Federal Reserve Bulletin, 1990-10

VOLUME 76 • NUMBER 10 • OCTOBER 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 Graphics Center 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 801 BANKING MARKETS AND THE USE ing over the past decade, discusses the OF FINANCIAL SERVICES BY SMALL evolution of conditions in real estate mar- AND MEDIUM-SIZED BUSINESSES kets and the dimensions of the problems they have presented to banks, and ad- Although buttressed by recent general emdresses some supervisory considerations pirical evidence and market surveys conand the effects of recent actions by banks ducted in specific cases, the definition of on the availability of bank credit, before the banking markets has generally relied on House Committee on Banking, Finance and Supreme Court decisions from the 1960s Urban Affairs, August 9, 1990. and early 1970s. This article examines evidence from the 1988-89 National Survey of 831 Henry Terrell, Senior Economist, Board of Small Business Finances to investigate Governors, discusses recent research into whether the definition derived from those the activities of U.S. agencies and branches decisions remains valid despite the changes of Japanese banks and suggests that the brought about by the deregulation and figrowth of activities of Japanese agencies nancial innovation of recent years. and branches has, in large part, been affected by economic and financial factors in 818 TREASUR Y AND FEDERAL RESER WE the United States and Japan, before the FOREIGN EXCHANGE OPERATIONS Task Force on the International Competi- On a trade-weighted basis, as measured by tiveness of U.S. Financial Institutions, Subthe staff of the Board of Governors, the committee on Financial Institutions Superdollar declined about 6 percent during the vision, Regulation and Insurance of the May-July reporting period. By the close of House Committee on Banking, Finance and the period, the dollar had declined more Urban Affairs, August 2, 1990. than 8 percent against the yen and 51/2 percent against the mark, approaching the 836 ANNOUNCEMENTS previous postwar low against the latter currency. Against sterling, the dollar declined Proposal to revise Regulation Y (Bank 12 percent. Holding Companies and Change in Bank Control). 824 INDUSTRIAL PRODUCTION AND Change in Board staff. CAPACITY UTILIZATION Industrial production was unchanged in 837 RECORD OF POLICY ACTIONS OF THE July after having increased 0.4 percent in FEDERAL OPEN MARKET COMMITTEE June. Capacity utilization declined 0.2 percentage point in July to 83.4 percent. At its meeting on July 2-3, 1990, the Committee reviewed the ranges for growth of the monetary and debt aggregates that it 827 STATEMENTS TO THE CONGRESS had established in February for 1990 and John P. La Ware, Member, Board of Gov- decided on provisional ranges for 1991. For ernors, provides a brief overview of the 1990, the Committee voted to reaffirm the trends and developments in real estate lend- range set in February of 3 to 7 percent for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

M2 and to lower the 1990 range for M3 by federal funds rate was left unchanged at 6 to IV2 percentage points to 1 to 5 percent; the 10 percent. monitoring range for total nonfinancial debt 847 LEGAL DEVELOPMENTS was maintained at 5 to 9 percent. The Committee approved provisional ranges for Various bank holding company, bank ser- 1991 that involved reductions of V2 percentvice corporation, and bank merger orders; age point for M2 and nonfinancial debt from and pending cases. the 1990 ranges and no further change in the M3 range from the reduced 1990 range. AI FINANCIAL AND BUSINESS STATISTICS With regard to the implementation of These tables reflect data available as of policy for the period immediately ahead, August 29, 1990. the Committee adopted a directive that called for maintaining the existing degree of A3 Domestic Financial Statistics pressure on reserve positions for at least a A46 Domestic Nonfinancial Statistics short period after this meeting; subse- A55 International Statistics quently, some slight easing of reserve con- A71 GUIDE TO TABULAR PRESENTATION, ditions could be implemented unless incom- STATISTICAL RELEASES, AND SPECIAL ing data on the monetary aggregates and the TABLES economy evidenced greater strength. The directive provided that slightly greater re- A74 BOARD OF GOVERNORS AND STAFF serve restraint might be acceptable during the intermeeting period or somewhat lesser A76 FEDERAL OPEN MARKET COMMITTEE restraint would be acceptable depending on AND STAFF; ADVISORY COUNCILS progress toward price stability, the strength of the business expansion, the behavior of A78 FEDERAL RESERVE BOARD the monetary aggregates, and developments PUBLICATIONS in foreign exchange and domestic financial A80 INDEX TO STATISTICAL TABLES markets. The reserve conditions contemplated at this meeting were expected to be A82 FEDERAL RESERVE BANKS, consistent with growth of M2 and M3 at BRANCHES, AND OFFICES annual rates of 3 and 1 percent respectively over the three-month period from June to A83 MAP OF THE FEDERAL RESERVE September. The intermeeting range for the SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services by Small and Medium-Sized Businesses This article was prepared by Gregory E. Ellie- innovations of recent years, the definition dehausen and John D. Wolken of the Board's rived from those decisions may be based on Division of Research and Statistics. outdated perceptions and data. The current approach to market definition A longstanding and contentious problem in the holds that the costs of information and transantitrust analysis of proposed bank mergers has portation incurred by customers searching for, been the definition of the geographic area and and using, distant or specialized institutions are services that constitute a particular market for prohibitive, as are the information costs infinancial services. The issues involved can be curred by a financial institution in evaluating a illustrated by two questions that arise in the nonlocal business seeking credit. Hence, acfollowing example. A commercial bank wants to cording to this view, financial services in the acquire another located in the same metropolitan main are offered by, and obtained from, local area. If one considers only the banks in that area, commercial banks. In terms of the opening the acquisition would apparently reduce compe- example, the current approach would answer tition for banking services in that locality. The both questions in the negative—neither the first question is, Does the presence of commer- banks outside the area nor the services availcial banks outside the area mitigate the anticom- able from nonbank suppliers would be viewed petitive effects? The second is, Would the anti- as important alternative supplies of banking competitive effects be lessened if nonbank services for the area and thus would be considinstitutions in the area offered some (but not all) ered not to mitigate the anticompetitive effects of the services offered by the two banks? within the area. Any definition of a banking market implies A contrary argument would answer that deanswers to these questions regarding the geo- regulation and advances in telecommunications graphic extent of that market and the scope of in recent years have lowered the costs of inforservices to be included. Although buttressed by mation and of travel, and the lower costs have recent general empirical evidence and market widened the range of institutions and the dissurveys conducted in specific cases, the defini- tance over which firms select their financial tion of banking markets has generally relied on services. Hence, in terms of the opening exam- Supreme Court decisions from the 1960s and ple, this argument would answer both questions early 1970s. Given the deregulation and financial in the affirmative. First, the extent of the relevant market area would have expanded from metropolitan to regional or national. The market therefore would be less "concentrated" NOTE. This article summarizes Gregory E. Elliehausen and John D. Wolken, Banking Markets and the Use of Financial (that is, would have more competitors) than Services by Small and Medium-Sized Businesses, Staff Stud- before, and the proposed acquisition would be ies 160 (Board of Governors of the Federal Reserve System, less likely to reduce competition below an ac- 1990), which is the first report of the results from the 1988-89 National Survey of Small Business Finances. An announce- ceptable level. Second, because the cost of ment of the availability for public use of the data file from the using specialized vendors for specific products survey will appear in the January 1991 issue of the Federal has decreased, commercial banks and nonbank Reserve Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

802 Federal Reserve Bulletin • October 1990 financial institutions have become closer com- geographic extent and the variety of products to petitors than they were in years past. be covered. Resolution of these questions requires empir- The current approach to market definition in ical evidence. To review its approach to market commercial banking was established by the definition in antitrust analysis of bank mergers 1963 decision of the Supreme Court in United and acquisitions, the Board of Governors com- States v. Philadelphia National Bank and was missioned surveys to learn more about the use subsequently supported by numerous case studof financial services by consumers and by small ies in specific areas of the country.1 In its and medium-sized business firms, the major decision, the Supreme Court determined that in customer groups whose demand is most likely banking cases the product line for antitrust to be limited to local commercial banks. purposes was that offered by commercial This article presents findings on the issue of banks; only institutions offering the full "clusmarket definition from the survey of busi- ter" of bank services thus defined—including nesses. This survey, sponsored jointly by the demand deposits and commercial loans—be- Board of Governors of the Federal Reserve longed in bank markets. As for the geographic System and the Small Business Administration, market, the Court concluded that because the is the National Survey of Small Business Fi- majority of bank customers are consumers and nances (NSSBF), a nationally representative small businesses and because these customers sample of 3,405 firms that encompasses size generally restrict their purchases to local banks, classes we shall hereafter call small (0-49 em- the geographic market for banking is local—a ployees) and medium-sized (50-499 employ- definition that has not been as easy to interpret ees). Such firms account for the vast majority of and follow as the Court's definition of product enterprises in the United States and for a sub- market. This market definition for commercial stantial share of business output, but little is banking is still in use today, with some adjustknown about their use of financial services and ments allowed for thrift institutions.2 institutions. The sample taken in the NSSBF represents the population of small and mediumsized firms more accurately and covers their 1. In United States v. Philadelphia National Bank, 374 use of financial services and financial institu- U.S. 321, the Court ruled that commercial banking was tions more thoroughly than any other survey to subject to the conditions of section 7 of the Clayton Act, date. The survey data permit an investigation of which prohibits the acquisition of any firm when "in any line of commerce in any section of the country the effect of such the full range of financial services and instituacquisition may be to substantially lessen competition" (sections used by small and medium-sized firms and tion 7, U.S.C. section 18, 1976). For examples of case studies the distances over which these firms handle of bank market definition subsequent to the Philadelphia National Bank case, see Ralph H. Gelder and George their financial affairs, an analysis that is neces- Budzeika, "Banking Market Determination—The Case of sary for assessing financial service markets. Central Nassau County," Federal Reserve Bank of New (See the appendix for a description of the York, Monthly Review, vol. 52 (July-August 1970), pp. 258-66; and Clifton B. Luttrell and William E. Pettigrew, survey.) "Banking Markets for Business Firms in the St. Louis Area," Federal Reserve Bank of St. Louis, Review, vol. 48 (September 1966), pp. 9-12; for a more complete discussion, see John D. Wolken, Geographic Market Delineation: A Review of the Literature, Staff Studies 140 (Board of Gover- DEFINING BANKING MARKETS nors of the Federal Reserve System, 1984). 2. In a 1974 decision, the Supreme Court noted that thrift institutions and other nonbank institutions had made compet- Analyzing proposed bank mergers for their effect itive inroads in some services. The Court decided, however, on competition and hence for their potential that to be included as full competitors in bank markets, these institutions had to be important suppliers of the entire cluster violation of antitrust statutes requires a case-byof bank services; see United States v. Connecticut National case definition of the relevant economic market. Bank, 418 U.S. 656 (1974). The current practice of antitrust Conceptually, defining a market involves identi- analysts is to judge whether thrift institutions in specific areas offer significant competition to commercial bank services fying all firms affecting the price and quantity of and, if so, to include them in the structural indexes of market a good or service and the specification of both the competition. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services 803 In recent years, technological progress, mar- than commercial banks provide financial services ket innovations, and numerous changes in finan- to small and medium-sized businesses? Is the cial regulation may have invalidated the current geographic distribution of these suppliers the approach to market definition regarding product same as that for banks? and geographic markets in banking: • What is the geographic area for each of the different types of financial services? • Advances in telecommunications allow fi- • Does a firm purchase financial services as a nancial institutions to supply many services over bundle from one financial institution? Do these large areas at low cost. services tend to be purchased only as a bundle, • Thrift institutions today can offer virtually all or do some firms purchase them separately from products that banks offer. different institutions? Are services purchased as • Nondepository financial institutions and non- a bundle obtained from the same geographic area financial firms increasingly offer financial ser- as services purchased separately? vices similar to those traditionally offered by • What factors (for example, product type, banks. institution class, firm characteristics, local mar- • Banks have much greater freedom to create ket conditions) influence the geographic reach of branches within states, and bank holding compa- firms seeking financial services? nies can expand more readily across state lines. Thus, the suppliers of financial products may A TRANSACTION-COST MODEL OF have increased, and the difficulties in servicing DEMAND FOR FINANCIAL SERVICES larger areas may have decreased. Nonetheless, the geographic extent of banking A key question is whether banking markets for markets may still be limited for many financial small and medium-sized business firms are local services. Despite the changes brought about by to the firms. Our premise is that current demand deregulation, barriers to entry may still exist. patterns define market boundaries. However, And despite the lowering of costs through elec- because demand patterns cannot conclusively tronic technologies, distance-sensitive transac- delineate market boundaries, we must consider tion costs such as those for transportation, infor- how interactions among local supply and demation, and search are nevertheless likely to mand, nonlocal supply and demand, and transremain an important consideration in choosing action costs can affect the observed use of finanfinancial institutions. These arguments, which cial services.3 are relevant particularly to small and medium- For two areas to be in the same economic sized businesses and to households, are sup- market, prices of identical products in the two ported in part by the heretofore limited evidence areas must be equal, and the transaction costs that these groups continue to obtain most bank between the two areas that customers and instiservices from commercial banks and thrift insti- tutions face must be negligible. Significant transtutions, that these institutions are usually local, action costs will cause consumers to have a and that purchases are often obtained as a cluster decided preference to purchase from local supfrom a single institution. pliers and will give those suppliers some degree In this article, we use the data from the of market power.4 The greater the transaction NSSBF to explore the following questions on the costs for nonlocal purchases, the greater is the definition of banking markets for small and medium-sized firms: 3. None of the approaches discussed, including ours, can fully account for the influence of potential competitors on • How wide is the area within which small and existing supply and demand, although studies using price data medium-sized firms obtain financial services, can come closest to doing so. search among alternative suppliers, and receive 4. This assumes that significant entry costs exist. If entry costs are negligible, then any attempt by local suppliers to solicitations? raise prices should be thwarted by the entry, or the threat of • To what extent do financial institutions other entry, of nonlocal suppliers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

804 Federal Reserve Bulletin • October 1990 potential market power for local suppliers. And To reduce the costs of credit evaluation and the more transaction costs increase with dis- monitoring, financial institutions can make artance, the smaller will be the geographic market. rangements such as restrictive covenants, collat- If prices in the two areas differ, then the two eral agreements, and guarantor requirements to areas may represent different economic markets. limit loan losses in the event of default and Generally, prices will be higher in less competi- thereby reduce their costs of dealing with distant tive markets and in markets with lower supply. borrowers. This generalization implies that buyers in less competitive markets will more often use nonlo- Choosing the Location of Financial cal suppliers than will buyers in competitive Service Providers markets, other things equal. In contrast, if these two areas are not separate economic markets, Consideration of these transaction costs suggests local competitive conditions should not have some hypotheses about the location of the supthis effect. plier for particular financial services. First, demand deposit accounts are likely to have relatively high transaction costs because of frequent Determinants of Transaction Costs deposits and withdrawals. This consideration is particularly important for retail firms, which typ- Two components of transaction costs are those ically make frequent withdrawals of cash for for transportation and those for information. making change and frequent deposits of receipts Transportation costs vary directly with the num- from sales. Therefore, checking accounts for ber of transactions a buyer has with a financial businesses can be expected to have relatively institution, the distance between the firm and the small geographic markets. Similarly, financial financial institution, and the need to conduct products such as cash management services, transactions with the institution in person rather currency and coin services, and credit card prothan by telephone or mail. cessing involve frequent transactions and are For buyers (firms), information costs include thus also likely to have relatively small geothe cost of searching for information about alter- graphic markets. native suppliers; for sellers (financial institu- Savings and investment accounts (hereafter, tions), they include the cost of evaluating and savings accounts) may have larger geographic monitoring the creditworthiness of firms. The markets than checking accounts. One reason for search costs of firms tend to vary directly with the difference is that, with generally fewer deposthe distance between the firm and the financial its and withdrawals, savings accounts have lower institutions and the degree to which financial transportation costs. Another reason is that the services are heterogeneous. expected return from a buyer's search for a Transaction costs for financial institutions savings account may be higher than that for a arise mainly in the credit area. An institution will demand deposit account: For a given amount of have greater difficulty evaluating and monitoring cash, firms seek to keep as little as possible in firms operating in distant areas than evaluating non-interest-paying checking accounts and as and monitoring those operating in its own mar- much as possible in savings accounts; thus, savketing area. An institution will be less likely, for ings balances may be larger than demand deposit example, to know the reputation of distant firms balances. Although search costs increase with or to know the product markets in which distant distance, expected benefits increase with the size firms operate. Moreover, in some cases, a finan- of the account, so firms are likely to search over cial institution may need to send a representative a wider geographic area for savings accounts to visit a distant firm to obtain the necessary than for checking accounts. information for credit evaluation or monitoring. On similar reasoning, secured credit and leases Thus, the information costs of financial institu- can be expected to have larger geographic martions may also vary directly with distance from kets than unsecured credit: The collateral rethe firm. duces creditors' exposure to loss and hence Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services 805 reduces the expenditures required for credit in- The information costs borne by any financial formation and monitoring. institution for credit evaluation and monitoring of customer firms tend to be higher relative to the The Effect of Firm Size on the Choice size of the transaction for small firms than for of Institution large firms, and this cost difference is likely to be greater when the financial institution is a distant Generally, larger firms operate in larger geo- one. In turn, because of these cost differentials, graphic markets for financial services than those institutions are more likely to screen out small in which smaller firms operate simply because firms, especially distant ones, as potential custheir demand is larger and because some special- tomers for loans. Thus, a small firm has a greater ized services usually not needed by smaller firms incentive than does a large firm to borrow from may be unavailable from the closest financial the same institution from which it obtains checkinstitution. For example, larger firms are more ing and to maintain a long-term relation with that likely than smaller firms to seek large loans. institution. A long-term checking account is piv- Because search costs tend to be fixed and bene- otal because it reveals the firm's cash flow and fits to vary directly with the size of loan, the net thus reduces the cost to the financial institution expected benefit from searching outside the local of credit evaluation and monitoring. For this area for better loan terms is likely to be greater reason, small firms are more likely than large for larger firms. firms to maintain a working relationship with a For another example of the effect of firm size, financial institution rather than seek out different large firms are more likely than small firms to suppliers for different financial products. In other have multiple locations, some of which may be words, small firms are more likely than large distant from the main office of the firm. Because firms to depend on their primary institution for of transaction costs, such firms would be more credit and to use fewer institutions. The primary likely than small, single-office firms to use finan- institution is likely to be local because of the cial institutions located outside the local area of transaction costs associated with checking. the main office. In sum, consideration of the effect of transpor- The size of the firm also affects the information tation costs, search costs, and firm size on a costs of financial institutions. Large firms are firm's demand for financial services and on the more likely than small firms to be known outside information costs of financial institutions sugthe areas in which they are located, either di- gests that medium-sized firms (50-499 employrectly or through their contacts with other busi- ees) and large firms (500 employees or more) nesses. They are also more likely to have the would be more likely than small firms to use financial information desired by financial institu- nonlocal financial institutions. tions because they have more sophisticated accounting records than do small firms, which are typically managed by their owners. Moreover, LOCAL SUPPLY CONDITIONS because bankruptcy costs have a large fixed component, the cost of default as a share of Characteristics of the local area may affect the assets is greater for small firms than it is for large likelihood that a firm will use nonlocal financial firms. Thus, the amount that creditors can re- institutions. For example, demand in rural areas cover from small firms is more limited. The lack for some financial services is often too small for of information and the relatively high cost of local suppliers to offer them. Rural firms debankruptcy make lending to small firms more manding such services will be forced to use expensive for financial institutions than lending nonlocal suppliers, even if they have to incur to large firms. Thus, distant suppliers are less large transaction costs, whereas urban firms with likely to accept applications for credit from small similar demands may be able to obtain the serfirms than they are to accept applications from vices locally. large firms, especially when the desired credit The structure of the local banking industry would be unsecured. may be another factor affecting the use of nonlo- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

806 Federal Reserve Bulletin • October 1990 cal suppliers. If prices of financial services are 1. Percentage of small and medium-sized firms using higher in areas in which a few banks and thrift local and nonlocal financial institutions, by type institutions have a greatly disproportionate share of institution1 of the market than they are in areas in which such institutions are less concentrated, and if transac- Financial institution Local Nonlocal Total tion costs are not trivial, then we expect to find All 97.1 19.7 98.2 firms in concentrated areas to be more likely than Commercial bank 92.8 8.3 94.0 Nonbank 26.3 13.5 35.5 firms in unconcentrated areas to use nonlocal Thrift2 13.1 1.3 14.1 Finance 8.2 7.2 14.3 financial institutions. Because of transaction 2.5 3.2 5.4 costs, firms in an unconcentrated market will not Other' 4.9 2.6 7.4 find using nonlocal suppliers economical. Some 1. Use of a financial institution consists of use of one or more of the folfirms in a concentrated market, however, may lowing services: checking, savings (other deposit or investment account); leasing; line of credit, mortgage, motor vehicle, equipment, or other credit; find using nonlocal suppliers, even with transaccurrency and coin, credit card processing, and night depository; cash managetion costs, less expensive than using local sup- ment, lockbox, and wire transfer; bankers acceptances, sales finance, letter of credit, and factoring; brokerage; and pensions, trusts, and safekeeping of pliers. Such a relation between bank structure securities. and the use of nonlocal suppliers would be con- Local institutions are thirty miles or less from the principal office of the firm. sistent with local markets. Sum of components may exceed totals because some firms use more than one institution. A finding of no relation between local bank 2. Savings and loan associations, savings banks, and credit unions. 3. Brokerage and money market mutual fund companies, mortgage banks, concentration and the use of nonlocal suppliers by and insurance companies. itself, however, provides no guidance as to the geographic dimensions of a banking market. The age companies, mortgage banks, and insurance existence of a local market would be consistent companies. Firms rarely purchase financial serwith this finding if the transaction costs of pur- vices from nonfinancial institutions. We define an chasing nonlocally supplied services exceeded the institution as local to a firm if it is located thirty benefits of obtaining a lower price outside the miles or less from the firm's main office.5 local area. In this case, local and nonlocal services The financial products covered are checking would be poor substitutes. Alternatively, finding accounts; other deposit and investment (savno relation between local bank structure and the ings) accounts; credit (financial leases, lines of use of nonlocal service suppliers could indicate credit, mortgages, motor vehicle loans, equipthat prices did not differ between local and non- ment loans, and other credit);6 transaction serlocal suppliers and thus that both sets of suppliers vices (currency and coin services, credit card belonged to the same economic market. processing, and night depository); cash management services (cash management, lock boxes, and wire transfers); credit-related ser- THE LOCATIONS AND TYPES vices (bankers acceptances, sales financing, let- OF FINANCIAL INSTITUTIONS USED ters of credit, and factoring); brokerage; and BY THE FIRMS Based on an analysis of the data from the survey, 5. The use of exactly thirty miles as a boundary value is not this section examines the different classes of critical. At a thirty-mile limit, 97.1 percent of firms use one or financial institutions that small and medium-sized more local financial institutions; at a twenty-mile limit the businesses use and the degree to which those percentage is 96.3, and at thirty-five miles the percentage is again 97.1. institutions are local. The importance of a type of A second type of definition for a local financial institution financial institution is measured by the frequency was considered: existence of a branch in the same metropolwith which the firms use it. itan area (urban firms) or county (rural firms) as the firm's main office. Because miles better reflect distance, the analy- The financial institutions covered are commersis using miles is reported. The basic conclusions would be cial banks; thrift institutions (savings and loan the same in either case. associations, savings banks, and credit unions); 6. A financial lease is a long-term lease in which the present value of the stream of payments at the inception of the lease finance companies; leasing companies; and approximates the market value of the asset; such a lease is money market mutual fund companies, broker- essentially similar to the purchase of the asset using credit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services 807 2. Mean number of local and nonlocal financial institutions used per small and medium-sized firm, by type of institution1 MEMO Financial institution Local Nonlocal Total Percentage of all institutions used All 1.53 .26 1.79 100 Commercial bank 1.21 .10 1.31 73.2 Nonbank .32 .16 .48 26.8 Thrift .14 .01 .15 8.4 Finance .09 .08 .17 9.5 Leasing .03 .04 .07 3.9 Other .06 .03 .09 5.0 1. Components may not sum to totals because of rounding. See notes to table 1 for definitions. trust services (pensions, trusts, and safekeeping versus 0.48 nonbanks (table 2). Finance compaof securities). nies, the most commonly used nonbank institu- Tables 1, 2, and 3 present survey findings on tions, account for 9.5 percent of all institutions the use of various types of local and nonlocal used and 35 percent of nonbank institutions financial institutions. The vast majority of the used. Thrift institutions, the second most frefirms, 97.1 percent, reported using a local insti- quently used nonbank, account for 8.4 percent tution, and 92.8 percent reported using a local of ^11 institutions used and for nearly one-third commercial bank (table l).7 On average, firms of the nonbank institutions used. The remaining use fewer than two financial institutions (1.53), third of nonbanks used includes mortgage bankand at least one of these institutions (1.21) is ers and insurance companies but consists prialmost always a local commercial bank (table marily of brokerage firms and leasing compa- 2). About 46 percent (50.1 percent of 0.92) of nies. firms rely solely on one local commercial bank Thrift institutions, like commercial banks, tend (table 3). For firms using more than one finan- to be located close to the firms that use them cial institution, about four-fifths of the institu- (table 2). In contrast, geographic proximity is not tions are local, and 59 percent of institutions are a distinguishing characteristic of other classes of local commercial banks.8 Thus, the survey financial institutions. Finance companies and shows local institutions, especially local com- leasing companies are divided almost equally mercial banks, to be the dominant suppliers of between local and nonlocal, and 34 percent of financial services to small and medium-sized other nonbank financial institutions are nonlocal. businesses. Nonetheless, nonlocal institu- The greater frequency of nonlocal use of these tions are important to some firms—one-fifth institutions could be due to the specific products report using a financial institution located more they offer. than thirty miles from the firm's main office The survey sought to gauge the relative impor- (table 1). tance to the firms of the various financial institu- On average, the firms use nearly three times tions by type and locality. Each firm that uses as many commercial banks as they do nonbank two or more financial institutions was asked to financial institutions—1.31 commercial banks identify which single institution it considered to be its primary source of financial products; the institution patronized by each firm that uses only one was defined to be the primary institution for 7. By the alternative definition of local given in note 5—location of a branch in the metropolitan area or county of that firm. As table 4 shows, 96.9 percent of firms the firm's main office—the percentage of nonlocal financial use a local financial institution as their primary institutions used was generally somewhat larger because institution; 90.8 percent of firms use a local many institutions used were located just outside the boundary of a firm's metropolitan area or county. commercial bank; and 5.9 percent use a local 8. These firms use 2.663 financial institutions, 2.149 of thrift institution. These data reinforce the conwhich are local (1.561 local commercial banks and 0.588 local clusion that, if a firm concentrates its purchases nonbank institutions). Hence, 80.7 percent are local instituof financial services at its primary institution, tions, and 58.6 percent are local commercial banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

808 Federal Reserve Bulletin • October 1990 3. Mean number of local and nonlocal financial institutions used per small and medium-sized firm, by number of institutions used1 Local Nonlocal MMEEMMOO PPeerrcceennttaaggee NNuummbbeerr ooff ffiinnaanncciiaall iinnssttiittuuttiioonnss uusseedd TToottaall Commercial Nonbank Commercial Nonbank ooff aallll bank bank ffiirrmmss 1 .920 .063 .012 .004 1 50.1 1 or more 1.212 .314 .094 .160 1.780 98.2 2 or more 1.561 .588 .183 .328 2.663 48.1 1. Components may not sum to totals because of rounding. See notes to table 1 for definitions. local commercial banks are the dominant suppli- institution, and only 19.7 percent use a nonlocal ers of financial products to small businesses. financial institution of any type (table 1). These data also suggest that service clustering occurs at local commercial banks and at primary financial FINANCIAL SERVICES institutions (table 5, memo). In sum, local commercial banks are the domi- The average number of financial services used nant suppliers of virtually every financial service per type of financial institution provides further considered. Almost all small and medium-sized evidence on the relative importance of the vari- businesses use a local commercial bank regardless ous institutions to businesses and indicates of the number of nonbank or nonlocal institutions where businesses may be bundling, or clustering, they use. A local commercial bank is typically the their purchases of financial services (table 5). firm's primary financial institution, which the firm Firms typically obtain several services from their uses for more than one financial service. A signifprimary institutions, which, as just shown, are icant number of firms use nonbank or nonlocal usually local commercial banks. On average, suppliers for a few services, but not frequently firms obtain 2.37 services from their primary and usually only for a single service. institutions and 2.14 services from all local commercial banks. Firms obtain somewhat fewer financial services from their primary institution DISTRIBUTION OF SUPPLIERS when the provider is a thrift institution (2.06) FOR SELECTED FINANCIAL SERVICES than when it is a commercial bank (2.40). In contrast, nonlocal institutions and all non- The first part of the analysis of the survey bank financial institutions other than thrifts tend indicated that the manner in which small and to be used for single services—on average, be- medium-sized firms use nonlocal and nonbank tween 1.04 and 1.26 services (table 5). However, financial institutions may differ from the way only 35.5 percent of firms use a nonbank financial they use local commercial banks. Here we investigate this issue further by comparing the ser- 4. Percentage of small and medium-sized firms desigvices firms purchase from nonbank and nonlocal nating selected types of local and nonlocal financial institutions to the services they purchase from institutions as their primary institution, by type of institution1 commercial banks and local institutions. In essence, this analysis helps to answer the second of Financial institution Local Nonlocal Total the five questions posed earlier: To what extent do financial institutions other than commercial All 9966..99 33..11 110000 Commercial bank 9900..88 22..00 9922..77 banks provide financial services to small and Thrift 55..99 ** 66..33 medium-sized businesses, and is the geographic Other ** ..66 ..99 distribution of these suppliers the same as that 1. For firms using more than one financial institution, the respondent chose for banks? It also provides evidence on the way which institution is the primary institution; otherwise, the institution used by in which the products of nonbank financial instithe firm is the primary institution. See notes to table 1 for definitions. * Less than 0.05 percent. tutions differ from those of commercial banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services 809 5. Mean number of services used by small and medium-sized firms per financial institution, by type and selected characteristics of institution1 Type of financial institution All Local Nonlocal Primary Nonprimary All 1.86 1.95 1.25 2.37 1.26 Commercial bank 2.09 2.14 1.55 2.40 1.42 Thrift 1.59 1.62 1.26 2.06 1.28 F L i e n a a s n in c g e 1 1 . . 0 0 4 4 1 1. . 0 0 2 3 1 1 . . 0 0 5 5 •* 1 1 . . 0 0 3 4 Other 1.16 1.20 1.09 * 1.15 MEMO When services include checking 2.29 2.30 2.05 2.40 1.78 When services exclude checking 1.08 1.10 1.07 1.36 1.08 1. Number of services range from one to thirteen. Each of the following brokerage, and trust. See notes to tables 1 and 4 for definitions, services counts as a single service: leasing, line of credit, mortgage, motor * Too few observations to provide a reliable estimate, vehicle loan, equipment loan, transactions, cash management, credit-related, Table 6 shows the percentage of firms using services, credit card processing, and night deposvarious financial services and the percentage of itory services. firms obtaining these services from financial institutions grouped by location, primary/nonpri- Use by Type of Supplier mary status, and class. The service used by the greatest proportion of firms (97 percent) is check- The dominant role of local suppliers for most ing. In contrast, only one-fourth of firms have financial services is remarkable, particularly for savings (other deposit or investment) accounts. those services hypothesized to have high trans- Credit is also an important service, used by 59.0 action costs: Local financial institutions supply percent of firms; lines of credit and motor vehicle 95.7 percent of firms with checking services, 54 loans, the most frequently used forms of credit, percent with credit, and 46.6 percent with transare each used by one-fourth of the firms. Nearly action services. 60 percent of firms use some other financial Nonlocal institutions are used by only 19.7 product; by far the greatest incidence of use in percent of all small and medium-sized firms (tathis category (47.3 percent of firms) is in trans- ble 1). However, for the minority of firms that action services, defined as currency and coin use specific services, such as leasing, nonlocal 6. Percentage of small and medium-sized firms that use various financial services, by service and selected characteristics of financial institutions1 Service Any financial Local Nonlocal Primary Nonprimary Commercial Nonbank Nonfinancial institution bank source Checking 97.0 95.7 4.0 96.9 12.5 92.0 7.8 0 Savings 25.0 23.5 2.5 19.3 9.4 20.4 6.8 0 Credit 59.0 54.0 14.3 43.8 32.3 47.9 24.5 15.9 Leasing 7.4 4.6 3.5 1.6 6.0 2.3 5.6 2.6 Line of credit 24.1 22.8 1.7 22.0 4.0 22.2 2.6 .5 Mortgage 15.0 13.8 1.8 10.4 5.5 11.8 3.6 4.1 Motor vehicle loan 25.1 20.2 6.4 10.2 16.8 15.3 11.6 1.3 Equipment loan 12.4 10.6 2.3 7.8 5.5 9.3 3.8 2.8 Other loan 8.9 8.1 1.1 6.3 3.1 7.1 2.1 6.5 Other2 59.3 57.8 4.2 55.3 13.2 55.7 8.1 2.6 Transactions 47.3 46.6 2.4 45.4 6.9 45.2 3.6 1.8 Cash management 15.0 14.3 .8 13.5 2.4 14.0 1.1 .1 Credit-related 7.4 6.7 .8 6.3 1.6 6.6 1.0 .3 Brokerage 3.3 2.7 .6 .6 2.8 .4 2.9 .2 Trust 3.8 3.5 .3 2.2 1.7 3.1 .8 .2 1. See notes to tables 1 and 4 for definitions. ment, lockbox, and wire transfer; credit-related services include bankers 2. Transactions services include currency and coin, credit card process- acceptances, sales finance, letter of credit, and factoring; trust services include ing, and night depository; cash management services include cash manage- pensions, trusts, and safekeeping. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

810 Federal Reserve Bulletin • October 1990 institutions become more important. For exam- sources (mainly owners, other individuals, and ple, 7.4 percent of all firms use leases, and 3.5 other business firms) are financial leases, mortpercent of all firms obtain leases from nonlocal gages, equipment loans, and other credit. institutions (table 6, columns 1 and 3). Thus, 47.3 percent of the firms that use leases obtain them Geographic Dispersion of Service Use from nonlocal suppliers (3.5 divided by 7.4; see table 7, column 2). In fact, leasing, motor vehicle Data on the geographic dispersion of the financial loans, equipment loans, and brokerage services institutions supplying firms with various services are the services for which users rely most heavily can provide further insights into how large geoon nonlocal institutions. graphic markets might be. The survey results Nonbank financial institutions are important reveal the preferences that small and mediumfor some services, particularly credit. About sized businesses have for local suppliers. Indione-fourth of the firms obtain credit from these rectly, the survey data suggest the relative iminstitutions (table 6). This importance can be portance of transaction costs for different seen more clearly in table 7: 75.7 percent of the financial services. firms using leases, 46.2 percent of firms using Firms use local suppliers to a remarkable exmotor vehicle loans, and 30.6 percent of firms tent (table 8). For all but one service, leasing, at using equipment loans obtain these services from least 75 percent of the financial institutions are nonbanks. In contrast, nonbank institutions are within thirty miles of the firms that use them, and not frequent sources for checking accounts, the median distance between the institutions and transaction services, and cash management ser- the firms is less than eight miles for twelve of the vices. Only 8 percent or fewer firms using these thirteen product categories in table 8. financial products obtain them from nonbank The institutions in which firms have checking institutions, whereas about 95 percent of users accounts have the smallest geographic distribuobtain them from commercial banks. tion: 50 percent of the institutions used for Nonfinancial sources are not important to most checking are within one mile of the firms using small and medium-sized businesses. No more them, and 90 percent of the institutions so used than 6.5 percent of firms obtain any one specific are within twelve miles of the firms. The suppliservice from a nonfinancial institution (table 6). ers of transaction and cash management services The services most frequently obtained from such have similar spatial distributions. 7. Percentage of small and medium-sized business users of various financial services that obtain such services from financial institutions with selected characteristics' Service Local Nonlocal Primary Nonprimary Commercial Nonbank bank Checking 98.4 4.1 99.9 12.9 94.8 8.0 Savings 94.0 10.0 77.2 37.6 81.6 27.2 Credit 91.5 24.2 74.2 54.7 81.2 41.5 Leasing 62.2 47.3 21.6 81.1 31.1 75.7 Line of credit 94.6 7.1 91.3 16.6 92.1 10.8 Mortgage 92.0 12.0 69.3 36.7 78.7 24.0 Motor vehicle loan 80.5 25.5 40.6 66.9 61.0 46.2 Equipment loan 85.5 18.5 62.9 44.4 75.0 30.6 Other loan 91.0 12.4 70.8 34.8 79.8 23.6 Other 97.5 7.1 93.3 22.3 93.9 13.7 Transactions 98.5 5.1 96.0 14.6 95.6 7.6 Cash management 95.3 5.3 90.0 15.0 93.3 7.3 Credit-related 90.5 10.8 85.1 21.6 89.2 13.5 Brokerage 81.8 18.2 5.2 84.8 12.1 87.9 Trust 98.5 5.1 96.0 14.0 95.6 7.6 1. Values can be obtained by dividing the value for each type of institution row 1, column 2), by 97.0 (table 6, row 1, column 1). See notes to tables in table 6 by the corresponding value in column 1 of table 6. For example, 1,4, and 6 for definitions, the first value in this table, 98.4, can be obtained by dividing 95.7 (table 6, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services 811 8. Miles between small and medium-sized firms and THE ROLE OF URBANIZATION AND their financial institutions, by financial service used FIRM SIZE and selected percentiles of institutions We now consider why firms choose particular Percentile of institutions PPee MM rrcc EE ee MM nntt OO aa ggee financial service suppliers by examining the level SSeerrvviiccee ooff ffiirrmmss of urbanization of a firm's locale and the size of uussiinngg 50th 75th 90th sseerrvviiccee the firm. Urban and rural areas may differ in the range of alternatives generally available locally Checking 1 4 12 97.0 Savings 1 7 24 25.0 because of differences in economic integration, Leasing 21 260 1,200 7.4 market size, and market structure.9 And the Line of credit 2 9 44 24.1 Mortgage 3 11 65 15.0 financial behavior of larger firms may differ from Motor vehicle loan... 7 29 128 25.1 Equipment loan 5 25 275 12.4 that of smaller firms because of differences in Other loan 3 15 80 8.9 Other' 1 5 21 59.3 transaction costs associated with financial so- Transactions 1 5 15 47.3 phistication, the use of financial products, and Cash management.. 1 5 16 15.0 Credit-related 4 12 43 7.4 the need for financial products. After the discus- Brokerage 5 29 80 3.3 Trust 2 6 25 3.8 sion of these factors, we consider other characteristics of the firm and of the local market in 1. See table 6, note 2, for definitions. assessing why firms may choose nonlocal suppliers in particular. Financial institutions used for savings ac- Urbanization counts and for the category of "other" services are also located quite close to the firm: 90 The overall number of financial institutions percent or more are located within twenty-four used by urban firms (those whose principal miles of the firm. Suppliers of motor vehicle office is in a metropolitan statistical area as loans, equipment loans, and leases are rela- defined by the Census Bureau) is on average tively more distant than those of other services. larger, by a statistically significant amount, than As mentioned in the section on nonbank suppli- the number used by rural firms (table 9). Urban ers, however, most suppliers are local. Al- firms also use more local banks and local nonthough these statistics do not define markets, banks than do rural firms, but the latter use they suggest how large geographic markets more nonlocal banks and nonbanks than do might be. They also suggest that the markets for urban firms. Although most of these differences different services may have different geographic are statistically significant, none is large. dimensions. Rural firms use more nonlocal financial insti- In sum, local commercial banks are the dom- tutions than do urban firms perhaps because the inant suppliers of virtually every financial prod- demand in rural areas for some services may be uct considered. Almost all of the small busi- too small for institutions to offer them. Rural nesses surveyed used a local commercial bank, firms are thereby forced to obtain such services most often for checking, regardless of the num- from nonlocal suppliers, whereas urban firms ber of nonbank or nonlocal institutions used. can obtain them locally. Perhaps another factor The variations in nonlocal and nonbank suppli- contributing to this difference is that the strucers for different types of products and the ture of the banking market in rural areas is geographic distribution of suppliers for specific services do not appear to support the hypothesis that businesses purchase all of their financial 9. For example, see Federal Reserve Bank of Chicago, U.S. Department of Agriculture, and Farm Foundation, services at a single financial institution. How- Rural Financial Markets: Research Issues for the 1980s ever, businesses using nonbank and nonlocal (Federal Reserve Bank of Chicago, 1982); and Ron Shaffer financial institutions generally did so to obtain a and Glen Pulver, "Rural Nonfarm Businesses' Access to few specific products, namely leases, motor Debt and Equity Capital" (paper presented at the Southern Regional Science Association Meetings, Washington, D.C., vehicle loans, and equipment loans. March 22-24, 1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

812 Federal Reserve Bulletin • October 1990 Use of selected types of financial institutions and Firm Size services, by urbanization of firm location1 The size of a firm can usually be expected to Percentage of Mean number of correlate with the firm's overall demand for f i i n rm sti s t u u t s io in n g i s n e s r t v it i u c t e i s o n u s s e o d r financial services and the complexity of financial FFiinnaanncciiaall iinnssttiittuuttiioonn or service oorr sseerrvviiccee22 services it requires. When we divide our sample Urban Rural Urban Rural of firms into two employment-size categories— firms firms firms firms small (0-49 employees) and medium-sized (50- All institutions 98.2 98.0 1.81* 1.69* 499 employees)—we find that the average num- Commercial bank 94.1 93.4 1.31 1.29 Local 92.9 92.1 1.22* 1.18* ber of financial institutions and services used is Nonlocal 7.6 9.2 .09 .11 significantly greater for medium-sized firms than Local 97.1 96.9 1.57* 1.38* Nonlocal 18.3 22.9 .24* .30* for small firms in all but one of seventeen com- Nonbank 26.7 30.2 .50* .40* parisons (table 10). Overall, medium-sized firms All services 98.2 98.0 3.26* 3.46* Checking 97.1 96.7 1.57 1.38 use nearly twice as many financial institutions on Savings 25.3 24.3 .31 .29 average as do small firms (3.1 versus 1.73). The Leasing 7.8 6.2 .10 .08 Line of credit 24.6 22.1 .27 .25 size-related differences (both in terms of percent- Mortgage 12.4 24.5 .14* .27* Motor vehicle loan .... 25.8 22.7 .31* .26* age of the size class using the institution or Equipment loan 11.9 14.1 .14 .16 service and the average number used) are great- Other loan 8.2 11.5 .09* .13* Other 57.6 65.1 .70* .78* est for nonlocal institutions and for leasing and lines of credit. One characteristic that does not 1. A firm is urban if its principal office is in a metropolitan statistical area. In the sample of 3,405 firms, 1,873 are urban and 1,532 are rural. differ much between small and medium-sized Selected characteristics of the sampled firms have the following mean values: firms is bank market structure, measured either Urban Rural by a Herfindahl index or a concentration ratio Number of employees 11.68* 9.58* (table 10, note 1), although the observed differ- Market Herfindahl index .09* .24* Market CR3 .42* .70* ence is statistically significant. Number of firm's locations 1.56 1.32 The findings that the use of distant institutions Number of firm's local locations 1.19 1.16 Sales (millions of dollars) 1.36* .93* and complex services increases with firm size suggest that transaction costs relative to the The market Herfindahl index measures the degree of deposit concentration, with higher numbers representing greater concentration; the market CR3 is value of financial services purchased by the firm the percentage of deposits held by the top three institutions in the market; are important in explaining differences between and the number of firm's local locations is the number that is thirty miles or less from the principal office of the firm. the use of local and the use of nonlocal financial 2. See notes to table 1 for definitions. institutions. * Difference significant at the 95 percent confidence level. FACTORS INFLUENCING THE CHOICE significantly more concentrated than that in OF NONLOCAL SUPPLIERS urban areas. As shown in the notes to table 9, the average Herfindahl index of the local con- In preceding sections, we examined firms' use of centration of banks and thrift institutions is financial institutions and services by type and 0.24 for rural firms and 0.09 for urban firms. If distance of institution, by service, and by locaprices of financial services were higher in more tion and size of the firm. We next identify those concentrated banking areas, buyers in those characteristics of firms and of the geographic areas would purchase fewer services locally areas in which they are located that indicate the and more services nonlocally than would use of nonlocal institutions. We present two firms in less concentrated areas. Thus, simply types of evidence on these questions. The first is comparing urban and rural firms cannot re- a univariate analysis of small and medium-sized solve this question; we shall address it again, firms that use only local financial institutions and with a multivariate model, after discussing the of those that use at least one nonlocal institution. role of firm size in the firm's choice of institu- We test the hypothesis that the means of several tions. business and geographic characteristics for the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services 813 10. Use of selected types of financial institutions and tions and demands). A greater proportion of services, by size of firm1 firms using nonlocal institutions are corporations. Such firms also tend to have relatively Percentage of Mean number of greater proportions of sales derived from exfirms using institutions institution ports, have more nonlocal branches or offices, or services used FFiinnaanncciiaall iinnssttiittuuttiioonn or service have smaller cash sales, use trade credit more oorr sseerrvviiccee22 Small M s e i d z i e u d m - Small M s e i d z i e u d m - frequently, and are more frequently denied firms firms firms firms credit. Statistically significant differences also arise in terms of industry classification. Firms All institutions 98.1 100.0 1.73* 3.10* Commercial bank ... 93.7 99.8 1.27* 2.20* using nonlocal institutions tend to be slightly Local 92.6 96.9 1.19* 1.71* Nonlocal 7.4 29.3 .08* .50* more widely represented in manufacturing and Local 97.0 98.6 1.50* 2.24* real estate and less well represented among re- Nonlocal 18.3 44.8 .23* .86* Nonbank 34.6 50,0 .46* .90* tailing and service industries. All services 98.1 100.0 3.20* 6.47* Local supply conditions also reveal statisti- Checking 96.9 99.8 1.12* 1.71* cally significant differences between the two Savings 24.3 42.8 .29* .70* Leasing 6.8 22.9 .09* .36* classes of firms (table 11). Firms using nonlocal Line of credit 22.7 58.5 .25* .69* Mortgage 14.4 30.6 .16* .38* institutions are more frequently located in rural Motor vehicle loan 25.1 26.7 .29* .44* areas; in areas with significantly smaller deposits Equipment loan 11.8 25.9 .13* .34* in banks and thrift institutions (a proxy for mar- Other loan 8.8 12.0 .10 .13 Other 58.3 83.0 .70* 1.32* ket size); and in areas with a. slightly higher concentration index and Herfindahl index, which 1. Small firms are those with 0 to 49 employees, and medium-sized firms are those with 50 to 499. In the sample of 3,405 firms, 2,899 are small and suggests less local competition among banks and 506 are medium-sized; see table A.l, note 3. thrift institutions. Selected characteristics of the sampled firms have the following mean values (see table 9, note 1): Medium- Multivariate Analysis Small sized Number of employees 6.96* 116.56* The univariate analysis highlights characteristics Market Herfindahl index .12* .11* Market CR3 .48* .45* that are significant in distinguishing firms likely Number of firm's locations 1.38* 4.82* to use a nonlocal financial institution. A multi- Number of firm's local locations 1.14* 2.19* Sales (millions of dollars) .76* 13.70* variate analysis is required to show the relative importance of the characteristics and to assess 2. See notes to table 1 for definitions. * Difference significant at the 95 percent confidence level. the effect of one variable when all others are held constant. Such an analysis is crucial if variables two classes of firms are equal. The second type associated with hypotheses about the size of of evidence, derived from a multivariate model economic markets are to be distinguished from based on the theoretical results discussed above, variables associated with hypotheses about is an estimate of the effect of each of the varia- unique firm characteristics. bles in the univariate analysis on the probability The analysis, reported in detail in the authors' that a small or medium-sized firm will use one or Staff Study 160, shows that firms that are relamore nonlocal financial institutions. tively large, have multiple locations, have been denied credit, have obtained trade credit, and are Univariate Analysis located in rural counties or in areas with higher concentrations of banks and thrift institutions '•• l. '.j.U-f have a significantly greater probability of obtain- The univariate comparisons find the following ing financial products from one or more nonlocal significant differences (table 11): Compared with suppliers. Firms having relatively large cash firms using only local financial institutions, firms sales, however, are more apt to use only local using nonlocal institutions tend to have more financial institutions. employees and greater sales and to use more institutions and more financial services (and thus Of particular importance for bank market defpresumably have more complex financial opera- inition is the finding concerning the Herfindahl Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

814 Federal Reserve Bulletin • October 1990 11. Population characteristics of small and medium-sized index of local market structure. The estimated firms, by locality of financial institutions they use' effect of the Herfindahl index on the probability Mean, except as noted of using nonlocal institutions suggests that, for many businesses, banking markets are locally Uses only Uses local Characteristics of firm local and nonlocal limited. However, all firms in the sample may not institutions institutions be equally limited. The significant effect of firm Number of financial institutions size indicates that medium-sized businesses may and services used Institutions 1.53* 2.98* not be as constrained as the small firms in the Services 2.97* 5.07* sample: Their transaction costs for financial ser- Number of employees vices may be a smaller relative cost than it is for 1987 9.25* 20.16* 1986 8.76* 18.62* small firms. Perhaps other complexities associated with size make medium-sized firms more Sales Total (millions of dollars) likely to use products, such as leases, for which 1987 .99 2.45 1986 .96 2.22 nonlocal suppliers are more important. The next Indicators (percent of sales) section analyzes why business firms choose dif- Exports 1.54 2.02 Cash sales 19.31* 13.26* ferent types of financial institutions for different Age types of services. Year acquired 1975 1973 Year established 1968 1964 Years from acquisition to 1989 14.1 13.8 Organizational form (percent REASONS FOR CHOOSING PARTICULAR of firms) Partnership 8.6 7.0 TYPES OF FINANCIAL INSTITUTIONS Sole proprietorship 41.3* 30.5* Corporation 50.1* 62.5* The NSSBF asked business owners "What were Industry, by Standard Industrial Classification (percent the factors that influenced the firm's decision to of firms) Construction obtain this set of services from this institution?" (1000 s SIC <2000) 13.8 12.0 The question was asked for the primary financial Primary manufacturing (2000 s SIC <3000) 3.9* 5.8* institution and up to five additional institutions Manufacturing (3000 < SIC <4000) 5.0 4.8 used by the firm. Transportation (4000 s SIC <5000) 2.7* 4.3* Wholesale (5000 s SIC <5200) 9.8 12.0 Reasons by Type of Institution Retail (5200s SIC<6000) 24.3 21.4 Insurance agents and real estate (6400 s SIC <7000) 6.4* 8.9* Services (7000 s SIC < 8000) 18.9* 14.9* The answers to the survey questions cover a Other (8000 s SIC <9000) 13.2 12.9 broad range of factors, including proximity, ease Office locations of conducting business (convenience other than Has nonlocal offices (percent of firms)3 6.8* 14.9* proximity), prices, services offered, and a variety Number of all offices 1.46 1.79 Number of local offices 1.16* 1.30* of professional and personal relationships. About Firm's geographic area3 one-fourth of the reasons given for the choice of Percent of firms in rural areas 20.7* 25.7* particular local and primary institutions are prox- Deposits in area (billions of dollars) 29.05 25.60 imity and ease of conducting business, which are Market Herfindahl index .12* .13* Market CR3 .47* .50* closely associated with transaction costs. The second largest category of reasons for the choice Other (percent of firms) Managed by owner 90.8 88.6 of these institutions is personal relationships. Has been denied credit 3.5* 7.4* Has used trade credit 75.1* 82.9* The most frequently cited reason for choosing nonlocal, nonbank, and nonprimary financial in- 1. See notes to tables 1 and 9 for definitions. stitutions is seller relationships (such as those in 2. A firm's nonlocal office is located more than thirty miles from the firm's principal office. which a motor vehicle dealer helps a customer to 3. Metropolitan statistical (urban) area or non-MSA (rural) county in which obtain financing from a particular financial instiprincipal office of the firm is located. * Difference significant at the 95 percent confidence level. tution or captive finance company). The second most important factor—nearly one-fifth of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services 815 reasons for choosing nonlocal institutions—is vehicle loans and leases, which tend to be purprice. In contrast, price is considerably less chased over a relatively wide area on the basis of important for choosing local and primary institu- seller recommendations or price. Hence, the data tions. This finding suggests that pricing may suggest that a pronounced local preference exists induce firms to use nonlocal institutions for some for some services, but that other services may products and may be consistent with the hypoth- not be part of local banking markets. esis that financial service markets are local. As Survey data on the behavior of firms in shopdiscussed earlier, firms in concentrated markets ping for financial services and on the efforts of have a greater incentive to purchase products in financial institutions to solicit sales show that more competitive nonlocal markets. local commercial banks clearly are the type of In sum, systematic differences appear in the institution that firms consider most in shopping reasons cited for the choice of various types of for financial services and that is dominant in financial institutions. Lower transaction costs is seeking business from local and nonlocal firms. the reason behind the choice of particular local The data on shopping and solicitation, which and primary institutions, whereas seller relation- include potential as well as current suppliers, do ships and prices are more often the basis for not change the conclusions concerning market choosing particular nonlocal and nonbank insti- definition that were reached on the basis of tutions. Another reason for using nonlocal sup- patterns of demand. pliers may be the lack of availability of certain services in some areas. We consider this possibility in the next section, which covers specific CONCLUSION financial services and the reasons for choosing the particular institutions offering them. Local commercial banks are still the main suppliers for most of the financial services used by Reasons by Type of Service small and medium-sized businesses. Local commercial banks, and sometimes local thrifts, sup- Proximity and ease of conducting business are ply an array of financial services centered on important reasons for the choice of almost every checking and transactions services. Nonbank service used by the firms. Prices (including inter- institutions, whether local or not, rarely supply est) are most important for leases, mortgages, such an array. These findings support the current and vehicle loans, a finding consistent with the approach to market definition in the antitrust importance of transaction costs to small and analysis of proposed bank mergers and proposed medium-sized businesses. Leases, vehicle loans, acquisitions by bank holding companies. Howand equipment loans are also the services that, ever, the findings also suggest that economic when purchased, are most frequently obtained markets for certain services, especially leases from nonlocal and nonbank suppliers (tables 6 and motor vehicle loans, include nonlocal and and 7); the products for which seller relationships nonbank financial institutions and hence justify a and other referrals are most important; and, as broader market definition for these services. This table 8 shows, the financial services with the broader market definition would apply to acquiwidest geographic distribution of suppliers. ? sitions by bank holding companies of certain The reasons associated with the use of institu- prospective nonbank subsidiaries. tions and services suggest that certain products tend to be purchased at local institutions for reasons associated with transaction costs. APPENDIX Checking, savings, other services, and, to a lesser extent, lines of credit and other loans are The National Survey of Small Business Finances in this category. For these services and for local is a survey of small and medium-sized business financial institutions, price is apparently not as firms in the United States, conducted in 1988-89 important a consideration as it is for motor for the Board of Governors of the Federal Re- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

816 Federal Reserve Bulletin • October 1990 A.l. Population and sample characteristics of the National Survey of Small Business Finances' Percent of Number of Percent of Number of businesses in businesses in Class population Class population (weighted)2 sample (weighted)2 sample (unweighted) (unweighted) Number of employees3 Type of industry, by Standard 0-4 58.8 1,733 Industrial Classification 5-9 18.9 556 Construction 10-24 13.6 395 (1000 < SIC <2000) 13.4 473 25-49 4.8 215 Primary manufacturing 50-99 2.3 283 (2000 < SIC <3000) 4.2 213 100-499 1.6 223 Manufacturing (3000 s SIC <4000) 5.0 195 Years under current owner Transportation 5 or fewer 24.1 749 (4000 s SIC <5000) 3.0 117 6-10 23.6 783 Wholesale 11-20 30.6 1,060 (5000S SIC <5200) 10.2 344 More than 20 21.7 813 Retail (5200 s SIC <6000) 25.6 929 Insurance agents and real estate Annual sales (1988 dollars) (6400 s SIC <7000) 6.9 195 Less than 50,000 16.3 501 Services (7000 s SIC <8000) .. 18.7 578 50,000-100,000 13.9 420 Other (8000S SIC <9000) 13.1 361 100,001-250,000 24.0 707 250,001-1,000,000 28.1 845 Characteristics of business 1,000,001-2,500,000 9.9 346 location 2,500,001-5,000,000 3.8 222 Herfindahl index4 5,000,001-10,000,000 2.3 154 Less than 1,000 51.3 1,281 More than 10,000,000 1.8 210 1,001-1,800 32.2 1,127 1,801-2,500 9.0 516 Organizational form More than 2,500 7.4 481 Sole proprietorship 39.9 1,255 Partnership 8.3 274 Urban5 78.3 1,873 Corporation 51.8 1,876 Rural 21.2 1,532 1. Survey conducted in 1988-89 among for-profit, nonagricultural, non- 4. Herfindahl index is based on the aggregate deposit level of all banks, financial small and medium-sized businesses (with fewer than 500 employees); savings and loan associations, and savings banks in the metropolitan statistitotal number of respondents was 3,405. cal area or rural county in which the principal office of the business firm is 2. All statistics unless otherwise noted are weighted to adjust for unequal located. rates of sampling and response so that results represent the population of small 5. Principal office of the business firm is located in a metropolitan statistiand medium-sized firms. Components may not sum to 100 because of rounding. cal area. 3. Full-time equivalents; the end-point of each size class has been rounded down to the nearest whole number. serve System and the Small Business Admini- The sample design was that of a stratified stration.10 The survey drew its sample from the random sample with oversampling to ensure the population of all for-profit, nonagricultural, nonfi- ability to estimate separately the reporting nancial enterprises listed in Dun's Market Identi- domains defined by census region, urban/rural fier file. The sample consisted of those firms that status, and class of employment size. Table A.l were in operation with fewer than 500 employees displays the characteristics of the sample.12 at the end of December 1987. The number of such firms in the Dun's file was 5,188,490; the number sampled was 5,547; the number eligible was 5,190; ment in the United States at that time. See U.S. Small and the number of respondents used for this Business Administration, The State of Small Business: A Report of the President (Government Printing Office, 1988); analysis was 3,405, for a response rate of those and U.S. Small Business Administration, Handbook of Small eligible of 66 percent.11 Business Data 1988 (GPO, 1988) for a discussion of population coverage of the Dun's file; and Brenda G. Cox, Gregory E. Elliehausen, and John D. Wolken, "The National Survey of Small Business Finances: Description and Preliminary 10. For detailed information on the methodology and con- Evaluation," Finance and Economics Discussion Series 93 tent of the National Survey of Small Business Finances, see (Board of Governors of the Federal Reserve System, Novem- Brenda G. Cox, Gregory E. Elliehausen, and John D. Wolken, ber 1989). The National Survey of Small Business Finances: Final Meth- 12. All statistics presented in the tables and used in the odology Report, RTI Report 4131-00F (Research Triangle analysis were obtained from the survey except the variables Park, N.C.: Research Triangle Institute, September 1989). describing the number and size distribution of banks and 11. The Small Business Administration estimates that the thrift institutions in specific geographic areas, which were 5,188,490 firms in the Dun's Market Identifier file at the end obtained from the Summary of Deposits reports of the of 1987 accounted for about 93 percent of private employ- Federal Deposit Insurance Corporation. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Banking Markets and the Use of Financial Services 817 Unless otherwise indicated, the results in this services, the most frequent method of conducttable and other tables in the article were ing noncredit business with the financial instituweighted to adjust for disproportionate rates of tion (in person, telephone, mail), the location of sampling and response and to permit inferences the financial institution office it uses to apply for about the population of small and medium-sized credit, the method of applying for credit, and the business firms.13 number of years the firm has done business with The survey collected the following types of the institution information from each business: • Experience in the past year in searching for financial products, changes in its choices of fi- • An inventory of the business's deposit and nancial institutions, and solicitations it has resavings accounts, financial leases, credit lines, ceived in the past year from financial institutions mortgages, motor vehicle loans, equipment • Data from each firm's income statement and loans, other loans, and selected other financial balance sheet, demographic information on the products for each financial service supplier used owners and their employees, and other characby that business teristics of the firm such as the industry to which • The business's reasons for choosing each of it belongs and its age. its financial institutions, the location of the office of the financial institution it uses for noncredit Each business selected for the survey received a worksheet in advance to encourage the use of written records in responding to the 13. The firms analyzed include all those surveyed that subsequent computer-assisted telephone intercompleted the entire questionnaire and were part of the main views, which were conducted by Research Trisample (see Cox, Elliehausen, and Wolken, The National angle Institute. Interviews lasted an average of Survey of Small Business Finances: Final Methodology Report). fifty minutes. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

818 Treasury and Federal Reserve Foreign Exchange Operations This quarterly report, covering the period May facilitate the retiring of a portion of the amounts through July 1990, provides information on Trea- held by the Federal Reserve under the ESF's sury and System foreign exchange operations. It warehousing arrangements with the Federal Rewas presented by Sam Y. Cross, Manager of serve. Foreign Operations of the System Open Market Account and Executive Vice President in charge of the Foreign Group of the Federal Reserve MAY THROUGH MID-JUNE Bank of New York. Paul DiLeo was primarily responsible for preparation of the report.1 The dollar was trading narrowly around DM1.68 and ¥159 as the period opened. The dollar ben- The dollar generally declined during the May- efited from the release of reports late in the July reporting period. At first the easier tone for previous period and early in May suggesting that the dollar largely reflected improving sentiment U.S. economic growth and price pressures were toward other currencies, especially the mark and strong enough that any move in monetary policy the yen. But by late June, the focus began to shift would be toward greater restraint. That percepto the dollar, and sentiment toward the dollar tion of U.S. economic prospects was temporarily deteriorated in the midst of talk of a worsening challenged early in May after a weaker than U.S. fiscal deficit, a weakening domestic econ- expected U.S. employment report for April reomy, and possible declines in U.S. interest rates leased May 4, growing concerns about the U.S. in an environment of rising worldwide demand budget deficit, and nervousness about the impact for capital. By the close of the period, the dollar of the savings and loan crisis on the economic had declined more than 8 percent against the yen outlook. The April retail sales and producer price and 5Vi percent against the mark, approaching data released on May 11 raised further questions the previous postwar low against the latter cur- about the strength of the economy, and the dollar rency. Against sterling, the dollar declined 12 moved down to DM1.6260 and ¥152.62. These percent. On a trade-weighted basis, as measured factors were offset later in the month by comby the staff of the Federal Reserve Board of ments from several Federal Reserve officials Governors, the dollar declined about 6 percent. reaffirming their view that the principal challenge facing the economy was the persistence of infla- During the period, no operations aimed at tionary pressures. influencing the level of the dollar were carried out. Over the course of the reporting period, the Much of the market's attention during the Trading Desk at the Federal Reserve Bank of weeks of May and early June, however, focused New York sold a total of $1 billion equivalent of on other currencies. A major area of interest was marks in the market on behalf of the Exchange how the mark would be affected by German Stabilization Fund (ESF). The sales were part of economic and monetary union. Ever since the a U.S. Treasury operation to adjust balances and West German government had first announced in February its commitment to rapid economic and monetary union, there had been great interest in the terms of the forthcoming currency conver- 1. The charts for the report are available on request from sion. Market participants had been wary of the Publications Services, Board of Governors of the Federal possibility that, in an effort to stabilize the East Reserve System, mail stop 138, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

819 German economy, the authorities might set a cerns that Japanese financial market conditions conversion rate for the East German "ost-mark" would have a major negative impact on economic so favorable to the East Germans as to generate performance gave way to renewed expectations an explosive increase in deutsche mark monetary that interest rates might tend to firm. In this aggregates and spending power. The actual terms context, reports circulated that Japanese invesof the conversion, announced in early May, tors were reconsidering their expectations of alleviated these concerns. Accordingly, early in persistent yen weakness and the hedging stratethe period, with most market participants con- gies for dollar investments associated with those vinced that union would boost an already strong expectations. Amid these conditions, the dollar German economy and impart to monetary policy declined through the ¥150 level on May 25 a further bias toward restraint for the period before recovering somewhat. ahead, the mark found renewed support in the Thus, the dollar moved up on balance against exchange markets. the mark from its early May low and was trading Nevertheless, some market participants re- around DM1.68 by the middle of June, showing mained leery of Germany's ability to accommo- at times a tendency to firm. Against the yen, in date union without serious negative repercus- contrast, it had declined more than 3 percent sions for financial markets, price pressures, or since early May to trade around ¥154 by midthe political landscape. As a result, sentiment June. toward the mark tended to fluctuate for most of Meanwhile, several high-yielding currencies May and June, alternating between more and less showed strength, as they would from time to time sanguine views of the likely short-term repercus- through the end of the period. The Canadian sions. Among the issues attracting market atten- dollar, although weighed down during May and tion were the jnixof tax and debt financing ftat June by concerns over political uncertainty relatthe West German government would use to help ing to the constitutional status of Quebec, demfinance structural adjustment in East Germany, onstrated considerable underlying buoyancy as the possibility of a backlash against the incum- differentials over U.S. interest rates increased bent political parties by West German voters from already high levels. Even though the Quealarmed by the potential costs of union, and bec question was left unresolved when a June 23 recurrent reports of conflicts between the deadline for unanimous provincial approval of Bundesbank and the government over the mech- the so-called Meech Lake Accord passed without anisms of monetary union. the necessary action, the Canadian dollar re- The yen, on the other hand, consistently bounded quickly. The currency then traded near strengthened during much of May. Analysts were ten-year highs for most of July. articulating a more balanced assessment of Jap- Sterling also benefited during this period as anese economic policy and political stability than relatively high yields coincided with an increashad been heard for several months. Political, ing sense on the part of market participants that financial, and economic concerns that had the United Kingdom would soon join the Exweighed on that currency earlier in the year change Rate Mechanism (ERM) of the European subsided. Public opinion polls indicated that Monetary System. Attention to the possibility of Prime Minster Kaifu had succeeded in clearly early ERM entry was sparked by a press report establishing his own leadership and in translating on June 12 that the government was contemplathis personal popularity into renewed support for ing entry as early as the fall. Sterling promptly the ruling Liberal Democratic Party. The May 6 strengthened, rising above $1.70, and subse- Group of Seven (G-7) meeting was seen in the quently reached a nineteen-month high of market as demonstrating more cohesion among $1.8650 on July 31. the governments with respect to Japanese con- Finally, the higher-yielding ERM currencies cerns. The volatility displayed by Japanese finan- also strengthened as market participants percial markets earlier in the year had damp- ceived that there was little risk of an ERM ened—in fact, the Nikkei Dow-Jones index had realignment in the foreseeable future. In particrecovered steadily since early April—and con- ular, the Italian lira remained at the top of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

820 Federal Reserve Bulletin • October 1990 1. Federal Reserve reciprocal currency arrangements proached with what appeared to be major areas Millions of dollars of disagreement outstanding. There was also some caution toward the mark as the July 1 Amount of Institution facility effective date of economic and monetary union July 31, 1990 neared. By June 25 the dollar was trading around Austrian National Bank 250 DM1.67 and ¥155. National Bank of Belgium 1,000 Bank of Canada 2,000 Toward the end of June, market participants National Bank of Denmark 250 began to reassess the outlook for the U.S. econ- Bank of England 3,000 Bank of France 2,000 omy and monetary policy. After President Deutsche Bundesbank 6,000 Bank of Italy 3,000 Bush's statement acknowledging that tax reve- Bank of Japan 5,000 nue increases could be a part of a deficit reduc- Bank of Mexico 700 tion package, market participants began to ex- Netherlands Bank 500 Bank of Norway 250 pect that agreement with the Congress on such a Bank of Sweden 300 package might lead to a decline in U.S. interest Swiss National Bank 4,000 rates at a time when German and Japanese rates Bank for International Settlements Dollars against Swiss francs 600 appeared likely to remain steady or, looking Dollars against other authorized European currencies 1,250 further ahead, even rise. The initial reaction of the foreign exchange market was muted as atten- Total 3300,,110000 tion was focused on political and economic developments elsewhere. narrow band throughout the period and the Span- In the weeks that followed, the dollar softened ish peseta moved to the top of its wider band. All as developments in Germany and Japan were other currencies tended to bunch together at the seen as favorable for their currencies. In Gerbottom of the bands against the lira and the many, initial reports following German economic peseta, and several currencies reached their bi- and monetary union and the currency conversion lateral limits at times. were reassuring. Indications were that the feared surge in consumption was not materializing. Although some monetary tightening was still ex- LATE JUNE AND JULY pected eventually, there appeared to be no immediate large increase in demand pressures, as A succession of statements by Federal Reserve East Germans took a cautious view of their officials during June had strengthened the view prospects in light of the economic restructuring that the central bank remained sensitive to the and uncertainties that lay ahead. Nevertheless, need to resist inflation and that the economic the mark, which had moved down in the ERM signs did not warrant a change in policy direc- since early in the year, declined further to trade tion. At the same time, market participants near its bilateral parity limit with the Italian lira adopted a moderately cautious attitude toward and Spanish peseta. With regard to the yen, the the yen as the final round of the Structural conclusion of the SII negotiations was seen as a Impediments Initiative (SII) negotiations ap- positive development. Fears that the negotia- 2. Drawings and repayments by foreign central banks under reciprocal currency arrangements with the Federal Reserve System1 Millions of dollars; drawings or repayments (-) Amount of Outstanding as Outstanding as Central Bank facility of April 30, May June July of July 31, 1990 1990 770000..00 554411..88 --2288..44 --111177..00 --339966..55 00 1. Data are on a value-date basis. Components in table 3 may not add to 2. Represents the FOMC portion of a $1,300 million short-term credit facility totals because of rounding. established on March 23, 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 821 tions would result in agreements that would Warehousing Operations undermine support for the Kaifu government During the three-month period, the Exchange Stabilization were largely erased when the highly visible issue Fund (ESF) of the Treasury both unwound and renewed of increased public works spending by the Japawarehousing transactions with the Federal Reserve. Warenese government was satisfactorily resolved. By housing operations have been carried out from time to time July 9 the dollar had drifted down more than 1 since 1963. In carrying out such an operation, the Federal percent against the mark and almost 3 percent Reserve buys the foreign currency in a spot purchase from the Treasury and simultaneously sells it back to the Treasury against the yen from its level in late June to close at the same exchange rate for a future maturity date. A key at DM1.65 and ¥151. aspect of this arrangement is that the Federal Reserve and On July 10, at the time of the Houston Summit, the Treasury agree to use the same exchange rate to iniseveral comments by U.S. officials served to tiate and reverse the transaction; consequently, neither party revive market participants' expectations of an incurs any foreign exchange rate risk as a result of the transaction itself. The ESF may realize a profit or loss at the early easing in U.S. monetary policy. The dollar time the warehousing transaction is undertaken or renewed, began to trade with a softer tone. The dollar and it remains exposed to valuation gains or losses on the firmed somewhat the next day when the final foreign currencies being warehoused (table 4). A warehoussummit communique was released and did not ing transaction is reversed when the Treasury repays dolcontain any references to new initiatives on lars and the Federal Reserve repays the foreign currency it has acquired from the Treasury. exchange rates, which some had expected. Then, on July 12, Chairman Greenspan told the Senate Banking Committee that the Federal Reserve might ease monetary policy to offset a firming in ter GNP data released July 27, were seen in credit market conditions suggested by a tighten- contrast with continued strong growth in several ing of terms on credit from banks and sluggish other countries. These factors suggested that growth in M2. The market had not expected that interest rate differentials would move further statement, and the dollar promptly declined, against the dollar. Despite occasional upward closing the'day at ¥147.45 and DM1.6355. movements associated with increased tensions in During the remaining two weeks of the period, the Middle East, the dollar closed the period at the dollar declined by a modest amount as interest DM1.5868 and ¥145.85, within a few basis points rate and financial market developments further of its lows for the period reached earlier that day. reduced the attractiveness of dollar investments. The U.S. monetary authorities did not inter- In particular, market participants noted the de- vene in the exchange market during the reporting cline in the U.S. stock market on July 23, which period to influence exchange rates. From late was associated with disappointing earnings by May through mid-July, the Trading Desk acseveral firms. New signs of weakening U.S. quired dollars against sales of marks on behalf of economic growth, particularly the second-quar- the ESF as part of an operation to adjust ESF 3. Drawings and repayments by foreign central banks under special swap arrangements with the U.S. Treasury1 Millions of dollars; drawings or repayments ( —) Central bank drawing Amount of Outstanding as Outstanding as on the U.S. Treasury facility of April 30, May June July of July 31, 1990 1990 Central Bank of Costa Rica2 27.5 . . . 27.5 -27.5 Bank of Mexico3 600.0 464.4 - 24.3 -100.2 - 339.9 0 Bank of Guyana4 31.8 ... ... 31.8 -18.3 13.4 National Bank of Hungary5 20.0 ... ... 11.1 8.9 20.0 Central Bank of Honduras6 82.3 ... ... 82.3 -25.0 57.3 1. Data are on a value-date basis. The ESFs facility with the National Bank 4. Represents the ESF portion of a $178 million short-term credit facility of Poland, inactive since February 9, expired on May 31,1990. Components established on June 18, 1990. may not add to totals in table 2 because of rounding. 5. Represents the ESF portion of a $280 million short-term credit facility 2. Represents intraday facility with the ESF established May 18, 1990. established on June 18, 1990. 3. Represents the ESF portion of a $ 1,300 million short-term credit facility 6. Represents the ESF portion of a $147.3 million short-term credit facility established on March 23, 1990. established on June 28, 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

822 Federal Reserve Bulletin • October 1990 balances and facilitate reversal of a portion of the certain member central banks) and the Kreditanoutstanding warehousing of foreign currency stalt fur Wiederaufbau of West Germany, agreed with the Federal Reserve. During this time, a to establish a multilateral financing facility for total of $2,000 million was acquired, of which Guyana to help clear arrears with the IMF and $1,000 million was acquired in the market and with other international financial institutions and $1,000 million in a direct transaction with another to facilitate the introduction of an economic central bank. The market transactions were con- adjustment program supported by the IMF and ducted as conditions permitted without signifi- the World Bank. The ESF's share of the $178 cantly influencing prevailing exchange rates. million facility was $31.8 million. Guyana drew The ESF exchanged the dollars acquired the entire amount of the facility on June 20 and through these transactions for foreign currencies repaid $18.3 million to the ESF on July 31. it had warehoused with the Federal Reserve, leaving at the close of the period an amount of Honduras. On June 28, the ESF, together with $7,000 million equivalent of foreign currency still certain Latin American central banks, estabwarehoused with the Federal Reserve. The Trea- lished a financing facility for Honduras totaling sury realized profits of $329.7 million from the $147.3 million to facilitate implementation of an sale of German marks, as well as profits of $459.0 IMF-supported economic adjustment program. million from renewals of warehousing transac- Honduras drew the full amount on the same day. tions that also occurred during the period. The ESF participation in the facility was $82.3 In other operations during the period, the million. On July 5, Honduras repaid $25.0 million Treasury agreed with the International Monetary to the ESF. Fund (IMF) to exchange SDRs for dollars with foreign monetary authorities that needed SDRs Hungary. On June 18, the ESF and the Bank for payment of IMF charges and for repurchases. for International Settlements (acting for certain Through the end of July, a total of $120.9 million member central banks) agreed to provide a mulequivalent of SDRs was exchanged. The Trea- tilateral facility for Hungary. Hungary received sury, through the ESF, also participated in mul- the full proceeds of the $280 million facility tilateral credit facilities to provide near-term eco- through three drawings made on June 21, July 16, nomic support to Guyana, Honduras, and and July 30. The ESF provided $20 million under Hungary, and provided assistance to Costa Rica the facility. through an intraday facility. Mexico repaid in full the remainder of its commitments to the U.S. Costa Rica. The ESF agreed to provide Costa authorities. Rica a $27.5 million intraday facility to facilitate the implementation of its debt restructuring Guyana. On June 18, the ESF, along with the agreement. On May 21, Costa Rica drew the Bank for International Settlements (representing entire amount of the facility and repaid on the same day, thereby liquidating the facility. 4. Net profits or losses (-) Mexico. At the beginning of the period, Mexon U.S. Treasury and Federal Reserve current foreign exchange operations1 ico's outstanding commitments on a short-term Millions of dollars credit facility to the Federal Reserve and Treasury stood at $541.8 million and $464.4 million U.S. Treasury Federal Exchange respectively. Partial repayments were made on Period and item Reserve Stabilization Fund May 23, June 1, and July 11, and a final payment on July 31. May 1, 1990-July 311990 As of the end of July, cumulative bookkeeping 00 778888..77 Valuation profits and losses or valuation gains on outstanding foreign curon outstanding assets and liabilities as rency balances were $3,547.5 million for the of July 31, 1990 33,,554477..55 11,,551199..55 Federal Reserve and $1,519.5 million for the ESF (the latter figure includes valuation gains on 1. Data are on a value-date basis. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Treasury and Federal Reserve Foreign Exchange Operations 823 warehoused funds). These valuation gains repre- return and that have a high degree of quality and sent the increase in dollar value of outstanding liquidity. A portion of the balances is invested in currency assets valued at end-of-period ex- securities issued by foreign governments. As of change rates, compared with rates prevailing at the end of July, holdings of such securities by the the time the foreign currencies were acquired. Federal Reserve amounted to $7,239.2 million The Federal Reserve and the ESF regularly equivalent, and holdings by the Treasury invest their foreign currency balances in a variety amounted to the equivalent of $7,391.7 million of instruments that yield market-related rates of valued at end-of-period exchange rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

824 Industrial Production and Capacity Utilization Released, for publication on August 15 on total output; in July, production of both autos and trucks fell sharply. Excluding motor vehi- Industrial production was unchanged in July af- cles, industrial output rose 0.2 percent last ter having increased 0.4 percent in June. Capac- month, about the same rate of growth that has ity utilization declined 0.2 percentage point in been evident so far this year. Over the twelve July to 83.4 percent. months ending in July, total industrial production Swings in production of motor vehicles during rose 1.9 percent to 109.9 percent of its 1987 the past few months have had a noticeable effect annual average. Industrial production indexes Twelve -month percent change Twelve-month percent change Capacity and industrial production Ratio scale, 1987 production = 100 Ratio scale, 1987 production = 100 —Manufacturing - Capacity _____—•— y/ Production 1 1 1 1 1 1 Percent of capacity Manufacturing Utilization 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, July. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

825 1987 = 100 Percentage change from preceding month Industrial production 1990 1990 Apr/ May' June' July1 Apr.' May' June' July1 Total index 108.8 109.4 109.9 109.9 -.1 Previous estimates 108.7 109.3 109.8 -.2 Major market groups Products, total 110.4 111.2 111.8 111.2 -.5 Consumer goods 107.2 107.4 108.1 107.7 .2 -.4 Business equipment.. 121.6 123.6 123.9 123.1 1.6 -.6 Construction supplies 106.4 105.5 105.5 104.3 -1.1 Materials 107.3 107.8 108.4 109.1 .7 Major industry groups Ma D n u u r f a a b c l t e u ring 110191..51 1 1 1 1 0 2 . . 3 6 1 1 1 1 0 3 . .0 6 1 1 1 1 0 2 . .6 6 - - . . 3 7 1. . 3 7 . . 3 4 - - . . 4 1 Nondurable 107.5 107.4 107.6 108.0 .3 -.1 .2 .3 Mining 102.9 102.6 102.6 103.7 1.8 -.3 .0 1.0 Utilities 106.7 107.0 109.1 108.6 .4 .3 1.9 -.4 Percent of capacity Capacity utilization 1989 1990 Average, Low, High, 1967-89 1982 1988-89 July Apr. May June Julyf Total industry 82.2 71.8 85.0 83.9 83.1 83.4 83.6 83.4 Manufacturing 81.5 70.0 85.1 83.6 82.5 82.8 82.9 82.6 Advanced processing 81.1 71.4 83.6 82.2 81.5 82.0 81.9 81.4 Primary processing .. 82.3 66.8 89.0 87.2 85.0 84.9 85.2 85.5 Mining 87.3 80.6 87.2 85.6 89.2 89.0 89.1 90.2 Utilities 86.8 76.2 92.3 85.0 84.5 84.7 86.2 85.7 r Revised, NOTE. Indexes are seasonally adjusted. p Preliminary. In market groups, reductions in output of materials, such as textiles, paper, chemicals, products in July were offset by increases in and parts for equipment and consumer duramaterials production. Output of durable con- bles, has also strengthened over the past few sumer goods fell in July, reflecting cutbacks in months. motor vehicles and appliances. Production of In industry groups, output in manufacturing nondurable consumer goods rose 0.3 percent, edged down 0.1 percent in July, bringing the with some pickup in clothing. Even with its July factory utilization rate down 0.3 percentage point rise, clothing output has declined more than 5 to 82.6 percent. Besides motor vehicles, output percent during the past year. Output of business also fell significantly in stone, clay, and glass equipment, excluding motor vehicles for busi- products, reflecting the weakness in the conness use, was unchanged in July as information struction industry. Production also declined in processing equipment fell but industrial equip- electrical machinery, with output of appliances ment rose. Production of construction supplies especially weak, and in nonelectrical machinery, continued its recent weakness, falling more than particularly information processing equipment. 1 percent in July. The rise in production of materials pushed the Output of materials posted another sizable operating rate for primary processing industries advance in July; the increases in June and July up 0.3 percentage point to 85.5 percent. Steel were led by sharp gains in basic metals, partic- production increased during June and July, with ularly steel. In addition, production of other the operating rate for iron and steel rising above Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

826 Federal Reserve Bulletin • October 1990 85 percent in July for the first time in more than operating rate for mining above 90 percent for the a year. first time since March 1982. Output from utilities A surge in mining output in July offset the small decreased 0.4 percent in July, with declines in declines in manufacturing and utilities production. both electric and gas utilities. Even so, the oper- Much of the increase in mining output reflected a ating rate for electric utilities, 91.7 percent, resharp rise in coal mining, bringing the overall mained well above its long-run average. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

827 Statements to the Congress Statement by John P. LaWare, Member, Board struction loans, while total assets of commerof Governors of the Federal Reserve System, cial banks grew at a much slower pace. By the before the Committee on Banking, Finance and end of the decade, real estate loans made up Urban Affairs, U.S. House of Representatives, about 23 percent of total bank assets compared August 9, 1990. with less than 15 percent at the end of 1980. Commercial property and construction loans I am pleased to be here on behalf of the Federal now account for roughly one-half of the $778 Reserve Board to discuss real estate lending by billion of total real estate loans held by comcommercial banks and its effects on their finan- mercial banks. cial condition. The committee is, I am sure, well States in which the energy sector was large, aware of the many problems that banks and other particularly Texas, Oklahoma, Colorado, and depository lenders have had with real estate Louisiana, were in the vanguard of the strong loans in the past five years or so and is under- real estate expansion of the early 1980s. These standably concerned about the prospects of strong economies stimulated sharp increases these problems continuing. In my comments I in construction of commercial and residential shall provide a brief overview of the trends and properties. Once under way, the construction developments of real estate lending over this boom maintained momentum even as the endecade and then discuss the evolution of con- ergy sector lost strength. This continued conditions in the real estate markets and the dimen- struction was encouraged by the substantial sions of the problems they have presented to optimism that prevailed in these Sun Belt states banks. I will also address some supervisory arising from their increases in population and considerations and the effects that recent ac- general income levels. tions by banks are having on the availability of The ready availability of credit bolstered this bank credit. process. Savings and loan associations in the region, seeking to overcome weak capital positions and deficient earnings, aggressively ex- COMMERCIAL REAL ESTATE LENDING tended credit for many projects. Commercial IN THE 1980S banks in the region were also active in real estate lending, as they sought to replace revenues pre- Real estate markets were generally robust over viously earned on loans to firms in energy and the decade of the 1980s. Growing demand pro- related sectors. Major banks from other areas of duced sizable increases in property values and the country and abroad also added to the supply prompted substantial growth in construction of of credit. new commercial and residential structures. Com- Other regions, as well, found real estate mercial banks, thrift institutions, insurance com- lending attractive areas for growth. Responding panies, and other major lenders, including for- to the general expansion in economic activity eign institutions, played important roles in this and the favorable tax laws embodied in the Tax process, providing funds for the construction and Reform Act of 1981, real estate markets gained sale of new properties and for the transfer of strength. From year-end 1980 to the end of ownership of existing properties at rising values. 1984, commercial real estate lending nationwide For the decade as a whole, real estate loans at grew at a rate roughly twice the pace of total all commercial banks almost tripled, reflecting a bank assets. By the mid-1980s when Southwest particularly sharp rise in commercial and con- real estate markets were beginning to slow, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

828 Federal Reserve Bulletin • October 1990 markets in most other parts of the country were denly. While there are no single or simple anstill growing at a brisk pace. Here again, the swers to these questions, several factors played general economic expansion and the willing- important roles. ness and ability of financial institutions, both domestic and foreign, to finance real estate Disintermediation. During the 1980s, U.S. projects on favorable terms played an important commercial banks—especially the larger ones— role. increasingly lost the business of their larger and By the end of the decade the pace of expan- stronger commercial borrowers to the commersion had slowed. In the past few years, the cial paper and securities markets. In the Southsupply of real estate has exceeded demand, west, as previously noted, this loss was comwith consequent effects on vacancy rates, prop- pounded when demands by energy-related firms erty values, and rental rates. To date, these dropped as oil prices started to come down. developments have been most pronounced in Generally, the proportion of bank loans to the New England region, although weak market commercial and industrial (C&I) borrowers deconditions exist along much of the East Coast clined over the decade, relative to other bank as demonstrated by high and rising office va- assets. During the last five years of the 1980s, for cancy rates. Market conditions in some mid- example, these loans fell from 20 percent of western cities have also begun to show a assets to 17.6 percent, with the New York money marked loss of strength, and even the western center banks much more severely affected. Instates of California, Oregon, and Washington, creased real estate lending offered a way to offset long the beneficiaries of strong real estate mar- revenue losses in other parts of their loan portkets, have begun to report increased office folios and to bolster overall earnings. vacancy rates in at least some areas. These weakening market conditions are re- Increased Fee Income. Banks were also atflected in higher real estate losses for banks. tracted to real estate loans because of the sub- During 1989, real estate charge-offs at commer- stantial fee income they could earn on these cial banks rose 54 percent from the prior year to loans. Fees on real estate loans are typically almost $3 billion and totaled $1 billion in the higher than those on other types of corporate first quarter of this year alone. The Northeast credits, and before accounting standards (excluding the large New York City banks) has changed in 1988, many of these fees could be replaced the Southwest as the latest area of con- recorded "up-front," providing an immediate cern and accounted for almost one-half of the boost to earnings. In other cases, the fees proindustry's first-quarter real estate losses. Nonper- vided, besides immediate income, an ongoing forming real estate loans also continued to mount, source of revenues. increasing 37 percent last year and another 8 percent, to $32 billion, in the first quarter of this Strong Demand. Demand for residential strucyear. Nonperforming real estate loans now ac- tures and for additional office, retail, and induscount for nearly one-half of all nonperforming trial properties rose rapidly in various areas in loans held by U.S. commercial banks. the middle part of the decade. Office space in the early 1980s, for example, was far below that needed for the decade. Looking back to the 1970s, developers and many others, including REASONS FOR THE ROBUST REAL ESTATE lenders, had the view that inflation would work MARKETS to make almost all projects profitable. In the face of the relative shortage, developers moved deci- Given the problems that certain types of real sively to put in place added structures. Supply estate loans have caused and the risk they still soon began to catch up with demand, and during present, it is fair to ask why banks pursued this the last half of the decade 40 percent more office strategy and how some of the large real estate space was built than absorbed. loan problems seem to have surfaced so sud- Tax law treatment introduced with the 1981 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 829 law and kept in place until the reform of 1986 also enticed some companies to relocate from highcontributed to the building boom by subsidizing cost areas, further weakening real estate markets the cost of real property. Some analysts estimate that were already beginning to slow. Such a that before the new law more than half of the pattern may help cities like San Antonio and return to taxable investors came from tax bene- Houston revive, but only increases pressures on fits rather than from higher economic values. higher cost cities like Stamford, which already Increased demand from abroad for U.S. real has the nation's highest metropolitan area office estate holdings also supported property values vacancy rate at 30 percent. and helped to encourage new construction. The expanded investment powers for thrift institutions may also have changed the nature, as well as the level, of competition. Besides simply EFFECT OF STRONG LENDER COMPETITION increasing the supply of credit available for real ON CREDIT AVAILABILITY estate construction, these changes introduced AND LENDING TERMS new competitors that at least initially were inexperienced in commercial real estate lending and The perceived need to find new business, the unable to adequately evaluate the risks. Thrift ability to generate real estate loans, and the institutions holding equity interests had different appeal of larger fee income combined to encour- incentives than typical lenders and often focused age aggressive real estate lending. These factors, on the potential gains from their ownership roles plus generally overly optimistic market assess- and extended credits they might otherwise have ments, produced favorable borrowing conditions denied. As long as market conditions were favorfor developers. It also led, in many cases, to more able, these actions influenced market terms. liberal underwriting standards. Some banks failed The result of these developments has been to assess realistically the economic soundness of overbuilt real estate markets in which financial specific projects and cash flow projections. institutions have been forced to finance buildings Construction loans that historically had been beyond the time they originally envisioned, to made on the basis of preleased space and prear- accept significant concessions on rents, and to ranged permanent financing were now made face vacancy rates much higher than planned. In without those features and largely on the basis of these circumstances, the value of the banks's past relationships and on the appraised value of collateral—often only the real estate itself—has the underlying property. Borrower equity in been reevaluated on the basis of existing market projects was often minimal, and appraisals sup- conditions and has led to significant write-downs porting the loans were sometimes based on rev- of many loans. enue projections that did not materialize. With steady or, indeed, robust economic growth and rising real estate prices, lenders felt pressured to BANK SUPERVISION match "prevailing" market terms and unduly relied on the projected value of collateral as As bank supervisors, the Federal Reserve and protection against loss. Some expanded nation- the other federal and state banking agencies have wide, extending credit in markets in which they the responsibility to review the activities of filacked experience. nancial institutions and to enforce sound lending Many lenders also seem to have focused on the and operating procedures. Doing that requires strength of specific projects without giving ap- sufficient resources to attract and retain qualified propriate consideration of total market condi- personnel and the institutional will to enforce tions. Although the latest projects they were the standards set. The atmosphere of deregulafinancing may have been successful, many were tion in the early 1980s led to budgetary presso only because they drew tenants from existing sures at some agencies and, in some instances, buildings and related problems elsewhere. Office to less supervisory oversight. These effects gluts and generally lower operating costs in the were most severe regarding the supervision of Southwest and other regions of the country have thrift institutions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

830 Federal Reserve Bulletin • October 1990 Of course, adequate resources and resolve are Real estate loans are typically collateralized, at not all that we need. Even under ideal conditions, least in part, by the project being financed, and a concentrations in certain types of credits will current appraisal of the value of that property occur because of the process we have. Bank should be included in the file or otherwise availregulatory agencies generally try to minimize their able at the bank. The file should also include influence on credit allocation decisions and, as a information supporting the value of any other general rule, do not impose limits on the different collateral the borrower has provided. types of loans banks should make. We do, how- Examiners will criticize any loan for which ever, evaluate the policies and activities of indi- documentation is outdated or incomplete or for vidual banks but try to avoid substituting our which the borrower's ability to pay is otherwise credit judgments for theirs in lending decisions uncertain. Real estate appraisals should be based unless the need to intervene is clear. I would on current market conditions and should demonstress that we clearly recognize our role in pro- strate that the project is economically viable. tecting the federal safety net and minimizing risks Even current loans, or portions thereof, are that insured deposits present to taxpayers. Bal- subject to criticism if the current or likely cash ancing those concerns with the objective of avoid- flow provided by the project is insufficient to ing unnecessary interference in bank lending ac- service the loan fully. That may happen, for tivities is a constant challenge to bank example, if current payments are being made supervisors. from an interest reserve created from proceeds of This supervisory approach recognizes that the the bank loan and the assumptions on which the long-term interests of the economy are best loan was made no longer reflect market condiserved when lending decisions are made by pri- tions. Indeed, any appraisals that are not realistic vate institutions, not government agencies. As are ordinarily discounted and could lead the private institutions, their own capital is first at examiner to criticize the loan. risk, and they are more familiar with and better While examiners urge adherence to sound able to determine the credit needs of their custom- banking practices, there are practical limits to the ers than are bank examiners and other supervi- achievement of this objective. Maintaining diversory personnel. sification is a good case in point. To a greater or The Federal Reserve has long had the view that lesser extent, all financial institutions will be a strong supervisory process is built upon a pro- affected by local conditions that may broadly gram of frequent on-site examinations that, in affect their activities. With roughly one-quarter turn, is centered on an evaluation of asset quality. of U.S. bank assets devoted to financing real Accordingly, a key function of the examiners is to estate, local conditions will almost certainly afevaluate credits and ensure that banks reflect fect that part of their business. assets at appropriate values in their financial state- Many of the real estate losses that banks have ments. While we leave credit decisions to banks, recently experienced have been identified by rigthe effects of their decisions must be promptly and orous supervisory reviews, or of bank manageaccurately reflected so that management receives ment's preparation for one. Some banks have the information it needs to respond prudently. been hit hard by these examinations; others have Recently, there has been specific interest in the come through quite well. Most banks, though, are procedures that examiners use to evaluate real acknowledging that the real estate markets have estate credits. I would say a few words about changed and have reviewed and tightened their them. As with any loan, examiners first check to lending procedures. The effect is painful now, but it determine if the loan is current; that is, that the will be beneficial for the long term. It will also borrower has made all required payments. Ex- reduce the risk they present to the federal safety net. aminers will then review the credit file, which should include financial statements of the bor- AVAILABILITY OF BANK CREDIT rower, a description of relevant terms of the loan, and full documentation on any collateral or Under present conditions, the Federal Reserve guarantees that the bank holds to cover its risk. has been concerned that creditworthy borrowers Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 831 continue to have adequate access to bank credit one of them can then participate out its own and has monitored credit markets closely. In interest. that connection, the Chairman of the Federal In either form, a lead lender generally has the Reserve, along with the Chairman of the Fed- responsibility to administer the loan and to eral Deposit Insurance Corporation and the ensure that the other lenders receive sufficient Comptroller of the Currency, met in May with information to make independent credit decibank representatives to stress the importance to sions—both before the loan is brought and the economy of continued lending and to clarify throughout the period that it is outstanding. that supervisory actions are not intended to Indeed, other borrowers have the responsibility prevent new loans. to make independent decisions about the cred- In subsequent testimony Chairman Greenspan itworthiness of the borrower and should not and I both indicated that while lenders had rely solely on the representations of the seller. tightened their standards there did not appear to Typically, the sales agreements include provibe a broad-based squeeze on credit but noted sions that require participating lenders to attest that the Federal Reserve was monitoring the to having made such independent reviews. situation closely. More recently, evidence is building that conditions have become weaker. It is difficult to determine what part of the slowdown derives from higher credit standards CONCLUSION versus less loan demand. As the Chairman stated in his testimony of July 18, however, Unfortunately, real estate loans are only one of lending standards seem to have tightened too the significant risks that banks in this country much. The Federal Reserve has recently taken face. Loans to highly leveraged borrowers and to some steps to offset the effect of these tighter developing countries cannot be ignored. The lending standards. current slowdown in real estate markets will have a dampening effect on economic activity that will be felt unevenly nationwide. SYNDICATIONS The problems that financial institutions are experiencing at this time merely illustrate the Questions have been raised regarding the use of risks and uncertainties inherent in lending loan syndications in funding real estate assets. In funds. Strong bank management and an active this regard, it should be noted that banking and sound supervisory process will help preorganizations rarely syndicate real estate loans in vent many problems. Many others, however, the same sense as they do in other types of loans, will still exist. It is critical that banks have including highly leveraged transactions. Real es- sufficient equity capital to support the risks they tate loans involving more than one lender typi- take—both to ensure their own survival and to cally involve participations in which one lender protect the federal safety net. Ensuring adeoriginates the loan and sells or assigns parts of it quate bank capital is an important objective of to one or more institutions. In true syndications, supervision and remains an important priority several institutions originate the loan, and any of the Federal Reserve. • Statement by Henry Terrell, Senior Economist, Finance and Urban Affairs, U.S. House of Rep- Division of International Finance, Board of Gov- resentatives, August 2, 1990. ernors of the Federal Reserve System, before the Task Force on the International Competitiveness I appreciate the opportunity to appear before this of U.S. Financial Institutions, Subcommittee on Task Force on the International Competitiveness Financial Institutions Supervision, Regulation of U.S. Financial Institutions to discuss the and Insurance of the Committee on Banking, results of some of the research that my col- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

832 Federal Reserve Bulletin • October 1990 leagues and I have conducted on the activities of year-end 1980 through year-end 1989.1 During the U.S. agencies and branches of Japanese that nine-year period, the assets of these agenbanks. I want to stress that my statement is as a cies and branches increased fivefold. Besides research economist employed at the Federal Re- rapid growth of their balance sheet assets, in serve; my conclusions do not represent policy more recent years there has also been a rapid positions that have been endorsed by the Board. increase in the off-balance-sheet activities of U.S. agencies and branches of Japanese banks these institutions, as shown by the increase in the had total assets of about $360 billion as of year- amount of their standby letters of credit since end 1989, or about 10 percent of the assets of all 1985. Loans, totaling nearly $160 billion, constibanking institutions domiciled in the United tute the largest single asset item, with cash and States, and somewhat more than one-half of the due from banks, largely reflecting clearings and total assets of $580 billion of all U.S. agencies other interbank transactions, representing anand branches of foreign banks. Agencies and other $100 billion. branches of foreign banks are integral parts of Examining more detail on the loan portfolio of their parent banking organizations with lending the U.S. agencies and branches of Japanese limits based on the worldwide capital of their banks shows that commercial and industrial parent. Agencies differ from branches in that loans, largely to borrowers identified as U.S. their deposit-taking powers are more limited. residents, were $90 billion, with loans to financial While my remarks cover only the activities of the institutions of about $30 billion being the second agencies and branches of Japanese banks, as of largest loan category, again reflecting the imporyear-end 1989 U.S.-chartered banks that were tant interbank activities of these institutions. majority-owned by Japanese banks had an addi- Some of these commercial and industrial loans tional $60 billion in total assets. These subsidiary were originated by U.S. banks and were purbanks differ from the agencies and branches in chased by the Japanese agencies and branches, having lending limits based on their own capital including loans for highly leveraged financial and tend to be more heavily oriented toward restructurings. U.S. banks, of course, earned retail banking activities. fees on these transactions. In recent years Japa- I will suggest this morning that the growth of nese agencies and branches have expanded their the activities of the Japanese agencies and loans secured by real estate to about $20 billion, branches in the United States has, in large part, but our data sources do not permit a distinction been affected by economic and financial factors in these loans between loans for U.S. real estate in the United States and Japan. Until recently, (including loans financing Japanese purchases of restrictions on the ability of Japanese banks to U.S. real estate) or loans secured by real estate offer their domestic Japanese customers market- in other countries including Japan. Loans to determined interest rates on deposits appear to foreign governments constitute a small and dehave had the effect of inducing Japanese banks in clining share of total loans. Japanese banks the aggregate to shift some domestically oriented booked many of their loans to developing counbusiness to their U.S. offices because the low tries in the early 1980s at their U.S. offices and, regulated interest rates in Japan caused funding like banks from other countries, many of these difficulties, and Japanese banks actually relied on loans have been sold, written off, or repaid. their overseas branches for funds for use at their For data showing the major funding sources domestic offices. This fact suggests that Japanese for the U.S. offices of Japanese banks, interbank banks were not on balance borrowing low-cost transactions are reported on a net basis, with a funds in Japan and relending them in the United positive number for net liabilities indicating a net States at low rates. source of funds to the agencies and branches and Table 1, derived from the regular U.S. Call Report for the U.S. agencies and branches of foreign banks, reviews the growth of the major 1. The attachments to this statement are available on request from Publications Services, mail stop 138, Board of asset categories of the agencies and branches of Governors of the Federal Reserve System, Washington, D.C. Japanese banks in the nine-year period from 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 833 a negative number representing a net use of the "pulls" of opportunities in the domestic U.S. funds. This distinction is important to separate banking market as well as "pushes" from Japafunding sources from interbank trading activities nese economic variables. In the former case our that gross up both sides of balance sheets. The research found a statistical correlation between reporting of some important categories on a net faster economic growth in the United States and basis means that the totals will be less than the faster asset growth of the U.S. offices of Japaasset totals, which include interbank activities on nese banks. a gross basis. The largest single source of funds Our research also found a very strong relationfor the Japanese banks is net borrowing from ship between Japanese economic variables and banking offices in the United States of about $55 the asset growth of U.S. agencies and branches billion, with net borrowing from banks outside of Japanese banks. The important influence of the United States of about $25 billion being Japanese economic variables on the activities of another important source of funds. Deposits the U.S. agencies and branches of Japanese from nonbank U.S. and foreign sources banks was expected because of the heavy conamounted to only about $35 billion, equivalent to centration of Japanese risk in their asset portfoonly about one-fourth of their total loans to lios. As of year-end 1989, about one-third of the nonbank parties. total assets of U.S. agencies and branches of Data on funding relations between the U.S. Japanese banks were direct claims on residents agencies and branches of Japanese banks and of Japan. However, when the country risk of the their related offices outside the United States portfolio is reallocated to the country of the show that, on balance, as of year-end 1989, U.S. ultimate obligor, rather than to the country of the agencies and branches of Japanese banks were nominal borrower, the share of Japan risk in the receiving about $25 billion net from their related portfolio of the agencies and branches of the offices outside the United States. However, that Japanese banks increases to about two-thirds. $25 billion in funding from related offices was This reallocation of risk occurs primarily in two accounted for by nearly $60 billion in net liabili- ways: First, a large proportion of Japanese bank ties to related offices outside Japan, largely in lending in the United States to nonbank borrowoffshore centers and in London, and a net claims ers is to U.S. affiliates of Japanese companies; position of almost $35 billion with their parent and second, a significant amount of the large bank in Japan. Stated slightly differently, the interbank activities of Japanese banks in the U.S. agencies and branches of Japanese banks United States is with other Japanese banks. borrowed (net) about $60 billion from their re- In our work two principal domestic Japanese lated offices in non-Japanese markets, retained variables were found to be important determiabout $25 billion for use in their U.S. business, nants of the U.S. activities of Japanese banks: and onlent the remaining $35 billion to their (1) the aggregate level of Japanese international parent bank in Japan. Since the source of funding trade, measured as the sum of Japanese exports to the offshore branches of Japanese banks is plus Japanese imports, and (2) the degree of largely the Eurodollar market, including the is- restraint on interest rates in the domestic Japasuance of Eurodollar CDs, these net borrowings nese banking market. The impact of internaby U.S. agencies and branches of Japanese tional trade is rather straightforward; a large banks from their related offices would appear to proportion of all Japanese international trade is represent a market-based source of funding for financed in U.S. dollars at the U.S. offices of both their U.S. office lending and their home Japanese banks. The degree of restraint on country activities. banking in Japan captures the extent to which Having briefly described the activities of these domestic Japanese restraints on the payment of institutions, it is useful to try to analyze the competitive rates of interest on bank deposits factors over time that have motivated Japanese have provided incentives for Japanese banks to banks to expand their U.S. activities rapidly shift banking business that might otherwise during this past decade. In our statistical re- have been conducted in Japan to offshore (nonsearch we used an approach that considered both Japanese) centers. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

834 Federal Reserve Bulletin • October 1990 The impact of restraints on banks' ability to from their offshore branches, located in London pay full market interest rates on deposits can be as well as in other offshore centers, to suppletwofold. First, to the extent that banks are able ment their domestic deposit sources. to obtain funds at lower interest rates than oth- During most of the 1980s there has been a erwise in the regulated market, their overall cost correspondence between the excess of loans of funding will be reduced, and the banks will over deposits at banking offices in Japan and net enjoy a competitive advantage if they are able to borrowings by domestic offices of Japanese lend these low-cost funds at market-determined banks from their foreign branches. The correrates. Since lending rates in Japan have not been spondence is only approximate and not perfect, fully market determined, some of the subsidy of since other asset items, such as securities, and low-cost deposits was passed through to local other sources of funds, such as borrowings in Japanese borrowers and did not accrue to the interbank markets or from the Bank of Japan, banks. A second, and offsetting, effect of re- can balance the difference between bank deposits straints on interest rates on deposits is that, from and loans. the point of view of investors, regulated deposits At year-end 1987, the net liabilities of domestic at banks carry inferior returns relative to unreg- offices of Japanese banks to their foreign ulated financial instruments offered by other in- branches peaked at slightly more than $130 biltermediaries, including insurance companies, lion, which was roughly equal to the difference and pension funds, as well as deposits offshore between loans and deposits at the domestic ofand other foreign financial investments. To the fices of Japanese banks. In the two-year period extent that investors elect to place their funds since year-end 1987 there have been several with other intermediaries offering higher yields, liberalizations of the restraints on interest rates banks will actually suffer a competitive loss of payable in the domestic Japanese market, which business. have increased the share of bank deposits with Restraints on interest rates that Japanese unregulated rates. Moreover, there have also banks were permitted to pay appear to have been improvements in the competitiveness of the affected their ability to fund their domestic loan interbank call money market in Japan in which portfolio in the Japanese domestic deposit mar- auction rates are more freely quoted. In this ket during a period when investors were being two-year period of liberalization of domestic offered increasingly attractive alternatives to do- interest rates, both net borrowings by Japanese mestic bank deposits. At year-end 1982, deposits banks from their foreign branches and the excess at Japanese banks' domestic offices exceeded of domestic office loans over deposits have detheir total loans. During the subsequent five clined. years, through year-end 1987, interest rates that In summary, during the 1980s, the evidence banks in Japan were permitted to offer lagged does not suggest that the growth of Japanese behind market clearing rates. Correspondingly, banks in the United States was financed by growth of deposits at banks in Japan lagged low-cost deposits raised in their home market. behind the growth of demand for loans at Japa- While lower-cost domestic office funding may, to nese banks' home offices. some extent, have aided the profitability of Jap- Japanese banks appear to have responded to anese banks in their domestic business, the imthis excess of loan demand above their ability to pact of the regulated interest rates for banks in acquire deposits at their offices in Japan in two Japan in this period appears to have provided ways. Their first response appears to have been incentives to Japanese banks to shift some of to use their offshore offices, including their of- their lending and interbank business, including fices in the United States, to book some of the transactions with Japan-based entities, to the loans that otherwise would have been booked at United States, because of regulations on interest the banks' domestic offices but which the domes- paid on deposits. The U.S. activities of agencies tic offices were unable to fund because of the and branches of Japanese banks are, in fact, restraints on deposit interest rates. Their second largely funded by large net interbank borrowings response appears to have been to use borrowings in the United States and abroad, and by advances Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 835 from their related offices in London and in other relatively low profit margins and could be candioffshore centers, neither of which is a low-cost dates for restructuring. source of funding. Third, recent research suggests that the largest Having discussed the factors that appear until Japanese corporations are increasingly choosing now to have motivated Japanese banks to expand to finance themselves through capital market their U.S. activities, it may be useful to note issues, and, thus, are becoming less reliant on several potential factors that might influence the their main banks for funding. This shift in Japafuture growth of their activities in the United nese corporate funding patterns is similar to what States. has happened in the United States, which re- First, the continued deregulation of interest sulted in some reduction in bank intermediation rates in the Japanese domestic banking system and slowed the growth of U.S. banks; it could should make it more efficient for Japanese banks affect Japanese banks, including growth in lendto conduct a greater proportion of their domestic ing at their U.S. offices because, in the past, large banking business, including interbank trading, in Japanese companies have been major borrowers Japan. from the U.S. offices of Japanese banks. Second, under pressure to meet the capital Fourth, the market for consumer banking in standards of the Bank for International Settle- Japan, including credit cards and other types of ments, Japanese banks may decide to reorient consumer loans, has been relatively underdeveltheir business practices away from growth oped, and some Japanese banks may choose to toward higher profitability to attract capital. redirect their growth toward this relatively higher Some of their U.S. activities reportedly carry margin activity. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

836 Announcements PROPOSED ACTION CHANGE IN BOARD STAFF The Federal Reserve Board issued for public The Board of Governors announced on Septemcomment on August 30, 1990, a proposal to ber 5, 1990, the appointment of Diane E. revise the Board's Regulation Y to permit bank Werneke to the official staff as Special Assistant holding companies to provide financial advisory to the Board for Congressional Liaison. services to financial and nonfinancial institutions Ms. Werneke came to the Board in August and high net worth individuals and to offer in- 1987 as Congressional Liaison Assistant. Before vestment advice and securities brokerage activi- that, she was an economist with the House ties on a combined basis. Comment is requested Budget Committee. She has a master's degree in by October 22, 1990. economics from George Washington University. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

837 Record of Policy Actions of the Federal Open Market Committee MEETING HELD ON JULY 2-3, 1990 had firmed as notable gains were recorded in the production of aircraft and information-pro- Domestic Policy Directive cessing equipment, and the output of other business equipment retraced a decline that had oc- The information reviewed at this meeting sug- curred in the second half of last year. Recent data gested that economic activity was continuing to on orders for durable goods appeared to be expand but at a relatively slow pace. Final de- consistent with a further modest rise in manufacmands seemed sluggish; while exports had in- turing activity in coming months. Total industrial creased further, consumer expenditures had capacity utilization edged higher in May to nearly been flat and notable weakness was evident in its level at the end of 1989; in manufacturing, new housing and nonresidential structures. Over- operating rates had changed little on balance this all increases in business inventories appeared to year as gains in factory output had about have been moderate, even though the production matched the expansion of capacity. of goods had picked up. The unemployment rate Real personal consumption expenditures in had remained in a relatively low range despite April and May were little changed on balance limited growth in employment. An unwinding in from their level in the first quarter. Expenditures recent months of the earlier jump in the prices of for non-energy services rose more slowly in food and energy had damped the rise in producer May, extending the pattern of smaller increases and consumer prices, but the latest data on that had been registered on balance this year. wages suggested continued pressure on costs. Outlays for motor vehicles declined, and spend- Total nonfarm payroll employment rose mod- ing for goods other than motor vehicles fell for erately in May after a small decline in April. Job the third straight month. Housing starts were gains in services were muted over the two about unchanged in May after a substantial demonths, following strong increases earlier; fac- cline in April. The average level of starts in the tory employment continued to ebb; and con- April-May period was substantially below the struction payrolls, after surging during unseason- first-quarter pace. This recent drop in starts ably mild winter weather, slipped below their evidently reflected in part a retracing of the level of last fall. Nonfarm payroll employment earlier surge in residential construction associhad grown relatively slowly on average since ated with mild winter weather, but higher mort- February, and hiring by the Census Bureau had gage rates and some tightening of credit availabilaccounted for all of the increase. Despite the ity to builders also appeared to exert a sluggish expansion of employment in recent constraining effect. months, the civilian unemployment rate was 5.3 Business capital spending appeared to have percent in May and had remained near that level slackened in recent months. After a pickup in the for more than a year. first quarter that was paced by strong purchases Industrial production increased substantially of office and computing equipment, outlays for in May, largely reflecting a rebound in the man- nondefense capital goods slowed in April and ufacture of motor vehicles, and the April level of May, with notable weakness evident in puractivity was revised upward. Production of con- chases of nonelectrical equipment. Other than sumer goods had been relatively sluggish thus far for aircraft and computers, new orders for nonin 1990; however, output of business equipment defense capital goods had advanced little on Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

838 Federal Reserve Bulletin • October 1990 balance this year. Following the sizable gain 1989 pace. Over the April-May period, prices of earlier in the year associated with unseasonably nonfood, non-energy goods were little changed mild weather, nonresidential construction activ- while prices of non-energy services rose less ity slowed on average in March and April. Con- rapidly than earlier in the year. Average hourly struction of office and other commercial build- earnings rose further in May, with large increases ings was especially weak in the March-April recorded in construction and in overtime in manperiod, and permits and other indicators of future ufacturing. The latest data on total employer activity suggested continued softness. At manu- costs for compensation indicated that labor costs facturing and trade establishments, inventories had increased more rapidly in the twelve months increased somewhat in April after a decline in the ended in March than in the year-earlier period. first quarter associated with a sharp paring of At its meeting on May 15, 1990, the Committee stocks of automobiles. In the manufacturing and adopted a directive that called for maintaining wholesale sectors, inventory-to-shipments ratios the existing degree of pressure on reserve posiwere down in April from year-end levels and tions and that did not include any presumption were around the middle of the ranges prevailing regarding the likely direction of any intermeeting in 1989. Among retailers of goods other than policy adjustments. In considering the possible automobiles, recent increases in inventories in need for such adjustments, the Committee conjunction with sluggish consumer spending agreed that primary weight would continue to be had led to a reversal of an earlier decline in given to developments bearing on the inflation inventory-sales ratios. outlook; accordingly, the directive indicated that The nominal U.S. merchandise trade deficit slightly more or less pressure on reserve posinarrowed further in April from its reduced aver- tions would be appropriate during the period age rate for the first quarter. Both imports and ahead depending on progress toward price stabilexports fell, partly as a result of less trade in ity, the strength of the business expansion, the automotive products with Canada. The value of behavior of the monetary aggregates, and develoil imports also declined in April as oil prices opments in foreign exchange and domestic finanmoved lower and the volume of imports slack- cial markets. Unchanged reserve conditions ened after surging earlier in the year. In April, were expected to be consistent with somewhat the value of exports retraced part of its sharp slower monetary expansion in the second quarter March rise but nonetheless remained at a higher than had been anticipated at the time of the rate than in the first quarter. Measures of eco- March meeting, including growth of M2 and M3 nomic activity in the major foreign industrial at annual rates of about 4 and 3 percent respecnations indicated some pickup in growth in the tively over the period from March through June. first quarter. Expansion was especially strong in Open market operations in the interval since Germany and Japan, but preliminary data for the May 15 meeting were directed at maintaining these two countries for the early part of the unchanged reserve conditions. Adjustment plus second quarter suggested a return to more modseasonal borrowing averaged nearly $600 million erate growth. Inflation in the foreign industrial over the three complete reserve maintenance countries remained little changed on average periods in the intermeeting interval, well above recently. the level registered in the maintenance period Producer prices of finished goods were un- that ended just after the May meeting. Much of changed on balance over April and May as the sharp rise in borrowing reflected the continenergy prices declined and food prices registered ued upswing in seasonal borrowing, for which no net change. The rate of increase for goods several technical adjustments were made to asother than food and energy items was held down sumed levels of borrowing, and a funding need at by manufacturers' discounts for motor vehicles. a large bank experiencing a temporary opera- Partly because of declines in food and energy tional problem over a long holiday weekend. The prices, consumer prices rose more slowly in federal funds rate stayed close to SV4 percent April and May; however, the average rate of over the intermeeting period, and other shortincrease thus far this year remained above the term market rates changed little from their mid- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 839 May levels. In long-term debt markets, interest In the Committee's discussion of the economic rates declined somewhat on balance as markets situation and outlook, the members generally responded to evidence of some slowing in the saw sustained but subdued growth in economic economy and to indications that the chances for activity as a reasonable expectation for the next substantial reductions in federal budget deficits several quarters. While business conditions were had improved. These factors also contributed to relatively depressed in some sectors of the econa decline on balance over the intermeeting inter- omy and parts of the country, business activity val in the trade-weighted value of the dollar in was better maintained in other areas, and the terms of the other G-10 currencies. economy as a whole gave no current indications Both M2 and M3 declined in May; available of slipping into a recession. Many members data suggested a partial rebound in June for M2 commented, however, that the risks appeared to and little change in M3. The continuing contrac- be weighted in the direction of a weaker-thantion of deposits at thrift institutions that was projected economic performance, especially in resulting from the restructuring of the thrift indus- the context of changing conditions in credit martry was one of the factors damping the growth of kets stemming from the financial difficulties of M2 and especially of M3. Through June, expan- many borrowers and lending institutions. With sion of M2 was estimated to be in the lower regard to the outlook for inflation, increases in portion of its range for 1990, and growth of M3 key price measures had moderated since earlier somewhat below its range for the year. Growth of in the year, but there was little evidence of total domestic nonfinancial debt appeared to have significant change in the trend rate of inflation. been at the midpoint of its monitoring range. Nonetheless, the members generally remained confident that some progress would begin to be The staff projection prepared for this meeting made in reducing the underlying rate of inflation suggested that the economy would expand over during the period ahead, given their expectations the remainder of 1990 at around the rate estiof diminished pressures on labor and capital mated for the first half of the year and at a slightly resources. Some also emphasized that the modfaster pace in 1991. Consumer demand was proerate rate of money growth experienced this jected to pick up a bit after a weak second year, and indeed for an extended period, was quarter, with spending on services expected to indicative of a sustained period of monetary continue increasing moderately and outlays for restraint that eventually should produce a lower goods to rebound somewhat. Business capital rate of inflation. spending was projected to strengthen a little; however, the extent of the bounceback would be In conformance with the usual practice at constrained by low profit margins associated meetings when the Committee considers its longwith relatively slow growth in final demands and run objectives for growth of the monetary and reduced levels of capacity utilization along with debt aggregates, the members of the Committee weakness in nonresidential construction activity and the Federal Reserve Bank presidents not arising from the overbuilt condition of many currently serving as members provided individcommercial real estate markets around the coun- ual projections of growth in real and nominal try and greater caution on the part of lenders. GNP, the rate of unemployment, and the rate of The pace of homebuilding was expected to re- inflation for 1990 and 1991. These forecasts took main low, damped by slow growth in household account of the Committee's policy of continuing incomes and relatively high borrowing costs. moderate restraint on aggregate demand to con- Exports of goods and services were projected to strain inflationary pressures over time. With reincrease substantially but to be accompanied by gard to growth of real GNP, the projections had an acceleration of imports. Moderate restraint on central tendencies of Wi to 2 percent for 1990 as expenditures at all levels of government was a whole and PA to 2Vi percent for 1991. Foreassumed. Price inflation was expected to ease casts of nominal GNP converged on growth rates somewhat further, following the bulge earlier in of 5 !/2 to 61/2 percent for 1990 and 5'A to 6»/> the year, but little improvement was anticipated percent for 1991. With output expanding below in the underlying trend of inflation. potential, the members anticipated that unem- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

840 Federal Reserve Bulletin • October 1990 ployment would edge up to rates centering however, final demands, including demands from around 5!/2 to 53A percent in the fourth quarter of abroad, appeared likely to support only sluggish 1990 and 51/2 to 6 percent in the fourth quarter of gains in the goods-producing sectors of the econ- 1991. Some easing of pressures on resources omy, and the service industries were likely to would help to damp inflation slightly by 1991. For continue to account for much of the anticipated the consumer price index, the projections had increases in output and employment. central tendencies of 41/2 to 5 percent for 1990 There also was discussion of two special facand 33/4 to 4V2 percent for 1991. tors that added to the uncertainties bearing on Turning to the prospects for individual sectors the economic outlook. One related to the unof the economy, members commented that, with known timing and extent of a possible reduction the possible exception of exports, none appeared in the federal budget deficit that the members likely to provide appreciable impetus to the ex- hoped would emerge from current discussions pansion over the forecast period. Retail sales between congressional and Administration offiwere weak in many parts of the country; and cials. Another was the uncertain degree to which there were indications of some decline in con- lenders had cut back on the availability of credit sumer confidence that seemed to be associated to creditworthy borrowers. The members continwith concerns about weakening real estate values ued to hear numerous reports that some busiin many parts of the country, reduced employ- nesses were finding it more difficult to obtain ment opportunities, and persistent reports of credit from banks, notably builders in many financial problems in the economy. In the cir- areas but also other businesses, including auto cumstances, growth in consumer spending was dealers, in some parts of the country. On the expected to remain relatively sluggish, and while basis of still fragmentary information, reduced retail sales might well pick up from their recently credit availability appeared to have had some, depressed levels, there was considerable uncer- but quite limited, effects on the economy. Howtainty regarding the outlook for expenditures for ever, a tightening of credit standards could affect motor vehicles and other consumer durables. credit flows and spending with a lag; and, in Construction activity was being inhibited in addition, there was some concern that the trend many areas by an overhang of excess capacity, to greater restraint in the provision of credit notably in commercial real estate but also in might continue. housing, and to some extent by the difficulties With regard to the outlook for prices and being experienced by builders in securing fi- wages, the apparent lack of progress in reducing nancing. Some members expressed concern that the underlying rate of inflation was a major building activity might weaken further, and in source of disappointment, but the members conany event this sector of the economy was be- tinued to anticipate some deceleration in the core lieved likely to remain depressed over the fore- rate of inflation during the year ahead. Among cast horizon. At the same time, the outlook for the favorable portents were the impact of the spending on capital equipment appeared to be softness in house prices on inflation attitudes, the somewhat more promising, at least for the near still highly competitive conditions in many marterm, judging from the recent pattern of new kets for goods, the related emphasis on costorders, order backlogs, and reports from indus- cutting efforts by businesses to compensate for try contacts. In addition, business inventories their difficulty or inability to raise prices, and appeared to be at acceptable levels in most some evidence that wage inflation was no longer industries and, unlike the experience in earlier worsening. Of particular significance in the view business cycles, seemed to be providing an ele- of some members was the relatively restrained ment of stability in a period of adjustments in monetary growth over the last few years associmajor industries such as motor vehicles and ated with a policy that had been resisting inflaconstruction. In the view of many members, the tion. This policy was likely to damp inflation over outlook was favorable for further sizable in- time; moreover, as the public's perceptions of creases in exports that would help to support the System's anti-inflationary stance became U.S. production and employment. On balance, more firmly held, progress in reducing inflation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 841 would tend to accelerate. On the unfavorable bank and thrift funding sources, but also were side, persisting inflation pressures in many ser- affecting M2. Such developments had few if any vice industries and relatively tight labor markets precedents, and there was substantial uncerin some areas remained a source of concern. tainty about their duration and effects on the Moreover, as evidenced by recent increases in economy. the prices of motor vehicles despite weak sales, Against this background, most of the members inflation psychology still was a serious problem were in favor of reaffirming the ranges for M2 and in at least some segments of the business com- nonfinancial debt for 1990 that the Committee munity. had established at its February meeting, while In keeping with the requirements of the Full others indicated a preference for reducing the Employment and Balanced Growth Act of 1978 range for M2. Members who preferred to main- (the Humphrey-Hawkins Act), the Committee at tain the current ranges pointed out that the this meeting reviewed the ranges for growth in expansion of these aggregates was within their the monetary and debt aggregates that it had respective ranges in the first half of the year, established in February for 1990 and decided on though toward the lower end of the range in the tentative ranges for growth of those aggregates in case of M2. With regard to the latter, it was 1991. The current ranges for the period from the suggested that the 4-percentage-point width of fourth quarter of 1989 to the fourth quarter of the current range should be enough to encompass 1990 included expansion of 3 to 7 percent for M2 likely and desirable outcomes for the year. Sevand 2Vi to 6I/2 percent for M3. The monitoring eral members also commented that, as a general range for growth of total domestic nonfinancial rule, they preferred not to adjust current ranges debt had been set at 5 to 9 percent. at midyear, in part to avoid conveying an impression of unwarranted precision—particularly if the In its consideration of the ranges for 1990 and adjustments were relatively small—or of changes 1991, the Committee took account of the much being made simply to reflect the actual data. A slower-than-anticipated expansion of M2 and M3 shortfall from the current ranges should be kept in the first half of the year and the possible under careful scrutiny to judge whether policy implications for spending and prices. To a large was indeed tighter than intended or desired. If extent, the weakness in monetary growth was ultimately the Committee elected to tolerate a associated with a redirection of credit flows away shortfall from the current ranges, it would accept from depository institutions to market channels, the useful discipline of explaining the reasons for and total borrowing by domestic nonfinancial the deviations in its reports to the Congress. sectors did not moderate appreciably in the first Members also noted that the reasons for the half of 1990 from the pace of 1989. Much of the shortfall in M2 were not entirely understood, and slower growth in lending by depository instituin the circumstances a downward adjustment to tions in turn reflected continued shrinkage of the the range might not be appropriate in terms of savings and loan industry—to an important exfurthering the Committee's basic objectives for tent because of a step-up in government assumpthe economy. Those who favored a lower range tion of thrift assets by the Resolution Trust for M2 observed that, despite the uncertainties Corporation (RTC) and related transfers of dethat were involved, enough was known to sugposits and assets to commercial banks. Expangest that velocity had increased for technical sion of commercial bank credit had remained reasons and that M2 growth lower than previmoderate, reflecting pressures on bank capital ously contemplated would be consistent with the positions and bank concerns about the credit Committee's objectives. One member also indiquality of borrowers. The members generally cated that a lower range would coincide with a anticipated that these special factors would concontinuing preference, first expressed in Februtinue to depress the growth of M2 and M3 in the ary, for a range that in this view appeared to be second half of this year and in 1991, though more consistent with the Committee's long-run, perhaps to a lesser extent next year. These anti-inflation strategy. factors were exerting their largest and most direct influence on M3, which includes the bulk of With regard to the 1990 range for M3, a major- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

842 Federal Reserve Bulletin • October 1990 ity of the members favored some reduction, Taking account of the unexpectedly strong M3 velocthough there were differences with regard to the ity, the Committee decided to reduce the 1990 range to precise amount. A lower range was deemed to be 1 to 5 percent. warranted by the strong indications that M3 Votes for this action: Messrs. Greenspan, Corgrowth would fall below its current range for the rigan, Angell, Boehne, Boykin, Hoskins, Kelley, year to an important extent because of continu- LaWare, Mullins, and Stern. Vote against this ing RTC activity in resolving insolvent thrift action: Ms. Seger. Absent and not voting: Mr. institutions. While the Committee had antici- Johnson. pated some slowing in M3 growth and had reduced the M3 range in February, the shortfall in Ms. Seger dissented because she wanted to the first half of the year was considerably greater reaffirm the existing range for M3 as well as those than expected. It represented mostly a restruc- for M2 and nonfinancial debt. In her view, the turing of credit flows rather than an overall shortfall in M3 growth reflected not only technireduction in credit availability, though there cal factors, related in large part to the ongoing were signs of some tightening of credit terms. In restructuring of the savings and loan industry, the circumstances, a lower range would be a but an undesirable tightening in the availability of technical adjustment and would not be indicative credit. In the circumstances, she was concerned of added restraint in overall credit availability or that tolerating M3 growth at a rate near the lower an intention by the Committee to increase the end of the 1 to 5 percent range would be associdegree of monetary restraint. A few members ated with credit conditions that presented too expressed reservations about lowering the M3 great a risk to the current economic expansion. range, or at least lowering it substantially, in part Turning to the provisional ranges for 1991, a because a higher range might be needed in later majority of the members argued for some reducyears when special factors were no longer de- tion in the ranges for M2 and nonfinancial debt, pressing the growth of this aggregate. In this and most favored a relatively low range for M3. view, to avoid potential misinterpretation of the Reductions in the ranges for M2 and debt would Committee's policy, the ranges should not be serve to implement the Committee's strategy of moved up and down to fit special circumstances; gradually lowering the ranges to levels that were instead, they should be reduced steadily but consistent with its long-run goals. Additionally, a gradually to levels that were consistent with the lower range for M2 seemed appropriate in light of Committee's long-run objective of sustainable, the prospect that the velocity of this aggregate, noninflationary economic growth. which like that of M3 had risen to an unexpected extent this year, might rise somewhat further in At the conclusion of this discussion, the Com- 1991 in conjunction with the ongoing restructurmittee voted to reaffirm the 1990 ranges that it ing of thrift institutions. In the view of many had established in February for growth of M2 and members, a reduction in the range for M2 also nonfinancial debt and to lower the 1990 range for was desirable because it would underscore the M3 by IV2 percentage points to 1 to 5 percent. Committee's commitment to an anti-inflationary The Committee approved the following statepolicy and by potentially enhancing the credibilment for inclusion in its domestic policy direcity of that policy possibly increase its effectivetive: ness. Several members indicated that while a small reduction in the M2 range was acceptable, The Committee reaffirmed at this meeting the range a greater reduction might imply tolerance of it had established in February for M2 growth of 3 to 7 slower monetary growth than would be consispercent, measured from the fourth quarter of 1989 to tent with sustained economic expansion. Morethe fourth quarter of 1990. The Committee also retained the monitoring range of 5 to 9 percent for the over, the M2 range already had been reduced year that it had set for growth of total domestic substantially over the past several years and was nonfinancial debt. With regard to M3, the Committee getting close to the level that might be desirable recognized that the ongoing restructuring of thrift over the long run. depository institutions had depressed its growth rela- Some members preferred not to change the tive to spending and total credit more than anticipated. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 843 1991 range for M2 at this meeting. They did not 6'/ percent for M2 and 1 to 5 percent for M3. The 2 disagree with the strategy of gradually reducing Committee tentatively set the associated monitoring range for growth of total domestic nonfinancial debt at the Committee's ranges over time, but they felt 4Vi to 8!/2 percent for 1991. The behavior of the that current uncertainties warranted approaching monetary aggregates will continue to be evaluated in any reduction with a special degree of caution. the light of progress toward price level stability, move- There was a possibility of a major shift in fiscal ments in their velocities, and developments in the policy, and ongoing changes in financial flows economy and financial markets. were affecting the relationship of the monetary aggregates to spending. By next February, the Votes for this action: Messrs. Greenspan, Corrigan, Angell, Boehne, Boykin, Hoskins, Kelley, Committee was likely to be in a much better Mullins, and Stern. Votes against this action: Ms. position to judge the implications of these factors Seger and Mr. LaWare. Absent and not voting: Mr. for the economy and appropriate money growth Johnson. as well as to have in clearer focus the usual factors bearing on the outlook for economic Mr. LaWare dissented because he preferred a activity and the financial system. somewhat lower range for M3 in 1991. He did not With regard to the range for M3, the factors view such a range as implying greater monetary that were tending to depress M3 growth relative restraint next year but as warranted by technical to income in 1990 could well persist through factors, notably the further shrinkage in prospect 1991. In these circumstances, a majority of the for the savings and loan industry, that pointed to members favored a range that was equal to or a further rise in the velocity of M3 and to little or lower than the revised range of 1 to 5 percent for no growth in this aggregate in 1991. Moreover, he 1990. Members who expressed a preference for believed that a further reduction in the M3 range some further reduction believed that a lower for next year would be more consistent with the range was more likely to encompass the actual lower ranges tentatively adopted for M2 and outcome and was consistent with the monetary- nonfinancial debt. policy restraint signaled by the reductions fa- Ms. Seger dissented because she wanted to vored by most members in the M2 and debt retain this year's ranges, at least tentatively, for ranges for 1991. Other members preferred not to 1991. She was not opposed to gradual reductions adopt a range that would accommodate essen- in the ranges over time, and she would be pretially no growth in M3, even if technical factors pared to make adjustments in February if intersuggested a relatively high probability of such an vening developments warranted. However, she outcome. In this view, such a range would be continued to believe that the inevitable uncerbelow the one likely to be warranted for the tainties in assessing the economic outlook over longer term and would therefore have to be an extended period of time argued for not changraised at some point, possibly even for 1991 ing the ranges at midyear but waiting until Febdepending on economic, financial, and fiscal pol- ruary. Such uncertainties loomed especially large icy developments prior to the Committee's re- at this time because of the possibility of a major view of the ranges early next year. adjustment in fiscal policy and the critical ques- At the conclusion of this discussion, the Com- tions that remained concerning the outlook for mittee approved provisional ranges for 1991 that credit conditions. involved reductions of Vi percentage point for In the Committee's discussion of policy imple- M2 and nonfinancial debt from the 1990 ranges mentation for the weeks ahead, all of the memand no further change in the M3 range from the bers supported a proposal to maintain unchanged reduced 1990 range. The Committee voted to conditions in reserve markets at least initially incorporate the following statement regarding the following this meeting, and a majority favored a 1991 ranges in its domestic policy directive: directive that could accommodate some slight easing of reserve conditions fairly soon unless incoming indicators suggested appreciably stron- For 1991, the Committee agreed on provisional ger monetary growth and greater inflationary ranges for monetary growth, measured from the fourth pressures than the members currently expected. quarter of 1990 to the fourth quarter of 1991, of 2Vi to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

844 Federal Reserve Bulletin • October 1990 The degree of monetary restraint sought by the sion, all of the members indicated that they Committee since late 1989 remained appropriate, favored or could accept a directive that called for but despite a steady policy course, credit condi- maintaining the existing degree of pressure on tions appeared to have tightened at least margin- reserve positions for at least a short period after ally in recent months. The evidence of such this meeting. Subsequently, some slight easing of tightening, while not conclusive, had become reserve conditions could be implemented unless more persuasive and was a source of increasing incoming data on the monetary aggregates and concern; the marked slowing in monetary growth the economy evidenced greater strength; bein the second quarter in particular suggested the cause of the minor firming that appeared to have possibility of more restraint than the Committee occurred in general credit conditions, such easintended. Nonetheless, in the view of nearly all ing in the availability of reserves would in effect the members, the persistence of inflation argued serve to maintain the overall degree of monetary for caution and against any adjustment that restraint that the Committee had sought to imwould have the effect of easing the overall thrust plement since late 1989. In keeping with this of policy unless incoming information on the approach to policy, the directive provided that monetary aggregates and the economy pointed to slightly greater reserve restraint might be accepta significantly weaker outlook for economic ac- able during the intermeeting period or somewhat tivity. lesser restraint would be acceptable depending The members who preferred not to bias the on progress toward price stability, the strength of Committee's directive toward a slight reduction the business expansion, the behavior of the monin the degree of reserve pressure believed that etary aggregates, and developments in foreign more evidence would be helpful to assess the exchange and domestic financial markets. The performance of the economy and the extent of reserve conditions contemplated at this meeting any inadvertent and inappropriate tightening in were expected to be consistent with growth of overall credit conditions. They emphasized that M2 and M3 at annual rates of 3 and 1 percent the persistence of inflationary pressures and the respectively over the three-month period from related need to maintain the credibility of the June to September. The intermeeting range for System's anti-inflationary policy warranted par- the federal funds rate, which provides one mechticular caution against any premature easing or anism for initiating consultation of the Commitany policy move that might be interpreted as tee when its boundaries are persistently exsuch. However, a number of these members ceeded, was left unchanged at 6 to 10 percent. acknowledged that they too were concerned by At the conclusion of the meeting, the following the very sluggish monetary growth in recent domestic policy directive was issued to the Fedmonths, at least to the extent that it could not be eral Reserve Bank of New York: explained by technical factors and might therefore be signaling a weaker economy or an inappropriately restrictive monetary policy. The information reviewed at this meeting suggests that economic activity is continuing to expand but at a According to a staff analysis prepared for this relatively slow pace. Total nonfarm payroll employmeeting, growth of M2 was likely to resume over ment has increased at a much reduced rate in recent the third quarter, but only to a pace that would months. Nevertheless, the civilian unemployment rate keep this aggregate near the lower end of the has remained in a narrow range for an extended period Committee's range for the year, assuming steady and was 5.3 percent in May. Industrial production increased substantially in May, largely reflecting a money market conditions and an economic perrebound in the manufacture of motor vehicles. Conformance in line with the members' expectations. sumer spending has been sluggish in recent months; The expansion of M3 was projected to remain outlays for goods have declined while expenditures for very sluggish as components of this aggregate services have increased at a slower pace. Business continued to respond to thrift industry and re- capital spending appears to have slackened a bit in the lated developments that had inhibited their spring after a pickup earlier in the year. Residential construction has fallen to a relatively low level in recent growth. months. The nominal U.S. merchandise trade deficit At the conclusion of the Committee's discus- narrowed in April from its average rate in the first Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Record of Policy Actions of the Federal Open Market Committee 845 quarter. Partly reflecting an unwinding of the earlier tive to spending and total credit more than anticipated. jump in prices of food and energy, consumer prices rose Taking account of the unexpectedly strong M3 velocat a slower rate in April and May, while producer prices ity, the Committee decided to reduce the 1990 range to were unchanged over the two months. The latest data 1 to 5 percent. For 1991, the Committee agreed on on wages suggest no improvement in underlying trends. provisional ranges for monetary growth, measured Short-term interest rates have changed little on from the fourth quarter of 1990 to the fourth quarter of balance since the Committee meeting on May 15, 1991, of 2Vi to 6V2 percent for M2 and 1 to 5 percent for while rates in long-term debt markets have declined M3. The Committee tentatively set the associated somewhat over the intermeeting period. The trade- monitoring range for growth of total domestic nonfiweighted foreign exchange value of the dollar in terms nancial debt at 4'/2 to 8V2 percent for 1991. The of the other G-10 currencies was somewhat higher behavior of the monetary aggregates will continue to over much of the period but declined late in the period be evaluated in the light of progress toward price level to a level slightly below that prevailing at the time of stability, movements in their velocities, and developthe May meeting. ments in the economy and financial markets. M2 and M3 declined in May; available data for June In the implementation of policy for the immediate suggest a partial rebound in M2 and little change in future, the Committee seeks to maintain the existing M3. Growth of M2 and especially of M3 has been degree of pressure on reserve positions. Taking acdamped by the continuing contraction of deposits of count of progress toward price stability, the strength thrift institutions resulting from the restructuring of of the business expansion, the behavior of the monethe thrift industry. Through June, expansion of M2 tary aggregates, and developments in foreign exchange was estimated to be in the lower portion of its range for and domestic financial markets, slightly greater re- 1990 and growth of M3 somewhat below its range for serve restraint might or somewhat lesser reserve rethe year. Expansion of total domestic nonfinancial straint would be acceptable in the intermeeting period. debt appears to have been at the midpoint of its The contemplated reserve conditions are expected to monitoring range. be consistent with growth of M2 and M3 over the The Federal Open Market Committee seeks mone- period from June through September at annual rates of tary and financial conditions that will foster price about 3 and 1 percent respectively. The Chairman may stability, promote growth in output on a sustainable call for Committee consultation if it appears to the basis, and contribute to an improved pattern of inter- Manager for Domestic Operations that reserve condinational transactions. In furtherance of these objec- tions during the period before the next meeting are tives the Committee reaffirmed at this meeting the likely to be associated with a federal funds rate perrange it had established in February for M2 growth of sistently outside a range of 6 to 10 percent. 3 to 7 percent, measured from the fourth quarter of 1989 to the fourth quarter of 1990. The Committee also retained the monitoring range of 5 to 9 percent for the Votes for the paragraph on short-run policy impleyear that it had set for growth of total domestic mentation: Messrs. Greenspan, Corrigan, Angell, nonfinancial debt. With regard to M3, the Committee Boehne, Boykin, Hoskins, Kelley, LaWare, Mullrecognized that the ongoing restructuring of thrift ins, Ms. Seger and Mr. Stern. Votes against this depository institutions had depressed its growth rela- action: None. Absent and not voting: Mr. Johnson. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

847 Legal Developments FINAL RULE—AMENDMENT TO REGULATIONS section 5155 of the Revised Statutes (12 U.S.C. 36) as HAND Y amended by the McFadden Act of 1927; and sections 1101-1122 of the Financial Institutions Reform, Re- The Board of Governors is amending 12 C.F.R. Parts covery and Enforcement Act of 1989 (12 U.S.C. 3310 208 and 225, its Regulations H and Y (Capital Ade- and 3331-3351). quacy Guidelines; Minimum Tier 1 Leverage Measure and Transition Capital Standards). On December 29, 2. Section 208.13 is revised to read as follows: 1989, the Board proposed for public comment transition capital guidelines to be applied through the end of Section 208.13—Capital adequacy. 1990, as well as guidelines for a new capital to total assets leverage ratio. The Board is now issuing in final The standards and guidelines by which the capital form transition capital standards and capital leverage adequacy of state member banks will be evaluated by guidelines that are substantially similar to those pro- the Board are set forth in Appendix A to Part 208 for posed. The standards the Board is adopting are mini- risk-based capital purposes, and, with respect to the mum requirements. Any institution experiencing or ratios relating capital to total assets, in Appendix B to anticipating significant growth would be expected to Part 208 and in Appendix B to the Board's Regulation maintain capital ratios, including tangible capital posi- Y, 12 C.F.R. Part 225. tions, well above the minimum levels. In all cases, banking institutions should hold capital commensurate Appendix A—[Amended] with the level and nature of all of the risks, including the volume and severity of problem loans, to which 3. Footnote 1 to "I. Overview" of Appendix A to Part they are exposed. 208 is revised to read as follows: Effective September 10, 1990, pursuant to the 1. Supervisory ratios that relate capital to total Board's authority under section 5(b) of the Bank assets for state member banks are outlined in Ap- Holding Company Act of 1956 (12 U.S.C. § 1844(b)), pendix B of this Part and in Appendix B to Part 225 and section 910 of the International Lending Supervi- of the Federal Reserve's Regulation Y, 12 C.F.R. sion Act of 1983 (12 U.S.C. § 3909), 12 C.F.R. Parts Part 225. 208 and 225 are amended as follows: 4. The last sentence of the first paragraph to "IV. Part 208—Membership of State Banking Minimum Supervisory Ratios and Standards" of Ap- Institutions in the Federal Reserve System pendix A to Part 208 is removed; the existing second paragraph now becomes the third paragraph and re- 1. The authority citation for Part 208 continues to read mains unchanged; and a new paragraph is added as follows: immediately following the first paragraph. The new second paragraph reads as follows: Authority: Sections 9, 11(a), 11(c), 19, 21, 25, and 25(a) Institutions with high or inordinate levels of risk are of the Federal Reserve Act, as amended (12 U.S.C. expected to operate well above minimum capital 321-338, 248(a), 248(c), 461, 481-486, 601, and 611, standards. Banks experiencing or anticipating signifrespectively); sections 4 and 13(j) of the Federal De- icant growth are also expected to maintain capital, posit Insurance Act, as amended (12 U.S.C. 1814 and including tangible capital positions, well above the 18230), respectively); section 7(a) of the International minimum levels. For example, most such institu- Banking Act of 1978 (12 U.S.C. 3105); sections 907- tions generally have operated at capital levels rang- 910 of the International Lending Supervision Act of ing from 100 to 200 basis points above the stated 1983 (12 U.S.C. 3906-3909); sections 2, 12(b), 12(g), minimums. Higher capital ratios could be required if 12(i), 15B(c)(5), 17, 17A, and 23 of the Securities warranted by the particular circumstances or risk Exchange Act of 1934 (15 U.S.C. 78b, 781(b), 781(g), profiles of individual banks. In all cases, banks 781(i), 78o-4(c)(5), 78q, 78q-l, and 78w, respectively); should hold capital commensurate with the level and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

848 Federal Reserve Bulletin • October 1990 nature of all of the risks, including the volume and risk exposure; excellent asset quality; high liquidity; severity of problem loans, to which they are ex- good earnings; and in general be considered a strong posed. banking organization, rated composite 1 under the CAMEL rating system of banks. Institutions not meet- 5. A second paragraph is added to "IV. B. Transition ing these characteristics, as well as institutions with Arrangements" of Appendix A to Part 208 to read as supervisory, financial, or operational weaknesses, are follows: expected to operate well above minimum capital stan- Through year-end 1990, banks have the option of dards. Institutions experiencing or anticipating signifcomplying with the minimum 7.25 percent year-end icant growth also are expected to maintain capital 1990 risk-based capital standard, in lieu of the min- ratios, including tangible capital positions, well above imum 5.5 percent primary and 6 percent total capital the minimum levels. For example, most such banks to total assets capital ratios set forth in Appendix B generally have operated at capital levels ranging from to Part 225 of the Federal Reserve's Regulation Y. 100 to 200 basis points above the stated minimums. In addition, as more fully set forth in Appendix B to Higher capital ratios could be required if warranted by this Part, banks are expected to maintain a minimum the particular circumstances or risk profiles of individratio of Tier 1 capital to total assets during this ual banks. Thus, for all but the most highly-rated transition period. banks meeting the conditions set forth above, the minimum Tier 1 leverage ratio is to be 3 percent plus 6. Appendix B is added after "Attachment VI.- Sum- an additional cushion of at least 100 to 200 basis mary" to Part 208 to read as set forth below. points. In all cases, banking institutions should hold capital commensurate with the level and nature of all Appendix B to Part 208: Capital Adequacy risks, including the volume and severity of problem Guidelines for State Member Banks: Tier 1 loans, to which they are exposed. Leverage Measure A bank's Tier 1 leverage ratio is calculated by dividing its Tier 1 capital (the numerator of the ratio) I. Overview by its average total consolidated assets (the denominator of the ratio). The ratio will also be calculated The Board of Governors of the Federal Reserve Sys- using period-end assets whenever necessary, on a tem has adopted a minimum ratio of Tier 1 capital to case-by-case basis. For the purpose of this leverage total assets to assist in the assessment of the capital ratio, the definition of Tier 1 capital for year-end 1992 adequacy of state member banks.1 The principal ob- as set forth in the risk-based capital guidelines conjective of this measure is to place a constraint on the tained in Appendix A of this Part will be used.2 maximum degree to which a state member bank can Average total consolidated assets are defined as the leverage its equity capital base. It is intended to be quarterly average total assets (defined net of the allowused as a supplement to the risk-based capital mea- ance for loan and lease losses) reported on the bank's sure. Reports of Condition and Income ("Call Report"), The guidelines apply to all state member banks on a less goodwill and any other intangible assets and consolidated basis and are to be used in the examina- investments in subsidiaries that the Federal Reserve tion and supervisory process as well as in the analysis determines should be deducted from Tier 1 capital.3 of applications acted upon by the Federal Reserve. Whenever appropriate, including when a bank is The Board will review the guidelines from time to time undertaking expansion, seeking to engage in new and will consider the need for possible adjustments in activities or otherwise facing unusual or abnormal light of any significant changes in the economy, finan- risks, the Board will continue to consider the level of cial markets, and banking practices. an individual bank's tangible Tier 1 leverage ratio (after deducting all intangibles) in making an overall II. The Tier 1 Leverage Ratio assessment of capital adequacy. This is consistent with the Federal Reserve's risk-based capital guide- The Board has established a minimum level of Tier 1 lines and long-standing Board policy and practice with capital to total assets of 3 percent. An institution operating at or near these levels is expected to have well-diversified risk, including no undue interest rate 2. At the end of 1992, Tier 1 capital for state member banks includes common equity, minority interests in equity accounts of consolidated subsidiaries, and qualifying noncumulative perpetual preferred stock, less goodwill. The Federal Reserve may exclude certain other intan- 1. Supervisory risk-based capital ratios that relate capital to gibles and investments in subsidiaries as appropriate. weighted risk assets for state member banks are outlined in Appendix 3. Deductions from Tier 1 capital and other adjustments are A to this Part. discussed more fully in section II.B. of Appendix A to this Part. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 849 regard to leverage guidelines. Banks experiencing Appendix B of this Part. In addition, as more fully growth, whether internally or by acquisition, are ex- set forth in Appendix D to this Part, banking orgapected to maintain strong capital positions substan- nizations are expected to maintain a minimum ratio tially above minimum supervisory levels, without sig- of Tier 1 capital to total assets during this transition nificant reliance on intangible assets. period. Part 225—Bank Holding Companies and Appendix B—[Amended] Change in Bank Control 5. Three new sentences are added to the end of the first 1. The authority citation for Part 225 continues to read paragraph of Appendix B to Part 225 to read as as follows: follows: * * * In this regard, the Board has determined that Authority. 12 U.S.C. 1817(j)(13), 1818, 1831i, during the transition period through year-end 1990 1843(c)(8), 1844(b), 3106, 3108, 3907, 3909, 3310, and for implementation of the risk-based capital guide- 3331-3351. lines contained in Appendix A to this Part and in Appendix A to Part 208, a banking organization may Appendix A—[Amended] choose to fulfill the requirements of the guidelines relating capital to total assets contained in this 2. Footnote 1 to "I. Overview" of Appendix A to Part Appendix in one of two manners. Until year-end 225 is revised to read as follows: 1990, a banking organization may choose to conform 1. Supervisory ratios that relate capital to total to either the 5.5 percent and 6 percent minimum assets for bank holding companies are outlined in primary and total capital standards set forth in this Appendices B and D of this Part. Appendix, or the 7.25 percent year-end 1990 minimum risk-based capital standard set forth in Appen- 3. The last sentence of the first paragraph to "IV. dix A to this Part and Appendix A to Part 208. Those Minimum Supervisory Ratios and Standards" of Ap- organizations that choose to conform during this pendix A to Part 225 is removed; the existing second period to the 7.25 percent year-end 1990 risk-based paragraph now becomes the third paragraph and re- capital standard will be deemed to be in compliance mains unchanged; and a new paragraph is added with the capital adequacy guidelines set forth in this immediately following the first paragraph. The new Appendix. second paragraph reads as follows: Institutions with high or inordinate levels of risk are 6. Appendix D is added to Part 225 to read as set forth expected to operate well above minimum capital below. standards. Banking organizations experiencing or anticipating significant growth are also expected to Appendix D—Capital Adequacy Guidelines for maintain capital, including tangible capital posi- Bank Holding Companies: Tier 1 Leverage tions, well above the minimum levels. For example, Measure most such organizations generally have operated at capital levels ranging from 100 to 200 basis points I. Overview above the stated minimums. Higher capital ratios could be required if warranted by the particular The Board of Governors of the Federal Reserve Syscircumstances or risk profiles of individual banking tem has adopted a minimum ratio of Tier 1 capital to organizations. In all cases, organizations should total assets to assist in the assessment of the capital hold capital commensurate with the level and nature adequacy of bank holding companies ("banking of all of the risks, including the volume and severity organizations").4 The principal objective of this meaof problem loans, to which they are exposed. sure is to place a constraint on the maximum degree to which a banking organization can leverage its equity 4. A second paragraph is added to "IV. B. Transition capital base. It is intended to be used as a supplement Arrangements" of Appendix A to Part 225 to read as to the risk-based capital measure. follows: The guidelines apply on a consolidated basis to bank Through year-end 1990, banking organizations have holding companies with consolidated assets of $150 the option of complying with the minimum 7.25 percent year-end 1990 risk-based capital standard, 4. Supervisory risk-based capital ratios that relate capital to in lieu of the minimum 5.5 percent primary and 6 weighted risk assets for bank holding companies are outlined in percent total capital to total assets ratios set forth in Appendix A to this Part. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

850 Federal Reserve Bulletin • October 1990 million or more. For bank holding companies with less necessary on a case-by-case basis. For the purpose of than $150 million in consolidated assets, the guidelines this leverage ratio, the definition of Tier 1 capital for will be applied on a bank-only basis unless: year-end 1992 as set forth in the risk-based capital (a) the parent bank holding company is engaged in guidelines contained in Appendix A to this Part will be nonbank activity involving significant leverage;5 or used.6 Average total consolidated assets are defined as (b) the parent company has a significant amount of the quarterly average total assets (defined net of the outstanding debt that is held by the general public. allowance for loan and lease losses) reported on the banking organization's Consolidated Financial State- The Tier 1 leverage guidelines are to be used in the ments ("FR Y-9C Report"), less goodwill and any inspection and supervisory process as well as in the other intangible assets or investments in subsidiaries analysis of applications acted upon by the Federal that the Federal Reserve determines should be de- Reserve. The Board will review the guidelines from ducted from Tier 1 capital.7 time to time and will consider the need for possible Whenever appropriate, including when an organizaadjustments in light of any significant changes in the tion is undertaking expansion, seeking to engage in economy, financial markets, and banking practices. new activities or otherwise facing unusual or abnormal risks, the Board will continue to consider the level of II. The Tier 1 Leverage Ratio an individual organization's tangible Tier 1 leverage ratio (after deducting all intangibles) in making an The Board has established a minimum level of Tier 1 overall assessment of capital adequacy. This is consiscapital to total assets of 3 percent. A banking organi- tent with the Federal Reserve's risk-based capital zation operating at or near these levels is expected to guidelines and long-standing Board policy and practice have well-diversified risk, including no undue interest with regard to leverage guidelines. Organizations exrate risk exposure; excellent asset quality ; high liquid- periencing growth, whether internally or by acquisiity; good earnings; and in general be considered a tion, are expected to maintain strong capital positions strong banking organization, rated composite 1 under substantially above minimum supervisory levels, withthe BOPEC rating system for bank holding companies. out significant reliance on intangible assets. Organizations not meeting these characteristics, as well as institutions with supervisory, financial, or operational weaknesses, are expected to operate well ORDERS ISSUED UNDER BANK HOLDING above minimum capital standards. Organizations ex- COMPANY ACT periencing or anticipating significant growth also are expected to maintain capital ratios, including tangible Orders Issued Under Section 3 of the Bank capital positions, well above the minimum levels. For Holding Company Act example, most such organizations generally have operated at capital levels ranging from 100 to 200 basis Bank of Southside Virginia Corporation points above the stated minimums. Higher capital Carson, Virginia ratios could be required if warranted by the particular circumstances or risk profiles of individual banking Order Approving Acquisition of Shares of a Bank organizations. Thus, for all but the most highly-rated organizations meeting the conditions set forth above, Bank of Southside Virginia Corporation, Carson, Virthe minimum Tier 1 leverage ratio is to be 3 percent ginia ("Southside"), a bank holding company within plus an additional cushion of at least 100 to 200 basis the meaning of the Bank Holding Company Act points. In all cases, banking organizations should hold ("BHC Act"), has applied for the Board's approval capital commensurate with the level and nature of all under section 3(a)(3) of the BHC Act (12 U.S.C. risks, including the volume and severity of problem § 1842(a)(3)) to acquire up to 20 percent of the outloans, to which they are exposed. A banking organization's Tier 1 leverage ratio is calculated by dividing its Tier 1 capital (the numerator of the ratio) by its average total consolidated assets 6. At the end of 1992, Tier 1 capital for bank holding companies (the denominator of the ratio). The ratio will also be includes common equity, minority interests in equity accounts of calculated on the basis of period-end assets, whenever consolidated subsidiaries, and qualifying perpetual preferred stock. (Perpetual preferred stock is limited to 25 percent of Tier 1 capital.) In addition, Tier 1 excludes goodwill. The Federal Reserve may exclude certain other intangibles and investments in subsidiaries as appropri- 5. A parent company that is engaged in significant off-balance sheet ate. activities would generally be deemed to be engaged in activities that 7. Deductions from Tier 1 capital and other adjustments are involve significant leverage. discussed more fully in section II.B. of Appendix A to this Part. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 851 standing voting shares of Bank of McKenney, Mc- Because Southside would not control 25 percent or Kenney, Virginia. more of the outstanding shares of any class of voting Notice of the application, affording interested per- securities of Bank of McKenney and would not be able sons an opportunity to submit comments, has been to elect a majority of the directors of the bank, published (55 Federal Register 20,526 (1990)). The Southside would only be deemed to control Bank of time for filing comments has expired, and the Board McKenney for purposes of the BHC Act at this time if has considered the application and all comments re- the Board determines that Southside, by virtue of ceived in light of the factors set forth in section 3(c) of acquiring these shares, would be able to exercise a the BHC Act. The Board received comments in oppo- controlling influence over the management or policies sition to the application from Bank of McKenney and of the bank.4 Southside states that it will not attempt to some of the employees and customers of that bank exercise a controlling influence over the management ("Protestants").1 or policies of Bank of McKenney in any manner The Board has previously indicated that the acqui- following the proposed acquisition. In addition, Southsition of less than a controlling interest in a bank is not side has committed that it will not, without the prior a normal acquisition for a bank holding company.2 approval of the Board: However, the requirement in section 3(a)(3) of the (1) take any action causing Bank of McKenney to BHC Act that the Board's approval be obtained before become a subsidiary of Bank of Southside Virginia, a bank holding company acquires more than five Carson, Virginia ("BSV") or its parent, Southside; percent of the voting shares of a bank suggests that (2) acquire or retain shares that would cause the com- Congress contemplated the acquisition by bank hold- bined interests of BSV, Southside, and their officers, ing companies of between five percent and 25 percent directors, and affiliates to exceed 20 percent of the of the voting shares of banks. Moreover, nothing in outstanding voting shares of Bank of McKenney; section 3(c) of the BHC Act requires denial of an (3) exercise or attempt to exercise a controlling application solely because a bank holding company influence over the management or policies of Bank proposes to acquire less than a controlling interest in a of McKenney; bank or a bank holding company. On this basis, the (4) seek or accept representation on the Board of Board has previously approved the acquisition by a Directors of Bank of McKenney; bank holding company of less than a controlling inter- (5) have or seek to have any representative serve as est in a bank.3 For these reasons, the Board concludes an officer, agent, or employee of Bank of McKenney; that the purchase by Southside of less than a control- (6) propose a director or slate of directors in oppoling interest in Bank of McKenney is not a factor that, sition to a nominee or slate of nominees proposed by by itself, warrants denial of this application. the management or board of directors of Bank of Protestants assert, however, that Southside intends McKenney; to attempt to control Bank of McKenney despite (7) solicit or participate in soliciting proxies with statements to the contrary made by Southside. Pro- respect to any matter presented to the shareholders testants argue that certain statements made by South- of Bank of McKenney ; side that it desires to negotiate a friendly combination (8) attempt to influence the dividend policies or with Bank of McKenney in the future indicate that practices of Bank of McKenney; Southside will attempt to control Bank of McKenney. (9) attempt to influence the loan and credit decisions Protestants argue that this acquisition would result in or policies of Bank of McKenney, the pricing of anticompetitive effects, including reduced service to services, any personnel decision, the location of any the community currently served by Bank of McKen- offices, branching, the hours of operation or similar ney. activities of Bank of McKenney; or (10) enter into any other banking or nonbanking transactions with Bank of McKenney, except that BSV and Southside may establish and maintain de- 1. The Board also received five comments from shareholders of Bank of McKenney who favor Southside's proposal. posit accounts with Bank of McKenney, provided 2. State Street Boston Corporation, 67 Federal Reserve Bulletin that the aggregate balances of all such accounts do 862, 863 (1981). not exceed $500,000 and that the accounts are main- 3. See, e.g., First State Corporation, 76 Federal Reserve Bulletin 376 (1990) (acquisition of up to 24.9 percent of the voting shares of a tained substantially on the same terms as those bank); Marine Midland Banks, Inc., 75 Federal Reserve Bulletin 455 prevailing for comparable accounts of persons unaf- (1989) (retention of warrants to acquire up to 24.99 percent of the filiated with Bank of McKenney. voting shares of a bank holding company); Midlantic Banks, Inc., 70 Federal Reserve Bulletin 776 (1984) (acquisition of 24.9 percent of the voting shares of a bank holding company); Comerica Incorporated, 69 Federal Reserve Bulletin 911 (1983) (acquisition of 21.6 percent of the voting shares of a bank). 4. 12 U.S.C. § 1841(a)(2); 12 C.F.R. 225.2(e)(1). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

852 Federal Reserve Bulletin • October 1990 In the event that Southside proposes to acquire of the total deposits in commercial banks in that control of Bank of McKenney in the future, Southside market.8 Bank of McKenney is the seventh largest would be required to receive prior Board approval, at commercial banking organization, controlling $18.4 which time the Board would reexamine the statutory million in deposits, which represents approximately factors based on the facts and circumstances at that 2.7 percent of total deposits in commercial banks in time. Based on all of the facts of record as well as the market. If considered as a combined banking Southside's commitments in this case, the Board does organization, upon consummation of this proposal, not believe that, as currently structured, Southside Southside and Bank of McKenney would remain the would acquire control over Bank of McKenney for fifth largest commercial banking organization in the purposes of the BHC Act upon consummation of this market, controlling approximately 13.5 percent of the proposal. deposits in commercial banks in the market. The Section 3(c) of the BHC Act requires the Board in Herfindahl-Hirschman Index ("HHI") would increase every case under section 3 of the BHC Act to analyze by 59 points to 1880.9 The Board notes that 10 bank competitive, financial, managerial, future prospects, and thrift competitors would remain in the market. and convenience and needs considerations. In accord- Based on these and other facts of record, the Board ance with the terms of this section of the BHC Act, the believes that consummation of this proposal would not Board has considered these factors in its analysis of have a significantly adverse effect on competition in this application, even though Southside's proposal the Petersburg-Hopewell banking market. involves less than a controlling interest in Bank of The financial and managerial resources of South- McKenney.5 side, its subsidiary bank, and Bank of McKenney are Southside is the 28th largest commercial banking consistent with approval as are the future prospects of organization in Virginia, controlling one subsidiary these organizations. Considerations relating to the bank with total deposits of $130.1 million, representing convenience and needs of the communities to be less than one percent of the total deposits in commer- served are also consistent with approval of this applicial banks in the state.6 Bank of McKenney is the cation. 125th largest commercial banking organization in Vir- Based on the foregoing and other facts of record, the ginia, controlling deposits of $19.0 million, also repre- Board has determined that the application should be, senting less than one percent of the total deposits in and hereby is, approved. The acquisition shall not be commercial banks in the state. Southside and Bank of consummated before the thirtieth calendar day follow- McKenney, if considered as a combined banking or- ing the effective date of this Order, or later than three ganization, would remain the 28th largest banking months after the effective date of this Order, unless organization in Virginia, and would control total de- such period is extended for good cause by the Board or posits of $149.1 million, representing less than one by the Federal Reserve Bank of Richmond, acting percent of the total deposits in commercial banks in pursuant to delegated authority. the state. Based on all of the facts of record, the Board By order of the Board of Governors, effective believes that consummation of the proposed acquisi- August 15, 1990. tion would not have a significantly adverse effect on the concentration of commercial banking resources in Voting for this action: Chairman Greenspan and Governors Angell, Kelley, LaWare, and Mullins. Absent and not voting: Virginia. Governor Seger. Southside and Bank of McKenney compete directly in the Petersburg-Hopewell, Virginia RMA banking JENNIFER J. JOHNSON market.7 Southside is the fifth largest of eight commer- Associate Secretary of the Board cial banking organizations, controlling $71.8 million in deposits, which represents approximately 10.8 percent 8. Market data are as of June 30, 1989. 9. Under the revised Department of Justice Merger Guidelines, 49 5. State Street Boston Corporation, supra. As noted above, in the Federal Register 26,823 (June 29, 1984), a market in which the event that Southside proposes to acquire control of Bank of McKen- post-merger HHI is above 1800 is considered highly concentrated. In ney in the future, Southside would be required to submit an applica- such markets, the Justice Department is likely to challenge a merger tion for such an acquisition, and the Board would reexamine the that increases the HHI by more than 50 points. The Justice Departcompetitive effects of such an acquisition as well as all of the other ment has informed the Board that a bank merger or acquisition factors in section 3(c) of the BHC Act in view of the new set of facts generally will not be challenged (in the absence of other factors and circumstances. indicating anticompetitive effects) unless the post-merger HHI is at 6. State banking data are as of March 31, 1990. least 1800 and the merger increases the HHI by at least 200 points. The 7. The Petersburg-Hopewell, Virginia RMA banking market is Justice Department has stated that the higher than normal HHI approximated by the Petersburg-Hopewell RMA, including the inde- threshold for screening bank mergers for anticompetitive effects pendent city of Colonial Heights, and the remainder of the counties of implicitly recognizes the competitive effect of limited-purpose lenders Dinwiddie and Prince George. and other non-depository financial entities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 853 Orders Issued Under Section 4 of the Bank 1982 ("Garn-St Germain Act"),4 or will be prohibited Holding Company Act upon consummation of this proposal. The Garn-St Germain Act amended section 4(c)(8) of the BHC Act C&S/Sovran Corporation to provide that, with seven exceptions, insurance Norfolk, Virginia activities are not closely related to banking and thus are not generally permissible for bank holding compa- Acquisition of Certain Companies Engaged in nies. 12 U.S.C. § 1843(c)(8); see also 12 C.F.R. Permissible Insurance Agency Activities 225.25(b)(8). The Board deferred action on Applicant's proposal to acquire the insurance subsidiaries of C&S/Sovran Corporation, Norfolk, Virginia ("Appli- Sovran and C&S to afford the Applicant an opportucant"), has applied pursuant to section 4(c)(8) of the nity to more fully address the issues raised by the Bank Holding Company Act (12 U.S.C. § 1843) Protestants.5 Applicant claims that it may acquire the ("BHC Act") to acquire the nonbank subsidiaries of insurance subsidiaries of C&S and Sovran under Ex- The Citizens and Southern Corporation, Atlanta, emptions A, D or G of the Garn-St Germain Act. Georgia ("C&S") and Sovran Financial Corporation, Norfolk, Virginia ("Sovran"), engaged in certain in- Exemption A surance underwriting and agency activities. In particular, Applicant proposes to acquire Sovran Credit Sovran Credit Corporation, Sovran Equity Mortgage Corporation, Elizabeth City, Virginia; Sovran Equity Corporation, Sovran Mortgage Corporation, Tennes- Mortgage Corporation, Richmond, Virginia; Sovran see Valley Life Insurance Company and C&S Family Mortgage Corporation, Richmond, Virginia; Sovran Credit, Inc., engage solely in acting as agent in the sale Life Insurance Company, Norfolk, Virginia; Tennes- of credit-related life, disability and involuntary unemsee Valley Life Insurance Company, Nashville, Ten- ployment insurance permissible under Exemption A. nessee; C&S Family Credit, Inc., Tucker, Georgia; Sovran Life Insurance Company and C&S Life act as The Citizens and Southern Life Insurance Company, both agent and underwriter of the types of credit- Tucker, Georgia ("C&S Life"); Sovran Insurance related insurance permissible under Exemption A. Agency, Inc., Norfolk, Virginia ("Sovran Agency"); Applicant proposes to conduct credit-related insur- Sovran Insurance, Inc., Gaithersburg, Maryland ance agency and underwriting activities through these ("Sovran Insurance"); and Citizens and Southern subsidiaries in accordance with Exemption A, and the Insurance Services, Inc., Tucker, Georgia ("C&S Board's regulations and orders implementing Exemp- Insurance") (collectively, "Insurance Subsidiaries") tion A. pursuant to sections 4(c)(8)(A), 4(c)(8)(D) or 4(c)(8)(G) of the BHC Act.1 Exemption G Applicant, formerly known as Avantor Financial Corporation, received Board approval to become a Applicant argues that it may acquire and operate C&S bank holding company on July 24, 1990, by acquiring Insurance pursuant to Exemption G of the Garn-St Sovran and C&S and certain nonbank subsidiaries of Germain Act, which allows a bank holding company or both Sovran and C&S.2 In connection with that appli- its subsidiary to continue to engage in any insurance cation, the Board received comments from several agency activity if the bank holding company or subinsurance trade associations ("Protestants")3 alleging sidiary was engaged in insurance agency activities that some of the insurance activities conducted by prior to January 1, 1971, as a consequence of approval subsidiaries of Sovran and C&S are prohibited under by the Board prior to that date.6 section 4(c)(8) of the BHC Act, as amended by Title VI C&S Insurance currently conducts insurance activof the Garn-St Germain Depository Institutions Act of ities pursuant to Exemption G. Applicant argues that it should be permitted to acquire and engage in insurance activities through C&S Insurance on the basis of Exemption G rights that accrue to C&S and C&S 1. 12 U.S.C. §§ 1843(c)(8)(A), (D) and (G). Insurance. Applicant claims that this proposal is sim- 2. See C&S/Sovran Corporation!Avantor Financial Corporation, 76 ilar to a corporate reorganization whereby Sovran, Federal Reserve Bulletin 779 ("Avantor Order"). 3. The Board has received comments opposing Board approval of C&S and their subsidiaries—including C&S Insurthese applications from the Independent Insurance Agents of Amer- ance—will continue to conduct their activities in the ica, Inc., the National Association of Casualty and Surety Agents, National Association of Life Underwriters, National Association of Professional Insurance Agents, National Association of Surety Bond Producers, the New York State Association of Life Underwriters, 4. Pub. L. 97-320, Title VI, 96 Stat. 1469, 1536-38 (1982). Professional Insurance Agents of New York, Inc., and Independent 5. See Avantor Order at note 24. Insurance Agents of New York, Inc. 6. 12 U.S.C. § 1843(c)(8)(G). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

854 Federal Reserve Bulletin • October 1990 same manner as had been conducted prior to this on or before May 1, 1982. C&S Insurance, Sovran transaction. In addition, Applicant argues that this Agency and Sovran Insurance were all subsidiaries of proposal could have been structured as the acquisition bank holding companies and had conducted insurance of Sovran by C&S, which is a structure that Applicant agency activities since prior to May 1, 1982.10 The argues would have preserved Exemption G privileges Protestants contend that Applicant has not provided accruing to C&S and C&S Insurance. an adequate basis for determining the extent to which The Board has previously determined that Exemp- C&S Insurance and Sovran Insurance qualify for tion G privileges expire when the bank holding com- Exemption D privileges.11 pany possessing the Exemption G rights is acquired by The Board has previously stated that the requireanother bank holding company that does not indepen- ment that a company have been "engaged in" insurdently qualify for Exemption G privileges.7 In this ance agency activities on May 1, 1982, in order to case, Applicant does not qualify for the privileges of qualify for grandfather privileges under Exemption D Exemption G because Applicant was not engaged in does not require the company to show that it actually insurance activities prior to January 1, 1971. engaged in the sale of each particular type of insurance The Board does not believe that the facts of this case product on the specific grandfather date.12 Instead, the justify a different conclusion. This case represents the Board has determined that a company would meet the combination of two major banking organizations into a requirements of Exemption D for particular types of new bank holding company that will have significantly insurance if the company provides evidence that it was greater resources and geographic scope of operations legally permitted to act as agent for those types of than either of the two combining companies. As the insurance on May 1, 1982, that the company held itself Board has previously noted, there is no indication that out to the public as agent for the particular types of Congress intended that the broad insurance powers insurance for which the company seeks grandfather permitted under Exemption G should be exercised by privileges, and that the company had not abandoned new companies with the potential to expand signifi- the business prior to the grandfather date.13 In previcantly the scope and amount of insurance sold and the ous Orders,14 the Board has indicated that a variety of locations from which such insurance is offered.8 Thus, types of evidence could establish Exemption D rights, the Board believes that it would be inconsistent with including copies of insurance agency licenses in effect the terms and purposes of Exemption G to permit on and around May 1, 1982, copies of policies for Applicant to acquire and retain C&S Insurance pursu- which the company acted as agent during the 12 ant to Exemption G. Accordingly, Applicant may not, months prior to May 1, 1982, material advertising the either directly or indirectly, continue to exercise the types of insurance policies sold by the company, and Exemption G rights previously enjoyed by C&S.9 summaries prepared by insurance underwriters of policies sold and revenues received by the agency. Other Exemption D evidence, including affidavits of the company's em- In the alternative, Applicant proposes to acquire and conduct insurance agency activities through C&S In- 10. The Protestants contend that, upon consummation of this proposal, the insurance agency activities currently conducted by surance pursuant to Exemption D of the Garn-St Sovran Agency, Sovran Insurance and C&S Insurance pursuant to Germain Act. Similarly, Applicant proposes to acquire Exemption D will no longer be permissible under this exemption. The and conduct insurance agency activities through Protestants argue that a company cannot continue to conduct insurance agency activities in reliance on Exemption D following acquisi- Sovran Agency and Sovran Insurance pursuant to tion of the company by another bank holding company. The Board has Exemption D. Exemption D permits a bank holding previously considered and rejected this claim. See Shawmut National Corporation, 74 Federal Reserve Bulletin 182 (1988); Sovran Financompany and any subsidiary of a bank holding comcial Corporation, 73 Federal Reserve Bulletin 672 (1987)("Sovran"). pany to continue to engage in any insurance agency The courts have reviewed and upheld the Board's decision in this activity in which the company was engaged on May 1, matter. National Association of Casualty and Surety Agents v. Board of Governors, 856 F.2d 282, reh'g denied en banc, 862 F.2d 351 (D.C. 1982, or which the Board approved for such company Cir. 1988), cert, denied, 109 S.Ct. 2430 (1989). 11. Because Sovran Agency conducts only credit-related insurance activities that were approved by the Board prior to 1982, the Protes- 7. Trustcorp Inc., 73 Federal Reserve Bulletin 827, 829 (1987). tants challenge only the ability of Sovran Agency to continue to 8. Id. at 829. conduct these activities pursuant to Exemption D after its transfer to 9. Applicant had originally proposed to conduct insurance agency Applicant, and do not otherwise challenge the basis for the particular activities through C&S Life under Exemption G. Because C&S Life is lines of insurance that Applicant claims this subsidiary was selling engaged only in underwriting credit-related insurance pursuant to pursuant to Exemption D on the grandfather date. Exemption A, Applicant has withdrawn its request that the Board 12. See Citicorp, 76 Federal Reserve Bulletin 70, 73 (1990) {"Citiapprove the retention of the Exemption G rights of this subsidiary corp"). following consummation of this proposal. Applicant has committed 13. See Citicorp. that C&S Life will only conduct those activities permissible under 14. See Citicorp; see also MidAmerican Corporation, 76 Federal section 4(c)(8)(A) of the BHC Act. Reserve Bulletin 559 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 855 ployees, may also support a finding that a company the management of the banking business and operaqualifies for Exemption D rights. tions of C&S and its subsidiaries.16 Accordingly, C&S In this case, C&S received approval from the Board Insurance is entitled to Exemption D rights and may in 1969 to acquire the predecessor of C&S Insurance, continue to conduct these insurance agency activities The Citizens and Southern Agency, Inc., and thereby that it conducted on May 1, 1982 pursuant to Exempengage in acting as agent in the sale of insurance in tion D.17 Under Exemption D, the insurance-agency connection with loans made by C&S's subsidiary activities of C&S Insurance may be conducted only in banks, and insurance written for C&S and its subsid- Georgia, states adjacent to Georgia, or states in which iaries in connection with the management of their C&S Insurance lawfully engaged in insurance activibanking business and operations.15 In that Order, the ties on May 1, 1982.18 Board defined the scope of insurance agency activities With regard to Sovran Insurance, the Board has that C&S Insurance could conduct to include selling previously determined that Sovran Insurance qualifies casualty insurance on loan collateral (e.g., fire, theft, for the privileges provided in Exemption D.19 Protescollision) or otherwise for the purpose of assuring the tants were parties to that application and did not ability of borrowers to repay the loans (e.g., liability question the claim by Sovran Insurance that it coninsurance in the case of loans secured by automobiles, ducted insurance agency activities on May 1, 1982, or business interruption insurance). The Board's Order the scope of its activities on that date, and did not specifically stated that insurance sold by C&S Insur- challenge the Board's findings in that case that Sovran ance to borrowers would be in connection with loans Insurance did engage in insurance activities on that from affiliated banks and not to customers generally date.20 The Board believes that, as parties to that merely because of a customer relationship. proceeding with full opportunity to raise these ques- The record indicates that, on May 1, 1982, C&S tions, a plausible argument could be made that Pro- Insurance did engage in these insurance agency activ- testants are precluded now from challenging the findities. C&S Insurance has provided copies of insurance ing in that case that Sovran Insurance is entitled to licenses held by C&S Insurance or its employees on conduct insurance agency activities pursuant to Ex- May 1, 1982, in Georgia, Alabama, Florida, Louisiana, emption D.21 In this regard, Applicant has proposed and Mississippi. Applicant has also submitted financial that Sovran Insurance will act as agent for the sale of statements and revenue sheets of C&S Insurance, and only those types of insurance for which Sovran Insurcommissions statements written by underwriters showing that during April and May of 1982, C&S Insurance derived premium revenues from the sale, in 16. See id. connection with loans made by bank subsidiaries of 17. Applicant contends that, under Exemption D, C&S Insurance may also conduct insurance agency activities that C&S Insurance did C&S, of automobile insurance, agricultural and connot conduct on May 1, 1982, but for which C&S Insurance received tractor's equipment insurance, disability insurance, Board approval prior to May 1, 1982. The terms of Exemption D life insurance, and comprehensive fire, theft and trans- provide that a bank holding company and its subsidiaries may engage in any insurance agency activity which the Board approved for such portation insurance on wholesale and retail equip- company on or before May 1, 1982. This language would appear to ment. C&S Insurance has also provided insurance permit a bank holding company that had received Board approval to conduct insurance agency activities at any time prior to May 1, 1982, policies and related documents, and agreements with to continue those activities pursuant to Exemption D, provided the underwriters that were effective on and around May 1, Board's approval continued to be effective on the grandfather date. As 1982 indicating that C&S Insurance was authorized to noted above, C&S Insurance conducted insurance agency activities pursuant to approval that it had received from the Board in 1969. That sell property and casualty insurance and comprehen- approval has not by its terms expired. However, Applicant has not sive and liability insurance covering mobile homes, indicated that the scope of the Board's 1969 order permits C&S Insurance to sell any particular types of insurance beyond those that boats, household goods, trailers and motorcycles, and it actually sold as agent on May 1, 1982. Accordingly, the Board fire, theft and physical damage to automobiles. believes that it need not at this time decide the issue of whether Based on these and the other facts of record in this Exemption D would permit C&S Insurance to conduct insurance activities beyond those that it in fact conducted on May 1, 1982. case, the Board believes that on May 1, 1982, C&S 18. In this regard, in Louisiana and Mississippi, C&S Insurance may Insurance acted as agent, pursuant to the Board's 1969 continue to act as agent in the sale of those types of insurance Order, in the sale of life, health and disability insur- described in this order which Applicant has documented were sold by C&S Insurance in Louisiana and Mississippi on and around the ance, personal and commercial property and casualty grandfather date. See infra. insurance, fidelity and surety insurance described 19. See Sovran. above, all in connection with loans made by bank 20. See id. at 673, 675. 21. The Board notes that, had the Protestants questioned the scope subsidiaries of C&S, and insurance in connection with of Sovran Insurance's Exemption D rights at the time of the appeal of the Sovran Order, Protestants likely would have been estopped from 15. See The Citizens and Southern Holding Company and The raising this issue in front of the appeals court because it had not been Citizens and Southern National Bank, 55 Federal Reserve Bulletin 673 raised before the Board. See United States v. L.A. Tucker Truck (1969). Lines, Inc., 344 U.S. 33 (1952). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

856 Federal Reserve Bulletin • October 1990 ance (as it then existed), acted as agent on May 1, committed that, following consummation of this pro- 1982. In conjunction with this application, Applicant posal, the geographic scope of all insurance activities has also submitted various materials that document will not be expanded beyond the scope permitted in the types of insurance that Sovran Insurance sold as the relevant exemptions in section 4(c)(8) of the BHC agent on and around the grandfather date. The record Act, and that all insurance activities will be conducted indicates that Sovran Insurance held a Maryland Res- in accordance with applicable state laws.22 The record idence Insurance Broker's License authorizing the does not indicate that approval of this application agency to sell all types of insurance in Maryland on would result in undue concentration of resources, May 1, 1982, and copies of valid licenses demonstrat- unfair or decreased competition, conflicts of interest, ing that employees of Sovran Insurance were licensed unsound banking practices, or other adverse effects. to act as agent for the sale of accident and health, life, Accordingly, the Board believes that the balance of and property and casualty insurance in the state of public interest factors in this case weighs in favor of Maryland on May 1, 1982. In addition, Applicant has approval of this application. submitted commissions statements of underwriters Based on the foregoing and all the facts of record, indicating that agents of Sovran Insurance sold life the Board has determined that the application should insurance during April and May of 1982. Applicant has be, and hereby is, approved.23 This determination is also submitted insurance policies and related docu- subject to the conditions that the insurance activities ments that were effective on and around May 1, 1982, be conducted solely by the Insurance Subsidiaries, that were sold by Sovran Insurance covering work- which must remain independent subsidiaries of Appliman's compensation, automobile, motorcycle, boat, cant, and that C&S Insurance limit its insurance home and commercial property insurance. Moreover, activities to the insurance agency activities that the Applicant has also submitted copies of surety bonds Board has found in this Order were conducted by C&S sold during March of 1982, and annual reports showing Insurance on May 1, 1982; that C&S Insurance conthat Sovran Insurance sold various forms of fidelity duct its permitted insurance agency activities only in insurance that were effective on the grandfather date. Georgia, states adjacent to Georgia, and states in Based on these and other facts of record in this case, which C&S Insurance was lawfully engaged in the as well as the Board's previous decision regarding the activity on May 1, 1982; that Sovran Insurance limit its activities of Sovran Insurance, the Board finds that, insurance activities to the insurance agency activities following consummation of this proposal, Sovran In- that the Board has found by previous Order, and has surance would remain entitled to Exemption D rights, confirmed by this Order, were conducted by Sovran and may continue to engage, pursuant to Exemption Insurance on May 1, 1982; that Sovran Insurance D, in the sale as agent of the types of insurance for conduct these activities only in Maryland, states adjawhich Sovran Insurance acted as agent on May 1, cent to Maryland, and states in which Sovran Insur- 1982, as described in this Order. Under the terms of ance was lawfully engaged in the activity on May 1, Exemption D, the insurance agency activities of 1982; and that these activities be conducted pursuant Sovran Insurance may be conducted only in Mary- to all of the conditions set forth in Regulation Y. This land, states adjacent to Maryland, and states in which approval is also subject to the Board's authority to Sovran Insurance lawfully engaged in insurance activ- require such modifications or termination of activities ities on May 1, 1982. of the bank holding company or any of its subsidiaries In acting on an application under section 4(c)(8) of as the Board finds necessary to assure compliance the BHC Act, the Board must consider whether an with, and prevent evasions of, the provisions and applicant's performance of the proposed activities purposes of the BHC Act and the Board's regulations "can reasonably be expected to produce benefits to and orders issued thereunder. the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts 22. In this regard, the Board notes that the Virginia Bureau of of interests, or unsound banking practices." Insurance and the Georgia Office of the Commissioner of Insurance have opined respectively that, as this transaction is structured, the 12 U.S.C. § 1843(c)(8). insurance activities of Sovran Agency are grandfathered by Virginia The Board believes that approval of this application law, and the insurance activities of C&S Insurance are grandfathered by Georgia law. would permit the Insurance Subsidiaries to remain 23. This determination does not prevent Applicant, Sovran Insurviable competitors and permit consumers in the areas ance or C&S Insurance from providing additional evidence that it served by the Insurance Subsidiaries to benefit from acted as agent in the sale of other types of insurance in any of the relevant states on May 1, 1982. Upon such a showing, these compacontinued access to these companies as a source of nies would be permitted to continue to act as agent for these types of insurance products and services. The Applicant has insurance. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 857 This transaction shall not be consummated later and currency swaps, interest rate caps, floors, and than three months after the effective date of this collars, and options on such instruments; and Order, unless such period is extended for good cause (6) act as agent or broker with respect to interests in by the Board or by the Federal Reserve Bank of loan syndications, interest rate and currency swaps, Atlanta, pursuant to delegated authority. interest rate caps, floors, and collars, and options on By order of the Board of Governors, effective such instruments. August 27, 1990. Applicant, with total consolidated assets of $48.8 Voting for this action: Chairman Greenspan and Governors billion, is the 12th largest banking organization in the Seger, Kelley and LaWare. Absent and not voting: Gover- nation.1 Applicant operates 15 subsidiary banks and nors Angell and Mullins. three trust companies and engages directly and through subsidiaries in a variety of permissible non- JENNIFER J. JOHNSON banking activities.2 Associate Secretary of the Board Notice of the application, affording interested persons an opportunity to submit comments on the pro- C&S/Sovran Corporation posal, has been published (55 Federal Register 19,995 Norfolk, Virginia (1990)). The time for filing comments has expired, and the Board has considered the application and all Sovran Financial Corporation comments received in light of the public interest Norfolk, Virginia factors set forth in section 4(c)(8) of the BHC Act. The Board has received comments regarding the application from the Investment Company Institute ("ICI"), Order Approving Applications to Act as Agent in the a trade association of the mutual fund industry.3 Placement of All Types of Securities and as Riskless Principal in Buying and Selling Securities, and to Private Placement and Riskless Principal Activities Engage in Mortgage Banking and Financial and Foreign Exchange Advisory Activities The Board previously has determined by order that, subject to a number of prudential limitations that C&S/Sovran Corporation and its wholly owned sub- address the potential for conflicts of interests, unsound sidiary Sovran Financial Corporation (collectively, banking practices, or other adverse effects, acting as "Applicant"), both of Norfolk, Virginia, bank holding agent in the private placement of securities (including companies within the meaning of the Bank Holding the provision of related advisory services) and pur- Company Act (the "BHC Act"), have applied for the chasing and selling securities on the order of investors Board's approval under section 4(c)(8) of the BHC Act as a riskless principal are so closely related to banking (12 U.S.C. § 1843(c)(8)) and section 225.23 of the as to be proper incidents thereto within the meaning of Board's Regulation Y (12 C.F.R. 225.23), through their subsidiary, Sovran Investment Corporation, Richmond, Virginia ("Company"), to: (1) act as agent for issuers in the private placement of all types of securities, including providing related 1. Asset data are as of December 31, 1989 and account for the recently approved merger of The Citizens and Southern Corporation, advisory services; Atlanta, Georgia and Sovran Financial Corporation, Norfolk, Vir- (2) purchase and sell all types of securities on the ginia. See Avantor Financial Corporation, 76 Federal Reserve Bulletin 779 (1990). Subsequent to the Board's approval, the combined order of investors as riskless principal; organization changed its name from Avantor Financial Corporation to (3) purchase and sell mortgage loans and other C&S/Sovran Corporation. extensions of credit in the secondary market as 2. Company previously has received authorization from the Board to engage in a variety of nonbanking activities, including underwriting permissible under section 225.25(b)(1); and dealing in certain bank-ineligible securities and government (4) provide advice with respect to foreign exchange securities. transactions and arrange for the execution of foreign 3. The Board also received a comment on the application from the Women's Center for Social Change, Lynchburg, Virginia, concerning exchange transactions to the extent permissible un- a loan application the Women's Center had made to one of Applicant's der section 225.25(b)(17); affiliate banks. The comment does not address the statutory factors the Board is required to review with respect to applications filed under (5) provide financial advice, including providing section 4 of the BHC Act. See Western Bancshares v. Board, 480 F.2d valuations, fairness opinions and advice in connec- 749 (10th Cir. 1973). In addition, to the extent that the comment may tion with merger, acquisition, divestiture, and simi- raise an issue under the Community Reinvestment Act, the Board has previously determined that the Community Reinvestment Act does lar transactions; and providing advice regarding loan not apply to applications filed under section 4 of the BHC Act. The syndications and strategies involving interest rate Mitsui Bank, Limited, 76 Federal Reserve Bulletin 381 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

858 Federal Reserve Bulletin • October 1990 section 4(c)(8) of the BHC Act.4 The Board has also action ultimately taken by the customer. In any case in previously determined that, subject to certain limita- which an affiliate of Company has an interest in a tions, private placement and riskless principal activi- specific transaction as a principal or intermediary, ties are consistent with section 20 of the Glass- Company will also advise its customer of that fact Steagall Act and that revenue derived from these before recommending participation in that activities is not subject to the 10 percent revenue transaction.11 In addition, Company's advisory serlimitation applicable to underwriting and dealing in vices will be offered only to sophisticated customers bank-ineligible securities.5 In order to address the who would be unlikely to place undue reliance on potential for conflicts of interests, unsound banking investment advice received and would be better able practices, or other adverse effects, Applicant has to detect investment advice motivated by selfcommitted that Company will conduct the proposed interest.12 private placement and riskless principal activities con- Consummation of the proposal would provide added sistent with the limitations, methods, and procedures convenience to Applicant's customers. In addition, established by the Board in these Orders.6 the Board expects that the de novo entry of Applicant into the market for some of these services would Financial Advisory and Related Activities increase the level of competition among providers of these services. Under the framework established in The Board has also determined by order that the this and prior decisions, consummation of this proproposed financial advisory activities are closely re- posal is not likely to result in any significantly adverse lated to banking for purposes of section 4(c)(8) of the effects, such as undue concentration of resources, BHC Act.7 Applicant commits that Company will decreased or unfair competition, conflicts of interests, conduct the proposed financial advisory activities sub- or unsound banking practices. Accordingly, the Board ject to the limitations established by the Board in the has determined that the performance of the proposed relevant Board Orders.8 activities by Applicant can reasonably be expected to In addition, the Board has determined by order that produce public benefits which would outweigh adverse acting as agent or broker with respect to interest rate effects under the proper incident to banking standard and currency swaps, interest rate caps, floors, and of section 4(c)(8) of the BHC Act. The financial and collars, and options on such instruments is closely managerial resources and future prospects of Applirelated to and a proper incident to banking within the cant are considered to be consistent with approval. meaning of section 4 of the BHC Act.9 Applicant will Based on the foregoing, the Board has determined to not act as a principal or originator with respect to these approve this application subject to all of the terms and instruments, but will act solely as agent or broker. In conditions set forth in this Order and in the aboveorder to minimize any possible conflicts of interests noted Board Orders and regulations that relate to these between Company's role as agent or broker10 in swap activities. and related transactions and its role as advisor to The Board's determination is subject to all of the potential counterparties, Company will disclose to conditions set forth in the Board's Regulation Y, each customer the fact that Company may have an including those in sections 225.4(d) and 225.23(b), and interest as a counterparty broker in the course of to the Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds 4. J.P. Morgan & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. Morgan')- Bankers Trust New York Corpo- necessary to assure compliance with, and to prevent ration, 75 Federal Reserve Bulletin 829 (1990) ("Bankers Trust"). evasion of, the provisions of the BHC Act and the 5. Id. Board's regulations and orders issued thereunder. 6. Id. See also First Eastern Corporation, 76 Federal Reserve Bulletin 764 (1990). The ICI has objected to the proposal to the extent This transaction shall not be consummated later that it could be construed to seek approval for Company to privately than three months after the effective date of this place, and act as a riskless principal with respect to, securities of Order, unless such period is extended for good cause investment companies that are sponsored or advised by Company, Applicant, or Applicant's bank or nonbank affiliates. Applicant has not requested approval to privately place, or act as a riskless principal with respect to, such securities. 7. Canadian Imperial Bank of Commerce, 74 Federal Reserve 11. Company may arrange swap transactions between its bank Bulletin 571 (1988); Signet Banking Corporation, 73 Federal Reserve affiliates and third parties. In any transaction in which Company Bulletin 59 (1987). arranges a swap transaction between an affiliate and a third party, 8. Id. Company will inform the third party that it is acting on behalf of the 9. The Fuji Bank, Limited, 76 Federal Reserve Bulletin 768 (1990); affiliate. The Sumitomo Bank, Limited, 75 Federal Reserve Bulletin 582 (1990). 12. Company also proposes to provide loan syndication and swap 10. An agent or broker in the swap and related markets locates, for and related product advisory and brokerage services to its affiliates. a fee, a suitable counterparty for a party seeking to enter into a swap This activity is permissible under section 4(c)(1)(C) of the BHC Act or related agreement. (12 U.S.C. § 1843(c)(1)(C)). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 859 by the Board or by the Federal Reserve Bank of duly published (55 Federal Register 24,640 (1990)). Richmond, pursuant to delegated authority. The time for filing comments has expired, and the By order of the Board of Governors, effective Board has considered the application and all com- August 8, 1990. ments received in light of the public interest factors set forth in section 4(c)(8) of the BHC Act.1 Voting for this action: Chairman Greenspan and Governors First Regional, with total consolidated assets of Kelley, La Ware and Mullins. Absent and not voting: Gover- approximately $108.2 million, is the 90th largest comnors Seger and Angell. mercial banking organization in Connecticut.2 It operates one bank subsidiary. JENNIFER J. JOHNSON The Board has previously determined by Order that Associate Secretary of the Board the proposed financial advisory activities are closely related to banking and permissible for bank holding First Regional Bancorp, Inc. companies within the meaning of section 4(c)(8) of the Hartford, Connecticut BHC Act, and the Board reaffirms its determinations regarding these activities.3 First Regional has commit- Order Approving Application to Provide Certain ted that Company will conduct its financial advisory Financial Advisory Services and to Act As Agent in activities in accordance with the Board's previous the Private Placement of All Types of Securities Orders regarding these activities.4 Accordingly, the Board concludes that the proposed financial advisory First Regional Bancorp, Inc., Hartford, Connecticut activities are closely related to banking. ("First Regional"), a bank holding company within Similarly, the Board has previously determined by the meaning of the Bank Holding Company Act Order that acting as agent for the issuer in the private ("BHC Act"), has applied for the Board's approval placement of all types of securities is closely related to under section 4(c)(8) of the BHC Act (12 U.S.C. banking and permissible for bank holding companies § 1843(c)(8)) and section 225.23 of the Board's Regu- within the meaning of section 4(c)(8) of the BHC Act.5 lation Y (12 C.F.R. 225.23) for its subsidiary, First First Regional has committed that Company will con- Regional Investcorp, Hartford, Connecticut ("Compa- duct its private placement activities in accordance ny"), to provide certain financial advisory services with the Board's previous Orders approving this and to act as agent for issuers in the private placement activity.6 of all types of securities. First Regional has requested that the Board allow First Regional proposes to offer, through Company, Company to have two of seven directors in common the following services (collectively, "financial advis- with First Regional's subsidiary bank.7 The Board's ory activities") to financial and nonfinancial institu- original prohibition against interlocks was intended to tions, and individuals who qualify as institutional preclude a member bank from engaging in impermiscustomers: sible securities activities, to prevent common control (1) advice in connection with mergers, acquisitions, of the decision-making process within a bank and its divestitures, reorganizations, recapitalizations, and securities affiliate, and to protect investors against similar transactions; potential conflicts of interest where one individual is (2) business valuations; (3) financial feasibility studies; 1. The Investment Company Institute has objected to First Region- (4) evaluations of tender offers; al's proposal to the extent that it could be construed to seek approval (5) fairness opinions in connection with mergers, for Company to privately place securities of investment companies that are sponsored or advised by Company or First Regional. First acquisitions, and similar financial transactions; Regional has not requested approval to place such securities. (6) advice for management on the viability and 2. Asset data are as of March 31, 1990. Ranking is as of June 30, capital adequacy of financially troubled companies; 1990. 3. See, e.g., Security Pacific Corporation, 71 Federal Reserve (7) valuation opinions on transactions involving pub- Bulletin 118 (1985); and Signet Banking Corporation, 73 Federal licly held securities; and Reserve Bulletin 59 (1987). 4. See Banc One Corporation, 76 Federal Reserve Bulletin 756 (8) advice regarding the structuring of, and arranging (1990). for, loan syndications. 5. See, e.g., Bankers Trust New York Corporation, 75 Federal Reserve Bulletin 829 (1989); and J.P. Morgan & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990). In addition, First Regional proposes to act as agent 6. First Eastern Corporation, 76 Federal Reserve Bulletin 764 for issuers in the private placement of all types of (1990). securities. 7. Two directors who will serve on the board of directors of Company currently serve as officers or directors of First Regional's Notice of the application, affording interested persubsidiary bank. Neither will serve as an officer or employee of sons an opportunity to submit comments, has been Company. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

860 Federal Reserve Bulletin • October 1990 required to advance the differing objectives of a bank expects that the de novo entry of First Regional into and its securities affiliate. the market for these services would increase the level These concerns do not appear to be significant in of competition among providers of these services. this application. First, First Regional is not seeking Accordingly, the Board has determined that the perauthority to engage in securities underwriting or deal- formance of the proposed activities by Company can ing. The Board has ruled that private placement activ- reasonably be expected to produce benefits to the ities conducted directly by a bank do not constitute public that outweigh potential adverse effects. "underwriting" or "dealing" in securities because Based on the foregoing and other facts of record, these activities do not involve a "public offering" of and subject to the commitments made by First Rethe securities and are conducted solely as agent.8 All gional and Company and the conditions set forth in of the proposed activities could be performed directly this and the above-noted orders, the Board has deterby First Regional's subsidiary bank. Consequently, in mined that the balance of the public interest factors it this instance a management interlock is not prohibited is required to consider under section 4(c)(8) of the by the Glass-Steagall Act. Second, the Board has BHC Act is favorable. Accordingly, the application is noted that concerns regarding common control of a hereby approved. This determination is subject to all bank and a securities affiliate are less significant of the conditions set forth in the Board's Regulation Y, where, as here, the securities affiliate is engaged in including those in sections 225.4(d) and 225.23(b) agency activities and where no substantial capital is (12 C.F.R. 225.4(d) and 225.23(b)), and to the Board's put at risk. See Bankers Trust New York Corporation, authority to require modification or termination of the 74 Federal Reserve Bulletin 695 (1988). Third, because activities of the holding company or any of its subsid- Company has no salesman's stake in the securities it iaries as the Board finds necessary to assure complirecommends, the potential for conflicts of interest is ance with, and to prevent evasion of, the provisions substantially mitigated. Moreover, it is unlikely that and purposes of the BHC Act and the Board's regulainvestors would confuse Company with First Region- tions and orders issued thereunder. al's subsidiary banks, because the customers of Com- This transaction shall not be consummated later pany will be sophisticated "accredited investors." than three months after the effective date of this Due to First Regional's relatively small size, its Order, unless such period is extended for good cause executive and management staff is significantly smaller by the Board or by the Federal Reserve Bank of than that of larger institutions, and the boards of Boston, pursuant to delegated authority. directors of First Regional and its lead bank are By order of the Board of Governors, effective substantially identical. First Regional seeks the direc- July 30, 1990. tor interlocks in order to oversee Company and provide continuity among First Regional's subsidiaries. Voting for this action: Chairman Greenspan and Governors Under these circumstances, the Board believes that a Seger, Angell, Kelley, and Mullins. Absent and not voting: Governors Johnson and LaWare. prohibition against director interlocks is not required by law, and that the proposed director interlocks JENNIFER J. JOHNSON between First Regional bank subsidiary and Company Associate Secretary of the Board would be appropriate. Consummation of the proposal within the frame- This Order corrects an Order issued on July 30, 1990. work established by this and previous Board orders is not likely to result in significantly adverse effects, such Midland Bank, PLC as undue concentration of resources, decreased or London, England unfair competition, conflicts of interests, or unsound banking practices. (12 U.S.C. § 1843(c)(8)). In addition, the financial considerations are consistent with Order Approving Application to Engage in Various approval of the application. Travelers Check, Payment Instrument, Foreign Consummation of First Regional's proposal would Exchange, Precious Metal, Advisory, Check Cashing provide increased convenience to Company's custom- and Tax Refund Agent Activities ers and gains in efficiency. In addition, the Board Midland Bank, PLC, London, England ("Midland"), a foreign bank subject to section 4 of the Bank Holding 8. Statement Concerning Applicability of the Glass-Steagall Act to Company Act (the "BHC Act"), has applied, pursuant the Commercial Paper Placement Activities of Bankers Trust Com- to section 4(c)(8) of the BHC Act (12 U.S.C. pany (June 4, 1985), aff d, Securities Industry Association v. Board of § 1843(c)(8)) and section 225.23 of the Board's Regu- Governors, 807 F.2d 1052 (D.C. Cir. 1986), cert, denied, 483 U.S. 1005 (1987). lation Y (12 C.F.R. 225.23), to acquire through its Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 861 wholly owned subsidiary, Thomas Cook, Inc., Prince- activities worldwide. In the United States, Midland ton, New Jersey ("TCI"), all of the voting shares of operates a branch and an Edge corporation, both Deak International Limited, New York, New York located in New York, New York. ("Deak"),1 and thereby engage through Deak in the following activities: Consumer and Payment Instrument Activities (1) the issuance and sale of U.S. dollar and foreign currency denominated travelers checks and of The Board has by regulation authorized bank holding money orders and similar consumer-type instru- companies to engage in the issuance and sale of ments with a face value of $1,000 or less (collective- travelers checks, as well as the issuance and sale of ly, "consumer instruments"); consumer instruments, with a maximum face value of (2) the issuance and sale of U.S. dollar denominated $1,000 or less.3 12 C.F.R. 225.25(b)(12). The Board drafts, wires, and payment orders with a face value has by order approved the issuance and sale of variof $10,000 or less and foreign currency denominated ably denominated payment instruments with a maxidrafts, wires, and payment orders with no maximum mum face value of $10,000. See, e.g., BankAmerica face value (collectively, "payment instruments"); Corporation, 73 Federal Reserve Bulletin 727 (1987). (3) the purchase and sale of foreign currency at The Board has also approved by order the issuance wholesale and retail for Deak's own account and for and sale of variably denominated payment instruments the account of others; with no maximum face value, subject to operational (4) the provision of general information on foreign restrictions and reporting requirements substantially exchange rates, currency markets, and the use of similar to those proposed in this application. Midland currencies; Bank, PLC, 74 Federal Reserve Bulletin 252 (1988); Wells Fargo & Co., 72 Federal Reserve Bulletin 148 (5) foreign exchange forward, options, futures, op- (1986). tions on futures, and swap transactions for Deak's own account for hedging purposes and foreign ex- In considering previous applications regarding varichange forward transactions for the account of ably denominated payment instruments, the Board has customers; expressed concern that the issuance of instruments in (6) the purchase and sale of gold and silver bullion, denominations larger than $1,000 would result in an rounds, and coins (collectively, "precious metals") adverse effect on the reserve base because such instrufor Deak's own account and the account of custom- ments are not subject to transaction account reserve ers and the provision of incidental services, includ- requirements. In this regard, the Board has noted that, ing providing precious metal storage facilities and because reserve requirements serve as an essential assaying services, and arranging for the transporta- tool of monetary policy, the conduct of that policy tion of precious metals; could be adversely affected by the erosion of reserv- (7) acting as exclusive sales tax refund agent for the able deposits in the banking system. Accordingly, in State of Louisiana in connection with the State's order to prevent such potential adverse effects, the tax-free shopping program for foreign visitors; and Board has conditioned approval of similar proposals (8) cashing U.S. dollar payroll checks. on a commitment that the applicant subject all proceeds of any payment instrument having a face value Notice of the application, affording interested per- in excess of $10,000 (or the foreign currency equivasons an opportunity to comment, has been published lent) to reserve requirements by depositing such pro- (55 Federal Register 28,297 (1990)). The time for filing ceeds into a demand deposit account.4 The Board has also imposed reporting requirements concerning these comments has expired, and the Board has considered payment instrument activities. Applicant has committhe application and all comments received in light of the factors set forth in section 4 of the BHC Act. Midland, a bank organized under the laws of the United Kingdom, is the 43rd largest banking organiza- 3. As an incident to its proposal to issue travelers checks and tion in the world, with total consolidated assets equiv- consumer instruments, Midland proposes to cash U.S. dollar and alent to $100.6 billion.2 Midland engages directly and foreign currency denominated travelers checks; purchase and send for collection U.S. dollar or foreign currency denominated consumer indirectly in a broad range of financial and commercial instruments generally drawn abroad; act as payment agent for wire transfers and payment orders issued by affiliated and unaffiliated institutions; and provide refunds for lost or stolen consumer instruments. The Board has previously noted that these activities are 1. Midland also will acquire through TCI the following two subsid- generally provided by an issuer of travelers checks, and believes that iaries of Deak International: Deak International GoJdline (U.S.) Ltd., these activities are incidental to the proposed activity of issuing New York, New York; and Deak & Co. AG Zurich, Zurich, Switzer- travelers checks. See BankAmerica Corporation, 38 Federal Register land. The activities of these companies are included in the list above. 16,280 (June 21, 1973). 2. Asset data are as of December 31, 1989. 4. See Wells Fargo & Co. and Midland Bank, PLC, supra. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

862 Federal Reserve Bulletin • October 1990 ted that it will conduct its proposed payment instru- and internal controls and audit programs applicable to ment activities in accordance with the operational and its trading in futures, options, options on futures, and reporting requirements established by these Board similar contracts used for hedging, including the guide- Orders. lines in the Board's Policy Statement regarding this type of activity. Accordingly, the Board finds that the Foreign Exchange Activities proposed activity of entering into currency swap transactions for hedging purposes is closely related to The Board has previously determined by order that banking for purposes of section 4(c)(8) of the BHC engaging in the purchase and sale of foreign currency Act. for a company's own account and for the account of others is permissible for bank holding companies.5 The Precious Metals Activities Board has also previously determined by order that engaging in foreign exchange forward transactions for The Board has also previously determined that the the account of customers is permissible under section purchase and sale of gold and silver bullion, bars, 4(c)(8) of the BHC Act.6 In addition, the Board has rounds, and coins for a company's own account and determined that providing general information on for- the account of others is a permissible activity for bank eign exchange rates, currency markets, and the use of holding companies.10 The Board has also determined various currencies is an activity incidental to the that the provision of gold and silver assaying and purchase and sale of foreign currency.7 storage services, arranging for the transport of gold In order to offset the potential risks of its foreign and silver, and certain administrative duties with reexchange trading activities, Midland also proposes to spect to gold and silver are activities that are part of engage through Deak in foreign exchange forward, and incidental to these permissible precious metal futures, options, options on futures, and currency trading activities, and are, therefore, permissible for swap transactions for its own account as means to bank holding companies.11 hedge Deak's positions in the underlying foreign currencies. The Board has previously approved the use of Tax Refund Agent and Payroll Check Cashing forward contracts, futures, options, and options on Activities futures by bank holding companies to hedge positions in foreign exchange.8 Although the Board has not to Deak currently acts as the exclusive sales tax refund date determined that a bank holding company may agent for the State of Louisiana in connection with the enter into currency swap transactions for hedging its State's tax-free shopping program for foreign visitors. own position in foreign currency, the Board has pre- Under this program, foreign visitors present sales viously found that banks engage in this activity.9 In invoices evidencing sales taxes paid in Louisiana to conducting this activity in currency swaps, Midland Deak offices in Louisiana. Deak refunds the tax in will adopt the same policies, quantitative limitations, U.S. dollars to the visitor, less a handling fee. Deak then remits a portion of the handling fee to the State, 5. Midland Bank, PLC, 74 Federal Reserve Bulletin 577 (1988) ("Midland //"); Long-Term Credit Bank of Japan, Ltd., 74 Federal Reserve Bulletin 573 (1988) (approving the trading of foreign exchange 10. See Westpac Banking Corporation, 73 Federal Reserve Bulletin for a company's own account). 61 (1987) ("Westpac"); Standard and Chartered Banking Group, 6. See, e.g., Hongkong and Shanghai Banking Corporation, 69 Limited, 38 Federal Register 27,552 (1973). Midland also proposes to Federal Reserve Bulletin 221 (1983). provide or arrange financing for its customers' purchases of precious 7. Midland II. Midland proposes to provide general information on metals. These financing activities are permissible for bank holding foreign currency, including information regarding current and histor- companies under the Board's Regulation Y. 12 C.F.R. 225.25(b)(1). ical currency rates, historical rate trends, and the convertibility of 11. See Westpac. Midland also proposes to purchase and sell currency. Midland does not propose to provide investment advice forward, futures, options, and options on futures contracts on gold regarding foreign currency, which would include, for example, advice and silver to hedge its activities in these precious metals. The Board intended to assist customers in monitoring, evaluating, and managing has not determined that these activities, if conducted independently of foreign exchange exposure. the underlying activity in precious metals, are closely related to 8. See, e.g., The Nippon Credit Bank, Ltd., 75 Federal Reserve banking, but has determined that these activities are incidental to the Bulletin 308 (1989) (approving purchase and sale of foreign exchange proposed activities in precious metals. Id. The Board expects that forward, futures, and options contracts for hedging purposes); The Midland will conduct the proposed precious metal forward, futures, Hongkong and Shanghai Banking Corporation, 75 Federal Reserve and options on futures transactions in accordance with the Policy Bulletin 217 (1989). See also Statement of Policy Concerning Bank Statement. In connection with the sale of precious metals, Midland Holding Companies Engaging in Futures, Forward and Option Con- proposes to provide general information on precious metals to custracts on U.S. Government and Agency Securities and Money Market tomers. The information provided will consist primarily of easily Instruments ("Policy Statement"). 12 C.F.R. 225.142 (establishing verifiable public information. Midland will not provide advice on guidelines for trading in forward, futures, and options contracts on precious metals exposures or on investment in precious metals and financial instruments). will not make recommendations to customers regarding investments 9. See, e.g., The Sumitomo Bank, Limited, 74 Federal Reserve in precious metals. The Board believes that this limited activity is Bulletin 582 (1989). See also Policy Statement. incidental to permissible precious metals activities. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 863 and the State and local tax authorities reimburse Deak these reasons, the Board concludes that the proposed for the tax refunds advanced. In addition, Deak cur- activity of acting as sales tax refund agent for the State rently cashes U.S. dollar payroll checks on a limited of Louisiana is closely related to banking for purposes basis, primarily to accommodate employees in airport of section 4(c)(8) of the BHC Act. facilities that lack banking services but where Deak Check cashing is a fundamental banking activity maintains offices. Midland proposes to continue these performed routinely by banks.16 Deak proposes to activities after its acquisition of Deak. Midland con- cash only checks drawn on unaffiliated banks, and tends that the activities of acting as a tax refund agent these offices will not be operated as branches of and cashing checks are closely related to banking for Midland or any affiliated bank. The Board concludes purposes of section 4(c)(8) of the BHC Act. that the proposed activity is closely related to banking Section 4(c)(8) of the BHC Act permits a bank for purposes of section 4(c)(8) of the BHC Act. holding company to engage in activities that the Board has determined by order or regulation to be "so Financial and Managerial Resources and Other closely related to banking or managing or controlling Factors banks as to be a proper incident thereto." 12 U.S.C. § 1843(c)(8). In making that determination, the Board In order to approve this application, the Board must and the courts have recognized the utility of several find that performance of the proposed activities "can alternative guidelines announced in National Courier reasonably be expected to produce benefits to the Association v. Board of Governors of the Federal public . . . that outweigh possible adverse effects, such Reserve System J2 Under the National Courier guide- as undue concentration of resources, decreased or lines, an activity may be found to be closely related to unfair competition, conflicts of interests, or unsound banking if: banking practices." 12 U.S.C. § 1843(c)(8). (1) banks generally have in fact provided the pro- In evaluating these factors under section 4 of the posed services; or BHC Act, the Board considers the financial condition (2) banks generally provide services that are oper- and resources of the applicant and its subsidiaries and ationally or functionally so similar to the proposed the effect of the proposal on these resources.17 In this services as to equip them particularly well to pro- case, the Board notes that the stated primary capital vide the proposed service; or ratio of Midland meets the minimum capital guidelines (3) banks generally provide services that are so for United States multinational bank holding compaintegrally related to the proposed service as to nies. Further, Midland's core capital exceeds the 1992 require their provision in a specialized form.13 The minimum standard adopted by the Basle Committee. Board may also consider any other basis that an In view of these and other facts of record, the Board applicant may advance to demonstrate a "reason- has determined that the financial and managerial facable or close connection or relationship of the tors are consistent with approval of the application. activity to banking."14 Midland, through TCI, competes with Deak in several lines of business, including the sale of travelers Banks routinely act as agents for customers in checks and other consumer instruments; the purchase numerous fashions. Banks may forward to taxing and sale of foreign currency (and the provision of authorities tax receipts delivered to the bank on pay- related advisory services); and the issuance and sale of ment of taxes due. In addition, banks commonly act as foreign currency denominated payment instruments. fiscal agent for government authorities, an activity However, the markets in which TCI and Deak curwhich, like the proposed activity, involves disbursing rently compete are not highly concentrated and neither funds on behalf of state and local governments.15 For firm has a substantial market share in those markets. Moreover, following consummation numerous competitors would remain in these markets. Consumma- 12. 516 F.2d 1229 (D.C. Cir. 1975). tion of the proposed acquisition is therefore unlikely to 13. The United States Supreme Court has approved, and other United States courts of appeals have followed, the National Courier result in any significantly adverse competitive effects. guidelines. See, e.g., Securities Industry Association v. Board of Under the framework and subject to the conditions Governors of the Federal Reserve System, 468 U.S. 207 (1984); NCNB established in this and prior Orders, the Board be- Corp v. Board of Governors of the Federal Reserve System, 599 F.2d 609 (4th Cir. 1979); Alabama Association of Insurance Agents v. lieves that consummation of this proposal is not likely Board of Governors of the Federal Reserve System, 533 F.2d 224 (5th to result in any significantly adverse effects, such as Cir. 1976), modified on other grounds, 588 F.2d 729 (1977), cert, denied, 435 U.S. 904 (1978). 14. 49 Federal Register 806 (1984). See also Association of Data Processing Organizations, Inc. v. Board of Governors of the Federal 16. See, e.g., 12 U.S.C. § 24(Seventh) (expressly authorizing na- Reserve System, 745 F.2d 677, 686 (D.C. Cir. 1984). tional banks to negotiate drafts). 15. See, e.g., 12 U.S.C. § 90. 17. 12 C.F.R. 225.24. 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864 Federal Reserve Bulletin • October 1990 undue concentration of resources, decreased or unfair iary, NCNB Capital Markets, Inc., Charlotte, North competition, conflicts of interests, or unfair banking Carolina ("Company"), to provide securities brokerpractices. Accordingly, the Board has determined that age and investment advisory services, both on a septhe performance of the proposed activities by Midland arate and combined basis; to act as agent in the private can reasonably be expected to produce public benefits placement of all types of securities, including providwhich would outweigh adverse effects under the ing related advisory services; and to buy and sell proper incident to banking standard of section 4(c)(8) securities on the order of customers as a "riskless of the BHC Act. principal." On the basis of the foregoing, including the commit- Company is currently authorized to underwrite and ments made by Midland, the Board has determined to, deal in securities eligible to be underwritten and dealt and hereby does, approve this application subject to in by U.S. member banks, and to underwrite and deal all the terms and conditions set forth in this Order and in, to a limited extent, municipal revenue bonds, 1-4 in the above noted Board Orders and regulations that family mortgage-related securities, commercial paper, relate to these activities. The Board's determination is and consumer receivable-related securities.1 Company also subject to all the conditions established in the is registered as a broker-dealer under the securities Board's Regulation Y, including those in sections laws of the United States (and certain states) and is a 225.4(d) and 225.23(b), and to the Board's authority to member of the National Association of Securities require modification or termination of the activities of Dealers, Inc. a bank holding company or any of its subsidiaries as NCNB, with approximately $69.4 billion in consolthe Board finds necessary to assure compliance with, idated assets, is the third largest commercial banking and prevent evasion of, the provisions of the BHC Act organization in the United States.2 It operates 10 and the Board's regulations and orders issued there- subsidiary banks and engages directly and through under. subsidiaries in a broad range of permissible nonbank- This transaction shall not be consummated later ing activities in the United States. than three months after the effective date of this order, Notice of the application, affording interested perunless such period is extended for good cause by the sons an opportunity to submit comments, has been Board or by the Federal Reserve Bank of New York, duly published (55 Federal Register 23,980 (1990)). pursuant to delegated authority. The time for filing comments has expired, and the By order of the Board of Governors, effective Board has considered the application and all com- August 15, 1990. ments received in light of the public interest factors set forth in section 4(c)(8) of the BHC Act. Voting for this action: Chairman Greenspan and Governors The Board has previously determined by Order that Angell, Kelley, La Ware, and Mullins. Absent and not voting: full-service brokerage/activities are permissible non- Governor Seger. banking activities for bank holding companies under section 4(c)(8) of the BHC Act. PNC Financial Cor- JENNIFER J. JOHNSON poration, 75 Federal Reserve Bulletin 396 (1989); Bank Associate Secretary of the Board of New England Corporation, 74 Federal Reserve Bulletin 700 (1988). NCNB proposes that Company NCNB Corporation engage in these full-service brokerage activities in Charlotte, North Carolina accordance with all of the conditions set forth in those Orders. Company would also engage in investment Order Approving Application to Engage in Certain advisory and securities brokerage activities on a sep- Securities-Related Activities, Including Acting as arate basis pursuant to the Board's Regulation Y. Agent in the Private Placement of All Types of 12 C.F.R. 225.25(b)(4) and (15). Securities, Providing Securities Brokerage and The Board has previously determined that, subject Investment Advisory Services on a Combined, Basis, to certain prudential limitations established to address and Acting as "Riskless Principal" the potential for conflicts of interests, unsound banking practices or other adverse effects, the proposed NCNB Corporation, Charlotte, North Carolina private placement and "riskless principal" activities ("NCNB"), a bank holding company within the mean- are so closely related to banking as to be a proper ing of the Bank Holding Company Act ("BHC Act"), incident thereto within the meaning of section 4(c)(8) has applied for the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and 1. NCNB Corporation, 75 Federal Reserve Bulletin 520 (1989) section 225.23(a)(2) of the Board's Regulation Y ("NCNB Order"). (12 C.F.R. 225.23(a)(2)) for its wholly owned subsid- 2. Data are as of December 31, 1989. 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Legal Developments 865 of the BHC Act. The Board has also previously individually and in the aggregate.5 These policies and determined that acting as agent in the private place- procedures, as well as the purchases themselves, will ment of securities and purchasing and selling securities be reviewed by the Federal Reserve Bank of Richon the order of investors as a "riskless principal" do mond. not constitute underwriting and dealing in securities Under the framework established in this and prior for purposes of section 20 of the Glass-Steagall Act, decisions, consummation of this proposal is not likely and that revenue derived from these activities is not to result in any significantly adverse effects, such as subject to the 10 percent revenue limitation on ineligi- undue concentration of resources, decreased or unfair ble securities underwriting and dealing.3 NCNB has competition, conflicts of interest, or unsound banking committed that Company will conduct its private practices. Consummation of the proposal would proplacement and "riskless principal" activities using the vide added convenience to NCNB's customers. In same methods and procedures, and subject to the addition, the Board expects that the de novo entry of same prudential limitations established by the Board in NCNB into the market for these services would inthe Bankers Trust Order, as modified by the J.P. crease the level of competition among providers of Morgan Order. these services. Accordingly, the Board has determined NCNB has proposed to have its affiliated banks that the performance of the proposed activities by extend credit to an issuer whose debt securities have NCNB can reasonably be expected to produce public been placed by the section 20 subsidiary where the benefits which would outweigh adverse effects under proceeds would be used to pay the principal amount of the proper incident to banking standard of section the securities at maturity. NCNB has committed that 4(c)(8) of the BHC Act. these extensions of credit will conform to the limita- Based on the above, the Board has determined to, tions set forth in the Board's decision in J.P. Morgan, and hereby does, approve the application subject to all including the requirement that a period of at least three of the terms and conditions set forth in this Order, and years elapse from the time of the placement of the in the above-noted Board Orders that relate to these securities to the decision to extend credit, that NCNB activities. The Board's determination is also subject to maintain adequate documentation of these transac- all of the conditions set forth in the Board's Regulation tions and decisions, and that the extensions of credit Y, including those in sections 225.4(d) and 225.23(b), meet prudent and objective standards as well as the and to the Board's authority to require modification or standards set out in section 23B of the Federal Reserve termination of the activities of a bank holding com- Act.4 The Federal Reserve Bank of Richmond will pany or any of its subsidiaries as the Board finds closely review loan documentation of bank affiliates to necessary to assure compliance with, and to prevent ensure that an independent and thorough credit eval- evasion of, the provisions of the BHC Act and the uation has been undertaken with respect to the partic- Board's regulations and Orders issued thereunder. ipation of the bank in these credit extensions to issuers This transaction shall not be consummated later of securities privately placed by an agent affiliated with than three months after the effective date of this the bank. Order, unless such period is extended for good cause NCNB also has proposed to have Company place by the Board or by the Federal Reserve Bank of securities with its parent holding company or with a Richmond, pursuant to delegated authority. nonbank subsidiary of the parent company consistent By order of the Board of Governors, effective with the Board's ruling in J.P. Morgan. In this regard, August 6, 1990. NCNB will establish both individual and aggregate limits on the investment by affiliates of the section 20 Voting for this action: Chairman Greenspan and Governors Kelley, LaWare, and Mullins. Absent and not voting: Govsubsidiary in any particular issue of securities that is ernors Seger and Angell. placed by the section 20 subsidiary and will establish appropriate internal policies, procedures, and limita- JENNIFER J. JOHNSON tions regarding the amount of securities of any partic- Associate Secretary of the Board ular issue placed by Company that may be purchased by NCNB and each of its nonbanking subsidiaries, 5. The limit established shall not exceed 50 percent of the issue being placed. Additionally, in the development of these policies and procedures, NCNB will incorporate, with respect to placements of securities, the limitations established by the Board in condition 12 of its Order regarding aggregate exposure of the holding company on a consolidated basis to any single customer whose securities are under- 3. J.P. Morgan & Company Inc., 76 Federal Reserve Bulletin 26 written or dealt in by Company. J.P. Morgan & Company, Incorpo- (1990) ("J.P. Morgan"); Bankers Trust New York Corporation, 75 rated, The Chase Manhattan Corporation, Bankers Trust New York Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). Corporation, Citicorp and Security Pacific Corporation, 75 Federal 4. 12 U.S.C. § 371c-l. Reserve Bulletin 192 (1989). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

866 Federal Reserve Bulletin • October 1990 The Royal Bank of Scotland Group pic United States, Applicant owns a bank holding com- Edinburgh, Scotland pany based in Providence, Rhode Island, and operates a branch in New York, an agency in San Francisco, Order Approving Applications to Act as Agent in the and representative offices in Chicago, Los Angeles, Private Placement of All Types of Securities, and to and Houston. Engage in Commercial Real Estate Equity Financing, Financial Advisory Services and Real Private Placement and Financial Advisory Services Estate Investment Advisory Services The Board has previously determined that, subject to The Royal Bank of Scotland Group pic, Edinburgh, a number of prudential limitations that address the Scotland ("Applicant"), a bank holding company potential for conflicts of interests, unsound banking within the meaning of the Bank Holding Company Act practices, and other adverse effects, the proposed ("BHC Act"),1 has applied for the Board's approval private placement activity is so closely related to under section 4(c)(8) of the BHC Act, 12 U.S.C. banking as to be a proper incident thereto within the § 1843(c)(8), and section 225.23(a)(3) of the Board's meaning of section 4(c)(8) of the BHC Act.3 In those Regulation Y, 12 C.F.R. 225.23(a)(3), for its wholly orders, the Board also found that acting as agent in the owned subsidiaries, Charterhouse Inc. and Charter- private placement of securities is consistent with sechouse North America Securities, Inc., both of New tion 20 of the Glass-Steagall Act, and that revenue York, New York ("Companies"), to act as agent in derived from that activity is not subject to the 10 the private placement of securities, and to: percent revenue limitation on underwriting and dealing provide advice to financial and nonfinancial institu- in ineligible securities. In order to address the potentions and high net worth individuals with respect to tial for conflicts of interests, unsound banking pracmerger, acquisition, divestiture, and financing trans- tices, or other adverse effects, Applicant has proposed actions, including loan syndications, interest rate that Companies conduct this activity consistent with swaps, interest rate caps, and similar transactions; the limitations, methods, and procedures established perform valuation services for financial and nonfi- by the Board in approving this activity, as these nancial institutions and high net worth individuals; limitations have been modified to reflect Applicant's render fairness opinions in connection with mergers, status as a foreign bank.4 acquisitions, and similar transactions; and prepare The Board has also determined by order that the feasibility studies for corporations (collectively, "fi- proposed financial advisory services are closely renancial advisory services"). lated to banking within the meaning of section 4(c)(8) of the BHC Act.5 Applicant has committed that Com- Applicant has also applied under section 4(c)(8) to panies will conduct these activities subject to the engage in certain real estate investment advisory ac- limitations established by the Board in these Orders. tivities and commercial real estate equity financing services through the acquisition of a general partner- Real Estate Investment Advisory Services and Real ship interest in Continental Partners, New York, New Estate Equity Financing Services York ("Continental"), a de novo general partnership. Notice of the applications, affording interested per- The Board has previously determined by regulation sons an opportunity to submit comments, has been that arranging commercial real estate equity financing published (55 Federal Register 17,670 (1990)). The is closely related to banking for purposes of section time for filing comments has expired, and the Board 4(c)(8) of the BHC Act. 12 C.F.R. 225.25(b)(14). Aphas considered the applications and all comments plicant proposes to conduct these activities through received in light of the public interest factors set forth in section 4(c)(8) of the BHC Act. Applicant, a bank holding company organized under 3. J.P. Morgan & Company Incorporated, 76 Federal Reserve the laws of the United Kingdom, has total consoli- Bulletin 26 (1990) ("J.P. Morgan")-, Bankers Trust New York Corpodated assets equivalent to $49.67 billion.2 Applicant ration, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). 4. See Bankers Trust New York Corporation, 73 Federal Reserve engages directly and indirectly in a broad range of Bulletin 138 (1987); J.P. Morgan; Bankers Trust; and Canadian financial activities through its offices worldwide. In the Imperial Bank of Commerce, The Royal Bank of Canada, and Barclays PLC, 76 Federal Reserve Bulletin 158 (1990). 5. See Banc One Corporation, 76 Federal Reserve Bulletin 756 (1990) (permitting the provision of financial advisory services to 1. Applicant owns Citizens Financial Group, Providence, Rhode financially sophisticated individuals whose net worth, including joint Island, a registered bank holding company. See The Royal Bank of net worth with spouse, exceeds $1 million); SunTrust Banks, Inc., 74 Scotland Group pic, 75 Federal Reserve Bulletin 41 (1989). Federal Reserve Bulletin 256 (1988); Signet Banking Corporation, 2. Asset data are as of March 31, 1990. 73 Federal Reserve Bulletin 59 (1987). 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Legal Developments 867 Continental in accordance with the Board's regula- consummation of this proposal is not likely to result in tions. any significantly adverse effects, such as undue con- Applicant also proposes, through Continental, to act centration of resources, decreased or unfair competias an investment advisor, and in such capacity, pro- tion, conflicts of interest, or unsound banking pracvide investment research and advice to, and promote tices. Accordingly, the Board has determined that the and assist direct investment by, investors in real performance of the proposed activities by Applicant property. The Board has previously determined that can reasonably be expected to produce public benefits these activities are permissible investment advisory that would outweigh possible adverse effects under the activities for bank holding companies under section proper incident to banking standard of section 4(c)(8) 225.25(b)(4) of the Board's Regulation Y (12 C.F.R. of the BHC Act. 225.25(b)(4)).6 Applicant commits that Continental will Based on the foregoing, the Board has determined conduct these real estate investment advisory services to, and hereby does, approve these applications subsubject to the limitations established by the Board in ject to all of the commitments made in these applicaits regulations and orders governing these activities.7 tions and to the terms and conditions set forth above and in the relevant Board Orders and regulations Financial, Managerial and Other Factors governing the proposed activities. The Board's determination is also subject to all of the conditions set In order to approve these applications, the Board must forth in the Board's Regulation Y, including those in find that performance of the proposed activities "can sections 225.4(d) and 225.23(b), and to the Board's reasonably be expected to produce benefits to the authority to require modification or termination of the public . . . that outweigh possible adverse effects, such activities of a bank holding company or any of its as undue concentration of resources, decreased or subsidiaries as the Board finds necessary to assure unfair competition, conflicts of interests, or unsound compliance with, and to prevent evasion of, the probanking practices." 12 U.S.C. § 1843(c)(8). visions of the BHC Act and the Board's regulations In evaluating these factors under section 4 of the and Orders issued thereunder. BHC Act, the Board considers the financial condition This transaction shall not be consummated later and resources of the applicant and its subsidiaries and than three months after the effective date of this the effect of the proposal on these resources. In this Order, unless such period is extended for good cause case, the Board notes that the stated primary capital by the Board or by the Federal Reserve Bank of ratio of Applicant meets the minimum capital guide- Boston, pursuant to delegated authority. lines for United States multinational bank holding By order of the Board of Governors, effective companies. Further, Applicant's core capital exceeds August 6, 1990. the 1992 minimum standard adopted by the Basle Committee. In view of these and other facts of record, Voting for this action: Chairman Greenspan and Governors the Board has determined that the financial and man- Kelley, LaWare and Mullins. Absent and not voting: Governors Seger and Angell. agerial factors are consistent with approval of the applications. JENNIFER J. JOHNSON Consummation of this proposal would provide Associate Secretary of the Board greater efficiencies and added convenience to Applicant's customers by allowing the provision of a wider Orders Issued Under Sections 3 and 4 of the range of services to these customers. In addition, the Bank Holding Company Act Board expects that the de novo entry of Applicant into the market for these services would increase the level The Bank of New York Company, Inc. of competition among providers of these services. New York, New York Under the framework established in this and prior decisions, as well as the relevant Board regulations, Order Denying Application to Acquire a Bank Holding Company 6. See Bancorp Hawaii, Inc., 71 Federal Reserve Bulletin 168 (1985); Standard Chartered Bank PLC, 71 Federal Reserve Bulletin 470 (1985). The Bank of New York Company, Inc., New York, 7. In this regard, Applicant has committed that Continental will not New York ("BNY"), a bank holding company within solicit properties to be sold, list or advertise properties for sale, or the meaning of the Bank Holding Company Act hold itself out or advertise as a real estate broker. In addition, Continental will not provide real estate investment advisory services ("BHC Act"), has applied for the Board's approval to clients when the real property is intended to be used in the trade or under section 3 of the BHC Act (12 U.S.C. § 1842) to business of the client, and will otherwise provide these services in accordance with the provisions of section 225.25(b)(4). acquire all of the voting shares of and, through a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

868 Federal Reserve Bulletin • October 1990 wholly owned subsidiary, to merge with Northeast $22.5 billion in deposits and representing 7.9 percent Bancorp, Inc., New Haven, Connecticut ("North- of market deposits. The Herfindahl-Hirschman Index east"), and thereby acquire its subsidiary bank, Union ("HHI") would increase by 9 points to 658.6 Accord- Trust Company, Stamford, Connecticut. BNY has ingly, the Board concludes that consummation of this also applied under section 4(c)(8) of the BHC Act proposal would not have a significantly adverse effect (12 U.S.C. § 1843(c)(8)) to acquire all of the voting on existing competition in this banking market. shares of NBI Mortgage Investment Corporation, The Board also has considered the effects of the New Haven, Connecticut, which engages in the place- proposal on probable future competition in the relement and servicing of large commercial mortgage vant banking markets. In light of the market concenloans pursuant to section 225.25(b)(1) of the Board's tration and the number of probable future entrants into Regulation Y (12 C.F.R. 225.25(b)(1)).1 those markets, the Board concludes that consumma- Notice of the applications, affording interested per- tion of this proposal would not have a significantly sons an opportunity to comment, has been published adverse effect on probable future competition in any (55 Federal Register 21,936 (1990)). The time for filing relevant market. comments has expired, and the Board has considered In evaluating this application, the Board is required, the applications and all comments received in light of under the terms of section 3 of the BHC Act, to the factors set forth in sections 3 and 4 of the BHC consider the financial resources of the companies and Act.2 banks involved and the effect of the proposed acqui- BNY controls one bank subsidiary and is the fifth sition on the future prospects of the bank and applicant largest commercial banking organization in New York, organization. The Board has stated and continues to controlling deposits of $19.1 billion, representing 7.3 believe that capital adequacy is an especially imporpercent of the total deposits in commercial banks in tant factor in the analysis of bank holding company New York.3 Northeast controls one bank subsidiary expansion proposals.7 and is the third largest commercial banking organiza- In this regard, the Board has stated that it expects tion in Connecticut, controlling deposits of $2.7 bil- banking organizations contemplating expansion prolion, representing 9.0 percent of the total deposits in posals to maintain strong capital levels substantially commercial banks in Connecticut. Based upon the above the minimum levels specified in the Board's facts of record, the Board concludes that consumma- Capital Adequacy Guidelines8 without significant relition of the proposed acquisition would not result in ance on intangibles, particularly goodwill. The Board any significantly adverse effect on the concentration of carefully analyzes the effect of expansion proposals on banking resources in Connecticut. the preservation or achievement of strong capital BNY and Northeast compete directly in the Metro- levels and has adopted a policy that there should be no politan New York-New Jersey banking market.4 BNY significant diminution of financial strength below these is the fifth largest commercial banking organization in levels for the purpose of effecting major expansion this market, controlling deposits of $20.6 billion and proposals.9 representing 7.3 percent of total deposits in commer- BNY proposes to acquire Northeast for approxicial banks in the market ("market deposits").5 North- mately $195.6 million, excluding BNY's existing ineast is the 26th largest commercial banking organiza- vestment of $43.2 million in Northeast common stock, tion in the market with deposits of $1.9 billion, which represents less than one percent of market deposits. Upon consummation, BNY would become the fourth 6. Under the revised Department of Justice Merger Guidelines largest commercial banking organization, controlling (49 Federal Register 26,823 (1984)), a market in which the post-merger HHI is less than 1000 is considered unconcentrated. Generally, the Justice Department will not challenge a bank merger (in the absence of other factors indicating anticompetitive effects) if the post-merger 1. BNY also proposes to acquire ownership of Northeast's 5.83 HHI is less than 1000. percent voting interest in The New York Switch Corporation, Hack- 7. See The Bank of New York Company, Inc., 74 Federal Reserve ensack, New Jersey, which engages in data processing and related Bulletin 257 (1988); Chemical New York Corporation, 73 Federal activities pursuant to section 225.25(b)(7) of the Board's Regulation Y Reserve Bulletin 378 (1987); Citicorp, 72 Federal Reserve Bulletin 497 (12 C.F.R. 225.25(b)(7)). (1986); National City Corporation, 70 Federal Reserve Bulletin 743 2. One commenter has expressed concerns about the ability of (1984). Union Trust Company to continue to meet the credit needs of its local 8. Capital Adequacy Guidelines, 50 Federal Register 16,057 (1985); community if it were acquired by an out-of-state banking organization. 12 C.F.R. 225.25 Appendix B. 3. State deposit data are as of March 31, 1990. 9. Thus, for example, the Board has generally approved proposals 4. This market is approximated by New York City, Nassau, Orange, involving a decline in capital only where the applicants have promptly Putnam, Rockland, Suffolk, Sullivan and Westchester Counties in restored their capital to pre-acquisition levels following consumma- New York; Bergen, Essex, Hudson, Hunterdon, Middlesex, Mon- tion of the proposals and have implemented programs of capital mouth, Morris, Ocean, Passaic, Somerset, Sussex, Union and Warren improvement to raise capital significantly above minimum levels. See, Counties in New Jersey; and part of Fairfield County in Connecticut. e.g., Citicorp, 72 Federal Reserve Bulletin 726 (1986); Security Pacific 5. Market deposit data are as of June 30, 1988. Corporation, 72 Federal Reserve Bulletin 800 (1986). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 869 warrants and nonvoting stock.10 BNY would pay the that effect and not merely by implication."13 In order purchase price in cash, to be funded entirely by to meet the requirements of the Douglas Amendment, subordinated debt, or by issuing Northeast sharehold- the Connecticut and New York statutes must authoers equal portions of BNY common stock, BNY rize banking acquisitions on a reciprocal basis.14 Alpreferred stock, and cash funded by subordinated though the New York Superintendent of Banks has debt.11 raised concerns about whether the statutory factors Under either financing alternative, however, the required to be considered under Connecticut law for proposal is inconsistent with the Board's capital policy out-of-state acquisitions negate reciprocity with New that an expansionary acquisition not interfere with an York law, the Board finds it unnecessary to resolve applicant's ability to maintain a strong capital position this issue in light of the determinations described above the minimum levels required under the Board's above. guidelines, without significant reliance on intangibles. On the basis of all the facts of record, the Board After the proposed acquisition, tangible capital ratios concludes that the banking considerations involved in for the combined organization would not be substan- this proposal present adverse factors bearing upon the tially above the Board's minimum capital levels and financial resources and future prospects of BNY that would be less than the current average levels of BNY's are not outweighed by any other factors. Accordingly, peer group of the nation's largest regional banking it is the Board's judgment that approval of these organizations. BNY has also failed to present any applications would not be in the public interest and proposal to strengthen the capital levels of the com- that the applications should be, and hereby are, debined organization within a short period of time after nied. consummation. In addition, the tangible common eq- By order of the Board of Governors, effective uity to tangible assets ratio would be below the appli- August 15, 1990. cable capital commitment required by prior Board Order.12 Accordingly, based upon all the facts of Voting for this action: Chairman Greenspan and Governors record in this case, the Board finds that financial Angell, Kelley, LaWare, and Mullins. Absent and not voting: Governor Seger. considerations are not consistent with approval of these applications. JENNIFER J. JOHNSON Managerial resources and considerations relating to Associate Secretary of the Board the convenience and needs of the community do not lend sufficient weight to warrant approval of these Centura Banks, Inc. applications. Rocky Mount, North Carolina Section 3(d) of the BHC Act (12 U.S.C. § 1842(d)), the Douglas Amendment, prohibits the Board from Order Approving Formation of a Bank Holding approving an application by a bank holding company Company, Merger of Banks, Establishment of to acquire control of any bank located outside of the Branches, Membership in the Federal Reserve holding company's home state unless such acquisition System, and Investment in Bank Premises is "specifically authorized by the statute laws of the State in which [the] bank is located, by language to Centura Banks, Inc., Rocky Mount, North Carolina ("Centura"), has applied under section 3 of the Bank Holding Company Act (12 U.S.C. § 1842) ("BHC 10. Under the Plan and Merger Agreement, as amended, the purchase price is 2.5 times the book value of Northeast shares on a 13. Connecticut, the home state of Northeast, has recently authofully-diluted basis. BNY and Northeast dispute the current book value rized acquisitions by out-of-state bank holding companies. Connectiof Northeast's stock and BNY's proposed purchase price constitutes cut Public Acts No. 90-2, effective March 19, 1990, amending less than one-half of the $513.2 million purchase price based on the C.G.S.A. § 36-552. book value reported by Northeast as of March 31, 1990. Although the 14. C.G.S.A. § 36-552 would permit a New York bank holding purchase price is in dispute, the Board has assessed the impact on company to acquire a Connecticut bank holding company if such an capital of the proposed transaction on the basis most favorable to the acquisition could be made on similar terms under New York law. applicant by using the lower purchase price projected by BNY. However, New York law would not authorize the acquisition of a New 11. Because the merger agreement requires that a Northeast share- York bank holding company by a Connecticut bank holding company holder must elect to receive consideration other than cash, the unless the laws of Connecticut permit acquisitions by New York bank availability of this financing alternative is uncertain. holding companies on a nondiscriminatory basis. N.Y. Banking Law 12. The Board notes that BNY has been required to achieve, within § 142-b (McKinney 1989) (requiring, under the facts of this applicaone year of consummating its acquisition of Irving Bank Corporation, tion, a finding that New York bank holding companies are not subject a 4.1 percent tangible common equity to assets ratio, based on the to conditions or restrictions materially limiting their ability to make deduction of all intangibles from the calculation of this ratio and not acquisitions in Connecticut if such conditions or restrictions are only goodwill, under the Board's Order conditionally approving this inapplicable to acquisitions made by Connecticut bank holding comacquisition. The Bank of New York Company, Inc., supra at 264. panies). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

870 Federal Reserve Bulletin • October 1990 Act") to become a bank holding company by acquiring comments received in light of the factors set forth in Peoples Bancorporation ("Peoples") and The Planters sections 3(c) and 4 of the BHC Act, in the Bank Corporation ("Planters"), both of Rocky Mount, Merger Act, and in the Federal Reserve Act. North Carolina, both bank holding companies within Peoples, with approximately $1.4 billion in total the meaning of the BHC Act, and thereby to acquire consolidated assets, owns three banking subsidiaries their subsidiary banks: Planters National Bank and and one savings association subsidiary in North Trust Company, Rocky Mount, North Carolina; Peo- Carolina.2 Peoples is the ninth largest commercial ples Bank and Trust Company, Rocky Mount, North banking organization in North Carolina, controlling Carolina; Peoples Bank of the Triad, Winston-Salem, approximately $1.1 billion in total deposits, repre- North Carolina; and Mid-South Bank and Trust Com- senting 2.2 percent of the total deposits in commerpany, Sanford, North Carolina.1 cial banks in the state.3 Planters, with approximately Centura also proposes to merge three of these four $1.2 billion in total consolidated assets, owns one banking subsidiaries with and into a de novo banking banking subsidiary in North Carolina. Planters is the subsidiary, Centura Bank, Rocky Mount, North tenth largest commercial banking organization in Carolina, which has applied to merge with Planters North Carolina, controlling approximately $1.0 bil- National Bank and Trust Company, Peoples Bank lion in total deposits, representing 2.0 percent of the and Trust Company, and Peoples Bank of the Triad total deposits in commercial banks in the state. Upon ("Merging Banks"), pursuant to section 18(c) of the consummation of this proposal and all planned dives- Federal Deposit Insurance Act (12 U.S.C. § 1828(c)) titures, Centura would become the seventh largest ("Bank Merger Act"). Centura Bank also seeks commercial banking organization in North Carolina approval to establish the branches of Merging Banks based upon its control of total deposits of $2.1 as branches of Centura Bank and to become a billion, representing approximately 4.2 percent of the member of the Federal Reserve System, pursuant to total deposits in commercial banks in the state. section 9 of the Federal Reserve Act (12 U.S.C. Consummation of this proposal would not have a § 321); and to invest in bank premises in excess of significantly adverse effect upon the concentration of the amount of its capital stock, pursuant to section commercial banking resources in North Carolina. 24A of the Federal Reserve Act (12 U.S.C. § 371d). Centura has also applied under section 4(c)(8) of Competitive Factors the BHC Act (12 U.S.C. § 1843(c)(8)) to acquire all of the voting shares of People's nonbanking subsid- Peoples and Planters compete directly in nine bankiary, Watauga Savings and Loan Association, Inc., ing markets in North Carolina.4 In the Roanoke Boone, North Carolina ("Watauga"). This activity is Rapids market,5 Peoples is the third largest of four authorized for bank holding companies under the commercial banking organizations, controlling ap- Board's Regulation Y, 12 C.F.R. 225.25(b)(9). proximately $59.0 million in deposits, representing Notice of the applications, affording interested 18.4 percent of total deposits in commercial banking persons an opportunity to submit comments, has organizations in that market ("market deposits").6 been published (55 Federal Register 23,136 (1990)) Planters is the largest commercial banking organizaand has been given in accordance with the Bank tion in the market, controlling approximately $119.1 Merger Act and the Board's Rules of Procedure million in deposits, representing 37.1 percent of (12 C.F.R. 262.3(b)). As required by the Bank market deposits. Upon consummation of this pro- Merger Act, reports on the competitive effects of the posal, Centura would become the largest commercial merger were requested from the United States Attor- banking organization in the market, controlling apney General, the Office of the Comptroller of the proximately 55.6 percent of market deposits. The Currency, and the Federal Deposit Insurance Corpo- Roanoke Rapids banking market is considered highly ration. The time for filing comments has expired, and concentrated. The Herfindahl-Hirschman Index the Board has considered the applications and all ("HHI") for the market is 2851 and would increase 1. Centura, a newly formed corporation, proposes to acquire all of 2. Asset data are as of June 30, 1990. the outstanding voting shares of Peoples and Planters through an 3. State deposit data are as of December 31, 1989. exchange of shares and a merger of each bank holding company with 4. These markets are Chatham County, Dare County, Hertford and into Centura. In connection with this transaction, Peoples and County, Pitt County, Raleigh RMA, Roanoke Rapids, Rocky Mount, Planters have granted to each other an option to purchase up to 19.9 Wilmington RMA, and Winston-Salem RMA. percent of the outstanding common stock of their respective organi- 5. The Roanoke Rapids, North Carolina banking market is approxzations and have applied under section 3 of the BHC Act to exercise imated by the counties of Halifax and Northampton. their options if any of several preconditions occur. 6. Market data are as of June 30, 1989. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 871 by 1367 points to 4218 upon consummation of this share, and commercial lending activities of thrift instiproposal.7 tutions in the Roanoke Rapids banking market, the While consummation of the proposal would result in Board has concluded that thrift institutions exert a a large increase in the HHI in the Roanoke Rapids significant competitive influence that mitigates in part market, certain factors mitigate the potential anticom- the anticompetitive effects of this proposal.11 petitive effects of this proposal. Peoples and Planters Based upon all of the facts of record, including the have committed to divest, on or before consummation proposed divestitures, the expected de novo entry of a of Centura's acquisition of these companies, three commercial banking organization into the market, the banking offices in the Roanoke Rapids market, con- role of thrift institutions in the market, and the fact trolling total deposits of $25.2 million, to an organiza- that nine depository institutions will remain in the tion that is not currently present in that market.8 market following consummation of the proposal, the Consequently, the number of competitors in the mar- Board finds that consummation of this proposal is not ket would not decrease under this proposal. The likely to result in a significantly adverse effect on acquiring organization would control approximately competition in the Roanoke Rapids market. 7.9 percent of market deposits, and the HHI would In the Rocky Mount market,12 Peoples is the second increase by 618 points to 3469 upon consummation of largest of eight commercial banking organizations, the planned divestitures. controlling approximately $412.9 million in deposits, In addition to the proposed divestitures, the Board representing 23.1 percent of total deposits in commerhas considered the presence of thrift institutions in the cial banking organizations in that market. Planters is Roanoke Rapids banking market in its analysis of this the fourth largest commercial banking organization in proposal.9 Six thrift institutions, controlling 35.9 per- the Rocky Mount market, controlling approximately cent of the combined deposits of commercial banks $200.8 million in deposits, representing 11.2 percent of and thrift institutions in the market, exert a particu- market deposits. Upon consummation of this prolarly strong competitive influence in the Roanoke posal, Centura would become the second largest com- Rapids market. These thrifts are significant competi- mercial banking organization in the market, controltors of commercial banks in the market with regard to ling approximately 34.3 percent of market deposits. providing a full range of financial services including The Rocky Mount banking market is considered highly commercial loans, consumer loans, and transaction concentrated, with the three largest commercial bankaccounts.10 Based upon the size, number, market ing organizations controlling 72.3 percent of market deposits. The HHI for the market is 2262 and would increase by 517 points to 2779 upon consummation of the proposal. 7. Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the Although consummation of this proposal would post-merger HHI is above 1800 is considered to be highly concen- eliminate some existing competition in the Rocky trated. In such markets, the Justice Department is likely to challenge a merger that increases the HHI by more than 50 points. The Justice Mount banking market, the Board believes that sev- Department has informed the Board that a bank merger or acquisition eral factors mitigate the potential anticompetitive efgenerally will not be challenged (in the absence of other factors fects of this proposal. Peoples and Planters have indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger increases the HHI by more than 200 points. committed to divest, on or before consummation of The Justice Department has stated that the higher than normal HHI Centura's acquisition of these companies, eight bankthresholds for screening bank mergers for anticompetitive effects implicitly recognize the competitive effect of limited-purpose lenders ing offices in the Rocky Mount market, controlling and other non-depository financial entities. 8. The Board's policy with regard to divestitures intended to remedy the anticompetitive effects resulting from a merger or acquisition proposal requires that divestitures must occur on or before 11. The Board previously has indicated that it may be appropriate in consummation. Barnett Banks of Florida, Inc., 68 Federal Reserve light of factors in a specific market to include thrift deposits at a level Bulletin 190 (1982); InterFirst Corporation, 68 Federal Reserve Bul- greater than 50 percent when analyzing the competitive effects of a letin 243 (1982). proposal. See, e.g., Fleet Financial Group, Inc., 74 Federal Reserve 9. The Board previously has indicated that thrift institutions have Bulletin 62 , 64 (1988); Hartford National Corporation, 73 Federal become, or have the potential to become, major competitors of Reserve Bulletin 720, 721 (1987). commercial banks. Midwest Financial Group, 75 Federal Reserve If 75 percent of the deposits controlled by thrift institutions in the Bulletin 386 (1989); CB&T Bancshares, Inc., 75 Federal Reserve Roanoke Rapids market were included in the calculation of market Bulletin 381 (1989); National City Corporation, 70 Federal Reserve concentration following the proposed divestitures, Centura would Bulletin 743 (1984). rank first among commercial banks and thrifts in the market, control- 10. Thrifts in the Roanoke Rapids market, on average, hold a larger ling 33.6 percent of the total market deposits of commercial banks and portion of their assets in commercial loans, consumer loans, and thrifts upon consummation of this proposal. The HHI would increase transaction accounts than the average for thrifts nationally. Two of 306 points to 1885. these thrift institutions have a substantial amount of their assets, 10.7 12. The Rocky Mount, North Carolina banking market is approxipercent and 5.3 percent respectively, in non-real estate commercial mated by the Rocky Mount RMA and the remainder of the counties of loans. Edgecombe, Nash, and Wilson. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

872 Federal Reserve Bulletin • October 1990 deposits of $71.3 million, to a commercial banking deposits held by thrift institutions were included in the organization that is a recent de novo entrant to that calculation of market concentration, the increase in market, and currently controls less than one percent of the HHI upon consummation of the proposal would total deposits in the market. The Board has also given not exceed the revised Department of Justice Merger substantial weight to the fact that seven banking Guidelines. On the basis of the foregoing and other organizations, including some of the largest commer- facts of record, the Board finds that consummation of cial banking organizations in North Carolina, would Centura's proposal would not have a significantly remain as competitors upon consummation of this adverse effect on existing competition in any relevant proposal. Eight thrift institutions are also present in market. the Rocky Mount market. Based upon the size, number, and market share of thrift institutions in the Financial, Managerial, and Convenience and Needs Rocky Mount banking market, the Board has con- Factors cluded that thrift institutions exert a competitive influence that mitigates in part the anticompetitive effects In evaluating these applications, the Board has conof this proposal.13 sidered the financial and managerial resources of Cen- In addition, characteristics of the Rocky Mount tura, Peoples, Planters, and their bank subsidiaries, market indicate that it is attractive for entry. The and the effect of the proposed acquisition on the Rocky Mount market's growth rate for total bank resources and future prospects of these companies. As deposits substantially exceeds the comparable average noted above, Centura proposes to accomplish the of similar North Carolina banking markets and the merger through an exchange of shares with both state as a whole. The per capita income also exceeds Peoples and Planters, and no debt would be incurred that for similar North Carolina banking markets. Fi- by any organization in the transaction. Following nally, as noted above, a commercial banking organi- consummation of the proposal, Centura and its bank zation entered the market during the past year. subsidiaries will have capital ratios above the mini- Based upon the facts of record, including the pro- mum levels specified in the Board's Capital Adequacy posed divestitures, the substantial number of remain- Guidelines. Based upon these and all of the other facts ing competitors, the role of thrift institutions in the of record, the Board concludes that the financial and market, and the market's attractiveness for entry, the managerial considerations, and considerations relating Board finds that consummation of this proposal is not to the effects of the proposed transaction on the likely to result in a significantly adverse effect on resources and future prospects of these companies, competition in the Rocky Mount market. are consistent with approval. Considerations relating The Board has also examined the effects of this to the convenience and needs of the communities to be proposal in the other seven banking markets where served by Centura's subsidiary banks also are consis- Peoples and Planters compete. In the six markets: tent with approval. Chatham County, Dare County, Pitt County, Raleigh RMA, Wilmington RMA, and Winston-Salem RMA,14 Acquisition of Savings Association the increase in the HHI upon consummation of the proposal would not exceed the limits in the revised Centura has also applied to acquire Peoples' nonbank- Department of Justice Merger Guidelines. In the Hert- ing subsidiary, Watauga Savings and Loan Associaford County banking market,15 if 50 percent of the tion, and to continue to operate Watauga as a savings association, pursuant to section 4(c)(8) of the BHC Act.16 As noted, the operation of a savings association 13. If 50 percent of the deposits held by thrift institutions in the is an activity that the Board previously has determined Rocky Mount market were included in the calculation of market to be closely related to banking for purposes of section concentration following the proposed divestitures, Centura would rank second among banks and thrifts in the market, controlling 26.7 4(c)(8).17 Further, Centura has committed to limit percent of the total market deposits in commercial banks and thrifts Watauga's activities to those that are permitted for upon consummation of this proposal. The HHI would increase by 215 points to 2007. bank holding companies under section 4(c)(8) of the 14. The Chatham, North Carolina banking market is approximated BHC Act. by Chatham County; the Dare, North Carolina banking market is approximated by Dare County; the Pitt, North Carolina banking market is approximated by Pitt County; the Raleigh RMA, North Carolina banking market is approximated by the Raleigh, North Carolina RMA; the Wilmington RMA, North Carolina banking market 16. Peoples acquired all of the outstanding stock of Watauga earlier is approximated by New Hanover County; and the Winston-Salem this year pursuant to Board approval. Peoples Bancorporation, 76 RMA, North Carolina banking market consists of Forsythe County, Federal Reserve Bulletin 254 (1990). Centura has committed to and portions of Stokes, Davie, and Davidson Counties. comply with the commitments made by Peoples in connection with 15. The Hertford, North Carolina banking market is approximated that application. by Hertford County. 17. 12 C.F.R. 225.25(b)(9). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 873 Peoples and Planters do not compete directly in any Centura Bank also requests permission, under secbanking market where Watauga is present. In light of tion 24A of the Federal Reserve Act, to invest in bank this and other facts of record, consummation of this premises in excess of the amount of its capital stock. proposal would not significantly affect competition in The investment will be used to acquire the existing any relevant market. Furthermore, there is no evi- premises of Merging Banks. The Board concludes that dence in the record to indicate that approval of this Centura Bank's proposed investment in bank premises proposal would result in undue concentration of re- in excess of the amount of its capital stock will support sources, unfair competition, conflicts of interest, un- Centura Bank's acquisition of the Merging Banks and sound banking practices, or other adverse effects on is consistent with approval. the public interest. Accordingly, the Board has deter- Based on the foregoing and other facts of record, mined that the balance of the public interest factors it including commitments made by Centura, the Board must consider under section 4(c)(8) of the BHC Act is has determined that all of the applications should be, favorable and consistent with approval of these appli- and hereby are, approved. The transactions shall not cations. be consummated before the thirtieth calendar day following the effective date of this Order, or later than Related Applications three months after the effective date of this Order, unless such period is extended for good cause by the Centura Bank has applied under the Bank Merger Act Board or by the Federal Reserve Bank of Richmond, to effect the merger of Planters National Bank and acting pursuant to delegated authority. The determi- Trust Company, Peoples Bank and Trust Company, nation as to the nonbanking activity approved in this and Peoples Bank of the Triad, with and into Centura case is subject to all of the conditions contained in Bank, a de novo bank.18 The Board has considered the Regulation Y, including those in sections 225.4(d) and factors set forth in the Bank Merger Act (12 U.S.C. 225.23(b)(3) (12 C.F.R. 225.4(d) and 225.23(b)(3)), and § 1828(c)(5)), and finds those factors to be consistent the Board's authority to require such notification or with approval. termination of the activities of a holding company or Centura Bank has also applied under section 9 of the any of its subsidiaries as the Board finds necessary to Federal Reserve Act (12 U.S.C. § 321 et seq.) and assure compliance with, or to prevent evasion of, the section 208.4 of the Board's Regulation H (12 C.F.R. provisions and purposes of the BHC Act and the 208.4) to become a member of the Federal Reserve Board's regulations and orders issued thereunder. System upon consummation of this proposal. Centura By order of the Board of Governors, effective Bank additionally seeks approval under section 9 of August 30, 1990. the Federal Reserve Act and section 208.9 of the Board's Regulation H (12 C.F.R. 208.9) to establish Voting for this action: Chairman Greenspan and Governors branches at the existing sites of the branches of Angell, Kelley, and Mullins. Absent and not voting: Governors Seger and LaWare. Merging Banks. The Board has considered the factors it is required to consider when approving applications JENNIFER J. JOHNSON for membership pursuant to section 9 of the Federal Associate Secretary of the Board Reserve Act (12 U.S.C. § 322) and section 6 of the Federal Deposit Insurance Act (12 U.S.C. § 1816), Norwest Corporation and finds those factors to be consistent with approval. Minneapolis, Minnesota Centura Bank appears to meet all the criteria in the Federal Reserve Act for admission to membership, Norwest Holding Company including capital requirements and considerations re- Minneapolis, Minnesota lated to management character and quality. Further, Centura Bank meets all the criteria in the Federal Reserve Act to establish branches. Accordingly, Cen- Order Approving the Acquisition of a Savings tura Bank's applications to become a member of the Association and Formation of a Bank Holding Federal Reserve System and to establish branches at Company the existing sites of the branches of Merging Banks are approved. Norwest Corporation, Minneapolis, Minnesota ("Norwest"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has 18. In connection with this merger, Centura Bank proposes to applied for the Board's approval under section 4(c)(8) transfer the trust and fiduciary operations of Peoples Bank and Trust of the BHC Act (12 U.S.C. § 1843(c)(8)) and section Company and Planters National Bank and Trust Company to Centura Bank. 225.23 of the Board's Regulation Y (12 C.F.R. 225.23), Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

874 Federal Reserve Bulletin • October 1990 to acquire First Minnesota Savings Bank, F.S.B., vice brokerage activities, and the sale of variable and Minneapolis, Minnesota ("First Minnesota"), a sav- fixed-rate annuities. ings association, pursuant to section 225.25(b)(9) of Notice of the applications, affording interested perthe Board's Regulation Y (12 C.F.R. 225.25(b)(9)). In sons an opportunity to submit comments, has been connection with this acquisition, Norwest and Nor- duly published (55 Federal Register 20,634 (1990)). west Holding Company, Minneapolis, Minnesota, a The time for filing comments has expired, and the newly-formed subsidiary of Norwest, have applied for Board has considered the applications and all comthe Board's approval under section 3 of the BHC Act ments received in light of the factors set forth in (12 U.S.C. § 1842) to convert First Minnesota into a sections 3(c) and 4 of the BHC Act.3 national bank. The bank will then merge into Norwest The Board has determined that the operation of a Bank Minnesota, N.A., Minneapolis, Minnesota savings association is closely related to banking and ("NBM"), which is currently wholly owned by permissible for bank holding companies. 12 C.F.R. Norwest.1 In connection with these transactions, Nor- 225.25(b)(9). In making this determination, the Board west has also requested the Board's approval under required that savings associations acquired by bank section 5(d)(3) of the Federal Deposit Insurance Act holding companies conform their direct and indirect ("FDI Act"), as amended by the Financial Institutions activities to those activities permissible for bank hold- Reform, Recovery, and Enforcement Act of 1989 ing companies under section 4 of the BHC Act. (Pub. L. No. 101-73, § 206, 101 Stat. 183, 199 (1989)) Norwest has committed to conform the direct and ("FIRREA"), to merge First Minnesota, following its indirect activities of First Minnesota to the requireconversion into a national bank, into NBM.2 ments of section 4(c)(8) of the BHC Act and Regula- Norwest has also applied for the Board's approval tion Y upon consummation.4 to acquire the following subsidiaries of First Minne- In order to approve applications under section sota: Preferred Mortgage Corporation, St. Paul, Min- 4(c)(8) of the BHC Act, the Board is required to nesota, and thereby engage in mortgage banking activ- determine that the performance of the proposed activities pursuant to 12 C.F.R. 225.25(b)(1); Regency ities by Norwest "can reasonably be expected to Insurance Agency, Inc., St. Paul, Minnesota, and produce benefits to the public . . . that outweigh thereby engage in general insurance agency activities possible adverse effects, such as undue concentration pursuant to 12 C.F.R. 225.25(b)(8)(vii); Warranty Title of resources, decreased or unfair competition, con- Inc., North St. Paul, Minnesota, and thereby engage in flicts of interests, or unsound banking practices." title insurance agency activities pursuant to 12 C.F.R. 12 U.S.C. § 1843(c)(8). 225.25(b)(8)(vii); and Warranty Financial Corporation, Burnsville, Minnesota, and thereby engage in full-ser- Effects on Competition Norwest, with total consolidated assets of $26.8 billion, operates 34 banking subsidiaries located in Min- 1. Under the proposal, Norwest Holding Company will acquire 100 nesota, Wisconsin, Illinois, Indiana, Arizona, Iowa, percent of the voting shares of First Minnesota following First Montana, Nebraska, North Dakota, and South Minnesota's conversion from a mutual savings bank to stock form. Dakota.5 Norwest is the second largest banking orga- First Minnesota will then convert into a national bank, which will immediately merge into NBM. Following the merger, Norwest Hold- nization in Minnesota, controlling approximately $7.8 ing Company will own 10 percent of the voting shares of NBM. billion in commercial bank deposits in Minnesota, Norwest will own directly the remaining 90 percent of the voting representing 19.7 percent of the total deposits in shares of NBM. 2. Section 5(d)(3) of the FDI Act (12 U.S.C. § 1815(d)(3)) ("the commercial banking organizations in the state. First Oakar Amendment") permits the merger of a savings association Minnesota, with total consolidated assets of $3.0 bilowned by a bank holding company into a subsidiary bank owned by the same bank holding company. In this case, the merger of First Minnesota, which is a savings association, into NBM will be facilitated by the intermediate conversion of First Minnesota into an interim bank. The interim bank is chartered solely to accommodate 3. The Board has received comments regarding the applications the requirements of the appropriate merger statutes and will cease to from the Independent Bankers of Minnesota, Bloomington, Minneexist immediately upon consummation of the underlying transaction sota; District 2 Community Council, St. Paul, Minnesota; First without ever having conducted any business. Under these circum- National Bank, Waseca, Minnesota; and First State Bank of Waseca, stances, the Board believes the structure of the proposal does not Waseca, Minnesota. appear to cause an otherwise qualifying transaction to fall outside of 4. First Minnesota currently owns a Minnesota FSL Corporation, the bounds of the Oakar Amendment. This interpretation is consistent which makes investments in real estate that are not generally permiswith the stated purposes of the Oakar Amendment, namely, to provide sible for bank holding companies. Norwest has committed that, an incentive for bank holding companies to provide needed private following consummation, this subsidiary will not undertake any new capital to the thrift industry, and to permit bank holding companies to real estate projects or investments and will divest all impermissible take advantage of the cost efficiencies of consolidating the operations real estate within two years of consummation. of the thrift with an existing bank subsidiary. See, e.g., Marshall & 5. Asset data are as of June 30, 1990. State banking data are as of llsley Corporation, 76 Federal Reserve Bulletin 556 (1990). June 30, 1989. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 875 lion, is the second largest savings association in Min- savings associations would continue to compete in this nesota, controlling approximately $2.3 billion in de- market.10 posits. Upon consummation of the proposed The Minneapolis-St. Paul banking market is domiacquisition, Norwest would remain the second largest nated by two banking organizations that together commercial banking organization in Minnesota, con- control approximately 56.9 percent of market depostrolling approximately $10.1 billion in deposits in Min- its. Only one other depository organization operating nesota, representing 25.5 percent of the total deposits in the market has attained a market share as high as 6 in commercial banking organizations in the state. percent of market deposits. The Board is concerned Norwest and First Minnesota compete directly in that, in the context of this market structure, the eight banking markets.6 In the Minneapolis-St. Paul acquisition of a series of depository organizations with banking market,7 Norwest is the second largest depos- relatively small market shares could, on a cumulative itory organization, controlling approximately $5.9 bil- basis, lead to significant anticompetitive effects. lion in deposits, representing 21.6 percent of the In reviewing this case, the Board has considered as deposits held by banks and savings associations oper- a significant factor First Minnesota's financial condiating in the market ("market deposits").8 First Min- tion and its ability to function as a viable competitor in nesota is the fifth largest depository organization, the market. First Minnesota has suffered financial controlling approximately $1.9 billion in deposits, rep- difficulties in recent years resulting in a negative net resenting 3.6 percent of market deposits. Upon con- worth at this time. As part of this proposal, Norwest summation of this proposal, Norwest would remain will inject sufficient capital into First Minnesota and the second largest depository organization in the mar- NBM to maintain capital levels above the Board's ket, controlling approximately $7.8 billion in deposits, minimum capital adequacy guidelines requirement. representing 27.7 percent of market deposits. The Thus, the proposal has the significant public benefit of Minneapolis-St. Paul banking market is highly resolving the capital deficiency of an impaired instituconcentrated.9 Upon consummation of the proposal, tion in a private transaction without cost to the federal the Herfindahl-Hirschman Index ("HHI") would in- deposit insurance funds. In light of the facts of this crease by 200 points to 2012. Following consummation case, the Board believes that the public benefits of this of this transaction, 92 other commercial banks and 13 proposal outweigh the adverse competitive effects that may result from the proposal in the Minneapolis-St. Paul market.11 The Board has also examined the effects of the 6. Norwest and First Minnesota compete in the Minneapolis-St. Paul, St. Cloud, Rochester, Duluth, Marshall, Owatonna, and Red proposal in the other seven banking markets in which Wing, Minnesota; and Sioux Falls, South Dakota, banking markets. Norwest and First Minnesota compete. None of these 7. The Minneapolis-St. Paul banking market is approximated by the markets is considered to be highly concentrated, and Anoka, Hennepin, Ramsey, Washington, Carver, Scott and Dakota Counties; Lent, Chisago Lake, Shafer, Wyoming and Franconia none will be highly concentrated following consumma- Townships in Chisago County; Blue Hill, Baldwin, Orrock, Livonia tion of the proposed transaction. In addition, numerand Big Lake Townships and the City of Elk River in Sherburne ous banks and savings associations would remain in all County; Monticello, Otsego, Buffalo, Frankfort, Rockford and Franklin Townships in Wright County; Lanesburgh Township in Le Sueur of the markets following consummation of the County, Minnesota; and the Town of Hudson in St. Croix County, proposal.12 Accordingly, the Board concludes that Wisconsin. 8. Market share data are as of June 30, 1989, for the Minneapolis-St. Paul banking market, and as of June 30, 1988, for the other banking markets. The pre-consummation market share data are based on calculations in which the deposits of First Minnesota and all other 10. The Board previously has indicated that savings associations thrifts are included at 50 percent. Upon consummation of the pro- have become, or have the potential to become, major competitors of posal, First Minnesota would be merged with a commercial banking commercial banks. Midwest Financial Group, 75 Federal Reserve organization, thus, on a pro forma basis, the deposits of First Bulletin 386 (1989); CB&T Bancshares, Inc., 75 Federal Reserve Minnesota are included at 100 percent, while the deposits of other Bulletin 381 (1989); National City Corporation, 70 Federal Reserve savings associations continue to be included at 50 percent. Bulletin 743 (1984). 9. Under the revised Department of Justice Merger Guidelines, 11. The Independent Bankers of Minnesota has protested the 49 Federal Register 26,823 (June 2, 1984), any market in which the application on the grounds that the proposal would have adverse post-merger HHI is over 1800 is considered highly concentrated, and effects on competition in the state of Minnesota and in the relevant the Justice Department is likely to challenge a merger that increases banking markets, especially the Minneapolis-St. Paul banking market. the HHI by more than 50 points unless other factors indicate that the For the reasons explained in this order, the Board has determined that merger will not substantially lessen competition. The Justice Depart- these comments do not warrant denial of the application. In addition, ment has informed the Board that a bank merger or acquisition the protest questions the bidding process that resulted in First generally will not be challenged (in the absence of other factors Minnesota's agreement to be acquired by Norwest. These commentindicating anticompetitive effects) unless the post-merger HHI is at ers have not provided any evidence that indicates improprieties in the least 1800 and the merger increases the HHI by at least 200 points. The bidding process and the record does not otherwise support a denial of Justice Department has stated that the higher than normal HHI this application on this ground. thresholds for screening bank mergers for anticompetitive effects 12. The following data, with thrifts weighted as discussed above, implicitly recognizes the competitive effects of limited-purpose lend- indicate the changes in the market share and HHI upon consummation ers and other non-depository financial entities. of the proposal: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

876 Federal Reserve Bulletin • October 1990 consummation of the proposed acquisition would not addition, the CRA performance of a savings associahave a significantly adverse effect on competition in tion and the ability of the bank holding company to any banking market. assure that the savings association can meet its CRA responsibilities following consummation of the acqui- Comments Under the Community Reinvestment Act sition are relevant to the Board's analysis under section 4(c)(8) of the public benefits of the bank holding In connection with this application, the Board has company's proposal to acquire the savings associareceived comments regarding the performance of Nor- tion. west and First Minnesota under the Community Rein- Accordingly, in considering this application, the vestment Act ("CRA"). The Board believes that the Board has reviewed the CRA performance record of terms and the purposes of the CRA and the BHC Act Norwest and First Minnesota, as well as the comments indicate that the Board must consider CRA perfor- from the District 2 Community Council ("Council") mance in connection with its review of a section 4 and Norwest's response to those comments, in light of application by a bank holding company to acquire a the CRA, the Board's regulations, and the jointly savings association. As a depository institution, a issued Statement of the Federal Financial Supervisory savings association is subject to the CRA, and the Agencies Regarding the Community Reinvestment Act acquisition of a savings association is one of the types ("Agency CRA Statement").14 The Agency CRA of transactions that represents the acquisition of a Statement provides guidance regarding the types of deposit facility for purposes of the CRA. Under the policies and procedures that the supervisory agencies CRA, the appropriate federal financial supervisory believe financial institutions should have in place in agency must consider CRA performance in reviewing order to fulfill their responsibilities under the CRA on any application for a deposit facility by a financial an ongoing basis, and the procedures that the superinstitution. The Board is the appropriate federal super- visory agencies will use during the application process visory agency for bank holding companies, and the to review an institution's CRA compliance and perfor- Board believes, therefore, that it must review CRA mance. performance in considering applications by bank hold- Initially, the Board notes that all of Norwest's ing companies to expand their deposit-taking ability subsidiary banks have received satisfactory ratings through the acquisition of a savings association.13 In from their primary regulators in the most recent examinations of their CRA performance. In addition, Norwest has in place the types of programs outlined in In the Sioux Falls banking market, Norwest would control 16.8 the Agency CRA Statement as essential to an effective percent of market deposits. The HHI would increase by 63 points to CRA program. For example, a review of the CRA 814. program at NBM, Norwest's lead bank, indicates that In the St. Cloud banking market, Norwest would control 12.1 percent of market deposits. The HHI would increase by 22 points to NBM maintains a dialogue with community organiza- 731. tions, a call program for small businesses and real In the Rochester banking market, Norwest would control 19.6 percent of market deposits. The HHI would increase by 45 points to estate brokers, strong participation in governmentally- 967. insured and guaranteed loan programs, and support for In the Duluth banking market, Norwest would control 20.7 percent housing rehabilitation projects in the downtown area of market deposits. The HHI would increase by 50 points to 1529. In the Marshall banking market, Norwest would control 30.9 as well as in the suburbs. percent of market deposits. The HHI would increase by 290 points to In addition, Norwest has taken steps to address the 1412. concerns raised by the Council.15 Norwest has desig- In the Owatonna banking market, Norwest would control 30.1 percent of market deposits. The HHI would increase by 274 points to nated a representative of NBM who is engaged in 1508. discussions with the Council. Norwest also has indi- In the Red Wing banking market, Norwest would control 18.6 percent of market deposits. The HHI would increase by 130 points to cated that it does not intend to close the Clarence 1244. 13. The Board has previously determined that the CRA by its terms does not apply to applications by bank holding companies to acquire nonbanking companies under section 4(c)(8) of the BHC Act. The holding companies under section 4(c)(8) of the BHC Act, savings Mitsui Bank, Ltd., 76 Federal Reserve Bulletin 381 (1990). The Board associations are insured depository institutions, as that term is defined has also recognized, however, that the provisions of the CRA are in the CRA, and the acquisition of savings associations are subject to applicable to savings associations and, in analyzing protests received review under the express terms of the CRA. in several previous applications involving the acquisition of savings 14. 54 Federal Register 13,742 (1989). associations, the Board has considered the CRA performance of the 15. The Council requests that the Board impose two conditions in acquiring bank holding company. See Citicorp (First Federal Savings approving the proposed acquisition. The first proposed condition is and Loan), 70 Federal Reserve Bulletin 149, 155 (1984); Citicorp (New that Norwest work with the Council in developing financial programs Biscayne Federal Savings and Loan), 70 Federal Reserve Bulletin or projects which meet the housing and economic development needs 157, 161 (1984); and Citicorp (Fidelity Federal Savings and Loan), 68 of the northeast St. Paul area. The second proposed condition is that Federal Reserve Bulletin 656, 667 (1982). In this regard, the Board First Minnesota's Clarence Street branch in St. Paul remain open after notes that, unlike all other companies that may be acquired by bank consummation of the proposal. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 877 Street branch after consummation of the proposal. insurance agency activities.18 As a qualified bank Norwest has stated that, under its existing corporate holding company under exemption G, Norwest may policy for branch closings, Norwest will provide ad- engage in general insurance agency activities without vance notice to the community, including community restriction as to the location or type of insurance groups and civic leaders, prior to any decision to close sold.19 Accordingly, Norwest may acquire Regency the Clarence Street branch; consider the impact of Insurance Agency, Inc., and Warranty Title Inc., and such action on the community; and take steps to help thereby engage in general insurance agency and title mitigate any adverse effects. insurance agency activities. For the foregoing reasons, and based upon the over- Norwest has applied to acquire Warranty Financial all CRA record of Norwest and its subsidiary banks, Corporation and thereby engage in full-service brokerand other facts of record, the Board concludes that the age activities. The Board has previously determined record of performance under the CRA of Norwest and by order that full-service brokerage activities are perits subsidiary banks, is consistent with approval of missible for bank holding companies under section Norwest's acquisition of First Minnesota.16 4(c)(8) of the BHC Act.2° The Board has also previously approved the conduct of full-service brokerage Other Nonbanking Activities activities by Norwest through Norwest's wholly owned subsidiary, Norwest Investment Services, Inc., Norwest also has applied to acquire subsidiaries of Minneapolis, Minnesota ("NISI").21 NISI will di- First Minnesota engaged in mortgage banking; gen- rectly acquire Warranty Financial Corporation, the eral insurance agency activities; title insurance subsidiary of First Minnesota engaged in full-service agency activities; full-service brokerage activities; brokerage activities, and will conduct these activities and the sale of variable and fixed-rate annuities. As in accordance with the requirements in the Board's noted above, the Board has previously determined previous orders governing these activities. that mortgage banking activities are permissible for Norwest also has applied to act through NISI as bank holding companies under the Board's Regula- agent in the sale of variable and fixed-rate annuities. tion Y.17 The Board has not previously approved a proposal by a The Board also has previously determined that bank holding company to act as agent in the sale of Norwest may engage in general insurance agency annuities. In order to approve Norwest's proposal, the activities, including the sale of title insurance, pursu- Board is required to determine that the proposed activant to section 4(c)(8)(G) of the BHC Act ("exemption ity is "so closely related to banking as to be a proper G"). Title VI of the Garn-St Germain Depository incident thereto." 12 U.S.C. § 1843(c)(8). The Board Institutions Act of 1982 ("Garn Act") amended sec- may find that an activity is closely related to banking if tion 4(c)(8) of the BHC Act to provide that insurance banks generally have in fact provided the proposed agency, brokerage and underwriting activities are not activity.22 Norwest argues that the sale of annuities is "closely related to banking" and thus are not permis- closely related to banking either because banks engage sible activities for bank holding companies, unless the in this activity or because the activity is an insurance activities are included within one of seven specific agency activity that Norwest is permitted to conduct exemptions (A through G) contained in section 4(c)(8). pursuant to its exemption G grandfather rights. Norwest is authorized to engage in insurance agency The Board notes that the OCC has authorized naactivities pursuant to exemption G, which authorizes tional banks to act as agent in the sale of both variable those bank holding companies that engaged in insur- and fixed-rate annuities.23 Accordingly, the Board ance agency activities prior to 1971 with prior Board finds that Norwest's proposal to broker annuities is approval, to engage, or control a company engaged in, 18. In 1959, Norwest received Board approval to retain its general insurance agency subsidiaries. Northwest Bancorporation, 45 Federal Reserve Bulletin 963 (1959). 16. The Board has also received comments on this application from 19. See Norwest Corporation, 70 Federal Reserve Bulletin 470 the First National Bank and the First State Bank of Waseca, which are (1984). two banks that compete with First Minnesota in Waseca, Minnesota. 20. Bank of New England Corporation, 74 Federal Reserve Bulletin These competitors have stated that they will object to Norwest's 700 (1988); PNC Financial Corp, 75 Federal Reserve Bulletin 396 establishment of a branch in Waseca under a provision of Minnesota (1989). law that prohibits a bank from establishing a branch office in a 21. Norwest Corporation, 76 Federal Reserve Bulletin 79 (1990). community of 10,000 or less, unless all banks having a principal office 22. National Courier Ass'n v. Board of Governors, 516 F.2d 1229, in that community have consented in writing. In response to these 1337 (D.C. Cir. 1975). protests, Norwest has committed not to maintain First Minnesota's 23. Interpretive Letter No. 331, April 4, 1985, reprinted in [1985branch in Waseca if to do so would be inconsistent with Minnesota 1987 Transfer Binder] Fed. Banking L. Rep. (CCH) % 85,501; OCC law. Interpretive Letter No. 499 (February 12, 1990), reprinted in [1989- 17. 12 C.F.R. 225.25(b)(1). 1990] Fed. Banking L. Rep. (CCH) 11 83,090. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

878 Federal Reserve Bulletin • October 1990 closely related to banking under section 4(c)(8) of the 5 percent during the quarter preceding its acquisi- BHC Act. The Board believes that it is not necessary tion by Norwest; to reach the question of whether the sale of annuities is (5) The transaction, which involves the merger of an insurance agency activity for purposes of the Garn First Minnesota, a savings association located in Act, because, as noted above, if the sale of annuities is Minnesota, with a bank subsidiary of Norwest, a deemed to be an insurance agency activity for pur- bank holding company whose banking subsidiaries' poses of the Garn Act, Norwest is permitted to act as operations are principally conducted in Minnesota, agent in the sale of any type of insurance pursuant to would comply with the requirements of section 3(d) exemption G. Thus, Norwest would be permitted to of the BHC Act if First Minnesota were a state bank sell annuities under exemption G. which Norwest was applying to acquire. The markets for the nonbanking activities in which both Norwest and First Minnesota compete are served Based on the foregoing and all of the other facts of by numerous competitors, and neither Norwest nor record, the Board has determined that the proposed First Minnesota has any significant market share. application under section 5(d)(3) of the FDI Act should Accordingly, the Board concludes that consummation be, and hereby is, approved. This application is subject of this proposal would not have a significantly adverse to Norwest obtaining the required approvals of the effect on competition in the provision of these services appropriate federal and state banking agencies for the in any relevant market. The record does not indicate proposed merger. that consummation of this proposal is likely to result in The transactions for which applications have been any significantly adverse effects, such as undue con- filed pursuant to section 3 of the BHC Act shall not be centration of resources, decreased or unfair competi- consummated before the thirtieth calendar day followtion, conflicts of interests, or unsound banking prac- ing the effective date of this Order, and all of the tices. Accordingly, based upon considerations of all transactions shall be consummated not later than three relevant facts, the Board has determined that the months after the effective date of this Order, unless balance of public interest factors it is required to such period is extended for good cause by the Board or consider under section 4(c)(8) of the BHC Act is by the Federal Reserve Bank of Minneapolis, acting favorable and consistent with approval of Norwest's pursuant to delegated authority. The determinations as acquisition of First Minnesota. Based on the record to the nonbanking activities are subject to all of the and for the reasons discussed above, the Board also conditions contained in the Board's Regulation Y, determines that the financial, managerial, competitive, including those in sections 225.4(d) and 225.23(b)(3) and convenience and needs factors that the Board (12 C.F.R. 225.4(d) and 225.23(b)(3)), and to the must review under section 3 of the BHC Act are Board's authority to require such modification or consistent with approval of this proposal. Accord- termination of the activities of a holding company or ingly, based on all the facts of record and the commit- any of its subsidiaries as the Board finds necessary to ments made by Norwest and Norwest Holding Com- assure compliance with, or prevent evasions of, the provisions and purposes of the BHC Act and the pany, the Board has determined that the applications Board's regulations and orders issued thereunder. under sections 3 and 4 of the BHC Act should be, and hereby are, approved. By order of the Board of Governors, effective In considering Norwest's request for approval of the August 29, 1990. merger of First Minnesota into NBM pursuant to section 5(d)(3) of the FDI Act, the record in this case Voting for this action: Chairman Greenspan and Governors shows that: Kelley and Mullins. Voting against this action: Governors Angell and La Ware. Absent and not voting: Governor Seger. (1) The aggregate amount of the total assets of all depository institution subsidiaries of Norwest is JENNIFER J. JOHNSON $21.4 billion, an amount which is not less than 200 Associate Secretary of the Board percent of the total assets of First Minnesota, which currently has $3.0 billion in total assets; Dissenting Statement of Governors Angell and (2) Norwest and all of its bank subsidiaries currently LaWare meet all applicable capital standards and, upon consummation of the proposed transactions, will continue to meet all applicable capital standards; We believe that the adverse competitive effects of the (3) The transaction is not in substance the acquisi- proposed acquisition in this case are not outweighed tion of a Bank Insurance Fund member bank by a by the public benefits of the proposal, and therefore, Savings Association Insurance Fund member; dissent from the Board's action in this case. The (4) First Minnesota had tangible capital of less than Minneapolis-St. Paul banking market is a highly con- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 879 centrated market dominated by Norwest and another the two largest banking organizations require close banking organization which together control over 56 scrutiny. percent of market deposits. Norwest in this case controls approximately 22 percent of market deposits August 29, 1990 and is nearly four times larger than the next largest depository institution in the market. In the context of the structure of the Minneapolis-St. Paul banking ORDERS ISSUED UNDER THE BANK MERGER market, and analysis of market concentration based ACT entirely on the Herfindahl-Hirschman Index does not, in our judgment, accurately reflect the anticompetitive Crestar Bank effects of the acquisition of a market competitor by Richmond, Virginia one of the two largest depository institutions. This type of acquisition significantly increases mar- Order Approving the Merger of Banks and the ket concentration by increasing the market dominance Establishment of a Branch of Norwest relative to the smaller depository institutions in the market. It also preempts possibilities for Crestar Bank, Richmond, Virginia, a state member the development of other competitors in the market by bank, has applied for the Board's approval pursuant to eliminating available acquisitions that could poten- section 18(c) of the Federal Deposit Insurance Act tially enhance the competitiveness of other organiza- (12 U.S.C. § 1828(c)) ("Bank Merger Act") to merge tions in the market or that could attract out-of-market with National Bank of Northern Virginia, Sterling, competitors. As a result, we believe that this type of Virginia ("Bank"), and thereby to establish a branch acquisition requires close scrutiny and should be per- pursuant to section 9 of the Federal Reserve Act mitted only if the public benefits of the acquisition are (12 U.S.C. § 321). significant. Notice of the applications, affording interested per- The acquisition proposed here does not bear close sons an opportunity to submit comments, has been scrutiny and would have a direct and adverse effect on given in accordance with the Bank Merger Act and the competition in the Minneapolis-St. Paul banking mar- Board's Rules of Procedure (12 C.F.R. 262.3(b)). As ket. The proposed acquisition would increase the required by the Bank Merger Act, reports on the concentration ratios for the market significantly and competitive effects of the merger were requested from would reverse a substantial amount of the deconcen- the United States Attorney General, the Office of the tration that has occurred in the market since 1980. This Comptroller of the Currency and the Federal Deposit increase in the concentration levels in the market Insurance Corporation. The time for filing comments would not occur if one of the other bidders for First has expired, and the Board has considered the appli- Minnesota were permitted to make the proposed ac- cations and all the comments received in light of the quisition. An alternative that would promote banking factors set forth in the Bank Merger Act (12 U.S.C. competition in the market would be preferable. § 1828(c)(5)). Moreover, in our opinion the public benefits that Crestar Bank, with deposits of $7.6 billion, and may arise from this proposal do not outweigh the Bank, with deposits of $19.0 million, are both subsidsignificant anti-competitive effects of this acquisition. iaries of Crestar Financial Corporation, Richmond, First Minnesota is not in conservatorship or receiver- Virginia ("CFC").1 Upon consummation of the ship and is seeking an acquirer in a private bidding merger, the single banking office of Bank will be process. Several potential acquirers submitted bids to operated as a branch of Crestar Bank. Because CFC acquire First Minnesota, and none of those bids would controls both Crestar Bank and Bank, consummation have required the expenditure of public funds. Ac- of this proposal would not have a significantly adverse cordingly, the benefits of permitting Norwest to ac- effect on the concentration of resources or competition quire First Minnesota are, in our view, not compelling. in Virginia or in any relevant market. The financial and On the other hand, the public benefits likely to result managerial resources of Crestar Bank and Bank are from the sale of First Minnesota to an out-of-market consistent with approval. bidder or even to an in-market bidder other than one of In considering the convenience and needs of the the two largest depository institutions in the market communities to be served, the Board has taken into would have been substantial. account the record of Crestar Bank under the Com- For these reasons, we would have denied this pro- munity Reinvestment Act ("CRA") (12 U.S.C. § 2901 posal. We do, however, agree with the other members of the Board that further acquisitions of competitors in the Minneapolis-St. Paul banking market by either of 1. All banking data are as of December 31, 1989. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

880 Federal Reserve Bulletin • October 1990 et seq.). The CRA requires the federal financial super- outlined in the Agency CRA Statement and has implevisory agencies to encourage financial institutions to mented this program at Crestar Bank. CFC has develhelp meet the credit needs of the local communities in oped a comprehensive program that establishes stanwhich they operate, consistent with the safe and sound dards that its subsidiary banks must meet in operation of such institutions. To accomplish this end, ascertaining community credit needs, responding to the CRA requires the appropriate federal supervisory those needs through the development and delivery of authority to assess the institution's record of meeting products and services, and monitoring and evaluating the credit needs of its entire community, including the bank's success in meeting those needs and its low- and moderate-income neighborhoods, consistent responsibilities under the CRA. CFC has established with the safe and sound operation of the institutions.2 four regional CRA plans covering all of its appointed In this regard, the Board has received comments CRA officers at the subsidiary bank level, the regional filed by the Women's Center for Social Change ("Prot- level, and the corporate level responsible for developestant") critical of the CRA performance of Crestar.3 ing, implementing, and overseeing the company's Protestant contends that Crestar Bank discriminated CRA efforts. To ensure that these regional plans against minorities and low-income communities in address community credit needs, CFC's regional CRA Lynchburg, Virginia, as a participant in a HUD- officers are required to meet with community leaders, sponsored community block grant program adminis- government officials, community groups, and other tered by the City of Lynchburg. Protestant also con- individuals within their region to obtain information on tends that the minority and low-income community in CFC's performance. In addition, the banks hold an- Lynchburg was not informed of the availability of the nual public meetings to assist in identifying credit community block grant funds.4 needs of their regions. The Board has carefully reviewed the CRA perfor- The record indicates that Crestar Bank uses a varimance of Crestar Bank, as well as Protestant's com- ety of media to promote its services throughout its ments and Crestar Bank's response to those com- community, and special effort is made to place adverments, in light of the CRA, the Board's regulations and tising to reach minorities and non-English speaking the Statement of the Federal Financial Supervisory persons. CFC, through its banks and mortgage com- Agencies Regarding the Community Reinvestment Act pany, is an active participant in VA, FHA and Virginia (March 21, 1989) ("Agency CRA Statement"). The Housing Development Authority mortgage programs; Agency CRA Statement provides guidance regarding CFC originated almost 20 percent of the total of such the types of policies and procedures that the supervi- loans made in most of the Metropolitan Statistical sory agencies believe financial institutions should have Areas within the banks' delineated communities. Crein place in order to fulfill their responsibilities under star Bank also has participated in various housing the CRA on an ongoing basis and the procedures that programs in Lynchburg and the surrounding commuthe supervisory agencies will use during the applica- nities in western Virginia that provide funds to lowtion process to review an institution's CRA compli- and moderate-income areas. As part of its CRA proance and performance. gram, Crestar Bank provides student loans through Initially, the Board notes that Crestar Bank has various state and local programs; in 1989, Crestar received satisfactory ratings in the most recent report Bank extended 44,000 loans totalling approximately of examination of its CRA performance. In addition, $99.0 million. Moreover, Crestar Bank also provides a CFC has developed a corporate CRA program that low-cost basic checking product and government contains the elements of an effective CRA policy as check cashing services. The Board notes that Protestant's complaints concern a community block grant program administered 2. 12 U.S.C. § 2903. by the City of Lynchburg, in which several banks, 3. Protestant also filed a complaint with the U.S. Department of including Crestar Bank, are participants. The program Housing and Urban Development ("HUD") alleging that the City of Lynchburg and participating financial institutions, including Crestar involves two loan pools; the loan pool that is the Bank, have engaged in illegal discrimination in administering a HUD- subject of this complaint is a loan pool targeted for sponsored community block grant program. HUD is currently investigating this matter and has requested and received information from commercial lending. The participating banks use their Crestar Bank concerning Crestar Bank's participation in the commu- own funds and credit standards to make loans under nity block grant program administered by the City of Lynchburg. the program; the community block grant funds are Protestant also contends that Lynchburg officials had relationships with CFC and Crestar Bank that resulted in conflicts of interest. A used to reduce the interest rate. Crestar Bank's parreview of these relationships indicates that the individuals in question ticipation in the program involved a small number of did not receive any block grant funds from Crestar Bank and were not commercial loans and a review of these loans does not involved in credit making decisions involving these funds. 4. The Director of Protestant also alleges that she personally provide any evidence that Crestar Bank's actions were attempted to apply for a loan under the program and was misinformed inconsistent with the loan programs or discriminatory. regarding the availability of funds under the program because she is a Moreover, a recent CRA examination of Crestar Bank minority. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 881 provided no evidence that the bank engaged in illegal Dear Mr. Murphy: discriminatory practices in its other lending activities. For the foregoing reasons, and based upon the As requested in your letter of June 13, 1989, the Board overall CRA record of Crestar Bank, as well as other of Governors grants consent for Bankers International facts of record, the Board concludes that convenience Corporation ("BIC"), New York, New York, to inand needs considerations are consistent with approval vest, indirectly through BT Australia Limited of this application. ("BTAL"), Sydney, Australia, approximately $1.5 Crestar Bank has applied under section 9 of the million in exchange for all of the shares of Bankers Federal Reserve Act (12 U.S.C. § 321 et seq.), to Trust Life Limited ("BT Life"), Sydney, Australia, a establish a branch at the present site of Bank. The proposed de novo company that will underwrite cer- Board has considered the factors it is required to tain life insurance products. consider when approving applications for establishing In taking this action, the Board noted that the branches pursuant to section 9 of the Federal Reserve general activity of underwriting life insurance in Aus- Act (12 U.S.C. § 322) and finds those factors to be tralia has been previously determined by the Board to consistent with approval. be usual in connection with the business of banking On the basis of the record, the applications are and other financial operations in Australia; the proapproved for the reasons summarized above. The posed investment in BT Life is small and projected transaction shall not be consummated before the growth is moderate. In approving this application, the thirtieth calendar day following the effective date of Board also relied on the commitments by Bankers this Order or later than three months after the Trust New York Corporation ("BTNY"), New York, effective date of this Order, unless such period is New York, that it will indemnify BTAL for the investextended for good cause by the Board or by the ment in BT Life should BTAL suffer losses resulting in Federal Reserve Bank of Richmond, pursuant to loss of capital from the operations of BT Life. BTNY delegated authority. will also indemnify any losses suffered by Bankers By order of the Board of Governors, effective Trust Company and its subsidiaries, including BTAL, August 13, 1990. on any loans to or additional investments in BT Life. BTNY also committed that any transactions by Bank- Voting for this action: Chairman Greenspan and Governors ers Trust Company or any of its subsidiaries with BT Seger, Angell, Kelley, La Ware, and Mullins. Life will be subject to the provisions of sections 23A and 23B of the Federal Reserve Act. JENNIFER J. JOHNSON The Federal Reserve Bank of New York should be Associate Secretary of the Board notified prior to any expansion of BT Life's life insurance product line. Very truly yours, ORDERS ISSUED UNDER FEDERAL RESERVE Jennifer J. Johnson ACT Associate Secretary of the Board Orders Issued Under Section 25(a) of the cc: Vice President Rutledge, Federal Reserve Bank of Federal Reserve Act New York Morgan Guaranty International Finance Bankers International Corporation Corporation New York, New York New York, New York Order Approving Application to Engage in Certain Order Approving Application to Underwrite Life Futures Commission Merchant Activities in Insurance in Australia Germany August 1, 1990 June 29, 1990 Mr. John L. Murphy Mr. Edmund P. Rogers, III Director Senior Vice President and Resident Counsel Bankers International Corporation J.P. Morgan & Co. Inc. 280 Park Avenue 60 Wall Street New York, New York 10015 New York, New York 10260 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

882 Federal Reserve Bulletin • October 1990 Dear Mr. Rogers: The Board has also granted delegated authority to the Federal Reserve Bank of New York to approve As requested in your letter of March 23, 1990, the additional financial contracts involving products that Board of Governors grants consent for Morgan Guar- the Board has reviewed and approved previously but anty International Finance Corporation ("MGIFC"), that are not products specifically covered by Regu- New York, New York, to retain its investment in its lation Y. Proposals involving products that have not indirect subsidiary, J.P. Morgan GmbH ("Morgan been reviewed previously by the Board would con- GmbH"), Frankfurt, Germany, after Morgan GmbH tinue to require the Board's specific consent. acts as a futures commission merchant on the DTB The Reserve Bank should be notified promptly of Deutsche Terminborse GmbH (the "DTB") in the any prospective substantial changes in the activities of execution and clearance of trades in certain futures and the DTB that would materially increase the potential options contracts for unaffiliated persons. These con- liability of the Morgan organization in conducting tracts include, in addition to those already approved by activities on the DTB. The Board expects that MGIFC the Board, a futures contract based on the Deutsche will comply with any conditions the Board may impose Aktienindex stock index, an index based on prices of 30 after reviewing such changes. German stocks, and a futures contract on German government bonds. Morgan GmbH will also engage in Very truly yours, the execution and clearance, for nonaffiliated persons, of stock options contracts on fourteen German blue chip stocks. In taking this action, the Board relied on Jennifer J. Johnson MGIFC's commitment that Morgan GmbH will execute Associate Secretary of the Board and clear futures contracts and options on futures contracts in accordance with the limitations specified in cc: Vice President Rutledge, Federal Reserve Bank of section 225.25(b)(18) of Regulation Y. New York ORDERS ISSUED UNDER THE FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT C FIRREA Orders'') Recent orders have been issued by the Staff Director of the Division of Banking Supervision and Regulation and the General Counsel 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. Acquired Surviving Approval Bank Holding Company Thrift Bank(s) date Aurora First National FirsTier Savings Bank, First National Bank & August 22, 1990 Company, F.S.B., Trust Company in Aurora, Nebraska Omaha, Nebraska (Neligh Aurora, Branch) Aurora, Nebraska Brenton Banks, Inc., Banc Iowa Federal Savings Brenton Bank and Trust August 10, 1990 Des Moines, Iowa Bank, Company, Cedar Rapids, Iowa Cedar Rapids, Iowa Brenton Banks, Inc., FirstCentral Federal Savings Warren County Brenton August 16, 1990 Des Moines, Iowa Bank, Bank and Trust, Chariton, Iowa (Indianola Indianola, Iowa Branch) Citizens Corporation, FirstCentral Federal Savings Citizens State Bank, August 16, 1990 Corydon, Iowa Bank, Corydon, Iowa Chariton, Iowa (Corydon and Russell Branches) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 883 FIRREA Orders—Continued Acquired Surviving Approval Bank Holding Company Thrift Bank(s) date Farmers & Merchants FirsTier Savings Bank, Union Bank & Trust August 22, 1990 Investment, Inc., F.S.B., Company, Lincoln, Nebraska Omaha, Nebraska Lincoln, Nebraska (Lincoln, Franklin, and Ainsworth Branches) First Alabama Bancshares, Baldwin County Federal First Alabama Bank, August 10, 1990 Inc., Savings Banks, Montgomery, Alabama Montgomery, Alabama Robertsdale, Alabama Hy-Vee Food Stores, Inc., FirstCentral Federal Savings National Bank & Trust August 16, 1990 Chariton, Iowa Bank, Co., Chariton, Iowa (Chariton Chariton, Iowa Branch) Key Bancshares of Provident Savings Key Bank of Wyoming - August 16, 1990 Wyoming, Association, F.A., Casper, Cheyenne, Wyoming Casper, Wyoming Casper, Wyoming KeyCorp, Albany, New York Midwest Banco FirsTier Savings Bank, First Bank and Trust August 17, 1990 Bancorporation, F.S.B., Company, Cozad, Nebraska Omaha, Nebraska Cozad, Nebraska (Imperial Branch) National City Corporation, Buckeye Financial BancOhio National August 31, 1990 Cleveland, Ohio Corporation, Bank, Columbus, Ohio Columbus, Ohio Republic Banking Miami Savings Bank, Republic National Bank August 16, 1990 Corporation of Florida, Miami, Florida of Miami, Miami, Florida Miami, Florida Rebank Netherlands Antilles, N.V., Miami, Florida United Nebraska Financial FirsTier Savings Bank, United Nebraska Bank, August 31, 1990 Co., F.S.B., Grant, Ord, Nebraska Omaha, Nebraska Grant, Nebraska (Ogallala Branch) West Point Bancorp, Inc., FirsTier Savings Bank, Farmers and Merchants August 22, 1990 West Point, Nebraska F.S.B., National Bank, Omaha, Nebraska (West West Point, Nebraska Point Branch) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

884 Federal Reserve Bulletin • October 1990 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 4 Applicant(s) Bank(s) Effective date Key Banc shares of Wyoming, Key Bank of Wyoming, F.S.B., August 17, 1990 Cheyenne, Wyoming Casper, Wyoming KeyCorp, Albany, New York Security Pacific Bancorporation Mountain West Savings Bank, F.S.B., August 20, 1990 Northwest, Coeur d'Alene, Idaho Seattle, Washington 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 Allegiant Bancorp, Inc., Eagle Bank and Trust Company, St. Louis July 27, 1990 Kahoka, Missouri St. Louis, Missouri Alpha Banco, Inc., The Bank of Alexis, Chicago July 30, 1990 Alpha, Illinois Alexis, Illinois Banc One Financial Corporation, Jeff Davis Bank and Trust Atlanta August 9, 1990 Jennings, Louisiana Company, Jennings, Louisiana Bank Corporation of Georgia, AmeriCorp, Inc., Atlanta August 17, 1990 Macon, Georgia Savannah, Georgia Blackhawk Bancorporation, Blackhawk State Bank, Chicago July 31, 1990 Milan, Illinois Milan, Illinois Boscobel Bancorp, Inc., Boscobel State Bank, Chicago August 14, 1990 Boscobel, Wisconsin Boscobel, Wisconsin Bumpushares, Inc., Citizens Bank and Trust St. Louis August 7, 1990 Atwood, Tennessee Company, Atwood, Tennessee Cascade Bancorp, Bank of the Cascades, San Francisco July 24, 1990 Bend, Oregon Bend, Oregon Citizens National Bancorp, Inc., The Citizens National Bank, Boston August 9, 1990 Putnam, Connecticut Putnam, Connecticut Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 885 Section 3—Continued Reserve Effective Appiicant(s) Bank(s) Bank date Community Bancshares of Community Bank of Grafton, Chicago August 22, 1990 Wisconsin, Inc., Grafton, Wisconsin Grafton, Wisconsin Community Bank Corporation, The Grant State Bank, Chicago August 14, 1990 Grant, Michigan Grant, Michigan E & A Associates, First Denver Corporation, Kansas City August 10, 1990 Denver, Colorado Denver, Colorado Financial Center Corporation, Paragon Bank, Chicago July 26, 1990 Holland, Michigan Holland, Michigan First Ascension Bancorp, Inc., First National Bank of Gonzales, Atlanta August 10, 1990 Gonzales, Louisiana Gonzales, Louisiana First Bank Group, Inc., FirstBank of Arkansas, St. Louis August 13, 1990 Brinkley, Arkansas Brinkley, Arkansas Bank of Kensett, Kensett, Arkansas First Community Bank Group, Todd County Agency, Inc., Minneapolis August 10, 1990 Inc., Bertha, Minnesota Minneapolis, Minnesota First Financial Bancorp, Trustcorp Bank, Dunkirk, Cleveland July 30, 1990 Monroe, Ohio Dunkirk, Indiana First Financial Corporation, Ridge Farm State Bank, Chicago August 21, 1990 Terre Haute, Indiana Ridge Farm, Illinois First Howard Bancshares, Inc., First Security Bankshares, Inc., Kansas City August 15, 1990 Topeka, Kansas Topeka, Kansas First Security Bankshares, Inc., I and B, Inc., Kansas City August 15, 1990 Topeka, Kansas Cherry vale, Kansas First State Bancorp, Inc., State Bank of La Crosse, Minneapolis August 23, 1990 La Crosse, Wisconsin La Crosse, Wisconsin FirsTrust, Inc., Hardin, Inc., Kansas City August 2, 1990 Cambridge, Nebraska Edison, Nebraska Gaylord Bancorporation, Ltd., Nicollet State Bank, Minneapolis July 27, 1990 Gaylord, Minnesota Nicollet, Minnesota GNW Financial Corporation, Great Northwest Bank, San Francisco August 15, 1990 Bremerton, Washington Bremerton, Washington Hartsville Bancshares, Inc. Hartsville Bancshares, Inc., Atlanta August 8, 1990 Employee Stock Ownership Hartsville, Tennessee Plan, Hartsville, Tennessee Heartland Bankshares, Inc., City State Bank, Chicago August 8, 1990 Madrid, Iowa Madrid, Iowa HomeTown Bancorp, Inc., Myersville Bank, Richmond July 30, 1990 Myersville, Maryland Myersville, Maryland Huxley Bancorp, First National Bank, Chicago August 22, 1990 Huxley, Iowa Huxley, Iowa The Jonesboro Bancompany, The First National Bank of St. Louis August 14, 1990 Inc., Jonesboro, Jonesboro, Illinois Jonesboro, Illinois Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

886 Federal Reserve Bulletin • October 1990 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank date Main Street Banks Incorporated, Southern Heritage Savings Bank, Atlanta July 27, 1990 Covington, Georgia Winterville, Georgia Marathon Financial Corporation, The Marathon Bank, Richmond July 31, 1990 Stephens City, Virginia Stephens City, Virginia Marshall & Ilsley Corporation, Barneveld State Bank, Chicago August 22, 1990 Milwaukee, Wisconsin Barneveld, Wisconsin The M & B Capital Company, The Merchants & Business Bank, Cleveland August 21, 1990 Mentor, Ohio Mentor, Ohio MC Bancshares, Inc., Morgan City Bank & Trust Atlanta August 15, 1990 Morgan City, Louisiana Company, Morgan City, Louisiana NCNB Corporation, NCNB America Bank, Richmond August 22, 1990 Charlotte, North Carolina Newark, Delaware NoDak Bancorporation, Union State Bank of Fargo, Minneapolis August 3, 1990 Fargo, North Dakota Fargo, North Dakota North Fulton Bancshares, Inc., Milton National Bank, Atlanta July 27, 1990 Roswell, Georgia Roswell, Georgia Northwest Bancorp, Inc., First National Hoffman Bancorp, Chicago August 2, 1990 Hoffman Estates, Illinois Inc., Hoffman Estates, Illinois First Midwest Financial Corporation, Hoffman Estates, Illinois Ogle County Bancshares, Inc., Leland National Bancorp, Inc., Chicago August 10, 1990 Rochelle, Illinois Leland, Illinois Rogers County Bank Holding Bank of Oklahoma, Claremore, Kansas City August 17, 1990 Company, Claremore, Oklahoma Claremore, Oklahoma Bank of Oklahoma, Pryor, Pry or, Oklahoma Southern Colorado Bancshares, Southern Colorado, Kansas City July 27, 1990 Inc., Pueblo West, Colorado Pueblo West, Colorado SouthTrust Corporation, South Florida Financial Atlanta August 3, 1990 Birmingham, Alabama Corporation, Cape Coral, Florida Three Forks Bancorporation, Citizens Bancshares, Inc., Minneapolis July 27, 1990 Three Forks, Montana Bozeman, Montana Vista Bancorp, Inc., Twin Rivers Community Bank, New York August 3, 1990 Phillipsburg, New Jersey Easton, Pennsylvania West Point Bancorp, Inc., West Point Savings Association, Kansas City August 17, 1990 St. Joseph, Missouri West Point, Nebraska Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 887 Section 4 Nonbanking Reserve Effective Applicant(s) Activity/Company Bank date BB&T Financial Corporation, First Federal Savings Bank of Richmond July 26, 1990 Wilson, North Carolina Pitt County, Greenville, North Carolina Citizens Financial Services, Inc., Star Savings and Loan Philadelphia August 3, 1990 Mansfield, Pennsylvania Association, Sayre, Pennsylvania CNB Bancshares, Inc., Valley Federal Savings Bank, St. Louis August 14, 1990 Evansville, Indiana Terre Haute, Indiana Compagnie Financiere de Suez, Indosuez Carr Futures Inc., New York August 14, 1990 Paris, France Chicago, Illinois Banque Indosuez, Paris, France Carolina First Corporation, First Federal Savings and Loan Richmond August 1, 1990 Greenville, South Carolina Association of Georgetown, Georgetown, South Carolina First Financial Bancorp, Fidelity Federal Savings Bank, Cleveland August 8, 1990 Monroe, Ohio Marion, Indiana Lincoln County Bancorp, Inc., Louisiana Title Company, Inc., St. Louis August 10, 1990 Troy, Missouri Louisiana, Missouri Midwest Banco Bancorporation, Interim Federal Savings Bank of Kansas City August 17, 1990 Cozad, Nebraska Imperial, Imperial, Nebraska National City Corporation, Buckeye Financial Corporation, Cleveland August 21, 1990 Cleveland, Ohio Columbus, Ohio Norwest Corporation, Yankton Savings and Loan Minneapolis July 27, 1990 Minneapolis, Minnesota Association, Yankton, South Dakota Redwood Empire Bancorp, Allied Savings Bank, F.S.B., San Francisco August 9, 1990 Santa Rosa, California Santa Rosa, California Societe Generale, FIMAT Futures USA, Inc., New York July 27, 1990 Paris, France Chicago, Illinois Southern National Corporation, Mutual Federal Savings and Richmond August 16, 1990 Lumberton, North Carolina Loan Association, Elkin, North Carolina Southern National Corporation, Western Carolina Savings & Richmond August 16, 1990 Lumberton, North Carolina Loan Association, Inc., Valdese, North Carolina United Nebraska Financial Co., United Nebraska Savings and Kansas City August 22, 1990 Ord, Nebraska Loan Association, Ogallala, Nebraska Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

888 Federal Reserve Bulletin • October 1990 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 Clanton Interim Bank, The Peoples Savings Bank, Atlanta August 17, 1990 Clanton, Alabama Clanton, Alabama First Virginia Bank-Piedmont, CorEast Savings Bank, FSB, Richmond August 6, 1990 Lynchburg, Virginia Richmond, Virginia First Virginia Bank-Planters, CorEast Savings Bank, FSB, Richmond August 6, 1990 Bridge water, Virginia Richmond, Virginia PENDING CASES INVOLVING THE BOARD OF injunction on June 5, 1990, in light of 5th Circuit's GOVERNORS decision in MCorp v. Board of Governors. Rutledge v. Board of Governors, No. CV90-L-0137S (N.D. Alabama, filed January 27, 1990). Tort suit This list of pending cases does not include suits challenging Board and Reserve Bank supervisory against the Federal Reserve Banks in which the Board actions. The Board's motion to dismiss or for sumof Governors is not named a party. mary judgment was granted on July 31, 1990. Plaintiff filed a notice of appeal to the Fifth Circuit on Kuhns v. Board of Governors, No. 90-1398 (D.C. Cir., August 21, 1990. filed July 30, 1990). Petition for review of Board Kaimowitz v. Board of Governors, No. 90-3067 (11th order denying request for attorney's fees pursuant Cir., filed January 23, 1990). Petition for review of to Equal Access to Justice Act. Board order dated December 22, 1989, approving Laufman v. State of California, et al., No. CIVS-89- application by First Union Corporation to ac- 1755 EJM-EM (E.D. California, filed April 2, 1990). uire Florida National Banks. Petitioner objects to Action to require bank regulatory agencies to exam- approval on Community Reinvestment Act ine or bring enforcement action against bank. The grounds. Board's answer was filed on June 13, 1990. Babcock and Brown Holdings, Inc. v. Board of Gov- May v. Board of Governors, No. 90-1316 (D.D.C., ernors, No. 89-70518 (9th Cir., filed November 22, filed June 5, 1990). Action under Freedom of Infor- 1989). Petition for review of Board determination mation and Privacy Acts. The Board's motion to that a company would control a proposed insured dismiss was granted on July 17, 1990. Plaintiff's bank for purposes of the Bank Holding Company notice of appeal was filed July 27, 1990. Act. Awaiting scheduling of oral argument. Burke v. Board of Governors, No. 90-9509 (10th Consumers Union of U.S., Inc. v. Board of Gover- Circuit, filed February 27, 1990). Petition for review nors, No. 90-5186 (D.C. Cir., filed June 29, 1990). of Board orders assessing civil money penalties and Appeal of District Court decision upholding amendissuing orders of prohibition. ments to Regulation Z implementing the Home BancTEXAS Group, Inc. v. Board of Governors, No. Equity Loan Consumer Protection Act. CA 3-90-0236-R (N.D. Texas, filed February 2, Synovus Financial Corp. v. Board of Governors, No. 1990). Suit for preliminary injunction enjoining the 89-1394 (D.C. Cir., filed June 21, 1989). Petition for Board from enforcing a temporary order to cease review of Board order permitting relocation of a and desist requiring injection of capital into plain- bank holding company's national bank subsidiary tiff's subsidiary banks under the Board's source of from Alabama to Georgia. Oral argument scheduled strength doctrine. District court granted preliminary for October 11, 1990. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 889 MCorp v. Board of Governors, No. 89-2816 (5th Cir., Holding Company Act apply only to non-bank subfiled May 2, 1989). Appeal of preliminary injunction sidiaries of bank holding companies. The Board's against the Board enjoining pending and future order was upheld on November 29, 1989. Petition enforcement actions against a bank holding com- for certiorari filed on April 18, 1990; the Board's pany now in bankruptcy. On May 15, 1990, the Fifth opposition to certiorari was filed on July 13, 1990. Circuit vacated the district court's order enjoining MCorp v. Board of Governors, No. CA3-88-2693 the Board from proceeding with enforcement ac- (N.D. Tex., filed October 10, 1988). Application for tions based on section 23A of the Federal Reserve injunction to set aside temporary cease and desist Act, but upheld the district court's order enjoining orders. Stayed pending outcome of MCorp v. Board such actions based on the Board's source-of- of Governors in Fifth Circuit. strength doctrine. The Board's petition for rehearing White v. Board of Governors, No. CU-S-88-623-RDF was denied on August 5, 1990. On August 29, the (D. Nev., filed July 29, 1988). Age discrimination Fifth Circuit denied the plaintiff's motion for a stay complaint. Board's motion to dismiss or for sumpending petition for certiorari. mary judgment pending. Independent Insurance Agents of America v. Board of Cohen v. Board of Governors, No. 88-1061 (D.N.J., Governors, No. 89-4030 (2d Cir., filed March 9, filed March 7, 1988). Action seeking disclosure of 1989). Petition for review of Board order ruling that documents under the Freedom of Information Act. the non-banking restrictions of section 4 of the Bank Dismissed by stipulation on June 25, 1990. TERMINATIONS OF FINAL ENFORCEMENT Household International, Inc. ORDERS ISSUED BY THE BOARD OF GOVERNORS Prospect Heights, Illinois Household Finance Corporation Prospect Heights, Illinois Bank South Corporation September 29, 1989 Atlanta, Georgia (Successor to Fulton National Holding Corporation, The Prineville Bank Atlanta, Georgia) Prineville, Oregon March 9, 1990 June 12, 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 Assets and liabilities Domestic Financial Statistics A19 All reporting banks A20 Banks in New York City MONEY STOCK AND BANK CREDIT A21 Branches and agencies of foreign banks A22 Gross demand deposits—individuals, A3 Reserves, money stock, liquid assets, and debt partnerships, and corporations measures 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 acceptances outstanding POLICY INSTRUMENTS A23 Prime rate charged by banks on short-term A7 Federal Reserve Bank interest rates business loans A8 Reserve requirements of depository institutions 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 MONETARY AND CREDIT AGGREGATES FEDERAL FINANCE 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 A17 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 • October 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 liabilities and business credit IN THE UNITED STATES A59 Liabilities to and claims on foreigners REAL ESTATE A60 Liabilities to foreigners A62 Banks' own claims on foreigners A37 Mortgage markets A63 Banks' own and domestic customers' claims on A3 8 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 ENTERPRISES IN THE UNITED STATES FLOW OF FUNDS A65 Liabilities to unaffiliated foreigners A41 Funds raised in U.S. credit markets A66 Claims on unaffiliated foreigners A43 Direct and indirect sources of funds to credit 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 INTEREST AND EXCHANGE RATES measures A47 Labor force, employment, and unemployment A69 Discount rates of foreign central banks A48 Output, capacity, and capacity utilization A69 Foreign short-term interest rates A49 Industrial production—Indexes and gross value A70 Foreign exchange rates A51 Housing and construction A52 Consumer and producer prices A71 Guide to Tabular Presentation, A53 Gross national product and income Statistical Releases, and Special A54 Personal income and saving Tables International Statistics SPECIAL TABLES SUMMARY STATISTICS All Pro forma balance sheet and income A55 U.S. international transactions—Summary statements for priced service operations, A56 U.S. foreign trade June 30, 1990 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 Q3 Q4 Q1 Q2' Mar. Apr. May June July Reserves of depository institutions2 1 Total .6 5.1 2.4 -1.4 1.6 -.4 -9.8 -1.0 -8.3 2 Required .5 5.0 2.5 -.9 4.2 -1.2 -11.3 2.8 -10.1 3 Nonborrowed 8.6 7.2 -3.9 -1.0 -12.1 9.8 -4.1 8.3 -5.9 4 Monetary base 3.2 4.0 8.5 7.0 8.7 7.1 3.5 7.6 6.4 Concepts of money, liquid assets, and debt4 5 Ml 1.8 5.1 4.8 3.5 5.1 3.7' -2.8 6.0' -.4 6 M2 7.0' 7.1' 6.4' 2.9 5.7' 2.3' -2.3' 2.9' 1.5 7 M3 4.0r 2^ 2.9' .8 1.4' 1.2' -2.4' 1.2' 1.0 8 L 4.5r 3.2' 3.1' 1.7 4.8' 3.0' -6.3' 6.9 n.a. 9 Debt 7.3 8.2 6.8' 6.6 7.4' 6.0' 5.6' 7.4 n.a. Nontransaction components 10 In M25 8.7 7.7 6.9' 2.7 5.9' 1.9' -2.1' 1.8' 2.2 11 In M3 only6 -6.5' -16.5' -10.5' -7.5 -16.2 -3.6' -2.9' -5.4' -1.1 Time and savings deposits Commercial banks 12 Savings .4 7.2 9.5 5.1 10.0 2.5 -1.9 9.3 3.7 13 MMDAs 5.2 12.3 9.1 10.6 10.4 10.7 9.9' 9.5 8.5 14 Small-denomination time7 11.9 11.3 7.8 12.0 5.6 9.4 20.8 18.5' 19.1 15 Large-denomination time8,9 2.9 2.7 -1.6 -2.9 -9.0' -5.4' 5.5 2.4' 6.9 Thrift institutions 16 Savings -5.2 .2 1.3 .5 -3.2 4.3 -2.7' -3.8 -1.1 17 MMDAs -6.2 4.7 5.7 2.6 21.6 7.1 -16.7 -15.1' -12.6 18 Small-denomination time7 8.7 -2.5 -3.3' -8.0 2.8' -5.9' -16.0' -20.9' -15.5 19 Large-denomination time8 -10.7 -28.6 -24.7 -30.5 -23.2 -35.0 -40.3 -28.7' -36.5 Money market mutual funds 20 General purpose and broker-dealer 37.6 29.1 19.8' -.7 2.2' -.4' -19.9' 5.6' 11.9 21 Institution-only 36.6 3.3 10.2 11.7 19.7 15.9 5.6 .0 17.9 Debt components4 22 Federal 4.7 9.5 8.1 10.2 14.9 7.7 6.6 13.5 n.a. 23 Nonfederal 8.1 7.8 6.4' 5.5 5.1' 5.5' 5.3' 5.5 n.a. 1. Unless otherwise noted, rates of change are calculated from average banking offices in the United Kingdom and Canada, and balances in both taxable amounts outstanding in preceding month or quarter. and tax-exempt, institution-only money market mutual funds. Excludes amounts 2. Figures incorporate adjustments for discontinuities associated with regula- held by depository institutions, the U.S. government, money market funds, and tory changes in reserve requirements. (See also table 1.20.) foreign banks and official institutions. Also subtracted is the estimated amount of 3. Seasonally adjusted, break-adjusted monetary base consists of (1) season- overnight RPs and Eurodollars held by institution-only money market mutual ally adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally funds. adjusted currency component of the money stock, plus (3) (for all quarterly L: M3 plus the nonbank public holdings of U.S. savings bonds, short-term reporters on the "Report of Transaction Accounts, Other Deposits and Vault Treasury securities, commercial paper and bankers acceptances, net of money Cash" and for all those weekly reporters whose vault cash exceeds their required market mutual fund holdings of these assets. reserves) the seasonally adjusted, break adjusted difference between current vault Debt: Debt of domestic nonfinancial sectors consists of outstanding credit cash and the amount applied to satisfy current reserve requirements. market debt of the U.S. government, state and local governments, and private 4. Composition of the money stock measures and debt is as follows: nonfinancial sectors. Private debt consists of corporate bonds, mortgages, con- Ml: (1) currency outside the Treasury, Federal Reserve Banks, and the vaults sumer credit (including bank loans), other bank loans, commercial paper, bankers of depository institutions; (2) travelers checks of nonbank issuers; (3) demand acceptances, and other debt instruments. Data are derived from the Federal deposits at all commercial banks other than those due to depository institutions, Reserve Board's flow of funds accounts. Data on debt of domestic nonfinancial the U.S. government, and foreign banks and official institutions, less cash items in sectors are monthly averages, derived by averaging adjacent month-end levels. the process of collection and Federal Reserve float; and (4) other checkable Growth rates for debt reflect adjustments for discontinuities over time in the levels deposits (OCD), consisting of negotiable order of withdrawal (NOW) and auto- of debt presented in other tables. matic transfer service (ATS) accounts at depository institutions, credit union 5. Sum of overnight RPs and Eurodollars, money market fund balances share draft accounts, and demand deposits at thrift institutions. (general purpose and broker-dealer), MMDAs, and savings and small time M2: Ml plus overnight (and continuing contract) repurchase agreements deposits. (RPs) issued by all depository institutions and overnight Eurodollars issued to 6. Sum of large time deposits, term RPs, term Eurodollars of U.S. residents, U.S. residents by foreign branches of U.S. banks worldwide, money market and money market fund balances (institution-only), less a consolidation adjustdeposit accounts (MMDAs), savings and small-denomination time deposits ment that represents the estimated amount of overnight RPs and Eurodollars held (time deposits—including retail RPs—in amounts of less than $100,000), and by institution-only money market mutual funds. balances in both taxable and tax-exempt general purpose and broker-dealer 7. Small-denomination time deposits—including retail RPs—are those issued money market mutual funds. Excludes individual retirement accounts (IRA) in amounts of less than $100,000. All IRA and Keogh accounts at commercial and Keogh balances at depository institutions and money market funds. Also banks and thrifts are subtracted from small time deposits. excludes all balances held by U.S. commercial banks, money market funds 8. Large-denomination time deposits are those issued in amounts of $100,000 (general purpose and broker-dealer), foreign governments and commercial or more, excluding those booked at international banking facilities. banks, and the U.S. government. 9. Large-denomination time deposits at commercial banks less those held by M3: M2 plus large-denomination time deposits and term RP liabilities (in money market mutual funds, depository institutions, and foreign banks and amounts of $100,000 or more) issued by all depository institutions, term Eurodol- official institutions. lars held by U.S. residents at foreign branches of U.S. banks worldwide and at all Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • October 1990 1.11 RESERVES OF DEPOSITORY INSTITUTIONS AND RESERVE BANK CREDIT Millions of dollars Monthly averages of daily figures Weekly averages of daily figures for week ending Factors 1990 1990 May June July June 13 June 20 June 27 July 4 July 11 July 18 July 25 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit 273,073 278,190 279,684 280,152 276,801 277,894 279,630 282,799 279,344 278,784 U.S. government securities1, 2 2 Bought outright-system account 224,344 228,752 230,592 227,798 228,982 229,576 231,276 229,944 230,347 230,736 3 Held under repurchase agreements 185 930 1,055 2,550 0 0 0 3,230 711 729 Federal agency obligations 4 Bought outright 6,446 6,446 6,437 6,446 6,446 6,446 6,446 6,446 6,446 6,433 5 Held under repurchase agreements 156 294 387 907 0 0 0 1,237 240 237 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions2 7 Adjustment credit 205 237 % 740 34 74 62 19 35 242 8 Seasonal credit 248 313 275 281 164 345 368 206 249 347 9 Extended credit 852 339 389 516 312 202 157 350 380 411 10 Float 720 486 674 579 494 542 877 914 426 819 11 Other Federal Reserve assets 39,917 40,394 39,780 40,334 40,369 40,707 40,445 40,453 40,511 38,829 12 Gold stock 11,063 11,065 11,065 11,065 11,065 11,065 11,065 11,065 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 19,949 20,016 20,093 20,005 20,019 20,033 20,065 20,078 20,091 20,105 ABSORBING RESERVE FUNDS 15 Currency in circulation 262,394 265,776 268,968 265,907 265,822 265,474 267,760 270,024 269,522 268,479 16 Treasury cash holdings 572 582 568 586 582 578 579 577 573 559 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,054 5,078 5,408 4,574 5,003 5,364 5,580 5,973 5,108 5,082 18 Foreign 214 250 243 217 233 266 287 262 221 251 19 Service-related balances and adjustments 2,038 2,010 2,022 1,910 2,037 1,956 1,847 2,022 2,016 2,138 20 Other 334 289 243 230 302 328 278 199 229 238 21 Other Federal Reserve liabilities and capital 9,468 9,788 9,176 10,231 9,553 9,625 99,,113366 99,,330022 99,,113366 99,,113366 22 Reserve balances with Federal Reserve Banks3 32,529 34,016 32,731 36,084 32,870 33,918 33,810 34,102 32,213 32,589 End-of-month figures Wednesday figures 1990 1990 May June July June 13 June 20 June 27 July 4 July 11 July 18 July 25 SUPPLYING RESERVE FUNDS 23 Reserve Bank credit 275,183 279,372 279,364 283,457 276,723 279,926 280,080 284,245 277,202 280,154 U.S. government securities1' 2 24 Bought outright-system account 227,455 231,383 232,313 227,857 229,101 230,978 231,299 230,280 229,255 229,431 25 Held under repurchase agreements 0 0 0 1,032 0 0 0 3,972 0 1,833 Federal agency obligations 26 Bought outright 6,446 6,446 6,414 6,446 6,446 6,446 6,446 6,446 6,446 6,414 27 Held under repurchase agreements 0 0 0 1,053 0 0 0 1,774 0 539 28 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions2 29 Adjustment credit 94 49 97 5,080 48 84 81 43 22 1,515 30 Seasonal credit 289 374 407 295 171 356 137 219 242 389 31 Extended credit 717 163 437 272 332 168 363 368 387 425 32 Float 316 575 643 685 189 1,052 1,582 407 539 858 33 Other Federal Reserve assets 39,866 40,382 39,053 40,736 40,436 40,842 40,172 40,739 40,312 38,750 34 Gold stock 11,065 11,065 11,064 11,065 11,065 11,065 11,065 11,065 11,065 11,064 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 19,985 20,047 20,118 20,005 20,019 20,033 20,065 20,078 20,091 20,105 ABSORBING RESERVE FUNDS 37 Currency in circulation 265,336 266,979 268,411 266,135 265,737 266,080 269,139 270,131 269,248 268,287 38 Treasury cash holdings 579 580 549 583 578 580 579 575 559 557 Deposits, other than reserve balances, with Federal Reserve Banks 39 Treasury 4,426 5,470 6,369 5,291 5,944 5,915 5,989 4,669 5,156 5,912 40 Foreign 309 368 279 224 223 189 239 276 190 228 41 Service-related balances and adjustments 2,242 1,847 2,000 1,910 2,037 1,956 1,847 2,022 2,016 2,138 42 Other 303 255 247 224 242 314 224 212 119933 474 43 Other Federal Reserve liabilities and capital 9,928 9,012 9,723 99,,665522 99,,336655 99,,440099 99,,111166 99,,112288 88,,882233 8,916 44 Reserve balances with Federal Reserve Banks3 31,628 34,490 31,484 39,027 32,198 35,099 32,595 36,893 30,690 33,327 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 1990 Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June July 1 Reserve balances with Reserve Banks2 37,691 37,837 35,436 34,090 30,929 33,407 35,409 32,771 33,878 32,945 2 Total vault cash3 26,675 28,204 29,812 31,301 32,489 29,581 29,281 29,812 29,632 30,457 3 Applied vault cash 24,449 25,909 27,374 28,841 29,693 27,251 27,103 27,461 27,318 27,996 4 Surplus vault cash5 2,226 2,295 2,439 2,461 2.795 2,330 2,178 2,351 2,314 2,461 5 Total reserves6 62,141 63,746 62,810 62,931 60,623 60,658 62,512 60,232 61,197' 60,941 6 Required reserves 61,094 62,699 61,888 61,914 59,634 59,797 61,615 59,269 60,423' 60,081 7 Excess reserve balances at Reserve Banks7 1,046 1,047 922 1,016 989 861 897 962 774 860 8 Total borrowings at Reserve Banks 777 1,716 265 440 1,448 2,124 1,628 1,335 881 757 9 Seasonal borrowings at Reserve Banks 93 130 84 47 51 78 122 244 311 389 10 Extended credit at Reserve Banks 483 1,244 20 26 535 1,950 1,403 875 346 280 Biweekly averages of daily figures for weeks ending 1990 Apr. 4 Apr. 18 May 2 May 16 May 30 June 13 June 27 July 11 July 25 Aug. 8 11 Reserve balances with Reserve Banks2 33,433 36,421 34,887 33,855 31,269 34,385 33,390 33,958' 32,390 32,384 12 Total vault cash3 29,585 28,931 29,589 28,863 30,852 28,986 30,097 30,264 30,549 30,597 13 Applied vault cash4, 27,278 26,920 27,259 26,730 28,268 26,803 27,676 27,885 28,094 27,970 14 Surplus vault cash 2,307 2,011 2,331 2,133 2,584 2,184 2,421 2,380 2,455 2,627 15 Total reserves6 60,711 63,341 62,145 60,584 59,537 61,188 61,066 61,842' 60,484 60,354 16 Required reserves 59,633 62,675 61,040 59,657 58,526 60,709 60,046 6600,,994444'' 59,609 59,599 17 Excess reserve balances at Reserve Banks7 1,078 665 1,105 927 1,011 479 1,020 889988'' 875 756 18 Total borrowings at Reserve Banks 2,157 1,882 1,155 976 1,723 1,291 566 581 832 908 19 Seasonal borrowings at Reserve Banks 96 100 158 221 278 282 329 359 396 429 20 Extended credit at Reserve Banks 1,965 1,676 899 673 1,098 559 183 182 298 419 1. These data also appear in the Board's H.3 (502) release. For address, see in- satisfy current reserve requirements. side front cover. 5. Total vault cash (line 2) less applied vault cash (line 3). 2. Excludes required clearing balances and adjustments to compensate for float 6. Reserve balances with Federal Reserve Banks (line 1) plus applied vault cash and includes other off-balance sheet "as-of' adjustments. (line 3). 3. Total "lagged" vault cash held by those depository institutions currently 7. Total reserves (line 5) less required reserves (line 6). subject to reserve requirements. Dates refer to the maintenance periods in which 8. Extended credit consists of borrowing at the discount window under the the vault cash can be used to satisfy reserve requirements. Under contempora- terms and conditions established for the extended credit program to help neous reserve requirements, maintenance periods end 30 days after the lagged depository institutions deal with sustained liquidity pressures. Because there is computation periods in which the balances are held. not the same need to repay such borrowing promptly as there is with traditional 4. All vault cash held during the lagged computation period by "bound" short-term adjustment credit, the money market impact of extended credit is institutions (i.e., those whose required reserves exceed their vault cash) plus the similar to that of nonborrowed reserves. amount of vault cash applied during the maintenance period by "nonbound" 9. Data are prorated monthly averages of biweekly averages. institutions (i.e., those whose vault cash exceeds their required reserves) to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • October 1990 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks1 Averages of daily figures, in millions of dollars 1990 week ending Monday2 Maturity and source June 4 June 11 June 18 June 25 July 2 July 9 July 16 July 23 July 30 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 85,413 88,698 89,848 82,754 82,140 90,826 88,646 80,664 For all other maturities 18,706 19,734 21,135 20,214 19,294 19,261 19,161 21,137 From other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies For one day or under continuing contract 37,418 40,495 40,424 39,759 37,304 41,114 42,193 40,122 For all other maturities 18,065 17,758 17,495 17,562 17,631 18,030 17,858 19,176 Repurchase agreements on U.S. government and federal agency securities in immediately available funds Brokers and nonbank dealers in securities 5 For one day or under continuing contract 13,898 13,874 13,354 13,068 11,064 11,700 13,311 13,067 6 For all other maturities 20,438 20,695 20,503 20,437 19,408 19,155 19,735 21,516 All other customers 7 For one day or under continuing contract 33,987 32,321 32,506 33,987 32,210 33,925 33,347 33,760 8 For all other maturities 13,263 14,130 13,964 14,211 13,902 13,691 13,572 13,854 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 49,490 44,708 61,783 49,258 51,135 47,908 45,724 46,841 10 To all other specified customers3 15,168 13,419 14,314 14,251 13,132 12,916 12,696 13,278 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 AAddjjuussttmmeenntt ccrreeddiitt Extended credit2 aanndd FFFeeedddeeerrraaalll RRReeessseeerrrvvveee SSeeaassoonnaall ccrreeddiitt11 First 30 days of borrowing After 30 days of borrowing3 BBBaaannnkkk On Effective Previous On Effective Previous On Effective Previous Effective date 8/8/90 date rate 8/8/90 date rate 8/8/90 date rate Boston 7 2/24/89 6V2 7 2/24/89 6 Vi 8.45 8/8/90 8.6 7/25/90 New York 2/24/89 2/24/89 8/8/90 7/25/90 Philadelphia 2/24/89 2/24/89 8/8/90 7/25/90 Cleveland 2/24/89 2/24/89 8/8/90 7/25/90 Richmond 2/24/89 2/24/89 8/8/90 7/25/90 Atlanta 2/24/89 2/24/89 8/8/90 7/25/90 Chicago 2/24/89 2/24/89 8/8/90 7/25/90 St. Louis 2/24/89 2/24/89 8/8/90 7/25/90 Minneapolis 2/24/89 2/24/89 8/8/90 7/25/90 Kansas City 2/24/89 2/24/89 8/8/90 7/25/90 Dallas 2/27/89 2/27/89 8/8/90 7/25/90 San Francisco ... 7 2/24/89 6'/z 7 2/24/89 Wi 8.45 8/8/90 8.6 7/25/90 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. B o an f k Effective 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. In effect Dec. 31, 1977. 6 6 1980-—July 78 10-11 10 11998844——AApprr.. 9 m-9 9 1978—Jan. 9 6-6V2 6V2 79 10 10 13 9 9 20 6V1 6V5 Sept. 76 11 11 Nov. 21 8'/2-9 m May 11 6</>-7 7 Nov. 17 12 12 26 8V5 m 12 7 7 Dec. 5 12-13 13 Dec. 24 8 8 July 3 7-7'/4 71/4 10 71/4 7V4 1981-——MMaayy 5 13-14 14 11998855——MMaayy 20 7i/>-8 71/2 Aug. 21 73/4 73/4 8 14 14 24 lYi 7'/> Sept. 22 8 8 Nov. 7 13-14 13 Oct. 16 8-8 W m 6 13 13 1986—Mar. 7 1-lVi 7 20 8'/2 m Dec. 4 12 12 10 7 7 Nov. 1 m-9l/l 9'/2 Apr. 21 6W-7 6 Vi 3 9l/i m 1982---JJuullyy 70 . 11W-12 1 \Vl July 11 6 6 73 im UVi AAuugg.. 21 5!/2-6 5'/> 1979—July 20 10 10 Aug. 7 11-111/2 11 22 5'A 5 Vi Aug. 17 10-10'/! IOVi 3 20 IOV2 \m 16 10W 10 •/> 11998877——SSeepptt.. 4 5 V5-6 6 Sept. 19 10W-11 11 77 10-10W 10 11 6 6 21 11 11 30 10 10 Oct. 8 11-12 12 Oct. 17 9!/>-10 9Vi 11998888——AAuugg.. 9 6-61/2 6W 10 12 12 n 9 Vi 9Vi 11 61/2 6V2 Nov. 77 9-9Vi 2 1980—Feb. 15 12-13 13 76 . 9 9 1989—Feb. 24 6>/>-7 7 May 2 19 9 12 1 - 3 1 3 1 1 3 3 Dec. I 1 S 4 8 8 1 1 / / 2 2 - - 9 9 8 9 V2 27 7 7 30 12 12 17 8W m In effect Aug. 8, 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 Joans 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 '/> 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 Financial Statistics • October 1990 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS' Percent of deposits Depository institution requirements after implementation of the Monetary Control Act Type of deposit, and deposit interval2 Percent of Effective date deposits Net transaction accounts3,4 $0 million-$40.4 million 3 12/19/89 More than $40.4 million 12 12/19/89 Nonpersonal time deposits5 By original maturity Less than 1 l/i years 3 10/6/83 11/2 years or more 0 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 Dec. Jan. Feb. Mar. Apr. May June U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 18,983 8,223 14,284 1,883 423 108 543 5,796 3,365 1,732 2 Gross sales 6,051 587 12,818 0 1,489 3,384 0 0 0 0 3 Exchange 0 0 0 0 0 0 0 0 0 0 4 Redemptions 9,029 2,200 12,730 0 1,000 400 0 0 0 0 Others within 1 year 5 Gross purchases 3,659 2,176 327 0 0 0 100 0 0 50 6 Gross sales 300 0 0 0 0 0 0 0 0 0 7 Maturity shift 21,504 23,854 28,848 1,268 1,201 2,845 1,876 993 4,387 1,314 8 Exchange -20,388 -24,588 -25,783 0 -2,489 -5,418 0 -4,304 -2,771 0 9 Redemptions 70 0 500 0 0 0 0 0 0 0 1 to 5 years 10 Gross purchases 10,231 5,485 1,436 0 0 0 100 100 0 0 11 Gross sales 452 800 490 0 0 0 0 0 0 0 12 Maturity shift -17,975 -17,720 -25,534 -1,268 -1,163 -1,713 -1,876 -739 -3,607 -1,314 13 Exchange 18,938 22,515 23,250 0 2,373 4,743 0 4,081 2,521 0 5 to 10 years 14 Gross purchases 2,441 1,579 287 0 0 0 0 0 00 00 11 Gross sales 0 175 29 0 0 0 0 0 0 0 16 Maturity shift -3,529 -5,946 -2,231 0 -38 -451 0 -254 -530 0 17 Exchange 950 1,797 1,934 0 116 450 0 223 0 0 Over 10 years 18 Gross purchases 1,858 1,398 284 0 0 0 0 0 0 0 19 Gross sales 0 0 0 0 0 0 0 0 0 0 20 Maturity shift 0 -188 -1,086 0 0 -681 0 0 -250 0 21 Exchange 500 275 600 0 0 226 0 0 250 0 All maturities 22 Gross purchases 37,170 18,863 16,617 1,883 423 108 743 5,896 3,365 1,782 23 Gross sales 6,803 1,562 13,337 0 1,489 3,384 0 0 0 0 24 Redemptions 9,099 2,200 13,230 0 1,000 400 0 0 0 0 Matched transactions 75 Gross sales 950,923 1,168,484 1,323,480 103,077 127,729 116,220 99,104 97,970 121,596' 107,896 26 Gross purchases 950,935 1,168,142 1,326,542 104,827 121,411 120,637 97,128 98,643 121,218' 110,042 Repurchase agreements2 77 Gross purchases 314,621 152,613 129,518 22,737 16,185 0 88,,005500 6,409 33,,995599 11,242 28 Gross sales 324,666 151,497 132,688 21,145 17,777 0 6,627 7,832 3,959 11,242 29 Net change in U.S. government securities 11,234 15,872 -10,055 5,225 -9,976 741 190 5,146 2,987 3,928 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 00 0 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 276 587 442 0 0 0 0 78 0 0 Repurchase agreements2 33 Gross purchases 80,353 57,259 38,835 2,992 1,741 0 1,966 2,595 2,314 3,221 34 Gross sales 81,350 56,471 40,411 2,467 2,266 0 1,457 3,104 2,314 3,221 35 Net change in federal agency obligations -1,274 198 -2,018 525 -525 0 509 -587 0 0 36 Total net change in System Open Market Account 9,961 16,070 -12,073 5,750 -10,501 741 699 4,559 2,987 3,928 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

A48 DomesticN onfinancial Statistics • October 1990 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1990 1990 June 27 July 4 July 11 July 18 July 25 May June July Consolidated condition statement ASSETS 1 Gold certificate account 11,065 11,065 11,065 11,065 11,064 11,065 11,065 11,064 2 Special drawing rights certificate account 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 3 474 457 450 455 470 468 470 476 Loans 4 To depository institutions 608 581 629 651 2,330 1,100 586 942 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 6,414 6,446 6,446 6,414 8 Held under repurchase agreements 0 0 1,774 0 539 0 0 0 U.S. Treasury securities Bought outright 9 Bills 108,433 108,754 107,736 106,710 106,886 104,960 108,838 109,768 10 Notes 91,782 91,782 91,782 91,782 91,782 91,732 91,782 91,782 11 Bonds 30,763 30,763 30,763 30,763 30,763 30,763 30,763 30,763 12 Total bought outright2 230,978 231,299 230,280 229,255 229,431 227,455 231,383 232,313 13 Held under repurchase agreements 0 0 3,972 0 1,833 0 0 0 14 Total U.S. Treasury securities 230,978 231,299 234,252 229,255 231,264 227,455 231,383 232,313 15 Total loans and securities 238,032 238,326 243,100 236,352 240,546 235,001 238,415 239,668 16 Items in process of collection 5,923 9,369 6,354 6,022 5,421 6,661 7,586 9,103 17 Bank premises 825 828 828 828 828 795 827 831 Other assets 18 Denominated in foreign currencies3 34,747 34,226 34,186 34,211 32,327 34,574 34,225 32,561 19 All other 5,167 5,169 5,534 5,232 5,599 4,563 5,248 6,577 20 Total assets 304,752 307,958 310,035 302,684 304,772 301,646 306,354 308,798 LIABILITIES 21 Federal Reserve notes 247,101 250,110 225511,,007788 225500,,117722 224499,,221100 224466,,339988 224477,,998833 224499,,331199 Deposits 22 To depository institutions 36,812 34,506 39,371 32,871 35,235 34,094 36,336 34,651 23 U.S. Treasury—General account 5,915 5,989 4,669 5,156 5,912 4,426 5,470 6,369 24 Foreign—Official accounts 189 239 276 190 228 309 368 279 25 Other 314 224 212 193 474 303 255 247 26 Total deposits 43,230 40,958 44,528 38,410 41,850 39,132 42,429 41,546 27 Deferred credit items 5,012 7,774 5,301 5,279 4,796 6,188 6,930 8,210 28 Other liabilities and accrued dividends 4,311 3,714 4,070 3,609 3,778 4,365 3,810 3,554 29 Total liabilities 299,655 302,556 304,977 297,470 299,634 296,083 301,152 302,629 CAPITAL ACCOUNTS 30 Capital paid in 2,344 2,346 2,348 2,369 2,358 2,344 2,344 2,359 31 Surplus 2,243 2,243 2,243 2,243 2,243 2,243 2,243 2,243 32 Other capital accounts 511 813 467 602 537 981 616 1,566 33 Total liabilities and capital accounts 304,752 307,958 310,035 302,684 304,772 301,646 306,354 308,798 34 MEMO: Marketable U.S. Treasury securities held in custody for foreign and international accounts 227,365 224,881 225,711 226,487 225,489 225,879 228,260 228,317 Federal Reserve note statement 35 Federal Reserve notes outstanding issued to bank 288,282 288,769 289,304 290,109 290,449 285,819 288,487 290,791 36 LESS: Held by bank 41,181 38,658 38,226 39,937 41,239 39,421 40,504 41,472 37 Federal Reserve notes, net 247,101 250,110 251,078 250,172 224499,,221100 224466,,339988 224477,,998833 224499,,331199 Collateral held against notes net: 38 Gold certificate account 11,065 11,065 11,065 11,065 11,064 11,065 11,065 11,064 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 227,518 230,527 231,495 230,588 229,629 227,815 228,400 229,737 42 Total collateral 247,101 250,110 251,078 250,172 249,210 247,398 247,983 249,319 1. Some of these data also appear in the Board's H.4.1 (503) release. For 3. Valued monthly at market exchange rates. address, see inside front cover. Components may not add to totals because of 4. Includes special investment account at the Federal Reserve Bank of Chicago rounding. in Treasury bills maturing within 90 days. 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities 5. Includes exchange-translation account reflecting the monthly revaluation at pledged with Federal Reserve Banks—and excludes securities sold and scheduled market exchange rates of foreign-exchange commitments. to be bought back under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month Type and maturity groupings 1990 June 27 July 4 July 11 July 18 July 25 May 31 June 29 1 Loans—Total 608 581 629 652 2,330 1,100 586 2 Within 15 days 559 322 499 599 2,255 1,014 415 4 3 9 1 1 6 d d a a y y s s t t o o 9 1 0 y e d a a r y s 49 0 25 0 9 13 0 0 5 0 2 75 0 86 0 17 0 1 5 6 7 8 Ac 9 W 1 c 1 6 e i p t d d h t a a a i y n y n s s c 1 e t t 5 o o s — d 9 1 a 0 T y y d o e s a t a a r y l s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 U.S. Treasury securities—Total .. 230,978 231,299 234,252 229,255 231,264 227,455 231,383 10 Within 15 days1 12,631 12,193 11,270 8,455 10,699 5,371 9,655 11 16 days to 90 days 52,287 55,254 56,300 53,875 53,516 50,466 57,872 12 91 days to 1 year 70,560 67,838 70,668 71,174 71,298 76,167 68,356 13 Over 1 year to 5 years 57,482 57,995 57,995 57,548 57,548 57,432 57,482 14 Over 5 years to 10 years 11,617 11,617 11,617 11,801 11,801 11,617 11,617 15 Over 10 years 26,402 26,402 26,402 26,402 26,402 26,402 26,402 16 Federal agency obligations—Total 6,446 6,446 8,219 6,446 6,952 6,446 6,446 17 Within 15 days' 225 39 1,890 232 654 266 223 18 16 days to 90 days 672 867 750 640 674 564 672 19 91 days to 1 year 1,406 1,396 1,411 1,406 1,506 1,416 1,406 20 Over 1 year to 5 years 2,846 2,846 2,851 2,851 2,802 2,895 2,846 2 2 1 2 O Ov v e e r r 5 1 0 y y ea e r a s r s t o 10 years 1,1 1 0 8 9 8 1,1 1 0 8 9 8 1,1 1 2 8 8 8 1,1 1 2 8 8 8 1,1 1 2 8 8 8 1,1 1 1 8 7 8 1,1 1 0 8 9 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

A48 Domestic Nonfinancial Statistics • October 1990 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1989 1990 1986 1987 1988 1989 IItteemm Dec. Dec. Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June July Seasonally adjusted AADDJJUUSSTTEEDD FFOORR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 58.02 58.59 60.59 60.03 60.03 59.90 60.22 60.30 60.28 59.78 59.73 59.32 2 Nonborrowed reserves4 57.20 57.82 58.88 59.77 59.77 59.46 58.77 58.17 58.65 58.45 58.85 58.56 3 Nonborrowed reserves plus extended credit5 57.50 58.30 60.12 59.79 59.79 59.48 59.30 60.12 60.05 59.32 59.20 58.84 4 Required reserves 56.65 57.55 59.55 59.11 59.11 58.88 59.23 59.44 59.38 58.82 58.96 58.46 5 Monetary base6 241.43 258.06 275.24 284.95 284.95 287.51 289.71 291.82 293.54 294.40 296.28r 297.86 ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 Not seasonally adjusted 6 Total reserves7 59.46 60.07 62.22 61.67 61.67 61.58 59.20 59.23 61.05 58.74 59.61 59.47 7 Nonborrowed reserves 58.64 59.30 60.50 61.40 61.40 61.14 57.75 57.11 59.42 57.41 58.73 58.71 8 Nonborrowed reserves plus extended credit5 58.94 59.78 61.75 61.42 61.42 61.17 58.29 59.06 60.82 58.28 59.07 58.99 9 Required reserves8 58.09 59.03 61.17 60.75 60.75 60.56 58.21 58.37 60.15 57.78 58.84 58.61 10 Monetary base9 245.17 262.00 279.54 289.45 289.45 288.67 286.50 288.86 293.35 293.52 297.37 299.90 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves11 59.56 62.14 63.75 62.81 62.81 62.93 60.62 60.66 62.51 60.23 61.20 60.94 12 Nonborrowed reserves 58.73 61.36 62.03 62.54 62.54 62.49 59.17 58.53 60.88 58.90 60.32 60.18 13 Nonborrowed reserves plus extended credit5 59.04 61.85 63.27 62.56 62.56 62.52 59.71 60.49 62.29 59.77 60.66 60.46 14 Required reserves 58.19 61.09 62.70 61.89 61.89 61.91 59.63 59.80 61.62 59.27 60.42 60.08 15 Monetary base 247.62 266.06 283.00 292.55 292.55 292.13 290.02 292.38 296.87 297.03 300.99' 303.39 16 Excess reserves 1.37 1.05 1.05 0.92 0.92 1.02 0.99 0.86 0.90 0.96 0.77 0.86 17 Borrowings from the Federal Reserve 0.83 0.78 1.72 0.27 0.27 0.44 1.45 2.12 1.63 1.33 0.88 0.76 1. Latest monthly and biweekly figures are available from the Board's H.3(502) 8. To adjust required reserves for discontinuities because of regulatory changes statistical release. Historical data and estimates of the impact on required reserves in reserve requirements, a multiplicative procedure is used to estimate what of changes in reserve requirements are available from the Monetary and Reserves required reserves would have been in past periods had current reserve require- Projections Section. Division of Monetary Affairs. Board of Governors of the ments been in effect. Break-adjusted required reserves includes required reserves Federal Reserve System, Washington, D.C. 20551. against transactions deposits and nonpersonal time and savings deposits (but not 2. Figures reflect adjustments for discontinuities or "breaks" associated with reservable nondeposit liabilities). regulatory changes in reserve requirements. 9. The break-adjusted monetary base equals (1) break-adjusted total reserves 3. Seasonally adjusted, break adjusted total reserves equal seasonally adjusted, (line 6), plus (2) the (unadjusted) currency component of the money stock, plus (3) break-adjusted required reserves (line 4) plus excess reserves (line 16). (for all quarterly reporters on the "Report of Transaction Accounts, Other 4. Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally Deposits and Vault Cash" and for all those weekly reporters whose vault cash adjusted, break-adjusted total reserves (line 1) less total borrowings of depository exceeds their required reserves) the break-adjusted difference between current institutions from the Federal Reserve (line 17). vault cash and the amount applied to satisfy current reserve requirements. 5. Extended credit consists of borrowing at the discount window under 10. Reflects actual reserve requirements, including those on nondeposit liabilthe terms and conditions established for the extended credit program to help ities, with no adjustments to eliminate the effects of discontinuities associated depository institutions deal with sustained liquidity pressures. Because there is with changes in reserve requirements. not the same need to repay such borrowing promptly as there is with traditional U. Reserve balances with Federal Reserve Banks plus vault cash used to short-term adjustment credit, the money market impact of extended credit is satisfy reserve requirements. similar to that of nonborrowed reserves. 12. The monetary base, not break-adjusted and not seasonally adjusted, 6. The seasonally adjusted, break-adjusted monetary base consists of (1) consists of (1) total reserves (line 11), plus (2) required clearing balances and seasonally adjusted, break-adjusted total reserves (line 1), plus (2) the seasonally adjustments to compensate for float at Federal Reserve Banks, plus (3) the adjusted currency component of the money stock, plus (3) (for all quarterly currency component of the money stock, plus (4) (for all quarterly reporters on reporters on the "Report of Transaction Accounts, Other Deposits and Vault the "Report of Transaction Accounts, Other Deposits and Vault Cash" and for all Cash" and for all those weekly reporters whose vault cash exceeds their required those weekly reporters whose vault cash exceeds their required reserves) the reserves, the seasonally adjusted, break-adjusted difference between current vault difference between current vault cash and the amount applied to satisfy current cash and the amount applied to satisfy current reserve requirements. reserve requirements. After the introduction of CRR, currency and vault cash 7. Break-adjusted total reserves equal break-adjusted required reserves (line 9) figures are measured over the computation periods ending on Mondays. plus excess reserves (line 16). 13. Unadjusted total reserves (line 11) less unadjusted required reserves (line 14). 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 2 1986 1987 1988 1989 Dec. Dec. Dec. Dec. Apr.' May' June' July Seasonally adjusted 1 Ml 724.7 750.4 787.5 794.8 807.3 805.4 809.4 809.1 2 M2 2,814.2 2,913.2 3,072.4 3,221.6' 3,277.9 3,271.6 3,279.4 3,283.6 3 M3 3,494.5 3,678.7 3,918.4 4,044.6'' 4,073.2 4,065.0 4,069.2 4,072.7 4 L 4,135.5 4,338.9 4,676.0 4,881.8'' 4,928.0 4,902.2 4,930.2 n.a. 5 Debt 7,588.3 8,307.5 9,062.0 9,777.6 9,997.1 10,043.8 10,105.4 n.a. Ml components 6 Currency3 180.6 196.7 211.8 221.9 230.1 231.6 233.4 235.4 7 Travelers checks4 6.5 7.0 7.5 7.4 7.6 7.7 7.7 7.7 8 Demand deposits5 302.1 287.0 287.0 279.7 277.8 274.5 274.5 274.8 9 Other checkable deposits6 235.5 259.7 281.3 285.7 291.8 291.5 293.8 291.2 Nontrgnsactions components 10 In M27 2,089.6 2,162.8 2,284.9 2,426.8' 2,470.6 2,466.2 2,470.0 2,474.5 11 In M3 only8 680.3 765.5 845.9 823.0' 795.3 793.4 789.8 789.1 Time and Savings accounts Commercial banks 12 Savings deposits 155.8 178.3 192.0 188.5 193.8 193.5 195.0 195.6 13 Money market deposit accounts 377.7 356.4 350.2 351.5 362.3 365.3 368.2 370.8 14 Small time deposits9 366.3 388.1 447.5 528.6 541.4 550.8 559.3 568.2 15 Large time deposits10' 11 289.8 326.9 368.2 401.5 394.6 396.4 397.2 399.5 Thrift institutions 16 Savings deposits 214.3 236.6 235.9 220.5 222.0 221.5 220.8 220.6 17 Money market deposit accounts 193.3 167.4 150.1 132.2 136.6 134.7 133.0 131.6 18 Small time deposits9 489.9 529.7 583.5 613.7 606.3 598.2 587.8 580.2 19 Large time deposits 150.0 161.9 172.9 156.8 143.0 138.2 134.9 130.8 Money market mutual funds 20 General purpose and broker-dealer 208.7 222.0 240.9 312.4 325.8 320.4 321.9 325.1 21 Institution-only 83.8 89.0 87.1 102.3 106.8 107.3 107.3 108.9 Debt components 22 Federal debt 1,805.8 1,957.4 2,113.5 2,265.7 2,340.9 2,353.8 2,380.2 n.a. 23 Nonfederal debt 5,782.5 6,350.1 6,948.5 7,511.9 7,656.2 7,690.0 7,725.2 n.a. Not seasonally adjusted 24 Ml 740.5 766.4 804.5 812.1 817.3 796.4 810.0 812.1 25 M2 2,826.5 2,925.6 3,085.2 3,234.5r 3,289.1 3,256.6 3,276.6 3,289.2 26 M3 3,508.8 3,692.7 3,932.5 4,058.6'' 4,079.9 4,049.3 4,062.8 4,071.7 27 L 4,151.5 4,355.2 4,692.7 4,899.5'' 4,931.4 4,889.8 4,921.4 n.a. 28 Debt 7,572.0 8,289.0 9,047.3 9,762.2 9,958.1 10,002.0 10,065.1 n.a. Ml components 29 Currency 183.0 199.3 214.8 225.3 229.5 231.7 234.8 237.1 30 Travelers checks 6.0 6.5 6.9 6.9 7.3 7.5 8.1 8.6 31 Demand deposits5 314.0 298.6 298.9 291.6 279.8 268.5 274.8 277.0 32 Other checkable deposits 237.5 262.0 283.8 288.4 300.7 288.7 292.3 289.3 Nontrgnsactions components 33 In M2 2,086.0 2,159.2 2,280.8 2,422.4'' 2,471.8 2,460.2 2,466.6 2,477.1 34 In M3 only8 682.3 767.0 847.3 824.2r 790.8 792.7 786.3 782.5 Time and Savings accounts Commercial banks 35 Savings deposits 154.4 176.9 190.6 187.2 194.2 194.0 196.1 197.2 36 Money market deposit accounts 379.8 359.0 353.2 355.0 362.4 361.0 365.8 368.0 37 Small time deposits9 366.1 387.3 446.0 526.4 541.7 549.7 560.4 569.7 38 Large time deposits • 289.2 325.8 366.9 399.8 394.6 396.9 396.8 397.3 Thrift institutions 39 Savings deposits 212.7 234.9 234.2 219.0 222.4 221.8 222.3 223.0 40 Money market deposit accounts 192.9 167.5 150.6 132.8 135.9 133.8 132.5 131.2 41 Small time deposits 489.8 529.1 582.4 612.3 606.0 596.5 586.8 581.7 42 Large time deposits 150.7 162.9 174.2 158.3 141.6 137.5 133.5 129.5 Money market mutual funds 43 General purpose and broker-dealer 208.0 221.5 240.5 312.2 329.4 319.6 319.8 322.3 44 Institution-only 84.4 89.6 87.6 102.9 105.8 106.7 106.1 108.1 Repurchase agreements and Eurodollars 45 Overnight 82.3 83.2 83.3 77.4r 79.8 83.7 83.0 83.9 46 Term 164.3 197.1 227.7 178.3' 160.7 163.2 163.2 161.6 Debt components 47 Federal debt 1,803.9 1,955.6 2,111.8 2,264.1 2,329.1 2,337.8 2,361.3 n.a. 48 Nonfederal debt 5,768.1 6,333.4 6,935.5 7,498.1 7,629.0 7,664.2 7,703.8 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • October 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 nor.financial sectors consists of outstanding credit release. Historical data are available from the Money 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, term Eurodollars of U.S. residents, dealer), foreign governments and commercial banks, and the U.S. government. and money market fund balances (institution-only), less a consolidation adjust- M3: M2 plus large-denomination time deposits and term RP liabilities (in ment that represents the estimated amount of overnight RPs and Eurodollars held amounts of $100,000 or more) issued by all depository institutions, term Eurodol- 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 11998899 Dec. Jan. Feb. Mar. Apr. May DEBITS TO Seasonally adjusted Demand deposits3 1 All insured banks 217,116.2 226,888.4 272,793.1 280,074.4 286,425.2 299,450.2 285,111.5 274,403.6 273,186.2 2 Major New York City banks 104,496.3 107,547.3 121,894.2 131,681.3 123,744.6 132,031.4 132,470.3 124,988.2 123,314.6 3 Other banks 112,619.8 119,341.2 150,898.9 148,393.1 162,680.5 167,418.8 152,641.2 149,415.4 149,871.6 4 ATS-NOW accounts4 2,402.7 2,757.7 3,501.8 3,727.5 3,910.4 4,115.7 4,075.7 3,993.3 4,165.6 5 Savings deposits 526.5 579.2 636.6 615.8 609.2 587.3 617.6 583.1 601.1 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 612.1 641.2 781.0 797.7 820.0 851.4 813.3 780.8 791.9 7 Major New York City banks 2,670.6 2,903.5 3,401.6 3,578.1 3,422.4 3,677.3 3,760.2 3,551.5 3,590.9 8 Other banks 357.0 376.8 481.5 472.1 519.5 530.1 484.0 472.5 482.5 9 ATS-NOW accounts4 13.8 14.7 18.3 18.9 19.8 20.6 20.2 19.7 20.5 10 Savings deposits5 3.1 3.1 3.5 3.3 3.3 3.1 3.2 3.0 3.2 DEBITS TO Not seasonally adjusted Demand deposits3 11 All insured banks 217,125.1 227,010.7 271,957.3 283,603.3 303,668.0 270,852.7 291,868.6 276,077.5 282,747.7 12 Major New York City banks 104,518.8 107,565.0 122,241.8 129,690.0 131,796.0 119,305.2 137,029.5 125,750.6 125,532.4 13 Other banks 112,606.2 119,445.7 149,715.5 153,913.3 171,872.0 151,547.5 154,839.2 150,326.9 157,215.3 14 ATS-NOW accounts4 2,404.8 2,754.7 3,496.5 3,904.0 4,263.7 3,721.3 4,030.4 4,285.8 4,066.2 15 MMDA® 1,954.2 2,430.1 2,790.6 2,880.5 3,075.9 2,551.2 2,714.9 2,848.4 3,016.4 16 Savings deposits 526.8 578.0 635.8 630.1 629.3 518.7 594.2 646.8 592.6 DEPOSIT TURNOVER Demand deposits3 17 All insured banks 612.3 641.7 779.0 769.3 847.9 791.8 850.4 784.4 834.7 18 Major New York City banks 2,674.9 2,901.4 3,415.4 3,250.4 3,433.3 3,314.9 3,836.2 3,564.6 3,796.3 19 Other banks 356.9 377.1 477.8 468.1 537.5 495.2 503.6 474.7 514.3 20 ATS-NOW accounts4 13.8 14.7 18.3 19.5 21.1 18.7 20.0 20.5 20.3 21 MMDA® 5.3 6.9 8.3 8.2 8.7 7.2 7.6 7.9 8.4 22 Savings deposits 3.1 3.1 3.5 3.4 3.4 2.8 3.1 3.4 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

A48 Domestic Nonfinancial Statistics • October 1990 1.23 LOANS AND SECURITIES All Commercial Banks1 Billions of dollars; averages of Wednesday figures 1989 1990 CCaatteeggoorryy Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Seasonally adjusted 1 Total loans and securities2 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 2,642.2' 2,657.9' 2,671.4 2 U.S. government securities 375.5 378.1 389.9 394.8 394.4 402.4 412.2 418.9 422.7 426.0' 434.7' 437.9 3 Other securities 183.8 183.1 180.9 179.3 180.3 180.2 180.1 180.2 180.8 179.2 178.5 178.1 4 Total loans and leases2 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 2,037.0 2,044.7 2,055.3 5 Commercial and industrial 636.1 637.7 641.9 645.9 642.9 639.0 637.9 642.8 648.2 647.9 651.2 650.0 6 Bankers acceptances held3... 8.1 8.4 8.8 8.1 7.6 7.4 8.0 8.3 8.4 8.4 8.7 8.5 7 Other commercial and industrial 628.0 629.3 633.2 637.8 635.3 631.6 629.8 634.5 639.8 639.5 642.5 641.6 8 U.S. addressees4 624.3 625.4 628.9 632.7 629.8 623.9 623.9 628.2 633.7 634.8 637.5' 638.9 9 Non-U.S. addressees4 3.7 3.9 4.2 5.1 5.5 7.7 5.9 6.3 6.1 4.7 5.0' 2.7 10 Real estate 727.7 735.8 742.6 749.2 756.4 759.6 768.1 774.4 779.4 787.5 793.7 801.1 11 Individual 367.5 370.3 372.6 374.6 375.9 377.9 378.9 379.2 377.8 379.2 377.9 376.3 12 Security 39.0 39.7 41.2 41.5 39.6 40.1 41.1 38.3 37.0 3355..77 3366..11 4400..00 13 Nonbank financial institutions 31.5 31.8 33.2 33.7 32.7 32.3 33.0 34.2 34.3 33.8 33.6 33.8 14 Agricultural 29.9 29.6 29.6 29.9 30.3 30.9 31.0 31.2 31.4 31.2 32.0 3344..00 15 State and political subdivisions 42.2 41.7 41.3 40.8 40.1 38.6 38.9 38.4 38.2 37.9 37.4 36.7 16 Foreign banks 8.1 7.5 8.5 8.0 8.6 7.9 7.8 8.4 9.0 8.8 7.5 7.1 17 Foreign official institutions 4.1 4.2 3.9 3.6 3.6 3.2 3.1 3.0 3.2 3.2 3.1 3.1 18 Lease financing receivables .... 31.0 31.3 31.7 31.6 31.4 31.6 31.6 31.8 31.6 31.8 31.5 31.9 iy All other loans 51.0 48.0 46.0 46.0 46.4 42.1 40.2 42.9 41.6 40.0 40.7 41.4 Not seasonally adjusted 20 Total loans and securities2 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 2,641.8' 2,657.9' 2,665.5 21 U.S. government securities 376.1 377.2 387.3 394.9 395.6 404.1 416.7 420.4 422.5 425.0' 431.7' 435.5 22 Other securities 183.8 183.3 181.8 180.5 181.2 180.7 179.9 179.8 180.2 178.6 177.7 176.8 23 Total loans and leases2 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 2,038.2 2,048.5 2,053.3 24 Commercial and industrial 633.4 633.7 639.3 643.1 642.8 637.5 638.5 644.5 652.5 652.1 653.6 650.4 25 Bankers acceptances held3... 8.1 8.4 8.9 8.2 7.7 7.5 8.1 8.2 8.2 8.3 8.6 8.2 26 Other commercial and industrial 625.3 625.3 630.4 634.9 635.1 630.0 630.4 636.3 644.3 643.8 645.0 642.2 27 U.S. addressees4 619.8 619.8 624.7 629.4 629.8 625.0 625.6 631.5 639.5 639.0 640.4 637.6 28 Non-U.S. addressees4 5.5 5.5 5.6 5.5 5.3 5.0 4.9 4.8 4.8 4.8 4.6 4.6 29 Real estate 729.2 737.8 743.9 750.9 757.1 759.7 765.5 771.7 777.5 786.4 793.6 801.7 30 Individual 367.7 372.1 373.7 376.0 380.3 381.5 378.1 376.0 375.0 376.7 376.1 374.8 31 Security 38.4 38.8 40.1 40.3 38.6 38.3 40.5 39.2 39.5 36.3 38.3 40.1 32 Nonbank financial institutions 31.3 31.4 32.8 34.0 33.8 33.0 32.6 33.4 34.2 33.8 34.0 33.9 33 Agricultural 30.7 30.5 30.4 30.2 30.2 30.3 30.1 30.1 30.4 30.9 32.4 34.7 34 State and political subdivisions 41.9 41.6 41.2 40.6 39.7 39.5 39.3 38.6 38.2 37.8 37.2 36.3 35 Foreign banks 8.1 7.8 8.8 8.1 8.4 8.0 7.7 7.9 8.5 8.8 7.7 7.2 36 Foreign official institutions 4.1 4.2 3.9 3.6 3.6 3.2 3.1 3.0 3.2 3.2 3.1 3.1 37 Lease financing receivables .... 30.9 31.2 31.6 31.6 31.5 32.0 31.8 31.7 31.7 31.8 31.5 31.6 38 All other loans 45.6 47.8 48.7 47.1 47.7 43.6 42.3 41.8 42.1 40.6 41.1 39.3 1. Data have been revised because of benchmarking and seasonal adjustment 2. Excludes loans to commercial banks in the United States, revisions beginning January 1973. These data also appear in the Board's G.7 (407) 3. Includes nonfinancial commercial paper held, release. For address, see inside front cover. 4. United States includes the 50 states and the District of Columbia. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Commercial Banking Institutions A17 1.24 MAJOR NONDEPOSIT FUNDS OF COMMERCIAL BANKS1 Monthly averages, billions of dollars 1989 1990 SSoouurrccee Aug. Sept. Oct. Nov. Dec. Jan. Feb.' Mar.' Apr.' May' June' July Seasonally adjusted 1 Total nondeposit funds 239. lr 247.0' 254.7' 256.5' 257.4' 258.4' 268.1 271.8 269.5 272.5 276.1 288.5 2 Net balances due to related foreign offices3 .... 9.7 11.1 10.2 8.6 7.4 10.9 14.7 17.3 16.7 24.5 14.8 16.7 3 Borrowings from other than commercial banks in United States4 229.4' 235.9' 244.5' 247.9' 250.0' 247.6' 253.3 254.5 252.9 248.0 261.3 271.8 4 Domestically chartered banks 184.5' 189.9' 196.5' 198.3' 200.4' 196.9' 201.4 198.5 194.2 189.8 202.7 209.8 5 Foreign-related banks 44.9 46.0 48.0 49.6 49.5 50.7 51.9 56.0 58.7 58.2 58.6 62.0 Not seasonally adjusted 6 Total nondeposit funds 238.6' 243.6' 249.9' 255.4' 250.8' 254.9' 271.2 277.7 272.3 281.1 281.0 283.9 7 Net balances due to related foreign offices .... 10.1 11.7 9.6 9.7 9.7 10.5 14.3 16.2 14.4 26.4 15.4 14.7 8 Domestically chartered banks -15.5 -14.3 -15.0 -15.5 -19.2 -14.5 -11.1 -11.5 -10.7 -1.4 -6.3 -6.1 9 Foreign-related banks 25.6 26.0 24.6 25.2 28.9 25.0 25.4 27.7 25.0 27.8 21.7 20.8 10 Borrowings from other than commercial banks in United States4 228.5' 231.9' 240.3' 245.8' 241.1' 244.4' 256.9 261.5 258.0 254.7 265.6 269.2 11 Domestically chartered banks 184.0' 186.9' 193.5' 198.5' 194.0' 192.9' 203.3 204.3 198.2 195.6 204.5 206.8 12 Federal funds and security RP borrowings5 181.0' 183.9' 190.4' 196.1' 191.5' 190.3' 199.6 199.9 194.5 192.3 201.4 203.9 13 Other6 3.0 3.0 3.0 2.4 2.5 2.7 3.7 4.5 3.7 3.4 3.2 2.9 14 Foreign-related banks6 44.5 45.0 46.8 47.2 47.1 51.5 53.5 57.2 59.7 59.1 61.1 62.4 MEMO Gross large time deposits 15 Seasonally adjusted 462.0 460.0 461.4 464.0 464.3 462.7 460.6 457.3 455.1 454.7 452.7 454.0 16 Not seasonally adjusted 462.6 461.5 462.6 464.4 462.7 460.4 460.3 460.2 455.1 455.2 452.2 451.9 U.S. Treasury demand balances at commercial banks8 17 Seasonally adjusted 22.3 22.8 21.5 20.4 21.1 20.2 17.8 19.2 21.2 18.6 20.4 14.9 18 Not seasonally adjusted 15.8 24.9 20.6 14.7 19.6 23.2 22.0 16.7 20.0 25.2 20.9 15.3 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

A48 Domestic Nonfinancial Statistics • October 1990 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series1 Billions of dollars 1989 1990 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June'' July ALL COMMERCIAL BANKING INSTITUTIONS2 1 Loans and securities 2,700.5 2,734.8 2,771.2 2,779.0 2,789.0 2,797.6 2,806.9 2,823.6 2,826.7 2,848.3 2,858.2 2 Investment securities 541.4 544.7 548.3 549.0 561.2 568.0 573.5 578.6 582.5 584.6 585.9 3 U.S. government securities 365.1 370.0 374.4 374.1 387.5 395.3 401.8 408.2 412.2 416.4 418.6 4 Other 176.3 174.7 173.9 174.9 173.8 172.7 171.7 170.5 170.2 168.2 167.3 5 Trading account assets 18.3 26.6 27.6 23.4 31.9 30.4 26.0 23.9 21.3 23.7 27.2 6 Total loans 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 2,240.1 2,241.7 7 Interbank loans 165.4 171.8 187.6 190.5 189.0 187.3 189.7 187.7 186.0 191.6 191.9 8 Loans excluding interbank 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 2,048.5 2,049.8 9 Commercial and industrial 632.1 638.9 643.0 644.3 636.4 640.6 643.8 652.2 650.2 653.6 646.9 10 Real estate 739.6 745.0 753.6 758.3 761.3 767.2 774.3 779.5 789.7 795.0 802.8 11 Individual 373.8 374.3 376.8 382.4 381.4 378.0 374.7 376.4 377.0 377.4 375.4 12 All other 229.9 233.6 234.2 231.1 227.6 226.2 224.9 225.3 220.1 222.5 224.8 13 Total cash assets 218.5 212.0 234.2 258.0 222.0 228.5 217.0 216.6 244.7 227.6 218.4 14 Reserves with Federal Reserve Banks. 31.8 28.5 38.7 42.8 24.5 29.3 31.8 31.3 27.5 31.8 29.8 15 Cash in vault 27.9 27.8 30.7 31.5 28.0 27.9 27.8 28.6 29.9 28.9 28.8 16 Cash items in process of collection ... 82.6 77.5 84.2 98.9 89.8 91.5 80.0 80.1 100.7 86.2 79.4 17 Demand balances at U.S. depository institutions 28.5 28.3 28.5 32.1 29.6 31.0 27.5 26.5 32.2 27.8 27.4 18 Other cash assets 47.6 49.9 52.2 52.7 50.1 48.9 49.8 50.1 54.4 52.9 53.0 19 Other assets 214.1 210.3 207.1 212.7 219.3 214.0 209.9 206.9 207.1 216.9 208.9 20 Total assets/total liabilities and capital.... 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 3,292.8 3,284.4 21 Deposits 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 2,274.1 2,282.9 22 Transaction deposits 586.5 585.8 600.4 641.5 611.3 615.9 593.9 600.5 617.7 598.5 590.5 23 Savings deposits 518.6 525.6 535.6 538.2 540.5 545.8 551.1 548.1 553.7 555.5 560.5 24 Time deposits 1,072.0 1,084.6 1,087.2 1,087.8 1,091.5 1,096.1 1,101.6 1,103.8 1,116.6 1,120.1 1,131.9 25 Borrowings 519.8 529.7 546.0 534.3 556.1 546.0 548.3 562.8 543.1 570.5 556.2 26 Other liabilities 226.0 225.2 236.0 239.8 223.8 227.4 228.1 220.0 235.3 234.3 228.5 27 Residual (assets less liabilities) 210.3 206.3 207.4 208.0 207.1 208.9 210.7 211.9 212.0 214.0 214.5 MEMO 28 U.S. government securities (including trading account) 377.2 389.6 394.8 390.7 412.6 418.6 419.5 423.4 425.4 430.2 437.3 29 Other securities (including trading account) 182.5 181.7 181.1 181.8 180.6 179.7 180.0 179.1 178.4 178.0 175.8 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 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 2,594.3 2,600.7 31 Investment securities 519.1 521.3 522.6 523.3 534.2 540.6 544.6 548.2 554.2 554.3 553.4 32 U.S. government securities 355.4 359.4 362.6 363.3 374.7 382.1 387.4 393.7 399.7 402.3 402.1 33 Other 163.7 161.9 160.0 160.1 159.5 158.5 157.2 154.5 154.6 152.0 151.3 34 Trading account assets 18.3 26.6 27.6 23.4 31.9 30.4 26.0 23.9 21.3 23.7 27.2 35 Total loans 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 2,016.4 2,020.0 36 Interbank loans 130.7 140.7 148.4 152.8 151.4 149.8 148.6 149.4 145.2 153.1 153.6 37 Loans excluding interbank 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 1,863.2 1,866.4 38 Commercial and industrial 511.3 515.7 516.9 516.9 513.4 517.7 518.9 523.3 519.6 519.6 516.1 39 Real estate 713.0 718.0 725.0 729.7 731.6 736.5 743.1 746.7 756.7 761.2 768.2 40 Individual 373.8 374.3 376.8 382.4 381.4 378.0 374.7 376.4 377.0 377.4 375.4 41 All other 211.4 214.4 213.9 211.9 208.7 206.8 206.4 205.2 202.6 205.1 206.7 42 Total cash assets 194.9 188.7 206.7 231.7 198.2 203.1 191.1 191.5 214.7 199.0 190.5 43 Reserves with Federal Reserve Banks. 29.5 26.7 37.9 41.7 22.7 27.5 29.8 29.8 26.6 30.8 28.8 44 Cash in vault 27.9 27.8 30.6 31.5 28.0 27.8 27.8 28.5 29.9 28.9 28.8 45 Cash items in process of collection ... 81.3 76.3 82.3 97.5 88.3 90.2 78.5 78.7 99.2 84.2 77.9 46 Demand balances at U.S. depository institutions 26.8 26.4 26.6 30.2 27.7 28.9 25.9 24.8 30.3 26.1 25.7 47 Other cash assets 29.3 31.6 29.3 30.8 31.4 28.6 29.1 29.6 28.7 28.9 29.2 48 Other assets 140.1 131.0 137.1 140.9 143.2 139.6 136.4 135.0 137.5 141.9 138.5 49 Total assets/liabilities and capital 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 2,935.3 2,929.7 50 Deposits 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 2,191.7 2,201.2 51 Transaction deposits 576.6 576.1 590.5 631.3 600.8 605.7 584.2 590.8 607.8 588.2 580.3 52 Savings deposits 515.8 523.0 532.8 535.4 537.7 542.9 548.2 545.1 550.8 552.6 557.5 53 Time deposits 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 1,051.0 1,063.4 54 Borrowings 392.4 395.1 406.8 400.6 407.3 397.3 395.9 402.8 389.1 408.5 393.7 55 Other liabilities 117.5 119.2 123.6 123.7 122.5 124.2 122.0 118.4 125.4 124.7 123.9 56 Residual (assets less liabilities) 206.7 202.7 203.7 204.4 203.4 205.3 207.1 208.3 208.4 210.4 210.9 MEMO 57 Real estate loans, revolving 47.6 48.0 48.6 49.3 50.4 50.8 51.2 52.4 53.3 54.3 55.4 58 Real estate loans, other 665.4 670.1 676.4 680.4 681.1 685.7 691.9 694.3 703.4 706.9 712.8 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 BANKS' Millions of dollars, Wednesday figures 1990 AAccccoouunntt May 30 June 6' June 13' June 20' June 27' July 4 July 11 July 18 July 25 1 Cash and balances due from depository institutions 123,112 112,508 114,579 111,026 113,097 125,786 109,748 107,704 105,938 2 Total loans, leases, and securities, net l,287,570r 1,293,485 1,297,378 1,305,110 1,297,624 1,301,236 1,295,202 1,305,249 1,300,853 3 U.S. Treasury and government agency 173,383' 178,508 177,647 179,098 174,598 176,680 176,636 180,024 178,155 4 Trading account 13,IOC 17,636 16,593 17,551 13,890 16,182 16,123 19,744 18,727 5 Investment account 160,282' 160,873 161,054 161,547 160,708 160,499 160,513 160,280 159,428 6 Mortgage-backed securities 79,437' 79,664 79,749 80,447 78,735 79,249 79,577 79,365 79,459 All other maturing in 7 One year or less 23,207' 23,021 22,972 22,898 22,917 21,936 21,785 21,252 20,253 8 Over one through five years 34,803 35,204 35,219 35,084 35,596 35,066 35,103 35,444 35,852 9 Over five years 22,835' 22,983 23,114 23,118 23,459 24,248 24,048 24,219 23,865 10 Other securities 62,709' 62,535 62,241 62,423 62,574 62,221 62,214 62,061 61,745 11 Trading account 787 781 864 942 1,472 1,149 1,061 830 709 12 Investment account 61,922' 61,754 61,376 61,481 61,102 61,072 61,153 61,231 61,036 13 States and political subdivisions, by maturity 34,090' 33,812 33,479 33,266 33,024 32,477 32,363 32,340 32,311 14 One year or less 3,957' 3,931 3,965 3,814 3,708 3,466 3,533 3,524 3,536 15 Over one year 30,132 29,881 29,514 29,453 29,316 29,011 28,830 28,815 28,775 16 Other bonds, corporate stocks, and securities 27,832' 27,941 27,897 28,214 28,078 28,595 28,790 28,891 28,725 17 Other trading account assets 7,345' 8,305 8,502 8,423 8,316 7,847 8,232 7,995 7,800 18 Federal funds sold3 70,429' 69,815 75,395 79,393 78,847 77,109 74,190 78,089 78,580 19 To commercial banks 51,496 48,632 53,566 57,645 59,643 58,799 55,242 56,283 56,049 20 To nonbank brokers and dealers in securities 13,390 15,316 16,152 16,464 13,925 13,948 14,640 17,196 17,967 71 To others 5,542' 5,867 5,677 5,285 5,279 4,362 4,308 4,610 4,564 77 Other loans and leases, gross 1,015,184' 1,015,691 1,014,895 1,016,981 1,014,207 1,016,636 1,013,028 1,016,268 1,013,674 73 Other loans, gross 988,215' 989,080 988,334 990,418 987,609 989,942 986,362 989,511 986,946 74 Commercial and industrial 322,692' 323,162 322,232 323,344 321,949 322,688 321,588 320,932 319,400 25 Bankers acceptances and commercial paper 1,604 1,777 1,679 1,672 1,680 1,598 1,557 1,604 1,596 76 All other 321,088' 321,386 320,553 321,672 320,269 321,090 320,030 319,328 317,804 77 U.S. addressees 319,731' 320,087 319,254 320,402 319,014 319,666 318,498 317,932 316,352 28 Non-U.S. addressees 1,357' 1,298 1,298 1,270 1,255 1,424 1,532 1,396 1,452 79 Real estate loans 371,754' 372,794 373,761 374,340 373,509 375,532 376,150 376,826 377,431 30 Revolving, home equity 29,594 29,700 29,839 30,005 30,126 30,168 30,325 30,446 30,459 31 All other 342,159' 343,094 343,922 344,335 343,383 345,364 345,825 346,380 346,972 32 To individuals for personal expenditures 174,689 173,074 173,240 173,710 174,188 172,341 172,326 172,555 173,039 33 To depository and financial institutions 52,593 51,841 50,891 49,969 49,190 49,618 49,839 50,994 49,630 34 Commercial banks in the United States 24,552 23,859 23,053 22,289 21,399 21,947 21,704 23,087 23,044 35 Banks in foreign countries 5,220 4,313 4,440 3,874 4,096 4,318 4,236 4,081 3,539 36 Nonbank depository and other financial institutions .. 22,821 23,668 23,399 23,806 23,694 23,353 23,900 23,826 23,047 V For purchasing and carrying securities 13,526 14,827 14,524 14,915 15,784 13,729 13,512 14,558 14,924 38 To finance agricultural production 5,875 5,918 5,969 6,029 6,037 6,128 6,160 6,167 6,174 39 To states and political subdivisions 23,716 23,675 23,549 23,463 23,233 23,182 22,869 22,788 22,712 40 To foreign governments and official institutions 1,497' 1,442 1,608 1,462 1,378 1,439 1,477 1,532 1,455 41 All other 21,873' 22,347 22,559 23,187 22,341 25,285 22,441 23,159 22,180 47. Lease financing receivables 26,969 26,611 26,562 26,563 26,598 26,694 26,666 26,758 26,728 43 LESS: Unearned income 4,552 4,565 4,572 4,571 4,584 4,433 4,434 4,448 4,442 44 Loan and lease reserve 36,927 36,804 36,729 36,638 36,335 34,825 34,664 34,740 34,661 45 Other loans and leases, net 973,704' 974,322 973,594 975,772 973,289 977,378 973,929 977,080 974,571 46 All other assets 129,699 131,048 131,033 130,461 134,217 138,881 135,244 130,584 128,535 47 Total assets 1,540,381' 1,537,041 1,542,990 1,546,597 1,544,937 1,565,903 1,540,193 1,543,536 1,535,326 48 Demand deposits 234,468 224,364 224,483 224,425 221,284 249,449 222,524 225,249 214,943 49 Individuals, partnerships, and corporations 183,159 179,025 181,882 177,207 174,215 199,742 179,819 178,114 171,181 50 States and political subdivisions 6,133 5,967 5,467 6,744 6,275 6,767 5,732 6,222 6,280 St U.S. government 1,472 2,870 2,187 6,383 3,562 2,164 3,108 4,258 2,660 52 Depository institutions in the United States 23,849 20,506 19,036 19,936 19,707 24,938 19,891 20,709 20,003 53 Banks in foreign countries 7,385 5,840 5,952 5,207 6,172 6,312 5,521 5,902 5,611 54 Foreign governments and official institutions 818 657 686 649 633 706 681 702 586 55 Certified and officers' checks 11,652 9,499 9,272 8,299 10,719 8,820 7,772 9,342 8,622 56 Transaction balances other than demand deposits 80,102 83,389 81,781 80,109 79,048 83,192 79,539 78,418 77,466 57 Nontransaction balances 740,894' 744,511 745,162 742,467 742,024 753,626 753,295 753,090 752,162 58 Individuals, partnerships, and corporations 701,900' 705,858 706,795 703,809 703,418 716,723 716,334 716,364 715,254 59 States and political subdivisions 30,879' 30,715 30,466 30,958 30,886 29,277 29,319 29,083 29,045 60 U.S. government 809 798 802 808 805 829 829 841 841 61 Depository institutions in the United States 6,777' 6,606 6,558 6,392 6,416 6,299 6,330 6,336 6,552 62 Foreign governments, official institutions, and banks .. 529 534 541 500 499 497 482 465 470 63 Liabilities for borrowed money 288,574' 290,969 297,170 306,188 305,052 285,008 291,164 291,396 293,387 64 Borrowings from Federal Reserve Banks 797 150 5,032 0 25 20 0 0 1,490 65 Treasury tax-and-loan notes 7,670 3,236 1,673 22,329 21,636 2,313 3,923 7,953 12,029 66 All other liabilities for borrowed money5 280,107' 287,583 290,465 283,859 283,391 282,674 287,242 283,443 279,868 67 Other liabilities and subordinated notes and debentures .. 93,691' 90,022 90,210 89,130 93,373 90,390 88,670 90,656 92,807 68 Total liabilities 1,437,729' 1,433,255 1,438,805 1,442,320 1,440,781 1,461,665 1,435,193 1,438,810 1,430,765 69 Residual (total assets minus total liabilities)6 102,652 103,786 104,185 104,277 104,156 104,238 105,000 104,726 104,560 MEMO 70 Total loans and leases (gross) and investments adjusted . 1,253,001' 1,262,363 1,262,062 1,266,385 1,257,500 1,259,748 1,257,354 1,265,067 1,260,862 71 Total loans and leases (gross) adjusted 1,009,564' 1,013,016 1,013,672 1,016,441 1,012,012 1,012,999 1,010,272 1,014,987 1,013,161 72 Time deposits in amounts of $100,000 or more 214,996' 215,000 213,880 213,266 212,413 214,143 214,470 214,936 214,729 73 U.S. Treasury securities maturing in one year or less .... 19,341 20,048 20,551 21,431 19,648 19,280 20,212 20,679 19,707 74 Loans sold outright to affiliates—total 310 312 304 277 273 300 290 298 298 75 Commercial and industrial 161 160 156 156 155 144 140 145 145 76 Other 149 151 148 120 118 155 150 153 154 77 Nontransaction savings deposits (including MMDAs) 281,008 283,771 285,168 282,285 281,977 287,077 286,132 285,266 284,606 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

A48 Domestic Nonfinancial Statistics • October 1990 1.28 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY1 Millions of dollars, Wednesday figures 1990 AAccccoouunntt May 30 June 6 June 13 June 20 June 27 July 4 July 11 July 18 July 25 1 Cash balances due from depository institutions 28,161 22,378 26,726 22,839 25,658 24,753 22,098 22,354 23,013 2 Total loans, leases, and securities, net2 218,334 216,989 217,980 218,900 219,108 219,993 215,469 220,749 220,615 Securities 3 U.S. Treasury and government agency3 0 0 0 0 0 0 0 0 0 4 Trading account3 0 0 0 0 0 0 0 0 0 5 Investment account 23,258' 23,376 23,343 23,322 23,238 22,309 22,592 22,668 22,672 6 Mortgage-backed securities4 12,301r 12,465' 1122,,446622'' 1122,,445555'' 1111,,228877'' 1111,,224422 1111,,330077 1111,,228899 1111,,229944 All other maturing in V One year or less 3,718 3,718 3,716 3,715 3,908 3,033 3,134 3,226 3,226 8 Over one through five years 3,325 3,299 3,273 3,269 3,874 3,776 3,832 3,834 3,812 9 Over five years 3,914' 3,894' 3,892' 3,883' 4,169' 4,259 4,319 4,319 4,339 10 Other securities3 0 0 0 0 0 0 0 0 0 11 Trading account3 0 0 0 0 0 0 0 0 0 12 Investment account 12,797' 12,735 12,679 13,134 13,042 12,960 13,174 13,143 13,199 13 States and political subdivisions, by maturity 6,549' 6,432' 6,361' 6,330' 6,277 6,199 6,174 6,167 6,210 14 One year or less 569' 566' 573' 571' 582 547 547 552 596 15 Over one year 5,980 5,866 5,788 5,759 5,694 5,652 5,627 5,616 5,614 16 Other bonds, corporate stocks, and securities 6,248' 6,303' 6,318' 6,804' 6,764 6,761 7,001 6,976 6,989 17 Other trading account assets3 0 0 0 0 0 0 0 0 0 Loans and leases 18 Federal funds sold5 18,194 16,491 18,296 18,173 21,060 21,209 17,345 19,842 21,002 19 To commercial banks 10,594 7,546 9,434 9,346 13,169 13,415 9,769 10,500 10,777 20 To nonbank brokers and dealers in securities 4,770 5,981 6,262 6,110 5,253 5,526 5,401 7,150 7,913 21 To others 2,829 2,964 2,600 2,716 2,638 2,267 2,175 2,192 2,312 22 Other loans and leases, gross 182,236 182,320 181,585 182,201 179,648 179,997 178,575 181,267 179,905 23 Other loans, gross 176,608 176,766 176,048 176,676 174,138 174,480 173,076 175,668 174,320 24 Commercial and industrial 58,487 58,328 58,004 58,083 56,826 56,943 57,037 57,678 57,293 25 Bankers acceptances and commercial paper 112 99 113 134 116 108 116 111 116 26 All other 58,376 58,229 57,891 57,949 56,710 56,835 56,921 57,567 57,177 27 U.S. addressees 57,819 57,722 57,366 57,450 56,223 56,153 56,140 56,876 56,470 28 Non-U.S. addressees 557 507 526 499 487 682 781 691 706 29 Real estate loans 62,798 62,928 62,991 63,243 62,741 62,603 62,639 62,901 62,753 30 Revolving, home equity 4,064 4,070 4,078 4,089 4,094 4,091 4,093 4,098 4,115 31 All other 58,733 58,858 58,913 59,154 58,648 58,512 58,546 58,803 58,638 32 To individuals for personal expenditures 19,986 20,005 20,033 19,523 19,514 19,747 19,794 19,819 19,883 33 To depository and financial institutions 20,419 19,935 19,443 19,854 18,781 18,948 18,925 19,157 18,830 34 Commercial banks in the United States 7,908 7,933 7,474 8,150 7,025 7,817 7,342 7,564 7,761 35 Banks in foreign countries 4,232 3,393 3,441 2,933 3,203 3,260 3,354 3,168 2,765 36 Nonbank depository and other financial institutions 8,278 8,610 8,528 8,771 8,552 7,871 8,228 8,424 8,304 37 For purchasing and carrying securities 4,222 4,808 4,698 5,105 5,722 4,421 4,117 4,977 5,101 38 To finance agricultural production 138 137 139 136 135 140 135 145 133 39 To states and political subdivisions 5,125 5,248 5,104 5,028 4,988 4,933 4,859 4,822 4,779 40 To foreign governments and official institutions 294 265 434 292 211 272 330 396 310 41 All other 5,140 5,112 5,202 5,412 5,219 6,472 5,238 5,772 5,238 42 Lease financing receivables 5,628 5,554 5,538 5,525 5,511 5,516 5,499 5,599 5,585 43 LESS: Unearned income 1,812 1,817 1,819 1,825 1,828 1,806 1,812 1,834 1,837 44 Loan and lease reserve 16,341 16,116 16,106 16,105 16,052 14,676 14,405 14,337 14,326 45 Other loans and leases, net6 164,084 164,387 163,661 164,271 161,769 163,515 162,358 165,096 163,741 46 All other assets7 50,836 54,466 54,250 54,880 54,367 56,619 56,792 58,965 56,114 47 Total assets 297,330 293,834 298,955 296,619 299,133 301,366 294,360 302,068 299,742 Deposits 48 Demand deposits 52,878 47,289 48,137 47,308 48,995 53,687 45,506 49,478 45,401 49 Individuals, partnerships, and corporations 35,220 33,128 34,514 33,632 32,555 39,732 33,028 33,638 31,096 50 States and political subdivisions 567 610 505 660 948 1,025 629 911 736 51 U.S. government 217 406 160 951 602 214 574 683 441 52 Depository institutions in the United States 4,793 4,531 3,718 4,441 4,746 4,782 4,183 5,154 5,188 53 Banks in foreign countries 5,999 4,582 4,819 4,056 4,831 5,046 4,334 4,628 4,302 54 Foreign governments and official institutions 637 517 554 517 497 560 551 554 448 55 Certified and officers' checks 5,445 3,514 33,,886655 33,,004499 44,,881144 22,,332299 22,,220066 33,,991111 33,,119911 56 Transaction balances other than demand deposits (ATS, NOW, Super NOW, telephone transfers) 8,642 8,879 8,784 8,675 8,651 9,040 8,753 8,660 8,514 57 Nontransaction balances 116,634' 117,397' 118,126' 116,655 115,765 118,212 116,805 117,186 116,567 58 Individuals, partnerships, and corporations 108,279' 109,044' 109,873' 108,244 107,393 109,912 108,477 108,938 108,271 59 States and political subdivisions 6,234 6,212 6,062 6,309 6,258 6,171 6,179 6,117 6,157 60 U.S. government 35 37 39 39 37 36 41 40 39 61 Depository institutions in the United States 1,844 1,853 1,904 1,855 1,869 1,883 1,906 1,902 1,900 62 Foreign governments, official institutions, and banks 242 251 248 207 208 209 202 189 199 63 Liabilities for borrowed money 60,832' 62,795' 68,351' 66,905 64,932 62,600 66,092 66,347 67,419 64 Borrowings from Federal Reserve Banks 0 0 3,834 0 0 0 0 0 1,000 65 Treasury tax-and-loan notes 1,488 738 363 5,167 4,918 411 747 1,691 2,534 66 All other liabilities for borrowed money8 59,344' 62,057' 64,154' 61,739 60,014 62,188 65,345 64,656 63,885 67 Other liabilities and subordinated notes and debentures 34,182 32,676 30,574 32,196 35,997 32,726 31,796 35,205 36,532 68 Total liabilities 273,168 269,036 273,972 271,739 274,340 276,265 268,952 276,876 274,433 69 Residual (total assets minus total liabilities)9 24,162 24,798 24,984 24,880 24,793 25,100 25,408 25,191 25,309 MEMO 70 Total loans and leases (gross) and investments adjusted2,10 217,984 219,444 218,9% 219,334 216,794 215,242 214,575 218,856 218,241 71 Total loans and leases (gross) adjusted10 181,928 183,332 182,973 182,877 180,514 179,972 178,809 183,045 182,369 72 Time deposits in amounts of $100,000 or more 39,354' 39 #37' 38,999' 39,229 38,640 39,934 39,178 39,619 39,666 73 U.S. Treasury securities maturing in one year or less 1,827 2,188 2,223 2,415 2,033 2,301 2,611 2,891 2,897 1. These data also appear in the Board's H.4.2 (504) release. For address, see 7. Includes trading account securities. inside front cover. 8. Includes federal funds purchased and securities sold under agreements to 2. Excludes trading account securities. repurchase. 3. Not available due to confidentiality. 9. Not a measure of equity capital for use in capital adequacy analysis or for 4. Includes U.S. government-issued or guaranteed certificates of participation other analytic uses. Digitized for FinR pAooSlsE oRf residential mortgages. 10. Exclusive of loans and federal funds transactions with domestic commerhttp://fraser.stlo5u. iIsnfceludd.eos rsge/c urities purchased under agreements to resell. cial banks. 6. Includes allocated 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 May 30^ June 6r June 13r June 2C June IT July 4 July 11 July 18 July 25 1 Cash and due from depository institutions ... 15,058 14,272 14,561 13,816 14,587 13,731 14,202 13,810 14,408 2 Total loans and securities 152,956 151,229 155,851 155,268 157,479 157,299 157,011 156,559 156,214 3 U.S. Treasury and government agency securities 9,419 10,086 10,241 10,378 10,505 10,198 10,112 10,166 1100,,664422 4 Other securities 6,933 6,910 7,003 7,035 7,117 7,111 7,122 6,979 7,079 5 Federal funds sold 10,678 6,194 9,091 8,016 9,563 9,041 10,376 8,369 8,771 6 To commercial banks in the United States . 9,449 4,511 7,720 6,728 8,592 7,740 9,310 7,053 7,674 7 To others 1,229 1,683 1,371 1,288 971 1,301 1,066 1,316 1,097 8 Other loans, gross 125,926 128,039 129,516 129,839 130,294 130,949 129,401 131,045 129,722 9 Commercial and industrial 75,717 77,351 77,880 77,409 77,985 78,182 76,577 77,218 76,002 10 Bankers acceptances and commercial paper 2,306 2,446 2,540 2,431 2,328 2,627 2,414 2,054 1,979 11 All other 73,411 74,905 75,340 74,978 75,657 75,555 74,163 75,164 74,023 12 U.S. addressees 71,938 73,426 73,980 73,569 74,238 74,169 72,830 73,795 72,671 13 Non-U.S. addressees 1,473 1,479 1,360 1,409 1,419 1,386 1,333 1,369 1,352 14 Loans secured by real estate3 22,475 22,467 22,706 22,880 22,942 23,167 23,295 23,408 23,559 15 To financial institutions 24,968 25,549 25,549 26,108 26,100 26,068 26,034 26,358 26,491 16 Commercial banks in the United States.. 18,684 19,052 19,512 20,130 20,042 19,983 19,714 20,240 20,534 17 Banks in foreign countries 1,668 1,847 1,388 1,270 1,283 1,232 1,353 1,244 1,111 18 Nonbank financial institutions 4,616 4,650 4,649 4,708 4,775 4,853 4,967 4,874 4,840 19 To foreign governments and official institutions 185 191 207 238 226 225 222233 212 221122 20 For purchasing and carrying securities .... 1,231 1,091 1,403 1,675 1,506 1,704 1,456 2,178 1,831 21 All other3 1,350 1,390 1,771 1,529 1,535 1,603 1,816 1,671 1,627 22 Other assets (claims on nonrelated parties) .. 32,550 33,667 33,580 32,984 32,950 33,581 33,108 33,280 33,380 23 Net due from related institutions 10,396 13,284 12,722 16,265 13,319 15,000 14,221 14,183 12,423 24 Total assets 210,960 212,456 216,714 218,334 218,334 219,610 218,543 217,832 216,425 25 Deposits or credit balances due to other than directly related institutions ....,• 50,178 50,567 50,910 51,064 51,180 50,734 50,545 50,886 49,768 26 Transaction accounts and credit balances . 3,872 3,877 3,776 4,423 4,572 4,282 4,043 4,383 4,019 27 Individuals, partnerships, and corporations 2,684 2,689 2,628 2,703 2,683 2,840 2,737 2,839 22,,772244 28 Other 1,188 1,188 1,148 1,720 1,889 1,442 1,306 1,544 1,295 29 Nontransaction accounts5 46,306 46,690 47,134 46,641 46,608 46,452 46,502 46,503 45,749 30 Individuals, partnerships, and corporations 38,823 39,372 39,166 38,943 38,976 38,874 38,679 38,717 3377,,774477 31 Other 7,483 7,318 7,968 7,698 7,632 7,578 7,823 7,786 8,002 32 Borrowings from other than directly related institutions 100,065 103,392 105,739 108,265 107,205 109,440 108,973 111,877 110077,,006666 33 Federal funds purchased6 44,154 47,181 49,464 52,450 48,681 52,086 51,954 53,016 50,036 34 From commercial banks in the United States 18,934 20,062 21,646 23,883 24,849 25,766 23,474 26,559 23,845 35 From others 25,220 27,119 27,818 28,567 23,832 26,320 28,480 26,457 26,191 36 Other liabilities for borrowed money 55,911 56,211 56,275 55,815 58,524 57,354 57,019 58,861 57,030 37 To commercial banks in the United States 32,297 32,461 32,688 32,146 32,874 32,348 32,040 32,436 32,547 38 To others 23,614 23,750 23,587 23,669 25,650 25,006 24,979 26,425 24,483 39 Other liabilities to nonrelated parties 32,316 33,177 32,687 32,282 32,168 32,488 32,282 32,421 32,245 40 Net due to related institutions 28,400 25,320 27,376 26,723 27,781 26,947 26,744 22,646 27,347 41 Total liabilities 210,960 212,456 216,714 218,334 218,334 219,610 218,543 217,832 216,425 MEMO 42 Total loans (gross) and securities adjusted .. 124,823 127,666 128,619 128,410 128,845 129,576 127,987 129,266 128,006 43 Total loans (gross) adjusted7 108,471 110,670 111,375 110,997 111,223 112,267 110,753 112,121 110,285 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

A48 DomesticN onfinancial Statistics • October 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 1985 1986 1987 1988 Dec. Dec. Dec. Dec. Mar. June Sept. Dec. Mar. June 1 All holders—Individuals, partnerships, and corporations 321.0 363.6 343.5 354.7 330.4 329.3 337.3 352.2 328.7 f 2 Financial business 32.3 41.4 36.3 38.6 36.3 33.0 33.7 33.8 34.1 1 3 Nonfinancial business 178.5 202.0 191.9 201.2 182.2 185.9 190.4 202.5 183.3 n.a. 4 Consumer 85.5 91.1 90.0 88.3 87.4 86.6 87.9 90.3 86.6 1 5 Foreign 3.5 3.3 3.4 3.7 3.7 2.9 2.9 3.1 3.0 I 6 Other 21.2 25.8 21.9 22.8 20.7 21.0 22.4 22.5 21.7 Weekly reporting banks 1989 1990 1985 1986 1987 1988 Dec. Dec. Dec. Dec. Mar. June Sept. Dec. Mar. June 7 All holders—Individuals, partnerships, and corporations 168.6 195.1 183.8 198.3 181.9 182.2 186.6 196.7 183.7 186.3 8 Financial business 25.9 32.5 28.6 30.5 27.2 25.4 26.3 27.6 25.6 25.0 9 Nonfinancial business 94.5 106.4 100.0 108.7 98.6 99.8 101.6 108.8 100.1 101.7 10 Consumer 33.2 37.5 39.1 42.6 41.1 42.4 43.0 44.1 42.4 43.3 11 Foreign 3.1 3.3 3.3 3.6 3.3 2.9 2.8 3.0 2.8 2.9 12 Other 12.0 15.4 12.7 12.9 11.7 11.7 12.9 13.2 12.8 13.3 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 1990 1985 1986 1987 1988 1989 Dec. Dec. Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 298,779 329,991 358,056 457,297 529,055 533,137 540,148 546,786 544,481 538,686 537,023 Financial companies' Dealer-placed paper 2 Total 78,443 101,072 102,844 160,094 187,084 183,401 185,391 184,097 185,107 186,155 191,463 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 paper4 4 Total 135,320 151,820 173,980 194,537 212,210 214,9% 215,650 215,501 213,843 209,203 202,101 5 Bank-related (not seasonally adjusted) 44,778 40,860 43,173 43,155 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 6 Nonfinancial companies5 85,016 77,099 81,232 102,666 129,761 134,740 139,107 147,188 145,531 143,328 143,459 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 68,413 64,974 70,565 66,631 62,972 60,019 57,852 55,865 53,945 54,766 53,756 Holder 8 Accepting banks 11,197 13,423 10,943 9,086 9,433 9,954 10,351 9,574 9,200 9,000 9,987 9 Own bills 9,471 11,707 9,464 8,022 8,510 8,467 8,907 8,386 7,850 7,632 8,600 10 Bills bought 1,726 1,716 1,479 1,064 924 1,488 1,444 1,188 1,350 1,368 1,387 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 1,069 1,123 1,180 1,141 1,291 1,507 13 Others 56,279 50,234 58,658 56,052 52,473 48,996 46,379 45,111 43,604 44,475 42,262 Basis 14 Imports into United States 15,147 14,670 16,483 14,984 15,651 15,100 14,522 14,418 13,413 13,993 14,799 15 Exports from United States 13,204 12,960 15,227 14,410 13,683 13,437 12,567 12,161 12,610 12,727 12,510 16 All other 40,062 37,344 38,855 37,237 33,638 31,482 30,764 29,286 27,922 28,046 26,447 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 Period Av r e a r te a ge Av r e a r te a ge Period 7.75 1987 8.21 1988— Jan. 8.75 1989— 8.00 1988 9.32 Feb. 8.51 8.25 1989 10.87 Mar. 8.50 July .. 8.75 Apr. 8.50 Aug. . 9.25 1987— Jan. 7.50 May 8.84 Sept. . 9.00 Feb. 7.50 June 9.00 Oct. ... 8.75 Mar. 7.50 July 9.29 Apr. 7.75 Aug. 9.84 Dec. .. 8.50 May 8.14 Sept. 10.00 9.00 June 8.25 Oct. 10.00 1990— 9.50 July 8.25 Nov. 10.05 Feb. .. 10.00 Aug. 8.25 Dec. 10.50 Mar. . 10.50 Sept. 8.70 Apr. .. Oct. 9.07 1989— Jan. 10.50 May ... 11.00 Nov. 8.78 Feb. 10.93 June .. 11.50 Dec. 8.75 Mar. 11.50 July ... 11.00 Apr. 11.50 Aug. .. 10.50 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

A48 Domestic Nonfinancial Statistics • October 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 Apr. May June July June 29 July 6 July 13 July 20 July 27 MONEY MARKET RATES 1 Federal funds1,2 6.66 7.57 9.21 8.26 8.18 8.29 8.15 8.28 8.33 8.28 8.14 8.05 2 Discount window borrowing1 5.66 6.20 6.93 7.00 7.00 7.00 7.00 7.00 77..0000 77..0000 77..0000 77..0000 Commercial paper4'5 3 1-month 6.74 7.58 9.11 8.32 8.24 8.21 8.09 8.25 8.23 8.23 8.02 7.97 4 3-month 6.82 7.66 8.99 8.30 8.25 8.14 7.99 8.17 8.13 8.13 7.94 7.88 6-month 6.85 7.68 8.80 8.29 8.23 8.06 7.90 8.07 8.03 88..0033 77..8855 77..7788 Finance paper, directly placed4'5 6 1-month 6.61 7.44 8.99 8.23 8.14 8.12 7.99 8.16 8.13 8.15 7.91 7.88 7 3-month 6.54 7.38 8.72 8.13 8.12 8.01 7.87 8.04 8.01 8.01 7.82 7.77 8 6-month 6.37 7.14 8.16 7.74 8.04 7.79 7.66 7.83 7.82 7.81 7.60 7.53 Bankers acceptances5'6 9 3-month 6.7 5 7.56 8.87 8.21 8.12 8.00 7.86 8.04 7.98 7.98 7.82 7.77 10 6-month 6.78 7.60 8.67 8.18 8.08 7.89 7.73 7.90 7.85 77..8855 77..6699 77..6633 Certificates of deposit, secondary market7 11 1-month 6.75 7.59 9.11 8.32 8.25 8.20 8.09 8.24 8.23 8.24 8.02 7.97 12 3-month 6.87 7.73 9.09 8.42 8.35 8.23 8.10 8.27 8.24 8.25 8.04 7.98 13 6-month 7.01 7.91 9.08 8.57 8.48 8.28 8.12 8.31 8.26 8.28 8.07 8.00 14 Eurodollar deposits. 3-month8 7.07 7.85 9.16 8.44 8.35 8.23 8.09 8.25 88..2211 88..2233 88..1111 88..0011 U.S. Treasury bills Secondary market9 15 3-month 5.78 6.67 8.11 7.77 7.74 7.73 7.62 7.77 7.71 7.73 7.57 7.53 16 6-month 6.03 6.91 8.03 7.84 7.76 7.63 7.52 7.66 7.61 7.65 7.48 7.42 IV 1-year 6.33 7.13 7.92 7.80 7.73 7.53 7.40 7.57 7.49 77..5533 77..3344 77..3333 Auction average10 18 3-month 5.82 6.68 8.12 7.78 7.78 7.74 7.66 7.78 7.73 7.81 7.62 7.49 19 6-month 6.05 6.92 8.04 7.82 7.82 7.64 7.57 7.67 7.60 7.75 7.52 7.40 20 1-year 6.33 7.17 7.91 7.72 8.05 7.65 7.52 n.a. 7.52 n.a. n.a. n.a. CAPITAL MARKET RATES U.S. Treasury notes and bonds" Constant maturities'" 21 1-year 6.77 7.65 8.53 8.40 8.32 8.10 7.94 8.13 8.06 8.09 7.87 7.85 22 2-year 7.42 8.10 8.57 8.72 8.64 8.35 8.16 8.36 8.25 8.30 8.12 8.07 23 3-year 7.68 8.26 8.55 8.78 8.69 8.40 8.26 8.42 8.33 8.39 8.23 8.21 24 5-year 7.94 8.47 8.50 8.77 8.74 8.43 8.33 8.45 8.36 8.43 8.31 8.30 li 7-year 8.23 8.71 8.52 8.81 8.78 8.52 8.46 8.55 8.48 8.54 8.44 8.43 26 10-year 8.39 8.85 8.49 8.79 8.76 8.48 8.47 8.51 8.44 8.53 8.47 8.48 2/ 30-year 8.59 8.96 8.45 8.76 8.73 8.46 8.50 8.49 88..4444 88..5533 88..5511 88..5544 Composite13 28 Over 10 years (long-term) 8.64 8.98 8.58 8.92 8.90 8.62 8.64 8.65 88..6600 88..6699 88..6666 88..6677 State and local notes and bonds Moody's series14 29 Aaa 7.14 7.36 7.00 7.04 6.97 6.88 6.96 6.95 6.95 6.98 6.94 6.95 30 Baa 8.17 7.83 7.40 7.43 7.37 7.11 7.13 7.10 7.10 7.16 7.11 7.15 31 Bond Buyer series15 7.63 7.68 7.23 7.39 7.35 7.24 7.19 7.27 77..2244 77..2211 77..1177 77..1155 Corporate bonds Seasoned issues16 32 All industries 9.91 10.18 9.66 9.82 9.87 9.67 9.65 9.69 9.64 9.68 9.65 9.66 33 Aaa 9.38 9.71 9.26 9.46 9.47 9.26 9.24 9.27 9.23 9.26 9.24 9.26 34 Aa 9.68 9.94 9.46 9.64 9.70 9.49 9.47 9.52 9.46 9.51 9.47 9.46 35 A 9.99 10.24 9.74 9.89 9.89 9.70 9.69 9.70 9.68 9.71 9.70 9.70 36 Baa 10.58 10.83 10.18 10.30 10.41 10.22 10.20 10.25 1100..2200 1100..2233 1100..1199 1100..1199 37 A-rated, recently offered utility bonds17 9.96 10.20 9.79 10.09 10.04 9.85 9.96 9.92 1100..0000 99..9944 99..9999 99..9944 MEMO: Dividend/price ratio18 38 Preferred stocks 8.37 9.23 9.05 9.05 9.04 9.01 8.94 9.05 9.00 9.00 8.84 8.93 39 Common stocks 3.08 3.64 3.45 3.51 3.44 3.36 3.37 3.42 3.37 3.36 3.34 3.41 1. Weekly, monthly and annual figures are averages of all calendar days, places. Thus, average issuing rates in bill auctions will be reported using two where the rate for a weekend or holiday is taken to be the rate prevailing on the rather than three decimal places. preceding business day. The daily rate is the average of the rates on a given day 11. Yields are based on closing bid prices quoted by at least five dealers. weighted by the volume of transactions at these rates. 12. Yields adjusted to constant maturities by the U.S. Treasury. That is, yields 2. Weekly figures are averages for statement week ending Wednesday. are read from a yield curve at fixed maturities. Based on only recently issued, 3. Rate for the Federal Reserve Bank of New York. actively traded securities. 4. Unweighted average of offering rates quoted by at least five dealers (in the 13. Averages (to maturity or call) for all outstanding bonds neither due nor case of commercial paper), or finance companies (in the case of finance paper). callable in less than 10 years, including one very low yielding "flower" bond. Before November 1979, maturities for data shown are 30-59 days. 90-119 days, 14. General obligations based on Thursday figures; Moody's Investors Service. and 120-179 days for commercial paper; and 30-59 days, 90-119 days, and 15. General obligations only, with 20 years to maturity, issued by 20 state and 150-179 days for finance paper. local governmental units of mixed quality. Based on figures for Thursday. 5. Yields are quoted on a bank-discount basis, rather than in an investment 16. Daily figures from Moody's Investors Service. Based on yields to maturity yield basis (which would give a higher figure). on selected long-term bonds. 6. Dealer closing offered rates for top-rated banks. Most representative rate 17. Compilation of the Federal Reserve. This series is an estimate of the yield (which may be, but need not be, the average of the rates quoted by the dealers). on recently-offered, A-rated utility bonds with a 30-year maturity and 5 years of 7. Unweighted average of offered rates quoted by at least five dealers early in call protection. Weekly data are based on Friday quotations. the day. 18. Standard and Poor's corporate series. Preferred stock ratio based on a 8. Calendar week average. For indication purposes only. sample often issues: four public utilities, four industrials, one financial, and one 9. Unweighted average of closing bid rates quoted by at least five dealers. transportation. Common stock ratios on the 500 stocks in the price index. 10. Rates are recorded in the week in which bills are issued. Beginning with the NOTE. These data also appear in the Board's H. 15 (519) and G. 13 (415) releases. Treasury bill auction held on Apr. 18, 1983, bidders were required to state the For address, see inside front cover. percentage yield (on a bank discount basis) that they would accept to two decimal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A25 1.36 STOCK MARKET Selected Statistics 1989 1990 IInnddiiccaattoorr 11998877 11998888 11998899 Nov. Dec. Jan. Feb. Mar. Apr. May June July Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) 161.78 149.97 180.13 188.50 192.67 187.96 182.55 186.26 185.61 191.35 196.68 196.61 2 Industrial 195.31 180.83 228.04 224.38 230.12 225.79 220.60 226.14 226.86 234.85 242.42 245.86 3 Transportation 140.52 134.09 174.90 174.26 177.25 173.67 166.69 175.08 173.54 173.53 177.37 173.18 4 Utility 74.29 72.22 94.33 94.95 99.73 95.69 92.15 92.99 91.92 93.29 93.65 89.85 5 Finance 146.48 127.41 162.01 160.89 155.63 150.11 142.68 143.14 138.57 142.94 147.93 143.11 6 Standard & Poor's Corporation (1941-43 = 10)' 287.00 265.88 323.05 340.22 348.57 339.97 330.45 338.47 338.18 350.25 360.39 360.03 7 American Stock Exchange (Aug. 31, 1973 = 50? 316.78 295.08 356.67 371.92 373.87 367.40 355.30 360.77 353.32 353.82 361.62 359.09 Volume of trading (thousands of shares) 8 New York Stock Exchange 188,922 161,386 165,568 144,389 160,671 172,420 155,960 149,240 140,062 163,486 153,634 160,490 9 American Stock Exchange 13,832 9,955 13,124 12,001 13,298 14,831 13,735 15,133 13,961 14,005 12,421 12,529 Customer financing (erid-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 31,990 32,740 34,320 34,630 34,320 32,640 31,480 30,760 31,060 31,600 31,720 32,130 Free credit balances at brokers4 11 Margin-account5 4,750 5,660 7,040 5,815 7,040 6,755 6,575 6,525 6,465 6,215 6,490 6,385 12 Cash-account 15,640 16,595 18,505 16,345 18,505 17,370 16,200 16,510 15,375 15,470 15,625 17,035 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

A48 DomesticN onfinancial Statistics • October 1990 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1989 1990 AAccccoouunntt 11998877 1988 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May SAIF-insured institutions 1 Assets 1,250,855 1,350,500 1,315,920 1,298,682 1,286,710' 1,277,191' 1,249,486' 1,236,989' 1,225,249' 1,223,340 2 Mortgages 721,593 764,513 760,786 755,427 748,780 745,091 733,883' 772277,,775522'' 772211,,115544'' 717,720 3 Mortgage-backed securities 201,828 214,587 195,309 188,493 181,464' 176,386' 170,534' 169,392' 116677,,332266'' 167,701 4 Contra-assets to mortgage assets1 . 42,344 37,950 27,433 27,085 25,950 24,976 25,468' 23,982' 22,349' 23,109 5 Commercial loans 23,163 33,889 33,035 32,936 32,572 32,344 32,154 31,933 31,781 31,781 6 Consumer loans 57,902 61,922 60,958 60,405 59,722 59,372 58,717' 5577,,118866'' 5566,,880033'' 56,789 7 Contra-assets to nonmortgage loans2 . 3,467 3,056 3,163 3,129 3,107 3,194 3,503' 2,094' 2,240' 2,435 8 Cash and investment securities 169,717 186,986 171,564 169,526 172,727 172,465' 166,020' 160,539' 157,307' 162,303 n. a. n. a. 9 Other3 122,462 129,610 124,864 122,109 120,501 119,704' 117,149' 116,259' 115,475' 113,299 10 Liabilities and net worth . 1,250,855 1,350,500 1,315,920 1,298,682 1,286,710' 1,277,191' 1,249,486' 1,236,989' 1,225,249' 1,223,340 11 Savings capital 932,616 971,700 960,344 958,901 948,500 946,655 945,651' 933,897' 926,424' 929,917 12 Borrowed money 249,917 299,400 289,634 281,684 275,979 268,462 252,203' 252,844' 247,992' 246,852 13 FHLBB 116,363 134,168 138,331 133,633 130,514 127,671 124,578 121,732 120,633' 117,467 14 Other 133,554 165,232 151,303 148,051 145,465 140,791 127,625' 131,112' 127,359' 129,385 15 Other 21,941 24,216 33,811 29,742 30,971 31,991 27,39c 26,944' 28,128' 25,987 16 Net worth n.a. n.a. 32,130 28,355 31.26C 30,083' 24,241' 23,309' 22,706' 20,583 SAIF-insured federal savings banks 17 Assets 284,270 425,966 504,233 500,937 502,484 499,995 498,522 497,412 489,113 18 Mortgages 161,926 230,734 285,557 283,162 283,652 282,510 228833,,884444 228800,,992222 227755,,772277 19 Mortgage-backed securities 45,826 64,957 72,124 72,478 72,332 71,204 7700,,449999 7700,,338866 6699,,774400 20 Contra-assets to mortgage assets1 . 9,100 13,140 13,872 13,801 13,506 13,216 13,548 10,234 9,503 21 Commercial loans 6,504 16,731 18,233 18,256 18,299 18,172 18,143 18,470 18,079 22 Consumer loans 17,696 24,222 28,987 28,762 28,322 28,079 2288,,221122 2288,,550099 2266,,551177 23 Contra-assets to nonmortgage loans . 678 889 1,026 1,073 1,048 1,082 1,193 620 634 24 Finance leases plus interest 591 880 1,076 1,092 1,085 1,092 1,101 n.a. n.a. n.a. n.a. n a. 25 Cash and investment ... 35,347 61,029 65,040 64,073 65,193 65,191 64,538 62,730 61,767 26 Other 24,069 35,412 40,542 40,659 40,799 40,852 39,981 40,317 40,710 27 Liabilities and net worth . 284,270 425,966 504,233 500,937 502,484 499,995 498,522 497,412 489,113 28 Savings capital 203,196 298,197 352,158 353,474 355,923 355,874 360,547 360,285 353,385 29 Borrowed money 60,716 99,286 117,973 115,627 114,231 111,369 108,448 109,028 106,237 30 FHLBB 29,617 46,265 59,189 57,941 57,793 56,842 57,032 55,862 55,081 31 Other 31,099 53,021 58,784 57,686 56,438 54,527 51,416 53,166 51,156 32 Other 5,324 8,075 11,443 9,904 10,317 10,749 9,041 9,885 10,330 33 Net worth 15,034 20,218 26,381 25,952 25,983 25,958 22,716 17,810 18,827 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets All 1.37—Continued 1989 1990 AAccccoouunntt 11998877 11998888 Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Credit unions4 34 Total assets/liabilities and capital 174,593 180,035 181,812 181,527 182,856 183,688 183,301 186,119 192,718 193,208 195,020 35 Federal 114,566 117,463 118,746 118,887 119,682 120,666 120,489 122,885 126,690 127,250 128,648 36 State 60,027 62,572 63,066 62,640 63,174 63,022 62,812 63,234 66,028 65,958 66,372 37 Loans outstanding n a. 113,191 120,577 122,522 122,997 122,899 122,608 122,332 121,968 121,660 122,616 123,205 38 Federal 73,766 78,946 80,548 80,570 80,601 80,272 80,041 79,715 79,407 80,205 80,550 39 State 39,425 41,631 41,874 42,427 42,298 42,336 42,291 42,253 42,253 42,411 42,655 40 Savings 159,010 162,754 164,050 164,695 165,533 167,371 166,629 168,609 175,942 175,745 176,701 41 Federal 104,431 106,038 106,633 107,588 108,319 109,653 109,818 111,246 115,714 115,554 116,402 42 State 54,579 56,716 57,417 57,107 57,214 57,718 56,811 57,363 60,228 60,191 60,299 Life insurance companies 43 Assets 1,044,459 l,166,870r 1,257,045 1,266,773 1,276,181 1,289,467 1,303,691 Securities 44 Government 84,426 84,051 83,225 82,867 83,727 83,609 84,381 45 United States5 57,078 58,564 56,978 56,684 57,726 57,290 58,169 46 State and local 10,681 9,136 9,002 9,037 9,019 9,280 9,191 47 Foreign6 16,667 16,351 17,245 17,146 16,982 17,039 17,021 48 Business 569,199 660,416 735,441 742,537 748,075 758,803 777,415 n.a. n. a. n.a. n.a. n. a. 49 Bonds 472,684 556,043 614,585 621,856 628,695 637,690 642,445 50 Stocks 96,515 104,373 120,856 120,681 119,380 121,113 134,970 51 Mortgages 203,545 232,863 238,944 240,189 242,391 243,728 246,345 52 Real estate 34,172 37,371 38,822 38,942 39,343 39,339 39,368 53 Policy loans 53,626 54,236 56,077 56,403 56,727 56,916 57,141 54 Other assets 89,586 93,358 104,536 105,835 105,918 107,072 110,284 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. SAlF-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 Financial Statistics • October 1990 1.38 FEDERAL FISCAL AND FINANCING OPERATIONS Millions of dollars Calendar year FFFiiissscccaaalll FFFiiissscccaaalll FFFiiissscccaaalll TTTyyypppeee ooofff aaaccccccooouuunnnttt ooorrr ooopppeeerrraaatttiiiooonnn yyyeeeaaarrr yyyeeeaaarrr yyyeeeaaarrr 1990 111999888777 111999888888 111999888999 Feb. Mar. Apr. May June July U.S. budget1 1 Receipts, total 854,143 908,166 990,701 65,170 64,819 139,624 69,212 110,614 72,357 2 On-budget 640,741 666,675 727,035 44,133 38,990 106,775 45,514 83,717 50,446 Off-budget 213,402 241,491 263,666 21,037 25,829 32,849 23,698' 26,897 21,911 4 Outlays, total 1,003,830 1,063,318 1,142,588' 100,437' 118,165' 97,865' 111,769' 121,842' 98,291 5 Oiv-budget 809,998 860,627 931,367' 80,874' 97,642' 79,749' 91,818' 105,882' 79,844 6 Off-budget 193,832 202,691 211,221 19,563 20,523 18,116 19,951' 15,960r 18,447 7 Surplus, or deficit (-), total -149,687 -155,152 -151,887' -35,267' -53,346r 41,760' -42,558' -11,228' -25,934 8 On-budget -169,257 -193,952 -204,332' -36,741' -58,652' 27,027' -46,305' -22,165' -29,398 9 Off-budget 19,570 38,800 52,445 1,474 5,306 14,733 3,747 10,937 3,464 Source of financing (total) 10 Borrowing from the public 151,717 166,139 140,811 18,221 56,090 -5,935 23,380 2233,,552200'' 24,233 11 Operating cash (decrease, or increase (-)) . -5,052 -7,962 3,425 25,463 1,123 -20,830 25,594 -20,916 9,862 12 Other 3,022 -3,025 7,651' -8,417' -3,867' -14,995' -6,416' 8,624' -8,161 MEMO 13 Treasury operating balance (level, end of period) 36,436 44,398 40,973 19,589 18,466 39,296 13,702 34,618 24,756 14 Federal Reserve Banks 9,120 13,023 13,452 6,613 4,832 5,205 4,426 5,470 6,369 15 Tax and loan accounts 27,316 31,375 27,521 12,976 13,634 34,091 9,276 29,148 18,387 1. In accordance with the Balanced Budget and Emergency Deficit Control Act international monetary fund; other cash and monetary assets; accrued interest of 1985, all former off-budget entries are now presented on-budget. The Federal payable to the public; allocations of special drawing rights; deposit funds; Financing Bank (FFB) activities are now shown as separate accounts under the miscellaneous liability (including checks outstanding) and asset accounts; agencies that use the FFB to finance their programs. The act has also moved two seigniorage; increment on gold; net gain/loss for U.S. currency valuation adjustsocial security trust funds (Federal old-age survivors insurance and Federal ment; net gain/loss for IMF valuation adjustment; and profit on the sale of gold. disability insurance trust funds) off-budget. SOURCE. Monthly Treasury Statement of Receipts and Outlays of the U.S. 2. Includes SDRs; reserve position on the U.S. quota in the IMF; loans to Government and the Budget of the U.S. Government. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A29 1.39 U.S. BUDGET RECEIPTS AND OUTLAYS' Millions of dollars Calendar year FFFiiissscccaaalll FFFiiissscccaaalll SSSooouuurrrccceee ooorrr tttyyypppeee yyyeeeaaarrr yyyeeeaaarrr 1988 1989 1990 1990 111999888888 111999888999 H2 HI H2 HI May June July RECEIPTS 1 All sources 908,166 990,701 449,330 527,574 470,329 548,977 69,212 110,614 72,357 2 Individual income taxes, net 401,181 445,690 200,300 233,572 218,661 243,529 21,467 49,639 33,290 3 Withheld 341,435 361,386 179,600 174,230 193,2% 190,219 32,548 31,469 32,211 4 Presidential Election Campaign Fund .... 33 32 4 28 3 30 6 5 31 5 Nonwithheld 132,199 154,839 29,880 121,563 33,303 118,241 7,235 19,573 2,783 6 Refunds 72,487 70,567 9,186 62,251 7,943 64,%2 18,322 1,408 1,734 Corporation income taxes 7 Gross receipts 109,683 117,015 56,409 61,585 52,269 58,830 2,461 19,513 3,364 8 Refunds 15,487 13,723 7,250 7,259 6,842 8,326 904 944 1,307 9 Social insurance taxes and contributions, net 334,335 359,416 157,603 200,127 162,574 210,476 37,450 34,326 29,610 10 Employment taxes and contributions 305,093 332,859 144,983 184,569 152,407 195,269 29,869 33,694 2277,,555544 11 Self-employment taxes and contributions 17,691 18,504 3,032 16,371 1,947 19,017 1,472 2,934 00 12 Unemployment insurance 24,584 22,011 10,359 13,279 7,909 12,929 7,155 252 1,701 13 Other net receipts 4,659 4,547 2,262 2,277 2,260 2,278 426 380 355 14 Excise taxes 35,604 34,386 19,299 16,814 16,844 18,188 3,743 3,566 3,053 15 Customs deposits 15,411 16,334 8,107 7,918 8,667 8,0% 1,371 1,387 1,505 16 Estate and gift taxes 7,594 8,745 4,054 4,583 4,451 6,442 1,045 852 924 17 Miscellaneous receipts 19,909 22,839 10,809 10,235 13,703 11,742 2,579 2,276 1,917 OUTLAYS 18 All types 1,063,318 1,142,588' 552,726' 565,422r 587,561' 641,364r 111,769' 121,842' 98,291 19 National defense 290,361 303,551 150,4% 148,098 149,613 152,733 26,339 27,870' 22,717 20 International affairs 10,471 9,596 2,627 6,567 6,029 6,770 1,204 578 28 21 General science, space, and technology 10,841 12,891 5,852 6,238 7,091 6,974 1,106 1,253 1,283 22 Energy 2,297 3,745 1,966 2,221 1,597' 1,504 3% 230 211 23 Natural resources and environment 14,625 16,084 9,072 7,022 9,183 7,343 1,536 1,233 1,375 24 Agriculture 17,210 16,948 6,911 9,619 4,132 7,450 1,254 170 417 25 Commerce and housing credit 18,828 27,810 19,836 4,129 22,200 38,788 8,937 17,880 5,142 26 Transportation 27,272 27,623 14,922 12,953 14,982 13,754 2,452 2,421 2,683 27 Community and regional development 5,294 5,755 2,690 1,833 4,879 3,987 681 552 606 28 Education, training, employment, and social services 31,938 35,697 16,162 18,083 18,663 19,537 3,127 3,092 22,,119988 29 Health 44,490 48,391 23,360 24,078 25,339 29,488 5,098 5,249 5,103 30 Social security and medicare 297,828 317,506 149,017 162,195 162,322 175,997 29,372 32,538 30,226 31 Income security 129,332 136,765 64,978 70,937 67,950 78,456 13,031 11,023 11,786 32 Veterans benefits and services 29,406 30,066 15,797 14,891 14,864 15,217 2,608 3,742 1,269 33 Administration of justice 8,436 9,3% 4,361 4,801 4,%3 4,983 895 859 921 34 General government 9,518 8,940 5,137 3,858 4,760 4,916' 678 1,388' 807 35 General-purpose fiscal assistance 1,816 n.a. 0 0 n.a. n.a. n.a. n.a. n.a. 36 Net interest6 151,748 169,314 78,317 86,009 87,927 91,155 16,062 14,493 15,153 37 Undistributed offsetting receipts -36,967 -37,212 -18,771 -18,131 -18,935 -17,688 -3,002 -2,730 -3,634 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 Financial Statistics • October 1990 1.40 FEDERAL DEBT SUBJECT TO STATUTORY LIMITATION Billions of dollars 1988 1989 1990 IItteemm June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 1 Federal debt outstanding 2,555.1 2,614.6 2,707.3 2,763.6 2,824.0 2,881.1 2,975.5 3,081.9 3,175.5 2 Public debt securities 2,547.7 2,602.2 2,684.4 2,740.9 2,799.9 2,857.4 2,953.0 3,052.0 3,143.8 3 Held by public 2,013.4 2,051.7 2,095.2 2,133.4 2,142.1 2,180.7 2,245.2 2,329.3 n.a. 4 Held by agencies 534.2 550.4 589.2 607.5 657.8 676.7 707.8 722.8 n.a. 5 Agency securities 7.4 12.4 22.9 22.7 24.0 23.7 22.5 29.9 n.a. 6 Held by public 7.0 12.2 22.6 22.3 23.6 23.5 22.4 29.8 n.a. 7 Held by agencies .5 .2 .3 .4 .5 .1 .1 .2 n.a. 8 Debt subject to statutory limit 2,532.2 2,586.9 2,669.1 2,725.6 2,784.6 2,829.8 2,921.7 2,988.9 3,077.0 9 Public debt securities 2,532.1 2,586.7 2,668.9 2,725.5 2,784.3 2,829.5 2,921.4 2,988.6 3,076.6 10 Other debt1 .1 .1 .2 .2 .2 .3 .3 .3 .4 11 MEMO: Statutory debt limit 2,800.0 2,800.0 2,800.0 2,800.0 2,800.0 2,870.0 3,122.7 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 TTyyppee aanndd hhoollddeerr 11998866 11998877 11998888 11998899 Q3 Q4 Ql Q2 1 Total gross public debt 2,214.8 2,431.7 2,684.4 2,953.0 2,857.4 2,953.0 3,052.0 3,143.8 By type 2 Interest-bearing debt 2,212.0 2,428.9 2,663.1 2,931.8 2,836.3 2,931.8 3,029.5 3,121.5 3 Marketable 1,619.0 1,724.7 1,821.3 1,945.4 1,892.8 1,945.4 1,995.3 2,028.0 4 Bills 426.7 389.5 414.0 430.6 406.6 430.6 453.1 453.5 5 927.5 1,037.9 1,083.6 1,151.5 1,133.2 1,151.5 1,169.4 1,192.7 6 Bonds 249.8 282.5 308.9 348.2 338.0 348.2 357.9 366.8 7 Nonmarketable1 593.1 704.2 841.8 986.4 943.5 986.4 1,034.2 1,093.5 8 State and local government series 110.5 139.3 151.5 163.3 158.6 163.3 163.5 164.3 9 Foreign issues 4.7 4.0 6.6 6.8 6.8 6.8 37.1 36.4 10 Government 4.7 4.0 6.6 6.8 6.8 6.8 37.1 36.4 11 Public .0 .0 .0 .0 .0 .0 .0 .0 17 Savings bonds and notes 90.6 99.2 107.6 115.7 114.0 115.7 118.0 120.1 13 Government account series3 386.9 461.3 575.6 695.6 663.7 695.6 705.1 758.7 14 Non-interest-bearing debt 2.8 2.8 21.3 21.2 21.1 21.2 22.4 22.3 By holder4 15 U.S. government agencies and trust funds 403.1 477.6 589.2 707.8 676.7 707.8 722.8 16 Federal Reserve Banks 211.3 222.6 238.4 228.4 220.6 228.4 219.3 17 Private investors 1,602.0 1,731.4 1,858.5 2,015.8 1,958.3 2,015.8 2,115.1 18 Commercial banks 203.5 201.5 193.8 180.6 174.8 180.6 182.0 19 Money market funds 28.0 14.6 11.8 14.4 12.9 14.4 31.3 20 Insurance companies 105.6 104.9 107.3 107.9 105.8 107.9 108.0 21 Other companies 68.8 84.6 87.1 93.8 93.5 93.8 95.0 n.a. 22 State and local Treasurys 262.8 284.6 313.6 337.1 332.2 337.1 338.0 Individuals ?3 Savings bonds 92.3 101.1 109.6 117.7 115.7 117.7 119.9 7.4 Other securities 70.4 71.3 79.2 93.8 93.5 93.8 95.0 25 Foreign and international 263.4 299.7 362.2 393.4 394.6 393.4 386.9 26 Other miscellaneous investors6 506.6 569.1 593.9 674.3 632.4 674.3 754.9 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 Apr. May' June May 23 May 30 June 6 June 13 June 20 June 27 Immediate delivery2 1 U.S. Treasury securities 110,050 101,623 112,722 106,862 114,731 97,108' 101,449' 95,039' 112,209 81,628 103,268 98,043 By maturity 7 Bills 37,924 29,387 30,737 32,971 30,758 27,092' 26,525' 2288,,776600'' 33,493 24,046 28,680 27,500 3 Other within 1 year 3,271 3,426 3,183 2,687 2,812 2,040 1,925 2,278 3,264 1,878 1,725 2,242 4 1-5 years 27,918 27,777 33,664 30,182 37,010 28,487 37,831' 27,779' 30,627 22,318 26,939 34,615 5 5-10 years 24,014 24,939 28,680 26,197 26,147 23,753' 20,968' 24,141' 27,583 19,834 26,544 21,587 6 Over 10 years 16,923 16,093 16,458 14,825 18,005 15,737' 14,200 12,081 17,242 13,552 19,380 12,099 By type of customer 7 U.S. government securities dealers 2,936 2,761 3,286 3,354 3,839 3,729 3,576 2,692 4,303 2,729 4,174 4,271 8 U.S. government securities brokers 61,539 59,844 66,419 59,618 65,588 5544,,889900'' 58,751' 54,281' 62,601 46,253 57,445 55,991 9 All others3 45,575 39,019 43,016 43,890 45,304 38,490' 39,121' 38,067' 45,305 32,647 41,648 37,782 10 Federal agency securities 18,084 15,903 18,626 19,751 17,994 18,446' 13,284' 15,006 16,586 21,630 19,351 16,265 11 Certificates of deposit 4,112 3,369 2,798 1,728 1,437 1,123 1,100 1,350 1,269 988 1,133 1,151 12 Bankers acceptances 2,965 2,316 2,222 1,532 1,390 1,182 1,247' 1,306 1,271 1,169 1,245 1,059 13 Commercial paper 17,135 22,927 31,805 39,797 36,605 36,746 36,112 37,516 37,514 35,824 37,356 37,325 Futures contracts 14 Treasury bills 3,233 2,627 2,525 2,607 2,022 1,846 1,431 1,563 2,471 1,555 1,275 2,157 15 Treasury coupons 8,963 9,695 9,602 9,798 10,780 9,819 10,481 8,557 11,510 7,258 12,238 7,922 16 Federal agency securities 5 1 8 12 12 47 20 0 5 21 150 1 Forward transactions 17 U.S. Treasury securities 2,029 2,095 2,127 1,837 2,449 1,393 2,218 1,170 1,520 1,057 1,770 1,416 18 Federal agency securities 9,290 8,008 9,483 10,064 12,826 9,772 11,360 8,360 8,738 13,444 10,639 6,053 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

A48 Domestic Nonfinancial Statistics • October 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 Apr. May June May 30 June 6 June 13 June 20 June 27 Positions Net immediate2 1 U.S. Treasury securities -6,216 -22,765 -5,940 -6,505 -14,464' —6,800r -10,777' -3,620 -4,928 -7,653 -11,666 2 Bills 4,317 2,238 7,835 9,820 2,705' 5,427' l.t^ 8,524 5,594 4,343 3,000 3 Other within 1 year 1,557 -2,236 -1,528 837 188' 2,071 210 1,093 2,202 2,598 1,972 4 1-5 years 649 -3,020 2,338 4,163 1,673 2,423 3,806 1,868 2,956 2,800 1,925 5 5-10 years -6,564 -9,663 -8,133 -5,891 -3,701 -3,898' -1,393 -1,801 -3,275 -4,447 -5,584 6 Over 10 years -6,174 -10,084 -6,452 -15,434 -15,329 -12,822' -14,459 -13,304 -12,404 -12,947 -12,979 7 Federal agency securities 31,911 28,230 31,913 34,928 36,214' 35,986 32,735' 32,300 37,041 39,291 34,116 8 Certificates of deposit 8,188 7,300 6,674 3,579 3,509 3,039 3,440 3,481 3,067 2,786 2,911 9 Bankers acceptances 3,660 2,486 2,089 1,277 1,08c 1,299 1,021 1,487 1,370 1,307 1,023 10 Commercial paper 7,4% 6,152 8,242 7,492 7,410 9,312' 6,265 9,788 8,750 10,255 8,217 Futures positions 11 Treasury bills -3,373 -2,210 -4,599 -7,017 -8,091 —5,961 -7,556 -7,553 -6,958 -4,784 -4,837 12 Treasury coupons 5,988 6,224 -2,918 -4,739 -5,604 -7,864' -6,939 -7,793 —7,%1 -7,466 -8,016 13 Federal agency securities -95 0 14 22 22 183 5 10 109 272 305 Forward positions 14 U.S. Treasury securities -1,211 346 -545 -1,188 -303' 767 308' -153 4 1,268 1,864 15 Federal agency securities -18,817 -16,348 -16,878 -12,146 -14,885' -15,467 -12,732' -12,083 -16,052 -19,099 -13,640 Financing3 Reverse repurchase agreements4 16 Overnight and continuing 126,709 136,327 157,955 160,104 161,523 154,644 155,850 155,318 162,631 151,271 149,491 17 Term , 148,288 177,477 225,126 220,483 219,006 211,544 211,400 208,799 212,339 214,964 209,526 Repurchase agreements 18 Overnight and continuing 170,763 172,695 219,083 227,829 218,348 217,5% 214,737 215,525 219,932 216,806 217,708 19 Term 121,270 137,056 179,557 175,175 182,135 175,603 174,829 172,743 178,047 178,358 172,693 1. Data for dealer positions and sources of financing are obtained from reports ties involved are not available for trading purposes. Immediate positions include submitted to the Federal Reserve Bank of New York by the U.S. Treasury reverses to maturity, which are securities that were sold after having been securities dealers on its published list of primary dealers. obtained under reverse repurchase agreements that mature on the same day as the Data for positions are averages of daily figures, in terms of par value, based on securities. Data for immediate positions do not include forward positions. the number of trading days in the period. Positions are net amounts and are shown 3. Figures cover financing involving U.S. Treasury and federal agency securion a commitment basis. Data for financing are in terms of actual amounts ties, negotiable CDs, bankers acceptances, and commercial paper. borrowed or lent and are based on Wednesday figures. 4. Includes all reverse repurchase agreements, including those that have been 2. Immediate positions are net amounts (in terms of par values) of securities arranged to make delivery on short sales and those for which the securities owned by nonbank dealer firms and dealer departments of commercial banks on obtained have been used as collateral on borrowings, that is, matched agreements. a commitment, that is, trade-date basis, including any such securities that have 5. Includes both repurchase agreements undertaken to finance positions and been sold under agreements to repurchase (RPs). The maturities of some "matched book" repurchase agreements. repurchase agreements are sufficiently long, however, to suggest that the securi- 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 1990 AAggeennccyy 11998855 11998866 11998877 11998888 Feb. Mar. Apr. May June 1 Federal and federally sponsored agencies 293,905 307,361 341,386 381,498 420,309 420,247r 423,481 424,082 422,261 2 Federal agencies 36,390 36,958 37,981 35,668 42,974 42,492 42,526 42,482 42,016 3 Defense Department' 71 33 13 8 7 7 7 7 7 4 Export-Import Bank2-3 15,678 14,211 11,978 11,033 10,985 11,017 11,017 11,017 11,151 5 Federal Housing Administration 115 138 183 150 280 318 352 365 394 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 6,148 6,148 8 Tennessee Valley Authority 16,347 17,222 18,089 18,335 25,257 24,705 24,705 24,945 24,316 9 United States Railway Association6 74 85 0 0 0 0 0 0 0 10 Federally sponsored agencies7 257,515 270,553 303,405 345,830 377,335 377,755 380,955 381,600 380,245 11 Federal Home Loan Banks 74,447 88,758 115,727 135,836 132,975 131,526 127,401 125,515 123,021 12 Federal Home Loan Mortgage Corporation 11,926 13,589 17,645 22,797 25,017 26,152 28,789 30,444 31,049 13 Federal National Mortgage Association 93,896 93,563 97,057 105,459 116,207 116,815 117,357 118,108 117,964 14 Farm Credit Banks8 68,851 62,478 55,275 53,127 53,790 53,732 53,700 53,795 53,451 15 Student Loan Marketing Association9 8,395 12,171 16,503 22,073 30,806 30,988 31,664 31,696 32,392 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 1,172 18 Resolution Funding Corporation 0 0 0 0 9,524 9,524 13,026 13,026 13,026 MEMO 19 Federal Financing Bank debt 153,373 157,510 152,417 142,850 133,567 135,448 136,957 141,536 157,685 Lending to federal and federally sponsored agencies 20 Export-Import Bank3 15,670 14,205 11,972 11,027 10,979 11,011 11,011 11,011 1111,,114444 21 Postal Service6 1,690 2,854 5,853 5,892 6,195 6,195 6,195 5,898 5,898 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 15,877 15,325 15,325 15,565 14,936 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 52,831 52,726 51,916 51,591 51,901 76 Rural Electrification Administration 20,654 21,680 21,191 19,246 19,219 19,221 19,191 19,182 19,168 27 31,429 32,545 32,078 26,324 23,586 26,090 28,439 33,409 49,758 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

A48 Domestic Nonfinancial Statistics • October 1990 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1989 1990 TTyyppee ooff iissssuuee oorr iissssuueerr,, oorr uussee 11998877 11998888 11998899 Dec. Jan. Feb. Mar. Apr. May June July 1 All issues, new and refunding1 102,407 114,522 113,646 13,636 6,694 6,329 9,880 8,582 12,032 13,625 8,731 Type of issue 2 General obligation 30,589 30,312 35,774 2,158 2,675 3,010 3,199 3,386 3,166 4,426 2,847 3 Revenue 71,818 84,210 77,873 11,478 4,019 3,319 6,681 5,196 8,866 9,199 5,884 Type of issuer 4 State 10,102 8,830 11,819 911 712 1,196 707 1,387 1,003 1,090 1,442 5 Special district and statutory authority 65,460 74,409 71,022 9,391 4,744 3,277 6,247 4,366 7,485 8,556 5,547 6 Municipalities, counties, and townships 26,845 31,193 30,805 3,334 1,238 1,856 2,926 2,243 3,544 3,977 1,742 7 Issues for new capital, total 56,789 79,665 84,062 10,195 6,263 5,635 6,667 7,744 10,486 10,974 7,442 Use of proceeds 8 Education 9,524 15,021 15,133 1,495 1,374 1,420 1,018 1,054 1,694 2,612 A 9 Transportation 3,677 6,825 6,870 645 98 511 1,158 1,215 1,375 1,592 T 10 Utilities and conservation 7,912 8,496 11,427 2,219 1,747 718 502 991 1,232 2,159 n.a. 11 Social welfare 11,106 19,027 16,703 2,518 1,017 432 1,425 2,664 2,628 2,199 I 12 Industrial aid 7,474 5,624 5,036 1,119 200 115 432 232 681 693 • 13 Other purposes 18,020 24,672 28,894 2,199 1,827 2,439 2,132 2,426 2,155 n.a. 1. Par amounts of long-term issues based on date of sale. SOURCES. Investment Dealer's Digest beginning April 1990. Securities Data/ 2. Includes school districts beginning 1986. Bond Buyer Municipal Data Base 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,, oorr uussee 11998877 11998888 11998899 Nov. Dec. Jan. Feb. Mar. Apr. May June 392,659' 410,791' 376,431' 20,895' 21,877' 15,139' 1133,,881111'' 2211,,003366'' 1155,,228855'' 2244,,557766'' 2288,,887733 1 All issues1 326,151' 335522,,999900'' 331188,,556600'' 1166,,665555'' 1177,,993322'' 1122,,886611'' 1100,,889922'' 1177,,224422'' 1133,,552299'' 2222,,222255'' 2266,,000000 2 Bonds2 Type of offering 209,775' 202,112' 181,173' 14,572' 16,306' 10,809' 9,985' 15,335' 12,608' 19,200' 22,600 3 Public, domestic 92,070 127,700 114,629 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 4 Private placement, domestic3 24,306 23,178 22,758 2,083 11,,662266 2,052 907 11,,990077'' 921' 33,,115500'' 33,,440000 5. Sold abroad Industry group 60,642' 70,554' 76,335' 3,651' 4,285 2,036 2,488' 3,232' 3,551' 2,412' 3,704 6 Manufacturing 49,773 62,104' 49,307' 1,253 347 655 131 263' 683' 1,171' 2,920 7 Commercial and miscellaneous 11,974 10,075 10,050 312 1,083 35 53 386 194 927' 1,001 8 Transportation 23,004 19,318 17,056' 1,072' 1,201' 1,043 1,057 317 435 1,004' 2,561 9 Public utility 7,340 5,952 8,503' 812 577 23 35 704 500 326' 411 10 Communication 173,418' 184,990' 157,309' 9,534' 1100,,339977'' 99,,007700'' 77,,110033'' 1122,,334400'' 8,167' 1166,,338855'' 1155,,440033 11 Real estate and financial 66,508 57,802 57,870 4,240 33,,994455 2,278 22,,991199 33,,779944 11,,775566 22,,335511 22,,887733 12 Stocks2 Type 10,123 6,544 6,194 160 626 50 167 1,028 193 665 310 13 Preferred 43,225 35,911 26,030 4,080 3,319 2,228 2,752 2,767 1,564 1,686 2,565 14 Common 13,157 15,346 25,647 n.a. n.a. n.a. n.a. n.a. n.a. nn..aa.. nn..aa.. 15 Private placement Industry group 13,880 7,608 9,308 378 279 835 431 521 253 86 265 16 Manufacturing 12,888 8,449 7,446 498 1,045 248 1,017 552 666 706 750 17 Commercial and miscellaneous 2,439 1,535 1,929 0 0 0 0 0 0 22 21 18 Transportation 4,322 1,898 3,090 211 244 106 582 533 219 471 0 19 Public utility 1,458 515 1,904 0 0 0 0 0 0 380 29 20 Communication 31,521 37,798 34,028 3,153 22,,337777 1,090 889 22,,118888 619 668866 11,,779999 21 Real estate and financial 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 Nov. Dec. Jan. Feb. Mar. Apr. May' June INVESTMENT COMPANIES1 1 Sales of own shares2 271,237 306,445 24,673 30,982 35,620 26,118 28,817 29,788 27,431 28,303 2 Redemptions of own shares3 267,451 272,165 19,573 24,967 27,331 20,978 23,777 27,306 23,337 23,354 3 Net sales 3,786 34,280 5,100 6,015 8,289 5,140 5,040 2,482 4,094 4,949 4 Assets4 472,297 553,871 549,892 553,871 535,165 542,725 549,638 542,061 574,302 580,632 5 Cash position5 45,090 44,780 47,875 44,780 48,865 51,356 50,454 55,213 52,741 50,277 6 Other 427,207 509,091 502,017 509,091 486,300 491,369 499,184 486,848 521,560 530,355 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'' Q3 Q4 Q1 Q2 Q3 Q4 Ql' Q2 1 Corporate profits with inventory valuation and capital consumption adjustment 308.3 337.6 311.6 334.4 349.6 327.3 321.4 306.7 290.9 296.8 306.5 2 Profits before tax 275.3 316.7 307.7 320.4 331.1 335.1 314.6 291.4 289.8 296.9 297.6 3 Profits tax liability 126.9 136.2 135.1 137.9 142.1 148.3 140.8 127.8 123.5 129.9 131.0 4 Profits after tax 148.4 180.5 172.6 182.5 189.1 186.7 173.8 163.6 166.3 167.1 166.7 5 Dividends 98.2 110.0 123.5 111.8 115.3 119.1 122.1 125.0 127.7 130.3 133.0 6 Undistributed profits 50.2 70.5 49.1 70.8 73.8 67.6 51.7 38.6 38.6 36.8 33.7 7 Inventory valuation -18.9 -25.0 n.a. -30.4 -20.1 -38.3 -21.0 n.a. n.a. n.a. n.a. 8 Capital consumption adjustment 52.4 47.8 25.5 47.3 40.9 35.2 29.9 21.4 15.6 11.3 7.7 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 12.15 12.70 12.59 12.65 12.86 13.77 14.02 Transportation 5 Railroad 7.06 8.12 8.14 7.45 8.02 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 other2 183.76 203.14 222.22 185.65 198.15 200.36 206.59 207.46 217.46 221.89 222.82 ATrade 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

A48 Domestic Nonfinancial Statistics • October 1990 1.51 DOMESTIC FINANCE COMPANIES Assets and Liabilities1 Billions of dollars, end of period 1988 1989 1990 AAccccoouunntt 11998855 11998866 11998877 Q4 Ql Q2 Q3 Q4 Ql Q2 ASSETS Accounts receivable, gross2 1 Consumer 111.9 134.7 141.1 146.2 139.1 143.9 146.3 140.8 137.9 138.6 2 Business 157.5 173.4 207.4 236.5 243.3 250.9 246.8 256.0 262.9 274.8 3 Real estate 28.0 32.6 39.5 43.5 45.1 47.1 48.7 48.9 52.1 55.4 4 Total 297.4 340.6 388.1 426.2 427.5 441.9 441.8 445.8 452.8 468.8 Less: 5 Reserves for unearned income 39.2 41.5 45.3 50.0 51.0 52.2 52.9 52.0 51.9 54.3 6 Reserves for losses 4.9 5.8 6.8 7.3 7.4 7.5 7.7 7.7 7.9 8.2 7 Accounts receivable, net 253.3 293.3 336.0 368.9 369.2 382.2 381.3 386.1 393.0 406.3 8 All other 45.3 58.6 58.3 72.4 75.1 81.4 85.2 91.6 92.5 95.5 9 Total assets 298.6 351.9 394.2 441.3 444.3 463.6 466.4 477.6 485.5 501.9 LIABILITIES 10 Bank loans 18.0 18.6 16.4 15.4 11.3 12.1 12.2 14.5 13.9 15.8 11 Commercial paper 99.2 117.8 128.4 142.0 147.8 149.0 147.2 149.5 115522..99 115522..44 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. 50.6 56.9 59.8 60.3 63.8 70.5 72.8 15 Not elsewhere classified n.a. n.a. n.a. 137.9 133.6 140.5 145.1 147.8 145.7 153.0 16 All other liabilities 41.5 44.1 52.8 59.8 58.1 63.5 61.8 62.6 61.7 66.1 17 Capital, surplus, and undivided profits 32.8 36.4 31.5 35.6 36.6 38.8 39.8 39.4 40.7 41.8 18 Total liabilities and capital 298.6 351.9 394.2 441.3 444.3 463.6 466.4 477.6 485.5 501.9 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 1990 type Jan. Feb. Mar. Apr. May June 1 Total 205,992 234,578 258,504 259,467 259,015 261,662 262,379 266,859 273,786 Retail financing of installment sales 2 Automotive 36,139 36,957 39,139 39,252 39,125 39,264 39,550 39,245 39,716 i Equipment 25,075 28,199 29,674 29,690 29,483 29,789 30,115 30,635 30,491 4 Pools of securitized assets2 n.a. n.a. 698 720 681 704 662 622 664422 Wholesale 5 Automotive 30,070 32,357 33,074 30,463 29,491 29,963 29,672 29,896 31,815 6 Equipment 5,578 5,954 6,896 9,183 9,155 9,408 9,372 9,429 9,495 / All other 8,329 9,312 9,918 9,943 9,877 10,030 9,961 9,892 10,043 8 Pools of securitized assets2 n.a. n.a. 0 0 0 0 0 00 00 Leasing 9 Automotive 22,097 24,875 27,074 26,978 27,161 28,325 28,528 28,878 29,575 10 Equipment 43,493 57,658 68,112 68,904 69,335 68,755 69,473 72,715 74,916 11 Pools of securitized assets2 n.a. n.a. 11,,224477 11,,224422 11,,337777 11,,443333 11,,664466 11,,559977 11,,554477 12 Loans on commercial accounts receivable and factored commercial accounts receivable 18,170 18,103 19,081 18,975 19,155 19,426 18,716 18,700 19,869 13 All other business credit 17,042 21,162 23,590 24,118 24,176 24,565 24,685 25,250 25,677 Net change (during period) 14 33,866 22,434 22,580 -1,255 -452 2,647 717 4,480 6,927 Retail financing of installment sales 15 Automotive 9,925 819 2,182 112 -127 140 286 -305 471 16 Equipment 2,056 1,386 1,475 16 -207 306 327 520 -144 17 Pools of securitized assets2 n.a. n.a. -26 22 -39 23 -42 --4400 2200 Wholesale 18 Automotive 7,158 2,288 716 -2,611 -972 472 -291 224 1,919 19 Equipment 250 377 940 68 -28 254 -37 57 67 20 All other 1,293 983 605 26 -66 153 -69 -69 151 21 Pools of securitized assets2 n.a. n.a. 0 0 0 0 00 00 00 Leasing 22 Automotive 2,174 2,777 2,201 -97 183 1,164 203 351 696 23 Equipment 5,271 9,752 9,187 792 431 -580 718 3,243 2,201 24 Pools of securitized assets2 n.a. n.a. 526 -5 113355 56 221133 --4499 --5500 25 Loans on commercial accounts receivable and factored commercial accounts receivable 2,245 -65 979 -107 180 272 -711 -16 1,169 26 All other business credit 3,498 4,119 3,796 528 59 388 120 565 427 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. 1990 IItteemm 11998899 Jan. Feb. Mar. Apr. May June July Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars) 137.0 150.0 159.6 148.5 148.9 138.2 155.5 162.1 149.8 163.5 2 Amount of loan (thousands of dollars) 100.5 110.5 117.0 107.3 109.0 100.9 114.6 119.7 111.8 120.9 3 Loan/price ratio (percent) 75.2 75.5 74.5 73.4 74.6 74.7 75.4 75.0 76.4 75.3 4 Maturity (years) 27.8 28.0 28.1 27.1 27.4 26.6 26.6 28.1 26.9 28.0 5 Fees and charges (percent of loan amount) 2.26 2.19 2.06 1.85 1.87 1.96 2.00 2.41 1.96 1.93 6 Contract rate (percent per year) 8.94 8.81 9.76 9.59 9.56 9.70 9.83 9.87 9.80 9.75 Yield (percent per year) 7 OTS series3 9.31 9.18 10.11 9.91 9.88 10.03 10.17 10.28 10.13 10.08 8 HUD series4 10.17 10.30 10.21 10.00 10.12 10.20 10.46 10.19 10.12 9.94 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (HUD series)5 10.16 10.49 10.24 10.01 10.22 10.30 10.75 10.23 10.18 10.11 10 GNMA securities6 9.44 9.83 9.71 9.24 9.44 9.53 9.77 9.77 9.54 9.48 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 95,030 101,329 104,974 111,329 111,628 112,353 112,463 112,791 112,855 113,378 12 FHA/VA-insured 21,660 19,762 19,640 20,471 20,614 20,688 20,707 20,723 20,830 21,059 13 Conventional 73,370 81,567 85,335 90,858 91,014 91,665 91,756 92,068 92,025 92,319 Mortgage transactions (during period) 14 Purchases 20,531 23,110 22,518 2,214 1,537 1,945 1,705 1,630 1,802 2,304 Mortgage commitments1 15 Contracted (during period) 25,415 23,435 27,409 1,787 3,216 3,789 5,700 n.a. n.a. n.a. 16 Outstanding (end of period) 4,886 2,148 6,037 5,619 4,977 6,765 10,534 n.a. n.a. n.a. FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of period)* 17 Total 12,802 15,105 20,105 20,361 20,112 19,823 19,730 19,874 n.a. n.a. 18 FHA/VA 686 620 590 578 572 561 555 556 n.a. n.a. 19 Conventional 12,116 14,485 19,516 19,782 19,540 19,261 19,174 19,319 n.a. n.a. Mortgage transactions (during period) 20 Purchases 76,845 44,077 78,588 6,423 5,676 6,301 5,719 6,064 n.a. n.a. 21 Sales 75,082 39,780 73,446 7,764 5,796 6,503 5,687 5,792' 6,291 4,177 Mortgage commitments9 22 Contracted (during period) 71,467 66,026 88,519 8,020 5,922 6,119 10,441 8,502 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

A48 Domestic Nonfinancial Statistics • October 1990 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1989 1990 Type of holder, and type of property 11998877 11998888 11998899'' Ql Q2' Q3' Q4' Ql 1 All holders 2,971,019r 3,243,371' 3,523,539 3,307,882' 3,382,521 3,454,730 3,523,539 3,593,640 2 1- to 4-family 1,958,400'' 2,172,161' 2,392,959 2,215,537' 2,274,253 2,334,726 2,392,959 2,440,682 3 Multifamily 272,500' 286,356' 303,400 291,715' 297.004 299,950 303,400 311,573 4 Commercial 651,323' 698,064' 741,863 714,647' 724,510 733,764 741,863 756,670 5 Farm 88,797' 86,791' 85,318 85,983' 86,755 86,290 85,318 84,714 6 Selected financial institutions 1,657,937' 1,805,691' 1,902,698 1,838,549' 1,871,649 1,895,094 1,902,698 1,916,241 7 Commercial banks2 592,449' 669,237' 763,533 689,335' 715,262 742,096 763,533 783,100 8 1- to 4-family 275,613' 317,585' 368,567 325,148' 338,799 355,084 368,567 376,616 9 Multifamily 32,756' 33,158' 37,990 34,332' 36,022 37,201 37,990 39,202 10 Commercial 269,648' 302,989' 340,285 313,971' 324,083 333,272 340,285 350,473 11 Farm 14,432' 15,505' 16,691 15,884' 16,358 16,539 16,691 16,809 12 Savings institutions3 860,467 903,629 893,709 914,537 919,153 913,553 893,709 883,628 13 1- to 4-family 602,408 657,591 657,868 667,671 673,608 670,308 657,868 649,537 14 Multifamily 106,359 108,003 103,832 107,880 107,622 106,023 103,832 103,025 15 Commercial 150,943 137,384 131,377 138,330 137,275 136,561 131,377 130,443 16 Farm 757 651 632 656 648 661 632 622 17 Life insurance companies 205,021' 232,825' 245,456 234,677' 237,234 239,445 245,456 249,513 18 1- to 4-family 12,676' 15,299' 13,827 12,675' 12,814 13,290 13,827 14,173 19 Multifamily 21,644' 23,583' 27,195 24,608' 25,232 26,372 27,195 28,182 20 Commercial 160,874' 184,273' 194,871 187,885' 189,623 190,152 194,871 197,621 21 Farm 9,828' 9,671' 9,563 9,509' 9,565 9,632 9,563 9,537 22 Finance companies4 29,716' 37,846' 45,476 39,610' 41,824 43,157 45,476 45,808 23 Federal and related agencies 192,721 200,570 209,472 199,968' 202,056 205,809 209,472 216,961 24 Government National Mortgage Association.. 444 26 23 25r 24 24 23 22 25 1- to 4-family 25 26 23 25' 24 24 23 22 26 Multifamily 419 0 0 0 0 0 0 0 27 Farmers Home Administration C C 0 0' 0 0 0 8,045 28 1- to 4-family 18,169 18,347 18,422 18,347 18,391 18,405 18,422 18,419 29 Multifamily 8,044 8,513 9,054 8,615 8,778 8,916 9,054 9,199 30 Commercial 6,603 5,343 4,443 5,101 3,885 4,366 4,443 4,510 31 Farm 10,235 9,815 9,257 9,717 9,657 9,430 9,257 8,997 32 Federal Housing and Veterans Administration 5,574 5,973 6,061 6,198 6,424 6,023 6,061 6,215 33 1- to 4-family 2,557 2,672 2,850 2,673 2,827 2,900 2,850 2,977 34 Multifamily 3,017 3,301 3,211 3,525 3,597 3,123 3,211 3,291 35 Federal National Mortgage Association 96,649 103,013 110,721 101,991 103,309 107,052 110,721 112,353 36 1- to 4-family 89,666 95,833 102,295 94,727 95,714 99,168 102,295 103,300 37 Multifamily 6,983 7,180 8,426 7,264 7,595 7,884 8,426 9,053 38 Federal Land Banks 34,131 32,115 29,640 31,261 31,467 30,943 29,640 29,325 39 1- to 4-family 2,008 1,890 1,210 1,839 1,851 1,821 1,210 1,197 40 Farm 32,123 30,225 28,430 29,422 29,616 29,122 28,430 28,128 41 Federal Home Loan Mortgage Corporation .. 12,872 17,425 21,851 18,713' 20,121 20,650 21,851 19,823 42 1- to 4-family 11,430 15,077 18,248 16,134' 17,382 17,659 18,248 16,772 43 Multifamily 1,442 2,348 3,603 2,579' 2,739 2,992 3,603 3,051 44 Mortgage pools or trusts6 718,297 810,887 943,932 839,684 864,885 899,435 943,932 981,265 45 Government National Mortgage Association.. 317,555 340,527 369,867 348,622 353,759 361,291 369,867 378,292 46 1- to 4-family 309,806 331,257 358,142 337,563 342,545 349,838 358,142 366,300 47 Multifamily 7,749 9,270 11,725 11,059 11,214 11,453 11,725 11,992 48 Federal Home Loan Mortgage Corporation ... 212,634 226,406 272,870 234,695 245,242 257,938 272,870 281,736 49 1- to 4-family 205,977 219,988 266,060 228,389 238,446 251,232 266,060 274,084 50 Multifamily 6,657 6,418 6,810 6,306 6,796 6,706 6,810 7,652 51 Federal National Mortgage Association 139,960 178,250 228,232 188,071 196,501 208,894 228,232 246,391 52 1- to 4-family 137,988 172,331 219,577 181,352 188,774 200,302 219,577 237,916 53 Multifamily 1,972 5,919 8,655 6,719 7,727 8,592 8,655 8,475 54 Farmers Home Administration5 245 104 80 96 85 82 80 75 55 1- to 4-family 121 26 21 24 23 22 21 20 56 Multifamily 0 0 0 0 0 0 0 0 57 Commercial 63 38 26 34 26 26 26 25 58 Farm 61 40 33 38 36 35 33 31 59 Individuals and others7 402,064 426,223' 467,438 429,681' 443,931 454,392 467,438 479,172 60 1- to 4-family 242,053 258,639' 292,967 260,770' 273,757 283,445 292,967 301,573 61 Multifamily 75,458 78,663' 82,899 78,828' 79,681 80,689 82,899 84,873 62 Commercial 63,192 68,037' 70,861 69,326' 69,618 69,387 70,861 72,136 63 Farm 21,361 20,884 20,711 20,757 20,875 20,871 20,711 20,589 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May' June Seasonally adjusted 1 Total 664,701 716,624 710,133 713,903 716,624 717,829 717,869 720,445 720,835 724,485 724,948 2 Automobile 284,556 290,770 290,210 290,972 290,770 290,904 289,629 290,932 288,936 288,931 287,348 3 Revolving 174,057 197,110 191,734 194,679 197,110 199,146 199,927 202,263 203,965 207,153 208,458 4 Mobile home 25,201 22,343 22,621 22,197 22,343 22,604 22,633 22,708 22,702 22,815 22,731 5 Other 180,887 206,401 205,568 206,055 206,401 205,175 205,680 204,543 205,232 205,585 206,412 Not seasonally adjusted 6 Total 674,719 727,561 711,295 715,145 727,561 721,026 717,062 713,138 715,801 720,045 723,300 By major holder 7 Commercial banks 324,792 343,865 335,657 337,285 343,865 342,266 339,418 334,645 337,576 339,328 335,951 8 Finance companies 146,212 140,832 143,293 142,802 140,832 140,740 139,115 137,857 138,174 138,384 138,642 9 Credit unions 88,340 90,875 91,291 90,965 90,875 90,452 90,127 89,556 89,689 89,913 90,482 10 Retailers2 48,302 42,638 37,045 37,906 42,638 39,959 37,904 37,302 37,207 37,347 37,382 11 Savings institutions 63,399 57,228 58,720 58,236 57,228 55,425 54,771 54,095 53,606 53,301 52,902 12 Gasoline companies 3,674 3,935 3,947 3,853 3,935 4,013 3,803 3,792 3,928 4,024 4,192 13 Pools of securitized assets .. n.a. 48,188 41,342 44,098 48,188 48,171 51,924 55,891 55,621 57,748 63,749 By major type of credit3 14 Automobile 284,328 290,421 293,664 292,543 290,421 288,984 288,036 286,539 286,220 287,140 287,434 15 Commercial banks 123,392 126,613 128,213 128,111 126.613 127,075 127,149 126,289 126,483 127,056 126,992 16 Finance companies .. 97,245 82,721 86,655 85,725 82,721 81,918 80,227 79,523 79,295 78,927 78,273 17 Pools of securitized assets n.a. 18,191 15,024 15,376 18,191 17,827 18,931 19,563 19,406 20,151 21,043 18 Revolving 183,909 208,188 189,913 194,640 208,188 203,288 200,147 199,937'' 201,783 204,854 206,915 19 Commercial banks 123,020 130,956 120,484 122,728 130,956 128,384 124,821 122,024 124,039 125,433 122,142 20 Retailers 43,697 37,967 32,618 33,432 37,967 35,359 33,378 32,794 32,721 32,857 32,884 21 Gasoline companies 3,674 3,935 3,947 3,853 3,935 4,013 3,803 3,792 3,928 4,024 4,192 22 Pools of securitized assets n.a. 22,977 20,371 22,186 22,977 23,450 26,204 29,542 29,403 30,913 36,125 23 Mobile home 25,143 22,283 22,849 22,319 22,283 22,717 22,726 22,426 22,484 22,610 22,642 24 Commercial banks 9,025 9,155 9,130 9,144 9,155 9,109 9,162 9,142 9,231 9,295 9,294 25 Finance companies 7,191 4,716 5,205 4,682 4,716 5,411 5,410 5,178 5,168 5,224 5,266 26 Other 181,339 206,669 204,869 205,643 206,669 206,037 206,153 204,236 205,314 205,441 206,309 27 Commercial banks 69,355 77,141 77,830 77,302 77,141 77,698 78,286 77,190 77,823 77,544 77,523 28 Finance companies 41,776 53,395 51,433 52,395 53,395 53,411 53,478 53,156 53,711 54,233 55,103 29 Retailers 4,605 4,671 4,427 4,474 4,671 4,600 4,526 4,508 4,486 4,490 4,498 30 Pools of securitized assets n.a. 7,020 5,947 6,536 7,020 6,894 6,789 6,786 6,812 6,684 6,581 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

A48 Domestic Nonfinancial Statistics • October 1990 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent unless noted otherwise 1989 1990 IItteemm 11998877 11998888 11998899 Dec. Jan. Feb. Mar. Apr. May June INTEREST RATES Commercial banks2 1 48-month new car3 10.45 10.85 12.07 n.a. n.a. 11.80 n.a. n.a. 11.82 n.a. 2 24-month personal 14.22 14.68 15.44 n.a. n.a. 15.27 n.a. n.a. 15.41 n.a. 3 120-month mobile home 13.38 13.54 14.11 n.a. n.a. 13.91 n.a. n.a. 14.09 n.a. 4 Credit card 17.92 17.78 18.02 n.a. n.a. 18.12 n.a. n.a. 18.14 n.a. Auto finance companies 5 New car 10.73 12.60 12.62 13.27 12.64 12.67 12.31 12.21 12.23 12.58 6 Used car 14.60 15.11 16.18 16.10 15.77 15.91 15.97 16.02 16.03 16.00 OTHER TERMS4 Maturity (months) 7 New car 53.5 56.2 54.2 55.1 54.7 54.7 54.3 54.2 54.5 54.8 8 Used car 45.2 46.7 46.6 45.5 45.5 46.4 46.4 46.5 46.1 46.2 Loan-to-value ratio 9 New car 93 94 91 89 89 88 88 87 87 87 10 Used car 98 98 97 96 95 96 95 96 96 95 Amount financed (dollars) 11 New car 11,203 11,663 12,001 12,301 12,381 12,053 12,216 12,089 12,064 12,108 12 Used car 7,420 7,824 7,954 8,096 8,040 8,065 8,132 8,105 8,169 8,296 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 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998855 11998866 11998877 11998899 Q3 Q4 Qi Q2 Q3 Q4 Ql Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors 846.3 831.1 693.2 754.5 711.8 749.3 734.2 748.9 672.4 684.7 741.1 771.2 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 16.0 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 56.0 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 71 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 247.2 290.7 242.8 277.5 259.7 267.3 278.0 275.6 313.0 223.6 226.7 219.0 23 Farm -14.5 -16.3 -10.6 -7.5 -.4 -2.2 -11.8 1.0 -3.0 -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 78 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 -5.9 -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 .9 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 43 201.3 318.9 315.0 246.5 210.8 216.3 302.5 387.2 117.0 132.9 205.9 189.9 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 30.9 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

A48 Domestic Nonfinancial Statistics • October 1990 1.57—Continued 1988 1989 1990 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998855 11998866 11998877 11998888 11998899 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 Ql Q2 Q3 Q4 Ql 1 Total funds advanced in credit markets to domestic nonfinancial sectors 846.3 831.1 693.2 754.5 711.8 749.3 734.2 748.9 672.4 684.7 741.1 771.2 By public agencies and foreign 2 Total net advances 202.0 314.0 262.8 215.5 193.8 181.2 255.8 310.8 -2.4 220.4 246.3 132.2 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 -12.2 11.5 8.8 8 Sponsored credit agencies 103.5 187.2 183.4 112.0 130.1 114.4 152.8 194.3 8.0 132.1 186.2 137.4 9 Monetary authorities 18.4 19.4 24.7 10.5 -7.3 15.5 18.9 5.2 -3.9 -30.7 .1 -7.7 10 Foreign 62.3 97.8 62.7 102.3 72.4 47.0 111.2 112.5 -2.6 131.1 48.5 -6.4 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 101.5 187.9 185.8 119.8 155.8 128.6 156.7 205.7 101.4 129.7 186.3 151.9 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 747.0 714.8 621.1 665.8 683.6 700.8 648.5 641.4 776.7 619.7 696.6 807.7 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 20 Credit market funds advanced by private financial institutions 579.9 744.0 560.8 561.2 514.2 429.1 634.9 564.9 523.3 323.4 645.3 611.1 21 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 22 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 23 Insurance and pension funds 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 25 Sources of funds 579.9 744.0 560.8 561.2 514.2 429.1 634.9 564.9 523.3 323.4 645.3 611.1 26 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 27 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 29 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 Treasury balances 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 266.8 101.8 189.6 231.3 224.4 359.3 159.4 258.0 269.0 299.6 70.9 234.6 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 Currency 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 42 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 491.4 384.8 349.8 453.8 451.3 574.4 408.1 431.6 482.6 532.5 358.4 462.9 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 88.1 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 83.9 -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 -60.8 -73.5 -163.5 -162.9 -48.8 -41.0 9.3 -7.2 52 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

A48 Domestic Nonfinancial Statistics • October 1990 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING Billions of dollars; period-end levels. 1988 1989 1990 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998855 11998866 11998877 11998888 Q3 Q4 Ql Q2 Q3 Q4 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 7 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 27 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 35 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 45 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 50 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 51 Finance companies 261.2 328.1 378.8 445.8 427.7 445.8 464.3 478.0 481.2 496.5 496.1 52 REITs 5.6 6.5 7.3 11.4 7.6 11.4 11.1 10.6 10.0 10.1 9.9 53 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 56 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 Q3 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 22,,225588..22 22,,331155..77 22,,338855..33 22,,440000..44 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 n 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 7.3 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 74 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 76 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 79 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 37 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, Digitized for FRASER Washington, D.C. 20551. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • October 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 Nov. Dec. Jan. Feb. Mar. Apr.' May' June' July 1 Industrial production (1987 = 100) 100.0 105.4 108.1 108.1 108.6 107.5 108.5 108.9 108.8 109.4 109.9 109.9 Market groupings 2 Products, total (1987 = 100) 100.0 105.3 108.6 108.9 109.7 108.4 109.4 110.1 109.8 110.5 110.9 110.4 3 Final, total (1987 = 100) 100.0 105.6 109.1 109.4 110.3 108.5 109.7 110.7 110.4 111.2 111.8 111.2 4 Consumer goods (1987 = 100) 100.0 104.0 106.7 107.4 108.3 106.0 107.0 107.5 107.2 107.4 108.1 107.7 5 Equipment (1987 = 100) 100.0 107.6 112.3 112.0 112.9 111.8 113.3 114.9 114.7 116.2 116.5 115.8 6 Intermediate (1987 = 100) 100.0 104.4 106.8 107.3 107.9 108.0 108.4 108.2 108.0 108.2 108.2 107.9 7 Materials (1987 = 100) 100.0 105.6 107.4 107.0 106.9 106.2 107.1 107.1 107.3 107.8 108.4 109.1 Industry groupings 8 Manufacturing (1987 = 100) 100.0 105.8 108.9 108.9 108.8 108.1 109.6 109.8 109.5 110.3 110.6 110.6 Capacity utilization (percent)2 9 Manufacturing 81.4 83.9 83.9 83.0 82.8 82.0 83.0 82.9 82.5 82.8 82.9 82.6 10 Construction contracts (1982 = 100)3 164.8 166.4 m.sr 167.0 166.0 158.0 154.0 157.0 147.0 155.0 153.0 148.0 11 Nonagricultural employment, total4 123.9 128.0 131.6 132.7 132.9 133.3 133.8 133.9 133.9 134.3 134.5 134.2 12 Goods-producing, total 101.5 103.7 105.3 105.2 104.9 104.8 105.5 105.2 104.7 104.5 104.4 104.1 13 Manufacturing, total 96.7 98.6 99.6 99.1 99.0 98.3 98.8 98.7 98.6 98.5 98.3 98.3 14 Manufacturing, production- worker ... 91.9 93.9 94.8 93.9 93.8 92.8 93.5 93.3 93.3 93.1 93.0 93.1 15 Service-producing 133.3 138.2 142.7 144.2 144.6 145.2 145.6 145.9 146.1 146.8 147.1 146.9 16 Personal income, total 234.3' 253.2' 272.7' 278.1' 279.7' 281.9' 283.8' 285.8' 286.7 287.7 289.0 290.7 17 Wages and salary disbursements 226.4' 244.6' 258.9' 262.0' 263^ 264.9' 266.9' 268.6' 269.9 271.0 272.6 274.2 18 Manufacturing 183.8 196.5 203.1' 201.7' 202.5' 201.1' 203.0' 204.6' 204.2 205.9 206.8 207.3 19 Disposable personal income 213.6 228.0 240.6' 275.6' 277.2' 279.9' 281.7' 283.9' 283.9 284.8 286.5 288.0 20 Retail sales® 113.6 118.3 124.0 243.7 242.8 249.6 249.7 248.7 246.3 246.1 248.8 249.0 Prices7 21 Consumer (1982-84 = 100) 113.6 118.3 124.0 125.9 126.1 127.4 128.0 128.7 128.9 129.2 129.9 130.4 22 Producer finished goods (1982 = 100) ... 105.4 108.0 113.6 114.9 115.4 117.6 117.4 117.2' 117.0 117.7 117.9 118.0 1. A major revision of the industrial production index and the capacity 5. Based on data in Survey of Current Business (U.S. Department of Comutilization rates was released in April 1990. See "Industrial Production: 1989 merce). Developments and Historical Revision" in the Federal Reserve Bulletin, vol. 76 6. Based on Bureau of Census data published in Survey of Current Business. (April 1990), pp. 187-204. 7. Data without seasonal adjustment, as published in Monthly Labor Review. 2. Ratios of indexes of production to indexes of capacity. Based on data from Seasonally adjusted data for changes in the price indexes may be obtained from Federal Reserve, McGraw-Hill Economics Department, Department of Com- the Bureau of Labor Statistics, U.S. Department of Labor. merce, and other sources. 3. Index of dollar value of total construction contracts, including residential, NOTE. Basic data (not index numbers) for series mentioned in notes 4, 5,and 6, nonresidential and heavy engineering, from McGraw-Hill Information Systems and indexes for series mentioned in notes 3 and 7 may also be found in the Survey Company, F. W. Dodge Division. of Current Business. 4. Based on data in Employment and Earnings (U.S. Department of Labor). Figures for industrial production for the last two months are preliminary and Series covers employees only, excluding personnel in the Armed Forces. estimated, respectively. 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 Dec. Jan. Feb. Mar. Apr. May June' July HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 185,010 186,837 188,601 189,381 189,506 189,607 189,717 189,844 189,983 190,122 190,275 2 Labor force (including Armed Forces)1 122,122 123,893 126,077 126,762 126,610 126,825 127,017 127,061 127,159 126,981 126,906 3 Civilian labor force 119,865 121,669 112233,,886699 124,546 112244,,339977 112244,,663300 112244,,882299 112244,,888866 112255,,000044 112244,,883366 112244,,776677 Employment 4 Nonagricultural industries2 109,232 111,800 114,142 114,691 114,728 114,957 115,133 114,983 115,045 115,041 114,867 5 Agriculture 3,208 3,169 3,199 3,197 3,134 3,079 3,200 3,133 33,,330055 3,348 3,085 Unemployment 6 Number 7,425 6,701 6,528 6,658 6,535 6,594 6,495 6,770 6,653 6,447 6,814 7 Rate (percent of civilian labor force) 6.2 5.5 5.3 5.3 5.3 5.3 5.2 5.4 5.3 5.2 5.5 8 Not in labor force 62,888 62,944 62,524 62,619 62,896 62,782 62,700 62,783 62,824 63,141 63,369 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 102,200 105,584 108,573 109,570 109,931 110,304 110,427 110,401 110,770r 110,925 110,706 10 Manufacturing 19,024 19,403 19,611 19,489 19,355 19,452 19,423 19,403 19,383r 19,360 19,353 11 Mining 717 721 722 739 745 749 751 755 758 764 763 12 Contract construction 4,967 5,125 5,302 5,304 5,418 5,485 5,432 5,323 5,281 5,230 13 Transportation and public utilities 5,372 5,548 5,703 5,834 5,850 5,865 5,875 5,875 5,895r 5,905 5,910 14 Trade 24,327 25,139 25,807 26,029 26,154 26,126 26,127 26,147 26,178' 26,186 26,200 15 Finance 6,547 6,676 6,814 6,885 6,8% 6,916 6,922 6,921 6,933r 6,936 6,942 16 Service 24,236 25,600 26,889 27,419 27,557 27,709 27,783 27,763 27,840^ 27,982 27,971 17 Government 17,010 17,372 17,726 17,871 17,956 18,002 18,114 18,214 18,474r 18,511 18,337 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 • October 1990 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1989 1990 1989 1990 1989 1990 SSeerriieess Q3 Q4 Ql Q2' Q3 Q4 Ql Q2 Q3 Q4 Ql Q2' Output (1987 = 100) Capacity (percent of 1987 output) Utilization rate (percent) 1 Total industry 108.1 108.1 108.3 109.4 128.8 129.5 130.3 131.2 84.0 83.5 83.1 83.4 2 Mining 100.8 100.6 101.3 102.7 116.7 116.1 115.7 115.2 86.4 86.7 87.6 89.1 3 Utilities 106.2 110.6 105.7 107.6 125.5 125.7 126.0 126.4 84.6 88.0 83.9 85.1 4 Manufacturing 108.9 108.7 109.2 110.2 130.2 131.1 132.1 133.2 83.7 82.9 82.6 82.7 5 Primary processing 106.4 106.1 106.4 106.2 122.7 123.4 124.2 124.9 86.7 85.9 85.7 85.0 6 Advanced processing . 110.1 109.9 110.5 112.0 133.7 134.7 135.8 137.0 82.4 81.6 81.4 81.8 Previous cycle2 Latest cycle3 1989 1990 High Low High Low July Nov. Dec. Jan. Feb. Mar. Apr/ May' June' July" Capacity utilization rate (percent) 7 Total industry 89.2 72.6 87.3 71.8 83.9 83.5 83.7 82.7 83.2 83.4 83.1 83.4 83.6 83.4 8 Mining 94.4 88.4 96.6 80.6 85.6 87.1 86.3 87.8 87.3 87.5 89.2 89.0 89.1 90.2 9 Utilities 95.6 82.5 88.3 76.2 85.0 86.2 92.3 84.8 82.5 84.2 84.5 84.7 86.2 85.7 10 Manufacturing 88.9 70.8 87.3 70.0 83.6 83.0 82.8 82.0 83.0 82.9 82.5 82.8 82.9 82.6 11 Primary processing 92.2 68.9 89.7 66.8 87.2 86.1 85.2 85.7 86.1 85.2 85.0 84.9 85.2 85.5 12 Advanced processing.. 87.5 72.0 86.3 71.4 82.2 81.7 81.8 80.5 81.7 82.0 81.5 82.0 81.9 81.4 1. These data also appear in the Board's G.17 (419) release. For address, see 2. Monthly high 1973; monthly low 1975. inside front cover. For a detailed description of the series, see "Recent Devel- 3. Monthly highs 1978 through 1980; monthly lows 1982. opments in Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 1990), pages 411-35. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A49 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1 Monthly data are seasonally adjusted 1987 1989 1990 1989 GGrroouuppss por- avg. tion July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr/ Mayr June' JJuullyy"" Index (1987 = 100) MAJOR MARKET 1 Total index 100.0 108.1 107.8 108.2 108.2 107.7 108.1 108.6 107.5 108.5 108.9 108.8 109.4 109.9 109.9 2 Products 60.8 108.6 108.2 108.5 108.8 108.1 108.9 109.7 108.4 109.4 110.1 109.8 110.5 110.9 110.4 3 Final products 46.0 109.1 108.7 109.1 109.6 108.5 109.4 110.3 108.5 109.7 110.7 110.4 111.2 111.8 111.2 4 Consumer goods 26.0 106.7 105.2 105.6 106.3 107.3 107.4 108.3 106.0 107.0 107.5 107.2 107.4 108.1 107.7 5 Durable consumer goods 5.6 107.9 105.6 105.8 107.6 106.8 105.7 106.8 99.4 106.2 110.8 107.3 109.2 111.9 108.9 6 Automotive products 2.5 106.9 101.1 103.2 104.9 102.9 102.4 104.5 85.2 99.3 109.3 102.4 107.0 112.1 107.1 7 Autos and trucks 1.5 105.7 97.1 101.1 103.1 99.7 98.4 100.1 66.3 92.7 107.7 95.8 105.6 112.9 104.8 8 Autos, consumer .9 101.2 89.3 95.1 102.0 100.7 92.8 92.6 62.1 86.9 100.5 87.7 96.8 103.8 98.0 9 Trucks, consumer .6 113.3 110.1 111.3 105.0 98.2 108.0 112.6 73.3 102.3 120.0 109.3 120.4 128.3 116.2 10 Auto parts and allied goods... 1.0 108.7 107.0 106.3 107.4 107.6 108.2 111.2 113.6 109.4 111.6 112.2 109.1 110.9 110.6 11 Other 3.1 108.7 109.2 107.9 109.8 109.8 108.4 108.6 110.6 111.6 112.0 111.2 111.0 111.8 110.4 12 Appliances, A/C, and TV .8 106.7 107.5 106.5 109.3 107.6 102.0 101.0 108.4 107.8 108.1 104.4 103.6 107.6 102.9 13 Carpeting and furniture .9 101.5 101.0 98.1 100.9 101.1 100.4 102.0 103.7 104.7 105.9 107.5 107.3 107.2 107.8 14 Miscellaneous home goods ... 1.4 114.5 115.4 114.8 115.8 116.6 117.1 117.1 116.2 118.2 118.0 117.3 117.5 117.0 116.2 15 Nondurable consumer goods 20.4 106.4 105.1 105.6 106.0 107.4 107.8 108.7 107.8 107.2 106.6 107.1 106.9 107.1 107.4 16 Foods and tobacco 9.1 104.2 102.2 103.3 103.7 105.6 105.8 106.4 105.5 106.2 105.8 105.6 105.3 105.1 105.4 17 Clothing 2.6 101.6 101.4 100.3 101.6 101.9 100.1 99.4 100.6 99.6 97.0 96.0 96.5 95.8 96.2 18 Chemical products 3.5 109.4 109.6 110.1 107.8 110.3 111.3 110.3 112.7 112.0 111.0 113.5 113.0 112.8 113.2 19 Paper products 2.5 114.3 113.1 114.1 116.2 117.2 118.1 116.9 116.2 117.6 116.4 118.1 118.6 118.4 118.5 20 Energy 2.7 106.7 105.2 104.7 106.0 106.0 108.0 115.2 107.9 101.5 103.1 104.1 103.4 106.6 106.9 21 Fuels .7 102.8 104.5 102.3 103.4 103.1 103.0 100.5 105.1 106.6 101.8 101.6 98.2 102.8 105.7 22 Residential utilities 2.0 108.1 105.5 105.6 106.9 107.0 109.8 120.7 109.0 99.6 103.6 105.0 105.3 108.0 107.3 23 Equipment, total 20.0 112.3 113.2 113.6 113.8 110.1 112.0 112.9 111.8 113.3 114.9 114.7 116.2 116.5 115.8 24 Business equipment 13.9 119.1 119.9 120.4 120.7 116.0 118.7 119.9 118.0 120.1 122.2 121.6 123.6 123.9 123.1 25 Information processing and related .. 5.6 121.7 122.7 122.0 123.7 119.9 123.5 124.0 124.0 124.7 126.0 126.4 126.8 126.2 125.7 26 Office and computing 1.9 137.2 137.1 139.3 141.8 132.8 141.0 142.7 142.7 144.3 147.2 149.3 148.9 148.1 146.0 77 Industrial 4.0 113.8 115.1 113.8 113.8 112.4 113.4 112.8 113.5 113.4 113.9 114.2 115.5 115.3 116.0 28 Transit 2.5 123.8 123.8 128.4 127.0 112.9 117.0 123.4 111.4 122.7 130.6 126.2 132.5 136.7 133.2 79 Autos and trucks 1.2 103.9 95.9 101.6 103.1 97.6 98.0 97.6 69.6 91.7 104.5 95.2 105.7 112.3 103.6 30 Other 1.9 116.5 116.4 118.6 119.1 116.3 117.8 118.5 118.7 117.4 117.8 117.6 119.6 118.5 117.6 31 Defense and space equipment 5.4 97.4 98.7 98.9 98.9 96.6 96.7 96.6 97.5 97.6 97.5 97.3 97.5 97.4 97.4 32 Oil and gas well drilling .6 93.7 95.3 95.3 97.3 97.3 99.9 100.3 98.3 100.1 106.0 114.3 118.6 122.7 115.9 33 Manufactured homes .2 92.3 86.5 89.5 87.5 87.9 89.4 91.6 91.6 94.3 92.9 89.7 91.3 93.1 93.3 34 Intermediate products, total 14.7 106.8 106.7 106.4 106.3 106.9 107.3 107.9 108.0 108.4 108.2 108.0 108.2 108.2 107.9 35 Construction supplies 6.0 106.1 106.5 105.5 105.2 106.3 107.0 107.4 107.9 108.2 107.3 106.4 105.5 105.5 104.3 36 Business supplies 8.7 107.3 106.8 106.9 107.0 107.3 107.5 108.2 108.0 108.5 108.9 109.1 110.1 110.1 110.4 37 Materials, total 39.2 107.4 107.3 107.8 107.4 107.1 107.0 106.9 106.2 107.1 107.1 107.3 107.8 108.4 109.1 38 Durable goods materials 19.4 111.6 111.5 112.0 112.0 110.8 110.8 110.4 109.4 110.8 110.9 110.9 112.5 113.2 113.7 39 Durable consumer parts 4.2 109.0 107.7 109.2 108.8 106.9 105.7 102.5 96.5 102.8 104.5 103.2 108.5 108.2 108.3 40 Equipment parts 7.3 114.7 115.0 115.6 115.5 114.4 115.3 115.8 116.5 117.6 117.6 117.4 118.0 118.7 119.1 41 Other 7.9 110.2 110.4 110.4 110.6 109.5 109.4 109.5 109.7 108.7 108.1 108.9 109.6 110.9 111.6 42 Basic metal materials 2.8 112.1 113.1 113.0 112.9 111.0 108.6 109.3 108.5 109.9 107.5 110.2 109.2 112.0 113.6 43 Nondurable goods materials 9.0 105.3 106.7 105.7 104.2 106.1 104.9 104.3 105.4 105.8 105.2 106.1 105.2 105.9 106.5 44 Textile materials 1.2 99.8 104.9 102.1 99.6 98.6 96.1 95.8 94.6 96.2 94.9 95.6 97.4 98.5 97.8 45 Pulp and paper materials 1.9 103.8 104.8 103.6 104.1 107.7 104.6 103.7 105.0 105.3 103.0 106.0 104.5 104.8 106.6 46 Chemical materials 3.8 106.4 108.2 107.3 104.5 106.8- 105.8 103.8 105.8 107.3 107.5 107.4 105.3 107.2 107.9 47 Other 2.1 107.6 106.8 107.0 106.5 107.5 108.4 110.4 110.9 108.8 108.7 109.8 109.8 108.7 108.6 48 Energy materials 10.9 101.4 100.1 101.7 101.6 101.3 101.9 102.7 101.2 101.7 102.0 101.8 101.5 101.7 102.9 49 Primary energy 7.2 99.9 100.0 102.5 100.7 99.8 100.5 99.0 101.1 102.1 101.2 100.3 100.5 100.2 102.3 50 Converted fuel materials 3.7 104.3 100.4 100.4 103.6 104.2 104.5 110.0 101.4 100.9 103.4 104.6 103.7 104.8 104.2 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.3 108.2 108.2 108.4 108.4 108.0 108.4 108.9 108.6 108.9 109.0 109.2 109.5 109.8 110.1 52 Total excluding motor vehicles and parts... 95.3 108.3 108.3 108.5 108.5 108.1 108.6 109.1 109.0 109.2 109.2 109.5 109.7 110.0 110.2 53 Total excluding office and computing machines 97.5 107.4 107.1 107.5 107.4 107.1 107.3 107.7 106.6 107.6 108.0 107.8 108.4 109.0 109.0 54 Consumer goods excluding autos and trucks 24.5 106.8 105.7 105.9 106.5 107.7 107.9 108.8 108.4 107.8 107.5 107.9 107.5 107.9 107.9 55 Consumer goods excluding energy 23.3 106.7 105.2 105.8 106.4 107.4 107.3 107.5 105.8 107.6 108.0 107.5 107.9 108.3 107.8 56 Business equipment excluding autos and trucks 12.7 120.6 122.3 122.3 122.4 117.8 120.7 122.1 122.8 122.9 124.0 124.2 125.3 125.0 125.0 57 Business equipment excluding office and computing equipment 12.0 116.2 117.2 117.4 117.3 113.3 115.0 116.2 114.0 116.2 118.2 117.2 119.5 119.9 119.4 58 Materials excluding energy 28.4 109.6 110.0 110.0 109.5 109.3 108.9 108.4 108.1 109.2 109.1 109.4 110.2 110.9 111.4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • October 1990 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1987 1989 1990 SIC pro- 1989 Groups code por- avg. tion July Aug. Sept. Oct Nov. Dec. Jan Feb. Mar. Apr/ Mayr June' Julyp Index (1987 = 100) MAJOR INDUSTRY 100.0 108.1 107.8 108.2 108.2 107.7 108.1 108.6 107.5 108.5 108.9 108.8 109.4 109.9 109.9 2 Manufacturing 84.4 108.9 108.6 109.1 109.1 108.4 108.9 108.8 108.1 109.6 109.8 109.5 110.3 110.6 110.6 3 Primary processing .. 26.7 106.4 106.8 106.6 105.8 106.6 106.2 105.3 106.2 106.9 106.0 105.9 106.0 106.7 107.2 4 Advanced processing 57.7 110.1 109.5 110.2 110.6 109.3 110.1 110.4 109.0 110.9 111.7 111.3 112.3 112.5 112.2 5 Durable 47.3 110.9 110.6 111.3 111.5 109.4 110.1 110.4 108.6 110.7 111.9 111.1 112.6 113.0 112.6 6 Lumber and products .. 24 2.0 103.0 102.8 102.4 102.6 103.2 104.8 106.4 106.0 104.3 105.0 103.3 101.4 101.1 100.9 7 Furniture and fixtures .. 25 1.4 105.3 104.9 104.5 105.7 105.6 104.4 105.1 105.1 104.8 105.9 107.6 108.2 107.8 108.3 8 Clay, glass, and stone products 32 2.5 108.0 106.2 107.8 106.5 107.7 108.2 108.6 110.0 108.0 107.7 105.1 106.4 105.7 104.3 9 Primary metals 33 3.3 109.2 108.8 111.7 109.9 108.6 104.8 102.6 105.0 107.9 105.4 106.4 106.2 109.6 111.2 10 Iron and steel 331,2 1.9 109.3 107.5 109.8 109.7 109.2 104.1 100.3 104.6 110.6 106.1 106.7 105.5 111.4 113.8 11 Raw steel .1 108.5 109.7 106.8 102.9 106.4 100.6 97.6 109.9 109.0 105.9 104.9 107.6 111.8 114.7 12 Nonferrous 333-6,9 1.4 109.0 110.4 114.0 109.8 107.6 105.8 105.8 105.6 104.0 104.3 105.9 107.1 107.0 107.5 13 Fabricated metal products 34 5.4 107.2 107.6 106.5 106.0 105.9 106.9 106.3 105.1 105.6 105.5 105.0 107.0 106.8 107.3 14 Nonelectrical machinery.. 35 8.6 121.8 121.6 121.8 123.4 119.0 122.9 123.8 123.7 124.2 125.2 125.7 126.9 126.3 125.8 15 Office and computing machines 357 2.5 137.2 137.1 139.3 141.8 132.8 141.0 142.7 142.7 144.3 147.3 149.3 149.0 148.2 146.0 16 Electrical machinery 36 8.6 109.5 108.6 110.6 110.8 110.2 110.1 110.1 110.1 111.0 112.3 111.3 112.1 112.6 112.2 17 Transportation equipment. 37 9.8 107.2 106.6 107.8 108.0 102.1 102.8 104.4 94.7 103.5 107.9 105.1 109.0 110.9 108.8 18 Motor vehicles and parts 4.7 104.9 99.6 102.7 103.2 99.7 99.0 98.7 76.8 94.1 103.5 95.8 104.0 108.0 102.9 19 Autos and light trucks.. 2.3 105.0 95.9 100.2 102.9 99.9 97.6 99.0 65.7 91.8 106.7 94.6 104.3 111.6 103.8 20 Aerospace and miscellaneous transportation equipment 372-6,9 5.1 109.3 113.0 112.4 112.3 104.3 106.3 109.6 111.0 111.9 111.9 113.4 113.5 113.5 114.2 2) Instruments 38 3.3 116.4 118.5 116.4 116.2 116.1 115.6 114.8 116.0 116.2 115.7 115.8 116.8 115.9 116.6 22 Miscellaneous manufactures 39 1.2 114.9 115.9 116.5 116.2 116.9 117.0 116.4 117.0 118.1 118.6 118.6 119.1 118.6 118.3 Nondurable 37.2 106.4 106.1 106.2 106.0 107.2 107.3 106.7 107.5 108.3 107.2 107.5 107.4 107.6 108.0 Foods 8.8 105.5 104.0 104.8 105.4 106.8 107.4 108.0 106.8 107.4 107.1 107.0 106.8 106.8 106.9 Tobacco products 1.0 99.7 94.2 95.0 93.3 99.7 98.8 98.5 101.3 102.3 100.0 98.8 97.2 95.6 97.9 Textile mill products ... 1.8 101.9 104.2 101.5 101.5 101.9 99.3 99.8 100.6 103.0 99.8 100.9 102.7 103.0 102.3 Apparel products 2.4 104.3 104.4 104.7 104.5 103.9 103.7 102.6 102.4 102.1 99.8 98.7 99.2 99.6 100.1 Paper and products 3.6 103.2 104.1 103.0 102.2 105.3 104.1 103.4 103.8 105.0 102.8 105.3 104.0 103.9 105.0 Printing and publishing . 6.4 108.5 106.6 107.8 109.4 109.3 109.6 109.6 110.7 112.1 111.4 112.0 112.8 112.4 112.3 Chemicals and products 8.6 108.5 109.7 109.6 107.5 109.4 109.8 107.6 109.9 110.5 109.5 110.3 109.2 110.0 110.4 Petroleum products .... 1.3 106.1 108.2 107.0 108.7 106.9 109.3 104.3 108.6 112.0 109.1 106.8 104.6 107.8 109.6 Rubber and plastic products 3.0 108.9 109.0 109.0 108.5 108.8 109.1 110.1 110.7 109.1 109.8 109.0 110.9 111.4 111.7 Leather and products .. .3 103.7 103.7 103.2 103.5 102.2 99.4 103.0 104.3 102.9 103.3 102.6 103.5 101.0 102.5 34 Mining 7.9 100.5 100.0 100.7 101.6 100.7 101.2 100.1 101.7 101.0 101.1 102.9 102.6 102.6 103.7 35 Metal 10 .3 141.4 151.7 144.3 145.4 143.2 145.9 155.5 144.8 143.4 141.4 152.7 148.5 151.4 156.5 36 Coal 11,12 1.2 105.7 101.1 103.1 109.6 109.9 108.1 103.5 114.1 111.9 112.9 114.2 110.0 113.5 120.8 37 Oil and gas extraction.... 13 5.7 95.5 94.9 96.3 95.9 94.3 95.5 94.0 94.4 94.1 94.6 95.7 96.4 95.3 95.1 38 Stone and earth minerals . 14 .7 113.9 116.8 113.3 114.1 118.0 115.8 119.7 121.2 120.0 116.5 120.2 120.1 121.9 121.0 39 Utilities... 7.6 107.1 106.6 106.2 105.9 107.4 108.3 116.1 106.8 104.0 106.2 106.7 107.0 109.1 108.6 40 Electric. 491,3PT 6.0 108.1 108.5 108.1 107.1 109.7 109.5 116.3 108.3 107.1 109.7 109.7 110.1 112.3 111.8 41 Gas .... 492,3PT 1.6 103.0 99.3 99.2 101.0 99.1 103.9 115.6 101.2 92.3 93.3 95.5 95.4 97.0 96.5 SPECIAL AGGREGATES 42 Manufacturing excluding motor vehicles and parts 79.8 109.2 109.2 109.5 109.5 108.9 109.4 109.3 109.9 110.5 110.2 110.3 110.7 110.8 111.0 43 Manufacturing excluding office and computing machines 82.0 108.1 107.8 108.2 108.1 107.7 107.9 107.7 107.1 108.6 108.7 108.3 109.1 109.5 109.5 Gross value (billions of 1982 dollars, annual rates) MAJOR MARKET 44 Products, total 1734.8 1,889.8 1,869.0 1,883.7 1,894.3 1,878.3 1,896.9 1,905.5 1,863.6 1,903.3 1,922.6 1,906.2 1,918.6 1,937.6 1,922.5 45 Final 1350.9 1,480.1 1,459.6 1,475.3 1,486.2 1,465.6 1,482.8 1,492.5 1,447.9 1,488.3 1,507.5 1,493.9 1,506.2 1,524.1 1,509.9 46 Consumer goods 833.4 884.6 868.9 870.1 878.8 883.2 889.0 898.6 864.3 888.6 893.4 883.9 886.0 897.0 890.6 47 Equipment 517.5 595.5 590.8 605.3 607.5 582.4 593.8 594.0 583.6 599.8 614.1 610.0 620.2 627.0 619.3 48 Intermediate 384.0 409.7 409.3 408.4 408.1 412.7 414.1 413.0 415.7 415.0 415.1 412.3 412.5 413.6 412.6 1. These data also appear in the Board's G.17 (419) release. For requests see Industrial Capacity and Utilization" and accompanying tables that contain address inside front cover. revised indexes (1987=100) in the Federal Reserve Bulletin, vol. 76 (June 1990), A major revision of the industrial production index and the capacity pp. 411-35. utilization rates was released in April 1990. See "Recent Developments in 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 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr/ May June Private residential real estate activity (thousands of units) NEW UNITS 1 Permits authorized 1,535 1,456 1,339 1,310 1,362 1,364 1,416 1,739 1,297 1,232 1,108 1,065 1,108 2 1-family 1,024 994 932 946 959 984 984 985 974 912 813 802 796 3 2-or-more-family 511 462 407 364 403 380 432 754 323 320 295 263 312 4 Started 1,621 1,488 1,376 1,263 1,423 1,347 1,273 1,568 1,488 1,307 1,216 1,206 1,179 5 1-family 1,146 1,081 1,003 969 1,023 1,010 931 1,099 1,154 996 898 897 885 6 2-or-more-family 474 407 373 294 400 337 342 469 334 311 318 309 294 7 Under construction, end of period1 . 987 919 850 892 894 881 886 892 900 887 876 860 847 8 1-family 591 570 535 565 565 558 567 571 575 567 559 549 539 9 2-or-more-family 397 350 315 327 329 323 319 321 325 320 317 311 308 10 Completed 1,669 1,530 1,423 1,366 1,317 1,486 1,302 1,443 1,351 1,378 1,295 1,353 1,279 11 1-family 1,123 1,085 1,026 959 987 1,078 933 1,031 1,041 1,037 942 998 948 12 2-or-more-family 546 445 396 407 330 408 369 412 310 341 353 355 331 13 Mobile homes shipped 233 218 198 186 190 189 189 195 200 193 189 191 191 Merchant builder activity in 1-family units 14 Number sold 672 675 650 638 636 687 633 613 606 558r 533 536 561 15 Number for sale, end of period1 .... 366 367 362 364 363 363 362 365 366 363 363 359 353 Price (thousands of dollars j2 Median 16 Units sold 104.7 113.3 120.4 120.0 123.0 125.0 125.2 125.0 126.9 119.4r 130.0 125.0 127.0 17 Units sold 127.9 139.0 148.3 151.1 147.8 151.4 154.3 151.7 150.9 144.6' 153.4 157.0 152.1 EXISTING UNITS (1-family) 18 Number sold 3,530 3,594 3,439 3,510 3,490 3,560 3,560 3,520 3,400 3,400 3,330 3,300 3,330 Price of units sold (thousands of dollars) 19 Median 85.6 89.2 93.0 93.8 92.4 93.1 92.5 96.3 95.2 96.3 95.6 95.6 97.5 20 Average 106.2 112.5 118.0 118.3 116.7 117.9 118.1 120.0 118.3 119.5 117.8 118.7 121.1 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 410,209 422,076 432,068 433,430 429,277 433,381 431,995 445,959 455,571 457,272 448,841 447,644 447,479 22 Private 319,641 327,102 333,514 332,087 332,131 329,847 325,011 338,078 343,118 347,366 344,324 339,151 339,112 23 Residential 194,656 198,101 196,551 192,980 192,087 190,855 189,636 200,149 203,013 206,868 205,092 200,537 196,079 24 Nonresidential, total 124,985 129,001 136,963 139,107 140,044 138,992 135,375 137,929 140,105 140,498 139,232 138,614 143,033 Buildings 25 Industrial 13,707 14,931 18,506 19,976 19,175 19,134 18,863 19,680 21,072 21,086 21,152 20,993 21,437 26 Commercial 55,448 58,104 59,389 59,279 61,353 59,627 57,090 57,376 58,748 57,210 55,770 54,674 57,274 27 Other 15,464 17,278 17,848 18,696 17,868 18,160 16,612 17,706 16,964 17,646 18,290 18,423 19,702 28 Public utilities and other 40,366 38,688 41,220 41,156 41,648 42,071 42,810 43,167 43,321 44,556 44,020 44,524 44,620 29 Public 90,566 94,971 98,551 101,343 97,146 103,534 106,984 107,881 112,453 109,906 104,517 108,494 108,368 30 Military 4,327 3,579 3,520 4,942 2,076 3,664 3,552 3,838 3,886 5,099 3,702 3,947 4,133 31 Highway 26,958 30,140 29,502 29,696 28,426 30,376 33,450 31,901 37,018 32,374 29,826 30,686 29,682 32 Conservation and development... 5,519 4,726 4,969 5,186 4,953 4,916 5,371 5,192 5,559 4,996 5,014 5,474 3,926 33 Other 53,762 56,526 60,560 61,519 61,691 64,578 64,611 66,950 65,990 67,437 65,975 68,387 70,627 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

A48 Domestic Nonfinancial Statistics • October 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 JJJuuulllyyy 11998899 11999900 111999999000 JJuullyy JJuullyy Sept. Dec. Mar/ June' Mar. Apr. May June July CONSUMER PRICES2 (1982-84=100) 1 AH items 5.0 4.8 2.3 4.9 8.5 3.5 .5 .2 .2 .5 .4 130.4 2 Food 5.6 5.7 3.6 5.5 11.4 2.1 .3 -.2 .0 .8 .4 132.7 3 Energy items 7.8 .4 -12.6 3.9 14.8 -2.0 -.8 -.4 -.7 .6 -.7 98.9 4 All items less food and energy 4.6 5.0 3.5 4.7 7.5 3.9 .7 .2 .3 .4 .6 135.5 5 Commodities 3.1 3.5 1.3 3.4 7.8 .7 .5 .0 .1 .1 .3 122.9 6 Services 5.3 5.9 4.5 5.7 7.2 5.5 .7 .4 .4 .6 .7 142.8 PRODUCER PRICES (1982=100) 7 Finished goods 5.1 3.4 .4 5.0 7.1 .3 -.2' -.3 .3 .2 -.1 118.0 9 8 C C o o n n s s u u m m e e r r e fo n o er d g s y 1 4 1 . . 8 6 - 5 .9 .0 -15.3 .7 - 1 5 2 .3 .4 2 1 4 0 . . 7 6 -1 -2 4 . . 9 3 -2 -. . 5 7 ' ' --t..Yr -1.0 .6 - - . . 9 4 -.5 .0 1 6 2 7 4 . . 8 9 10 Other consumer goods 4.5 3.8 2.3 4.2 3.5 5.1 .3 ,i .5 .7 -.2 128.8 11 Capital equipment 3.9 3.2 4.4 2.0 4.0 1.7 .4' .C .0 .4 .3 122.5 12 Intermediate materials3 4.3 .4 -.7 -.4 2.5 -1.1 .0 .0 -.1 -.2 -.1 112.8 13 Excluding energy 3.9 .2 -.7 -1.0 1.0 .7 .3 .2' .1 -.1 .1 120.5 Crude materials 14 Foods .0 4.8 -2.2 19.2 9.1 -11.5 .9 -.9' -2.5 .4 1.0 115.4 1 lb 5 E O n th e e rg r y 1 2 7 . . 0 2 -12 1 . . 0 6 -7.0 .6 -1 1 5 3 . . 3 2 4. . 0 5 -3 1 8 0 .9 .9 -4 i . 8y' -7 2 . . 6 2 ' 2 1 . . 1 0 -6 -. . 6 2 -.1 .9 1 6 3 9 7 . . 4 7 1. Not seasonally adjusted. 3. Excludes intermediate materials for food manufacturing and manufactured 2. Figures for consumer prices are those for all urban consumers and reflect a animal feeds. rental equivalence measure of homeownership after 1982. SOURCE. Bureau of Labor Statistics. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Selected Measures A53 2.16 GROSS NATIONAL PRODUCT AND INCOME Billions of current dollars except as noted; quarterly data are at seasonally adjusted annual rates. 1989 1990 AAccccoouunntt 11998877 11998888 11998899 Q2 Q3 Q4 Ql Q2' GROSS NATIONAL PRODUCT 1 Total 4,515.6 4,873.7 5,200.8 5,174.0 5,238.6 5,289.3 5,375.4 5,451.9 By source 2 Personal consumption expenditures 3,009.4 3,238.2 3,450.1 3,425.9 3,484.3 3,518.5 3,588.1 3,623.9 3 Durable goods 423.4 457.5 474.6 473.6 487.1 471.2 492.1 479.3 4 Nondurable goods 1,001.3 1,060.0 1,130.0 1,127.1 1,137.3 1,148.8 1,174.7 1,178.7 5 Services 1,584.7 1,720.7 1,845.5 1,825.1 1,859.8 1,898.5 1,921.3 1,965.9 6 Gross private domestic investment 699.5 747.1 771.2 776.7 775.8 762.7 747.2 760.5 7 Fixed investment 671.2 720.8 742.9 744.0 746.9 737.7 758.9 745.7 8 Nonresidential 444.9 488.4 511.9 511.4 518.1 511.8 523.1 516.3 9 Structures 133.7 139.9 146.2 144.2 147.0 147.1 148.8 148.2 10 Producers' durable equipment 311.2 348.4 365.7 367.2 371.0 364.7 374.3 368.1 11 Residential structures 226.3 232.5 231.0 232.7 228.9 225.9 235.9 229.4 12 Change in business inventories 28.3 26.2 28.3 32.7 28.9 25.0 -11.8 14.8 13 Nonfarm 32.3 29.8 23.3 26.1 26.2 24.1 -17.0 14.4 14 Net exports of goods and services -114.7 -74.1 -46.1 -51.3 -49.3 -35.3 -30.0 -19.1 15 Exports 449.6 552.0 626.2 628.8 623.7 642.8 661.3 662.9 16 Imports 564.3 626.1 672.3 680.0 673.0 678.1 691.3 682.0 17 Government purchases of goods and services 921.4 962.5 1,025.6 1,022.7 1,027.8 1,043.3 1,070.1 1,086.6 18 Federal 381.3 380.3 400.0 402.5 399.2 399.9 410.6 421.7 19 State and local 540.2 582.3 625.6 620.2 628.6 643.4 659.6 664.8 By major type of product 20 Final sales, total 4,487.3 4,847.5 5,172.5 5,141.3 5,209.7 5,264.3 5,387.2 55,,443377..11 21 Goods 1,788.4 1,935.1 2,072.7 2,079.4 2,090.2 2,085.9 2,111.0 2,148.4 22 Durable 780.5 860.2 906.7 904.6 922.1 907.4 919.9 933.1 23 Nondurable 1,007.9 1,074.9 1,166.1 1,174.9 1,168.1 1,178.6 1,191.2 1,215.3 24 Services 2,292.4 2,488.6 2,671.2 2,639.2 2,693.3 2,747.5 2,791.3 2,839.7 25 Structures 434.9 450.0 456.9 455.3 455.0 455.9 473.0 463.8 26 Change in business inventories 28.3 26.2 28.3 32.7 28.9 25.0 -11.8 14.8 27 Durable goods 22.9 19.9 11.9 8.4 6.6 13.2 -21.6 2.8 28 Nondurable goods 5.4 6.4 16.4 24.3 22.2 11.9 9.8 12.0 MEMO 29 Total GNP in 1982 dollars 3,845.3 4,016.9 4,117.7 4,112.2 4,129.7 4,133.2 4,150.6 4,162.8 NATIONAL INCOME 30 Total 3,660.3 3,984.9 4,223.3 4,216.8 4,232.1 4,267.1 4,350.3 4,415.9 31 Compensation of employees 2,686.4 2,905.1 3,079.0 3,062.6 3,095.2 3,128.6 3,180.4 3,231.1 32 Wages and salaries 2,249.7 2,431.1 2,573.2 2,560.0 2,586.6 2,612.7 2,651.6 2,695.1 33 Government and government enterprises 419.4 446.6 476.6 473.2 479.9 486.7 497.1 505.7 34 Other 1,830.3 1,984.5 2,096.6 2,086.9 2,106.7 2,126.0 2,154.5 2,189.4 35 Supplement to wages and salaries 436.6 474.0 505.8 502.6 508.6 515.9 528.8 536.0 36 Employer contributions for social insurance 227.2 248.5 263.9 262.6 265.1 268.4 276.0 279.6 37 Other labor income 209.4 225.5 241.9 239.9 243.5 247.5 252.8 256.4 38 Proprietors' income1 323.4 354.2 379.3 379.6 368.1 381.7 404.0 402.9 39 Business and professional1 280.6 310.5 330.7 329.1 329.5 336.0 346.6 352.2 40 Farm1 42.8 43.7 48.6 50.5 38.7 45.7 57.4 50.6 41 Rental income of persons2 13.7 16.3 8.2 9.7 5.8 4.1 5.5 4.9 42 Corporate profits1 308.3 337.6 311.6 321.4 306.7 290.9 296.8 306.5 43 Profits before tax3 275.3 316.7 307.7 314.6 291.4 289.8 296.9 297.6 44 Inventory valuation adjustment -19.4 -27.0 -21.7 -23.1 -6.1 -14.5 -11.4 1.2 45 Capital consumption adjustment 52.4 47.8 25.5 29.9 21.4 15.6 11.3 7.7 46 Net interest 328.6 371.8 445.1 443.4 456.2 461.7 463.6 470.6 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A48 Domestic Nonfinancial Statistics • October 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 1989 Q2 Q3 Q4 Ql Q2' PERSONAL INCOME AND SAVING 1 Total personal income 3,766.4 4,070.8 4,384.3 4,362.9 4,402.8 4,469.2 4,562.8 4,626.2 2 Wage and salary disbursements 2,249.7 2,431.1 2,573.2 2,560.0 2,586.6 2,612.7 2,651.6 2,695.1 3 Commodity-producing industries 649.9 696.4 720.6 719.3 722.3 721.4 724.6 730.0 4 Manufacturing 490.3 524.0 541.8 541.4 543.2 540.9 541.2 548.4 5 Distributive industries 531.8 572.0 604.7 602.6 607.1 614.6 627.0 637.4 6 Service industries 648.5 716.2 771.4 764.9 777.4 790.0 802.9 822.0 7 Government and government enterprises 419.4 446.6 476.6 473.2 479.9 486.7 497.1 505.7 8 Other labor income 209.4 225.5 241.9 239.9 243.5 247.5 252.8 256.4 9 Proprietors' income1 323.4 354.2 379.3 379.6 368.1 381.7 404.0 402.9 10 Business and professional1 280.6 310.5 330.7 329.1 329.5 336.0 346.6 352.2 11 Farm1 42.8 43.7 48.6 50.5 38.7 45.7 57.4 50.6 12 Rental income of persons2 13.7 16.3 8.2 9.7 5.8 4.1 5.5 4.9 13 Dividends 91.8 102.2 114.4 113.2 115.7 118.2 120.5 122.9 14 Personal interest income 501.3 547.9 643.2 642.1 655.2 664.9 670.5 681.3 15 Transfer payments 549.9 587.7 636.9 630.2 641.8 655.9 680.9 686.9 16 Old-age survivors, disability, and health insurance benefits ... 282.9 300.5 325.3 321.9 328.3 334.1 347.2 347.7 17 LESS: Personal contributions for social insurance 172.9 194.1 212.8 212.0 214.0 215.8 222.9 224.0 18 EQUALS: Personal income 3,766.4 4,070.8 4,384.3 4,362.9 4,402.8 4,469.2 4,562.8 4,626.2 19 LESS: Personal tax and nontax payments 571.6 591.6 658.8 665.5 659.5 669.6 675.1 694.4 20 EQUALS: Disposable personal income 3,194.7 3,479.2 3,725.5 3,697.3 3,743.4 3,799.6 3,887.7 3,931.9 21 LESS: Personal outlays 3,102.2 3,333.6 3,553.7 3,528.5 3,588.8 3,625.5 3,696.4 3,732.7 22 EQUALS: Personal saving 92.5 145.6 171.8 168.9 154.5 174.1 191.3 199.1 MEMO Per capita (1982 dollars) 23 Gross national product 15,759.4 16,302.4 16,550.2 16,554.8 16,578.5 16,546.0 1166,,557755..99 1166,,558844..99 24 Personal consumption expenditures 10,310.7 10,578.3 10,678.5 10,649.4 10,739.9 10,688.2 10,692.1 10,674.5 25 Disposable personal income 10,946.0 11,368.0 11,531.0 11,492.0 11,538.0 11,541.0 11,586.0 11,581.0 26 Saving rate (percent) 2.9 4.2 4.6 4.6 4.1 4.6 4.9 5.1 GROSS SAVING 27 Gross saving 555.5 656.1 691.5 697.9 692.4 674.8 664.8 688.9 28 Gross private saving 662.6 751.3 779.3 770.3 776.0 786.4 795.0 812.9 29 Personal saving 92.5 145.6 171.8 168.9 154.5 174.1 191.3 199.1 30 Undistributed corporate profits1 83.2 91.4 53.0 58.5 53.9 39.8 36.7 42.6 31 Corporate inventory valuation adjustment -19.4 -27.0 -21.7 -23.1 -6.1 -14.5 -11.4 1.2 Capital consumption allowances 32 Corporate 303.2 322.1 346.4 334411..11 351.6 335566..55 335566..77 335599..88 33 Noncorporate 183.8 192.2 208.0 201.8 215.9 216.0 210.3 211.4 34 Government surplus, or deficit (-), national income and product accounts -107.1 -95.3 -87.8 -72.4 -83.6 -111.6 -130.2 --112244..00 35 Federal -158.2 -141.7 -134.3 -122.7 -131.7 -150.1 -168.3 -161.8 36 State and local 51.0 46.5 46.4 50.3 48.1 38.5 38.1 37.7 37 Gross investment 544.9 627.8 674.4 677.6 676.1 671.8 665.6 689.4 38 Gross private domestic 699.5 747.1 771.2 776.7 775.8 762.7 747.2 760.5 39 Net foreign -154.6 -119.2 -96.8 -99.1 -99.7 -90.9 -81.6 -71.1 40 Statistical discrepancy -10.6 -28.2 -17.0 -20.3 -16.2 j -3.0 0.7 0.6 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 1989 1990 Item credits or debits 11998877 11998888 11998899 Q1 Q2 Q3 Q4 Ql --116622,,331155 --112288,,886622 --111100,,003355 -27,104 -28,649 -27,591 -26,692 -22,941 Not seasonally adjusted -22,961 -27,528 -31,620 -27,926 -19,164 Merchandise trade balance"1 -159,500 -126,986 -114,864 -28,093 -28,222 -29,803 -28,746 -26,371 Merchandise exports 250,266 320,337 360,465 88,267 91,111 89,349 91,738 %,044 Merchandise imports -409,766 -447,323 -475,329 -116,360 -119,333 -119,152 -120,484 -122,415 Military transactions, net -3,530 -5,452 -6,319 -1,763 -1,667 -1,114 -1,776 -1,370 Investment income, net 5,326 1,610 -913 465 -1,957 17 561 608 Other service transactions, net 9,964 16,971 26,783 5,842 6,203 6,839 7,900 7,681 Remittances, pensions, and other transfers -4,299 -4,261 -3,758 -999 -%2 -909 -889 -874 U.S. government grants -10,276 -10,744 -10,963 -2,556 -2,044 -2,621 -3,742 -2,615 11 Change in U.S. government assets, other than official reserve assets, net (increase, -) 997 2,969 1,185 %2 -303 574 -47 -486 12 Change in U.S. official reserve assets (increase, -). 9,149 -3,912 -25,293 -4,000 -12,095 -5,9% -3,202 -3,177 13 Gold 0 0 0 0 0 0 0 0 14 Special drawing rights (SDRs) -509 127 -535 -188 68 -211 -204 -247 15 Reserve position in International Monetary Fund. 2,070 1,025 471 316 -159 337 -23 234 16 Foreign currencies 7,588 -5,064 -25,229 -4,128 -12,004 -6,122 -2,975 -3,164 17 Change in U.S. private assets abroad (increase, -). -73,092 -83,232 -102,953 -29,821 11,017 -38,654 -45,4% 33,172 18 Bank-reported claims -42,119 -56,322 -50,684 -23,586 26,829 -21,269 -32,658 45,655 19 Nonbank-reported claims 5,324 -2,847 1,391 1,851 -2,384 1,877 47 20 U.S. purchase of foreign securities, net -5,251 -7,846 -21,938 -2,062 -6,144 -9,623 -4,109 -4,871 21 U.S. direct investments abroad, net -31,046 -16,217 -31,722 -6,024 -7,284 -9,639 -8,776 -7,612 22 Change in foreign official assets in United States (increase, +) 45,210 39,515 8,823 7,797 —4,%1 13,003 -7,016 -8,825 23 U.S. Treasury securities 43,238 41,741 333 4,630 -9,726 12,771 -7,342 -5,874 24 Other U.S. government obligations 1,564 1,309 1,383 721 -97 190 569 -531 25 Other U.S. government liabilities4 ^ -2,503 -710 332 -200 470 -350 412 -368 26 Other U.S. liabilities reported by U.S. banks3 3,918 -319 4,940 2,191 3,820 -251 -820 -1,926 27 Other foreign official assets5 -1,007 -2,506 1,835 455 572 643 165 -126 28 Change in foreign private assets in United States (increase, +) 173,260 181,926 205,829 60,605 7,755 61,133 76,336 -18,665 29 U.S. bank-reported liabilities'1 89,026 70,235 61,199 17,486 -20,806 27,845 36,674 -28,125 30 U.S. nonbank-reported liabilities 2,863 6,664 2,867 3,717 -407 -2,175 1,732 31 Foreign private purchases of U.S. Treasury securities, net -7,643 20,239 29,951 9,323 2,339 12,618 5,671 -864 32 Foreign purchases of other U.S. securities, net 42,120 26,353 39,568 8,731 9,574 10,470 10,793 2,732 33 Foreign direct investments in United States, net 46,894 58,435 72,244 21,348 17,055 12,375 21,466 7,592 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 66,,779900 --88,,440044 2222,,444433 -8,439 27,236 -2,469 6,117 20,922 36 Owing to seasonal adjustments 3,093 -1,697 -4,953 3,560 3,116 37 Statistical discrepancy in recorded data before seasonal adjustment 6,790 -8,404 22,443 -11,532 28,933 2,484 2,558 17,806 MEMO Changes in official assets 38 U.S. official reserve assets (increase, -) 9,149 -3,912 -25,293 -4,000 -12,095 -5,9% -3,202 -3,177 39 Foreign official assets in United States (increase, +) excluding line 25 47,713 40,225 8,491 7,997 -5,431 13,353 -7,428 -8,457 40 Change in Organization of Petroleum Exporting Countries official assets in United States (part of line 22 above) -9,956 -2,9% 10,713 7,100 460 4,532 -1,379 2,976 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 • October 1990 3.11 U.S. FOREIGN TRADE1 Millions of dollars; monthly data are seasonally adjusted. 1989 1990 IItteemm 11998877 11998888 11998899 Dec. Jan. Feb. Mar. Apr. Mayr Junep 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments, f.a.s. value 254,073 322,427 363,812 31,262 31,372 31,576 33,266 32,058 32,774 34,296 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 2 Customs value 406,241 440,952 473,211 38,058 41,570 38,672 41,636 39,364 40,543 39,367 Trade balance 3 Customs value -152,169 -118,526 -109,399 -6,796 -10,198 -7,096 -8,370 -7,306 -7,770 -5,071 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 1990 TTyyppee 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June July" 1 Total 45,798 47,802 74,609 75,506 74,173 76,303 76,283 77,028 77,298 77,906 2 Gold stock, including Exchange Stabilization Fund1 11,078 11,057 11,059 11,059 11,059 11,060 11,060 11,065 11,065 11,064 3 Special drawing rights2'3 10,283 9,637 9,951 10,041 10,216 10,092 10,103 10,396 10,490 10,699 4 Reserve position in International Monetary Fund 11,349 9,745 9,048 9,173 8,985 8,727 8,687 8,764 8,449 8,686 5 Foreign currencies4 13,088 17,363 44,551 45,233 43,913 46,424 46,433 46,803 47,294 47,457 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 1990 AAsssseettss 11998877 11998888 11998899 p Jan. Feb. Mar. Apr. May June July 1 Deposits 244 347 589 251 309 300 402 309 368 279 Assets held in custody 2 U.S. Treasury securities 195,126 232,547 224,911 225,618 221,798 250,447 252,759 253,691 255,651 256,585 3 Earmarked gold3 13,919 13,636 13,456 13,458 13,458 13,458 13,458 13,460 13,433 13,422 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 AAsssseett aaccccoouunntt 11998866 11998877 11998888 Dec. Jan. Feb. Mar. Apr. May June All foreign countries 1 Total, all currencies 456,628 518,618 505,595 545,366 549,368 553,815 535,059 535,886 541,439' 524,010 2 Claims on United States 114,563 138,034 169,111 198,835 192,688 188,700 176,0%' 177,104 182,224' 179,446 3 Parent bank 83,492 105,845 129,856 157,092 149,285 145,156 135,172'' 133,573 140,751' 138,329 4 Other banks in United States 13,685 16,416 14,918 17,042 17,840 18,064 15,511 17,965 15,647 15,166 5 Nonbanks 17,386 15,773 24,337 24,701 25,563 25,480 25,413 25,566 25,826 25,951 6 Claims on foreigners 312,955 342,520 299,728 300,575 307,937 313,934 308,117 307,470 306,058' 293,542 7 Other branches of parent bank 96,281 122,155 107,179 113,810 120,359 122,457 120,488 118,835 116,640 108,524 8 Banks 105,237 108,859 96,932 90,703 91,712 94,065 89,837 90,812 90,422 85,983 9 Public borrowers 23,706 21,832 17,163 16,456 15,392 15,148 15,973 16,217 16,172 16,249 10 Nonbank foreigners 87,731 89,674 78,454 79,606 80,474 82,264 81,819 81,606 82,824' 82,786 11 Other assets 29,110 38,064 36,756 45,956 48,743 51,181 50,846r 51,312 53,157' 51,022 12 Total payable in U.S. dollars 317,487 350,107 357,573 382,414 375,315 375,511 358,543 360,224 363,128' 350,255 13 Claims on United States 110,620 132,023 163,456 191,184 184,782 180,738 168,833 169,9% 173,887' 171,4% 14 Parent bank 82,082 103,251 126,929 152,294 144,055 139,920 130,350 129,162 135,21 V 133,112 15 Other banks in United States 12,830 14,657 14,167 16,386 17,018 17,187 14,992 17,209 14,818 14,575 16 Nonbanks 15,708 14,115 22,360 22,504 23,709 23,631 23,491 23,625 23,858 23,809 17 Claims on foreigners 195,063 202,428 177,685 169,690 167,722 172,132 167,616 168,419 167,630 158,652 18 Other branches of parent bank 72,197 88,284 80,736 82,949 86,114 87,403 85,028 84,930 83,381 76,415 19 Banks 66,421 63,707 54,884 48,396 45,385 46,582 43,408 43,814 44,449 43,121 20 Public borrowers 16,708 14,730 12,131 10,961 10,332 10,529 11,110 11,191 10,912 10,882 21 Nonbank foreigners 39,737 35,707 29,934 27,384 25,891 27,618 28,070 28,484 28,888 28,234 22 Other assets 11,804 15,656 16,432 21,540 22,811 22,641 22,094 21,809 21,611 20,107 United Kingdom 23 Total, all currencies 140,917 158,695 156,835 161,947 166,915 169,727 167,162 173,127 177,947' 167,885 24 Claims on United States 24,599 32,518 40,089 39,212 41,208 40,161 38,809 42,366 43,247' 40,147 25 Parent bank 19,085 27,350 34,243 35,847 37,292 36,311 34,648 37,572 39,089' 35,924 26 Other banks in United States 1,612 1,259 1,123 1,058 1,441 1,365 1,301 1,262 747 730 27 Nonbanks 3,902 3,909 4,723 2,307 2,475 2,485 2,860 3,532 3,411 3,493 28 Claims on foreigners 109,508 115,700 106,388 107,657 109,837 110,911 109,227 111,175 114,800' 107,837 29 Other branches of parent bank 33,422 39,903 35,625 37,728 37,701 38,410 39,636 41,613 43,358 38,068 30 Banks 39,468 36,735 36,765 36,159 37,668 36,488 34,803 35,224 35,730 34,194 31 Public borrowers 4,990 4,752 4,019 3,293 3,128 3,076 3,857 3,980 3,943 3,740 32 Nonbank foreigners 31,628 34,310 29,979 30,477 31,340 32,937 30,931 30,358 31,769' 31,835 33 Other assets 6,810 10,477 10,358 15,078 15,870 18,655 19,126 19,586 19,90c 19,901 34 Total payable in U.S. dollars 95,028 100,574 103,503 103,427 103,038 103,752 101,024 107,483 110,186' 100,887 35 Claims on United States 23,193 30,439 38,012 36,404 38,261 37,006 35,752 39,091 39,374' 36,158 36 Parent bank 18,526 26,304 33,252 34,329 35,731 34,462 32,697 35,663 36,712' 33,509 37 Other banks in United States 1,475 1,044 964 843 1,118 1,036 1,122 1,041 521 552 38 Nonbanks 3,192 3,091 3,796 1,232 1,412 1,508 1,933 2,387 2,141 2,097 39 Claims on foreigners 68,138 64,560 60,472 59,062 56,939 58,763 57,166 60,165 63,025 57,802 40 Other branches of parent bank 26,361 28,635 28,474 29,872 28,655 30,224 30,421 32,885 34,441 30,050 41 Banks 23,251 19,188 18,494 16,579 16,399 15,984 13,748 14,141 14,635 14,625 42 Public borrowers 3,677 3,313 2,840 2,371 2,321 2,266 3,074 3,131 3,114 2,942 43 Nonbank foreigners 14,849 13,424 10,664 10,240 9,564 10,289 9,923 10,008 10,835 10,185 44 Other assets 3,697 5,575 5,019 7,961 7,838 7,983 8,106 8,227 7,787 6,927 Bahamas and Caymans 45 Total, all currencies 142,592 160,321 170,639 176,006 167,385 164,908 155,145 150,767 154,851 154,354 46 Claims on United States 78,048 85,318 105,320 124,205 117,177 114,263 105,466 102,184 105,617 107,244 47 Parent bank 54,575 60,048 73,409 87,882 79,525 76,475 70,535 65,084 69,807 72,115 48 Other banks in United States 11,156 14,277 13,145 15,071 15,403 15,827 13,564 15,902 14,079 13,603 49 Nonbanks 12,317 10,993 18,766 21,252 22,249 21,961 21,367 21,198 21,731 21,526 50 Claims on foreigners 60,005 70,162 58,393 44,168 42,610 43,162 42,393 41,467 42,147 39,812 51 Other branches of parent bank 17,296 21,277 17,954 11,309 13,371 14,409 13,171 13,306 12,917 11,906 52 Banks 27,476 33,751 28,268 22,611 20,119 19,595 19,370 18,499 19,947 18,492 53 Public borrowers 7,051 7,428 5,830 5,217 4,764 4,753 4,684 4,490 4,350 4,393 54 Nonbank foreigners 8,182 7,706 6,341 5,031 4,356 4,405 5,168 5,172 4,933 5,021 55 Other assets 4,539 4,841 6,926 7,633 7,598 7,483 7,286 7,116 7,087 7,298 56 Total payable in U.S. dollars 136,813 151,434 163,518 170,780 160,832 159,484 150,061 145,994 149,467 149,943 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 • October 1990 3.14—Continued 1989 1990 LLiiaabbiilliittyy aaccccoouunntt 11998866 11998877 Dec. Jan. Feb. Mar. Apr. May June All foreign countries 57 Total, all currencies 456,628 518,618 505,595 545,366 549,368 553,815 535,059 535,886 541,439' 524,010 58 Negotiable CDs 31,629 30,929 28,511 23,500 23,510 23,620 21,767 24,113 25,452' 23,504 59 To United States 152,465 161,390 185,577 197,239 178,452 181,164 173,675' 168,669 169,791 169,762 60 Parent bank 83,394 87,606 114,720 138,803 117,318 119,967 114,170' 109,642 109,831 113,144 61 Other banks in United States 15,646 20,355 14,737 11,704 11,850 11,990 10,799 11,782 10,272' 9,092 62 Nonbanks 53,425 53,429 56,120 46,732 49,284 49,207 48,706 47,245 49,688' 47,526 63 To foreigners 253,775 304,803 270,923 296,850 315,991 317,318 309,756 313,446 315,058' 299,999 64 Other branches of parent bank 95,146 124,601 111,267 119,591 126,965 126,786 124,084 120,405 120,722 113,758 65 Banks 77,809 87,274 72,842 76,452 82,042 77,449 75,017 77,875 78,681 73,201 66 Official institutions 17,835 19,564 15,183 16,750 19,004 20,637 17,704 20,683 19,710' 19,115 67 Nonbank foreigners 62,985 73,364 71,631 84,057 87,980 92,446 92,951 94,483 95,945' 93,925 68 Other liabilities 18,759 21,496 20,584 27,777 31,415 31,713 29,861' 29,658 31,138' 30,745 69 Total payable in U.S. dollars ... 336,406 361,438 367,483 396,282 385,010 385,634 369,306 368,626 369,505' 358,681 70 Negotiable CDs 28,466 26,768 24,045 19,619 18,512 18,783 17,084 19,601 20,579' 18,928 71 To United States 144,483 148,442 173,190 187,286 167,754 169,669 162,606 157,579 157,851 158,166 72 Parent bank 79,305 81,783 107,150 132,954 111,328 113,487 108,128 103,252 103,389 106,811 73 Other banks in United States 14,609 18,951 13,468 10,519 10,560 10,684 9,296 10,415 8,855' 7,741 74 Nonbanks 50,569 47,708 52,572 43,813 45,866 45,498 45,182 43,912 45,607' 43,614 75 To foreigners 156,806 177,711 160,766 176,460 185,192 183,378 176,939 178,035 177,888 168,686 76 Other branches of parent bank 71,181 90,469 84,021 87,636 91,736 90,360 86,908 84,090 84,415 80,022 77 Banks 33,850 35,065 28,493 30,537 32.551 28,741 27,639 29,207 28,265 26,577 78 Official institutions 12,371 12,409 8,224 9,873 11,063 11,740 9,248 11,909 11,480 9,092 79 Nonbank foreigners 39,404 39,768 40,028 48,414 49,842 52,537 53,144 52,829 53,728 52,995 80 Other liabilities 6,651 8,517 9,482 12,917 13.552 13,804 12,677 13,411 13,187' 12,901 United Kingdom 81 Total, all currencies 140,917 158,695 156,835 161,947 166,915 169,727 167,162 173,127 177,947' 167,885 82 Negotiable CDs 27,781 26,988 24,528 20,056 19,791 19,656 18,266 20,535 21,846' 19,672 83 To United States 24,657 23,470 36,784 36,036 31,893 32,686 32,780 33,931 33,755 32,284 84 Parent bank 14,469 13,223 27,849 29,726 23,256 23,752 22,970 23,339 23,179 23,151 85 Other banks in United States 2,649 1,536 2,037 1,256 1,545 2,115 1,827 1,841 1,847 1,615 86 Nonbanks 7,539 8,711 6,898 5,054 7,092 6,819 7,983 8,751 8,729 7,518 87 To foreigners 79,498 98,689 86,026 92,307 99,720 101,565 101,160 103,362 106,138' 99,327 88 Other branches of parent bank 25,036 33,078 26,812 27,397 29,216 28,074 29,848 28,581 29,193 26,611 89 Banks 30,877 34,290 30,609 29,780 33,568 32,110 29,116 31,026 31,580 27,868 90 Official institutions 6,836 11,015 7,873 8,551 9,368 10,758 9,184 10,829 l l^ 11,815 91 Nonbank foreigners 16,749 20,306 20,732 26,579 27,568 30,623 33,012 32,926 33,956' 33,033 92 Other liabilities 8,981 9,548 9,497 13,548 15,511 15,820 14,956 15,299 16,208' 16,602 93 Total payable in U.S. dollars ... 99,707 102,550 105,907 108,178 106,676 106,416 103,544 109,708 110,595' 101,530 94 Negotiable CDs 26,169 24,926 22,063 18,143 16,931 16,910 15,660 17,936 19,012' 17,233 95 To United States 22,075 17,752 32,588 33,056 28,542 28,817 29,383 30,386 29,666 28,153 96 Parent bank 14,021 12,026 26,404 28,812 22,428 22,513 22,219 22,446 22,339 22,183 97 Other banks in United States 2,325 1,308 1,752 1,065 1,217 1,807 1,552 1,553 1,456 1,325 98 Nonbanks 5,729 4,418 4,432 3,179 4,897 4,497 5,612 6,387 5,871 4,645 99 To foreigners 48,138 55,919 47,083 50,517 54,574 53,751 52,095 54,371 55,163 49,716 100 Other branches of parent bank 17,951 22,334 18,561 18,384 19,660 18,556 19,182 18,799 18,589 17,575 101 Banks 15,203 15,580 13,407 12,244 14,701 11,920 9,976 11,233 11,007 9,042 102 Official institutions 4,934 7,530 4,348 5,454 5,649 6,717 5,192 6,703 7,264 5,405 103 Nonbank foreigners 10,050 10,475 10,767 14,435 14,564 16,558 17,745 17,636 18,303 17,694 104 Other liabilities 3,325 3,953 4,173 6,462 6,629 6,938 6,406 7,015 6,754' 6,428 Bahamas and Caymans 105 Total, all currencies 142,592 160,321 170,639 176,006 167,385 164,908 155,145 150,767 154,851 154,354 106 Negotiable CDs 847 885 953 678 681 671 522 524 528 535 107 To United States 106,081 113,950 122,332 124,859 114,829 113,137 108,003 101,024 103,655 103,592 108 Parent bank 49,481 53,239 62,894 75,579 65,380 64,085 61,528 55,311 57,136 58,880 109 Other banks in United States . 11,715 17,224 11,494 8,883 8,677 8,198 7,310 8,544 6,99 r 5,984 110 Nonbanks 44,885 43,487 47,944 40,397 40,772 40,854 39,165 37,169 39,528' 38,728 111 To foreigners 34,400 43,815 45,161 47,382 48,974 48,726 44,314 46,741 48,410 47,613 112 Other branches of parent bank 12,631 19,185 23,686 23,414 24,911 25,110 20,778 22,446 25,535 24,184 113 Banks 8,617 10,769 8,336 8,823 8,439 8,059 7,983 8,617 8,154 8,969 114 Official institutions 2,719 1,504 1,074 1,097 1,528 1,290 1,078 1,247 962 960 115 Nonbank foreigners 10,433 12,357 12,065 14,048 14,096 14,267 14,475 14,431 13,759 13,500 116 Other liabilities 1,264 1,671 2,193 3,087 2,901 2,374 2,306 2,478 2,258 2,614 117 Total payable in U.S. dollars 138,774 152,927 162,950 171,250 162,141 160,212 150,758 146,259 149,707 149,680 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 11998888 11998899 Dec. Jan. Feb. Mar. Apr/ Mayr June" 1 Total1 259,556 299,782 308,303 305,433 300,030 297,493 303,790 303,730 305,622 By type 2 Liabilities reported by banks in the United States 31,838 31,519 36,486 34,303 33,633 35,208 36,372 36,313 37,160 3 U.S. Treasury bills and certificates3 88,829 103,722 76,985 76,157 73,099 73,039 69,454 72,322 71,804 U.S. Treasury bonds and notes 4 Marketable 122,432 149,056 176,084 176,411 174,986 171,130 176,694 173,837 175,385 5 Nonmarketable 300 523 568 572 576 580 3,596 3,620 3,644 6 U.S. securities other than U.S. Treasury securities 16,157 14,962 18,180 17,990 17,736 17,536 17,674 17,638 17,629 By area 7 Western Europe1 124,620 125,097 134,907 135,688 134,050 136,807 139,796 140,438 145,800 8 Canada 4,961 9,584 9,553 9,368 7,976 8,386 7,880 6,621 7,036 9 Latin America and Caribbean 8,328 10,099 8,809 7,943 8,327 9,229 9,137 9,217 10,279 10 116,098 145,608 147,064 143,966 140,924 134,700 136,519 135,108 129,910 11 1,402 1,369 995 817 990 902 861 1,040 904 12 Other countries6 4,147 7,501 6,406 7,077 7,187 6,889 6,000 7,685 8,050 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 1990 IItteemm 11998866 11998877 11998888 June Sept. Dec. Mar. 1 Banks' own liabilities 29,702 55,438 74,980 69,213 73,755 67,805 63,105 2 Banks' own claims 26,180 51,271 68,983 62,234 70,328 65,127 60,999 3 Deposits 14,129 18,861 25,100 23,866 22,960 20,489 21,456 4 Other claims 12,052 32,410 43,884 38,368 47,368 44,638 39,543 5 Claims of banks' domestic customers 2,507 551 364 723 2,558 3,102 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 • October 1990 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period Holder and type of liability 1988 1989 Jan. Feb. Apr/ May' 1 All foreigners 618,874 685,339 736,112 736,112 705,383 696,813 704,185 702,299 714,763 2 Banks' own liabilities 470,070 514,532 576,732 576,732 544,172 538,567 541,694 546,652 551,777 3 Demand deposits 22,383 21,863 22,090 22,090 19,982 20,894 20,518 21,143 20,908 4 Time deposits2 148,374 152,164 168,744 168,744 159,144 156,304 154,725 148,779 150,883 5 Other3 51,677 51,366 67,569 67,569 62,807 58,484 60,433 66,017 65,207 6 Own foreign offices4 247,635 289,138 318,330 318,330 302,238 302,884 306,017 310,713 314,779 7 Banks' custody liabilities5 148,804 170,807 159,380 159,380 161,211 158,246 162,492 155,647 162,986 8 U.S. Treasury bills and certificates6 101,743 115,056 91,100 91,100 90,703 88,032 88,015 83,644 88,907 9 Other negotiable and readily transferable instruments7 16,776 16,426 19,526 19,526 18,658 18,655 21,031 18,055 18,342 10 Other 30,285 39,325 48,754 48,754 51,851 51,560 53,446 53,948 55,737 11 Nonmonetary international and regional organizations 4,464 3,224 4,772 4,772 4,671 3,765 4,896 5,727 4,558 12 Banks' own liabilities 2,702 2,527 3,156 3,156 3,071 2,218 3,334 3,781 2,913 13 Demand deposits 124 71 96 96 36 55 156 52 28 14 Time deposits 1,538 1,183 927 927 1,042 624 1,137 2,025 773 15 Other3 1,040 1,272 2,133 2,133 1,993 1,539 2,041 1,704 2,112 16 Banks' custody liabilities5 1,761 698 1,616 1,616 1,599 1,547 1,562 1,947 1,645 17 U.S. Treasury bills and certificates6 265 57 197 197 102 160 191 190 174 18 Other negotiable and readily transferable instruments7 1,497 641 1,417 1,417 1,497 1,387 1,371 1,740 1,463 19 Other 0 0 2 2 0 0 0 17 20 Official institutions9 120,667 135,241 113,471 113,471 110,459 106,732 108.247 105,826 108,635 21 Banks' own liabilities 28,703 27,109 31,098 31,098 30,755 30,443 31,366 33,594 32,961 2 2 2 2 3 4 T O D i t e m h m e e a r 3 n d . d e p d o e s p it o s s 2 its 1 1 4 1 2 , , , 1 7 8 0 5 4 3 7 3 1 9 5 1 , , , 7 4 9 6 2 1 7 5 7 1 1 2 8 0 , , , 1 3 5 9 5 5 6 1 0 1 1 2 8 0 , , , 1 3 5 9 5 5 6 1 0 1 9 1 9 , , , 7 6 3 6 0 8 9 1 5 1 1 8 0 1 , , , 1 6 6 3 5 5 2 8 4 1 9 9 1 , , , 7 8 8 0 3 2 4 6 6 2 1 2 0 0 , , , 6 0 8 3 6 8 9 6 9 2 1 0 1 1 , , , 2 6 0 2 4 88 8 4 25 Banks' custody liabilities5 91,965 108,132 82,373 82,373 79,704 76,289 76,881 72,231 75,674 26 U.S. Treasury bills and certificates6 88,829 103,722 76,985 76,985 76,157 73,099 73,039 69,454 72,322 27 Other negotiable and readily transferable instruments7 2,990 4,130 5,028 5,028 3,459 2,892 3,671 2,605 3,158 28 Other 146 280 361 361 298 171 173 195 29 Banks10 414,280 459,523 514,251 514,251 491,782 484,881 490,793 492,534 502,559 30 Banks' own liabilities 371,665 409,501 453,737 453,737 427,414 421,392 422,578 425,874 431,861 31 Unaffiliated foreign banks 124,030 120,362 135,407 135,407 125,175 118,508 116,561 115,161 117,082 32 Demand deposits 10,898 9,948 10,339 10,339 9,523 10,072 9,625 9,864 9,673 33 Time deposits 79,717 80,189 90,557 90,557 79,518 74,873 75,296 68,692 71,048 34 Other3 33,415 30,226 34,511 34,511 36,133 33,563 31,640 36,605 36,361 35 Own foreign offices4 247,635 289,138 318,330 318,330 302,238 302,884 306,017 310,713 314,779 36 Banks' custody liabilities5 42,615 50,022 60,514 60,514 64,369 63,489 68,215 66,660 70,698 37 U.S. Treasury bills and certificates6 9,134 7,602 9.367 9.367 9,614 9,342 9,359 9,374 11,578 38 Other negotiable and readily transferable instruments7 5,392 5,725 5,124 5,124 5,090 4,918 7,611 5,437 5,615 39 Other 28,089 36,694 46,023 46,023 49,665 49,229 51,244 51,850 53,504 40 Other foreigners 79,463 87,351 103,618 103,618 98,471 101,434 100.248 98,212 99,011 41 Banks' own liabilities 67,000 75,396 88,742 88,742 82,932 84,513 84,415 83,404 84,042 4 4 3 2 T D i e m m e a d nd ep d o e s p it o s s 2 its 54 9 , , 2 6 7 0 7 4 61 9 , . 0 9 2 2 5 8 66 9 , , 7 4 1 5 1 8 66 9 , , 7 4 1 5 1 8 68 8 , , 8 8 1 2 5 1 70 9 , , 1 1 4 1 8 4 68 8 , , 5 9 8 1 8 1 67 9 , , 1 1 7 6 4 0 67 9 , , 9 5 7 6 4 2 44 Other 3,119 4,443 12,573 12,573 5,295 5,251 6,915 7,069 6,506 45 Banks' custody liabilities5 12,463 11,956 14,877 14,877 15,539 16,921 15,834 14,809 14,969 46 U.S. Treasury bills and certificates6 3,515 3,675 4,551 4,551 4,830 5,431 5,425 4,627 4,834 47 Other negotiable and readily transferable instruments7 6,898 5.929 7,958 7,958 8,612 9,457 8,378 8,273 8,106 48 Other 2,050 2,351 2.368 2.368 2,098 2,033 2,031 1,909 2,030 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 7,314 7,203 7,203 8,576 8,457 7,634 7,183 7,161 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 Dec. Jan. Feb. Mar. Apr. May Junep 1 Total 618,874 685,339 736,112 736,112 705,383 696,813 704,185 702,299' 714,763' 705,018 2 Foreign countries 614,411 682,115 731,340 731,340 700,713 693,048 699,289 696,572' 710,205' 700,021 3 Europe 234,641 231,912 237,453 237,453 231,067 224,715 224,907 229,675' 236,336' 232,633 4 Austria 920 1,155 1,233 1,233 1,422 1,817 1,764 1,549' 1,373 1,531 5 Belgium-Luxembourg 9,347 10,022 10,611 10,611 11,357 11,400 11,978 10,128' 9,507' 9,277 6 Denmark 760 2,200 1,415 1,415 1,240 1,244 1,760 2,271 2,152 2,411 7 Finland 377 285 570 570 684 614 431 464 314 387 8 France 29,835 24,777 26,903 26,903 22,992 21,850 21,921 24,263 23,103' 23,078 9 Germany 7,022 6,772 7,578 7,578 7,584 8,718 7,488 8,763' 8,029' 8,067 10 Greece 689 672 1,017 1,017 1,092 1,024 906 879 860 833 11 Italy 12,073 14,599 16,169 16,169 13,051 11,977 12,728 14,138 16,347 16,791 12 Netherlands 5,014 5,316 6,613 6,613 7,733 8,226 9,454 7,731 8,166' 7,624 13 Norway 1,362 1,559 2,401 2,401 1,256 997 2,619 1,454' 1,582' 2,443 14 Portugal 801 903 2,407 2,407 2,381 2,285 2,385 2,354 2,359 3,082 15 Spain 2,621 5,494 4,364 4,364 5,424 4,280 4,911 4,230' 4,535 4,427 16 Sweden 1,379 1,284 1,491 1,491 2,303 1,468 1,574 1,889 1,837 1,769 17 Switzerland 33,766 34,199 34,496 34,496 33,283 33,036 33,964 33,244' 35,278' 35,281 18 Turkey 703 1,012 1,818 1,818 1,048 886 1,039 1,432 1,641' 1,596 19 United Kingdom 116,852 111,811 102,362 102,362 102,282 99,749 96,718 99,376' 104,643' 98,274 20 Yugoslavia 710 529 1,474 1,474 1,349 1,402 1,613 1,599 1,934 2,169 21 Other Western Europe 9,798 8,598 13,563 13,563 13,220 12,088 10,214 12,039' 10,989' 11,829 22 U.S.S.R , 32 138 350 350 229 376 141 446 158 105 23 Other Eastern Europe2 582 591 619 619 1,138 1,277 1,299 1,427' 1,530' 1,662 24 Canada 30,095 21,062 18,864 18,864 19,246 21,329 18,536 19,483' 19,853' 19,939 25 Latin America and Caribbean 220,372 271,146 310,514 310,514 300,601 305,620 314,575 308,616' 315,235' 312,261 26 Argentina 5,006 7,804 7,304 7,304 7,380 7,496 8,036 8,235' 8,343 8,003 27 Bahamas 74,767 86,863 98,932 98,932 95,513 94,627 98,003 89,895' 98,226' 99,119 28 Bermuda 2,344 2,621 2,884 2,884 2,539 2,239 2,308 2,807' 2,514' 3,111 29 Brazil 4,005 5,314 6,334 6,334 6,679 7,128 7,280 6,729' 6,087 6,095 30 British West Indies 81,494 113,840 138,263 138,263 131,959 135,940 141,075 143,264' 142,135' 136,650 31 Chile 2,210 2,936 3,212 3,212 3,052 3,134 3,261 3,418' 3,517 3,470 32 Colombia 4,204 4,374 4,653 4,653 4,435 4,610 4,510 4,404 4,471 4,507 33 Cuba 12 10 10 10 31 10 9 9 10 11 34 Ecuador 1,082 1,379 1,391 1,391 1,232 1,325 1,337 1,334' 1,367 1,372 35 Guatemala 1,082 1,195 1,312 1,312 1,338 1,362 1,403 1,451 1,473 1,473 36 Jamaica 160 269 209 209 204 217 245 224 215 224 37 Mexico 14,480 15,185 15,399 15,399 14,773 15,802 15,246 15,066 15,097 16,141 38 Netherlands Antilles 4,975 6,420 6,310 6,310 6,192 6,470 6,412 6,460 6,806 6,649 39 Panama 7,414 4,353 4,361 4,361 4,543 4,743 4,766 4,749 4,539 4,520 40 Peru 1,275 1,671 1,984 1,984 1,927 1,975 1,836 1,703 1,533 1,474 41 Uruguay 1,582 1,898 2,284 2,284 2,419 2,397 2,513 2,575 2,560 2,520 42 Venezuela 9,048 9,147 9,468 9,468 9,832 9,615 9,871 9,636' 9,717 10,240 43 Other 5,234 5,868 6,205 6,205 6,554 6,530 6,464 6,657' 6,625' 6,682 44 121,288 147,838 156,128 156,128 141,600 132,085 132,744 130,903' 129,001' 125,828 China 45 Mainland 1,162 1,895 1,772 1,772 1,681 1,470 1,573 1,840 1,781' 1,868 46 Taiwan 21,503 26,058 19,565 19,565 19,151 17,901 15,552 15,413' 15,153 10,948 47 Hong Kong 10,180 12,248 12,395 12,395 11,824 11,115 11,569 12,231' 12,857' 12,302 48 India 582 699 780 780 907 762 1,033 1,013 1,148 966 49 Indonesia 1,404 1,180 1,281 1,281 1,061 1,174 1,545 1,560 1,192 1,522 50 Israel 1,292 1,461 1,243 1,243 1,039 894 1,497 1,310 1,226' 1,201 51 Japan 54,322 74,015 81,183 81,183 70,223 65,127 66,078 65,549' 62,063' 62,317 52 Korea 1,637 2,541 3,214 3,214 2,617 2,562 2,320 2,109 2,011' 2,063 53 Philippines 1,085 1,163 1,764 1,764 1,150 1,263 1,198 1,191' 1,187' 1,332 54 Thailand 1,345 1,236 2,093 2,093 2,381 2,524 1,930 1,595 1,973 2,125 55 Middle-East oil-exporting countries 13,988 12,083 13,369 13,369 13,262 12,558 12,450 11,626' 13,048 12,955 56 Other 12,788 13,260 17,468 17,468 16,305 14,735 15,999 15,466' 15,362' 16,229 57 Africa 3,945 3,991 3,823 3,823 3,627 3,778 3,644 3,722 3,778' 3,660 58 Egypt 1,151 911 686 686 640 722 601 595' 646 593 59 Morocco 194 68 78 78 86 95 80 111 86 81 60 South Africa 202 437 205 205 257 261 277 236 241 318 61 Zaire 67 85 86 86 82 77 74 70 66 42 62 Oil-exporting countries 1,014 1,017 1,120 1,120 993 1,110 1,048 936 1,016 888 63 Other 1,316 1,474 1,648 1,648 1,570 1,513 1,563 1,775 1,722 1,739 64 Other countries 4,070 6,165 4,559 4,559 4,571 5,521 4,883 4,173 6,002 5,699 65 Australia 3,327 5,293 3,867 3,867 3,891 4,798 3,994 3,469 5,250 5,052 66 All other 744 872 692 692 680 723 889 703 751 647 67 Nonmonetary international and regional organizations 4,464 3,224 4,772 4,772 4,671 3,765 4,896 5,727' 4,558 4,997 68 Internationa] 2,830 2,503 3,825 3,825 3,599 2,765 3,634 4,147 3,393 3,862 69 Latin American regional 1,272 589 684 684 857 655 949 1,123 912 920 70 Other regional 362 133 263 263 214 345 313 457' 253 215 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 • October 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 Area and country 11998877 11998888 11998899 Dec. Jan. Feb. Mar. Apr. May' June'' 1 Total 459,877 491,165 533,763 533,763 511,739 499,176 489,951 490,778r 490,721 491,392 2 Foreign countries 456,472 489,094 530,324 530,324 507,246 495,102 486,158 486,385' 486,135 487,447 3 Europe 102,348 116,928 118,885 118,885 105,603 104,162 104,191 104,989 103,415 102,616 4 Austria 793 483 415 415 658 429 500 592 431 537 5 Belgium-Luxembourg 9,397 8,515 6,478 6,478 6,668 7,063 66,,335588 6,330 6,754 5,410 6 Denmark 717 483 582 582 664 635 660088 750 1,004 590 7 Finland 1,010 1,065 1,027 1,027 1,224 1,218 1,153 1,025 931 1,035 8 France 13,548 13,243 16,146 16,146 15,839 16,392 15,631 16,087 16,224 14,794 9 Germany 2,039 2,329 2,865 2,865 1,990 2,762 2,783 2,476 3,045 2,934 10 Greece 462 433 788 788 735 773 664 622 597 514 11 Italy 7,460 7,936 6,662 6,662 4,934 5,377 5,010 4,230 4,758 5,126 12 Netherlands 2,619 2,541 1,904 1,904 1,659 1,567 2,182 2,027 1,968 2,041 13 Norway 934 455 609 609 600 672 777 918 741 725 14 Portugal 477 261 376 376 309 288 273 381 407 540 15 Spain 1,853 1,823 1,930 1,930 2,790 2,040 2,240 1,726 1,887 2,074 16 Sweden 2,254 1,977 1,773 1,773 2,718 2,158 2,236 2,206 2,711 2,609 17 Switzerland 2,718 3,895 6,141 6,141 4,835 4,922 5,056 4,826 4,999 5,250 18 Turkey 1,680 1,233 1,071 1,071 1,087 1,088 1,123 1,120 1,138 1,230 19 United Kingdom 50,823 65,706 65,388 65,388 54,462 52,121 52,993 55,439 52,163 53,806 20 Yugoslavia 1,700 1,390 1,329 1,329 1,243 1,158 1,157 1,121 1,128 1,095 21 Other Western Europe2 619 1,152 1,302 1,302 1,133 1,271 1,183 970 786 804 22 U.S.S.R 389 1,255 1,179 1,179 1,192 1,322 1,356 1,322 945 760 23 Other Eastern Europe3 852 754 921 921 864 905 907 820 800 743 24 Canada 25,368 18,889 15,427 15,427 16,694 16,768 15,082 15,199 16,320 16,482 25 Latin America and Caribbean 214,789 214,264 230,353 230,353 224,116 220,258 212,902 202,614' 207,913 210,666 26 Argentina 11,996 11,826 9,270 9,270 12,117 8,718 8,189 8,025 7,689 7,599 27 Bahamas 64,587 66,954 77,921 77,921 70,102 71,891 69,095 63,927 70,296 66,536 28 Bermuda 471 483 1,315 1,315 485 401 425 443 774 1,830 29 Brazil 25,897 25,735 23,749 23,749 23,503 23,210 21,884 21,848'' 21,844 20,741 30 British West Indies 50,042 55,888 68,664 68,664 70,889 70,048 72,329 67,610' 67,378 74,353 31 Chile 6,308 5,217 4,353 4,353 4,212 4,208 4,079 3,714 3,624 3,457 32 Colombia 2,740 2,944 2,784 2,784 2,530 2,610 2,720 2,649 2,624 2,598 33 Cuba 1 1 1 1 0 0 0 0 0 0 34 Ecuador 2,286 2,075 1,688 1,688 1,588 1,570 1,536 1,527 1,503 1,523 35 Guatemala4 144 198 197 197 213 200 208 207 206 188 36 Jamaica4 188 212 297 297 284 274 265 260 260 258 37 Mexico 29,532 24,637 23,381 23,381 22,027 21,400 16,798 17,080' 16,866 17,013 38 Netherlands Antilles 980 1,306 1,921 1,921 1,764 1,702 1,692 1,759 1,630 1,727 39 Panama 4,744 2,521 1,740 1,740 1,748 1,688 1,732 1,743 1,653 1,594 40 Peru 1,329 1,013 771 771 750 752 733 721 679 683 41 Uruguay 963 910 928 928 932 935 926 886 876 842 42 Venezuela 10,843 10,733 9,647 9,647 9,289 8,956 8,528 8,423 8,272 8,137 43 Other Latin America and Caribbean 1,738 1,612 1,726 1,726 1,682 1,695 1,764 1,790' 1,737 1,587 44 Asia 106,096 130,881 157,416 157,416 152,452 145,033 145,675 155,435' 150,045 149,308 China Mainland 968 762 634 634 620 619 599 674 517 519 46 Taiwan 4,592 4,184 2,776 2,776 2,157 1,824 2,016 1,890 1,941 1,946 47 Hong Kong 8,218 10,143 11,128 11,128 7,6% 6,605 7,418 8,965 9,553 9,238 48 India 510 560 621 621 625 892 721 588 579 840 49 Indonesia 580 674 651 651 641 611 604 560 599 802 50 Israel 1,363 1,136 813 813 749 752 737 721 709 744 51 Japan 68,658 90,149 111,270 111,270 113,387 108,352 108,527 117,487 108,203 107,607 52 Korea 5,148 5,213 5,2% 5,2% 5,156 4,880 5,016 4,991' 5,141 5,052 53 Philippines 2,071 1,876 1,344 1.344 1,297 1,163 1,204 1,221 1,351 1,357 54 Thailand . 496 848 1,140 1,140 1,172 1,052 992 1,070 1,202 1,279 55 Middle East oil-exporting countries 4,858 6,213 10,149 10,149 8,663 9,250 8,774 8,376 9,577 10,815 56 Other Asia 8,635 9,122 11,594 11,594 10,290 9,035 9,066 8,894 10,674 9,108 57 Africa 4,742 5,718 5,890 5,890 5,935 5,967 5,984 5,953 55,,990088 5,785 58 Egypt 521 507 502 502 470 493 474 491 448888 469 59 Morocco 542 511 559 559 575 588 581 596 582 579 60 South Africa 1,507 1,681 1,628 1,628 1,619 1,629 1,648 1,632 1,639 1,568 61 Zaire 15 17 16 16 16 17 25 19 20 21 62 Oil-exporting countries6 1,003 1,523 1,648 1,648 1,667 1,749 1,749 1,705 1,665 1,638 63 Other 1,153 1,479 1,537 1,537 1,588 1,491 1,507 1,509 1,515 1,509 64 Other countries 3,129 2,413 2,354 2,354 2,446 2,914 2,324 2,195 2,535 2,590 65 Australia 2,100 1,520 1,781 1,781 1,815 2,015 1,632 1,551 1,657 11,,771122 66 All other 1,029 894 573 573 631 900 692 644 878 887788 67 Nonmonetary international and regional organizations7 3,404 2,071 3,439 3,439 4,493 4,074 3,794 4,393' 4,585 3,945 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 Dec. Jan. Feb. Mar. Apr.' May' June'' 1 Total 444444499999997777777,,,,,,,666666633333335555555 555555533333338888888,,,,,,,666666688888889999999 555555599999990000000,,,,,,,222222255555551111111 555555599999990000000,,,,,,,222222255555551111111 555555544444443333333,,,,,,,111111111111114444444''''''' 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 444444455555559999999,,,,,,,888888877777777777777 444444499999991111111,,,,,,,111111166666665555555 555555533333333333333,,,,,,,777777766666663333333 555555533333333333333,,,,,,,777777766666663333333 511,739 499,176 444444488888889999999,,,,,,,999999955555551111111 490,778 490,721 491,392 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 66666664444444,,,,,,,666666600000005555555 66666662222222,,,,,,,666666655555558888888 55555559999999,,,,,,,888888877777777777777 55555559999999,,,,,,,888888877777777777777 58,969 56,909 55555553333333,,,,,,,999999922222220000000 53,497 52,998 51,150 44 OOwwnn ffoorreeiiggnn ooffffiicceess 222222222222224444444,,,,,,,777777722222227777777 222222255555557777777,,,,,,,444444433333336666666 222222299999995555555,,,,,,,999999944444448888888 222222299999995555555,,,,,,,999999944444448888888 289,826 283,970 222222277777774444444,,,,,,,888888866666661111111 274,326 274,876 279,349 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111122222227777777,,,,,,,666666600000009999999 111111122222229999999,,,,,,,444444422222225555555 111111133333334444444,,,,,,,888888844444448888888 111111133333334444444,,,,,,,888888844444448888888 123,647 120,114 111111122222223333333,,,,,,,000000000000003333333 125,138 125,595 122,330 66 DDeeppoossiittss 66666660000000,,,,,,,666666688888887777777 66666665555555,,,,,,,888888899999998888888 77777778888888,,,,,,,000000000000005555555 77777778888888,,,,,,,000000000000005555555 69,522 67,121 66666669999999,,,,,,,999999977777777777777 71,770 71,951 69,124 77 OOtthheerr 66666666666666,,,,,,,999999922222222222222 66666663333333,,,,,,,555555522222227777777 55555556666666,,,,,,,888888844444443333333 55555556666666,,,,,,,888888844444443333333 54,125 52,993 55555553333333,,,,,,,000000022222227777777 53,368 53,645 53,206 88 AAllll ootthheerr ffoorreeiiggnneerrss 44444442222222,,,,,,,999999933333336666666 44444441111111,,,,,,,666666644444446666666 44444443333333,,,,,,,000000099999990000000 44444443333333,,,,,,,000000099999990000000 39,297 38,184 33333338888888,,,,,,,111111166666667777777 37,817 37,252 38,562 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss33...... 33333337777777,,,,,,,777777755555558888888 44444447777777,,,,,,,555555522222224444444 55555556666666,,,,,,,444444488888888888888 55555556666666,,,,,,,444444488888888888888 55555553333333,,,,,,,111111166666663333333''''''' 3333333,,,,,,,666666699999992222222 8888888,,,,,,,222222288888889999999 11111112222222,,,,,,,888888833333334444444 11111112222222,,,,,,,888888833333334444444 11111116666666,,,,,,,777777788888888888888 11 Negotiable and readily transferable 22222222222222,,,,,,,00000002222222(((((((YYYYYYY 22222226666666,,,,,,,666666699999996666666 22222225555555,,,,,,,777777700000000000000 22222229999999,,,,,,,000000066666663333333 22222229999999,,,,,,,000000066666663333333 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,,,,,,,777777755555553333333 11111112222222,,,,,,,777777755555553333333 11111113333333,,,,,,,555555566666663333333 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States 40,909 45,502 45,309 45,309 43,932 45,263 41,809' 38,888 41,237 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 1990 MMaattuurriittyy;; bbyy bboorrrroowweerr aanndd aarreeaa 11998866 11998877 11998888 June Sept. Dec. Mar. 1 Total 232,295 235,130 233,184 232,277 234,112 237,474 213,670 By borrower 2 Maturity of 1 year or less2 160,555 163,997 172,634 167,904 169,279 177,223 160,087 3 Foreign public borrowers 24,842 25,889 26,562 24,343 24,102 23,483 22,725 4 All other foreigners 135,714 138,108 146,071 143,561 145,178 153,741 137,362 5 Maturity over 1 year 71,740 71,133 60,550 64,373 64,832 60,251 53,584 6 Foreign public borrowers 39,103 38,625 35,291 39,033 39,537 35,822 30,050 7 All other foreigners 32,637 32,507 25,259 25,340 25,295 24,429 23,533 By area Maturity of 1 year or less 8 Europe 61,784 59,027 55,909 58,398 53,122 53,300 48,368 9 Canada 5,895 5,680 6,282 5,693 6,236 5,886 5,694 10 Latin America and Caribbean 56,271 56,535 57,991 50,479 52,227 52,929 46,719 11 Asia 29,457 35,919 46,224 45,600 50,445 57,766 51,744 12 Africa 2,882 2,833 3,337 3,601 3,514 3,225 3,165 13 All other3 4,267 4,003 2,891 4,134 3,735 4,118 4,396 Maturity of over 1 year2 14 Europe 6,737 6,696 4,666 4,561 6,065 4,595 4,407 15 Canada 1,925 2,661 1,922 2,592 2,459 2,353 2,702 16 Latin America and Caribbean 56,719 53,817 47,547 50,537 49,046 45,844 37,668 17 Asia 4,043 3,830 3,613 3,803 4,203 4,142 5,479 18 Africa 1,539 1,747 2,301 2,408 2,475 2,633 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 • October 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 386.5 382.4 370.9 351.9 354.0 346.3 346.1 340.0 346.0 337.8 336.5r 2 G-10 countries and Switzerland 156.6 159.7 156.3 150.7 148.7 152.7 145.4 145.1 146.4 152.7 146.8' 3 Belgium-Luxembourg 8.4 10.0 9.1 9.2 9.5 9.0 8.6 7.8 6.9 6.3 6.6' 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 6.3 10 United Kingdom 70.9 68.8 71.7 70.4 67.6 66.2 65.6 64.5 63.7 67.0 63.8 11 Canada 5.2 5.5 4.7 5.3 4.9 5.0 4.0 5.1 5.9 5.4 4.8 12 Japan 25.1 29.8 29.2 27.3 31.6 34.9 30.5 30.2 31.0 32.2 32.5' 13 Other developed countries 26.1 26.4 26.4 24.0 23.0 21.0 21.1 21.2 21.0 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 11..55 15 Denmark 1.7 1.7 1.4 1.1 1.2 1.1 1.1 1.4 1.1 1.1 11..11 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 2.4 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 1.2 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 1.6 2.1 25 OPEC countries3 19.4 17.4 17.6 17.0 17.9 16.6 16.2 16.1 16.2 17.1 15.7 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 7.4 7.0 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 44..44 30 African countries 1.8 1.9 1.9 1.9 1.9 1.9 1.7 1.6 1.9 1.7 11..88 31 Non-OPEC developing countries 99.6 97.8 94.4 91.8 87.2 85.3 85.9 83.4 81.2 77.5 71.2' Latin America 32 Argentina 9.5 9.5 9.6 9.5 9.3 9.0 8.5 7.9 7.6 6.3 5.5 33 Brazil 25.3 24.7 23.8 23.7 22.4 22.4 22.8 22.1 20.9 19.0 17.5 34 Chile 7.1 6.9 6.6 6.4 6.3 5.6 5.7 5.2 4.9 4.6 44..33 35 Colombia 2.1 2.0 2.0 2.2 2.1 2.1 1.9 1.7 1.6 1.8 11..88 36 Mexico 24.0 23.5 22.4 21.1 20.4 18.8 18.3 17.7 17.2 17.7 15.2 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 55..33 44 Malaysia 2.1 1.5 1.5 1.5 1.7 1.6 1.7 1.6 1.7 1.7 11..88 45 Philippines 5.4 5.2 5.1 4.9 4.7 4.5 4.4 4.4 4.0 4.1 33..77 46 Thailand .9 .7 1.0 1.1 1.2 1.1 1.0 1.0 1.3 1.3 11..11 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 3.4' 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 36.2 43.0 57 Bahamas 22.4 17.3 15.9 8.9 12.9 11.0 15.8 11.0 11.1 5.1 9.3 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 1155..33 8.9 10.9 60 Netherlands Antilles 1.8 1.2 1.3 1.2 1.2 1.0 .9 1.0 11..11 2.3 2.6 61 Panama 4.0 3.7 3.2 3.0 2.6 2.5 2.2 1.9 11..55 11..44 11..33 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 ..11 ..11 ..11 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 8.0 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 25.0 27.4 28.5 29.8 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 1990 Type, and area or country 11998866 11998877 11998888 Dec. Mar. June Sept. Dec. Mar. 1 Total 25,587 28,302 33,646 33,646 37,384 36,998 35,584 37,406 37,214 2 Payable in dollars 21,749 22,785 28,040 28,040 31,594 31,925 30,746 32,588 32,920 3 Payable in foreign currencies 3,838 5,517 5,606 5,606 5,790 5,073 4,838 4,819 4,294 By type 4 Financial liabilities 12,133 12,424 15,130 15,130 17,453 17,124 16,268 17,524 16,663 5 Payable in dollars 9,609 8,643 11,243 11,243 13,373 13,265 12,440 13,631 13,445 6 Payable in foreign currencies 2,524 3,781 3,888 3,888 4,080 3,860 3,829 3,893 3,218 7 Commercial liabilities 13,454 15,878 18,516 18,516 19,931 19,874 19,315 19,882 20,551 8 Trade payables 6,450 7,305 6,466 6,466 7,030 6,350 6,812 7,206 7,111 9 Advance receipts and other liabilities .. 7,004 8,573 12,050 12,050 12,901 13,524 12,503 12,676 13,440 10 Payable in dollars 12,140 14,142 16,797 16,797 18,220 18,661 18,306 18,957 19,475 11 Payable in foreign currencies 1,314 1,737 1,719 1,719 1,711 1,213 1,009 925 1,076 By area or country Financial liabilities 12 Europe 7,917 8,320 9,918 9,918 12,571 11,404 10,374 10,697 9,810 13 Belgium-Luxembourg 270 213 289 289 320 357 308 340 333 14 France 661 382 319 319 224 278 262 243 199 15 Germany 368 551 699 699 741 838 809 736 699 16 Netherlands 542 866 879 879 873 834 853 946 865 17 Switzerland 646 558 1,033 1,033 954 978 839 578 595 18 United Kingdom 5,140 5,557 6,533 6,533 9,266 7,939 7,087 7,582 6,777 19 Canada 399 360 663 663 616 544 599 583 481 20 Latin America and Caribbean 1,944 1,189 1,239 1,239 677 1,216 1,315 1,226 1,764 21 Bahamas 614 318 184 184 189 165 186 157 237 22 Bermuda 4 0 0 0 0 0 0 17 0 23 Brazil 32 25 0 0 0 0 0 0 0 24 British West Indies 1,146 778 645 645 471 621 698 594 1,046 25 Mexico 22 13 1 1 15 17 4 6 5 26 Venezuela 0 0 0 0 0 0 0 0 0 27 Asia 1,805 2,451 3,306 3,306 3,583 3,860 3,878 4,916 4,503 28 Japan 1,398 2,042 2,563 2,563 2,825 3,100 3,130 4,064 3,445 29 Middle East oil-exporting countries2 . 8 8 3 3 1 12 2 2 3 30 Africa 1 4 1 1 5 3 4 2 3 31 Oil-exporting countries3 1 1 0 0 3 2 2 0 0 32 All other4 67 100 2 2 2 97 97 100 102 Commercial liabilities 4,446 5,516 7,351 7,351 7,965 7,778 8,319 8,867 9,099 33 Europe 101 132 170 170 134 114 137 178 233 34 Belgium-Luxembourg 352 426 455 455 579 535 806 872 883 35 France 715 909 1,699 1,699 1,373 1,190 1,183 1,362 1,143 36 Germany 424 423 591 591 670 688 548 699 688 37 Netherlands 385 559 417 417 459 447 531 621 583 38 Switzerland 1,341 1,599 2,065 2,065 2,585 2,709 2,703 2,599 2,906 39 United Kingdom 40 Canada 1,405 1,301 1,217 1,217 1,163 1,133 1,189 1,066 1,124 41 Latin America and Caribbean 924 864 1,118 1,118 1,267 1,611 1,053 1,127 1,264 42 Bahamas 32 18 49 49 35 34 27 41 37 43 Bermuda 156 168 286 286 426 388 305 308 516 44 Brazil 61 46 95 95 103 541 113 100 117 45 British West Indies 49 19 34 34 31 42 30 27 18 46 Mexico 217 189 179 179 198 179 187 243 208 47 Venezuela 216 162 177 177 179 131 107 154 86 48 Asia 5,080 6,565 6,923 6,923 7,330 6,957 7,038 6,953 6,809 49 Japan 2,042 2,578 3,097 3,097 3,059 2,708 2,674 2,772 2,624 50 Middle East oil-exporting countries • 1,679 1,964 1,386 1,386 1,526 1,431 1,406 1,346 1,341 51 Africa 619 574 578 578 706 752 639 838 739 52 Oil-exporting countries3 197 135 202 202 272 253 246 300 248 53 All other4 980 1,057 1,328 1,328 1,500 1,642 1,077 1,031 1,517 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 • October 1990 3.23 CLAIMS ON UNAFFILIATED FOREIGNERS Reported by Nonbanking Business Enterprises in the United States1 Millions of dollars, end of period 1988 1989 1990 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 11998866 11998877 11998888 Dec. Mar. June Sept. Dec. Mar. 1 Total 36,265 30,964 33,842 33,842 31,608 34,282 32,022 31,011 29,836' 2 Payable in dollars 33,867 28,502 31,507 31,507 29,293 32,088 29,797 28,683 27,180' 3 Payable in foreign currencies 2,399 2,462 2,335 2,335 2,315 2,193 2,225 2,328 2,655r By type 4 Financial claims 26,273 20,363 21,843 21,843 19,616 21,808 19,116 17,326 16,623' 5 Deposits 19,916 14,894 15,792 15,792 14,456 16,734 12,442 10,360 10,469' 6 Payable in dollars 19,331 13,765 14,693 14,693 13,542 15,814 11,577 9,434 9,627' 7 Payable in foreign currencies 585 1,128 1,099 1,099 914 921 865 926 842' 8 Other financial claims 6,357 5,470 6,051 6,051 5,160 5,074 6,673 6,966 6,154' 9 Payable in dollars 5,005 4,656 5,320 5,320 4,267 4,362 5,812 6,170 4,913' 10 Payable in foreign currencies 1,352 814 731 731 893 713 862 796 1,241' 11 Commercial claims 9,992 10,600 11,999 11,999 11,992 12,473 12,906 13,685 13,213' 12 Trade receivables 8,783 9,535 10,924 10,924 10,730 11,042 11,421 12,073 11,620' 13 Advance payments and other claims 1,209 1,065 1,075 1,075 1,262 1,432 1,485 1,612 1,593 14 Payable in dollars 9,530 10,081 11,494 11,494 11,485 11,913 12,408 13,079 12,640' 15 Payable in foreign currencies 462 519 505 505 507 560 498 606 573' By area or country Financial claims 16 Europe 10,744 9,531 10,276 10,276 8,848 8,614 7,507 6,830 7,124' 17 Belgium-Luxembourg 41 7 18 18 22 161 166 13 22 18 France 138 332 226 226 233 198 209 153 195' 19 Germany 116 102 138 138 171 199 147 194 501' 20 Netherlands 151 350 348 348 384 297 292 303 305 21 Switzerland 185 65 217 217 260 67 111 90 124 22 United Kingdom 9,855 8,467 8,977 8,977 7,469 7,378 6,340 5,848 5,262' 23 Canada 4,808 2,844 2,339 2,339 2,210 2,617 2,428 1,916 1,807 24 Latin America and Caribbean 9,291 7,012 8,122 8,122 7,465 9,351 8,278 7,428 6,843' 25 Bahamas 2,628 1,994 1,838 1,838 2,171 1,881 1,707 1,513 1,590' 26 Bermuda 6 7 19 19 25 33 33 7 4 27 Brazil 86 63 47 47 49 78 70 224 79 28 British West Indies 6,078 4,433 5,733 5,733 4,799 6,949 6,080 5,273 4,757' 29 Mexico 174 172 151 151 117 114 105 94 152 30 Venezuela 21 19 21 21 25 31 36 20 21 31 Asia 1,317 879 830 830 951 1,109 801 829 761' 32 Japan 999 605 561 561 627 640 440 439 416' 33 Middle East oil-exporting countries2 7 8 5 5 8 8 7 8 7 34 Africa 85 65 106 106 89 80 75 140 67 35 Oil-exporting countries3 28 7 10 10 8 8 8 12 11 36 All other4 28 33 170 170 52 37 27 183 20' Commercial claims 37 Europe 3,725 4,180 5,051 5,051 4,984 5,290 5,423 6,140 6,018 38 Belgium-Luxembourg 133 178 178 178 202 205 220 241 219 39 France 431 650 661 661 760 770 824 948 951 40 Germany 444 562 623 623 657 675 688 666 690 41 Netherlands 164 133 208 208 161 413 396 478 449 42 Switzerland 217 185 327 327 251 231 222 305 270 43 United Kingdom 999 1,073 1,323 1,323 1,300 1,371 1,3% 1,550 1,689 44 Canada 934 936 974 974 1,114 1,181 1,278 1,045 1,089 45 Latin America and Caribbean 1,857 1,930 2,237 2,237 2,114 2,100 2,131 2,163 2,045 46 Bahamas 28 19 36 36 34 13 10 57 22 47 Bermuda 193 170 230 230 234 238 270 323 242 48 Brazil 234 226 298 298 277 314 232 285 227 49 British West Indies 39 26 22 22 23 30 33 36 38 50 Mexico 412 368 460 460 482 438 508 507 522 51 Venezuela 237 283 226 226 213 229 188 148 189 52 Asia 2,755 2,915 2,973 2,973 3,097 3,145 3,301 3,532 3,273' 53 Japan 881 1,158 943 943 1,042 998 1,177 1,184 1,058 54 Middle East oil-exporting countries2 563 450 445 445 428 430 406 509 419 55 Africa 500 401 434 434 386 407 390 419 427 56 Oil-exporting countries3 139 144 122 122 95 111 80 108 89 57 All other4 222 238 331 331 297 350 381 386 361 1. For a description of the changes in the Internationa] 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 J J a u n n . e - Dec. Jan. Feb. Mar. Apr. May' Junep U.S. corporate securities STOCKS 1 Foreign purchases 181,185 213,160 88,481 15,413 13,747 13,463 16,430 11,457 15,231 18,153 2 Foreign sales 183,185 203,537 95,310 16,870 14,130 13,692 19,117 12,356 17,717 18,297 3 Net purchases, or sales (—) -2,000 9,623 -6,828 -1,457 -383 -229 -2,687 -899 -2,486 -144 4 Foreign countries -1,825 9,857 -6,903 -1,409 -353 -230 -2,733 -937 -2,543 -108 5 Europe -3,350 278 -3,634 -281 -183 -144 -990 -666 -1,048 -603 6 France -281 -708 -547 -255 -155 -157 7 -85 -189 32 7 Germany 218 -830 31 -41 41 3 105 6 -57 -66 8 Netherlands -535 167 -137 -9 -18 -38 48 -25 -20 -83 9 Switzerland -2,243 -3,468 -1,690 -442 -240 -242 -441 -221 -347 -199 10 United Kingdom -954 3,729 -1,237 391 -275 183 -720 -99 -200 -127 11 Canada 1,087 -845 -535 -458 -140 51 -163 -212 -101 29 12 Latin America and Caribbean 1,238 3,089 -449 -478 -111 -178 -208 -27 90 -14 13 Middle East1 -2,474 3,531 -921 69 -27 93 -425 116 -593 -85 14 Other Asia 1,365 3,405 -1,136 -124 231 -30 -921 -55 -904 543 15 Japan 1,922 3,340 -1,031 -53 166 -104 -764 -92 -750 512 16 Africa 188 131 -40 9 2 -34 1 -2 0 -7 17 Other countries 121 268 -189 -147 -125 12 -27 -91 13 30 18 Nonmonetary international and regional organizations -176 -234 75 -48 -30 1 46 38 57 -37 BONDS2 19 Foreign purchases 86,381 120,540 58,401 13,703 9,464 10,297 9,248 8,355 8,467 12,571 20 Foreign sales 58,417 86,510 45,794 9,331 7,810 7,780 8,061 7,499 6,347 8,297 21 Net purchases, or sales (-) 27,964 34,031 12,607 4,372 1,654 2,517 1,186 856 2,120 4,273 22 Foreign countries 28,506 33,678 12,857 4,319 2,054 2,491 1,026 850 2,195 4,242 73 Europe 17,239 19,848 7,622 1,412 1,135 245 915 1,008 781 3,538 74 France 143 372 474 6 118 9 5 -58 108 293 25 Germany 1,344 -238 -378 -33 -114 -253 -15 -40 -39 82 76 Netherlands 1,514 850 30 41 -43 15 -11 -2 33 37 77 Switzerland 505 -165 474 -277 157 58 -69 59 83 186 78 United Kingdom 13,084 18,459 7,090 1,937 1,132 475 1,009 1,158 495 2,821 79 Canada 711 1,116 1,679 204 178 474 183 353 198 292 30 Latin America and Caribbean 1,931 3,686 3,185 492 493 883 313 411 508 578 31 Middle East1 -178 -182 353 242 87 100 36 -2 251 -120 32 Other Asia 8,900 9,063 -55 1,954 152 796 -461 -993 440 11 33 Japan 7,686 6,331 10 1,728 170 1,103 -419 -1,044 331 -131 34 Africa -8 56 87 27 3 36 -8 48 8 2 35 Other countries -89 91 -15 -11 5 -43 48 24 9 -59 36 Nonmonetary international and regional organizations -542 353 -250 52 -399 27 160 6 -76 32 Foreign securities 37 Stocks, net purchases, or sales (-)3 -1,959 -12,832 -6,186 -2,217 772 -981 -90 -872 -2,421 -2,593 38 Foreign purchases 75,356 109,789 64,381 9,913 12,983 10,481 11,765 8,360 9,772 11,020 39 Foreign sales3 77,315 122,621 70,567 12,130 12,211 11,461 11,855 9,233 12,193 13,613 40 Bonds, net purchases, or sales (-) -7,434 -6,049 -14,781 -275 556 -159 -9,605 -1,830 -1,837 -1,906 41 Foreign purchases 218,521 234,215 133,279 18,545 18,512 20,671 22,375 20,184 25,879 25,658 42 Foreign sales 225,955 240,264 148,060 18,819 17,955 20,830 31,981 22,015 27,716 27,564 43 Net purchases, or sales (-), of stocks and bonds .... -9,393 -18,881 -20,967 -2,492 1,328 -1,139 -9,695 -2,702 -4,259 -4,499 44 Foreign countries -9,873 -18,914 -19,054 -2,500 1,220 -1,229 -8,094 -2,852 -4,054 -4,046 45 Europe -7,864 -17,728 -6,246 -933 1,398 -1,226 -305 -669 -1,888 -3,557 46 Canada -3,747 -4,180 -4,062 -970 -58 -144 -1,323 -1,797 -721 -19 47 Latin America and Caribbean 1,384 426 -5,924 -269 33 161 -6,648 -171 282 418 48 979 2,722 -2,322 -549 111 -307 693 -341 -1,403 -1,075 49 Africa -54 93 -20 56 -14 9 -1 -28 6 8 50 Other countries -571 -246 -480 165 -249 277 -511 154 -331 180 51 Nonmonetary international and regional organizations 480 33 -1,912 8 108 89 -1,601 150 -205 -453 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 • October 1990 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1990 1989 1990 Country or area 1988 1989 Jan.- June Dec. Jan. Feb. Mar. Apr. May' June'' Transactions, net purchases or sales (-) during period1 1 Estimated total2 48,832 54,607 -2,552 1,054 819 1,454 -8,793 3,081R -2,505 3,394 2 Foreign countries2 48,170 52,705 -1,468 -462 1,090 1,795 -8,597 4,071' -2,915 3,088 3 Europe2 14,319 35,939 5,983 2,432 1,238 2,191 -2,374 5,998r -4,247 3,178 4 Belgium-Luxembourg 923 1,048 395 -85 144 -337 -256 458 115 270 5 Germany2 -5,268 7,904 860 1,735 -216 1,672 -475 633 306 -1,061 6 Netherlands -356 -1,141 -1,341 -386 -330 -1,400 -411 749 -263 313 7 Sweden -323 886 179 29 -71 270 -22 763 -727 -34 8 Switzerland2 -1,074 1,097 299 -355 -284 -5 -251 422 -189 606 9 United Kingdom 9,640 20,198 2,058 1,285 150 1,627 -298 2,250 -3,533 1,862 10 Other Western Europe 10,786 5,968 3,524 209 1,845 363 -664 714r 43 1,223 11 Eastern Europe -10 -21 6 0 0 0 0 6 0 0 12 Canada 3,761 701 -5,338 164 -542 -2,137 -1,383 110 -1,752 367 13 Latin America and Caribbean 713 490 3,956 -886 -333 91 672 2,134 478 914 14 Venezuela -109 311 -48 -36 -107 -48 38 -49 71 48 15 Other Latin America and Caribbean 1,130 -297 2,143 -610 262 16 270 -35 610 1,021 16 Netherlands Antilles -308 475 1,860 -240 -488 123 365 2,218 -204 -154 17 Asia 27,603 14,021 -5,371 -2,767 447 2,287 -5,119 -3,872' 2,725 -1,838 18 Japan 21,750 2,404 -8,331 -1,133 837 852 -5,630 -6,102 2,933 -1,221 19 Africa -13 116 19 39 9 13 -43 —4' -8 52 20 All other 1,786 1,439 -717 555 273 -650 -351 -294 -110 416 21 Nonmonetary international and regional organizations 661 1,902 -1,084 1,516 -272 -341 -196 -991' 410 305 22 International 1,106 1,473 -401 1,335 -360 -286 -92 -528' 403 462 23 Latin America regional -31 231 -9 0 38 -11 -26 74 25 -109 Memo 24 Foreign countries2 48,170 52,705 -1,468 -462 1,090 1,795 -8,597 4,071' -2,915 3,088 25 Official institutions 26,624 27,028 -698 1,305 328 -1,425 -3,856 5,564' -2,857 1,548 26 Other foreign2 21,546 25,677 -769 -1,767 763 3,220 -4,741 -1,493' -58 1,540 Oil-exporting countries 27 Middle East^ 1,963 8,148 2,947 -640 916 970 1,020 668 -188 -439 28 Africa4 1 -1 -0 0 -1 0 0 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 Aug. 31, 1990 Rate on Aug. 31, 1990 Rate on Aug. 31, 1990 CCoouunnttrryy CCoouunnttrryy CCoouunnttrryy Percent e M ffe o c n t t i h v e Percent e M ffe o c n t t i h v e Percent e M ffe o c n t t i h v e 66666.....55555 OOOOOcccccttttt..... 11111999998888899999 99999.....55555 AAAAAppppprrrrr..... 11111999999999900000 888...000 JJJuuunnneee 111999888333 1111100000.....2222255555 OOOOOcccccttttt..... 11111999998888899999 GGeerrmmaannyy,, FFeedd.. RReepp.. ooff...... 66666.....00000 OOOOOcccccttttt..... 11111999998888899999 666...000 OOOcccttt... 111999888999 1111122222.....9999922222 AAAAAuuuuuggggg..... 11111999999999900000 IIttaallyy 1111122222.....55555 MMMMMaaaaayyyyy 11111999999999900000 1111100000.....55555 OOOOOcccccttttt..... 11111999998888899999 66666.....00000 AAAAAuuuuuggggg..... 11111999999999900000 Netherlands 77777.....00000 OOOOOcccccttttt..... 11111999998888899999 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 1990 CCoouunnttrryy,, oorr ttyyppee 11998877 11998888 11998899 Feb. Mar. Apr. May June July Aug. 1 Eurodollars 7.07 7.85 9.16 8.24 8.37 8.44 8.35 8.23 8.09 7.99 2 United Kingdom 9.65 10.28 13.87 15.07 15.23 15.17 15.11 14.95 14.92 14.95 3 Canada 8.38 9.63 12.20 12.96 13.35 13.59 13.77 13.76' 13.58 13.15 4 Germany 3.97 4.28 7.04 8.27 8.42 8.20 8.27 8.24 8.17 8.36 5 Switzerland 3.67 2.94 6.83 9.31 8.88 9.01 8.78' 8.71 8.81 8.74 6 Netherlands 5.24 4.72 7.28 8.93 8.70 8.46 8.37 8.26 8.16 8.44 7 France 8.14 7.80 9.27 10.93 10.56 9.92 9.70 9.94 9.91 10.02 8 Italy 11.15 11.04 12.44 13.22 13.03 12.11 12.09 11.33 11.38 11.53 9 Belgium 7.01 6.69 8.65 10.54 10.39 10.19 9.90 9.63 9.30 9.31 10 Japan 3.87 3.96 4.73 6.22 6.33 6.62 6.84 6.86 7.02 7.14 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 • October 1990 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar 1990 Country/currency 1987 1988 Mar. Apr. May June' July Aug. 1 Australia/dollar2 70.137 78.409 79.186 75.562 76.366 76.106 77.903 79.076 80.676 2 Austria/schilling 12.649 12.357 13.236 11.514 11.862 11.699 11.843 11.520 11.048 3 Belgium/franc 37.358 36.785 39.409 35.398 34.868 34.325 34.602 33.715 32.298 4 Canada/dollar 1.3259 1.2306 1.1842 1.1800 1.1641 1.1747 1.1730 1.1570 1.1446 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 6.5349 6.4305 6.3349 6.4080 6.2339 6.0036 7 Finland/markka 4.4037 4.1933 4.2963 4.0276 3.9923 3.9270 3.9561 3.8386 3.7071 8 France/franc 6.0122 5.9595 6.3802 5.7555 5.6638 5.5989 5.6613 5.4924 5.2706 9 Germany/deutsche mark 1.7981 1.7570 1.8808 1.7053 1.6863 1.6630 1.6832 1.6375 1.5708 10 Greece/drachma 135.47 142.00 162.60 162.44 163.77 163.82 164.78 160.59 154.84 11 Hong Kong/dollar 7.7986 7.8072 7.8008 7.8129 7.7966 7.7877 7.7855 7.7704 7.7715 12 India/rupee 12.943 13.900 16.213 17.116 17.294 17.325 17.421 17.412 17.330 13 Ireland/punt2 148.79 152.49 141.80 156.26 158.97 161.21 159.28 163.75 170.79 14 Italy/lira 1,297.03 1,302.39 1,372.28 1,257.67 1,238.38 1,221.93 1,235.60 1,199.65 1,156.34 15 Japan/yen 144.60 128.17 138.07 153.31 158.46 154.04 153.70 149.04 147.99 16 Malaysia/ringgit 2.5186 2.6190 2.7079 2.7170 2.7264 2.7024 2.7104 2.7051 2.6966 17 Netherlands/guilder .... 2.0264 1.9778 2.1219 1.9204 1.8984 1.8704 1.8946 1.8452 1.7698 18 New Zealand/dollar2 ... 59.328 65.560 59.354 58.471 57.883 57.293 58.254 59.147 61.194 19 Norway/krone 6.7409 6.5243 6.9131 6.5972 6.5457 6.4477 6.4700 6.2925 6.0843 20 Portugal/escudo 141.20 144.27 157.53 150.59 149.29 147.08 147.90 143.93 138.79 21 Singapore/dollar 2.1059 2.0133 1.9511 1.8777 1.8783 1.8589 1.8471 1.8193 1.7944 22 South Africa/rand 2.0385 2.2770 2.6214 2.6158 2.6552 2.6468 2.6592 2.6253 2.5742 23 South Korea/won 825.94 734.52 674.29 700.50 708.76 711.85 718.07 718.75 718.43 24 Spain/peseta 123.54 116.53 118.44 109.37 107.00 103.98 103.91 100.41 96.84 25 Sri Lanka/rupee 29.472 31.820 35.947 40.018 40.018 40.023 40.018 40.018 40.015 26 Sweden/krona 6.3469 6.1370 6.4559 6.1683 6.1160 6.0560 6.0896 5.9470 5.7776 27 Switzerland/franc 1.4918 1.4643 1.6369 1.5133 1.4866 1.4198 1.4250 1.3924 1.3093 28 Taiwan/dollar 31.753 28.636 26.407 26.361 26.369 26.961 27.391 27.163 27.292 29 Thailand/baht 25.775 25.312 25.725 25.926 26.024 25.928 25.876 25.706 25.596 30 United Kingdom/pound 163.98 178.13 163.82 162.45 163.72 167.74 171.03 180.98 189.85 MEMO 31 United States/dollar3... 96.94 92.72 98.60 94.11 93.51 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 A72 December 31, 1989 June 1990 A72 Terms of lending at commercial banks May 1989 March 1990 A73 August 1989 November 1989 A73 November 1989 March 1990 A79 February 1990 September 1990 A73 Assets and liabilities of U.S. branches and agencies of foreign banks June 30, 1989 November 1989 A78 September 30, 1989 March 1990 A84 December 31, 1989 August 1990 A72 March 31, 1990 September 1990 A78 Pro forma balance sheet and income statements for priced service operations June 30, 1989 February 1990 A78 September 30, 1989 March 1990 A88 March 31, 1990 September 1990 A82 June 30, 1990 October 1990 All Special table follows. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 Special Tables • October 1990 4.31 Pro forma balance sheet for priced services of the Federal Reserve System1 Millions of dollars Item June 30, 1990 June 30, 1989 Short-term assets2 Imputed reserve requirement on clearing balances 222.6 217.9 Investment in marketable securities 1,632.4 1,598.1 Receivables 59.1 62.4 Materials and supplies 6.5 6.6 Prepaid expenses 15.4 11.0 Items in process of collection 3,098.1 2,969.6 Total short-term assets 5,034.2 4,865.6 Long-term assets3 Premises 304.8 282.4 Furniture and equipment 130.3 122.0 Leases and leasehold improvements 7.0 7.7 Prepaid pension costs 57.8 44/7 Total long-term assets 499.9 456.9 Total assets 5,534.1 5,322.4 Short-term liabilities Clearing balances and balances arising from early credit of uncollected items 2,318.4 1,993.7 Deferred availability items 2,634.8 2,791.9 Short-term debt 81.0 80.0 Total short-term liabilities 5,034.2 4,865.6 Long-term liabilities Obligations under capital leases 1.2 1.2 Long-term debt 140.2 130.7 Total long-term liabilities 141.4 131.9 Total liabilities 5,175.6 4,997.5 Equity 358.5 325.0 Total liabilities and equity4 5,534.1 5,322.4 1. Details may not sum to totals because of rounding. collected for government agencies; and items associated with providing fixed 2. The imputed reserve requirement on clearing balances and investment in availability or credit prior to receipt and processing of items. The cost base for marketable securities reflect the Federal Reserve's treatment of clearing balances providing services that must be recovered under the Monetary Control Act maintained on deposit with Reserve Banks by depository institutions. For includes the cost of float (the difference between the value of gross CIPC and the presentation of the balance sheet and the income statement, clearing balances are value of deferred availability items) incurred by the Federal Reserve during the reported in a manner comparable to the way correspondent banks report period, valued at the federal funds rate. The amount of float, or net CIPC, compensating balances held with them by respondent institutions. That is, represents the portion of gross CIPC that involves a financing cost. respondent balances held with a correspondent are subject to a reserve require- 3. Long-term assets on the balance sheet have been allocated to priced services ment established by the Federal Reserve. This reserve requirement must be with the direct determination method, which uses the Federal Reserve's Planning satisfied with either vault cash or with nonearning balances maintained at a and Control System (PACS) to ascertain directly the value of assets used solely in Reserve Bank. Following this model, clearing balances maintained with Reserve priced services operations and to apportion the value of jointly used assets Banks for priced service purposes are subjected to imputed reserve requirements. between priced services and nonpriced services. Also, long-term assets include an Therefore, a portion of the clearing balances held with the Federal Reserve is estimate of the assets of the Board of Governors directly involved in the classified on the asset side of the balance sheet as required reserves and is development of priced services. reflected in a manner similar to vault cash and due from bank balances normally Long-term assets include amounts for capital leases and leasehold improveshown on a correspondent bank's balance sheet. The remainder of clearing ments and for prepaid pension costs associated with priced services. Effective balances is assumed to be available for investment. For these purposes, the January 1, 1987, the Federal Reserve Banks implemented Financial Accounting Federal Reserve assumes that all such balances are invested in three-month Standards Board Statement No. 87, Employer's Accounting for Pensions. Treasury bills. 4. A matched-book capital structure has been used for those assets that are not The account "items in the process of collection" (CIPC) represents the gross "self-financing" in determining liability and equity amounts. Short-term assets amount of Federal Reserve CIPC as of the balance sheet date, stated on a basis are financed with short-term debt. Long-term assets are financed with long-term comparable with a commercial bank. Adjustments have been made for intra- debt and equity in a proportion equal to the ratio of long-term debt to equity for System items that would otherwise be double-counted on a consolidated Federal the bank holding companies used in the model for the private sector adjustment Reserve balance sheet; items associated with nonpriced items, such as items factor (PSAF). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Bank Reported Data A73 4.32 Pro forma income statement for priced services of the Federal Reserve System1 Millions of dollars Quarter ending June 30 IItteemm 1990 1989 Income services provided to depository institutions2 182.7 180.7 Production expenses3 146.3 141.7 Income from operations 36.4 39.0 Imputed costs4 Interest on float 6.6 13.9 Interest on debt 4.2 4.2 Sales taxes 2.2 1.8 FDIC insurance 1.3 14.3 .4 20.3 Income from operations after imputed costs 22.1 18.7 Other income and expenses5 Investment income 40.6 42.4 Earnings credits 35.9 4.6 40.0 2.5 Income before income taxes 26.7 21.2 Imputed income taxes6 7.4 5.7 Net income 19.3 15.5 MEMO Targeted return on equity6 8.4 8.2 Six months ending June 30 1990 1989 Income services provided to depository institutions2 364.5 357.8 Production expenses3 292.1 291.1 Income from operations 72.4 66.7 Imputed costs4 Interest on float 15.0 25.3 Interest on debt 8.4 8.4 Sales taxes 4.0 3.7 FDIC insurance 2.6 29.9 .8 38.3 Income from operations after imputed costs 42.5 28.4 Other income and expenses5 Investment income 78.2 80.7 Earnings credits 68.8 9.4 74.3 6.3 Income before income taxes 51.9 34.7 Imputed income taxes6 14.4 11.8 Net income 37.5 22.9 MEMO Targeted return on equity6 16.8 16.4 1. The income statement reflects income and expenses for priced services. Float recovered through per-item fees is valued at the federal funds rate and has Included in these amounts are the imputed costs of float, imputed financing costs, been added to the cost base subject to recovery in the second quarter of 1990 and the income related to clearing balances. Total float 639.0 Details may not add to totals because of rounding. Unrecovered float 60.8 2. Income represents charges to depository institutions for priced services. Float subject to recovery 578.2 This income is realized through one of two methods: direct charges to an Sources of float recovery institution's account or charges against accumulated earnings credits. Income Income on clearing balances 69.3 includes charges for per-item fees, fixed fees, package fees, explicitly priced float, As of adjustments 368.6 account maintenance fees, shipping and insurance fees, and surcharges. Direct charges 93.7 3. Production expenses include direct, indirect, and other general administra- Per-item fees 146.6 tive expenses of the Federal Reserve Banks for providing priced services. Also Also included in imputed costs is the interest on debt assumed necessary to included are the expenses of staff members of the Board of Governors working finance priced-service assets and the sales taxes and FDIC insurance assessment directly on the development of priced services, which amounted to $0.4 million in that the Federal Reserve would have paid had it been a private-sector firm. the second quarter and 0.9 million in the first six months for both 1990 and 1989. Because of a change in the methodology for imputing PSAF costs approved in 4. Imputed float costs represent the value of float to be recovered, either 1989, FDIC insurance is now calculated on the basis of actual clearing balances explicitly or through per-item fees, during the period. Float costs include those for and credits that are deferred to depository institutions. Previously, the assessment checks, book-entry securities, noncash collection, ACH, and wire transfers. was calculated on the basis of available funds. The following table depicts the daily average recovery of float by the Federal 5. Other income and expenses consist of income on clearing balances and the Reserve Banks for the second quarter of 1990. In the table, unrecovered float cost of earnings credits granted to depository institutions on their clearing includes that generated by services to government agencies or by other central balances. Income on clearing balances represents the average coupon-equivalent bank services. yield on three-month Treasury bills applied to the total clearing balance main- Float recovered through income on clearing balances represents increased tained, adjusted for the effect of reserve requirements on clearing balances. investable clearing balances as a result of reducing imputed reserve requirements Expenses for earnings credits are derived by applying the average federal funds through the use of a deduction for float for cash items in process of collection rate to the required portion of the clearing balances, adjusted for the net effect of when calculating the reserve requirement. This income then reduces the float reserve requirements on clearing balances. required to be recovered through other means. 6. Imputed income taxes are calculated at the effective tax rate derived from a As-of adjustments and direct charges refer to midweek closing float and model consisting of the 50 largest bank holding companies. The targeted return on interterritory check float, which may be recovered from depositing institutions equity represents the after-tax rate of return on equity that the Federal Reserve through adjustments to the institution's reserve or clearing balance or by valuing would have earned had it been a private business firm, based on the bank holding the float at the federal funds rate and billing the institution directly. company model. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A74 Federal Reserve Board of Governors ALAN GREENSPAN, Chairman MARTHA R. SEGER 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 DIANE E. WERNEKE, Special Assistant to the Board DAVID H. HOWARD, Deputy Associate Director ROBERT F. GEMMILL, Staff Adviser DONALD B. ADAMS, Assistant Director LEGAL DIVISION 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 DIVISION OF RESEARCH AND STATISTICS SCOTT G. ALVAREZ, Assistant General Counsel 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 (Administration) GRIFFITH L. GARWOOD, Director GLENN E. LONEY, Assistant Director ELLEN MALAND, Assistant Director DIVISION OF MONETARY AFFAIRS DOLORES S. SMITH, Assistant Director DONALD L. KOHN, Director DAVID E. LINDSEY, Deputy Director DIVISION OF BANKING BRIAN F. MADIGAN, Assistant Director SUPERVISION AND REGULATION RICHARD D. PORTER, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board WILLIAM TAYLOR, Staff Director DON E. KLINE, Associate Director FREDERICK M. STRUBLE, Associate Director OFFICE OF THE INSPECTOR GENERAL WILLIAM A. RYBACK, Deputy Associate Director STEPHEN C. SCHEMERING, Deputy Associate Director BRENT L. BOWEN, Inspector General RICHARD SPILLENKOTHEN, Deputy Associate Director BARRY R. SNYDER, Assistant Inspector General HERBERT A. BIERN, Assistant Director JOE M. CLEAVER, Assistant Director ROGER T. COLE, Assistant Director JAMES I. GARNER, Assistant Director JAMES D. GOETZINGER, Assistant Director MICHAEL G. MARTINSON, Assistant Director ROBERT S. PLOTKIN, Assistant Director SIDNEY M. SUSSAN, Assistant Director LAURA M. HOMER, Securities Credit Officer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A75 and Official Staff EDWARD W. KELLEY, JR. DAVID W. MULLINS, JR. JOHN P. LA WARE OFFICE OF OFFICE OF STAFF DIRECTOR FOR STAFF DIRECTOR FOR MANAGEMENT FEDERAL RESERVE BANK ACTIVITIES S. DAVID FROST, Staff Director WILLIAM SCHNEIDER, Special Assignment: Project THEODORE E. ALLISON, Staff Director 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

76 Federal Reserve Bulletin • October 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 EDWARD W. KELLEY, JR. MARTHA R. SEGER ROBERT H. BOYKIN JOHN P. LA WARE GARY H. STERN 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

All and Advisory Councils CONSUMER ADVISORY COUNCIL WILLIAM E. ODOM, Dearborn, Michigan, Chairman JAMES W. HEAD, Berkeley, California, Vice Chairman GEORGE H. BRAASCH, Oakbrook, Illinois KATHLEEN E. KEEST, Boston, Massachusetts BETTY TOM CHU, Arcadia, California A.J. (JACK) KING, Kalispell, Montana CLIFF E. COOK, Tacoma, Washington COLLEEN D. MCCARTHY, Kansas City, Missouri JERRY D. CRAFT, Atlanta, Georgia MICHELLE S. MEIER, Washington, D.C. DONALD C. DAY, Boston, Massachusetts LINDA K. PAGE, Worthington, Ohio R.B. (JOE) DEAN, JR., Columbia, South Carolina BERNARD F. PARKER, JR., Detroit, Michigan WILLIAM C. DUNKELBERG, Philadelphia, Pennsylvania SANDRA PHILLIPS, Pittsburgh, Pennsylvania JAMES FLETCHER, Chicago, Illinois VINCENT P. QUAYLE, Baltimore, Maryland GEORGE C. GALSTER, Wooster, Ohio CLIFFORD N. ROSENTHAL, New York, New York E. THOMAS G ARM AN, Blacksburg, Virginia ALAN M. SILBERSTEIN, New York, New York DEBORAH B. GOLDBERG, Washington, D.C. RALPH E. SPURGIN, Columbus, Ohio MICHAEL M. GREENFIELD, St. Louis, Missouri NANCY HARVEY STEORTS, Dallas, Texas ROBERT A. HESS, Washington, D.C. DAVID P. WARD, Chester, New Jersey BARBARA KAUFMAN, San Francisco, California LAWRENCE WINTHROP, Portland, Oregon THRIFT INSTITUTIONS ADVISORY COUNCIL DONALD B. SHACKELFORD, Columbus, Ohio, President MARION O. SANDLER, Oakland, California, Vice President CHARLOTTE CHAMBERLAIN, Los Angeles, California ELLIOT K. KNUTSON, Seattle, Washington DAVID L. HATFIELD, Kalamazoo, Michigan JOHN WM. LAISLE, Oklahoma City, Oklahoma LYNN W. HODGE, Greenwood, South Carolina PHILIP E. LAMB, Springfield, Massachusetts ADAM A. JAHNS, Chicago, Illinois JOHN A. PANCETTI, New York, New York H.C. KLEIN, Jacksonville, Arkansas CHARLES B. STUZIN, Miami, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A78 Federal Reserve Board Publications For ordering assistance, write PUBLICATIONS SER- Each Handbook, $90.00 per year. VICES, MS-138, Board of Governors of the Federal Reserve THE U.S. ECONOMY IN AN INTERDEPENDENT WORLD: A System, Washington, D.C. 20551 or telephone (202) 452-3244 MULTICOUNTRY MODEL, May 1984. 590 pp. $14.50 each. or FAX (202) 452-3102. When a charge is indicated, payment WELCOME TO THE FEDERAL RESERVE. March 1989. 14 pp. should accompany request and be made payable to the Board INDUSTRIAL PRODUCTION—1986 EDITION. December 1986. of Governors of the Federal Reserve System. Payment from 440 pp. $9.00 each. foreign residents should be drawn on a U.S. bank. FINANCIAL FUTURES AND OPTIONS IN THE U.S. ECONOMY. December 1986. 264 pp. $10.00 each. THE FEDERAL RESERVE SYSTEM—PURPOSES AND FUNC- FINANCIAL SECTORS IN OPEN ECONOMIES: EMPIRICAL TIONS. 1984. 120 pp. ANALYSIS AND POLICY ISSUES. August 1990. 608 pp. ANNUAL REPORT. $25.00 each. ANNUAL REPORT: BUDGET REVIEW, 1988-89. FEDERAL RESERVE BULLETIN.Monthly. $25.00 per year or $2.50 each in the United States, its possessions, Canada, and Mexico. Elsewhere, $35.00 per year or $3.00 each. CONSUMER EDUCATION PAMPHLETS BANKING AND MONETARY STATISTICS. 1914-1941. (Reprint Short pamphlets suitable for classroom use. Multiple copies of Part I only) 1976. 682 pp. $5.00. are available without charge. ANNUAL STATISTICAL DIGEST 1974-78. 1980. 305 pp. $10.00 per copy. Consumer Handbook on Adjustable Rate Mortgages 1981. 1982. 239 pp. $ 6.50 per copy. Consumer Handbook to Credit Protection Laws 1982. 1983. 266 pp. $ 7.50 per copy. Federal Reserve Glossary 1983. 1984. 264 pp. $11.50 per copy. A Guide to Business Credit for Women, Minorities, and 1984. 1985. 254 pp. $12.50 per copy. Small Businesses 1985. 1986. 231 pp. $15.00 per copy. How to File A Consumer Credit Complaint 1986. 1987. 288 pp. $15.00 per copy. Series on the Structure of the Federal Reserve System 1987. 1988. 272 pp. $15.00 per copy. The Board of Governors of the Federal Reserve System 1988. 1989. 256 pp. $25.00 per copy. The Federal Open Market Committee SELECTED INTEREST AND EXCHANGE RATES—WEEKLY SE- Federal Reserve Bank Board of Directors RIES OF CHARTS. Weekly. $30.00 per year or $.70 each in Federal Reserve Banks the United States, its possessions, Canada, and Mexico. Organization and Advisory Committees Elsewhere, $35.00 per year or $.80 each. A Consumer's Guide to Mortgage Lock-Ins THE FEDERAL RESERVE ACT and other statutory provisions A Consumer's Guide to Mortgage Settlement Costs affecting the Federal Reserve System, as amended A Consumer's Guide to Mortgage Refinancing through August 1988. 608 pp. $10.00. Home Mortgages: Understanding the Process and Your Rights REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- ERAL RESERVE SYSTEM. Making Deposits: When Will Your Money Be Available? ANNUAL PERCENTAGE RATE TABLES (Truth in Lending— When Your Home is on the Line: What You Should Know Regulation Z) Vol. I (Regular Transactions). 1969. 100 About Home Equity Lines of Credit pp. Vol. II (Irregular Transactions). 1969. 116 pp. Each volume $2.25; 10 or more of same volume to one address, $2.00 each. INTRODUCTION TO FLOW OF FUNDS. 1980. 68 pp. $1.50 each; PAMPHLETS FOR FINANCIAL INSTITUTIONS 10 or more to one address, $1.25 each. Short pamphlets on regulatory compliance, primarily suit- FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; up- able for banks, bank holding companies, and creditors. dated at least monthly. (Requests must be prepaid.) Consumer and Community Affairs Handbook. $75.00 per Limit of 50 copies year. Monetary Policy and Reserve Requirements Handbook. The Board of Directors' Opportunities in Community Rein- $75.00 per year. vestment Securities Credit Transactions Handbook. $75.00 per year. The Board of Directors' Role in Consumer Law Compliance The Payment System Handbook. $75.00 per year. Combined Construction/Permanent Loan Disclosure and Federal Reserve Regulatory Service. 3 vols. (Contains all Regulation Z three Handbooks plus substantial additional material.) Community Development Corporations and the Federal Re- $200.00 per year. serve Rates for subscribers outside the United States are as Construction Loan Disclosures and Regulation Z follows and include additional air mail costs: Finance Charges Under Regulation Z Federal Reserve Regulatory Service, $250.00 per year. How to Determine the Credit Needs of Your Community Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A79 Regulation Z: The Right of Rescission 158. THE ADEQUACY AND CONSISTENCY OF MARGIN RE- The Right to Financial Privacy Act QUIREMENTS IN THE MARKETS FOR STOCKS AND DERIV- Signature Rules in Community Property States: Regulation B ATIVE PRODUCTS, by Mark J. Warshawsky with the Signature Rules: Regulation B assistance of Dietrich Earnhart. September 1989. 23 pp. Timing Requirements for Adverse Action Notices: Regula- 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUBtion B SIDIARIES OF BANK HOLDING COMPANIES, by Nellie What An Adverse Action Notice Must Contain: Regulation B Liang and Donald Savage. February 1990. 12 pp. Understanding Prepaid Finance Charges: Regulation Z 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- VICES BY SMALL AND MEDIUM-SIZED BUSINESSES, by Gregory E. Elliehausen and John D. Wolken. September 1990. 35 pp. STAFF STUDIES: Summaries Only Printed in the Bulletin REPRINTS OF Bulletin ARTICLES Studies and papers on economic and financial subjects that 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 Foreign Experience with Targets for Money Growth. 10/83. Staff Studies 114-145 are out of print. Intervention in Foreign Exchange Markets: A Summary of Ten Staff Studies. 11/83. 146. THE ROLE OF THE PRIME RATE IN THE PRICING OF A Financial Perspective on Agriculture. 1/84. BUSINESS LOANS BY COMMERCIAL BANKS, 1977-84, by Survey of Consumer Finances, 1983. 9/84. Thomas F. Brady. November 1985. 25 pp. Bank Lending to Developing Countries. 10/84. 147. REVISIONS IN THE MONETARY SERVICES (DIVISIA) IN- Survey of Consumer Finances, 1983: A Second Report. DEXES OF THE MONETARY AGGREGATES, by Helen T. 12/84. Farr and Deborah Johnson. December 1985. 42 pp. Union Settlements and Aggregate Wage Behavior in the 148. THE MACROECONOMIC AND SECTORAL EFFECTS OF THE 1980s. 12/84. ECONOMIC RECOVERY TAX ACT: SOME SIMULATION The Thrift Industry in Transition. 3/85. RESULTS, by Flint Brayton and Peter B. Clark. Decem- A Revision of the Index of Industrial Production. 7/85. ber 1985. 17 pp. Financial Innovation and Deregulation in Foreign Industrial 149. THE OPERATING PERFORMANCE OF ACQUIRED FIRMS IN Countries. 10/85. BANKING BEFORE AND AFTER ACQUISITION, by Stephen Recent Developments in the Bankers Acceptance Market. A. Rhoades. April 1986. 32 pp. 1/86. 150. STATISTICAL COST ACCOUNTING MODELS IN BANKING: The Use of Cash and Transaction Accounts by American A REEXAMINATION AND AN APPLICATION, by John T. Families. 2/86. Rose and John D. Wolken. May 1986. 13 pp. Financial Characteristics of High-Income Families. 3/86. 151. RESPONSES TO DEREGULATION: RETAIL DEPOSIT PRIC- Prices, Profit Margins, and Exchange Rates. 6/86. ING FROM 1983 THROUGH 1985, by Patrick I. Mahoney, Agricultural Banks under Stress. 7/86. Alice P. White, Paul F. O'Brien, and Mary M. Foreign Lending by Banks: A Guide to International and McLaughlin. January 1987. 30 pp. U.S. Statistics. 10/86. 152. DETERMINANTS OF CORPORATE MERGER ACTIVITY: A Recent Developments in Corporate Finance. 11/86. REVIEW OF THE LITERATURE, by Mark J. Warshawsky. Measuring the Foreign-Exchange Value of the Dollar. 6/87. April 1987. 18 pp. Changes in Consumer Installment Debt: Evidence from the 153. STOCK MARKET VOLATILITY, by Carolyn D. Davis and 1983 and 1986 Surveys of Consumer Finances. 10/87. Alice P. White. September 1987. 14 pp. Home Equity Lines of Credit. 6/88. 154. THE EFFECTS ON CONSUMERS AND CREDITORS OF PRO- Mutual Recognition: Integration of the Financial Sector in the POSED CEILINGS ON CREDIT CARD INTEREST RATES, by European Community. 9/89. Glenn B. Canner and James T. Fergus. October 1987. The Activities of Japanese Banks in the United Kingdom and 26 pp. in the United States, 1980-88. 2/90. 155. THE FUNDING OF PRIVATE PENSION PLANS, by Mark J. Industrial Production: 1989 Developments and Historical Warshawsky. November 1987. 25 pp. Revision. 4/90. 156. INTERNATIONAL TRENDS FOR U.S. BANKS AND BANK- U.S. International Transactions in 1989. 5/90. ING MARKETS, by James V. Houpt. May 1988. 47 pp. Recent Developments in Industrial Capacity and Utilization. 157. M2 PER UNIT OF POTENTIAL GNP AS AN ANCHOR FOR 6/90. THE PRICE LEVEL, by Jeffrey J. Hallman, Richard D. Developments Affecting the Profitability of Commercial Porter, and David H. Small. April 1989. 28 pp. Banks. 7/90. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A80 Index to Statistical Tables References are to pages A3-A73 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 Discount rates at Reserve Banks and at foreign central Automobiles banks and foreign countries (See Interest rates) Consumer installment credit, 39, 40 Discounts and advances by Reserve Banks (See Loans) Production, 49, 50 Dividends, corporate, 35 BANKERS acceptances, 9, 23, 24 EMPLOYMENT, 47 Bankers balances, 18-20 (See also Foreigners) Eurodollars, 24 Bonds (See also U.S. government securities) New issues, 34 FARM mortgage loans, 38 Rates, 24 Federal agency obligations, 4, 9, 10, 11, 31, 32 Branch banks, 21, 57 Federal credit agencies, 33 Business activity, nonfinancial, 46 Federal finance Business expenditures on new plant and equipment, 35 Debt subject to statutory limitation, and types and own- Business loans (See Commercial and industrial loans) ership of gross debt, 30 Receipts and outlays, 28, 29 CAPACITY utilization, 48 Treasury financing of surplus, or deficit, 28 Capital accounts Treasury operating balance, 28 Banks, by classes, 18 Federal Financing Bank, 28, 33 Federal Reserve Banks, 10 Federal funds, 6, 17, 19, 20, 21, 24, 28 Central banks, discount rates, 69 Federal Home Loan Banks, 33 Certificates of deposit, 24 Federal Home Loan Mortgage Corporation, 33, 37, 38 Commercial and industrial loans Federal Housing Administration, 33, 37, 38 Commercial banks, 16, 19 Federal Land Banks, 38 Weekly reporting banks, 19-21 Federal National Mortgage Association, 33, 37, 38 Commercial banks Federal Reserve Banks Assets and liabilities, 18-20 Condition statement, 10 Commercial and industrial loans, 16, 18, 19, 20, 21 Discount rates (See Interest rates) Consumer loans held, by type and terms, 39, 40 U.S. government securities held, 4, 10, 11, 30 Loans sold outright, 19 Federal Reserve credit, 4, 5, 10, li Nondeposit funds, 17 Federal Reserve notes, 10 Real estate mortgages held, by holder and property, 38 Federal Reserve System Time and savings deposits, 3 Balance sheet for priced services, 72 Commercial paper, 23, 24, 36 Condition statement for priced services, 73 Condition statements (See Assets and liabilities) Federal Savings and Loan Insurance Corporation insured Construction, 46, 51 institutions, 26 Consumer installment credit, 39, 40 Federally sponsored credit agencies, 33 Consumer prices, 46, 48 Finance companies Consumption expenditures, 53, 54 Assets and liabilities, 36 Corporations Business credit, 36 Nonfinancial, assets and liabilities, 35 Loans, 39, 40 Profits and their distribution, 35 Paper, 23, 24 Security issues, 34, 67 Financial institutions Cost of living (See Consumer prices) Loans to, 19, 20, 21 Credit unions, 27, 39. (See also Thrift institutions) Selected assets and liabilities, 26 Currency and coin, 18 Float, 4, 73 Currency in circulation, 4, 13 Flow of funds, 41, 43, 44, 45 Customer credit, stock market, 25 Foreign banks, assets and liabilities of U.S. branches and agencies, 21 DEBITS to deposit accounts, 15 Foreign currency operations, 10 Debt (See specific types of debt or securities) Foreign deposits in U.S. banks, 4, 10, 19, 20 Demand deposits Foreign exchange rates, 70 Banks, by classes, 18-21 Foreign trade, 56 Ownership by individuals, partnerships, and corpora- Foreigners tions, 22 Claims on, 57, 59, 62, 63, 64, 66 Turnover, 15 Liabilities to, 20, 56, 57, 59, 60, 65, 67, 68 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 GOLD REAL estate loans Certificate account, 10 Banks, by classes, 16, 19, 20, 38 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 and expenses, Federal Reserve System, 72-73 Commercial banks, 18 Income, personal and national, 46, 53, 54 Depository institutions, 3, 4, 5, 12 Industrial production, 46, 49 Federal Reserve Banks, 10 Installment loans, 39, 40 U.S. reserve assets, 56 Insurance companies, 26, 30, 38 Residential mortgage loans, 37 Interest rates Retail credit and retail sales, 39, 40, 46 Bonds, 24 Consumer installment credit, 40 SAVING Federal Reserve Banks, 7 Flow of funds, 41, 43, 44, 45 Foreign central banks and foreign countries, 69 National income accounts, 53 Money and capital markets, 24 Savings and loan associations, 26, 38, 39, 41. (See also Mortgages, 37 Thrift institutions) Prime rate, 23 Savings banks, 26, 38, 39 International capital transactions of United States, 55-69 Savings deposits (See Time and savings deposits) International organizations, 59, 60, 62, 65, 66 Securities (See also specific types) Inventories, 53 Federal and federally sponsored credit agencies, 33 Investment companies, issues and assets, 35 Foreign transactions, 67 Investments (See also specific types) New issues, 34 Banks, by classes, 18, 19, 20, 21, 26 Prices, 25 Commercial banks, 3, 16, 18-20, 38 Special drawing rights, 4, 10, 55, 56 Federal Reserve Banks, 10, 11 State and local governments Financial institutions, 26, 38 Deposits, 19, 20 Holdings of U.S. government securities, 30 New security issues, 34 LABOR force, 47 Ownership of securities issued by, 19, 20, 26 Life insurance companies (See Insurance companies) Rates on securities, 24 Loans (See also specific types) Stock market, selected statistics, 25 Banks, by classes, 18-20 Stocks (See also Securities) Commercial banks, 3, 16, 18-20 New issues, 34 Federal Reserve Banks, 4, 5, 7, 10, 11 Prices, 25 Federal Reserve System, 72-73 Financial institutions, 26, 38 Student Loan Marketing Association, 33 Insured or guaranteed by United States, 37, 38 TAX receipts, federal, 29 MANUFACTURING Thrift institutions, 3. (See also Credit unions and Savings Capacity utilization, 48 and loan associations) Production, 48, 50 Time and savings deposits, 3, 13, 17, 18, 19, 20, 21 Margin requirements, 25 Trade, foreign, 56 Member banks (See also Depository institutions) Treasury cash, Treasury currency, 4 Federal funds and repurchase agreements, 6 Treasury deposits, 4, 10, 28 Reserve requirements, 8 Treasury operating balance, 28 Mining production, 50 UNEMPLOYMENT, 47 Mobile homes shipped, 51 U.S. government balances Monetary and credit aggregates, 3, 12 Commercial bank holdings, 18, 19, 20 Money and capital market rates, 24 Treasury deposits at Reserve Banks, 4, 10, 28 Money stock measures and components, 3, 13 Mortgages (See Real estate loans) U.S. government securities Mutual funds, 35 Bank holdings, 18-20, 21, 30 Dealer transactions, positions, and financing, 32 Mutual savings banks (See Thrift institutions) Federal Reserve Bank holdings, 4, 10, 11, 30 Foreign and international holdings and transactions, 10, NATIONAL defense outlays, 29 30, 68 National income, 53 Open market transactions, 9 Outstanding, by type and holder, 26, 30 OPEN market transactions, 9 Rates, 24 U.S. international transactions, 55-69 PERSONAL income, 54 Utilities, production, 50 Prices Consumer and producer, 46, 52 VETERANS Administration, 37, 38 Stock market, 25 Prime rate, 23 WEEKLY reporting banks, 19-21 Producer prices, 46, 52 Wholesale (producer) prices, 46, 52 Production, 46, 49 Profits, corporate, 35 YIELDS (See Interest rates) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A82 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON* 02106 Richard N. Cooper Richard F. Syron Richard L. Taylor Robert W. Eisenmenger NEW YORK* 10045 Cyrus R. Vance E. Gerald Corrigan Ellen V. Futter James H. Oltman Buffalo 14240 Mary Ann Lambertsen James O. Aston PHILADELPHIA 19105 Peter A. Benoliel Edward G. Boehne Gunnar E. Sarsten William H. Stone, Jr. CLEVELAND* 44101 Charles W. Parry W. Lee Hoskins John R. Miller William H. Hendricks Cincinnati 45201 Kate Ireland Charles A. Cerino1 Pittsburgh 15230 Robert P. Bozzone Harold J. Swart1 RICHMOND* 23219 Hanne M. Merriman Robert P. Black Anne Marie Whittemore Jimmie R. Monhollon Baltimore 21203 John R. Hardesty, Jr. Robert D. McTeer, Jr.1 Charlotte 28230 William E. Masters Albert D. Tinkelenberg1 Culpeper Communications John G. Stoides1 and Records Center 22701 ATLANTA 30303 Larry L. Prince Robert P. Forrestal Edwin A. Huston Jack Guynn Donald E. Nelson Birmingham 35283 A. G. Trammell Fred R. Herr1 Jacksonville 32231 Lana Jane Lewis-Brent James D. Hawkins1 Miami 33152 Robert D. Apelgren James T. Curry III Nashville 37203 Victoria B. Jackson Melvyn K. Purcell New Orleans 70161 Andre M. Rubenstein Robert J. Musso CHICAGO* 60690 Marcus Alexis Silas Keehn Charles S. McNeer Daniel M. Doyle Detroit 48231 Phyllis E. Peters Roby L. Sloan1 ST. LOUIS 63166 H. Edwin Trusheim Thomas C. Melzer Robert H. Quenon James R. Bowen Little Rock 72203 L. Dickson Flake Karl W. Ashman Louisville 40232 Raymond M. Burse Howard Wells Memphis 38101 Katherine H. Smythe Ray Laurence MINNEAPOLIS 55480 Michael W. Wright Gary H. Stern Delbert W. Johnson Thomas E. Gainor Helena 59601 J. Frank Gardner John D. Johnson KANSAS CITY 64198 Fred W. Lyons, Jr. Roger Guffey Burton A. Dole, Jr. Henry R. Czerwinski Denver 80217 Barbara B. Grogan Kent M. Scott Oklahoma City 73125 John F. Snodgrass David J. France Omaha 68102 Herman Cain Harold L. Shewmaker DALLAS 75222 Bobby R. Inman Robert H. Boykin Hugh G. Robinson William H. Wallace Tony J. Salvaggio1 El Paso 79999 Donald G. Stevens Sammie C. Clay Houston 77252 Andrew L. Jefferson, Jr. Robert Smith, III1 San Antonio 78295 Roger R. Hemminghaus Thomas H. Robertson SAN FRANCISCO 94120 Robert F. Erburu Robert T. Parry Carolyn S. Chambers Carl E. Powell Los Angeles 90051 Yvonne B. Burke Thomas C. Warren2 Portland 97208 William A. Hilliard Angelo S. Carella1 Salt Lake City 84125 Don M. Wheeler E. Ronald Liggett1 Seattle 98124 Bruce R. Kennedy Gerald R. Kelly1 •Additional offices of these Banks are located at Lewiston, Maine 04240; Windsor Locks, Connecticut 06096; Cranford, New Jersey 07016; Jericho, New York 11753; Utica at Oriskany, New York 13424; Columbus, Ohio 43216; Columbia, South Carolina 29210; Charleston, West Virginia 25311; Des Moines, Iowa 50306; Indianapolis, Indiana 46204; and Milwaukee, Wisconsin 53202. 1. Senior Vice President. Digitized for FR2A. SEExeRc utive Vice President. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A83 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories April 1984 LEGEND ~~~ Boundaries of Federal Reserve Districts ® Federal Reserve Bank Cities Boundaries of Federal Reserve Branch * Federal Reserve Branch Cities Territories Federal Reserve Bank Facility Q Board of Governors of the Federal Reserve System Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Publications of Interest FEDERAL RESERVE REGULATORY SERVICE subscription requests must be accompanied by a check or money order payable to the Board of Governors of To promote public understanding of its regulatory the Federal Reserve System. Orders should be adfunctions, the Board publishes the Federal Reserve dressed to Publications Services, mail stop 138, Board Regulatory Service, a three-volume looseleaf service of Governors of the Federal Reserve System, Washcontaining all Board regulations and related statutes, ington, D.C. 20551. interpretations, policy statements, rulings, and staff opinions. For those with a more specialized interest in the Board's regulations, parts of this service are pub- U.S. MONETARY POLICY AND FINANCIAL lished separately as handbooks pertaining to monetary MARKETS policy, securities credit, consumer affairs, and the payment system. U.S. Monetary Policy and Financial Markets by These publications are designed to help those who Ann-Marie Meulendyke offers an in-depth descripmust frequently refer to the Board's regulatory mate- tion of the way monetary policy is developed by the rials. They are updated at least monthly, and each Federal Open Market Committee and the techniques contains citation indexes and a subject index. employed to implement policy at the Open Market The Monetary Policy and Reserve Requirements Trading Desk. Written from her perspective as a Handbook contains Regulations A, D, and Q plus senior economist in the Open Market Function at the related materials. For convenient reference, it also Federal Reserve Bank of New York, Ann-Marie contains the rules of the Depository Institutions De- Meulendyke describes the tools and the setting of regulation Committee. policy, including many of the complexities that dif- The Securities Credit Transactions Handbook con- ferentiate the process from simpler textbook models. tains Regulations G, T, U, and X, dealing with exten- Included is an account of a day at the Trading Desk, sions of credit for the purchase of securities, together from morning information-gathering through daily with all related statutes, Board interpretations, rul- decisionmaking and the execution of an open market ings, and staff opinions. Also included is the Board's operation. list of OTC margin stocks. The book also places monetary policy in a broader The Consumer and Community Affairs Handbook context, examining first the evolution of Federal Recontains Regulations B, C, E, M, Z, AA, and BB and serve monetary policy procedures from their beginassociated materials. nings in 1914 to the end of the 1980s. It indicates how The Payment System Handbook deals with expe- policy operates most directly through the banking dited funds availability, check collection, wire trans- system and the financial markets and describes key fers, and risk-reduction policy. It includes Regulation features of both. Finally, the book turns its attention to CC, Regulation J, the Expedited Funds Availability the transmittal of monetary policy actions to the U.S. Act and related statutes, official Board commentary on economy and throughout the world. Regulation CC, and policy statements on risk reduc- The book is $5.00 a copy for U.S. purchasers and tion in the payment system. $10.00 for purchasers outside the United States. Cop- For domestic subscribers, the annual rate is $200 for ies are available from the Public Information Departthe Federal Reserve Regulatory Service and $75 for ment, Federal Reserve Bank of New York, 33 Liberty each Handbook. For subscribers outside the United Street, New York, N.Y. 10045. Checks must accom- States, the price including additional air mail costs is pany orders and should be payable to the Federal $250 for the Service and $90 for each Handbook. All Reserve Bank of New York in U.S. dollars. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis