Federal Reserve Bulletin, 1990-11

VOLUME 76 • NUMBER 11 • NOVEMBER 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 I 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 891 U.S. EXCHANGE RATE POLICY: tionally, before the House Committee on BRETTON WOODS TO PRESENT Banking, Finance and Urban Affairs, September 13, 1990. This article traces U.S. exchange rate policy through two major exchange rate re- 928 Chairman Greenspan discusses the state of gimes: the Bretton Woods system of fixed the economy and says that it is the responexchange rates from December 1958 to sibility of monetary policy to look through March 1973 and the present system of man- the uncertainty of the near term and to aged floating, which began in March 1973. provide the stable financial environment The article discusses broad objectives, ap- that is consistent with our longer-run objecproaches, and major episodes in policy dur- tives, before the Joint Economic Commiting each regime. tee of the U.S. Congress, September 19, 1990. 909 INDUSTRIAL PRODUCTION 931 ANNOUNCEMENTS Industrial production decreased 0.2 percent in August after no change in July; industrial Amendment to Regulation Z related to capacity utilization declined 0.4 percent in home equity lines of credit. August to 83.1 percent. Extension of comment period on proposed revisions to Regulation K. 911 STATEMENTS TO THE CONGRESS Revised brochure, A Guide to Business Wayne D. Angell, Member, Board of Gov- Credit for Women, Minorities, and Small ernors, discusses regulatory accounting Businesses. standards and capital requirements for de- Publication of new brochure, Home Mortpository institutions and focuses in particugages: Understanding the Process and lar on market value accounting and the Your Rights. Federal Reserve's view on how the banking agencies might proceed to assess interest rate risk for examination and capital ade- 933 LEGAL DEVELOPMENTS quacy purposes, before the Senate Committee on Banking, Housing, and Urban Af- Various bank holding company, bank serfairs, September 10, 1990. vice corporation, and bank merger orders; and pending cases. 917 Alan Greenspan, Chairman, Board of Governors of the Federal Reserve System, dis- AI FINANCIAL AND BUSINESS STATISTICS cusses deposit insurance reform and says These tables reflect data available as of that this issue is intimately related to the September 26, 1990. need for legislation to modernize our banking system in other ways in light of the A3 Domestic Financial Statistics erosion of the competitiveness of our bank- A46 Domestic Nonfinancial Statistics ing system both domestically and interna- A55 International Statistics Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 GUIDE TO TABULAR PRESENTATION, A78 FEDERAL RESERVE BOARD STATISTICAL RELEASES, AND SPECIAL PUBLICATIONS TABLES A80 INDEX TO STATISTICAL TABLES A74 BOARD OF GOVERNORS AND STAFF A82 FEDERAL RESERVE BANKS, BRANCHES, AND OFFICES A76 FEDERAL OPEN MARKET COMMITTEE A83 MAP OF THE FEDERAL RESERVE AND STAFF; ADVISORY COUNCILS SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present B. Dianne Pauls, of the Board's Division of "U.S. dollar of specified gold content."2 Foreign International Finance, prepared this article. monetary authorities were obliged to intervene in foreign exchange markets to maintain the value of their currencies within 1 percent of their dollar Over the past thirty years or so, the United parities. Monetary authorities in major foreign States has operated under two distinct exchange countries undertook this intervention in dollars; rate regimes. The first, which lasted effectively the U.S. Treasury stood ready to sell gold to from December 1958 to March 1973, was the them or buy it from them at the official price of Bretton Woods system of fixed exchange rates. $35 per ounce. In light of this commitment by the In the second, which began in March 1973 and United States and the dominance of the U.S. has continued to the present, exchange rates economy, the dollar was the principal reserve have been subject to managed floating. This currency and, aside from gold, the principal article traces the evolution of U.S. exchange rate reserve asset of the Bretton Woods system. policy through these two regimes, focusing for Sterling remained a reserve currency, but it was each on the broad objectives of U.S. policy, only a minor one for countries outside of the operational objectives and approaches, and the British Commonwealth. major episodes in policy during the period. Because the responsibility for intervention in exchange markets lay with foreign authorities, direct U.S. intervention during the Bretton THE BRETTON WOODS SYSTEM: Woods era was extremely limited. Before August DECEMBER 1958 TO MARCH 1973 15, 1971, U.S. operations were restricted largely to two types: selling gold to foreign authorities The system of fixed exchange rates was provided for the dollars acquired by those authorities in for in the Articles of Agreement, the charter for exchange market intervention; and, later, buying the International Monetary Fund that was negodollars from foreign authorities in return for that tiated at Bretton Woods, New Hampshire, in country's currency, which the United States had 1944. Although the Articles went into force in acquired by drawings on the Federal Reserve December 1945, the system of fixed exchange swap network and the issuance of bonds denomrates envisaged at Bretton Woods became fully inated in foreign currencies. Only after the dollar operational only at the end of 1958, when most had been declared inconvertible into gold, had major foreign currencies became convertible for the private sector into dollars for current account transactions.1 Under the Bretton Woods system, par values were established for the currencies of 2. Initially, the par value of the dollar was defined by the IMF member countries in terms of gold or the President at $35 per ounce of gold under the authority granted to him by the Gold Reserve Act of 1934. The Congress modified the par value of the dollar to $38 per ounce of gold in the Par Value Modification Act, passed in February 1972. This act was subsequently amended in September 1973, to redefine the par value as $42.22 per ounce of gold. When the 1. In 1958, among European countries, only Germany also Second Amendment to the Articles of Agreement was appermitted convertibility for the proceeds of capital account proved on October 19, 1976, the Congress repealed the Par transactions. The Japanese yen was not convertible for Value Modification Act but retained the value of $42.22 per current account transactions until 1964. ounce of gold for the purpose of valuing the U.S. gold stock. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

892 Federal Reserve Bulletin • November 1990 been devalued in the Smithsonian Agreement, early 1960s, when the United States began to and still was under downward pressure in ex- cumulate deficits in its balance of payments. (See change markets, did U.S. authorities undertake the glossary for a definition of this term and much direct intervention in the exchange market. others used in this article.) From 1960 to 1967, as U.S. residents continued to invest in the recon- Broad Objectives struction of Western Europe and Japan, large of U.S. Exchange Rate Policy capital outflows generally outweighed surpluses in the U.S. trade and current accounts. Foreign In establishing the Bretton Woods system, the monetary authorities began to accumulate dollars IMF's Articles of Agreement heavily stressed as they intervened to maintain the value of their exchange rate stability. The intent was to dis- currencies in the face of growing U.S. payments courage the competitive devaluations that were deficits. In turn, they purchased gold more and viewed as contributing to economic and financial more from the U.S. Treasury with these dollars. chaos in the 1920s and 1930s. The Articles for- The Treasury sold, net, more than $10 billion mally permitted adjustment of a currency's par worth of gold between December 1958 and August value only if the country's balance of payments 1971, cutting its gold stock in half (see chart 1). was in "fundamental disequilibrium." This was Sales to France and in the London gold market to an imprecise concept, but it came to mean that stabilize the market price around the official price exchange rates would be adjusted only as a last accounted for much of this total. Even if gold resort and only in conjunction with other policies were not immediately demanded, there remained to redress the disequilibrium. the threat that it could be demanded by foreign monetary authorities. To preserve the credibility Given the widespread concern about competiof the offer to convert dollars into gold and, with tive devaluations and the goal of maintaining a it, the stability of the Bretton Woods system, the system of fixed exchange rates, the overriding protection of the U.S. gold stock became the key objective of U.S. exchange rate policy was the operational objective of U.S. exchange rate polmaintenance of a fixed par value of the dollar. icy. The government adopted five approaches to Keeping the dollar a leading standard and store meeting this objective. of value provided a stable center for the world's monetary structure. Revaluations of foreign currencies against gold and the dollar, though few, Operations in Foreign Currencies. As the first were more readily accepted by the United States line of defense, U.S. authorities resumed operathan devaluations, which were considered appro- tions in foreign currencies in the early 1960s, priate only if unavoidable. Devaluation of the after a hiatus of nearly thirty years. The Treadollar, under the Bretton Woods system, could sury, using the Federal Reserve Bank of New be achieved only by an increase in the dollar York as its fiscal agent, began operations in 1961. price of gold without a commensurate increase in the price of gold in terms of other currencies. 1. U.S. gold stock and gold and foreign exchange Hence, it could not be accomplished without the reserves of foreign G-10 countries, 1958-71 cooperation of foreign authorities. Moreover, Billions of dollars Billions of dollars most U.S. policymakers ruled out devaluation of the dollar: They saw it as likely to disturb the world economy by increasing the propensity to shift reserves out of dollars and into gold and thereby undermining confidence in the fixed exchange rate system. Operational Objectives and Approaches The credibility of the U.S. commitment to con- Gold is valued at $35 per ounce. The data are for the end of the periods, vert dollars into gold came into question in the except for 1971, for which the data are for the end of August. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present 893 Glossary mi Balance of Payments. The balance of payments marks, Swiss francs, Italian lira, Belgian francs, and is defined in various ways. Under the Bretton Austrian schillings. Earlier issues, also called Roosa Woods system, analysis of longer-run fundamen- bonds, were denominated in dollars and had special tals tended to focus on the basic balance, consist- maturity and interest rate provisions. ing of the current account plus net long-term capital flows. From the perspective of potential SDRs. Special drawing rights are international claims on the gold stock, however, policymakers reserve assets created by the International Monegenerally used the official settlements balance— tary Fund. The IMF has allocated a total of SDR the basic balance plus net private short-term 21.4 billion in six allocations since the SDR was capital. Unless otherwise specified, the concept established in 1969. The amount allocated to a used in this paper for the Bretton Woods period is participant is proportionate to its quota in the Fund the official settlements balance. Under the regime at the time of the allocation. The value of the SDR of floating exchange rates, measures of the overall initially was defined in terms of gold, at SDR 35 per balance of payments were abandoned and attenounce. After the move to widespread floating of tion focused on current account positions. exchange rates in 1973, the value of the SDR was redefined in terms of a basket of currencies. Ini- Carter Bonds. Carter bonds were two- to four-year tially, the currencies were those of the sixteen notes denominated in marks and Swiss francs and countries that had a share in world exports of goods issued publicly by the U.S. Treasury in the German and services in excess of 1 percent on average over and Swiss capital markets between late 1978 and the period 1968-72—the G-10 countries plus Austra- January 1980. They were issued to supplement forlia, Denmark, Norway, Spain, Austria, and South eign currency resources for U.S. intervention. Africa. The composition and weights for the basket of sixteen currencies were revised in July 1978 to Group of Five or G-5 Countries. The countries are reflect export shares for 1972-76. In 1981, the Fund France, Germany, Japan, the United Kingdom, and decided to restrict the currencies in the basket to the United States. those of the five most important countries in world trade—the United States, West Germany, Japan, Group of Seven or G-7 Countries. The countries France, and the United Kingdom. include the G-5 countries plus Canada and Italy. Swap Network. The swap network is a series of Group of Ten or G-10 Countries. The countries bilateral arrangements between the Federal Reserve were those members of the IMF participating in and fourteen foreign central banks and the BIS the General Agreements to Borrow—originally, providing standby reciprocal facilities for obtaining Belgium, Canada, France, Germany, Italy, Japan, foreign currencies. The facilities provide for the the Netherlands, Sweden, the United Kingdom, swap (simultaneous spot purchase and forward sale) and the United States. In 1984, Switzerland joined of each other's currency by the Federal Reserve and the G-10, making in fact eleven countries, but by the respective foreign central bank. Swap drawings convention the name remains the G-10. The usage typically have a three-month maturity, with an unof G-10 throughout this article includes Switzerderstanding that they may be more or less automatland, even though it was not a member of the IMF, ically rolled over for another three months. because it was party to the various agreements regarding exchange rates and before joining the G-10 had an agreement parallel to the General Warehousing. In a warehousing operation, the Agreements to Borrow to lend its currency to the Federal Reserve buys foreign currencies spot from IMF. the Exchange Stabilization Fund, and simultaneously sells back the proceeds for delivery at a Roosa Bonds. Roosa bonds were medium-term specified future date. Because both purchase and bonds denominated in foreign currencies issued to sale are made at a given exchange rate, neither side official institutions of foreign countries intermit- incurs additional exchange rate risk; interest earntently from 1962 to 1971, in an effort to defend the ings on the foreign currencies warehoused accrue U.S. gold stock. They were issued in German to the Federal Reserve. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

894 Federal Reserve Bulletin • November 1990 It acted under the authority granted it by the mostly to purchase dollars unwillingly held by for- Gold Reserve Act of 1934, which established the eign monetary authorities, thereby assuming the Exchange Stabilization Fund for the purpose of exchange rate risk on those holdings. Otherwise, stabilizing the exchange value of the dollar. Be- those dollars could have been converted into gold. cause the ESF's resources were meager, the To obtain medium-term credit, the Treasury Treasury was anxious for the Federal Reserve to issued "Roosa bonds," named after then Underparticipate for its own account in foreign cur- secretary of the Treasury Robert V. Roosa. rency operations.3 The Federal Reserve had op- These bonds were designed to be attractive to erated on a very limited ad hoc basis for its own foreign monetary authorities as an alternative to account in the forward exchange market in 1961. converting dollars into gold. Part of the foreign In early 1962, the Federal Open Market Commit- currency proceeds from Roosa bonds was used tee (FOMC) authorized operations in foreign to extinguish swap debt that otherwise would currencies, first on an experimental, then on an have lingered beyond the one-year limit set by ongoing basis. In 1963, the Federal Reserve the FOMC on such drawings. authorized the "warehousing" of foreign curren- Finally, the Treasury also could obtain foreign cies for the ESF, and in that year, it made a currencies by drawing on its credit facilities with warehousing-type transaction. By temporarily the International Monetary Fund. However, beselling some of its foreign currency holdings to fore 1961, the IMF's supply of usable nondollar the Federal Reserve for dollars through ware- currencies was limited by the small size of the housing, the ESF was able to continue to pur- quotas of its other members. In that year, the chase foreign currencies even after it had ex- United States and the other Group of Ten counhausted its initial dollar resources. tries negotiated a mechanism to increase the po- To supplement resources for foreign currency tential availability of their currencies to the IMF operations, various credit facilities were devel- under the General Arrangements to Borrow. oped. Beginning in 1962, the Federal Reserve established a network of reciprocal currency Stabilizing the Market Price of Gold. A second agreements (swap facilities) with the major for- approach used to protect the U.S. gold stock was eign central banks and the Bank for International an attempt to stabilize the private market price of Settlements. By the end of 1967, this network gold around the official price of $35 an ounce. consisted of lines with fourteen central banks and The United States was concerned that if the the BIS. Drawings on swap lines were explicitly market price were allowed to rise appreciably of short term, and were intended to finance or above the official price, foreign monetary authoraccommodate short-term capital flows believed ities would convert their dollar holdings into gold to be seasonal or temporary in nature. They were at the official price in order to profit by later not intended as a substitute for more fundamen- reselling the gold at the higher market price. To tal adjustment in the balance of payments. For its eliminate this potential source of pressure on part, the Federal Reserve used its swap drawings U.S. gold reserves, in 1961 the United States and seven other countries formed the Gold Pool, a consortium to sell officially held gold in the London market to keep the private market price 3. The ESF had an initial capital of $2 billion derived from below $35.20 an ounce (roughly the cost of the proceeds of the 1934 revaluation of the U.S. gold stock from $20.67 to $35.00 per ounce. Subsequently, the Bretton delivering in London gold purchased in New Woods Agreements Act directed the Secretary of the Treasury York). The nominal share of the United States in to pay $1.8 billion from the ESF for the U.S. quota subscrip- Gold Pool sales was 60 percent; in fact, the share tion in the IMF, thereby reducing the ESF's appropriated capital to $200 million. The ESF grew over time through was larger because other central banks converted subsequent revaluations of gold, interest receipts, and net the dollar proceeds of their Gold Pool sales at the profits resulting from foreign exchange operations. Beginning Treasury's gold window in order to replenish in 1978, SDRs allocated by the IMF to the United States or otherwise acquired by the United States became resources of their gold stocks. Although the Gold Pool later the ESF, and the ESF was authorized to issue SDR certificates became a gold-buying as well as gold-selling to the Federal Reserve to help finance the ESF's foreign syndicate, most of its transactions were sales; currency operations. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present 895 given the large U.S. share in the pool, in the end lating growth, and monetary policy emphasized these sales played a major role in the decline in redressing the capital outflow. In 1961, debt- U.S. gold reserves. Ultimately, in March 1968, management and monetary policies sought to the Gold Pool was closed, and a two-tier market sustain short-term interest rates while allowing for gold was adopted with a fixed price for official long-term rates to decline. This policy, called transactions and a flexible price in the private Operation Twist, was aimed at discouraging capmarket. The United States continued to sell gold ital outflows while encouraging business and to foreign monetary authorities at $35 an ounce, residential investment. The investment tax and they, in turn, agreed not to sell gold in the credit, introduced in October 1962, was designed private market. to boost investment without lowering long-term interest rates and possibly exacerbating capital Freeing Gold for International Settlement. outflows. In 1963, tax rates were reduced, and The amount of U.S. gold reserves that were the Federal Reserve increased its discount rate in "free," or available for transactions with foreign July from 3 to 3V2 percent "to minimize shortmonetary authorities, was limited by the legal term capital outflows prompted by higher interest requirement that U.S. monetary authorities hold rates prevalent in other countries." gold equal to 25 percent of the value of domestic In addition, a comprehensive program of capcurrency as backing for the currency. In a third ital controls was adopted, which targeted the approach to protecting the U.S. gold stock, this three main types of capital outflow: American gold cover was repealed, also in March 1968, portfolio and direct investment abroad, particufreeing up additional gold reserves for interna- larly in Western Europe and Japan, and foreign tional settlement.4 borrowing in the United States. The interest equalization tax, initiated in 1963, was a reaction Redressing the Balance of Payments. The to the growing issuance of foreign bonds in the fourth approach used to protect the U.S. gold United States: Markets for these issues were stock was to redress the balance of payments developing slowly in other countries, and interest deficit, both directly through commercial policies rates were lower in the United States than and capital controls and indirectly through de- abroad. The tax was designed to curtail sales of mand-management policies. Devaluation of the new issues of stocks and bonds by foreigners to dollar was ruled out by U.S. policy and could not U.S. residents. The Federal Reserve's Voluntary be accomplished unilaterally in any case under Foreign Credit Restraint Program, established in the Bretton Woods system. 1965, was intended to limit funding in the United A sharp deterioration in the U.S. current ac- States of U.S. banks' foreign operations.5 U.S. count, which recorded a deficit in 1959, funding of direct foreign investment by U.S. prompted the United States to tie its foreign aid corporations was limited by a Commerce Departto its exports and played some role in the adop- ment program, begun on a voluntary basis in tion of more restrictive monetary and fiscal pol- 1965 but made mandatory in 1968. icies in that year. As the economy entered a recession in 1960, the current account returned Creating a New Reserve Asset. While trying to to surplus, but the United States continued to run remedy the payments deficit, U.S. policymakers deficits in its balance of payments as a result of recognized the need for a systematic means to capital outflows. During the Kennedy Adminis- provide for growth in international liquidity withtration, fiscal policy was directed toward stimu- out putting pressure on the role of the dollar in the international monetary system. An expand- 4. The Gold Reserve Act of 1934 required 40 percent gold cover on Federal Reserve notes in circulation and 35 percent 5. As a traditional borrower in U.S. markets, Canada was cover on deposits at Federal Reserve Banks. In 1945, these exempted from both the interest equalization tax and the requirements were reduced to a uniform 25 percent. In March Voluntary Foreign Credit Restraint Program on the under- 1965, the 25 percent gold cover on deposits at Federal standing that it would not serve as a conduit for capital flows Reserve Banks was eliminated. to the rest of the world. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis N

896 Federal Reserve Bulletin • November 1990 ing world economy could be expected to gener- During the summer of 1964, the U.K. balance of ate a secular increase in the demand for interna- payments deteriorated sharply, largely because of tional reserves—dollars and gold. That demand a stimulative fiscal policy. After the Labor Party's had been met through the early 1960s by a victory in October 1964, selling pressure on sterbuildup of official claims on the United States as ling intensified as the new government's policies foreign monetary authorities intervened to main- showed little prospect for redressing the paytain the value of their currencies against the ments deficit. The U.K. government strongly opdollar. Gold and foreign exchange reserves of the posed the devaluation of sterling. The United foreign G-10 countries tripled over the Bretton States endorsed this position and participated in Woods period, as chart 1 shows. Most of the international credit packages to bolster U.K. regrowth reflects an increase in foreign exchange serves, including increases in the Federal Re- (essentially dollars), which, as is evident from serve's swap line with the Bank of England in the chart, was not matched by a rise in the U.S. 1964 and 1966. When sterling again came under gold stock. Hence, confidence in the ability of downward pressure in the second half of 1965, the the United States to meet calls on the gold stock Federal Reserve joined a number of European diminished. Thus, reliance solely on increases in central banks and the Bank of Japan in purchasing U.S. liabilities to foreign official institutions for sterling in the market. Exchange rate risk on the an increase in world reserves was seen to be sterling acquired was covered by agreements with inconsistent in the long run with maintaining the the Bank of England. convertibility of the dollar into gold. After intermittent recoveries and bouts of sell- In light of this fundamental tension, the final ing pressure, sterling again came under persistent approach to protecting the U.S. gold stock and downward pressure beginning in the spring of the stability of the Bretton Woods system was to 1967, for several reasons: U.K. monetary policy create a reserve asset whose supply could be eased; tensions mounted in the Middle East systematically increased as the world economy culminating in war; and the U.K. trade position expanded. This approach was proposed by the steadily deteriorated, especially after the closing United States and eventually resulted in an of the Suez Canal. In an effort to support sterling, agreement to create SDRs (Special Drawing U.S. authorities purchased it in the market on a Rights of the International Monetary Fund) swap basis (that is, they bought sterling spot through the First Amendment to the IMF Arti- against redelivery to the market at a future date). cles of Agreement, which was adopted in 1968 After several increases in the Bank of England's and became effective the following year. The first official lending rate failed to relieve the pressure allocation of SDRs was made in January 1970. on sterling, the U.K. authorities devalued the pound in November 1967. No major country followed the United Kingdom in devaluing; Major Episodes and U.S. Responses nonetheless, the devaluation of sterling brought into question the basic premise of the Bretton Responding to the strains that divergent macro- Woods system that par values of reserve curreneconomic policies, structural changes in the cies should be regarded as fixed. world economy, and resulting payments imbal- By late 1967, U.S. inflation had risen, and the ances placed on the Bretton Woods system, balance of payments had worsened as a consemonetary authorities devalued and revalued cur- quence of the economic expansion associated rencies or on occasion allowed them to float. The with the Vietnam War. Rapid advances in Ja- United States generally welcomed revaluations pan's international competitiveness, following its but considered devaluations appropriate only if postwar reconstruction, exacerbated the U.S. they were unavoidable. However, when sterling payments imbalance. In this context, selling came under pressure intermittently in 1964-67, pressure shifted from sterling to the dollar. The the United States was concerned that the deval- pressure took the form of record private puruation of the other major reserve currency would chases of gold in London and shifts of private exert substantial market pressure on the dollar. funds from dollars into continental currencies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present 897 The United States reaffirmed its commitment to controls in foreign countries proliferated, and maintain the official price of gold at $35 per ounce intervention by foreign central banks to slow the and, acting jointly with other members of the appreciation of their currencies against the dollar Gold Pool, continued to stabilize the market was substantial, even though they were no longer price through sales in the London market. The defending fixed dollar parities. Federal Reserve also enlarged its swap lines, A system of fixed parities among the currencies which were used to absorb some of the dollars of the G-10 countries was re-established through a flowing to foreign central banks; and to a limited negotiated realignment of exchange rates in the extent it sold foreign currencies forward to the Smithsonian Agreement of December 1971. The market. However, heavy sales of gold by mem- dollar was devalued in terms of gold to $38 per bers of the Gold Pool tended to encourage further ounce; other currencies generally were revalued speculative buying as market participants came against the dollar by varying amounts. These to expect that, given the implied loss of gold, changes in parities resulted in an effective devalthese operations would be abandoned. Indeed, uation of the dollar of nearly 10 percent on averthe Gold Pool was disbanded in March 1968, and age against the other G-10 currencies. The amount the two-tier pricing system was established. of the devaluation fell short of the best U.S. Continued deterioration in the U.S. trade and government estimates of what would be required current accounts was offset in 1969 by increases in to restore the U.S. external position to a sustain- U.S. monetary restraint, which supported the able balance. Other G-10 countries, however, dollar. However, once U.S. monetary conditions would not agree to a larger devaluation of the eased as domestic economic activity slowed, the dollar. Recognizing that somewhat more flexideterioration in the external accounts again came bility in exchange rates was desirable, the G-10 to the fore, and by 1971 the dollar came under authorities widened the margins for intervention heavy selling pressure. U.S. authorities re- to 2Va percent to permit small adjustments in sponded initially with limited forward sales of exchange rates without changes in par values. The foreign currencies and swap drawings to mop up United States made no commitment to defend the part of the purchases of dollars by foreign central Smithsonian parity for the dollar through interbanks. Some foreign countries, notably Germany, vention or to restore the convertibility of the abandoned parities and began to allow their cur- dollar into gold: Intervention was still left to rencies to float in May 1971. After selling pressure foreign monetary authorities if they wanted to on the dollar intensified and foreign central banks maintain their new parities. The United States did stepped up their demands for gold conversions, agree to examine the case for a more thorough President Nixon, on August 15, 1971, suspended reform of the international monetary system, convertibility of dollars into gold or other reserve which led to the establishment in 1972 of the assets for foreign monetary authorities. He also Committee on Reform of the International Moneannounced a temporary 10 percent surcharge on tary System and Related Issues (the Committee of imports to ensure "that American products will Twenty, or C-20). It also terminated the import not be at a disadvantage because of unfair ex- surcharge and the job development credit. change rates" and a 10 percent tax credit to As downward pressure on the dollar continued businesses that invested in American-made equip- after the Smithsonian Agreement, and the United ment (the job development credit). Use of the States refrained from intervening to defend the Federal Reserve swap network was suspended dollar, market participants began to doubt that after the closing of the gold window. Foreign foreign monetary authorities would continue to authorities then had the choice of continuing to buy inconvertible dollars. As selling pressure on pile up dollars in their official reserves that were the dollar mounted, the United States, in July now inconvertible into gold or allowing their cur- 1972, resumed limited sales of foreign currencies rencies to appreciate. The United States no longer to defend the dollar's Smithsonian parities, and intervened in the market to support the dollar. By the swap network was reactivated. the end of August, all major currencies except the New concerns about the durability of the French franc were floating. The use of exchange Smithsonian Agreement surfaced in early 1973, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

898 Federal Reserve Bulletin • November 1990 after the Swiss authorities permitted their curren- continued expansion of international trade and cies to float and Italian authorities adopted dual productive capital flows."7 exchange rates. (The United Kingdom had al- Although some issues were never completely ready allowed sterling to float, in June 1972.) In resolved, the Committee of Twenty described a this context, a tightening of monetary policies reformed monetary system in its Outline for abroad, the partial relaxation of the U.S. wage- Monetary Reform issued in June 1974. The sysprice controls imposed in August 1971, and the tem had five broad features: sluggish response of the U.S. trade account to 1. An exchange rate regime based on stable the dollar's depreciation in the Smithsonian re- but adjustable par values. It would include the alignment helped renew downward pressure on right to float in particular situations, subject to the dollar. In February 1973, the dollar was Fund authorization. devalued a second time, by 10 percent in terms of 2. A greater symmetry in adjustments to the gold to $42.22 per ounce. Nearly all other major balance of payments. Under the old system, a currencies accepted the full devaluation of the country in deficit that was losing reserves was dollar, and the yen floated to an even higher pushed more quickly than a country in surplus to level. At the same time the dollar was devalued, deal with its balance of payments problem, either U.S. authorities stated their intention to phase through demand-management policy, or by adout all controls on capital outflows over the next justing the par value of its currency. The U.S. two years.6 They expected that the second de- authorities, in particular, believed that because valuation of the dollar would be sufficient to the exchange rate parities of other currencies remedy the disequilibrium in the U.S. balance of were defined in terms of the dollar so that the payments, but the market was not persuaded. dollar was the residual currency, other countries The dollar fell to its new floor against the major were allowed to maintain undervalued currencies continental European currencies, a development and accumulate payments surpluses, while the that triggered massive intervention by some for- United States ran deficits. As a means of remeeign central banks. Ultimately, in March, the dying this asymmetry, countries in surplus would system of fixed parities effectively was sus- now have a larger responsibility for correcting pended, and the G-10 authorities de facto their payments positions. adopted generalized floating of their exchange 3. Multilateral surveillance. In the context of a rates. par value system in which convertibility could be suspended, the United States favored an international reserve indicator as an objective gauge of MANAGED FLOATING: MARCH 1973 whether a country's policies were consistent TO DATE with overall equilibrium in the balance of payments and with adequate growth in global liquid- Initially, the move to generalized floating was ity (at existing par values). The use of this widely viewed as a temporary means of coping indicator was thought to put more pressure on with speculative pressures, rather than as a per- countries in surplus to adjust. manent feature of the international monetary 4. Convertibility. European authorities focused system. In the discussions of the Committee of on the lack of mandatory convertibility of dollars Twenty, the par value system still was regarded under the Bretton Woods system and believed as the "normal" regime, and "the task of mon- that if the United States were required to finance etary reform was viewed as one of improving the its payments deficits with reserve assets (gold, Bretton Woods system so that it would operate SDRs, and Fund drawings), it would have a without frequent crises, and in a more symmet- greater incentive to adopt policies to eliminate its rical fashion" than previously, "to facilitate the deficits. The United States wanted to limit the 7. Robert Solomon, The International Monetary System 6. U.S. capital controls were dismantled in early 1974. 1945-1981, rev. ed. (Harper & Row, 1982). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present 899 convertiblity of dollars beyond a certain point for jority vote of the IMF membership, effectively surplus countries as a means of encouraging a more giving the United States a veto over such a move. symmetric adjustment of payments imbalances. Article IV also provides for surveillance over 5. Better international management of global the Fund's members to ensure effective operaliquidity. The SDR would become the principal tion of the international monetary system and reserve asset, and the role of gold and reserve compliance with members' general obligations, currencies would be reduced. which include (1) "endeavoring to direct eco- Meanwhile, the increase in worldwide inflation nomic and financial policies toward . . . fostering in 1972-74, associated in part with the runup in orderly economic growth with reasonable price oil prices in 1973, led to a divergence in rates of stability;" (2) "fostering orderly economic and inflation across countries and increased strains financial conditions and a monetary system that on countries' external positions; these problems does not tend to produce erratic disruptions;" were aggravated by the worldwide recession in and (3) "avoiding manipulating exchange rates or 1974-75. Under these circumstances, a system of the international monetary system in order to par values seemed even less viable than before. prevent effective balance of payments adjust- Moreover, the world economy had been func- ment or to gain an unfair competitive advantage tioning reasonably well under a mixed floating over other members." This new Article IV was system for a few years. The United States shifted incorporated, along with a number of other sigfrom favoring a system of stable, but adjustable nificant changes, in the Second Amendment of par values, with floating in particular situations, the IMF's Articles of Agreement, which became to explicitly advocating a system of floating ex- effective April 1, 1978. change rates as a long-run option. The Committee of Twenty recognized that the Broad Objectives of U.S. Exchange Rate international monetary system was in flux and Policy that it might be particularly difficult in the circumstances of the time to return to a par value In conjunction with the decision in March 1973 to system. However, it recommended the immedi- suspend the commitment to intervene in support ate adoption in the interim of "appropriate guide- of fixed parities against the dollar, the G-10 lines for the management of floating exchange countries issued a communique stating that "ofrates." These were agreed to in 1974, though ficial intervention may be useful at appropriate many of the rest of the committee's recommen- times, to facilitate the maintenance of orderly dations were not adopted because there was market conditions "(emphasis added). An evennever a return to a par value system. tual return to a par value system was assumed, Floating was finally legitimatized at the Ram- and intervention was viewed as a way to mainbouillet Economic Summit among the major in- tain order in the interim. Subsequently, as a dustrial countries in November 1975. The agree- system of floating exchange rates came to be ment reached there, which had been worked out regarded as the norm, the statement about interin advance between the representatives of the vention in the Rambouillet Declaration was United States and France, had two basic ele- changed to "countering disorderly market condiments. The first was to "deepen, systematize, and tions" (emphasis added). The Rambouillet forbroaden" daily consultation among the monetary mulation was repeated in the IMF's Principles authorities, including central banks, of the larger for the Guidance of Members' Exchange Rate countries with regard to exchange market inter- Policies.8 This concept has since guided U.S. vention. Second, Article IV of the IMF's Articles of Agreement, governing exchange arrangements, was to be revised to permit a member to choose 8. International Monetary Fund, Selected Decisions and its own exchange arrangements—including float- Selected Documents, Fourteenth Issue (IMF, April 30, 1989). ing. Under the revised article, completed in 1976, These principles, first adopted in April 1977, specify that a return to a generalized par value system, if "(1) A member shall avoid manipulating exchange rates or the international monetary system in order to prevent effecdeemed appropriate, requires an 85 percent mative balance of payments adjustment or to gain an unfair Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

900 Federal Reserve Bulletin • November 1990 exchange rate policy and appears in both the 2. Net official purchases of dollars and the foreign U.S. notification to the IMF of its exchange exchange value of the dollar, 1973-90 arrangements and the FOMC's Foreign Currency Directive.9 A precise official definition of "disorderly market conditions" has never been attempted. In a narrow sense, the phrase has been understood to mean market disruptions of very short duration. In a broader sense, the phrase has referred to episodes in which policymakers deem market exchange rates to be clearly out of line with economic fundamentals. In his testimony before the Joint Economic Committee in January 1989, Alan Greenspan, the Chairman of the Federal Reserve Board, interpreted the phrase "countering disorderly market conditions" as fostering exchange rate stability, consistent with understandings among the Group of Seven (G-7) coun- Net official foreign purchases of dollars are those by thirteen major fortries. eign countries. The foreign exchange value of the dollar is its weighted average against the currencies of the foreign G-10 countries; the weights used are total trade for 1972-76. This series is plotted monthly. The 1990 data Operational Objectives and Approaches for both series are for the first seven months. Since 1973, the frequency and size of U.S. foreign exchange operations have varied, as chart 2 rate fluctuations. Throughout the floating-rate illustrates. Intervention was substantial in 1977— period, other countries' intervention policies 79, when the dollar was deemed unacceptably have been mixed, with some countries adopting a low. U.S. operations were minimal during the consistently more active policy than the United first Reagan Administration, in line with its pol- States. icy of limiting government interference in mar- Although episodes of U.S. intervention have kets generally; they were directed mainly at been relatively infrequent since 1973, the countering short-run market disruptions. Inter- amounts involved sometimes have been sizable. vention was substantial again in the autumn of Accordingly, the United States at times has 1985, when the dollar was regarded as unaccept- taken steps to increase foreign currency reably high. By far the most extensive U.S. inter- sources for intervention, particularly when the vention operations, however, have taken place dollar was under sustained downward pressure. since the Louvre Accord of February 1987; since The overall size of the Federal Reserve's swap then U.S. operations have been guided largely by lines with other central banks was enlarged. A informal understandings with the other G-7 coun- new swap line between the ESF and the Bundestries about the limits of tolerance for exchange bank was established in early 1978, and the ESF became an active partner in the financing of intervention at that time. During 1978, the Treacompetitive advantage over other members. (2) A member sury sold SDRs for foreign currency, drew on its should intervene in the exchange market if necessary to reserve position at the IMF, and began to issue counter disorderly conditions which may be characterized inter alia by disruptive short-term movements in the ex- securities denominated in foreign currencies in change value of its currency. (3) Members should take into the private market ("Carter bonds"). In late account in their intervention policies the interests of other 1980, U.S. authorities for the first time began to members, including those of the countries in whose currenbuild up substantial foreign currency reserves cies they intervene." 9. The U.S. notification to the IMF was amended following through purchases in the market and from other the Plaza Agreement of September 1985 to provide for central banks, after having first covered outintervention "to counter disorderly market conditions, or standing foreign currency liabilities. when otherwise deemed appropriate." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present 901 During times when the dollar's exchange value many and Switzerland. Between October 1974 raised particular concern—in 1977-79, 1984-85, and March 1975, U.S. authorities made gross and 1987—it became a significant factor in Fed- purchases of $1.4 billion, and the central banks of eral Reserve decisions regarding monetary pol- Germany and Switzerland made somewhat larger icy. Furthermore, consultation and cooperation dollar purchases. The dollar did not recover until on macroeconomic policies by the major indus- March, when U.S. interest rates stabilized while trial countries have increased over the floating- foreign interest rates declined. rate era amid a growing perception that the The first sustained period of U.S. intervention existing international monetary arrangements under the floating-rate regime occurred in 1977— have not exerted as much equilibrating influence 79. By 1977, rapid growth in U.S. domestic on payments imbalances, or provided as much demand had contributed to a deterioration of the independence for monetary policies, as had been U.S. current account balance, which swung from hoped. Wide swings in exchange rates have a surplus of more than $4 billion in 1976 to a occurred, contributing to large trade imbalances deficit of more than $14 billion in 1977; it had and resource reallocations, and pointing up the also contributed to a pick-up in inflation to nearly need for more compatible policies among the 7 percent (December to December), up from major countries. 5 percent in the previous twelve months. Shortterm interest rates in the United States rose Major Episodes and U.S. Responses during 1977, and the Federal Reserve raised its discount rate twice by year-end. But, with Ml The first time U.S. authorities intervened follow- expanding at a rate well beyond the upper limit of ing the adoption of generalized floating was in the target range set by the FOMC, the perception July 1973. Concern over rising U.S. inflation, in exchange markets was that the Federal Reforecasts of vastly higher energy imports, and the serve was too slow in responding to inflationary potential ramifications of the Watergate affair pressures. These conditions contrasted with weighed on the dollar; at the same time, a those in Germany and Japan, where a more rapid tightening of German monetary policy supported policy response to inflationary pressures resulted the mark and associated European currencies. in slower economic growth, contributing to sur- As the dollar fell, trading became increasingly pluses in current accounts. disorderly, with many banks refusing to quote As the depreciation of the dollar intensified rates. In these circumstances, U.S. authorities around the turn of the year, the Federal Reserve intervened to counter disorderly conditions in responded by raising its discount rate in January the markets. 1978 to 6'/2 percent, citing developments in for- The scale of operations was expanded a bit in eign exchange markets. However, the pace of the winter of 1974-75. Inflation in the United U.S. inflation quickened to 9 percent in 1978, in States was still worrisome, whereas price pres- part reflecting the past depreciation of the dollar; sures in many other industrialized countries were meanwhile, inflation in the other G-10 countries, abating. Though worldwide, the recession was on average, declined—from 5Vi percent in 1975 most severe in the United States. The Federal to slightly more than 4 percent in 1978. Efforts to Reserve had begun to ease money market condi- reduce the U.S. trade deficit by curbing oil tions in the autumn of 1974, and the federal funds imports also were unsuccessful. The Federal rate plummeted from 13 percent in July 1974 to Reserve engineered further firming in money 53/8 percent in March 1975. With interest differ- market conditions through the spring and sumentials between dollar and foreign currency as- mer, but the growth of Ml still exceeded its sets eroding, the dollar depreciated. U.S. author- targeted range and the dollar continued to fall. ities intervened at first to cushion the dollar's Noting both disorderly conditions in exchange decline. In mid-January 1975, they became more markets and the serious U.S. inflation problem, concerned with the dollar's progressive slippage, the Federal Reserve in August 1978 raised its and stepped up intervention in support of the discount rate Vi percentage point further to 73/4 dollar in concert with the central banks of Ger- percent. This move and subsequent increases in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

902 Federal Reserve Bulletin • November 1990 the autumn provided only temporary support for of SDRs; a drawing on the U.S. reserve position the dollar. Between May and October 1978, at the IMF by the Treasury; and issuance of President Carter announced a series of measures Carter bonds.11 to fight inflation, including delays and reductions With these resources, U.S. authorities interin the amount of scheduled tax cuts, budgetary vened aggressively, sometimes in concert with restraints, and voluntary wage-price guidelines. other central banks. Net official purchases by Following the announcement of the last two U.S. authorities in the market from October 1977 measures in October, the dollar tumbled still through the end of 1978 amounted to about $10 further, hitting on October 30 a record low on the billion, while foreign authorities bought about trade-weighted index compiled by the Federal $37 billion. In 1978, the major central banks more Reserve Board staff. Two days later, a dollar- than financed the current account deficit, with defense package was announced. It included a net official purchases more than double the $15 further hike in the discount rate by an unprece- billion deficit. dented full percentage point, to a then historic In the first half of 1979, the dollar recovered high of 9Vi percent. In unveiling the package, somewhat, but by mid-June it came under re- President Carter stated that "the continuing de- newed selling pressure. The second oil-price cline in the exchange value of the dollar is clearly shock in 1979 added substantial upward pressure not warranted by the fundamental economic sit- to price levels worldwide and restricted output. uation" and "as a major step in the anti-inflation In the United States, these problems were acute: program, it is now necessary to correct the Inflation already was more rapid than in most excessive decline in the dollar." foreign economies, and the data pointed to a During 1977-79, U.S. authorities also took slowdown in economic activity. In contrast, forsteps to bolster their resources for intervention. eign economic growth had not yet begun to In December 1977, the President announced an decline, with German and Japanese authorities explicit undertaking to intervene in concert with having committed themselves to stimulative fisother countries to support the dollar. In January cal packages at the Bonn Economic Summit in 1978, the Treasury stated that the ESF would the summer of 1978. Policymakers in most forhenceforth be used as an active partner in the eign countries responded to the hike in oil prices financing of intervention, and that a new swap by tightening monetary conditions, but the Fedline with the Bundesbank had been established. eral Reserve, responding to signs of weakness in Furthermore, in March, the Federal Reserve's the U.S. economy, took less vigorous steps, swap line with the Bundesbank was doubled, and raising its discount rate 1 Vi percentage points in the Treasury sold SDRs to the German central three moves in the third quarter of 1979. Neverbank for marks. The Treasury also indicated that theless, the growth of U.S. monetary aggregates it was prepared to draw on its reserve position at remained well above projected rates during the the IMF to acquire foreign currencies. To further summer of 1979. Furthermore, U.S. energy polsupport the dollar, the Treasury announced in icy was widely regarded in exchange markets as May that it would resume auctioning gold to the being in disarray. The subsequent shake-up of public.10 Finally, as part of the November 1, the Carter cabinet raised concerns in exchange 1978, dollar-defense program, a $30 billion pack- markets about political leadership as well. Under age of foreign currency resources to finance U.S. these circumstances, U.S. authorities intervened intervention in cooperation with foreign authori- substantially during the summer of 1979 to resist ties was put together. It consisted of an increase the dollar's decline. in Federal Reserve swap lines with the central The continued weakness in the dollar and banks of Germany, Japan, and Switzerland; sales other signs of rapidly deteriorating inflation ex- 10. The U.S. Treasury had auctioned a small amount of gold—1.3 million ounces—during 1975-77 to underline the 11. In 1978, the FOMC extended the warehousing facility U.S. policy position that gold was no longer a monetary asset to include the U.S. Treasury's General Fund, which used the and should be treated like any other commodity. warehousing facility for the proceeds of the Carter bonds. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present 903 pectations, including sharpiy rising prices of gold strengthen as the U.S. economy performed faand other commodities, were important consid- vorably compared with other economies. Inflaerations in the adoption of new monetary oper- tion in the United States had begun to wane, ating procedures by the Federal Reserve on while in several other countries, especially the October 6, 1979. The shift in operating proce- traditionally low-inflation countries of Europe, it dures entailed a greater emphasis on the control remained high relative to postwar experience. of banks' nonborrowed reserves and, therefore, The U.S. economy also showed more resilience, less control of the federal funds rate. These bouncing back from the sharp downturn in the procedures were intended to assure better con- second quarter of 1980; output in most European trol over the growth of the monetary aggregates economies stagnated and unemployment inand, in general, to damp inflationary pressures. creased. As the U.S. economy rebounded and The Federal Reserve also increased its discount the Federal Reserve continued to emphasize rate a full percentage point to 12 percent and nonborrowed reserves, interest rate differentials imposed a supplemental reserve requirement on moved sharply in favor of dollar assets. Two banks' managed liabilities. additional factors lent further support to the Following the change in operating procedures, dollar later that fall: The election of Ronald U.S. interest rates rose sharply, but political Reagan suggested to the market a political comdevelopments in late 1979 weighed on the dollar. mitment to bringing down inflation; and the These included the taking of U.S. hostages by global pattern of external balances shifted in Iranian militants, the threat by Iranian authori- favor of the United States. The U.S. current ties to withdraw funds from U.S. banks, the account swung into surplus in the second half of freezing of Iranian assets in U.S. banks, and the 1980, reflecting a strong improvement in non-oil Soviet invasion of Afghanistan. trade as a result of the past depreciation of the During the first quarter of 1980, the dollar dollar. strengthened. The demand for money and credit In the fall of 1980, U.S. monetary authorities was increasing rapidly: Inflationary expectations still had outstanding foreign currency obligations were mounting, as increases in consumer prices in the form of swap debt and maturing Carter topped 14 percent in the year ending in March bonds to cover. As the dollar began to 1980; and financial markets were anxious about strengthen, they purchased the foreign currenthe Carter Administration's economic policies, cies needed to cover those obligations when they including the imposition of credit controls in judged that doing so would not depress the March. The Federal Reserve continued to re- dollar. strain the growth of nonborrowed reserves, and Even after the outstanding obligations were interest rates in the United States soared, with covered, U.S. authorities continued to purchase the federal funds rate increasing nearly 4 percent- foreign currencies to build up U.S. foreign curage points, in barely four months, from 133/4 rency reserves. Before this time, the Federal percent in December 1979 to 175/s percent in Reserve and the Treasury had had essentially no April. U.S. authorities took advantage of the long-term net asset position in foreign currencies dollar's rebound to acquire foreign currencies to (see chart 3). U.S. authorities decided to acquire repay debt incurred as a result of dollar-support foreign currency balances to avoid having to operations in 1978-79. finance intervention by incurring swap debts with Subsequently, as economic activity in the sometimes reluctant foreign monetary authori- United States contracted sharply in the second ties. In addition, they judged that the dollar's quarter of 1980, short-term interest rates in the strength could well be temporary. The dollar had United States plummeted. Between April and been supported primarily by unusually favorable July, the federal funds rate fell more than 8 interest differentials and, in an environment of percentage points, prompting a sharp decline in volatile interest rates, these might narrow, putthe dollar. During this period U.S. authorities ting downward pressure on the dollar. intervened heavily to slow the dollar's fall. The Federal Reserve and the Treasury inter- By September 1980, the dollar began to vened in this manner from October 1980 through Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

904 Federal Reserve Bulletin • November 1990 3. U.S. net foreign currency balances, 1962-90 of the Federal Reserve's policy of gradually reducing money growth to noninflationary levels. Billions of dollars equivalent From 1981 through early 1985, the dollar con- 40 tinued to strengthen, for several reasons. U.S. monetary conditions were restrictive in the con- • 30 text of a robust recovery, and prospects for • 20 continued large U.S. fiscal deficits exerted upward pressure on real interest rates. Meanwhile, 10 + monetary authorities abroad initially were reluc- 0 tant to raise interest rates because their recover- I I I I 1 I I I I I I I I I I [ I I I 1 I, I I, ,1„1 ,1 I I I J ies appeared more fragile. Investment, including 1965 1970 1975 1980 1985 1990 foreign investment, boomed in the United States, Foreign currency balances are valued at historical cost. The data are for attracted by the increasingly favorable business the end of the periods, except the datum for 1990, which is for the end of July. climate. In addition, dollar-denominated assets mid-February 1981, purchasing nearly $7 billion were sought as a "safe haven" following the equivalent of German marks and small amounts onset of the international debt crisis and amid of Swiss francs and French francs. As of Febru- apprehensions about the political situations in ary 1981, their combined net position in foreign some European countries. currencies (marks, yen, and Swiss francs) was U.S. intervention operations from April 1981 $6 billion equivalent. This position compares through 1984 were very limited, occurring on with net foreign currency liabilities that peaked only twenty days, in line with the Administraat $3.5 billion equivalent (valued at February tion's view that the strong dollar was an indica- 1981 exchange rates) in September 1979. tion of the robust U.S. economy and not a cause In early 1981, the new Reagan Administration for concern. Moreover, most of these operations decided to move away from what it judged to were undertaken at the urging of foreign monehave been the heavy intervention inherited from tary authorities. On net, U.S. authorities sold the previous administration. This decision re- $750 million against marks and yen during this flected the view that exchange rates were the period. product of economic policies and that a "conver- Some European monetary authorities who fagence" of economic policies was the way to vored more active management of exchange stabilize exchange rates, a view consistent with rates objected to the U.S. policy of "noninterthe Administration's general desire to minimize vention." In this context, the G-7 Economic government interference in markets. Testifying Summit at Versailles in June 1982, agreed to before the Joint Economic Committee of the establish a working group (the Jurgensen Group) U.S. Congress on May 4, 1981, then Undersec- to study the effectiveness of intervention in forretary of the Treasury Beryl Sprinkel described eign exchange markets.12 the new Administration's exchange market pol- By mid-1984, however, the dollar had risen icy as "a return to fundamentals" by "concen- nearly 60 percent on average against the other trating on strengthening and stabilizing the do- G-10 currencies from its level in the fourth quarmestic economic factors which have undermined the dollar during the last decade or so." In conjunction with the emphasis on economic fun- 12. Paragraph 38 of the Jurgensen report concludes that damentals, Undersecretary Sprinkel stated that "intervention had been an effective tool in the pursuit of certain exchange rate objectives—notably those oriented the Administration intended to "return to the towards influencing the behavior of the exchange rate in the more limited pre-1978 concept of intervention by short run. There was also broad agreement that sterilized intervening only when necessary to counter con- intervention [intervention that leaves the monetary base unchanged] did not generally have a lasting effect, but that ditions of disorder in the market." He anticiintervention in conjunction with domestic policy changes did pated little need for U.S. intervention in light of have a more durable impact. At the same time it was the President's proposed program of incentive- recognized that attempts to pursue exchange rate objectives which were inconsistent with the fundamentals through inenhancing tax cuts and deregulation and in light tervention alone tended to be counterproductive." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present 905 ter of 1980, and its strength concerned some U.S. economic conditions than has been the case. policymakers. Concern was expressed in FOMC They believe that agreed policy actions must be implemented and reinforced to improve the funmeetings, among other forums, about the implidamentals further, and that in view of the precations of the strong dollar for the U.S. manusent and prospective changes in fundamentals, facturing sector and about the consequences for some further orderly appreciation of the main inflation should the dollar drop precipitously. non-dollar currencies against the dollar is desir- These considerations were among the arguments able. They stand ready to cooperate more closely to encourage this when to do so would be leading to an adoption of an easier monetary helpful. stance in mid-1984. As the dollar continued to rise, the second Reagan Administration began to reverse its pol- This statement that exchange rates were out of icy of nonintervention in currency markets. line with economic fundamentals represented a Group of Five (G-5) officials, meeting on January sharp reversal of the U.S. Administration's pre- 22, 1985, issued a statement reaffirming their vious stance. commitment to promote the convergence of eco- Although intervention in exchange markets nomic policies, to remove structural rigidities, was not explicitly mentioned, the last sentence of and (as agreed at the Williamsburg Economic the G-5 statement quoted above encompassed it. Summit of April 1983) to undertake coordinated During the seven weeks following the Plaza intervention in exchange markets as necessary. Accord, G-5 authorities sold nearly $9 billion, of Subsequently, in coordinated operations with which the United States sold $3.3 billion. other central banks, U.S. authorities sold about With respect to policy intentions, the commu- $650 million between January and March 1985. nique said little that was new. No commitments Although the dollar had started to decline by were made regarding U.S. monetary policy. late February, that decline had not yet had time However, Japanese government officials stated to produce an improvement in the U.S. trade their intention to implement "flexible managedeficit. So, protectionist sentiment in the United ment of monetary policy with due attention to the States mounted as the trade deficit swelled to an yen [exchange] rate." Since the imbalance in annual rate of $120 billion in the summer of 1985. external positions reflected, to some extent, the In part to deflect protectionist legislation, U.S. misalignment of fiscal policies, specific programs officials arranged a meeting of G-5 officials at the consistent with current policy intentions to re- Plaza Hotel in New York on September 22 with duce fiscal stimulus in the United States and the purpose of ratifying an initiative to bring increase it abroad were included in the stateabout an orderly decline in the dollar. In their ments. The United States promised to "implestatement, G-5 officials drew attention to the ment fully the deficit reduction package for fiscal significant progress that had been made in pro- year 1986" specified in the Gramm-Rudmanmoting favorable economic performance along a Hollings act and indicated its intention to implepath of steady noninflationary growth. Yet, they ment revenue-neutral tax reform. Japan agreed observed, "recent shifts in fundamental eco- to increase investment by local governments, nomic conditions among their countries, together conditional on the circumstances of each region. with policy commitments for the future, have not The West German government stated its intenbeen fully reflected in exchange markets." Large tion to continue its tax reform, with tax cuts due imbalances in external positions were noted, to take effect in 1986 and 1988. The United along with the potentially "mutually destruc- Kingdom and France each promised to curb tive" protectionism they might engender. The public expenditure and to reduce tax burdens. statement concluded: In reaction to the G-5 statement and subsequent intervention, the dollar fell sharply. Monetary tightening in Japan in late October provided The Ministers and Governors agreed that exfurther downward impetus for the dollar. By change rates should play a role in adjusting year-end the dollar had fallen 17 percent against external imbalances. In order to do this, exchange rates should better reflect fundamental the yen and 14 percent against the mark from its Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

906 Federal Reserve Bulletin • November 1990 levels just before the Plaza meeting, leaving it 24 interpreted in exchange markets as indicating a and 29 percent respectively below its peaks in lack of concern about the ramifications of a February. further decline in the dollar. In these circum- Throughout this period, the Federal Reserve stances, U.S. monetary authorities at the end of emphasized that, given the dependence of the January intervened on one occasion in support of United States on large capital inflows for the time the dollar. This was the first operation in support being, underlying confidence in the dollar needed of the dollar since mid-1980, except for small to be maintained. Although it believed that a operations when President Reagan was shot in precipitous fall in the dollar was only a remote March 1981 and during the Continental Bank possibility, it was concerned that, should it oc- crisis in May 1984. It was conducted in coordicur, it could force sharply higher interest rates nation with the Bank of Japan. and inflationary pressures, thereby threatening On February 22, 1987, officials of the major the financial system and the economy. In light of industrial countries met at the Louvre in Paris. these considerations, the decisions to lower the They concluded that "substantial exchange rate Federal Reserve's discount rate in March and changes since the Plaza Agreement will increas- April 1986 were carefully coordinated with simi- ingly contribute to reducing external imbalances lar moves by other central banks. The March and have now brought their currencies within move coincided with reductions in official rates ranges broadly consistent with underlying ecoin Japan, Germany, France, and the Nether- nomic fundamentals." In addition, they exlands. Subsequently, the United Kingdom and pressed concern that "further substantial exseveral other countries in the European Mone- change rate shifts could damage growth and tary System cut their official rates. In April, the adjustment prospects in their countries." There- United States and Japan lowered their discount fore, they agreed to "cooperate closely to foster rates in tandem. stability of exchange rates around current lev- Formal procedures to improve G-7 policy coor- els." In this regard, the G-7 authorities reached dination and strengthen multilateral surveillance certain general understandings about the tolerawere agreed to at the Tokyo Economic Summit in ble range of fluctuations in exchange rates for the May 1986. In particular, a framework for the dollar and about cooperation in exchange market systematic consideration of national policies and operations. performance was adopted, involving the use of No new commitments regarding monetary poleconomic indicators. According to the summit icy were made at the Louvre, although the Bank declaration, the purposes of improved coordina- of Japan announced a reduction of a half percenttion "should explicitly include . . . fostering age point in its discount rate effective the next greater stability of exchange rates." Although the day. Only two aspects of the agreements on fiscal United States supported improved coordination policy represented new initiatives. Japan promof macroeconomic policies to foster increased ised that "a comprehensive economic program stability in exchange rates, U.S. authorities did will be prepared after the approval of the 1987 not intervene in exchange markets in 1986 be- budget by the Diet, so as to stimulate domestic cause the dollar's continued decline was regarded demand, with the prevailing economic situation as orderly and not cause for concern. Japanese duly taken into account." Germany agreed to authorities, however, became quite concerned "propose to increase the size of the tax reducabout the yen's appreciation, particularly in the tions already enacted for 1988." On the U.S. runup to the national elections in Japan, and the side, the commitment to "policies with a view to Bank of Japan intervened quite heavily in support reducing the fiscal 1988 deficit to 2.3 percent of of the dollar in the spring and summer of 1986. GNP from its estimated level of 3.9 percent in fiscal year 1987" was consistent with the The dollar declined to seven-year lows in early Gramm-Rudman-Hollings target, which in the 1987, amid signs that the U.S. economy might be event was not reached. weakening while the U.S. trade deficit continued to grow. Furthermore, various press statements Despite heavy intervention purchases of dolattributed to U.S. Administration officials were lars following the Louvre Accord, the dollar Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

U.S. Exchange Rate Policy: Bretton Woods to Present 907 continued to decline, particularly against the reached a new set of understandings about flucyen. Market participants perceived delays in the tuations in exchange rates and cooperation in implementation of expansionary fiscal measures exchange market operations. They stated that in Japan expected after the Louvre Accord, and "either excessive fluctuation of exchange rates, a talk of trade sanctions on some Japanese prod- further decline of the dollar, or a rise in the dollar ucts heightened concern about a deterioration in to an extent that becomes destabilizing to the U.S.-Japanese trade relations. By the time of the adjustment process, could be counterproductive G-7 meeting in early April, the dollar had fallen by damaging growth prospects in the world econmore than 5 percent against the yen from its level omy." They also reaffirmed their commitment to at the time of the Louvre Accord. At the April "cooperate closely on exchange markets." In meeting, the G-7 officials "reaffirmed the view addition, the agreements on fiscal policy meathat around current levels their currencies are sures contained in the Louvre Accord were exwithin ranges broadly consistent with economic tended to include policies for 1988. fundamentals and the basic policy intentions Following the Louvre Accord, the G-7 authoroutlined at the Louvre meeting." They urged ities intervened heavily in support of the dollar further measures, however, to "resist rising pro- throughout the episodes of dollar weakness in tectionist pressures, sustain global economic ex- 1987, and sold dollars on several occasions when pansion, and reduce trade imbalances." In this the dollar strengthened significantly. Net official regard, they welcomed newly announced propos- dollar purchases by the G-7 and other major als by Japan for a large supplementary budget to central banks effectively financed more than twostimulate the economy. thirds of the $144 billion U.S. current account The dollar began to firm in May when monetary deficit in 1987. The U.S. share of these purchases conditions tightened in the United States and was $8.5 billion, and the share of the other G-7 eased abroad. In addition, the passage of the countries was $82 billion. supplementary budget in Japan and more favor- The G-7 authorities continued to make large able U.S. trade data offered some optimism re- purchases of dollars into January 1988, and the garding adjustment of trade imbalances. But the dollar stabilized. Subsequently, the dollar dollar turned down again with the release of strengthened as monetary conditions in the disappointing U.S. trade data in mid-August. Cit- United States were tightened earlier than those ing "the potential for greater inflation, associated abroad and U.S. external accounts improved. As in part with weakness in the dollar," the Federal some foreign authorities began to tighten mone- Reserve raised its discount rate V2 percentage tary conditions and external adjustment stalled point to 6 percent in early September. However, during the second half of 1988, the dollar eased record U.S. trade deficits and market perceptions back somewhat. For the year as a whole, the that the G-7 authorities were pursuing their own dollar appreciated moderately; U.S. authorities domestic objectives soon sparked a further sellofF both bought and sold dollars, so that intervention of the dollar, and equity prices plunged world- was small on balance. When the dollar again wide. The dollar's decline gathered momentum strengthened in the first part of 1989, reaching a once the Federal Reserve moved more aggres- 2!/2-year high against the mark and threatening to sively than its foreign counterparts to supply undermine progress on external adjustment, the liquidity in the aftermath of the stock market U.S. authorities became more active in selling crash. The Federal Reserve's actions in this regard dollars. led market participants to believe that it would In September 1989, G-7 officials issued a comemphasize domestic objectives, if necessary at the munique stating that they "considered the rise in cost of a further decline in the dollar. By year-end, recent months of the dollar inconsistent with the dollar's value had fallen 21 percent against the longer run fundamentals" and "agreed that a rise yen and 14 percent against the mark from its levels in the dollar above current levels or an excessive at the time of the Louvre Accord. decline could adversely affect prospects for the In these circumstances, G-7 officials recon- world economy. In this context, they agreed to vened by telephone in late December and cooperate closely in exchange markets." The Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

908 Federal Reserve Bulletin • November 1990 release of this statement was followed by three uncertainty and concern in exchange markets weeks of coordinated intervention with the initial that monetary policy in Japan was too lax objective of lowering the dollar and the later depressed the yen. Consistent with G-7 underobjective of keeping the dollar lower. For 1989 as standings, U.S. authorities intervened in supa whole, U.S. authorities sold $22 billion net, by port of the yen in early 1990, buying more than far the largest U.S. annual operation ever; other $2 billion equivalent of yen. The Bank of Japan G-7 countries made net sales of $43 billion.13 To also bought yen against dollars. As the yen facilitate these operations, the Treasury made continued to weaken nonetheless, G-7 offiextensive use of the warehousing facility with the cials—meeting in early April—issued a commu- Federal Reserve—its first use since the proceeds nique stating that they had discussed "developof the Carter bonds were unwound in 1982. ments in global financial markets, especially the Chiefly as a result of intervention, the combined decline of the yen against other currencies and Federal Reserve and Treasury net position in its undesirable consequences for the global adforeign currencies increased to $38 billion equiv- justment process and . . . reaffirmed their alent at the end of 1989 valued at historical cost, commitment to economic policy coordination, as shown in chart 3. including cooperation in the exchange markets." In fact, there was little U.S. intervention During late 1989 and early 1990, the dollar's in support of the yen after the communique was movements against the major currencies direleased. Concerns about Japanese monetary verged. The opening of the Berlin Wall and policy dissipated, and the yen recovered somesubsequent steps toward unification of the two what. Between May and July of 1990, in order Germanys bolstered the mark, while political to adjust balances of foreign currencies and to facilitate the retirement of a portion of the 13. The scale of U.S. intervention was much larger in 1989 than in 1977-79. However, somewhat larger operations prob- amounts of foreign currencies held by the Fedably are required to influence exchange rates now, because eral Reserve under its warehousing arrangethe size of the net open position of the private sector ments with the ESF, the Treasury liquidated $2 undoubtedly has increased during this period. Though there billion equivalent of DM balances in ways that are no reliable measures of the latter, according to a survey by the Federal Reserve Bank of New York, the size of the would not significantly influence prevailing ex- U.S. market increased from an estimated average daily change rates. turnover of $18 billion in 1980 to $129 billion in 1989. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

909 Industrial Production and Capacity Utilization Released for publication on September 14 the past year, total industrial production has risen 1.5 percent to 109.8 percent of its 1987 Industrial production decreased 0.2 percent in annual average. August after no change in July; industrial capac- In market groups, overall, output of consumer ity utilization declined 0.4 percentage point in goods was little changed in August. Gains in August to 83.1 percent. output of nondurables, particularly food and Small declines were evident among many mar- electricity for residential use, were about balket and industry groups in August; industries anced by declines in the production of durables posting gains included steel and utilities. During such as light trucks and goods for the home. 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 All series are seasonally adjusted. Latest series, August. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

910 Federal Reserve Bulletin • November 1990 Output of motor vehicles for business use was However, iron and steel production increased unchanged after having fallen sharply in July. about 2Vz percent in August, bringing its utiliza- Excluding autos and trucks, output of business tion rate to 85.2 percent—the highest in more equipment decreased slightly in August but re- than a year. With flat or declining output, utilimained well above its level of last winter. Output zation rates for chemicals, instruments, lumber, of construction supplies edged down in August. stone, clay and glass products, and apparel have It has changed little, on balance, since May after dropped several percentage points during the having fallen significantly earlier this year. Ma- past year. terials production declined in August. Decreases Output in mining declined about 2xh percent in were widespread among the categories of nondu- August. Besides the drop in coal production, oil rables; in addition, coal mining dropped back and gas well drilling fell sharply, and iron ore after having posted a sharp gain in July. mining was curtailed because of a strike. Utilities In industry groups, manufacturing output production rose more than 1 percent as a result of edged down 0.1 percent in August, lowering the a significant increase in electricity generation. factory utilization rate 0.3 percentage point to The operating rate for electric utilities hit 93.1 82.4 percent. Output declined in most industries percent in August, well above its longer-run in both durable and nondurable manufacturing. average. 1987 = 100 Percentage change from preceding month PPPeeerrr--ccceeennntttaaagggeee ccchhhaaannngggeee,,, IIInnnddduuussstttrrriiiaaalll ppprrroooddduuuccctttiiiooonnn 1990 1990 AAAuuuggg... 111999888999 tttooo Mayr Juner Julyr Aug.P Mayr Juner Julyr Aug.P AAAuuuggg... 111999999000 Total index 109.4 110.0 110.0 109.8 .5 .5 .0 -.2 1.5 Previous estimates 109.4 109.9 109.9 .6 .4 .0 Major market groups Products, total 110.5 111.0 110.7 110.6 .6 .4 -.3 .0 1.9 Consumer goods 107.4 108.1 107.5 107.7 .3 .6 -.5 .1 1.9 Business equipment 123.5 123.9 123.8 123.6 1.6 .3 -.1 -.2 2.6 Construction supplies 105.5 106.0 105.4 105.3 -.8 .4 -.6 -.1 -.2 Materials 107.7 108.5 109.0 108.6 .4 .8 .5 -.4 .7 Major industry groups Manufacturing 110.3 110.7 110.8 110.6 .7 .4 .0 -.1 1.4 Durable 112.6 113.2 112.9 112.6 1.4 .5 -.3 -.2 1.2 Nondurable 107.4 107.6 108.1 108.1 -.1 .2 .5 .0 1.8 Mining 102.2 102.6 103.2 100.8 -.6 .3 .6 -2.3 .0 Utilities 107.1 109.2 108.7 110.1 .4 2.0 -.4 1.2 3.6 Percent of capacity CCCaaapppaaaccciiitttyyy gggrrrooowwwttthhh,,, CCCaaapppaaaccciiitttyyy uuutttiiillliiizzzaaatttiiiooonnn 1989 1990 AAAuuuggg... 111999888999 AAvveerraaggee,, LLooww,, HHiigghh,, tttooo 11996677--8899 11998822 11998888--8899 AAAuuuggg... 111999999000 Aug. Mayr Juner Julyr Aug.p Total industry 82.2 71.8 85.0 84.0 83.4 83.6 83.5 83.1 2.6 Manufacturing 81.5 70.0 85.1 83.8 82.8 82.9 82.7 82.4 3.1 Advanced processing 81.1 71.4 83.6 82.4 82.0 81.9 81.5 81.1 3.4 Primary processing 82.3 66.8 89.0 86.9 84.9 85.5 85.8 85.5 2.5 Mining 87.3 80.6 87.2 86.4 88.7 89.1 89.7 87.8 -1.6 Utilities 86.8 76.2 92.3 84.7 84.7 86.3 85.9 86.9 1.0 r Revised, NOTE. Indexes are seasonally adjusted. p Preliminary. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

911 Statements to the Congress Statement by Wayne D. Angell, Member, Board issues raised in your letter of invitation, Mr. of Governors of the Federal Reserve System, Chairman, including market value accounting before the Committee on Banking, Housing, and and our view on how the banking agencies might Urban Affairs, U.S. Senate, September 10, 1990. proceed to assess interest rate risk for examination and capital adequacy purposes. I am pleased to be here on behalf of the Federal Reserve Board to discuss regulatory accounting standards and capital requirements for deposi- THE ROLE OF ACCOUNTING STANDARDS tory institutions. Both of these standards play particularly important roles in the supervisory The Federal Reserve has long viewed accounting process. Accounting standards, by promoting standards as a necessary step to efficient market consistent and accurate financial reports, en- discipline and bank supervision. Accounting hance the ability of supervisors to monitor devel- standards provide the foundation for credible opments at depository institutions and to identify financial statements and other financial reports. situations of deteriorating financial conditions Accurate information reported in a timely manthat require immediate corrective actions. Capi- ner provides a basis for the decisions of market tal standards are perhaps even more critical. A participants. The effectiveness of market discistrong capital position enables an organization to pline, to a very considerable degree, rests on the withstand an unexpected setback and return to quality and timeliness of reported financial inforfinancial health, and when that does not prove mation. possible, helps to limit potential losses to the Financial statements and regulatory financial government deposit insurance fund. reports perform a critical role for depository The importance of accounting and capital institution supervisors. The supervisory agencies standards, of course, was recognized by the have in place monitoring systems that enable Congress when it enacted the Financial Institu- them to follow, on an off-site basis, financial tions Reform, Recovery, and Enforcement Act developments at depository institutions. When (FIRREA). FIRREA directed the depository reported financial information indicates that a institution supervisory agencies to develop uni- deterioration in financial condition has occurred, form accounting standards for all federally in- these systems can signal the need for on-site sured depository institutions, and mandated examinations and any other appropriate actions. that capital standards for thrift institutions be The better the quality of financial information, no less stringent than those for commercial the greater the ability to monitor and supervise banks. Furthermore, the Congress asked the effectively. agencies to submit reports discussing any dif- Financial statements provide information ferences among their accounting and capital needed to evaluate an enterprise's financial constandards by August 9, 1990. The Federal Re- dition and performance. Generally accepted acserve's report was submitted on that date. counting principles (GAAP) must be followed in Today, I do not want to repeat all of the details the preparation of financial statements filed with set forth in that report. Rather, I would like to the Securities and Exchange Commission or that address some important policy issues regarding otherwise are audited by Certified Public Acthe accounting and capital standards employed countants (CPAs). The regulatory financial stateby the Federal Reserve and the other banking ments for federally insured commercial banks agencies. I particularly want to focus upon those and savings banks are the reports of condition Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

912 Federal Reserve Bulletin • November 1990 and income, commonly referred to as call re- thrift institutions, which is somewhat different ports. The call reports, the form and content of from GAAP for banks. Some of the reporting which, by law, are developed by the Federal differences between banks and thrift institutions Financial Institutions Examination Council were appropriate given the different type of as- (FFIEC), are currently required to be filed in a sets that thrift institutions typically held. Howmanner generally consistent with GAAP. In ever, FDIC-insured mutual savings banks file the those few instances in which the call report same call report as commercial banks, and the specifies reporting requirements that differ from FDIC has been able to accommodate the differ- GAAP, these requirements are intended to be ences between these two types of institutions more conservative than GAAP. while still preserving comparability and defini- Call reports include balance sheets, income tional consistency. statements, and supporting schedules providing Table 1 in the appendix summarizes the priinformation on types of loans, securities, and mary areas of difference that exist between the deposits, and the extent of off-balance-sheet ac- reporting standards of the federal banking agentivities. Other supporting schedules also provide cies and the OTS.1 Some of these differences, information on past due and nonaccrual loans such as those involving loan-loss reserves for and leases, loan losses and recoveries, and real estate loans and the valuation of foreclosed changes in the allowance for loan and lease real estate, arise from differences between losses. Certain information on the maturity or GAAP for banks and GAAP for savings and loan repricing frequency of securities, loans, and time associations. Other differences arise in those certificates of deposit is also presented. Further- areas in which bank reporting standards are more, the call report provides information nec- intended to be more conservative than GAAP, essary for the calculation of capital ratios. such as in the areas of asset sales with recourse, futures contracts, excess servicing, and in-substance defeasance of debt. These areas of differ- FIRREA MANDATE FOR UNIFORM ence are discussed in more detail in our report to ACCOUNTING STANDARDS the Congress. The Federal Reserve Board and the other As you know, section 1215 of FIRREA provides banking agencies have held preliminary discusthat each federal bank and thrift regulatory sions with the OTS to study ways in which a agency "establish uniform accounting standards more uniform reporting scheme can be develto be used for determining the capital ratios of all oped for all banking and thrift institutions. The federally insured depository institutions and for Federal Reserve Board is prepared to work conother regulatory purposes." As I have explained, structively to resolve differences between the the banking agencies, under the auspices of the call report and the thrift financial report. Also, FFIEC, have in place uniform call reports for all the Financial Accounting Standards Board commercial banks and savings banks supervised (FASB) and the American Institute of CPAs have by the Federal Deposit Insurance Corporation been asked by the FDIC to consider eliminating (FDIC). The banking agencies base their capital the differences in GAAP as applied to banks and adequacy and other regulatory and supervisory thrift institutions. More uniform reporting by all computations on the call report. Thus, for the institutions is a goal of the Federal Reserve Federal Reserve Board, the Office of the Comp- Board. troller of the Currency (OCC), and the FDIC, uniform "accounting standards" for capital and other regulatory purposes are in place. On the other hand, the Office of Thrift Supervision (OTS) utilizes the Thrift Financial Report (TFR), which differs from the bank call report in 1. The attachments to this statement are available on request from Publications Services, mail stop 138, Board of scope, detail, and definition of terms. Further- Governors of the Federal Reserve System, Washington, D.C. more, the TFR is based entirely on GAAP for 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 913 MARKET VALUE ACCOUNTING the estimation of market values, financial statements prepared on a market value accounting A major issue relating to accounting standards is basis would not be reliable or verifiable by audits the appropriateness of market value accounting. and examinations. The federal banking agencies Under market value accounting, an institution's are reviewing the use of market values in conassets, liabilities, and off-balance-sheet items nection with the federal deposit insurance study would be reported in financial statements at their mandated by the FIRREA. At the same time, the market values. Alternatively, market values FASB is studying the need for greater use of could be disclosed in supplemental schedules market values in GAAP as part of a project to without affecting the balance sheet and income develop new comprehensive standards for all statement. financial instruments. These studies should pro- The problems in our financial system over the vide additional information regarding the appropast several years have focused attention on the priateness of market value accounting for purdifferences that often exist between accounting poses of bank regulation and financial reporting. and economic measures of the financial condition It is also important to emphasize that much can and performance of banking and thrift institu- be done to reduce the differences between actions. Market value accounting has been pro- counting and economic measures of financial posed by some as a way to narrow these differ- condition and performance without adopting ences between accounting and economic market value accounting. This is accomplished measures. It is argued that the use of market when declines in economic value that result from value accounting might lead to more effective credit problems are accurately reflected in loanregulation and supervision of financial institu- loss reserves and capital positions in a timely tions and to the closure of problem institutions manner. long before they would become insolvent on the Chairman Greenspan addressed the need to basis of financial statements prepared under accurately measure capital positions in his testi- GAAP. mony before this committee on July 12, 1990, While market value accounting has theoretical when he discussed his proposal for prompt corappeal, several concerns have been expressed rective action. In this regard, a key part of this regarding this accounting model that should be proposal is the conduct of on-site examinations— considered. One major potential problem is that focusing on the quality of asset portfolios and market values do not exist for a large portion of off-balance-sheet commitments—at least annua financial institution's assets and liabilities and ally, when it is not already in practice. This standards have not been developed for the esti- rigorous review helps ensure that the loan-loss mation of reliable market values for these items. reserves are consistent with the quality of the In addition, the overall cost and reporting burden portfolio. When they are not, the examiner reassociated with market value accounting could quires that additional reserves be created with an be considerable, including the cost of verifying associated reduction in the earnings and equity market value quotations and estimates during capital of the bank. This process leads to a timely audits and supervisory examinations. Further- review of the adequacy of loan-loss reserves and more, market value accounting could result in an accurate measurement of capital positions. more volatility in the reported financial condition When the resultant capital position of the bank is and earnings of financial institutions. not adequate and credible capital raising commit- Clearly, information about the economic value ments are not met, the regulatory agency should of financial institutions is beneficial for supervi- promptly require such responses as lowered divsory purposes. However, the Federal Reserve idends, slower asset growth, divestiture of affilbelieves that the preceding issues should be iates, and other corrective measures while an thoroughly studied before dramatic moves institution's capital position is still positive. Such toward market value accounting are made. In a policy not only deters banks from riskier lendparticular, the Federal Reserve is concerned ing practices, it also minimizes the ultimate resthat, without the development of standards for olution costs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

914 Federal Reserve Bulletin • November 1990 While the adjustment of recorded asset values the late 1970s than the total dollar volume of new for inherent credit losses could be accomplished issues of all domestic corporate firms. through market or economic value accounting, it I would like to elaborate on some of the can also be accomplished under existing GAAP. important benefits that would result from stron- Timely, thorough on-site examinations focusing ger capital requirements. First, a stronger capital on asset quality, together with rigorous applica- position would strengthen the incentives of bank tion of GAAP, result in loan-loss reserves that owners and managers to evaluate more prudently accurately reflect the estimated credit losses in- the risks and benefits of portfolio choices beherent in loan portfolios and in accurate reported cause a substantial amount of their money would capital positions. This process narrows differ- be at risk. In effect, the moral hazard risk of ences between accounting and economic mea- deposit insurance would be reduced. Second, sures of depository institutions' financial condi- stronger capital levels would create a larger tion and performance, while avoiding many of buffer between the mistakes of bank owners and the potential problems associated with market managers and the need to draw on the deposit value accounting. While not provided for in insurance fund. For too many institutions, that current GAAP, if further guidance were provided buffer has been too low in recent years. The key to determine an appropriate method for deriving to creating incentives to behave as the market the present value of asset and liability cash flows, would dictate, and at the same time creating even more accurate measures of market or eco- these buffers or shock absorbers, is to require nomic value could be estimated. that those who would profit from an institution's success have the appropriate amount of their own capital at risk. Third, requiring stronger capital positions would impose on bank manag- THE IMPORTANCE OF CAPITAL STANDARDS ers an additional market test, in that they must convince investors that the expected returns For several years, the Federal Reserve and the justify the commitment of risk capital. Those other banking agencies have been working to banks unable to do so would not be able to strengthen bank capital positions. The Federal receive the additional funds necessary for expan- Reserve has long viewed adequate capital as sion. Fourth, strongly capitalized financial instiessential to protecting the soundness of individ- tutions are in a better position to take advantage ual banks and our banking system as a whole. of opportunities that may arise. Furthermore, it While some have set forth arguments about the would not be necessary to apply as rigorous competitive disadvantages of stronger capital re- supervisory attention to such institutions. Thus, quirements, we must not ignore the long-term it is important that regulators make sure that benefits of strong capital positions. Well-capital- financial institutions are operating not from a ized banks are the ones best positioned to be minimal capital base, but from a strong capital successful in the establishment of long-term re- base. lationships, to be the most attractive counter- The three federal bank regulatory agencies parties for a large number of financial transac- have a long-established history of cooperation in tions and guarantees, and to expand their setting minimum capital standards. Throughout business activities to meet new opportunities and most of the 1980s, the banking agencies required changing circumstances. Indeed, many success- banks to meet minimum ratios of capital-to-total ful U.S. and foreign institutions would today assets or leverage ratios. In 1989, the federal meet substantially increased risk-based capital banking agencies also adopted a risk-based capstandards. In addition, although there has been ital standard. Furthermore, the Federal Reserve uncertainty lately in the current market, the System has adopted new leverage guidelines that evidence of recent years suggests that U.S. will supplement the risk-based capital framebanks have raised sizable amounts of equity. The work. However, the primary supervisory emphadollar volume of new stock issues by banking sis has shifted to the risk-based capital requireorganizations has grown at a greater rate since ment. Prudent banking organizations would Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 915 continue to operate with a cushion above the stantial amounts of low credit risk assets must minimum leverage and risk-based capital ratios. still maintain a minimum amount of capital. A financial institution operating at or near the es- Risk-Based Capital tablished minimum level must have well-diversified risk, including no undue interest rate risk The risk-based capital framework adopted by all exposure, excellent asset quality, high liquidity, three of the federal bank supervisory agencies, in good earnings, and, in general, be considered a 1989, is based upon the international Capital strong banking organization. Institutions without Accord developed by the Basle Committee on these characteristics, including institutions with Banking Supervision and endorsed by the central supervisory, financial, or operational weakbank governors of the G-10 countries. Under this nesses, are expected to operate well above the framework, total capital comprises tier 1 (or minimum standard. Also, institutions experiencequity capital) and tier 2 (or supplemental) capi- ing or anticipating significant growth are extal instruments. The risk-based capital standards pected to maintain above average capital ratios. establish for all commercial banking organiza- It should be stressed that the banking agencies tions a minimum ratio of total capital to risk- have generally viewed their capital ratios as weighted assets of 7.25 percent for year-end minimums. Furthermore, most banking organiza- 1990. This minimum standard increases to 8.0 tions would wish to operate well above these percent as of year-end 1992. Besides identical levels. Over the years, the Federal Reserve has ratios, the risk-based framework includes a com- encouraged banks to continue to strengthen their mon definition of regulatory capital as well as a capital positions. We have done this primarily uniform system of risk weights and categories. through the bank examination process, and by The principal objectives of risk-based capital requiring strong capital positions of those instiare to make regulatory capital requirements more tutions undertaking expansion. sensitive to differences in risk profiles of banks, to factor off-balance-sheet exposures more ex- Differences in Capital Standards plicitly into the assessment of capital adequacy, and minimize disincentives to holding liquid, As you are aware, we have submitted a report to low-risk assets. this committee detailing the capital and accounting standards used by the federal banking and Leverage Ratio thrift agencies. The differences in the capital standards of the banking agencies and the OTS The banking agencies are also engaged in imple- are discussed in detail in our report. A summary menting new minimum leverage ratios that will of the primary areas of difference is presented in be based upon a definition of capital consistent the appendix. The staffs of the banking agencies with the tier 1 capital definition that is used in the and the OTS meet regularly to identify and risk-based capital guidelines. The Federal Re- address differences in their capital standards and serve has issued a new supplementary leverage work toward consistency. standard that will require a minimum ratio of capital to assets of 3.0 percent for the safest Assessment of Capital Adequacy institutions. These minimum risk-based and leverage ratio requirements will enable us to re- While current capital standards generally provide move the current capital-to-assets standards at a cushion against losses from operations or a year-end 1990. Similar leverage guidelines are weak loan portfolio, they do not address all risks being developed by the OCC and the FDIC, as of an institution. For example, the bank riskexplained in detail in the Federal Reserve's re- based capital guidelines, at present, do not yet port to the Congress on capital and accounting address noncredit factors, such as interest rate standards used by the regulatory agencies. risk and foreign exchange positions. The objective of the new leverage ratio is to Interest rate risk is defined as the sensitivity of ensure that banking organizations that hold sub- an institution's earnings and capital to changes in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

916 Federal Reserve Bulletin • November 1990 interest rates. This sensitivity may result from Although domestic and international work has differences in the maturity or repricing of an been under way for some time, we have not yet institution's assets, liabilities, and off-balance- achieved a consensus on how to measure interest sheet instruments. This type of mismatch occurs, rate risk or assess an appropriate capital requirefor example, when an institution funds a long- ment. However, it is necessary to find a measure term, fixed-rate loan with a short-term or variable- that produces an acceptable interest rate risk rate deposit. When significant interest rate expo- measurement tool. sure exists, a relatively small adverse change in While the Board has not officially approved a interest rates may result in a substantial reduction particular approach to interest rate risk measurein an institution's earnings and capital. ment, there are a number of possible approaches Interest rate risk has been evaluated in con- that the Board is likely to consider. One alternanection with the overall determination of an tive might be to require that all institutions, organization's capital adequacy and financial regardless of size, provide detailed information condition during on-site examinations. Since a on the maturity and repricing of their assets, conclusive assessment of capital adequacy can liabilities, and off-balance-sheet exposures. This be made only after consideration of all the quan- information would then be used to calculate an titative factors that determine the need for capi- institution's interest rate exposure and the cortal, we think it is clear that the time has now responding capital requirement. One drawback, come to place greater emphasis on the quantita- however, is that this approach could impose tive measurement of interest rate risk and to substantial reporting burdens on institutions with more explicitly factor interest rate risk into the minimal interest rate risk. assessment of capital adequacy. Another alternative that the supervisory agen- To this end, the Federal Reserve is working cies might explore to deal with interest rate risk with the other U.S. banking agencies and regu- involves a two-phased approach. Under this aplatory authorities on the Basle Supervisors' proach, institutions would be screened by the use Committee to develop methods to measure and of a rather rough measure of interest rate risk, address interest rate and other noncredit risks. derived from minimally enhanced data that is, for These methods are necessary to enhance the the most part, already available in the call report. basic risk-based capital framework. For institutions that undertake interest rate risks In considering how best to factor interest rate outside of established parameters, more detailed risk into capital adequacy calculations, we are reporting would be required and could be the guided by the following principles: basis for a more precise calculation of an addi- 1. The system should provide incentives to tional capital requirement. reduce risk or a means to ensure that those risks We would certainly work to ensure that any that are assumed are backed by sufficient capital approach that is finally adopted would be comto fully protect the deposit insurance system and patible with the rate risk measurement mechainvestors. nism that might be developed internationally 2. The system should assess the impact on the under the auspices of the Basle Supervisor's firm of interest rate volatility and hedging activ- Committee. The approach that is finally adopted ities, including proper risk weighting of hedging should be designed to afford regulators considerinstruments. able comfort that institutions with undue interest 3. The system should be straightforward so rate risk have been appropriately identified, that that it can be widely understood and utilized by a reasonable amount of additional capital for that bank directors and management. added risk is being held, and that additional supervisory action could be taken as warranted. 4. the system or the data required to imple- In addition, institutions that undertake interest ment it should not place excessive burdens or risk outside of the established parameters would costs upon the institution. be expected to have the management expertise, 5. The system should strengthen U.S. banking together with strong reporting and control sysorganizations so as to enhance their international tems that would enable them to undertake such competitiveness. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 917 risks on a knowledgeable basis. Moreover, the important role in the supervisory process. Beinterest rate data that banks provide would be sides providing important information to market verified regularly through the examination pro- participants, accurate and timely financial recess. ports enhance the supervisor's ability to monitor One area that must also be addressed involves an institution's financial condition and to take the accounting treatment for off-balance-sheet prompt corrective action. instruments. To better factor these instruments Stronger capital positions and prompt correcinto the assessment of interest rate risk, more tive action by supervisors will help reduce exceswork will have to be done by the FASB to sive risktaking by insured institutions. The reimprove the accounting standards for these di- quirement for depository institutions to maintain verse instruments and to provide more specific strong capital positions sufficient to cover oncriteria for hedge accounting. and off-balance-sheet risks will promote the safety and stability of our banking system and protect the interest of the U.S. taxpayers. The CONCLUSION Federal Reserve will continue to work with the other supervisory agencies to develop uniform In summary, the Federal Reserve believes that capital and accounting standards that achieve both accounting and capital standards play an these important objectives. • Statement by Alan Greenspan, Chairman, Board ize our banking system in other ways. The Conof Governors of the Federal Reserve System, gress and the Board repeatedly are reminded of before the Committee on Banking, Finance and the erosion of the competitiveness of our banking Urban Affairs, U.S. House of Representatives, system both domestically and internationally. September 13, 1990. The Board believes that addressing this problem should be joined with deposit insurance reform, I am pleased to appear before this committee to and my statement will intertwine both topics. discuss deposit insurance reform. Your letter of The fundamental problems with our current invitation contained a list of important issues and deposit insurance program are clearly underquestions that I will try to address. Our recent stood and are, I believe, subject to little debate experience with thrift institutions underlines the among those with drastically different prescrippressing need for deposit insurance reform. In- tions for reform. The safety net—deposit insurdeed, the Congress recognized that last year's ance, as well as the discount window—has so landmark Financial Institutions Reform, Recov- lowered the risks perceived by depositors as to ery, and Enforcement Act of 1989 (FIRREA) was make them relatively indifferent to the soundness only a first step when it mandated a Treasury of the depository recipients of their funds, except study of deposit insurance issues. This study, in in unusual circumstances. With depositors exerwhich the Federal Reserve is an active partici- cising insufficient discipline through the risk prepant, will be published late this year or early mium they demand on the interest rate they next. By holding hearings considerably before receive on their deposits, the incentive of some that research is complete, I hope that the Con- banks' owners to control risktaking has been gress will be able to focus on the needed legisla- dulled. Profits associated with risktaking accrue tion immediately after the release of the Treasury to owners, while losses in excess of bank capital study. that would otherwise fall on depositors are ab- Your letter of invitation suggested that the sorbed by the Federal Deposit Insurance Corpotopic of these hearings would be solely deposit ration (FDIC). insurance reform. While this subject is complex, Weak depositor discipline and this moral hazthe Board believes that the issue is intimately ard of deposit insurance have two important related to the need for legislation to also modern- implications. First, the implicit deposit insurance Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

918 Federal Reserve Bulletin • November 1990 subsidy has encouraged banks to enhance their deposit insurance system, we should not lose profitability by increasing their reliance on de- sight of the contribution that both deposit insurposits rather than capital to fund their assets. In ance and the discount window have made to effect, the deposit insurance funds have been macroeconomic stability. The existence and use increasingly substituted for private capital as the of the safety net have shielded the broader financushion between the asset portfolios of insured cial system and the real economy from instabiliinstitutions and their liabilities to depositors. A ties in banking markets. More specifically, it has hundred years ago, the average equity capital to protected the economy from the risk of deposit assets ratio of U.S. banks was almost 25 percent, runs, especially the risk of such runs spreading approximately four times the current level. Much from bank to bank, disrupting credit and payof the decline over the past century no doubt ment flows and the level of trade and commerce. reflects the growing efficiency of our financial Confidence in the stability of the banking and system. But it is difficult to believe that many of payments system has been the major reason why the banks operating over recent decades would the United States has not suffered a financial have been able to expand their assets so much, panic or systemic bank run in the last half with so little additional investment by their own- century. ers, were it not for the depositors' perception There are thus important reasons to take care that, despite the relatively small capital buffer, as we modify our deposit insurance system. their risks were minimal. Regulatory efforts over Reform is required. So is caution. The ideal is an the past ten to fifteen years have stabilized and institutional framework that, to the extent possipartially reversed the sharp decline in ratios of ble, induces banks both to hold more capital and bank equity capital to assets. This reversal has to be managed as if there were no safety net, occurred despite the sizable write-off of loans while at the same time shielding unsophisticated and the substantial buildup in loan-loss reserves depositors and minimizing disruptions to credit in the past three years or so. But the capital and payment flows. ratios of many banks are still too low. If we were starting from scratch, the Board Second, government assurances of the liquid- believes it would be difficult to make the case ity and availability of deposits have enabled that deposit insurance coverage should be as high some banks with declining capital ratios to fund as its current $100,000 level. However, whatever riskier asset portfolios at a lower cost and on a the merits of the 1980 increase in the deposit much larger scale, with governmental regulations insurance level from $40,000 to $100,000, it is and supervision, rather than market processes, clear that the higher level of depositor protection as the major constraint on risktaking. As a result, has been in place long enough to be fully capitalmore resources have been allocated to finance ized in the market value of depository institurisky projects than would have been dictated by tions and incorporated into the financial decieconomic efficiency. sions of millions of households. The associated In brief, the subsidy implicit in our current scale and cost of funding have been incorporated deposit insurance system has stimulated the into a wide variety of bank and thrift decisions, growth of banks and thrift institutions. In the including portfolio choices, staffing, branch process the safety net has distorted market sig- structure, and marketing strategy. Consequently, nals to depositors and bankers about the eco- a return to lower deposit insurance coverage— nomics of the underlying transactions. This dis- like any tightening of the safety net—would tortion has led depositors to be less cautious in reduce insured depository market values and choosing among institutions and has induced involve significant transition costs. It is one thing some owners and their managers to take exces- initially to offer and then to maintain a smaller sive risk. In turn, the expanded lending to risky degree of insurance coverage, and quite another ventures has required increased effort and re- to reimpose on the existing system a lower level sources by supervisors and regulators to monitor of insurance, with its associated readjustment and modify behavior. and unwinding costs. This is why the granting of subsidies by the Congress should be considered But, in reviewing the list of deficiencies of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 919 so carefully: They not only distort the allocation ual at one depository institution, at all instituof resources but also are extremely difficult to tions in the same holding company, and perhaps eliminate, imposing substantial transition costs even across depositories of different ownership. on the direct and indirect beneficiaries. For such But we are concerned about the cost and adminreasons, the Board has concluded that, should istrative complexity of such schemes and would the Congress decide to lower deposit insurance urge the careful weighing of benefits and costs limits, a meaningful transition period would be before adopting any specific plan. needed. The same study could consider the desirabil- Another relevant factor that should be consid- ity of limiting pass-through deposit insurance— ered in evaluating the $100,000 insurance limit is under which up to $100,000 of insurance prothe distribution of deposit holders by size of tection is now explicitly extended to each of the account. Unfortunately, data to analyze this is- multiple beneficiaries of some large otherwise sue by individual account holder do not exist. uninsured deposits. Brokered accounts of less However, we have been able to use data col- than $100,000 also have been used to abuse lected on an individual household basis in our deposit insurance protection, particularly by 1983 Survey of Consumer Finances to estimate undercapitalized institutions. However, we the distribution of account holders. While these must be careful to remember that the use of data are seven years old, they are the best brokered deposits by healthy firms can be the available until results from our 1989 Survey of economy's most efficient way of allocating Consumer Finances become available this fall. I funds to their most productive use. The study have attached as an appendix to this statement should keep in mind these considerations, as summary tables and descriptive text of the 1983 well as the power that the Congress has already survey results.1 Briefly, the survey suggests that provided the agencies to constrain misuse of between 1.0 and 1.5 percent of U.S. households brokered accounts. held, in 1983, deposit balances in excess of No matter what the Congress decides on de- $100,000. The demographic characteristics of posit insurance limits, we must be cautious of our these account holders suggest that they are treatment of uninsured depositors. Such deposimainly older, retired citizens with most of their tors should be expected to assess the quality of financial assets in insured accounts. These char- their bank deposits just as they are expected to acteristics of heads of households owning depos- evaluate any other financial asset they purchase. its are remarkably stable as the size of deposits Earlier I noted that our goal should be for banks declines to $50,000. to operate as much as possible as if there were no A decision by the Congress to leave the safety net. In fact, runs of uninsured deposits $100,000 limit unchanged, however, should not from banks under stress have become commonpreclude other reforms that would reduce current place. inequities in, and abuses of, the deposit insur- So far, the pressure transmitted from such ance system, often thwarting its purpose. Serious episodes to other banks whose strength may be study should be devoted to the cost and effec- in doubt has been minimal. Nevertheless, the tiveness of policing the $100,000 limit so that clear response pattern of uninsured depositors to multiple accounts are not used to obtain more protect themselves by withdrawing their deposits protection for individual depositors than the from a bank under pressure raises the very real Congress intends. We at the Federal Reserve risk that in a stressful environment the flight to believe that it is administratively feasible—but quality could precipitate wider financial market not costless—to establish controls on the number and payments distortions. These systemic effects and dollar value of insured accounts per individ- could easily feed back to the real economy, no matter how open the discount window and how expansive open market operations. Thus, while 1. The attachments to this statement are available on deposits in excess of insurance limits should not request from Publications Services, mail stop 138, Board of be protected by the safety net at any bank, Governors of the Federal Reserve System, Washington, D.C. reforms designed to rely mainly on increased 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

920 Federal Reserve Bulletin • November 1990 market discipline by uninsured depositors raise periodic market evaluation of the bank. The serious stability concerns. Board continues to support the use of subordi- An example of one such approach is depositor nated debt for these reasons, as well as the fact coinsurance or a deductible under which a de- that it provides supplementary capital to act as positor at a failed institution receives most, but an additional buffer to the FDIC over and above not all, of his or her deposit in excess of a that provided by the owners' equity capital. But, reduced (or the current) insurance limit. This in our view, subordinated debentures can only be option has some attractions, coupling depositor supporting players and not be awarded the cenmarket discipline with relatively modest possible tral role in reform. This is a limited source of losses to depositors. The Board believes, how- capital and one that may prove difficult and ever, that an explicit policy that requires impo- expensive to obtain when advertised as having sition of uninsured depositor loss—no matter constrained returns whose holders are expected how small—is likely to increase the risk of de- to absorb losses for the FDIC. Adding features to positor runs and to exacerbate the depositor make it more attractive adds complications that response to rumors. perhaps are best met directly by additional pure Another option to rely more on private-market equity and other reforms. incentives is the use of private deposit insurance A promising approach that seeks to simulate as a supplement or replacement for FDIC insur- market discipline with minimal stability implicaance. This use would require, of course, that all tions is the application of risk-based deposit relevant supervisory information—much of insurance premiums by the FDIC. The idea is to which is now held confidential—be shared with make the price of insurance a function of the private insurers who would be obligated to use bank's risk, reducing the subsidy to risktaking that information only to evaluate the risk of and spreading the cost of insurance more fairly depositor insurance and not for the purposes of across depository institutions. In principle, this adjusting any of their own portfolio options. In approach has many attractive characteristics, addition, it is clearly unreasonable to impose on and could be designed to augment risk-based private insurers any responsibilities for macro- capital. For example, banks with high risk-based stability in their commercial underwriting of de- capital ratios might be charged lower insurance posit insurance. Private insurers' withdrawal of premiums. But the range of premiums necessary coverage in a weakening economy or their un- to induce genuine behavioral changes in portfolio willingness to forebear in such circumstances management might well be many multiples of the would be understandable but counterproductive. existing premium, thereby raising practical con- The inability of private insurers to meet their cerns about its application. Risk-based premiums obligations after an underwriting error would be also would have to be designed with some degree disruptive at best and involve taxpayer responsi- of complexity if they are to be fair and if uninbility at worst. Private insurance and public tended incentives are to be avoided. In any responsibility unfortunately are not always com- event, the potential additional benefits on top of patible. We have similar concerns with mutual an internationally negotiated risk-based capital assurance among groups of banks who would system, while positive, require further evaluaseek to evaluate each other's risk exposure and tion. to discipline overly risky entities by expulsion Another approach that has induced increasing from their mutual guarantee syndicate. In addi- interest is the insured narrow bank. Such an tion, a system of mutual guarantees by banks institution would invest only in high quality, could raise serious anticompetitive issues. short-maturity, liquid investments, recovering its There has also been support for the increased costs for checking accounts and wire transfers use of subordinated debentures in the capital from user fees. The narrow bank would thus structure of banking organizations. Intriguing require drastic institutional changes, especially attractions of this option are the thoughts that for thousands of our smaller banks and for virtunonrunnable, but serially maturing, debt would ally all households using checking accounts. provide both enhanced market discipline and a Movement from the present structure for deliv- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 921 ery of many bank services would be difficult and Accord will begin. This risk-based capital apcostly, placing U.S. banks at a disadvantage proach provides a framework for incorporating internationally. In addition, this approach might portfolio and off-balance-sheet risk into capital shift and possibly focus systemic risk on larger calculations. Most U.S. banks have already banks. Banking organizations would have to lo- made the adjustment required for the fully cate their business and household credit opera- phased-in standard that will be effective at the tions in nonbank affiliates funded by uninsured end of 1992. However, the prospect of an indeposits and borrowings raised in money and creasingly competitive environment suggests capital markets. Only larger organizations could that the minimum level of capital called for by the fund in this way, and these units, unless financed 1992 requirements may not be adequate, espelonger term than banks today, would, even with cially for institutions that want to take on addithe likely higher capital ratio imposed on them by tional activities. As a result of the safety net, too the market, be subject to the same risks of many banking organizations, in our judgment, creditor runs that face uninsured banks, with all have traveled too far down the road of operating of the associated systemic implications. If this with modest capital levels. It may well be neceswere the case, we might end up with the same set sary to retrace our steps and begin purposefully of challenges we face today, refocused on a to move to capital requirements that would, over different set of institutions. We at the Board time, be more consistent with what the market believe that while the notion of a narrow bank to would require if the safety net were more modinsulate the insurance fund is intriguing, in our est. The argument for more capital is strengthjudgment further study of these systemic and ened by the necessity to provide banking organioperational implications is required. zations with a wider range of service options in If, in fact, proposals that rely on uninsured an increasingly competitive world. Indeed, prodepositor discipline, private insurance, subordi- jections of the competitive pressures only intennated debentures, risk-based premiums, and sify the view that if our financial institutions are structural changes in the delivery of bank ser- to be among the strongest in the world, let alone vices raise significant difficulties, reform should avoid an extension of the taxpayers' obligation to then look to other ways to curb banks' risk even more institutions, we must increase capital appetites, and to limit the likelihood that the requirements. Our international agreements undeposit insurance fund, and possibly the tax- der the Basle Accord permit us to do so. payer, will be called on to protect depositors. There are three objectives of a higher capital The Board believes that the most promising requirement. First, higher capital would approach is to reform both bank capital and strengthen the incentives of bank owners and supervisory policies. This would build upon the managers to evaluate more prudently the risks groundwork laid in the FIRREA, in which the and benefits of portfolio choices because more of Congress recognized as key components of a their money would be at risk. In effect, the moral sound banking system the essentiality of strong hazard risk of deposit insurance would be recapital plus effective supervisory controls. Both duced. Second, higher capital levels would crewould be designed to reduce the value of the ate a larger buffer between the mistakes of bank insurance subsidy. Neither would rule out either owners and managers and the need to draw on concurrent or subsequent additions to deposit the deposit insurance fund. For too many instiinsurance reform, such as the changes discussed tutions, that buffer has been too low in recent previously, other proposals, or new approaches years. The key to creating incentives to behave that may emerge in the years ahead. In fact, as the market would dictate, and at the same time higher capital, by reducing the need for, and creating these buffers or shock absorbers, is to thereby the value of, deposit insurance would require that those who would profit from an make subsequent reform easier. There would be institution's success have the appropriate less at stake for the participants in the system. amount of their own capital at risk. Third, requir- At the end of this year, the phase-in to the ing higher capital imposes on bank managers an International Capital Standards under the Basle additional market test. They must convince in- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

922 Federal Reserve Bulletin • November 1990 vestors that the expected returns justify the portfolios and off-balance-sheet commitments— commitment of risk capital. Those banks unable should occur at least annually, and the results of to do so would not be able to expand. such examinations should promptly be shared We are in the process in the Federal Reserve with the board of directors of the bank and used System of developing more specific capital pro- to evaluate the adequacy of the bank's capital. posals, including appropriate transition arrange- The examiner should be convinced after a rigorments designed to minimize disruptions. How- ous and deliberate review that the loan-loss reever, at the outset I would like to anticipate serves are consistent with the quality of the several criticisms. For many banks, raising sig- portfolio. If they are not, the examiner should nificant new capital will be neither easy nor insist that additional reserves be created with an cheap. Maintaining return on equity will be more associated reduction in the earnings or equity difficult, and those foreign banks that only adhere capital of the bank. to the Basle minimums may be put in a somewhat This method of adjusting and measuring capital better competitive position relative to some U.S. by reliance on examiner loan evaluations does banks. Higher capital requirements also will tend not depend on market value accounting to adjust to accelerate the move toward bank consolida- the quality of the assets. Some day, perhaps, we tion and slow growth in bank assets. However, may be able to apply generally accepted precepts these concerns must be balanced against the of market value accounting to both the assets and increasing need for reform now, the difficulties liabilities of a financial going concern with a wide with all the other options, and both the desire of, spectrum of financial assets and liabilities. But and necessity for, banking organizations to the Board is not comfortable with the process as broaden their scope of activities to operate suc- it has developed so far, either regarding the cessfully. ability of market value accounting to reflect More generally, many of the arguments about market values accurately over reasonable perithe competitive disadvantages of higher capital ods or to avoid being overly sensitive to shortrequirements are shortsighted. Well-capitalized run events. For most banks, loans are the prebanks are the ones best positioned to be success- dominant asset, an asset that the examiners ful in the establishment of long-term relation- should evaluate in each of the proposed annual ships, to be the most attractive counterparties for in-bank supervisory reviews. We at the Federal a large number of financial transactions and Reserve believe that the examiners' classification guarantees, and to expand their business activi- of loan quality should, as I noted, be fully ties to meet new opportunities and changing reflected in the banks' loan-loss reserves by a circumstances. Indeed, many successful U.S. diversion of earnings or a reduction in capital. If and foreign institutions would today meet sub- the resultant capital is not consistent with ministantially increased risk-based capital standards. mum capital standards, the board of directors In addition, the evidence of recent years suggests and the bank's regulators should begin the prothat U.S. banks can raise sizable equity. The cess of requiring the bank either to reduce those dollar volume of new stock issues by banking assets or to rebuild equity capital. organizations has grown since the late 1970s at a If credible capital raising commitments are not greater rate than the total dollar volume of new forthcoming, and if those commitments are not issues by all domestic corporate firms. promptly met, the authorities should pursue such Higher capital standards should go a long way responses as lowered dividends, slower asset toward inducing marketlike behavior by banks. growth, or perhaps even asset contraction, re- However, the Board believes that, so long as a strictions on the use of insured brokered depossignificant safety net exists, additional induce- its, if any, and divestiture of affiliates with the ments will be needed through an intensification resources used to recapitalize the bank. What is of supervisory efforts to deter banks from main- important is that the supervisory responses occur taining return on equity by acquiring riskier promptly and firmly and that they be anticipated assets. When it is not already the practice, full by the bank. This progressive discipline or in-bank supervisory reviews—focusing on asset prompt corrective action of a bank with inade- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 923 quate capital builds on our current bank supervi- Congress should consider designing the system sory procedures and is designed to simulate so that forced mergers, divestitures, and, when market pressures from risktaking—to link more necessary, conservatorships could be required closely excessive risktaking with its costs—with- while there is still positive equity capital in the out creating market disruptions. It is also in- depository institution. While existing stockholdtended to help preserve the franchise value of a ers should be given a reasonable period of time to going concern by acting early and quickly to correct deteriorating capital positions, the Conrestore a depository to financial health. In this gress should specifically provide the bank reguway, the precipitous drop in value that normally lators with the clear authority, and therefore occurs when a firm is placed in conservatorship explicit support, to act well before technical or receivership would, for the large majority of insolvency to minimize the ultimate resolution cases, be avoided. costs. The presence of positive equity capital, While some flexibility is certainly required in even if at low levels, when combined with any this approach, the Board believes that there must tier 2 capital, would limit reorganization and be a prescribed set of responses and a presump- liquidation costs. tion that these responses will be applied unless In the Board's view, most of the remedial the regulator determines that the circumstances actions discussed above can be taken, and have do not warrant them. Even though prompt cor- been taken, by bank regulators under the current rective action implies some limit on the discre- legal framework. Under current law, however, tion of supervisors to delay for reasons that they the actions to be taken are discretionary and perceive to be in the public interest, the Board is dependent upon a showing of unsafe or unsound of the opinion that it would be a mistake to conditions or a violation of law, and implemeneliminate completely the discretion of the regu- tation of a supervisory remedial action can be lator. extended over a protracted period of time when Accordingly, the Board believes that a system the depository institution contests the regulator's that combined a statutorily prescribed course of determination. In cases in which an institution's action with an allowance for regulatory flexibility capital is deteriorating, the progressive discipline would result in meaningful prompt resolution. framework described above would establish a For example, if a depository institution failed to systematic program of progressive action based meet minimum capital requirements established on the capital of the institution, instead of requirby its primary regulatory agency, the agency ing the regulator to determine on a case-by-case might be required by statute to take certain basis, as a precondition to remedial action, that remedial action unless it determined on the basis an unsafe or unsound practice exists. This proof particular circumstances that such action was gram would introduce a greater level of consisnot required. The presumption would thus be tency of treatment into the supervisory process, shifted toward supervisory action, and delay place investors and managers on notice regarding would require an affirmative act by the regulatory the expected supervisory response to falling capagency. ital levels, and reduce the likelihood of pro- The prescribed remedial action required in a tracted administrative actions challenging the given case would be dependent upon the ade- regulator's actions. quacy of the institution's capital. As the capital The Board is in the process of developing the fell below established levels, the supervisor parameters, processes, and procedures for could be required, for example, to order the prompt corrective action. One of the principles institution to formulate a capital plan, limit its guiding our efforts is the need to balance rules growth, limit or eliminate dividends, or divest with discretion. In addition, as is the case for certain nonbank affiliates. In the event of seri- higher capital standards, the Board is mindful of ously depleted capital, the supervisor could re- the need for an appropriate transition period quire a merger, sale, conservatorship, or liquida- before fully implementing such a change in sution. pervisory policy. In adopting such a statutory framework, the Higher capital and prompt corrective action Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

924 Federal Reserve Bulletin • November 1990 would increase the cost and reduce the availabil- time to come. Moreover, pressures would inity of credit from insured institutions to riskier tensify if real estate market conditions were to borrowers. In effect, our proposal would reduce weaken further or a recession were to develop the incentive that some banks currently have to in the general economy. overinvest in risky credits at loan rates that do It should, however, be clearly underlined that not fully reflect the risks involved. This implies the size or adequacy of the insurance fund does that the organizers of speculative and riskier not change the quality of the deposit insurance ventures will have to restructure their borrowing guarantee made by the federal government; it plans, including possibly paying more for their does allocate the cost of meeting any guarantee credit, or seek financing from noninsured enti- between the banking industry that pays the inties. Some borrowers may find their proposals no surance premiums and the taxpayers as a whole. longer viable. However, it is just such financing It should, in our view, be the policy of the by some insured institutions that has caused so government to minimize the risk to taxpayers of many of the current difficulties, and it is one of the deposit insurance guarantee, and we believe the objectives of our proposals to cause deposi- that our proposal does that. While some increase tories to reconsider the economics of such cred- in insurance premiums is in all likelihood necesits. As insured institutions reevaluate the risk- sary, we must be concerned that attempts to return tradeoff, they are likely to be more accomplish this end by substantially higher insurinterested in credit extensions to less risky bor- ance premiums may well end up—especially if rowers, increasing the economic efficiency of our accompanied by higher capital requirements— resource allocation. simply making deposits so unattractive that Despite their tendency to raise the average banks are unable to compete. Avoiding taxpayer level of bank asset quality, higher capital require- costs and maintaining a competitive banking sysments and prompt corrective action will not tem are just two more reasons why basic deposit eliminate bank failures. An insurance fund will insurance reform is so urgent. still be needed, but we believe that, with a fund Among the deposit insurance reforms that of reasonable size, the risk to taxpayers should might be considered on the basis of both be reduced substantially. As I have noted, higher strengthening the insurance fund and fairness to capital requirements and prompt corrective ac- smaller and regional banks is the assessment of tion imply greater caution in bank asset choices insurance premiums on the foreign branch deposand a higher cushion for the FDIC to absorb bank its of U.S. banks. A substantial proportion of the losses. In addition, an enhanced supervisory deposits of the largest U.S. banks are booked at approach will not permit deteriorating positions branches outside the United States, including to accumulate. offshore centers in the Caribbean. Assessing But until these procedures have been adopted such deposits could yield significant revenue for and the banking system has adjusted to them, the FDIC. circumstances could put the existing insur- However, assessing deposit insurance premiance fund under severe pressure. As Chairman ums on foreign deposits would involve some Seidman has indicated, the fund is already costs. Such deposits may be quite sensitive to a operating under stress, as its reserves have small decline in their yields. Thus imposing predeclined in recent years and now stand, as a miums could lead to deposit withdrawals and percentage of insured deposits, at their lowest funding problems at some U.S. banking organilevel in history. At the same time, there remain zations and possibly inhibit the ability of these all too many problems in the banking system, organizations to raise capital. problems that have been growing of late as Even if no adjustment is made in the insurance many banks, including many larger banks, have assessment on foreign deposits, held almost been experiencing a deterioration in the quality solely by large banks, other deposit insurance of their loan portfolios, particularly real estate reforms should be equally applicable to banks of loans. It thus seems clear that the insurance all sizes. No observer is comfortable with the fund likely will remain under stress for some inequities and adverse incentives of an explicit or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 925 implicit program that penalizes depositors, cred- from reform at minimum cost. We believe that itors, and owners of smaller banks more than our proposals achieve this goal. those of larger ones. The Board believes that no It is worth noting that in many foreign counbank should assume that its scale insulates it tries large banks are considered so important to from market discipline, nor should any depositor their economy that it is widely anticipated that with deposits in excess of the insurance limit at authorities in these countries would support the largest of U.S. banks assume that he or she these banks during financial crises. In some faces no loss should their bank fail. countries, notably France and Italy, some large Nevertheless, it is clear that there may be banks are owned by the government, another some banks, at some particular times, whose factor that arguably leads market participants to collapse and liquidation would be excessively doubt that these banks could fail. Thus the disruptive to the financial system. But it is only commitment of foreign authorities presumably under the very special conditions, which should extends beyond the rather limited levels explicbe relatively rare, of significant and unavoidable itly incorporated into their deposit insurance risk to the financial system that our policies for systems and may potentially create the same resolving failed or failing institutions should be types of problems that the United States faces relaxed. The benefits from the avoidance of a with institutions deemed "too big to fail." contagious loss of confidence in the financial Virtually all of the major industrial countries system accrue to us all. But included in the cost have instituted a system of explicit deposit insurof such action is the loss of market discipline that ance. The character of these systems, however, would result if large banks and their customers varies widely, and most of them are more modest presume a kind of exemption from loss of their in scope than the U.S. system. In many cases, funds. The Board's policies of prompt corrective especially in Europe, deposit insurance is not a action and higher capital are designed to mini- funded system, but rather an agreement among mize these costs. Under these policies, the pre- banks intended to make money available to prosumption should always be that prompt and tect the small depositors at failed banks. Except predictable supervisory action will be taken. For in Germany and Italy, the ceiling on insured no bank is ever too large or too small to escape deposits is substantially lower than in the United the application of the same prompt corrective States. Membership in the insurance system is action standards applied to other banks. Any also voluntary in several countries. Though most bank can be required to rebuild its capital to banks in these countries join the system, deposit adequate levels and, if it does not, be required to insurance is not viewed as the primary means of contract its assets, divest affiliates, cut its divi- support for large banks. As Europe 1992 is dends, change its management, sell or close implemented, and full cross-border banking beoffices, and the resultant smaller entity can be comes a European reality, it is quite likely that merged or sold to another institution with the the European Community will find itself under resources to recapitalize it. If this is not possible, pressure to make its deposit insurance system the entity can be placed in conservatorship until more explicit and more uniform. it is. I noted earlier that one response of some U.S. It is, by the way, the largest U.S. banks that banks to the more intense competitive environwould be required under our proposals to raise ment has been to draw down their capital buffer. the most additional capital, both absolutely and These and other institutions cannot rebuild, proportionally. Most banks with assets of less strengthen, and maintain the appropriate level of than $1 billion already meet capital requirements capital unless they are able to adapt to the considerably above the fully phased-in Basle changing competitive and technological environ- Capital Accord minimums. In addition, it bears ment. The ability to adapt is crucially dependent emphasizing that no deposit insurance reform on broadening the permissible range of activities that truly reduces the subsidy existing in the for banking organizations. At the same time, we current system will be costless for banks. The should be sensitive to the implications of the issue really is one of achieving maximum benefit potential extension of the safety net—directly or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

926 Federal Reserve Bulletin • November 1990 indirectly—under those markets that banking or- means for ensuring that the activities of the orgaganizations are authorized to enter. nization as a whole do not impose undue risk on The Board has for some time held the view that the insured entity and hence either the financial strong insulating fire walls would both protect system or the safety net. We believe that, to banks (and taxpayers) from the risk of new activ- protect the insured entity, the financial system, ities and limit the extension of the safety net and the safety net, some agency should be responsubsidy that would place independent competitors sible for oversight of the entire organization. at a disadvantage. However, recent events, in- Authorization to use their expertise over a cluding the rapid spread of market pressures to wider range of markets might well be limited only separately regulated and well-capitalized units of to those organizations in which the bank or the Drexel when their holding company was unable to holding company meets a new higher capital meet its maturing commercial paper obligations, standard. Consequently, the Congress might have raised serious questions about the ability of wish to authorize bank supervisors to grant cerfire walls to insulate one unit of either a holding tain of these activities only to those entities that company or a bank from funding problems of an exceed such a standard. Those institutions that affiliate or subsidiary. Partially as a result, the consistently exceed the capital standard perhaps Board is in the process of reevaluating both the could receive more flexibility in supervisory efficacy and desirability of substantial fire walls treatment. For example, a notice requirement between a bank and some of its affiliates or could be substituted for formal applications for subsidiaries. It is clear that high and thick fire activities permitted by law and regulation, prowalls reduce synergies and raise costs for financial vided that such acquisitions leave the bank or institutions, a significant problem in increasingly other appropriate entity's capital in excess of the competitive financial markets. If they raise costs higher standards. Other reductions in regulatory and may not be effective, we must question why burden for highly capitalized banks or banking we are imposing these kinds of fire walls at all. organizations might also be appropriate. Such Moreover, higher capital standards and prompt organizations would, however, still be subject to corrective action at the bank go a long way to limit the same thorough annual examinations. the transference of the bank safety net subsidies As you know, the Board has long supported to bank affiliates or subsidiaries that fire walls are repeal of the provisions of the Glass-Steagall Act designed to constrain. And, as such, they should that separate commercial and investment bankgreatly limit the risk of distorted market signals ing. We still strongly advocate such repeal beand excessive risktaking over an expanded range cause we believe that technology and globalizaof markets, as well as the unfair competition, that tion have continued to blur the distinctions might otherwise accompany wider activities by among credit markets and have eroded the franbanking organizations. chise value of the classic bank intermediation It may be more realistic to apply more limited process. Outdated constraints will only endanger fire walls to the new activities. I have in mind the profitability of banking organizations and here restrictions such as sections 23A and 23B of their contribution to the American economy. the Federal Reserve Act, which already limit the Beyond investment banking, the Board believes financial transactions between a bank and its that highly capitalized banking firms should be affiliates, requiring collateral, arms-length trans- authorized to engage in a wider range of financial actions, and—except when Treasury securities activities as a part of the modernization of our are used as collateral—quantitative limits based financial structure and the maintenance of on the bank's capital. Such limitations could also strong, profitable financial institutions that can be applied to transactions between a bank and compete in world markets. A banking system certain bank subsidiaries. that cannot adapt to the changing competitive Even with these, or tighter fire walls, the po- and technological environment will no longer be tential for problems in one unit of a firm to affect able to attract and maintain the higher capital other units raises the question of the implications level that some of our institutions need to operate of a piecemeal regulatory structure, with no without excessive reliance on the safety net. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 927 Firms primarily engaged in the financial ac- reform, now or later. Moreover, we believe that tivities authorized to banking organizations with such an approach the Congress should feel should likewise be permitted to operate an comfortable with authorizing banking organizainsured bank. The Congress, of course, will tions to expand the scope of their financial activhave to give careful consideration to how to ities. Indeed, we believe that permitting wider handle the activities some of these entities are activities is necessary to ensure that such orgaalready engaged in that would not be permitted nizations can remain competitive both here and to banking organizations. More generally, as we abroad. Increased activities are also required to expand the range of activities available to banks sustain the profitability needed if banking firms and their subsidiaries or affiliates, competitive are to attract capital. To limit the risks of safety equity suggests the desirability of functional net transference, some new activities might be regulation. Under such an approach, each area made available by banking regulators only to of activity should be subject to the same regu- banks with impressive capital positions. We belatory constraints as equivalent or very similar lieve that whatever the regulatory form and functions at nonbank firms. structure under which new activities are permit- As the Congress considers modernization of ted, one agency should have oversight responsiour banking structure to meet the needs of the bility sufficient to protect the bank from excestwenty-first century, it should not only widen the sive risks taken in other parts of its broader permissible activities of well-capitalized banking organization. It is also our view that, with these organizations but also eliminate outdated stat- suggested reforms, reliance on stringent fire utes that only increase costs. The McFadden Act walls would not be necessary. And the McFadforces state member banks and national banks to den Act should be amended to permit banks to deliver interstate services only through sepa- deliver their services at the lowest possible costs rately capitalized bank holding company subsid- and to more easily diversify their geographic iaries (where permitted by state law) rather than risks. The Board has shared its views with the through branches. Such a system reduces the Treasury as part of our continuing consultations ability of many smaller banks to diversify geo- on these matters, especially in the context of graphically and raises costs for all banking orga- their FIRREA-mandated study. nizations that operate in more than one state, a Finally, in considering all proposals, we should curious requirement as we search for ways to remind ourselves that our objective is a strong make banks more competitive and profitable. and stable financial system that can deliver the The McFadden Act ought to be amended to best services at the lowest cost and compete permit interstate branching by banks. around the world without taxpayer support. This In summary, events have made it clear that we objective requires the modernization of our fiought not to permit banks, because of their nancial system and the weaning of some instituaccess to the safety net, to take excessive risk tions from the unintended benefits that accomwith inadequate capital. Even if we were to pany the safety net. Higher capital requirements ignore the potential taxpayer costs, we ought not may well mean a relatively leaner and more to permit a system that is so inconsistent with efficient banking system, and they will certainly efficient market behavior. In the process of re- mean one with reduced inclinations toward risk. form, however, we should be certain we consider However, the Board believes that our proposed carefully the implications for macroeconomic reforms—including the authorization of wider stability. The Board believes that higher capital activities by banking organizations—will go a and prompt corrective action by supervisors to long way toward ensuring a safer and more resolve problems will go a long way to eliminate efficient financial system and lay the groundwork excessive risktaking by insured institutions and for other modifications in the safety net in the would not preclude additional deposit insurance years ahead. • Additional statement follows. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

928 Federal Reserve Bulletin • November 1990 Statement by Alan Greenspan, Chairman, Board rough indications of the likely direction and size of Governors of the Federal Reserve System, of the impacts. before the Joint Economic Committee, U.S. Admittedly, even the most sophisticated Congress, September 19, 1990. econometric models are simplified, almost crude, representations of economic reality. They vary in It is a pleasure to be here today to discuss the their readings of history and cannot capture state of the economy and the appropriate course completely the scope and complexity of the for policy in the current situation. economy's interrelationships or changes in its When I presented the Federal Reserve's semi- structure over time. Moreover, they cannot take annual report on monetary policy to the Con- into account the political and military unknowns gress in July, I noted that the pace of economic in the current situation. Nonetheless, such modactivity had slowed considerably this year. Real els can be employed to identify the directions, gross national product rose at only a 1 Vi percent and rough orders of magnitude, of the average annual rate, on average, in the first half, and the effects of changes in oil prices. This is certainly a available indicators suggest that real growth re- useful first step in policy analysis. mained slow during the summer. Private employ- Suppose, for example, that crude oil prices ment has been flat over the past two months, and were to average something under $30 per barrel the unemployment rate, which had fluctuated over the next year—roughly in line with what is narrowly for several quarters, has edged up since suggested by current transactions in the spot and midyear. futures markets. This would be approximately Despite the general sluggishness in business $10 per barrel above their July level. Repreactivity this year, the underlying trend in infla- sentative models suggest that such a $10 per tion has not improved. In fact, the core rate of barrel increase in the price of oil would add V-h to inflation in consumer prices may have crept 2 percent to the level of overall consumer prices higher. Moreover, the chance of a significant over the next year. Much of the increase in the break soon in the inflation trend would seem to overall price level reflects the pass-through of have diminished in view of the additional pres- higher costs of crude oil into prices of domestisures from oil prices. cally consumed petroleum products. These di- In my July testimony, I noted that the Board rect effects typically appear relatively quickly; members and Reserve Bank presidents ex- indeed, such effects already were evident in pected the economy to expand at a moderate yesterday's report on the consumer price index pace over the ensuing year and a half, while for August and undoubtedly will remain sizable prices were anticipated to rise less rapidly than in the September figures as well. Other, less they had earlier this year. Most private fore- direct, effects will build over time. Prices for casters shared that assessment. Regrettably, competing energy products will be bid up, and events in the Middle East have introduced new those of goods and services that use energy as an and substantial risks to the outlook. The higher input will rise more rapidly than they otherwise oil prices already have added to overall price would have. A sustained higher oil price also pressures and may have begun to restrain real would tend to feed through—with some lag—to activity. Besides the effects of the higher oil wages, as workers seek to offset losses in their prices per se, just the enormous uncertainty real income. about how and when the tensions in the Persian The effects on economic activity work through Gulf will be resolved undoubtedly is affecting several channels and are more difficult to sort the economy in a negative way. out. The range of empirical estimates is doubtless If we knew how oil prices were going to move wider than for prices, but a representative figure in coming months, it would be feasible—at least is that a sustained increase of $10 per barrel of oil in principle—to trace out the effects of the 1990 would reduce the level of real GNP roughly 1 "oil shock" on the U.S. economy. Economic percent within a year. Much of this loss in output theory supplies an analytical framework, and arises because—to the extent that the United empirical analyses of past experience provide States is a net importer of oil—a hike in oil prices Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Statements to the Congress 929 drains away purchasing power from American in the summer. In addition, the advance estienergy users to foreign oil producers. Indeed, mates for August suggest that retail sales of other with imports of petroleum and products currently items were about the same in real terms as in the averaging about 8V2 million barrels per day, a $10 preceding few months. Nonetheless, prospects per barrel rise in the oil price adds roughly $30 for consumer demand are highly uncertain, espebillion to our annual import bill. cially in light of the sharp deterioration in con- Specifically, the higher consumer prices that sumer sentiment recorded in a variety of surveys result from the oil shock cut into the real dispos- since the Middle East crisis began. For example, able income of households, which in turn can be the indexes compiled by the Survey Research expected to reduce their spending. The weaker Center at the University of Michigan and by the path for consumption subsequently can be pre- Conference Board both plummeted in August to sumed to spill over to business investment as their lowest levels since 1983. many firms—their profit margins already As yet, there is no statistical evidence on how squeezed by higher energy costs—lower capital prospects for business investment may have spending in response to the reduced demand for changed as a consequence of the oil shock. But their output. the available anecdotal information clearly has Over time, the oil-producing countries may taken on a more pessimistic tone over the past increase their purchases of U.S.-produced goods several weeks. Notably, the latest information and services. In the current situation, the recent provided to the Federal Reserve Banks by busifall in the dollar may also provide some stimulus nesses and other contacts suggests a greater to our exports and restrain our imports. But, in caution on the part of firms in the acquisition of total, the increment to U.S. GNP from higher net capital goods, in some cases because of inexports probably will be smaller than the drop in creased uncertainty. The reports from the Disdomestic demand—particularly in the short run. trict Banks are summarized in the so-called Beige In addition, the weaker dollar adds upward pres- Book, which will be released later today. sure to U.S. import prices and hence raises It would be surprising if the recent developfurther concern about inflation and instability. ments did not give rise to some pullback by Domestic energy producers, like their foreign consumers and businesses. But the paucity of counterparts, benefit from higher oil prices. At hard data makes it difficult to assess the extent of least to some extent, they likely will increase any cutbacks in spending or production that may spending on exploration and drilling, or other be under way. It is also difficult to put the types of investment. Nonetheless, this offset, information in perspective. For example, the too, probably will be relatively small in the near sharp drop in consumer attitudes may be largely term, as producers—not knowing whether the a reflexive response to bad news, rather than an higher oil price will be sustained—are likely to be objective assessment of the outlook for income reluctant to undertake major projects. and employment. If so, attitudes, and spending in Turning from the abstract to the current real- turn, may improve, once the initial shock effect ity, hard data on the output of goods and services wears off. On the other hand, the surveys may be in the period since the invasion of Kuwait are signalling a more basic weakness in demand that limited, and it is difficult to distinguish the effects will not be eased by the mere passage of time. of higher oil prices from developments that The prospects for weakness cascading throughwould have occurred anyway. Clearly, growth is, out the economy do not as yet appear compelat best, sluggish. Nonetheless, judging from both ling, in part because of the tight rein that busihard data and more anecdotal reports, we are nesses have been keeping on inventories. not—at least as yet—witnessing a cumulative Nonetheless, we must remain alert to the possiunwinding of economic activity. bility of such a development. Outlays on new cars and light trucks should be Whether an efficacious policy response to sensitive to the uncertainty shock that the Per- current developments would seek higher, sian Gulf crisis has imparted, yet they have lower, or unchanged interest rates will depend softened only moderately from the pace of earlier on the specifics of the situation, which are Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

930 Federal Reserve Bulletin • November 1990 shifting day by day. In framing policy, how- monetary policy over the past few years may ever, we must not lose sight of the fact that have reduced the odds of the oil shock igniting a there is no policy initiative that can in the end more general acceleration of prices and a sharp prevent the transfer of wealth, and cut in our escalation of bond yields. standard of living, that stems from higher prices In any event, the surest way to bring down real for imported oil. In addition, we must take into long-term interest rates is to reduce the federal account the policy problems that already were budget deficit. As you know, some have expresent before the oil shock. For example, as I pressed concern in recent weeks that a large cut reported to the Congress in July, we made an in the FY 1991 budget—coming on top of the oil adjustment to policy at that time in response to shock—would risk tipping the economy into reevidence, including Federal Reserve surveys, cession. Such fears are understandable; howthat banks—along with other lenders—had ever, they must be balanced against the benefits tightened credit. Data since that time have that will flow from reducing the federal governvalidated the earlier assessment, and, of ment's claim on the nation's limited pool of course, we shall continue to evaluate all of the saving. Because the government has been borevidence relating to credit conditions. rowing so much and for so long, it is well past Another key issue one must address is how time to scale back its draw on credit markets and much of any change in short-term rates would to free up more resources for enhancing investcarry over to the crucially important long-term ment and production by the private sector. rates, given the concern in financial markets The participants in the Budget Summit are about prospects for inflation and about future endeavoring to craft a package of sizable deficit economic developments. It is lower long-term reductions. If they succeed and the Congress rates, rather than short rates, that can do the does enact a credible, long-term, enforceable most to foster the investment activity that is budget agreement, I would expect long-term incritical for the future health of the economy. terest rates to decline. Specifically, lower mortgage rates clearly would In that context, I would presume that the be useful in containing the current erosion of real Federal Reserve would move toward ease to estate markets. Policy actions that are not per- accommodate those changes in the capital marceived to be consistent with a stable, noninfla- kets. What adjustment might be necessary, and tionary economic environment could easily be how it might be timed, cannot be spelled out counterproductive over the long haul. before the fact. The actions required will depend It is the responsibility of monetary policy to on current economic conditions, the nature and look through the uncertainty of the near term and magnitude of the fiscal package, and the likely to provide the stable financial environment that is timing of its effects. consistent with our longer-run objectives. We In the final analysis, no one can guarantee that shall want, for example, to make sure that money real growth will proceed smoothly, without a and credit remain on appropriate growth tracks, hitch on a quarter-to-quarter basis. I can only with due allowance for the special influences offer the assurance that the Federal Reserve will affecting the demand for money and its velocity; seek, as we have in the past, to foster economic among those influences are the credit develop- stability and sustainable growth, in the context of ments to which I referred a moment ago. Indeed, continued progress over time toward price staone could argue that the restrained stance of bility. • Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

931 Announcements REGULATION Z: AMENDMENTS to prepare effectively the necessary loan application documentation. The guide also points out The Federal Reserve Board issued on Septem- that both the borrower and the lender have ber 14, 1990, amendments to its Regulation Z certain responsibilities. If a borrower does not (Truth in Lending) relating to home equity lines obtain the credit at first, he or she is encouraged of credit. The final rules become effective Sep- to find out the reasons why from the lender, and tember 19, 1990, but compliance is not manda- to make the necessary improvements, while retory until October 1, 1991. alizing that getting credit has always been trou- One of the amendments allows creditors to blesome if the documentation is not in order. continue to freeze the home equity line of credit Within the guide, the reader will find some if the rate cap is reached, stipulating that this sources for technical assistance and recourses to condition is specified in the contract. The other take if the application is not approved. amendment requires that all repayment phase Copies of the brochure are available from the disclosures be given to consumers when they Board's Publications Services, mail stop 138, receive the application for the line of credit. Board of Governors of the Federal Reserve System, Washington, D.C. 20551 or from the District Reserve Banks. REGULATION K: EXTENSION OF COMMENT PERIOD ON PROPOSED REVISIONS PUBLICATION OF NEW BROCHURE The Federal Reserve Board on September 26, Home Mortgages: Understanding the 1990, extended the period to receive comments Process and Your Rights on its proposed revision to Regulation K (International Banking Operations) that would permit The Federal Reserve Board announced on Sep- U.S. banking organizations to extend the scope tember 20, 1990, the publication of a new broof their international activities. Comment must chure regarding mortgage discrimination entitled now be received by October 14, 1990, instead of Home Mortgages: Understanding the Process by September 30, 1990. and Your Rights. The brochure describes a mortgage, tells how to shop for one and what to look for, outlines the REVISED BROCHURE application process, and advises a potential A Guide to Business Credit for Women, homebuyer on how to register complaints if the Minorities, and Small Businesses consumer thinks that he or she may have been discriminated against. To help a consumer make The Federal Reserve Board announced on Sep- this determination, the brochure lists some comtember 14, 1990, the availability of a newly mon discrimination practices and states some of revised and retitled brochure designed to assist the laws that provide consumers with protection women, minorities, and small businesses in ob- regarding homeownership. taining startup or additional financing. The pub- Copies of the brochure are available from the lication is entitled A Guide to Business Credit for Board's Publications Services, mail stop 138, Women, Minorities, and Small Businesses. Board of Governors of the Federal Reserve Sys- The brochure helps to demystify the commer- tem, Washington, D.C. 20551 or from the District cial credit process and provides guidance on how Reserve Banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

933 Legal Developments FINAL RULE - REVISION TO REGULATION J APPENDIX A TO SUBPART B — COMMENTARY The Board of Governors is revising 12 C.F.R. Part 210, Subpart B to its Regulation J (Funds Transfers APPENDIX B TO SUBPART B — ARTICLE 4A. Through Fed wire), to make it consistent with the new Article 4A of the Uniform Commercial Code, Funds Subpart B — Funds Transfers through Fedwire Transfers. The revision sets out the rules governing funds transfers through Fedwire, as well as Commen- Section 210.25—Authority, purpose, and tary to the regulation that constitutes a Board inter- scope. pretation of the regulation. Effective January 1, 1991, 12 C.F.R. Part 210, is (a) Authority and purpose. This Subpart provides rules revised to read as follows: to govern funds transfers through Fedwire, and has been issued pursuant to the Federal Reserve Act — 1. The authority citation for Part 210 is revised to read section 13(12 U.S.C. 342), paragraph (f) of section 19 as follows: (12 U.S.C. 464), paragraph 14 of section 16 (12 U.S.C. 248(o)), and paragraphs (i) and (j) of section 11 (12 Authority: Federal Reserve Act, sec. 13 (12 U.S.C. U.S.C. 248(i) and (j)) — and other laws and has the 342), sec. ll(i) and (j) (12 U.S.C. 248(i) and (j)), force and effect of federal law. This Subpart is not a sec. 16 (12 U.S.C. 248(o) and 360), and sec. 19(f) funds-transfer system rule as defined in Section 4A- (12 U.S.C. 464); and the Expedited Funds Availability 501(b) of Article 4A. Act (12 U.S.C. 4001 et seq.) (b) Scope. (1) This Subpart incorporates the provisions of 2. The heading to Part 210 is revised to read Article 4A set forth in Appendix B. In the event of as follows: an inconsistency between the provisions of the sections of this Subpart and Appendix B, the provisions of the sections of this Subpart shall prevail. (2) Except as otherwise provided in paragraphs (3) Part 210 - Regulation J (Collection of Checks and (4) below, this Subpart governs the rights and and Other Items by Federal Reserve Banks and obligations of: Funds Transfers Through Fedwire) (i) Federal Reserve Banks sending or receiving payment orders; 3. Subpart B is revised to read as follows: (ii) senders that send payment orders directly to a Federal Reserve Bank; (iii) receiving banks that receive payment orders Subpart B — Funds Transfers Through Fedwire directly from a Federal Reserve Bank; (iv) beneficiaries that receive payment for pay- Section 210.25 Authority, purpose, and scope. ment orders sent to a Federal Reserve Bank by Section 210.26 Definitions. means of credit to an account maintained or used Section 210.27 Reliance on identifying number. at a Federal Reserve Bank; and Section 210.28 Agreement of sender. (v) other parties to a funds transfer any part of Section 210.29 Agreement of receiving bank. which is carried out through Fedwire to the same Section 210.30 Payment orders. extent as if this Subpart were considered a funds- Section 210.31 Payment by a Federal Reserve transfer system rule under Article 4A. Bank to a receiving bank or bene- (3) This Subpart governs a funds transfer that is sent ficiary. through Fedwire, as provided in paragraph (b)(2), Section 210.32 Federal Reserve Bank liability; even though a portion of the funds transfer is payment of interest. governed by the Electronic Fund Transfer Act, but Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

934 Federal Reserve Bulletin • November 1990 the portion of such funds transfer that is governed (1) a Federal Reserve Bank need not be identified in by the Electronic Fund Transfer Act is not governed the payment order in order to be the beneficiary's by this Subpart. bank; and (4) In the event that any portion of this Subpart (2) the term includes a Federal Reserve Bank when establishes rights or obligations with respect to the that Federal Reserve Bank is the beneficiary of a availability of funds that are also governed by the payment order. Expedited Funds Availability Act or the Board's (e) Fedwire is the funds-transfer system owned and Regulation CC, Availability of Funds and Collection operated by the Federal Reserve Banks that is used of Checks, those provisions of the Expedited Funds primarily for the transmission and settlement of pay- Availability Act or Regulation CC shall apply and ment orders governed by this Subpart. Fedwire does the portion of this Subpart, including Article 4A as not include the system for making automated clearing incorporated herein, shall not apply. house transfers. (c) Operating Circulars. Each Federal Reserve Bank (f) Interdistrict transfer means a funds transfer involvshall issue an Operating Circular consistent with this ing entries to accounts maintained at two Federal Subpart that governs the details of its funds-transfer Reserve Banks. operations and other matters it deems appropriate. (g) Intradistrict transfer means a funds transfer involv- Among other things, the Operating Circular may: set ing entries to accounts maintained at one Federal cut-off hours and funds-transfer business days; ad- Reserve Bank. dress available security procedures; specify format (h) Off-line bank means a bank that transmits payment and media requirements for payment orders; identify orders to and receives payment orders from a Federal messages that are not payment orders; and impose Reserve Bank by telephone orally or by other means charges for funds-transfer services. other than electronic data transmission. (d) Government senders, receiving banks, and benefi- (i) Payment order has the same meaning as in Article ciaries. Except as otherwise expressly provided by the 4A, except that the term does not include automated statutes of the United States, the parties specified in clearing house transfers or any communication desigparagraphs (b)(ii) - (v) include: nated in a Federal Reserve Bank Operating Circular (1) a department, agency, instrumentality, indepen- issued under this Subpart as not being a payment dent establishment, or office of the United States, or order. a wholly-owned or controlled Government corpora- (j) Sender's account, receiving bank's account, and tion; beneficiary's account mean the reserve, clearing, or (2) an international organization; other funds deposit account at a Federal Reserve Bank (3) a foreign central bank; and maintained or used by the sender, receiving bank, or (4) a department, agency, instrumentality, indepen- beneficiary, respectively. dent establishment, or office of a foreign govern- (k) Sender's Federal Reserve Bank and receiving ment, or a wholly-owned or controlled corporation bank's Federal Reserve Bank mean the Federal Reof a foreign government. serve Bank at which the sender or receiving bank, respectively, maintains or uses an account. Section 210.26—Definitions. Section 210.27—Reliance on identifying As used in this Subpart, the following definitions number. apply: (a) Article 4A means Article 4A of the Uniform Com- (a) Reliance by a Federal Reserve Bank on number to mercial Code as set forth in Appendix B. identify an intermediary bank or beneficiary's bank. A (b) As of adjustment means a debit or credit, for Federal Reserve Bank may rely on the number in a reserve or clearing balance maintenance purposes payment order that identifies the intermediary bank or only, applied to the reserve or clearing balance of a beneficiary's bank, even if it identifies a bank different bank that either sends a payment order to a Federal from the bank identified by name in the payment Reserve Bank, or that receives a payment order from order, if the Federal Reserve Bank does not know of a Federal Reserve Bank, in lieu of an interest charge or such an inconsistency in identification. A Federal payment. Reserve Bank has no duty to detect any such incon- (c) Automated clearing house transfer means any sistency in identification. transfer designated as an automated clearing house (b) Reliance by a Federal Reserve Bank on number to transfer in a Federal Reserve Bank Operating Circular. identify beneficiary. A Federal Reserve Bank, acting (d) Beneficiary's bank has the same meaning as in as a beneficiary's bank, may rely on the number in a Article 4A, except that: payment order that identifies the beneficiary, even if it Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 935 identifies a person different from the person identified Article 4A, a reasonable time to notify a Federal by name in the payment order, if the Federal Reserve Reserve Bank of the relevant facts concerning an Bank does not know of such an inconsistency in unauthorized or erroneously executed payment order identification. A Federal Reserve Bank has no duty to is within 30 calendar days after the sender receives detect any such inconsistency in identification. notice that the payment order was accepted or executed, or that the sender's account was debited with Section 210.28—Agreement of sender. respect to the payment order. (a) Payment of sender's obligation to a Federal Re- Section 210.29—Agreement of receiving bank. serve Bank. A sender (other than a Federal Reserve Bank), by maintaining or using an account with a (a) Payment. A receiving bank (other than a Federal Federal Reserve Bank, authorizes the sender's Fed- Reserve Bank) that receives a payment order from its eral Reserve Bank to obtain payment for the sender's Federal Reserve Bank authorizes that Federal Reserve payment orders by debiting the amount of the payment Bank to pay for the payment order by crediting the order from the sender's account. amount of the payment order to the receiving bank's (b) Overdrafts. account. (1) A sender does not have the right to an overdraft (b) Off-line banks. An off-line bank that does not in the sender's account. In the event an overdraft is expressly notify its Federal Reserve Bank in writing created, the overdraft shall be due and payable that it maintains an account for another bank warrants immediately without the need for a demand by the to that Federal Reserve Bank that the off-line bank Federal Reserve Bank, at the earliest of the followdoes not act as an intermediary bank or a beneficiary's ing times: bank with respect to payment orders received through (i) at the end of the funds-transfer day; Fedwire for a beneficiary that is a bank. (ii) at the time the Federal Reserve Bank, in its sole discretion, deems itself insecure and gives Section 210.30—Payment orders. notice thereof to the sender; or (iii) at the time the sender suspends payments or is closed. (a) Rejection. A sender shall not send a payment order (2) The sender shall have in its account, at the time to a Federal Reserve Bank unless authorized to do so the overdraft is due and payable, a balance of by the Federal Reserve Bank. A Federal Reserve actually and finally collected funds sufficient to Bank may reject, or impose conditions that must be cover the aggregate amount of all its obligations to satisfied before it will accept, a payment order for any the Federal Reserve Bank, whether the obligations reason. result from the execution of a payment order or (b) Selection of an intermediary bank. For an interotherwise. district transfer, a Federal Reserve Bank is authorized (3) To secure any overdraft, as well as any other and directed to execute a payment order through obligation due or to become due to its Federal another Federal Reserve Bank. A sender shall not Reserve Bank, each sender, by sending a payment send a payment order to a Federal Reserve Bank that order to a Federal Reserve Bank that is accepted by requires the Federal Reserve Bank to issue a payment the Federal Reserve Bank, grants to the Federal order to an intermediary bank (other than a Federal Reserve Bank a security interest in all of the send- Reserve Bank) unless that intermediary bank is desiger's assets in the possession of, or held for the nated in the sender's payment order. A sender shall account of, the Federal Reserve Bank. The security not send to a Federal Reserve Bank a payment order interest attaches when an overdraft, or any other instructing use by a Federal Reserve Bank of a fundsobligation to the Federal Reserve Bank, becomes transfer system or means of transmission other than due and payable. Fedwire, unless the Federal Reserve Bank agrees with (4) A Federal Reserve Bank may take any action the sender in writing to follow such instructions. authorized by law to recover the amount of an (c) Same-day execution. A sender shall not issue a overdraft that is due and payable, including, but not payment order that instructs a Federal Reserve Bank limited to, the exercise of rights of set off, the to execute the payment order on a funds-transfer realization on any available collateral, and any other business day that is later than the funds-transfer busrights it may have as a creditor under applicable law. iness day on which the order is received by the Federal (c) Review of payment orders. A sender, by sending a Reserve Bank, unless the Federal Reserve Bank payment order to a Federal Reserve Bank, agrees that agrees with the sender in writing to follow such for the purposes of Sections 4A-204(a) and 4A-304 of instructions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

936 Federal Reserve Bulletin • November 1990 Section 210.31—Payment by a Federal Reserve The interest payment that is made to the party Bank to a receiving bank or beneficiary. entitled to compensation shall not be less than the value of the as of adjustment or interest payment (a) Payment to a receiving bank. Payment of a Federal that was provided by the Federal Reserve Bank to Reserve Bank's obligation to pay a receiving bank the sender or receiving bank. The party entitled to (other than a Federal Reserve Bank) occurs at the compensation may agree to accept compensation in earlier of the time when the amount of the payment a form other than a direct interest payment, proorder is credited to the receiving bank's account or vided that such an alternative form of compensation when the payment order is sent to the receiving bank. is not less than the value of the interest payment that (b) Payment to a beneficiary. Payment by a Federal otherwise would be made, Reserve Bank to a beneficiary of a payment order, (c) Nonwaiver of right of recovery. Nothing in this where the Federal Reserve Bank is the beneficiary's Subpart or any Operating Circular issued hereunder bank, occurs at the earlier of the time when the shall constitute, or be construed as constituting, a amount of the payment order is credited to the bene- waiver by a Federal Reserve Bank of a cause of action ficiary's account or when notice of the credit is sent to for recovery under any applicable law of mistake and the beneficiary. restitution. Section 210.32—Federal Reserve Bank liability; payment of interest. APPENDIX A TO SUBPART B — COMMENTARY (a) Damages. In connection with its handling of a The Commentary provides background material to payment order under this Subpart, a Federal Reserve explain the intent of the Board of Governors of the Bank shall not be liable to a sender, receiving bank, Federal Reserve System (Board) in adopting a particbeneficiary, or other Federal Reserve Bank, governed ular provision in the Subpart and to help readers by this Subpart, for any damages other than those interpret that provision. In some comments, examples payable under Article 4A. A Federal Reserve Bank are offered. The Commentary constitutes an official shall not agree to be liable to a sender, receiving Board interpretation of Subpart B. Commentary is not bank, beneficiary, or other Federal Reserve Bank for provided for every provision of Subpart B, as some consequential damages under Section 4A-305(d) of provisions are self-explanatory. Article 4A. (b) Payment of interest. Section 210.25—Authority, purpose, and (1) A Federal Reserve Bank, in its discretion, may scope. satisfy its obligation, or that of another Federal Reserve Bank, to pay compensation in the form of (a) Authority and purpose. Section 210.25(a) states interest under Article 4A by: that the purpose of Subpart B is to provide rules to (i) providing an as of adjustment to its sender, its govern funds transfers through Fedwire and recites the receiving bank, or its beneficiary, as provided in Board's rulemaking authority for this Subpart. Subthe Federal Reserve Bank's Operating Circular, in part B is federal law and is not a "funds-transfer an amount equal to the amount on which interest system rule," as defined in Section 4A-501(b) of Artiis to be calculated multiplied by the number of cle 4A, Funds Transfers, of the Uniform Commercial days for which interest is to be calculated; or Code (UCC), as set forth in Appendix B. Certain (ii) paying compensation in the form of interest provisions of Article 4A may not be varied by a to its sender, its receiving bank, its beneficiary, funds-transfer system rule, but under Section 4A-107, or another party to the funds transfer that is regulations of the Board and Operating Circulars of the entitled to such payment, in an amount that is Federal Reserve Banks supersede inconsistent provicalculated in accordance with Section 4A-506 of sions of Article 4A to the extent of the inconsistency. Article 4A. In addition, regulations of the Board may preempt (2) If the sender or receiving bank that is the inconsistent provisions of state law. Accordingly, Subrecipient of an as of adjustment or an interest part B of Regulation J supersedes or preempts inconpayment is not the party entitled to compensation sistent provisions of state law. It does not affect state under Article 4A, the sender or receiving bank shall law governing funds transfers that does not conflict pass through the benefit of the as of adjustment or with the provisions of Subpart B, such as Article 4A, interest payment by making an interest payment, as as enacted in any state, as it applies to parties to funds of the day the as of adjustment or interest payment transfers through Fedwire whose rights are not govis effected, to the party entitled to compensation. erned by Subpart B. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 937 (b) Scope. funds transfer may be sent from an originator's bank (1) Subpart B incorporates the provisions of Article through a funds-transfer system other than Fedwire 4A set forth in Appendix B. The provisions set forth to a receiving bank which, in turn, sends a payment expressly in the sections of Subpart B supersede order through Fedwire to execute the funds transfer. or preempt any inconsistent provisions of Article 4A Similarly, a Federal Reserve Bank may execute a as set forth in Appendix B or as enacted in any state. payment order through Fedwire to a receiving bank The official comments to Article 4A are not incor- that sends it through a funds-transfer system other porated in Subpart B or this Commentary to Subpart than Fedwire to a beneficiary's bank. In the first B, but the official comments may be useful in example, if the originator's bank has notice that interpreting Article 4A. Because Section 4A-105 Fedwire may be used to effect part of the funds refers to other provisions of the Uniform Commer- transfer, the sending of the payment order through cial Code, e.g., definitions in Article 1 of the UCC, the other funds-transfer system to the receiving these other provisions of the UCC, as approved by bank will be governed by Subpart B unless the the National Conference of Commissioners on Uni- parties to the payment order have agreed otherwise. form State Laws and the American Law Institute, In the second example, if the beneficiary's bank has from time to time, are also incorporated in Sub- notice that Fedwire may be used to effect part of the part B. Subpart B applies to any party to a Fedwire funds transfer, the sending of the payment order to funds transfer that is in privity with a Federal the beneficiary's bank through the other funds- Reserve Bank. These parties include a sender (bank transfer system will be governed by Subpart B or nonbank) that sends a payment order directly to a unless the parties have agreed otherwise. In both Federal Reserve Bank, a receiving bank that re- cases, the other funds-transfer system's rules would ceives a payment order directly from a Federal also apply to, at a minimum, the portion of these Reserve Bank, and a beneficiary that receives credit funds transfers going through that funds-transfer to an account that it uses or maintains at a Federal system. Because Subpart B is federal law, to the Reserve Bank for a payment order sent to a Federal extent of any inconsistency, Subpart B will take Reserve Bank. Other parties to a funds transfer are precedence over any funds-transfer system rule covered by this Subpart to the same extent that this applicable to the remote sender or receiving bank or Subpart would apply to them if this Subpart were a to a Federal Reserve Bank. If remote parties to a "funds-transfer system rule" under Article 4A that funds transfer, a portion of which is sent through selected Subpart B as the governing law. Fedwire, have expressly selected by agreement a (2) The scope of the applicability of a funds-transfer law other than Subpart B under Section 4A-507(b), system rule under Article 4A is specified in Section Subpart B would not take precedence over the 4A-501(b), and the scope of the choice of law choice of law made by the agreement even though provision is specified in Section 4A-507(c). Under the remote parties had notice that Fedwire may be Section 4A-507(c), a choice of law provision is used and of the governing law. (See 4A-507(d)). In binding on the participants in a funds-transfer sys- addition, Subpart B would not apply to a funds tem and certain other parties having notice that the transfer sent through another funds-transfer system funds-transfer system might be used for the funds where no Federal Reserve Bank handles the funds transfer and of the choice of law provision. The transfer, even though settlement for the funds trans- Uniform Commercial Code provides that a person fer is made by means of a separate net settlement or has notice when the person has actual knowledge, funds transfer through Fedwire. receives notification or has reason to know from all (4) Under Section 4A-108, Article 4A does not apply the facts and circumstances known to the person at to a funds transfer, any part of which is governed by the time in question. (See UCC Section 1-201(25).) the Electronic Fund Transfer Act (15 U.S.C. 1693 However, under Sections 4A-507(b) and 4A-507(d), et seq.). Fedwire funds transfers to or from cona choice of law by agreement of the parties takes sumer accounts are exempt from the Electronic precedence over a choice of law made by funds- Fund Transfer Act and Regulation E (12 C.F.R. transfer system rule. Part 205). A funds transfer from a consumer origi- (3) If originators, receiving banks, and beneficiaries nator or a funds transfer to a consumer beneficiary that are not in privity with a Federal Reserve Bank could be carried out in part through Fedwire and in have the notice contemplated by Section 4A-507(c) part through an automated clearing house or other or if those parties agree to be bound by Subpart B, means that is subject to the Electronic Fund Trans- Subpart B generally would apply to payment orders fer Act or Regulation E. In these cases, Subpart B between those remote parties, including participants would not govern the portion of the funds transfer in other funds-transfer systems. For example, a that is governed by the Electronic Fund Transfer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

938 Federal Reserve Bulletin • November 1990 Act or Regulation E. (See Commentary to Section definitions unless these terms are expressly defined 210.26(i) "payment order".) otherwise in Subpart B. This Subpart modifies the (5) Finally, Section 4A-404(a) provides that a bene- definitions of two Article 4A terms, "beneficiary's ficiary's bank is obliged to pay the amount of a bank" and "payment order." This Subpart also depayment order to the beneficiary on the payment fines terms not defined in Article 4A. date unless acceptance of the payment order occurs (a) Article 4A. "Article 4A" means the version of that on the payment date after the close of the funds- article of the Uniform Commercial Code set forth in transfer business day of the bank. The Expedited Appendix B. It does not refer to the law of any Funds Availability Act provides that funds received particular state unless the context indicates otherwise. by a bank by wire transfer shall be available for Subject to the express provisions of this Subpart, this withdrawal not later than the banking day after the version of Article 4A is incorporated into this Subpart business day on which such funds are received and made federal law for transactions covered by this (12 U.S.C. 4002(a)). That Act also preempts any Subpart. provision of state law that was not effective on (b) As of adjustments. As of adjustments are memo- September 1, 1989 that is inconsistent with that Act randum items that affect a bank's reserve or clearing or its implementing Regulation CC (12 C.F.R. Part balance for the purpose of meeting the required bal- 229). Accordingly, the Expedited Funds Availability ance, but do not represent funds that can be used for Act and Regulation CC may preempt Section 4A- other purposes. As discussed in the Commentary to 404(a) as enacted in any state. In order to ensure Section 210.32(b), the Federal Reserve Banks generthat Section 4A-404(a), or other provisions of Arti- ally provide as of adjustments as a means of effecting cle 4A, as incorporated in Subpart B, do not take interest payments or charges. precedence over provisions of the Expedited Funds (d) Beneficiary's bank. The definition of "beneficiary's Availability Act, this section provides that where bank" in Subpart B differs from the Section 4A- Subpart B establishes rights or obligations that are 103(a)(3) definition. The Subpart B definition clarifies also governed by the Expedited Funds Availability that where a Federal Reserve Bank functions as the Act or Regulation CC, the Expedited Funds Avail- beneficiary's bank, it need not be identified in the ability Act or Regulation CC provision shall apply payment order as the beneficiary's bank and that a and Subpart B shall not apply. Federal Reserve Bank that receives a payment order (c) Operating Circulars. The Federal Reserve Banks as beneficiary is also the beneficiary's bank with issue Operating Circulars consistent with this Subpart respect to that payment order. that contain additional provisions applicable to pay- (e) Fedwire. Fedwire refers to the funds-transfer sysment orders sent through Fedwire. Under Section tem owned and operated by the Federal Reserve 4A-107, these Operating Circulars supersede inconsis- Banks that is governed by this Subpart. The term does tent provisions of Article 4A, as set forth in Appen- not refer to any particular computer, telecommunicadix B and as enacted in any state. These Operating tions facility, or funds transfer, but to the system as a Circulars are not funds-transfer system rules, but, by whole, which may include transfers by telephone or by their terms, they are binding on all parties covered by written instrument in particular circumstances. Fedthis Subpart. wire does not include the system used for automated (d) Government senders, receiving banks, and benefi- clearing house transfers. ciaries. This section clarifies that unless a statute of (h) Off-line bank. Most Fedwire payment orders are the United States provides otherwise, Subpart B ap- transmitted electronically from a sender to a Federal plies to governmental entities, domestic or foreign, Reserve Bank or from a Federal Reserve Bank to a including foreign central banks as specified in para- receiving bank. Banks transmitting payment orders to graph (b)(1). Federal Reserve Banks electronically are often referred to as on-line banks. Some Fedwire participants, Section 210.26—Definitions. however, transmit payment orders to a Federal Reserve Bank or receive payment orders from a Federal Article 4A defines many terms (e.g., "beneficiary," Reserve Bank orally by telephone, or, in unusual "intermediary bank," "receiving bank," "security circumstances, in writing. A bank that does not use procedure") used in this Subpart. These terms are either a terminal or a computer that links it electronidefined or listed in Sections 4A-103 through 4A-105. cally to a terminal or computer at its Federal Reserve These terms, such as the term "bank" (defined in Bank to send payment orders through Fedwire is an Section 4A-105(d)(2)), may differ from comparable off-line bank. terms in Subpart A. As Subpart B incorporates con- (i) Payment order. sistent provisions of Article 4A, it incorporates these (1) The definition of "payment order" in Subpart B Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 939 differs from the Section 4A-103(a)(l) definition. The ber. This section provides this notice to entities that Subpart B definition clarifies that, for the purposes are not banks, such as the Department of the Treaof Subpart B, automated clearing house transfers sury, that send payment orders directly to a Federal and certain messages that are transmitted through Reserve Bank. Fedwire are not payment orders. Federal Reserve (b) Reliance by a Federal Reserve Bank on number to Banks and banks participating in Fedwire send identify beneficiary. Section 4A-207 provides that a various types of messages, relating to payment beneficiary's bank, such as a Federal Reserve Bank, orders or to other matters, through Fedwire that are may rely on the number identifying a beneficiary, such not intended to be payment orders. Under the as the beneficiary's account number, specified in a Subpart B definition, these messages, and messages payment order as identifying the appropriate benefiinvolved with automated clearing house transfers, ciary, even if the payment order identifies another are not "payment orders" and therefore are not beneficiary by name, provided that the beneficiary's governed by this Subpart. The Operating Circulars bank does not know of the inconsistency. Under of the Federal Reserve Banks specify those mes- Section 4A-207(c)(2), if the originator is not a bank, an sages that may be transmitted through Fedwire but originator is not obliged to pay for a payment order if that are not payment orders. the originator did not have notice that the beneficiary's (2) In some cases, messages sent through Fedwire, bank might rely on the identifying number and the such as certain requests for credit transfer, may be person paid on the basis of the identifying number was payment orders under Article 4A, but are not not entitled to receive payment. This section of Subtreated as payment orders under Subpart B because part B provides this notice to entities that are not they are not an instruction to a Federal Reserve banks, such as the Department of the Treasury, that Bank to pay money. are originators of payment orders sent directly by the (3) This Subpart and Article 4A govern a payment originators to a Federal Reserve Bank, where that order even though the originator's or beneficiary's Federal Reserve Bank or another Federal Reserve account may be a consumer account established Bank is the beneficiary's bank (see also Section 4Aprimarily for personal, family, or household pur- 402(b), providing that a sender must pay a benefiposes. Under Section 4A-108, Article 4A does not ciary's bank for a payment order accepted by the apply to a funds transfer any part of which is beneficiary's bank). governed by the Electronic Fund Transfer Act. That Act, and Regulation E implementing it, do not apply Section 210.28—Agreement of sender. to funds transfers through Fedwire (see 15 U.S.C. 1693a(6)(B) and 12 C.F.R 205.3(b)). Thus, this (a) Payment of sender's obligation to a Federal Re- Subpart applies to all funds transfers through Fed- serve Bank. When a sender issues a payment order to wire even though some such transfers involve orig- a Federal Reserve Bank and the Federal Reserve Bank inators or beneficiaries that are consumers. (See issues a conforming order implementing the sender's also Section 210.25(b) and accompanying Commen- payment order, under Section 4A-403, the sender is tary.) indebted to the Federal Reserve Bank for the amount of the payment order. A sender, other than a Federal Section 210.27—Reliance on identifying Reserve Bank, that maintains or uses an account at a number. Federal Reserve Bank authorizes the Federal Reserve Bank to debit that account so that the Federal Reserve (a) Reliance by a Federal Reserve Bank on number to Bank can obtain payment for the payment order. identify intermediary bank or beneficiary's bank. Sec- (b) Overdrafts. tion 4A-208 provides that a receiving bank, such as a (1) In some cases, debits to a sender's account will Federal Reserve Bank, may rely on the routing num- create an overdraft in the sender's account. The ber of an intermediary bank or the beneficiary's bank Board and the Federal Reserve Banks have estabspecified in a payment order as identifying the appro- lished policies concerning when a Federal Reserve priate intermediary bank or beneficiary's bank, even if Bank will permit a bank to incur an overdraft in its the payment order identifies another bank by name, account at a Federal Reserve Bank. These policies provided that the receiving bank does not know of the do not give a bank or other sender a right to an inconsistency. Under Section 4A-208(b)(2), if the overdraft in its account. Subpart B clarifies that a sender of the payment order is not a bank, a receiving sender does not have a right to such an overdraft. If bank may rely on the number only if the sender had an overdraft arises, it becomes immediately due and notice before the receiving bank accepted the sender's payable at the earliest of: the end of the fundsorder that the receiving bank might rely on the num- transfer business day of the Federal Reserve Bank; Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

940 Federal Reserve Bulletin • November 1990 the time the Federal Reserve Bank, in its sole nary care to determine that the order was not discretion, deems itself insecure and gives notice to authorized and to notify the receiving bank within a the sender; or the time that the sender suspends reasonable period of time after the sender receives a payments or is closed by governmental action, such notice that the payment order was accepted or that as the appointment of a receiver. In some cases, a the sender's account was debited with respect to the Federal Reserve Bank extends its Fedwire opera- order. Similarly, under Section 4A-304, if a sender tions beyond its cut-off hour for that funds-transfer of a payment order that was erroneously executed business day. For the purposes of this section, does not notify the bank receiving the payment unless otherwise specified by the Federal Reserve order within a reasonable time, the bank is not liable Bank making such an extension, an overdraft be- to the sender for compensation in the form of comes due and payable at the end of the extended interest on any amount refundable to the sender. operating hours. An overdraft becomes due and Section 210.28(d) establishes 30 calendar days as the payable prior to a Federal Reserve Bank's cut-off reasonable period of time for the purposes of these hour if the Federal Reserve Bank deems itself inse- provisions of Article 4A. cure and gives notice to the sender. Notice that the (2) Section 4A-505 provides that a customer must Federal Reserve Bank deems itself insecure may be object to a debit to its account by a receiving bank given in accordance with the provisions on notice in within one year after the customer received notifi- Section 1-201(27) of the UCC, in accordance with cation reasonably identifying the payment order. any other applicable law or agreement, or by any Subpart B does not vary this one-year period. other reasonable means. An overdraft also becomes due and payable at the time that a bank is closed or Section 210.29—Agreement of receiving bank. suspends payments. For example, an overdraft becomes due and payable if a receiver is appointed for (b) Off-line banks. the bank or the bank is prevented from making (1) Generally, an on-line bank receiving payment payments by governmental order. The Federal Re- orders or advices of credit for payment orders from serve Bank need not make demand on the sender for a Federal Reserve Bank receives the payment orthe overdraft to become due and payable. ders or advices electronically a short time after the (2) A sender must cover any overdraft and any other corresponding payment orders are received by the obligation of the sender to the Federal Reserve Bank on-line bank's Federal Reserve Bank. An off-line by the time the overdraft becomes due and payable. bank receiving payment orders or advices of credit By sending a payment order to a Federal Reserve from a Federal Reserve Bank does not have an Bank, the sender grants a security interest to the electronic connection with the Federal Reserve Federal Reserve Bank in any assets of the sender Bank; therefore, payment orders or advices are held by, or for the account of, the Federal Reserve transmitted either by telephone on the day the Bank in order to secure all obligations due or to payment order is received by the receiving bank's become due to the Federal Reserve Bank. The Federal Reserve Bank, or sent by courier or mail security interest attaches when the overdraft, or along with the off-line bank's daily account stateother obligation of the sender to the Federal Reserve ment, on the funds-transfer business day following Bank, becomes due and payable. The security inter- the day the payment order is received by the off-line est does not apply to assets held by the sender as bank's Federal Reserve Bank. custodian or trustee for the sender's customers or (2) Under Section 4A-302(a)(2), a Federal Reserve third parties. Once an overdraft is due and payable, Bank must transmit payment orders at a time and by a Federal Reserve Bank may exercise its right of set means reasonably necessary to allow payment to the off, liquidate collateral, or take other similar action beneficiary on the payment date, or as soon thereto satisfy the overdrafting bank's obligation owed to after as is feasible. Therefore, where an off-line the Federal Reserve Bank, receiving bank is an intermediary bank or benefi- (c) Review of payment orders. ciary's bank in a payment order, its Federal Reserve (1) Under Section 4A-204, a receiving bank is re- Bank attempts to transmit the payment order to the quired to refund the principal amount of an unau- off-line bank by telephone on the day the payment thorized payment order that the sender was not order, is received by the Federal Reserve Bank. A obliged to pay, together with interest on the refund- Federal Reserve Bank can generally identify these able amount calculated from the date that the receiv- payment orders from the type code designated in the ing bank received payment to the date of the refund. payment order. The sender is not entitled to compensation in the (3) Under Section 4A-404(b), if a payment order form of interest if the sender fails to exercise ordi- instructs payment to the account of the beneficiary, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 941 the beneficiary's bank must notify the beneficiary of or other matters before the sender may send paythe receipt of a payment order before midnight of ment orders to the Federal Reserve Bank. the next funds-transfer business day following the (b) Selection of an intermediary bank. payment date. Where an off-line bank is the benefi- (1) Under Section 4A-302, if a receiving bank (other ciary of a payment order, telephone notice by a than a beneficiary's bank), such as a Federal Re- Federal Reserve Bank to the off-line bank of the serve Bank, accepts a payment order, it must issue receipt of the order is not required by Article 4A a payment order that complies with the sender's because the Federal Reserve Bank sends notice to order. The sender's order may include instructions the off-line bank by courier or mail, along with its concerning an intermediary bank to be used that daily account statement, on the day after the pay- must be followed by a receiving bank (see Section ment order is received by its Federal Reserve Bank. 4A- 302(a)(1)). If the sender does not designate any Payment orders for which an off-line bank is the intermediary bank in its payment order, the receivbeneficiary of the order are generally designated as ing bank may select an intermediary bank through settlement transactions. which the sender's payment order can be expedi- (4) If an off-line receiving bank maintains an account tiously issued to the beneficiary's bank so long as for another bank, the off-line bank may receive the receiving bank exercises ordinary care in selectpayment orders designated as settlement transac- ing the intermediary bank {see Section 4A-302(b)). tions in its capacity as beneficiary's bank or inter- (2) This section provides that in an interdistrict mediary bank. A Federal Reserve Bank cannot transfer, a Federal Reserve Bank is authorized and readily distinguish these payment orders from set- directed to select another Federal Reserve Bank as tlement transactions for which the off-line bank is an intermediary bank. A sender may, however, the beneficiary of the order. If an off-line bank instruct a Federal Reserve Bank to use a particular notifies its Federal Reserve Bank that it maintains intermediary bank by designating that bank as the an account for another bank, the Federal Reserve bank to be credited by that Federal Reserve Bank Bank will attempt to telephone the off-line bank with (or the second Federal Reserve Bank in the case of respect to all settlement transactions received by an interdistrict transfer) in its payment order, in such bank, whether the off-line bank is the benefi- which case the Federal Reserve Bank will send the ciary, the beneficiary's bank, or an intermediary payment order to that bank if that bank receives bank in the payment order. Under this section, an payment orders through Fedwire. A sender may not off-line bank that does not expressly notify its Fed- instruct a Federal Reserve Bank to use its discretion eral Reserve Bank in writing that it maintains an to select an intermediary bank other than a Federal account for another bank warrants to that Federal Reserve Bank or an intermediary bank designated Reserve Bank that it does not act as an intermediary by the sender. In addition, a sender may not instruct bank or a beneficiary's bank for a bank beneficiary a Federal Reserve Bank to use a funds-transfer with respect to payment orders received through system or means of transmission other than Fedwire Fedwire. unless the sender and the Federal Reserve Bank agree in writing to the use of the funds-transfer system or means of transmission. Section 210.30—Payment orders. (c) Same-day execution. Generally, Fedwire is a sameday value transfer system through which funds may be (a) Rejection. transferred from the originator to the beneficiary on (1) A sender must make arrangements with its the same funds-transfer business day. A sender may Federal Reserve Bank before it can send payment not send a payment order to a Federal Reserve Bank orders to the Federal Reserve Bank. Federal Re- that specifies an execution date or payment date later serve Banks reserve the right to reject or impose than the day on which the payment order is issued, conditions on the acceptance of payment orders for unless the sender of the order and the Federal Reserve any reason. For example, a Federal Reserve Bank Bank agree in writing to the arrangement. might reject or impose conditions on accepting a payment order where a sender does not have suffi- Section 210.31—Payment by a Federal Reserve cient funds in its account with the Federal Reserve Bank to a receiving bank or beneficiary. Bank to cover the amount of the sender's payment order and other obligations of the sender due or to (a) Payment to a receiving bank. become due to the Federal Reserve Bank. A Federal (1) Under Section 4A-402, when a Federal Reserve Reserve Bank may require a sender to execute a Bank executes a sender's payment order by issuing written agreement concerning security procedures a conforming order to a receiving bank that accepts Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

942 Federal Reserve Bulletin • November 1990 the payment order, the Federal Reserve Bank must (2) This section does not affect the ability of other pay the receiving bank the amount of the payment parties to a funds transfer to agree to be liable for order. Section 210.29(a) authorizes a Federal Re- consequential damages, the liability of a Federal serve Bank to make the payment by crediting the Reserve Bank under Section 4A-404, or the liability account at the Federal Reserve Bank maintained or to parties governed by Subpart B for claims not used by the receiving bank. Section 210.31(a) pro- based on the handling of a payment order under this vides that the payment occurs when the receiving Subpart, bank's account is credited or when the payment (b) Payment of interest. order is sent by the Federal Reserve Bank to the (1) Under Article 4A, a Federal Reserve Bank may receiving bank, whichever is earlier. Ordinarily, be required to pay compensation in the form of payment will occur during the funds-transfer busi- interest to another party in connection with its ness day a short time after the payment order is handling of a funds transfer. For example, payment received, even if the receiving bank is an off-line of compensation in the form of interest is required in bank. This credit is final and irrevocable when made certain situations pursuant to Sections 4A-204 (reand constitutes final settlement under Section 4A- lating to refund of payment and duty of customer to 403. Payment does not waive a Federal Reserve report with respect to unauthorized payment order), Bank's right of recovery under the applicable law of 4A-209 (relating to acceptance of payment order), mistake and restitution (see Section 210.32(c)), af- 4A-210 (relating to rejection of payment order), fect a Federal Reserve Bank's right to apply the 4A-304 (relating to duty of sender to report erronefunds to any obligation due or to become due to the ously executed payment order), 4A-305 (relating to Federal Reserve Bank, or affect legal process or liability for late or improper execution or failure to claims by third parties on the funds. execute a payment order), 4A-402 (relating to obli- (2) This section on final payment does not apply to gation of sender to pay receiving bank), and 4A-404 settlement for payment orders between Federal Re- (relating to obligation of beneficiary's bank to pay serve Banks. These payment orders are settled by and give notice to beneficiary). Under Section 4Aother means. 506(a), the amount of such interest may be deter- (b) Payment to a beneficiary. Section 210.31(b) spec- mined by agreement between the sender and receivifies when a Federal Reserve Bank makes payment to ing bank or by funds-transfer system rule. If there is a beneficiary for which it is the beneficiary's bank. As no such agreement, under Section 4A-506(b), the in the case of payment to a receiving bank, this amount of interest is based on the federal funds rate. payment occurs at the earlier of the time that the Section 210.32(b) provides two means by which Federal Reserve Bank credits the beneficiary's ac- Federal Reserve Banks may provide compensation count or sends notice of the credit to the beneficiary, in the form of interest: through an as of adjustment and is final and irrevocable when made. or through an explicit interest payment. (2) An as of adjustment is a memorandum credit or Section 210.32—Federal Reserve Bank liability; debit that is applied to the reserve or clearing payment of interest. balance of the bank that sent the payment order to, or received the payment order from, a Federal (a) Damages. Reserve Bank. Federal Reserve Banks generally (1) Under Section 4A-305(d), damages for failure of provide as of adjustments to correct errors and a receiving bank to execute a payment order that it recover float. An as of adjustment differs from a was obliged to execute by express agreement are debit or credit to an account in that it does not affect limited to expenses in the transaction and incidental the actual balance of the account; it only affects the expenses and interest and do not include additional balance for reserve or clearing balance computation damages, including consequential damages, unless purposes. These adjustments affect the level of they are provided for in an express written agree- reserve or clearing balances that the bank must fund ment of the receiving bank. This section clarifies by other means and are therefore an effective subthat in connection with the handling of payment stitute for explicit interest payments. orders, Federal Reserve Banks may not agree to be (3) A party that sent or received a payment order liable for consequential damages under this provi- from a Federal Reserve Bank may be unable to sion and shall not be liable for damages other than make use of an as of adjustment as compensation in those that may be due under Article 4A to parties lieu of explicit interest. For example, if the sender or governed by this Subpart. Any agreement in conflict receiving bank is not subject to reserve requirewith these provisions would not be effective, be- ments or satisfies its reserve requirements with vault cause it would be in violation of Subpart B. cash, the as of adjustment could not be used to free Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 943 other balances for investment. A Federal Reserve Section 4A-103.—Payment Order - Definitions Bank may, in its discretion, provide compensation by an explicit interest payment rather than through (a) In this Article: an as of adjustment. Interest would be calculated in (1) "Payment order" means an instruction of a accordance with the procedures specified in Section sender to a receiving bank, transmitted orally, elec- 4A-506(b). Similarly, compensation in the form of tronically, or in writing, to pay, or to cause another explicit interest will be paid to Government senders, bank to pay, a fixed or determinable amount of receiving banks, or beneficiaries described in Sec- money to a beneficiary if: tion 210.25(d) if they are entitled to interest under (i) the instruction does not state a condition to this Subpart. A Federal Reserve Bank may also, in payment to the beneficiary other than time of its discretion, pay explicit interest directly to a payment, remote party to a Fedwire funds transfer that is (ii) the receiving bank is to be reimbursed by entitled to interest, rather than providing compen- debiting an account of, or otherwise receiving sation to its direct sender or receiving bank. payment from, the sender, and (4) If a bank that received an as of adjustment or (iii) the instruction is transmitted by the sender explicit interest payment is not the party entitled to directly to the receiving bank or to an agent, interest compensation under Article 4A, the bank funds-transfer system, or communication system must pass the benefit of the as of adjustment or for transmittal to the receiving bank. explicit interest payment made to it to the party that (2) "Beneficiary" means the person to be paid by is entitled to compensation in the form of interest the beneficiary's bank. from a Federal Reserve Bank. The benefit may be (3) "Beneficiary's bank" means the bank identified passed on either in the form of a direct payment of in a payment order in which an account of the interest or in the form of a compensating balance, if beneficiary is to be credited pursuant to the order or the party entitled to interest agrees to accept the which otherwise is to make payment to the benefiother form of compensation, and the value of the ciary if the order does not provide for payment to an compensating balance is at least equivalent to the account. value of the explicit interest that otherwise would (4) "Receiving bank" means the bank to which the have been provided, sender's instruction is addressed. (c) Nonwaiver of right of recovery. Several sections of (5) "Sender" means the person giving the instruc- Article 4A allow for a party to a funds transfer to make tion to the receiving bank. a claim pursuant to the applicable law of mistake and restitution. Nothing in Subpart B or any Operating (b) If an instruction complying with subsection (a)(1) is Circular issued under Subpart B waives any such to make more than one payment to a beneficiary, the claim. A Federal Reserve Bank, however, may waive instruction is a separate payment order with respect to such a claim by express written agreement in order to each payment. settle litigation or for other purposes. (c) A payment order is issued when it is sent to the receiving bank. Section 4A-104.—Funds Transfer - Definitions APPENDIX B TO SUBPART B—ARTICLE 4A, FUNDS TRANSFERS In this Article: (a) "Funds transfer" means the series of transactions, Part 1—Subject Matter and Definitions beginning with the originator's payment order, made for the purpose of making payment to the beneficiary Section 4A-101.—Short Title of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment This Article may be cited as Uniform Commercial order. A funds transfer is completed by acceptance by Code—Funds Transfers. the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment Section 4A-102.—Subject Matter order. (b) "Intermediary bank" means a receiving bank other Except as otherwise provided in Section 4A-108, this than the originator's bank or the beneficiary's bank. Article applies to funds transfers defined in Section (c) "Originator" means the sender of the first payment 4A-104. order in a funds transfer. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

944 Federal Reserve Bulletin • November 1990 (d) "Originator's bank" means 'Payment by beneficiary's (i) the receiving bank to which the payment order bank to beneficiary" Section 4A-405 of the originator is issued if the originator is not a 'Payment by originator bank, or to beneficiary" Section 4A-406 'Payment by sender to (ii) the originator if the originator is a bank. receiving bank" Section 4A-403 'Payment date" Section 4A-401 Section 4A-105.—Other Definitions 'Payment order" Section 4A-103 (a) In this Article: 'Receiving bank" Section 4A-103 (1) "Authorized account" means a deposit account 'Security procedure" Section 4A-201 of a customer in a bank designated by the customer 'Sender" Section 4A-103 as a source of payment of payment orders issued by the customer to the bank. If a customer does not so (c) The following definitions in Article 4 apply to this designate an account, any account of the customer Article: is an authorized account if payment of a payment order from that account is not inconsistent with a 'Clearing house" Section 4-104 restriction on the use of that account. 'Item" Section 4-104 (2) "Bank" means a person engaged in the business 'Suspends payments" Section 4-104 of banking and includes a savings bank, savings and loan association, credit union, and trust company. A (d) In addition Article 1 contains general definitions branch or separate office of a bank is a separate bank and principles of construction and interpretation apfor purposes of this Article. plicable throughout this Article. (3) "Customer" means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders. Section 4A-106.—Time Payment Order is (4) "Funds-transfer business day" of a receiving Received bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations (a) The time of receipt of a payment order or commuand amendments of payment orders. nication canceling or amending a payment order is (5) "Funds-transfer system" means a wire transfer determined by the rules applicable to receipt of a network, automated clearing house, or other com- notice stated in Section 1-201(27). A receiving bank munication system of a clearing house or other may fix a cut-off time or times on a funds-transfer association of banks through which a payment order business day for the receipt and processing of payment by a bank may be transmitted to the bank to which orders and communications canceling or amending the order is addressed. payment orders. Different cut-off times may apply to (6) "Good faith" means honesty in fact and the payment orders, cancellations, or amendments, or to observance of reasonable commercial standards of different categories of payment orders, cancellations, fair dealing. or amendments. A cut-off time may apply to senders (7) "Prove" with respect to a fact means to meet the generally or different cut-off times may apply to difburden of establishing the fact (Section 1-201(8)). ferent senders or categories of payment orders. If a payment order or communication canceling or amend- (b) Other definitions applying to this Article and the ing a payment order is received after the close of a sections in which they appear are: funds-transfer business day or after the appropriate cut-off time on a funds-transfer business day, the 'Acceptance" Section 4A-209 receiving bank may treat the payment order or com- 'Beneficiary" Section 4A-103 munication as received at the opening of the next 'Beneficiary's bank" Section 4A-103 funds-transfer business day. 'Executed" Section 4A-301 (b) If this Article refers to an execution date or 'Execution date" Section 4A-301 payment date or states a day on which a receiving 'Funds transfer" Section 4A-104 bank is required to take action, and the date or day 'Funds-transfer system rule" Section 4A-501 does not fall on a funds-transfer business day, the next 'Intermediary bank" Section 4A-104 day that is a funds-transfer business day is treated as 'Originator" Section 4A-104 the date or day stated, unless the contrary is stated in 'Originator's bank" Section 4A-104 this Article. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 945 Section 4A-107.—Federal Reserve Regulations (ii) the bank proves that it accepted the payment and Operating Circulars order in good faith and in compliance with the security procedure and any written agreement Regulations of the Board of Governors of the Federal or instruction of the customer restricting ac- Reserve System and operating circulars of the Federal ceptance of payment orders issued in the name Reserve Banks supersede any inconsistent provision of the customer. The bank is not required to of this Article to the extent of the inconsistency. follow an instruction that violates a written agreement with the customer or notice of Section 4A-108.—Exclusion of Consumer which is not received at a time and in a Transactions Governed by Federal Law manner affording the bank a reasonable opportunity to act on it before the payment order is This Article does not apply to a funds transfer any part accepted. of which is governed by the Electronic Fund Transfer (c) Commercial reasonableness of a security proce- Act of 1978 (Title XX, Public Law 95-630, 92 Stat. dure is a question of law to be determined by 3728, 15 U.S.C. § 1693 et seq.) as amended from time considering the wishes of the customer expressed to to time. the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer Part 2—Issue and Acceptance of Payment to the bank, alternative security procedures offered Order to the customer, and security procedures in general use by customers and receiving banks similarly situ- Section 4A-201.—Security Procedure ated. A security procedure is deemed to be commercially reasonable if: "Security procedure" means a procedure established (i) the security procedure was chosen by the by agreement of a customer and a receiving bank for customer after the bank offered, and the customer the purpose of: refused, a security procedure that was commer- (i) verifying that a payment order or communica- cially reasonable for that customer, and tion amending or canceling a payment order is (ii) the customer expressly agreed in writing to be that of the customer, or bound by any payment order, whether or not (ii) detecting error in the transmission or the authorized, issued in its name and accepted by the content of the payment order or communication. bank in compliance with the security procedure A security procedure may require the use of chosen by the customer. algorithms or other codes, identifying words or (d) The term "sender" in this Article includes the numbers, encryption, callback procedures, or customer in whose name a payment order is issued if similar security devices. Comparison of a signa- the order is the authorized order of the customer ture on a payment order or communication with under subsection (a), or it is effective as the order of an authorized specimen signature of the customer the customer under subsection (b). is not by itself a security procedure. (e) This section applies to amendments and cancellations of payment orders to the same extent it applies to Section 4A-202.—Authorized and Verified payment orders. Payment Orders (f) Except as provided in this section and in Section 4A-203(a)(l), rights and obligations arising under this (a) A payment order received by the receiving bank is section or Section 4A-203 may not be varied by the authorized order of the person identified as sender agreement. if that person authorized the order or is otherwise bound by it under the law of agency. (b) If a bank and its customer have agreed that the Section 4A-203.—Unenforceability of Certain authenticity of payment orders issued to the bank in Verified Payment Orders the name of the customer as sender will be verified pursuant to a security procedure, a payment order received by the receiving bank is effective as the order (a) If an accepted payment order is not, under Section of the customer, whether or not authorized, if: 4A-202(a), an authorized order of a customer identified (i) the security procedure is a commercially rea- as sender, but is effective as an order of the customer sonable method of providing security against un- pursuant to Section 4A-202(b), the following rules authorized payment orders, and apply: Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

946 Federal Reserve Bulletin • November 1990 (1) By express written agreement, the receiving Section 4A-205.—Erroneous Payment Orders bank may limit the extent to which it is entitled to enforce or retain payment of the payment order. (2) The receiving bank is not entitled to enforce or (a) If an accepted payment order was transmitted retain payment of the payment order if the customer pursuant to a security procedure for the detection of proves that the order was not caused, directly or error and the payment order: indirectly, by a person (i) erroneously instructed payment to a benefi- (i) entrusted at any time with duties to act for the ciary not intended by the sender, customer with respect to payment orders or the (ii) erroneously instructed payment in an amount security procedure, or greater than the amount intended by the sender, (ii) who obtained access to transmitting facilities or of the customer or who obtained, from a source (iii) was an erroneously transmitted duplicate of a controlled by the customer and without authority payment order previously sent by the sender, the of the receiving bank, information facilitating following rules apply: breach of the security procedure, regardless of (1) If the sender proves that the sender or a person how the information was obtained or whether the acting on behalf of the sender pursuant to Section customer was at fault. Information includes any 4A-206 complied with the security procedure and access device, computer software, or the like. that the error would have been detected if the (b) This section applies to amendments of payment receiving bank had also complied, the sender is not orders to the same extent it applies to payment order. obliged to pay the order to the extent stated in paragraphs (2) and (3). (2) If the funds transfer is completed on the basis of Section 4A-204.—Refund of Payment and Duty an erroneous payment order described in clause (i) of Customer to Report With Respect to or (iii) of subsection (a), the sender is not obliged to Unauthorized Payment pay the order and the receiving bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law govern- (a) If a receiving bank accepts a payment order ing mistake and restitution. issued in the name of its customer as sender which is: (3) If the funds transfer is completed on the basis of (i) not authorized and not effective as the order of a payment order described in clause (ii) of subsection the customer under Section 4A-202, or (a), the sender is not obliged to pay the order to the (ii) not enforceable, in whole or in part, against the extent the amount received by the beneficiary is customer under Section 4A-203, the bank shall greater than the amount intended by the sender. In refund any payment of the payment order received that case, the receiving bank is entitled to recover from the customer to the extent the bank is not from the beneficiary the excess amount received to entitled to enforce payment and shall pay interest on the extent allowed by the law governing mistake and the refundable amount calculated from the date the restitution. bank received payment to the date of the refund. (b) If (i) the sender of an erroneous payment order However, the customer is not entitled to interest described in subsection (a) is not obliged to pay all from the bank on the amount to be refunded if the or part of the order, and customer fails to exercise ordinary care to deter- (ii) the sender receives notification from the remine that the order was not authorized by the ceiving bank that the order was accepted by the customer and to notify the bank of the relevant facts bank or that the sender's account was debited within a reasonable time not exceeding 90 days after with respect to the order, the sender has a duty to the date the customer received notification from the exercise ordinary care, on the basis of information bank that the order was accepted or that the cus- available to the sender, to discover the error with tomer's account was debited with respect to the respect to the order and to advise the bank of the order. The bank is not entitled to any recovery from relevant facts within a reasonable time, not exthe customer on account of a failure by the customer ceeding 90 days, after the bank's notification was to give notification as stated in this section. received by the sender. If the bank proves that the (b) Reasonable time under subsection (a) may be fixed sender failed to perform that duty, the sender is by agreement as stated in Section 1-204(1), but the liable to the bank for the loss the bank proves it obligation of a receiving bank to refund payment as incurred as a result of the failure, but the liability stated in subsection (a) may not otherwise be varied by of the sender may not exceed the amount of the agreement. sender's order. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 947 (c) This section applies to amendments to payment (ii) the originator's payment order described the orders to the same extent it applies to payment orders. beneficiary inconsistently by name and number, and (iii) the beneficiary's bank pays the person iden- Section 4A-206.—Transmission of Payment tified by number as permitted by subsection Order Through Funds-Transfer or Other (b)(1), the following rules apply: Communication System (1) If the originator is a bank, the originator is obliged to pay its order. (a) If a payment order addressed to a receiving bank is (2) If the originator is not a bank and proves that the transmitted to a funds-transfer system or other third- person identified by number was not entitled to party communication system for transmittal to the receive payment from the originator, the originator bank, the system is deemed to be an agent of the is not obliged to pay its order unless the originator's sender for the purpose of transmitting the payment bank proves that the originator, before acceptance order to the bank. If there is a discrepancy between of the originator's order, had notice that payment of the terms of the payment order transmitted to the a payment order issued by the originator might be system and the terms of the payment order transmitted made by the beneficiary's bank on the basis of an by the system to the bank, the terms of the payment identifying or bank account number even if it idenorder of the sender are those transmitted by the tifies a person different from the named beneficiary. system. This section does not apply to a funds-transfer Proof of notice may be made by any admissible system of the Federal Reserve Banks. evidence. The originator's bank satisfies the burden (b) This section applies to cancellations and amend- of proof if it proves that the originator, before the ments of payment orders to the same extent it applies payment order was accepted, signed a writing statto payment orders. ing the information to which the notice relates. (d) In a case governed by subsection (b)(1), if the beneficiary's bank rightfully pays the person identified Section 4A-207.—Misdescription of Beneficiary by number and that person was not entitled to receive payment from the originator, the amount paid may be (a) Subject to subsection (b), if, in a payment order recovered from that person to the extent allowed by received by the beneficiary's bank, the name, bank the law governing mistake and restitution as follows: account number, or other identification of the benefi- (1) If the originator is obliged to pay its payment ciary refers to a nonexistent or unidentifiable person or order as stated in subsection (c), the originator has account, no person has rights as a beneficiary of the the right to recover. order and acceptance of the order cannot occur. (2) If the originator is not a bank and is not obliged (b) If a payment order received by the beneficiary's to pay its payment order, the originator's bank has bank identifies the beneficiary both by name and by an the right to recover. identifying or bank account number and the name and number identify different persons, the following rules Section 4A-208.—Misdescription of apply: Intermediary Bank or Beneficiary's Bank (1) Except as otherwise provided in subsection (c), if the beneficiary's bank does not know that the name (a) This subsection applies to a payment order identiand number refer to different persons, it may rely on fying an intermediary bank or the beneficiary's bank the number as the proper identification of the bene- only by an identifying number. ficiary of the order. The beneficiary's bank need not (1) The receiving bank may rely on the number as determine whether the name and number refer to the the proper identification of the intermediary or bensame person. eficiary's bank and need not determine whether the (2) If the beneficiary's bank pays the person identi- number identifies a bank. fied by name or knows that the name and number (2) The sender is obliged to compensate the receividentify different persons, no person has rights as ing bank for any loss and expenses incurred by the beneficiary except the person paid by the benefi- receiving bank as a result of its reliance on the ciary's bank if that person was entitled to receive number in executing or attempting to execute the payment from the originator of the funds transfer. If order. no person has rights as beneficiary, acceptance of (b) This subsection applies to a payment order identithe order cannot occur. fying an intermediary bank or the beneficiary's bank (c) If (i) a payment order described in subsection (b) is both by name and an identifying number if the name accepted, and number identify different persons. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

948 Federal Reserve Bulletin • November 1990 (1) If the sender is a bank, the receiving bank may order or that funds with respect to the order may rely on the number as the proper identification of the not be withdrawn or used until receipt of payment intermediary or beneficiary's bank if the receiving from the sender of the order; bank, when it executes the sender's order, does not (2) when the bank receives payment of the entire know that the name and number identify different amount of the sender's order pursuant to Section persons. The receiving bank need not determine 4A-403(a)(l) or 4A-403(a)(2); or whether the name and number refer to the same (3) the opening of the next funds-transfer business person or whether the number refers to a bank. The day of the bank following the payment date of the sender is obliged to compensate the receiving bank order if, at that time, the amount of the sender's for any loss and expenses incurred by the receiving order is fully covered by a withdrawable credit bank as a result of its reliance on the number in balance in an authorized account of the sender or executing or attempting to execute the order. the bank has otherwise received full payment from (2) If the sender is not a bank and the receiving bank the sender, unless the order was rejected before that proves that the sender, before the payment order time or is rejected within: was accepted, had notice that the receiving bank (i) one hour after that time, or might rely on the number as the proper identification (ii) one hour after the opening of the next business of the intermediary or beneficiary's bank even if it day of the sender following the payment date if identifies a person different from the bank identified that time is later. If notice of rejection is received by name, the rights and obligations of the sender and by the sender after the payment date and the the receiving bank are governed by subsection (b)(1), authorized account of the sender does not bear as though the sender were a bank. Proof of notice interest, the bank is obliged to pay interest to the may be made by any admissible evidence. The sender on the amount of the order for the number receiving bank satisfies the burden of proof if it of days elapsing after the payment date to the day proves that the sender, before the payment order the sender receives notice or learns that the order was accepted, signed a writing stating the informa- was not accepted, counting that day as an elapsed tion to which the notice relates. day. If the withdrawable credit balance during (3) Regardless of whether the sender is a bank, the that period falls below the amount of the order, receiving bank may rely on the name as the proper the amount of interest payable is reduced accordidentification of the intermediary or beneficiary's ingly. bank if the receiving bank, at the time it executes the (c) Acceptance of a payment order cannot occur sender's order, does not know that the name and before the order is received by the receiving bank. number identify different persons. The receiving Acceptance does not occur under subsection (b)(2) or bank need not determine whether the name and (b)(3) if the beneficiary of the payment order does not number refer to the same person. have an account with the receiving bank, the account (4) If the receiving bank knows that the name and has been closed, or the receiving bank is not permitted number identify different persons, reliance on either by law to receive credits for the beneficiary's account. the name or the number in executing the sender's (d) A payment order issued to the originator's bank payment order is a breach of the obligation stated in cannot be accepted until the payment date if the bank Section 4A-302(a)(l). is the beneficiary's bank, or the execution date if the bank is not the beneficiary's bank. If the originator's Section 4A-209.—Acceptance of Payment bank executes the originator's payment order before Order the execution date or pays the beneficiary of the originator's payment order before the payment date (a) Subject to subsection (d), a receiving bank other and the payment order is subsequently canceled purthan the beneficiary's bank accepts a payment order suant to Section 4A-211(b), the bank may recover from when it executes the order. the beneficiary any payment received to the extent (b) Subject to subsections (c) and (d), a beneficiary's allowed by the law governing mistake and restitution. bank accepts a payment order at the earliest of the following times: Section 4A-210.—Rejection of Payment Order (1) when the bank (i) pays the beneficiary as stated in Section 4A-405(a) or 4A-405(b), or (a) A payment order is rejected by the receiving bank (ii) notifies the beneficiary of receipt of the order by a notice of rejection transmitted to the sender or that the account of the beneficiary has been orally, electronically, or in writing. A notice of rejeccredited with respect to the order unless the tion need not use any particular words and is sufficient notice indicates that the bank is rejecting the if it indicates that the receiving bank is rejecting the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 949 order or will not execute or pay the order. Rejection is to act on the communication before the bank accepts effective when the notice is given if transmission is by the payment order. a means that is reasonable in the circumstances. If (c) After a payment order has been accepted, cancelnotice of rejection is given by a means that is not lation or amendment of the order is not effective unless reasonable, rejection is effective when the notice is the receiving bank agrees or a funds-transfer system received. If an agreement of the sender and receiving rule allows cancellation or amendment without agreebank establishes the means to be used to reject a ment of the bank. payment order, (1) With respect to a payment order accepted by a (i) any means complying with the agreement is receiving bank other than the beneficiary's bank, reasonable and cancellation or amendment is not effective unless a (ii) any means not complying is not reasonable conforming cancellation or amendment of the payunless no significant delay in receipt of the notice ment order issued by the receiving bank is also resulted from the use of the noncomplying means. made. (b) This subsection applies if a receiving bank other (2) With respect to a payment order accepted by the than the beneficiary's bank fails to execute a payment beneficiary's bank, cancellation or amendment is order despite the existence on the execution date of a not effective unless the order was issued in execuwithdrawable credit balance in an authorized account tion of an unauthorized payment order, or because of the sender sufficient to cover the order. If the sender of a mistake by a sender in the funds transfer which does not receive notice of rejection of the order on the resulted in the issuance of a payment order: execution date and the authorized account of the (i) that is a duplicate of a payment order previsender does not bear interest, the bank is obliged to ously issued by the sender, pay interest to the sender on the amount of the order (ii) that orders payment to a beneficiary not entifor the number of days elapsing after the execution tled to receive payment from the originator, or date to the earlier of the day the order is canceled (iii) that orders payment in an amount greater than pursuant to Section 4A-211(d) or the day the sender the amount the beneficiary was entitled to receive receives notice or learns that the order was not exe- from the originator. If the payment order is cancuted, counting the final day of the period as an celed or amended, the beneficiary's bank is entielapsed day. If the withdrawable credit balance during tled to recover from the beneficiary any amount that period falls below the amount of the order, the paid to the beneficiary to the extent allowed by amount of interest is reduced accordingly. the law governing mistake and restitution. (c) If a receiving bank suspends payments, all unac- (d) An unaccepted payment order is canceled by cepted payment orders issued to it are deemed re- operation of law at the close of the fifth funds-transfer jected at the time the bank suspends payments. business day of the receiving bank after the execution (d) Acceptance of a payment order precludes a later date or payment date of the order. rejection of the order. Rejection of a payment order (e) A canceled payment order cannot be accepted. If precludes a later acceptance of the order. an accepted payment order is canceled, the acceptance is nullified and no person has any right or obligation based on the acceptance. Amendment of a Section 4A-211.—Cancellation and Amendment payment order is deemed to be cancellation of the of Payment Order original order at the time of amendment and issue of a new payment order in the amended form at the same (a) A communication of the sender of a payment order time. canceling or amending the order may be transmitted to (f) Unless otherwise provided in an agreement of the the receiving bank orally, electronically, or in writing. parties or in a funds-transfer system rule, if the receiv- If a security procedure is in effect between the sender ing bank, after accepting a payment order, agrees to and the receiving bank, the communication is not cancellation or amendment of the order by the sender effective to cancel or amend the order unless the or is bound by a funds-transfer system rule allowing communication is verified pursuant to the security cancellation or amendment without the bank's agreeprocedure or the bank agrees to the cancellation or ment, the sender, whether or not cancellation or amendment. amendment is effective, is liable to the bank for any (b) Subject to subsection (a), a communication by the loss and expenses, including reasonable attorney's sender canceling or amending a payment order is fees, incurred by the bank as a result of the cancellaeffective to cancel or amend the order if notice of the tion or amendment or attempted cancellation or communication is received at a time and in a manner amendment. affording the receiving bank a reasonable opportunity (g) A payment order is not revoked by the death or Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

950 Federal Reserve Bulletin • November 1990 legal incapacity of the sender unless the receiving Section 4A-302.—Obligations of Receiving bank knows of the death or of an adjudication of Bank in Execution of Payment Order incapacity by a court of competent jurisdiction and has reasonable opportunity to act before acceptance (a) Except as provided in subsections (b) through (d), of the order. if the receiving bank accepts a payment order pursuant (h) A funds-transfer system rule is not effective to the to Section 4A-209(a), the bank has the following obliextent it conflicts with subsection (c)(2). gations in executing the order: (1) The receiving bank is obliged to issue, on the execution date, a payment order complying with the Section 4A-212.—Liability and Duty of sender's order and to follow the sender's instruc- Receiving Bank Regarding Unaccepted tions concerning: Payment Order (i) any intermediary bank or funds-transfer system to be used in carrying out the funds transfer, or If a receiving bank fails to accept a payment order (ii) the means by which payment orders are to be that it is obliged by express agreement to accept, the transmitted in the funds transfer. If the originabank is liable for breach of the agreement to the tor's bank issues a payment order to an intermeextent provided in the agreement or in this Article, diary bank, the originator's bank is obliged to but does not otherwise have any duty to accept a instruct the intermediary bank according to the payment order or, before acceptance, to take any instruction of the originator. An intermediary action, or refrain from taking action, with respect to bank in the funds transfer is similarly bound by an the order except as provided in this Article or by instruction given to it by the sender of the payexpress agreement. Liability based on acceptance ment order it accepts. arises only when acceptance occurs as stated in (2) If the sender's instruction states that the funds Section 4A-209, and liability is limited to that pro- transfer is to be carried out telephonically or by wire vided in this Article. A receiving bank is not the transfer or otherwise indicates that the funds transagent of the sender or beneficiary of the payment fer is to be carried out by the most expeditious order it accepts, or of any other party to the funds means, the receiving bank is obliged to transmit its transfer, and the bank owes no duty to any party to payment order by the most expeditious available the funds transfer except as provided in this Article means, and to instruct any intermediary bank acor by express agreement. cordingly. If a sender's instruction states a payment date, the receiving bank is obliged to transmit its payment order at a time and by means reasonably Part 3—Execution of Sender's Payment Order necessary to allow payment to the beneficiary on the by Receiving Bank payment date or as soon thereafter as is feasible. (b) Unless otherwise instructed, a receiving bank executing a payment order may: Section 4A-301.—Execution and Execution (i) use any funds-transfer system if use of that Date system is reasonable in the circumstances, and (ii) issue a payment order to the beneficiary's (a) A payment order is "executed" by the receiving bank or to an intermediary bank through which a bank when it issues a payment order intended to carry payment order conforming to the sender's order out the payment order received by the bank. A pay- can expeditiously be issued to the beneficiary's ment order received by the beneficiary's bank can be bank if the receiving bank exercises ordinary care accepted but cannot be executed. in the selection of the intermediary bank. A (b) "Execution date" of a payment order means the receiving bank is not required to follow an instrucday on which the receiving bank may properly issue a tion of the sender designating a funds-transfer payment order in execution of the sender's order. The system to be used in carrying out the funds execution date may be determined by instruction of transfer if the receiving bank, in good faith, deterthe sender but cannot be earlier than the day the order mines that it is not feasible to follow the instrucis received and, unless otherwise determined, is the tion or that following the instruction would unduly day the order is received. If the sender's instruction delay completion of the funds transfer. states a payment date, the execution date is the (c) Unless subsection (a)(2) applies or the receiving payment date or an earlier date on which execution is bank is otherwise instructed, the bank may execute a reasonably necessary to allow payment to the benefi- payment order by transmitting its payment order by ciary on the payment date. first class mail or by any means reasonable in the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 951 circumstances. If the receiving bank is instructed to error, the sender of the payment order that was execute the sender's order by transmitting its payment erroneously executed and all previous senders in the order by a particular means, the receiving bank may funds transfer are not obliged to pay the payment issue its payment order by the means stated or by any orders they issued. The issuer of the erroneous order means as expeditious as the means stated, is entitled to recover from the beneficiary of the order (d) Unless instructed by the sender, the payment received to the extent allowed by the law (i) the receiving bank may not obtain payment of governing mistake and restitution. its charges for services and expenses in connection with the execution of the sender's order by Section 4A-304.— Duty of Sender to Report issuing a payment order in an amount equal to the Erroneously Executed Payment Order amount of the sender's order less the amount of the charges, and If the sender of a payment order that is erroneously (ii) may not instruct a subsequent receiving bank executed as stated in Section 4A-303 receives notifito obtain payment of its charges in the same cation from the receiving bank that the order was manner. executed or that the sender's account was debited with respect to the order, the sender has a duty to exercise Section 4A-303.—Erroneous Execution of ordinary care to determine, on the basis of information Payment Order available to the sender, that the order was erroneously executed and to notify the bank of the relevant facts (a) A receiving bank that: within a reasonable time not exceeding 90 days after (i) executes the payment order of the sender by the notification from the bank was received by the issuing a payment order in an amount greater than sender. If the sender fails to perform that duty, the the amount of the sender's order, or bank is not obliged to pay interest on any amount (ii) issues a payment order in execution of the refundable to the sender under Section 4A-402(d) for sender's order and then issues a duplicate order, the period before the bank learns of the execution is entitled to payment of the amount of the send- error. The bank is not entitled to any recovery from er's order under Section 4A-402(c) if that subsec- the sender on account of a failure by the sender to tion is otherwise satisfied. The bank is entitled to perform the duty stated in this section. recover from the beneficiary of the erroneous order the excess payment received to the extent Section 4A-305.—Liability for Late or allowed by the law governing mistake and restitu- Improper Execution or Failure to Execute tion. Payment Order (b) A receiving bank that executes the payment order of the sender by issuing a payment order in an amount (a) If a funds transfer is completed but execution of a less than the amount of the sender's order is entitled to payment order by the receiving bank in breach of payment of the amount of the sender's order under Section 4A-302 results in delay in payment to the Section 4A-402(c) if: beneficiary, the bank is obliged to pay interest to either (i) that subsection is otherwise satisfied and the originator or the beneficiary of the funds transfer (ii) the bank corrects its mistake by issuing an for the period of delay caused by the improper execuadditional payment order for the benefit of the tion. Except as provided in subsection (c), additional beneficiary of the sender's order. If the error is damages are not recoverable. not corrected, the issuer of the erroneous order is (b) If execution of a payment order by a receiving bank entitled to receive or retain payment from the in breach of Section 4A-302 results in: sender of the order it accepted only to the extent (i) noncompletion of the funds transfer, of the amount of the erroneous order. This sub- (ii) failure to use an intermediary bank designated section does not apply if the receiving bank exe- by the originator, or cutes the sender's payment order by issuing a (iii) issuance of a payment order that does not payment order in an amount less than the amount comply with the terms of the payment order of the of the sender's order for the purpose of obtaining originator, the bank is liable to the originator for payment of its charges for services and expenses its expenses in the funds transfer and for incidenpursuant to instruction of the sender. tal expenses and interest losses, to the extent not (c) If a receiving bank executes the payment order of covered by subsection (a), resulting from the the sender by issuing a payment order to a beneficiary improper execution. Except as provided in subdifferent from the beneficiary of the sender's order and section (c), additional damages are not recoverthe funds transfer is completed on the basis of that able. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

952 Federal Reserve Bulletin • November 1990 (c) In addition to the amounts payable under subsec- the execution date of the sender's order. The obligations (a) and (b), damages, including consequential tion of that sender to pay its payment order is excused damages, are recoverable to the extent provided in an if the funds transfer is not completed by acceptance by express written agreement of the receiving bank. the beneficiary's bank of a payment order instructing (d) If a receiving bank fails to execute a payment order payment to the beneficiary of that sender's payment it was obliged by express agreement to execute, the order. receiving bank is liable to the sender for its expenses in (d) If the sender of a payment order pays the order and the transaction and for incidental expenses and inter- was not obliged to pay all or part of the amount paid, est losses resulting from the failure to execute. Addi- the bank receiving payment is obliged to refund paytional damages, including consequential damages, are ment to the extent the sender was not obliged to pay. recoverable to the extent provided in an express Except as provided in Sections 4A-204 and 4A-304, written agreement of the receiving bank, but are not interest is payable on the refundable amount from the otherwise recoverable. date of payment. (e) Reasonable attorney's fees are recoverable if de- (e) If a funds transfer is not completed as stated in mand for compensation under subsection (a) or (b) is subsection (c) and an intermediary bank is obliged to made and refused before an action is brought on the refund payment as stated in subsection (d) but is claim. If a claim is made for breach of an agreement unable to do so because not permitted by applicable under subsection (d) and the agreement does not law or because the bank suspends payments, a sender provide for damages, reasonable attorney's fees are in the funds transfer that executed a payment order in recoverable if demand for compensation under subsec- compliance with an instruction, as stated in Section tion (d) is made and refused before an action is brought 4A-302(a)(l), to route the funds transfer through that on the claim. intermediary bank is entitled to receive or retain (f) Except as stated in this section, the liability of a payment from the sender of the payment order that it receiving bank under subsections (a) and (b) may not accepted. The first sender in the funds transfer that be varied by agreement. issued an instruction requiring routing through that intermediary bank is subrogated to the right of the Part 4 — Payment bank that paid the intermediary bank to refund as stated in subsection (d). Section 4A-401.—Payment Date (f) The right of the sender of a payment order to be excused from the obligation to pay the order as stated "Payment date" of a payment order means the day on in subsection (c) or to receive refund under subsection which the amount of the order is payable to the (d) may not be varied by agreement. beneficiary by the beneficiary's bank. The payment date may be determined by instruction of the sender Section 4A-403.—Payment by Sender to but cannot be earlier than the day the order is received Receiving Bank by the beneficiary's bank and, unless otherwise determined, is the day the order is received by the beneficiary's bank. (a) Payment of the sender's obligation under Section 4A-402 to pay the receiving bank occurs as follows: Section 4A-402.— Obligation of Sender to Pay (1) If the sender is a bank, payment occurs when the Receiving Bank receiving bank receives final settlement of the obligation through a Federal Reserve Bank or through a (a) This section is subject to Sections 4A-205 and funds-transfer system. 4A-207. (2) If the sender is a bank and the sender: (b) With respect to a payment order issued to the (i) credited an account of the receiving bank with beneficiary's bank, acceptance of the order by the the sender, or bank obliges the sender to pay the bank the amount of (ii) caused an account of the receiving bank in the order, but payment is not due until the payment another bank to be credited, payment occurs date of the order. when the credit is withdrawn or, if not withdrawn, (c) This subsection is subject to subsection (e) and to at midnight of the day on which the credit is Section 4A-303. With respect to a payment order withdrawable and the receiving bank learns of issued to a receiving bank other than the beneficiary's that fact. bank, acceptance of the order by the receiving bank (3) If the receiving bank debits an account of the obliges the sender to pay the bank the amount of the sender with the receiving bank, payment occurs sender's order. Payment by the sender is not due until when the debit is made to the extent the debit is Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 953 covered by a withdrawable credit balance in the had notice of the damages, unless the bank proves that account. it did not pay because of a reasonable doubt concern- (b) If the sender and receiving bank are members of a ing the right of the beneficiary to payment. funds-transfer system that nets obligations multilater- (b) If a payment order accepted by the beneficiary's ally among participants, the receiving bank receives bank instructs payment to an account of the benefifinal settlement when settlement is complete in accord- ciary, the bank is obliged to notify the beneficiary of ance with the rules of the system. The obligation of the receipt of the order before midnight of the next fundssender to pay the amount of a payment order trans- transfer business day following the payment date. If the mitted through the funds-transfer system may be sat- payment order does not instruct payment to an account isfied, to the extent permitted by the rules of the of the beneficiary, the bank is required to notify the system, by setting off and applying against the send- beneficiary only if notice is required by the order. er's obligation the right of the sender to receive Notice may be given by first class mail or any other payment from the receiving bank of the amount of any means reasonable in the circumstances. If the bank fails other payment order transmitted to the sender by the to give the required notice, the bank is obliged to pay receiving bank through the funds-transfer system. The interest to the beneficiary on the amount of the payment aggregate balance of obligations owed by each sender order from the day notice should have been given until to each receiving bank in the funds-transfer system the day the beneficiary learned of receipt of the paymay be satisfied, to the extent permitted by the rules of ment order by the bank. No other damages are recovthe system, by setting off and applying against that erable. Reasonable attorney's fees are also recoverable balance the aggregate balance of obligations owed to if demand for interest is made and refused before an the sender by other members of the system. The action is brought on the claim. aggregate balance is determined after the right of setoff (c) The right of a beneficiary to receive payment and stated in the second sentence of this subsection has damages as stated in subsection (a) may not be varied been exercised. by agreement or a funds-transfer system rule. The right (c) If two banks transmit payment orders to each other of a beneficiary to be notified as stated in subsection (b) under an agreement that settlement of the obligations may be varied by agreement of the beneficiary or by a of each bank to the other under Section 4A-402 will be funds-transfer system rule if the beneficiary is notified made at the end of the day or other period, the total of the rule before initiation of the funds transfer. amount owed with respect to all orders transmitted by one bank shall be set off against the total amount owed Section 4A-405.—Payment by Beneficiary's with respect to all orders transmitted by the other Bank to Beneficiary bank. To the extent of the setoff, each bank has made payment to the other. (d) In a case not covered by subsection (a), the time (a) If the beneficiary's bank credits an account of the when payment of the sender's obligation under Sec- beneficiary of a payment order, payment of the bank's tion 4A-402(b) or 4A-402(c) occurs is governed by obligation under Section 4A-404(a) occurs when and to applicable principles of law that determine when an the extent: obligation is satisfied. (i) the beneficiary is notified of the right to withdraw the credit, Section 4A-404.—Obligation of Beneficiary's (ii) the bank lawfully applies the credit to a debt of Bank to Pay and Give Notice to Beneficiary the beneficiary, or (iii) funds with respect to the order are otherwise (a) Subject to Sections 4A-211(e), 4A-405(d), and made available to the beneficiary by the bank. 4A-405(e), if a beneficiary's bank accepts a payment (b) If the beneficiary's bank does not credit an account order, the bank is obliged to pay the amount of the of the beneficiary of a payment order, the time when order to the beneficiary of the order. Payment is due payment of the bank's obligation under Section 4Aon the payment date of the order, but if acceptance 404(a) occurs is governed by principles of law that occurs on the payment date after the close of the determine when an obligation is satisfied. funds-transfer business day of the bank, payment is (c) Except as stated in subsections (d) and (e), if the due on the next funds-transfer business day. If the beneficiary's bank pays the beneficiary of a payment bank refuses to pay after demand by the beneficiary order under a condition to payment or agreement of and receipt of notice of particular circumstances that the beneficiary giving the bank the right to recover will give rise to consequential damages as a result of payment from the beneficiary if the bank does not nonpayment, the beneficiary may recover damages receive payment of the order, the condition to payresulting from the refusal to pay to the extent the bank ment or agreement is not enforceable. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

954 Federal Reserve Bulletin • November 1990 (d) A funds-transfer system rule may provide that (i) at the time a payment order for the benefit of payments made to beneficiaries of funds transfers the beneficiary is accepted by the beneficiary's made through the system are provisional until receipt bank in the funds transfer and of payment by the beneficiary's bank of the payment (ii) in an amount equal to the amount of the order order it accepted. A beneficiary's bank that makes a accepted by the beneficiary's bank, but not more payment that is provisional under the rule is entitled to than the amount of the originator's order. refund from the beneficiary if: (b) If payment under subsection (a) is made to satisfy (i) the rule requires that both the beneficiary and an obligation, the obligation is discharged to the same the originator be given notice of the provisional extent discharge would result from payment to the nature of the payment before the funds transfer is beneficiary of the same amount in money, unless: initiated, (i) the payment under subsection (a) was made by (ii) the beneficiary, the beneficiary's bank and the a means prohibited by the contract of the benefioriginator's bank agreed to be bound by the rule, ciary with respect to the obligation, and (ii) the beneficiary, within a reasonable time after (iii) the beneficiary's bank did not receive pay- receiving notice of receipt of the order by the ment of the payment order that it accepted. If the beneficiary's bank, notified the originator of the beneficiary is obliged to refund payment to the beneficiary's refusal of the payment, beneficiary's bank, acceptance of the payment (iii) funds with respect to the order were not order by the beneficiary's bank is nullified and no withdrawn by the beneficiary or applied to a debt payment by the originator of the funds transfer to of the beneficiary, and the beneficiary occurs under Section 4A-406. (iv) the beneficiary would suffer a loss that could (e) This subsection applies to a funds transfer that reasonably have been avoided if payment had includes a payment order transmitted over a funds- been made by a means complying with the contransfer system that: tract. If payment by the originator does not result (i) nets obligations-multilaterally among partici- in discharge under this section, the originator is pants, and subrogated to the rights of the beneficiary to (ii) has in effect a loss-sharing agreement among receive payment from the beneficiary's bank unparticipants for the purpose of providing funds der Section 4A-404(a). necessary to complete settlement of the obliga- (c) For the purpose of determining whether discharge tions of one or more participants that do not meet of an obligation occurs under subsection (b), if the their settlement obligations. If the beneficiary's beneficiary's bank accepts a payment order in an bank in the funds transfer accepts a payment amount equal to the amount of the originator's payorder and the system fails to complete settlement ment order less charges of one or more receiving pursuant to its rules with respect to any payment banks in the funds transfer, payment to the beneficiary order in the funds transfer, is deemed to be in the amount of the originator's order (i) the acceptance by the beneficiary's bank is unless upon demand by the beneficiary the originator nullified and no person has any right or obligation does not pay the beneficiary the amount of the debased on the acceptance, ducted charges. (ii) the beneficiary's bank is entitled to recover (d) Rights of the originator or of the beneficiary of a payment from the beneficiary, funds transfer under this section may be varied only by (iii) no payment by the originator to the benefi- agreement of the originator and the beneficiary. ciary occurs under Section 4A-406, and (iv) subject to Section 4A-402(e), each sender in Part 5 — Miscellaneous Provisions the funds transfer is excused from its obligation to pay its payment order under Section 4A-402(c) Section 4A-501.—Variation by Agreement and because the funds transfer has not been com- Effect of Funds-Transfer System Rule pleted. Section 4A-406.—Payment by Originator to (a) Except as otherwise provided in this Article, the Beneficiary; Discharge of Underlying rights and obligations of a party to a funds transfer Obligation may be varied by agreement of the affected party. (b) "Funds-transfer system rule" means a rule of an (a) Subject to Sections 4A-211(e), 4A-405(d), and association of banks: A-405(e), the originator of a funds transfer pays the (i) governing transmission of payment orders by beneficiary of the originator's payment order: means of a funds-transfer system of the associa- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 955 tion or rights and obligations with respect to those may not reject the payment order except for a orders, or reason unrelated to the service of process, (ii) to the extent the rule governs rights and (d) Creditor process with respect to a payment by the obligations between banks that are parties to a originator to the beneficiary pursuant to a funds transfunds transfer in which a Federal Reserve Bank, fer may be served only on the beneficiary's bank with acting as an intermediary bank, sends a payment respect to the debt owed by that bank to the benefiorder to the beneficiary's bank. Except as other- ciary. Any other bank served with the creditor process wise provided in this Article, a funds-transfer is not obliged to act with respect to the process. system rule governing rights and obligations between participating banks using the system may Section 4A-503.—Injunction or Restraining be effective even if the rule conflicts with this Order With Respect to Funds Transfer Article and indirectly affects another party to the funds transfer who does not consent to the rule. A For proper cause and in compliance with applicable funds-transfer system rule may also govern rights law, a court may restrain: and obligations of parties other than participating (i) a person from issuing a payment order to banks using the system to the extent stated in initiate a funds transfer, Sections 4A-404(c), 4A-405(d), and 4A-507(c). (ii) an originator's bank from executing the payment order of the originator, or Section 4A-502.—Creditor Process Served on (iii) the beneficiary's bank from releasing funds to Receiving Bank; Setoff by Beneficiary's Banks the beneficiary or the beneficiary from withdrawing the funds. A court may not otherwise restrain a person from issuing a payment order, paying or (a) As used in this section, "creditor process" means receiving payment of a payment order, or otherlevy, attachment, garnishment, notice of lien, sequeswise acting with respect to a funds transfer. tration, or similar process issued by or on behalf of a creditor or other claimant with respect to an account. (b) This subsection applies to creditor process with Section 4A-504.—Order in Which Items and respect to an authorized account of the sender of a Payment Orders May be Charged to Account; payment order if the creditor process is served on the Order of Withdrawals from Account receiving bank. For the purpose of determining rights with respect to the creditor process, if the receiving (a) If a receiving bank has received more than one bank accepts the payment order the balance in the payment order of the sender or one or more payment authorized account is deemed to be reduced by the orders and other items that are payable from the amount of the payment order to the extent the bank sender's account, the bank may charge the sender's did not otherwise receive payment of the order, unless account with respect to the various orders and items in the creditor process is served at a time and in a manner any sequence. affording the bank a reasonable opportunity to act on it (b) In determining whether a credit to an account has before the bank accepts the payment order. been withdrawn by the holder of the account or (c) If a beneficiary's bank has received a payment applied to a debt of the holder of the account, credits order for payment to the beneficiary's account in the first made to the account are first withdrawn or apbank, the following rules apply: plied. (1) The bank may credit the beneficiary's account. The amount credited may be set off against an Section 4A-505.—Preclusion of Objection to obligation owed by the beneficiary to the bank or Debit of Customer's Account may be applied to satisfy creditor process served on the bank with respect to the account. (2) The bank may credit the beneficiary's account If a receiving bank has received payment from its and allow withdrawal of the amount credited unless customer with respect to a payment order issued in the creditor process with respect to the account is name of the customer as sender and accepted by the served at a time and in a manner affording the bank bank, and the customer received notification reasona reasonable opportunity to act to prevent with- ably identifying the order, the customer is precluded drawal. from asserting that the bank is not entitled to retain the (3) If creditor process with respect to the benefi- payment unless the customer notifies the bank of the ciary's account has been served and the bank has customer's objection to the payment within one year had a reasonable opportunity to act on it, the bank after the notification was received by the customer. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

956 Federal Reserve Bulletin • November 1990 Section 4A-506.—Rate of Interest (i) rights and obligations between participating banks with respect to payment orders transmitted (a) If, under this Article, a receiving bank is obliged to or processed through the system, or pay interest with respect to a payment order issued to (ii) the rights and obligations of some or all parties the bank, the amount payable may be determined: to a funds transfer any part of which is carried out (i) by agreement of the sender and receiving bank, or by means of the system. A choice of law made (ii) by a funds-transfer system rule if the payment pursuant to clause (i) is binding on participating order is transmitted through a funds-transfer sys- banks. A choice of law made pursuant to clause tem. (ii) is binding on the originator, other sender, or a (b) If the amount of interest is not determined by an receiving bank having notice that the funds-transgreement or rule as stated in subsection (a), the fer system might be used in the funds transfer and amount is calculated by multiplying the applicable of the choice of law by the system when the Federal Funds rate by the amount on which interest is originator, other sender, or receiving bank issued payable, and then multiplying the product by the or accepted a payment order. The beneficiary of a number of days for which interest is payable. The funds transfer is bound by the choice of law if, applicable Federal Funds rate is the average of the when the funds transfer is initiated, the benefi- Federal Funds rates published by the Federal Reserve ciary has notice that the funds-transfer system Bank of New York for each of the days for which might be used in the funds transfer and of the interest is payable divided by 360. The Federal Funds choice of law by the system. The law of a jurisrate for any day on which a published rate is not diction selected pursuant to this subsection may available is the same as the published rate for the next govern, whether or not that law bears a reasonpreceding day for which there is a published rate. If a able relation to the matter in issue. receiving bank that accepted a payment order is re- (d) In the event of inconsistency between an agreequired to refund payment to the sender of the order ment under subsection (b) and a choice-of-law rule because the funds transfer was not completed, but the under subsection (c), the agreement under subsection failure to complete was not due to any fault by the (b) prevails. bank, the interest payable is reduced by a percentage (e) If a funds transfer is made by use of more than one equal to the reserve requirement on deposits of the funds-transfer system and there is inconsistency bereceiving bank. tween choice-of-law rules of the systems, the matter in issue is governed by the law of the selected jurisdiction Section 4A-507.—Choice of Law that has the most significant relationship to the matter in issue. (a) The following rules apply unless the affected parties otherwise agree or subsection (c) applies: (1) The rights and obligations between the sender of FINAL RULE—AMENDMENT TO REGULATION Z a payment order and the receiving bank are governed by the law of the jurisdiction in which the The Board of Governors is amending 12 C.F.R. Part receiving bank is located. 226, its Regulation Z (Truth in Lending), to require (2) The rights and obligations between the benefi- that creditors wishing to freeze the credit line when the ciary's bank and the beneficiary are governed by the rate cap on a home equity line is reached must law of the jurisdiction in which the beneficiary's expressly provide for this event in their agreements. bank is located. Creditors that currently include such a provision in (3) The issue of when payment is made pursuant to their contracts will not be affected by this revision. a funds transfer by the originator to the beneficiary The Board also is removing from the regulation the is governed by the law of the jurisdiction in which provision that would permit delaying the time for the beneficiary's bank is located. providing disclosures about any repayment phase set (b) If the parties described in each paragraph of forth in an agreement. The rules in question relate to subsection (a) have made an agreement selecting the the Home Equity Loan Consumer Protection Act of law of a particular jurisdiction to govern rights and 1988, which requires creditors to provide consumers obligations between each other, the law of that juris- with information for open-end credit plans secured by diction governs those rights and obligations, whether the consumer's dwelling, and imposes substantive or not the payment order or the funds transfer bears a limitations on these plans. Although the final regulareasonable relation to that jurisdiction. tions implementing the law were adopted in June 1989 (c) A funds-transfer system rule may select the law of and became effective in November 1989, in response a particular jurisdiction to govern: to litigation, the Board in March 1990 published for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 957 comment a proposal dealing with the rate cap provi- (F) The creditor is notified by its regulatory sion and the timing of disclosures for the repayment agency that continued advances constitute an phase. unsafe and unsound practice. Effective September 19, 1990, but compliance is optional until October 1, 1991, 12 C.F.R. Part 226 is amended as follows: 3. In Section 226.9, paragraph (c)(3) is revised to read as follows: 1. The authority citation for Part 226 continues to read as follows: Section 226.9—Subsequent disclosure requirements. Authority: Sec. 105, Truth in Lending Act, as amended by sec. 605, Pub. L. No. 96-221, 94 Stat. 170 (15 U.S.C. 1604 etseq.y, Section 1204(c), Competitive (c) Change in terms. * * * Equality Banking Act, Pub. L. No. 100-86, 101 (3) Notice for home equity plans. If a creditor Stat. 552. prohibits additional extensions of credit or reduces the credit limit applicable to a home equity plan 2. In Section 226.5b, the introductory text to para- pursuant to section 226.5b(f)(3)(i) or 226.5b(f)(3)(vi), graphs (f), (f)(3), and (f)(3)(vi) is republished and the creditor shall mail or deliver written notice of the paragraphs (f)(3)(i), (f)(3)(vi)(E), and (f)(3)(vi)(F) are action to each consumer who will be affected. The revised and paragraph (f)(3)(vi)(G) is removed to read notice must be provided not later than three busias follows: ness days after the action is taken and shall contain specific reasons for the action. If the creditor re- Subpart B—Open-End Credit quires the consumer to request reinstatement of credit privileges, the notice also shall state that fact. Section 226.5b—Requirements for home equity plans. 4. Appendix G to Part 226 is amended by removing G-14C — Home Equity Sample (Repayment phase disclosed later). (f) Limitations on home equity plans. No creditor may, by contract or otherwise: (3) Change any term, except that a creditor may: ORDERS ISSUED UNDER BANK HOLDING (i) Provide in the initial agreement that it may COMPANY ACT prohibit additional extensions of credit or reduce the credit limit during any period in which the Orders Issued Under Section 3 of the Bank maximum annual percentage rate is reached. A Holding Company Act creditor also may provide in the initial agreement that specified changes will occur if a specified AmSouth Bancorporation event takes place (for example, that the annual Birmingham, Alabama percentage rate will increase a specified amount if the consumer leaves the creditor's employment). AmSouth Bank of Tennessee Nashville, Tennessee (vi) Prohibit additional extensions of credit or Order Approving Acquisition of Bank by Merger and reduce the credit limit applicable to an agreement Membership in the Federal Reserve System during any period in which: AmSouth Bancorporation, Birmingham, Alabama ("AmSouth"), a bank holding company within the (E) The priority of the creditor's security inter- meaning of the Bank Holding Company Act ("BHC est is adversely affected by government action Act"), has applied for the Board's approval under to the extent that the value of the security section 3(a)(3) of the BHC Act to acquire First Bank of interest is less than 120 percent of the credit Maury County, Columbia, Tennessee ("First Bank"). line; or AmSouth proposes to acquire First Bank by merger, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

958 Federal Reserve Bulletin • November 1990 with the successor institution, AmSouth Bank of the state.3 AmSouth also controls a commercial bank- Tennessee, Nashville, Tennessee ("AmSouth ing organization in Florida. First Bank is the 196th Bank"), becoming a member of the Federal Reserve largest commercial bank in Tennessee, controlling System.1 Accordingly, AmSouth has also applied deposits of $14.9 million, representing less than one pursuant to section 18(c) of the Federal Deposit percent of all deposits in commercial banks in the Insurance Act (12 U.S.C. § 1828(c)) (the "Bank state. AmSouth Bank will compete in the Nashville, Merger Act") and section 9 of the Federal Reserve Tennessee area banking market, where AmSouth does Act (12 U.S.C. § 321) for membership in the Federal not currently operate.4 Accordingly, the Board has Reserve System. concluded that consummation of this proposal would Notice of the applications, affording interested per- not have a significantly adverse effect on the concensons an opportunity to submit comments, has been tration of banking resources in Tennessee, or have a published (55 Federal Register 17,820) and given in significantly adverse effect upon competition in any accordance with the Bank Merger Act and the Board's relevant banking market. The financial and managerial Rules of Procedure (12 C.F.R. 262.3(b)). As required resources and future prospects of AmSouth and its by the Bank Merger Act, reports on the competitive subsidiary banks and of First Bank are also considered effects of the merger were requested from the United satisfactory and consistent with approval. States Attorney General, the Office of the Comptroller In considering the convenience and needs of the of the Currency, and the Federal Deposit Insurance communities to be served, the Board has taken into Corporation. The time for filing comments has ex- account the record of AmSouth's subsidiary banks pired, and the Board has considered the applications under the Community Reinvestment Act (12 U.S.C. and all the comments received in light of the factors set § 2901 et seq.) ("CRA"). The CRA requires the fedforth in section 3(c) of the BHC Act (12 U.S.C. eral financial supervisory agencies to encourage finan- § 1842(c)) and in the Bank Merger Act (12 U.S.C. cial institutions to help meet the credit needs of the § 1828(c)(5)). local communities in which they operate consistent Section 3(d) of the BHC Act (12 U.S.C. § 1842(d)), with the safe and sound operation of such institutions. the Douglas Amendment, prohibits the Board from To accomplish this end, the CRA requires the approapproving an application by a bank holding company priate federal supervisory authority to "assess an to acquire control of any bank located outside of the institution's record of meeting the credit needs of its holding company's home state, unless such acquisition entire community, including low- and moderate-inis "specifically authorized by statute laws of the state come neighborhoods, consistent with the safe and in which [the] bank is located, by language to that sound operation of the institution," and to take this effect and not merely by implication." The Board has record into account in its evaluation of bank holding concluded that the laws of Tennessee expressly autho- company applications.5 rize the acquisition of Tennessee banks by Alabama In this regard, the Board has received comments bank holding companies.2 Accordingly, the Board's filed by the Center for Human Rights, Birmingham, approval of this application is not barred by the Alabama ("Protestant"), critical of the performance of Douglas Amendment. AmSouth's lead bank, AmSouth, N.A., Birmingham, AmSouth, the largest commercial banking organiza- Alabama ("AmSouth-Birmingham"). Specifically, the tion in Alabama, controls three subsidiary banks in Protestant alleges that AmSouth-Birmingham is not Alabama with total deposits of $5.8 billion, represent- meeting the need for mortgage loans in the low- to ing 19.9 percent of all deposits in commercial banks in moderate-income and minority communities of Birmingham.6 1. First Bank will merge with AmSouth Bank of Tennessee, Columbia, Tennessee ("Interim Bank"), a bank subsidiary of Am- 3. Data are as of March 31, 1990. South also applying for membership in the Federal Reserve System, 4. The Nashville, Tennessee area banking market consists of that has been established solely to facilitate the acquisition. First Davidson, Rutherford, Williamson, and Wilson counties, Tennessee, Bank, the successor to this merger, will be renamed AmSouth Bank plus the southern halves of Robertson and Sumner counties, Tennesby charter amendment and relocate from Columbia to Nashville, see. Tennessee. 5. 12 U.S.C. §§ 2902-2903. 2. SouthTrust of Tennessee, Inc., 74 Federal Reserve Bulletin 779 6. As evidence to support this allegation, Protestant has relied upon (1988). The Tennessee Commissioner of Financial Institutions has a study which appeared in The Birmingham News in August 1989, confirmed that the proposal complies with the provisions of the suggesting that, in recent years, there has been a significant disparity Tennessee interstate banking statute, including the five-year longevity in the home mortgage loans made by Birmingham lenders to highrequirement in Tenn. Code Ann. § 45-12-103(4), and that the laws of income and white residents as opposed to low- and moderate-income Tennessee specifically authorize the proposed acquisition and charter and minority residents in Birmingham. In the "Report on Loan relocations. The State has not approved the proposal, however, and Discrimination" submitted to Congress by the Board on October 13, the Board's approval is conditioned upon AmSouth obtaining the 1989, pursuant to section 1220 of the Financial Institutions Reform, necessary approvals from the Tennessee Commissioner. Recovery and Enforcement Act of 1989 (the "Report"), the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 959 The Board has carefully reviewed the CRA perfor- sidiary banks are meeting their responsibilities to the mance record of AmSouth and AmSouth-Birmingham, community under the CRA. as well as Protestant's comments and AmSouth's Pursuant to the CRA plan implemented at AmSouthresponse to those comments, in light of the CRA, the Birmingham, the CRA officer reports annually to the Board's regulations and the Statement of the Federal bank's full board of directors and quarterly to the audit Financial Supervisory Agencies Regarding the Com- committee of the bank's board of directors. The audit munity Reinvestment Act ("Agency CRA State- committee then reports to the full board of directors on ment").7 The Agency CRA Statement provides guid- CRA activities at the next board meeting. AmSouth ance regarding the types of policies and procedures has also implemented a CRA self-assessment program that the supervisory agencies believe financial institu- at AmSouth-Birmingham. tions should have in place in order to fulfill their AmSouth-Birmingham provides SBA, FHA, VA, responsibilities under the CRA on an ongoing basis, and government-guaranteed student loans. It accepts and the procedures that the supervisory agencies will mortgage loan applications at all branches in its extenuse during the application process to review an insti- sive branch network. In addition, AmSouth-Birmingtution's CRA compliance performance. The Agency ham spearheaded the establishment of the Birmingham CRA Statement also suggests that decisions by agen- Minority Enterprise Small Business Investment Comcies to allow financial institutions to expand will be pany, which was formed to make loans to expanding made pursuant to an analysis of the institution's over- minority businesses. A number of the members of all CRA performance, and will be based on the actual AmSouth-Birmingham's board of directors are acrecord of performance of the institution.8 tively involved in community development activities. Initially, the Board notes in this case that Am- The Board has considered Protestant's allegation South's subsidiary banks—including AmSouth-Bir- that the Home Mortgage Disclosure Act ("HMDA") mingham—have each received satisfactory ratings data for AmSouth-Birmingham in the Birmingham from their primary regulators in the most recent ex- Metropolitan Statistical Area ("MSA") show that aminations of their CRA performance. The Agency AmSouth-Birmingham has failed to comply with the CRA Statement provides that, although CRA exami- provisions of the CRA. Analysis of the HMDA data nation reports do not provide conclusive evidence of shows that for the period 1984 through 1989, with an institution's CRA record, these reports will be respect to home improvement and one to four family given great weight in the applications process.9 owner-occupied home purchase mortgage loans, Am- In addition, AmSouth and AmSouth-Birmingham South-Birmingham's lending to middle-income borhave put in place various elements outlined in the rowers is relatively equal, regardless of race.10 Am- Agency CRA Statement that contribute to an effective South has also begun interviewing to obtain minority CRA program. Specifically, AmSouth has established loan originators and processors for its mortgage coma program for reviewing and supervising the CRA pany subsidiary and is exploring the possibility of programs of its subsidiary banks. This program in- purchasing loans from minority loan brokerage firms. cludes regular review of reports made by each subsid- The Board notes that there have been some dispariary bank to AmSouth concerning the bank's CRA ities in the HMDA data for AmSouth-Birmingham's program, and annual review of each bank's CRA lending to borrowers in low- and moderate-income statement. AmSouth provides information to subsid- versus high-income census tracts.11 AmSouth-Biriary banks regarding evolving areas of emphasis under mingham has taken steps to address this disparity the CRA, and suggests guidelines to assure that sub- through a number of new mortgage loan programs and through additional outreach efforts. AmSouth-Birmingham is the largest participant in a $25 million mortgage pool sponsored by the City of Birmingham, generally reviewed various public studies of mortgage lending in which is known as the Birmingham Residential Mort- Atlanta, Cleveland, Detroit and Boston. The Report noted that, while these studies appeared to indicate that disparities existed in home mortgage lending between minority and non-minority areas, they did not provide a basis for definitive conclusions about the existence or extent of racial discrimination in mortgage lending and did not account for certain factors other than discrimination in lending that might 10. For example, an analysis of home purchase mortgage loans for account for these disparities—including differences in demand for one-to-four-family owner-occupied units and home improvement mortgage loans, differences in the types of mortgage products offered loans for 1988 shows that AmSouth-Birmingham made the same by depository and nondepository institutions, and the tendency of number of loans to applicants in middle-income white census tracts as nondepository lenders to dominate the minority mortgage loan mar- to applicants in middle-income minority census tracts. ket. 11. Although some disparities appear in the HMDA data, an 7. 54 Federal Register 13,742 (1989). analysis of AmSouth-Birmingham's recent consumer lending activity 8. Id. shows that the loan to deposit ratios are higher for low- and moderate- 9. 54 Federal Register at 13,745. income census tracts than for middle- or high-income census tracts. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

960 Federal Reserve Bulletin • November 1990 gage Plan.12 In addition, AmSouth-Birmingham has Interim Bank and AmSouth Bank have also applied committed $5 million to the Community Home Buy- under section 9 of the Federal Reserve Act (12 U.S.C. er's Program, a mortgage loan program offered in § 321 et seq.) to become members of the Federal conjunction with General Electric Mortgage Insurance Reserve System. The Board has considered the factors Company.13 it is required to consider when approving applications AmSouth-Birmingham also uses specialized market- for membership pursuant to section 9 of the Federal ing efforts to ensure that all segments of the commu- Reserve Act (12 U.S.C. § 322) and finds those factors nity are aware of its services. For example, AmSouth- to be consistent with approval. Birmingham regularly advertises in newspapers and on Based on the foregoing and other facts of record, the radio stations that are targeted to reach minority and Board has determined that the applications should be, low- and moderate-income communities. AmSouth- and hereby are, approved. This transaction shall not Birmingham regularly calls upon realtors to acquaint be consummated before the thirtieth calendar day them with products of interest to low- and moderate- following the effective date of this Order, unless such income individuals. AmSouth-Birmingham has re- period is extended for good cause by the Board or by cently implemented a program assigning each city the Federal Reserve Bank of Atlanta, acting pursuant office a quota of calls to make to ascertain the credit to delegated authority. needs of low- and moderate-income individuals and By order of the Board of Governors, effective Septhe information obtained as a result of these calls is tember 10, 1990. incorporated into the product development process. The Board expects AmSouth-Birmingham to continue Voting for this action: Chairman Greenspan and Governors its efforts to improve its outreach and lending record Seger, Angell, Kelley, and Mullins. Absent and not voting: for low- and moderate-income applicants. Governor LaWare. The Board believes that, on balance, the CRA JENNIFER J. JOHNSON record of AmSouth and AmSouth-Birmingham is con- Associate Secretary of the Board sistent with approval of this application. The Board expects AmSouth and AmSouth-Birmingham to imple- Orders Issued Under Section 4 of the Bank ment fully their CRA programs and to continue to Holding Company Act improve their record of CRA performance. The Board will consider the progress of AmSouth and AmSouth- The Dai-Ichi Kangyo Bank, Limited Birmingham under the CRA in future applications to Tokyo,Japan expand their deposit-taking operations. For the foregoing reasons, and based upon the overall CRA record Manufacturers Hanover Corporation of AmSouth and AmSouth-Birmingham and other New York, New York facts of record, the Board concludes that convenience and needs considerations, including the record of Order Approving Application to Engage in Certain performance under the CRA of AmSouth, AmSouth- Leasing Activities Birmingham, and AmSouth's other subsidiary banks, are consistent with approval of this application.14 The Dai-Ichi Kangyo Bank, Limited, Tokyo, Japan ("Dai-Ichi"), and Manufacturers Hanover Corporation, New York, New York ("MHC") (collectively, "Applicants"), both bank holding companies within 12. Ten area financial institutions are participating in the Plan, the meaning of the Bank Holding Company Act which is designed to provide affordable mortgages to low- and moderate-income residents in the five county Birmingham metropol- ("BHC Act"), have applied under section 4(c)(8) of itan area. The plan targets homes with a sales price of less than the BHC Act (12 U.S.C. § 1843(c)(8)) and section $50,000 and subsidizes the closing costs. Loans under the Plan became available in May 1990. AmSouth-Birmingham has received 225.23(a) of the Board's Regulation Y (12 C.F.R. seven applications, with one loan approved and four pending. 13. This program targets low- and moderate-income families seeking to purchase houses costing $50,000 or less. Borrowers under this program receive pre-purchase education, liberalized lending criteria, a The Board has carefully considered the Protestant's request for a home inspection, and reduced closing costs. This program started in public meeting or hearing in this case. In the Board's view, the parties the first quarter 1990, and no loans have yet been extended. have had ample opportunity to present their arguments in writing and 14. Protestant also has requested that the Board hold a public to respond to one another's submissions, and have submitted substanhearing or meeting to assess further facts surrounding AmSouth- tial written comments that have been considered by the Board. In light Birmingham's CRA performance. Generally under the Board's rules, of these facts, the Board has determined that a public meeting or the Board may, in its discretion, hold a public hearing or meeting on hearing is not necessary to clarify the factual record in these applicaan application to clarify factual issues related to the application and to tions, or otherwise warranted in this case. Accordingly, Protestant's provide an opportunity for testimony, if appropriate. 12 U.S.C. request for a public meeting or hearing on this application is hereby §§ 262.3(e) and 262.25(d). denied. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 961 225.23(a)) to engage, through their subsidiary The CIT Board has previously determined by order that the Group Holdings, Inc., New York, New York activities of engaging in higher residual value leasing ("CIT"), in the leasing of personal property, and and acting as agent, broker, or adviser with respect to acting as agent, broker, or adviser in leasing such such lease transactions are closely related to banking property, including lease transactions in which CIT and permissible for bank holding companies subject to may rely for its compensation on an estimated residual certain limitations.4 CIT proposes to conduct these value of the leased property at the expiration of the activities using the same methods and procedures and initial lease term of up to 100 percent of the acquisition subject to the same limitations established by the cost of the property ("higher residual value leasing").1 Board in its previous order regarding these activities. Notice of the application, affording interested per- In addition, all leases will be non-operating and, with sons an opportunity to submit comments, has been the exception of the residual value calculation, will duly published (55 Federal Register 22,099 and 34,077 otherwise conform to all of the requirements provided (1990)). The time for filing comments has expired, and in the Board's regulation regarding leasing transacthe Board has considered the application and all tions generally.5 In particular, CIT would engage in comments received in light of the factors set forth in the proposed activities only for leases in which the section 4(c)(8) of the BHC Act. property to be leased is acquired specifically for the Dai-Ichi is the largest banking organization in the leasing transaction under consideration or was acworld with $435.0 billion in total consolidated assets.2 quired specifically for an earlier leasing transaction. Dai-Ichi owns The Dai-Ichi Kangyo Bank of Califor- Moreover, Applicants have committed that the pronia, Los Angeles, California, with total assets of $503 posed lease transactions engaged in by CIT will have a million as of June 30, 1990. In addition, Dai-Ichi minimum initial lease term of one year, that the operates branches in New York, Los Angeles, and maximum lease term will be no more than forty years, Chicago, and agencies in Atlanta and San Francisco. and that CIT will sell or re-lease the property within Dai-Ichi also engages in certain nonbanking activities two years of the expiration of the initial lease. through subsidiaries including CIT, a joint venture In acting on an application under section 4(c)(8) of subsidiary. the BHC Act, the Board must also consider whether MHC is the eighth largest commercial banking or- an applicant's performance of the proposed activities ganization in the nation with $59.7 billion in total "can reasonably be expected to produce benefits to consolidated assets. MHC operates two banking sub- the public, such as greater convenience, increased sidiaries in New York and Delaware and engages competition, or gains in efficiency, that outweigh posdirectly and through other subsidiaries in a broad sible adverse effects, such as undue concentration of range of nonbanking activities. resources, decreased or unfair competition, conflicts CIT engages primarily in commercial finance, leas- of interests, or unsound banking practices." ing, factoring, and sales finance activities, operating 12 U.S.C. § 1843(c)(8). approximately 30 subsidiaries with total assets of $10.3 Applicants contend that approval of the proposed billion. CIT is one of the largest bank-affiliated leasing activity would provide greater convenience to CIT's companies in the United States with a leasing portfolio customers by allowing it to offer a broader range of of $1.4 billion as of December 31, 1989. leasing terms, would allow CIT to compete more In order to approve an application under section effectively with other lessors, and would result in gains 4(c)(8) of the BHC Act, the Board must determine that in efficiency and improved services to its leasing the proposed activity is "so closely related to banking customers. or managing or controlling banks as to be a proper The Board has considered the potential for adverse incident thereto . . . ." 12 U.S.C. § 1843(c)(8).3 The effects that might be associated with reliance by CIT on high residual values in leasing transactions. In this case, Applicants propose for CIT to engage in these leasing activities subject to limitations previously re- 1. Manufacturers Hanover Corporation, New York, New York ("MHC") owns 40 percent of CIT. Applicants have not applied to lied on by the Board which are designed to minimize engage in this activity independently or through any other subsidiary. the possibility of such effects. Applicants have also On December 15, 1989, the Board approved Dai-Ichi's application to acquire 60 percent of CIT as a joint venture with MHC. Dai-Ichi Kangyo Bank, Limited, 76 Federal Reserve Bulletin 75 (1990). CIT currently engages in leasing activities for which it has received prior 4. See Security Pacific Corporation, 76 Federal Reserve Bulletin Board approval under Regulation Y. 462 (1990). On May 25, 1990, the Board issued for comment a proposal 2. Asset data are as of March 31, 1990, unless otherwise noted. to make these leasing activities permissible for bank holding compa- 3. The Board has previously determined that the activities con- nies generally under Regulation Y. 55 Federal Register 22,348 and ducted by CIT are closely related to banking and are permissible for 23,446. Applicants have committed to conform CIT's leasing activities bank holding companies. Manufacturers Hanover Corporation, 70 to any final rule adopted by the Board. Federal Reserve Bulletin 452 (1984). 5. See 12 C.F.R. 225.25(b)(5). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

962 Federal Reserve Bulletin • November 1990 committed to limit the aggregate amount of CIT's Mid Am, Inc. investment in leases with estimated residual values in Bowling Green, Ohio excess of 25 percent of the acquisition cost of the leased property to no more than 10 percent of Dai- Order Approving the Acquisition of a Savings Ichi's total consolidated assets, and to limit the Association aggregate amount of CIT's investment in leases with estimated residual values in excess of 70 percent of Mid Am, Inc., Bowling Green, Ohio ("Mid Am"), a the acquisition cost of the leased property to the bank holding company within the meaning of the Bank lesser of: Holding Company Act ("BHC Act"), has applied (i) 0.5 percent of Dai-Ichi's total consolidated pursuant to section 4(c)(8) of the BHC Act (12 U.S.C. assets, or § 1843(c)(8)) and section 225.23(a) of the Board's (ii) 10 percent of Dai-Ichi's total consolidated Regulation Y (12 C.F.R. 225.23(a)), to acquire Home shareholders' equity. Savings and Loan Association, Defiance, Ohio ("Home"), a savings association, pursuant to section In addition, Applicants and CIT have committed that 225.25(b)(9) of the Board's Regulation Y (12 C.F.R. CIT and any of CIT's subsidiaries engaging in the 225.25(b)(9)).1 proposed activity will maintain capitalization com- Mid Am has also requested Board approval of its mensurate with industry standards for comparable proposal under section 5(d)(3) of the Federal Deposit leasing activities. The Federal Reserve Bank of San Insurance Act ("FDI Act"), as amended by the Finan- Francisco will monitor the policies and procedures of cial Institutions Reform, Recovery, and Enforcement CIT to assure that these policies and procedures are Act of 1989 (Pub. L. No. 101-73, § 206, 103 Stat. 183, consistent with the leasing authority granted under this 199 (1989)) ("FIRREA"), to merge Home into one of Order. Mid Am's existing subsidiary banks, The First Na- Based upon the consideration of the foregoing and tional Bank of Northwest Ohio, Bryan, Ohio ("Bryan all of the relevant facts of record, the Board concludes Bank"), after Mid Am acquires the shares of Home.2 that the balance of the public interest factors that it is Notice of the application, affording interested perrequired to consider under section 4(c)(8) is favorable sons an opportunity to submit comments, has been in this case. published (55 Federal Register 10,807 (1990)). The Accordingly, based on all of the facts of record, and time for filing comments has expired, and the Board subject to the conditions in this Order and the com- has considered the application and all comments remitments made by Applicants in this case, the Board ceived in light of the public interest factors set forth in has determined that the proposed application should section 4(c)(8) of the BHC Act. be, and hereby is, approved. This determination is The Board has determined that the operation of a subject to all of the conditions set forth in the Board's savings association is closely related to banking and Regulation Y, including sections 225.4(d) and permissible for bank holding companies. 12 C.F.R. 225.23(b) (12 C.F.R. 225.4(d) and 225.23(b)), and to 225.25(b)(9). In making this determination, the Board the Board's authority to require such modification or required that savings associations acquired by bank termination of the activities of a bank holding com- holding companies conform their direct and indirect pany or any of its subsidiaries as the Board finds activities to those permissible for bank holding comnecessary to assure compliance with, or to prevent panies under section 4 of the BHC Act. Mid Am has evasion of, the provisions and purposes of the BHC committed to conform all activities of Home to the Act and the Board's regulations and orders issued requirements of section 4 and Regulation Y.3 In order thereunder. This transaction shall not be consummated later than three months after the effective date of this Order, unless such period is extended for good 1. Home currently operates as a mutual savings association. Prior to cause by the Board or by the Federal Reserve Bank of the acquisition, Home will convert from mutual to stock form. San Francisco, pursuant to delegated authority. 2. 12 U.S.C. § 1815(d). Section 5(d)(3) of the FDI Act ("the Oakar By order of the Board of Governors, effective Amendment") permits the merger of a savings association owned by a bank holding company into a subsidiary bank owned by the same September 17, 1990. bank holding company. 3. Upon consummation of this proposal, Mid Am has committed that Home will divest of its real estate agency subsidiary and that Voting for this action: Chairman Greenspan and Governors Home's insurance subsidiary will terminate its agency activities. In Seger, Angell, Kelley, La Ware, and Mullins. order to receive deferred revenues due under an existing contract, Home's insurance subsidiary will retain its license for two years after consummation of this proposal. During that time the subsidiary will JENNIFER J. JOHNSON engage only in referring customers to its former insurance under- Associate Secretary of the Board writer. Home does not engage in any other activities that are not Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 963 to approve the application, the Board also is required schman Index ("HHI") would increase by 334 points, by section 4(c)(8) of the BHC Act to determine that the to a level of 2103.7 ownership and operation of Home by Mid Am "can Although this proposal would eliminate some existreasonably be expected to produce benefits to the ing competition in the Defiance County banking marpublic . . . that outweigh possible adverse effects, such ket, the Board believes that a number of factors as undue concentration of resources, decreased or mitigate the potential anticompetitive effects of this unfair competition, conflicts of interests, or unsound proposal. First Federal Savings and Loan, Defiance, banking practices." 12 U.S.C. § 1843(c)(8). Ohio ("First Federal"), the largest depository organi- Mid Am, which operates three subsidiary banks, is zation in the Defiance County market, actively comthe 25th largest depository organization in Ohio, con- petes with commercial banks in the market.8 First trolling deposits of $808.3 million, representing less Federal is a major provider of consumer and non-real than 1 percent of the total deposits in the state.4 Mid estate commercial loans, in addition to offering a full Am also engages through several subsidiaries in per- range of time and demand deposit services. Among the missible nonbanking activities. Home, which operates five depository institutions headquartered in the Defifive offices in Ohio, is the 78th largest depository ance County market, First Federal held the largest organization in Ohio, controlling deposits of $189.8 dollar volume of consumer loans and the second million. After consummation of the proposed acquisi- largest volume of commercial loans at year-end 1989. tion, Mid Am would become the 21st largest deposi- First Federal has a separate commercial lending detory organization in Ohio with aggregate deposits of partment and holds approximately 16.2 percent of its $998.1 million, representing less than 1 percent of the assets in consumer loans and 5.5 percent in commertotal deposits in the State. In the Board's view, cial loans.9 In comparison, the commercial banks consummation of the proposal would not have a operating in the Defiance County market hold, on significantly adverse effect on the concentration of average, 13.1 percent of their assets in consumer loans resources in depository institutions in Ohio. and 15.9 percent in commercial loans. Mid Am and Home compete directly in four banking Based on the size, market share, and activities of markets in Ohio. In the Defiance County banking First Federal in this market, the Board has concluded market,5 Mid Am is the sixth largest of nine depository that it is appropriate to include First Federal's deposits institutions, controlling $24.7 million in deposits, rep- at 100 percent in analyzing the competitive effects of resenting 5.8 percent of deposits of banks and thrift this proposal in the Defiance County market.10 If 100 institutions in the market ("market deposits"). Home percent of the deposits of First Federal are included in is the third largest depository institution, controlling the calculation of market concentration, Mid Am would $62.5 million in deposits, representing 14.8 percent of control 27.1 percent of the market deposits upon conmarket deposits. Upon consummation of this pro- summation. The HHI would increase by 186 points posal, Mid Am would become the largest depository organization in the Defiance County market, with 30.9 percent of market deposits.6 The Defiance County 7. Under the revised Department of Justice Merger Guidelines, 49 banking market is considered highly concentrated, Federal Register 26,823 (1984), a market in which the post-merger HHI is between 1000 and 1800 is considered moderately concentrated. with the four largest depository institutions currently In such markets, the Justice Department is unlikely to challenge a controlling 75.9 percent of the market deposits. After merger if an increase in the HHI is less than 100 points. Any market consummation of the proposal, the Herfindahl-Hir- in which the post-merger HHI is over 1800 is considered highly concentrated, and the Justice Department is likely to challenge a merger that increases the HHI by more than 50 points unless other factors indicate that the merger will not substantially lessen competition. The Justice Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence permissible for bank holding companies under section 4(c)(8) of the of other factors indicating anticompetitive effects) unless the post- BHC Act. merger HHI market is at least 1800 and the merger increases the HHI 4. State deposit data are as of March 31,1990. Market data are as of by at least 200 points. The Justice Department has stated that the June 30, 1989. higher than normal HHI thresholds for screening bank mergers for 5. The Defiance County banking market consists of Defiance anticompetitive effects implicitly recognizes the competitive effect of County, Ohio, excluding Hicksville Township; Paulding County, limited-purpose lenders and other non-depository financial entities. Ohio, excluding Carryall Township; Flatrock and Pleasant Townships 8. First Federal controls $132.7 million in deposits, representing in Henry County, Ohio; and Monroe and Perry Townships in Putnam 27.1 percent of market deposits. County, Ohio. 9. Nationwide, thrift institutions hold, on average, 4.5 percent of 6. The pre-consummation market share statistics are based on their assets in consumer loans and 2.8 percent in commercial loans. calculations in which the deposits of Home and all other savings 10. The Board has previously indicated that it may be appropriate in associations are included at 50 percent. Upon consummation, Home light of market factors in a specific market to include thrift deposits at will be merged with a commercial banking organization, thus, on a pro a level greater than 50 percent when analyzing the competitive effects forma basis, the deposits of Home are included at 100 percent, while of a proposal. See, e.g., Fleet Financial Group, Inc., 74 Federal the deposits of other savings associations continue to be included at 50 Reserve Bulletin 62, 64 (1988); Hartford National Corporation, 73 percent unless otherwise indicated. Federal Reserve Bulletin 720, 721 (1987). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

964 Federal Reserve Bulletin • November 1990 from 1874 to 2060. Eight depository institutions would determination is subject to all the conditions set forth in remain as competitors upon consummation of the pro- the Board's Regulation Y, including sections 225.4(d) posal including the two largest pre-merger depository and 225.23, and to the Board's authority to require such institutions. In addition, the Defiance County market is modification or termination of the activities of a bank attractive for entry by new banking competitors.11 holding company or any of its subsidiaries as the Board Based on the foregoing, the Board has concluded that finds necessary to assure compliance with, or to pre- First Federal exerts a competitive influence that miti- vent evasion of, the provisions and purposes of the gates the anticompetitive effects of this proposal in the BHC Act and the Board's regulations and orders issued Defiance County banking market. thereunder. Mid Am and Home also compete directly in the In considering Mid Am's request for approval of the Williams County,12 Fulton County,13 and Henry Coun- merger of Home into Bryan Bank pursuant to section ty14 banking markets in Ohio. The Henry County mar- 5(d)(3) of the FDI Act, the record in this case shows that: ket is not currently highly concentrated, and would not (1) The aggregate amount of the total assets of all become so after consummation of this proposal. The depository institution subsidiaries of Mid Am is HHI in the Williams County market would increase by $941.6 million, an amount which is not less than 200 only 90 points to just above 1800 and would not percent of the total assets of Home, which currently increase in the Fulton County market. In addition, has $185.5 million in total assets; numerous other depository institutions would continue (2) Mid Am and all its bank subsidiaries currently to compete in each market.15 On the basis of the meet all applicable capital standards and, upon conforegoing and other facts of record, the Board believes summation of the proposed transactions, will conthat consummation of this proposal would not have a tinue to meet all applicable capital standards; significantly adverse effect on competition in any rele- (3) The transaction is not in substance the acquisition vant banking market. of a Bank Insurance Fund member bank by a Savings The financial and managerial resources and future Association Insurance Fund member; prospects of Mid Am, its bank subsidiaries, and Home (4) Home had tangible capital of less than 5 percent are consistent with approval. Upon consummation of during the quarter preceding its acquisition by Mid Am; this proposal, Mid Am, its bank subsidiaries, and Home (5) The transaction, which involves the merger of would meet applicable capital requirements. Home, a savings association located in Ohio, into a In light of the above considerations, and based on all bank subsidiary of Mid Am, a bank holding company the facts of record, the Board has determined that whose banking subsidiaries' operations are princiconsummation of this proposal is not likely to result in pally conducted in Ohio, would comply with the any other significantly adverse effects, such as undue requirements of section 3(d) of the BHC Act if Home concentration of resources, decreased or unfair compe- were a state bank which Mid Am was applying to tition, conflicts of interests, or unsound banking prac- acquire. tices. Accordingly, based upon consideration of all the relevant facts, the Board has determined that the bal- Based on the foregoing and all the other facts of ance of the public interest factors that it is required to record, the Board has determined that the proposed consider under section 4(c)(8) of the BHC Act is application under section 5(d)(3) of the FDI Act should favorable and consistent with approval of Mid Am's be, and hereby is, approved. This approval is subject application to acquire Home. to Mid Am obtaining the required approvals of the Accordingly, the Board has determined that the appropriate federal and state banking agencies for the proposed application pursuant to section 4(c)(8) of the proposed merger. BHC Act should be, and hereby is, approved. This The transactions approved in this Order shall be made not later than three months after the effective date of this Order, unless such period is extended for 11. The Defiance County market encompasses an area in which good cause by the Board or by the Federal Reserve population growth, per capita personal income, and deposit growth exceed the comparable averages of similar Ohio banking markets. Bank of Cleveland, pursuant to delegated authority. 12. The Williams County banking market is approximated by By order of the Board of Governors, effective Williams County, Ohio. September 4, 1990. 13. The Fulton County banking market includes: a majority of Fulton County, Ohio, and the southern halves of Seneca, Ogden, and Fairfield Townships in Lenawee County, Michigan. 14. The Henry County banking market includes Henry County, Voting for this action: Chairman Greenspan and Governors Ohio, excluding Flatrock and Pleasant Townships. Seger, Angell, Kelley, LaWare, and Mullins. 15. The Henry County, Williams County, and Fulton County markets will have six, seven, and seven other depository institutions, respectively, continuing to compete in these markets after consum- JENNIFER J. JOHNSON mation of this proposal. Associate Secretary of the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 965 SouthTrust Corporation Alabama, representing 18.3 percent of the total deposits Birmingham, Alabama in commercial banking organizations in the state. SouthTrust operates two banking subsidiaries in Geor- Order Approving Application to Acquire a Savings gia, controlling approximately $51.7 million in deposits, Association representing less than 1 percent of the total deposits in commercial banks in the state.3 SouthTrust Corporation, Birmingham, Alabama ("South- Liberty is the 18th largest savings association in Trust"), a bank holding company within the meaning of Georgia, with approximately $185 million in total dethe Bank Holding Company Act ("BHC Act"), has posits, representing slightly more than 1 percent of the applied pursuant to section 4(c)(8) of the BHC Act (12 total thrift deposits in the state.4 Upon consummation U.S.C. § 1843(c)(8)) and section 225.23(a) of the Board's of the proposed acquisition, SouthTrust would become Regulation Y (12 C.F.R. 225.23(a)), to acquire at least 80 the 12th largest commercial banking organization in percent of Liberty Savings Bank of South Georgia, Georgia, controlling approximately $236.7 million in F.S.B., Valdosta, Georgia ("Liberty"), a federally char- deposits, representing less than 1 percent of total detered savings bank, pursuant to section 225.25(b)(9) of the posits in commercial banking organizations in the state. Board's Regulation Y (12 C.F.R. 225.25(b)(9)).1 In the Board's view, consummation of this proposal Notice of the application, affording interested per- would not have a significantly adverse effect upon the sons an opportunity to submit comments, has been concentration of banking organizations in Georgia. published (55 Federal Register 7566 (1990)). The time SouthTrust and Liberty would compete directly in for filing comments has expired, and the Board has the Atlanta, Georgia, banking market upon consummaconsidered the application and all comments received tion.5 In the Atlanta banking market, SouthTrust is the in light of the public interest factors set forth in section 46th largest depository organization, controlling $51.7 4(c)(8) of the BHC Act. million in deposits, representing less than 1 percent of The Board has determined that the operation of a total deposits held by banks and savings associations savings association is closely related to banking and operating in the market ("market deposits"). Liberty is permissible for bank holding companies. 12 C.F.R. the 34th largest depository organization, controlling 225.25(b)(9). In making this determination, the Board $144.5 million in deposits in the Atlanta banking marrequired that savings associations acquired by bank ket, representing less than 1 percent of market deposits. holding companies conform their direct and indirect ac- Upon consummation of this proposal, SouthTrust tivities to those activities permissible for bank holding would become the 14th largest depository organization companies under section 4 of the BHC Act. SouthTrust in the market, controlling approximately $196.2 million has committed to conform the direct and indirect activi- in deposits, representing less than 1 percent of market ties of Liberty to the requirements of section 4(c)(8) of the deposits.6 Upon consummation of the proposal, the BHC Act and Regulation Y upon consummation. Herfindahl-Hirschman Index ("HHI") would decrease In order to approve applications under section 4(c)(8) by five points to 1086 with the Atlanta banking market of the BHC Act, the Board is required to determine that remaining moderately concentrated.7 In light of these the performance of the proposed activities by South- Trust "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects, 3. SouthTrust's recent acquisition of one of its Georgia banking such as undue concentration of resources, decreased or subsidiaries is not included in the state or market data, and, if included, would not change the competitive considerations based on unfair competition, conflicts of interests, or unsound the small deposit size of that bank. banking practices." 12 U.S.C. § 1843(c)(8). 4. The deposit data of Liberty and the competitive considerations in this order reflect Liberty after the restructuring with its affiliated SouthTrust, with total consolidated assets of $8.3 savings association. billion, operates 41 banking subsidiaries located in 5. The Atlanta Metro Area banking market in Georgia includes the Alabama, Florida, Georgia, South Carolina, and Ten- counties of Cherokee, Clayton, Cobb, Dekalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Newton, Paulding, Rockdale, and nessee.2 SouthTrust is the second largest commercial Walton. banking organization in Alabama, controlling approxi- 6. The pre-consummation market share data are based on calculamately $5.1 billion in commercial bank deposits in tions in which the deposits of Liberty and all other thrifts are included at 50 percent. Upon consummation of the proposal, Liberty would be affiliated with a commercial banking organization, thus, on a pro forma basis, the deposits of Liberty are included at 100 percent, while the 1. Prior to the proposed acquisition, Liberty's parent, First Liberty deposits of other savings associations continue to be included at 50 Financial Corporation, Atlanta, Georgia, will cause Liberty to acquire percent. 17 of 34 branches located in northern Georgia counties from an 7. Under the revised Department of Justice Merger Guidelines, 49 affiliated federal savings association in exchange for Liberty's sole Federal Register 26,823 (1984), a market in which the post-merger branch in Valdosta, Georgia. HHI is between 1000 and 1800 is considered moderately concentrated. 2. Asset data are as of June 30, 1990. State and market banking data In such markets, the Justice Department is unlikely to challenge a are as of June 30, 1989. merger if the increase in the HHI is less than 100 points. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

966 Federal Reserve Bulletin • November 1990 and other facts of record, the Board concludes that the ingly, the Board believes that the proposal complies acquisition would not have a significantly adverse effect with the requirements of the Georgia statute.11 on competition in the Atlanta banking market. CBA also alleges that SouthTrust intends to merge The financial and managerial resources and future Liberty with one of SouthTrust's commercial banks in prospects of SouthTrust and its bank subsidiaries and Georgia, thereby permitting this commercial bank to of Liberty are also consistent with approval. In assess- indirectly acquire as commercial bank branches half of ing the financial factors, the Board believes that bank a federal savings association's branches, in violation of holding companies must maintain adequate capital at state law.12 At this time, SouthTrust has not proposed savings associations that they propose to acquire. to merge Liberty with any of SouthTrust's subsidiary Upon consummation, SouthTrust and its bank subsid- banks. Approval of SouthTrust's application before the iaries would meet applicable capital requirements, and Board only authorizes the operation of Liberty as a SouthTrust will cause Liberty to meet all applicable federal savings association under section 4(c)(8) of the capital requirements. In this regard, SouthTrust has BHC Act. Additional state and federal regulatory apcommitted that Liberty will have Tier 1 capital, ex- provals would be required before SouthTrust could cluding all intangible assets, of at least three percent of effect such a merger.13 Accordingly, the Board believes its total assets upon consummation of the proposal. In that issues regarding SouthTrust's future plans for addition, SouthTrust commits that Liberty will meet commercial bank branches are more appropriately all current and future minimum capital ratios adopted raised if and when SouthTrust determines to take this for savings associations by the Office of Thrift Super- action and seeks the required regulatory approvals. vision ("OTS") or the Federal Deposit Insurance A minister of the Nation of Islam also has protested this Corporation. The record does not indicate that con- application, alleging that SouthTrust's lead banking subsummation of this proposal is likely to result in any sidiary, SouthTrust Bank of Alabama, N.A., Birmingsignificant adverse effects, such as undue concentra- ham, Alabama ("Birmingham bank"), is not meeting the tion of resources, decreased or unfair competition, credit needs of minority communities in its service area, conflicts of interests, or unsound banking practices. as required by the Community Reinvestment Act The Community Bankers Association of Georgia (12 U.S.C. § 2901 et seq.) ("CRA").14 The Board has ("CBA") has protested SouthTrust's application on the recently found the CRA record of SouthTrust and its grounds that the proposed acquisition of the restruc- Birmingham bank to be consistent with approval.15 Actured Liberty violates Georgia law.8 Georgia law states cordingly, the Board concludes that this protest does not that any "bank," including a federal savings bank, raise issues sufficient to warrant denial of this application. cannot be acquired unless it has been in existence and Based on the foregoing and all the facts of record continuously operated as a bank for a period of five including the commitments made by SouthTrust set forth years.9 CBA maintains that the reorganization of Lib- in this Order, the Board has determined that the balance erty before its acquisition by SouthTrust results in an of public interest factors it must consider under section institution that does not meet this condition.10 The 4(c)(8) of the BHC Act is favorable and consistent with Georgia statute, however, requires only "existence" approval of SouthTrust's application to acquire Liberty. and' 'continuous'' operations as a bank for the requisite Accordingly, the Board has determined that the proposed five-year period. Both Liberty and its affiliated savings application should be, and hereby is, approved. This association have been in existence and continuously operating for a period greater than five years. Accord- 11. The Georgia Department of Banking and Finance has approved the acquisition and determined that the CBA protest did not raise issues warranting denial. 12. Ga. Code Ann. § 7-1-606(e) provides that when a bank holding 8. These comments were received after the close of the comment company effects a change in the corporate structure of its banking period and SouthTrust has objected to the comments as untimely. The subsidiaries through merger, consolidation or purchase, the resulting Board has taken into consideration the substance of these comments bank may continue to engage in all of the banking activities that were with respect to this application as authorized under its rules. See conducted by all of the banks before the changes in their structures. 12 C.F.R. 262.3(e). The Supreme Court of Georgia recently has clarified that this exemp- 9. Ga. Code Ann. § 7-l-621(d)(2) (1989). tion to state branching restrictions is not available when the commercial 10. As a general matter, a federal savings association's ability to bank subsidiary of a bank holding company acquires only some of the branch within a state is governed by the branching regulations of the branches of a banking organization located in a different county. First OTS which provide that "as a general policy, the [OTS] permits a Nat'I Bank of Commerce v. Community Bankers Ass'n, No. S90G0355 Federal savings association to branch within the state in which its (Ga. July 10, 1990). home office is located . . . ." 12 C.F.R. 556.5. Under the case law, it 13. See Ga. Code Ann. § 7-l-606(e) and the Bank Merger Act is well-settled that the OTS has the power to authorize branch (12 U.S.C. § 1828(c)). facilities and that this mandate grants to the OTS the complete 14. The Board will review CRA performance in considering appliauthority to permit intrastate branching by federal associations. City cations by bank holding companies to expand their deposit-taking Federal Savings and Loan Ass'n v. Federal Home Loan Bank Board, ability through the acquisition of a savings association pursuant to 600 F.2d 681, 685 (7th Cir. 1979); Independent Bankers Ass'n of section 4(c)(8) of the BHC Act. Norwest Corporation, 76 Federal America v. Federal Home Loan Bank Board, 557 F. Supp. 23, 26 Reserve Bulletin 873 (1990). (D.D.C. 1982). The OTS has granted conditional approval to the 15. SouthTrust Corporation (SouthTrust of Florida), 76 Federal restructuring of Liberty's branches. Reserve Bulletin 647 (1990). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 967 determination is subject to all of the conditions set forth in date of this Order, unless such period is extended for good the Board's Regulation Y, including sections 225.4(d) and cause by the Board or by the Federal Reserve Bank of 225.23 (12 C.F.R. 225.4(d) and 225.23), and to the Board's Atlanta, pursuant to delegated authority. authority to require modification or termination of the By order of the Board of Governors, effective activities of a bank holding company or any of its subsid- September 20, 1990. iaries as the Board finds necessary to assure compliance Voting for this action: Chairman Greenspan and Governors with, or to prevent evasion of, the provisions and pur- Angell, Kelley, LaWare, and Mullins. Absent and not voting: poses of the BHC Act and the Board's regulations and Governor Seger. orders issued thereunder. This transaction shall not be JENNIFER J. JOHNSON consummated later than three months after the effective Associate Secretary of the Board 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 Banc One Corporation, Capitol City Federal Bank One, Texas, N.A., September 13, 1990 Columbus, Ohio Savings Association, Dallas, Texas Austin, Texas Banc One Corporation, Empire Federal Savings Bank One, Texas, N.A., September 28, 1990 Columbus, Ohio Bank of America, Dallas, Texas Buffalo, New York (Texas Branches) BankAmerica Merabank Federal Bank of America September 28, 1990 Corporation, Savings Bank, Arizona, San Francisco, Phoenix, Arizona Phoenix, Arizona California Barnett Banks, Inc., Empire Federal Savings Barnett Bank of Volusia September 28, 1990 Jacksonville, Florida Bank of America, County, Buffalo, New York DeLand, Florida (Florida Division) Barnett Bank of Central Florida, N.A., Winter Park, Florida Barnett Bank of Lake County, N.A., Eustis, Florida Barnett Bank of Pinellas County, St. Petersburg, Florida Barnett Bank of Tampa, N.A., Tampa, Florida Barnett Bank of Alachua County, N.A., Gainesville, Florida Barnett Bank of North Central Florida, Lake City, Florida Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

968 Federal Reserve Bulletin • November 1990 FIRREA Orders—Continued Acquired Surviving Approval Bank Holding Company Thrift Bank(s) Date Citizens Bancshares, Midland-Buckeye Federal The Citizens Banking September 7, 1990 Inc., Savings and Loan Company, Salineville, Ohio Association, Saline ville, Ohio Alliance, Ohio Comerica Incorporated, Empire Federal Savings Comerica Bank-Detroit, September 28, 1990 Detroit, Michigan Bank of America, Detroit, Michigan Buffalo, New York (Michigan Branches) Community First North Midwest Federal Savings Community First September 21, 1990 Dakota Bankshares, Bank of Minot, National Bank & Inc., Minot, North Dakota Trust Company of Fargo, North Dakota (Dickinson Branch) Dickinson, Dickinson, North Dakota Crestar Financial Seasons Federal Savings Crestar Bank, September 28, 1990 Corporation, Bank, Richmond, Virginia Richmond, Virginia Richmond, Virginia Crestar Financial Security Federal Savings Crestar Bank, September 28, 1990 Corporation, Association, Richmond, Virginia Richmond, Virginia Richmond, Virginia Fessenden Bancshares, Midwest Federal Savings The First National September 21, 1990 Inc., Bank of Minot, Bank, Fessenden, North Minot, North Dakota Fessenden, North Dakota (Fargo Branch) Dakota First Affiliated Bancorp, Crest Federal Savings Watseka First National September 13, 1990 Inc., and Loan Association, Bank, Watseka, Illinois Kankakee, Illinois Watseka, Illinois (West Court Street Branch) First Alabama City Federal Savings and First Alabama Bank, September 13, 1990 Bancshares, Inc., Loan Association, Montgomery, Montgomery, Alabama Birmingham, Alabama Alabama First Chicago Great American Federal The First National Bank September 21, 1990 Corporation, Savings & Loan of Chicago, Chicago, Illinois Association, Chicago, Illinois Oak Park, Illinois First Citizens North Carolina Savings First Citizens Bank, September 21, 1990 BancShares, Inc., and Loan Association, Raleigh, North Raleigh, North F.A., Carolina Carolina Charlotte, North Carolina First Empire State Key Interim Savings Manufacturers and September 28, 1990 Corporation, Bank, FSB, Traders Trust Buffalo, New York Buffalo, New York Company, Buffalo, New York First Forest Corporation, Central Savings Bank, Bank of Forest, September 28, 1990 Forest, Mississippi Jackson, Mississippi Forest, Mississippi Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 969 FIRREA Orders—Continued Acquired Surviving Approval Bank Holding Company Thrift Bank(s) Date FirsTier Financial, Inc., FirsTier Savings Bank, FirsTier Bank, N.A., September 28, 1990 Omaha, Nebraska F.S.B., Omaha, Nebraska Omaha, Nebraska (Blair, Fremont, and Kearney Branches) KeyCorp, Empire Federal Savings Key Bank of Eastern September 28, 1990 Albany, New York Bank of America, New York, N.A., Buffalo, New York Albany, New York (Eastern Division) KeyCorp, Empire Federal Savings Key Bank of Western September 28, 1990 Albany, New York Bank of America, New York, N.A., Buffalo, New York Buffalo, New York (Western Division) Key Bank of Central New York, N.A., Syracuse, New York Peoples Heritage Home Owners Savings Peoples Heritage September 7, 1990 Financial Group, Inc., Bank, F.S.B., Savings Bank, Portland, Maine Boston, Massachusetts Portland, Maine (Maine Branches) Rolla Holding Company, Midwest Federal Savings First State Bank Rolla, September 21, 1990 Inc., Bank of Minot, Rolla, North Dakota Rolla, North Dakota Minot, North Dakota (Rolla Branch) SCB Bancorp, Inc., Gem City Federal Soy Capital Bank and September 7, 1990 Decatur, Illinois Savings and Loan Trust Company, Association, Decatur, Illinois Quincy, Illinois (Decatur Branches) Security Pacific Mercury Federal Savings Security Pacific September 21, 1990 Corporation, and Loan Association, National Bank, Los Angeles, California Huntington Beach, Los Angeles, California California UST Corp., Home Owners Savings United States Trust September 7, 1990 Boston, Massachusetts Bank, F.S.B., Company, Boston, Massachusetts Boston, (Massachusetts Massachusetts Branches) Valley Bancshares, Inc., Midwest Federal Savings Valley Bank and Trust September 21, 1990 Grand Forks, North Bank of Minot, Company, Dakota Minot, North Dakota Grand Forks, North (Hillsboro Branch) Dakota Watford City Bancshares, Midwest Federal Savings The First International September 21, 1990 Inc., Bank of Minot, Bank, Watford City, North Minot, North Dakota Watford City, North Dakota (Williston, Minot, West Dakota Minot and Killdeer Branches) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

970 Federal Reserve Bulletin • November 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 3 Effective Applicant(s) Bank(s) Barnett Banks, Inc., Barnett Card Services Bank, N.A., September 7, 1990 Jacksonville, Florida Jacksonville, Florida Section 4 Effective Applicant(s) Bank(s) date Bank America Corporation, BAA Interim Federal Savings Bank, September 28, 1990 San Francisco, California Phoenix, Arizona BankAmerica Corporation, Bank of America, Federal Savings September 7, 1990 San Francisco, California Bank, Portland, Oregon Barnett Banks, Inc., Barnett Federal Savings Bank, September 28, 1990 Jacksonville, Florida Jacksonville, Florida First Chicago Corporation, First Chicago Federal Interim Savings September 20, 1990 Chicago, Illinois Bank, Chicago, Illinois First Empire State Corporation, Manufacturers and Traders Interim September 28, 1990 Buffalo, New York Bank, FSB, Buffalo, New York KeyCorp, Key Interim Savings Bank, FSB, September 28, 1990 Albany, New York Buffalo, New York Key Eastern Interim Savings Bank, FSB, Albany, New York Security Pacific Corporation, Mercury Federal Interim Savings September 20, 1990 Los Angeles, California Association, Los Angeles, California Trans Financial Bancorp, Inc., Trans Financial Acquisition September 6, 1990 Bowling Green, Kentucky Corporation, Russellville, Kentucky Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 971 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 AApppplliiccaanntt((ss)) BBaannkk((ss)) Bank date AmeriWest Corporation, United Bancshares of Nebraska, Kansas City August 29, 1990 Omaha, Nebraska Inc., Omaha, Nebraska Aurora First National Company, Antelope Savings Bank, F.A., Kansas City August 24, 1990 Aurora, Nebraska Aurora, Nebraska Banco Bilbao Vizcaya, S.A., New Mexico Banquest Investors New York September 4, 1990 Bilbao, Spain Corporation, Santa Fe, New Mexico Banc One Corporation, D.S.B. Bancshares, Inc., Cleveland August 27, 1990 Columbus, Ohio Randolph, Wisconsin Bank of Montana System, Toole County State Bank, Minneapolis September 18, 1990 Great Falls, Montana Shelby, Montana Bank of Montreal, Frankfort Bancshares, Inc., Chicago August 30, 1990 Montreal, Quebec, Canada Frankfort, Illinois Bankmont Financial Corp., New York, New York Harris Bankcorp, Inc., Chicago, Illinois Bonduel Bancorp, Inc., Bonduel State Bank, Chicago September 5, 1990 Bonduel, Wisconsin Bonduel, Wisconsin Cathay Bancorp, Inc., Cathay Bank, San Francisco August 24, 1990 Los Angeles, California Los Angeles, California CBR Bancshares Corp., Citizens Bank of Rogersville, St. Louis September 12, 1990 Rogersville, Missouri Rogersville, Missouri Central Community Corporation, First State Bank, Dallas September 18, 1990 Wilmington, Delaware Temple, Texas Chalybeate Springs Corporation, The First National Bank of Dallas August 31, 1990 Hughes Springs, Texas Hughes Springs, Hughes Springs, Texas CNB Bancorp, The Central National Bank and Chicago August 28, 1990 Attica, Indiana Trust Company, Attica, Indiana CNB Bancshares, Inc., Henderson County State Bank, St. Louis September 5, 1990 Evansville, Indiana Henderson, Kentucky Community Bancorporation, Farmers State Bank of San Francisco September 6, 1990 Pullman, Washington Uniontown, Uniontown, Washington Community National Community National Bank of Richmond September 20, 1990 Bancorporation of South South Carolina, Carolina, Inc., Columbia, South Carolina Columbia, South Carolina Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

972 Federal Reserve Bulletin • November 1990 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank date Conrad Company, First National Bank, Minneapolis August 24, 1990 Minneapolis, Minnesota Cut Bank, Montana Country Bank Shares, Inc., Owens Investment Company, Kansas City September 6, 1990 Milford, Nebraska Weeping Water, Nebraska C.S.B. Company, Pine Ridge Management Inc., Kansas City September 14, 1990 Cozad, Nebraska Chadron, Nebraska Decatur Bancshares, Inc., Decatur State Bank, St. Louis September 21, 1990 Decatur, Arkansas Decatur, Arkansas Farmers National Bancshares of Farmers National Bank of Kansas City September 14, 1990 Bethany, Inc., Ridge way, Bethany, Missouri Bethany, Missouri First Canadian Bancorp, Inc., Lipscomb Bancshares, Inc., Dallas September 20, 1990 Canadian, Texas Higgins, Texas First National Bank in Higgins, Higgins, Texas First of America Bank Trustcorp Bank, Columbus, Chicago September 10, 1990 Corporation, National Association, Kalamazoo, Michigan Columbus, Indiana First of America Bank Corporation-Indiana, Indianapolis, Indiana First National Insurance Agency, First National Bank in Exeter, Kansas City August 29, 1990 Inc., Exeter, Nebraska Exeter, Nebraska FNB Newton Bankshares, Inc., Georgia Central Bancshares, Atlanta September 14, 1990 Covington, Georgia Inc., Social Circle, Georgia The Gadsden Corporation, The Attalla Trust Company, Atlanta August 30, 1990 Altoona, Alabama Attalla, Alabama Garfield County Bancshares, Garfield County Bank, Minneapolis August 24, 1990 Inc., Jordan, Montana Jordan, Montana George Gale Foster Corporation, Fishkill National Corporation, New York August 17, 1990 Poughkeepsie, New York Beacon, New York Happy Bancshares, Inc., First State Bank, Dallas August 29, 1990 Canyon, Texas Happy, Texas INB Financial Corporation, The Peoples Savings Bank of Chicago September 12, 1990 Indianapolis, Indiana Evans ville, Indiana, Evans ville, Indiana Jackson Bancorporation, Fairmont Bancorporation, Minneapolis September 19, 1990 Jackson, Minnesota Fairmont, Minnesota Bank Midwest, Minnesota Iowa, N.A., Jackson, Minnesota JDJ Banco, Inc., Nebraska State Bank, Kansas City August 29, 1990 Lynch, Nebraska Lynch, Nebraska Lowry Facilities, Inc., Oklahoma Bancorporation, Inc., Kansas City August 28, 1990 Clinton, Oklahoma Clinton, Oklahoma Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 973 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank date Mercantile Bankshares The Farmers & Merchants Bank Richmond September 19, 1990 Corporation, - Eastern Shore, Baltimore, Maryland Onley, Virginia The Merchants Holding La Crescent State Bank, Minneapolis September 7, 1990 Company, La Crescent, Minnesota Winona, Minnesota Midstates Bancshares, Inc., Harlan National Company, Chicago September 13, 1990 Omaha, Nebraska Harlan, Iowa First National Company of Missouri Valley, Inc., Missouri Valley, Iowa Nichols Financial, Inc., First State Bank of Storden, Minneapolis August 24, 1990 Sunfish Lake, Minnesota Storden, Minnesota Northeast Bancorp, Inc., Peoples State Bank, Minneapolis September 18, 1990 Summit, South Dakota Summit, South Dakota Old National Bancorp, Security Bank and Trust St. Louis September 14, 1990 Evansville, Indiana Company, Mt. Carmel, Illinois Overton Bancorporation, Inc., Overton Park National Bank, Dallas August 31, 1990 Dover, Delaware Fort Worth, Texas First National Bank Mansfield, Mansfield, Texas Pacific Capital Bancorp, Pajaro Valley Bancorporation, San Francisco September 14, 1990 Salinas, California Watsonville, California Rising Sun Bancorp, The National Bank of Rising Richmond September 20, 1990 Rising Sun, Maryland Sun, Rising Sun, Maryland Royal Bancshares, Inc., Lone Rock Investments, Inc., Chicago September 13, 1990 Elroy, Wisconsin Lone Rock, Wisconsin Sand Springs Bancshares, Inc., Bank of Oklahoma, Sand Kansas City September 19, 1990 Tulsa, Oklahoma Springs, Sand Springs, Oklahoma Screven Bancshares, Inc., Farmers and Merchants Bank, Atlanta September 18, 1990 Sylvania, Georgia Sylvania, Georgia Silsbee Financial Corporation, Silsbee State Bank, Dallas September 6, 1990 Silsbee, Texas Silsbee, Texas Soperton Naval Stores, Inc., Soperton Bancshares, Inc., Atlanta September 14, 1990 Soperton, Georgia Soperton, Georgia Southwest Bancshares, Inc., First National Bank of Poinsett St. Louis September 21, 1990 Trumann, Arkansas County, Trumann, Arkansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

974 Federal Reserve Bulletin • November 1990 Section 3—Continued Reserve Effective Applicant(s) Bank(s) Bank date Stuart Family Partnership, Minden Exchange Company, Kansas City August 24, 1990 Lincoln, Nebraska Minden, Nebraska Catherine Stuart Schmoker Family Partnership, Lincoln, Nebraska James Stuart, Jr. Family Partnership, Lincoln, Nebraska Scott Stuart Family Partnership, Lincoln, Nebraska First Commerce Bancshares, Inc., Lincoln, Nebraska Synovus Financial Corp., First Coast Community Bank, Atlanta September 14, 1990 Columbus, Georgia Fernandina Beach, Florida TB&C Bancshares, Inc., Columbus, Georgia Tysons Financial Corporation, Tysons National Bank (in Richmond August 27, 1990 Vienna, Virginia organization), Vienna, Virginia United Missouri Bancshares, Inc., Liberty National Bank, Kansas City September 10, 1990 Kansas City, Missouri Liberty, Missouri Wayne City Bancorp, Inc., First National Bank of Wayne St. Louis September 7, 1990 Springfield, Illinois City, Wayne City, Illinois Weatherford Bancorporation, United Community Bank, Kansas City September 7, 1990 Inc., Weatherford, Oklahoma Weatherford, Oklahoma Section 4 Nonbanking Reserve Effective Applicant(s) Activity/Company Bank date Amsterdam-Rotterdam Bank N.V., NSR Asset Management Chicago September 14, 1990 Amsterdam, The Netherlands Corporation, Stichting Amro, New York, New York Amsterdam, The Netherlands ABN AMRO Holding, N.V., Amsterdam, The Netherlands Stichting Administratiekantoor ABN AMRO Holding, Amsterdam, The Netherlands Stichting Priorieit ABN-AMRO Holding, Amsterdam, The Netherlands Arkansas Union Bankshares, Inc., Benton Savings and Loan St. Louis August 29, 1990 Benton, Arkansas Association, Benton, Arkansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 975 Section 4—Continued Nonbanking Reserve Effective Applicant(s) Activity/Company Bank date Bank of Montreal, Harris Investment Management, Chicago September 5, 1990 Montreal, Quebec, Canada Inc., Bankmont Financial Corp., Chicago, Illinois New York, New York Harris Bankcorp, Inc., Chicago, Illinois Bank Shares, Incorporated, to continue to furnish employee Minneapolis August 31, 1990 Minneapolis, Minnesota benefit services to third parties The Dai-Ichi Kangyo Bank, to engage in the solicitation, San Francisco September 4, 1990 Limited, Tokyo, Japan execution, and clearance of certain futures contracts and options on futures contracts, and in the provision of investment advice with respect to such contracts First Citizens BancShares, Inc. Catawba SavShares, Inc., Richmond August 28, 1990 Raleigh, North Carolina Charlotte, North Carolina Norwest Corporation, Abramson-Nault-Kreager-Oas Minneapolis August 24, 1990 Minneapolis, Minnesota Agency, Inc., Duluth, Minnesota Peoples Heritage Financial PHFG Interim Savings and Loan Boston September 6, 1990 Group, Inc., Association, Portland, Maine Portland, Maine Security Bancshares, Inc., Crownover Insurance Agency, Kansas City September 14, 1990 Scott City, Kansas Oakley, Kansas Sooner Southwest Bankshares, Southwest Consolidated Life Kansas City September 26, 1990 Inc., Insurance Company, Bristow, Oklahoma Phoenix, Arizona The Sumitomo Bank, Limited, SB General Leasing (USA), Inc., San Francisco September 6, 1990 Osaka, Japan Greenwich, Connecticut UST Corp., UST Savings Bank, F.S.B., Boston September 6, 1990 Boston, Massachusetts Boston, Massachusetts 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 Peoples Bank of Montross, Newport News Savings Bank, Richmond August 24, 1990 Montross, Virginia Newport News, Virginia Star Bank, Kenton County, Star Bank, Northern Kentucky, Cleveland September 10, 1990 Covington, Kentucky Verona, Kentucky Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

976 Federal Reserve Bulletin • November 1990 PENDING CASES INVOLVING THE BOARD OF GOVERNORS This list of pending cases does not include suits ments to Regulation Z implementing the Home against the Federal Reserve Banks in which the Board Equity Loan Consumer Protection Act. of Governors is not named a party. Synovus Financial Corp. v. Board of Governors, No. 89-1394 (D.C. Cir., filed June 21, 1989). Petition for review of Board order permitting relocation of a Kuhns v. Board of Governors, No. 90-1398 (D.C. Cir., bank holding company's national bank subsidiary filed July 30, 1990). Petition for review of Board from Alabama to Georgia. Oral argument scheduled order denying request for attorney's fees pursuant for October 11, 1990. to Equal Access to Justice Act. MCorp v. Board of Governors, No. 89-2816 (5th Cir., Laufman v. State of California, et al., No. CIVS-89filed May 2, 1989). Appeal of preliminary injunction 1755 EJM-EM (E.D. California, filed April 2, 1990). against the Board enjoining pending and future Action to require bank regulatory agencies to examenforcement actions against a bank holding comine or bring enforcement action against bank. pany now in bankruptcy. On May 15, 1990, the Fifth May v. Board of Governors, No. 90-1316 (D.D.C., Circuit vacated the district court's order enjoining filed June 5, 1990). Action under Freedom of Inforthe Board from proceeding with enforcement acmation and Privacy Acts. The Board's motion to tions based on section 23A of the Federal Reserve dismiss was granted on July 17, 1990. Plaintiffs Act, but upheld the district court's order enjoining notice of appeal was filed July 27, 1990. such actions based on the Board's source-of- Burke v. Board of Governors, No. 90-9509 (10th strength doctrine. The Board's petition for rehearing Circuit, filed February 27, 1990). Petition for review was denied on August 5, 1990. On August 29, the of Board orders assessing civil money penalties and Fifth Circuit denied the plaintiff's motion for a stay issuing orders of prohibition. pending petition for certiorari. BancTEXAS Group, Inc. v. Board of Governors, No. Independent Insurance Agents of America v. Board of CA 3-90-0236-R (N.D. Texas, filed February 2, Governors, No. 89-4030 (2d Cir., filed March 9, 1990). Suit for preliminary injunction enjoining the 1989). Petition for review of Board order ruling that Board from enforcing a temporary order to cease the non-banking restrictions of section 4 of the Bank and desist requiring injection of capital into plain- Holding Company Act apply only to non-bank subtiff's subsidiary banks under the Board's source of sidiaries of bank holding companies. The Board's strength doctrine. District court granted preliminary order was upheld on November 29, 1989. Petition injunction on June 5, 1990, in light of 5th Circuit's for certiorari filed on April 18, 1990; the Board's decision in MCorp v. Board of Governors. opposition to certiorari was filed on July 13, 1990. Rutledge v. Board of Governors, No. 90-7599 (11th MCorp v. Board of Governors, No. CA3-88-2693 Cir., filed August 21, 1990). Appeal of district court (N.D. Tex., filed October 10, 1988). Application for grant of summary judgment for defendants in tort injunction to set aside temporary cease and desist suit challenging Board and Reserve Bank superviorders. Stayed pending outcome of MCorp v. Board sory actions. of Governors in Fifth Circuit. Kaimowitz v. Board of Governors, No. 90-3067 (11th White v. Board of Governors, No. CU-S-88-623-RDF Cir., filed January 23, 1990). Petition for review of (D. Nev., filed July 29, 1988). Age discrimination Board order dated December 22, 1989, approving complaint. Board's motion to dismiss or for sumapplication by First Union Corporation to acquire mary judgment pending. Florida National Banks. Petitioner objects to approval on Community Reinvestment Act grounds. Babcock and Brown Holdings, Inc. v. Board of Gov- FINAL ENFORCEMENT ORDERS ISSUED BY THE ernors, No. 89-70518 (9th Cir., filed November 22, BOARD OF GOVERNORS 1989). Petition for review of Board determination that a company would control a proposed insured Northwest Indiana Bancshares, Inc. bank for purposes of the Bank Holding Company Fort Wayne, Indiana Act. Awaiting scheduling of oral argument. Consumers Union of U.S., Inc. v. Board of Gover- The Federal Reserve Board announced on Septemnors, No. 90-5186 (D.C. Cir., filed June 29, 1990). ber 10, 1990, the issuance of an order imposing civil Appeal of District Court decision upholding amend- money penalties against seven former directors of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 977 Northwest Indiana Bancshares, Inc., Fort Wayne, Institutions Act of 1982,2 and are, therefore, not Indiana ("Northwest"), for violations of the Bank permissible for Family Guardian as a nonbank subsid- Holding Company Act and of a cease and desist order iary of Citicorp under the Act. issued by the Board against Northwest on Febru- Citicorp currently holds the shares of Family Guardary 13, 1984. ian through Citibank (Delaware), New Castle, Delaware ("Citibank Delaware"), a state-chartered bank Andrew F. Stasio, Jr. that is a wholly-owned subsidiary of Citicorp.3 Citi- Former Director of Commonwealth Bank corp originally established Family Guardian, with the Arlington, Texas required Board approval under the BHC Act, to underwrite and sell certain credit-related insurance The Federal Reserve Board announced on Septem- expressly authorized for bank holding companies by ber 7, 1990, the issuance of an Order of Prohibition section 4(c)(8)(A) of the BHC Act.4 On May 31, 1990, against Andrew F. Stasio, Jr., a former director of the Citicorp transferred the voting shares of Family Commonwealth Bank, Arlington, Texas, and a former Guardian to Citibank Delaware in order for Family director of the Commonwealth Bancorp, Inc., Arling- Guardian to transact the broader range of insurance ton, Texas, a registered bank holding company. activities authorized under the Delaware statute which was enacted on May 30, 1990. The Delaware statute provides that a state-chartered bank may act as an ACTION ON PETITION FOR ENFORCEMENT BY insurer and transact the business of insurance (other THE BOARD OF GOVERNORS than title insurance) through a separate division of the bank or through a subsidiary of the bank.5 After its Citicorp transfer to Citibank Delaware, Family Guardian, with New York, New York the approval of the Delaware Insurance Commissioner, began to expand the scope of its insurance Family Guardian Life Insurance Company activities to include insurance underwriting and Phoenix, Arizona agency functions that are not permissible for bank holding companies under section 4(c)(8) of the Act.6 Order with Respect to Petition for Enforcement Citicorp acquired Citibank Delaware pursuant to Delaware's Financial Center Development Act, which The Independent Insurance Agents of America, Inc. ; allows out-of-state bank holding companies to acquire National Association of Casualty & Surety Agents; newly chartered state banks in the state, subject to National Association of Life Underwriters, Inc.; Na- certain conditions. The banks acquired by out-of-state tional Association of Professional Insurance Agents; companies must employ at least 200 residents of National Association of Surety Bond Producers; Pro- Delaware after two years, may have only one branch fessional Insurance Agents of Pennsylvania, Maryland open to the general public in Delaware, and may not and Delaware, Inc.; and the Delaware Association of market the bank's products and services in Delaware Life Underwriters ("Petitioners") have petitioned the to the substantial detriment of existing Delaware Board to initiate enforcement action to require Citi- banks, except to serve and retain existing customers.7 corp, New York, New York, a bank holding company Although the Delaware statute authorizes state-charwithin the meaning of the Bank Holding Company Act ("BHC Act"), to terminate certain insurance activities conducted pursuant to a newly enacted Delaware 2. 12 U.S.C. § 1843(c)(8). The Garn-St Germain Depository Institutions Act of 1982 amended section 4(c)(8) of the BHC Act to statute by Family Guardian Life Insurance Company, provide that it is not closely related to banking for a bank holding Phoenix, Arizona ("Family Guardian"), an indirect company to provide insurance as a principal, agent or broker except in nonbank subsidiary of Citicorp.1 The petition con- seven specific situations. 3. Citibank Delaware engages primarily in leasing and commercial tends that the broad insurance agency and underwrit- lending activities, and had assets of approximately $1.8 billion as of ing activities authorized by the Delaware statute are March 31, 1990. not permissible for bank holding companies and their 4. 12 U.S.C. § 1843(c)(8)(A). The insurance activities of Family Guardian prior to its transfer to Citibank Delaware had been authononbank subsidiaries under section 4(c)(8) of the BHC rized by the Board under the first of the seven exceptions specified in Act, as amended by the Garn-St Germain Depository the Garn-St Germain Act. 5. House Bill No. 193, House Substitute No. 1 ("House Bill No. 193"). 6. As of March 31,1990, Family Guardian had $203 million in assets 1. The American Council of Life Insurance, the American Insur- and net contingent insurance liabilities outstanding of several billion ance Association, the National Association of Independent Insurers, dollars. At present, the expanded insurance activities of Family and the Alliance of American Insurers have, by separate letter, joined Guardian represent an insignificant percentage of its business. in the petition for enforcement. 7. Del. Code Ann. tit. 5, §§ 801-07. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

978 Federal Reserve Bulletin • November 1990 tered banks to engage in the general insurance busi- take advantage of the operating subsidiary rule to ness on a nationwide basis through offices in any state, establish a subsidiary to conduct these activities. banks owned by out-of-state holding companies may In the alternative, Petitioners contend that the opnot market the sale of insurance products in Delaware erating subsidiary regulation itself is inconsistent with to the detriment of Delaware banks.8 the express terms of section 4 of the BHC Act because In addition, the Delaware statute requires that the it permits holding companies to acquire and retain insurance activities must be conducted through a nonbank companies without compliance with the prior division or department of the bank that must be approval, activity, and prudential limits of section 4 of separately capitalized in accordance with the require- the BHC Act. ments of the Insurance Code, that must maintain On June 28, 1990, Citicorp responded to the argufinancial records separate and distinct from the other ments made in the petition for enforcement. Citicorp records of the bank, and that must comply with an contends that Family Guardian's expanded insurance extensive series of structural, operational, and regula- activities are permissible under the operating subsidtory requirements designed to treat the insurance iary rule in Regulation Y, since the Delaware statute division as a distinct corporate entity separate from on its face authorizes state-chartered banks to transact the bank.9 the business of insurance and since the requirement In their petition for enforcement, filed on May 30, that insurance activities be conducted in a separate 1990, Petitioners argue that Citicorp is not authorized department is consistent with traditional regulatory to hold Family Guardian under the BHC Act once it practice. expands its insurance activities beyond those autho- The Board has carefully considered the submissions rized and approved by the Board under section 4(c)(8) of Petitioners and Citicorp. As explained below, the of the BHC Act. Petitioners contend that, as a non- Board concludes that the operating subsidiary rule bank subsidiary of the holding company, Family does not authorize Citicorp to retain ownership and Guardian's continued ownership by Citicorp after control of Family Guardian for purposes of the BHC commencement of the broad insurance activities au- Act to the extent that Family Guardian takes advanthorized by the Delaware statute is not permitted tage of the Delaware statute to expand its insurance under any of the nonbanking provisions of the BHC activities beyond those permissible for bank holding Act. companies and their nonbank subsidiaries under sec- In this regard, Petitioners argue that Citicorp may tion 4(c)(8) of the Act. Although on its face the not rely on the Board's existing regulatory exemption Delaware statute authorizes state-chartered banks to in Regulation Y for operating subsidiaries of holding provide a full range of insurance services, the Board company state banks as authority to retain control of cannot ignore the fact that this authorization is condi- Family Guardian through Citibank Delaware. The tioned on compliance with an unprecedented and operating subsidiary rule states that a state-chartered comprehensive set of regulatory restrictions, the pracbank owned by a bank holding company may acquire tical effect of which is to treat the insurance division as and retain, without Board approval under the BHC a separate corporate entity. For example, the separa- Act, all (but not less than all) of the shares of a tion has been carried to such an extent that the routine company engaged solely in activities in which the authority of the state bank regulator over the insurparent bank may engage, subject to the same limita- ance division is restricted, and the insurance division tions that would apply if the bank were engaging in the is regulated under the insurance laws as a separate activity directly.10 12 C.F.R. 225.22(d)(ii). Petitioners corporate entity from the bank. Thus, in the Board's argue that the Delaware statute does not in practice view, the Delaware statute does not authorize banks to permit state banks to conduct insurance activities engage in the insurance business directly, as is redirectly because the Delaware statute requires that the quired by the operating subsidiary rule. state bank conduct general insurance activities only The Board emphasizes that its decision in this case through a division of the bank that has been separated is not based on the view that banking organizations in all material respects from the bank itself. Thus, should be prohibited from expanding their powers in Petitioners argue, holding company banks may not order to adapt to the changes in technology and competition in financial markets. The Board has repeatedly called for a comprehensive Congressional review and reform of the laws regulating the activities 8. House Bill No. 193, Sections 2, 7; Senate Bill No. 415, Section 1; of banking organizations in the United States in order Letter, dated June 1, 1990, from Keith H. Ellis, Delaware State Bank Commissioner to Mr. Richard T. Collins, Vice President, Citicorp. to establish a structure that would allow for the 9. House Bill No. 193, Sections 4-38. exercise of broader powers consistent with basic prin- 10. In addition, under the rule, the activities may be conducted only ciples of safety and soundness and avoidance of conat locations at which the bank could conduct the activity. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 979 flicts of interest, undue concentration of resources, Citicorp here relies on the state bank operating and unfair competition. For example, the Board has subsidiary rule in Regulation Y (section 225.22(d)(ii)), consistently supported insurance agency authority for which, as noted, provides a regulatory exception to banking organizations.11 the general nonbanking prohibitions of the BHC Act to The Board has, however, expressed concern with allow state banks that are owned by bank holding state initiatives that are designed to attract jobs and companies to establish, without prior Board approval revenues to the state by allowing out-of-state banking under the BHC Act, wholly-owned subsidiaries that organizations the ability to avoid federal banking pol- engage only in activities that the bank could conduct icies by acquiring banks in the state that have the directly. The Board adopted this rule in 1971 to allow authority to export nonbanking activities not available holding company banks to establish operating subsidto the organizations under federal law to the rest of the iaries to engage in activities the bank could conduct nation, but not to engage in these activities in the directly. At the time that it adopted this provision, the authorizing state itself. The Board has noted that this Board recognized that the exemption could become type of initiative could promote potentially destructive the focus for evasion of the BHC Act. The Board competition among the states with adverse conse- noted, however, "the absence of evidence that acquiquences for the national interest in safeguarding the sitions by holding company banks are resulting in safety and soundness of the nation's financial system evasions of the BHC Act," but stated that it would and the federal deposit insurance funds.12 review the merits of the decision to adopt this regula- The Board believes that this case provides further tory exemption in light of its experience in administerdemonstration of the urgent need for Congress to take ing the BHC Act.14 up the important questions of banking reform and Noting several recent developments, including the structure. In the Board's view, Congress is clearly the enactment of the insurance prohibitions in section appropriate forum in which to resolve major issues of 4(c)(8) of the BHC Act and enactment of a number of national banking policy, including the resolution of the state statutes that broadly authorize state banks and issues of safety and soundness and competitive equity their subsidiaries to engage in various nontraditional associated with state initiatives in the area of bank activities, the Board has requested comment on repowers expansion. Initiatives such as that in Dela- scinding the operating subsidiary rule as inconsistent ware, however, necessitate a decision by the Board on with the nonbanking provisions of the BHC Act.15 The aspects of these questions that are within the area of Board held a public hearing on this proposal in 1989, the Board's responsibilities under the BHC Act. and currently has this rulemaking proceeding under review. The Board believes that it is neither necessary Discussion nor appropriate to decide that rulemaking in the context of this petition for enforcement, because the As noted, the issue raised by the petition for enforce- Board finds that the current operating subsidiary rule ment is whether Citicorp is authorized under the BHC does not provide Citicorp with authority to retain Act to retain the shares and control of Family Guard- Family Guardian after it commences insurance activian after it begins conducting the broad insurance ities beyond those permissible under section 4(c)(8)(A) agency and underwriting business authorized by the of the BHC Act. Delaware statute. Under the terms of the BHC Act, a The Board's operating subsidiary rule permits activbank holding company may not acquire or retain, ities for a subsidiary of a state bank "subject to the directly or indirectly, the shares or control of any same limitations as if the parent bank were engaging in company (other than a bank) unless the acquisition is authorized by one of the exceptions to this general prohibition specified in the Act.13 (2) engage directly in activities other than banking or managing or controlling banks and other subsidiaries authorized under the Act and those activities permitted under the closely related to banking standards of section 4(c)(8) of the Act. 12 U.S.C. § 1843(a). Indirect control for purposes of this prohibition is defined to include shares 11. E.g., Statement by Governor H. Robert Heller before a Sub- held by any subsidiary. Id., § 1841(g)(1). By their terms, the committee of the Committee on Energy and Commerce, U.S. House nonbanking prohibitions in section 4 do not limit activities conof Representatives, Sept. 9, 1988 . 74 Federal Reserve Bulletin 743 ducted directly within holding company subsidiaries that are banks. (1988). Merchants National Corp., 75 Federal Reserve Bulletin 388 (1989), 12. See, e.g., Statement by Chairman Paul A. Volcker before the ajfd, 890 F.2d 1275 (2d Cir. 1989), petition for cert, filed, U.S. Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Supreme Court (April 18, 1990) (No. 89-1620). See 53 Federal Jan. 21, 1987. 73 Federal Reserve Bulletin 199, 202 (1987). Register 48,915, 48,921-24 (Dec. 5, 1988) for a more detailed legal 13. Section 4 of the BHC Act provides that, except as set forth in the analysis of the nonbanking provisions of the Act, which is incorpo- Act, bank holding companies may not rated herein by reference. (1) acquire or retain direct or indirect control of voting shares of 14. 36 Federal Register 9292 (May 22, 1971). "any company which is not a bank," or 15. 53 Federal Register 48,915 (Dec. 5, 1988). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

980 Federal Reserve Bulletin • November 1990 the activity directly." Although one provision of the Code.22 Second, under the state statute, the bank is Delaware statute does state that a bank chartered by not financially responsible for the insurance division. Delaware shall have the power to transact the business The statute expressly provides that the assets of the of insurance in accordance with the state Insurance bank are applicable to the payment of the liabilities, Code,16 the statute further mandates that any activity obligations, and expenses of the bank only, and not to so authorized must be conducted through a separate the liabilities, obligations, and expenses of the insurdepartment or division.17 In addition, the statute also ance department. The liabilities and expenses of the establishes a comprehensive set of financial, opera- bank may be paid only out of the assets of the bank tional, and regulatory limitations that separate virtu- and not out of the assets of the insurance division.23 ally every aspect of the insurance division's business The statute also makes explicit the converse of this from the bank. While no one of these restrictions in requirement: the assets of the insurance division may itself is necessarily determinative, the cumulative ef- only be used to pay the liabilities and expenses of that fect of all of these restrictions in the Delaware statute division, which must be paid solely out of the assets of is, in the Board's judgment, to compel the insurance the division.24 division to function in practice and for all intents and Third, under the Delaware statute, the bank may purposes as a distinct corporate entity separate from transact business with the insurance division only on the bank. In light of this pervasive corporate-like an arm's length basis—on the same terms and under separation, the Delaware statute cannot reasonably be circumstances substantially the same as for a compaviewed as authorizing a state-chartered bank itself rable transaction with a third party.25 Ordinarily, there to conduct insurance activities directly, as required by is no need for such a requirement for activities that are the terms of the operating subsidiary rule in Regula- being conducted within the same entity. Instead, as in ion Y. Thus, because Family Guardian's parent bank, section 23B of the Federal Reserve Act,26 the arm's Citibank Delaware, may not engage in the general length requirement has been imposed to regulate transinsurance business directly within the meaning of the actions between a bank and separate affiliates. operating subsidiary rule, Citicorp may not rely on Fourth, the Delaware statute makes clear that the that rule as authority for Family Guardian to conduct insurance division is to be treated as a "separate such activities under the BHC Act. corporation" — thus an entity distinct from the bank With regard to structural restrictions, the Delaware itself— for regulatory purposes, specifically, for purstatute requires that the insurance division must main- poses of bank lending limits.27 Fifth, the statute imtain financial records separate and distinct from other poses the same kind of limits on the distribution of records of the bank.18 In addition, the bank is pre- earnings from the insurance activities it authorizes as vented from allocating more than 25 percent of its are applicable to dividends paid to stockholders by a current total capital to the insurance division.19 Such separate insurance company.28 Thus, for this purpose, limits on capital attributed to specific functions typi- the bank is treated as a shareholder of the insurance cally do not apply to activities conducted within a division rather than part of the same entity. Finally, single entity, but rather to investments in a subsidiary the Delaware statute restricts the use of certain cusby a parent company.20 Indeed, this limit on allocation tomer information obtained by the bank in connection of capital to the insurance business is contained in the with a request for an extension of credit.29 provision limiting investments by Delaware banks in With respect to regulation of the insurance business, securities of other companies.21 under the Delaware statute, the insurance division is The Delaware statute also mandates pervasive financial and operational firewalls that insulate the insurance division from the bank. First, the minimum 22. House Bill No. 193, Section 3. The Insurance Code is contained in Title 18 of the Delaware Code Annotated. capital that the bank is required to maintain "in its 23. Id., Section 8. The fact that any insurance policies issued are not banking or trust company business" under the banking direct liabilities of the bank and that only the assets of the insurance division are applicable to the payment of such policies or claims under laws may not be used by the insurance division to meet the policies must be disclosed to all insurance customers. Id., Section its separate capital requirements under the Insurance 13. 24. Id., Section 22. Although the Delaware statute has no explicit requirement that the insurance division have separate employees from the bank, the fact that the expenses associated with the division's employees may be paid only out of the assets of the division would 16. House Bill No. 193, Section 2. appear to segregate these employees from those of the bank. 17. Id., Section 4. 25. Id., Section 4. 18. Id. 26. 12 U.S.C. § 371c-l. 19. Id., Section 10. 27. House Bill No. 193, Section 9; Synopsis of House Bill No. 193, 20. See, e.g., 12 C.F.R. 211.5(b), (c)(limitations on investments Section 8. abroad by banking organizations). 28. Id., Section 33; Insurance Code, Section 4922(a). 21. Del. Code Ann. tit. 5, § 910. 29. House Bill No. 193, Section 4. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 981 treated almost exclusively as a company that is not a The Board recognizes, as Citicorp points out, that bank. Not only must the insurance division conduct under the Delaware statute the insurance division the insurance business in accordance with the state operates under the charter of the bank and is not Insurance Code,30 but the statute expressly states that, technically a separate corporation with its own sharefor purposes of the Insurance Code, the insurance holders and board of directors. However, the Board division (but not the bank) is deemed to be "a sepa- does not believe that formal characteristics alone rately incorporated subsidiary" of the bank "with should be determinative in assessing the scope of the separate capital accounts, assets and liabilities."31 operating subsidiary exception in section 225.22(d)(ii). Thus, the bank itself is not made subject to the state Indeed, the terms of the regulation itself require that regulation applicable to insurance companies, but the the scope of the activities it permits for subsidiaries of insurance division is so regulated. Because of this holding company state banks must be determined in treatment, the insurance division is generally subject light of the practical restrictions on the powers of the to the substantive regulatory provisions of the Insur- parent bank, since the rule prescribes that in conductance Code and to the supervision of the state Insur- ing a specific function the subsidiary must follow the ance Commissioner, including that commissioner's same limitations as if the bank were engaged in the power to examine the operations of the insurance activity directly. Here, as is evident from the face of business.32 More importantly, however, the Delaware the Delaware statute, the limitations imposed on the statute severely limits the routine supervisory and conduct of the general insurance business so compreexamination authority of the Bank Commissioner over hensively and pervasively insulate the insurance divithe insurance division. Specifically, the Bank Commission from the bank that it would be unreasonable, in sioner has jurisdiction over the division only when he the Board's judgment, to view the bank as directly determines that the insurance activity "is likely to authorized to offer the expanded services, as is rehave a materially adverse effect on the safety and quired by the terms of the rule. soundness of the bank."33 Moreover, this conclusion is also consistent with the Because it is treated as a separately incorporated basic objective that motivated the Board's original subsidiary of the bank for purposes of the Insurance adoption of the operating subsidiary rule. As the terms Code, the insurance division is subject to the minimum of the rule demonstrate, the rule was meant to allow capital requirements of that Code.34 As pointed out state banks in holding company systems the operaabove, the capital of the bank may not be used to tional flexibility of establishing operating subsidiaries satisfy these requirements. In addition, the Delaware to conduct activities the bank performed directly. statute expressly provides that the assets and liabilities Historically, the activities of banks have been circumof the bank are not considered in determining the scribed by the chartering authorities in order to protect financial condition of the insurance division;35 and the the safety and soundness of the institutions and to statute provides that the Insurance Commissioner, not guard against harmful conflicts of interest and unfair the Bank Commissioner, has the authority to take competition. The permission granted by the operating possession of the business of the insurance division in subsidiary rule was premised on the Board's belief that order to conserve or to liquidate its business.36 This this traditional concern for safeguarding the depositaction can apparently be taken by the insurance su- receiving function would constrain the expansion of pervisor without causing the closing of the bank. bank activities (and thus of the activities of subsidiar- Finally, the insurance division is taxed as if it were an ies of holding company state banks), so that the independent insurance company; the earnings from activities permitted by the rule would not result in the insurance business are expressly exempted from evasions of the purposes of the BHC Act. 36 Federal the franchise tax the state imposes on the net income Register 9292 (May 21, 1971). of banks.37 Here, it is evident from the terms and structure of the Delaware statute that the state, in apparent recognition of the enhanced potential for risks associated with certain aspects of the insurance underwriting 30. Id. business, has not authorized that business for its 31. Id., Section 17. depository institutions directly, but through a struc- 32. Insurance Code, Sections 301-34. 33. House Bill No. 193, Section 5. ture that seeks the risk minimization advantages avail- 34. Id., Sections 17, 19; see Insurance Code, Section 511(a). able through the corporate separation of the banking 35. House Bill No. 193, Sections 21, 24. 36. Id., Section 38. 37. Id., Sections 14, 16; Del. Code Ann. tit. 5, § 1101(a). The Delaware statute does contain a handful of exceptions for the insurance division from the substantive provisions of the Insurance Code. the regulatory provisions relates to an essential element of the E.g., House Bill No. 193, Sections 25, 30, 32, 35. However, none of structure, operations, or regulation of the division. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

982 Federal Reserve Bulletin • November 1990 and insurance businesses. The entire practical effect utes were permitted to engage in the same activities of the Delaware statute is to sanction expanded under section 225.22(d)(ii), but instead elected to defer insurance activities only for an entity that in sub- such a determination.40 Before the Board resolved the stance is a separate corporation and that is not a issue, however, Congress, in an amendment to the bank. The only apparent reason the statute nominally BHC Act in 1987, expressly authorized savings bank authorizes the bank itself, through a separate divi- life insurance activities if, among other things, the sion, to conduct the insurance business, rather than activities are conducted directly in the bank.41 Accordauthorizing the activity through a separate corporate ingly, the Board has never considered whether an subsidiary of the bank, is to attempt to bring the state operations subsidiary of such a bank could engage in law within the scope of the Board's operating sub- the activities under the operating subsidiary rule. In sidiary rule for the benefit of insurance subsidiaries any event, although these state laws do require that of state banks that are owned by holding companies. insurance functions be separated to some degree from If the statute had required the activity to be con- the operations of the bank, the insulation prescribed is ducted only through a separate subsidiary corpora- not as comprehensive and complete as that directed by tion of the bank in order to minimize the risk to the the Delaware statute.42 bank and its depositors and the potential for conflicts Banks also conduct a number of traditional funcof interest, unfair competition, and other adverse tions in separate departments, like dealing in municeffects, bank holding companies could not have ipal securities and offering trust services. But in each availed themselves of the statute because of the case, the separation of these operations from the rest operating subsidiary rule. Under that rule, a holding of the bank required by the applicable regulatory company bank may control a nonbank subsidiary framework does not even approximate the thorough only if it engages in activities the parent bank could insulation mandated by the Delaware statute.43 conduct directly. Accordingly, viewing the state In sum, the Board finds that Citicorp may not avail bank operating subsidiary rule as applicable in cir- itself of the provisions of section 225.22(d)(ii) to retain cumstances such as presented under the Delaware control of Family Guardian for purposes of the BHC statute frustrates the purposes of the rule and allows Act to the extent Family Guardian engages in insura serious evasion of the provisions of the BHC Act. ance activities not permitted to bank holding compa- Given the extraordinary extent to which the Dela- nies and their nonbank subsidiaries under section ware statute isolates the insurance business from the 4(c)(8) of the BHC Act. Accordingly, Family Guardian traditional, deposit-receiving operations of state-char- may not engage in insurance activities authorized tered banks, the Board believes that its treatment of under the Delaware statute other than those that are that statute for purposes of the operating subsidiary permissible under section 4(c)(8) of the BHC Act and rule is consistent with its past practice. Although the Board, as Citicorp notes, has in the past not objected to insurance activities conducted in a subsidiary of a holding company bank under state law where the 40. First Essex Bancorp, Inc., 73 Federal Reserve Bulletin 354, 355 parent bank has engaged in the same activities through (1987), Neworld Bancorp, Inc., 13 Federal Reserve Bulletin 357, a separate department,38 the relevant state law in those 358-59 (1987). 41. 12 U.S.C. § 1842(f)(3). cases did not require that the insurance functions be 42. For example, under the Massachusetts statute authorizing carried out in a separate department or mandate the savings bank life insurance (Mass. Gen. L. Ann. ch. 178), the insurance department must be managed under the general laws insulation of insurance activities from the rest of the relating to savings banks and is subject to the supervision of both the bank to the substantial extent directed by the Dela- insurance and bank commissioners (id., §§ 6, 26-28), while under the ware statute.39 Delaware statute, in contrast, the insurance division operates principally under the Insurance Code and the power of the Bank Commis- Nor is the Board's decision here inconsistent with sioner over the division is restricted. In addition, the Massachusetts its prior treatment of statutes in three states that allow law lacks many of the key firewall provisions prescribed by the Delaware statute, such as the limitations on the use of the bank's savings banks to engage in life insurance activities, capital for insurance purposes and the requirement of arm's length since these statutes have only some, but not all, of the transactions between the bank and the insurance division. operational, structural, and regulatory firewalls em- 43. For example, like the insurance division required by the Delaware statute, the municipal securities department of a bank under bedded in the Delaware statute. Indeed, the Board the securities laws must keep separate records, is regulated separately never decided that subsidiaries of saving banks en- from the bank, and is subject to limits on transfer of information from gaged in the life insurance business under these stat- the bank. See 15 U.S.C. §§ 78c(a)(30), 78o-4; 12 C.F.R. 208.8(j). However, the municipal securities department is not subject to the remaining host of restrictions that the Delaware statute imposes on the insurance division, like the bank's lack of liability for the obligations of the division, the restrictions on the use of the bank's capital for the 38. E.g., Merchants National Corp., supra. insurance business, and the restriction of the bank regulator's routine 39. See, e.g., Ind. Code Ann. § 28-1-11-2 (Burns 1986). supervisory authority over the insurance division. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Legal Developments 983 for which it has secured the necessary approval under state. This means that out-of-state banking organizathat section.44 tions can use the state bank franchise to operate an Therefore, pursuant to the provisions of sections insurance business throughout the rest of the country, 4(a) and 5(b) of the BHC Act (12 U.S.C. §§ 1843(a), but may not effectively offer those services within 1844(b)), Citicorp should immediately cause Family Delaware. Guardian to cease providing any further insurance as Not only is this kind of state authorization inconsisprincipal, agent, or broker, except as authorized and tent with the principles underlying the dual banking approved by the Board under section 4(c)(8)(A) of the system, as I have previously stated in connection with Act. a somewhat similar statute in South Dakota, this kind By order of the Board of Governors, September 5, of expansion of state powers, shows, in my judgment, 1990. that the state does not treat the expanded powers as true banking activities for Delaware banks owned by Voting for this action: Chairman Greenspan and Governors out-of-state banking organizations. In these circum- Seger, Angell, Kelley, and LaWare. Abstaining from this stances, the Board's operating subsidiary rule should action: Governor Mullins. not be interpreted to permit such activities. I note that the majority has not reached the question WILLIAM W. WILES of the validity of the Board's operating subsidiary rule Secretary of the Board in deciding this case. I continue to believe that the Board's regulation is appropriate and valid, and be- Concurring Statement of Governor Seger lieve that this opinion is consistent with my view of the Delaware statute here. I concur with the result reached by the majority that the proposal by Citibank Delaware to conduct broad insurance activities through Family Guardian Life September 5, 1990 Insurance Company does not meet the requirements of the Board's Regulation Y dealing with operating sub- Concurring Statement of Governor Angell sidiaries of holding company banks. I reach this conclusion for reasons different from those stated by the I concur with the Board's conclusion in this matter majority, however. that the Bank Holding Company Act does not permit As a general matter, I do not object to proposals by Citicorp to retain the shares of Family Guardian Life the states to authorize their state banks to engage Insurance Company to the extent Family Guardian directly or through subsidiaries in activities at any takes advantage of the recently-enacted Delaware location provided that the activities may be conducted statute to engage in insurance underwriting or agency within the bank's home state without restriction as activities that are not permissible for bank holding well. I believe that states should be permitted to companies under section 4(c)(8) of the Act. However, delineate the types of activities that banks may con- I reach this conclusion on different grounds than the duct within their borders. One of the virtues of the Board. In my view, the expanded insurance activities dual banking system, in my judgment, is that it allows of Family Guardian are inconsistent with the nonbankthe states to serve as laboratories for the development ing prohibitions in the Act regardless of whether the and expansion of banking services and activities exception contained in the operating subsidiary rule in within their boundaries. Regulation Y applies in this case. My disagreement with the Citicorp arrangement My view is based on the plain and unambiguous stems from the fact that the state here has severely language of section 4 of the Act. This section by its limited banks owned by out-of-state holding compaterms prohibits a bank holding company from acquirnies from conducting the insurance business within the ing or retaining control, directly or indirectly, of any company other than a bank unless that company's 44. In any event, even if Citibank Delaware, Family Guardian's activities are authorized under one of the nonbanking parent bank, is viewed as being authorized by the Delaware statute to exceptions in the Act. Family Guardian, a multiengage in the general insurance business within the scope of the million dollar insurance underwriting company, is exemption in section 225.22(d)(ii), the bank cannot be viewed as authorized to engage in such a business in those states (approximately clearly not a bank as defined in the Act, and, under 22) where banks are effectively barred under state law, by licensing the Act, there is simply no question that Family requirements or other similar restrictions, from providing insurance activities. Specifically, in a number of these states, banks are pre- Guardian is controlled by Citicorp. As the terms of cluded from obtaining the license necessary to provide insurance the Act make clear, a company controlled by a bank services in that state. Thus it is clear that in those states Family that is in turn a subsidiary of a bank holding company Guardian, under the terms of the regulation, may not provide general insurance services. is indirectly controlled by, and treated as an indirect Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

984 Federal Reserve Bulletin • November 1990 subsidiary of, the parent holding company. As a write or sell insurance beyond the seven situations nonbank subsidiary of a bank holding company, set forth in the statute. Family Guardian is required to limit its activities to For these reasons, I agree with the Board's decision those permitted for bank holding companies and their that Family Guardian must cease any insurance activity nonbank subsidiaries under the Act. Under the 1982 other than those previously approved for Family Guardamendment to section 4(c)(8) of the Act, the Board ian by the Board under section 4(c)(8) of the Act. no longer has the discretion to permit a bank holding company or any of its nonbank subsidiaries to under- September 5, 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 COMMERCIAL BANKING INSTITUTIONS All Major nondeposit funds A18 Assets and liabilities, last-Wednesday-of-month Domestic Financial Statistics series WEEKLY REPORTING COMMERCIAL BANKS MONEY STOCK AND BANK CREDIT Assets and liabilities A19 All reporting banks A3 Reserves, money stock, liquid assets, and debt A20 Banks in New York City measures A21 Branches and agencies of foreign banks A4 Reserves of depository institutions, Reserve All Gross demand deposits—individuals, Bank credit partnerships, and corporations 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 A23 Prime rate charged by banks on short-term POLICY INSTRUMENTS business loans A7 Federal Reserve Bank interest rates A24 Interest rates—money and capital markets A8 Reserve requirements of depository institutions A25 Stock market—Selected statistics A9 Federal Reserve open market transactions A26 Selected financial institutions—Selected assets and liabilities FEDERAL RESERVE BANKS FEDERAL FINANCE A10 Condition and Federal Reserve note statements A28 Federal fiscal and financing operations All Maturity distribution of loan and security A29 U.S. budget receipts and outlays holdings A30 Federal debt subject to statutory limitation A30 Gross public debt of U.S. Treasury—Types and ownership MONETARY AND CREDIT AGGREGATES A31 U.S. government securities A12 Aggregate reserves of depository institutions dealers—Transactions and monetary base A32 U.S. government securities dealers—Positions A13 Money stock, liquid assets, and debt measures and financing A15 Bank debits and deposit turnover A3 3 Federal and federally sponsored credit A16 Loans and securities—All commercial banks agencies—Debt outstanding Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2 Federal Reserve Bulletin • November 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 liabilities and business credit REPORTED BY BANKS IN THE UNITED STATES REAL ESTATE A59 Liabilities to and claims on foreigners A60 Liabilities to foreigners A37 Mortgage markets A62 Banks' own claims on foreigners A38 Mortgage debt outstanding A63 Banks' own and domestic customers' claims on foreigners CONSUMER INSTALLMENT CREDIT A63 Banks' own claims on unaffiliated foreigners A64 Claims on foreign countries—Combined A39 Total outstanding and net change domestic offices and foreign branches A40 Terms FLOW OF FUNDS A41 Funds raised in U.S. credit markets REPORTED BY NONBANKING BUSINESS A43 Direct and indirect sources of funds to credit ENTERPRISES IN THE UNITED STATES markets A65 Liabilities to unaffiliated foreigners A44 Summary of credit market debt outstanding A66 Claims on unaffiliated foreigners A45 Summary of credit market claims, by holder Domestic Nonfinancial Statistics SECURITIES HOLDINGS AND TRANSACTIONS SELECTED MEASURES A67 Foreign transactions in securities A46 Nonfinancial business activity—Selected A68 Marketable U.S. Treasury bonds and measures notes—Foreign transactions A47 Labor force, employment, and unemployment A48 Output, capacity, and capacity utilization A49 Industrial production—Indexes and gross value A51 Housing and construction INTEREST AND EXCHANGE RATES A52 Consumer and producer prices A53 Gross national product and income A69 Discount rates of foreign central banks A54 Personal income and saving A69 Foreign short-term interest rates A70 Foreign exchange rates International Statistics SUMMARY STATISTICS A71 Guide to Tabular Presentation, A55 U.S. international transactions—Summary Statistical Releases, and Special A56 U.S. foreign trade Tables Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Money Stock and Bank Credit A3 1.10 RESERVES, MONEY STOCK, LIQUID ASSETS, AND DEBT MEASURES Annual rates of change, seasonally adjusted in percent1 1989 1990 1990 MMoonneettaarryy aanndd ccrreeddiitt aaggggrreeggaatteess Q3 Q4 Ql Q2 Apr. May June July' Aug. Reserves of depository institutions2 1 Total .6 5.1 2.4 -1.4 -.4 -9.8 -1.0 -8.2 8.7 2 Required .5 5.0 2.5 -.9 -1.2 -11.3 2.8 -10.1 8.6 3 Nonborrowed 8.6 7.2 -3.9 -1.0 9.8 -4.1 8.3 -5.8 5.3 4 Monetary base3 3.2 4.0 8.5 7.0 7.1 3.5 7.6 6.4 13.2 Concepts of money, liquid assets, and debt4 5 Ml 1.8 5.1 4.8 3.5 3.7 -2.8 6.0 -.3 10.7 6 M2 7.0 7.1 6.4 2.9 2.3 -2.2' 2.6' 1.7 6.7 7 M3 4.0 2.0 3.C .8 1.1' -2.4 .y .9 4.7 8 L 4.5 3.r 3.2' 1.4' 2.9' -6.9' 5.1' 2.5 n.a. 9 Debt 7.1' i.y 6.1' 6.7' 6.6' 5.1' 6.7' 7.2 n.a. Nontrgnsaction components 10 In M25 8.7 7.7 6.9 2.6' 1.8' -2.0r 1.5' 2.4 5.4 11 In M3 only6 -6.4r -16.6' -10.2' -7.5 -2.9 -e.o' -2.4 -3.8 Time and savings deposits Commercial banks 12 Savings .4 7.2 9.5 5.1 2.5 -1.9 9.3 3.7 1.8 13 MMDAs 5.2 12.3 9.1 10.6 10.7 9.9 9.5 8.8 12.0 14 Small-denomination time 11.9 11.3 7.8 12.0 9.4 20.8 18.5 18.9 7.0 15 Large-denomination time '9 2.9 2.7 -1.1' -2.8' -5.1' 5.5 2.4 5.1 -9.9 Thrift institutions 16 Savings -5.2 .2 1.3 .5 4.3 -2.7 -3.8 -.5 -1.1 17 MMDAs -6.2 4.7 5.7 2.6 7.1 -16.7 -15.1 -12.6 -5.5 18 Small-denomination time 8.7 -2.5 -3.3 -8.0 -5.7' -16.0 -20.9 -15.7 -3.9 19 Large-denomination time -10.7 -28.6 -24.7 -30.5 -35.0 -40.3 -28.7 -36.5 -29.4 Money market mutual funds 20 General purpose and broker-dealer 37.6 29.1 19.8 -.7 -.4 -19.9 5.6 11.9 32.1 21 Institution-only 36.6 3.3 10.2 11.7 15.9 5.6 .0 17.9 56.2 Debt components4 22 Federal e.o' 10.2' 6.8' 9.5' 7.4' 7.2' 14.3' 13.2 n.a. 23 Nonfederal 7.4' 6.4' 5.9' 5.9' 6.3' 4.5' 4.4' 5.4 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

A4 Domestic Nonfinancial Statistics • November 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 June July Aug. July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 SUPPLYING RESERVE FUNDS 1 Reserve Bank credit 278,190 279,684 280,961 279,344 278,784 277,506 281,579 280,153 281,890 280,338 U.S. government securities1' 2 2 Bought outright-system account 228,752 230,592 231,366 230,347 230,736 231,172 232,027 232,406 230,140 230,240 3 Held under repurchase agreements ... 930 1,055 2,139 4,416 2,706 0 1,509 423 4,416 2,706 Federal agency obligations 4 Bought outright 6,446 6,437 6,408 6,446 6,433 6,414 6,414 6,414 6,414 6,398 5 Held under repurchase agreements ... 294 387 551 240 237 0 426 238 714 894 6 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions2 7 Adjustment credit 237 % 318 35 242 89 32 160 1,148 55 8 Seasonal credit 313 275 433 249 347 434 423 425 438 445 9 Extended credit 339 389 134 380 411 390 448 70 6 10 10 Float 486 674 566 426 819 138 1,056 407 120 846 11 Other Federal Reserve assets 40,394 39,780 39,045 40,511 38,829 38,869 39,245 39,610 38,495 38,745 12 Gold stock 11,065 11,065 11,064 11,065 11,065 11,064 11,064 11,064 11,064 11,064 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 20,016 20,093 20,145 20,091 20,105 20,118 20,128 20,139 20,150 20,160 ABSORBING RESERVE FUNDS 15 Currency in circulation 265,776 268,968 270,536 269,522 268,479 268,180 269,566 270,622 270,835 270,754 16 Treasury cash holdings 582 568 544 573 559 555 550 546 545 536 Deposits, other than reserve balances, with Federal Reserve Banks 17 Treasury 5,078 5,408 5,415 5,108 5,082 5,328 5,763 5,288 5,501 5,219 18 Foreign 250 243 265 221 251 217 236 242 355 239 19 Service-related balances and adjustments 2,010 2,022 1,873 2,016 2,138 2,000 2,017 1,968 2,132 1,955 20 Other 289 243 236 229 238 308 188 212 266 278 21 Other Federal Reserve liabilities and capital 9,788 9,176 9,219 9,136 9,136 9,207 9,624 9,044 8,990 9,027 22 Reserve balances with Federal Reserve Banks3 34,016 32,731 32,600 32,213 32,589 31,410 33,345 31,952 32,998 32,074 End-of-month figures Wednesday figures 1990 1990 June July Aug. July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 SUPPLYING RESERVE FUNDS 23 Reserve Bank credit 279,372 279,364 284,445 277,202 280,154 278,239 284,776 279,970 284,227 281,237 U.S. government securities1' 2 24 Bought outright-system account 231,383 232,313 233,498 229,255 229,431 232,207 233,686 230,477 230,092 230,314 25 Held under repurchase agreements ... 0 0 2,936 0 1,833 0 2,205 2,960 693 3,206 Federal agency obligations 26 Bought outright 6,446 6,414 6,377 6,446 6,414 6,414 6,414 6,414 6,414 6,377 27 Held under repurchase agreements ... 0 0 1,186 0 539 0 936 1,667 186 823 28 Acceptances 0 0 0 0 0 0 0 0 0 0 Loans to depository institutions2 29 Adjustment credit 49 97 50 22 1,515 23 116 819 7,257 71 30 Seasonal credit 374 407 412 242 389 437 422 426 447 448 31 Extended credit 163 437 3 387 425 400 469 4 7 13 32 Float 575 643 -97 539 858 -172 1,145 -857 747 1,199 33 Other Federal Reserve assets 40,382 39,053 40,081 40,312 38,750 38,931 39,384 38,060 38,384 38,787 34 Gold stock 11,065 11,064 11,065 11,065 11,064 11,064 11,064 11,064 11,064 11,065 35 Special drawing rights certificate account . 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 36 Treasury currency outstanding 20,047 20,118 20,171 20,091 20,105 20,118 20,128 20,139 20,150 20,160 ABSORBING RESERVE FUNDS 37 Currency in circulation 266,979 268,411 272,690 269,248 268,287 268,755 270,235 271,035 270,693 271,684 38 Treasury cash holdings 580 549 534 559 557 549 546 546 537 530 Deposits, other than reserve balances, with Federal Reserve Banks 39 Treasury 5,470 6,369 4,453 5,156 5,912 5,940 5,341 5,659 5,438 6,130 40 Foreign 368 279 337 190 228 206 215 246 217 246 41 Service-related balances and adjustments 1,847 2,000 1,953 2,016 2,138 2,000 2,017 1,968 2,132 1,955 42 Other 255 247 219 193 474 239 183 276 233 276 43 Other Federal Reserve liabilities and capital 9,012 9,723 10,504 8,823 8,916 9,334 8,903 8,710 8,657 8,759 44 Reserve balances with Federal Reserve Banks3 34,490 31,484 33,509 30,690 33,327 30,916 37,046 31,251 36,052 31,400 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. Feb. Mar. Apr. May June July Aug. 1 Reserve balances with Reserve Banks2 37,691 37,837 35,436 30,929 33,407 35,409 32,771 33,878 32,946r 32,452 2 Total vault cash3 26,675 28,204 29,812 32,489 29,581 29,281 29,812 29,632 30,457 30,843 3 Applied vault cash4 24,449 25,909 27,374 29,693 27,251 27,103 27,461 27,318 27,996 28,280 4 Surplus vault cash 2,226 2,295 2,439 2,795 2,330 2,178 2,351 2,314 2,460' 2,563 5 Total reserves6 62,141 63,746 62,810 60,623 60,658 62,512 60,232 61,197 60,943r 60,732 6 Required reserves 61,094 62,699 61,888 59,634 59,797 61,615 59,269 60,423 60,081 59,860 7 Excess reserve balances at Reserve Banks 1,046 1,047 922 989 861 897 962 774 862r 872 8 Total borrowings at Reserve Banks 777 1,716 265 1,448 2,124 1,628 1,335 881 757 927 9 Seasonal borrowings at Reserve Banks 93 130 84 51 78 122 244 311 389 430 10 Extended credit at Reserve Banks 483 1,244 20 535 1,950 1,403 875 346 280 127 Biweekly averages of daily figures for weeks ending 1990 May 2 May 16 May 30 June 13 June 27 July 11 July 25 Aug. 8r Aug. 22 Sept. 5 11 Reserve balances with Reserve Banks 34,887 33,855 31,269 34,385 33,390 33,958 32,390 32,389 32,463 32,491 12 Total vault cash 29,589 28,863 30,852 28,986 30,097 30,264 30,549 30,597 31,379 30,229 13 Applied vault cash 27,259 26,730 28,268 26,803 27,676 27,885 28,094 27,974 28,815 27,721 14 Surplus vault cash 2,331 2,133 2,584 2,184 2,421 2,380 2,455 2,623 2,565 2,507 15 Total reserves 62,145 60,584 59,537 61,188 61,066 61,842 60,484 60,363 61,277 60,213 16 Required reserves 61,040 59,657 58,526 60,709 60,046 60,944 59,609 59,599 60,367 59,304 17 Excess reserve balances at Reserve Banks 1,105 927 1,011 479 1,020 898 875 764 910 909 18 Total borrowings at Reserve Banks 1,155 976 1,723 1,291 566 581 832 908 1,124 638 19 Seasonal borrowings at Reserve Banks 158 221 278 282 329 359 396 429 432 430 20 Extended credit at Reserve Banks 899 673 1,098 559 183 182 298 419 38 8 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

A6 Domestic Nonfinancial Statistics • November 1990 1.13 SELECTED BORROWINGS IN IMMEDIATELY AVAILABLE FUNDS Large Banks1 Averages of daily figures, in millions of dollars 1990 week ending Monday2 MMaattuurriittyy aanndd ssoouurrccee June 25 July 2 July 9 July 16 July 23 July 30 Aug. 6 Aug. 13 Aug. 20 Federal funds purchased, repurchase agreements, and other selected borrowing in immediately available funds From commercial banks in the United States 1 For one day or under continuing contract 82,754 82,140 90,826 88,646 80,664 79,671 86,516 85,883 89,773 2 For all other maturities 20,214 19,294 19,261 1199,,116611 2211,,113377 1199,,331111 1199,,227700 1199,,556677 1199,,229988 From other depository institutions, foreign banks and foreign official institutions, and U.S. government agencies 3 For one day or under continuing contract 39,759 37,304 41,114 42,193 40,122 37,516 39,342 41,080 39,250 4 For all other maturities 17,562 17,631 18,030 17,858 19,176 18,779 17,596 16,873 16,866 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 13,068 11,064 11,700 13,311 13,067 13,481 17,406 17,771 18,476 6 For all other maturities 20,437 19,408 19,155 19,735 21,516 21,734 24,262 2255,,227722 24,233 All other customers 7 For one day or under continuing contract 33,987 32,210 33,925 33,347 33,760 32,907 33,487 30,243 32,148 8 For all other maturities 14,211 13,902 13,691 13,572 13,854 14,737 14,266 14,512 13,522 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 49,258 51,135 47,908 45,724 46,841 46,791 52,042 61,601 54,448 10 To all other specified customers 14,251 13,132 12,916 12,696 13,278 12,576 16,229 16,660 17,025 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 ccrreeddiitt'' First 30 days of borrowing After 30 days of borrowing3. 4 BBBaaannnkkk 9/2 O 7 n /9 0 Ef d fe a c t t e i ve Pre ra v t i e o us 9/2 O 7 n /9 0 Eff d e a c t t e i ve Pre ra v t i e o us 9/2 O 7 n /9 0 Ef d fe a c t t e i ve Pre ra v t i e o us Effective date Boston 7 2/24/89 6(h. 7 2/24/89 6 Vi 8.55 9/20/90 8.6 9/7/90 New York 2/24/89 2/24/89 9/20/90 9/7/90 Philadelphia 2/24/89 2/24/89 9/20/90 9/7/90 Cleveland 2/24/89 2/24/89 9/20/90 9/7/90 Richmond 2/24/89 2/24/89 9/20/90 9/7/90 Atlanta 2/24/89 2/24/89 9/20/90 9/7/90 Chicago 2/24/89 2/24/89 9/20/90 9/7/90 St. Louis 2/24/89 2/24/89 9/20/90 9/7/90 Minneapolis 2/24/89 2/24/89 9/20/90 9/7/90 Kansas City 2/24/89 2/24/89 9/20/90 9/7/90 Dallas 2/27/89 2/27/89 9/20/90 9/7/90 San Francisco ... 7 2/24/89 m 7 2/24/89 m. 8.55 9/20/90 8.6 9/7/90 Range of rates for adjustment credit in recent years5 Range (or F.R. Range (or F.R. Range (or F.R. Effective date A le l v l e F l) . — R. Ba o n f k Effective 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-——JJuullyy 78 10-11 10 11998844——AApprr.. 9 SVi-9 9 1978—Jan. 9 6-6VS 6 Vl 79 10 10 13 9 9 20 6Vl 6 Vl Sept. 76 . . 11 11 Nov. 21 8Vi-9 8 Vi May 11 6V2-7 1 Nov. 17 12 12 26 8 Vl 8V2 12 1 1 Dec. 5 12-13 13 Dec. 24 8 8 July 3 7-7V4 iv* 10 IV* IV* 1981-——MMaayy 5 13-14 14 11998855——MMaayy 20 lVl-% IVi Aug. 21 7V4 73/4 8 14 14 24 IVi IVi Sept. 22 8 8 Nov. ? 13-14 13 Oct. 16 8-8 Vl 8Vi 6 . 13 13 1986—Mar. 7 1-lVi 1 20 m m Dec. 4 12 12 10 1 1 Nov. 1 9Vl Apr. 21 (,Vi-l 6 Vl 3 9 Vi 9V2 1982---JJuullyy 7,0 , , 11 Vi—12 im July 11 6 6 7,3 , 1 IVi 11 Vl AAuugg.. 21 51/2-6 5 Vl 1979—July 20 10 10 AAuugg.. ? 11-11VI 11 22 5 Vl 5 Vl Aug. 17 10-10W 10V2 3 , , 11 11 20 10 Vi 10 Vl 16 , lOVi 10W 11998877——SSeepptt.. 4 5Vl-(> 6 Sept. 19 10^-11 11 77 10-10VS 10 11 6 6 21 11 11 30 10 10 Oct. 8 11-12 12 Oct. 1? 9VS-10 9 Vl 11998888——AAuugg.. 9 6-6 Vl 6 Vi 10 12 12 13 9Vi 9 Vi 11 6>/2 6 Vl Nov. 77 9-9 Vl 9 1980—Feb. 15 12-13 13 76 9 9 1989—Feb. 24 6V2-7 7 19 13 13 Dec. 14 m-9 9 27 1 7 May 29 12-13 13 15 8W-9 m 30 12 12 17 .. 8W 8V1 In effect Sept. 27, 1990 7 7 June 13 11-12 11 16 11 11 1. Adjustment credit is available on a short-term basis to help depository two-week reserve maintenance period. At the discretion of the Federal Reserve institutions meet temporary needs for funds that cannot be met through reason- Bank, the time period for which the basic discount rate is applied may be able alternative sources. After May 19, 1986, the highest rate established for loans shortened. to depository institutions may be charged on adjustment credit loans of unusual 4. In the September and October issues of the Bulletin, the effective dates for size that result from a major operating problem at the borrower's facility. interest rates on extended credit outstanding more than 30 days were reported Seasonal credit is available to help smaller depository institutions meet regular, incorrectly. The correct dates, which are one day later than those published, are seasonal needs for funds that cannot be met through special industry lenders and June 28, July 12, July 26, and August 9. that arise from a combination of expected patterns of movement in their deposits 5. For earlier data, see the following publications of the Board of Governors: and loans. A temporary simplified seasonal program was established on Mar. 8, Banking and Monetary Statistics, 1914-1941, and 1941-1970; Annual Statistical 1985, and the interest rate was a fixed rate Vi percent above the rate on adjustment Digest, 1970-1979. credit. The program was reestablished for 1986 and 1987 but was not renewed for In 1980 and 1981, the Federal Reserve applied a surcharge to short-term 1988. adjustment credit borrowings by institutions with deposits of $500 million or more 2. Extended credit is available to depository institutions, when similar assist- that had borrowed in successive weeks or in more than four weeks in a calendar ance is not reasonably available from other sources, when exceptional circum- quarter. A 3 percent surcharge was in effect from Mar. 17, 1980 through May 7, stances or practices involve only a particular institution or when an institution is 1980. There was no surcharge until Nov. 17,1980, when a 2 percent surcharge was experiencing difficulties adjusting to changing market conditions over a longer adopted; the surcharge was subsequently raised to 3 percent on Dec. 5, 1980, and period of time. to 4 percent on May 5, 1981. The surcharge was reduced to 3 percent effective 3. For extended-credit loans outstanding more than 30 days, a flexible rate Sept. 22, 1981, and to 2 percent effective Oct. 12, 1981. As of Oct. 1, 1981 the somewhat above rates on market sources of funds ordinarily will be charged, but formula for applying the surcharge was changed from a calendar quarter to a in no case will the rate charged be less than the basic discount rate plus 50 basis moving 13-week period. The surcharge was eliminated on Nov. 17, 1981. points. The flexible rate is reestablished on the first business day of each Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A8 Domestic Nonfinancial Statistics • November 1990 1.15 RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS' Percent of deposits Depository institution requirements after implementation of the Type of deposit, and Monetary Control Act deposit interval 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 IVi years 3 10/6/83 1 Vi years or more 0 10/6/83 Eurocurrency liabilities All types 3 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 1990 TTyyppee ooff ttrraannssaaccttiioonn 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June July U.S. TREASURY SECURITIES Outright transactions (excluding matched transactions) Treasury bills 1 Gross purchases 18,983 8,223 14,284 423 108 543 5,796 3,365 1,732 287 2 Gross sales 6,051 587 12,818 1,489 3,384 0 0 0 0 0 3 Exchange 239,740 241,876 228,710 15,960 18,113 19,051 17,286 22,894 16,279 16,159 4 Redemptions 9,029 2,200 12,730 1,000 400 0 0 0 0 0 Others within 1 year 5 Gross purchases 3,659 2,176 327 0 0 100 0 0 50 0 6 Gross sales 300 0 0 0 0 0 0 0 0 0 7 Maturity shift 21,504 23,854 28,848 1,201 2,845 1,876 993 4,387 1,314 1,321 8 Exchange -20,388 -24,588 -25,783 -2,489 -5,418 0 -4,304 -2,771 0 -3,577 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 0 100 100 0 0 0 11 Gross sales 452 800 490 0 0 0 0 0 0 0 12 Maturity shift -17,975 -17,720 -25,534 -1,163 -1,713 -1,876 -739 -3,607 -1,314 -1,234 13 Exchange 18,938 22,515 23,250 2,373 4,743 0 4,081 2,521 0 3,577 5 to 10 years 14 Gross purchases 2,441 1,579 287 0 0 0 0 0 0 0 15 Gross sales 0 175 29 0 0 0 0 0 0 0 16 Maturity shift -3,529 -5,946 -2,231 -38 -451 0 -254 -530 0 -87 17 Exchange 950 1,797 1,934 116 450 0 223 0 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 -681 0 0 -250 0 0 21 Exchange 500 275 600 0 226 0 0 250 0 0 All maturities 22 Gross purchases 37,170 18,863 16,617 423 108 743 5,8% 3,365 1,782 287 23 Gross sales 6,803 1,562 13,337 1,489 3,384 0 0 0 0 0 24 Redemptions 9,099 2,200 13,230 1,000 400 0 0 0 0 0 Matched transactions 25 Gross sales 950,923 1,168,484 1,323,480 127,729 116,220 99,104 97,970 121,5% 107,8% 95,144 26 Gross purchases 950,935 1,168,142 1,326,542 121,411 120,637 97,128 98,643 121,218 110,042 95,787 Repurchase agreements2 27 Gross purchases 314,621 152,613 129,518 16,185 0 8,050 6,409 3,959 1111,,224422 1133,,110066 28 Gross sales 324,666 151,497 132,688 17,777 0 6,627 7,832 3,959 11,242 11,447 29 Net change in U.S. government securities 11,234 15,872 -10,055 -9,976 741 190 5,146 2,987 3,928 2,590 FEDERAL AGENCY OBLIGATIONS Outright transactions 30 Gross purchases 0 0 0 0 0 0 0 0 00 00 31 Gross sales 0 0 0 0 0 0 0 0 0 0 32 Redemptions 276 587 442 0 0 0 78 0 0 33 Repurchase agreements2 33 Gross purchases 80,353 57,259 38,835 1,741 0 1,966 2,595 2,314 3,221 4,697 34 Gross sales 81,350 56,471 40,411 2,266 0 1,457 3,104 2,314 3,221 4,137 35 Net change in federal agency obligations -1,274 198 -2,018 -525 0 509 -587 0 0 527 36 Total net change in System Open Market Account 9,961 16,070 -12,073 -10,501 741 699 4,559 2,987 3,928 3,117 1. Sales, redemptions, and negative figures reduce holdings of the System Open 2. In July 1984 the Open Market Trading Desk discontinued accepting bankers Market Account; all other figures increase such holdings. Details may not add to acceptances in repurchase agreements, totals because of rounding. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A10 Domestic Nonfinancial Statistics • November 1990 1.18 FEDERAL RESERVE BANKS Condition and Federal Reserve Note Statements1 Millions of dollars Wednesday End of month AAAccccccooouuunnnttt 1990 1990 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 June July Aug. Consolidated condition statement ASSETS 1 Gold certificate account 11,064 11,064 11,064 11,064 11,065 11,065 11,064 11,065 2 Special drawing rights certificate account 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 3 477 484 493 503 495 470 476 491 Loans 4 To depository institutions 861 1,006 1,250 7,711 531 586 942 465 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 0 0 0 0 0 0 0 0 7 Bought outright 6,414 6,414 6,414 6,414 6,377 6,446 6,414 6,377 8 Held under repurchase agreements 0 936 1,666 186 823 0 0 1,186 U.S. Treasury securities Bought outright 9 Bills 109,662 111,141 107,932 107,547 107,769 108,838 109,768 110,953 10 Notes 91,782 91,782 91,582 91,582 91,582 91,782 91,782 91,582 11 Bonds 30,763 30,763 30,963 30,963 30,963 30,763 30,763 30,%3 12 Total bought outright 232,207 233,686 230,477 230,092 230,314 231,383 232,313 233,498 13 Held under repurchase agreements 0 2,205 2,959 693 3,206 0 0 2,936 14 Total U.S. Treasury securities 232,207 235,891 233,436 230,785 233,520 231,383 232,313 236,434 15 Total loans and securities 239,481 244,247 242,765 245,096 241,251 238,415 239,668 244,461 16 Items in process of collection 6,296 6,252 5,512 5,698 5,896 7,586 9,103 5,726 17 Bank premises 831 831 832 833 831 827 831 836 Other assets 18 Denominated in foreign currencies 32,562 32,586 32,615 32,666 32,695 34,225 32,561 34,059 19 All other4 5,707 6,022 4,981 4,934 5,274 5,248 6,577 5,230 20 Total assets 304,936 310,005 306,781 309,311 306,025 306,354 308,798 310,386 LIABILITIES 21 Federal Reserve notes 249,663 251,137 251,936 251,583 252,549 247,983 249,319 253,544 Deposits ?? To depository institutions 33,429 39,011 33,780 38,099 33,334 36,336 34,651 35,592 73 U.S. Treasury—General account 5,940 5,341 5,659 5,438 6,130 5,470 6,369 4,453 24 Foreign—Official accounts 206 215 245 217 246 368 279 337 25 Other 239 183 276 233 276 255 247 219 26 Total deposits 39,813 44,750 39,961 43,987 39,985 42,429 41,546 40,600 71 Deferred credit items 6,126 5,215 6,177 5,084 4,732 6,930 8,210 5,738 28 Other liabilities and accrued dividends 3,523 3,719 3,514 3,445 3,559 3,810 3,554 4,288 29 Total liabilities 299,125 304,821 301,588 304,100 300,824 301,152 302,629 304,169 CAPITAL ACCOUNTS 30 Capital paid in 2,375 2,378 2,387 2,387 2,396 2,344 2,359 2,399 31 2,243 2,243 2,243 2,243 2,243 2,243 2,243 2,243 32 Other capital accounts 1,192 563 564 582 562 616 1,566 1,579 33 Total liabilities and capital accounts 304,936 310,005 306,781 309,311 306,025 306,354 308,798 310,386 34 MEMO: Marketable U.S. Treasury securities held in custody for foreign and international accounts 227,484 229,058 230,056 233,391 233,637 228,260 228,317 236,408 Federal Reserve note statement 35 Federal Reserve notes outstanding issued to bank 290,756 290,931 291,471 292,935 293,783 288,487 290,791 293,807 36 LESS: Held by bank 41,093 39,794 39,535 41,352 41,234 40,504 41,472 40,263 37 Federal Reserve notes, net 249,663 251,137 251,936 251,583 252,549 247,983 249,319 253,544 Collateral held against notes net: 38 Gold certificate account 11,064 11,064 11,064 11,064 11,065 11,065 11,064 11,065 39 Special drawing rights certificate account 8,518 8,518 8,518 8,518 8,518 8,518 8,518 8,518 40 Other eligible assets 0 0 0 0 0 0 0 0 41 U.S. Treasury and agency securities 230,081 231,555 232,354 232,001 232,966 228,400 229,737 233,961 42 Total collateral 249,663 251,137 251,936 251,583 252,549 247,983 249,319 253,544 1. Some of these data also appear in the Board's H.4.1 (503) release. For 3. Valued monthly at market exchange rates. address, see inside front cover. Components may not add to totals because of 4. Includes special investment account at the Federal Reserve Bank of Chicago rounding. in Treasury bills maturing within 90 days. 2. Includes securities loaned—fully guaranteed by U.S. Treasury securities 5. Includes exchange-translation account reflecting the monthly revaluation at pledged with Federal Reserve Banks—and excludes securities sold and scheduled market exchange rates of foreign-exchange commitments. to be bought back under matched sale-purchase transactions. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Reserve Banks All 1.19 FEDERAL RESERVE BANKS Maturity Distribution of Loan and Security Holding Millions of dollars Wednesday End of month TTTyyypppeee aaannnddd mmmaaatttuuurrriiitttyyy gggrrrooouuupppiiinnngggsss 1990 1990 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 June 29 July 31 Aug. 31 861 1,006 1,250 7,711 531 586 942 465 2 4 3 W 9 1 1 6 i t d d h a a in y y s s 1 t t 5 o o d 9 1 a 0 y y d e s a a r y s 5 2 6 9 4 7 0 7 2 2 8 1 6 0 9 2 7 7 1 8 0 7,63 7 3 8 0 4 1 3 0 2 0 0 4 1 1 7 5 0 1 7 2 2 1 3 8 0 2 2 2 4 1 3 0 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 0 0 0 0 1 1 1 1 1 1 9 0 1 2 3 4 5 U. 9 W O O O S 1 1 . 6 v v v i t e T e e d d h r r r a a r i n e y y 5 1 1 a s s 0 y s y 1 t t u 5 e e y o o a r a e d y r r 9 a 1 a s 0 r t s y y s o t e d e s o c 1 a a 5 u r y 1 r y s 0 i e t a y ie r e s s a — rs T otal 23 5 6 5 2 1 1 2 1 8 9 6 1 4 , , , , , , , 2 6 2 7 4 8 4 0 0 3 0 0 0 5 7 3 9 6 2 1 6 2 7 5 3 2 5 1 1 5 8 0 1 6 7 1 , , , , , , , 8 2 4 8 4 1 8 9 7 3 4 0 0 2 1 5 9 6 2 1 8 2 4 3 7 5 2 1 1 8 3 3 9 4 3 3 , , , , , , , 4 9 3 4 5 9 1 3 7 4 6 3 4 7 7 5 5 0 6 9 0 2 6 5 3 2 5 1 1 9 0 9 1 4 1 3 , , , , , , , 7 7 4 8 5 9 1 8 3 9 6 3 8 7 5 8 5 0 6 6 0 23 5 6 5 2 1 1 3 7 4 9 4 4 3 , , , , , , , 4 5 7 4 5 1 1 2 5 2 6 3 7 7 2 3 0 0 6 8 0 23 5 6 5 2 1 1 7 7 8 9 6 1 , , , , , , , 3 8 4 6 3 4 6 8 7 8 5 5 0 1 3 2 2 5 6 2 7 2 6 3 5 5 2 1 9 2 8 6 6 9 1 , , , , , , , 3 7 2 2 4 8 8 1 0 3 9 0 0 7 3 6 9 4 1 2 2 23 6 7 5 2 1 3 0 2 9 4 2 3 , , , , , , , 4 5 7 7 5 8 1 6 9 0 0 3 2 7 3 8 9 0 6 0 0 2 2 2 1 1 1 1 1 0 2 6 7 8 9 Fe O O O 9 d W 1 1 e 6 v v v i r e e e t d d a h r r r a l a i y n y 5 1 1 a s s 0 g y y 1 t e t e e y 5 o o n a a e d c r r a 9 1 y s a r 0 t y s y o t o d e o s b 1 a a 5 l r 1 y i y 0 g s e a y a t e r io s a n rs s —Total 6 2 1 1 , , , , 4 8 7 5 1 1 1 2 1 8 1 8 4 0 2 3 0 0 8 7 2 1 1 , , , , 3 8 9 8 4 1 1 5 2 3 1 8 1 8 0 0 6 1 4 0 8 8 2 1 1 1 , , , , , 0 7 7 7 1 5 1 8 6 6 1 1 4 8 0 0 4 4 0 4 8 6 2 1 1 , , , , 6 7 5 4 1 5 1 0 6 6 3 1 4 8 0 0 3 4 0 4 8 7 2 1 1 1 , , , , , 2 6 4 1 6 1 1 5 0 9 3 1 1 8 5 0 7 3 6 0 8 6 2 1 1 , , , , 4 8 2 6 1 4 1 4 4 2 7 0 0 8 6 6 3 2 9 6 8 6 2 1 1 , , , , 4 8 4 7 1 1 1 1 2 6 1 1 1 8 4 0 8 2 0 5 8 6 2 1 1 , , , , 3 6 4 3 1 6 1 7 5 9 1 1 1 8 7 5 7 0 0 6 8 1. Holdings under repurchase agreements are classified as maturing within 15 NOTE: Components may not add to totals because of rounding, days in accordance with maximum maturity of the agreements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A12 Domestic Nonfinancial Statistics • November 1990 1.20 AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS AND MONETARY BASE1 Billions of dollars, averages of daily figures 1990 1986 1987 1988 1989 IItteemm Dec. Dec. Dec. Dec. Jan. Feb. Mar. Apr. May June July Aug. Seasonally adjusted ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS2 1 Total reserves3 58.02 58.59 60.59 60.03 59.90 60.22 60.30 60.28 59.78 59.73 59.32 59.75 2 Nonborrowed reserves4 57.20 57.82 58.88 59.77 59.46 58.77 58.17 58.65 58.45 58.85 58.56 58.82 3 Nonborrowed reserves plus extended credit 57.50 58.30 60.12 59.79 59.48 59.30 60.12 60.05 59.32 59.20 58.84 58.95 4 Required reserves 56.65 57.55 59.55 59.11 58.88 59.23 59.44 59.38 58.82 58.96 58.46 58.88 5 Monetary base6 241.43 258.06 275.24 284.95 287.51 289.71 291.82 293.54 294.40 296.28 297.86 301.13 ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS Not seasonally adjusted 6 Total reserves7 59.46 60.07 62.22 61.67 61.58 59.20 59.23 61.05 58.74 59.61 59.47 59.22 7 Nonborrowed reserves 58.64 59.30 60.50 61.40 61.14 57.75 57.11 59.42 57.41 58.73 58.71 58.29 8 Nonborrowed reserves plus extended credit 58.94 59.78 61.75 61.42 61.17 58.29 59.06 60.82 58.28 59.07 58.99 58.42 9 Required reserves8 58.09 59.03 61.17 60.75 60.56 58.21 58.37 60.15 57.78 58.84 58.61 58.34 10 Monetary base9 245.17 262.00 279.54 289.45 288.67 286.50 288.86 293.35 293.52 297.37 299.90 301.47 NOT ADJUSTED FOR CHANGES IN RESERVE REQUIREMENTS10 11 Total reserves11 59.56 62.14 63.75 62.81 62.93 60.62 60.66 62.51 60.23 61.20 60.94 60.73 12 Nonborrowed reserves 58.73 61.36 62.03 62.54 62.49 59.17 58.53 60.88 58.90 60.32 60.19' 59.81 13 Nonborrowed reserves plus extended credit 59.04 61.85 63.27 62.56 62.52 59.71 60.49 62.29 59.77 60.66 60.47' 59.93 14 Required reserves 58.19 61.09 62.70 61.89 61.91 59.63 59.80 61.62 59.27 60.42 60.08 59.86 15 Monetary base12 247.62 266.06 283.00 292.55 292.13 290.02 292.38 296.87 297.03 300.99 303.39 305.01 16 Excess reserves 1.37 1.05 1.05 0.92 1.02 0.99 0.86 0.90 0.96 0.77 0.86 0.87 17 Borrowings from the Federal Reserve 0.83 0.78 1.72 0.27 0.44 1.45 2.12 1.63 1.33 0.88 0.76 0.93 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 11. 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 IItteemm22 D 19 e 8 c 6 . D 19 e 8 c 7 . D 19 e 8 c 8 . D 19 e 8 c 9 . May June July Aug. Seasonally adjusted 1 Ml 724.7 750.4 787.5 794.8 805.4 809.4 809.2' 816.4 2 M2 2,814.2 2,913.2 3,072.4 3,221.6 3,271.8' 3,279.0' 3,283.7' 3,302.1 M3 3,494.5 3,678.7 3,918.3' 4,044.3' 4,065.8' 4,069.0' 4,072.2' 4,088.0 4 L 4,135.5 4,338.9 4,675.9' 4,881.5' 4,900.3' 4,921.1' 4,931.4 n.a. 5 Debt 7,636.2r 8,345.lr 9,107.6' 9,788.9' 10,052.5' 10,108.4' 10,169.2 n.a. Ml components 6 Currency 180.6 196.7 211.8 221.9 231.6 233.4 235.4 238.4 7 Travelers checks4 6.5 7.0 7.5 7.4 7.7 7.7 7.7 8.0 8 Demand deposits 302.1 287.0 287.0 279.7 274.5 274.5 274.8 278.0 9 Other checkable deposits6 235.5 259.7 281.3 285.7 291.5 293.8 291.3' 292.0 Nontransactions components 10 In M27 2,089.6 2,162.8 2,284.9 2,426.8 2,466.4' 2,469.5' 2,474.5 2,485.7 11 In M3 only8 680.3 765.5 845.9 822.6' 794.0' 790.0' 788.4' 785.9 Time and Savings accounts Commercial banks 12 Savings deposits 155.8 178.3 192.0 188.5 193.5 195.0 195.6 195.9 13 Money market deposit accounts 377.7 356.4 350.2 351.5 365.3 368.2 370.9' 374.6 14 Small time deposits 366.3 388.1 447.5 528.6 550.8 559.3 568.1' 571.4 15 Large time deposits10' 11 289.8 326.9 368.2 401.5 397.0' 397.8' 399.5 396.2 Thrift institutions 16 Savings deposits 214.3 236.6 235.9 220.5 221.5 220.8 220.7' 220.5 17 Money market deposit accounts 193.3 167.4 150.1 132.2 134.7 133.0 131.6 131.0 18 Small time deposits 489.9 529.7 583.5 613.7 598.2 587.8 580.1' 578.2 19 Large time deposits10 150.0 161.9 172.9 156.8 138.2 134.9 130.8 127.6 Money market mutual funds 20 General purpose and broker-dealer 208.7 222.0 240.9 312.4 320.4 321.9 325.1 333.8 21 Institution-only 83.8 89.0 87.1 102.3 107.3 107.3 108.9 114.0 Debt components 22 Federal debt 1,806. r 1,957.9'' 2,114.2' 2,266.7' 2,343.0' 22,,337700..99'' 2,397.0 n.a. 23 Nonfederal debt 5,830. r 6,387.2'' 6,993.4' 7,522.1' 7,709.5' 7,737.5' 7,772.2 n.a. Not seasonally adjusted 74 Ml 740.5 766.4 804.5 812.1 796.4 810.0 812.2' 814.2 2.5 M2 2,826.5 2,925.6 3,085.2 3,234.5 3,256.8' 3,276.1' 3,289.3' 3,302.1 76 M3 3,508.8 3,692.7 3,932.5 4,058.3' 4,050.1' 4,062.7' 4,071.2' 4,088.1 27 L 4,151.5 4,355.2 4,692.7 4,899.2' 4,887.9' 4,912.4' 4,919.1 n.a. 28 7,619.0' 8,329.1' 9,093.2' 9,774.3' 10,006.6' 10,064.7' 10,126.3 n.a. Ml components 29 Currency3 183.0 199.3 214.8 225.3 231.7 234.8 237.1 223399..22 30 Travelers checks 6.0 6.5 6.9 6.9 7.5 8.1 8.6 8.9 31 Demand deposits 314.0 298.6 298.9 291.6 268.5 274.8 277.0 276.7 32 Other checkable deposits 237.5 262.0 283.8 288.4 288.7 292.3 289.4' 289.4 Nontransactions components 33 In M2 2,086.0 2,159.2 2,280.8 2,422.4 2,460.4' 2,466.2' 2,477.2' 2,487.9 34 In M3 only8 682.3 767.0 847.3 823.8' 793.3' 786.5' 781.9' 786.0 Time and Savings accounts Commercial banks 35 Savings deposits 154.4 176.9 190.6 187.2 194.0 196.1 197.3' 196.3 36 Money market deposit accounts 379.8 359.0 353.2 355.0 361.0 365.8 368.1' 372.9 37 Small time deposits 366.1 387.3 446.0 526.4 549.7 560.4 569.7 572.5 38 Large time deposits10, 11 289.2 325.8 366.9 399.8 397.4' 397.3' 397.3 396.8 Thrift institutions 39 Savings deposits 212.7 234.9 234.2 219.0 221.8 222.3 223.0 221.0 40 Money market deposit accounts 192.9 167.5 150.6 132.8 133.8 132.5 131.2 131.2 41 Small time deposits9 489.8 529.1 582.4 612.3 596.5 586.8 581.6' 578.6 42 Large time deposits10 150.7 162.9 174.2 158.3 137.5 133.5 129.4' 127.0 Money market mutual funds 43 General purpose and broker-dealer 208.0 221.5 240.5 312.2 319.6 319.8 322.3 332.8 44 Institution-only 84.4 89.6 87.6 102.9 106.7 106.1 108.1 113.2 Repurchase agreements and Eurodollars 45 Overnight 82.3 83.2 83.3 77.4 83 .V 82.5' 83.9 82.7 46 164.3 197.1 227.7 178.0' 163.3' 163.0' 161.1' 164.6 Debt components 47 Federal debt 1,803.9 1,955.6 2,111.8 2,264.5' 2,336.8' 2,359.0' 2,382.7 n.a. 48 Nonfederal debt 5,815.1' 6,373.5' 6,981.4' 7,509.8' 7,669.8' 7,705.7' 7,743.6 n.a. For notes see following page. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A14 Domestic Nonfinancial Statistics • November 1990 NOTES TO TABLE 1.21 1. Latest monthly and weekly figures are available from the Board's H.6 (508) Debt: Debt of domestic nonfinancial sectors consists of outstanding credit release. Historical data are available from the 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. 1990 Bank group, or type of customer 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June Seasonally adjusted Demand deposits 1 All insured banks 217,116.2 226,888.4 272,793.1 286,425.2 299,450.2 285,111.5 274,403.6 273,186.2 301,578.2 2 Major New York City banks 104,496.3 107,547.3 121,894.2 123,744.6 132,031.4 132,470.3 124,988.2 123,314.6 131,042.7 3 Other banks 112,619.8 119,341.2 150,898.9 162,680.5 167,418.8 152,641.2 149,415.4 149,871.6 170,535.5 4 ATS-NOW accounts4 2,402.7 2,757.7 3,501.8 3,910.4 4,115.7 4,075.7 3,993.3 4,165.6 4,004.2 5 Savings deposits 526.5 579.2 636.6 609.2 587.3 617.6 583.1 601.1 566.6 DEPOSIT TURNOVER Demand deposits3 6 All insured banks 612.1 641.2 781.0 820.0 851.4 813.3 780.8 791.9 866.2 7 Major New York City banks 2,670.6 2,903.5 3,401.6 3,422.4 3,677.3 3,760.2 3,551.5 3,590.9 3,742.8 8 Other banks 357.0 376.8 481.5 519.5 530.1 484.0 472.5 482.5 544.6 9 ATS-NOW accounts" 13.8 14.7 18.3 19.8 20.6 20.2 19.7 20.5 19.5 10 Savings deposits5 3.1 3.1 3.5 3.3 3.1 3.2 3.0 3.2 2.9 Not seasonally adjusted Demand deposits 11 All insured banks 217,125.1 227,010.7 271,957.3 303,668.0 270,852.7 291,868.6 276,077.5 282,747.7 302,181.4 12 Major New York City banks 104,518.8 107,565.0 122,241.8 131,796.0 119,305.2 137,029.5 125,750.6 125,532.4 130,332.7 13 Other banks 112,606.2 119,445.7 149,715.5 171,872.0 151,547.5 154,839.2 150,326.9 157,215.3 171,848.6 14 ATS-NOW accounts 2,404.8 2,754.7 3,496.5 4,263.7 3,721.3 4,030.4 4,285.8 4,066.2 4,098.2 15 MMDA° 1,954.2 2,430.1 2,790.6 3,075.9 2,551.2 2,714.9 2,848.4 3,016.4 2,992.1 16 Savings deposits 526.8 578.0 635.8 629.3 518.7 594.2 646.8 592.6 567.8 DEPOSIT TURNOVER Demand deposits3 17 All insured banks 612.3 641.7 779.0 847.9 791.8 850.4 784.4 834.7 866.5 18 Major New York City banks 2,674.9 2,901.4 3,415.4 3,433.3 3,314.9 3,836.2 3,564.6 3,796.3 3,797.6 19 Other banks 356.9 377.1 477.8 537.5 495.2 503.6 474.7 514.3 546.6 20 ATS-NOW accounts" 13.8 14.7 18.3 21.1 18.7 20.0 20.5 20.3 20.1 21 MMDA° 5.3 6.9 8.3 8.7 7.2 7.6 7.9 8.4 8.2 22 Savings deposits3 3.1 3.1 3.5 3.4 2.8 3.1 3.4 3.1 2.9 1. Historical tables containing revised data for earlier periods may be obtained of states and political subdivisions. from the Monetary and Reserves Projections Section, Division of Monetary 4. Accounts authorized for negotiable orders of withdrawal (NOW) and ac- Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. counts authorized for automatic transfer to demand deposits (ATS). ATS data are 20551. available beginning December 1978. These data also appear on the Board's G.6 (406) release. For address, see inside 5. Excludes ATS and NOW accounts, MMDA and special club accounts, such front cover. as Christmas and vacation clubs. 2. Annual averages of monthly figures. 6. Money market deposit accounts. 3. Represents accounts of individuals, partnerships, and corporations and Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A16 Domestic Nonfinancial Statistics • November 1990 1.23 LOANS AND SECURITIES All Commercial Banks' Billions of dollars; averages of Wednesday figures 1989' 1990r CCaatteeggoorryy Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Seasonally adjusted 1 Total loam and securities2 2,546.2 2,570.5 2,585.8 2,588.8 2,594.4 2,614.3 2,635.6 2,646.7 2,653.8 2,669.4 2,684.7 2,707.8 2 U.S. government securities 379.3 390.9 396.0 396.1 404.7 414.5 422.3 427.3 430.6 438.5 440.6 441.3 3 Other securities 183.6 181.4 179.9 180.8 180.4 180.5 180.1 180.0 178.3 177.9 177.8 179.2 4 Total loans and leases2 1.983.3 1,998.2 2,009.9 2,011.9 2,009.3 2,019.4 2,033.2 2,039.4 2,045.0 2,053.0 2,066.4 2,087.3 5 Commercial and industrial..... 638.2 642.0 645.0 641.6 637.9 638.8 644.4 649.0 648.6 651.6 651.7 653.1 6 Bankers acceptances held3... 7.5 7.9 7.6 7.4 7.3 7.6 7.6 7.5 7.6 7.9 7.6 7.3 7 Other commercial and industrial 630.8 634.1 637.4 634.2 630.6 631.2 636.8 641.5 641.0 643.7 644.2 645.8 8 U.S. addressees4 626.9 629.9 632.4 628.8 623.1 625.4 630.6 635.5 636.4 638.8 641.6 643.2 9 Non-U.S. addressees4 3.8 4.2 5.0 5.4 7.6 5.8 6.2 6.0 4.5 4.9 2.6 2.5 10 Real estate 739.1 746.7 754.0 761.1 765.9 774.7 781.8 786.9 794.6 800.1 808.0 811.9 11 Individual 370.8 372.4 374.4 375.8 378.3 379.5 379.9 378.8 379.8 378.4 378.3 380.1 12 Security 39.5 40.7 40.9 38.8 39.3 40.0 37.1 36.1 34.8 35.3 38.8 46.0 13 Nonbank financial institutions 31.7 33.2 33.9 33.0 32.5 32.9 33.8 33.9 33.9 34.4 34.8 35.7 14 Agricultural 30.4 30.5 30.5 30.7 30.9 30.8 30.6 30.4 30.0 29.5 29.3 2299..22 15 State and political subdivisions 41.7 41.3 40.8 40.1 38.6 38.9 38.4 38.2 37.9 37.4 36.6 36.0 16 Foreign banks 8.1 9.1 8.3 8.9 8.1 7.8 8.4 8.8 8.7 7.4 7.0 8.0 17 Foreign official institutions 4.2 3.8 3.7 3.6 3.2 3.1 3.0 3.2 3.2 3.2 3.2 3.2 18 Lease financing receivables 31.4 31.9 31.9 31.8 32.1 32.2 32.6 32.3 32.5 32.3 32.6 32.7 19 All other loans 48.0 46.6 46.4 46.5 42.5 40.6 43.2 41.8 40.9 43.3 46.1 51.5 Not seasonally adjusted 20 Total loans and securities2 2,544.8 2,570.8 2,587.9 2,596.8 2,600.1 2,616.7 2,629.9 2,647.0 2,653.4 2,669.5 2,678.9 2,701.4 21 U.S. government securities 378.4 388.2 396.1 397.2 406.4 419.0 423.8 427.2 429.6 435.6 438.1 442.1 22 Other securities 183.8 182.3 181.2 181.8 180.9 180.3 179.7 179.4 177.7 177.2 176.4 179.3 23 Total loans and leases2 1,982.6 2,000.2 2,010.6 2,017.9 2,012.8 2,017.3 2,026.4 2,040.4 2,046.1 2,056.7 2,064.4 2,080.0 24 Commercial and industrial..... 634.3 639.4 642.2 641.6 636.4 639.5 646.0 653.3 652.7 654.0 652.1 650.6 25 Bankers acceptances held'... 7.5 8.1 7.7 7.5 7.4 7.7 7.4 7.3 7.5 7.8 77..33 7.4 26 Other commercial and industrial 626.8 631.3 634.5 634.0 629.1 631.8 638.6 645.9 645.2 646.2 644.8 643.2 27 U.S. addressees4 621.2 625.7 629.1 628.8 624.1 627.0 633.9 641.3 640.6 641.8 640.3 638.7 28 Non-U.S. addressees4 5.5 5.6 5.4 5.2 4.9 4.8 4.7 4.6 4.6 4.4 4.5 4.5 29 Real estate 741.2 748.0 755.7 761.9 766.0 772.1 779.1 784.9 793.5 800.0 808.7 813.6 30 Individual 372.7 373.5 375.8 380.3 381.8 378.7 376.6 376.0 377.3 376.7 376.7 380.3 31 Security 38.6 39.7 39.7 37.9 37.8 39.5 38.1 38.5 35.3 3377..44 3388..88 4455..33 32 Nonbank financial institutions 31.4 32.8 34.2 34.1 33.2 32.5 33.0 33.7 33.9 34.7 35.0 35.5 33 Agricultural 31.4 31.2 30.8 30.6 30.4 29.9 29.5 29.5 29.7 2299..99 3300..00 3300..00 34 State and political subdivisions 41.6 41.2 40.6 39.7 39.5 39.3 38.6 38.2 37.8 37.2 36.2 35.8 35 Foreign banks 8.3 9.4 8.5 8.7 8.2 7.8 7.8 8.4 8.7 7.6 7.1 7.9 36 Foreign official institutions 4.2 3.8 3.7 3.6 3.2 3.1 3.0 3.2 3.2 3.2 3.2 3.2 37 Lease financing receivables 31.3 31.8 31.9 31.9 32.5 32.4 32.5 32.4 32.5 32.2 32.3 32.5 38 All other loans 47.7 49.3 47.5 47.7 43.8 42.6 42.1 42.4 41.6 43.9 44.1 45.4 1. Data have been revised because of benchmarking and seasonal adjustment 2. Excludes loans to commercial banks in the United States, revisions beginning Januai> 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 BANKS' Monthly averages, billions of dollars 1989 1990 Source Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Ma/ June' Jul/ Aug. Seasonally adjusted 1 Total nondeposit funds — 247.0 254.7 256.5 257.3' 258.1' 267.6' 271.4' 268.7' 270.5 271.9 283.3 282.9 2 Net balances due to related foreign offices3 — 11.1 10.2 8.6 7.4 10.9 14.7 17.3 16.6' 24.4 14.7 16.7 16.7 3 Borrowings from other than commercial banks in United States4 235.9 244.5 247.9 249.y 247.2' 252.9' 254.1' 252.1' 246.1 257.2 266.6 266.2 4 Domestically chartered banks 189.9 196.5 198.3 200.4 196.9 201.4 198.5 194.2 189.1 199.1 205.0 203.8 5 Foreign-related banks 46.0 48.0 49.6 49.4r 50.4' 51.5' 55.6' ss.a 57.0 58.1 61.6 62.4 Not seasonally adjusted 6 Total nondeposit funds — 243.6 249.9 255.4 250.7' 254.6' 270.8' 277.2' 271.6' 279.1 276.8 278.7 282.0 7 Net balances due to related foreign offices — 11.7 9.6 9.7 9.7 10.5 14.3 16.2 14.3' 26.3 15.4 14.7 16.9 8 Domestically chartered banks -14.3 -15.0 -15.5 -19.2 -14.5 -11.1 -11.5 -10.7 -1.4 -6.3 -6.1 -3.6 9 Foreign-related banks 26.0 24.6 25.2 28.9 25.0 25.4 27.7 25.0 27.7 21.7 20.8 20.6 10 Borrowings from other than commercial banks in United States 231.9 240.3 245.8 241.0' 244.1' 256.4' 261.1' 257.2' 252.8 261.4 264.0 265.1 11 Domestically chartered banks 186.9 193.5 198.5 194.0 192.9 203.3 204.3 198.2 194.9 200.9 202.0 203.3 12 Federal funds and security RP borrowings 183.9 190.4 196.1 191.5 190.3 199.6 199.9 194.5 191.5 197.7 199.1 199.6 13 Other6 3.0 3.0 2.4 2.5 2.7 3.7 4.5 3.7 3.4 3.2 2.9 3.6 14 Foreign-related banks6 45.0 46.8 47.2 47.0' si.r 53.1' 56.8' 59.0' 57.9 60.6 62.0 61.8 MEMO Gross large time deposits 15 Seasonally adjusted 460.0 461.4 464.0 464.3 462.7 460.6 457.3 455.1 454.7 452.7 454.0 450.8 16 Not seasonally adjusted 461.5 462.6 464.4 462.7 460.4 460.3 460.2 455.1 455.2 452.2 451.8 451.4 U.S. Treasury demand balances at commercial banks8 17 Seasonally adjusted 22.8 21.5 20.4 21.1 20.2 17.8 19.2 21.2 18.6 20.4 14.9 33.2 18 Not seasonally adjusted 24.9 20.6 14.7 19.6 23.2 22.0 16.7 20.0 25.2 20.9 15.2 23.5 1. Data have been revised because of benchmarking and seasonal adjustment 4. Other borrowings are borrowings through any instrument, such as a revisions beginning January 1973. Commercial banks are those in the 50 states and promissory note or due bill, given for the purpose of borrowing money for the the District of Columbia with national or state charters plus agencies and branches banking business. This includes borrowings from Federal Reserve Banks and of foreign banks, New York investment companies majority owned by foreign from foreign banks, term federal funds, loan RPs, and sales of participations in banks, and Edge Act corporations owned by domestically chartered and foreign pooled loans. banks. 5. Based on daily average data reported weekly by approximately 120 large These data also appear in the Board's G.10 (411) release. For address, see banks and quarterly or annual data reported by other banks. inside front cover. 6. Figures are partly daily averages and partly averages of Wednesday data. 2. Includes federal funds, RPs, and other borrowing from nonbanks and net 7. Time deposits in denominations of $100,000 or more. Estimated averages of balances due to related foreign offices. daily data. 3. Reflects net positions of U.S. chartered banks, Edge Act corporations, and 8. U.S. Treasury demand deposits and Treasury tax-and-loan notes at com- U.S. branches and agencies of foreign banks with related foreign offices plus net mercial banks. Averages of daily data. positions with own IBFs. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A18 Domestic Nonfinancial Statistics • November 1990 1.25 ASSETS AND LIABILITIES OF COMMERCIAL BANKING INSTITUTIONS Last-Wednesday-of-Month Series1 Billions of dollars 1989 1990 AAccccoouunntt Oct/ Nov/ Dec/ Jan/ Feb/ Mar/ Apr/ Mayr Juner July' Aug. ALL COMMERCIAL BANKING INSTITUTIONS2 1 Loans and securities 2,739.3 2,774.7 2,780.1 2,796.0 2,809.2 2,821.2 2,838.3 2,845.9 2,870.9 2,876.4 2,895.8 2 Investment securities 546.8 551.0 550.5 563.9 571.2 576.8 582.5 585.9 587.7 587.5 595.8 3 U.S. government securities 371.6 376.5 375.1 389.8 398.0 405.9 412.6 416.9 419.9 420.1 427.1 4 Other 175.2 174.5 175.5 174.1 173.2 170.8 169.9 169.0 167.8 167.4 168.7 5 Trading account assets 25.8 26.8 22.8 31.8 30.2 26.0 23.9 21.4 23.7 27.2 29.2 6 Total loans 2,166.7 2,196.9 2,206.8 2,200.4 2,207.8 2,218.5 2,231.9 2,238.7 2,259.6 2,261.6 2,270.7 7 Interbank loans 169.3 185.4 187.0 187.4 187.5 191.6 190.6 192.8 202.7 199.9 198.4 8 Loans excluding interbank 1,997.4 2,011.6 2,019.8 2,013.0 2,020.3 2,026.9 2,041.3 2,045.9 2,056.9 2,061.7 2,072.4 9 Commercial and industrial 638.7 641.6 643.2 636.4 642.4 646.2 653.3 650.9 654.1 648.7 646.3 10 Real estate 749.3 758.3 762.8 767.6 774.0 781.6 786.7 796.7 801.3 810.2 813.3 11 Individual 374.0 376.5 382.3 381.7 378.6 375.5 377.5 377.3 378.5 377.7 382.2 12 All other 235.3 235.2 231.5 227.3 225.3 223.6 223.8 220.9 222.9 225.0 230.6 13 Total cash assets 209.6 231.5 255.7 218.9 224.9 212.9 211.6 239.9 222.9 214.1 211.0 14 Reserves with Federal Reserve Banks. 28.4 38.7 42.8 24.6 29.5 32.0 31.6 27.8 32.0 30.1 30.3 15 Cash in vault 27.8 30.7 31.6 28.0 27.8 27.7 28.5 29.9 28.9 28.7 30.2 16 Cash items in process of collection ... 77.5 84.4 99.1 89.9 91.6 80.0 80.0 100.6 86.1 79.5 77.4 17 Demand balances at U.S. depository institutions 28.2 28.5 32.3 29.6 30.8 27.4 26.3 32.0 27.6 27.4 27.5 18 Other cash assets 47.6 49.2 49.9 46.8 45.2 45.8 45.2 49.7 48.3 48.4 45.6 19 Other assets 206.3 203.3 209.9 218.1 212.9 209.1 206.0 199.5 211.1 207.1 216.3 20 Total assets/total liabilities and capital.... 3,155.2 3,209.5 3,245.8 3,233.0 3,247.0 3,243.2 3,255.9 3,285.4 3,304.9 3,297.5 3,323.1 21 Deposits 2,198.2 2,225.7 2,270.0 2,247.1 2,262.4 2,251.3 2,257.3 2,293.1 2,280.6 2,289.7 2,295.2 22 Transaction deposits 585.5 600.8 642.0 612.2 616.6 594.3 601.0 618.4 599.6 591.5 590.5 23 Savings deposits 525.7 535.7 538.2 540.8 546.3 551.8 548.7 554.4 556.3 561.3 565.7 24 Time deposits 1,086.9 1,089.2 1,089.7 1,094.2 1,099.5 1,105.3 1,107.5 1,120.3 1,124.7 1,136.8 1,139.0 25 Borrowings 528.7 543.9 531.0 552.8 542.2 545.4 564.7 548.2 578.7 564.4 576.2 26 Other liabilities 219.3 229.5 233.5 221.8 229.3 230.8 218.0 227.8 227.2 224.3 231.7 27 Residual (assets less liabilities) 209.0 210.4 211.3 211.4 213.2 215.7 215.8 216.2 218.4 219.1 220.0 MEMO 28 U.S. government securities (including trading account) 390.4 396.2 391.0 414.7 421.2 423.8 427.8 430.0 433.8 438.9 444.3 29 Other securities (including trading account) 182.2 181.6 182.3 180.9 180.2 179.0 178.6 177.2 177.6 175.9 180.8 DOMESTICALLY CHARTERED COMMERCIAL BANKS3 30 Loans and securities 2,514.1 2,534.1 2,542.4 2,557.9 2,566.3 2,570.5 2,581.8 2,585.1 2,602.9 2,610.3 2,627.6 31 Investment securities 522.7 524.6 524.4 536.2 543.1 547.2 551.5 557.5 557.3 556.8 565.5 32 U.S. government securities 360.2 363.9 363.8 376.6 384.4 391.2 397.6 404.0 405.5 405.5 413.0 33 Other 162.5 160.7 160.5 159.6 158.7 156.0 154.0 153.5 151.9 151.4 152.5 34 Trading account assets 25.8 26.8 22.8 31.8 30.2 26.0 23.9 21.4 23.7 27.2 29.2 35 Total loans 1,965.6 1,982.7 1,995.2 1,989.9 1,993.0 1,997.3 2,006.4 2,006.2 2,021.9 2,026.3 2,032.9 36 Interbank loans 139.2 147.3 150.3 150.0 148.5 148.3 149.1 144.4 153.6 151.6 151.3 37 Loans excluding interbank 1,826.3 1,835.5 1,844.9 1,839.9 1,844.6 1,849.0 1,857.3 1,861.7 1,868.3 1,874.7 1,881.6 38 Commercial and industrial 516.1 516.7 517.7 513.8 518.3 519.4 523.4 520.4 519.2 516.9 513.4 39 Real estate 721.4 728.6 733.0 735.9 741.1 747.8 751.8 761.2 765.3 773.5 776.1 40 Individual 374.0 376.5 382.3 381.7 378.6 375.5 377.5 377.3 378.5 377.7 382.2 41 All other 214.8 213.7 211.8 208.5 206.5 206.3 204.6 202.8 205.3 206.7 209.9 42 Total cash assets 187.6 205.5 230.5 195.7 199.9 187.3 186.8 210.7 194.8 186.5 184.2 43 Reserves with Federal Reserve Banks. 26.7 37.9 41.7 22.7 27.5 29.8 29.8 26.6 30.8 28.8 28.1 44 Cash in vault 27.8 30.7 31.5 28.0 27.8 27.7 28.5 29.8 28.8 28.7 30.2 45 Cash items in process of collection ... 76.3 82.5 97.7 88.5 90.2 78.5 78.7 99.2 84.1 78.1 75.8 46 Demand balances at U.S. depository institutions 26.3 26.6 30.4 27.6 28.7 25.6 24.6 30.0 25.9 25.6 25.1 47 Other cash assets 30.5 27.9 29.2 28.9 25.7 25.7 25.2 25.1 25.2 25.3 25.0 48 Other assets 129.6 136.0 140.7 143.6 140.2 136.4 133.8 136.3 141.8 138.4 144.3 49 Total assets/liabilities and capital 2,831.3 2,875.7 2,913.6 2,897.2 2,906.5 2,894.2 2,902.4 2,932.0 2,939.6 2,935.3 2,956.1 50 Deposits 2,115.8 2,143.3 2,186.8 2,164.5 2,179.9 2,169.4 2,174.6 2,210.6 2,197.8 2,207.7 2,213.3 51 Transaction deposits 576.0 591.2 632.1 601.9 606.3 584.5 591.2 608.3 589.0 581.1 579.9 52 Savings deposits 523.1 532.9 535.4 537.9 543.4 548.8 545.7 551.4 553.3 558.3 562.7 53 Time deposits 1,016.8 1,019.2 1,019.3 1,024.7 1,030.2 1,036.1 1,037.6 1,050.9 1,055.4 1,068.2 1,070.7 54 Borrowings 393.8 405.2 398.4 405.3 394.2 393.1 405.4 391.7 409.9 395.6 403.5 55 Other liabilities 116.5 120.6 120.9 119.9 123.1 119.9 110.5 117.3 117.2 116.8 123.2 56 Residual (assets less liabilities) 205.2 206.6 207.4 207.5 209.3 211.8 212.0 212.3 214.6 215.3 216.1 MEMO 57 Real estate loans, revolving 48.4 49.2 50.0 51.1 51.4 52.0 53.1 54.0 55.0 56.1 57.4 58 Real estate loans, other 673.0 679.4 683.0 684.8 689.7 695.8 698.7 707.2 710.3 717.4 718.8 1. Data have been revised because of benchmarking beginning January 1989. condition report data. Data for other banking institutions are estimates made for Back data are available from the Banking and Monetary Statistics section, Board the last Wednesday of the month based on a weekly reporting sample of of Governors of the Federal Reserve System, Washington, D.C., 20551. These foreign-related institutions and quarter-end condition reports. 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. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A19 1.26 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS1 Millions of dollars, Wednesday figures 1990 AAccccoouunntt July 4 July 11 July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 1 Cash and balances due from depository institutions 125,786 109,748 107,704 105,938 123,886 106,361 119,362 107,130 103,510 2 Total loans, leases, and securities, net 1,301,304' 1,295,27c 1,305,428' 1,301,031' 1,318,974 1,313,635 1,336,988 1,318,957 1,308,980 3 U.S. Treasury and government agency 176,680 176,636 180,024 178,155 181,389 178,830 182,470 181,098 182,880 4 Trading account 16,182 16,123 19,744 18,727 19,705 16,508 19,683 17,478 17,153 Investment account 160,499 160,513 160,280 159,428 161,683 162,322 162,787 163,621 165,726 6 Mortgage-backed securities2 79,567' 79,914' 79,70C 79,797' 80,250 81,086 80,829 80,642 82,184 All other maturing in 7 One year or less 21,934'" 21,784' 21,251' 20,252' 19,816 18,706 18,500 18,408 18,429 8 Over one through five years 34,876' 34,892' 35,234' 35,642' 37,089 37,763 38,979 39,743 40,095 9 Over five years 24,121' 23,922' 24,095' 23,738' 24,528 24,767 24,478 24,827 25,018 10 Other securities 62,221 62,214 62,061 61,745 63,030 61,991 61,849 62,141 62,323 11 Trading account 1,149 1,061 830 709 1,813 708 772 981 946 17 Investment account 61,072 61,153 61,231 61,036 61,216 61,283 61,078 61,160 61,376 13 States and political subdivisions, by maturity 32,477 32,363 32,340 32,311 32,138 32,155 32,121 32,057 32,032 14 One year or less 3,466 3,529' 3,52C 3,531' 3,616 3,632 3,667 3,686 3,699 15 Over one year 29,011 28,834' 28,82C 28,78C 28,522 28,524 28,454 28,371 28,333 16 Other bonds, corporate stocks, and securities 28,595 28,790 28,891 28,725 29,079 29,128 28,957 29,103 29,345 17 Other trading account assets 7,847 8,232 7,995 7,800 8,103 9,388 10,257 9,769 10,723 18 Federal funds sold3 77,109 74,190 78,089 78,580 87,589 85,450 98,368 83,717 75,566 19 To commercial banks 58,799 55,242 56,283 56,049 59,363 56,821 68,717 55,767 51,126 70 To nonbank brokers and dealers in securities 13,948 14,640 17,1% 17,967 22,540 22,973 23,528 22,373 19,439 21 Toothers 4,362 4,308 4,610 4,564 5,686 5,656 6,123 5,578 5,001 7,7 Other loans and leases, gross 1,016,702' 1,013,093' 1,016,445' 1,013,853' 1,017,802 1,016,867 1,022,975 1,021,122 1,016,607 23 Other loans, gross 990,008' 986,428' 989,577' 987,014' 991,008 990,065 9%,133 994,211 989,527 7,4 Commercial and industrial 322,743' 321,643' 320,987' 319,455' 320,402 319,906 321,833 319,751 317,459 21 Bankers acceptances and commercial paper 1,598 1,557 1,604 1,5% 1,549 1,612 1,698 1,609 1,563 7,6 All other 321,145' 320,085' 319,383' 317,859' 318,853 318,293 320,134 318,142 315,8% 77 U.S. addressees 319,721' 318,553' 317,987' 316,407' 317,350 316,857 318,724 316,726 314,504 28 Non-U.S. addressees 1,424 1,532 1,396 1,452 1,503 1,436 1,411 1,416 1,392 79 Real estate loans 375,543' 376,161' 376,837' 377,444' 378,635 379,192 380,304 380,154 379,229 30 Revolving, home equity 30,168 30,325 30,446 30,459 30,643 30,751 30,923 31,085 31,252 31 All other 345,375' 345,836' 346,391' 346,985' 347,992 348,441 349,380 349,070 347,977 32 To individuals for personal expenditures 172,341 172,326 172,555 173,039 173,280 173,374 173,724 174,320 174,632 33 To depository and financial institutions 49,618 49,839 50,994 49,630 49,841 49,446 52,317 51,748 51,512 34 Commercial banks in the United States 21,947 21,704 23,087 23,044 21,915 21,781 23,071 23,499 23,996 35 Banks in foreign countries 4,318 4,236 4,081 3,539 3,957 3,650 4,921 4,907 4,158 36 Nonbank depository and other financial institutions .. 23,353 23,900 23,826 23,047 23,%9 24,015 24,325 23,342 23,358 37 For purchasing and carrying securities 13,729 13,512 14,558 14,924 14,848 15,139 14,234 15,434 14,262 38 To finance agricultural production 6,128 6,160 6,167 6,174 6,140 6,157 6,178 6,103 6,085 39 To states and political subdivisions 23,182 22,869 22,788 22,712 22,658 22,633 22,560 22,528 22,454 40 To foreign governments and official institutions 1,439 1,477 1,532 1,455 1,480 1,409 1,591 1,404 1,449 41 All other 25,285 22,441 23,159 22,180 23,724 22,809 23,392 22,768 22,445 47. Lease financing receivables 26,694 26,666 26,868' 26,839' 26,794 26,802 26,842 26,911 27,080 43 LESS: Unearned income 4,431' 4,432' 4,446' 4,442 4,405 4,416 4,426 4,444 4,451 44 Loan and lease reserve 34,825 34,664 34,740 34,661 34,534 34,476 34,505 34,446 34,668 45 Other loans and leases, net 977,446' 973,997' 977,259' 974,75C 978,862 977,975 984,044 982,231 977,488 46 All other assets 138,845' 135,176' 130,405' 128,356' 131,012 129,955 134,164 131,921 133,698 47 Total assets 1,565,935' 1,540,193 1,543,536 1,535,326 1,573,872 1,549,951 1,590,514 1,558,008 1,546,188 48 Demand deposits 249,546' 222,619' 225,342' 215,038' 242,856 215,571 244,622 213,516 213,287 49 Individuals, partnerships, and corporations 199,839' 179,914' 178,207' 171,276' 190,311 175,623 195,530 172,258 171,109 •so States and political subdivisions 6,767 5,732 6,222 6,280 7,393 5,610 6,081 5,956 5,404 51 U.S. government 2,164 3,108 4,258 2,660 2,414 1,392 2,608 1,261 1,440 57, Depository institutions in the United States 24,938 19,891 20,709 20,003 25,325 18,683 24,929 18,604 18,840 53 Banks in foreign countries 6,312 5,521 5,902 5,611 6,650 4,968 6,231 6,363 6,202 54 Foreign governments and official institutions 706 681 702 586 %1 681 1,375 857 809 S5 Certified and officers' checks 8,820 7,772 9,342 8,622 9,801 8,614 7,868 8,216 9,482 56 Transaction balances other than demand deposits 83,192 79,539 78,418 77,466 80,364 80,295 79,805 78,324 77,478 57 Nontransaction balances 753,626 753,295 753,090 752,162 753,999 754,155 758,425 753,907 752,688 58 Individuals, partnerships, and corporations 716,723 716,334 716,364 715,254 716,754 717,231 721,393 716,765 715,236 59 States and political subdivisions 29,277 29,319 29,083 29,045 29,116 29,218 29,304 29,359 29,676 60 U.S. government 829 829 841 841 1,168 881 887 884 888 61 Depository institutions in the United States 6,299 6,330 6,336 6,552 6,488 6,368 6,366 6,446 6,429 62 Foreign governments, official institutions, and banks .. 497 482 465 470 473 456 475 452 459 63 Liabilities for borrowed money 285,040' 291,164 291,3% 293,387 297,080 299,683 310,734 312,008 299,6% 64 Borrowings from Federal Reserve Banks 20 0 0 1,490 0 100 785 6,837 0 65 Treasury tax-and-loan notes 2,313 3,923 7,953 12.03C 10,007 12,448 14,864 21,735 22,394 66 All other liabilities for borrowed money5 282,706' 287,242 283,443 279,866' 287,072 287,136 295,085 283,436 277,302 67 Other liabilities and subordinated notes and debentures .. 90,390 88,670 90,656 92,807 94,%8 95,288 92,234 95,175 97,744 68 Total liabilities 1,461,793' 1,435,288' 1,438,903' 1,430,86C 1,469,265 1,444,992 1,485,820 1,452,930 1,440,893 69 Residual (total assets minus total liabilities)6 104,142' 104,905' 104,633' 104,466' 104,607 104,959 104,694 105,078 105,294 MEMO 70 Total loans and leases (gross) and investments adjusted . 1,259,814' 1,257,42c 1,265,244' 1,261,041' 1,276,635 1,273,925 1,284,131 1,278,582 1,272,977 71 Total loans and leases (gross) adjusted" 1,013,065' 1,010,338' 1,015,164' 1,013,34C 1,024,113 1,023,715 1,029,555 1,025,573 1,017,051 17, Time deposits in amounts of $100,000 or more 214,143 214,470 214,936 214,729 214,461 213,908 213,799 212,889 212,279 73 U.S. Treasury securities maturing in one year or less 19,280 20,212 20,679 19,707 19,416 18,394 17,858 17,455 17,475 74 Loans sold outright to affiliates—total8 300 290 298 298 253 256 254 257 266 75 Commercial and industrial 144 140 145 145 137 140 138 135 144 76 Other 155 150 153 154 116 116 116 122 122 77 Nontransaction savings deposits (including MMDAs) 287,077 286,132 285,271' 284,606 286,787 287,356 291,492 287,758 287,387 1. Beginning Jan. 6, 1988, the "Large bank" reporting group was revised or more on Dec. 31, 1977, see table 1.13. somewhat, eliminating some former reporters with less than $2 billion of assets 6. This is not a measure of equity capital for use in capital-adequacy analysis or and adding some new reporters with assets greater than $3 billion. for other analytic uses. 2. Includes U.S. government-issued or guaranteed certificates of participation 7. Exclusive of loans and federal funds transactions with domestic commercial in pools of residential mortgages. banks. 3. Includes securities purchased under agreements to resell. 8. Loans sold are those sold outright to a bank's own foreign branches, 4. Includes allocated transfer risk reserve. nonconsolidated nonbank affiliates of the bank, the bank's holding company (if 5. Includes federal funds purchased and securities sold under agreements to not a bank), and nonconsolidated nonbank subsidiaries of the holding company. repurchase; for information on these liabilities at banks with assets of $1 billion Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A20 Domestic Nonfinancial Statistics • November 1990 1.28 ASSETS AND LIABILITIES OF LARGE WEEKLY REPORTING COMMERCIAL BANKS IN NEW YORK CITY1 Millions of dollars, Wednesday figures 1990 July 4 July 11 July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 1 Cash balances due from depository institutions 24,753 22,098 22,354 23,013 30,759 23,366 30,190 28,032 21,286 2 Total loans, leases, and securities, net2 219,993 215,469 220,749 220,615 228,069 225,680 236,058 230,061 222,178 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 22,309 22,592 22,668 22,672 22,646 22,684 23,046 22,896 23,381 6 Mortgage-backed securities4 11,242 11,307 11,289 11,294 11,294 11,471 11,492 10,890 11,329 All other maturing in 7 One year or less 3,033 3,134 3,226 3,226 3,180 3,070 3,270 3,272 3,265 8 Over one through five years 3,776 3,832 3,834 3,812 3,810 3,805 3,924 4,488 4,545 9 Over five years 4,259 4,319 4,319 4,339 4,362 4,338 4,360 4,246 4,241 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 12,960 13,174 13,143 13,199 13,333 13,454 13,258 13,424 13,576 13 States and political subdivisions, by maturity 6,199 6,174 6,167 6,210 6,207 6,194 6,209 6,163 6,116 14 One year or less 547 547 552 5% 598 596 628 628 615 15 Over one year 5,652 5,627 5,616 5,614 5,609 5,597 5,581 5,536 5,500 16 Other bonds, corporate stocks, and securities 6,761 7,001 6,976 6,989 7,126 7,260 7,050 7,261 7,461 17 Other trading account assets 0 0 0 0 0 0 0 0 0 Loans and leases 18 Federal funds sold5 21,209 17,345 19,842 21,002 26,368 24,288 32,245 24,420 19,855 19 To commercial banks 13,415 9,769 10,500 10,777 13,072 12,088 17,834 12,000 9,507 20 To nonbank brokers and dealers in securities 5,526 5,401 7,150 7,913 10,470 9,443 11,882 9,898 8,026 21 To others 2,267 2,175 2,192 2,312 2,826 2,756 2,528 2,523 2,322 22 Other loans and leases, gross 179,997 178,575 181,267 179,905 181,599 181,011 183,307 185,130 181,451 23 Other loans, gross 174,480 173,076 175,668 174,320 176,031 175,422 177,680 179,436 175,766 24 Commercial and industrial 56,943 57,037 57,678 57,293 58,469 58,286 59,463 58,995 58,288 25 Bankers acceptances and commercial paper 108 116 111 116 122 117 128 130 124 26 All other 56,835 56,921 57,567 57,177 58,346 58,169 59,335 58,866 58,163 27 U.S. addressees 56,153 56,140 56,876 56,470 57,600 57,457 58,687 58,218 57,514 28 Non-U.S. addressees 682 781 691 706 747 713 648 647 649 29 Real estate loans 62,603 62,639 62,901 62,753 62,859 63,016 62,975 62,816 62,463 30 Revolving, home equity 4,091 4,093 4,098 4,115 4,125 4,132 4,141 4,145 4,151 31 Mother 58,512 58,546 58,803 58,638 58,734 58,884 58,834 58,672 58,312 32 To individuals for personal expenditures 19,747 19,794 19,819 19,883 19,771 19,731 19,829 19,893 19,863 33 To depository and financial institutions 18,948 18,925 19,157 18,830 18,689 17,951 19,865 21,010 19,763 34 Commercial banks in the United States 7,817 7,342 7,564 7,761 7,251 6,863 7,537 8,876 8,439 35 Banks in foreign countries 3,260 3,354 3,168 2,765 2,973 2,736 3,809 3,961 3,246 36 Nonbank depository and other financial institutions 7,871 8,228 8,424 8,304 8,465 8,352 8,519 8,172 8,078 37 For purchasing and carrying securities 4,421 4,117 4,977 5,101 5,327 5,622 4,490 6,039 4,990 38 To finance agricultural production 140 135 145 133 136 146 157 147 146 39 To states and political subdivisions 4,933 4,859 4,822 4,779 4,734 4,720 4,668 4,648 4,592 40 To foreign governments and official institutions 272 330 396 310 342 267 448 267 339 41 All other 6,472 5,238 5,772 5,238 5,704 5,683 5,784 5,620 5,322 42 Lease financing receivables 5,516 5,499 5,599 5,585 5,568 5,589 5,627 5,694 5,685 43 LESS: Unearned income 1,806 1,812 1,834 1,837 1,826 1,829 1,835 1,858 1,869 44 Loan and lease reserve 14,676 14,405 14,337 14,326 14,051 13,928 13,963 13,951 14,218 45 Other loans and leases, net6 163,515 162,358 165,096 163,741 165,722 165,254 167,509 169,320 165,364 46 All other assets7 56,619 56,792 58,965 56,114 57,946 54,729 58,062 57,591 59,099 47 Total assets 301,366 294,360 302,068 299,742 316,774 303,775 324,311 315,683 302,562 Deposits 48 Demand deposits 53,687 45,506 49,478 45,401 55,134 44,751 58,835 47,894 45,519 49 Individuals, partnerships, and corporations 39,732 33,028 33,638 31,0% 36,853 32,363 41,742 33,485 30,876 50 States and political subdivisions 1,025 629 911 736 813 614 657 655 466 51 U.S. government 214 574 683 441 288 197 338 152 186 52 Depository institutions in the United States 4,782 4,183 5,154 5,188 7,806 3,900 7,722 4,628 4,571 53 Banks in foreign countries 5,046 4,334 4,628 4,302 5,330 3,728 4,934 5,154 5,036 54 Foreign governments and official institutions 560 551 554 448 836 553 1,216 738 681 55 Certified and officers' checks 2,329 2,206 3,911 3,191 3,209 3,397 2,226 3,082 3,703 56 Transaction balances other than demand deposits (ATS, NOW, Super NOW, telephone transfers) 9,040 8,753 8,660 8,514 8,832 8,737 8,779 8,571 8,489 57 Nontransaction balances 118,212 116,805 117,186 116,567 117,472 116,647 119,678 116,813 116,135 58 Individuals, partnerships, and corporations 109,912 108,477 108,938 108,271 109,254 108,521 111,570 108,796 108,150 59 States and political subdivisions 6,171 6,179 6,117 6,157 6,058 6,022 6,012 5,945 5,891 60 U.S. government 36 41 40 39 37 37 41 41 41 61 Depository institutions in the United States 1,883 1,906 1,902 1,900 1,929 1,877 1,856 1,856 1,870 62 Foreign governments, official institutions, and banks ... 209 202 189 199 194 189 199 175 182 63 Liabilities for borrowed money 62,600 66,092 66,347 67,419 72,464 69,674 76,139 79,253 70,446 64 Borrowings from Federal Reserve Banks 0 0 0 1,000 0 0 0 6,232 0 65 Treasury tax-and-loan notes 411 747 1,691 2,534 2,045 2,640 3,040 4,688 4,638 66 All other liabilities for borrowed money8 62,188 65,345 64,656 63,885 70,419 67,033 73,099 68,332 65,807 67 Other liabilities and subordinated notes and debentures ... 32,726 31,796 35,205 36,532 37,171 38,050 35,298 37,610 36,612 68 Total liabilities 276,265 268,952 276,876 274,433 291,074 277,859 298,730 290,143 277,201 69 Residual (total assets minus total liabilities)9 25,100 25,408 25,191 25,309 25,700 25,916 25,580 25,541 25,362 MEMO 70 Total loans and leases (gross) and investments adjusted2,10 215,242 214,575 218,856 218,241 223,623 222,486 226,484 224,995 220,317 71 Total loans and leases (gross) adjusted10 179,972 178,809 183,045 182,369 187,644 186,348 190,180 188,675 183,360 72 Time deposits in amounts of $100,000 or more 39,934 39,178 39,619 39,666 39,617 39,215 39,628 38,643 38,116 73 U.S. Treasury securities maturing in one year or less 2,301 2,611 2,891 2,897 2,683 2,394 2,516 2,524 2,644 1. These data also appear in the Board's H.4.2 (504) release. For address, see 7. Includes trading account securities. inside front cover. 8. Includes federal funds purchased and securities sold under agreements to 2. Excludes trading account securities. repurchase. 3. Not available due to confidentiality. 9. Not a measure of equity capital for use in capital adequacy analysis or for 4. Includes U.S. government-issued or guaranteed certificates of participation other analytic uses. in pools of residential mortgages. 10. Exclusive of loans and federal funds transactions with domestic commer- Digitized for FRA5.S IEncRlu des securities purchased under agreements to resell. cial banks. 6. Includes allocated transfer risk reserve. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Weekly Reporting Commercial Banks A21 1.30 LARGE WEEKLY REPORTING U.S. BRANCHES AND AGENCIES OF FOREIGN BANKS1 Assets and Liabilities Millions of dollars, Wednesday figures 1990 AAccccoouunntt July 4r July IT July 18' July 25' Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 1 Cash and due from depository institutions ... 13,731 14,202 13,810 14,408 13,975 15,706 14,755 15,019 14,262 2 Total loans and securities 156,844 156,591 156,167 155,717 154,212 157,005 158,374 160,027 158,445 3 U.S. Treasury and government agency securities 10,198 10,112 10,166 10,642 10,629 10,189 10,524 10,591 1100,,225588 4 Other securities 7,192 7,203 7,061 7,160 7,217 7,292 7,263 7,272 7,266 5 Federal funds sold 9,041 10,376 8,369 8,771 7,157 7,994 8,053 8,418 8,267 6 To commercial banks in the United States . 7,740 9,310 7,053 7,674 6,126 6,788 6,996 7,264 7,290 7 To others 1,301 1,066 1,316 1,097 1,031 1,206 1,057 1,154 977 8 Other loans, gross 130,413 128,900 130,571 129,144 129,209 131,530 132,534 133,746 132,654 9 Commercial and industrial 77,378 75,817 76,484 75,167 75,351 75,773 77,540 77,064 76,032 10 Bankers acceptances and commercial paper 2,648 2,435 2,108 1,995 2,129 2,234 2,282 2,149 2,358 11 All other 74,730 73,382 74,376 73,172 73,222 73,539 75,258 74,915 73,674 12 U.S. addressees 73,382 72,089 73,047 71,860 71,908 72,212 73,913 73,531 72,340 13 Non-U.S. addressees 1,348 1,293 1,329 1,312 1,314 1,327 1,345 1,384 1,334 14 Loans secured by real estate3 23,450 23,569 23,684 23,831 24,061 24,169 24,149 24,214 24,276 15 To financial institutions 26,053 26,019 26,342 26,476 26,465 27,580 26,425 27,237 27,831 16 Commercial banks in the United States.. 19,983 19,714 20,240 20,534 20,504 21,457 20,239 20,918 20,839 17 Banks in foreign countries 1,232 1,353 1,244 1,117 1,028 1,163 1,320 1,503 1,923 18 Nonbank financial institutions 4,838 4,952 4,858 4,825 4,933 4,960 4,866 4,816 5,069 19 To foreign governments and official institutions 225 223 212 212 208 227 209 208 214 20 For purchasing and carrying securities 1,704 1,456 2,178 1,831 1,663 2,174 2,887 3,473 2,892 21 All other3 1,603 1,816 1,671 1,627 1,461 1,607 1,324 1,550 1,409 22 Other assets (claims on nonrelated parties) .. 34,000 33,561 33,682 33,885 33,752 33,783 33,249 33,257 32,824 23 Net due from related institutions 14,918 14,218 14,180 12,423 17,175 15,693 19,522 14,844 14,157 24 Total assets 219,492 218,573 217,839 216,435 219,118 222,188 225,902 223,146 219,690 25 Deposits or credit balances due to other than directly related institutions 50,005 49,923 50,233 49,155 48,819 49,237 49,467 49,701 48,813 26 Transaction accounts and credit balances . 4,207 4,014 4,323 3,999 4,348 4,332 4,465 4,321 4,125 27 Individuals, partnerships, and corporations 2,818 2,729 2,820 2,717 2,840 2,778 2,864 2,908 2,796 78 Other 1,389 1,285 1,503 1,282 1,508 1,554 1,601 1,413 1,329 29 Nontransaction accounts 4455,,779988 45,909 45,910 45,156 44,471 44,905 45,002 45,380 44,688 30 Individuals, partnerships, and corporations 38,199 38,086 38,124 37,154 36,600 36,614 36,241 35,968 35,812 31 Other 7,599 7,823 7,786 8,002 7,871 8,291 8,761 9,412 8,876 32 Borrowings from other than directly related institutions 108,974 108,563 111,500 106,600 111,850 112,504 116,905 114,867 110099,,557766 33 Federal funds purchased6 52,086 51,954 53,016 50,036 56,535 51,947 56,843 53,245 49,921 34 From commercial banks in the United States 25,766 23,474 26,559 23,895 29,059 25,886 32,304 27,323 25,291 35 From others 26,320 28,480 26,457 26,141 27,476 26,061 24,539 25,922 24,630 36 Other liabilities for borrowed money 56,888 56,609 58,484 56,564 55,315 60,557 60,062 61,622 59,655 37 To commercial banks in the United States 32,319 32,032 32,432 32,542 31,749 33,314 34,374 33,980 33,679 38 To others 24,569 24,577 26,052 24,022 23,566 27,243 25,688 27,642 25,976 39 Other liabilities to nonrelated parties 32,970 32,750 32,865 32,737 33,773 33,273 33,996 33,118 32,946 40 Net due to related institutions 27,542 27,337 23,239 27,943 24,674 27,174 25,532 25,460 28,354 41 Total liabilities 219,492 218,573 217,839 216,435 219,118 222,188 225,902 223,146 219,690 MEMO 42 Total loans (gross) and securities adjusted .. 129,121 127,567 128,874 127,509 127,582 128,760 131,139 131,845 130,316 43 Total loans (gross) adjusted7 111,731 110,252 111,647 109,707 109,736 111,279 113,352 113,982 112,792 1. Effective Jan. 4, 1989, the reporting panel includes a new group of large U.S. separate component of Other loans, gross. Formerly, these loans were included in branches and agencies of foreign banks. Earlier data included 65 U.S. branches "All other", line 21. and agencies of foreign banks that included those branches and agencies with 4. Includes credit balances, demand deposits, and other checkable deposits. assets of $750 million or more on June 30, 1980, plus those branches and agencies 5. Includes savings deposits, money market deposit accounts, and time that had reached the $750 million asset level on Dec. 31, 1984. These data also deposits. appear in the Board's H.4.2 (504) release. For address, see inside front cover. 6. Includes securities sold under agreements to repurchase. 2. Includes securities purchased under agreements to resell. 7. Exclusive of loans to and federal funds sold to commercial banks in the 3. Effective Jan. 4, 1989, loans secured by real estate are being reported as a United States. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A22 Domestic Nonfinancial Statistics • November 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 11998855 11998866 11998877 11998888 DDeecc.. DDeecc.. DDeecc.. DDeecc.. Mar. June Sept. Dec. Mar. June 1 AH holders—Individuals, partnerships, and corporations 321.0 363.6 343.5 354.7 330.4 329.3 337.3 352.2 328.7 334.3' 2 Financial business 32.3 41.4 36.3 38.6 36.3 33.0 33.7 33.8 34.1 34.9' 3 Nonfinancial business 178.5 202.0 191.9 201.2 182.2 185.9 190.4 202.5 183.3 186.5' 4 Consumer 85.5 91.1 90.0 88.3 87.4 86.6 87.9 90.3 86.6 86.4' 5 Foreign 3.5 3.3 3.4 3.7 3.7 2.9 2.9 3.1 3.0 3.1' 6 Other 21.2 25.8 21.9 22.8 20.7 21.0 22.4 22.5 21.7 23.5' Weekly reporting banks 1989 1990 11998855 11998866 11998877 11998888 DDeecc.. DDeecc.. DDeecc.. DDeecc.. 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 IInnssttrruummeenntt Dec. Dec. Dec. Dec. Dec. Feb. Mar. Apr. May Juner July Commercial paper (seasonally adjusted unless noted otherwise) 1 All issuers 298,779 329,991 358,056 457,297 529,055 540,148 546,786 544,481 538,686 537,023 545,849 Financial companies1 Dealer-placed paper1 2 Total 78,443 101,072 102,844 160,094 187,084 185,391 184,097 118855,,110077 118866,,115555 119911,,446633 119999,,446666 3 Bank-related (not seasonally adjusted) 1,602 2,265 1,428 1,248 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Directly placed paper4 4 Total 135,320 151,820 173,980 194,537 212,210 215,650 215,501 221133,,884433 220099,,220033 220022,,110011 220022,,882299 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 81,232 102,666 129,761 139,107 147,188 145,531 143,328 143,459 143,554 Bankers dollar acceptances (not seasonally adjusted)6 7 Total 68,413 64,974 70,565 66,631 62,972 57,852 55,865 53,945 54,766 53,750 52,006 Holder 8 Accepting banks 11,197 13,423 10,943 9,086 9,433 10,351 9,574 9,200 9,000 9,972 9,628 9 Own bills 9,471 11,707 9,464 8,022 8,510 8,907 8,386 7,850 7,632 8,639 8,395 10 Bills bought 1,726 1,716 1,479 1,064 924 1,444 1,188 1,350 1,368 1,332 1,233 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 1,123 1,180 1,141 1,291 1,507 1,571 13 Others 56,279 50,234 58,658 56,052 52,473 46,379 45,111 43,604 44,475 42,271 40,806 Basis 14 Imports into United States 15,147 14,670 16,483 14,984 15,651 14,522 14,418 13,413 13,993 14,801 13,691 15 Exports from United States 13,204 12,960 15,227 14,410 13,683 12,567 12,161 12,610 12,727 12,511 12,186 16 All other 40,062 37,344 38,855 37,237 33,638 30,764 29,286 27,922 28,046 26,438 26,129 1. Institutions engaged primarily in activities such as, but not limited to, 5. Includes public utilities and firms engaged primarily in such activities as commercial savings, and mortgage banking; sales, personal, and mortgage fi- communications, construction, manufacturing, mining, wholesale and retail trade, nancing; factoring, finance leasing, and other business lending; insurance under- •transportation, and services. writing; and other investment activities. 6. Beginning January 1988, the number of respondents in the bankers accep- 2. Includes all financial company paper sold by dealers in the open market. tance survey were reduced from 155 to 111 institutions—those with $100 million 3. Beginning January 1989, bank-related series have been discontinued. or more in total acceptances. The panel is revised every January and currently has 4. As reported by financial companies that place their paper directly with about 100 respondents. The current reporting group accounts for over 90 percent investors. of total acceptances activity. 1.33 PRIME RATE CHARGED BY BANKS on Short-Term Business Loans Percent per year Rate Period Av r e a r t a e ge Period Av r e a r t a e ge 7.75 1987 8.21 1988— Jan. 8.75 1989— June .. 8.00 1988 9.32 Feb. 8.51 July .. 8.25 1989 10.87 Mar. 8.50 Aug. . 8.75 Apr. 8.50 Sept. . 9.25 1987— Jan. 7.50 May 8.84 Oct. .. 9.00 Feb. 7.50 June 9.00 Nov. .. 8.75 Mar. 7.50 July 9.29 Dec. .. Apr. 7.75 Aug. 9.84 8.50 May 8.14 Sept. 10.00 1990— Jan. ... 9.00 June 8.25 Oct. 10.00 Feb. .. 9.50 July 8.25 Nov. 10.05 Mar. .. 10.00 Aug. 8.25 Dec. 10.50 Apr. 10.50 Sept. 8.70 May ... 11.00 O N c o t v . . 9 8. . 7 0 8 7 1989— J F a e n b . . 1 1 0 0 . . 9 5 3 0 J Ju u l n y e .. . . . 11.50 Dec. 8.75 Mar. 11.50 Aug. .. 11.00 Apr. 11.50 Sept. .. 10.50 May 11.50 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

A24 Domestic Nonfinancial Statistics • November 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 May June July Aug. Aug. 3 Aug. 10 Aug. 17 Aug. 24 Aug. 31 MONEY MARKET RATES 1 Federal funds1'2 6.66 7.57 9.21 8.18 8.29 8.15 8.13 8.03 8.07 8.13 8.30 8.08 2 Discount window borrowing1, '3 5.66 6.20 6.93 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 Commercial paper ' 3 1-month 6.74 7.58 9.11 8.24 8.21 8.09 7.99 7.89 7.92 8.01 8.07 8.03 4 3-month 6.82 7.66 8.99 8.25 8.14 7.99 7.88 7.78 7.77 7.85 7.98 7.96 5 6-month 6.85 7.68 8.80 8.23 8.06 7.90 7.77 7.67 7.64 7.71 7.90 7.89 Finance paper, directly placed4' 6 1-month 6.61 7.44 8.99 8.14 8.12 7.99 7.88 7.79 7.78 7.89 7.95 7.94 7 3-month 6.54 7.38 8.72 8.12 8.01 7.87 7.69 7.62 7.57 7.68 7.79 7.78 8 6-month 6.37 7.14 8.16 8.04 7.79 7.66 7.46 7.42 7.40 77..3388 77..5533 7.56 Bankers acceptances5'6 9 3-month 6.75 7.56 8.87 8.12 8.00 7.86 7.75 7.62 7.65 7.75 7.90 7.80 10 6-month 6.78 7.60 8.67 8.08 7.89 7.73 7.64 7.46 7.51 7.60 7.83 7.73 Certificates of deposit, secondary market7 11 1-month 6.75 7.59 9.11 8.25 8.20 8.09 7.98 7.90 7.90 7.97 8.08 8.02 12 3-month 6.87 7.73 9.09 8.35 8.23 8.10 7.97 7.89 7.87 7.94 8.09 8.04 13 6-month 7.01 7.91 9.08 8.48 8.28 8.12 7.99 7.89 7.87 7.93 8.13 8.10 14 Eurodollar deposits. 3-month8 7.07 7.85 9.16 8.35 8.23 8.09 7.99 7.91 7.88 7.91 8.04 8.14 U.S. Treasury bills Secondary market9 15 3-month 5.78 6.67 8.11 7.74 7.73 7.62 7.45 7.43 7.37 7.45 7.54 7.46 16 6-month 6.03 6.91 8.03 7.76 7.63 7.52 7.38 7.29 7.29 7.37 7.49 7.44 17 1-year 6.33 7.13 7.92 7.73 7.53 7.40 7.26 7.16 7.18 7.22 7.39 7.32 Auction average 18 3-month 5.82 6.68 8.12 7.78 7.74 7.66 7.44 7.50 7.23 7.41 7.55 7.49 19 6-month 6.05 6.92 8.04 7.82 7.64 7.57 7.36 7.37 7.19 7.31 7.45 7.48 20 1-year 6.33 7.17 7.91 8.05 7.65 7.52 7.37 7.34 n.a. n.a. n.a. 7.40 CAPITAL MARKET RATES U.S. Treasury notes and bonds11 Constant maturities 21 1-year 6.77 7.65 8.53 8.32 8.10 7.94 7.78 7.67 7.70 7.73 7.93 7.85 22 2-year 7.42 8.10 8.57 8.64 8.35 8.16 8.06 7.88 7.98 8.00 8.23 8.16 23 3-year 7.68 8.26 8.55 8.69 8.40 8.26 8.22 8.01 8.15 8.15 8.38 8.33 24 5-year 7.94 8.47 8.50 8.74 8.43 8.33 8.44 8.12 8.36 8.39 8.62 8.56 25 7-year 8.23 8.71 8.52 8.78 8.52 8.46 8.64 8.28 8.60 8.60 8.81 8.79 26 10-year 8.39 8.85 8.49 8.76 8.48 8.47 8.75 8.37 8.72 8.71 8.92 8.88 27 30-year 8.59 8.96 8.45 8.73 8.46 8.50 8.86 8.44 8.82 8.84 9.03 9.00 Composite 28 Over 10 years (long-term) 8.64 8.98 8.58 8.90 8.62 8.64 8.97 8.54 8.93 8.96 9.14 9.11 State and local notes and bonds Moody's series14 29 Aaa 7.14 7.36 7.00 6.97 6.88 6.96 6.99 6.90 6.95 6.95 6.97 7.19 30 Baa 8.17 7.83 7.40 7.37 7.11 7.13 7.21 7.08 7.12 7.25 7.13 7.47 31 Bond Buyer series 7.63 7.68 7.23 7.35 7.24 7.19 7.32 7.08 7.22 7.26 7.56 7.47 Corporate bonds Seasoned issues16 32 All industries 9.91 10.18 9.66 9.87 9.67 9.65 9.84 9.59 9.77 9.80 9.94 9.98 33 Aaa 9.38 9.71 9.26 9.47 9.26 9.24 9.41 9.19 9.34 9.37 9.50 9.56 34 Aa 9.68 9.94 9.46 9.70 9.49 9.47 9.63 9.41 9.56 9.63 9.71 9.75 35 A 9.99 10.24 9.74 9.89 9.70 9.69 9.89 9.64 9.84 9.85 9.99 10.03 36 Baa 10.58 10.83 10.18 10.41 10.22 10.20 10.41 10.14 10.34 1100..3366 10.54 1100..5566 37 A-rated, recently offered utility bonds17 9.96 10.20 9.79 10.04 9.85 9.96 10.29 10.07 10.22 10.34 10.50 10.31 MEMO: Dividend/price ratio 38 Preferred stocks 8.37 9.23 9.05 9.04 9.01 8.94 8.97 8.90 8.99 8.87 9.05 9.02 39 Common stocks 3.08 3.64 3.45 3.44 3.36 3.37 3.65 3.43 3.61 3.59 3.85 3.76 1. Weekly, monthly and annual figures are averages of all calendar days, places. Thus, average issuing rates in bill auctions will be reported using two where the rate for a weekend or holiday is taken to be the rate prevailing on the rather than three decimal places. preceding business day. The daily rate is the average of the rates on a given day 11. Yields are based on closing bid prices quoted by at least five dealers. weighted by the volume of transactions at these rates. 12. Yields adjusted to constant maturities by the U.S. Treasury. That is, yields 2. Weekly figures are averages for statement week ending Wednesday. are read from a yield curve at fixed maturities. Based on only recently issued, 3. Rate for the Federal Reserve Bank of New York. actively traded securities. 4. Unweighted average of offering rates quoted by at least five dealers (in the 13. Averages (to maturity or call) for all outstanding bonds neither due nor case of commercial paper), or finance companies (in the case of finance paper). callable in less than 10 years, including one very low yielding "flower" bond. Before November 1979, maturities for data shown are 30-59 days, 90-119 days, 14. General obligations based on Thursday figures; Moody's Investors Service. and 120-179 days for commercial paper; and 30-59 days, 90-119 days, and 15. General obligations only, with 20 years to maturity, issued by 20 state and 150-179 days for finance paper. local governmental units of mixed quality. Based on figures for Thursday. 5. Yields are quoted on a bank-discount basis, rather than in an investment 16. Daily figures from Moody's Investors Service. Based on yields to maturity yield basis (which would give a higher figure). on selected long-term bonds. 6. Dealer closing offered rates for top-rated banks. Most representative rate 17. Compilation of the Federal Reserve. This series is an estimate of the yield (which may be, but need not be, the average of the rates quoted by the dealers). on recently-offered, A-rated utility bonds with a 30-year maturity and 5 years of 7. Unweighted average of offered rates quoted by at least five dealers early in call protection. Weekly data are based on Friday quotations. the day. 18. Standard and Poor's corporate series. Preferred stock ratio based on a 8. Calendar week average. For indication purposes only. sample of ten issues: four public utilities, four industrials, one financial, and one 9. Unweighted average of closing bid rates quoted by at least five dealers. transportation. Common stock ratios on the 500 stocks in the price index. 10. Rates are recorded in the week in which bills are issued. Beginning with the NOTE. These data also appear in the Board's H. 15 (519) and G. 13 (415) releases. Treasury bill auction held on Apr. 18, 1983, bidders were required to state the For address, see inside front cover. percentage yield (on a bank discount basis) that they would accept to two decimal Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Financial Markets A25 1.36 STOCK MARKET Selected Statistics 1989 1990 11998877 11998888 11998899 Dec. Jan. Feb. Mar. Apr. May June July Aug. Prices and trading (averages of daily figures) Common stock prices 1 New York Stock Exchange (Dec. 31, 1965 = 50) 161.78 149.97 180.13 192.67 187.96 182.55 186.26 185.61 191.35 196.68 196.61 181.45 2 Industrial 195.31 180.83 228.04 230.12 225.79 220.60 226.14 226.86 234.85 242.42 245.86 226.73 3 Transportation 140.52 134.09 174.90 177.25 173.67 166.69 175.08 173.54 173.53 177.37 173.18 147.41 4 Utility 74.29 72.22 94.33 99.73 95.69 92.15 92.99 91.92 93.29 93.65 89.85 85.81 5 Finance 146.48 127.41 162.01 155.63 150.11 142.68 143.14 138.57 142.94 147.93 143.11 128.14 6 Standard & Poor's Corporation (1941-43 = 10)1 287.00 265.88 323.05 348.57 339.97 330.45 338.47 338.18 350.25 360.39 360.03 330.75 7 American Stock Exchange (Aug. 31, 1973 = 50? 316.78 295.08 356.67 373.87 367.40 355.30 360.77 353.32 353.82 361.62 359.09 333.49 Volume of trading (thousands of shares) 8 New York Stock Exchange 188,922 161,386 165,568 160,671 172,420 155,960 149,240 140,062 163,486 153,634 160,490 174,446 9 American Stock Exchange 13,832 9,955 13,124 13,298 14,831 13,735 15,133 13,961 14,005 12,421 12,529 15,881 Customer financing (end-of-period balances, in millions of dollars) 10 Margin credit at broker-dealers3 31,990 32,740 34,320 34,320 32,640 31,480 30,760 31,060 31,600 31,720 32,130 30,350 Free credit balances at brokers4 11 Margin-account5 4,750 5,660 7,040 7,040 6,755 6,575 6,525 6,465 6,215 6,490 6,385 7,140 12 Cash-account 15,640 16,595 18,505 18,505 17,370 16,200 16,510 15,375 15,470 15,625 17,035 16,745 Margin requirements (percent of market value and effective date)6 Mar. 11, 1968 June 8, 1968 May 6, 1970 Dec. 6, 1971 Nov. 24, 1972 Jan. 3, 1974 13 Margin stocks 70 80 65 55 65 50 14 Convertible bonds 50 60 50 50 50 50 15 Short sales 70 80 65 55 65 50 1. Effective July 1976, includes a new financial group, banks and insurance "margin securities" (as defined in the regulations) when such credit is collatercompanies. With this change the index includes 400 industrial stocks (formerly alized by securities. Margin requirements on securities other than options are the 425), 20 transportation (formerly 15 rail), 40 public utility (formerly 60), and 40 difference between the market value (100 percent) and the maximum loan value of financial. collateral as prescribed by the Board. Regulation T was adopted effective Oct. 15, 2. Beginning July 5, 1983, the American Stock Exchange rebased its index 1934; Regulation U, effective May 1, 1936; Regulation G, effective Mar. 11, 1968; effectively cutting previous readings in half. and Regulation X, effective Nov. 1, 1971. 3. Beginning July 1983, under the revised Regulation T, margin credit at On Jan. 1, 1977, the Board of Governors for the first time established in broker-dealers includes credit extended against stocks, convertible bonds, stocks Regulation T the initial margin required for writing options on securities, setting acquired through exercise of subscription rights, corporate bonds, and govern- it at 30 percent of the current market-value of the stock underlying the option. On ment securities. Separate reporting of data for margin stocks, convertible bonds, Sept. 30, 1985, the Board changed the required initial margin, allowing it to be the and subscription issues was discontinued in April 1984. same as the option maintenance margin required by the appropriate exchange or 4. Free credit balances are in accounts with no unfulfilled commitments to the self-regulatory organization; such maintenance margin rules must be approved by brokers and are subject to withdrawal by customers on demand. the Securities and Exchange Commission. Effective Jan. 31, 1986, the SEC 5. New series beginning June 1984. approved new maintenance margin rules, permitting margins to be the price of the 6. These regulations, adopted by the Board of Governors pursuant to the option plus 15 percent of the market value of the stock underlying the option. Securities Exchange Act of 1934, limit the amount of credit to purchase and carry Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A26 Domestic Nonfinancial Statistics • November 1990 1.37 SELECTED FINANCIAL INSTITUTIONS Selected Assets and Liabilities Millions of dollars, end of period 1989 1990 AAccccoouunntt 11998877 11998888 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June SAIF-insured institutions 1 Assets 1,250,855 1,350,500 1,298,682 1,286,710 1,277,191 1,249,055' 1,236,543' 1,225,221' 1,223,365' 1,210,424 2 Mortgages 721,593 764,513 755,427 748,780 745,091 733,729' 727,527' 721,513' 717,687' 715,488 3 Mortgage-backed securities 201,828 214,587 188,493 181,464 176,386 170,532r 169,459' 167,303' 167,692' 166,164 4 Contra-assets to mortgage assets . 42,344 37,950 27,085 25,950 24,976 25,457' 24,161' 22,815' 23,093' 21,978 5 Commercial loans 23,163 33,889 32,936 32,572 32,344 32,150' 31,919' 31,777' 31,072' 30,932 6 Consumer loans 57,902 61,922 60,405 59,722 59,372 58,685' 57,303' 56,804' 56,785' 56,623 7 Contra-assets to nonmortgage loans . 3,467 3,056 3,129 3,107 3,194 3,592' 2,218' 2,248' 2,432' 2,230 8 Cash and investment securities 169,717 186,986 169,526 172,727 172,465 166,053' 160,513' 157,307 162,304' 153,349 n.a. n.a. 9 Other3 122,462 129,610 122,109 120,501 119,704 116,955' 116,201' 115,580' 113,349' 112,077 10 Liabilities and net worth . 1,250,855 1,350,500 1,298,682 1,286,710 1,277,191 1,249,055' 1,236,543' 1,225,221' 1,223,365' 1,210,424 11 Savings capital 932,616 971,700 958,901 948,500 946,655 945,656' 933,842' 926,436' 929,912' 916,058 12 Borrowed money 249,917 299,400 281,684 275,979 268,462 252,230' 252,942' 248,034' 246,875' 246,647 13 FHLBB 116,363 134,168 133,633 130,514 127,671 124,577' 121,732 120,633 117,489' 115,620 14 Other 133,554 165,232 148,051 145,465 140,791 127,653' 131,210' 127,401' 129,386' 131,027 15 Other 21,941 24,216 29,742 30,971 31,991 27,556' 26,988' 28,116' 26,003' 27,340 16 Net worth n.a. n.a. 28,355 31,260 30,083 23,612' 23,051' 22,637' 20,575' 20,393 SAIF-insured federal savings banks 17 Assets 284,270 425,966 500,937 502,484 499,995 498,522 497,412 489,113 18 Mortgages 161,926 230,734 283,162 283,652 282,510 283,844 280,922 275,727 19 Mortgage-backed securities 45,826 64,957 72,478 72,332 71,204 70,499 70,386 69,740 20 Contra-assets to mortgage assets' . 9,100 13,140 13,801 13,506 13,216 13,548 10,234 9,503 21 Commercial loans 6,504 16,731 18,256 18,299 18,172 18,143 18,470 18,079 22 Consumer loans 17,696 24,222 28,762 28,322 28,079 28,212 28,509 26,517 23 Contra-assets to nonmortgage loans . 678 889 1,073 1,048 1,082 1,193 620 634 24 Finance leases plus interest 591 880 1,092 1,085 1,092 1,101 n.a. n.a. n. a. n. a. n.a. n.a. 25 Cash and investment ... 35,347 61,029 64,073 65,193 65,191 64,538 62,730 61,767 26 Other 24,069 35,412 40,659 40,799 40,852 39,981 40,317 40,710 27 Liabilities and net worth . 284,270 425,966 500,937 502,484 499,995 498,522 497,412 489,113 28 Savings capital 203,196 298,197 353,474 355,923 355,874 360,547 360,285 353,385 29 Borrowed money 60,716 99,286 115,627 114,231 111,369 108,448 109,028 106,237 30 FHLBB 29,617 46,265 57,941 57,793 56,842 57,032 55,862 55,081 31 Other 31,099 53,021 57,686 56,438 54,527 51,416 53,166 51,156 32 Other 5,324 8,075 9,904 10,317 10,749 9,041 9,885 10,330 33 Net worth 15,034 20,218 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 Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June Credit unions4 34 Total assets/liabilities and capital 174,593 181,812 181,527 182,856 183,688 183,301 186,119 192,718 193,208 195,020 35 Federal 114,566 118,746 118,887 119,682 120,666 120,489 122,885 126,690 127,250 128,648 36 State 60,027 63,066 62,640 63,174 63,022 62,812 63,234 66,028 65,958 66,372 37 Loans outstanding n. a. 113,191 122,522 122,997 122,899 122,608 122,332 121,968 121,660 122,616 123,205 n. a. 38 Federal 73,766 80,548 80,570 80,601 80,272 80,041 79,715 79,407 80,205 80,550 39 State 39,425 41,874 42,427 42,298 42,336 42,291 42,253 42,253 42,411 42,655 40 Savings 159,010 164,050 164,695 165,533 167,371 166,629 168,609 175,942 175,745 176,701 41 Federal 104,431 106,633 107,588 108,319 109,653 109,818 111,246 115,714 115,554 116,402 42 State 54,579 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 1,166,870 1,266,773 1,276,181 1,289,467 1,303,691 Securities 44 Government 84,426 84,051 82,867 83,727 83,609 84,381 45 United States5 57,078 58,564 56,684 57,726 57,290 58,169 46 State and local 10,681 9,136 9,037 9,019 9,280 9,191 47 Foreign6 16,667 16,351 17,146 16,982 17,039 17,021 48 Business 569,199 660,416 742,537 748,075 758,803 777,415 n.a. n.a. n.a. n. a. n. a. n.a. 49 Bonds 472,684 556,043 621,856 628,695 637,690 642,445 50 Stocks 96,515 104,373 120,681 119,380 121,113 134,970 51 Mortgages 203,545 232,863 240,189 242,391 243,728 246,345 52 Real estate 34,172 37,371 38,942 39,343 39,339 39,368 53 Policy loans 53,626 54,236 56,403 56,727 56,916 57,141 54 Other assets 89,586 93,358 105,835 105,918 107,072 110,284 1. Contra-assets are credit-balance accounts that must be subtracted from the International Bank for Reconstruction and Development. corresponding gross asset categories to yield net asset levels. Contra-assets to NOTE. SAIF-insured institutions: Estimates by the OTS for all institutions mortgage loans, contracts, and pass-through securities include loans in process, insured by the SAIF and based on the OTS thrift Financial Report. unearned discounts and deferred loan fees, valuation allowances for mortgages SAIF-insured federal savings banks: Estimates by the OTS for federal savings "held for sale," and specific reserves and other valuation allowances. banks insured by the SAIF and based on the OTS thrift Financial Report. 2. Contra-assets are credit-balance accounts that must be subtracted from the Credit unions: Estimates by the National Credit Union Administration for corresponding gross asset categories to yield net asset levels. Contra-assets to federally chartered and federally insured state-chartered credit unions serving nonmortgage loans include loans in process, unearned discounts and deferred loan natural persons. fees, and specific reserves and valuation allowances. Life insurance companies: Estimates of the American Council of Life Insurance 3. Holding of stock in Federal Home Loan Bank and Finance leases plus for all life insurance companies in the United States. Annual figures are annualinterest are included in "Other" (line 9). statement asset values, with bonds carried on an amortized basis and stocks at 4. Data include all federally insured credit unions, both federal and state year-end market value. Adjustments for interest due and accrued and for chartered, serving natural persons. differences between market and book values are not made on each item separately 5. Direct and guaranteed obligations. Excludes federal agency issues not but are included, in total, in "other assets." guaranteed, which are shown in the table under "Business" securities. As of June 1989 Savings bank data are no longer available. 6. Issues of foreign governments and their subdivisions and bonds of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A28 Domestic Financial Statistics • November 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 Mar. Apr. May June July Aug. U.S. budget1 1 Receipts, total 854,143 908,166 990,701 64,819 139,624 69,212 110,614 72,357 78,486 2 On-budget 640,741 666,675 727,035 38,990 106,775 45,514 83,717 50,446 56,284 3 Off-budget 213,402 241,491 263,666 25,829 32,849 23,698 26,897 21,911 22,202 4 Outlays, total 1,003,830 1,063,318 1,142,714' 118,165 97,865 111,769 121,747' 98,291 131,240 5 On-budget 809,998 860,627 931,493' 97,642 79,749 91,818 105,787' 79,844 89,751 6 Off-budget 193,832 202,691 211,221 20,523 18,116 19,951 15,960 18,447 41,489 7 Surplus, or deficit (-), total -149,687 -155,152 -152,013' -53,346 41,760 -42,558 -11,133' -25,934 -52,754 8 On-budget -169,257 -193,952 -204,458' -58,652 27,027 -46,305 -22,070' -29,398 -33,467 9 Off-budget 19,570 38,800 52,445 5,306 14,733 3,747 10,937 3,464 -19,287 Source of financing (total) 10 Borrowing from the public 151,717 166,139 140,811 56,090 -5,935 23,380 23,520 24,23c 47,329 11 Operating cash (decrease, or increase (-)) . -5,052 -7,962 3,425 1,123 -20,830 25,594 -20,916 9,862 2,433 12 Other 3,022 -3,025 7,777' -3,867 -14,995 -6,416 8,529' -8,158' 2,992 MEMO 13 Treasury operating balance (level, end of period) 36,436 44,398 40,973 18,466 39,296 13,702 34,618 24,756 22,323 14 Federal Reserve Banks 9,120 13,023 13,452 4,832 5,205 4,426 5,470 6,369 4,453 15 Tax and loan accounts 27,316 31,375 27,521 13,634 34,091 9,276 29,148 18,387 17,869 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 OUTLAYS1 Millions of dollars Calendar year Fiscal Fiscal SSoouurrccee oorr ttyyppee year year 1988 1989 1990 1990 1988 1989 H2 HI H2 HI June July Aug. RECEIPTS 1 All sources 908,166 990,701 449,330 527,574 470,329 548,977 110,614 72,357 78,486 2 Individual income taxes, net 401,181 445,690 200,300 233,572 218,661 243,529 49,639 33,290 36,434 3 Withheld 341,435 361,386 179,600 174,230 193,2% 190,219 31,469 32,211 34,610 4 Presidential Election Campaign Fund 33 32 4 28 3 30 5 31 -29 5 Nonwithheld 132,199 154,839 29,880 121,563 33,303 118,241 19,573 2,783 3,451 6 Refunds 72,487 70,567 9,186 62,251 7,943 64,%2 1,408 1,734 1,598 Corporation income taxes 7 Gross receipts 109,683 117,015 56,409 61,585 52,269 58,830 19,513 3,364 2,564 8 Refunds 15,487 13,723 7,250 7,259 6,842 8,326 944 1,307 956 9 Social insurance taxes and contributions, net 334,335 359,416 157,603 200,127 162,574 210,476 34,326 29,610 32,047 10 Employment taxes and contributions 305,093 332,859 144,983 184,569 152,407 195,269 33,694 27,554 27,919 11 Self-employment taxes and contributions 17,691 18,504 3,032 16,371 1,947 19,017 2,934 0 0 12 Unemployment insurance 24,584 22,011 10,359 13,279 7,909 12,929 252 1,701 3,712 13 Other net receipts 4,659 4,547 2,262 2,277 2,260 2,278 380 355 416 14 Excise taxes 35,604 34,386 19,299 16,814 16,844 18,188 3,566 3,053 2,745 15 Customs deposits 15,411 16,334 8,107 7,918 8,667 8,0% 1,387 1,505 1,627 16 Estate and gift taxes 7,594 8,745 4,054 4,583 4,451 6,442 852 924 883 17 Miscellaneous receipts 19,909 22,839 10,809 10,235 13,703 11,742 2,276 1,917 3,142 OUTLAYS 18 All types 1,063,318 1,142,714'' 552,726 565,422 587,656r 641,269r 121,747'' 98,291 131,240 19 National defense 290,361 303,551 150,4% 148,098 149,613 152,733 27,870 22,717 28,664 20 International affairs 10,471 9,596 2,627 6,567 6,029 6,770 578 28 1,039 21 General science, space, and technology 10,841 12,891 5,852 6,238 7,091 6,974 1,253 1,283 1,333 22 Energy 2,297 3,745 1,966 2,221 1,597 1,504 230 211 207 23 Natural resources and environment 14,625 16,084 9,072 7,022 9,183 7,343 1,233 1,375 1,388 24 Agriculture 17,210 16,948 6,911 9,619 4,132 7,450 170 417 98 25 Commerce and housing credit 18,828 27,810 19,836 4,129 22,295r 38,788 17,880 5,142 3,045 26 Transportation 27,272 27,623 14,922 12,953 14,982 13,754 2,421 2,683 2,734 27 Community and regional development 5,294 5,755 2,690 1,833 4,879 3,987 552 606 614 28 Education, training, employment, and social services 31,938 35,697 16,162 18,083 18,663 19,537 3,092 2,198 3,417 29 Health 44,490 48,391 23,360 24,078 25,339 29,488 5,249 5,103 5,585 30 Social security and medicare 297,828 317,506 149,017 162,195 162,322 175,997 32,538 30,226 49,891 31 Income security 129,332 136,765 64,978 70,937 67,950 78,456 11,023 11,786 13,475 32 Veterans benefits and services 29,406 30,066 15,797 14,891 14,864 15,217 3,742 1,269 3,624 33 Administration of justice 8,436 9,3% 4,361 4,801 4,963 4,983 859 921 866 34 General government 9,518 8,940 5,137 3,858 4,760 4,916 1,388 807 691 35 General-purpose fiscal assistance 1,816 n.a. 0 0 n.a. n.a. n.a. n.a. n.a. 36 Net interest 151,748 169,314 78,317 86,009 87,927 91,155 14,493 15,153 17,556 37 Undistributed offsetting receipts -36,967 -37,212 -18,771 -18,131 -18,935 -17,688 -2,730 -3,634 -2,987 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 • November 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 2,368.8' 4 Held by agencies 534.2 550.4 589.2 607.5 657.8 676.7 707.8 722.7' 775.0' 5 Agency securities 7.4 12.4 22.9 22.7 24.0 23.7 22.5 29.9 31.7' 6 Held by public 7.0 12.2 22.6 22.3 23.6 23.5 22.4 29.8 31.6' 7 Held by agencies .5 .2 .3 .4 .5 .1 .1 .2 .2' 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 Type and holder 1988 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.! 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 Notes 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 12 Savings bonds and notes. 90.6 99.2 107.6 115.7 114.0 115.7 118.0 120.1 13 Government account series 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.T 775.0 16 Federal Reserve Banks 211.3 222.6 238.4 228.4 220.6 228.4 219.3 231.4 17 Private investors 1,602.0 1,731.4 1,858.5 2,015.8 1,958.3 2,015.8 2,115.1 n.a. 18 Commercial banks 203.5 201.5 193.8 180.6 174.8 180.6 182.0 n.a. 19 Money market funds 28.0 14.6 11.8 14.4 12.9 14.4 31.3 n.a. 20 Insurance companies 105.6 104.9 107.3 107.9 105.8 107.9 108.0 n.a. 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 n.a. Individuals 23 Savings bonds 92.3 101.1 109.6 117.7 115.7 117.7 119.9 121.6 24 Other securities 70.4 71.3 79.2 93.8 93.5 93.8 95.0 n.a. 25 Foreign and international 263.4 299.7 362.2 393.4 394.6 393.4 386.9 392.7 26 Other miscellaneous investors 506.6 569.1 593.9 674.3 632.4 674.3 754.9 n.a. 1. Includes (not shown separately): Securities issued to the Rural Electrifica- 5. Consists of investments of foreign and international accounts. Excludes tion Administration; depository bonds, retirement plan bonds, and individual non-interest-bearing notes issued to the International Monetary Fund. retirement bonds. 6. Includes savings and loan associations, nonprofit institutions, credit unions, 2. Nonmarketable dollar-denominated and foreign currency-denominated se- mutual savings banks, corporate pension trust funds, dealers and brokers, certain ries held by foreigners. U.S. Treasury deposit accounts, and federally-sponsored agencies. 3. Held almost entirely by U.S. Treasury agencies and trust funds. SOURCES. Data by type of security, U.S. Treasury Department, Monthly 4. Data for Federal Reserve Banks and U.S. Treasury agencies and trust funds Statement of the Public Debt of the United States; data by holder and the are actual holdings; data for other groups are Treasury estimates. Treasury Bulletin. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Federal Finance A31 1.42 U.S. GOVERNMENT SECURITIES DEALERS Transactions1 Par value; averages of daily figures, in millions of dollars 1990 1990 IItteemm June July Aug. July 4 July 11 July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 IMMEDIATE TRANSACTIONS2 By type of security U.S. government securities 1 Bills 0 135,618 150,589 119,178 129,894 138,088 125,145 165,104 180,990 142,351 126,730 165,575 Coupon securities 2 Maturing in less than 3.5 years .. 0 124,839 162,366 88,882 92,887 155,363 126,754 151,200 254,307 144,551 131,341 146,503 3 Maturing in 3.5 to 7.5 years 0 119,918 120,685 92,141 113,869 158,472 101,401 123,264 182,708 109,405 105,121 100,355 4 Maturing in 7.5 to 15 years 0 45,979 67,972 30,854 45,445 53,610 42,822 52,395 103,473 80,974 50,396 52,945 5 Maturing in 15 years or more .... 0 69,519 76,686 48,648 79,579 89,930 52,709 68,094 115,514 98,123 60,166 52,514 Federal agency securities Debt 6 Maturing in less than 3.5 years .. 0 22,963 19,543 24,422 17,902 24,191 21,329 28,705 18,522 16,011 17,029 22,775 7 Maturing in 3.5 to 7.5 years 0 3,382 2,772 3,193 2,379 3,606 4,679 2,877 3,483 3,303 2,788 2,087 8 Maturing in 7.5 years or more ... 0 5,019 3,894 2,771 7,395 6,228 3,762 3,793 4,451 4,372 3,673 3,761 Mortgage-backed 9 Pass-throughs 0 35,119 34,383 26,151 45,196 30,744 28,734 42,700 32,996 33,747 36,272 3366,,002233 10 All others 0 7,323 6,981 5,497 7,845 7,566 5,987 9,407 7,954 6,791 7,184 6,544 By type of counterparty Primary dealers and brokers 11 U.S. government securities Federal agency 0 309,875 360,883 232,168 289,540 367,849 287,973 348,483 539,401 353,942 299,091 307,981 12 Debt securities 0 10,909 8,240 8,940 11,470 12,304 9,953 11,138 8,761 8,265 6,746 8,551 13 Mortgage backed securities.. 0 20,070 19,092 15,272 27,728 13,520 17,757 25,175 17,640 17,576 21,023 20,579 Customers 14 U.S. government securities Federal agency 0 185,997 217,415 147,535 172,134 227,614 160,858 211,574 297,591 221,462 174,663 209,911 15 Debt securities 0 20,455 17,969 21,446 16,206 21,721 19,817 24,237 17,695 15,421 16,744 20,072 16 Mortgage-backed securities.. 0 22,372 22,272 16,376 25,313 24,790 16,964 26,932 23,310 22,962 22,433 21,988 FUTURE AND FORWARD TRANSACTIONS By type of deliverable security U.S. government securities 17 Bills 0 14,786 22,805 9,079 13,585 13,324 17,709 18,743 41,056 14,016 20,133 2211,,112211 Coupon securities 18 Maturing in less than 3.5 years .. 0 6,441 8,400 3,761 5,601 9,623 4,955 7,380 12,096 7,893 6,399 9,282 19 Maturing in 3.5 to 7.5 years 0 3,078 3,405 3,731 3,249 4,117 2,550 1,738 4,284 2,633 2,984 4,476 20 Maturing in 7.5 to 15 years 0 4,140 6,829 3,160 5,425 3,749 4,037 3,886 10,686 6,898 5,654 6,031 21 Maturing in 15 years or more .... 0 30,248 50,736 22,320 27,383 37,757 27,594 33,704 71,756 54,946 45,408 43,631 Federal agency securities Debt 22 Maturing in less than 3.5 years .. 0 452 236 386 509 717 450 101 48 437 108 447 23 Maturing in 3.5 to 7.5 years 0 163 393 65 173 153 88 331 162 928 580 60 24 Maturing in 7.5 years or more ... 0 775 102 87 2,797 114 321 155 95 154 104 70 Mortgage-backed 25 Pass-throughs 0 40,660 42,167 19,266 47,711 59,994 33,966 32,094 42,653 55,723 43,127 3388,,113322 26 All others 0 7,332 7,223 6,815 9,128 5,809 8,061 6,469 9,843 7,594 7,553 5,358 OPTION TRANSACTIONS6 By type of underlying securities U.S. government securities 27 Bills 0 26 109 152 0 10 12 0 0 1 250 225500 Coupon securities 28 Maturing in less than 3.5 years .. 0 1,978 3,382 1,728 1,447 2,927 1,154 2,675 3,347 3,255 3,365 3,811 29 Maturing in 3.5 to 7.5 years 0 1,665 1,442 1,065 1,272 2,775 1,073 1,956 2,983 748 866 934 30 Maturing in 7.5 to 15 years 0 954 1,550 818 650 927 1,290 1,051 2,111 1,666 1,549 1,175 31 Maturing in 15 years or more.... 0 8,099 14,110 7,475 8,732 8,413 5,966 10,047 16,422 13,568 13,968 16,332 Federal agency securities Debt 32 Maturing in less than 3.5 years .. 0 19 11 0 0 58 15 15 6 0 0 40 33 Maturing in 3.5 to 7.5 years 0 0 0 0 0 0 0 0 0 0 0 0 34 Maturing in 7.5 years or more ... 0 11 35 0 0 0 50 0 0 50 80 0 Mortgage-backed 35 Pass-throughs 0 2,394 2,600 1,565 3,437 2,896 1,515 2,183 3,162 3,409 2,745 1,802 36 All others3^ 0 0 0 0 0 0 2 0 0 0 0 0 1. Transactions are market purchases and sales of securities as reported to the 3. Includes securities such as CMOs, REMICs; IOs, and POs. Federal Reserve Bank of New York by the U.S. government securities dealers on 4. Futures transactions are standardized agreements arranged on an exchange. its published list of primary dealers. Averages for transactions are based on the Forward transactions are agreements made in the over-the-counter market that number of trading days in the period. Immediate, forward, and future transactions specify delayed delivery. All futures transactions are included regardless of time are reported at principal value, which does not include accrued interest; option to delivery. Forward contracts for U.S. government securities and federal agency transactions are reported at the face value of the underlying securities. debt securities are included when the time to delivery is more than five days. 2. Transactions for immediate delivery include purchases or sales of securities Forward contracts for mortgage-backed securities are included when the time to (other than mortgage-backed agency securities) for which delivery is scheduled in delivery is more than thirty days. five business days or less and "when-issued" securities that settle on the issue 5. Options transactions are purchases or sales of put and call options, whether date of offering. Transactions for immediate delivery of mortgage-backed securities arranged on an organized exchange or in the over-the-counter market and include include purchases and sales for which delivery is scheduled in thirty days or less. options on futures contracts on U.S. government and federal agency securities. Stripped securities are reported at market value by maturity of coupon or corpus. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A32 Domestic Nonfinancial Statistics • November 1990 1.43 U.S. GOVERNMENT SECURITIES DEALERS Positions and Financing1 Averages of daily figures, in millions of dollars 1990 1990 Item June July Aug. July 4 July 11 July 18 July 25 Aug. 1 Aug. 8 Aug. 15 Aug. 22 Aug. 29 Positions2 NET IMMEDIATE3 By type of security U.S. government securities 1 Bills 0 3,032 0 646 -15 2,777 4,630 6,610 6,517 99,,552200 6,587 4,975 Coupon securities 2 Maturing in less than 3.5 years 0 3,183 0 3,401 2,535 2,142 3,147 5,050 7,415 6,879 1,538 6,286 3 Maturing in 3.5 to 7.5 years 0 3,781 0 5,815 5,821 5,386 1,815 466 -1,681 -3,352 -4,255 -1,683 4 Maturing in 7.5 to 15 years 0 -6,018 0 -4,665 -5,798 -5,507 -6,578 -7,117 -4,837 -5,312 -5,178 -7,079 5 Maturing in 15 years or more 0 -10,969 0 -12,681 -11,756 -11,708 -9,251 -10,051 -12,406 -10,398 -12,494 -13,375 Federal agency securities Debt 6 Maturing in less than 3.5 years 0 3,166 0 2,381 2,856 2,967 3,257 4,175 4,837 4,828 3,447 3,849 7 Maturing in 3.5 to 7.5 years 0 1,446 0 1,687 1,537 1,375 1,323 1,403 1,235 1,080 1,545 1,723 8 Maturing in 7.5 years or more 0 2,899 0 1,918 3,177 3,157 2,753 3,098 2,690 2,535 11,,994477 2,342 Mortgage-backed 9 Pass-throughs 0 17,146 0 11,066 16,326 18,951 17,521 19,612 19,038 19,894 15,815 12,592 10 All others 0 0 0 0 0 0 0 0 0 0 0 0 Other money market instruments 11 Certificates of deposit 0 2,877 0 2,290 2,632 2,785 2,791 3,761 3,436 2,795 2,879 3,180 12 Commercial paper 0 6,146 0 4,877 6,015 6,961 5,133 7,375 9,049 7,846 5,984 6,541 13 Bankers' acceptances 0 1,030 0 891 1,105 1,026 1,069 994 1,169 1,508 1,133 1,002 FUTURE AND FORWARD5 By type of deliverable security U.S. government securities 14 Bills 0 -8,317 0 -7,266 -2,792 -8,495 -10,205 -13,051 -18,829 -18,715 --1155,,779944 -10,246 Coupon securities 15 Maturing in less than 3.5 years 0 -771 0 -1,532 -1,055 -285 -1,186 -16 -551 -680 -678 -578 16 Maturing in 3.5 to 7.5 years 0 -1,909 0 -1,815 -1,789 -1,774 -2,071 -2,078 -2,465 -1,865 -1,116 -1,659 17 Maturing in 7.5 to 15 years 0 -798 0 -1,579 -910 -880 -181 -769 143 137 668 565 18 Maturing in 15 years or more 0 -5,098 0 -4,558 -5,954 -4,823 -4,046 -6,006 -3,406 -2,508 -1,621 -1,928 Federal agency securities Debt 19 Maturing in less than 3.5 years 0 -69 0 186 -45 -136 -147 -99 45 148 115 397 20 Maturing in 3.5 to 7.5 years 0 -104 0 -19 -133 -143 -66 -126 -17 282 -2 70 21 Maturing in 7.5 years or more 0 162 0 -57 766 -20 19 -17 -42 -139 6 -47 Mortgage-backed 22 Pass-throughs 0 -11,755 0 -7,479 -12,184 -13,760 -11,847 -11,658 -8,732 -11,313 -6,190 -5,320 23 All others 0 0 0 0 0 0 0 0 0 0 0 0 Other money market instruments 24 Certificates of deposit 0 35,615 0 53,686 40,137 37,568 24,023 29,540 43,378 33,875 63,054 55,075 25 Commercial paper 0 0 0 0 0 0 0 0 0 0 0 -13 26 Bankers' acceptances 0 0 0 0 0 0 0 0 0 0 0 0 Financing6 Reverse repurchase agreements 27 Overnight and continuing 0 148,001 0 138,747 153,651 147,648 138,614 158,942 153,860 161,066 160,550 152,563 28 Term 0 217,735 0 198,007 206,992 222,169 223,649 231,348 250,444 212,011 224,848 234,528 Reverse repurchase agreements 29 Overnight and continuing 0 223,111 0 193,997 220,581 237,309 220,314 232,171 233,845 241,163 237,704 225,955 30 Term 0 179,589 0 170,695 170,056 177,821 187,301 189,706 210,937 177,140 184,504 193,893 Securities borrowed 31 Overnight and continuing 0 42,585 0 43,040 36,302 44,531 44,485 45,126 43,148 42,080 47,678 47,948 32 Term 0 13,238 0 12,721 11,420 13,798 15,080 1122,,990022 13,036 12,394 1133,,883388 14,973 Securities lent 33 Overnight and continuing 0 19,830 0 21,709 19,248 20,622 19,393 18,843 18,518 18,220 19,650 20,810 34 Term 0 1,290 0 709 619 1,073 2,924 807 539 335 829 203 Collateralized loans 35 Overnight and continuing 0 4,503r 0 5,345 4,913 3,781 4,044 4,839 5,918 4,119 5,000 4,369 36 Term 0 824' 0 0 0 1,719 1,592 394 249 1,580 503 461 MEMO: Matched book7 Reverse repurchases 37 Overnight and continuing 0 92,712 0 86,093 88,860 95,031 89,864 102,235 99,169 101,014 105,318 95,007 38 Term 0 177,648 0 158,115 168,019 180,244 118855,,116622 190,108 204,184 167,985 118800,,116666 118899,,008822 Repurchases 39 Overnight and continuing 0 124,806' 0 110,718' 119,303 130,444 124,188 134,759 129,610 127,391 137,781 127,388 40 Term 0 139,661 0 123,275 126,395 140,124 150,978 152,319 170,604 135,251 144,808 149,716 1. Data for positions and financing are obtained from reports submitted to the delivery. Forward contracts for U.S. government securities and for federal Federal Reserve Bank of New York by the U.S. government securities dealers on agency debt securities are included when the time to delivery is more than five its published list of primary dealers. Data for positions and financing are averages business days. Forward contracts for mortgage-backed securities are included of close-of- business Wednesday weekly data. when the time to delivery is more than thirty days. 2. Securities positions are reported at market value. 6. Overnight financing refers to agreements made on one business day that 3. Net immediate positions include securities purchased or sold (other than mature on the next business day; continuing contracts are agreements that remain mortgage-backed agency securities) that have been delivered or are scheduled to in effect for more than one business day but have no specific maturity and can be be delivered in five business days or less and "when-issued" securities settle on terminated without a requirement for advance notice by either party; term the issue date of offering. Net immediate positions of mortgage-backed securities agreements have a fixed maturity of more than one business day. include securities purchased or sold that have been delivered or are scheduled to 7. Matched-book data reflect financial intermediation activity in which the be delivered in thirty days or less. borrowing and lending transactions are matched. Matched-book data are included 4. Includes securities such as CMOs, REMICs, IOs, and POs. in the financing breakdowns listed above. The reverse repurchase and repurchase 5. Futures positions are standardized contracts arranged on an exchange. numbers are not always equal due to the "matching" of securities of different Forward positions reflect agreements made in the over-the-counter market that values or types of collateralization. specify delayed delivery. All futures positions are included regardless of time to 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 11998866 11998877 11998888 11998899 Mar. Apr. May June July 1 Federal and federally sponsored agencies 307,361 341,386 381,498 411,805 420,247 423,481 424,082 422,261 0 2 Federal agencies 36,958 37,981 35,668 35,664 42,492 42,526 42,482 42,015' 41,978 3 Defense Department1 33 13 8 7 7 7 7 7 7 4 Export-Import Bank2'3 14,211 11,978 11,033 10,985 11,017 11,017 11,017 ll,150r 11,150 5 Federal Housing Administration4 138 183 150 328 318 352 365 394 281 6 Government National Mortgage Association participation certificates 2,165 1,615 0 0 0 0 0 0 0 7 Postal Service 3,104 6,103 6,142 6,445 6,445 6,445 6,148 6,148 6,148 8 Tennessee Valley Authority 17,222 18,089 18,335 17,899 17,899 24,705 24,945 24,316 24,392 9 United States Railway Association6 85 0 0 0 0 0 0 0 0 10 Federally sponsored agencies7 270,553 303,405 345,830 375,407 377,755 380,955 381,600 380,245 0 11 Federal Home Loan Banks 88,758 115,727 135,836 136,087 131,526 127,401 125,515 123,021 119,692 12 Federal Home Loan Mortgage Corporation 13,589 17,645 22,797 26,148 26,152 28,789 30,444 31,049 27,716 13 Federal National Mortgage Association 93,563 97,057 105,459 116,064 116,815 117,357 118,108 117,964 118,356 14 Farm Credit Banks8 62,478 55,275 53,127 54,864 53,732 53,700 53,795 53,451 53,175 15 Student Loan Marketing Association 12,171 16,503 22,073 28,705 30,988 31,664 31,696 32,392 0 16 Financing Corporation10 0 1,200 5,850 8,170 8,170 8,170 8,170 8,170 8,170 17 Farm Credit Financial Assistance Corporation11 0 0 690 847 847 847 847 1,172 1,172 18 Resolution Funding Corporation 0 0 0 4,522 9,524 13,026 13,026 13,026 18,052 MEMO 19 Federal Financing Bank debt1 157,510 152,417 142,850 134,873 135,448 136,957 141,536 157,685 162,443 Lending to federal and federally sponsored agencies 20 Export-Import Bank 14,205 11,972 11,027 10,979 11,011 11,011 11,011 11,144 11,144 21 Postal Service6 2,854 5,853 5,892 6,195 6,195 6,195 5,898 5,898 5,898 22 Student Loan Marketing Association 4,970 4,940 4,910 4,880 4,880 4,880 4,880 4,880 4,880 23 Tennessee Valley Authority 15,797 16,709 16,955 16,519 15,325 15,325 15,565 14,936 15,012 24 United States Railway Association6 85 0 0 0 0 0 0 0 0 Other Lending14 25 Farmers Home Administration 65,374 59,674 58,496 53,311 52,726 51,916 51,591 51,901 52,171 26 Rural Electrification Administration 21,680 21,191 19,246 19,265 19,221 19,191 19,182 19,168 19,066 27 Other 32,545 32,078 26,324 23,724 23,724 28,439 33,409 49,758 54,272 1. Consists of mortgages assumed by the Defense Department between 1957 10. The Financing Corporation, established in August 1987 to recapitalize the and 1963 under family housing and homeowners assistance programs. Federal Savings and Loan Insurance Corporation, undertook its first borrowing in 2. Includes participation certificates reclassified as debt beginning Oct. 1, 1976. October 1987. 3. Off-budget Aug. 17, 1974, through Sept. 30, 1976; on-budget thereafter. 11. The Farm Credit Financial Assistance Corporation (established in January 4. Consists of debentures issued in payment of Federal Housing Administration 1988 to provide assistance to the Farm Credit System) undertook its first insurance claims. Once issued, these securities may be sold privately on the borrowing in July 1988. securities market. 12. The Resolution Funding Corporation, established by the Financial Institu- 5. Certificates of participation issued before fiscal 1969 by the Government tions Reform, Recovery, and Enforcement Act of 1989, undertook its first National Mortgage Association acting as trustee for the Farmers Home Admin- borrowing in October 1989. istration; Department of Health, Education, and Welfare; Department of Housing 13. Includes FFB purchases of agency assets and guaranteed loans; the latter and Urban Development; Small Business Administration; and the Veterans contain loans guaranteed by numerous agencies with the guarantees of any Administration. particular agency being generally small. The Farmers Home Administration item 6. Off-budget. consists exclusively of agency assets, while the Rural Electrification Administra- 7. Includes outstanding noncontingent liabilities: notes, bonds, and deben- tion entry contains both agency assets and guaranteed loans. tures. Some data are estimated. 14. The FFB, which began operations in 1974, is authorized to purchase or sell 8. Excludes borrowing by the Farm Credit Financial Assistance Corporation, obligations issued, sold, or guaranteed by other federal agencies. Since FFB shown in line 17. incurs debt solely for the purpose of lending to other agencies, its debt is not 9. Before late 1981, the Association obtained financing through the Federal included in the main portion of the table in order to avoid double counting. Financing Bank (FFB). Borrowing excludes that obtained from the FFB, which is shown on line 21. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A34 Domestic Nonfinancial Statistics • November 1990 1.45 NEW SECURITY ISSUES Tax-Exempt State and Local Governments Millions of dollars 1990 Type of issue or issuer, or use 1988 1989 Jan. Feb. Mar. Apr. May June July Aug. 1 All issues, new and refunding1 102,407 114,522 113,646 6,694 6,329 9,880 8,582 12,032 13,625 8,731' 10,035 Type of issue 2 General obligation 30,589 30,312 35,774 2,675 3,010 3,199 3,386 3,166 4,426 2,847 3,358 3 Revenue 71,818 84,210 77,873 4,019 3,319 6,681 5,196 8,866 9,199 5,884 6,677 Type of issuer 4 State 10,102 8,830 11,819 712 1,196 707 1,387 1,003 1,090 1,442 1,610 5 Special district and statutory authority 65,460 74,409 71,022 4,744 3,277 6,247 4,366 7,485 8,556 5,670 6,692 6 Municipalities, counties, and townships 26,845 31,193 30,805 1,238 1,856 2,926 2,243 3,544 3,977 1,742 2,195 7 Issues for new capital, total 56,789 79,665 84,062 6,263 5,635 6,667 7,744 10,486 10,974 7,442 9,346 Use of proceeds 8 Education 9,524 15,021 15,133 1,374 1,420 1,018 1,054 1,694 2,612 2,212 1,389 9 Transportation 3,677 6,825 6,870 98 511 1,158 1,215 1,375 1,592 789 931 10 Utilities and conservation 7,912 8,496 11,427 1,747 718 502 991 1,232 2,159 719 1,015 11 Social welfare 11,106 19,027 16,703 1,017 432 1,425 2,664 2,628 2,199 2,012 3,506 12 Industrial aid 7,474 5,624 5,036 200 115 432 232 681 693 434 495 13 Other purposes 18,020 24,672 28,894 1,827 2,439 2,132 2,426 2,155 4,366 2,688 3,161 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 Dec. Jan. Feb. Mar. Apr. May June July 1 All issues1 392,674' 410,811' 376,488' 21,877 15,144' 13,811 21,199' 15,496' 25,159' 28,734' 19,852 2 Bonds2 326,166r 353,010' 318,617' 17,932 12,866' 10,892 17,405' 13,740' 22,808' 25,861' 17,605 Type of offering 3 Public, domestic 209,790' 202,132' 181,230' 16,306 10,814' 9,985 15,498' 12,8^ 19,658' 22,650' 14,300 4 Private placement, domestic3 92,070 127,700 114,629 n.a. n.a. n.a. n.a. n.a. n.a. n.a. 5. Sold abroad 24,306 23,178 22,758 1,626 2,052 907 1,907 921 3,150 3,211' 3,305 Industry group 6 Manufacturing 60,657' 70,574' 76,345' 4,285 2,036 2,488 3,3%' 3,762' 2,540' 3,729' 1,545 7 Commercial and miscellaneous 49,773 62,104 49,307 347 655 157' 263 683 1,171 2,999' 1,542 8 Transportation 11,974 10,075 10,050 1,083 35 53 386 194 927 1,001 270 9 Public utility 23,004 19,318 17,056 1,201 1,043 1,057 317 435 1,004 2,561 655 10 Communication 7,340 5,952 8,503 577 23 35 704 500 326 411 113 11 Real estate and financial 173,418 184,990 157,355' 10,397 9,075' 7,103 12,340 8,167 16,840' 15,16c 13,480 12 Stocks2 66,508 57,802 57,870 3,945 2,278 2,919 3,794 1,756 2,351 2,873 2,247 Type 13 Preferred 10,123 6,544 6,194 626 50 167 1,028 193 665 310 350 14 Common 43,225 35,911 26,030 3,319 2,228 2,752 2,767 1,564 1,686 2,565 1,897 15 Private placement3 13,157 15,346 25,647 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Industry group 16 Manufacturing 13,880 7,608 9,308 279 835 431 521 253 86 265 348 17 Commercial and miscellaneous 12,888 8,449 7,446 1,045 248 1,017 552 666 706 750 507 18 Transportation 2,439 1,535 1,929 0 0 0 0 0 22 21 0 19 Public utility 4,322 1,898 3,090 244 106 582 533 219 471 0 173 20 Communication 1,458 515 1,904 0 0 0 0 0 380 29 0 21 Real estate and financial 31,521 37,798 34,028 2,377 1,090 889 2,188 619 686 1,799 862 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 Dec. Jan. Feb. Mar. Apr. May June' July INVESTMENT COMPANIES1 1 Sales of own shares2 271,237 306,445 30,982 35,620 26,118 28,817 29,788 27,431 28,301 29,470 2 Redemptions of own shares3 267,451 272,165 24,967 27,331 20,978 23,777 27,306 23,337 23,340 22,957 3 Net sales 3,786 34,280 6,015 8,289 5,140 5,040 2,482 4,094 4,961 6,513 4 Assets4 472,297 553,871 553,871 535,165 542,725 549,638 542,061 574,302 582,190 586,681 5 Cash position5 45,090 44,780 44,780 48,865 51,356 50,454 55,213 52,741 49,861 51,944 6 Other 427,207 509,091 509,091 486,300 491,369 499,184 486,848 521,560 532,329 534,737 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 Ql Q2 Q3 Q4 Ql Q2r 1 Corporate profits with inventory valuation and capital consumption adjustment 308.3 337.6 311.6 334.4 349.6 327.3 321.4 306.7 290.9 296.8 306.6 2 Profits before tax 275.3 316.7 307.7 320.4 331.1 335.1 314.6 291.4 289.8 296.9 299.3 3 Profits tax liability 126.9 136.2 135.1 137.9 142.1 148.3 140.8 127.8 123.5 129.9 133.1 4 Profits after tax 148.4 180.5 172.6 182.5 189.1 186.7 173.8 163.6 166.3 167.1 166.1 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 33.2 7 Inventory valuation -19.4 -27.0 -21.7 -33.3 -22.5 -43.0 -23.1 -6.1 -14.5 -11.4 -0.5 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 A Billions of dollars; quarterly data are at seasonally adjusted annual rates. 1989 1990 IInndduussttrryy 11998888 11998899 11999900 Ql Q2 Q3 Q4 Ql Q2 Q3 Q4 1 Total nonfarm business 455.49 507.40 534.76 487.43 502.05 514.95 519.58 532.45 535.49 532.47 538.61 Manufacturing 2 Durable goods industries 77.04 82.56 84.69 80.20 82.44 83.60 83.41 86.35 84.34 83.63 84.45 3 Nondurable goods industries 86.41 101.24 107.75 92.53 98.47 102.40 108.47 105.02 110.82 108.74 106.42 Nonmanufacturing 4 Mining 9.29 9.21 9.96 8.94 9.24 9.24 9.38 9.58 9.84 10.23 10.19 Transportation 5 Railroad 5.52 6.26 5.89 6.02 5.81 6.36 6.80 6.45 6.66 5.34 5.10 6 Air 5.63 6.73 9.09 5.67 6.84 8.89 5.75 9.35 9.36 9.77 7.88 7 Other 5.48 5.85 6.13 6.15 5.78 5.78 5.69 6.33 5.84 5.50 6.83 Public utilities 8 Electric 40.90 44.81 43.79 43.56 46.37 44.44 44.66 43.37 42.62 43.85 45.33 9 Gas and other 19.47 21.47 22.12 22.53 21.72 20.75 21.15 22.34 21.65 22.35 22.13 10 Commercial and other 205.76 229.28 245.34 221.82 225.39 233.50 234.25 243.66 244.37 243.05 250.27 •Trade and services are no longer being reported separately. They are included 2. "Other" consists of construction; wholesale and retail trade; finance and in Commercial and other, line 10. insurance; personal and business services; and communication. 1. Anticipated by business. SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A36 Domestic Nonfinancial Statistics • November 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 lype Feb. Mar. Apr, May June July 1 Total 205,992 234,578 258,504 259,015 261,662 262,379 266,859 273,786 277,416 Retail financing of installment sales 2 Automotive 36,139 36,957 39,139 39,125 39,264 39,550 39,245 39,716 38,931 i Equipment 25,075 28,199 29,674 29,483 29,789 30,115 30,635 30,491 30,623 4 Pools of securitized assets2 n.a. n.a. 698 681 704 662 622 664422 660000 Wholesale 5 Automotive 30,070 32,357 33,074 29,491 29,963 29,672 29,896 31,815 33,158 6 Equipment 5,578 5,954 6,896 9,155 9,408 9,372 9,429 9,495 9,929 7 All other 8,329 9,312 9,918 9,877 10,030 9,961 9,892 10,043 9,722 8 Pools of securitized assets2 n.a. n.a. 0 0 0 00 00 00 00 Leasing 9 Automotive 22,097 24,875 27,074 27,161 28,325 28,528 28,878 29,575 30,210 10 Equipment 43,493 57,658 68,112 69,335 68,755 69,473 72,715 74,916 76,316 11 Pools of securitized assets2 n.a. n.a. 1,247 11,,337777 11,,443333 11,,664466 11,,559977 11,,554477 11,,776600 12 Loans on commercial accounts receivable and factored commercial accounts receivable 18,170 18,103 19,081 19,155 19,426 18,716 18,700 19,869 20,077 13 All other business credit 17,042 21,162 23,590 24,176 24,565 24,685 25,250 25,677 26,089 Net change (during period) 14 33,866 22,434 22,580 -452 2,647 717 4,480 6,927 3,630 Retail financing of installment sales 15 Automotive 9,925 819 2,182 -127 140 286 -305 471 -785 16 Equipment 2,056 1,386 1,475 -207 306 327 520 -144 132 17 Pools of securitized assets2 n.a. n.a. -26 -39 23 --4422 -40 2200 --4422 Wholesale 18 Automotive 7,158 2,288 716 -972 472 -291 224 1,919 1,343 19 Equipment 250 377 940 -28 254 -37 57 67 434 20 All other 1,293 983 605 -66 153 -69 -69 151 -321 21 Pools of securitized assets2 n.a. n.a. 0 0 0 0 0 00 0 Leasing 22 Automotive 2,174 2,777 2,201 183 1,164 203 351 696 636 23 Equipment 5,271 9,752 9,187 431 -580 718 3,243 2,201 1,400 24 Pools of securitized assets2 n.a. n.a. 526 135 56 213 -49 --5500 213 25 Loans on commercial accounts receivable and factored commercial accounts receivable 2,245 -65 979 180 272 -711 -16 1,169 208 26 All other business credit 3.498 4,119 3,796 59 388 120 565 427 412 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. Apr. May July Aug. Terms and yields in primary and secondary markets PRIMARY MARKETS Conventional mortgages on new homes Terms1 1 Purchase price (thousands of dollars) 137.0 150.0 159.6 148.9 138.2 155.5 162.1 149.8 163.5 161.5 2 Amount of loan (thousands of dollars) 100.5 110.5 117.0 109.0 100.9 114.6 119.7 111.8 120.9 118.3 3 Loan/price ratio (percent) 75.2 75.5 74.5 74.6 74.7 75.4 75.0 76.4 75.3 74.5 4 Maturity (years) 27.8 28.0 28.1 27.4 26.6 26.6 28.1 26.9 28.0 27.2 5 Fees and charges (percent of loan amount) 2.26 2.19 2.06 1.87 1.96 2.00 2.41 1.96 1.93 2.07 6 Contract rate (percent per year) 8.94 8.81 9.76 9.56 9.70 9.83 9.87 9.80 9.75 9.75 Yield (percent per year) 7 OTS series3 9.31 9.18 10.11 9.88 10.03 10.17 10.28 10.13 10.08 10.11 8 HUD series4 10.17 10.30 10.21 10.12 10.20 10.46 10.19 10.12 9.94 10.12 SECONDARY MARKETS Yield (percent per year) 9 FHA mortgages (HUD series)5 10.16 10.49 10.24 10.22 10.30 10.75 10.23 10.18 10.11 10.28 10 GNMA securities6 9.44 9.83 9.71 9.44 9.53 9.77 9.77 9.54 9.48 9.63 Activity in secondary markets FEDERAL NATIONAL MORTGAGE ASSOCIATION Mortgage holdings (end of period) 11 Total 95,030 101,329 104,974 111,628 112,353 112,463 112,791 112,855 113,378 113,507 12 FHA/VA-insured 21,660 19,762 19,640 20,614 20,688 20,707 20,723 20,830 21,059 21,101 13 Conventional 73,370 81,567 85,335 91,014 91,665 91,756 92,068 92,025 92,319 92,406 Mortgage transactions (during period) 14 Purchases 20,531 23,110 22,518 1,537 1,945 1,705 1,630 1,802 2,304 2,134 Mortgage commitments7 15 Contracted (during period) 25,415 23,435 27,409 3,216 3,789 5,700 n.a. n.a. n.a. n.a. 16 Outstanding (end of period) 4,886 2,148 6,037 4,977 6,765 10,534 n.a. n.a. n.a. n.a. FEDERAL HOME LOAN MORTGAGE CORPORATION Mortgage holdings (end of periodf 17 Total 12,802 15,105 20,105 20,112 19,823 19,730 19,874 19,979 n.a. n.a. 18 FHA/VA 686 620 590 572 561 555 556 550 n.a. n.a. 19 Conventional 12,116 14,485 19,516 19,540 19,261 19,174 19,319 19,429 n.a. n.a. Mortgage transactions (during period) 20 Purchases 76,845 44,077 78,588 5,676 6,301 55,,771199 6,064 55,,885566 n.a. n.a. 21 Sales 75,082 39,780 73,446 5,796 6,503 5,687 5,792 5,546r 4,177 4,705 Mortgage commitments9 22 Contracted (during period) 71,467 66,026 88,519 5,922 6,119 10,441 8,502 11,183 n.a. n.a. 1. Weighted averages based on sample surveys of mortgages originated by 6. Average net yields to investors on Government National Mortgage Associmajor institutional lender groups; compiled by the Federal Home Loan Bank ation guaranteed, mortgage-backed, fully modified pass-through securities, as- Board in cooperation with the Federal Deposit Insurance Corporation. suming prepayment in 12 years on pools of 30-year FHA/VA mortgages carrying 2. Includes all fees, commissions, discounts, and "points" paid (by the the prevailing ceiling rate. Monthly figures are averages of Friday figures from the borrower or the seller) to obtain a loan. Wall Street Journal. 3. Average effective interest rates on loans closed, assuming prepayment at the 7. Includes some multifamily and nonprofit hospital loan commitments in end of 10 years. addition to 1- to 4-family loan commitments accepted in FNMA's free market 4. Average contract rates on new commitments for conventional first mort- auction system, and through the FNMA-GNMA tandem plans. gages; from Department of Housing and Urban Development. 8. Includes participation as well as whole loans. 5. Average gross yields on 30-year, minimum-downpayment, Federal Housing 9. Includes conventional and government-underwritten loans. FHLMC's mort- Administration-insured first mortgages for immediate delivery in the private gage commitments and mortgage transactions include activity under mortgage/ secondary market. Based on transactions on first day of subsequent month. Large securities swap programs, while the corresponding data for FNMA exclude swap monthly movements in average yields may reflect market adjustments to changes activity. in maximum permissable contract rates. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A38 Domestic Nonfinancial Statistics • November 1990 1.54 MORTGAGE DEBT OUTSTANDING1 Millions of dollars, end of period 1989 1990 Type of holder, and type of property 11998877 11998888 11998899 Q2 Q3 Q4 Ql Q2" 1 All holders 2,971,019 3,264,348' 3,540,084' 3,402,082' 3,473,550' 3,540,084' 3,601,132' 3,657,741 2 1- to 4-family 1,958,400 2,186,292' 2,404,311' 2,287,645' 2,347,566' 2,404,311' 2,450,291' 2,492,784 3 Multifamily 272,500 289,128' 305,582' 299,449' 302,374' 305,582' 310,273' 314,360 4 Commercial 651,323 702,113' 744,856' 728,212' 737,299' 744,856' 755,857' 765,489 5 Farm 88,797 86,816' 85,336' 86,777' 86,311' 85,336' 84,710' 85,109 6 Selected financial institutions 1,657,937 1,826,668' 1,919,243' 1,891,210' 1,913,914' 1,919,243' 1,924,635' 1,924,617 7 Commercial banks2 592,449 669,237 763,533 715,262 742,0% 763,533 783,100 803,660 8 1- to 4-family 275,613 317,585 368,567 338,799 355,084 368,567 376,616 388,018 9 Multifamily 32,756 33,158 37,990 36,022 37,201 37,990 39,202 40,271 10 Commercial 269,648 302,989 340,285 324,083 333,272 340,285 350,473 358,367 11 Farm 14,432 15,505 16,691 16,358 16,539 16,691 16,809 17,003 12 Savings institutions3 860,467 924,606' 910,254' 938,714' 932,373' 910,254' 892,022' 867,640 13 1- to 4-family 602,408 671,722' 669,220' 687,00c 683,148' 669,220' 658,440' 639,985 14 Multifamily 106,359 110,775' 106,014' 110,067' 108,447' 106,014' 103,860' 101,112 15 Commercial 150,943 141,433' 134,370' 140,977' 140,0%' 134,370' 129,103' 125,944 16 Farm 757 676' 650' 67C 682' 650^ 619' 599 17 Life insurance companies 205,021 232,825 245,456 237,234 239,445 245,456 249,513 253,317 18 1- to 4-family 12,676 15,299 13,827 12,814 13,290 13,827 14,173 14,479 19 Multifamily 21,644 23,583 27,195 25,232 26,372 27,195 28,182 29,155 20 Commercial 160,874 184,273 194,871 189,623 190,152 194,871 197,621 200,139 21 Farm 9,828 9,671 9,563 9,565 9,632 9,563 9,537 9,544 22 Finance companies4 29,716 37,846 45,476 41,824 43,157 45,476 45,808 47,104 23 Federal and related agencies 192,721 200,570 209,472 202,056 205,809 209,472 216,059' 230,511 24 Government National Mortgage Association.. 444 26 23 24 24 23 22 21 25 1- to 4-family 25 26 23 24 24 23 22 21 26 Multifamily 419 0 0 0 0 0 0 0 27 Farmers Home Administration 0 0 0 0 0 0 7,143' 17,944 28 1- to 4-family 18,169 18,347 18,422 18,391 18,405 18,422 18,419 18,433 29 Multifamily 8,044 8,513 9,054 8,778 8,916 9,054 9,199 9,351 30 Commercial 6,603 5,343 4,443 3,885 4,366 4,443 4,510 4,418 31 Farm 10,235 9,815 9,257 9,657 9,430 9,257 8,997 8,826 32 Federal Housing and Veterans Administration 5,574 5,973 6,061 6,424 6,023 6,061 6,268 6,284 33 1- to 4-family 2,557 2,672 2,850 2,827 2,900 2,850 2,977 3,041 34 Multifamily 3,017 3,301 3,211 3,597 3,123 3,211 3,291 3,243 35 Federal National Mortgage Association 96,649 103,013 110,721 103,309 107,052 110,721 112,353 114,592 36 1- to 4-family 89,666 95,833 102,295 95,714 99,168 102,295 103,300 105,026 37 Multifamily 6,983 7,180 8,426 7,595 7,884 8,426 9,053 9,566 38 Federal Land Banks 34,131 32,115 29,640 31,467 30,943 29,640 29,325 30,517 39 1- to 4-family 2,008 1,890 1,210 1,851 1,821 1,210 1,197 1,957 40 Farm 32,123 30,225 28,430 29,616 29,122 28,430 28,128 28,559 41 Federal Home Loan Mortgage Corporation .. 12,872 17,425 21,851 20,121 20,650 21,851 19,823 20,126 42 1- to 4-family 11,430 15,077 18,248 17,382 17,659 18,248 16,772 16,918 43 Multifamily 1,442 2,348 3,603 2,739 2,992 3,603 3,051 3,208 44 Mortgage pools or trusts6 718,297 810,887 943,932 864,885 899,435 943,932 981,265 1,011,982 45 Government National Mortgage Association.. 317,555 340,527 369,867 353,759 361,291 369,867 378,292 384,289 46 1- to 4-family 309,806 331,257 358,142 342,545 349,838 358,142 366,300 372,051 47 Multifamily 7,749 9,270 11,725 11,214 11,453 11,725 11,992 12,237 48 Federal Home Loan Mortgage Corporation .. 212,634 226,406 272,870 245,242 257,938 272,870 281,736 291,863 49 1- to 4-family 205,977 219,988 266,060 238,446 251,232 266,060 274,084 283,822 50 Multifamily 6,657 6,418 6,810 6,7% 6,706 6,810 7,652 8,041 51 Federal National Mortgage Association 139,960 178,250 228,232 196,501 208,894 228,232 246,391 259,664 52 1- to 4-family 137,988 172,331 219,577 188,774 200,302 219,577 237,916 250,663 53 Multifamily 1,972 5,919 8,655 7,727 8,592 8,655 8,475 9,002 54 Farmers Home Administration5 245 104 80 85 82 80 75 71 55 1- to 4-family 121 26 21 23 22 21 20 18 56 Multifamily 0 0 0 0 0 0 0 0 57 Commercial 63 38 26 26 26 26 25 23 58 Farm 61 40 33 36 35 33 31 30 59 Individuals and others7 402,064 426,223 467,438 443,931 454,392 467,438 479,172 490,631 60 1- to 4-family 242,053 258,639 292,967 273,757 283,445 292,967 301,573 310,747 61 Multifamily 75,458 78,663 82,899 79,681 80,689 82,899 84,873 86,468 62 Commercial 63,192 68,037 70,861 69,618 69,387 70,861 72,136 72,868 63 Farm 21,361 20,884 20,711 20,875 20,871 20,711 20,589 20,548 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 Nov. Dec. Jan. Feb. Mar. Apr. May June' July Seasonally adjusted 1 Total 664,701 716,624 713,903 716,624 717,829 717,869 720,445 720,835 724,485 724,601 729,066 2 Automobile 284,556 290,770 290,972 290,770 290,904 289,629 290,932 288,936 288,931 287,168 286,634 3 Revolving 174,057 197,110 194,679 197,110 199,146 199,927 202,263 203,965 207,153 208,362 212,128 4 Mobile home 25,201 22,343 22,197 22,343 22,604 22,633 22,708 22,702 22,815 22,733 22,766 5 Other 180,887 206,401 206,055 206,401 205,175 205,680 204,543 205,232 205,585 206,338 207,539 Not seasonally adjusted 6 Total 674,719 727,561 715,145 727,561 721,026 717,062 713,138 715,801 720,045 722,953 726,933 By major holder 7 Commercial banks 324,792 343,865 337,285 343,865 342,266 339,418 334,645 337,576 339,328 335,998 339,657 8 Finance companies 146,212 140,832 142,802 140,832 140,740 139,115 137,857 138,174 138,384 138,642 138,796 9 Credit unions 88,340 90,875 90,965 90,875 90,452 90,127 89,556 89,689 89,913 90,137 90,288 10 Retailers2 48,302 42,638 37,906 42,638 39,959 37,904 37,302 37,207 37,347 37,382 36,804 11 Savings institutions 63,399 57,228 58,236 57,228 55,425 54,771 54,095 53,606 53,301 52,902 52,503 12 Gasoline companies 3,674 3,935 3,853 3,935 4,013 3,803 3,792 3,928 4,024 4,192 4,396 13 Pools of securitized assets2 .. n.a. 48,188 44,098 48,188 48,171 51,924 55,891 55,621 57,748 63,700 64,489 By major type of credit3 14 Automobile 284,328 290,421 292,543 290,421 288,984 288,036 286,539 286,220 287,140 287,254 287,322 15 Commercial banks 123,392 126,613 128,111 126,613 127,075 127,149 126,289 126,483 127,056 126,988 127,509 16 Finance companies 97,245 82,721 85,725 82,721 81,918 80,227 79,523 79,295 78,927 78,273 77,716 17 Pools of securitized assets2 n.a. 18,191 15,376 18,191 17,827 18,931 19,563 19,406 20,151 21,043 21,239 18 Revolving 183,909 208,188 194,640 208,188 203,288 200,147 199,937 201,783 204,854 206,820 209,582 19 Commercial banks 123,020 130,956 122,728 130,956 128,384 124,821 122,024 124,039 125,433 122,116 124,602 20 Retailers 43,697 37,967 33,432 37,967 35,359 33,378 32,794 32,721 32,857 32,884 32,325 21 Gasoline companies 3,674 3,935 3,853 3,935 4,013 3,803 3,792 3,928 4,024 4,192 4,396 22 Pools of securitized assets2 n.a. 22,977 22,186 22,977 23,450 26,204 29,542 29,403 30,913 36,076 36,786 23 Mobile home 25,143 22,283 22,319 22,283 22,717 22,726 22,426 22,484 22,610 22,644 22,843 24 Commercial banks 9,025 9,155 9,144 9,155 9,109 9,162 9,142 9,231 9,295 9,296 9,443 25 Finance companies 7,191 4,716 4,682 4,716 5,411 5,410 5,178 5,168 5,224 5,266 5,328 26 Other 181,339 206,669 205,643 206,669 206,037 206,153 204,236 205,314 205,441 206,235 207,186 27 Commercial banks 69,355 77,141 77,302 77,141 77,698 78,286 77,190 77,823 77,544 77,598 78,103 28 Finance companies 41,776 53,395 52,395 53,395 53,411 53,478 53,156 53,711 54,233 55,103 55,752 29 Retailers 4,605 4,671 4,474 4,671 4,600 4,526 4,508 4,486 4,490 4,498 4,479 30 Pools of securitized assets n.a. 7,020 6,536 7,020 6,894 6,789 6,786 6,812 6,684 6,581 6,464 1. The Board's series cover most short- and intermediate-term credit extended 2. Outstanding balances of pools upon which securities have been issued; these to individuals that is scheduled to be repaid (or has the option of repayment) in balances are no longer carried on the balance sheets of the loan originator. two or more installments. 3. Totals include estimates for certain holders for which only consumer credit These data also appear in the Board's G.19 (421) release. For address, see totals are available. inside front cover. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A40 Domestic Nonfinancial Statistics • November 1990 1.56 TERMS OF CONSUMER INSTALLMENT CREDIT1 Percent unless noted otherwise 1990 IItteemm 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June July INTEREST RATES Commercial banks2 1 48-month new car3 10.45 10.85 12.07 n.a. 11.80 n.a. n.a. 11.82 n.a. n.a. 2 24-month personal 14.22 14.68 15.44 n.a. 15.27 n.a. n.a. 15.41 n.a. n.a. 3 120-month mobile home3 13.38 13.54 14.11 n.a. 13.91 n.a. n.a. 14.09 n.a. n.a. 4 Credit card 17.92 17.78 18.02 n.a. 18.12 n.a. n.a. 18.14 n.a. n.a. Auto finance companies 5 New car 10.73 12.60 12.62 12.64 12.67 12.31 12.21 12.23 12.58 12.68 6 Used car 14.60 15.11 16.18 15.77 15.91 15.97 16.02 16.03 16.00 15.% OTHER TERMS4 Maturity (months) 7 New car 53.5 56.2 54.2 54.7 54.7 54.3 54.2 54.5 54.8 54.9 8 Used car 45.2 46.7 46.6 45.5 46.4 46.4 46.5 46.1 46.2 46.2 Loan-to-value ratio 9 New car 93 94 91 89 88 88 87 87 87 86 10 Used car 98 98 97 95 96 95 96 96 95 96 Amount financed (dollars) 11 New car 11,203 11,663 12,001 12,381 12,053 12,216 12,089 12,064 12,108 12,125 12 Used car 7,420 7,824 7,954 8,040 8,065 8,132 8,105 8,169 8,296 8,401 1. These data also appear in the Board's G.19 (421) release. For address, see home loans was 84 months. inside front cover. 4. At auto finance companies. /sll.56-bul-tel/bUql! 53.5 56.2 54.2 54.7 54.7 54.3 2. Data for midmonth of quarter only. 54.2 54.5 54.8 54.9 45.2 46.7 46.6 45.5 46.4 46.4 46.5 46.1 46.2 46.2 93 94 91 89 88 3. Before 1983 the maturity for new car loans was 36 months, and for mobile 88 87 87 87 86 98 98 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'' 11998888'' 11998899'' Q4' Ql' Q2' Q3' Q4' Ql' Q2 Nonfinancial sectors 1 Total net borrowing by domestic nonfinancial sectors 848. 1' 687.0 760.8 676.5 694.9 746.7 666.5 673.3 619.5 749.9 598.1 By sector and instrument ? 223.6 215.0 144.9 157.5 150.2 144.8 147.3 100.1 168.4 185.0 224477..66 221166..77 3 Treasury securities 223.7 214.7 143.4 140.0 150.0 103.2 148.5 95.0 166.8 189.6 218.1 211.4 4 Agency issues and mortgages -.1 .4 1.5 17.4 .2 41.6 -1.2 5.1 1.6 -4.6 29.6 5.4 5 Private domestic nonfinancial sectors 624.5' 621.9' 542.1 603.3 526.3 550.1 599.4 566.3 504.9 434.5 502.3 381.4 6 Debt capital instruments 451.2' 465.8' 453.2 459.2 379.7 439.0 412.8 390.1 369.2 346.8 362.3 284.4 7 Tax-exempt obligations 135.4 22.7 49.3 49.8 30.4 56.8 39.7 28.7 34.1 19.1 13.5 21.6 8 73.5r 126.8' 79.4 102.9 73.6 87.1 58.2 86.5 62.7 87.2 42.3 60.2 9 242.2 316.3 324.5 306.5 275.7 295.1 314.9 275.0 272.4 240.5 306.5 202.6 10 Home mortgages 156.8 218.7 234.9 231.0 218.0 212.0 225.5 211.3 221.0 214.3 238.4 144.1 11 Multifamily residential 29.8 33.5 24.4 16.7 16.4 19.2 23.1 21.4 11.8 9.5 21.5 17.1 17 Commercial 62.2 73.6 71.6 60.8 42.7 63.9 68.6 41.5 40.9 19.9 47.9 42.2 13 Farm -6.6 -9.5 -6.4 -2.1 -1.5 .0 -2.3 .9 -1.3 -3.2 -1.4 -.8 14 Other debt instruments 173.3' 156.1' 88.9 144.1 146.6 111.1 186.6 176.2 135.7 87.7 139.9 97.0 15 82.5 58.0 33.5 50.2 39.1 51.2 38.2 36.9 37.1 44.1 14.6 9.8 16 Bank loans n.e.c 40.6' 66.9' 10.0 39.8 39.9 22.2 55.9 45.1 50.8 7.7 21.2 17.4 17 Open market paper 14.6 -9.3 2.3 11.9 20.4 39.0 32.3 39.5 16.9 -6.9 69.7 -6.0 18 Other 35.6 40.5 43.2 42.2 47.1 -1.3 60.2 54.7 30.9 42.8 34.5 75.8 19 By borrowing sector 624.5' 621.9' 542.1 603.3 526.3 550.1 599.4 566.3 504.9 434.5 502.3 381.4 70 State and local governments 90.9 36.2 48.8 45.6 29.6 53.0 40.1 33.3 28.6 16.5 9.0 14.9 ?1 284.5' 293.0' 302.2 314.9 284.8 288.5 293.2 263.7 290.8 291.3 294.8 197.8 77 Nonfinancial business 249.1' 292.7' 191.0 242.8 211.9 208.6 266.0 269.4 185.4 126.7 198.5 168.7 73 -14.5 -16.3 -10.6 -7.5 1.6 -14.5 4.7 -5.0 -2.1 8.9 4.3 6.2 74 Nonfarm noncorporate 129.3 99.2' 77.9 65.7 50.8 57.3 71.0 56.9 40.2 35.0 32.5 55.9 25 Corporate 134.3' 209.7' 123.7 184.6 159.5 165.8 190.3 217.4 147.3 82.9 161.6 106.6 26 Foreign net borrowing in United States 1.2 9.7 4.5 6.3 10.9 9.9 3.2 -6.9 30.4 16.9 -3.3 46.3 77 3.8 3.1 7.4 6.9 5.3 5.7 2.5 11.5 8.1 -1.0 28.3 27.0 78 Bank loans n.e.c -2.8 -1.0 -3.6 -1.8 -.1 -3.8 3.2 -3.2 3.7 -4.3 -6.7 -5.2 29 Open market paper 6.2 11.5 2.1 8.7 13.3 14.3 16.9 -6.6 20.7 22.2 -16.5 23.0 30 U.S. government loans -6.0 -3.9 -1.4 -7.5 -7.5 -6.3 -19.4 -8.7 -2.1 .1 -8.3 1.4 31 Total domestic plus foreign 849.3' 846.6' 691.5 767.1 687.4 704.8 749.9 659.6 703.6 636.4 746.6 644.4 Financial sectors 32 Total net borrowing by financial sectors ... 201.3 285.1' 300.2 247.6 205.5 306.1 356.6 154.1 123.9 187.3 201.7 150.1 By instrument 33 U.S. government related 101.5 154.1' 171.8 119.8 151.0 149.0 194.0 128.8 124.8 156.4 175.5 145.2 34 Sponsored credit agency securities 20.6 15.2 30.2 44.9 25.2 62.8 70.0 22.5 13.2 -4.7 14.5 17.3 35 Mortgage pool securities 79.9 139.2' 142.3 74.9 125.8 86.3 124.0 106.3 111.6 161.1 161.0 127.8 36 Loans from U.S. government 1.1 -.4 -.8 .0 .0 .0 .0 .0 .0 .0 .0 .0 37 Private financial sectors 99.7 131.0 128.4 127.8 54.5 157.1 162.6 25.3 -.9 30.9 26.2 5.0 38 Corporate bonds 50.9 82.9 78.9 51.7 36.8 45.5 52.3 28.5 26.7 39.6 41.6 69.0 39 Mortgages .1 .1 .4 .3 .0 1.2 .3 .0 .3 -.4 -.7 .0 40 Bank loans n.e.c 2.6 4.0 -3.2 1.4 1.8 1.8 1.0 -.1 2.0 4.2 -2.2 -5.7 41 Open market paper 32.0 24.2 27.9 54.8 26.9 74.9 50.1 10.1 11.0 36.3 9.4 -27.7 42 Loans from Federal Home Loan Banks 14.2 19.8 24.4 19.7 -11.0 33.7 58.9 -13.1 -41.0 -48.8 -21.8 -30.7 By sector 43 Total 201.3 285.1' 300.2 247.6 205.5 306.1 356.6 154.1 123.9 187.3 201.7 150.1 44 Sponsored credit agencies 21.7 14.9 29.5 44.9 25.2 62.8 70.0 22.5 13.2 -4.7 14.5 17.3 45 Mortgage pools 79.9 139.2' 142.3 74.9 125.8 86.3 124.0 106.3 111.6 161.1 161.0 127.8 46 Private financial sectors 99.7 131.0 128.4 127.8 54.5 157.1 162.6 25.3 -.9 30.9 26.2 5.0 47 Commercial banks -4.9 -3.6 6.2 -3.0 -1.4 6.6 -11.1 2.5 3.5 -.7 -4.9 3.3 48 Bank affiliates 16.6 15.2 14.3 5.2 6.2 1.5 9.4 2.9 16.5 -3.9 -12.8 -32.7 49 Savings and loan associations 17.3 20.9 19.6 19.9 -14.1 31.3 60.8 -16.3 -44.7 -56.2 -15.9 -41.1 50 Mutual savings banks 1.5 4.2 8.1 1.9 -1.4 3.7 -4.1 .0 -2.3 .7 -8.3 4.7 51 Finance companies 57.7' 54.7' 40.8 67.7 46.3 67.0 68.8 40.4 23.5 52.6 33.8 22.6 52 REITs -.1' .8' .3 3.5 -1.9 14.5 -1.8 -2.8 -3.1 .1 -.5 -2.4 53 SCO Issuers 11.5 39.0 39.1 32.5 20.8 32.5 40.6 -1.4 5.7 38.2 34.7 50.5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A42 Domestic Nonfinancial Statistics • November 1990 1.57—Continued 1988 1989 1990 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr 11998855 11998866 11998877'' 11998888'' 11998899'' Q4' Ql' Q2' Q3' Q4' Ql' Q2 All sectors 54 Total net borrowing 1,050.6' 1,131.7' 991.7 1,014.7 892.9 1,010.9 1,106.5 813.7 827.5 823.7 948.3 794.5 55 U.S. government securities 324.2 369.5' 317.5 277.2 301.2 293.8 341.3 228.9 293.2 341.4 423.1 361.9 56 State and local obligations 135.4 22.7 49.3 49.8 30.4 56.8 39.7 28.7 34.1 19.1 13.5 21.6 57 Corporate and foreign bonds 128.2' 212.8' 165.7 161.5 115.7 138.3 113.0 126.5 97.6 125.7 112.1 156.2 58 Mortgages 242.2 316.4 324.9 306.7 275.7 296.2 315.2 275.0 272.7 240.1 305.7 202.6 59 Consumer credit 82.5 58.0 33.5 50.2 39.1 51.2 38.2 36.9 37.1 44.1 14.6 9.8 60 Bank loans n.e.c 40.3' 69.9" 3.2 39.4 41.5 20.2 60.2 41.9 56.5 7.5 12.2 6.5 61 Open market paper 52.8 26.4 32.3 75.4 60.6 128.2 99.3 42.9 48.5 51.6 62.7 -10.7 62 Other loans 45.0 56.1 65.5 54.4 28.6 26.1 99.7 32.9 -12.2 -6.0 4.3 46.6 63 MEMO: U.S. government, cash balance 14.4 .0 -7.9 10.4 -5.9 -2.8 -14.3 20.7 -22.7 -7.3 21.5 -51.0 Totals net of changes in U.S. government cash balances 64 Net borrowing by domestic nonfinancial 833.7' 836.9' 694.9 750.4 682.4 697.7 761.0 645.8 696.0 626.8 728.4 649.2 65 Net borrowing by U.S. government 209.3 215.0 152.8 147.1 156.1 147.6 161.6 79.4 191.1 192.4 226.2 267.8 External corporate equity funds raised in United States 66 Total net share issues 17.r 86.ST 10.9 -124.2 -60.7 -173.0 -164.7 -38.1 -54.6 14.6 -8.3 55.7 67 Mutual funds 84.4 159.0 73.9 1.1 41.3 9.8 1.0 34.0 57.9 72.4 53.1 76.5 68 All other -67.2' -72.2' -63.0 -125.3 -102.0 -182.8 -165.7 -72.1 -112.5 -57.8 -61.4 -20.8 69 Nonfinancial corporations -84.5' -85.(y -75.5 -129.5 -124.2 -194.5 -172.3 -98.7 -146.3 -79.3 -69.0 -48.0 70 Financial corporations 13.6' 11.6' 14.6 3.3 5.5 5.0 2.1 9.2 6.3 4.3 6.4 5.5 71 Foreign shares purchased in United States 3.7 1.2 -2.1 .9 16.7 6.8 4.5 17.4 27.5 17.2 1.2 21.7 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'' Q4' Ql' Q2' Q3' Q4' Ql' Q2 1 Total funds advanced in credit markets to domestic nonfinancial sectors 848. 1' 836.9 687.0 760.8 676.5 694.9 746.7 666.5 673.3 619.5 749.9 598.1 By public agencies and foreign 7 Total net advances 202.0 280.2 248.8 210.7 187.6 230.2 312.8 15.5 221188..33 220033..88 223344..55 228844..11 3 U.S. government securities 45.9 69.4 70.1 85.2 30.7 114.5 83.1 -103.3 115.7 27.1 16.9 96.1 4 Residential mortgages 94.6 136.3 139.1 86.3 137.9 97.7 126.0 119.7 127.7 178.3 181.1 178.7 5 FHLB advances to thrifts 14.2 19.8 24.4 19.7 -11.0 33.7 58.9 -13.1 -41.0 -48.8 -21.8 -30.7 6 Other loans and securities 47.3 54.7 15.1 19.4 30.0 -15.6 44.8 12.1 15.8 47.1 58.3 39.9 Total advanced, by sector 7 U.S. government 17.8 9.7 -7.9 -9.4 -2.4 -28.7 -.2 -6.0 -9.3 5.7 35.1 53.3 8 Sponsored credit agencies 103.5 153.3 169.3 112.0 125.3 146.8 188.2 28.0 126.4 158.4 183.3 138.5 9 Monetary authorities 18.4 19.4 24.7 10.5 -7.3 13.1 8.1 -1.6 -31.2 -4.6 -6.7 39.7 10 Foreign 62.3 97.8 62.7 97.6 72.1 99.0 116.7 -4.9 132.4 44.2 22.8 52.6 Agency and foreign borrowing not in line 1 11 Sponsored credit agencies and mortgage pools 101.5 154.1 171.8 119.8 151.0 149.0 194.0 128.8 112244..88 115566..44 117755..55 114455..22 12 Foreign 1.2 9.7 4.5 6.3 10.9 9.9 3.2 -6.9 30.4 16.9 -3.3 46.3 Private domestic funds advanced 13 Total net advances 748.8r 720.5 614.5 676.2 650.8 623.6 631.1 772.9 610.1 589.0 687.6 505.5 14 U.S. government securities 278.2 300.1 247.4 192.1 270.5 179.4 258.2 332.2 177.4 314.3 406.2 265.8 15 State and local obligations 135.4 22.7 49.3 49.8 30.4 56.8 39.7 28.7 34.1 19.1 13.5 21.6 16 Corporate and foreign bonds 40.6' 89.7 66.9 91.3 66.0 68.5 36.8 91.1 65.6 70.4 54.5 70.8 17 Residential mortgages 91.8 115.9 120.2 161.3 96.5 133.5 122.6 113.0 105.1 45.5 78.8 -17.5 18 Other mortgages and loans 216.9' 212.0 155.2 201.4 176.4 219.2 232.8 194.8 187.0 91.0 112.8 134.2 19 LESS: Federal Home Loan Bank advances 14.2 19.8 24.4 19.7 -11.0 33.7 58.9 -13.1 -41.0 -48.8 -21.8 -30.7 Private financial intermediation 20 Credit market funds advanced by private financial institutions 578.0' 730.0 528.4 562.3 522.5 621.4 517.4 581.5 361.7 629.2 365.6 309.9 21 Commercial banking 188.4r 198.1 135.4 156.3 177.3 144.5 180.4 160.9 183.7 184.3 187.9 127.4 27 Savings institutions 87.9 107.6 136.8 120.4 -91.3 96.2 46.1 -71.7 -138.1 -201.6 -26.6 -177.1 23 Insurance and pension funds 150. lr 160.1 179.7 198.7 189.7 209.7 195.7 198.2 156.9 207.8 146.9 195.1 24 Other finance 151.6 264.2 76.6 86.9 246.8 171.0 95.1 294.2 159.2 438.7 57.3 164.6 25 Sources of funds 578.0r 730.0 528.4 562.3 522.5 621.4 517.4 581.5 361.7 629.2 365.6 309.9 26 Private domestic deposits and RPs 212.1' 277.1 162.8 229.2 223.7 197.5 136.5 278.1 275.4 204.9 122.2 63.3 27 Credit market borrowing 99.7 131.0 128.4 127.8 54.5 157.1 162.6 25.3 -.9 30.9 26.2 5.0 78 Other sources 266. R 321.8 237.1 205.3 244.3 266.9 218.3 278.1 87.2 393.5 217.3 241.7 29 Foreign funds 19.7 12.9 43.7 9.3 -11.7 35.3 -3.8 -43.0 30.5 -30.3 50.0 -18.4 30 Treasury balances 10.3 1.7 -5.8 7.3 -3.4 .5 -12.6 13.9 -19.9 5.0 11.9 -27.1 31 Insurance and pension reserves 131.7r 119.9 135.4 177.6 143.8 215.7 179.5 119.5 96.9 179.2 131.1 173.4 32 Other, net 104.4r 187.3 63.9 11.0 115.6 15.4 55.2 187.6 -20.2 239.6 24.3 113.8 Private domestic nonfinancial investors 33 Direct lending in credit markets 270.5' 121.5 214.6 241.7 182.8 159.3 276.4 216.7 247.5 -9.4 348.1 200.5 34 U.S. government securities 157.8 27.0 86.0 129.0 136.0 82.3 195.1 160.2 188.8 .0 290.9 105.1 35 State and local obligations 37.7 -19.9 61.8 53.5 28.3 57.9 56.7 4.4 39.6 12.3 2.5 3.5 36 Corporate and foreign bonds 3.8' 52.9 23.3 -9.4 -12.6 -32.5 -27.9 8.8 -32.1 .7 31.2 45.1 37 Open market paper 51.6' 9.9 15.8 36.4 4.1 33.8 44.6 7.6 20.8 -56.7 6.3 24.9 38 Other 19.6 51.7 27.6 32.2 27.1 17.8 7.8 35.8 30.4 34.3 17.1 21.9 39 Deposits and currency 222.8' 297.5 179.3 232.8 239.8 153.3 177.8 301.3 250.0 230.2 146.8 88.5 40 Currency 12.4 14.4 19.0 14.7 11.7 7.6 17.8 12.8 6.0 10.1 25.9 22.6 41 Checkable deposits 41.4' 96.4 -.9 12.9 1.7 20.2 -31.6 -40.3 16.3 62.2 -9.2 -53.6 47 Small time and savings accounts 138.5 120.6 76.0 122.4 100.5 56.5 20.7 111.6 162.2 107.4 104.6 134.9 43 Money market fund shares 7.2' 43.2 28.9 20.2 85.2 60.9 39.4 119.2 116.7 65.6 72.8 5.8 44 Large time deposits 7.4 -3.2 37.2 40.8 23.1 37.0 68.5 61.1 -23.8 -13.4 -31.3 -41.2 45 Security RPs 17.7 20.2 21.6 32.9 13.3 22.9 39.4 26.6 3.9 -16.9 -14.8 17.4 46 Deposits in foreign countries -1.7' 5.9 -2.5 -11.2 4.4 -51.8 23.5 10.4 -31.3 15.2 -1.3 2.6 47 Total of credit market instruments, deposits, and currency 493.3' 419.0 393.9 474.5 422.7 312.5 454.2 518.1 497.5 220.8 495.0 288.9 48 Public holdings as percent of total 23.8 33.1 36.0 27.5 27.3 32.7 41.7 2.3 31.0 32.0 31.4 44.1 49 Private financial intermediation (in percent) 77.2' 101.3 86.0 83.2 80.3 99.6 82.0 75.2 59.3 106.8 53.2 61.3 50 Total foreign funds 82.0 110.7 106.4 106.9 60.4 134.3 112.9 -47.9 162.9 13.9 72.7 34.2 MEMO: Corporate equities not included above 51 Total net issues 17.2' 86.8 10.9 -124.2 -60.7 -173.0 -164.7 -38.1 -54.6 14.6 -8.3 55.7 57 Mutual fund shares 84.4 159.0 73.9 1.1 41.3 9.8 1.0 34.0 57.9 72.4 53.1 76.5 53 Other equities -67.2' -72.2 -63.0 -125.3 -102.0 -182.8 -165.7 -72.1 -112.5 -57.8 -61.4 -20.8 54 Acquisitions by financial institutions 46.9' 50.9 32.0 -2.9 7.2 17.3 -.2 -14.1 -17.9 60.9 36.7 71.0 55 Other net purchases -29.7' 35.9 -21.2 -121.4 -67.9 -190.3 -164.5 -24.0 -36.7 -46.3 -45.0 -15.4 NOTES BY LINE NUMBER. 31. Excludes net investment of these reserves in corporate equities. 1. Line 1 of table 1.57. 32. Mainly retained earnings and net miscellaneous liabilities. 2. Sum of lines 3-6 or 7-10. 33. Line 13 less line 20 plus line 27. 6. Includes farm and commercial mortgages. 34-38. Lines 14-18 less amounts acquired by private finance plus amounts 11. Credit market funds raised by federally sponsored credit agencies, and net borrowed by private finance. Line 38 includes mortgages. issues of federally related mortgage pool securities. 40. Mainly an offset to line 9. 13. Line 1 less line 2 plus line 11 and 12. Also line 20 less line 27 plus line 33. 47. Lines 33 plus 39, or line 13 less line 28 plus 40 and 46. Also sum of lines 28 and 47 less lines 40 and 46. 48. Line 2/line 1. 18. Includes farm and commercial mortgages. 49. Line 20/line 13. 26. Line 39 less lines 40 and 46. 50. Sum of lines 10 and 29. 27. Excludes equity issues and investment company shares. Includes line 19. 51. 53. Includes issues by financial institutions. 29. Foreign deposits at commercial banks, bank borrowings from foreign NOTE. Full statements for sectors and transaction types in flows and in amounts branches, and liabilities of foreign banking agencies to foreign affiliates, less outstanding may be obtained from Flow of Funds Section, Division of Research claims on foreign affiliates and deposits by banking in foreign banks. and Statistics, Board of Governors of the Federal Reserve System, Washington, 30. Demand deposits and note balances at commercial banks. D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A44 Domestic Nonfinancial Statistics • November 1990 1.59 SUMMARY OF CREDIT MARKET DEBT OUTSTANDING Billions of dollars; period-end levels. 1988 1989 1990 TTrraannssaaccttiioonn ccaatteeggoorryy,, sseeccttoorr Q4' Ql Q2' Q3' Q4' Ql' Q2 Nonfinancial sectors 1 Total credit market debt owed by domestic nonfinancial sectors 6,804.5' 7,646.3' 8,343.9 9,096.0 9,096.0 9,267.7' 9,438.6 9,603.6 9,803.5 9,972.6 10,126.6 By sector and instrument 2 U.S. government 1,600.4 1,815.4 1,960.3 2,117.8 2,117.8 2,155.7 2,165.7 2,204.7 2,268.0 2,359.5 2,397.3 3 Treasury securities 1,597.1 1,811.7 1,955.2 2,095.2 2,095.2 2,133.4 2,142.1 2,180.7 2,245.2 2,329.3 2,365.8 4 Agency issues and mortgages 3.3 3.6 5.2 22.6 22.6 22.3 23.6 24.0 22.8 30.2 31.6 5 Private domestic nonfinancial sectors 5,204. V 5,831.0' 6,383.6 6,978.2 6,978.2 7,111.9' 7,272.9 7,398.9 7,535.5 7,613.1 7,729.3 6 Debt capital instruments 3,485.2' 3,962.7' 4,427.9 4,886.4 4,886.4 4,989.1' 5,091.4 5,189.9 5,283.2 5,356.3 5,432.2 7 Tax-exempt obligations 655.5 679.1 728.4 790.8 790.8 798.6' 804.9 816.4 821.2 822.5 826.8 8 Corporate bonds 542.6' 669.4' 748.8 851.7 851.7 866.2' 887.9 903.5 925.3 935.9 951.0 9 Mortgages 2,287.1 2,614.2 2,950.7 3,243.8 3,243.8 3,324.2' 3.398.6 3,470.0 3,536.6 3,597.9 3,654.5 10 Home mortgages 1,490.2 1,720.8 1,943.1 2,173.9 2,173.9 2,229.0' 2,287.6 2,347.6 2,404.3 2,450.3 2,492.8 11 Multifamily residential 213.0 246.2 270.0 286.7 286.7 293.1' 298.3 301.2 304.4 309.2 313.3 12 Commercial 478.1 551.4 648.7 696.4 696.4 716.2' 725.9 734.9 742.6 753.7 763.3 13 Farm 105.9 95.8 88.9 86.8 86.8 86.0 86.8 86.3 85.3 84.7 85.1 14 Other debt instruments 1,718.9'' 1,868.2' 1,955.7 2,091.9 2,091.9 2,122.8' 2,181.5 2,208.9 2,252.3 2,256.9 2,297.1 15 Consumer credit 601.8 659.8 693.2 743.5 743.5 741.7 756.7 771.0 790.6 774.3 783.3 16 Bank loans n.e.c 602.3' 666.0' 673.3 713.1 713.1 725.6' 740.3 750.7 763.0 756.6 764.8 17 Open market paper 72.2 62.9 73.8 85.7 85.7 96.1 110.1 113.3 107.1 126.0 128.7 18 Other 442.6 479.6 515.3 549.6 549.6 559.4 574.4 574.0 591.7 599.9 620.3 19 By borrowing sector 5,204.1' 5,831.0' 6,383.6 6,978.2 6,978.2 7,111.9' 7,272.9 7,398.9 7,535.5 7,613.1 7,729.3 20 State and local governments 473.9 510.1 558.9 604.5 604.5 612.4' 619.9 629.9 634.1 634.3 636.8 21 Households 2,296.0' 2,596.1' 2,879.1 3,191.5 3,191.5 3,257.9' 3,330.5 3,411.3 3,501.5 3,542.8 3,600.1 22 Nonfinancial business 2,434.2' 2,724.8' 2,945.6 3,182.2 3,182.2 3,241.6' 3,322.5 3,357.6 3,399.9 3,436.0 3,492.4 23 Farm 173.4 156.6 145.5 137.6 137.6 136.7 139.5 139.2 139.2 138.2 143.8 24 Nonfarm noncorporate 898.3 997.6' 1,075.4 1,145.1 1,145.1 1,177.6 1,183.0 1,195.9 1,205.1 1,218.6 25 Corporate 1,362.4' 1,570.6' 1,724.6 1,899.5 1,899.5 1,941.0' 2,005.3 2,035.4 2,064.8 2,092.8 2,130.0 26 Foreign credit market debt held in United States 236.7' 238.3' 244.6 253.9 253.9 254.0' 252.2 257.7 261.6 260.5 273.0 2277 Bonds 71.8 74.9 82.3 89.2 89.2 90.4' 92.1 94.2 94.5 102.1 107.5 28 Bank loans n.e.c 27.9 26.9 23.3 21.5 21.5 21.6 21.5 22.6 21.4 19.0 18.5 29 Open market paper 33.9 37.4 41.2 49.9 49.9 54.4 52.7 57.5 63.0 59.3 65.1 30 U.S. government loans 103.0' 99.1' 97.7 93.2 93.2 87.5' 85.8 83.4 82.7 80.1 81.9 31 Total domestic plus foreign 7,041.1' 7,884.7' 8,588.5 9,349.9 9,349.9 9,521.7' 9,690.7 9,861.3 10,065.1 10,233.1 10,399.7 Financial sectors 32 Total credit market debt owed by financial sectors 1,213.2 1,529.8' 1,836.8 2,084.4 2,084.4 2,191.3 2,234.1 2,263.8 2,322.4 2,358.6 2,400.0 By instrument 33 U.S. government related 632.7 810.3' 978.6 1,098.4 1,098.4 1,140.8 1,169.5 1,203.6 1,249.3 1,287.5 1,319.7 34 Sponsored credit agency securities 257.8 273.0 303.2 348.1 348.1 364.3 369.0 370.4 373.3 376.0 378.9 35 Mortgage pool securities 368.9 531.6' 670.4 745.3 745.3 771.5 795.6 828.2 871.0 906.5 935.9 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 580.5 719.5 858.2 986.1 986.1 1,050.5 1,064.6 1,060.2 1,073.0 1,071.1 1,080.3 38 Corporate bonds 204.5 287.4 366.3 418.0 418.0 458.6 466.1 472.7 482.7 492.6 510.4 39 Mortgages 2.7 2.7 3.1 3.4 3.4 3.5 3.5 3.5 3.4 3.2 3.3 40 Bank loans n.e.c 32.1 36.1 32.8 34.2 34.2 32.2 33.8 34.1 36.0 33.2 33.5 41 Open market paper 252.4 284.6 322.9 377.7 377.7 392.5 399.4 398.8 409.1 409.1 406.8 42 Loans from Federal Home Loan Banks... 88.8 108.6 133.1 152.8 152.8 163.8 161.9 151.1 141.8 132.9 126.3 43 Total, by sector 1,213.2 1,529.8' 1,836.8 2,084.4 2,084.4 2,191.3 2,234.1 2,263.8 2,322.4 2,358.6 2,400.0 44 Sponsored credit agencies 263.9 278.7 308.2 353.1 353.1 369.3 374.0 375.4 378.3 381.0 383.8 45 Mortgage pools 368.9 531.6' 670.4 745.3 745.3 771.5 795.6 828.2 871.0 906.5 935.9 46 Private financial sectors 580.5 719.5 858.2 986.1 986.1 1,050.5 1,064.6 1,060.2 1,073.0 1,071.1 1,080.3 47 Commercial banks 79.2 75.6 81.8 78.8 78.8 73.3 75.7 77.0 77.4 73.4 76.1 48 Bank affiliates 106.2 116.8 131.1 136.2 136.2 140.0 141.2 144.0 142.5 140.8 133.0 49 Savings and loan associations.- 98.9 119.8 139.4 159.3 159.3 170.1 167.9 155.7 145.2 137.0 128.7 50 Mutual savings banks 4.4 8.6 16.7 18.6 18.6 17.8 17.7 17.5 17.2 15.4 16.3 51 Finance companies 261.2 328.1 378.8 446.1 446.1 464.3 478.0 481.2 496.2 501.3 510.9 52 REITs 5.6 6.5 7.3 11.4 11.4 11.1 10.6 10.0 10.1 10.1 9.7 53 SCO issuers 25.0 64.0 103.1 135.7 135.7 173.8 173.5 174.9 184.4 193.1 205.7 All sectors 54 Total credit market debt 8,254.4' 9,414.4' 10,425.3 11,434.3 11,434.3 11,712.9' 11,924.8 12,125.1 12,387.4 12,591.7 12,799.7 55 U.S. government securities 2,227.0 2,620.0' 2,933.9 3,211.1 3,211.1 3,291.5 3,330.3 3,403.3 3,512.4 3,642.0 3,712.1 56 State and local obligations 655.5 679.1 728.4 790.8 790.8 798.6' 804.9 816.4 821.2 822.5 826.8 57 Corporate and foreign bonds 818.9' 1,031.7' 1,197.4 1,358.9 1,358.9 1,415.2' 1,446.1 1,470.5 1,502.6 1,530.7 1,568.9 58 Mortgages 2,289.8 2,617.0 2,953.8 3,247.2 3,247.2 3,327.7' 3,402.1 3,473.6 3,540.1 3,601.1 3,657.7 59 Consumer credit 601.8 659.8 693.2 743.5 743.5 741.7 756.7 771.0 790.6 774.3 783.3 60 Bank loans n.e.c 662.4' 729.0' 729.5 768.9 768.9 779.5' 795.6 807.4 820.3 808.9 816.9 61 Open market paper 358.5 384.9 437.9 513.4 513.4 543.0' 562.2 569.6 579.2 594.5 600.5 62 Other loans 640.5' 693.1' 751.1 800.5 800.5 815.7' 827.0 813.4 821.1 817.8 833.6 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 11998855rr 11998866rr 11998877'' 11998888'' Q4' Ql' Q2' Q3' Q4' Ql' Q2 1 Total funds advanced in credit markets to domestic nonfinancial sectors 6,804.5 7,646.3 8,343.9 9,096.0 9,096.0 9,267.7 9,438.6 9,603.6 9,803.5 9,972.6 10,126.6 By public agencies and foreign ? Total held 1,474.0 1,779.4 2,006.6 2,199.7 2,199.7 22,,225577..00 2,266.9 22,,332233..33 22,,338866..55 22,,442288..99 22,,550044..77 3 U.S. government securities 435.4 509.8 570.9 651.5 651.5 666.1 646.1 674.5 689.4 686.4 714.0 4 Residential mortgages 518.2 678.5 814.1 900.4 900.4 927.2 954.4 991.1 1,038.4 1,078.9 1,120.8 5 FHLB advances to thrifts 88.8 108.6 133.1 152.8 152.8 163.8 161.9 151.1 141.8 132.9 126.3 6 Other loans and securities 431.6 482.4 488.6 495.1 495.1 500.0 504.5 506.6 517.0 530.7 543.6 7 Total held, by type of lender 1,474.0 1,779.4 2,006.6 2,199.7 2,199.7 2,257.0 2,266.9 2,323.3 2,386.5 2,428.9 2,504.7 8 U.S. government 248.6 255.3 240.0 217.6 217.6 212.9 211.5 207.8 207.1 216.6 231.1 9 Sponsored credit agencies and mortgage pools ... 659.8 835.9 1,001.0 1,113.0 1,113.0 1,151.1 1,157.8 1,193.5 1,238.2 1,275.4 1,309.5 10 Monetary authority 186.0 205.5 230.1 240.6 240.6 235.4 238.4 227.6 233.3 224.4 237.8 11 Foreign 379.5 482.8 535.5 628.5 628.5 657.6 659.2 694.5 707.9 712.5 726.3 Agency and foreign debt not in line 1 12 Sponsored credit agencies and mortgage pools ... 632.7 810.3 978.6 1,098.4 1,098.4 1,140.8 1,169.5 1,203.6 1,249.3 11,,228877..55 1,319.7 13 Foreign 236.7 238.3 244.6 253.9 253.9 254.0 252.2 257.7 261.6 260.5 273.0 Private domestic holdings 14 Total private holdings 6,199.9 6,915.6 7,560.4 8,248.5 8,248.5 8,405.4 8,593.3 8,741.5 8,927.9 9,091.7 99,,221144..77 15 U.S. government securities 1,791.6 2,110.1 2,363.0 2,559.7 2,559.7 2,625.4 2,684.1 2,728.8 2,823.0 2,955.5 2,998.1 16 State and local obligations 655.5 679.1 728.4 790.8 790.8 798.6 804.9 816.4 821.2 822.5 826.8 17 Corporate and foreign bonds 517.3 606.6 674.3 765.6 765.6 776.5 797.7 814.5 831.6 846.8 862.5 18 Residential mortgages 1,185.1 1,288.5 1,399.0 1,560.2 1,560.2 1,594.9 1,631.5 1,657.7 1,670.4 1,680.6 1,685.2 19 Other mortgages and loans 22,,113399..33 2,339.8 2,528.7 2,724.9 2,724.9 2,773.7 2,836.9 2,875.2 2,923.5 2,919.1 2,968.4 20 LESS: Federal Home Loan Bank advances 8888..88 108.6 133.1 152.8 152.8 163.8 161.9 151.1 141.8 132.9 126.3 Private financial intermediation 21 Credit market claims held by private financial 5,289.4 6,018.0 6,564.5 7,128.6 7,128.6 7,273.3 7,430.5 7,518.2 7,674.1 7,760.9 77,,885511..66 77 Commercial banking 1,989.5 2,187.6 2,323.0 2,479.3 2,479.3 2,501.4 2,549.0 2,599.6 2,656.6 2,680.4 2,721.1 23 Savings institutions 1,191.2 1,297.9 1,445.5 1,567.7 1,567.7 1,570.6 1,561.0 1,530.3 1,480.3 1,461.2 1,425.4 74 Insurance and pension funds 1,365.3 1,525.4 1,705.1 1,903.8 1,903.8 1,957.8 2,004.9 2,042.7 2,093.4 2,135.7 2,181.4 25 Other finance 743.4 1,007.1 1,091.0 1,177.9 1,177.9 1,243.5 1,315.6 1,345.5 1,443.8 1,483.6 1,523.7 76 Sources of funds 5,289.4 6,018.0 6,564.5 7,128.6 7,128.6 7,273.3 7,430.5 7,518.2 7,674.1 7,760.9 7,851.6 77 Private domestic deposits and RPs 2,926.1 3,199.0 3,354.2 3,599.1 3,599.1 3,629.1 3,680.0 3,741.3 3,822.8 3,849.8 3,843.9 28 Credit market debt 580.5 719.5 858.2 986.1 986.1 1,050.5 1,064.6 1,060.2 1,073.0 1,071.1 1,080.3 79 Other sources 1,782.9 2,099.5 2,352.1 2,543.5 2,543.5 2,593.7 2,685.9 2,716.6 2,778.3 2,840.0 2,927.4 30 Foreign funds 5.6 18.6 62.3 71.5 71.5 61.8 50.0 55.7 59.9 62.8 58.2 31 Treasury balances 25.8 27.5 21.6 29.0 29.0 13.5 34.4 30.3 25.6 16.7 29.1 37 Insurance and pension reserves 1,289.3 1,398.5 1,527.8 1,692.5 1,692.5 1,741.8 1,774.0 1,793.2 1,829.9 1,867.1 1,918.3 33 Other, net 462.1 655.0 740.3 750.5 750.5 776.6 827.5 837.4 862.9 893.3 921.8 Private domestic nonfinancial investors 34 Credit market claims 1,491.0 1,617.0 1,854.1 2,106.0 2,106.0 2,182.6 2,227.4 2,283.6 22,,332266..88 22,,440011..99 22,,444433..44 35 U.S. government securities 803.3 848.7 936.7 1,072.2 1,072.2 1,099.1 1,119.8 1,166.6 1,201.0 1,279.7 1,286.3 36 Tax-exempt obligations 231.5 212.6 274.4 340.9 340.9 348.9 353.6 363.1 369.2 363.0 367.0 37 Corporate and foreign bonds 37.1 90.5 114.0 100.4 100.4 123.6 125.1 121.2 117.2 125.4 136.7 38 Open market paper 135.2 145.1 178.5 218.0 218.0 225.1 233.5 235.9 227.4 219.0 232.6 39 Other 283.8 320.1 350.4 374.4 374.4 386.0 395.3 396.8 412.1 414.7 420.9 40 Deposits and currency 3,116.8 3,410.1 3,583.9 3,832.3 3,832.3 3,865.5 3,927.1 3,977.2 4,072.1 4,098.1 4,103.5 41 Currency 171.9 186.3 205.4 220.1 220.1 220.7 226.4 224.4 231.8 234.4 242.6 47 Checkable deposits 420.3 516.6 515.4 527.2 527.2 494.6 495.8 487.2 528.9 501.9 499.0 43 Small time and savings accounts 1,831.9 1,948.3 2,017.1 2,156.2 2,156.2 2,168.9 2,189.3 2,224.4 2,256.7 2,290.4 2,316.9 44 Money market fund shares 225.6 268.9 297.8 318.0 318.0 342.7 362.1 391.0 403.3 436.7 426.3 45 Large time deposits 339.9 336.7 373.9 414.7 414.7 430.8 435.7 440.0 437.8 429.2 407.1 46 Security RPs 108.3 128.5 150.1 182.9 182.9 192.1 197.1 198.6 196.2 191.6 194.5 47 Deposits in foreign countries 18.8 24.8 24.3 13.1 13.1 15.8 20.7 11.4 17.6 13.9 17.0 48 Total of credit market instruments, deposits, and currency 4,607.8 5,027.2 5,438.0 5,938.2 5,938.2 6,048.1 6,154.5 6,260.8 6,399.0 6,500.0 6,546.9 49 Public holdings as percent of total 20.9 22.6 23.4 23.5 23.5 23.7 23.4 23.6 23.7 23.7 24.1 50 Private financial intermediation (in percent) 85.3 87.0 86.8 86.4 86.4 86.5 86.5 86.0 86.0 85.4 85.2 51 Total foreign funds 385.1 501.3 597.8 700.1 700.1 719.5 709.3 750.2 767.8 775.3 784.5 MEMO: Corporate equities not included above 52 Total market value 2,823.9 3,360.6 3,325.0 3,619.8 3,619.8 3,730.8 4,071.3 4,398.7 4,382.1 4,172.4 4,339.8 53 Mutual fund shares 240.2 413.5 460.1 478.3 478.3 486.3 514.8 543.9 555.1 550.3 587.9 54 Other equities 2,583.7 2,947.1 2,864.9 3,141.6 3,141.6 3,244.5 3,556.5 3,854.8 3,827.0 3,622.1 3,751.9 55 Holdings by financial institutions 800.3 974.6 1,039.5 1,176.1 1,176.1 1,241.6 1,354.4 1,490.5 1,497.8 1,438.4 1,539.8 56 Other holdings 2,023.6 2,385.9 2,285.5 2,443.7 2,443.7 2,489.2 2,716.9 2,908.2 2,884.3 2,734.0 2,800.0 NOTES BY LINE NUMBER. 32. Excludes net investment of these reserves in corporate equities. 1. Line 1 of table 1.59. 33. Mainly retained earnings and net miscellaneous liabilities. 2. Sum of lines 3-6 or 7-10. 34. Line 14 less line 21 plus line 28. 6. Includes farm and commercial mortgages. 35-39. Lines 15-19 less amounts acquired by private finance plus amounts 12. Credit market debt of federally sponsored agencies, and net issues of borrowed by private finance. Line 39 includes mortgages. federally related mortgage pool securities. 41. Mainly an offset to line 10. 14. Line 1 less line 2 plus line 12 and 13. Also line 21 less line 28 plus line 34. 48. Lines 34 plus 40, or line 14 less line 29 plus 41 and 47. Also sum of lines 29 and 48 less lines 41 and 47. 49. Line 2Aine 1 and 13. 19. Includes farm and commercial mortgages. 50. Line 21/line 14. 27. Line 40 less lines 41 and 47. 51. Sum of lines 11 and 30. 28. Excludes equity issues and investment company shares. Includes line 20. 52-54. Includes issues by financial institutions. 30. Foreign deposits at commercial banks plus bank borrowings from foreign NOTE. Full statements for sectors and transaction types in flows and in amounts affiliates, less claims on foreign affiliates and deposits by banking in foreign banks. outstanding may be obtained from Flow of Funds Section, Stop 95, Division of 31. Demand deposits and note balances at commercial banks. Research and Statistics, Board of Governors of the Federal Reserve System, Washington, D.C. 20551. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A46 Domestic Nonfinancial Statistics • November 1990 2.10 NONFINANCIAL BUSINESS ACTIVITY Selected Measures 1977 = 100; monthly and quarterly data are seasonally adjusted. Exceptions noted. 1989 1990 MMeeaassuurree 11998877 11998888 11998899 Dec. Jan. Feb. Mar. Apr. May June' July' Aug. 1 Industrial production (1987 = 100)1 100.0 105.4 108.1 108.6 107.5 108.5 108.9 108.8 109.4 110.0 110.0 109.8 Market groupings 2 Products, total (1987 = 100) 100.0 105.3 108.6 109.7 108.4 109.4 110.1 109.8 110.5 111.0 110.7 110.6 3 Final, total (1987 = 100) 100.0 105.6 109.1 110.3 108.5 109.7 110.7 110.4 111.2 111.7 111.4 111.2 4 Consumer goods (1987 = 100) 100.0 104.0 106.7 108.3 106.0 107.0 107.5 107.2 107.4 108.1 107.5 107.7 5 Equipment (1987 = 100) 100.0 107.6 112.3 112.9 111.8 113.3 114.9 114.7 116.2 116.5 116.4 115.8 6 Intermediate (1987 = 100) 100.0 104.4 106.8 107.9 108.0 108.4 108.2 108.0 108.3' 108.5 108.4 108.8 7 Materials (1987 = 100) 100.0 105.6 107.4 106.9 106.2 107.1 107.1 107.3 107.7' 108.5 109.0 108.6 Industry groupings 8 Manufacturing (1987 = 100) 100.0 105.8 108.9 108.8 108.1 109.6 109.8 109.5 110.3 110.7 110.8 110.6 Capacity utilization (percent)2 9 Manufacturing 81.4 83.9 83.9 82.8 82.0 83.0 82.9 82.5 82.8 82.9 82.7 82.4 10 Construction contracts (1982 = 100)3 164.8 166.4 171.3r 166.0 158.0 154.0 157.0 147.0 155.0 153.0 148.0 146.0 11 Nonagricultural employment, total4 123.9 128.0 131.6 132.6' 133.C 133.3' 133.5' 133.6' 134.1' 134.4 134.3 134.2 12 Goods-producing, total 101.5 103.7 105.3 103.6' 103.5' 104.1' 103.8' 103.4' 103.5' 103.4 103.1 102.7 13 Manufacturing, total 96.7 98.6 99.6 98.(r 97.4' 97.8' 97.6' 97.5' 97.4' 97.3 97.2 96.9 14 Manufacturing, production- worker ... 91.9 93.9 94.8 92.8' 92.0' 92.5' 92.4' 92.3' 92.1' 92.0 92.0 91.7 15 Service-producing 133.3 138.2 142.7 144.8' 145.3' 145.6 146.0' 146.2' 147.0' 147.4 147.3 147.4 16 Personal income, total 234.3 253.2 272.7 279.7 281.9 283.8 285.8 286.7 287.7 289.0 290.7 n.a. 17 Wages and salary disbursements 226.4 244.6 258.9 263.9 264.9 266.9 268.6 269.9 271.0 272.6 274.2 n.a. 18 Manufacturing 183.8 196.5 203.1 202.5 201.1 203.0 204.6 204.2 205.9 206.8 207.3 n.a. 19 Disposable personal income 213.6 228.0 240.6 277.2 279.9 281.7 283.9 283.9 284.8 286.5 288.0 n.a. 20 Retail sales 213.6 228.0 240.6 242.8 249.6 249.7 248.7 246.3 246.1 248.9 249.9 248.5 Prices7 21 Consumer (1982-84 = 100) 113.6 118.3 124.0 126.1 127.4 128.0 128.7 128.9 129.2 129.9 130.4 131.6 22 Producer finished goods (1982 = 100) ... 105.4 108.0 113.6 115.4 117.6 117.4 117.2 117.2' 117.7 117.9 118.0 119.2 1. A major revision of the industrial production index and the capacity 6. Based on Bureau of Census data published in Survey of Current Business. utilization rates was released in April 1990. See "Industrial Production: 1989 7. Data without seasonal adjustment, as published in Monthly Labor Review. Developments and Historical Revision" in the Federal Reserve Bulletin, vol. 76 Seasonally adjusted data for changes in the price indexes may be obtained from (April 1990), pp. 187-204. the Bureau of Labor Statistics, U.S. Department of Labor. 2. Ratios of indexes of production to indexes of capacity. Based on data from Federal Reserve, McGraw-Hill Economics Department, Department of Com- NOTE. Basic data (not index numbers) for series mentioned in notes 4, 5,and 6, merce, and other sources. and indexes for series mentioned in notes 3 and 7 may also be found in the Survey 3. Index of dollar value of total construction contracts, including residential, of Current Business. nonresidential and heavy engineering, from McGraw-Hill Information Systems Figures for industrial production for the latest month are preliminary and the Company, F. W. Dodge Division. prior three months have been revised. See "Recent Developments in Industrial 4. Based on data in Employment and Earnings (U.S. Department of Labor). Capacity and Utilization," Federal Reserve Bulletin, vol. 76 (June 1990), pp. Series covers employees only, excluding personnel in the Armed Forces. 411-35. 5. Based on data in Survey of Current Business (U.S. Department of Commerce). 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. 1990' CCaatteeggoorryy 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June July Aug. HOUSEHOLD SURVEY DATA 1 Noninstitutional population1 185,010 186,837 188,601 189,506 189,607 189,717 189,844 189,983 190,122 190,275 190,411 2 Labor force (including Armed Forces)1 122,122 123,893 126,077 126,610 126,825 127,017 127,061 127,159 126,981 126,906 126,810 3 Civilian labor force 119,865 121,669 123,869 124,397 124,630 124,829 124,886 125,004 124,836 124,767 124,660 Employment 4 Nonagricultural industries2 109,232 111,800 114,142 114,728 114,957 115,133 114,983 115,045 115,041 114,867 114,521 5 Agriculture 3,208 3,169 3,199 3,134 3,079 3,200 3,133 3,305 3,348 3,085 3,137 Unemployment 6 Number 7,425 6,701 6,528 6,535 6,594 6,495 6,770 6,653 6,447 6,814 7,003 7 Rate (percent of civilian labor force) .... 6.2 5.5 5.3 5.3 5.3 5.2 5.4 5.3 5.2 5.5 5.6 8 Not in labor force 62,888 62,944 62,524 62,896 62,782 62,700 62,783 62,824 63,141 63,369 63,601 ESTABLISHMENT SURVEY DATA 9 Nonagricultural payroll employment3 102,200 105,584 108,573 109,654 109,958 110,122 110,177 110,617 110,829 110,740 110,665 10 Manufacturing 19,024 19,403 19,611 19,171 19,244 19,217 19,190 19,167 19,148 19,126 19,081 11 Mining 717 721 722 723 727 729 734 738 744 743 736 12 Contract construction 4,967 5,125 5,302 5,294 5,368 5,313 5,256 5,286 5,270 5,231 5,191 13 Transportation and public utilities 5,372 5,548 5,703 5,790 5,804 5,808 5,809 5,833 5,846 5,840 5,849 14 24,327 25,139 25,807 26,163 26,115 26,125 26,141 26,164 26,205 26,224 26,214 15 Finance 6,547 6,676 6,814 6,794 6,817 6,821 6,823 6,838 6,844 6,843 6,852 16 Service 24,236 25,600 26,889 27,721 27,842 27,950 27,969 28,094 28,225 28,284 28,356 17 Government 17,010 17,372 17,726 17,998 18,041 18,159 18,255 18,497 18,547 18,449 18,386 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 • November 1990 2.12 OUTPUT, CAPACITY, AND CAPACITY UTILIZATION1 Seasonally adjusted 1989 1990 1989 1990 1989 1990 SSeerriieess Q3 Q4 Ql Q2T Q3 Q4 Ql Q2 Q3 Q4r Ql Q2r 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 100.8 100.6 101.3 102.6 116.7 116.1 115.7 115.2 86.4 86.7 87.6 89.0 3 Utilities 106.2 110.6 105.7 107.6 125.5 125.7 126.0 126.4 84.6 88.0 83.9 85.2 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 106.4 106.1 106.4 106.3 122.7 123.4 124.2 124.9 86.7 85.9 85.7 85.1 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 Aug. Dec. Jan. Feb. Mar. Apr. May' June' July' Aug." Capacity utilization rate (percent) 7 Total industry 89.2 72.6 87.3 71.8 84.0 83.7 82.7 83.2 83.4 83.1 83.4 83.6 83.5 83.1 8 Mining 94.4 88.4 96.6 80.6 86.4 86.3 87.8 87.3 87.5 89.2 88.7 89.1 89.7 87.8 9 Utilities 95.6 82.5 88.3 76.2 84.7 92.3 84.8 82.5 84.2 84.5 84.7 86.3 85.9 86.9 10 Manufacturing 88.9 70.8 87.3 70.0 83.8 82.8 82.0 83.0 82.9 82.5 82.8 82.9 82.7 82.4 11 Primary processing.... 92.2 68.9 89.7 66.8 86.9 85.2 85.7 86.1 85.2 85.0 84.9 85.5 85.8 85.5 12 Advanced processing.. 87.5 72.0 86.3 71.4 82.4 81.8 80.5 81.7 82.0 81.5 82.0 81.9 81.5 81.1 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 Industrial 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 GGrroouuppss por- a 1 v 98 g 9 . tion Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May' June' July' Aug." Index (1987 = 100) MAJOR MARKET 1 Total index 100.0 108.1 108.2 108.2 107.7 108.1 108.6 107.5 108.5 108.9 108.8 109.4 110.0 110.0 109.8 2 Products 60.8 108.6 108.5 108.8 108.1 108.9 109.7 108.4 109.4 110.1 109.8 110.5 111.0 110.7 110.6 3 Final products 46.0 109.1 109.1 109.6 108.5 109.4 110.3 108.5 109.7 110.7 110.4 111.2 111.7 111.4 111.2 4 Consumer goods 26.0 106.7 105.6 106.3 107.3 107.4 108.3 106.0 107.0 107.5 107.2 107.4 108.1 107.5 107.7 5 Durable consumer goods 5.6 107.9 105.8 107.6 106.8 105.7 106.8 99.4 106.2 110.8 107.3 109.3 112.1 109.2 107.7 6 Automotive products 2.5 106.9 103.2 104.9 102.9 102.4 104.5 85.2 99.3 109.3 102.4 107.0 112.2 107.4 105.3 7 Autos and trucks 1.5 105.7 101.1 103.1 99.7 98.4 100.1 66.3 92.7 107.7 95.8 105.6 112.9 104.8 101.5 8 Autos, consumer .9 101.2 95.1 102.0 100.7 92.8 92.6 62.1 86.9 100.5 87.7 96.8 103.8 98.0 97.2 9 Trucks, consumer .6 113.3 111.3 105.0 98.2 108.0 112.6 73.3 102.3 120.0 109.3 120.4 128.3 116.2 108.8 10 Auto parts and allied goods... 1.0 108.7 106.3 107.4 107.6 108.2 111.2 113.6 109.4 111.6 112.2 108.9 111.2 111.3 110.9 11 Other 3.1 108.7 107.9 109.8 109.8 108.4 108.6 110.6 111.6 112.0 111.2 111.1 112.0 110.7 109.7 12 Appliances, A/C, and TV .8 106.7 106.5 109.3 107.6 102.0 101.0 108.4 107.8 108.1 104.4 103.6 107.5 101.9 100.7 N Carpeting and furniture .9 101.5 98.1 100.9 101.1 100.4 102.0 103.7 104.7 105.9 107.5 107.6 107.8 108.6 108.3 14 Miscellaneous home goods ... 1.4 114.5 114.8 115.8 116.6 117.1 117.1 116.2 118.2 118.0 117.3 117.5 117.2 116.9 115.5 15 Nondurable consumer goods 20.4 106.4 105.6 106.0 107.4 107.8 108.7 107.8 107.2 106.6 107.1 106.9 107.0 107.0 107.6 16 Foods and tobacco 9.1 104.2 103.3 103.7 105.6 105.8 106.4 105.5 106.2 105.8 105.6 105.2 104.9 104.9 105.4 17 Clothing 2.6 101.6 100.3 101.6 101.9 100.1 99.4 100.6 99.6 97.0 96.0 96.4 95.8 96.1 96.0 18 Chemical products 3.5 109.4 110.1 107.8 110.3 111.3 110.3 112.7 112.0 111.0 113.5 113.0 112.0 110.5 110.8 19 Paper products 2.5 114.3 114.1 116.2 117.2 118.1 116.9 116.2 117.6 116.4 118.1 118.6 118.3 120.2 121.4 20 Energy 2.7 106.7 104.7 106.0 106.0 108.0 115.2 107.9 101.5 103.1 104.1 104.1 107.3 107.8 109.1 21 Fuels .7 102.8 102.3 103.4 103.1 103.0 100.5 105.1 106.6 101.8 101.6 98.2 102.6 105.7 105.4 22 Residential utilities 2.0 108.1 105.6 106.9 107.0 109.8 120.7 109.0 99.6 103.6 105.0 106.3 109.1 108.5 110.5 23 Equipment, total 20.0 112.3 113.6 113.8 110.1 112.0 112.9 111.8 113.3 114.9 114.7 116.2 116.5 116.4 115.8 24 Business equipment 13.9 119.1 120.4 120.7 116.0 118.7 119.9 118.0 120.1 122.2 121.6 123.5 123.9 123.8 123.6 7.5 Information processing and related .. 5.6 121.7 122.0 123.7 119.9 123.5 124.0 124.0 124.7 126.0 126.4 126.6 125.5 126.0 125.8 76 Office and computing 1.9 137.2 139.3 141.8 132.8 141.0 142.7 142.7 144.3 147.2 149.3 148.9 148.1 149.3 149.9 77 Industrial 4.0 113.8 113.8 113.8 112.4 113.4 112.8 113.5 113.4 113.9 114.2 115.8 115.5 116.8 116.2 78 Transit 2.5 123.8 128.4 127.0 112.9 117.0 123.4 111.4 122.7 130.6 126.2 132.5 136.8 133.7 134.0 79 Autos and trucks 1.2 103.9 101.6 103.1 97.6 98.0 97.6 69.6 91.7 104.5 95.2 105.7 112.3 103.7 30 Other 1.9 116.5 118.6 119.1 116.3 117.8 118.5 118.7 117.4 117.8 117.6 119.4 119.9 119.2 118.9 31 Defense and space equipment 5.4 97.4 98.9 98.9 96.6 96.7 96.6 97.5 97.6 97.5 97.3 97.6 97.5 98.0 97.4 32 Oil and gas well drilling .6 93.7 95.3 97.3 97.3 99.9 100.3 98.3 100.1 106.0 114.3 118.6 122.7 115.8 106.4 33 Manufactured homes .2 92.3 89.5 87.5 87.9 89.4 91.6 91.6 94.3 92.9 89.7 91.3 92.8 90.0 92.8 34 Intermediate products, total 14.7 106.8 106.4 106.3 106.9 107.3 107.9 108.0 108.4 108.2 108.0 108.3 108.5 108.4 108.8 35 Construction supplies 6.0 106.1 105.5 105.2 106.3 107.0 107.4 107.9 108.2 107.3 106.4 105.5 106.0 105.4 105.3 36 Business supplies 8.7 107.3 106.9 107.0 107.3 107.5 108.2 108.0 108.5 108.9 109.1 110.2 110.3 110.5 111.2 37 Materials, total 39.2 107.4 107.8 107.4 107.1 107.0 106.9 106.2 107.1 107.1 107.3 107.7 108.5 109.0 108.6 38 Durable goods materials 19.4 111.6 112.0 112.0 110.8 110.8 110.4 109.4 110.8 110.9 110.9 112.5 113.7 113.9 113.9 39 Durable consumer parts 4.2 109.0 109.2 108.8 106.9 105.7 102.5 96.5 102.8 104.5 103.2 108.5 108.5 108.4 109.7 40 Equipment parts 7.3 114.7 115.6 115.5 114.4 115.3 115.8 116.5 117.6 117.6 117.4 118.1 118.9 119.0 118.8 41 Other 7.9 110.2 110.4 110.6 109.5 109.4 109.5 109.7 108.7 108.1 108.9 109.6 111.6 112.0 111.6 47 Basic metal materials 2.8 112.1 113.0 112.9 111.0 108.6 109.3 108.5 109.9 107.5 110.2 109.2 113.4 113.9 114.2 43 Nondurable goods materials 9.0 105.3 105.7 104.2 106.1 104.9 104.3 105.4 105.8 105.2 106.1 105.2 106.2 107.1 106.3 44 Textile materials 1.2 99.8 102.1 99.6 98.6 96.1 95.8 94.6 96.2 94.9 95.6 97.4 99.4 98.5 97.7 45 Pulp and paper materials 1.9 103.8 103.6 104.1 107.7 104.6 103.7 105.0 105.3 103.0 106.0 104.5 104.8 107.6 106.8 46 Chemical materials 3.8 106.4 107.3 104.5 106.8 105.8 103.8 105.8 107.3 107.5 107.4 105.4 107.3 107.8 107.1 47 Other 2.1 107.6 107.0 106.5 107.5 108.4 110.4 110.9 108.8 108.7 109.8 109.8 109.0 110.0 109.2 48 Energy materials 10.9 101.4 101.7 101.6 101.3 101.9 102.7 101.2 101.7 102.0 101.8 101.1 101.3 102.1 101.1 49 Primary energy 7.2 99.9 102.5 100.7 99.8 100.5 99.0 101.1 102.1 101.2 100.3 100.1 99.9 101.3 99.5 50 Converted fuel materials 3.7 104.3 100.4 103.6 104.2 104.5 110.0 101.4 100.9 103.4 104.6 102.9 104.1 103.6 104.1 SPECIAL AGGREGATES 51 Total excluding autos and trucks 97.3 108.2 108.4 108.4 108.0 108.4 108.9 108.6 108.9 109.0 109.2 109.5 109.9 110.2 110.0 52 Total excluding motor vehicles and parts ... 95.3 108.3 108.5 108.5 108.1 108.6 109.1 109.0 109.2 109.2 109.5 109.7 110.1 110.4 110.2 53 Total excluding office and computing machines 97.5 107.4 107.5 107.4 107.1 107.3 107.7 106.6 107.6 108.0 107.8 108.4 109.0 109.0 108.8 54 Consumer goods excluding autos and trucks 24.5 106.8 105.9 106.5 107.7 107.9 108.8 108.4 107.8 107.5 107.9 107.6 107.8 107.7 108.0 55 Consumer goods excluding energy 23.3 106.7 105.8 106.4 107.4 107.3 107.5 105.8 107.6 108.0 107.5 107.8 108.1 107.5 107.5 56 Business equipment excluding autos and trucks 12.7 120.6 122.3 122.4 117.8 120.7 122.1 122.8 122.9 124.0 124.2 125.3 125.0 125.8 125.5 57 Business equipment excluding office and computing equipment 12.0 116.2 117.4 117.3 113.3 115.0 116.2 114.0 116.2 118.2 117.2 119.4 119.9 119.7 119.3 58 Materials excluding energy 28.4 109.6 110.0 109.5 109.3 108.9 108.4 108.1 109.2 109.1 109.4 110.2 111.3 111.7 111.5 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A50 Domestic Nonfinancial Statistics • November 1990 2.13 INDUSTRIAL PRODUCTION Indexes and Gross Value1—Continued 1987 1990 Groups SIC procode por- avg. tion Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May' June' July' Aug." Index (1987 = 100) MAJOR INDUSTRY 1 Total index. 100.0 108.1 108.2 108.2 107.7 108.1 108.6 107.5 108.5 108.9 108.8 109.4 110.0 110.0 109.8 2 Manufacturing 84.4 108.9 109.1 109.1 108.4 108.9 108.8 108.1 109.6 109.8 109.5 110.3 110.7 110.8 110.6 3 Primary processing.. 26.7 106.4 106.6 105.8 106.6 106.2 105.3 106.2 106.9 106.0 105.9 106.1 107.0 107.6 107.5 4 Advanced processing , 57.7 110.1 110.2 110.6 109.3 110.1 110.4 109.0 110.9 111.7 111.3 112.4 112.5 112.2 112.1 Durable 47.3 110.9 111.3 111.5 109.4 110.1 110.4 108.6 110.7 111.9 111.1 112.6 113.2 112.9 112.6 Lumber and products . 24 2.0 103.0 102.4 102.6 103.2 104.8 106.4 106.0 104.3 105.0 103.3 101.7 101.6 101.1 101.3 Furniture and fixtures . 25 1.4 105.3 104.5 105.7 105.6 104.4 105.1 105.1 104.8 105.9 107.6 108.0 108.7 108.7 108.6 Clay, glass, and stone products 32 2.5 108.0 107.8 106.5 107.7 108.2 108.6 110.0 108.0 107.7 105.1 106.4 106.1 105.4 105.1 Primary metals 33 3.3 109.2 111.7 109.9 108.6 104.8 102.6 105.0 107.9 105.4 106.4 106.2 109.6 109.4 110.6 Iron and steel 331,2 1.9 109.3 109.8 109.7 109.2 104.1 100.3 104.6 110.6 106.1 106.7 105.5 110.5 109.7 112.6 Raw steel .1 108.5 106.8 102.9 106.4 100.6 97.6 109.9 109.0 105.9 104.9 107.6 111.8 113.8 117.1 Nonferrous 333-6,9 1.4 109.0 114.0 109.8 107.6 105.8 105.8 105.6 104.0 104.3 105.9 107.1 108.3 108.9 107.8 Fabricated metal products 34 5.4 107.2 106.5 106.0 105.9 106.9 106.3 105.1 105.6 105.5 105.0 107.1 106.8 107.7 107.4 Nonelectrical machinery. 35 8.6 121.8 121.8 123.4 119.0 122.9 123.8 123.7 124.2 125.2 125.7 126.9 126.6 127.3 126.6 Office and computing machines 357 2.5 137.2 139.3 141.8 132.8 141.0 142.7 142.7 144.3 147.3 149.3 149.0 148.2 149.3 149.9 Electrical machinery .... 36 8.6 109.5 110.6 110.8 110.2 110.1 110.1 110.1 111.0 112.3 111.3 112.4 112.7 111.9 111.8 Transportation equipment 37 9.8 107.2 107.8 108.0 102.1 102.8 104.4 94.7 103.5 107.9 105.1 109.0 110.9 109.1 108.6 Motor vehicles and parts 371 4.7 104.9 102.7 103.2 99.7 99.0 98.7 76.8 94.1 103.5 95.8 104.0 108.0 103.0 102.2 Autos and light trucks. 2.3 105.0 100.2 102.9 99.9 97.6 99.0 65.7 91.8 106.7 94.6 104.3 111.6 103.8 100.9 Aerospace and miscellaneous transportation equipment.. 372-6,9 5.1 109.3 112.4 1)2.3 104.3 106.3 109.6 111.0 111.9 111.9 113.4 113.5 113.5 114.7 114.3 Instruments 38 3.3 116.4 116.4 116.2 116.1 115.6 114.8 116.0 116.2 115.7 115.8 116.5 115.0 115.7 115.4 Miscellaneous manufacturers.... 39 1.2 114.9 116.5 116.2 116.9 117.0 116.4 117.0 118.1 118.6 118.6 119.1 119.6 119.9 119.7 Nondurable 37.2 106.4 106.2 106.0 107.2 107.3 106.7 107.5 108.3 107.2 107.5 107.4 107.6 108.1 108.1 Foods 20 8.8 105.5 104.8 105.4 106.8 107.4 108.0 106.8 107.4 107.1 107.0 106.8 106.6 106.8 107.2 Tobacco products ... 21 1.0 99.7 95.0 93.3 99.7 98.8 98.5 101.3 102.3 100.0 98.8 97.2 95.6 97.7 96.7 Textile mill products 22 1.8 101.9 101.5 101.5 101.9 99.3 99.8 100.6 103.0 99.8 100.9 102.7 103.6 103.8 103.0 Apparel products.... 23 2.4 104.3 104.7 104.5 103.9 103.7 102.6 102.4 102.1 99.8 98.7 99.2 99.3 99.7 99.3 Paper and products .. 26 3.6 103.2 103.0 102.2 105.3 104.1 103.4 103.8 105.0 102.8 105.3 104.0 104.2 107.5 106.7 Printing and publishing .. 27 6.4 108.5 107.8 109.4 109.3 109.6 109.6 110.7 112.1 111.4 112.0 112.8 112.2 112.4 113.0 Chemicals and products 28 8.6 108.5 109.6 107.5 109.4 109.8 107.6 109.9 110.5 109.5 110.3 109.2 109.9 109.4 109.5 Petroleum products.... 29 1.3 106.1 107.0 108.7 106.9 109.3 104.3 108.6 112.0 109.1 106.8 104.6 106.0 109.0 108.4 Rubber and plastic products 30 3.0 108.9 109.0 108.5 108.8 109.1 110.1 110.7 109.1 109.8 109.0 110.9 112.8 113.1 112.5 Leather and products .. 31 .3 103.7 103.2 103.5 102.2 99.4 103.0 104.3 102.9 103.3 102.6 103.5 102.0 103.4 102.3 34 Mining 7.9 100.5 100.7 101.6 100.7 101.2 100.1 101.7 101.0 101.1 102.9 102.2 102.6 103.2 100.8 35 Metal 10 .3 141.4 144.3 145.4 143.2 145.9 155.5 144.8 143.4 141.4 152.7 148.7 155.3 156.9 155.1 36 Coal 11,12 1.2 105.7 103.1 109.6 109.9 108.1 103.5 114.1 111.9 112.9 114.2 110.0 113.5 118.5 109.4 37 Oil and gas extraction... 13 5.7 95.5 96.3 95.9 94.3 95.5 94.0 94.4 94.1 94.6 95.7 96.0 95.0 94.8 93.7 38 Stone and earth minerals 14 .7 113.9 113.3 114.1 118.0 115.8 119.7 121.2 120.0 116.5 120.2 119.9 122.5 121.7 120.0 39 Utilities ... 7.6 107.1 106.2 105.9 107.4 108.3 116.1 106.8 104.0 106.2 106.7 107.1 109.2 108.7 110.1 40 Electric. 491,3PT 6.0 108.1 108.1 107.1 109.7 109.5 116.3 108.3 107.1 109.7 109.7 110.3 112.5 112.0 113.7 41 Gas 492,3PT 1.6 103.0 99.2 101.0 99.1 103.9 115.6 101.2 92.3 93.3 95.5 95.2 96.9 96.5 96.7 SPECIAL AGGREGATES 42 Manufacturing excluding motor vehicles and parts 79.8 109.2 109.5 109.5 108.9 109.4 109.3 109.9 110.5 110.2 110.3 110.7 110.9 111.2 111.8 43 Manufacturing excluding office and computing machines 82.0 108.1 108.2 108.1 107.7 107.9 107.7 107.1 108.6 108.7 108.3 109.2 109.6 109.6 109.5 Gross value (billions of 1982 dollars, annual rates) MAJOR MARKET 44 Products, total 1734.8 1,889.8 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 1,922.2 1,935.5 1,930.3 45 Final 1350.9 1,480.1 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 1,506.0 1,522.7 1,517.3 46 Consumer goods 833.4 884.6 870.1 878.8 883.2 889.0 898.6 864.3 888.6 893.4 883.9 885.9 897.8 892.5 47 Equipment 517.5 595.5 605.3 607.5 582.4 593.8 594.0 583.6 599.8 614.1 610.0 620.1 624.9 624.8 48 Intermediate 384.0 409.7 408.4 408.1 412.7 414.1 413.0 415.7 415.0 415.1 412.3 416.2 412.7 413.0 1. These data also appear in the Board's G.17 (419) release. For requests see utilization rates was released in April 1990. See "Industrial Production: 1989 address inside front cover. Developments and Historical Revision," Federal Reserve Bulletin, vol. 76 (April A major revision of the industrial production index and the capacity 1990), pp. 187-204. 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 Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Private residential real estate activity (thousands of units) NEW UNITS 1 1,535 1,456 1,339 1,362 1,364 1,416 1,739 1,297 1,232 1,108 1,065 1,108 1,082 ? 1,024 994 932 959 984 984 985 974 912 813 802 796 780 3 2-or-more-family 511 462 407 403 380 432 754 323 320 295 263 312 302 4 Started 1,621 1,488 1,376 1,423 1,347 1,273 1,568 1,488 1,307 1,216 1,206 1,189 1,147 5 1,146 1,081 1,003 1,023 1,010 931 1,099 1,154 996 898 897 889 868 6 2-or-more-family 474 407 373 400 337 342 469 334 311 318 309 300 279 7 Under construction, end of period1 . 987 919 850 894 881 886 892 900 887 876 857' 845 834 8 591 570 535 565 558 567 571 575 567 559 546' 540 532 9 2-or-more-family 397 350 315 329 323 319 321 325 320 317 311 305 302 10 1,669 1,530 1,423 1,317 1,486 1,302 1,443 1,351 1,378 1,295 1,363' 1,291 1,280 11 1,123 1,085 1,026 987 1,078 933 1,031 1,041 1,037 942 1,008' 943 962 12 2-or-more-family 546 445 396 330 408 369 412 310 341 353 355 348 318 13 Mobile homes shipped 233 218 198 190 189 189 195 200 193 189 191 191 184 Merchant builder activity in 1-family units 14 672 675 650 636 687 633 613 606 555588 553333 553366 556611 554488 15 Number for sale, end of period 366 367 362 363 363 362 365 366 363 363 359 353 349 Price (thousands of dollars)2 Median 16 Units sold 104.7 113.3 120.4 123.0 125.0 125.2 125.0 126.9 119.4 130.0 125.0 127.0 112211..00 17 Units sold 127.9 139.0 148.3 147.8 151.4 154.3 151.7 150.9 144.6 153.4 150.7' 152.1 150.5 EXISTING UNITS (1-family) 18 Number sold 3,530 3,594 3,439 3,490 3,560 3,560 3,520 3,400 3,400 3,330 3,300 3,330 3,330 Price of units sold (thousands of dollars) 19 85.6 89.2 93.0 92.4 93.1 92.5 96.3 9955..22 9966..33 9955..66 9955..66 9977..55 9988..33 20 Average 106.2 112.5 118.0 116.7 117.9 118.1 120.0 118.3 119.5 117.8 118.7 121.1 122.0 Value of new construction3 (millions of dollars) CONSTRUCTION 21 Total put in place 410,209 422,076 432,068 429,277 433,381 431,995 445,959 455,571 457,272 448,841 444,587' 440,407 442,220 22 Private 319,641 327,102 333,514 332,131 329,847 325,011 338,078 343,118 347,366 344,324 336,596' 331,614 333,621 23 Residential 194,656 198,101 196,551 192,087 190,855 189,636 200,149 203,013 206,868 205,092 198,059' 191,254 190,505 24 Nonresidential, total 124,985 129,001 136,963 140,044 138,992 135,375 137,929 140,105 140,498 139,232 138,537' 140,360 143,116 Buildings 25 Industrial 13,707 14,931 18,506 19,175 19,134 18,863 19,680 21,072 21,086 21,152 21,014' 20,464 22,386 26 Commercial 55,448 58,104 59,389 61,353 59,627 57,090 57,376 58,748 57,210 55,770 54,614r 56,402 56,503 27 Other 15,464 17,278 17,848 17,868 18,160 16,612 17,706 16,964 17,646 18,290 18,423 19,189 19,998 28 Public utilities and other 40,366 38,688 41,220 41,648 42,071 42,810 43,167 43,321 44,556 44,020 44,486' 44,305 44,229 29 Public 90,566 94,971 98,551 97,146 103,534 106,984 107,881 112,453 109,906 104,517 107,991' 108,793 108,600 30 Military 4,327 3,579 3,520 2,076 3,664 3,552 3,838 3,886 5,099 3,702 3,947 4,133 4,260 31 Highway 26,958 30,140 29,502 28,426 30,376 33,450 31,901 37,018 32,374 29,826 30,630' 30,166 29,103 32 Conservation and development 5,519 4,726 4,969 4,953 4,916 5,371 5,192 5,559 4,996 5,014 5,494' 3,935 4,378 33 Other 53,762 56,526 60,560 61,691 64,578 64,611 66,950 65,990 67,437 65,975 67,920' 70,559 70,859 1. Not at annual rates. NOTE. Census Bureau estimates for all series except (1) mobile homes, which 2. Not seasonally adjusted. are private, domestic shipments as reported by the Manufactured Housing 3. Value of new construction data in recent periods may not be strictly Institute and seasonally adjusted by the Census Bureau, and (2) sales and prices comparable with data in previous periods because of changes by the Bureau of the of existing units, which are published by the National Association of Realtors. All Census in its estimating techniques. For a description of these changes see back and current figures are available from the originating agency. Permit Construction Reports (C-30-76-5), issued by the Bureau in July 1976. authorizations are those reported to the Census Bureau from 16,000 jurisdictions beginning with 1978. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A52 Domestic Nonfinancial Statistics • November 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 AAAuuuggg... 11998899 11999900 111999999000 AAuugg.. AAuugg.. Sept. Dec. Mar. June Apr. May June July Aug. CONSUMER PRICES2 (1982-84=100) 1 All items 4.7 5.6 2.3 4.9 8.5 3.5 .2 .2 .5 .4 .8 131.6 2 5.4 5.6 3.6 5.5 11.4 2.1 -.2 .0 .8 .4 .3 132.9 i Energy items 5.1 6.8 -12.6 3.9 14.8 -2.0 -.4 -.7 .6 -.7 4.3 103.6 4 AU items less food and energy 4.4 5.5 3.5 4.7 7.5 3.9 .2 .3 .4 .6 .5 136.4 5 Commodities 3.1 3.7 1.3 3.4 7.8 .7 .0 .1 .1 .3 ..00 123.2 6 Services 5.1 6.4 4.5 5.7 7.2 5.5 .4 .4 .6 .7 ..88 144.0 PRODUCER PRICES (1982=100) 7 Finished goods 4.3 5.1 .4 5.0 7.1 .3 -.2' .V .2 -.1 11..33 119.2 8 Consumer foods 4.5 5.3 .7 12.4 10.6 -2.9 -.9 .6 -.4 .0 ..88 125.0 9 Consumer energy 4.1 17.0 -15.3 -5.3 24.7 -14.3 -.7' -1.2' -.9 -.5 9.5 74.4 10 Other consumer goods 4.5 3.5 2.3 4.2 3.5 5.1 .2' .4' .7 -.2 .2 128.9 11 Capital equipment 3.9 3.3 4.4 2.0 4.0 1.7 .V .4 .3 .3 122.9 12 Intermediate materials3 3.6 2.1 -.7 -.4 2.5 -1.1 .0 -.1 -.2 -.1 1.5 114.4 13 Excluding energy 3.4 .7 -.7 -1.0 1.0 .7 .2 .1 -.1 .1 .3 120.8 Crude materials 14 Foods -.4 3.2 -2.2 19.2 9.1 -11.5 — .6' —2.8R .4 1.0 -.9 113.5 1 1 5 6 E O n th e e r r g y 1 2 1 . . 0 2 1 2 8 . . 4 5 -7.0 .6 -1 1 5 3 . . 3 2 4. . 0 5 -3 1 8 0 . . 9 9 -7 2 . . C 5' 1 . .4 1 ' ' -6 -. . 6 2 -.1 .9 25 1 . . 5 8 1 8 3 7 9 . . 1 9 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 5,443.3 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 3,622.7 3 Durable goods 423.4 457.5 474.6 473.6 487.1 471.2 492.1 478.4 4 Nondurable goods 1,001.3 1,060.0 1,130.0 1,127.1 1,137.3 1,148.8 1,174.7 1,179.0 5 Services 1,584.7 1,720.7 1,845.5 1,825.1 1,859.8 1,898.5 1,921.3 1,965.3 6 Gross private domestic investment 699.5 747.1 771.2 776.7 775.8 762.7 747.2 759.0 7 Fixed investment 671.2 720.8 742.9 744.0 746.9 737.7 758.9 745.6 8 Nonresidential 444.9 488.4 511.9 511.4 518.1 511.8 523.1 516.5 9 Structures 133.7 139.9 146.2 144.2 147.0 147.1 148.8 147.2 10 Producers' durable equipment 311.2 348.4 365.7 367.2 371.0 364.7 374.3 369.3 11 Residential structures 226.3 232.5 231.0 232.7 228.9 225.9 235.9 229.1 12 Change in business inventories 28.3 26.2 28.3 32.7 28.9 25.0 -11.8 13.4 13 Nonfarm 32.3 29.8 23.3 26.1 26.2 24.1 -17.0 13.0 14 Net exports of goods and services -114.7 -74.1 -46.1 -51.3 -49.3 -35.3 -30.0 -24.9 15 Exports 449.6 552.0 626.2 628.8 623.7 642.8 661.3 659.7 16 Imports 564.3 626.1 672.3 680.0 673.0 678.1 691.3 684.6 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 1,086.4 18 Federal 381.3 380.3 400.0 402.5 399.2 399.9 410.6 421.9 19 State and local 540.2 582.3 625.6 620.2 628.6 643.4 659.6 664.6 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 5,429.9 21 Goods 1,788.4 1,935.1 2,072.7 2,079.4 2,090.2 2,085.9 2,111.0 2,146.6 22 Durable 780.5 860.2 906.7 904.6 922.1 907.4 919.9 930.1 23 Nondurable 1,007.9 1,074.9 1,166.1 1,174.9 1,168.1 1,178.6 1,191.2 1,216.4 24 Services 2,292.4 2,488.6 2,671.2 2,639.2 2,693.3 2,747.5 2,791.3 2,834.2 25 Structures 434.9 450.0 456.9 455.3 455.0 455.9 473.0 462.5 26 Change in business inventories 28.3 26.2 28.3 32.7 28.9 25.0 -11.8 13.4 27 Durable goods 22.9 19.9 11.9 8.4 6.6 13.2 -21.6 0.0 28 Nondurable goods 5.4 6.4 16.4 24.3 22.2 11.9 9.8 13.4 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 4,155.1 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 4,411.3 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 3,232.5 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 2,696.3 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 2,190.6 35 Supplement to wages and salaries 436.6 474.0 505.8 502.6 508.6 515.9 528.8 536.1 36 Employer contributions for social insurance 227.2 248.5 263.9 262.6 265.1 268.4 276.0 279.7 37 Other labor income 209.4 225.5 241.9 239.9 243.5 247.5 252.8 256.4 38 Proprietors' income1 323.4 354.2 379.3 379.6 368.1 381.7 404.0 401.7 39 Business and professional1 280.6 310.5 330.7 329.1 329.5 336.0 346.6 350.8 40 Farm1 42.8 43.7 48.6 50.5 38.7 45.7 57.4 51.0 41 Rental income of persons2 13.7 16.3 8.2 9.7 5.8 4.1 5.5 4.3 42 Corporate profits1 308.3 337.6 311.6 321.4 306.7 290.9 296.8 306.6 43 Profits before tax3 275.3 316.7 307.7 314.6 291.4 289.8 296.9 299.3 44 Inventory valuation adjustment -19.4 -27.0 -21.7 -23.1 -6.1 -14.5 -11.4 -0.5 45 Capital consumption adjustment 52.4 47.8 25.5 29.9 21.4 15.6 11.3 7.7 46 Net interest 328.6 371.8 445.1 443.4 456.2 461.7 463.6 466.2 1. With inventory valuation and capital consumption adjustments. 3. For after-tax profits, dividends, and the like, see table 1.48. 2. With capital consumption adjustment. SOURCE. Survey of Current Business (Department of Commerce). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A54 Domestic Nonfinancial Statistics • November 1990 2.17 PERSONAL INCOME AND SAVING Billions of current dollars; quarterly data are at seasonally adjusted annual rates. Exceptions noted. 1989 1990 AAccccoouunntt 11998877 11998888 11998899 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 4,622.2 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 2,696.3 3 Commodity-producing industries 649.9 696.4 720.6 719.3 722.3 721.4 724.6 731.1 4 Manufacturing 490.3 524.0 541.8 541.4 543.2 540.9 541.2 548.1 5 Distributive industries 531.8 572.0 604.7 602.6 607.1 614.6 627.0 637.3 6 Service industries 648.5 716.2 771.4 764.9 777.4 790.0 802.9 822.2 7 Government and government enterprises 419.4 446.6 476.6 473.2 479.9 486.7 497.1 505.7 209.4 225.5 241.9 239.9 243.5 247.5 252.8 256.4 9 Proprietors' income1 323.4 354.2 379.3 379.6 368.1 381.7 404.0 401.7 10 Business and professional 280.6 310.5 330.7 329.1 329.5 336.0 346.6 350.8 11 Farm1 42.8 43.7 48.6 50.5 38.7 45.7 57.4 51.0 12 Rental income of persons2 13.7 16.3 8.2 9.7 5.8 4.1 5.5 4.3 91.8 102.2 114.4 113.2 115.7 118.2 120.5 122.9 14 Personal interest income 501.3 547.9 643.2 642.1 655.2 664.9 670.5 678.0 15 Transfer payments 549.9 587.7 636.9 630.2 641.8 655.9 680.9 686.7 16 Old-age survivors, disability, and health insurance benefits ... 282.9 300.5 325.3 321.9 328.3 334.1 347.2 347.6 17 LESS: Personal contributions for social insurance 172.9 194.1 212.8 212.0 214.0 215.8 222.9 224.1 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 4,622.2 19 LESS: Personal tax and nontax payments 571.6 591.6 658.8 665.5 659.5 669.6 675.1 696.5 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 3,925.7 21 LESS: Personal outlays 3,102.2 3,333.6 3,553.7 3,528.5 3,588.8 3,625.5 3,6%.4 3,730.6 22 EQUALS: Personal saving 92.5 145.6 171.8 168.9 154.5 174.1 191.3 195.1 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,,555544..22 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 10,672.5 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 11,564.0 26 Saving rate (percent) 2.9 4.2 4.6 4.6 4.1 4.6 4.9 5.0 GROSS SAVING 555.S 656.1 691.5 697.9 692.4 674.8 664.8 679.3 28 Gross private saving 662.6 751.3 779.3 770.3 776.0 786.4 795.0 806.7 29 Personal saving 92.5 145.6 171.8 168.9 154.5 174.1 191.3 195.1 30 Undistributed corporate profits1 83.2 91.4 53.0 58.5 53.9 39.8 36.7 40.5 31 Corporate inventory valuation adjustment -19.4 -27.0 -21.7 -23.1 -6.1 -14.5 -11.4 -0.5 Capital consumption allowances 32 Corporate 303.2 322.1 346.4 341.1 351.6 356.5 335566..77 335599..77 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 --113300..22 --112277..33 -158.2 -141.7 -134.3 -122.7 -131.7 -150.1 -168.3 -166.0 36 State and local 51.0 46.5 46.4 50.3 48.1 38.5 38.1 38.6 37 Gross investment 544.9 627.8 674.4 677.6 676.1 671.8 665.6 676.1 38 Gross private domestic 699.5 747.1 771.2 776.7 775.8 762.7 747.2 759.0 39 Net foreign -154.6 -119.2 -96.8 -99.1 -99.7 -90.9 -81.6 -82.9 40 Statistical discrepancy -10.6 -28.2 -17.0 -20.3 -16.2 -3.0 .7 -3.2 1. With inventory valuation and capital consumption adjustments. SOURCE. Survey of Current Business (Department of Commerce). 2. With capital consumption adjustment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Summary Statistics A55 3.10 U.S. INTERNATIONAL TRANSACTIONS Summary Millions of dollars; quarterly data are seasonally adjusted except as noted.1 1989 1990 Item credits or debits 11998877 11998888 11998899 Ql Q2 Q3 Q4 Ql 1 Balance on current account. -162,315 --112288,,886622 -110,035 -27,104 -28,649 -27,591 -26,692 -22,941 2 N M o e t r c s h ea a s n o d n is a e l ly t ra a d d e j u b s a te la d n ce L ^ i' -159,500 -126,986 -114,864 - -2 2 2 8 , , 9 0 6 9 1 3 - -2 2 7 8 , , 5 2 2 2 8 2 - - 2 3 9 1 , , 8 6 0 2 3 0 - - 2 2 8 7 , , 7 9 4 2 6 6 - -1 2 9 6 , , 1 3 6 7 4 1 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 -962 -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 1,185 962 -303 574 -47 -486 12 Change in U.S. official reserve assets (increase, -). 9,149 -3,912 -25,293 -4,000 -12,095 -5,996 -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 claims3 -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 0 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 -4,961 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 assets -1,007 -2,506 1,835 455 572 643 165 -126 28 Change in foreign private assets in United States (increase, 3 2 3 3 3 2 9 0 1 3 F F F U U o o o . . S S + r r r e . . e e ) i i i g b n g g n n n a o n n p p d k b u r i - a r i r r n v e e c c a k p h t t - o e a r i r s e n p t e p v e s u o d e r r o s c t f t l h e i m a o d a b e t s h i n l e l i e s t i a r s t b i o e i i U f n l s i 3 t . U t S U ie . . n s S s . i t e e T c d u r r e S i a t t s i a u e t s r e , y s , n s e n e t c e t u rities, net 1 - 4 8 4 7 7 2 9 6 2 3 , , , , , 6 , 1 0 8 8 2 4 2 2 6 9 6 3 0 6 3 4 0 " 1 7 2 2 5 8 0 6 6 0 8 1 , , , , , , 2 3 2 6 4 9 3 5 3 6 3 2 5 3 9 4 5 6 2 6 7 2 3 0 9 2 9 5 1 2 , , , , , , 9 8 8 5 1 2 5 6 2 6 9 4 1 7 9 8 9 4 2 6 1 9 8 0 3 1 7 , , , , , , 7 3 7 6 3 4 3 2 1 0 4 8 1 3 7 5 8 6 -2 1 0 7 2 9 - 7 , , 4 , , , 8 7 5 3 0 0 0 5 7 3 5 7 6 5 4 9 5 - 6 2 1 1 1 2 7 1 2 0 2 , , , 1 , , , 8 1 6 4 3 7 4 3 1 7 7 5 5 3 8 5 0 7 3 2 1 5 6 6 1 0 1 , , , , , , 6 3 6 4 7 7 7 3 7 9 6 3 1 6 4 3 6 2 - - 1 2 8 8 7 2 - , , , 8 , 6 1 7 5 6 6 2 3 9 4 5 5 2 0 2 34 Allocation of SDRs 0 0 0 0 0 0 0 0 35 Discrepancy 66,,779900 --88,,440044 22,443 -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 -2,996 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 foreijgn 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 • November 1990 3.11 U.S. FOREIGN TRADE' Millions of dollars; monthly data are seasonally adjusted. 1990 IItteemm 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May Juner July" 1 EXPORTS of domestic and foreign merchandise excluding grant-aid shipments, f.a.s. value 254,073 322,427 363,812 31,372 31,576 33,266 32,058 32,774 34,221 32,026 GENERAL IMPORTS including merchandise for immediate consumption plus entries into bonded warehouses 2 Customs value 406,241 440,952 473,211 41,570 38,672 41,636 39,364 40,543 39,561 41,357 Trade balance 3 Customs value -152,169 -118,526 -109,399 -10,198 -7,096 -8,370 -7,306 -7,770 -5,340 -9,330 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 Feb. Mar. Apr. May June July Aug." 1 Total 45,798 47,802 74,609 74,173 76,303 76,283 77,028 77,298 77,906 78,909 2 Gold stock, including Exchange Stabilization Fund 11,078 11,057 11,059 11,059 11,060 11,060 11,065 11,065 11,064 11,065 3 Special drawing rights2'3 10,283 9,637 9,951 10,216 10,092 10,103 10,396 10,490 10,699 10,780 4 Reserve position in International Monetary Fund 11,349 9,745 9,048 8,985 8,727 8,687 8,764 8,449 8,686 8,890 5 Foreign currencies4 13,088 17,363 44,551 43,913 46,424 46,433 46,803 47,294 47,457 48,174 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 BANKS' Millions of dollars, end of period 1990 AAsssseettss 11998877 11998888 11998899 p Feb. Mar. Apr. May June July Aug. 1 Deposits 244 347 589 309 300 402 309 368 279 337 Assets held in custody 2 U.S. Treasury securities 195,126 232,547 224,911 221,798 250,447 252,759 253,691 255,651 256,585 261,051 3 Earmarked gold 13,919 13,636 13,456 13,458 13,458 13,458 13,460 13,433 13,422 13,412 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 1990 AAsssseett aaccccoouunntt 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June July All foreign countries 1 Total, all currencies 518,618 505,595 545,366 549,368 553,815 535,059 535,886 541,439 524,010 531,421 7 Claims on United States 138,034 169,111 198,835 192,688 188,700 176,096 177,104 182,224 179,258'' 174,583 105,845 129,856 157,092 149,285 145,156 135,172 133,573 140,751 138,384' 133,682 4 Other banks in United States 16,416 14,918 17,042 17,840 18,064 15,511 17,965 15,647 15,166 15,239 5 Nonbanks 15,773 24,337 24,701 25,563 25,480 25,413 25,566 25,826 25,708r 25,662 6 Claims on foreigners 342,520 299,728 300,575 307,937 313,934 308,117 307,470 306,058 293,730' 305,010 7 Other branches of parent bank 122,155 107,179 113,810 120,359 122,457 120,488 118,835 116,640 108,464r 115,525 8 108,859 96,932 90,703 91,712 94,065 89,837 90,812 90,422 85,780' 86,007 9 21,832 17,163 16,456 15,392 15,148 15,973 16,217 16,172 16,323' 16,703 10 Nonbank foreigners 89,674 78,454 79,606 80,474 82,264 81,819 81,606 82,824 83,163' 86,775 11 Other assets 38,064 36,756 45,956 48,743 51,181 50,846 51,312 53,157 51,022 51,828 12 Total payable in U.S. dollars 350,107 357,573 382,717' 375,315 375,511 358,543 360,224 363,128 350,310' 346,338 n Claims on United States 132,023 163,456 191,184 184,782 180,738 168,833 169,996 173,887 171,551' 166,294 14 103,251 126,929 152,294 144,055 139,920 130,350 129,162 135,211 133,167' 128,066 15 Other banks in United States 14,657 14,167 16,386 17,018 17,187 14,992 17,209 14,818 14,575 14,375 16 14,115 22,360 22,504 23,709 23,631 23,491 23,625 23,858 23,809 23,853 17 Claims on foreigners 202,428 177,685 169,690 167,722 172,132 167,616 168,419 167,630 158,652 157,915 18 Other branches of parent bank 88,284 80,736 82,949 86,114 87,403 85,028 84,930 83,381 76,410' 79,413 19 63,707 54,884 48,396 45,385 46,582 43,408 43,814 44,449 42,918' 39,019 70 Public borrowers 14,730 12,131 10,961 10,332 10,529 11,110 11,191 10,912 10,956' 10,652 21 Nonbank foreigners 35,707 29,934 27,384 25,891 27,618 28,070 28,484 28,888 28,368' 28,831 22 Other assets 15,656 16,432 21,843' 22,811 22,641 22,094 21,809 21,611 20,107 22,129 United Kingdom 23 Total, all currencies 158,695 156,835 161,947 166,915 169,727 167,162 173,127 177,947 167,885 175,257 74 Claims on United States 32,518 40,089 39,212 41,208 40,161 38,809 42,366 43,247 39,904' 40,418 75 Parent bank 27,350 34,243 35,847 37,292 36,311 34,648 37,572 39,089 35,924 36,564 76 Other banks in United States 1,259 1,123 1,058 1,441 1,365 1,301 1,262 747 730 894 77 Nonbanks 3,909 4,723 2,307 2,475 2,485 2,860 3,532 3,411 3,250' 2,960 78 Claims on foreigners 115,700 106,388 107,657 109,837 110,911 109,227 111,175 114,800 108,080' 114,259 79 Other branches of parent bank 39,903 35,625 37,728 37,701 38,410 39,636 41,613 43,358 38,068 41,186 30 36,735 36,765 36,159 37,668 36,488 34,803 35,224 35,730 34,194 35,085 31 Public borrowers 4,752 4,019 3,293 3,128 3,076 3,857 3,980 3,943 3,740 3,619 32 Nonbank foreigners 34,310 29,979 30,477 31,340 32,937 30,931 30,358 31,769 32,078' 34,369 33 Other assets 10,477 10,358 15,078 15,870 18,655 19,126 19,586 19,900 19,901 20,580 34 Total payable in U.S. dollars 100,574 103,503 103,427 103,038 103,752 101,024 107,483 110,186 100,887 103,050 35 Claims on United States 30,439 38,012 36,404 38,261 37,006 35,752 39,091 39,374 36,158 36,230 36 Parent bank 26,304 33,252 34,329 35,731 34,462 32,697 35,663 36,712 33,509 33,716 37 Other banks in United States 1,044 964 843 1,118 1,036 1,122 1,041 521 552 681 38 Nonbanks 3,091 3,796 1,232 1,412 1,508 1,933 2,387 2,141 2,097 1,833 39 Claims on foreigners 64,560 60,472 59,062 56,939 58,763 57,166 60,165 63,025 57,802 58,283 40 28,635 28,474 29,872 28,655 30,224 30,421 32,885 34,441 30,050 31,225 41 19,188 18,494 16,579 16,399 15,984 13,748 14,141 14,635 14,625 13,621 47 Public borrowers 3,313 2,840 2,371 2,321 2,266 3,074 3,131 3,114 2,942 2,839 43 Nonbank foreigners 13,424 10,664 10,240 9,564 10,289 9,923 10,008 10,835 10,185 10,598 44 Other assets 5,575 5,019 7,961 7,838 7,983 8,106 8,227 7,787 6,927 8,537 Bahamas and Caymans 45 Total, all currencies 160,321 170,639 176,006 167,385 164,908 155,145 150,767 154,851 154,354 145,813 46 85,318 105,320 124,205 117,177 114,263 105,466 102,184 105,617 107,244 99,918 47 60,048 73,409 87,882 79,525 76,475 70,535 65,084 69,807 72,115 64,748 48 14,277 13,145 15,071 15,403 15,827 13,564 15,902 14,079 13,603 13,412 49 10,993 18,766 21,252 22,249 21,961 21,367 21,198 21,731 21,526 21,758 50 Claims on foreigners 70,162 58,393 44,168 42,610 43,162 42,393 41,467 42,147 39,812 38,393 51 Other branches of parent bank 21,277 17,954 11,309 13,371 14,409 13,171 13,306 12,917 11,906 11,947 5? 33,751 28,268 22,611 20,119 19,595 19,370 18,499 19,947 18,492 16,761 53 Public borrowers 7,428 5,830 5,217 4,764 4,753 4,684 4,490 4,350 4,393 4,307 54 Nonbank foreigners 7,706 6,341 5,031 4,356 4,405 5,168 5,172 4,933 5,021 5,378 55 Other assets 4,841 6,926 7,633 7,598 7,483 7,286 7,116 7,087 7,298 7,502 56 Total payable in U.S. dollars 151,434 163,518 170,780 160,832 159,484 150,061 145,994 149,467 149,943 140,966 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 • November 1990 3.14—Continued 1990 LLiiaabbiilliittyy aaccccoouunntt 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June July All foreign countries 57 Total, all currencies 518,618 505,595 545,366 549,368 553,815 535,059 535,886 541,439 524,010 531,421 58 Negotiable CDs 30,929 28,511 23,500 23,510 23,620 21,767 24,113 25,452 23,504 21,810 59 To United States 161,390 185,577 197,239 178,452 181,164 173,675 168,669 169,791 169,769' 163,117 60 Parent bank 87,606 114,720 138,412' 117,318 119,967 114,170 109,642 109,831 113,151' 105,243 61 Other banks in United States 20,355 14,737 11,704 11,850 11,990 10,799 11,782 10,272 9,092 9,454 62 Nonbanks 53,429 56,120 47,123r 49,284 49,207 48,706 47,245 49,688 47,526 48,420 63 To foreigners 304,803 270,923 296,850 315,991 317,318 309,756 313,446 315,058 299,951' 314,503 64 Other branches of parent bank 124,601 111,267 119,591 126,965 126,786 124,084 120,405 120,722 113,653' 119,476 65 Banks 87,274 72,842 76,452 82,042 77,449 75,017 77,875 78,681 73,896' 77,940 66 Official institutions 19,564 15,183 16,750 19,004 20,637 17,704 20,683 19,710 17,637' 19,718 67 Nonbank foreigners 73,364 71,631 84,057 87,980 92,446 92,951 94,483 95,945 94,765' 97,369 68 Other liabilities 21,496 20,584 27,777 31,415 31,713 29,861 29,658 31,138 30,786' 31,991 69 Total payable in U.S. dollars 361,438 367,483 396,613r 385,010 385,634 369,306 368,626 369,505 358,681 355,785 70 Negotiable CDs 26,768 24,045 19,619 18,512 18,783 17,084 19,601 20,579 18,928 16,524 71 To United States 148,442 173,190 187,286 167,754 169,669 162,606 157,579 157,851 158,173' 150,785 7? Parent bank 81,783 107,150 132,563'' 111,328 113,487 108,128 103,252 103,389 106,818' 98,770 73 Other banks in United States 18,951 13,468 10,519 10,560 10,684 9,2% 10,415 8,855 7,741 7,884 74 Nonbanks 47,708 52,572 44,204' 45,866 45,498 45,182 43,912 45,607 43,614 44,131 75 To foreigners 177,711 160,766 176,460 185,192 183,378 176,939 178,035 177,888 168,642' 174,616 76 Other branches of parent bank 90,469 84,021 87,636 91,736 90,360 86,908 84,090 84,415 78,646' 81,332 77 Banks 35,065 28,493 30,537 32,551 28,741 27,639 29,207 28,265 27,434' 28,045 78 Official institutions 12,409 8,224 9,873 11,063 11,740 9,248 11,909 11,480 9,066' 10,613 79 Nonbank foreigners 39,768 40,028 48,414 49,842 52,537 53,144 52,829 53,728 53,496' 54,626 80 Other liabilities 8,517 9,482 13,248' 13,552 13,804 12,677 13,411 13,187 12,938' 13,860 United Kingdom 81 Total, all currencies 158,695 156,835 161,947 166,915 169,727 167,162 173,127 177,947 167,885 175,257 87. Negotiable CDs 26,988 24,528 20,056 19,791 19,656 18,266 20,535 21,846 19,672 17,800 83 To United States 23,470 36,784 36,036 31,893 32,686 32,780 33,931 33,755 32,291' 32,320 84 Parent bank 13,223 27,849 29,726 23,256 23,752 22,970 23,339 23,179 23,158' 21,952 85 Other banks in United States 1,536 2,037 1,256 1,545 2,115 1,827 1,841 1,847 1,615 1,626 86 Nonbanks 8,711 6,898 5,054 7,092 6,819 7,983 8,751 8,729 7,518 8,742 87 To foreigners 98,689 86,026 92,307 99,720 101,565 101,160 103,362 106,138 99,279' 107,533 88 Other branches of parent bank 33,078 26,812 27,397 29,216 28,074 29,848 28,581 29,193 26,506' 28,944 89 Banks 34,290 30,609 29,780 33,568 32,110 29,116 31,026 31,580 28,575' 32,420 90 Official institutions 11,015 7,873 8,551 9,368 10,758 9,184 10,829 11,409 10,263' 11,314 91 Nonbank foreigners 20,306 20,732 26,579 27,568 30,623 33,012 32,926 33,956 33,935' 34,855 92 Other liabilities 9,548 9,497 13,548 15,511 15,820 14,956 15,299 16,208 16,643' 17,604 93 Total payable in U.S. dollars 102,550 105,907 108,178 106,676 106,416 103,544 109,708 110,595 101,530 104,375 94 Negotiable CDs 24,926 22,063 18,143 16,931 16,910 15,660 17,936 19,012 17,233 14,836 95 To United States 17,752 32,588 33,056 28,542 28,817 29,383 30,386 29,666 28,16c 27,%7 % Parent bank 12,026 26,404 28,812 22,428 22,513 22,219 22,446 22,339 22,190' 21,208 97 Other banks in United States 1,308 1,752 1,065 1,217 1,807 1,552 1,553 1,456 1,325 1,175 98 Nonbanks 4,418 4,432 3,179 4,897 4,497 5,612 6,387 5,871 4,645 5,584 99 To foreigners 55,919 47,083 50,517 54,574 53,751 52,095 54,371 55,163 49,672' 54,591 100 Other branches of parent bank 22,334 18,561 18,384 19,660 18,556 19,182 18,799 18,589 16,\W 17,408 101 Banks 15,580 13,407 12,244 14,701 11,920 9,976 11,233 11,007 9,911' 11,251 10? Official institutions 7,530 4,348 5,454 5,649 6,717 5,192 6,703 7,264 5,305' 6,515 103 Nonbank foreigners 10,475 10,767 14,435 14,564 16,558 17,745 17,636 18,303 18,257' 19,417 104 Other liabilities 3,953 4,173 6,462 6,629 6,938 6,406 7,015 6,754 6,465' 6,981 Bahamas and Caymans 105 Total, all currencies 160,321 170,639 176,006 167,385 164,908 155,145 150,767 154,851 154,354 145,813 106 Negotiable CDs 885 953 678 681 671 522 524 528 535 548 107 To United States 113,950 122,332 124,859 114,829 113,137 108,003 101,024 103,655 103,592 95,746 108 Parent bank 53,239 62,894 75,188' 65,380 64,085 61,528 55,311 57,136 58,880 51,257 109 Other banks in United States 17,224 11,494 8,883 8,677 8,198 7,310 8,544 6,991 5,984 6,228 110 Nonbanks 43,487 47,944 40,788' 40,772 40,854 39,165 37,169 39,528 38,728 38,261 111 To foreigners 43,815 45,161 47,382 48,974 48,726 44,314 46,741 48,410 47,613 47,010 112 Other branches of parent bank 19,185 23,686 23,414 24,911 25,110 20,778 22,446 25,535 24,184 24,560 113 Banks 10,769 8,336 8,823 8,439 8,059 7,983 8,617 8,154 8,%9 8,120 114 Official institutions 1,504 1,074 1,097 1,528 1,290 1,078 1,247 %2 960 999 115 Nonbank foreigners 12,357 12,065 14,048 14,0% 14,267 14,475 14,431 13,759 13,500 13,331 116 Other liabilities 1,671 2,193 3,087 2,901 2,374 2,306 2,478 2,258 2,614 2,509 117 Total payable in U.S. dollars 152,927 162,950 171,250 162,141 160,212 150,758 146,259 149,707 149,680 140,377 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 1990 IItteemm 11998888 11998899 Jan. Feb. Mar. Apr. May June July" 1 Total1 299,782 308,303 305,433 300,030 297,493 303,790 303,830' 305,803' 308,143 By type 2 Liabilities reported by banks in the United States 31,519 36,486 34,303 33,633 35,208 36,372 36,413' 37,341' 38,086 3 U.S. Treasury bills and certificates3 103,722 76,985 76,157 73,099 73,039 69,454 72,322 71,804 72,694 U.S. Treasury bonds and notes 4 Marketable 149,056 176,084 176,411 174,986 171,130 176,694 173,837 175,385 176,066 .5 Nonmarketable 523 568 572 576 580 3,5% 3,620 3,644 3,668 6 U.S. securities other than U.S. Treasury securities5 14,962 18,180 17,990 17,736 17,536 17,674 17,638 17,629 17,629 By area 7 Western Europe1 125,62<y 135,475 136,260' 134,626' 137,387' 143,392' 144,158' 149,624' 151,665 8 9,584 9,553 9,368 7,976 8,386 7,880 6,621 7,036 8,486 9 Latin America and Caribbean 10,099 8,809 7,943 8,327 9,229 9,137 9,217 10,280' 9,750 10 145,608 147,064 143,966 140,924 134,700 136,519 135,108 129,910 129,332 11 Africa 1,369 995 817 990 902 861 1,040 904 883 12 Other countries6 7,501 6,406 7,077 7,187 6,889 6,000 7,685 8,050 8,029 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 Sept. Dec. Mar. June 1 Banks' own liabilities 29,702 55,438 74,980 73,755 67,805 63,105 68,140 2 Banks' own claims 26,180 51,271 68,983 70,328 65,127 60,999 66,626 3 Deposits 14,129 18,861 25,100 22,960 20,489 21,456 21,046 4 Other claims 12,052 32,410 43,884 47,368 44,638 39,543 45,580 5 Claims of banks' domestic customers2 2,507 551 364 2,558 3,102 1,190 928 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 • November 1990 3.17 LIABILITIES TO FOREIGNERS Reported by Banks in the United States1 Payable in U.S. dollars Millions of dollars, end of period 1990 HHoollddeerr aanndd ttyyppee ooff lliiaabbiilliittyy 11998877 11998888 11998899 Jan. Feb. Mar. Apr. Mayr Juner July" 1 All foreigners 618,874 685,339 736,112 705,383 6%,813 704,185 702,299 715,313 706,022 719,881 2 Banks' own liabilities 470,070 514,532 576,732 544,172 538,567 541,694 546,652 552,138 542,754 554,527 3 Demand deposits 22,383 21,863 22,090 19,982 20,894 20,518 21,143 20,578 20,413 19,813 4 Time deposits 148,374 152,164 168,744 159,144 156,304 154,725 148,779 150,972 150,820 154,203 Other3 51,677 51,366 67,569 62,807 58,484 60,433 66,017 65,233 65,004 66,286 6 Own foreign offices4 247,635 289,138 318,330 302,238 302,884 306,017 310,713 315,356 306,518 314,225 7 Banks' custody liabilities5 148,804 170,807 159,380 161,211 158,246 162,492 155,647 163,175 163,267 165,354 8 U.S. Treasury bills and certificates 101,743 115,056 91,100 90,703 88,032 88,015 83,644 88,908 90,082 91,975 9 Other negotiable and readily transferable instruments 16,776 16,426 19,526 18,658 18,655 21,031 18,055 18,531 17,865 17,519 10 Other 30,285 39,325 48,754 51,851 51,560 53,446 53,948 55,737 55,320 55,860 11 Nonmonetary international and regional organizations 4,464 3,224 4,772 4,671 3,765 4,8% 5,727 4,558 44,,999977 4,112 1? Banks' own liabilities 2,702 2,527 3,156 3,071 2,218 3,334 3,781 2,913 3,598 2,790 13 Demand deposits 124 71 96 36 55 156 52 28 29 64 14 Time deposits2 1,538 1,183 927 1,042 624 1,137 2,025 773 1,416 1,038 15 Other3 1,040 1,272 2,133 1,993 1,539 2,041 1,704 2,112 2,154 1,689 16 Banks' custody liabilities5 1,761 698 1,616 1,599 1,547 1,562 1,947 1,645 1,399 1,322 17 U.S. Treasury bills and certificates 265 57 197 102 160 191 190 174 147 148 18 Other negotiable and readily transferable instruments7 1,497 641 1,417 1,497 1,387 1,371 1,740 1,463 1,253 1,159 19 Other 0 0 2 0 0 0 17 8 0 15 20 Official institutions9 120,667 135,241 113,471 110,459 106,732 108,247 105,826 108,735 109,145 110,780 71 Banks' own liabilities 28,703 27,109 31,098 30,755 30,443 31,366 33,594 33,061 33,249 34,339 77 Demand deposits 1,757 1,917 2,1% 1,601 1,654 1,826 2,066 1,644 1,613 1,610 73 12,843 9,767 10,550 9,769 10,658 9,704 10,889 11,178 10,102 11,199 24 Other3 14,103 15,425 18,351 19,385 18,132 19,836 20,639 20,238 21,533 21,530 75 Banks' custody liabilities5 91,965 108,132 82,373 79,704 76,289 76,881 72,231 75,674 75,896 76,440 26 U.S. Treasury bills and certificates 88,829 103,722 76,985 76,157 73,099 73,039 69,454 72,322 71,804 72,694 27 Other negotiable and readily transferable instruments7 2,990 4,130 5,028 3,459 2,892 3,671 2,605 3,158 3,650 3,5% 28 Other 146 280 361 88 298 171 173 195 443 150 29 Banks10 414,280 459,523 514,251 491,782 484,881 490,793 492,534 503,103 495,599 508,150 30 Banks' own liabilities 371,665 409,501 453,737 427,414 421,392 422,578 425,874 432,404 423,508 434,729 31 Unaffiliated foreign banks 124,030 120,362 135,407 125,175 118,508 116,561 115,161 117,048 116,990 120,504 37 Demand deposits 10,898 9,948 10,339 9,523 10,072 9,625 9,864 9,673 9,503 9,236 33 Time deposits2 79,717 80,189 90,557 79,518 74,873 75,296 68,692 70,999 72,819 75,043 34 Other3 33,415 30,226 34,511 36,133 33,563 31,640 36,605 36,377 34,668 36,224 35 Own foreign offices4 247,635 289,138 318,330 302,238 302,884 306,017 310,713 315,356 306,518 314,225 36 Banks' custody liabilities5 42,615 50,022 60,514 64,369 63,489 68,215 66,660 70,699 72,091 73,421 37 U.S. Treasury bills and certificates6 9,134 7,602 9,367 9,614 9,342 9,359 9,374 11,578 13,501 13,%1 38 Other negotiable and readily transferable instruments7 5,392 5,725 5,124 5,090 4,918 7,611 5,437 5,616 5,757 5,770 39 Other 28,089 36,694 46,023 49,665 49,229 51,244 51,850 53,504 52,833 53,690 40 Other foreigners 79,463 87,351 103,618 98,471 101,434 100,248 98,212 98,917 96,281 %,839 41 Banks' own liabilities 67,000 75,396 88,742 82,932 84,513 84,415 83,404 83,760 82,400 82,668 47 Demand deposits 9,604 9,928 9,458 8,821 9,114 8,911 9,160 9,232 9,268 8,902 43 Time deposits 54,277 61,025 66,711 68,815 70,148 68,588 67,174 68,022 66,484 66,923 44 Other3 3,119 4,443 12,573 5,295 5,251 6,915 7,069 6,506 6,648 6,843 45 Banks' custody liabilities5 12,463 11,956 14,877 15,539 16,921 15,834 14,809 15,157 13,881 14,170 46 U.S. Treasury bills and certificates 3,515 3,675 4,551 4,830 5,431 5,425 4,627 4,834 4,631 5,173 47 Other negotiable and readily transferable instruments7 6,898 5,929 7,958 8,612 9,457 8,378 8,273 8,293 7,205 6,993 48 Other 2,050 2,351 2,368 2,098 2,033 2,031 1,909 2,030 2,044 2,004 49 MEMO: Negotiable time certificates of deposit in custody for foreigners 7,314 6,425 7,203 8,576 8,457 7,634 7,183 7,282 6,429 5,911 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 1990 AArreeaa aanndd ccoouunnttrryy 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May June July" 1 Total 618,874 685,339 736,112 705,383 696,813 704,185 702,299 715,313r 706,022' 719,881 2 Foreign countries 614,411 682,115 731,340 700,713 693,048 699,289 696,572 710,755'' 701,024' 715,768 3 Europe 234,641 231,912 237,453 231,067 224,715 224,907 229,675 236,417'' 233,138' 235,818 4 Austria 920 1,155 1,233 1,422 1,817 1,764 1,549 1,373 1,531 1,527 5 Belgium-Luxembourg 9,347 10,022 10,611 11,357 11,400 11,978 10,128 9,507 9,276' 10,533 6 Denmark 760 2,200 1,415 1,240 1,244 1,760 2,271 2,152 2,411 2,552 7 Finland 377 285 570 684 614 431 464 314 387 485 8 France 29,835 24,777 26,903 22,992 21,850 21,921 24,263 23,103 23,569' 23,139 9 Germany 7,022 6,772 7,578 7,584 8,718 7,488 8,763 8,030' 8,071' 7,334 10 Greece 689 672 1,017 1,092 1,024 906 879 860 833 873 11 Italy 12,073 14,599 16,169 13,051 11,977 12,728 14,138 16,347 16.79C 17,0% 12 Netherlands 5,014 5,316 6,613 7,733 8,226 9,454 7,731 8,166 7,624 5,%7 13 Norway 1,362 1,559 2,401 1,256 997 2,619 1,454 1,582 2,443 1,792 14 Portugal 801 903 2,407 2,381 2,285 2,385 2,354 2,359 3,082 3,073 15 Spain 2,621 5,494 4,364 5,424 4,280 4,911 4,230 4,535 4,427 4,913 16 Sweden 1,379 1,284 1,491 2,303 1,468 1,574 1,889 1,855' 1,769 1,586 17 Switzerland 33,766 34,199 34,496 33,283 33,036 33,964 33,244 35,260r 35,283' 34,387 18 Turkey 703 1,012 1,818 1,048 886 1,039 1,432 1,641 1,5% 1,654 19 United Kingdom 116,852 111,811 102,362 102,282 99,749 96,718 99,376 104,624' 98,32C 100,856 20 Yugoslavia 710 529 1,474 1,349 1,402 1,613 1,599 1,934 2,169 2,435 21 Other Western Europe1 9,798 8,598 13,563 13,220 12,088 10,214 12,039 11,089' 11,822' 13,783 22 U.S.S.R 32 138 350 229 376 141 446 158 75' 257 23 Other Eastern Europe 582 591 619 1,138 1,277 1,299 1,427 1,529' 1,661' 1,576 24 Canada 30,095 21,062 18,864 19,246 21,329 18,536 19,483 19,88c 19,939 20,029 25 Latin America and Caribbean 220,372 271,146 310,514 300,601 305,620 314,575 308,616 315,664' 312,612' 317,406 26 Argentina 5,006 7,804 7,304 7,380 7,496 8,036 8,235 8,346' 8,004' 8,160 27 Bahamas 74,767 86,863 98,932 95,513 94,627 98,003 89,895 98,648' 99,166' 99,237 28 Bermuda 2,344 2,621 2,884 2,539 2,239 2,308 2,807 2,514 3,11C 2,825 29 Brazil 4,005 5,314 6,334 6,679 7,128 7,280 6,729 6,088' 6,0%' 6,128 30 British West Indies 81,494 113,840 138,263 131,959 135,940 141,075 143,264 142,127' 136,974' 142,187 31 Chile 2,210 2,936 3,212 3,052 3,134 3,261 3,418 3,517 3,462' 3,538 32 Colombia 4,204 4,374 4,653 4,435 4,610 4,510 4,404 4,471 4,507 4,470 33 Cuba 12 10 10 31 10 9 9 10 11 28 34 Ecuador 1,082 1,379 1,391 1,232 1,325 1,337 1,334 1,367 1,372 1,348 35 Guatemala 1,082 1,195 1,312 1,338 1,362 1,403 1,451 1,473 1,473 1,522 36 Jamaica 160 269 209 204 217 245 224 215 224 220 37 Mexico 14,480 15,185 15,399 14,773 15,802 15,246 15,066 15,116' 16,159' 15,966 38 Netherlands Antilles 4,975 6,420 6,310 6,192 6,470 6,412 6,460 6,806 6,649 7,023 39 Panama 7,414 4,353 4,361 4,543 4,743 4,766 4,749 4,539 4,507' 4,383 40 Peru 1,275 1,671 1,984 1,927 1,975 1,836 1,703 1,533 1,474 1,404 41 Uruguay 1,582 1,898 2,284 2,419 2,397 2,513 2,575 2,560 2,520 2,559 42 Venezuela 9,048 9,147 9,468 9,832 9,615 9,871 9,636 9,717 10,240 9,610 43 Other 5,234 5,868 6,205 6,554 6,530 6,464 6,657 6,617' 6,664' 6,798 44 121,288 147,838 156,128 141,600 132,085 113322,,774444 113300,,990033 112299,,001155'' 112255,,997766'' 133,625 China 45 Mainland 1,162 1,895 1,772 1,681 1,470 1,573 1,840 1,781 1,868 1,821 46 Taiwan 21,503 26,058 19,565 19,151 17,901 15,552 15,413 15,173' 10,%9' 12,610 47 Hong Kong 10,180 12,248 12,395 11,824 11,115 11,569 12,231 12,858' 12,303' 13,244 48 India 582 699 780 907 762 1,033 1,013 1,148 966 908 49 Indonesia 1,404 1,180 1,281 1,061 1,174 1,545 1,560 1,192 1,522 1,367 50 Israel 1,292 1,461 1,243 1,039 894 1,497 1,310 1,226 1,202' 1,112 51 Japan 54,322 74,015 81,183 70,223 65,127 66,078 65,549 62,056' 62,334' 65,979 52 Korea 1,637 2,541 3,214 2,617 2,562 2,320 2,109 2,011 2,063 2,111 53 Philippines 1,085 1,163 1,764 1,150 1,263 1,198 1,191 1,187 1,332 1,314 54 Thailand 1,345 1,236 2,093 2,381 2,524 1,930 1,595 1,973 2,125 2,745 55 Middle-East oil-exporting countries3 13,988 12,083 13,369 13,262 12,558 12,450 11,626 13,048 13,034' 14,062 56 Other 12,788 13,260 17,468 16,305 14,735 15,999 15,466 15,362 16,258' 16,352 57 3,945 3,991 3,823 3,627 3,778 3,644 3,722 3,778 3,660 3,411 58 Egypt 1,151 911 686 640 722 601 595 646 593 583 59 Morocco 194 68 78 86 95 80 111 86 81 95 60 South Africa 202 437 205 257 261 277 236 241 318 239 61 Zaire 67 85 86 82 77 74 70 66 41' 38 62 Oil-exporting countries 1,014 1,017 1,120 993 1,110 1,048 936 1,016 889' 874 63 Other 1,316 1,474 1,648 1,570 1,513 1,563 1,775 1,722 1,737' 1,583 64 Other countries 4,070 6,165 4,559 4,571 5,521 4,883 4,173 6,002 5,699 5,479 65 Australia 3,327 5,293 3,867 3,891 4,798 3,994 3,469 5,250 5,052 4,891 66 All other 744 872 692 680 723 889 703 751 647 588 67 Nonmonetary international and regional organizations 4,464 3,224 4,772 4,671 3,765 4,8% 5,727 4,558 4,997 4,112 68 International 2,830 2,503 3,825 3,599 2,765 3,634 4,147 3,393 3,862 2,981 69 Latin American regional 1,272 589 684 857 655 949 1,123 912 920 812 70 Other regional 362 133 263 214 345 313 457 253 215 319 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 • November 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 1990 AArreeaa aanndd ccoouunnttrryy 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May' June' July" 1 Total 459,877 491,165 533,763 511,739 499,176 489,951 490,778 490,276' 490,169 490,297 2 Foreign countries 456,472 489,094 530,324 507,246 495,102 486,158 486,385 485,691' 486,175 486,007 3 Europe 102,348 116,928 118,885 105,603 104,162 104,191 104,989 103,415 102,232 102,114 4 Austria 793 483 415 658 429 500 592 420' 537 399 5 Belgium-Luxembourg 9,397 8,515 6,478 6,668 7,063 6,358 6,330 6,765' 5,411 6,744 6 Denmark 717 483 582 664 635 608 750 1,004 590 503 7 Finland 1,010 1,065 1,027 1,224 1,218 1,153 1,025 931 1,035 1,120 8 France 13,548 13,243 16,146 15,839 16,392 15,631 16,087 16,224 14,794 13,746 9 Germany 2,039 2,329 2,865 1,990 2,762 2,783 2,476 3,045 2,943 2,591 10 Greece 462 433 788 735 773 664 622 597 514 529 11 Italy 7,460 7,936 6,662 4,934 5,377 5,010 4,230 4,758 5,126 4,618 12 Netherlands 2,619 2,541 1,904 1,659 1,567 2,182 2,027 1,968 2,041 1,762 13 Norway 934 455 609 600 672 777 918 741 725 657 14 Portugal 477 261 376 309 288 273 381 407 540 543 15 Spain 1,853 1,823 1,930 2,790 2,040 2,240 1,726 1,887 2,074 2,115 lb Sweden 2,254 1,977 1,773 2,718 2,158 2,236 2,206 2,711 2,609 3,351 17 Switzerland 2,718 3,895 6,141 4,835 4,922 5,056 4,826 4,999 5,249 4,297 18 Turkey 1,680 1,233 1,071 1,087 1,088 1,123 1,120 1,138 1,230 1,186 19 United Kingdom 50,823 65,706 65,388 54,462 52,121 52,993 55,439 52,163 53,379 54,588 20 Yugoslavia 1,700 1,390 1,329 1,243 1,158 1,157 1,121 1,128 1,095 1,070 21 Other Western Europe2 619 1,152 1,302 1,133 1,271 1,183 970 786 804 960 22 U.S.S.R 389 1,255 1,179 1,192 1,322 1,356 1,322 945 754 565 23 Other Eastern Europe 852 754 921 864 905 907 820 800 782 769 24 Canada 25,368 18,889 15,427 16,694 16,768 15,082 15,199 16,320 16,482 16,391 25 Latin America and Caribbean 214,789 214,264 230,353 224,116 220,258 212,902 202,614 207,467' 210,288 202,059 2 2 6 1 A Ba rg h e a n m ti a n s a 6 1 4 1 , , 5 9 8 9 7 6 6 1 6 1 , , 9 8 5 2 4 6 77 9 , , 9 2 2 7 1 0 7 1 0 2 , , 1 1 0 1 2 7 71 8 , , 8 7 9 1 1 8 69 8 , , 0 1 9 8 5 9 63 8 , , 9 0 2 2 7 5 7 7 0 , , 6 2% 89 66 7 , , 5 5 3 9 8 9 66 7 , , 8 1 5 6 5 5 28 Bermuda 471 483 1,315 485 401 425 443 774 1,830 2,047 29 Brazil 25,897 25,735 23,749 23,503 23,210 21,884 21,848 21,793' 20,699 20,412 30 British West Indies 50,042 55,888 68,664 70,889 70,048 72,329 67,610 67,554' 74,564 66,198 31 Chile 6,308 5,217 4,353 4,212 4,208 4,079 3,714 3,630' 3,453 3,488 32 Colombia 2,740 2,944 2,784 2,530 2,610 2,720 2,649 2,624 2,5% 22,,554411 33 Cuba 1 1 1 0 0 0 0 0 0 11 34 Ecuador 2,286 2,075 1,688 1,588 1,570 1,536 1,527 1,503 1,523 1,515 35 Guatemala4 144 198 197 213 200 208 207 206 188 197 3b Jamaica4 188 212 297 284 274 265 260 260 258 262 37 Mexico 29,532 24,637 23,381 22,027 21,400 16,798 17,080 16,360' 16,507 16,963 38 Netherlands Antilles 980 1,306 1,921 1,764 1,702 1,692 1,759 1,630 1,722 1,873 39 Panama 4,744 2,521 1,740 1,748 1,688 1,732 1,743 1,643' 1,598 1,491 40 Peru 1,329 1,013 771 750 752 733 721 679 683 661 41 Uruguay 963 910 928 932 935 926 886 876 842 843 42 Venezuela 10,843 10,733 9,647 9,289 8,956 8,528 8,423 8,251' 8,139 8,065 43 Other Latin America and Caribbean 1,738 1,612 1,726 1,682 1,695 1,764 1,790 1,697' 1,547 1,484 44 106,0% 130,881 157,416 115522,,445522 114455,,003333 114455,,667755 115555,,443355 115500,,004422'' 114488,,779999 115588,,000088 China Mainland 968 762 634 620 619 599 674 517 519 620 46 Taiwan 4,592 4,184 2,776 2,157 1,824 2,016 1,890 1,941 1,946 1,580 47 Hong Kong 8,218 10,143 11,128 7,6% 6,605 7,418 8,%5 9,553 9,271 9,375 48 India 510 560 621 625 892 721 588 579 802 849 49 Indonesia 580 674 651 641 611 604 560 599 801 831 50 Israel 1,363 1,136 813 749 752 737 721 738' 775 932 51 Japan 68,658 90,149 111,270 113,387 108,352 108,527 117,487 108,17C 107,598 114,439 52 Korea 5,148 5,213 5,2% 5,156 4,880 5,016 4,991 5,141 5,057 5,445 53 Philippines 2,071 1,876 1,344 1,297 1,163 1,204 1,221 1,351 1,357 1,342 54 Thailand 4% 848 1,140 1,172 1,052 992 1,070 1,202 1,279 1,267 55 Middle East oil-exporting countries 4,858 6,213 10,149 8,663 9,250 8,774 8,376 9,577 10,816 12,347 56 Other Asia 8,635 9,122 11,594 10,290 9,035 9,066 8,894 10,674 8,576 8,981 57 Africa 4,742 5,718 5,890 5,935 5,%7 5,984 5,953 5,913' 5,785 5,557 58 Egypt 521 507 502 470 493 474 491 488 469 421 59 Morocco 542 511 559 575 588 581 5% 587' 565 544 60 South Africa 1,507 1,681 1,628 1,619 1,629 1,648 1,632 1,639 1,568 1,560 61 Zaire 15 17 16 16 17 25 19 20 21 20 62 Oil-exporting countries6 1,003 1,523 1,648 1,667 1,749 1,749 1,705 1,665 1,653 1,604 63 Other 1,153 1,479 1,537 1,588 1,491 1,507 1,509 1,515 1,510 1,408 64 Other countries 3,129 2,413 2,354 2,446 2,914 2,324 2,195 2,535 2,590 1,878 65 Australia 2,100 1,520 1,781 1,815 2,015 1,632 1,551 1,657 1,712 1,422 66 All other 1,029 894 573 631 900 692 644 878 878 456 67 Nonmonetary international and regional organizations7 3,404 2,071 3,439 4,493 4,074 3,794 4,393 4,585 3,994 4,291 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 1990 TTyyppee ooff ccllaaiimm 11998877 11998888 11998899 Jan. Feb. Mar. Apr. May' June' July" 1 Total 444444499999997777777,,,,,,,666666633333335555555 555555533333338888888,,,,,,,666666688888889999999 555555599999990000000,,,,,,,222222255555551111111 555555544444443333333,,,,,,,111111111111114444444 555555544444449999999,,,,,,,000000055555559999999 22 BBaannkkss'' oowwnn ccllaaiimmss oonn ffoorreeiiggnneerrss 444444455555559999999,,,,,,,888888877777777777777 444444499999991111111,,,,,,,111111166666665555555 555555533333333333333,,,,,,,777777766666663333333 511,739 499,176 444444488888889999999,,,,,,,999999955555551111111 490,778 490,276 444444499999990000000,,,,,,,111111166666669999999 490,297 33 FFoorreeiiggnn ppuubblliicc bboorrrroowweerrss 66666664444444,,,,,,,666666600000005555555 66666662222222,,,,,,,666666655555558888888 55555559999999,,,,,,,888888877777777777777 58,%9 56,909 55555553333333,,,,,,,999999922222220000000 53,497 52,490 55555550000000,,,,,,,777777788888888888888 49,340 44 OOwwnn ffoorreeiiggnn ooffffiicceess 222222222222224444444,,,,,,,777777722222227777777 222222255555557777777,,,,,,,444444433333336666666 222222299999995555555,,,,,,,999999944444448888888 289,826 283,970 222222277777774444444,,,,,,,888888866666661111111 274,326 274,931 222222277777779999999,,,,,,,666666655555552222222 274,632 55 UUnnaaffffiilliiaatteedd ffoorreeiiggnn bbaannkkss 111111122222227777777,,,,,,,666666600000009999999 111111122222229999999,,,,,,,444444422222225555555 111111133333334444444,,,,,,,888888844444448888888 123,647 120,114 111111122222223333333,,,,,,,000000000000003333333 125,138 125,567 111111122222221111111,,,,,,,111111188888882222222 128,779 66 DDeeppoossiittss 66666660000000,,,,,,,666666688888887777777 66666665555555,,,,,,,888888899999998888888 77777778888888,,,,,,,000000000000005555555 69,522 67,121 66666669999999,,,,,,,999999977777777777777 71,770 71,993 66666667777777,,,,,,,999999999999998888888 72,761 77 OOtthheerr 66666666666666,,,,,,,999999922222222222222 66666663333333,,,,,,,555555522222227777777 55555556666666,,,,,,,888888844444443333333 54,125 52,993 55555553333333,,,,,,,000000022222227777777 53,368 53,575 55555553333333,,,,,,,111111188888883333333 56,017 88 AAllll ootthheerr ffoorreeiiggnneerrss 44444442222222,,,,,,,999999933333336666666 44444441111111,,,,,,,666666644444446666666 44444443333333,,,,,,,000000099999990000000 39,297 38,184 33333338888888,,,,,,,111111166666667777777 37,817 37,288 33333338888888,,,,,,,555555544444448888888 37,547 99 CCllaaiimmss ooff bbaannkkss'' ddoommeessttiicc ccuussttoommeerrss33...... 33333337777777,,,,,,,777777755555558888888 44444447777777,,,,,,,555555522222224444444 55555556666666,,,,,,,444444488888888888888 55555553333333,,,,,,,111111166666663333333 55555558888888,,,,,,,888888899999990000000 3333333,,,,,,,666666699999992222222 8888888,,,,,,,222222288888889999999 11111112222222,,,,,,,888888833333334444444 11111116666666,,,,,,,777777788888888888888 11111115555555,,,,,,,444444499999999999999 11 Negotiable and readily transferable 22222226666666,,,,,,,6666666%%%%%%% 22222225555555,,,,,,,777777700000000000000 22222229999999,,,,,,,000000066666663333333 22222222222222,,,,,,,000000022222220000000 22222227777777,,,,,,,444444455555551111111 12 Outstanding collections and other 7777777,,,,,,,333333377777770000000 11111113333333,,,,,,,555555533333335555555 11111114444444,,,,,,,555555599999991111111 11111114444444,,,,,,,333333355555554444444 11111115555555,,,,,,,999999944444440000000 13 MEMO: Customer liability on 22222223333333,,,,,,,111111100000007777777 11111119999999,,,,,,,555555599999996666666 11111112222222,,,,,,,777777755555553333333 11111113333333,,,,,,,555555566666663333333 11111112222222,,,,,,,999999944444443333333 Dollar deposits in banks abroad, reported by nonbanking business enterprises in the United States .... 40,909 45,502 45,309 43,932 45,263 41,809 38,923' 41,071 39,657 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 Sept. Dec. Mar. June" 1 Total 232,295 235,130 233,184 234,112 237,474 213,670 211,062 By borrower 2 Maturity of 1 year or less2 160,555 163,997 172,634 169,279 177,223 160,087 157,458 3 Foreign public borrowers 24,842 25,889 26,562 24,102 23,483 22,725 19,421 4 All other foreigners 135,714 138,108 146,071 145,178 153,741 137,362 138,037 5 Maturity over 1 year 71,740 71,133 60,550 64,832 60,251 53,584 53,603 6 Foreign public borrowers 39,103 38,625 35,291 39,537 35,822 30,050 31,069 7 All other foreigners 32,637 32,507 25,259 25,295 24,429 23,533 22,534 By area Maturity of 1 year or less 8 Europe 61,784 59,027 55,909 53,122 53,300 48,368 49,101 9 Canada 5,895 5,680 6,282 6,236 5,886 5,694 5,579 10 Latin America and Caribbean 56,271 56,535 57,991 52,227 52,929 46,719 44,323 11 Asia 29,457 35,919 46,224 50,445 57,766 51,744 50,729 12 Africa 2,882 2,833 3,337 3,514 3,225 3,165 2,991 13 All other3 4,267 4,003 2,891 3,735 4,118 4,3% 4,734 Maturity of over 1 year2 14 Europe 6,737 6,6% 4,666 6,065 4,595 4,407 4,326 15 Canada 1,925 2,661 1,922 2,459 2,353 2,702 2,860 16 Latin America and Caribbean 56,719 53,817 47,547 49,046 45,844 37,668 35,924 17 Asia 4,043 3,830 3,613 4,203 4,142 5,479 7,036 18 Africa 1,539 1,747 2,301 2,475 2,633 2,764 2,739 19 All other3 777 2,381 501 584 684 564 718 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 • November 1990 3.21 CLAIMS ON FOREIGN COUNTRIES Held by U.S. Offices and Foreign Branches of U.S.-Chartered Banks12 Billions of dollars, end of period 1988 1989 1990 AArreeaa oorr ccoouunnttrryy 11998866 11998877 June Sept. Dec. Mar. June Sept. Dec. Mar. June" 1 Total 386.5 382.4 351.9 354.0 346.3 346.1 340.0 346.2r 338.2' 336.2r 324.3 2 G-10 countries and Switzerland 156.6 159.7 150.7 148.7 152.7 145.4 145.1 146.4 152.7 146.9' 139.4 3 Belgium-Luxembourg 8.4 10.0 9.2 9.5 9.0 8.6 7.8 6.9 6.3 6.6 6.2 4 France 13.6 13.7 10.9 10.3 10.5 11.2 10.8 11.1 11.7 10.5 10.3 5 Germany 11.6 12.6 10.6 9.2 10.3 10.2 10.6 10.4 10.5 11.2 11.2 6 Italy 9.0 7.5 6.3 5.6 6.8 5.2 6.1 6.8 7.4 6.0 5.5 7 Netherlands 4.6 4.1 3.2 2.9 2.7 2.8 2.8 2.4 3.1 3.1 2.7 8 Sweden 2.4 2.1 1.9 1.9 1.8 2.3 1.8 2.0 2.0 2.1 2.3 9 Switzerland 5.8 5.6 5.6 5.2 5.4 5.1 5.4 6.1 7.1 6.3 6.4 10 United Kingdom 70.9 68.8 70.4 67.6 66.2 65.6 64.5 63.7 67.0 63.8 59.7 11 Canada 5.2 5.5 5.3 4.9 5.0 4.0 5.1 5.9 5.4 4.8 5.1 12 Japan 25.1 29.8 27.3 31.6 34.9 30.5 30.2 31.0 32.2 32.5 29.9 13 Other developed countries 26.1 26.4 24.0 23.0 21.0 21.1 21.2 21.0 20.7 23.1 22.6 14 Austria 1.7 1.9 1.6 1.6 1.5 1.4 1.7 1.5 1.5 1.5 1.5 15 Denmark 1.7 1.7 1.1 1.2 1.1 1.1 1.4 1.1 1.1 1.1 1.1 16 Finland 1.4 1.2 1.2 1.3 1.1 1.0 1.0 1.1 1.0 1.1 .9 17 Greece 2.3 2.0 2.1 2.1 1.8 2.1 2.3 2.4 2.5 2.6 2.7 18 Norway 2.4 2.2 1.9 2.0 1.8 1.6 1.8 1.4 1.4 1.7 1.4 19 Portugal .9 .6 .4 .4 .4 .4 .6 .4 .4 .4 .8 20 Spain 5.8 8.0 7.2 6.3 6.2 6.6 6.2 6.9 7.1 8.3 7.9 21 Turkey 2.0 2.0 1.8 1.6 1.5 1.3 1.1 1.2 1.2 1.3 1.4 22 Other Western Europe 1.5 1.6 1.7 1.9 1.3 1.1 1.1 1.0 .7 1.0' 1.1 23 South Africa 3.0 2.9 2.8 2.7 2.4 2.2 2.1 2.1 2.0 2.0 1.9 24 Australia 3.4 2.4 2.2 1.8 1.8 2.4 1.9 2.1 1.6 2.1 1.9 25 OPEC countries3 19.4 17.4 17.0 17.9 16.6 16.2 16.1 16.2 17.1 15.3' 15.4 26 Ecuador 2.2 1.9 1.8 1.8 1.7 1.6 1.5 1.5 1.3 1.2 1.2 27 Venezuela 8.7 8.1 8.0 7.9 7.9 7.9 7.5 7.4 7.0 6.1 6.0 28 Indonesia 2.5 1.9 1.8 1.8 1.7 1.7 1.9 2.0 2.0 2.1 2.0 29 Middle East countries 4.3 3.6 3.5 4.6 3.4 3.3 3.4 3.5 5.0 4.1' 4.4 30 African countries 1.8 1.9 1.9 1.9 1.9 1.7 1.6 1.9 1.7 1.8 1.8 31 Non-OPEC developing countries 99.6 97.8 91.8 87.2 85.3 85.9 83.4 81.2 77.5 71.1' 69.5 Latin America 32 Argentina 9.5 9.5 9.5 9.3 9.0 8.5 7.9 7.6 6.3 5.5 5.1 33 Brazil 25.3 24.7 23.7 22.4 22.4 22.8 22.1 20.9 19.0 17.5 17.2 34 Chile 7.1 6.9 6.4 6.3 5.6 5.7 5.2 4.9 4.6 4.3 3.7 35 Colombia 2.1 2.0 2.2 2.1 2.1 1.9 1.7 1.6 1.8 1.8 1.7 36 Mexico 24.0 23.5 21.1 20.4 18.8 18.3 17.7 17.2 17.7 15.2 14.8 37 Peru 1.4 1.1 .9 .8 .8 .7 .6 .6 .6 .5 .5 38 Other Latin America 3.1 2.8 2.6 2.5 2.6 2.7 2.6 2.9 2.8 2.7 2.4 Asia China 39 Mainland .4 .3 .4 .2 .3 .5 .3 .3 .3 .3 .2 40 Taiwan 4.9 8.2 4.9 3.2 3.7 4.9 5.2 5.0 4.5 3.8 3.6 41 India 1.2 1.9 2.3 2.0 2.1 2.6 2.4 2.7 3.1 3.5 3.6 42 Israel 1.5 1.0 1.0 1.0 1.2 .9 .8 .7 .7 .6 .6 43 Korea (South) 6.7 5.0 5.9 6.0 6.1 6.1 6.6 6.5 5.9 5.3 5.6 44 Malaysia 2.1 1.5 1.5 1.7 1.6 1.7 1.6 1.7 1.7 1.8 1.8 45 Philippines 5.4 5.2 4.9 4.7 4.5 4.4 4.4 4.0 4.1 3.7 3.9 46 Thailand .9 .7 1.1 1.2 1.1 1.0 1.0 1.3 1.3 1.1 1.3 47 Other Asia .7 .7 .8 .8 .9 .8 .8 1.0 1.0 1.2 1.1 Africa 48 Egypt .7 .6 .6 .5 .4 .5 .6 .5 .4 .4 .5 49 Morocco .9 .9 .9 .8 .9 .9 .9 .8 .9 .9 .9 50 Zaire .1 .0 .1 .0 .0 .0 .0 .0 .0 .0 .0 51 Other Africa4 1.6 1.3 1.2 1.2 1.1 1.1 1.1 1.0 1.0 .9 .9 52 Eastern Europe 3.5 3.2 3.3 3.1 3.6 3.5 3.4 3.5 3.5 3.4 3.0 53 U.S.S.R .1 .3 .4 .4 .7 .7 .6 .8 .7 .8 .4 54 Yugoslavia 2.0 1.8 1.9 1.8 1.8 1.7 1.7 1.7 1.6 1.4 1.4 55 Other 1.4 1.1 1.0 1.0 1.1 1.1 1.1 1.1 1.3 1.3 1.2 56 Offshore banking centers 61.5 54.5 43.0 47.3 44.2 48.5 43.1 49.2' 36.6r 43.0 38.9 57 Bahamas 22.4 17.3 8.9 12.9 11.0 15.8 11.0 11.4' 5.5r 9.3 8.5 58 Bermuda .6 .6 1.0 .9 .9 1.1 .7 1.3 1.7 .9 2.2 59 Cayman Islands and other British West Indies 12.3 13.5 10.3 11.9 12.9 12.0 10.8 15.3 8.9 10.9 7.3 60 Netherlands Antilles 1.8 1.2 1.2 1.2 1.0 .9 1.0 1.1 2.3 2.6 2.3 61 Panama 4.0 3.7 3.0 2.6 2.5 2.2 1.9 1.5 1.4 1.3 1.4 62 Lebanon .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 .1 63 Hong Kong 11.1 11.2 11.6 10.5 9.6 9.6 10.4 10.7 9.7 9.8 10.0 64 Singapore 9.2 7.0 6.9 7.0 6.1 6.8 7.3 7.8 7.0 8.0 7.0 65 Others6 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 66 Miscellaneous and unallocated7 19.8 23.2 22.2 26.7 22.6 25.0 27.4 28.5 29.8 33.1 35.3 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 TTyyppee,, aanndd aarreeaa oorr ccoouunnttrryy 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 37,306r 2 Payable in dollars 21,749 22,785 28,040 28,040 31,594 31,925 30,746 32,588 33,004' 3 Payable in foreign currencies 3,838 5,517 5,606 5,606 J 5,790 5,073 4,838 4,819 4,303' By type 4 Financial liabilities 12,133 12,424 15,130 15,130 17,453 17,124 16,268 17,524 16,749' 5 Payable in dollars 9,609 8,643 11,243 11,243 13,373 13,265 12,440 13,631 13,523r 6 Payable in foreign currencies 2,524 3,781 3,888 3,888 4,080 3,860 3,829 3,893 3,226r 7 Commercial liabilities 13,454 15,878 18,516 18,516 19,931 19,874 19,315 19,882 20,557' 8 Trade payables 6,450 7,305 6,466 6,466 7,030 6,350 6,812 7,206 7,117' 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 19,481' 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 9,897' 13 Belgium-Luxembourg 270 213 289 289 320 357 308 340 333 14 France 661 382 319 319 224 278 262 243 208' 15 Germany 368 551 699 699 741 838 809 736 532' 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 7,021' 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 countries 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 Allother4 67 100 2 2 2 97 97 100 102 Commercial liabilities 33 Europe 4,446 5,516 7,351 7,351 7,965 7,778 8,319 8,867 9,096' 34 Belgium-Luxembourg 101 132 170 170 134 114 137 178 233 35 France 352 426 455 455 579 535 806 872 881' 36 Germany 715 909 1,699 1,699 1,373 1,190 1,183 1,362 1,143 37 Netherlands 424 423 591 591 670 688 548 699 688 38 Switzerland 385 559 417 417 459 447 531 621 583 39 United Kingdom 1,341 1,599 2,065 2,065 2,585 2,709 2,703 2,599 2,906 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 1,263' 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 95 103 541 113 100 116' 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 85' 48 Asia 5,080 6,565 6,923 6,923 7,330 6,957 7,038 6,953 6,819' 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 1,340' 51 Africa 619 574 578 578 706 752 639 838 738' 52 Oil-exporting countries 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 • November 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 29,927' 2 Payable in dollars 33,867 28,502 31,507 31,507 29,293 32,088 29,797 28,683 27,269' 3 Payable in foreign currencies 2,399 2,462 2,335 2,335 2,315 2,193 2,225 2,328 2,657' By type 4 Financial claims 26,273 20,363 21,843 21,843 19,616 21,808 19,116 17,326 16,732' 5 Deposits 19,916 14,894 15,792 15,792 14,456 16,734 12,442 10,360 10,452' 6 Payable in dollars 19,331 13,765 14,693 14,693 13,542 15,814 11,577 9,434 9,609' 7 Payable in foreign currencies 585 1,128 1,099 1,099 914 921 865 926 843' 8 Other financial claims 6,357 5,470 6,051 6,051 5,160 5,074 6,673 6,966 6,28C 9 Payable in dollars 5,005 4,656 5,320 5,320 4,267 4,362 5,812 6,170 5,039' 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 13,194' 12 Trade receivables 8,783 9,535 10,924 10,924 10,730 11,042 11,421 12,073 11,602' 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 12,622' 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 7,139' 17 Belgium-Luxembourg 41 7 18 18 22 161 166 13 22 18 France 138 332 226 226 233 198 209 153 20C 19 Germany 116 102 138 138 171 199 147 194 501 20 Netherlands 151 350 348 348 384 297 292 303 315' 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 6,935' 25 Bahamas 2,628 1,994 1,838 1,838 2,171 1,881 1,707 1,513 1,616' 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 4,822' 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 1,109 801 829 763' 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 21' 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 431 650 661 661 760 770 824 948 952' 40 Germany 444 562 623 623 657 675 688 666 690 41 Netherlands 164 133 208 208 161 413 396 478 450' 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 1,396 1,550 1,689 44 Canada 934 936 974 974 1,114 1,181 1,278 1,045 1,091' 45 Latin America and Caribbean 1,857 1,930 2,237 2,237 2,114 2,100 2,131 2,163 • 2,043' 46 Bahamas 28 19 36 36 34 13 10 57 22 47 Bermuda 193 170 230 230 234 238 270 323 242 48 Brazil 234 226 298 298 277 314 232 285 225' 49 British West Indies 39 26 22 22 23 30 33 36 38 50 Mexico 412 368 460 460 482 438 508 507 523' 51 Venezuela 237 283 226 226 213 229 188 148 187' 52 Asia 2,755 2,915 2,973 2,973 3,097 3,145 3,301 3,532 3,254' 53 Japan 881 1,158 943 943 1,042 998 1,177 1,184 1,060^ 54 Middle East oil-exporting countries2 563 450 445 445 428 430 406 509 42C 55 Africa 500 401 434 434 386 407 390 419 425' 56 Oil-exporting countries3 139 144 122 122 95 111 80 108 89 57 All other4 222 238 331 331 297 350 381 386 365' 1. For a description of the changes in the International Statistics tables, see 3. Comprises Algeria, Gabon, Libya, and Nigeria. July 1979 Bulletin, p. 550. 4. Includes nonmonetary international and regional organizations. 2. Comprises Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Trucial States). Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Securities Holdings and Transactions A67 3.24 FOREIGN TRANSACTIONS IN SECURITIES Millions of dollars 1990 1990 Transactions, and area or country 1988 1989 Jan.- July Jan. Feb. Mar. Apr. May June July" U.S. corporate securities STOCKS 1 Foreign purchases 181,185 213,160 106,345 13,747 13,463 16,430 11,457 15,231 18,511' 17,505 2 Foreign sales 183,185 203,537 111,771 14,130 13,692 19,117 12,356 17,717 18,584' 16,175 3 Net purchases, or sales (-) -2,000 9,623 -5,426 -383 -229 -2,687 -899 -2,486 -72r 1,330 4 Foreign countries -1,825 9,857 -5,553 -353 -230 -2,733 -937 -2,543 -36' 1,278 5 Europe -3,350 278 -3,633 -183 -144 -990 -666 -1,048 -590' -12 6 France -281 -708 -572 -155 -157 7 -85 -189 32 -25 7 Germany 218 -830 -9 41 3 105 6 -57 -66 -41 8 Netherlands -535 167 -167 -18 -38 48 -25 -20 -83 -30 9 Switzerland -2,243 -3,468 -1,859 -240 -242 -441 -221 -347 -198' -170 10 United Kingdom -954 3,729 -969 -275 183 -720 -99 -200 -114' 255 11 Canada 1,087 -845 -339 -140 51 -163 -212 -101 88' 137 12 Latin America and Caribbean 1,238 3,089 -539 -111 -178 -208 -27 90 -14 -90 13 Middle East1 -2,474 3,531 -957 -27 93 -425 116 -593 -85 -36 14 Other Asia 1,365 3,405 -80 231 -30 -921 -55 -904 543 1,056 15 Japan 1,922 3,340 -180 166 -104 -764 -92 -750 512 851 16 Africa 188 131 -28 2 -34 1 -2 0 -7 13 17 Other countries 121 268 22 -125 12 -27 -91 13 30 211 18 Nonmonetary international and regional organizations -176 -234 127 -30 1 46 38 57 -37 52 BONDS2 19 Foreign purchases 86,381 120,540 69,208 9,464 10,297 9,248 8,355 8,467 12,572' 10,805 20 Foreign sales 58,417 86,510 53,432 7,810 7,780 8,061 7,499 6,347 8,456' 7,480 21 Net purchases, or sales (-) 27,964 34,031 15,776 1,654 2,517 1,186 856 2,120 4,116' 3,326 22 Foreign countries 28,506 33,678 16,067 2,054 2,491 1,026 850 2,195 4,084' 3,368 23 Europe 17,239 19,848 9,462 1,135 245 915 1,008 781 3,380' 1,998 24 France 143 372 528 118 9 5 -58 108 293 54 25 Germany 1,344 -238 -345 -114 -253 -15 -40 -39 82 33 26 Netherlands 1,514 850 67 -43 15 -11 -2 33 37 37 27 Switzerland 505 -165 1,044 157 58 -69 59 83 186 570 28 United Kingdom 13,084 18,459 8,175 1,132 475 1,009 1,158 495 2,761' 1,145 29 Canada 711 1,116 1,749 178 474 183 . 353 198 292 70 30 Latin America and Caribbean 1,931 3,686 3,459 493 883 313 411 508 578 273 31 Middle East1 -178 -182 370 87 100 36 -2 251 -120 17 32 Other Asia 8,900 9,063 944 152 796 -461 -993 440 11 999 33 Japan 7,686 6,331 940 170 1,103 -419 -1,044 331 -131 930 34 Africa -8 56 83 3 36 -8 48 8 2 -4 35 Other countries -89 91 1 5 -43 48 24 9 -59 15 36 Nonmonetary international and regional organizations -542 353 -291 -399 27 160 6 -76 32 -42 Foreign securities 37 Stocks, net purchases, or sales (-)3 -1,959 -12,832 -7,468 772 -981 -90 -872 -2,421 -2,759' -1,117 38 Foreign purchases 75,356 109,789 75,756 12,983 10,481 11,765 8,360 9,772 11,020 11,375 39 Foreign sales 77,315 122,621 83,224 12,211 11,461 11,855 9,233 12,193 13,779' 12,492 40 Bonds, net purchases, or sales (-) -7,434 -6,049 -15,215 556 -159 -9,605 -1,830 -1,837 -2,030' -310 41 Foreign purchases 218,521 234,215 156,707 18,512 20,671 22,375 20,184 25,879 25,658 23,428 42 Foreign sales 225,955 240,264 171,922 17,955 20,830 31,981 22,015 27,716 27,688' 23,738 43 Net purchases, or sales (-), of stocks and bonds .... -9,393 -18,881 -22,683 1,328 -1,139 -9,695 -2,702 -4,259 -4,789' -1,426 44 Foreign countries -9,873 -18,914 -20,800 1,220 -1,229 -8,094 -2,852 -4,054 -4,336' -1,456 45 Europe -7,864 -17,728 -6,706 1,398 -1,226 -305 -669 -1,888 -3,649' -368 46 Canada -3,747 -4,180 -4,591 -58 -144 -1,323 -1,797 -721 -219' -329 47 Latin America and Caribbean 1,384 426 -6,146 33 161 -6,648 -171 282 418 -222 48 979 2,722 -2,445 111 -307 693 -341 -1,403 -1,073' -124 49 Africa -54 93 -103 -14 9 -1 -28 6 8 -83 50 Other countries -571 -246 -810 -249 277 -511 154 -331 180 -330 51 Nonmonetary international and regional organizations 480 33 -1,883 108 89 -1,601 150 -205 -453 30 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 • November 1990 3.25 MARKETABLE U.S. TREASURY BONDS AND NOTES Foreign Transactions Millions of dollars 1990 1990 Country or area 1988 1989 Jan.- July Jan. Feb. Mar. Apr. May June July" Transactions, net purchases or sales (—) during period1 1 Estimated total2 48,832 54,607 2,384 819 1,454 -8,793 3,081 -2,505 3,394 4,936 2 Foreign countries2 48,170 52,705 3,871 1,090 1,795 -8,597 4,071 -2,915 3,088 5,338 3 Europe2 14,319 35,939 9,639 1,238 2,191 -2,374 5,998 -4,247 3,178 3,656 4 Belgium-Luxembourg 923 1,048 575 144 -337 -256 458 115 270 180 5 Germany -5,268 7,904 859 -216 1,672 -475 633 306 -1,061 -1 6 Netherlands -356 -1,141 -1,145 -330 -1,400 -411 749 -263 313 196 7 Sweden -323 886 311 -71 270 -22 763 -727 -34 133 8 Switzerland2 -1,074 1,097 -499 -284 -5 -251 422 -189 606 -799 9 United Kingdom 9,640 20,198 3,109 150 1,627 -298 2,250 -3,533 1,862 1,051 10 Other Western Europe 10,786 5,968 6,420 1,845 363 -664 714 43 1,223 2,896 11 Eastern Europe -10 -21 6 0 0 0 6 0 0 0 12 Canada 3,761 701 -3,920 -542 -2,137 -1,383 110 -1,752 367 1,418 13 Latin America and Caribbean 713 490 5,889 -333 91 672 2,134 478 914 1,934 14 Venezuela -109 311 -49 -107 -48 38 -49 71 48 -1 15 Other Latin America and Caribbean 1,130 -297 3,204 262 16 270 -35 610 1,021 1,060 16 Netherlands Antilles -308 475 2,735 -488 123 365 2,218 -204 -154 874 17 Asia 27,603 14,021 -7,048 447 2,287 -5,119 -3,872 2,725 -1,838 -1,677 18 Japan 21,750 2,404 -8,170 837 852 -5,630 -6,102 22,,993333 -1,221 161 19 Africa -13 116 36 9 13 -43 -4 --88 52 17 20 All other 1,786 1,439 -726 273 -650 -351 -294 -110 416 -9 21 Nonmonetary international and regional organizations 661 1,902 -1,486 -272 -341 -1% -991 410 305 -402 22 International 1,106 1,473 -986 -360 -286 -92 -528 403 462 -585 23 Latin America regional -31 231 16 38 -11 -26 74 25 -109 25 Memo 24 Foreign countries2 48,170 52,705 3,871 1,090 1,795 -8,597 4,071 -2,915 3,088 5,338 25 Official institutions 26,624 27,028 -17 328 -1,425 -3,856 5,564 -2,857 1,548 681 26 Other foreign2 21,546 25,677 3,888 763 3,220 -4,741 -1,493 -58 1,540 4,658 Oil-exporting countries 27 Middle East3 1,963 8,148 852 916 970 1,020 668 -188 -439 -2,095 28 Africa4 1 -1 -0 -1 0 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 Sept. 30, 1990 Rate on Sept. 30, 1990 Rate on Sept. 30, 1990 Country Country Country Month Month Month Percent effective Percent effective effective Austria.. 6.5 Oct. 1989 France 9.5 Apr. 1990 Norway 8.0 June 1983 Belgium . 10.25 Oct. 1989 Germany, Fed. Rep. of. 6.0 Oct. 1989 Switzerland 6.0 Oct. 1989 Canada.. 12.65 Sept. 1990 Italy 12.5 May 1990 United Kingdom2 Denmark 10.5 Oct. 1989 Japan 6.0 Aug. 1990 Netherlands 7.0 Oct. 1989 1. As of the end of February 1981, the rate is that at which the Bank of France or makes advances against eligible commercial paper and/or government comdiscounts Treasury bills for 7 to 10 days. mercial banks or brokers. For countries with more than one rate applicable to 2. Minimum lending rate suspended as of Aug. 20, 1981. such discounts or advances, the rate shown is the one at which it is understood the NOTE. Rates shown are mainly those at which the central bank either discounts central bank transacts the largest proportion of its credit operations. 3.27 FOREIGN SHORT-TERM INTEREST RATES Percent per year, averages of daily figures 1990 CCoouunnttrryy,, oorr ttyyppee 11998877 11998888 11998899 Mar. Apr. May June July Aug/ Sept. 1 Eurodollars 7.07 7.85 9.16 8.37 8.44 8.35 8.23 8.09 7.99 8.05 2 United Kingdom 9.65 10.28 13.87 15.23 15.17 15.11 14.95 14.92 14.95 14.88 3 Canada 8.38 9.63 12.20 13.35 13.59 13.77 13.76 13.58 13.13 12.64 4 Germany 3.97 4.28 7.04 8.42 8.20 8.27 8.24 8.17 8.36 8.37 5 Switzerland 3.67 2.94 6.83 8.88 9.01 8.78 8.71 8.81 8.71 8.12 6 Netherlands 5.24 4.72 7.28 8.70 8.46 8.37 8.26 8.16 8.44 8.42 7 France 8.14 7.80 9.27 10.56 9.92 9.70 9.94 9.91 10.03 10.24 8 Italy 11.15 11.04 12.44 13.03 12.11 12.09 11.33 11.38 11.49 10.69 9 Belgium 7.01 6.69 8.65 10.39 10.19 9.90 9.63 9.30 9.30 9.05 10 Japan 3.87 3.96 4.73 6.33 6.62 6.84 6.86 7.02 7.15 7.41 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 • November 1990 3.28 FOREIGN EXCHANGE RATES1 Currency units per dollar Country/currency 1987 Apr. May July Aug/ Sept. 1 Australia/dollar^ 70.137 78.409 79.186 76.366 76.106 77.903 79.076 80.871 82.463 2 Austria/schilling 12.649 12.357 13.236 11.862 11.699 11.843 11.520 11.044 11.044 3 Belgium/franc 37.358 36.785 39.409 34.868 34.325 34.602 33.715 32.280 32.274 4 Canada/dollar 1.3259 1.2306 1.1842 1.1641 1.1747 1.1730 1.1570 1.1448 1.1590 5 China, P.R./yuan 3.7314 3.7314 3.7673 4.7339 4.7339 4.7339 4.7339 4.7339 4.7343 6 Denmark/krone 6.8478 6.7412 7.3210 6.4305 6.3349 6.4080 6.2339 6.0033 5.9959 7 Finland/markka 4.4037 4.1933 4.2963 3.9923 3.9270 3.9561 3.8386 3.7051 3.7091 8 France/franc 6.0122 5.9595 6.3802 5.6638 5.5989 5.6613 5.4924 5.2680 5.2583 9 Germany/deutsche mark. 1.7981 1.7570 1.8808 1.6863 1.6630 1.6832 1.6375 1.5702 1.5702 10 Greece/drachma 135.47 142.00 162.60 163.77 163.82 164.78 160.59 154.82 154.83 11 Hong Kong/dollar 7.7986 7.8072 7.8008 7.7966 7.7877 7.7855 7.7704 7.7707 7.7653 12 India/rupee 12.943 13.900 16.213 17.294 17.325 17.421 17.412 17.347 17.823 13 Ireland/punt2 148.79 152.49 141.80 158.97 161.21 159.28 163.75 170.86 170.89 14 Italy/lira 1,297.03 1,302.39 1,372.28 1,238.38 1,221.93 1,235.60 1,199.65 1,157.07 1,172.41 15 Japan/yen 144.60 128.17 138.07 158.46 154.04 153.70 149.04 147.46 138.53 16 Malaysia/ringgit 2.5186 2.6190 2.7079 2.7264 2.7024 2.7104 2.7051 2.6956 2.6949 17 Netherlands/guilder 2.0264 1.9778 2.1219 1.8984 1.8704 1.8946 1.8452 1.7692 1.7698 18 New Zealand/dollar2 59.328 65.560 59.354 57.883 57.293 58.254 59.147 61.294 62.159 19 Norway/krone 6.7409 6.5243 6.9131 6.5457 6.4477 6.4700 6.2925 6.0810 6.0725 20 Portugal/escudo 141.20 144.27 157.53 149.29 147.08 147.90 143.93 138.71 139.09 21 Singapore/dollar 2.1059 2.0133 1.9511 1.8783 1.8589 1.8471 1.8193 1.7905 1.7675 22 South Africa/rand 2.0385 2.2770 2.6214 2.6552 2.6468 2.6592 2.6253 2.5734 2.5718 23 South Korea/won 825.94 734.52 674.29 708.76 711.85 718.07 718.75 718.26 718.18 24 Spain/peseta 123.54 116.53 118.44 107.00 103.98 103.91 100.41 96.90 98.54 2 2 5 6 S Sr w i e L d a e n n k /k a r / o ru na p ee 2 6 9. . 4 3 7 4 2 6 9 3 6 1 . . 1 8 3 20 7 0 3 6 5 . . 4 9 5 47 5 9 406..101186 0 4 6 0 . . 0 02 5 3 6 0 40 6 . . 0 0 1 8 8 9 6 40 5 . . 0 9 1 4 8 7 0 40 5 . . 0 7 0 7 7 5 4 3 5 9 . . 7 94 6 7 4 3 27 Switzerland/franc 1.4918 1.4643 1.6369 1.4866 1.4198 1.4250 1.3924 1.3076 1.3070 28 Taiwan/dollar 31.753 28.636 26.407 26.369 26.961 27.391 27.163 27.291 27.302 29 Thailand/baht 25.775 25.312 25.725 26.024 25.928 25.876 25.706 25.579 25.381 30 United Kingdom/pound 163.98 178.13 163.82 163.72 167.74 171.03 180.98 190.13 188.13 MEMO 31 United States/dollar3 ... 96.94 92.72 93.51 92.43 89.68 86.55 1. Averages of certified noon buying rates in New York for cable transfers. currencies of 10 industrial countries. The weight for each of the 10 countries is the Data in this table also appear in the Board's G.5 (405) release. For address, see 1972-76 average world trade of that country divided by the average world trade of inside front cover. all 10 countries combined. Series revised as of August 1978 (see Federal Reserve 2. Value in U.S. cents. Bulletin, vol. 64, August 1978, p. 700). 3. Index of weighted-average exchange value of U.S. dollar against the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A71 Guide to Tabular Presentation, Statistical Releases, and Special Tables GUIDE TO TABULAR PRESENTATION Symbols and Abbreviations c Corrected 0 Calculated to be zero e Estimated n.a. Not available p Preliminary n.e.c. Not elsewhere classified r Revised (Notation appears on column heading when IPCs Individuals, partnerships, and corporations about half of the figures in that column are changed.) REITs Real estate investment trusts * Amounts insignificant in terms of the last decimal place RPs Repurchase agreements shown in the table (for example, less than 500,000 SMSAs Standard metropolitan statistical areas when the smallest unit given is millions) Cell not applicable General Information Minus signs are used to indicate (1) a decrease, (2) a negative obligations of the Treasury. "State and local government" figure, or (3) an outflow. also includes municipalities, special districts, and other po- "U.S. government securities" may include guaranteed litical subdivisions. issues of U.S. government agencies (the flow of funds figures In some of the tables, details do not add to totals because also include not fully guaranteed issues) as well as direct of rounding. STATISTICAL RELEASES—List Published Semiannually, with Latest BULLETIN Reference Issue Page Anticipated schedule of release dates for periodic releases June 1990 A88 SPECIAL TABLES—Published Irregularly, with Latest BULLETIN Reference Title and Date Issue Page Assets and liabilities of commercial banks March 31, 1989 December 1989 All June 30, 1989 January 1990 A72 September 30, 1989 February 1990 All December 31, 1989 June 1990 All 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 All 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 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A72 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 SCOTT G. ALVAREZ, Assistant General Counsel DIVISION OF RESEARCH AND STATISTICS MARYELLEN A. BROWN, Assistant to the General Counsel MICHAEL J. PRELL, Director EDWARD C. ETTIN, Deputy Director OFFICE OF THE SECRETARY THOMAS D. SIMPSON, Associate Director LAWRENCE SLIFMAN, Associate Director WILLIAM W. WILES, Secretary DAVID J. STOCKTON, Associate Director JENNIFER J. JOHNSON, Associate Secretary MARTHA BETHEA, Deputy Associate Director BARBARA R. LOWREY, Associate Secretary PETER A. TINSLEY, Deputy Associate Director MYRON L. KWAST, Assistant Director PATRICK M. PARKINSON, Assistant Director DIVISION OF CONSUMER MARTHA S. SCANLON, Assistant Director JOYCE K. ZICKLER, Assistant Director AND COMMUNITY AFFAIRS LEVON H. GARABEDIAN, Assistant Director (Administration) GRIFFITH L. GARWOOD, Director GLENN E. LONEY, Assistant Director ELLEN MALAND, Assistant Director DIVISION OF MONETARY AFFAIRS DOLORES S. SMITH, Assistant Director DONALD L. KOHN, Director DAVID E. LINDSEY, Deputy Director DIVISION OF BANKING BRIAN F. MADIGAN, Assistant Director SUPERVISION AND REGULATION RICHARD D. PORTER, Assistant Director NORMAND R.V. BERNARD, Special Assistant to the Board WILLIAM TAYLOR, Staff Director DON E. KLINE, Associate Director FREDERICK M. STRUBLE, Associate Director OFFICE OF THE INSPECTOR GENERAL WILLIAM A. RYBACK, Deputy Associate Director STEPHEN C. SCHEMERING, Deputy Associate Director BRENT L. BOWEN, Inspector General RICHARD SPILLENKOTHEN, Deputy Associate Director BARRY R. SNYDER, Assistant Inspector General HERBERT A. BIERN, Assistant Director JOE M. CLEAVER, Assistant Director ROGER T. COLE, Assistant Director JAMES I. GARNER, Assistant Director JAMES D. GOETZINGER, Assistant Director MICHAEL G. MARTINSON, Assistant Director ROBERT S. PLOTKIN, Assistant Director SIDNEY M. SUSSAN, Assistant Director LAURA M. HOMER, Securities Credit Officer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A73 and Official Staff EDWARD W. KELLEY, JR. DAVID W. MULLINS, JR. JOHN P. LA WARE OFFICE OF OFFICE OF STAFF DIRECTOR FOR STAFF DIRECTOR FOR MANAGEMENT FEDERAL RESERVE BANK ACTIVITIES S. DAVID FROST, Staff Director THEODORE E. ALLISON, Staff Director WILLIAM SCHNEIDER, Special Assignment: Project Director, National Information Center PORTIA W. THOMPSON, Equal Employment Opportunity DIVISION OF FEDERAL RESERVE Programs Officer BANK OPERATIONS DIVISION OF HUMAN RESOURCES CLYDE H. FARNSWORTH, JR., Director MANAGEMENT DAVID L. ROBINSON, Associate Director BRUCE J. SUMMERS, Associate Director DAVID L. SHANNON, Director CHARLES W. BENNETT, Assistant Director JOHN R. WEIS, Associate Director JACK DENNIS, JR., Assistant Director ANTHONY V. DIGIOIA, Assistant Director EARL G. HAMILTON, Assistant Director JOSEPH H. HAYES, JR., Assistant Director JOHN H. PARRISH, Assistant Director FRED HOROWITZ, Assistant Director LOUISE L. ROSEMAN, Assistant Director FLORENCE M. YOUNG, Assistant Director OFFICE OF THE CONTROLLER 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 Digitized for F R R I A CH S A E R R D C. STEVENS, Assistant Director http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 Federal Reserve Bulletin • November 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. LAWARE 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

A75 and Advisory Councils CONSUMER ADVISORY COUNCIL WILLIAM E. ODOM, Dearborn, Michigan, Chairman JAMES W. HEAD, Berkeley, California, Vice Chairman GEORGE H. BRAASCH, Oakbrook, Illinois KATHLEEN E. KEEST, Boston, Massachusetts BETTY TOM CHU, Arcadia, California A.J. (JACK) KING, Kalispell, Montana CLIFF E. COOK, Tacoma, Washington COLLEEN D. MCCARTHY, Kansas City, Missouri JERRY D. CRAFT, Atlanta, Georgia MICHELLE S. MEIER, Washington, D.C. DONALD C. DAY, Boston, Massachusetts LINDA K. PAGE, Worthington, Ohio R.B. (JOE) DEAN, JR., Columbia, South Carolina BERNARD F. PARKER, JR., Detroit, Michigan WILLIAM C. DUNKELBERG, Philadelphia, Pennsylvania SANDRA PHILLIPS, Pittsburgh, Pennsylvania JAMES FLETCHER, Chicago, Illinois VINCENT P. QUAYLE, Baltimore, Maryland GEORGE C. GALSTER, Wooster, Ohio CLIFFORD N. ROSENTHAL, New York, New York E. THOMAS GARMAN, Blacksburg, Virginia ALAN M. SILBERSTEIN, New York, New York DEBORAH B. GOLDBERG, Washington, D.C. RALPH E. SPURGIN, Columbus, Ohio MICHAEL M. GREENFIELD, St. Louis, Missouri NANCY HARVEY STEORTS, Dallas, Texas ROBERT A. HESS, Washington, D.C. DAVID P. WARD, Chester, New Jersey BARBARA KAUFMAN, San Francisco, California LAWRENCE WINTHROP, Portland, Oregon THRIFT INSTITUTIONS ADVISORY COUNCIL DONALD B. SHACKELFORD, Columbus, Ohio, President MARION 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 CHARLES B. STUZIN, Miami, Florida H.C. KLEIN, Jacksonville, Arkansas Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A76 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 REGULATIONS OF THE BOARD OF GOVERNORS OF THE FED- Rights 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. FEDERAL RESERVE REGULATORY SERVICE. Looseleaf; up- Short pamphlets on regulatory compliance, primarily suitdated at least monthly. (Requests must be prepaid.) able for banks, bank holding companies, and creditors. Consumer and Community Affairs Handbook. $75.00 per year. Limit of 50 copies Monetary Policy and Reserve Requirements Handbook. $75.00 per year. The Board of Directors' Opportunities in Community Rein- Securities Credit Transactions Handbook. $75.00 per year. vestment The Payment System Handbook. $75.00 per year. The Board of Directors' Role in Consumer Law Compliance Federal Reserve Regulatory Service. 3 vols. (Contains all Combined Construction/Permanent Loan Disclosure and three Handbooks plus substantial additional material.) Regulation Z $200.00 per year. Community Development Corporations and the Federal Re- Rates for subscribers outside the United States are as serve follows and include additional air mail costs: Construction Loan Disclosures and Regulation Z Federal Reserve Regulatory Service, $250.00 per year. Finance Charges Under Regulation Z Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

All How to Determine the Credit Needs of Your Community 158. THE ADEQUACY AND CONSISTENCY OF MARGIN RE- Regulation Z: The Right of Rescission QUIREMENTS IN THE MARKETS FOR STOCKS AND DERIV- The Right to Financial Privacy Act ATIVE PRODUCTS, by Mark J. Warshawsky with the Signature Rules in Community Property States: Regulation B assistance of Dietrich Earnhart. September 1989. 23 pp. Signature Rules: Regulation B 159. NEW DATA ON THE PERFORMANCE OF NONBANK SUB- Timing Requirements for Adverse Action Notices: Regula- SIDIARIES OF BANK HOLDING COMPANIES, by Nellie tion B Liang and Donald Savage. February 1990. 12 pp. What An Adverse Action Notice Must Contain: Regulation B 160. BANKING MARKETS AND THE USE OF FINANCIAL SER- Understanding Prepaid Finance Charges: Regulation Z 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 Most of the articles reprinted do not exceed 12 pages. are of general interest. Requests to obtain single copies of the full text or to be added to the mailing list for the series Limit of 10 copies may be sent to Publications Services. 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 Bray ton 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

A78 Index to Statistical Tables References are to pages A3-A70 although the prefix "A" is omitted in this index ACCEPTANCES, bankers (See Bankers acceptances) Depository institutions Agricultural loans, commercial banks, 19, 20 Reserve requirements, 8 Assets and liabilities (See also Foreigners) Reserves and related items, 3, 4, 5, 12 Banks, by classes, 18-20 Deposits (See also specific types) Domestic finance companies, 36 Banks, by classes, 3, 18-20, 21 Federal Reserve Banks, 10 Federal Reserve Banks, 4, 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 Bankers balances, 18-20 (See also Foreigners) EMPLOYMENT, 47 Bonds (See also U.S. government securities) Eurodollars, 24 New issues, 34 Rates, 24 Branch banks, 21, 57 Business activity, nonfinancial, 46 FARM mortgage loans, 38 Business expenditures on new plant and equipment, 35 Federal agency obligations, 4, 9, 10, 11, 31, 32 Business loans (See Commercial and industrial loans) Federal credit agencies, 33 Federal finance CAPACITY utilization, 48 Debt subject to statutory limitation, and types and own- Capital accounts ership of gross debt, 30 Banks, by classes, 18 Receipts and outlays, 28, 29 Federal Reserve Banks, 10 Treasury financing of surplus, or deficit, 28 Central banks, discount rates, 69 Treasury operating balance, 28 Certificates of deposit, 24 Federal Financing Bank, 28, 33 Commercial and industrial loans Federal funds, 6, 17, 19, 20, 21, 24, 28 Commercial banks, 16, 19 Federal Home Loan Banks, 33 Weekly reporting banks, 19-21 Federal Home Loan Mortgage Corporation, 33, 37, 38 Commercial banks Federal Housing Administration, 33, 37, 38 Assets and liabilities, 18-20 Federal Land Banks, 38 Commercial and industrial loans, 16, 18, 19, 20, 21 Federal National Mortgage Association, 33, 37, 38 Consumer loans held, by type and terms, 39, 40 Federal Reserve Banks Loans sold outright, 19 Condition statement, 10 Nondeposit funds, 17 Discount rates (See Interest rates) Real estate mortgages held, by holder and property, 38 U.S. government securities held, 4, 10, 11, 30 Time and savings deposits, 3 Federal Reserve credit, 4, 5, 10, 11 Commercial paper, 23, 24, 36 Federal Reserve notes, 10 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 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

A79 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 Commercial banks, 18 INCOME, personal and national, 46, 53, 54 Depository institutions, 3, 4, 5, 12 Industrial production, 46, 49 Federal Reserve Banks, 10 Installment loans, 39, 40 U.S. reserve assets, 56 Insurance companies, 26, 30, 38 Residential mortgage loans, 37 Interest rates Retail credit and retail sales, 39, 40, 46 Bonds, 24 Consumer installment credit, 40 SAVING Federal Reserve Banks, 7 Flow of funds, 41, 43, 44, 45 Foreign central banks and foreign countries, 69 National income accounts, 53 Money and capital markets, 24 Savings and loan associations, 26, 38, 39, 41. (See also Mortgages, 37 Thrift institutions) Prime rate, 23 Savings banks, 26, 38, 39 International capital transactions of United States, 55-69 Savings deposits (See Time and savings deposits) International organizations, 59, 60, 62, 65, 66 Securities (See also specific types) Inventories, 53 Federal and federally sponsored credit agencies, 33 Investment companies, issues and assets, 35 Foreign transactions, 67 Investments (See also specific types) New issues, 34 Banks, by classes, 18, 19, 20, 21, 26 Prices, 25 Commercial banks, 3, 16, 18-20, 38 Special drawing rights, 4, 10, 55, 56 Federal Reserve Banks, 10, 11 State and local governments Financial institutions, 26, 38 Deposits, 19, 20 Holdings of U.S. government securities, 30 LABOR force, 47 New security issues, 34 Life insurance companies (See Insurance companies) Ownership of securities issued by, 19, 20, 26 Loans (See also specific types) Rates on securities, 24 Banks, by classes, 18-20 Stock market, selected statistics, 25 Commercial banks, 3, 16, 18-20 Stocks (See also Securities) Federal Reserve Banks, 4, 5, 7, 10, 11 New issues, 34 Financial institutions, 26, 38 Prices, 25 Insured or guaranteed by United States, 37, 38 Student Loan Marketing Association, 33 MANUFACTURING TAX receipts, federal, 29 Capacity utilization, 48 Thrift institutions, 3. (See also Credit unions and Savings Production, 48, 50 and loan associations) Margin requirements, 25 Time and savings deposits, 3, 13, 17, 18, 19, 20, 21 Member banks (See also Depository institutions) Trade, foreign, 56 Federal funds and repurchase agreements, 6 Treasury cash, Treasury currency, 4 Reserve requirements, 8 Treasury deposits, 4, 10, 28 Mining production, 50 Treasury operating balance, 28 Mobile homes shipped, 51 UNEMPLOYMENT, 47 Monetary and credit aggregates, 3, 12 U.S. government balances Money and capital market rates, 24 Commercial bank holdings, 18, 19, 20 Money stock measures and components, 3, 13 Treasury deposits at Reserve Banks, 4, 10, 28 Mortgages (See Real estate loans) U.S. government securities Mutual funds, 35 Bank holdings, 18-20, 21, 30 Mutual savings banks (See Thrift institutions) Dealer transactions, positions, and financing, 32 Federal Reserve Bank holdings, 4, 10, 11, 30 NATIONAL defense outlays, 29 Foreign and international holdings and transactions, 10, National income, 53 30, 68 Open market transactions, 9 OPEN market transactions, 9 Outstanding, by type and holder, 26, 30 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

A80 Federal Reserve Banks, Branches, and Offices FEDERAL RESERVE BANK Chairman President Vice President branch, or facility Zip Deputy Chairman First Vice President in charge of branch BOSTON* 02106 Richard N. Cooper Richard F. Syron Richard L. Taylor Robert W. Eisenmenger NEW YORK* 10045 Cyrus R. Vance E. Gerald Corrigan Ellen V. Futter James H. Oltman Buffalo 14240 Mary Ann Lambertsen James O. Aston PHILADELPHIA 19105 Peter A. Benoliel Edward G. Boehne Gunnar E. Sarsten William H. Stone, Jr. CLEVELAND* 44101 Charles W. Parry W. Lee Hoskins John R. Miller William H. Hendricks Cincinnati 45201 Kate Ireland Charles A. Cerino1 Pittsburgh 15230 Robert P. Bozzone Harold J. Swart1 RICHMOND* 23219 Hanne M. Merriman Robert P. Black Anne Marie Whittemore Jimmie R. Monhollon Baltimore 21203 John R. Hardesty, Jr. Robert D. McTeer, Jr.1 Charlotte 28230 William E. Masters Albert D. Tinkelenberg1 Culpeper Communications John G. Stoides1 and Records Center 22701 ATLANTA 30303 Larry L. Prince Robert P. Forrestal Edwin A. Huston Jack Guynn Donald E. Nelson Birmingham 35283 A. G. Trammell Fred R. Herr1 Jacksonville 32231 Lana Jane Lewis-Brent James D. Hawkins1 Miami 33152 Robert D. Apelgren James T. Curry III Nashville 37203 Victoria B. Jackson Melvyn K. Purcell New Orleans 70161 Andre M. Rubenstein Robert J. Musso CHICAGO* 60690 Marcus Alexis Silas Keehn Charles S. McNeer Daniel M. Doyle Detroit 48231 Phyllis E. Peters Roby L. Sloan1 ST. LOUIS 63166 H. Edwin Trusheim Thomas C. Melzer Robert H. Quenon James R. Bowen Little Rock 72203 L. Dickson Flake Karl W. Ashman Louisville 40232 Raymond M. Burse Howard Wells Memphis 38101 Katherine H. Smythe Ray Laurence MINNEAPOLIS 55480 Michael W. Wright Gary H. Stern Delbert W. Johnson Thomas E. Gainor Helena 59601 J. Frank Gardner John D. Johnson KANSAS CITY 64198 Fred W. Lyons, Jr. Roger Guflfey 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 FRA2S. EExRe cutive Vice President. http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A81 The Federal Reserve System Boundaries of Federal Reserve Districts and Their Branch Territories llgSglHIBg^ 11 BMHMKBs \ / ALASKA i ''•.,'iuPMf i 1 1|| 1 © ^ / 1 7 /p V=y\. j •Xs 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

Federal Reserve Statistical Releases Available on the Commerce Department's Electronic Bulletin Board The Board of Governors of the Federal Reserve scription. For further information regarding a System makes some of its statistical releases avail- subscription to the electronic bulletin board, able to the public through the U.S. Department of please call (703) 487-4630. The releases transmit- Commerce's electronic bulletin board. Computer ted to the electronic bulletin board, on a regular access to the releases can be obtained by sub- basis, are the following: Reference Number Statistical release Frequency of release H.3 Aggregate Reserves Weekly/Thursday H. 4.1 Factors Affecting Reserve Balances Weekly/Thursday H.6 Money Stock Weekly/Thursday H. 8 Assets and Liabilities of Insured Domestically Chartered Weekly/Monday and Foreign Related Banking Institutions H.10 Foreign Exchange Rates Weekly/Monday H. 15 Selected Interest Rates Weekly/Monday G.5 Foreign Exchange Rates Monthly/end of month G.17 Industrial Production and Capacity Utilization Monthly/midmonth G.19 Consumer Installment Credit Monthly/fifth business day Z.7 Flow of Funds Quarterly 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