.4 112.9 98.8 -83.7 117.3 201.1 19.1 114.1 252.3 Private domestic nonfinancial investors 33 Direct lending in credit markets 266.8 101.8 189.6 231.3 224.4 359.3 159.4 225588..00 226699..00 229999..66 7700..99 223344..66 34 U.S. government securities 157.8 60.9 100.0 131.8 150.0 209.3 140.5 213.2 128.3 179.2 79.4 199.3 35 State and local obligations 37.7 -21.7 45.6 33.9 15.8 56.0 22.1 35.8 -9.1 35.8 .9 -1.3 36 Corporate and foreign bonds 4.2 39.3 24.1 -4.1 24.3 -6.1 -29.4 -33.0 70.8 10.6 48.6 -4.6 37 Open market paper 47.5 5.4 6.6 37.2 4.5 75.6 -1.3 44.9 18.9 53.5 -99.3 25.3 38 Other 19.6 17.9 13.3 32.6 29.8 24.5 27.4 -2.8 60.1 20.4 41.3 15.9 39 Deposits and currency 224.6 283.0 160.2 222.5 226.9 215.1 248.7 173.6 213.6 232.9 287.5 228.3 40 12.4 14.4 19.0 14.7 11.7 29.3 5.1 19.3 12.6 9.1 5.7 25.7 41 Checkable deposits 41.9 95.0 -3.0 12.4 .6 -22.3 97.8 -54.1 -93.2 -3.5 153.1 -23.9 47 Small time and savings accounts 138.5 120.6 76.0 122.8 100.5 73.1 86.1 19.9 111.2 130.0 140.8 132.3 43 Money market fund shares 8.9 38.3 27.2 22.8 84.8 -3.5 58.1 51.1 111.8 124.3 51.9 85.8 44 Large time deposits 7.4 -11.4 26.7 40.7 20.9 136.9 12.6 97.9 29.9 10.7 -55.0 5.6 45 Security RPs 17.7 20.2 17.2 21.2 1.1 7.0 23.3 13.6 14.5 -6.0 -17.8 -3.2 46 Deposits in foreign countries -2.1 5.9 -2.8 -12.1 7.5 -5.5 -34.4 25.9 26.8 -31.6 8.8 6.0 47 Total of credit market instruments, deposits, and currency 491.4 384.8 349.8 453.8 451.3 574.4 408.1 431.6 482.6 553322..55 335588..44 446622..99 48 Public holdings as percent of total 23.8 37.3 37.6 28.3 26.9 24.1 34.2 41.6 -.4 31.0 32.6 16.8 49 Private financial intermediation (in percent) 77.6 104.1 90.3 84.3 75.2 61.2 97.9 8888..11 67.4 52.2 92.6 75.7 50 Total foreign funds 82.0 110.7 106.4 111.6 60.8 5.4 156.4 8833..99 -22.0 153.9 27.2 -1.2 MEMO: Corporate equities not included above 51 Total net issues 20.1 90.5 14.3 -117.9 --6600..88 -73.5 --116633..55 --116622..99 --4488..88 --4411..00 99..33 --77..22 57 Mutual fund shares 84.4 159.0 71.6 -.7 38.3 1.5 11.9 3.6 24.0 54.8 70.8 55.9 53 Other equities -64.3 -68.5 -57.3 -117.2 -99.1 -75.0 -175.4 -166.5 -72.7 -95.8 -61.5 -63.1 54 Acquisitions by financial institutions 45.6 53.7 21.4 .5 5.2 13.2 20.9 -1.1 -11.6 -11.8 45.3 52.8 55 Other net purchases -25.5 36.8 -7.1 -118.4 -66.0 -86.7 -184.4 -161.8 -37.1 -29.2 -36.0 -60.0 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 Financial Statistics • August 1990 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING Billions of dollars; period-end levels. 1988 1989 1990 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr Q3 Q4 Qlr Q2r Q3r Q4r Ql Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 6,795.1 7,631.2 8,335.0 9,080.8 8,856.6 9,080.8 9,240.7 9,415.1 9,591.5 9,806.5 9,987.4 By sector and instrument 2 U.S. government 1,600.4 1,815.4 1,960.3 2,117.8 2,063.9 2,117.8 2,155.7 2,165.7 2,204.3 2,267.6 2,359.1 3 Treasury securities 1,597.1 1,811.7 1,955.2 2,095.2 2,051.7 2,095.2 2,133.4 2,142.1 2,180.7 2,245.2 2,329.3 4 Agency issues and mortgages 3.3 3.6 5.2 22.6 12.2 22.6 22.3 23.6 23.5 22.4 29.8 5 Private domestic nonfinancial sectors 5,194.7 5,815.8 6,374.7 6,963.1 6,792.7 6,963.1 7,084.9 7,249.4 7,387.2 7,539.0 7,628.4 6 Debt capital instruments 3,485.5 3,957.5 4,428.0 4,881.8 4,763.3 4,881.8 4,971.9 5,079.8 5,186.1 5,294.2 5,372.1 V Tax-exempt obligations 655.5 679.1 713.2 759.8 746.1 759.8 764.7 769.9 781.5 785.2 792.1 8 Corporate bonds 542.9 664.2 764.1 878.2 853.6 878.2 903.3 935.3 960.9 992.5 1,014.5 9 Mortgages 2,287.1 2,614.2 2,950.7 3,243.8 3,163.6 3,243.8 3,303.9 3,374.6 3,443.7 3,516.4 3,565.6 10 Home mortgages 1,490.2 1,720.8 1,943.1 2,173.9 2,117.8 2,173.9 2,215.1 2,271.5 2,328.9 2,388.9 2,426.0 11 Multifamily residential 213.0 246.2 270.0 286.7 281.0 286.7 290.4 294.2 297.5 301.1 305.0 12 Commercial 478.1 551.4 648.7 696.4 677.9 696.4 712.5 722.2 730.8 740.0 748.2 13 Farm 105.9 95.8 88.9 86.8 87.0 86.8 86.0 86.7 86.6 86.5 86.4 14 Other debt instruments 1,709.3 1,858.4 1,946.7 2,081.3 2,029.4 2,081.3 2,113.0 2,169.7 2,201.1 2,244.8 2,256.3 15 Consumer credit 601.8 659.8 692.7 743.7 721.2 743.7 741.7 756.7 771.0 790.6 775.4 16 Bank loans n.e.c 592.7 656.1 664.3 702.6 687.7 702.6 715.9 729.4 743.6 758.3 757.4 17 Open market paper 72.2 62.9 73.8 85.4 80.3 85.4 96.1 110.1 113.3 107.1 123.7 18 Other 442.6 479.6 516.0 549.5 540.2 549.5 559.4 573.5 573.2 588.8 599.8 19 By borrowing sector 5,194.7 5,815.8 6,374.7 6,963.1 6,792.7 6,963.1 7,084.9 7,249.4 7,387.2 7,539.0 7,628.4 20 State and local governments 473.9 510.1 543.7 573.5 565.7 573.5 578.5 584.8 595.1 598.1 603.8 21 Households 2,295.5 2,591.8 2,864.5 3,151.7 3,068.0 3,151.7 3,200.8 3,269.3 3,348.2 3,442.3 3,472.5 22 Nonfinancial business 2,425.4 2,714.0 2,966.5 3,237.9 3,159.0 3,237.9 3,305.6 3,395.3 3,443.9 3,498.6 3,552.0 23 Farm 173.4 156.6 145.5 137.6 143.6 137.6 136.7 139.4 137.7 137.1 138.3 24 Nonfarm noncorporate 898.3 1,001.6 1,109.4 1,200.9 1,172.6 1,200.9 1,223.5 1,239.3 1,249.1 1,265.0 1,279.2 25 Corporate 1,353.6 1,555.8 1,711.6 1,899.4 1,842.9 1,899.4 1,945.5 2,016.6 2,057.2 2,096.4 2,134.5 26 Foreign credit market debt held in United States 234.7 236.4 242.9 249.8 246.1 249.8 249.5 249.7 255.2 259.4 264.1 2277 Bonds 71.8 74.9 82.3 89.2 87.4 89.2 90.5 92.1 94.2 94.2 96.4 28 Bank loans n.e.c 27.9 26.9 23.3 21.5 22.7 21.5 21.6 22.7 22.6 21.4 19.6 29 Open market paper 33.9 37.4 41.2 50.9 46.3 50.9 54.4 52.7 57.5 63.0 68.2 30 U.S. government loans 101.1 97.1 96.1 88.3 89.8 88.3 83.0 82.2 80.9 80.9 79.9 31 Total domestic plus foreign 7,029.9 7,867.6 8,578.0 9,330.7 9,102.8 9,330.7 9,490.1 9,664.8 9,846.7 10,066.0 10,251.5 Financial sectors 32 Total credit market debt owed by financial sectors 1,213.2 1,563.6 1,885.5 2,084.1 1,996.5 2,084.1 2,191.3 2,229.9 2,262.8 2,327.3 2,351.4 By instrument 33 U.S. government related 632.7 844.2 1,026.5 1,098.4 1,054.6 1,098.4 1,140.8 1,166.5 1,202.6 1,254.1 1,282.5 34 Sponsored credit agency securities 257.8 273.0 303.2 348.1 328.5 348.1 364.3 369.0 370.4 373.3 376.0 a Mortgage pool securities 368.9 565.4 718.3 745.3 721.1 745.3 771.5 792.5 827.2 875.8 901.5 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 580.5 719.5 859.0 985.7 941.9 985.7 1,050.5 1,063.5 1,060.2 1,073.2 1,068.9 38 Corporate bonds 204.5 287.4 366.3 418.0 406.4 418.0 458.6 466.1 472.7 483.0 491.3 39 Mortgages 2.7 2.7 3.1 3.4 3.1 3.4 3.5 3.5 3.5 3.4 3.3 40 Bank loans n.e.c 32.1 36.1 32.8 34.2 32.9 34.2 32.2 33.8 34.1 36.0 35.4 41 Open market paper 252.4 284.6 323.8 377.4 358.0 377.4 392.5 398.3 398.8 409.1 406.1 42 Loans from Federal Home Loan Banks... 88.8 108.6 133.1 152.8 141.6 152.8 163.8 161.9 151.1 141.8 132.9 43 Total, by sector 1,213.2 1,563.6 1,885.5 2,084.1 1,996.5 2,084.1 2,191.3 2,229.9 2,262.8 2,327.3 2,351.4 44 Sponsored credit agencies 263.9 278.7 308.2 353.1 333.5 353.1 369.3 374.0 375.4 378.3 381.0 43 Mortgage pools 368.9 565.4 718.3 745.3 721.1 745.3 771.5 792.5 827.2 875.8 901.5 46 Private financial sectors 580.5 719.5 859.0 985.7 941.9 985.7 1,050.5 1,063.5 1,060.2 1,073.2 1,068.9 47 Commercial banks 79.2 75.6 82.7 78.8 76.6 78.8 73.3 74.5 77.0 77.4 76.4 48 Bank affiliates 106.2 116.8 131.1 136.2 136.3 136.2 140.0 141.2 144.0 142.4 142.3 49 Savings and loan associations 98.9 119.8 139.4 159.3 148.1 159.3 170.1 167.9 155.7 145.2 134.7 30 Mutual savings banks 4.4 8.6 16.7 18.6 18.1 18.6 17.8 17.7 17.5 17.2 16.9 31 Finance companies 261.2 328.1 378.8 445.8 427.7 445.8 464.3 478.0 481.2 496.5 496.1 32 REITs 5.6 6.5 7.3 11.4 7.6 11.4 11.1 10.6 10.0 10.1 9.9 33 SCO issuers 25.0 64.0 103.1 135.7 127.5 135.7 173.8 173.5 174.9 184.4 192.8 All sectors 54 Total credit market debt 8,243.1 9,431.2 10,463.4 11,414.8 11,099.3 11,414.8 11,681.5 11,894.8 12,109.5 12,393.3 12,602.9 55 U.S. government securities 2,227.0 2,653.8 2,981.8 3,211.1 3,113.5 3,211.1 3,291.5 3,327.2 3,401.8 3,516.7 3,636.5 36 State and local obligations 655.5 679.1 713.2 759.8 746.1 759.8 764.7 769.9 781.5 785.2 792.1 57 Corporate and foreign bonds 819.2 1,026.4 1,212.7 1,385.4 1,347.4 1,385.4 1,452.3 1,493.5 1,527.8 1,569.6 1,602.2 58 Mortgages 2,289.8 2,617.0 2,953.8 3,247.2 3,166.7 3,247.2 3,307.4 3,378.1 3,447.3 3,519.8 3,568.9 59 Consumer credit 601.8 659.8 692.7 743.7 721.2 743.7 741.7 756.7 771.0 790.6 775.4 60 Bank loans n.e.c 652.7 719.1 720.3 758.3 743.3 758.3 769.7 785.8 800.3 815.6 812.4 61 Open market paper 358.5 384.9 438.8 513.6 484.6 513.6 543.1 561.1 569.6 579.2 598.0 62 Other loans 638.6 691.1 750.2 795.6 776.5 795.6 811.1 822.6 810.2 816.5 817.5 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 1990 TTrraannssaaccttiioonn ccaatteeggoorryy,, oorr sseeccttoorr 11998855 11998866 11998877 11998888 Q3 Q4 Ql' Q2' Q3f Q4' Ql 1 Total funds advanced in credit markets to domestic nonfinancial sectors 6,795.1 7,631.2 8,335.0 9,080.8 8,856.6 9,080.8 9,240.7 9,415.1 9,591.5 9,806.5 9,987.4 By public agencies and foreign 2 Total held 1,460.5 1,794.7 2,044.9 2,196.5 2,130.2 2,196.5 2,252.4 2,258.2 2,315.7 2,385.3 2,400.4 3 U.S. government securities 423.8 493.2 563.3 648.3 613.3 648.3 661.2 638.7 664.7 678.5 665.0 4 Residential mortgages 518.2 712.3 862.0 900.4 873.3 900.4 927.2 951.2 990.9 1,044.6 1,074.6 5 FHLB advances to thrifts 88.8 108.6 133.1 152.8 141.6 152.8 163.8 161.9 151.1 141.8 132.9 6 Other loans and securities 429.7 480.5 486.6 495.0 502.1 495.0 500.3 506.4 509.0 520.5 527.9 7 Total held, by type of lender 1,460.5 1,794.7 2,044.9 2,196.5 2,130.2 2,196.5 2,252.4 2,258.2 2,315.7 2,385.3 2,400.4 8 U.S. government 246.7 253.3 238.0 212.7 226.3 212.7 208.3 207.9 205.3 206.3 209.5 9 Sponsored credit agencies and mortgage pools ... 659.8 869.8 1,048.9 1,113.0 1,071.2 1,113.0 1,151.1 1,154.6 1,192.6 1,243.1 1,266.4 10 Monetary authority 186.0 205.5 230.1 240.6 230.8 240.6 235.4 238.4 227.6 233.3 224.4 11 Foreign 367.9 466.1 527.9 630.3 601.9 630.3 657.6 657.3 690.1 702.7 700.1 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 1,054.6 1,098.4 1,140.8 1,166.5 1,202.6 1,254.1 1,282.5 13 Foreign 234.7 236.4 242.9 249.8 246.1 249.8 249.5 249.7 255.2 259.4 264.1 Private domestic holdings 14 Total private holdings 6,202.1 6,917.1 7,559.5 8,232.5 8,027.2 8,232.5 8,378.5 8,573.1 8,733.6 8,934.8 9,133.6 15 U.S. government securities 1,803.2 2,160.6 2,418.5 2,562.8 2,500.3 2,562.8 2,630.3 2,688.5 2,737.2 2,838.3 2,971.6 16 State and local obligations 655.5 679.1 713.2 759.8 746.1 759.8 764.7 769.9 781.5 785.2 792.1 17 Corporate and foreign bonds 517.6 601.3 689.6 787.2 770.6 787.2 808.7 839.6 866.3 891.0 912.7 18 Residential mortgages 1,185.1 1,254.7 1,351.1 1,560.2 1,525.5 1,560.2 1,578.3 1,614.5 1,635.5 1,645.4 1,656.4 19 Other mortgages and loans 2,129.7 2,330.0 2,520.1 2,715.2 2,626.3 2,715.2 2,760.2 2,822.5 2,864.2 2,916.8 2,933.7 20 LESS: Federal Home Loan Bank advances 88.8 108.6 133.1 152.8 141.6 152.8 163.8 161.9 151.1 141.8 132.9 Private financial intermediation 21 Credit market claims held by private financial institutions 5,283.1 6,025.7 6,604.6 7,167.5 7,002.7 7,167.5 7,306.9 7,461.0 7,546.1 7,703.9 7,833.1 22 Commercial banking 1,978.9 2,176.3 2,313.1 2,468.4 2,421.6 2,468.4 2,490.9 2,538.2 2,588.6 2,645.5 2,680.9 23 Savings institutions 1,191.2 1,297.9 1,445.5 1,567.7 1,535.2 1,567.7 1,565.5 1,556.1 1,526.2 1,478.7 1,446.9 24 Insurance and pension funds 1,369.7 1,544.3 1,755.2 1,953.3 1,901.9 1,953.3 2,007.0 2,050.9 2,085.2 2,136.4 2,173.8 25 Other finance 743.4 1,007.1 1,090.7 1,178.1 1,144.0 1,178.1 1,243.5 1,315.7 1,346.1 1,443.4 1,531.5 26 Sources of funds 5,283.1 6,025.7 6,604.6 7,167.5 7,002.7 7,167.5 7,306.9 7,461.0 7,546.1 7,703.9 7,833.1 27 Private domestic deposits and RPs 2,930.0 3,188.4 3,324.8 3,560.2 3,480.0 3,560.2 3,584.1 3,631.0 3,690.3 3,767.8 3,808.0 28 Credit market debt 580.5 719.5 859.0 985.7 941.9 985.7 1,050.5 1,063.5 1,060.2 1,073.2 1,068.9 29 Other sources 1,772.7 2,117.9 2,420.8 2,621.5 2,580.7 2,621.5 2,672.3 2,766.5 2,795.6 2,862.9 2,956.1 30 Foreign funds 5.6 18.6 62.2 71.5 52.0 71.5 61.8 50.0 55.7 59.9 57.9 31 Treasury balances 25.8 27.5 21.6 29.0 34.2 29.0 13.5 34.4 30.3 25.6 18.5 32 Insurance and pension reserves 1,289.4 1,427.9 1,597.2 1,761.8 1,722.3 1,761.8 1,811.2 1,844.9 1,863.9 1,909.2 1,943.5 33 Other, net 451.8 643.9 739.6 759.2 772.4 759.2 785.7 837.2 845.6 868.3 936.2 Private domestic nonfinancial investors 34 Credit market claims 1,499.5 1,610.8 1,813.9 2,050.7 1,966.4 2,050.7 2,122.1 2,175.6 2,247.8 2,304.1 2,369.5 35 U.S. government securities 814.7 899.1 992.0 1,077.8 1,022.3 1,077.8 1,109.8 1,132.3 1,186.1 1,227.8 1,285.8 36 Tax-exempt obligations 231.9 211.2 256.8 303.7 289.0 303.7 307.2 308.8 316.3 319.5 313.2 37 Corporate and foreign bonds 38.0 77.8 102.2 93.9 106.1 93.9 125.7 135.4 141.0 147.5 158.3 38 Open market paper 131.0 136.4 160.7 200.9 185.8 200.9 208.0 218.0 221.4 210.6 206.5 39 Other 283.8 286.2 302.3 374.5 363.2 374.5 371.3 381.0 383.0 398.6 405.7 40 Deposits and currency 3,120.4 3,399.2 3,553.9 3,791.9 3,710.3 3,791.9 3,819.2 3,879.9 3,927.8 4,018.6 4,058.2 41 Currency 171.9 186.3 205.4 220.1 213.4 220.1 220.7 226.4 224.4 231.8 233.8 42 Checkable deposits 422.5 517.4 514.0 525.3 495.9 525.3 492.8 494.0 485.0 525.9 500.9 43 Small time and savings accounts 1,831.9 1,948.3 2,017.1 2,156.5 2,137.3 2,156.5 2,168.9 2,189.3 2,224.4 2,256.7 2,297.5 44 Money market fund shares 227.3 265.6 292.8 315.6 303.6 315.6 340.3 359.9 389.2 400.4 434.0 45 Large time deposits 339.9 328.5 355.2 395.9 384.7 395.9 412.5 417.2 421.8 416.9 409.2 46 Security RPs 108.3 128.5 145.7 166.9 158.6 166.9 169.6 170.7 169.8 167.9 166.5 47 Deposits in foreign countries 18.5 24.5 23.7 11.6 16.8 11.6 14.4 22.5 13.1 19.1 16.4 48 Total of credit market instruments, deposits, and currency 4,619.9 5,010.0 5,367.8 5,842.6 5,676.7 5,842.6 5,941.3 6,055.5 6,175.6 6,322.7 6,427.7 49 Public holdings as percent of total 20.8 22.8 23.8 23.5 23.4 23.5 23.7 23.4 23.5 23.7 23.4 50 Private financial intermediation (in percent) 85.2 87.1 87.4 87.1 87.2 87.1 87.2 87.0 86.4 86.2 85.8 51 Total foreign funds 373.5 484.7 590.2 701.8 653.8 701.8 719.4 707.3 745.9 762.6 758.0 MEMO: Corporate equities not included above 52 Total market value 2,823.9 3,360.6 3,325.0 3,620.3 3,577.6 3,620.3 3,731.8 4,072.4 4,398.9 4,382.4 4,335.2 53 Mutual fund shares 240.2 413.5 460.1 478.3 478.1 478.3 486.3 514.8 539.7 551.9 548.5 54 Other equities 2,583.7 2,947.1 2,864.9 3,142.0 3,099.5 3,142.0 3,245.4 3,557.7 3,859.2 3,830.6 3,786.6 55 Holdings by financial institutions 800.0 972.1 1(013.8 1,186.1 1,160.0 1,186.1 1,253.4 1,366.3 1,500.5 1,505.0 1,476.4 56 Other holdings 2,023.9 2,388.4 2,311.2 2,434.2 2,417.6 2,434.2 2,478.4 2,706.2 2,898.4 2,877.4 2,858.7 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 • August 1990 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures1 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1989 1990 MMeeaassuurree 11998877 11998888 11998899 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May 1 Industrial production (1987 = 100) 100.0 105.4 108.1 108.2 107.7 108.1 108.6 107.5 108.5 109.0 109.0 109.7 Market groupings 2 Products, total (1987 = 100) 100.0 105.3 108.6 108.8 108.1 108.9 109.7 108.4 109.4 110.2 110.0 110.8 3 Final, total (1987 = 100) 100.0 105.6 109.1 109.6 108.5 109.4 110.3 108.5 109.7 110.8 110.6 111.6 4 Consumer goods (1987 = 100) 100.0 104.0 106.7 106.3 107.3 107.4 108.3 106.0 107.0 107.6 107.4 108.0 5 Equipment (1987 = 100) 100.0 107.6 112.3 113.8 110.1 112.0 112.9 111.8 113.3 114.9 114.8 116.3 6 Intermediate (1987 = 100) 100.0 104.4 106.8 106.3 106.9 107.3 107.9 108.0 108.4 108.3 108.1 108.1 7 Materials (1987 = 100) 100.0 105.6 107.4 107.4 107.1 107.0 106.9 106.2 107.1 107.2 107.5 108.0 Industry groupings 8 Manufacturing (1987 = 100) 100.0 105.8 108.9 109.1 108.4 108.9 108.8 108.1 109.6 109.9 109.7 110.6 Capacity utilization (percent)2 9 Manufacturing 81.4 83.9 83.9 83.6 82.9 83.0 82.8 82.0 83.0 82.9 82.6 83.0 10 Construction contracts (1982 = 100)3 164.8 166.4 170.6 185.0 180.0 167.0 166.0 158.0 154.0 157.0 147.0 155.0 11 Nonagricultural employment, total4 123.9 128.0 131.6 132.3 132.4 132.7 132.9 133.3 133.8 133.9 133.9 134.1 12 Goods-producing, total 101.5 103.7 105.3 105.2 105.2 105.2 104.9 104.8 105.5 105.2 104.7 104.5 13 Manufacturing, total 96.7 98.6 99.6 99.4 99.2 99.1 99.0 98.3 98.8 98.7 98.6 98.4 14 Manufacturing, production- worker ... 91.9 93.9 94.8 94.2 94.1 93.9 93.8 92.8 93.5 93.3 93.3 93.1 15 Service-producing 133.3 138.2 142.7 143.6 143.8 144.2 144.6 145.2 145.6 145.9 146.1 146.5 16 Personal income, total 235.0 252.8 275.4 277.9 280.0 282.5 283.9 286.4 288.5 290.8 291.6 292.4 17 Wages and salary disbursements 226.3 244.4 264.7 268.5 271.0 271.1 272.9 274.1 276.5 278.1 279.7 280.8 18 Manufacturing 183.8 196.5 207.3 208.8 211.1 209.1 209.2 208.1 210.3 212.1 211.4 213.6 19 Disposable personal income5 213.6 228.0 240.7 276.5 278.4 281.2 282.4 285.4 287.4 289.9 290.3 290.9 20 Retail sales 113.6 118.3 124.0 245.2 241.9 243.7 242.8 249.6 249.7 248.7 246.4 244.6 Prices7 21 Consumer (1982-84 = 100) 113.6 118.3 124.0 125.0 125.6 125.9 126.1 127.4 128.0 128.7 128.9 129.2 22 Producer finished goods (1982 = 100) ... 105.4 108.0 113.6 113.6 114.9 114.9 115.4 117.6 117.4 117.0 117.0 117.7 1. A major revision of the industrial production index and the capacity 5. Based on data in Survey of Current Business (U.S. Department of Comutilization rates was released in 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 7. 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 Oct. Nov. Dec. Jan. Feb. Mar/ Apr. May HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 185,010 186,837 188,601 189,096 189,238 189,381 189,506 189,607 189,717 189,844 189,983 2 Labor force (including Armed Forces)1 122,122 123,893 126,077 126,373 126,709 126,762 126,610 126,825 127,017 127,061 127,159 3 Civilian labor force 119,865 121,669 123,869 124,148 124,488 124,546 124,397 124,630 124,829 124,886 125,004 Employment 4 Nonagricultural industries2 109,232 111,800 114,142 114,388 114,676 114,691 114,728 114,957 115,133 114,983 115,045 5 Agriculture 3,208 3,169 3,199 3,197 3,160 3,197 3,134 3,079 3,200 3,133 3,305 Unemployment 6 Number 7,425 6,701 6,528 6,563 6,652 6,658 6,535 6,594 6,495 6,770 6,653 7 Rate (percent of civilian labor force) 6.2 5.5 5.3 5.3 5.3 5.3 5.3 5.3 5.2 5.4 5.3 8 Not in labor force 62,888 62,944 62,524 62,723 62,529 62,619 62,8% 62,782 62,700 62,783 62,824 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 102,200 105,584 108,573 109,171 109,452 109,570 109,931 110,304 110,427 110,404r 110,568 10 Manufacturing 19,024 19,403 19,611 19,537 19,517 19,489 19,355 19,452 19,423 19,404' 19,369 11 Mining 717 721 722 731 737 739 745 749 751 755 757 12 Contract construction 4,967 5,125 5,302 5,335 5,355 5,304 5,418 5,485 5,432 5,332' 5,313 13 Transportation and public utilities 5,372 5,548 5,703 5,729 5,753 5,834 5,850 5,865 5,875 5,871' 5,879 14 Trade 24,327 25,139 25,807 25,957 26,044 26,029 26,154 26,126 26,127 26,145' 26,157 15 Finance 6,547 6,676 6,814 6,851 6,871 6,885 6,8% 6,916 6,922 6,919' 6,924 16 Service 24,236 25,600 26,889 27,188 27,345 27,419 27,557 27,709 27,783 27,761' 27,798 17 Government 17,010 17,372 17,726 17,843 17,830 17,871 17,956 18,002 18,114 18,217' 18,371 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 • August 1990 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1989 1990 1989 1990 1989 1990 SSeerriieess Q2 Q3 Q4 Qlr Q2 Q3 Q4 Ql Q2 Q3 Q4 Qlr Output (1987 = 100) Capacity (percent of 1987 output) Utilization rate (percent) 1 Total industry 108.4 108.1 108.1 108.3 128.0 128.8 129.5 130.3 84.7 84.0 83.5 83.1 2 Mining 101.1 100.8 100.6 101.1 117.2 116.7 116.1 115.7 86.2 86.4 86.9 87.4 3 Utilities 106.3 106.2 110.6 106.1 125.3 125.5 125.7 126.0 84.9 84.6 88.0 84.2 4 Manufacturing 109.3 108.9 108.7 109.2 129.2 130.2 131.1 132.1 84.5 83.7 82.9 82.7 5 Primary processing 106.4 106.4 106.1 106.4 122.0 122.7 123.4 124.2 87.3 86.7 85.9 85.7 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 May Sept. Oct. Nov. Dec. Jan. Feb/ Mar/ Apr/ May Capacity utilization rate (percent) 7 Total industry 89.2 72.6 87.3 71.8 84.6 83.9 83.4 83.5 83.7 82.7 83.2 83.4 83.3 83.6 8 Mining 94.4 88.4 96.6 80.6 86.3 87.2 87.3 87.1 86.3 87.8 87.3 87.2 88.9 88.9 9 Utilities 95.6 82.5 88.3 76.2 84.8 84.3 85.5 86.2 92.3 84.8 82.5 85.4 85.9 84.9 10 Manufacturing 88.9 70.8 87.3 70.0 84.5 83.6 82.9 83.0 82.8 82.0 83.0 82.9 82.6 83.0 11 Primary processing.... 92.2 68.9 89.7 66.8 87.0 86.1 86.6 86.1 85.2 85.7 86.1 85.2 85.1 85.2 12 Advanced processing.. 87.5 72.0 86.3 71.4 83.4 82.5 81.4 81.7 81.8 80.5 81.7 82.0 81.5 82.1 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 1990 pro- 1989 Groups por- avg. tion May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb/ Mar. Apr." Mayf Index (1987 = 100) MAJOR MARKET1 1 Total index 100.0 108.1 108.3 108.4 107.8 108.2 108.2 107.7 108.1 108.6 107.5 108.5 109.0 109.0 109.7 2 Products 60.8 108.6 108.9 109.1 108.2 108.5 108.8 108.1 108.9 109.7 108.4 109.4 110.2 110.0 110.8 1 1 1 1 1 1 1 1 1 1 4 6 8 9 3 7 5 0 1 3 4 5 6 7 8 9 2 Fin C D N a o u o l C P A C F O n r n p a o l a u h s t d o A A M C A p r h u b o e t u t o e o e m d m l u u a h p r T i A e d r r m r s s t t i p a e i n u r o p o c u c c p b l r o a u e g s c i e a o t r l p a t n l t t c o e l g n o i l s a i n a d k v a s n o d s n p r c , c s e n u g o u d t t r , e o c e s m o d o c s p n a c o o b , t s t d a r s n o e r n s u a u u o n A r u d n s s c d m d c u c s / c g t f C u h u k m o s u e a o c o s m , r r l o t e m l n s a i d e r g e i n r e s t o d d u o g r g d T o e o s o V o d d s s 4 2 2 6 0 6 3 9 2 2 5 2 3 1 1 1 . . . . . . . . . . . . . . . . . 0 5 1 1 8 4 6 0 6 5 5 6 9 9 4 5 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 4 6 4 9 7 8 1 3 1 5 8 6 6 1 4 6 9 . . . . . . . . . . . . . . . . . 5 7 3 1 7 3 5 9 7 7 7 4 2 2 9 6 4 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 1 1 0 0 0 0 0 0 0 0 0 1 0 0 2 6 8 6 4 0 4 1 5 4 6 9 9 9 9 9 5 . . . . . . . . . . . . . . . . . 7 8 1 1 5 2 6 9 9 7 2 2 2 2 3 6 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 5 4 6 2 5 2 8 0 7 2 9 9 9 0 6 6 3 . . . . . . . . . . . . . . . . . 7 3 1 3 5 8 9 4 3 8 8 8 5 2 4 7 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 8 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 7 9 3 0 5 5 5 7 1 8 9 1 1 2 9 5 7 . . . . . . . . . . . . . . . . . 1 1 1 3 4 1 1 5 4 7 2 6 0 2 2 6 0 1 1 1 1 1 1 1 1 1 1 1 1 I 1 1 9 9 I 1 0 1 1 0 0 0 0 0 0 0 0 0 0 I 8 5 4 4 5 0 1 9 6 0 6 5 3 5 7 3 . . . . . . . . . . . . . . . . . 3 1 1 1 8 1 1 1 5 6 3 3 8 3 6 9 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 3 5 6 6 6 9 7 5 7 3 1 9 9 0 4 2 . . . . . . . . . . . . . . . . . 1 3 6 8 3 2 8 0 4 0 7 6 6 8 9 9 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 0 0 0 0 1 0 1 1 0 0 0 0 0 0 0 9 8 6 1 7 8 7 0 0 6 7 9 1 7 5 7 2 . . . . . . . . . . . . . . . . . 7 2 8 1 3 5 2 7 3 6 6 8 9 4 6 6 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 1 0 1 0 0 1 0 0 0 0 0 0 0 0 0 2 8 7 0 8 5 7 1 7 5 2 8 8 2 0 9 8 . . . . . . . . . . . . . . . . . 8 1 1 1 4 7 4 3 8 8 0 0 2 4 4 4 4 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 0 0 0 1 1 1 0 1 0 1 1 0 0 0 0 2 9 8 8 7 6 0 6 0 1 4 0 2 1 8 2 6 . . . . . . . . . . . . . . . . . 6 4 1 7 3 8 1 3 5 9 3 2 6 0 6 0 4 1 1 1 1 1 1 1 1 1 1 1 1 9 6 6 8 7 0 1 0 0 1 1 0 1 0 0 0 1 9 2 6 3 5 8 6 7 6 3 6 3 2 0 5 8 0 . . . . . . . . . . . . . . . . . 4 1 3 3 5 2 2 8 0 2 7 7 6 5 4 6 6 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 9 8 0 0 1 0 0 0 0 0 0 1 1 0 1 2 9 6 9 9 2 8 6 9 7 4 7 7 7 2 6 1 . . . . . . . . . . . . . . . . . 7 6 9 7 3 3 2 2 4 7 8 0 2 6 0 2 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 0 1 1 0 0 0 1 1 0 1 2 1 0 0 0 1 7 7 7 1 8 6 7 0 8 0 2 1 9 0 5 5 2 . . . . . . . . . . . . . . . . . 1 4 6 1 0 7 7 8 1 5 5 1 5 9 0 9 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 8 0 0 0 1 0 1 0 1 1 0 0 1 0 1 8 5 7 7 7 7 7 5 8 9 0 1 6 6 2 3 1 . . . . . . . . . . . . . . . . . 7 0 6 1 1 5 4 3 2 3 6 8 1 5 2 0 4 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 0 1 1 2 1 1 0 0 0 1 0 0 0 1 1 8 6 5 2 0 1 8 1 8 6 5 7 8 7 6 3 1 . . . . . . . . . . . . . . . . . 5 8 8 4 7 2 3 5 6 6 0 0 4 4 9 2 6 20 Energy 2.7 106.7 106.1 106.1 105.2 104.7 106.0 106.0 108.0 115.2 107.9 101.5 102.6 103.4 101.7 21 Fuels .7 102.8 100.6 103.0 104.5 102.3 103.4 103.1 103.0 100.5 105.1 106.6 101.8 102.1 99.3 22 Residential utilities 2.0 108.1 108.1 107.2 105.5 105.6 106.9 107.0 109.8 120.7 109.0 99.6 102.9 103.9 102.6 23 Equipment, total 20.0 112.3 113.1 114.3 113.2 113.6 113.8 110.1 112.0 112.9 111.8 113.3 114.9 114.8 116.3 24 Business equipment 13.9 119.1 120.2 121.4 119.9 120.4 120.7 116.0 118.7 119.9 118.0 120.1 122.3 121.9 123.9 25 Information processing and related . 5.6 121.7 122.5 124.0 122.7 122.0 123.7 119.9 123.5 124.0 124.0 124.7 126.1 126.9 128.4 26 Office and computing 1.9 137.2 137.6 139.1 137.1 139.3 141.8 132.8 141.0 142.7 142.7 144.3 147.2 151.4 152.6 27 Industrial 4.0 113.8 113.8 114.9 115.1 113.8 113.8 112.4 113.4 112.8 113.5 113.4 113.9 114.4 115.0 28 Transit 2.5 123.8 127.6 128.3 123.8 128.4 127.0 112.9 117.0 123.4 111.4 122.7 130.6 125.9 132.3 2 3 9 0 Ot A he u r t os and trucks 1 1. . 9 2 1 1 0 1 3 6 . . 9 5 1 1 1 0 7 5 . . 4 3 1 11 0 7 2 . . 4 9 1 9 1 5 6 . . 9 4 1 1 0 1 1 8 . . 6 6 1 1 1 0 9 3 . . 1 1 1 9 1 7 6 . . 6 3 1 9 1 8 7 . . 0 8 1 9 1 7 8 . . 6 5 1 6 1 9 8 . . 6 7 1 9 1 1 7 . . 7 4 1 1 0 1 4 7 . . 5 7 1 9 1 5 7 . . 1 6 1 1 0 1 4 8 . . 9 4 31 Defense and space equipment 5.4 97.4 97.6 98.3 98.7 98.9 98.9 96.6 96.7 96.6 97.5 97.6 97.5 97.3 97.2 3 3 2 3 O M i a l n a u n f d a c g t a u s r e w d e h ll o d m r e il s li ng . . 2 6 9 9 2 3 . . 3 7 9 9 2 2 . . 8 5 9 9 2 6 . . 8 7 8 9 6 5 . . 5 3 8 9 9 5 . . 5 3 8 9 7 7 . . 5 3 9 8 7 7 . . 3 9 9 89 9 . . 4 9 1 9 0 1 0 . . 6 3 9 9 1 8 . . 6 3 1 9 0 4 0 . . 3 1 1 9 0 2 6 . . 9 0 1 8 1 9 4 . . 7 3 1 8 1 9 8 . . 4 6 34 Intermediate products, total 14.7 106.8 106.6 106.7 106.7 106.4 106.3 106.9 107.3 107.9 108.0 108.4 108.3 108.1 108.1 35 Construction supplies 6.0 106.1 105.9 106.2 106.5 105.5 105.2 106.3 107.0 107.4 107.9 108.2 106.9 106.6 106.5 36 Business supplies 8.7 107.3 107.1 107.0 106.8 106.9 107.0 107.3 107.5 108.2 108.0 108.5 109.2 109.2 109.2 37 Materials, total 39.2 107.4 107.3 107.6 107.3 107.8 107.4 107.1 107.0 106.9 106.2 107.1 107.2 107.5 108.0 38 Durable goods materials 19.4 111.6 111.5 112.1 111.5 112.0 112.0 110.8 110.8 110.4 109.4 110.8 110.8 110.5 112.0 39 Durable consumer parts 4.2 109.0 110.6 110.3 107.7 109.2 108.8 106.9 105.7 102.5 96.5 102.8 104.4 102.0 106.4 40 Equipment parts 7.3 114.7 114.2 115.0 115.0 115.6 115.5 114.4 115.3 115.8 116.5 117.6 117.5 117.3 118.3 41 Other 7.9 110.2 109.7 110.4 110.4 110.4 110.6 109.5 109.4 109.5 109.7 108.7 108.0 108.7 109.2 42 Basic metal materials 2.8 112.1 109.9 111.9 113.1 113.0 112.9 111.0 108.6 109.3 108.5 109.9 107.2 108.6 108.6 43 Nondurable goods materials 9.0 105.3 105.4 105.5 106.7 105.7 104.2 106.1 104.9 104.3 105.4 105.8 105.3 106.2 106.1 44 Textile materials 1.2 99.8 101.5 103.2 104.9 102.1 99.6 98.6 96.1 95.8 94.6 96.2 95.0 96.5 96.9 45 Pulp and paper materials 1.9 103.8 102.1 102.4 104.8 103.6 104.1 107.7 104.6 103.7 105.0 105.3 103.4 106.2 106.3 4 4 6 7 C O h th e e m r i cal materials 3 2 . . 8 1 1 1 0 0 6 7 . . 4 6 1 1 0 0 6 9 . . 1 1 1 1 0 0 6 7 . . 5 9 1 1 0 0 8 6 . . 2 8 1 1 0 0 7 7 . . 3 0 1 1 0 0 4 6 . . 5 5 1 1 0 0 6 7 . . 8 5 1 1 0 0 5 8 . . 8 4 1 1 0 1 3 0 . . 8 4 1 1 0 1 5 0 . . 8 9 1 1 0 0 7 8 . . 3 8 1 1 0 0 7 8 . . 5 8 1 1 0 0 7 9 . . 4 2 1 1 0 0 7 9 . . 1 2 48 Energy materials 10.9 101.4 101.2 101.0 100.1 101.7 101.6 101.3 101.9 102.7 101.2 101.7 102.2 103.2 102.4 49 Primary energy 7.2 99.9 100.6 100.8 100.0 102.5 100.7 99.8 100.5 99.0 101.1 102.1 101.1 102.4 101.4 50 Converted fuel materials 3.7 104.3 102.5 101.7 100.4 100.4 103.6 104.2 104.5 110.0 101.4 100.9 104.4 104.8 104.3 51 Total excluding autos and trucks 97.3 108.2 108.3 108.6 108.2 108.4 108.4 108.0 108.4 108.9 108.6 108.9 109.1 109.4 109.8 52 Total excluding motor vehicles and parts .. 95.3 108.3 108.3 108.7 108.3 108.5 108.5 108.1 108.6 109.1 109.0 109.2 109.3 109.7 109.9 53 Total excluding office and computing machines 107.5 107.7 107.1 107.5 107.4 107.1 107.3 107.7 106.6 107.6 108.0 108.0 108.6 54 Consumer goods excluding autos and trucks 24.5 106.8 106.7 106.3 105.7 105.9 106.5 107.7 107.9 108.8 108.4 107.8 107.6 108.1 108.1 55 Consumer goods excluding energy 23.3 106.7 107.0 106.3 105.2 105.8 106.4 107.4 107.3 107.5 105.8 107.6 108.2 107.9 108.7 56 Business equipment excluding autos and trucks 12.7 120.6 121.7 123.2 122.3 122.3 122.4 117.8 120.7 122.1 122.8 122.9 124.0 124.5 125.7 57 Business equipment excluding office and computing equipment 12.0 116.2 117.4 118.6 117.2 117.4 117.3 113.3 115.0 116.2 114.0 116.2 118.2 117.1 119.3 58 Materials excluding energy 28.4 109.6 109.6 110.0 110.0 110.0 109.5 109.3 108.9 108.4 108.1 109.2 109.1 109.1 110.1 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 • August 1990 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1987 1989 1990 SIC pro- 1989 Groups code por- avg. tion May June July Aug. Sept. Oct. Nov. Dec Jan. Feb/ Mar. Apr/ May' Index (1987 = 100) MAJOR INDUSTRY 1 Total index 100.0 108.1 108.3 108.4 107.8 108.2 108.2 107.7 108.1 108.6 107.5 108.5 109.0 109.0 109.7 2 Manufacturing 84.4 108.9 109.2 109.3 108.6 109.1 109.1 108.4 108.9 108.8 108.1 109.6 109.9 109.7 110.6 3 Primary processing 26.7 106.4 106.1 106.3 106.8 106.6 105.8 106.6 106.2 105.3 106.2 106.9 106.0 106.1 106.4 4 Advanced processing 57.7 110.1 110.6 110.7 109.5 110.2 110.6 109.3 110.1 110.4 109.0 110.9 111.7 111.4 112.5 5 Durable 47.3 110.9 111.4 111.8 110.6 111.3 111.5 109.4 110.1 110.4 108.6 110.7 111.9 111.2 112.6 6 Lumber and products ... 24 2.0 103.0 102.3 103.5 102.8 102.4 102.6 103.2 104.8 106.4 106.0 104.3 105.0 102.5 102.8 7 Furniture and fixtures ... 25 1.4 105.3 107.9 107.0 104.9 104.5 105.7 105.6 104.4 105.1 105.1 104.8 106.0 107.3 107.5 8 Clay, glass, and stone products 32 2.5 108.0 108.2 108.0 106.2 107.8 106.5 107.7 108.2 108.6 110.0 108.0 106.7 106.2 106.0 9 Primary metals 33 3.3 109.2 107.0 108.7 108.8 111.7 109.9 108.6 104.8 102.6 105.0 107.9 105.3 106.2 106.2 10 Iron and steel 331,2 1.9 109.3 104.8 107.1 107.5 109.8 109.7 109.2 104.1 100.3 104.6 110.6 106.1 106.5 105.9 11 Raw steel .1 108.5 106.9 110.2 109.7 106.8 102.9 106.4 100.6 97.6 109.9 109.0 105.9 104.9 104.5 12 Nonferrous [333-6,9 1.4 109.0 110.0 110.9 110.4 114.0 109.8 107.6 105.8 105.8 105.6 104.0 104.1 105.9 106.7 13 Fabricated metal products ... 34 5.4 107.2 107.9 108.3 107.6 106.5 106.0 105.9 106.9 106.3 105.1 105.6 105.4 104.7 105.7 14 Nonelectrical machinery 35 8.6 121.8 121.8 123.4 121.6 121.8 123.4 119.0 122.9 123.8 123.7 124.2 125.1 126.4 127.2 15 Office and computing 16 Electri m ca a l c h m in ac es h ineiy 35 3 7 6 2 8 . . 5 6 1 10 3 9 7 . . 5 2 1 1 0 3 8 7 . . 8 6 1 1 0 3 9 9 . . 1 1 1 1 0 37 8 . . 1 6 1 1 3 1 9 0 . . 3 6 1 1 4 1 1 0 . . 8 8 1 1 1 3 0 2. . 8 2 1 1 1 4 0 1 . . 1 0 1 11 4 0 2 . . 1 7 1 1 4 1 2 0 . . 7 1 1 1 4 1 4 1 . . 3 0 1 1 4 1 7 2 . . 3 3 1 1 5 1 1 1 . . 4 0 1 1 5 1 2 1. . 5 6 17 Transportation equipment ... 37 9.8 107.2 109.6 109.0 106.6 107.8 108.0 102.1 102.8 104.4 94.7 103.5 107.9 104.9 109.3 18 Motor vehicles and parts .. 371 4.7 104.9 107.8 105.0 99.6 102.7 103.2 99.7 99.0 98.7 76.8 94.1 103.5 95.8 104.4 19 Autos and light trucks 2.3 105.0 109.0 105.3 95.9 100.2 102.9 99.9 97.6 99.0 65.7 91.8 106.7 94.5 104.6 20 Aerospace and miscellaneous transportation equipment 372-6,9 5.1 109.3 111.2 112.6 113.0 112.4 112.3 104.3 106.3 109.6 111.0 111.9 111.9 113.1 113.8 21 Instruments 38 3.3 116.4 118.0 118.3 118.5 116.4 116.2 116.1 115.6 114.8 116.0 116.2 115.9 116.2 118.2 22 Miscellaneous manufactures . 39 1.2 114.9 116.9 116.1 115.9 116.5 116.2 116.9 117.0 116.4 117.0 118.1 119.1 120.0 121.0 23 Nondurable 37.2 106.4 106.4 106.2 106.1 106.2 106.0 107.2 107.3 106.7 107.5 108.3 107.3 107.8 107.9 24 Foods 8.8 105.5 105.5 104.2 104.0 104.8 105.4 106.8 107.4 108.0 106.8 107.4 107.1 107.8 107.9 25 Tobacco products 1.0 99.7 101.7 100.4 94.2 95.0 93.3 99.7 98.8 98.5 101.3 102.3 100.0 98.0 96.0 26 Textile mill products .... 1.8 101.9 103.2 102.4 104.2 101.5 101.5 101.9 99.3 99.8 100.6 103.0 101.0 101.9 102.2 27 Apparel products 2.4 104.3 104.9 105.2 104.4 104.7 104.5 103.9 103.7 102.6 102.4 102.1 99.9 100.5 100.7 28 Paper and products 3.6 103.2 102.1 101.8 104.1 103.0 102.2 105.3 104.1 103.4 103.8 105.0 103.0 105.2 105.6 29 Printing and publishing .. 6.4 108.5 108.4 108.6 106.6 107.8 109.4 109.3 109.6 109.6 110.7 112.1 111.5 110.9 111.6 30 Chemicals and products . 8.6 108.5 108.4 109.1 109.7 109.6 107.5 109.4 109.8 107.6 109.9 110.5 109.5 110.1 110.0 31 Petroleum products 1.3 106.1 104.6 106.6 108.2 107.0 108.7 106.9 109.3 104.3 108.6 112.0 109.1 109.7 107.5 32 Rubber and plastic products 3.0 108.9 109.8 109.0 109.0 109.0 108.5 108.8 109.1 110.1 110.7 109.1 109.8 109.6 111.4 33 Leather and products ... .3 103.7 102.8 102.2 103.7 103.2 103.5 102.2 99.4 103.0 104.3 102.9 103.0 102.6 101.0 Mining 7.9 100.5 101.1 100.4 100.0 100.7 101.6 100.7 101.2 100.1 101.7 101.0 100.8 102.5 102.5 Metal 10 .3 141.4 136.1 143.3 151.7 144.3 145.4 143.2 145.9 155.5 144.8 143.4 139.6 143.8 144.8 Coal 11,12 1.2 105.7 104.7 100.3 101.1 103.1 109.6 109.9 108.1 103.5 114.1 111.9 112.9 114.2 114.0 Oil and gas extraction .. 13 5.7 95.5 97.0 96.3 94.9 96.3 95.9 94.3 95.5 94.0 94.4 94.1 94.5 96.1 96.1 Stone and earth minerals .7 113.9 113.0 115.0 116.8 113.3 114.1 118.0 115.8 119.7 121.2 120.0 114.2 116.7 116.2 39 Utilities 7.6 107.1 106.3 106.3 106.6 106.2 105.9 107.4 108.3 116.1 106.8 104.0 107.7 108.5 107.3 40 Electric 491,3PT 6.0 108.1 107.4 107.6 108.5 108.1 107.1 109.7 109.5 116.3 108.3 107.1 110.9 111.7 110.5 41 Gas 492,3PT 1.6 103.0 102.2 101.8 99.3 99.2 101.0 99.1 103.9 115.6 101.2 92.3 95.9 96.6 95.7 42 Manufacturing excluding motor vehicles and parts 79.8 109.2 109.3 109.6 109.2 109.5 109.5 108.9 109.4 109.3 109.9 110.5 110.2 110.5 110.9 43 Manufacturing excluding office and computing machines 82.0 108.1 108.3 108.5 107.8 108.2 108.1 107.7 107.9 107.7 107.1 108.6 108.7 108.4 109.3 Gross value (billions of 1982 dollars, annual rates) MAJOR MARKET 44 Products, total 1,734.8 1,889.8 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 1,903.3 1,923.7 1,910.3 1,929.0 45 Final 1,350.9 1,480.1 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 1,488.3 1,508.9 1,497.0 1,511.9 46 Consumer goods 833.4 884.6 885.7 878.5 868.9 870.1 878.8 883.2 889.0 898.6 864.3 888.6 894.8 885.4 889.2 47 Equipment 517.5 595.5 599.6 607.1 590.8 605.3 607.5 582.4 593.8 594.0 583.6 599.8 614.1 611.6 622.7 48 Intermediate 384.0 409.6 409.5 408.8 409.3 408.4 408.1 412.7 414.1 413.0 415.7 415.0 414.8 413.3 417.1 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 July Aug. Sept. Oct. Nov. Dec. Jan/ Feb/ Mar/ Apr. Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,535 1,456 1,339 1,281 1,334 1,310 1,362 1,364 1,416 1,739 1,297 1,232 1,108 2 1-family 1,024 994 932 910 933 946 959 984 984 985 974 912 813 3 2-or-more-family 511 462 407 371 401 364 403 380 432 754 323 320 295 4 Started 1,621 1,488 1,376 1,424 1,325 1,263 1,423 1,347 1,273 1,568 1,488 1,307 1,224 5 1-family 1,146 1,081 1,003 1,029 987 969 1,023 1,010 931 1,099 1,154 9% 905 6 2-or-more-family 474 407 373 395 338 294 400 337 342 469 334 311 319 7 Under construction, end of period1 . 987 919 850 918 901 892 894 881 886 892 900 887 882 8 1-family 591 570 535 576 565 565 565 558 567 571 575 567 563 9 2-or-more-family 397 350 315 342 336 327 329 323 319 321 325 320 319 10 Completed 1,669 1,530 1,423 1,375 1,437 1,366 1,317 1,486 1,302 1,443 1,351 1,375 1,294 11 1-family 1,123 1,085 1,026 967 1,037 959 987 1,078 933 1,031 1,041 1,035 936 12 2-or-more-family 546 445 3% 408 400 407 330 408 369 412 310 340 358 13 Mobile homes shipped 233 218 198 179 194 186 190 189 189 195 200 193 189 Merchant builder activity in I-family units 14 Number sold 672 675 650 741 719 638 636 687 633 661133 606 555599 553300 15 Number for sale, end of period 366 367 362 369 364 364 363 363 362 365 366 363 362 Price (thousands of dollars)2 Median 16 Units sold 104.7 113.3 120.4 116.0 122.9 120.0 123.0 125.0 125.2 125.0 126.9 119.9 113333..44 Average 17 Units sold 127.9 139.0 148.3 140.3 158.6 151.1 147.8 151.4 154.3 151.7 150.9 144.8 154.2 EXISTING UNITS (1-family) 18 Number sold 3,530 3,594 3,439 3,380 3,440 3,510 3,490 3,560 3,560 3,520 3,400 3,400 3,330 Price of units sold (thousands of dollars) 19 Median 85.6 89.2 93.0 95.2 95.8 93.8 92.4 9933..11 9922..55 9966..33 9955..22 9966..33 9955..66 20 Average 106.2 112.5 118.0 121.0 121.6 118.3 116.7 117.9 118.1 120.0 118.3 119.5 117.8 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 397,721 409,663 414,273 410,269 416,279 416,176 411,544 416,509 415,135 425,043 438,482 435,623 432,369 ?? 320,108 328,738 330,250 328,785 331,884 329,564 328,687 327,761 321,380 334,216 342,948 344,806 344,819 73 194,656 198,101 195,385 195,165 194,393 192,765 191,428 190,313 189,452 1%,659 199,302 203,322 202,740 74 Nonresidential, total 125,452 130,637 134,865 133,620 137,491 136,799 137,259 137,448 131,928 137,557 143,646 141,484 142,079 Buildings 75 Industrial 13,707 14,931 16,756 16,424 17,526 17,927 17,856 17,997 17,2% 19,323 20,892 21,018 22,491 76 55,448 58,104 57,485 56,640 57,680 57,132 58,213 57,845 54,368 55,376 59,695 55,897 54,799 77 Other 15,464 17,278 17,366 16,768 18,455 17,962 17,332 17,813 16,248 17,511 17,034 17,579 18,218 28 Public utilities and other 40,833 40,324 43,258 43,788 43,830 43,778 43,858 43,793 44,016 45,347 46,025 46,990 46,571 79 Public 77,612 80,922 84,019 81,484 84,395 86,612 82,857 88,748 93,755 90,827 95,534 90,817 87,551 30 4,327 3,579 3,504 3,194 3,779 4,916 2,076 3,664 3,552 3,325 3,206 3,556 3,234 31 25,343 28,524 27,663 26,128 27,367 27,581 26,214 28,670 32,502 29,358 34,021 29,302 26,938 37 Conservation and development... 5,162 4,474 4,772 4,567 4,708 4,906 5,145 5,075 5,664 4,934 5,319 4,778 4,754 33 Other 42,780 44,345 48,080 47,595 48,541 49,209 49,422 51,339 52,037 53,210 52,988 53,181 52,625 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 • August 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 llleeevvveeelll 1989 1990 1990 MMMaaayyy 11998899 11999900 111999999000 MMaayy MMaayy June Sept. Dec. Mar. Jan. Feb. Mar. Apr. May CONSUMER PRICES2 (1982-84=100) 1 All items 5.4 4.4 5.3 2.3 4.9 8.5 1.1 .5 .5 .2 .2 129.2 2 Food 6.8 5.1 5.6 3.6 5.5 11.4 2.0 .5 .3 -.2 .0 131.3 3 Energy items 9.8 -.7 22.7 -12.6 3.9 14.8 5.1 -.7 -.8 -.4 -.1 96.7 4 All items less food and energy 4.6 4.8 3.8 3.5 4.7 7.5 .6 .5 .7 .2 .3 134.4 5 Commodities 3.6 3.3 2.4 1.3 3.4 7.8 .4 1.0 .5 .0 .1 123.6 6 Services 5.1 5.5 4.6 4.5 5.7 7.2 .7 .4 .7 .4 .4 140.7 PRODUCER PRICES (1982=100) 7 Finished goods 6.2 3.1 5.8 .4 5.0 6.7 1.9' -.1' -.2 -.3 .3 117.7 8 Consumer foods 7.1 4.8 -2.3 .7 12.4 9.5 2.3' .6' -.6 -.6 .6 124.8 9 Consumer energy 16.6 -5.3 34.3 -15.3 -5.3 24.0 13.7' —4.9' -2.4 -1.7 -1.0 68.0 10 Other consumer goods 4.8 3.8 6.0 2.3 4.2 3.5 .2' .5' .2 .1 .5 128.0 11 Capital equipment 4.0 3.2 4.5 4.4 2.0 3.4 .2 .2 .4 .2 .0 122.1 12 Intermediate materials3 5.8 .2 2.9 -.7 -.4 2.5 1.3 -.7 .0 .0 -.1 112.8 13 Excluding energy 5.6 -.2 .3 -.7 -1.0 1.3 .1' .C .2 .1 .1 120.6 Crude materials 14 Foods 9.7 1.6 -16.9 -2.2 19.2 8.7 .7' 1.0 .3 -.8 -2.5 116.7 15 Energy 9.7 -5.4 23.6 -7.0 13.2 1.0 4.8' .2' -4.6 -7.8 2.1 74.1 16 Other 6.9 -1.4 -7.7 .6 -15.3 4.3 -.2 -.8 2.0 2.2 1.0 138.3 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 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 5,433.1 By source 4 2 3 5 Pe D N r S s e u o o r n r n v a d a i b u c l l e r e c s a o g b n o l s e o u d g m s o p o t d i s o n expenditures 3 1 , , 0 4 9 5 1 9 2 9 8 0 1 1 . . . . 1 8 0 7 3 1 1 , , , 2 4 0 7 3 5 5 2 5 5 2 7 . . . . 1 2 3 6 3 1 1 , , , 4 4 1 8 7 7 2 7 1 3 3 4 . . . . 1 2 4 4 3 1 1 , , , 3 4 8 0 8 6 1 9 1 6 6 8 . . . . 4 4 7 3 3 1 1 , , , 4 4 1 8 4 7 2 5 4 1 1 1 . . . . 1 0 5 7 3 1 1 , , , 5 4 1 8 0 8 3 9 8 6 1 0 . . . . 1 1 4 6 3 1 1 . , . 4 5 1 9 6 5 4 3 9 0 2 8 . . . . 5 6 4 7 3 1 1 , , , 6 4 1 9 2 8 6 7 9 9 8 1 . . . . 4 9 2 2 6 Gross private domestic investment 699.9 750.3 773.4 769.6 775.0 779.1 770.1 752.9 7 Fixed investment 670.6 719.6 746.3 742.0 747.6 751.7 744.0 764.6 8 Nonresidential 444.3 487.2 511.7 503.1 512.5 519.6 511.4 526.1 9 Structures 133.8 140.3 144.9 144.7 142.4 146.2 146.4 151.3 10 Producers' durable equipment 310.5 346.8 366.7 358.5 370.1 373.4 365.0 374.8 11 Residential structures 226.4 232.4 234.6 238.8 235.1 232.1 232.6 238.5 12 Change in business inventories 29.3 30.6 27.1 27.7 27.4 27.4 26.1 -11.7 13 Nonfarm 30.5 34.2 22.2 19.1 23.6 19.8 26.4 -16.1 14 Net exports of goods and services -112.6 -73.7 -47.1 -54.0 -50.6 -45.1 -38.8 -32.0 15 Exports 448.6 547.7 625.9 605.6 626.1 628.5 643.5 664.7 16 Imports 561.2 621.3 673.0 659.6 676.6 673.6 682.3 696.6 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 1,082.9 18 Federal 381.6 381.3 403.2 399.0 406.0 402.7 405.1 413.7 19 State and local 544.5 587.6 633.4 617.0 627.2 636.2 653.2 669.2 By major type of product 20 Final sales, total 4,495.0 4,850.0 5,206.9 5,085.4 5,174.3 5,253.6 5.314.2 5,444.8 21 Goods 1,785.2 1,931.9 2,072.3 2,030.9 2,079.1 2,096.3 2,082.8 2,108.6 22 Durable 777.6 863.6 909.1 894.7 905.2 930.1 906.5 924.1 23 Nondurable 1,007.6 1,068.3 1,163.2 1,136.2 1,173.9 1,166.2 1.176.3 1,184.5 24 Services 2,304.5 2,499.2 2,702.7 2,620.8 2,667.5 2,728.1 2,794.2 2,846.4 25 Structures 434.6 449.5 459.1 461.3 455.1 456.6 463.2 478.1 26 Change in business inventories 29.3 30.6 27.1 27.7 27.4 27.4 26.1 -11.7 27 Durable goods 22.0 25.0 11.9 22.0 6.0 5.2 14.2 -17.0 28 Nondurable goods 7.2 5.6 15.3 5.7 21.4 22.2 11.8 5.3 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 4,193.4 NATIONAL INCOME 30 Total 3,665.4 3,972.6 4,266.5 4,185.2 4,249.6 4,287.3 4,344.0 4,438.3 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 3,285.5 3 3 3 3 3 3 2 7 3 4 5 6 W Su O E G O a p g m p t o t e h h l v s p e e e e m r l r a r o n n e l y a d m n e b r t e o s n t a c r o o l t a i n n w a r t c n i r a e o d i g s b m e g u s e o t i a v o n e n r d s n m s f a o e l r a n r s t o i e c e s i n a t l e r in p s r u is r e a s n c . e . 2 1 , . 2 4 4 2 2 8 4 4 2 1 1 3 0 7 9 9 0 2 . . . . . . 7 8 1 2 8 4 2 1 , , 4 4 4 2 2 9 4 7 2 4 2 8 6 8 9 2 8 9 . . . . . . 5 6 5 7 9 0 2 2 . . 6 1 4 5 2 2 3 5 1 4 7 6 1 4 3 8 6 5 . . . . . . 1 2 3 3 9 0 2 2. . 0 4 5 5 2 2 9 6 6 5 4 0 3 6 9 0 1 1 . . . . . . 7 8 9 7 3 0 2 2. , 1 6 4 2 5 2 3 0 7 6 4 0 3 5 8 3 6 9 . . . . . . 5 3 4 8 0 4 2 2 , , 1 6 4 5 2 2 7 5 5 6 8 1 4 0 6 4 0 7 . . . . . . 5 7 6 7 2 2 2 2 , , 2 7 4 2 5 2 1 0 7 8 2 5 3 0 0 5 7 5 . . . . . . 1 4 8 1 3 0 2 2 . . 2 7 4 5 2 2 4 7 4 4 9 6 8 8 0 1 5 6 . . . . . . 5 5 6 0 5 9 38 Proprietors' income1 311.6 327.8 352.1 359.3 355.5 343.3 350.3 374.6 39 Business and professional 270.0 288.0 305.9 300.3 304.2 307.2 311.8 322.7 40 Farm' 41.6 39.8 46.2 59.0 51.3 36.1 38.5 51.9 41 Rental income of persons2 13.4 15.7 7.9 11.8 9.8 5.4 4.8 8.1 42 Corporate profits1 298.7 328.6 301.3 316.3 307.8 295.2 285.9 289.7 43 Profits before tax3 266.7 306.8 290.6 318.0 296.0 275.0 273.7 283.3 44 Inventory valuation adjustment -18.9 -25.0 -18.7 -38.3 -20.5 -6.3 -9.7 -11.1 45 Capital consumption adjustment 50.9 46.8 29.3 36.6 32.3 26.5 21.9 17.5 46 Net interest 351.7 392.9 460.8 436.1 458.4 471.5 477.2 480.4 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 • August 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 4,638.8 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 2,745.5 3 Commodity-producing industries 649.9 696.3 738.2 726.6 733.7 742.6 749.7 754.0 4 Manufacturing 490.3 524.0 552.9 546.3 549.9 555.7 559.6 560.5 5 Distributive industries 531.9 571.9 615.1 598.8 610.8 619.4 631.2 645.0 6 Service industries 648.3 714.4 801.0 768.4 790.8 812.4 832.2 849.6 7 Government and government enterprises 419.2 446.5 476.9 466.9 473.5 480.2 487.0 496.9 8 Other labor income 212.8 228.9 248.3 241.3 246.0 250.7 255.3 261.5 9 Proprietors' income1 311.6 327.8 352.1 359.3 355.5 343.3 350.3 374.6 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 51.9 12 Rental income of persons2 13.4 15.7 7.9 11.8 9.8 5.4 4.8 8.1 13 Dividends 92.0 102.2 112.4 109.4 111.4 113.2 115.7 118.0 14 Personal interest income 523.2 571.1 657.4 629.0 655.1 667.8 677.7 685.2 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 172.9 194.9 214.2 210.0 213.0 215.4 218.2 226.6 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 4,638.8 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 3,966.5 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 3,735.0 22 EQUALS: Personal saving 101.8 144.7 204.4 205.7 200.7 195.1 216.0 231.5 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 16,709.8 16,746.8 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 10,799.9 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 11,802.0 26 Saving rate (percent) 3.2 4.2 5.4 5.6 5.4 5.1 5.6 5.8 GROSS SAVING 27 Gross saving 553.8 642.4 701.7 693.5 695.8 709.9 707.7 697.0 28 Gross private saving 663.8 738.6 806.2 792.1 793.7 809.7 829.4 830.5 29 Personal saving 101.8 144.7 204.4 205.7 200.7 195.1 216.0 231.5 30 Undistributed corporate profits' 75.3 80.3 49.5 53.4 52.0 49.3 43.3 36.9 31 Corporate inventory valuation adjustment -18.9 -25.0 -18.7 -38.3 -20.5 -6.3 -9.7 -11.1 Capital consumption allowances 32 Corporate 303.1 321.7 344.9 335.2 339.7 349.9 354.9 354.2 33 Noncorporate 183.6 191.9 207.4 197.8 201.3 215.3 215.2 208.0 34 Government surplus, or deficit (-), national income and product accounts -110.1 -96.1 -104.6 -98.7 -97.9 -99.8 -121.8 -133.5 35 Federal -161.4 -145.8 -148.5 -147.5 -145.4 -144.7 -156.5 -170.9 36 State and local 51.3 49.7 44.0 48.8 47.5 44.9 34.7 37.4 37 Gross investment 549.0 632.8 677.3 669.3 677.5 684.3 677.8 671.4 38 Gross private domestic 699.9 750.3 773.4 769.6 775.0 779.1 770.1 752.9 39 Net foreign -150.9 -117.5 -96.2 -100.3 -97.5 -94.8 -92.2 -81.5 40 Statistical discrepancy -4.7 -9.6 -24.4 -24.1 -18.3 -25.5 -29.8 -25.6 1. With inventory valuation and capital consumption adjustments. SOURCE. Survey of Current Business (Department of Commerce). 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics 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 Merchandise trade balance2 -159,500 -127,215 -113,248 -32,019 -28,355 -27,529 -28,558 -28,806 Merchandise exports 250,266 319,251 361,872 83,729 87,783 91,284 90,691 92,114 Merchandise imports -409,766 -446,466 -475,120 -115,748 -116,138 -118,813 -119,249 -120,920 Military transactions, net -2,856 -4,606 -5,662 -1,604 -1,498 -1,518 -1,175 -1,471 Investment income, net 22,283' 2,228R 1,029' 4,489' -2,484' -6,104' 2,860' 6,757 Other service transactions, net 10,585 17,702 26,279 5,475 5,433 5,981 7,449 7,425 Remittances, pensions, and other transfers .. -4,063 -4,279 -4,028 -1,090 -1,147 -972 -975 -935 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. banks3 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 11,,887788 -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 • August 1990 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data are seasonally adjusted. 1989 1990 IItteemm 11998877 11998888 11998899 Oct. Nov. Dec. Jan. Feb. Mar/ Apr/ 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments, f.a.s. value 254,073 322,426 363,983 31,474 30,627 30,843 31,940 31,818 33,494 32,307 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 2 Customs value 406,241 440,952 472,977 41,915 40,739 38,522 41,261 37,916 41,856 39,247 Trade balance 3 Customs value -152,169 -118,526 -108,994 -10,441 -10,112 -7,678 -9,321 -6,099 -8,362 -6,940 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr/ 1 Total 48,511 45,798 47,802 70,560 70,560 74,609 75,506 74,173 76,303 76,283 2 Gold stock, including Exchange Stabilization Fund1 11,064 11,078 11,057 11,062 11,060 11,059 11,059 11,059 11,060 11,060 3 Special drawing rights2'3 8,395 10,283 9,637 9,473 9,751 9,951 10,041 10,216 10,092 10,103 4 Reserve position in International Monetary Fund 11,730 11,349 9,745 8,722 9,047 9,048 9,173 8,985 8,727 8,687 5 Foreign currencies4 17,322 13,088 17,363 41,552 42,702 44,551 45,233 43,913 46,424 46,433 1. Gold held under earmark at Federal Reserve Banks for foreign and interna- in the IMF also are valued on this basis beginning July 1974. tional accounts is not included in the gold stock of the United States; see table 3. Includes allocations by the International Monetary Fund of SDRs as follows: 3.13. Gold stock is valued at $42.22 per fine troy ounce. $867 million on Jan. 1, 1970; $717 million on Jan. 1, 1971; $710 million on Jan. 1, 2. Beginning July 1974, the IMF adopted a technique for valuing the SDR based 1972; $1,139 million on Jan. 1, 1979; $1,152 million on Jan. 1, 1980; and $1,093 on a weighted average of exchange rates for the currencies of member countries. million on Jan. 1, 1981; plus transactions in SDRs. From July 1974 through December 1980, 16 currencies were used; from January 4. Valued at current market exchange rates. 1981, 5 currencies have been used. The U.S. SDR holdings and reserve position 3.13 FOREIGN OFFICIAL ASSETS HELD AT FEDERAL RESERVE BANKS1 Millions of dollars, end of period 1989 1990 AAsssseettss 11998866 11998877 11998888 p Oct. Nov. Dec. Jan. Feb. Mar. Apr. 1 Deposits 287 244 347 252 307 589 251 309 300 402 Assets held in custody 2 U.S. Treasury securities 155,835 195,126 232,547 230,804 231,059 224,911 225,618 221,798 250,447 252,759 3 Earmarked gold3 14,048 13,919 13,636 13,460 13,458 13,456 13,458 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 at face value. 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 Asset account 11998866 11998877 1988 Oct. Nov. Dec. Jan. Feb. Mar. Apr. All foreign countries 1 Total, all currencies 456,628 518,618 505,595 532,912 548,074 545,366 549,368 553,815 535,059' 535,886 7 114,563 138,034 169,111 184,327 195,913 198,835 192,688 188,700 176,095 177,104 3 83,492 105,845 129,856 145,200 154,825 157,092 149,285 145,156 135,171 133,573 4 Other banks in United States 13,685 16,416 14,918 14,084 15,301 17,042 17,840 18,064 15,511 17,965 5 17,386 15,773 24,337 25,043 25,787 24,701 25,563 25,480 25,413 25,566 6 312,955 342,520 299,728 300,567 302,525 300,575 307,937 313,934 308,117' 307,470 7 Other branches of parent bank 96,281 122,155 107,179 110,681 111,053 113,810 120,359 122,457r 120,488' 118,835 8 105,237 108,859 96,932 93,190 95,098 90,703 91,712 94,065' 89,837' 90,812 9 Public borrowers 23,706 21,832 17,163 16,720 16,148 16,456 15,392 15,148 15,973 16,217 10 Nonbank foreigners 87,731 89,674 78,454 79,976 80,226 79,606 80,474 82,264 81,819' 81,606 11 Other assets 29,110 38,064 36,756 48,018 49,636 45,956 48,743 51,181 50,847 51,312 12 Total payable in U.S. dollars 317,487 350,107 357,573 369,737 380,282 382,414 374,984 375,210 358,543' 360,224 n 110,620 132,023 163,456 176,047 188,105 191,184 184,782 180,738 168,833 169,9% 14 82,082 103,251 126,929 139,390 149,908 152,294 144,055 139,920 130,350 129,162 15 Other banks in United States 12,830 14,657 14,167 13,432 14,543 16,386 17,018 17,187 14,992 17,209 16 15,708 14,115 22,360 23,225 23,654 22,504 23,709 23,631 23,491 23,625 17 195,063 202,428 177,685 171,854 168,404 169,690 167,722 172,132 167,616' 168,419 18 Other branches of parent bank 72,197 88,284 80,736 84,224 79,585 82,949 86,114 87,403' 85,028' 84,930 19 66,421 63,707 54,884 47,274 48,966 48,396 45,385 46,582' 43,408' 43,814 70 16,708 14,730 12,131 11,579 11,446 10,961 10,332 10,529 11,110 11,191 21 Nonbank foreigners 39,737 35,707 29,934 28,777 28,407 27,384 25,891 27,618 28,070' 28,484 22 Other assets 11,804 15,656 16,432 21,836 23,773 21,540 22,480 22,340 22,094 21,809 United Kingdom 23 Total, all currencies 140,917 158,695 156,835 163,426 164,916 161,947 166,915 169,727 167,162 173,127 74 24,599 32,518 40,089 42,246 44,661 39,212 41,208 40,161 38,809 42,366 75 19,085 27,350 34,243 39,104 40,848 35,847 37,292 36,311 34,648 37,572 76 Other banks in United States 1,612 1,259 1,123 1,036 1,199 1,058 1,441 1,365 1,301 1,262 77 3,902 3,909 4,723 2,106 2,614 2,307 2,475 2,485 2,860 3,532 78 109,508 115,700 106,388 106,183 105,349 107,657 109,837 110,911 109,227 111,175 79 Other branches of parent bank 33,422 39,903 35,625 35,249 35,064 37,728 37,701 38,410 39,636 41,613 30 39,468 36,735 36,765 37,881 36,317 36,159 37,668 36,488 34,803 35,224 31 Public borrowers 4,990 4,752 4,019 3,345 3,181 3,293 3,128 3,076 3,857 3,980 32 Nonbank foreigners 31,628 34,310 29,979 29,708 30,787 30,477 31,340 32,937 30,931 30,358 33 Other assets 6,810 10,477 10,358 14,997 14,906 15,078 15,870 18,655 19,126 19,586 34 Total payable in U.S. dollars 95,028 100,574 103,503 106,708 106,086 103,427 103,038 103,752 101,024 107,483 35 Claims on United States 23,193 30,439 38,012 39,534 41,504 36,404 38,261 37,006 35,752 39,091 36 18,526 26,304 33,252 37,570 39,304 34,329 35,731 34,462 32,697 35,663 37 Other banks in United States 1,475 1,044 964 786 861 843 1,118 1,036 1,122 1,041 38 3,192 3,091 3,796 1,178 1,339 1,232 1,412 1,508 1,933 2,387 39 68,138 64,560 60,472 59,552 56,872 59,062 56,939 58,763 57,166 60,165 40 26,361 28,635 28,474 28,363 26,961 29,872 28,655 30,224 30,421 32,885 41 23,251 19,188 18,494 18,200 16,884 16,579 16,399 15,984 13,748 14,141 47 3,677 3,313 2,840 2,553 2,404 2,371 2,321 2,266 3,074 3,131 43 Nonbank foreigners 14,849 13,424 10,664 10,436 10,623 10,240 9,564 10,289 9,923 10,008 44 Other assets 3,697 5,575 5,019 7,622 7,710 7,961 7,838 7,983 8,106 8,227 Bahamas and Caymans 45 Total, all currencies 142,592 160,321 170,639 164,836 172,762 176,006 167,385 164,908 155,145' 150,767 46 78,048 85,318 105,320 109,910 118,037 124,205 117,177 114,263 105,466 102,184 47 54,575 60,048 73,409 75,900 82,605 87,882 79,525 76,475 70,535 65,084 48 Other banks in United States 11,156 14,277 13,145 12,059 13,185 15,071 15,403 15,827 13,564 15,902 49 12,317 10,993 18,766 21,951 22,247 21,252 22,249 21,961 21,367 21,198 50 Claims on foreigners 60,005 70,162 58,393 47,214 46,391 44,168 42,610 43,162 42,393' 41,467 51 Other branches of parent bank 17,296 21,277 17,954 16,961 14,414 11,309 13,371 14,409' 13,171' 13,306 57 27,476 33,751 28,268 19,579 21,641 22,611 20,119 19,595' 19,37c 18,499 53 Public borrowers 7,051 7,428 5,830 5,289 5,340 5,217 4,764 4,753 4,684 4,490 54 Nonbank foreigners 8,182 7,706 6,341 5,385 4,9% 5,031 4,356 4,405 5,168' 5,172 55 Other assets 4,539 4,841 6,926 7,712 8,334 7,633 7,598 7,483 7,286 7,116 56 Total payable in U.S. dollars 136,813 151,434 163,518 159,643 167,182 170,780 160,832 159,484 150,061' 145,994 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 • August 1990 3.14—Continued 1989 1990 LLiiaabbiilliittyy aaccccoouunntt 11998877 11998888 Oct. Nov. Dec. Jan. Feb. Mar. Apr. All foreign countries 57 Total, all currencies 456,628 518,618 505,595 532,912 548,074 545,366 549,368 553,815 535,059' 535,886 58 Negotiable CDs 31,629 30,929 28,511 26,776 26,555 23,500 23,510 23,620 21,767 24,113 59 To United States 152,465 161,390 185,577 183,484 190,149 197,239 178,452 181,164 173,674' 168,669 60 Parent bank 83,394 87,606 114,720 123,281 128,799 138,803 117,318'' 119,%7' 114,169' 109,642 61 Other banks in United States 15,646 20,355 14,737 11,333 10,811 11,704 11,850 11,990 10,799' 11,782 62 Nonbanks 53,425 53,429 56,120 48,870 50,539 46,732 49,284' 49,207' 48,706' 47,245 63 To foreigners 253,775 304,803 270,923 294,294 302,346 296,850 315,991 317,318 309,756 313,446 64 Other branches of parent bank 95,146 124,601 111,267 114,175 115,484 119,591 126,965 126,786 124,084 120,405 65 Banks 77,809 87,274 72,842 75,601 81,200 76,452 82,042 77,449 75,017' 77,875 66 Official institutions 17,835 19,564 15,183 19,484 18,938 16,750 19,004 20,637 17,704' 20,683 67 Nonbank foreigners 62,985 73,364 71,631 85,034 86,724 84,057 87,980 92,446 92,951 94,483 68 Other liabilities 18,759 21,496 20,584 28,358 29,024 27,777 31,415 31,713 29,862 29,658 69 Total payable in U.S. dollars 336,406 361,438 367,483 385,117 392,983 396,282 384,579 385,203 369,306' 368,626 70 Negotiable CDs 28,466 26,768 24,045 22,260 22,539 19,619 18,512 18,783 17,084 19,601 71 To United States 144,483 148,442 173,190 172,305 179,927 187,286 167,754 169,669 162,606' 157,579 72 Parent bank 79,305 81,783 107,150 116,308 122,910 132,954 111,328'' 113,487' 108,128' 103,252 73 Other banks in United States 14,609 18,951 13,468 10,129 9,512 10,519 10,560 10,684 9,2%' 10,415 74 Nonbanks 50,569 47,708 52,572 45,868 47,505 43,813 45,866' 45,498' 45,182' 43,912 75 To foreigners 156,806 177,711 160,766 177,610 177,459 176,460 185,192 183,378 176,939 178,035 76 Other branches of parent bank 71,181 90,469 84,021 85,780 82,912 87,636 91,736 90,360 86,908 84,090 77 Banks 33,850 35,065 28,493 31,886 33,370 30,537 32,551 28,741 27,639' 29,207 78 Official institutions 12,371 12,409 8,224 11,446 11,713 9,873 11,063 11,740 9,248' 11,909 79 Nonbank foreigners 39,404 39,768 40,028 48,498 49,464 48,414 49,842 52,537 53,144 52,829 80 Other liabilities 6,651 8,517 9,482 12,942 13,058 12,917 13,121 13,373 12,677 13,411 United Kingdom 81 Total, all currencies 140,917 158,695 156,835 163,426 164,916 161,947 166,915 169,727 167,162 173,127 82 Negotiable CDs 27,781 26,988 24,528 23,152 22,837 20,056 19,791 19,656 18,266 20,535 83 To United States 24,657 23,470 36,784 34,089 33,101 36,036 31,893 32,686 32,780 33,931 84 Parent bank 14,469 13,223 27,849 25,113 25,430 29,726 23,256 23,752 22,970 23,339 85 Other banks in United States 2,649 1,536 2,037 1,859 1,096 1,256 1,545 2,115 1,827 1,841 86 Nonbanks 7,539 8,711 6,898 7,117 6,575 5,054 7,092 6,819 7,983 8,751 87 To foreigners 79,498 98,689 86,026 93,508 96,509 92,307 99,720 101,565 101,160 103,362 88 Other branches of parent bank 25,036 33,078 26,812 26,931 26,656 27,397 29,216 28,074 29,848 28,581 89 Banks 30,877 34,290 30,609 30,531 33,016 29,780 33,568 32,110 29,116' 31,026 90 Official institutions 6,836 11,015 7,873 10,255 9,724 8,551 9,368 10,758 9,184' 10,829 91 Nonbank foreigners 16,749 20,306 20,732 25,791 27,113 26,579 27,568 30,623 33,012 32,926 92 Other liabilities 8,981 9,548 9,497 12,677 12,469 13,548 15,511 15,820 14,956 15,299 93 Total payable in U.S. dollars 99,707 102,550 105,907 110,980 109,116 108,178 106,676 106,416 103,544' 109,708 94 Negotiable CDs 26,169 24,926 22,063 20,433 20,715 18,143 16,931 16,910 15,660 17,936 95 To United States 22,075 17,752 32,588 31,280 30,130 33,056 28,542 28,817 29,383' 30,386 96 Parent bank 14,021 12,026 26,404 24,241 24,578 28,812 22,428 22,513 22,219' 22,446 97 Other banks in United States 2,325 1,308 1,752 1,691 863 1,065 1,217 1,807 1,552' 1,553 98 Nonbanks 5,729 4,418 4,432 5,348 4,689 3,179 4,897 4,497 5,612 6,387 99 To foreigners 48,138 55,919 47,083 52,809 52,135 50,517 54,574 53,751 52,095 54,371 100 Other branches of parent bank 17,951 22,334 18,561 18,925 16,845 18,384 19,660 18,556 19,182 18,799 101 Banks 15,203 15,580 13,407 13,077 13,587 12,244 14,701 11,920 9,976' 11,233 102 Official institutions 4,934 7,530 4,348 6,606 6,755 5,454 5,649 6,717 5,192' 6,703 103 Nonbank foreigners 10,050 10,475 10,767 14,201 14,948 14,435 14,564 16,558 17,745 17,636 104 Other liabilities 3,325 3,953 4,173 6,458 6,136 6,462 6,629 6,938 6,406 7,015 Bahamas and Caymans 105 Total, all currencies 142,592 160,321 170,639 164,836 172,762 176,006 167,385 164,908 155,145' 150,767 106 Negotiable CDs 847 885 953 669 671 678 681 671 522 524 107 To United States 106,081 113,950 122,332 114,701 121,021 124,859 114,829 113,137 108,003' 101,024 108 Parent bank 49,481 53,239 62,894 66,292 70,107 75,579 65,380' 64,085' 61,528' 55,311 109 Other banks in United States 11,715 17,224 11,494 8,088 8,438 8,883 8,677 8,198 7,31C 8,544 110 Nonbanks 44,885 43,487 47,944 40,321 42,476 40,397 40,772' 40,854' 39,165' 37,169 111 To foreigners 34,400 43,815 45,161 46,906 47,521 47,382 48,974 48,726 44,314 46,741 112 Other branches of parent bank 12,631 19,185 23,686 23,086 23,352 23,414 24,911 25,110 20,778 22,446 113 Banks 8,617 10,769 8,336 8,985 9,137 8,823 8,439 8,059 7,983 8,617 114 Official institutions 2,719 1,504 1,074 1,003 1,131 1,097 1,528 1,290 1,078 1,247 115 Nonbank foreigners 10,433 12,357 12,065 13,832 13,901 14,048 14,0% 14,267 14,475 14,431 116 Other liabilities 1,264 1,671 2,193 2,560 3,549 3,087 2,901 2,374 2,306 2,478 117 Total payable in U.S. dollars 138,774 152,927 162,950 160,028 167,835 171,250 162,141 160,212 150,758' 146,259 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 Oct. Nov. Dec. Jan. Feb/ Mar/ Apr." 1 Total1 259,556 299,782 315,632 315,051 308,275 305,019 300,043 297,493 302,948 By type 2 Liabilities reported by banks in the United States 31,838 31,519 42,615 39,090 36,458 33,889 33,646 35,208 35,502 3 U.S. Treasury bills and certificates3 88,829 103,722 81,466 82,474 76,985 76,157 73,099 73,039 69,454 U.S. Treasury bonds and notes 4 Marketable 122,432 149,056 173,093 174,778 176,084 176,411 174,986 171,130 176,722 5 Nonmarketable 300 523 561 564 568 572 576 580 3,596 6 U.S. securities other than U.S. Treasury securities 16,157 14,962 17,897 18,145 18,180 17,990 17,736 17,536 17,674 By area 7 Western Europe 124,620 125,097 134,378 137,760 134,907 135,277 134,051 136,807 138,948 8 Canada 4,961 9,584 8,688 9,130 9,553 9,368 7,976 8,386 7,880 9 Latin America and Caribbean 8,328 10,099 10,003 9,892 88,,880088 7,927 8,309 9,200 9,147 10 116,098 145,608 154,130 149,745 114477,,003388 143,962 140,924 134,700 136,514 11 1,402 1,369 910 1,019 994 834 1,020 930 861 12 Other countries6 4,147 7,501 6,962 6,941 6,406 7,077 7,187 6,889 6,000 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 June Sept. Dec. Mar. 1 Banks' own liabilities 29,702 55,438 74,980 69,213 72,782 66,418 62,963 2 Banks' own claims 26,180 51,271 68,983 62,874 70,929 65,136 60,973 3 Deposits 14,129 18,861 25,100 23,922 22,998 20,346 21,556 4 Other claims 12,052 32,410 43,884 38,952 47,931 44,790 39,416 5 Claims of banks' domestic customers 2,507 551 364 723 2,558 3,100 1,190 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 • August 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 Oct. Nov. Dec. Jan. Feb/ Mar/ Apr." 1 All foreigners 618,874 685,339 735,896 709,321 731,874 735,896 704,593 696,232 703,101 701,544 2 Banks' own liabilities 470,070 514,532 576,515 544,913 565,702 576,515 543,382 537,986 540,610 543,744 3 Demand deposits 22,383 21,863 21,722 20,955 21,315 21,722 19,836 21,198 20,555 20,506 4 Time deposits 148,374 152,164 170,472 162,531 166,044 170,472 160,677 156,906 155,193 148,742 5 Other. 51,677 51,366 65,758 65,085 66,130 65,758 61,331 57,869 59,955 64,846 6 Own foreign offices4 247,635 289,138 318,563 296,342 312,213 318,563 301,538 302,013 304,907 309,650 7 Banks' custody liabilities5 148,804 170,807 159,380 164,409 166,172 159,380 161,211 158,246 162,492 157,800 8 U.S. Treasury bills and certificates6 101,743 115,056 91,100 95,893 97,018 91,100 9900,,770033 88,032 8888,,001155 8833,,664433 9 Other negotiable and readily transferable instruments7 16,776 16,426 19,526 19,883 19,236 19,526 18,658 18,655 21,028 20,231 10 Other 30,285 39,325 48,754 48,633 49,918 48,754 51,851 51,560 53,449 53,926 11 Nonmonetary international and regional organizations8 4,464 3,224 4,772 5,833 5,905 4,772 4,778 3,766 4,896 5,629 12 Banks' own liabilities 2,702 2,527 3,156 3,797 4,587 3,156 3,178 2,218 3,334 3,682 13 Demand deposits 124 71 % 53 62 96 36 55 156 52 14 Time deposits 1,538 1,183 927 1,107 1,075 927 1,048 624 1,137 2,025 15 Other3 1,040 1,272 2,133 2,638 3,449 2,133 2,094 1,539 2,041 1,605 16 Banks' custody liabilities5 1,761 698 1,616 2,036 1,318 1,616 1,599 1,547 1,562 1,947 17 U.S. Treasury bills and certificates6 265 57 197 568 321 197 102 160 191 190 18 Other negotiable and readily transferable instruments7 1,497 641 1,417 1,454 996 1,417 1,497 1,387 1,371 1,740 19 Other 0 0 2 14 0 2 0 0 0 17 20 Official institutions9 120,667 135,241 113,443 124,081 121,563 113,443 110,046 106,745 108,247 104,956 21 Banks' own liabilities 28,703 27,109 31,070 37,538 34,119 31,070 30,342 30,455 31,366 32,724 22 Demand deposits 1,757 1,917 2,189 1,941 1,829 2,189 1,599 1,666 1,826 2,066 23 Time deposits 12,843 9,767 10,530 12,101 11,237 10,530 9,358 10,658 9,704 10,448 24 Other3 14,103 15,425 18,351 23,496 21,053 18,351 19,385 18,132 19,836 20,210 25 Banks' custody liabilities5 91,965 108,132 82,373 86,542 87,444 82,373 79,704 76,289 76,881 72,231 26 U.S. Treasury bills and certificates6 88,829 103,722 76,985 81,466 82,474 76,985 7766,,115577 7733,,009999 7733,,003399 6699,,445544 27 Other negotiable and readily transferable instruments7 2,990 4,130 5,028 4,774 4,845 5,028 33,,445599 2,892 3,671 2,605 28 Other 146 280 361 303 125 361 8888 298 171 173 29 Banks10 414,280 459,523 514,395 483,498 507,346 514,395 491,589 484,295 489,694 492,734 30 Banks' own liabilities 371,665 409,501 453,880 421,805 444,491 453,880 427,220 420,806 421,479 423,906 31 Unaffiliated foreign banks 124,030 120,362 135,317 125,463 132,278 135,317 125,682 118,793 116,572 114,256 32 Demand deposits 10,898 9,948 10,339 9,885 10,736 10,339 9,601 10,357 9,625 9,283 33 Time deposits 79,717 80,189 92,278 83,983 87,444 92,278 81,519 75,500 75,784 69,012 34 Other3 33,415 30,226 32,701 31,594 34,099 32,701 34,562 32,936 31,163 35,961 35 Own foreign offices4 247,635 289,138 318,563 296,342 312,213 318,563 301,538 302,013 304,907 309,650 36 Banks' custody liabilities5 42,615 50,022 60,514 61,693 62,855 60,514 64,369 63,489 68,215 68,829 37 U.S. Treasury bills and certificates6 9,134 7,602 9,367 9,427 9,670 9,367 99,,661144 99,,334422 99,,335599 99,,337744 38 Other negotiable and readily transferable instruments7 5,392 5,725 5,124 5,102 4,797 5,124 5,090 4,918 7,608 7,628 39 Other 28,089 36,694 46,023 47,165 48,388 46,023 49,665 49,229 51,247 51,827 40 Other foreigners 79,463 87,351 103,286 95,909 97,060 103,286 98,180 101,427 100,264 98,226 41 Banks' own liabilities 67,000 75,396 88,409 81,773 82,505 88,409 82,641 84,506 84,431 83,433 42 Demand deposits 9,604 9,928 9,098 9,077 8,689 9,098 8,599 9,121 8,948 9,106 43 Time deposits 54,277 61,025 66,738 65,338 66,288 66,738 68,752 70,124 68,567 67,258 44 Other3 3,119 4,443 12,573 7,357 7,528 12,573 5,290 5,261 6,915 7,069 45 Banks' custody liabilities5 12,463 11,956 14,877 14,137 14,555 14,877 15,539 16,921 15,834 14,793 46 U.S. Treasury bills and certificates6 3,515 3,675 4,551 4,432 44,,555533 44,,555511 44,,883300 55,,443311 55,,442255 44,,662266 47 Other negotiable and readily transferable instruments7 6,898 5,929 7,958 8,553 8,597 7,958 8,612 9,457 8,378 8,258 48 Other 2,050 2,351 2,368 1,152 1,405 2,368 2,098 2,033 2,031 1,909 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 7,314 6,425 7,203 7,434 7,050 7,203 8,576 8,457 7,634 7,183 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 Oct. Nov. Dec. Jan. Feb. Mar/ Apr." 1 618,874 685,339 735,896 709,321 731,874 735,896 704,593 696,232 703,101 701,544 2 Foreign countries 614,411 682,115 731,124 703,488 725,970 731,124 699,815 692,467 698,205 695,916 3 Europe 234,641 231,912 237,292 233,250 242,602 237,292 230,730 224,369 224,465 228,574 4 920 1,155 1,232 1,201 1,475 1,232 1,422 1,817 1,764 1,923 Belgium-Luxembourg 9,347 10,022 10,491 10,852 10,333 10,491 11,348 11,3% 11,937 9,651 6 760 2,200 1,410 1,444 1,913 1,410 1,240 1,244 1,760 2,271 7 377 285 570 464 577 570 685 611 431 446 8 29,835 24,777 26,893 23,971 26,018 26,893 22,985 21,841 21,910 24,252 9 7,022 6,772 7,578 8,757 9,145 7,578 7,580 8,718 7,487 8,375 10 689 672 1,017 850 1,030 1,017 1,092 1,024 906 878 11 Italy 12,073 14,599 16,159 14,244 14,673 16,159 13,050 11,978 12,728 14,137 1? 5,014 5,316 6,613 5,634 7,259 6,613 7,732 8,214 9,454 7,731 13 1,362 1,559 2,401 1,344 1,954 2,401 1,256 997 2,620 1,453 14 Portugal 801 903 2,407 2,293 2,251 2,407 2,381 2,285 2,384 2,351 15 2,621 5,494 4,364 5,007 4,911 4,364 5,421 4,279 4,902 4,231 16 1,379 1,284 1,491 1,665 1,921 1,491 2,303 1,468 1,524 1,914 17 33,766 34,199 34,511 29,765 31,714 34,511 33,288 33,029 33,959 33,472 18 703 1,012 1,818 1,202 1,372 1,818 1,047 886 1,039 1,432 19 United Kingdom ,116,852 111,811 102,334 106,371 108,914 102,334 101,968 99,438 %,395 99,304 70 Yugoslavia 710 529 1,474 858 1,017 1,474 1,349 1,402 1,613 1,599 71 Other Western Europe1 9,798 8,598 13,563 16,394 15,170 13,563 13,219 12,087 10,213 11,275 V U.S.S.R 32 138 350 338 286 350 229 377 141 446 23 Other Eastern Europe 582 591 618 597 669 618 1,138 1,278 1,299 1,434 24 Canada 30,095 21,062 18,861 16,744 18,245 18,861 19,243 21,329 18,536 19,336 75 Latin America and Caribbean 220,372 271,146 310,737 289,329 299,765 310,737 300,123 305,275 313,823 309,915 76 5,006 7,804 7,294 8,178 7,803 7,294 7,368 7,501 8,036 8,236 77 74,767 86,863 99,341 93,246 96,386 99,341 95,254 94,373 97,334 89,394 78 2,344 2,621 2,869 2,525 2,628 2,869 2,539 2,240 2,308 2,842 79 4,005 5,314 6,287 6,139 6,282 6,287 6,660 7,149 7,294 6,706 30 British West Indies 81,494 113,840 138,177 122,108 129,378 138,177 131,820 135,818 140,985 145,062 31 Chile 2,210 2,936 3,209 3,050 3,097 3,209 3,045 3,134 3,261 3,408 37 Colombia 4,204 4,374 4,652 5,006 4,805 4,652 4,395 4,593 4,481 4,404 33 Cuba 12 10 10 10 15 10 30 10 9 9 34 1,082 1,379 1,391 1,359 1,343 1,391 1,229 1,304 1,337 1,338 35 Guatemala 1,082 1,195 1,312 1,296 1,309 1,312 1,332 1,362 1,403 1,451 36 160 269 209 209 191 209 202 217 245 214 37 14,480 15,185 15,398 15,285 15,012 15,398 14,767 15,803 15,269 15,051 38 Netherlands Antilles 4,975 6,420 6,300 5,973 6,287 6,300 6,189 6,475 6,411 6,460 39 7,414 4,353 4,361 4,579 4,537 4,361 4,569 4,747 4,766 4,749 40 1,275 1,671 1,982 1,924 1,944 1,982 1,921 1,969 1,836 1,703 41 1,582 1,898 2,283 2,235 2,335 2,283 2,418 2,400 2,513 2,575 47 9,048 9,147 9,466 9,609 9,855 9,466 9,841 9,630 9,871 9,643 43 Other 5,234 5,868 6,196 6,598 6,558 6,1% 6,544 6,548 6,464 6,668 44 121,288 147,838 155,857 151,967 151,679 155,857 140,942 131,251 132,081 130,277 45 1,162 1,895 1,871 1,989 1,659 1,871 1,780 1,470 11,,557733 11,,885544 46 21,503 26,058 19,562 22,492 21,316 19,562 19,147 17,901 15,552 15,413 47 10,180 12,248 12,245 12,209 12,111 12,245 11,653 11,051 11,533 12,155 48 582 699 780 842 990 780 907 762 1,032 1,013 49 1,404 1,180 1,279 1,147 1,303 1,279 1,057 1,174 1,545 1,560 50 1,292 1,461 1,243 2,237 1,0% 1,243 1,038 894 1,497 1,310 51 54,322 74,015 80,991 74,039 75,368 80,991 70,084 65,065 66,088 65,509 s? 1,637 2,541 3,213 3,288 3,528 3,213 2,616 2,561 2,318 2,108 53 1,085 1,163 1,759 1,185 1,269 1,759 1,143 1,262 1,197 1,176 54 Thailand 1,345 1,236 2,093 1,707 1,909 2,093 2,379 2,523 1,925 1,595 55 Middle-East oil-exporting countries 13,988 12,083 13,362 13,485 13,610 13,362 13,258 12,551 12,443 11,627 56 Other 12,788 13,260 17,459 17,346 17,519 17,459 15,879 14,037 15,377 14,958 57 3,945 3,991 3,819 3,507 3,767 3,819 4,293 4,925 4,432 3,709 58 1,151 911 685 581 637 685 640 722 600 594 59 194 68 78 72 76 78 86 95 80 111 60 202 437 205 222 293 205 255 261 277 228 61 67 85 86 71 60 86 82 77 74 70 67 Oil-exporting countries4 1,014 1,017 1,120 1,048 1,120 1,120 1,671 2,259 1,839 935 63 Other 1,316 1,474 1,644 1,513 1,581 1,644 1,559 1,511 1,562 1,770 64 4,070 6,165 4,558 8,690 9,912 4,558 4,485 5,318 4,868 4,105 65 3,327 5,293 3,866 8,072 9,141 3,866 3,806 4,598 3,987 3,404 66 All other 744 872 692 618 771 692 679 720 881 701 6677 Nonmonetary international and regional 4,464 3,224 4,772 5,833 5,905 4,772 44,,777788 33,,776666 44,,88%% 55,,662299 68 2,830 2,503 3,825 4,515 4,768 3,825 3,706 2,765 3,634 4,047 69 Latin American regiona] 1,272 589 684 919 586 684 857 655 949 1,123 70 Other regional6 362 133 263 400 551 263 214 345 313 458 1. Includes the Bank for International Settlements and Eastern European 4. Comprises Algeria, Gabon, Libya, and Nigeria. countries that are not listed in line 23. 5. Excludes "holdings of dollars" of the International Monetary Fund. 2. Comprises Bulgaria, Czechoslovakia, the German Democratic Republic, 6. Asian, African, Middle Eastern, and European regional organizations, Hungary, Poland, and Romania. except the Bank for International Settlements, which is included in "Other 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and Western Europe." United Arab Emirates (Trucial States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A62 International Statistics • August 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 Oct. Nov. Dec. Jan. Feb. Mar.' Apr." 1 Total 459,877 491,165 535,706 515,422 535,459 535,706 514,647 499,386r 489,877 489,905 2 Foreign countries 456,472 489,094 532,055 512,771 532,471 532,055 510,395 495,312r 486,083 486,004 3 Europe 102,348 116,928 118,956 113,288 111,987 118,956 105,817 103,959' 104,101 104,800 4 Austria 793 483 415 575 559 415 658 429 500 592 5 Belgium-Luxembourg 9,397 8,515 6,478 7,497 6,606 6,478 6,645 7,008' 6,352 6,313 6 Denmark 717 483 582 513 609 582 664 635 608 750 7 Finland 1,010 1,065 1,027 1,707 1,129 1,027 1,214 1,218 1,150 1,025 8 France 13,548 13,243 16,146 16,391 16,055 16,146 15,832 16,391' 15,677 16,002 9 Germany 2,039 2,329 2,865 3,371 2,657 2,865 1,990 2,760' 2,783 2,465 10 Greece 462 433 788 650 700 788 735 773 664 622 11 Italy 7,460 7,936 6,662 5,472 5,718 6,662 4,931 5,374' 5,010 4,219 12 Netherlands 2,619 2,541 1,904 1,886 2,259 1,904 1,656 1,567 2,181 2,020 13 Norway 934 455 609 647 635 609 599 672 775 908 14 Portugal 477 261 376 258 275 376 309 288 273 380 15 Spain 1,853 1,823 1,930 1,733 1,840 1,930 2,766 2,038 2,240 1,725 16 Sweden 2,254 1,977 1,773 2,087 2,555 1,773 2,718 2,158 2,305 2,166 17 Switzerland 2,718 3,895 6,141 4,522 4,940 6,141 4,797 4,910' 4,984 4,853 18 Turkey 1,680 1,233 1,049 1,021 1,044 1,049 1,065 1,065' 1,125 1,126 19 United Kingdom 50,823 65,706 65,426 59,838 59,919 65,426 54,567 52,018' 52,870 55,380 20 Yugoslavia 1,700 1,390 1,329 1,373 1,281 1,329 1,243 1,158 1,157 1,121 21 Other Western Europe2 619 1,152 1,302 1,504 1,245 1,302 1,373 1,271' 1,183 980 22 U.S.S.R 389 1,255 1,234 1,448 1,075 1,234 1,192 1,322 1,356 1,322 23 Other Eastern Europe3 852 754 921 794 883 921 864 905' 907 831 24 Canada 25,368 18,889 16,087 13,800 16,177 16,087 18,330 16,768' 15,082 15,193 25 Latin America and Caribbean 214,789 214,264 231,540 221,040 232,878 231,540 225,332 220,260' 212,686 202,940 26 Argentina 11,996 11,826 9,444 10,444 10,274 9,444 8,986 8,718 8,189 8,025 27 Bahamas 64,587 66,954 78,656 71,379 78,487 78,656 74,336 71,891' 68,695 63,927 28 Bermuda 471 483 1,315 804 841 1,315 485 401 425 443 29 Brazil 25,897 25,735 23,888 25,075 24,418 23,888 23,503 23,210' 21,882 21,849 30 British West Indies 50,042 55,888 68,572 63,840 69,450 68,572 70,894 70,051' 72,330 67,550 31 Chile 6,308 5,217 4,353 4,601 4,474 4,353 4,212 4,208' 4,079 3,714 32 Colombia 2,740 2,944 2,781 2,800 2,784 2,781 2,530 2,610' 2,720 2,649 33 Cuba 1 1 1 1 1 1 0 0 0 0 34 Ecuador 2,286 2,075 1,698 1,864 1,858 1,698 1,588 1,570 1,536 1,527 35 Guatemala 144 198 197 188 190 197 213 200 208 207 36 Jamaica 188 212 297 270 260 297 284 274 265 260 37 Mexico 29,532 24,637 23,563 22,751 23,292 23,563 22,136 21,400 16,982 17,435 38 Netherlands Antilles 980 1,306 1,921 1,201 1,099 1,921 1,763 1,702 1,692 1,760 39 Panama 4,744 2,521 1,740 1,834 1,792 1,740 1,748 1,688 1,730 1,743 40 Peru 1,329 1,013 771 849 836 771 750 752 733 721 41 Uruguay 963 910 928 903 915 928 932 935 926 886 42 Venezuela 10,843 10,733 9,688 10,269 10,119 9,688 9,289 8,956 8,528 8,425 43 Other Latin America and Caribbean 1,738 1,612 1,726 1,965 1,787 1,726 1,682 1,695 1,766 1,818 44 106,096 130,881 157,187 153,744 158,766 157,187 151,934 144,284' 114455,,114411 115544,,998844 China Mainland 968 762 634 594 610 634 620 619 599 674 46 Taiwan 4,592 4,184 2,776 2,858 2,702 2,776 2,137 1,823 2,013 1,890 47 Hong Kong 8,218 10,143 11,103 10,047 10,442 11,103 7,679 6,557 7,418 8,953 48 India 510 560 621 617 637 621 625 892' 721 587 49 Indonesia 580 674 651 685 655 651 641 611 604 560 50 Israel 1,363 1,136 813 1,185 758 813 748 751 737 721 51 Japan 68,658 90,149 111,066 110,425 114,498 111,066 113,327 108,351' 108,633 117,482 52 Korea 5,148 5,213 5,296 5,713 5,838 5,296 5,156 4,880 5,016 4,964 53 Philippines 2,071 1,876 1,344 1,549 1,498 1,344 1,297 1,163 1,204 1,221 54 Thailand 496 848 1,140 1,046 1,064 1,140 1,171 1,046 992 1,066 55 Middle East oil-exporting countries 4,858 6,213 10,149 8,357 8,675 10,149 8,655 9,248 8,740 8,367 56 Other Asia 8,635 9,122 11,594 10,669 11,387 11,594 9,880 8,344 8,463 8,500 57 Africa 4,742 5,718 5,931 5,771 5,914 5,931 6,593 7,317 6,757 5,949 58 Egypt 521 507 502 475 471 502 470 493 474 491 59 Morocco 542 511 559 538 547 559 575 588 581 596 60 South Africa 1,507 1,681 1,628 1,679 1,686 1,628 1,619 1,628 1,647 1,632 61 Zaire 15 17 16 15 16 16 16 17 25 19 62 Oil-exporting countries 1,003 1,523 1,689 1,554 1,641 1,689 1,667 3,099 2,523 1,705 63 Other 1,153 1,479 1,537 1,510 1,553 1,537 2,247 1,491 1,506 1,506 64 Other countries 3,129 2,413 2,354 5,129 6,750 2,354 2,390 2,724 2,316 2,138 65 Australia 2,100 1,520 1,781 4,301 6,174 1,781 1,761 1,824 1,625 1,497 66 All other 1,029 894 573 828 576 573 629 900 692 641 67 Nonmonetary international and regional organizations 3,404 2,071 3,651 2,651 2,987 3,651 4,252 4,074' 3,794 3,900 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 Oct. Nov. Dec. Jan. Feb/ Mar/ Apr." 1 Total 444444499999997777777,,,,,,,666666633333335555555 555555533333338888888,,,,,,,666666688888889999999 555555588888889999999,,,,,,,777777722222221111111 555555588888889999999,,,,,,,777777722222221111111 555555544444441111111,,,,,,,666666655555553333333 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 444444455555559999999,,,,,,,888888877777777777777 444444499999991111111,,,,,,,111111166666665555555 555555533333335555555,,,,,,,777777700000006666666 515,422 535,459 555555533333335555555,,,,,,,777777700000006666666 514,647 499,386 444444488888889999999,,,,,,,888888877777777777777 489,905 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 66666664444444,,,,,,,666666600000005555555 66666662222222,,,,,,,666666655555558888888 66666660000000,,,,,,,555555522222223333333 63,398 62,488 66666660000000,,,,,,,555555522222223333333 58,967 56,884 55555554444444,,,,,,,000000066666665555555 53,276 44 OOwwnn ffoorreeiiggnn ooffffiicceess22 222222222222224444444,,,,,,,777777722222227777777 222222255555557777777,,,,,,,444444433333336666666 222222299999997777777,,,,,,,111111188888884444444 277,330 297,592 222222299999997777777,,,,,,,111111188888884444444 292,561 283,794 222222277777774444444,,,,,,,333333322222225555555 274,169 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111122222227777777,,,,,,,666666600000009999999 111111122222229999999,,,,,,,444444422222225555555 111111133333334444444,,,,,,,888888844444442222222 131,133 133,803 111111133333334444444,,,,,,,888888844444442222222 123,784 120,505 111111122222223333333,,,,,,,111111199999995555555 124,631 66 DDeeppoossiittss 66666660000000,,,,,,,666666688888887777777 66666665555555,,,,,,,888888899999998888888 77777777777777,,,,,,,999999900000000000000 72,220 75,629 77777777777777,,,,,,,999999900000000000000 69,752 67,161 77777770000000,,,,,,,000000077777774444444 71,829 77 OOtthheerr 66666666666666,,,,,,,999999922222222222222 66666663333333,,,,,,,555555522222227777777 55555556666666,,,,,,,999999944444442222222 58,913 58,174 55555556666666,,,,,,,999999944444442222222 54,033 53,344 55555553333333,,,,,,,111111122222221111111 52,803 88 AAllll ootthheerr ffoorreeiiggnneerrss 44444442222222,,,,,,,999999933333336666666 44444441111111,,,,,,,666666644444446666666 44444443333333,,,,,,,111111155555558888888 43,562 41,577 44444443333333,,,,,,,111111155555558888888 39,334 38,203 33333338888888,,,,,,,222222299999992222222 37,828 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss33...... 33333337777777,,,,,,,777777755555558888888 44444447777777,,,,,,,555555522222224444444 55555554444444,,,,,,,000000011111114444444 55555554444444,,,,,,,000000011111114444444 55555551111111,,,,,,,777777777777776666666 3333333,,,,,,,666666699999992222222 8888888,,,,,,,222222288888889999999 11111110000000,,,,,,,333333388888883333333 11111110000000,,,,,,,333333388888883333333 11111116666666,,,,,,,777777788888888888888 11 Negotiable and readily transferable 22222226666666,,,,,,,666666699999996666666 22222225555555,,,,,,,777777700000000000000 22222229999999,,,,,,,000000044444440000000 22222229999999,,,,,,,000000044444440000000 22222220000000,,,,,,,666666633333334444444 12 Outstanding collections and other 7777777,,,,,,,333333377777770000000 11111113333333,,,,,,,555555533333335555555 11111114444444,,,,,,,555555599999991111111 11111114444444,,,,,,,555555599999991111111 11111114444444,,,,,,,333333355555554444444 13 MEMO: Customer liability on 22222223333333,,,,,,,111111100000007777777 11111119999999,,,,,,,555555599999996666666 11111112222222,,,,,,,888888811111118888888 11111112222222,,,,,,,888888811111118888888 11111113333333,,,,,,,555555577777775555555 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States 40,909 45,568 45,413 45,742 47,288 45,413 44,146r 45,255 44,601 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 June Sept. Dec. Mar." 1 Total 232,295 235,130 233,184 231,606 236,265 238,458 214,278 By borrower 2 Maturity of 1 year or less2 160,555 163,997 172,634 167,663 169,192 178,065 160,164 3 Foreign public borrowers 24,842 25,889 26,562 24,295 24,054 23,687 22,516 4 All other foreigners 135,714 138,108 146,071 143,368 145,138 154,378 137,648 5 Maturity over 1 year 71,740 71,133 60,550 63,944 67,072 60,392 54,114 6 Foreign public borrowers 39,103 38,625 35,291 38,605 41,806 35,967 30,401 7 All other foreigners 32,637 32,507 25,259 25,339 25,266 24,425 23,712 By area Maturity of 1 year or less 8 Europe 61,784 59,027 55,909 58,260 53,030 53,584 48,274 9 Canada 5,895 5,680 6,282 5,693 6,236 5,901 5,694 10 Latin America and Caribbean 56,271 56,535 57,991 50,527 52,320 53,082 46,801 11 Asia 29,457 35,919 46,224 45,448 50,358 57,932 51,205 12 Africa 2,882 2,833 3,337 3,601 3,514 3,238 3,933 13 All other3 4,267 4,003 2,891 4,134 3,735 4,329 4,257 Maturity of over 1 year2 14 Europe 6,737 6,696 4,666 4,554 8,746 4,769 4,458 15 Canada 1,925 2,661 1,922 2,592 2,459 2,338 2,702 16 Latin America and Caribbean 56,719 53,817 47,547 50,095 48,586 45,801 38,018 17 Asia 4,043 3,830 3,613 3,823 4,223 4,139 5,608 18 Africa 1,539 1,747 2,301 2,408 2,475 2,662 2,764 19 All other3 777 2,381 501 472 584 684 564 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 • August 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 1988 1989 1990 AArreeaa oorr ccoouunnttrryy 11998866 11998877 Mar. June Sept. Dec. Mar. June Sept. Dec. Mar." 1 Total 386.5 382.4 370.9 351.9 354.0 346.3 345.3 339.2 345.0 339.9 335.9 2 G-10 countries and Switzerland 156.6 159.7 156.3 150.7 148.7 152.7 145.1 144.7 145.9 153.2r 146.3 3 Belgium-Luxembourg 8.4 10.0 9.1 9.2 9.5 9.0 8.6 7.8 6.9 6.3 6.5 4 France 13.6 13.7 11.8 10.9 10.3 10.5 11.2 10.8 11.1 11.7 10.5 5 Germany 11.6 12.6 11.8 10.6 9.2 10.3 10.2 10.6 10.4 10.5 11.2 6 Italy 9.0 7.5 7.4 6.3 5.6 6.8 5.2 6.1 6.8 7.4 6.0 7 Netherlands 4.6 4.1 3.3 3.2 2.9 2.7 2.8 2.8 2.4 3.1 3.1 8 Sweden 2.4 2.1 2.1 1.9 1.9 1.8 2.3 1.8 2.0 2.0 2.1 9 Switzerland 5.8 5.6 5.1 5.6 5.2 5.4 5.1 5.4 6.1 7.1 6.2 10 United Kingdom 70.9 68.8 71.7 70.4 67.6 66.2 65.3 64.2 63.5 67. 1' 63.7 11 Canada 5.2 5.5 4.7 5.3 4.9 5.0 4.0 5.1 5.9 6.1 4.8 12 Japan 25.1 29.8 29.2 27.3 31.6 34.9 30.4 30.1 30.8 31.9 32.1 13 Other developed countries 26.1 26.4 26.4 24.0 23.0 21.0 21.0 21.1 20.9 20.7 23.1 14 Austria 1.7 1.9 1.6 1.6 1.6 1.5 1.4 1.7 1.5 1.5' 1.5 15 Denmark 1.7 1.7 1.4 1.1 1.2 1.1 1.1 1.4 1.1 1.1 1.1 16 Finland 1.4 1.2 1.0 1.2 1.3 1.1 1.0 1.0 1.1 1.0 1.1 17 Greece 2.3 2.0 2.3 2.1 2.1 1.8 2.1 2.3 2.3 2.5 2.6 18 Norway 2.4 2.2 1.9 1.9 2.0 1.8 1.6 1.8 1.4 1.4 1.7 19 Portugal .9 .6 .5 .4 .4 .4 .4 .6 .4 .4 .4 20 Spain 5.8 8.0 8.9 7.2 6.3 6.2 6.6 6.2 6.9 7.1 8.3 21 Turkey 2.0 2.0 2.0 1.8 1.6 1.5 1.3 1.1 1.1 1.2 1.3 22 Other Western Europe 1.5 1.6 1.9 1.7 1.9 1.3 1.1 1.1 1.0 .7 1.1 23 South Africa 3.0 2.9 2.8 2.8 2.7 2.4 2.2 2.1 2.1 2.0 2.0 24 Australia 3.4 2.4 2.0 2.2 1.8 1.8 2.4 1.9 2.1 1.6f 2.1 25 OPEC countries3 19.4 17.4 17.6 17.0 17.9 16.6 16.2 16.0 16.2 17.2 16.4 26 Ecuador 2.2 1.9 1.9 1.8 1.8 1.7 1.6 1.5 1.5 1.3 1.2 27 Venezuela 8.7 8.1 8.1 8.0 7.9 7.9 7.9 7.5 7.3 7.1 6.1 28 Indonesia 2.5 1.9 1.8 1.8 1.8 1.7 1.7 1.9 2.0 2.0 2.1 29 Middle East countries 4.3 3.6 3.9 3.5 4.6 3.4 3.3 3.4 3.5 5.0 4.4 30 African countries 1.8 1.9 1.9 1.9 1.9 1.9 1.7 1.6 1.9 1.8 2.6 31 Non-OPEC developing countries 99.6 97.8 94.4 91.8 87.2 85.3 85.4 83.1 80.8 77.9' 71.3 Latin America 32 Argentina 9.5 9.5 9.6 9.5 9.3 9.0 8.4 7.9 7.6 6.4 5.5 33 Brazil 25.3 24.7 23.8 23.7 22.4 22.4 22.7 22.0 20.8 19.1 17.5 34 Chile 7.1 6.9 6.6 6.4 6.3 5.6 5.7 5.1 4.9 4.6 4.3 35 Colombia 2.1 2.0 2.0 2.2 2.1 2.1 1.9 1.7 1.6 1.8 1.8 36 Mexico 24.0 23.5 22.4 21.1 20.4 18.8 18.0 17.5 17.0 17.8 15.3 37 Peru 1.4 1.1 1.1 .9 .8 .8 .7 .6 .6 .6 .5 38 Other Latin America 3.1 2.8 2.8 2.6 2.5 2.6 2.7 2.6 2.9 2.8 2.7 Asia China 39 Mainland .4 .3 .4 .4 .2 .3 .5 .3 .3 .3 .3 40 Taiwan 4.9 8.2 6.1 4.9 3.2 3.7 4.9 5.2 5.0 4.5 3.8 41 India 1.2 1.9 2.1 2.3 2.0 2.1 2.6 2.4 2.7 3.1 3.5 42 Israel 1.5 1.0 1.0 1.0 1.0 1.2 .9 .8 .7 .7 .6 43 Korea (South) 6.7 5.0 5.7 5.9 6.0 6.1 6.1 6.6 6.5 5.9 5.3 44 Malaysia 2.1 1.5 1.5 1.5 1.7 1.6 1.7 1.6 1.7 1.7 1.8 45 Philippines 5.4 5.2 5.1 4.9 4.7 4.5 4.4 4.4 4.0 4.1 3.7 46 Thailand .9 .7 1.0 1.1 1.2 1.1 1.0 1.0 1.3 1.3 1.1 47 Other Asia .7 .7 .7 .8 .8 .9 .8 .8 1.0 1.0 1.2 Africa 48 Egypt .7 .6 .5 .6 .5 .4 .5 .6 .5 .4 .4 49 Morocco .9 .9 .9 .9 .8 .9 .9 .9 .8 .9 .9 50 Zaire .1 .0 .1 .1 .0 .0 .0 .0 .0 .0 .0 51 Other Africa4 1.6 1.3 1.2 1.2 1.2 1.1 1.1 1.1 1.0 1.0 .9 52 Eastern Europe 3.5 3.2 3.1 3.3 3.1 3.6 3.5 3.4 3.5 3.5 3.5 53 U.S.S.R .1 .3 .3 .4 .4 .7 .7 .6 .8 .7 .8 54 Yugoslavia 2.0 1.8 1.9 1.9 1.8 1.8 1.7 1.7 1.7 1.6' 1.4 55 Other 1.4 1.1 1.0 1.0 1.0 1.1 1.1 1.1 1.1 1.3' 1.3 56 Offshore banking centers 61.5 54.5 51.5 43.0 47.3 44.2 48.5 43.1 48.9 37.1' 42.0 57 Bahamas 22.4 17.3 15.9 8.9 12.9 11.0 15.8 11.0 11.1 5.8 8.9 58 Bermuda .6 .6 .8 1.0 .9 .9 1.1 .7 1.3 1.7 .9 59 Cayman Islands and other British West Indies 12.3 13.5 11.6 10.3 11.9 12.9 12.0 10.8 15.3 9.1' 10.9 60 Netherlands Antilles 1.8 1.2 1.3 1.2 1.2 1.0 .9 1.0 1.1 2.3 2.6 61 Panama5 4.0 3.7 3.2 3.0 2.6 2.5 2.2 1.9 1.5 1.4 1.3 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 11.1 11.2 11.3 11.6 10.5 9.6 9.6 10.4 10.7 9.7' 9.8 64 Singapore 9.2 7.0 7.4 6.9 7.0 6.1 6.8 7.3 7.8 7.0 7.4 65 Others6 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated7 19.8 23.2 21.5 22.2 26.7 22.6 25.1 27.4 28.5 30.1 33.1 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 Type, and area or country 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 37,635' 2 Payable in dollars 21,749 22,785 28,382 27,365 28,382 31,856 32,298 30,425 32,808' 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 17,484' 5 Payable in dollars 9,609 8,643 11,593 11,700 11,593 13,658 13,465 12,428 13,591' 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 20,151' 8 Trade payables 6,450 7,305 6,458 6,455 6,458 7,009 6,339 6,416 7,475' 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 19,217' 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 10,657' 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 7,555' 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 11,,339988 22,,004422 2,563 2,435 2,563 2,950 3,225 3,130 4,064 29 Middle East oil-exporting countries2 . 88 88 3 4 3 1 12 2 2 30 Africa 1 4 1 3 1 5 3 4 2 1 1 0 1 0 3 2 2 0 31 Oil-exporting countries 67 100 2 3 2 2 97 97 100 32 All other4 Commercial liabilities 4,446 5,516 7,344 6,681 7,344 7,944 7,865 7,985 9,119' 33 Europe 101 132 170 206 170 134 117 138 178' 34 Belgium-Luxembourg 352 426 455 432 455 579 549 767 874' 35 France 715 909 1,699 1,185 1,699 1,372 1,190 1,196 1,370' 36 Germany 424 423 591 647 591 670 689 549 709 37 Netherlands 385 559 417 486 417 458 458 416 621 38 Switzerland 1,341 1,599 2,065 2,110 2,065 2,585 2,709 2,729 2,821 39 United Kingdom 40 Canada 1,405 1,301 1,217 1,091 1,217 1,163 1,132 1,191 1,069' 41 Latin America and Caribbean 924 864 1,118 997 1,118 1,267 1,669 1,092 1,127' 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 217 189 179 177 179 198 182 191 243' 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 6,967' 49 Japan .j 2,042 2,578 3,097 2,763 3,097 3,059 2,712 2,649 2,773' 50 Middle East oil-exporting countries ,5 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 All 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 • August 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 Total 36,265 30,964 33,816 38,691 33,816 31,964 34,348 32,474 31,791r 2 Payable in dollars 33,867 28,502 31,481 36,179 31,481 29,650 32,232 30,261 29,463' 3 Payable in foreign currencies 2,399 2,462 2,335 2,512 2,335 2,315 2,115 2,212 2,328' By type 4 Financial claims 26,273 20,363 21,882 27,597 21,882 20,045 22,051 19,644 17,523' 5 Deposits 19,916 14,894 15,887 19,367 15,887 14,865 16,986 12,985 10,485' 6 Payable in dollars 19,331 13,765 14,788 18,340 14,788 13,950 16,065 12,120 9,559' 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 7,038' 9 Payable in dollars 5,005 4,656 5,265 7,288 5,265 4,287 4,349 5,795 6,243' 10 Payable in foreign currencies 1,352 814 731 943 731 893 716 864 7%r 11 Commercial claims 9,992 10,600 11,933 11,094 11,933 11,919 12,297 12,830 14,268' 12 Trade receivables 8,783 9,535 10,859 10,097 10,859 10,658 10,866 11,401 12,711'' 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 13,662' 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 10,296 9,245 8,845 8,005 6,976' 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 90' 22 United Kingdom 9,855 8,467 8,997 9,742 8,997 7,856 7,587 6,819 5,933' 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 countries 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 38 Belgium-Luxembourg 133 178 177 172 177 202 201 219 241' 39 France 431 650 660 517 660 758 755 820 950 40 Germany 444 562 613 615 613 647 643 672 670 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 9% 45 Latin America and Caribbean 1,857 1,930 2,234 2,104 2,234 2,110 2,089 2,120 2,161r 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 412 368 459 463 459 481 431 502 507' 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 3,51c 53 Japan 881 1,158 934 %7 934 1,038 990 1,168 1,177' 54 Middle East oil-exporting countries 563 450 445 437 445 427 430 406 508 55 Africa 500 401 434 424 434 386 402 388 419 56 Oil-exporting countries 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.- Oct. Nov. Dec. Jan. Feb. Mar/ Apr." Apr. U.S. corporate securities STOCKS 1 Foreign purchases 181,185 212,975 55,0% 22,350 13,830 15,410 13,745 13,463' 16,430 11,457 2 Foreign sales 183,185 203,385 59,294 20,988 14,947 16,868 14,128 13,692' 19,117 12,356 3 Net purchases, or sales (—) -2,000 9,589 -4,198 1,363 -1,117 -1,458 -383 -229 -2,687 -899 4 Foreign countries -1,825 9,834 -4,252 1,340 -1,116 -1,411 -353 -230 -2,733 -937 5 Europe -3,350 248 -1,982 -107 -1,655 -281 -183 -144 -990 -666 -281 -700 -390 -265 -2% -255 -155 -157 7 -85 7 Germany 218 -866 154 -117 -119 -41 41 3 105 6 8 Netherlands -535 168 -33 226 -34 -9 -18 -38 48 -25 9 Switzerland -2,243 -3,471 -1,145 -244 -509 -442 -240 -242 -441 -221 10 United Kingdom -954 3,728 -911 -34 -718 391 -275 183 -720 -99 1,087 -860 -463 -140 -137 -459 -139 51 -163 -212 12 Latin America and Caribbean 1,238 3,0% -525 149 -24 -478 -111 -178 -208 -27 13 Middle East1 -2,474 3,530 -244 112 303 69 -27 93 -425 116 14 Other Asia 1,365 3,414 -775 1,138 342 -124 231 -30 -921 -55 15 Japan 1,922 3,348 -794 975 310 -53 166 -104 -764 -92 16 Africa 188 131 -33 -6 19 9 2 -34 1 -2 17 Other countries 121 274 -231 193 37 -147 -125 12 -27 -91 18 Nonmonetary international and regional organizations -176 -245 54 23 -1 --4488 --3300 11 4466 3388 BONDS2 19 Foreign purchases 86,381 120,466 37,363 10,930 11,133 13,702 9,463 10,297' 9,248 88,,335555 20 Foreign sales 58,417 86,291 30,986 6,803 6,656 9,313 7,809 7,714' 7,964 7,499 21 Net purchases, or sales (-) 27,964 34,175 6,377 4,127 4,476 4,388 1,654 2,583 1,284 856 22 Foreign countries 28,506 33,822 6,583 4,074 4,464 4,336 2,054 2,556 1,123 850 23 Europe 17,239 19,873 3,401 1,955 2,712 1,429 1,135 245 1,012 1,008 143 372 73 -41 -14 6 118 9 5 -58 25 Germany 1,344 -239 -421 113 -117 -33 -114 -253 -15 -40 26 Netherlands 1,514 850 -41 30 143 41 -43 15 -11 -2 27 Switzerland 505 -165 205 74 54 -277 157 58 -69 59 28 United Kingdom 13,084 18,488 3,871 1,679 2,328 1,954 1,132 475 1,106 1,158 29 Canada 711 1,112 1,188 175 -86 204 178 474 183 353 30 Latin America and Caribbean 1,931 3,682 2,100 247 539 492 493 883 313 411 31 Middle East1 -178 -179 222 140 -57 242 87 100 36 -2 32 Other Asia 8,900 9,060 -505 1,553 1,343 1,954 152 796 -461 -993 7,686 6,331 -189 1,263 1,045 1,728 170 1,103 -419 -1,044 -8 56 78 0 8 27 3 36 -8 48 35 Other countries -89 218 100 4 4 -11 5 22 48 24 36 Nonmonetary international and regional organizations -542 353 -206 53 12 52 -399 27 160 6 Foreign securities 37 Stocks, net purchases, or sales (-)3 -1,959 -12,515 -1,171 -1,558 -525 -2,150 772 -981 -90 -872 38 Foreign purchases 75,356 108,917 43,588 11,399 10,304 9,857 12,982 10,481' 11,765 8,360 39 Foreign sales 77,315 121,433 44,759 12,958 10,829 12,007 12,210 11,461 11,855 9,233 40 Bonds, net purchases, or sales (—) -7,434 -5,921 -4,486 -638 478 -270 556 -159 -3,053 -1,830 41 Foreign purchases 218,521 234,099 81,742 21,266 20,463 18,543 18,512 20,671 22,375 20,184 42 Foreign sales 225,955 240,020 86,228 21,904 19,986 18,812 17,955 20,830 25,429 22,015 43 Net purchases, or sales (-), of stocks and bonds -9,393 -18,436 -5,657 -2,196 -47 -2,420 1,329 -3,143 -2,702 44 Foreign countries -9,873 -18,423 -4,402 -1,860 -122 -2,428 1,221 -1,229 -1,542 -2,852 45 -7,864 -17,613 -801 -2,728 210 -904 1,398 -1,226 -305 -669 46 Canada -3,747 -4,063 -3,322 924 -325 -967 -58 -144 -1,323 -1,797 47 Latin America and Caribbean 1,384 426 -72 187 -102 -269 33 161 -% -171 48 979 2,952 156 -232 -2 -512 111 -307 693 -341 49 Africa -54 93 -34 12 13 56 -14 9 -1 -28 50 Other countries -571 -219 -330 -22 84 168 -249 277 -511 154 51 Nonmonetary international and regional organizations 480 -13 -1,254 -336 75 88 108 8899 -1,601 150 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 • August 1990 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1990 1989 1990 Country or area 1988 1989 J A a p n r .- . Oct. Nov. Dec. Jan. Feb. Mar. Apr." Transactions, net purchases or sales (-) during period1 1 Estimated total2 48,832 54,723 -3,455 -2,138 8,195 1,149 818 1,454 —8,793r 3,066 2 Foreign countries2 48,170 52,747 -1,707 -3,392 8,311 -362 1,090 1,795 —8,597r 4,005 3 Europe2 14,319 36,016 7,068 -2,137 4,259 2,434 1,238 2,191 -2,374' 6,014 4 Belgium-Luxembourg 923 1,053 7 90 210 -85 144 -337 -256 456 5 Germany2 -5,268 7,907 1,615 137 1,666 1,735 -216 1,672 -475 634 6 Netherlands -356 -1,137 -1,391 -1,200 54 -386 -330 -1,400 -411 749 7 Sweden -323 886 940 140 -232 29 -71 270 -22 763 8 Switzerland2 -1,074 1,097 -123 -187 -780 -355 -284 -5 -251 417 9 United Kingdom 9,640 20,250 3,729 -919 3,823 1,286 150 1,627 -298' 2,250 10 Other Western Europe 10,786 5,982 2,282 -199 -481 209 1,845 363 -664 738 11 Eastern Europe -10 -21 6 0 0 0 0 0 0 6 12 Canada 3,761 700 -3,953 191 375 164 -543 -2,137 -1,383 110 13 Latin America and Caribbean 713 477 2,563 -1,568 1,372 -886 -333 91 672 2,133 14 Venezuela -109 311 -166 72 163 -36 -107 -48 38 -49 15 Other Latin America and Caribbean 1,130 -310 511 -96 576 -610 262 16 270 -36 16 Netherlands Antilles -308 475 2,218 -1,545 634 -240 -488 123 365 2,218 17 27,603 14,000 -6,262 -131 1,646 -2,669 447 2,287 -5,119 -3,877 18 Japan 21,750 2,383 -10,043 1,330 1,085 -1,036 837 852 -5,630 -6,102 19 -13 116 -102 13 9 39 9 13 -43 -81 20 All other 1,786 1,439 -1,022 240 649 555 273 -650 -351 -294 21 Nonmonetary international and regional organizations 661 1,976 -1,747 1,254 -116 1,511 -272 -341 -196 -939 22 International 1,106 1,473 -1,291 1,158 -143 1,335 -360 -286 -92 -553 23 Latin America regional -31 231 75 160 0 0 38 -11 -26 74 Memo 24 Foreign countries 48,170 52,747 -1,707 -3,392 8,311 -362 1,090 1,795 -8,597' 4,005 25 Official institutions 26,624 27,028 638 -979 1,686 1,305 328 -1,425 -3,856' 5,591 26 Other foreign2 21,546 25,720 -2,345 -2,413 6,626 -1,667 762 3,220 -4,741' -1,586 Oil-exporting countries 77 Middle East3 11,,996633 8,148 3,574 -2,183 -26 -640 916 970 1,020 668 28 Africa4 11 -1 -1 0 -1 0 -1 0 0 0 1. Estimated official and private transactions in marketable U.S. Treasury 3. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and securities with an original maturity of more than 1 year. Data are based on United Arab Emirates (Trucial States). monthly transactions reports. Excludes nonmarketable U.S. Treasury bonds and 4. Comprises Algeria, Gabon, Libya, and Nigeria. notes held by official institutions of foreign countries. 2. Includes U.S. Treasury notes publicly issued to private foreign residents denominated in foreign currencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Interest and Exchange Rates A69 3.26 DISCOUNT RATES OF FOREIGN CENTRAL BANKS Percent per year Rate on June 30, 1990 Rate on June 30, 1990 Rate on June 30, 1990 Country Country Month Month Month Percent effective effective effective 6.0 June 1989 France 9.5 Apr. 1990 Norway 8.0 June 1983 10.25 Oct. 1989 Germany, Fed. Rep. of. 6.0 Oct. 1989 Switzerland 6.0 Oct. 1989 49.0 Mar. 1981 Italy 12.5 May 1990 United Kingdom 13.83 June 1990 Japan 5.25 Mar. 1990 Venezuela 8.0 10.5 Oct. 1989 Netherlands 7.0 Oct. 1989 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 Dec. Jan. Feb. Mar. Apr. May June 1 7.07 7.85 9.16 8.39 8.22 8.24 8.37 8.44 8.35 8.23 i 9.65 10.28 13.87 15.07 15.13 15.07 15.23 15.17 15.11 14.95 3 8.38 9.63 12.20 12.34 12.24 12.96 13.35 13.59 13.77 13.73 4 3.97 4.28 7.04 8.06 8.22 8.27 8.42 8.20 8.27 8.24 S 3.67 2.94 6.83 8.14 9.35 9.31 8.88 9.01 8.83 8.71 6 5.24 4.72 7.28 8.47 8.82 8.93 8.70 8.46 8.37 8.26 7 8.14 7.80 9.27 10.71 11.19 10.93 10.56 9.92 9.70 9.94 8 11.15 11.04 12.44 12.83 12.88 13.22 13.03 12.11 12.09 11.32 9 7.01 6.69 8.65 10.03 10.48 10.54 10.39 10.19 9.90 9.63 1100 33..8877 33..%% 4.73 5.80 6.02 6.22 6.33 6.62 6.84 6.86 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 • August 1990 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar 1990 CCoouunnttrryy//ccuurrrreennccyy 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June 1 Australia/dollar2 70.137 78.409 79.186 78.111 75.932 75.562 76.366 76.106 77.840 2 Austria/schilling 12.649 12.357 13.236 11.904 11.803 11.514 11.862 11.699 11.849 3 Belgium/franc 37.358 36.785 39.409 35.451 34.998 35.398 34.868 34.325 34.621 4 Canada/dollar 1.3259 1.2306 1.1842 1.1720 1.1965 1.1800 1.1641 1.1747 1.1734 5 China, P.R./yuan 3.7314 3.7314 3.7673 4.7339 4.7339 4.7339 4.7339 4.7339 4.7339 6 Denmark/krone 6.8478 6.7412 7.3210 6.5620 6.4729 6.5349 6.4305 6.3349 6.4115 7 Finland/markka 4.4037 4.1933 4.2963 4.0080 3.9642 4.0276 3.9923 3.9270 3.9582 8 France/franc 6.0122 5.9595 6.3802 5.7568 5.6897 5.7555 5.6638 5.5989 5.6646 9 Germany/deutsche mark 1.7981 1.7570 1.8808 1.6914 1.6758 1.7053 1.6863 1.6630 1.6841 10 Greece/drachma 135.47 142.00 162.60 157.68 158.04 162.44 163.77 163.82 164.87 11 Hong Kong/dollar 7.7986 7.8072 7.8008 7.8116 7.8103 7.8129 7.7966 7.7877 7.7854 12 India/rupee 12.943 13.900 16.213 16.963 16.990 17.116 17.294 17.325 17.421 13 Ireland/punt2 148.79 152.49 141.80 156.31 158.28 156.26 158.97 161.21r 159.20 14 Italy /lira 1,297.03 1,302.39 1,372.28 1,261.87 1,243.68 1,257.67 1,238.38 1,221.93 1,236.23 15 Japan/yen 144.60 128.17 138.07 144.98 145.69 153.31 158.46 154.04 153.76 16 Malaysia/ringgit 2.5186 2.6190 2.7079 2.7041 2.7137 2.7170 2.7264 2.7024 2.7104 17 Netherlands/guilder 2.0264 1.9778 2.1219 1.9073 1.8892 1.9204 1.8984 1.8704 1.8956 18 New Zealand/dollar2 59.328 65.560 59.354 60.220 59.156 58.471 57.883 57.293r 58.225 19 Norway/krone 6.7409 6.5243 6.9131 6.5462 6.4760 6.5972 6.5457 6.4477 6.4730 20 Portugal/escudo 141.20 144.27 157.53 149.17 147.71 150.59 149.29 147.08 147.% 21 Singapore/dollar 2.1059 2.0133 1.9511 1.8873 1.8641 1.8777 1.8783 1.8589 1.8474 22 South Africa/rand 2.0385 2.211V 2.6214r 2.5532 2.5449 2.6158 2.6552 2.6468 2.6598 23 South Korea/won 825.94 734.52 674.29 686.18 692.47 700.50 708.76 711.85 718.03 24 Spain/peseta 123.54 116.53 118.44 109.71 108.27 109.37 107.00 103.98' 103.99 25 Sri Lanka/rupee 29.472 31.820 35.947 40.018 40.018 40.018 40.018 40.023 40.018 26 Sweden/krona 6.3469 6.1370 6.4559 6.1776 6.1250 6.1683 6.1160 6.0560 6.0923 27 Switzerland/franc 1.4918 1.4643 1.6369 1.5175 1.4879 1.5133 1.4866 1.4198 1.4255 28 Taiwan/dollar 31.753 28.636 26.407 26.081 26.118 26.361 26.369 26.961 27.401 29 Thailand/baht 25.775 25.312 25.725 25.745 25.733 25.926 26.024 25.928 25.879 30 United Kingdom/pound2 163.98 178.13 163.82 165.12 169.61 162.45 163.72 167.74 170.86 MEMO 31 United States/dollar3 96.94 92.72 98.60 93.00 92.25 94.11 93.51 92.04 92.48 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 A72 June 30, 1989 January 1990 A72 September 30, 1989 February 1990 All December 31, 1989 June 1990 A72 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 August 1990 A72 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 foSr pFeRcAiSaEl Rt able follows. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All Special Tables • August 1990 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, December 31, 19891 Millions of dollars All states2 New York California Illinois IItteemm in I T c B l o u F t d a ' i s l n g I o B n F ly 's 3 in I c T B l o u F t d a ' i s l n g I o B n F ly 's 3 in I c T B l o u F t d a ' i s l n g I o B n F ly 's 3 in I T c B l o u F t d a ' i s l n g I o B nl F y ' s 1 Total assets4 579,512 276,560 428,794 222,011 78,779 27,531 44,143 17,046 2 Claims on nonrelated parties 519,718 214,142 382,870 172,287 72,681 20,414 43,739 16,079 3 Cash and balances due from depository institutions 145,685 124,231 121,701 103,019 8,319 7,483 13,806 12,544 4 Cash items in process of collection and unposted debits 1,239 0 1,179 0 31 0 6 0 5 Currency and coin (U.S. and foreign) 23 n.a. 17 n.a. 2 n.a. 1 n.a. 6 Balances with depository institutions in United States .. 77,547 58,934 64,952 48,690 4,701 4,105 7,091 5,906 7 U.S. branches and agencies of other foreign banks (including their IBFs) 67,493 54,809 56,643 44,966 4,117 3,915 6,314 5,724 8 Other depository institutions in United States (including their IBFs) 10,054 4,125 8,309 3,724 584 190 777 183 9 Balances with banks in foreign countries and with foreign central banks 66,013 65,297 54,892 54,329 3,497 3,378 6,649 6,637 10 Foreign branches of U.S. banks 2,552 2,496 2,069 2,014 183 183 279 279 11 Other banks in foreign countries and foreign central banks 63,461 62,801 52,823 52,315 3,314 3,196 6,371 6,359 12 Balances with Federal Reserve Banks 862 n.a. 661 n.a. 89 n.a. 58 n.a. 13 Total securities and loans 298,766 77,180 201,590 58,994 52,864 11,234 26,954 3,020 14 Total securities, book value 37,676 12,262 31,969 10,144 3,760 1,496 1,162 539 15 U.S. Treasury 6,140 n.a. 5,882 n.a. 80 n.a. 116 n.a. 16 Obligations of U.S. government agencies and corporations 55,,001166 n.a. 44,,883388 n.a. 111155 n.a. 00 n.a. 17 Other bonds, notes, debentures and corporate stock (including state and local securities) 26,520 12,262 21,249 10,144 3,565 1,496 1,045 539 18 Federal funds sold and securities purchased under agreements to resell 20.253 4,520 17,803 3,764 914 508 991 107 19 U.S. branches and agencies of other foreign banks 11,964 2,834 10,407 2,523 406 108 899 100 20 Commercial banks in United States 4,438 1 4,109 0 98 0 44 0 21 Other 3,851 1,685 3,287 1,241 410 400 49 7 22 Total loans, gross 261,273 64,951 169,739 48,880 49,148 9,740 25,806 2,482 23 Less: Unearned income on loans 183 33 118 30 44 1 14 1 24 Equals: Loans, net 261.090 64,918 169,621 48,849 49,104 9,739 25,792 2,481 Total loans, gross, by category 25 Real estate loans 30,207 272 16,741 176 7,868 90 33,,225544 00 26 Loans to depository institutions 61.431 31,508 43,785 20,511 10,864 7,109 4,546 2,070 27 Commercial banks in United States (including IBFs) 38,376 11,152 26,850 5,984 7,642 4,001 3,561 1,102 28 U.S. branches and agencies of other foreign banks ... 33.713 10,545 23,267 5,624 7,142 3,764 3,003 1,092 29 Other commercial banks in United States 4,663 607 3,583 360 500 237 558 10 30 Other depository institutions in United States (including IBFs) 209 141 166 141 42 0 0 0 31 Banks in foreign countries 22.845 20,215 16,769 14,386 3,180 3,108 985 968 32 Foreign branches of U.S. banks 586 585 498 497 65 65 18 18 33 Other banks in foreign countries 22,259 19,630 16,271 13,889 3,115 3,043 967 949 34 Other financial institutions 7,726 885 5,409 677 1,149 170 480 23 35 Commercial and industrial loans 138,218 15,966 84,552 13,706 27,279 1,640 17,119 310 36 U.S. addressees (domicile) 117,491 289 68,300 175 24,587 104 16,655 10 37 Non-U.S. addressees (domicile) 20,727 15,677 16,252 13,531 2,692 1,535 463 300 38 Acceptances of other banks 1,237 45 702 45 352 0 114 0 39 U.S. banks 279 0 141 0 85 0 4 0 40 Foreign banks 958 45 561 45 267 0 110 0 41 Loans to foreign governments and official institutions (including foreign central banks) 17,113 15,888 1144,,441122 13,395 778844 731 110022 7799 42 Loans for purchasing or carrying securities (secured and unsecured) 2,850 52 2,050 52 800 0 0 0 43 All other loans 2,490 335 2,087 319 52 0 192 0 44 All other assets 55,014 8,211 41,775 6,510 10,583 1,188 1,988 409 45 Customers' liability on acceptances outstanding 33,412 n.a. 24,491 n.a. 7,910 n.a. 792 n.a. 46 U.S. addressees (domicile) 22,832 n.a. 15,149 n.a. 6,865 n.a. 787 n.a. 47 Non-U.S. addressees (domicile) 10,581 n.a. 9,342 n.a. 1,045 n.a. 6 n.a. 48 Other assets including other claims on nonrelated parties 21,602 8,211 17,284 6,510 2,674 1,188 1,196 409 49 Net due from related depository institutions 59,794 62,418 45,924 49,723 6,098 7,117 404 967 50 Net due from head office and other related depository institutions5 59,794 n.a. 45,924 n.a. 6,098 n.a. 404 n.a. 51 Net due from establishing entity, head offices, and other related depository institutions n.a. 62,418 n.a. 49,723 n.a. 7,117 n.a. 967 52 Total liabilities4 579,512 276,560 428,794 222,011 78,779 27,531 44,143 17,046 53 Liabilities to nonrelated parties 504,776 246,096 388,000 201,095 72,129 25,673 28,177 11,518 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A73 4.30—Continued Millions of dollars All states2 New York California Illinois IItteemm in I T c B l o u F t d a ' i s l n g I o B n F ly 's 3 in I T c B l o u F t d a ' i s l n g I o B n F ly 's 3 in I T c B l o u F t d a ' i s l n g I o B n F ly 's 3 in I T c B l o u F t d a ' i s l n g I o B n F ly 's 3 54 Total deposits and credit balances 77,581 192,071 64.206 171,280 3,573 9,407 3,429 4,801 55 Individuals, partnerships, and corporations 62,845 16,023 51.072 9,950 2,785 434 2,897 40 56 U.S. addressees (domicile) 48,850 684 42,267 683 1,044 0 2,083 0 57 Non-U.S. addressees (domicile) 13,996 15,340 8,805 9,267 1,742 434 815 40 58 Commercial banks in United States (including IBFs)... 10,398 60,068 9,211 52,057 642 5,064 514 2,639 59 U.S. branches and agencies of other foreign banks .. 5,069 51,526 4,560 44,872 6 4,258 482 2,125 6(1 Other commercial banks in United States 5,329 8,541 4,651 7,184 637 806 32 514 61 Banks in foreign countries 1,571 106,118 1,450 99,813 29 3,801 3 2,102 6? Foreign branches of U.S. banks i59 9,248 139 8,245 20 573 0 369 63 Other banks in foreign countries 1,412 96,870 1,311 91,568 9 3,229 3 1,733 64 Foreign governments and official institutions (including foreign central banks) 998 9,662 875 9,267 2244 102 2 2200 65 All other deposits and credit balances 1,376 200 1,284 194 58 6 2 0 66 Certified and official checks 392 n a. 314 n. a. 35 n.a. 11 n a. 67 Transaction accounts and credit balances (excluding IBFs) 7,336 6,212 307 223 68 Individuals, partnerships, and corporations 4,995 4,057 260 206 m U.S. addressees (domicile) 3,641 3,073 217 203 70 Non-U.S. addressees (domicile) 1,354 984 43 4 71 Commercial banks in United States (including IBFs)... 273 267 1 0 72 U.S. branches and agencies of other foreign banks .. 61 60 0 0 73 Other commercial banks in United States 211 n.a. 207 n.a. 0 n.a. 0 n a. 74 Banks in foreign countries 1,001 931 9 3 75 Foreign branches of U.S. banks 30 30 0 0 76 Other banks in foreign countries 971 902 9 3 77 Foreign governments and official institutions (including foreign central banks) 386 361 2 1 78 All other deposits and credit balances 289 282 2 11 79 Certified and official checks 392 314 35 1111 80 Demand deposits (included in transaction accounts and credit balances) 6,312 5,446 218 211 81 Individuals, partnerships, and corporations 4,338 3,648 172 194 87 U.S. addressees (domicile) 3,210 2,770 146 191 83 Non-U.S. addressees (domicile) 1,127 878 26 4 84 Commercial banks in United States (including IBF)s... 132 127 0 0 85 U.S. branches and agencies of other foreign banks .. 60 59 0 0 86 Other commercial banks in United States 71 n.a. 67 n. a. 0 n. a. 0 n.a. 87 Banks in foreign countries 881 817 9 3 88 Foreign branches of U.S. banks 30 30 0 0 89 Other banks in foreign countries 851 788 9 3 90 Foreign governments and official institutions (including foreign central banks) 330 305 2 1 91 All other deposits and credit balances 239 234 0 1 92 Certified and official checks 392 314 35 11 93 Non-transaction accounts (including MMDAs, excluding IBFs) 70,245 57,994 3,266 3,206 94 Individuals, partnerships, and corporations 57,850 47,016 2,525 2,691 95 U.S. addressees (domicile) 45,208 39,194 826 l,i 80 96 Non-U.S. addressees (domicile) 12,642 7,822 1,699 811 97 Commercial banks in United States (including IBFs)... 10,126 8,944 642 514 98 U.S. branches and agencies of other foreign banks .. 5, 008 4,500 6 482 99 Other commercial banks in United States 5, 118 n a. 4,444 n a. 636 n a. 52 n a. 100 Banks in foreign countries 570 519 20 0 101 Foreign branches of U.S. banks 130 110 20 0 102 Other banks in foreign countries 441 409 0 0 103 Foreign governments and official institutions (including foreign central banks) 612 514 2222 1 104 All other deposits and credit balances 1,087 1,002 56 1 105 IBF deposit liabilities 192,071 171.280 9,407 4,801 106 Individuals, partnerships, and corporations 16,023 9,950 434 40 107 U.S. addressees (domicile) 684 683 0 0 108 Non-U.S. addressees (domicile) 15,340 9,267 434 40 109 Commercial banks in United States (including IBFs)... 60,068 52,057 5,064 2,639 110 U.S. branches and agencies of other foreign banks .. 51,526 44,872 4,258 2,125 111 Other commercial banks in United States n.a. 8,541 n. a. 7,184 n.a. 806 n.a. 514 117 Banks in foreign countries 106,118 99,813 3,801 2,102 in Foreign branches of U.S. banks 9,248 8,245 573 369 114 Other banks in foreign countries 96,870 91,568 3,229 1,733 115 Foreign governments and official institutions (including foreign central banks) 9,662 9,267 102 2200 116 All other deposits and credit balances 200 194 6 0 For notes see end of table. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Special Tables • August 1990 4.30 ASSETS AND LIABILITIES of U.S. Branches and Agencies of Foreign Banks, December 31, 1989'—Continued Millions of dollars All states- New York California Illinois IItteemm in I c T B l o u F t d a ' i s l n g I o B nl F y ' 3 s in I c T B l o u F t d a ' i s l n g I o B n F ly 's 3 in I c T B l o u F t d a ' i s l n g I o B nl F y 's 3 in I c T B l o u F t d a ' i s l n g I o B nl F y ' 3 s 117 Federal funds purchased and securities sold under agreements to repurchase 51,661 6,264 37,175 3,697 10,064 2,129 3,825 365 118 U.S. branches and agencies of other foreign banks .... 12,247 1,827 6,977 362 4,054 1,284 971 181 119 Other commercial banks in United States 14,380 563 8,529 490 3,669 48 1,996 25 120 Other 25,033 3,874 21,670 2,845 2,341 797 859 159 121 Other borrowed money 129,838 40,295 75,441 20,076 38,207 13,133 14,019 6,052 122 Owed to nonrelated commercial banks in United States m Ow (i e n d c l t u o d i U ng .S I . B o F ff s i ) c es of nonrelated U.S. banks 3 8 5 0 , ,3 5 1 2 4 9 1 2 5 , , 0 2 5 7 0 2 2 4 2 2 , , 0 7 4 4 6 3 4,6 8 8 3 7 2 2 9 8 , , 4 1 5 9 6 5 7,9 3 6 7 1 4 7 3, , 5 9 5 6 1 9 2,0 1 3 7 0 4 124 Owed to U.S. branches and agencies of nonrelated foreign banks 44,785 13,222 20,698 3,855 18,739 7,087 4,418 1,856 125 Owed to nonrelated banks in foreign countries 23,842 23,119 14,105 13,490 5,217 5,167 4,057 4,022 126 Owed to foreign branches of nonrelated U.S. banks ... 2,724 2,678 1,151 1,104 989 989 498 498 127 Owed to foreign offices of nonrelated foreign banks. .. . 21,118 20,441 12,955 12,386 4,228 4,178 3,559 3,524 128 Owed to others 25,682 1,903 18,592 1,8 98 4,795 5 1,993 0 129 All other liabilites 53,625 7,466 39,897 6,042 10,878 1,004 2,102 300 130 Branch or agency liability on acceptances executed and outstanding 34,688 n.a. 24,528 n a. 8,485 n.a. 1,222 n.a. 131 Other liabilities to nonrelated parties 18,937 7,466 15,369 6,042 2,394 1,004 880 300 132 Net due to related depository institutions5 74,737 30,464 40,794 20,916 6,649 1,858 15,966 5,528 133 Net due to head office and other related depository institutions5 74,737 n.a. 40,794 n a. 6,649 n a. 15,966 n a. 134 Net due to establishing entity, head office, and other related depository institutions5 n.a. 30,464 n.a. 20,916 n.a. 1,858 n.a. 5,528 MEMO 135 Non-interest bearing balances with commercial banks in United States 2,170 1 1,905 1 98 0 80 0 136 Holding of commercial paper included in total loans 909 670 217 15 137 Holding of own acceptances included in commercial and industrial loans 2,142 1,365 501 113 138 Commercial and industrial loans with remaining maturity of one year or less 73,121 42,921 14,876 9,418 139 Predetermined interest rates 41,600 n a. 22,912 n a. 9,861 n a. 5,461 n.a. 140 Floating interest rates 31,522 20,009 5,016 3,957 141 Commercial and industrial loans with remaining maturity of more than one year 65,096 41,631 12,403 7,700 142 Predetermined interest rates 24,836 17,577 4,158 2,447 143 Floating interest rates 40,260 24,054 8,245 5,253 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Branches and Agencies A75 4.30—Continued Millions of dollars All states2 New York California Illinois IItteemm inc T I l B o u t F d a s i l n g o IB nl F y s 3 inc T I l B o u F t d a s i l n g o IB nl F y s 3 inc T I l B o u F t d a s i l n g o IB nl F y s inc T I l B o u t F d a s i l n g o IB nl F y s 3 111144444444 CCCCoooommmmppppoooonnnneeeennnnttttssss ooooffff ttttoooottttaaaallll nnnnoooonnnnttttrrrraaaannnnssssaaaaccccttttiiiioooonnnn aaaaccccccccoooouuuunnnnttttssss,,,, i n i n i n i n nnnn oooo cccc nnnn lllluuuu ttttrrrr dddd aaaa eeee nnnn dddd ssss aaaa iiii cccc nnnn tttt iiii tttt oooo oooo nnnn ttttaaaa aaaa llll llll dddd aaaa eeee cccc pppp cccc oooo oooo ssss uuuu iiii nnnn ttttssss tttt ssss aaaa ,,,, nnnn iiii dddd nnnn cccc cccc lllluuuu rrrreeee dddd dddd iiiinnnn iiiitttt gggg bbbb IIII aaaa BBBB llllaaaa FFFF nnnn ssss cccc eeeessss ooooffff 84,892 1 72,766 1 3,358 t 3,340 t 111144445555 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 48,973 40,632 2,146 1,812 111144446666 OOOOtttthhhheeeerrrr ttttiiiimmmmeeee ddddeeeeppppoooossssiiiittttssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee 13,758 n.a. 11,920 n1.a. 648 n1.a. 1,082 n.a. 111144447777 TTTTiiiimmmmeeee CCCCDDDDssss iiiinnnn ddddeeeennnnoooommmmiiiinnnnaaaattttiiiioooonnnnssss ooooffff $$$$111100000000,,,,000000000000 oooorrrr mmmmoooorrrreeee » \ wwwwiiiitttthhhh rrrreeeemmmmaaaaiiiinnnniiiinnnngggg mmmmaaaattttuuuurrrriiiittttyyyy ooooffff mmmmoooorrrreeee tttthhhhaaaannnn 11112222 mmmmoooonnnntttthhhhssss ........ 22,161 20,214 563 446 All states2 New York California Illinois inc T I l B o u t F d a s i l n g o IB nl F y s 3 inc T I l B o u t F d a s i l n g o IB nl F y s 3 inc T I l B o u t F d a s i l n g o IB nl F y s 3 inc T IB l o u F t d a s i l n g o IB nl F y s 3 111144448888 MMMMaaaarrrrkkkkeeeetttt vvvvaaaalllluuuueeee ooooffff sssseeeeccccuuuurrrriiiittttiiiieeeessss hhhheeeelllldddd 37,262 11,489 31,882 9,583 3,482 1,284 1,160 539 111144449999 IIIImmmmmmmmeeeeddddiiiiaaaatttteeeellllyyyy aaaavvvvaaaaiiiillllaaaabbbblllleeee ffffuuuunnnnddddssss wwwwiiiitttthhhh aaaa mmmmaaaattttuuuurrrriiiittttyyyy ggggrrrreeeeaaaatttteeeerrrr tttthhhhaaaannnn oooonnnneeee ddddaaaayyyy iiiinnnncccclllluuuuddddeeeedddd iiiinnnn ooootttthhhheeeerrrr bbbboooorrrrrrrroooowwwweeeedddd mmmmoooonnnneeeeyyyy 72,624 n.a. 42,766 n.a. 24,366 n.a. 4,431 n.a. 111155550000 NNNNuuuummmmbbbbeeeerrrr ooooffff rrrreeeeppppoooorrrrttttssss ffffiiiilllleeeedddd6666 548 0 255 0 128 0 55 0 1. Data are aggregates of categories reported on the quarterly form FFIEC 002, IBF asset or liability or because that level of detail is not reported for IBFs. From "Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign December 1981 through September 1985, IBF data were included in all applicable Banks." Details may not add to totals because of rounding. This form was first items reported. used for reporting data as of June 30, 1980. and was revised as of December 31, 4. Total assets and total liabilities include net balances, if any, due from or due 1985. From November 1972 through May 1980, U.S. branches and agencies of to related banking institutions in the United States and in foreign countries (see foreign banks had filed a monthly FR 886a report. Aggregate data from that report footnote 5). On the former monthly branch and agencyu report, available through were available through the Federal Reserve statistical release G. 11, last issued on the G.ll statistical release, gross balances were included in total assets and total July 10, 1980. Data in this table and in the G.ll tables are not strictly comparable liabilities. Therefopre, total asset and total liability figures in this table are not because of differences in reporting panels and in definitions of balance sheet comparable to those in the G.ll tables. items. 5. "Related banking institutions" includes the foreign head office and other 2. Includes the District of Columbia. U.S. and foreign branches and agencies of the bank, the bank's parent holding 3. Effective December 1981, the Federal Reserve Board amended Regulations company, and majority-owned banking subsidiaries of the bank and of its parent D and Q to permit banking offices located in the United States to operate holding company (including subsidiaries owned both directly and indirectly). International Banking Facilities (IBFs). As of December 31, 1985 data for IBFs 6. In some cases two or more offices of a foreign bank within the same are reported in a separate column. These data are either included in or excluded metropolitan area file a consolidated report. from the total columns as indicated in the headings. The notation "n.a." indicates NOTE. Revised data for December 1988, mislabeled December 1989, were that no IBF data re reported for that item, either because the item is not an eligible inadvertently published in the June 1990 Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 Federal Reserve Board of Governors ALAN GREENSPAN, Chairman MARTHA R. SEGER MANUEL H. JOHNSON, Vice Chairman WAYNE D. ANGELL OFFICE OF BOARD MEMBERS DIVISION OF INTERNATIONAL FINANCE JOSEPH R. COYNE, Assistant to the Board EDWIN M. TRUMAN, Staff Director DONALD J. WINN, Assistant to the Board LARRY J. PROMISEL, Senior Associate Director 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 JOYCE K. ZICKLER, Assistant Director AND COMMUNITY AFFAIRS LEVON H. GARABEDIAN, Assistant Director (Adm inis tra tion) 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

All and Official Staff EDWARD W. KELLEY, JR. DAVID W. MULLINS, JR. JOHN P. LAWARE 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

A78 Federal Reserve Bulletin • August 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 VACANCY, Sixth District PAUL HAZEN, Twelfth District HERBERT V. PROCHNOW, Secretary WILLIAM J. KORSVIK, Associate Secretary Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 and Advisory Councils CONSUMER ADVISORY COUNCIL 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 GARMAN, 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 0. 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

A80 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. ANNUAL REPORT. ANNUAL REPORT: BUDGET REVIEW, 1988-89. CONSUMER EDUCATION PAMPHLETS FEDERAL RESERVE fii/z.z.E7Y/v.Monthly. $25.00 per year or $2.50 Short pamphlets suitable for classroom use. Multiple copies each in the United States, its possessions, Canada, and are available without charge. Mexico. Elsewhere, $35.00 per year or $3.00 each. BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint Consumer Handbook on Adjustable Rate Mortgages of Part I only) 1976. 682 pp. $5.00. Consumer Handbook to Credit Protection Laws ANNUAL STATISTICAL DIGEST Federal Reserve Glossary 1974-78. 1980. 305 pp. $10.00 per copy. A Guide to Business Credit and the Equal Credit Opportunity 1981. 1982. 239 pp. $ 6.50 per copy. Act 1982. 1983. 266 pp. $ 7.50 per copy. How to File A Consumer Credit Complaint 1983. 1984. 264 pp. $11.50 per copy. Series on the Structure of the Federal Reserve System 1984. 1985. 254 pp. $12.50 per copy. The Board of Governors of the Federal Reserve System 1985. 1986. 231 pp. $15.00 per copy. The Federal Open Market Committee 1986. 1987. 288 pp. $15.00 per copy. Federal Reserve Bank Board of Directors 1987. 1988. 272 pp. $15.00 per copy. Federal Reserve Banks 1988. 1989. 256 pp. $25.00 per copy. Organization and Advisory Committees SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SE A Consumer's Guide to Mortgage Lock-Ins RIES OF CHARTS. Weekly. $30.00 per year or $.70 each in A Consumer's Guide to Mortgage Settlement Costs the United States, its possessions, Canada, and Mexico. A Consumer's Guide to Mortgage Refinancing Elsewhere, $35.00 per year or $.80 each. Making Deposits: When Will Your Money Be Available? THE FEDERAL RESERVE ACT and other statutory provisions When Your Home is on the Line: What You Should Know affecting the Federal Reserve System, as amended About Home Equity Lines of Credit through August 1988. 608 pp. $10.00. REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- ERAL RESERVE SYSTEM. ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— PAMPHLETS FOR FINANCIAL INSTITUTIONS Regulation Z) Vol. / (Regular Transactions). 1969. 100 Short pamphlets on regulatory compliance, primarily suitpp. Vol. II (Irregular Transactions). 1969. 116 pp. Each able for banks, bank holding companies, and creditors. volume $2.25; 10 or more of same volume to one address, $2.00 each. Limit of 50 copies INTRODUCTION TO FLOW OF FUNDS. 1980. 68 pp. $1.50 each; 10 or more to one address, $1.25 each. The Board of Directors' Opportunities in Community Rein- FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; up- vestment dated at least monthly. (Requests must be prepaid.) The Board of Directors' Role in Consumer Law Compliance Consumer and Community Affairs Handbook. $75.00 per Combined Construction/Permanent Loan Disclosure and year. Regulation Z Monetary Policy and Reserve Requirements Handbook. Community Development Corporations and the Federal $75.00 per year. Reserve Securities Credit Transactions Handbook. $75.00 per year. Construction Loan Disclosures and Regulation Z The Payment System Handbook. $75.00 per year. Finance Charges Under Regulation Z Federal Reserve Regulatory Service. 3 vols. (Contains all How to Determine the Credit Needs of Your Community three Handbooks plus substantial additional material.) Regulation Z: The Right of Rescission $200.00 per year. The Right to Financial Privacy Act Rates for subscribers outside the United States are as Signature Rules in Community Property States: Regulation B follows and include additional air mail costs: Signature Rules: Regulation B Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 Timing Requirements for Adverse Action Notices: Regula- 158. THE ADEQUACY AND CONSISTENCY OF MARGIN REtion B QUIREMENTS IN THE MARKETS FOR STOCKS AND DERIV- What An Adverse Action Notice Must Contain: Regulation B ATIVE PRODUCTS, by Mark J. Warshawsky with the Understanding Prepaid Finance Charges: Regulation Z assistance of Dietrich Earnhart. September 1989. 23 pp. STAFF STUDIES: Summaries Only Printed in the Bulletin Studies and papers on economic and financial subjects that REPRINTS OF Bulletin ARTICLES are of general interest. Requests to obtain single copies of Most of the articles reprinted do not exceed 12 pages. the full text or to be added to the mailing list for the series may be sent to Publications Services. Limit of 10 copies Staff Studies 114-145 are out of print. Foreign Experience with Targets for Money Growth. 10/83. Intervention in Foreign Exchange Markets: A Summary of 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF Ten Staff Studies. 11/83. BUSINESS LOANS BY COMMERCIAL BANKS, 1977-84, by A Financial Perspective on Agriculture. 1/84. Thomas F. Brady. November 1985. 25 pp. Survey of Consumer Finances, 1983. 9/84. 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) IN- Bank Lending to Developing Countries. 10/84. DEXES OF THE MONETARY AGGREGATES, by Helen T. Survey of Consumer Finances, 1983: A Second Report. Farr and Deborah Johnson. December 1985. 42 pp. 12/84. 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF THE Union Settlements and Aggregate Wage Behavior in the ECONOMIC RECOVERY TAX ACT: SOME SIMULATION 1980s. 12/84. RESULTS, by Flint Brayton and Peter B. Clark. Decem- The Thrift Industry in Transition. 3/85. ber 1985. 17 pp. A Revision of the Index of Industrial Production. 7/85. 149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS IN Financial Innovation and Deregulation in Foreign Industrial BANKING BEFORE AND AFTER ACQUISITION, by Stephen Countries. 10/85. A. Rhoades. April 1986. 32 pp. Recent Developments in the Bankers Acceptance Market. 150. STATISTICAL COST ACCOUNTING MODELS IN BANKING: 1/86. A REEXAMINATION AND AN APPLICATION, by John T. The Use of Cash and Transaction Accounts by American Rose and John D. Wolken. May 1986. 13 pp. Families. 2/86. 151. RESPONSES TO DEREGULATION: RETAIL DEPOSIT PRIC- Financial Characteristics of High-Income Families. 3/86. ING FROM 1983 THROUGH 1985, by Patrick I. Mahoney, Prices, Profit Margins, and Exchange Rates. 6/86. Alice P. White, Paul F. O'Brien, and Mary M. Agricultural Banks under Stress. 7/86. McLaughlin. January 1987. 30 pp. Foreign Lending by Banks: A Guide to International and 152. DETERMINANTS OF CORPORATE MERGER ACTIVITY: A U.S. Statistics. 10/86. REVIEW OF THE LITERATURE, by Mark J. Warshawsky. Recent Developments in Corporate Finance. 11/86. April 1987. 18 pp. Measuring the Foreign-Exchange Value of the Dollar. 6/87. 153. STOCK MARKET VOLATILITY, by Carolyn D. Davis and Changes in Consumer Installment Debt: Evidence from the Alice P. White. September 1987. 14 pp. 1983 and 1986 Surveys of Consumer Finances. 10/87. 154. THE EFFECTS ON CONSUMERS AND CREDITORS OF PRO- Home Equity Lines of Credit. 6/88. POSED CEILINGS ON CREDIT CARD INTEREST RATES, by U.S. International Transactions in 1988. 5/89. Glenn B. Canner and James T. Fergus. October 1987. Mutual Recognition: Integration of the Financial Sector in the 26 pp. European Community. 9/89. 155. THE FUNDING OF PRIVATE PENSION PLANS, by Mark J. The Activities of Japanese Banks in the United Kingdom and Warshawsky. November 1987. 25 pp. in the United States, 1980-88. 2/90. 156. INTERNATIONAL TRENDS FOR U.S. BANKS AND BANK- Industrial Production: 1989 Developments and Historical ING MARKETS, by James V. Houpt. May 1988. 47 pp. Revision. 4/90. 157. M2 PER UNIT OF POTENTIAL GNP AS AN ANCHOR FOR U.S. International Transactions in 1989. 5/90 THE PRICE LEVEL, by Jeffrey J. Hallman, Richard D. Recent Developments in Industrial Capacity and Utilization. Porter, and David H. Small. April 1989. 28 pp. 6/90 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 Index to Statistical Tables References are to pages A3-A75 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, 10 Financial institutions, 26 Turnover, 15 Foreign banks, U.S. branches and agencies, 21, 72-75 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, 72-75 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, 72-73 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, 72-75 Condition statement, 10 Commercial and industrial loans, 16, 18, 19, 20, 21, 72-75 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, 11 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, 72-75 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

A83 Gold—Continued Real estate loans—Continued Stock, 4, 56 Financial institutions, 26 Government National Mortgage Association, 33, 37, 38 Terms, yields, and activity, 37 Gross national product, 53 Type of holder and property mortgaged, 38 Repurchase agreements, 6, 17, 19, 20, 21 HOUSING, new and existing units, 51 Reserve requirements, 8 Reserves INCOME, personal and national, 46, 53, 54 Commercial banks, 18 Industrial production, 46, 49 Depository institutions, 3, 4, 5, 12 Installment loans, 39, 40 Federal Reserve Banks, 10 Insurance companies, 26, 30, 38 U.S. reserve assets, 56 Interest rates Residential mortgage loans, 37 Bonds, 24 Retail credit and retail sales, 39, 40, 46 Consumer installment credit, 40 Federal Reserve Banks, 7 SAVING Foreign central banks and foreign countries, 69 Flow of funds, 41, 43, 44, 45 Money and capital markets, 24 National income accounts, 53 Mortgages, 37 Savings and loan associations, 26, 38, 39, 41. (See also Prime rate, 23 Thrift institutions) International capital transactions of United States, 55-69 Savings banks, 26, 38, 39 International organizations, 59, 60, 62, 65, 66 Savings deposits {See Time and savings deposits) Inventories, 53 Securities (See also specific types) Investment companies, issues and assets, 35 Federal and federally sponsored credit agencies, 33 Investments (See also specific types) Foreign transactions, 67 Banks, by classes, 18, 19, 20, 21, 26 New issues, 34 Commercial banks, 3, 16, 18-20, 38 Prices, 25 Federal Reserve Banks, 10, 11 Special drawing rights, 4, 10, 55, 56 Financial institutions, 26, 38 State and local governments Deposits, 19, 20 LABOR force, 47 Holdings of U.S. government securities, 30 Life insurance companies {See Insurance companies) New security issues, 34 Loans (See also specific types) Ownership of securities issued by, 19, 20, 26 Banks, by classes, 18—20 Rates on securities, 24 Commercial banks, 3, 16, 18-20 Stock market, selected statistics, 25 Federal Reserve Banks, 4, 5, 7, 10, 11 Stocks (See also Securities) Financial institutions, 26, 38 New issues, 34 Insured or guaranteed by United States, 37, 38 Prices, 25 MANUFACTURING Student Loan Marketing Association, 33 Capacity utilization, 48 Production, 48, 50 TAX receipts, federal, 29 Margin requirements, 25 Thrift institutions, 3. (See also Credit unions and Savings Member banks (See also Depository institutions) and loan associations) Federal funds and repurchase agreements, 6 Time and savings deposits, 3, 13, 17, 18, 19, 20, 21 Reserve requirements, 8 Trade, foreign, 56 Mining production, 50 Treasury cash, Treasury currency, 4 Mobile homes shipped, 51 Treasury deposits, 4, 10, 28 Monetary and credit aggregates, 3, 12 Treasury operating balance, 28 Money and capital market rates, 24 UNEMPLOYMENT, 47 Money stock measures and components, 3, 13 U.S. government balances Mortgages (See Real estate loans) Commercial bank holdings, 18, 19, 20 Mutual funds, 35 Treasury deposits at Reserve Banks, 4, 10, 28 Mutual savings banks (See Thrift institutions) U.S. government securities Bank holdings, 18-20, 21, 30 NATIONAL defense outlays, 29 Dealer transactions, positions, and financing, 32 National income, 53 Federal Reserve Bank holdings, 4, 10, 11, 30 Foreign and international holdings and transactions, 10, OPEN market transactions, 9 30, 68 Open market transactions, 9 PERSONAL income, 54 Outstanding, by type and holder, 26, 30 Prices Rates, 24 Consumer and producer, 46, 52 U.S. international transactions, 55-69 Stock market, 25 Utilities, production, 50 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

A84 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 *AdditionaI offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; Cranford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202. Digitized for FRA1S. ESeRn ior Vice President. http://fraser.stlou2i.s Efexde.courtgiv/e Vice President. Federal Reserve Bank of St. Louis

A85 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories April 1984 ii ii ALASKA ii ii ii ii ii © / 7 /p y 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